Full text of Diaries of Henry Morgenthau, Jr. : Volume 472 : Part 1

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DIARY

Book 472

December 12 and 13, 1941

-ABook Page

Air Raid Shelters
See White House

Appointments and Resignations
Knollenberg, Bernhard: HMJr and Paul discuss

assistance to Treasury - 12/13/41
a) Knollenberg-HMJr correspondence

472

293
295

-BBarth, Alan

Editorial Opinion on Foreign Affairs: The Nation
Rallies - 12/12/41

British Purchasing Mission
Vesting order sales - 12/12/41

189

199,200

Canada

See Military Reports
Capital Funds Committee
Establishment of discussed in memorandum to FDR 127

12/12/41
China

Joint Council of War urged by Chiang Kai-shek 12/12/41

150

memorandum - 12/12/41

207

Stabilization Board operations discussed in Fox
Coordinator of Information
See Military Reports
Correspondence

Mrs. Forbush's resume' - 12/12/41

171

Customs, Bureau of

Reapportionment of appropriations to permit
additional 1000 guards at seaports and on Mexican
border being negotiated with Budget Bureau 12/12/41

149

- DDefense Savings Bonds

See Financing, Government; Inflation

-EExchange Market

Resumes - 12/12-13/41

Export Control
Exports to Russia, China, Burme, Hong Kong, Japan,
France, and other blocked countries, week ending
December 6, 1941

202,385

365

-7Book

Page

472

138

Financing, Government

Bond market discussed by HMJr, Bell, Morris, and
Haas - 12/12/41
a) Rouse-HMJr conversation

140

Defense Savings Bonds:

See also Inflation

Report for present and preceding weeks discussed
by FDR and HMJr - 12/12/41

Federal Reserve Banks report - 12/12/41
American Federation of Labor President Green
asked for cooperation - 12/12/41

Early's letter of congratulations - 12/12/41
Patterson, Richard: Farley told "he just isn't
good enough - 12/13/41
(See also Book 473, page 109 - 12/15/41)

Field Organization News Letter, No. 30 - 12/13/41..
Boettiger (John) told of Secretary Perkins'

revision of regulations with regard to payroll

deductions - 12/13/41
Foreign Funds Control

154
163
165
166
283
353

355

Vatican:
Financial needs discussed by Monsignor Michael Ready,

HMJr, Foley, and White - 12/13/41
a) Accounts - resume'of: Book 473, page 216

316

France

British Embassy transmits memoranda concerning

financing of French Missions abroad - 12/13/41

373

-GGold

Transactions with central banks of foreign countries
during November - Hawkey report - 12/12/41

201

Inflation
Tax program (timing of) and savings bonds campaign,

together with postponement of introduction of
taxes to be collected at source, discussed at HMJr's
home by Eccles, Henderson, Smith, Currie, Viner,
and Treasury group (December 11, 1941)

a) Discussion at 9:30 meeting - 12/12/41
b) Paul memorandum

-J- Japan

Latin American reports on deposits - 12/12/41
a) See also Book 478, pages 128, 131, 136, 140, 143,
and 279 - 12/26/41; Book 480, pages 291, 293,
and 301 - 12/31/41; Book 481, page 412 - 1/3/42;
Book 483, pages 127 and 135 - 1/7/42 Book 487,
page 147 - 1/21/42

215,376

-KKnollenberg, Bernhard
See Appointments and Resignations

Book Page

-LLatin America
See Japan
Lend-Lease

Third report - 12/13/41

472

364

-M-

Military Reports
Canadian Labor Problems - Coordinator of Information
report - 12/12/41
Netherlands Indies - Coordinator of Information
report - 12/12/41
Summaries by Kamarck - 12/12-13/41

Reports from London transmitted by Halifax 12/12-13/41

Light tank report from Cairo - 12/12/41

244

248

270,389
274,386
278

-NNetherlands Indies
See Military Reports

-Office of Civilian Defense
Treasury loan of personnel questioned in HMJr's
memorandum to Thompson - 12/13/41

348

-P Patterson, Richard
See Financing, Government: Defense Savings Bonds

-RRevenue Revision

See Inflation
-S-

Securities and Exchange Commission

Assistance offered Treasury - 12/12/41

VVatican

See Foreign Funds Control

122

I
December 12, 1941

MEMORANDUM FOR THE SECRETARY

The following persons met at my house last evening from
8 to about 10:30 p.m.:
Chairman Eccles of the Federal Reserve Board; Mr. Leon
Henderson of SPAB: Mr. Harold Smith, Director of the Budget;

Mr. Lauchlin Currie, Administrative Assistant to the President:
and the following persons from the Treasury Department: Messrs.
Daniel Bell, Blough, Buffington, Gaston, Graves, Groves, Kades,
Kuhn, Morris, Odegarde, Randolph Paul, Tarleau, Viner and Harry
White.

I presented the general problem of the timing of the tax
program and particularly the question of stressing the savings
bond campaign, while postponing the introduction of taxes to be
collected at source.
Mr. Paul said it was felt that some additional withdrawal
of purchasing power through taxes would be necessary in dealing

with the inflation problem. He said that in his opinion it was
not desirable to pass a supplementary collectionat-source tax

except as part of a comprehensive tax program, since the lower
income groups should not be burdened unless the taxes are increased on the higher brackets also. He said that a comprehensive tax program could not be ready before January 15. In his
opinion the only method of withdrawal through taxation of additional purchasing power prior to the passage of a comprehensive
tax program would be through collecting at source in 1942 part
of the income taxes which would be collected regularly in 1943.
He suggested that in view of the uncertainty when such additional

tax collections would be necessary as an anti-inflationary device

and due to the desire not to impede the bond program unnecessarily,
it would be desirable to have immediate legislation passed empower-

ing the Secretary of the Treasury, with the approval of the
President, to put in force the advance payment procedure, official
rates ranging up to 10 percent.
Other members of the group were then asked for their points

of view. Mr. Henderson said that due to the dislocations of

industry, the pressure of incomes on prices would not be resumed
until March and that increased prices between now and then would
be due to events which have already taken place and could not be

stopped by taxation. He felt, however, that beginning in March,

-2- -

the pressure of incomes would increase and that larger withdrawals of purchasing power would be necessary. He thought

that the plan for speeding up collections might be put in the
regular tax bill and then passed separately in case the bill
were delayed.

Mr. Currie appeared to be in harmony with this position.
He thought that the case for a strong tax bill might be weakened
if there was a prior request for discretion to advance the date
of collection.

Mr. Harold Smith Agreed. He felt that to ask for the
authority to collect at source might have the result of dissi-

pating the strength of the movement for a strong tax program and

that if delay were feasible, it would be better to include the
request for discretionary authority as part of the regular tax

bill.

Mr. Eccles discussed the general situation at length,
especially the necessity for restrictions on wages and prices
to prevent taxes from increasing prices and thus failing to

accomplish the desired purpose. However, he appeared to be
in general harmony with Mr. Henderson's view. Mr. Eccles

expressed the view that the people would not be willing to
take a strong tax program until there had been some further

inflation.

On questioning, Mr. Harold Graves said that he thought
the savings bond program could increase the sales of E bonds
from $115 million to $400 million a month. Everyone seemed

surprised and gratified at this figure, although some pointed

out that much of the increase might come from sources other
than current incomes of the lower income groups where the effect
would be most anti-inflationary. Mr. Graves said that he thought
that the presence on the statute books of the discretionary power

to introduce collection at source would not materially affect the

savings bond program, but that as soon as the collection at source
was put into operation, the savings bond purchases through payroll
deductions would slump.

There were other elements to the discussion, of course,
some of which were rather far afield. The unenimous sentiment
appeared to be, however, that it would not be necessary to ask

immediately for the authority to collect at source, but that it
would be desirable to ask for such authority as part of the
regular tax bill.
This

December 12, 1941

8:45 a.m.

RE TAXES

Present:

Mr. Paul
Mr. Blough
Mr. Tarleau

Mr. Bell
Mrs. Klotz
Mr. Sullivan
Mr. White

Mr. Kuhn

Mr. Viner

Mr. Graves
Mr. Kades
Paul:

We had a very interesting conference last

night, as a result of which I will state the
result first; we changed our mind.

H.M.Jr:

-Paul:

Your mind was fluid?

Proving our fluidity, yes.

H.M.Jr:

Very good.

Paul:

I will tell you what made us change our mind.

H.M.Jr:

Now the question is, is my mind fluid? (Laughter)

Paul:

I think it will be. Our premises were somewhat
shifted. Henderson gave us quite an account
of the inflation situation and does not expect
any really acute condition until at least March.
Lauch Currie and Eccles and I think more or
less that Smith agreed with that conclusion.

H.M.Jr:

Harold Smith?

Paul:

Yes, he was there. So that fact, coupled

It is basically this.

with the fact that it would be somewhat confusing

to come in with an earlier bill, which wasn't the

whole program made us feel that it would be

-2-

unwise now. Then there was also a feeling
based on some estimates of possible sales up
to four hundred million a month -H.M.Jr:

Of --

Paul:

Savings bonds, that we might make very good use

of that period, shooting out a lot of bonds.

H.M.Jr:

Who gave you that estimate?

Paul:

Graves.

Tarleau:

Graves did, yes.

H.M.Jr:

Well, if he said four hundred, I will make it

Blough:

He said it was the first time anybody had
succeeded in forcing an estimate out of him.

H.M.Jr:

Was he there last night?

Paul:

Yes. So that we felt - I have a memorandum
here but to my mind it is academic now, because

five.

I don't think we ought to go ahead with this

isolated bit of a tax program. I think we

should concentrate on the bond selling and
turn around to the whole tax program. Now,
if you can change your mind --

H.M.Jr:

Will you (Mrs. Klotz) get me the ammonia, please?

Paul:

Here is a memorandum anyway.

H.M.Jr:

On what?

Paul:

Which you asked me to get in case you don't
change your mind.

H.M.Jr:

Let's take this fellow (Blough). You were the

most active proponent of doing something now.
Where do you stand, Mr. man?

-3-

Blough:

I stand just where I did yesterday morning,
with a slight change. Yesterday morning, as

you recall, I said that if it wouldn't delay

getting this tax, it seemed to me that we
ought to give the bonds a chance. If it would
delay getting it, that we ought to go after
the tax now. Now, in the light of what Henderson
said particularly, I gave in my own mind a great
deal of weight to what he said, on the fact that

we wouldn't have much trouble until March, and

Paul:

then Mr. Daniel Bell pointed out that in March
the income tax collections would be extremely
heavy, so that might take care of March, anyway.
Two billion seven.

Blough:

And with Harold Smith pointing out that

dividing the program would give you confusion

in the public mind, I feel that to follow this
along as Randolph Paul has pointed out, putting
the request for this sort of thing in with
the tax bill when the tax bill goes up - Harold
Graves says that the adverse effects on the sales
of bonds will not occur until the tax is
actually collected, so that we have plenty of

time to drop it if we want to drop it. In fact,

it could be put in as an authority anyway.

I am quite in harmony with what Randolph Paul
says.

Paul:

The point you have attributed to Smith was also
made by Lauch Currie, that it would be confusing.

Blough:

In fact, I believe he made it first.

H.M.Jr:

What would be confusing?

Paul:

It would be confusing to have this early bit
of legislation and then another entire program.
Henderson pointed out that there is going to

be a great deal of dislocation in the first

two months of the year, a tremendous amount.

H.M.Jr:

Well, of course this takes away the biggest

-4-

argument that you used on me the latter part

of yesterday's meeting, that if I didn't do

this, what would Henderson say in three months
about my not -Paul:

That wasn't my point, but it does take that

argument away.

H.M.Jr:

But you did say it, didn't you?

Paul:

No, somebody else said that, Mr. White or
somebody else.

Blough:

White.

Tarleau:

I think it was Harry White.

Paul:

I don't think it was Mr. White, but it was
somebody back in that part of the room.

Blough:

It may have been Viner. Mr. Secretary, Mr.
Viner is completely in accord -(Mr. Bell entered the conference.)

H.M.Jr:

Sit down and back yourself up with two cushions
for a shock.

Paul:

He was there.

(Mr. Viner entered the conference.)
Bell:

Shock? I am in favor of it.

H.M.Jr:

Were you there last night?

Bell:

Yes, sir.

Paul:

There is one point that I would like to make.

It is a point of detail. That is that in

discussing any bond program, I do not think you
should commit yourself to any definite date,
certainly any date beyond March; and another

-5-

point is that this apparent abandonment of

this idea we gave you yesterday is not - is

only a temporary abandonment. We still
feel that that mechanism ought to be part of

the Revenue Act, but we don't think it is

necessary to go ahead now, at this precise

moment.

Viner:

You have also raised the point, haven't you,

that it ought to be put into our program to
the House so that if they go slowly on the

main bill we will say, Well, then, put this
through in a hurry.

Paul:

That is right. It is a card up the sleeve.

Viner:

That was one of the persuasive arguments last
night. Who suggested that?

Paul:

Henderson.

H.M.Jr:

Are you through for the moment?

Paul:

Yes.

H.M.Jr:

Dan, give me a thumbnail opinion, after listening
last night, please.

Bell:

I think that the first thing to do is to go

all out on a savings bond program, unrelated in
any way to the tax program, and nothing to be
said about a tax program whatever but to go
all out on the savings bond program. Go ahead
with your tax program as early in January as
possible and not relate it to the bond program

and include this flexible provision in the
program in a separate title, so that it can be
pulled out at any time that it is urgent to
put through and put it through separately from
the regular bill. Now, when the tax bill goes
through, if it goes through in the regular
manner, it may and it may not interfere with
the bond sales. Certainly if you put the

-6-

flexible provision in it will interfere with
the sales of bonds.

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

Excuse me. Do you (Blough) remember who was

there so you could give me a list?

Tarleau:

There were eighteen. I counted them.

H.M.Jr:

Write it down so I can give it to the President.

Blough:

I had it with me. I have dictated a memorandum

H.M.Jr:

No, just the people who were there.

Viner:

I would say it was unanimous, wasn't it?

H.M.Jr:

Put the non-Treasury people first, at the head

Bell:

As I say, a tax bill might interfere but the
tax bill you put through last summer didn't

on the meeting.

of the list.

interfere materially with your bond program,
but when you put in the flexible provision

I don't think there is any doubt --

Graves:

When you put it into effect.

Bell:

Put it into effect. Putting it into effect

might interfere with the bond program, but so
what? There isn't anything to do but to go ahead

and put it in, I think, and use a little more
pressure on the bond program. When you come

around to collect your taxes, even though you

don't put in the flexible provision for 1943, I
think it might have some effect. I am not so

sure that your March sales this year and your
present bond program won't fall off and you

might get some redemptions on your savings bonds.
The people won't have the cash with which to

pay their taxes. I think you will have that even

-7-

in greater volume in '43, if you go through

with a regular tax program and the bond program.

I think this is a good program.

H.M.Jr:

Harold, give me - well, now, give me your

opinion of last night's meeting.

Graves:

I agree with Dan.

H.M.Jr:

Was Kuhn there last night?

Graves:

Yes, he was, and Odegard.

Viner:

And Gaston and Kades.

Bell:

Harry White.

H.M.Jr:

Well, would you (Graves), while I am over with
the President, you and Kuhn and Odegard get

together beginning to write my outline for my

statement.
Graves:

At Chicago?

H.M.Jr:

At Chicago, so when I come back from Cabinet

or any time this morning after Cabinet I could
see it. Do you see what I mean?

Graves:

Yes, sir.
(Mr. Sullivan entered the conference.)

H.M.Jr:

What happened to the Army truck?

Sullivan:

Oh, that was here on time. That is all I agreed
to, is to have the Army truck here. I am sorry I
am late.

H.M.Jr:

Did the machine gun freeze?

Sullivan:

No, sir, it is working very well.

-8H.M.Jr:

You know, John, all I kept watching this morning was the clock, and I said, "My God, I have

got to get there before John. I just got here
as the clock struck a quarter of nine.

Sullivan:

They told me eight forty-eight.

H.M.Jr:

It is all right. You are a slow arriver, but
an early starter. Go ahead.

Graves:

Well, I had finished. You had just told me
to get together with Kuhn and Odegard.

H.M.Jr:

But on last night, did that register, to have
something for me?

Graves:

Yes. I think I understand.

H.M.Jr:

But as to last night?

Graves:

Yes.

H.M.Jr:

All right.
Jack, I will give you a chance to catch your

breath. I will tell you what I would like

you to do-Viner:

The lesson I drew from it is that it always

pays to take another chance to listen to some
other fellows because we were pretty set here,
and yet the minute these other arguments began

to be made they clicked with us, and they

didn't have to persuade us. I think we all
immediately saw that that seemed to be the

right strategy.
H.M.Jr:

Well, you didn't hear Paul make his report. I
would like to get your impression, from your
mind.

Viner:

As to what they thought you ought to do?

H.M.Jr:

As to the arguments for changing your position
yesterday. What impressed you, why you should
change?

Viner:

After all, all that was changed was the question of Congressional strategy and of impact
on the Defense Savings Bonds thing. They all
accepted the idea as a good idea, but they
didn't think we ought to introduce it now as a
separate bill. Some thought it would affect
the Defense Savings sales. Others thought that
we mightn't be able to get it through quickly
so that we would be taking up the attention

of Congress with what, after all, is a small

measure and then when we wanted the big measure

we would have spent all our ammunition. That

was one of the arguments used. Then somebody

came along later with the idea, put it into
the bill. Push them on the bill, mention the

whole tax program. Push them on the whole

tax program. If they are slow and if you
are not getting results, then tell them, we

will yank this Title 2 out, if that is what it

is called, and pass that in a hurry if we
need it to stop inflation, and then you might
get it faster that way than if you submitted
it in the penalty. Whereas if you submitted it
in the penalty, Congress might say, "Is that
what Treasury thinks is a tax program?"

Paul:

I wish you would explain to the Secretary the
impact on the economy idea too, because you
are better able to do that than I am.

Viner:

Well--

Bell:

Henderson's idea?

Viner:

Yes, Henderson surveyed the economic situation

and he indicated that the present situation
plus the impact of the transfer from civilian
to military use will probably make a bad
January and a bad February from the point of

- 10 -

view of employment, not a bad one but some-

what of a little slump. In any case, that

in those two months there is no inflationary

danger. He thinks that the danger may come

in March or in April and at that time we may

begin to need it, but that there isn't any

immediate urgency, he thinks, in January and
February. He says on the contrary the Febru-

ary sentiment, business sentiment, will not be

inflationary. They will see the effects of
the priorities, of the lack of metals in the
civilian industries, of unemployment for that
reason. He thinks that in March or April
there will be a very big pickup and that then

we may really see the inflationary forces working fast, but he doesn't see any very immediate
urgency.

(Mr. Kades entered the conference.)
Viner:

He did make some comments in one way or another

about how quick action you could get from
Congress on any type of measure, and therefore

I thought that on the whole he felt that you
had better get your stuff in as soon as you can
because you can't count on very quick action.
I gathered from him that he would want us to
push ahead on our tax program as soon as we

can because he would want it in effect at least

by April if it possibly could be. Wasn't that
the impression you got?

Blough:

Distinctly.

H.M.Jr:

By April?

Bell:

Yes, by April he said. He thought that was

Viner:

That if you didn't get it then, then there
would be a dose of inflation at that time

about the deadline.

which would be so much into the pot that you
couldn't get back.

- 11 Paul:

I think one other point of strategy was made

by Eccles, if I remember it correctly. It was
that there might be a little inflation which

would be a good thing to help you get the tax

bill through, that you could take a little.

H.M.Jr:

We have got a little now. Maybe we have got

Viner:

quite a little now.
I wouldn't plan to take it. I wouldn't be
shocked if it occurs, but I would plan not to
have it if you possibly can.

Paul:

Well, I don't think Henderson guarantees that

Blough:

He said we would have price rises in January
and February, but they would be due to conditions which have already occurred and not to
the pressure of purchasing power.

Viner:

In other words, the retailers begin pricing on

we won't have a little.

the basis of the prices they are now paying on

their stocks and that will show up in the
retail prices in February and March. That is
already done.

Bell:

He also said that if we could increase Savings

Bonds as much as a hundred million dollars a
month, it would be a tremendous help in this
next few months, and April and May.

H.M.Jr:

That is easy.

Graves:

He came to me afterward and told me that he
was very much impressed with the possibilities

of this bond program, and incidentally, he
said that if there was anything in the world
that his organization could do to help that

program, he wanted us to call on them.
H.M.Jr:

John?

- 12 Sullivan:

I think the big thing I got out of it was
that the four guest stars all agreed that there

wasn't any gun to our head and wouldn't be.
H.M.Jr:

Who were they?

Sullivan:

Harold, Leon, Marriner, and Lauch.

H.M.Jr:

Currie, Eccles, Henderson, and Smith.

Sullivan:

And they were unanimous that there wasn't any-

thing too bad that we had to fear for three

months, maybe four.

Now, as Randolph just indicated, Marriner, I

think, would like to see a little inflation.
(Mr. Kuhn entered the conference.)

Sullivan:

I didn't think the discussion on the strategy
was any too brilliant, but that is entirely
aside from the point. They were in accord that
we had that much time to turn around in.

H.M.Jr:

Well, where are you this morning as to your
recommendations to me?

Sullivan:

Well, I think that we have got to present the

entire program, that whichever plan you decide

to adopt must be a part of that and that you
have got to recognize all the way along that
a situation may arise in which this collection
at the source may be separated from the rest
of the bill and rushed through as a - one part
which, because of conditions, has to be hurried
ahead of the other part.
H.M.Jr:

Well, I am awfully glad I suggested having that
meeting last night.

Sullivan:

Oh, it was a very good meeting.

Paul:

I hope it will--

- 13 H.M.Jr:

Our yesterday meeting, the meeting last night,
the President this morning, and these two men

for lunch, it is a good program.

Paul:

I hope it will teach us a lesson that we can
get a great deal of help from those people.
They are very helpful.

H.M.Jr:

Tarleau?

Tarleau:

Well, out of the meeting I was trying to glean

what they would want you to do, what they
thought was the best program for the next few
months, and I was impressed by their reaction
to the Savings Bond program and the importance
that they attached to the Savings Bond program,
and that even a moderate success from your
standpoint of a hundred million dollars a month
would mean a great deal to them. They seemed
to feel that was much more important at the
moment than going ahead with an immediate col-

lection at the source in taxes. The next thing
that impressed me was the fact that they felt it was the general feeling that this flexible
provision, if inserted in the general revenue
bill, which ought to be part of the whole revenue
bill, was a desirable instrument to have and
consequently it seems that the course of action
ought to be pretty clear, to push as much as

possible on the bonds, because every hundred
million dollars on the bonds seems to mean a

great deal to them and for us to work on the

whole tax program.
Viner:

On the E Bonds. Isn't it E?

Graves:

That is right.

Kuhn:

And on the payroll deductions, specifically.

That is the only think that really interested

Henderson.

Viner:

So it is not the figure of bond sales but in

- 14 -

this category.
Tarlean:

Yes.

Sullivan:

Incidentally, Mr. Secretary, some one asked how

they felt about Social Security, and Harold

Smith said he hoped it hadn't been abandoned,

that just now it was pretty dead. Then I think

Leon made some remark and it got off on another

subject, and we never did get back to it, and
I wonder if anybody here asked the other three
fellows how they felt about Social Security.

Did anybody?

Viner:

Currie said he hopes very much it will go

through.
H.M.Jr:

Well, I will come to that, but I throw out

the suggestion now, I think next week you might
have another meeting like that and have the
same people, but bring in the people who are

interested in Social Security, see.

Paul:

I was terribly impressed with the value of that
sort of meeting. I think we ought to have them
regularly.

H.M.Jr:

I do. We could have another meeting and devote

some night next week to Social Security. I am
all for these meetings as long as I don't have
to go. (Laughter)

Ferdie?
Kuhn:

Nothing else.

H.M.Jr:

Chuck?

Kades:

Well, apart from the considerations that Tommy
has just mentioned, with which I agree, what
struck me in what they said was that if you got
this flexible instrument now, you wouldn't use

it, in which case it would - it might materially

- 15 -

affect adversely the imminence of getting a
tax program through in March or in April,
because the Congressmen would say, "Well,

you have had the power for two months to
impose this withholding tax and you haven't

done it, so what is the rush about it, whereas
if you were going to use it in the next two

months it would help get the program through
but as far as they could foresee, January and
February would be months where you wouldn't

want to use the instrument if you had it.

H.M.Jr:

(Mr. White entered the conference.)
Harry, you have got a minute and a half.

White:

Well, I am sure I have nothing to say. I
didn't know there was a meeting.

H.M.Jr:

Well, all the better that you haven't heard.

Give me a summary of what you would recommend

to me this morning.

White:

Well, I felt that the conclusion that was arrived
at last evening was a very happy one. I presume
what it was has already been indicated to you,

and I am in favor of that conclusion. I think
that the fact that those who were closest to

the problem seemed to feel that during the next
two or three months the price situation was

not likely to run away, but from then on there

might be sharp increases, indicates at the same
time that you ought to have something and that

it could well be presented with the larger
tax bill as a separate part. The only thing

in retrospect that I was a little bit sorry

about, we didn't ask them whether they thought

there was anything specious, anything slick
about that advance payments. It didn't strike

anybody that way, but whether they would have
had some worth while comments if it had been

metioned, I don't know, but that point was not

brought up. No one else brought it up. I think
that the opinion there was unanimous.

- 16 -

Paul:

There was some discussion of that.

Sullivan:

Yes, there was.

White:

There was of that?

Paul:

Yes, they didn't comment on it at all.

Sullivan:

It came up in the way that whether or not having
this on the books would adversely affect the
sale of bonds.

White:

No, that isn't what I had in mind. I had in
mind the point that troubled the Secretary

as to whether the Treasury - whether anybody
would think the Treasury was being slick.

Paul:

Well, Gaston made that point, don't you remember?

Viner:

That argument is out of the window, because the

general tax bill is already telling them what
they are going to pay next year.

White:

I guess that is right.

Viner:

That would answer that.

H.M.Jr:

Fortunately, my mind is also fluid, and I will

take this over. Now, one suggestion I made,
Harry, just before you came in, that there
should be a similar meeting next week, same
group, but add the Social Security group.
White:

I would like to say that I thought that meeting last night was very worth while, very well
handled, and there ought to be more like it
at the proper occasions.

H.M.Jr:

Did anybody act as chairman?

Bell:

John.

Sullivan:

No; I just made a general statement about our

- 17 -

principal concern being whether we should go
ahead and intensify the Defense Bond campaign

and if that didn't succeed, if we should try
to go ahead with the withholding or collection
at source tax, and that we had a couple of

schemes for doing that, and we would like to
present the general problem, and tell them

about these two schemes and get their comments

on the two schemes and find out if they had any
alternative schemes, and I told them Randolph
Paul had been doing quite a bit of work on that
and asked him to describe it to them, and then

he proceeded.
H.M.Jr:

How late did the meeting last?

Sullivan:

I guess the last fellow left a little after
eleven.

White:

Harold Graves gave a very good talk, and they
were interested and it was new to them.

Sullivan:

And they were very much encouraged by it.

The way they rose to Harold's recital of

what he thought could be done was - in fact,
they discounted him.

Graves:

Viner:

They stabbed me in the back.

It is better not to promise them too much, you

know.

H.M.Jr:

Harold never does. What are your reports from

the field, Harold, that I can take to the Presi-

dent.

Bell:

Mr. Secretary, we couldn't get figures that were
any good. Some of them are not reflected yet in
the accounts.

Graves:

Those are the general reports from the Federal

Bank. Here are the only reports that we got in.

The Post Office Department sent out wires to over

- 18 -

a hundred cities, but as I told you, on account
of the congestion--

H.M.Jr:

This isn't -

Graves:

... that is interesting.

H.M.Jr:

This is good.

Viner:

I would wait to see, even in giving him an
impression, how long that lasts, on that basis.

Graves:

I think Dr. Viner is right.
It may be a little flurry. And then what you

Viner:

may have to do is hard elbow grease to get it
up slowly without jumps.
Graves:

But there is no question that there is a
tremendous increase in interest.

Viner:

No doubt of it.

H.M.Jr:

Harold, at eleven o'clock I would like to see

you, Juhn and Odegard and Callahan and Mahan

and I want them to tell me very briefly - I
didn't get it the other day at all - the pro-

motional stuff which you have been doing, new,
and what they propose to do, new, you see.
Graves:

I have it, if you would like me to get it now,
a two page summary.

H.M.Jr:

No, I would like to see those men at eleven.

Graves:

All right.

H.M.Jr:

Do you want to bring General Sloan too.

Graves:

Sure.

H.M.Jr:

Keep it down to that, will you? And then let

those men be prepared to tell me at eleven what

- 19 -

what they have done and what they propose to

do and I will have a few ideas of my own.

White:

Is it clear that Mr. Smith, Mr. Eccles, and

Henderson, and Mr. Currie all went on record

as favoring this idea?

H.M.Jr:

Yes.

White:

If you want to check that up--

H.M.Jr:

No, that is clear. I have got the list.

Sullivan:

They were all warned that you wanted this kept

right within the room.
H.M.Jr:

Well, I am not worrying about Currie because
Harry took care of him.

Sullivan:

I know, he guaranteed the whole group, I
think.

White:

No, I am not worrying about him without that. One
swallow doesn't make a night club. (Laughter)
That is not bad.

H.M.Jr:

Yes, but a night club sometimes makes a gutter
snipe.

White:

Yes, after while.

Graves:

There is one observation I should make. I don't

think the Director of the Budget is friendly to
the bond program. He was a little skeptical
in his comments, I thought, in the open discus-

sion. He came to me afterward and told me he
didn't think we were getting important money or

the right kind of money. He doesn't like our
publicity, the tone of our advertising. He
says it is based on the defense note, not on the
anti-inflationary note. He certainly is cold

to this Defense Bond program. Were you there
when he was talking with me, Dan?

- 20 -

Bell:

No,
but I got his remark in the general discussion.

White:

That isn't quite fair, Harold, to what he said,
and I think he has got a good point. You are
speaking of Marriner Eccles aren't you?

Graves:

No, about Smith.

White:

I am awfully sorry.

Kuhn:

No, Eccles was interested in the bonds and very

friendly, but he thought that the publicity had

been bad and wrong and that it stressed defense
of the country, and we need your money, and didn't

stress the anti-inflationary nature of Defense
Bond buying, the need of getting payroll allotments. I think he is wrong, because we stressed
it very heavily.
H.M.Jr:

Well--

Bell:

They hadn't read the literature all the way
through.

H.M.Jr:

O.K., this is good.

Handed to HM Jr by Randolph Paul on
12/12/41.

1. Inflation
It is generally believed that there is a considerable danger of
inflation in 1942. There is some doubt as to when inflation may affect
the economics, but the general agreement is that it may very well do so
early in 1942.
Fear of inflation is based upon increased purchasing power caused

by defense expenditures at the rate of more than 2.5 billions per month
average for 1942. Such expenditures will put a heavy pressure upon the
price structure. The gap between purchasing power and the amount of

available goods has been estimated at varying figures up to ten billion
dollars. Tax payments are one of several mechanisms to absorb some of

this increased purchasing power. Even if taxes are an insufficient
mechanism and price control should be necessary, the absorption of pur-

chasing power by taxes relieves pressure and aids the policing of control.
2. Comprehensive tax program.

The need of a reorganization of our tax system, apparent before the
war has now become imperative. The policy and detailed problems involved

in an entire program are many, and will require further consideration
by the Treasury and a still longer period of consideration in Congress.
This is true not only as to hundreds of technical amendments, but also in

respect to basic matters of policy. It is doubtful if a satisfactory program can be put on the statute books until the middle of 1942.

3. The imposition of additional taxes as an instrument of inflation control.
To accomplish the control of inflation taxes must reach materially
into the lower income brackets which have the mass purchasing power. If

25
-2there is to be any instrument for the control of inflation previous to the
adoption of a complete tax program, there must be some collection of taxes
from low income groups.

It is believed inadvisable to impose additional taxes on the low
brackets in any separate bill which would not also subject to increased
taxes higher individual incomes, corporate incomes, and estates, and which

would not also close all avenues of tax avoidance to the privileged few.
Any such increased taxation would be regarded by the low incomes groups as

discriminatory and would be intensely resented. It is, therefore, inadvisable
to control inflation by imposing additional taxes.
4. Anticipated payments as an expedient

In lieu of immediate additional taxes upon the low income groups, it
has been proposed:

1) In order to expedite larger tax collections, ask immediately
for legislation authorising collection at the source of a percentage of taxes on 1942 incomes, otherwise payable in 1943,
the amount collected to be treated as an advance payment.
This point does not contemplate a separate or supplementary

tax, but rather the advanced collection of part of one integrated

income tax,

2) Let the Secretary of the Treasury, with the approval of the
President, have discretion as to the date when the collection
at the source begins.

3) Let the Secretary of the Treasury, also with the approval of
the President, have discretion as to the rates of collection,
or advance payment, within limits from, say, 2 to 10%
The advantage of this proposal are:
(a) The advance payments would immediately withdraw purchasing
power;

-3-

(b) The proposal would preserve intact the progressive rate
structure;

(c) While not ultimately solving the problem, such a mechanism
would accomplish for 1942 the anti-inflationary objects of

an additional tax, giving further time for the consideration
of taxes particularly adopted to the war situation:

(d) The proposal would accomplish the important objective of put-

ting the income tax in a large part upon a current collection
basis, thus integrating it with personal budgets;

(e) The proposal would enable the setting up more immediately of
an administrative system for collection at the source which will
ultimately undoubtedly be necessary. This will make the income
tax a more sensitive instrument of economic policy.
(f)

The proposal has the great advantage of flexibility in that it
may be used only if it should be necessary. This is particularly
important in view of many uncertainties as to the time of impact

of inflation. It enables control of inflation if, as, and when

inflation comes, but renders action unnecessary as long as there

is no serious inflation.

The principal disadvantage of this proposal is that it merely postpones
the problem. However, postponement is exactly what we need so that increased

taxes on low income groups, if any, may be integrated into the entire tax
program which reaches all taxpayers.

5. The public reaction
It may be asserted that some taxpayers, particularly those in the low
income groups, will not understand this program and will erroneously think

that additional taxes are being imposed. This will no doubt be true as to
some taxpayers, though most taxpayers will undoubtedly favor such an advance

-4-

payment program as against an increased tax program. At any rate,

the proposal seems the only available alternative to an additional tax

if we are to be prepared to control inflation. In other words, the only
alternative to the additional payment plan is to do nothing. Lack of
preparedness for inflation may well be criticized by the public if
inflation descends upon us before a complete tax program is enacted.

December 12, 1941
10:30 a.m.

RE AIR RAID SHELTERS FOR THE PRESIDENT

Present:

Mrs. Klotz
Mr. Thompson

Mr. Wilson

Mr. Reilly

H.M.Jr:

I spoke to the President. Well, in the first

place, get this. Mrs. Helm stopped me in the
street. She came out in the street to ask me

whether I would back her up with Mrs. Roosevelt that the foreign students should not come

to the White House reception, and I said I

would. Could she use my name, and I said she

could. Also, that the Army reception should

be called off, for the Army and Navy on Christmas
Eve and I said she could use my name on that.

Of course, this is so everybody gets it. Then

I mentioned to the President that we were going
to go ahead and prepare an air raid shelter

for him in the Treasury.

Thompson:

That is right.

H.M.Jr:

And he was very much pleased. I said could I
have some of his secret funds if necessary to
build this. He said I could have any amount
that I wanted. Then he said he wanted a
similar arrangement made in the State Department and also in the White House, and he said

also that then - he kept thinking about this

-2-

thing - that it should be done in the Capitol

and some place at the Senate Office Building
and some place in the House Office Building.
Now, what I thought was that you (Thompson)

and the Chief could call on - I think it is
Colonel - who is head of the Public Works?

Wilson:

Reynolds.

H.M.Jr:

No.

Wilson:

McNutt.

H.M.Jr:

No.

Thompson:

Fleming.

H.M.Jr:

And tell him in strictest confidence - we have
got to have somebody to do this building.

Thompson:

Reynolds is always helpful. We have had him

H.M.Jr:

No, this is his superior. I think he should

before.

go to Fleming or I could ask Fleming if he

could come over here. Supposing I ask Colonel
Fleming whether he wouldn't come over here.

Is it Colonel Fleming?
Thompson:

Wilson:

Yes.

And perhaps you would want Reynolds. Reynolds

has given it study, and he talked with us about
it just day before yesterday.
Reynolds, who is his subordinate -H.M.Jr:

Get it. The President has agreed on having one
in the White House and also we can use his
secret fund.

-3Wilson:

Reynolds, who is his subordinate, has tentative

plans for building one right across the
street, a seven story bomb proof structure that

would take them five months to build.
H.M.Jr:

You mean underground?

Wilson:

No, above ground. He drew the plan out in my
office for me roughly day before yesterday on
the ground where the Customs Court is right

now.

H.M.Jr:

Well, an underground vault is what you would
want.

Wilson:

Well, as a layman, I don't know - he has made
an extensive study for over here.

Thompson:

Reynolds made a survey of the Treasury building,
and he thought the thing we mentioned was the

best thing in the city of Washington today as an
emergency so we fixed that up immediately but

the question is construction.
H.M.Jr:

Is that what those men are doing down there now?

Thompson:

Oh, that is all available.

Wilson:

We had that open last night for use in the event
it was necessary.

H.M.Jr:

But you haven't put the channel through yet
to the President?

Wilson:

Oh, no.

(Telephone conversation with Colonel Fleming

follows:)

December 12, 1941
10:33 a.m.
HMJr:

Hello.

Operator:

Colonel Fleming.

HMJr:

Hello. Colonel Fleming.

Colonel

Fleming: Yes.
HMJr:

Morgenthau speaking.

Yes, Mr. Secretary.

HMJr:

Colonel, I've just left the President and

there are some special arrangements he'd like
me to make, but I need you to help me.
F:

All right, sir.

HMJr:

Do you suppose you and Mr. Reynolds could come

over here at eleven-thirty to my office?

Yes, sir.

HMJr:

To give you an idea what it's about, Chief Wilson
of Secret Service will be here.

HMJr:
F:

HMJr:

All right, sir.
It's about bomb-proof - you see?
Yes, sir.
I understand Reynolds has been doing some work

on it.

Yes, he's right here with me now; and we'll be
there.

HMJr:

And if you'll come to my private entrance, I'll
arrange that you can get in and get through the
barrier.

All right, sir.

HMJr:

See?

All right,sir.

-2HMJr:

Will you - it will be just you and Reynolds.

Okay.

HMJr:

Eleven-thirty.

All right, sir.

-4H.M.Jr:

He laughed at the barrier, about him trying
to get through. The usher had to show his
pass six times to get in the White House
this morning. And then I think you three
gentlemen ought to be here.

Wilson:

We will be here.

H.M.Jr:

At eleven-thirty, because this other thing - I
mean, I am not going to worry, but I am going
to tell him that the President wants it and it
is up to him to take care of the Capitol and
those people, but State and the White House

and Treasury, we will do that for the President. It is a good thing, because he can go
in either direction. If we have one in the

White House he will never come over here.

Reilly:

That is a six months' proposition in the White

House, Mr. Secretary.

H.M.Jr:

How long for this one?

Thompson:

This vault is available today.

H.M.Jr:

But can he get here under ground?

Reilly:

Yes, sir. Since Sunday night we have been set up

H.M.Jr:

Under ground?

Wilson:

Not under ground.

H.M.Jr:

How long will it take to do this thing?

Thompson:

Reynold was going to let us know today.

H.M.Jr:

They ought to work day and night, three shifts.

Thompson:

to move him into the vault if necessary.

He said they were working twenty-four hours a

day, three shifts and shove it through in a

week probably.

-5-

H.M.Jr:

They ought to do it tonight.

Reilly:

I wish they would give some thought to putting
in an arrangement like they have between the
Senate Office Building and the Capitol.

Thompson:

lie doesn't approve of that. He says for a

bomb-proof tunnel it ought to zigzag. If it
was a straight line, it would shatter the

whole thing.

Reilly:

I am thinking about the President and the
speed.

Thompson:

Iidea
am isgoing
to talk to Reynolds about it. His
curves.

H.M.Jr:

Supposing we talk about it at eleven-thirty.

Thompson:

We had thought about an automobile going through

H.M.Jr:

I told the President, Chief. He was pleased with

it. He said it should have lots of curves in
it.

everything except about darkening the White

House two nights.

Reilly:

We did not order that.

H.M.Jr:

I know, it was the usher, and I told the usher
to stop
it. He didn't like it, but everything
else
he likes.

Wilson:

Fine.

H.M.Jr:

I will see you gentlemen later.

35
December 12, 1941
10:44 a.m.

Operator:

Go ahead.

HMJr:

Hello, Mr. Eicher.

Mr.

Eicher:

Hello, Mr. Secretary.

HMJr:

I'm sorry. I just got back from the White House.
I called as soon as I got back.
Well, I know you're very, very busy.
No, I've always got time.
Well, I'm very, very anxious to see you myself
either today or tomorrow; but I'm 111, and the
doctor won't let me get back to the office

HMJr:
E:

before Sunday.

HMJr:

Oh, I'm sorry.

And I'm - I'm calling directly for this purpose,

to see if you won't give Commissioner Ganson Purcell
a few minutes of time either today or tomorrow.

HMJr:

Who?

Purcell - Commissioner Purcell.

HMJr:

Oh, surely.

Can you tell me the time now so I can let him
know when to come over?

HMJr:

Yes, I'll see him at a quarter of twelve.

At quarter of twelve?

HMJr:

Yes.

This morning?

HMJr:

Yes.

I'11 have him there.

HMJr:

Thank you.

Thank you very much.

HMJr:

Good-bye.

36
December 12, 1941
10:43 a.m.
RE GOVERNMENT BOND MARKET

Present:

H.M.Jr:

Mr. Bell
Mr. Morris
Mrs. Klotz

I am sorry, I just got back from the White

House.

(The Secretary held a telephone conversation

with Mr. Eicher.)
Klotz:

Who?

H.M.Jr:

Purcell.
Well, you gentlemen be back at a quarter of

twelve, SEC, Purcell. I don't know what it

was. Go ahead.
Bell:

The prices are up from one to five. The

demand, both taxables and the tax exempts, but

there is no supply available. The two's are
five and the new two and a half's are three
thirty-seconds premium.

H.M.Jr:

What do you mean, no supply available.

Bell:

It says no supply available of those securities,
tax exempts.

H.M.Jr:

I have got some.

Bell:

Have you?

H.M.Jr:

Sure, and they are for sale.

-2-

Bell:

Well, I wouldn't sell them yet, but I think
they are for sale later on.

H.M.Jr:

Don't hold on to them too long.

Bell:

Let's let the market fluctuate a little. I

agree with you that they should sell them later.

H.M.Jr:

What do you mean, later?

Bell:

When the market gets a little better tone. We
may have bad news again.

Morris:

Another five thirty-seconds.

H.M.Jr:

What are the two and a half's selling at now?

Bell:

Three thirty-seconds premium.

H.M.Jr:

You mean a hundred and three thirty-seconds?

Bell:

Yes, a hundred and ten cents.

H.M.Jr:

And the two's?

Bell:

Five thirty-seconds premium.

H.M.Jr:

Well, I agree with you. When they get up a

Bell:

little bit more you would begin to-Even if they kept this for a week and the
demand is still there with no supply, I would
let some of them go, but I would let the market
get pretty well settled first, and be sure that
we got the distribution through.
Parkinson called me yesterday and he said he
wanted you to know that he had bought forty-

five million dollars of our securities in the

last four days and Bob Rouse said that he and
Metropolitan and New York Life and the New
York Trust had been very helpful, and Morgan's,
also, Morgan's and Chase. Guaranty had been in

-3-

there also.
H.M.Jr:

Parkinson is the best man down there. Is he
sick?

Bell:

I don't think he is sick, but I think he is
getting along in years and he is just kind of
drifting out. He still comes to the office two
or three days a week or something like that,

but I don't think he is as active as he was a
year ago. I don't think he is as well as he was
a year ago, either. But, on the other hand, I
don't think he is what you would call sick.
H.M.Jr:

All right.

39
TREASURY DEPARTMENT

Washington

FOR RELEASE, MORNING NEWSPAPERS,

Friday, December 12, 1941.

The Secretary of the Treasury, by this public notice, invites tenders for $150,000,000, or thereabouts, of 91-day Treasury
bills, to be issued on a discount basis under competitive bidding.
The bills of this series will be dated December 17, 1941, and will
mature March 18, 1942, when the face amount will be payable without interest. They will be issued in bearer form only, and in

denominations of 31, 000, 5,000, $10,000, $100,000, $500, 000, and
$1,000,000 (maturity value).

Tenders will be received at Federal Reserve Banks and

Branches uo to the closing hour, two o'clock p. m., Eastern Stan-

dard time, Monday, December 15, 1941. Tenders will not be
received at the Treasury Department, Washington. Each tender must

be for an even multiple of $1,000, and the price offered must be
expressed on the basis of 100, with not more than three decimals,

e. g., 99.925. Fractions may not be used. It is urged that

tenders be made on the printed forms and forwarded in the special
envelopes which will be supplied by Federal Reserve Banks or
Branches on application therefor.

Tenders will be received without deposit from incorporated

banks and trust companies and from responsible and recognized

dealers in investment securities. Tenders from others must be

accomoanied by payment of 10 percent of the face amount of Treasury

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

Immediately after the closing hour, tenders will be opened at

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

will be advised of the acceptance or rejection thereof. The
Secretary of the Treasury expressly reserves the right to accept
or reject any or all tenders, in whole or in part, and his action
in any such respect shall be final. Payment of accepted tenders

at the prices offered must be made or completed at the Federal
Reserve Bank in cash or other immediately available funds on
December 17, 1941, provided, however, any qualified depositary

will be permitted to make payment by credit for Treasury bills
allotted to it for itself and its customers up to any amount for
which it shall be qualified in excess of existing deposits when
SO notified by the Federal Reserve Bank of its district.
The income derived from Treasury bills, whether interest or

gain from the sale or other disposition of the bills, shall not
have any exemption, as such, and loss from the sale or other
disposition of Treasury bills shall not have any special treatment,
as such, under Federal tax Acts now or hereafter enacted. The
bills shall be subject to estate, inheritance, gift, or other
excise taxes, whether Federal or State, but shall be exempt from

28-93

40
-2-

all taxation now or hereafter imposed on the principal or interest
thereof by any State, or any of the possessions of the United
States, or by any local taxing authority. For purposes of taxation the amount of discount at which Treasury bills are originally
sold by the United States shall be considered to be interest.

Under Sections 42 and 117 (a) (1) of the Internal Revenue Code, as
amended by Section 115 of the Revenue Act of 1941, the amount of
discount at which bills issued hereunder are sold shall not be
considered to accrue until such bills shall be sold, redeemed or
otherwise disposed of, and such bills are excluded from considera-

tion as capital assets. Accordingly, the owner of Treasury bills
(other than life insurance companies) issued hereunder need
include in his income tax return only the difference between the
price paid for such bills, whether on original issue or on subsequent purchase, and the amount actually received either upon sale
or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418, as amended, and this

notice, prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank or Branch.

-00o-

December 12, 1941
11:00 a.m.

RE FOREIGN FUNDS CONTROL

Present:

Mr. Thompson

Mr. Foley
Mr. Pehle

Mr. Bernstein
Mrs. Klotz

H.M.Jr:

I have here a report from J. Edgar Hoover, the
report of his man Piper with our man in San
Francisco, confirming what I only sensed, that
this man in San Francisco got a bad nerve and

went off completely half cocked and Hoover was

kind enough to show me this thing and that is
that, that we weren't prepared and that the
thing is being badly handled out there, and that
this man that we are relying on is no good, this
so-called expert in the Japanese business.

Now you men can read that thing. Now here comes you read these telegrams out loud. They came to

Mrs. Roosevelt. I knew this thing would descend
on me personally sooner or later.

Foley:

"RESPONSIBLE PEOPLE IN CALIFORNIA FEEL BANK
ORDER PERMITTING AMERICAN FIRMS TO RECEIVE
JAPANESE GROWN VEGETABLES AND RETURN MONEY

NOT TO JAPANESE BUT TO CERTAIN BANKS WHO CAN
LATER PAY BILLS INCURRED WILL WORK TOO SLOWLY
TO SAVE VEGETABLE CROP WHICH CONSTITUTES SEVENTY
FIVE PERCENT OF WINTER VEGETABLES FOR WHOLE

COUNTRY. THIS CROP PERISHABLE AND INVALUABLE
TO COUNTRY AS A WHOLE. PEOPLE HERE FEEL IF
RECEIVER COULD BE APPOINTED TO RECEIVE MONEY AND

-2DOLE OUT TO JAPANESE NATIONALS AND AMERICAN

CITIZENS JAPANESE EXTRACTIONS SUFFICIENT FOR
LIVING EXPENSES THESE CROPS MIGHT BE SAVED."
"THE YMCA OUT HERE AND YWCA MUCH DISTURBED
FOR AMERICAN BORN JAPANESE STUDENTS IN COLLEGE
WHO CANNOT OBTAIN TRANSPORTATION. THEY WANT

CLARIFICATION OF FEDERAL ORDER APPLYING TRANSPORTATION, ALSO BANK AND MONEY FOR AMERICAN

BORN JAPANESE CITIZENS AND PARENTS LIVING WITH

CITIZENS. THEY ARE ASKING FOR LIVING EXPENSES
FROM THE BANKS. THEY SAY GENERAL ORDER FROM
TREASURY DEPARTMENT IS INTERPRETED DIFFERENTLY

AND IS CREATING GREAT HARDSHIPS.
ELEANOR ROOSEVELT"

H.M.Jr:

Now, how are you going to answer those?

Pehle:

Those were taken care of last night.

Foley:

The first telegram--

H.M.Jr:

It was?

Foley:

Yes, sir.

H.M.Jr:

Which one?

Pehle:

Both of those were taken care of last night
by two licenses which were issued last night,
one of which allows living expenses and the
other one takes care of the food situation.

Foley:

"The Treasury Department today announced regu-

lations governing living expenses and wages for
Japanese nationals in United States and regulations governing Japanese nationals engaged in the

production, marketing, and distributing of food
and agricultural products within the United

States.

-3"Under General License No. 11-A any Japanese

national in the continental United States may
receive up to $100 per month for living and
personal expenses for him and his family."
H.M.Jr:

I saw one thing. In Honolulu we allowed them

Foley:

They did that on their own. We delegated that
to Poindexter.

H.M.Jr:

Is this a release?

Foley:

Yes, sir. It went out last night.

two hundred dollars.

"This license permits such payments from either
the national's bank account or from his employer
in the form of wages. Banks and employers making such payments are required to make certain
that the Japanese national is not drawing more
than $100 under the license. Thus a Japanese
national cannot draw $100 per month in the form
of wages and at the same time withdraw $100 per
month from his bank accounts.

"Under General License No. 77 Japanese nationals
engaged in the business of producing, marketing

or distributing food or agricultural products

may, with minor exceptions, engage in all transactions incident to the normal conduct of such

business. However, under the license a Japanese
national cannot withdraw from his accounts during
any one week for such enterprises sums in excess

of his average weekly withdrawals during the last
six months. Moreover, the license covers only
Japanese nationals who were previously licensed

under General License No. 68. This action is
intended to permit the orderly movement of fresh
vegetables and other food in areas such as the
Pacific coast in order to supply the needs of

our civilian population and military forces."

H.M.Jr:

When was that released?

-4-

Foley:

Last night.

H.M.Jr:

No paper carried it.

Pehle:

It was very late at night.

H.M.Jr:

Now, I will tell you what you do. Arrange with
Vincent Callahan that this be put on all the

West Coast radios, you see. Arrange with him

that all the West Coast radios put it out. Cal-

lahan is in Graves' room. Let Chick Schwarz he should be able to do this, so we don't get
the two things crossed out. He ought to be
able to get the West Coast radios to announce

this thing.

Foley:

Itoshould
think so. It would be pretty important
them.

H.M.Jr:

Now, and then we will find out where Mrs.
Roosevelt is.

Foley:

That ought to take care of the transportation
thing as well.

Pehle:

Well, the transportation is not only freezing

but the enemy aliens where they won't let them

go from one point to another, but that is not

our problem.
Foley:

And CAA won't let them ride the airlines.

H.M.Jr:

Let me tell you a little story for the first
time. Never say that again, it isn't our
problem, when somebody like the President

or Mrs. Roosevelt brings me a complaint. It is
my problem. Now, wait a minute. Get this thing
straight. Just telling poor Mrs. Roosevelt who
is out on the West Coast that it isn't Treasury
doesn't help her any.

(Mrs. McHugh entered the conference.)

-5H.M.Jr:

Take this telegram to Eleanor Roosevelt.
"Thank you very much for your two telegrams.

I am sending you herewith a copy of the two
press releases which were given out late last

night. We hope that this will take care of the
situation which you were kind enough to bring
to my attention.
Now, what are the other things which will have
to be taken care of by other people.
Pehle:

Well, the transportation, Mr. Secretary, is

caused by the proclamation which the President
issued barring enemy aliens from moving from
one place to another except under certain regula-

tions. I should think that that is Biddle's

problem, although I-Foley:

Biddle and CAA.

She says, "Japanese students in college who can

not obtain transportation are disturbed. They
want clarification Federal order applying transportation also bank and money for the American
born."

That is taken care of.
H.M.Jr:

Paragraph. "As to the transportation question,

while that does not fall under - is not part
of the Treasury's responsibility, we are contacting other Federal agencies and will hope

to have a report for you on that shortly hope to shortly have a report - hope shortly
to have a report for you on that.
Now what else?

Klotz:

Is this a telegram?

H.M.Jr:

I will explain it.

-6Foley:

How did the first of it start? Did he say

McHugh:

"Thank you very much for your two telegrams.

releasing two licenses?

I am sending you herewith a copy of the two
press releases which were given out late last

night."
Foley:

Just one press release, and there were two
general licenses. The press release and the
general licenses.

H.M.Jr:

"The press release of the general licenses."
"The press release covering two general licenses."

Just say, "the press release." She doesn't
know what it is.
Klotz:

Just say, "the press release and two licenses."

H.M.Jr:

Well, "the press release covering two general

licenses." Is that technically correct?

Foley:

Yes.

H.M.Jr:

All right. Now read it again, please.

McHugh:

"Thank you very much for your two telegrams. I
am sending you herewith a copy of the press
release covering two general licenses which
were given - which was given out--"

H.M.Jr:

"Which were released late last night."

Foley:

"Which was."

H.M.Jr:

Yes.

McHugh:

"Which was released late last night. We hope

that this will take care of the situation which
you were kind enough to gring to my attention."

-7-

Paragraph. "As to the transportation question,
while that is not part of the Treasury
responsibility, we are contacting the other
Federal agencies and will hope shortly to have
a report for you on that."
H.M.Jr:

Now, this is the thought that I had. It is
very nice to do this release and all that. It
is like what I originally told you, I sent a
letter to the banks, do this stuff, and they
don't do it. What would you gentlemen think
if I could put W. I. Myers, who is both farmer

and financeer, on a plane to go out there to
Los Angeles and watch this farm situation for
us, you see, and have him stay there as our

representative until this thing gets straightened
up, Bill Myers, you see. Send him there
amongst the farmers to see what the situation is.

What?

Foley:

Sure.

H.M.Jr:

If he would go and get on a plane tonight and
go out there, he would know. He would do it.
These men (Foley and Pehle) sitting at a desk

can't tell. He will get the Farm Credit people,

anybody he needs, to go out and see what is the
matter and is it working. I want somebody on
the ground whom I have confidence in.
Klotz:

It has been so far away from Washington and so
removed from everything.

H.M.Jr:

But look, I want to know why aren't the crops what is the trouble. There are few men in the
United States who are both a financier and a
farmer and to have a man on the ground would be
very reassuring to me.

Klotz:

I think that is right, but I was wondering if

he was your best bet.

-8-

H.M.Jr:

Well, I will have him contact Helen Gahagan
and between the two of them they can do it.

Foley:

You told your people, didn't you?

Pehle:

I told them to get in touch with the Agricultural

people there.
H.M.Jr:

Well, if I can get Bill and put him on a plane

Pehle:

We won't be crossing Agriculture by doing that?

H.M.Jr:

He is there as a Treasury man. I will tell him
to contact the Agricultural people. This is a
serious thing. I mean, I think that - if I can
get him out there. Do you think it would be

to go out there--

crossing them up?

Pehle:

It troubles me a little bit on that score because by the license we issued last night we

took away all the financial controls so they

won't stand in the way any more of the farm
situation, so it becomes a disturbed farm
situation caused by the attitude of the Japanese
farmer.

H.M.Jr:

Maybe you're right. This is the way this is to be

handled, Mrs. McHugh. Sign it, "Affectionate
regards." This is to go by Secret Service
teletype at Seattle to be delivered by a
Secret Service agent to Mrs. Roosevelt. From
here by teletype.

McHugh:

Our men down stairs will teletype it?

H.M.Jr:

Tell Chief Wilson to teletype this thing to

Seattle, and then the Secret Service agent will
put it in the hands of Mrs. Roosevelt. Ask him
to wait to see if there is any answer for me.

Klotz:

She is with the Boettigers.

-9H.M.Jr:

We have five men with the Boettigers so there
should be no trouble.

Chief Wilson should get this thing, and they
should contact Mrs. Roosevelt and put it in

her hands and wait for an answer.
McHugh:

Do you want this transcribed also, these

general licenses, or just the first thing?

Foley:

I think the press releases are enough.

H.M.Jr:

Who is your man in charge there?

Pehle:

Towson.

H.M.Jr:

Read the last two pages of that. You know on

your orders, I have got teletype all over the

country and the telegraph wires are all jammed,
you know, but you can get through on teletype.

Don't forget about that. Did you know that?

Pehle:

No.

H.M.Jr:

Did you know I had teletype?

Pehle:

No, I didn't.

H.M.Jr:

Yes, I have teletype all over.

Pehle:

Swell, because we can't get through on the
telephones for so long--

H.M.Jr:

No, I have teletype all over and the thing to
do is--

Pehle:

Secret Service?

H.M.Jr:

I will show you. I will get a teletype directory.

Pehle:

We have a teletype direct to New York, but the
other one goes through the Treasury board and

- 10 -

Board of Governors and then it gets held up
at Chicago and it takes an awfully long time.
H.M.Jr:

I have a teletype upstairs. It is my own

teletype. I set this thing in. I was a crank
on this communication. It is upstairs with

my own room, and I will show you the places

you can send it to.
Pehle:

Fine.

H.M.Jr:

This does not - this is our own paid system.

Pehle:

It is in the office that Secret - Secret Service

Office?

H.M.Jr:

No, this happens to be in our own telegraph room

Pehle:

But I mean on the other end.

H.M.Jr:

I will show you.

on the third or fourth floor.

Now, let me ask you this. I want to write a
letter to the Attorney General in which I say,
on second thought we have decided that we are
going to confine ourselves - where is Towson?

Pehle:

Federal Reserve Bank in San Francisco. He may

still be in the hotel.

(The Secretary held a telephone conversation
with Mr. Hamilton of the Department of Agricul-

ture as follows:)

51
December 12, 1941

11:18 a.m.
HMJr:

Hello.

Operator:

Go ahead.

Mr. Carl

Hamilton:

Hello, Mr. Secretary.

HMJr:

Mr. Hamilton, this is Morgenthau speaking.

Yes.

HMJr:

We have been having a lot of trouble with the
Japanese farmers in the Los Angeles District.

Uh huh.

HMJr:

We think we've got them straightened out.....

Uh huh.

HMJr:

..... but we're not sure. I want whoever your
very top man is in the Los Angeles area - if

Claude Wickard would ask him to get on this
thing - whether your Farm Bureau Agents - whoever your best people are, you see?
H:

Uh huh.

HMJr:

We don't know whether it was the financial

situation or whether they've just gone on a
sit-down strike and don't want the food to go

in, you see?
H:

They're withholding food.

HMJr:

That's the point.

I see.

HMJr:

Now the excuse that they gave was - the excuse

that they gave was that if they sold and got

any money, we'd lock it up. Now, we've changed
that situation and they have no excuse.
H:

Uh huh.

-2-

HMJr:

But the situation - the food situation around

Uh huh.

HMJr:

And I'm very anxious to get a first-hand report

Well, we'll get that for you right away.

HMJr:

Los Angeles is very acute.

of what happened this morning - did the food
move into the markets, and what happened, and
so forth and 80 on.

Now, if you want to find out about what our
regulations are - now just a minute, and I'11
tell you who to contact.

All right, sir.

HMJr:

We have a man by the name of Joseph Murphy.

Joseph Mercy.

HMJr:

Murphy.

HMJr:

Murphy.

Yes, sir.

HMJr:

At the Los Angeles Federal Reserve Branch

Uh huh.

HMJr:

And he's there representing us.

Uh huh.

HMJr:

So if, for instance, they say, well - they want

any change, or what are the regulations - they
go right to this man.

Yeah. These Japanese are, of course, citizens.

HMJr:

Well, some are and some aren't.

Really?

-3-

HMJr:

But there's about a hundred thousand of them

Ye Gods. Why, I thought we were taking up the
nationals as fast as we could.

HMJr:

down there.

I think FBI took - oh, I don't know - less than

a thousand.
H:

Is that 80.

HMJr:

If they took that many.

Uh huh.

HMJr:

So there's a hundred thousand of them in that
district.

Uh huh.

HMJr:

Now, I want the food to flow.

Yeah.

HMJr:

And
theon.hospitals are complaining and so forth
and 80

Yes.

HMJr:

And if you could - I think it's important enough
to get word to your various county agents and

what have you.
H:

HMJr:

That's right. Well, we've got our Defense Boards

out there. They'11 get right on this.
Get right on this, and I'd personally like to
be informed.

All right, sir.
And don't hesitate, if you think we're wrong,
if we haven't done anything, call a spade a
spade.

All right, sir. Tell me this, from what sources

have you gotten the complaint. That might help us.

Or do you want to
HMJr:

Well, we get them from everywhere; and the last
one
that we got was from Mrs. Roosevelt, who's
on the West Coast.

Well, that's good enough for us.
It's good enough for me.

HMJr:
H:

(Laughs) All right, Mr. Secretary, right away.

HMJr:

All right.

Good-bye.

HMJr:

Thank you.

- 11 H.M.Jr:

Your (Pehle's) suggestion was good. I am
glad you made it, because that puts the whole
organization to work.
Now, this is my impression, gentlemen, and you

can come back at me. After reading that

stuff there, I think I would like to write a

letter to the Attorney General and to J. Edgar
Hoover along these lines and simply say, "After
giving this matter careful consideration we feel
that all that we can attempt to do is to close
the businesses on which we have these T. R. Forms.

We feel that the situation is full of dynamite,

that this is a responsibility - that this

situation as we see it as brought now to your
attention and we realize that you are fully aware
of it and will take whatever steps are necessary,
but we hereby want to serve notice on you that
we are just going to take care of the businesses

which we have these forms on or which you ask

us to go into.' I want to stop all this going

helter skelter through a telephone book on the
Japanese stuff and so forth, you see. I want

to stop it.

Pehle:

Mr. Secretary, could we first be sure that we
all understand this T. R. business, because it

is a little confusing. The firms which were

operating under license before Japan was frozen
are the ones we are talking about. Those were
the ones that were either owned by Japanese in

Japan, such as the big enterprises like Mitsui,

Mitsubishi, N. Y. K., or were owned by Japanese

who came here after June 17, '40. It won't
cover the bulk of the Japanese business in this
country owned by people, (a), who are American

citizens, Japs who are American citizens, or

Japs who aren't American citizens who have been
here since June 17, 1940.
H.M.Jr:

Now let's, for the time being, eliminate those

who are American citizens.

- 12 -

Pehle:

From the control altogether?

H.M.Jr:

For the moment. I mean, for the next courle
of days until we catch our breath. What
about the aliens who have come here since
June 17?

Pehle:

We are controlling those.

H.M.Jr:

You are controlling those?

Pehle:

That is right.

H.M.Jr:

That have come since?

Pehle:

That is right.

H.M.Jr:

What about the aliens that have come in before
then?

Pehle:

We are trying to control those. That is what

the big problem is out in California. That is in Little Tokyo in Los Angeles, it is just full

of those people, a great many of whom are not
citizens but have been here for several years.

- 13 H.M.Jr:

Again I say, in the attempt to swallow this
bad wolf, we are choking.

Pehle:

I agree.

H.M.Jr:

Now, we are taking on a lot of people that
aren't used to this business.

Pehle:

That is right.

H.M.Jr:

The repercussions on us will be bad. I would
much rather we got off to a - too quick a

start. Now, what I want to do is just to

stop for a couple of days and catch our breaths.

I am telling you that I want to stop and I
want to get out of this thing, this request I

made of the Attorney General to arrest several
thousand people, because I don't want to do it.
Pehle:

Do you want us to stop hiring guards in California?
I talked to my people yesterday and Maloney,
who is the coordinator out there, who might be perhaps there are some doubts about his efficiency

but that is beside the point. He is hiring

guards in great numbers, according to our orders,
but they have some question as to what kind of

people he is hiring and whether he will load

this thing up with friends of his or what.

H.M.Jr:

How many people have you got now out there,
roughly?

Pehle:

I would say we have about five hundred.

H.M.Jr:

What I would do is, I would stop right there
and let's see what we have got, see? Just
stop hiring for a couple of days and let's

just stop, look and listen. Is that all right

with you?
Pehle:

Very good.

H.M.Jr:

Let's just stop. Now, what business is - can't

- 14 -

you
confine yourself just to taking care of
the aliens?
Pehle:

H.M.Jr:
Pehle:

H.M.Jr:

Well, that is what we have been doing.
I thought
book.

you were taking anybody in the telephone

Japanese citizens? Oh no. I think they have
been going to the places and if they couldn't
prove
theythem.
are American citizens then we try
to control
I want to get this even more - I mean, I am

not satisfied. In the first place, I want a
letter withdrawing that request that we

recommended that the Army and Navy go in and

arrest these - I am on record as making this

request, you see. I want to make it perfectly
clear that we are going to do the best we can.

I haven't still satisfied myself. But I

want to formally say that whatever the decision

is in regard to alien property - alien population in
America, I feel that having drawn it to the
attention of the Attorney General it is his
decision and that it is a separate matter and if
he doesn't, we don't want him to do it in
connection with freezing of the property. He
has got to do it because he thinks It is a
danger to the country. Make that very clear,

you see.

The request we made was in connection with

doing it to help us do this freezing. Now,
I want to say, I withdraw that request, and if
this thing is going to be done, he has got to
decide to do this thing because he thinks they

are a menace to this country and not because we
want to freeze these businesses. That I am

not
going to argue about. That I want to get
over.
Foley:

I am not arguing about it.

- 15 H.M.Jr:

No.

Foley:

The only point I would large about is that
you made it in connection with freezing. I
think that the whole thing was raised as

something that we came across that was
bigger than we could handle, that was beyond

the scope of the freezing control.

H.M.Jr:

That is all right. But I want to make it
perfectly plain to them. I don't want them to
do it solely because he thinks I want it done
to help us in the freezing. If he wants to
do it, he has got to do it in connection with
the defense of the realm because he has got

to decide that this is necessary in order to
protect the United States, but not to do it

because we here in the Treasury have got
hysterical Monday night or whenever it was.
Do you see what I mean? Is that clear?
Foley:

H.M.Jr:

Yes.

You agree with me on that?

Foley:

Yes.

H.M.Jr:

Let me do it once more.

Foley:

I understand it.

H.M.Jr:

I am going to do it once more. You have got

to write the letter for me. "I have brought this
to your attention, Mr. Attorney General. If
you decide to do this thing, you have got to
decide this thing solely on the ground, is this
a menace to the safety of the United States. I
don't want you to do it because - as an adjunct

to the freezing." All right?

Foley:
H.M.Jr:

Right.

Have you any question on that?

- 16 -

Pehle:

No sir, none whatsoever.

H.M.Jr:

Have you?

Bernstein:

No.

H.M.Jr:

But I want that in writing and I want it soon.
I would like to get it to him before Cabinet,
in case he brings it up. Now --

Foley:

It can be done.

H.M.Jr:

Now, I am not yet satisfied, John, as to how

you are going to restrict this thing. Can't
you
-- in the first place, I want to slow
down.
Pehle:

Well, there are a lot of ways of slowing down,

Mr. Secretary.
H.M.Jr:

Well, make some recommendations. How can we
slow this down?

Pehle:

What I recommend that we do is to allow Japanese

people in this country who are operating small
businesses to continue to operate them and not

go up and down the streets slapping padlocks

on their doors. If we do that, we are going

to have to support those people for the duration

of the war and I don't see any point in shutting
down every Japanese concern in the United

States and that is what we are trying to do

in California. It is almost hopeless. The

Japanese grocer, we have been trying to shut

down. We have eased up a little bit on that,
but it is not a problem that we are equipped
to handle on the basis of issuing individual

licenses.
H.M.Jr:

All right. Are you raising a question or is
this a recommendation?

- 17 Pehel:

It is a recommendation. I haven't discussed
it with anybody else. You asked for my

recommendation and that would be it.
Foley:

Mr. Secretary, on Sunday night after the attack
in Pearl Harbor and the declaration of war
against us, the orders went out to freeze
everything in so far as Japan was concerned,
and we would take a look-see afterward. Now,
that is farther than we have ever gone before,
vastly farther than we have ever gone before.

We shut down everything.
H.M.Jr:

I know.

Foley:

And now we have got to relax.

H.M.Jr:

That is what I am saying.

Foley:

We admit we went too far. That was the purpose,
and now we are looking at it and we are getting

the complaints. What John is saying is that
what we did last night in so far as these

food businesses is concerned and in so far as
the hundred dollars a month for these families

is concerned, is still too little. We have

got to relax the controls even more. As you

said yesterday afternoon, right now we have got
to re-examine the whole thing and see if we

have not gone far enough with the Germans and

the Italians and we have gone too far with the

Japs.

Now, we are not together with the two problems.
The Japanese thing was shut down entirely

and then we backed off just a little bit --

H.M.Jr:

Now look, I can't keep this man waiting. You
know now how I feel, see. Before I go to

Cabinet I would like to send this letter so that
he doesn't bring this thing up in Cabinet.
I want to be on record and get it in his hands,

my change of the request. As to the second

- 18 -

thing, think this thing over, how we can do this

thing. Now, I told Ed a little story. I

don't know whether he repeated it to you,
(Pehle) but this is apropos. When I came in
here we had this law enforcement. They said,
"We want twenty-five hundred more men. I said,
"Well, what for?" "Well, we have got to go

after those people in the Tennessee mountains

and North Carolina." I said, "I am not going
to do it." We always get so many people killed,
is the reason they wanted them. Well, I am
not going to do it.
(Mr. Stone entered the conference.)
H.M.Jr:
Stone:

Are you in charge up there?

Just in Chick's absence. He is over at the

White House.
H.M.Jr:

Never mind, then. What is your name again?

Stone:

Stone.

H.M.Jr:

Thank you. That is all.
(Mr. Stone left the conference.)

I, with my eyes open, have left the little

fellow who makes four or five gallons of alcohol
to make it up and down the Appalachian chain. My
men haven't got shot and I have half the enforcement people - I will leave them alone. There
has never been a complaint. The stuff has never
gotten into commercial channels. That is the
same thing here. In other words, I was prac-

tical. I said, "I can not go after all of these

people," you see, with the result that we have
had good enforcement, but the little fellow

with the little still we have left. It is the
same thing as here. I want--

(Mr. Thompson entered the conference.)

Sit down, Norman. I want from you people a

- 19 -

practical recommendation what we can enforce well

during the next ten days. And then as in
extra cases, instead of five gallons, when
the fellow jumps to a hundred gallon still,
then we will take care of him; but I want
from you fellows a practical suggestion written
out so that order could go out if I approve
it when I come back from Cabinet. That gives
you from now until four o'clock. There is
no question. That gives you time?
Foley:

H.M.Jr:
Foley:

H.M.Jr:

Thompson:

I don't know whether it gives us enough time.

It gives you plenty of time.
We won't do anything else between now and the
time you come back.

Listen, Norman, I asked for Chick Schwarz. I
said - they said he is at the White House.
We want to get something out on the radio. I
said, "Well, who is in charge?" They send this
fellow Stone down here, who is a half-wit.
Shaeffer is supposed to be in charge in his

absence.

H.M.Jr:

Look, Norman, I asked you two months ago to

clean that thing up. Now, I want it cleaned

up. You told me you were going to move these
two or three men and so forth and nothing happened.
Now, I want that press office cleaned up so
that if Chick Schwarz is sick I can get somebody

down here that isn't a half-wit.

Thompson:

H.M.Jr:
Thompson:

I will get right at it.
I don't want - you have had this assignment
for fully two months.

Yes. Of course, they have all told me that
these men were all right.

- 20 -

Klotz:

That is right.

Thompson:

And I have just been --

H.M.Jr:

You
told
me you were going to move three men
out of
there.

Thompson:

That is right, a couple of weeks ago, and I
was getting a report in --

H.M.Jr:

Well, that was a couple of weeks ago.

Thompson:

But Shaeffer is supposed to be Schwarz'
assistant.

H.M.Jr:

Well, he is not here.

Klotz:

He is over in Procurement, isn't he?
Mr. Morgenthau, they have no teletype to
Seattle.

H.M.Jr:

Well, wait a minute, just a second; just
tell them to wait a minute. Well, at Seattle,
United States Treasury has Federal Office

Building S. E. one hundred forty-six, U.S.
Customs Agency.

Klotz:

I will send it to Customs.

H.M.Jr:

Who said that?

Klotz:

Mrs. McHugh. She said Chief Wilson told her
that.

H.M.Jr:

Well, we will send it to the Customs office.

Klotz:

Narcotics has one too.

H.M.Jr:

Customs is all right. Tell them the number
is S. E. 146. You see, Pehle, in this book

you can look at any city. There is Seattle.

Now we will look at San Francisco. Customs

-21-

is two eighty-four. It is mostly Customs,

you
see, instead
of Coast Guard, but here is
this book,
you see.
Pehle:

All these in San Francisco?

H.M.Jr:

No, this is U. S. Government.

Pehle:

H.M.Jr:

Federal Reserve must have one there.

No, I don't think that they have - they have

always been very funny about that. The Federal
Reserve
F. twenty. I will make you
a
presentBank,
of thisS.book.
Pehle:

H.M.Jr:

Thank you.

But you see, between them - and the one you

want to use - Ed, you can do this thing. That
is my number, one hundred sixty-eight, isn't
it? Itupstairs?
is Chief Clerk, Message Center. Isn't
that
Thompson:

H.M.Jr:

Yes.

We have messages coming there. What you do is,

tell them to put one in your office and get a

number, but until they come, use mine. I would
keep that open, but get one and put it into

yours, you see, and you will find, I think,
Customs
all over. But have one put into your
office
direct.
Pehle:

H.M.Jr:

Yes, sir. Thank you.
I sent that in a long time ago. Now cheer up,

Ed, this is going to be all right.
Foley:

H.M.Jr:

Well, I have got a couple of other things that
I would like to talk to you about in so far as -Well, I have got --

- 22 -

Foley:

request that was made yesterday, and

he certainly isn't helpful on this thing.
H.M.Jr:

Well, I have got Colonel Fleming outside.

67
TREASURY DEPARTMENT

Washington

Press Service

FOR IMMEDIATE RELEASE,

Thursday, December 11, 1941.

No. 28-97

The Treasury Department today announced regulations govern-

ing living expenses and wages for Japanese nationals in the United
States and regulations governing Japanese nationals engaged in

the production, marketing and distributing of food and agricultural products within the United States.
Under General License No. 11-A any Japanese national in the
continental United States may receive up to $100 per month for

living and personal expenses for him and his family. This
license permits such payments from either the national's bank
account or from his employer in the form of wages. Banks and

employers making such payments are required to make certain that
the Japanese national is not drawing more than $100 under the
license. Thus a Japanese national cannot draw $100 per month
in the form of wages and at the same time withdraw $100 per
month from his bank accounts.
Under General License No. 77 Japanese nationals engaged in

the business of producing, marketing or distributing food or
agricultural products may, with minor exceptions, engage in all
transactions incident to the normal conduct of such business.

However, under the license a Japanese national cannot withdraw
from his accounts during any one week for such enterprises sums

in excess of his average weekly withdrawals during the last six

months. Moreover, the license covers only Japanese nationals
who were previously licensed under General License No. 68.
This action is intended to permit the orderly movement of fresh in
vegetables and other food in areas such as the Pacific coast

order
to supply the needs of our civilian population and military
forces.

-000-

68
TREASURY DEPARTMENT

Office of the Secretary
December 11, 1941.

GENERAL LICENSE NO. 77
UNDER EXECUTIVE ORDER NO. 8389, APRIL
10, 1940, AS AMENDED, AND REGULATIONS
ISSUED PURSUANT THERETO, RELATING TO

TRANSACTIONS IN FOREIGN EXCHANGE, ETC.*

(1) A general license is hereby granted licensing any
person engaged, prior to December 7, 1941, in the production,

marketing or distribution of food products within the continental
United States and who is a national of Japan to engage in all

transactions ordinarily incidental to the normal conduct of their
business of producing, marketing or distributing food within the
continental United States, Provided, however, that this general
license shall not authorize

(a) any transaction which could not be effected without
a license if such person were not a national of any
blocked country.

(b) total payments, transfers or withdrawals from blocked
accounts of any such person during any one week in
excess of the average weekly payments from such
account during the six months' period immediately

preceding the date of this license, or
(c) any transaction by or on behalf of nationals of

Japan who were not generally licensed nationals
under General License No. 68 prior to December 7,
1941.

(2) Any person engaging in business pursuant to this
general license shall not engage in any transaction pursuant to

this general license which, directly or indirectly, substantially
*

Part 131; - Sec. 5(b), 40 Stat. 415 and 966; Sec. 2, 48 Stat.1;
54 Stat. 179; Ex. Order 8389, April 10, 1940, as amended by
Ex. Order 8785, June 14, 1941, and Ex. Order 8832, July 26,
1941; Regulations, April 10, 1940, as amended June 14, 1941,
and July 26, 1941; Ex. Order 8963, December 9, 1941.

28-97

-2-

diminishes or imperils the assets of such person within the

continental United States or otherwise prejudicially affects the
financial position of such person within the continental United
States.

(3) Any bank effecting any payment, transfer or withdrawal

pursuant to this general license shall satisfy itself that such
payment, transfer or withdrawal is being made pursuant to the
terms and conditions of this general license.
(4) Where any blocked account in a bank is debited in
excess of $500 per calendar month pursuant to this general

license, such bank shall file with the appropriate Federal
Reserve Bank a report for such calendar month setting forth the
details of the transactions in such account during the calendar
month.

E. H. FOLEY, JR.

Acting Secretary of the Treasury.

70
TREASURY DEPARTMENT,

Office of the Secretary,
December 11, 1941.

GENERAL LICENSE NO. 2, AS AMENDED,
UNDER EXECUTIVE ORDER NO. 8389, APRIL
10, 1940, AS AMENDED, AND REGULATIONS
ISSUED PURSUANT THERETO, RELATING TO

TRANSACTIONS IN FOREIGN EXCHANGE, ETC.*

General License No. 2 is hereby amended in the following respects:

(a) Paragraph (2) thereof is deleted;
(b) The following sentence is substituted for the

sentence deleted by paragraph (a) of this amend-

ment:

"(2) Any banking institution within the

United States which during any quarterly period
enters any single item in excess of $50 to any
account under the authority of this general
license shall file with the appropriate Federal
Reserve Bank at the end of such quarterly period
a report showing the name of such account and the
nature and amount of each item in excess of $50
entered to such account under the authority of
this general license during such quarterly period." "

E. H. Foley, Jr.,

Acting Secretary of the Treasury.

Part 131; - Sec. 5(b), 40 Stat. 415 and 966; Sec. 2, 48 Stat.1
54 Stat. 179; Ex. Order 8389, April 10, 1940, as amended by
Ex. Order 8785, June 14, 1941, and Ex. Order 8832, July 26,
1941; Regulations, April 10, 1940, as amended June 14, 1941,
and July 26, 1941; Ex. Order 8963, December 9, 1941.

28-98

TREASURY DEPARTMENT,

Office of the Secretary,
December 11, 1941.

GENERAL LICENSE NO. 11-A
UNDER EXECUTIVE ORDER NO. 8389, APRIL
10, 1940, AS AMENDED, AND REGULATIONS
ISSUED PURSUANT THERETO, RELATING TO
TRANSACTIONS IN FOREIGN EXCHANGE, ETC.*

(1) A general license is hereby granted authorizing payments out of the blocked account of any national of Japan in the continental United States for the living and personal expenses of
such national and his household; provided that the total payments under this general license from all the blocked accounts
of any one national shall not exceed $100 in any one calendar
month.

(2) Banks, employers and other persons making any such pay-

ments shall satisfy themselves, through affidavits or otherwise,
that payments out of blocked accounts for living expenses for
any one national and his household do not exceed $100 in any one
calendar month.

E. H. Foley, Jr.

Acting Secretary of the Treasury.
#

Part 131: - Sec. 5(b), 40 Stat 415 and 966; Sec. 2, 48 Stat. 1;
54 Stet. 179: Ex. Order 8389, April 10, 1940, AS amended by
Ex. Order 8785, June 14, 1941, Ex. Order 8832, July 26, 1941,
and Ex. Order 8963, December 9, 1941; Regulations, April 10,
1940, as amended June 14, 1941, and July 26, 1941.

28-99

Miss Chauncey

1/9'42

Here are the papers you asked

me to locate. It top me much

too long. But here you are.
fm

MR. FOLEY

JOHN EDGAR HOOVER
DIRECTOR

73
Federal Surrau of Investigation
United States Department of Justice
Washington, D. C.

December 11, 1941

Strictly Personal and Confidential
Honorable Henry Morgenthau, Jr.

Secretary of the Treasury
United States Treasury Department

Washington, D. C.

Dear Mr. Morgenthau:

with reference to our conference of last
night, I am inclosing herewith a copy of the

message
received from my Special in
San Francisco. which I I Agent teletype Charge

at
would of course appreciate your considering certain comments in this teletype confidential
in view of the fact that the Agent in Charge of my of-

fice there was advancing them for my personal information. However, I did want you to have the complete
picture and benefit of such observations as the FBI
Special Agent in Charge at San Francisco saw fit to
make. I have, of course, advised the Attorney General
of the report which has been received, and have suggested
to him that it might be desirable for some representative
of the General Counsel's office of your Department in
Washington to proceed to San Francisco to survey

thoroughly the present situation, if it is considered

desirable
to make
any large
number of arrests, either
now
or in the
immediate
future.

time if
matter.

Please do not hestitate to call me any

I can be of any assistance in this or any other
Sincerely yours,

Inclosure
BY SPECIAL MESSENGER

I 24oover

December 11, 1941
FBI SAN FRANCISCO

12-11-41

4-10 AM

RHM

SPECIAL PLACE ON DIRECTORS DESK IMMEDIATELY.

DIRECTOR

RE TELEPHONIC INSTRUCTIONS TENTH, CONFERENCE WITH TREASURY OFFICIALS

JOSEPH B FRIEDMAN AND RICHARD AIKEN REGARDING JAPANESE SITUATION
DISCLOSED THAT APPROXIMATELY TWO HUNDRED AND FIFTY JAPANESE BUSINESS
PLACES HAVE BEEN CLOSED IN THE SAN FRANCISCO AREA SINCE DECEMBER

SEVENTH. FRIEDMAN WAS SPOKESMAN. OBVIOUS THAT THEY ARE PROCEEDING
ON NO WELL PLANNED PROGRAM. ADMIT NO REAL KNOWLEDGE OF JAPANESE

SITUATION, PROBLEMS, OR SETUP. ADMIT THEY ARE RELYING ON ONE JOHN
E. ANDERTON FOR GUIDANCE. MANY PLACES CLOSED NOT GUARDED BEING
MERELY POSTED AS UNDER CONTROL OF THE US TREASURY. FRIEDMAN SAYS HE
HAS BEEN GOING AHEAD ON THE STRICTLY TREASURY PROGRAM BUT BEGAN TO

FEEL THAT THEY WERE NOT ACCOMPLISHING PURPOSE BECAUSE IT IS PHYSICALLY
IMPOSSIBLE TO COVER ALL JAPANESE TRANSACTIONS THROUGH PRESENT PROCEDURE.
FEELS GOVERNMENT SHOULD CLOSE OUT EVERY ALIEN AND CITIZEN JAPANESE

BUSINESS OR FUNDS WILL BE DISSIPATED. EXPRESSED BELIEF THAT THIS IS
NOW A PROBLEM FOR WHOLE GOVERNMENT RATHER THAN JUST TREASURY. STATES

HAVE NO EVIDENCE NOW TO SUBSTANTIATE CONVICTIONS BUT BELIEVES IF WE

RANSACKED PLACES OF ALL JAPANESE MIGHT FIND EVIDENCE. ADMITS NO SPECIFIC
FINDINGS, HAS ONLY GENERALITIES WHICH IN HIS OPINION SHOW CLOSE KNIT
RELATIONSHIP OF ALL JAPANESE AND GENERAL FANATICISM OF JAPS. BELIEVES

75
IT WORTH WHILE TO EXECUTE HIS PLANS IF ONLY THING ACCOMPLISHED IS TO
SHOW THESE GENERALITIES. FRIEDMAN WANTS TO TAKE EVERY JAPANESE IN THE

UNITED STATES INTO CUSTODY. THIS IS HIS IDEA QUOTE "HOW CAN WE PICK
OUT THE DANGEROUS JAPANESE ALIENS OR CITIZENS WITHOUT PICKING UP THE
WHOLE LOT AND LETTING THEM WORK THEIR WAY OUT OF DETENTION. CAN WE
AFFORD TO LET EVEN A MINORITY BE AT LIBERTY EVEN THOUGH IT MEANS
DETAINING A LARGE NUMBER OF LOYAL JAPS." END QUOTE. HE REPEATEDLY
EXPRESSED VIEW THAT ALL JAPS REGARDLESS OF LOYALTIES, POSITION, AGE
OR LOCALITY SHOULD BE DETAINED AND THAT WE COULD START FROM THAT

POINT AS TO WHICH JAPS WOULD HAVE THEIR LIBERTY. RELATIVE TO NAVAL
CODE HAVE ASCERTAINED THAT IMPRESSION GIVEN SECRETARY MORGENTHAU BY

FRIEDMAN IS NOT SUBSTANTIATED BY FACT. JOHN HALLY, JOHN OKANE AND
JOHN L. ANDERTON MAKING CURSORY EXAMINATION FILES IN OLYMPIC PRESS,
FOUR FORTY SANSOME, SAN FRANCISCO. SOJIRO HORIKAWA, PROPRIETOR,
FOUND SEVERAL SLIPS OF PAPER IN AMONG SOME INDEX CARDS. THESE SLIPS

BORE CHINESE IDIOGRAPHS WHICH ARE SIMILAR TO JAPANESE. UNDER IDIO
GRAPHS WERE FIGURES IN NUMERICAL ORDER. ALPHABETICAL LETTER FOLDER
FILE WITH BOTH LETTERS AND NUMBERS ON GUIDE TABS ALSO FOUND IN PREMISES.
IT WAS ANDERTONS BELIEF THAT IDIOGRAPHS AND NUMBERALS ON SCRAPS OF PAPER

-3-

CONFORMED WITH THOSE ON GUIDE TABS OF ALPHABETICAL FOLDER FILE.
ANDERTONS EXAMINATION CURSORY. HE SAYS HE WAS NOT PARTICULARLY

INTERESTED. HAS NO EXPERIENCE IN CODE WORK. EXPRESSED IDEA THAT
SOME CODE EXPERT WOULD HAVE A GOOD TIME WITH IT AS HE BELIEVES IT
POSSIBLE TO WORK OUT SOME SUCH CODE IN JAPANESE CHARACTERS. REASON
TOOK TO NAVY WAS BECAUSE CONCLUDED WAS NAVAL CODE IF CODE SINCE A

PICTURE ON THE WALL PORTRAYED THREE JAP NAVAL OFFICERS AND CIVILIAN
JAP PICTURE POSSIBLY TAKEN NINETEEN TWENTY TWO. HE CONCLUDED CIVILIAN
MUST HAVE BEEN OWNER OR PICTURE WOULD NOT HAVE BEEN THERE, ALSO BECAUSE
PRINTING COMPANY HAD DONE SOME WORK FOR JAP STEAMSHIP LINES FELT

PROPRIETOR MUST BE FAMILIAR WITH JAP NAVAL MEN. ADMITTED TO ME THAT
DESPITE HIS PROFESSED THOROUGH KNOWLEDGE OF WHOLE JAP SETUP HE HAD

NEVER HEARD OF PROPRIETOR BEFORE NOR HAD HE EVER SEEN HIM. ONI, WHOSE
MEN GOT SLIPS PAPER EXAMINED AND STATED THAT THEY COULD BE A CODE
BECAUSE OF THE PECULIAR E COMBINATION OF CHA RACTERS AND NUMBERS BUT

ADDED THAT IT COULD LIKEWISE BE MERELY EXPERIMENTING AS THE WRITINGS
WERE ONLY SCRIBBLINGS. ONE PAPER BROUGHT IN AND THROWN AWAY WAS A

CHINESE POEM. ONI ADVISES SHEETS SEEMED SIMILAR TO COPY PAPER USED BY
NEWSPAPERMEN. THAT CHARACTERS THEREON DID NOT MAKE SENSE. NOTHING LIKE
ANY KNOWN JAPANESE CODE IF A CODE. ONI SAYS NOT JAP NAVAL CODE.
EXPRESSES OPINION KNOWING ANDERTON THAT SCRIBBLINGS WERE BROUGHT TO

THEIR ATTENTION IN A MAGNIFIED MANNER. THEY DO NOT THINK IT A CODE.

ONLY DOCUMENTS AVAILABLE WERE SEVERAL JAPANESE TELEPHONE DIRECTORIES
AND TWO TYPEWRITTEN MEMOS LEFT AT YAMATO HOTEL BY ONE FUKUSHIMI
CONSULAR EMPLOYEE AT LOS ANGELES WHO HAS NOW RETURNED TO JAPAN. THESE
MEMOS DISCUSS RELATIVE MERITS VARIOUS WAYS TO GET JAP PROGRAM TO THE

PEOPLE. DISCUSS WHETHER NEWSPAPER, RADIO OR LECTURES MIGHT BE BEST.
MENTION TWO HUNDRED FIFTY FIVE THOUSAND DOLLARS APPROXIMATE AMOUNT TO

BE EXPENDED. WE RECOGNIZE MEMOS AS PART OF PLAN USED IN YEARS OF
NINETEEN THIRTY SEVEN THRU THIRTY NINE AND APPARENTLY HANDLED BY LEE

AND PERKINS. PERKINS IDENTIFIED AS SUBJECT OF LOS ANGELES ORIGIN
PERCIVAL DENSMORE PERKINS, INTERNAL SECURITY - J. FILE REFLECTS
SUBJECT REGISTERED IN WASHINGTON AS REPRESENTATIVE OF JAPANESE FOREIGN

OFFICE. ALSO MENTIONED THEY HAD FOUND LISTS OF SOCIETY MEMBERS NOT
KNOWN BY THEM TO BE SUBVERSIVE, AT THE NIPPON CLUB, JAPANESE CHAMBER
OF COMMERCE, JAPANESE ASSN OF AMERICA, JAPANESE AMERICAN NEWS AND NEW

WORLD SUN NEWSPAPERS. THESE LISTS WERE NOT AVAILABLE. FRIEDMAN FIRST
MENTIONED PHOTOGRAPHS WHICH WERE SUPPOSED TO HAVE BEEN FOUND CONCEALED,
KNEW NOTHING ABOUT NATURE OF PHOTOGRAPHS OR WHERE FOUND AND CHECK UP AT

OUR REQUEST FAILED TO DISCLOSE WHERE, WHEN OR BY WHOM FOUND. FRIEDMAN
COULD NOT FURNISH US WITH ANY EVIDENCE OTHER THAN MENTIONED WHICH WOULD

SHOW JAPANESE ENGAGED IN SUBVERSIVE ACTIVITIES OR ESPIONAGE. ONLY
SABOTAGE CLAIM IS INDEPENDENT JAPANESE FARMERS PURPORTEDLY REFUSING TO
HARVEST OWN CROPS AND CLAIM SABOTAGE BECAUSE PRODUCE PRICES IN LOS
ANGELES AREA GOING UP DUE TO LOWER PRODUCTION OF GARDEN PRODUCTS.

78
-5-

FRIEDMAN AND AIKEN AND ONE NORMAN TOWSON, FOREIGN FUNDS DIVISION,

DIVIDED ON THIS QUESTION. FRIEDMAN CLAIMING JAP FARMERS MIGHT BE
WANTING TO SAVE CROPS FOR OWN CONSUMPTION SINCE CANNOT BE PAID IF
THEY DO HARVEST UNDER PRESENT SETUP. THEIR PROPOSED PLAN OF HANDLING

THIS SITUATION IF ALL JAAPS TAKEN IN CUSTODY WAS TO HAVE ARMY TAKE OVER
AND HARVEST THE CROPS. THEY HAVE NO PLAN FOR A SLECTING PROCESS IF
AUTHORIZED TO TAKE SMALLER NUMBERS OF JAPANESE INTO CUSTODY. HAVENT
THOUGHT ABOUT SELECTIVITY BUT BELIEVE BUSINESS MEN, FRATERNAL AND

RELIGIOUS LEADERS WOULD BE FIRST CHOICE. HAVE TAKEN NO CONSIDERATION

FOR DIVISION OF CITIZENS OR ALIENS. FRIEDMAN STATED QUOTE JUST
RAISING QUESTIONS FOR BETTER BRAIN THAN MINE TO FIGURE OUT END QUOTE.
G-TWO ADVISED THE FORCE FOR PROMPT APPREHENSION, TRANSPORTATION TO

PLACES OF DETENTION AND CUSTODY UNDER CONDITIONS OF MINIMUM FACILITIES
FOR DETENTION OF TWENTY THOUSAND PERSONS ARE THREE REGIMENTS OF INFANTRY
APPROXIMATELY NINE THOUSAND MEN. ONLY THE WAR DEPARTMENT CANESTIMATE
TIME REQUIRED TO MAKE ABOVE TROOPS AVAILABLE SINCE NONE HAVE BEEN ALLOTED

FOR THIS PURPOSE IN NINTH CORPS AREA. BASED ON THE THREE REGIMENTS
TWENTY FOUR HOURS WOULD BE REQUIRED FOR ACTUAL APPREHENSION AFTER THE

NAMES AND ADDRESSES ARE SUBMITTED BY FBI. AFTER RECEIPT OF ORDER A
MINIMUM OF ONE WEEKS TIME WOULD BE NECESSARY TO MAKE MINIMUM SUITABLE

DETENTION FACILITIES AVAILABLE. GENERAL J. L. BENEDICT, CORPS AREA
COMMANDER REQUESTED THAT THE FOLLOWING COMMENTS MADE BY HIM BE CALLED

TO THE DIRECTORS PERSONAL ATTENTION.

PAGE SIX

QUOTE "I HAVE DISCUSSED THIS MATTER WITH THE COMMANDING GENERAL OF THE FOURTH

ARMY AND WE ARE IN AGREEMENT ON THE FOLLOWING POINTS. IF ANY SUCH LARGE NUMBER
OF PERSONS ARE TO BE TAKEN INTO CUSTODY, IT COULD NOT BE ACCOMPLISHED PRECIPITATELY,
BUT WOULD HAVE TO BE GRADUAL, PROBABLY BY TAKING THE LEADERS FIRST, KEEPING THE
REMAINDER SEGREGATED IN JAPANESE AREAS BY STATE AND MUNICIPAL AUTHORITIES AND
MOVING THEM TO RAILWAY TRAINS GRADUALLY. WE BELIEVE THAT UNDER NO CIRCUMSTANCES

SHOULD ANY SUCH LARGE NUMBER OF JAPANESE BE DETAINED IN THIS CORPS AREA. THEY
SHOULD, IF TAKEN INTO CUSTODY, BE TRANSPORTED INTO THE INTERIOR. WE ARE FURTHER
OF THE OPINION THAT IF ANY SUCH CONDITIONS AS ALLEGED EXIST IN THE SAN FRANCISCO
AREA, AN INVESTIGATION SHOULD BE MADE IN OTHER AREAS, PARTICULARLY THE LOS ANGELES
AREA, FOR THE DETERMINATION OF WHETHER OR NOT SIMILAR CONDITIONS EXIST THERE AND
A GREATER NUMBER OF PERSONS THERE SHOULD BE TAKEN INTO CUSTODY" END QUOTE. FOR
YOUR INFORMATION WITH REGARD TO JOHN E. ANDERTON, I RECEIVED A CONFIDENTIAL
LETTER FROM CAPT. R. P. MC CULLOUGH, DISTRICT INTELLIGENCE OFFICER OF THE TWELFTH
NAVAL DISTRICT, DATED AUGUST TWELFTH, NINETEEN FORTY, WHICH ADVISED THAT ANDERTON
WAS EMPLOYED BY THAT OFFICE AS A TRANSLATOR FROM SEPTEMBER FIRST, NINETEEN THIRTY
FIVE TO SEPTEMBER TWENTY, NINETEEN THIRTY SEVEN, WHEN HE RESIGNED DUE TO DISAGREEMENT

AS TO COMPENSATION. THE LETTER STATES ANDERTON IS AN UNUSUALLY WELL QUALIFIED
LINGUIST BUT IS TREMENDOUSLY EGOTISTICAL AND HAS INFLATED IDEAS AS TO THE VALUE OF
HIS SERVICES. IT FURTHER MENTIONS THAT AFTER ANDERTON LEFT THE EMPLOY OF ONI HE RESUMEDTHE

-6 -

PAGE SEVEN

PRACTICE OF LAW AND RECEIVED RETAINERS FROM JAPANESE GROUPS, ONE OF WHI CH

RETAINERS HE INDICATED WOULD MAKE HIM FINANCIALLY INDEPENDENT FOR LIFE. CAPT.
MC CULLOUGHS LETTER STATED ONI WAS CONCERNED THAT POSSIBLY ANDERTON HAD CONFIDED
TO THE JAPANESE THAT ONI HAD BEEN ABLE TO OBTAIN RECORDINGS OF CERTAIN JAPANESE
TELEPHONE CONVERSATIONS. ANDERTON HAS REPEATEDLY OFFERED HIS SERVICES TO US BUT

I HAVE HAD NO CONFIDENCE IN HIM BASED ON THE NAVY'S EXPERIENCE. FROM ACTIONS TONIGHT
I FEEL HE IS TRYING TO IMPRESS TREASURY so THAT HE CAN GET CONNECTED WITH THE
GOVERNMENT IN SOME WAY ON JAPANESE MATTERS. I FEEL YOU SHOULD HAVE MY PERSONAL

PINION OF FRIEDMAN. FRIEDMAN, AN ATTORNEY IN GENERAL CONSUL'S OFFICE TREASURY
SINCE NINETEEN THIRTY FIVE, HAD JUST COME FROM DENVER TO TIE IN WITH A SPEAKING
TOUR OF TREASURY MEN EXPLAINING TREASURY REGULATIONS TO BANKERS, EXPLAINED WAS SENT TO

DENVER BECAUSE OF ILLNESS. THINKS ASSIGNMENT HERE WAS JUST TO GIVE HIM TRIP. ADDED
THAT THINGS BROKE SUNDAY, SOMEONE HAD TO TAKE OVER, AND HE DID. ADMITTED THAT UNTIL
SUNDAY HAD NO KNOWLEDGE OF JAPANESE SITUATION, AND SINCE THEN IS DEPENDING UPON THE

ADVICE OF AIKEN AND ANDERTON. HE DID NOT IMPRESS ME AS BEING STABLE, DID NOT SEEM
TO KNOW WHAT HE WAS DOING, HAD NOT EVEN THOUGHT OF THE RAMIFICATIONS OF HIS

PROPOSALS. HE SAID LET WASHINGTON FIGURE THEM OUT. HE EVEN IMPRESSED ME AS BEING
A BIT HYSTERICAL DUE TO OUR AIR RAIDS AS EVIDENCED BY HIS MANNER OF REFERENCE TO THEM
AND HIS DESIRE TO NOT TAKE ANY CHANCES WITH ANY TYPE JAPANESE, EVEN WOMEN. HE IS
YOUNG MAN WITH AN ASSIGNMENT BIGGER THAN HE CAN HANDLE. HE DOES NOT SEEM

TO KNOW WHERE HE IS GOING OR HOW HE IS GOING TO GET THERE. THE FACT

-7-

THAT HE IS UNDER PRESSURE IS OBVIOUS WHEN YOU TALK TO HIM. HE IS A
THEORIST AND CERTAINLY DOES NOT APPEAR TO UNDERSTAND PRACTICAL
REALITIES.
PIEPER

END ACK PLS

December 12, 1941.

My dear Mr. Attorney General:

On Wednesday night, after talking to J. Edgar
Hoover, I discussed with you over the telephone certain
matters in connection with he Japanese situation on the
West Coast that had been brought to my attention by our
Freezing Control people at San Francisco.

At that time our people were endeavoring to

cope with a most difficult situation caused by a desire
to control all Japanese-owned business enterprises in

that area pending clarification of the Government's policy
with respect to Japanese nationals in this country. Our
people found that even with all of the Treasury personnel
in the area they were only able to deal with about twenty
percent of the business concerns in San Francisco and
Los Angeles.

I raised with you the desirability of dealing
on a more comprehensive basis with such enterprises. To

carry this out we also discussed the desirability of detaining large numbers of Japanese nationals until the

-2-

Government could be satisfied as to their loyalty and the

desirability of unblocking their businesses and unfreesing
their funds.

Since talking to you I have continued to study the
problem and have been in almost constant communication with

the West Coast. I believe that the situation from the
point of view of Foreign Funds Control can now be stated
as follows:

1. When the war broke out on Sunday, I thought

it desirable to freeze completely assets and business enter-

prises of Japanese nationals in this country. This enabled
us to take a look at the situation and determine more
adequate y what forms of control should be continued over
these Japanese nationals.

2. In view of the situation that began to develop
with regard to the shipment of food to Los Angeles markets,
a General License was issued last night which removed the

financial restrictions from the production, marketing, and
distribution of food by Japanese nationals. At the same time,
in order to enable Japanese nationals to obtain minimum
living expenses, a General License was also issued permitting
Japanese nationals to obtain $100 a month from their blocked

-385

funds for their living expenses and also permitting the payment of wages and salaries to Japanese employees in a similar

amount. A copy of the release explaining these general
licenses is enclosed.

3. I have reached the conclusion that Freezing
Control should not be employed to shut down all Japanese

businesses without regard to size or length of residence in

this country of the owners or the lack of specific evidence

of disloyalty. I am taking steps to permit the reopening of
most of the Japanese enterprises since we have no evidence in

those cases that the policies of Freezing Control are being
violated. However, should F. B. I. desire us to continue
to freeze any particular Japanese concern I shall be happy to
cooperate.

Accordingly, I withdraw any suggestion that large
numbers of Japanese nationals be detained as an adjunct to the

Freezing Control, and any decision you make in connection with
the problem of detaining Japanese nationals who might be

regarded as a threat to the safety of the country should not
be influenced by Freezing Control considerations.
Sincerely yours,

Secretary of the Treasury.
(Signed) H. Morgenthau, Jr.

The Honorable

Secretary's handwriting "Copy to F.B.I."

The Attorney General.
EHF:BB:JWP/mp 12/12/41

TREASURY DEPARTMENT

Washington
FCR IMMEDIATE RELEASE,

Press Service

Thursday, December 11, 1941.

No. 28-97

The Treasury Department today announced regulations govern-

ing living expenses and wages for Japanese nationals in the United
States and regulations governing Japanese nationals engaged in

living and personal expenses for him and his family. This
license permits such payments from either the national's bank

account or from his employer in the form of wages. Banks and
employers making such payments are required to make certain that
the Japanese national is not drawing more than $100 under the
license. Thus a Japanese national cannot draw $100 per month
in the form of wages and at the same time withdraw $100 per

month from his bank accounts.

Under General License No. 77 Japanese nationals engaged in

the business of producing, marketing or distributing food or
agricultural products may, with minor exceptions, engage in all
transactions incident to the normal conduct of such business.

However, under the license a Japanese national cannot withdraw
from his accounts during any one week for such enterprises sums

in excess of his average weekly withdrawals during the last six
months. Moreover, the license covers only Japanese nationals
who were previously licensed under General License No. 68.

This action is intended to permit the orderly movement of fresh
vegetables and other food in areas such as the Pacific coast in

order
forces. to supply the needs of our civilian population and military

-000-

December 12, 1941.

My dear Mr. Attorney General:

On Wednesday night, after talking to J. Edgar

Hoover, I discussed with you over the telephone certain
matters in connection with the Japanese situation on the
West Coast that had been brought to my attention by our
Freezing Control people at San Francisco.

At that time our people were endeavoring to

cope with a most difficult situation caused by a desire
to control all Japanese-owned business enterprises in

that area pending clarification of the Government's policy

with respect to Japanese nationals in this country. Our
people found that even with all of the Treasury personnel
in the area they were only able to deal with about twenty
percent of the business concerns in San Francisco and
Los Angeles.

I raised with you the desirability of dealing
on a more comprehensive basis with such enterprises. To

carry this out we also discussed the desirability of detaining large numbers of Japanese nationals until the

-2-

Government could be satisfied as to their loyalty and the
desirability of unblocking their businesses and unfreesing
their funds.

Since talking to you I have continued to study the
problem and have been in almost constant communication with

the West Coast. I believe that the situation from the
point of view of Foreign Funds Control can now be stated
as follows:
1. When the war broke out on Sunday, I thought

it desirable to freese completely assets and business enter-

prises of Japanese nationals in this country. This enabled
us to take a look at the situation and determine more
adequately what forms of control should be continued over
these Japanese nationals.

2. In view of the situation that began to develop
with regard to the shipment of food to Los Angeles markets,
a General License was issued last night which removed the

-3- -

funds for their living expenses and also permitting the payment of wages and salaries to Japanese employees in a similar

amount. A copy of the release explaining these general
licenses is enclosed.

3. I have reached the conclusion that Freezing
Control should not be employed to shut down all Japanese Changes
madelin

without regard to
businesses cagandless of size or length of residence in this Hmm
handwriting
minitor

country of the owners and-regardless of the of specific

evidence of disloyalty. I am taking steps to permit the

any genet

reopening of most of the Japanese enterprises since we have

no evidence in those cases that the policies of Freezing

Control are being violated. However, should F. B. I. desire
us to continue to freeze any particular Japanese concern I
shall be happy to cooperate.

Accordingly, I withdraw any suggestion that large
numbers of Japanese nationals be detained as an adjunct to

the Freezing Control, and any decision you make in connection
with the problem of detaining Japanese nationals who might

be regarded as a threat to the safety of the country should
not be influenced by Freezing Control considerations.
Sincerely yours,

The Honorable

The Attorney General.
EHF:BB:JWP/mp 12/12/41

Secretary of the Treasury.

TREASURY DEPARTMENT,

Office of the Secretary,

December 11, 1941.

GENERAL LICENSE NO. 11-A
UNDER EXECUTIVE ORDER NO. 8389, APRIL
10, 1940, AS AMENDED, AND REGULATIONS
ISSUED PURSUANT THERETO, RELATING TO

TRANSACTIONS IN FOREIGN EXCHANGE, ETC.

(1) A general license is hereby granted authorizing payments out of the blocked account of any national of Japan in the
continental United States for the living and personal expenses of
such national and his household; provided that the total payments under this general license from all the blocked accounts
of any one national shall not exceed $100 in any one calendar
month.

(2) Banks, employers and other persons making any such pay-

E. H. Foley, Jr.,
Acting Secretary of the Treasury.
Part 131: - Sec. 5(b), 40 Stat. 415 and 966; Sec. 2, 48 Stat..
=4 Stet. 179; Ex. Order 8389, April 10, 1940, as amended by
Ex. Order 8785, June 14, 1941, Ex. Order 8832, July 26, 1941,
and Ex. Order 8963, December 9, 1941; Regulations, April 10,
1940, as amended June 14, 1941, and July 26, 1941.

28-99

91
TREASURY DEPARTMENT

Office of the Secretary
December 11, 1941.

GENERAL LICENSE NO. 77
UNDER EXECUTIVE ORDER NO. 8389, APRIL
10, 1940, AS AMENDED, AND REGULATIONS
ISSUED PURSUANT THERETO, RELATING TO
TRANSACTIONS IN FOREIGN EXCHANGE, ETC.

(1) A general license is hereby granted licensing any
person engaged, prior to December 7, 1941, in the production,

marketing or distribution of food products within the continental
United States and who is a national of Japan to engage in all
transactions ordinarily incidental to the normal conduct of their
business of producing, marketing or distributing food within the
continental United States, Provided, however, that this general
license shall not authorize
(a) any transaction which could not be effected without
a license if such person were not a national of any
blocked country.

(b) total payments, transfers or withdrawals from blocked
accounts of any such person during any one week in
excess of the average weekly payments from such

account during the six months' period immediately

preceding the date of this license, or
(c) any transaction by or on behalf of nationals of

Japan who were not generally licensed nationals
under General License No. 68 prior to December 7,
1941.

(2) Any person engaging in business pursuant to this
general license shall not engage in any transaction pursuant to

this general license which, directly or indirectly, substantially
Part 131; - Sec. 5(b), 40 Stat. 415 and 966; Sec. 2, 48 Stat.1;
54 Stat. 179; Ex. Order 8389, April 10, 1940, as amended by
Ex. Order 8785, June 14, 1941, and Ex. Order 8832, July 26,
1941; Regulations, April 10, 1940, as amended June 14, 1941,
and July 26, 1941; Ex. Order 8963, December 9, 1941.

28-97

-2diminishes or imperils the assets of such person within the

continental United States or otherwise prejudicially affects the
financial position of such person within the continental United
States.

(3) Any bank effecting any payment, transfer or withdrawal

license, such bank shall file with the appropriate Federal
Reserve Bank a report for such calendar month setting forth the

details of the transactions in such account during the calendar
month.

E. H. FOLEY, JR.

Acting Secretary of the Treasury.

TREASURY DEPARTMENT

Washington

Press Service

FOR IMMEDIATE RELEASE,

Thursday, December 11, 1941.

No. 28-97

The Treasury Department today announced regulations govern-

ing living expenses and wages for Japanese nationals in the United
States and regulations governing Japanese nationals engaged in

living and personal expenses for him and his family. This

license permits such payments from either the national's bank
account or from his employer in the form of wages. Banks and
employers making such payments are required to make certain that
the Japanese national is not drawing more than $100 under the
license. Thus a Japanese national cannot draw $100 per month
in the form of wages and at the same time withdraw $100 per

month from his bank accounts.

Under General License No. 77 Japanese nationals engaged in

the business of producing, marketing or distributing food or
agricultural products may, with minor exceptions, engage in all
transactions incident to the normal conduct of such business.

However, under the license a Japanese national cannot withdraw
from his accounts during any one week for such enterprises sums

in excess of his average weekly withdrawals during the last six
months. Moreover, the license covers only Japanese nationals

who were previously licensed under General License No. 68.

This action is intended to permit the orderly movement of fresh
vegetables and other food in areas such as the Pacific coast in
order
to supply the needs of our civilian population and military
forces.

-00o-

94
December 12, 1941
11:50 a.m.
HMJr:

Hello.

Operator:

Go ahead.

HMJr:

Hello.

Mrs. Melvyn
Douglas:

Hello.

HMJr:

Mrs. Douglas.

Yes, good morning.

HMJr:

This is Henry Morgenthau.

Yes.

HMJr:

How are you?

Fine, thank you.

HMJr:

Mrs. Douglas, we're trying our best to get
that food situation straightened out in
Los Angeles. Hello.

Yes. What do you mean?

HMJr:

Well, I mean we've issued licenses so that

there's no reason why these Japanese farmers

shouldn't bring in the food, you see?
D:

HMJr:

Yeah.

And I wondered if you could make inquiries
around and see whether the situation has - is

any better or worse today. Hello.

HMJr:

HMJr:
D:

Yes, I will.
And then. if you would, if you'd call me back
collect

All right.
my number is District 2626.
Two six two six.

-2HMJr:

Yes.

All right, fine.

HMJr:

But we've issued the licenses; and now, if they
don't come in, it's because they don't want to.
Uh huh.

HMJr:

And the Department of Agriculture is making a
survey for me out there.
Yeah.

HMJr:

But I did want to see what you thought and what
you found out whether the hospitals, particularly,
were getting the food.

Yes, I see.

HMJr:

You see?

Yeah. And you think that they didn't get in?

HMJr:

Yes.

So I didn't hear. I was talking about other

I was in bed all day yesterday.

things on the phone

HMJr:

Yes.

at all.
Well, maybe it isn't as bad as they say it is;

HMJr:

and I didn't get any word about the food

but I thought
No, because nobody mentioned it to me. It seems
to me I would have heard it, because I talked to
the defense thing.

HMJr:

Well

L.....

.....

HMJr:

You check, and particularly the hospitals.

the defense people. But I'11 check today.

-3 D:

Did they tell you that the hospitals weren't
getting it?

HMJr:

Yes.

They did?

HMJr:

Yes.

HMJr:

Well, I'll call the Red Cross and have them
find out.
And I had a telegram from Mrs. Roosevelt also,

asking me to look into it.

HMJr:

Uh huh.

That came in this morning. But we got out all
these licenses last night.

That came from San Francisco, didn't it?

HMJr:

Pardon?

She was in San Francisco yesterday.

HMJr:

I don't know where the telegram came from.

Yes. You see it might have been up in San
Francisco that this happened.

HMJr:

No, I - I think it - no, she was mentioning
Los Angeles, I think. I'11 check it, anyway.

She wasn't here yesterday.

HMJr:

She wasn't there yesterday?

No. She left - yesterday she was in - let me
see now - San Diego.

HMJr:

Yes.

No, San Francisco. And the day before she
was in San Diego.

HMJr:

Oh.

-4D:

HMJr:

You
been see,
here. there's been two days that she hasn't
Well, she just mentioned Japanese farmers; she

didn't mention the locality. But the other

telegrams we've had have definitely mentioned
hospitals in Los Angeles.
D:

They have? Well, I'll check.

HMJr:

Thank you so much.

District 2626.

HMJr:

Collect.

Yeah, all right.

HMJr:

All right.

Thanks.

HMJr:

Thank you.

98
Copy to Mrs. McHugh
December 12, 1941

5:45 PM

146

OPR

CG OPR

MY TIME 2-21 PM OK RING AGAIN FOR INWARD PLS

SE
SE

VCKTS BY WILL CALL U

OK THANK UK

OKM

TRFX

RDY WITH SE 146 PLS ANNOUNCE SE

SEATTLE 146 OK CA

SECRET SERVICE WASH FRANK J WILSON CHIEF CALLING
PLEASE DELIVER THE FOLLOWING MESSAGE TO SUPERVISING AGENT WILLIAM R
JARRELL, U. S. SECRET SERVICE, SEATTLE WASHINGTON, TO BE DELIVE
M

T CA PLLS
R U READY TO RECEIVED

THIS IS SEATTLE 146 I HAVE ANNOUNCED TWICE ALREADY GA PLS
THIS IS WASH 194 MY MEAXXX MESSAGE FOLLOWS

PLS DELIER THE FOLLOWING MESSAGE TO SUPERVISING AGENT WILLIAM R.
JARRELL, U. S. SECRET SERVICE FOR DELIVERY IN PERSON TO MRS.
ROOSEVELT

"DECEMBER 12, 1941

MRS. FRANKLIN D. ROOSEVELT
C/O MR. JOHN BOETTIGER
MERCER ISLAND
SEATTLE, WASHINGTON

IN REGARD TO TRANSPORTATION AMERICAN BORN JAPANESE STUDENTS,
JUSTICE ADVISES ME THAT NO PROCLAMATION OR OTHER DOCUMENT OR LAW
FORBIDS AMERICAN BORN JAPANESE STUDENTS FROM OBTAINING TRANSPORTATION.
TRANSPORTATION RESTRICTIONS ON JAPANESE SUBJECTS IN SECTION 3 B OF
TRADIN

MY I CONTINUE PLS
TRADING WITH ENEMY ACT ARE NOT APPLICABLE TO TRANSPORTATION BETWEEN
POINTS IN UNITED STATES EXCEPT WHEN TRANSPORTATION IS BY VESSEL OF
0

AMERICAN REGISTRY.

IS THERE ANY ADDITIONAL INOXXXXXX INFORMATION I CAN GET FOR
YOU ON THIS SUBJECT. AFFECTIONATE REGARDS.

HENRY MORGENTHAU, JR."
THANK YOU WILSON END

WILL DEVLV. THIS MESSAGE AT ONCE END R
y

December 12, 1941

Mrs. Franklin D. Roosevelt
c/o Mr. John Boettiger

Mercer Island
Seattle, Washington

In regard to transportation American-born Japanese
students, Justice advises me that no Proclamation or
other document or law forbids American-born Japanese

students from obtaining transportation. Transportation
restrictions on Japanese subjects in section 3 (b) of
Trading with Enemy Act are not applicable to transporta-

tion between points in United States except when transpor-

tation is by vessel of American registry.

Is there any additional information I can get for
you on this subject? Affectionate regards.
Henry Morgenthau, Jr.

100

Mrs. Eleanor Roosevelt
Civilian Defense Headquarters

San Francisco, California

to
In regard the transportation American-born Japanese students,
Justice advises me that no Proclamation or other document
1

or law forbids American-born Japanese students from obtain-

ing transportation. Stop. Transportation restrictions on
Japanese subjects in section 3(b) of Trading With Enemy Act

are not applicable to transportation between points in
United States except when transportation is by vessel of
American registry. Step.
Re bank and money for American born Japanese itizens

and parents situation is S follows:

Is there any additional information

I can get for you an This

subject affectionate years

1pm J

101

DEC 15 1941

My dear Mr. Attorney General:

Thank you for your letter of December 12

with regard to the telegram which I had received

from Mrs. Roosevelt asking for clarification of
the Federal order applying to transportation of
American-born Japanese students on the West Coast.

I sent her a telegram which explained the

difficulty and clarified the situation for her.
Sincerely yours,
(Signed) N. Morgenthan, Jr.

Secretary of the Treasury.

The Honorable

The Attorney General.

EHFJr/fm

12/13'41
By Messenger

Sixth

102
Office of the Attorney General
Washington, D.C.
December 12, 1941.

The Honorable

The Secretary of the Treasury.
ity dear Mr. Secretary:

The following inquiry was received by the Attorney General

from the office of the General Counsel of the Treasury:
"The Secretary of the Treasury received a
telegram this morning from Mrs. Roosevelt asking

for clarification of the proclamation preventing
aliens from traveling on railroads, etc. Mrs.
Roosevelt was particularly inquiring about the
difficulty American-born Japanese students were
having."

This I understand refers to the following telegram from
Mrs. Roosevelt:
YWCA AND YMCA OUT H.R. MUC.. DISTURBED FOR
AMERICAN BORN JAPANES= STUDENTS IN COLLEGE
WHO CANNOT OETAIN TRANSPORTATION. THEY WART
CLARIFICATIO.. OF FEDERAL ORDER APPLYING
TRANSPORTATION.* * *

There is nothing in the Proclamation of December 7 which
prevents American-born Japanese students from obtaining trans

portation. Nor indeed is there anything in the Proclamation
which prevents Japanese nationals from obtaining such transpor-

tation. See my opinion to you dated December 11, 1941. Para-

graph 10 of the regulations prescribed by the President in con-

-2-

103

nection with the Proclamation gives the Attorney General power

to prescribe regulations concerning the movements of alien
enemies within the continental United States, but no regulations
have been prescribed. Section 12 forbids enemy aliens to enter
upon railroad premises which are not open to the public, but of
course that would in no way prevent securing transportation.
Respectfully,

Americation
Attorney General

OPR

DO U WISH TO PLACE A CALL PLS

SE 146

104

OK
CG

146 GOVT

QIG OPR

REPEAT
DA

DA WILL CALL U
OK

146 GOVT

XOK

M DA WILL CALL U

OK THANKS

G OVT

ARE YOU ABLE TO GET SE 146 YET

BCY

WA 194
VERY URGENT MESSAGE

TO SE PLS ANNOUNCE ONCE AGAIN FOR WA
SEATTLE CUSTOMS AGSNCY CA
U S SECRET SERVICE WASH WILSON

PLEASE DELIVER THE FOLLOWING TO SUPERVISING AGENT WILLIAM R. JARRELL,
U S SECRET SERVICE, 220 U S COURTHOUSE, SEATTLE, WITH INSTRUCTIONS
TO GIVE PERSONALLY DIRECT TO MRS. FRANKLIN D. ROOSEVELT

MRS. FRANKLIN D. ROOSEVELT
CAREMR. JOHN BOETTIGER
MERCER ISLAND
SEATTLE, WASHINGTON

THANK YOU VERY MCXX MUCH FOR YOUR TWO TELERRAMS.
I AM SENDING
YOU HEREWITH A COPY OF THE PRESS RELEASE COVERIN 6 TWO GENERAL

LICENSES WHICH WAS RELEASED LATE LAST NIGHT. WE HOPE THAT THIS WILL
TAKE CARE OF THE SITUATION WHICH YOU WERE KIND ENOUGH TO BRING TO

MY ATTENTION.

AS TO THE TRANSPORTATION QUESTION, WHILE THAT IS NOT PART OF THE
TREASURYS RESPONSIBILITY, WE ARE CONTACTING OTHER FEDERAL AGENCIES,
AND WE HOPE SHLRTLY TO HAVE A REPORT FOR YOU ON THAT.

AFFECTIONATELY,
HENRY MORGENTHAU, JR.

COPY

TREASURY DEPARTMENT
WASHINGTON

105

FOR IMMEDIATE RELEASE, THURSDAY, DECEMBER 11,1941.

PRESS SERVICE NO. 28-97

THE TREASURY DEPARTMENT TODAY ANNOUNCED REGULATIONS GOVERNING LIVING
EXPENSES AND WAGES FOR JAPANESE NATIONALS IN THE UNITED STATES
AND REGULATIONS GOVERNINGJAPANESE NATIONALS ENGAGED IN THE PRODUCTION,
MARKETING
AND DISTRIBUTING OF FOOD AND AGRICULTURAL PRODUCTS WITHIN
THE UNITED STATES.

UNDER GENERAL LICENSE NO. 11-A ANY JAPANESE NATIONAL IN THE
CONTINENTAL UNITED STAES MAY RECEIVE UP TO $100 PER MONTH FOR

LIVING AND PERSONAL EXPENSES FOR HIM AND HIS FAMILY. THIS LICENSE
PERMITS SUCH PAYMENTS FROM EITHER THE NATIONALS BANK ACCOUNT OR
FROM HIS EMPLOYER IN THE FORM OF WAGES. BANKS AND EMPLOYERSMAING
XX MAKING SUCH PAYMENTS ARE REQUIRED TO MAKE CERTAIN THAT THE
JAPANESE NATIONAL IS NOT DRAWING MORE THAN $100 UNDER THE LICENSE
THUS A JAPANESE NATIONAL CANNOT DRAW $100 PER MONTH IN THE FORM
OF
WAGES
AND AT THE SAME TIME WITHDRAW $100 PER MONTH FROM HIS
BANK
ACCOUNTS.

UNDER GENERAL LICENSE NO. 77 JAPANESE NATIONALS ENGAGED IN THE
BUSINESS OF PRODUCING, MARKETING OR DISTRIBUTING FOOD OR AGRICULTURAL
PRODUCTS MAY, WITH MINOR EXCEPTIONS, ENGAGE IN ALL TRANSACTIONS
INCIDENT TO THE NORMAL CONDUCT OF SUCH BUSINESS. HOWEVER, U DXX
UNDER THE LICENSE A JAPANESE NATIONAL CANNOT WITHDRAW FROM HIS
ACCOUNTS DURING ANY ONE WEEK FOR SUCH ENTERPRISES SUMS IN EXCESS
OF HISAVERAGE WEEKLY WITDRAWALS DURING THE LAST SIX MONTHS.
MOREOVER, THE LICENSE COVERS ONLY JAPANESE NATIONALS WHO WERE

PREVIOUSLY LICENSED UNDER GENERAL LICENSE NO. 68. THIS ACTION IS
INTENDED TO PERMIT THE ORDERLY MOVEMENT OF FRESH VEGETABLES AND
OTHER FOOD IN AREAS SUCH AS THE PACIFIC COAST IN ORDER TO SUPPLY

THE NEEDS OF OUR CIVILIAN POPULATION AND MILITARY FORCES.
WILSON END

WE WILL DELIVER THIS MSG TO CAPT JARRELL AT ONCE END

106

December 12, 1941

Mrs. Franklin D. Roosevelt
c/o Mr. John Boettiger

Mercer Island

Seattle Washington

Thank you very much for your two telegrams. I am sending
you herewith a copy of the press release covering two
general licenses which was released late last night. We

hope that this will take care of the situation which you

were kind enough to bring to my attention.

As to the transportation question, while that is not
part of the Treasury's responsibility, we are contacting

other Federal agencies, and we hope shortly to have a report
for you on that.

Affectionately,
Henry Morgenthau, Jr.

107
TREASURY DEPARTMENT

Washington

Press Service

FOR IMMEDIATE RELEASE,

Thursday, December 11, 1941.

No. 28-97

The Treasury Department today announced regulations govern-

ing living expenses and wages for Japanese nationals in the United
States and regulations governing Japanese nationals engaged in

living and personal expenses for him and his family. This
license permits such payments from either the national's bank
account or from his employer in the form of wages. Banks and

the business of producing, marketing or distributing food or
agricultural products may, with minor exceptions, engage in all
transactions incident to the normal conduct of such business.

However, under the license a Japanese national cannot withdraw
from his accounts during any one week for such enterprises sums

in excess of his average weekly withdrawals during the last six
months. Moreover, the license covers only Japanese nationals
who were previously licensed under General License No. 68.
This action is intended to permit the orderly movement of fresh
vegetables and other food in areas such as the Pacific coast in

order
to supply the needs of our civilian population and military
forces.

-000-

108
WAF9 92 GOVT NT
GERBER CALIF DEC 11
THE SECRETARY OF THE TREASURY

1941 DEC 12 AM 8 59

TREASURY DEPT

RESPONSIBLE PEOPLE IN CALIFORNIA FEEL BANK ORDER
PERMITTING AMERICAN FIRMS TO RECEIVE JAPANESE GROWN
VEGETABLES AND RETURN MONEY NOT TO JAPANESE BUT TO

CERTAIN BANKS WHO CAN LATER PAY BILLS INCURRED WILL WORK
T00 SLOWLY TO SAVE VEGETABLE CROP WHICH CONSTITUTES
SEVENTY FIVE PERCENT OF WINTER VEGETABLES FOR WHOLE COUNTRY
THIS CROP PERISHABLE AND OF VALUE TO COUNTRY AS A WHOLE

PEOPLE HERE FEEL IF RECEIVER COULD BE APPOINTED
TO RECEIVE MONEY AND DOLE OUT TO JAPANESE NATIONALS AND

AMERICAN CITIZENS JAPANESE EXTRACTION SUFFICIENT FOR LIVING
EXPENSES THESE CROPS MIGHT BE SAVED
ELEANOR ROOSEVELT.

858A

109

WAF10 66 GOVT NT

SANFRANCISCO CALIF DEC 11
THE SECRETARY OF THE TREASURY
TREASURY DEPT

1941 DEC 12 AM

THE YWCA AND YMCA OUT HERE MUCH DISTURBED FOR AMERICAN BORN
JAPANESE STUDENTS IN COLLEGE WHO CAN NOT OBTAIN
TRANSPORTATION THEY WANT CLARIFICATION OF FEDERAL ORDER
APPLYING TRANSPORTATION ALSO BANK AND MONEY FOR AMERICAN

BORN JAPANESE CITIZENS AND PARENTS LIVING WITH CITIZENS
THEY ARE ASKING FOR LIVING EXPENSES FROM THE BANKS THEY
SAY GENERAL ORDER FROM TREASURY DEPARTMENT IS INTERPRETED

DIFFERENTLY AND IS CREATING GREAT HARDSHIPS
ELEANOR ROOSEVELT
900A

9 07

110
December 12, 1941

I told Foley to tell Gaston to send out the new

regulations about the Japanese that we sent to
Mrs. Roosevelt to every Customs Agent on the

Pacific Coast, and ask them to take it to the local
radio station and have them put it on.

111
December 12, 1941
11:25 a.m.

RE AIR RAID SHELTERS

Present:

General Fleming
Mr. Reynolds

Mr. Reilly

Mr. Wilson
Mr. Thompson

Mrs. Klotz

H.M.Jr:

General, the President gave me a job to do

which I said I would do, having you in
mind all the time. That was this morning.
I said he could forget it and we would take
care of it. He wants a bomb proof shelter

in the White House, the State Department and

the Treasury, and he will give us out of his
secret fund the money to do that, if necessary.

He also said we ought to fix one up at the
Capitol and the Senate Office Building and
in the House Office Building. That is pretty

far removed from me, but you know how to take

care of that. I mean, I would like it if

Fleming:

you would be willing to say, "Forget it,
Morgenthau. I will take care of that."
We will take care of it.

H.M.Jr:

Will you?

Fleming:

Yes.

H.M.Jr:

Because, I mean, it is pretty far removed in

Fleming:

You mean he wants three here, one for the White

these times.

-2-

112

House

H.M.Jr:

One here, one in the White House and one at
the State Department. The Capitol and
Senate Office Building and House Office
Building.

Now, the one here, I don't know whether they

have told you, but they think we can fix

one here for the President almost immediately,
and whoever is on that, I haven't heard the

details. I am interested for him. He strictly
said that what we were doing here was for the

Treasury and not for him, but I am doing it
for him and expecting him to use it, not myself.
What is the situation on the one that we can
do here within a week, somebody said?
Fleming:

You have looked into some of these vaults
down here.

Reynolds:

The new vaults that were built in the north
court have very excellent protection at the

present time.
H.M.Jr:
Reynolds:

In the Treasury?

In the Treasury, that is, in the lower vault.
is two feet and then there is another little

There are two thicknesses of concrete. One

room above that and then three feet of concrete

over that with three inch steel over that, and

that is protection against at least a five

hundred pound bomb and there are several

sections in that vault. The safest place in

Washington that we know of at the present time

is right there.

H.M.Jr:

How can we get the President from the White
House over here?

Reynolds:

By car only, and we are figuring on a tunnel

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113

going over to the White House.
H.M.Jr:

Well, how long would it take to make this

Reynolds:

Well, I think you would want to just simply
bore it as a tunnel and not expose the street.

H.M.Jr:

That is right.

Reynolds:

tunnel?

I think it would probably take a month to go

across there. It is a slow and laborious

process when you do it that way.
H.M.Jr:

I thought, Norman, they said we have a sort
of a conduit now.

Thompson:

Well, a pipeline is all it is.

Reynolds:

We checked that and it is almost impossible
to use that.

Fleming:

Is there any way of expanding that present

run instead of driving a tunnel all the way
through? Couldn't you work off of that and
save some time?

Reynolds:

It might save a little time. It might save a

week.

H.M.Jr:

Well, that is a lot.

Wilson:

How much time would be saved if you built a
tunnel by the open trench method, if you used
the subterfuge that we had to have duplicate
heating conduits for the White House? That

would save a lot of time, would it not?
Reynolds:

That will save time.

Fleming:

I don't see how you are going to hide the fact

that you are digging a tunnel there. With all

the workmen that will be on it and the dirt and

114

stuff coming out, it can't be hidden. It

seems to me there is an element of speed
involved that we might as well go ahead and

say it is connected up with the heating
plant. about
Make an
frank
it. open trench and be perfectly
H.M.Jr:

Well, to show you, for instance, how - there
hasn't been one line in the newspapers about

all these machine guns here and the fire truck
right outside my window. There hasn't been
one line. Let me show you. Here is this
equipment down there. There is a radio station

and machine gun and fire truck and not a word.
Wilson:

The press are cooperative. They called me up
last night at midnight. We have two guns on
the roof here. They wanted to know if they were

there. I said I could tell them off the record
they are there, but they don't publish the
stuff.

H.M.Jr:

I think you are right, General. I would do it
the quickest way.

Fleming:

What is the soil here?

Reynolds:

Soil conditions are not too bad at the level
we could go through. You see, we would start

practically at this ground floor level down
here. So that comes in to all levels.

Fleming:

Any rock?

Reynolds:

No rock.

H.M.Jr:

Were you here when they put in that heating
plant? We went way, way down and there was no
rock.

Reynolds:

It is no problem.

H.M.Jr:

Well, it is just a question of getting the money,

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115

isn't it?
Reynolds:

Getting
the and
money
down there
-- and getting a steam shovel

H.M.Jr:

Well, fix it and the President will give it

to us out of his secret money. He agreed to
that this morning.

Fleming:

H.M.Jr:

Have
you
any idea as to the size, the capacity
that you
want?
What I would like to do for the Treasury, you
see, we have got this plaza outside here and
I think - once we get the President fixed up,
I am not worried. It seems to me that under
this plaza out here you could build a place big
enough to take care of a thousand people and
there are not many places in Washington that

you can do that. I just offer the suggestion,
the possibility of doing one big enough there
that a thousand people might go in and stay

there and work. How many people are there in
the building?
Thompson:

About two thousand.

H.M.Jr:

Well, enough for two thousand people. You
asked me.

Thompson:

We probably could squeeze two thousand into the
space.

Reynolds:

What about White House people?

H.M.Jr:

We have got to study that.

Reynolds:

You have this proposition which I think you
should understand.

H.M.Jr:

You have got to study that. The only thing that

I am going to put the pressure on is some place
just as promptly as possible to bring the President

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116

to. I hope within a week, you see.
Fleming:

Well, we can move fast on that. We can go
to work on it today, can't we? Do we need

to wait for funds?

Reynolds:

I haven't had to wait for funds on a lot of
things lately.

H.M.Jr:

You haven't?

Reynolds:

No, I have gone on property I didn't even own.

H.M.Jr:

He has the money he said we could draw on.

Fleming:

Two thousand is an awful big place if you put
in a place for the people to work.

H.M.Jr:

Well that, General, I wouldn't expect you to you can 8 tudy it and after you have a day or
two, if you wouldn't mind coming back and

seeing me again, I would like to see you. If
I did nothing else today but to get you to
agree to start on this tunnel business, I
think that is a good day's work.
Fleming:

We will start on it right away.

H.M.Jr:

And if you want to drop in Monday I would be

delighted. Would you like to do that?

Fleming:

Yes.

H.M.Jr:

You could say --

Fleming:

You have made some notes, haven't you?

Reynolds:

We have a bomb proof shelter designed for the

White House. I have been working on it for
six months.

H.M.Jr:

Do you want to drop in at 10:30 Monday morning,
as far as you know? By that time you would

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117

have a chance to look at the thing. I mean,
that is something that I want to - whatever

you men recommend. Can you get a steam
Reynolds:

shovel to start this thing right away?
I think so.

H.M.Jr:

Think you can get going by tomorrow?

Reynolds:

Yes.

H.M.Jr:

And Norman Thompson, you give him the money

and he will fix it up.

Thompson:

We have already had two of his engineers over
this morning.

H.M.Jr:

We can start tomorrow. Have you got desks

fixed up in there for the President and
telephones in the vault and all that?

Thompson:

I don't know if we have completed all those
details.

H.M.Jr:

But you will by the time he has got his
tunnels fixed.

Thompson:

Oh, today.

Reynolds:

Well, you have moved out of that other place,
haven't you?

Thompson:

Yes, the vaults are all ready. We have even
got food in there today, one hundred dollars
worth of food.

Fleming:

I am just wondering what we will run into when
we start this steam shovel business.

Reynolds:

We have most of that data in our office.

H.M.Jr:

How about an emergency lighting plant for this
vault for the President?

-8-

Thompson:

We are running a power line in from --

H.M.Jr:

But I mean a little --

Wilson:

Delco.

Fleming:

That can be easily arranged.

118

Then, I think, we will start immediately in

operations on this tunnel and we will probably
get in there tomorrow and then we will make

these other studies for these other - for the

six bomb proofs.
H.M.Jr:

I see.

Fleming:

And Monday we will be prepared to discuss the
three over here.

H.M.Jr:

That is right.

Fleming:

And then the others --

H.M.Jr:

The Capitol I will leave with you, if I may.
I will tell the President that this afternoon
in Cabinet, that I am going to leave the
rest with you, that I am not going to worry
about it.

Fleming:

You have nothing to worry about.

H.M.Jr:

Thank you very much.

119

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE December 12, 1941
TO

Secretary Morgenthau

FROM

Mr. Thompson
CONFIDENTIAL

(1) Arrangements for sleeping 40 men and 3 officers in the basement
have been made.

(2) Fifty-calibre aircraft guns were mounted on the Treasury roof
last night. We slept 15 additional men in Room 81. Will conclude sleep-

ing quarters on the fourth floor for this detachment today.
(3) Main Treasury vault No. 1 on the Subbasement level has been

selected for housing President in an emergency. The safety of this
vault has been checked with Commissioner Reynolds. This vault was avail-

able last night. Equipping will follow at once. Time locks were detached and men knowing the combination are available on three minutes'

notice on a 24-hour basis.

(4) Narcotics will be moved to Comptroller's vault cleared earlier
this week for emergency use.

(5) Commissioner Reynolds will come over today to advise on neces-

sary facilities for vault, including living quarters, bath, kitchen,
phones, air conditioning, etc.
(6) Two bullet-proof cars, a 1937 Lincoln and a 1932 Cadillac,
have been located and are being reconditioned to the last word by our

Treasury garage. The Linooln will be available today; the Cadillac in
about two weeks. Herman Klotz made the arrangements for the cars, but
did not know the purpose.

And

120
December 12, 1941

This morning General Watson told me that as

a result of my inquiry in regard to the anti-aircraft

gunds, he has gotten ten anti-aircraft guns. There
will be two on the Treasury, two on State and two on
Commerce, and I believe the rest will be around the

Capitol.

I am under the impression that these are the

first anti-aircraft guns in the whole capital.

121
December 12, 1941
11:55 a.m.
John

Sullivan:

The bill goes onto the Floor of the Senate at

HMJr:

Yeah.

HMJr:

noon today.

They refuse to give the Bureau anything at

all

Yeah.

for the collection of auto use.

HMJr:

For the collection for what?

The automobile use tax.

HMJr:

Yeah.

They apparently want the Post Office to sell
them and they don't want any enforcement.

HMJr:
S:

Yeah.

But we will have to pay the Post Office a
million and a half.

HMJr:

Yeah.

And Norman Kann called me and asked if you or

I would be willing to call McKellar or Glass
and ask them to provide at least that million
and a half we have to pay the Post Office.

HMJr:

Yeah. Well, you do it.

All right, sir. I will.

HMJr:

You carry the ball.

Righto.

HMJr:

Thank you.

122
December 12, 1941
12: n. N.

RE OFFER OF S.E.C. ASSISTANCE

Present:

Mr. Purcell
Mr. Morris

Mr. Bell
Mrs. Klotz

Purcell:

I am coming over, as you know, in behalf of
the Chairman, because apparently his cold

isn't very well and he feels he ought to

stay out a little longer, but he didn't think

that we should delay giving you our message

any longer and that is to say that we want

to report to the Chief Financial Officer of

the Government and say that we are ready to
do whatever we can to assist.

As you know, we have an organization built
up over there which is probably the best
unit in the Government from the point of

view of corporate affairs.
H.M.Jr:

That is right.

Purcell:

And that organization and our facilities are
at your disposal at any time.
That is fine.

H.M.Jr:

Purcell:
H.M.Jr:

Purcell:

We hope we have given good service in the past -You have.

..and we will do our best to do so in the

future.
H.M.Jr:

You are useful because we need all the help we

123

-2-

can get.
Purcell:

Well, we want to give it.

H.M.Jr:

You know, we haven't thought of S.E.C. in
connection with carrying out some of those
freezing things, but they might have some
people in some of these banks and businesses
that could help us.

Bell:

I think Ed has talked to you on one or two
occasions, hasn't he, Ganson?

Purcell:

Ed has. He mentioned about two or three weeks

ago to me that he would like to use our
services if he found that the occasion should
arise where we want that kind of men and he

thought it was going to come. I think Joe

O'Connell has also spoken to us more recently,
although I understand that something has put
off an immediate decision on the matter, but
we stand ready to help you in any way we can.
H.M.Jr:

Well, I just wondered whether he had thought
of S.E.C. because we are so short of men on the
West Coast.

Bell:

I think he has had it in mind, but I think --

H.M.Jr:

Well, you might --

Bell:

I think it rests to some extent on this
larger decision of custodians and so forth.

H.M.Jr:

That is right.

Purcell:

I understand that is why there is some delay

H.M.Jr:

at the moment.

Well, you tell the Chairman and the rest of

the board members that I appreciate this very

much and I will be delighted to avail myself
of it and that goes two ways, if we can be of

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124

any service to you.
Purcell:

That is fine, sir. I think you will need our

services more than we will need yours. I
would like to mention one specific thing, and

that is the question of capital funds control,

which, of course, you have been thinking about
and which we have been talking to you about

since Jerry Frank, I believe --

H.M.Jr:

The summer of '39.

Purcell:

...had that conversation with you in the

summer of '39 and I believe you sent the
proposed - according to Ed - the proposed
Executive Order to the Budget, and I guess
that is where it is at the present moment.

Also, as you know, I made some remarks in

Detroit about three weeks ago on the subject,
which was the speech I asked Ed Foley to look
over.

H.M.Jr:

That was explained. That wasn't your fault.

Purcell:

I understand, sir.

H.M.Jr:

You know, that was - but I mean, you did yours

but my people didn't bring it to me.

Purcell:

Well, I learned that afterward, after I had
gotten back. I didn't intend to raise that
point.

H.M.Jr:

I just want to say for you that I am sorry I
raised it, because it was my own people who
were at fault, not you.

Purcell:

Not at all, sir. But what we have done, I have
had that Executive Order and letter revised, and
I should like to leave copies for you and really
would like to urge upon you our sincere feeling
that something ought to be set up as rapidly
as possible.

125
4

H.M.Jr:

Well, we will take it and --

Purcell:

The only further change which I haven't made
which occurs to me might well be made for the

purposes of simplicity and efficiency as to

H.M.Jr:

perhaps leave out two of the five suggested
agencies, namely, the Secretary of Agriculture
and the Federal Reserve Board, leaving in as
the chief head the Secretary of the Treasury
and then with the loaning agency and the S.E.C.
I see.

Purcell:

I don't know; I just make that suggestion as

possible in the interests of simplicity and effic-

iency.
H.M.Jr:

Well, if you would leave it with me, we are all
studying it.

Purcell:

Surely, sir.

H.M.Jr:

And we will see if the people think it is

urgent.
Bell:

You think it is urgent now?

Purcell:

Well, personally, yes, I do, and I think the
Commission - I am quite sure the Commission

agrees with me that we ought to set it up so
that you can begin obtaining the pertinent
facts. I am afraid sometimes we have started

too late in things of this kind, in getting the

background so we can act at a time when important
questions come up. I am, of course, not a judge

of whether it is the appropriate time. I

merely make the suggestion that it be undertaken,

if possible.

H.M.Jr:

You leave it with these two men and we will go

Purcell:

I won't take more of your time.

to it.

H.M.Jr:

126

Thank you very much for coming over. Sort

of look to Dave Morris as liason so that
if you want something, he is here.

Purcell:

Fine.

H.M.Jr:

And I mean Bell may be busy and so forth, but
I mean Bell is operating and Dave is here to
help Bell and me, so if there is something

particular any time, if you would sort of -Purcell:

Anything we want to get through quick.

H.M.Jr:

...if you would look to Dave Morris.

Purcell:

And of course, we are continuing on as far as
the actual markets are concerned discussing those
matters with Ed Foley and Bernie.

H.M.Jr:

On the markets?

Purcell:

On questions relating to the securities

markets.
H.M.Jr:

Yes.

Purcell:

From time to time. For instance, the Jap

and German and Italian bonds were questioned.

Bell:

They are not worrying about freezing right now.

H.M.Jr:

But something like this, if you want to get
it through either Bell or me, Dave Morris is

available.
Purcell:

Fine. Thank you very much.

127
Through the Bureau of the Budget
Attorney General

Division of the

Federal Register
My dear Mr. President:

There is transmitted herewith for your consideration a
proposed Executive Order creating a Capital Funds Committee

in order effectively to utilize, conserve, and coordinate the
Nation's financial resources for the conduct of the war and for
national defense. The Committee would consist of the Secretary

of the Treasury, the Secretary of Agriculture, the Administrator
of the Federal Loan Agency, the Chairman of the Securities and
Exchange Commission, and the Chairman of the Board of Covernors

of the Federal Reserve System.
Such a Committee would provide the means for the proper

coordination of the various existing agencies of the Covernment having functions relating to public and private financing,
and would maintain continuous channels of information concern-

ing the supply and use of our financial resources. The Committee would also take appropriate measures to insure and

foster effective utilization, conservation, and coordination
of the financial resources of the nation for the conduct of
the war and for national defense in connection with any financing, and the financial integrity of enterprises engaged in
or affecting production for the conduct of the war and for
*

Deleted portions are indicated by a dashed line, thus;
inserted portions are indicated by underscoring, thus.

-2-

128

national defense. It is believed that the Committee would
be of substantial assistance in connection with the defence
war effort, and that some such device is destrable essential

to help in directing the flow of capital funds.
The plan embodied in the proposed Order has the advant-

age that it would require no additional governmental machinery
or new legislation.

Faithfully yours,
Secretary of the Treasury

The President,
The White House

129

EXECUTIVE ORDER

Draft of 12/4/41
ESTABLISHING A CAPITAL FUNDS COMMITTEE

AND DEFINING ITS FUNCTIONS AND DUTIES

By virtue of the authority vested in me as President

of the United States and in order effectively to utilize,
conserve, and coordinate the Nation's financial resources
for the conduct of the war and for national defense and
for other purposes, it is hereby ordered as follows:
1. There is hereby created a Capital Funds Committee

which shall consist of (1) the Secretary of the Treasury
who shall act as Chairman, (2) The Secretary of Agriculture,
(3) The Administrator of the Federal Loan Agency, (4) The
Chairman of the Securities and Exchange Commission, and

(5) The Chairman of the Board of Governors of the Federal
Reserve System. Each member may act through a designee.

The members shall serve without additional compensation

but shall be entitled to actual and necessary transportation,
subsistence, and other expenses incidental to the performance

of their duties.
2. Subject to such policies, directions and regulations
13 the President may from time to time prescribe, the Com-

mittee shall take all lawful steps necessary to:

-2-

130

a. Obtain, assemble- and analyze all pertinent information from private or public sources for the purpose of
utilizing and conserving the Nation's financial resources
for the conduct of the war and for national defense, for
the purpose of coordinating the flow of capital and the
Nation's requirements for the conduct of the war and for
national defense, and for related purposes.

b. Insure and foster effective utilization, conservation and coordination of the financial resources of the
Nation for the conduct of the war and for national defense

in connection with any financing, and the financial integrity
of enterprises engaged in or affecting production for the
conduct of the war and for national defense.

C. Determine the adequacy of existing facilities for
financing business enterprise and Government needs and foster

the expansion and creation of such financial facilities as
may be appropriate to increase, aid and expedite production
for the conduct of the war and for national defense.

d. Plan and take all steps necessary to facilitate and
coordinate financing in accordance with needs for production
and deliveries of material required in connection with the
conduct of the war and the defense program.

e. Utilize and coordinate for the purpose of carrying
out this Order the power and facilities available in the

-3-

131

several departments and other agencies of the Government
represented

on the Capital Funds Committee and such other departments

and agencies as are concerned with industry, finance, the
conduct of the war, and national defense.

f. Establish and maintain liaison with the financial,
fiscal and monetary, defence-and military and defense agencies
of the Government and with such other departments and agencies

of the Government and with such individuals as the Committee
may deem necessary to carry out this Order.

g. Keep the President informed with regard to progress
made and problems encountered in carrying out this Order,

advise him upon proposed or existing legislation, and recommend to him such additional legislation or Executive
Orders as may be necessary or desirable, relating to financial
activities or resources which affect the use of all such
resources required for the conduct of the war and for national
defense.

3. The Committee may provide for its internal organization and for the conduct of its business in such manner as
it deems necessary or appropriate to the performance of its
functions and duties.

4. Within the limits of such funds as may be allocated
for that purpose by the President on the recommendation of
the Bureau of the Budget, the Committee and the Government

-4-

132

Departments and agencies represented on it are authorized to
employ necessary personnel and make provision for the neces-

sary supplies, facilities, and services to carry out the provisions of this Order. However, the Committee shall use

insofar as practicable such statistical, informational,
fiscal, and other services and facilities as may be made
available through other departments and agencies of the
Government.
THE WHITE HOUSE

Aprily

1041

December, 1941

133
December 12, 1941

4:00 p.m.

RE FOREIGN FUNDS CONTROL

Present:

Mr. Foley
Mr. Pehle
Mr. Bernstein

Foley:

We have got this memo all ready. This is a
program that we would like to talk to you
about. We haven't had a chance to get the
benefit of the suggestions of the fellows
on the Coast about it. We put it on the
teletype and haven't gotten one reply.

H.M.Jr:

Are you having one put in your office?

Pehle:

We are having one put in. We have already
used this one and we have gotten the reply.

H.M.Jr:

This one works all right?

Pehle:

Yes, very good.

H.M.Jr:

You get quick replies?

Pehle:

Right away.

Foley:

This program is agreeable, but we would like

to work out the details and not put it into
effect until Monday morning.

H.M.Jr:

More than a thousand dollars?

Foley:

We have to start with the title there. We are
dealing with these Japanese nationals who have

lived here continuously since the 17th of June,
1940, prior to Sunday.
H.M.Jr:

How about those who lived here before?

-2-

134

Pehle:

These are the ones that lived here before and
not the ones that have come in here since.

H.M.Jr:

Oh, because those that have come since - how
do you treat those?

Pehle:

We have been handling those specifically and
are continuing to do so.

Foley:

There are not so many of them.

H.M.Jr:

Ithe
see,
so that this is - leaves it prior to
17th?

Foley:

That is right, who have lived here continuously.
You don't think a thousand dollars is too low?

H.M.Jr:
Pehle:

This is just for reports. That is the same
dollar limit as we used on all the reports that

we got.
Foley:

You see, this group didn't have to report

H.M.Jr:

Well, of course I don't understand this, but

before.

can you give me a thumbnail sketch of what

percentage this would eliminate of the people
you are trying to handle now?
Pehle:

I would say it would eliminate at least ninety

percent.
H.M.Jr:

It would? Are you all together on this?

Pehle:

Yes.

Foley:

Yes.

H.M.Jr:

Are you, Bernie?

Bernstein:

Yes, sir.

-3H.M.Jr:

135

Well, if it will eliminate ninety percent of
your troubles, I am for it, without going into

the formula, see. Why do you say - oh, blocked
assets of more than a thousand. I see. And

the assets five. That is all right. I mean,

if the assets of their business is five thousand.
Bernstein:

Yes.

H.M.Jr:

Well, as to principle, I agree with you, and if

it is all right, put it into effect Monday. This

will eliminate ninety percent?
Foley:

Oh sure, it will take care of this terrific
burden. We are trying to do something about
these little businesses that - where you have
got to put a guard in and you don't know what
they are doing.

H.M.Jr:

The Germans you just handle just --

Foley:

Well now, I think as to the Germans and as to
the Italians, that he may want to suggest
something to parallel this, because of the war.

H.M.Jr:

Why not - why wouldn't this apply the same way?

Pehle:

Well, we never took the tightening up action
on the Germans.

H.M.Jr:

Well, I am willing to give you until Sunday

night to think it over. You would like to put
this into effect Monday morning?

Foley:

Yes.

Pehle:

We would like to notify the Federal Reserve
before then.

H.M.Jr:

I am satisfied.

Foley:

We will get the papers up tonight and notify

136

the Federals and they will have over the week-

end to get it ready and put it into effect

Monday morning. Then I think next week we

will want to come in and talk to you about
tightening up on the Germans and Italians and
perhaps bringing them into line with this 80

we will have more of a uniform program than we
will have now, because we are dealing with the

different groups of nationals in a different

way at the present time and creating a problem
for the State Department in so far as South
America is concerned.

H.M.Jr:

As far as I am concerned, I really would be
excited if I found that certain people were

allowed to escape, so I would much rather have

you err on the side of having gone too far
than not far enough. This is much easier to
undo. If, for a week, there is - somebody
told me this afternoon that you can't get any
laundry done out there, the laundries are
locked up. Those are things temporarily -Foley:

Well, I think we discovered one thing, Mr.
Secretary, and that is the potency of this
instrument.

H.M.Jr:

Good.

Foley:

It can tie up a whole area, --

H.M.Jr:

O.K.

Foley:

...very, very quickly.

137

Program re Japanese Nationals Who Have Lived Here

Continuously since June 17, 1940, and Business
Enterprises in the Continental United States Owned
by Such Japanese Nationals.

1. Such Japanese nationals and their business enterprises

will be generally lioessed and they and their banks will be required

to file a TFR-300 report within 30 days if their total blooked assets
are more than $1,000.

2. Business enterprises in this country belonging to Japanese
nationals who have been residing here continuously since June 17, 1940,

will be allowed to do business on the following conditions:

(a) If their assets are in excess of $5,000 they will
file a comprehensive report comparable to the reports (Form TFBE-1)

required of other blooked business enterprises in this country.
(b) Such businesses must conduct themselves so as not

to substantially diminish their assets in the United States.
(o) Periodic reports will be required if payments,
transfers, or withdrawals are in excess of $1,000 a month.
3. Federal Reserve Banks will be authorised to exclude from
these benefits any person or enterprise known to be dangerous to our
national interests.

4. All guards and supervisory personnel will be promptly
removed from business enterprises having the benefits of this program.

5. We will put this program into effect Monday morning but will
tell the Federal Reserve Banks about it Saturday morning so that they will
have over the week end to prepare.

138
December 12, 1941

4:20 p.m.

RE GOVERNMENT BOND MARKET

Present:

Mr. Bell

Mr. Morris
Mr. Haas

Mrs. Klotz

H.M.Jr:

What do you know?

Bell:

Well, the market was very good. The new bonds

are - the market is generally up nine to

eighteen thirty-seconds. The news two's are

five to eleven. I guess that is what he means,
new bonds. They made no purchases today at
all. I haven't heard from the Open Market
Committee, but I know they did discuss the

question of selling. I think they have given
New York the authority to sell.
I think they feel - at least New York feels that

we shouldn't do any selling this week, but
certainly Monday. If this keeps on we should

let them dribble out a little, not too heavy
but just a few at a time. You called Allen

Sproul and he was at the board.
Morris:
H.M.Jr:

I think you will have to talk to Bob Rouse.
You saw the results on the ticker of our lunch?

Bell:

Not yet. Complete harmony?

H.M.Jr:

They are going to hold - both the Senate and the
House are going to hold simultaneous meetings.

Bell:

Again?

(The Secretary held a telephone conversation with

139
-

Mr. Rouse, as follows:)

140
December 12, 1941
4:18 p.m.
HMJr:

Bob, I hear you've gone Scotch on me.

Robert
Rouse:

What do you mean, "Scotch"? Oh, yes, I'm not
spending your money. (Laughs)

HMJr:

Yeah.

Well, I'm very happy to report that it was
entirely unnecessary.

HMJr:

Good.

And I - Allan's down there today, and I talked
with him and also wanted to get a clearance
from you through Dan on looking to the sale of

securities
if this worked out, and it appears
to.

HMJr:

I'll tell Allan to stay in Washington. I save

money that way.
R:

(Laughs) Well, the way the thing shaped up,
we've had a market for these new bonds - a

broad market in a small way. I think that
would be the fairest way to state it.
HMJr:

Good.

People feeling their way along, buying fifties,
hundreds, and pretty well over the country.

HMJr:
R:

Good.

The big people who were supporting the thing

naturally didn't follow it up. That is easily
understood.
HMJr:
R:

Well, it's the little fellows that we want.
Yeah. It really works out very well. Of course,
there's been a number of switches that wanted

to be done in a substantial way, but that solved
the selling of the when-issued securities and

the purchase of the outstanding; and we've

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141

discouraged that, because we didn't want to
see any big supply of the new issues come in.
HMJr:
R:

Good. Now, you

The insurance market also, in view of the tax
notes and so on, I was more concerned about

fundamentally for the time being than the long,

so it's finally straightening itself out.

HMJr:

I'm glad. Now, did you see that Gregory of the
Tribune used your story on the financial page?

No, I haven't had a chance to read the clippings
today.

HMJr:

Well, read Gregory - right on the first financial

page about - I used the story about the bond dealer
said he'd take care of the bond market if we'd

HMJr:

take care of the air raid alarms.
Fine, I'11 take a look.

Yeah, right on the front page of the financial
page by Gregory.

Also, while you're on the wire, I want to thank
you for the invitation to Toscanini tomorrow
night. Mrs. Rouse and I are both anxious to
go.

HMJr:

Good. Good.

It's a real privilege.

HMJr:

You might tell Sproul that at Cabinet I reported
how excellent the cooperation was under his
leadership in New York with the financial
community.

Yes, sir, I shall.

HMJr:

Will you tell him that?

I will the first thing in the morning.

HMJr:

Thank you.

Thank you very much.

HMJr:

Good-bye.

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142

H.M.Jr:

Sufficient unto the day.

Bell:

Pretty good. I feel better.

Morris:

Almost happy, too.

H.M.Jr:

Who, you?

Morris:

The market.

Haas:

Oh, it didn't decline much.

Morris:

It went up.

Haas:

I mean even at the bottom it handled itself
very well.

144
2C:

HMJr:

Yeah.

And we fussed around all morning and we couldn't

reach him. I told Ed, "Let them go."

HMJr:

Yeah.

And we got a swell telegram from John E. Mack

saying we want this and this and that. Now, I
know now how you feel, but I don't think that
everybody else in the Attorney General's office,
frankly, feels the same way.

That was the reason why - when Biddle talked to me
he said that Shea wasn't getting along well and he
said that he thought that I could work with Ed

and wanted to know if I wouldn't do it for him;
and I said, "Now, Francis, I'11 do that providing
that I don't get mixed up in any squabbles between
the Attorney General's office and the Secretary of
the Treasury regarding jurisdiction. I said, "Now,

I've worked with Henry Morgenthau ever since I came
to Washington and came here with him."

HMJr:

That's right.

"And as long as you don't put me down the middle
on any quarrels because my relationships and my
friendships certainly are with those fellows over
there.

HMJr:

Yeah.

And the reason that I told Ed was that I thought
that Ed would get things cleared through a fellow
like me quicker than he would through a fellow
like Shea.

HMJr:

No question about it; but, Leo, I don't understand

what's the matter and the Attorney General sent me
a memo which I don't know whether you have seen

or not, which I understand Shea has written, which

to put it mildly, I think if he'd have read it at
all, I don't think he'd have signed it.
Well, let me say this to you - I don't think Francis
read that memo. Now, here's the situation. I

- -3-

145

didn't go over there after Francis talked with
you - I didn't go over there to take charge of
the thing, because I didn't want to do it until
after I talked with you. In the meantime, why

Shea, of course, kind of got his neck bored, and
what we've got to do tomorrow is to sit down and
talk the thing over and then let Shea go back to
his office; and then after the President gets the
legislation, why we've got to sit down and work

ittrouble.
out and you and I'll have no - we'll have no

HMJr:

Well,
look, we got just one enemy and that's the
Nazis.

And that's the way I feel about it.
And I just haven't got time to have any interdepartmental fights.

Well, now, I think you know me well enough.

HMJr:

See? I just haven't - I haven't got time.

I think you know me well enough that any influence
that I can bring to bear won't be against anything
that you want.

Now, I don't think that Biddle feels that way. I

HMJr:

talked with Biddle yesterday
Well, I don't quite understand the way Biddle's

acting on this. I just don't understand it.

I told Biddle yesterday noontime, I said, "Now,

Francis, I want you to tell the boss that I'm
not going to get into this thing here and get into
any personal squabbles, that it's got to be on a
basis that's going to be congenial and then if I
can help you I will, but I'm not going to row with
fellows that have been friends of mine for eight

years."
HMJr:

Well, at Cabinet, the President brought up this
thing and said - this is what he said, that he'd
asked you to go over there to study this thing.

146
C:

HMJr:

Yeah.

And have a little organization so that later on
in the question of running these businesses that
the organization would be there; but he left the
distinct impression with me, certainly, that for
the time being he didn't want to do it; but - you
know, take them over - have Justice take them
over.

HMJr:

Yeah.

But, as I say, I'm going to start - as far as
I'm concerned - I'm going to settle it at lunch
tomorrow, because that's all the time I can give
to it.

Fine. That's perfectly all right.

HMJr:

See?

The thing that

HMJr:

And all I'd like to do is see that the thing is

well done and that these people aren't able to
be spies or do something or not turn out the stuff
or something else.

HMJr:

Yeah.

And I'm tickled to death you're there, because I
know that you're my friend and, as I say, one

luncheon is all that this is worth.
That's right. And let me say this to you, that
if it isn't worked out satisfactory to both you
and myself, then I'm not going into it.

HMJr:

Swell.

HMJr:

Because our friendship is worth more than my getting
mixed up with this over in the Justice Department
on some damn little jurisdictional squabble.

Well, I couldn't fight with you, Leo, especially

over who's going to do something. I mean, I think

147

-5there are certain things that the Treasury should

do
anddo.I think there are certain things that Justice
should
C:

The thing that I had back - have you got a moment?

HMJr:

I've got all the time you have.
The thing that I had back in my mind that I thought
maybe that coming from out in the middle of the

West and knowing the German-American situation and

things like that, that I could be helpful to you.
I don't - I think the thing is being administered
perfectly all right; if the Justice Department would
let us cooperate together, there isn't much reason
for any of this squabble at all.

Well, this committee of which Ed has been chairman
has done a swell job for months now.

HMJr:

Well, you remember I told Ed to tell you that I was
afraid that there was an Executive Order. That's
the reason that I confidentially wanted you to know

that.

Yeah.

HMJr:

Because I won't be a party to anything that you don't

know.

HMJr:

Right.

I want you to know this, that in this thing here,

that you've got my friendship and that whatever's
done is going to be done the way we've always
operated.

HMJr:
C:

HMJr:

Fine.

And we'll talk it over tomorrow noon. I'm sure we'll
work it out together.
Yes. But just take a look at that letter that
Biddle wrote me and - can you get hold of it?

Yes, I'11 ask him for it in the morning.

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148

HMJr:

Yeah, because he may want to withdraw it.

Well, I think that I can get

HMJr:

He may want to withdraw it. He may not want it

Here's what I didn't want to

HMJr:

on the record

because it certainly gets you off to a bad

start.

That wouldn't have happened had I gone down there,

but I didn't want to go down there until I talked
to you.

HMJr:

Well, Leo, after you've read it, you may - and Biddle
may read it for the first time - he may decide that
before he comes to lunch, he may want to withdraw

that letter.
Fine. I'11 talk to him about it.

HMJr:

Okay.

Good-bye.

HMJr:

Good-bye.