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DIARY Book 452 October 17 - 20, - 1941 -BBook Page Budget Non-defense expenditures in 1942 budget: Report submitted by Bureau of Budget - 10/18/41 Business Conditions Haas memorandum on situation for week ending October 18, 1941 452 141 331 -0China See War Conditions Coast Guard Commandant, with approval of Secretary of Treasury, to put personnel ashore to protect vital facilities, shore structures, etc. : Proposed Executive Order discussed at 9:30 meeting - 10/17/41 Waesche to cancel trip West on HMJr's instructions 10/17/41 33 42,43 Connelly, Martin R. (Lieutenant) See Customs, Bureau of Copper See War Conditions: Lend-Lease Correspondence Mrs. Forbush's resume' - 10/17/41 104 Custome, Bureau of Shooting of Lieutenant Martin R. Connelly by Customs Guard John K. Yeung, as Connelly was leaving United States Army Transport PRESIDENT CLEVELAND a) Navy asked to permit personnel to testify 10/17/41 b) Report to Secretary of War - 10/20/41 1) Stimson-HMJr conversation - 10/21/41: See Book 453, page 101 c) Supervising Customs Agent in Pacific Coast sent out to help - discussion at 9:30 meeting - 10/21/41: Book 453, page 14 d) HMJr's letter to Attorney General - 10/21/41: Book 453, page 98 e) Stimson-HMJr conversation - 10/27/41: Book 454, page 167 f) Resume of case to date discussed at 9:30 meeting - 10/29/41: Book 455, page 130 g) Pictures discussed at 9:30 meeting - 11/4/41: Book 457, page 98 h) Foley reports on police record - 11/4/41: Book 457, page 257 i) Reports received from Honolulu - 11/6/41: Book 458, page 73 j) Justice and Treasury select counsel 11/12/41: Book 460, page 154 k) Foley gives HMJr complete report on trial to date from "Bob" Chambers in Honolulu 11/26/41: Book 465, page 271 1) Verdict: Manslaughter - 10-15 years; probable appeal - 12/1/41: Book 467, page 30 a) 10 years at hard labor - 12/4/41: Book 468, page 226 103 324 -DBook Page Defense Savings Bonds See Financing, Government -FFinancing, Government Non-defense expenditures in 1942 budget: Report submitted by Bureau of Budget - 10/18/41 452 141 a) Report on first meeting with Committee 10/29/41: See Book 455, page 151 Defense Savings Bonds: Treasury Hour: Albert Stoessel (friend of Werner Josten) to review programs in advance 10/17/41 38,41 a) HMJr changes plan - 10/23/41: Book 453, page 309 Progress report - 10/17/41 Status of state organizations as of October 17, 1941 74 78 "Millions for Defense" - samples of Field Organization News Letter, No. 22 79,80,81,82 83 Kentucky set-up discussed by Barkley and HMJr 10/20/41 285 Comparative statement of sales for first sixteen business days of August, September, and October, 1941 - 10/20/41 306 -GGuatemala See Latin America -KKentucky See Financing, Government: Defense Savings Bonds -LLatin America Guatemala: Report on possible freezing control sent by DuBois (Treasury) and Hooker (State) - 197 10/18/41 -MMail See Treasury Department -RBook Page Revenue Revision Tax Anticipation Notes: Proposed letter to taxpayers discussed by HMJr, Bell, Sullivan, Morris, Buffington, Barnard, Odegard, and Kuhn 10/17/41 452 a) Proposed letter b) "Know Your Taxes": See Book 453, page 298 46 66,67,69 -Stoessel, Albert See Financing, Government: Defense Savings Bonds -TTax Anticipation Notes See Revenue Revision Treasury Department Mail: Greater efficiency in handling at Foreign Funds, Public Debt, and Savings Bonds discussed at 9:30 meeting - 10/17/41 17 -UUnemployment Relief Work Projects Administration report for week ending October 8, 1941 345 United Kingdom See War Conditions: Military Planning -WWar Conditions Airplanes: Employment in Aviation Manufacturing Industry Haas report - 10/17/41 a) Chart Shipments to United Kingdom and overseas 92 100 commands - British Air Commission report - 10/17/41 101 Shipments to the British - Kamarck report 10/20/41 356 China: Fox praised in Singapore Daily, Hong Kong 10/20/41 Exchange market resume' - 10/17/41, etc 364 138,211,370 - W - (Continued) War Conditions (Continued) Export Control: Exports to Russia, China, Burma, Japan, and France, as reported to Treasury Department during week ending October 11, 1941 10/18/41. Book Page 452 180 Exports of petroleum products, scrap iron, and scrap steel from United States to Japan, Russia, Spain, and Great Britain, week ending October 18, 1941 Foreign Funds Control: Progress report as of October 20, 1941 350 349 Lend-Lease: Aid to Britain: Conference in White's office 10/20/41 249 a) Agenda 280 Copper Mines: Purchase of output of three high-cost Michigan mines discussed in Foley memorandum - 10/20/41 354 10/19/41 213 Military Planning: Report from London transmitted by Halifax Purchasing Mission: Vesting order sales - 10/20/41 Work Projects Administration See Unemployment Relief -YYeung, John K. (Customs Guard) See Customs, Bureau of 361,362 1 TREASURY DEPARTMENT Washington. FOR RELEASE, MORNING NEWSPAPERS, Friday, October 17, 1941. The Secretary of the Treasury, by this public notice, invites tenders for $150,000,000, or thereabouts, of 91-day Treasury bills, to be issued on a discount basis under competitive bidding. The bills of this series will be dated October 22, 1941, and will mature January 21, 1942, when the face amount will be payable with- out interest. They will be issued in bearer form only, and in denominations of $1,000, $5,000, $10,000, $100,000, $500,000 and $1,000,000 (maturity value). Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o'clock p. m., Eastern Standard time, Monday, October 20, 1941. Tenders will not be received at the Treasury Department, Washington. Each tender must be for an even multiple of $1,000, and the price offered must be expressed on the basis of 100, with not more than three decimals, e. g., 99.925. Fractions may not be used. It is urged that tenders be made on the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Branches on application therefor. Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of 10 percent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company. 28-10 2 -Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which public announcement will be made by the Secretary of the Treasury of the amount and price range of accepted bids. Those submitting tenders will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Payment of accepted tenders at the prices offered must be made or completed at the Federal Reserve Bank in cash or other immediately available funds on October 22, 1941. The income derived from Treasury bills, whether interest or gain from the sale or other disposition of the bills, shall not have any exemption, as such, and loss from the sale or other disposition of Treasury bills shall not have any special treatment, as such, under Federal tax Acts now or hereafter enacted. The bills shall be subject to estate, inheritance, gift, or other excise taxes, whether Federal or State, but shall be exempt from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions of the United States, or by any local taxing authority. For purposes of taxation the amount of discount at which Treasury bills are originally sold by the United States shall be considered to be interest. Under ) 3 -3Sections 42 and 117 (a) (1) of the Internal Revenue Code, as amended by Section 115 of the Revenue Act of 1941, the amount of discount at which bills issued hereunder are sold shall not be considered to accrue until such bills shall be sold, redeemed or otherwise disposed of, and such bills are excluded from considera- - tion as capital assets. Accordingly, the owner of Treasury bills (other than life insurance companies) issued hereunder need include in his income tax return only the difference between the price paid for such bills, whether on original issue or on subsequent purchase, and the amount actually received either upon sale or redemption at maturity during the taxable year for which the return is made, as ordinary gain or loss. Treasury Department Circular No. 418, as amended, and this notice, prescribe the terms of the Treasury bills and govern the conditions of their issue. Copies of the circular may be obtained from any Federal Reserve Bank or Branch. -00o- 4 October 17, 1941 9:25 a.m. RE FINANCING Present: Mr. Haas Mr. Hadley Mr. Bell Mr. Morris Mrs. Klotz H.M.Jr: On reading this memo, it isn't quite clear to me what you people had in mind. You say, "Offer a new Treasury security for four hundred cash and in addition offer the holders of the RFC the fifty percent. If Maybe I don't understand it, but you say the RFC need-- Bell: They need five hundred million. H.M.Jr: Well, now, if you took the - yes. RFC, three hundred and the Commodity Credit - I take it you are bunching the two? Bell: That is right. You would offer a Treasury note, say, for four hundred million dollars. Is that what I put in there? H.M.Jr: Yes, that is right. Bell: Four hundred million dollars, and then you would increase that - that is, you would 5 -2offer for cash and then you would increase that four hundred million by fifty percent of the exchange of RFC and Commodity Credit, which would be a hundred and fifty, two hundred and fifty million, so you would have a six hundred fifty million Treasury note outstanding, and then you would pay off the two hundred fifty left in cash. H.M.Jr: Wait a minute. You see, you have got - now wait a minute. I have got the four hundred and half of the RFC and Commodity Credit, two fifty, which would give you a six fifty note. Bell: That is right. H.M.Jr: What are you going to do with the hundred and fifty? Bell: Hundred and twelve? H.M.Jr: No, the other half of the RFC. Bell: Pay that off in cash. Have one half of it exchanged. H.M.Jr: And the four hundred you raise will do that, Bell: Well, the four hundred plus the two fifty bills. You see, you are getting fifty million bills coming in also. H.M.Jr: I don't think that that is quite clear, the is that it? way you are putting it. Bell: You see we put down there, start the bills the twenty-second at fifty million dollars a week. H.M.Jr: Let me just see. I see. 6 - -3 - Now, all of that one - now, what is two? Bell: Well, two is another-- H.M.Jr: Oh, no. Bell: another suggestion, yes. You can reopen a Treasury note - I don't think I am in favor of it, but you could reopen that old Treasury note. H.M.Jr: Could they say, "Here is one, and then the alternative the next time it is written? Bell: Well, we didn't recommend any one of them, but we said we suggest these for consideration. H.M.Jr: Oh! Well, it isn't clear to me that two and three are alternatives. Reading it quickly, you wouldn't know it. Bell: I see. I am not so sure that that fifty percent is even enough. There is quite a lot of kick in the market. H.M.Jr: Oh, I got wonderful statements in the Tribune today. Bell: Your Tribune is good, but the banks are feel- ing a little bit low about it, particularly some of your banks, your large banks, that have really taken your guaranteed and made a market for them, such as the Guaranty and one or two of the others, and they have pur- chased them, so they say, with the rights in mind. H.M.Jr: The Tribune just glowed. Morris: Well, I think that was on the major policy. I read that, and I think that is on the major 7 -4policy, which we are all in accord with. H.M.Jr: But today you are talking about something - Bell: It is pretty effective. H.M.Jr: I just wanted to see what would happen if Bell: There really wasn't much market yesterday. It was just a marking down. Hadley: A marking down. They weren't willing to sell at. par, but they would bid for them at there are no rights on this thing. Something happened to this thing. Of course, I didn't have that in mind. I said it. par. H.M.Jr: Some banks call you? Bell: By golly, I have had calls from all over the country, and I have got one in from Chicago this morning waiting for me. McLucas called me. They weren't sore. They just said to tell the Secretary that they have been in this market, they have held these guaranteeds, and they haven't got them for speculation but for investments, but they have taken into consideration the right values. They buy them because it gives them an exchange privilege on the next one, and they don't have to be in the market and boosting up the market all the time to get their investments. They said to just tell you that, and that is all they wanted. Some of the people around New York yesterday said, "We just don't think the Secretary is going to be that brutal. He hasn't been in the past," and they have been patting you on the back as to your fairness in the past, and 8 -5they don't think you are going to be brutal in this. I had a lot of calls yesterday. H.M.Jr: Well, I understand this now. Bell: I told them that they would just have to keep their shirts on for a couple of days, and I thought the situation would be clarified by Monday. I told them you usually gave out some information as to what we were thinking about before a financing, and you certainly would do that again Monday. (Mrs. Klotz entered the conference.) H.M.Jr: Did you (Morris) get any calls? Morris: No, I didn't. H.M.Jr: All right. We will go into the next meeting. 9 THE UNDER SECRETARY OF THE TREASURY WASHINGTON October 16, 1941 TO THE SECRETARY: Subject: The November and December 1 - March 1 Financing Program November financing The following is the amount of financing which was contemplated for the month of November: Maturities RFC U.S. Housing $300,000,000* $500,000,000 $ Authority 112,000,000* Corporation 204,000,000** Commodity Credit Total New Cash 150,000,000 - 800,000,000 262,000,000 204,000,000 $616,000,000 $650,000,000 $1,266,000,000 Maturing November 1. **Maturing November 15. In view of the long policy of the Treasury in granting exchange privileges, we definitely feel that "rights" should not be entirely eliminated at this time. We believe, therefore, that to keep faith with the market some provision should be made for allowing the holders of the maturing obligations of the Reconstruction Finance Corporation and Commodity Credit Corporation to exchange their holdings, at least in part, for any -2- 10 other securities offered. At the time the obligations of the U. S. Housing Authority were issued, it was intimated by the Treasury that they might be paid off in cash at maturity. For this reason they have practically no "right" value attached to them, and they may, therefore, be paid off and no exchange privilege granted. To provide for the refunding of the Reconstruction Finance Corporation and Commodity Credit Corporation maturities and the additional cash required between now and December 15th, we suggest the following for consideration: (1) Offer a new Treasury security for $400M cash, and in addition offer the holders of the RFC and CCC maturing obligations the privilege of exchanging them for the new securities offered up to 50% of their holdings, and pay off the USHA maturing obligations amounting to $112M in cash. This would require cash of $264M to meet maturities which was not contemplated in our cash position estimates, although we will get about $300M more on the recent bond issue than provided for in these -3- 11 estimates. To follow up the policy agreed upon at yesterday's luncheon conference, begin on October 22nd to issue $50M additional bills a week. By January 14th we would have completed the 13 weeks and raised $650M additional funds. The total bills then outstanding would be $1,950M, at which time we could consider as to whether we wanted to go on at the rate of additional $50M a week to a total of $2,600M. (2) Reopen an outstanding Treasury taxable note for cash in the amount of $400M and exchange along lines of (1) above. For example, the 3/4% note maturing March 15, 1943, selling at about 100 25 - 27 would serve this purpose, 32 although selling a little high. (3) Either (1) or (2) with full exchange privileges. In either case additional Treasury bills should begin October 22nd. -4- 12 December 1 to March 1 financing Maturities Treasury .$ RFC FFMC New Cash Total 426,000,000* $2,500,000,000 350,000,000 310,000,000** $2,926,000,000 660,000,000 $2,850,000,000 $3,926,000,000 340,000,000* $1,076,000,000 - 340,000,000 Maturing March 15 Maturing January 15 $236M callable January 15 and $104M callable March 1 Our cash position estimates contemplate raising new money for the Treasury of $1,500M on December 15 and $1,000M on February 1. Ordinarily we would refund on December 15 the March maturities amounting to $426,000,000. Our estimates also contemplated raising additional money in January in the amount of $350,000,000 for the RFC and refunding its maturities of $310,000,000, and also refunding the issues of the FFMC amounting to $236,000,000 callable January 15, and $104,000,000 callable March 1. The following are suggested for consideration in connection with the December and January financing operations, subject to change however depending upon what plan is adopted for the November financing: -5- 13 (1) a. Offer a Treasury bond on December 15 for $1,500M in cash, and in addition, refund the Treasury note of $426M maturing March 15: (b) Offer a new Treasury note in January for refunding the RFC maturity of $310M, and the two callable issues of FFMC aggregating $339M, or a total of $649M; or (c) Under (b) raise in January $450M in cash and grant exchange privilege on a 50% basis. (2) a. Offer a Treasury bond on December 15 for $1,500M in cash only; (b) Then in January offer a Treasury security in exchange for Treasury, RFC, and FFMC maturities; or (c) Under (b) offer Treasury security for cash of $450M and grant exchange privilege on a 50% basis for agency maturities. (This also assumes a bill program of at least $50M a week for 13 weeks.) -6- 14 (3) In view of the fact that it will be necessary to raise additional cash early in February, probably in the amount of $1,000M or more, the $104M issue of FFMC callable March 1 and the $426M Treasury issue maturing March 15 could be refunded into whatever issue is offered at that time. AWB DAMP 15 October 17, 1941 9:30 a.m. GROUP MEETING Present: Mr. Haas Mr. Morris Mr. Bell Mrs. Klotz Mr. Buffington Mr. Barnard Mr. Sullivan Mr. Schwarz Mr. Foley Mr. Thompson Mr. Gaston Mr. Graves Mr. Kuhn Mr. Odegard Mr. Coe In this morning's Wall Street Journal the o H.M.Jr: SEC seeks to remove tax law discrimination in favor of bond debt. Are you familiar with the study they are making? Sullivan: No. There are two or three other things we are going over with them. That represents a problem we have been working on ourselves. H.M.Jr: Well, don't you think that they might say something to us before they give it out? Sullivan: Yes, I do. As a matter of fact, they shouldn't be giving any of it out. 16 -2H.M.Jr: Well, it is Purcell, I think, who made a speech on it. The only way to talk to the fellows is to call them up and say, "Well, do you think that this is very nice?" Sullivan: He is a pretty good fellow. He has always Foley: They haven't got very much to do over there cooperated with us. I will read this. now. (Laughter) They are like the Federal Reserve Board. H.M.Jr: Really? Foley: That is right. They are looking for something H.M.Jr: Well, why don't they do a job on the utilities? Foley: Well, they are doing that. H.M.Jr: Without taking ten years to do it, I mean. to do. How about Ambassador Winant's cable? Bell: I have it here, Mr. Secretary. That was handled before by Mr. White and Mr. Coe and we think H.M.Jr: you answered it, but I don't see any objection to sending another cable saying that we will back him up in the position he takes. Is that a cable? Bell: Yes, sir. You just initial it and I will see that it goes out. H.M.Jr: Bell: O.K. It is just for the record. It really doesn't mean an answer. Thompson: Here is a memorandum on Frazier and Coffren, your two chauffeurs. -3- H.M.Jr: The reason is, Frazier thinks the evening Thompson: Well, that is a little bad news in there. H.M.Jr: Oh, I didn't read it. When do they have to 17 job is a little better. change it? Thompson: On the first of January. H.M.Jr: It is a nice Christmas present, isn't it? He has got to go back from two thousand to sixteen hundred. Nothing you can do? Thompson: We have argued it out and argued it out. They don't have a higher grade for any cabinet officer. Klotz: They knew that, though. Thompson: Oh, yes, they knew it. H.M.Jr: I think I would tell it to him now. Thompson: I had been planning to do that. I am having a rather complete survey made of the Mail Depart- ment. Up in Foreign Funds it is probably the worst spot but steps are being taken. H.M.Jr: I didn't hear very well. Would you mind repeating that? (Facetiously) Thompson: Foreign Funds. I might say, in fairness to them, they have reached the saturation point in mail and they are doing a good job. H.M.Jr: Did you say they are setting an example for the Department? Thompson: Mr. Bell also has beaten me to the gun down in Loans and Currency. He had already taken steps about three weeks ago to improve conditions there but I am having a check made all around. -4H.M.Jr: 18 I think every four years ought to be time for a little dusting off. Thompson: I think the delay now is because the saturation point has been reached and there is just tons of mail coming in. Bell: The volume is really terrific now. Thompson: I know the mail on my own desk is about a four H.M.Jr: hundred percent increase. But I will have a report for you on that. This is apropos of what you told me yesterday of some letters I have been getting. I think somebody ought to decide how often we go to these Defense Bond lists. I got a mean letter yesterday from a man that ought to know better, about how he had gotten two letters. Max Farrand. Kuhn: I prepared a mean reply, Mr. Secretary. It was a very nasty letter and the only one of its kind that I have seen. All the other people are delighted to get these letters from you. H.M.Jr: But the point I am making, let's take the United States Savings Bond list. I don't think that we should circularize that - well, certainly not more than once a month, and I think if we circularize it -- Kuhn: We don't. We can't. H.M.Jr: Well, once in two months. Now Buffington has it in mind, you see. Kuhn: But it is physically impossible to do the turnover of so many millions. H.M.Jr: I am just raising the question. I don't know how often it is done, but I think, Harold, you -5- 19 ought to be controller on that. I think there is a limit to how many times you can go to a list like that. Kuhn: His complaint was that he got two of the same Bell: You see, his name is in the file twice. They have taken it from different places, and there is a constant study of that list to eliminate letter. duplications, but when you have got seven million names, it is impossible to eliminate all duplications. H.M.Jr: While I am on that, could you give me a report Monday on how far along you are with the mailing of my Boston speech? Kuhn: Well, Norman knows that already. Thompson: They have completed the mailing to the extent of available copies of the speech. They ran out of copies. Over two million copies have gone out. H.M.Jr: Don't you think that is enough? Thompson: There are three or four hundred thousand more to go and they just reported yesterday that they would have to get that additional number of speeches to complete the list. H.M.Jr: Do you think you want to do that? Do you want Kuhn: The requests are coming in all the time, Mr. Secretary. I have never seen anything hold up to do it? so long. Thompson: I haven't gotten my copy yet. Odegard: Wasn't the Max Farrand duplication due to the -6- 20 fact that is name appeared on the lists of two of those learned societies? H.M.Jr: I am not bothered by it. It is just those kind of letters which they bring to me which just raises some of these things, and having talked with Buffington yesterday and knowing that he had this thing in mind, I am taking a little unfair advantage. He shouldn't come and tell me what he is thinking of doing. It made me wonder how much we go to those lists. Kuhn: Mr. Secretary, on the Boston speech Mrs. Forbush upstairs gets requests for about twenty-five hundred - I think almost twenty-five hundred a week, in addition to what the Defense Savings people get. H.M.Jr: Good. Kuhn: And it keeps coming and Harry Hopkins wants us to send it to all high schools. H.M.Jr: Really? Harry Hopkins? Kuhn: Yes. He transmitted a request or a suggestion. I don't know how you feel about that. Thompson: It is a good place for it, I think. H.M.Jr: Well, I will leave that to you people. Professor Odegard can decide whether it is fit and clean, and so forth, for high school children. (Laughter) How about something nice for Mrs. Lewisohn? Kuhn: I handed it in at 9:10. (Laughter) H.M.Jr: That is all right. Did you have a time stamp put on it. Kuhn: Would you like one? 7- Bell: He can fix that too. H.M.Jr: Anything else, Norman? Thompson: That is all. H.M.Jr: 21 All right. I am just telling you on the record, I think it is a very healthy thing, this check-up. My office may get a little unpopular, but the only way to keep us from getting after you is to do it before the memo comes. Bell: I have this -- H.M.Jr: We are just going to keep after you people, and it is the only way I can get the stuff; and if I get the service so we don't have to check up, I am sure we will all be delighted. The other point, Mrs. Klotz says, when you people do give me a report on something, could we have a little memorandum in writing so that they can close out our books on it, you see. I mean, you may stop by and say, Well, I have done this," but there is no way that the girls know. Klotz: H.M.Jr: It makes it difficult. So if you would, when you run back, stop a minute and confirm it in writing, then they can close it out. Bell: I find they usually check up. H.M.Jr: It is all right. She has got a good organization. It keeps you people on your toes. Klotz: It is a nuisance, I know. 8- 22 Bell: No, it is all right. H.M.Jr: If they don't like it they can beat the memo, and then you don't get any. But a confirmation of any verbal thing, please. Bell: I have this memo that the Chinese Ambassador gave you about having someone from the Federal Reserve Bank go over there and study their central bank, one. Two, whether Fox could serve as an advisor to the Chinese Treasury. Do you mind if I talk to Eccles on it? H.M.Jr: No. Bell: I think we can prepare a cable on two and say H.M.Jr: we have no objection if it isn't burdensome to Fox. I expect it is largely honorary, anyhow. Well, if you and Coe would work it out. Bell: Yes, we will. H.M.Jr: Can I forget it? Bell: Yes. Well, we ought to have a letter, probably. All right. I think we should let the Ambassador H.M.Jr: know it. Bell: Yes, I think so too. H.M.Jr: Anything else? Bell: Yes. Mr. McGoldrick from New York wants to come down Monday and get his twelve and a half million dollars in obligations, and I think it is a publicity stunt. He might want a picture taken of somebody handing them to him. He said he would like to have a picture of you handing him the twelve and a half million, and if not, he would like to have a picture getting 23 -9- off the plane back in New York. He says there is a campaign on. He paid his money yesterday to the Federal Reserve. Do you want to do that? H.M.Jr: Sure. He is a friend of Peter Odegard's. (Laughter) Bell: Harold Smith called me and gave me some background of the letter he wrote you on the state money. He had to do that, he said, because it was being approached through another angle to the President by some governor. It is something they have been working on for some time with one of the state treasurers. Now, the governor got hold of it and he approached the President and he wanted to stop that so he wrote to the President also and he said he wanted to explain it to you and he understands that this governor is going to write you a letter. It is the Governor of Virginia. He wanted you to know that. I also have his document that went up yesterday. It is about twenty-six pages long. H.M.Jr: I will take it to the country with me. I will most likely light the fire with it. 24 - 10 Bell: Well, it is interesting reading, but doesn't give much consolation to the committee, certainly, on '42 expenditures. Could Mr. Buffington and I have a few minutes today to discuss this tax note thing? Sullivan: I would like to be here when that is dis- cussed, too. H.M.Jr: Sure. Buffington: Mr. Secretary, could we do that as late in H.M.Jr: Yes, you can do it right late. You can do it about two o'clock (laughter). We the afternoon as possible? will say two fifteen. That will be the deadline. Bell: I would like to do it before. I have a luncheon engagement with the Hungarian Minister. H.M.Jr: Well, I can't do it before. Buffington: I won't be prepared before two fifteen. H.M.Jr: This will be the last appointment of the day anyway. Pell: I wanted to get something before he went away. H.M.Jr: Two fifteen. All right, Dan? Bell: Yes, sir. Coe: I gave Bewley the Russian information. He wanted to apologize for the fact that 24 - 10 Bell: Well, it is interesting reading, but doesn't give much consolation to the committee, certainly, on '42 expenditures. Could Mr. Buffington and I have a few minutes today to discuss this tax note thing? Sullivan: I would like to be here when that is dis- cussed, too. H.M.Jr: Sure. Buffington: Mr. Secretary, could we do that as late in H.M.Jr: Yes, you can do it right late. You can do it about two o'clock (laughter). We the afternoon as possible? will say two fifteen. That will be the deadline. Bell: I would like to do it before. I have a luncheon engagement with the Hungarian Minister. H.M.Jr: Well, I can't do it before. Buffington: I won't be prepared before two fifteen. H.M.Jr: This will be the last appointment of the day anyway. Bell: I wanted to get something before he went away. H.M.Jr: Two fifteen. All right, Dan? Bell: Yes, sir. Coe: I gave Bewley the Russian information. He wanted to apologize for the fact that - 11 - 25 Halifax hadn't told the Treasury people what Bewley told Halifax, for bothering you. H.M.Jr: Coe: Tell him I don't accept his apologies and I don't think it is necessary. We have got information that South Africa is selling more gold to Britain. For some time they have been accumulating a lot. Now it is going down again. H.M.Jr: That was this morning's paper? Coe: That is this morning's. That is all. Buffington: I have nothing. Schwarz: Felix Belair called and asked if you would say a word of tribute for the return of the March of Time program to the air. He said he spoke to you about it. H.M.Jr: I don't know which is the correct pronun- Schwarz: He said now we were in the radio business. ciation, nertz or nuts. I told him we weren't giving out testimonials. H.M.Jr: You can take your choice. I can't spell. Schwarz: I paved the way for that. H.M.Jr: Felix Belair's boss came in. He was going to let me hear from him about putting on fifteen minutes for us in connection vi th Life, and I have never had any answer. But that is neither here nor there. All right? Schwarz: Yes. - 12 - 26 H.M.Jr: George? Haas: (Handing reports to Secretary) Mr. Secretary, you probably noticed that there are very sharp breaks in the commodity market yesterday. The Dow Jones average had the sharpest daily break since it was computed in '33, and the ones that broke sharpest were the ones where the commodities were inflated, like grains and fats and oils, but all of them shared in the decline. Wheat went down the limit, ten cents. H.M.Jr: Peter? Odegard: 1 have nothing. H.M.Jr: Harold? Graves: We are all clear in Delaware. As luck would have it, we got a letter from Governor Buck yesterday saying that on account of bad health he would not be able to accept the chairmanship of that state. H.M.Jr: Wonderful. Who is the Senator, Hughes? Graves: Hughes is the Senator who called you. H.M.Jr: Fine. Graves: I think when you talk to Hughes it would be well to put it on that ground, that Buck finally declined. H.M.Jr: Now, Harold (laughter). Graves: Because we have got to go in there again and make an effort to induce somebody else to take this job. I suppose you won't want to call on Hughes. 27 - 13 H.M.Jr: I am not going to. Graves: We have now got our chairmen and administra- tors and deputy administrators in both North and South Dakota, and the governors of both of those states have agreed to accept honarary chairmanships of our organizations. They both were quite friendly and favorable to this program. H.M.Jr: Now let me see, that just leaves you New Orleans and New Hampshire? Sullivan: Oh, boy, I have got a star for you up there H.M.Jr: I said to Harold, "Well, Harold, why don't (laughter). you do something about New Hampshire?" "Well now, Mr. Morgenthau, can't I leave the least until the last?" He said, "It is so insignificant" (laughter). Sullivan: We have the first presidential primary, don't H.M.Jr: That is about fifty per cent correct. Sullivan: I have got a star for you. William J. Graves: forget. Starr. This might be interesting to you. Our people who have been in North and South Dakota say that there is no following for Senator Nye or for the isolationist group in those states. H.M.Jr: I would like to do an extra good job in Graves: We are doing a good job already in Montana. We have been organized there for three months North Dakota and Montana. - 14 - 28 and it is working well. I think we will do a good job in North Dakota. H.M.Jr: Thank you. What else, Harold? Graves: That is all. Barnard: Nothing. Kuhn: Nothing. Morris: Nothing. H.M.Jr: You and I are going to get together Monday? Barnard: Yes. Sullivan: That sounds like a pretty close corporation, H.M.Jr: Sullivan: Dan (laughter). Junior (Foley) and I ran across a bad situation -Junior? (Laughter). .... in Brooklyn. There is a fellow up there that the Internal Revenue men have been after, an Austrian national, who apparently bought himself a job as a consular representative of Paraguay and acquired diplomatic status. He was in trouble with us on income taxes. H.M.Jr: What is his name? Sullivan: Faringer. H.M.Jr: That is Sam Klaus. Gaston: Yes. Sullivan: That is right. And Wednesday he blew into 29 - 15 town with one attorney to see us on taxes and the Collector of Internal Revenue in Brooklyn representing him before the State Department to prevent his being put out of the country. That brings up the old, old problem as to whether or not collectors of Internal Revenue shall continue to practice law or engage in their own business. H.M.Jr: Good heavens, there is a succession Sullivan: Well, apparently more than half of them of orders in Internal Revenue which I got out at the time I was having my fight with Senator Bulkley in Ohio. are still in business, and I think as soon as Mr. Helvering comes back we had better take that up. H.M.Jr: If there ever were stiff regulations, they were written at that time. You (Graves) were in on that at that time. Foley: They have never been put into effect. Graves: I don't remember that specific thing, but I was in on the -- H.M.Jr: I mean that whole liquor case with the Graves: All that was done as a result of that was to issue a regulation or renew an old regulation absolutely prohibiting any collector and all that. employee in Revenue to have any Interest in the liquor business, or, as I recall, tobacco business or any other business that was subject to supervision by the Bureau of Internal Revenue. I think our orders then went no further than that. 30 - 16 - Foley: It is something that ought to have attention, Mr. Secretary. (The Secretary held a telephone conversation with Senator Hughes). H.M.Jr: All right? Klotz: You didn't give him a chance. That was Gaston: He says, "Ha, ha, that is too bad." Foley: I think you ought to do it, Mr. Secretary. H.M.Jr: What? Foley: marvelous. I think you ought to clear it with him. Yes, I do, really. I think this is wrong. I really do. I feel quite strongly about it. H.M.Jr: Well, I feel quite strongly about it, too. We can't start it. Have a talk with Harold. He is a nice soft gentle fellow. Foley: I know, but to get a Republican fellow in a state who may run against a United States Senator, and set him up as the head of an organization in a state, I think that is wrong. H.M.Jr: Granted, but that doesn't mean at this stage of the game where we have got everything straightened out but New Hampshire, that I am going to let the political bosses appoint the people. We have gone through this whole thing without consulting the Senators. If we start now, where does that leave us? We have done the whole job. As far as I 31 - 17 know, this is the only complaint I have had on forty-eight states, and I think that is a great compliment to Harold Graves. It is a great compliment. Now, my heavens, if he makes one mistake in forty-eight he is better than I am. He is the only Senator that has called us. Foley: This is the only one I have heard about, H.M.Jr: I think he has done an amazing job to set up a non-political organization. We have but it is a bad situation. got Willkie Democrats and we have got Willkie Republicans, and we have got all kinds. Just as long as their heart is in the right place and they want to lick Hitler, they are all right with me. This is the only complaint. Bell: I don't think you will get the cooperation of the community if you start to make the appointment, politically. H.M.Jr: No. I think Harold has done an amazing job. The purpose of the meeting is to exchange opinions. Don't you, on second thought, think so? Foley: This is the only case I have heard of, Mr. Secretary, and it seems to me that is awfully raw. H.M.Jrs Well, it is the only one that there has been. All right. Where were we? Sullivan: Brooklyn. H.M.Jr: Well, can't we get out of Brooklyn? Sullivan: I think as soon as Commissioner Helvering returns, we ought to. 32 - 18 H.M.Jr: O.K. Incidentally, I have been making a little fun about Sammy Klaus. He wrote me a four or five page report on what he has been doing, and it is perfectly amazing what that fellow has done. It is an amazing report. foley: He is not modest. Gaston: He has done a lot of good stuff. Foley: H.M.Jr: He is not modest (laughter). I'll bet I could take the report and .... Well, you will get a chance at it. All Sullivan: Yes. Foley: I have nothing. H.M.Jr: Hell, he is your assistant. Foley: Oh, yes? (Laughter). Sullivan: That is one of those compromises like I had right? on Blough. Foley: Well, don't rub it in. H.M.Jr: Assistant to the General Counsel, on your Foley: payroll. You ought to be proud. You ought to say, "Well, he is one of my boys." I would if he was. H.M.Jr: What else, Ed? Foley: Nothing. Gaston: I promised to bring to you the inquiry of the American Federation of Labor as to 33 - 19 - whether or not it would be possible to lift the limit with respect to the purchase of Savings Bonds from union funds. That was just after I had gotten through explaining that we didn't want the union funds invested in Savings Bonds. So I am merely H.M.Jr: reporting that inquiry to you for the record. Well, the President of the Teamsters' Union, Gaston: Yes. H.M.Jr: But you have reported it anyway. Gaston: That is right. I have here a proposed Tobin, he has been downright nasty about it. Executive Order which would permit the Commandant of the Coast Guard, on the approval of the Secretary of the Treasury, to put Coast Guard personnel ashore to protect vital facilities, shore structures and so on. I think it is a desirable thing to have in case of an emergency. We have discussed it at some length. H.M.Jr: How about the Navy? How do they feel about it? Gaston: It is all right with them. H.M.Jr: Is there anything to show it is? Gaston: There is nothing here to show it. H.M.Jr: Well, had you better get something? Gaston: I will get something. H.M.Jr: I will sign it, not to hold it up. Gaston: This is a letter to the President through the Director of the Budget. I will get 34 - 20 - something definite in writing from the Navy. H.M.Jr: Anything else? Gaston: No, I think that is all. H.M.Jr: There was some Pittsburgh labor union wanted me to speak. I handed it to you (Kuhn) to prepare an answer. Kuhn: Pittsburgh labor union? H.M.Jr: Yes, they came in here. A longhand memo. Kuhn: You spoke to Fitzgerald yesterday about it? H.M.Jr: Yes. Kuhn: Yes, I have it. H.M.Jr: You are taking care of it? Kuhn: You can't do that. I think he told them H.M.Jr: Well, you had better write it. I don't that you couldn't. know, i f anybody has not seen the March of Time picture on Norway, we are going to show it immediately now downstairs, if anybody Gaston: would care to come down, he is invited. It is immediately below this room here. It is the March of Time, Norway picture. It will be shown in sixty seconds downstairs, if anybody would like to see it. One other little thing, we are discussing a complicated matter of Cox and Gibbs, the naval architects, for design of an ice ship. I don't know whether you are interested or not. H.M.Jr: No. 35 October 17, 1941 9:54 a.m. HMJr: Senator Hello. Hughes: Hello, Mr. Secretary. How are you this HMJr: I'm fine. How are you, Senator? morning? Not so very good. HMJr: Oh, you're not feeling well? I haven't been feeling well for several days. HMJr: I'm sorry. H: I'm over home. HMJr: H: Well, Senator, the question about appointing Buck has taken care of itself Yes. because he's not well enough. HMJr: H: Huh? HMJr: He has heart trouble. H: Oh, has he? HMJr: So I understand. H: (Laughs) I don't know about that. I hadn't heard that. That's too bad. That's getting to be too prevalent. HMJr: H: HMJr: Well, anyway that situation is solved; and while I'm very sorry that Mr. Buck is ill Yes, I feel very sorry. I'm glad to be able to do what you wanted. -2H: Yeah. HMJr: So we're looking around for somebody else. H: Very good. I'11 be back at Washington on Monday. HMJr: H: HMJr: H: Right. I hope you'll be feeling better. Thank you very much. Hope you're well. Take care of yourself. All right. HMJr: Good-bye. H: Thank you. 36 37 October 17, 1941 12:01 p.m. Lt. Sinton's Secretary: Hello. HMJr: Sinton? S: Yes, sir. HMJr: What are the prospects for flying this S: afternoon? They're good, sir. We will have north winds, possibly twenty miles per hour, and a few clouds at three to five thousand feet; but the weather will be good. HMJr: S: HMJr: S: Well, the earliest that I can take off now is two-thirty. Two-thirty. That'll be the earliest. Yes, sir. Well, we can - the deadline should be three-thirty. HMJr: The deadline should be three-thirty? S: Yes, sir. HMJr: S: HMJr: Well, I won't crowd you, but the earliest that I can get over to the port would be twothirty. Yes, sir. That'11 be Washington National. That's right. S: All right, sir. We'll be ready. HMJr: Thank you. S: Good-bye, sir. October 17, 1941 38 12:05 p.m. HMJr: Mr. Hello. Stoessel: Good morning, Mr. Secretary. HMJr: How are you? S: All right, thank you. HMJr: S: HMJr: I think you know the Werner Jostens very well. Yes. I don't know whether you know he happens to be my brother-in-law. S: Yes, I do. HMJr: Mr. Stoessel, the reason I'm calling you is this. You may or may not know that we have three radio programs a week - the Treasury does. S: Yes. HMJr: And on Saturday over WOR each week we have - Alfred Wallenstein does the programs for us, and Deems Taylor is the commentator. Well, frankly I have been disappointed because I just don't think that the music is sufficiently in tune with the times. In other words, a nonmusician, it seems to me that the radio audience, that we could give them a little bit more exciting music. See? S: Yes. HMJr: And what I'd like to do is - if you felt you S: Well, I should be very glad to give it to you, could do it - would be just send you in advance the programs that they're proposing to do and then get your criticisms. Mr. Secretary. -2HMJr: 39 See? Now, I have on my desk here, for instance, the program for October 25th, what they propose to do. I don't know whether, you know, it's something - whether it's the kind of music that we ought to be doing in these times or not. I mean, there's so much music that gets people aroused and makes them a little bit - feel patriotic - but on this particular program we've only been using foreign artists - foreign-born artists - I mean it's dedicated to that, you see. But a lot of this foreign composed music is exciting, and I don't think we've been putting that kind of programs on the air. What I'd like to do, if I could, would be to put in air mail a list of what we have been doing to give you an idea. S: Yes. HMJr: And then what we propose to do October 25th. S: Fine. HMJr: And would it be rushing you too much to have an answer by Monday morning? S: I'd be very glad to send it to you, sir. HMJr: Well, that - and could I do that each week? S: Yes, I'd be very happy to. HMJr: And then possibly I'd arrange maybe - would it be possible, for instance, for you to come down here and spend an evening with me next week and we could go into it in greater detail? S: A week from tomorrow? HMJr: Well, any - no, sometime during the week. S: HMJr: Oh, sometime during the week. Yes, any time that would suit your convenience. Well, I'11 get in touch with you again Monday -3- 40 and find out. S: Yes, sir. Do you have my home address? HMJr: No, I don' I t. That's 14 East 90. Fourteen S: Fourteen East Ninetieth. East Ninetieth. HMJr: S: And the telephone is Atwater 95358. HMJr: Telephone Atwater S: Nine HMJr: Nine S: HMJr: five three five eight. five three five eight. Well now, this will go out immediately and it ought to be delivered to your home tonight or tomorrow morning. S: HMJr: Yes, sir. And then if I could, say - you get something what I have in mind. S: Yes, I have an idea. HMJr: And I think if you see what we've done and S: Well, I'll do the best I can about it. HMJr: That's all anybody can ask. Thank you. S: Thank you for calling. what we propose to do, I think - well, at least you'll see why I'm disappointed. 41 OFFICIAL OCT. 17,1941 MR. ALBERT STOESSEL JUILLARD SCHOOL OF MUSIC 130 CLAREMONT AVENUE NEW YORK, N.Y. ON SECOND THOUGHT BEFORE SENDING THE MATERIAL I WANT AN OPPORTUNITY TO DISCUSS IT WITH MR. DEEMS TAYLOR AND MAKE SURE THAT IT IS AGREEABLE TO HIM HENRY MORGENTHAU JR - 17 - 4 The Secretary Admiral Waesche is planning to leave tonight by train for San Francisco, where he is to xitzaxx attend the American Merchant Marine Congress and to address it on Wednesday also to look into harbor protection xxt matters. He will return via St. Louis for KK a Mississippi River transporta#t tion meeting and be back in Washington Wednesday, Oct. 29. I agreed to this plan bebre I left for Seattle and he will go ahead according to plan unless you object. He will be in continuous contact with headquarters and can be recalled by plane at any time. Vit FROM: MR. GASTON 43 October 17, 1941 12:32 p.m. Operator: He stepped out of his office. I'll have him HMJr: Oh, for God's sake. Where is he, Miss? Operator: She said he was just out in the hall and he's HMJr: Get him. Get him. Operator: All right. HMJr: Herbert in just a moment. coming back. Herbert Gaston: HMJr: Yes. I'm sorry, I disagree with you. This is no time for Waesche to be outside of Washington. Do you know that there was a torpedo - a destroyer was torpedoed this morning? G: I - yes, that's true. Yes, I hadn't thought of it in this HMJr: No, I'm sorry. I want Waesche here. G: All right. HMJr: I positively don't want him out of Washington. G: Yes. HMJr: I mean, this is no time for him to be touring the country. G: Yes. He discussed it with me - oh, it's a month ago. HMJr: Well, times have changed, and he should stay here. G: Yes. 2HMJr: All right, then. Keep his organization on G: Yes, right. HMJr: Thank you. G: Okay. a twenty-four hour basis. 44 45 ASSISTANT SECRETARY OF THE TREASURY October 17, 1941. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston Jim Rowe called me today to tell me that the President disapproved the appointment by O.P.M. of William A. Parker, whom the Bureau detected in an attempted tax fraud in 1937. pay 46 October 17, 1941 2:15 p.m. RE TAX ANTICIPATION NOTES Present: Mr. Bell Mr. Sullivan Mr. Morris Mr. Buffington Mr. Barnard Mr. Odegard Mr. Kuhn Buffington: In order that tax payers may know what their tax liability is going to be annually this year and what it was last year, and to show them accurately what monthly savings will be required to pay their income taxes, we plan to send out a circular to the demand depositors. It is the only record which we have. It will go to approximately twentyfive million people, represented by all of the banks in the United States. This pamphlet, in order that they can insert it in the monthly statement of accounts to customers. The first page carries a message from the Secretary of the Treasury, and then the following pages show, beginning with a single person with no dependents, and continuing through to a married person with three dependents, what their taxes were last year, what they are this year, payments they will have to make next year on this year's income, and the monthly savings necessary, and on the back we have put a short message headed, "Start saving now to make tax payments easier," and in the center, "Consult your bank about Tax Savings Notes." 47 -2We are not giving the taxpayer much infor- mation about the Notes, feeling that all commercial banks have the official circular on file, but rather trying first to make the taxpaper conscious of what his problem is. Once he is conscious of that, we will try to get him to go to a bank to secure detailed information about the plan. I have the proposed letter which I think everyone has looked over, which we would like to have the Secretary consider. H.M.Jr: When you say "everybody", who has seen this? Buffington: Mr. Broughton, Mr. Kilby, Mr. Kuhn, Mr. Graves, Mr. Bell, Mr. Sullivan, Tax Research. H.M.Jr: Has Odegard seen it? Buffington: Not in this last form. He has seen it up until the last changes that I made. H.M.Jr: Have you seen it, Barnard? Barnard: No. Buffington: I am sorry, I didn't prepare enough copies. I didn't know how many were going to be present. H.M.Jr: "We in America have decided upon an 'all- out' defense program that will require 'allout' taxation. Our eyes are wide open to the sacrifices we shall all have to make in the next few years for the sake of our country's defense. Through our representa- tives in Congress we have expressed our preference for paying as much as possible of the cost of defense out of current earnings. "Accordingly, our Federal income taxes have been increased so sharply that they will fall 48 -3heavily upon millions of individual budgets next year." I don't like that "so sharply". Sullivan: All right, go ahead. Buffington: You used somewhat similar phrasing, I H.M.Jr: Buffington: Bell: thought, in a previous letter of July 28. It wasn't as strong as that. I don't like the "so sharp". I have prepared the letter with and without that paragraph. I have another copy. Sullivan objects to that paragraph for other reasons. H.M.Jr: He objects to this letter? Buffington: No, he objects to the one that has just Sullivan: That one paragraph. H.M.Jr: "We in America have decided upon an 'all- been read. out' defense program that will require an 'all-out' taxation. Our eyes are wide open to the sacrifices we shall all have to make in the next few years for the sake of our country's defense. Through our representatives in Congress we have expressed our preference If -- (Mr. Odegard entered the conference). H.M.Jr: Peter, would you come in and sit down? I am doing a rush job which I would like you to take a look at before it goes out. This is the thing to acquaint the country with what the tax program is. The other 49 -4people have seen it, but you haven't seen it, but it is very important that you do see it, you see. I will start again. Odegard: H.M.Jr: I am sorry. I didn't let you know. It is my fault. And I didn't tell Buffington to see you, so it is entirely on me. Buffington: I did see you once, Mr. Odegard. You have seen it in one form, but not in this final form. H.M.Jr: When I leave here, these gentlemen can go over this if I haven't got the time to polish it up. "We in America have decided upon an 'all- out' defense program that will require 'allout' taxation. Our eyes are wide open to the sacrifices we shall all have to make in the next few years for the sake of our country's defense. Through our representa- tives in Congress we have expressed our preference for paying as much as possible of the cost of defense out of current earnings. "Accordingly, our Federal income taxes have been increased so sharply that they will fall heavily upon millions of individual budgets next year. These increases are going to be hard to meet unless we all make definite plans for accumulating tax payments well before they are due. "Your Government, therefore, is anxious that each taxpayer know as promptly and as accur- ately as possible what his income tax bill will be. As a service to the taxpayers, I 50 -5have had prepared the following tables showing what you will have to pay in the coming year, and how much of your monthly income you should set aside regularly for tax payments. "Tax Savings Notes are now being sold by the Treasury because thousands of citizens have already asked for a plan to enable them to save money systematically and con- veniently for this purpose. When you study the attached tables you will, I think, see the usefulness of these Treasury Notes in helping you to meet your own tax payments next year. I am sure that your neighborhood bank will be glad". and so forth. My horseback opinion is that I would leave out that first paragraph. Bell: First? H.M.Jr: The first paragraph. I me an, I wouldn't talk about the 'all-out defense". I would simply say, "Your Government therefore" - I mean, I would go into the idea that it is in the rest of the letter, but I wouldn't talk about "all-out defense" or "all-out taxation" and the sacrifices, and so forth. I think it immediately sets up a resistance. Take a look at that, Peter. I think it immediately sets up a resistance. "We are coming to you, gentler men, and here in the first place is what we want to tell you, what it is. This is an easy way for you to figure your taxes and second, here is a suggested method of setting aside something each month out of current earnings to meet next year's tax bill." But my reaction at first blush is that you hit the 51 -6 fellow first in the chin and knock him down and then you expect him to get up and fight for you. I am being very blunt. Now, Odegard may disagree with me. Sullivan is going to lay an egg in a minute if he doesn't say something. Don't lay an egg in the office, Sullivan. Sullivan: Everything you said is ancient history to me. I have been arguing this thing over and over. We are entirely in accord. H.M.Jr: With whom? Sullivan: You and I, on everything you have said so H.M.Jr: I don't like that "so far". Sullivan: That is right. I will help you to continue far. to keep pace with me here. In the letter it shows the taxes you paid this year and the taxes you paid last year. I don't see any point in the taxes last year. I think that is confusing. I further object to that for the more important reason that it is emphasizing that we are going up there to give them a sock. H.M.Jr: Sullivan, I am pleased to say we are still Sullivan: What is the date? H.M.Jr: It isn't the 17th of March. What is St. Sullivan: The 17th of March. Buffington: Mr. Graves asked me to say for him in this together. Patrick's Day? meeting that he thought if we took out that tax of last year's it would destroy ninety per cent of the effectiveness of what we were sending out. -7Barnard: Odegard: 52 I(Sullivan) don't agree with that. I agree with you on that. I think, as a general proposition, it is a bad thing to make anything negative if you can make it affirmative. That is, people shy away from the things that - "cost" is a negative word. "Saving" is a plus word, and so on. I think it is a good thing to keep it as affirmative as possible. H.M.Jr: And so you would do what? Odegard: Well, I think that the elimination of the H.M.Jr: And leave out last year's. Odegard: I would, yes. H.M.Jr: How can you make it glaring unless you compare table showing last year's payments so that the increase is made very clear would improve it. it with something. Oh, I misunderstood you. I thought you said you wanted to make the increase glaring. Odegard: They will know that anyway. Sullivan: That is right. I had one other suggestion, Mr. Secretary. When this is printed up I think, as a matter of courtesy, I should tike it to Mr. Doughton and also to Senator George, and if he is not here, Senator Connally, just so they will know before it goes out. I think this is one of the first direct approaches we have made to the taxpayers. Sullivan: That is all right, but that wouldn't -Not at all. H.M.Jr: .... keep him from putting - you are leaving H.M.Jr: when, tomorrow? -8Buffington: Tomorrow night. Bell: John, do you mean the table as amended and 53 taking out the column? Sullivan: Oh, yes. I mean after it is printed. You H.M.Jr: I would go better than that. When your proof comes off the press Monday, I would show it to him. Sullivan: I think Mr. Buffington says that it has to just don't want Doughton to-- be printed over this weekend or they can't print them before the first of November. H.M.Jr: Well, I would put - just as soon as he will give you a proof or a copy, I think you should go up and show it to them. Sullivan: All right, sir. Buffington: Dr. Odegard, hasn't this information been extensively in the newspapers, comparing last Odegard: Buffington: year's tax with this year's tax. That is right. Therefore, I can't share Mr. Sullivan's view or yours, when it has such a tremendous sales appeal, I feel, to the public. In other words, what my taxes were last year is behind me. I have already paid most of it, but now to see that comparison-- Odegard: Then why don't you say that? You ought to have it carried through, you see. You don't say that in the body of your letter. You don't say anything about last year's taxes. You say, "As a service to taxpayers, I have had prepared the following tables showing what you will have to pay in the coming year." -9Buffington: 54 I didn't want to repeat. The table speaks for itself. It is very clear that there is that comparison by the heading of those columns. Bell: You do show it in the little heading at the top? Buffington: Yes. Odegard: There is a dangerous thing in it, too, that I don't want to exaggerate, but many people will look at that and think that that is what they have to pay. The capacity of people to misunderstand-- Buffington: That is true. Odegard: .... is almost unlimited, and they will look at the statement of last year's taxes and say, "Well, that is what I have got to pay next year. Countless thousands of them, and if you keep it out, you avoid that possibility. Buffington: It is a simpler printing job. H.M.Jr: Where do you stand on this, Morris? Morris: I would make it just as simple as possible. H.M.Jr: How about you? Barnard: I agree with Mr. Sullivan. If you can do it, I would stick a sentence somewhere in there that reads like this: 'When you get your money, don't forget that it isn't all yours. Some of it belongs to the Government, and anticipate payment when it will be due," " or Buffington: something to that effect. "It isn't all yours." I had that sentence. I went so far as to - 10 - 55 say that you must remember income tax has first claim on your income. Barnard: That is too high-brow. That isn't direct "When you get your money, don't forget itenough. is all yours," is a lot different than saying something about income tax payments. I am not critical, but I am trying to express myself. H.M.Jr: Well, here is what I am saying. I am not laying down any rules. I would leave off that first paragraph. I would only talk about - I would only have one table. Buffington: You mean-- Bell: One column. Buffington: .... H.M.Jr: Monthly and annually, that is all right. Odegard: Mr. Secretary, would you leave out the whole two columns, monthly and annually? column or couldn't you meet all your obligations by simply having it read, "We in America have decided upon an all-out defense program. Through our representatives in Congress we have expressed our preference for paying as much as possible of the cost of defense out of current earnings, and your government, and so forth." H.M.Jr: Do that once more. (Mr. Kuhn entered the conference.) Odegard: It simply leaves out the negative. H.M.Jr: Say it once more. Odegard: "We in America have decided upon an all-out 56 - 11 defense program. Through our representatives in Congress we have expressed our preference for paying as much as possible of the cost of defense out of current earnings. Then it goes on: "Your Government, therefore, is anxious, and so forth.' H.M.Jr: Well, following what Barnard says, does the man on the street know what it means, "paying out of current earnings"? Is that too highfaluting? Odegard: Then you could add Mr. Barnards sentence. Barnard: I am thinking of a telephone installer. He gets two thousand dollars a year. He doesn't get that language, though, and he doesn't know what you mean by tax liability. What you have got to pay under the 1941 Act for these people is what makes sense to them. Buffington: Tax Research insisted upon having-- Barnard: I bet they did. I know damnwell they did. (Laughter) I don't blame them. So would I if I were there, but it still doesn't change the fact that to a telephone installer, "tax liability" is a big word. Morris: But this is going only to people that have checking accounts. Barnard: I have got a suggestion to make there, or a question. That is your first easy distri- bution, but there is no reason in the world why you can't send this, for instance, to every telephone company in the United States. There is three hundred thousand employees, and ask them to distribute it. So will the steel companies. So will International Busi- ness Machines. Take all the big ones, not - 12 - 57 to make too big a job, and they will do it for you, and they will get an awful lot of people that won't go to the banks. They are not Morris: going to ask the banks. Most of these corporations will facilitate getting the information for these things. The payroll office. Barnard: Yes. Buffington: My thought is that this is the first distri- Sullivan: You have got twenty-five million of these Buffington: Sullivan: Yes. bution. going out? You are only going to have about twenty-three million returns next year, so either we are not firing in the right places-- Buffington: We had this problem, Mr. Sullivan: The January 1 income tax blanks which will go out, the envelope is full. You can't get anything in it. The next mailing of the income tax bills was going to be - will be December 1 for the Sullivan: December 15 bills. Too late. Buffington: The Defense Savings Bonds are sending out literature at intervals which makes that difficult, so this seemed to be the best coverage to hit broadly, and if banks want to send it out partially, they would still be available in those banks for public distribution. Sullivan: What I mean to say is, you are hitting a very large proportion of the people who are going to file income tax returns in this one broadside. H.M.Jr: I came back with this idea from Detroit. I picked it up in Detroit. Let me say this. I would like to make one other suggestion. "See your neighborhood bank or write me a letter, or write the United States Treasury," you see. - 13 Buffington: H.M.Jr: 58 I had that in before. But don't make it just the bank. It is a little bit too much like the aspirin program. "See your neighborhood drug store". Odegard: Had you rejected the idea, Mr. Buffington, of any mention of the collectors of Internal Revenue? Buffington: Yes, I would stay away from -- Sullivan: No, Peter, that isn't any good. You have got sixty-four of them in America. Most of these people live hundreds of miles from a collector. Buffington: I have tried the post office routes and this seemed to be the best focal point for the moment that we can get. H.M.Jr: But I would like for you to add that you can see your neighborhood bank or write to the Treasury of the United States. Sullivan: I think that is a good suggestion. Buffington: Excellent. Odegard: What percentage of the population live within Sullivan: Oh, in most states there is just one for the entire state. Odegard: Yes. Kuhn: He is in a big city, isn't he, John? Odegard: He is usually in a big city and it reaches a very large number - the reason I suggested it was because I was impressed in Philadelphia with it - what I was told by the Collector of Internal Revenue there, the facilities that they have for assisting people in making out those sixty-four cities? - 14 - 59 their income tax returns and so on. I don't know, maybe it isn't worth including. Sullivan: Peter, if the inquiries come here and we have one uniform set of replies, if they go to sixtyfour different collectors, you don't get that same uniformity no matter how hard you try. Odegard: That is true. H.M.Jr: Or you can make it, "Or write me" That is simple enough. "See your neighborhood bank or write me." Kuhn: And they will do it. Bell: You will get a lot of letters. H.M.Jr: We have got a whole staff for that. Buffington: We plan to send this directly to the banks in the interest of time for November first mailing. It would require a covering letter from you. You may have somewhat the same criticism of the first paragraph, although that is almost identically what you told them in a previous letter. H.M.Jr: On July 28 I wrote you regarding the"- this is the banks? Büffington: Yes. H.M.Jr: "New tax savings notes which were about to be issued. I told you __" Change that. I don't tell them; I inform them, " that I thought it important that taxpayers of the Nation become aware of the unprecedented taxes they will have to pay next year on this year's income. I also suggested that they be encouraged to set aside funds now, with which to meet these later payments. - 15 - 60 "As a service to taxpayers, the Treasury has just prepared a pamphlet entitled 1 Know Your Taxes --" Again, I would leave out most of that first paragraph. "As a service to taxpayers, the Treasury has just prepared a pamphlet entitled 'Know Your Taxes1, showing monthly savings needed to meet individual income tax payments for 1941 salaries and wage incomes of selected sizes for single and married persons wi th selected number of dependents. "Pamphlets will be sent to you by the Treasury and I request that you enclose a copy" -- I wouldn't say, "and I hope you will find it feasible or possible" -- you see. "...That you enclose a copy with monthly state- ments of accounts which you send to depositors the end of October. "Your continued cooperation in furthering the Tax Savings Plan will be appreciated." Now, there is just one thought. This is all right. I am perfectly willing to do it, but here is an alternative. The possibility of letting the FDIC do it through all insured banks. Bell: Well, we get all the banks through the Federal. H.M.Jr: Do we? Bell: Yes, they are all on the mailing list of each Federal Reserve district. H.M.Jr: And these people, when I leave in a couple of minutes, they can stay behind right here in this - 16 - 61 room and help you get over the thing. I am moving very fast. I would leave off that first paragraph, "As a service to taxpayers, the Treasury asks you to join me" or no "I you as a service us." You know, something like that. You have got enough talent around here But country that no request, and will help do this orders. sincerely something. to the hope Odegard: that can get that spirit. Right, Peter? That is quite right. H.M.Jr: You know, just that "You will join me in helping us to do this sort of work", and so forth. Buffington: Mr. Bell, on the question of the printing office working over this weekend, is that a question that will have to be asked? Bell: We would like to get this proof to the printer so they can work over this weekend and give you seven million pamphlets by Monday morning. If they don't work over the weekend you may not get the seven million by November first, so it will cost us about five hundred dollars. H.M.Jr: O.K. Bell: That isn't very much. Sullivan: One suggestion on that opening sentence: We say, "We in America." How about, All of us in America"? H.M.Jr: Well, the main thing, I don't want a request. I don't want to direct them. I want to ask them to join me in a spirit of cooperation, you know. You have got enough talent around here. Buffington: I am sorry about that le tter. It has been around the circle so many times and I have changed it -- 62 - 17 - Buffington: Well, if they stay right in this room they can settle the thing. That is fine. H.M.Jr: What else do you want? Idon't see why you Buffington: That is fine, if these men will just give me H.M.Jr: May I say one thing, on the whole program: In talking to a lot of people who are buying these notes on a monthly basis, they kick on two H.M.Jr: can't get it through tonight. a few moments time. things. One is that it takes a lot of time to fill out an application, and they get the note back and they have no place to keep it, and it is a bother. That, I think, is the sales resistance. Barnard: Mr. Sullivan and I have been talking about having a man send his check in to the collector as often as once a month in multiples of five dollars. We have an account with him anyhow. Let him pay his income taxes in advance and give him a discount and when we get the administrative bill before Congress we will put in a provision like that and cut out all of this debt structure. H.M.Jr: Bell: Well, that doesn't have anything to do with this circular. But I wanted to tell you and I think we ought to try to get it through so that we can have it in the next year. H.M.Jr: Well, it doesn't go into the circular. Bell: No, it does not. Barnard: That is a good idea, though, awfully good. - 18 - H.M.Jr: 63 I didn't get it, see. You will have to start in all over again Monday. Bell: We have got some resistance on that too in the mechanical operations but I think John will be able to overcome it. H.M.Jr: I'll tell you what I would like to do, if they could do this. I want Odegard and Kuhn to ride down to the airport with me. They could be back here at 3:15. Have you got anybody waiting in your office? Kuhn: Yes, but he is about to go anyway. H.M.Jr: Have you got anybody waiting in your office? Odegard: I was to meet Lew Douglas. H.M.Jr: Where could you meet at 3:15? Can they meet in your office at 3:15? Bell: They can. I have got an appointment but they can meet in there. Sullivan: They can meet in mine. Morris: H.M.Jr: I have got lots of room. Three-fifteen? Sullivan: Sure. H.M.Jr: Would you? Barnard: All right. And I will deliver these fellows. Three-fifteen. H.M.Jr: Can you get rid of your fellow? Bell: Yes. H.M.Jr: Is that all right? - 19 - 64 Bell: Yes, sure. H.M.Jr: I have got one idea I would like to leave with you. Have this thing photographed and we can, for two or three thousand dollars, have a short newsreel made, which we pay for, to have it run in every newsreel theater. FHA used to do that. It cost about three thousand dollars, I think, something unbelievably small to have the thing photographed and then put on every newsreel theater. Think about it. We haven't used the newsreels. We have used the radio but that would reach forty million people, supposedly. What do you think, Ferdie? Kuhn: Better than the radio. Buffington: We thought of putting up placards in post offices containing this table. H.M.Jr: And the final thing, add, "If you care to ask for a copy of this circular you can get one at the boxoffice as you go out. The theaters will do that. They will do that. "If you want a copy of this circular, you can get one at the boxoffice as you go out." Buffington: You will have to print sixty million up. H.M.Jr: Well, you can't make too many. People are going to lose them. We are trying to collect twelve million dollars worth of taxes. Supposing we spent a hundred thousand dollars on this thing. It would be a very small amount and it doesn't begin to reach that, does it? How much is it? Buffington: I can't get the figure yet. H.M.Jr: But supposing we set out to spend a hundred thousand dollars. But will you remember that newsreel idea? Buffington: Yes. - 20 - H.M.Jr: 65 And we have newsreel people who could help you, see, and then you would get the moving picture distributing people to handle the thing and give them a package of the things to put in the box office. Buffington: If we take that third column out, Mr. Sullivan might have his picture taken with it, if he would be willing to. 66 On July 28, I wrote you regarding the new Tax Savings Notes which were then about to be issued. I told you I thought it important that taxpayers of the Nation become aware of the unprecedented taxes they will have to pay next year on this year's income. I also suggested that they be encouraged to set aside funds now, with which to meet these later payments. As a service to taxpayers, the Treasury has just prepared a pamphlet entitled "Know Your Taxes*, showing monthly savings needed to meet individual income tax payments for 1941 salaries and wage incomes of selected sizes for single and married persons with selected number of dependents. Pamphlets will be sent to you by the Treasury and I request that you enclose a copy with monthly statements of accounts which you send to depositors the end of October. Your continued cooperation in furthering the Tax Savings Plan will be appreciated. Yours very truly, 67 Dear Taxpayers We in America have decided upon an "all-out" defense program that will require "all-out" taxation. Our eyes are wide open to the sacrifices we shall all have to make in the next few years for the sake of our country's defense. Through our representstives in Congress we have expressed our preference for paying as much as possible of the cost of defense out of current earnings. Accordingly, our Federal income taxes have been increased so sharply that they will fall heavily upon millions of individual budgets next year. I These increases are going to be hard to meet unless we all make definite plans for accumulating tax payments well before they are due. Your Government, therefore, is anxious that each taxpayer know as promptly and as accurately as possible what his income tax bill will be. As a service to the taxpayers, I have pas-propared the following tables showing what you will have to pay in the coming year, and how much of your monthly income you should set aside regularly for tax payments. Tax Savings Notes are now being sold by the Treasury because thousands of citizens have already asked for a plan to enable then to save money systematically and conveniently for this purpose. When you study the attached tables you will, I think, -2- 68 see the usefulness of these Treasury Notes in helping you to meet your own tax payments next year. I - sure that your neighborhood bank will be glad to help you start such a savings program. 69 Dear Taxpayers We in America have decided upon an "all-out" defense program that will require "all-out" taxation. Our eyes are wide open to the sacrifices we shall all have to make in the next for years for the sake of our country's defense. Through our representatives in Congress we have expressed our preference for pays ing as much as possible of the cost of defense out of current earnings. Your Government, therefore, is anxious that each taxpayer know as promptly and as accurately as possible what his income tax bill will be. As a service to the taxpayers, I have had prepared the following tables showing what you will have to pay in the coming year, and how much of your monthly income you should set aside regularly for tax payments. Tax Savings Notes are now being sold by the Treasury because thousands of citizens have already asked for a plan to enable them to save money systematically and conveniently for this purpose. When you study the attached tables you will, I think, see the usefulness of these Treasury Notes in helping you to meet your own tax payments next year. I am sure that your neighborhood bank will be glad to help you start such a savings program. 70 October 17, 1941. MEMORANDUM FOR THE SECRETARY'S FILES A meeting relative to the administration of Executive Order 8389 was held in Mr. Foley's office at 3:30 p.m. on October 16, 1941, attended from time to time by the following: Messrs. Foley (Chairman), Pehle, B. Bernstein, Dietrich, Lawler, and Timmons for the Treasury; Messrs. Acheson, Luthringer, Fisher, and Miller for State; Messrs. Shea, Swidler, Jurenev, Kreeger, and Rosenwald for Justice; and Mr. Knapp for the Board of Governors of the Federal Reserve System. Mr. Pehle referred to approximately fifty applications, involving $2,000,000, which seek to transfer funds from blocked Rumanian, Dutch, Belgian and Estonian accounts to Swedish account. The Swedish Legation in Washington has requested the reconsideration of these applications, stating that the funds involved represent purchases of merchandise by Sweden in various European countries, which merchandise was not delivered. Mr. Pehle pointed out that it has not been the policy of the Foreign Funds Control to license such reversal payments for several reasons. Several despatches from the British Government have indicated that should the Swedish banks receive these reversal payments they would then proceed to pay Rumania through other channels, possibly Switzerland. One application for a reversal payment from the Netherlands to Bulgaria was cancelled and the Attache of the Bulgarian Legation stated that Bulgaria had received payment through other channels, presumably the Berlin clearing arrangement. In view of all the considerations involved, the Committee unanimously reaffirmed the denial of these applications. Mr. Acheson reported that with respect to the three Japanese boats which are coming to the United States to remove Japanese nationals, it has been made perfectly clear to the Japanese that such boats will not be allowed to bring cargo into the United States nor to carry any cargo from the United States. In connection with the recent denial of the Maywood Chemical Company application by this Committee, Mr. Bernstein said that a new proposal had been submitted. It is now proposed that the -2 - 71 German subsidiary of the Socony-Vacuum purchase the Maywood Chemical Company stock owned by Mrs. Janner, a resident of Germany, and place such stock in a blocked account in the United States in the name of the German subsidiary. The Committee agreed that this amendment to the previous application should be denied. Mr. Bernstein informed the Committee that Messrs. Pehle, Miller and himself had spoken with Mr. White, the New York State Superintendent of Banks. Mr. White was requested to take no strong action with respect to the Yokohama Specie Bank without consulting with the State and Treasury Departments. Mr. White was also informed that this Committee is prepared to license the payment of Japanese diplomatic expenses in the United States out of the Yokohama Specie Bank. Mr. White is to proceed with his discussions with the Yokohama Specie Bank looking toward the escrowing of sufficient assets to safeguard the interests of the American creditors. Mr. White also reported that the New York State banking license of the Yokohama Specie Bank had been extended for three months. Mr. Foley described to the Committee certain steps being taken by the Treasury in connection with its public relations program on freezing control. An article on Foreign Funds Control will appear in the November issue of Banking Magazine and the Secretary is addressing a letter to the president of each bank in the United States pointing out the importance of freezing control and requesting cooperation and suggestions. The Secretary is also addressing a letter to each state banking association, which states that speakers will be available to address meetings on various aspects of the freezing control. A committee consisting of Mr. Loree and other bankers from New York is to meet in Washington with representatives of the various Federal Reserve Banks, at which time a series of discussions throughout the country will be planned. Mr. Acheson reported to the Committee that Mr. Stopford of the British Embassy had recently called on him with two British in- surance men. Mr. Acheson suggested that inasmuch as they wished to discuss insurance problems in connection with the freezing control and the Proclaimed List, these matters should be taken up with the -3- 72 Treasury Department. Mr. Shea stated that the Department of Justice was looking into the possibility of the leakage of information through maritime insurance companies. He said that he would receive in two weeks a report from the Pilot Reinsurance Company and that he would send copies thereof to the Treasury Department. Mr. Lawler submitted a sub-committee report with respect to the plan of Sterling Products to obtain complete ownership of Laboratories Suarey. Sterling Products now owns 86% of the shares of such company. I. G. Farben has some sort of an equitable interest in 75% of 51% of the stock of Laboratories Suarey. The shares were originally paid for with Sterling Products money and the amount owing to Sterling for such purchase was to be deducted from profits accruing to I. G. Farben. It is now proposed to form a new corporation of which Sterling will own 86% of the stock, and liquidate the old corporation. It seems clear that I. G. Farben will not realize any funds from this transaction. Representatives of Sterling Products have been informed that approval in this transaction under Executive Order 8389 implies nothing as to the legality of such transaction under Argentine law or the morality of the transaction. The Committee unanimously adopted resolution of the sub-committee that this transaction should be approved. Mr. Lawler also reported for the sub-committee on the sales outlets being developed in Latin America by Sterling Products for ethical pharmaceuticals. Seven corporations have been formed in the larger countries and Sterling proposes to use agents satisfactory to the American Commercial Attaches in the others. It is proposed to insert in the names of the corporations a reference to Winthrop, as it is planned to sell products made by Winthrop. It has been represented that this use of the Winthrop name is necessary because of various sanitary requirements and because Winthrop has compiled the necessary clinical records over a period of years to support the sale of its ethical pharmaceuticals. The report of the sub-committee was adopted, and Mr. Lawler is to make clear to a representative of Sterling Products that this action does not in any way prejudice the Committee's freedom of action in passing on any application that may be filed by Sterling to buy out General Aniline & Film's interest in Winthrop. 73 -4Mr. Fisher referred to a note and oral statement which the State Department proposes to transmit to the Italian Embassy. In such note it is pointed out that American foreign service officers in Italy are unable to cash drafts drawn on the Secretary of State, and they have been forced to receive funds for their maintenance through Argentina and Switzerland. Of late the State Department has been experiencing some difficulty in remitting funds through these channels. It is pointed out to the Italian Government that it is expected that such State Department drafts will be accepted and when presented for payment they will be paid in free dollars, which funds may be utilized for the payment of Italian diplomatic expenses in the United States and for conversion into the currencies of non-blocked countries. Should, however, the American Government be forced to continue to effect remittances to Italy through Switzerland, we will require that the dollars necessary for the replenishment of Italian official accounts in the United States also be transferred to the United States from Switzerland. Mr. Fisher also read a telegram to Ambassador Grew in Tokio stating that in view of the fact that the contemplated payment of Japanese diplomatic expenses out of the Yokohama Specie Bank will represent a depletion of the very limited assets of such bank, this Government will require that dollar funds accruing to Japan as a result of encashment of the State Department drafts be paid into an account with the Yokohama Specie Bank as a partial offset to Japanese payments. The Committee agreed to the despatch of such telegram. 74 October 17, 1941 To: HAROLD N. GRAVES Subject: PROGRESS REPORT FROM DEFENSE SAVINGS STAFF SALE OF BONDS Actual cash receipts from the sale of E, F and G Bonds from October 1st through October 15th were $134,552,000, which is an increase of 9.5 per cent over the same period in September. Sales from September 1st through September 15th were $116,608,000. Sales from August 1st through August 15th were $151,742,000. (Federal Reserve and other banks in many states were closed on Monday, October 13th, in celebration of Columbus Day.) SALE OF STAMPS Sale of Stamps as of September 30th reached a total of $18,998,000 for five months. September sales were $4,978,000, largest of any month, an increase of 11.8 per cent over August. In September 2,942,000 more Stamps were sold than in August. Total number of Stamps sold through September 30 was 61,855,000. 75 -2- DIRECT MAIL Total receipts from all mailings (which began on June 21st) are $4,175,264. The industrial mailing has brought to date orders of $2,381,816; the customer mailing orders of $1,480,621. Both of these mailings are still pulling. Mailings for November, now being prepared, will include the following: To approximately 2,000,000 prospects of "over $5,000 income" in seventeen Grade A States; 400,000 corporations, etc.; twelve tests to 120,000 prospects; enclosures to 210 mail advertisers for their use. HOTEL COOPERATION Distribution of three million posters and folders to 6,000 hotels started this week, marking the participation of the American Hotel Association in the Program. In con- nection with this activity, an experimental sales and information booth for Bonds, Stamps and Tax Notes was opened in the Willard Hotel lobby. 76 -3- POST OFFICE MANUAL Fifty thousand manuals describing and illustrating available display material and literature, prepared in cooperation with the Post Office Department, are being sent to postmasters. (Copy Attached). TREASURY BOOTHS Stamps, Tax Notes and Bonds have been sold at the four Washington booths since the opening dates (indicated), as follows: Garfinckle's (Oct. 3) Stamps $186.30 25.00 375.00 $586.30 Tax Notes Bonds Lansburgh's (Oct. 10) Stamps Bonds $142.50 281.25 $423.75 Woodward & Lothrop (Oct. 6) Stamps Tax Notes Bonds $678.70 50.00 2,493.75 $3,222.45 Willard Hotel (Oct. 15) Stamps Bonds $10.25 37.50 $47.75 Total sales -- $4,280.25 EXHIBIT The Baltimore National Defense Exhibit and Automobile Show was held in the Fifth Regiment Armory from October 11th to 16th. An entire floor was devoted to the defense -4- exhibit which included equipment from all armed services and a Defense Savings Booth manned by the Baltimore Post Office Department. FIELD OFFICE Since October 10th North Dakota and South Dakota have been moved from the white to the yellow group. There are now only three states in which an organizational beginning has not been made - Delaware, Louisiana and New Hampshire. (See map attached). Two new field representatives have finished their training and are leaving for the field. Four other newly appointed representatives are completing the course. BUSINESS PUBLICATIONS Printed copies of the first four supplements for insertion in business publications are ready. (See copies attached) RADIO Many stations report that they are able to use as many as ten football announcements per game. Returns show that announcements were broadcast last week-end 378 times over 111 stations. (Farm announcements attached). ANIZATION STATUS OF STATE NORTH IOWA NEBRASKA ILLINOIS Key: Hawaii 490 500 MILES State and Local Committees Organized Committees and/or Chairmen Appointed State Administrators Organized Not Started LIONS FORDHHANSE DEFENSE OR MILLIONS Soldiers in the drafting room- meticulous army whose plans precede our figating machines "THE MEN BEHIND THE MEN BEHIND THE GUN" He doesn't wear a uniform, nor man a gun, nor guide a plane, nor peer from the porthole of a fighting ship, but hethe man behind the man behind the gun-is the soldier of the factory. honorable and indispensable volunteer in a key corps of America's army for defense. It takes five such of him for each fighter on the front line. Sweat and sacrifice. we must know now. are the dues demanded of those who would enjoy for themself their own. and their posteril the blessings of democracy and freedom. Your defense dollar are needed to keep the man behind the man behind the gun in action. Soldiers in the shipyard the unsung army which gives the Navy the floating power to protect our commerce and our shores. Soldiers on the assembly line wizards of the tool and wrench in Uncle 'oldiers in the factory millions of men and women who make up the Sam's army of mechanics behind the scenes army that helps provide the arsenal of democracy. t thank in the defense army of indus. Soldiers on the farm-gigantic army of the soil to sustain America's total A PERSONAL MESSAGE THE PAY ROLL ALLOTMENT PLAN PUTS PATRIOTISM INTO ACTION (This space is reserved for a personal signed message exclusively written for this MILLIONS FOR DEFENSE supplement by an outstanding and distinguished leader of the industry represented by the participating publication. It is suggested that in this message the industry leader personally endorse the Defense Savings Program, indicate his personal sponsorship of the Defense effort in his industry and indicate why it is specifically important and appropriate for people in his industry to support the program. Where possible. reference should be made to the industry's current contributions to the National Defense activity as a whole and to the Defense Savings Program in particular. If possible. also, the message should mention MILLIONS FOR DEFENSE as a continuing contribution of the industry.) Many of the Nation's leading industrial firms. both large and small, have established Pay Roll Allotment Plans which permit their employees to set aside regularly a portion of their income for the purchase of Defense Savings Bonds and Stamps. The establishment of the plan is voluntary on the part of the em- ployer. as is the use of the plan by the employees. The plan is flexible so that if it becomes necessary the employee can discontinue participation. Pay Roll Allotment Plans have been endorsed by the American Federation of Labor. Congress of Industrial Organizations. and the Railroad Brotherhoods. By establishing a Pay Roll Allot- ment Plan. employers provide a sound method for their employees to participate in America's Defense efforts. At the same time, employ- ees have the opportunity to build for themselves a financial reserve that will protect them against future economic changes. The establishment and operation of the plan is simple. Full details have been worked out by the Treasury Department and will be sent to you upon request without obligation. Simply address your letter to Department A. Defense Savings Staff, U. S. Treasury Department, Washington. D. C. PORDEFENSE ) BUY This supplement is a special section of THIS BUSINESS PUBLICATION published inDefense cooperation withProgram the United States Treasury Department in behalf of the Savings EFENSE FOR MILLIONS "WE, THE PEOPLE OF THE UNITED STATES " to provide for the common defense and secure the blessings of liberty to ourselves and our posterity ."- stated. in the length of a single prophetic sentence. was the purpose of "We the people of the United States." in formulating that charter of law and liberty which we call our Constitution. Common people. we would call these men of the Congress of 1787 whose signatures were affixed to that seroll-common men with uncommon fortitude and uncommon vision. By only a decade removed from the role of "colonists," these simple. un-ophisticated patriots set themselves to the task of building and built a framework for a free government. We the people of the United States today. the posterity of whom our forefather were mindful. are again engaged in a great national effort "To provide for the common defense and secure the blessings of liberty to ourselves and our posterity." The prophetic phrase of 1787 in the complete and people of the United States. Men and wom precise description of the purpose for which we are asked to purchase today Defense Savings Bonds defense of the country that is their home. the opportunity, their children's most preciou- inbe and Stamps. Posing on this page for its collective portrait the greatest society of free people in the world-i from many lands. of many callings and of mai minds. but of one united will-to provide for itance. Put Your Patriotism Into Action-Buy Defense Bonds and Stamps it Strength. Determination. Hope. II isdom. Humor, I understanding-these are the things in the faces of "We the people of the United States.' A PERSONAL What a Business Man MESSAGE Should Know About (This space is reserved for a personal signed message exclusively written for this MILLIONS FOR DEFENSE supplement by an outstanding and distinguished leader of the industry represented by the participating publica- tion. It is suggested that in this message the industry leader personally endorse the Defense Savings Program. indicate his personal sponsorship of the Defense effort in his industry and in- dicate why it is specifically important and appropriate for people in his industry to support the program. Where possible. reference DEFENSE SAVINGS STAMPS Defense Savings Stamps were created because everybody isn't always able to buy a minimum Defense Savings Bond. Defense Savings Stamps give every man. woman. and child in America an opportunity to participate in our Nation's Defense Program. Defense Savings Stamps are sold in denominations of 10 cents. 25 cents 50 cents, SI. and 85. They may be redeemed in cash at any time. No interest is earned on the amount invested in them until they have been accumulated in sufficient amount and exchanged for a Defense Savings Bond. Defense Savings Stamps are on sale at hundreds of thousands of retail stores throughout America, should be made to the Even though you have a sufficient income to industry's current contribu- purchase Defense Bonds regularly. you may find mans use for Defense Stamps tions to the National Defense activity as a whole and to the Defense Savings Program in particular. If possible. also, the message should mention MILLIONS FOR DEFENSE as a continuing contribution of the industry.) They are a wonderful way to encourage thrift and patriotism in children. Help them to get started by getting them an album and encouraging them to buy stamps regularly Business men who understand the importance of system and habit will quickly appreciate the value of this one: As you make a retail purchase get a part of your change in Defense Stamps FORDEFENSE BUY This supplement is a special section of THIS BUSINESS PUBLICATION published in cooceration with the United States Treasury Department in behalf of the Defense Savings Program. are JR SCOP N S VE (E 'RS OUR ATH ER R UGI T C (TH it A IS C C IN T 2 N 10 C ED 'EV NATC N IN IB VI D D PROPUSITION NT NE T I REATED EQUA ARE ENGAGED li. Great CIVIL WAR TESTING WHETHER THAT NATION OR ANY NATION so CONCEIVED AND SO DEDICATED CAN LONG ENDURE WE ARE MET ON A GREAT BATTLEFIELD OF THAT WAR WE HAVE COME TO DEDICATE A PORTION OF THAT FIELD AS A FINAL RESTING PLACE FOR THOSE WHO HERE GAVE THEIR LIVES THAT THAT NATION MIGHT LIVE IT IS ALTOGETHER FIT- TING AND PROPER THAT WE SHOULD DO THIS BUT IN A LARGER SENSE WE CAN NOT DEDICATE - WE CAN NOT CONSECRATE-W CAN NOT HALLOWTHIS GROUND THE BRAVE MEN LIV- ING AND DEAD WHO STRUGGLED HERE HAVE CONSECRATED IT FAR ABOVE OUR POOR POWER TO ADD OR DETRACT THE WORLD WILL LITTLE NOTE NOR LONG REMEMBER WHAT WE SAY HERE BUT IT CAN NEVER FORGET WHAT THEY DID HERE IT IS FOR US THE LIVING RATHER TO BE DEDICATED HERE TO THE UNFINISHED WORK WHICH THEY WHO FOUGHT HERE HAVE THUS FAR SO NOBLY ADVANCED. IT IS RATHER FOR US TO BE HERE DEDICATED TO THE GREAT TASK REMAINING BEFORE USTHAT FROM THESE HONORED DEAD WE TAKE INCREASED DEVOTION TO THAT CAUSE FOR WHICH THEY GAVE THE LAST FULL MEASURE OF DEVOTION - THAT WE HERE HIGHLY RESOLVE THAT THESE DEAD SHALL NOT HAVE DIED IN VAIN - THAT THIS NATION UNDER GOD SHALL HAVE A NEW BIRTH OF FREEDOMAND THAT GOVERNMENT OF THE PEOPLE BY THE PEOPLE FOR THE PEOPLE SHALL NOT PERISH FROM THE EARTH. DEFENSE FOR MILLIONS America Means Freedom To Own Your Own Land, Till Your Own Soil, Win Your Own Share of a Natural Abundance " SHALL NOT PERISH FROM THE EARTH!" There is beauty in America clean-lined New England with its quiet verdant hill-, pleasant valleys and the bridal whiteness of her little towns: the still Southland. blazing bright. luxuriant with flower and fruit: the great sweep of the Western plains under a canopy of stars: the matehless grandeur of the Rockies and the thick Coastal forests sloping down to the deep Pacific's shore. There is bounty in America Southern field. gleaming with cotton: fat Line feeding on the rich-grained prairies: Western mountains hedded with ores, oil flowing deep under Southwestern plains, and power pulled from the churning streams of the East. From American minds and laboratories sprang most of the scientific wonders of the modern world the steamship. the telegraph. transoceanic cable. telephone. electric light. the automobile. and the airplane. These things are America's and above all. the conception of free men governing themselves in order and prosperity and guarding the freedom of each to worship as he wishes. freedom to speak truth as he sees it. freedom to work and enjoy the fruits of his labor. It is inconceivable that the last drop of American blood and the last dollar of American resource should not be pledged to the proposition that this bounty and blessing that is American democracy shall not perish from the earth. Put Patriotism Into Action-Buy Defense Bonds and Stamps I America Means Freedom to Work-and Freedom to Choose the Time and the Place and the Kind of Work America Means Freedom to Live in Cit Country Lane-and in Peac You Want. America Means Freedom to Dream, to Hope to Take a Long Look Forward. America Means Freedom to WorshipEach Man in His Own Conscience Each Man by His Own Creed America Means Freedom to be Loyal, to be Proud to Give Devotion to the Undictated Desires of Your Own Heart. A PERSONAL MESSAGE HOW YOU CAN PUT YOUR PATRIOTISM INTO ACTION WHEN should you buy Defense Savings Bonds? (This space is reserved for a personal signed message exclusively written for this MILLIONS FOR DEFENSE supplement by an outstanding and distinguished leader of the industry represented by the participating publica- tion. It is suggested that in this message the industry leader personally endorse the Defense Savings Program, indicate his personal sponsorship of the Defense effort in his industry and indicate why it is specifically important and appropriate for people in his industry to support the program. Where possible. reference should be made to the industry's current contributions to the National Defense activity as a whole and to the Defense Savings Program in particular. If possible. also, the message should mention MILLIONS FOR DEFENSE as a continuing contribution of the industry.) Now. They are the most urgent investment in America today. As the momentum of our defense program grows daily. the need for action on Defense Savings grows with it. WHY should you buy Defense Savings Bonds and Stamps? Because that is your was to put your patriotism into action so that The American II ay "shall not perish from the earth." Because it provides you with a unique opportunity to save systematically by putting your money into the soundest investment on the face of the earththe United States of America-and at liberal interest rates, WHO should buy Defense Bonds and Stamps? You should. No one else can take your place in this program-no one else will buy your share. WHAT type of Defense Bonds should you buy? Whichever type best suits your purposes. There are three types of Defense Bonds to fill three different needs. Your bank will explain what they are and help you plan a program for purchasing them. HOW much should you invest in Defense Savings Bonds? As large a portion of your income as you are willing to contribute to the Defense of America. The main point is to set up a regular program for your continuing participation in Defense Savings. WHERE can you buy Defense Bonds and Stamps? Defense Bonds are on sale at banks. saving< and loan associations, all U. S. Post Offices. and other designated agencies. Defense Stamps are on sale at hundreds of thousands of retail establishments all over America. Buy a Bond Today, Start Saving Stamps Now! FORDEFENSE BUY UNITED This supplement is special section of THIS BUSINESS PUBLICATION published in cooperation with the United States Treasury Department in behalf of the Defense Savings Program. ILLIONS SFORDREENSFE DEFENSE FOR MILLIONS America Needs Guns for the Arsenal of Democracy. America Needs Scout Cars for the Arsenal of Democracy "THE WORLD'S BEST TOOLS Once America could be. and was. defended by thousand lean lads who reached for the rude flintlod their cottage walls and marched off to victoriousrifle Today the high-caliber. rapid-firing automatic Taigres mildest weapon in the modern army 8 arsenal AND untold tonnage. of bore and a vas mechanical are for the lem lolla guns andforestall great marvels forcesmonsters who would theblackout basic raes on Before tanks guns canthis rollHemisphere. with regularity fromthe assemb and BUY America Needs Planes for the Arsenal of Democracy. PUT YOUR PATRIOTISM INT America Needs Parachutes for the Arsenal of Democracy America Needs Artillery Eyes for the Arsenal of Democracy HE WORLD'S BIGGEST JOB!" erican factories. tools of supreme strength and minute cision must first be forged. great workshops built. hnicians trained. Defense of Democracy is the biggest yet attempted by America in this world: calls for the i financial contribution ever asked of its citizens: mands for each soldier in the field. tens of thousands of lar- for his protection and equipment. The biggest fen- bond can bus makes one American soldier the ual in armament of his potential opponent in battle. America Needs Aircraft Carriers for the Arsenal of Democracy. UY DEFENSE BONDS AND STAMPS A PERSONAL MESSAGE (This space is reserved for a personal signed message SYSTEMATIZE exclusively written for this YOUR SAVINGS FOR DEFENSE MILLIONS FOR DEFENSE supplement by an outstanding and distinguished leader of the industry represented by the participating publica- The best way to buy Defense Savings Bond= tion. It is suggested that in this message the industry leader personally endorse the Defense Savings Program, indicate his personal sponsorship of the Defense effort in his industry and in- dicate why it is specifically important and appropriate for people in his industry to isonasystematic basis-a bond every week. every month. or whatever space of time is most convenient. While it helps pay for National Defense your money will be safe. It will be grouing. It will be available if you need it. Under the Government's Regular Purchase Plan you receive reminders at the interval you select. You may without penalty and support the program. at any time increase or decrease the amount Where possible, reference should be made to the of Defense Bonds you buy, stop and begin again. change the interval. or discontinue industry's current contribu- altogether. tions to the National Defense activity as a whole and to the Defense Savings Program in Write to the Treasury Department. Washington. D. C., and ask them to send you a particular. If possible. also, request form for the Regular Purchase the message should mention MILLIONS FOR DEFENSE as a continuing contribution of the industry.) Plan on Defense Savings Bonds. For your country's sake. for your sake. do it today. Buy Defense Bonds on the Regular Purchase Plan FORDEFENSE BUY This supplement is 3 special section of THIS BUSINESS PUBLICATION published in cooperation with the United States Treasury Department in behalf of the Defense Savings Program. FOR DEFENSE BUY UNITED STATES FIELD ORGANIZATION DEFENSE SAVINGS STAFF 83 News Letter SAVINGS BONDS MASTANDS TREASURY DEPARTMENT, WASHINGTON, D.C. October 18, 1941 NUMBER 22 TO THE FIELD STAFF: Sales of Defense Bonds reached $1,504,411,000, as of September 30. September sales were $232,327,000. Stamp sales as of the same date totaled $18,998,000 for the initial five months. The exact number of individual bonds purchased and the number of in- dividual owners are unavailable. We can tell you that in five months individual stamps sold totaled 61,855,000 pieces, divided by denominations as follows: TEN-CENT. 12,370,000; TWENTY-FIVE-CENT, 40,404,000; FIFTY-CENT. 5,611,000; ONE-DOLLAR, 3,123,000; FIVE-DOLLAR 346,000. In our program to reach millions of Americans, the Series E (The People's) Bond and the Stamps loom large as criterions of success. Either accumulations through Stamps or payroll allotment deposits will swell eventually the number of E Bonds owned. Therefore, every payroll allotment plan and every Stamp sale promotion builds into the long-haul program. However, to syphon off any real surplus from the rapidly growing national income, Bonds must go to owners monthly in increasing numbers. There are many, many thousands of Americans who should be so motivated by our Field Organization's activities that they will BUY A BOND A MONTH. Every convenient method to make buying a regular monthly habit should be established. Our local committees should encourage banks to establish the Depositors Draft Plan and to let depositors know it is available. The Treasury's direct mail plan should be widely known. In payroll allotment plans there should be many regular monthly purchasers of bonds from each allotment. Our task is to so promote our program that the number of Bond buyers increases steadily month by month. The best method is that which starts an individual on a systematic thrift program which will be followed automatically. Sincerely yours, GALE F. JOHNSTON Field Director. Defense Savings Staff. News Letter "YOU, TOO. CAN ANSWER YOUR COUNTRY'S CALL" YOU CITIZENS OF AMERICA ARE THE BUY YOUR SHARE IN AMERICA WE'RE WE'RE WE'RE DOING BUYING BACK OF OUR OUR PART DEFENSE WE'RE INSURING BOYS BONDS OUR LIBERTY SECOND LINE OF DEFENSE. THE MORAL SUPPORT YOU GIVE OUR BOYS MEANS MUCH TO THEM AND THE STRENGTH OF OUR FIRST LINE OF DEFENSE! - By C. E. B. Klessig, Sheboygan Press, Sheboygan, Wisconsin. IN THIS ISSUE MISSOURI Reports - Page 3 NORTH CAROLINA - Page 4 WASHINGTON - Page 6 ILLINOIS - Page ? MAINE - Page 7 LOCAL INITIATIVE Produced These Attractive Exhibits - Page 5 DEFENSE SAVINGS In The Schools - Pages 8 and 9 BANKS Have Depositor Draft Plans - Pages 10 and 11 PEORIA BANK Hangs Up a Record - Page 11 TO THE LADIES - Page 12 FARMERS Learn of Program - Page 13 NEW POSTERS For Banks - Page 14 RADIO PROGRAMS - Page 15 JUKE BOXES Boost "Any Bonds Today?" - Page 15 QUOTABLE QUOTES - Page 16 -2- News Letter 84 MISSOURI School Program Outlined: Many Local Committees Active CITY AND COUNTY SCHOOL SUPERINTENDENTS from all parts of Missouri, more than 600 of them, met September 10 in Jefferwon City and voted enthusiastic endorsement of an eight-point program of preparedness instruction outlinedby Lloyd W. King, state superintendent of public instruction. Instruction in thrift and the economics of Defense Savings is to be an important part of this general program. AN EIGHT-PAGE MEMORANDUM outlining in detail a suggested plan for school participation in the Defense Savings Program has been distributed to school executives and teachers through Missouri. State Administrator Dan M. Nee reports that this program outline has been extremely well received and that "Defense Savings Councils" have been formed in many schools. MISSOURI STATE GOVERNMENT EMPLOYEES are accepting the systematic savings idea with enthusiasm. Two Departments already report 100% participation. A CONCERTED EFFORT to get every city and town in the State to adopt a pay roll allotment plan is now underway. The City of Columbia was the first municipality to install the plan, according to the magazine of the Missouri Municipal League. HIGHLIGHTS:- In Flat River, the Lions Club has unanimously voted for 100% participation in the Defense Savings Program. In Hannibal, every member of the Retail Merchants Bureau has agreed to handle Defense Savings Stamps "for the duration": the schools have organized a thrift and savings program; and a group of insurance men is actively at work assisting the Local Committee in connec- tion with the installation of pay roll allotment plans. O. A. Brown is the active chairman of the Hannibal Committee. In Independence, a Defense Savings essay contest was conducted by the schools in cooperation with the Chamber of Commerce. $24 in Do fense Stamps were awarded as prizes. In Nevada, Dr. John S. Newlon is offering to cancel All unpaid accounts of $5 or less if his patients will take the money they owe him and buy Defense Stamps. In Norborne, the Farm and Farmyard Fair this year awarded premiums in Defense Stamps. In Perrysville, a Defense Bond rally in the courthouse yard addressed by State Administrator Dan M. Nee, attracted a crowd of more than 3,000. the The rally was heralded by a flight of Army pursuit planes over city in the late afternoon and later by the school band, which presented a program of patriotic selections. -3- News Letter N O R T H CAROLINA School Program Underway: Allotment Plan Adopted by Shelby Mills SCHOOL SUPERINTENDENTS throughout the state have received from State Administrator C. H. Robertson the suggestion that in each school an assembly period be set aside for a presentation of the Defense Savings Program by either the school superintendent or principal or by a representative of the local Defense Savings Committee. Administrator Robertson has also arranged for each school superintendent to receive, direct from the Office of the Field Director, an ample supply of Defense Savings folders and posters for all schools under his supervision. COUNTY FAIRS now being held in all parts of the State will, in most instances, have Defense Stamp Booths, staffed by attractive volunteer sales- girls and decorated with official posters. TOBACCO FARMERS who are now gathering in the big leaf tobacco ware- houses in the Eastern part of the State to sell their crops are receiving Defense Savings literature. Deputy Administrator Forrest G. Miles reports, after a visit to this part of the State, that farmers throughout the section are responding in a fine way to the Defense Savings appeal. PROMINENT NEGRO CITIZENS are cooperating wholeheartedly with the De- fense Savings Program, according to Administrative Robertson. Chairmen of local Defense Savings Committees in the State have been asked to organise Negro Sub-committees. These sub-committees have been formed and are already at work in a number of places, including Durham, Charlotte, Winston-Salem, and Alamance County. T. E. McKinney, dean of Johnson C. Smith University, is Chairman of the Negro Sub-committee in Charlotte, and George W. Hill, President of the Winston Mutual Life Insurance Company, is the Chairman of the Negro Sub-committee in Winston-Salem. HIGHLIGHTS:- In Charlotte, teachers of the fifth through twelfth grades are having their pupils write essays on reasons for buying Defense Bonds and Stamps, and the banks of Charlotte are offering $25 Bonds as prises for the best essays. In Goldsboro, the city committee, R. M. Davis, General Chairman, has prepared a folder listing the chairmen and members and outlining the scope and functions of each of its nine sub-committees. In Raleigh. organisation of the city committee was completed at a dinner meeting at the Sir Walter Raleigh Hotel on the evening of September 8th. G. P. Geoghegan, Jr. is chairman of this important committee which consists of 125 persons, organised into 15 divisions. In Shelby, the following cotton mills have announced allotment plans: Shelby Cotton Mills -- 525 employees; Cleveland Cloth - 670; Dover Mill Co. - 550; Lilly Mills Company - 500; Esther Mills Company -526. -4- 85 News Letter LOCAL INITIATIVE AND RESOURCEFULNESS PRODUCED THESE ATTRACTIVE BOOTHS AND EXHIBITS HIND S COUNTY DEFENSE SAVINGS COMMITTEE DEFENSE I Stamp booth on main floor of Davison-Paxon Company in Atlanta. From left to Booth at Mississippi State Fair. From left to right: Mrs. Mitchell Robinson; Mississippi State Administrator, Eugene Fly: E. L. Hynes, field representative, Defense Savings Staff; Mrs. Bell; Orrin H. Swayse, Deputy State Administrator; and Mrs. Joe Robinson, Chairman, Women's Division, and Russ M. Johnson, General Chairman, Hinds County Committee. right: Marion Allen, Georgia State Administra- tor; Mrs. Paul Seydel Jr., Mrs. Bill Wise and Mr. Charles H. Jagels, President of Davison-Paxon Company. A typical local Defense Savings Head- quarters. Booth in the Crutcher GODBLESS Hotel, McAlester, Oklahoma. From AMERICA left to rights Mrs. Melvin Wilkins, Mrs. Nettie Mae Bedingfield in charge of headquarters and Mrs. Harry J. Bettes. BUY BUY S.DEFENSE STAMPLE sponsored by the Marion County League Display at Franklin County Fair, Farmington, Maine. A postal clerk was on duty at all times to sell Defense Bonds of Building & Loan Associations. and Stamps. Booth at the Indiana State Fair -- News Letter WASHINGTON Seven Thousand Seattle School Children Saving For Bonds SCHOOL CHILDREN in Seattle and King County are actively participating in the Defense Savings Program. On September 30, 1733 children received Defense Bonds for which they had completed payment, at formal ceremonies held in practically every school in the county. This outstanding action was possible because of the well developed school savings plan which has been in operation in Seattle schools for some years, in cooperation with the Washington Mutual Savings Bank. More than 7,000 King County school children are now saving regularly to buy Defense Bonds. Each Seattle school child. when he completes payment on a Defense Bond, receives a fine letter of encouragement from State Administrator Saul Haas. with which is enclosed a copy of the telegram in which Secretary Morgenthau instructed Mr. Haas to convey his sincere congratulations to the boys and girls, and to their parents and teachers, for their "patriotic devotion and sacrifice." TWO IMPRESSIVE EXHIBITS featured Defense Savings at the Central Wash- ington Fair in Yakima, where one booth was staffed by volunteers of the Women's Committee and another by Boy Scouts in uniform. Flag raising and flag lowering ceremonies each morning and evening were among the events which attracted attention to the booths. MANY STUNTS helped put over "Retailers for Defense Week". For example: Seattle's original cable car, which is now mounted on a motorized chassis, was appropriately decorated with such signs as "Lick a Defense Stamp and you lick an 'ism" and paraded through downtown Seattle by members of the Junior Advertising & Sales Club. "Uncle Sam's Stampede," an original half-hour radio program, was broadcast Sunday evening, September 13, over Station KIRO. On this program, listeners were invited to telephone in and order Bonds or Stamps, appropriate announcements were made, and West- ern Union messengers dispatched to deliver Bond order forms or Defense Stamps and to collect for the securities. The program was sponsored by the Retail Trade Bureau and the Advertising & Sales Club of Seattle and resulted in the sale of $9,000 worth of Defense Bonds and Stamps. Special booths, staffed by volunteers from various women's organisations, were set up in all of the larger downtown stores. . . HIGHLIGHTS: In Bremerton, the Carpenters Union has voted to invest $5,000 in Defense Bonds. In Longview, pay roll allotment plans have been announced by the LongBell Lumber Company, Weyerhaeuser Timber Company and the Longview Fibre Company. -6- News Letter Highlights From Other States: ILLINOIS MAYOR EDWARD J. KELLY has accepted Honorary Chairmanship of the De- fense Savings Committee for Chicago. He was photographed purchasing a Defense Bond on the occasion of his acceptance. MANY STATE STREET STORES arranged Defense Bond windows for Chicago's Marshall Field had four such windows. "Retailers for Defense Week" MEMBERS OF CHICAGO LOCALS of the Amalganated Clothing Workers of America had bought $25,000 worth of Defense Stamps by the first of Septem- ber, through their "group agents", and had taken $500,000 as their goal. MAINE PRACTICALLY ALL COUNTIES now have functioning Committee organisations. TICKET OFFICES of the Bangor and Aroostock Railroad are selling stamps, and in some communities with no post offices, are the only source of supply. FIRST GROCERY STORE in the State to adopt the salary allotment plan is Shrero's Market in Waterville. INSTALLATION OF AN ALLOTMENT PLAN by the Central Maine Power Company has recently been announced. Walter S. Wyman. President of the Company. is Chairman of the State Committee. AT MAINE FAIRS: Defense Bonds were prises on 4H Club Day at the Windsor County Fair. An Army "jeep" helped boost sales at the Skowhegan Fair, where Postmaster Frank Madden arranged a booth for the sale of both bonds and stamps. AN EDITORIAL COMMENT: "While showers of household gadgets are very nice for young ladies contemplating matrimony, they have certain notorious faults. They do, it must be conceded, stock the prospective home well with can openers, dish cloths, luncheon napery, ash trays, and even such fine things as linen, dishware, cooking utensils, and Aprons. All this is a tedious way of approaching a suggestion, which is both timely and practical. It is that friends of those who are about to wed depart from the time-worn shower tradition and sprinkle the happy couples instead with Defense Bonds and Stamps. "In this way, eight olive forks and 19 book ends would be avoided; Uncle San would have his defense program helped along; and the couple would start out with money in the bank and the means of buy- ing what they really want when they get settled and seriously think about home making." --Portland Press Herald, Portland, Maine. -7- 86 News Letter DEFENSE SAVINGS IN THE SCHOOLS The week preceeding Armistice Day this year has been proclaimed "School Defense Week" by the Governor of Texas. His proclamation reads: "WHEREAS, there exists in America today an urgent need for everyone to do his part in the National Defense Program: and "WHEREAS, the Defense Savings Staff for Texas is soliciting 'allout aid' to make every citisen of Texas, old and young, Defense Bond and Stamp conscious by putting on an educational program in every school in Texas to acquaint the students with the importance of buying Defense Bonds and Stamps and through this medium pass the information and idea on into the homes of Texas; and "WHEREAS, the citisens of the Sovereign State of Texas, have heretofore in every crisis in the affairs of this great nation been willing and proud to do their full duty, and "WHEREAS, it is now the duty of the citisen of Texas, to invest in Defense Savings Stamps and Bonds; "NOW, THEREFORE, I. Coke Stevenson, Governor of the State of Texas, do hereby proclaim and designate the week of November 3, 1941 to November 11, 1941 as SCHOOL DEFENSE WEEK in Texas, and urge all Texans to cooperate with the Defense Savings Staff for Texas and the school children of this State in this undertaking." TO ASSIST SCHOOLS in developing special programs for "School Defense Week". State Administrator Frank Scofield has circulated to school principals a manual prepared by two school teachers of the city of Austin, which contains many specific suggestions for relating class room work in music, art, penmanship, spelling, English, public speaking, social studies, arith metic, reading, dramatics, etc., to Defense Savings. This manual also contains many suggestions for school activities designed to sustain the in- terest of school children in Defense Bonds and Stamps throughout the year. OTHER SCHOOL NEWS: SCHOOL THRIFT PROGRAMS. which are conducted in many cities in cooperation with local banks and savings institutions, have in several cases been related specifically to Defense Savings by providing that a savings account at the option of the depositor may be used to purchase Defense Bonds each time the account reaches $18.75. This has been done in Seattle. Washington; Dallas, Texas: Rochester, New York and New Haven, Connecticut, among other places. STAMPS ARE ON SALE one day each week in the class rooms of many schools. This is the plan used generally in Michigan where many schools inaugurated "Stamp Bank Day" last spring. Teachers and students work together to keep the necessary records, collect the money and purchase and distribute the stamps. -8- 87 News Letter OTHER SCHOOL NEWS (Continued) IN RURAL AREAS and some smaller towns letter carriers, and postal offi- cials have arranged to visit schools periodically with ample supplies of stamps and to relieve teachers and students of a large part of the task of handling siseable sums of money. REPLICA "STAMP BANKS" and "post offices" have been built by some schools as semi-permanent fixtures in school corridors, class rooms or assembly halls. A REVIVAL OF BELIEF in the virtue of thrift is deemed by many to be one of the important by-products of the Defense Savings Program. Bearing upon this point is a report from an up-state New York town where a large consolidated school has arranged to have postal officials visit the school once each week and distribute Defense Savings Stamps through student banking committees. The report adds: "For several years the school maintained a banking service for its pupile but this was discontinued during the depression years." EVERY SCHOOL PUPIL in Marshfield, Massachusetts has started on the road towards ownership of Defense Bonds. In that community, early in the current school year, every child in the elementary grades and all students in the junior and senior high schools received albums each containing one Defense Stamp. The distribution was made possible by the generosity of members of the Board of Trade, Kiwanis Club and Woman's Club and was arranged by the Marshfield Defense Savings Committee, Shirley R. Crosse, Chairman. TYPIFYING THE ENTHUSIASTIC RESPONSE of school children is a report from Schenectady, N. Y. At Nott Terrace High School in that city the student council sponsored a band concert early one morning before school opened. The supply of Defense Stamps was exhausted in ten minutes. Later in the morning the school assembly period was devoted to a Defense Savings Program and Principal Loydd S. Michael purchased the "first" stamps sold at the stamp booths sponsored by the school's three classes. DEFENSE SAVINGS FLOAT This float attracted much favorable atten- tion at the "Corn Carnival" parade held in Granger, Texas, September 24, 1941. -9- I News Letter MANY BANKS MAKE DEFENSE BOND DRAFT PLANS AVAILABLE TO CUSTOMERS From all parts of the country come reports that bankers have made it possible for their customers to participate in the Defense Savings Program by simply authorizing periodic drafts on their accounts to purchase Defense Bonds of specified series and denominations. The following is a partial list of banks which have installed this convenient "Buy A Bond A Month" plan: ALABAMA - Bank of Fairhope. CALIFORNIA - Bank of America, San Francisco. COLORADO - First National Bank of Colorado Springs. CONNECTICUT - Riverside Trust Co., Hartford; Shelton Trust Co: American Bank & Trust Co., Community Bank & Trust Co., First National Bank & Trust Co., New Haven Bank, Second National Bank, and Trademens National Bank - all of New Haven. DELAWARE Delaware Trust Co., Wilmington; Equitable Trust Co., Wilmington. DISTRICT OF COLUMBIA - Lincoln National Bank: Riggs National Bank. FLORIDA - Lewiston State Bank, Tallahassee. GEORGIA - Trust Company of Georgia, Atlanta; National Exchange Bank, Augusta; Fourth National Bank, Columbus: First National Bank & Trust Co., Macon; First National Bank, Rome: Liberty National Bank & Trust Co., Savannah. ILLINOIS - National Security Bank, Chicago: Third National Bank, Rockford. INDIANA - First National Bank, Elkhart; Farmers National Bank, Reming ton. MAINE - First National Bank, Damariscotta. MASSACHUSETTS - Hyannie Trust Co; Winchester National Bank; Guaranty Bank & Trust Co., Worcester. MICHIGAN - Commercial & Savings Bank, Albion; State Savings Bank, Escanaba; Farmington State Bank, MINNESOTA - First National Bank, Austin; Farmers & Merchants State Bank, Clarkfield; First National Bank, Deer River. MISSISSIPPI - Bank of Greenwood; Citisens Bank, Hattiesburg: Capital National Bank, Jackson; Deposit Guaranty Bank & Trust Co., Jackson; Bank of Morton. MISSOURI - Cotton Exchange Bank, Kennett: United Bank of Union. MONTANA - First National Bank, Great Falls: Great Falls National Bank; Montana Bank & Trust Co., Great Falls. NEW JERSEY - Sussex County Trust Co., Franklin; Leonia Bank & Trust Co. NEW MEXICO - First National Bank, Albu- querque; First National Bank, Santa Fe. NEW YORK - First National Bank, Glens Falls: First National Bank, New Rochelle; National Bank & Trust Co., Norwich. (This list is continued on the next page.) THIS DISPLAY BOOSTS BOND SALES This Defense Bond replica tank which belongs to the HartfordConnecticut Trust Company is on the sidewalk in front of the Greenwich-Connecticut Trust Company. Since it was on duty in Hartford (see NEWS LETTER No. 15) it has been in Bridgeport and several other Connecticut towns. Everywhere it goes bond sales jump. - 10 - News Letter 88 BANK DEFENSE BOND DRAFT PLANS (Continued) NORTH CAROLINA - National Bank of Lumberton; Scottish Bank, Lumberton; Citizens National Bank, Gastonia; National Bank of Commerce, Gastonia; American Bank & Trust Co., Monroe: Security National BankRaleigh; of Peoples Bank & Trust Co., Rocky Mount. OHIO - Peoples State Bank, Granville; Greenville National Bank; National Bank of Lima; Savings Deposit Bank, Medina. OKLAHOMA - First National Bank of Tulsa. OREGON - Bank of California, N. A.. Portland, PENNSYLVANIA - Abington Bank & Trust Co: Pioneer Dime Bank, Carbondale; Girard National Bank: Peoples National Bank, Norristown; Third National Bank & Trust Co., Scranton. SOUTH CAROLINA - South Carolina National Bank; First National Bank of Columbia; Bank of Hartsville; Citizens & Southern Bank. TENNESSEE - American Bank, St. Joseph. TEXAS - First National Bank, Alpine; Commercial National Bank, Brady: Commercial State Bank, E1 Campo: Commercial Bank, Mason: National Bank of Commerce, San Antonio: Citizens National Bank, Waco; City National Bank, Wichita Falls. VIRGINIA - Bank of Lancaster, Kilmarnock, WASHINGTON - Seattle First National Bank. . IMPRESSIVE SALES RECORD HUNG UP BY PEORIA BANK More than $1,200,000 worth of Defense Bonds and Stamps were sold during the past five months by the Commercial Merchants National Bank & Trust Company, Peoria, Illinois (population 105,000). Since early in May this bank has used newspaper advertisements and special lobby displays to call attention to the Defense Savings Program. A new promotional program is now being developed around the song "Any Bonds Today?" Tellers' windows will be decorated with the front cover of the sheet music souvenir edition of the song; and ten times during banking hours a recording of the song will be played and distributed at low volume from twelve loud speakers located near the tellers' windows. Pictured below is the bank's attractive floral display which featured more than 1200 red and white peonies. DEFENSE BONDS - 11 - News Letter TO THE LADIES Some Useful Ideas from New York In New York, Mrs. Lytle Hull, vicechairman of the State Committee in charge of women's activities, and her Executive Assist ant, Mrs. Marion Miller, have already made most of their committee appointments through- out the State. They were able to find the kind of women they wanted in each munici- pality, they report, by going to big state wide women's organizations, like the state affiliates of the PTA, the General Federa- tion of Women's Clubs, and the Women's Trade Union League, and asking who the most active workers of those organizations were in each locality. Newspaper editors and women's page writers were also asked to supply the names of leaders in women's activities in each town, and the names of organizations which would probably want to work with local Defense Savings Committees. Mrs. Lytle Hull and Miss Vivian Bolster of Hearn's Volunteers "Flying Squadron" In New York City, a "Flying Squadron", selling Defense Stamps together has been formed composed of society women, Store in New York City. club women, and business girls, who have volunteered to help the Defense Savings Program in any way they can. at Bonwit Teller's Fifth Avenue During "Retailers-for-Defense Week", these volunteers tended Defense Stamp booths in department stores. Helping out on this particular project, too, were the "Hearn's Volunteers", an or- ganization of salesgirls from Hearn's Department Store, who are giving one day every week to National Defense work. INSTRUCTING VOLUNTEERS From long experience with volunteer workers, Mrs. Hull and Mrs. Miller know the importance of providing them with detailed instructions. For example, the volunteers who are helping to sell Defense Stamps in stores are given mimeographed sheets setting forth such suggestions and instructions as: 1. Tell shoppers who stop to examine the literature on display, where Defense Stamps are on sale (at the booth or cashier's desk) and that Bonds can be bought at any post office or bank. 2. Distribute albums with the first stamp sold if the shopper does not already have one. 3. Read the Defense Savings informational pamphlets in order to be able to answer questions intelligently. 4. Keep a record of stamps sold, and, if possible, of the number of people who make inquiry about Stamps or Bonds or pick up literature. - 12 - News Letter 89 FARMERS LEARN OF DEFENSE SAVINGS PROGRAM TRIPLE A CHECKS BUYING DEFENSE BONDS FARMERS are being encouraged to invest in Defense Bonds. All Triple A soil conservation and parity payment checks (about 6,000,000 are distributed each year) are now being delivered accompanied by a new Defense Savings foldor entitled: "12 Facts For American Farmers About Defense Savings Bonds and Stamps." MEMBERS OF THE 800 RURAL ELECTRIFICATION COOPS., who represent approxi- mately 1,000,000 farm families, are now receiving the folder "Freedom for the Future" (referred to in NEWS LETTER NO. 18). ALL FIELD OFFICES AND AGENTS of the Departments of Agriculture and Interior are cooperating to keep Defense Savings before the rural families whom they serve. Field representatives of these Departments have been instructed to cooperate closely with state and local Defense Savings Committees and to do all that they can to stress to farmers the importance of substantial and continuous investment in Defense Bonds and Stamps. OTHER NEWS FROM THE FARM FRONT:- All Creameries in Vermont, including both privately owned and cooperative creameries, are distributing folders giving information about the Defense Savings Program. In addition, some of them are developing plans whereby the creameries help farmers buy bonds by making authorised deductions from milk checks. This is a plan which operates for farmers in much the same way that the pay roll allotment plan operates for wage earners and salaried employees. Future Farmers of America, organizations of boys studying vocational agriculture, are investing reserve funds in Defense Bonds. The Mississippi FFA organization reports the investment of $3,000; Florida, Louisiana and New Mexico organizations each report purchases of $1,000 Defense Bonds, and the Vermont group has made an initial purchase of a $100 bond. His fine Jersey cow produced the milk which brought the money which Danny Eugene Farrow, 4H Club boy of Spring Creek, Yell County, Arkansas, saved to buy the Defense Bond he proudly displays in the picture at the left. Danny's father, Glenn Farrow, in 1931 won the Future Farmers of America award as Master Farmer. Rural Electrification cooperatives throughout the country have invested $650,000 in Defense Bonds. In Missouri, every such cooperative has purchased Bonds. VET A Minute Man Sculptured in Butter was the principal attraction at the exhibit of the Beatrice Creamery Company of Topeka, at the Kansas Free Fair in that city. - 13 - News Letter NEW DISPLAYS AVAILABLE FOR OUTDOOR ADVERTISERS OUTDOOR ADVERTISING is doing much to keep the objectives of the Defense Savings Program before the American public. Already in scores of cities, banks and savings and loan associations and other local users of the outdoor advertising medium, and some national advertisers, notably the Wrigley Company, have placed Defense Savings messages upon outdoor displays which they either own, lease or contract for. Pictures of a few of these billboards have already appeared in previous issues of this NEWS LETTER. A NEW PROGRAM of outdoor advertising is now getting underway. The newly established Outdoor Display Section of the office of the director of information has just announced that arrangements have been made with the Outdoor Advertising Industry for the production of a series of Treasury-approved designs which will be made available at cost to users of outdoor advertising space and to the "plant operators" engaged in this business. Own a SHARE IN AMERICA FOR DEFENSE BUY DEFENSE SAVINGS BONDS THIS SPACE FOR ADVERTISER'S IMPRINT A SMALL BOY AND A DOG (above) feature the design of the poster which is the first in this series to become available. This design was provided by the Mass Marketing Institute of Chicago. Colored miniatures of this design were mailed on October 14th by the Treasury Department to approximately 12,000 banks, insurance companies, and other financial institutions throughout the United States, together with a letter announcing the availability of these posters and outlining the procedure by which they can be obtained. The large 24-sheet posters for this design are now in the process of production, and should be available to advertisers about October 20th. FOR PAINTED BULLETINS, the two designs now available have been provided by Outdoor Advertising Incorporated. Both feature the Minute Man, and differ only as to the wording of the headlines. One says: "OWN A SHARE IN AMERICA. Buy United States Defense Bonds and Stamps." The other reads: "FOR DEFENSE AND SECURITY. Buy United States Defense Bonds and Stamps." - 14 - 90 News Letter DEFENSE SAVINGS ON THE AIR Leading Programs for the Coming Week FOR AMERICA WE SING Monday, October 20 Tuesday, October 21 Saturday, October 25 MILLIONS FOR DEFENSE (The Treasury Hour) AMERICA PREFERRED 9:30-10:00 P.M. (EST) 8:00-9:00 P.M. (EST) NBC Blue Network 9:15-9:45 P.M. (EST) THESE THREE PROGRAMS are dedicated exclusively to Defense Savings. In addition, many regularly sponsored programs during the week will include announcements and other boosts to remind America's radio audience to "Buy a Share in America." . "ANY BONDS TODAY?" IN FIRST POSITION IN NATION'S 300,000 AUTOMATIC PHONOGRAPHS A nation-wide campaign to place "Any Bonds Today?" and other popular National Defense records as they become available in the No. 1 position on the nation's 300,000 automatic phonographs has been launched by the Automatic Phonograph Manufacturers Association and representatives of all major record- ing companies. Records which receive this position are played more often than any others in the machines. Each recording company will make special stickers, cards and title slips for distribution to all places where the automatic phonographs, popularly known as "juke boxes", are installed. This material is now in production, and the week of November 9 to 16 has been fixed as "Automatic Phonograph Operators Cooperating in the Promotion of United States Defense Bonds and Stamps Week." In Michigan, automatic phonograph operators got the jump on the rest of the country and, through the efforts of Roy Small, Conciliator for Local 737, United Phonograph Operators Association, CIO, and the United Music Operators Association of Michigan, "Any Bonds Today?" was given the preferred position on all 5,100 music boxes in Detroit and Wayne, Macomb and Oakland counties. Late in September, when Secretary Morgenthau made his trip to Detroit to discuss pay roll allotment with labor and business leaders, Frank N. Isbey, Michigan State Chairman, offered him $100 if he could find a juke box on which "Any Bonds Today?" was not the first tune. The Secretary took up the challenge and, accompanied by State Administrator Giles Kavanagh, Chairman Isbey and one or two others. went to more than a dozen places, buying hot dogs and dropping nickels in the slots of automatic phonographs. Reports have it that the personal investigation cost the Secretary a pocketful of nickels and that Chairman Isbey kept his $100. "Any Bonds Today?" was in the top spot on every machine! - 15 - News Letter QUOTABLE QUOTES "In this, the most perilous hour in the entire history of civilization and Christianity, it becomes the duty of all who believe in the preservation of American freedom and the American way of life to do everything possible in behalf of the perfection of national defense. Every member of the Moose Lodge can increase his contribution to the nation's security and the perpetuation of his own liberty by purchasing Defense Savings Stamps and Defense Savings Bonds to the limit of his capacity. Therefore, every member of the Loyal Order of Moose is urged to buy at least one Defense Savings Stamp a day and at least one Defense Savings Bond a month." -- Mathew M. Neely, Supreme Governor, Loyal Order of Moose, Governor of West Virginia, and Honorary Chairman of his State's Defense Savings Committee. "The time has come for us to take our American Citizenship seriously. We have accepted the privileges afforded us by our form of Government as a matter of course, forgetful of the price our forefathers paid that we might be free. That freedom, and the Government under which we enjoy it, is not only challenged, but it is threatened. Let the bankers as a class take the lead in a great movement to arouse our people to the dangers which threaten, and try to make them conscious of their individual obligation and responsibility to our Government. Let us pledge anew our allegiance to the flag of our country, and rededicate our lives to its protection and perpetuation." Ed. L. Weathers. President, Kentucky Bankers Association. "Our job is to sell every individual--without coercion and with each one the judge of his own limitations--the obligation of THRIFT FOR DEFENSE." - William H. Bartley, State Defense Savings Administrator for Montana. I CAN KILL A LITTLE TIME READING THAT POSTER. I'VE NOTICED A LOT OF THEM AROUND THAT'S ONE OF THOSE MINUTE MEN. THEY SAVED THIS COUNTRY YEARS WELL I'M NO WAR EXPERT BUT IF YOU PORDEFENSE AGO AND DID A GREAT JOB BUY TOO. FOLKS TO DO EXPECT THEIR THIN AGAIN. YOU'D BETTER KICK IN AND GIVE FOR DE THEM SOMETHING DESIDES A SQUIRREL SUN TO WORK WITH. "BO", Comic strip character by Frank Beck, McNaught Syndicate, Inc. OFFICE - 16 Page 91: "Program for Guidance of Postmasters for Defense Savings Bonds and Stamps": See Book 450, P. 235 STRICTLY CONFIDENTIAL TREASURY DEPARTMENT INTER OFFICE COMMUNICATION Farm DATE Oct. 17, 1941 TO FROM Secretary Morgenthau Mr. Haas Subject: Employment in the Aviation Manufacturing Industry 1. Employment in the aviation manufacturing industry is reported at 289,000 for August 1941, the latest month for which data are available. A total of 230,000 of these employees was engaged in the manufacture of airplanes and parts, and the remaining 59,000 in the manufacture of airplane engines. These figures do not include employment in the Ford and Buick engine plants, estimated at 4,000 workers. 2. More workers were employed in the industry in August 1941 than in any previous month. There were 9 percent more employees than in the preceding month, 73 percent more than at the beginning of this year, and 132 percent more than a year ago. 3. Since the first of the year the industry has ex- panded by 121,000 employees. All of the larger companies reported gains in employment during this period. Lockheed showed the greatest advance of the airplane manufacturing companies, with 15,000 additional workers. The largest increment for the engine companies was 7,000 at Pratt & Whitney. 4. The attached chart shows total employment in the industry, and in selected companies, since January 1937. Data from which the curves were plotted are given in the accompanying tables. Attachments 93 Employment in Aviation Manufacturing Industry (Airplanes and Airplane Engines) 1937-1941 1937 1938 1939 1940 1941 22,100 23,700 25,251 24,100 24,200 27,875 25,200 22,800 35,973 138,900 149,700 155,800 167,048 175,371 190,200 210,729 229,644 23,400 22,050 41,425 23,800 24,450 52,800 58,000 60,500 64,500 67,000 73,000 80,000 90,000 97,448 105,362 115,241 123,492 131,200 5,500 6,500 6,989 6,000 6,600 7,825 6,600 6,900 8,727 38,550 40,468 42,869 44,849 48,546 51,816 54,702 58,882 Sept. 6,400 6,772 9,289 Oct. Nov. Dec. 6,600 6,847 12,600 13,900 15,800 17,300 18,600 20,800 22,900 25,400 27,019 28,981 32,633 34,199 36,045 Airplanes Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Airplane Engines Jan. Feb. Mar. Apr. - May June July Aug. Total Industry -- Airplanes and Airplane Engines Jan. Feb. Mar. 27,600 30,200 32,240 30,100 30,800 35,700 31,800 29,700 44,700 Apr. May June July Aug. Sept. Oct. Nov. Dec. 29,800 28,822 50,714 30,400 31,297 65,400 Office of the Secretary of the Treasury, Division of Research and Statistics. Source: Bureau of Labor Statistics. 71,900 76,300 81,800 85,600 93,800 102,900 115,400 124,467 134,343 147,874 157,691 167,245 177,450 190,168 198,669 211,897 223,917 242,016 265,431 288,526 October 16, 1941 STRICTLY CONFIDENTIAL Employment of Selected Aircraft Manufacturing Corporations 94 1937-1941 1937 1938 1939 1940 615 222 654 850 290 912 859 865 896 840 873 808 440 1941 Bell Aircraft Corp. Jan. Feb. Mar. Apr. May June 1,410 July Aug. 718 235 703 213 606 799 1,834 1,493 2,380 1,726 1,700 2,749 Sept. Oct. Nov. Dec. 1,192 1,480 1,963 4,309 5,043 5,754 6,540 7,036 7,738 7,743 8,677 2,413 3,355 3,597 3,865 Boeing Aircraft Co. -- Seattle Jan. Feb. Mar. Apr. May June 1,249 1,736 2,989 July Aug. Sept. Oct. Nov. Dec. 1,109 1,798 3,985 1,380 2,285 4,749 3,169 2,540 968 3,246 2,518 819 3,099 2,104 832 2,617 989 1,408 2,580 981 2,540 5,137 4,942 4,759 4,198 5,190 5,882 6,571 6,926 6,940 6,391 5,351 5,657 6,939 8,104 7,960 7,740 7,739 7,920 8,720 11,145 Consolidated Aircraft Corp. Jan. Feb. Mar. Apr. 4,349 5,040 May June July Aug. Sept. Oct. Nov. Dec. Office of the Secretary of the Treasury, Division of Research and Statistics. Source: Bureau of Labor Statistics. 2,837 3,477 3,807 5,821 6,743 7,836 9,289 11,018 12,355 12,118 13,135 14,097 14,251 13,886 13,547 14,007 15,238 18,484 October 16, 1941. Employment of Selected Aircraft Manufacturing Corporations 95 1937-1941 (continued) STRICTLY CONFIDENTIAL 1938 : 1937 1939 1940 3,802 4,380 4,744 5,016 1941 Curties-Wright Corp. -- Buffalo Jan. Feb. Mar. 1,241 1,500 2,211 2,347 2,939 5,213 5,698 Apr. May June 1,933 2,310 2,848 6,531 6,597 July Aug. Sept. Oct. Nov. Dec. 6,314 2,202 2,736 1,562 6,824 7,682 8,273 8,902 9,607 9,946 10,537 11,431 13,191 13,966 7,889 2,007 3,491 3,447 8,010 5,591 6,328 4,334 5,961 6,173 4,177 17,054 18,057 19,313 6,653 4,672 5,445 Douglas Aircraft Co. Inc. Jan. 5,532 4,028 6,318 6,771 4,110 10,362 11,952 12,077 13,119 14,033 14,656 14,957 14,662 14,898 14,219 14,158 14,726 16,120 910 1,577 2,305 5,157 11,544 4,768 12,031 1,094 1,594 3,509 Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. 21,502 22,678 25,019 25,940 25,647 Lockheed Aircraft Coro. Jan. Feb. Mar. Apr. May June 1,338 1,797 5,699 July Aug. Sept. Oct. Nov. Dec. 1,383 1,997 5,324 1,428 2,123 5,156 Office of the Secretary of the Treasury, Division of Research and Statistics. Source: Bureau of Labor Statistics. 4,362 13,028 4,400 5,016 5,591 14,829 6,599 7,296 7,582 8,517 10,056 10,904 15,418 19,640 23,865 26,247 October 16, 1941. STRICTLY CONFIDENTIAL Employment of Selected Aircraft Manufacturing Corporations 96 1937-1941 (continued) 1940 1937 1938 1939 Jan. 1,364 1,814 2,905 Feb. Mar. 1,716 1,892 4,092 2,044 2,134 6,029 2,032 2,341 10,070 1,818 2,777 11,174 9,133 9,010 9,357 9,133 9,513 11,200 10,019 11,414 12,871 13,829 829 1,713 2,223 4,049 889 1,935 2,457 June July Aug. Sept. Oct. Nov. Dec. 10,984 9,407 Apr. May : Glenn L. Martin Co. 1941 14,039 13,771 13,216 15,482 16,180 18,313 21,082 23,299 North American Aviation, Inc. Jan. Feb. Mar. Apr. May 841 June 2,400 3,125 July Aug. 4,324 4,154 4,371 4,336 4,782 4,918 4,916 1,272 2,685 2,992 5,111 5,828 6,064 566 2,530 3,795 6,867 Jan. 2,350 2,245 1,826 Feb. Mar. 2,444 2,168 1,766 2,757 3,051 3,468 3,735 3,912 4,282 4,823 5,016 5,445 6,010 6,105 6,401 Sept. Oct. Nov. Dec. 7,767 8,247 8,736 9,590 9,803 9,770 9,693 9,986 United Aircraft Corp. (excluding Pratt & Whitney) Apr. May June July 2,497 1,972 Aug. Sept. 1,952 2,439 1,880 2,123 2,338 1,774 2,588 Oct. Nov. Dec. Office of the Secretary of the Treasury, Division of Research and Statistics. Source: Bureau of Labor Statistics. 7,011 7,652 7,418 7,492 7,718 7,974 7,963 8,224 October 16, 1941. STRICTLY CONFIDENTIAL Employment of Selected Aircraft Manufacturing Corporations 97 1937-1941 (continued) 1938 : : 1937 1939 1940 364 742 938 959 1941 Vultee Aircraft, Inc. Jan. Feb. 440 Mar. Apr. May June 560 533 430 288 334 662 July Aug. Sept. Oct. Nov. Dec. Office of the Secretary of the Treasury, Division of Research and Statistics. Source: Bureau of Labor Statistics. 1,008 1,334 2,127 2,618 2,857 3,531 3,652 3,733 3,851 4,057 4,325 4,544 5,096 5,022 4,955 4,864 4,842 October 16, 1941. STRICTLY CONFIDENTIAL Employment of Selected Airplane Engine Corporations 98 1937-1941 1937 1938 1939 218 262 454 229 297 466 238 339 558 1940 1941 Allison Engineering Co. Jan. Feb. Mar. Apr. May June July Aug. 1,114 1,261 1,610 1,958 2,766 3,254 3,917 4,595 5,282 6,280 6,295 238 382 642 266 439 901 6,394 Jan. 151 153 134 Feb. Mar. 153 152 288 344 358 162 144 Sept. Oct. Nov. Dec. 6,422 6,720 7,012 7,114 7,670 8,133 8,420 9,192 Continental Motors Corp. (Airplane Engine Division) 138 Apr. May June 171 July Aug. Sept. Oct. Nov. Dec. 135 146 203 152 142 243 953 1,057 1,063 368 378 388 398 382 567 732 855 875 1,186 1,235 581 638 657 711 765 819 873 970 1,607 1,661 1,245 1,230 1,240 Lyooming Division of Aviation Manufacturing Corp. Jan. 849 729 519 889 704 521 Feb. Mar. Apr. May June 901 549 573 756 514 644 762 506 689 July Aug. Sept. Oct. Nov. Dec. Office of the Secretary of the Treasury, Division of Research and Statistics. Source: Bureau of Labor Statistics. 1,645 1,695 1,717 1,729 1,706 1,859 1,080 1,459 1,320 1,576 October 16, 1941. STRICTLY CONFIDENTIAL 99 Employment of Selected Airplane Engine Corporations 1937-1941 (continued) 1937 1938 1,931 1939 1940 2,567 2,264 2,119 2,489 2,659 2,384 2,555 3,066 2,471 2,384 3,394 12,287 13,483 14,286 14,865 15,824 16,633 17,524 17,959 2,618 2,227 5,022 5,642 6,549 7,158 7,541 7,765 8,504 9,121 9,449 9,406 9,794 10,377 11,228 12,847 13,136 13,415 13,849 14,241 14,643 15,150 15,602 1941 : : Pratt & Whitney Aircraft Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Wright Aeronautical Corp. -- Paterson Jan. 2,254 2,607 3,398 Feb. Mar. 5,411 6,081 2,515 2,705 3,771 2,800 2,930 3,997 2,690 3,184 4,026 2,608 3,374 5,141 6,537 6,984 7,882 8,682 9,491 10,151 10,726 11,240 11,864 12,408 Apr. May June July Aug. Sept. Oct. Nov. Dec. Office of the Secretary of the Treasury, Division of Research and Statistics. Source: Bureau of Labor Statistics. October 16, 1941. 100 STRICTLY CONFIDENTIAL EMPLOYMENT IN AVIATION MANUFACTURING INDUSTRY Factory Wage Earners 1940 1939 1938 1937 1941 M J M J M 6 J N M M EMPLOYEES N EMPLOYEES Thousands Thousands Total Industry (Aircraft and Engines) 280 280 240 240 200 200 160 160 120 120 80 80 40 40 0 M M J J 0 1937 1940 1941 $ M N N N M J Selected Aircraft Manufacturing Companies Selected Airplane Engine Companies EMPLOYEES EMPLOYEES Thousands Thousands The Douglas Aircraft Co EMPLOYEES Thousands Glenn Martin Co Wright Aeronautical Corp Paterson 22.5 25.0 20.0 20.0 22.5 17.5 17.5 20.0 15.0 17.5 15.0 15.0 12.5 10.0 12.5 10.0 75 10.0 7.5 5.0 5.0 2.5 7.5 12.5 2.5 0 5.0 1938 1937 1939 1940 1941 27.5 2.5 1938 0 1937 1939 1940 25.0 17.5 0 1937 1938 1939 1940 Consolidated Aircraft Corp. 1941 22.5 15.0 12.5 Pratt and Whitney Aircraft 194 Boeing Aircraft Co 10.0 12.5 7.5 10.0 5.0 7.5 2.5 5.0 o 1937 1938 1939 1940 1941 20.0 17.5 15.0 12.5 10.0 2.5 22.5 7.5 Lockhead Aircraft Corp 0 20.0 15.0 17.5 12.5 1938 1937 1939 1940 1941 Curtiss-Wright Corp. 5.0 (Excluding Wright Aeronautical Corp) 2.5 10.0 15.0 0 12.5 1937 1938 1939 1940 1941 15.0 7.5 Allison Engineering Co. 12.5 5.0 10.0 10.0 2.5 7.5 7.5 5.0 0 1937 1938 1939 1940 1941 10.0 North American Aviation, Inc. 2.5 5.0 7.5 2.5 0 1937 1938 1939 1940 1941 5.0 10.0 United Aircraft Corp 0 (Excluding Pratt and Whitney 7.5 1937 1938 1939 1940 1941 7.5 2.5 Lycoming Division of Aviation Manufacturing Corp 5.0 0 1937 1938 1939 1940 1941 5.0 10.0 Ball Aircraft Corp 2.5 2.5 7.5 0 0 1937 1938 1939 1940 1941 5.0 5.0 1937 1941 1939 1940 1941 2.5 0 0 1940 1941 1937 1938 1939 1940 1941 o 2.5 1939 1940 (Aircraft Engine Division) 2.5 1938 1939 Continental Motors Vultee Aircraft Corp 1937 1938 5.0 1937 1938 101 BRITISH AIR COMMISSION 1785 MASSACHUSETTS AVENUE WASHINGTON. D.C. TELEPHONE HOBART 9000 PLEASE QUOTE REFERENCE NO With the compliments of British Air Commission, who enclose Statement No. 2, covering aircraft shipped, for week ending October 14, 1941. The Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. October 17, 1941 Mr Commission 16, systish one 1941. 102 STATEMENT NO. 2. DESPATCHED FROM UNITED STATES WEEK ENDED OCTOBER 14, 1941. TYPE DESTINATION ASSEMBLY POINT BY SEA BY AIR FLIGHT DELIVERED FOR USE IN CANADA Misscobra U. K. U. K. Boston III U. K. U. K. 7-50 Canada Cataline Liberstor II Kittyhawk Australia U.K. 20 -- 7 22 Melbourhe U. (via Gander) Middle East Port Sudan -- -- 1 -- -- 9 44 Canada Boston III Hudson III U. K 4 U. I Middle East Port*Sudan U. K. 8 -- 1 (via Gander) Port Paltimore 23 5 AMERICAN Harvard II Middle East Port Sudan 7 15 Canada Chosapeake TOTAL U.K. U. 1 115 11 41 103 OCT 17 1941 My dear Mr. Secretary: On September an, 1941, Liestenant Martin it. Gennelly of the Usi ted States Aray was fatelly shot by Customs Guard John K. Young at Menolais, T. N., as the former was leaving the Maited States Army Transport PERSIMENT GLEVELAND. I as informed by the active collector of customs at Fonclule that the sheeting occurred while the guard was on official duty, in connection with an attempt of Meutement Councilly to pass through the castone linee with a package without submitting 18 to isapeetion upon the guard's request. The Customs Agency Service of this Department is conducting as investigation to assertata the faste and evidence in the ease. IS is believed that two United States assel officers in Honolula are is possession of important information is the after, but the local navel officials have refused to permit these officers to be interviewed. Criminal presention of Mr. Young for the sheeting has been instituted is the leen1 courte and I for informal that the trial may take place is the BOBS future. in view of the seriousness and urgency of the matter, and of the information received from the eating collector that the sheet- ing occurred in line of duty, I shall be obliged 18 you will instruct the appropriate noval efficials at Honolula by telegraph to permit the Oustems Agency Service to interview the navel officers notional above reparting the after. Very typi) DUTH, (Signed) Hather) Acting Secretary of the Treasury. The Reasonable The Secretary of the Nevy. 10-16-01 104 200 THE SECRETARY. October 17, 1241. Mail Apport for 2011 suring this week lea followed the pottern 01 the previous letters do ing in in about the seme proportion. 0: courte there are fewer comments on the 10% speech, and the 4th in Levol of the suggestion her ricen. It in about : the politic of 25 in invor to as against. Keny letters age the not to weaken on the original stend. Sending out the speech on infinition through the Defence Bond office and resulted in 0 very high comment this 05 this speech :- to Sond onles. A grent any letters are who 1- endorse ...... the Bond crapeign 0.14 very patrictic in their tone. Keny who the TO buying Bonds are nonetheList critics1 of Administration THE the one outstanding criticist is of Government failure 00 edencize. There to no doubt that the Lost recent militur elicited are than any previous one. Letter after letter peak of in willing linte, expensive printing, the weste of those who are already buying and intend to buy. Some State Letters have been abntrected. Next critician :- number of letters received is that afrected inbox unions, strikes end high vages 1 H general. There are the usual Anti-British fewer Anti and : erent tony agrinst any pr articipation in the Khr. Action that the Neutrelity Act should not be emended or repeated outsushered those supporting such motion 37 7 to - There Les tees the usual scattering of oburive letters, and :hose enclosing neverapers Address and columns criticining the President, the Secretary, or the Administretion in general. - 105 FAVORABLE LETTERS Comments on the Secretary's Speeches Mrs. Ralph A. Metzger, San Francisco, Calif. I greatly admire your stand on the various issues which have come up from time to time, especially your suggestion of a 100% tax on all profits above 6% hope the latter is enacted into law for the period of the emergency. I hope this letter reaches you personally. I T. R. Crook, South Boca Grande, Fla. 100% in favor of your recently expressed opinion. How about passing it along to FDR? "Man in the street" doesn't mind heavy taxes, but violently opposed to excessive profits, and hopes you won't be fooled by the loud voice of Big Business. Boca Grande still beautiful and would be nice if you could vacation with us again this winter. Hope you can arrange it. J. P. Harrison, Texas Theatre, Denton, Texas. I am one of the 130 million Americans you mentioned in your speech, a small town theatre operator in a little college town down here in North Texas, but regard- less of my status, I have been trying to figure out the main events that Your speech seem to cast the most gastly shadow over the future. enlightened me more and at the same time it fascinated me by its simplicity and its abundance of good old hard common horse sense. And just as a humble citizen that I am, I want you to know that I am one of our 130 million Americans who are behind you in your mastodonic task. In the language of a showman, I have some other good adjectives that describe it such as: Colossal, Gigentic, and Stupenduous. R. E. Masterson, Beaumont, Texas. Your address is put in such a concise and interesting manner that one cannot fail to read it thoroughly. The principles set forth in the address should be supported by all Americans, but I imagine the pressure groups in Washington will probably hinder the inauguration of same, and there will be "heck" to pay in the "sweet bye and bye". D. G. Merkel, East Orange, N. J. Your pamphlet, "A Speech and a Pledge", to which you were so kind as to send me has impressed me greatly. I wish I thank you for this admirably clear and far-sighted speech, with which When I listen to the men of my own profession, heartily agree. college professors and teachers, I am seriously worried. There is no doubt that they agree completely with the aims of our Government's foreign policy. But there is on the other side a rising bitterness about the fact that the Government up to now was not able to prevent the rise of the cost of living. -2- 106 E. H. Beardsley, Jacksonville, Florida. I have read of your suggestion to limit the amount of profits to the stockholders of corporations to Corporations are made up 6% and think they are all very good. largely of small people, like myself, who save and invest, and seldom if ever see over 6% The directors and special heads at the time of their organization for the year, vote themselves a large salary (possibly they are worth it), which is known to the stockholders. Then at the end of the year they figure out a small amount to said investing stockholders, and take the surplus for themselves in the form of a bonus. I have seen recently where the Courts ordered a president of a tobacco company to refund his bonus to the rightful stockholders. This if followed up might put a lot of money in circulation, where it rightfully belongs, and help increase taxes. 3- 107 Comments on Bonds Felix Bilgrey, N. Y. C. I thank you for your letter of September 26. I was very happy that you thanked me personally for having bought a $25 Savings Bond. I am proud that I could buy a Savings Bond with the first $20 I earned in the United States. I am a Dutch boy who fled from the Germans in May, 1940; on July 23, 1940, my parents and I entered the United States. During the past year, I attended the Long Island City High School, from which I graduated with honor in June. On June 17, my seventeenth birthday, I received the amount of $20 from the Manufacturers' Trust Company, this representing the First Prize for an essay contest, "Why Everybody Must Buy National Savings Bonds". I purchased my Bond on the following day. David A. Williams, Cleveland, Ohio. I have not only used what surplus funds my monthly income permits for the purchase of Defense Bonds, but have disposed of some other holdings and transferred same into this of I am sometimes discouraged to find the lack type of security. recognition that prevails among the run of men in the steel plants with regard to the critical situation that is presented to our great democracy. I do not mean to infer that I am pessimistic but feel quite certain that one of the biggest problems facing our Government today is to impress upon the individual in every way just what a critical situation it is, and how necessary it is for exerybody to put his shoulder to the wheel. Phil S. Dickinson, Chicago, Ill. As you know, this section of the country is probably the center of the controversy as to the wisdom of our President's foreign policy. I am one of those who believes that the most important problem before the American people today is to see that Hitler is licked, and so I personally am heartily in accord with everything he is doing to see that aid is given to the forces opposing the Axis Power. I likewise realize that under present conditions all the members of our Administration are under terrific pressure. Finally, I am in sympathy with what I conceive to be many of the social reforms that the Administration has instituted. There are, however, several things which are giving to those who do not agree with the President's foreign policy, arguments which are hurting the general program. First, your statement that all corporate profits should be limited to 6% of invested It has, unfortunately, tremendously increased the feeling capital. of dissatisfaction. Second, many of the group who disagree with the President's foreign policy, and even many of those who agree with it, feel very strongly that if the country as a whole is asked to make sacrifices, the Government should help us likewise by seeing to it that non-defense All citizens of the country must expenditures are cut to the bone. change their scale of living, give up things they have had in the past, and make sacrifices, which they are quite willing to do, at the same time that our own Government, which asks us to do so, is not following this procedure at all. 108 4 Quite the gem of the week's mail comes from Mildred Shane, Chicago, Ill. She has invested her "widow's mite", $3,000, in U. S. Bonds. She writes that in order to buy more she will have to get a job, and suggests that the Secretary can help her out. However, there is an alternative -- she could get married again. The drawback to this is -"Ny boy friend is in jail. Perhaps you can do something about releasing him in my custody. He just drifted and got into wrong company, but he is smart and has a little money which could be invested in U.S. Bonds. We need help and if you furnish it, we will help you by buying Bonds". Name and address are given in order to make the assistance an easy matter for H.M.Jr. William Roben, Omeha, Neb. Appreciate very much your letter of Oct. 10 regarding Defense Savings plan, and wish to advise I have contracted through my employers whereby I am buying a certain number of the U. S. Every paragraph of your letter is inspiring but sometimes I wonder if we are all doing our share, especially Defense Bonds each month. when e certain number of citizens cooperate and then in almost every daily paper we find strike after strike mentioned, which in practically every case has something to do with delaying the output of thanks, planes, and other valuable equipment necessary end for the purpose of defeating Hitler and the Axis Powers. Henri Schueg Chassin, Santiago de Cuba. Taking its inspiration from the very forceful and stimulating campaign which the Treasury Department developed under your leadership for the sale of Postage Saving Stamps and Defense Bonds, and as a contribution to the good cause of Continental solidarity and Continental defense, this Company has originated and adopted the design which appears on the postal license stemp used on the envelope bearing this letter. It shows an eagle and e condor with claws outstretched in a gesture of mutual protection, and the legend - both in English and in Spanish - "The Americas will save liberty". The same slogen, with a similar design, is now being used in all of our LatinIn submitting this design to you, we would like you to regard it BE R token of the friendly sentiments which the peoples to the south of the Rio Grande entertain towards the United States. American advertising. -5- 109 UNFAVORABLE LETTERS Comments on the Secretary's Speeches Robert Withington, Northampton, Mass. Your franked speech entitled, "The Fight Against Inflation", reached me yesterday, and it is worth the postage for me to acknowledge it, although my letter may never get to your desk. Of course I agree with you that the subject is one of supreme importance to every American, and I am glad you are concerned with it. I presume that you have read the remarks on "Taxation" in TIME for October 6th (p. 23), and Mr. Robey's comments on your latest proposal to limit profits in NEWSWEEK of the same date (p. 38). I enclose the articles, hoping that you will note the fallacies in your You do not (I fear) stress in your speech the need for reasoning. limiting wages as well as prices, of which wages are an integral part. It would also be nice if the Government could cut its non-defense spendI write as a salaried teacher, whose ing and 80 cut its taxes. wages are not likely to go up. Our salaries are paid from money received for tuition and from funds received from the investments of the college. If parents cannot afford to send their children to college, one source is affected; if the return on stocks is reduced, the other source is dried up. At the best, our salaries are so small that we cannot save much; and with the increased taxes cannot soon save anything at all. We must listen to your appeal to buy Defense Savings Bonds with a wry face, for, with the best will in the world, we cannot afford to buy them. Dr. A. H. Clagett, Upper Darby, Pa. I agree with you and pledge my whole-hearted support in this crisis. Because of changing conditions, encroachment on private practice by Social Agencies, and age, I am on the way out, but I, as a patriotic American whose ancestors fought in As the the Revolution, will continue to do my bit as to economy. representative from our County Medical Society, I attended a meeting in the Court House at Media, called for defense. I was under the impression that it was to deal with emergencies and disasters arising in the County from invasion or sabotage. I went prepared to offer the services of every physician in the County and had done considerable work in arranging means for rendering emergency service in times of disaster. A call of the Roll revealed that there were representatives from Bar Tenders Unions, Barbers' Unions, Labor Unions, Women's Auxiliaries of all kinds. I was amazed when a Resolution was passed asking the Federal Government for a loan of several hundred thousand dollars to construct a few playgrounds and a swimming pool at a public park near Swarthmore. I went from that meeting with a bad taste in my mouth and will attend no more. Playgrounds and pools are of little use when a shipyard on the Delaware is blown up and human beings are scattered over the surrounding countryside. 111 - Comments on Bonds W. F. Kaynor, President, The Waterbury Button Co., Waterbury Conn. I am forwarding you under separate cover just a sample of what the business executive is greeted with most every morning. (Bond literature) These advertisements, in many cases, RS you can well see, cost good and plenty. It seems to me that this is a type of expenditure that ought to be brought to a minimum at this time. Miss Rahna Benson, Brooklyn, N. Y. To whom it may concern, whether you be President of these United States, or one of the clerks in the office of the Treasury, where there must be an over supply to be able to send me one of these every few months. We would not have to pay such large taxes if you clerks at that end tried to save a little of our money. DO NOT SEND ME ANY MORE BOND LITERATURE, I AM BUYING MORE BONDS THAN THE MAJORITY OF PEOPLE MAKING TEN TIMES MORE MONEY THAN I. Your office should get in touch with the Defense Bond sales office and get the names of the purchasers. Mrs. J. E. West, Jamestown, N. Y. Some time ago I bought for each of my 12 grendchildren a "Baby Bond" all in my name, but each grandchild named as "Co-owner" - they not even knowing I have done so - have also each month I done the same for each of my 5 children. Now get from 12 to 17 duplicate letters, addressed in each of their names. do not like waste, and as each of these are just thrown into my waste-basket, I am writing to see if there is any way to stop you sending them to me constantly. We are all doing all we can to buy Defense Bonds and save, and I would greatly appreciate thinking there might be I some effort of economy on the part of our Government. Miss Jennie T. Schrage, Madison, Wis. Your letter thanking me for buying U. S. Sevings Bonds and urging me to buy them regularly is probably the 20th or 30th letter of that type which you have sent me. By this time, it seems to me that the automatic sending of letters with . lot of expensive enclosures every time anyone does buy A bond is A bit wasteful. After all, the purchase of these bonds is supposed to furnish money for Government use in necessary expenditures. A. J. Gillet, The Harter Corp., (Manufacturers of modern metal furniture, posture chairs, etc.), Sturgis, Mich. I appreciate your letter of October 3rd, thanking me for buying $10,000 worth of United States Savings have Bonds, and requesting that I endeavor to buy these systematically. Our I just returned from our factory at feel very disheartened. factory has A Government contract which takes 25% of our normal production, 100% and I have just been advised by them that you have cut them down from to 40% When you take the 25% out of the 40% it only leaves 15% balance I also understand that which we can ship to our regular customers. our factory has been compelled to lay off quite a number of workers due them entirely to our inability to secure the necessary materials to keep working. You surely realize that people out of work and without incomes cannot do their part in buying defense bonds. Is there anything that you can do about all this? -- 112 Mrs. Joseph K. Elder, Henderson Ky. On June 30th I took every cent I had out of the bank and bought U. S. Defense Bonds because I thought it was a patriotic duty and a good investment. On July 3rd, while coming home from work, an Army truck ran through a red traffic light and struck my autmobile. It was raining hard and no officer was on I have signed a number of duty to warn of approaching trucks. effidavits and given all information requested, however, if any definite progress is being made to reimburse me, I am unaware of it. This damage probably My last letter of inquiry was unanswered. seems small to you in your capacity of handling millions and billions of dollars, but it has worked a very severe hardship on me. do not think our Government should withhold payment any longer on this just claim. I do not know how to proceed further and I hope you will do what you can to help me so that I can start buying U. S. Defense I Bonds again. Harm White, The Carpenter Advertising Company, Cleveland, Ohio. While your courtesy in sending out this letter is appreciated, let me remark that this is the duty of the citizen, even though he has to do it with his fingers crossed. I say with his fingers crossed, because I am becoming more and more convinced that the entire fiscal policy of this Administration is headed for disaster. I say disaster, because if it goes any further, it will simply give the President an excuse to proclaim some sort of national socialism or quasi-Communism as the only In an effort to analyze the reasons for the total lack of national unity, I an forced to the conclusion that it is due to the way out. people's inability to believe any more of the President's promises. Frankly, it has me more confused than ever before and I am therefore hoping that by some stroke, one way or the other, this European war will be over before we too will find ourselves under the same kind of rule that we have been so valiantly opposed to. Franklin Lindsay, Austin, Texas. If your bonds are no sounder than your suggestion that profits of corporations be limited to 6% of their invested capital, I have enough of them. Arthur J. Neppel, Chicago, Ill. What shameful waste to keep on sending letters and all the printed matter that goes with them to persons whom your records must clearly indicate are buying bonds regularly, such as I am doing. There must be thousands upon thousands of people in my category, and I'm sure I am expressing their sentiments and those of millions of others when I venture the opinion that it indicates an utter lact of inefficiency, and it is high time that your Department, and all others connected with our national Government, strive to cut down to an absolute minimum all this deplorable and unnecessary expense. -- 113 George M. Morris, Lawyer, American Security Bldg., Washington, D. C. I am tremendously interested in the financing of the defense of the United States, but I must confess that when I read in the New York Times the reports of the Senate Finance Committee hearing in which a Government officer admits that he refused a contract for housing to a bidder (with a $900,000 bid) who was over $400,000 lower than his nearest competitor on the assi gned ground that the bidder's methods would revolutionize the building industry and would cause trouble with one of the national labor organizations, my faith turns a little faint. Carl Scholz, Consulting Mining Engineer, Charleston, W. Va. Periodically I receive from you a letter thanking me for my subscriptions to United States Savings Bonds. This, I am always glad to do as far as my means permit, but there is one feature which causes concern, not only to myself, but to many others situated like myself, and that is - our Administration is not making any effort to curtail expenditures not directly connected with our defense program. Is it possible that the attitude of our Administration is to create employment at a time when there is a scarcity of labor for the defense program, and the im- pelling motive is entirely of a political and vote gathering effort? I am frank to say that this attitude is spreading very rapidly, and since it is your duty to find money, I think we are entitled to your help in having the Administration reckon with this feature. Prof. Harold L. Reed, Cornell University. I have bought the maximum amount possible of Series E and its predecessor in each of the lastinthree years, and I am therefore especially vulnerable to a further It is absolutely nec- crease in prices and the cost of living. essary that the Government deal realistically with the wage problem, particularly wages in the war industries. I AM alarmed at such information as I receive regarding waste of Government funds in the construction of ammunition depots, camps, and so forth. May I therefore say that I am one of the number of persons who has done his part and I am now waiting for official Administration to forget politics and do its part. Miss M. E. Dobson, Springfield, Mass. I have just received the numerous pieces of literature on Government Bonds enclosed in your letter of Oct. 9th, and in return would like to ask why this Government feels that it is necessary to spend so much money for advertisement in connection with these bonds when every intelligent citizen of this country, who could I feel that by this disafford to buy one, knows what they are. continuance of needless spending of money, the Government could do its part along this line which sould help greatly to curtail the chances of inflation. 114 - 10 - F. L. Burroughs, Odessa, Texas. If we make application to work for the Government on 8 defense project to rush up work to give all out aid to England, unless we join a labor union that we do not wish to join, we are refused work. Then the Government calls on us to buy bonds and fight in the army, nothing is said about the labor union. Krs. Henry V. Colby, Berkeley, Calif. I have deliberately refrained from buying U. S. Savings Bonds, since I disapprove strongly of the Administration's foreign policy and the use to which the money you are attempting to raise in this way, is being spent. I write you this in answer to your form letter of September 16th, thanking me for "entriotic cooperation", because I believe disapproval cannot be expressed too often if we are to evoid at least some of the catastrophe towards which we are being led. George R. Walter, Niles, Mich. These bonds are without doubt as safe and sound as any investment in the world. But I have stopped buying them because this is the only opportunity given me to register my opposition to the Government's war policy. Furthermore, I believe B majority of the citizens of this nation oppose this war policy. Fronz Schick, keley, Celif. Unfortunately I have come to the con- clusion that the defense savings program, or any similar borrowing in the future will be disappointing since it will not reach the full earning capacity of the American people. The lesson which I have learned ns an economic observer in practically all European countries during and after the first World Wer has taught me that inflation - whatever its causes may be - and appeals to serve a country by making investments in Government Bonds are hardly reconcilable. French E. Wolfe, Cincinnati, Ohio. Why doesn't the Federal Government be honest with its taxpayers and cut down non-defense expenditures by eliminating N.Y.A., c.c.c., and W.P.A. and other wasteful outlays known to people all over the country? If citizens are asked to sacrifice and economize to pay heavy and burdensome taxes, our Government must first practice what it preaches. At any rate, election days are coming and new officials will be elected to do the job. - 11 - 115 Comments on Texation Policies Dr. Lawrance G. Hallock, Los Angeles, Calif. We ordinary Americans have been struggling to provide for our families and our future in the face of ever mounting taxation, but the biggest obstacle to our welfare has often been the careless utterances of some of our high placed economic Quislings, like yourself, Mr. Morgenthau, who would betray all business, big and little. Maybe you also 'shed crocodile tears" for our big farmers and insurance companies who get fat checks from the rest of us taxpayers for not planting cotton or what not on lands that never SAW a good crop of anything. That's the kind of thing that makes us small middle class investors weep and its not crocodile tears either. The New Deal and its appeal to the mob. Myer Prussian, Detroit, Mich. I suggest the Department change its procedure as to the amount of interest payable on Tax Anticipation Bonds. A differential has been set up wherein the large man is penalized and the small man is given preference. I believe about two and one-half per cent is paid on the money, and the big man who purchases a large amount does not get this. In this way, there is a distinction between the two, and it should not be so. 116 - 12 General Comments E. D. Moses, Bluffton, S. C. I don't mind being bled white for this nation's defense. I don't mind being bled white to help England. I can even hold my nose and not gag too audibly over helping Russia - but always with the wistful hope that Hitler and Stalin will annihilate one another. As a taxpayer. I have bought farm and labor votes for politicians so long that I can take that with a grain of salt. But what I want to know is where you get the sheer nerve to ask the already hard-pressed and overburdened taxpayer to pay $30,000,000 for Mexican roads? If the idea is to bankrupt this democracy out of existence, it well on its way to fulfillment. Disgustedly yours, E. D. Moses. is William M. Mill, Worcester, Mass. I received the enclosed circular today. (P. 0. - "National Letter Writing Week" pamphlet) We are asked to conserve supplies and now you will note the Government is urging us to use them. It seems rather a pity to raise the question, but this type of thing with others is what I feel is the inconsistency of Government expenditures. This costs money and time. C. C. King, North Tonawanda, N. Y. Here is an item for your official scrap book to show the lengths to which certain Institutions are going. Today I cashed a City of North Tonawanda official check for $65.00 at the State Trust Co., the official depository for the City, requesting in addition to $61.00 in bills, $4.00 in silver and nickels. The Teller refused to accommodate me with the four dollars worth of change unless I paid A fee of 1 cents per "roll" for the silver and nickels. No request WBB made that the change be rolled. It would be interesting to know whether the Bank was acting legally in refusing change without payment of the above fee. Albert Schwartz, Pennsylvania Glass Bottle Co., N. Y. C. There is a great waste of materials and fuel in replacing whiskey bottles now being destroyed after contents are emptied, pursuant to A ruling of one of the Federal Departments. We would like to know more about this ruling and whether same cannot be suspended for the duration of the Defense Program. The bottles now being destroyed can be redistributed to the original owners for use, thereby making a tremendous saving in fuel and other important materials. As usual, after an offering of Government securities, there have been complaints saying that the offering of bonds was so timed that small subscribers could not get their bids in, or information was not obtainable in time to take advantage of the opportunity. Amos Burt Thompson, Lawyer, Cleveland, Ohio, writes, "It is unfair to the small investor to make an offering in the morning and close the books in the afternoon, because certainly this gives a very great advantage - 13 - 117 to the insurance companies who are able to and, in fact, do have officials that are in constant touch with the matter, and, of course, everybody recognizes that the banks have about all the U. S. bonds they should have. The point of the matter is that no individual can possibly keep in touch with what you are going to do ifI had youaccumudo it in the morning and close the books in the afternoon. lated some funds that I intended to use for the purchase of bonds offered yesterday, but the manner in which the matter was handled prevented my doing so." Edwin B. Mayer, Lawyer, Chicago, Ill., writes, "Yesterday subscriptions were open for the new 21% issue, and books closed last night. I have so many friends and clients - persons in moderate circumstances and men of considerable means - who would like to have subscribed and become owners of blocks of these bonds, ranging from $500 to $5,000. They feel, however, that their position is hopeless. There is no preference given to the small subscriber. Would it not be well to set up a priority in subscriptions up to a definite amount? I would like to know personally that if I want up to $5,000 worth of my Government's bonds, that I have right and can get them without resorting to the subterfuge of a large a subscription and a scale-down." Stanley Setterwhite, San Diego, Calif. I was recently employed by Aetna Casualty and Surety Company on a National Defense Project here in San Diego. I was paid by check twice monthly, and would stop in at the Bank of America, located at the corner of 6th and Broadway in this city, to have my check cashed. The bank did cash some three or four of my checks, then suddenly refused because I was not known, The Aetna Casualty and Surety Company was not known, the Bank of America didn't know who (what bank) Aetna did business with, the check was drawn on a bank in New York, You know and I and I didn't have an account with Bank of America. know that banks are responsible for doing business with checks. We might as well receive our salaries in the form of any other useless paper if we cannot cash our checks. Bankers have a church ritual of courtesy and politeness when one goes in to deposit a dollar. Go in to cash your check or withdraw a dollar and notice the change. 118 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 17, 1941 Ferdinand Kuhn, Jr. Herbert Merillat PRESS COMMENT ON PRICES AND WAGES There has been a noticeable slackening of editorial discussion of the price-control bill. Organized labor, however, responding to the pressure for wage-control, is carrying on a vigorous campaign to prevent the inclusion of wage-restrictions in the bill. The farm conference in Washington, called by Senator Thomas, has received little editorial attention. Scattered comments from papers in farming regions, however, indicate wide approval for the refusal of Farm Bureau President O'Neal to endorse the demands of the conference. The more moderate newspapers in farming states have been afraid that the farmers' cause would be more injured than benefited by extreme demands -- for a guarantee of minimum farm commodity prices, for no ceilings on such prices, and for revision of the parity formula to gain further advantages for farmers. This moderate element has taken its stand on the parity principle and asks for no more, no less, than parity prices for farm products. -2- - 119 The Des Moines Register, applauding O'Neal's walk-out, had this to say: "For agriculture to press now for more and more, indifferent to the effects that success in further demands would have on the dangerous upward price spiral, would in our very sober judgment be imprudent to the point of folly." Agriculture, it said, cannot consistently demand proper restraints on wages while making extreme demands itself. "It can't be 'whoa' for the other groups and not also 'whoa' for agriculture." Wage-Control Organized labor, for its part, is busily developing a case against wage-control as part of a price-control bill. "Labor," the paper of the railroad brotherhoods, for three successive weeks has carried editorials to bolster labor's arguments. One assailed Mr. Baruch as an "ambassador from Wall Street," seeking "to place war burdens on farmers and workers, while profiteers escape." Another welcomed the testimony of Dr. Isador Lubin, to the effect that recent wage increases had not been a significant factor in price increases. A report of the American Federation of Labor claimed that wage increases had been unjustifiably used to excuse large price increases. Wage increases, it said, have added only two percent to manufacturing costs. -3- 120 The C.I.O. News again repeated at length the arguments of C.I.O. President Murray against freezing wages in connection with price control. New Treasury Borrowing The Treasury offering of $1.2 billions of long-term bonds was the occasion for much editorial pondering of Federal borrowing policy. The terms of the bonds were considered well-designed to attract investors other than commercial banks. There is consid- erable editorial alarm, however, at the inflationary risks in relying to any great extent on borrowing from such banks. The alternative, say the commentators, lies in heavier taxation, much larger sales of defense bonds, and curtailment of non-defense spending. In particular a more vigorous sales campaign for defense bonds is urged. The press is disappointed at what it regards as a slump in sales. It points out that relatively few bonds are being bought by low-income groups and that heavier purchases by such persons are desirable, not only to raise money for the Treasury but to cut mass purchasing power. 121 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 17, , 1941 Ferdinand Kuhn, Jr. FROM Alan Earth EDITORIAL OPINION ON FOREIGN AFFAIRS: THE CRUCIAL TEST Firmness Rumblings from Tokyo, culminating in the resignation of the Konoye Cabinet, have given the press an expectation of dramatic events in the Far East. As to their form, the editorial writers are uncertain; the preponderant view is that the Japanese will stab at the Russian rear. There is a corresponding vagueness as to the course which the United States should pursue. The Washington Post, for example, concludes an editorial on the subject in the following rather enigmatic fashion: "The situation is thus one of explosive potentialities which the United States and every other nation endangered by Japanese aggression must be prepared to meet with prompt- ness and vigor." The press as a whole desires to avoid conflict with Japan, yet insists on the sternest resistance to Japanese aggression. The general editorial attitude toward Japan continues to be bellicose and even contemptuous. It has been assumed during the past week that negotiations between the United States and -2- 122 Japan have broken down. A number of commentators, in fact, have insisted that there was never any basis for such negotiations and that the Japanese had been employing them merely as a device to stall for time until the Russo-German situation should be clarified. Continuance of the talks has given rise to some apprehension that a deal might be made at the expense of the Chinese. In virtually all comment, this or any other species of "appeasement" is vigorously denounced. Doubt In both news and editorial pages, the nation's press has fostered a feeling that the battle now raging around Moscow represents a crucial test for the forces opposing Hitler. The popular reaction, in the event of an imminent Russian collapse, would almost surely be one of deep disheartenment. Perhaps still more dangerous is an impression created by the newspapers that there is little or nothing America can do to influence the decision. Editorials even in strongly interventionist papers reiterate that insuperable problems of production and transportation make it impossible for effective aid to flow from this country to the Soviet Union. No great optimism is expressed for the survival of Moscow; and there is occasional expression of the fear that Stalin may come to -3- 123 terms with the Nazis. Much of the current comment, indeed, is in the form of a wringing of editorial hands. The future, in the event of a decisive German victory on the Eastern Front, baffles and frightens the commentators. Suppose, says The Omaha World-Herald, that Hitler, "having polished off his friend Stalin, having taken possession of the riches of the Ukraine and Crimea, chooses to call it a day ... he may say: 'I've got all I want Britain may keep her empire. I've no war with America. Let's quit. If you don't want to quit -- come and get me, if you can!'" The World-Herald, along with a great many other moderate or tepid supporters of Administration foreign policy, views such a proposal of "peace" with contempt. But it sees as an alternative only a long, bloody stalemate with an American Expeditionary Force fighting abroad. And it quails frankly before the choice. It appears inevitable that a Russian defeat would give rise to a serious wave of defeatism among a considerable body of press and public alike. -4- 124 Disappointment American newspaper commentators experience a natural abashment in discussing the advisability of a British invasion of the European continent. Since most of them are opposed to an American Expeditionary Force at this time, they hesitate to exhort the British to such an undertaking. But the degree to which they desire it was attested by the rejoicing with which they greeted the mere rumor that British forces had landed at Archangel. There seems to be a general understanding among American papers of the enormous difficulties in the way of an invasion effort. These are recited whenever the subject is discussed. Most commentators agree that the British lacked the manpower, training or equipment requisite for a sustained offensive. Yet through all the comment runs an undercurrent of disappointment and the sense of a great opportunity lost and unlikely to recur. Impatience In the face of such grave and immediate dangers as loom on the Eastern Front and in the Far East, the press has been inclined to consider the current debate over arming American merchant ships as relatively trivial. The torpedoing of the destroyer Kearny can scarcely fail to aggravate this feeling. -5- 125 It is the spirit, rather than the letter, of the Neutrality Act which the newspapers wish to see erased. There appears to be a rather widespread feeling that the modification proposed by the Administration is timid and inadequate. Many commentators doubt that guns or gun crews are available in sufficient number or that they will afford effective protection against Axis U-boats and raiders. They argue that access to British ports is of far greater importance, that abandonment of all pretense to neutrality is most important of all. 126 October 17. 19th Dr. Feis Mr. D.V. Bell STRICTLY CONFIDENTIAL Would you please send the following cable to interester Vineas as Sentons "For interester Vinant from the Secretary of the Treasury. Is reply so your No. 4788 of October s. 1941. the treasury will press for the administration of export arrangements being handled in the United States and will support you is maintaining the position you are taking on this point." 127 CABLE TO WINANT FROM THE SECRETARY OF THE TREASURY In reply to your No. 4782 of October 8, 1941, the Treasury will press for the administration of export arrangements being handled in the United States and will support you in maintaining the position you are taking on this point. plungs. 128 October 27. 19th w. Fets Mr. 3. W. Sell will you please can't the following collegree to the American Sentens "you from the Secretary of the To facilitate the now of supplies to Basela, the United States has agreed to by gold from the Quested Government is adresse of delivery and on this beets the Bussies Government has agreed to sell thirty million dollars of word. the British Spousery represents live here has been informed about this. wass yes please inform - w Vineat and Mr. (Signed) D.W. BELL FDI 10/17/12 129 FOR CASADAY AMERICAN EMBASSY LONDON FROM THE SECRETARY OF THE TREASURY To facilitate the flow of supplies to Russia, the United States Treasury has agreed to buy gold from the Russian Government in advance of delivery and on this basis the Russian Government has agreed to sell thirty million dollars of gold. The British Treasury representative here has been informed about this. Will you please inform Ambassador Winant and Mr. Harriman. thuth 130 October 17. 1942 Files m. newish so . Letter from the Federal Reserve Seak of See York dated october 16 enclosing photostets of . letter dated September n received by the Natural Secure Beak from the Mobilization Board of Hong Kene. which lists the - of the with of the Board is English end is Chinese characters. P FD: 10/17/41 131 FEDERAL RESERVE BANK OF NEW YORK October 16, 1941. sir: Attention: Mr. Frank Dietrich In accordance with your telephone request, we are forwarding herewith eight photostats of a letter dated September 27, 1941, received by us from the Stabilization Board of China, Hongkong. Respectfully, /s/ D.J. Cameron D. J. Cameron, Manager, Foreign Department. The Honorable, The Secretary of the Treasury, Washington, D. C. Encs. Copy: VW: 10-18-41 A TABILIZATION BOARD OF CHINA CENTRAL BANK BUILDING CABLE ADDRESS SINOSTABO TAOMENKOU, CHUNGKING VIA AIR MAIL 27th September, 1941. Reserve Bank, 18 Sirs, We wish to confirm the following message which set you on September 25th: SEPTEMBER 20TH SENT YOU THROUGH U.S. TREASURY FOLLOWING AGE: KEBVA LABUX EFIFS MERIA FEEGY OWBYC CULIE INHUY KAZOR ML EVFYE CULIE RUMJI ETXUG GADEV XUWYX OWBYC CULIE KYHFY UNQUOTE OF CHINA HAS BEEN ADVANCING UNDS TO BOARD AND WE ARE LOUS TO RETURN AMOUNT so ADVANCED CABLE WHETHER BOARDS OUNT IS AVAILABLE (Signed) STABILIZATION BOARD OF CHINA HONGKONG BANK BUILDING HONGKONG Yours truly, ou BOARD CE CHINA STABIL Genera. Secrets M 133 PARAPHRASE OF TELEGRAN RECEIVED FROM: American Enbassy, Chungking, China, Via N.R. DATE: October 17, 1941, 9 a.m. NO.1 418. This telegram has reference to Shanghai's telegram No. 1472, 9 p.m., under date of the 15th of October 1941. I am in complete accord with the views of the General General in Shanghai. This telegram 10 being sent to the Department and is also Dates repeated to Shanghai, China. GAUSS NPL 10 811.51693.132 SECRETARY of THE FFINE 2+ PARAPHRASE OF TELEGRAM RECEIVED FROM: AMERICAN EMBASSY, ANKARA. TO: Secretary of State, Washington DATED: October 17, 1941, 7 p.m. NO.: 388 134 CONFIDENTIAL - NOT FOR PUBLICATION First. The exchange of goods valued at 96 million Turkish pounds, divided into two groups, is provided for in the TurkishGerman commercial arrangement (comprising commercial agreement with protocol and thirteen confidential exchanges of notes, and payments agreement with confidential protocol and two exchanges of notes) which entered into force provisionally on October 9 and is to remain in force until March 31, 1943. Exchange is to be made for specific German goods c.i.f. value of 55 million Turkish pounds of which the most important are 18 million war materials, iron and steel (?) machines, means of transport, thirty, and copper manufactures of which copper content is not to exceed 1,000 tons two point five by Turkish goods of similar value f.o.b. of which the most important items are 10 million minerals and metals (copper, chrone "to be delivered after January 15, 1943" and antimony), olive oil, seven, cotton seven, mohair and other goats' hair six, skins five, and oleeginous seeds four point five. Tobacco 20 million, figs six point five, hazel nuts five point four, raisins three, fish two point five, and other Turkish goods to total 41 million are to be exchanged to the extent of 50% for German goods specified in first group with -2- 135 with the exception of war material, copper manufactures and sugar beet seed: and hardware, iron and other metal manufactures and to the extent of 50% for any other sort of German goods. A confidential exchange of notes provides for a margin in each group of 10% of value of goods to be exported, although the commercial agreement stipulates that export of Turkish goods will be authorized to the value of German goods in corresponding category arriving in Turkey in customs. The meaning of this apparently is that the Germans could import from Turkey at the beginning Turkish goods in group one to the value of 5,500,000 Turkish pounds prior to the arrival in Istanbul of any German goods. Either Government may take measures necessary to restore equilibrium when the margin is exceeded according to provisions in the agreement. It was agreed in a confidential note that the Turkish Government would issue export licenses to Germany for seven thousand tons of cotton, eight thousand tons of olive oil, forty-five thousand tons of chrome and twelve thousand tons of copper. It is worthy of note in this connection that the export of copper, chrome and antimony to Germany was not authorized under the previous Turkish-German commercial agreement. There has also been an increase in the quantities of olive oil and cotton. Second. The two Governments agreed in a confidential exchange of notes, to conclude before March 31, 1943 an agreement concerning the delivery to Germany of Turkish chrome to be effected up to December 31, 1944 on the following 136 conditions: (1) in schedule 1-A the amount of war materials specified must be entirely liquidated by delivery to Turkey of the materials in the conditions the agreement specified: (2) the two Governments will agree upon the further war materials for which chrome to be exported from Turkey will form the counter value: (3) exportation will be authorized by the Turkish Government of an annual quantity of chrome amounting to ninety thousand tons, for the periods from January 15 to December 31, 1943 and from January 1 to December 31, 1944, that is a total from the 15th of January, 1943 to the end of 1944 of one hundred and eighty thousand tons. Germany is to deliver to Turkey these war materials: heavy machine guns, forty relined Bochum guns, spare parts for German planes, Krupp guns 7.5/60 with sights and ammunition, Bochum guns 7.5/20 with ammunition, pontoons and engineering material spare parts for trucks and motorcycles. Third. In addition to payments arising out of commercial exchanges, the payments agreement which is similar to 1938 agreement, covers financial transfers of all sorts between the two countries. In a supplementary note provision is made for the utilization of excess blocked funds in Germany of persons residing in Turkey for the purchase by German banks for Turkish account of obligations of the Anatolian Railway, Port of Maydar Pasha and Turkish debt 1933 in circulation in Germany or in German-occupied territories. Copy:hr:10-23-41. MACHURRAY 137 GRAY PM Berlin Dated October 17, 1941 REC'D 6:38 p.m. Secretary of State, Washington. 3798, October 17, 2 p.m. This morning's press announces that in view of the fact that German funds in America are frozen, interest on dollar issues of the Dawes and Young loans will no longer be transferred. Holders of dollar issues of American C.S well C.S non-American registry will bE paid by means of deposits to their credit at the Treuhand Gesellschaft Von 133 MBH in Berlin. Special agreements in Effect will not bE affected. Details follow in air mail despatch. MORRIS. KLP 138 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE October 17. 1941 Chauncey TO Secretary Morgenthau For FROM Mr. Dietrich CONFIDENTIAL Registered sterling transactions of the reporting banks were as follows: $44,000 Sold to commercial concerns Purchased from commercial concerns LI 9.000 Open market sterling held steady at 4.03-1/2, and there were no reported transactions. The Canadian dollar, which closed at a discount of 11-1/4% yesterday, improved to a final quotation of 11% today. In New York, closing quotations for the foreign currencies listed below were as follows: Argentine peso (free) Uruguayan peso (free) Venezuelan bolivar .2360 .0505 .5775 .2070 .4650 .2670 Cuban peso 1/8% discount Brazilian milreis (free) Colombian peso Mexican peso Mexico. We purchased $1,125,000 in gold from the earmarked account of the Bank of No new gold engagements were reported. In London, spot and forward silver were again fixed at 23-1/2d and 23-7/16d, respectively. The U. S. equivalents were 42.67 and 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 no silver purchases today. RESTRICTED 139 M.I.D., W.D. 11:00 A.M., October 17, 1941 G-2/2657-220; No. 521 SITUATION REPORT I. Eastern Theater. Ground: Little definite information is available on the progress of the fighting around Moscow. Powerful German forces appear to be making steady progress. North and south of Kharkov, the slow German advance continues. The Germans claim to have established a bridgehead north of Taganrog. The Rumanian High Command states that their troops have penetrated the defense lines of Odessa. Air: German sources claim that much damage is being done against Moscow defenses during the present operations by air attacks. They also report heavy activity against Leningrad and shipping outside Odessa. II. Western Theater. Air: Raids carried out by the R.A.F. last night were said to have been widespread, including the Ruhr Valley and the invasion port docks. German reports claim attacks on British shipping and harbor facilities, while the British say that no bombs were actually dropped. III. Middle Eastern Theater. Air: Reports from both sides indicate a successful bombing by the R.A.F. of Naples. Malta and Benghazi were other objectives of the British in this theater. Ground: No significant information. RESTRICTED 140 MEMORANDUM October 18, 1941. TO: The Secretary FROM: Mr. Sullivan Mr. Buffington and I called on Chairman Doughton this morning and explained to him our purpose in sending to taxpayers the pamphlet disclosing their tax liabilities. Mr. Buffington explained the pamphlet and our objectives and the Chairman approved what we were doing. After Mr. Buffington left the room I sounded out Mr. Doughton on the question of our assimilating into the national debt and directly guaranteeing the obligations of the Federal agencies, which are now only indirect obligations of the Federal Government. He was somewhat reluctant to approve it but suggested that he would think it over this weekend and call me on Monday. Senator George was in Georgia. Senator Connally was in Texas. Senator Barkley was out of the city. Senator McNary could not be reached. I had a long conference with Senator Vandenberg who heartily approved your contemplated action in regard to the obligations of the Federal agencies which are guaranteed only indirectly by the Federal credit but he thought that it would be a mistake to accord the same treatment to the two billion two hundred million obligations of Federal agencies which we do not guarantee either directly or indirectly. I was leaving Senator Vandenberg asked me about Social Security. then I knowAswhat was going to be done about it. He serious to the urged told that him you that give I consideration did very not consequences Social Security of syphoning off increased earning power through the medium of taxes before you finally decided to do it. He said he thought that that would the get the Treasury into the worst possible mess and that it would spell end of Social Security as an insurance trust fund. JhS 141 Hold Saturday- noon 60110,1941 REPORT ON NON-DEFENSE EXPENDITURES IN THE 1942 BUDGET Submitted by the Bureau of the Budget in Conformance With Resolution of Senate Finance Committee, Adopted on August 28, 1941 October 15, 1941 142 REPORT ON NON-DEFENSE EXPENDITURES IN THE 1942 BUDGET CONTENTS Page III. ALLOCATION OF COMMITTEE'S REDUCTIONS A. Civil Departments and Agencies B. General Public Works Program C. Aids to Agriculture 5 3. Curtailing or Abolishing Functions D. Legal Implications of Revisions 5 A. Base Used for Revisions B. Magnitude of Revisions C. General Aspects of Revising Estimates 1. Performing Functions More Economically 2. Adjusting Programs to Improved Business Conditions 5 II. THE PROBLEM OF REVISING NON-DEFENSE EXPENDITURES 1 I. INTRODUCTION 7 8 8 12 13 15 17 18 19 D. Aids to Youth E. Work Relief 22 F. Social Security 25 23 143 APPENDICES Appendix Resolution of Senate Finance Committee A Items Classified as "National Defense" in the Budget B Documents for 1940, 1941 and 1942 and as of October 1, 1941 Non-Defense 1942 Appropriations and Expenditures, and C Hypothetical Revisions to Cut Budget Estimates of Expenditures by $1 billion, $1.5 billion and $2 billion 1942 Non-Defense Expenditure Estimates by Type of Commitment D E F G H Chart: Income and Industrial Production Chart: Employment and Unemployment Chart: Prices, Cost of Living and Earnings Reductions in Individual Programs Compared with Total Reductions K Chart: Number of Persons Receiving Work Relief 144 -I. INTRODUCTION This report is in response to the Resolution of the Senate Committee on Finance, requesting the Director of the Bureau of the Budget to supply a revision of the estimated 1942 expenditures on the assumption of an instruction to reduce non-defense estimates by $1 billion, $1.5 billion and $2 billion respectively, and, further, to indicate changes made in the classification of defense or non-defense expenditures since the submission of the 1940 Budget. The request of the Committee is based upon provisions of the Budget and Accounting Act which direct the Bureau of the Budget to furnish aid and information to the committees of the Congress having to do with the finances of the Government. The Resolution of the Committee specifies that the Director shall submit his report by October 15, 1941. With this time limitation it obviously has been impossible to prepare the equivalent of three Budgets for 1942. An annual budget, as the Committee knows, contains one thousand pages of detail and is the product of four months of intensive hearings with every Department and agency of the Government. Since it has been impossible to employ the usual process of hearings and detailed examination of individual estimates, it must be assumed that the Committee had in mind a hypothetical approach involving a broad review of Federal programs to achieve arbitrary reductions of 145 -2- $1 billion, $1.5 billion and $2 billion. This report is based upon such an hypothesis. The allocations of the Committee's reductions must not be considered as recommendations of the Director of the Budget for cuts in non-defense expenditures. It should be clearly kept in mind that it is the responsibility of the President alone to submit budgetary recommendations to the Congress. In preparing the report many difficulties of definition and classification .have been encountered. The Committee!s resolution implies that the term "non-defense expenditures" has precise meaning and that such expenditures can definitely be segregated in the Budget. In a period of total defense effort such a segregation has little significance. Even if the interpretation of defense were restricted to military activities, segregation of non-defense expenditures could not be made simply and precisely. For example, the beach patrol of the Coast Guard is paid from the same payroll as its neutrality patrol in the North Atlantic. The Tennessee Valley Authority, the Bureau of Reclamation, and the War Department are transforming peace-time water control projects to meet the power needs of defense. The Federal Trade Commission, the Interstate Commerce Commission, and the Tariff Commission are shifting their normal programs in order to meet the demands for information essential to defense. The General Accounting Office has an enormous new load of auditing defense expenditures. The Bureau of Internal Revenue has the 146 -3job of collecting new taxes. In every department of the Government there are similar instances of the interrelation of "defense" and "non-defense" activities. Because of the magnitude of the defense portion of total current expenditures, there has been a natural tendency to lump all other expenditures under a general term "non-defense". In this approach, directness of relationship to defense effort is the primary determining factor in classification. Necessarily, this requires determinations which are arbitrary. Such determinations as have been made are set forth in a table in Appendix B in specific answer to the Committee's request. There is but one item -- U. S. Maritime Commission Ship Construction Fund -- included as "non-defense" in the 1940 budget and subsequently changed to a national defense classification. In summary, this report makes three arbitrary revisions of the 1942 Budget, without regard to the function of the Bureau of the Budget to estimate expenditures "necessary for the support of the Government". It is apparent that many of the indicated downward re- visions would seriously impair the defense effort and other vital Governmental activities. The normal process of budget building has not been followed. The Departments have not been consulted; no hearings have been held; and there have been no conferences with the President. In response to the request of the Committee, the Director 147 -4wishes to reiterate that three arbitrary revisions of a budget prepared ten months ago should not be interpreted as recommendations with respect to the remaining months of the fiscal year 1942 or in any sense as a forecast of the President's Budget for 1943. 148 5- II. THE PROBLEM OF REVISING NON-DEFENSE EXPENDITURES The Resolution of the Senate Finance Committee (See Appendix A for full text) requests detailed revisions of 1942 estimated expenditures on the assumption that the Budget Director had been instructed to reduce original 1942 appropriations by $1 billion, $1.5 billion and $2 billion. The specific request is as follows: such detailed revisions of the estimates of expenditures for the fiscal year ending June 30, 1942, as he would make if he had been instructed to prepare three budget estimates for such fiscal year in which the total annual expenditures for non-defense purposes were less by one billion dollars ($1,000,000,000), by one and one-half billion dollars ($1,500,000,000) and by two billion dollars ($2,000,000,000), respectively, than the total amounts appropriated for such non-defense purposes for such fiscal year . " A. Base Used for Revision The Resolution of the Senate Finance Committee does not specify the base for the requested revision. The Director of the Budget has adopted as a base the estimates of expenditure in the original 1942 budget. Estimates of expenditures rather than appropriations have been used because in many instances appropriations made for a fiscal year may be spent in future years. B. Magnitude of Revisions The significance of the $1 billion, $1.5 billion and $2 billion reductions which the Senate Finance Committee has asked the Budget Director to allocate can be easily underestimated if these 149 -6amounts are related to total expenditures for defense and non-defense of $25 billion for the fiscal year. On such a basis, a $2 billion cut amounts to 8 percent of the total expenditures. The same cut applied only to non-defense expenditures would amount to 30 percent. The following table illustrates the general effect of the reductions proposed by the Committee. The first column of figures shows the percentages for over-all reductions of $1 billion, $1.5 billion and $2 billion, respectively, in total non-defense expenditures of $6.6 billion for fiscal 1942. The second column gives the percentages if expenditures of $3,196 million that are "fixed" by contractual and legislative commitments are excluded. Such exclusions amount to almost 50 percent of all non-defense expenditures. Appendix D gives a breakdown of non-defense expenditures according to the type of commitments. It would not be reasonable to view all legal and legislative commitments as sacrosanct when a drastic revision of important govern- mental services is under consideration. Thus, balanced judgment would seriously question a policy of cutting sharply into such important items as expenditures for law enforcement, work relief, and the like, while leaving untouched agricultural benefits or grants-in-aid for Federal highways because they are based on prior commitments. For these reasons the third column of the table gives the percentage reductions if the exclusions of fixed commitments are 150 -7limited to an amount of $2,094 million for interest on the public debt, veterans' pensions, and the other commitments enumerated in the footnote. Percentage Reductions Required to Lower All or Part of Estimated 1942 Non-Defense Expenditures by $1 Billion, $1.5 Billion and $2 Billion Reduction Based on All Over-all Non-Defense Reduction $1.0 Billion $1.5 Billion $2.0 Billion Expenditures after Excluding: Certain Fixed All Fixed Commitments Commitments * 15% 30% 22% 23% 44% 33% 30% 59% 44% Expenditures of Reduction Rased on Non-Defense These percentages indicate the drastic nature of the over-all reductions of $1 billion, $1.5 billion and $2 billion posed by the Senate Finance Committee. Because of their magnitude, the Budget Director in distributing the over-all reductions among Federal programs, has assumed that certain changes will be made in legislative and other commitments. C. General Aspects of Revising Estimates In arriving at the hypothetical revisions of estimates which are presented in the following section of this report, certain general considerations are relevant. In general, there are three major approaches to budget reduction: * The fixed commitments excluded are interest on the public debt, veterans' pensions and insurance, transfers to trust accounts, refunds, the Federal contribution to the District of Columbia, and legislative and judicial establishments. 151 -81. By performing functions in a more economical manner through improvements in administrative management; 2. By reducing economic and social aid programs to adjust for improved business conditions; 3. By curtailing or eliminating functions. 1. Performing Functions More Economically The Bureau of the Budget and the various departments and agencies continuously study organization and procedures in order to evolve more efficient and economical administration. Constant effort is made to eliminate duplication and overlapping of functions. Reductions in expenditures from further improvements in government machinery will at best contribute in minor degree to any major budgetary revision. Moreover, they may require considerable time to become effective. In many cases improved administrative management is reflected in the ability to carry an increased work load rather than in a reduction of expenditures. 2. Adjusting Programs to Improved Business Conditions (a) Improvement in production, employment and income. Employment and income have increased markedly during the past year. This increase has been even more rapid than was expected a year ago because it has been necessary to expand and accelerate the defense effort. Hence 152 -9the expenditures for certain programs will be lower than was planned in the President's budget for the current fiscal year. The revisions in this report are based on the assumption that the intensification of economic activities could have been foreseen last December when the original estimates were formulated, and would have been fully effective throughout the fiscal year. Various charts which picture the improvement in economic activities are attached (Appendices E and F). Appendix E shows the increase in agricultural incomes. Enlarged sales and increased prices brought higher farm receipts. Because of this favorable development, reductions of total payments for farm aid are incorporated in the overall reduction programs requested by the Senate Finance Committee. General statistics showing improvement in income and production are, however, somewhat deceptive guides for the revision of estimates. The improvement of income and employment conditions is largely due to the tremendous increase in defense production. Various parts of the country, various groups of farmers, and various groups of labor are differently affected by the defense effort. Defense "prosperity" is spotty in its effects. There exist side by side scarcities for some types of labor, and unemployment for other types; scarcities of some farm products, and excesses of others; boom conditions in certain regions, and slack conditions in others. Therefore, an improvement in agricultural or employment conditions would not necessarily justify a corresponding reduction in farm or relief programs. 153 - 10 - (b) Continuous adjustment to changing conditions. If, in December of 1940, the improvement in business conditions could have been fully foreseen, smaller appropriations for the economic and social programs would have been recommended. This improvement has been cap- tured in the process of budget administration. Although the budget document is only submitted once a year to the Congress, its execution is revised constantly. Budget execution is a continuous economy drive. The President's recommendation to the Congress in May of 1941 for the WPA appropriation for the current fiscal year was $109 million below the estimate in the original budget document. The lower figure contemplated that average WPA employment would be 23 percent below the average on which the original budget estimate was based. The Administration can, within certain limits, adjust current expenditures to changing needs. In apportioning available funds a certain portion of the appropriations may be placed in reserve if it is believed that a department or agency has appropriations in excess of actual needs. This reserve is withheld until the department or agency can demonstrate that the money is essential to its program. For the fiscal year 1942 reserves of $450 million have been established. This unusually large amount appears possible in the light of improved business conditions. A larger reserve could not be established at this time without a revision of the functions and programs which are the result of Congressional enactments. 154 - 11 - Even if intense economic activity persists throughout the present fiscal year, the lowest of the three hypothetical figures requested by the Committee implies curtailment of government functions. (c) Price and wage increases. During the last year not only production, employment and income, but also prices and wages have increased. While an improvement in economic activities permits the reduction of certain expenditures, price and wage advances may cause a rise in other items. The considerable increases in prices and wages during the last year are indicated by the chart in Appendix G. In the downward revision of estimates, the possible effect of price increases upon government expenditures has been disregarded. First of all, price increases affect defense expenditures much more than non-defense ex- penditures. About 90 percent of defense costs are for weapons of all kinds, food, equipment, and construction, which are immediately affected by price rises. In contrast, only about 10 percent of non-defense expenditures are for direct purchase of material and equipment which are immediately affected by price increases. Some other items, such as rents and service contracts, will eventually be affected by price increases, but the direct effects in this field are not yet of great significance. The effects of future price developments must be borne in mind. If higher costs of living cause an increase in wages and salaries, 155 - 12 - a substantial rise in non-defense expenditures will take place. Thus, it is likely that a part of the economies which are now possible are only temporary and may subsequently be offset by increasing costs due to higher prices. 3. Curtailing or Abolishing Functions All three proposals for reductions involve curtailment or abolition of some functions of government. In judging relative urgency of functions it is inevitable that the following factors be taken into consideration: (a) Defense implications. Many expenditures of defense importance are included in the so-called non-defense classification. All government functions have more or less direct relationship to defense in an era of total war and total defense. In many cases this relationship is so close that curtailment of the activity of a regular department would necessitate reestablishing the same functions, possibly at a higher cost, as an activity in some new defense agency. Numerous examples could be cited. On the other hand, it must be recognized that every possible curtailment of non-defense use of labor and material that is needed for defense must be effected. Postponement of non-defense construction may be a definite contribution to national defense. This is a factor of prime importance in any budget readjustment. 156 - 13 (b) Post-defense aspects. Preparedness for the post-defense period is an integral part of the whole program for the defense of democracy. During the last decade experiments were made and governmental policies and instruments were developed for an effective fight against depressions. It is essential to preserve and improve these instruments so that they may be available for immediate use in the post-defense period. It must also be assumed that the normal functioning of the government and the execution and enforcement of laws must be maintained. It would, for example, be utter waste to wreck the machinery for law enforcement now only to rebuild it later. The damage done to the welldeveloped operating machinery would be entirely out of proportion to the immediate saving. Abolition of an agency would be preferable to a drastic reduction which would leave an inefficient and demoralized organization. D. Legal Implications of Revisions The President emphasized in the Budget Message of January, 1941, that almost half of non-defense expenditures are for so-called "fixed commitments". These fixed commitments include contractual and legislative commitments such as the payment of interest, pensions, transfers to trust accounts and legislative commitments which cannot be changed without amendment or repeal of statutes. In many cases, 157 - 14 especially with respect to highway grants to State governments, commitments are made a year or more in advance and curtailments could not become effective immediately without breach of prior commitments. Although an effort has been made to minimize the legislative changes implied in the revisions of this report, the major revisions could not be made without many such changes. 158 15 - III. ALLOCATION OF COMMITTEE'S REDUCTIONS In allocating the hypothetical reductions requested by the Senate Finance Committee, the Director of the Budget was guided by the principles set forth in the preceding section, although different weight can be given to the various criteria. It must be emphasized, however, that the reductions discussed in this report are in no sense a product of the normal budgetary process of request, review, and recommendation. The normal budget process could not be followed within the framework of the Senate Finance Committee request. Reductions pre- sented in this study have not been discussed with the agencies af- fected nor do they reflect the policy of the administration. They serve only as illustrations of a possible distribution of the overall reductions, required by the Committee, among the different government agencies and programs. To facilitate an understanding of the revisions by major types of activities, a summary table of percentage reductions is presented on the next page. The amounts of expenditures on which the percentages are based are shown in Appendix C. Another table, Appendix H, indi- cates the ratio of the three over-all reductions which has been allocated to each agency and program. The following text discusses most of the major groups of governmental activities shown on the accompanying full page table. 159 - 16 REVISIONS OF ESTIMATED EXPENDITURES REQUIRED BY REDUCTIONS OF $1 BILLION, $1.5 BILLION AND $2 BILLION SPECIFIED BY SENATE FINANCE COMMITTEE* Activity (Current Classification) Legislative, Judicial & Estimated Expenditures in 1942 Budget Percentage Reductions to Achieve Total Cut of $2 Billion $1 Billion $1.5 Billion Per Cent Per Cent Per Cent (In Millions) $41 0 0 0 Executive Civil Departments 833 9.4 12.4 16.0 533 10.3 16.1 19.9 564 2.1 2.3 2.5 1,061 28.6 44.1 45.5 Aids to Youth 363 51.0 67.5 94.8 Social Security 463 0.6 1.3 11.0 1,034 31.6 49.3 73.9 and Agencies General Public Works Program Veterans' Pensions and Benefits Aids to Agriculture Work Relief Refunds 0 89 0 0 Interest on Public 0 Debt 1,225 0 0 Transfers to Trust Accounts 275 4.4 6.9 10.9 100 25.0 50.0 75.0 $6,581 15.2 22.8 30.4 Supplemental ItemsRegular Total, excluding debt retirement These revisions reflect allocations of the total reductions posed by the Senate Finance Committee, and are not to be considered as recommendations of the Director of the Budget. 160 - 17 A. Civil Departments and Agencies To achieve over-all reductions of $1 billion, $1.5 billion, and $2 billion, cuts of 9, 12 and 16 percent, respectively, of iriginal estimates of 1942 expenditures have been allocated to the general category of civil departments and agencies. Related expenditures for these services do not become less urgent because of improved business conditions. Moreover, it must be remembered that many of the functions have direct and immediate importance for defense although they are included in the so-called non-defense operations of the Government. Practically all Government agencies have reoriented their 80- called non-defense activities to do their part in the defense program. In many cases, this adjustment has occurred without special defense appropriations or defense reimbursements. The Census Bureau, for instance, supplies information essential to many defense agencies. This work imposes a heavy additional burden which it has been possible for that Bureau to assume only by reduction of other activities. The work of the Bureau of Internal Revenue is another example of a "non-defense" agency which has a greatly increased work load. Reductions which have been applied to the expenditures of many of the independent offices and commissions would require postponing or restricting established regulatory activities--as in the case of the Federal Communications Commission, Federal Trade Commission, Securities and Exchange Commission and the Interstate Commerce Commission. Other reductions would necessitate greatly decreasing the number of services 161 - 18 supplied both to the Government and to the public at large by such agencies as the Bureau of Standards and the Coast and Geodetic Survey. The postponement of maintenance work on rivers and harbors would in- crease expenditures in future years. The Post Office Department showed an estimated deficit of $51 million in the budget document submitted last January. Because post office business has exceeded expectations, the deficit will be smaller than anticipated. If the postal deficit were to be erased, it would be necessary to raise postal rates or reduce services to the public. With the increasing demand resulting from present busi- ness conditions, the latter course is difficult. Nevertheless, the $2 billion over-all cut might well require the elimination of the postal deficit. B. General Public Works Program. The General Public Works Program would be cut 10, 16 and 20 percent, respectively, under the three reductions proposed by the Senate Finance Committee. In the original 1942 budget, public works expenditures were cut 10 percent below the estimated expenditures for the fiscal year 1941. From the point of view of non-defense work the cut was even greater because of a shift to large power and other projects essen- tial to the defense effort. Subsequent to presentation of the budget, it became necessary to request additional appropriations for important public works projects 162 - 19 - such as new power projects under the Tennessee Valley Authority and the Department of the Interior. These projects are classed as "non-defense" expenditures, although they obviously spring directly out of the defense program. Reclamation, river and harbor, and public building projects, not directly related to defense but already under way, were continued when stoppage would have meant waste. Their rate of construc- tion is now being spread over a longer period of time than originally planned. No new public works other than those vital for defense are planned for the current fiscal year. A big item in the public works program is the grants to states for Federal highways. These expenditures, to a large extent, reimburse states for the cost of work authorized and entered upon in the previous year. A reduction in the 1942 estimates for this function would be in conflict with legislative commitments. Given all these circumstances, a further reduction in public worksis practically impossible without curtailing works essential for defense or breaking legislative commitments. Application of the percentages of reduction mentioned in the opening paragraph of this section would require elimination of items such as the appropriations for public land highways, many activities of the TVA, and the preparation of projects which may be essential in a post-defense period. C. Aids to Agriculture Of the $1 billion, $1.5 billion, and $2 billion cuts, the 163 - 20 tabulation shows that the Agricultural Aid programs would have to contribute 29, 44 and 46 percent, respectively, of their original budget estimates. The original 1942 estimates were slightly below those for the preceding year. The war in its initial period affected various sectors of American agriculture in very diverse ways. Certain groups of farmers faced increasing difficulties because of the loss of foreign markets while other groups benefited from improved domestic conditions. In December of 1940, when the original program for 1942 was formulated, a small reduction in outlays for farm aid appeared reasonable. Congress, however, went beyond the President's recommendations. In recent months the agricultural situation has shown a marked improvement as compared with conditions at the end of 1940. Influenced by further increases in domestic purchasing power and to an even greater extent by large scale food purchases for Great Britain, farm incomes have risen rapidly (see Appendix E). General improvement in farm conditions, extending to almost all types of farmers, will permit a substantial reduction of Government aid at some future time. The words "future time" are used because there is a considerable interval between the time when farm conditions improve and the date when reduction in farm aid payments is possible. Parity pay ments are intended to make up for the disparity between the farm prices of the preceding year and the parity prices of the same period. In other words, the amount of payments made in fiscal 1942 depends largely 164 - 21 on farm conditions which existed in the calendar year 1940. Likewise, payments for conservation and use of agricultural land resources cannot be suddenly curtailed without repudiating moral obligations. The Department of Agriculture announces its program in the fall so that the farmer can decide whether or not he intends to participate in the program for the ensuing crop year. Thus, in the late fall of 1940 payment rates for participating in the 1941 crop program were announced. These payments, in turn, will be made out of funds provided by 1942 appropriations. In order to achieve curtailments of the magnitude indicated above, parity payments have been reduced by $50 million. Payments for soil conservation have also been decreased by $100 million in the first, and $250 million in the second and third of the hypothetical cuts. The second and third reductions might have far-reaching economic consequences. It must be remembered that the Agricultural Adjustment program now aims at planned increases in production of many commodities as well as curtailments in those crops which contribute heavily to our major surpluses. It is possible that a sharp reduction of this program would cost consumers more in the form of higher prices than it would relieve tax burdens. This consideration does not preclude, of course, the possibility that'a lesser reduction in outlays may be feasible without impairing the fundamental objectives of the program. 165 - 22 - In order to attain the total reductions it was also necessary in each case to eliminate the annual appropriation for the disposal of surplus commodities--$100 million in the original budget estimate and $125 million in the actual appropriation. In all three revisions a separate $100 million permanent appropriation was left untouched. This is an amount equal to the 30 percent of customs revenue which is permanently allocated to the Disposal of Surplus Commodities and mainly used for financing the stamp plan and similar projects. Elimination of the annual appropriation means, therefore, a curtailment of the funds available for the stamp plan, free school lunches, etc., by one-half of the original estimates for 1942. In making such a revision it should be emphasized that these programs have proved to be highly beneficial in improving the diet of low income groups among our citizens. The revisions for agriculture show only a slight increase under the $2 billion cut, as compared with the $1.5 billion cut. A further reduction would compel either repudiation of the commitments made for parity payments or a change in the law permanently allocating an amount equal to 30 percent of customs revenue to agricultural aid. Otherwise the only other alternative would be disruption of the machinery developed for agricultural adjustment. D. Aids to Youth To achieve the three over-all cuts, reductions of 51, 68 and 95 percent, have been indicated for the youth program. 166 - 23 A substantial contraction of the CCC and NYA programs is already under way. Employment opportunities for youth have increased to such an extent that the number of enrollees is decreasing. (See Appendix K). This development has been taken into account in the reserve established for 1942. There still remains a body of American youth for whom these programs provide worthwhile training and healthful activities. In the larger perspective of national defense this work is not without significance. Certainly there can be little doubt that some sort of youth program will be necessary in the post-defense period. It would be costly to wreck existing organization which may be urgently needed later. E. Work Relief The original budget estimate for work relief in 1942 was 29 percent below the expenditures of the preceding year. Subsequently the President recommended a further cut of about 10 percent in view of increased employment. (See Appendices F and K). To achieve the over-all cuts posed by the Senate Committee work relief expenditures were reduced by 32, 49, and 74 percent of the original estimates. In considering such further curtailment of work relief, it must be remembered that the defense program has not affected certain types of workers and certain regions of the country. There are groups of people who are employable but who have great 167 - 24 - difficulty in finding employment even in a tight labor market because their technical or other abilities do not fit the qualifications for the available employment. Many such people are now producing useful work on public programs. The defense program is expected to absorb additional millions of persons, but it is probable that, temporarily at least, increasing defense employment will be wholly or partly offset by rising dismissals in the consumer goods industries which are forced to lower production because of the lack of material, machinery, transportation facilities or skilled labor. While most of these people will be eligible for unemployment compensation, needy persons who exhaust their rights before new work is found will be eligible for WPA employment. It also must be understood that 32 percent of present WPA workers and 38 percent of WPA expenditures are for defense projects. Whether WPA is or is not the most appropriate agency for such defense work, the fact remains that elimination of such WPA defense projects would necessitate the work being done by some other agency. A major reduction in work relief may increase the number of general relief cases which must be taken care of by state and local governments. The question whether or not such a development is de- sirable is related to the whole problem of Federal-state-local fiscal relations. Under the $2 billion reduction program, about three-fourths of work relief expenditures has been eliminated. 168 - 25 F. Social Security Reductions allocated to Social Security programs are relatively minor--$3 million, $6 million, and $51 million, respectively, for the three cuts of $1 billion, $1.5 billion, and $2 billion. The 1942 budget provides for a 4 percent increase in Social Security expenditures over the preceding year. The increase is caused primarily by additions to federal grants necessary to match state payments to a rising number of aged persons and to match state payments for increased assistance to dependent children. The Social Security public assistance programs are not related to defense, but are part of the declared long-range policy of the Congress to aid the helpless indigent. The payments do not directly reduce either labor or materials available for defense. Like any income payment, assistance payments may contribute to the inflationary pressure through making more funds available which the recipients can spend. But by providing a minimum income to people on the bottom of the income pyramid, such payments create purchasing power which is used primarily for goods and services that are neither scarce nor compete with defense. In allocating the Committee's reductions this report has precluded revisions of certain fixed commitments such as debt service; minimized reductions involving legislative changes; and avoided reductions which would disrupt law enforcement and other essential operations of the Government. 169 - 26 Under this approach, those social and economic programs which are not fixed by legal commitments, must bear the brunt of any major reductions. A substantially different result is obtainable only if the approach is changed. If, for instance, to make a $2 billion reduction, veterans' pensions were cut, debt service reduced, and Federal grants- in-aid curtailed, then it would be possible to preserve a substantial part of the social and economic programs. Still other aproaches to allocation of reductions are possible. This report presents one schedule of revisions based on the Resolution of the Committee. n