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DIARY Book 468 December 3 and 4, 1941 -B- Book Page Blind Persons Seeing-Eye Dog Legislation: Report to Mrs. FDR 12/3/41 468 99 Buck, Clarence F. - Chicago, Illinois See Knox, Frank (Secretary of Navy) -CCalumet National Bank See Knox, Frank (Secretary of Navy) Casablanca See War Conditions: Gold China See War Conditions -DDakar See War Conditions: Gold Defense Savings Bonds See Financing, Government Director General of Railroads See Railroad Administration Dogs, Seeing-Eye See Blind Persons -FFar East See War Conditions Financing, Government December Financing: Conference; present: HMJr, Hadley, Bell, Morris, Rouse, Haas, and Murphy 12/3/41 a) Suggestions b) Sproul-HMJr conversation c) Eccles-HMJr conversation d) Tompkins-HMJr conversation e) McIntyre-HMJr conversation concerning opening.. f) Calendar of direct and guaranteed bonds and notes g) Jones-HMJr conversation h) Preliminary announcement concerning basis of subscriptions 1) Announcement of offering - 12/4/41 j) Federal Reserve Banks' report - 12/5/41: See Book 469, page 2 k) Subscription figures and bases of allotment 12/8/41: Book 470, page 79 1) Final subscription and allotment figures 12/16/41: Book 473, page 272 4,34 21 8 16 27 32 52 60 62 217 - 7 - (Continued) Book Page Financing, Government (Continued) Work Projects Administration: Cut in operating funds for Treasury accounting procedure - HMJr discusses economies in letter to FDR - 12/4/41 468 281 Defense Savings Bonds: Trade unions - sales through: FDR memorandum 12/4/41 305 France See War Conditions: Gold -General Aniline and Film Company See War Conditions: Foreign Funds Control Germany See War Conditions Gold See War Conditions: Gold; Thailand Gugler, Eric See Sub-Treasury Building - New York City -JJapan See War Conditions -KKnox, Frank (Secretary of Navy) Buck, Clarence F. - Chicago, Illinois - receiver for Calumet National Bank: Knox asks HMJr to investigate suit planned by Comptroller of Currency - 12/3/41 89 -MMack, John See War Conditions: Foreign Funds Control (General Aniline and Film Company) Maritime Commission, United States Contract authorizations, obligations, and disbursements for ships and facilities from inception of Commission (October 26, 1936) to October 31, 1941 - 12/3/41 (See also Book 469, page 101 - 12/5/41) Morocco See War Conditions: Gold 83 -R- Book Page Railroad Administration Secretary of Treasury, as successor to Director General of Railroads, discusses funds still on hand and final liquidation in letter to FDR - 12/4/41 468 283 Revenue Revision Tax studies (preparatory) and conferences - status of: Sullivan report - 12/4/41 Military and naval training camps and stations - tax on admissions to entertainments: Letter to Majority Leader McCormack - 12/4/41 289 292 -SSeeing-Eye Dogs See Blind Persons Sheean, Vincent See War Conditions: Military Reports Social Security Extension of coverage and Treasury attitude toward funds discussed in Green-HMJr correspondence 12/3/41 Sub-Treasury Building - New York City Correspondence concerning preservation between Eric Gugler, Mrs. FDR, and HMJr - 12/3/41 102 91 - TTaxation See Revenue Revision Thailand See War Conditions -UUkrainians See War Conditions: Military Reports -WWar Conditions Airplanes: Employment in Aviation Manufacturing Industry Haas report - 12/4/41 311 China: 12/4/41 359 . "Observations of Vincent Sheean on his trip to Far East" - Coordinator of Information report - - W - (Continued) War Conditions (Continued) Exchange market resume' - 12/3-4/41 Export Control: Exports to Russia, China, Burma, Hong Kong, Japan, France, and other blocked countries, week ending November 22, 1941 - White report.. Book Page 468 211,349 128 Far East: "Observations of Vincent Sheean on his trip to Far East" - Coordinator of Information report 12/4/41 Foreign Funds Control: General Aniline and Film Company: Biddle-HMJr conversation: John Mack recently made president and is represented by Homer Cummings - 12/3/41 359 66 257 a) Mack-HMJr conference - 12/4/41 1) Biddle-HMJr conversation 260 Wollner, O'Connell, etc., sent to plants by Treasury - 12/11/41: See Book 471, page 225 Germany: 136 Oil production summarized - 12/3/41 "The Problem of German Occupation of Northwest Africa - Objectives and Costs"- Coordinator of Information report - 12/3/41 141 a) Copy to FDR - 12/6/41: Book 469, page 267 Gold: $250 million worth shipped from Dakar to Casablanca Treasury questions British Embassy concerning and reports transaction to FDR - 12/4/41 322 a) Revised figures - 12/9/41: Book 471, page 330 Japan: Bank of Japan: Closing of agency in New York City reported to FDR by HMJr - 12/3/41 125 Firms doing business with firms in Latin America report from Canadian Legation, Washington - 190 12/3/41 Military Reports: "The Problem of German Occupation of Northwest Africa - Objectives and Costs" - Coordinator of Information report - 12/3/41 Reports from London transmitted by Halifax 12/3-4/41 "Observations of Vincent Sheean on his trip to Far East" - Coordinator of Information report 12/4/41 "Political Tendencies of American Ukrainians' Coordinator of Information report - 12/4/41 213,351,357 359 - "The War This Week" - November 27-December 4, 1941 - Coordinator of Information report Purchasing Mission: Federal Reserve Bank of New York statement showing dollar disbursements, week ending November 26, 1941 12/4/41 141 368 385 328 - W - (Continued) Book Page War Conditions (Continued) Thailand: Purchase of gold and possible extension of credit discussed in Cochran memorandum - 12/3/41 (See also Book 469, page 138 - 12/5/41) Assets frozen - 12/9/41: Book 470, pages 278 and 279 Work Projects Administration See Financing, Government 468 201,252 1 December 3, 1941 9:15 a.m. HMJr: Hello. Operator: Mr. Gaston. HMJr: Herbert? Herbert Gaston: Yes. HMJr: Good morning. Where are you? Hello. G: Yes. HMJr: G: HMJr: G: HMJr: G: Where are you talking from Herbert? From the Governor Clinton Hotel. Yeah. Herbert, remember the conversation we had after staff on Monday? Yes. That particular agent - did he do what I instructed him to do? Yes. I got it yesterday afternoon, and gave it since I was coming up here, I gave it to Ed Foley to hand to you. HMJr: G: No, that isn't what I mean. The agent who I wanted to report to a certain gentleman. Well, he hasn't reported to him, no. I thought we would send a copy of his report to the man. He is out in Chicago. HMJr: When 18 he going to see this certain gentleman? G: When is he going to see him? HMJr: Yeah. G: HMJr: Why, I didn't instruct him to see him. I thought we would deliver a copy of this report to him. Well, is this report written by you or by the agent? -G: It's written by him. HMJr: By the agent. 2 Yes. He was in Chicago, and Harry got him on the phone. He wrote the report, and it came in yesterday. G: HMJr: But it hasn't been given to this man yet. It has not, no. Well, that's unfortunate. G: Would you like me to see that man? HMJr: G: G: No, I'm going to talk to him myself on the phone. Uh huh. This agent is in Chicago. HMJr: Yeah. Well HMJr: Have you read the New York Times today? G: I have, yes. HMJr: Yeah. All right, Herbert, I'll - the report is G: It 18, yes. HMJr: G: HMJr: in the hands of Foley? Okay. All right. All right. I've got to get it into this man's hands. I had hoped it was in his hands, but I'11 tell - I'11 see that it gets to him today. G: HMJr: G: Right. You don't want me to do anything? Well, I don't see - what can you do? I don't think there's anything, unless you wanted me to see somebody here. HMJr: No, I - it's this report I want to get into this man's hands. -3G: Yes. HMJr: And I'll make the arrangements. G: HMJr: G: HMJr: Yes. Well, Foley has it. All right. All right. Thank you. 3 4 December 3, 1941 10:45 a.m. RE FINANCING Present: Mr. Hadley Mr. Bell Mr. Morris Mr. Rouse Mr. Haas Mr. Murphy H.M.Jr: Now listen, let's go to town on this thing. We have been fooling around long enough. Where is Rouse? Bell: He went out to telephone to New York to get the reactions. I can get him in a minute. (Mr. Hadley entered the conference). H.M.Jr: Each fellow take a piece of paper and write down with his initials what he recommends on this financing, will you please? Is anybody missing that I usually use on this? Bell: Rouse is the only one out, and he will be here H.M.Jr: Let me see. One fellow says eight hundred in a minute. million of the '67 - '72's with a fifty cent premium. There is no harm in giving the name, is there? Bell: No. 5 -2H.M.Jr: That is Mr. Bell. Bell: I think I would rather see it at par, but I H.M.Jr: wouldn't kick at fifty cents premium. Then Mr. Morris says reopen the two and a halfs at a hundred and a half. George has open '67 - '72 at a hundred and a half for the seven fifty. And then Mr. Murphy, seven fifty, for a '65 '75. He likes something new. Hadley wants a billion of the two and a halfs, '70 - '75. Now, on the twos Bell wants '51 - '53, Morris wants '52 - '54, Hadley wants '52 - '54, Haas wants '51 - '56, and Murphy wants '51 - '56. Bell: I didn't know where they fell. I just meant in that area. I hadn't seen any price charts. Morris: Yes, I said 'about'. I hadn't had time to dope that out. Bell: But that area is what we mean. Morris: As a matter of fact, that '51 - '56 was in George's memorandum, and I think it is a pretty good idea. Haas: Just a little -- H.M.Jr: I personally lean toward a billion of the long. Bell: Do you? H.M.Jr: And I will tell you why. I think on the refunding we will have to go somewhere on -3- 6 a two, and if we got out a twelve now, we might want to reopen the two in January for the refunding. Had you thought of that? Bell: Yes. That is one reason you ought to put on H.M.Jr: That would be all right. Hadley: the five-year call period. I agree with that, if you are willing to reopen, make it five years. H.M.Jr: That would be all right. Haas: Then I think I would like Henry's longer call on the billion. H.M.Jr: But I was thinking of a billion dollars, reopen this one, half a billion of the two, and then reopen the two, possibly in January. Murphy: Reopen both of them in January. H.M.Jr: No, I would say if we had a billion dollars now, I would say that issue is closed. Bell: Well, I was hitting at the billion. If you did a billion would you want a fifty cent H.M.Jr: premium. Bell: Nine hundred fifty million. H.M.Jr: Would you want a fifty-cent premium? Bell: Well, the fifty-cent premium doesn't worry me. I would like to see it go off. I think you have got that much more cushion out there, and it is very important. H.M.Jr: Would you put on the fifty cents? -4Bell: H.M.Jr: 7 I would prefer to see it not on there. I wouldn't argue about it. But I mean how about you, Dave, if I say a billion? Do you still want to sell at a hundred and a half? Morris: I would hesitate a little bit, but I would like to say something. (The Secretary held a telephone conversation with Mr. Sproul as follows): 8 December 3, 1941 10:56 a.m. HMJr: Hello. Allan Sproul: Good morning, Mr. Secretary. HMJr: Good morning. How are you? S: Fine. HMJr: Allan, we're down now that we've got to do business, see? S: Yeah. HMJr: And I wondered after cogitating over the night, whether you were ready to make a recommendation to me. S: HMJr: Well, I have cogitated and I'm still of the opinion that a billion of two and a half as close to this outstanding issue as you could put it and five hundred million of fifty-two fifty-four would be the best ticket. Well, you and I are practically together. What I was thinking of was this. A billion dollars, and I'm willing to reopen the other one. Then if I do, telling the people though that just after we did this, it would be close. S: Uh huh. HMJr: Now, some of the people here in the Treasury think if we do the billion - well, I mean, some of them think we ought to charge a hundred and a half. S: My recommendation would be to do it at par. HMJr: It would be. S: Yeah. HMJr: I see. -2S: 9 If you think that the issue - my guess is that the issue will settle down around a hundred and one to a hundred and one and a quarter or somewhere around there; and I think that would make a better offering than to put the half on. HMJr: The boys hear you on the loudspeaker. They say you think of a new issue. I'm talking about reopening the old. S: That's right. HMJr: You still stick by that? S: Yeah. HMJr: It will settle down to a hundred and one? It will settle down to a hundred and one to a S: hundred and one and a half, yes. HMJr: Well, I think you're a little more conservative than some of us, but that's all right. Bell just wet his pants. S: (Laughs) HMJr: Well, I'11 have to get him diapers, then. S: (Laughs) HMJr: (Laughs) Well, anyway - these side remarks have completely upset the meeting. S: (Laughs) HMJr: Now, where were we? S: Well, we were wondering whether the reopened issue should be at par and a half or at par. HMJr: Yeah. Well, let me just go to the other a S: Yeah. HMJr: minute. We can come back. If we do the five hundred million, what do you recommend on that? 3S: 10 Well, my recommendation there would be fifty- HMJr: two, fifty-four. Fifty-two, fifty-four. Well, let me just. S: Two per cent. HMJr: Yeah. Just let me give you this thought. I'd like to keep that issue in mind and possibly using it again in January. 8: Uh huh. HMJr: Now, if you did that, couldn't you spread it a S: Well, you mean HMJr: Make it fifty-two, fifty-five or fifty - Bell little bit? Make it a little bit longer call? HMJr: says fifty-one, fifty-six. Yes, I - if you're going to use in January with that refunding, I'd rather bring the call date up a year or make it, say, fifty-one, fifty-five. Fifty-one, fifty-five. S: Yeah. HMJr: You wouldn't give me fifty-six? S: S: Well, I think that at these rates, the market tends to look at the maturity date rather than the call date and if you get it out to fiftysix, it might be a little thin, but I HMJr: S: HMJr: Well, four years is plenty. Four years is plenty for a call date. Well, don't you think we ought to have it in mind for January? S: Yes, I do. A five hundred million issue and with a billion or more of refunding to be done in January, I think it would be well to have it there 80 you might reopen it; and on that basis I'd like to bring the call date down a year to fifty-one. -4HMJr: And make it fifty-one, fifty-five. S: Yeah. HMJr: S: 11 Well, I don't think - I found Chicago much more bullish than New York; and I find the insurance companies generally are just as keen to buy now as they were last time. Yeah. Their ability to buy may be a little slack, but their keenness to buy is just as great. HMJr: S: That's right. Now. Chicago doesn't think we're going to pot in New York this time? HMJr: Going to do what? S: The last time Chicago seemed to think New York was going to go into a tailspin and be HMJr: No. Nobody said anything about that. S: Good. HMJr: But I mean the Chicago people just - I mean, S: I see. HMJr: S: they're not 80 sensitive to the foreign news. And one - George Harrison - for instance, said if there was a declaration of war or breaking off relations between Japan and United States tomorrow, his inclination will be to increase his subscription. Well, that sort of reaction makes sense to me in that we've been living in this kind of a world for two years now, and you can't base your operations on what happens or tomorrow. Anything may blow up at any time. HMJr: The only thing that bothers me, heretofore I've always given the market one day's sort of notice -5- 12 on what we were going to do, and then see it settle down. I'm not doing that this time. We're saying it'11 be a long bond and a medium bond. S: Well, your sin would be to go for a billion and a half in bonds. HMJr: Yeah. S: I don't think you need to give them a day on this. There were two alternatives in the market mind - one all a long bond and one a long and a medium - and they're getting one of them and the one they prefer, and I think that's all they need. HMJr: I see. Well, Bell tells me he wants for the Government to invest seventy-five million? (Talks aside) Oh, well, no. But supposing I want a billion and a half for the public, how much do you want? What? We might put our own selves down for another fifty. S: For your account? HMJr: Yes. S: Well, that would be all right, too. HMJr: That doesn't make any difference. S: No, I don't think that makes any difference. HMJr: What? S: HMJr: S: HMJr: I think that's perfectly all right. Now, I tell you, could I - oh, the other thing I haven't talked to - Bob Rouse hasn't come back - have you seen those regulations? No, he was just talking to me when you called. Oh, damn. oh, I very much want your advice on those. Could he - should he go somewhere and -6- 13 finish talking to you? S: Yes, can he do that? HMJr: Yeah. S: All right, that'11 be fine. HMJr: Then if you don't mind I'11 entertain myself by talking to the Chairman while he's talking to you. S: HMJr: Well, you'll be good for quite awhile. Just a moment, Bell's pointing. Just a moment I'11 have you switched over to Bell's phone. S: Thank you. HMJr: Just a moment. Operator: Operator. Will you switch Mr. Sproul to Mr. Rouse, who's HMJr: in Mr. Bell's room? Operator: Right. HMJr: Thank you. 14 -5(Mr. Rouse left the conference). H.M.Jr: You wouldn't make it December? Hadley: My basis on December for a four-year call would probably be up around one point. H.M.Jr: That is not enough. Hadley: I think I am a little pessimistic on that issue, mainly because of the length of the call date. H.M.Jr: Have you talked with Piser at all? Hadley: His figures are about the same as mine on this. H.M.Jr: Have you talked with anybody in New York? Hadley: Yes. Of course, they haven't considered the longer call. H.M.Jr: Go to work on it, because I have got to move. Will you? Talk with Piser. Who have you talked with, Miller? Hadley: Harris and Miller, both. H.M.Jr: Well, move, will you? And then as soon as you have it, come on back. (Mr. Hadley left the conference). Morris: If you split the issue and then you have a million naught seven five for your refundings, you get a total for that issue of eight twenty-five, which isn't a bad size for that issue. Also, I think there may be some advantages, this may be a good time or not, if you are going to reopen issues, to get them 15 -6used to taking a small premium, and not expecting everything flat. It gives you a little better flexibility on prices. It is not important. (The Secretary held a telephone conversation with Mr. Eccles as follows): December 3, 1941 11:07 a.m. Marriner Eccles: Hello. HMJr: Marriner. E: Yes, Henry. HMJr: E: 16 We're getting towards the point where I've got to make up my mind, and this is the way I feel. We'd like to reopen the last long two and a half, and offer the public a billion of that. Well, that's fine. That was our feeling about it. We felt very strongly that to put another long issue out so near to that as it would be necessary to do it would be unnecessary and possibly only confusing. HMJr: E: HMJr: And then five hundred million issue of, say, fifty-one, fifty-five. Fifty-one. What date in fifty-one? Well, I just told Hadley to go out and talk with Piser and work it out as to the date, see? E: Do you HMJr: I don't know as E: How much do you want to give them on HMJr: Oh, a point and a half. E: HMJr: E: Point and a half, huh. It figured yesterday fifty-two - even December '52 figured about a point and an eighth. of course, these fellows differ sometimes a little. Well But I would imagine if it's going to be fiftyone, it would be possibly - the last would be December '51, likely, wouldn't it? 2HMJr: 17 Well, I don't know. I just told them to talk to - somebody he talks to in New York I don't know - and Harrison, I guess, and that's all. He talked to Piser to see if the three of them could get together. E: Uh huh. HMJr: If that's what we decided to do. E: Uh huh. You wouldn't object to going to fiftytwo if it was - if the pricing was - gave them too much? HMJr: No. The point is, I want four years, and I'11 tell you why I'd like that instead of five. I'd keep that issue in mind, possibly to reopen it in January on our refunding. Yeah. For the billion dollars guarantees. Yeah. And therefore, I'd like a little more E: Uh huh. Yeah, that would be a good one to HMJr: E: call, you know? open. HMJr: E: You see? What - did you discuss with Dan at all the method of allotment that HMJr: Yeah, we've come to a decision here, but he E: Oh, yeah. HMJr: And the minute he gets ready I want him to hasn't been able to leave the room. I've had him right here on the carpet. see you. E: Yeah. We talked about it yesterday a little while, but - about various means of cutting down this padding and HMJr: Well, at least we're together here, and..... -3- 18 E: Well HMJr: He'11 present it to you. Well, I'm sure that your decisions- the conclusions that you've come to - are pretty much in line with the ones we came to yesterday with the exception that we felt that it wasn't necessary to put out two issues, but we didn't E: feel it very strongly; and if it was necessary that is if it was felt to be desirable on the part of the Treasury, and then we were pretty strong for opening up the existing issue and for putting out the five hundred ten-year issue. So I think we - I'm sure our people will be all pretty well pleased with the decision. HMJr: Now let me ask you this. There are some people here think we ought to get a fifty cent premium on the long one. E: I wouldn't put a premium on. HMJr: You wouldn' E: No, I wouldn't do it, because it isn't - it HMJr: Yeah. E: HMJr: E: HMJr: just isn't enough; and personally, I don't think that we ought to expect to finance at cheaper than we financed on the last issue. If we can hold a long two and a half, it seems to me that that's going to be pretty good; and to put a premium on, is equivalent to putting it out for a longer period. And it means driving - it means, in effect, trying to get a little more favorable financing than the Treasury got on the last issue. Yeah. And with all the financing that is to be done, I think it's a good thing to have a two and a half point leeway. Yeah. 19 E: Because if the market should break down, you've got two and a half points to go before the anybody loses any money; and it's our feeling that the market, of course, if it should break, it should be supported and not be permitted to go through par, that the country has got to be made to realize the Treasury is going to finance on not more than a two and a half basis. HMJr: Yeah. E: That's the way we feel about it; so it's a good thing, I think, it leaves them some leeway. HMJr: Well, I'll tell you what we'll do. While the boys are figuring out whether it should be fiftyone, fifty-five or fifty-two, fifty-four and where it should fall, I'11 ask Bell to go to his office and talk to you about these regulations. E: Yeah. HMJr: And if you prefer - well, anyway, I'll have him go into his office and talk to you and see whether we can clear that. Then after the boys get together, I'11 give you another ring. E: Fine. HMJr: How's that? E: That's fine. HMJr: Is that all right? E: That's fine. HMJr: Thank you. E: All right. -7 - 20 H.M.Jr: As long as Sproul and Eccles both say "No" Morris: Well, I agree with you for a billion. I think there is a difference. That extra thing on the fifty cents, Dave -- does it. H.M.Jr: Yes. Well, I will tell you what I would like you to do, Dan. Just as soon as you are there are two things. Let these three men work on the pricing of this, whether it is '51 - '55 or 52 - '54, and get that clear. When you have got that and when you have got Eccles cleared on these other regulations, give me a ring, and I will see you. You can leave your stuff here, if you want to. Will you give me a ring? Bell: Yes. H.M.Jr: I will clear it with Jones and I am waiting to hear from you. Bell: You are satisfied with this? H.M.Jr: Yes. Bell: We.will give this to the press immediately and wire to the banks, so they can send it out. They ought to get it before this announcement. C sproul 21 1.000 500 52-54 & Jamels. -51-55 9th-13t2 101.10.15 500- 22 (Jame 52-54 11000 - - 2 1/2%S. 29-34-po (1970-75) 23 750 million 2's 9-15/51-56 7 50 million 2' /2' 12/15/65.75 Hz murphy fen at 67-22-212 1001/2 for 750 24 2% S 51-56 for 750 Maes # Bapen 67-72 at for 25 800 would do insferm) Gork And afe 754 2% 51-53 600 1.400 dd 10% Goct true. 140 75 $1.6154 DWB 26 reopen 2 1/2 - 67/72 @ 100 1/2 for 750m new 2 - about 52/54 for 750th DAmoning December 3, 1941 11:16 a.m. HMJr: B. A. 27 Hello. Tompkins: Hello. Mr. Tompkins. HMJr: I'm calling up, as I really felt sorry we didn't have a chance to talk to each other yesterday. T: Yes, I understood. HMJr: And I wanted to ask you myself this morning T: just how you felt about this issue. Well, I was going to say to you - as I told HMJr: Yes. Danny - I think you can open up your two and a half safely. T: HMJr: Yes. T: I think you should put in a medium two per HMJr: Yes. T: With the weather as uncertain as it is, I think HMJr: I see. T: cent issue. that would be a measure of safety. I think that the - while the long-term market perhaps hasn't the zip in it that it had in October, the undertone is still good. HMJr: Yes. Well T: How do you feel about it? HMJr: T: Well, you and I don't feel very different. And I think that in view of the picture, that -2 - HMJr: it would be well to go right ahead with it instead of delaying it. I think you're right, too. My son Bob was T: I left a message for you about him. HMJr: I didn't get it. T: Well, I guess Dan was too busy. HMJr: Yes. T: There's no dividends in this, but they're not 28 sorry he didn't have a chance to meet you, because he enjoyed your hospitality. bad things to hear. HMJr: T: Yes. I happened to have a group of five ensigns dining at my house one night who had just come down from that school. HMJr: T: HMJr: T: Oh, yes. And they asked me if I knew Bob, and I said that I hadn't and they said that he was the most respected man in that unit. Is that right? Well I know that isn't a hard thing for a father to hear. HMJr: T: No, that's very nice. He must be a great lad, and I do want to see his some time. HMJr: Well, he asked me when he heard that you were coming. He said, "Daddy, where's Mr. Tompkins?" And I said, "Well, there was a confusion and he's gone back to New York." But he did want to meet you. T: Well, I hope we'll do it. Tommy will get hold -3 HMJr: of his some time, and we'll get together. Well, next time there '11 be no confusion. T: All right, sir. HMJr: All right. T: Good-bye. HMJr: Good-bye. 29 30 December 3, 1941 11:25 a.m. General Watson: Yes. HMJr: This is the story that I get. I understand that Senator Thomas approached the White House on his own. W: That's right. HMJr: It was not our suggestion. W: That's right. HMJr: And he wants to take two personal friends with him. HMJr: Well, that's all right. You mean in Treasury? No, of his own friends. W: Yeah. W: HMJr: W: HMJr: W: HMJr: W: And then we have to send two people out to assist in the opening of this, you see? And we thought as long as the Army's plane was going and they were taking a Senator and two of his friends, we could send two of ours; but it's unimportant if All right. We can do it as long as they're giving it to the Senator. Yeah. It's okay. He is Chairman of the subcommittee of the Appropriation on Military Affairs Yeah. and that justifies - you see, the thing that's important is the trip. HMJr: Sure. W: And we're going to send as long as they can hold -2two or three more. There's no reason why they shouldn't take them, provided they take their chances on meeting death and so forth. HMJr: W: Well, you take that every day. Yeah. They can't take that and hold me responsible for that. HMJr: No. W: No. HMJr: No. Well, what else? W: HMJr: And that's all that I had come over here yet. Well, I'm ready to talk to him now any time. W: All right. All right. HMJr: Thank you. 31 32 December 3, 1941 11:30 a.m. HMJr: Mr. Hello. Henry speaking. MoIntyre: Yes, Henry. Ready to shoot? HMJr: Yes, sir. Mc: Let her go. HMJr: All right. Mc: It's a good time. HMJr: It is. Mo: When do you close it? HMJr: Well, we open it tomorrow morning. Mo: Yeah. HMJr: And close it tomorrow night. Mo: That's good. HMJr: It'11 be a billion dollars of the same two and Mo: HMJr: Mo: HMJr: a half issue that we offered a month ago Yes. and half a billion of two per cent. Half a billion of two per oent. How long? We're figuring on it. It'11 be somewhere around '51-'54. That's from ten to thirteen years. Mo: Yes. Yes. HMJr: Ten to thirteen years. I mean, it's a question Mo: Yes. How much is the long-term issue? HMJr: Mo: It's twenty Twenty-five, thirty? -2HMJr: It's twenty-six, thirty-one. Mo: Good. That's fine. HMJr: Twenty-six, thirty-one. Mo: HMJr: That's all right. And it will be over there within the hour. But you think tomorrow is as good a chance as any? Mo: I think you may just get under the wire. HMJr: Wonderful. Mo: Yeah. HMJr: Thank you so much. Mo: All right. Good-bye. 33 34 December 3, 1941 11:50 a.m. RE FINANCING Present: Mr. Rouse Mr. Bell Mr. Murphy Mr. Haas Mr. Morris Mr. Hadley Mrs. Klotz H.M.Jr: Well now, how does Sproul feel about this -- Rouse: I went over it with him, and he felt it was all right. It was a good thing, and it would not hurt the market. He was sorry that we didn't have a little more time on it, for the final consideration and so on, but after I had discussed it with him, he felt it would be better to go ahead with it now, rather than wait for the next time, and he thought it would not interfere with a successful issue. In general, I think his ideas about it are pretty much the same as both Randy and George Harrison expressed, that this thing over a period of time is going to solve itself, and that the evils were not as great as is sometimes feared. H.M.Jr: Now, are you people together as to what the 35 -2five hundred million issue should be? Bell: Treasury and New York say that a '51 - '55, H.M.Jr: thirteen and a half years. Nine and a half -- Bell: And thirteen and a half. Will sell at a pre- June 15, '51 - '55, is nine and a half - mium of about one point ten to one point fifteen thirty-seconds. H.M.Jr: Not a hundred and one? Bell: A hundred and one ten -- H.M.Jr: You didn't say a hundred and one. 11: No, I said a premium of one point ten. A hundred and one ten to a hundred and one and fifteen thirty-seconds. Piser feels it will be richer than that, with the probability of a hundred and one twenty. H.M.Jr: He has never been right yet, has he? Bell: He is on the right side if he is right. Now, if you want to move it up to December 15, 1951, I think they feel it will give you one point premium instead of the ten or fifteen extra thirty-seconds. H.M.Jr: You mean that makes it what, ten years and thirteen years? Bell: That makes it ten and fourteen. H.M.Jr: That makes it a flat what? Hadley: One point. Bell: About a point. 36 -3H.M.Jr: What do you think, Rouse? Rouse: It would be all right. The only consideration that leads to the desirability of the higher premium is the possibility of reopening in January, adding a billion to it, in which you would want for the billion perhaps a little more cushion. H.M.Jr: For the reopening? Bell: The refunding in January. Rouse: So that I think I tend back to the nine and Bell: a half - thirteen and a half. Though I like the idea of the ten to fourteen better. Now, as to '51, there is a June, September, and December - there is quite a large sum that may be called in each of those places. There is a billion and two that actually matures in March, but you have got several call periods in that area - beyond that area, which you can call, all of these maturities or issues separately and I don't think they would interfere with each other. H.M.Jr: Of course you could reopen something else. It is just a question of five hundred million of twos at -- Bell: You mean at that time? H.M.Jr: Yes. Bell: Oh, yes, you could reopen -- Rouse: Well, of course this thing too may go a little better because of the small size of it. -4H.M.Jr: Didn't that one yesterday go very well? Rouse: That New York State issue? H.M.Jr: Yes. Bell: One forty-four. Rouse: Well, it is tax exempt one to four years, 37 and the competition is keen. Bell: H.M.Jr: Rouse: One forty-four is the average rate. It would be keen for this five hundred. Oh, yes, this meets a different market. This is a bank market, and they are keen for it. H.M.Jr: I think that the best policy always is to price the thing as of today, not what we are going to do in January. How the heck are we going to know where we are in January? If you were doing it just to sell five hundred million, what would you do, Bob? Rouse: I would do the ten - fourteen. H.M.Jr: That would be December? Rouse: Yes. Bell: Rouse: That is one point. Do you think that that -That is the one eighty-five, isn't it? Bell: Do you think that premium will throw the subscriptions to the other side, to the long bond, because of the higher premium? Rouse: Yes, I think it will throw the corporate and -5- 38 individual subscriptions, and I think the banks will be in there fully, and the insurance companies partially, on the two per cent bonds. Bell: It might have a tendency then to decrease the subscriptions on the five hundred million, increase the subscriptions on the billion? Hadley: That is about a one eighty-eight rate. isn't it? H.M.Jr: Well, supposing we did throw them in to the Bell: It is no harm. It would just cut down the long. What is the matter with that? percentage of allotment. H.M.Jr: Well, let me find out what they are thinking in New York. Incidentally, I cleared this with the President. He has guaranteed me tomorrow. Bell: He is here today, so now we can send a letter H.M.Jr: Oh, yes, he is in his office. It is a funny over. thing, Marvin McIntyre called up and said - they said Marvin McIntyre wanted to speak, and I have got orders that nobody can use that phone but the President. It was Marvin McIntyre, 80 they threw him on to this phone, and then the next thing I knew, the President was on, on this wire. Bell: Well, I suppose the reason they did that was because Marvin was calling first. Klotz: They couldn't tell who it was. H.M.Jr: But when it was Marvin McIntyre, she wouldn't put him on that phone, because I won't let 39 -6anybody else use it. (The Secretary held a telephone conversation with Mr. Sproul as follows): 40 December 3, 1941 11:55 a.m. HMJr: Hello. Allan Sproul: Hello. HMJr: Allan. S: Yes. HMJr: You're on the loudspeaker. Now, I've got a clearance from the President to go ahead for tomorrow. S: Fine. HMJr: So he ought to know what's going on. S: Yes. HMJr: And it's just a question whether we make this two per cent thing December or June of nine and S: a half, thirteen and a half, or ten, fourteen. Nine and a half, thirteen and a half or ten, fourteen. HMJr: S: HMJr: 8: Yeah. It doesn't seem to me it makes a great deal of difference. Well, you've got to have an opinion. (Laughs) Well, I would make it ten, fourteen myself. HMJr: You would? S: Yeah. I'd make it December. HMJr: 8: HMJr: The boys figure that's about one point in it. I think that's enough on that five hundred million issue. They'11 be hungry for it, won't they? -28: 41 I think that's been the strongest section of the market, and it's right down the alley of the banks and ought to go well. HMJr: Well, I'11 talk to Marriner and see what he thinks. And one other thing, do you think if we're going to go ahead with this, don't you think it would be a good thing if I told the press we're going to go ahead with the financing tomorrow? S: I distinctly do, yes. HMJr: I thought so. S: Your statement about the weather was interpreted HMJr: correctly and I think it would be a good thing now to tell them the weather is all right as far as the financing is concerned. I was going to say the weather is static, but that doesn't - I don't mean that - I mean stationary. HMJr: No. (Laughs) That's what I mean. S: Yeah. HMJr: The weather's stationary for the moment. S: Yeah. S: HMJr: S: HMJr: S: HMJr: I think just as soon as I clear it with Marriner, I think I will give something out. I think it would be a good idea. Right. All right. Unless Marriner has some other ideas. And now as for that - those new rules and regulations, okay? Yes. I talked that over thoroughly with Bob Rouse, and I think it's okay. Thank you. 42 S: HMJr: All right, sir. Wait a minute, Bell's saying something. (talks aside) What? oh, Marriner is okay on the regulations. S: He is. HMJr: Bell looks a little weak. I didn't know what happened to him. S: (Laughs) - They've probably had a long conversation. HMJr: Yeah, that's what happened. 8: (Laughs) 8: All right. All right. HMJr: Okay. S: Good-bye. HMJr: -7H.M.Jr: 43 I had a nice talk, just so that you (Rouse) know. I called up Tommy Tompkins and had a nice talk with him. I think he had it coming to him. But I still say I was unnecessarily disturbed, but that wasn't his fault. It was a combination. I shouldn't let things disturb me, that is the answer. Bell: Mr. Secretary, we would like to put on these two issues a five thousand dollar preferred allotment, stick to the five this time. You suggested ten. I think I would stick to five. H.M.Jr: What were they last time? Bell: Five. Two, we did. H.M.Jr: Five? Are you going back to five? Bell: No, it was originally five. H.M.Jr: But last time there wasn't any preferred. Haas: Since the F and G's have been out. H.M.Jr: What do you want to do that for? Bell: You suggested the other day you wanted ten. H.M.Jr: I made a lot of suggestions. You didn't take them all seriously? Bell: Yes, I did that one, because I have always favored it, but I thought it was a mistake for this time. (The Secretary held a telephone conversation with Mr. Eccles as follows): December 3, 1941 12:00 Noon. HMJr: Hello. Operator: Chairman Eccles. HMJr: Hello. Marriner. Marriner Eccles: Yes, Henry. HMJr: Now I've cleared this thing for tomorrow with the President. E: HMJr: E: HNJr: E: 44 Fine. He's given me an all clear weather signal, so we're ready to go ahead. Now, I understand that Dan's talked to you about the new rules and regulations. Yes, he read them over the phone. They're all right? Yes, they're pretty much in line with what we discussed yesterday. As I told him, they're fine as far as they go, that I would go farther than he's gone, but they're - certainly could have no objection whatever to any of the pro- visions and they're all in the right direction; and he said that after all, they were the result of a compromise and it's about as far as he felt they could go this time. And I said, "Well, of course, we certainly could have no objections to the modifications you've made, because we're all very strong for them, except we'd go farther." HMJr: Now, did you know that the president - or the head - of one of the biggest banks in Atlanta came in and told us that the four banks down there agreed that they would make loans to customers to buy Government securities and put up the Government securities as collateral? And that's the way that they were operating down there. E: Well, I didn't know that specifically. I did -2- 45 know that in Atlanta - from what Ronald Ransom has told me - that for years they're a bunch of speculators down there, and every time they get a chance to get a rake- off, they get it. HMJr: No, this - some man said that there's an agreement amonget the four banks and they make loans to their customers to buy Governments with Governments as collateral. I think it's outrageous. E: Well, now, this memorandum of Dan's - I mean this new regulation - calls specific attention to that provision, so that it seems to me that if those banks don't cooperate, why we can do something about it. HMJr: Well, I'm going to send a Treasury man down E: I think it's - I think it might be all right. HMJr: there just to observe this time. But evidently they're - they haven't been playing the game, Marriner, down there. E: Well, what - I think we're partly at fault, because with the twelve banks and the branches throughout the system, there has been no uniformity. HMJr: E: That's right. And I think that that's been one of the faults. HMJr: Yeah. E: Now with this memorandum as a basis, we can HMJr: E: tighten up from now on a basis of uniformity, and this will give us the basis of experience. That's right. Outside of Atlanta - well, there's Atlanta and Richmond, in particular - we're bad. -3- 46 HMJr: Yeah. E: And I think this is all in the right direction myself. HMJr: Okay. Now, one other thing. On the two per E: Yeah. HMJr: E: cent. There's the question of whether we make it December or June. In other words, nine and a half, thirteen and a half, or ten-year, fourteen-year. I would go December. I think you've got plenty of - plenty on it for December. That's ten years. HMJr: Ten-fifty-two, yeah. E: Ten-fifty-two. I think nine and a half is too short. You're giving a premium that you don't need to give, I think, on that type of bond. HMJr: All right. E: Don't you agree on that? HMJr: Yeah. Well, we'll make it ten-fourteen. E: Yeah, I wouldn't go nine. Who wants nine and a half? HMJr: Oh, we've got a couple of conservative fellows here at the Treasury, you know. E: In fact, that sounds like the bankers. HMJr: Well, we talk to bankers. E: (Laughs) Yeah, well, nine and a half sounds more like the bankers than the Treasury. HMJr: We don't associate with them, but we talk to them. (Laughs) 4 E: (Laughs) I see. Well, ten certainly looks better to me. HMJr: All right. E: Fine. HMJr: E: All right. All right. Good-bye. 47 48 -8H.M.Jr: There is quite a difference. Now, what I would do is, I would have Chick Schwarz announce that it is a billion dollars, and we are reopening the old issue, and that five hundred million would be offered of the new issue, and that there will be some new regulations coming along. Bell: They will be out this afternoon. Let's see, you are going to announce now that you are going to reopen and five hundred million of - you are not going to say that is an intermediate -- H.M.Jr: I am going to say the whole thing. Bell: Rate and everything? H.M.Jr: Sure, I want the whole thing out. It is too tight. We will get the whole thing out and give the fellows a chance. Rouse: You didn't decide on that five thousand. H.M.Jr: No, I want to get the thing out. Wouldn't you? Or would you just tell them we are going to go ahead? Rouse: I think I would first tell them you are going to go ahead tomorrow, and then after the close of the market, tell them this, unless you want to get the effect in the '67 - '72's today. H.M.Jr: No. We have never done that. Bell: We have never given out anything except the amount when we split one billion of a long bond and five hundred million as an intermediate. H.M.Jr: O.K. Rouse: That is fine. -9H.M.Jr: Bell: 49 Now, what about your five thousand dollars? Well, I think there is a real need for us to go back to that five thousand dollar allotment. I think you have got a lot of small banks that refuse to subscribe because of the limitation on their capital. H.M.Jr: Why not make it ten, if you are going to make it anything? The five thousand didn't bring in twenty-five million dollars. Bell: Thirty-nine million on the last, and we had ninety days before they could get their securities, and statistics show that when the ninety days were up, only about half of them asked for coupon bonds. They showed about the same per- centage as the first one on which we got twentyone million. Rouse: You don't announce a hundred per cent of them as preferred allotments. If you get too much, you can make it partial. Bell: Fifty or sixty, yes. H.M.Jr: What is the argument against the Baby Bond thing? Rouse: The argument is that there are a number of individuals, for example - of course banks can't subscribe to Baby Bonds, small banks, but on the individuals, there are a number of people who would like to buy marketable Government securities because they don't know when they will have to borrow against them. H.M.Jr: Oh, banks can't take the others? Bell: Can't take any savings bonds at all. H.M.Jr: Anybody don't want to see five thousand dollars? - 10 Morris: 50 I am in favor of five. I just question ten, but not strongly. Hadley: I would go along with ten. Haas: Five is all right with me, and I wouldn't worry about ten. Murphy: Bell: Ten is O.K. with me. five for this issue; maybe ten on thevote nextfor one. I H.M.Jr: It is all right with me. Bell: What? H.M.Jr: Five. Bell: O.K. Murphy: Is that ninety days? Morris: Oh yes, definitely. Bell: One reason I would like to have it ninety days is because it falls in March, and I hope that we won't have a financing in March. I wouldn't want it to fall on the day when we have a financing. H.M.Jr: Now what else do you want, Dan? Bell: That is all I have. I am all set. H.M.Jr: Bell: H.M.Jr: The Government bond market is up two thirty-seconds. That reflects the conference yesterday. Maybe this long bond will go up instead of down. Now when do you want me to sign? - 11 - Bell: 51 It will take some little time to get ready. What I would like to do is get this memorandum on the subscriptions out right away and then I would like to send a preliminary telegram to the banks, giving them just a little more than you are giving to the press, so that they can get that ready to go in the first mail. H.M.Jr: I can sign for you at two o'clock. Do you want me before that? Bell: No, I am sure we won't be ready. Maybe a H.M.Jr: Thank you very much, Bob. You have been very Rouse: little later than two, even. helpful. Thank you, sir. 52 Calendar of Direct and Guaranteed Bonds and Notes November 3, 1941 (In millions of dollars) Fixed maturities Description Date Direct Guaranteed Callable issues First callable Direct Guaranteed Final maturities Direct Guaranteed 1941-Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. 1942-Jan.15 Jan.15 RFC 7/8% 310 FFMC 3% (1942-47) 236 Feb. Mar. 1 Mar.15 FFMC 2-3/4% (1942-47) Note 1-3/4% 103 426 Apr. May June July 1 July 1 RFC 1% 276 HOLC 2-1/4% (1942-44) 875 Aug. Sept.15 Oct.15 Note 2% 342 320( T RFC 7/8% Nov. Dec.15 Note 1-3/4% Total 232 1,000 1,214 906 1943-Jan. Feb. Mar.15 Note 3/4% Apr. May 1 June15 June15 000 3/4% Note 1-1/8% July15 66(T) 289 629 Bond 3-3/8% (1943-47) 454 RFC 1-1/8% 324(T) Aug. Sept.15 Note 1% Oct.15 Bond 3-1/4% (1943-45) 279 1,401 Nov. Dec.15 Note 1-1/8% Total 1944-Jan. Feb. 1 Mar.15 Mar.15 Apr.15 Apr.15 Note 1% FFMC 3-1/4% (1944-64) 613 114 95 RFC 1% July 1 HOLC 2-1/4% (1942-44) 1,855 .515 Bond 3-1/4% (1944-46) June15 May 15 1,395 USHA 1-3/8% HOLO 3% (1944-52) FFMC 3% (1944-49) Note 3/4% May 1 421 571(T) 1,519 779 835 416 875 Aug. Sept.15 Note 1% 283 Sept.15 Note 3/4% 635(T) Oct. Nov. Dec.1 Bond 4% (1944-54) Total 1,037 1,849 685 2,556 1,709 875 Excludes special issues, issues redeemable at option of holder, Postal Savings accepted by the bulk of the holders. bonds, FHA debentures, and issues for which an exchange offer has been made and 1 53 Calendar of Direct and Guaranteed Bonds and Notes 1 November 3, 1941 (In millions of dollars) Description Date Fixed maturities Direct 1945-Jan. Feb.15 Mar.15 000 1-1/8% Note 3/4% Guaranteed Callable issues First callable Direct Guaranteed Final maturities Direct Guaranteed 412(T) 718 Apr. May June 1 July Aug. Sept.15 Oct.15 HOLO 1-1/2% (1945-47) 755 Bond 2-3/4% (1945-47) Bond 3-1/4% (1943-45) 1,214 1,401 Nov. Dec.15 Dec.15 Bond 2-1/2% Note 3/4% Total 1946-Jan. 1 541 531 (T) 1,790 Conversion 3% 412 1,214 755 1,401 16 Feb. Mar.15 Mar.15 Apr. 15 Note 1% Bond 3-3/4% (1946-56) Bond 3-1/4% (1944-46) 503(T) 489 1,519 May June15 June15 July Bond 3% (1946-48) Bond 3-1/8% (1946-49) 1,036 819 Aug. Sept. Oct. Nov. Dec. Total 1947-Jan. 1 Jan.. 15 Conversion 3% FFMC 3% (1942-47) 519 2,344 1,519 13 236 Feb. Mar. 1 FFMC 2-3/4% (1942-47) 103 Apr. May June 1 June15 July HOLO 1-1/2% (1945-47) Bond 3-3/8% (1943-47) 755 454 Aug. Sept.15 Oct.15 Nov. Dec.15 Bond 2-3/4% (1945-47) Bond 4-1/4% (1947-52) 1,214 759 Bond 2% 701 Total 714 759 1,668 1,094 1948-Jan. Feb. Mar.15 Mar.15 Apr. Bond 2% (1948-50) Bond 2-3/4% (1948-51) 1,115(T) 1,223 May June15 July Bond 3% (1946-48) 1,036 Aug. Sept.15 Oct. Bond 2-1/2% 451 Nov. Dec.15 Bond 2% (1948-50) Total 1 571 451 2,909 1,036 Excludes special issues, issues redeemable at option of holder, Postal Savings accepted by the bulk of the holders. bonds, FHA debentures, and issues for which an exchange offer has been made and 54 Calendar of Direct and Guaranteed Bonds and Notes 1/ November 3, 1941 (In millions of dollars) Fixed maturities Date Description Direct Guaranteed Callable issues First callable Direct Guaranteed Final maturities Direct Guaranteed 1949-Jan. Feb. Mar. Apr. May 15 June15 FFMC 3% (1944-49) 835 Bond 3-1/8% (1946-49) 819 July Aug. Sept. Oct. Nov. Dec.15 Dec.15 Bond 3-1/8% (1949-52) Bond 2-1/2% (1949-53) Total 491 1,786 2,277 819 835 1950-Jan. Feb. Mar.15 1,115(T) Bond 2% (1948-50) Apr. May June July Aug. Sept.15 Bond 2-1/2% (1950-52) 1,186 Oct. Nov. Dec.15 Bond 2% (1948-50) Total 571 1,186 1,686 1951-Jan. Feb. Mar.15 1,223 Bond 2-3/46 (1948-51) Apr. May June15 Bond 2-3/4% (1951-54) 1,627 July Aug. Sept.15 Bond 3% (1951-55) 755 Oct. Nov. Dec.15 Bond 2-1/4% (1951-53) Total 1,118 3,500 1,223 1952-Jan. Feb. Mar.15 Apr. Bond 2-1/2% (1952-54) May 1 HOLO 3% (1944-52) 1,024(T) -779 June July Aug. Sept.15 Oct.15 Bond 2-1/2% (1950-52) Bond 4-1/4% (1947-52) 1,186 759 Nov. Dec.15 Bond 3-1/8% (1949-52) Total 1 491 1,024 2,436 779 Excludes special issues, issues redeemable at option of holder, Postal Savings bonds, FHA debentures, and issues for which an exchange offer has been made and accepted by the bulk of the holders. 55 Calendar of Direct and Guaranteed Bonds and Notes V November 3, 1941 (In millions of dollars) Description Date Fixed maturities Direct Guaranteed Callable issues First callable Direct Guaranteed Final maturities Direct Guaranteed 1953-Jan. Feb. Mar. Apr. May June15 Bond 2% (1953-55) July 725 Aug. Sept. Oct. Nov. Dec.15 Dec.15 Bond 2-1/2% (1949-53) Bond 2-1/4% (1951-53) Total 1,786 1,118 725 2,904 1954-Jan. Feb. Mar.15 Bond 2-1/2% (1952-54) 1,024(T) Apr. May June15 June15 July Bond 2-3/4% (1951-54) Bond 2-1/4% (1954-56) 681 1,627 Aug. Sept. Oct. Nov. Dec.15 Bond 4% (1944-54) Total 1,037 681 3,688 1955-Jan. Feb. Mar.15 Bond 2-7/8% (1955-60) Apr. 2,611 May June15 July Bond 2% (1953-55) 725 Bond 3% (1951-55) 755 Aug. Sept.15 Oct. Nov. Dec. Total 2,611 1,480 1956-Jan. Feb. Mar.15 Mar.15 Bond 3-3/4% (1946-56) Bond 2-1/2% (1956-58) Apr. 1,449(T) 489 May June15 July Bond 2-1/4% (1954-56) 681 Aug. Sept.15 Oct. Bond 2-3/4% (1956-59) 982 Nov. Dec. Total 1/ 2,431 1,170 Excludes special issues, issues redeemable at option of holder, Postal Savings accepted by the bulk of the holders. bonds, FHA debentures, and issues for which an exchange offer has been made and 56 Calendar of Direct and Guaranteed Bonds and Notes 1 November 3, 1941 (In millions of dollars) Description Date Fixed maturities Direct Guaranteed Callable issues First callable Direct Guaranteed Final saturities Direct Guaranteed 1957-Jan. Feb. Mar. Apr. May June July Aug, Sept. Oct. Nov. Dec. Total 1958-Jan. Feb. Mar.15 Bond 2-1/2% (1956-58) 1,449(T) Apr. May June15 July Bond 2-3/4% (1958-63) 919 Aug. Sept. Oct. Nov. Dec. Total 919 1,449 1959-Jan. Feb. Mar. Apr. May June July Aug. Sept.15 Oct. Bond 2-3/4% (1956-59) 982 Nov. Dec. Total 982 1960-Jan. Feb. Mar.15 Bond 2-7/8% (1955-60) 2,611 Apr. May June July Aug. Sept. Oct. Nov. Dec.15 Bond 2-3/4% (1960-65) Total 1/ 1,485 1,485 2,611 Excludes special issues, issues redeemable at option of holder, Postal Savings accepted by the bulk of the holders. bonds, FHA debentures, and issues for which an exchange offer has been made and 57 Calendar of Direct and Guaranteed Bonds and Notes 1 November 3, 1941 (In millions of dollars) Date Description Fixed maturities Direct Guaranteed Callable issues First callable Direct Guaranteed Final maturities Direct Guaranteed 1961-Jan. Feb. Mar. Apr. May June 1 July Panama 3% 50 Aug. Sept. Oct. Nov. Dec. Total 50 1962-Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total 1963-Jan. Feb. Mar. Apr. May June15 July Bond 2-3/4% (1958-63) 919 Aug. Sept. Oct. Nov. Dec. Total 919 1964-Jan. Feb. Mar.15 Apr. FFMC 3-1/4% (1944-64) .95 May June July Aug. Sept. Oct. Nov. Dec. Total 95 1/ Excludes special issues, issues redeemable at option of holder, Postal Savings bonds, FHAbydebentures, for which an exchange offer has been made and accepted the bulk ofand theissues holders. 58 Calendar of Direct and Guaranteed Bonds and Notes 1 November 3, 1941 (In millions of dollars) Date Description Fixed maturities Direct Guaranteed Callable issues First callable Direct Guaranteed Final maturities Direct Guaranteed 1965-Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.15 Bond 2-3/4% (1960-65) 1,485 Total 1,485 1966-Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total 1967-Jan. Feb. Mar. Apr. May June July Aug. Sept.15 Oct. Bond 2-1/2% (1967-72) 1,590(T) Nov. Dec. Total 1,590 * . . 1972-Sept.15 Bond 2-1/2% (1967-72) 1,590(T) 1 Excludes special issues, issues redeemable at option of holder, Postal Savings bonds, FHAbydebentures, for which an exchange offer has been made and accepted the bulk ofand theissues holders. 59 December 3, 1941 12:05 p.m. HMJr: Hello. Colonel Donovan: Henry. HMJr: Yes. D: I'm sorry I can't be there at lunch HMJr: I am, too. D: HMJr: D: but Jim Baxter will talk very openly and freely Good. - have you been getting some of my little and stories? HMJr: Yes, I have. D: That will be a steady flow, Henry. HMJr: Fine. D: And if there's any particular thing that we can do, I'll let you know. HMJr: Will you do that? D: Yeah. HMJr: All right. D: Now, I was glad to have Gaston over yesterday. We explained the whole thing to him. HMJr: Good. D: All right. HMJr: Thank you. D: All right, Henry. 60 December 3, 1941 12:07 p.m. HMJr: Operator: HMJr: Hello. Secretary Jones is at the Capitol. Well, leave word I called him. Operator: Right. Leave word I called. HMJr: Operator: Right. December 3, 1941 12:10 p.m. HMJr: Jesse Hello. Jones: Hello, Henry. HMJr: Jesse, we're about ready to blow. J: Yeah. HMJr: We're going to reopen that last two and a J: Uh huh. HMJr: And then sell a new two per cent ten-fourteen half per cent issue for a billion dollars. year. J: Ten-fourteen. HMJr: Yeah. J: I think you've hit on the right - that's about the way you were talking yesterday, wasn't it? HMJr: Yeah. Sound all right to you? -2- 61 J: I think it sounds all right. HMJr: Well J: And I believe we're going to like it. HMJr: The President gave me a clearance for tomorrow. J: Uh huh. HMJr: So that' J: Well, I'm whole-heartedly for it. HMJr: Thank you, Jesse. J: Okay. Thanks. TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday, December 3, 1941. 62 Press Service No. 28-71 In advance of the cash offering of Treasury securities to be announced tomorrow, the Treasury today announced the basis on which subscriptions will be entertained from the various classes of subscribers who will participate in that offering. The primary purpose is, so far as possible, to meet the legitimate investment requirements of the public, and to accomplish that purpose subscriptions will be grouped broadly into four classes, as follows: Banks and trust companies for their own account-not to exceed 50 per cent of capital and surulus. Mutual savings and cooperative banks, Federal Savings and Loan Associations, trust accounts and investment corporations, pension funds, insurance companies, and similar institutions and funds -- not to exceed ten per cent of total resources. Corporations organized for profit, and dealers and brokers -- not to exceed 50 per cent of net worth. Individuals -- not to exceed 50 per cent of net worth or 100 per cent of cash deposited with subscription. (Note: No preferred allotment will be made on such full-paid subscriptions. ) Notwithstanding the general limitations outlined above, the Federal Reserve Banks are authorized and instructed to continue to examine applications for cash offerings of securities issued by the Treasury, and to report to the Secretary of the Treasury any which, in their judgment, require special treatment, or which appear to be excessive from the standpoint of the resources or investment practices of the subscribers, or for other reasons, with recommendation as to the acceptance, reduction or rejection of any such applications, which recommendations will be promptly acted upon by the Secretary. The cooperation of banking institutions, and of the subscribing public generally, is earnestly solicited so that subscriptions forwarded to the Federal Reserve Banks and the Treasury will in each instance be for amounts not in excess of the limitation set forth above. Attention is again invited to the requirement that subscribers agree not to sell or otherwise dispose of their -2- 63 subscriptions, or of the securities which may be allotted thereon, prior to the closing of the subscription books. It is also requested that banks and others refrain from making any unsecured loans, or loans collateralized in whole or in part by the securities subscribed for, to cover the initial deposits which are required to be paid when subscriptions are entered. -o0o- 64 December 3, 1941 1:40 p.m. HMJr: Mr. Hello. O'Dwyer: Hello, Mr. Morgenthau. HMJr: How are you? O: Splendid, thanks. HMJr: Mr. 0' 'Dwyer O: Yeah. HMJr: The reason I'm calling you is this. Monday of this week it was brought to my attention that our Narcotic Agent, Albert E. Aman. O: Yes. HMJr: You know of him? O: Yes, very well. HMJr: He had some information which he got from two men which you gave him permission to talk to. 0: That's right. Now, I asked him to give me a written report HMJr: which has just been handed to me this morning and I think it's - it may be of interest to 0: HMJr: 0: you. And Aman is in Chicago, and he's leaving there tonight and will arrive in New York tomorrow and hand it to you personally. That's lovely. Now, if there's anything else that we here can do, call on me personally. Yes. Well, that's swell. Thanks a lot, Mr. Morgenthau. HMJr: Now, this has certain income tax angles, and we will pursue those through our Internal Revenue agents. -2- 65 Yes. O: HMJr: But there are other things in there which are of interest to you and don't come under the Treasury. O: I see. HMJr: But..... Well, thank you very much, sir; and when will I have the pleasure of meeting you? O: 0: Well, any time - I very rarely get to New York. You're rarely in town, aren't you. HMJr: Practically never; but if I do, or you should HMJr: happen to come to Washington, why I'd be delighted to see you. O: Thank you very much. HMJr: Good-bye. O: I will take advantage of that invitation when I come down. HMJr: Do that, will you? O: Yes, sir. HMJr: But I think you'll be interested in what Aman has. 0: All right. Thank you very much. HMJr: Okay. O: Good-bye. 00 - Mr. Foley STRICTLY CONFIDENTIAL 66 December 3. 1941 2:26 p.m. HMJr: Hello. Francis Biddle: Henry, this is Francis. HMJr: Good morning. B: How are you today? HMJr: Okay. B: Henry, I have two matters - one personal and the other business. I'm afraid Kathryn and HMJr: B: HMJr: B: I won't be able to make your party in New York. Oh, I'm sorry. I'm terribly sorry. Shall I write your secretary about it? No, no, I'm Shall I send the tickets back? HMJr: If you don't mind. B: I'll send them over tomorrow morning if that's time. HMJr: That's time enough. B: Now, the other thing, Henry. John Mack is coming over to see you. HMJr: B: Yes. Then also, I thought I'd say a word about that situation. HMJr: I wish you would. I know nothing about it. B: John Mack has recently been made president of General Aniline. 67 -2HMJr: Yes. B: He's represented by Homer Cummings. HMJr: Yes. B: The majority of the stock - practically all of the stock - is owned by a Swiss company, called a Cremmie Company HMJr: B: Yes. who undoubtedly could vote in any group they wanted. HMJr: Yes. B: This situation involves a - really a fight for control, and it is a stockholder's bill, asking under the Delaware laws, for a special election brought by the Chemmie group, which, in turn, is controlled undoubtedly from Germany HMJr: Yes. and has been pending for some time. B: HMJr: Yes. B: I think on the whole, we've looked at it pretty carefully, that the present board which has been changed. HMJr: B: Yes. and the association of both Mack and Cummings with the board, gives us much more confidence than the other groups, who are Raskob, DuPont, and A1 Smith. HMJr: Yes. B: of course, what they're trying to do is to get the DuPont's control over this competitor company and divide up the boodle pending the war. HMJr: Yeah. 68 - B: Now, it's a very simple matter, but apparently there's been a good deal of backing and filling. They want us to try to get the case postponed again for three months. HMJr: Yeah. B: For several reasons. Mainly because we can get HMJr: Yeah. B: a better picture of it. I approve that. I think the Inter-Departmental Committee, who naturally don't like to take responsibility for some of these things without going to us, are a little shy about it; although Frank Shea gotten into the position where he agrees. HMJr: B: Yeah. You'll want, of course, to talk to Ed about it afterwards. HMJr: Right. B: I think Ed is a little instinctively against it. HMJr: Yeah. B: But literally, all I think need be done is to go down to court and say that this involves a serious situation and we are already on record in a criminal proceeding under the Anti-Trust Act in which we state that it is our belief and we expect to prove that the Chemmie Company is controlled and owned by General Aniline under a geographical trust distribution agreement. Therefore, we've said that already. We repeat that, and we talk a little bit about national the slightest doubt that the court will respond defense and the emergency situation. I haven't as they have already once done, so I think it should be done. HMJr: Well, I know nothing about it. I'll listen to 4- 69 Mack. I'll make no commitment one way or the other. B: That's right. And then talk to Ed. HMJr: And then talk to Ed. B: Give me a ring when you've decided. HMJr: B: I'11 very definitely give you a ring before I decide. Oh, incidentally, Mack's been over to see the President, I think, about it; and I think he was put in the company with the President's approval. HMJr: B: HMJr: I see. Which would indicate that the boss would like us to play along; and if you want to speak to him, that would be all right, but I hardly think it's necessary. Well, before I make up my mind, I'll talk to you again. B: Thank you, Henry. HMJr: Thank you. TREASURY DEPARTMENT 70 INTER-OFFICE COMMUNICATION DATE December 3. 1941 Secretary Norgenthau TO FROM Mr. Cochran STRICTLY CONFIDENTIAL At 4 p.m. this afternoon Secretary Morgenthau received Sir Frederick Phillips, at the latter's request. Mrs. Klotz and Messrs. White and Cochran were present. Sir Frederick stated that he desired to report to the Secretary on progress being made on "take outs" from old contracts. While it had resulted from the recent meeting participated in by Messrs. Phillips, McCloy, Greenbaum, Wilson and others that there were no funds available to the Army to relieve the British from any of the contracts which have been under discussion, Mr. Stettinius seemed willing to give such relief out of the second Lend-Lease appropriation, provided free funds can 00 found in this allotment. Phillips made the point that $1,000,000,000 of this second appropriation has been set aside for Russia, but that study is now being made E.S to whether the desired relief can be obtained from the remaining funds. In answer to the Secretary's inquiry, Sir Frederick stated that Colonel Greenbaum had been quite helpful. The Secretary had stressed to Colonel Greenbeum, on the latter's visit to the Treasury, the importance which he attached to this matter. The Secretary naked to be kept currently informed of developments. Phillips then recalled to the Secretary that the British authorities had given the definite ruling when refugees from the British Isles came out to Canada and United States that foreign exchange could not be remitted to these countries to take care of such refugees, principally women and small children. Principally as a result of experience with Canada, it has now developed that strict adherence to this rule cannot be maintained. The British calculate that something like £280,000 per year will be required for remittances to women and children now in the United States. Since this would mean an additional drain on British dollar exchange resources, Sir Frederick desired to consult the Secretary before giving his assent to the arrangement. The Secretary said that he gladly and heartily agreed thereto. Incidentally, he asked Phillips sometime to bring him to date on the recent arrangement consummated with the British Treasury authorities by the American Embassy in London with respect to dividends for American movie interests. Sir Frederick then mentioned the question of payments to Russia, The Secretary told Phillips that this question had been brought up, particularly in Sir Frederick's absence, on one or more occasions, but in a matter of "trading", rather than in the direct fashion which has always characterized dealings between Sir Frederick and the Secretary. The latter hoped that on this, as on all matters, Sir Frederick would tell the Secretary directly what he wanted, and a frank reply would be forthcoming. Phillips stated that the first point was with respect to supplies which the British had obtained from the United States against actual payment in United States dollars before Lend-Lease was operative. When such articles have now been transferred by the British to the Russians, does the United States Treasury agree to the British collecting dollars or gold from the Russians therefor? As the second point, 71 -2Phillips referred to certain Boston bombers which had been acquired by the British and which are now to be released by the British to fulfill the American commitment to the Russians under the Moscow protocol. Should the British expect payment in dollars or in kind? To these two questions the Secretary replied that he would like to have a written memorandum from Sir Frederick. He would then give an early answer. 72 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE TO Secretary Morgenthau FROM Mr. Cochran December 3. 1941 STRICTLY CONFIDENTIAL Confirming the information which I gave you orally at 4:15 this evening, word was today received from the Soviet Embassy that the SS DONBASS was arriving in San Francisco today, and that an amount of $6,000,000 of gold would be deposited at the Mint in San Francisco to our credit. From the SS TRANSBALT, arriving at San Francisco on December 6, a similar amount of $6,000,000 in gold will be deposited, leaving still due from Russia under the $30,000,000 advance, a balance of $13,326,000. AMP. C 0 73 P Y EMBASSY OF THE UNION OF SOVIET SOCIALIST REPUBLICS WASHINGTON, D. C. December 3, 1941 My dear Mr. Secretary: On or about December 6, 1941 there will be deposited at the United States Mint, San Francisco, an amount of gold for the account of the Secretary of the Treasury of the United States by order of the Government of the Union of Soviet Socialist Republics. This gold will arrive on the S.S. Transbalt and is to be applied against the amount of gold sold under the agreement of October 10, 1941. Very truly yours, (Signed) A. Gromyko A. Gromyko Charge d'Affaires The Honorable The Secretary of the Treasury Washington Copytec 12-5-41 0 74 Y San Francisco, California December 3, 1941 Mr. D. V. Doll Washington, B. c. I have been advised that there will be 98 eases of Russian gold at as estimated value of $6,600,000 delivered to this mint today. Will we handle it the same as other Bussian deposited Haggerty Superintendent 75 Rechange Stabilization Feed DEC 3 1941 United States Mas. Sea Typestees, California. as or about December 3. 1941 you will receive gold valued at approximately 16,000,000 for the account of the Secretary of the treasury by order of the Government of the Union of Seviet Socialist Royablies. Upen receipt of this gold you are hereby authorised and instructed to well - determine its value. After determination of the value you are further authorised and instructed to purchase the wild at the nat price of 035 per fine trey ourse without subtracting the 1/4 of 1 passent hamiling charge, to - the deposit certificate accordingly and to drea your check for the not value of the gold (loss the usual sins charges) to the order of the Federal Because Deak of San Typestose for account of the Federal Receive Bank of New York for credit to the "Secretary of the Treasury. Special Please instruct the Federal Receive Real of Sex Transise to transfer this - w telegraph to the Federal Reserve Deak of New York for credit to the of the Treasury, Special Please have the Federal Receive Bank of San Transless instate is the telegram to the Federal Boservo Bank of York the culture of the nother of fiss season, the total dollar value, the I of the segalor 1/4 of 1 possest healthing charge. and the sint charges which have been delected, as well as the - of the ship on which the and was transported, and the date of its arrival. Please prepare tea copies of Hist Form us-s is the meal - inserting is the prepared spaces as the feet of the report the total value of the mld, the molting charge, the handling charge, the total charges, and the not value of the will, with the handling and other charges deducted, but without other extresses notations ea the form. Please forward these feems to the Secretary of the treasury. Assestions N. Herie through Department, Washington, 3.6. You will observe from the instructions that you are not to detect the 1/4 of 15 hamdling charge. (Signed) D. 7. BELL Acting Vehiclery of the Treasury. 76 REQASSI OF UNION OF SOVIET SOCIALIST REPUBLICS WASHINGTON,B.O December 5, 1941 My dear Mr. Secretary: 0a or about December 3, 1941 there will be w posited at the United States Mint, San Francisco, gold valued at approximately $6,000,000.00 for the account of the Secretary of the Treasury of the United States w order of the Government of the Union of Seviet Socialist Reyablies. This gold arrived on the s.s. and is to be applied against the amount of gold sold under the agreement of October 10. 1941. Very truly yours, (a) A. Groupho A. Grouping Charge d'Affaires The Monerable The Secretary of the Treasury Washington 77 Computation of tax liability on 1940 income under present law National Steel Corporation Return filed on an unconsolidated basis, for the calendar year. The income method is used in computing the excess profits tax. Computation of excess profits tax 1. Net income 2. Adjustments in arriving at excess profits net inc. 3. Excess profits credit and specific exemption 4. Adjusted excess profits 5. Excess profits tax 6. Balance of net income, after E.P.T., subject to normal tax and surtax 7. Normal tax 8. Surtax 9. Total income and excess profits taxes 10. Total income & excess profits taxes as a percent of net income $13,508,570 - 1,029,699 11,818,791 660,080 350,048 13,158,522 3,158,045 920,847 4,428,940 32.8% Invested capital credit Amount of invested capital 5,000,000 at 8% 400,000 128,780,993 123,780,993 at 7% 8,664,670 Total credit Average earnings credit 9,064,670 11,813,791 COMPUTATION OF TAX LIABILITY ON 1940 INCOME UNDER PRESENT LAW 12/3/41 NATIONAL STEEL CORP. Net Income $13.5 mil. E.P. Credit $11.8 mil. Income Method Adjusted Excess Profits $0.7 mil. Normal Tax Net Income $13.2 mil. I. Computation of Excess Profits Tax 100% 100% 80% 80% 60% 60% Adjustments E.P. Credit$11.8 -$1.0 40% 40% E.P. Tax $0.4 20% 20% 0 0 4 10 0 2 6 8 MILLIONS OF DOLLARS 12 13.5 Net Income II. Computation of Income Tax and Balance after Tax 100% 100% 80% 80% E.P. Tax Balance after Tax 60% $0.4 60% $9.1 40% 40% Surtax$0.9 20% 20% Normal Tax $3.2 0 0 4 8 6 0 2 MILLIONS OF DOLLARS Secretary of the Treatur 10 12 13.5 Net Income 79 Computation of tax liability on 1940 income under present law Lockheed Aircraft Corporation Return filed on an unconsolidated basis, for the calendar year. The income (growth) method is used in computing the excess profits tax. Computation of excess profits tax 1. Net income 2. Adjustments in arriving at excess profits net income 3. Excess profits credit and specific exemption 4. Adjusted excess profits 5. Excess profits tax 6. Balance of net income, after E.P.T., subject to normal tax and surtax 7. Normal tax 8. Surtax 9. Total income and excess profits taxes 10. Total income & excess profits taxes as a percent of net income $5,149,409 - 3,535,306 1,614,103 922,462 4,226,947 1,014,467 295,636 2,232,565 43.4% Invested capital credit Amount of invested capital 26,963,853 5,000,000 at 8% 400,000 21,963,853 at 7% 1,537,470 Total credit 1,937,470 3,530,306 Average earnings credit COMPUTATION OF TAX LIABILITY ON 1940 INCOME UNDER PRESENT LAW LOCKHEED AIRCRAFT CORP. Income (Growth) Method Net Income 5.1 mil. Adjusted Excess Profits $1.6 mil. E. P. Credit $3.5mil. Normal Tax Net Income $ 4.2 mil. I. Computation of Excess Profits Tax 100% 100% 80% 80% 60% 60% E.P. Credit $3.5 40% 40% E.P. Tax $0.9 20% 20% 0 0 0 5.1 4 MILLIONS OF DOLLARS 3 Net Income 2 II. Computation of Income Tax and Balance after Tax 100% 100% 80% 80% Balance after Tax $2.9 60% 60% E.P. Tax $0.9 40% 40% Surtax $0.3 20% 20% Normal Tax $1.0 0 0 I 0 2 MILLIONS OF DOLLARS 3 4 5.1 Net Income 81 CONFIDENTIAL UNITED STATES SAVINGS BONDS Comparative Statement of Sales During First Two Business Days of December, November, and October, 1941 (October 1-2, November 1-3, December 1-2) On Basis of Issue Price (Amounts in thousands of dollars) : : : $ 4,205 $ 4,394 $ 3,320 -$ 189 6,496 5,171 5,815 1,325 10,701 1,956 12,970 9,565 2,009 13,292 9,134 2,153 12,596 $25,627 $24,866 $23,883 : over November over : October $1,074 644 - 1,136 431 144 - 53 - 322 696 $ 761 $ 983 - Office of the Secretary of the Treasury, Division of Research and Statistics. : : : December : November : October or Decrease (-) December : November over : November : : Total December : November Percentage of Increase : : : Series G - Banks : Series F - Banks : Series E - Total or Decrease (-) : : Series E - Post Offices Series E - Banks : Item Amount of Increase : Sales over : October - 4.3% 32.3% - 11.1 25.6 11.9 4.7 - 2.6 - 2.4 - 6.7 5.5 3.1% December 3, 1941. Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States Savings Bonds. 4.1% Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. 82 CONFIDE UNITED STATES SAVINGS BONDS Daily Sales - December 1941 On Basis of Issue Price (In thousands of dollars) Post Office Bank Bond Sales Bond Sales Date All Bond Sales Series E Series E Series F Series G Total Series E Series F Series G Total $ 2,976 $ 3,904 $ 1,333 $ 7,220 $ 12,458 $ 6,880 1,229 $ 1,333 $ 7,220 $ 15,434 2,592 623 5,750 8,964 3,821 623 5,750 10,193 $ 4,205 $ 6,496 $ 1,956 $ 12,970 $ 21,422 $ 10,701 $ 1,956 $ 12,970 $ 25,627 December 1941 1 2 Total Office of the Secretary of the Treasury, Division of Research and Statistics. December 3. 1941. Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States Savings Bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. 83 DEC 3 1941 w - Material Books - yes for your letter of November 26, 1941. endosing - tublics presenting certain information on the states of appropriations requested in my letter of Number no. Year cooperation in this matter is gradity appreciated. - the copy - with the information I decised. and - developing . - evering the Signees. As seen - se has book completed. I shall - you a Sincerely. (Signed) E. Morgenthesis IN Year Ministral Beary s. Lead. Chairman, United States Merities Commission, Machington, a. 6. By Messenger Steen too VLIVER 12/2/41 n.m C. Photoster file Original to Haad office UNITED STATES MARITIME COMMISSION WASHINGTON OF THE CHAIRMAN November 28, 1941 The Honorable The Secretary of the Treasury Washington, D. C. Attention: Mr. George C. Heas Director of Research and Statistics My dear Mr. Secretary: Further reference is made to your letter of November 10 and your request for information for each appropriation act and contract authorization acts approved since January 1, 1940, and defense aid allocations providing for construction by the Commission of vessels and equipment for national defense. In response to the above, the following statements have been prepared and are attached hereto: a. Contract Authorizations for Ships and Facilities b. Obligations for Ships and Facilities (Cumulative) C. Disbursements for Ships and Facilities (Cumulative) All of the above from inception of the Commission (October 26, 1936) to period ending October 31, 1941. Mr. Lindow of your department has collaborated with this agency in the preparation of the foregoing. Sincerely yours, rs hand. E. S. Land Chairman Enclosures UNITED STATES MARITIUS COMMISSION OBLIGATION FOR SHIPS AND FACILITION (CIMULATIVE) LICEPTION TO OCTOBER 31, 1941 Long Range Program Perfod Ships Ending (Millions) Sept. 30. 1938 Deo. 31, 1938 March 31. 1939 June 30. 1939 & Deo. 31, 1937 March 31. 1938 June 30. 1938 Facilities (Millions) 15.8 Total (Millions) 26.3 26.3 76.5 92.6 135.7 161.1 231.1 231.1 330.3 343.5 343.5 362.8 362.8 426.1 434.7 458.1 480.3 May 31, 1941 June 30, 1941 518.9 722.1 426.1 434.7 458.1 480.3 479.8 518.9 722.1 722.2 July 31. 1941 722.7 31, 1941 1,039.9 1,158.5 1,384.8 1941 31.1941 (Millions) (Millions) (Millions) Defense Aid Program Ships (Millions) Facilities (Millions) Total (Millions) War and Navy Departments; Ships 479.8 Total All Programs Total Facilities (Millions) (Millions) (Millions) Ships (Millions) 15.8 26.3 26.3 76.5 15.8 26.3 26.3 76.5 92.6 135.7 161.1 135.7 161.1 330.3 April 30. 1941 Total 76.5 92.6 Dec. 31. 1939 March 31. 1940 June 30. 1940 Dec. 31. 1940 Jen. 31. 1941 Feb. 28, 1941 March 31, 1941 Facilities 15.8 26.3 26.3 Sept. 30, 1939 Sept. 30 1940 Emergency Ship Program Ships 12.2 12.8 12.2 310. 33.4 35.0 310. 36.8 38.9 722.2 310. 38.9 782.7 310. 40.7 40.8 46.6 47.3 310. 22.6 1,062.5 24.9 1,183.4 352.0 343.8 25. 1,309.8 340. 33.4 345.0 346.8 348.9 348.9 350.7 392.8 390.4 387.3 12.2 33.0 184.8 184.8 477.0 12.4 42.8 43.8 197.2 227.6 520.8 479.0 47.6 524.6 489.7 494.5 521.5 497.1 50.0 539.7 544.5 33.0 571.5 33.2 550.3 36.4 50.0 50.0 53.2 33.0 33.0 33.0 33.4 92.6 135.7 161.1 231.1 231.1 330.3 343.5 362.8 438.3 446.9 470.3 492.5 330.3 343.5 1,007.G 1,046.7 1,542.1 1,542.2 1,555.4 1,919.8 2,057.0 2,158.3 362.8 438.3 446.9 33.4 47.4 79.6 82.7 86.5 90.7 113.4 121.5 125.5 470.3 525.9 1,055.0 1,126.3 1,624.8 1,628.7 1,646.1 2,033.2 2,178.5 2,283.8 << K WLAP UNITED STATES MARITIME COMMISSION DISBURSEMENTS FOR SHIPS AND FACILITIES (CUMULATIVE) INCEPTION TO OCTOBER 31, 1941 Long Range Program Ships Period (Millions) Beding Dec. 31, 1937 Facilities (Millions) Emergency Ship Program Total (Millions) .7 .7 1.6 June 30, 1938 1.6 1.6 Sept. 30, 1938 3.6 Dec. 31, 1938 Mar. 31, 1939 $ Mar. 31-1238 8.8 June 30, 1939 Sept. 30, 1939 54.5 17.5 35.0 54.5 Dec. 31, 1939 Mar. 31, 1940 81.8 81.8 108.6 June 30, 1940 139.4 108.6 139.4 Sept. 30, 1940 172.1 210.6 223.4 232.2 May 31, 1941 June 30, 1941 July 31, 1941 293.7 Aug. 31, 1941 306.2 Sept. 30g 1941 320.5 Oct. 31, 1941 330.4 Total (Millions) Defense Aid Program Ships Facilities Total (Millions) (Millions) (Millions) 246.9 259.4 270.0 hips Ships (Millions) (Millions) .2 .2 .1 .1 1.3 .1 1.7 1.8 .3 3.6 3.0 6.6 2.0 2.4 4.4 .7 281.1 4.6 8.6 1.2 21.0 2.6 4.6 6.0 8.8 8.4 12.2 13.0 293.7 306.2 7.6 18. 30.7 7.4 13.3 12.2 20.7 24.8 44.2 60.2 11.5 19. 17.9 25.4 331.5 Facilities (Millions) .2 12.7 19.4 28.9 31.3 Total .7 .7 1.6 1.6 1.6 1.6 3.6 3.6 8.8 8.8 1.1 320.5 1.1 Total All Program War and Navy Departments 172.1 210.6 223.4 232.2 246.9 259.4 270.0 281.1 Apr. 30,1941 (Millions) Facilities (Millions) 1.6 3.6 8.8 17.5 35.0 Dec. 30, 1940 Jan. 31, 1941 Feb. 28, 1941 Mar. 31, 1941 Ships 17.5 17.5 35.0 54.5 81.8 54.5 81.8 35.0 108.6 108.6 139.4 172.1 210.6 139.4 223.4 232.2 246.9 260.0 172.1 .3 210.6 223.4 232.2 247.2 2.8 262.8 5.4 14.4 1.0 276.3 289.5 308.1 1.6 327.9 31.3 281.7 303.9 327.9 359.2 30.5 2.4 43.3 3.4 353.8 380.6 43.8 57.8 397.6 438.4 19.8 UNITED STATES MARITIME COMMISSION CONTRACT AUTHORIZATIONS FOR SHIPS AND FACILITIES INCEPTION TO OCTOBER 32. 1961 War and Long Range Program Ships Authority (Millions) ate opriation Act, 1940 March Plation Act, 1940 June 3. 1937 6. 1937 A Aug. $ lation Act, 1937 Facilities (Millions) otal (Millions) 215 21.5 230 230 1940 50 1943 65 Ships Total (Millions) (Millions) (actions) Navy Emergency Ship Program Delease MATORIA TOTAL (Millions) MIN (Millions) Departments Total- All Processes (Millions) TOTAL adidas Facilities (Millions) (Millions) (Musicions) Stips 215 215 230 230 50 50 50 Fab 65 65 oriation Act, 1941 April 1943 180 65 180 180 Add, 180 1942 Congress, let Session) 1941 Augo a 1941 1,246.7 50 1,296.7 50 1,246.7 50 100 1,346. 54 Statute 377 (Emergency Fund for Dec. a 1940 .5 .5 .5 .5 angreen President, War (Allotment to U.S.M.C.) 1942 July 2, 1943 36 36 36 36 Congress Feb. mess 310 320 $00 205-19 Oct. 11, 1943 272 310 March 27, 1943 April 14, 1943 Sept. 26, 1941 285 310 - Sept. 13, 1941 Aug. 50 550 500 50 22.3 22.5 22.5 8.2 8.2 8.2 550 2 Allocation n b, 1941 22.5 8.2 5, 1941 13.2 6/30/32 47 Stat. 417 13.2 13.2 working fund established Symbol 6925902 $ 9,200,000.00 Approp. (Stat. 54-967) Aug. to 1941 6/30/32 Stat. 417 working fund established 800,000.00 J.S.M.C. Symbol 690/15900 $ 10,000,000.00 March 10,1941 Construction 4 Machinery (Mat. 54-882) 602, 6/30/32 - 47 Stat. 47 shipe 23.2 Working fund established Fund U.S. Mariline Commission $ 8,750,000.00 1,980,000.00 276,937.93 March 0,1941 KAY 7991 June no, 1941 - 0 1,986.7 50 - 2,036.7 -346.9 23.2 23.2 396.5 530.7 585.7 2,900.3 - 155 3,055.3 88 DEC 3 1941 Dear Henry: I wonder if I can't start a little real competition between the Army and the Navy! On November 5th I wrote to you and to the Secretary of the Navy asking for certain information. Copy of the letter is attached. On November 13th the Army Air Corps supplied us with information concerning its activities. On November 27th the Havy came through in full. When may I expect the Army to do as well by me as the Navy? Yours sincerely, (Signed) Henry Honorable Henry L. Stimson, Secretary of War. By Messenger Steen 400 n.m C 89 DEC 3 1941 My dear Frank: Since receiving your letter of November 28th, I have ascertained that legal action has been instituted by the Comptroller of the Currency in the Circuit Court of Cook County, Illinois, against Mr. Clarence F. Buck and two surety companies which bonded him as receiver of the Calumet National Bank of Chicago. The suit was filed for the purpose of recovering losses which were sustained by the receivership as a result of alleged negligence on the part of Mr. Buck in conducting the affairs of the receivership. I find that a very thorough investigation was made prior to the institution of the suit and that extreme care was taken by the Comptroller's office to ascertain and sift all the available evidence before concluding to seek recovery from Mr. Buck or his sureties. In May of 1939, after Mr. Buck and his counsel, former Senator Otis F. Glenn, had been afforded an opportunity to present to the Comptroller's office arguments and reasons why recovery should not be sought as against Mr. Buck, a letter was written to Mr. Buck by the Comptroller's Office stating that under the circumstances it had concluded that the facts should be submitted to a court of record of competent jurisdiction, in order that there might be a judicial determination of his lia- bility or lack of liability for the losses sustained. The Comptroller's Office is convinced that there is with its duties and obligations with reference to the administration of the affairs of the insolvent Calumet National Bank for the benefit of the depositors and creditors thereof. no alternative action which would be in complete accord Sincerely yours, (Signed) 1. Morgenthau, Jr. Secretary of the Treasury Honorable Frank Knox, The Secretary of the Navy, Washington, D. C. JER/CBUIPM 12/2/41 By Messenger nmc the THE SECRETARY OF THE NAVY WASHINGTON November 28, 1941 e ite of J qam up My dear Henry: One of my oldtime friends in Illinois is Mr. Clarence Buck, of Monmouth, Illinois. He is A former member of the State Senate and formerly one of the best of our Republican leaders in the state. I don't think there is any man in the state of Illinois who enjoys A higher reputation. Sometime ago, he WR S urged by the then Comptroller of the Treasury to take the receivership of the Calumet National Bank which He did. This involved him in some very sizeable real estate operations closing out some property which the bank acquired during the depression. Mr. Buck has been in to see me to tell me of R threatened suit against him which he is very insistent is completely unjustified. Among other things, he told me the matter had been presented by those seeking to prosecute the matter, to Judge Holly and on four separate occasions, Judge Holly, who is the Federal Judge in Chicago, dismissed the CASE and, despite this failure in the Federal Courts, Buck tells me the case is now being pursued in the state courts. He has no fear of its success and I think he is warranted in feeling so However, he d says it is going to impose A very high cost on him to deyThop it and he asked me if I would not urge you to have some independent person investigate the matter and get at the actual facts. I feel sure that if the facts are brought out by some impartial investigator, the Comptroller will order the case dropped. Certainly Buck is the kind of an American citizen for whom I am very glad to go to the front. I like him and admire him and have complete confidence in his integrity. If there is anything you can do to investigate this matter, I would appreciate it very greatly. Yours sincerely, Honorable Henry Morgenthau, Jr. The Secretary of the Treasury Washington, D. C. 91 December 3. 1941. Dear Mr. Ongler: I have your letter of November 28th, and the copies of correspondence exchanged between Mrs. Roosevelt and you. Of course I would have been glad to see you and Mr. NoAmony if there had been anything I could do in the matter about which you wrote. However, as I have written Mrs. Reesevelt, the Treasury no longer has juriediction over the Sub-Treasury Building in New York, that responsibility having been transferred to the Public Buildings Administration of the Federal Works Agency. I have suggested to Mrs. Roosevelt that she may wish to take up the matter with that Agency, and I am return- ing to you the copies of the letters you sent, in case you wish to forward then yourself to the office of the Public Buildings Administration. With cordial regards, Sincerely, (Signed) 3. Morgenthan, is Mr. Eric Gogler, 101 Park Avenue, New York, New York. Enclosures. n.m.c. ERICCUGLER 92 101-PARK AVE NEW-YORK November 28th, 1941 Honorable Henry Morgenthan Secretary of The Treasury Washington, D. C. Dear Mr. Secretary: I am enclosing a letter from Mrs. Roosevelt, along with copies of the notes to her, to which the letter refers. Might it be possible for you to fit in a brief word with Mr. McAneny and myself in Washington at some hour in the near future convenient to you? We could ourselves best come at any hour on Wednesday, Thursday or Friday of next week, though, of course, at any other time that you may suggest. I do hope that you can manage 11,/and/I ap, Very trul: yours, 02-2 Cue day to Encle EG/RF 93 C 0 P Y The White House Washington November 26, 1941 Dear Eric: I gave your letter and the enclosure on Federal Hall to the President. He is all for it and is giving it to Henry Morgenthau. He suggests that you get in touch with Henry. Sincerely, /s/ Eleanor Roosevelt 94 ERIC GUGLER COPY 101 Park Ave New York November 14th, 1941 Miss Malvina Thompson The White House Washington, D. C. Dear Malvina: I am enclosing a letter to Mrs. Roosevelt. I realize how busy she is, nevertheless, I do want to see her - it has been altogether too long. The essence of the matter is this - that Federal Hall, the Sub-Treasury Building, is the birthplace of so many of the great accomplishments that established our government - among them, the Bill of Rights. December 15th, 1941, marks the 150th anniversary of the ratification of the Bill of Rights. There is to be a ceremony there on the anniversary. We should so much have liked to have had the President to be here on this sacred spot rather than in Washington on that day, but he will be addressing both Houses of Congress, so we may have the Chief Justice of the Supreme Court here for an address to take place at the same moment. We would like the President to take this occasion to say that this building shall from now on become a national monument and be given over as a memorial shrine for the public forever. In fact, what would delight me would be if he would indicate to someone that the partitions and desks that now clutter up the big room could be moved out by the 15th of December so the people could walk through the building and get the benefit of the fine dignified shrinelike look that it even now has. Mr. McAneny has fathered the idea of preserving the building and putting it into shape. He has collected pennies, as well as spent from his own money, and we here in New York who care about our heritage are very grateful to him. I think the President would undoubtedly be delighted to do all of this without any question, except that it might not occur to him or come to his notice. My guess is that he would be more than pleased. I wish you would read the attached letter to Mrs. Roosevelt and let me know what you think I ought to do next. With kindest regards, Sincerely, (Signed) Eric COPY 95 Eric Gugler 101 Park Ave. New York Mrs. Franklin D. Roosevelt November 14th, 1941 The White House Washington, D. C. Dear Mrs. Roosevelt: The Sub-Treasury Building, in New York, is going to be restored and become a museum in memory of George Washington, and of the great events which took place on that site. It was the site of the old Federal Hall, first American Capitol under the Constitution; the Stamp Act Congress met there, also the Provincial Assembly and the Congress of the Confederation; the Northwest Ordinance was adop- ted there; on the site, in 1789. Washington was inaugurated, and the Congress, the Cabinet, and the Supreme Court were organized; and Congress adopted the Bill of Rights there. December 15th, 1941. is the 150th anniversary of the ratifica- tion of the Bill of Rights. As you know, in front of the building is one of the greatest and most distinguished portrait statues in America and the interior of the building is handsome. It has been used by the Custom Authorities until lately and the central circular domical room is still all cluttered up with bank screens, counters, etc., and it has been almost impossible to see or appreciate how fine it really is. It should be respectfully restored. Mr. George McAneny has been trying to collect funds and to develop public interest in this very worthy project. Washington's sturdy character so closely associated with New York is to be handsomely and properly emphasized here. It should be valuable for the education of young Americans. We are all trying to help Mr. McAneny in his fine efforts. It is not only our duty as a public service, but it is our pleasure to help. Some time ago I made a model for Mr. McAneny of the existing entrance hall, which is 80 elegant and fine architecturally, that in addition to the historic nature of the site, everyone would agree that it would make a very fitting and proper - and quite sacred - setting for a most important American Washington Memorial, not to be compared in architectural importance with the Washington Monument, but a most worthy counterpart. Now I would love to show this model to Mr. Roosevelt and get him to arrange for the authorisation of enough money to at least put the building back into good condition, but realize, of course, how important the President's time is and how urgent are the matters that lie before him. But I also realize that some times a "change is a rest"; that it might be a diversion to him, that he might think it was entertaining to have Mr. McAneny and me bring the model either to Washington or to Hyde Park for him to look at for a few minutes, but you are the only one to say whether this would be a pleasant and good idea, or whether you should give me an idea of who would be the right one to turn to to help us. I feel that in times of stress like this the memorialisation of Washington's sturdy character and staunch courage, and of those other outstanding figures who made our first Government, is especially timely and appropriate when eyes are clearer and minds more great men. EG/RF adjusted to the understanding of the trials and troubles of the nation's Sincerely (Signed) Eric 96 December 1, 1941 Dear Eleanort The Treasury no longer has jurisdiction over the Sub-Treasury Building in New York, that responsibility having been transferred to the Public Buildings Administration of the Federal Works Agency. Perhaps you will wish to send to that Agency the enclosed letter you sent to me with your note of November 27th. Affectionately, (Signed) Henry Mrs. Franklin D. Roosevolt, The White House. WNT:aja By Sever Service 5:31 n.m.C. 97 THE WHITE HOUSE WASHINGTON November 27, 1941. Dear Henry: I showed this to the President and he said to send it to you. He is all for it. T Affectionately, ERICCUGLER 101-PARK AVE NEW-YORK November 14th, 1941. Mrs. Franklin D. Roosevelt The White House Tashington, D. C. Dear Mrs. Roosevelt: The Sub-Treasury Building, in New York, is going to be restored and become a miseum in memory of George Washington, and of the Teat events which took place on that site. It was the site of the old Federal Hall, first American Capitol under the Constitution: the Stamp Act Congress met there, also the Provincial Assembly and the Congress of the Confederation; the Northwest Ordinance was adop ted there; on the site, in 1789, Washington was inaugurated, and the Congress, the Cabinet, and the Supreme Court were organized; and Congress adopted the Bill of Right there. December 15th, 1941, is the 150th anniversary of the ratification of the Bill of Rights. As you know, in front of the building is one of the greatest and most distinguished portrait statues in America and the interior of the building is handsome. It has been used by the Customs Authorities until lately and the central circular domical room is still all cluttered up with bank screens, counters, etc., and it has been almost impossible to see or appreciate how fine it really is. It should be respectfully restored. Mr. George McAneny has been trying to collect funds and to develop public interest in this very worthy project. Washington's sturdy character so closely associated with New York is to be handsomely and properly emphasized here. It should be valuable for the education of young Americans. We are all trying to help Mr. McAneny in his fine efforts. It is not only our duty as A public service, but it is our pleasure to help. Some time ago I made 3 model for Kr. McAneny of the existing entrance hall, which is so elegant and fine architacturally, that in addition to the historic nature of the site, everyone would agree that it would make a very fitting and proper - and quite sacred - setting for a most important American Washington Memorial, not to be compared in architectural importance with the Washington Monument, but a most worthy counterpart. Now I would love to show this model to Mr. Roosevelt and get him to arrange for the authorization of enough money to at least put the building back into good CODdition, but realize, of course, how important the President's time is and how urgent are the matters that lie before him. But I also realize that some times a "change is a rest"; that it might be a diversion to him, that he might think it was entertaining to have Mr. McAneny and me bring the model either to Washington or to Hyde Park for him to look at for & few minutes, but you are the only one to say whether this would be a pleasant end good idea, or whether you should give me an idea of who would be the right one to turn to to help us. I feel that in times of stress like this the memorialization of Washington's sturdy character and staunch courage, and of those other outstanding figures who made our first Government, is especially timely and appropriate when eyes are clearer and minds more adjusted to the understanding of the trials and troubles of the nation's great men. Sincerely, EG/HF Cue 99 DEC 3 1941 Dear Eleanor: You will be gratified, I know, to learn that the legislation to permit seeing-eye dogs to enter public buildings with their blind masters, which was brought to your attention last July by Herbert F. Gelsler, the blind lawyer from Chicago, has passed both houses of Congress and is now ready for the President's signature. Senator Maloney and Congressman Lanham, were in active charge of the measure. I am delighted that the Treasury Department was able to contribute to the success of this worth while undertaking. Affectionately, (Signed) Henry Mrs. Franklin D. Roosevelt, The White House. LJB:EHF/mp 12/2/41 File to Thompson By Messenger (Secret Service) 4:35 cc. Mrs n.m.c. Morgenthen Treasury Department 100 Division of Monetary Research Date 12/3/41 To: 19 Miss Chauncey Mrs. Morzenthau may be interested in this. MR. WHITE Branch 2058 - Room 214 TREASURY DEPARTMENT 101 INTER OFFICE COMMUNICATION DATE December 3, 1941 TO FROM Mr. White Mr. Hoflich Subject: British Women's War Work and the Alleged Deterrent Effect of the Present Income Tax. A recent article in the London Banker contains the statement that the point has been reached "at which high rates of taxation exert a deterrent on individual output. A particularly flagrant case is the joint assessment of married couples, which removes all incentive for married women to take up jobs in industry at normal wages when any addition to the combined income is subject to taxation at 10s. in the pound. Even though one of our most urgent needs is to attract the greatest possible number of women into industry, this object is entirely defeated by the tax system, and any proposal for separate assessment would certainly be resisted by the Treasury on the ground that we could not 'afford' the resulting loss of revenue. For the sake of minimizing the budget deficit, in other words, war production must be kept down below its potential maximum, even though the only rational reason for collecting revenue at all is to pay for the war." (The Banker, London, Nov., 1941, pp. 96-97.) 102 December 3, 1941. My dear Mr. Green: I read your letter of November 5th with such interest. Unfortunately. it was mislaid and I as sorry, therefore, that my reply is late in reaching you. Please accept my apologies for I an very glad of the opportunity to make clear the views of the Treasury on the specific question you raise. The Treasury has, of course, never regarded the Social Security Program as a source of revenue for the Federal Government, nor have we ever contemplated raising the taxes collected under that program unless the increase were needed to help finance the benefits under that program. I an glad to say that I personally an in agreement with your view that both the old-age and survivors' insurance and unemployment compensation programs should be extended in coverage, and that the creation of a complete Federal system of unemployment compensation is preferable to the Federal-State system of unexploy- ment compensation now in force. Proposals concerning social security and unemployment compensa- tion properly originate, of course, with the Social Security Board and are shaped to fit social needs and not the immediate fiscal program. Nonetheless, the effect upon the fiscal program of any substantial change in the Social Security Program must be considered by the Treasury. Fortunately, from a fiscal point of view, the air- cunstances at present are timely for the extension of the Social Security Program along the lines outlined in your letter. We are now in a period of rising prices, of approaching scarcity of labor, and of rapid absorption of idle capacity in many vital industries. At such a time, the net withdrawal of purchasing power consequent upon an expansion of the Social Security Program during the initial period, is an aid in combating the danger of inflation. I hope ve may have your continued comments and suggestions. Sincerely, (Signed) 8. Morgenthan. Ja. Mr. William Green, President, American Federation of Labor, A. F. of L. Building, Washington, D. C. cc. mr.w hite office file n m c. 103 DRAFT OF SUGGESTED REPLY MSV My dear Mr. Green: In reply to your letter of November 5, 1941, I am glad of the opportunity to make clear the views of the Treasury on the specific question you raise. The Treasury has, of course, never regarded the Social Security Program as a source of revenue for the Federal Government, nor have we ever contemplated raising the taxes collected under that program unless the increase were needed to help finance the benefits under that program. I am glad to say that I personally am in agreement with your view that both the old-age and survivors' insurance and unemployment compensation programs should be extended in coverage, and that the creation of a complete Federal system of unemployment compensation is preferable to the Federal-State system of unemployment compensation now in force. Proposals concerning social security and unemployment compensa- tion properly originate, of course, wi th the Social Security Board and are shaped to fit social needs and not the immediate fiscal program. Nonetheless, the effect upon the fiscal program of any substantial change in the Social Security Program must be considered by the Treasury. Fortunately, from a fiscal point of view, the cir- cumstances at present are timely for the extension of the Social Security Program along the lines outlined in your letter. We are now in a period of rising prices, of approaching scarcity of labor, and of rapid absorption of idle capacity in many vital industries. At such a time, the net withdrawal of purchasing power consequent upon an expansion of the Social Security Program during the initial period, is an aid in combating the danger of inflation. I hope we may have your continued comments and suggestions. Sincerely yours, Secretary of the Treasury. Mr. William Green, President, American Federation of Labor, A.F. of L. Building, Washington, D. C. In 104 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE November 12, 1941 TO Secretary Morgenthau FROM Mr. Barnard not used . I spent some time on Armistice Day speculating as to what to kind of reply might be made to William Green. I don't know your plans on this or whether you have assigned it to someone, but if not, perhaps the attached draft would serve as a start. OVB THE SECRETARY OF THE TREASURY WASHINGTON 105 November 12, 1941 th off onlypuliminary for consideration Mr> William Green, President American Federation of Labor Washington D. C. My dear Mr. Green: In reply to your letter of November 5, 1941, I am glad of the opportunity to state the views of the Treasury on the specific questions you raise; also on the broader matters involved that are of great concern to all of us. The Treasury has as yet formulated no definite recommenda tions to Congress on new taxes. I have urged prompt action in view of the danger of inflation and the great deficit which will occur if additional revenues are not quickly obtained. The Treasury has, of course, given study to a number of possible measures and it is clear, I think, that several different tax plans and adjustments will be necessary to meet the needs. Some will be required for revenue purposes and to secure an equitable distribution of tax burdens, but are not such as will control inflationary tendencies immediately. Others are desirable as soon as possible not only for revenue but especially to guard against inflation. Among the latter possibilities are certain proposals con- cerning social security and unemployment compensation. Proposals concerning these matters properly originate with the Social Security Board and would naturally be determined by social security considerations, and not by the current revenue needs of the government or by regard for the problems of inflation. Thus no proposals on Social Security legislation have been or would be made by the Treasury as a means of taxation for general Treasury purposes. I agree with you that it would be undesirable to impose social security and unemployment compensation taxes except on their merits as insurance premiums. In fact, the Treasury position is quite the reverse of that implied in your letter. It is compelled, for the reasons I shall set forth later, to scrutinize critically every proposal calling for payments by the people and for expenditures for non-defense purposes, from the standpoints both of their effect upon the -2- 106 capacity of the people to pay for defense and of their effect upon prices. Certain possible changes in social security legislation involving increased social security taxes can be endorsed by the Treasury because they would for several years be anti-inflationary in effect. Among these are some which you desire. They would result in more income than outgo during this period, although this would not decrease the government's deficit and would limit the ability of the government to obtain true current revenues by other taxes. Other social security proposals which are justified on broad social grounds could not be endorsed by the Treasury at this time because they would add to the heavy tax burdens of the people without helping finance the government and without antiinflationary advantage. This includes one which you also desire.-? Our views on this matter as well as on the more general question of savings to which you refer, can best be understood by taking account of the truly gigantic financial burden which our defense program involves. I am sure that you are aware of this; but we ourselves find it necessary constantly to keep it before us in its simplest outlines in order that we shall not become confused in thinking about the specific problems and the practical complexities of the situation. In the calendar year 1942 we estimate that the expenditures of the Federal Government will be about $37 billions, of which more than $30 billions will be for defense. These total expenditures amount to about $280 for every man, woman and child in the United States. The income of the people may be for the same period about $100 billions or about $765 for every man, woman and child. Thus, nearly 40% of the income of the people must go to the government either in the form of taxes or savings, leaving only about $485 per individual for expenditures on consumption, for local and state government services, and for such other savings as will be necessary. It is hardly possible to consider these figures without realising that they mean not nominal but real and substantial sacrifices by all the people. Soldiers and sailors, shot and shell, and armaments, are now the prime necessity of this nation and are basic to the welfare of its people; but the people cannot eat shot and shell or wear armaments, nor can those who produce these things be also producing at the same time what we do consume. Roughly, two-thirds of our people must, therefore, carry the load of providing for their own needs and for the other third which is engaged in defense; and the needs of defense materials will restrict the capacity even of this two-thirds to produce as much as they otherwise could. -3- 107 We should not feel sorry for ourselves because of this. We shall still live better than our grandfathers and great-grandfathers. But we should only injure ourselves and restrict our ability to meet these conditions if we did not recognize that they are serious and that they impose upon us heavy duties of conservation and economy. They mean that the two-thirds who must supply them- selves and the other third with civilian goods must tighten their belts, and that the third which is engaged in defense work in all conscience must do the same. What does this situation mean in the language of finance? How shall our defense and civilian production be paid for? The $100 billions of national income for the most part will, of course, be paid in money or its equivalent; but this is only nominal payment, the first stage of real payment. Money is only good for what it will buy. For the great mass of our people it will only buy just two kinds of things - goods that can be used and consumed now, and promises and expectations of money in the future that can buy goods that can be used and consumed then. How much can be bought now and how good are the promises? What can be bought now is limited probably to only 60-odd billions of dollars worth. If all of the balance, some $30-odd billions were covered by increasing the public debt, how good the promises would be would depend upon how much debt there will be. Already the debt is $54 billions and the present authorization by Congress is for $65 billions. This about equals the total pro- duction of civilian consumers' goods for a whole year. Moreover, it must be borne in mind that though debt for the country's protection is necessary, it does not provide the kind of things to any great extent, directly useful in future civilian production or consumption. Such a debt can only mean that we shall tax ourselves later to pay ourselves later. That is why the people will regard an excessive debt as mere make-believe promises to pay; and it is why the debt should be kept within reasonable bounds by the maximum of practicable taxation. Any other policy means deluding ourselves as to the real value of the money we receive today. I - strongly in favor of having the public debt owned by the working people of this country, and have urged it in the efforts to have people buy Savings Bonds. Heretofore, the bulk of the savings have come from individuals receiving the middle and upper incomes, and from corporations. The present income, estate and gift, and profits taxes already have substantially reduced the capacity of such individuals and of corporations to save in the future. Moreover, these taxes will have to be further substantially.increased. We shall, therefore, need inescapably the savings of all the people; and cannot supply the consumers goods which would be demanded if these savings are not made by all the people. 108 But we must remember that such savings will be good only if current taxation is high enough to make the debt reasonable in relation to the wealth of the country and the future capacity of the country to pay the taxes which will make the debt good. Not only the savings of the people whether voluntary or compulsory or through savings banks and insurance companies, but also the Social Security Reserves which are invested in the public debt, all would be endangered and lost if we foolishly declined to tax ourselves heavily now in the false idea that we can have our cake in the future and still eat now more than we can bake. In all of this we must have full regard for post-defense conditions. When defense is over we shall want themaximum purchas- ing power in the hands of the people and as little tax burden as may be. We shall then need also as much saving by individuals as we can secure to restore the full capital equipment of the country, which may be considerably impaired and cannot expand normally under present circumstances. These are all conditions essential to future security of unemployment, and the supply of consumers' goods, and are desired greatly by the people. Our ability to attain these conditions depends on our present unity, forbearance and foresight and on maintaining the credit of the government. Next to defense, to preserve that credit is the first obligation and the first interest of all the people. Surely, to bring up and educate our children with care and expense and sacrifice but in such a way as to burden them with debt and taxes and the disorganization consequent on a bad public credit, is not justice to them, nor good sense for ourselves. Finally, it may be said that the easiest thing to do and the hardest to bear in its consequences is to let either purchasing power excessive for our present civilian production or excessive government deficits lead to substantial inflation. That easy course means pay in bad dollars, constantly rising prices, and impairment of our savings and reserves; and would leave the government and the people in the worst of circumstances to accomplish the restoral of peace-time production and real prosperity and con- timed progress in our national welfare. To avoid these disasters, perhaps greater than the loss of a fleet or of an army, is only initially and technically a problem of the Treasury or of Congress. It is the problem of the whole people of the United States of America and that of organized labor at least as much as that of other groups. And it is a problem which only the people can solve by their understanding, self-restraint, strict economy, and willingness to follow the leadership devoted to the protection of their interests. 109 I hope we may have your continued comments and suggestions and your cooperation in helping to make clear to the people just what it is that we are trying to accomplish in proposing the sacrifices the defense effort calls for. Sincerely yours, Secretary of the Treasury 110 AMERICAN FEDERATION OF LABOR Executive Council WILLIAM copy to each member 11/10/11 TELEPHONE NATIONAL 3870-1-2-3-4 CABLE ADDRESS AFEL. Washington, November 5, 1941 The Honorable Henry Morgenthau, Secretary of the Treasury, Washington, D.C. Dear Secretary Morgenthau: The American Federation of Labor has been an active sponsor of the Social Security Act, urging its enactment in 1935 and proposing far-reaching amendments to broaden its coverage, im- prove its benefit structure, and its financing in the years since it was passed. We have a grave concern that it should be regarded solely as a program for the protection of working men and women and their families against hazards socially created or beyond their individual control which cut off their incomes. We consider the investment of the social security reserves in Federal bonds a wise provision of the law but we would protest vigorously the deliberate conversion of the social security system into primarily a source revenue under the of for the Federal Government by raising the taxes collected unless such increase were needed to finance new benefits program. Knowing your own interest in the welfare of working people, I want to give you the American Federation of Labor's viewpoint on social security and the defense program. I am sure you will give fair consideration to these matters before formulating a new tax proposal to send to Congress. Both the old age and survivors' insurance and unemployment compensation programs are too limited in coverage. There is no valid reason for the continued exclusion from protection of millions of persons, farm and domestic workers, employees of religious, educational and charitable institutions and of various government units, which have no equivalent protective programs, and of smallincome self-employed persons. To bring these persons under the Act 111 Honorable Henry Morgenthau -2- November 5, 1941 would tremendously increase its value, would create a more effective bulwark against depression later, and would add to the reserve funds now available for Federal borrowing without changing the relation between individual taxes paid and benefits expected. The Social Security Act is deficient in its failure to provide any protection against loss of income during illness and disability, temporary and permanent, and its failure to make any payments toward medical and hospital costs which often pauperize workers' families. We cannot have security of wage income unless the hazards of 111 health are provided against. To spread the cost of payments for permanent and temporary disability and for medical and hospital care over millions of insured persons and by small payments over long periods of time will avoid the overwhelming burden of expense illness or accident places on some families suddenly. It is reasonable that workers should share this cost. We believe an increase in the payroll tax paid by employees would be justified to the extent necessary to add these additional protections to the social insurance program. The Federal-State system of unemployment compensation im- mobilizes unnecessarily large reserves in order to make 51 separate systems safe. The benefits payable under the several state laws are uneven in amount and almost all inadequate for their purpose. We urge the creation of a complete Federal system decentralized in administration but with adequate Federal benefit standards and financed from a single pooled fund into which would be paid all social security contributions, We are convinced that the safety of the system could be materially increased and post-defense unemployment more effectively compensated for and reduced if the unemployment compensation and employment services were made Federal programs. Insofar as these changes in the Act would increase the reserves available for Treasury borrowing, we believe the Treasury has a legitimate interest in them. In all cases the fundamental purpose of social security would be preserved, the additional taxes coming from new beneficiaries and from payments for additional forms of protection. We are convinced, however, that to raise payroll taxes on any other basis would be unjustified and would endanger the whole social security program by destroying confidence in the integrity of its purpose and the safety of its funds. Payroll taxes are regressive in effect and can be justified only when they are collected to pay specific benefits to wage earners and their families greater than they could provide for themselves with that money. If the payroll tax on present contributors under the Social Security Act were to be increased out of proportion to increased security for those insured, it would be an unfair general tax, levied on only part of the population. Honorable Henry Morgenthau -3- 112 November 5, 1941 If it 18 the intention of the Treasury to ask Congress for legislation which would reduce consumers' purchasing power now, the American Federation of Labor submits that this should be in the form of a proposal for a supplementary system of dismissal wage or of required savings so designed that every worker would be guaranteed the return of his own contributions at some future date. When the defense emergency is over, unemployment will increase. If contributions were returned at that time they would transfer purchasing power, helping curb inflation now and deflation later. This should be definitely an emergency measure, separate from the Social Security Act, though using its collection and record keeping system if convenient. The funds should go not into the general reserve for social security, but into a separate trust fund from which each contributor would, at the close of the emergency or in specified individual emergencies, draw out at least his own contributions with interest. The fund could be increased, with advantage, of course, if contributions were made also by employers. If the social security tax is raised merely to provide extra funds for the Treasury, workers will suffer a disproportionate share of taxation. A savings system will permit the sale of government bonds now and will build up individual reserves to be used by families when the nation faces depression. The Social Security Act should be amended to increase coverage and benefits, but all amendments to that Act must be made to contribute to its purpose, not to subordinate its social function to that of raising money to be used by the government for unrelated purposes. Sincerely yours, When President American Federation of Labor LMcC 113 December 3, 1941 My dear Mr. Hoover: I have received and read with interest your confidential letters dated November 27th, two dated November 28th, and another dated November 29th. Yours sincerely, (Signed) 1. Morgenthau, Jo. Mr. J. Edgar Hoover, Federal Bureau of Investigation, Department of Justice, Washington, D. C. 12/2/41 Photostatic copies to: 1. Mr. Foley 2. Mr. Pehle 114 115 JOHN EDGAR HOOVER DIRECTOR Federal Burrau of Investigation Hatted States Department of Justice Washington, B. C. November 27, 1941 N PERSONAL AND CONFIDENTIAL BY SPECIAL MESSENGER The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: As of possible interest to you, information has been received from a reliable confidential source that Commander F. Tostain, Acting Chief of Staff, Martinique, reported on March 27, 1941, that it had been found almost impossible to obtain an export license for a collective order for 19,407 metal sheets, placed for the account of various Guadeloupe traders by one Mr. Monroux, Pointe a Pitre. This order was sent to the Newport Rolling Mill, Kentucky, and on December 1, 1940, a credit of $15,069.47 was opened by the Banque de la Guadeloupe in favor of the French American Banking Corporation. Delivery was to be made in January and February, 1941. For the purpose of effecting this, the Director, Minis- try of Finance, Financial Attache to the French Embassy in the United States, was requested by Commander Tostain to contact the Division of Control with a view to obtaining an export license for these goods as soon as possible. Sincerely yours, J E. 2000 116 12/2/41 Photostatic copies sent to: 1. Mr. Foley 2. Mr. Pehle 117 JOHN EDGAR HOOVER DIRECTOR Federal Burrau of Investigation M Mutted States Department of Justice Washington, D. C. November 28, 1941 PERSONAL AND CONFIDENTIAL BY SPECIAL MESSENGER The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: As of possible interest to you, information has been received from a confidential, reliable source that the Argentine Embassy, Washington, D. C., advised on September 5, 1941, that they are now engaged in negotiations with a view to unfreezing the credits of the S.A.I.C.T.F., an Argentine Firm. They are also producing negotiations with a view to having the Banque Francaise Et Italienne removed from the Black List. Sincerely, J. E. 24oover 12/2/41 Photostatic copies sent to: 1. Mr. Foley 2. Mr. Pehle 118 119 JOHN SOGAR HOOVER DIRECTOR Federal Surran of Investigation Natted States Department of Justice Washington, D. C. November 28, 1941 ii PERSONAL AND CONFIDENTIAL BY SPECIAL MESSENGER The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: As of possible interest to you, information has been received from a reliable confidential source that the French Commercial Attache, New York, in March, 1941, advised that the extracts in the enclosed memorandum were addressed to M. Robert Midy, the Professional Group of Manufacturers of Pharmaceutical Products, Vichy. Sincerely yours, I Le. Aloover Enclosure 120 MEMORANDUM November 28, 1941 1. "The Commercial Situation "French products with sales of any importance in the United States are not numerous, and most of them are now manufactured there. The rest, whose individual sales are small but the aggregate of which is fairly considerable, are beginning to be scarce. Representatives and wholesalers endeavour to obtain them from other representatives in the Americas, and do not always succeed. The result in many cases, is a very appreciable increase in the price to the public, which in its turn causes a reduction in sales. "American specialities are on the whole much cheaper than their imported French equivalents, and moreover goods of French origin, especially if bearing an address in the occupied sone, are today regarded with some suspicion on the grounds that they may have fallen into enemy hands. Further, the Jewish sections of the medical profession and of the population in general (and they are many) feel resentment at the measures of race discrimination taken by the Vichy Government." 2. "The Financial Situation "French funds are blocked and I think it improbable that licences would be granted at the present time for the employment of these funds outside the U. S. (e.go to supply other markets in the Americas with raw materials or finished goods or, still less, to pay for organisation and publicity in these markets). "This blocking of funds which has as its origin the aim of preventing appropriation by a third Power and which is therefore in the interests of the French themselves, may be turned to their disadvantage if political events should lead to the seisure of these funds." 3. "Trade Marks "On this matter it is well to remember what happened to the German trade marks which in 1917 were seized and sold for the profit of the American government. One cannot guarantee that developments in the political situation will not cause a similar danger to French trade marks. As a safeguard against this the following measures might be envisaged: (a) The cession of the trade marks for a small sum to an individual or to an American company, or 121 Memorandum Page 2. (b) The granting of a 99 years' license for their exploitation to an individual or to an American company, in return for a small interest on the turnover. "This latter solution would perhaps be the one most in harmony with the French internal laws and with the armistice conventions. "Moreover, one or other of these solutions might prove to be a protection against another danger which is foreseen here (but to what degree it is real I do not know), vis., the possibility of the French being compelled to code their trade marks to a foreign 'occupying' Power. "Both the cession of the trade marks and the granting of a license would necessitate the granting of powers of attorney to a person resident in America, the most suitable text for this, in the opinion of an American adviser, being that used in the warrant sent by M. L'Hopitalier to M. Sterling. "These powers could be profitably extended to all the countries of the American continent, in case measures similar to those envisaged here should be taken in any of these States However they should not, in my opinion, be utilised unless absolutely necessary for the transfers could not fail to provoke complications." 4. "Trade Marks in Canada . The trade marks in Canada of French laboratories situated in occupied sone have passed into the hands of the Sequestrator - the Secretary of State, Ottawa - and are subject to the regulations governing Trading with the Enemy (1939). It would thus be justifiable to code these trade marks to an American citisen in order to ensure their protection." It was further stated: the (a) "MM. Alfredo Herbruger Jr. & Co., Apartado Postal No. 210, Quatemals City, wish to know whether Dienol and Gaiarsine are manufactured on the American continent, in order that they may purchase stocks. (b) MM. E. Fongers & Co., Inc., 75 Varick Street, New York City, wish to receive particulars of the processes by which Tamar Indian (Darasse) and Lancelot (Lancelot) are manufactured, in order to supply their Specifique market. (c) The Anglo-French Laboratories, 75 Varick Street, New York City, have commenced the local manufacture of Corbiere products, but would be glad to receive any practical details of the preparation of these products in order to check their method of manufacture." 122 12/2/41 Photostatic copies to: 1. Mr. Foley 2. Mr. Pehle JOHN EDGAR HOOVER 123 DIRECTOR Federal Burrau of Investigation United States Department of Justice IT Washington, D. C. November 29, 1941 PE SONAL AND CONFIDENTIAL BY SPECIAL MESSENGER The Honorable The Secretary of the Treasury Lashington, D. C. My dear Mr. Secretary: is of possible interest to you, information has been received from is reliable confidential source that on April 25, 1941, George Helouis, French Minister at Bogots, Colombia, commented as follows to the Ministry of Foreign Affairs, Vichy, concerning the Creesing of French commercial credits in Colombia and French Exports in 1940 and 1941: "This resolution, in fact, does not alter the position of the French commercial credits coming under the first category. I have informed your Excellency since July, 1940, the Colombian Exchenge Control Office has systematically refused to authorize the tr nofer of these credits to Frence, even to the unoccuried zone, on the pretext that the remittances would run the risk of not reaching their rightful owners. lie note that this official ae sure simply, somewhat late in the day, confirms the arbitrary action of the Colombian Exchange Control Office. "It is none the less certain that the total amount of French commercial credits in Colombie are virtually frozen, whether as 6 result of the moratorium regulation of resolution 100, or by the terms of resolution 101, of February and March, respectively. "/ t though, for the reasons given in my letter of Februnny 1, I 00 not possess the exact figures corresponding to the French credits which come under resolution 101, I think that the Emount the some must undoubtedly be considerable - some 5 or 6 millionoffrancs. 124 The Secretary of the Treasury Page 2. "In fact France has supplied Colombian importers, during the last quarter of 1940 and the first quarter of 1941, with large cuantities of the type of goods that are classified in the 1st category - raw material and commodities. Among these are looms for weaving, silk and wool yarn, tyres, wines and liqueurs, books, and particularly pharmaceutical products. "To these credits the sum of 722,766 francs for fertilizer supplied by the Soc. Commerciale Des Potasses D'Alsace, Mulhouse, at present in Montlucon, must be added, the payment of which in transferable currency is equally gravely compromised. "Since the Colombian Exchange Control refuses to authorize the transfer of remittances to France unless they are given proof that these will reach the banks or creditors concerned safely, would it not be possible to obtain an official testimony to this effect from the French authorities ? "At the moment, when it seems that our book trade with Colombia is likely to be resumed, it is to be feared the French editors will not be prepared to carry out further orders while the matter of their credits, payable in transferable currency but at present blocked in Stabilisation Funds, remains unsettled. The same question arises for our future deliveries of other goods and pharmaceutical specialities." Sincerely yours, J Ee. 24oover 125 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE TO December 3, 1941 Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL Mr. Cameron telephoned from the Federal Reserve Bank at New York at 5:45 this evening to let me know that Mr. Kitadai, representative of the Bank of Japan in New York, had told Mr. Cemeron today that, under instructions from Japan, he is closing tomorrow or next day the agency of the Bank of Japan in New York, Mr. Kitadai will leave New York on December 10 and will probably sail from a west coast port on December 16 for Japan. carp Dictated this at 7,05 P.M. to White House operator, when Ilearned not Pos. could that steak in phone unit after suffer mih 126 DEC 3 1941 My dear Mr. President: I am enclosing report on our exports to some selected countries during the week ending November 22, 1941. Faithfully, (Stemed) W. Morgenthes. Jr. Secretary of the Treasury The President, The White House. Enclosures 35 Sives Service x35 HDW.moh 12/2/41 c c. White office n. m. C. Bet to Seeps office 127 DEC 3 1941 My dear m. Secretary: I an enclosing copy of report on our exports to some selected countries during the week ending November 22, 1941. Sincerely yours, (Stemed) H. Morgenthan. Jr. Secretary of the Treasury the Henerable the Secretary of state, Washington, D. c. Enclosures By Messenger Steen 4/00 cc. White offer 12/2/51 Ret to Secio office 128 November 28, 1941 Exports to Russia, China, Burna, Hong Kong, Japan, France and other blocked countries, as reported to the Treasury Department during week ending November 22, 1941. 1. Exports to Russia Exports to Russia as reported to the Treasury during the week ending November 22, 1941 amounted to approximately $3,600,000 for a total of $52,409,000 since July 28, 1941. Motor trucks and chassis constituted more than of the total exports during the week under review. (See one-third Appendix C.) 2. Exports to China, Burma and Hong Kong Exporte to Free China were valued at about $1,200,000 of which aircraft parts and motor trucks and chassis were the principal items. (See Appendix D.) Exports to Occupied China were higher than for any single week since October 11, 1941, amounting to over $470,000. (See Appendix E.) Exports to Burma totalled over $1,000,000 and motor trucks nd chassis and metallie eartridges accounted for about 85% of the total. A large percentage of these exports are probably destined for Free China. (See Appendix F.) Exports to Hong Kong amounted to $600,000. (See Appendix G.) 3. Exports to Japan Exports to Japan were negligible during the week under review. Japan, however, might be the ultimate destination of come of the exports to Occupied China and Hong Kong (via Occupied China). 4. Exports to France No exports to France were reported during the week ending November 22, 1941. 5. Exports to other blocked countries Exports to other blocked countries are given in Appendix A. STRICTED CONFIDENTIAL SUMMARY OF UNITED STATES DOMESTIC EXPORTS TO SELECTED COUNTRIES AS REPORTED TO THE TREASURY DEPARTMENT FROM EXPORT DECLARATIONS RECEIVED 129 DURING THE PERIOD INDICATED 1 July 26 to November 22, 1941 (In thousands of dollars) July as to Week ended me U.S.S.R. Occupied China Free China 15 Week ended Member 22 Total Deneatta 845,803 # 2,677 8 3,581 8 52,062 9,704 195 466 10,403 17,883 2,851 1,228 21,962 s/ 1,870 1,022 5,354 Japan 1,870 a/ Seras V 4,245 France W - se - 6 6 Decupied France - 2 a Free France Spain SwitserLand Soudon French Indechine of - - of 1,733 482 3,965 920 133 4,608 6,092 2,478 132 9,502 303 2 Treasury Department, Division of Monetary Research 1 - 2,226 305 November 26, 1941 V Many of the expert declarations are received with a lag of several days or more. Therefore this compilation dees not accurately represent the actual shipment of a particular week. The longer the period covered, the closer will these figures come to Department of Commerce revised figures. 2/ of this total $1,864 thousand was reported from July 28 to August 23, inclusive, and shipped prior to freening orders. Deneatic experts from August 23 through week enting November Semonted to 85,905. V Free September 11, 1941 to date - It is pressured that a large persentage of material listed here, consigned to Desme, is destined for Free Okine. V Includes both occupied and Free France through week ending Ostober 40 1941. Occupied and Free France separated thereafter. V Less than 8500. / 11/26/82 STRICTLY CONFIDENTIAL APPENDIX B Exports from the U.S. to China, Burna, Hong Kong, Japan, and U.S.S.R. as reported to the Treasury Department, July 28, 1941 - November 22, 1941 (Thousands of Dollars) 1 Exports to China Total To Japanese To Chinese Exports Exports Exports Exports controlled controlled to to ports July 28 - Aug. 2 Aug. 4 - Aug. 2 Aug. 11 - Aug. 16 Aug. is - Aug. 23 Aug. 25 - Aug. 30 Sept. 2 - Sept. 6 Sept. s - Sept.13 Sept.15 - Sept.20 Sept.22 - Sept.27 Sept.29 - Oct. 4 Oet. 6 - Oct. 11 Oet. 13 - Oct. 18 Oct. 20 - Oct. 25 Oct. 27 - Nov. 1 Nov. 3 - Nov. 8 Nev. 10 - Nov. 15 Nov. 17 - Nov, 22 Total 937 2,794 1,278 1,352 736 897 3,038 3.978 462 1,305 5,864 272 668 5,210 1,836 3,009 1,701 35,337 ports 542 2,794 969 1,350 735 693 757 156 352 80 Burma 3 to Hong Kong 395 654 963 235 234 742 634 456 389 810 297 309 2 1 204 2,281 2/ 3,822 110 449 684 Japan U.S.S.R. 1,657 4,523 159 35 - 269 584 403 1,243 1,021 10,879 24,458 4,237 as 2,333 - 323 - 624 283 303 - 600 - 10,304 752 - 5 342 2,735 1,023 4,280 5,217 - - 58 6 - 1,233 4.772 1,672 2,851 1,228 986 - 1,157 5 1,869 222 42 - 1,225 5,312 552 267 399 438 164 158 473 to 6,845 1,924 5,623 4,484 4,552 2,677 3,581 52,409 y These figures are in part taken from copies of shipping manifests. 2/ Figures for to exports to FreeforChina presuned be destined Free during China. these weeks include exports to Rangoon which are 3/ It is presumed that a large percentage of exports to Burna are destined for Free China. Treasury Department, Division of Monetary Research December 2, 1941 131 APPENDIX c Principal Exporte from U.S. to U.S.S.R. as reported to the Treasury Department during the week ending November 22, 1941 (Thousands of Dollars) TOTAL EXPORTS $ 3,581 Principal Items: Motor trucks and chassis Military tanks and parts Landplanes, powered Refined copper Gasoline Brass and bronze plates and sheets Non-rotating welding sets Lathes Auto replacement parts Men's boots and choes 1,382 432 299 274 154 171 121 109 108 72 STRICTLY CONFIDENTIAL Treasury Department,Division of Monetary Research November 29,1941 132 APPENDIX D Principal Exports from U.S. to Free Chima, as reported to the Treasury Department during the week ending November 22, 1943 (Thousands of Dollars) TOTAL EXPORTS TO FREE CHINA e 1,228 Principal Items: Aircraft parts, n.e.e. Motor trucks and obgests Diesel enginee Steel bare Road anchinery and parts Insulated copper wire Tim plate and taggers sim Tires and tubes Aircraft engines Well and refining machinery 27 BE appearance STRICTLY CONFIDENTIAL Hampy BAVABOR os is 19.2 133 APPENDIX E Principal Exports fres U.S. to Occupied China as reported to the Treasury Department during the week ending November 22, 1941 TOTAL EXPORTS TO OCCUPIED CHINA e 473 Principal Items: Wheat flour 44 Hope Medicinal preparations Printing paper 35 Leather Milk Other paper and paper products Aute replacement parts STREET if STRICTLY CONFIDENTIAL treasury Separtment, Division of Hono tax Masser December 2,1941 134 APPENDIX F Principal Experts from U.S. to Burna as reported to the treasury Department during week ending November 22, 1941 (Thousands of Dollars) TOTAL EXPORTS e 1,021 Principal Items: Motor trucks and chaseis Metallic eartridges Steel sheets Lubricating oils 38 Well and refining machinery Tin plate and taggers sin Metallie containers Tires and tubes 655 202 28 14 14 11 10 STRICTLY CONFIDENTIAL Peasury Department, Division or Monetary Masseroll December 2, 1942 135 APPENDIX e Principal Exports from U.S. to Hong Kong as reported to the treasury Department during the week ending November 22, 1941 (Thousands of Dollars) TOTAL EXPORTS s 600 Principal Items: Artificial leather, braces, garters, belts and suspenders Tires and innor tubes Medicinal and pharmacoutical preparations Motor trucks Printing paper Miscellaneous office supplies 212 38 as 22 Gopper manufactures 19 18 17 13 13 11 Commodities Milk and cream exported for relief or charity 11 Ginsong Chemical specialties Automobile parts for replacement Fruits and preparations 11 10 STRICTLY CONFIDENTIAL Treasury Department, Livision or Honotary Research December E, 194X Isr/efe 12/2/41 TREASURY DEPARTMENT 136 INTER OFFICE COMMUNICATION DATE December 3, 1941 TO FROM Secretary Morgenthau Mr. Kamarck Subject: Summary, British Estimate of Axis 011 Production 1. Up to July 1, 1941, German oil reserves of 5,000,000 - 5,500,000 tons did not have to be touched. Consumption needs being just met by production, imports and captures. 2. From July 1, 1941 to November 1, consumption was 30 percent or 400,000 tons a month in excess of production. During this period, stocks therefore were depleted by 1,600,000 tons. Since 1,400,000 tons of the oil reserves are always immobilized in process and in transit, net available reserves on November 1 amounted to 2,000,000 - 2,500,000 tons (not quite two months consumption). 3. It is believed that the axis can meet the excess consumption by military or further civil saving, by increased alcohol and synthetic oil production, and by exploitation of the Russian Polish oil fields. 4. The two Caucasus oil fields south of Rostov produce 5,000,000 tons a year. If destroyed, the Germans are not likely to obtain more than 600,000 tons of oil in the first six months. COORDINATOR OF INFORMATION WASHINGTON, D. C. November 30, 1941 Honorable Henry Morgenthau The Secretary of the Treasury Washington, D. C. Dear Henry: Attached is a British estimate on the enemy oil position contained in a report now under preparation by British experts. Sincerely, Bill William J. Donovan 137 During period September 1st, 1939 to July 1st, 1941, consumption in Axis Europe believed almost exactly equal to intake, including produc- tion, imports and loot. Therefore, Axis Europe stocks on July 1st, 1941 believed equal to Greater Germany stocks on September 1st, 1939, or between five million tons and five million, five hundred thousand tons. Estimated about one million, four hundred thousand tons always immobilized in process and in transit. Estimated current production totalled eighteen million, two hundred thousand tons and consumption twenty-five million tons, offset during twenty-two months period by capture of six million, eight hundred thousand tons. Estimated production four months JulyOctober four million, six hundred thousand tons, consumption six million, two hundred thousand tons. 138 139 Therefore, estimated stocks November 1st, three million, four hundred thousand to three million, nine hundred thousand tons, of which two million to two million, five hundred thousand tons available. Excess consumption of four hundred thousand tons monthly might be met by:- (a) Army saving estimated possible if static front in Russia at three hundred thousand tons, or i two hundred thousand tons if in fact front active. (b) Increased use of alcohol producer produce or other alternatives, increased synthetic production, exploitation of Russian Poland fields, curtailment of local consumption, etc. say two hundred thousand tons. Caucasus oil fields if not destroyed would of course solve problem. First objective Maikop and Groany fields estimated current production 140 five million tons annually. If fields destroyed unlikely obtain more than six hundred thousand tons in first six months of occupation. If refineries destroyed use would be deferred until transport available to Europe. SECRET copy 22 The Problem of GERMAN OCCUPATION OF NORTHWEST AFRICA OBJECTIVES AND COSTS December 3, 1941 Coordinator of Information 141 142 The dismissal of Weygand and the suspension of the Economic Accord between the United States and North Africa have necessitated slight revisions in the original memorandum of November 12, 1941. The most important changes apply to Part I, B: Economic Objectives (reconsideration of the importance of cobalt, molybdenum, and olive oil) and Part IV: Timing. 143 SECRET -1The Problem of GERMAN OCCUPATION OF NORTHWEST AFRICA OBJECTIVES AND COSTS Summary and Conclusion I. Objectives The positive military advantages to Germany of occupying Northwest Africa are considerable: first, in connection with the Mediterranean campaign; second, with respect to the South Atlantic counter-blockade; third. and less urgently, with respect to long run exploitation of areas bordering on the South Atlantic. Equally, if not more important, would be the negative advantage of denying access to an important European flank and Mediterraneen rear position. Economically the advantages of occupation are at best slight in the short run, problematical in the long run. It should be noted, however, that even small incre- nents to the present flow of North African cobalt and nolybdenum are likely to be significant in terms of the present status of German mineral supply. Increases in the supply of olive oil would have less importance in the short run, since such increases would be offset by a probable decrease of peanut oil shipments from Dakar owing to Allied action in that region. Moreover, occupation would have the important negative advantage to Germany of preserving a considerable leak in the Allied blocktade. Politically, occupation would remove the last remaining important bergaining levers of France and Spain. There would be, for them, no real alternatives to full collaboration. Further, occupation might be the basis for significant strengthening of the morale of Italy. Negatively, occupation would sorve to insulate the politically vulnerablo peoples of Southorn Europe from Allied influence. II. Costs Military advice is to the effect that an action by Germany against Northwest Africa would tako the form of a pincer movement through Spain and Tunisia. It is most unlikely that the Germans will move through Spain without Spanish collaboration or acquioscence. The force mobilized by the Germans would be of 2 sizo capable of overcoming - ii - SECRE 144 full French resistance in Northwest Africa, whether or not that resistance is, in fact, expected. On these assueptions it is calculated that occupation would require roughly from nine to fourteen divisions and sufficient planes to achieve air superiority. The transport, landing, and subsequent supply of the required force, against the air and naval resistance available to the British and French in this theater would be a difficult but not insurmountable problem for Germany; this assumes Spanish collaboration or acquiescence and the maintenance of the existing supply facilities from Italian and Greek ports across the central Mediterranean. The net political and economic costs of a campaign against Northwest Africa will vary considerably, depending upon the decision taken by Vichy with respect to collabo- ration. Other costs would include the loss of entrepot supplies through Spain, Portugal, and the Canaries; the probable necessity of economic and territorial compensation to Spain and Spanish Morocco; the burden of occupying French Morocco, Tunis, and Algeria; and the cost of furnishing the goods not supplied by the country. In addition, Germany must reckon with possible Allied occupation of the Azores and Cape Verde Islands; probable strengthening effect on American morale and unity, caused by German bases at Casablanca and in the Canaries. III. Final Conclusion The military and political advantages of occupying Northwest Africa seem to outweigh the probable and even the maximum costs to Germany. IV. Timing is The timing of E German move into Northwest Africa dependent largely on the success or failure of the prosont British offensive in Libya. The need of Tunisian ports, as supply bases for the Axis forces in Libya, might precipitato Gorman military action, if these ports are not yielded voluntarily. A decisive British victory would endanger the potential control of the Germans over all of Northwost Africa. A British failure in the present campaign would make the Northwost African situation less urgent to the Germans; but it is unlikely that they will broak off the chain of actions bogun with the dismissal of Weygand until at least key strategic points in Northwest Africa have boon occupied by German troops. 145 SECRET TABLE OF CONTENTS Page I. Objectives 1-6 A. Military Objectives 1 B. Economic Objectives 3 C. Political Objectives 4 Conclusion 5 II. Costs A. Military Costs 7-14 1. Troops and Equipment 7 2. Transport and Supply Conclusion (Military) B. Probable Political and Economic Costs 1. France (a) Vichy (b) French North Africa (c) The French Navy Conclusion (French) 2. Spain Conclusion (Spanish) 9 10 10 10 12 12 12 13 14 3. French Morocco 14 Conclusion (Political and Economic) 15 C. Disadvantages based upon Allied Reaction III. Final Conclusion IV. Timing Appendix on West Africa List of Supporting Studies 15 15 15-18 19-22 23 SECRET 146 -1The Problem of GERMAN OCCUPATION OF NORTHWEST AFRICA OBJECTIVES AND COSTS I. Objectives A. Military Objectives Occupation by Germany of Northwest Africa relates to four sections of the present war: the campaign against Britain in the Mediterranean; the campaign against Russia in the east; the counter-blockade against British shipping in the South Atlantic; the campaign for commercial and perhaps military power in the Western hemisphere and in West, Southwest, and South Africa. 1. Occupation of Northwest Africa would further the German campaign in the Mediterranean: (a) by providing a secondary defense position in case of a British victory in Libya; (b) by opening important new supply ports for Axis troops in Libya; (c) by completely closing the Mediterranean as a supply route to the British armies of the Middle East; (d) by neutralizing Gibraltar as a naval base and opening the Western Mediterranean to Axis commercial shipping; (e) by closing an exposed -- SECRET 147 rear position and eliminating the possibility of an Allied pincer movement in North Africa. 2. The Russian campaign affects German North- west African strategy in two ways: (a) No voluntary move against Northwest Africa can be made if, during the coming months, the demands of the Russian War make the mobiliza- tion of a sufficient German striking force impossible; (b) If the Russian war is expected to continue on a large scale into 1942, it would be to the German advantage to dony the Northwest African coast to the Allies, as a potential base for attack on Southern Europe. 3. Occupation of Northwost Africa would further the countor-blockado in the South Atlantic: (a) by providing submarine bases at Casablanca and elsewhere on the coast; (b) by providing abundant facilities for land-based air attack on shipping; (c) by providing control of the Canaries, as a base within protective rango of shore-based circraft. 4. Occupation of Northwest Africa would be the first and perhaps decisive stop in the long run German gcopolitical program for attaining commercial and political hogemony in Latin -3- SECRET 148 America, West, Southwest, and South Africa. B. Economic Objectives Pursuant to the terms of the Armistice Agreement, the strategic resources of Northwest Africa are now virtually under German control. Subsequent negotiation and maneuver have given Germany more direct control, especially with respect to olive oil, wheat, phosphates, molybdenum, cobalt, manganese, and the negligible native petroleum output. At the present time Northwest Africa is the decisive source of continental supply for olive oil, phosphates, and cobalt--all extremely scarce. Molybdenum and manganese resources are of considerable importance. The flow of Northwest African goods after occupation, as opposed to the present flow, will be determined by the following considerations: 1. The acquisition of any stock of cobalt, molybdenum, and other minerals which might have been denied to Germany by French polit- ical resistance. 2. The extent to which Germany will invest manufactured goods to regenerate the com- mercial, transport, agricultural, and mining facilities of North Africa. 3. The extent to which increased shipping 149 -4- SECRET facilities will be made available to the Northwest African-South European routes. 4. The extent to which technicians and capital will be invested to discover and exploit suspected new mineral resources. 5. The extent to which present leaks (hoarding, non-European exports, black bourse operations, etc.) will be stopped. Negatively, occupation would forestall the loss of very considerable agricultural and mineral supplies now flowing from Northwest Africa to the European continent. This loss would presumably follow upon a possible Allied occupation. C. Political Objectives. Successful occupation by Germany of North- west Africa would achieve the following political objectives, favorable to the Axis effort: 1. The belief in ultimate Axis victory would be spread further throughout the Moslom world. 2. An end to the quasi-independent French state in Northwest Africa would remove an important residual French hope and bargaining lever; moreover, all of southern Europe would be forced into greater dependence on Germany, and, in the long run, probably into greater collaboration with Germany. 150 -5- SECRET 3. The elimination of the possibility of Allied occupation of Northwest Africa would forestall a potentially serious inroad on the morale of the New Order; for Allied occupation would / create serious difficulties for Germany within France, Spain, and Portugal; and might cause a complete collapse of the Fascist regime within Italy. 4. The possible gift of Tunisia to Italy would significantly strengthen Italian morale. 5. German occupation of Northwest Africa would seriously affect the disposition of Latin America; through the full incorporation of Spain and Portugal in the New Order; through German occupation of African ports and air bases; through the acceptance of a strategic set-back by the Allies. CONCLUSIONS: The positive military advantages to Germany of occupying Northwest Africa are very con- siderable: first, in connection with the Mediterranean campaign; second, with respect to the South Atlantic counter-blockade; third, and less urgently, with respect to long run exploitation of areas bordering on the South Atlantic. Equally, if not more important, would be the negative advantage of denying access to an important European flank and Mediterranean rear position. Economically the advantages of occupation are at best slight in the short run, problematical in the long run. The maximum increment to 151 -6- SECRET occupied Europe of Northwest African supplies cannot be regarded as a significant factor in the German decision. Occupation would, however, have the important negative advantage of preserving a considerable leak in the Allied blockade. Politically, the occupation would narrow the alternatives to full collaboration which are now available to France, Italy, Spain, and Portugal; in addition, occupation might be the basis for a significant strengthening of the morale of Italy. 7> SECRET 152 II. Costs The disadvantages of and obstaclos to a German occupation of Northwost Africa are grouped as follows: (a) military costs; (b) probable political and economic costs; (c) disadvantages based on Allied roaction. A. Military Costs 1. Troops and Equipment Estimates of Gorman force required to occupy Northwest Africa vary with the degree of resistance assumed. The maximum opposing force is the following: (a) Spain - 500,000 to 550,000 troops (of which 194,000 have beon reported in Morocco and 55,000 in the Canaries). 6 cruisors, 18 destroyers, 5 submarines 400 first line planes (b) Portugal - 50,000 troops 3 cruisers, 10 destroyers, 3 submarines 150 planos (c) France - 86,000 troops in unoccupied France 80,000 in North Africa 2 battloships, 1 aircraft carrier, 11 cruisers, 25 flotilla lenders, 28 destroyers, 55 submarines (also damaged Richeliou, Dunkorque, partially complete Joan Bart) in European and Northwest African waters. 312 planes in unoccupied France 371 planes in North Africa. 153 There is, in addition, the British naval, land, and air force based on Gibraltar and Malta. Under no circumstance foreseeable can it be assumed that the full force of this array will be thrown against a German attack. The Spanish and Portuguese metropolitan forces are, by most observers, expected to be passive. The Spanish colonial force, under the most likely conditions, must be counted a minor net addition to the German strength. Most estimates assume full, but in- effective, resistance by the British force at Gibraltar; full or partial resistance by the French force in Northwest Africa. Even if such resistance does not occur, it seems likely that the Germans will mobilize a force of occupation fully capable of dealing with it. On this basis it is calculated that the occupation of Northwest Africa will require nine to fourteen divisions with a balanced air force suf- ficient to achieve air superiority, operating from Italian, Libyan, Spanish, and later, Spanish-Moroccan bases. This campaign, according to military advice, will take the form of a pincer movement through Spain and Tunisia with the troops and planes about equally divided between the two arms of the -9- SECRET 154 pincer.1 A British ostimate on the length of time this operation would take calculates that about nine wooks would suffice. This assumos, however, full French resistance in Northwest Africa. 2. Transport and Supply. The problom of transport and supply consti- tutes a difficult but not insurmountable problem to the Germans. (a) Assuming full French resistance in Tunisia, it is calculated by the British that a month would be required to soize Tunisian ports, land, and concentrate five divisions. Adequate shipping and European ports of om- barkation are available for this operation. (b) Assuming Spanish acquiescence in Europe and Africa, it is calculated by the British that fully six weeks would be required to move five divisions from the Spanish-French frontier to consolidated positions in Spanish Morocco. Motor-road, railway, tanker, and ship transport facilities, though neither first class nor 1. In case of Spanish resistance a British estimate states that fourteen German divisions would be required for the Spanish pincer. - 10 - SECRET 155 2 abundant, are available for this operation. CONCLUSION (Military): Assuming Spanish collaboration and full resistance by the French in North Africa, the occupation would require from nino to fourteen divisions, and sufficient planes to achieve air superiority. Assuming Spanish collaboration or acquioscence, and the mainten- ance of existing supply facilities in the Central Mediterranean, the transport and landing of the required force against the naval and air resistance available to the British and the North African French in this theater and the subsequent supply of that force would be a difficult but not insurmountable problem for Germany. B. Probable Political and Economic Costs. 1. France If German diplomacy were to secure the full collaboration of Vichy and the Northwest African administration, the cost of occupation would consist merely of the diversion of the occupying force. Occupation would be almost immediately undertaken under these circumstances. (a) Vichy If Vichy refused to collaborate or submit politically to a German occupation of Northwest Africa, total occupation 2. It is universally assumed that Gibraltar would be by-passed in the occupation of Northwest Africa and rendered useless as a naval base by artillery and air attack. The reduction of Gibraltar as a stronghold would be a lengthy and costly undertaking, to be launched by the Germans and Spanish at a later date, if at all. - 11 - SECRET 156 of France would probably follow. This would croate the following difficultios for Gormany: (1) An enlarged occupation force and enlarged administrative respon- sibilities, over an increasingly restless population. (2) The failure of the Now Order in France would be demonstrated to occupied Europe. (3) French North and West Africa and the French navy might be free to pursue an independent policy. To forestall this situation the Germans could bargain powerfully with: (a) a peace offer (b) the French prisoners now hold by Germany (c) the political aspirations of Vichy collaborationists (d) an offer of increased supply of food and of manufactured goods necessary for a higher standard of living (c) further reduction of occupation costs. Granted the strength of those bargaining powers Petain and the anti-collaborationists might accept the consequences SECRET 157 - 12 of rofuer1 if they know that the Allios woro propered to sond a ducisivo forco to Northwost Africa; and if they know that the Fronch nevy would oithor assist the Allios, or at loast not collaborato with Gormany. (b) Frunch North Africa The renoval of Weygand has roducod sharply the possibility of a unified, organized resistance to the Gormans in North Africa. The only condition under which some of the North African forcos might now rosist is a docisivo Allied victory, In this case many Frenchnen might profer to fight with the British rather than with the Gormans, (c) The French Nevy It soons unlikely that the present Fronch Neval Comand would order collab- oration with the British. The major condition under which it would order collaboration with Gormany is the cer- tainty of ultimate Gornan victory. CONCLUSION (French): If the Gernans induce the Fronch to collaborate, the political and economic costs will bc negligible. If the Gernans cannot induco the French to SECRET 158 - 13 collaborate, the costs would be those listed above under the difficulties of full occupation of metropolitan France, 2. Spain It may be assumed that Spain and Portugal will submit to, if not collaborate with, a German operation against Northwest Africa. 3 There are, nevertheless, the following irreducible costs to Germany of passage through Spain: (a) Loss of Spain and Portugal as financial agents and entrepots in Atlantic trade; (b) Loss of petroleum products now stated to be flowing to the Canaries for use of German submarines; (c) Loss of Lisbon as an observation and espionage center; (d) Necessity to occupy and police minimal territory along the supply line and on the west flank (Portugal); (e) Indirect loss consequent to shutting off Spain's current imports chiefly 3 There are reports at present that the Franco regime may even invite German occupation, in order to avoid alleged inpending disorders over the Spanish food shortage. SECRET - 14 from Latin America and Britain, 4 If Germany should occupy Spanish Morocco, the loss of current imports would have even more severe economic consequences than in metropolitan Spain. CONCLUSIONS (Spanish): All available evidence points to Spanish collaboration or acquiescence in a Gorman move against Northwest Africa. There are, nevertheless, the considorable costs to Germany listed above. And although these are considerable, they cannot be ro- garded as costs sufficient to deter a Gor- man drive. 3. French Morocco, Assuming German victory in French North- west Africa certain minor costs would follow: (a) the management of a widely dispersed population; (b) the necessity for importing all manufactured supplius and pctroloum products for the occupying force; (c) the nocessity of kooping in repair North African economy, partially revived lately by imports from America. 4 To shut off those imports would worson an alroady dos- perate situation in Spain. In order to preserve the form of Falangist Now Order the Gormans would probably offer some combination of food and notably oil supplies as woll as promises of territory. The alternative would probably be the disintegration of the present Spanish regime, with damaging reporcussions in Europe and South America, 159 SECRET 160 - 15 CONCLUSIONS (Political and Economic): The not political and economic costs consequent to a campaign against Northwest Africa are those dependent upon Vichy's decision; the loss of entrepot supplies through Spain, Portugal, and the Canaries; the probable necessity of economic and territorial compensation to Spain and Spanish Morocco; the burden of occupying French Morocco, Tunis, and Algeria; and the cost of furnishing the goods not supplied by the country. C. Disadvantages Based upon Allied Reaction 1. Possiblo Allied occupation of the Azores and Cape Verde Islands. 2. Probablo strengthening effect on American morale, unity, and action caused by Gorman bases at Casablance and in the Cancries. III. Final Conclusion. The military and political advantages of occupying Northwest Africa far outweigh the probable and ovon the maximum costs. IV. Tining. The timing of C Gernan move into Northwest Africa is dopendent largely on the success or failure of the present British offensive in Libya, The need of Tunisian ports, as supply basos for the Axis forces in Libyn, might procipitate German military action, if these ports are not yielded voluntarily. A decisive British victory would ondanger the potential control of the Gormans over all of Northwest Africa. A British failure in the present campaign would make the Northwost African situation less urgent to SECRET 161 - 16 - the Germans; but it is unlikely that they will break off the chain of actions bogun with the dismissal of Weygand until at loast key strategic points, in Northwest Africa, have been occupied by Gorman troops. A, The following strategic factors argue that German Action against Northwest Africa may como in the near futuro. 1. The inadequacies of the Libyan ports to supply the Axis forces sufficiently for a lengthy campaign. This inadequacy, caused to a large degree by recent Allied air and sea actions, might necessitate the occupation of Tunisian ports, with or without French permission. 2. A decisive British victory would endanger the actual and potential control of the Gornans over all of Northwest Africa, and consequently force the Germans to undertake a campaign which they had hoped to postpone at the present time, 3. The possibility of a winter lull in the campaign in Russia would permit the liberation of the necessary German forces. 4. The increased productivity of war industries in the United States and the increased naval activity in the North Atlantic have the effect of lightening the patrol dutics of the British 162 - 17 - SECRET navy, increasing the volune of American delivorios to Britain, and possibly releasing British tonnage. This may increase German fear of the Allios anticipating the Gorman occupation of Northwest Africa. B. The following strategic factors argue that Gornan action against Northwost Africa may be delayed. 1. Gorman commitments in Russia, the Middlo East, and Libya: According to military advice present developments in these thontros indicate that the Germans will probably be reluctant to open a now military front. At the same timo it should be noted that the permission to establish Germen consulates in key cities of Northwest Africa, and the ousting of Woygand night be interpreted C.S the beginning of a diplonatic offensive which may result in Gernany's froodom to use Bizorta, Oran, and Casablenea as air end submarine bases, 2. Political crisos in France and Spain night be procipitated by a German occupation of Northwest Africa. Vichy's psychological and oconomic collaboration with Germany is based on the hope of a partnership in the now European Order. The chances of realizing those hopes would bc danaged SECRET 163 - 18 by the probable German promise of French colonial territory to both Italy and Spain. Such a division of the French Empire might seriously curtail France's present industrial contribution to the Nazi war machine, A German occupation of Spain might hurt Spanish pride and the promised German rewards would probably fall short of Spanish ambitions. 3. is failure of the British campaign in Libya would remove all Allied throats to Northwest Africa in the immediate future and might postpone full German military occupation. - 19 - SECRET APPENDIX Wost Africa Full collaboration of the French with the Gormans would extend Gorman occupation autometically from North to West Africa and nocossitate no further discussion, Scrious difficulties for the Germans, however, would be created by the resistance of the West African command to full collaboration. Assuming this rosistance the conquest of Dakar might bo attempted if the Gormans should have the French fleet at their disposal. Barring this possibility, however, it soons most likely that the extension of German control to West Africa would not follow immediately upon the conquest of French North Africa. The factors indicating the postpononent of a German Wost African campaign are more substantial than those which argue for innodiate action. A. Factors arguing for the postponement of a Gornan West African campaign. 1. The operation against Dakar would be extremely difficult. Dakar at the present time is considered imprognable by sea to anything less than a major naval and military expedition. Its defenses consist of more than 50,000 troops and 100 planes (of late frequently reenforced by shiploads of non and modern equipment), powerful constal bat- terios, the guns of the stationary Richeliou and flotilla leaders, one destroyer and twelve submarinos. Only the cooperation of the Vichy fleet an efficient naval force of two cruisers, four 164 165 - 20 - SECRET with the Gornans night disorganize those defenses sufficiently to make a comparatively oasy conquest possible. Barring this possibility, the Germans would be forced to take the land-air route from Marrakesh to Dakar, a distance of about 1740 miles. Most of this route consists of a track through the Western Sahara, rough, hot, and short of water. Before troops and materials could pass over it in any quantity, supply dumps would have to be established and considerable road improvement carried out. The same considerations apply to the establishment of air bases. 2. German control of the Moroccan ports and the Canaries would suffice for the time being seriously to jeopardize British-bound shipping on the northsouth lane. At the present time British convoys assemble at or near Freetown and proceed north through the eastern reaches of the Atlantic. To interrupt this traffic the Gernans would have available in Morocco the excellent harbors of Casablanca (ac- commodation for a naval force of three battle- ships, a squadron of cruisers, and two flotillas of destroyers; 10,000 feet of quayage for 23-feet- draught vessols, modern equipment) and Tangior (not so well developed, but better protected from southwost winds and swells) as well as the eight minor harbors of Agadir, Mogador, Safi, Fodala, Rabat Wadi Sebout, Larache, and Arcila, of which Agadir has the groatest possibilities, if developed fur- ther, as a potential submarine base. These ports, however, lie somewhat to the northeast of the optimum zone of submarine operations. Consequently, the Germans would probably occupy the two good ports of the Canary Islands, Las Palmas and Santa Cruz, about 630 miles southwest of Casablanca. Using those bases, the now Gorman submarinos with an operating rango of 8000 to 10,000 miles, supplemented by observation planes and surface raiders, could quite onsily mako the present British supply route untonable. An expensive diversion of shipping to the West and from there to the North Atlantic route would be the minimum cost inflicted upon the British. 166 - 21 - SECRET 3. Dakar's use as a submarine and air base would depend upon the ability of the Germans to supply it. This supply would be extremely difficult without the cooperation of the French fleet or the execution of a vast road building program. 4. An Allied occupation of Dakar, on the other hand, would constitute no danger of Allied operations against the German position in North Africa. 5. In case the Germans should need Dakar for an extension of the battle of the Atlantic, their possession of Northwest Africa would give them a geographical advantage over any other power. B. Factors arguing for the imminence of a German West African campaign. 1. West African peanut oil is important to the continental economy. A German occupation of Dakar would provide a better protected sea route from Dakar to Casablanca and also prevent the possible loss of this source of supply to the Allies. 2. The Germans desire additional well protected air, submarine, and raider bases, not only to interfere with the British use of Bathurst and Freetown as convoy and naval bases but also to serve as a constant threat to Latin America. 167 SECRET - 22 3. The Germans might choose to move at once in order to avoid a costlier future campaign in case Allied forces should reenforce the French West African garrison. 4. The Germans desire to deny the Allies the chance to acquire another good naval and convoy base on the bulge of Africa. These latter factors, serious as they are, do not seem great enough to force the Germans to undertake an immediate attack on Dakar. The Germans can well afford to leave the problem unsolved until they are ready to extend the area of their hegemony over Africa and South America. 168 SECRET - 23 Supporting Studies 1. North African Chronology since the Fall of France. 2. German "Eurafrican" Objectives as Developed in Geopolitical Theory. 3. The Problem of Vichy. 4. The German Political and Economic Problems in Iberia. 5. Germany's Economic Stake in French North and West Africa: 6. The Military Problems of a German Conquest of Northwest Africa. 169 December 3. 1941 Mr. Livesey Mr. Cochran will you kindly send the following cablegram: American London. For Casaday from Secretary of the Treasury. In answer to Enbassy's 5158, please communicate to the proper authorities the following paragraphs: 'The figure of 22 percent in the second sentence of the fourth paragraph of the State Department's 4670 is at variance with the figure of 25 percent gives by the United States Chamber of Commerce, due to material differences in the figures used for both United States tax collections and United States national income. The United States tax figures are based upon (1) a release by the Director of the Bureau of the Budget, October 5. 1941 and (2) "State Tax Collections: 1940* published by the Dureas of the Census, page 29. Copies of these are being sent by air pench. In these sources Federal tax collections for fiscal year 1942 (including social security taxes but excluding missellaneous receipts) are estimated at $12,659 million; State and local taxes for 1940, the latest year available, are estimated at $9,175 million, making total tax collections of $21,834 million. This figure is 22 percent of national income estinated at $100 billion. The Chamber of Commerce of the United States used $22.5 billion for United States tax collections and $90 billion for the national income estimate, thus arriving at its figure of 25 percent. Total Federal tax collections for the calendar year 1942 are expected to be $16 billion before transfers to social security reserves." TM.P. 170 TELE GRAM SENT PLAIN ALH DECEMBER 3, 1941 AMEMBASSY, LONDON, (ENGIAND). 5648, Third FOR CASADAY PROL SECRETARY OF THE TREASURY. QUOTE In answer to Embassy's 5158, please communicate to the proper authorities the following paragraphs: The figure of 22 percent in the second sentence of the fourth paragraph of the State Department's 4570 is at variance with the figure of 25 percent given by the United States Chamber of COMMERCE, due to material differences in the figures used for both United States tax collections and United States national income. The United States tax figures are based upon (1) a release by the Director of the Bureau of the Budget, October 5, 1941 and (2) 'State Tax Collections: 1040' published by the Sureau of the Census, page 29. Copies of these are being sent by air pouch. In these sources Federal tax collections for fiscal year 1042 (including social security taxes but Excluding miscellaneous receipts) -2- #5648, DECEMBER 3, to London 171 miscellaneous receipts) are Estimated at $12,659 million;State and local taxes for 1940, the latest year available, are estimated at 9,175 million, making total tax collections of $21,834 million. This figure is 22 percent of national income EStimated at $100 billion. The Chamber of COMMERCE of the United States used $22.5 billion for United States tax collections and 300 billion for the national income EStimate, thus arriving at its figure of 25 percent. Total Federal tax collections for the calendar year 1912 are EXPECTED to be 16 billion before transfers to social security reserves. . END QUOTE !HULL (FL) FD:FL:ME C 172 0 P Y DEPARTMENT OF STATE WASHINGTON December 3, 1941 In reply refer to FD The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses copies of the paraphrase of telegram No. 5817, dated December 2, 1941, from the American Embassy, London, England, transmitting a message for Secretary Morgenthau from Ambassador Winant. Telegram No. 5817 refers to the Department's telegram No. 5402, dated November 24, 1941, which was transmitted to the Secretary of the Treasury in this Department's letter of November 26, 1941, also telegram No. 5169, dated November 13, 1941, which was transmitted to the Secretary of the Treasury in this Department's letter of November 14, 1941. Enclosure: From Embassy, London, No. 5817, dated December 2, 1941. Copy: bj: 12-4-41 173 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embassy, London, England. DATE: December 2, 1941, 10 p.m. NO. $ 5817. THE FOLLOWING IS FROM AMBASSADOR WINANT FOR SECRETARY MORGENTHAU. Your message concerning contact with the Select Committee on national expenditure, which was forwarded on the 24th of November from Washington, has been dis- cussed with me by Mr. Lauren W. Casaday. In my opinion a direct approach to the Committee in order to get the information you desire would be a political mistake. However, the information in question and the other material you requested can be procured and are being prepared for you. Published reports of the Committee have already been forwarded to Washington under cover of various reports and despatches. However, you will receive a complete set by the earliest pouch. In response to the Department's telegram No. 5169, dated November 13, 1941, regarding the excess profits tax the Embassy is also taking steps to elicit further opinions. There is no one among my co-workers here with whom I enjoy working more than Mr. Casaday. I hope the reports submitted by Casaday have been satisfactory. I appreciate your kind letter of the 18th of November and the copy of the address you gave at Worcester. Copy:bj:12-4-41 WINANT 174 December 3. 1941 Mr. Livesey Mr. Cechres will you kindly send the following emblogram American Changing. From Treasury for year information. Following message is being cabled to Fox: 'National City and Chase Beake have raised with Treasury Departmost the question as to the oustedy of Chinese currency notes and as to the risks assumed by the Shoughai offices of these beaks in ceasection with such oustedy. We have advised the banks that those are matters which must be worked out with the Stabiliantion Board. We are airmailing copies of this correignationse but pass on for your early consideration the suggestion of the basks that the Chinese currency notes be destroyed. You may wish to take - with the appre- an printe Chinese authorities the matter of destruction of the currency notes.' HMC:da:12/3/41 175 December 3. 194 Mr. Livesey Mr. Coshres will you kindly and the following esblegrams American Rebescy, Chungking. For Fox from treasury. Reference your 424 of October 20 your report on the effect on the Shanghai market of United States basknotes singgied into China from the continental United States is appreciated. You are advised that this problem will continue to receive the consideration of the treasury Department." HMC:da:12/3/41 am 176 December 3. 1942 Mr. Liveary Mr. Sochree will you killy coal the following eablegram *American Subscry. Choughing. From Treasury. Reference your 432 of November 6. This request for information to be shimitted to the Chinese commission for the central of foreign exchange was made prior to the - of the - program exbedied in the general licenses issued by the treasury Department on November 12. In view of the - program 11 10 believed that the Stabilization Sourd of China will require information concerning pm transactions is which Shina is interested. Please advise The of this abile." 177 December & 1942 m. Minorey Mr. Gostress will yes Mally send the following collegrees Senant, thenghes. From for your information. Following massage is being ashies to Yes 'We have licensed Chase National Deak Now Yesk to you Indiatha Bateria account / Beak $1,200,000 is cover of Mass Beak Monghest writte Leased poter to Severabor 18, 1948 covering shipments free Jane to - and to you mericon Regress - Bodby 680,000 for account Chase Beak is eever of Chase Seak - arolite Screen prior to November 12, 1941 covering chiperate from Intio to Ranghai. these National Deak has been adviced informally that you are being advised of the Brogning and further that - 1 morely permite the Stenantal and is as way effects the of the Mass Beak Rangles mm as - appointed beak to the Stabilization Down of aim.' INC: da: 12/3/41 178 December 3. 294 Mr. Misseey Mr. will you kiddly and the following Seasol, Shoughai. Reference year 1692 of November 15 you are actived that the tors 'fully effected is paragraph (1)(a)(ass) of General Sicnase No. 98 - payment is United States dollars. Such payments suce have been fully effected prior to November 12, 1942, end ea November 12, 1941, the consigner of the shipment mas have had as further - or other things of value oving to Me is commetion with cash chiperate. Stailer restrictions apply to shipments free Heaghes to the simental Suited States via Manila and consular should not be certified by you covering cash shippents whose the terms and tiess of General Sicence No. 98 are fully complied with. Above massage is also being ashied directly to Yes. and HMO: da: 12/3/41 179 December 3. 1942 Mr. Liveray Mr. Bechres will you kindly and the following emblogram 'aperican Censul, Banghai. From treasury for your information. Following message is being cabled to For. 'National only and Chase Banks have raised with treasury Deposit seat the question as to the exately of Chinese currency notes and as to the sisks accused w the Shoughal office of these basis is w mosties with such exalety. We have advised the beake that those are matters which met be worked out with the Stabilization Board. We are airmiling copies of this correspondence but pass ea for your early consideration the mygestion of the banks that the Chinese currency notes be destroyed. Yes my wish to take w with the printe Chinese authorities the matter of destruction of the currency notes. # HMC: da: 12/3/41 180 December 3.1942 Mr. Livery Mr. Gashren will you kindly was the following exhiogram General, Shought From treasury. Reference year 1733. November 15. You are advised that in those cases share am importer has United States dollars - deposit with appointed beek the approval of the stabilitation Board of Skins is required before - appointed beak - notify a democite beak that the transaction actiofies the terms and confisions of General Maraon No. 58. You will hear from us further - year other Foregoing is also being cabied to Nex. me No:da:12/3/41 181 December 3. 1941 Mr. Livesey Mr. Sechres Will you kindly send the following cablegram American Consul, Elong Kong. For Fox from Treasury. Reference is made to your 475 of November 6. 5 p.m., in which the request of the Stabilisation Board of China was expressed that Beague Dolgo pour 1'Strenger not be designated as - appointed beak. The Belgian Inbusseler to the United States has now protested ea behalf of Banque Belge pour 1'Strenger the omission of that beak as as appointed beak. Consideration is being given to the desirebility of advising the Belgian Ambussader that, since the Desqua Belge pour 1'Strenger was not included in the list of beaks reconmasted for designation as appointed beaks by the Stabilisation Board of Chim, is was not included in the list of appointed banks and to further magnet to the Belgies Ambussader that Banque Delgo pour 1'Strenger should present its request for designation as appointed bank to the Stabiliantion Board of Skins for consideration by that Board. Your connects on this procedure will be appreciated." and HNO:da:12/3/41 182 - 3. see Mr. Minosey n. will yes Mally and - following obblegrees electronic General. Song Keng. For For tree treasury. No have Housed - National Seak New York to - December Inticate Secompte Masterhappis Sateria - Chase Beak - $1,200,000 in - of - Bank - writte Secure peter to November 10. 19th comming from Jone w Chine - to - surrices Regress - - for - - Seak is - of Shase Deak - evolite Lease prime to 18, 19th evering disposate true Intin to amount. - Beak has book striced informally that you are boing since of - and further that our 1100000 arely pornite - financial transaction and is as way effects the of - - Beak - as - appointed book to the Medilination Booth of this. IM Torogoting to also being ashied to - General, - 12/32:12/3141 183 December 3. 1941 Mr. Livesey Mr. Cochres will you kindly send the following eablegram American General, Hong Kong. For Fox from Treasury for your information. Following message 10 being sabled to American Consul, Shanghai: Reference your 1692 of November 15 you are advised that the term "fully effected is paragraph (1)(a)(sss) of General License No. 58 meas payment is United States dollars. Such payments must have been fully effected prior to November 12, 1941, and on November 12, 1942, the consigner of the shipment must have had as further same or other things of value oving to his is connection with each shipments. Similar restrictions apply to shipments from Shanghai to the orntinental United States via Mamila and censular invoices should not be certified by yes overing such shipments anloss the terms and couldtions of General License No. 58 are fully complied with. . pml HNC:da:12/3/41 184 December 3. 1942 Mr. Livessy Mr. Geokrea will you kindly send the following collegram American Centul, Hong Keng. For For from treasury. National city and Chase Deaks have raised with treasury Department the question as to the easiely of Chinese currency notes and as to the risks assumed w the Duoghes offices of these Deaks is connection with such oustedy. We have advised the beaks that these are matters which must be worked out with the Stabilisation Board. We are airmilling copies of this - was your on for your early consideration the represtion of the bonis that the Chinese currency notes to destroyed. You my wish to take . with the apprepriate Rhinose authorities the matter of destruction of the currency notes. Foregoing is also being ashied to American General, Manghai. and to pm American Embassy, Chungking." HNG:da:12/3/41 185 December 3. 1941 Mr. Livesty Mr. Codires will you kally - the following cablegram long Keng. For Fox from treasury for your information. Following masange is being cabled to American Geneal, Reference year 1723. November 18. Tenance advised that in these cases where - Superter has United States dollars on deposit with appointed beek the approval of the Stabilination Board of China to required before - appointed beak my notify a descette bank that the transaction articline the terms - conditions of Georgial Memo No. 58. pm You will hear from us further on your other inquiry. . 186 PLAIN EJ Hong Kong via N. R. Dated December 3, 1941 Rec'd 12:58 p.m. Secretary of State, Washington. 526, December 3. REfERENCE Hong Kong's telegrams 476, 477 and 478 of November 7 quoting messages for Treasury from Fox and Cochran and confirmed by despatch 1046 November 7 and enclosures reporting action by Hong Kong Government to control unduly large operations in Chinese currency in this colony. Local authorities now report that their action has been Effective in greatly reducing 30-called salack market operations. Meanwhile the trading license has been suspended of the Hong Kong gold and silver exchange which apparently was doing big business in Chinese currency notes and Government instructed it to settle outstanding transactions at Hong Kong dollars one hundred fifty five to Chinese national dollars one thousand. Chinese Vice Minister of Finance visited here recently 187 -2-#526, December 3, from Hong Kong via N. R. recently as result of which Chinese Ministry of Finance as Stabilization Board of China establishing a joint office in Hong Kong to deal in cooperation with the British authoritica with the problem of Chinese currency deposits now frozen in the colony. Sent to the Department, repeated to Chungking, Peiping and Shanghai. SOUTHARD DD C 188 0 P Y DEPARTMENT OF STATE WASHINGTON In reply refer to FD 894.515/96 December 3, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses a copy of despatch No. 97, dated November 21, 1941, from the American Legation, San Jose, Costa Rica, concerning shipments of gold from Japan to Costs Rica. Enclosure: From Legation, San Jose, Despatch No. 97, dated November 21, 1941. 189 San Jose, Costa Rica, November 21, 1941. No. 0097 Subject: Shipments of Gold from Japan to Costa Rica. The Honorable The Secretary of State, Washington. Sir: I have the honor to refer to the Department's circular telegram of November 14, 1941 directing this office to report any recent and all future shipments of gold to Costa Rica from Japan and to report in this connection that a representative of this office has been advised by Mr. T. Harrington, Auditor of the Banco de Costa Rica, and also by the Banco Nacional de Costa Rica, the official bank of the country, that no shipments of gold from Japan have been received here at any recent time. Should any such shipments be received in the future, which appears unlikely, they will be at once reported as directed. Respectfully yours, Leslie E. Reed, 851.51 American Consul General. HGM/fp Original and three copies to the Department. Copy:bj:12-3-41 190 0 P Y CANADIAN LEGATION WASHINGTON December 3, 1941 Dear Mr. Dietrich, I am enclosing in duplicate a list of Japanese firms doing business with firms in Latin America. I also enclose copies of correspondence dealing with an exchange of Japanese cotton against scrap iron from Ecuador. Yours sincerely, /s/ R. M. Macdonnell, R. M. Macdonnell, Secretary. Frank Dietrich, Esq., Room 279, Treasury Department, Washington, D. C. Copy: vw: 12-10-41 191 0 Y LIST OF JAPANESE FIRMS TRADING WITH FIRMS IN LATIN AMERICA FIRMS LISTED COSMOS TRADING CO., Osaka. Statutory, British W.T.L. No. 6 on the Canadian List of Specified Persons Rev. No. 6 TRADING WITH: KLIMESCH, GUILLERMO, Statutory, British W.T.L. No. 6. Canadian List of Specified Persons 17 and with z. SOLARI Y HNOS, LIMA, PERU HONDA TRADING CO., OSAKA. Statutory, British W.T.L. No. 6 Canadian List of Specified Persons 17. Francisco Fonseca, Lima, Peru. Statutory, British N.T.L. No. 6 Fernandez Pita Federico, Buenos Aires, Argentine. CIALDA CIA. ANON., GUAYAQUIL, ECUADOR. Ramon Espin Cordova, Statutory, British W.T.L. No. 6, Canadian List of Specified Persons 17. Guayaquil, Ecuador. U.S.A. Proclaimed List. Yagi & Co., Osaka, Japan MATSUNAGA BOEKI K.K. KOBE. Statutory, British W.T.L. No. 6, Moises, Lajhan, Canedian List of Specified Persons 16 Panama. HATTORI SHOTEN, YOKOHAMA. & HERMANN, HAVANA, CUBA Black List, British W.T.L. No. 6 Cordova is trading with T. Fujiye & Co., Japan Fujiye is trading with U.S.A. Proclaimed List. Cassorla & Goluboff, Santiago (Chile?) and with Miguel Gorab Z. Santiago, (Chile?) GUTIERREZ, J. C. may be associated with the Gutierrez, J. C. is mentioned in letter referring to Luis Guillermo GUTIERREZ, SANCHEZ, LIMA, PERU, who is on the Black List, British W.T.L. No. 6 Ostalaza, S.A. Lime, Peru and Beniya Co. (Japan?) Taxuke Shoten, Osaka. A. M. Sauwma British M.E.W. "G" List No. 3 Paramaribo, Dutch Guiana; Jeruselmi Hnos, Montevideo, Uruguay; Marcos Nahoum, Montevideo, Uruguay; Moises D. Sacca E. Hijos, Buenos Aires, Argentina. ITSUI BUSSAN K.K. JAPAN Melamed & Capuano, dritish M.E.W. "G" List No. 3 Montevideo, Uruguay 192 -2FIRMS LISTED TRADING WITH: ASAI TAKEGORA SHOTEN, NOGOYA, JAPAN L. A. Espinoza, S. A. British M.E.W. "G" List No. 3 Arequipa, Peru. JULIO SANTOS & CO., CIUDAD TRUJILLO, Temaru & Co. DOMINICAN REPUBLIC Japan. British M.E.W. "G" List No. 3 193 THE YOKOHAMA SPECIE BANK, LIMITED NEW YORK AGENCY In Reply Cable Address 120 Broadway Address Attention NEW YORK. Import Department. SHOKIN-NEW YORK. October 20, 1941 The Yokohama Specie Bank, Limited, Osaka, Japan. Re: Your B/B 159 - $2,070, - on Ramon Espin Cordova, Guayaquil, by Yagi & Co. Gentlemen; Please refer to your cable of September 17th regarding the above draft and our reply of September 18th wherein we advised you that the bill of lading had been received by us and that we were applying for a license to forward it to you. We wish to advise you that 106 tons of scrap iron were duly shipped on the S.S. #Kiyokawa Maru", which sailed from Guayaquil, Ecuador, to Japan on July 23rd. We also enclose a certificate issued by Mr. Tadao Sato, Guayaquil, Ecuador, correspondent of the Commercial Osaka Museum, stating that the weight of the shipment is 109 metric tons. However, Messrs. Cialda Compania informed the collecting bank that the exact weight of the shipment should be fixed at the arrival of the steamer in Japan. The total weight of the shipments considering the former effected on the S.S. "Kiyokawa Maru" should be 135 metric tons and the drawers must pay U.S. $13. - for each additional ton. In the event that the shipments total more than 135 metric tons please arrange to reimburse Cialda & Compania at the rate of $13. - per ton. Expenses of $12.45 were incurred by the Banco de Descuento. In our license for permission to return the original bill of exchange, together with the bills of lading for the shipment of scrap iron, we have included authority to debit you for this expense. As soon as the outcome of our license application is known, we will inform you accordingly. Very truly yours, THE YOKOHAMA SPECIE BANK, Limited. 194 Permission to return to our Osaka Branch the original bill of exchange on their B/B No. 159 for $2,070. - drawn by Yagi & Company, Ltd. on Ramon Espin Cordova, Guayaquil, Ecuador, to- gether with a complete set of bills of lading indicating a ship- ment of 106,000 kilos scrap iron, which was shipped from Guayaquil, Ecuador, to Osaka, Japan, on the S.S. "Kiyokawa Marus of the "K" Line, dated the 23rd of July, Guayaquil. The draft in question, which covered an original ship- ment of 25 bales of cotton piece goods shipped from Osaica to Guayaquil on March 26th, 1941, was originally drawn on Mr. Cordova but he refused to pay for the same. On December 13, 1940 our Osaka Branch instructed us by cable to deliver 8 and 17 bales to Cialda Compania, Guayaquil, against bills of lading covering not less than 50 metric tons and 100 metric tons of scrap iron, respectively. We in turn instructed our correspondents, the Banco de Descuento, Guayaquil, accordingly. On February 4th, 1941, the Banco de Descuento informed us that they had released to Cialda 8 bales of merchandise against bills of lading covering a shipment of 50 tons of scrap iron shipped on the S.S. "Goyo Maru", which sailed on February 1st for Osaka. The bills of lading for this shipment, when received by us, were forwarded to Japan. On July 2nd our Osaka Branch advised us by cable that their instructions of Dec. 13 were amended so that the remaining 17 bales of merchandise were to be delivered against "Kiyokawa Maru" bill of lading covering 106 metric tons of scrap iron. Upon receipt of our branch's instructions we in turn advised our correspondents accordingly. The bills of lading for the shipment of scrap iron have now been received by us. We also desire permission to instruct the Chase National Bank to debit our blocked account for the sum of $12.45 covering expenses of the Banco de Descuento and to place this sum to the credit of the account of the Banco de Descuento maintained at Chase National Bank. Copy:vv:12-10-41 195 December 3. 1941 Mr. Livesey Mr. Dechrea will you please send the following message: American Legation, Ouryaquil, Benader. From fressury. with reference to researchered application of Compania do Corresas Nasionales, Las Pense, Guayaquil, Bounder, dated November 6. 1941, which has been assigned the number Onayaquil 1 and which is the subject of despateh no. 2234 from Quite, dated November 7. 1941, approval is authorised provided applicant gives proper assurances to you that they will not enter into further transactions with Chadvick, Berrere & Co., Ltda., of Santiage, Chile, OF other Preclaimed List nationale, without license." (Init.) H. M. 0. None: C 0 P DEPARTMENT OF STATE Y WASHINGTON In reply refer to FD 894. 515/97 December 3, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses copies of despatch no. 206, dated November 25, 1941, from the American Legation, Managua, D. N., Nicaragua, concerning gold shipments from Japan. Enclosure: From Legation, Managua, no. 206, November 25, 1941. 196