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234
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATE
July 15, 1941
Secretary Morgenthau
John C. Wiley
Three Japanese naval officers attached to the
"Japanese Naval Inspector's Office", New York City,
shipped their household effects to Japan on the TOSAN
MARU last Sunday. (From Commissioner Johnson.)
Mr. Shamhart quoted the following message from
Shanghai:
"Well informed sources state that Japanese
banks have sold over four million U. S. dollars in the past few days and during the next
ten days would sell a further six million dollars."
Also, $2,000,000 were transferred on the books of
the Chase National Bank from the account of the Yokohama
Specie Bank, New York, for credit to the Bank of Brazil.
(Mr. Merle Cochran.)
I discussed these items with Commander McCollum of
ONI who expressed the opinion that it certainly looks as
if the Japs were up to something in the very near future.
COUNCIL OF NATIONAL DEFENSE
COORDINATOR OF COMMERCIAL AND CULTURAL RELATIONS
BETWEEN THE AMERICAN REPUBLICS
DEPARTMENT BUILDING
July 15, 1941
WASHINGTON. D.
Dear Mr. Morgenthau:
Thank you very much for your thoughtful
letter of July eighth. I am delighted to know of
your interest in Madame Tabouis' proposed trip to
South America. This will be helpful to us in working out the project which we have under discussion
with her. She is coming in again this Wednesday,
and I hope that we will be able to let you know
definitely of the arrangements in the near future.
Personal regards and best wishes,
Sincerely,
teles
Nelson A. Rockefeller
Coordinator
The Honorable
The Secretary of the Treasury
Washington, D. C.
235
236
July 15. 1941
Filee
Mr. Deahree
Testerday I had as opportunity to cheek with Mr. Bathringer of the Department
of State when he called at my office, and I learned that, incefar as he was stare,
the State Department had not been is touch with the National City Bank of New York
concerning the subject of the attached nonoranium, famely, that of making payments
to Cabas officials abroad.
At 10:45 this morning I spoke w telephone with Mr. Show, Vice President of
the National City Bank handling foreign business. and summarised to his the State
Department neceranium. Mr. Shaw thought that the difficulties possibly confresting
Cabe had been semewhat comperated to the Gaban Ambresoder. Mr. Shaw stressed the
importance of the business which the National City has in Cabe and of their natural
desire to do everything possible to be of service to the Oubes Government. It was
the opinion of Mr. Shew that the Navesa branch of the National City, which ordinartly
hamiles the business under reference, may have thought some days age that issursentable difficulties would be experienced in obtaining Swiss france. for example,
against dollars. Mr. Shaw reminded me that the Swiss had not been disposed to take
dollars for new business since the recent extension of our freesing orders. There
has been a little relaxing of the Swiss rules the past few days. As to activities
of the National City Bank is foreign countries. Mr. Shaw said that, as we are avare,
the National City was cartailing 100 business is Paris, as well as China, but that
there was,ae decision definitely to withires free these other areas where the
National City is still represented. Ee thought that the Navasa branch could still
sale remittances through various currencies to meet most of the requirements of the
Oslan Government with respect to its officials alread. He volunteered to send a
wire to Navena ever the National City direct wire and give no a report on the
situation.
is 3:30 this afternoon Mr. Shaw called no back. He had received a wire from
the Isvana branch of the National City to the effect that at the end of Jane the
Minister of Finance of Cabe had asked the National City to make payments to the Oubes
Government's personnel is several countries, totaling around $5,000. AS that time
the Swiss National Bank would not accept dollars, se payments to Switsorland were
made through the only acceptable currency, namely, Argentine poses. Otherwise, all
of the June payments to Barepean countries were made through Swiss frames. Mr. Shaw
is not aware as to whether the Outer Ministry of Finance will desire that July paymeats abread be made is the same masser as at the end of June. If the Cubese desire
that the
is dollars and request
arrangements
to thiswith
and free
the
payments
be made
is touch
the
Reveae branch of the National City, the Edvass breach will get
National City in New York which, is turn, would approach the Treasury for the seesesary licenses.
237
eletating the above I have received from Mr. Publie's office - later-
sisse collegrame between the Federal Receive Seak of New Test and the Gentral
-1 effecting
concerning
an
arrangement
would
payments to Augentime
assist of of is urgentine to the officials wherely is the Surge. Federal This Receive precedent Bank
not be of interest
238
--I
Is reply refer to
July 3. 1941
BA
The Secretary of State presente his complimente to
the Menerable the Secretary of the treasury and transmite
a copy of a accordina of a conversation between the
Gubes Ambasentes and officers of the Department of State
on July 2, 1941,regarding payments to Gubes officiale
abread through the National City Beak, together with a
translation of a list of payments needed to be sale monthly.
Inclosures
1. Reservation of conversation,
July 2. 1941.
2. franciation of list of payments.
engine
n
239
OF IREASE
,
T
or CONVERSARION
DASS, July 2. 1941
Payment of Cuban officiale Abroad Through the National
City Bank.
PARRICIPANES:
Dr. Aarolic F. Genehone. Gabas Inbacenter
Mr. Deggan
Mr. Schover
COPIES 201
During a visit to the Department es other matters, Dr. Seashase
stated that he had received instructions from the Oubea Foreign office
to inquire into the possibility of receiving assistance from the
Department with a view to continuing the system at present is effect
of paying Gabea diplomatic, consular, and other representatives abread
through the offices of the National only Bank or their representatives.
It appears that the Oubea Government deposite with the breach is
Nabana each month a - to defrey expenses of this sature shread and
such funds are treamitted to the appropriate breaches or agents in
the field.
It appears from the Gubaa request that they believe that the
National City Bank may be giving - thought to the discontinuase
of the operations is many of the Surepean countries. In addition, is
Germany, where the National City Beak operated through the American
Express Company. - - procedure would have to be accertained is
.1.
240
any event. Would " be possible for MA to investigate this satter
and arrange for each assistance as - be so would
appear that this is . matter for the head office of the National nw
Bask of New York esty. A 11st of payments nooled under this plan me
left by Dr. Genehose and 10 attached. 10 will be noted that is
neveral instances payments are accignated for consulte of other countries
who represent the intereste of Gabe is their designated countries.
-
7/15/41
241
translation of test left at the Department of State
w the Gabes July 2, 1941.
Y
LISE or PAYMENT onzers - ARE I so PAY - ALLOWADORS or - DEPROMANIC AND CORPS IF SEE
FOLLOWING ON:
Caloutic
IN FATOR OF:
Formando Housees
Shibata
fokyo
Censul of Brasil
8 100.00
Logation of Gaba
100.00
Consulate of Sale
146.67
farragens
Namel 0. Jaine
Mairid
Rames Betelella
Mairid
Jose Garballal
Consulate of Oaka
899.87
Santamier
Alberto Almagre
Generate of Onbe
221.40
Bilbee
Deniage Grasia
Mestales
Sensulate of Cabe
199.75
Alicente
Seatiage Seler
General of Delivia
67.50
Vigo
Nareeline Martinos
Censal of Delivia
217.90
Codis
Antonio Servane
of Sabe
1,064.87
Vice Consal of the
Deminical Republic
67.90
Valencia
Reas Rey
Giosulate of Sahe
172.79
01 Jon
Marie Martinos
Consulate of Gabe
195.75
Meter
Jean A. Pasariage
Legation of Gaba
172.79
Meter
Francisco do Area
Segation of Gabe
312.15
Meter
Marte do Area
Legation of Gube
176.40
Mebea
Maine de Here
Consulate of Gabe
195.75
Conce
Vitalic do is Terro
Consulate of Gabe
193.04
Dora
Builte Basses
Legation of Gabe
105.29
Born
Jose do 1a Les Lees
Legation of Gube
418.35
Night nigeores
desoniate of labe
496.12
Hario Labourdette
desculate of date
230.05
-
Source
242
ON
Beneve
Bearts
General
IN FATOR or.
Fierencie Guessa
Seasulate of Onba
8 782.10
lease Notefane
Consulate of Gaba
186.85
Jose A. Losa
Consulate of Date
200.12
Beneva
Lais Formanies Vallis Consulate of Guba
leases
Francisco Garcia
Beneva
Gieneree
40.0
Consulate of Oube
153.90
Podre P. Gartaya
Consulate of Oube
126.25
Season
Jose Duneis
Consulate of Gube
79.27
Season
Just Desland
Consulate of Oube
$41.65
Season
Armando Mentere
Consulate of Guba
765.63
Geneva
Highel Angel Hapiness Consulate of -
229.88
GREETS
Antenie Receil
Consulate of Gabe
113.25
Sesova
Nataban Niguel Barcia
Consulate of Cabe
323.25
Geneva
Onstaro
Consulate of Gabe
159.15
Seasva
Rafeel Mulet
Consulate of Gabe
134.67
Genova
lais Valdoe Reis
Consulate of Cabe
269.88
Sabana, June 30, 1941
LUIS a. MIRANDA
Under Secretary of State
Copying
243
0
DEPARTMENT OF STATE
0
WASHINGTON
P
Y
In reply refer to
EA
July 15, 1941
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and transmits
herewith copies of the paraphrase of telegram no. 630,
dated July 9. 1941, from the American Embassy at Madrid
concerning diversion of Spanish vessels from trade with
$
the United States in view of difficulties in obtaining
licenses for the transfer of Spanish funds.
Enclosure:
Paraphrase of no. 630,
from Madrid,
July 9. 1941.
244
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Madrid
DATE: July 9, 1941, 6 p.m.
NO. : 630.
Orders have been issued by the Spanish Government for
a Spanish vessel to proceed from Gibralter and discharge its
cargo of 18,000 tons of pyrites at a Spanish port. This
cargo was consigned to the United States. This ship, and
others, loaded with cargo or about to be loaded, are to be
used for other purposes. The demurrage charges resulting
from the delays in obtaining licenses to permit the transfer
of Spanish funds arising from exports from Spain or from
gold reserves (such as the case of the steamship Cundado,
now being held at a port in Cuba, which is loaded with sugar
valued at 110,100) have been so heavy that it has not seemed
possible to avoid this action.
On Saturday the Marquis de Comillas was permitted to
proceed on its way to Cuba and the United States. It is
hoped that before its arrival at United States ports the
present difficulties will be overcome.
The same officials of Spain have stated that they fear
that political considerations in the United States rather
than administrative difficulties have caused these delays.
WEDDELL
RR
EA:VCL
Copy:bj:7-15-41
245
BRITISH EMBASSY,
WASHINGTON, D.C.
PERSONAL
AND
SECRET.
Dear Mr. Secretary,
I enclose herein for your
personal and secret information a
copy of the latest report received
from London on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
have Bather
For the Ambassador.
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D. C.
246
Telegram from London dated July 15th.
Naval. O.B.V. Lady Somers torpedoed early a.m.
1.
15th east of the Azores. H.M.A.M.C. "Aurania" damaged
in collision with an iceberg in thick fog is returning
to harbour.
2.
Suez Canal raided by aircraft night of July 13th/
July 14th. Sections remain closed. At Suez transport
Georgic 27,759 tone hit beached and burnt out.
3.
American naval forces arrived in Iceland (c) a
week ago.
4.
During week ending July 9th 779 ships convoyed
including 117 allied and 9 neutral. Imports into Great
Britain in convoy during week ending July 5th to talled
652,597 tons.
5.
Our shipping losses during last week much lighter
than in any week since April, 1940.
Our merchant losses during June about 170,000 tons
6.
less than in May although total for June may yet increase.
Tonnage sunk by German aircraft has progressively decreased
since February. Losses in May and June approximately half
those of February and March.
syria. Convention for cessation of
Military.
hostilities signed 17.00 July 14th.
7.
8.
Ruesia. Main German drives towards Leningrad,
Moscow, (via Smolensk) Kiev all making progress. Russian
air force giving considerable trouble to advancing German
formations.
9.
Royal Air Force. Night of July 14th/15th 200
aircraft despatched Bremen Hanover (main station) Hanover
(rubber factory) Rotterdam. 7 aircraft missing 4 high
explosives of 4,000 pounds each dropped on Hanover main
station/
247
-2-
station.
10.
Night of July 12th/July 13th 15 Wellingtons
successfully bombed three aerodromes Rhodes.
During daylight July 14th 29 Blenheims, two missing
attacked shipping Le Havre, Cherbourg, Hasebrouch railway
centre and shipping off Texal. Two merchant shipe
totalling 9,000 tons and an escort vessel 1,500 tons in
convoy off Ymuiden claimed total losses. Also hite made
11.
on two shipe totalling 8,000 tone and on port installations
at Le Havre and Cherbourg. Our fighters provided escort
over France destroyed 7 M.E. 109's damaged 4. Four
spitfires lost. Blenheime destroyed 1 M.E. 109.
248
BRITISH EMBASSY,
WASHINGTON.
PERSONAL AND
July 15th, 1941
SECRET
Dear Mr. Secretary,
I enclose herein for your
personal and secret information a copy
of the latest report received from London
on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
(For the Ambassador)
York Both
The Honourable,
Henry Morgenthau, Jr.,
nited States Treasury,
Washington, D.C.
TELEGRAM RECEIVED FROM LONDON
DATED JULY 14th, 1941
249
NAVAL,
In the Bay of Biscay July 7th, 8th
and 9th British submarine sank by gunfire two
Tunny fishing vessels, one steam trawler. Crows
transferred to other ships.
S.
British 5,000 ton ship hit by two
bombs north of Gromer night of July 12th, July
13th in convey, but arrived safely in harbour.
3.
ROYAL AIR FORCE. July 13th.
Blenheims from Malta attacked convey
outside Tripoli (L) : One ship believed tanker
7,000 tons and 1,500 ton merchant vessel set on
fire and a three masted schooner blow up.
4.
Night of July 13th/14th. 69 aircraft
attacked Bremen Vege sack shipyards. One aircraft
missing.
5.
Early July 14th twelve Blenheims with
fighter escort despatched to attack Havre and
Cherbourg.
6.
Military. Egypt. July 12th, Tobruk;
our patrols inflicted casualties and took some
Italian prisoners.
Syria. News of final signature of Armistice
terms still awaited.
7.
8.
Rugsia. Beltic states. Germans appear to
be making main effort north east from Pakov.
Ukrane. Enemy armoured troops have made
progress towards Kiev.
Bessarabia, Russians withdrawing slowly.
250
RESTRICTED
0-2/2657-220
No. 441
M.I.D., W.D.
12:00 M., July 15, 1941.
SITUATION REPORT
I.
GERMAN-RUSSIAN FIGHT.
Ground: German mechanized units reached on July 13th the
line: Luga-Ilmen Lake, some sixty miles southwest of Leningrad. The
Finnish army, reinforced by the 163rd German Division, the whole force
under Field Marshal Mannerheim, launched, on July 14th, a large-scale
attack on both sides of Lake Ladoga. A German column advancing northward through Estonia from Tartu has reached the Gulf of Finland to the
west of Narva. In consequence a considerable Russian force is isolated
in the vicinity of Tallin. Narva may still be in Russian hands.
German columns are advancing from Vitebak and Orsha
on Smolensk, Behind the front line, to the southwest of Vitebak, a
considerable Russian force has been encircled as a result of these
German advances. Rogachev, on the Dnieper to the south of Orsha, is
held by the Russians, having been retaken by counterattack on July 14.
South of the Marshes, German troops are close to
Kiev, but in this area the Russians have launched a series of counterattacks.
A German-Roumanian combat group has captured Gara-
Bucovat in Bessarabia, some twenty miles west of Chisinau.
Air: German strategic bombing of the Leningrad-Moscow
railway continues.
II. BRITISH-GERMAN FIGHT.
Air: German. Light activity.
British. Normal day and night operations. Night
attacks were heavier than usual and centered on Hanover and Bremen.
III.
MEDITERRANEAN FIGHT.
Ground: No change.
Air: Axis raid on Tobruk.
British raid on Messina, Sicily.
RESTRICTED
SECRET 251
- or Date
Received
as the M/-
By authority A. C. of S. G-2
Date
JUL17
1941
Day,
Initials
as Bobb, July 19, MA.
Gaire, filed nike, July 23, 19th.
the - diffections to the / - for - Mass
(1) Thirty and safe eather Instructions - - planting bullets
are felt to be - Indifications to - of the Tember - being
sade as that British .305 - - be Installed - continate British
ammition of this - - be made
(2) A anothed for - - the - - from the is destrobic. In a few - the - have Salled to - as - -
the results have been - of the / of - clear
layer in this climate, - is registed - marky every election.
(3) the British sight checkers - - - Interfure
with vision. The breating is / in - of a whole - leasting or
- one. n is - that a antification or - Indication be
- to the better potato of the U.S. signs.
(b) Same another has to be elected to - stare from the
propellers - the - is as the pilot's back. the store is - to the
paint - the book of the propeller Media being - off w - Also
the - glass should be eliminated If sight operations are to be
- with this plano.
(5) If the - were entirely in the wants, and affiliation
would be relevent. Grade - covere - used but they - not effective as they most be reasoned before the engine is started.
SECRET
IMPORNATION COPT
SECRET
252
(6) - was reported - five during combat - to the
fuel and all Lines - the better of the facelage being valuebable.
(7) During lee figing operations the asics of the englase propellers are . determine to the element of surgrise.
(8) IS is believed w fighter pilote this 18 is concential that
there be - form of matfold pressure or boost central which be out eat.
Markins being used w South African - - liked very They are claimed to be as that as the No-199 as - level. The min /
tion is that the beak Leads are offee I - to and e the release salemoids to stick. Is to copested that the high ring wear is the
realis of commite welfold presentes being word. the beating - to
operating - - that - cash profitiges the look pts
is est straight and Pilate' FOR vise stature have been tentalies
is all Markins and are - holyful is emiding - Pilote have
used fifty-fine taches of watfold - for short partate. A - to
-
- Insured esteas gooding is to to - this - although studies extens
is - in Distributions
Secretary of w
State Department
Assistant Shief of Staff, as
Yes Please Division
office of Real Intelligence
a. a. c
Order of the Anney Air Forces
Bater
of
Secretary of Treasury
Air Garge
SECRET
253
CONFIDENTIAL
of Gate
Received as the Year Department
as 10:36, July 19, 1941.
Losion, filed 17:00, July 19, 1941.
1.
Brasses Air Assistant - the -
2. State of date 13-14. The previously reported number of
bombore dispatched to Bronse dropped as tens of high emplosive boube and
21 incontinay bombe. Because of unformation weather, meet of those streners
attached community objectives.
b. the of date 14. Blockets because were dispotated as follows:
6 against shipping as La Barre, 6 against the Charbeurg deeks, 11 against
shipping off Tenal, and 6 against the reiling easter at in
the Tesal reid Shares ships totalling 10,000 tens were seak. the bed centities
of the weather provembed definite information regarding the results of the
other operations. A total of 668 fighters were sent out as follows: she
on offensive patrels, - in defease of shipping, 73 - special patrole,
and 144 on interesption patrels.
2.
Bight of dais 14-15. Stirling because were dispotabol as
follows: 8 to Betterism, 6 to Measurer, , on - stating in the Bibe, and ,
on see sining off the Frietes Islands. 97 because were sent to Brease and
85 to attack the rubber factory and main reilway statics as the
majority of these beebare were compalled to attack community targete because
of bad weather in all areas.
2. Serves Air Activity - Britate.
a. Tax of July 13. 15 - atreast and 10 long reage
bombers were need against Register 100 fighters mistained defensive patrels.
CONFIDENTIAL
INFORMATION
255
July 16, 1941
9:30 a.m.
GROUP MEETING
Present:
Mr. Cochran
Mr. Sullivan
Mr. Blough
Mr. Viner
Mr. Gaston
Mr. Kuhn
Mr. Schwarz
Mr. Thompson
Mr. Graves
Mr. Bell
Mr. Foley
Mr. Haas
H.M.Jr:
I thought we could do this thing on the phone.
Do you know him?
Gaston:
Yes.
H.M.Jr:
That is why I sent it to you. Just say you
have got this and it will be all right to send
it over.
Gaston:
All right, I will do that.
H.M.Jr:
I thought you knew him.
Gaston:
I do.
H.M.Jr:
I wouldn't do it if it is commercial.
256
-2Gaston:
No, of course not.
H.M.Jr:
You can - as long as it is the University of
Cornell, I don't hesitate to ask for it, but
you might point that out.
Gaston:
Yes.
H.M.Jr:
Norman?
Thompson:
I have had a number of inquiries in recent
months about the Gallatin statue. We have had
the base up for a year. I have been pressing
the sculptor on it, and I have had his advice
that he will notify us very soon of the date
for the final inspection.
H.M.Jr:
I will let you worry about that.
Gaston:
You don't object if I get Ned Bruce to make a
statue of Gallatin about a foot high and put
it up on top of that pedestal, do you?
H.M.Jr:
I don't care. We will make that Thompson's
exclusive worry.
Thompson:
He has been very tempermental and stubborn
H.M.Jr:
What else have you got that is important?
Bell:
Some people are in favor of putting back the
about getting it out.
fountain.
(Secretary handed glass bank to Viner.)
Viner:
Haas:
Who says it doesn't pay to work for the Treasury?
You have more trouble than I do.
H.M.Jr:
What else?
257
-3Thompson:
I have nothing else.
H.M.Jr:
Daniel?
Bell:
A little over a billion dollar's worth of
obligations were incurred under Lend-Lease
in half
the last
two weeks of June, making two and
a
billion.
H.M.Jr:
How much has gone out?
Bell:
About twenty-six million in cash up to that
time. About ten million on our daily state-
ment has gone out since June 30.
H.M.Jr:
I saw that there is some delay in the LendLease
left. going up, and I also see that Hopkins
Bell:
I say that too.
H.M.Jr:
I imagine he is on the same ship that Coe is.
Coe left yesterday?
Bell:
Yes.
H.M.Jr:
Anything else? Are you coming along nicely
with your savings certificates stuff?
Bell:
Yes, we are. We will be ready next week.
H.M.Jr:
Good.
Bell:
We have had a conference with the representatives of the Federal Reserve Board and
Henderson's office on that control of consumer credit. I don't know whether you
would like to have us tell you about it sometime today or tomorrow.
H.M.Jr:
When are you ready?
258
-4Bell:
We are ready now. We don't know just how you
want to do it, whether you want to have a
conference with Eccles and Henderson or--
H.M.Jr:
Let's run around the room and we will see
where we are at. Shall we?
Bell:
O.K. It will take a little time.
H.M.Jr:
Pardon?
Bell:
It
will it.
take a little time for us to tell you
about
H.M.Jr:
Bell:
Will it?
Yes. Ten or fifteen minutes, I would say,
wouldn't you?
Viner:
I think the only real issue is how the
Treasury feels as to the location of the policy
power and the administration.
H.M.Jr:
I am available at three-fifteen.
Bell:
All right.
Viner:
I don't think on the question of whether they
should have it or not there is any real ques-
tion.
H.M.Jr:
I am available at three-fifteen.
Bell:
I don't know whether Harry is.
Viner:
Harry isn't well. I just heard he was sick.
If Harry isn't here, then, we ought to call
the British thing off, I should think. I
Bell:
don't know what he has done with it. He
said something yesterday about having a con-
ference with the British at three.
259
-5Viner:
Maybe he passed them down until later.
Bell:
This is at three-fifteen. We will call the
other off. I don't know. Three-fifteen is
all right for this.
Bell:
All right?
That is all.
H.M.Jr:
Chick?
Schwarz:
The Army has sent you a very nice looking
book on plants, defense plants, and their own
H.M.Jr:
camps. I think you would like to look through
it. Mr. Stimson might mention it.
H.M.Jr:
All right.
How are you getting along with getting the
President to broadcast?
Schwarz:
Steve says that he has taken it up with the
President, and he will let us know as soon as
there is a decision.
H.M.Jr:
I see. When are we going to announce this
Tuesday broadcast, Kuhn?
H.M.Jr:
I think it should go out today.
Yes. Can I see it in advance?
Kuhn:
The release?
H.M.Jr:
Yes.
Kuhn:
Yes, sir.
H.M.Jr:
Before it is mimeographed.
Kuhn:
I sent it over last night and assumed it
Kuhn:
260
-6-
would go out last night, but it didn't
seem to go. I will find out about it.
H.M.Jr:
Will you?
Kuhn:
Yes.
H.M.Jr:
Graves is arranging for a meeting of the staff
at ten-thirty. You could tell me about it
then.
Kuhn:
Good.
H.M.Jr:
Anything else, Chick?
Schwarz:
That is all.
H.M.Jr:
George?
Haas:
I have some of these reports. I do recall
that you asked for that sometime ago. I am
sorry to have to show you a carbon. Here is
the E Bond, total of banks and post offices.
They are up thirty-seven percent, July over
June.
H.M.Jr:
Say it out loud so everybody can hear it.
Haas:
The E Bond sales from July 1 to July 14 are
up seventeen percent as compared to the com-
parable period in June. The F Series are
down thirty-three percent, and the G Series
down twenty-nine and six-tenths percent.
H.M.Jr:
Haas:
And the net?
The net of the three series, they are down
eleven and four-tenths percent. The banks are
doing relatively better.
H.M.Jr:
The banks are up on the E forty-two percent
261
-7and the post offices on the E are up twenty-
nine, is that right?
Haas:
H.M.Jr:
Haas:
H.M.Jr:
Yes, sir.
So
we sold sixty-five million as against fortyseven?
That is right.
Look up, George, whether that was the first
few days when the people took it out of the
savings banks after July 1. Do you see what
I mean? They might have done it in the first
couple of days.
Haas:
Here it is.
H.M.Jr:
Where is the E? It is keeping up.
Haas:
You get irregularities, but it is keeping up.
Here is the last. It was seventy-seven.
H.M.Jr:
I think it is very good, don't you?
Bell:
Yes.
H.M.Jr:
That is the one we want to sell, isn't it?
Haas:
That is right, that is the important one.
H.M.Jr:
And the banks are doing - do you get this every
day?
Haas:
We have a - one every day, yes, sir. Do you
want to see it each day?
H.M.Jr:
Yes. And then you make a summary--
Haas:
We make a summary like that so you can get the
comparison.
262
-8H.M.Jr:
Each day?
Haas:
Yes.
H.M.Jr:
Haas:
H.M.Jr:
Well,
when
see me,
I would
likeyou
to see
it. until further notice,
I will be glad to.
And
then I will give it back to you. I would
like to see that.
Anything else?
Haas:
That is all on that.
H.M.Jr:
Viner?
I don't know whether I had a chance to thank
you for the extra splendid work on Monday and
Tuesday. I don't know whether it will bear
any fruit. If Mr. Roosevelt won't use it, I
will later on. Those of you - I don't know
if I have told some. We went over there and
Mr. Doughton was very, very much upset, who
was running it, me or the President, and he
took it very badly, so then the President he asked the President what he wanted to do
or was the President going to tell him what
to do, and the President said, "No," he
wouldn't tell him anything, so he left it
up in the air, and then Doughton tried to get
me to tell him what to do, and I said I
wouldn't, so we left it that he was to report
to his committee as a whole, the conversation
between the President and himself, but the
conversation was solely on excess profits.
The President never used the word infla-
Gaston:
tion" or "prices" once during the conference.
He used that material about inflation in his
press conference.
263
-8H.M.Jr:
I guess so.
Schwarz:
Yes, he did.
H.M.Jr:
Well, you see Henderson followed me and
Henderson said he got what he wanted.
Bell:
Apparently.
(Mr. Graves entered the conference.)
H.M.Jr:
I just thought I would tell you. I thought
the President was going to send a message.
Instead of that, I don't think he is going to
do anything. But from my standpoint, those
two days were well worth doing, because it
certainly cleared my thinking, and I have
got a magnificent document that I can use any
time I want to.
Kuhn:
Mr. Secretary, I have more copies of that
document. What should be done with them,
destroy them or send them over to you?
H.M.Jr:
Send half a dozen in to Miss Chauncey and
destroy the rest.
Kuhn:
Right.
H.M.Jr:
Unless somebody like Dr. Viner wants a copy.
Kuhn:
I wonder about the people who worked on it.
H.M.Jr:
Give a copy to each person who worked on it.
Kuhn:
Including Henderson?
H.M.Jr:
They all went out.
Sullivan:
Did you send one to Wallace?
H.M.Jr:
Yes. I sent one to the Vice President.
264
-9Roy?
Blough:
William Green of the American Federation of
Labor is reported to have recommended a
compulsory savings plan for defense workers
to be returned after the war, after the
defense period. So far as I know, that is
the first time any prominent labor leader
has indicated a willingness to have any type
of compulsory saving. It is purely a matter
of interest for now, but it might turn into
something later.
H.M.Jr:
Did you want to say something, Jake?
Viner:
No.
Kuhn:
I have nothing except that I spoke to Olin
Downes yesterday in accordance with your suggestion to see whether he would be an adviser
in case of need on musical things. He would
be delighted. Any time we want to ask what
numbers ought to be played on a particular
program, he will be available to make suggestions.
H.M.Jr:
Well, what is he doing?
Kuhn:
Doing for us?
H.M.Jr:
What is he doing now?
Kuhn:
He is music critic up at the Times, but he
is always available to sit down with one of
our people and look over projected programs
and say, "Well, this is no good. I think you
ought to have a different song.
H.M.Jr:
Will he please look at Sunday's program?
Kuhn:
Next Sunday?
265
- 10 H.M.Jr:
This coming Sunday. Will he do that?
Kuhn:
Yes.
H.M.Jr:
Herbert, you were grand on the radio Sunday.
Gaston:
Thank you.
H.M.Jr:
There were only two things on the program
I thought were any good, and that was you and
I meant to tell you. Your voice came over
beautifully.
this English actor who took off Churchill.
Gaston:
Yes, Claude Rains. It was too heavy talk.
H.M.Jr:
It was terrific. You cameover beautifully.
I never had heard you on the radio before.
Gaston:
Hadn't you?
H.M.Jr:
No. It was beautiful. I had a couple of
fellows in the room there trying to sell me
some apple boxes. They got so excited - they
thought it was Churchill. They thought he
was wonderful.
Gaston:
Through one key word you could tell it wasn't
Churchill. Rains says "Nat-zi" and Churchill
says "Nazi".
H.M.Jr:
It was very good.
Will you let him take a look at that program.
Kuhn:
Yes. I was thinking particularly of coming
orchestral ones with NBC.
H.M.Jr:
Yes, but let him look at this. And if you
could tell him how to use the Federal Reserve
wire, he could call you any time.
266
- 11 Kuhn:
Yes.
Bell:
Is the program down at the glass house broad-
Kuhn:
No.
Bell:
It is not?
Kuhn:
No.
Bell:
There is a pretty good program down there
tonight.
Graves:
The program from there last night was broad-
Kuhn:
cast?
cast. I heard it.
Tonight it is in competitition with the other
broadcast.
H.M.Jr:
Anything else?
Kuhn:
No.
H.M.Jr:
I didn't know that you had decided that we
were going to go ahead with Olin Downes, or did you?
Kuhn:
It is very informal. We don't have to use
him, or we can use him a lot.
H.M.Jr:
I am delighted.
Do you think you could get him to listen to
tonight's program or even maybe go or maybe
listen and have his criticism on tonight s?
Why don't you phone him and ask him to give
us his criticisms from the music standpoint
on tonight's program?
Kuhn:
folk He a
He said to me yesterday that he is not much
good on songs.
doesn't
he can
great be
number
of them,
butthat
heknow
thinks
helpful to us on instrumental stuff of all kinds.
- 12 H.M.Jr:
Let's get his criticism of tonight's program.
Kuhn:
All right, sir.
H.M.Jr:
Cochran:
I got your stuff, and don't give me an exami-
nation in it, please.
All right.
Coyne was in yesterday-H.M.Jr:
Stay a minute behind, will you? I have got
Cochran:
all of your stuff here. You can tell me.
I can tell you in one minute.
H.M.Jr:
Will you? It is right here. Please. You
gave me too much home work.
Cochran:
All right.
Sullivan:
Capital stock returns are due on July 31 and
nobody is going to know how to make a return
until after they know what is going to happen
to excess profits, and the Commissioner and I
have discussed it. Everybody seems to feel
that we will have to give everybody a sixtyday extension. That is not on excess profits,
that is on capital stock taxes.
Bell:
All right.
That is quite heavy, isn't it?
Sullivan:
I beg pardon.
Bell:
That is quite a sizeable sum of money.
Sullivan:
Yes, it is.
Bell:
That is a nice job on our monthly estimates.
H.M.Jr:
Well, I hate to do it. Do you think you have
got to do it?
Sullivan:
Yes, sir, I do. It is going to be impossible
H.M.Jr:
for anybody to estimate.
H.M.Jr:
All right.
Sullivan:
Apparently the Speaker is doing quite a bit
of lobbying against compulsory joint returns.
267
268
- 13 -
H.M.Jr:
Sullivan:
H.M.Jr:
It is out in the paper. It was on the ticker
yesterday.
I didn't see it.
He and Wendell Willkie. Oh, Willkie, last
week he was violent on it. He came down
here about seeing England and then out of a
perfectly clear sky he let off a broadside
on joint returns.
Sullivan:
Did you want me to do some --
H.M.Jr:
The next day Arthur Krock gave him a nice
line. Have you seen Arthur Krock on joint
returns?
Kuhn:
Yes.
H.M.Jr:
He practically names his salary and his wife's
and he said it gets down to a question, is it
worth being married.
Foley:
I talked to him about it yesterday.
H.M.Jr:
Did you see his stuff?
Kuhn:
I saw it last week and I laughed about it.
H.M.Jr:
But the week before was even funnier.
Schwarz:
The Washington Post had the best answer to
Kuhn:
him in their editorials.
I think Bishop Manning was pretty funny
yesterday, talking about America always
having been enlightened on - America always
having been enlightened on the subject of
marriage and now we are going back into
barbarism. England, which Bishop Manning
adores, has had joint returns for years
269
- 14 -
and it hasn't upset the sanctity of the
English home.
Foley:
Monsignor Ready said he didn't know much
about it but from the character of the
attachs on it, he was inclined to be in favor
of it.
Sullivan:
It is all on expensive stationery.
H.M.Jr:
Maybe he would like to answer Bishop Manning.
Gaston:
He is getting me wavering.
Sullivan:
Do you want me to go to work on the suggestion
you made yesterday so we can be ready if
it looks like a compromise?
H.M.Jr:
Yes. You might tell the crowd and give them
twenty-four hours notice.
Foley:
That Bishop in Delaware wasn't a Catholic
Sullivan:
No, Episcopal. I called up to find out.
Foley:
He told me you called to find out if that was
Sullivan:
No, I didn't know.
H.M.Jr:
All right, Episcopal, O.K. (Laughter)
Foley:
The DuPont Bishop.
Gaston:
There are Methodist Bishops, too, you know.
H.M.Jr:
Give the crowd twenty-four hours notice on
this suggestion.
Sullivan:
The suggestion is that on joint returns
that shall relate only to unearned income,
Bishop at all.
a Catholic Bishop.
270
- 15 -
and that earned income shall be exempt
from the joint feature and shall be taxable
on individual rates, as though the person
earning that salary had no mate.
Gaston:
With the regular limitations, income tax
limitations on earned income, anything
up to three thousand and not more than
fourteen?
Sullivan:
That is right.
H.M.Jr:
Whatever the regular rates would be, they
would apply to earned income.
Sullivan:
What Herb is talking about now is how large
a salary will be deemed to be earned income.
Gaston:
Under the present law, anything up to three
thousand dollars is assumed to be earned
and - but you can't take credit for more than
fourteen thousand dollars of earned income.
If your salary is beyond fourteen thousand,
only fourteen thousand is assumed to be
earned.
H.M.Jr:
I didn't know that.
Sullivan:
That is one of many angles we want to work
out.
H.M.Jr:
When it is above fourteen?
Sullivan:
The Government says nobody is worth more
H.M.Jr:
What happens when you are over fourteen?
Gaston:
The balance is unearned income for tax
treatment.
than fourteen thousand dollars a year.
271
- 16 -
H.M.Jr:
It would be a nifty. Congress would like
that. Go to work on it and let the boys
come back at you. I will tell you, why
don't you present it tomorrow at the
nine-thirty group?
Sullivan:
I would be very, very happy to.
H.M.Jr:
I didn't know about the three to fourteen.
What happens - I mean, to the thousand
dollars salary?
Sullivan:
The Government says you are only worth four-
H.M.Jr:
What happens to my fifteenth thousand?
Sullivan:
You don't get any credit.
Gaston:
You get earned income credit on fourteen
thousand, but not the extra thousand.
Blough:
You are allowed to deduct from your income
H.M.Jr:
I see. Well, I didn't know that.
Well, there are a lot of different angles.
Sullivan:
H.M.Jr:
teen.
ten per cent of fourteen thousand dollars
or one thousand four hundred dollars.
Well, go to work on it. I think that would
be very interesting. You would like that,
wouldn't you, Ed?
Foley:
It would take care of me all right.
(Laughter)
H.M.Jr:
George, would you still foam at the mouth
or do you think the sanctity of the home
would be a little safer under that revision?
Haas:
No, that takes care of the social aspect.
(Laughter)
272
- 17 -
H.M.Jr:
Do you think that would be a little bit better?
Gaston:
It is a lot better than the straight -I think it would be well to sit very tight
Sullivan:
I think we have got something there.
on it and see what happens. It might be
a solution of a problem when things get really
tough.
H.M.Jr:
I think we have got something and I am in
the pretty position that I haven't expressed
myself. I didn't know about the three to
fourteen. I like that. That takes care
of some of the people I read about who get
from three hundred to five hundred thousand.
Gaston:
Well, it also takes care of the poor widow
and so on who is getting - maybe getting
two pensions or earnings from a small capital.
H.M.Jr:
How is a widow in a joint return? (Laughter)
Gaston:
I have talked about --
H.M.Jr:
She and God?
Gaston:
Yes. They always use the widow when they talk
about the small income on bonds and so on.
(Laughter)
H.M.Jr:
You know, this thing really - everybody gets
excited about it, even Herbert. All right,
Herbert, I think we have got something on
that.
Sullivan:
I do too.
H.M.Jr:
I think Herbert's thing about the three to
fourteen which I didn't know about makes
it a natural.
273
- 18 Gaston:
Yes.
H.M.Jr:
I think we can get that through and that would
take care of these property - what do you
call them, estates? It would be awfully
hard
argue against the plan we are talking
about to
now.
Sullivan:
Yes.
H.M.Jr:
It would be awfully hard.
Sullivan:
True.
H.M.Jr:
I like that. What other good ideas have you
got?
Sullivan:
Do you think I dreamed that one?
H.M.Jr:
No. I take credit for that. Ed?
Foley:
We have got a --
H.M.Jr:
Oh, what Foley did to Mr. Shea of Justice
yesterday was something. I knew something
was wrong. It really was funny. At this
meeting up at the Vice President's yesterday,
they had Welles and Acheson and Wickard
and the two barons from Houston, Texas,
"Baron" Jones and "Baron" Clayton. (Laughter)
And whenever Jesse doesn't get what he wants,
the two corners of his mouth go down absolutely
like this. I didn't know what was the matter
with the suggestion, but there was something
wrong because Jesse's was way down. You have
seen him when he gets that way. All we did
was, I got this fellow (Foley) out of bed
at seven-thirty and at nine o' clock in the
morning our draft for an executive order
was on Wallace's desk, and that was the
one to the Budget. The only person who had
a good time was me. I had a wonderful time.
I paid my respects to the Budget and every-
body else. As a result of the thing, we
274
- 19 kicked the Army and Navy off, I did.
Ed kicked Justice off. The only reason
we stayed on was because we were there.
They are coming back Thursday with a report.
It really was funny. My recommendation was,
Wallace is to be Chairman and let's get
started.
Gaston:
You are going to have a Board of --
H.M.Jr:
About four.
Foley:
Five.
H.M.Jr:
State, Treasury, Jones, Agriculture.
Foley:
And Wallace, five. He is Chairman.
H.M.Jr:
That is right.
Gaston:
You are to decide policies --
H.M.Jr:
They didn't want --
Foley:
I think we will have to put Justice back on.
H.M.Jr:
Do you?
Foley:
Yes.
H.M.Jr:
Have you heard about it?
Foley:
Dean spoke to me in the office last night.
He asked me how you felt about it. I said both
of us thought that they probably were supposed
to be on.
H.M.Jr:
I think Justice should be on, definitely.
I never carry my feuds beyond sticking a
knife in a fellow.
Foley:
Well, you fellows got kidding me so there
wasn't anything I could say.
275
- 20 -
H.M.Jr:
I said, "Let's get started and then they can
worry about General Maxwell and the other
business later."
Gaston:
And leave Army and Navy off?
H.M.Jr:
Yes. All right, Herbert?
Gaston:
Oh, yes.
H.M.Jr:
Coast Guard is represented.
Gaston:
Yes.
H.M.Jr:
Foley?
Foley:
I have here the proposed proclamation for
the President to sign pursuant to which a
list of Latin American firms will be considered as blocked nationals under the freezing
control order and also for purposes of export
control it will be necessary for any export
to any one of the firms listed to be licensed.
The order says the Secretary of State, acting
in conjunction with the Secretary of Treasury,
the Attorney General, the Secretary of Commerce, Administrator of Export Control, and
the Coordinator of Commercial and Cultural
Ralations between the American Republics
shall from time to time cause the list to be
published. The President signs the proclama-
tion and this is the initialed copy. Everybody has initialed it. It will be sent over
by Justice today to the White House.
H.M.Jr:
Who gets out the release, the President?
Foley:
It will probably be the State Department.
This is the thing that Welles was going
to state to the Inter-American Financial
and Economic Committee. It is a statement.
276
- 21 I am sending back the original proposals
that we got from Wallace yesterday. We
were working on the order last night. I
had photostats made and sent them around
to Welles and Jones and Wickard. Here is
a proposed tax convention between ourselves
and Great Britain to take care of the taxing
of British property by the States.
H.M.Jr:
All right with you?
Sullivan:
Sure.
Foley:
Everybody has initialed it. I want you to
H.M.Jr:
They can't sue me while I am Secretary of
the Treasury, but God knows what they will
do to me once I am a civilian back on the farm.
Foley:
sign a letter to the State Department.
Well, this will save the British ten to thirty
million dollars, this convention, if the State
Department will go through with it.
Sullivan:
And by the same token, under some circumstances it might save us something.
H.M.Jr:
Give me a little memorandum for my meeting
with the British Treasury Friday on that.
Foley:
Yes. Here, you can have this.
H.M.Jr:
No, I won't remember it. Have it when the
British come Friday.
Bell:
Haven't the British discussed that with the
State Department?
Foley:
They never asked for it, Dan. They took
it up with Halifax a couple of times and
Halifax thought that he was asking too much
of this Government, and for him to ask for
tax immunity was going a little bit too far,
277
- 22 but they would - it is something they would
like very much and we are raising it now
because we are interested in preserving
their dollars and there isn't any reason
at all why they should have to pay a tax
on personal property that they buy that is
moved from one State to another. They buy
an engine in New York and pay a tax there
and send it out to Lockheed to have it
assembled and they have to pay a tax on
the ad valorem value to the State of Califor-
nia. It isn't right. Every time they have
to move the thing around they have to pay
another tax.
Bell:
They question as to whether they want to
bring suit out in California for some
of those taxes. They had it in one of our
meetings. I told them we didn't want to
pass on that, that was a question for them
to pass on, but I thought they ought to
think of the public psychology of suing
for taxes when we were giving them so much
under Lend-Lease.
Foley:
Up at Cabinet last Friday it was decided,
as I understand it, that we wouldn't par-
ticipate in the suit, but we suggested in
lieu of that this tax convention which will
take care of it and it will be binding
on the States. It is a very simple thing
to draft. We can do it in an hour if the
State Department approves, and I don't think
we have to have Senate approval on it
because I think you have to have Executive
agreement.
H.M.Jr:
Who told you it came up Friday in Cabinet?
Foley:
Over in Justice they told me.
H.M.Jr:
Good. I forgot to tell you about it.
Everything O.K.?
278
- 23 Foley:
O.K.
H.M.Jr:
You will be ready Thursday?
Foley:
Thursday.
Gaston:
You may have noticed on the ticker this
morning the story about the protest by the
Japanese for delaying certain ships. Two
ships we delayed because the War Department,
Military Intelligence, had a report that
there were some explosives attached to them
or in them, and they were to go through
the Panama Canal. We searched them inside
and out and had divers examine the hulls
and delayed them a day. The State Depart-
ment knows about it.
H.M.Jr:
O.K.
Gaston:
We had another meeting over in Justice
yesterday on this question of suppression
of the German films that are in this country
now. We told State - Mr. Fiedler attended
the meeting and on my advice he told State
that we didn't want to use the fund freezing
device to suppress films, but Townsend
supported this by saying that he didn't
think it could be used for that purpose, so
I think State was a good deal vexed, but -
Savage was, but they planned to ask the President what to do about it. Townsend's
advice was that it would require legislation.
H.M.Jr:
Oh, no.
Gaston:
To suppress them. There is a bunch of phonograph records down here, German propaganda
phonograph records, addressed to the German
Consulate. Of course, they can't be delivered
but it is possible you might be interested
in listening to them. They are rather funny.
279
- 24 -
H.M.Jr:
No, thank you.
Gaston:
Right.
H.M.Jr:
How about that memo I gave you?
Gaston:
The memo that you - on the --
H.M.Jr:
On J. Edgar.
Gaston:
The one you gave me wasn't on J. Edgar.
Perhaps you gave me the wrong one. This is
about a -H.M.Jr:
Gaston:
I am sorry.
organizing a group of economists.
H.M.Jr:
I gave you the wrong one.
Gaston:
No, not yet. I found that the original story
of what happened wasn't quite correct, and I
have asked the man to give me a memorandum
of it - exactly what did happen, and I haven't
got that yet.
Gaston:
All right. All right, Herbert?
That is all.
H.M.Jr:
Thank you.
H.M.Jr:
7-16'+1
TO:
.
miss Churchy 280
D
this is copy from
document which the
at
930 Security Metrony initialed today
according a instructions
the initialed copy was
sent via messurger
immediately after l
730 meeting & as som -
could have copies
made
mcguire
mode
for need MR. more FOLEY copie
Sent to Dean Eches 7/16/41
by messenger
at 1020 an no
letter of
AUTHORIZING A PROCLAIMED LIST OF CERTAIN BLOCKED
NATIONALS AND CONTROLLING CERTAIN EXPORTS
travemetted
BY THE PRESIDENT OF THE UNITED STATES OF AMERICA
A PROCLANATION
1, PRANKLIN D. ROOSEVELT, President of the
United States of America, acting under and by virtue
of the authority vested in me by Section 5(b) of the
Act of October 6, 1917 (40 Stat. 415) as amended and
Section 6 of the Ast of July 2, 1940 (54 Stat. 714)
as amended and by virtue of all other authority
vested in mo, and by virtue of the existence of a
period of unlimited national emergency and finding
that this Presidenation is necessary is the interest
of national defense, do hereby order and preclais
the following:
Section 1. the Secretary of State, acting in
conjunction with the Secretary of the Treasury, the
Atterney General, the Secretary of Commerce, the
Administrator of Expert Control, and the Coordinator
of Commercial and Cultural Relations Between the
American Republics, shall from time to time cause
to be prepared an appropriate list of
(a) certain persons deemed to be, or to
have been acting or purporting to act, directly
or indirectly, for the benefit of, or under the
direction of, or under the juriodiction of, or
282
on behalf of, or in collaboration with Germany
or Italy or a national thereef; and
(b) certain persons to whom, OF on whose
behalf, or for whose account, the exportation
directly or indirectly of any article or
material exported from the United States, is
deemed to be detrimental to the interest of
national defense.
In similar manner and is the interest of national
defense, additions to and deletions from such list
shall be made from time to time. Such list and any
additions thereto or deletions therefrom shall be
filed pursuant to the provisions of the Federal
Register Act and such list shall be known as "The
Proclaimed List of Certain Blocked Nationals".
Section 2. Any person, se long as his name
appears in such list, shall, for the purpose of
Section 5(b) of the Act of October 6, 1917, as
amended, and for the purpose of this Proclamation,
be deemed to be a national of a foreign country, and
shall be treated for all purposes under Executive Order
No. 8389, as amended, as though he were a national
of Germany or Italy. All the terms and provisions of
Executive Order No. 8389, as amended, shall be applieable to any such person so long as his name appears
in such list, and to any property in which any such
person has or has had an interest, to the same extent
that such terms and provisions are applicable to
283
-3-
nationals of Germany or Italy, and to property in
which nationals of Germany or Italy have or have
had an interest.
Section 3. The exportation from the United
States directly or indirectly to, or OR behalf of,
or for the account of any person se long as his
name appears on such list of any article or material
the exportation of which is prohibited or ourtailed
by any proclamation heretofore or hereafter issued
under the authority of Section 6 of the Act of
July 2, 1940, as amended, or of any other military
equipment or munitions, or component parts thereof,
or machinery, tools, or material, or supplies necessary for the manufacture, servicing, or operation
thereof, is hereby prohibited under Section 6 of
the Act of July 2, 1940, as amended, except (1) when
authorized in each case by a license as provided for
in Proclamation No. 2413 of July 2, 1940, or in
Proclamation No. 2465 of March 4, 1941, as the case
may be, and (2) when the Administrator of Export
Control under my direction has determined that such
prohibition of exportation would work an unusual
hardship on American interests.
Section 4. The term "person" as used herein
means an individual, partnership, association, corporation or other organization.
284
The term "United States as used herein means
the United States and any place subject to the
juristiction thereof, including the Philippine
Islands, the Ganal None, and the District of Columbia
and any other territory, dependency or possession of
the United States.
Section 5. Ne thing herein contained shall be
deemed in any manner to limit or restrict the provisions of the said Executive Order No. 8389, as
amended, or the authority vested thereby in the
Secretary of the Treasury and the Attorney General.
So far as the said Executive Order No. 8389, as
amended, is concerned, "The Preclaimed List of
Certain Blocked Nationals', authorised by this Preo-
lanation, is a a list of certain persons with
respect to when and with respect to whose property
interests the public is specifically put on notice
that the provisions of such Executive Order are
applicable; and the fact that any person is not named
in such list shall in no wise be deemed to mean that
such person is not a national of a foreign country
designated in such order, within the meaning thereef,
OF to affect in any manner the application of such
order to such person or to the property interests
of such person.
IN WESNESS - I have horounts we - I
and canced the seal of the States of I
to be affirm
YORK at the city of Washington this
was
of July. in the
year of Love
sinsteen handred
and fortypose,
and of the
Independence
of the Waited
States of America
the one hundred and
sixty-sixth.
By the President:
Secretary of State
D*
da
DH
UA.
is?
A-A:AF:MFA
7-14-41
nat u
wef. in CLASS
B.B
off
A.Z.Z.
share
286
July 16, 1941
10:25 a.m.
Sumner
Welles:
Good morning, Henry.
HMJr:
Hello, Sumner, how are you?
HMJr:
Fine. I hope you are.
I'm very well. Sumner, I just saw on the
W:
Oh, really.
HMJr:
And I wondered if you could interpret
W:
U.P. Ticker that the Japanese Cabinet
resigned en bloc.
that for me. I - I don't know what it
means.
W:
HMJr:
W:
Well, I'd like to be able to interpret it,
Henry. It means one of two things.
Yeah.
Either that they're moving immediately to
occupy Indo-China
HMJr:
Yeah.
and subsequently Siberia.
W:
HMJr:
Yeah.
W:
Or else the element in the Cabinet that's
been favoring that has been defeated, and
a more reasonable Cabinet from our stand-
point will be installed.
HMJr:
I see.
W:
I can't yet tell.
HMJr:
If
287
-2We've been anticipating for two or three
weeks that something of this kind would
W:
happen.
HMJr:
W:
HMJr:
Well, if you get a glimmer on it, would
you call me so that
I'11 call you immediately.
And we continue to get advices of the
Japanese getting out of dollars wherever
they can.
W:
HMJr:
W:
HMJr:
Yes.
And 80 - for whatever that's worth. But if
you get something on this, I would appreciate
a call.
I'll be very glad to do it, Henry. I'll
let you know.
Now while I've got you, I don't know what
Jesse Jones has in mind, but it seems that
for some reason he very much wants an
administrator in this thing. We were up
at Wallace's yesterday.
W:
HMJr:
W:
Yeah.
I don't know what it is, but
But I fully - I don't know how you feel,
but I fully agree with every indication
that is contained in the President's
letter.
HMJr:
Yeah.
W:
I think an administrator would be altogether
wrong.
HMJr:
Yeah.
W:
I think that all of our Departments are
288
-3directly interested, and I think that we
ought to have an opportunity of serving as
an advisory body to the President in these
matters with such administrative powers as
may be necessary.
HMJr:
Then get started.
That's right.
W:
Is that right?
I think it's already been delayed at least
HMJr:
Yeah. Well, you and I seem to look eye to
HMJr:
W:
three months too long.
eye on it. I think that Justice ought to
be in on it, though.
I fully agree.
HMJr:
Okay.
W:
That was left in the air yesterday; but
if it comes up again on Thursday, I shall
say that from our standpoint, we feel the
Attorney General must be included.
HMJr:
Right. Well, thank you.
Thank you very much, Henry.
HMJr:
Good-bye.
W:
Good-bye.
289
July 16, 1941
10:30 a.m.
RE DEFENSE SAVINGS BONDS
Present:
Mr. Duffus
Mrs. Kuhn
Mr. Mahan
Mr. Sparks
Mr. Buckley
Mr. Sloan
Mr. Graves
Mr. Powel
Mr. Masters
Mr. Paige
Mr. Gilchrist
Mr. Peters
Graves:
Would you like to have me attend to the items
that you have asked me about?
H.M.Jr:
Would you,first, please?
Graves:
You sent word to me yesterday that you wanted
H.M.Jr:
Well now, you and I and George - you see,
the daily statement of sales, beginning July 1.
That is through the fourteenth.
George didn't give it to me either.
Graves:
No, they all come to me and I am not giving
them to anybody, for the reasons that I told
you, that there is a change --
H.M.Jr:
Would you and George Haas get together and
see that I get something tomorrow that you
agree on?
Graves:
We agree on that.
290
-2H.M.Jr:
Then he has an analysis on percentages.
Graves:
I haven't seen that.
H.M.Jr:
How much you are running over or under on
Graves:
I will continue that, but you may keep this.
H.M.Jr:
July over June, on totals we were eleven per
Graves:
Yes.
H.M.Jr:
And then the banks on the E's were running
each one.
cent behind.
way ahead of the post offices.
Graves:
They always have.
H.M.Jr:
They were running a forty-five per cent
Graves:
That is because of the shift of balances
from savings accounts, we think.
H.M.Jr:
It doesn't show up because July 14 is better
than July 1.
Graves:
You see, their interest on the bonds here begins
to run at the first of the month, even though
they bought later. People didn't necessarily
increase.
make those shifts on the first day of July.
H.M.Jr:
But look at the way the E's are holding up.
You may be right. O.K.
Graves:
You asked for figures of sales at Treasury
House, daily figures.
H.M.Jr:
That is grand.
291
-3Graves:
Also, here is a daily report on the requests
for our song. I think those are the three
items you asked me about yesterday. Getting
back to your report on --
H.M.Jr:
Three hundred twenty-eight cards? Wonderful.
Graves:
Yes, you will notice, as I told you, you are
getting a good many requests for large numbers.
H.M.Jr:
Where is our direct mail man?
Buckley:
Right here, Mr. Secretary.
H.M.Jr:
How much longer - don't you think by next
Buckley:
Monday we could decide whether this postal
card was a success or not?
Yes, I should think so. We will have eighty
per cent of the results in by then, I should
think.
H.M.Jr:
H_w many days do you figure from the day
you go out - I mean, how soon do you get
eighty per cent?
Buckley:
Ordinarily, within two to three weeks.
H.M.Jr:
Harold, one minute while I have this Treasury House thing. Will somebody tell me what
Esso is going to do about having it in
other places?
Graves:
I think Mr. Duffus can tell us.
Duffus:
Esso is set to go on having permanent displays in Philadelphia, Boston, and New
York.
H.M.Jr:
Philadelphia, Boston, and --
Duffus:
Boston and New York, which are all in their
292
-4territory. We are going to contact people in
Chicago and on the west coast in an attempt
to put permanent displays in Chicago and San
Francisco and Seattle, if possible.
H.M.Jr:
Now, what are the Army and Navy going
Duffus:
We are preparing a letter for them of exactly
to do about giving you the stuff?
what we need for both permanent displays
and also móbile units so we can work towns around
New York at the same time we have a permanent
display in New York. They are very much for
the idea. The Air Corps is also working to
supply us with a flying squadron that can go,
for instance, into the New York State Fair
and places of that kind to carry hostesses
in to sell the stamps and speakers to speak
about them over P.A. systems which we will
carry with us. All of the services are very
much with us.
H.M.Jr:
Are you sure that the services are going to
give you enough material? I mean, I don't
know how many - as somebody said - well, I
don't know how many planes they can spare,
for instance.
Duffus:
That is what they are working on now. That
is, their public relations departments are
working on that.
H.M.Jr:
Do the Army and Navy like this show?
Duffus:
Very much. We have contacted every one of
H.M.Jr:
The sales are good. Is Esso pleased?
Duffus:
Yes.
H.M.Jr:
Would you call up Mr. Dietz and tell him I
got his letter?
them and they are all very pleased with it.
293
-5Duffus:
Yes.
H.M.Jr:
I am free tomorrow night, if he would care
Duffus:
All right, I will certainly do that.
H.M.Jr:
Could you --
Duffus:
I will, and then I will let you know.
H.M.Jr:
I am right, you are under Dietz?
Duffus:
Yes.
H.M.Jr:
Would you?
Duffus:
I certainly will.
H.M.Jr:
And tell him the invitation always holds
good for his Mrs. if she cares to come.
Duffus:
Thank you.
H.M.Jr:
Tell him I am alone. I read his thing last --
to come down and have supper with me.
Have you read it, Ferdie?
Kuhn:
Graves:
I have read it, yes, sir.
While we have Mr. Duffus, I think he can tell
you something, too, about the other distribution of
"Any Bonds Today".
Duffus:
Yes. We have had one interesting thing happen,
Mr. Secretary. Since the cards were sent out
asking if they wanted any copies of the song,
we have had sheet music publishers around
the country write in asking for limited
quantities of the song to give their regular
customers as souvenir copies from the Treas-
ury. We are supplying those in limited quan-
tities only.
294
-6H.M.Jr:
I would go easy with that.
Duffus:
We are. We are asking them to have their
H.M.Jr:
If this postal card thing works, I think it
is the way to do it.
Duffus:
Also on --
H.M.Jr:
When are you going to have my copy, my regular
Duffus:
As I understand, that is in the process of being
made now in full color.
Graves:
Do you know about that, Harford?
Powel:
Yes. The design has just been made and approved
Duffus:
Also, Mr. Secretary, on "America Preferred"
the long version of the film, we have had
prints made in sixteen millimeter sound which
people write if possible.
sheet music with a nice cover?
and that will be out in a few days.
we are distributing through the Agriculture
Department. They have seventy-five operators
and projection machines around the country.
They will use them in meetings in farming
areas and we are sending two prints to each
State Administrator to use in his meetings.
H.M.Jr:
Well, the best job that has ever been done,
as far as the Treasury goes, on that, with
no organization, no training, was done by
a man under Chief Wilson on Know your
money." And talk to him because the distribution that they got on that film was simply
amazing. High schools and - I mean, the
fellow is down there and he really ought to
be taken out and put in your division because
the man has got imagination and - he is a
295
-7Secret Service operator, but he had the thing
made and he got it into all the high schools
and chambers of commerce and did a perfectly
amazing job on that. I don't know how many
millions of matches, for instance, have been
printed and distributed with "Know your money".
We have got this counterfeiting thing licked
so it is down to zero through publicity. You
ought to find out who that fellow is and you
might pick him up and bring him up into your
group, because he is an amazing person.
Duffus;
We will follow through on that.
H.M.Jr:
He really is an amazing person. You know him.
Graves:
I don't know who it is.
H.V.Jr:
He just has an imagination. We might pick him
up because the number of places that they
showed that film, where they got it and everything else, really was quite amazing.
Graves:
You set Mr. John A. Stevenson down for ten-
thirty Tuesday. Would it make any difference
to you if we could give him a later hour than
that? I spent some time with him yesterday.
He is a very busy person. It would press
him a little hard to get down here for ten-
thirty.
H.M.Jr:
Will you tell Stephens at three o'clock?
Graves:
Yes. Three o'clock Tuesday?
H.M.Jr:
Yes.
When am I going to see the script for Tuesday
night?
Graves:
Mr. Kuhn wants to talk to you about that.
296
-8Kuhn:
I would like to set aside tome time tomorrow
to go over that script. Mr. Gilchrist says
it will be ready tomorrow morning, and als o
the script for your little N.B.C. introduction
on Tuesday night is ready now.
H.M.Jr:
Would you have it tonight, Ferdie?
Kuhn:
The Round Table script, will that be ready
tonight?
Gilchrist:
It isn't completed yet. It is being done in
New York.
H.M.Jr:
Ten o'clock tomorrow morning?
Kuhn:
I think that would be better.
H.M.Jr:
O.K.
Graves:
Have you any other things, Ferdie?
Kuhn:
No, I have nothing.
H.M.Jr:
Excuse me. And the publicity on that?
Kuhn:
Oh, yes, the publicity on the Round Table.
Gilchrist:
The story has been written and approved and
Kuhn:
Can the Secretary see it before it goes out?
Gilchrist:
Certainly.
H.M.Jr:
Can somebody step out and get it now?
Gilchrist:
Surely.
Graves:
Now, I think unless you have some other thing
is being written now for release.
you would like to bring up specially, we will
ask Mr. Powel to tell us --
297
-9H.M.Jr:
I got a thrill out of that poster this morn-
Powel:
Sure. That is the one, you know, that you
ing. You haven't got a bigger copy than that?
judged when we had that dinner party one
night.
H.M.Jr:
This? Oh, I like this but I meant the one
Powel:
No. Jock Whitney gave those prizes yesterday.
H.M.Jr:
Is that who paid for them?
Powel:
At a big party at the Museum.
H.M.Jr:
Were you there?
Powel:
No. I went down to judge them but I didn't
think I had to go and see him hand out his
in today's New York Times.
prizes.
H.M.Jr:
I have seen those in the paper.
Powel:
You have seen both of these?
H.M.Jr:
I think they are wonderful.
Powel:
This one, I don't know whether you noticed
the lipstick on the face of the soldier. It
is a startling thing in the design, and that
really is a knockout, though. They couldn't
give it first prize. They have given it all
kinds of honorable mention. There are about
fifty more in the back room that aren't being
shown. They are showing thirty or so because
that is all the room they have in that main
entrance where you go out on the patio. They
are in there on the street floor. Admission
is free and the crowd yesterday was consider-
able.
298
- 10 H.M.Jr:
Now, what are you going to do? Are we
Powel:
Oh, you bet.
H.M.Jr:
When?
Powel:
Absolutely. We are either going to put it
going to put this one to use?
out ourselves or get somebody to sponsor it
as Wrigley and the First National Bank, and
so forth have sponsored other things.
H.M.Jr:
I think we had better do it ourselves.
Powel:
I do too.
H.M.Jr:
Leon Henderson says that white cuff on that
Powel:
All right, I will tell Henry Billings.
H.M.Jr:
I notice, for instance, the workman there
Powel:
Yes.
H.M.Jr:
I think if it isn't too late --
Powel:
Oh, no, you can do anything to it. Ten thou-
poster is terrible. He says there ought to
be no cuff, or at least a workman's cuff.
has no cuff.
sand of those have been run off, so we may
see one now and then.
H.M.Jr:
There is no blue in there, is there?
Powel:
No blue.
H.M.Jr:
Could it be brown?
Powel:
Brown or that kind of gray that the map is.
H.M.Jr:
If it is not too difficult.
299
- 11 Powel:
Not a bit. No charge.
H.M.Jr:
I like that one in the paper.
Oh, it is marvelous. The color is the best
part of it. Now, that gives us a winner,
Powel:
a second prize, five minor awards, thirty that
they think good enough to show, and then
in the back room some I like better, but
then, I am not as esthetic as some of the
curators so that we could shop around and
for fifteen or twenty-five dollars we could
buy any of those, and I am going to lug them
down here.
H.M.Jr:
Put them up downstairs.
Powel:
Sure I will. I am going to lug them down
here in the next week or so and we will
have a little show.
H.M.Jr:
Is that all?
Powel:
That is all, sir.
H.M.Jr:
Nothing else?
Powel:
Industrial poster series. We have got thirty-
five thousand. That is the one where the
Packard automobile is giving us posters.
H.M.Jr:
Any finished?
Powel:
They are just going through now. They have been
very slow in printing them.
H.M.Jr:
Thirty-five thousand?
Powel:
Thirty-five, giving you a total circulation
of more than two million, and the company
salesmen will go to a hardware store or rail-
road station or whatever, and pin them up.
300
- 12 H.M.Jr:
Good.
Graves:
Is that all, Harford:
Powel:
I think so, yes, sir.
Graves:
Now, Mr. Mahan can bring us up to date,
Mahan:
Mr. Secretary, there are between ten and
if you like, on the retail outlet situation.
fifteen thousand retailers selling stamps
in Michigan. I am indefinite about it because
the independent retailers are being checked
now, and we have no way of determining until
probably Monday. That number should be
doubled. We are sending additional material,
have worked out a system with the Post Office
whereby we drop a delivery of a certain num-
ber of posters as we have worked them out
by formula for that territory to fill in
chinks. The ones who are not furnished material on the first distribution. We should
have by Monday a very complete picture
of what has happened in Michigan. In the
meantime, on Friday the Chain Drug Association offered to go along and are sending material to their several hundred members. Some
of those have already received material but a
great many of them have not. There is - it
hasn't been announced yet, but there is a "Retailers for Defense" week set for September 15,
and all the associations that we are dealing
with will work together to put that week over
and it should really be the very peak of
the effort. We should by that time, using this
Post Office system, which will also be worked
out for all other States, because our big
problem is to get the material distributed that should - we should be able to deliver on
September 15 material to every one of the
States whether there is a State organization
there or not.
301
- 13 H.M.Jr:
By when?
Mahan:
By September 15, so they would be up on Sep-
H.M.Jr:
You are inching in on me. I thought we
were going to have it by Labor Day.
Mahan:
tember 15.
Well, the retailers - the associations themselves have set their date. They can't be
ready before that. However, that doesn't
mean - that is merely the peak of it. By
September first material will be distributed
in most --
H.M.Jr:
fifty thousand?
Mahan:
Oh, yes, easily.
Graves:
I think that your fifty thousand figure is --
Mahan:
The fifty thousand was to be a commitment
by the 31st of July from the stores themselves.
H.M.Jr:
Yes, and the stores selling by the first of
September.
Mahan:
That is right, and we already have a commit-
ment from the Institute of Distribution alone,
from twenty-one members, for over eight thou-
sand stores, and those are the big stores like
Woolworth and Kresge and so forth.
H.M.Jr:
But you won't have the stores selling by
the first of September?
Mahan:
A great many of those will be, Mr. Secretary.
I am sure that many of these stores that are
indicating their intention to go along now
will be selling by the first of August.
H.M.Jr:
Good. If you get ten thousand in Michigan
alone, I mean, that would be enormous.
Mahan:
Well, it will go way over that, I am sure.
302
- 14 We now have six thousand selling right now,
and the others are estimated on independent
retailers.
H.M.Jr:
Anything else, Harold?
Graves:
You remember that you asked to read our
H.M.Jr:
Yes.
Graves:
They are there.
H.M.Jr:
Where?
Graves:
In the legal department.
H.M.Jr:
Are they still there?
Yes, sir. I have talked with Miss McGuire
about it.
Graves:
letters that we were addressing to these various associations through the legal department.
Mahan:
It is very important we get those out while
the bloom is on this thing.
H.M.Jr:
How long have they been there?
Graves:
H.M.Jr:
Just a couple of days. I wouldn't bother.
I will take care of it.
I will tell them to give you twenty-four hour
service.
(Unrecorded telephone conversation with Mr.
Foley)
H.M.Jr:
Mahan:
H.M.Jr:
Graves:
Mahan:
They are signed now. They are through. They
are out.
We have about twenty-five -I mean everybody was tied up with me solid for
two days, as Mr. Kuhn can testify.
Can you think of anything further, Sid.
No. I will have a report on Monday or Tuesday
303
- 15 on the whole Michigan situation.
Graves:
Where do we stand with the Post Office Department on our joint program with them? Are
we any further along?
Mahan:
They are about ready to release. We have had
one more meeting with them covering some
things that - decisions that had to be made,
and they are releasing the material to us
probably the latter part of this week. We
are waiting for them on material.
Graves:
Mr. Buckley, have you anything new in the
mail order business to tell the Secretary
about.
Buckley:
Well, to bring you completely up to date, we
have received about fifteen thousand dollars
in since I reported last week, which gives
us practically ninety thousand dollars so
far from the first test, and of course they
are still coming in. We have another test
of almost ten thousand each going out this
Saturday. Until they have been out a little
longer, all of them, we still won't be able
to arrive at any definite conclusion.
H.M.Jr:
Have they been out long enough for you to pick
Buckley:
Well, it is more a matter of picking groups
than it is one or two, because the same letter
went to three different groups, one featur-
one or two?
ing E Bonds, one G, and one E, F, and G; so
I am leaning more toward the elimination of
F Bonds, for instance, and deciding whether
we can feature E to the exclusion of G or
work E and G together. That is probably
what is going to happen next. The next
thing I would like to test would be how far
down in the income bracket we can go and still
304
- 16 -
sell profitably. We are planning a test to
sixty-four thousand people around the first
of August to incomes of less than twentyfive hundred entirely.
H.M.Jr:
Does anybody know whether they have begun to
Graves:
Mr. Sloan can tell you.
Sloan:
On the Internal Revenue list? No, sir, we
had a long meeting with Ed Kilby about it,
cut those stencils?
and they are putting it up to Mr. Bell, I
understand, today.
H.M.Jr:
When are you going to be on that? When did we
meet on it?
Buckley:
I think it was Monday or Tuesday.
H.M.Jr:
It was Thursday, wasn't it?
Sloan:
It was when we were in on the tax notes,
Friday morning.
H.M.Jr:
When is it going to be put up?
Sloan:
Put up to Dan Bell today. Ed said that he
would have the memorandum all ready. We
sat in on the meeting with them and gave
them our comments. He was preparing it for
Bell to bring to your attention today.
H.M.Jr:
All right.
He is coming in at three to see me, so if you
would drop by and - he is down for three-
fifteen. I will give him a yes or no then,
if he will bring it in to me at three-fifteen.
Graves:
Mr. Sparks can bring us up to date on the
field situation.
305
- 17 -
Sparks:
Since Mr. Johnston reported last week, Mr.
Secretary, two additional states have launched
their organizations, their meetings. Two
additional governors have accepted your
appointment as honorary chairmen. The State
of New York, as you know, you appointed
Colonel Patterson, and the staff - field
staff is working very closely with Colonel
Patterson on seeing that he gets all of the
material and assistance that he wishes.
H.M.Jr:
Mr. Graves told me that Tuesday's newspapers
would carry an announcement of Mrs. Hull in
charge of women, but I didn't see it.
Graves:
Today. That was postponed one day.
H.M.Jr:
I didn't see it in today's papers.
Graves:
I saw it in the Herald Tribune. Did you see
it in the Times, Ferdie?
Kuhn:
No, I didn't look very carefully.
Powel:
I think I can find it for you. Yes, right
H.M.Jr:
Sparks:
here, sir.
It didn't get as much play as I expected. O.K.
In addition to the work in the field, we are
reorganizing some of our internal structure
across the street. We are reorganizing the
problem of handling the mail with a view to
making it more effective, and with much more
dispatch. We are drawing up an organization
chart which will give a bird's eye picture of
the entire field organization. We are con-
centrating on the problem of obtaining several
additional field representatives with the
bigger and more important states coming in,
New York and Pennsylvania and Illinois and
Ohio, particularly.
306
- 18 We anticipate the need of - being shorthanded
on our field representatives. We are going
through the growing pains now of analyzing
all applications and interviewing possibilities
for those positions so that we will have them
in time to be of the greatest service.
We are also reorganizing our filing system so
that we will have a minimum of file correspondence in the field office and a maximum
in the central files; and, finally, we received
a rather complete report from the National
Association of Mutual Savings Banks bringing
us up to date to July 10. The meat of that
report showed that eighty-eight per cent of
all the mutual savings banks in the country
have qualified and that represents ninetyseven per cent of the deposit liability in
those banks. There was one big bank in
Boston that had not come in, and if we could
get that in we would have ninety-nine per cent.
This morning I got a telephone call from
Boston that that bank had decided to come in as
a qualified agent.
H.M.Jr:
Sparks:
The mutual savings banks are as good as Ivory
Soap. (Laughter)
That is the sum of it, Mr. Secretary.
Graves:
I think, Mr. Sparks, you might tell the
Secretary of the division of labor that we have
made between yourself and Mr. Gail Johnston,
the Field Director.
Sparks:
Oh, yes. Mr. Johnston is going to spend
practically all of his time in the field. He
is now traveling through New Jersey, New York,
Connecticut, and Massachusetts. lie has also
planned a trip down into Florida where there
has been some slight concern, nothing alarming,
307
- 19 about confusion between the Defense Council
and the Defense Savings Staff. He also is
planning to go to the - to Oregon to their
organization meeting.
I, under the direction of Mr. Graves, am
spending all of my time in the Washington office
with a view to handling the field organization
from headquarters.
H.M.Jr:
O.K.
Graves:
Do you mind signing these letters now? Mr.
Odegard is not here, but the others have all
seen them.
H.M.Jr:
O.K.
Graves:
Mr. Peters is one of Mr. Houghteling's men
and has been working with trade associations,
enlisting their support and cooperation and
getting them into this. If you care, he
could explain just what he is doing.
Peters:
Mr. Secretary, the most important recent
development in the trade association field is
a gratifying response that we are receiving
to your letter to trade associations dated
June 26. You probably recall that that letter
was mailed to some fifteen hundred national
and regional trade associations. The list
was obtained from the Department of Commerce
and I am told it is the best and most recent
and up-to-date list there is. In that letter,
as you recall, we asked the trade associations
to help us convey information about Defense
Savings Bonds and Stamps and also to warn
their members and business concerns to use the
payroll allotment plan in a democratic way
and not exert coercion on their employees.
We have had about four hundred replies to
your letter, all of which have been very
308
- 20 favorable and all have offered their cooperaand other information.
tion and facilities for distributing literature
In that connection, there was the possibility
of a distribution problem, because the trade
associations don't have an awful lot of money
for mailing purposes, and if we sent them a
stack of a thousand bulletins, they would
have a difficult time getting them out to
their members in good shape, so we have
developed a little pamphlet which is entitled
"Six Ways for American Business to Cooperate
in the Sale of Defense Savings Bonds and
Stamps", and it mentions six suggested ways,
which are the usual suggestions. Attached
to that pamphlet is a return order form
addressed to Mr. Sloan so that business firms
may order the unmber of leaflets they want,
the number of posters they will need, the
Stamp material that Mr. Mahan has been work-
ing up, and also a sample payroll allotment
plan that I believe Mr. Touchstone has
developed. The businessman can get all these
things by filling out a return order for them
and sending it back to us. We have had about
fifty requests so far for that folder. Those
were replies to your letters. They are coming
in every day, and I think we will have a larger
response as soon as some of these organizations
have their board of directors meeting and can
take it up as a unit.
Trade association executives don't like to
act without the authority of their board, and
that is the situation of the trade associations
at present.
Graves:
You see, what we are doing in Mr. Houghteling's
group is during this period when we have
either no state organization or an imperfect
state organization, we are trying to function
309
- 21 through these national trade association
groups and get down to the individual members.
Mr. Peters has that. Do you have any idea,
Mr. Peters, how many individual concerns are
being reached in that way?
Peterson:
Well, several trade associations have asked
for up to four thousand copies of this little
bulletin to be sent to their members.
Graves:
Each?
Peters:
Yes.
H.M.Jr:
What would be your estimate of the total number.
Peters:
We are ordering a hundred thousand copies of
Graves:
It will give you some idea of how wide dis-
this folder.
tribution we are getting in that way. I
think ultimately we will get - we can depend
upon our state organizations to do this kind
of thing for us, but since we still don't have
all state organizations, we are doing it
through the trade associations.
Peters:
This little post card reply may come in awfully
handy because when it ge back to Mr. Sloan's
office it will be kept in a card file and the
state administrator or local organization will
be notified right away that that concern wants
to cooperate.
Graves:
Mrs. Kuhn is Mr. Orville Poland's right hand
man. He is in California at this time trying
to make a start for us on the state organiza-
tion there. She is handling his work, if you
would like to have her say a word.
H.M.Jr:
If she would.
310
- 22 Mrs. Kuhn:
Mr. Secretary, we tried to cover the national
organizations in four fields, education, pro-
fessional - like bar associations - patriotic like American Legion - and then the women's.
In the field of education, Mr. Poland has
prepared a kit for the public schools, outlined a kit which Mr. Milton has now got in
hand and which Dr. Studebaker is preparing
the distribution of. Last Saturday we sent
out a letter to eight hundred university
summer schools; and on the first day which
we could get a reply, which was yesterday,
we had requests for more than fifty thousand
pamphlets, so we are completely snowed under.
H.M.Jr:
Wonderful.
Mrs. Kuhn:
Mr. Poland goes around talking at national
conventions and building up contacts that way,
and then we feed them literature; and with the
women's clubs and associations, we are trying
to find out how we can work in with their
study groups and programs next September.
H.M.Jr:
Now, which one of you people are doing the work
with the labor unions?
Peters:
Mr. Houghteling is.
Graves:
Mr. Houghteling is personally handling that.
He is away for one week. He left last Thursday
and will be back the latter part of this week.
H.M.Jr:
He does that?
Graves:
He does that himself. He is in the process of
employing an assistant for that, a Mr. Hyatt.
He is a former officer of the A.F. of L., as
I understand.
311
- 23 Kuhn:
He was head of the Union of Postal Clerks,
I believe, and is a good man.
H.M.Jr:
Mrs. Kuhn, what are you doing with the women,
Mrs. Kuhn:
The women's organizations?
particularly?
Well, we are trying to find out first of all
what their setup is so that we can supply the
right literature to work in with the different kinds of organizations, so we sent
them out a questionnaire so that we can get
information that will enable us to produce
the right stuff. Then, of course, there is
the question of getting the stuff across,
and they are very, very helpful and cooperative. They have asked for specific pamphlets
which they will distribute.
For instance, the University Women, American
Association of University Women, wants to
get seventy thousand pamphlets to send out in
September to each one of their members, and
they are also sending out study material of
ours to each one of their nine hundred local
clubs. That is the way we are going at it.
H.M.Jr:
If you don't give the women something to do
soon, they will be going nuts on nutrition.
Everything is vitamins. You have got to give
them something.
Mrs. Kuhn:
We are trying to keep them out of the bucket
brigades.
H.M.Jr:
Aren't they all anxious to do something?
Mrs. Kuhn:
With one or two exceptions, they are wonderful.
Some of them are a little bit sticky, but most
of them are wonderful.
312
- 24 H.M.Jr:
Anything else?
Mrs. Kuhn:
We brought Mr. Paige along. Mr. Paige is the
H.M.Jr:
It is coming along very much better. Don't
get it too big now.
boy who does your weekly news item.
Paige:
It is our--
H.M.Jr:
It is getting to be quite a volume.
Graves:
It will get bigger rather than smaller as we
bring more states in.
Paige:
Our last issue did run twenty pages. That is
rather large. I might say that it is rather
obvious - our effort is to report in the news
letter the developments of interest to the
field organizations, developments in Washing-
ton. I get the reports from the Information
Division, the ones that Mr. Powel sends to
Mr. Johnston, and I get, of course, reports
on the daily radio programs and other reports
from Mr. Houghteling and Mr. Peters and try
to keep our field organization up to date on
what is being done here, and then I get reports
from the state administrators and clippings
that they send in and clippings from the
Division of Press Intelligence and from other
sources, attempt to report the definite activities that are taking place in the field,
the selling stunts and--
H.M.Jr:
It is a big improvement. The appearance of it
Paige:
Yes, sir.
Graves:
Did you get the list that you asked for?
H.M.Jr:
Yes.
is so much better.
313
- 25 Anything else?
Paige:
You might be interested in the distribution.
At the present time we are - we mimeograph
four thousand copies. About two thousand of
them are distributed immediately. All state
administrators receive at least fifty.
Individual county chairmen in many of the
states and in an increasing number of the
states are being put on our mailing list.
We added two hundred Texas county chairmen
this week and about fifty Mississippi county
chairmen this week, and we are adding other
county chairmen as the state administrator
sends them in so that that news letter will
reach them directly; and we, of course, have
in mind that our circulation may eventually
necessitate a change in the printing procedure,
and we are studying that.
Graves:
Mr. Sloan usually wants to avoid being
called on, but I think he might tell you what
we will do about moving.
Sloan:
I was down to the W. and J. Sloane building
this morning, and I think that the top floor,
which will be Mr. Powel's organization, will
be ready to move in any time from tomorrow on,
probably the latter part of this week or over
the week-end. Coming down each floor, I
think probably all of us can be in there
between the fifth and tenth of August.
Graves:
We are all going into that building.
H.M.Jr:
I feel very badly that nobody asked me what
song should be sung tonight or anything.
Graves:
That is Ferdie Kuhn's fault. He is the
impresario in the song department.
H.M.Jr:
I don't know whether they are singing "Louise"
314
- 26 over again or-Kuhn:
They are singing Scotch songs.
H.M.Jr:
Nobody asked whether I like "My Bonnie Lies
Over the Ocean" or whatever it is. I had no
chance on it.
Kuhn:
I think we talked about the script the other
day, and you said you thought it was all right.
H.M.Jr:
If it is not good, I am free to criticize you.
(Laughter) Did you see the script?
Kuhn:
I have it. I can show it to you any time.
There is still time to change certain things.
H.M.Jr:
Well, we were a little busy yesterday. It
Kuhn:
Yes. I made some comments to them in New
is all right, is it?
York yesterday, things that I thought should
be changed. They had a little crack about
John L. Lewis' eyebrows, and I thought we had
Graves:
better not go into that subject.
Mr. Gilchrist is here for Mr. Callahan, if
you have any questions about the radio business.
H.M.Jr:
Well, only my - that I was--
Gilchrist:
You asked for this release--
H.M.Jr:
Your Sunday program over Mutual can only go
one way, and that is get better. It couldn't
get any worse. It couldn't be any worse.
That is my comment on it.
Kuhn:
I can report something on that, Mr. Secretary.
Callahan feels that way also, and he has
asked Monroe, a professional who runs the
315
- 27 Texaco Hour, to take a hand and see that
this Sunday thing is produced well, and
he thinks that it is just a matter of getting
a professional touch in there and making it
less heavy, and I think it will be better
next Sunday.
H.M.Jr:
Shall I read this now? Who is doing this,
you, Ferdie? (Referring to announcement of
Tuesday round table broadcast.)
Kuhn:
That is Mr. Callahan's shop, and they send
these things over to me for my O.K.
H.M.Jr:
Would you stay behind a minute?
Graves:
I have a wire this morning from Palmer White,
Portland, Oregon, our state chairman in Ore-
gon, suggesting that we listen tonight to a
national hookup on NBC, Blue Network, on
National Defense Bonds. In other words, they
are doing a Callahan on us out at Portland,
as near as I can tell. That will be broadcast
at nine-thirty. That is half an hour after
ours. It will be on WMAL, if you would care
to listen and see what some amateurs can do
on Defense Bonds in Portland.
H.M.Jr:
WMAL at nine-thirty?
Graves:
Yes.
I may be sorry that I suggested that you
listen in. I am going to listen.
H.M.Jr:
Graves:
H.M.Jr:
All right.
I think there is nothing else.
The thing that pleases me the most is the way
the E Bonds are going up and also the fact that
that they are the small denominations. I think
316
- 28 -
that is just the right direction. The only
thing missing today is - there is no report
on how we are getting along on the payroll
plans.
Graves:
Have you anything new on that, Bob?
Sparks:
I tried to get Mr. Touchstone in. He just
arrived this morning from a trip in the field,
and he told me that he had very excellent
results, and I told him to give me a detailed
report immediately, but it did not reach me
before I came to this office.
H.M.Jr:
If you could have for Mr. Graves next Monday
a report on how many concerns - if you
haven't got them, it should be organized.
How many concerns have got the payroll plan,
how many employees have they got on their
payrolls, and what percentage of their
employees are participating. If you haven't
Sparks:
got it-I think we will have a little difficulty, Mr.
H.M.Jr:
Yes, but it is the last one that counts.
Graves:
We sent out, when you first began to ask about
Secretary, on that last one, but I don't
anticipate any on the first two.
this, to all of our states where we are
organized, blank forms calling for precisely
that information.
Sparks:
That is right.
Graves:
To what extent it has come in, I am sorry to
say, I don't know.
H.M.Jr:
Harold, we were going to do it on Michigan to
start with.
317
- 29 Graves:
Well, I have a report on Michigan.
H.M.Jr:
On this?
Graves:
Yes, I have a report on Michigan.
H.M.Jr:
Well, see what you can do anyway.
Graves:
Yes.
H.M.Jr:
Thank you all.
318
Grace Moore
280 Park Avenue
New York City.
July 16, 1941.
Secretary of the Treasury
Henry W. Morgenthau
Treasury Building
Washington,
D. C.
Dear Mr. Secretary,
I wish to thank you so much for the
citation and also for the very beautiful corsage of
orchids which arrived from the Treasury Department.
I am having the citation framed to hang among the
treasured souvenirs of my career. Both it and the lovely
flowers added so much to the pleasure of our memorable
program on July second.
Sincerely,
Race Moore de Parara
Grace Moore de Parera.
DEFENSE SAVINGS STAFF
ADVANCE NOTICE RADIO PROGRAM
Secretary Morgenthau
WEDNESDAY - JULY 16, 1941
Time:
2:45 - 2:55 P.M.
Program: Children Are Also People
Talk by Miss Katherine Lenroot, Chief,
Childrens' Bureau, on Defense Bonds & Stamps
Station: WJSV and Columbia Broadcasting System
Time:
4:15 - 4:30 P.M.
Program:
Portia Faces Life
Station: WRC and National Broadcasting Red Network
Time:
6:00 - 6:15 P.M.
Program:
Fred Waring and His Orchestra
Station: WRC and National Broadcasting Red Network
Time:
6:15 - 6:30 P.M.
Program:
Mr. Keen, Tracer of Lost Persons
Station:
WMAL and National Broadcasting Blue Network
Time:
7:00 - 7:30 P.M.
Program:
Quiz Kids
Station:
WMAL and National Broadcasting Blue Network
Time:
7:30 - 8:00 P.M.
Program:
Plantation Party
Station:
WRC and National Broadcasting Red Network
Time:
8:00 - 9:00 P.M.
Program: "THE TREASURY HOUR - MILLIONS FOR DEFENSE"
Station:
WJSV and Columbia Brondcasting System
The full hour broadcast will include a specially
prepared skit by the Aldrich family; Walter O'Keefe;
Burns and Allen; Lilly Pons: and Andre Kostelanetz.
THESE PROGRAMS PROMOTE THE SALE OF DEFENSE BONDS AND STAMPS.
319
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Daily Sales - July 1941
On Basis of Issue Price
(In thousands of dollars)
Post Office
All Bond Sales
Date
Bank Bond Sales
Bond Sales
Series F
Series G
957
$ 6,160
Total
Series E
595
$ 8,910
$ 1,793
1,735
2,077
9,877
12,969
2,331
2,827
845
843
6,701
9,299
843
6,701
9,299
2,437
10,875
3,191
19,709
6,397
2,437
10,875
472
4,242
5,162
9,413
4,808
6,610
7,347
3,908
1,346
2,229
2,459
2,405
1,672
7,120
9,881
14,341
8,972
13.905
11,017
2,407
3,522
4,048
3,559
6,098
2,810
472
4,242
5,162
3,060
1,458
10,375
8,625
4,693
3,296
1,046
602
4,636
4,728
602
4,636
4,728
$ 11,940
$ 79,980
$ 26,135
$135,700
$ 43,781
$ 11,940
$ 79,980
Series F
Series G
957
$ 6,160
Total
Series E
$ 9,505
$ 2,387
11,612
15,045
4,066
4,903
845
22,900
9,589
11,028
11,226
16,570
11,430
16,311
12,689
6,315
4,867
6,277
6,018
8,504
4,482
13,435
10,083
7.754
4,754
1,046
$161,836
$ 69,916
Series E
July 1941
1
2
3
5
7
8
9
10
11
12
14
15
Total
$
1,197
880
605
1,197
860
$
$
1,197
9,413
4,808
6,610
7,347
880
605
1,197
860
Office of the Secretary of the Treasury, Division of Research and Statistics.
July 16, 1941.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of
United States Savings Bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
321
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Sales in July Compared with June, 1941
On Basis of Issue Price
First Twelve Business Days
(June 1-14, July 1-15)
(Amounts in thousands of dollars)
:
:
Amount
Percent
5,950
13,826
29.5%
:
:
:
:
Series E - Banks
43,781
29,955
Series E - Total
69,916
11,940
79,980
50,140
17,843
110,085
$161,836
$178,067
Total
:
June
$ 20,185
Series F - Banks
Series G - Banks
in July Compared with June
:
July
$ 26,135
Series E - Post Offices
Increase or Decrease (-)
:
Item
Sales
Office of the Secretary of the Treasury,
Division of Research and Statistics.
$
-
-
-$
19,776
5.903
30,105
16,231
46.2
39.4
- 33.1
- 27.3
-
9.1%
July 16, 1941.
Source: All figures are deposits with the Treasurer of the United States
on account of proceeds of sales of United States Savings Bonds.
Note: Figures have been rounded to nearest thousand and will not
necessarily add to totals.
322
July 16, 1941
11:30 a.m.
HMJr:
Jere
Hello.
Cooper:
Hello.
HMJr:
Jere?
C:
Henry?
HMJr:
Right.
C:
Jere Cooper.
HMJr:
Good morning.
C:
Well, how're you this time?
HMJr:
Well, I'm alive.
C:
Well, that's good. That's some encourage-
ment, isn't it?
HMJr:
And I got a clear conscience.
Well, I'm the same shape.
Yeah. What's going on?
C:
Well, I - I understand Bob's going to call
HMJr:
C:
a meeting of the committee at ten o'clock
in the morning.
HMJr:
Yeah.
C:
And with the idea that he and I will try
HMJr:
Yeah.
C:
And, that's all I know so far.
HMJr:
to state to the committee what the President
stated to us yesterday.
I see.
323
-2 of course, he got - this is just between
C:
us
HMJr:
I understand.
but he got busy just as soon as he got
C:
back up here, and been contacting the members
and talking to them.
HMJr:
Yeah.
C:
So.....
HMJr:
Well, what else could I do when he called
me up? I mean - if he - I - if he wants
to tell it to the committee, I think that
that's the thing to do.
Yeah.
C:
HMJr:
C:
HMJr:
C:
Don't you?
Oh, sure. Of course, the committee'd have
to be told, naturally.
Yeah.
I had just thought it might be better for
you and John Sullivan to come up and
HMJr:
I don't think it'd be - I don't think that
I'd help it; it might only irritate the
committee.
C:
HMJr:
Uh huh.
But if Doughton says, "Well, now this is
what the President said," that might have
some effect.
C:
HMJr:
C:
Well, all right. I hope so.
That's the way I feel.
Well, I hope so, but
324
-3 HMJr:
We've been uo - we've been up there, and
we failed. Now maybe if Mr. Doughton
tells them this is what the President
wants, it might have some effect.
Well, maybe so. I hope 80.
C:
HMJr:
But
C:
I just want to help any way I can.
HMJr:
I know. You always do, and you were swell
at the meeting yesterday. But there's no
use my going up. I've had my say, and
John's had his say.
C:
Yeah.
HMJr:
They paid no attention to us.
C:
Yeah. So we'll try to see if they pay
some attention to the other man.
HMJr:
That's right.
C:
I see.
HMJr:
Well.....
C:
Listen, Henry.
HMJr:
Yeah.
C:
HMJr:
I'm awful sorry to bother you again, but I I'm intensely interested in that Miss Colleen
Rhea that I talked to you about.
Yeah.
C:
Do you remember the name?
HMJr:
Colleen Rhea.
C:
Colleen Rhea. R-h-e-a.
HMJr:
Well, we gave her a nice increase.
325
-
Well, I understood from you at the time
you called me about that, that she was
given a Civil Service Status as senior
stenographer, with a salary of $1,620.
C:
HMJr:
Yeah.
Well, I understand the Civil Service status
C:
didn't come through for her.
HMJr:
Now, just 80 we understand. It's - you want
me to look up about her Civil Service status?
Yes. I understand that if Wilson, the
Director of Personnel would give her six
months' service as of July 1, she'd be in
C:
HMJr:
C:
HMJr:
the clear all right.
Well, let me inquire, and I'll call - I'11
call you back myself.
And she - you see, Charlie Bell gave her
the job for me
Yeah.
the latter part of December.
C:
HMJr:
Yeah.
C:
And he said - it was at Charlie's suggestion
that she come in after the holidays, you see.
She was here in my office on the second of
January ready to go to work.
HMJr:
Yeah.
C:
I called Charlie, and he suggested that I
bring her down the next day.
HMJr:
Yeah.
C:
Which I did.
HMJr:
Yeah.
326
-If I'd taken her down the - January the
C:
second, the day I wanted to, why everything
would have been in the clear.
HMJr:
Yeah.
But at his suggestion, I waited until the
next day to bring her down to his office
C:
and introduce her to him.
HMJr:
I see.
And if Wilson will just give her six months'
service as of July 1, I understand she'11
C:
be all right
HMJr:
I'11 send for the boys and talk to them.
as far as the classification is con-
C:
cerned.
HMJr:
Yeah.
C:
I'm awful sorry to trouble you with it.
HMJr:
That's all right.
C:
It's a matter of great importance to me.
She
HMJr:
Well, that's enough. That's enough said.
C:
Her brother and brother-in-law and people
HMJr:
That's enough.
C:
All right.
HMJr:
Enough for me.
C:
All right, Henry.
that are awful good friends of mine
HMJr:
Thank you.
C:
Thank you so much. Good-bye.
327
July 16, 1941
2:15 p.m.
HMJr:
I just had the Undersecretary of Navy for
lunch.
Harold
Graves:
Yes, sir.
HMJr:
He had never seen our show out here in the
G:
Uh huh.
HMJr:
Very enthusiastic.
G:
Yes.
HMJr:
Said that they are just starting on a big
G:
Yes.
square.
program of recruiting
that they've got a lot of money
HMJr:
G:
HMJr:
Yes.
and they'd like to tie un the Navy's
recruiting program with the Treasury Defense
Bonds.
G:
Yes.
HMJr:
They - they've got all kinds of money, the
Navy has.
G:
Yes.
HMJr:
Crazy about our show.
G:
Well - I - I thought you had said he had
never seen it.
HMJr:
He'd never seen it.
G:
Well, you mean he's crazy about the idea.
328
-2HMJr:
I walked him over there.
Oh, I see. I see what you mean.
G:
HMJr:
I just walked him over, made him buy a
dollar's worth of stamps.
Good for you.
G:
HMJr:
and then he says, "The Navy has a
lot of money.....'
Yes.
G:
HMJr:
to recruit," and they want to tie up
the Navy's recruiting program with the
Treasury Defense Savings Bonds.
G:
That's grand.
HMJr:
Now, I told him that you were the man,
G:
HMJr:
G:
but I don't want to - I'd like to take
the initiative.
Yes, sir. Well, why - wouldn't you like
for me to call on him.
Why don't you call him up and ask him
if you can come and see him?
Okay. Is that Forrestal?
HMJr:
James Forrestal.
G:
Yes.
And he - he, by the way, is a Princeton
man, and I think a classmate of Gene Sloan,
who knows him well.
HMJr:
G:
HMJr:
Well, why, if he does, take Gene - why not
let Gene contact him.
I think I will, if you don't mind.
Let Gene contact him if he knows him, and
that saves time.
329
-3G:
I'm sure that Gene knows him well. I believe
HMJr:
Well, anyway, one way or the other, do it
G:
I'11 take care of it today.
HMJr:
they were classmates at Princeton.
today.
But if we could tie up with the Navy on
their whole recruiting program, it would
be something.
G:
Yes, it would.
HMJr:
But what he likes is the band and all of
G:
Was there a band working while he - while
the rest of the stuff.
you were there?
HMJr:
G:
HMJr:
Yeah. Fine. Yeah.
I'11 get at it right away.
Yeah. Thank you.
G:
Yes, sir.
HMJr:
Good-bye.
330
July 16, 1941
Dear Henrys
I - returning the original
papers which you gave to - after the
meeting yesterday in your office.
I have retained a copy of
these documents for - file and have
had sent a set to Under Secretary
Summer Welles, Secretary Claude R.
Wickers and Secretary Jesse H. Jones.
Certially yours
(Signed) Henry
Monorable Senry A. Wallane
10:30 you
Vice President of the United States
By Messenger
Enclosures
FMcG
7/14/11
1. Undated letter from The President to the Vice President
re Problem of Economic Defense.
2. March 6, 1941 draft of the Bureau of the Budget on
What Should Be Done About Economic Defense.
3. Executive Order Establishing the Office of Economic
Defense In the Executive Office of the President
And Defining Its Functions and Duties.
331
July 16, 1943
Dear Henrys
I - returning the original
papers which you gave to - after the
meeting yesterday in your office.
I have retained a copy of
these documents for my file and have
had sent a set to Under Secretary
Summer Welles, Secretary Gloude R.
Wickard and Secretary Jesse H. Jenes.
Certially yours
(Signed) Henry
Reasonable Heary A. Wallens
Vise President of the United States
By Messenger
10:30am
7/1/14
Inclesures
FMcG
1. Undated letter from The President to the Vice President
re Problem of Economic Defense.
2. March 6, 1941 draft of the Bureau of the Budget on
What Should Be Done About Economic Defense.
3. Executive Order Establishing the Office of Economic
Defense In the Executive Office of the President
And Defining Its Functions and Duties.
332
THE WHITE HOUSE
WASHINGTON
My dear Henry:
I have been giving a great deal of consideration
in the last few weeks to the whole problem of our
economic defense.
As you know, several of the government departments
and independent agencies have important responsibilities
in this field which are fixed by statute.
I have given some consideration to appointing a
director of economic defense who would administer certain
phases of the program and act as coordinator. The more
I think of it, however, the more I believe there is much
to be said in favor of a committee giving broad consideration to the problem of our economic relationships
rather than an administrative unit. I had in mind
appointing five or six people from various departments
concerned, who would consider the broad implications of
our economic relationships in the light of what is going
on in the world today and would consider further the
potentialities of the future.
I realize the committee would have to give consideration to immediate problems and that at'a later
date that committee might wish to recommend to me a
more definite administrative alignment within the
government.
I am quite sure I am right about not appointing
an administrator of economic defense at this time, but
I do want the advice of a competent group sitting
333
-2constantly in regard to these matters.
I have been wondering if you would take the
chairmanship of such a committee. I am sure that
you know more about this field than anybody in town
and it is essential that we have someone as chairman
in whom the various cabinet officers will have
confidence.
Will you let me know what you think about this.
Very sincerely yours,
finality
he Honorable
Henry A. Wallace,
Vice President of the United States.
BUREAU OF THE BUDGET. CONFIDENTIAL (Trel
(Preliminary)
March 6, 1941
WHAT SHOULD BE DONE ABOUT ECONOMIC DEFENSE
In order to aid Britain effectively as well as to protect ourselves against a thoroughgoing, although undeclared, economic war, we
must develop a comprehensive program of economic defense. Economic
defense consists of those economic measures having international implications exercised for the purpose of protecting and conserving the
resources and the commerce of the Nation, aiding friendly neutrals and
belligerents, and impairing the resources and commerce of unfriendly
belligerents.
We should begin at once to plan the defense of our post-war
foreign trade, for irrespective of the outcome of the present war,
peace will be fraught with manifold economic problems, insoluble without a long period of study.
A number of instances, based on suggestions by various depart-
ments and agencies contacted during the course of the survey, illustrate
some of the ramifications of economic defense problems. Random in nature,
they reveal that the disposition of any particular problem may require
the choice of one of many potential measures or the decision to take
no action whatsoever.
Transit Trade to the "Axis"
The Japanese have been purchasing in Latin America raw materials
for munitions. They have negotiated a contract expiring November first
of this year to purchase the entire output of Peruvian molybdemum, and
334
335
-2they have been buying Bolivian tungsten at a price well above the
world market to assure preempting supplies. The Japanese are also
purchasing Bolivian antimony, Brasilian quarts crystals, rubber,
mica, castor seed, Mexican lead and mercury, Argentine quebracho and
hides, and Chilean copper.
Using Japanese bottoms to Vladivostok, quantities of these
materials it is charged are then shipped by rail to Germany. The
Italians transport by airline non-bulk items such as platinum and
industrial diamonds from Brasil to Europe.
Preclusive Purchasing versus Alternatives
Several Government agencies have recommended preclusive pur-
chasing by the United States of the Latin American raw materials to
preempt them from inimical interests. Before such a program is inaugurated, consideration should be given to the possible use of alternative measures: diplomatic pressure, lending power, managed exchange,
and others.
Under the urgency for a stockpiling program, we have made
purchases in Latin America with free and uncontrolled dollar exchange.
Should we not have used our bargaining position as a buyer either to
gain advantages for ourselves or to thwart unfriendly nations? Could
we not have restrained Bolivia from selling tungsten to Japan? The
latter could probably have been accomplished by diplomatic pressure
or as a condition for granting a loan, since Bolivian tungsten is sold
through only one outlet, Banco Minero.
-3-
336
Purchases in Latin America by Japan have been made largely
with American dollars. If compatible with State policy, the prompt
freezing of exchange here might have the effect of stripping unfriendly
powers of their means of payment. Moreover, influence could be exerted
through a series of special deals and barters; pressure could be applied
through private exporting and importing firms. The use of private firms
to regulate foreign trade would have the obvious advantage of being
"unofficial." Since many of the Latin American countries desperately
need shipping facilities and certain materials, 6. go, aluminum, we
could furnish these on condition that they refrain from supplying stratagic materials to our potential enemies.
Loans and Subsidies
Loans made by the Export-Import Bank to South America might,
in many instances, be conditioned upon the United States being granted
reasonable considerations. Thus, the United States might have obtained
cabotage (internal air transport) rights for the American line "Panagra"
and cooperation in excluding German rights as consideration for a loan
recently made to Chile by the Export-Import Bank. Actually part of
the loan was used to finance the purchase of equipment for the Chilean
National Airline. Since German and Italian airlines to South America
are now encountering difficulties in obtaining new equipment, our loan
and air subsidy programs assume a new and vital importance.
-4-
337
Boycott and Embargo
Instances pertaining to Japan and the Philippinesillustrate
the necessity for careful study of the economic as well as political
effects of proposed measures. Thus in contemplating a boycott of
Japanese silk, consideration must be given to the affect of such action
upon American silk-consuming industries, upon competing materials and
substitutes, and upon the price effects of the use of those materials
and substitutes viewed both from the Japanese and the American side
of the picture. In anticipation of such a boycott, Japan might increase
her shipments, thereby acquiring additional amounts of exchange. The
advantages and disadvantages of a boycott must thus be weighed against
those of a currency freezing or another kind of program.
The Philippines constitute an important link in an embargo
of materials to Japan, for the effect of such embargo is nullified
if materials received in the Philippines can be reshipped to Japan.
Control of Shipping
The Office of Production Management requested the power to
direct the requisitioning of ships in order to facilitate prompt ship
ment of strategic materials. Shipping has broader aspects. Control
over shipping should be exercised in the light of our foreign com-
mercial policy. Attention might be given to the requisitioning and
directing of ships for the purpose of interfering simultaneously
with the commerce of unfriendly belligerents and aiding that of
friendly nations.
-5-
338
Shipping rates affect the types of cargoes carried. Unless
rates can be controlled, both the commodities carried and the ports
covered may be out of line with defense needs. Control of ship movements may be the key to control over rates.
Economic Strings on "Lend-Lease" Program
Pending operations under the "Lend-Lease" program are tied
up with these economic questions. While time is of the essence in
aiding Britain to the fullest extent consistent with American defense,
a great opportunity may be lost if careful consideration is not given
to the many economic ramifications under that bill. Is the United
States once more to win a war only to lose the peace? Or will she
now, while still retaining her current bargaining position, take
advantage of the lessons of 1918-19?
Many courses are open under the Lend-Lease program. We could
merely give Britain armaments outright and forego the assurance of an
important position in the post-war settlement. Or we might offer to
exchange armaments for any one of a number of agreements relating to
the post-war period. For example, we might insist on the elimination
of the effects of the Ottawa Conference, whereby the colonies and
dominions receive preferential trade treatment within the Empire, and
in its place create a wide trading area, a kind of economic "Union Now"
of states recognising the writ of habeas corpus. Here might be the
opportunity to return to the objectives of the reciprocal trade program,
and to stimulate foreign trade and investment in order to cushion the
effect of post-war economic readjustments.
-6-
339
We might exchange weapons for Britain's South American hold-
ings and utilise these in a variety of ways to control trade (Britain
uses them for this purpose), to obtain military bases, to gain the
friendship of the Latin countries by returning the investments to
them and their nationals, or to obtain concessions from Great Britain
by returning these holdings to her after the war.
We might lend armaments to be repaid in kind, but before doing
so, we should give thought to the economic effects of the repayment
of such loans.
Deficiencies in Present Facilities
Many agencies of the Government have been thinking about iso-
lated segments of economic defense, but no single focal point exists
where all segments can be brought into proper relationship, coordinated,
and adjusted to the over-all defense policies of the President. For
example, one agency urges purchasing Mexican mercury in order to preempt the supply from Japan; another agency states that there are ample
world supplies outside the United States and Mexico. Further, many
suggestions for action toward South America have been made, but no
agency appears to be relating these suggestions to a Far Eastern program
or to the Nation's plan in regard to Britain and the Dominions.
The difficulties of planning and directing a program of economic
defense lie in the number of the agencies involved and the variety of
controls in each as well as in the complexity of the economic problems.
The appended schedule of controls and devices and list of departments
-7 and agencies concerned with economic defense indicate the scope of the
problem.
The job of developing sound programs of action and the full
coordination of effort of the many agencies concerned with economic
defense cannot be accomplished by any existing department or agency for
the following reasons:
1. Individual agencies are preoccupied by daily routine
and with their main interests, which in every case
are far narrower than the conception of total economic
defense. For example, the Treasury Department con-
tributes appreciably in the fiscal role, which is,
however, only one segment of the problem.
2. Any existing agency because of jealousies and lack
of central position would find it difficult to se-
cure the thorough cooperation of other departments
and agencies.
3. Direction of the economic defense activities requires
someone of unusual qualifications and broad-gauged
experience; the director must of necessity devote his
full and undivided attention to this problem. He
would have knowledge of plans known only to a few.
Such a task precludes Cabinet members and agency
heads who are already overburdened; nor should
attention to pressing internal governmental prob-
lems be allowed to recede.
4. By nature, economic defense is an emergency function
which is to be liquidated when the emergency passes;
consequently, these activities should not be allowed
to become so intermeshed with permanent governmental
activities that they become a vested interest or
that their cessation would cause disturbance of
normal governmental functions.
5. The Department of State, probably the most eligible
agency, should it be decided to entrust economic
defense activities to an existing department, would
be placed at a disadvantage in carrying out its main
defense role as a buffer in our political relationships with other nations.
340
-8-
341
6. The Office of Administrator of Export Control seems
unfitted for this role because of its military approach.
The military mind is accustomed to dealing with concrete problems and obtaining direct results; whereas
the mind concerned with economic defense must deal
in abstractions and delayed or not easily controlled
results. Moreover, the chief officials of the Economic
Defense Unit of necessity must be experienced in
international finance and trade and possessed of
considerable analytical ability and imagination.
In addition to the hierarchal arrangement of the Export
Control office, question is raised as to the ability
of a military organization to deal successfully with
and understand businessmen.
It is important to note that the Office of Export
Control Administrator is now expanding its program and
staff to cover the whole economic defense field.
What is the Solution?
The preceding random illustrations of economic defense activi-
ties reveal that the determination of any particular course of actionor inaction-may require the choice of one of many possible measures.
Economic controls should be exercised only after the most careful preliminary study. Here is indeed a case where haste makes waste, and
where partial measures may undo the desired total effect. International
trade and finance is a highly complicated field, with influencing factors commingling from every angle. In such a field there is danger
that any one agency, focusing upon some particular phase of defense,
may fail to see the alternatives or the full implications of a given
measure. It may want action of some nature, any nature, when action
is the most undesirable course in a particular set of circumstances.
The many officials contacted in the course of this survey
believe that the establishment of a coordinating center on economic
342
-9- defense measures is exceedingly urgent. Except in the case of the
Office of the Export Control Administrator and the Treasury, which
desire to be entrusted with these responsibilities, opinion was unanimous
that the job must be done by a new agency under the President. Only
in this fashion can the respective parts which several agencies may
play in a particular course of action be scheduled and unified. Only
through such an agency can that all-important, illusive factor of "timing"
be safely exercised. Only by the creation of a central unit can we
be assured that carefully planned, deliberate study is being given to
problems of economic defense in the proper order of importance and with
proper attention to the inherent ramifications of alternative measures
and policies.
This might be accomplished by the designation of someone with
outstanding ability and braod experience in this field to assist the
President and such Cabinet Committee as may be desirable in formulating
and ccordinating programs for economic defense. If necessary, this
could be done quite informally. However, the many agencies which deal
with particular segments of the problems would need to understand the
role of this advisor so that the necessary planning and unification of
actions could result.
Or preferably perhaps a Division of Economic Defense in the Office
for Emergency Management of the Executive Office of the President could
be established by Executive order.
Under either alternative, a major task for the economic defense
advisor or division would be to assist in a secretarial and advisory
- 10 -
343
way whatever Cabinet Committee the President might wish to designate
on economic defense. The same Cabinet Committee which is now helping
the President on Lend-Lease operations might appropriately cover this
related field. Such an arrangement could be accomplished informally
as a normal method of doing business.
In any event, intimate relationships would be necessary between
the Economic Defense Unit and the agencies administering the Lend-Lease
program and the Office of Production Management. Likewise, a close
relationship would necessarily exist between the Economic Defense Unit
and any price administration and consumer agency that might be established
as a successor to the Price Stabilization and Consumer Protection Divisions of the Advisory Commission on National Defense. The Coordinator of
Commercial and Cultural Relations between the American Republics would
have in the Economic Defense Unit a channel for securing more effective
action than he now possesses.
The Office of the Administrator of Export Control should also
come under the direction of this unit. While that office is not suited
to be the central economic defense agency, the fact that it has been
developing a program and specific projects which go far beyond export
control is fortunate. The location of that office in the proposed
Economic Defense Unit will capitalize on the various economic defense
activities already launched by that office. and on the experience of its
staff in dealing with such matters.
In e1 ther plan a highly competent research man in the international economics field would be needed to assist the Advisor or
Director in carrying on the necessary studies and the many contacts with
344
- 11 the departments and agencies affected. The staff would appropriately
consist largely of persons borrowed from other departments and agencies
who have been actively engaged in working on the specific problems under
consideration. While there might be some type of actions which the
Economic Defense Advisor or Director would need to carry out through
his own facilities, most of the actions would be executed through the
normal facilities of existing departments and agencies. Clear-cut and
speedy channels of relationship with such departments and agencies would
need to be established.
Since the Economic Defense Unit would be dealing with matters
which require continuous decision by the President and the advice of
Cabinet members, its head would need ready access to the President and
his principal officers. The unit would need to work at all times in
close consultation with the Department of State, and any proposed action
should have the approval of that Department.
345
EXHIBIT A
MEASURES THAT MIGHT BE EXERCISED IN A
PROGRAM OF ECONOMIC DEFENSE
Exports
Embargo (by countries); "moral" embargo; licensing of exports
(special and general); favoring or hampering through United States
production priority regulations; requisitioning of goods under license;
licensing of exporters; quotas (rationing of neutrals to prevent reexport); subsidies (including subsidized export competition ("dumping") to drive out enemy goods from a neutral market); barter and
special trade deals; pressure on exporting firms, such as: Black
lists, bonuses and subsidies, pressure on producers, private monopolies.
Examination of foreign orders.
Imports
Boycott (by countries); licensing (special and general); licensing
of importers; quotas; barter and special trade deals; tariffs (special
increases and reductions); administrative discretion by customhouse;
pressure on importers such as: Black list, bonuses and subsidies,
private trade monopoly, indirect pressure by consumer boycotts.
Purchases of strategic materials to: Acquire needed materials,
help friendly countries, prevent acquisition by unfriendly countries,
pressure on private firms to purchase materials.
Foreign Exchange
Freezing of foreign assets as follows: Prohibiting transactions
in foreign exchange, transfers of credit, transfers of securities,
export or withdrawal of gold, silver, coin, and currency, and transfers
of other evidences of indebtedness, or of ownership involving property
of specific countries or nationals.
Licensing of foreign exchange transactions as follows: Clearing
agreements, use of blocked money units.
Manipulation of the value of currencies: Price at which bullion
is bought or sold; purchase by United States Treasury of gold or silver,
or refusal to purchase it when origin from accepted areas cannot be
proved; licensing of export of bullion; the purchase and/or sale of
foreign currencies through the stabilization fund.
Foreign Investments
Direct loans to foreign governments (for roads, airports, etc.),
direct loans to foreign nationals (for trade monopolies, special
2-
346
productive facilities, etc.); encouragement of private loans to foreign
governments or nationals; subsidies and loans to our nationals for the
benefit of foreign governments or foreign trade (as subsidisation of
tin smelter in America for Bolivian are); gifts; paying civil servants
in orphaned colonies (e.g., in French colonies); calking of loans,
refusal to renew; assistance or threats through influential United
States companies (e.g., the United Fruit Company in Central America).
Special International Activities
Cooperative purchasing agreements for stockpiling: To attain
needed materials, to prevent purchase of materials by the enemy, to
maintain prices.
Cartels for marketing or regulating production; furnishing or
withdrawal of technical experts, including government and civilian
experts and military technicians, to develop resources, transportation
systems, etc.; training of experts (exchanges of students).
Furnishing of needed materials to friendly countries; support
of currencies of friendly nations; joint propaganda and cultural activities (promotion of travel); joint agreements to prohibit transactions
with unfriendly countries and their nationals; seisure of property of
unfriendly countries and their nationals; cooperative trade policies
(such as a joint program with Britain in regard to South American trade);
blacklisting of uncooperative neutral firms.
Shipping and Transportation
Acquisition by purchase or lease; requisition (ships of neutrals
and belligerents); determination of routes; control of anchorage; con-
trol of bunkers, harbor facilities, warehouse facilities; regulation
of marine insurance; regulation of overseas mail and parcel post; control of shipping in territorial waters (as through clearance papers,
inspections, etc.); favorable or unfavorable treatment in allocation
of shipping (assuming shipping control); offer of convoy protection
of ships of a neutral; blockade reinforced by navicert system; control
of overseas airlines.
Patents and Other Property
Restriction of international licensing under new patents; offering
to friendly nations of special patent rights; confiscation of enemy
patents; licensing of foreign firms doing business in the United States;
seizure of enemy property.
Communications
Prohibition of adverse commercial propaganda, broadcast and otherwise communicated; encouraging of commercial propaganda to friendly
- -3 5
347
nations; control over mail and parcel post (used for shipment of nonbulk articles, plans, and military secrets; examination of mails to
trace illegal
enemy,
etc.). transfers and obtain information on goods shipped to the
Political Instruments
Threats and pressures, or favors and concessions, in the political
(diplomatic) field, for which the country concerned might reciprocate
by economic measures that help our friends or harm our enemies.
Military and Naval Instruments
Bombing and other attacks on objectives picked for their key
importance in a campaign of economic attrition; blockade, perfected
by a navicert system.
EXHIBIT B
FEDERAL GOVERNMENT ESTABLISHMENTS CONCERNED WITH ECONOMIC DEFENSE
Executive Office of the President
office for Emergency Management
Office of Production Management
Division of Priorities
Division of Purchases
Bureau of the Budget
National Resources Planning Board
Council of National Defense
Advisory Commission to the Council of National Defense
Price Stabilisation Division
Defense Communications Board
Office for Coordination of Commercial and Cultural Relations
between the American Republics
Office of Export Control
Interdepartmental Committee for Coordination of Foreign and Domestic
Military Purchases
Permanent Joint Board on Defense
Interdepartmental Committees:
Joint Army and Navy Munitions Board
Executive Committee on Commercial Policy
National Munitions Control Board
Interdepartmental Committee on Inter-American Affairs
Department of State
Division of Controls
Division of International Communications
Special Division
Liaison Office
Division of European Affairs
Division of Near Eastern Affairs
Division of Far Eastern Affairs
Division of the American Republics
Office of Philippine Affairs
Division of Commercial Affairs
Division of International Conferences
Division of Commercial Treaties and Agreements
Consular Service
Passport Division
Office of the Advisor on International Economic Affairs
348
-2
Department of the Treasury
Procurement Division
Bureau of Customs
U. S. Coast Guard
(Stabilisation Fund)
Secretary, as personal representative of the President in
matters relating to formal purchasing of war materials
War Department
War Department General Staff
Department of Justice
Anti-Trust Division
Immigration and Naturalisation Service
Federal Bureau of Investigation
Post Office Department
International Postal Service
Bureau of the Chief Inspector
Department of the Navy
Office of the Chief of Naval Operations
Bureau of Supplies and Accounts
Department of the Interior
Bureau of Mines
Geological Survey
Petroleum Conservation Division
Department of Agriculture
Bureau of Agricultural Chemistry and Engineering
Bureau of Agricultural Economics
Office of Foreign Agricultural Relations
Surplus Marketing Administration
Department of Commerce
Bureau of Foreign and Domestic Commerce
Patent Office
Bureau of Marine Inspection and Navigation
Civil Aeronautics Authority
349
-3Federal Loan Agency
Reconstruction Finance Corporation
Rubber Reserve Company
Metals Reserve Company
Defense Supplies Corporation
Export-Import Bank of Washington
Federal Trade Commission
Federal Communications Commission
United States Maritime Commission
United States Tariff Commission
The Federal Reserve System
The Pan American Union
350
351
EXHIBIT C
AN EXAMPLE OF SUCCESSFUL ECONOMIC WARFARE
Back in 1918, acting under an agreement for joint intervention
in eastern Siberia by the United States and Japan, Japan violated the
terms of the agreement. Instead of sending 12,000 troops into Siberia,
as agreed, she dispatched a force of 72,500 fighting men and officers.
This east
was and
more
than
the combined forces of the Allied intervention in
both
west
Siberia.
President Wilson, disappointed and displeased with Japan's
failure to observe the agreement, made the most vigorous diplomatic
protest and authorised the strongest kind of economic pressure. On
November 18, the War Trade Board issued an order stopping the further
granting of all licenses for the export of cotton to Japan and the import
of silk from Japan to this country. Iron and steel and their products
were considered for similar action, but, as it seemed that Japan would
be able to obtain these products elsewhere, cotton and silk were chosen
as the commodities that would make the economic pressure most effective.
At that time we were buying from Japan about $15,000,000 worth
of silk per month and were selling that country roughly $13,000,000
worth of cotton per month. This trade was vital to Japan's economy.
The action taken by the United States, together with the effect of the
collapse of Germany, brought an immediate response from the Japanese.
By the end of December, 1918, they had removed over 50,000 troops from
Siberia. Having achieved the desired result, the United States restored
the granting of licenses, and trade in cotton and silk was resumed.
In this incident we have a concrete example of the effective-
ness of American economic pressure. Thus in 1918 the United States was
not afraid to make its displeasure felt by measures which were easily
understood by the militarists of Japan. Diplomatic protests were backed
by economic pressure and the desired results immediately achieved.
Today the issues at stake are of even more vital importance to the
United States; the economic weapons at hand are of even greater effectiveness when war becomes a total effort.
EXECUTIVE ORDER
ESTABLISHING THE OFFICE OF ECONOMIC DEFENSE
IN THE EXECUTIVE OFFICE OF THE PRESIDENT
AND DEFINING ITS FUNCTIONS AND DUTIES
By virtue of the authority vested in me by the
Constitution and statutes of the United States, and
in order to define further the functions and duties
of the Office for Emergency Management of the Execu-
tive Office of the President in respect to the unlinited national emergency as declared by the President on
May 27, 1941, and for the purpose of developing, 00ordinating, and carrying out plans and programs designed
to protect and strengthen the international economic
relations of the United States in the interest of
national defense, it is hereby ordered as follows:
1. The term "economic defense" as used in this
Order means the conduct, in the interest of defense,
of international economic activities relating to exports, imports, the acquisition and disposition of
materials and commodities from foreign countries,
foreign exchange, international investments, shipping
and transportation of goods among countries, the international aspects of patents, international communications pertaining to commerce, and other foreign economic
matters.
preclusive bayer in
from countries
352
2. There shall be within the Office for Emergency
303
Management of the Executive Office of the President an
Office of Economic Defense, consisting of a Director to
be appointed by the President, and a Committee on Economic
the v P the
Defense composed of the 1 Secretary of State, Secretary of
War, Secretary of the Navy, Secretary of the Treasury,
the
Secretary of Commerce, and such others as the President
- from time to time designate. The Director shall serve
as of the Committee on Economic Defense. The
Drapirector shall receive compensation at such rate as the
shill
/
President shall approve and, in addition, shall be entitled to actual and necessary transportation, subsistence,
and other expenses incidental to the performance of his
duties.
3. Subject to such polidies, regulations, and direc-
comment
tions as the - may from time to time prescribe,
the Office of Economic Defense shall:
a. Study and analyse probleme and methods of economic
commun -
defense and formulate plans and programs palating
thereto; and advise the Resident as to economic
defense measures to be taken or functions to be
performed essential to the effective defense of
the Nation.
b. Use all appropriate means to assure that policies
and measures relating to economic defense approved
by the President are carried into effect by the
departments and agencies concerned, and in the
case of policies and measures which are not appropriate for execution by other departments and
agencies, take all lawful steps necessary to carry
them into effect.
3
354
(a) Initiate plans and make arrangements for the
coordination of the work of agencies engaged
in the accumulation and assembly of information and data required for economic defense
in order to assure maximum availability and
utility of such information and data.
(d) Review proposed or existing legislation relating to or affecting economic defense and recommend such additional legislation as may be
necessary or desirable; and perform such other
functions relating to economic defense as the
President may from time to time assign.
4. The Director shall exercise and perform all powers
and functions heretofore vested by any Proclamation, Execu-
tive order, or regulation in any officer or agency of the
Government (1) under section 6 of the act of July 2, 1940,
entitled "An Act to expedite the strengthening of the
national defense" (Public, No. 703, 76th Cong.), as extended
by joint resolution of May 28, 1941 (Public, No. 75, 77th
Cong.), and (2) under the act of October 10, 1940, entitled
"An Act to authorise the President to requisition certain
articles and materials for the use of the United States,
and for other purposes" (Public, No. 829, 76th Cong.),
except the powers and functions vested in the Joint Army
and Navy Munitions Board by sections 1 and 2 of Executive
Order No. 8567 of October 15, 1940; and all such Proclama-
tions, Executive orders, and regulations are amended to
the extent necessary to make this paragraph effective,
but shall otherwise remain in full force and effect, and
355
4
any of the provisions thereof heretofore applicable to
any such officer or agency shall be applicable to the
Office of Economic Defense.
5. The Director, with the advice and assistance of
the Committee on Economic Defense, shall discharge and
perform the administrative responsibilities and duties
required to carry out the functions and authorities set
forth in this Order.
6. In the study of problems and in the execution
of programs, it shall be the policy of the Office of Economic
Defense to collaborate with existing departments and agencies
which perform functions and activities pertaining to economic
defense. Such departments and agencies are requested to
cooperate with the Office of Economic Defense in arranging
for appropriate clearance of proposed policies and measures
involving economic defense considerations. The Office of
with Pre age pival for
Economic Defense may arrange for the establishment, com1
mittess or groups of advisers, representing two or more
departments and agencies as the case may require, to study
Cock
and develop economic defense plans and programs in respect
to particular commodities or services, geographical areas,
types of measures that might be exercised, and other related
matters.
7. To facilitate unity of action and the maximum use
of existing services and facilities, each of the following
departments and agencies, in addition to the departments and
agencies represented on the Committee on Economic Defense,
shall designate a responsible officer or officers to represent the department or agency in its continuing relationships
with the Office of Economic Defense: The Departments of
Justice, Agriculture, and Labor,
ankefeller
356
5
Commerce, the Federal Loan Agency, the United States
Maritime Commission, the United States Tariff Commission,
the Federal Trade Commission, the Board of Governors
of the Federal Reserve System, the Office of Production
Management, the Office of Price Administration and
Civilian Supply, the Office for Coordination of Commercial
and Cultural Relations Between the American Republics,
the Permanent Joint Board on Defense, the Division of
Defense Aid Reports, and such additional departments and
agencies as the President may from time to time determine.
The Office of Economic Defense shall provide for the
systematic conduct of business with the foregoing departments and agencies.
7. The Director may provide for the internal
organization and management of the Office of Economic
Defense. He shall obtain the President's approval for
the establishment of the principal subdivisions of the
Office and the appointment of the heads thereof.
8. Within the limits of such funds as may be
appropriated to the Office of Economic Defense, or as
may be allocated to it by the President through the
Bureau of the Budget, the Director may employ necessary
personnel and make provision for the necessary supplies,
facilities, and services. However, the Office of Economic
Defense shall use such statistical, informational, fiscal,
personnel, and other general business services and facilities as may be made available through the Office for
Emergency Management.
357
6
9. This Order shall become effective immediately,
except that paragraph 4 shall become effective on June
1941.
THE WHITE HOUSE,
June
, 1941
358
July 16, 1941
My dear Admiral:
As a token of the great pleasure that
I derived from my trip with you on the
U. S. S. AUGUSTA, I am sending you a silver
cup which I would like to present, through
you, to the AUGUSTA to be given to "who In
the opinion of his Commanding Officer has
contributed most to the battle efficiency
of the U. S. S. AUGUSTA.
Yours sincerely,
(Signed) H. Morgenthau, Sm.
Admiral Ernest J. King,
U.S. S. AUGUSTA,
Care, Postmaster,
Newport, Rhode Island.
359
July 16, 1941
My dear Admiral:
As a token of the great pleasure that
I derived from my trip with you on the
U. S. S. AUGUSTA, I am sending you a silver
cup which I would like to present, through
you, to the AUGUSTA to be given to "who In
the opinion of his Commanding Officer has
contributed
to the battle efficiency
of
the U. S. S. most
AUGUSTA.
Yours sincerely,
(Signed) H. Morgenthan, Sr.
Admiral Ernest J. King,
U.S. S. AUGUSTA,
Care, Postmaster,
Newport, Rhode Island.
360
July 16, 1941
My dear Admiral:
As a token of the great pleasure that
I derived from my trip with you on the
U. S. S. AUGUSTA, I am sending you a silver
cup which I would like to present, through
you, to the AUGUSTA to be given to "who In
the opinion of his Commanding Officer has
contributed
to the battle efficiency
of
the U. S. S.most
AUGUSTA.
Yours sincerely,
(Signed) H. Morgenthau. Se.
Admiral Ernest J. King,
U.S. S. AUGUSTA,
Care, Postmaster,
Newport, Rhode Island.
361
THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA
Box 680
TELEPHONE REPUBLIC 7860
BENJAMIN FRANKLIN STATION
WASHINGTON. D.C.
Dr Harry E. White,
Director of Monetary Research,
July 16th, 1941
U.S. Treasury,
Washington, D.C.
My dear White,
In connection with the recent press criticisms about
our export policy, I have obtained the latest available figures of export
values
by telegram from London. You may be interested to have a copy
of these.
The figures are not published in England and should,
therefore, be regarded as strictly confidential.
Very sorry to hear that you have been not quite well
to-day. I am making a bold bid to leave Washington for London
late next Tuesday evening.
Yours sincerely,
JMkeym
mannaged VIDGEST
AA
I JUL
to colalvia
crodecioM
Johns
VALUE AND VOLUME OF AGGREGATE BRITISH EXPORTS
362
(Monthly Averages)
Value
Volume Index
1935 = 100
L million
1937
43.5
111.1
1938
39.2
98.6
1939
36.6
92.9
1940 (first six months)
41.7
90.4
27.4
54.1
27.9
53.2
24.7
47.0(?)
(second six months)
"
1941 (Jan. Feb. March, Apr., May)
May
II.
(Monthly Averages)
Exports of
Iron and Steel
Machinery
Manufactures
1000 tons
1000 tons
1937
215
36.5
1938
160
38.3
1939
132
30.5
1940 (first six months)
115
26.5
65
15.9
47
15.7
35
13.2
(second six months)
1941 (Jan. Feb. March, Apr., May)
May
III.
Exports to
North America
(Monthly Averages)
L million
South America &
West Indies
L million
1937
5.1
4.2
1938
3.7
3.7
1939
4.3
3.6
1940 (first six months)
5.5
4.7
5.8
3.3
6.1
2.9
4.7
2.3
(second six months)
If
1941 (Jan. Feb. March, Apr., May)
May
7/16/41 - Handed to Miss Kistler by Mr. Chance (6:30 p.m.)
363
Discussed in meeting
SALES OF LEAD
w Deep's offer 7/18/14
The British representatives would appreciate advice on the
following question, which raises a matter of principle possibly
applicable to other commodities.
It is understood that negotiations have just been concluded
between the Metals Reserve Company, and the Consolidated Mining &
Smelting Company of Canada, for the prompt delivery of 35,000 short
tons of lead, and in addition, a minimum of 5,000 short tons, and
a maximum of 8,000 tons a month, during the period July to December
1941, inclusive, the price being 3.75 cents (U.S.) per pound f.o.b.
Trail. It is believed that additional quantities will be required
by U.S.A. The British Government own a stock of 60,000 tons of
lead in Canada surplus to their requirements similarly placed in all
respects to the above, which they would like to offer to the Metals
Reserve Company; and they may also have a further small amount
available from forthcoming supplies. The question for decision is
that of the price at which this lead shall be offered. There are
three possible alternatives:
(1) The lead might be offered at the price of 3.75 f.o.b. Tra
agreed upon for recent purchases by the Metals Reserve Company from
Canadian and also other producers.
(2) The lead in question has, however, been acquired by the
British Government under a running contract, arranged immediately
after the outbreak of war, at a basic price only slightly in excess
of 3 cents, with increments corresponding to any increased costs of
production. (The exact price is only determinable some time after
the production period.) Carrying charges have also been incurred.
The lead might be offered at the contract price.
(3) In order to avoid a transaction between Governments at a
profit, the lead might be released by the British Government to the
Canadian producers, leaving them free to sell it to the Metals Reserve
Company at 3.75 f.o.b. Trail.
(1) would provide the British Treasury with the maximum amount
of dollars. (2) and (3) would preserve the principle, that there
364
-2-
should he no question of profit in transactions between Governments.
(3) would transfer the profit to the Canadian producers and furnish
the British Treasury with Canadian, not U.S., dollars.
A possible argument in favour of (1), which might provide a
defensible precedent, is that Great Britain in purchasing this lead
a considerable time ago took the risks of the market and has incurred
subsequent carrying charges. An argument against (3) is that much
of this lead was paid for in effect in gold, so that it is reasonable
that the British Treasury should now be reimbursed in U.S. dollars.
If we depart from the existing price, difficulties may arise where
the contract price is higher than the existing price.
The above is to be sharply distinguished from a subsequent lead
transaction which the British authorities may wish to suggest for the
purchase of a stock pile of surplus lead (40,000 tons in Burma, and
100,000 - 200,000 tons in Australia), which cannot be shipped. In
the case of a purchase of unshippable surplus lead the price would
unquestionably be the same as that paid by the British Government
without any question of recovery in back carrying charges. The
British Treasury do not like to suggest a different basis for the
Canadian lead without explaining the full position. But it might
be held that the proper course is to make use of the existing price
where raw materials are supplied for immediate shipment and the
contract price in other cases.
365
THE WHITE HOUSE
WASHINGTON
July 16, 1941.
Dear Mr. Secretary:
This is a copy of the letter I spoke
to you about. I should appreciate it very
much if you would check the fourth paragraph
with your own records.
Sincerely yours,
Land
time
Lauchlin Currie
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
C
366
0
P
Y
WAR DEPARTMENT
General Staff
War Plans Div.
Washington
June 16, 1941.
WD 400.3295 (6-13-41) MC-E
Honorable Mr. Lauchlin Currie,
Administrative Assistant to the President,
Washington, D. C.
Dear Mr. Currie:
The War Department has given careful consideration
to your letter of June 3, 1941, relative to ammunition, spare
parts and accessories for the one hundred Curtiss P-40 airplanes
and their armament to be shipped to China.
The supply of ammunition presents one of the most
critical problems in the munitions program. A study of the
ammunition requirements to meet the minimum needs of the Army
and Navy, including certain special urgent requirements, indi-
cates the inability of the War Department to fulfill your
request.
The subject of spare parts and accessories for armament and airplanes is now being considered and you will be advised at an early date on this matter.
At the time the decision was made to reallocate 300
P-40 airplanes, allotting 100 to China and 200 to Britain, the
British agreed to supply the guns and ammunition for the 100
airplanes allotted to China. I informed the Secretary of the
Treasury that the United States Army would be unable to furnish
guns and ammunition for the above airplanes.
I regret that circumstances do not permit a favorable
reply at this time.
Faithfully yours,
(G. C. Marshall - Signed)
Chief of Staff.
SECRET
367
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 16, 1941
TO
Secretary Morgenthau
FROM
Mr. Kamarok
Subject: Airplane Deliveries
1. A total of 85 planes shipped is reported in the latest
statement received.
2. Two Bell Airacobras are reported as shipped to England.
This 18 the first mention of a movement of P-39's to England.
3. Out of the total of 1,440 airplanes shipped since
January, two types make up more than half (Curties Tomahawks,
431, all to the Middle East; Lockheed Hudsons, 342, all to
England).
368
-2-
Division of Monetary
Research
Airplane Shipments to the British
(From February 1 to July 13 by air
January 11 to June 21 by sea)
Table
A. - Shipments by Area
Total
Latest
Week
Reported
To Date
34
521
0
41
ma
11
To the United Kingdom
Light and medium bombers
Heavy bombers
Naval patrol bombers
Pursuit
71
Total to United Kingdom
644
39
To the Middle East
Light and medium bombers
Pursuit
150
O
40
Total to Middle East
431
40
581
To the Far East
Light and medium bombers
Naval patrol bombers
Pursuit
Trainers
6
0
o
9
145
6
55
0
Total to Far East
215
6
Totals
Light and medium bombers
Heavy bombers
Naval patrol bombers
Pursuit
Trainers
Grand Total
34
677
0
41
80
3
48
587
o
55
85
1,440
369
-3-
Division of Monetary
Research
Table B.
Shipments by Types
-
Total
Latest
Reported
To Date
Week
Bell Airacobra (P-39)
Boeing B-17
2
21
0
Brewster Buffalo
Consolidated Catalina
Liberator
Curtiss Tomahawk
Douglas
2
Boston I
Boston II
Boston III
Glenn Martin Maryland
80
3
40
1
0
72
14
83
0
United Chesapeake
Grand Total - All Types
150
O
Lockheed Hudson I
North American Harvard II
431
0
O
Hudson IV
Hudson V
20
0
Grumman Martlet II
Hudson III
145
6
9
1
57
0
o
18
16
266
O
55
4
29
85
1,440
370
Division of Monetary
4
Research
Table C. - Plane Deliveries to the British by Weeks
Light
and Medium
Week
Bombers
Ended
Feb. 8
Feb. 15
Feb. 22
Mar. 1
Mar. 8
Mar. 15
Mar. 22
Mar. 29
22
Apr. 5
21
21
Naval
Heavy
Bombers
Patrol
Bombers
-
35
-
-
-
-
100
5
7
16
26
-
25
-
Apr. 19
Apr. 26
20
May 3
May 10
May 17
May 25
61
23
#
June i
June 8
June 15
June 22
June 29
July 6
July 13
*
45
19
31
2
22
-
41
18
-
46
73
-
101
27
-
52
-
32
2
4
5
-
28
56
15
27
106
10
-
3
2
1
8
30
28
37
29
1
13
26
-
2
10
37
62
25
-
7
36
61
28
-
-
3
3
27
-
-
2
25
139
-
10
3
17
Total
4
-
1
Trainers
-
-
3
39
Apr. 12
Pursuit
55
100
19
-
25
-
65
21
-
59
-
-
46
4
20
-
51
-
4
52
-
84
-
-
1
96
-
42
5
2
7
-
5
7
1
-
50
20
34
-
3
48
-
85
677
41
80
587
55
1,440
3
-
The date given is for shipments by air. Shipments by
water start three weeks earlier. That is, the statement
reporting the shipment of planes by air for the week ending July 13 would report the shipment of planes by water
for the week ending June 21.
Prepared by:
Mr. Turner
Mr. Foy
Mr. Murphy
Mr. Haas
371
Y DEPARTMENT
CE COMMUNICATION
DATE July 16, 1941
TO
FROM
Secretary Morgenthau
Mr. Haas
Subject: Current
Markets Developments in the High-grade Security
SUMMARY
(1) Prices of United States Government securities have changed
very little on balance during the first half of July
(Charts I and II). The only group of issues to gain
markedly were the taxable bonds.
Weekly reporting member banks increased their holdings
of guaranteed securities by $174 millions in the week
ended July 9 (Chart III). This reflects mainly the absorption by these banks of the cash portion of the new
RFC note which was issued on July 3.
(2) The new 000 note offered on July 10 was quoted at the
close on that day at 100-19/32 to yield .96 percent.
The issue appears to be selling about in line with the
market for comparable guaranteed securities (Chart IV).
(3) High-grade corporate and municipal bonds showed little
change in price during the first half of this month.
New bond offerings in the first two weeks of July were
relatively small.
(4) About 53 percent of the $5.8 billions increase during
the fiscal year 1941 in the volume of direct and guar-
anteed Government securities held by private investors
was financed by the expansion of bank deposits. The
remaining 47 percent (about $2.7 billions) was financed
out of "real savings" or idle bank balances. During
the same period about 54 percent of the increase in
member bank deposits can be attributed to Government
financing operations. The remainder was principally
due to the growth of bank loans.
(5) The prices of British Government securities have recently
risen rather sharply (Chart v). Among the reasons offered by the press for this rise are rumors of a new "tap"
security to be issued on terms less attractive to investors than the current yields on outstanding securities.
372
Secretary Morgenthau - 2
I. United States Government Securities
Prices of Treasury bonds and notes have varied within a
fairly narrow range in the first half of July (Chart I).
With the exception of the outstanding taxable bonds, which
advanced about 5/8 of a point, Treasury securities were
very little changed at last night's close from their prices
on June 30. Price changes are shown by maturity classes
and tax-exemption status in the following tablet
Average price change
June 30 - July 15
issues
:
Tax-exempt
Taxable
issues
All issues
:
(In thirty-seconds)
Notes
1 to 3 years
3 to 5 years
+1
-1
+2
+ 20
+5
-
o
0
0
0
0
Bonds
5 to 15 years to call
15 years and over to call
0
The average yield of long-term partially tax-exempt
June 30 (Chart II).
Treasury bonds was 1.90 percent yesterday, the same as on
During the week ended July 9, weekly reporting member
banks in leading cities increased their holdings of guaranteed
securities by $174 millions, of which $96 millions was accounted for by banks in New York City and $78 millions by
banks in other cities (Chart III). This increase presumably
reflects the issuance on July 3 of the 1 percent RFC note
due April 15, 1944. The amount of this note outstanding is
$573 millions, of which about $210 millions represented refunding of a maturing issue and $363 millions new money.
It appears, therefore, that about one-half of the new money
portion of the issue went to weekly reporting banks, at
least in the first instance.
373
Secretary Morgenthau - 3
II. CCC Financing
The new 1-1/8 percent CCC note due February 15, 1945,
which was offered on July 10. was quoted at the opening
that day at 100-23/32 bid. At the close it was quoted at
100-19/32 bid, equivalent to a yield of .96 percent. Since
the offering date the when-issued quotations have varied
with the quotations of other guaranteed securities.
Chart IV, based on last night's closing bid quotations,
compares the yield of the new 000 note with the yields of
the other outstanding taxable guaranteed securities. The
new note appears to be selling about in line with the market.
III. High-grade Corporate and Municipal Securities
Prices in the high-grade corporate and municipal bond
market have been stable during the past two weeks. Our
average of the yields of five high-grade corporate bonds,
moving inversely to prices, has increased one basis point
since June 30 (Chart II). The weekly average price of
municipal bonds remains unchanged from its high level of
June 28.
New bond offerings to the public in the New York market
in the first two weeks of this month totaled about $30 millions. This compares with offerings of about $103 millions
in the last two weeks of June.
The registration of the new large issue of $234 millions
of American Telephone and Telegraph Company convertible bonds
became effective July 15. About $94 millions of the $234
millions will probably be used by the Company to call an
outstanding issue. Therefore, the new issue will probably
absorb about $140 millions of funds seeking bond investment.
IV. Increase in the Public Debt and in Bank
Deposits During the Fiscal Year 1941
During the fiscal year just ended, the total interest-
bearing debt increased by $6.9 billions. of this amount,
$6.0 billions consisted of direct obligations of the United
374
Secretary Morgenthau - 4
States and $0.9 billions of guaranteed securities. Federal
Government agencies and trust funds and the Federal Reserve
Banks absorbed about $1.1 billions net. (The Federal Reserve
Banks decreased their holdings of Governments by $0.3 billions
during the period.) The remaining $5.8 billions was absorbed
by private investors.
As has been the case in other recent years, commercial
banks were the largest single group in amount of Government
securities absorbed, taking about 53 percent of the increase
in the privately held debt. The estimated absorption of the
$5.8 billions available to private investors is shown in the
table below.
Estimated Absorption of Government Securities
by Private Investors
June 30, 1940 - June 30, 1941
(Billions of dollars)
Weekly reporting member banks
Other member banks
Non-member commercial banks
2.7
.3
.1
All commercial banks
Mutual savings banks
Insurance companies
All others:
Marketable obligations
Savings bonds - July through April
Savings bonds - May and June
3.1
.2
.8
.3
.7
.7
2.7
5.8
Approximately 47 percent of the increase in privately
held debt was financed from real savings or from idle bank
deposits. Mutual savings banks and insurance companies
together accounted for only $1 billion, or about 17 percent,
while all others -- principally individuals and non-financial
375
Secretary Morgenthau - 5
corporations -- accounted for about $1.7 billions, or about
30 percent of the increase. All except $0.3 billions of
this absorption was in the form of United States savings
bonds, however. It is also of considerable interest that
the amount of United States savings bonds sold during the
two months of the defense savings bond campaign was equal
to the whole amount of savings bonds sold during the ten
months preceding the campaign.
It is estimated that deposits of all member banks increased $5.6 billions in the fiscal year 1941. The part
played
Government financing in increasing these deposits
is shownby
below.
Factors Accounting for the Increase
in Member Bank Deposits
June 30, 1940 - June 30, 1941
(Billions of dollars)
Increase in deposits:
Demand deposits
Time deposits
+ 5.3
+ .3
5.6
Principal factors accounting
for the increase:
Government security holdings
Other investments
+ .1
Cash and reserve balances
- .6
Loans
Other
+ 3.0
+ 2.9
+ .2
5.6
During the fiscal year 1941 the increased holdings of
Government securities accounted for about 54 percent of the
$5.6 billions estimated increase in deposits of member banks.
However, the increase in loans during the same period accounted
for only slightly less of the increased deposits than did the
increased Government security holdings.
376
Secretary Morgenthau - 6
The above tables indicate that slightly more than half
of the Government's borrowing from the public during the
fiscal year has been financed by the expansion of bank
credit. It is also clear, however, that other factors have
been almost as important as Government borrowing in the
expansion of bank deposits.
The foregoing figures present several interesting
contrasts with the developments of the fiscal year 1940
before the Defense Program had gotten under way. During
fiscal 1940 the privately held direct and guaranteed public
debt increased by $1.4 billions, of which $0.8 billions, or
about 57 percent, was absorbed by commercial banks. Purchases
of $0.9 billions of United States savings bonds by investors
other than banks and insurance companies, were almost offset
by a decrease of $0.7 billions in the marketable securities
held by these investors. During this same period deposits
of member banks increased by $5.4 billions. About 69 percent of this increase was attributable to an increase in
cash and reserve balances - the result of the large inflow
of gold which occurred during that year - while only 16 percent of the increase was attributable to purchases of
Government securities and 15 percent to an increase in
loans.
V. British Government Securities
After remaining fairly steady since the beginning of
the year, prices of British Government securities have
recently risen sharply. The 2-1/2 percent consols have
gained almost 4 points in the two months since the middle
of May to a price of 82-1/4, equivalent to a yield of 3.05
percent, at yesterday's close (Chart V). This rise compares
with a rise of only one point in the four months between
mid-January and the middle of May.
The price behavior of other British Government securities has been similar. The 3-1/2 percent War Loan is now
quoted at 105-1/16, to yield 3.01 percent, as compared with
103-1/2 in the middle of May. The British financial press
attributes this improvement in the prices of Government
bonds partly to favorable war news and partly to rumors
that the current "tap" issue will soon be replaced by another
issue on terms which will make the current yields on outstanding issues favorable by comparison.
Attachments.
377
Chart I
CHANGES IN THE PRICES OF U.S. SECURITIES
Points Plotted Represent the Difference from December 28, 1940 Price of Each Maturity Class
1941
MAR.
1941
1942
SEPT.
MAY
NOV.
JUNE
TTT
POINTS
JULY
JAN.
POINTS
AUGUST
TTITT
POINTS
(NET CHANGE)
CHANGE)
(RET ONANGE)
Daily
Saturday Quotations
+16
+16
+3
+3
+1
+1
+1
+1
+2
+2
+
+1
BONDS.
OVER 15 Yes. TO CALL
+1
+1
+
+1
NOTES
NOTES
3-5 Yes.
Yes.
0
0
-3
0
0
-1
-
-
-1
NOTES
+
1-3 Yes.
.1
NOTES
3-5 Yes
-1
+
-2
-2
-1
+1
-11
-11
-3
BONDS
-3
5-15 Yes. TO CALL
-1
-1)
BONDS.
5-15 Yes
+
+
-11
-11
TO CALL
-2
-2
BONDS
OVER 15 Yrs.
-5
-5
TO CALL
-24
-24
-24
-2)
-6
-24
-24
-7
-3
-3
-M
-34
-6
->>
-H
-M
-9
-34
-4
-4
-10
1941
SEPT.
NOV.
JAN.
1942
-4)
14
7
JULY
MAY
-11
16
26
JUNE
28
21
5
MAR.
with
LITTLE
19
12
2
JAN.
-
23
-4)
30
9
+
-4
4
AUGUST
MAY
941
F 153 - E
Office of the Secretary of the Treasury
I - - Declaration
378
Chart II
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM US TREASURY
AND AVERAGE OF HIGH GRADE CORPORATE BONDS
yea
JAN
1941
1941
1940
AUG SEPT OCT. NOV DEC JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT. NOV1.4DEC
MAR
Inverted Scale
PER CENT
inverted Scale
PER CENT
WEEKLY Saturday Quotations
PER CENT
1.8
.
2.0
20
18
Long Term
20
Treasury
2.2
2.2
22
Long Term Treasury
or years more to earliest call date)
2.4
24
24
2.4
26
26
28
28
Corporate
28
10
Corporate
30
30
1.2
32
32
14
3.4
14
36
36
PER
36
PER
CENT
CENT
CENT
100
100
Spread Between Long Term
.
Treasury and Corporate
80
Spread
.
80
in
100
80
60
60
60
40
40
4C
20
20
20
0
0
AUG
940
SEPT
OCT
Nov
be
JAN
.
int
"
0
=
MAY
. MAR APR - MAY OF
1941
Change in composition of Long Term Treasury average
DEC
14
.
the the Secretary the Treatment
APR
NOV
.
MAR
OCT
MAY
.
FEB
SEPT
NINE
1941
.
-
JAN
AUG
N
14
JULY
JUN
ALL
Chart III
U.S. GOVERNMENT SECURITY HOLDINGS, WEEKLY REPORTING MEMBER BANKS
Cumulative Net Change from December 4. 1940
1940
1 94 1
9
4
DOLLARS
MAY
7
26
23
AUGUST SEPTEMBER OCTOBER
JULY
JUNE
21
4
12
26
12
2
29
15
16
30
16
27
13
24
10
22
T
T
MILLIONS
B
18
APRIL
MARCH
n
FEBRUARY
JANUARY
DECEMBER
DOLLARS
WILLIONS
New York City
1600
1600
TOTAL
1200
1200
e
800
800
NOTES
400
400
BONDS
0
0
GUARANTEED
ILLS
-400
400
DECEMBER JANUARY FEBRUARY
APRIL
MARCH
AUGUST SEPTEMBER OCTOBER
JULY
JUNE
MAY
1200
1200
All Other
800
800
TOTAL
400
400
BONDS
GUARANTEED
0
0
BILLS
NOTES
400
400
DECEMBER
JANUARY
FEBRUARY
APRIL
MARCH
MAY
AUGUST SEPTEMBER OCTOBER
JULY
JUNE
2400
2400
All Cities
2000
2000
TOTAL
1600
1600
1200
1200
BONDS
800
800
NOTES
GUARANTEED
400
400
0
0
BILLS
1.
1
I
I
1
I
1
4
Dividian of Research and Statistics
1
Office of the Secretary of the Treasury
400
FEBRUARY
26
12
MARCH
26
23
9
JANUARY
1940
12
APRIL
7
29
21
MAY
4
DECEMBER
15
18
JUNE
2
18
16
JULY
30
13
27
10
24
8
400
22
AUGUST SEPTEMBER OUTOBER
1941
F 146 - D
Ohar
YIELDS OF TAXABLE GUARANTEED BECURITIRE
Based on Closing Bids, July 15, 1941
1941
1942
1943
1944
PCR
1945
1946
1947
1948
PER
CENT
CENT
1.4
1.4
1.2
1.2
1.0
1.0
NEW C.C.C. NOTE
.8
.8
.6
.6
.4
A
.2
2
0
1941
- of - - I
1942
1943
1944
1945
0
1946
1947
1948
Office of the Secretary of the Treasury
F 136-E
381
Chart V
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM U.S TREASURY
BONDS AND U.K. 21/2% CONSOLS
inverted Scale
PER CENT
NOV
SEPT
MAR
JAN
MAY
1942
JULY
SEPT
NOV
and
JUNE
MAR
JAN
Inverted Scale
TTL
JULY
-
SEPT
AUG
14
,
2
MAY
IIII
1941
1941
1940
JULY
PER CENT
so
inverted Scale
PER CENT
Daily
WEEKLY. Friday Quotations
1.8
1.8
1.8
2.0
20
20
Long Term Treasury
22
2.2
22
Long Term Treasury
(12 years - - - earliest call date)
2.4
2.4
2.6
24
2.4
2.6
28
2.8
28
U.K 2%% Console
3.0
3.0
30
U.K. 2%% Consols
3.2
3.2
3.2
3.4
3.4
3.4
New Minimum
34
3.6
New Minimum
36
38
3.8
38
PER
PER
CENT
CENT
PER
CENT
14
1.4
14
12
1.2
5
12
Differential
Differential
10
1.0
10
8
6
4
2
0
JAN
MAR
JULY
MAY
SEPT
NOV
1942
to
NOV
JUNE
.
SEPT
.
JULY
JULY
,
MAY
IF
10
MAR
JAN
AUG
SEPT
1941
1941
1940
Change composition of Form Treasury average
Fixed terms of prices not veries in terms
vields
FO-IN 6
0
-
:
382
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
Miss Channesy
DATE July 16, 1941.
For
Secretary Morgenthau
TO
FROM Mr. Cochran
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
Purchased from commercial concerns
£39,000
£13,000
Open market sterling closed at 4.03-3/4. as against a final quotation of
4.03-1/2 yesterday. There were no reported transactions.
In New York, closing quotations for the foreign currencies listed below were
as follows:
Canadian dollar
Argentine peso (free)
Brazilian milreis (free)
Uruguayan peso (free)
Colombian peso
Mexican peso
11-3/4% discount
.2380
.0505
.4380
.5800
.2070
Cuban peso
1-5/16% discount
Japanese yen
.2358
In Shanghai, the yuan remained at 5-5/16 Sterling was quoted at 3.92-1/4,
the decline of 2-1/4 cancelling yesterday's gain.
There were no gold transactions consummated by us today.
The Federal Reserve Bank of New York reported that the Bank of Canada shipped
$3,185,000 in gold from Canada to the Federal for account of the Government of
Canada, for sale to the New York Assay Office.
In London, spot and forward silver were again fixed at 23-3/8d, equivalent to
42.444.
The Treasury's purchase price for foreign silver was unchanged at 35 Handy
and Harman's settlement price for foreign silver was also unchanged at 34-3/44.
We made no purchases of silver today.
E
383
-2 The report of July 9 received from the Federal Reserve Bank of New York
giving foreign exchange positions of banks and bankers in its district, revealed
that the total position of all countries was short the equivalent of $5,646,000,
increase of $649,000 in the short position since July 2. Net changes were as
an
follows:
Short Position
Country
England**
Europe
July 2
$ 193,000
2,943,000
Canada
572,000 (Long)
Latin America
484,000
45,000
Japan
Other Asia
1,887,000
All others
17,000
Total
$4,997,000
Short Position
July 9
$ 766,000
2,922,000
421,000 (Long)
469,000
42,000
1,921,000
53,000 (Long)
$5,646,000
Change in
Short Position
+ $573,000
- 21,000
+ 151,000
- 15,000
- 3,000
+ 34,000
- 70,000
+ $649,000
*Plus sign (+) indicates increase in short position, or decrease in long position.
Minus sign(-) indicates decrease in short position, or increase in long position.
**Combined position in registered and open market sterling.
N.M.S.
CONFIDENTIAL
384
kir
MEMORANDUM FOR THE SECRETARY.
Mail Report
July 16, 1941.
General mail has very much fallen off during the last week or
ten days. Although the volume is not so great, the particular tenor
of the mail continues in the same type and proportion it has been for
some time.
Attacks on England, on convoys, and on any participation in the
war continue to lead in numbers. There are 10 anti-England letters
to one pro-England, and out of each 10, at least 3 attack cooperation
with Russia.
Only 1 letter personally abusive of the Secretary has come in
in the last ten days. It was anonymous. There are many abusive of
the Administration, rather than any individual, largely on the basis
of extravagance, but also because of the "President's desire to drag
us into war, etc.".
There are a few letters protesting strikes and urging curbs on
labor, but these have fallen off.
The campaign against the proposed additional taxes on married
couples continues very active.
The new radio hour elicited a great many suggestions, original
poems, music, etc., but so far as the Secretary's mail is concerned,
little direct comment either of praise or criticism. There were 3
letters after the last hour criticising the use of English songs, and
2 after the first hour criticising the fact that an English actor
instead of an American one recited the Gettysburg Address.
there.
Several Seattle citisens wrote praising the income tax investigation
There continued to be many suggestions as to methods of raising
taxes -- horse races, dog licenses, bank accounts, real estate transfer
taxes, etc., are frequently suggested. Protests are against joint re-
turns, the record keeping necessary for small businesses, and the burden
on the middle classes.
385
-Memorandum for the Secretary.
July 16, 1941.
There are also many suggestions as to methods of increasing
bond sales. There is much continued criticism of getting to banks
or Post Offices in lunch hours or after the office. Many wish to
have wage deduction or canvassing within plant or office where they
work.
Comments from various letters follow:
W. T. Marshall, Tuxedo Park, Delaware, Tinsmith in Pa. Railway Shop,
has bought $1,400 worth of bonds. Will buy more. Has canvassed
Wilmington shop and out of 73 tinsmiths, is only one who has bought.
Doesn't know of any other buyer in plant of 2,000 except self and boss.
On talking with fellow workers hears many wisecracks and is often
offered a dime with the statement, "This is my all-out-aid". Believes
resentment against scale of wages, rather than U. S., responsible for
lack of enthusiasm. Also, banks closed before workmen can reach them,
and Post Office too far away. If any representative of the Government -not of employers, churches or labor unions - were to canvass, believes
it would have immediate result.
J. 0. Nuckolles, Little Rock, Ark., notes we are still paying Senator
Wheeler's salary. Doesn't loyalty to country apply even to Senators?
Why pay salary to a man working for Hitler and not United States?
Among the letters from editors of country newspapers canvassed by
Defense Bond staff are a number strongly expressed comments on Govern-
ment drive for free advertising. The word "chiseling" is frequently
used 1 Editors write that the Treasury can afford to spend a proportion
of the money for launching the bond campaign in the advertising which
the small paper desperately needs to maintain its existence. The country
press gives liberally of its space to print releases from many Government
Departments, and supports the drive editorially and by private purchasing. Texas
Why ask that it also contribute its very livelihood? One editor in
writes, "Seven out of ten letters we get are franked, and our private
opinion (not agitated in our columns) is that it is high time a little
economy was practiced in Washington, and tax-eating employees with in the
entire alphabet of Government agencies stop sending releases the
suggestion, 'publish this if it doesn't cost us anything'. We will other cooperate -- but we are paying taxes, find the cost of paper and by
commodities soaring, and the hick-town press is completely passed
when there is advertising appropriation to pass out".
386
-3Memorandum for the Secretary.
July 16, 1941.
K. Morgan, Ann Arbor, Mich. Some who cannot conscientiously take
part in military service, either actively or through purchase of
Defense Bonds, would like to help carry peacetime burdens of Government. Could not the Government issue peace bonds for non-military
purposes, bearing no interest? Many would be glad to buy at a
sacrifice to show love of country.
A. H. Mogensen, New York City, suggests we print special cards to be
used instead of Christmas greetings. Could be distributed through
Post Offices, and would cost very little either to print or distribute.
Cards would have some such legend as this -- "By purchasing this special
Defense Christmas Card I have turned over to the Treasury (or USO or
other beneficiary) the amount I would ordinarily have spent for cards."
W. E. Staley, Los Angeles. Why I do not buy Defense Bonds -- the more
this Administration has, the more it spends. The money is not devoted
to National Defense, but goes in loans to China, Latin America, to crop
control, and other pet projects. The President is doing all he can
to provoke war, giving away our destroyers, occupying Iceland, etc.
C. H. Crandon, a County Commissioner, Director of the First National
Bank, and leader in the defense work of Miami, Florida, writes that the
food stamp plan was more or less forced upon the Board of County Com-
missioners, which now feels it is not wise or necessary. The writer
has been asked to help push the sale of Defense Stamps and Bonds, and
urges that a survey be made to undertake to determine whether the food
stamp should be eliminated. Local welfare workers have reported that
the plan has not only not been helpful, but has actually wasted public
funds. He believes that the Government on one hand is coming into the
community and encouraging public officials to waste money, and on the
other hand, is asking them to save and invest in Government Stamps and
Bonds.
A belated letter of praise for the Amherst speech came from Miss Ortha
Vanerstrom, Seattle, Wash., who read what was printed in the Christian
Science Monitor on June 24th. "It is a fine thing for the graduating
class to hear that message from one who is not on the faculty, and from
one who holds such an important position in the Federal Government.
I liked the way you handled the subject, from the first line right down
to the last period."
Greforest
387
C
0
P
Y
CONFIDENTIAL
PARAPHRAS E
A telegram (no. 867) of July 16, 1941 from the American
Consul General at Shanghai reads substantially as follows:
There are reports current to the effect that the question
of stabilization may affect financial activities of the Japanese
in the Shanghai area and that the United States may yet "freeze"
Japanege and/or Chinese accounts. The operation of the export
license systems of the Philippine Islands and the United States
and of similar systems by the Netherlands and the British territories in the eastern hemisphere reduce to a great extent
Japan's opportunity to continue the use of Shanghai as a supply
base for imported commodities. It is believed that the foregoing are factors which may result in the adoption by the
Nanking regime and Japan of new strategy concerning the currency
problem in East Central China and Shanghai.
The fact that the Yokohama Specie Bank at Shanghai is es-
timated to have sold during the two weeks ending July 14 in
the Shanghai foreign exchange market US $5,000,000 is signifi-
cant. This may be, it is thought, part of a plan by means of
which the Central Reserve Bank's foreign exchange reserves,
as
-2allegedly turned over recently to the Yokohama Specie Bank, are
disposed of for the acquirement of slightly less than
100,000,000 national Chinese yuan with which Japan may purchase
necessary materials out of the stocks remaining at Shanghai (?)
or from the goods of the hinterland, since Japan's problems of
supplies are no doubt growing more serious. However, it is possible that the above-mentioned sales of US currency may be representative of the reserves abroad of the Huahsing Bank.
The supposition is that Wang Ching-wei's regime will be allowed to use the 300,000 yen loan to accomplish objectives as
follows: (a) acquiring fapi gradually in exchange for the military scrip yen borrowed from Japan, in this way depressing grad-
ually the exchange value of the scrip yen to parity with Central
Reserve Bank yuan issues and so breaking the way for the inclusion
of the region within the yen currency and the economy bloc, and
(b) obtaining in exchange for the fapi thus acquired services and
goods with which to improve the administrative position of the
Tang regime in thisarea. It is thought probable that this program, if carried out, will affect adversely the purchasing
power of the fapi in this area and impair the position of the
fapi with relation to the Central Reserve Bank currency which it
is likely will be dissociated from its arbitrary temporary parity
with fapi at a later date. Although these measures would not
affect directly the exchange value of the fapi on the market at
Shanghai (technically rates tend to be strengthened by the current sales of United States currency) such measures may affect
388
389
-even more adversely the economy of the Shanghai area and the
position of the Chinese currency. No doubt these moves when
once started will have a tendency to affect adversely the
economy of unoccupied China, especially if a back flow of fapi
from East Central China to Chinese-controlled areas results,
increasing the circulation in the Chinese-controlled areas.
thus raising prices and, perhaps, making it possible for the
Wang Ching-wei regime to buy with fapi goods from unoccupied
China.
Copy:1g 7/21/41
390
July 16, 1941
Dear Mr. Soong:
Thank you for sending me the
latest telegram from Berlin. I
have forwarded it to the President.
Yours sincerely,
(Signed) E. Morgenthan, Jr.
Mr. T. V. Soong,
2817 Woodland Drive,
Washington, D. C.
391
July 16, 1941
Dear Mr. Soong:
Thank you for sending me the
latest telegram from Berlin. I
have forwarded it to the President.
Yours sincerely,
(Signed) E. Morgenthau, Se.
Mr. T. V. Soong,
2817 Woodland Drive,
Washington, D. C.
392
July 16, 1941
Dear Mr. Seong:
Thank you for sending me the
latest telegram from Berlin. I
have forwarded it to the President.
Yours sincerely,
(Signed) H. Morgenthau, Jr.
Mr. T. V. Soong,
2817 Woodland Drive,
Washington, D. C.
393
2817 WOODLAND DRIVE
WASHINGTON,D.C.
Joy 15, 1941
Our m Mayorther,
I take the pleasure of sending
hm copy y a telgram that high prove 7
interest, although is was dated the ninth
:
With hind agans
Jan Sincerely
between tomy
394
TELEGRAM FROM BERLIN
July 9th, 1941
Staunch resistance of Soviet troops entirely unexpected by the General Staff, which had hoped to achieve
a break through in a few days, entrap and destroy the main
Red armies and destroy their fighting strength, and secure
the crops and industrial areas intact.
So far the Soviet line is unbroken, their armies
are making orderly retirement according to plans, and destroying everything in the areas they are evacuating.
If, in the scheduled time, the German army cannot
achieve the collapse of the Soviet armies, it will affect
their entire military plans and the situation of Germany.
After careful consideration I propose to come to the
United States and report to you before returning to Switzerland.
395
July 16, 1941
My dear Mr. President:
Mr. T. V. Soong has given me
another message which he has re-
ceived from Berlin. I am enclosing
a copy herewith.
Yours sincerely,
(Signed) H. Morganthan, JR.
The President,
The White House.
By Messenger a.m.
Sever Service
of
July 16, 1941
My dear Mr. President:
Mr. T. V. Soong has given me
another message which he has re-
ceived from Berlin. I am enclosing
a copy herewith.
Yours sincerely,
(Signed) H. Morganthau, Jr.
The President,
The White House.
By Messenger a.m.
Secret Service
396
397
July 16, 1941
My dear Mr. President:
Mr. T. V. Soong has given me
another message which he has re-
ceived from Berlin. I am enclosing
a copy herewith.
Yours sincerely,
(Signed) H. Morgenthan, Jr.
The President,
The White House.
By Messenger a. m.
Sever Service
398
July 16, 1941
My dear Mr. Ambassador:
If you are furnishing the President or our Army and Navy with military
information on the progress of the war
between Russia and Germany, I would ap-
preciate it if you would also let me
have copies which I would treat confidentially.
Yours sincerely,
(Signed) H. Morgenthau, Jr.
His Excellency
The Ambassador of the Union of
Soviet Socialist Republics,
Washington, D. C.
4:25pm
7/14/41
399
July 16, 1941
My dear Mr. Ambassador:
If you are furnishing the President or our Army and Navy with military
information on the progress of the war
between Russia and Germany, I would ap-
preciate it if you would also let me
have copies which I would treat confidentially.
Yours sincerely,
(Signed) H. Morgenthau, Jr.
His Excellency
The Ambassador of the Union of
Soviet Socialist Republics,
Washington, D. C.
By
7/16/41
7:25
400
July 16, 1941
My dear Mr. Ambassador:
If you are furnishing the President or our Army and Navy with military
information on the progress of the war
between Russia and Germany, I would ap-
preciate it if you would also let me
have copies which I would treat confidentially.
Yours sincerely,
(Signed) H. Morgenthau, Jr.
His Excellency
The Ambassador of the Union of
Soviet Socialist Republics,
Washington, D. C.
4:25pm
By
7/16/41
OFFICIAL
COMMUNICATIONS
401
TO
SECRETARY OF STATE
WASHINGTON
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
July 16. 1941
My dear Mr. Secretary:
As you will recall, during the fall of 1940 we had
under consideration an exchange of notes between the Soviet
Ambassador and myself in which it was proposed to give
assurances to the Government of the Union of Soviet Socialist
Republics that no prohibitive or restrictive measures would
be applied by the Government of the United States to the
export or import of Soviet gold or silver which would not
be applied to all other countries. In view of certain considerations of an international character the contemplated
exchange did not take place.
The Soviet Ambassador has brought up this question again
and desires to effect an immediate exchange of notes on
this subject. He has furthermore suggested that this exchange
be
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
402
-2-
be connected with, or perhaps form a part of, the commercial
agreement between the Soviet Union and the United States
which is to be renewed in the immediate future.
I am enclosing herewith draft copies of the notes
which we propose to exchange, subject of course to your
approval, and I would appreciate receiving from you at your
earliest convenience any comments which you may wish to make
on these draft notes.
Sincerely yours,
Acting Seeretary
Enclosures:
Draft copies of notes.
IS VA
OF
2€
403
My dear Mr. Velles:
For a number of years purchases by the Union of Soviet
Socialist Republies in the United States of America have
greatly exceeded exports fres the Seviet Union to the
United States and 18 is probable that this condition will
continue to exist for some time. In view of this situation
the Government of the Union of Seviet Socialist Republics
may find is desirable to expert gold to the United States
of America in as amount sufficient to enable it to meet
obligations which it has already made or the making of
which is under contemplation. It would, therefore, appreelate assurances from the Government of the United States
that
The Honorable
The Secretary of State.
404
that the State Bank of the Union of Soviet Socialist Repub-
lies will be permitted without hindrance to expert gold into
the United States for the purpose indicated, that the
Treasury of the United States will purchase such gold, and
in particular that the Government of the United States of
America will not take with respect to the Union of Soviet
Socialist Republies any measures prohibiting or curtailing
exports or importe of gold or silver which shall not be
applied with respect to all other countries.
I am, my dear Mr. Welles,
Very sincerely yours,
405
My dear Mr. Ambassador:
The receipt is acknowledged of your note of
1941, in which you state that the Government of the Union
of Soviet Socialist Republics would appreciate certain
assurances from the Government of the United States
relating to the purchase of Soviet gold in the United
States.
In announcements of January 31 and February 1, 1934,
the Secretary of the Treasury stated that, until further
notice, the United States would buy gold imported from
abroad at the rate of $35 per fine troy ounce, less the
usual
His Excellency
Constantine A. Ounansky,
Ambassador of Union of Soviet
Socialist Republics.
406
-8-
usual mint charges and less one-fourth of one percent,
all subject to compliance with the regulations issued
under the Gold Reserve Act of 1934. Such gold purchases
have been made continuously thereafter and without disorimination.
The foregoing continues to be the policy of the
Government of the United States and assurances are given
to the Government of the Union of Soviet Socialist Repub-
lies that no prohibitive or restrictive measures will be
applied to the export or import of Soviet gold or silver
which will not be applied to all other countries.
I am, ay dear Mr. Oumansky,
Very sincerely yours,
Eu:EP:LIS
7/15/41
with-that impliments 407
nom
OUNT R. N. COUDENHOVE-KALERGI
PRESIDENT OF THE PAN EUROPA UNION
2501 PALISADE AVENUE
NEW YORK CITY
408
July 16, 1941
My dear Mr. President:
Count R. N. Coudenhove-Kalergi called on me
today and gave me, in confidence, the following
suggestion:
"To transform Liberia into an
American Bridgehead in Africa.
1. By an understanding with
the Liberian Government, analogue to
its recent agreement with Iceland,
the U.S.A. could assure a strategical
bridgehead in Africa at the narrowest
part of the Atlantic, without risking
any conflict with France, Portugal or
other European powers.
2. An American naval and airbasis in Liberia would enable the U.S.A.
to control all communications between
West Africa and South America.
8. This American stronghold in
Africa would back decisively the resistance of the French government and of its
African Empire against any German attempt
to invade North-Africa or to seize or
control Dakar.
4. Liberia might eventually be
considered as within the Western Hemis-
phere, if the Date-Line is accepted as
its natural geographic limit."
is
409
The suggestion seems sufficiently interesting
to pass along to you.
Yours sincerely,
The President,
The White House.
P. S. Count Coudenhove-Kalergi, as you probably know,
is President of the Pan-Europe Union.
410
July 16, 1941
My dear Mr. President:
Count R. N. Coudenhove-Kalergi called on me
today and gave me, in confidence, the following
suggestion:
"To transform Liberia into an
American Bridgehead in Africa.
1. By an understanding with
the Liberian Government, analogue to
its recent agreement with Iceland,
the U.S.A. could assure a strategical
bridgehead in Africa at the narrowest
part of the Atlantic, without risking
any conflict with France, Portugal or
other European powers.
2. An American naval and airbasis in Liberia would enable the U.S.A.
to control all communications between
West Africa and South America.
3. This American stronghold in
Africa would back decisively the resist-
ance of the French government and of its
African Empire against any German attempt
to invade North-Africa or to seise or
control Dakar.
4. Liberia might eventually be
considered as within the Western Hemis-
phere, if the Date-Line is accepted as
its natural geographic limit."
411
-2-
The suggestion seems sufficiently interesting
to pass along to you.
Yours sincerely,
The President,
The White House.
P. S.
Count Coudenhove-Kalergi, as you probably know,
is President of the Pan-Europa Union.
412
July 16, 1941
My dear Mr. President:
Count R. N. Coudenhove-Kalergi called on me
today and gave me, in confidence, the following
suggestion:
"To transform Liberia into an
American Bridgehead in Africa.
1. By an understanding with
the Liberian Government, analogue to
its recent agreement with Iceland,
the U.S.A. could assure a strategical
bridgehead in Africa at the narrowest
part of the Atlantic, without risking
any conflict with France, Portugal or
other European powers.
2. An American naval and airbasis in Liberia would enable the U.S.A.
to control all communications between
West Africa and South America.
3. This American stronghold in
Africa would back decisively the resist-
ance of the French government and of its
African Empire against any German attempt
to invade North-Africa or to seise or
control Dakar.
4. Liberia might eventually be
considered as within the Western Hemis-
phere, if the Date-Line is accepted as
Its natural geographic limit."
413
-2-
The suggestion seems sufficiently interesting
to pass along to you.
Yours sincerely,
The President,
The White House.
P. S. Count Coudenhove-Kalergi, as you probably know,
is President of the Pan-Europa Union.
414
2501 PALISADE AVENUE
NEW YORK CITY
SUGGESTION
in Africa. to transform Liberia into an American Bridgehead
I.) By an understanding with the Liberian Government,
analogue to its recent agreement with Iceland, the U.S.A.
could assure a strategical bridgehead in Africa at the
narrowest part of the Atlantic ,without risking any
conflict with France, Portugal or other R uropean powers.
2.) An American naval and air-basis in Liberia would
enable the U.S.A. to control all communications between
West Africa and South America.
3.) This American stroghold in Africa would back decisively
the resistance of the French government and of its African
Empire against any German attempt to invade North-Africa
or to seize or control Dakar.
4.) Liberia might eventually be considered as within
the Western Hemisphere, if the Date-Line is accepted
as its natural geographic limit.***
/
415
run
MRS HENRY BAR MAINE HARBOR MORGENTHAU July 13/41
My dear bountCondenhamen
Kalergi
I spoke to my son
I to day & told him l would
give you a letter of introduction
to him - so he will expect for
Please communicate mth
Sir Very Mrs klotz she mil
arrange an interview - show
for this letterWith Kind repair
Amerperthan
416
Institute of Public Affairs
University of Virginia
Charlottesville, Virginia
Morning Address
Friday
July 4, 1941
Topic: Post War Problems
THE FUTURE OF EUROPE AND AMERICA
Address by Count R. N. Coudenhove-Kalergi: President, Pan-Europa Union;
Author, Europe Must Unite; The Totalitarian State Against Man, The Technical
Revolution; The Struggle for Pan-Europa; etc. New York, New York.
"The conception of a United States of Europe is right.
Every step taken to that end which appeases the obsolete
hatred and vanished oppressions, which makes easier the traffic
and reciprocal services of Europe, which encourages its
nations to lay aside their procautionary panoply, is good in
itself - is good for them and good for all."
Winston Churchill (1930)
The main issue of this war is the future of Europe: whether this
artificial continent will join the West or the East, America or Asia.
If Europe joine the West, an "Atlantic Union" of Western Civilization, embracing Pan-America, Pan-Europe, and the British Commonwealth will
become the most powerful association on earth, capable of assuring a century
of peace, progress and prosperity.
But if Europe should join the East, then a totalitarian world would
emerge, embracing the whole of Europe, Africa and Asia. The democratic New
a
World would be confronted by Motalitarian Old World, combining its strong
forcest o amash Western Civilization, and to replace it by other anti-democratic
forms of life.
After this war the Atlantic will eithor become a huge bridge between Europe and America, uniting them by a stream of common ideals and interests
- or a deep abyss, separating two hostile worlds, continents, and civilizations.
The issue of this war therefore is decisive not only for Europe,
but also for America and for the world.
417
Count Coudenhove-Kalergi
=2-
This war cannot be understood as a more conflict between nations:
for it is a decisive struggle between three utterly different principles of
life, represented by three very different men: by Churchill, Hitler, and Stalin.
Each of these three men is fighting for a Europe and for a world
following his proper conceptions:
Churchill as champion of Western Civilization;
Hitler as champion of Nazism;
Stalin as champion of Bolshevism.
Churchill's victory would affirm Europe as a part of the great world
of Western Civilization, organizing it as a reliable and permanont partner and
ally of the Americas.
Hitler's victory would transform Europe into the center of a new
Nazi-world, profoundly hostile toward America, its ideals, its interests, and
its principles of life.
Stalin's victory would condemn Europe to become a part of the
Soviet Union, equally hostile against everything America stands for and lives
for.
Hitler and Stalin are both fighting for a Union of Europe, but for a
Union that would transform all Europeans into slaves.
Hitlers's Europe would be based on German domination, Nazi-distatorship
and his personal tyranny.
Stalin's Europe would be based on Russian domination, Bolshevist
dictatorship and his personal despotism.
In both cases Europe would become a deadly enemy of America.
For both mon, and their systems, aim not only at the domination of
Europe, but of the entire planet. Triumphant in Europe, controling Africa, and
418
Count Coudenhove-Kalergi
3
backed by Asia, they would, without delay prepare the siege, the revolution and
conquest of America as the decisive step toward their world-domination.
Therefore America's future only can be secured if Churchill triumphs
over this totalitarian peril. Britain's victory alone can save Europe from bar
barism, and America from utter isolation.
To assure a bright and peaceful future for America, for Europe, for
Britain, and for the World, an Allied victory is the first, the most essential,
but not the only condition. The years that followed the Allied victory of 1918
have proved that even the most brilliant military triumph remains futile, if
followed by a fragile and stupid peace.
Victory alone cannot guarantee our future, but only a victory completed by a stable and constructive peace.
Our first task then is to win the war, our second task to win the peace.
Just as war must be prepared in peace-time so must peace be prepared in war-time.
No one can know when, and by what surprising events, peace may become possible.
It would then be a disaster, if the Allies had to improvise a peace-treaty,
only to end the war, and neglect to prepare in advance a solid and lasting
peace-order as a gateway toward a new and better era of history.
Hitler and Stalin know exactly what kind of a world they would attempt
to create after their eventual triumph.
Hitler would organize Europe under German domination, and Germany
under Nazi dictatorship. After having crushed the Soviets, and having transformed Russia into a German colony, he would attempt to encircle the United
States from the West, East, and South, preparing her collapse, desintegration
and destruction. Finally he would preach a racial crusade against his Asiatic
ally, as a final step to conquer the Globe.
Stalin works with different means toward a similar aim. All his
419
Count Coudonhove-Kalergi
policies aimed to probong the wars in Europe, and in Asia, until Hitler and the
democracies as well as Japan and China would be utterly exhausted, starved, and
ruined. Then he hoped to pick in five continents the ripe fruits of his revolutionary agitation, using a bolshevist Germany as his main instrument -for the
conquest of Europe, and a bolshevist China for the conquest of Asia. From
these two points he hoped to carry his world-revolution across the Atlantic and
the Pacific, to undermine and to conquer the last stronghold of liberty: America.
Compared with these world-embracing war aims of Hitler and Stalin,
Britain's vision of a New World remains rather uncertain. Yet the declared
British war-aims can be resumed in a threefold program:
1.) To overthrow Hitlerism.
2.) To break forever Germany's domination over Europe.
3.) To organize an era of world-wide peace and general prosperity.
It is obvious that the liquidation of Hitlerism is the key of this
entire program. If Hitlerism is overthrown, Britain has won the war;
if Britain is obliged to sign any peace with Hitler, she will have lost the war.
For any peace-treaty with Hitler would be but a screen to hide his preparations for a surprising and final assault against England. The experience
of more than a dozen nations which trusted in Hitler 's pledges until they were
suddenly invaded and smashed, have shown that no negotiated peace is conceiva-
ble with men who consider pence-promises only as instruments of aggression.
Neither disarmament, nor re conciliation, nor prosperity, could follow such a
negotiated peace with Hitler, or any of his Nazi successors. Britain faces the
alternative of either smashing Hitler, or to be smashed by him.
Britain can smash Hitler, either by crushing his army - or by provoking a military upheaval in Germany that would erush Nazism and open the path to
peace-negotiations.
420
Count Coudenhove-Kalergi
=5m
A decisive military victory for Britain, over Gormany, would certainly
be possible, after the conquest of the European skies with the help of American
production. But such an effort would mean a long war with incalculable consoquences.
Therefore, the second alternative of a military upheaval ought not to
be neglected. Today the German army with its national aims, and the Nazi Party
with its party-aims, are not friends, but allies. This alliance will be maintained
as long as the army-chiefs hope that Hitler will end the war by a crushing victory
over Britain. But as soon as the army-chiefs become aware that such a military
decision has become impossible, and that Britain will nover negotiate with
Hitler, they will take the government into their own hands to obtain an honourablo peace, and to save Germany from utter destruction.
Britain can promote such an evolution, by barring definitely all possibilities of poace-negotiations with a Nazi-Germany, and by offering simultaneously,
an honourable peace to any German government that will overthrow Nazism, on the
following terms:
1.) Re-establishment of the Rights of Man and the Rule of Law in Germany:
2.) Guarantee of Germany's pro-invasion frontiers of 1937:
3.) Formation of a European Federation limiting national soversignty
in the fromework of an Atlantic Union with Britain and America.
It is evidont that no victorious Gormany will be ready to accept
such terms; but they might bo very welcomo to a Gorman army and government
after decisive military revorsos.
Tho second British war-ain is to put an and forever to Gormany's donination over Europe, just C.B Great Britain put an and to the Spanish hogenony
of Philipp II. and to the Fronch hegonony of Napoleon. This war-ain is not
only directed against Nazism, but also against overy other form of Pan-Gornanism,
421
Count Coudenhovo-Kalergi
-6-
because any form of Gernan domination over Europe could only be maintained by
force and by arcements, throatáning the peace and the life of Britain.
The first guaranty against such a German hegenony would have to be the
re-establishment of the German pre-invasion frontiers of 1937. Should Germany
maintain control over Austria, Hitler would remain in German public opinion
the creator of Greater Germany, and his regime would be glorified in spite of
all sacrifices. If Austria romained in Gorman hands, the independence of the
Czechs would be doomed - and with their independence the independence of the
Poles.
Controlling Austria, and the Sudeten-region, Germany even after its
defeat would remain the naster of Central and Eastern Europe, and hence the
potential waster of Europe.
Therefore the future delinitations in Europe cannot be based on the
principle of nationality, but on the principle of balance.
Should every linguistic group in Europe be recognized as a single
national state, then Gormany would constitute in the center of Europe a hugo
state of 85 millions of inhabitants. This Pan-Gernany would be surrounded by
a dozon of much smaller and weaker states, the largest of which would be France
and Italy with only 45 millions each.
It is obvious that nothing could prevent the prodominance of this
German block and its future attempts to rule the continont. Therefore Europe
must be based on the principle, that the general interest of the Continent must
prevail over all regional or national aspirations of its sections.
Europe must learn to consider itself as a single great nation, liko
the United States or China, or India - in spite of the diversity of its languages,
religions and traditions.
This European Nation was united for conturios by the Roman Enpire, and
422
Count Coudenhove-Kalergi
7
again for centuries by the Roman Church. Now this community is totally disorganized, and will have to be re-organized again into a Federal System at the
end of the war.
To prevent German hegemony, Europe must break with its pre-war structure, when three or four great powers were surrounded by some two dozen weak
little states. This fatal system will have to be transformed into a new system
of balance, setting an end to German predominance, and paving the way toward
equality, collaboration, and reconciliation.
This balance of power would demand the organization of federal groups
within the framework of a United Europe. Such regional groups might be formed
by each of the four main peninsulas of Europe: The Balkan, Scandinavia, the
Iberian, and the Italian; a fifth group could be organized by the four Western
Democracies: France, Belgium, Holland, Switzerland; a sixth group by the four
Catholic states of Eastern Europe: Poland, Czechoslovakia, Austria, Hungary.
Germany then would constitute a seventh group, without dominating its neighbours
nor being dominated by them. If she ever should try to resume her policies
of pan-Gormanism, she would immediately be stopped by her strong and united
neighbours.
To overcome forever the throat of German hegemony such a system of Euro-
pean balance would have to be combined with the principle of European Federalism,
depriving Germany, and all the other continental states, of their unlimited
sovereignty, in order to prevent new European Wars.
Such a Federation would have to organize its Federal Government and
Parliament; its Federal Army and Supreme Court; its Federal Economy and Reserve
Bank; its Federal Police and its Federal Bill of Rights, for all citizens of the
United States of Europe.
Europe does not need any artificial blueprint for its Federation,
423
Count Coudenhove-Kalergi
-8-
because it has worked out during the last three generations an excellent model
of the future United States of Europe. This model is Switzerland. Here 25 little
states of different tradition, origin, language, religion, and economy, have
constituted a Federation that has found ideal and practical solutions for all
problems confronting European Federalism. Europe would only have to follow
this very successful example - to find the way to permanent poace and general
prosperity.
The Federal executive of Switzerland is formed by a Federal Council of
7 non, elected and always reelected by the Senate and the Parliamont. Each of
those soven non is the chief of a separate Federal Department: State, Commerce,
Finance, Justice, Interior, Army and Transports. Every year another nomber acts
as chairman of this executivo board, with the title of the President of the
Swiss Confederation.
Each of the 25 Swiss Carton-States has complete solf-government, but
the army, the supreme Court, the monstary system, the foreign and economic policy
are federal policies.
In Switzerland there is no national, religious, or racial oppression,
because the Federation guarantees to all Swiss citizens the some human rights.
There is also no shade of national hogenony in spite of the fact
that three quarters of the Swiss population are of German breed and tongue. But
this German-speaking majority is not united to a single dominating canton, but
split up into a system of balance. Moreover the Swiss Constitution stipulates
that all of the Federal Counsellors originate from different cantons, - a very vise
stipulation indeed, that Europe would have to adopt in its future Federal Constitution.
If Europe accepts the principle of Swiss Federalism, its different
states should be able to maintain their traditional political systems as far as
424
Count Coudonhove-Kalergi
they are not in contradiction to European collaboration and civilization.
This meuns that neither Nazian nor Bolahevism would be tolerated within the
European system; but that for instance, Holland could maintain its democratic
kingdom, and that Austria should be allowed to reostablish its traditional monarchy to prevent a new Anschluss-movement in the very interest of European balance,
peace and order. Such democratic monarchies should collaborate loyally with
their republican sister-states under the control of the Federal Government.
AS for the linguistic problem of Eurone, it could find an easy 30lution, if the leading language of the West, English, would be introduced as a
second language in all schools throughout the continent.
Although it is evident that no lasting peace nor prosperity in Europo
are conceivable without some kind of Federation, many Europeans are opposed to
this idea because they decline to become co-citizons of their German oppressors.
They demand either the exclusion of Germany from the European system, or its
transformation into a kind of European "Ghetto".
They do not understand, that no solid European Union can be organized
without or against the Germans. They do not understand that any such attempt
would only drive Germany into the arms of Russia, because this overpopulated
country cannot live in a state of isolation, but must choose between East and
West.
A German-Russian block, reaching from the Rhino to the Boring Strait,
and eventually alliod with Asia, would be a fornidable and pormanent throat
against Westorn Europo, oven if its democracios woro backed by Britain and
America.
To broak tho Gorman throat 30120 are advocating to split up the Gorman
Roich into a serios of littlo statos, instead of noutralizing German prodorrination by a European Fodoration.
425
Count Coudenhove-Walergi
-10-
Although a transformation of German centralism toward federalism
would facilitate reconciliation in Europe, a destruction of German unity by
force would risk the creation of a now and fierce movement for national unity
and revenge among the Germans, thus threatening European peace.
Therefore Europe must deprive Germany of all means of revenge, with-
out creating now elements of hatrod, fear, misory and oppression.
The Germans will have to be assimilated by the Vest and not excluded.
Therefore they will have to receive equal access to the raw-materials, and equal
economic and individual opportunities shared by all Europeans.
The peace of tomorrow should not be based on hatred and revenge
like the peace of 1918 - but on reason and cooperation like the peace of 1815,
which put an end to the long period of Napoleonic ware and invasions.
After twenty years of continental invasions, started by the French
Revolution and continued by Napoleon, the Allies concluded a lasting peace with
France. This peace was signed with an anti-Napoleonic French government, after
France had restituted all its conquests of 20 years, and was ready to participate on equal terms in a system of European reconstruction.
This reconciliation became possible, because the Allies had thrown
the entire responsibility of the French era of invasion on Napoleon and his
system, without trying to punish, to isolate, or to humiliate, the French nation
in spite of its obvious complicity.
The striking success of this method compared with the failure of the
punitive peace of Versailles, indicates the way toward European reconstruction
and reconciliation. This is the same way Lincoln chose after victory in the
Civil War, assuring permanent peace by collaboration, and granting equal rights
to the vanquished within a strong Federal system.
Only such a system of European Federation, balance, solidarity and control can enforce the second British var-aim: to break German hegemony and to
426
Count Coudonhove-Kalorgi
-11-
assure Europo against any future Gornan attempt at invasion or domination.
Only such a Unitod States of Europe, following the Swiss nodel, could
assuro Europe against hegenony, and open an ora of Continental peace and pros-
perity. But it could, by itself, not assure the third British war-ain: World
Pocca.
This world-ponce is inconceivable as long as Europe remains in its pre-
war state of anarchy, economic division and national rivalry. Should such a disnonbored Europe again survive the war America and the British Enpire would risk
involvement every twenty yours in a now Europoan conflagration.
But ovon c. Unitod Europe could only prevent intornational wars by a
close and permanent association with tho Britich Connonwealth and the Amorican
Ropublics.
After the war, the world will prosurably bo divided in fivo hugo groups:
Tho British Enpiro, Pan-America, Russia, Pan-Europo, and the Far East. The sinoJapanese war will probably and with a fodoration botwoon the bolligorants, just
as the European war will probably ond.
Among these fivo huge groups three are associated by a compon civiliaction and traditions Pan-Europe, Pan-America and Britain.
The futuro of Russia remins uncertain and the Far East represents a
very different way of lifo with its own idoals, interests and aspirations.
Thoroforo the Atlantic Family of nations must form a closer association
to assure an ora of lasting peace, to defend its territory, and its compon
civilization, and to assuro a rising standard of general prospority.
Such an Atlantic Union would be strong enough to maintain an air-
floot and a navy capable of enforcing peace all over the world against any
potential coalition, and to assure poacoful solutions of all oventual conflicts
in the Pacific and at the eastern borders of Europe.
427
Count Coudenhove-Kalorgi
-12-
This Atlantic Union is not only a necessary consequence of the grow-
ing development of the Far East, but also of the fact, that Britain is linked by
inseparable bonds with Europe as woll as with America. She nevor can separate
hor fate from that of the European Continent, although the inter-continental
character of hor world-embracing Enpiro prevonts hor from becoming a merber of a
European Federation. But she also can never separate her destiny from that of
the United States of America.
Therefore her mission is to form a living bridge across the stlantic
with England and Canada as main bridgeheads.
This necessary Union between Europo and Britain in the East, America
and Britain in the West, assured an adequate Union between the European and the
American continents, embracing frica and Australia.
The closer and sooner such an Atlantic Union betwoon all nations of
Western Civilization develops, the better for Europe, for America and for Britain. Such an association would have to be based on compon ideals, and interests,
on a common policy of defense, on a common economic system, and a common respect
for International Law.
Such an Atlantic Union, emerging from a British victory, would transform the Atlantic Ocean into tho Moditorranoun Soc. of our ora; its coasts would
bocome the natural contors of a common civilization, liko the coasts of the
Modittorranoan during tho long and prosporous period of Ronan Peaco.
This Atlantic Union, basod on the groat combined ideas of PanAmericanism, Pan-Europo, and tho Union of English-spoaking nations, could alone
assure the third of tho British war-ains: the ostablishnont of an orn of lasting poace and of genoral prosperity.
The world of tonorrow will have to develop throe different organiza-
tions, replacing the ill-fated Loaguo of Nations after its failuro to organize
428
Count Coudenhove-Kalergi
13
Europe and the world to a single Federal system.
1.) A universal, but unpolitical League of Nations, embracing
the whole world, for economic, scientific, medical, moral,
and technical issues, and continuing the successful non-
political activity of the former League.
2.) An Atlantic Union, organized as a system of political,
economic, military, and monetary cooperation between a
reformed Panamerica, a reorganized British Commonwealth
and an organized Pan-Europe as guardians of international
peace and Western Civilization.
3.) A United States of Europe, transforming the European
Continent with its colonies into a Federal State, organized after the democratic example of Switzerland.
Every research-work toward the future peace will have to follow these
three outlines.
It would be very wrong to consider the plane for a now League of
Nations, for a closer Union between America and Britain, and for a United
States of Europe as antagonistic aims, rather than coordinating them to a single
system of post-war peace and international collaboration.
But WG must draw the lessons from the past, and understand why the
generous but unpracticable idea of a world-wide League of Nations has been such
a failure.
We also must understand that any Union limited to Britain and the
United States would provoke the organization of a contra-union between Europe
and Latin-America, thus splitting up the world of Atlantic civilization into two
hostile groups, instead of uniting it.
We must understand that the future of Europe, of America and of Britain,
Count Coudenhove-Kalergi
-14-
429
are so closely linked, that neither of them the decline of the
others in its own vital interest; and that the future of our common Civilization depends on such a Union with all its moral and material strength.
Thile Europe is enslaved, and Britain involved in a heroic struggle
for its life and future, America can prepare this great reconstruction of the
world.
This great Reconstruction would have to follow the main principle of
American life and politics: Federalism. For this grand principle unites
liberty with cooperation, and peace with power. It is the soul of the American
Constitution and the goal of Pan-/uericaniam.
In this American spirit the United States of America should become the
natural sponsor of the United States of Europe, and in closest association
with Britain build up the Atlantic Union of peace, prosperity and liberty.
Then the prophecy will be fullfilled, pronounced almost a century ago
by the great French poet Victor Hugo:
"The day will come when these two hugo Unions: The United
States of America and the United Statos of Europe, will face and
great each other across the Ocean, exchanging their goods, their
commerce, their industry, their art, and their genius - to civilize the planot, to fortilize the deserts, to improve creation
under the eyes of the Creator; and to assure the greatest
benefit for all by combining those two infinite forces:
The brotherhood of man, and the might of God!"
430
0
0
P
DEPARTMENT OF STATE
Y
DIVISION OF THE AMERICAN REPUBLICS
July 16, 1941
Mr. Cochran:
These documents were left with me by the
Colombian Ambassador.
E. G. Collado
(Initialed) E.G.C.
COPY:1ap-7/16/41
431
c
0
P
(TRANSLATION)
Y
DECREE NUMBER 548 OF 1940
(March 16)
by which are formulated certain regulations concerning
the Fund dealt with in Clause 4 of the contract of
October 31, 1934, authorised by Law 7 of 1935.
THE PRESIDENT OF THE REPUBLIC OF COLOMBIA
exercising the extraordinary powers conferred upon him
by Article 1 of Law 54 of 1939.
DECREES:
Article 1
In accordance with the powers granted by Paragraph b)
of Article 1 of Law 54 of 1939. the Government is authorized to come to an agreement with the Banco de la Republica
(Bank of the Republic) upon a change in the contracts in
force concerning the establishment, organization and func-
tioning of the Stabilization Fund, dealt with in Clause 4
of the contract of October 31, 1934, authorized by Law 7
of 1935, and which (Fund) shall have an independent legal
personality.
Article 2
In contracts which are made according to the provi-
sions of the above Article, there may be stipulated:
a) - An increase in the capital of the Fund through contributions of the Government, the Banco de la Republica,
or both.
b)
432
-2-
b) - The power of the Fund to make, in a form to be agreed
upon with the Office of Exchange and Export Control,
contracts for the purchase and sale of foreign exchange,
on either a sight or future basis.
c) - The power of the Fund to contract loans in legal
currency or in foreign currencies (divisas), and to negotiate promissory notes, drafts, bills of exchange and
other certificates of debt.
d) - A guarantee by the Government and the Banco de la
Republica of the operations of the Fund.
e) - The reorganization of the Management of the Fund.
f) - Other changes in the present organization which may
be necessary for the proper fulfillment of the functions
assigned to it.
Article 3
The Government and the Banco de la Republica are
hereby authorized to make loans to the Stabilization Fund
in legal currency or in foreign currencies (divisas), and
to increase their contributions to the capital of the said
Fund in the amount considered necessary to enable the
latter to function properly.
Article 4
The Office of Exchange and Export Control is authorised
to
433
-3-
to hand over to the Stabilization Fund requests for the
purchase of international exchange, approved in accordance
with existing regulations, and which have been covered by
exchange contracts made by the said Fund or through its
intermediary.
The above shall be communicated and published.
Given at Bogota on March 16, 1940.
EDUARDO SANTOS.-
Carlos Lleras Restrepo.-
Minister of the Treasury and Public Credit
copytime
7/17/41
434
DECREE NUMBER 669 OF 1940
(April 5)
by which a contract is approved and certain measures are
ordered concerning the Banco de la Republica.
-THE PRESIDENT OF THE REPUBLIC OF COLOMBIA,
exercising the extraordinary powers conferred upon him by
Article 1 of Law 54 of 1939.DECREES:
Article 1.- The following contract is hereby approved:
"The undersigned, namely: Carlos Lleras Restrepo,
Minister of the Treasury and Public Credit. having been
duly authorized by His Excellency the President of the
Republic, who in the text of this contract will be called
the Government, on the one hand, and Julio Caro, in his
capacity as Manager of the Banco de la Republica, having
been duly authorised by the Board of Directors of the said
bank, on the other hand, who in the text of this contract
will be called the Bank, bearing in mind the stipulations
in the agreements of October 31, 1934 and November 23,
1938, made between the Government and the Bank and, as
authorised by Extraordinary Decree No. 548 of 1940, have
drawn up the contract as shown below:
First.- The Stabilization Fund dealt with in Clauses 4 and
5, respectively, of the contracts of October 31, 1934 and
November 23, 1938. made between the Government and the Bank,
shall
435
-5shall exercise, in accordance with the provisions of
Article 1 of Extraordinary Decree No. 548 of 1940, the
rights and prerogatives of an autonomous legal person.
Second.- In accordance with the provisions of Clause 5 of
the above-mentioned contract of November 23, 1938, the
Stabilization Fund shall be administered by an Autonomous
Board composed of the Minister of the Treasury and Public
Credit, the Manager of the Banco de la Republica and a
member freely designated by the President of the Republic.
The Fund, as a legal person, shall be represented by one of
the members of the Administrative Board, designated by the
Board itself.
Third.- The Stabilization Fund, besides the powers which
it now possesses in conformity with the provisions regulating its functions, may negotiate promissory notes, drafts,
bills of exchange and other certificates of debt, and may
contract loans, on short or long terms, in national currency
or in foreign currencies (divisas).
The Stabilization Fund may likewise conclude contracts
for the purchase and sale of foreign exchange, on a sight or
future basis, adhering to rules which may be issued by the
Office of Exchange and Export Control on the subject.
Fourth.- The Government and the Bank may guarantee any
operations of the Stabilization Fund referred to in the
above Clause. In order to establish the Bank's guarantee,
-the approval of the Board of Directors of the said Bank is
required in each case. The guarantee of the National Government
may be given by the Minister of the Treasury and Public Credit,
by authorization of the President of the Republic.
Fifth.- The Banco de la Republica shall be obligated solely
to contribute to the Stabilization Fund, as its total, an
amount equivalent to 10% of the initial Government contribution,
according to the first (1st) Clause of the above-mentioned contract of November 23, 1938.
The Bank shall make its contributions to the Fund at the
time fixed by the Board of Directors of the said Bank, and they
(the contributions) shall be not less than one half percent
(1/2%) of its paid up capital and legal reserve fund annually,
until the said 10% limit of the initial contribution of the
Government is reached.
Sixth.- In case of liquidation of the Stabilization Fund, their
respective contributions shall be returned to the Government
and the Bank. In such an event, the contributions made by the
Bank shall have priority of reembursement over those of the
National Government.
If the Banco de la Republica should be liquidated before
the Stabilization Fund, its contributions to the latter shall
subject to demand from the moment the liquidation begins.
Seventh.- The Board of Directors of the Banco de In Republica
shall, upon the approval of the Minister of the Treasury and
Public Credit, establish regulations for the manner of carrying
436
-on the operations of the Stabilisation Fund. The said regulations may be modified only by the Board itself with the approval
of the Minister of the Treasury.
Eighth.- There remain in force those stipulations of the contracts of October 31, 1934 and November 23, 1938 which are not
contrary to the present agreement.
Ninth.- This contract must have, to be valid, the approval of
His Excellency the President of the Republic, after a favorable
report of the Council of Ministers and the Board of Directors
of the Banco de la Republica, and it is being issued in duplicate, at Bogota the second of April, nineteen hundred forty.
(Signed)
-
(Signed)
Carlos Lleras Restrepo.
Julio Caro
Republic of Colombia.- Council of Ministers, Bogota,
April 2, 1940.
In today's session the Honorable Council issued a favorable
report on the preceding contract.
The Secretary, Miguel Velandia
---Republic of Colombia.- Executive Branch, Bogota, April 2, 1940.
Approved,
The Minister,
TR:JVN:HSF
COPY:1ap-7/17/41
(Signed) EDUARDO SANTOS
(Signed) Carlos Lleras Restrepo
437
438
DEPARTMENT OF STATE
0
DIVISION OF THE AMERICAN REPUBLICS
0
MEMORANDUM
P
July 16, 1941
Y
Memorandum for Undersecretary Bell:
There are attached an informal confidential memorandum
bringing up-to-date the progress on the financial negotiations
with Mexico referred to in the Department's memorandum of
last fall and the Mexican Government's note of February made
available to the Secretary several months ago, and copies of
(some brief notes on financial aspects of the Mexican note which
are being
led and will
(I submitted to Mr. Welles shortly after its receipt.
(
along.-EGC
I hope that you will be able to arrange a meeting with
Mr. Pierson and myself upon his return to Washington tomorrow,
and that Mr. White or someone else will be able to talk to
Mr. Monteros at some length this week.
E.G.C.
Emilio G. Collado
RA:EGC:MJC
OOPY:lap-7/16/41
0
0
439
P
Y
CONFIDENTIAL
July 16, 1941
Financial Aspects of Mexican Negotiations
1. 011 Expropriations
We have asked the Mexican Government to make a
down payment of $9,000,000 on account of compensati on to
be paid to American oil companies. The two Governments
would appoint experts to determine the total indemnity.
The Mexican Government has suggested a down
payment of $5,000,000, and feels that the down payment
must not be construed to give any indication of amount
of eventual settlement. It is likely that down payment
will be something above $5,000,000 and possibly less than
$9,000,000.
2. Claims
There exists a mass of property claims of American
citizens running back many years. These include agrarian
claims (against which Mexico has already paid in $3,000,000
which will be credited against that amount mentioned below).
general claims, and other property claims. Mexico has
agreed to pay $40,000,000 against all of these, a down
payment of $3,000,000 plus annual payments of $2,500,000
beginning in 1943. The Department has requested that
when the payments of $500,000 a year on account of
Special
440
-2Special (Revolutionary) Claims have been completed
after five years, the animal payments under the present
agreement be increased to $3,000,000. It is not certain
that Mexico will agree to the latter proposal, and the
point is not of the highest importance in the whole
negotiation.
The claims arrangement would be embodied in a
Convention.
3. Foreign Debt
The Mexican Government has been having informal
discussions with the Lamont Committee regarding a plan to
settle its outstanding foreign public and railway debts,
all of pre-1911 origin, which amount as to principal to
some $500,000,000, which have been more or less
continuously in default for over thirty years, which have
been quoted as low as 1/4 on the New York Stock Exchange,
and of which about twenty percent are held by Americans.
The plan under discussion envisages the issuance of new
bonds denominated in pesos at one peso to one dollar
original face value (a reduction to one-fifth), paying
4 percent interest, and to be amortized over a long
period. Mexico would need some $4,000,000 to $5,000,000
annually for the purpose.
The
441
-3The Department does not believe that the whole
plan should be directly contingent upon the conclusion
of these discussions and is requesting the Mexican
Government to agree to some such statement as the follow-
ing in the formal announcement of agreement in principle:
"Without prejudice to the principle that
the difficulties arising between bondholders and
foreign governments are primarily matters for adjustment between these parties rather than between
governments, the Department expresses the gratification
with which it has learned that the Mexican Government is about to enter into negotiations with
representatives of holders of bonds of the railway
debt and the so-called public debt with a view to
effecting a settlement. American citizens are
understood to hold approximately 20% of the bonds
in each category."
4. Stabilization Arrangement
Being discussed with the Treasury.
5. Silver Purchase Arrangement
Being discussed with the Treasury.
b. Export-Import Bank Credits
Being discussed with Mr. Pierson, whom it is
suggested the Treasury consult. The Department has
suggested informally that the Bank consider a credit of
$10,000,000 or $15,000,000 to a Mexican institution,
guaranteed by the Mexican Government, aiding the
completion
-4
completion of construction of the Inter-American Highway
and perhaps certain other major highways. In addition,
Mexico is asking for assistance in a number of projects
such as the purchase of freight cars urgently needed for
transporting strategic materials to the United States,
expansion of steel mill facilities by adding a blast furnace
and rolling mill, establishment of a cellulose industry, and
the construction of a steam plant to supply additional
electric power badly needed in Mexico City. Since these
projects are not all ready for the Bank to consider in detail
it will probably make some general commitment in principle.
The Department envisages a total figure for Export-Import
Bank operations of $30,000,000 or more.
7. The Mexican Government has just signed a contract
with the Metals Reserve Company whereby the latter will
provide a market for all of Mexico's production of a number
of strategic materials, while Mexico is prohibiting export
of these items except to the United States and, for
consumption needs only, to other American republics. Mexico
is also about to adopt general export control parallel to
our own.
Copying 7/17/41
442
C
443
0
P
Y
SALE OF SILVER
The Mexican note requests:
a) "The assurance, at least for a period of
four years, of the purchase of silver by the American
Treasury at a reasonable price."
b) "A contract for the purchase of 6,500,000
ounces a month for four years."
c) Price - that now being paid to American
producers, 71 cents per ounce, to compensate for
the loss of European markets for industrial metals
which at present are being sold in the United States
after payment of heavy import duties. Mexico would
be willing that any amount received over 45 cents an
ounce be applied to military works.
The Secretary of the Treasury has indicated that he
would be prepared at the appropriate time to enter into
conversations with the Mexican Government regarding the
possibility of an arrangement for the purchase of silver.
The Treasury would probably be willing to consider only an
arrangement similar to that in force between 1936 and 1938,
by which, it will be recalled, the Treasury agreed to buy
directly from Mexico up to 5,000,000 ounces per month
at its "world" price fixed daily. The agreement was on a
month to month basis and was extended monthly during that
period. So long as the Treasury maintains its present
policy of buying all silver delivered to it at its world
price, the agreement is only a facility since it would
guarantee such purchase only for monthly intervals.
It
444
-It is probable that the Treasury would agree, on
such terms, to purchase the 6,500,000 ounces a month
requested by Mexico, and it is just possible that we might
persuade the Treasury to enter into slightly longer
contracts than monthly ones. As to price, it is very
unlikely that the Treasury would be willing to pay more
than 35 cents an ounce and should this world price subsequently be changed, the price to Mexico would in all
probability likewise be changed.
Copy:rg 7/17/41
445
C
0
P
Y
STABILIZATION CREDIT
The Mexican note requests a stabilization credit of
up to $30,000,000, and fixes a rate of interest of 1-1/2%
on the balance actually used. This much of the operation
would apparently be quite feasible, and in fact is the
operation which the Department has suggested and which it is
probable the Treasury would be willing to undertake.
The Mexican note goes on to add mimerous conditions
which do not seem reasonable, and which it is probable
the Mexicans do not actually expect to receive. The
first of these is that reciprocal interest, presumably
interest to be paid by the United States on Mexican
balances, also be paid at the rate of 1-1/2%. The
Federal Reserve Bank of New York and commercial banks
pay no interest on this type of deposits and I believe
that there is no possibility that they or Treasury would
even consider paying interest.
The Mexican Government also suggests that any
balance outstanding against Mexico at the end of five
years be subject to liquidation in twenty years 3% bonds,
to be amortized yearly, with the option of repayment in
silver. This type of operation is actually possible, I
believe, under the Stabilization Fund legislation, but is
very
-2-
very different from any operation which the Treasury has
up to now entered, such as the Argentine. It is extremely
doubtful whether the Treasury would consider such an arrange-
ment, although the use of silver even as collateral or for
repayment might possibly be discussed.
The Mexican note also suggests that the dollars in
any balance be computed at the rate of $35 per ounce of
gold. This may be of some importance if the operation is
based in part against gold or silver collateral. If the
operation is carried out on the same basis as the Argentine
operation, the provision has no meaning at all since dollars
will be repaid in dollars and not in some other unit.
Copy:lg 7/17/41
446
447
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Y
CONSTRUCTION OF HIGHWAYS
The Mexican note indicates that the Mexican Government
proposes to issue road bonds in an amount which is apparently
$100,000,000 and which it hopes to place entirely within
Mexico. It requests, however, that some institution,
presumably the Export-Import Bank, agree to underwrite
such an issue to the extent of 60% to take the form of 3%
bonds to be liquidated in ten to fifteen years.
An operation of financing roads or other public
works in Mexico, as well as other American materials needed
in development operations, is quite feasible. It is very
doubtful whether the Federal Loan Agency would wish to go
as high as $60,000,000 immediately and the going rate of
interest in the past has been 4% for a ten years operation.
Nevertheless, the Mexicans' request presents a possibility
for discussion, although it would be desirable immediately
to remove the impresal on that any such generous credit is
likely.
While no requests therefor are actually pending it is
possible that Mexico may soon desire direct or indirect
financial assistance in the rehabilitation of the railway
and telegraph systems.
Copy:1g 7/17/41
448
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P
Y
BALANCE OF PAYMENTS CONSIDERATIONS
In addition to considering individually the various
points of the suggested plan for handling the Mexican
situation, it is essential that we give some consideration
to the net economic effect of the entire proposal. This
it is obviously very difficult to do in a definitive way
since so many items are still quite indefinite. Nevertheless,
it is possible to examine the probable effects on the
balance of payments of Mexico of the financial items of
the plan.
Items which will affect the balance of payments of
Mexico include:
a) The claims settlement.
b) The petroleum settlement.
c) The foreign debt.
d) The sale of silver.
e) Stabilization credit.
f) Credits for public works and development.
g) Trade agreement.
h) Military expenditures.
Of these no attempt will be made to evaluate the results
of a possible trade agreement; it will be assumed that
the psychological benefits of a stabilization credit will
result in a small further inflow of short term capital and
the remaining in Mexico of the funds which recently have
entered; and military expenditures will be left out of
consideration since no estimates are available of the
amounts involved and we are forced to assume that they will
be
-2-
be taken care of by special financial operations. It should
be kept in mind that these three items may have a considerable
effect on the balance of payments, but there is reason to
believe that the effects of any one of them may be offset
by the effects of others. With respect to sale of silver, as
opposed to the use of silver as collateral for any operation,
it can probably be said that no change which will affect
the Mexican balance of payments for the better is to be
expected, and that at best the Treasury may agree to continue
purchasing at the present world price.
The Mexican note proposes an annual payment on claims
of $2,500,000 which would take about fifteen years. The
note gives no details as to a possible debt settlement, but
the Mexicans have had in mind a figure of about $4,500,000
annually for some forty years to cover both the federal and
railway debts. Only about 20% of this amount will accrue
to American bondholders; the rest will be made available
to European bondholders.
With respect to petroleum the Mexican note implies
that all payment is to be made in petroleum, and ignores
our suggestion that some $9,000,000 or $10,000,000 down
payment also be made. If the settlement is to include all
of the oil companies and not only the American it is
probable that at least $9,000,000 or $10,000,000 worth of
oil,
449
450
-3-
oil, or of oil and cash would be involved annually. A portion of this would of course come out of the returns which
Mexico is now receiving from such oil exports as she is able
to make. In 1940 it is probable that Mexico exported at least
$14,000,000 worth of oil. Since any arrangement which would
be satisfactory to Mexico would unquestionably involve the
export of considerably greater quantities of petroleum from
Mexico, it is probably safe to say that a much less than
$10,000,000 a year, perhaps only $5,000,000 a year, net offect on the balance of payments would result.
As a result of all these payments Mexico would undertake a balance of payments drain of at least $12,000,000
for ten years or more, $7,000,000 for an additional five
years or so, and $4,500,000 for the whole forty year period.
This would constitute a serious load in the first period,
while the oil situation was being clarified. In the subsequent years the drain is one which is within the possibilities of the Mexican balance of payments as far as can be
foreseen from a distance of ten years or more.
The effect on the Mexican exchange of the stabilization
credit, largely psychological, will help to make possible
the heavy drains of the first ten years, and financial assistance by the Export-Import Bank, in connection with pub-
lic works and development projects if a portion of this can
be
451
be devoted to local expenditures in Mexico, will also tend to
ease the situation at first. If the highway program extends
over say five years, there should be a net inflow of funds for
four or five years, following which additional amortization
payments must be added to those mentioned above.
All of these considerations point to the fact that, while
it is possible that such a heavy scale of out-payments can be
handled by Mexico, a complete meeting of all these obligations
will be practicable only if the general economic situation of
the United States and the other American republics is kept on
a satisfactorily even keel so that markets for Mexico's present
export products are maintained and developed.
Copy:lg 7/17/41
THE COMPLIMENTS
OF
HAROLD K. HOCHSCHILD
452
Copy of Letter from B. Mexico City, July 16,1941
The big news of the period under review was the announcement
in yesterday's papers of the conclusion of an agreement between the
United States and Mexico regarding certain exports from this country.
So far there have been no comments regarding this agreement,
excepting one from Lic. Padilla, Secretary of the Exterior, who
applauds the measure and calls it the first step towards a real
understanding between the two countries. We don't know at this
writing what the effect of this agreement is going to be, although
we are under the impression that Mexico's export of fibers and
metals to other than American countries has been restricted to the
sales of some lead to Japan, which country was also absorbing most
of the mercury produced here. Manufacturers here, who depend on
the United States for materials, continue to worry over their ability
to purchase from the States, in view of the priorities, etc., and
the new agencies will probably be kept busy on that side of the
agreement.
Otherwise there has been nothing of importance excepting certain
agitation amongst the communists. There is also quite a bit of
agitation amonst federal employees, because the President wants to
make certain readjustments in Federal offices, which are suffering
from an excess of personnel and a notorious inefficiency.
raer
AS
JUL
notatvic
WITH
453
THE
COMPLIMENTS
OF
HAROLD K. HOCHSCHILD
of
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treat this latter information as strictly private.
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454
CONFIDENTIAL
MILITARY INTELLIGENCE DIVISION
TENTATIVE LESSONS BULLETIN
No. 133
G-2/2657-235
WAR DEPARTMENT
Washington, July 16, 1941
NOTICE
The information contained in this series of bulletins
will be restricted to items from official sources which are
reasonably confirmed. The lessons necessarily are tentative
and in no sense mature studies.
This document is being given an approved distribution,
and no additional copies are available in the Military Intelligence Division. For provisions governing its reproduction,
see letter TAG 350.05 (9-19-40) M-B-M.
NOTES ON THE BALKAN CAMPAIGN
SOURCE
These notes are based upon the report of an American official
observer in Berlin. The report, which was dated May 26, 1941, contained information released verbally to the observer by a highly competent foreign military attache who had visited the battlefields of
the Balkan Campaign.
CONTENTS
1. BRITISH SECTOR
2. GREEK SECTOR
3. MISCELLANEOUS
a. Crossing of Streams
b. German Supply
C. German Military Estimate of the Campaign
4. COMMENT BY AMERICAN OFFICIAL OBSERVER
CONFIDENTIAL
CONFIDENTIAL
455
NOTES ON THE BALKAN CAMPAIGN
1. BRITISH SECTOR*
a. Forces Engaged
No Greek forces at all were in the British sector, and the
British had practically no air force there; one South African division,
which had been landed at Athens, had re-embarked immediately after the
fall of Salonika. On the other hand the Germans had at hand as large
an air force as the ground troops could desire and large reserves of
all arms. These reserves were never committed.
The following forces were actually engaged:
(1) German
Corps Hartmann
3 infantry divisions;
Corps B8hme
2 mountain divisions - 5th and 6th;
1 panzer division - the 2d;
1 infantry division.
Corps Stumme
2 panzer divisions;
1 motorized infantry division - this
followed behind but was not committed.
Leibstandarte Adolf Hitler
(2) British
1 English mechanized Brigade equipped with Heavy Carden
Loyd - 2 men - tanks
2d New Zealand Infantry Division
6th Australian Infantry Division
b. Losses incurred
(1) German
In the corps which did the heaviest fighting the losses in
one mountain division were 66 dead and 147 wounded, and in one panzer
#
No Greek forces were in the British sector
CONFIDENTIAL
-2-
CONFIDENTIAL
456
division 97 dead and 160 wounded.
(2) British
It was estimated that the British losses were 5,000 dead or
wounded, and 10,000 prisoners. The British took with them all of
their dead and most of their wounded.
C. German Coordination of Combat Teams
The German plan of attack was based on air superiority and
the close coordination of three combat teams:
(1) Panzer division followed by motorized infantry divisions and normal infantry divisions;
(2) Mountain divisions followed by normal infantry units;
(3) Air attack units principally consisting of Stukas.
Since the German forces were superior in strength to the
British, the British forces could be, and were, out-maneuvered,
which accounts for the extremely low German losses. The heaviest
British losses were suffered through air attacks.
In this campaign German panzer units were confined within
comparatively narrow limits by the character of the terrain which
extended along the few vital roads to southern Greece. The German
commander advanced with his first team, the panzer troops, as the
spearhead. When these units met determined resistance, no serious
effort was made to break it, and the second team, the mountain troops,
were sent through the mountains to penetrate to a point in the rear
which could threaten the defending force. Since no continuous line
was held, this method was usually possible. If, however, the mountain troops also met stiff resistance, the commander could then put
in his third team, the Stukas, to break it. Moreover, the Stuka
team could be used to help either the panzer team or the mountain
troop team, depending on which operation promised the greatest advantages. This type of maneuver was followed throughout the campaign.
During the retreat of the Eritish forces, the air force team
had the added mission of attacking along the roads. Bombs placed on
both sides of the roads were effective in destroying or disrupting
transport and troop columns without damaging the road for a later ad-
vance of German panzer and motorized units.
While that was the general plan, naturally it was varied by
the use of task teams developed for special operations. These task
teams were organized from different arms and services for the partiCONFIDENTIAL
-3-
457
CONFIDENTIAL
cular operations, but in all cases they were built to support either
panzer or mountain troop teams.
2. GREEK SECTOR
A six kilometer sector of the Struma River pass, along the
Metaxas line, was defended by approximately one regiment of 'Greek
troops. This regiment also covered the terraced fortifications
which in turn were manned by normal garrisons. The Germans allotted
the following forces to attack on that sector:
1 infantry regiment;
1 infantry battalion;
1 light 105-mm. battalion;
1 heavy 210-mm. battalion;
2 mixed battalions, each including
1 battery of 105-mm. guns,
1 battery of 150-mm. howitzers;
2 batteries Sturm Geschutze - four 75-mm. guns;
1 battery of 88-mm. antiaircraft guns;
2 Pioneer companies;
Extra signal troops.
As additional support for the main attack, the following
forces were placed under a group commander.
2 mixed artillery battalions;
2 mixed antitank battalions.
No reconnaissance was made prior to attack. This particular attack failed to break through during the first 48 hours,
although one battalion penetrated to a depth of six kilometers.
The Greek position was surrendered only after the Metaxas Line had
been pierced at another point and Salonkia had fallen.
3. MISCELLANEOUS
a. Crossing of Streams
The German crossing of streams was accomplished by means of
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the methods developed during previous campaigns of this war. However,
the crossing of the Corinth Canal, near its southeastern end, was of
particular interest. The nearby terrain on the Corinth side was suitable for aircraft landing, and both banks of the Canal were occupied
by parachute troops. It was reported that 25 graves of German parachutists were seen on the north bank of the Canal, and it is believed
that even stronger resistance was met on the south bank. Immediately
after both sides had been secured, German pioneers blew away enough
of the steep Canal bank to form approaches for vehicles. A previously prepared pontoon bridge in three sections was then put in place the middle section could be removed to permit the passage of vessels.
b. German Supply
The Germans fought the entire campaign without field kitchens
or trains. The first supply train arrived in Athens on April 26 after the final capitulation.
Troops depended upon supplies dropped from the air to supple-
ment captured supplies. The resulting scarcity of food, together
with the tremendous physical demands placed upon troops, had an in-
teresting effect. When the assault troops were sent to rest camps
after the capitulation of Athens, they suffered from insomnia and
from an inability to keep cooked food on their stomachs. In some
cases two weeks were required to bring these soldiers back to normal
mental and physical condition.
C. German Military Estimate of the Campaign
The Metaxas Line was extremely strong and well defended.
The British positions had been selected with care and were defended
with skill and courage, but the British forces were too small, they
arrived too late, and they had no air support. These positions were
not taken by direct assault, but they were made untenable by threats
from the rear. The Germans were able to accomplish their successes
through air superiority and greatly superior ground strength. The
entry of Yugoslavia into the war was a real advantage to the German
conduct of operations; the Yugoslav armies were in no position to
offer effective resistance, and were easily brushed aside, and the
freedom to move through Yugoslav territory permitted the German
forces to out-maneuver British and Greek forces with a minimum cost
in casualties.
The first British troops arrived in Greece on March 2, although the British had brought in their heavy weapons, ammunition,
food supplies, and transport during the fall of 1940. Their prac-
tice of separate loading in troop transport probably caused them
much trouble. The Germans found huge undamaged British stores at
Larissa; one dump contained 100,000 tins of corned beef and all other
supplies in proportionate amounts.
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The British infantry divisions did not reach their positions
until after the Greek main positions had been taken, and they were
thus unable to support the Greeks. British defeat was inevitable
and no great military operation was required; the skill of the Ger-
man commanders in holding down the casualty list was especially
commendable.
After the fall of the Epirus Army the British had but one
thought, and that was to get back to their ships. They occupied and
held positions almost entirely along the roads, and these they held
only long enough to cover the retreat, which was skillfully carried
out considering their relatively weak forces and the fact that they
had no air support.
England entered the Balkan Campaign with two objects in mind:
(1) To establish a Balkan front primarily to prevent German
occupation of Greek airports which could be used to
threaten the Pritish Mediterranean fleet and its
bases;
(2) To strengthen the Greek and Yugoslav Governments in the
hope that by military operations, damage could be
done to the German economical and political organizations.
4. COMMENT BY AMERICAN OFFICIAL OBSERVER
The Balkan Campaign followed the general pattern of all German campaigns during this war. It was characterized by neither new
weapons nor new tactics. It could easily be said that no new lessons
were to be learned, but it must be stated emphatically that at least
one of the old lessons has now assumed the importance of a basic
military principle. That lesson is that air supremacy is an essential and vital factor in the success of all military operations.
German officers and soldiers never criticize the courage,
equipment, or tactical skill of British units. On the contrary,
they have great admiration for the British soldier, and their estimate of British skill in selection and defense of positions in
this campaign is no surprise. German officers have, however, crit-
icized British strategy for arriving too late, with insufficient
forces and with inadequate air support. Of course the Eritish High
Command is faced by tremendous difficulties, but the obvious lesson,
based on cold facts, should not be disregarded.
The positive evidence in this campaign is that German panzer
units and troop columns choked the limited roads of approach for days.
Obviously they were extremely vulnerable to air attacks, and it is
thought that if the British had had even local air supremacy in support of their greatly out-numbered land forces in this favorable
defense terrain, the German attack would have been far more costly
in time, personnel, and materiel.
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At no time in this war has the force lacking air supremacy
been successful, regardless of the relative superiority of the ground
forces. Relatively small forces having air supremacy, however, have
at times been able to defeat much larger opposing forces.
The attacks on the British Isles illustrate the lack of success of the air attacker who has overwhelming land forces and superior
air forces, but does not have air supremacy over the theater of operations. It is not meant that the air force supersedes any other arms;
on the contrary, it is believed that the final decision will still be
made by carefully balanced ground forces. However, if these ground
forces lack air support they are in the same desperate position of
World War I ground forces which lacked artillery support and observa-
tion. In fact, their position is even more precarious because the
enemy with air supremacy has the advantage of mobility in action, relative security for his air bases, clear lines of air communication,
and the great advantage of unhampered observation. Even a highly
mobile ground defensive force is vitally handicapped in action against an enemy having air supremacy.
Another old lesson which should be emphasized is the importance of coordination between attack groups. In the German Army, task
forces are the general practise. These forces are designed to accomplish the assigned mission with due consideration to terrain and
other obstacles, lines of communication available, and opposing forces.
Each task force consists of a team of attack groups. Wide difference
in composition is to be expected, but close coordination is the invariable rule, and again it must be pointed out that close coordination
depends basically upon air supremacy, and secondarily upon liberal
facilities for communication.
In the Balkans the usual task force consisted of three attack
groups:
a. Panzer units;
b. Mountain Units;
C. Air Attack units.
The Panzer units had to get through in any event in order to
take over the limited, but vital, lines of communication. In the confining terrain of the Balkans a small defending force could effective-
ly hold up panzer troops.
The mountain units were employed to work their way around the
flanks of the defenders and to make the defense position untenable.
If both units were held up, the commander of the task force had at his
disposal, by virtue of air supremacy, air attack units capable of
breaking the resistance at either point. These air units preferably
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would be used in support of mountain units in order to avoid destruction of roads, although the choice was always in the hands of the
task commander. In the Balkan Campaign this close coordination, and
the limited defense forces opposing, permitted unusual maneuver with
minimum casualties on the part of the attacker.
The fact that the German troops were able to operate with-
out their trains in this campaign is proof of a very high state of
training and sound discipline.
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RESTRICTED
G-2/2657-220
No. 442 M.I.D., W.D.
12:00 M., July 16, 1941.
SITUATION REPORT
I.
GERIAN-RUSSIAN FIGHT.
Ground: Operations in Murmansk Sector show definite
gain by columns moving east from Petsamo. German-Finnish offensive
has driven Russians out of six former Finnish towns. The thrust
east and south around Lake Ladoga is being reinforced and is making
gains.
German columns are advancing between Luga and
Ilmen Lake on Leningrad. In the encounter at Orsha east of
Borisov, the Russians were driven back, but German columns are
driving east on highway to Smolensk.
Russians continue to hold the Dnieper River at
Rogachev while German columns in flanking maneuvers advance toward
Gomel.
German advanced units have reached the vicinity
of Kiev. Russians are counterattacking southwest of Kiev to check
German advance.
Air: No change in the general situation. The Russians
continue to attack the Ploesti (Roumania) oil area.
II.
GERMAN-BRITISH FIGHT.
Air: German. Extremely limited activity.
British. Apparently no daylight attacks; subnornal
night attacks on the Ruhr.
III. MEDITERRANEAN FIGHT.
Ground: Nothing of importance.
Air: Axis raids on Tobruk and over the Western Desert.
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of Sale Orbiogram
Received as the Mar Department
at 12:12, July 26, 1941.
Lesson, filed 18:15, July 16, 1941.
1. Drive Air Activity - the Continue.
a. of date 14-15. The members of tens of high explosive
boube and numbers of insealteries dropped upon the objectives - were as
follows: the waiting center at Heaver, 86, including five 4000 pound bonbo
and also 1900 pound bonbo, and 4000, Bronon, 72 and 10,000, - the rubber
factory as Broover, 18 and 3000.
A. A total of 207 fighters were dispotated as
follows: 75 - interesption patrols, 6 on special patrols, and 186 in the
protection of shipping. No lessee were reported on these missions.
2.
Bight of July 15-16 Dispotched to the railway eater of
Dateborg were 38 because Considerable fighter opposition was montabered,
resulting in commities to the because personnel. Thirty per cont of the
streatt sent out attention the target, forty per cont attached the city of
Dateburg.
2. - Air Activity over Britata.
a. be of dais 14. 375 fighters were need - defensive patrels.
se - aircraft and 10 long renge because were offensively employed
b. of The - sent out the following: 25
almo-laying airwork, 10 fighters, 25 long reage bembers and 5 recommission
aircraft.
2. bar of Jair 15. a this day German activity consisted of
- over the Chemical and the South Coast.
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464
Highs of July 15-16. Operations were directed against
shipping off the East and Kombiah Consta.
3.
Aircraft Learns Departer.
a.
British legges. or the bombers dispotated to Dateberg the
night of July 15-16, three were - one created in the sea and
one exashed in England.
Information obtainable here indicates that the Rassisa Air Force
is still operating efficiently and that is appears to be attacking German
armored units with success. Personal of the Baseian deek at the British
Air Ministry are unofficially of the opinion that the Bussian Air Force
should be operating at the end of three months, insamch as is is now
operating after three weeks of combat with the German Air Force.
LEE
Distribution:
Secretary of War
State Department
Assistant Chief of Staff, G-2
Mar Plans Division
Office of Naval Intelligence
G.M. e.
Chief of the Army Air Forces
Secretary of Treasury
Assistant Chief of Staff, G-3
Air George
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