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321 JUL 22 1941 My dear Mr. Secretary: We have been very pleased with the results at "Treasury Rouse which is, you will recell, a display for Defense Bonds and Stamps and which includes both equipment and personnel representing the Army. We are planning to further this activity by having permenent displays built in such cities as New York, Philadelphic, Boston Detroit, Chicago and San Francisco. To make these displaysas effective as the one in Washington, it will be necessary for us to have your further cooperation in providing tanks, field guns, etc., as attentiongetters to attract the public and to provide for personnel to explan such pieces as are on display and to add atmosphere by being in uniform. We also have in mind E number of mobile units which could work from city to city to bring home to the people of America se directly as possible the necessity of buying Defense Stamps and Bonds to provide themselves with on Army sufficiently large for our defense. We would like to undertake to have ten such mobile units ready in the very neer future to start touring the country and would like to incorporate in such units all brenches possible representing the verious service organizations. We would also like to have a Flying Squadron for Defense Bonds and Stemps which we could send into state and local celebration centers. These would be used at the biggest of the State Fairs and at the country's big conventions. The entire plan will be handles with advance publicity through our Defense Sevings Staff Information office working with your Bureau of Press Relations. The wish to thank you again for the cooperation you have extended in making "Treasury House" e success and 11 you will advise us of the officers you designate to consider the plan above outlined, our representatives will promptly confer with then. Sincerely, (Signed) W. Morgonthan. Jr. Secretary of the Treasury. The Honorable, The Secretary of War, Fashington, D. C. OD: CA: DEF File to Mr. Thompson cc-nmc 322 JUL 22 1941 My dear Mr. Secretary: We have been very pleased with the results at "Treasury House" which is, as you will recall, a display for Defense Bonds and Stemps and which includes both equipment and personnel representing the Navy. We are planning to further this activity by having permanent displays built in such cities as New York, Philadelphia, Boston, Detroit, Chicago and San Francisco. To make these displays oa effect tive es the one in Washington, it will be necessary for us to have your further cooperation in providing lending equipment, guns, etc., as attention-getters to attract the public and to provide for per- sonnel to explain such pieces 0.8 Are on display and to add atmosphere by being in uniform. We also have in missing a number of mobile units which could work from city to city to bring home to the people of America as directly as possible the of buying Defense Steaps and Bonda to pro- vide themselves with a Navy sufficiently large for our defense. We would like to undertake to have ter. such uobile units rocky in the very near future to start touring the country end would like to incorporate in such units all brenches possible representing the various service organizations. The entire plan will be hendled with advance publicity through our Defence Savings Staff Information office working with your Bureeu of Prece Relations. We wish to thank you again for the cooperation you have extended of the "Treasury House" a success and if you will advise us our officers in making you designate to consider the plan above outlined, repre- sentatives will promptly confer with them. Sincerely, (Signed) H. Morgentham. Jr. Secretary of the Treasury. File to Mr. Thompson The Honorable, The Secretary of Navy, Washington, D. C. ON:DEF cc.n.m.c. 323 TO: 7/29/41 Miss Chauncey D The Secretary was anxious to know whether the Army and Navy were using the tickets he had been sending them for the Treasury Hour. This is the answer. F.K. MR. KUHN 324 TREASURY DEPARTMENT WASHINGTON DEFENSE SAVINGS STAFF July 22, 1941 Dear Vince: Miss Banks of the CBS reports the following information concerning the use of the tickets by the Army and the Navy. We have been forwarding, as you know, regularly 100 tickets to each of these organizations, and they have been using a weekly average of 79 in the Army and 47 in the Navy. This is considered a good average. We will, however, arrange with Miss Banks to reduce the number of tickets to conform to their average so as to make more tickets available for her distribution. Kindest regards. Sincerely Paul Munroe:rc 1501 Broadway New York City Mr. Vincent Callahan Chief-Radio Section Defense Savings Staff Washington, D. C. 325 TREASURY DEPARTMENT WASHINGTON July 22, 1941 PERSONAL Dear Mr. Morgenthau: I have checked around town and, apparently, Mr. Houston did not see anyone when he was in Washington yesterday except the President. As previously advised, he did come by to see me, but I was in conference in your office at the time and missed him. Sincerely yours, B. M. Edwards Honorable Henry Morgenthau, Jr. Secretary of the Treasury UNITED STATES SAVINGS BONDS CONFIDENTIAL 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 E 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 9,589 2,437 10,875 3,191 19,709 6,397 2,437 10,875 11,028 11,226 16,570 11,430 16,311 12,689 6,315 4,867 6,277 6,018 8,504 4,482 472 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 9,413 4,808 6,610 7,347 7,754 4,754 5,541 6,213 6,730 4,513 926 4,636 4,728 5,645 7,930 4,837 2,114 3,060 1,458 1,645 1,799 2,042 1,505 10,375 8,625 10,349 13,533 10,362 6,048 4,693 3,296 3,896 4,414 4,689 3,007 1,046 19 13,435 10,083 11,994 15,332 12,404 7,553 926 4,636 4,728 5,645 7,930 4,837 2,114 21 14,136 7,105 1,015 6,016 3,060 11,076 4,046 1,015 6,016 $223,255 $100,017 $ 16,715 $106,522 $ 36,186 $187,069 $ 63,831 $ 16,715 $106,522 Total Series E $ 9,505 $ 2,387 11,612 15,045 4,066 4,903 22,900 Series F July 1941 1 2 3 5 7 8 9 10 11 12 14 15 16 17 18 Total $ 957 845 1,197 880 605 1,197 860 1,046 602 808 1,189 836 Series G $ 6,160 $ Office of the Secretary of the Treasury, Division of Research and Statistics. Series F $ 957 Series G $ 6,160 1,197 880 605 1,197 860 602 808 1,189 836 July 22, 1941. Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of Unit ed States Savings Bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. 327 CONFIDENTIAL UNITED STATES SAVINGS BONDS Sales in July Compared with June, 1941 On Basis of Issue Price First Seventeen Business Days (June 1-20, July 1-21) (Amounts in thousands of dollars) : : : June Amount : : July : in July Compared with June : : : : Item : Increase or Decrease (-) Sales Percent : $ 36,186 $ 27,591 $ 8,595 Series E - Banks 63,831 41,697 22,134 Series E - Total 100,017 16,715 106,522 69,289 21,396 137,726 30,728 - 31,204 - 4,681 - 21.9 - 22.7 $223,255 $228,411 -$ 5,156 - 2.3% Series E - Post Offices Series F - Banks Series G - Banks Total Office of the Secretary of the Treasury, Division of Research and Statistics. 31.2% 53.1 44.3 July 22, 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. 328 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE July 22, 1941 TO Secretary Morgenthau CONFIDENTIAL FROM Mr. Cochran Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns £72,000 £ 6,000 Purchased from commercial concerns Open market sterling held steady at 4.03-3/4. The only reported transactions consisted of £5,000 purchased from commercial concerns. In New York, closing quotations for the foreign currencies listed below were as follows: Canadian dollar 11-5/8% discount Argentine peso (free) .2380 .0505 .4380 .5800 .2070 Brazilian milreis (free) Uruguayan peso (free) Colombian peso Mexican peso Cuban peso Japanese yen 1-1/4% discount .2358 In Shanghai, the yuan was again quoted at 5-5/16 and sterling was unchanged at 3.94-1/4. There were no gold transactions consummated by us today. No new gold engagements were reported. A price of 23-7/16d was again fixed in London for both spot and forward silver, equivalent to 42.55 The Treasury's purchase price for foreign silver was unchanged at 35 Handy and Harman's settlement price for foreign silver was also unchanged at 34-3/44. We made three purchases of silver totaling 190,000 ounces under the Silver Purchase Act. Of this amount 100,000 ounces represented new production from various foreign countries, purchased for forward delivery. The remaining 90,000 ounces consisted of inventory silver, which was bought for spot delivery. 329 -2- The Federal Reserve Bank's report of July 16, listing deposits of banks in Asia with the New York agencies of Japanese banks, showed that such deposits totaled $52,367,000, a decline of $5,785,000 since July 9. Most of the change in deposits took place on the books of the Yokohama Specie Bank's New York agency. The latter's principal liabilities to and dollar claims on Japanese banks in Asia stood as follows ondollar July 16: July 16 Liabilities: Deposits for Japan and Manchuria Deposits for China : U.S. Treas. Bills, comm. paper, etc If Claims : Loans : Other - mainly Jap. import bills Change from July 9 $34,760,000 11,565,000 29,538,000 - 2,257,000 - 1,676,000 $13,606,000 6,868,000 + 1,800,000 - $3,230,000 + $1,565,000 In connection with recent reports that Japan has been selling substantial amounts of dollars in Shanghai, it is interesting to note, from the above figures, that as much as $8,484,000 may have been withdrawn from Asiatic bank accounts with the Yokohama Agency in the week of July 16. Despite an increase of $1,202,000 in Agency loans to banks in Japan and Manchuria (included in the $1,565,000 figure), those banks' deposits fell $3,230,000 and Treasury bills, etc. held for such banks declined $1,571,000 (included in the $1,676,000 shown above). Withdrawals from Japanese and Manchurian accounts, then, may have exceeded $6,000,000. There was also a decrease of $2,257,000 deposits held by the Agency for banks in China, despite a rise of $227,000 in loans to such banks; this suggests the possible withdrawal of $2,484,000. NMP CONFIDENTIAL 330 July 22, 1941 MEMORANDUM FOR THE SECRETARY'S FILES: A meeting relative to the administration of Executive Order 8389, as amended, was held in Mr. Foley's office at 4:00 p.m., July 22, 1941, attended from time to time by the following: Messrs. Foley, Cochran, B. Bernstein, Pehle, E. M. Bernstein, Kades and Aikin for the Treasury, Messrs. Acheson and Luthringer for State, Messrs. Rosenwald and Jurenev for Justice. Mr. Bernstein discussed the status of Tangier. To clarify the status of Tangier in a manner acceptable to the State De- partment, Mr. Bernstein proposed that a General Ruling be issued stating that Tangier cannot operate under the Spanish General License and stating in effect that transactions of its nationals are subject to specific license. It was agreed to issue the General Ruling and, at the same time, send out a Circular to all the Federals making it clear that Tangier is blocked. There was considerable discussion regarding the payment amounting to 83 million dollars which the British owe the French on French contracts they have taken over. The British are not anxious at this time to make the payment, which will take the form of a check to be drawn by the British Government on their account with the New York Federal Reserve Bank in favor of the Bank of Canada, for the account of the French Government. Last year, the British submitted an application and received a license to make such payments. The question now is whether we should revoke the license and refuse to grant a new one. Mr. Kades explained that if the Treasury was not prepared to follow this procedure, the British would feel obliged to make the payment, since default might bring suit by the French against the American contractors who are supplying the British. If this should happen, we could take over the goods but the War Depart- ment at this time is unwilling to give assurances that there would be future lend-lease funds to pay for these goods. Mr. Acheson said that he would have to take this matter up with Mr. Welles before any decision could be reached. Mr. Bernstein stated that, according to Mr. Finletter of the State Department, the French had made what they described 331 -2- - - as a rock-bottom proposal to sell 10,000 tons of Indo-Chinese rubber for 4 million dollars in free funds, plus 6-1/2 million dollars which would be transferred from their blocked account to be used for the purchase in this country of non-strategic materials for shipment to French Indo-China. Mr. Pehle asked whether we should be willing to let our goods go to Indo-China under present circumstances. It was believed that events themselves in the next few days would decide what our attitude should be. It was agreed that proofs of the proposed TFR-300 should be sent to the New York Federal for study and consultation with bankers and brokers of that city. Representatives of the latter could then be asked to come to Washington for further discussion. It was the consensus that the Report Form should require information with respect to unsecured obligations. Mr. Acheson reported that the Swedes were unable to under- stand the contemplated extension of the Black List to include persons or firms resident in Sweden, since the certification gives official assurances that no national interest other than Sweden's is involved in a transaction when it has been certified. Mr. Bernstein explained the necessity of such a list to deal with individual applications. Mr. Acheson stated that cables were about to be despatched to all embassies and legations asking for the names of: (1) German and Italian firms in the particular country; (2) those firms or individuals who are engaged in anti-American activi- ties; (3) those American firms which have employees who are en- gaged in anti-American activities. It was agreed that the British Statutory List would be given consideration by the embassies and legations in preparing their reports to the State Department. At Mr. Pehle's suggestion, it was agreed that goods presently en route or already here coming from South American firms which are on the Proclaimed List should be allowed into the country provided payment for the goods is made to a blocked account. In this connection, Mr. Acheson said that cables were being despatched amending Consular Regulations to prevent Con- sular Certification of invoices relative to cargo in which a person whose name appears on the Proclaimed List has an interest, provided, of course, the shipment is not covered by a specific license. This is a particularly effective technique, since Con- sular representatives should know who may be acting as cloaks. 332 3- Mr. Foley said that Mr. J. Crane of Standard Oil does not wish to commence discussions regarding the sale of their Berlin property until some settlement has been reached on the Hungarian subsidiary. According to Mr. Crane, it is understood that the Germans are trying to work the offer in respect to the Hungarian property up to 12 million dollars in gold and 12 million in foreign exchange and perhaps even 20 million in gold and 4 million dollars in foreign exchange. As soon as the Standard Oil is ready with some definitive proposal they will communicate with Mr. Foley. Mr. Luthringer reported that the State Department would like approval given to an application to remit $6,000 to Switzerland for the support of Lithuanians who are stranded in that country. 333 7/22/43 11: a.m. EXECUTIVE ORDER ----ESTABLISHMENT OF AN ECONOMIC DEFENSE BOARD By virtue of and pursuant to the authority vested in me by the Constitution, by virtue of all other authority vested in no, and by visitos of the existence of a period of unlimited national energency, and finding that this Order is in the public interest and is necessary in the interest of national defense and security, I, FRANKLIN D. BOOSEVELS, PRESIDENT of the UNITED STATES OF AMERICA, do prescribe the followings Section A. There is hereby established an Economic Do- fease Board (harminafter referred to as the #Board"). The Board shall consist of the vise President of the United States, who shall be Chairman, the Secretary of State, the Secretary of the Treasury, the Attorney General, the Secretary of Agrieultare and the Secretary of Commerce. Each nomber of the Board, other than the Chairman, may designate an alternate from among the officials of his Department and such alternate may not for 1 number is all matters relating to the Board. Section 2. As used in this Executive Order the term "economic defense" shall - the developing, coordinating, and earrying - of plans - programs designed to protect and strengthen the international - relations of the United States in the interest of national defense. Economic defense shall include the - of international economic activities relating to Bernstein gave copy to Donald Hiss for 4 p.m. July 23, 1941 CC: Vice President Secretary Wickard Secy. Jones Solicitor General Biddle Asst. Secy. Acheson Under Secretary Taylor got copy by hand yesterday at 12:30. Gladieux received copy. 334 -2exports, imports, the acquisition and disposition of materials and commodities from foreign countries including proclusive buying, transactions in foreign exchange and foreign-omed or foreign-controlled property, international investments and extensions of credit, shipping and transportation of goods among countries, the international aspects of patents, international communications pertaining to commerce, and other foreign economic matters. Section 3. The Board shall formulate and by appropriate means cause to be exceuted by the departments and agencies concerned an integrated and coordinated program of economic defense, dealing with both immediate problems and with pro- posals and recommendations for the future. The administration of the program of economic defense will remain with the several departments and agencies of the Government now charged with such duties but such administration shall conform to the policies formulated by the Board. Section 40 The Board may, in carrying out the provisions of this Order, appoint through its Chairman such subcomittees, personnel or employees as the performance of its functions may require; and, in respect of matters involving other departments or agencies of the Government, the Board may from time to time call upon such departments or agencies for advisors to sit with 18 and for such information and assistance as may be necessary in connection with the activities of the Board. 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 represented on the Board, shall 335 0 -3designate a responsible officer or officers to represent the department or agency in its continuing relationships with the Board. The Departments of War, Post Office, Navy, Interior and Labor, the Petroleum Coordinator for National Defense, the Federal Loan Agency, the United States Maritime Commission, the United States Tariff Commission, the Interstate Commerce 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 of Export Control, the Office for Coordination of Commercial and Cultural Relations Between the American Republics, the Division of Defense Aid Reports, the Federal Communications Commission, the Securities and Exchange Commission, the Army and Navy Munitions Board, and such additional departments and agencies as the Board may from time to time determine. Section 5. Any regulation, license, ruling, instruction or other action by any of the departments or agencies in connection with the administration of economic defense shall be conclusively presumed to have been issued or taken in con- formance with the policies of the Board. Section 6. This Executive Order may be amended, modified organoked at any time. THE WHITE HOUSE, . 1941. C 336 0 P July 22, 1941 Y Honorable Daniel W. Bell, Under Secretary of the Treasury, Treasury Department, Washington, D. C. Dear Mr. Secretary: Reference is made to my letter of March 17, 1941, giving you information concerning British contracts, in compliance with the request contained in a letter from the Secretary of the Treasury to the Secretary of War, dated March 11, 1941. Enclosed in that letter, as Schedule "B", was a statement giving $29,000,000 as the estimated amount to be repaid to the British on four machine gun contracts previously made by them. Of this amount it was estinated that $21,000,000 would be paid in connection with facilities, and $8,000,000 in connection with supplies. These transactions have been consummated and letters of cancella- tion of the British contracts have been signed, which provide that the British will be repaid approximately $30,600,000. Of this sum, amounts not to exceed $22,960,000 will be paid by Defense Plant to the manufacturers and by them to the British, and the balance, or approximately $7,640,000 will come from payments made under the new supplies contracts entered into between the War Department and the manufacturers, in replacement of the British contracts. Sincerely yours, (SIGNED) JOHN J. McCLOY JOHN J. McCLOY Assistant Secretary of War Copy:dtg:7/24/41 337 TREASURY DEPARTMENT PROCUREMENT DIVISION OFFICE OF THE DIRECTOR WASHINGTON July 22, 1941 Memorandum to the Secretary: Twenty used transport airplanes were pur- chased for the British and transferred to them in accordance with the President's directive dated May 9, 1941. Ten of these planes were flown to Africa via Brazil by Atlantic Airways Limited under a contract with the British Government. The Brazilian Government has objected to the further transporting of British planes in this manner. It has been proposed by Mr. Cox' Office that the transfer of the remaining ten planes now in Miami be rescinded and title re- vested in the United States in order that the planes may be flown to Africa in the same manner under the British contract but as United States planes under the control of the Treasury Department, transfer of title to be effected at destination. The legal questions involved in this proposal are now being considered, preliminary to administrative determination. not Clifton Director of Procurement E. Mack, 338 JUL 22 1941 My dear Mr. Secretary: Reference is made to your letter of July 8, 1941, ET14/N1-9 (410627)U, requesting information whether the Treasury Department is willing to transfer all of the buildings at the Coast Guard Air Station, Charleston, South Carolina, to the Navy Department, and including the following statement: "From informal sources the Navy Department understands that the United States Coast Guard is closing the Coast Guard Air Station in the Navy Yard, Charleston, South Carolina, on or about July 1, 1941, because the Station will no longer be needed in view of the completion of the Coast Guard Air Station at Elizabeth City, North Carolina." The construction and location of the Coast Guard Air Stations along the coasts of the United States were planned so that the Coast Guard could readily patrol, by plane, the entire coast line in carrying out its regular duties. The Coast Guard Air Stations at Elizabeth City, North Carolina; Charleston, South Carolina; and Miami, Florida, were constructed and located with this plan in mind and, therefore, when the construction of the Coast Guard Air Station, Elizabeth City, North Carolina, was authorized, it was not contemplated that the Coast Guard Air Station at Charleston would be abandoned. With the closing of the Coast Guard Air Station, Charleston, South Carolina, the Coast Guard will have no permanent aviation facilities between Elizabeth City, North Carolina, and Miami, Florida, a distance of approximately 858 miles, and these stations are too far apart to permit efficient patrol of the coast in carrying out the Coast Guard's normal peacetime duties. 339 -2The Coast Guard Air Station, Charleston, South Carolina, can no longer be used because of the expansion of Navy facilities at the Charleston Navy Yard, which in- cluded the closing of the air field, the construction of buildings, and the development of the waterfront heretofore used by Coast Guard seaplanes. In view of this situation, the Treasury Department will relinquish the site and take the necessary steps to transfer the buildings of the Coast Guard Air Station, Charleston, South Carolina, to the Navy Department, subject to further discussion of the request with respect to the hangar and garage contained in the following paragraph. The hanger and garage at the Coast Guard Air Station, Charleston, South Carolina, are of steel construction, and can be moved to a new location at materially less cost than construction of new buildings of the same type. The Coast Guard needs these two buildings at the site of the Coast Guard Air Station, Elizabeth City, North Carolina, and it is requested that the Navy Department dismantle them and re- erect them at the Coast Guard Air Station, Elizabeth City, North Carolina. The need for these buildings at Elizabeth City is partly due to the closing of the Coast Guard Air Station at Charleston, necessitating the housing of more planes at Elisabeth City than had been intended. The barracks building, radio building, and other investments of the Coast Guard at Charleston will not be disturbed. It is believed that the Navy Department, as well as the Coast Guard, will benefit by moving the hangar and garage from Charleston to the Coast Guard Air Station at Elizabeth City, North Carolina. Sincerely yours, (Signed) H. Morgenthau, as Secretary of the Treasury. Mr. Have 10:45 am The Honorable, By Messenger The Secretary of the Navy. 7/22/41 file returned to Geston's office cc-min Channel 340 ET14/NO-9(410627)U DEPARTMENT OF THE NAVY OFFICE OF THE SECRETARY WASHINGTON July 8, 1941. Sir: Reference is made to a letter dated June 13, 1941, from the Acting Secretary of the Navy requesting information as to whether the Treasury Department was willing to transfer the United States Coast Guard Air Base Building in the Charleston Navy Yard, South Carolina, to the jurisdiction of the Navy Department. From informal sources the Navy Department understands that the United States Coast Guard is closing the Coast Guard Air Station in the Navy Yard, Charleston, South Carolina, on or about July 1, 1941, because the Station will no longer be needed in view of the completion of the Coast Guard Air Station at Elizabeth City, North Carolina. Since it appears, therefore, that the Coast Guard will no longer need any of the buildings at its Station in the Charleston Navy Yard, and because of the fact that all of the buildings can be used to fill the vital need for additional buildings at the Charleston Navy Yard, it is requested that the Navy Department be informed as to whether the Treasury Department is willing to transfer all of the buildings at the Coast Guard Air Station to the Navy Department in addition to the Coast Guard Air Base Building heretofore requested. Respectfully, /s/ JAMES FORRESTAL, Acting Secretary of the Navy. The Honorable, The Secretary of the Treasury. C-O-P-Y 341 JUL 22 1941 Sir: I have received your letter of 19 July 1941, 390130 L11-6/ET14(410711), requesting that the Honolulu District, U. S. Coast Guard, with its present organisation, personnel, and equipment, be transferred to the jurisdiction of the Navy Department, and stating that the situation governing the need for the transfer of the Honolulu District to the Navy does not exist, at present, in any other Naval District. Realising the special conditions that now govern Naval Defense requirements in the Territory of Hawaii, and appreciating the advantages of concentrating in the Coast Guard Captain of the Port all military authority for the control of the Port of Honolulu, I am willing that, during the present unlimited emergency, the Honolulu District of the Coast Guard shall operate as a part of the Navy, subject to the orders of the Secretary of the Navy. I will therefore instruct the Commandant of the Coast Guard, upon the approval of this letter by the President, to direct the Commander of the Honolulu District Captain Gordon T. Finlay, U.S.C.G. - to report by despatch to the Chief of Naval Operations for duty, together with his organisation, personnel and equipment. With the assignment of this organisation of the Coast Guard to operate during the period of the unlimited emergency as a part of the Navy, there will devolve upon the Navy, for the same period, all functions, duties, and responsibilities with which this organisation is charged by law, regulation, and legal orders. I believe it desirable to call to your attention the Coast Guard construction program now under way in the Honolulu District to provide the necessary aids to navigation, in- cluding lighthouses, buoys, and radio beacons, at Naval bases in the Pacific. A large part of the technical work, and the 342 -2letting of contracts in connection with this program, is handled by the staff of Coast Guard Headquarters in Washington. The necessary arrangements to see that this program is not interrupted may be made by the Chief of Naval Operations and the Commandant of the Coast Guard, and I hope you will agree that this procedure shall be followed. Sincerely yours, (Signed) E. Morgenthau, in. Secretary of the Treasury. The Honorable The Secretary of the Navy. APPROVED: 1941. The short 10:45 am By Messenger File returned to 7/22/41 Garton's office cc- - Min channey 343 Serial 390130 L11-6/ET14(410711) Department of the Navy Office of Secretary Washington 19 July 1941 Sir: The importance of the Hawaiian Islands as a Fleet base and as an outpost in the sea frontier defenses of the continental Pacific coast, combined with the rapidly changing situation and growing uncertainties throughout the world, make it imperative that the defenses of this outpost be placed in a state of readiness now, adecuate to meet any sudden threat that may develop without warning. It is urgently necessary, in this particular locality, to place in effect now, an organization corresponding 88 nearly as possible to that which would exist in a state of war. Measures entirely within the control of the Navy and Army have been taken to accomplish this. As an additional step in this direction, it is necessary to unify the control of shipping under the Commandant, Fourteenth Naval District, where it would lie in the event of war. It is, therefore, requested that the Honolulu District U. S. Coast Guard with its present or- ganization, personnel, and equipment be transferred to the jurisdiction of the Navy Department. If this is done it is the intention of the Commandant of the Fourteenth Naval District to concentrate in Captain Finlay, U. S. Coast Guard, all authority over the control of shipping and other related matters in the Harbor of Honolulu and adjacent waters. In this connection the following 18 quoted from a letter from the Commandant of the Fourteenth Naval District: "If the Department can arrange the above transfer, as recommended, there is no intention to interfere in any way with the duties of the Coast Guard, but it is intended to use the District Commander, Captain G. T. Finlay, U.S.C.G., as the controller of the Port of Honolulu and to give him the entire job of looking out for the net, operating the net (the Navy furnishing the personnel, assisting officers and vessels), handling the buoys and lights, designating the hours when ships can go and come, etc. 344 -This situation does not exist, at present, in any other Naval District. It is, however, considered most urgent that this should be done in the Hawaiian area. It is proposed, if the transfer is effected, that the District Commander of the Coast Guard will continue to perform hie customary duties with Coast Guard personnel. In the interest of national security, I therefore request you, Mr. Secretary, to give your most favorable consideration to this request. I also want to take this occasion to express to you my appreciation for the splendid cooperation that the Navy is receiving everywhere from all Coast Guard officials. Respectfully, (signed) Forrestal Acting Secretary of the Navy The Honorable The Secretary of the Treasury 345 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Consulate General, Hong Kong, China, via N.R. DATE: July 22, 1941, 5 p.m. SENT PRIORITY. The departure of Fox has been delayed for a few days. Fox's delay in departing from Hong Kong is due to the (9) message which has been received. This message was sent to Chungking in order that 18 might be repeated to the Department for its information, BRUINS EASPAK 10 THE LECHNICY OLLICE 53 bW DECEIVED 3 31 346 PARAPHRASE OF TELEGRAN RECEIVED FROM: American Consulate General, Hong Kong, China, via N.R. DATE: July 22, 1941 Ree'd - 8:10 a.a. The arrival date of Fox and party is July 23 at Chungking. This message was sent to Chungking in order that it might be repeated for the Department's information. BRUINS EAIPAK 10 THE OLLICE OF THE DVI W S3 WW 11 30 18EV2RBA DELVELWEW RECEIVED 0 0 347 P Y PARAPHRASE OF TELEGRAM SENT TO: American Embassy, Rio de Janeiro, Brazil. DATE: July 22, 1941, 10 p.m. NO: 563 This telegram is in reference to the final paragraph of the Embassy's telegram of May 26, 10 a.m., No. 531, and to the Embassy's telegram of July 5. 4 p.m., No. 799. The Department directs the Embassy to discuss the question again at once. The suggestion should be made that the funds under reference be transferred by the Bank of Brazil to the Federal Reserve Bank of New York, to be placed in an account held there jointly in the names of the Yugoslav National Bank and the Bank of Brazil. Should the Bank of Brazil not wish to have the account held jointly under the names of both banks, the Department authorizes the Embassy to suggest that the account be placed in the name of the Bank of Brazil and the name of the Yugoslav National Bank be placed on a sub-account. The Embassy should lay emphasis upon the fact that the arrangement suggested above gives the Bank of Brazil in substance the protection it wishes. Instructions would have to be received from both the Bank of Brazil and the Yugoslav National Bank before any payments could be made out of the account, and no funds could be paid out of the account without a 348 -license being issued by the Government of the United States under the freezing control order. The arrangement suggested has been given the approval of the Minister of Yugoslavia in Washington. The Embassy should try to get the Bank of Brazil to approve the arrangement also. The Department should be notified at once if the approval of the Bank of Brazil is obtained. WELLES, Acting (DA) 860H.51/1044 EA;CD 7-28-41 Copy:dtg: 7-30-41 349 BRITISH EMBASSY, WASHINGTON. 22nd July, 1941. 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, York Both The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D.C. 350 TELEGRAM RECEIVED FROM LONDON DATED JULY 21ST. 1941 Night of July 20th/July 21st. Virulent air attack on east coast convoy resulted 1. in two British ships being damaged. Both taken in tow for harbour. On July 20th six Blenheims escorted by fighters made attack on 5,000 ton merchant vessel off Le Touquet. She had previously been unsuccessfully attacked July 19th but second attack drove her ashore Berck-sur-Mer. Two enemy fighters shot down. Night of July 19th/July 20th. Thirty-nine 2. bombers dropped heavy load high explosives and 6,000 incendiaries on Hanover. More very large fires started. Last night 146 bombers despatched to Cologne 3. and Rotterdan - one missing. Egypt and Libya 4. Tobruk Midnight July 18th/July 19th to evening July 19th small formations of enemy aircraft made eight raids. No damage or casualties. Enemy shelled town and harbour. No damage. We shelled K1 Adem aerodrome. 5. Syria Our forces well received at Jerablus. 6. Russia Situation Murmansk well in hand. Baltic States strong Russian resistance has prevented further German advance. Smolensk area - fierce fighting and repeated Russian counter-attacks from the south. Sery. to Orcaning 351 RESTRICTED 0-2/2657-220 No. 447 M.I.D., W.D. 12:00 M., July 22, 1941 SITUATION REPORT I. EASTERN THEATER. Ground: Front lines generally unchanged. Violent fighting around the Smolensk salient. Air: German. Strategic bombing continued on and to the west of the Moscow-Leningrad railway. Moscow was raided last night by an estimated 200 planes. Russian. Extensive damage caused to the Rumanian oil facilities at Ploesti. II. WESTERN THEATER. Air: German. Small harrassing raids on Great Britain. British. Normal offensive operations by day and night. Last night's attack centered on Mannheim and Frankfurtam-Main, although other objectives in industrial Germany and along the coast were also raided. III. MEDITERRANEAN THEATER. Ground: No operations reported. Air: Usual harrassing raids by both sides. RESTRICTED