Full text of Diaries of Henry Morgenthau, Jr. : Volume 415 : Part 1

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DIARY

Book 415

June 27 - 30, 1941

Book Page
Allison Engineering Company
See War Conditions: Airplanes (Engines)

American Library at Paris
See War Conditions: Foreign Funds Control
Appointments and Resignations
Viner, Jacob:

To join Treasury staff July 1 at $100 a week 415

6/27/41

Argentina

See Stabilization Fund

-BBarlow, Lester P.
$300,000 claim against United States discussed in
Treasury release - 6/27/41
Barth, Alan

212

"The Fourth Climacteric": Eyes on the Target -

218

6/27/41

Baruch, Bernard M.

"American Industry in the War" reviewed by Gass 6/30/41

336

6/30/41

319,320,322

Bloch-Laine, Mr.
Altschul-HMJr-Walter Stewart correspondence
concerning connection with Rockefeller Foundation Business Conditions
Haas memorandum on situation for week ending
June 28, 1941

375

-cCanada

See War Conditions
China

See Stabilization Fund
" War Conditions
Coast Guard

Ediz Hook near Port Angeles, Washington: Navy to

use portion for section base - 6/27/41

215

Commodity Credit Corporation

Balance sheet, etc., showing net worth as of
March 31, 1941 - 6/30/41

426

Cox, Oscar S.

HMWr protests removal of records on British
purchasing, which should be part of Treasury
permanent files - 6/27/41

-DDefense Savings Bonds

See Financing, Government

-FBook

Page

Financing, Government
Defense Savings Bonds:

"Momentum in the Press" - Dallas report 415

6/27/41

Radio programs over Mutual Broadcasting System
sent to HMJr by Kuhn - 6/28/41
Programs with American Federation of Labor,

Congress of Industrial Organizations, etc.,
outlined by Kuhn - 6/29/41

a) Conversation with "Bill" Green, A.F. of L. 7/11/41: See Book 420, page 68

b) Draft of follow-up letter: Book 420,
page 405

c) Green accepts: Book 421, page 438

-GGasoline (Aviation)
See War Conditions: Japan
Germany

See War Conditions: Foreign Funds Control; Germany

-HHyde Park Roosevelt Library
See Roosevelt (Franklin D.) Library, Hyde Park

-IInstallment Credit
See War Conditions: Price Control

-JJapan

See War Conditions

-KKeynes, John Maynard

See War Conditions: Lend-Lease

-LLatin America
See War Conditions: Germany

Library at Paris, American
See War Conditions: Foreign Funds Control

293

306

-0-

Book Page

Oil

See War Conditions: Japan

-P Paydays, Staggered - United States Government
Plan as presented to FDR - 6/27/41,
Price Control

415

214

See War Conditions

-RRevenue Revision

Press Opinion on Taxes: Inflation Talk - Merillat

223

memorandum - 6/27/41

Roosevelt (Franklin D.) Library, Hyde Park
Dedication address - 6/30/41

318

-SStabilisation Fund
China and Argentina to be asked to sign extension
arrangements for one year - 6/30/41

392,397

a) Confusion as to whether Bell or Foley is to
act with Secretary discussed at 9:30
meeting - 7/1/41: See Book 416, page 15

-TTabouis, Genevieve

Possible trip to South America discussed in Wiley

334

memorandum - 6/30/41

a) Letter to Rockefeller

Taxation
See Revenue Revision
Treasury Department

Representative in every county to handle savings

bonds, tax certificates, etc., discussed by HMJr,

Bell, and Graves - 6/27/41

-Unemployment Relief

Work Projects Administration report for week ending
June 18, 1941
U.S.S.R.

See War Conditions
United Kingdom

See War Conditions: Military Planning

388

Book Page

Viner, Jacob
See Appointments and Resignations

-WWar Conditions

Airplanes:
Engines:

Allison Engineering Company shipments 6/30/41

Shipments to the British, by sea and by air Kamarck report - 6/27/41

415

373
241

Canada:

Treasury relations with regard to Lend-Lease,
etc., clarified in White memorandum to
Joint Economic Committees - 6/27/41

208

China:

Fox cable on talk with Hall-Patch concerning
Rogers appointment - 6/27/41
Exchange market resume' - 6/27/41, etc
Export Control:

245

ending June 28, 1941 - 6/30/41
Foreign Funds Control:
American Library at Paris discussed in MacLeish

349

Exports of petroleum products, scrap iron, and
scrap steel from United States to Japan,
Russia, Spain, and Great Britain, week

and Cochran memoranda - 6/28/41

247,299,347

289,290

Germany:

Regulations in face of over-all freezing

order - 6/29/41
American Embassy, Berlin, asks concerning
arrangements to be made in connection with

over-all freezing order - 6/30/41

309

401,403

Germany:

Movement to Latin America of household cases,
packages, etc., to be looked into by Customs

unless State Department definitely objects 6/27/41

a) Customs' memorandum after talks with
Acheson - 6/28/41

279

Japan:

67 Octane Gasoline: Welles' attitude at time of
Cabinet discussion discussed by Ickes and
HMJr - 6/27/41

Lend-Lease:

Aid to Britain discussed by HMJr, Coyne, Archer,
O'Connell, Coe, Miss Kistler, Cochran, Childs,
Phillips, Boddie, Cox, Brown, and White 6/27/41

a) Available gold and dollars - Phillips
memorandum

199,200

- W - (Continued)
War Conditions (Continued)
Lend-Lease (Continued):
Weekly report - Lease-Lend purchases
(June 20-27, 1941) - 6/27/41
Keynes tells HMJr "mission has been completed

Book

Page

415

205

successfully"; HMJr decides to ask for

confirmation in writing - 6/30/41
Military Planning:

Reports from London transmitted by Halifax 6/27/41, etc
War Department bulletins:

316

249,300,408,411

Coordination of command in German armed

forces - 6/27/41
"At the Meuse, 1940" - 6/30/41
Price Control:
Minutes of June 25 meeting - 6/27/41
a) Discussion of
1) Automobile prices
2) Rubber price order

251

414
227

3) Vinson priorities legislation
4) Kaiser proposal for steel plant on
West Coast

5) Price schedule for.pig iron

Installment Credit: Resume of problem and
consideration to date given in Bell memorandum 350

6/30/41

a) Discussion at 9:30 meeting - 7/1/41:
See Book 416, page 37

Purchasing Mission:
See also War Conditions: Lend-Lease
Federal Reserve Bank of New York statement showing
dollar disbursements, week ending June 18, 1941 340

6/30/41

Vesting order sales - 6/30/41

345,346

U.S.S.R.:

Welles' attitude toward U.S.S.R. discussed by
Ickes and HMJr - 6/27/41

Work Projects Administration
See Unemployment Relief

-YYoung, Philip

HMJr protests removal of records on British purchasing,
which should be part of Treasury permanent files 6/27/41

June 27, 1941
9:30 a.m.
GROUP MEETING

Present:

Mr. Haas

Mr. Cairns
Mr. Johnson

Mr. Viner

Mr. Odegard
Mr. Schwarz
Admiral Waesche
Mr. Kuhn
Mr. Graves

Mr. White

Mrs. Klotz

Mr. Cochran

Mr. Sullivan
Mr. Bell
H.M.Jr:

Where is Huntington? Is this the correct
order now, of these papers? They weren't
yesterday, it seems to me. Well, I guess
they are all right.
(Mr. Cochran entered the conference.)

H.M.Jr:

Norman?

Thompson:

If convenient, today I would like to go
through the Stabilization cases before

the close of the fiscal year. It won't

take more than two or three minutes.
H.M.Jr:

Well now, Bell is coming in with everybody

that is helping me on the tax anticipation
thing at ten-fifteen. I want to argue

-2amongst my own people first, you see. So

if this meeting doesn't run too long, I

could see you then or I could see you why do I crowd myself? Why don't I tell
you now eleven-fifteen.
Thompson:

It won't take more than five minutes.

H.M.Jr:

And Harry, I would like to see you at

eleven thirty. I want to go over with

you this whole business of the English
money, you see. I would like you and
Dr. Viner, if you would come in together
Thompson:

H.M.Jr:

at eleven-thirty, please.
That is all.

Harold, I don't know what this means, but
here is a telegram from Howard Dietz.

"The welkin will ring on July 2. Regards."
Graves:

That is thanks to Odegard and Kuhn.

H.M.Jr:

Had you heard from him?

Graves:

No.

H.M.Jr:

Well anyway --

Kuhn:

Is that about the Liberty Bell, Mr. Secretary

H.M.Jr:

Yes.

Kuhn:

I have a letter here from the mayor of

Philadelphia saying that he understands
you wish to broadcast from Independence

Hall and tap the Liberty Bell. I suggest
that you wire him today that it would be
very nice if he would do that for us.
H.M.Jr:

Well, I will leave it to the Liberty Bell
committee.

-3Kuhn:

You don't care?

H.M.Jr:

No. They tried to get me to do that once

before. If you people still want me to
broadcast on that, I will do it from my
desk here, see. I will do it right from
my desk. I am not going to ring any bells
and I am not going to go up and --

Kuhn:

And we may ask him to do it?

H.M.Jr:

Well, you notice what Dietz said. He said
there are mechanical difficulties, you see.
I don't care - Graves was out on the end of
a bell and we made it ring. (Laughter)

Graves:

Well, that is fine. We have the mechanical

difficulties in hand.

(Mr. Sullivan entered the conference.)
H.M.Jr:

We have got Graves fixed all right. I don't
care how it is done just as long as we save

Graves' face.

(Mr. Bell entered the conference.)
H.M.Jr:

Did you get my memorandum? After seeing

that picture of that song last night, "Any
Bonds Today," I want to kill it. It is
terrible. I will ask Howard Dietz whether
he won't do one at Hollywood for me. I
just can't let it be done the way it was
done last night.

Graves:

Well, you knew that was not a complete thing.

H.M.Jr:

No, but I mean --

Graves:

Even what there was of it you disliked?

H.M.Jr:

What there was was terrible. I mean, the

-4man had no makeup on. You could see the

beads of perspiration on his lips. He
looked the way I do when I broadcast.

White:

You have reference to that presentation and
not the song, because I think the song is
pretty good.

H.M.Jr:

No, I just me an a movie presentation of the
song.

White:

Oh.

H.M.Jr:

I want it done in the best Hollywood manner,

not the way it was done last night.

White:

It was too much a scene of this man's mouth.

H.M.Jr:

But Dietz is coming Sunday and I am talking

to him. You might get word to him that in
addition to those other two songs, I want

to talk to him about this.

Graves:

Very good.

H.M.Jr:

Thank you.

Graves:

You are apparently going to talk to the
Secretary of War. If you do, it would be
nice to mention our --

H.M.Jr:

I wrote a letter on the thing.
(The Secretary held a telephone conversation
with Undersecretary of War Patterson)

H.M.Jr:

All right, Harold, anything else?

Graves:

I was about to say that the War Department
has withdrawn its cooperation on putting
pieces of munitions in our block down here
with our glass house, and as I understand,

-5there is to be a meeting in the of fice
of the Secretary today about it.
H.M.Jr:

Oh.

Graves:

And I thought if you were talking with
Secretary Stimson, it would be very helpful
to us if you could just ask him if he
wouldn't --

H.M.Jr:

What do you want?

Graves:

We have asked - or they have said up to the
present that they could put pieces of mu-

nitions in this square, tanks and that sort
of thing. Now they haven't got any tanks
or munitions to put in the square. They
have practically said that they won't do
anything to help, and it seems to us very
strange that the Army doesn't have a few

pieces that they could put in that block.
H.M.Jr:

I get it.

Kuhn:

The idea was, Mr. Secretary, to have price
tags on these.

H.M.Jr:

Sure. Well, he will call me back. I didn't
want to - I couldn't talk to you in the
split seconds.

Graves:

Sure, it was too close.

H.M.Jr:

When he calls me back I will talk to him
about it.

Graves:

That would be fine, because it would add a
great deal to our exhibit down there to have

those things in the block. In fact, it

almost completely kills our exhibit if they
are not in the block.

H.M.Jr:

All right. I will get you something. Bomber

preferred?

-6Graves:

Bomber or - well, you would think that an
army ought to have a few pieces they could

put in there.
H.M.Jr:

Well, I guess the answer is they don't.

Graves:

Well, they are saying they don't. They say

H.M.Jr:

Pardon?

Graves:

They are saying that all their munitions are

they are all down South.

down South.

H.M.Jr:

Well, they have got the stuff here at
Aberdeen. I have seen it.

Graves:

It is just a question of whether they want
to help us or not, I think.

H.M.Jr:

What else?

Graves:

That is all.I have.

H.M.Jr:

I talked with Tobin on this idea of his million
dollar check and I don't want to for the time
being raise the fifty thousand dollar limit.
Let's go through with this tax certificate
thing and get that launched.

Graves:

Is that all, Harold?
That is all.

H.M.Jr:

Harry?

White:

I think you would want to know about important
negotiations that are going on between the
British and the State Department with respect

to trade negotiations for the Empire. Mr.
Keynes is taking a pretty active part, and
there apparently is a difference of opinion

-7among the British. The importance lies

in the fact that some feel that they want
bilateral trade arrangements after the
war as well as during, and others feel
that it should be multilateral.
Mr. Hawkins of the State Department has
expressed the hope that the Treasury would
support State Department and that possibly
Commerce would, because they don't expect

support, but other opposition from Agri-

culture and Tarrif, et cetera.

I think that your ideas are in accord with what

the State Department's ideas are likewise

on that as a whole policy, so I think in

general we probably will be able to, but when

some specific matter comes before them, you
will have ample opportunity to comment on

it, but I thought you ought to know that
there are these negotiations going on.

H.M.Jr:

Would you (Cochran) right after this meeting

call up Sir Frederick Phillips and tell him
before one o'clock I would like in my hands

a memorandum giving me what the details are

of this corporation that is to fly these

planes to - via Takoradi.
Cochran:

That is the one Boddis was talking about?

H.M.Jr:

Yes. I want an outline of what is that
thing. I would like to have that.

White:

Don't you also want his decision?

H.M.Jr:

Pardon?

White:

They were also to give you their decision.

H.M.Jr:

I don't want to force him on the decision.
If he can, yes, but at least I would like

-8-

to know what it is. I would like to have
a decision if possible.
Cochran:

I understand.

H.M.Jr:

Let's ask him. Tell him I would like a
yes or no by one o'clock.

Cochran:

All right, sir.

H.M.Jr:

The plan and a yes or no by one o'clock.
And also, they have another corporation
which is doing a job for the Navy in Scotland, and I would like to know just how

that is set up.

Cochran:

All right.

H.M.Jr:

There is a corporation doing. a similar thing,
an American corporation, that is doing a job

in Scotland. I would like -Cochran:

A separate memorandum?

H.M.Jr:

Yes.

Just what that is and how that is being done,
how they are paying for it, you see.
Cochran:

H.M.Jr:

Yes, sir.

And plenty of details. I would like to

understand it.

Cochran:

Right.

H.M.Jr:

Anything else, Harry?

White:

There are a few things you had indicated
that you wanted to speak to me about, but
that can wait.

-9H.M.Jr:

All right. Chick?
Chick, if I am correct, and you can find out

from Norman Thompson, one Arthur Krock wrote

a column today in which he says that we sit

in --

Schwarz:

On Joint Aircraft Board.

H.M.Jr:

I am almost sure that we have no membership
on that.

Schwarz:

I don't think so either.

Thompson:

We don't.

H.M.Jr:

We have no membership?

Thompson:

No, sir. I will check it.

Schwarz:

My guess would be that he is confusing that

with the so-called War Cabinet, but I will
straighten him out.

H.M.Jr:

Well, be a hundred and one percent sure
between you and Norman that you are right

and then call up Krock and tell him.that
his information is wrong.

Schwarz:

I have asked my people already to check

for me.

H.M.Jr:

But be entirely sure.

White:

Did you happen to read Mr. Krock's column,

I think it was the day before, on the
question of British --

H.M.Jr:

Yes. That is why I --

White:

I didn't like it.

- 10 H.M.Jr:

Neither did I. That is why I had such a
bad time yesterday morning at my press
conference, as a result of that column.
I mean, that is why the Tribune went
after me so.

Schwarz:

He didn't help any.

H.M.Jr:

No, he - lots of inuendos and he was helping
Jesse Jones and doing all he could to make

it difficult for me, and he wasn't helping
the English.

White:

It seemed to me there were a couple of
statements there on which he might well
be called.

H.M.Jr:

I wouldn't bother. It is useless. But

this thing, the question am I or am I not the Treasury, on the committee, it is a
matter of fact. He is hopeless, Harry,
you can't do anything.

Peter?
Odegard:

Nothing.

H.M.Jr:

George?

Haas:

I have nothing.

H.M.Jr:

Where is this Helen - what is her name?

Kuhn:

Dallas.

H.M.Jr:

Yes. Where is her booklet, what is the
status of that?

Graves:

You asked, as I understand, that it be ready
for you to look at next Thursday.

H.M.Jr:

That was yesterday.

- 11 Graves:

I didn't so understand it. I thought it

was next Thursday.
H.M.Jr:

Oh, it couldn't have been.

Graves:

Well, you didn't give me the message.
The people to whom you did give it gave me
to understand you meant next Thursday,
which is about as good as we could do

anyway to get a layout and proof on that.

H.M.Jr:

Are you going to use those illustrations

in Dorothy Thompson's article from Look,
are you going to use any of those?

Odegard:

There have been specially selected photographs for that.
The photographs have gone to New York for

the purpose of making a layout. As soon
as that comes back, the proof will be
over from the Printing Office, and you
will have a copy as soon as possible.
Maybe early in the week.
Graves:

I doubt whether it will be early in the

week, because we want to get a proof of

it so that it will be easy for people
to see what it is going to be like and

not just a rough layout.

- 12 H.M.Jr:

What I was to get today, Harold, was--

Graves:

Portfolios for distribution.

H.M.Jr:

Yes.

Graves:

Those are ready, and I will send one in for
you to look at any time you like.

H.M.Jr:

Right after this meeting.

Graves:

Fine.

Haas:

Mr. Secretary, there is one thing. Did you

want to have anything done about those docu-

ments that are not in the Treasury that you

inquired about yesterday? Those are copies.

The originals are not here.
H.M.Jr:

Well, they should be here. They belong to
the Treasury.

Haas:

I can get Norman to get them back.

H.M.Jr:

Yes. Then Norman Thompson had better have

somebody go over Philip Young's files and
anything that has to do with the Treasury
while he was here, those things should be
moved.
Thompson:

We went over the files before he left here.

H.M.Jr:

You couldn't have done a very good job, if
you don't mind my saying so, because these
most important documents that I wanted yesterday were where?

Haas:

In Philip Young's office.

H.M.Jr:

In Philip Young's office. The most important
of all. When I was signing every day how much

- 13 the British could buy, those original docu-

ments aren't here, so please send an expert
over there and anything that is Treasury
business should be here. I don't care how
Philip Young squawks, those things should

be - they are part of the Treasury and that
goes for Oscar Cox, too.

Kuhn:

I just had the unrevised script of next

Wednesday's show, and I would like to work
on it, and then show it to you when you come
back from the week-end.
H.M.Jr:

It will be pretty late. I won't get back

until Monday night or Tuesday morning, because I am going to the opening of the Hyde

Park library.

Kuhn:

Would you like to see it Tuesday morning.

H.M.Jr:

Yes.

Kuhn:

I thought you would like to see your speech

is reprinted in full out on the Pacific
Coast.

Schwarz:

I sent it out there.

Kuhn:

This is a paper that goes to five hundred

H.M.Jr:

What is the joke?

White:

Chick sent it out, he said. Chick deserves
credit for that.

Schwarz:

At Ferdie's suggestion. (Laughter)

White:

I retire.

Graves:

You are doing all right, Harry.

editorial writers west of the Mississippi.

- 14 H.M.Jr:

Well, may I, anyway, thank the Schwarz-Kuhn Kuhn and Schwarz.

What else?
Kuhn:

That is all, sir.

Cairns:

Nothing.

H.M.Jr:

Could your (Cairns') legal division give me

a little memorandum Tuesday morning just

what do we do about these profits like this
thing, this question of this Falk Company,
you see? I mean, what are we doing about

reviewing them, is it under the Vinson

Act, is that what it is?
Cairns:

Vinson-Trammell Act, yes.

H.M.Jr:

Then we only do those, which, up to the time

of the Vinson-Tranmell Act expired, I take

it.

Sullivan:
Cairns:

That is right.
I will have to get up a memo. I am not

familiar with it.

H.M.Jr:

Is that in General Counsel or is it in the
Assistant Secretary's office?

Sullivan:

The investigation in this case has been in

Mr. Irey's office for at least a year and
a half. I know I got it - I talked with him
about it when I was over at the Bureau. I
think that was late in October or early in

November of '39, and Mr. Foley told me

yesterday that Mr. Irey's investigation was

not yet completed.
H.M.Jr:

Well, that--

Cairns:

I think it goes over Kades' desk.

- 15 White:

Yes, I know that merely because there are
certain economic aspects which Kades took

up with my staff so that I do know the
Legal Division is playing an important

role in it. Whether an exclusive role, I

don't know.
H.M.Jr:

Well, look into it and have something for

me Tuesday.

How many others are there, and are we doing

it systematically and so forth, and when the

Vinson-Trammell Act died - I mean, do we
look into any contracts of the Army and Navy

any more, or don't we? Then I would go into

the whole question, who checks up to see
whether they - how many other cases are there

like the Falk case?

Cairns:

I will give you a report.

H.M.Jr:

I mean, when the Vinson-Trammellthing died,

did we stop looking into illegal excess

profits or does some other agency? Does

anybody check up on the Army and Navy? I
am just beginning to wonder how smart we

were to let the Vinson-Trammelldie.
White:

There are still channels through which those
can be and should be examined.

H.M.Jr:

Well, I think if by Tuesday morning I could
have something.

Graves:

Mr. Secretary, I can tell you this much,

that the Vinson-Trammell cases in the Bureau
of Internal Revenue are handled precisely as
income tax cases are handled. They are
investigated under the same procedure and

handled throughout under the same procedure

that prevails in income tax cases. There

- 16 -

is no special routine for them.
Bell:

There were a group of accountants, were there
not, that went into those firms and examined
the accounts.

Graves:

They had special personnel in the field to
make investigations, but all of the aspects
of the handling of the cases are the same
as income tax cases.

H.M.Jr:

Well, I don't think it will do any harm to
look into it and talk with Mr. Sullivan or
anybody else about it that is necessary,
will you?

Cairns:

Yes, sir.

Johnson:

In connection with the movement of German

nationals, I learned this morning of an
intention to ship seven cases of household
goods from the German Consulate General at

San Francisco to Chile, Santiago, to the

German Embassy. That raises two questions

in my mind. First, the possibility that

some of them may think they can get to
South America, and secondly, the question

of looking into the packages that go out of
the country with or in connection with the
departure of some of these consular officers.
I suppose the State Department will be quite
opposed to that. I know they were in the

case of a recent movement of certain Russians.

H.M.Jr:

Well, times change. What I would do is,
tell Mr. Acheson, and unless they say, "No,"

we will look into it.

Johnson:

White:

All right, sir.
Chile is one of the most important hotbeds of

Nazi propaganda.

- 17 H.M.Jr:

Unless he tells us not to, we will do it.

Johnson:

Mr. Wiedemann of course - I don't know

whether it is his stuff or not. All I know
is it came from the German Consulate, San

Francisco.
H.M.Jr:

I would tell him, unless he tellsus not to,
we will take it inside out.

Johnson:

I will get in touch with him today.

Waesche:

I thought you might want, Mr. Secretary, just
a brief resume of the present status of these
foreign ships.

The Danish ships which we took over have been

turned over to the Maritime Commission last

Monday. This coming Monday, June 30, we

will turn over to the Maritime Commission the
Italian and the German ships. The Maritime
Commission have taken over directly directly,
without proceeding through the Treasury, the
Esthonian, Latvian, and Lithuanian ships.
There are only a very few of them. The
Finnish ships in our ports now are very pro-

Nazi. I had a report from Captain Bayliss,
and they are very pro-Nazi up there.

We took it up with the State Department, and
the State Department says, "Do nothing. We

feel that they probably will be sabotaged

when we have no guards aboard them. Also
the Maritime Commission requested us to-H.M.Jr:

They say do nothing?

Waesche:

Sir?

H.M.Jr:

They say do nothing about it?

Waesche:

The State Department. We took it up with

- 18 the State Department-H.M.Jr:

When?

Waesche:

Day before yesterday and again yesterday I
talked with the Maritime Commission about it.

H.M.Jr:

Have you talked to the State Department?

Waesche:

Yes, sir.

H.M.Jr:

Who did you talk to there?

Waesche:

Mr. Saugstad, and he took it up with Breckinridge Long, and Breckinridge Long--

H.M.Jr:

Take it up directly with Dean Acheson.

Waesche:

All right, sir, I will do that.

H.M.Jr:

Take it up with Dean Acheson.

Waesche:

Now, the Normandy, the Maritime Commission we have guards, as you know, on the Normandy.
The Maritime Commission wanted our people to

start taking an inventory of the goods and

equipment on the Normandy, and we told them

we couldn't do that without the State De-

partment's approval, because we were merely

there as guards for the prevention of sabo-

tage.

Admiral Land, after I talked to the State

Department and they said, "No," Admiral
Land talked to Summer Welles, and he said
to do nothing.

H.M.Jr:

Well, that doesn't interest me, but the

Finnish ships, it is just--

Waesche:

I will get Dean Acheson on the phone about
the Finnish ships.

- 19 The Marion is now on her way to Guadeloupe

taking the last of those French prisoners

which have been in Puerto Rico so long.
That matter is now cleared up.
H.M.Jr:

You haven't landed them yet, though?

Waesche:

No, sir, not the last group. The last group
are aboard the America.

I think we are giving you (Graves) all the
help you want on the glass house down here,
is that correct?
Graves:

I don't know specifically, but I would suspect that you would.

Waesche:

We are putting a surf boat and a tractor and
a lifesaving apparatus and a few enlisted
men there.

H.M.Jr:

You had better not put a surf boat there.
The Navy may take it. (Laughter)

Waesche:

Here is a letter to the Navy.

H.M.Jr:

Fine. What is the Navy giving us for Treasury
House?

Graves:

I don't know but--

Viner:

How about one of those old submarines?

Graves:

We are asking their cooperation. I think
there will be a letter in here for you to
sign to the Navy today about it.

H.M.Jr:

Merle?

Cochran:

The Central Bank of China telegraphed through
the Federal Reserve Bank of New York wanting

an extension for about six months of that

- 20 1937 Stabilization agreement. That has been
renewed each time, you see.

H.M.Jr:

What about it?

Bell:

Well, we are hoping they clean that up, but
I suppose we ought to renew it and ought to
do it before June 30.

Cochran:

I am not so sure.

H.M.Jr:

Well, may I do this? If Mr. Bell and you

(Cochran) and White will pass on it and decide

it, the three of you.
Cochran:

When the fund expired before in '39, we waited

until the twelfth of July.

I have the Canadian silver letter.
H.M.Jr:

Oh! I haven't signed one for a long time.

Sullivan:

You sent in a letter from a Mrs. Jay Eddy
yesterday afternoon at three o'clock. That

meant four o'clock up there. It was Daylight
Saving Time. We only had an hour. We found
out that we had placed a lien on one safety

deposit company, one insurance company, and

two banking institutions in which there were

trust funds, of which she was trustee. I
rather doubt we had a right to do that. She
owes us over eleven thousand dollars. I
suspect it is a long drawn out case, and
I will have a much more complete report
probably by noontime, if you would like to
have it.

H.M.Jr:

Yes. Well, I will tell you what I would like
you to do. If you don't - if you can't do
anything by noon, at least have a telegram
for my signature saying that I am having the
matter looked into.

- 21 Sullivan:

Right. I will do that for you right away,
and then I am going up on the Hill, and I

might not be back here by twelve.
Klotz:

I can prepare the telegram, for that matter.

H.M.Jr:

Can you?

Klotz:

Yes. Send in the correspondence; I will send
the telegram.

Sullivan:

All right, I will. I will send with it a

copy of the memo from Commissioner Helvering.

Bell:

I will also tell him if he gets any more
information while I am on the Hill this
morning to send it directly to you.
Here is a letter on the investment of the
old age reserve for another year.

H.M.Jr:

Anything else?

Bell:

No, that is all. This is a letter to the

President just for the record on the staggered

payday.

H.M.Jr:

All right.
All right?

Bell:

Yes.

H.M.Jr:

Thank you all.

22
June 27, 1941
9:40 a.m.
HMJr:

Hello.

Operator:

Secretary Stimson is out of town.
I have Mr. Patterson.

HMJr:

All right.

Operator:

Go ahead.

HMJr:

Hello.

Robert

Patterson:

Henry?

HMJr:

Bob?

Yeah.

HMJr:

How are you?

Fine.

HMJr:

Bob, I hear Mr. Stimson is out of
town SO I'm sending you over a

letter
P:

He's back.

HMJr:

Hello?

I think he's back.

Oh, they told me....
They tell you that this morning?

HMJr:

Just now, yes.

HMJr:

Well maybe so. I understood he was
coming back last night. However, it
doesn't matter.

Well, the letter will come over. I

asked for either Secretary of War or

Acting Secretary of War and they gave
me you.

Yeah.

-2HMJr:

You want to argue about it?

HMJr:

No, I don't.
Okay. A letter is coming over to you
in regard to one Harold S. Falk,
Civilian Aid to the Secretary of War

Harold S. what?

HMJr:

Falk, F-a-1-k.

Yes.

HMJr:

After you've read my letter, I'd
appreciate it if you'd call me back

and tell me what you're going to do
about it.

All right, I will, I'll do that.

HMJr:

You know who he 187

No.

HMJr:

Well, read my letter, would you?

Yes, indeed.

HMJr:

And tell me what you're going to do
about it and other people like him.

HMJr:

Yeah. I will and I'll call you back.
But I think if you don't mind - I think
both War and Navy ought to let the
Treasury investigate these people, both
personally and their companies from an
Income Tax before you put them on jobs

like - evidently this man 18.

F-a-1-k?

HMJr:

Yeah. F-a-1-k, Harold S. Falk.

Yeah, yeah, I'll look at the letter.

-3HMJr:

It will be over in a few minutes.

Right, thank you. Is it addressed

HMJr:

It's addressed to you, but I'm going
to put it in an envelop for you.

Right, thank you.

HMJr:

Thank you.

Goodbye.

to me or the Secretary.

JUN 27 1941

Dear Henrys

I am enclosing a copy of a letter which I
have written to Secretary Knox in response to an
inquiry from the Nevy Department concerning the

tax liability of the Falk Corporation of Milwaukee, Wisconsin, arising out of certain contracts

with the Navy Department to which the Vinson

Profit Limitation Act applies.
I thought you would be interested in this
information not only because the War Department

may also be dealing with the Falk Corporation,
but also because I have been informed that a

Harold S. Falk is Civilian Aid to the Secretary

of War. The President and Works Manager of the
Falk Corporation, who handles its shop management, is named Harold S. Falk.
Sincerely yours,
(Signed) Henr

Hon. Henry Stimson

The Secretary of War

Enclosure

Attention: Under Secretary

CLK:23Frakm 6-26-41

FILE TO MR. FOLEY.

Robert Patterson

Sent by Secret Service.

26
THE UNDER SECRETARY OF WAR

HAVES

WASHINGTON
DEPARTMENT

410%

June 27th, 1941.

UNIVERSITY

Dear Henry:

I have your letter of June 27th, relative

to the Falk Corporation and Harold S. Falk.

The War Department has no contracts with

the Falk Corporation, barring a small job which involves
$500.00.

Harold S. Falk is listed as one of the civilian
aides to the Secretary of War in connection with the Military Training Camps Association. As you doubtless know,

that Association submits a list of some sixty civilian aides,

one for each corps area and one for each state. These posts
are of nominal importance and involve no active duties.
Harold S. Falk is the Aide for Wisconsin. The work, such as

it is, has to do solely with military training camps program,
and there will be no military training camps this year.
Sincerely yours,

Honorable Henry Morgenthau, Jr.,
The Secretary of the Treasury.

/ to

Copy to Ed. Foly
1/m/h

JUN 27 1941

My dear Mr. Secretary:

Reference is made to the letter of Under Secretary
of the Navy Forrestal, dated June 4, 1941, relative to the
Falk Corporation of allmaukee, Wisconsin.
An investigation has been made of the corporation's

incons tax liability for the years 1935 to 1938, inclusive,
and of its liability for excess profit under the profitlimiting provisions of the Act of March 27, 1934, as

amended, sometimes referred to as the Vinson Act. The
examining officer has recommended additional income taxes
for such years in the amount of $135,232.98, increasing
the total income taxes for such years to $255,080.31, as
compared with $118,737.33 as reported by the corporation.
In addition, the examining officer has recommended an excess

profit liability under the Vinson Act in the amount of

$474,082.62 in respect of contracts completed in the years
1935 to 1938, inclusive, whereas the corporation filed a
report showing no excess profit liability; and he has also
recommended fraud penalties in the amount of $230,041.31

making & total liability of $711,123.93 for excess profit
and penalties under the Vinson Act.

The liability under the Vinson Act is due to the fact
that the corporation stated the cost of performing its contracts to be $2,278,652.69 whereas the examining officer
found such cost to be $1,596,205.24, the difference being
$680,357.45. The corporation included as part of the c ost
of performing the contracts fraudulent charges and other
charges able were clearly erronoous. For example, in
numerous cases, the time for an employee was charged to
the Navy contracts when, in fact, the employee had never

been engaged on this type of work; the costs of various

machines and items of equipment were charged to the Navy
contracts when it was known that they would also be used
on commercial joba; higher machine hour rates were used

-2when certain machines were working on Navy contracts than

when the same machines were used on commercial work; charges

for research and development expense were duplicated; and

no effort was made to follow the regulations issued by this
Department and the Navy Department relative to the prefit-

limiting provisions of the Vinson Act, such regulations
being clearly disregarded in allocating burden or direct

expenses and in making adjustments for liquidating damages
assessed by the Navy Department.

During the course of the investigation the corporation
made payments of $425,000 to the collector of internal
revenue, Milmaukee, to cover all of the additional income
taxes recommended by the examining officer, and a portion

of the additional excess profit under the Vinson Act. It
appears that the officials of the corporation recognise
that a clearly erroneous re ort was filed but content that
at the time the report was filed they were not aware of the
false charges and that they issued no instructions as to
the incorrect charges. On this point it does not seem
possible, so the examining officer reports, that the officials or heads of the cost and accounting departments were
not aware of these charges until after the report was filed.
In view of the fact that the cost of performing the contracts, as stated by the corporation in its report, was
more than 40 per cent in excess of the actual cost, it

would appear that the examining officer has considerable

reason for his opinion. At the present time the case is
pending before the internal revenue agent in charge in
Milwaukae, Misconsin, and a final conclusion in respect
of the case has not been reached.

Very truly yours,
(Signed) 5. Norgouthau. Jr.

Secretary of the Treasury.
The Honorable,

The Secretary of the Navy

Copy attached.(dup of theth

FILE TO MR. FOLEY

Sent by Secret Service.

29
Treasury Department
TELEGRAPH OFFICE
0

SER SI NEWYORK NY 549p JUNE 26 1941
1941 JUN 27 AM 8 25
ENRY MORGANTHAU JR
SECRETARY OF THE TREASURY
WASHINGTON DC

HE WELKIN WILL RING ON JULY SECOND REGARES

HOWARD DIETZ
35A

June 27, 1941
My dear Mayor Lamberton:

This is just to confirm my telegram
inviting you to tap the Liberty Bell and

speak to a nation-wide audience for one minute

in our program entitled "Millions for Defense"
next Wednesday evening, July 2. It will be an
honor to the Treasury to have you participate
in its program in this way and it will be most
helpful to the Defense Savings effort generally.

Our radio staff will supply you with
full details-about your part in the program. In

the meantime, please accept my sincere thanks for

the fine offer of cooperation contained in your
letter of June 19.
Sincerely yours,

in
Hon. Robert E. Lamberton,

Mayor, City of Philadelphia,
Philadelphia, Pennsylvania

FK/hkb

6/27/41

File to Mr. Thompson

June 27, 1941
Harold Graves

Secretary Morgenthau

Please do not let the movie which I saw on "Any
Bonds Today" be released until I have a chance to talk
with Howard Diets because I do not consider the picture

good enough. It is entirely too anateurish.

32
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE June 27, 1941
TO

Ferdinand Kuhn, Jr.

FROM

Helen Dallas
DEFENSE SAVINGS: MOMENTUM IN THE PRESS

While June sales figures show a slump compared to May,
the press throughout the country shows increased momentum in the
promotion of the Defense Savings program.

From Michigan comes news that the State association of chain

stores will sponsor the sale of Defense Savings Stamps in all chain

outlets -- including grocery stores, variety stores and clothing

stores. If the plan proves successful, it will be tried in other
states. News of independent store cooperation continues to take
up an important part of the space given the Defense Bond program

in the press of the country.
Employee and employer plans for payroll deduction programs

are also increasing in great number. In addition to such nationally known firms as Swift and Company, which last week received

widespread publicity as a result of efforts along this line, scores
of nationally prominent businesses and hundreds of small establishments have announced their intentions to cooperate.

Most of these plans are strictly voluntary and thus in
full accord with Treasury policy; occasionally, however, the

n
33

-2-

spirit of the program is violated. An article in "Variety" for
June 18 reports that the management of a legitimate stage company

in New York has adopted a rule that from now on 25 per cent of

actors' salaries are to be paid in Defense Savings Bonds. "Variety"
remarked that "this may be a dress rehearsal for 'forced savings.'"

The "Daily Worker" reprinted the "Variety" article, but without
comment.

An article in "Business Week" expressed the view that to
build up the sale of Defense Savings Bonds the Treasury is banking

on the check-off system. After noting that "several companies
already have inaugurated payroll-deduction plans," the article went
on to say: "More pressure salesmanship undoubtedly will be applied.
Repeated official statements that no compulsion will be resorted to
merely mean that no legal compulsion is contemplated."

June conventions of various organizations, ranging from

bankers' associations to the Missouri Federation of Post Office Clerks,
have heard speakers on the subject of Defense Bonds and Stamps, and

have passed resolutions pledging all aid and support to the program.
The bankers' groups -- including the North Dakota, Idaho Bankers'

Association, Utah, and Kentucky Bankers' Associations -- all considered the Defense Savings program and its possible usefulness in

checking inflation.

-3The "Biggest Syndicate"

The Information Section of the Defense Savings Staff recently
devised a "Defense Bond Quiz" for newspaper use, and sent letters to
every daily and weekly newspaper and every trade publication, re-

questing that the Quiz be published in the news columns. The response has been so great that the Treasury now commands the biggest

feature syndicate in the country.
Even the Russo-German war news, which last Monday crowded

many national and local news stories out of the newspapers, did not

keep the first announcements of the daily quiz from appearing in

all parts of the country. By Tuesday the first installment was
being carried in hundreds of metropolitan and small town dailies,
and even by financial papers and the foreign language press. So
far, 2,400 newspapers have assured the Treasury that they will gladly

publish the quiz, and acceptances continue to pour in at a rate of
500 a day.

The sporting pages give evidence of a growing habit among

baseball players, golf champions, prize fighters and speedway kings,
of accepting Defense Bonds instead of cash prizes, or of buying

Defense Bonds with a part of their well publicized cash earnings.
Much of this activity has been prompted by the Information Section
of the Defense Savings Staff.

-4-

In the same way, public interest has been caught by the
awarding of Defense Bonds to top-ranking students at Benjamin

Franklin University and other schools; by the investment in
Defense Bonds of the earnings of 1,600 prisoners at a Virginia
penitentiary, and especially by the purchase of Defense Savings
Stamps by Mr. and Mrs. William Andrew White of Washington and

seventeen of their eighteen children.

June 27, 1941
10:15 a.m.
RE TAX ANTICIPATION NOTES

Present:

Mr. Eccles
Mr. White
Mr. Haas
Mr. Ransom
Mr. McKee

Mr. Piser
Mr. Bell
Mr. Kuhn

H.M.Jr:

I had a few minutes this morning with Bell
on this thing, and he has told me about
lowering the rates on the Treasury and he
asked me the question, did I want to do

this as a tax matter or did I want to do it
as a money raising matter, and my answer

was, I wanted to do it in connection with
the tax program.
Bell:

The reason that came up was the Eccles

plan. I said I thought that the Eccles

plan had a lot to be commended in these

times and that if we made a decision that
this was a financing matter primarily and

a tax simplification or tax facilitating

payment plan secondarily, then the Eccles

plan might be fitted in some way; but if

it was just a tax facilitating plan, then
I didn't think the Eccles plan the way it

was presented should be adopted in this
connection. We have adopted some of the

-2Eccles plan in a Series B note. It has
the same idea behind it.

H.M.Jr:

Excuse me. Do these people know what

Bell:

Yes, they know.

H.M.Jr:

Are you (Viner) in accord?

Viner:

Yes, I think you may want to move on to the
Eccles thing as a separate proposition
later, or you may want to open up this
second series. One way of moving on would

changes you have made?

be to open up this second series to all
comers.

Bell:

Use it both for a tax payment plan and a

H.M.Jr:

Well, isn't it the way we are proposing

Viner:

Yes, but only for tax purposes; but then

financing.

now that anybody can take it?

if you wanted a finance scheme, then you

say here, "We are offering this to the

market," but you may want to do that.

At that stage you may want to change the

rate on it in some way. Also, I wouldn't
have - I wouldn't push this, if I adopted
it. I would just make it available as a
facility for taxpayers and not have a
campaign to confuse them with the Savings
Bonds and not have a rival campaign, but

just say, "This is for the convenience of
taxpayers. They can come and get if if

they want it." If not, it is all right

with you.
H.M.Jr:

Well, I don't quite agree with you. I

-3think that we don't differ very much. I
think it should be explained that it is
a program to encourage taxpayers large

and small to set aside the funds as they

go along.
Viner:

Yes, that is right.

H.M.Jr:

See? What?

Bell:

Sure.

H.M.Jr:

As they go along, and that is the primary
purpose, and that this is part of the whole
Treasury thing.

(Mr. Kuhn entered the conference.)
H.M.Jr:

Ferdie, I want you to sit in at this meeting

and listen, because if we decide to go ahead,

you are going to have to write a story for
me.

Kuhn:

On tax anticipation?

H.M.Jr:

Yes. I want you to get the gist of it. I

was just saying that if we decide to do the
thing, my idea is that we are doing this to

encourage anybody that has to pay his taxes,

small or big, to set aside sufficient funds

each month as the year progresses and that
we are making it convenient for him and
paying him a modest amount of interest on

it to encourage him to do it as we go along,
to set aside out of current earnings.
Current earnings is the word, isn't it?

Bell:

That is right.

Viner:

That is right.

-4White:

Current income.

Viner:

Yes, that is right.

H.M.Jr:

That is the program. Then if we go to

the public, in view of the tax bill that

is about to pass and the increased taxes

and so forth and so on, that is the point.
My feeling is that I don't want to say anything about bank balances or excess reserves
or anything else, but I want to see whether

you people agree with me before we meet with
Eccles in a few minutes.

If anybody disagrees with me, I wish they
would tell me.
White:

I am not sure I feel quite as Dan does with

respect to the publicity program. I think

quite an active publicity program could be
conducted and yet be quite distinct and

not even confuse the public if that is
harped upon. I think that might be a good
thing.

H.M.Jr:

He didn't say it. It was Jake Viner that
said about the publicity.

Bell:

Well, I agree with Jake that there should
not be an active --

Viner:

It depends on what you mean by active. I
would certainly make the public aware of

it, but I wouldn't go very far in pushing

them as if the Treasury was very, very much

interested in their doing this.
White:

Oh no, merely as a --

Bell:

I think along the lines that you (Secretary)
suggest with a first statement and that that
ought to be given wide publicity, and we

-5ought to send it to each Federal Reserve

Bank to see that the local papers in their

districts all carry it, and that each bank
and financial institution in the district
gets a copy of your statement, plus the

circular and the offering of the securities
and get application blanks which they can

talk to their customers about if they come
in and ask for an explanation of it.

I think that we ought to mail out to all of

the income tax payers on our list this whole --

White:

Bell:

That is a very good idea.
this whole document, and we have about

eight million names on our list that didn't

pay taxes, people who filed returns but had

no tax, and they certainly are potential

taxpayers under this new bill and we ought
to do something.

It can't be done immediately because the
plates haven't been cut, but we ought to
do something eventually about getting someWhite:

thing into their hands.
I think Ferdie could write a simple kind of

a letter, because the bulk of these taxpayers
would have to have it explained in simple

terms on one page. I think that is an
excellent idea, an educational campaign
rather than a drive.

H.M.Jr:

There is no objection to that, is there, Jake?

Viner:

That is right.

Kuhn:

Tell people about it rather than say, "Go
ahead and buy these things.

-6White:

Explain it on one page as an opportunity

Bell:

It is done to facilitate their tax payment.

Viner:

Rather than an appeal, it is an educational

for them.

drive to indicate that it is in their
interest.

White:

I think I feel a little differently than
they do about the Eccles scheme. I think
it could be fitted in, but I also think

that the compromise which was made is close

enough so that there isn't nearly the
difference that there was before; but I
do think that in your discussion that other

proposal ought to be given enough of your
approval, because I think you will come to

it some time later, not now.

H.M.Jr:

What I was going to say this morning was

that we would like to go along with this

proposal, having modified it, and we would

like to continue to study the Eccles one

and see how much money we get from this one.
White:

Yes.

Viner:

As a matter of fact, there is some advantage

in going at it this way, even if you knew

you were going on to the other, because you
will get some experience in what are the
bugs and what is the administrative problem
and how does the market react to the terms
and so on.

White:

And curiously enough, I think the chief
argument which they use is fallacious in
support of theirs. The argument which they
use is the question of using active accounts.

I would like to point this out, because I

-7don't want to get drawn into it.
As a matter of fact, they are not withdrawing stuff that is inflationary, because

what they are attracting under their scheme

is idle funds. The thing which appeals to

me from their scheme is something that I
don't know they would favor. Maybe they

H.M.Jr:

Bell:

would. That is that it makes possible a
substantial increase in the proportion of
short term securities against long and
thereby reduces your interest cost very
substantially, but that is another matter.
That is another matter.
Yes. I think we have got to have a debt
program and tie our short term securities
into that whole debt program and that is
the question.

H.M.Jr:

Well, Dan, how much notice would they have

to give us on this before a fellow can cash

it in?

Bell:

On the Series A, we will cash them in immediately. We don't expect any large volume.
On the Series B, we require them to hold
them sixty days and give us thirty days'
notice.

Kuhn:

May I ask what the actual commodity is now,

after all these discussions? I mean, what

are we going to put out?
White:

Couldn't we explain that to you later,

Ferdie?
Kuhn:

Yes, surely.

H.M.Jr:

I will tell you. In about three minutes I

-8am going to ask Bell to explain what we
are proposing to do to the Federal Reserve.
We are going to go ahead and we are proposing

to do it this way, and you can pick It up
then.

Bell:

By the way, that is a repetition. They
know what is in this after all our discussions.

Bell:

Well, I will ask you to restate our position.
I don't mind repeating it.

H.M.Jr:

For the benefit of Kuhn and me.

Bell:

O.K.

H.M.Jr:

For the benefit of Kuhn and me, to restate

H.M.Jr:

it.

George, let me ask you this. How do you

fellows give in - you have cut the interest
rate on this thing about a half, Bell tells

me.

Haas:

Oh, the main difference between this proposal and the one - the original proposal

is that this is a security which a new

series doesn't come out each month. You

use the same security and you buy it at

the redemption price and the purchase
price is the same, depending upon whether

you are redeeming it or buying it, so instead of having a two year security, you
have in reality a - it averages a one year
security.

H.M.Jr:

Bell says instead of being on about six

tenths, it is about --

--9-

Bell:

A little less than three eighths, one

Haas:

Point three six.

White:

third.

I see some doubt in your mind at the last
moment whether it should be a half or three
eighths.

Bell:

We have moved down to three eighths. New

York thinks that is ample. I am not so
sure.

Haas:

It is really a one year security now. It

will average about one year.
White:

I think if you have any doubts, if you would
like that to be a large amount that you get,

it might be a half. If you don't care,
three eighths is probably fairer.

Bell:

Well, there was so much argument that it
really didn't make much difference.

White:

I don't think it will be a great deal of

Bell:

difference.

It is so much above the Treasury bill rates.

I think it ought to be attractive enough to
the large fellows to get some money.

H.M.Jr:

Well now, what Bell suggested this morning

also is that if we agree at this meeting
at ten-thirty, then he is going to rush a
letter out to all the Federal Reserve Banks
asking them to talk to the financial people
in their communities and have answers here
for us Wednesday morning.

White:

On the proposal?

H.M.Jr:

Yes.

- 10 White:

You might get some good criticisms.

H.M.Jr:

But it goes through twelve Federal Reserve

districts. It worked very well the last
time.

White:

I think it is a good idea anyway, because

then if you go through with it, they are
more interested in it.

H.M.Jr:

They like it.

Bell:

They don't get it as a shock when it is

H.M.Jr:

There might be some bugs in it. There might
be something in the San Francisco, Dallas,

announced.

or Minneapolis districts that is peculiar
there which didn't exist in New York.

White:

That is a good idea.

H.M.Jr:

It is a big country.

White:

The delay doesn't affect you?

H.M.Jr:

No, because if I can announce it - you see,
Wednesday is July 2. If I can announce it
July 3, so that - you know, people read it

in their papers on July 4. That is time
enough.

Bell:

There are some details to be worked out,
and I take it you are not so much interested

in them. There is one thing I think --

H.M.Jr:

Could you hold your thought a second?

Bell:

Yes.

H.M.Jr:

If they are not cutting those stencils, I
wish you would make a note to yourself to
get them cut.

- 11 -

I got the aluminum for that. That was the

trouble. I got the aluminum. I mean, it
is either seventy-five tons or eighty tons

of aluminum; so if the stencils on these
names aren't cut, on these eight million
names, I wish you would see that they are.
Bell:

The reason, you know, that they stopped was

H.M.Jr:

Yes, but we want this for this. There are

White:

I think that is a good idea.

Haas:

It is a good list.

H.M.Jr:

That is a good list anyway.

Bell:

The other was that I wanted to make people
hold these three months before they could

that the Defense Staff decided that the
direct by mail was not very profitable.
eight million names.

turn them in for taxes. I take it you don't
care. It is so they can't buy them on

February 28 and turn them in March 1.

(Mr. McKee, Mr. Eccles, Mr. Ransom, and

Mr. Piser entered the conference.)
H.M.Jr:

If it is agreeable to you, for my benefit
could Bell restate the position as we see
it this morning?

Eccles:

All right.

H.M.Jr:

He says you people know it, but I am not
sure that I do.

Ransom:

That is what he says.

Bell:

I think you do.

- 12 Well, after our meeting in your office

the other day, we had another meeting with
this group in my office and went over the
proposal that we had at that time and also

went over Mr. Eccles' memorandum in which
he made some suggestions, more particularly
concerning Series B.

On Series A, as you recall, which had at
first a rate of two forty and many thought
that that rate was too high, we decided
that it ought to come down nearer the two
percent rate which was in line with many
savings bank rates, and particularly Postal
Savings. So that we have reduced that to so that the security would increase at the
rate of four cents a month on a twenty-five
dollar denomination instead of five cents
a month, and that makes the rate approximately one ninety two.

There was some discussion as to the limit
of twelve hundred dollars which we had

in our first proposal, and it is still

twelve hundred dollars. Some thought that

it might be fifteen, some thought that it
might be eighteen. I think it was generally
agreed that in view of the rate and the type
of people we were trying to reach that
twelve hundred dollars was sufficient,
because that reaches a man who gets a salary

of about eight thousand dollars a year. That
is about as high as we can go, and still keep
it within the terms of the small taxpayer;
but as I say, the twelve hundred dollars

is quite arbitrary and just set there for

meaning one hundred dollars a month that
he can save and the highest denomination
is one hundred dollars.

On Series B - I ought to say first that we
did consider Mr. Eccles' proposal to issue

- 13 -

a two year note, increasing at the rate

of - starting out at a rate of one quarter
percent for the first six months, and increasing a quarter each month; and we got
it to one percent for the last six months.
That raised a question of policy as to whether
we want to really raise money by this scheme

or whether it is to be a plan to facilitate
tax payment. If it is a financing and a
scheme to raise money, then his plan has a

lot to commend it, and we should give it
consideration; and whether we adopt it in

this connection, it certainly should be
given consideration later on.

We thought that if you are going to just

adopt a plan which - to facilitate tax
payments, why then we should not adopt it
in this connection at this time, but we
should go to something like we had before.

There again the rate was under consideration.
We had at that time six tenths of one percent
or approximately that, and most everybody

thought that was too high for the present

money market. So we agreed to increase the

security on a basis of a hundred dollar

denomination, three cents a month flat
increase.

Now, that isn't a scientific, actuarily
speaking, increase; but it gives thirtysix cents on a hundred dollars for twelve
months and that is just a little less than
a three eighths rate, and it is still a
two year note so that if you held it for
two years you would get seventy-two cents.

That is about the scheme, I think. Have I
misstated it in any way?

- 14 McKee:

Perfect.

H.M.Jr:

If I could just state my own position, the

way I feel about it - in the first place,

may I say I appreciate the time that you
men have given to us. It has been helpful
because we have been able to cut the rate
about in half from where we started. I
have looked at this thing. What we are

trying to do is to go to the public and
say, Now we are about to pass a tax bill
that will add three and a half billion

dollars to our revenue, and as a matter
of service and accomodation to the taxpayers,
we would like to make it easy for you to
set aside out of your earnings each month
enough money to meet these taxes.

Bell has suggested the possibility of
sending a letter not only to people who
are taxpayers, but about eight million

names that we have who don't for one reason

or another pay taxes. I mean, it wouldn't
be a selling campaign, it would simply be
as a matter of convenience, and then see

how much money we get and what kind of
money we get.

I am not closing the door to the suggestion
that Eccles has made, but I just thought

in connection with the tax bill and everything that it was a sort of timely thing

to do and we might get a lot of money.
We might get a lot of money.

Now, Bell made another suggestion. He thought

he would send this out tonight to the twelve
Federal Reserve Banks and ask them to do

what they did last time, to bring in their
friends and talk to them about it for two
days and then send us in wires Tuesday night.

- 15 That is for any suggestion which they

have. It is a big country, and it would

get some interest.

Then what I would like to do, if you people
had the time, would be to meet again with
you Wednesday afternoon and show you what

we had and then make a final decision.
Eccles:

That is, you would send wires out to the
banks to get their views?

H.M.Jr:

Well, they have done it before - no, ask

Bell:

We did it in the United States Savings.

Eccles:

Yes, I know.

H.M.Jr:

Invite people in their communities in to

them --

talk it over. Isn't that what you did

last time?
Bell:

Yes. We would send it out tonight by
air mail so that it would be there tomorrow
or not later than Monday, and they would
have two days in which to discuss it with
the bankers and other financial people in

their districts.

H.M.Jr:

It worked very well in the last case. It

got them interested and they thought that
they were a part of the show, which I would

like them to feel.

White:

Is that a customary procedure, Mr. Secretary,
to send from the Treasury to the banks without going through the Board?

H.M.Jr:

Yes. They are our official agent.

- 16 White:

There is just this point. I think Dan

has stated the conclusions that we came

to quite accurately. If you start on
the premise that all we want to do at
this time is to design securities for the
purpose of enabling the public to save
for taxes - I mean, that is the limit --

H.M.Jr:

That is unanimous within the Treasury. I
don't know how it is over at your place.

Eccles:

Now, the suggestion that we had on the as a substitute for Series B was designed
to enable the larger taxpayers to save

for taxes, but of course, it went beyond
that and it would allow them to save in
this form for any other reserve.

In other words, you not only reserve for
taxes, but people reserve for a lot of

things and corporations set up a good many
reserves, and it was merely designed to

enable individuals or concerns with idle
money that was holding it in reserve for
whatever it may be and didn't want to invest
it in long term securities merely designed
to tap those funds just as you would tap
reserves for taxes.
That was my thought so as to avoid a market
financing, and simply say, "Now here, the

Treasury views these reserve funds in this

way and it would meet the tax problem as

well as the other; but if you just want to
confine it strictly to taxes, of course,
I think this meets the problem thoroughly
and may be just a little cheaper than the
other.

H.M.Jr:

Oh yes.

- 17 Eccles:

The other proposal.

H.M.Jr:

In consultation with you, we have benefited

Eccles:

definitely.

I merely want to draw that distinction, that

the one that I had discussed was not designed
merely as a means of raising money, necessarily.
It was designed to accommodate the people hold-

ing - not only money for tax reserves but for
any other kind of reserve.

Eccles:

I should have stated that, that is right.
Well, that was the only distinction.

H.M.Jr:

Well, the only difference is that we would

Eccles:

We understood--

McKee:

No idea of volume in your mind?

H.M.Jr:

No.

Eccles:

The thought of this, as we get it, it isn't

Bell:

like to go just so far at this time.

designed to get any particular amount of money

for the Treasury, a little or a lot. It is

designed to accommodate the people rather than
the Treasury.
H.M.Jr:

That is right.

Eccles:

Strictly.

Bell:

That is right.

Eccles:

Well, of course with that in mind I - I was
thinking of the other, both from the standpoint
of accommodating the investor and at the same

time enable the Treasury to get the largest
amount of money that now exists instead of

- 18 -

selling - having to sell securities to the

bank through an open market financing.
H.M.Jr:

Well, we just feel that if the public feels,
"Well, the Treasury is interested, and they
want to be a little helpful, and they are
adding three and a half million dollars that
they are going to take away from us, and
this is an accommodation, that might help

us a little bit to get the bill through and
a little bit better public feeling toward
the Treasury.

Now, some people around here think we might
McKee:

get several billion dollars. I don't know.
Oh, I think you would. I think there is a
good possibility on your B issue.

H.M.Jr:

We might get that. And if we did, that would
go part way toward meeting what the Federal
Reserve has in mind, but only part way.

Bell:

The same kind of money?

Eccles:

It would be exactly the same kind of money.

Bell:

Exactly as much money in this pot as there
would be in that pot.

Eccles:

It would pull in money that otherwise would

be lying idle, and that is desirable instead

of going to the market and having the banks
subscribe.

White:

Mr. Secretary, you conceive of that rather as
a first step than a compromise? This is a
first step and the second step remains--

H.M.Jr:

Open.

Viner:

I think you ought to study the experience

- 19 -

with a view to learning from this how to
float a short term of the other kind that
is open to all except banks, as a special
security.

H.M.Jr:

That is right.

Viner:

See if they don't respond, try and find out
what is wrong with this because if they don't
respond to this for tax purposes, they won't
respond to something like it for other purposes.

White:

Well, there is a slight difference. That is,
they don't lose the interest rate. There is
that difference. I don't know how significant

it is.

Eccles:

The other is an investment of six, twelve,
eighteen, and twenty-four months with an

increasing rate if they hold, so it is like

your Savings Bonds for the little fellow, the
longer they hold the better they get, so it
does have that difference.

Viner:

You can also see the administrative problem,
see whether the machinery is elaborate and
whether you would have to build up more receiving and selling machinery in order to
handle the larger scale operation.

Eccles:

If you limit it to the thousand dollar bond,

that would reduce the registration problem
very greatly and at the same time not affect

your volume much.
McKee:

Well, that is a separate category. What these
two issues spell to me is what you spelled in
your - out to the public in your Savings
Bonds. You have met the little fellows' requirements, and you have met the big fellows'

requirements. That is a savings proposition

- 20 -

and this is a tax proposition.
H.M.Jr:

You have got it.

McKee:

You are not going after volume?

H.M.Jr:

That is right.

McKee:

But there is just one thing I think we
ought to all be thinking of is mediums of
making it easy for people to get these things.
I don't know that answer, but the little tax
payer, there is a lot of tax payers that
don't have bank accounts, and I can visualize

a fellow wanting a twenty-five dollar certificate, tax certificate, who can go into the
bank and make out his application and leave
his money. Somebody has got to notify him

when that is ready for delivery. He has got
to come back and get it. He may have to

stand in line to do those things.

Now, with those things in mind, I think we

all ought to be studying ways and means of

making it accessible to the little fellow.
White:

Is it possible for the post offices to sell
these?

Bell:

Well, it is possible, but it is rather diffi-

cult. We thought that we would let each bank
handle the applications just about like they
handle F and G. Have all issues from the
Federal Reserve Bank because they have to be

inscribed, and it had better be done by the

Federal Reserve Bank than be done out in a

lot of field offices, because there are going

to be a lot of mistakes made in them, but to
handle them like F and G and let the applications flow in from a number of--

- 21 H.M.Jr:

The Post Office handles the E Bond, don't they?

Bell:

Yes, they sell the E Bonds.

White:

Is there a lot of difficulty if a man goes into
dollar tax bond,' or whatever you call it; is

a post office and says, "I want a twenty-five

there more difficulty than when he buys a money

order or anything of that sort?

Bell:

Except you have postmasters to educate on what

Viner:

The man doesn't say, "I want that." He comes
in and asks questions, "Which one should I
take, and what is the advantage of taking

to do with a public debt obligation.

twenty-five denominations or fifty and just
what are my rights under it?" I can tell you
from my personal esperience around the corner

that whoever sells these has to - discovers
very quickly that he has to know the merchandise, because he is asked questions.

White:

Can't he reach into a cubby-hole and slip
out an information sheet?

McKee:

That doesn't do it. They want somebody to

H.M.Jr:

Which raises the question whether we won't

tell them about it.

come to where we have one man on the Post

Office payroll that we pay for who does that
and nothing else.

White:

And Defense Bonds. He might represent

Treasury in the post office during the period
of education, six months or a year.

H.M.Jr:

For the duration.

Viner:

Something else you ought to consider, Mr.

- 22 Secretary, is that before you are through
with your financing program you ought to

consider whether you are not going to have

a staff of people to sell them whom you will
station at the various post offices and who
will be on your payroll and who will be
experts in all the things you have to sell,
because some banks already have full time

people on this job, and you still would ask
for their cooperation, but you can put one
man into each large scale thing, centralize
information, and he would be the liason
between the selling people and yourself.

White:

I think that is a very good idea.

H.M.Jr:

Would you (Bell) mention it to Graves? I
will mention it to him too. Because right
along that idea I made this suggestion. It
came out of the West Coast. The Giannini

people, using the fact that we won't give

any more branches, how can a poor soldier

cash his check, you see. I don't know
whether it reached you or not.

Well, Mario Giannini, after seven years,
called on me the other day; and, after letting
him know just where we stood, with a smile-Eccles:

Did he smile or both of you smiled?

H.M.Jr:

He smiled occasionally, and when he left,
he asked could he come back again, and I
said, "Yes," he could save a lot of money

that way. He could come right in and find
out just where I stood and wouldn't have to
hire so many fancy lawyers. But I had a very
good time.

Out of that, I made the suggestion to him, and
since then that the Treasury put a man in

every Army post in the United States. It will

- 23 be run something like a consolidated ticket
office, and the soldier could come in and
either cash his check or make a deposit for
his bank. The same man would also sell
Defense Savings Bonds and Stamps, you see.

I mean, run it like a consolidated ticket
office. We are working on that now.

McKee:

What were the arrangements in the World
War when the soldiers by allotment bought
Government bonds, Dan?

Bell:

That was handled by the finance officer of
the post.

McKee:

He just turned so much - and information over

Bell:

Turned it over to the Federal Reserve Bank

to the Treasury at that time and--

in the district, usually, or a local bank,

and they gave him the bonds or they kept

an account and took the money; and, when he
paid enough money to get a bond, they gave
him the bond.
Viner:

They Army doesn't run, say, currency exchanges

at its big posts at all, even though it sets

up a post-White:

Well, a company store.

Viner:

I know, but it also does that. I see.

McKee:

I don't know whether they make a habit--

Eccles:

Couldn't you do this? Of course, the California situation is only one in the United
States. I mean, I suppose they think that
is most important; but, at the same time, you

have got that - it isn't only Army posts, but
it is all these defense industries in small
communities. The problem is getting to be

- 24 pretty great where they have got a small

community and a small bank there, and the

volume of business is so great they just

can't get them in the lobby. It is a
situation that - it isn't only the Army,
but that brings all kinds of general busi-

ness that may be very temporary, and I have

thought that it may be possible to set up -

permit the banks to set up a temporary agency,

not a - don't grant a branch but merely a
temporary agency that will be permitted to
operate just during the period of the-Viner:

Of course, they needn't accept local deposits.

Eccles:

No, they don't need to accept deposits.

Viner:

Don't give them the right to accept deposits.

Ransom:

Cash checks.

Viner:

Act as a currency exchange.

They would merely take the deposits for the
banks. They would sell exchange. There are
a lot of people buying drafts, money orders

of all kinds--

McKee:

At twenty-one dollars a month?

Eccles:

I am not speaking of the soldier, I am speaking of a lot of the defense workers and also

the business - the various types of activity
that are a result of that.

Viner:

I think that you or Treasury ought to send
somebody down to one of these defense areas

just to make a little survey of what the

problem is.
Ransom:

See whether it is a serious--

- 25 Viner:

Whether it is serious and see what the local

McKee:

I think that is a good suggestion, and I

bankers say.

think it ought to be joint. I think it ought
to be yourselves, ourselves, and the Comp-

troller's Office, and the FDIC.

Viner:

It is a Government problem. You have created

this big influction of people. Have you pro-

vided them with their currency, money needs?
H.M.Jr:

If you will appoint somebody, I will have

the Comptroller appoint somebody and we will--

Bell:

We have already, Mr. Secretary, done quite a

bit of that, and we have increased depositary
facilities of the country tremendously just

to take care of this situation.

H.M.Jr:

Well, Dan, if you have got time, would you
represent the Treasury, and I would love to
have the Federal Reserve people on it. Will
you do that?

Bell:

Fine.

White:

I am much intrigued, Mr. Secretary, by mention
of Jake's idea of having a Treasury representa-

tive both at banks and post offices. He could
take care of a great many things and be of

excellent service in your financing and in

taxes and any other matters that come before

the Treasury in a lot of these local communi-

ties. I think it has excellent possibilities.

Train men who would be able to answer a great

many questions that either come in here or
go to lawyers and cost money or-Viner:

Or we will say that he will find information
because there is no reason why he shouldn't
tell them even on Customs or anything else
that is Treasury business.

- 26 Eccles:

I think the availability of these tax certificates is going to be a great deterrent.

You can sell your stamps and sell your Series
E Bonds, because they go in and get them and

that is an important thing in a small transaction, but to go into a local bank, that bank
has got to write in to the Federal Reserve Bank.
That means that ninety-five percent of all the
banks are going to have to write in. They
have got to go to the trouble andexpense of
filling out the application for twenty-five

dollar, fifty dollars. There is the time

element. And then, when the transaction is

completed and the security comes back, then

they have got to get in touch in a day or two
or three or a week, whenever it is that they
get it back. Then they have either got to
mail it out again to the person that has made
the purchase - and for the size of the trans-

action, and the little ones in particular the big ones are quite different - it will
involve an unusual amount of expense, and it
will tend to - it seems to me, it will both

dampen the interest of the tax payer in pur-

chasing, and it certainly will dampen the willingness of the bank to go through - a lot of
the banks are not going out of the way.

If you do what you say here in the case of
your post office, in the case of these small
ones, you could have those right at the post

office just like you sell money orders at the
post office or you sell your stamps at the
post office; and there is, in a great many
communities in this country, post offices

where there are not banks. There are an
awful lot of communities where there are no
banks.

H.M.Jr:

Why don't we go the whole way and make it really

easy and just let's put all checking accounts
in post offices and do the thing up right.
(Facetiously) That will take care of your

- 27 excess reserves.
Ransom:

That will also solve the banking problems but

not in a way the bankers approve.
Eccles:

If it solves them, I would approve, but the
trouble is that doesn't solve anything.

Ransom:

It solves a death sentence.

Bell:

Let's us use the money.

McKee:

You have over-burdened tax collectors. It
seems to me that there is the place to have
the Treasury representative, in the tax office,
because a lot of people have - now, don't

think of Washington, but think of some little
community that has its tax office and its
local collector.

H.M.Jr:

I am thinking of myself. I live ten miles

from any town. I am entirely dependent upon

RFD.

Ransom:

I think, John, is it your idea that you might
popularize the tax offices by getting people
in the habit of going there?

McKee:

I think they will feel better by turning

their money over to a tax collector and getting one of these things than they are turning
it over to a bank and waiting to come back

and wait to get it.
H.M.Jr:

If you gentlemen will come back at three

o'clock on July 2, we will have this stuff in
from the field, and I am going to take up

this suggestion, and we will see what we can
do with it between now and July 2.
Ransom:

Is that Wednesday? Two o'clock, you said?

- 28 H.M.Jr:

Three. Is that all right?

Ransom:

There is one question that I would like to
ask that we had up for discussion the other
afternoon and the discussion this morning
suggests something that wasn't said. How
much can you buy of the Series A and in what

period, Dan? Twelve hundred - is it within

a year or two years?
Viner:

You can buy any amount you like.

Bell:

Any amount you want, but you can only use
twelve hundred dollars.

Ransom:

Of Series A?

Viner:

Yes, but you can use only twelve hundred

dollars a year.

Ransom:

I should have said, "How much can you use?"

Bell:

Twelve hundred dollars in any one tax year.

Ransom:

You were puzzled the other afternoon by reason
of the fact that we only have six months now

before the first of the year. Could you buy
twelve hundred dollars between now and the

first of January and use it-Eccles:

You could buy twenty-four hundred.

Viner:

You could buy ten thousand.

Eccles:

You could only buy twenty-four hundred, because

that is all you can use. (Laughter)

White:

I don't like to inject another note there,

but my understanding was you could only buy

twelve hundred dollars in any one year and

that if you kept it after the tax date you

would not receive interest on the Series A
Bond.

- 29 Bell:

No, that isn't right.

Ransom:

Is there any way you can convince people who

buy the Series A that they can buy the full
amount they can use in the next six months?

You get over the difficulty, it seems to me,
that you were faced with the other day that
they have got to save for twelve months'
taxes in six months' time.
Bell:

They can buy, when this thing is first offered,
twenty-four hundred dollars, and they can turn
in twelve hundred dollars of them next March
for their tax payment during that year and they
can turn the other twelve hundred in during
the following year.

Eccles:

They can buy more but they won't because they
can only use twelve hundred to pay taxes,

and hence wouldn't get any interest.

Bell:

We haven't put the limit on the purchase but
on the turn-in.

H.M.Jr:

I would like to say again that it has been
very helpful in getting your advice, and I

would like it if you would come back Wednesday
at three o'clock and help me make up my mind.
Eccles:

All right, sir.

TREASURY NOTES - TAX SERIES

The Treasury has under consideration a proposal to issue two series

of notes as outlined below, both dated July 15, 1941, and maturing

July 15. 1943. The reason for the two-year note is to permit a taxpayer,
if he so desires, to begin saving in January of one year and continuing
throughout that year for his taxes due in March, June, September, and

December of the following year. On January 1st of each year hereafter
two new series will be provided so that a taxpayer can always purchase

notes during the entire year in which he is receiving his income, to
be used in payment of his taxes due in the following year.

All notes are to be sold at par and accrued interest, if any, and
will be redeemed at any time up to the maturity date when presented in
payment of income taxes at par and accrued interest up to and including

the month in which such taxes are paid. If not presented in payment of
income taxes, they will be redeemed under certain specified conditions

at par and accrued interest, if any, up to the date of purchase. In
other words, the taxpayer, in this case, gets back just the amount he

paid for the notes and no more. The notes will not be registered, but
will have the purchaser's name and address inscribed thereon so that the
Collector of Internal Revenue can compare the purchaser's name with that

on his tax return. They will not be transferable; nor can they be used
as collateral. Applications for purchases of both series of notes can
be made through the taxpayer's bank and the bank may credit the proceeds

to its War Loan Deposit Account, if it has such an account. Applications
can also be made directly to the Federal Reserve Banks or to the
Treasurer of the United States.

These notes may be used to pay any Federal income taxes (current

and back / personal and corporation taxes, and excess-profits taxes)
and estate taxes where the notes have been purchased by the estate

after the death of the testator.
TAX SERIES A-1943

Denominations will be $25, $50, and $100. The amount of this series
which can be presented in payment of income taxes will be limited to

$1200 in any one tax year. The notes will provide a return of 1.92 per
cent a year, but the return will not be expressed in terms of percentage.
For a $25 denomination, it will be expressed at 4 cents a month, $50
denomination at 8 cents a month, and so on for the other denominations.
By following this method it is made simple to compute the cost when the
taxpayer purchases the notes and simple both to the taxpayer and the

Collector of Internal Revenue to compute the credit that may be applied

to the taxes due. There will be a schedule of values printed on the
face of each note. (See attached schedule showing the purchase price
and the tax payment values for each month from July 1941 to July 1943.)

These notes will be redeemed for cash at any time at the price paid by
the taxpayer.

It is realized that this rate of return (1.92%) is considerably out
of line with two-year money rates, but it should be an inducement to the

taxpayer, particularly the small ones, to save his taxes currently as he
earns his income rather than paying his taxes due on this year's income

out of next year's income. The rate is not too much out of line with
the rate paid in some cases on savings accounts and the rate paid on

67
-3postal savings deposits. Furthermore, the taxpayer can use these only
for the one purpose and if he wants cash for their redemption he gets
no interest. Anyway, it gives the taxpayer a break and he pays the
bill in the end.
TAX SERIES - B-1943

Denominations will be $100, $500, $1,000, $10,000, and $100,000.
Other denominations can be made available if a need for them is shown.
The amount of these notes which can be presented in payment of taxes

is limited only by the amount of taxes due. The Secretary will, however,

reserve the right to reject any and all subscriptions. It is necessary
to keep this control in order to prevent their use for a purpose not

intended. The notes will provide a return of slightly less than 3/8
of 1 per cent (0.36%) a year, but here, as in Series A, the rate percentage
will not be expressed. It will be stated as 3 cents & month for a $100
denomination, 15 cents for a $500 denomination, and so on. There will
be a schedule of values printed on the face of each note. (See attached
schedule showing the purchase price and the tax payment values for each

month from July 1941 to July 1943.) These notes will be redeemed for
cash at the Federal Reserve Bank of issue, after sixty days and upon

thirty days advance notice at the price paid by the taxpayer.

TREASURY NOTES - TAX SERIES A-1943

Purchase Price and Tax Payment Values on each Denomination
$100

$50

$25

:
:

July 1941
August 1941
September 1941
October 1941
November 1941
December 1941
January 1942
February 1942
March 1942

April 1942
May 1942

ine 1942

July 1942
August 1942
September 1942

October 1942
November 1942
December 1942
January 1943
February 1943
March 1943

April 1943
May 1943

June 1943

July 1943

June 25, 1941.

$25.00
25.04
25.08
25.12
25.16
25.20
25.24
25.28
25.32
25.36
25.40
25.44

25.48
25.52
25.56
25.60
25.64
25.68
25.72
25.76
25.80

25.84
25.88
25.92
25.96

$50.00
50.08
50.16
50.24
50.32
50.40
50.48
50.56
50.64
50.72
50.80
50.88

50.96
51.04
51.12
51.20
51.28
51.36
51.44
51.52
51.60
51.68
51.76
51.84
51.92

$100.00
100.16
100.32

100.48
100.64
100.80

100.96
101.12
101.28
101.44
101.60
101.76
101.92
102.08
102.24
102.40
102.56
102.72
102.88
103.04
103.20
103.36
103.52
103.68

103.84

TREASURY NOTES - TAX SERIES B-1943

Purchase Price and Tax Payment Values on Each Denomination
:
$100

$500

$1,000

$10,000

$100,000

$100.00
100.03
100.06

$500.00
500.15
500.30

$1,000.00
1,000.30
1,000.60

$10,000.00
10,003.00
10,006.00

$100,000.00
100,030.00
100,060.00

100.09
100.12
100.15

500.45
500.60
500.75

1,000.90
1,001.20
1,001.50

10,009.00
10,012.00
10,015.00

100,090.00
100,120.00
100,150.00

100.18
100.21
100.24

500.90
501.05
501.20

1,001.80
1,002.10
1,002.40

10,018.00
10,021.00
10,024.00

100,180.00
100,210.00
100,240.00

100.27
100.30
100.33

501.35
501.50
501.65

1,002.70
1,003.00
1,003.30

10,027.00
10,030.00
10,033.00

100,270.00
100,300.00
100,330.00

100.36
100.39
100.42

501.80
501.95
502.10

1,003.60
1,003.90
1,004.20

10,036.00
10,039.00
10,042.00

100,360.00
100,390.00
100,420.00

100.45
100.48
100.51

502.25
502.40
402.55

1,004.50
1,004.80
1,005.10

10,045.00
10,048.00
10,051.00

100,450.00
100,480.00
100,510.00

100.54
100.57
100.60

402.70
402.85
403.00

1,005.40
1,005.70
1,006.00

10,054.00
10,057.00
10,060.00

100,540.00
100,570.00
100,600.00

June 1943

100.63
100.66
100.69

403.15
403.30
403.45

1,006.30
1,006.60
1,006.90

10,063.00
10,066.00
10,069.00

100,630.00
100,660.00
100,690.00

July 1943

100.72

403.60

1,007.20

10,072.00

100,720.00

July 1941

ugust 1941
September 1941

ctober 1941
ovember 1941
December 1941

January 1942

february 1942
arch 1942

pril 1942
lay 1942

ne 1942
July 1942

ugust 1942
September 1942

ctober 1942
November 1942
December 1942

January 1943
February 1943

arch 1943

pril 1943
lay 1943

June 26, 1941

TREASURY DEPARTMENT

Washington
FOR RELEASE, MORNING NEWSPAPERS,

Friday, June 27, 1941.

The Secretary of the Treasury, by this public notice, invites
tenders for $100,000,000, or thereabouts, of 91-day Treasury bills,
to be issued on a discount basis under competitive bidding. The

bills of this series will be dated July 2, 1941, and will mature
October 1, 1941, when the face amount will be payable without

interest. They will be issued in bearer form only, and in
denominations of $1,000, $5,000, $10,000, $100,000, $500,000, and

$1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches

up to the closing hour, two o'clock p. m., Eastern Standard time,
Monday, June 30, 1941. Tenders will not be received at the
Treasury Department, Washington. Each tender must be for an even

multiple of $1,000, and the price offered must be expressed on the

basis of 100, with not more then three decimals, e. E., 99.925.
Fractions may not be used. It is urged that tenders be made on the
printed forms and forwarded in the special envelopes which will be
supplied by Federal Reserve Banks or Branches on application therefor.
26-14

-2Tenders will be received without deposit from incorporated
banks and trust companies and from responsible and recognized

dealers in investment securities. Tenders from others must be
accompanied by payment of 10 percent of the face amount of

Treasury bills applied for, unless the tenders are accompanied by
an express guaranty of payment by an incorporated bank or trust
company.

Immediately after the closing hour, tenders will be opened
at the Federal Reserve Banks and Branches, following which public
announcement will be made by the Secretary of the Treasury of the
amount and price range of accepted bids. Those submitting tenders

will be advised of the acceptance or rejection thereof. The
Secretary of the Treasury expressly reserves the right to accept

or reject any or all tenders, in whole or in part, and his action
in any such respect shall be final. Payment of accepted tenders
at the prices offered must be made or completed at the Federal
Reserve Bank in cash or other immediately available funds on
July 2, 1941.

The income derived from Treasury bills, whether interest or

gain from the sale or other disposition of the bills, shall not
have any exemptions, as such, and loss from the sale or other

disposition of Treasury bills shall not have any special treatment,

-3as such, under Federal tax Acts now or hereafter enacted. The

bills shall be subject to estate, inheritance, gift, or other
excise taxes, whether Federal or State, but shall be exempt from

all taxation now or hereafter imposed on the principal or interest
thereof by any State, or any of the possessions of the United

States, or by any local taxing authority. For purposes of
taxation the amount of discount at which Treasury bills are

originally sold by the United States shall be considered to be
interest.

Treasury Department Circular No. 418, as amended, and this

notice, prescribe the terms of the Treasury bills and govern the

conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank or Branch.

-00o-

TREASURY DEPARTMENT

Washington

Press Service

FOR IMMEDIATE RELEASE

No. 26-16

Friday, June 27, 1941.

Secretary of the Treasury Morgenthau today announced the

subscription figures and the basis of allotment for the offering
of 1 percent notes of Series W of the Reconstruction Finance
Corporation.

Reports received from the Federal Reserve Banks show that

subscriptions aggregate $5,277,000,000. Of this total, about
$210,000,000 were received from holders of Series N notes of the
Corporation who tendered a like par amount of such notes to the

Secretary for purchase. Such subscriptions were allotted in full,
and all other subscriptions were allotted 7 percent, but not less
than $1,000 on any one subscription.

Further details as to subscriptions and allotments will be
announced when final reports are received from the Federal Reserve
Banks.

-00o-

June 27, 1941
11:00 a.m.

RE LOCAL TREASURY REPRESENTATIVES

Present:

Bell:

Mr. Bell

Mr. Graves.

On this representative in the county, we have
thought, from time to time, in my own bailiwick

upstairs that it would be a nice thing if we

could have this country departmentalized like,
say, France has.

H.M.Jr:

I know.

Bell:

France has a treasury representative in each

section. That is one thing that we were trying to work up in this accounting organization,
that we have the type of people that could
have information and give it out to the public. Of course, what we are planning is,
at the present time, a Federal Reserve representative. To do it on a state basis would
be rather expensive, but if you had a county
basis, you have got three thousand counties.

Supposing you had an A-1 man and a good secre-

tary and they might travel around in the county

and say, "I will be at this little town on

such and such a day to answer questions oncerning taxes and Treasury matters and so

forth. Now, that is a possibility if you

want to consider that.

(Mr. Graves entered the conference.)
H.M.Jr:

Harold, sit down a minute. I just want to

-2say, Graves told me yesterday he is not at

all satisfied on the setup that he has on
this to sell savings bonds, you see.
Bell:

Yes.

H.M.Jr:

Now, we just had a meeting here this morning
with the Federal Reserve and John--

Bell:

McKee.

H.M.Jr:

McKee brings up the question, talking particularly about these twelve hundred dollars worth

of savings certificates, you see, and the fact
that it was just at the bank. I mean tax
certificates. That that wouldn't be a sufficient way of distributing the thing, and
that we would have to use other devices, and

then somebody said, "Why not have somebody in

every post office, not only to explain these
but to explain the savings, you see; so from
that Bell and I have jumped to the possibility
of have a Treasury man in every county who
would be doing savings bonds, stamps, tax

certificates, and also - would you go beyond
that? Would you do things besides that?

Bell:

Well, for this purpose he probably shouldn't

do anything else, but I think eventually, if

we are going to do what was discussed here,
then he should be a Treasury permanent repre-

sentative, and he would be able to discuss we would bring him in and train him - would
be able to discuss almost anything in the
Treasury Department with a view to giving the
man certainly generaly information. Sometimes
he might have to come to Washington for it,
but if a man comes in and says, "I have a
matter that concerns the Treasury," he ought
to be able to sit down and discuss it, whether
it is Customs, Internal Revenue, or Public

-3Debt, or what not, but he would have enough

information in his files to be able to satisfy

ninety percent of the people that would want
to discuss Treasury matters. At the same time

we would be using it to get information to
help us, and we might set it up as an accounting organization and get information on all
of these expenditures in each county on

public projects that we are trying to set up
in a Federal Reserve district.

H.M.Jr:

But that would be eventually. I mean, that
is what you would aim for eventually; but at
the beginning, if he did - if he was the

representative of the Treasury on Treasury
bonds, stamps, and these tax certificates
and would handle that at the beginning, then
gradually--

Bell:

It might be a good education.

H.M.Jr:

You see, you are tussling with this thing,
Harold, and what I would like you to do, because Bell has an idea, and you have a good

idea, this sounded kind of good to me, and I
sent for you immediately, you see.
Graves:

Yes.

H.M.Jr:

I would like you and Bell to get together

between now and Tuesday, and I would like to
sit down with you two and Norman Thompson.

Don't you think he should be in on this?
Bell:

Yes.

H.M.Jr:

I think we have got something, Harold.

Bell:

It is very expensive though, Mr. Secretary. It
is really very expensive.

H.M.Jr:

I know, but all of this stuff is expensive.

77
4-

Look, I started out - I am not going to be

satisfied until I reach every man, woman, and

child in the United States on these things.

We can't do it unless we have something

like a paid representative in every county,
a Treasury representative.

Bell:

It may be that in some sections you could

H.M.Jr:

Well, in Hamilton County, New York, where

combine two counties.

you have three hundred fifty population that is what they did when we did a study of

it, I don't think you would have to have it.

Bell:

What county is that?

H.M.Jr:

Hamilton County, New York. It is the heart
of the Adirondacks. Everybody is an office
holder in the county. When we made that

survey, we recommended that it be abolished

and made part of the state forest, you see,
and administered by the state.
Bell:

I didn't know there was a county in New York
that had that few people.

H.M.Jr:

Let me just suggest - I am going to put down
ten thirty Tuesday, you see, Bell, Graves,
and Thompson. Wouldn't he be in on this?

Bell:

Well, it wouldn't hurt to have him. I don't
think it is his affair, but it wouldn't hurt
to have him.

H.M.Jr:

Well, he is supposed to be Administrative

Assistant, isn't he?

Graves:

Yes, sir.

H.M.Jr:

But it sounds damn interesting to me, and I
wanted to give it to you, but please, gentlemen,

-5get together before you see me.
Graves:

Bell:

Yes, sure, we will.
Is this something that you envisage that might

be kept as a permanent organization.

H.M.Jr:

Yes.

Bell:

In the fiscal setup?

H.M.Jr:

Yes.

Graves:

Like the county agents, apparently, in Agri-

H.M.Jr:

Right.

Graves:

Same sort of thing.

Bell:

Then I think we ought to get Bartelt and talk
to him about it.

H.M.Jr:

Yes. No, I look at this thing--

Bell:

We are working on this eighty-five twelve
now to set up Federal Reserve districts on a
Treasury basis, and there certainly ought to
be people qualified to carry on that function.

H.M.Jr:

Well, you have got certain things in mind,

culture, isn't it?

Harold has got something. Knowing Harold's
problem and the thing that we have got to

get and looking at this thing as a five-year
proposition, if we are going to do this job

we have got to have a paid man in every
county. And then he can draw in what

volunteers he wants. I wouldn't get away
from the idea that his headquarters would
be the post office. He would have a booth,
a window. I don't want to get away from
that idea, that his headquarters would be

6--

the post office. That is where the people
come. That is the community center for

the Federal Government, and we want a window

there for the United States Treasury, and
the people could come and that would be his
window, but I don't want to get away from

Graves:

the idea that that would be his place. But
that is where I started. I almost forgot
the most important thing and that is, I want
this fellow in the post office.
I think there will be a lot of trouble about
this, Dan, chiefly involved with the Bureau
of Internal Revenue because that is the outfit
that will have the most problems. That is,
more people will be interested in seeing your
county agent about Revenue matters than any

other single thing.
H.M.Jr:

Harold, the beauty of this thing is, you know
Internal Revenue because you helped reorganize
it so there are two fellows who know it. He
(Bell) knows the accounting end. Now, out

of the two of you, with Eddie Bartelt and

Norman Thompson, you ought to be able to give

me something Tuesday.
Graves:

Yes, sir, we will.

Bell:

The thing that worries me, as the former

acting Director of the Budget, it is expensive.

80
June 27, 1941
11:27 a.m.

HMJr:

Hello.

Operator:

Solicitor General.

HMJr:

Hello.

Francis
Biddle:

Henry, Francis.

HMJr:

Hello, Francis.

I promised Archie MacLeish yesterday
that I would say a word about our proposed

proclamation which Jim Allan and I thought

up here. Archie is very anxious to be
able - after he gets it written out - I
rather insisted that he write out a
specific thing - to take it up and show
it to the President.

HMJr:

Yes.

At Hyde Park and he also wants to talk
I should think that would be
to

all right if he can work it in with Pa,
don't you?

HMJr:

Sure.

Yes.

HMJr:

Sure, he's going to be up there Monday.

Fine. Well, I think he's got something
there.

HMJr:

Good.

Fine. I wanted to be sure he cared.
Sorry to have bothered you.

HMJr:

No bother.

June 27, 1941
12:08 p.m.

HMJr:

Hello.

Operator:

Mr. Upham.

HMJr:

Cy?

C. B.
Upham:

Yes, sir.

HMJr:

B. M. Edwards was just in here telling

me that you've been helping him and I
just want to tell you that I'm delighted.
Give him all the help you can.
Well, thank you.

HMJr:

And I also told him that under no
circumstances would I let him give up
the job he's doing.
Oh, fine. I hope he does stay.
He's going to stay.

He's a grand person.

HMJr:

But he said that if he could have even
more of your time, it would make it that
much easier for him.

HMJr:

Well, I'll be glad to help him all I can.
Because I consider him an extremely useful
person to us so anything you can do to help

him, it'11 be pleasing to me.
U:

Well, that's fine. If I can help him and
you both, I'll be glad to.

HMJr:

Thank you.

82
June 27, 1941
12:10 p.m.
HMJr:

Hello.

Operator:

Secretary Ickes.

HMJr:

Hello.

Operator:
HMJr:

Harold

Go ahead.

Hello.

Ickes:

Hello.

HMJr:

Hello, Harold.

You remember that you presented - that
there came up at Cabinet once that order

that you had induced the President to

sign limiting the oil shipped to Japan.

Sumner Welles was there and he was very
excited.
HMJr:

Gosh, I don't remember the particular

incident. The last time
Well, they - this one you hadn't submitted
to State, but you had - some how you had
gotten the President's signature.

HMJr:

Well, if you say.so, I'll say I did.

Well, of course, it was there.

HMJr:

Yeah.

And Welles was very much excited. Then

we discussed what types of oil or gasoline
should be shipped - might be shipped to
Japan and I think the decision was that
nothing above 67 octane.

HMJr:

That's as I remember it, Harold.

-2I:

You remember that.

HMJr:

Well, I'd have to check my memory.

Well, what I'm wanting you to do is

to check your records. I'd like to

know those facts if you'll be good
enough to let me have them.

HMJr:

Oh, surely. As I remember it - but
I'd want to check it - that

Because what we are doing now is to -

putting a fast one over on the people.

HMJr:

That the orders were 67 octane.

That's right.

HMJr:

And then something - then subsequently oh, several months after that, Sumner
Welles said that as far as he was concerned
he was ready to recommend 67.

Yeah.

HMJr:

See?

I think they violated it though there all

HMJr:

I wouldn't be surprised.

Will you look it up and let me know?
Yeah. Did you see the story yesterday that
Pearson and Allen wrote, that - on this

HMJr:

the time.

Russian thing that Welles always wanted

I:
HMJr:

to help Russia, but that Hull didn't?
No, I didn't.

Well, what's his name was in today, Pearson,
and I said, "How did he get that way?" So

he said, "Well that was true and if I asked

you sometime that you could tell me that Welles

84
-3--

had
been consistently for helping
Russia"?
I:

That I could?

HMJr:

Yeah.

Well,
don't to
know
that's Inews
me. a damn thing, Henry,

HMJr:

And Pearson said that he had gotten you
and Welles together and that you could

substantiate the thing.

Oh, no.

HMJr:

What?

No.

HMJr:

Well, I just - he came in on another
matter and I just had the thing there
it was yesterday!

It's all news to me.

HMJr:

Well, I said I'd ask you the first time

I:
HMJr:

I saw you because I said it was news to
me that Welles ever wanted to do anything
for Russia.

I - I think so, that's been my opinion.
Until I read about it in Pearson's column.

Yes. Well, he's, he's - some how Welles
has a great hold on him.

HMJr:

That's right. Well, we'll look this thing

up and when I have it, I'll let you know.
All right, Henry.

June 27, 1941
2:03 p.m.

HMJr:

Hello,

Operator:

Go ahead.

HMJr:

Hello.

Colonel
Hasley:

Yes.

HMJr:

Morgenthau.

HMJr:
H:

Yes, sir. I just wanted you to know that
we've actually gotten around to your bill
and it's under consideration, they're
calling a quorum for it right now. They've
passed the War Department, they've passed
the District and now they're ready for your
Stabilization.
Will they get on a vote to it?
Well, no they haven't - they haven't even
presented the matter, they've just gotten
it up. I just thought you'd be interested
to know that we're going to get busy. Mr.
Glass is in his seat and Mr. Adams, I
understand, 18 going to take the floor
against him.

HMJr:

All right, thank you.

Adams 18 going to force out some of the

HMJr:

Yeah.

Shall I keep you posted?

HMJr:

No, I - I - that won't be necessary. I

iniquities, if there are any.

find we have somebody up there watching it.

Yes, uh huh.

-2-

HMJr:
H:

And

Well, be free to call me if you want to

talk to any of these people. I'll be

glad to get them for you.
HMJr:

Thank you.

Right-o.

HMJr:

Goodbye.

June 27, 1941
2:09 p.m.

HMJr:

Jake Viner would like to go on
our payroll at a $100.00 a week beginning
with July 1.

W. N.
Thompson:

Yes, sir.

HMJr:

He's coming every other week.

HMJr:
T:

HMJr:

I see. $100.00 a week, July 1.
Right, and talk to him about it.

Yes, I'll do...
I think that's correct.

HMJr:

That's - we gave him that before.
He said he wants just what he had

Well, that's exactly what he had before.

HMJr:

Right.

Okay, sir.

HMJr:

Thank you.

before.

June 27, 1941
2:25 p.m.

Daniel

Bell:

As I told you the other day we got
5 billion and 67 million and instead

of getting 199 exchanges, we got 210

HMJr:

Yeah.

Twelve more came in the mail.

HMJr:

Yeah.

So if you allot 6 percent, you get only

304 million cash to about 3, 8 on

adjustments, 210 in exchanges gives you

518.
HMJr:

Yeah.

If you allot 7 percent, you get 355

millon on cash and about - and 210 on
exchanges which might go to 570. That
look too big to you?

HMJr:

No, because I think Jesse wants the money,

Yeah, he wants the money and I don't believe

you see.

there'11 be much kick on it because I think
everybody :thought they'd get 00 percent.

That's the basis of their subscriptions.
HMJr:
B:

HMJr:

No. I - I'd do it.
I can go ahead on it?
Yes, sir.

Thank you.

HMJr:

Goodbye.

Good night.

89
TREASURY DEPARTMENT

Washington,
June 27, 1941.

MEMORANDUM FOR THE SECRETARY:

This is to remind you, if you please,

to speak to Secretary Stimson regarding
the War Department exhibits to be placed
on the lot with "Treasury House."

Our people say that after a good deal

of backing and filling, the officials of

the War Department are placing the matter
of their cooperation before Mr. Stimson
this morning.

What we want is the Army Band a few

times, some tanks, field guns, a plane or
two, and other similar items. The Army

people know the details.

part B.
Lt Col Lovett GRAVES.
chief 7 Burum of Public Relations

90
June 27, 1941
2:28 p.m.

HMJr:

Hello.

Robert

Patterson:

Henry?

HMJr:

Bob?

Yes.

HMJr:

I got another matter that has nothing
to do with what I sent you this morning.

Yeah.

HMJr:

Our people have had.

I looked that up, by the way.

HMJr:

What's that?

I looked that up.

HMJr:

Yes.

That doesn't amount to anything. He's
one of these Military Training Camp's
Aides - one in each state.

HMJr:

I see.

It's purely nominal.

HMJr:

Oh.

You know each state has a Military Training
Camp's Association and each - they put in

a list of 48 civilian aides.

HMJr:

I see.

And we have - he's the one for Wisconsin.

HMJr:

Oh.

That's all there is to that.

2HMJr:

Well,
it's atit.least - I wanted you to
know about
Yeah.

HMJr:

You have a man by the name of Lieutenant

Yeah.

HMJr:

We've had up with him a question of giving

Colonel Ralph B. Lovett, Chief of the
Bureau of Public Relations.

some army equipment to help us launch a
drive on Defense Savings Bonds and we are

going to have it in Harold Ickes' park
right outside here of a - the Willard Hotel.

HMJr:

Yes.

We thought we were all right with Lieutenant
Colonel Lovett, he seemed to think it was

all right, but he - we wanted a - oh, a
band a couple times and a

Band and what?

HMJr:

Oh, we wanted an Army band to play a

Yeah.

HMJr:

And we wanted to show how much they cost -

That's a good idea.

HMJr:

And everybody was enthusiastic about it.

Yeah.

HMJr:

And then something suddenly went wrong.

couple times - that's easy, but we wanted
some equipment like a plane or tank and
a field gun.

if you bought so many bonds, it'd pay for
a tank or field gun or a plane, you see?

Now, we're opening it next week.

When, what day? You got the day settled?

-3HMJr:

HMJr:

No, but I could find out in a split yeah, the day is settled. Lovett knows
all
about it.
Well, I'll get that. What has been the
hitch?
Well, the hitch was - the word I got was
that it couldn't be passed on without the
Secretary of War, himself passing on it.

Oh, all right.
But, if you had time to clear that today
I would appreciate it.
I'll clear it within a half an hour.

HMJr:

I would appreciate that.

I will.

HMJr:

And if it goes here you see, then we're

Yeah, yeah.

HMJr:

Don't you think it's a good idea?

HMJr2

thinking of doing it in other big cities.

HMJr:

First rate. Good advertising for us too.
Well, it would help us if - unless we get
the help from you - I mean, the thing's
a failure.

Well, I'll get it.

HMJr:

I'm ever 80 much obliged.

HMJr:

Well, thank you.

Goodbye.

93
June 27, 1941
2:48 p.m.

HMJr:

Harold
Graves:

HMJr:
G:

HMJr:

whether Arthur Powell was able to

get Wrigley to do anything on this

Yes, I - I was prepared to do that. I
thought perhaps I should not bring that
up at the general meeting. I'd like to
tell you.
Go ahead.

I went over that right after you asked
me - I went over that with Powell
Yeah.

And I concluded that we ought not to make

HMJr:

I see.

that request of Wrigley.

We have never asked anybody flat out for
advertizing space

HMJr:

I see.

We have accepted space, as you know, that

people have offered us, but this would be
the first time that we had ever made a

specific request and I just don't think we
ought to do it.

HMJr:

Well, what we

Now, Powell is in touch with Wrigley and is
going to have for me on Tuesday a statement

of specifically what they are offering to do.
HMJr:

Okay.

But do you agree with me that we ought not

HMJr:

That's right.

to....

-2-

Yes.

HMJr:

Okay.

Well, I'll have the Wrigley thing in

HMJr:

Thank you.

Yes, sir. Goodbye.

specific form for you on Tuesday.

95
June 27, 1941
3:02 p.m.

Robert

Patterson:

Henry?

HMJr:

Hello.

This is Bob.

HMJr:

Yes, Bob.

I took a look at that list. A great

bulk of that stuff you could have.
There may be a few items on there
that we can't furnish on quick notice,

but a great bulk of it we'll give.

HMJr:

The date is July 1.

July 1?

HMJr:

Yeah.

How long do you want it, just a day?

HMJr:

Oh, no.

How long?

HMJr:

Oh, just as long AB it attracts a crowd

Oh, I see, all right.

HMJr:

What?

That's all right.

HMJr:

We may - we may want it - you may want

Yeah. We - of course, we can't commit

HMJr:

Would

This one 18 all right.

HMJr:

Well

and as long as we can sell some bonds.

to change the stuff, but if it works,
I hope that it will go on for months.

ourselves as to every city in the U. S. A.

-2P:

HMJr:

Yes, yes.
What?

I just mean - I mean I can't - we can't
take it as precedent either way.

HMJr:

That's fair enough.

We'll do our best every time anyway.

Well, I couldn't ask for anything more.
And the bulk of that stuff, we - you can

HMJr:

Love an airplane.

Well, that's on the list and that's

HMJr:

have. Do you want an airplane?

going to be the hardest of any I guess.
Yeah. Well, you can give us one of
those Curtis P 40's, that nobody uses.
Well, I guess we can get you all that

stuff. Is there room for all the stuff
there?

HMJr:

Well, that I don't know. All - I tell

you, my boys had trouble - I mean they
were blocked because they couldn't get

to the Secretary's office so they had
to get me in on it and I had to bother

you.
P:

HMJr:

That's all right. I'll give you a letter -

I'll get a letter over to you this
afternoon, but in any event be assured
that you'll get the stuff.
Well, that's all - I don't - never mind
about the letter as long as I get the
stuff.

All right.
And then let's see how it goes - you and
I will walk over there some day and take

-3-

a look at it.
All right.

HMJr:

How's that?

Good. All right.

HMJr:

Thank you so much.

Goodbye.

June 27, 1941
3:00 p.m.
RE AID TO BRITAIN

(Meeting held in Mr. White's Office)
Present:

Mr. Coyne

Mr. Archer
Mr. O'Connell
Mr. Coe

Miss Kistler

Mr. Cochran

Mr. Childs

Sir Frederick Phillips

Mr. Boddis
Mr. Cox
Mr. Brown
Mr. White
White:

Well, I don't know whether we should wait
for our prima donna, Mr. Cox, or not.
Without him, some of this discussion is a

little irrelevant. He said he would be
here at three. I will find out whether he
has left his office.

Well, somebody has done a great deal of work

in the last few days, judging from the income,
or whether it is the combination of --

Childs:

In the last few hours, sir.

White:

Well, I suppose that is just a topping off
process.

-2Childs:

That is right.

White:

The first thing we might dispose of rather
quickly is this memorandum of yours dealing
with the expenditures on account of the
Civilian Technical Corps for various oper-

ations. Is this a matter which you thoroughly

have canvassed with Mr. Cox and are certain

that there is no possibility of meeting these
transportation expenditures and other details?

Boddis:

It hasn't been discussed at any considerable

Phillips:

Transportation charges were omitted, but surely
as regards to the great problem there couldn't

length at all.

be any doubt. It is the providing of certain

persons who are in the United Kingdom receiving

sterling salaries, providing them with dollars
and the allotments for their wives and dependents
in the United States.

White:

That would be definitely out.

Childs:

I shouldn't think under the present state of

decisions or any expected decisions it would

be left in.

White:

One million for expenses of transportation?

Phillips:

Is that the total or is that only part?
It is the total for the thirty thousand.

Childs:

I don't like to anticipate about it, sir, but
in view of what we did this morning on this
other matter, we couldn't get transportation

charges, we thought, on material which was
not lease-lent under the Act, even though
it was Lease-Lend articles.
White:

But you haven't got a no answer, even though

you anticipate it?

100

-3Childs:

No.

White:

Then let's just raise it again with Mr. Cox.
Offhand, I don't see why it may not be desirable
to reopen some of the items that appear to have

been closed on what superficially, at any rate,

seems to be possibly inadequate grounds. There

doubtless are good reasons for it, and it may
be that the reopening of many of those things
from the point of view of a policy procedure
might yield no results; but in the absence of
an adequate or a completely adequate explanation by Mr. Cox when he comes as to why

that million dollars transportation cannot
be provided for, I think we might suggest to
the Secretary that that, along with several
other items which may involve questions of

policy, be taken up directly by himself with
Mr. Hopkins so that even if it is necessary

to bend a little or diverge a little, that it

may be possible because we are accepting a lot

of statements that these things are not possible
when they may not be for legal reasons, but
where they appear to be difficult for policy
reasons.

Well, I think the situation has changed

sufficiently so that it may warrant a re-

examination so that when he comes in I am

going to ask him to reexamine that point.
Boddis:

Well, I don't think to bring those forward
again as contracts which have been placed
since the eleventh of March and might be
reviewed again --

Phillips:

The present ruling is something like twenty-

White:

Isn't that one of the items which was on the

three or twenty-five million a year.

memorandum which we just received?

101

-4Childs:

Yes, it was in this group here.

White:

It is this one here, is it not?

Boddis:

Yes.

White:

This one? I just got this and have just had
a chance to have photostats made but not to
read it. Merle, you just got these?
I believe I have them. Yes, I have them here.

Cochran:

Boddis:

That doesn't refer to anything more than our
day to day expenditures.

White:

I see. Then what you refer to is another

memorandum which you have with you?
Childs:

Yes, it is in here. We made up these lists
in the form that the Secretary said he wanted.
As a matter of fact, Dr. White, carrying out
your very principle, there are lots of things
in here which are identical to what has been
refused before, but we put them in anyway.

White:

Well, I think it will be best to adopt that
procedure because the circumstances under
which the decision may have been made may

have been different; and since we are more

or less starting from scratch, I think it
will be helpful to reexamine it. Let's leave
this until Oscar comes, and we will go over
it.
In the meantime, we might go over some other
things.

Coe:

Cox has approved this.

White:

Cox has approved this form?

Coe:

That is right.

102

-5Childs:

I had a session with him this morning just

White:

Oh, I see.

Cochran:

This replaces that red sheet you had yesterday?

Childs:

The pink one, yes, those salmon colored sheets.

White:

Well, the first memo that - the next memo that

to review it and see if he had any comments.

we might consider is your memorandum on the

administratively difficult imports under the
Lend-Lease procedure, and we might go right
to your apendix in which your suggested procedure is indicated and determine whether

this is workable. I presume that the crux
of the difficulty would be that contained

in approval by the Lend-Lease of a variety
of commodities, rather than a particular
commodity.

Phillips:

Yes.

White:

That is, I see under one that is clear. You
put in a blanket requisition. Now, does
that blanket requisition have to be acted
upon or approved as such?

Childs:

Yes, I think that we could find --

White:

You have a copy, don't you?

Childs:

We have some parallels, as a matter of fact,

Dr. White. For instance, we put in blanket
requisitions for such things as spare parts
for aircraft without specifying what they were.
That was approved and the money allocated, and

then orders were placed on the basis of it.

White:

But that was indicated as being aircraft?

Childs:

Then a broader category is one where we put

103

-6in for ships' stores. We say we want enough
ships' stores to carry an approximate number
of ships during a specified period of seven

months.
White:

Childs:
White:

Is there a broader classification than that?
That is the broadest I know of.
Would it be possible to have a classification
of possibly a small magnitude, let's say five
million dollars, in which the category might

be semi-manufactured or possibly a - parts
of machines used in factories making "X", "Y",
something of that kind of category which might
enable them to approve it on the grounds that
the apparent purpose is satisfactory?

Childs:

I should think it would be possible, wouldn't

Phillips:

I should have thought so, of course it would

White:

You can put it in in a small amount and there
is always a subsequent possibility for correction

it?
be.

of any errors made.

Now, I have no knowledge as to whether that

would be satisfactory to Mr. Cox' organization,
but it would seem that if you could reduce
the magnitude it would enable you to be a

little more specific as to the category and
yet be sufficiently large to eliminate the
bulk of the transactions.
Childs:

I should think that would be very practical.

White:

Well, now when you put in that figure of a
hundred and ninety-nine which was reduced

later to a hundred and fifty, we divided
into those heads, didn't we, to build up
that total? We could divide our figure to
that extent.

104

-7Or, you might have varying magnitudes of

categories. There might be several categories going forward at the same time.
There might be allocations for some twenty

to fifty categories. The criterion would
be that the category be sufficiently described
so that they could feel justified in approving
the initial commitment or note. I mean, that

might work out that way.
Childs:

As I say, it has been accepted in two cases
which I have just named, and it could be made

a little broader.

Archer:

They were aircraft, weren't they?

Childs:

And ships' stores. Under ships' stores, there
are a lot of various things.

O'Connell:

It hasn't been tried, has it, the suggestion
that Harry brought up?

Childs:

No. I think it is a practical suggestion.

White:

Then assuming that some arrangement of that

character might be satisfactory to Mr. Hopkins'
organization, then the next step that would
concern them would be the final approval,

that is, the item or the transaction, I think,

which is described under five here.

The statement is, "If the United States Government

approves the application." What does that
application refer to now?

Phillips:

It will be for a --

White:

For what kind - will it be for one item?
It might be for one item.

Archer:

Any cases of one item, or it might be for a
dozen items of a different character. It might

105

-8-

be screws of all different sizes.
White:

Then the only decision tc be made by the
Lend-Lease organization would be to deter-

mine whether that specific item fell wholly
within the category that had been approved

at the time of the submission of the requisition.

Childs:

Actually it might even be done easier than
that, sir, because you take some applications

like steel and oil. We have had, for instance,
blanket requisitions approved for steel and
for oil in which no specification is mentioned,
and that is the - once that blanket requisition

is approved, the Hopkins office does not require

further requisitions of detailed quantities
with specific specifications within the group.
They simply say, "Send that over to the Procurement Division.

The Procurement Division will have the larger
instruction, and they will pass upon whether

or not that specific thing fits in that, so
it might not have to bother to come before
the Commission.

Archer:

On steel, supplementary requisitions do go,
don't they?

Childs:

They just send a copy for information purposes

to Hopkins' office.

White:

Have you had an opportunity to go over this
and discuss it with anyone in Mr. Cox'
organization?

Childs:

No, I haven't discussed it with anyone.

White:

Well, will this procedure, Sir Frederick,

seem to make sense to you, that if Mr. Cox
is agreeable that somebody in his organization

would begin working immediately with someone

106

in your organization to work out a plan
designed to achieve this that would appear
to be satisfactory and then present that
plan to us at the next meeting on Monday?
Phillips:

Yes. We can easily manage that, Mr. White.

I don't think, in fact, if there were a
few hundred items here there would have been
much difficulty; but the fact is, there are
ten thousand.

White:

But if they could be placed --

Phillips:

It is the volume of the work, not the Lecessary

White:

If the volume of the work could be transfered
to that end --

Phillips:

Yes, that is what we are attempting.

White:

And if, further, they could devise some means
of handling the categories.

difficulty of it.

Phillips: Yes.
White:

Or, let's put it this way, it really doesn't

matter what system they devise so long as it
is satisfactory at the other end where the
pressure is.

Phillips:
White:

As long as it doesn't -If it means more work here, that still meets
the problem.

Phillips:

That is right.

White:

Then supposing we --

Phillips:

Well, Mr. Thompson would be on that, Mr. Lucius
Thompson.

107

- 10 White:

I don't know who Mr. Cox would want, but we
will
--

Archer:

You get into somewhat deep waters with Procurement on this scheme.

White:

Well, we would have somebody from the Treasury

Procurement as well on that, but I think it

would have to be worked out by some committee

working steadily until they devise something
which is mutually satisfactory. How does
that sound to you?

Viner:

I think you can work it out very satisfactorily.

White:

Merle?

Cochran:

It is all right.

White:

Then supposing we pass this and we will put
that proposal up to Mr. Cox when he gets
here.

The next memorandum is requirements for New

Zealand, which appears to me to be sufficiently

detailed so that Mr. Cox ought to be able to --

Viner:

Check the errors. He might be willing to check
the categories that they should be encouraged

to try and put through this machine.

White:

Yes. There is sufficient description here
of the specific items you have here so there
should be no difficulty. Are any of these

items already recorded on some form of blank

requisition sheet so that he could handle any
one of them that he wished to select as a

definite requisition?
Childs:

No, but they could be very shortly. I will
tell you what we planned to do on that, sir.

108
- 11 We had a meeting with all these men yesterday
morning, had them in here, and proposed that
they put on these sheets here that we bring
before this committee all these requirements
so this committee can pass on them here.
White:

Childs:

This -The greatest possible number, as quickly as
they could frame their precise demands, or
at least a specimen demand in which one of
those groups occurred, and then at the same

time make up their requisitions so that if

they were approved here at the committee they
could shove them right in on the requisitions.

That was our proposition. If you thought that
was the most satisfactory way to handle it,
that is the way we would do it.
White:

Well, I can't say. So much depends on the
requirements of Mr. Hopkins' organization.

Childs:

I thought it would meet the suggestion made

before that he wouldn't like to act on anything
except a specific recommendation, whereas if

you bring it here, we might get his --

White:

We will put it up to him.

Childs:

In the meantime, the Dominions are making up
the sheets which you have next there.

White:

So that, let us say, on Monday they will have
a batch ready, should this not be the form

which he would require?
Childs:

I hope they will have a batch, yes. Certainly
they will have some. of course, the difficulty
there is that in many cases, such as in Australia,
they haven't got very much --

Phillips:

We didn't really get onto the Dominions yesterday. If we had, I would have made one quite

109
- 12 general remark. We have talked to those

people and in my mind it is perfectly clear
that the subject of whether the Governments

are perfectly willing to take sufficient
control themselves, particularly Australia

and New Zealand - frankly, they aren't prepared to set up detailed Government control.
India is not so good, but there is a man
coming out here and we may find out something

from him. South Africa are very, very difficult, but the line I talked to them was that
they couldn't do the whole thing straight off
and that they should have a look at it --

White:

You mean their requirements?

Phillips:

Their requirements, yes.

White:

Do they constitute any significant portion

Phillips:

Oh yes, they are quite big but when you get

of their --

out of that into the commercial field, it is
quite clear they are going to have immense

requirements.
White:

Well, are the difficulties with South Africa
a question of political difficulties?

Phillips:

Oh yes.

White:

Then would it be at all helpful if there could
be ascertained, either from our trade records
or from any that may be available to you, the
type of things which are exported with sufficient
detail so that we might then examine those in
concert with the Priorities Committee and
possibly arrive at some tentative decision

with respect to the likelihood of there being

difficulty of exports?

110

- 13 Viner:

Also the export control.

White:

And export control, yes.

Phillips:

Yes.

Childs:

An excellent suggestion.

Viner:

I understand, for instance, that Canada is
adjusting its own control so that we shall
not have to permit things to go there for
use for civilian purposes which we will not
permit for use for civilian purposes here.

We might apply something like that to South
Africa and we might say to them, "Unless the
Government is willing to show that much

Governmental interest in it, that is a
civilian thing and we have got it restricted
here for our own civilian use, and we want
something of that sort."

White:

Do you have any information available that
might enable you to have somebody make up

that kind of a list?

Phillips:

I think we might find out --

Archer:

The last figures that we have got here that
are public are the 1939 reports. Is there
anyone to do that?

Childs:

Yes, Mr. Jordan.

Viner:

You mean the last ones you have?

Archer:

Yes.

Viner:

You haven't tried Commerce or --

Archer:

We could probably get them from Commerce.

White:

Well, they have broken down by their - how
late are they?

111

- 14 Viner:

No, I mean they have - you mean, South Africa
hasn't published them since then?

Archer:

You haven't published them from here, if you

want to look at your export figures.

Kistler:

Through April --

White:

The figures of the actual breakdown of
commodities by countries of our exports is

something that I don't think - how late is

it?
Kistler:

Oh, about a year and a half.

Archer:

1939 is the last one I remember.

White:

Those in lieu of anything else would have to

Viner:

How soon are they available in manuscript
form in the department?

Coe:

Kistler:

do, but it would be --

We could go over them --

I don't know. We do have some figures for
the war. By broad commodity classifications,
but those are confidential and I suppose if
they are to be released, Commerce would give
them.

White:

We could get them, but they don't have them

in the detail that I think would be most

helpful from the point of view of priorities,
because there may be many of the priorities
that are not indicated in those large classes.
Phillips:

Well anyhow, we will see what we can get.

White:

Will you see what you can get, and if you

can't --

112
- 15 Viner:

At the same time, Harry, you might inquire

Childs:

Would this come under priorities?

White:

Well, this is a list of imports into South

Phillips:

Distinguish between what is Government or
quasi-government and ordinary imports, what

to se- just what stage their data is at.

Africa from the United States of all kinds.
seems like ordinary transactions.

Childs:

Right.

Phillips:

Well now, I have got a list here - a preliminary
list. I don't know if I have ever given this

Archer:

to you. It is a list of the stuff we thought
the Dominions might make a start with. I
will just read it down. I will dictate it,
if you like, before I go.
Here is the list.

Phillips:

Got it, have you? Oh, good. That is good.

White:

This is a preliminary list of --

Phillips:

What they ought to start with.

White:

These are general categories, of course?
These specific items would be in much greater

detail than that?

Phillips:

Yes.

White:

Well, some of those items seem very definitely

of a character that they ought to be able to
handle, and some are homogeneous enough so

that I should think there wouldn't be any

problem of a number of separate items.
Phillips:

I should think that the Hopkins organization

113

- 16 -

would have no difficulty in passing for the
Dominions generally, but there is a certain
kind of thing.
Viner:

Well then, if I understand what was said
earlier, they are going forward with something of this character and are going to

place it on sheets of this kind and they will
be ready some time --

White:

Then to examine their requirements, they could

be centralized in this particular group as a

beginner, and then include them on those sheets.

Phillips:

And then we can see if there is anything else
they think can be done.

Viner:

These, however, have suppliers?

Childs:

I might --

Viner:

On this list here, there is no indication,
nor I suppose need there be, as to the period
for which this is to be used. In other words,
you could come back next week with an exact

duplicate of this and present it?

White:

But supposing it is something that you need
currently, say so much per week. How would
you put in your --

Childs:

The proposition --

Viner:

I was wondering whether sometime you might

ask for a series of contracts which run so
much per week or so much per month.

Boddis:

We do.

Viner:

So as to reduce the paper work where the

specifications remain constant.

114

- 17 Archer:

Well, I mean, take copper. We can put in
fifty thousand
over
six months.tons of copper for delivery

Viner:

That is another way. You put the total

amount and then the question of delivery,
I suppose - would that go on here this way?

If you had --

Archer:

White:

That is right. We put it on our requisition.

We give them precise delivery dates on all
our requisitions.

Well then, that takes care of the Dominions
in so far as we can discuss them profitably
until Mr. Cox comes.

Now turn to the various memoranda on commodi-

ties. The first one I have here is wool. We

haven't had an opportunity to do more than
barely glance at them, and we shall supplement
this with whatever analysis may be called for
and probably get in touch with some of the
interested agencies here in Washington very
quickly.
Phillips:

Well, on wool I think in the letter it was

White:

suggested in ten days or a fortnight.
You didn't receive a reply?

Phillips:

I have had no reply.

White:

Well, I am just hesitating to answer that

question and throw that open for discussion

for this reason. It may be that the answer,

if it be known in the light of the various
which determined a

it
be
a
to that answer

more answer considerations difficult earlier, get might little modified similar bit

than if we examined it in the meantime and
see what might be done with it or what support

115

- 18 -

might be rallied for this or what are the

specific obstacles so that we could work
possibly with Mr. Jones before and - there
is a commitment on an answer?

Phillips:

Yes, I quite agree with you.

White:

What do you think?

Viner:

White:

I think I would try and get in touch with
Jesse Jones' office and find out if you can,
informally, what is the situation.
I was wondering if it had better be the

Treasury than themselves.

Viner:

And then you can let Sir Frederick know.

O'Connell:

You mean that an indication of our interest
should be given --

White:

I have. That is why I hesitated talking to
Mr. Jones first. I thought there were

numerous things to be done to get everything

lined up, and then we will talk to Mr. Jones
and see what can be done; but it would be a

little more difficult if he has already

committed himself to an answer to you. What

do you think of that, Merle?
Cochran:

It is all right.

White:

That is fine.
With respect to cocoa, there is nothing that

we can say on that, because we haven't studied

it, unless there is --

Phillips:

That was the case, wasn't it, where the Mari-

time Commission had decided that they couldn't
provide --

116

- 19 White:

Well now, whether this is - if that is a
block, we might be able to do something,
because there is a lot of money involved.
(Mr. Cox and Mr. Brown entered the conference.)

White:

Let me return to some of the points we tried
to cursorily decide in your absence, postponing
the questions concerning you until your arrival.
The first item we took up was a memorandum

relating to the expenses of the Civil Technical

Corps which, among other things, raises the

question of transportation. What we had in
mind was the possibility of reexamining the
decision with respect to the payment of
transportation. I gather that some decisions
have been made in the past which seem to

indicate that it is very difficult or un-

likely.

Now, what we wondered, Oscar, is whether it

was - is it a legal restriction? Is it a
policy restriction?

Cox:

Except that they are mixed in some cases.
There is no general decision on transportation.
I mean, we have allocated funds to pay trans-

portation, for example, for aircraft which
moved, let's say, from Burbank, California,
to New York Harbor. It is charged right into

the allocation for the aircraft itself.

Secondly, there is another provision in the

Appropriation Act of forty million dollars
for other necessary expenses required to
carry out the Act which has been used in

part for transportation. But that has all
been in relationship to particular defense
articles or defense articles turned over

under the Act as a necessary incident of the
defense article.

117

- 20 -

On this C.T.C. thing, you haven't any
defense article at all. What you have is
the
training
of people and the handling of
radio
and locators.
Viner:

What is the wording of the law?

White:

Does it have to be defense articles?

Cox:

The meaning of the organic act itself is

the empowering by the President of the
Secretaries of War and Navy in procuring

defense articles or information and to turn
them over to one of these designated countries.

Now, the defense information which you can

communicate is the information in terms of
prototypes, plans, and specifications which

pertain to a particular defense article turned
over under the Act. In other words, if you
turned over a Sperry Bomb Sight to them, you

can teach them how to use the Sperry Bomb

Sight, which would carry with it the expenses
necessary in the teaching.

Now, in terms of the radio locator thing, I

would like to get a little more of the detail
in terms of possibly working it out around
the locator itself. In other words, if we
happened to have a locator which conceivably

is a minor or a major modification of the one
they have, if we are turning that over then

we could probably teach these people to use

them and the necessary expenses incidental
would be - would

and so forth. Then you
of whether

and the to it, policy lodging which pay question be they paying would would board want have

to go as far as paying the proportionate part
which is necessary for their families. That
would be a mixed question.

White:

I see. Therefore, the first thing to determine

118

- 21 is what the nature of the articles were which
this Civilian Training Corps are receiving
transportation -Cox:

Right.

Childs:

I think this is a transportation expense only.

Viner:

No, that isn't the question at all. The

Childs:

I know, but is this training expenses or is

White:

Both. Mr. Cox suggested that not only might
transportation be an appropriate expenditure
if the instrument for which they were receiving
training was of the character he described,

question now is, what sort of instruments
are they being trained to use.
it transportation expenses?

but they may even go further and examine the

possibility of additional expenditure
Viner:

Well, aren't they being trained - which are
these, are these these radio people or these
air people?

Phillips:

Radio.

Cox:

It is the radio locator. The radio locator
itself would certainly be a defense article.

Viner:

If we provided it.

Cox:

If we provided it, that is right.

White:

Well --

Phillips:

What is the amount, do you know?

Boddis:

Sir Frederick, I don't know fully.

White:

Will you on Monday get the facts on that in

119
- 22 -

sufficient detail so that a decision can

be reached on the basis of the memorandum

which you have given us? Right?
Viner:

According to the newspapers, this is an English
device, but I presume they are handing it over
to us.

Boddis:

Cox:

If you want it. But that doesn't necessarily
imply that they will be made here.

The thing is not as simple as that, Jake,
because the original - I think Sir Frederick

is right. The one that is primarily in use

there is the one that they have, and we don't
have; but I know that one outfit has been
doing a great deal of work on this particular
thing. Whether there are any modifications
or these people ought to be trained in both,
on the theory that the training is progressive
and to a certain extent interchangeable, I
don't know.

White:

It is sub (2) under your definition of defense
article, which seems to be a little broader
than I first thought from your definition.
This subsection two says any machinery,

facility, tool, material or supply necessary
for the manufacture. Facility necessary for
the manufacture.

Viner:

That means a plant?

White:

It might in some cases include a plant.

Viner:

I think that has been used for plant, hasn't

Cox:

Plant and things similar.

Phillips:

That makes it rather confusing, Mr. Cox.

it?

120
- 23 The expenditure on this Civil Technical

business is first of all the dollars needed
for transporting people recruited here to
Canada, which would be a million dollars

if thirty thousand were recruited. The
rest of the charge, which is of the order
of ten or twelve million dollars rises in
this way. These fellows are taken from

Canada straightway to England, and no doubt

for the first two or three months there one

might say - the dollars are needed because

the married men will have to make fifty

percent allotments to their families. Un-

married men with no dependents will have to
make twenty-five percent.

So I should say for the first two or three
months, they are probably training. of course,
they go on after that using the locators.
Cox:

Well, let me ask you this. Mr. Boddis may
know. Is it indispensable that these trainees
be sent to England for the training?

Boddis:

I don't think there is much apparatus here to

White:

If it were indispensable, then it would change

Cox:

Not necessarily on the legal basis, because
there is nothing in the Act which says where

train them, but that is -the character?

you have to communicate the defense information

as a practical policy question. But it would
look a little easier to do the training here
in terms of the locators if it were at all
practical. I don't know whether it is. I
would doubt it.

White:

Well, in any case you will be in a better
position to decide that after you see the
pertinent information?

121

- 24 Cox:

Yes. I may have to talk with Bush and see
what they have done in terms of whether they
have got any improvement which is now ready

to go into operation.

Coyne:

Mr. Cox, you are buying some from us, I think.

Cox:

I know they are, but I know also that this

National Defense Research Committee is a
good deal ahead of the Army and Navy on some

of their stuff, and it is a question of what

stage it is in, because they have been interchanging in part --

Viner:

In other words, if there should be a decision

Cox:

Train them for both at the same time.

Viner:

And then it would make it much easier to handle

to adopt a somewhat modified locator which
included some American phase --

as part of the training then in the use of an

American instrument?
Cox:

Yes.

White:

The next item that we discussed was the --

Cox:

Well, can you get us - have you got an extra
copy?

White:

No, I will see that you get it.
The next item that we wanted to take up with
you was the proposal of the British Treasury
relating to possible arrangements for handling
the large number of items which were --

Cox:

White:

Small.

difficult to handle except on a personal,
private basis.

122
- 25 Cox:

It seems to me the essential problem there

is this, Harry. Sir Frederick has yesterday
suggested an administrative mechanism to make
the thing simpler, that is, in terms of the

double limit, so much per week, of items
not in excess of so much.

Now, we have bought, say, sixty balls of
twine and a thousand pencils. That decision,

it seems to me, is primarily up to the British

as to whether in terms of convenience in
handling items which are small, they want to

set up the administrative limit to pay dollars
or whether the thing can fall into Lend-Lease

and have it bought by Procurement the same
way as they buy for our Government, whether

it is two needles or fifty-seven thousand
gallons of oil.

Phillips:

That is rather a difficult question, is it

not, Mr. Cox? I suggested, though, mentioning

the possibility of those limits in connection

with the very small purchases by our missions

out here which are going on all the time. A
few spark plugs for an airplane and things of
that kind.

But this is referring to a somewhat different
subject. This is stuff which dealt - which
is not Government material.

Cox:

Which one are you talking about?

White:

Non-Government materials.

Cox:

Oh, I didn't understand.

Phillips:

This is Keynes' point, that there was a figure

which you put down of a hundred and ninety-

nine and a hundred and fifty millions of stuff
which, theoretically, can be brought under
Lease-Lend, but we don't think there are

123

- 26 -

practical difficulties or legal difficulties,

but where the practical work of administration
complicates it.
Cox:

White:

Do you have any of those items?

This is our suggestion, that if somebody
from your staff could meet with someone

from the British Treasury staff, I think

he named Mr. Thompson, and somebody from

the Procurement Division; and if they could

either start from the specific proposal

which they have suggested or any other proposal that they may have in mind and see
whether they can't work out something in the
way of procedure that would be satisfactory

to them and to you, and then bring it at the
next meeting. Can they do that?

I will run through that very quickly. Here

is the other page. There are some preliminary

discussions, you see.
Cox:

All right, I will designate Brown.

White:

Why don't you designate someone right now,

and they could carry it back to Mr. Thompson.

Could you begin tomorrow morning, for example?

What time?
Brown:

Any time.

White:

Ten o'clock?

Brown:

Surely.

Phillips:

No, I expect Thompson is in New York. Is

it Mr. Brown? I will let you (Brown) know
when he is available. The point about it
is, you see, he is out from England five

weeks ago, and he actually has seen these

particular difficulties. We don't know

124

- 27 anything about it because we have been here
since before Lease-Lend.
White:

But he would be familiar with the objective?

Viner:

You can send somebody else along with him

if you think that while he may be very
familiar with the English end, he may not

know enough about the Washington end.

Phillips:

That is all right, I think he knows enough

Viner:

At the first meeting, anyway.

Archer:

It is a good idea.

White:

Then as soon as you (Brown) know the date

about the Washington end.

of the meeting, if you will let my office

know and we would like to have somebody

from the Procurement. Would that be helpful?

Cox:

Yes, very helpful.

Archer:

We must have somebody.

Cochran:

We have got to have somebody.

White:

The next item was requirements for the

Dominions, and apparently they have already

begun to prepare requisitions of this
character to be brought --

Viner:

Did this form satisfy you?

Cox:

Yes.

White:

These are the forms which you helped draw

up. So that if they have a batch of those

requirements, you will be prepared to con-

sider them?

125

- 28 Cox:

Right.

White:

And as soon as they have a batch, it might
be some time early Monday.

Childs:

That is right. We hope to have them Monday.

White:

They do have in some detail the requirements,
but inasmuch as they are going to turn in
the other sheets, possibly you had better
consider them with this category so as to
enable you to get some idea of what general

categories they plan to submit requisitions
on.

Viner:

That is New Zealand you have in your hand,

White:

Yes, but I take it that you meant that they

Viner:

Isn't New Zealand doing this?

Childs:

New Zealand is making up these things. What

White:

This is merely a summary.

Childs:

Oh yes.

Phillips:

We gave you full details about New Zealand,
but that was the only case where we could

isn't it?

all are New Zealand, Australia --

is the other thing?

give you full details.

Childs:

New Zealand and Australia definitely have
made a start.

Viner:

I wonder if it would be possible to use this
list to eliminate items, not necessarily
improve the remainder?

Archer:

That would be a great help.

126
- 29 White:

Well, I said this list would accompany
the requisition so that they could handle
them both together.

Viner:

No, my point is that they are hard at work
preparing these requisitions. If they were
told that there is some category in this
list which is altogether out of the question,
they could save themselves all of that trouble
of working at this.

White:

If there are any such commodities that you

could tell by looking over that are out of
so, but is that --

the question, it would be desirable to do
Viner:

The detailed list is on about page three,
if I remember right.

Cox:

I don't see anything that couldn't come in.

White:

There is nothing here, you say, that seems
impossible?

Cox:

No. Of course, you have got the same central
problem here that came up, I think, late
yesterday a little bit more when the Secretary

was talking to Mr. Purvis, and that is this,

that they are programing at the present time,
it has already been tentatively worked out

and there will be another bite at it.

Now, if you want to do this immediately, it

seems to me that you (Childs) and Purvis
have to decide between you which is immediately

more important, initiation orders on other

materials going to U.K., whether it is air-

craft or canned milk, or whether you want to

get relief from dollars.
Phillips:

Mr. Cox, we have already taken up this miscellaneous group. We have already taken that

full twenty percent.

127

- 30 Cox:

But we may be able to put some more back.

Phillips:

We still have a hundred and fifty-eight
thousand on that group. That was the

major part of that. It was on that particular group.

Cox:

One hundred fifty-eight million.

Phillips:

Yes, and it was against that that we took

Cox:

Well, we could check that.

Phillips:

I don't think you would have any other use

Cox:

I don't know. I think they have other uses,

all of that stuff out.

for that.

but let's put it this way. If there are no

other uses, then this can be charged against
Lend-Lease, and I see no legal prohibition.

If not, you will have to face the other
decision. All right?

Phillips:

All right.

White:

While you are on that --

Cox:

But I think you ought to prevail on Purvis
in terms of these Dominion things in the
new estimates to get included sufficient
margin to include all the Dominion stuff
of this character or any other character
that you think is likely to come up.

Archer:

We have included in the new estimates the
estimates for these Dominion requirements.

Phillips:

Two hundred fifty millions a year, isn't it?

Archer:

Just over two hundred million for miscellaneous.

128

- 31 We were asked to estimate those - to submit
those estimates to General Burns.
White:

This raises the question which was discussed

at some length at the last meeting with the
Secretary and about which I wasn't clear as

to the decision, so I am going to reraise it
to see whether a final decision had been
reached or whether the subject is still open
for discussion.

You will remember at the time Mr. Purvis said

that they preferred to initiate these orders

because they didn't want to hold them up, and

he raised the further question whether It

might not be possible to get a Government

requisition substituted for their requisition so they could initiate the orders --

Viner:

Then transfer them later.

White:

And get relief at the same time. In that
discussion you thought that there were difficulties about that with respect to the Army,
but I am a little unclear as to the --

Cox:

Well, here --

White:
Cox:

..conclusion.

It is by no means a simple problem, Harry.
I think the new Army Supply Bill is going
to come up and be passed much sooner than

Mr. Purvis thought.

Now, as one illustration, that Army Supply

Bill includes about three billion dollars
for aircraft. If we are not at war, it seems

to me most, if not all, of that aircraft will

be available for distribution under Lend-Lease,
so that the sooner they place initiation orders

129

- 32 -

for that Supply Bill, the sooner you are in

production and what you are interested in
is finished equipment.

I don't suppose the British care very much
what mechanism is used to get them four-engine
or twin-engine bombers.

Now, secondly in the Supply Bill is the provision which gives the Chief of Staff openended contract authorization to procure all
the equipment that is necessary for armored
divisions, and he could go out tomorrow and
order a hundred thousand tanks.

White:

When you say he could go out tomorrow and

Cox:

As soon as the Bill is passed. It has already

order --

gone through the House and probably will go
through the Senate quickly.

White:

Was it Mr. Purvis' understanding that that
Bill would go through in about two months?

Viner:

He said about August.

Cox:

He is probably wrong on that, and I am not

White:

Which are in the Bill?

Cox:

Which are in the Bill.

White:

so sure that he is aware of these particular
kinds of provisions, such as the armored
provision thing.

Is it your suggestion in view of the rapidity
with which that Bill will pass that the
practice of initiating these orders had
better be postponed until the Bill is passed,
in which case it would be necessary --

130

- 33 Viner:

Don't postpone these things.

Cox:

Don't postpone it. My point is that you can't
answer the problem that was put to Mr. Purvis
unless you know two things. Certainly one
is whether the planes and tanks will be

available or are likely to be available for

the British and when they can place them in

terms of both of our needs. It may be that
the Army will have to also go up for another
appropriation on aircraft.
White:

Well, is it your thought, then, that if they

initiate certain orders now and therefore
become obligated for them, that in the event
the Bill passes they will be relieved of
that obligation by the arrangements which

you may be able to make under the new Supply

Bill?
Cox:

No, I don't quite understand that.

White:

I still don't get it.

Cox:

I think what Mr. Purvis is talking about is

that he looks at a certain program in terms
of his job, which is based on what he gets
from London and so forth and so on.

Now, in order to execute that program, he

feels that it has to be initiated as early
as possible. Now, to initiate it as early

as possible, one of the things that may be

required is the placement of a letter of

intention by the War Department as a potential
charge against funds which it is to get in
the future.

Now, there still may be a deficiency in his
program when he looks at all the facts in
terms of his particular program, and I think
you have to look at those before you can

131

- 34 decide whether you want to take up a modi-

fication on the Lend-Lease or let the LendLease orders go through, the new aircraft,
for example.

White:

Then I don't - I am afraid I am not clear as
to what his intention was, because I don't
gather --

Cox:

White:

Cox:

Let me --

in retrospect that his intentions were
identical with what you are describing now.
You have a difference in the facts. Let me
give you a specific example, a simple illustration, Harry.
Suppose in Lend-Lease we have already allocated

four hundred thousand dollars to procure a
heavy four-engine bomber with everything that

goes with it. Now, suppose it requires four

hundred thousand dollars to modify some Lockheed
Hudson bombers which the British have on prior

order with their own money. Now, the essential
issue in that simple form is whether the
British between Phillips and Purvis want
to forego the order for that four hundred

thousand bomber and use the four hundred
thousand dollars to modify the Lockheed Hudsons.

It is not as simple as that because if the

War Department got money to place an order

for a four-engine bomber of that same type,

which may be for the ultimate disposition of

Britain, that may do the trick, so that you

just take out four hundred thousand out of
Lend-Lease money and use it for the modification.

Childs:

Then you do get to the point which Dr. White
raised, about placing the order for that bomber.

You said you would place it with a letter of

132

- 35 intention, even though you don't have any
appropriation, but you said the manufacturer

won't take that.
Viner:
Cox:

Childs:
Cox:

He will take it from the War Department.

He will take it from the War Department if
the appropriation --

If it is going to pass.
For example, on the Lend-Lease thing we placed
orders between March 11 and the twenty-seventh

on what was called "a conditional letter of
intent."

Childs:

Did you?

Cox:

Oh, sure.

Viner:

I have been told by manufacturers that they
have accepted orders without any written
document.

Cox:

White:

That is right.
Then let me see if I can draw this thing

together, because I still am rather vague

as to what the specific step is. There are

certain things, I take it, that Mr. Purvis
wishes to initiate an order for. The point
is that if he does that he won't get relief
on that.

Cox:

He may not.

White:

He may not. Well, I thought he would not well, you say he may not. I thought he said
he would not. He said there are only two
alternatives unless you adopt this third one.

Cox:

It is not as simple as that, Harry, because

133

- 36 look, Harry, we have got over forty-two
billion appropriated for defense. We also
have an open-ended contract authority when

this Bill passes for tanks.

Now, the equipment is used to equip a certain
number of tactical units. Now, you won't
need "X" number of tactical units, or you
may not need them, if you decide that it is
more important to have that equipment go to

Britain; and it all comes down to the essential
question, whether you have got the equipment.

Now, what Purvis is talking about from the

supply end, is that in terms of the British
program as he sees it, in the light of all
the evidence he has got, you ought to start
in the works a certain amount of equipment

by initiating orders, you see.

Now, orders placed by the Army and Navy may

ultimately be for British disposition.

White:

What is your concrete conclusion with respect

to that, that (A) he go ahead and initiate
these orders or - with the anticipation that

he will receive relief; or (B) that he go
ahead with the Army?
Cox:

I would suggest two practical things. One is
that the requisitions for these modifications
on pre-existing contracts be put in.

White:

That is being done.

Cox:

You are talking about two different requisitions.
They have done it there, and it is up before
the committee for decision, and I recommend
that the decision on those be that they file
Lend-Lease requisitions for them.

White:

Which is another type of requisition, a more

134
- 37 comprehensive.
Childs:

It is no more comprehensive. It will go in
promptly the minute it is decided.

White:

Then the moment this is decided in the

affirmative, then you will prepare the type

which is necessary to go to the Lend-Lease
Committee. That is A.
Cox:

Now, what we will do there first, that will
give us a concrete basis for going to the
Army and Navy and saying, "Now, in terms

of what you programed, you got 'X' percent,"
and they don't amount to very much so they
don't take up much.

If they come back and say - at that point it

seems to me Sir Frederick and Purvis in terms

of knowing what the facts are, will have to

make a decision as to whether they want to

pull out a Lend-Lease initiation order and
use the money for this purpose, or let the
thing go on.

White:

But that is a second step - decision which
they would have to make only if the Army

doesn't wish to accept their -Cox:

Well, if they say they haven't got any money
outside the program, it is all programed.

White:

Then that second step isn't necessary at
this moment, is it?

Cox:

No, except I think they ought to start getting

familiar with the - with what all the facts

are and the other thing.
White:

Do you have doubts as to the accepted ability

of the Army to - do you think they will be
able to arrange most of those?

135

- 38 -

White:

The way to find out is to try, Harry.
Is that clear?

Childs:

Oh yes.

White:

It has always been clear?

Childs:

Yes.

Cox:

Phillips:

Actually what was the purpose of signing

was not, as I understand it, distinctly
between initiation or these particular
stunts but rather a contrast between initiation
orders and continuation orders, saying that
the initiation orders were much more valuable

and therefore we had to see that somebody
placed those because there was no other way

out to be found.

Viner:

That is what I understood them to mean, that
there was a limited amount of funds available

to them in terms of dollars.

Cox:

It is the same principle. For example, if

you -Childs:

If you get these things in --

Cox:

You are going to use four hundred thousand

dollars to modify existing contracts, which
is a kind of a continuation as against an
alternative of placing a new order for a four-

engine bomber. You have got the decision

before you.

Phillips:

It seems you might find that some continuation
orders you had otherwise had in mind to place
might be postponed for a month or so and give
you this money for another use.

White:

But again that is a decision that need not be

136

- 39 -

made until you find that the alternative,
which would be the simplest solution, is
not good, so that there is nothing further
that we need discuss until you ascertain
that fact.
Childs:

Until we put these in - he says General Burns

is going to take a look at the existing

Lease-Lend funds, and if we find there is no
order, then they are going to make a decision.
Cox:

Well, we already practically squeezed forty

Childs:

That is hopeful, then.

White:

That is already counted.

Cox:

No, what I meant was that they had most of
that stuff programed.

White:

Oh.

Cox:

And we went to them and said, "You can do

million dollars of water out after March 11.

this. You have got enough water in it."
They practically said yes.
White:

You did squeeze water, but that is no indication that there may not be a lot more.

Boddis:

There is one other point on some of these

things. We have got to take action within
the next few days or all the things are

going to be jammed. One particular case
that I mentioned yesterday was where the
contractor refused to supply a Lease-Lend

Q der.
Childs:

That will come up in these items, item by

item. He is just talking about in general

what does get in.

137
- 40 White:

The next two or three memoranda which we
have here which you began
cocoa, and other strategic talking materials, of, wool, unless

there is some other thought I think we had
better pass that over until we can get the
analyses and the other information.
Viner:

I wonder if Mr. Cox has any ideas about this
wool thing?

White:

I don't think there is anything we can discuss profitably at this moment. We will

take It up later.

Coe:

What about priorities and export? Did you
say you wanted some decision on that?

White:

It was suggested that there would be presented -

submitted, a list of items which South Africa

imports from United States with a view toward
examining them for the purpose of determining

what might fall under export restrictions of
one character or another, to pursue the line
of thought I think you suggested might help
South Africa develop its program so as much
of the purchases could be channeled as
possible.

Cox:

That reminds me, Tom. Knudsen's office called
yesterday afternoon and wanted to know if

they could get a list of all of your out-

standing supply contracts and facilities
contracts because they find that they are
not clear on the priorities of many of them.
Childs:

Yes. Who wants it, Knudsen?

Cox:

Yes. You had better send it to me or send

it to Eaton, either one, because I think they

bumped into one yesterday and it wasn't clear.

138

- 41 White:

Now, how is your thought, Oscar, as to the
procedure with respect to these items? How
do you want to handle them?

Cox:

Well, I think following the old judicial

technique, I think it would be a good idea
to take them up one by one.

Viner:

In the order in which they appear on the

Cox:

That is right.

Viner:

And reading from left to right?

Cox:

White:

sheets?

All right. I thought we were going to proceed on the Oriental idea, from right to left.
As a matter of fact, that is the way we will
probably do it. We will see what the amount

is first. (Laughter)

You haven't a copy there. Joe, could you

move up here? You don't have a copy, Oscar,
do you?

Cox:

Oh yes.

Childs:

Before we get into this, in view of the

mentioning of signatures and so on yesterday

by the Secretary, I wanted to be quite sure
we had it right.

White:

Did the Secretary say something about other
signatures and are they necessary?

Phillips:

If he wants them, we will get them.

Cox:

Just to follow the prior procedure where you
and Purvis used to sign things.

Phillips:

No, we didn't.

139

- 42 -

Cox:

Didn't you? He had the distinct impression
that you did and that you ought to.

Phillips:

Well, that is something that he can't --

White:

Well, I presume that the sheets numbered one

to four dated June 2, since they are all

numbered, what the actual capital procedure -

we needn't stop at this point.

Cox:

He seemed very set on the proposal, Harry.
He was very concerned about the form. I

think just for formal purposes, I would get
somebody to sign it from the British Supply

Council.
White:

Would you get the letter or the form or both?

Cox:

The covering letter.

Phillips:

This is the --

Childs:

We checked his recollection, but neither of
them signed those old reports.

Cox:

White:

It is all right with me, Harry.
It is perfectly all right with me unless the
Secretary indicates to the contrary.

Well, if Mr. Purvis' signature is part of
the procedure, I take it that it could be -Childs:

We could do it.

White:

It could be done before any bridges are down.

That is why I think it would be best to proceed without waiting for the signature. Is
that all right with you?

Cox:

Yes, it is O.K. As a matter of fact, I think

140
- 43 -

Sir Frederick's is the important one, be-

cause the Supply people have always wanted
to go ahead and place them.

White:

Well, apparently Sir Frederick feels that
way, too, so we will proceed. (Laughter)
Will you carry on?

Cox:

Number one that I have got is Brewster Aeronautical Corporation. What do you mean here,
the firm has already entered into commitments?

Without a contract on your part for the modifications?

Boddis:
Cox:

Yes, without a written contract.
And you put up the proposition of the Army
coming into this to Brewster?

Boddis:

Only in the form mentioned here, that we
should cancel an additional number of machines.

Cox:

You didn't put it up to them in any other form?

Boddis:

No.

Cox:

You know, it is not necessary to get the cancelation of an equivalent.

Boddis:

That was the --

Cox:

What is the objection, for example, between
Brewster and the United States entering into

this kind of a contract and providing for
inspection and what not by the British?

Boddis:

Not the slightest.

Cox:

If they want to do that or joint inspection
on modifications.

141

- 44 Boddis:
Cox:

Not the slightest.
There is no necessity for our getting an
equivalent number in terms of the legal
picture.

Boddis:

Cox:

If you can work it purely on the modification
amendment to the contract.

Well, you have got it up in terms of a
specific quantitative dollar amount on
the modification, and the essential dif-

ference would be that the U. S. would go
on the contract rather than you where the

base contract would be between you and
Brewster.

Childs:

Cox:

You don't think there would be any difficulty with the Army taking on a contract of
that sort without having to amend it to include that in the general form? From the
practical end of entering into a contract
which has no relation to their normal form
and all that thing?
I shouldn't think so. This is in substance
a change order and there may be some dif-

ference in the price which they would pay
on this kind of a change order as against
what you would pay.
Childs:

They will have to pay some money which on a

formal contract they would not approve. I
am not raising this suggestion to kick this
out.

Cox:

No, but their change order wouldn't - although

it affects the prior contract, they could

work out their own terms. They are not
vouching for the base contract.
Boddis:

The real answer is, as I see it, shouldn't

142
- 45 -

we try that out? We haven't tried it either
on the contractor or on the Army.

Cox:

I think that is the thing to do. The

contractor is going ahead anyway in so far

as the commitments and production are con-

cerned.
White:

So your decision on one is that they go ahead

Cox:

Yes.

Childs:

The last column shows a place for the action

and file a requisition?

by the committee.
Cox:

Just say, "For Lend-Lease."

Childs:

O.K. for Lend-Lease?

White:

I will see that you get another copy. On
the final column, Miss Kistler, if you will

put -Viner:

What about the Walsh-Healey Act?

O'Connell:

If this is approved, the War Department will
in effect enter into a contract for the modifications.

White:

And what question are you raising?

O'Connell:

I was wondering if - as I understand it, all

Government contracts to purchase supplies

and materials have certain statutory requirements such as the inclusion of the WalshHealey Act provisions, eight-hour day law.
Childs:

That is what was holding us up. We say wages
and hours instead of Walsh-Healey. But they
do have those things.

143

- 46 O'Connell:

Those things were not taken into account

Childs:

I am thinking back to a remark made yesterday. When we took over, we tried to assign
some of our contracts to the United States,

in your original contract.

four of them. It took six months to do
it, just working out the differences of
that very nature. It took six months,
January to June.

Cox:

Childs:
White:

Do you think we have got a pattern now?
I don't know.

Is it your thought that the contract as
presently written does not fit in with the
labor laws?

Childs:

Wouldn't satisfy the Army at all.

O'Connell:

Assuming the Walsh-Healey Act must be in-

cluded, which provides that certain statutory
provisions must be included in all Government
contracts over ten thousand dollars for the
purchase of supplies and material. The
British never put such a provision in these

aircraft contracts. I am just raising a

question.
Childs:

You are qui te right.

White:

If that is going to be a stumbling block --

Childs:

It is a particularly good question on account
of these four contracts.

O'Connell:

Have you worked those out?

Childs:

After four months, we did.

O'Connell:

What is the status of the work? Is it under
way?

144
- 47 Childs:

Finished.

O'Connell:

What did they do about the Walsh-Healey Act?

Childs:

They wrote a completely new contract.

Viner:

Were the terms exactly the same?

Childs:

O'Connell:
White:

I don't think there was any great change.

Even the amounts were the same.

Some of these contract provisions must have

been --

Are the terms under these contracts resulting
in higher costs?

Cox:

Lower costs.

White:

I don't get this. I mean, the terms under
the Walsh-Healey Act.

Viner:

They are buying a little differently.

O'Connell:

The manufacturer would say it was higher cost.
They say all Government regulations result in
higher cost.

Viner:

Harry, and smaller profits.

White:

I still don't get it. I am just a little bit

Cox:

No, you are not. The thing is this, Harry,

obtuse in this.

that we get reamed but the British get reamed
more in terms of the end dollar amount, because we are a bigger and a more continuing
customer.

White:

Well, what if you take over these contracts

under this requisition, will not the British

get the benefit of your superior buying power

in terms of the price of the --

145
- 48 Childs:
Viner:

I doubt that.
Oh no, not now. They have got this commit-

ment now.

Childs:

We would have another six months on it.

Cox:

It wouldn't make enough difference on the
modifications.

White:

Specify then --

Childs:

I think Boddis is quite right. Let's try it

with the understanding that if we get to such
a kicking in the teeth as I expect, come back
with it after we have had the bitter experience.
Cox:

Just to illustrate what your problem is,
Harry --

White:

I gather that it is not a simple problem.
(Laughter)

Cox:

That is right.

White:

I have yet to find one.

Phillips:

Supposing we do try this proposal to put in
a requisition for the modifying contract and
try it out with the War Department; and if

it doesn't work, if you will then accept our -

we can cancel the last batch of airplanes
and transfer those -Childs:

The company has already refused.

Phillips:

Let's try it.

Childs:

They will refuse.

White:

Let's take that step. Maybe we can try them
again. Then the prospects of that being an

146
- 49 -

Childs:
Cox:

Phillips:

obstacle are not sufficiently certain so
as to - not to justify going ahead?
Correct, sir.
Wait a minute. I would like to hear what
the rest of Sir Frederick's proposal is.
The proposal was that simply where an

additional expenditure is incurred on
these modifications and that additional

expenditure could be put over under the
same title under Lend-Lease, that we should
ask you to take over so many of the airplanes

specified for this country, say the last
fifty or last seventy, as we produce the
same sum of money.

That is our proposal.
Childs:

That is not in your notes there.

Phillips:

What is the ob jection to that? Have you any
objection, Mr. White?

Cox:

No, I haven't any.

White:

I don't see any. Explain it -Well, this is an eight million dollar modi-

Cox:

fication.

Now, suppose for eight million dollars you
could get a hundred planes. What Sir Frederick

says is that instead of getting into all these
complications about Walsh-Healey and so forth,
the British use their dollars for the modification and we make a contract for a hundred

planes for eight million dollars with the

contractor and take the last hundred planes,
you see, and chop those off --

147
- 50 White:

Chop off a contract which was made when?

Cox:

Oh, a long time ago.

Boddis:

1940.

Viner:

We take over--

White:

Take over some of the past contracts--

Cox:

The answer you have is, it is--

Childs:

You are going--

Cox:

Standing alone would be taking over the past
contracts, but what you are doing is swapping

the equivalent of a modification.

White:

For a past contract.

Cox:

I think we might be able to convince--

White:

Offhand, I don't see any objection to that.
It seems to me that might be a very good

idea. Do you--

Viner:

Well, my imagination goes a little bit further,
and I can see a number of larger possible ob-

jectors. The Army mightn't want to do it.

White:

But I was thinking from the point of view I take it the question was raised, as far

as you are concerned, from the point of view
of the Secretary's statement and the Budget

Bureau's position, et cetera. The other

problems of objections, et cetera, are something that they can work among them.

Viner:

I would say go ahead and try this way first

and then I would say that would be the second

way.

148
- 51 Childs:
Boddis:

We will try it both ways.
We have tried--

Childs:

Has been rejected.

Viner:

By the firm. But now I would see whether
there is any way of softening up the firm.

Cox:

O'Connell:

That is right.
It seems to me if the Army or this Government
went after the Brewster Company that we might

get a little different reception. I can't

see why in the world they could object to it.
I don't see why the Army would object, either.

Viner:

In fact, if the Army told them, "You have
got to turn over one hundred planes to us,
they wouldn't think for a moment of rejecting

it.

White:

Do you see any objection to that, Merle?

Cochran:

Just the Secretary's commitment there.

White:

I mean that is what that question is.

Phillips:

I don't remember this.

White:

You do feel that this runs counter to--

Cochran:

I would like to think it over a little more.
I am afraid it does.

Phillips:

Mr. Cochran, I did mention this to the Secre-

tary, not just as a matter of interest to him,

I think, a month or six weeks ago, and I

understood then he did not see any obvious
objection.

White:

Yes, I remember when that suggestion was made

149

- 52 and his reaction was, as you say, he seemed

to think it might be a good idea. That

doesn't
react-- necessarily mean that he may not
Viner:

Taking over contracts--

Cochran:

Old contracts.

Viner:

But you see the Army might handle it this

way. It might take over the contract and the
planes and then having had possession of the
planes
for a few weeks or a month, might
then transfer--

White:

Oh, no, that is something else. We have been
over that ground, and we dodged from that.

This is dealing - this is a little different

here. This is a question of exchanging a

hundred planes for "X" of something else.

There is an exchange. The exchange happens

to be one of modifications and not specific

items, but it is an exchange. Is that correct?

Childs:

No, I don't think so. Let me put it his

way. You have got a contract for a hundred
units which cost a hundred dollars each.
White:

Right.

Childs:

You want to amend those units so they cost
two hundred dollars each. We have a total

commitment at the time before the amendment

of a hundred units at a hundred dollars,
ten thousand dollars. We can't get bailed
out of any of that commitment. So we say we

will split the contract in two. We will keep
fifty units at two hundred dollars each. They

are still ten thousand dollar commi tments.
We haven't been bailed out of any commitments.

You take the other fifty at the higher price

150

- 53 and you take the ten thousand dollars worth
of commitments. We are not bailed out of
any.
White:

They are abiding by their contracts in terms

of dollars, not in terms of specific items.
I think the Secretary's interest, I should
think, might be legitimately interpreted to
be in terms of dollars rather than items,
so - and if that be the case, then it would
seem that this other would provide the way
out. Well, then, supposing we go that way.

We will try it on this and then that other
will be the next step.
O'Connell:

But the distinction that has just been made,

I take it, if you could do that in this case

we could do it in a case in which there was
no modification involved, and in that way
we could take over an existing contract.
White:

Well, if there are no modifications--

Viner:

Same amount of original dollar commitments.

O'Connell:

Yes.

Cox:

That is the important thing.

Viner:

All we are trying to do is to get the dollars
free.

O'Connell:

Sure, but I take it we want - the Secretary's
objective is to see to it that the commitments
that the British made before the Lease-Lend

Act.
White:

Connell:

Commitments in terms of dollars.

In terms of the expenditures, they were committed to be making before that date were not
to be taken over by us.

151

- 54 Cox:

Viner:

But he didn't say that they had no commitments,
and they wanted to change. They had a choice
as to whether they would take the change or
not in terms of a prospective commitment.

In that case, the commitment was for, let's
say, two millions of dollars to the Brewster of airplane material of one kind or another
to the Brewster thing. They stand by that
commitment.

White:

They meet twenty million dollars worth of
commitments. It happens to be - consist of
a different pattern than was--

Viner:

A double plane - a two engine plane instead
of a single engine.

O'Connell:

And less planes.

White:

All right.

Cox:

Number two, Consolidated Aircraft. What do
you mean - how many airplanes are being
changed here, Boddis? You say the present

airplanes are already due for delivery within

a few days. How many planes are along?
Boddis:

A hundred and thirty-nine.

Cox:

One hundred thirty-nine?

Boddis:

Yes. This is another case.

Cochran:

This that urgent case you mentioned?

Boddis:

Yes.

Cox:

What kind of modifications are they, do you
know?

152
- 55 Boddis:
Cox:

Boddis:

All sorts of stuff.
What will happen if you don't get answer on
this in a week?
Well, we have tried Consolidated on that. They
are actually doing the work. They won't give
us custody of the machines under the Neutrality

Act until we have paid for them in full.

Viner:

Under this column here?

Boddis:

It is easy to take care of those as long as

we can spend some dollars.
Cox:

Boddis:

While this thing is pending can't you pay them
a proportional amount, get custody of the ones
that are finished?

If we can fix a little bit extra for each
machine as they come along. That necessarily
implies some sort of commitment to pay a

certain figure for the rest of them.

Childs:

Do we have to make an initial down payment
of six hundred seventeen thousand?

Cox:

What I am trying to find out is this.

Viner:

Can you take them on the instalment plan?

Childs:

That is right.

Viner:

And in the interim--

Boddis:

That is what they have asked us to pay. We

will tell them what other action they are
going to take - they might be perfectly content to say as long as we know orders are
coming in from now on, they will proceed.

153
- 56 Cox:

Childs:

Why don't you put in a requisition and then
the other question Brown raises, doesn't the
contract
provide
for payment on delivery,
even
on the
modification?
A payment of the difference between down

payment and the over-all cost. You have to

make an additional down payment which
presumably is the six hundred seventeen
thousand dollars.
White:

Isn't it possible in between the British
Government and the manufacturer to say it
is merely a question as to some discussion

as to who is going to pay it, the British

or the United States Government? Isn't that
good enough credit risk?
Boddis:

Certainly, as long as the U. S. Government
comes along and says it will.

White:

The British Government can say, "If they
don't, we will." 11

Viner:
Childs:

Well, they are not selling on credit.
They don't seem to trust us. They are curious

with us.
White:

Very curious.

Viner:

Isn't cash and carry still in effect?

O'Connell:

Sure.

Cox:

On the instalment thing--

Viner:

White:

Harry,
that. they haven't got the right to accept
What?

154

- 57 Viner:

The manufacturer hasn't.

White:

The right to postpone down payment--

Cox:

Except as instalment payment on the plane.

Viner:

Not faster than delivery - I mean, not
slower than delivery, pro rata with delivery.
That was your proposal. I don't think they
say that.

Boddis:

Payment in full for the modifications as they
come along.

White:

In other words, the British Treasury has the

Viner:

Even if they did have it--

White:

Well, have you done as much as you can with

credit, but our orders interfere with--

that?

Cox:

Yes. Lend-Lease requisition.

Childs:

Number three is just a temporary financing

thing, you see. It really isn't a matter of
losing money at all. It is not a matter,

really, of Lend-Lease.
Boddis:

It is only a very, very temporary thing.

Childs:

We advance them, if necessary, enough money

to a company, which is already going to
accept a Lend-Lease order so that the company

will get busy with it and not wait for the

otherwise slow Army contract to come along.
When the Army contract comes along-White:

What is the problem?

Viner:

We have to finance the--

155

- 58 Childs:

We get our money back.

White:

Then there is no action to be taken on three?

Childs:

No.

Viner:

You don't mind financing it temporarily as
long as you know it isn't a permanent drain
on your assets?

Phillips:

The million, of course, does appear--

White:

And then you get it back--

Viner:

It comes back.

Phillips:

Comes back.

White:

When does it come back?

Phillips:

Monthly.

Boddis:

I am hoping this thing will be clear inside

a few months.
White:

If it were a very large sum we might find
some other alternative.

Cochran:

On the Lockheed thing, is that - what is

that installation? Is that new engines or

what?
Boddis:

No, the airframe was designed to take the

Allison F-3. Because we wanted to get the
machine with a supercharger in it, which is
exactly the same as the Army type, they are
changing to F-2 and this is the additional
cost involved in putting an F-2 engine instead of an F-3 and rearranging the cowling
around the engine for the supercharger.
Cox:

Are you using the same engines?

156

- 59 Boddis:

The
We have got as many
F-2'sAllison
as weengines?
have F-3's.

Cox:

Harry raised another question, as to whether

White:

I didn't mean that to be answered.

Cox:

No, that was a rhetorical question.

Boddis:

This case again is exactly the same as the

White:

Is three the same as - or four, rather?

you had them.

first two items.

Lend-Lease, then?

Boddis:

This is the Miami school.

White:

The matter which was raised yesterday and
on which you thought you might get an answer

today, Merle, did you get a chance to call

up?

Cochran:

Yes, Sir Frederick came by just before one

o' clock and gave me some documents which I

handed to the Secretary as he was going out,
and I made copies of those here.
White:

They related to that?

Cochran:

Yes. Did you want to give us anything more

on that, Sir Frederick?

White:

Is there any further aspect of that that you

wanted to discuss? I think probably you had
better explain the difference, because you
had that penned memo, you see, covering the
two.

Phillips:

Well, Mr. Childs and Mr. Cox had a conference
on the subject this morning and I understood
the opinion was that Lend-Lease expenditure

157
- 60 for this scheme - they could all be brought

under Lease-Lend in the case of machines which
came under the Lease-Lend act but possibly
could not be brought under Lease-Lend in the
case of machines which didn't come under the
Lease-Lend Act which were brought under exist-

ing commitments, is that right?

Cox:

That is right, in terms of personnel to fly
them.

Phillips:

Yes.

Cox:

Everything except pay of the flying personnel.

Childs:

Is there a chance of that being extended or
improved?

Cox:

Yes.

Childs:

Because I gather that everything will be
owned by us.

Cox:

Yes. We are working on that now, a modification
of the War Department Appropriation Act.

Childs:

The appropriation could be used for it?

Cox:

Yes.

Phillips:

Well, broadly, I tried to find out--

White:

Yes, but I mean this what the Secretary asked
for.

Phillips:

And it appeared that as far as it was concerned with planes which were shipped out

there and parts, the stuff should be bought
under our own commitments by - as regards

the planes which were to be flown over, it
seemed rather clear that they would be mostly

158

- 61 planes under our own commitments.
Cox:

Unless we started--

O'Connell:

As far as that goes, I don't think it will.

White:

Do I understand this correctly, that the
question which the Secretary asked was

clearly indicated in the last sentence on
this sheet? "We are willing to find what

dollars are needed if not eligible under

Lend-Lease.
Phillips:

That is the first scheme. That is a small
scheme. With regards to the second scheme,
we hadn't at the time of the memorandum you
have got your hands on was written, gotten

the opinion of Mr. Cox, but at the time I

called on Mr. Cochran we had that opinion,
and I just wrote down the information for
him. The opinion was that certain types of
expenses such as fuel oil would be brought
under Lease-Lend in any case but that there
are other types such as the pay of these

pilots and so on where the expenses could
only be brought under Lease-Lend if the
expenses were incurred with respect to
material, planes which had been supplied
under Lease-Lend. Then I was explaining that

the effect of that ruling, as far as I can

see, would be to split the dollar expenditures by half and half because of these

planes which have been going over, some

of them have been delivered under our old
contracts. Others are coming forward under
Lease-Lend and apparently that decides also
the question of whether the expenses of
transportation comes under Lease-Lend.

White:

Then if I remember correctly, the question
which he asked would call for a similar answer

159

- 62 either this way or the other way, but that
the amount involved might be much less by

virtue of your explanation right now. In
other words, the British Treasury is willing
to find what dollars are needed if not
eligible under Lend-Lease and there are
approximately, as you say at the moment, a

half or so-Viner:

No, no.

White:

That may be eligible under Lend-Lease.

Phillips:

That is what I told Mr. Cochran.

Childs:

This is a proposition involving two hundred

White:

But I was saying a similar answer would apply.

Phillips:

That is clear, isn't it?
I think it is. The only thing we didn't have

Cochran:

thousand dollars.

was that Scottish Navy business. Did you
find any more on that?
Phillips:

I have got the people hunting for it.

Cochran:

The Secretary had the idea that there was a
company set up for ferrying the planes to
Scotland.

Boddis:

That is--

Viner:

That is what he would like to know.

White:

He asked that it be described. Is this it?

Cochran:

No, it is not here. Sir Frederick coultin't
identify it in the short time I gave him this

morning.

160

- 63 Viner:

Let us know about that. How about this
decision that transportation expenses are
out unless the item is a Lend-Lease item?
Is that like the laws of the Medes and the
Persians?

Cox:

No, nothing is like the laws of the Medes

and the Persians. It is like the laws of
Lend and the Lease. (Laughter)

Viner:

Do you think there is no use in their trying?

Cox:

No, I think they ought to try it, but the

other alternative that we are pursuing now,
Jake, is to get the War Department appropriations amended so that their transportation
account can be used for their own stuff or
for stuff procured under Lend-Lease or for
stuff procured by the use of foreign funds.
If terms of storage and transportation,

because you have got a double problem there--

Viner:

In the meantime, would you wait for that to
pursue this or in the meantime try and get
this out?

Cox:

The thing works in several different ways.

In the first place, in terms of shipping

we can procure a Lend-Lease ship to them
and the usual method of Lend-Leasing is

to charter the ship. Now, would you charter
the ship - we can put the supplies on it

and the cargo may be half Lend-Lease and

half not Lend-Lease. So that, logically,
is already cut into the other principle, but-Viner:

Except on these that are to be flown, that

is a different story?

Cox:

Yes, because they are much more separable

in terms of planes, and that was put up one

161

- 64 time to Hopkins as a a matter of mixed
law and policy, and he thought we ought

to draw the line that way.

White:

Making a distinction between flying the
plane over and carrying it over?

Viner:

Whether the planes came under Lend-Lease or

under your own contracts and put in two

requisitions to cover it all and you may
be turned down one way.

Childs:

Boddis:

Did you say it couldn't possibly be handled

under two contracts?

I will confess that I had considered it that
way.

Cox:

Here was the reason for it, just briefly.

There was nothing in the organic act which

said anything about delivery, in the legislative history. As a matter of fact, O'Mahoney's

amendment was to authorize deliveries in the
Western Hemisphere and it was defeated, but
we have got the appropriation language cleared
up so the expenses necessary in connection

with any particular Lend-Lease article could
be covered, which covers transportation,

storage, and other similar expenses. But
it would be a long stretch as a legal matter
to cover stuff which wasn't procured with
Lend-Lease funds. There is one subterfuge
way in which you could do the thing and that

would be for the British to turn over all
right, title, and interest to these planes

on acquisition without the payment of money
to the United States, which makes it a LendLease plane, and then you turn around and
Lend-Lease them to them.

White:

That would be no contradiction to the spirit
of the Secretary's testimony. Why - would you

162
- 65 -

still have title after it has left the country?
Cox:

White:
Cox:

White:

Sure.

Well, so what?

It isn't a question of violating the Secretary's testimony. It is a question-No, I was thinking of it from that point of
view, that if they were willing to turn over
the title to those planes--

O'Connell:

It is finagling.
It is indirect, if you do it that way.

Cox:

I would think that in terms of what the legis-

Viner:

lative intent was, if anybody knows what that
meant, that they never contemplated that you
were going to use Lend-Lease money to pay the

transportation on previously acquired material.

O'Connell:

Did you tell them they weren't or it was never
contemplated at all?

Childs:

Get a bill of sale on these things.

White:

I don't quite see the distinction between
building a ship and sending it over. Transportation is part of construction, obviously.
You don't produce the thing until you deliver
it where it is wanted, and if you now step
in and say that delivery is equal to production, it would be unorthodox in classical
economic reasoning at any rate.

Viner:

You are talking about Congressional legislation, Harry.

0' Connell:

What about the analogy between these cases

163

- 66 and the amendments to your airplane con-

tracts? This delivery is as much a fiscal
part of the job that we are trying to do
as anything before it.

Cox:

There is nothing in the act about delivery,

White:

Is there anything in the act that prevents

Cox:

No, but you have got to look to your Appro-

Joe.

delivery?

priation Act - in the first place, there is
nothing in it but it gives you specifically

monies-Cochran:

I am going out for a little while. I will
try to get back as soon as I can.

White:

Oh, all right.

Viner:

I have arranged with the Secretary that I

am going to be here on the eleventh for about
a week. I must catch a plane now.
White:

Oh.

Cox:

Item number five, you had better use dollars

on it for the present.
Boddis:

Well, the trouble there is that we put in a

Lease-Lend requisition and it was turned down
in the main and now the school has got to

start. It is actually opening on the fifth

of July.
White:

Well, wait, that is - you say use dollars.
You mean there is no other alternative?

Cox:

Well, I think the other alternative is sufficiently improbable at this time in the

164
- 67 time involved to go ahead with the school
that they had better go ahead and make the
dollar commitment on it.
White:

But that need not necessarily constitute
a precedent with respect to subsequent

expenditures of a similar character.

Cox:

That is right.

White:

Then that requisition ought to be started
now, oughtn't it, on the labor expenditures?

Cox:

I gather this is for a certain unit cost

per student. For what period, a year?
Boddis:

Yes.

White:

Would it be possible for you to go ahead
with the dollar payments while this is being
examined?

Cox:

Let me ask this. Would it be possible to

make a six months' contract?
Boddis:

Well, we have got a break clause in it.

Cox:

I can go ahead with the dollars, then.

White:

How would it come to your attention again?

Boddis:

There is actually a Lend-Lease requisition

already filed in connection with this.

Cox:

Has it been formally denied?

Boddis:

In the same way that all the others have

been turned down. I have never seen any-

thing in writing on any of them.

White:

How would you want this brought to your

165
- 68 attention again, Oscar, in what form?
Cox:

Well, I would think that in the light of

possible changed circumstances, you ought

to
put a tickler on this to look at it again
in about a month.

Childs:

Why don't we make up new lists of existing

contracts made since March 11? We can make

one once a month or something like that. You
can examine them and see what you can take
over.

White:

Then the decision on this is to let this go.
They will pay dollars and you are going to
submit again the contracts, is that clear?

Childs:

Yes.

White:

Six?

Cox:

What is the cost of this amendment?

O'Connell:

Can't tell. Three to four hundred thousand
dollars. They apparently don't know.

Childs:

Three to four hundred thousand dollars.

O'Connell:

It says it is impossible to estimate the
difference in cost, but they assume it will
be between three and four hundred thousand.

Childs:

This is a funny one. How in the world we
can take that under here, I don't know.

Cox:

I don't know.

Childs:

It is a cost plus contract.

White:

Why is this modification different than any
other modification?

166

- 69 Childs:

It is like this. Where you have a cost plus
contract, the idea is to figure what the
cost may be. It brings up our estimated
cost by three or four hundred thousand dollars.

White:

But it remains the cost of the contract?

Childs:

That is right.

White:

Well, isn't that 8--

Cox:

The same principle, Harry. It is hard to

figure it out.

O'Connell:

You don't know how much the commitment was
so how do you know whether--

Childs:

Well, if you see an estimated cost of change,
you--

Cox:

Childs:

Wait a minute, you also had a commitment to
make this modification five months ago.

But we estimated fourteen hundred millions
instead of fourteen hundred millions plus
three hundred thousand.

Cox:

But the commitment must have changed, and you

will pay cost plus a fixed fee.
Childs:

That commitment has changed because of size.

Now, we have a different size under changed

conditions. The assets haven't gone up, but
the estimate has gone up. I should think you

would have an argument on that ground, wouldn't
you?
Cox:

Gee, I don't see that.

167
- 70 Brown:

Didn't you place the order for this change

Childs:

I don't think so.

White:

You said here some five months ago the con-

Childs:

We always give instructions without a con-

White:

Well, is the difficulty you are raising, Oscar,

Cox:

You have got--

White:

.....

Cox:

Both. The first thing is that ifI say to you,

five months ago?

tractor was given instructions to this effect.

tract. I think we have to pay for it once
we get it, sir.

is it a--

mechanical one in determining what

that cost is?

"You make a suit for me," I don't have to

give you a written document. If that suit
does the job, I am obligated to pay for it.
That is a commitment unless it is within the
statute of fraud or something.
White:

In other words, is it your contention that
this additional amount is part of the
original contract?

Cox:

Well, the commitment was made for the change
order before March 11.

Boddis:

That applies to--

White:

To a great many.

Boddis:

It certainly applies to the first item here.
It applies to some parts of the second.

168
- 71 Childs:

It is a difficult problem. I take it your

people out there are making changes all the
time, aren't they?

Cox:

Boddis:

Cox:

Let's leave the others and put this down as
dollars because I think the combined practical it would be doubtful if we could get the Army
to take this over because they couldn't tell
what the cost of modifications would be.

No, you could have that problem - it is
entirely a new precedent.

I know, but isn't the cost of the modifications

determined?

Boddis:

At the moment? The whole--

Cox:

They are ascertainable, aren't they?

Childs:

Yes. They are under this one, too.

Boddis:

Yes, they are ascertainable.

Cox:

How are they ascertainable under this one?

O'Connell:

They say here it is impossible to ascertain
them.

Childs:

Impossible to ascertain with any accuracy.

White:

Well, it has to be accurate.

Childs:

Yes.

Cox:

O.K. I think we ought to put that one down

as dollars.
Childs:

We can estimate the cost on this one as well

as the first one.

White:

You don't know how you arrived at it, but it

169
- 72 -

apparently has a definite dollar figure.
Boddis:
Cox:

Well, it is just an estimate.
Well, let me ask you this. Are the modifications such that the Army could make a

separate contract and fix a separate price
for them under the first one?
Boddis:

Yes.

Cox:

O.K., let's go.

White:

There is more doubt in your mind on this one?

Cox:

Yes.

Boddis:

Don't tell me that next one is going to be
easy?

Cox:

White:

No, not that.
I suppose the Army is going to not be too
enthusiastic about any of these and it may
be necessary to give them a little encourage-

ment from on top.
Cox:

Yes. I think it is much better to make it
worth their while on an eight million dollar
contract than on aneight thousand or three

hundred thousand.
Boddis:

Oh, very much. If I had the job of doing it--

White:

Does that apply to number seven? Or is that
of a different character?

Cox:

That is eight thousand dollars total, isn't it?
Why not leave that in dollars?

White:

Are there many of these very small ones?

170

- 73 Kistler:

They all are.

Boddis:

There are a lot of small ones hereafter.

White:

Might it be worth while establishing a principle
with respect to below a certain amount If
there are going to be too many small ones?

How much is involved?
Phillips:

Well, we did have a look at that and we found
that in the case of the British Purchasing
Mission, the really small cases worked out
about forty thousand dollars a week, didn't
they?

White:

On these amendments, changes?

Boddis:

New purchases.

White:

I am speaking of modifications. The new pur-

Phillips:

It is all the same, isn't it?

Cox:

The new ones are easier. I would suggest

chases would be--

for the present, how about taking all

items of ten thousand or under on modifications and handling them by dollar payments
instead of Lend-Lease.

White:

How much would that amount to?

O'Connell:

You wouldn't apply that to the new ones, just

modifications?
Cox:

That is right.

O'Connell:

That isn't going to cost you very much.

Boddis:

There were some new purchases which we had to

place. We have got someone in the middle of
Texas who wants some new sparkplugs.

171

- 74 -

O'Connell:

I was just suggesting applying this to the

amendments. There is much less cost there
anyway than the new purchases. Just arbi-

trarily to cut out everything under ten

thousand on amendments would make his job
much easier.
Cox:

Number seven, Brown points out that number

Childs:

The facilities are certainly additional.

Cox:

It says the cost of additional pattern and die

Brown:

It appears that you are just buying a new

O'Connell:

Yes, this is machine tools.

Childs:

Facilities, that is the eight thousand dollars.

Cox:

Why don't we leave that one in Lend-Lease?

Childs:

Eight thousand dollars is the facilities.

seven is a purchase, isn't it? You are buying additional jigs, dies, patterns and so on.

facilities.

set of tools, really.

Let's see what the other eight thousand dol-

lars is. That is all there is to it.

Cox:

Why don't we put that in Lend-Lease, because

that is a new purchase, Item number eight is

a change, isn't it?
O'Connell:

A change, yes.

Cox:

Yes, I think you could put that one in, too.
New latches, semi-complete latches. The

same thing with nine. Apparently the order
has already been placed, though. We will
just leave nine out.

172
- 75 Childs:

Fifty-eight dollars, is that going to be

Lend-Lease?

Cox:

No, because you have already placed your

White:

Did you come to some tentative decision on

Cox:

White:
Cox:

White:

order.

the small amounts?

Yes.

What was it?

Well, the new stuff under ten thousand dollars will be taken and on the modifications
under ten thousand they will be left out.

Might I suggest this, if you could, by the

time the Secretary meets, which is Tuesday,

if you could have an estimate of the total

which would be involved on the modifications

as distinct from the new orders and let's
get the Secretary's reaction.

Cox:

White:

Well, I don't think you could do that, Harry.
Can't you get some estimate of the total of
the modifications which are less than ten
thousand dollars?

Boddis:

No.

Cox:

I don't see how you could do that, Harry.

White:

I don't understand why not.

Cox:

Well, you could get it from past experience
for three weeks or a month past.

White:

Oh, I thought they had a batch of them. That

would be only a small part of the total, is
that it?

173

- 76 -

Cox:

No, I mean I don't think you have got any
statistical curve which you can project
except in so far as you have got certain
past experience, but when you have a change--

Boddis:

Even that isn't reliable.

Cox:

I was going to point that out.

Boddis:

You get this sort of situation. An airplane
is brought into service, and they find for
some reason or other a rib cracks so they
send a cable over saying that particular

rib has to be replaced. That might cost
a few cents per airplane to strengthen, but
you can't possibly foresee it.
White:

And it has been running even enough from

month to month so it is projected with
any degree of justification?
Boddis:

No.

Cox:

Is it all right with you, Sir Frederick -

where were you thinking the figure ought to
be placed on modifications?

Phillips:

I am rather in Mr. Boddis' hands. I don't
mind, myself.

Boddis:

I think if we had that ten thousand and on
modifications thirty thousand dollars would--

Phillips:

What about these small orders? I am not
quite so happy about those.

Boddis:

No.

White:

That doesn't include the small orders, the
new orders.

174
- 77 Phillips:

Cox:

What I had in mind for small orders was to
fix some figure, I don't know what figure,
for an individual item, but also to fix
a total of so much a week.

Well, that is all right, but suppose you
have got things that are of no particular
urgency such as very small machine tools.

Boddis:

Those will go through Lease-Lend.

Cox:

They would?

Boddis:

Yes.

Cox:

Boddis:

What about things like twine and so forth
that go through? Then you have got three
conditions, urgency, size, and modification-total dollar amount per week. They want
to have a drawing account of items not in
excess of five thousand.
The figure I suggested, which was to include

minor modifications, was ten with an over-all
maximum of fifty thousand a week to cover
other new modifications which were urgent
new purchases.

White:

Supposing it is over fifty thousand a week?
Then you will attempt to--

Cox:

They are going to exercise control.

White:

I see.

Cox:

I should think your modification of new

orders would be different, because adminis-

tratively it is much easier in terms of -

in relationship to urgency to get a new
order placed through than it is a modification.

175
- 78 -

Boddis:

Cox:

It depends where the demand arises. If you

have got a machine manufactured in Texas--

I wasn't thinking in those close limits, but
I was thinking of the difference between, say,
a five thousand dollar limit for new purchases and a ten thousand dollar limit for
modifications.

Boddis:

That is perfectly all right.

O'Connell:

Why don't we try it on that basis and if you

White:

All right.

Phillips:

Should I prepare a memorandum, Mr. White,

see you are spending a lot more dollars on
the
it. small stuff than you like,you can change

on that suggestion and have it confirmed on
Tuesday?

White:

I think that would be good.

Boddis:

Did you bring Mr. White that memorandum?

Phillips:

I don't know.

Boddis:

That little memorandum at the opening of
this meeting, you said you had a memorandum

which you said you hadn't had time to read.
White:

That is right. I think we had just made
some copies of them.

Phillips:

We will take that back with us, because it
wants a little change in view of the modifications.

White:

Is that copy all right for you or do you want
the original?

176
- 79 Phillips:

This is all right.

Cox:

What about these two items, what are they
going to be used for, do you know?

White:

Have you gone by item number nine?

Childs:

Nine is dollars.

White:

And ten?

Kistler:

Ten is dollars, too.

White:

A hundred and sixty-eight dollars and a
hundred and ten dollars? No.

O'Connell:

Under the rule of thumb they would be.

Kistler:

They are going to apply that today.

White:

Is that right, nine and ten fall under
these dollars because of its being a modification of the small amount?

Cox:

Yes. What are these machine toolsfor India
for, do you know, item number eleven?

Archer:

Doesn't it say in the notes? I would put
that in under Lend-Lease.

White:

Number eleven, Lend-Lease.

Well, now, does this - is this one of the

items about which there have been some dis-

cussions originally as to whether it would
fall under them or not?
Archer:

No, I don't think so.

Cox:

The same thing came up--

Archer:

Except so far as it is independent--

177

- 80 -

Cox:

Archer:

White:

Well--

The other things are really commercial
things.

But this is one type about which there have

been some discussions.

Cox:

Oh, yes.

White:

Number twelve. Number eleven is Lend-Lease.

Cox:

Number twelve. That is an amendment. Is
there any question in your mind on this?

That falls clearly within the category of-You can't tell from this whether there is

any urgency. Is there any urgency on thirteen?

White:

One bearing.

O'Connell:

If there is urgency, that is a compelling
reason for having it Lease-Lend, isn't it?

White:

No, the other way around, because it takes

more time.
O'Connell:

What about when you get into the priorities

situation? Or would this get priorities?

White:

They would get priorities.

O'Connell:

Would they?

Cox:

They wouldn't on the Indian thing.

White:

For ordnance?

Cox:

Number eleven, no sir, not unless it is under
Lend-Lease.

Phillips:

Machine tools.

178

- 81 White:

But you did put Lend-Lease--

Cox:

I say if you put it under Lend-Lease, you do

get priorities, and if you tell them, "No,"
they probably won't get it anyway.

O'Connell:
Cox:

Well, this urgency-Look at number twelve. On the delivery
schedule, suppose it is available at once.
Machines which have already come forward pursuant to contracts made on March 1, so the

priorities thing is washed out, but on
number thirteen, you can't tell.

Childs:

It is very probable where your company is
named that they may already have a priority

on it.

Cox:

There is no delivery schedule or no indication
of urgency.

Childs:

Incidentally, as we go through this thing

for goodness sake make suggestions. Would
you like to have a regular heading of emergency?
Cox:

I would like to.

O'Connell:

Well on thirteen--

White:

What was the decision on twelve, Miss Kestler?

Kestler:

Use dollars because of the urgency.

Cox:

You have got to, Tom. You have got a delivery
schedule, and then you have got your marks,

explain fully any other difficulties--

0 Connell:

It seems to me--

Childs:

The thing is, I had a number of items of urgency
but they haven't put this under "urgency."

179

- 82 I would put this under Lend-Lease unless

Cox:

you think that is urgent.

White:

Would
youtime?
want to determine that and present
this next

Childs:

You don't know?

Archer:

This doesn't come--

White:

Is there any way of ascertaining that quickly?

Cox:

We can put it down Lend-Lease.

White:

Put thirteen Lend-Lease and then they can

begin inquiring about it.

Cox:

Fourteen, Lend-Lease.

White:

Fourteen is Lend-Lease. I take it where it is
Lend-Lease, you needn't pause for discussion.

Cox:

Fifteen, Lend-Lease. Sixteen ought to be

no Lend-Lease, dollars.
White:

Seventeen, dollars.

Cox:

Urgently required.

White:

No Lend-Lease on seventeen. There are two

seventeens. Oh, wait, that was - sixteen was

what?
Brown:

Sixteen was no Lend-Lease.

White:

Is dollars. And seventeen?

Cox:

Wait a second. What happened to the Admiral's

request
it in? for a requisition, did you ever put

180
- 88 Childs:

That I don't know.

White:

This seems to be clearly something that could

Cox:

Yes, if the requisition is in. Who is--

O'Connell:

That is--

Cox:

They have already put the order n,have they?

go under Lend-Lease.

We will need some arrangement on that.
Brown:

The parts are all in New York, aren't they?

Cox:

Yes.

White:

Apparently the authorization--

Archer:

I think that should be in that column.

White:

How can they ship it?

Cox:

Phillips can get it to them, can't you?

Phillips:

Certainly, for some three thousand dollars.

Cox:

You had better put dollars on that one, but
I think you ought to find out on these kind
of cases where you put a requisition in and
have the company there, I think you have got
a loophole there because every motivation is
on the part of the company to make it a direct order.

Kistler:

That is eighteen?

White:

Seventeen.

Childs:

Now, eighteen comes next. The dollars figure

is on the second sheet. It is two million

dollars.

181

- 84 -

Cox:

Childs:
Cox:

That is the same as - no Lend-Lease. It is
the same as the navigation school.

It has got to be dollars?
Yes.

White:

Let's hesitate just a moment.

Cox:

Do you stop at two million, Harry?

White:

Well--

Cox:

That item, incidentally, is super confidential.

O'Connell:

That is labor cost alone?

White:

There is no doubt in your mind?

Cox:

They have already passed on it. Hopkins has

been in this thing from the outset. On
nineteen, I think they ought to put a requisition in under Lend-Lease.

Archer:

May I raise a point on that incident?

White:

Twenty?

Coe:

What is nineteen?

White:

Lend-Lease.

Archer:

If you want it sent by air right away, what
procedure can be made by the Treasury procurement?

Phillips:

Are you on nineteen?

Archer:

Yes. I mean, would they be able to get it
all through by next week? The stuff is already
waiting - I have written to Mr.--

182
- 85 -

0' Connell:

He can't move until he gets a clearance from

you.

Cox:

He has probably gotten one already.

Archer:

It has only gone in this morning.

Cox:

You have droped him a note telling him about

Archer:
Cox:

O'Connell:

the urgency?

Yes.

If you didn't hear by Monday I would follow
it up with him.

If you have any difficulty, you might get in

touch with me and I would call him because I

deal with those people all the time.
Cox:

Because on those urgent items, that is about

the best you can do, I think, keep pressing
them.

Archer:

They can do it all right if they are so disposed.

Cox:

Well, now, wait a minute, you have put it in

Archer:

There is one requisition for eight.

Cox:

When was that put in?

Archer:

It reached you, I think, sometime at the

for a billion? What is the requisition?

beginning of this week.

Cox:

That may be ready. They are just interchange-

able units, aren't they?

Archer:

No, it hasn't gotten to that stage.

183

- 86 -

Childs:
Archer:

Well, obviously, whichever comes first--

Shall
put in the additional requisition
for thewe
two?

Cox:

That is right.

O'Connell:

In terms of availability, isn't it?

Cox:

Yes.

O'Connell:

You can always get that in.

Cox:

In terms of a billion units, I don't know.

Childs:

Cox:

Twenty looks as though it were only a contract.
We put that one down as no Lend-Lease. Number
twenty-one, no Lend-Lease.

Childs:

This is a service charge, isn't it?

Boddis:

Yes, no Lend-Lease on this one. Now we are

finished on that.

Now, on twenty-three and twenty-four, this
is the one you have seen before, Mr. Cox.

The essential trouble is that the contractor

has refused to accept the contract.
Cox:

I would put this one like the Consolidated, Lend-

Lease.
O'Connell:

What are you on?

Cox:

Twenty-three. I don't know about twenty-four.

Archer:

It is a self-balancing item.

Cox:

Half of it is for export and sale in the United
States.

184

- 87 Archer:

White:

Cox:

Which
I gather is not of a type that is
Lend-Leased.
Well, I am wondering whether this issue
hadn't better be raised on a large amount.
I would think so.

White:

I think it somewhat prejudices the case or
principle when it is a small amount. What
do you think about it?

Childs:

I think that is right.

Cox:

How about requisitioning only the half that
is required for U. K. consumption? Is that
possible.

Archer:

We don't want to start that, do we, trying

Boddis:

say it is precisely half.
At all in one form.

Cox:

Comes in various forms.

White:

Oh, this is one of the private--

Cox:

Well, you had two private things. One is,

to split the thing up? It is difficult to

it is used in textile machinery in Britain

which conceivably could be used to make uni-

forms for the Army, but the other part is

used in belting which comes to the United
States from the export market, sold by

White:

private sellers for dollars.
Well, it raises a very knotty problem.
My first reaction is that we are perfectly
willing and want to and should wrestle with

that problem, but I think there is a better
opportunity to examine it with the consideration it deserves if it were a large amount,

185

- 88 unless they are going to do a lot of these
small amounts, and then we had better hit

it at the beginning.

Phillips:

I think it is very difficult to find a case

of this kind. In the ordinary way, we should
be arguing on the principle of discussion.

Where it was quite clear that we were making
at home in the United Kingdom far more steel

and applying it to all purposes than we
were importing from the United States for
reexport, the mere incident, the particular
part of the item of steel of the United States,
it was a mere incident that it happened to get
back into trade. This, I understand, they

put in because it isn't a case like that.

Cox:

Can you separate it out?

Phillips:

No. If you would like to have it generally,

Cox:

we can do that.

If you can say it is used - "X" dollars worth
is used for the manufacture oftextile machinery

in Britain, that is one thing.

Boddis:

It is all building.

Cox:

Can't you on the other hand--

White:

Let me ask this question. If there are going
to be numerous items of small amounts, or

relatively small amounts, then I think we
might well raise this, because the totals
may be large. If, on the other hand, there
are not numerous items of small amounts or

if there is likely to be an item of a million

dollars or so or over, then I am wondering
whether it might not be wise to postpone
consideration until we get that kind of a--

186

- 89 -

Cox:

Well, we have already passed on it sub-

stanially in the steel case.

Archer:

I don't think that is quite the same.

Cox:

No, not--

White:

Which steel case is that?

Cox:

Part of the steel that they require from us
in a descending percentage goes into the

manufacture of equipment which may be exported

like sugar machinery, for example.

White:

Cox:

How did you pass on that? What was your decision?

The decision was to exercise every effort
to cut down on the reexport part, which they
are doing under normal pressures anyway.

White:

Does that constitute a clear precedent for

Cox:

No.

White:

Why not?

Cox:

Well--

White:

this?

It is an export to them, of which they use a
portion andreexport some, but is it not a
precent because steel is an important item

which has been decided on its own merits and--

Cox:

White:

That is right.
I should be inclined to think we might pass
these for dollars and see if we are going to
get some more of them or if you have a large

Item, because if you bring this question up

187

- 90 -

it has got to be thrashed out, I should think,
on the question of policy and whether it is
worth doing on this small amount - I think
the tendence would be to say, "Oh, well,

it is only this amount." Let's not face

that question, so that we either have to be
in the position of saying that there were a
lot of these small amounts and they total
large and we have got to settle the issue
on them or if we can't say that, I almost

think we are licked to start with.

Archer:

The little fag ends of all the big things--

Cox:

Are you sure it can't be separated at all in

terms of what is to be used for machinery in
the United Kingdom?

Phillips:

I should think most of this when it gets
in our market is sold at the ordinary commercial price, not below the price suggested
in America, and it goes to different people.
It is impossible to tell how much would be
used for our own textile machinery.

Cox:

Can't you do it without complicating the

administrative machinery by saying that

annually at least so many tons will go into

machinery in the United Kingdom.
White:

Yes, it would be some such approach that
would be necessary if a decision were to be

made. I am raising another question which

may be over-simplifying it. I mean, this
is a case - an isolated case or if there
are very few, if the total were small, I

think we had better avoid it. If it is
typical of a large number, we have got to
face it. If we are going to face it and

if there are such questions, I think probably
it might be a little more helpful if we could

188

- 91 get a large amount.

What is this, two hundred thousand?
Archer:

That is for six months. For a year, the
amount would be double.

Archer:

Now, is it your feeling that there are a
lot of those cases of a similar character?
Not now. I should think there would be

White:

Then if there are very few, maybe - unless

Phillips:

You are proposing to withdraw the application

White:

Withdraw the application so the decision will

Cox:

Let's give it further consideration.

White:

very few.

they can-so the--

not be made.

What we might suggest is that if there are
more of them, let's lump them together if
they appear. If they don't appear, you are
not concerned with them. Does that suit
you?

Archer:

We withdraw it from here and spend the dol-

White:

You will not submit - you are not submitting

lars?

a request-Archer:

We have got to tell England to spend the dollars,
you see.

White:

Well, you can spend--

Cox:

You ought to consider whether or not you can't--

189

- 92 -

White:

Archer:

Spend a month's worth of dollars.

That is a six months' order. You could give
us that for six months, and we could look

at it again in six months' time.

White:

Sir Frederick's point was that he - it is
better not to make a decision on this. In

other words, you withdraw the application so
that there is no decision made--

Phillips:

For the moment, anyhow.

White:

Yes.

Archer:

And England has got to go on buying.

Phillips:

I realize that.

Cox:

Can't you ascertain how much approximately

is used for the manufacture of textile
machinery or other similar machinery in
Britain?

Boddis:

There is no real difference in the machinery

as long as it is run off a pulley.

Cox:

But you must have some estimate of what is
used in England as against reexport.

White:

You are raising the kind of questions that

we would want raised in deciding these things.

If it is a very small proportion, for example--

O' Connell:

They have got an estimate right here.

Cox:

They have got an estimate of half and half.

White:

Why don't you put in a requisition for half
and state in the requisition that that is
going to be used for stuff in the British

190

- 93 -

Empire, but put in no requisition for the

rest?
White:

Even though the identical belt may--

Cox:

There is no question about that, but I would
put the requisition in and say that you

are requisitioning fifty percent of your
six months' need, that the other fifty per-

cent which is the estimate of what would be
required for reexport, is being handled by
dollar purchases. Then your requisition would
show that on the basis of your estimate--

White:
Cox:

Except that-This may be a sample of the type of purchases
which in private purchases may bulk large.
Therefore, why make the decision unless you
are ready to make a Lend-Lease decision?
If you are not ready to make a Lend-Lease

decision, let's postpone it until by virtue
of its size or mere lapse of time there is
an opportunity. All right? So it will be
just withdrawn.

Childs:

There is one more, Dr. White, that Archer

got in late today.
White:

Do you have a copy of that?

Cox:

Yes.

White:

Let's number these.

Childs:

We would have put it on here. It will be
twenty-five.

White:

Why should any distinction be made whether

the parts are to be - why should any parts

be imported except under Lend-Lease in view

191

- 94 -

of the fact that they are to be used for
development of food supplies? Why shouldn't
Cox:

O'Connell:

all the - why is it necessary to distinguish?
It isn't. That last sentence proposes that
the whole thing be centralized so that it will
be no restriction.
But they want to know that if they do centralize,

they will be able to get it. This raises two

questions, doesn't it? One is whether it can
be Lend-Leased and the rest of the question

they raise here is as to how they dispose of it.

Cox:

That is right.

White:

Well, does it matter how they dispose of it?

Cox:

Well, there have been several questions raised
on that. The first one was on the purchase of

a specific kind of agricultural equipment like
International Harvester and the use of International Harvester as a distributing agent.
Now, you get the same thing in terms of parts

which makes much more sense than the tractors

themselves did, and I would think you probably

could get the Section 4 consent if that is your
most practical way of handling the distribution of parts.
White:

You think this could be submitted under LendLease?

Cox:

Yes.

White:

All right.

O'Connell:

Are you concerned with the basis upon which

the British dispose of such things as
tractors and parts through dealers? I mean

in terms of price. Suppose they give them away.

192

- 95 -

Cox:

No, we are not concerned about that, but we

don't want to be in a position, for example,

of being politically criticized on a thing like
the International Harvester where you buy
a trade name as against - but if a fellow
has got an International Harvester and
needs a part, you can justify yourself much

more practically in going to the International
Harvester agency in a particular part of
England to get a part rather than going to
the Ministry of Supply in London.

Archer:

The parts, you see, have got to filter down
to much smaller people than the larger

machines.
O'Connell:

Take the situation such as food. Supposing
we Lend-Lease a substantial quantity of food-

stuffs. I don't - politically, I should think

it wouldn't make a great deal of difference
to us whether the food is given to the British
under Lease-Lend and is distributed through through a few stores or whether it was sold at
a high price or what.

White:

There might be political difficulties,
definitely. If the Government itself sold

it for a high price, that is one thing. If

private individuals sold it for a high price,
that would be a matter, I take it, which the
British Government would--

O'Connell:

Cox:

I am raising the question as to whether we

would be concerned.

The first question we raised on food was

whether it couldn't be, again having - whether
it couldn't be distributed through the Army
and Navy depots.
White:

I don't quite see why we should be concerned

193
- 96 whether the British Government makes a

profit.

Cox:

That is not the point. Our Quartermaster
Corps, for example, buys enormous quantities

of food, and if the Food Ministry uses "X"
amount of food which it gets from us for
Army and Navy distribution, the balance

goes for civilians. Here is the only question. We don't care what they sell it for.

The question which has already arisen is where

people - private individuals have profiteered
with Lend-Lease food. Now, you get a political question. To peddle these under the
British law is normally a matter for domestic
regulation. They have a certain penalty for
a man who violates the price schedules on
the sale of food.
Now, politically, some fellow up on the Hill
can raise an awful lot of noise-White:

Except that don't they already have some re-

strictions? Isn't the British Government
interested in restricting profiteering on

food?
Cox:

Phillips:

Sure, they are. It is a question of violation of the restrictions.
Suppose the British Government even gave it

away free? What question is there. On the

whole of our food supply, it is quite clear
the British Government is subsidizing the

food.
White:

Cox:

His point is, there would be less political
objection if they gave it away.
There is no objection about that, but here is

what happens. You take a Lend-Lease ship and

it really isn't any of our - we don't care,

194

- 97 -

but you really have political investigations
where a Lend-Lease ship is sold to the
private distributor and the distributor
attempts to profiteer by it. He will be
punished in one community by imprisonment
or fine-White:

Cox:

Is it your suggestion that the British Government is not enforcing its profiteering laws
satisfactorily?
There is only one practical solution to that,

Harry, and it has probably already been made.

It is one of the things Winant was worried

about. The thing for him to do is go to the

Ministry of Food and say, "Here is a situation

that may have some political backwash. Maybe
you ought to make your penalties more stringent

or your sanctions better."

White:

Do you have any--

Phillips:

Act to regulate the prices.

O'Connell:

I am sorry that I raised the question this

Cox:

That is a matter of domestic--

White:

late.

Their domestic control, yes.

Cox:

We can't control it internally.

White:

Are you through, Oscar?

Cox:

Yes.

White:

If you don't mind staying just a minute, Mr.
Cochran just passed me this statement of the

cash position. Is there anything else that
you want to raise at this--

195

- 98 Childs:

Phillips:

Yes.

The point I got is, I am in communication
with the Secretary. Am I to pass him any
more about the Takoradi scheme?

White:

No, it seems to me you gave him the answer

Phillips:

Well, I gave it orally to Cochran. I didn't

White:

No, but the statement was, if I understood

that--

attempt to estimate--

it correctly, that if there were any dollar

payments necessary to the scheme, you would

meet them-Cox:

Well, the thing that the Secretary is
particularly interested in, I think you have
answered, and that is that this thing will
go forward immediately. Whether or not it
requires dollars and regardless to what

extent it requires dollars. I got a call

from Hopkins this morning asking me to get

in touch with Lovett to help out in any
way I could to expedite the thing.
White:

Do you understand that that way, Sir Frederick?

Phillips:

That doesn't mean I don't want to go forward.

White:

That doesn't preclude going forward and attempting to produce the number of dollars necessary,

but they didn't want to stop initiating the
plan. Is there anything else?

O'Connell:

Is there a requisition for that plan?

Cox:

It hasn't come through yet.

O'Connell:

You expect them to file a requisition?

196

- 99 Cox:

Yes.

White:

As I understand it, what you (Childs) are

Childs:

That is right.

White:

You submit those to Mr. Cox.

going to do is submit requisitions in the
form required for all those that were indicated to be - to look like Lend-Lease projects,
is that right?

Childs:

As fast as they can be prepared. Is there
anything we can put on these things to push
them? A lot of them--

Cox:

Why don't you get together with Burns and Young?

I think you ought to work out some degree of
speed - relative speed as between these requi-

sitions. Maybe you want to put "urgent" or

whatever-Childs:

Or "Passed by the Committee, Cleared for Lend-

Lease." Just put something like that on it
so nobody else can raise the question, "Is

this lend-leaseable?" because many people

do, I gather, in some of the departments.
White:

Well, we could - I don't know whether this
committee - we have no status with respect

to being cleared by Lend-Lease. It would be
wholly a matter of-Cox:

We will have to get together and work out
something to put on the requisition on not
only this type of case but others, because we

don't want them raising all kinds of questions
as to more particular legal things, because

we have had some instances of that character.
Childs:

What will we do about these sheets now.

197
- 100 -

White:

Well, now, I would suggest that we would
like one copy here.

Childs:

We made you two or three.

White:

All right. The next step is for you to submit the regular forms directly to Mr. Cox.

Childs:

Correct.

White:

Does that answer your question?

Childs:

That is fine. We don't have to make up any

more records or anything?
White:

No, we have an account and we will make up
the records. You can keep your own and
check them with ours. This memorandum which

I haven't had time to peruse, can that go

over?

Phillips:

That is the one about those limits?

White:

That is the one--

Phillips:

It wants some slight amendment, and that will
come back to you, and from the discussion today
I take it it can be agreed on Tuesday.

White:

I see. Now, will you have some more of these
ready, and in any case, can we meet Monday

afternoon? It may be very brief, merely so
that we can - or Tuesday morning. I want
to meet again before the Secretary--

Phillips:

What is important is that we shall have some
dominion stuff in for the Tuesday meeting.
Will you have anything in by Monday afternoon?

Archer:

I have got one small thing that Elliott was
speaking to me about.

198
- 101 -

Childs:

These drift in all the time.

Phillips:

I am inclined to think Tuesday morning would

Cox:

be a little bettern than Monday afternoon.

I would suggest that these requisitions, that

you put down a notation that this was discussed
with me at the committee meetings at the

Treasury, so that they won't get--

Childs:

Why not just say, "Passed by Mr. Cox"?

White:

Whichever you think would have more force,
whichever you work out.

Well, then shall we meet Tuesday at eleven
o'clock?

Cox:

What time is the meeting with the Secretary?

White:

Three. Is it all right?

Cox:

How about meeting at two?

Childs:

We would have more work than we could do in
the hour.

White:

As long as we don't come in the office with

any unfinished business, we can meet at two, and

just stop in time to--

Childs:

We have run three hours today.

Phillips:

I prefer a little more time.
Then let's do it at eleven. I hope these
aren't criteria. Mr. Bell was tied up at

White:

a meeting today. He thought he might be
able to get through in time to come but he
wasn't certain.

199
(Handed by Sir Frederick Phillips of the British Treasury to
Mr. Cochran in the U. S. Treasury at 12:45 p.m., June 27, 1941.)
0
0
P

THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA

MEMORANDUM FROM
TO

R. G. D. Allen

Sir Frederick Phillips
June 27. 1941

Note for Mr. Cochran

In connection with my memorandum on the British Cash Position dated April 18,

I informed you that I expected the available gold and dollar balance to fall from
$161,000,000 at April 1st to a low point of about $70,000,000 by the end of June.
This estimate was based on forecasts of payments on British contracts provided

by the British Missions. Actual payments fell short of these forecasts by about
$130,000,000 during the months of April and May, and the June payments so far

are also lower than the forecast. Payments have fallen behind partly, if not
largely, because of the difficulty under present conditions of obtaining de-

liveries up to schedule on British contracts. Allowing for a short fall of about
$150,000,000 on contractual payments between April 1st and June 20th, I find

the actual gold and dollar balance of $161,000,000 at June 20th a surprisingly
low figure. The excess of gold and dollar receipts over payments other than

on the British contracts in the U.S. must have fallen short of my original
estimate by about $60,000,000.

Copytalm 6-27-41

200
(Handed by Sir Frederick Phillips of the British Treasury to Mr. Cochran in
the Treasury at 12:45 p.m., June 27. 1941)

Available gold and dollars

$millions
At close of business ont

161

March 31, 1941

April 30

152
138

May 31

June 6

151
137

June 13
161

June 20

Washington

June 27, 1941

(Init.) F.P.

Copyinle 6-27-41

201
M'Cochran

Mencorandum m the Jakenadi schemes harow ith

M'Childs has interroued n'Ex the morning m Leave dead
aspects with following results
Fust Scheme

n'sx is z pinion that this expenditure can
be hought under lease and
Second Scheme

Mr Sox is of opinion that all these expenses could

be hought under lease Lend eweft family there cometed

with the delivery oplanes ourcel by the united Knightm
V12 purchased not of pre lease lead contracts
76.
27/6

Recid 1.00 P.M. June 27, 1941

202

FIRST SCHEME

There is at present a collection of
aircraft at Takoradi which have been shipped in

parts for assembly there. To relieve congestion
at Takoradi, General Arnold has arranged for 30 skilled
mechanics of the Curtiss Wright Company by Clipper on
Cost of transport not known, but say
the 2nd July.
$15,000 to $30,000.
a year.

Pay of Mechanics, say $180,000

They are going indefinitely for such period

as they are needed at Takoradi.

We are willing to find what dollars are
needed, if not eligible under lease-lend.
Throups

27th June 1941.

SECOND SCHEME

203

This scheme provides broadly (1) for

the shipment in parts and/or the flying of complete
aircraft from U.S. seaboard to Takoradi via South

America, (ii) for the ferrying of the aircraft from
Takoradi to Khartoum or other point near the operational zone.

Provision is thus needed for three

distinct services (a) ferrying of aircraft across the South Atlantic,
(b) ferrying of aircraft, either shipped or flown,
from Takoradi to Khartoum or other delivery point,

Scheme was discussed in general terms

between Mr. Hopkins and Air Marshal Harris and also

between General Arnold and Air Marshal Harris with the
President and other representatives of Pan American
Airways.

It was proposed that Pan American Airways,

by direct agreement with British authorities, should
undertake the responsibility for the three services.
The Trans-Atlantic and Trans-Africa ferrying services
would involve the provision of operating personnel and

the supply of fuel and oils. The transportation of
ferry pilots on the return journey from delivery point
would entail provision of aircraft (20 Douglas DC3 )
and operating personnel, ground organisation at terminal

and intermediate points. It was assumed that existing
ground facilities should be adequate, but P.A.A. indicated

that it might be necessary to provide additional

204

navigational and ground equipment. Pan American

Airways would also be responsible for providing
personnel and material required for maintenance of
aircraft and ground equipment.

An estimate, necessarily conjectural,
of the expenditure involved for these services is:a.

Trans-Atlantic ferry

(150 mixed crews)

$2,700,000

Return
journeys
to U.S.by clip
per $1,800,000
Trans-Africa
ferrying
of military aircraft,
$1,250,000
(80 pilots)

3) Transport service:-

(a) 20 D.C.3 transports
and spares at
$125,000

$2,500,000

(b) Maintenance equipment

required in Africa
and cost of transportation to West Africa.

500,000

tional, radio, etc.

say,

300,000

(d) Cost of pilots, crews,
ground personnel and

other ground services

$3,600,000

(e) Administrative and

miscellaneous expenses

$2,000,000
$14,650,000

Mr. Trippe, of Pan American Airways
emphasized that the Company did not wish to make any

profit out of this undertaking and would base their
charges on audited costs.

Howays
27th June 1941.

205

TREASURY DEPARTMENT

PROCUREMENT DIVISION
WASHINGTON

OF THE DIRECTOR

June 27, 1941
MEMORANDUM TO THE SECRETARY:

Weekly Report - Lease-Lend Purchases

6/20 - 6/27/41)

Purchases to 6/20/41
Purchases 6/20 to 6/27/41

$ 18,329,823.37

Total to 6/27/41

$ 19,033,399.59

703,576.22

Estimated Cost

Requisitions Pending
Cleared by O.P.M

10,588,827.00

Awaiting clearance by O.P.M

Total Pending Requisitions

221,869,538.15

232,458,365.15

Acutal committments for iron, steel and scrap requirements
were not made this week due to a revision of specifications by the
British. The revised specifications have been received on
approximately 300,000 tons of steel and contracts are now being
executed. Specifications of an additional 150,000 tons are now
being submitted by the British, and the Office of Production
Management has indicated it will clear scrap and pig iron requirements tomorrow.

you

Clifton E. Mack
Director of Procurement
Attachment

JUNE 2 1941

MEMORANDUM TO THE SECRETARY
CONTRACT
NUMBER

REQUISITIONER

CONTRACTOR'S NAME

COMMODITY

DA-TPS-232

Clinton Asphalt Co.

China

Asphalt 1,521,000 gals.

DA-TPS-143

Deere & Co.

U. K.

Spare Parts for Farm Equip.

DA-TPS-182

Heyden Chemical Corporation

DA-TPS-86

Allis-Chalmers Mfg. Co.

DA-TPS-235

The H. A. Wilson Company

DA-TPS-223

U. S. Rubber Export Company, Ltd.

DA-TPS-82

The Cleveland Tractor Co.

DA-TPS-229

Driver Harris Co.

DA-TPS-207

Marsh-Stencil Machine Co.

-TPS-188

DA-TPS-190

Thermometal

Tires

Wire Copper

DK-TPS-227 W. L. Brubaker & Bros. Co.
Worthington Pump & Machinery Co.

DA-TPS-248

Allis Chalmers Mfg. Co.

DA-TPS-218
DA-THS-123

International Harvester Export Co.
Minneapolis-Moline Power Imple.Co.

41,605.53
10,808.00

7,720 lbs.

664.00

200

60,250.00

3,000 lbs.

2,016.00
156,535.00

Brass & Wire

178,222.00

Pumps, etc.

29,224.69

Brass & Wire

Reamers

DA-TPS-221

1,680.00

2240 lbs.

Stencil Cutting Machines 28

The American Brass Company

285.04

Spare Parts for Agric. Equip.
If

Bohn Aluminum & Brass Corp.

158,564.25

Parts for Agric. Implements

Creosote

TOTAL VALUE

QUANTITY

247 sets

13,201.00
14,411.00

Speed Patrols & Parts

14,683.04

Motor Trucks

20,834.72

591.95

Spare parts for Farm Equip.

Total Purchases 6/20 to 6/27/41

700 576.22

207
Treasury Department

Division of Monetary Research

Date 6/27/41 19
To:

From:

Miss Chauncey
L. Shanahan

Mr. White wanted you to have a

copy of this for your files.

In the future there may be documents on this which are to be kept in

the Secretary's office. This is not

a Treasury cormittee, but Mr. White
serves on it.

208

June 27, 1942

Yes

Mr. Alvia
Chairman, Joint Economic Committees

Trums

H. D. White,
Director of Monstary Research

U.S. Treasury Relations with Canada
Representatives of the Canadian Ministry of Finance, headed by
Deputy Minister W. C. Clark, have been is frequent touch with the
Secretary of the U.S. Treasury, the Under Secretary, and other
treasury officials.
Over the past few months, there have been frequent discussions
in Tashington conserting Canada's exchange position vise-vis the

United States, and vis-e-tis Great Britain. One got of these
conversations were related to - of the subjects in the Hyde
Park Boclaration. Since that period, the Canadian Ministry of

Finance officials have raised with the U.S. Treasury a number
of questions - Land-Lease precedure where the issues involved
were closely related to Canada's exchange position. For such

conversations, the Canadiana have brought in a

representative of the Ministry of institute and Supply.

Since the appointment by Canada of a Financial Attache is
Washington, this official has on ossesion been the channel
through which questions were discussed.

6/29/41

209

COMMANDANT THIRD NAVAL DISTRICT
90 CHURCH STREET
NEW YORK

June 27, 1941.

My dear Mr. Secretary:

Please allow me to thank you for your

very kind letter of June 24th, regarding the

Treasury Hour Radio Program on July 2nd, over
the Columbia Broadcasting System. I have
received the hundred guest tickets from C.B.S.

today, and will have them distributed to the
five of them allocated to the U.S.S. PRAIRIE

various activities in this area, with twentySTATE.

I know that all the Navy personnel

who will view this broadcast are grateful for
your kindness in making these tickets available,
and I wish to thank you on their behalf.
Very sincerely,
ADOLPHUS ANDREWS

Hon. Henry Morgenthau, Jr.,
The Secretary of The Treasury,
Washington, D. C.

210

atty. Gen Jackson
TWO WITNESSES BEFORE A SENATE JUDICIARY SUBCOMMITTEE TODAY OPPOSED

CONFIRMATION OF ATTORNEY GENERAL JACKSON TO BE SUPREME COURT JUSTICE,

ONE BASING HIS OPPOSITION ON THE HANDLING OF INVESTIGATIONS OF CIVIL

LIBERTIES IN JERSEY CITY PRIOR TO AND DURING THE 1940 PRESIDENTIAL
CAMPAIGN.

THE OTHER WITNESS, INVENTOR LESTER P. BARLOW, CHARGED THAT JACKSON

HAD ISSUED A RULING HOLDING UP PAYMENT OF A $300,000 CLAIM AND THAT THE
RULING MAKES "EVERY SINGLE GOVERNMENT CONTRACT SUBJECT TO EXTORTION. /
THE COMMITTEE DID NOT HEAR THE PROTEST OF SENATOR TYDINGS, WHO
REQUESTED THAT THE CONSIDERATION OF HIS EVIDENCE, THE NATURE OF WHICH
HE HAS NOT REVEALED, BE POSTPONED UNTIL MONDAY.

ROBERT C. MCMANUS, EDITOR OF THE NEW JERSEY VOTER, A NEWARK PUBLICA
TION SAID HE WAS OPPOSED TO MAYOR HAGUE OF JERSEY CITY, READ LETTERS
HE HAD WRITTEN TO JACKSON ALLEGING THAT A *SUSPICION* EXISTED THAT THE
ATTORNEY GENERAL WAS PARTY TO A "CONSPIRACY TO SUPPRESS" THE CIVIL

LIBERTIES INQUIRY INSTITUTED IN JERSEY CITY BY JACKSON'S
PREDECESSOR, FRANK MURPHY.

6/27--S1237P

211
ADD JACKSON NOMINATION, SENATE

AFTER MCMANUS MAD READ FROM NEWSPAPER CLIPPINGS, SENATOR O'MAHONEY,
A COMMITTEE MEMBER, INTERRUPTED TO CHARGE THAT THE WITNESS WAS NOT

PRESENTING FACTS BUT WAS TRYING TO USE THE COMMITTEE AS A "SOUNDING
BOARD IN HIS ATTACK AGAINST MAYOR HAGUE.

"NO," MCMANUS REPLIED, "THAT IS NOT RIGHT."
*WHAT YOU ARE TRYING TO SAY," INTERJECTED COMMITTEE CHAIRMAN HATCH,
IS THAT JACKSON MADE A TRADE WITH MAGUE TO SUPPRESS VIOLATIONS OF

CIVIL LIBERTIES IN JERSEY CITY IN RETURN FOR HAGUE'S SUPPORT OF ROOSEVELT FOR A THIRD TERM."

*I AM ASKING THAT YOU LOOK INTO IT AND SEE IF A TRADE DID TAKE
PLACE," MCMANUS ANSWERED.

mamaries

THE WITNESS

ALSO REQUESTED AN INQUIRY INTO ALLEGED *NEGLIGENCE IN

THE HANDLING OF INCOME TAX CHARGES AGAINST FORMER NEW JERSEY SECRETARY
OF STATE THOMAS A. MATHIS

BARLOW TOLD THE COMMITTEE HE WAS THE RECIPIENT OF AN AWARD BY

CONGRESS OF $592,719 IN PAYMENT FOR THE USE OF HIS INVENTIONS DURING
THE WORLD WAR. HE HAS RECEIVED HALF THAT AMOUNT, HE SAID, BUT THE
OTHER HALF HAS BEEN WITHHELD UNDER JACKSON'S RULING.

HE ALLEGED HE HAD BEEN SUBJECTED TO *BLACKMAIL AND EXTORTION IN
TRYING TO GET HIS MONEY.

BE SAID A TREASURY DEPARTMENT ATTORNEY TOLD HIM HE OWED $100,000

IN 1936 INCOME TAXES. A YEAR IN WHICH BARLOW SAID HE HAD NO NET
INCOME. HE SAID THE TREASURY HAD REQUESTED HIM TO PRESENT DOCUMENTARY
EVIDENCE ON HIS 1940 INCOME TAXES, AND WHEN THE PAPERS WERE OFFERED

HE FOUND HIS TAX REPORT HAD NOT BEEN PULLED FROM THE FILES
6/27--S&R1243P W20-0

212

TREASURY DEPARTMENT

Washington

FOR IMMEDIATE RELEASE,

Friday, June 27, 1941.

Press Service
No. 26-17

Secretary Morgenthau today made public the Treasury's record

with respect to the $300,000 claim of Lester P. Barlow, inventor,
against the United States. The Secretary said that the facts in the
case do not bear out the testimony of Mr. Barlow this afternoon be'ore the Senate Judiciary Subcommittee considering the nomination of
Attorney General Jackson to be an Associate Justice of the
United States Supreme Court.

The record in the Barlow case is as follows: On September 6,
940, E bill was enected providing for the payment of approxi motely

592,000 to Mr. Barlow in satisfaction of his claim against the
United States for infringement of E petent on a bomb which he had
invented many years ago. Three days Inter, on September 9, before

the money appropricted by the bill could be paid to Mr. Barlow, papers
,

were served upon Treasury officials in on action which John F. Clerk
Los Angeles lawyer, had that day brought in the Federal District
Court for the District of Columbin against Mr. Barlow, the Secretary

of the Treasury, and the Treasurer of the United States. The purpose
of Mr. Clerk's suit was to recover half of the money appropriated to
(r. Barlow and to prevent the Treasury from making payment to Barlow

pending 5 court decision in the matter. Mr. Cls rk claimed that
bout 25 years ago he and Mr. Barlow entered into C contingent legal
C arrangement in connection with the invention. Mr. Berlow, on

-2-

213

the other hand, claimed that he had settled with Mr. Clark in 1924
for the sum of $12,000. This left the Trensury Department a
disinterested S tockholder holding moneys claimed by two persons.

On at least two occasions where the Trersury found itself in this
situation and paid one of two rival claiments while litigation
was pending, the other claiment went to the Supreme Court of the
United States and compelle d the Department to pay him ns well.
In view of these circumstances, the Treasury Department rnd the

Department of Justice, in order to protect the interest of the
Government's well C.S those of the rival claiment, many yearsvage
adopted the policy of withholding payment pending the judgment of

the courts as to the rightful ownership. The Cla rk-Barlow case

is still being litigated and the Treasury Department, while
it has paid half of the sum appropriated to Mr. Barlow, is,
pursuant to court order, holding up payment of the other half
until final judicial determination of the matter. The Treasury
Department has kept in close touch with the Department of Justice
in connection with each s ten taken, 0.8 it is custom in such
matters.

No Treasury attorney, according to the Department's records,
told Barlow that the inventor owed $100,000 in connection with

his 1936 income taxes. The records of the Bureau of Internal

Revenue show that he was not visited by on agent with respect to

any tsxos other than those for 1939 and 1940. All dealings with
Barlow, insofar as his 1939 return was concerned, were conducted by
correspondence and Barlow has been advised there is no question

concerning his 1939 tax liability. His 1940 income tax return is
now being Audited by the Bureau as C matter of ordinary routine.
-000-

214

JUN 27 1941

by dear Mr. Presidents

In compliance with your request of June 7. 1941, the
Secretaries of New. Herry. Agriculture, Comeree and the Administrators
of the Federal Security and Federal Wester Agencies have been informed

by letters eated June 24, 1942, that commenting July 4. 1941. the -

playees of their respective departments - - in she Metrick
of Calumbia will receive shoin salaries or wages on July 8 for the
period July 1 to July a, instucive, and thereafter on the Street of each

with for the period from the w to the - inclusive, - on the
8th of each month for the posited from the 26th of each worth to the
8th of the following month, both dates inclusive.
Similar information has been transmissed to the hands of

- office and Divisions of she Treasury Department shough the
solium of a depositphotos election. with the - of the Suress
of Regrowing and Printing share the you days have been staggered
heretefore.

Faithfully yours.
(Signed) S. Morgenthau, Jr.

Secretary of the Treasury
The President.
The White House.
June 20, 1941
Grange

File to Mr. Thompson
By Messenger

215
L 183

JUN 27 1941

The Honorable,

The Secretary of the Navy.
My dear Mr.Secretary:

Reseipt is acknowledged of your letter dated June 24, 1941,
concerning the use by the Navy Department of a portion of the
Coast Guard Reservation on Edis Hook, near Fort Angelee, Washington,
for a Section Base and for the construction by the Navy of certain

buildings and other facilities for joint Naval-Coast Guard use,
is accordance with the local testative agreements mentioned is
this Department's letter of May as, 1941.

It being noted from your communication that the arrangements

referred to are satisfactory, the accessary action is being taken to
cause a possis to be issued to the Navy Department, as requested,
which will be forwarded is the neer future.

Very truly yours,
(Signed) E. Morgenthan. Jr.

Secretary of the Treasury.

typed 6-26-41

File to Mr. Thompson
By Messenger

KSH ma

216
c) BBN
31973
0.

DEPARTMENT OF THE NAVY

No.

Office of the Secretary
Washington

June 24, 1941

CONFIDENTIAL

Sir:

Reference in made to your letter dated May 23, 1941, concerning the use by the Navy Department of a portion of the
Coast Guard property on Ediz Hook near Port Angeles, Washington, for a Section Base.

It was stated in your letter that the Treasury Department
confirmed tentative agreements between the Commandent, Thirteenth Naval District, and the Commander, Seattle District, as
to the location and construction by the Navy of certain buildings and other facilities for naval use and joint Neval-Coast
Guard use, and that the Secretary of the Treasury would issue
a permit giving effect to these tentative agreements if they
were setisfactory to the Secretary of the Navy.
These tentative agreements as to the use of Ediz Hook
Reservation jointly by the Navy and Coast Guard are satisfactory.
Accordingly it is requested that a permit giving effect to
these tentative agreements be issued.
Respectfully,
/8/ James Forrestal
Acting

The Honorable

The Secretary of the Treasury

James Forrestal

217
0G-OP-72-650-651-612

JUN 27 1941

Chief Boatswain C. L. Jorden,
Commanding Officer,
U. S. Coast Guard Cutter GENERAL GREENS,

floods Hole, Massachusetts.
Sir:

I have read with much interest your report dated June s,
1941, of the reseue by the Cutter GENERAL ORSENE, under your con-

and, of 39 survivors of the terpedeed British steamship MARCONI
more than 700 ailes northeast of St. John's, Newfoundland, on
June 26, 1941.

This outstanding achievement does you great credit and
has reflected very favorably upon the Coast Guard.

I wish to take official cognisance of your accomplishment,
and it gives me real pleasure to commend you for your intelligent,
efficient and courageous performance of duty.
Sincerely yours,
(Signed) E. Morgenthan. 30.

Secretary of the Treasury.

File to Mr. Thompson

EGR:RWH

218

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE June 27, 1941

Ferdinand Kuhn, Jr.
FROM

Alan Barth
"THE FOURTH CLIMACTERIC": EYES ON THE TARGET

Despite mixed emotions over the latest extension of the war,
the American press has, to a remarkable degree, kept its sights

trained on the bull's-eye of Nazism. It has, in the main, embraced
and fostered the conclusions expressed in the official statement
made by Under Secretary of State Summer Welles: that the German

invasion of Russia constitutes final proof of Nazi perfidy, illustrating anew the senselessness of appeasing Hitler; that, regardless of our abhorrence for the doctrines of Communism, "Hitler's
armies are today the chief dangers of the Americas."
Rejoicing

The instinctive American response to the Russo-German conflict

was one of thanksgiving. There seemed to be a peculiarly satisfying irony in the prospect of the world's two most ruthless and

formidable dictators tearing at one another's vitals.
Behind this editorial delight there appears to be a somewhat
complex motivation. The basic source of satisfaction, of course,
was the transfer of the Soviet Union's unknown strength from the

219

-2Axis to the anti-Axis column. Yet the hope that Hitler will come
a cropper in his latest venture is paralleled -- sometimes on the

same editorial page -- by the hope that Stalin will be liquidated;
the invasion is looked upon as retribution for Soviet collaboration
with Germany. And no small part of the editorial enjoyment of the
situation stems from the discomfiture of Communists in the United
States. Almost every commentator has indulged himself in a chortle
over The Daily Worker's sudden insistence upon full American aid in
the fight against Fascism.
Newspapers have advanced several explanations for the German

attack on the U.S.S.R. The most popular and most hopeful of these

deals with economics. It assumes that Hitler can no longer carry
on the war with his present resources and is obliged to secure grain
and oil from the Ukraine. The New York Times observes, in this

connection, that "Essentially the war against Russia is a counterbalance to the weight of the United States."
Other commentators argue that the Hitlerian purpose is

strategic -- to secure his rear in preparation for an all-out attack on the British Isles later on. This view regards the campaign
against Russia as a display of strength instead of weakness. It
foresees, also, a flanking movement against the British position in
the middle east.

220

-3Considerable weight has been given as well to a supposed

psychological motivation. The drive on Russia is interpreted as
an attempt to divide and confuse the democracies by the semblance
of a crusade against Communism. The Hess flight is now commonly

linked to a Nazi attempt to substitute war in the east for war in
the west. Should the Soviet Union be quickly crushed, many com-

mentators fear there will be, both in Britain and in this country,
greater receptivity toward peace proposals which would give the
Reich complete mastery of Europe. It is acknowledged that a German

triumph over Russia would afford Hitler an almost unassailable position.

Opposition

Isolationists and interventionists alike assume that the
Reichswehr will win in Russia. The Red Army is not highly rated by

America's journalistic strategists. But to the isolationists, this
extension of the war seems a reprieve for Britain and the United

States, while the interventionists hail it as an opportunity.
The isolationist line finds its most elementary expression in

The Chicago Tribune. In an editorial titled "The Heat Is Off," this
newspaper declares categorically that "Britain is no longer threatened with invasion." From this premise, it argues that "

there ever was any justification for our intervention in arms, that

justification no longer exists." In varying degrees, a minority of
newspapers reflect this tendency to relax American efforts against

221

-4the Axis.

A more specious and subtle means of distracting American

attention from the main issue of defeating Hitlerism is put forward
by the Scripps-Howard and Patterson papers. The former, rejoicing

in the prospect of a death struggle between the dictators, assert

somewhat paradoxically: "Our neutrality is positive -- against
both of them." The New York Daily News echoes The Chicago Tribune's

complacent assumption that Britain is now safe and plays upon the
average American's distaste for Communism. "We'll be hearing a

lot," it remarks, "about Russia being another embattled democracy,
But it looks to us as if it
like Britain, China and Greece

will take a very long time to sell Americans the idea of fighting
with and for Joe Stalin." The Wall Street Journal pushes this
prejudice a step farther by warning that American aid may turn all
Europe over to Communism.
Opportunity

A majority of the American press, however, has refused to

allow itself to be distracted from its primary purpose -- the
defeat of Hitler. The Des Moines Register is representative of
newspapers in every section of the country in urging that, "To
permit ourselves to be befuddled and divided on this central
reality would be what the Nazis hope -- and what we cannot afford."

There is a manifest sense of relief, to be sure, over the

222
-5editorial assumption that time and geography make the direct tendering of Lend-Lease aid to Russia largely academic. The pressure is

for redoubled assistance to the British. The Administration is
exhorted to give Britain at once as many planes as possible and to
employ whatever measures may be needed to transport these safely and

speedily across the Atlantic. Many papers urge full use of the
United States Navy to win the Battle of the Atlantic now.

What Winston Churchill called "the fourth climacteric" is seen
as a great chance -- perhaps the final chance -- to change the current

of the conflict. The Prime Minister's speech allying Britain with
Russia was generally applauded here as indicating a realistic deter-

mination to take advantage of the opportunity. High hopes are entertained for the efficacy of British bombing raids over western Europe.

The chief benefit of Russian resistance is seen in the possibility
of carrying the war to Germany with increasing vigor. The pace of
American aid at this moment is regarded as one of the decisive

factors. In the face of the opportunity, the press reflects a
general public feeling of renascence.

223

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE June 27, 1941

Ferdinand Kuhn, Jr.
FROM

Herbert Merillat
PRESS OPINION ON TAXES: INFLATION TALK

The fear, or professed fear, of inflation has been a constant
theme in newspaper discussions of federal fiscal policy, especially

tax problems. Most inflation talk is found in the conservative press,
which points to the danger of inflation as the most compelling reason

for: (1) broader income taxes or sales taxes to cut the purchasing
power of low income groups; (2) termination of the President's power

to devalue the dollar, which is characterized as a potent threat of

inflation; (3) a ceiling on wages; (4) reduction of farm subsidies;
and (5) reduction of non-defense spending.

On the other hand, the pro-labor newspapers and labor journals

are relatively quiet on the subject of inflation; they continue to
demand higher wages and the exemption of low incomes from taxation.

When the subject is touched on at all, it is usually said that there
is no danger of inflation so long as our productive capacity is not
used to the limit, and that emphasis should be placed on increasing
production rather than curtailing purchasing power.

All shades of opinion agree that it is important to raise as
much as possible of the money needed to finance defense by taxation

224
-2and borrowing from current savings rather than by borrowing from
banks. Some papers and commentators, notably the Scripps-Howard

papers and John T. Flynn, point out that 31 billions in taxes will
retrieve for the Treasury only a small part of the billions being
poured out by the Government. In this fact, with its corollary of
the need to rely heavily on borrowing, these papers see danger of

inflation. In general, however, there is no demand for a higher
revenue goal as a means of checking the inflationary spiral.
The Committee's Tax Bill

Press criticism of the Ways and Means Committee's tentative tax

proposals follows the lines laid out in earlier editorial discussion

of taxes. The surtaxes on individuals, it is noted with relief, are
milder than those proposed by the Treasury, but still severe. The
demand for a broader base continues in most papers. It is said that
the surtaxes imposed on present taxable incomes represent too abrupt

an increase when it is considered that incomes below the present

exemption levels will continue to be tax free.
Much emphasis is placed on the psychological aspect of income

tax payments by low income groups. Everyone, it is said, should

have a feeling of making a direct financial contribution to the
defense effort. Most papers urge a broader base, not as a means of
raising large amounts of revenue, but on the ground that more people
should be tax conscious. This is a notable change from the theme

225
-3developed earlier in the year, when the answer to the Treasury's
prayer for more revenue was widely publicized as lying somewhere
below present exemption levels.

Joint Returns, Morals, and Manifest Destiny

The only substantive change in the personal income tax law
proposed by the Committee -- the requirement that husband and wife

file joint returns -- has provoked remarkably little comment.
Papers in community-property states have pointed out the special

interest of such states in the proposal, but as often as not they
have been uncritical. A substantial number, however, bitterly oppose
the joint return plan and accuse the Committee of an attack on the

moral code of the nation of invading the constitutional rights of
citizens living under the blessings of the community-property system.
The joint return requirement, they say, will discourage marriages and
encourage divorces.

The Washington Post scoffed at the charge that the proposal
would break up happy homes and concluded that the emergency justified

the change. It followed up with a suggestion that bachelors be discriminated against in the tax laws, in order to encourage marriages

and boost the birth rate. Only if the birth rate goes up, said the
Post, will the nation be ready to fulfill its manifest destiny when
Hitlerism falls.

226
-4-

Delay

There is a growing impatience in the press at the delay in

Congressional action on the new tax bill. It is said that individuals
and corporations should know as soon as possible what their taxes

will amount to, in order to make provision for payment. Also it is
pointed out that delay is costing much in lost excises. Senator
Vandenberg's suggestion that the income tax and excise features of

the bill be separated, with immediate action on the excises, has been
received favorably.

227
5621

MEMORANDOM

June 27. 1941

To:

PRICE ADMINISTRATION COMMITTEE

From:

R. K. Thompson

Appended hereto are:

1. Minutes of the meeting of June 25.
2. Price schedule No. 10
3. Amendment to price schedule No. 4

228
5621

CONFIDENTIAL

SUMMARY OF STENOGRAPHIC TRANSCRIPT OF MEETING OF
PRICE ADMINISTRATION COMMITTEE

June 25. 1941
11:00 a.m.

Chairman: Mr. Henderson

Present: Messrs. March, Stevens, Lubin, Nelson, Clayton, Pike,
O'Connell, Whitcomb, Barnes, Shields, Hamm, Galbraith,
Ginsburg, Weiner, Cassels, Plummer, Thompson.
1. Automobile prices

Mr. Henderson reported that OPACS has had meetings with the Packard,
Hudson, Nash, Reo, and Chrysler motor companies concerning prices.

Though the Chrysler Corporation made $2.20 a share in the first quarter of

this year and it is evident that in the second quarter they will make
enough to make the six months' earnings at least $5. it has flatly refused to rescind the price increases instituted on June 4 and which will
represent an increase of about $4,000,000.

Messrs. Henderson and Galbraith reported that a statement on the
automobile price situation will be issued detailing the background of the
negotiations with the smaller independents and with Chrysler, the cooperation received from Studebaker and Packard (the latter of which lost $9,000
a day for about two and a half weeks in deferring price increases at
OPACS request), and releasing the independents from the OPACS'request not

to increase prices in order not to be discriminatory. The statement will

add that if OPACS were to accept the position that moderate increases in
cost can not be absorbed in enormous increases in volume without raising
prices, the entire American economy would already be in wild inflation.
It will also announce that plans are under way for a price schedule on the
new models from the factory on down to the final consumer.
2. Rubber price order

Mr. Galbraith reported that from the time the reduction in rubber
consumption was first contemplated it was apparent that parallel action
would have to be taken on the prices of crude rubber, scrap rubber and the
finished products. The problem of fixing a ceiling on prices for rubber
and rubber products is extremely difficult and complex as it involves
both wholesale and retail price-fixing. Mr. Galbraith added that during
the rest of the week OPACS is holding discussions with the rubber trade,
including the Retail Tire Dealers' Association, to explore all phases of
the application of a rubber price order. The order will probably not be
issued for a week but in the meantime a statement will be issued announcing

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that
a price
is in preparation to make it clear that price
increases
willschedule
not be permitted,
3. Allocation of rubber

Mr. Weiner spoke of the difficulty of relating the reduced consumption of rubber to the balance of the 1941 model season and the desire of
some companies to use the amount permitted to be consumed for the first
two months during July so that enough tires will be produced to equip
new cars coming off the assembly line. He added that the possibilities

of eliminating whitewall tires or requiring trade-ins or re-treads or
devices to lengthen the use of existing tires are also under consideration.

4. Vinson priorities legislation
Mr. Weiner reported that two meetings have been held with Messrs.
Knudsen, Hillman and O'Brian of OPM and Mesars. Henderson, Ginsburg and

Veiner of OPACS to consider the form of an Executive Order to be issued

clarifying the existing situation under the Vinson priorities legislation.

The order as agreed on by representatives of the two agencies specifies
what defense requirements are so that OPM's authority to determine

priorities for all direct and indirect defense requirements is clarified.
OPM is also required to determine what the residue is and as to that

residue OPACS is to prepare plans and programs which OPM is required to

administer. In order to relieve manufacturers of the difficult problem
of deciding as between defense and non-defense requirements in the

priority or allocation applications and as to where such applications
should be sent, the Executive Order will direct all applications to be
sent to OPM with internal machinery provided so that copies will flow
to OPACS for consideration.

Mr. Henderson reported that a series of exploratory conferences is
planned with industry to discuss their problems and their requested The
schedules of raw materials and other deliveries under priorities.
first conference, probably to be held next week, will be with the because automo-

bile industry and the OPM Labor Division will have representation
problems of dislocation and unemployment are involved in that industry.
5. The Kaiser proposal for a steel plant on the West Coast
Mr. Harm reported that for some time Mr. Kaiser has been West attempting Coast

and his before
the relationsteel on the referred
a steel plant on the

memorandum to secure that he funds on finally the from cost laid the of RFC producing plan to build President West has Coast in been the and form of a

ships with West Coast producers. The Kaiser proposal Hamm pointed

OPACS by the President. Mr. we

out knows (1) how much it, a

for recommendation that since to OPM and additional steel need capacity
need, (2) what no type one of capacity we need, and (3) where we

230
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major survey will have to be undertaken before Mr. Kaiser can be given
a specific answer. Mr. Henderson pointed out that the contemplated F
cost of building Mr. Kaiser's new capacity is about $100 an ingot
which compares very unfavorably with a cost of about $35 to $50 a ton in
existing plants. He added that OPACS will probably advise the President
that a definitive answer cannot be given on the Kaiser proposal without
having a study made of the entire situation.
Mr. Henderson reported that the President had requested him to
consult with Mr. Nelson and others concerning recommendations to be

made to the Budget Office for provision for the continuation of a quarterly report on steel. He asked the committee members whether they would
want to join in suggesting the formation of a competent group to study
the steel problem and it was the general consensus that since this is a

production and not a price problem a recommendation should not be submitted to the President by the Price Administration Committee.

6. Cotton print cloth price schedule
Mr. Henderson reported that he had received indirect information
that a Congressional bommittee may attempt to prevent the issuance of a
price schedule on cotton print cloth, but that in the absence of a
Presidential or Congressional restraining order OPACS will proceed with

the issuance of a ceiling in this field. Mr. Galbraith reported that
the industry itself is very favorably disposed since it recognizes that
the situation in this market is out of their hands and requires issuance

of a ceiling.

7. Price legislation

Mr. Ginsburg reported that a revision of the proposed price legis-

lation bill is being prepared and that it is likely it will be considered

by legislative leaders upon their return the end of this week. He added
that there is substantial agreement that price legislation is needed but
that the form and language of the bill need simplifying.
8. Enforcement

Mr. Henderson reported that $35,000 for the Federal Trade Commission
and $35,000 for the Tariff Commission has been placed in the OPACS budget

for enforcement work which will be farmed out to the two agencies. He
added that the Budget Committee is on notice that in the event price

legislation is passed providing for penalties to individual violators, an

additional appropriation would be necessary to cover the increased work.
9. Shingles

Mr. Whitcomb reported that the Tariff Commission has recently been

asked to make a study of the effect of the importation of shingles on the

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domestic shingle situation. There is at present a quota of shingles for
free entry while there is a duty of 25 cents a square on the balance,
which can be changed only by Congressional action. If the report indicates that British Columbia is getting a larger share of this market,
there is a possibility that legislation removing the duty could be passed
which would affect prices.

The committee adjourned at 12 noon to meet Tuesday, July 1 at 11:00 a.m.

232

OFFICE FOR EMERGENCY MANAGEMENT

Office of Price Administration and Civilian Supply
For Immediate Release
June 25, 1941

PM 614

Maximum prices which may be charged for pig iron, a major raw material

in the production of steel, were established in a schedule issued yesterday
by Leon Henderson, Administrator, Office of Price Administration and Civilian
Supply.

This is the third major factor in the iron and steel industry on which
action has been taken by OPACS in order to avoid inflationary tendencies. Pre-

viously ceilings had been established for iron and steel scrap and for iron
and steel products.

The schedule sets forth basing point base prices for the five major grades

of pig iron at various cities; such prices for three minor grades; differentials
based on silicon, phosphorus, and manganese content; and two minor exceptions.

The basing point prices are generally those prevailing during the second quarter.

The domestic ceiling prices will be the aggregate of the basing point base

price at the governing basing point; differentials according to content of the
iron; and transportation charges from the governing basing point to the place
of delivery as customarily computed.

The export ceiling prices will be the aggregate of the basing point base
price at the governing basing point, differential, and export transportation
charges from the governing basing point to the place of delivery as customarily
computed. In the case of exports the governing basing point may be the estab-

lished basing point at or nearest the place of production.
Text of the schedule is attached.

233
PM 614

TITLE 32 - NATIONAL DEFENSE
CHAPTER XI - OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY
PART 1306 - IRON AND STEEL
PRICE SCHEDULE NO. 10 - PIG IRON

The Office of Price Administration and Civilian Supply is charged
with maintenance of price stability and the prevention of undue price

rises and price dislocations. Iron and steel scrap and Pig Iron are basic
materials for the production of iron and steel products. By Price Schedule No. 4, Revised, and Price Schedule No. 6, Revised, respectively, price
ceilings have been placed on iron and steel scrap and on iron and steel
products. Recent wage increases and the increased demand for Pig Iron resulting from the national defense emergency have been exerting pressure

upon the price structure, causing the prices of certain grades and kinds

of Pig Iron to be increased. In the interest of national defense and
the public interest a price ceiling is necessary. On the basis of infornation secured by independent investigation by this Office, and upon in-

formation furnished by the trade, I find that the maximum ("ceiling")
prices as set forth below constitute reasonable limitations on prices
for Pig Iron,

Therefore, pursuant to the authority vested in me by Executive Order
No. 8734 it is hereby directed that:
1306.51 Definitions, When used in this Schedule:

(a) The term "Person" includes an individual, corporation, association, partnership, or other business entity.

(b) The term "Pig Iron" includes all Pig Iron such as Basic, Foundry,
Malleable, Bessemer, Low-Phosphorous, High-Silicon or Silvery, Gray Forge,
Charcoal, etc., commonly produced in blast furnaces.

234
PM 614

(d) The term "Differential" means those provided in Section 1306.56,
Appendix A, otherwise the charges in effect June 24, 1941, prescribing
additions or deductions from the base price to make adjustment for various
analyses of the product sold from the product governed by the base price,

which variations may be in chemical analysis, or other quality of the
product.

(e) The term "Governing Basing Point" means that basing point the

use of which results in the lowest delivered price at the place of delivery;
in the case of exports it may also mean the established basing point at or
nearest the place of production.

1306.51 to 1306.56, inclusive, issued pursuant to the authority contained in Executive Order No. 8734.

6 1306.52. Maximum ("ceiling") prices on sales of Pig Iron. On and

after June 24, 1941, regardless of any commitment theretofore entered

into, no Person who produces Pig Iron shall sell or deliver or offer to
sell or deliver any such product, and no purchaser shall buy or accept
delivery or offer to buy or accept delivery from such Person of any such
product, at a price exceeding the maximum ("ceiling") price: Provided,

That with respect to any sale of Pig Iron for future delivery, a contract
may provide for the payment of an adjusted price not to exceed the paxi-

num ("ceiling") price in effect at the time of shipment.
A lower price than the ceiling price may be charged, demanded, offered,

or paid, The price limitations set forth in this Price Schedule shall not
be evaded by additional charges for prompt or early delivery, or by other

direct or indirect methods, nor shall the other terms and conditions of
sale be made more onerous to the purchasers than those available or in
effect on June 24, 1941.

-3-

PM 614

235

(a) The domestic ceiling price for any grade or kind of Pig
Iron for which there are Basing Point Base Prices shall
be the aggregate of: (1) the Basing Point Base Price
at the Governing Basing Point; (2) Differentials; (3)
transportation charges from the Governing Basing Point
to the place of delivery as customarily computed.

(b) The export ceiling price for any grade or kind of Pig
Iron for which there are Basing Point Base Prices shall
be the aggregate of: (1) the Basing Point Base Price
at the Governing Basing Point; (2) Differentials; (3)
export transportation charges from the Governing Basing Point to the place of delivery as customarily COMputed.

For all special kinds or grades of Pig Iron for which there are no
Differentials, the ceiling prices shall be the Basing Point Base Prices
andthe special differentials which were or would have been charged by the
seller on June 24, 1941, (upon the basis of the prices, discounts, charges,

or special differentials then listed or quoted by the seller) for such
kinds or grades of Pig Iron, exclusive of any premium or charge for advanced delivery or any other inducement offered by the buyer or demanded

by the seller to negotiate the sale.*
8 1306.53. Records. (a) Every Person who produces Pig Iron shall

retain copies of all invoices, dated January 1, 1941, or later, relating
to sales of such products, including sales to exporters, brokers and all
other Persons purchasing for resale. Reports on such sales, in such form
as may be determined, will be required by Supplements issued under this
Price Schedule,

(b) Every Person who produces and sells Pig Iron shall file a copy

of his price schedules, including Differentials, stating the prices, charges
and discounts in effect on June 24, 1941. Such materials shall be filed
with the Office of Price Administration and Civilian Supply, Washington,
D. C., on or before July 10, 1941.

I 1306.54. Supplement. In order to facilitate the application of this
Schedule, Supplements further stating its scope will be issued from time to
time as may be necessary, or appropriate.*

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PM 614

§ 1306.55. Modification. This Price Schedule is issued upon

the basis of presently existing conditions, It is subject to adjustment or revocation if called for by changed conditions, Persons com-

plaining of hardship or inequity in the operation of this Schedule
(whether arising from action taken in reliance on a commitment of sale

at prices in excess of those herein established, or from any other
cause) may apply to the Office of Price Administration and Civilian
Supply for approval of any proposed modification thereof.*
Issued this twenty-fourth day of June, 1941.

LEON HENDERSON

Administrator

CERTIFIED TO BE A TRUE COPY OF THE ORIGINAL:

John E. Hamm, Deputy Administrator