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149
ASSISTANT SECRETARY OF THE TREASURY
December 12, 1941.
MEMORANDUM
To:
Secretary Morgenthau
From: Mr. Gaston
We are negotiating with Budget
for a reapportionment of customs ap-
propriations which will permit the im-
mediate employment of 1,000 additional
customs guards for services at seaports and on the Mexican Border. This
has nothing to do with Foreign Funds
but is due to the necessity of pro-
viding adequate customs guard service
in the war emergency. Other customs
personnel cannot be detailed to this
work since it is necessary to draw
men from other customs work to ad-
minister the search and license provisions of section 3(c) of the Trading
with the Enemy Act. As to this last
function I signed regulations as
Acting Secretary last night.
CHINA DEFENSE SUPPLIES, INC.
1601 V STREET N. W.
150
WASHINGTON D.C.
Confidential
December 12, 1941
Personal - By had
Let Harry white at to
Dear Mr. Secretary:
read f return my the
I am enclosing a copy of telegram from General Chiang
Kai-shek relative to some joint council of war to be set up.
Since events are now pressing, I shall be grateful if you could
give me any suggestion how to push the matter in this country.
I am sending also a copy of a communication I was
charged to present to the Secretary of War and the Secretary of
Navy yesterday.
With kind regards,
Yours sincerely,
T. V. Soong
Enclosures (2)
The Secretary of the Treasury
Washington, D.C.
noted
by
sights
12/13/11
151
TELEGRAM FROM GENERAL CHIANG KAI-SHEK
By the sinking of the two British battleships off Singapore the
British fleet in the Far East has been practically put out of action.
Two days ago I made the following proposal to the American and British
military representatives in Chungking:
(1) The United States, Great Britain, the Netherlands, and China im-
mediately to formulate a unified war plan aiming at the coordination of all
military movements.
(2) The four Powers immediately to set up for the Far East a central
command, or a central war council, with headquarters at Chungking. This organ-
isation may either be under the direction of the American representative, or
function as a committee. This organization shall decide on all questions concerning joint war efforts against Japan.
(3) The four Powers immodiately to enter into a military alliance, and
to undertake not to make separate peace with the enemy.
(4) The Soviet Union to be requested to join as soon as practicable.
I have requested the American and the British representatives to oable
their respective Governments of the above suggestions, with the request that a
concrete procedure of action be decided upon with a week's time. Only in this
way can we avoid being defeated in detail by the strongly united Axis Powers.
The Soviet Chief Advisor expressed his personal opinion when I saw him
today that Soviet declaration of war against Japan is merely a matter of time
and a matter of procedure. The Soviet Union, he believes, will make the open
declaration only after a general coordinated war plan has been decided upon
among the United States, Great Britain, China and the Soviet Union. This differs
considerably with the attitude of scepticism and disappointment which he evinced
152
Telegram from General Chiang Kai-Shek
Page 2
.
two days ago. I cannot fathom whether this change in his attitude is due
to new instructions received from his government to be communicated to mo.
H owever, any student of military strategy will feel disheartened at the
lack even now of a general plan of war against Japan between the United States,
Great Britain, and China, and the consequent lack of coordination among the
democratic front. And the Axis Powers will not fail to be profited thereby.
Please transmit this message to the American authorities, and to work
for the consumation of a coordinated plan.
Chiang Kai-Shek
Chungking, December 10, 1941
153
TELEGRAM FROM GENERAL CHIANG-SHEK
Please convey to the Secretary of War and the Secretary
of the Navy my utmost indignation at the dastardly Japanese attack
on Pearl Harbor, and my deepest sympathy for the losses sustained
by the armed forces of the United States.
In the Far Eastern zone of hostilities I have already
given orders for immediate operations to relieve Hongkong. We have
also decided upon an attack on the Japanese in Indo-China, which will
be launched as soon as a joint Far Eastern plan of campaign has been
definitely agreed upon.
I summoned the British and American military attaches
last night and conveyed to them China's unalterable decision to do
its utmost and share the fortunes of the war with the two countries
unflinchingly.
What is urgently needed now is the immediate creation of
an Inter-Allied War Council, under the leadership of the United
States, which should begin to function at once. Otherwise all our
countries are in danger of being beaten in detail.
Chiang Kai-shek
Chungking, December 9, 1941
12/12/41
154
Secretary took this with him to the White
Couse today and showed it to the President.
155
TREASURY DEPARTMENT
Washington,
December 12, 1941
MEMORANDUM FOR THE SECRETARY:
Herewith the figures for selected
Post Offices which I promised you.
GRAVES.
-
156
BOND SALE'S
Nine additional Postoffices
&
4 days
Mon. Tues. Wed. Thurs.
Columbus, Ohio
26,768.16
53,418.75
26,650.59 100
Springfield, Mass.
13,554.52
26,400
12,845.48 95
Toledo. Ohio
17,604.00
36,281
18,677.00 106
Cheyenne, Wyo.
2,222.52
14,925
12,702.48
572
Fort Wayne, Ind.
9,436.36
12,187.50
2,751.14
29
Mon. Tues. Wed. Thurs. Increase Increase
Huntington, W. Va.
12,313.44
9,300
Baltimore, Md.
51,954.56
133,012
Charlotte, N. C.
ewiston. Me.
TOTALS:
5,304.52
700.00
139,858.08
10,143.75
2,300
297,968.00
- 3,013.44
-24
81,057.44
156
4,839.23
91
1,600.00
229
113
156
BOND SALES
Nine additional Postoffices
%
4 days
Mon. Tues. Wed. Thurs.
Columbus, Ohio
26,768.16
53,418.75
26,650.59
Springfield, Mass.
13,554.52
26,400
12,845.48 95
Toledo. Ohio
17,604.00
36,281
18,677.00
106
Cheyenne, Wyo.
2,222.52
14,925
12,702.48
572
Fort Wayne, Ind.
9,436.36
12,187.50
2,751.14
29
Mon. Tues. Wed. Thurs. Increase Increase
Huntington, W. Va.
12,313.44
9,300
Baltimore, Md.
51,954.56
133,012
Charlotte, N. C.
ewiston. Me.
TOTALS:
5,304.52
700.00
139,858.08
10,143.75
2,300
297,968.00
- 3,013.44
100
-24
81,057.44
156
4,839.23
91
1,600.00
229
113
157
SALE OF BONDS AND STAMPS
This is a preliminary report. It includes bank reports
from various cities, but does not include all banks in cities
listed. Post Office reports do include all post offices in
cities mentioned.
BOND SALES (E, F AND G)
Banks **
Last Week
This Week
Mon. Tues. Wed. Mon. Tues. Wed.
Boston, Mass.
Providence, R. I.
New York, N. Y.
Brooklyn, N. Y.
Newark, N. J.
$202,718
23,550
461,697
270,950
92,200
$480.425
80,725
214,836
$5,592,759
$3,118,466
126
500,300
31,770
39,950
264,375
Minneapolis, Minn 56,300
60,600
St. Paul, Minn.
Detroit, Mich.
483,300
Denver, Colorado 101,175
Seattle, Wash.
99,900
63,908
Houston, Texas
TOTAL BANKS $2,474,293
64,012
New Orleans, La.
Cleveland, Ohio
%
Increase
123
194
166
236
380,875
205,975
Atlanta, Ga.
Increase
$277,707
57,175
697,728
109,925
113,775
278,400
32,242
59,636
296,725
49,500
39,600
592,950
196,025
166,150
150,928
1,159,425
Philadelphia, Pa. 221,900
$
99,586
561,100
105,800
100,200
1,076,250
297,200
266,050
137
243
151
41
123
125
101
149
112
88
65
**These are totals for representative banks
Post Offices
$181,837.50
614,075.00
176,681.25
67,537.50
469,968.75
$86,948.85
291,915.92
41,029.56
31,742.04
205,638.75
92
$852,824.88
$1,510,100.00
$657,275.12
77
$3,327,117.88
$7,102,859.00
$3,775,741.12
113
Boston, Mass.
$94,888.65
New York, N. Y.
322,159.08
Philadelphia, Pa. 135,651.69
Cincinnati, Ohio
35,795.46
Chicago, III.
264,330.00
TOTAL POST
OFFICES
GRAND TOTAL BONDS
91
30
89
78
158
STAMP SALES
Post Offices
Last Week
Mon. Tues. Wed.
$37,999.80
81,718.68
New York, N. Y.
Philadelphia, Pa. 45,619.02
8,210.07
Cineinnati, Ohio
54,008.55
Chicago, Ill.
TOTAL
$227,556.12
Boston, Mass.
This Week
$
Mon. Tues. Wed.
Increase
$45,675.40
82,901.05
85,111.95
10,647.80
57,726.40
$282,062.60
$7,675.60
1,182.37
39,492.93
2,437.73
3,717.00
$54,506.48
*This high percentage is result of newspaper carrier boy
campaign. Similar campaigns either started, or about to
start, in 489 cities with 678 newspapers participating.
%
Increase
20
1
87'
30
7
24
159
REMARKS
Chicago - Federal Reserve Bank wires as follows:
"Chicago, Detroit, Milwaukee and Indianapolis all report
substantial sales of Defense Bonds as compared with any
previous period. The increase in larger banks ranges from
seventy to five hundred per cent. We have been swamped with
requests of issuing agents for more bonds from all sections
of district, many telephoning us to rush shipment. First
National Bank, Chicago - this their record day. Terre Haute
reports post office entirely sold out.
Federal Reserve Bank of New York reports demands have
increased at least 800 or even 1000 per cent.
Administrator for Honolulu wires bond sales increased
ten times.
Pittsburgh Postmaster reports that on Monday newspapers
purchased 700,000 or $70,000 worth of Stamps. These are
for newspaper carrier boys for delivery to customers.
Retail stores pledge sale of $1,000,000,000 worth of
Bonds and Stamps for 1942. The larger stores will permit
customers to buy Bonds and Stamps on charge accounts. New
York department stores have already inaugurated plan.
160
Sale of Bonds and Stamps increased slightly on Monday,
increased more on Tuesday, and much more on Wednesday.
Indications are that Thursday's figure will be still
greater. Continued increase is expected.
@@@@@@@
It is reasonable to assume that the increase of 113
per cent on sale of Bonds (three days this week compared to
three days last week) will certainly prevail for many months.
A much greater increase can be anticipated as the planned
intensified sales campaign gets under way.
Applying this 113 per cent increase on a monthly basis,
it can be reasonably expected that Bond sales monthly (from
December on indefinitely) will reach $497,000,000.
This figure is arrived by taking the November sales
($233,000,000) as a basis, and applying percentage increase
of 113 per cent.
161
TREASURY DEPARTMENT
Washington,
December 12, 1941.
MEMORANDUM FOR THE SECRETARY:
I attach a pen-and-ink tabulation corresponding to the figures I gave you this
morning, for banks in certain cities.
These are later figures.
I expect to have corresponding figures
for selected post offices within the next
few minutes, and will send them down.
GRAVES.
Bond Sales (E, Fand G)
120 'clock Noon
Banks
Last week
Men Tues wed
23,550
Providence, RI
new york Ny
Brooklun Ny
1,005,347
39,300
Newark NJ
2,621,750
1,616,403
161
89,550
205,975
49,250
264,375
500,300
64,012
137,886
561,100
32,242 101
88,636
296,725
180
112
1,076,250
592,950
123
293,670
25,700
490,175
196,505
42,100
67
196,02 5
194
173
214,836
206,300
150, 928
236
7,461,059
4,322,846
138
60,600
fouldon Texas
278,400 125
483,300
St Paul Mim
cattle Wash
123
100,200
105,800
Denver Col
113,775
128
88
56,300
hicago HI
Maka Neb
50,250
49,500
39,600
Minneapolis Mim
Detrod mich
Increase
152
243
31,770
Cleveland ohio
Increase
%
315,332
53,175
Pheladelphia Pa. 221,900
new OreleansLa
#
$522,275
80,725
92,200
Vilanta Ga
Deca her 12,1941
This week
mm Tros wed
Botton, Maso #206,943
162
101,175
118,925
63,908
3,138,213
67,800
297,200
325,225
note: not all banks in the citine named an
included in these figure
65
164
163
December 12, 1941
MEMORANDUM TO THE SECRETARY:
RR: Report of Federal Reserve Banks on Savings Bonds Activities
Bostont
New York:
The sales by issuing agents increased approximately 100%.
The banks report this morning prospects of increased sales
now that we are in war. New customers in large numbers.
Agents request increase in designation accompanied by
statements that they are out of bonds of low denominations.
Philadelphia: Sales for this week show material increase over last
week. Banks report necessary to increase personnel
handling sales and provide additional facilities.
Sentiment seems to indicate that sales will increase
as new subscribers are coming in, saying that now we
are in the war, they want to do their share. We have
been deluged all day with urgent calls for shipments
of additional bonds.
Cleveland: We have unprecedented demand for shipments of Series E to
agents in industrial centers. Reports indicate that sales
have increased enormously this week but mainly in smaller
denominations. We are working overtime to get out shipments of bonds urgently requested.
Richmond: Reports yesterday was the biggest day they have ever had.
Atlanta:
Have received urgent request for large volume of bonds to
agents.
Chicago:
Best indication of current unturn and demand is the great
increase of requests for shipment of bonds by issuing
agents. Requests have been pouring in by mail, wire, and
telephone from many sections, especially industrial centers.
From comments received there is a great increase due to
war developments.
DWB handed orig
to Sing 9:08am 12.12.41,
Secy read to groups then
gave are to Graves
164
-2St. Louis:
It appears that sales have either tremendously increased
or considerable demand is anticipated by issuing agents
in this district.
Mianompolist Sales are gaining momentum. Orders received over the
counter have just about doubled and consignments to
agents have more than doubled.
Kansas City: Exceptional interest and demand for defense bonds through-
out entire district. More bonds have been shipped to
issuing agents last two days than in previous eight days.
Dallas:
Savings bonds sales in this district have shown tremendous
increase since declaration of war. Agents have been
ordering bonds to replenish stocks by wire and telephone
ever since Monday.
165
DEC 12 1941
My dear Mr. Green:
In the light of the present war emergency it becomes
vitally necessary for all organizations of Americans to
redouble their support of their Government in every way
possible. I am gratified to learn that the Executive
Council of the American Federation of Labor has been convened in Washington to consider its war policy. One of
the most important things which your great organization
can do is to support the Defense Savings Program, and
this gives you an opportunity of participation by every
individuel member of your organization such AS no other
part of our war program can offer.
Under your leadership during the months pest a fine
beginning has been made--both by the purchase of Defense
Savings Bonds by your parent body and many of its con-
stituent bodies and by the systematic saving plans sponsored
by your unions among their members. But this is only a
beginning. We are at war and the emergency is greater
than any in the history of this nation. May I suggest
that your Executive Council give this program the emphasis
which its importance warrants. You may see fit to call on
your members to take part in Payroll Allotment Plans or
other systematic saving lans to the utmost limit of their
bility. A large part of the national income-of the
earnings of all citizens-- must be used to finance this
wer; and voluntary participation through buying United
States Bonds is every citizen's duty today. Your Executive
Council can perform e great patriotic service by such help
to its country in e time of great need.
Sincerely,
signed) 5. Morgenthan, Jr.
Mr. William Green,
President,
The American Federation
of Labor,
Washington, D. C.
LH:EM:CBK
By
Messenger Simmon 4:20
n
166
THE WHITE HOUSE
WASHINGTON
December 12, 1941
Dear Henry:
I have your letter of December
eleventh in which you give me a very clear
summary of the work the Treasury Department
has done in connection with its Defense
Bond promotion program since the outbreak
of war on Sunday.
You have been and are doing a
swell job -- the sort of promotional job
that would be an excellent example to many
departments, agencies and Government bureaus.
I really think they would benefit much by
taking a page from your book.
With kindest personal regards,
Very sincerely yours,
Sluex
STEPHEN EARLY
Secretary to the President
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
TREASURY DEPARTMENT
167
INTER OFFICE COMMUNICATION
DATE December 12, 1941
TO
Secretary Morgenthau
FROM
Mr. White
Subject: New Facilities of the Economic Defense Board
The Chairman of the Economic Defense Board and the Secretary
of Commerce have issued a joint statement to the following effect:
1. All international economic functions of the Commerce
Department will be at the disposal of the Economic Defense Board
during the war.
This move will make available to the Economic Defense Board
the services and the information of the Bureau of Foreign and
Domestic Commerce.
2. These facilities will supplement the merger announced
last week, which placed under the Board a part of the personnel
formerly under the Coordinator of Inter-American Affairs.
Anhele
ECONOMIC DEFENSE BOARD
168
WASHINGTON D.C.
December 9, 1941
OFFICE OF THE EXECUTIVE DIRECTOR
3.6
The Honorable,
The Secretary of the Treasury.
Dear Mr. Secretary:
The Vice President has aske me to call
this announcement to your attention.
Sincerely yours,
Wils Parkins
Executive Director
Enclosure
HEVETIMA !
dign
1001 DEC 10 W 8 23
ECHELVEGA
Oz
OLLIGE
169
ECONOMIC DEFENSE BOARD
No. 18
PRESS RELEASE
December 9, 1941
For IMMEDIATE release
ECONOMIC WARFARE PROGRAM INTENSIFIED
Department of Commerce places cer-
tain facilities at service of
Economic Defense Board
Vice President Henry A. Vallace, Chairman of the Economic Defense
Board, and the Secretary of Commerce, Jesse H. Jones, today issued the following
statement:
"The Department of Commerce finds that its responsibilities for
handling matters of foreign commerce can be most effectively carried out during
the war by concentrating its activities for this purpose toward the carrying
out of the objective OI' the program of the Economic Defense Board,
"Since the initiative for the economic warfare program of the United
States rests with the Economic Defense Board, the Secretary of Commerce has
directed that all functions of the Department of Commerce devoted to inter-
national economic affairs shall take their principal direction during the war
from the Hoard, of which the Secretary is a member.
"The Economic Defense Board has decided to utilize for its purposes
the existing organization of the Department of Commerce to the fullest extent
possible and to assist that organization to develop its functions for adequate
service to the Board,
"This program of cooperation was developed from a joint review of the
functions of the Economic Defense Board, the Department of Commerce and the
Office of the Coordinator of Inter-American Affairs. The first step in the
(over)
-2-
merger of facilities was announced last week when the Coordinator of InterAmerican Affairs was appointed a member of the Economic Defense Board, and the
executive personnel of the Economic Defense Board engaged in hemisphere matters
was merged with the personnel of the Commercial and Financial Division of the
Coordinator's Office -- the entire personnel now acting as the American Hemisphere
Division of the Economic Defense Board.
"Under the new arrangements, the Bureau of Foreign and Domestic Com-
merce and other divisions of the Department of Commerce propose to contribute
a major share of their effort in the international field to the work of the
Economic Defense Board by providing expert informational and advisory services,
in conjunction with the Bureau's normal activities in the international field.
"The Bureau will devote not only the factual information and international experts in its Washington office to this work, but also the Department's
field offices and the thousands of established contacts which it has with
business men throughout the country.
"It is hoped that final arrangements can be completed to make space
available to the Board in the Department of Commerce Building."
-0-
eib
ES 8
WA
01
330
30
301330
170
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
December 12, 1941
Garce
TO D. W. Bell
10
FROM
Secretary Morgenthau
Doughton which has told me about a very
Committee meeting is scheduled to be held by important the
I ought to on be Tuesday there. morning, and that he thinks Byrd
Would let you please find out about this meeting
and me know not later than Monday morning.
Seeer
out
171
MEMORANDUM FOR THE SECRETARY.
December 12, 1941.
Mail Report
Mail received on Monday of this week seemed a pallid
rehash of that of preceding weeks. There were the badly
written postal cards of anonymous abuse; the accusations
of "war mongering"; the pleas for Government economy; and
protests against strikes.
From Tacoma, Washington, there came a carbon copy of
a telegram to Washington Representatives here, from an
organization concerned about the President's nefarious
schemes to drag us into a European war at Great Britain's
behest. Read in the light of Sunday's events, the state-
ment made one wonder if these Pacific Coast citizens would
not have liked to recall their telegram before it was received here.
By Tuesday the tenor of the mail changed as letters
began to pour in. Since Treasury mail naturally reflects
patriotism as expressed through money, the offers of personal
service, though varied and interesting, were far outnumbered
by the offers of outright cash gifts, pledges of a day's
wages, a week's profits, etc., and suggestions and comments
on the bond selling campaign.
Since Monday's "pre war" mail, there have been no let-
ters of protest against alliance with Great Britain or
Russia; no letters personally abusive of the Secretary nor
the President, and very few of the Administration as a whole.
There have been some that are highly critical, and these
range from protests on economy to criticisms of the President's
most recent radio address, These are isolated examples,
however, of a great outpouring of letters of support, encouragement and confidence.
Summarizing by subjects, letters urging cuts in nonessential expenditures have spurted far ahead of all other
mail, except that concerning taxes. Economy letters outnumber those in regard to labor policies by 15 to 1. General
tax comment is very heavy. There are many suggestions as to
172
-2Memorandum for the Secretary.
December 12, 1941.
collecting the $5 automobile tax, many ideas as to possible sources of taxation, and this week - up to Friday
noon - there were 137 requests for individual help on
income tax problems, elicited by the "Know Your Taxes"
circular.
No comments on the Grange speech, or requests for
copies. A number of allusions to the inflation speech several pointing out that it was made three months ago;
that the war is upon us and no definite steps taken yet.
Continued requests for the tax folders both in bulk and
individual copies.
student
-1-
173
OFFERS OF SUPPORT IN TIME OF CRISIS
T. L. Vanns, President, Louisiana Bankers Assn., Lafayette,
La. The facilities of the Banks of Louisiana are at your
disposal in any and every way that they can be of possible
service.
Lee Nelson, c/o Diamond Bar S. Ranch, Wisdom, Mont. (Sends
a $25 Bond with his letter.) Well sir, I have done bot my
first Defence Bond, and am a sendin it in to you to just
write across the face of it, "Paid with Liberty", that is
all 1 ask, and send it back as a receipt. Each month
I'll be a sendin you another one to do the same to. If
you care to, you can tell Mr. Roosevelt that I'm a cowhand
and 43 this year, can fight like a wildcat. I have a '36
Chevrolet pickup, am single, can go anywhere, can shoot
like hell, and he can have all I got, myself throwed in,
if he needs us. Tell him I ain't got no more to offer, but
I'm all out for him, which a way he goes.
Eugene C. Donovan, President, New York State Bankers, N.Y.C.
Please know that the N. Y. State Bankers Association, consisting of almost 700 commercial banks in the empire state,
stands ready and willing to do everything possible to aid
you in mobilizing the country's financial resources against
this infamous attack. We shall feel privileged to serve in
any way you think best. We await your orders.
K. C. Li, N.Y.C. (Telegram) The wisdom of your policy is
now vindicated by the sudden attack on Hawaii. I volunteer
my services and I have pledged my resources to the President
of the United States in my telegram this morning, which I
quote: "As a citizen of a country which has suffered
treacherous and unprovoked attacks of a common enemy, and
as the father of five American children, I pledge my services
to you, and I put my resources at your command. You have
done your best to avoid war, and now that it has come,
despite your patient efforts, may God grant you wisdom and
strength to prosecute it to a successful finish so that
Twentieth Century barbarism may be permanently eliminated
from this earth".
-2-
174
Urban B. Brinker, Cincinnati, Ohio. Six years ago we
adopted a five-year old girl; sometime later we learned
she was the orphan of a World War Veteran. About two
years ago we applied for and received a $10 a month pension
for my daughter, our intention was to build up a small
estate for her to do with as she pleased later in life.
Now our country is at war and needs every cent. We don't
need this pension money. My salary as a postal employee
is more than enough to give us a good living. This being
the case, I hereby waive all claims and surrender our rights
to this pension.
J. Henry Showalter, West Milton, Ohio. (Very quivering hand-
writing.) Very Dear Sir: Wife and I are both past 77 years
old, with income a bit too low to require income tax payments,
as I understand the law. Too old to realize on bonds or
stamps of present date. Besides, we do not in any wise
wish to lay present or future financial burdens or obligations upon our Government. In our personal behalf, there-
fore, will try to send at least a part of our tithe as a
grateful gift to our Government's Treasury. I begin with
the enclosed check of $5.00. More will follow, the Lord
willing. Please instruct me as to whom I shall make my
checks payable, and how to address the Treasury Department.
Our contributions will be insignificant, I know, but we
greatly desire to do what we can, though it be little.
Thank you, and most truly yours - J. Henry Showalter.
M. Llewellyn Raney, Director, The University Libraries,
The University of Chicago, encloses a letter which describes
to the Secretary of State, work that he did during the first
World War. At that time, working with the Wilson Administration, he arranged a method of securing foreign current publications greatly needed here for research and information,
and distributed these publications to American Libraries.
In trying to work out a similar arrangement now, the organization needs the cooperation of both the State Department and
the Treasury. Mr. Raney submits the highly successful plan
of the previous war as a basis which might be followed now.
However, the situation is more difficult because of the necessity of securing individual licenses through the F.C.C.
Mr. Raney asks a study of this arrangement on behalf of
schools, scientists and Libraries here, which need to keep
their files complete. (Letter referred to Mr. Kuhn for possible discussion with interested officials.)
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175
Alfred S. Tindell, Highland Park, N.J. I want to donate
to the Government of the United States, My Country, one
hundred dollars. I have invested in Defense Bonds and
Stamps to the best of my financial ability with the exception of the above, which I wish to do. Kindly accept
this in behalf of Our Country.
The Staff of the Chicago Housing Authority, Chicago, Ill.
(Telegram) Pledges at least $238 as its members plan to
contribute at least $1 per person to the fund, "Dollars
for Defense and Victory". This money, contributed to the
United States Treasury, is to be used as you see fit for
defense and victory purposes.
Mrs. Betty Waller, Nanticoke, Pa. We all realize that
patriotism, morale and unity are very essential in our
present task. I am begging you to call our President's
attention to the urgent necessity of closing the Securities Market. There are millions of small investors in
our country who have loans on their securities, while the
market is declining in a so-called orderly fashion. This
decline is from 1 to 9 points daily, and more and more of
the small investors are being wiped out every day.
Henry Krumholz, Troy, N. Y. Today I received your kind
letter asking me to buy more Defense Savings Bonds. I am
more than willing to do all in my power to do so. I was
born in Vienna, Austria, and am in this blessed country
since October, 1939. I am thirteen years old and I have
heard, seen and felt what it is like to be in a country
where you have no liberty. I think that every American
should be thankful to be in this country and pay it back
for all the good things this country gave him by buying
more Bonds and Stamps. In the summertime I have had a
job which paid me $18. I went to the next Post Office and
purchased a United States Defense Bond. Now I have a job
selling newspapers and make 25d a week which I am putting
aside to buy stamps, and I hope that I can buy as many as
possible. I hope that I did not take up too much of your
valuable time, and I hope that I can do everything to help
in my own way in National Defense.
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176
William Ralph Voss, Milwaukee, Wisconsin. In the Mexican
crisis, back in 1916, I enlisted in the armed forces of
the United States, and took the oath of allegiance twice;
once, on the day of enlisting in the Iowa Field Artillery,
and the second time, soon thereafter when we were sworn
into federal service. Owing to physical disability, I was
later on honorably discharged. At that time I was just a
boy. Shortly thereafter the U. S. entered the war against
the Imperial German Government. When the draft was called,
I - so very foolishly - signed a paper of exemption as an
enemy alien. There was no reason, for I had served this
country and had been honorably discharged. I was exempt
anyway -- the fact that I was German born, made no difference.
Years later, when I applied for citizenship, this was denied
me. The newspapers played up that story in a way which made
me feel that everywhere everyone was pointing fingers at me.
Time after time I have tried to get up sufficient nerve to
again apply - but my fear of publicity was too great.
In words and deeds I have long ago foresworn any allegiance
to Germany, and, when you realize that I came to this country
in 1913, you can readily understand that I certainly would
not or could not consider myself a citizen of a country run
by gangsters, murderers, and whose every move is directed
All of this
against everything we hold dear and holy.
means, of course, that right now - and for that matter, dur-
ing the past few months - I have been unemployed, am the sole
support of 8 persons. I have money saved, but beside providing
for their welfare, I have been paying off on a home and could
not buy Defense Bonds as I would have liked. I just bought one
little bond - some time ago - and I am enclosing it herewith
as a token as to how I feel about our United States. I have
great hopes that my research work will bring me a substantial
income in the not too distant future, and just as soon as this
materializes, I shall send you small Defense Bonds regularly
for retirement. Last Sept. I bought and paid for a new Stude-
baker DeLuxe Commander Sedan. I have about 500 miles on that
new car, and if the U. S. Government can use it in any way,
it
is yours for the asking. * # # I trust that you will
read
this letter, cancel the Defense Bond, and act as you see fit
on my offer of my car and my personal services. But please,
Sir, don't show this letter to anyone else, and thus respect
my horror and fear of publicity.
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177
GENERAL COMMENTS
William M. Stuart, Stamp Editor, Washington Post. Some
time ago I wrote to you regarding the philatelic viewpoint
of the National Defense Savings stamps. My purpose was
to interest someone in your Department in seeking to
present this series of revenue stamps to stamp collectors.
Aside from a rather disheartening conference, nothing came
of it. I am enclosing a copy of The Post on November 23rd.
I hope you will see my point in it, and too, note that
some of the stamp collectors and writers are still Americans.
and have a story to tell. Philately is a full-sized job
today, and while a newspaper man can cover the news and
what-not, still I am of the opinion that the philatelic
press, as well as stamp collectors and dealers, and the
clubs, should have appeals written in the language stamp
collectors understand. With kind personal regards of one
stamp collector to another, - William M. Stuart.
J. Randolph Anderson, Treasurer, The Protestant Episcopal
Church, Savannah, Georgia. I have been sympathizing very
fully with your efforts to do away with unnecessary nondefense expenditures, and I am writing now to call your
attention to a proposed expenditure of public funds which
I think is entirely unjustified and unnecessary at this
time. There has been a movement on foot for some time to
have the Government establish a National Memorial Park on
St. Simons Island, Georgia. (Describes the property.)
About 50 acres of this land was, many years ago, conveyed
Now
to The Protestant Episcopal Church as Trustee.
the promoters of this park are proposing to take practically
all of the trust property into this proposed park. They
have not approached the Board of Trustees, of which I happen
to be Treasurer, but we find they have had surveys made and
plans drawn for this park and are proposing to have the
Government acquire the land by condemnation. There is
no necessity for any such park at present, and it ought not
to be undertaken, at least until after the close of the existing years of war. I am therefore taking the liberty of
bringing the matter to your attention in the hope that you
will prevent the making of any appropriation of money for
this park purpose.
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178
Edwin Oviatt, New Haven, Conn. I suggest a Government issue
of Defense "Victory" or "V" seals, such as the Red Cross
Christmas seals, to be sold everywhere -- stores, and
Post Offices - at 100 seals for a dollar. * # # Many people
are probably not buying Defense Bonds or Stamps largely be-
cause of apathy or unfamiliarity with the procedure. Would
not many others buy "V" stamps or seals, not postage, to
put on letters, packages, etc? # * # Here is my order for
$10 worth as a starter. There would be thousands who would
follow suit and keep buying as long as the need lasted.
E. M. Miller, Chicago, Ill. As labor must make sacrifices
to win the war, so must capital - profits - industry;
limit its profits to 4% or 5% per year -- its only fair.
Copy of letter sent to the Federal Reserve Bank, Richmond,
Virginia, by the President of the Avery County Bank, Newland,
N. C. We would like very much to bid upon some of the bond
offerings of the Government, but invariably all your descriptive literature and telegrams making the offering are
so timed that they do not reach us until subscription books
are closed. We presume this is arranged to exclude the
small banks from getting any of the bonds. The attached
telegram did not reach us until the 6th - two days after
your books had closed.
Thomas J. Stewart, Jr., Maplewood, N. J. Based on experience
in Great Britain, it is suggested that the United States
Government, in conjunction with the large fire insurance
companies, provide that owners of structures of all kinds
through the nation, be compelled to insure their structures
against damage through the vicissitudes of war, civil commotion or rebellion, which conditions are not covered in
regular fire insurance policies issued by private companies,
and this insurance should include damage resulting from
The percentage of only 2% loss
falling airplanes.
over all of Great Britain illustrates the fact that while
any section of the country is apt to be bombed, or invaded
and damaged, the whole country helps to bear the loss of
any individual section, spreading the cost, and avoiding
the calamity of ruination to individuals, suffering because
of the national emergency, and avoiding the making of un* Rather than approach the great
employment, etc.
7-
179
insurance companies, which would no doubt hesitate, and
if went on with it, make the cost prohibitive, it is
urgently recommended that the Government back it, make
no profit on it, and arrange that the companies handle it,
without profit over an estimated percentage of cost to
handle, and that any profits over such costs be applied to
reduction of rates, if legally practical.
Arthur E. Aydt, President, Sunshine Manufacturing Co.,
St. Louis, Mo. As an American citizen who voted three
times for our President, and one who worked in helping
our President with his many domestic problems in many
civic endeavors here in South St. Louis, I wish to bring
your attention to a very serious condition regarding the
laxity in the protection of the largest small arms plant
in the world here. I am very serious in defending our
Democratic way of life, and it is my duty to help now as
in the last war. Showing of the badges to the guards at
the plant to obtain admittance is not enough.
Every employee should in addition to his badge have a
certificate or card printed on paper that could not easily
be duplicated, and I think that the paper on which is
printed our legal tender would serve the purpose because
it is about the closest thing to perfection I know of.
When I served in the last war, I had bona fide
credentials in addition to my badge and while they knew
you, it was a hard and fast rule to occasionally ask for
the credentials as a double check. As this is an all out
war, we cannot be too careful, and I hope you find merit
in my loyal suggestion.
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180
FAVORABLE Comments on Taxes
C. W. Hanks, President, Royall National Bank, Palestine,
Texas. In my opinion your proposal to require monthly
deductions from salaries for the income tax is a splendid
idea. There will be so many people that will not provide
for their taxes ahead that the deduction system would be
fair to everyone and would be no more objectionable than
the Social Security plan.
John M. Whitmore, Whitmore Publishing Co., Reisterstown,
Md. The enclosed check ($3.76) was sent to me today as
a refund on over-payment of 1940 income tax. Because I
recognize that I get a greater value for my tax dollar
than for any other dollar I spend, and because I feel that
if my tax were ten times what it is, I would still be in-
debted to the U. S. Government, I am returning herewith
the refund and ask that it be applied to any funds where
it might help in any way. This is no time for loyal Americans
to be accepting refunds on their taxes.
Miss Anna Durham, Santa Barbara, Calif. I am no doubt as
well qualified to advise or suggest in regard to forced
savings and Social Security as anyone in the United States.
I was employed under Civil Service over a period of
20 years, and always rather begrudged what was taken out
I suffered
of my salary for the old-age pension.
nervous collapse and a heart condition, so was retired from
Civil Service due to disability, on an annuity of $53.66
per month* * # My annuity is ample income to feed myself
and a cat, so I am very comiortable indeed, and independent
and self-respecting, where in the Government had not compelled me to make those savings, I would no doubt have been
forced to commit suicide or something worse, as I had no
other means of support, being alone in the world.
Elbert M. Chanaler, Olympia, Wash. This letter is written
to add my small bit in support of policies which the papers
indicate you advocate, namely, that at least two-thirds 01
the defense activities be financed out of taxation, and
that in doing so, it would be necessary to tax all corporate
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181
profits in excess of a reasonable return on their investments, and also to institute a heavy payroll tax in order
to reach the surplus earnings of the great army of defense
workers. When I was in Germany in 1938, I was told that
the Germans were paying a payroll tax of 25% and that the
German Government would come out of its present activities
in a strong financial position. Incidentally, strikes were
outlawed and disputes were settled by compulsory arbitra-
tion. What will be the good accomplished if this country
contributes to the defeat of Germany only to find itself
burdened with debt beyond its ability to pay in peacetime,
and with credit impaired so as to be unable to carry on a
national program to prevent unemployment.
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182
UNFAVORABLE Comments on Taxes
Martin Prosperi, N.Y.C. I am a Venezuelan born citizen
and I have invested money in American stocks whose
dividends are now taxed up to the extent of 27.60%
Before that special dividend tax was passed for foreign
holders of American securities, we had to make a formal
income tax return, like any American citizen. That
happened in the old days of the Republican party when
no good neighbor policy was talked about. * * * That new
tax policy of yours appears to be discriminatory against
us. No U. S. citizens, residents or not, in Venezuela,
are taxed differently, and besides, you are showing us
the way to tax your enormous investments in our country
to the same extent you are taxing ours in yours. As a
believer and supporter of your good friendly neighbor
policy
amongstyou
American
nations, I have taken the liberty
of
addressing
in this matter.
Waldo Shumway, Professor of Zoology, The University of
Ill., Urbana, Ill. I have recently received through my
publishers a ruling dated April 5, 1941, and signed by
William Sherwood, your Acting Deputy Commissioner, in
which it states that royalties received by an author do
not constitute payment for personal services actually
rendered, and do not come within the meaning of earned
increment. There follows a long argument, which seems to
me to be simply a verbal quibble. While the actual dif-
ference in dollars and cents in my own income tax return
between reporting my royalties as earned income and un-
earned income is a small one, I wish to take this occasion
to protest most vigorously at this interpretation of the
law. If you and your staff are under the impression that
writing a book does not constitute work, let me suggest
that you try it.
Mrs. Norma Moe Olson, Minneapolis League of Women Shoppers,
Minneapolis, Minn. We wish to protest your recent proposal
to raise $4,800,000,000 by taxing incomes at their source,
thus adding further to a tax burden that is already too
great for persons of low and medium income. We wholeheartedly
agree that new funds must be obtained for national defense
and that inflation must be halted now. The 1941 Revenue
183
- 11 -
Act places the major tax burden on low and medium income
groups, and on many articles of mass consumption, and
barely touches the surface of huge corporation profits.
Therefore, we urge that new taxes be raised in the
direction of your own excellent recommendation, i.e., a
ceiling of 6% be placed on all corporate profits. It is
our sincere opinion that any further curtailment of mass
purchasing power will very seriously affect American
living standards, morale and production.
E. F. Donnelly, Rock Island, Ill. I am writing this
letter in protest against the New and Revised Income Tax
measure which especially hits the "Little Men" who are
in the same position that I am -- whether it will do any
good, depends entirely on you, Mr. Secretary
As
my
reason for this protest, will say as briefly as possible
that I am married and am getting a salary of around
$2,600 a year. Eight or nine years ago, my wife fell a
victim to arthritis (which she still has) and which in-
capacitated her from doing her own housework, and thus
required the services of a maid, with considerable additional expense for medicine, doctor fees, etc. In 1938,
I became diabetic which, besides being an additional
expense, also made it much more difficult to perform the
duties of my profession. * # * This additional expense
over my salary - which can be verified - runs on an average
of $50 to $70 per month, and is explained by Doctor Bills,
Expenses for Drugs, Nursing and everything else that accompanies serious illness. I have filed every year on my
income and paid the amount due from past savings which
accrued while I was in good health, but my savings account
is now badly depleted and will soon be gone. # * While I
realize the importance of paying for the defense program
with new and higher taxes, it does seem as if in my case and perhaps there are thousands of others in a similar
position -- that some provision should be made.
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184
FAVORABLE Comments on Bonds
Clarence J. Arts, Burlington, Iowa. You now are issuing
short term bonds to be used in payment of Income Tax.
Why not insert a clause in your long term bonds to the
effect that these bonds will be accepted at par and
accrued interest before maturity, in payment of Federal
Estate taxes, and if possible, a legal tender for State
Inheritance tax. I am 65 years of age and may leave a
moderate estate in farm lands, as I am a farmer, and I
know that I should now accumulate some liquid assets to
pay the various taxes that accompany estates. I feel
sure that such a bond would be popular, as I know of
many people of moderate means who are thinking as I am.
Wallace F. McFall, President of Delaware Bankers Assn.,
Milford, Delaware. (Telegram) Having implicit confidence
in the power of the United States and its allies in the
ultimate victory over the dictators of the world, the
Banks of Delaware will cooperate as they have been doing
in the sale of Defense and Tax Bonds in every possible
way, having one thought uppermost in our minds -- that
by a united effort upon the part of every American citizen,
justice and right will prevail.
C. W. Robinson, Cashier, The First National Bank, Sayre-
ville, N. J. As of Monday, December 8th, this institution
sold of record a total of $52,000 of U. S. Defense Bonds,
which we believe to be a remarkable record. We understand
that the approximate annual amount of baby bonds sold for
Sayreville previously was $5,000 to $10,000 per year and
we in turn have sold over $50,000 in six months. The fact
that the population numbers about 8,500, and that the community covers fourteen square miles, also gives an idea of
the amount obtained, as some of our residents live close
to adjoining communities, which also have other banking
facilities, and too, the Bonds are sold by two Post Offices
in our borough.
185
- 13 UNFAVORABLE Comments on Bonds
Neal Grider, Vice President & Cashier, The Peoples State
Bank, Indianapolis, Ind. Since Defense Bonds have been
available, this bank has sold in excess of $120,000
maturity value of the various defense issues. In a
number of my contacts with Defense Bond buyers, I have
frequently had people say that they would be glad to buy
in substantial amounts if it were possible to use the
bonds as collateral security in an emergency. Naturally,
I understand the restrictions as to assignment of these
bonds, and I think that I understand the reasoning behind
these restrictions. My suggestion is that permission be
given to pledge Defense Bonds to banks and trust companies
as collateral security with the further restriction that
in the event the lending institution found it necessary to
realize upon the collateral pledged, then the bond could
be redeemed by the lending institution only at cost price,
and all accrued interest would be forfeited. The forfeiture
of interest accrued would constitute a penalty which in my
opinion would be severe enough to hold to a minimum the
failure of borrowers to repay loans so secured.
J. C. Gebhardt, Annette Island Landing Field, Alaska.
(Sends the Secretary copy of a letter addressed to the
Postmaster General. About two months ago a branch office
of the Ketchikan Post Office was opened to serve the large
number of men, military and civilian, stationed here. I
do not know of a single Defense Bond or Stamp which has
been sold through the efforts of this branch. The literature
and books are placed on a shelf under the counter and for-
gotten, gathering dust -- no posters or anything else referring to Defense Bonds are on display anyhwere. In addition, there is no Postal Savings branch here - whether by
order or not, I do not know, but there is established in
this post office a branch of the Miners & Merchants Bank
of Ketchikan, which handles checking accounts and cashes
checks for the men at a charge of 25c per $50, and propor-
tionately higher for amounts over that. I also understand
that both the Chief Clerk, Vance P. Shugart, and also the
man acting as Postmaster here, both get a share of the
186
-14-
charge made for thus cashing checks.
This branch
bank takes more than half a day of the time of the man
in charge of the Post Office, besides which, it entails
more than an hour's work on the part of the chief clerk
in checking over the balances, which are usually out, and
also necessitates his calling the bank in Ketchikan
almost every day to check the balances, this over govern-
ment wires. I believe that it is unlawful to use govern-
ment property and time for other than government purposes,
particularly when any earnings from such transactions go
into the pockets of people who are paid by the government.
We have a great labor turn-over here due to various
acts of administration, and this bank charge is the straw
that broke the camel's back for most of them.
*
- 15 -
187
FAVORABLE Comments on Speeches
John A. Wilkins, Attorney at Law, Gastonia, N.C. A short
time ago there was considerable publicity given to a
statement made by you to the effect that profits on corporation capital should be limited to 6%, and you received
considerable unfavorable publicity with regard to it. I was
moved to write you at the time in support of your position,
and in view of the developments of the last 48 hours, I am
quite convinced that your position was not only correct,
but that during this present emergency, that is the duration of our war declared today, no profits should be made
by any corporation engaged in manufacturing goods for our
National Defense. Certainly, the owners should have their
plants well-kept, their machinery replaced, and a reasonable
wear and tear on the whole plant. Otherwise, I do not think
there ought to be any net profits to the stockholders except
salaries for the officers. I realize that these state-
ments will be considered by a great many people as radical.
However, I make them under a conviction that a man who is
drafted for military service and active duty in the face of
any enemy is called on for the supreme sacrifice, and that
no sacrifice made by capital or any civilian is equal to
this.
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188
UNFAVORABLE Comments on Speeches
Mrs. Earl Mann, Fredericktown, Ohio. I have waited before answering your government financial propaganda so
that I might cool off a little. It surely is filled with
wrong ideas almost from start to rinish. # * # You surely
do know, Mr. Secretary, just how Low the farm prices have
been for many years past, while other things needed just
as badly by the people have been sky-high always. * * *
The prices of farm machinery for many years back have been
one of the greatest disgraces the farmers ever had to
face. * * # How can the farmer pay his indebtedness, hired
help and build a reserve for the future on the prices we
have had for the last years? They need a very high price
now, or you will learn that they will not cooperate at all.
* # If guns which cost $23 in the World War now cost $60,
then butter should now be $1.50 a pound instead of 76%.
189
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE December 12, 1941
TO Ferdinand Kuhn, Jr.
FROM Alan Barth
EDITORIAL OPINION
ON FOREIGN AFFAIRS:
THE NATION RALLIES
Unity
The country's newspapers give expression to a thrilling and
uplifting sense of union. Out of their shock, their horror, their
awareness of loss, they attest to a fresh pride in America, 8 renewed
feeling of dedication. The United States has again become a community.
The principal editorial theme of every newspaper during this
anxious week has been national unity. Commentators of all political
hues are in agreement that the first Japanese bomb dropped upon
Hawaii wrought suddenly the miracle which no amount of logic or
persuasion had previously been able to achieve. Isolationism, they
report, was the initial casualty of the war.
But the fact is that isolationism, within any literal meaning
of the term, has long been dead. It is a misnomer which has been
indiscriminately applied to those who felt an aversion to war, those
who felt an aversion to President Roosevelt and those who felt an
aversion to democracy. These attitudes no doubt persist beneath
-2190
the surface of the unity created by the Japanese dive bombers.
There is every reason to suppose that they will manifest themselves
again under the strains of war. Indeed, they are already discernible in the transcendent nobility of The Chicago Tribune's editorial
acceptance of American involvement. "Recriminations are useless,"
declares The Tribune, "and we doubt that they will be indulged in.
Certainly not by us. All that matters today is that we are in the
war and the nation must face that simple fact."
In a few other editorials, this suggestion that the conflict
might have been avoided by an altered Administration foreign policy
emerges through the bandwagon patriotism. A dissident and extreme
minority, however lustily it may now be joining in the national
chorus, continues to be out of tune with the deeper purposes of
America's participation in the war.
Unity for the moment, nevertheless, appears to be virtually
complete and extremely intense. One striking evidence of the con-
version of the minority is to be found in the editorial page of
William Randolph Hearst's New York Journal-American: "Thus America
has gone to war -- democratically, under responsible leadership, by
Constitutional methods, and with the consent, approval and united
support of the American people."
found
vigilante spirit
principles of
-3-
191
The President's message to Congress requesting a declaration
of war on Japan was almost universally applauded. His radio address
to the nation was received with almost equal approval. And there
was general commendation of the decision to continue Lend-Lease
deliveries to Britain and Russia. Even prior to the formal announcement of hostilities against the United States by Germany and Italy,
there was general recognition that the Japanese action was part of
an Axis plan, that the Pacific constituted only a minor theater of
a world-wide conflict. The essential qualities of the war's scope
and nature seem to be understood by the great majority of the American press.
Wrath
Although American newspapers had for some time predicted war
with Japan, the nature of the onslaught genuinely shocked them.
Editorial comment on the treachery of the Japanese was vehement,
sometimes vituperative. In a few editorials, the anger was so
great as to expose an underlying contempt for the Japanese on racial
grounds. The Denver Post, for example, declares that "Japanese
power must be destroyed so completely that the Pacific Ocean will
be a white man's ocean from now on."
This racial antagonism has found occasional expression in radio
comments, as well as in the press. Unless it is effectively arrested,
it may give rise to a vigilante spirit which will do grave violence
to American principles of tolerance and justice.
4-
192
The incredulity and indignation with which the press at first
responded to the Japanese attack now appears to be giving way to
some measure of resentment against our military and naval commanders
in the Pacific. A number of editorials express wonderment that
Japanese airplane carriers could have moved without detection over
the long distance from their own bases to Pearl Harbor. Most of
the comment along this line is temperate and tentative in tone;
but it reveals a latent ire which may seek scapegoats for the humiliation and loss endured.
In the main, the editorial attitude toward the war is one of
high confidence. The Japanese attack is widely labeled "lunatic",
although a number of commentators warn against overconfidence or
the expectation that Japan can be quickly overcome. With the German
and Italian declarations, a long and extremely difficult war is
generally anticipated. But there appears to be no doubt anywhere
of eventual American victory.
News
Editors accepted the principles laid down by the President
respecting the release of information about the progress of the
fighting. They are less happy about the operation of these principles since the shooting started.
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193
There has been a marked disposition on the part of the American
press and radio to use D.N.B. despatches and foreign broadcasts as
news sources. On the basis of these sources, news and editorial
comment have conveyed to the public the impression that losses far
greater than those officially admitted by the United States were
sustained in the Pacific.
It would be genuinely tragic if American newspaper readers and
radio listeners came to place credence in these foreign sources or
permitted them to cast doubt on the adequacy and reliability of our
own releases. Editors appear to be well aware of this and complain
about the scarcity of official American news. The prompt action of
the British in announcing the sinking of the Prince of Wales and the
Repulse has been pointed to by some commentators as an object lesson
to the United States Government in the virtues of candor.
Influential editorial opinion considers it of the utmost importance to establish in the minds of the American people an absolute
reliance upon their own Government for full, fast and fair information.
Such confidence can be captured only at the very outset of the war.
194
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE December 12, 1941
TO
Ferdinand Kuhn, Jr.
FROM Joseph Melia
EDITORIAL OPINION
ON DOMESTIC AFFAIRS:
WAR SUBMERGES DISSENSION
Dissension over domestic issues has changed to comparative
unity in war. Even the granting to John L. Lewis of a union
shop in the "captive" coal mines was accepted relatively calmly
by the press. While many newspapers consider the Arbitration
Board's decision "a sell out" and "further evidence" of the need
for restrictive labor legislation, the Board's announcement was
not a signal for the kind of attacks upon organized labor that
had previously characterized the press. And many papers are
taking the unprecedented position that a conference between rep-
resentatives of industry, labor and the Government to work out a
voluntary production policy in wartime would be more valuable
than compulsory "cooperation" by law.
Unlike the interventionist-isolationist controversy over
foreign policy, however, domestic disagreements are not yet buried
for the duration. Editorial comment immediately before the outbreak of war indicated that the questions of taxation, non-defense
--
195
spending, inflation, and the status of organized labor -- all
subordinated now to calls for all-out unity -- might soon be in
the forefront again.
The editorial "line" on these issues on the eve of war was
this:
Curbing Labor
As would be expected, the Smith Bill was generally accepted
by the press as a start in the right direction. Editorial writers
rejoiced over its passage by the House with a we-told-you-so
attitude, saying that labor had nobody but itself and John L. Lewis
to blame. The press was quick to point out, however, that its
stand was not "anti-labor" -- just "anti-racketeering, power-drunk
labor leaders". Passage of the bill, the press maintained, would
protect the rank and file of labor from these leaders.
A minority of newspapers criticized the Smith Bill in a mild
way as catch-all legislation passed in heat and haste by the House
and containing provisions which were either too repressive or so
loosely worded as to be administratively unenforceable. A few
like the Philadelphia Record objected, for instance, that the antipicketing provision as worded was a violation of civil rights.
But even these papers agreed with the general objectives of the
bill. They merely called upon the Senate to clarify the language
to make it more workable.
-3-
196
Controlling Prices statement that we are the
With so few exceptions that they are not worth noting, newspapers condemned the House Price Control Bill as toothless. Many
maintained that it was worse than none at all. Roundly criticizing
the House for fearing the farm and organized-labor lobbies more
than inflation, editorial writers centered their attack around the
lack of control over agricultural prices and wages. This criticism
was widespread in the metropolitan press and even cropped up in
occasional editorials from the farm belt.
heightened
While confident that some sort of price legislation would
eventually be enacted, the press bitterly assailed Congress for
ion
procrastinating. It called upon the Senate for quick and effective
action. But it voiced pessimism, fearing that by the time action
is taken prices will be so high no law will be able to halt our
march to inflation.
Cutting Spending
The sentiment for curtailment of government spending, previously
confined mainly to the east, was widespread throughout the country
just before the outbreak of war. Pending appropriations for highway
construction, the St. Lawrence Seaway, and the Florida Ship Canal
were widely criticized as being not defense measures but pork barrel
legislation. Many papers also called for a close scrutiny of defense
expenditures.
-4
-
197
Senator George's statement that we are at the "near-maximum"
level of taxation was used generally to drive home the argument
for non-defense economies.
The Future?
It remains to be seen what "line" will be taken after the
initial impact of the war is absorbed and the Victory Program
gets into full swing, with consequently increased taxes, a bigger
debt, higher prices, and fewer consumer goods.
Past editorial comment indicates that there will be a heightened
demand for action to pass an effective price control bill and cut
non-defense spending. But demands for repressive labor legislation
seemingly are being held in abeyance pending the working out of
policies which will come from the President's conference of repre-
sentatives of industry, labor, and the public.
198
BRITISH AIR COMMISSION
1785 MASSACHUSETTS AVENUE
WASHINGTON D.C.
TELEPHONE HOBART 9000
PLEASE QUOTE
REFERENCE NO
Received from BRITISH AIR COMMISSION
envelope addressed to The Hon. Henry
Morgenthau, Jr.
December 12, 1941
Saraiho
B Sandre
Addressee or Secretary
Mrs foundus
segued original
receipt it returned
,
it
Hm
TREASURY DEPARTMENT
miss.
199
INTER-OFFICE COMMUNICATION
DATE
December 12, 1941
Secretary Morgenthau
TO
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
Official sales of British-owned dollar securities under the vesting order
effective February 19, 1940:
No. of Shares $ Proceeds of
Sold
$ Proceeds of
5,000
3,500
4,931
Bonds Sold
90
134,765
6,794
149,194
48,532
7,876
200
6,509
Nil
Nil
8,707
353,670
34,500
32,562
9,838,873-1/2
281,503,211
45,570,016
37,401,226
9,847,580-1/2
281,856,881
45,604,516
37,433,788
3,085
Dec. 1
Shares Sold
Nominal Value
of Bonds Sold
230
2
4,200
902
4
5
6
Nil
11,000
15,000
3,570
Nil
10,693
13,368
Sales from
Feb.22,1940 to
Nov.29,1941
Sales from
Feb.22,1940 to
Dec.6,1941
amy
200
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
Apply
DATE
December 12, 1941
Secretary Morgenthau
TO
Mr. Cochran
FROM
STRICTLY CONFIDENTIAL
Official
sales
of British-owned dollar securities under the vesting order
effective
February
19, 1940:
$ Proceeds of
Shares Sold
Dec. 1
$ Proceeds of
Total
Bonds Sold
134,765
6,794
149,194
48,532
7,876
6,509
4,931
3,570
Nil
139,696
10,364
149,194
59,225
21,244
6,509
353,670
32,562
386,232
281,503,211
37,401,226
318,904,437
281,856,881
37,433,788
319,290,669
Nil
10,693
13,368
2
Sales from
Feb.22,1940 to
Nov.29.1941
Sales from
Feb.22,1940 to
Dec. 6. 1941
$ Proceeds of nonvested securities sold
400,000
Nov. 24,1941 to Nov. 29, 1941
$ Proceeds of nonvested securities sold
Sept. 1, 1939 to Nov. 22, 1941
$ Proceeds of nonvested securities sold
Sept. 1, 1939 to Nov. 29, 1941
319,290,669
238,700,000
239,100,000
GRAND TOTAL
9 Units sold from Aug.18,1941 to Dec.6,1941 for
11 Shares Stock Dividend sold Aug.18,1941 to Dec.6,1941 for
55.772 Rights sold from July 24,1941 to Dec. 6, 1941 for
BMP
239,100,000
558,390,669
$
$
42
123
$102,853
TREASURY DEPARTMENT
201
INTER-OFFICE COMMUNICATION
DATE December 12, 1941
Chauncey
TO
Mr
WDFetrich
FOR
FROM Mr. Hawkey
There follows a summary of the gold transactions effected by us with the
central banks of foreign countries during the month of November:
Purchased from:
$ 4,988,000
Argentina
25,000,000
Java
Mexico
$5,399,000
39,900,000
Switzerland
Uruguay
Total
Sold to:
1,004,000
$6,403,000
$69,888,000
As a result of increasingly heavy net sales to foreign countries, we con-
tinued to purchase gold from the General Fund, buying $70,688,000 in the full
month of November. On four occasions, November 3, 17, 18, and 19, a reduction
in Treasury gold stocks resulted from such purchases.
On November 6, Russia deposited about $5,614,000 in gold at the San
Francisco Mint for the Secretary's account. This gold, which arrived at San
Francisco from Russia on the S. S. Azerbaidjan, was applied against the
Treasury's purchase, on October 10, of $31,605,000 in gold from the Russian
Government, for delivery within 180 days. The shipment was melted and treated,
then sold by us to the San Francisco Mint on November 18.
202
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE December 12, 1941.
Secretary Morgenthau
TO
FROM
CONFIDENTIAL
Mr. Dietrich
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
Purchased from commercial concerns
£53,000
£19,000
Open market sterling was quoted at 4.03-3/4, and there were no reported
transactions.
The Argentine free peso improved a further 10 points to close at a new
three-year high of .2405.
The Uruguayan free peso advanced 35 points to a final quotation of .5310.
The Venezuelan bolivar rose 40 points to close at .2665.
In New York, closing quotations for the foreign currencies listed below
were as follows:
Canadian dollar
Brazilian milreis (free)
Colombian peso
Mexican peso
Cuban peso
11-11/16% discount
.0516
.5775
.2065
1/32% discount
There were no purchases or sales of gold effected by us with foreign
countries today.
No new gold engagements were reported.
to 42.67
In London, spot and forward silver were again fixed at 23-1/2d, equivalent
The Treasury's purchase price for foreign silver was unchanged at 35$.
Handy and Harman's settlement price for foreign silver was also unchanged at
35-1/8. It was reported that business is being done in the silver market at
35-3/8.
We made no purchases of silver today.
C
0
P
TREASURY DEPARTMENT
Y
UNITED STATES MINT SERVICE
SAN FRANCISCO, CALIF.
December 12, 1941.
Secretary of the Treasury,
Treasury Department,
Washington, D.C.
Attention - H. Merle Cochran
Dear Sir:
I am enclosing copy of a letter which I have today
handed to the Federal Reserve Bank with check - also ten
copies of memorandum for 42-R.
Hoping you will find everything in order, and
assuring you that I am glad of the opportunity of serving
you at any time, I am -
Respectfully,
(Signed)
P. J. Haggerty
Superintendent.
Copy: ec:12-17-41
203
204
0
P
TREASURY DEPARTMENT
UNITED STATES MINT SERVICE
SAN FRANCISCO, CALIF.
December 12, 1941.
Federal Reserve Bank,
San Francisco, California.
Gentlemen:
There was on December 5. 1941, delivered to the
U.S. Mint, San Francisco, 189,910.27 ounces of gold which
arrived in San Francisco on the SS "Dombass" for the account
of the State Bank of the U.S.S.R. Moscow. We were instructed
by telegram from D. W. Bell, Acting Secretary of the Treasury
(copy of which is attached) to instruct the Federal Reserve
Bank of San Francisco to transfer by telegram to the Federal
Reserve Bank of New York, for credit of the Secretary of the
Treasury, Special Account, and to include in the telegram
the number of -
Fine Ounces
Dollar Value
Mint Charges
Net Amount
189,883.240
$6,645,913.40
$
190.00
$6,645,723.40
for which latter amount we are delivering you our check.
The amount of one-fourth of one percent (1/4%)
handling charge is $16,614.78.
Yours very truly,
Superintendent.
Copy:le: 12/17/41
0
205
0
P
Y
CONFIRMATION
SAN FRANCISCO CAL DECEMBER 12 1941
ACTING SECRETARY OF THE TREASURY
D W BELL
WASHINGTON D C
I HAVE TODAY DELIVERED TO THE FEDERAL RESERVE BANK SAN FRANCISCO
CHECK FOR SIX MILLION SIX HUNDRED AND FORTY FIVE THOUSAND SEVEN
HUNDRED AND TWENTY THREE DOLLARS AND FORTY CENTS ($6,645,723.40)
FOR CREDIT OF SECRETARY'S SPECIAL ACCOUNT
HAGGERTY SUPT
OFFICIAL BUSINESS
ARMY RADIO
PHONED 3:39 p.m.
Copy:1c:12/17/41
206
PARAPHRA'E OF TELEGRAM RECEIVED
FROM: American Embassy, Chungking, China
DATE: December 12, 1941, 9 P.M.
NO.: 489
This telegram, TFS, is in strict confidence for the
Secretary of the Treasury from Mr. A. Manuel Fox.
Reference is made to telegram no. 296 sent by the
De artmont at 5 Delhe, on the 11th of December, 1941.
This is to inform you of the arrival in Chungking of
Hsi To Mou and ife. Notification to leave Hong Kong on
Monday night was given to Frese but he refused and has
remained on the Hong Kong side. Bond of ONAC informed
him that he WES first on the list for the next plane
available. Next on the list is Taylor. Notification to
this effect is being given them by me as well as instruc-
tions to proceed to the Kowloon side at once. It is
absolutely necessary that they be on the Kowloon side and
available immediately when the plane is ready for flight.
It would be appreciated if you would send them a message
ordering them to follow these instructions.
GAUSS
207
C
0
DEPARTMENT OF STATE
P
WASHINGTON
Y
December 12, 1941
In reply refer to
FD 893.51/7362
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
a copy of despatch no. 221, dated November 24, 1941,
from the American Embassy, Chungking, China, concerning
the operations of the Stabilization Board.
Enclosure:
From Embassy, Chungking,
no. 221, November 24, 1941.
208
No. 221
Chungking, November 24, 1941
Subject: Operations of the Stabilization
Board
STRICTLY CONFIDENTIAL
Air Mail
The Honorable
The Secretary of State,
Washington, D.C.
Sir:
I have the honor to enclose a copy of an interesting memorandum prepared by Dr. Fox, American member of the Stabilization
Board of China, for the use of the Chinese Government at the
current session of the People's Political Council.
At the meeting of the Council before which the Vice Minister
of Finance appeared on November 18 (the Minister of Finance, Dr.
H. H. Kung, was unable to attend because of ill health) many
questions were asked from the floor in regard to the operations
of the Stabilization Board. These questions indicated e critical
attitude principally toward the Board's policy in making exchange
available in support of the Shenghai market and toward the fact
that the headquarters of the Board are located in Hong Kong. Dr.
Fox in his telegram of November 21 to the Secretary of the Treasury
(transmitted through the Department as the Embassy's no. 455, Novem-
ber 21, 10 a.m.) has indicated what he considers the reasons for the
criticism from the Council.
In conversation with me several days ago, Dr. Fox extressed
the belief that, while much of the criticism might be considered
as coming spontaneously from Council members and as being based
on misunderstanding or lack of information, it was quite probable
that some of it was prompted or engineered by high officials in the
Government who have steadfastly distrusted the Board's motives in
supporting the Shenghei market and in maintaining headquarters at
Hong Kong. The Minister of Finance himself has been very loath he to
countenance support of Shanghai and I gather from Dr. Fox that
is under constant pressure to justify and to reduce such support. whom
Furthermore, the Generalissimo and Madame Chiang, neither of
have a clear grasp of the situation and of the problems involved, to
have indicated doubts as to the Board's policy with regard
Shanghai.
-2-
209
The enclosed memorandum was prepared therefore as much
with high officials of the government in mind as for the
purpose of furnishing the Finance Ministry with material
to answer the questions put by members of the People's
Political Council. Dr. Fox has told me that it would have
been impolitic as well as impracticable to disclose to the
Council a complete picture of the operations of the Board.
Many of its operations and objectives must perforce remain
confidential. He feels, however, that the manner in which the
Board is now conducting and plans to conduct its operations
are in the best interest of free China, and basing my opinion
on the information he has given me and on my general familiarity
with conditions at Shanghai, I am inclined to agree.
It will be observed from the memorandum that in the first
eleven weeks of its operations (operations commenced August 18,
1941), the Board allocated U.S. $13,300,000 and £1,869,000 in exchange. Although for reasons of policy the memorandum does not
reveal the fact, most of this exchange was alloted to Shanghai.
Allotments to Kunming have now risen to about $1,000,000 a month
and allotments to Chungking are substantially less. It will also
be observed that 44% of the applications for American dollars
and 22% of the applications for pounds sterling have been refused.
This statement applies to applications at Shanghai.
Dr. Fox tells me that he anticipates that the net average
monthly drain on the American dollar fund will be between four and
five million dollars, probably nearer the latter figure. The
net figure is arrived at by deducting from gross outgo the amount
which the Board expects to have accounted to it from foreign exchange received from exports and from remittances. Although
nothing like a definite statement can be made with regard to this
amount, I gather that it may run between three and four million
American dollars monthly.
It is interesting to note the statements in the memorandum
(1) that in granting exchange in Shanghai the Board is guided by
a determination to encourage the flow of commodities into Free
China, (2) that there has been a gradual spread in the number of
commodities for which exchange is allotted from thirty-four to over
fifty, this being done with a view to preventing the cessation of
business in long-established and deserving lines, and (3) that
the Board, through its control of exchange endeavors to promote the
interests of the Chinese Government at Chungking by making the
criteria of granting exchange the direct or indirect benefit that
will accrue to free China. Another consideration which the Board
rightly has not overlooked is the problem of subsistence for the
millions of Chinese inhabiting Shanghai and environs. In this
connection Dr. Fox tells me that the Board is giving all practicable
support to the Shanghai Municipal Council in its efforts to control
prices.
210
-3-
There has been some criticism of the Board because it
did not take care of the exchange committments in existence
at the time it commenced operations, the argument being that
the Board's failure to do so has greatly encouraged operations
on the "black market" (actually there would seem to be no lar
or regulation in China making the purchase and sale of exchange
at non-stabilization rates illegal). Dr. Fox explained that the
Board had hoped to provide exchange for these committments but
found it clearly impracticable to do so because of the amount
(about U.S. $30,000,000) and character of the applications. The
Board is, however, making a study to determine what proportion
of these pre-stabilization committments might warrantably be given
exchange coverage. In the meantime it would appear that operations
on the "black market" are diminishing as is the spread between
the "official" and the open rates.
It my conversations with Sir Otto Niemeyer and other informed persons in Chungking I find the general view to be that
the operations of the Stabilization Board have their principal
justification as a political measure maintaining in some measure
the prestige of the Chungking Government in Shanghai and occupied
China. In this connection it is well to bear in mind the importance
of maintaining business activity in Shanghai as long as practicable
both for the sake of the millions in and near Shanghai who depend
for their livelihood on such business activity and for the benefit
which free China, so lamentably lacking in consumer goods, derives
from the not inconsiderable quantity of commodities produced in
Shanghai which reaches this interior area. I am gratified to note
from my conversations with him that Dr. Fox shares this view.
Respectfully yours,
C. E. Gauss
Enclosure:
Memorandum
Original and one copy to Department by air.
Three copies to Department by pouch.
851
JCV:ge
Copy:bj:12-13-41
211
C
Enclosure no. 1 to despatch
0
no. 221, dated November 24,
from the American Embassy
Y
at Chungicing.
STRICTLY CONFIDENTIAL
MEMORANDUM OF THE BOARD'S OPERATIONS
The People's Political Council which is meeting in Chungicing this
week is naturally interested in all economic and financial problems affecting China and thus also in the operations of the Stabilization Board. It
has raised many pertinent questions concerning the Board's operations to
which we would like to direct your attention.
The Board prepares month by month reports of its operations and has
already submitted the September report to the Ministries of Finance in the
three cooperating countries, China, United States and Great Britain. It
proposes to continue to submit such monthly reports and in addition a
quarterly statement presenting an account of its operations in great detail.
The Board has adopted the policy of avoiding all publicity on its activities
even though it is reasonably confident that if more of the facts were known
the ground would be taken from under most of the criticisms directed against
it. It has repeatedly been stated that the Board was spending US$10,000.00
per month and even per week, when as a matter of fact the actual figure is
not much over US$4,000,000 and about 600,000 pounds sterling a month.
Four specific questions have been raised:
(1) How much exchange has the Board given out thus far?
(2) What are the proportions spent for Shanghai and for Free China?
(3) For what commodities has the Board given exchange?
(4) What criteria has the Board used in giving exchange?
(1) How much exchange has the Board given out thus fart
In the first 11 weeks of its operations the Board has given out
US$13,300,000 and £1,869,000. It is interesting to note that applications
in this period amounted to $23,600,000 and £2,400,000. Thus approximately
only 56% of the amount of U. S. dollars aplied for and 78% of the amount
of sterling applied for was granted. The above amounts are gross and not
net, as they do not allow for the substantial sums of foreign exchange the
banks have received from exports, which sums must be accounted for to the
Board.
(2) What are the proportions spent for Shanghai and for Free China?
From its inception the Board has been fully cognizant of the fact that
212
-2- its primary function was to strengthen Free China and Free China alone.
It was not and is not interested in helping Shenghai for the sake of
Shanghai. It was and is interested in giving exchange to Shanghai when
such allocations of exchange redound to the benefit of the economy of
Free China.
At the very outset the Board endeavored to analyze the expenditure
for Shanghei in order to determine how much was for Shanghai alone and
how much was clearly intended for Free China. Thus far it has found no
feasible method of making such a segregation. However, it is confident
that sizeable proportions of the funds for Shanghai were for products
which would ultimately reach Free China. During the past month the Board
has adopted the policy of meeting with representatives of each group before granting exchange to that group. In each case it endeavors to ascertain the annual exchange requirements of the group and grants it exchange
only on condition that the particular commodities the group wishes to import will reach Free China in increasing volume. In this connection a
study was recently made of the distribution of a number of Shanghai products. This study showed that the following proportions of commodities
produced in Shanghai during September were for Free China:
Cotton textiles
65%
Knitted goods
45%
Machines and machine
tools
35%
The Board's attitude is strikingly illustrated in its arrangements
with the cotton textile group. While it was negotiating with the repre-
sentatives of the cotton textile industry, the Nanking puppet government
imposed an embargo on exports of textiles from Shanghai. The Board immediately stipulated that no exchange would be made available for cotton
textiles as long as the embargo was in effect. Recently in the Board's
negotiations with the Chairman of the Shanghai Municipal Council and one
of its American members, a proposal was made for the Board to provide exchange for cotton, provided the Shenghai Municipal Council succeeded in
having the embargo against textiles lifted. The Board would moice no agree-
ment as long as the embargo remained in force.
With respect to Shanghai, it must also be remembered that the Board
has been engaged in waging economic warfare. It is true that the tactics
employed in this warfare are of a subtle and complex nature and that too
much publicity cannot be given to this warfare for obvious reasons.
Nevertheless there are strong grounds for believing that this economic
warfare has been producing good results. The maintenance of fapi in circulation in Shanghai and occupied China against the determined efforts of
Japan and its puppet regimes to replace fapi with yen bloc currencies is
the best testimony that China's currency war has so far been successful.
The Board feels that its Shanghai policy has recently been an important
element in the successes of the currency sector of the economic war.
213
-3-
The Board's office in Kunming is in active operation and is granting
exchange at the rate of US$ 1,000,000 per month. The Chungking office is
now making allocations of exchange and it is hoped to set up with the cooperation of the Central Bank machinery for handling applications expeditiously in all important commercial centers in Free China from Lanchow to
Kweilin.
(3) For what commodities has the Board given exchange?
With few exceptions, the Board does not grant foreign exchange for
commodities on China's prohibited list. The Board's s policy in granting
exchange is perhaps best revealed in its attitude toward raw cotton and
timber. During the first two weeks the Board received applications for
US$2,000,000 for cotton and granted US$1,933,000. During September it received applications for US$532,000 and granted only US$28,000. It has
since granted no exchange for cotton. In the case of timber it granted
foreign exchange amounting to $408,000 during the first two weeks, the
full amount applied for, but during September it granted exchange for only
US$68,500, whereas $465,000 was applied for, and no exchange for timber
has been granted since.
During the first two weeks of its operations it granted exchange for
about 34 commodities and during the month of September for 44 commodities.
(October over 50) The commodities for which the Board granted foreign exchange in amount of US$10,000 or more during September are as follows:
Rice
Tobacco leaf
Petroleum products
Coal
Raw cotton
Wool and wool waste
Tinned plate plain
Machinery
Electrical materials
Evaporated milk
Wheat flour
Molesses
Chemicals and chemical compounds
Pharmaceuticals
Analine dyes
oils
Fats and waxes
Newsprinting paper
Packing paper
Writing and printing paper
Leather
Timber
Photographic products
Starch
Sugar
(4) What criteria has the Board used in giving exchange?
(a) The Board grants direct applications for exchange from Free China
as generously and liberally as possible.
(b) As has been pointed out above with few exceptions no exchange is
granted to items on the prohibited list.
(c) Many factors are given serious consideration with respect to the
complex Shanghai situation. In its Shanghai policy the Board is
actuated by the desire to
214
(1) restrict exchange to those commodities which are the raw
materials for products destined for Free China. The Board
feels that anything its activities contribute to increasing
the inflow of goods in Free China relieves the scarcity of
goods in Free China and to that extent helps to keep prices
down. For this reason in view of the puppet regime's embargo on the export of cotton goods from Shanghai no exchange
is being granted for cotton.
(ii) restrict exchange to commodities which are essential for the
subsistence of the Chinese population of Shanghai.
(111) ensure that the granting of exchange for imports is reflected
in falling prices. Falling prices in Shanghai to some extent
contribute to falling prices in Free China.
(iv) facilitate the waging of effective economic warfare against
Japan and its puppets and maintain fapi in circulation in OCcupied China.
(v) gradually cut down exchange granted to Shanghai especially
as far as such items as tobacco are concerned.
It should be noted that the Stabilization Fund of the United States and
the Exchange Equalization Fund of Great Britain have for obvious reasons
preserved a maximum of secrecy in their operations. While the U. S. Stabilization Fund and the British Exchange Equalization Fund have published a bare
modicum of information on their activities, they have done so only after the
lapse of a considerable period of time. In each-case, however, detailed information on exchange operations has always been available to the President
and to the Secretary of the Treasury in the case of the United States and to
the Prime Minister and to the Chancellor of the Exchequer in the case of
Great Britain. The Stabilization Board of China has, of course, a vast mass
of information at its disposal which it utilizes in its deliberations and
decisions.
In conclusion, attention is briefly called to the new set of licenses
concerning China issued by the United States Treasury on November 12. These
licenses clearly indicate that China possesses the full confidence of the
United States Government in coping with the problems with which it is confronted. These licenses facilitate and increase the control of the Chinese
Government over its foreign exchange and foreign trade. They make available
to the Chinese Government and its instrumentalities all foreign exchange accruing from remittances from the United States to China and from Chinese exports, whether from occupied or from Free China, to the United States.
STABILIZATION BOARD OF CHINA
go
True copy of
signed original - go
Copy:vw:12-13-41
215
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE December 12, 1941
TO
Secretary Morgenthau
FROM Mr. Dietrich
With reference to cable #1931 from the American Embassy, Rio de Janeiro,
received in the State Department's letter of December 11, the State Department
informed me that the second line of the cable referred to should read "has the
total of approximately 34,000 contos 'about $1,700,000
Also received in the State Department's letter of December 11 is cable
554 from the American Embassy, Montevideo, which the State Department has
recuested be returned to it. Will you therefore please return your copy of
this cable to me.
A
NOTE: Paragraph Two which refers to Cable #524 from the American Embassy,
Montevideo, has been taken care of and that cable was returned to
State Department December 12, 1941.
F.D.
216
C
DEPARTMENT OF STATE
0
WASHINGTON
P
Y
In reply refer to
December 11, 1941
FF 840.51 Frozen Credits/4581
The Secretary of State presents his compliments to the Honorable
the Secretary of the Treasury and encloses herewith copies of para-
phrases of certain telegrams with reference to the Department's circular
telegram of December 8, 1941 to all diplomatic and consular establishments in the American republics. The paraphrases are listed below:
Number
From
1931
Rio de Janeiro
241
Ciudad Trujillo
508
Quito
1946
Rio de Janeiro
524
Santiago
Montevideo
354
La Paz
712
722
Buenos Aires
Mexico City
224
Guatemala
218
111
Guatemala City
Tegucigalpa
486
Panama
1402
625
1964
Bogota
Rio de Janeiro
Date
12/7/41
12/8/41
12/8/41
12/8/41
12/8/41
12/9/41
12/8/41
12/8/41
12/8/41
12/9/41
12/8/41
12/8/41
12/8/41
12/9/41
12/9/41
The Secretary of State also transmits herewith copies of certain
other telegrams with reference to the Department's circular telegram of
December 8, 1941. These are as follows:
From
Number
193
1944
1947
Habana
Rio de Janeiro
Rio de Janeiro
660
Lima
669
Lima
Enclosures:
As stated.
Copy : bj:12-12-41
Date
12/8/41
12/8/41
12/9/41
12/8/41
12/9/41
C
217
0
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMEMBASSY, Rio de Janeiro
TO :
Secretary of State, Washington
DATED:
December 7. 1941, 11 p.m.
NUMBER: 1931
The Yokohama Specie Bank, Rio de Janeiro branch,
has a total of approximately $34,000 "about $1,700,000"
on deposit with the Bank of Brazil. Relatively small
accounts with commercial banks, principally in the State
of Sao Paulo, are maintained by Japanese firms. Decem-
ber 8 will be a banking holiday in Rio. Matter will be
discussed by the Director and the Minister of Finance
tomorrow. The hope has been expressed to the Brazilian
Government that these funds will be blocked.
Copy:bj:12-12-41
218
C
0
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMLEGATION, Ciudad Trujillo
TO :
Secretary of State, Washington
DATED:
December 8, 1941, 11 a.m.
NUMBER:
241
Assurances have been received from the Minister of
Foreign Affairs and the various banks that the transfer of
funds to Japan will not be permitted.
Copy:bj:12-12-41
219
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMLEGATION, Quito
TO:
Secretary of State, Washington
DATED:
December 8, 1941, 3 p.m.
NUMBER:
508
Permission now prerequisite to transfer of Japanese
funds to or from Ecuador under recent Presidential decree
by which trade with Japan is regulated. Operating expenses of $1,000. per month currently allowed Japanese
Legation. Though liberal, the amount is not excessive.
Instructions requested as to whether this amount should
be reduced or cut off.
Copy:bj:12-12-41
220
c
0
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMEMBASSY, Rio de Janeiro
TO:
Secretary of State, Washington
DATED:
December 8, 1941, 11 p.m.
NUMBER:
1946
Proposed decree law to block all funds of European
countries at war and funds of Japan was presented to
President Vargas tonight by Finance Minister. Later
report of details. Funds of Britain would be accepted.
Copy:bj:12-12-41
C
0
221
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMEMBASSY, Santiago
TO:
Secretary of State, Washington
DATED:
December 8, 1941, 6 p.m.
NUMBER:
712
Almost no gold nor funds of Japanese Government or
banks are now in Chile according to belief of Foreign
Minister. It is believed he will take favorable action
should any considerable amount of funds or gold be found
after Foreign Minister's investigation tomorrow.
Copy:hmd:12/12/41
C
222
0
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMLEGATION, La Paz
TO:
Secretary of State, Washington
DATED:
December 8. 1941, 6 p.m.
NUMBER: 354
Oral commitments are being secured as a result of
discussions had in the matter by the Legation with
appropriate Bolivian authorities and local bank managers.
Copy:hmd:12/12/41
223
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMEMBASSY, Buenos Aires
TO:
Secretary of State, Washington
DATED:
December 8, 1941, 12 p.m.
NUMBER:
1402
Foreign Minister gave assurances of full consideration
when presented with matter. Question discussed with head
of Foreign Exchange Department of Central Bank, Grumbach,
who will discuss it with Prebisch at once and with the
Finance Minister. Japanese funds here, he said, perhaps
amount to two million pesos, largely in peso form. His
attitude was cooperative. In the absence of a decree he
said it would be difficult to prevent peso transfers but
that banks possibly could be requested beginning tomorrow
morning to consult with Central Bank before granting transfers
of pesos held by Japanese.
Copy:hmd:12/12/41
0
0
224
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMEMBASSY, Mexico City
TO :
Secretary of State, Washington
DATE:
December 8, 1941, noon
NUMBER: 722
All accounts of Japanese have been frozen by the
Mexican Government effective today before banks open.
ehicopy.
12-12-41
0
0
P
:
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMLEGATION, Quatemala
TO
Secretary of State, Washington
:
DATE:
December 9, 1941, 5 p.m.
No. :
224
All Japanese funds have been frozen by a decree
issued by the Guatemalan Government. Sending text
air mail.
eh:copy
12-12-41
225
C
0
P
is
226
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMLEGATION, Guatemala City
TO:
Secretary of State, Washington
DATED:
December 8, 1941, 10 a.m.
NO. : 218
The wish of the United States Government as expressed
in Department's circular was conveyed and interpreted to
the Foreign Minister last night. Immediate assurance was
given that his Government will fully cooperate and expedite
effective measures.
eh:copy
12-12-41
C
227
0
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMLEGATION, Tegucigalpa
TO:
Secretary of State, Washington
DATE:
December 8, 1941, 5 p.m.
NO.
111
:
No funds can be sent to any Japanese firms or
persons by local banks as the Government of Honduras
is at war.
eh:copy
12-12-41
C
0
228
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMEMBASSY, Panama
TO. :
Secretary of State, Washington
DATE:
December 8, 1941, 11 a.m.
NO. :
486
Transfers of funds and gold owned by Japanese
Government, companies, banks or individuals are now
prohibited by measures agreed upon last night by
Panamanian Government.
eh:copy
12-12-41
c
0
229
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMEMBASSY, Bogota
TO :
Secretary of State, Washington
DATE:
December 9. 1941, 10 p.m.
NO. :
625
All funds and credits of the Japanese are automatically blocked by regulations covering exchange
control, according to information from the Secretary
General of the Foreign Office. Specific measures as
indicated by the Department are being proposed after
an investigation. Department will be kept informed.
ehicopy
12-12-41
C
230
0
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMENBASSY, Rio de Janeiro
TO :
Secretary of State, Washington
Date:
December 9, 1941, 9 p.m.
No. :
1964
All of Brazil now has blocking procedure in opera-
tion. Bank of Brazil has a total of 88,901 contos
(approximately $4,500,000) of blocked accounts belonging
to Axis banks. Payment on a check presented by the
Yokohama Specie Bank for 20,000 contos to the Bank of
Brazil was refused this morning.
Further cooperation by the Bank of Brazil is
evidenced by its holding steady the dollar milreis
cross rate. Black market transactions have been normal.
eh:copy
12-12-41
C
0
231
P
PLAIN
MEV
Habana
Undated
Rec'd December 8, 1941
1:50 p.m.
Secretary of State,
Washington.
193
Department's circular December 7. 7 p.m.
Contents of above formally transmitted to
Ministry of State this morning, contents, Depart-
ment's triple priority circular amplifying above
communicated to heads local United States banking
concerns and notice to all United States concerns
being published in press.
MESSERSMITH
HPD
eh:copy
12-12-41
C
232
0
Y
PLAIN
Rio de Janeiro
BS
Dated December 8, 1941
Rec'd. 9:13 p.m.
Secretary of State,
Washington.
1944, Eighth.
Reference Department's circular December 7 re-
garding Japanese nationals. American banking representatives and Consulates in Brazil have been informed. American Chambers of Commerce Rio de Janeiro
and Sao Paulo are circularizing all members today.
CAFFERY
JRL
eh:copy
12-12-41
C
0
233
P
Y
MEV
PLAIN
Rio de Janeiro
Dated December 9. 1941
Rec'd 1:26 p.m.
Secretary of State,
Washington.
RUSH
1947, ninth.
My 1946, December 8, 11 p.m.
President Vargas today signed a decree law
blocking funds of nationals (including official funds)
of non-American countries now in state of war.
The pertinent provision of the legislation follows:
"All operations (financial) involving nations and
juridical persons of non-American countries which are in
a state of war are subject to previous permit of the
bank of Brazil",
Bank of Brazil investigators are already in control
of operations of German, Italian, French and Japanese
banks in Brazil.
(BEGIN GRAY) (British funds will be excepted.) (END
GRAY)
CAFFERY
DD
Copy:hmd:12/12/41
234
0
0
P
Y
PLAIN
MEV
Lima
Dated December 8, 1941
Rec'd 12:38 p.m.
Secretary of State,
Washington.
660, 8th
Department's circular telegram December 7. 7 p.m.
The Government received the suggestion favorably
and stated that the Department's wish had been anticipated.
NORWEB
HPD
eh:copy 12-12-41
0
235
Y
PLAIN
NWN
Lima
Dated December 9. 1941
Rec'd. 6:15 p.m.
Secretary of State,
Washington.
669. December 9. 1 p.m.
Department's circular telegram December 7. 7 p.m.
and Embassy's 660, December eighth
Peruvian Government decree dated December 8th
blocks Japanese funds. A second decree of same
date prohibits despatching of any merchandise of
Japanese origin as well as reexportation of all
imported merchandise including that in transit
without special license.
NORWEB
JRL
Copytec
12-12-41
COORDINATOR OF INFORMATION
WASHINGTON, D. c.
The Honorable
The Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
I am transmitting herewith a memorandum
on the situation in Lower California, which I
hope may be of interest to you.
Sincerely yours,
James P. Baxter, 3d
Director, Branch of
Research and Analysis
Enclosure
236
237
SECRET
COORDINATOR OF INFORMATION
Latin American Section
Special Situation Memorandum No. 15
REPORT ON THE CURRENT SITUATION IN BAJA CALIFORNIA
December 12, 1941.
238
SECRET
SECRET
Latin American Section
Special Situation
Memorandum No. 15
REPORT ON THE CURRENT SITUATION IN BAJA CALIFORNIA
Unconfirmed reports published in the newspaper
December 11, 1941, state that 5,000 Japanese from various parts of Mexico have been moving into Lower
California in the last two or three days. This report
comes from Mexicali. The report also states that the
Island of Tiburon is being used as an air base for the
landing of planes from other parts of Mexico.
These rumors are undoubtedly exaggerated and their
significance is questionable. In the first place, to
move 5,000 Japanese or even a fifth of that number would
bring up a problem of transportation which would require
a major effort. There are no railroads running from the
main part of Mexico into Baja California. The only railroads to Mexicali cross the border from the United States.
The passage of Japanese from one part of Mexico to another
would require government permit which alone would make
the movement of 5,000 people at this time impossible.
Nevertheless, if only a hundred Japanese have succeeded
in moving illegally from their homes, perhaps going by
239
-2-
SECRET
airplane or boat, the movement should be recorded and
must be watched. Telephone conversation with the Latin
American Section of G-2 supports this point of view.
G-2 reports that it has received information that there
has been a considerable movement of Japanese from
Southern California across the border into Lower
California, following the opening of hostilities with
Japan. Some doubt is expressed however whether this
movement has reached the proportions of 5,000. Most of
these Japanese are probably now in the area around
Mexicali.
The use of the Island of Tiburon for the landing
of airplanes has long been noted by both O. N. I. and
G-2. The field is not large enough for the landing
of bombers but can be used for small planes. No concentrations of fuel are known to have been made and
probably could not have been made on a large scale
without some rumor to that effect reaching Washington.
Nevertheless this does not preclude the possibility
of the existence of a sufficient amount of fuel to
make possible raids by small planes on the nearby portions of the United States.
Lower California is all desert. It is composed
239
-2-
SECRET
airplane or boat, the movement should be recorded and
must be watched. Telephone conversation with the Latin
American Section of G-2 supports this point of view.
G-2 reports that it has received information that there
has been a considerable movement of Japanese from
Southern California across the border into Lower
California, following the opening of hostilities with
Japan. Some doubt is expressed however whether this
movement has reached the proportions of 5,000. Most of
these Japanese are probably now in the area around
Mexicali.
The use of the Island of Tiburon for the landing
of airplanes has long been noted by both O. N. I. and
G-2. The field is not large enough for the landing
of bombers but can be used for small planes. No concentrations of fuel are known to have been made and
probably could not have been made on a large scale
without some rumor to that effect reaching Washington.
Nevertheless this does not preclude the possibility
of the existence of a sufficient amount of fuel to
make possible raids by small planes on the nearby portions of the United States.
Lower California is all desert. It is composed
240
-3-
SECRET
of rocky terraces, scored by sharp sided, flat bottomed
dry valleys. The surface is covered with gravel and
stones which would mean that landing fields would have
to be specially prepared and would be easily visible
from the air. The landscape is utterly barren so that
important concentrations of people or materials could
scarcely be hidden. The population is very small,
grouped in isolated communities where water is available. There are no roads connecting these settlements
overland. At Santa Rosalia, located on the east cost
of Baja California a little north of latitude 27°,
southwest of Hermosillo, there is a copper mine operated by a North American company. The Mexican concen-
tration of people in the Mexicali area is more closely
related to the United States than to the rest of Mexico.
The presence of Japanese colonists in this area
has been known for a long time. For the most part these
colonists are fishermen and dispose of their product in
the Mexican West Coast ports. It is well known that many
of the fishermen hold commissions in the Japanese Navy,
and their presence off this coast in close proximity to
San Diego has an obvious purpose. In the recent G-2
report on Japanese activities in Latin America it was
241
-4-
SECRET
stated that about 1,000 Japanese are known to be in
this area. Since that report was prepared in August,
however, the Mexicans have forced the Japanese fishermen out of business and Mexicans have taken over control
of the fishing activity. G-2 states that most of the
Japanese have left Baja California. These Japanese com-
munities, not only in Lower California but in other
parts of Mexico, are known to have formed semi-military
groups, organized and disciplined under the leadership
of ex-service men or reservists. The total number,
however, is small and could scarcely constitute a threat
to the border settlements in California, excepting as
these Japanese units might cross the border by infil-
tration or carry on raids of local significance in the
border communities. The chief handicap which any enemy
groups in Baja California would have to overcome before
they would constitute a menace to such strategic points
as San Diego would be the supply problem. In the absence
of transportation facilities by land or large landing
fiels for airplanes or good harbors, no really significant concentration of material could be made without
the knowledge of responsible Navy and Army officials
of the United States. The possibility that some of the
242
-5-
SECRET
little ports along the Pacific Coast might be used for
the refueling of submarines or surface raiders is not
to be overlooked. Small quantities of fuel oil could
easily be made available in these places. In this connection, however, the following points should be noted:
1. The desert character of Lower
California would not permit any large scale
operations of this sort. (The only surface
stream in the whole area is near the southern
end of the peninsula.)
2. The ports are open and unsheltered,
and refueling operations would not be at all
easy.
3. Only the ports on the Pacific side
or near the southern end on the Gulf side
would be available. The coast of the Gulf of
California north of latitude 290 is almost
impossible for landing operations because of
the very great tidal range.
It should be noted that in addition to the Japanese
settlements in Baja California, there has been a recent
movement by the Sinarquistas. A small number of
243
-6-
SECRET
Mexicans, mostly Indians, have been actually colonized
in Lower California under the direction of this proNazi political organization.
244
COORDINATOR OF INFORMATION
WASHINGTON, D. c.
December 12, 1941
RESTRICTED
COORDINATOR OF INFORMATION
The Honorable
The Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
I am enclosing herewith a summary of
a report on Canadian Labor Problems which
has been prepared in my office and which
I hope may be of interest to you. The
full report on which this summary is based
will be available upon request.
Sincerely yours,
James P. Baxter, 3d
Director, Branch of
Research and Analysis
Enclosure
RESTRICTED
245
COORDINATOR OF INFORMATION
British Empire Section
Special Memorandum No. 3
CANADIAN LADOR PROBLEMS
DIGEST
CANADIAN LABOR RELATIONS ARE RAPIDLY APPROACHING A CRISIS on
the question as to whether Canadian workers are to obtain the full
union recognition and mandatory collective bargaining hitherto
denied them. Canada has no Wagner Act or N.L.R.B. and employers
are still refusing to deal with unions, strikes are frequent and
labor fears that government and management are trying to foist a
modified "company union" plan on the workers.
THE CANADIAN LABOR MOVEMENT IS ABOUT THIRTY YEARS BEHIND THAT
IN THE UNITED STATES and has been largely influenced by the
American labor movement. The Trades and Labor Congress, closely
Effiliated with the A.F. of L., was founded in 1886 and has remained the main organization of "international" unions. The Canadian
"national" unions have been smaller and less successful. The
Catholic Confederation of Workers has been chiefly centered in
Quebec, has fought all radicalism and sponsored "corporatism" on
European models. Radical labor movements have centered in the
west, especially immediately after World War I when there were
tie-ups with the I.W W. and to a certain extent with Communists.
The Communist party was never very large in membership or influonce. The Canadian C.I.C. unions took their inception and
direction from the United States and hence were subject to dislike
-2-
246
by ultra-nationalists in Canada. The political parties have
never been closely tied up with the labor movement. CANADIAN
UNIONISM HAS BEEN SCATTERED AND WEAK BECAUSE OF SECTIONALISM, the
aggressive policies of THE ROMAN CATHOLIC CHURCH, the inability
of the Trades and Labor Congress to maintain conformity, the
instability and insecurity of the wage earning group and the
SLIGHT DEGREE OF INDUSTRIAL CONCENTRATION. In 1939, out of a
total of 1,105,712 workers in industry, there were 358,967 union
members.
THE WAR TIME LABOR POLICY OF CANADA HAS BEER CHIEFLY PROMUL-
GATED BY ORDERS IN COUNCIL, i.e., through the Executive. of
these the most important was Number 2685, which recommended but
did not order collective bargaining, attempted to reassure labor
and also to speed war production and prevent strikes. Number 7440
on wage policy set a ceiling and a floor on wages, and provided a
bonus for labor based on the cost of living. Labor has not been
satisfied with the results of these Orders in Council, claiming
that their provisions have been disregarded, coercion and intimidation resorted to by employers and an attempt made by government
and management to force acceptance of company unions. Labor has
also objected to the government policy of placing leading antilabor industrialists in key positions as controllers of war
industries.
THERE HAVE BIREN A NUMBER OF IMPORTANT STRIKES, in spite of
their having been declared illegal. One of the reasons has been
the maddeningly slow tempo of the conciliation machinery THE
-3-
247
MOST DRAMATIC STRIKE TOOK PLACE AT THE ARVIDA, QUEBEC PLANT OF THE
ALUHINUM COMPANY, where potmen striking for higher wages occupied
the premises for four days. There was a great hue and cry of
"sabotage" and "subversive activity" led by Hon. Clarence Howe,
Minister of Munitions and Supply, but later report of a Royal
Commission entirely exonorated French Canadian workers at Arvida
of these charges.
THE PERSONALITIES OF GOVERNMENT LEADERS HAVE NOT BEEN PLEASING
TO LABOR. The Labor Minister, Hon. Norman McLarty, has no pro-
vious labor experience and has been all his life a corporation
lawyer. Hon. Clarence Howe. Minister of Munitions and Supply, is
a "strong man" closely alliod to industry. The Prime Minister,
Mr. King, though temperamentally favorable to the underdog, is
suspect to labor, because of his authorship of Rockofeller
"company union" plan during World War I.
FULL RECOGNITION OF UNIONS WILL DOUBTLESS COME REASONABLY
SOON. It will be speeded up by the vastly increased industrialization involved in the present war effort. Labor domands are
comparatively modest comprising collective bargaining, full union
recognition, a labor code promulgated by Parliament after full
lobatc in place of "Order in Council government" and a labor
court, whose decisions shall be free from dictation of the foderal
Labor Department.
248
COORDINATOR OF INFORMATION
WASHINGTON, D. c.
December 12, 1941
The Honorable
The Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
I am transmitting herewith a memorandum on The Netherlands Indies which
I hope may be of service to you.
Sincerely yours,
James Porta grd
James P. Baxter, 3d
Director, Branch of
Enclosure
Research and Analysis
CONFIDENTIAL
249
COORDINATOR OF INFORMATION
British Empire and Western European Sections
Special Memorandum No.3
THE NETHERLANDS INDIES
December 3, 1941
250
SUMMARY
The Netherlands East Indies, because of its strategic
geographical position and the possession of raw materials (such
as rubber, tin and petroleum), vital to the defense efforts of
the United States and the war efforts of the Allies, holds a
major position in deliberations on the ominous crisis in the
Orient. Since the war the United States has become the leading
source of Indies' imports and its chief expert market.
The Indies, militarily weak, is dependent upon the United
States for defense equipment, and upon the United States and
Britain for military protection. The army, nazy and air-force
are small and purely defensive, but military morale is good,
as it appears to be among the civilian population, despite numerous
native nationalist movements.
In spite of dislocations incident to the war, the economy
of the N.E.I. has not been seriously disturbed. The trade
outlook is good. Shipping facilities, for the time being, at
least, are adequate. Deliveries on defense orders placed in the
United States are lagging.
THE NETHERLANDS INDIES
251
STRATEGIC IMPORTANCE
Geographic
The Indies is likely to be the cockpit of a general
conflict in the Far East, for it is situated at the convergence
of numerous important air and shipping routes from Europe,
Africa, Near and Middle East to Eastern Asia, and from Middle
and Eastern Asia to Australia; it lies within the defense triangle Singapore, Honkong, and Port Darwin; and is an important
source of strategic raw materials.
It has an area of 734,000 square miles (one-fourth the
area of the United States), with a population in 1940 of 60,731,025,
of which two-thirds lived on Java and Madura (area 50,000 square
miles) and 8,250,000 on Sumatra (area 162,000 square miles). The
largest non-native groups in the population are the Chinese
(1,250,000), the Europeans (200,000, about three-fifths of whom
are Eurasians) and the Arabs (79,000). Chinese, Eurasian and
Arab elements make up the bulk of the lower middle class population.
Economic
The Indies may be called the arsenal of strategic raw
materials for the democracies. In 1938 it produced 37% of the
world's rubber, 17% of the tin, 90% of the quinine and 28% of the
palm oil products. The United States imports all of its quinine,
nearly all of its rubber and 30% of its tin from the East Indies.
The United States is, since 1940, the leading source of Indies'
imports and its chief export market. The estimated value of our
2.
252
imports from the Indies in 1940 was $53,871,000 and our exports
to the Indies approximated $167,000,000. For the first six months
of 1941 the figures were $49,724,000 and $96,896,000 respectively.
In 1940 the United States imported from the Indies about $100,000,000
worth of rubber (60% of the total Indies' rubber exports) $4,000,000
of tin, $4,000,000 of fibres, 33,500,000 of quinine and $3,000,000
of palm oil. Imports from the United States in 1940 (exclusive of
military material) increased by 60% over 1939, and exports to the
United States by 100% in the same period.
oil is the most important strategic problem of Eastern Asia.
This region, with over half of the world's population, consumes 5%
but produces only 3.5% of the world's oil, and of this four-fifths
is produced by the Indies. The annual production of the Indies is
about 60,000,000 barrels or 2.8% of the world's total. Japan's
consumption of oil in 1939 was estimated at about 40,000,000 barrels,
of which 3,000,000 were produced domestically, 19,400,000 were imported from the United States, 14,600,000 from the Indies and 3,000,000
from other countries.
Military
The strategic importance of the Indies in A.B.C.D. defense
is obvious. While the United States is very dependent on the Indies
for vital supplies, the Indies is completely dependent on the United
States for defense equipment. The Indies Government and its agencies
have placed orders here for military materials to the value of over
$200,000,000. Delivery has been made on orders totalling only slightly
more than one-fifth of this amount. On May 15th the Netherlands Indies
estimated that to satisfy minimum defense needs orders for approximately
$160,000,000 worth of material would have to be placed in 1941 and
3.
$353,000,000 in 1942.
253
of the oil produced in the Indies only 20% comes from the
Borneo fields, the fields most exposed to Japanese attack; most of
the remainder is produced on Sumatra and Java.
THE DEFENSE STATUS OF THE NETHERLANDS EAST INDIES
An Associated Press dispatch of December 1, announces
that the Governor General of the N.E.I. has ordered mobilization of
the colony's military forces. The real military strength of these
Dutch islands, however, is not in their own military or economic
defenses, but in the military cooperation between Britain and
Holland and in the expectation that naval support can be anticipated from the United States in the event of a Japanese attack.
Military Forces
Despite its dense population and the institution of compulsory militia service for the Netherlanders of the islands in 1923,
and quite recently for the natives, the Netherlands Indies army
totals only 113,775 effectives. Of this number approximately 90,000
are distributed among six stations in Java.
The naval forces, consisting of four cruisors, seven
destroyers and fifteen submarines, are capable of delaying action
only, against strong attack. The only naval bases of consequence, i.e.
having facilities for the repair of ships, are at Batavis and Soerabaya.
Soerabaya boasts the only navy yard, and plans the construction of
a fixed dry dock able to accomodate ships up to 40,000 tons. The
existing floating docks are limited to vessels less than 7000 tons.
Ambon affords a small base, and a number of other places offer good
anchorage.
1
4.
The air combat strength is also very limited.2
254
Morale
Despite a high percentage of natives in the armed forces3
the morale in all branches of the service is thought to be excellent.
Natives attain the rank of petty officer in the Navy, and, since
the occupation of Holland, a few natives of prominent families have
been admitted to the Naval Academy at Soerabaya. There are a few
native officers in the Army. Despite the background of native
nationalist agitation the morale of the civilian population is also
considered satisfactory.
FOREIGN RELATIONS
The Indies' relations with China are not now very extensive,
but due to proximity and the large Chinese population in the Indies
are bound to be important in the future. The relations of the Indies
with the Near East are important because 90% of the Indonesians are
Moslem (a very large number of Indonesians make the pilgrimages to
Mecca) and because many southern Arabs go to the Indies in search
of fortunes.
British
For its security, the Netherlands, both in Europe and in
Asia, has been very dependent upon the British, but in spite of this
Authorization for more precise military data could not be obtained
and the writers are informed that it would be secured by Mr.
2
Bullitt in person.
3
The ratio of natives to whites in the army, ordinarily at 4 to 1,
has been reduced to about 4 to 3, and is approximately 2 to 3 in
the Navy, where natives are employed primarily as stokers and mess-
men.
dependence the Dutch rigidly adhered to a policy of isolation and
255
5.
neutrality. With the invasion of Holland came a change of policy;
yet no formal alliance has been made between the two nations in the
Far East. The common defense interests of Australia, New Zealand
and the Indies are bringing these countries closer together. While
the trade between them is still small, it is rapidly developing.
Japanese
Indies-Japanese relations became important after 1929.
In that year Japan supplied the Indies with 10% of its imports;
in 1933, 32% The Dutch were alarmed at the commercial invasion
but feared political penetration even more. To protect the Indies'
export markets (Japan took only 5% of Indies' exports in 1933), to
safeguard, to some degree, the market for Dutch exports, and to
protect the Indies' economy, the Government resorted to licensing
imports and to quotas. At the time the Dutch and the Japanese were
also engaged in a shipping war. An effort to resolve their differences
was made in a trade conference in 1934, but, in spite of six months
of negotiations, came to nought. Shipping and commercial agreements
in 1936, 1937, and 1938 offered only a temporary solution. Since
the termination of the Japanese-United States commercial treaty in
January, 1940, Japan has exerted diplomatic and other pressures on
the Indies for broad commercial and economic concessions. Shortly
after the invasion of Holland, Japan insisted upon another trade conference, which began in Batavia in September, 1940, with the arrival
of a Japanese delegation headed by Minister of Commerce Kobayashi.
The only agreement which came out of the nine months' conference was an
agreement on oil shipments which fell much below Japanese expectations,
since it did not provide for the delivery of high octane aviation gas.
256
6.
When the Dutch Government on June 6th rejected the Japanese demands
and refused to reconsider its position, the conference broke up on
June 17th. A joint communique was issued stating that the "discontinuance of the present negotiations will lead to no change in the normal
relations" between the two countries. On July 28th, the Indies Government followed the British, the Dominion and American governments in
freezing Japanese credits. Trade with Japan quickly tapered off and
has now practically ceased. Recently Japan acquired commercial air
base rights in Portuguese Timor. The Dutch have countered this move
by prohibiting the export of oil to this territory.
THE ECONOMIC CONDITION OF N.E.I.
Trade Relations with Japan
Whatever the future may hold for them the Netherlands Indies
are experiencing a substantial war boom due to the demand for their
strategic commodities--rubber, tin, and quinine. The N.E.I. has not
suffered greatly as a result of the drastic restrictions imposed on
the flourishing pre-war trade with Japan. While this was serious for
Japan, since the N.E.I. furnished all of Japan's quinine, and much
of her rubber, tin and petroleum, it was no great blow to the Dutch,
for the United States and the Allies willingly absorbed these commodities. The only hardship for the Dutch was the loss of Japan's
cheap textiles, important for native consumption. Despite a falling
off of 6% in the value of exports and 2% of imports for the first
six months of 1941 as compared with 1940, the foreign trade situation
is considered satisfactory.
The recent shifts in foreign trade have affected native
standards of living in the areas in which non-strategic materials such
257
7.
as copra, sugar, pepper, etc. are produced. Moreover, there has been
a steady rise in the cost of living.
N.E.I. Industry
Industrial production in the N.E.I. has doubled in the past
decade but still is in its infancy, the annual value of industrial
production today attaining only an approximate $238,500,000. Only
some 10% of the native population is engaged in industry.
Shipping
There is no crucial situation at present with regard to
shipping on the N.E.I.-United States route. An average monthly carrying
tonnage of 125,000 is required to meet our needs in this trade. Two
ships en route to the United States from the East Indies--one Norwegian
and one Dutch--have been lost, reportedly by action of surface raiders,
during the past two months.
THE INTERNAL SOCIO-POLITICAL CONDITION OF THE N.E.I.
Native Attitudes and Pressure Groups
The pressure of the N.E.I. non-European population groups for
reforms has been stimulated by the war and the new importance of the
islands since the occupation of Holland. This pressure has induced
the Government to appoint an official Commission (the Viaman Commis-
sion) to investigate the desires of population groups for political
reform. The natives, despite nationalist activities, are not disloyal to the Dutch and few among them can be considered pro-Japanese;
in fact, the majority of Indonesians can be described as indifferent
to the present conflict as, indeed, they have been to their own
"movements" all along.
While the Dutch have carefully refrained from disturbing
258
8
native cultural institutions, have prohibited the alienation of native
agricultural lends to Europeans, and have brought many improvements
and . much development to the area, Dutch native policy in political
matters has been essentially negative. The resentment among many
articulate Indonesians at their relative political impotence has
crystallised in the formation of a large number of native nationalist
organisations of varying degrees of radicalism. Most of the estimated
500,000 native nationalists are enrolled in the eight parties comprising
the "Gapi" (Gaboengen Politick Indonesia--"Indonesian Political Feder-
ation"), which advocates home rule on a sort of dominion basis. Significantly, the Indonesians have pressed for an East Indian citizenship
and have favored compulsory military service for natives.
Political Organizations
The "Gapi" controls eight of the thirty native seats in the
Volkaraad (Peoples Council), which is the highest legislative body in
the land, though its functions are mainly advisory and its actions
may be vetoed by the Governor General, in whom are vested the real
governing powers--powers which have been greatly enhanced since the
war. There is no direct suffrage in the East Indies: elections are
based upon a proportional representation of political parties in a
unique system of local councils.
Chinese Complaints
The Chinese complain of the denial to them of legal equality
with Europeans and allege discriminations in the economic realm.
Unofficial Dutch
The 25,000 unofficial, unmixed Dutch, are generally unconcerned
about the native problem, and rely on the Government to suppress seditious
movements among the natives, as it has done efficiently enough in the
259
9.
past.
The Netherlands Indies, since the conquest of the mother
country, have had to hoe their own row and have developed a sense
of independence and self-reliance that will scarcely tolerate a return to the pre-war colonial statue.
APPENDIX I.
PERSONS TO VISIT
260
Governor-General Jhr. A.W.L. Tjarda van Starkenborgh Stachouwer, born in Groningen, Netherlands 1888; diplomatic service
1912-25; Queens Commissioner in Province of Groningen, 1925-33;
Minister to Belgium, 1933-36; Govenor General 1936
Married to a daughter of Theodore Marburg of Baltimore.
J. van Mook,--Director, Department of Economics, head of delegation
at recent trade conference with Japanese, soon to be Minister
of Colonies in the Dutch Ministry in London.
A. Soojone, -Javanese, member of Council of Indies, formerly NetherLands representative on the International Tin Committee.
F.H. Visman, member of the Council of the Indies,--Chairman of Com-
mittee investigating desires and plans for constitutional reforms.
General H. ter Poorten, -Commander-in-Chief of the Indies' Army;
Director of the Department of War.
Vice-Admiral C.E.L. Helferich, director of Department of Navy;
Commander of Indies' Fleet.
C.O. van de Plas, former Governor of East Java, now member of the
council of the Indies, probably knows native thought, morale,
etc. better than anyone now in the Indies.
Van Buttengha Wichers, Director of the Bank of Java.
C. van Helsdingen,--prominent Dutch member of the Volkaraad.
APPENDIX II.
PLACES TO VISIT
Medan--east coast of Sumatra, center of large scale western plantations.
Batavia--seat of most government agencies.
Bandoeng--Java. Departments of Navy and War are located here.
Buitenzorg--Official residence of Governor General. Famous botanical
gardens.
Soerakarta or Solokarta--seats of the native states.
Soerabaya--commercial center and naval base.
Timor--an island half of which is under Dutch, other half under Portuguese sovereignty. Center of Japanese activities.
Ambon--Center of Dutch culture, seat of Government of Great East minor
naval base.
261
SOURCES
Documents and Interviews:
State Department
Commerce Department
Office of Naval Intelligence
Military Intelligence Division
Netherlands Legation
Maritime Commission
Lease-Lend
Secondary:
Vandenbosch, Amry. The Dutch East Indies, 2d. ed.,
Berkeley and Los Angeles, University of California
Press, 1941
Seven maps attached
262
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE December 12,1941
Secretary Morgenthau
TO
Mr. Kamarck
FROM
Subject:
Monthly
Report: Royal Air Force Bombing Activity
in November, 1941
Comment
During November, Naples was the city particularly favored
by the R. A. F. The British attacked Naples on eight separate
occasions during the month. Ostend, the second favorite target
of the month, suffered six attacks.
263
-2-
1. Losses
Losses during
November
Total Losses
in Raids to
December 1
R.A.F. bomber losses
in bombing raids in
Northern Europe
2.
Analysis of Targets
1,297
99
Total number
Attacks during
November
Ports, docks, shipping
Industrial plants
of Attacks to
December 1
70
1,388
17
885
12
838
Airdromes and seaplane
bases
011 refineries, synthetic
oil plants and tank
farms
Total of above
356
2
101
3,467
-33. Leading Cities Attacked
264
Attacks during
November
Total Number
of Attacks to
December 1
A. Germany
Bremen (port)
Hamburg (port)
Emden (port)
Wilhelmshaven (port)
Mannheim (industrial center)
Kiel (port)
Berlin (industrial center)
Gelsenkirchen (synthetic oil)
Essen (industrial center)
Hanover (synthetic oil)
Total of above (11 cities)
92
1
84
o
83
3
à
62
4
56
2
55
1
Cologne (industrial center)
55
2
50
1
o
3
1
41
0
664
15
B. Occupied Areas
Brest (port)
Calais (port)
Flushing (port)
Lorient (port)
Total of above (6 cities)
113
93
me
6
85
4
77
3
63
0
52
1
Boulogne (port)
Ostend (port)
483
17
C. Italy
Naples (port)
Turin (industrial center)
Total of above (2 cities)
21
8
13
0
8
34
TREASURY DEPARTMENT
265
INTER OFFICE COMMUNICATION
DATE December 12,1941
Secretary Morgenthau
TO
Mr. Kamarck
FROM
Subject:
Mt
O.C.I. Background Report on the Remarks of
Premier Saw of Burma, November 17, 1941
(Since Japanese forces in Thailand are now on the
Burmese frontier, the Burmese attitude, indicated by
Premier Saw, of hostility to the British and even,
perhaps, friendship towards Japan has become important).
1. Burma has a history of anti-British sentiment,
growing out of its three wars for independence. As
late as 1930-31, an open rebellion of 50,000 Burmese
had to be suppressed by force.
2. In 1935, the Burmese asked for immediate
Dominion status.
3. Burma admires Japan "as a kindred nation which
had defeated a European power."
4. In the last two months, Burmese feeling has
been becoming increasingly resentful of Churchill's
statement that the Atlantic Charter does not apply to
Burma.
266
Secretary Morgenthau
Grepove
BY
OC,1,
267
Burma, which is important today for the defense
of China as well as of herself and India, is not
supporting the war well and may even welcome Japanese
intrusion. The latter possibility was indicated in the
remarks of U. Maung Saw, Premier of Burma, in a conversation on November 17.
Mr. Saw's remarks have a background not only of
controversy but also of war with Britain and revolt
against British rule extending down to the recent past.
The three Burmese wars of 1824, 1852, and 1885, by which
Britain won Burma, have not been forgotten by the Burmese
people, and resentment still continues.
In the present century, when issues concerning
representative institutions and home rule have agitated
the country, anti-British feeling has reached extreme
expression. In 1930-31, when Gandhi was leading the
second Civil Disobedience Campaign in India, a revolt
broke out in Burna, which was partly economic and partly
political. It extended over large parts of Lower Burna
and as far north as the Shan states. The rebels got
rifles and guns, put up a strong fight and evidently had
local popular support. Troops had to be brought from
India to suppress the revolt, and at least 3,000 rebels
were killed and wounded. Surrenders, under promise of an
amnesty, amounted to no less than 36,500. It is safe
to say that no less than 50,000 Burmese were under arms
against the government.
268
After this revolt was suppressed the question was
discussed of separating Burma from India, of which it
was a province. Burmese opinion was divided on the issue.
In the election of November 1932 to the Burna Legislative
Council the anti-separationists won a majority. But,
when the Council met, its votes on various questions
involving separation from India or federation with India
were of a varying character, and Sir Samuel Hoare, then
Secretary of State for India, expressed the opinion in
1933 that the Burmans themselves actually supported the
separation. The succeeding report of the Join Parliamentary Commission (prelude to Government of Burmo Act
of 1935) recommended the separation and the establishment
of a separate constitution for Burma. When the Burma
Legislative Council discussed this report, it rejected
an anti-separation motion and also rejected the
constitution proposed by the Joint Parliamentary Commission
which included separation from India. Instead, it adopted
a proposal favorable to the immediate grant of Dominion
status.
Burma was, therefore, in a state of political dissatisfaction with Britain when the war with Germany broke
out in 1939. Besides this fact, she was disposed to be
friendly to Japan and admired her as a kindred nation
which had defeated a European power. She dislikes the
implication that the Burma Road may involve her in a war
with Japan, and her war support has been very slender. In
269
the past two months her popular lethargy toward the war
has been turning toward resentment that the Atlantic
Charter, with its declaration for self-government by all
nations, should not apply to Burma. Mr. Churchill stated
flatly in the House of Commons on September 9 that Burma
is excluded from the operation of the Charter.
A discontented Burma is an obvious impediment to
the effective use of the Burma Road and might become a
danger to its safety.
M
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
270
DATE December 12,1941
Secretary Morgenthau
TO
Mr. Kamarck
FROM
Subject: Summary of Military Reports
The Japanese Attacks
In the attack on Pearl Harbor, the battleship
Oklahoma, (29,000 tons, launched in 1914, carries ten
14-inch guns) capsized and the battleship Tennessee,
(32,000 tons, launched in 1919, carries twelve 14-
inch guns) was set on fire. One destroyer in the
layer were set on fire. Four airdromes were attacked.
dock was blown up; another destroyer and a mine-
One hundred airplanes were destroyed (63 fighters, 4
light bombers, 28 heavy bombers, and 5 Flying For-
tresses). (According to our Military Intelligence,
half of our planes in Hawaii were destroyed.) The
power stations were also hit, but not put out of
action.
The same morning, 18 airplanes attacked Singapore but no navel damage occurred.
(U.K. Embassy, Operations Reports, December
8,9; U.S. Military Intelligence)
Japanese Air Force
The British estimate that the Japanese now have
350 airplanes in French Indo-China. Approximately
100 are in the north and 250 in the south. Of these,
probably not over 100 are fighter planes. (Our Army
estimates that the Japanese have 500 airplanes in
Indo-China. In operations in this area, the Japanese
also can use planes based on carriers. It 19 believed
that the attacks on Manila are coming from carriers.
For operations against northern Luzon, the Japanese
have available bombers from Formosa).
(U.K. Embassy, Operations Report, November
8, 1941; U.S. Military Intelligence)
TREASURY DEPARTMENT
W270
INTER OFFICE COMMUNICATION
DATE December 12,1941
Secretary Morgenthau
TO
Mr. Kamarok
FROM
Subject: Summary of Military Reports
The Japanese Attacks
In the attack on Pearl Harbor, the battleship
Oklahoma, (29,000 tons, launched in 1914, carries ten
14-inch guns) capsized, and the battleship Tennessee,
(32,000 tons, launched in 1919, carries twelve 14-
inch guns) was set on fire. One destroyer in the
dock was blown up; another destroyer and a minelayer were set on fare. Four airdromes were attacked.
One hundred airplanes were destroyed (63 fighters, 4
light bombers, 28 heavy bombers, and 5 Flying For-
tresses). (According to our Military Intelligence,
half of our planes in Hawaii were destroyed.) The
power stations were also hit, but not put out of
action.
The same morning, 18 airplanes attacked Singapore but no naval damage occurred.
(U.K. Embassy, Operations Reports, December
8,9; U.S. Military Intelligence)
Japanese Air Force
The British estimate that the Japanese now have
350 airplanes in French Indo-China. Approximately
100 are in the north and 250 in the south. Of these,
probably not over 100 are fighter planes. (Our Army
estimates that the Japanese have 500 airplanes in
Indo-China. In operations in this area, the Japanese
also can use planes based on carriers. It 1s believed
that the attacks on Manila are coming from carriers.
For operations against northern Luzon, the Japanese
have available bombers from Formosa).
(U.K. Embassy, Operations Report, November
8, 1941; U.S. Military Intelligence)
-2-
271
German Air Force
Some quarters of the British Air Ministry consider it
a bad sign that the Russians now claim to have air super-
iority over the entire Soviet-German front. It is thought
that the Germans may be withdrawing planes from Russia
for a renewal of heavy assaults on England.
(U.S. Military Intelligence, Situation Report,
December 11, 1941)
The Germans have recently transferred 30 Junkers-88
planes from Holland to Sicily. It is estimated that
there are around 70 planes of this type now in Sicily,
of which 30 are long-range bombers and 40 long-range
night fighters.
(U.K. Embassy, Operations Report, December 9,1941)
(While it is quite possible that the Germans may be
concentrating their airplanes for bombing attacks on
England, it is most likely that a move into Spain and
North Africa is contemplated. The report of the transfer
of planes from the North Sea Coast to Sicily may be a
small indication of this).
Finland
The fat ration has recently been cut from 600 to
150 grammes a month. The Finnish fat ration is thus reduced to only about 12 percent of British or German
rations. (In view of the Finnish climate, this ration
must mean considerable suffering for the Finne).
(U.K. Embassy, Operations Report, December 9,1941)
German Casualties in the Russian War
Hitler has twice given his figures on the German
casualties in the Russian war. In a September speech,
he gave the casualties to September 1; in his speech
yesterday, to December 1. Upon analysis, some strange
results appear:
-3-
(a)
272
In the 71 days from June 22 to September
1, the Germans admit casualties of 5,590
per day. In the 91 days from September
1 to December 1, the casualties come to
only 1,950 a day. (Our Military Intelli-
gence estimates German casualties at
12,000 a day as a rock bottom minimum.
Thus, even for the earlier period, Hitler
under-stated casualties by at least 50
percent.) If, as is likely, the average
rate of casualties did not change very
much between the two periods, and the fic-
titious earlier rate of 5,590 a day continued, total casualties for the war to
December 1 would have been 900,000, rather
than 573,000.
(b) From the break-down of the casualty figures
for the period from September 1 to Decem-
ber 1, the later figures from internal evi-
dence appear to be spurious. Up to September 1, according to the German figures, there were
3.5 men wounded for every 1.0 killed -a plausible ratio. From September 1 to
December 1, there was 1.1 man wounded for
1.0 man killed. The nature of the war
did not change 80 drastically between the
two periods to account for 80 drastic a
change in the ratio.
-4-
273
Statistical Appendix
German Casualties in the Russian War
Hitler's Figures
A.
Casualties from June 22 to
September 1
:
396,000
162,000
378,000
33,000
:
TOTAL
Wounded
:
Missing
84,000
293,000
19,000
:
Killed
December 1
:
573,000
:
Comparison of Total Casualties
B.
September 1 to
June 22 to
:
396,000
:
TOTAL
Wounded
:
Missing
84,000
293,000
19,000
:
Killed
(91 days)
:
(71 days)
December 1
:
September 1
78,000
85,000
14,000
177,000
Comparison of daily casualties
C.
September 1 to
June 22 to
December 1
September 1
Daily Average
Daily Average
Killed
1,190
Wounded
4,130
Missing
270
860
940
150
TOTAL
5,590
1,950
:
274
BRITISH EMBASSY
WASHINGTON, D.C.
December 12th, 1941
PERSONAL AND SECRET
Dear Mr. Secretary,
I enclose herein for your
personal and secret information a copy
of the latest report received from
London on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
Halifax
The Honourable
Henry Morgenthau, Jr.
United States Treasury,
Washington, D. C.
274
BRITISH EMBASSY
WASHINGTON, D.C.
December 12th, 1941
PERSONAL AND SECRET
Dear Mr. Secretary,
I enclose herein for your
personal and secret information a copy
of the latest report received from
London on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
Halifex
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D. C.
Copy No.
13
275
BRITISH MOST SECRET
(U.S. SECRET)
OPTEL No. 30
Information received up to 7 a.m., 10th December, 1941.
(I) NAVAL
A Russian submarine operating off Northern Norway torpedoed on
the 3rd a Westbound merchant ship of 5,000 tons and sank a trawler and a motor
boat escorting the ship. Another Russian submarine torpedoed a Westbound tanker
north of VARANGER Fjord. H.M. armed boarding vessel ALQUETTE intercepted a small
French merchant vessel off LISBON and is sending her into GIBRALTAR,
(II) MILITARY
LIBYA. On 8th December we made good progress. The enemy con-
tinued to fight a stubborn delaying action Test of EL ADEM and North West of EL
GOBI but the remains of his armoured divisions are being driven back and he
appears to be retiring Westwards, EL ADEM is now in our hands and the siege of
TOBRUK appears to have been finally raised. 9th - From the EL GOBI area our
armoured formations were in progress of out-flanking the enemy and mixed mobile
columns were working wide Westwards and Northwards in the direction of ACROMA.
To the East of TOBRUK and in the frontier area vigorous mopping up operations
were in progress but BARDIA, HALFAYA and a strong point between SOLLUM and SIDI
CMAR were still in enemy hands.
MALAYA. Nothing further to my OPTEL No. 29.
STAM. There have been further enemy landings at PRACHUABKIRIK-
HAN, 150 miles South West of BANKOK, but reports of fighting in this district
with British forces from BURMA are not confirmed. Japanese forces entered
BANKOK a.m. 9th.
HONG KONG. Our troops are now established in their main posi-
tions which are being successfully maintained in the face of an enemy attack by
a force estimated at about two divisions. Our patrols are active and one of them
ambushed and practically annihilated a Japanese Platoon. 8th/9th. Two air raid
alerts but no enemy aircraft located. Air attacks on the 9th were countered by
A/A fire. Civilian air raid casualties now reported as 70 killed and over 100
injured,
RUSSIA. There are indications that the Germans are now trying
to stabilise the MOSCOW Front. The Russians are continuing their heavy pressure
on the Germans in the ROSTOV Sector.
=2-
276
(III) AIR OPERATIONS
9th, Coastal aircraft bombed and probably sunk a 6-7,000 ton
merchant vessel off NORWAY and attacked a convoy off the Dutch coast obtaining 3
hits on a 7,000 ton ship which was still burning 6 hours later. Another ship of
3-4,000 tons was also hit, Our fighters attacked an Alcohol Distillery in
Northern France and consider they destroyed it. Off DURHAM a JU 88 was shot down
by fighters.
LIBYA. 7th/8th. Hurricanes damaged 6 aircraft on JEDABYA aerodrome and a number vehicles on the EL AGHEILA road, 8th, Squadrons of light
bombers successfully attacked transport near ACROMA and EL ADEM, stores dumps at
BARDIA and DERNA landing ground where 8 aircraft, including 5 JU 52's were destroyed. Blenheim fighter damaged M.T. North East of MARAWA. 12 enemy fighters
attacked 3 of our landing grounds near MADDALENA, causing a few casualties.
(IV) ENEMY ACTIVITY
UNITED STATES. 8th, PHILIPPINES. There was further Japanese
air activity over Southern and Central LUZON, WAKE ISLAND was bombed. 9th,
HAHAII. No renewal of Japanese attacks. Some U.S. bombers which arrived from
CALIFORNIA made an unsuccessful search for the attacking Japanese aircraft
carrier. GUAM. An air attack on AGAMA caused heavy casualties, A large ship,
possibly a transport, and two destroyers were sighted off the Island at 6.00 p.m.
A Japanese aircraft carrier is believed to be operating 750 miles North East of
PEARL HARBOUR. Reports of attack on NAURU, also of the bombing of TOKYO, KOBE
and FORMOSA are all unconfirmed.
(v) AIRCRAFT CASUALTIES in Operations over and from the British Isles. German,
1 destroyed.
(VI)
During the past week the Russian Air Force has been very active
on all sectors of the Front. They have carried out both bombing and machine gun
attacks on German ground troops with good results. They are reported to be maintaining continuous pressure on the enemy and to be affording remarkably good sup-
port to their own troops. The success of these operations is of particular inportance at a time when the Germans are attempting to stabilise the Front. It
is believed that during the past few weeks the Russians have had numerical and
operational air superiority on the whole sector of the front South of KURSK and
have maintained at the same time local air superiority at a number of points
between TULA and ALININ.
277
-3It is believed, but not confirmed that the two aircraft carriers
(VII)
from which the attack against HAWAII was launched were the SORYU and ZIUKAKU,
They normally carry: SORYU, 12 fighters, 12 torpedo bombers and 18 dive bombers.
ZIUKAKU, 12 fighters and 36 torpedo bombers and/or dive Bombers. The attack
therefore probably did not exceed this scale. The torpedo bombers can carry torpedoes or bombs. Air attacks on MANILA could have been made either from FORMOSA
or CANTON, more probably the former. Air attacks on SINGAPORE will most probably
have been delivered by aircraft based on SOCTRANG.
(VIII)
The Japanese occupation of THAILAND will, subject to their being
able to ship the commodities to JAPAN, assure the supply of some 48,000 tons of
rubber per annum and valuable supplies of tin from the provinces South of the
KRA Isthmus. This rubber from THAILAND will, together with that from INDO-CHINA,
provide JAPAN with all the supplies she needs and allow for some export to FRANCE
or GERMANY. The quantity of tin available may be limited by immobilisation of
mining machinery. Small but useful quantities of wolfram and sinc are also available, From the Northern provinces, JAPAN will have access to substantial supplies
of rice which will provide her with a margin of safety, and also useful supplies
of hides. Prior to occupation JAPAN obtained from THAILAND all the rice and
hides she asked for, most of the rubber but less than 1/3 of the tin.
(IX)
OCEAN ISLAND was attacked from the air on 8th and 9th. Serious
damage to residency. No other damage reported.
Last paragraph received indeoypherable. Check requested.
278
PARAPHRASE OF A SECRET
SECRET
MESSAGE
RECEIVED AT WAR DEPT.
I December 15 . 1941
(Classification Stamp)
Filed 9:40
From Cairo
COCKUT December 12 1941
1
12:30
December 17
p. m.
.
Received in I. B.
p.m.
I
2000
p.
m.
.
at 6:10
1941
No.
356
From Colby for the Ordnance Department.
Colonel Drew, Commander of the 5th Royal Tank Regiment which
was equipped with American light tanks, after being wounded, made a re-
port on the performance of the light tank, the pertinent parts of which
follow:
24 tanks, including scoe replacements were all that weeleft
out of the 52 tanks originally in his organization on November 30, the
date on which he left.
1.
He did not see any tanks with (?) or running gear so
severely damaged that it was unable to move from the battlefield under
its own power.
2. lie does not believe that protecting skirts are at all
necessary except in the case of heavy assaulting tanks,
3.
The condition of the tracks was excellent.
4.
The quality of the armor was excellent.
5.
20-mm armor plate# and 75-mm HE had no noteworthy
effect. 50-mm and 88-mm armor plate were most effective.
6.
The light tank is better in battle than the 15 VI/C
British tank.
7. The welding of the turret is excellent and so far as
Col. Drew could see there was no need for alarm at the structures
1 (12-17-11)
229
it z
PARAPHRASE OF A SECRET
CONFIDENTIAL RESTRICTED MESSAGE
RECEIVED AT WAR DEPT.
a. m.
. 194
(Classification Stamp)
a.m.
p.m.
Filed
From
a. m.
Received in 1. B.
194
p.m.
194
}
p. m.
}
at
SECRET
No.
-2-
were riveted.
8.
Universal points of the propeller shaft failed but aside
from that there were no serious mechanical troubles.
9.
The British in the Western Desert have had fears as to
the vulnerability of the air intake Louvre.
10. All louvres have been modified on the equipment of the 2d
Armored Brigade which has recently come out from England.
11.
12.
(?) (?) damage was due to (?) fire in louvre.
The big handicap of the light tank is its low gasoline
capacity. Col. Drew never experienced any difficulty in getting high
octane gasoline.
13.
The Gormans with 50-mm guns had a definite advantage over
the British with (?) --man and 2-pounders.
14. It would be better if the tank had a 3 man turret with a
platform and power traverse.
15.
A periscope for all around vision is very necessary,
but a light tank cupola is not essential.
There was very little anti-aircraft fire from the AA
16.
mounting. The volume of fire WAS very adversely affected by loose rounds
in the machine gun belt.
B No
1 (12-17-41)
280
PARAPHRASE OF A SECRET
CONFIDENTIAL RESTRICTED MESSAGE
RECEIVED AT WAR DEPT.
a. m.
4 194
p. m.
(Classification Stamp)
Filed
From
I
p.m.
194
194 No.
a.m.
Received in I. B
a. m.
p. m.
I
at
SECRET
-317.
The driver should have a better and more protected vision.
18.
When struck by (?) fire, a number of turrets were
jammed.
19. The performance of the radios was good but shock easily
puts them out of action. Col. Drew says tanks without radio are deaf and
dumb tanks. It is believed that several tanks were lost because of the
lack of radio receivers.
20. Conclusions,
a. There is a definite military place for the light
tank M-3 with (?) -ET gun. For pursuit and exploitation it is better
than anything in the Western Desert.
b. For anti-tank purposes a heavier tank with larger
caliber weapons in the turret is essential. The medium tank 11-4 (Ameri-
can) appears to meet the requirements. In the British tank the largest
gun is the 2-pounder which compares with our (?) C.
The M-3 light tank needs the following modifications:
(1) Better vision for car commander and driver.
(2) Greater fuel capacity.
(3) Better protected and more reliable turret
bearings.
(12.17.1)
281
PARAPHRASE OF A SECRET
CONFIDENTIAL RESTRICTED MESSAGE
RECEIVED AT WAR DEPT.
a m.
at
SECRET
. 194
p. m.
(Classification Stamp)
a.m.
Filed
From
, 194
p. m.
a. m.
p.m.
.
Received in I. B.
194
No.
{
-4-
(4) A 3 man turret with platform and power
traverse.
FELLERS
G-2 Note: This cable was garbled with many words omitted.
# G-2 Comment: Believed to refer to gun and not to armor plate.
Paraphrased by Col. Compton.
All copies informational
I.B.No.
dya
one.
Indicate distribution by check for one copy, by figure for more than
ticular copy by drawing circle.
State
W PD
ON I
GHQ
OASW
ASWA
OCAC
CAAF
SW
1 (12-17-41)
Message center Indicate recipient of parC/S
USW
ACS, G-2
X
ACS,G-3
6
9
Ch. B
MA
FL
CIB
Air
B ES
SES
WES
CES
EES
LAS
FES
Sit.
ACG G-4
X
And
X
2
I
DEPARTMENT
C.S. 17-B
DAD
X
N.A.
OLLA
X
x
Mr.
Ord.
RS
Corrie
X
I
Tank
Center
Y
Classification Sam
Treas.
SECRET
RESTRICTED
G-2/2657-220; No. 567
282
M.I.D., W.D. 11:00 A.M., December 12, 1941
SITUATION REPORT
I.
Pacific Theater.
Philippines: Japanese air activity continued through
December 11, 1941. Further air raids were made in the Kanila area.
Hostile landing forces were being augmented at Aparri and Vigan.
Landines were repulsed south of Vigan and north of San Ferando, also
at Lingayen. Five heavy Japanese ships and eleven destroyers were
reported off Zambales Province. Landing on island of Lubang
(northwest indoro) admitted. Air raids with use of parachutists
were reported at Tuguegarao and Ilagan. Landing at Legaspi confirmed - communications cut at Naga. (North of Legaspi). Japanese
air raid at Davao (hindanao).
II. Eastern Theater.
Ground: The Germans report the repulse of Russian local
counterattacks.
The Russians claim advances near Kalinin and west
of Ylets. Strong pressure is being exerted in the Stalinogorsk area.
III.
.lestern Theater.
Ground: The R.A.F. bombed Cologne and other targets in
western Germany last night, as well as docks at Brest and LeHavre in
occupied France, Other British aircraft sowed mines in "enemy"
waters. Three planes were listed as missing.
Yesterday British bombers attacked a dock near
Emden, and an airdrome in Holland. No British planes were lost.
IV.
Middle Eastern Theater.
Ground: Axis rear guards west of Tobruk have given way
and British mobile columns have penetrated to Ain el Gazala. The
situation is confused and number of Axis troops left behind in this
withdrawal is at present unknown. Nothing has been heard from British
forces in the Gialo area.
Air: Nazi planes were said to have dispersed British
armored columns attacking Axis forces west of Tobruk. Other Nazi
planes bombed rail lines near Sidi Barrani. Six British planes
were said to have been shot down in Libya.
The Italians admit that the British have made an
aerial bombing attack on Derna.
RESTRICTED
283
December 13, 1941
9:20 a.m.
HMJr:
I had a call in for Leo Crowley also. How are
you?
James
Farley:
Good. Never better. Thanks.
HMJr:
Jim, I - you remember you recommended Dick
F:
Yes.
HMJr:
Patterson to me for this job in New York.
Well, between us, he's just completely fallen down
on it.
What's the matter with him?
F:
HMJr:
Well, he just isn't good enough; and up to the time
we got the war, he just kept sitting around and
arguing and not doing any business; and it's the
worst organized state in the Union. It's the only
bad one.
F:
Are the others all right?
HMJr:
The other states?
F:
Yeah.
HMJr:
Yeah. We're getting along fine. But in New York,
both Mrs. Patterson and Mrs. Lytle Hull, neither
of them are any good. He made a remark last week
something - this was before the war - that he'd
kind of like to get back to his business. Hello.
F:
HMJr:
How much time does he devote to it?
Oh, he devotes quite a lot of time; but he just won't get down to business, Jim; and we've got a big job
New York's the richest state, as you know, - we've
got to get the most money there, and he just isn't
up to it.
F:
I see.
HMJr:
And I don't want to have any row with him, but I
284
-2
wish there was some graceful way to have him
go back to RKO.
F:
Well, what do you want to do?
HMJr:
Well, I wondered if you couldn't drop some hint
F:
HMJr:
to him.
Well, then after you do that, what will you do?
Well, we'll put somebody else in. I don't know
whether you - he's there for New York State - I
mean New York City. I don't know whether he'd
take it, but I would give it - I was thinking of
Lew Douglas.
F:
For New York City?
HMJr:
For the whole state.
F:
I see. Well, he's a good fellow.
HMJr:
For the whole state, because he's taken hold
and he means business, see?
F:
Let me talk to you about that. Let me think it
over during the week-end, will you?
HMJr:
Will you do it? It's a kind of a delicate thing.
I don't want to hurt his feelings, but on the other
hand we've got a hell of a big job. He's had three
or four months and he's just completely fallen down
on us.
F:
Well, let me think it over over the week-end and
HMJr:
Yes. Don't you think Lew Douglas would be good?
F:
Yeah. He's interested, and he's a worker. Of
I'll talk to you.
course, I thought that Patterson would work.
HMJr:
F:
No, well, he hasn't, Jim.
My impression of Dick was that the position with
his company was more or less - well, honorary isn't
the word to use, but for want of a better word,
there it is.
285
-3HMJr:
Well, they pay him a big salary.
F:
Yeah, I know they do. It's a fine salary and I
HMJr:
thought that he - I thought that he had time to I thought he was more of a front man, 80 to speak that he had time to do things.
Well,
he's got the time, but he hasn't got the
brains.
Well, of course, he's all society.
F:
HMJr:
F:
HMJr:
F:
HMJr:
Yeah, but that isn't what we want.
I know that.
You put your finger on it - we've got too much
society up there and too little muscle.
Well, the time for fooling 18 past, Henry.
That's why I'm calling you, Jim, because both he
and Mrs. Lytle Hull - too much society - and it's
the only place that we've got it.
Well, the unfortunate part in Mrs. Lytle Hull's
place is because she's all interested in her
musical end of it and all those other things that
F:
she does.
HMJr:
Well, she only comes in a couple of hours a week;
and in her case, what I would simply - I wouldn't
hesitate in her case. If Lew Douglas went in,
I'd say to Lew, "Now, what woman do you want to
be associated with you?"
F:
Yeah.
HMJr:
And I'd simply write a letter to Mrs. Hull and say
that we have to have somebody that can give it ten
hours a day, seven days a week.
F:
HMJr:
Yeah.
But you put your finger on it - it's too much society
and too little down to earth with the laboring
fellow and the real fellow that we want to reach.
286
4
Well, of course, they don't know, probably, who
the hell Patterson is, anyway.
F:
HMJr:
What's that?
F:
They probably don't know who the hell Patterson
HMJr:
No.
F:
But I'm disappointed. I thought he'd do a better
18, anyway.
job for you.
HMJr:
F:
Well, the reason I'm bothering you is because it
was your suggestion; and if, after thinking it
over, - he did pass the remark last week that he
would like to go back to his business.
Well, I'd have to work it rather delicately. He
has a good friend named Tom Durrell, who's on one
of those motion picture boards with him.
HMJr:
F:
Yeah.
Durrell is Treasurer of the State Committee. He and
Tom are pretty good fellows - friends.
HMJr:
Yeah.
F:
Maybe I could have Tom - maybe I could handle it
through Tom.
HMJr:
Well
F:
Let me think it over, anyway.
HMJr:
F:
Well, what - Dick Patterson said two or three times
that if in any way he was out of tune with Washington,
why just tell him and he'd go back to his business.
Well, the only thing about it is this. Now that
you re in war, he might not want to get out.
HMJr:
F:
I know.
I mean, that's probably more - it isn't as easy now
as it was last Saturday morning.
287
-5HMJr:
Well
- and I wasn't - I didn't feel tough last
Saturday.
F:
I know.
HMJr:
See?
F:
Who's running it in the country for you?
HMJr:
We've got a man down here - we've got a group
F:
I see.
HMJr:
And - but, all the other - I mean, I checked, and
down here running it.
every place - I mean, now Herbert Lehman came to
me the other day and said, "Henry, what's the matter
in New York State?" I said, "What?" He said, "Well,"
he said, "Your committee's no good; they're not doing
anything." And he said, "I think it's terrible."
"Well," I said, "I agree with you, Herbert." Well,
of course, those things hurt; especially where it's
dy own state.
F:
I know. Well, let me think it over over the week-end.
HMJr:
But Herbert Lehman jumped on me awful hard Saturday.
F:
Well, let me think it over the week, and I'11 talk
to you Monday.
HMJr:
Thank you 80 much.
F:
How are you? Is this serious around?
HMJr:
Is it serious?
F:
How serious is it?
HMJr:
Yes, but it's like everything else, they got us -
F:
HMJr:
if you start on the bottom ladder, you can't go
any lower - you only got to go up.
Well.....
And we'll win. It's going to be a long, hard battle,
288
-6but they caught us unprepared and we've been a
peace-loving country for a great many years,
and we're
notbusiness.
a war country; now we've got to
learn
the war
F:
HMJr:
F:
There's
one thing about it. The way they did that
in Honolulu.
Yeah.
While it was - I don't know the extent of it,
I've heard all sorts of rumors and I don't want
to discuss that feature of it at all, that's
something else. But I do know that nothing could
have happened, as bad as it was - and it was bad that would have united the country
HMJr:
F:
HMJr:
F:
That's right.
.....as it did unite us.
That's right.
In other words, if we shot first over there,
they'd say that the President was a war-monger
and started the war.
HMJr:
F:
That's right.
Now, the fact that it happened as it did, despite
the losses which apparently are heavy enough
HMJr:
F:
HMJr:
F:
HMJr:
F:
Yeah.
it united the country so that everything else
is forgotten about.
That's right.
It's a question of winning the war.
That's right.
So it had that advantage, no matter how big the
bite was.
HMJr:
That's right.
289
-7F:
All right, Henry.
HMJr:
Well, Jim, if you can help me on this, I would
F:
All right. Well, I'll talk to you Monday morning.
HMJr:
Thank you.
F:
Good-bye.
appreciate it very much.
290
December 13, 1941
9:37 am
HM Jr:
Hello.
James
Forrestal:
Henry?
HM Jr:
Yes, Jim.
F:
I thought I would tell you that the only news this
morning is that early - about four o'clock - there
was an alarm that Zeppelin was over Cape Sable.
HM Jr:
Where is Cape Sable?
F:
Well, somewhere around Newfoundland - that area.
HM Jr: Yes.
F:
Heading southwest.
HM Jr: I see.
F:
It turned out to be a Blimp of our own, however.
HM Jr: I see.
F:
But there was a great deal of alarm for a while. .
HM Jr:
But nothing else?
F:
No. Well, one thing - there was a warning - there
was an unverified pickup of a message in the South-
west of Mexico of a ship being sunk last night.
HM Jr:
I see.
F:
About118-28, which is southwest of Magdalena Bay which would be quite possible.
HM Jr:
I see. Well, it's terribly nice of you to call
me. I appreciate it.
291
-2-
F:
Well, that's not a very hot bit of news.
HM Jr:
No. But, let me ask you a question. I heard -
oh, two, three months ago - that we had quite
a flock of long distance submarines over in the
Philippines.
F:
Well, I think we have, Henry.
HM Jr:
Wouldn't
it be reasonable to expect something
from them?
F:
Well, that's what we're hoping. I don't want to
be hoping, however, until they actually act.
HM Jr:
Right.
F:
But it is reasonable.
HM Jr:
A reasonable hope.
F:
Yes. I think so.
HM Jr:
Well, thanks terribly. I appreciate it and I would
like it if you would call me occasionally.
F:
Okay, Henry.
HM Jr:
Thank you.
292
December 13, 1941
Mr. Randolph E. Paul,
Washington, D. C.
Sir:
You are hereby appointed an Assistant to the Secretary
of the Treasury, with compensation at the rate of nine
thousand dollars per annum, payable from the appropriation
"Collecting the Internal Revenue," the appointment to be
effective today.
Very truly yours,
(Signed) K. Morgenthan. JR.
Secretary of the Treasury.
w MIL. Thompson
nmc
293
December 13, 1941
9:43 a.m.
Randolph
Paul:
HMJr:
P:
HMJr:
Good morning, Mr. Secretary.
How are you? I had a letter which I'm quite
excited about, pleasantly, and I thought I'd
tell you.
oh, fine.
Because I didn't want to do anything unless, in fact,
talking to you. Bernie Knollenberg has written in
that he could get a leave of absence to come down
to help us.
P:
Yeah.
HMJr:
Don't you think that would be good?
P:
Yeah, I do. I certainly do. He's got some very
good ideas
HMJr:
P:
HMJr:
P:
Well
somewhat shocking to some of the businessmen,
but that is probably down our alley.
Well, don't you think as long as this is your end
that you'd like to contact him?
Yes, I will. I'll contact him tomorrow. I'll call
him up. I'11 be back in New York tomorrow, and I'11
call him up and perhaps see if I can get together
with him.
HMJr:
Will you do that, because you don't know me, but I
never cross people up; when I give them responsibility
I leave it with them.
P:
Okay, I appreciate that.
HMJr:
And he simply said that this is a letter to say that
now we're at war, Yale Corporation would unquestionably If
give me leave to be of assistance in Washington.
I can help at any time, I shall be happy to serve.
P:
Yeah. Well, he's a grand fellow, you know.
-2HMJr:
P:
HMJr:
P:
294
Oh, I've used him two or three times, you know.
Yeah, I see.
And you know I asked him to come down originally
on a year's basis, and he agreed to and the President
of Yale agreed to it; and then whatever they call
the Board of Trustees, voted it down.
Yeah, well, I know the background of that. The
Board has been very ungenerous in that respect.
HMJr:
P:
HMJr:
P:
So I think that 1f you - it looks to me that here's
another top-flight fellow.
Yeah.
But I'11 leave it in your good hands.
Well, thank you; and I'll call up tomorrow and I'11
get busy on it right away.
HMJr:
Okay.
P:
Glad you called me.
HMJr:
Thank you.
P:
Thank you.
295
OFFICIAL
PROF BERNHARD KNOLLENBERG
300 OGDEN STREET
DECEMBER 13, 1941
NEW HAVEN CONNECTICUT
DELIGHTED TO RECEIVE YOUR LETTER AND OFFER OF SERVICES.
I HAVE APPOINTED OUR MUTUAL FRIEND RANDOLPH PAUL AS TAX
ADVISOR AND IT IS HIS RESPONSIBILITY TO BUIID UP OUR TAX
GROUP. I TELEPHONED RANDOLPH WHO IS IN CLEVELAND AND
TOLD HIM YOUR LETTER WAS A MOST PLEASANT WINDFALL AND HE
AGREED. HE WILL GET IN TOUCH WITH YOU ON SUNDAY. DELIGHTED
AT PROSPECT OF HAVING YOU DOWN HERE WITH US
HENRY MORGENTHAU JR
296
BERNHARD KNOLLENBERG
BOX 16018 YALE STATION
NEW HAVEN CONNECTICUT
December 9, 1941
The Honorable Henry Morgenthau, Jr.
The Treasury Department
Washington, D. C.
300 go
3 900 no ogen at
Dear Mr. Morgenthau:
This letter is primarily to say that now the United
States is at war, the Yale Corporation would unquestionably
give me leave to be of assistance in Washington, and if I can
be of help at any time in the Treasury Department, I shall be
happy to serve.
Another minor point: In a tax seminar that I am giving
at the Yale Law School, we are studying the structure of the
present income tax law, and, in connection with this, I have
drafted an article entitled, "Unfairness of the Present
Income Tax Law," which I expect to have published. It occurs
to me that it might be well for someone in the Department to
look it over to make sure that anything I say will not be em-
barrassing to the Administration at this time. If it were I
would, of course, not wish to publish it. I am sending the
article under separate cover.
Sincerely yours,
Barnhand Knollenbung
-2-
297
I
The present federal income tax law provides that there
"shall be exempt from taxation under this title ... inter-
est upon the obligations of a State, Territory, or
any political subdivision thereof."
In simple English, this means that the owners of bonds issued by any
state or municipality in the United States receive the interest on
these bonds scot-free from federal income tax.
At the time this provision was inserted in the tax law, twentyfive years ago, it made sense. At that time, the celebrated case of
The Collector V. Day WES still binding on Congress, and IN that case
********* held that the federal government could not impose a tax on
the income of a state judge, because
to give effect to
"the reserved rights of the States
laws through executive action; to administer justice
through the courts, and to employ all necessary agencies
for legitimate purposes of State government, are not
proper subjects of the taxing power of Congress."
But on March 27, 1939, the Supreme Court, in Graves V. New York ex rel.
O'Keefe, holding that New York State could impose a tax on the salary
of O'Keefe, a federal officer, declared that The Collector V. Day
and similar cases were "over-ruled so far as they recognize an implied
constitutional immunity from income taxation of the salaries of officers or employees of the national or a state government or their instrumentelities." The Court as now constituted would be even less
likely to sustain the discredited doctrine of the Day case. Furthermore, although the constitutionality of a federal tax on the income
from state and municipal bonds has not been passed on by the Supreme
Court, there would be even less reason to sustain the exemption from
federal tax of interest received by the holder XXXXXX of B state bond
298
=3a
than salary received by a state officer. The old constitutional objection to a tax on the interest from state and municipal bonds is,
therefore, clearly a thing of the past.
From the standpoint of fairness, there is much to be said for continuing to exempt the interest on bonds sold by the state and local
governments before the date of the O'Keefe case decision, because the
purchasers of such bonds, relying on the precedent of the Day case,
presumably paid a substantial premium on the bonds for their supposed
tax exemption. But the present federal tax law, as previously indicated, does not restrict the exemption to such bonds. It exempts the
interest from all state and municipal bonds, no matter when issued.
The fact that a class of citizens, through shrewd selection of its
capital investments, can thus avoid the burden of income tax was
serious enough in normal times. The existence of this loophole in
the present emergency is intolerable.
III
A men invests $10,000 in property; it increases in value to
$100,000; he gives it to his wife; and she sells it for $100,000. The
wife must pay a federal income tax on 8 taxable profit of $90,000 the difference between the selling price and the original cost - even
though, under the federal gift tax law, the husband must pay a gift
tax based on a $100,000 valuation of the property at the date of the
gift. The fact that there has been an intervening valuation of the
property for gift tax purposes is ignored by the income tax statute.
This provision of the income tax law, which applies to the sale of all
property acquired by gift, is so reasonable that no one thinks today
299
of challenging its fairness.
If, however, the property costing $10,000, but worth $100,000,
were transferred by inheritance rather than by gift, the $90,000 of
unrealized profit accrued to the date of death would escape income tax
entirely. If and when the heir or executor sold the property, he or
she would be permitted, under the present provisions of the federal
income tax law, to take as the cost basis of the property the estate
tax valuation of $100,000. The income tax leakage resulting from
this defect in the law is enormous. True, the leakage is somewhat off-
set by the fact that, if the property had depreciated in value between
the date of purchase and the date of death, the deductible loss on a
subsequent sale of the property is less than if the original cost
were used. But this offset is relatively unimportant. Examination of
the holdings in the great estates passing by death in recent years
will show that the unrealized losses on the property in the estates are
almost negligible in comparison with the unrealized profits, running
into the hundreds of millions of dollars. This situation is attributable largely to the fact that property on which there are paper losses
has been sold during the owner's lifetime to establish income tax
deductions, while property on which there are paper profits has been
retained, with knowledge that these profits will escape income tax if
the property is held until the owner's death.
The income tax law should be amended to provide that the valua-
tion of property for estate tax purposes, like the valuation for gift
tax purposes, shall be ignored in computing taxable profit subject to
income tax.
o
-5-
300
II
Under the British income tax law, a person who occupies a house
or apartment which he owns is required to include as part of his taxable income the estimated rental value of the property. Under such a
system, since the owner is taxed on the assumed income from his
property, it is fair that local property taxes, mortgage interest, and
other expenses of maintaining the property be considered in the nature
of business expenses and that the owner be permitted to deduct them in
computing his net income subject to tax.
The United States income tax law, however, does not treat as tax-
able income the estimated rental value of property occupied by the
owner. (It is doubtful whether Congress would have power to tax such
rental value as "income" within the meaning of the Sixteenth Amendment
to the Constitution.) It follows that, under the United States income
tax law, there is no reason to permit a person to deduct the local
property taxes, mortgage interest, or other expenses incident to the
upkeep of his home. Logically, these expenses should be recognized
for what they are: personal expenses of the taxpayer, differing not
one whit from the cost of the clothes he wears or of the food he eats.
Yet our federal income tax law as it now stands arbitrarily permits
the home owner to deduct local taxes and mortgage interest in computing
his net taxable income. This indefensible deduction costs the Treasury Department an enormous loss of revenue each year, and, besides,
operates as a gross discrimination against the millions of taxpayers
occupying rented houses or apartments, who are not permitted to deduct
any part of their rental payments in computing their net taxable incomes.
0
301
m
family would he $ 1305
-6-
24700 in California.
III
new gookendouly
If a resident, say, of Connecticut makes a legally binding as-
signment, pursuant to which half of his salary is paid to his wife
under demarone. of Use tes states
the husband is - required
to include his entire salary in his
usually
federal income tax return, with the result in most that itheady
is
N
subject to much higher rates of surtax than if it were divided, for
income tax purposes, between his wife and himself.
noil If, however, the husband and wife are residents of one of the nine
edgitte so-called "community property" states, the husband is more for-
Thore originally only
tunate
of theory
California
sevent state Arizona Idaho, Louisiana, Nevada,
oklahoma
New Mexico, Texas, and Washington
to
not
insure a favored position for sident The Supreme Court holds
that, since the local law of these states requires, .. engeneral rule,
test the income of married couples be pooled, the husband is exempt
from tax on the part of his salary and other income to which his wife
Supreme
is entitled under the local law. À The Court S grounds for
law distinguishin
ing between income that goes to the wife by operation of/the
comin other
states
states
munity law/and that which goes to her pursuent to a binding agreement/
lin Congress
are unconvincing. But until the federal tax statute is amended A the
Treasury Department's hands are tied.
The argument has been advanced that it would be useless for Con-
gress to try to amend the federal income tax law on this point, because the Supreme Court has indicated that its decisions with respect
to community property income are based on constitutional grounds. But
302
-7-
this is not true; on the contrary, the Court, in the leading case on
this point (Poe V. Seaborn), , intimated that, if Congress had expressly
provided for the inclusion of the entire community income in the husband's return, the Court would have sustained the provision. Furthermore, a number of recent tax cases, involving a variety of questions
of control over income, indicate that the Supreme Court as now con-
stituted would unhesitatingly uphold the constitutionality of the
proposed revision. These decisions, in fact, indicate that, since
the husband has control over the entire community income, Congress
could tax the husband on the entire income, from property as well as
from earnings. But as long as there is no provision in the federal
income tax law requiring husband and wives in all states to pool all
their income for income tax purposes, it would be unfair to require
the husband, in a community property state, to pay tax on the community income from property as well as from earnings.
The wiping out of the four inequalities here discussed will not
perfect the federal income tax law. Various other amendments to the
/
law might be enacted with profit. But these particular defects are
so glaring and so easily rectified that there can be no justification
for Congress' failure to correct them immediately.
Bernhard Knollenberg
VII
Unfairness of the Present Income Tax Law
303
Have you figured your federal income tax for 1941? If not, you
had better do so at once and begin to think about how to raise the
money to pay it. For, while the newspapers have informed the public
of the new, high rates, few, even of thos hardest hit, have yet
awakened to what the new rates mean to their particular pocketbooks.
The first reaction, when the awakening comes, is likely to be one of
uncritical resignation. But as taxpayers find themselves forced to
give up more and more of their favorite amenities and charities to
meet the inexorable demands of the tax collector, they will become
more critical. They will begin to ask whether, in doubling or tripling
their particular income tax burden, Congress has remembered that the
heavier the tax, the heavier the responsibility to assure that it is
fairly distributed among those called upon to pay.
The most imperious demands for change in our income tax system is
the revision of the corporation excess profits tax and the enactment
of a drastic war profits tax law. These changes will, however, require
long and patient study. Meanwhile, Congress can and should immediately
correct the following glaring inequalities in the income tax law.
Giving immunity from income tax to a single, favored class - the
holders of state and municipal bonds.
Giving a stepped-up cost basis to a man's heirs in computing
profits from sales of property.
Discriminating in favor of home owners as against those who rent
the house or apartment in which they live.
Discriminating in favor of the residents of the eight so-called
"community property" states as against those who live in the other
forty states.
304
December 13, 1941
9:48 a.m.
Harold
Graves:
HMJr:
Yes, sir.
I thought that your namesake, Harold Smith's,
letter
in anewer to mine was a very friendly
one. Hello.
G:
Yes, sir.
HMJr:
Have you seen it?
G:
I have seen it.
HMJr:
And I think that it doesn't cost anything for
me to write him a letter that I appreciate his
friendly spirit, it encourages me to go on,
greater effort, blah-blah-blah
G:
Yes.
HMJr:
and doesn't hurt one bit. I'll send the
letter in to you and you write me a little
applesauce letter.
G:
HMJr:
I'll be glad to do that.
Particularly in view of the fact that I gathered
the other night he's got grave doubts.
G:
That's right.
HMJr:
And that's - Grave doubts
G:
HMJr:
(Laughs) Yes.
about candy so early in the morning.
G:
Yes, sir.
HMJr:
He has Grave doubts about our bond program. (Laughs)
G:
Yes, sir. All right, sir. I'll be glad to take
HMJr:
care of it.
Now the other thing - I talked to one James
Aloysius Farley this morning.
-2G:
HMJr:
G:
HMJr:
305
Oh, yes.
and told him that he'd wished this on me
and
I came
to him
could
un-wish
it. as the wishing well and he
Yes, sir.
So he said he'd like to think about it over the
week-end.
G:
Yes.
HMJr:
He agreed with me that this was no time - as he
G:
HMJr:
put it - to fool around with society people.
That's right.
Now, isn't that amusing that he should use that
term?
G:
Yeah, that's right.
HMJr:
And I said I agreed with him.
G:
Yes.
HMJr:
And that would he - and he said give him until
Monday and he'd call me back.
G:
Fine. It occurred to me after you talked to me
last about this that since your choice of a
successor here was Douglas
HMJr:
I offered that as a suggestion.
G:
Well, I think that's fine. It occurred to me that
possibly we might want to talk with Lew Douglas
about it.
HMJr:
Well, Jim Farley said, quick as a flash, "Well, who
have you got in mind?" I said, "Well, if I could
get Lew Douglas to do it." "Oh," he said, "that
would be wonderful," . and that influenced him
G:
Yes.
HMJr:
In his decision to try to get rid of Patterson.
-3G:
HMJr:
G:
306
Yes.
But I think - let's sit tight until Monday?
Yes. There is one thing I wanted to have you
understand, that I am planning to leave for
Chicago tomorrow
HMJr:
G:
HMJr:
G:
HMJr:
G:
HMJr:
G:
Fine.
and will be out of circulation with most of
my help the first three days of the week.
Well, now, can't you - because you know I get
ideas all day and night
Yes.
Couldn't you leave
Gene Sloan will be here.
You took the lips off my words.
Yes. Gene Sloan will be here, and we'll have a
kind of a skeleton crew to work with here.
HMJr:
I was going to suggest, leave me Sloan.
G:
Yes. Well, he'll be here.
HMJr:
Leave me Sloan.
G:
There is another thing that I would like five
minutes to discuss with you this morning. It's
a matter of replacing Gale Johnston, which I think
we ought to be prepared to announce at Chicago.
HMJr:
G:
Well, I thought you had this Portland fellow.
Well, that's what I wanted to talk with you
about
HMJr:
Well
G:
......1f you could give me five minutes.
307
4HMJr:
All right, I'11 give you five minutes of
eleven.
G:
Five minutes of eleven.
HMJr:
Yeah.
G:
Thank you very much, sir. I'11 be in.
HMJr:
And listen, did you get my two memos?
G:
HMJr:
I got one of them. The other Mrs. McHugh said
was not clear and she was going to speak to you
about it.
Well, which one did you get.
G:
I saw them both.
HMJr:
Well, what were they; and I can tell you what
G:
I had.
The Fredericksburg thing. I would appreciate if
you would tell me.
HMJr:
Well, the Fredericksburg thing was, I suggested
that whoever had the brains to do what he did,
let's bring him down - the way we did the circulation manager of the Philadelphia Bulletin.
G:
What did the man do?
HMJr:
What did the man do?
G:
Yes.
HMJr:
Well, I read it in Graves' report.
G:
HMJr:
Oh, my goodness; I'd better read - I'd better
get that report.
Well, I don't mind. A man by the name of Graves
wrote me.
G:
Yes.
HMJr:
..... that this fellow in Fredericksburg - always
-5-
308
glad
to tell you - oh, boy, you'll never hear
the end of this one
G:
(Laughs) You've got me.
HMJr:
You bet I have.
G:
What you want is to get that fellow in here
Monday.
HMJr:
Let me tell you what he did.
G:
Yes.
HMJr:
He's got an idea - successful - of selling bonds
over the radio. From this little station he sold
$40,00 in one day.
G:
Yes.
HMJr:
Now he's got an idea.
G:
Yes.
HMJr:
G:
HMJr:
And he's got a technique. Let's bring him down,
particularly to work with the small stations.
I wonder if due to the fact that I will not be
here and Callahan will not be here, we shouldn't
postpone having him in until we're back.
No. Well, see if he'd come down. Fredericksburg
is only a few miles. Maybe you could get him in
today.
G:
All right, we'll try.
HMJr:
Or tomorrow. Don't wait until you go away.
HMJr:
Well, are you going to be within reach to
Well, you can bring him in - you don't have to
show him to me. Here's a fellow that's got a
bright idea.
G:
I see.
HMJr:
Let's get him.
G:
6-
309
G:
Yes. All right, sir; we'll make a try at it.
HMJr:
You see, I read your reports.
G:
Yes. Well, I read it, too; but I had forgotten
HMJr:
Well, that was a bright spot, just the way the
G:
Yes.
HMJr:
Now, what was the other thing?
G:
Well, I wanted to talk
HMJr:
that article completely.
Philadelphia Bulletin was.
No, what was the other thing on the machine?
There were two things.
G:
The other thing was the mural thing.
HMJr:
Oh, yes.
G:
And I've already passed that along to Mr. Mahan,
HMJr:
who did the New York mural.
Yes. I was going to say - I mean - if it's I'd like to see him put it in at least Chicago
and Washington and as many more where there are
union stations with heavy traffic.
G:
Yes. I get it. Apparently you'd like to scatter
those pretty well about the country.
HMJr:
Geographically.
G:
Yeah.
HMJr:
Right?
G:
I have it.
HMJr:
Okay, that was the two.
G:
HMJr:
Yes, sir.
And I enjoy reading your reports very much.
-7G:
HMJr:
G:
310
Well, thank you very much. I - as a matter
of fact, I was very hasty about that, as you
now see, because I wanted to get it to you
and I had my hands full.at the time.
All right.
All right. Thank you for calling
311
DEC 13 1941
Dear Mr. Smith:
Thank you for your letter of
December 10, with further reference
to the allowance for the Defense
Savings Staff.
I much appreciate the friendly
spirit of your message. It gives me
confidence in your support for this
very important program.
Sincerely,
(Signed) N. Morgentham. Jr.
Non. Harold Smith,
Director of the Budget,
Washington, D. C.
HNG:fns
Photoster file to n m.c.
File a Thompson
EXECUTIVE OFFICE OF THE PRESIDENT
BUREAU OF THE BUDGET
WASHINGTON.D.C.
DEC10 1941
My dear Mr. Secretary:
I have your letter of December 4, 1941, with ref-
erence to the 1943 budget estimates for the Defense
Savings Staff of your Department.
The allowance of $4,800,000 for the 1943 costs of
this unit, which the President has approved for inclu-
sion in the 1943 Annual Budget, represents the maximum,
which, in the judgment of this office, your estimate
submission appeared to justify. It provides in full for
the organization indicated to be desired and the directly
related expenses of that organization, plus a considerable
sum for promotion. materials, and facilities.
You are assured that there is no disposition to hamper
in any way your program for the sale of these securities.
!
If after reasonable trial you feel that the progress of the
program is so impeded by lack of funds as to invite a failure
to attain the objective, this office will consider a supplemental estimate on the basis of facts available at that time.
You will appreciate, however, that I am not in a position to authorise incurrence of a deficiency or any expansion of this program in advance of Congressional action on
estimates of appropriations, which would result in a rate
of expenditure involving commitments beyond the limits of
the actual appropriation.
Very truly yours,
7m
The Honorable,
The Secretary of the Treasury.
313
December 13, 1941
10:15 a.m.
HMJr:
Colonel
Smith:
HMJr:
Hello.
Good morning, Mr. Secretary. How are you, sir?
Fine. Colonel, I don't know whether you do know you most likely do - that it was my suggestion to
General Watson that we have these anti-aircraft
guns around.
S:
HMJr:
S:
HMor:
S:
HMJr:
S:
HMJr:
S:
Yes, sir.
And I see them from my window.
Yes, sir.
Now the thing that - when I asked it - was it is it General Cox who's in charge of the District?
Yes, sir. He's in charge of most of it, but the
anti-aircraft defense of the District will be
under what they call the Interceptor Commander,
an air officer here
Yes.
who will have charge both of the air and
anti-aircraft defense.
Good. Now, I want to ask a question. They've got
these guns up. Have they any listening devices?
Not as yet. They're coming in.
HMJr:
My God, when are they going to get those?
S:
Well, they come in with the heavy stuff. Anything
those guns can reach they can see, you see; and we've
got a regiment of 90 millimeter guns coming which
will occupy areas around the District outside of
what they call the "bomb release line": and it's
with those guns that the listening devices will
be placed.
HMJr:
Well, when do you think they'11 get to the District.
314
-2- Well, I saw the 90 millimeters coming in - the
first battalion of them - about noon yesterday.
S:
HMJr:
I see.
So - and Colonel Nicholson, formerly in this office,
S:
18
commanding the regiment and making the arrangements.
HMJr:
S:
HMJr:
S:
HMJr:
S:
HMJr:
Well, would you arrange that sometime Monday - I'd
like - after they' ve been set up, you see
Yes, sir.
I'd like to be taken on a tour of inspection.
All right, Mr. Secretary.
Will you arrange that?
Yes, I'm quite sure I can.
What?
Yes, sir; yes, indeed I can. I'm making a note of
S:
it. That's why
HMJr:
Well
S:
I've got Monday, after they're set up.
HMJr:
Maybe you'd have time to go with me.
S:
HMJr:
S:
HMJr:
I surely will.
And I'd like to see guns and listening devices,
and whatever arrangements they have for planes
to defend the District.
All right, sir.
In other words, I'd like to be told and shown the
whole plan to defend the thing, because, as I say,
my interest 18 the President of the United States,
you see?
S:
Yes, Mr. Secretary.
-3HMJr:
S:
HMJr:
315
So if by Monday the thing is set up and the planes
and the listening device and the ninety - the whole
set-up and who's in control and where the nerve-
center is. I'd like to be shown.
All right, sir. You bet. We'd be glad to.
Because I got off - I got a very bad impression here
the other day. I don't know whether you heard about
it or not.
S:
HMJr:
No, I did not. What was it, sir?
Well, I mean, this truck with machine guns in
my ramp. I went up and asked the fellow whether
he could load it, and he was all thumbs and had
great difficulty loading the machine gun. And I
told the Colonel about it - I just bumped into him
on the street - I don' t know the Colonel's name
who 8 supposed to be in charge here, of these men.
Hello.
S:
HMJr:
S:
HMJr:
S:
HMJr:
Yes.
I told him about it. But Mike Reilly was with me
and, as I say, to have people in these trucks and
not able to know to load the thing - he finally
did, after great difficulty - so it made a very bad
impression, and I just hope that if I go around I
won't find any more of it.
Well, I hope not either, Mr. Secretary.
Well, you - I'll hear from you Monday.
Yes, indeed, sir.
Thank you.
316
December 13, 1941.
Memorandum for the Secretary's Diary
At 11:00 o'clock this morning Monsignor Michael Ready
called upon Secretary Morgenthau by appointment. At the
meeting, in addition to Monsignor Ready and the Secretary,
were Harry White and Ed Foley.
Monsignor Ready said that the Vatican was having
some difficulty financing some of its apostolates in
various parts of the world, as well as some of their
charities. He left with the Secretary the attached memorandum which outlines some of their difficulties. After
reading the memorandum the Secretary asked the Monsignor
if he could give him some idea as to the amounts that were
needed in particular countries. The Monsignor said he
coulan't do this off nand but would be very glad to get
the information. The Secretary said that this was a matter
he wished to handle personally and was confident that it
could be worked out, not upon the basis of the memorandum,
but upon some basis which we would devise. He said that
there was no question at all about dollars for use in the
Western Hemisphere. He also thought that it would be
possible to provide dollars for the operation of the Vatican
City. On the other hand, the Secretary said he thought
there might be some difficulty in providing dollars for use
in Axis countries. However, he told Monsignor Ready that
he was sympathetic and would do everything he could to work
the thing out to the entire satisfaction of Monsignor Ready
and his associates.
The Secretary pointed out that the memorandum
indicated that Switzerland might be acting under duress in
this matter as she would not want to draw her gold out of
New York if she were a free agent. Monsignor Ready said
that the Church wanted to do it the American way and promised
to get in touch with the Secretary just as soon as the
apostolic delegates had been able to get the necessary
information from the Vatican.
S.m-LL
0
12/13'41
This material was brought back to
the office after a conferance in
the Secretary's office attended by
Monsignor Ready and Harry White
and Mr. Foley.
FMcGuire
Meeting was at all a.m.
MR. FOLEY
318
NOTA
The Holy See has almost all of its funds deposited or invested in the United
States of America. At the present time the Holy See finds great difficulty in
meeting its financial needs, which are connected with its organization and mission
of charity and apostolate in all parts of the world.
The Holy See estimates that its transmissions of funds to foreign countries,
in a period of six months, would amount to $1,200,000. to $2,000,000. part of
which would be assigned to countries under the control of the Axis powers.
For the effecting of such transmissions the Holy See has no other way than
to exchange dollars for Swiss francs. After long discussions with the Swiss Government, they have declared themselves willing to place Swiss currency at the dis-
posal of the Holy See, only if the Treasury Department of the United States will
permit Switzerland to use such dollars received from the Holy See for the pur-
chase of gold, with permission to transfer this gold to Switzerland. In fact the
Swiss Government does not find it suitable to accept dollars into its blocked
account in the United States, nor even into its free account, which in practise
is likewise subject to many restrictions of movement.
If the Treasury Department is disposed to permit such a transaction, the
Government of Berne will give the necessary instructions to the Swiss Minister
in Washington.
As an alternative or limitation on the foregoing plan, the Holy See also
suggests that the Treasury Department consider the possibility of placing at
their disposal European currency owned or freely controlled by the American Govern-
ment. The Holy See would then use such foreign currency for its religious purposes, while making corresponding payment to the Treasury Department in United
-2-
319
States Dollars.
The Holy See moreover will be most grateful for any other plan that the Treasury Department may be able to suggest for the transfer of their funds to Europe.
The consideration of the competent officials of the Treasury Department
will be appreciated.
320
December 13, 1941
1:00 p.m.
Marriner
Eccles:
Good morning, Henry.
HMJr:
Hello, Marriner.
E:
How are you?
HMJr:
E:
HMJr:
I'm all right. How are you?
Well, I'm pretty good, all things considered.
Yeah.
E:
I would like to see you if possible on Monday.
HMJr:
It's perfectly possible.
E:
Well, now there's two matters I wanted to talk
to you about.
HMJr:
Yeah.
E:
They re both of a legislative nature
HMJr:
Yes.
E:
HMJr:
E:
and the Treasury would be directly interested
in both of them.
I see.
If I could have about twenty minutes or a half
hour
HMJr:
E:
HMJr:
E:
Is eleven o'clock a good time?
That's fine.
All the time you want.
Okay.
HMJr:
Just a minute - let me look at my calendar.
E:
Eleven o'clock Monday.
Eleven o'clock.
-2-
321
HMJr:
Yes, sir.
E:
All right. Now, there's another matter. I've
been talking to Dan. We had the committee - the
Open Market Committee - here all day yesterday
HMJr:
Yeah.
to carry out our statutory requirement of
having the fourth meeting of the year.
E:
HMJr:
Yeah.
And, of course, it was a good time to have them
because after the week we've been through and
discussing the whole question of policy.
E:
HMJr:
Yeah.
Now, I have suggested to Dan that the Executive
Committee meet with him and some of the boys that
we've been talking to - George Haas and Morris and
80 forth
E:
HMJr:
Yeah.
E:
.....on Thursday.
HMJr:
Good.
E:
HMJr:
And then if we could meet with you Thursday afternoon, I'll get Allan Sproul down and Bob Rouse if
the market permits
Right.
and Hugh Leach and we'll have the Executive
E:
Committee spend some time - I think it's important
now to take a look at this thing and anticipate
just what the future is for us, a little.
HMJr:
Good.
E:
Don't you agree with that?
HMJr:
Yes, I do.
3E:
HMJr:
322
I think that we've got to take a look now at
this
whole pattern in the light of the changed
situation
Yes.
and so that we'll all have a meeting of
E:
minds and make a stand and know exactly what
we're going to do - and make a stand on that.
Now we ve done that up to date, and I think if
we're
goingit.to do that in the future, we ought
to discuss
E:
Fine.
HMJr:
Well, I was very much pleased with the way things
E:
Well, considering everything, I think that a
went this week.
pretty good job was done.
HMJr:
E:
Well, I was delighted.
I don't know whether it's over with, but at
least we're past the first week.
HMJr:
Do you like Dave?
E:
What is it?
HMJr:
Do you like Dave Morris?
E:
Well, I don't know Dave very well. He doesn't
HMJr:
say much. He's a pretty quiet fellow. He a
nice - personally, he's a very nice fellow to
meet with - I mean, I like him personally.
Yeah. Well, he's a smart fellow, and he's here
to help Bell and me on
E:
HMJr:
Well, he and George were over - and Dan - last
week. They called up one morning and they came
over and we spent - oh, an hour and a half, I guess
just generally discussing things; and I've been in
close touch with Dan every day.
Yeah.
-
323
E:
of course, to me there isn't anybody like Dan.
Maybe it's a question of acquaintanceship. But
I like Morris personally; I mean, I like his
personality and I think he's a straight shooter.
HMJr:
All right, Marriner.
E:
Well, does that sound - that Thursday sound - Dan
was going to talk to you about it, and I told him
I'd do likewise.
HMJr:
E:
HMJr:
Good.
You're going to Chicago, but you'll be back.
That's right.
E:
Fine. All right, then.
HMJr:
Okay.
E:
Good-bye.
HMJr:
Thank you, Marriner.
324
December 13, 1941.
Memorandum for the Secretary's Diary
The Secretary asked Attorney General Biddle, Leo Crowley,
and Ed Foley to take luncheon with him today at 1:00 o'clock
for the purpose of discussing the relationship of the Alien
Property Custodian to Foreign Funds Control.
Leo Crowley came over at the Secretary's request at
11:30 for a preliminary discussion.
At luncheon the Secretary said he would like to see the
Foreign Funds Control Committee consisting of Acheson, Crowley,
and Foley continue the work they had been performing. He
suggested that Foreign Funds Control be continued in the
Treasury under the general supervision of the Policy Committee.
Whenever it became necessary for the Government to take title
to a business then the operation or sale of the business could
be performed by the APC. Mr. Crowley indicated that this would
be entirely satisfactory to him. The Attorney General said he
wanted to explore the matter before he committed himself.
After a full discussion of the present operations of the
Committee and Foreign Funds Control, it was agreed that Foreign
Funds would be left in the Treasury, that Leo Crowley would be
the Attorney General's representative on the Foreign Funds
Policy Committee; that Leo Crowley would attempt to obtain the
services of Ben Cohen as his counsel and advisor; that Crowley,
Foley and Cohen would attempt to work out an Executive Order
defining the jurisdiction and powers of the APC as soon as the
omnibus legislation containing the necessary amendments to
Section 5(b) of the Trading with the Enemy Act was enacted into
law; and that all problems would be resolved by the Committee
and if any insurmountable difficulties were encountered the
matter would again be taken up with the Attorney General and
the Secretary. Under no circumstances, it was agreed, would
the matter get to the point where it was necessary to bother
the President with it.
in 14.
2-
325
The Secretary then asked the Attorney General, as a
personal favor to him, to wi thdraw the Attorney General's
memorandum of December 11 commenting upon our proposed tele-
gram to the Presidents of the Federal Reserve Banks in regard
to certain German and Italian
businesses
observers.
Theinto which the
commented
thatAttorney
it was
a little
Treasury read the memorandum,
proposed to place
General
sharpand
unduly critical, and then tore it up.
The Secretary told the Attorney General we had another
matter to take up with him.
Mr. Foley then pointed out that the letters dated
December 11 which the Attorney General had sent over in
lieu of the proposed general license to authorize transactions
under Section 3(a) of the Trading wi th the Enemy Act when
they are licensed by the Secretary of the Treasury under
Section 5(b) of the Trading with the Enemy Act, were not
a full answer to the problems which have arisen. Mr. Foley
pointed out that many of the banks were hesitating to execute
transactions licensed under Section 5(b) because they feared
that to do so would violate Section 3(a) unless such transactions were also licensed under that section. Mr. Foley added
that there were external as well as internal transactions
involved and the matter was really critical. The Attorney
General then signed the attached General License, which was
carried to the President by Mr. Bernstein. The President
signed at approximately 2:50 p.m.
Mr. Foley promised the Attorney General that he would
work as harmoniously with Leo Crowley as he had been able to
work all along with Dean Acheson. Mr. Foley told the Attorney
General that it had become so difficult to work with Shea
that he had been reluctant in recent times to call the Committee
together. The Attorney General said Mr. Shea had been trying
unsuccessfully to reach Mr. Foley by telephone for over twentyfour hours and suggested that Foley give Shea an "irish ring"
which Mr. Foley promised to do.
S.117h
GENERAL LICENSE UNDER SECTION 3(a)
OF THE
TRADING WITH THE ENEMY ACT
By virtue of and pursuant to the authority
vested in me by sections 3 and 5 of the Trading with
the enemy Act, as amended, and by virtue of all
other authority vested in me, I, FRANKLIN D. ROOSEVELT,
PRESIDENT of the UNITED STATES OF AMERICA, do
prescribe the following:
A general license is hereby granted
licensing any transaction or act prohibited by
section 3(a) of the Trading with the enemy Act,
as amended, provided, however, that such trans-
action or act is authorized by the Secretary of
the Treasury by means of regulations, rulings,
instructions, licenses or otherwise, pursuant
to Executive Order No. 8389, as amended.
THE WHITE HOUSE
finally
December 13, 1941.
Secretary of the Treasury
huncin madh
Attorney General of the United States
327
Memorandum To The President:
Section 3(a) of the Trading with the
Enemy Act is now in effect. This section prohibits
any person, except with license of the President,
to trade with an enemy. Throughout the country
banking and business institutions are refusing to
put through transactions because they may involve
German, Italian or Japanese interests. The Treasury
is attempting to control the situation under the
freezing control Order.
It is necessary, however, that you issue the
attached general license which will have the effect
of licensing all transactions under section 3(a) of
the Trading with the Enemy Act provided that the
transactions are licensed by the Treasury under the
freezing control Order. The general license has
been approved by the Attorney General.
Secretary of the Treasury.
Attachment
BD/JMP/
12/13'41m
328
GENERAL LICENSE UNDER SECTION 3(a)
OF THE
TRADING WITH THE ENEMY ACT
By virtue of and pursuant to the authority vested
in me by sections 3 and 5 of the Trading with the enemy
Act, as amended, and by virtue of all other authority
vested in me, I, FRANKLIN D. ROOSEVELT, PRESIDENT of
the UNITED STATES OF AMERICA, do prescribe the following:
A general license is hereby granted licensing
any transaction or act prohibited by section 3(a)
of the Trading with the enemy Act, as amended,
provided, however, that such transaction or act
is authorized by the Secretary of the Treasury by
means of regulations, rulings, instructions,
licenses or otherwise, pursuant to Executive Order
No. 8389, as amended.
THE WHITE HOUSE
Secretary of the Treasury
JuAttorney General of the United States
B.B
GENERAL LICENSE UNDER SECTION 3(a)
OF THE
TRADING WITH THE ENEMY ACT
By virtue of and pursuant to the authority
vested in me by sections 3 and 5 of the Trading with
the enemy Act, as amended, and by virtue of all
other authority vested in me, I, FRANKLIN D. ROOSEVELT,
PRESIDENT of the UNITED STATES OF AMERICA, do
prescribe the following:
A general license is hereby granted
licensing any transaction or act prohibited by
section 3(a) of the Trading with the enemy Act,
as amended, provided, however, that such trans-
action or act is authorized by the Secretary of
the Treasury by means of regulations, rulings,
instructions, licenses or otherwise, pursuant
to Executive Order No. 8389, as amended.
THE WHITE HOUSE
December 13, 1941.
Secretary of the Treasury
huncin middle
Attorney General of the United States
Message
330
FOREIGN FUNDS CONTROL
COPY
2020120
Salaries and Expenses
Foreign Exchange Control 1942-Allot. 1-b
TO ALL COLLECTORS OF CUSTOMS:
(SEE ATTACHED LIST)
THE PRESIDENT HAS ISSUED THE FOLLOWING GENERAL LICENSE:
QUOTE. A GENERAL LICENSE IS HEREBY GRANTED LICENSING ANY
TRANSACTION OR ACT PROHIBITED BY SECTION 3(a) OF THE TRADING WITH THE
ENEMY ACT, AS AMENDED, PROVIDED, HOWEVER, THAT SUCH TRENSACTION OR ACT
IS AUTHORIZED BY THE SECRETARY OF THE TREASURY BY MEANS OF REGULATIONS,
RULINGS, INSTRUCTIONS, LICENSES OR OTHERWISE, PURSUANT TO EXECUTIVE ORDER
NO. 8389, AS AMENDED. UNQUOTE.
ACCORDINGLY YOU SHALL NO LONGER, BY REASON OF THE PROVISIONS
OF SECTION 3(a) OF THE TRADING WITH THE ENEMY ACT, WITHHOLD THE RELEASE
FROM CUSTOM'S CUSTODY EITHER FOR CONSUMPTION OR EXPORTATION OF ANY
MERCHANDISE IF SUCH RELEASE IS AUTHORIZED BY THE SECRETARY OF THE TREASURY
BY MEANS OF REGULATIONS, RULINGS, INSTRUCTIONS, LICENSES, OR OTHERWISE,
PURSUANT TO EXECUTIVE ORDER NO. 8389, AS AMENDED.
NOTHING HEREIN CONTAINED IN ANY WAY AFFECTS THE PROVISIONS OF
THE TELEGRAM OF DECEMBER 7 IN WHICH YOU WERE INFORMED THAT CERTAIN LICENSES
RELATING TO TRANSACTIONS IN WHICH JAPAN, ETC., HAD AN INTEREST HAD BEEN
REVOKED.
(Initialed) E.H.F., Jr.
Acting Secretary of the Treasury
EFRikh:12/13/41
TREASURY DEPARTMENT
331
INTER-OFFICE COMMUNICATION
DATE
TO
FROM
Secretary Morgenthau
December 13, 1941
E. H. Foley, Jr.
The attached teletype from the Treasury
representative in Los Angeles brings you up to
date on the food poisoning rumors in that area.
8.117h.
Attachment
332
1941 Dec 13 AM 9:20
C
0
P
Y
WO3WASH G1 LA 12-831
E. H. Foley, Jr., Acting Secretary of the Treasury
Room 268, Treasury Dept.
Confidential
Frank Kramer, Acting Administrative Assistant of California
Department of Agriculture, one State chemist who examines
vegetables for insecticide residue, and one State bacteriologist,
conferred with us today. Kramer is concerned with the possibility
that Japanese handling produce may poison it. The chemist, in
charge of inspecting vegetables for excessive spray, has made
careful examinations and reports no abnormal situation. However,
these men indicated that there are many available poisons, includ-
ing poisoning through bacteria, which might be used. At present
no checks against such poisons exist. In view of devious methods
of poisoning the food, the great number of hands through which it
passes, and the delayed action of various kinds of poisons, ade- -
quate check by State Inspectors is felt by their representatives
to be practically impossible. They have discovered no such cases
of poisoning yet.
This problem has been discussed by representatives of the State
Department of Agriculture with the Army and the Navy. We advised
them to present it to the F.B.I. and U.S. Department of Agriculture
-2-
333
although my conversations with representatives of both of these
groups indicate that their Departments are familiar with the
problem. We might add in my conversations with Mr. Davidson of
the Department of Agriculture today he asked me about the existence
of hysteria resulting from fear of poisoning and I repeated to him
what the county agricultural Commissioner told me, namely that the
high price of these products reflected a demand negativing the
existence of such hysteria. I referred Mr. Davidson to the F.B.I.
on this question.
The representatives from the State Department of Agriculture were
not willing to take an official position with respect to the
desirability of cutting off the supply of fresh vegetables furnished
by the Japanese be cause of the potential danger of poisoning. We
stated to them that the General License did not reflect a Treasury
position with respect to this question. They indicated to us they
were merely passing the information on to us for our consideration.
I talked with Mr. Pehle over the phone about this and he advised me
to telegraph directly to you.
(signed) Joseph H. Murphy.
334
DEPARTMENT OF AGRICULTURE
WASHINGTON
December 13,1941
The Honorable,
The Secretary of the Treasury.
Dear Mr. Secretary:
Here is a copy of another telegram which just came
in from the California Agricultural Extension
Director, dealing with the vegetable situation in
California.
11:15AM
I will be calling our other representatives out there
shortly and will give you a personal report at that
time.
Sincerely yours,
Coulk amilton
Carl Hamfiton,
Assistant to the Secretary.
Enclosure.
TELEGRAM
335
BERKELEY CALIF 12 1035A
M L WILSON
DIR EXTENSION AGRI WASHDC
INQUIRIES RECEIVED HERE FROM TREASURY AND AGRICULTURE ON VEGETABLE
SITUATION SEEM TO MISS THE POINT THAT THE PROBLEM IS NOT ESSENTIALLY
CONCERNED WITH VEGETABLE SUPPLY OF LOSANGFLES OR EVEN OF CALIFORNIA BUT
IS SUPPLY FOR UNITEDSTATES AND IS NOT ONLY QUESTION OF IMMEDIATE SUPPLY
OF VEGETABLES BUT THAT OF REGULAR FUTURE SUPPLY FOR TOWNS AND CITIES OF
AMERICA. IT IS WELL KNOWN THAT JAPANESE AND ITALIANS GROW MOST OF AMERICAN VEGETABLES. MANY JAPANESE AND ITALIANS ARE NOT CITIZENS BUT THESE
PEOPLE DO THE WORK AND PRODUCE THE VEGETABLES HERE AND IN THE EAST. NOT
ONLY MUST CERTAIN OF THEIR ASSETS BE RELEASED BUT THEY MUST BE ENCOURAGED
TO GO ON AND PRODUCE. YESTERDAY AFTERNOON CONFERENCE OF OUR MARKET SPECIALIST WITH FEDERAL RESERVE BANK DID NOT SHOW ANY COMPREHENSIVE PLAN TO
ADEQUATELY MEET THE SITUATION. IT APPEARED DIFFICULT TO MAKE BANKS REPRESENTATIVE UNDERSTAND WE WERE NOT INTERESTED IN JAPANESE BUT IN VEGETABLES
LAST EVENING. AT MY REQUEST MISS NYE AND MISS FLORA ROSE DISCUSSED VEGETABLE
SITUATION WITH MRS ROOSEVELT BPO STATED HER INTENTION TO WIRE SECRETARY
MORGENTHAU AT ONCE. I SUGGEST THAT AS CHAIRMAN NUTRITION COMMITTEE YOU
SEE HIM PERSONALL AND EXPLAIN IMPORTANCE OF SITUATION. YOUR WIRE JUST
RECEIVED SAYING SECRETARY OF AGRICULTURES COMMITTEE IS GIVING SITUATION
CONSIDERATION BUT USUAL CHANNELS MAY BE TOO SLOW. ACTION IS NEEDED
NATIONALLY ON THIS PROBLEM
B H CROCHERON
12/13/41
(
1:00
pm 336
from mr. Hamiltow in
Agriculture
In regard to the food situ
tion in California brought
about by freeling funds of
Japanese nationals
Mr. Hamiltow has talked
4 their defense board out
there and this is the report
they make ( Nelew Gahagaw
live cure )
CURRENT SITUATION
Situation in general is
improving rapidly Food
supply is again approaching
337
normal as are prices in
general is not
agriculture
concerned
with
the im mediale
situation
a feels that the
present clearing
situation
hasqueen the
effected by Order ho 11A
and no. 77 issued by
The Federal Reserve
legiculture
that
the
initialfaels
conditive
in the food market may in
part ^ caused by propaganka
to the effect that the Japs
would pris ow the vega-
tables and fruits
3
338
Recommendation for the Future
Restriction and still severe
enough to act as a deterrant
to Program the future food for freedom
Canners don't want to
coulrael with Japs beCause of un certainty
Banks and employee
are shying at extending
Credits
to and
the the
Japs
-they
want to be
Safe
Jehk
these readous have
slowed down normal
trade and steps should
be taken
to clarify
the
situation
335
There is fear that some
District allongy or may
start proseenting John
under California alien
Land Law the the past,
ithas been a custom for
some some gop nationals to
have farms operated in
the have of are) and
Clau who are Citizen
This prastice, although a
subterfuge, has been
permitted They fear
that some over zealous
D.a'scause
may "crack
- dourd"
and
au obstacle
in normal flow of Supplies
5
340
His recommended that
a reestablish ment of
Jo panere contacts such
news paper,
alsotheir
ciations
would and
do
much to allevate Doubts
in the mind of ue jap
formerstion arises as to
whether a caw
sell his Dates to a
citizen land get his
money.
mr Hamiltow will be at
Lone this afternoon of
you wishe to phane him
341
12/13/41
1:00 p.m.
From Mr. Hamilton in Agriculture.
In regard to the food situation in California brought about by
freesing funds of Japanese nationals:
Mr. Hamilton has talked to their defense board out there and this
is the report they make. (Helen Gahagan concurs).
CURRENT SITUATION
1. Situation in general is improving rapidly. Food supply is
again approaching normal as are prices in general.
2. Agriculture is not concerned with the immediate situation.
3. Agriculture feels that the present clearing of the situation
has been effected by Order No. 11-A and No. 77 issued by the Federal
Reserve.
4. Agriculture feels that the initial bad condition in the food
market may in part be caused by propaganda to the effect that the Japs
would poison the vegatables and fruits.
RECOMMENDATION FOR THE FUTURE
1. Restrictions are still severe enough to act as a deterrent
to the future Food for Freedom Program.
2. Canners don't want to contract with Japs because of
uncertainty.
3. Banks and employers are shying at extending credits to the
Jeps - they want to be on the safe side.
4. These reasons have slowed down normal trade and steps should
be taken to clarify the situation.
5. There is fear that some District Attorneys may start prosecuting Japs under California's Alien Land Law. (In the past, it the has
been a custom for some Jap nationals to have farms operated in
name of son and daughter who are citizens). This practice, although
subterfuge, has been permitted.) They fear that some over-zealous
D.A.'s may "crack-down" and cause an obstacle in normal flow of supplies.
a
342
-6. It is recommended that a re-establishment of Japanese
contacts such as their newspapers and associations would do much
to alleviate doubts in the minds of the Jap farmers.
7. Question arises as to whether a Jap can sell his farm
to a citizen and get his money.
DEPARTMENT OF AGRICULTURE
WASHINGTON
December 12, 1941
The Honorable
The Secretary of the Treasury
Dear Mr. Secretary:
This telegram, from the California State Director of
the Extension Service, arrived at our office at approximately the same time as your telephone call
regarding the Los Angeles situation. We have called
the Chairman of our U.S.D.A. Defense Board and asked
him to survey the situation, get in touch with
Joseph Murphy, and get back to us, as rapidly as
possible, a report and recomnendations for action.
We shall notify you just as soon as they arrive.
Sincerely yours,
Carl Hamilton
Enclosure
Assistant to the Secretary
343
c
P
344
POW127 311 GOVT COLLECT
KY HERKELEY CALIF 1223P Dec 11 1941
is L WILSON
DIRECTOR AGRICULTURAL WASHN DC
THE FREEZING OF JAPANESE ASSETS HAS PRODUCED DIFFICULT AND PERHAPS DISASTROUS
SITUATION IN CALIFORNIA VEGETABLE SUPPLY WHERE MOST VEGETABLES ARE GROWN BY
AMERICAN JAPANESE WHO ARE TIED BY FAMILY OR FINANCE WITH JAPANESE NATIONALS.
VEGETABLE DELIVERIES TO LOSANGELES HAVE DROPPED TO ABOUT HALF AND GREAT
FIELD LOSSES OF MUCH NEEDED FOOD ARE LIKELY TO RESULT. WE URGE IMMEDIATE
APPOINTMENT FOR SUCH FARMS OF FEDERAL RECEIVER OR SOME SIMILAR DEVICE BY
FEDERAL RESERVE SYSTEM IN ORDER THAT VEGETABLE PRODUCTION MAY GO FORWARD.
QUICK ACTION IS ESSENTIAL. ON THIS PROBLEM WE HAVE OF COURSE BEEN IN TOUCH
WITH STATE USDA DEFENSE BOARD AND WITH STATE DEFENSE COUNCIL AND ARE RETAINING
INFORMATION TO FEDERAL RESERVE BANK, SANFRANCISCO, BUT IT IS OUR BELIEF
THAT SITUATION WILL PROBABLY REQUIRE ORDER FROM HIGH NATIONAL OFFICIAL TO
GET QUICK ENOUGH ACTION TO SAVE THIS ENORMOUS SUPPLY OF VEGETABLES WHICH
SUPPLIES LARGE SECTION OF UNITED STATES. THE FOLLOWING TELEGRAM FROM OUR
COUNTY AGENT IN IMPERIAL VALLEY IS TYPICAL OF CONDITIONS IN NUMEROUS CALIFORNIA
COUNTIES QUOTE I INITIATED A SURVEY OF OPERATIONS OF JAPANESE FARMERS IN
IMPERIAL VALLEY RELATIVE TO US FARM DEFENSES PROGRAM AND DEVELOPED FOLLOWING
INFORMATION. FIRST TOTAL ABOUT 180 JAPANESE ARE FARMING AT LEAST 15,000
ACRES MOSTLY VEGETABLES SECOND, 99 PERCENT OF JAPANESE AMERICAN FARMERS ARE
CLOSELY TIED IN FARMING OPERATIONS BY FAMILY OR PARTNERSHIP WITH JAPANESE
NATIONAL THAT IT APPEARS UNLIKELY THEY CAN BE FREED FROM FEDERAL RESERVE BANK
ORDER FREEZING ALL JAPANESE ASSETS THIRD, SINCE THE ABOVE CROPS CAN QUICKLY
DETERMINE FROM LACK OF ATTENTION THE FOOD FOR DEFENSE GOALS REQUIRE THE FARMING
OPERATIONS OF THE ABOVE BE QUICKLY TURNED OVER TO A FEDERAL RECEIVER OR OTHER
y
345
APPROPRIATE MEANS BE TAKEN TO HARVEST OR KEEP CROPS GOING ACCORDINGLY
THROUGH USDA. CAN YOU EXPEDITE A SOLUTION TO THE PROBLEM WITH THE US
TREASURY OR OTHER PROPER AGENCIES IN ORDER TO SAVE THESE ESSENTIAL
FOOD STUFFS UNQUOTE
B H CROCHERON
346
OR
Office of the Attorney General
Washington D.C.
.
December 13, 1941.
My dear Mr. Secretary:
I acknowledge with this your letter of
December 12, 1941, enclosing a copy of the
release with respect to the Japanese situation on the West coast.
Sincerely yours,
transcription
Francis Biddle
Attorney General.
The Honorable
The Secretary of the Treasury
"ashington.
MICH
United States Senate
347
COMMITTEE ON RULES
MEMEPEE,CLERK
December 13, 1941 d
The Honorable Henry Morgenthau
The Secretary of the Treasury
My dear Mr. Secretary:
Senator George, on his return from your
office yesterday, told me you would be available
for a meeting of the Joint Committee on Reduction
of Nonessential Federal Expenditures on Tuesday.
Last night, therefore, I sent out notices for a
meeting at 10 o'clock.
Through Mr. Bell, I was told today that
you plan to be away. Of course, I do not want you
to interfere with any engagements you have made,
but this is a most important meeting, and if it is
possible for you to be present, I shall greatly
appreciate it.
I would have communicated with you before
calling the meeting, but, as I have stated, Senator
George told me you could come on Tuesday.
With best wishes, I am
Faithfully yours,
8/16/41
Secretary
(tended
Harry J. Punk
348
December 18, 1941
Norman Thompson
Secretary Morgenthau
I understand that one of Mayor LaGuardia's secre-
taries is loaned and paid for by the Treasury. Please
look into this and explain to me why. Have we loaned
any other people to Mayor LaGuardia or to his organization?
Don't do anything about the above except to find
out the facts and tell me about it in confidence.
349
December 13, 1941.
Secretary Morgenthau
Mr. Thompson
With reference to your nemorandum na to one of Mayor LaGuardia's
secretaries, I understand that Joseph S. Steiner is employed in that
capacity. Steinor, formerly an investigator with the Alcohol Tax
Unit at $2,700 per annum, transferred from the Treasury to the Office
of Civilian Defense on June 15, 1941. He is, therefore, not on a
loan basis, his salary being paid by funds available to Office for
Emergency Management.
Our records do not indicate that "O have any employees on loan
to Mayor LaGuardia or to his organization.
350
December 18, 1941
Norman Thompson
Secretary Morgenthau
Who paid Dr. Klein for his bill for Mrs.
Cochran?
TREASURY DEPARTMENT
351
INTER OFFICE COMMUNICATION
DATE December 13, 1941.
TO
Secretary Morgenthau
FROM
Mr. Thompson
Mr. Foley has been handling the bills in connection with
Mrs. Cochran's illness and he advised me that no bill has been
received from Dr. Klein.
from
352
December 13, 1941
Mr. B. M. Edwards,
Office of the Secretary.
Sir:
Effective today your designation is changed from
Assistant to the Secretary to Consulting Expert, CAF-15,
in the Defense Savings Staff, without change in compensation
or pay roll.
Very truly yours,
(Signed) A. Korganthaw, JF.
Secretary of the Treasury.
lifes
in ML. Thompson
n.m.c.
353
RODEFENSE
BUY
UNITED
FIELD ORGANIZATION News Letter
DEFENSE SAVINGS STAFF
TREASURY DEPARTMENT, WASHINGTON, D. C.
DECEMBER 13, 1941
NUMBER 30
THE MCLARATION 0 F
WAR
THE DECLARATION OF WAR PLACES A NEW AND INCREASED RESPON.
SIBILITY ON DEFENSE SAVINGS COMMITTEES.
YOU AT ONCE SHOULD ADVISE ALL LOCAL COMMITTEES TO REDOUBLE
THEIR ACTIVITIES AND CONDUCT A SALES CAMPAIGN WHICH BY ITS RESPONSE WILL DEMONSTRATE TO OUR ENEMIES THAT AMERICA TO A MAN IS
BEHIND OUR GREATEST NATIONAL TEST.
IT IS SUGGESTED THAT PAY ROLL ALLOTMENT PARTICIPATION BE
INCREASED, THAT EACH LOCALITY PUSH THE BANK DRAFT PLANS, STAMP
BANKS, SCHOOL PROGRAMS, AND OTHER PLANS TO SECURE INCREASED CONSISTENT PURCHASING.
ALSO, LOCAL COMMITTEES SHOULD FORM GROUPS TO SOLICIT LIMIT
PURCHASING OF ALL SERIES OF BONDS FOR 1941. INCREASED CO-OPERATION IN MERCHANDISING OF ALL FINANCIAL GROUPS SHOULD BE ASKED.
OUR COMMITTEES HAVE DONE A SPLENDID TASK IN ORGANIZATION
AND PROMOTION WORK TO DATE. NOW THAT WAP IS ON US, LET EVERY
MAN, WOMAN AND CHILD BE GIVEN THE OPPORTUNITY AND URGED TO PURCHASE BONDS ON A REGULAR PLAN. I KNOW YOU AND YOUR COMMITTEES
WILL PERFORM GREAT SERVICE.
HENRY MORGENTHAU, JR.
(The above message is the text of the telegram sent
on Monday, December 8, to all State Administrators
and Chairmen of State Defense Savings Committees.)
News Letter
News Letter
Speaking of Shooting---
SHOOT
New York City
December 9. 1941.
DEFOGE
BONDS
WORKS!
HERE
TO THE FIELD STAFF:
War financing has become the order of the day for the entire
Defense Savings Staff.
The Secretary's message to all State Chairmen and Administrators, reproduced on the first page of this NEWS LETTER, gives the
order to proceed with all the power at our command.
I
-
-- HERBLOCK, of NEA Service, Inc.
IN THIS ISSUE
SECRETARY MORGENTHAU Telegraphs State Leaders - Page 1
FIELD STAFF Letter - Page 3
FIRST LADY Congratulates Newsboy - Page 4
THE FIRST TWO BILLION - Page 4
A QUOTABLE QUOTE - Page 4
FIGHTER PLANE Campaign Sets Pattern - Page 5
GRAVE of "It Can't Be Done" Recalled in Canton - Pages 6 and 7
Our committees are so constituted that they can step into
this new situation without delay. A thorough marketing job can
be done, and millions of new and regular purchasers can be enlisted in our many marketing plans now in operation. All committees
are familiar with these methods.
Three activities are of special importance:
1. Committees should make an immediate effort to see
that all those who can afford to do so, purchase Series
E and Series F. or G Bonds "to the limit* before January let. 1942. An investment of $53,750 for each
individual and of $50,000 for each separate corporate
body is possible under present regulations.
2. Committees should arrange for expansion of pay roll
allotment plane and all the other known methods of facilitating continuous investment on a systematic basis.
3. Every person not already enrolled on a regular purchase plan should be contacted by our committeemen or
teams of workers and urged to enroll in such a plan at
once.
CREDIT UNIONS Active - Pages 8 and 9
Sincerely yours,
IN THE SCHOOLS - Page 10
TO THE LADIES - Pages 11 and 12
GALE F. JOHNSTON.
Field Director, Defense Savings Staff.
CHRISTMAS BONUSES - Page 13
FIELD ORGANIZATION NEWS - Pages 14 to 18
RADIO PROGRAMS for Coming Week - Page 19
A FIRST PRIZE FLOAT - Page 20
CAPTIVE BALLOON - Page 20
-2-
-3-
News Letter
News Letter
BUFFALO FIGHTER PLANE CAMPAIGN HUGE SUCCESS
FIRST LADY CONGRATULATES NEWSBOY
THE TREMENDOUS SUCCESS of Buffalo's campaign to invest a sufficient
amount in Defense Savings Stamps to purchase two fighter planes was report-
Mrs. Franklin D. Roosevelt congratu.
lates James Cotton, Philadelphia Evening
Bulletin newspaper carrier boy, who as a
volunteer U. S. Defense Agent sold
ed to the nation on the coast-to-coast broadcast of the Treasury Hour,
"Millions For Defense" December 2.
has a Silver
10 weeks.
IN EIGHT BUSINESS DAYS, between November 24, and December 2, Buffalo
Defense earned Savings his Honor Stamps Shield, in 15,000 James Bar,
citizens purchased $249,000 worth of Defense Savings Stamps, as compared
with an October average of about $1200 a day or under $10,000 for an eight
day period - an increase of 2480%
and 19 Gold Bars.
In the past month, over 250,000 newspaper boys throughout the United States
have volunteered to participate in the
Treasury Department's Defense Savings
BOND PURCHASES TOO WENT UP PHENOMENALLY. For the eight day period,
sales of Defense Bonds amounted to $807,000 as compared with $87,000 during
. previous eight day period - an increase of more than 800%
Stamp sales program. Over 600 newspapers,
ing.
A DESCRIPTION of this campaign WAS included in the NEWS LETTER for
November 29. Additional information will be presented in the "Buffalo
Pattern Book" now being prepared for distribution to all state administratore. This book will be of great help to other communities in conducting
1
located in 466 cities in practically every
state in the Union, already are co-operat-
similar campaigns.
THE FIRST TWO BILLION
The first two billion dollars have been raised through the purchase of
Defense Savings Bonds. The following figures give us a base against which to
measure our efforts and results in the months to come.
Series E
$100,581,000
102,517,000
May
June
July
August
September
October
November
Totals
145,274,000
117,603,000
105,241,000
122,884,000
109,475,000
$292,656,000
Series F
Series G
$37,817,000
28,876,000
27,359,000
20,318,000
18,099,000
22,963,000
18,978,000
$211,420,000
183,134,000
169,498,000
127,685,000
108,987,000
124,866,000
$174,410,000
(
Total
$349,818,000
314,527,000
342,132,000
265,606,000
105,035,000
232,327,000
270,713,000
233,487,000
$1,030,625,000
$2,008,611,000
Watch these sales figures soart
Leaders of organized labor who met
and went on record to support the
campaign. Note the special poster
featuring the two fighter planes
which were the objectives of the
A group of the life underwriters
who conducted a systematic telephone canvass of all business firms
in Buffalo throughout the week.
Buffalo campaign.
#
A QUOTABLE QUOTE:
vation. "The
paramount issue confronting the nation today is one of self-preserThe workers have been, are now, and will always be in opposition
to
Hitlerism.
It
must be defeated and destroyed. Democracy can survive in no
other way."
Philip Murray, President,
Congress of Industrial Organizations
(Nov. 19, 1941)
The billboard which charted progress
of the campaign in the public square
as it appeared flood lighted at night.
News Letter
News Letter
TIMES DAYS IN CANTON
TIMKEN DAYS IN CANTON. OHIO BOOST STAMP SALES 5.900%
(Continued)
CANTON. OHIO - a city of more than 100,000 - is the home of the great
Tinken Roller Bearing Company, a vital part of this nation's arsenal, in
which
nearly a third of all Canton workers
are
employed.
A systematic canvass of all large downtown
buildings was made by the Timkenettes
to sell stamps and distribute Defense
Bond literature.
ON FOUR DAYS IN NOVEMBER, Canton proved
that Americans respond to direct appeals to
buy the securities which mean so much to
the successful conclusion of the great
struggle in which we are now engaged. On
these days, eight colorfully uniformed Timken girls, dubbed "Timkenettes", staffed
the stamp booth in Canton's public square
A Mystery Man went through the business
section, passing out dollar bills to
various persons who could show receipts for Defense Stamp purchases
made that day at the booth in the
public square. A tremendous amount of
newspaper publicity grew out of the
advance notices of the "Mystery Man's"
(See NEWS LETTER, November 15) and carried
on a sales promotion program that boosted
The Timkenettes prepare to "go Defense Savings Stamp sales from the prevto town on a Canton Fire Truck. ious daily average of about $250 to a high
scheduled appearance; and, on the
following day. there was more pub-
licity as a result of his gifts
of $15,081.
on a busy downtown street.
Coin boxes and an ample
supply of stamps were
carried by all of the girls
while on duty.
ALL OF THESE THINGS resulted in publicity for the Defense Savings Pro(
"This gun is free. Real guns cost lots of money.'
A Timkenette makes a sale
pictures, quotes from the recipients,
etc. Almost invariably, those receiving the money elected to return to the public square and purchase additional stamps.
HERE
ARE FEW of the things which were done to accomplish this magnificent
result:
With cardboard popguns. people in the downtown section were "held up"
by the Timkenettes and asked to Buy Defense Stamps Now.
II
"Tinken
is gunning
the
works." for new Defense Stamp sales records. Help us shoot
gram in newspapers and on the radio. Practically all sales involved some
explanation of what the stamps were and how their purchase led towards the
purchase of bonds. It is safe to assume that the Tinkenettes, in four days
of strenuous activity, brought the Defense Savings message home to thousands
of Canton citizens for the first time and that their activities will con-
tribute towards large increase in the sales of both bonds and stamps which
is confidently expected during December.
"Pal Joey, a Tinken workman in effigy, "climbed the flag-pole* in the
public square, moving up a few notches each hour as sales mounted.
"Help me touch the flag before sunset" was his
IN CANTON'S PUBLIC SQUARE, unnoticed for many years by pedestrian
appeal. The Booth in Canton's public square,
passersby, there is a plate, imbedded in concrete, which reads: "Here lies
It Can't Be Done. The plate commemorates the successful termination of
The Victory Loan drive World War I.
which was the focal point of all the activity
outlined here is shown at the right. Note
"Pal Joey, on the flag-pole.
This grave of *It Can't Be Done, was shined and polished last month. both literally and figuratively.
A large percentage dial recorded progress of the
sales effort towards the day's goal.
A "courier service" nade stamps available to anyone in town who telephoned a request to
headquarters. To prevent this service from
Robert W. Timken
and Charles Mob-
being swamped by requests it was necessary
to establish $18.75 as the minimum amount of
stamps which could be delivered.
berly, a Tinken
employee, at the
Stamp Booth. Mr.
In the Tinken plants a similar courier service
made stamps available to the workmen on the
job.
e
Three Tinkenettes
report to Roy D.
Moore, State Chairman of Ohio Defense
Savings Committee
Tinken and Mr.
Mobberly were
and publisher of
the Canton Reposi-
schoolmates.
tory.
News Letter
News Letter
THESE SLIDES TELL OUR STORY
CREDIT UNIONS ACTIVE IN BEHALF OF DEFENSE SAVINGS
the
Defense Savings Staff. With a large majority of post offices, banks
and savings and loan associations already qualified issuing agents for
Series E Bonds, the steady increase in the number of credit unions which have
so qualified deserves attention.
ADEQUATE
WAR DOMINATES
CREDIT
UNIONS
MAKING DEFENSE BONDS CONVENIENTLY AVAILABLE is a primary objective of
DEFENSE
THE WORLD TODAY
WILL COST
DEFENSE
Billions
CREDIT UNIONS are co-operatively owned and operated small loan and thrift
organizations, composed usually of the employees of a single business or fac-
tory. There are now nearly 10,000 of these organizations operating under
either state or Federal charters. They have an estimated 3,000,000 members
and total assets of about $250,000,000.
WE WILL PAY DEFENSE &
BUYING IMPENSE BONDS
. TAXATION
WHAT WILL
PROVIDE
THE SALE OF
FUNDS in
DEFENSE
DEFENSE BONDS
ACCOMPLISH
BOTH STATE AND FEDERALLY CHARTERED CREDIT UNIONS may qualify as issuing
agents for Series E Bonds by making proper application to the Federal Reserve
Bank of the districts in which they are located. By the end of November, about
800 credit unions had so qualified. At credit union meetings now being held
throughout the country, lantern slides pictured on the next page are being
shown and the technique of qualifying and issuing Bonds explained. Both the
Credit Union Section of FCA (the agency which supervises Federally chartered
credit unions) and the Credit Union National Association, to which both statechartered and Federal credit unions belong, are urging all credit unions to
qualify as issuing agents and to educate their members in the principles of
Defense Savings. (Note: All field representatives of the Federal Credit
Union Section have a set of the slides pictured on the next page.)
Permit were person to
SHARE in
DEFENSE
RELEASES
MATERIAL
PREVENTS
FOR
INFLATION
DEFENSE
ACTIVE SALESMANSHIP in behalf of Defense Savings is being carried on by
many credit unions, according to the Credit Union National Association. The
123 credit unions replying to a recent questionnaire distributed by this association reported the following, among other, activities in behalf of Defense
Savings: display of posters; talks of credit union of ficers with individual
CONSERVES CONSUMER
PURCHASING POWER
POST-WAR ADJUSTMENT
members; articles on Defense Savings in credit union bulletins; addresses at
regular or special membership meetings; distribution of pledge cards; inclusion
of advertising slips and Defense Bond folders in pass books.
CREDIT UNIONS REACH
HUNDREDS OF
CREDIT UNIONS
HAVE ENLISTED
8 MILLION CONSUMERS
for
DEFENSE
THAT THESE ACTIVITIES SELL BONDS is evidenced by the fact that the 123
credit unions, more than half of which qualified as issuing agents after
August 1, had sold $612,000 in bonds to their 96,000 members by the end of
October. The credit unions had also invested more than $578,000 of surplus
funds in Series F and G Bonds.
LETS BE
WORTHY
ENLIST & The
OF AMERICA
DEFENSE
of our
OUTSTANDING JOBS of Defense Bond promotion are reportedly being done by
these, among other credit unions: "Groton Shipbuilders," New London, Connecticut (See NEWS LETTER, August 2); "Esso Marketers, in Bayonne and Newark;
"Homestead Employees," in Pittsburgh; "Braniff Airways, in Fort Worth; and
"Studebaker Employees," in South Bend.
EXPERIENCE OF THESE CREDIT UNIONS appears to indicate that they provide
a convenient mechanism by which management and employees can co-operate in
conducting an intensive, purposeful and continuing campaign.
-8-
HERITAGE
CREDIT UNION
These are the slides which have been used to present the message of Defense
Savings at Regional, State and local meetings of credit union officers and
members throughout the country.
News Letter
News Letter
IN THE SCHOOLS
TO THE LADIES
MADAME CHAIRMAN! the guide for women's clubs' Defense Savings Pro-
grams, has just been printed in a handy 3-1/2 x 7-3/4 inch booklet, which
has the attractive cover design illustrated here and is printed in gray
green ink. Copies of the booklet, which contain some revisions of the
original mimeographed text included in the Women's Kit, are being sent to
all State Administrators this week,
Four Program Aid booklets, to be included in
new kit with MADAME CHAIRMAN! are now being
a
printed. These Aids, which will be mailed as soon
as they come off the Government printing presses,
madame
include:
Program Aid 1 - This is a revised speech
for the presidents of women's clubs, lodges
and other organizations which are launching
Defense Savings Programs of their own.
This Oklahoma Rural Mail Carrier is one of
many who are making it easy for children on
their routes to buy Defense Savings Stamps.
After telling then about the Program, the
carriers personally deliver the Stamps to
the schools each week. Meantime, children
are studying Defense Savings in mathematics
and social studies classes.
Program Aid 2 - This is a twelve minute
After learning about Defense Savings at school,
high school students in
suggested speech for the Chairmen of Defense
Savings Committees of women's clubs, lodges
and other organizations.
Winchester, Mass. completed
a novel assignment--each
told four neighbors about
Program Aid 3 - A set of discussion questions and answers for use at club meetings.
Stamps and Bonds.
Program Aid 4 - Rapid Fire Quizzes on
Some Pussling Problems, rewritten in concise
language for the use of women's organizations.
The Quizzes are divided into seven groups of
about ten questions each, and it is suggested
that one group of questions be used at the
beginning or end of meetings of clubs which
FOR DEFENSE
have a Defense Savings Program.
A study pamphlet especially designed for women's organizations particularly interested in political science and economics is now undergoing
a final revision and probably will be out in printed form sometime in
January.
BUY
The Defense Savings Program
stimulates children to earn
their own money. This 11year old Atlanta girl makes
tiny dolls, then sells them
to schoolmates for money to
buy Stamps.
Cover design and
Student-managed Stamp Booths are instructivein bookkeeping, salesmanship and public rela-
illustration from
the new printed
tions--s. well as valuable aids to National
Defense. This hall booth at Smiley Junior
High School, Denver, is supervised by two
boys and operated in turn by pupile from
different grades.
edition of MADAME
CHAIRMAN!
11
10
News Letter
TO THE LADIES
News Letter
CHRISTMAS BONUSES IN DEFENSE SECURITIES
A daily boxed feature in the Minneapolis, Minnesota STAR JOURNAL
THRIFT
Buys
Defense
NOW MORE THAN EVER there is point to Secretary Morgenthau's suggestion
that customary Christmas bonuses be paid in Defense Bonds and Stamps and
from many parts of the country come reports that the suggestion has been
accepted. Business firms of all kinds, big and small, are taking up this
patriotic and practical way of rewarding their employees. In some cases
where employers have seen fit to make bonus payments in cash, they have
urged that a portion of the money be invested in Defense securities: and
by their response to this suggestion, employees have shown that they approve the idea.
HERE ARE A TEM early reports of well-known companies which are extend-
Bond,
ing "Greetings of the Season to their employees with a "Share in America":
National Cash Register Company. Approximately 9,000 employees in
Dayton, Ohio and throughout the country are to receive more
than $200,000 in Defense Bonds as their Christmas bonus.
Springs Cotton Mill Company. This company, with plants at Lancaster
and three other points in South Carolina, has purchased $135,000
in Defense Stamps to be distributed as a Christmas bonus to its
11,000 employees. The purchase included 400,000 - 25 stamps
and 35,000 - $1 stamps. Faced with the task of placing all the
stamps in the albums, the company called on State Administrator
V. P. Bowers and his staff of willing volunteers for assistance.
Captain Elliott Springs, owner of the mills is a renowned aviator
of World War I. At the beginning of the Defense Program he relinquished executive management of the mills and took up active
duties with the Army Air Corps for the duration.
Ash Collector and Wife
Buy Stamps for Defense
By Mrs. King 4125
Even a Three-Year-OldCan
Save Pennies for Defense
Wife of Former Mayor of
Douglas Aircraft Company. A special "defense dividend" of more than
$1,000,000 will be paid soon to the 35,000 workers in the Douglas
plants in California and Oklahoma, The bonus will be accompanied
by a strong recommendation from President Donald W. Douglas that
the money be converted into Defense Bonds.
general Electric Company. This year the annual bonus to employees will
be paid in Defense Bonds instead of bonds of the Employees Securities Corporation, President C. E. Wilson has announced.
Narvik, Norway, Buys Bond
SOME OTHER BONUSES IN DEFENSE BONDS AND STAMPS
Hudson Silk Hosiery Company, Charlotte, North Carolina - $36,000.
Riegel Paper Corporation of New Jersey - $95,000 to 1,495 employees.
Hyman Gondelman, Boston merchant - $5 to $1000 to each of 127 employees.
Service Plumbing Company, Fort Worth, Texas - $3,600.
Schuykill Valley Lines, Inc., Norristown, Pa. $6,550 to 70 employees.
A PUBLICITY IDEA OF THE WOMEN'S DIVISION OF THE MINNEAPOLIS
Mengel Company, New York - $100,000 to 4,000 employees.
Mohawk Pontiac Company, Schenectady, New York - $6,000 to 18 employees.
DEFENSE SAVINGS COMMITTEE
12 -
13
News Letter
News Letter
FIELD ORGANIZATION NEWS
has
ARKANSAS. The state's largest employer, the Crossett Lumber Company
installed an allotment plan for its more than 2,000 workers, State Ad-
FIELD ORGANIZATION
ILLINOIS (Continued)
ministrator Roy G. Paschal has announced.
CONNECTICUT. Purchase of a $1000 Defense Bond by the Hartford Team-
Union, Local 559, (AFL) is recorded in the picture at the left.
In this picture R. B. Nevell, president
of the Hartford National Bank & Trust
Company and state chairman of the
Connecticut Defense Savings Committee is
shown seated at his desk as Herbert
Miller, secretary-treasurer of the Union,
signs the application for the Bond. Standing, left to right, are Deputy Administrator Philip Hewes: Frank Bansola. Union
representative; Oliver B. Ellsworth, chair-
man of the Hartford Defense Savings Committee; and Nicholas Yannone: and Joseph M.
issued the following statement:
Baker, union representatives. As the purchase was made, officials of the union
"The American Federation of Labor is 100% back of the Defense Savings Program. Ve figure that everybody is in
the same boat as far as defense and rising prices go. The
more money that goes into these Bonds, the more there is
for defense and the less there is left to help drive prices
up. Our unions are buying bonds for their own treasuries.
Our members are buying bonds for themselves and their fami-
lies. If there is a pay roll allotment plan where they are
working, our members are signing up."
DELAWARE. All of the 46 banks in this state have now qualified as
Plans for a systematic canvasa of all firms employing 500 or more in
the Chicago area, to present full information about the allotment plan,
have been completed and this important project is now well under way. The
work is being done by 328 life underwriters working under a committee headed by George Huth of the Provident Mutual Life Insurance Company and Edvard
R. Seese of the Metropolitan Life Insurance Company. Approximately 500 concorns employing a total of 1,166,000 are to be asked to install the plan.
The Curtien Candy Company of Chicago
is conducting among their salesmen a contest in which Defense Bonds are to be
awarded as prises.
The Sawyer Biscuit Company of Chicago
has a Rhymater Program over radio station
WGN in which eight $25 Defense Bonds are
awarded as prizes each week.
The L. Fish Furniture Company and
Triangle Restaurants are among the concarns in Chicago which have recently in-
stalled allotment plans. In the picture
at the right, La A. Toffanetti, president
of Triangle Restaurants, and five waitresses receive congratulations from
Deputy Administrator Gallaher for their participation in the Defense Savings
Program.
IOWA. The Iowa Bankers Association now has a Defense Savings Bond
Committee of 11 members, headed by G. H. Ayers of the Sibley State Bank
The committee was appointed by the president of the Association, A.
Donhove, who is also vice-president of the Central National Bank and Trust
Company of Des Moines,
issuing agents for Series E Bonds.
KENTUCKY. To familiarise Kentuckians with the benefits of investing
in Defense Savings securities, the Kentucky Bankers Association announced
IDAHO. Idaho, with 50 banks, has become the seventh state in the
nation, and the second in the Pacific Northwest, in which all banks have
qualified as issuing agents for Series E Bonds.
school students would be "Your American Duty--To Buy Defense Bonds.
ILLINOIS. Members of the Amalganated Clothing Workers Union in Chicago
are reported to have invested more than $125,000 in Defense Savings Securities through the so-called "Rochester Plan," a plan whereby union officers
or leaders act as group agents. Deputy State Administrator John G. Gallaher
addressed a group of Amalgamated officers recently.
J.P. Seeburg Corporation. manufacturer of the automatic phonograph
specially decorated to boost "Any Bonds Today?" and other patriotic songs,
continues its effective co-operation with the State Headquarters office
according to State Administrator Norman B. Collins.
14
that the subject of its fourth annual public speaking contest for high
"We believe this competition, with its wide participation,
will go far towards acquainting Kentuckiana with the
importance of buying Defense Bonds," said William F. Miller.
president of the Kentucky Bankers Association.
MASSACHUSETTS. Feature of a recent banquet of the Milk Wagon Drivers,
Local No. 380, in Boston, was the delivery of a $10,000 Defense Bond purchased by the union. This gathering of approximately 1,000 union members
and guests was addressed by Harold G. Jackson. chairman of the Defense Sayings Staff's State Speakers' Bureau.
State Administrator Daniel J. Doherty reports that 29 large companies
(500 or more employees) have installed allotment plans.
15
News Letter
FIELD ORGANIZATION NEWS
MASSACHUSETTS (Continued)
News Letter
FIELD ORGANIZATION
MINNESOTA (Continued)
A revolving fund for school stamp
banks in New Bedford has been provided
by a $1000 contribution of Patrick
Sweeney, president of the Continental
Wood Screw Company. A noteworthy innovation has also been made here by
Humphrey and Covill. insurance agents,
who have agreed to insure this revolying fund against theft as their contribution to the success of the Savings
Program in the schools.
In the picture at the left, Manager
William McKeogh of the Gardner Electric Company of Gardner, Massachusetts
receives allotment authorization cards from a few of the many employees of
the company who are now saving for Defense Bonds.
The Sons of Italy of Masnachusetts have purchased another $30,000 in
Defense Bonds. This organization had previously invested $20,000 in these
securities.
MICHIGAN. A number of one-minute news
reel shote have been taken in various Michigan cities of persons in various walks of
BUY
life, telling why they are buying Defense
Bonds and Stamps. The pictures will be distributed throughout the State.
The Retail Merchants Association of St.
Joseph will award $50 in Defense Stamps in its annual Christmas home decorating contest.
Two foreign language newspapers in Detroit publish a weekly column on
Defense Savings, written by Peter F. Saluk, Deputy Collector of Internal
Revenue. Mr. Szluk has spoken several times on the radio, explaining the
program to Hungarian-American audiences in Michigan and Ohio.
The Slav-American Defense Savings Committee of Michigan was organised
December 7 at a meeting of the Michigan Committee of the Slav-American
Congress held in Masonic Temple, Detroit, Michigan. United States Attorney General Francis Biddle was the principal speaker of the occasion. This
was an occasion similar to the one at which Michigan's Italian-American Defense Savings Committee WAS organized. (See NEWS LETTER, December 6.) How-
ever there was a difference. While the dinner was in progress, the first
electrifying news of the attack on Pearl Harbor was received.
MINNESOTA. In Fergus Falls (pop. 10,000), 72 places of business now
have "Bond-A-Month* Clubs. Through the efforts of Chairman Cyrus Field, the
city is filled with placards proclaiming, "We Belong 100 Per Cent - Defense
Bonds or Stamp Club."
Duluth and St. Paul ran a close race for honors as the first city in
Minnesota to establish a pay roll allotment plan for city employees.
In St. Paul, Mayor McDonough has announced in a letter to all employees that
the City and County Employees Credit Union will handle bond purchases on the
allotment
plan. In Duluth, the City Council formally authorized pay roll
allotments.
Many billboards featuring the Defense Savings Program have been put up
throughout the state. The Northern States Power Company has had "bulls eyes"
featuring Defense Savings on 300 of its 24 sheet panels in 129 cities and
towns in Minnesota, Wisconsin and the Dakotas during the past three months,
The Northwestern National Bank of Minneapolis has placed Defense Bond messages on 35 large boards.
MISSISSIPPI. Deputy Administrator Orrin Swayse reports that the members
of the Women's Division of the Hinda County Committee, after more than six
months of active service, are more enthusiastic workers for Defense Savings
than ever. Members of this Division are responsible for staffing two department store bond and stand booths.
"These girls took this job for the duration, Mr. Swayze
wrote on November 28, ten days before hostilities began,
"and it would do your heart good to see how high their
loyalty is now-mmch higher than when they began, and
they are ready and willing to keep on until the boys are
mustered out.'
The important job of distributing Defense Savings display material in
Jackson has been entrusted to a selected group of 35 Boy Scouts. under the
direction of Scout Executive Harry Maxfield. The boys, four of whom are
shown at the right, not only make
the original distribution of such
material, but are responsible for
its "upkeep," replacing posters
whenever they become dirty or frayed. The boys are on the job whenever a new display piece becomes
available and are able to do a
thorough and efficient job of distribution as each boy has been en-
trusted with a particular district
of the city and knows exactly where
posters and signs of various sizes
should be placed.
NEW YORK. George L. Harrison, president of the New York Life Insurance
Company. has accepted the chairmanship of the finance group of the Greater
New York Defense Savings Committee, Lewis W. Douglas. general chairman of
the New York City Committee has announced.
16
17
News Letter
News Letter
FIELD ORGANIZATION NEW:
ON THE AIR
NEW YORK (Continued)
The first union-sponsored Defense Bond poster contest was recently conducted in New York City by the art class of Local 22. International Ledies
Garment Workers Union. At the left Miss Anna Perez receives the first prize,
Defense Stamps, and congratulations from
Mrs. Lytle Hull, vice-chairman and director
of women's activities of the New York State
These three Treasury Programs continue their great contribution to
national morale, economic well-being, future security and Victory
Monday, December 15
Committee's Women's Division has been the
training of speakers who are addressing
women workers in industry on the allotment
Dr. Frank Black's orchestra and chorus
and Walter Cassel. radio and concert singer.
Tuesday, December 16
entertainers of stage, screen,
and radio.
Headquarters.
Genesee Valley Trust Company employees have subscribed 100% to the
allotment plan, according to a report by Raymond N. Ball and Marion Folson.
co-chairmen of the Rochester and Monroe County Committee. The reports
stated that 16 industries in the Rochester area have adopted the allotment
plan, including Eastman Kodak Company, Rochester Telephone Company. BauschLomb Company. and Stromberg-Carlson Company.
OREGON. Employees of the Peerless Pattern Works in Portland are par-
ticipating 100% in the allotment plan. In
the picture at the right, Ted Miller (with
hat), chairman of the pay roll allotment
division of the Multnomah County Committee,
congratulates C. H. Pape, manager of the
company. The poster "United We Stand"
(distributed by the Division of Information, OEM) has added significance now.
WASHINGTON. In Bremerton, Buel
Gossett has formed a "Bond-A-Month" Club
and is doing an exceptional job of promot-
ing it. He carries with him a supply of
the *Buy-Me-A-Bond" application forms of the Bremerton Branch of the
National Bank of Commerce, and when he finishes his "sales talk" he is ready
to "close the deal." Here's an idea worthy of wider application.
18
Thursday, December 18
AMERICA PREFERRED
9:00-10:00 PM (EST)
Mutual Network
Alfred Wallenstein's Orchestra: Deems Taylor Commentator.
GUEST STAR: Joseph Sxiggeti. violinist
.
Bureau, is serving full time as a labor consultant on the staff of State
8:00-9:00 PM (EST)
THE TREASURY HOUR: Variety program with leading
chosen speakers are being conducted under
the direction of the division's executive,
"MILLIONS FOR DEFENSE"
NBC Blue Network
plan. Special classes for these carefully
Mrs. Marion M. Miller, and Rose Schneiderman, Secretary of the New York State Labor
Department and a member of the State Committee, is arranging with employers
and union representatives for these speakers to address workers in plants
and factories in order to reach the largest possible audiences.
Arthur T. McManus, formerly publicity director of both the New York
State Federation of Labor and the American Federation of Labor Publicity
9:30-10:00 PM (EST)
NBC Blue Network
GUEST STARS: Helen Jepson. Metropolitan Opera Star,
Defense Savings Committee.
An important activity of the State
AMERICA WE SING"
PRESS AND RADIO MOVE SWIFTLY TO BRING NEW APPEAL TO "BUY BONDS NOW"
Immediately following the outbreak of var, all newspapers, through
their wire services, and all radio stations, directly, received messages
from the Treasury Department, asking their co-operation in placing before
the American people the imperative necessity of increasing investment in
Defense Bonds and Stamps.
Newspapers were given a suggested announcement
which undoubtedly all members of the Field Staff
have seen in their own daily papers. Radio stations
received several different announcements on Monday
by wire and telephone and other announcements later
LIBERTY
in the week.
By their full and prompt co-operation, newspapers and radio networks, stations and sponsors,
have demonstrated that they know the importance of
the Savings Program and are prepared to render all
possible assistance to the Defense Savings Staff in
placing its message before the public.
The sign shown at the right is at a busy intersection in downtown Boston. Since early fall it has
helped prepare Bostonians for the days and months
which lie ahead.
19
WCOP
News Letter
THE FIRST PRIZE FLOAT.
In the National Defense
celebration held recently in the Frankford Sec-
tion of Philadelphia,
Pennsylvania.
ON A VIRGINIA HILLSIDE.
V
BONDS
EM
YING
BUY
DEFENSE
BUY DEFENSE
BONDS NOW
A CAPTIVE BALLOON.
Huge letters clearly legible at a
distance of more than a mile spell
out the slogan "Buy Defense Bonds
Now."
IN A NEIGHBORHOOD STORE.
Is the unusual Defense Bond Ad of
the Towner Grove Bank & Trust Company
of St. Louis, Missouri.
In Mankato, Minnesota a customer takes her change in
Defense Stamps.
PHOTOGRAPHS OF UNCLE SAM'S ARMORED MIGHT.
SAVE
Make up the timely
window display of
SAVE
the Citizen's Sav-
SAVE
ings Bank at Lexington and 51st
Streets in Midtown
Manhattan, New York
City.
20 -
354
b
OFFICE OF FACTS AND FIGURES
WASHINGTON
THE DIRECTOR
December 14, 1941
Dear Henry:
Thank you very much for telling me
about the intensification of your defense
bond program following the outbreak of war.
The information you give would be extremely
interesting to my colleagues of OFF, and I am
grateful to you for taking the time to keep
us informed.
With best regards,
Faithfully yours,
and
Archibald MacLeish
The Honorable
Henry Morgenthau
Secretary of the Treasury
Washington, D. C.
355
DEC 13 1941
Dear John:
with further reference to your letter of
November 21, 1941 about payroll deductions for the
purchase of Defense Savings Bonds and my telegram
of November 26 to you on this subject, I am glad to
be able to tell you that Secretary Perkins has just
issued an amendment of the existing regulations under the Copeland Kick-back Act and the Davis-Bacon
Act. This amendment specifically authorizes voluntary payroll deductions for the purchase of
Defense Savings Bonds and Stamps, as well as our
Tax Savings Notes, in situations where the Copeland
Kick-back Act and Davis-Bacon Act are applicable.
The matter had been held up for some time because
the Department of Labor is preparing & comprehensive
revision of its regulations on this subject, but at
our urgent request, Secretary Perkins was good enough
to issue an interim regulation covering our problem.
This became effective on December 9 and is printed
356
-2on page 6329 of the Federal Register of December 10,
which I enclose.
I am glad that Anna and you were able to get a
short vacation before the war began. There won't
be much opportunity for vacations from now on.
Elinor joins me in sending you both our love.
Sincerely,
(Signed) Henry
Mr. John Boettiger,
Publisher, Seattle Post-Intelligencer,
Seattle, Washington.
SJS:mfw
12/10/41
File a Thompson
n.m.
DEPARTMENT OF LABOR
OFFICE OF THE SECRETARY
WASHINGTON
December 1
1941.
Dear Henry:
Thank you for your note of November 25, 1941,
enclosing a copy of a letter from John Boettiger of
November 21, 1941 with reference to payroll deductions
for Defense Bonds.
On November 25, 1941 the Solicitor of this
Department sent a proposed revision of the regulations
under the Copeland and Davis-Bacon Acts to some sixtytwo persons in the Government service who are concerned
with these regulations, including Messrs. Cairns and
O'Malley of the Treasury Department. We will hear their
views on December 2, 1941 and expect to promulgate the
revised regulations very shortly afterward.
The proposed revision of the regulations
permits deductions for the purchase of Defense Stamps
and Bonds where voluntarily consented to by the employees.
This revision is that which I explained in my letter of
October 14, 1941.
Sincerely,
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
LLS
TREASURY DEPARTMENT
358
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
December 13, 1941
MEMORANDUL TO THE SECRETARY
The detailed specifications are being received on
the steel requirements for the first quarter of 1942.
Orders are being placed as pa idly as specifications are received. As of today 496,000 tons have
been placed against the total requirements of 772,000
tons. Commitments have not been reported against these
orders for the reason that the price has not been definitely determined.
Director of Procurement
Cli Spark on E. lack
Attachment
ROD DEFENSE
BUY
UNITED
STATES
SWINGS
BONDS
359
OPERATING REPORT - LEND-LEASE PURCHASES
WEEK ENDED DECEMBER 13, 1941
$515,975,712.00
TOTAL ALLOCATIONS
LESS:
REVOLVING FUNDS
FUNDS AWAITING
$135,330,609.00
CLEARANCE BY O.P.M. 2,961,130.59
NET ALLOCATIONS
#REQUISITIONS APPROVED FOR
138,291,739.59
$377,683,972.41
$346,323,771.23
PURCHASE
PURCHASES PREVIOUSLY REPORTED
PURCHASES THIS WEEK
TOTAL PURCHASES
REQUISITIONS IN PROCESS INCLUDING THOSE AWAITING
SPECIFICATIONS
$274,387,308.18
12,174,113.81
286,561,421.99
$ 59,762,349.24
*THE DIFFERENCE BETWEEN NET ALLOCATIONS AND REQUISITIONS APPROVED
FOR PURCHASE REPRESENTS ALLOCATIONS IN EXCESS OF COMMITMENTS, REQUI-
SITIONS TRANSFERRED TO OTHER AGENCIES, AND CANCELLED REQUISITIONS.
360
DEC 13 1941
Dear Mr. Home:
I have received your letter of November 24,
referring to the question of the United States
purchasing in Cannda completed defense articles
for lend-leasing to the United Kingdom.
tion
Deedly was meeting
net Administrapartment
in
discuss Hr. undoubtOn December 1, officiale of this Treasury
that
Carsorder trans-
well
with Canada's informed and the to this with ascertain of officials Treasury Munitions problem. you, Mr. dollar Carswell should it of the exchange the and AB importance explore agreed Supely Lend-Lease of Carswell prospects, the with at of Canadian order that the Mr. in to
actions in question to Canada's dollar position.
lie hope shortly to be ready to discuss the problen with you, with vr. Carswell, or with anyone
else whom you wish to name.
Very sincerely yours,
(Signed) R. Borgentham. 326
Secretary of the Treasury.
Mr. C. D. Howe,
Ministar of Munitions and Supply
for Canada,
1205 - 15th Street, N. E.
Washington, D. C.
HDW:EH:bvl
12-10-41
By
Photocoper
Original
Messenger
whate
prown
10:30
n.m.c.
361
OFFICE OF THE
DIRECTOR GENERAL
WASHINGTON OFFICE
DEPARTMENT OF MUNITIONS AND SUPPLY
CANADA
1205 - 15th St. N. W.,
Washington, D. C.,
November 24th, 1941.
Personal.
Mr. Henry Morgenthau,
Secretary of the Treasury,
Washington, D. C.
Dear Mr. Morgenthau:
At our very pleasant luncheon engagement
of this noon, I mentioned to you a letter addressed to our
Mr. J. B. Carswell from Mr. Philip Young, copy of which
is enclosed herewith.
Mr. Young's letter states that it is
the policy of your Administration not to use Lend-Lease
funds to make purchases in one part of the British Empire
for completed defense articles destined for use in another
part of that Empire.
You are very familiar with the Hyde-Park
Agreement, in fact I believe you had a hand in drafting the
Agreement. I think you will agree with me that Mr. Young's
statement of Administration policy does not conform to
either the letter or the spirit of the Agreement. My
opinion in this regard is witnessed by the fact that a
number of transactions have already been completed, con-
trary to Mr. Young's interpretation of Administration policy.
Unless Mr. Young's view can be changed,
the usefulness of the Hyde-Park Agreement will be largely
at an end. I will greatly appreciate anything that Ityou
would
may be willing to do in remedying the situation.
362
Washington, D. C., November 24th, 1941.
Mr. Henry Morgenthau,
-2 -
seem most desirable that Mr. Young's letter be either with-
drawn or corrected.
Yours sincerely,
led Howe
C. D. Howe,
Minister of Munitions and Supply
CDH*B
363
OFFICE OF LEND-LEASE ADMINISTRATION
FIVE-FIFTEEN 22nd STREET N.W.
WASHINGTON, D.C.
NOVEMBER 21st, 1941.
Dear Mr. Carswell:
On November 6, 1941, you inquired as to
the status of Requisition No. 5828 for Anson Training planes
proposed to be built in Canada.
I have explained to you the reasons why
this requisition cannot be approved and this will confirm
that it is the policy of this Administration not to use
Lend-Lease funds to make purchases in one part of the British
Empire of complete defense articles destined for use in
another part of that Empire.
Sincerely yours,
(Signed) Philip Young,
Assistant Executive Officer
Mr. J. B. Carswell
Director General
Department of Munitions and
Supply
1205 - 15th St., N.W.,
Washington, D. C.
Meldeard R.Stettinius.junior
12-13-41
THIRD REPORT TO CONGRESS
ON LEND-LEASE OPERATIONS
Under Act of March 11, 1941
364
5000000000000000000000000000000000000000000000000000
THIRD REPORT TO CONGRESS
ON LEND-LEASE OPERATIONS
Under Act of March 11, 1941
CONTENTS
Chapter
Page
President's Letter of Transmittal
5
1. Lend-Lease Progress
7
2. Lend-Lease Countries
16
3. The Fight on Land and in the Air
18
4. The Fight on the Sea
21
5. The Food Front
24
6. How the Lend-Lease Program Works
27
7. Lend-Lease Agreements
32
Appendix
I. Lend-Lease Act
38
II. First Lend-Lease Appropriation Act
III. Second Lend-Lease Appropriation Act
IV. Executive Order Establishing Office of Lend-Lease
Administration
V. British White Paper of September 10, 1941
VI. Outline Map of the World
3
41
42
44
45
48
PRESIDENT'S LETTER OF TRANSMITTAL
THE PRESIDENT OF THE SENATE,
THE SPEAKEROF THE HOUSE OF REPRESENTATIVES:
I am transmitting herewith to the Congress the third report of the
aid which our Government has rendered under the Lend-Lease Act to
the nations opposing the Axis.
We are now engaged in a total war against a group of Axis powers
led by Nazi Germany and bent on world domination. Their strategy
is world-wide. Ours also must be world-wide.
Underlying the Lend-Lease Act was the conception that those who
were fighting the aggression of the Axis powers were fighting our potential enemies. The Axis powers now have openly declared themselves
to be our enemies. We must not only help others to defeat them. We
must fight them, with all the forces we have and can get.
The world-wide strategy of the Axis powers must be met with equal
strategy on the part of all the nations who are joined together in resist-
ing their aggression. Accordingly we must use the weapons from the
arsenal of the democracies where they can be employed most effectively.
And that means we must let Britain, Russia, China, and other nations,
including those of this Hemisphere, use the weapons from that arsenal
so that they can put them to most effective use. Too much is at stake
in this greatest of all wars for us to neglect peoples who are or may be
attacked by our common enemies.
FRANKLIN D. ROOSEVELT.
THE WHITE HOUSE,
December 12, 1941.
5
Chapter 1
LEND-LEASE PROGRESS
The Lend-Lease Administration is responsible for coordinating and expediting the procurement and delivery of LendLease goods and services and operates with the assistance of
the War and Navy Departments, the Maritime Commission,
the Treasury Department, and the Department of Agriculture.
These and other Government departments and agencies such
as the State Department and the Economic Defense Board
work together in the administration of the Lend-Lease program. In the past ninety days steps have been taken which
have greatly accelerated the rendering of Lend-Lease aid.
This report, to the extent that the defense policy will permit, discloses the facts concerning Lend-Lease operations to
November 30, 1941.
What Congress Has Appropriated.
To enable the President to carry out the provisions of the
Lend-Lease Act, Congress has passed two appropriation acts
calling for $7,000,000,000 and $5,985,000,000, respectively.
How the money is to be spent is indicated in Table No. 1 on
the following page.
Allocations and Obligations.
Allocation of the 7 billion dollars appropriated under the
first appropriation act was completed on November 13, 1941.
Allocation of the second appropriation is proceeding at an
accelerated rate; over 2 billion dollars, or more than onethird of the amount appropriated, has already been allocated
Chart No. 1 shows the progress to date in allocating funds
provided by the Lend-Lease appropriation acts.
After requests for aid from the various Lend-Lease countries
have been carefully reviewed by the Lend-Lease Administration and the other Government agencies concerned, the necessary funds are allocated to the proper procurement agencies.
As soon as funds are allocated, the procurement agencies pro-
ceed with the letting of contracts to suppliers for the designated goods and services. (See Chapter 6-How the LendLease Program Works.)
LEND-LEASE APPROPRIATIONS
ALLOCATIONS AND OBLIGATIONS
OF LEND-LEASE - FUNDS
First Appropriation Act-March 27, 1941
Second Appropriation Act-October 28, 1941
15
Millions of Dollars
15
First Appropriation Act
Category
BILLIONS OF DOLLARS-CUMULATIVE
As
Adjust-
As
Approprioted
ment
Ad.
(+or-)
justed
+117
1,460
Second
Total
Appro-
First
pria-
and
tion
Second
Act
Acts
12
Second
12
Appropriation
9
1,343
1,190
9
Ordnance and ordnance stores
2,650
ALLOCATIONS
First
2,054
-29
2,025
685
2,710
Tanks and other vehicles
362
+100
462
385
847
Ships
629
+149
778
850
1,628
Misc. military equipment
260
+16
276
155
431
Production facilities in U. S
752
-150
602
375
977
1,350
-182
1,168
1,875
3,043
200
-34
166
175
341
Appropriation
6
6
OBLIGATIONS
3
Aircraft and aeronautical mat'l
3
Agric. and indust. commodities
o
o
Servicing, repair of ships, etc
1941
Services and expenses
40
40
285
325
Administrative expenses
10
10
10
20
6,987
5,985
12,972
Total
7,000
-13
Table No. 1
*The adjustments in connection with the first appropriation act were made in accordance
with the provision of the act that permitted the transfer of not to exceed 20 percent of the
amount appropriated in one category to the amount appropriated in another, so long as no
appropriation was increased by more than 30 percent. The $13,000,000 net adjustment represents the sum used to reimburse the Treasury Department for Coast Guard vessels transferred
to the United Kingdom, leaving $6,987,000,000 available for allocation to the procurement
agencies.
1942
Chart No. 1
Contracts have been let for nearly two-thirds of the amount
of funds allocated, and the remainder is being obligated as
rapidly as possible.
Progress in the allocation and obligation of funds provided
by Lend-Lease appropriations is shown in Table No. 2.
The table presents the information by procurement agencies
and by appropriation categories.
8
9
Total Lend-Lease Aid.
Lend-Lease aid cannot be adequately reflected by figures
ALLOCATIONS AND OBLIGATIONS
alone. It includes the repair of hundreds of ships and the
Under Lend-Lease Appropriation Acts
2,000,000 tons of American shipping that have been made
available to carry defense goods. It includes the shipways
To November 30, 1941
that will produce Lend-Lease ships and the training of airplane
Millions of Dollars
pilots for Lend-Lease countries. It includes the goods which
BY PROCURING AGENCY
have been completed and the facilities that are being expanded
Allocations
Procuring Agency
to produce more goods. It includes the raw materials and
Obligations
machine tools that have made it possible for the Lend-Lease
War Department
5,099
2,979
Navy Department
2,032
819
Maritime Commission
788
732
Treasury Department
436
260
Department of Agriculture
831
453
9,186
5,243
Total
countries to step up their production of war material. It includes the hundreds of things that are being done which are
described in subsequent chapters.
QUANTITIES OF NONMILITARY GOODS TRANSFERRED
To November 30, 1941
Commodity
Quantity
BY APPROPRIATION CATEGORY
Allocations
Category
Meat and fish products
Obligations
535,742,451 pounds
Milk products
Ordnance and ordnance stores
2,215
Aircraft and aeronautical material
947
2,040
1,727
628
316
1,303
713
Miscellaneous military equipment
311
70
Production facilities
757
427
1,665
930
167
109
Tanks and other vehicles
Ships
Agricultural and indust. commodities
Servicing, repair of ships, etc
Services and expenses
95
5
Table No. 2
9,186
5,243
87,438,813 pounds
Fruits and vegetables
548,091,424 pounds
Grain and cereal products
719,834,984 pounds
Sugar and related products
6,058,740 pounds
Cotton linters
13,094,955 pounds
439,619 bales
Leaf tobacco
120,822 hogsheads
Petroleum products
1
Total
Egg products
Raw cotton
3
Administrative expenses
343,301,116 pounds
30,546,999 barrels
Fertilizer
447,162 tons
Iron and steel
1,361,492 tons
Nonferrous metals
63,012 tons
Table No. 3
10
11
Indicative of the magnitude of aid rendered thus far is the
physical volume of nonmilitary articles transferred. Transfers
of some of the more important nonmilitary items are shown
Table No. 4 summarizes total Lend-Lease aid by principal
types. "Defense Articles Transferred'' represents the value
in Table No. 3.
of goods which have actually been transferred to the different
In terms of dollars, total Lend-Lease aid to November 30,
1941, amounted to more than 1.2 billion dollars, or approx-
are finished articles ready to be transferred to a Lend-Lease
imately 15 percent of our total defense expenditures since the
Lend-Lease Act was enacted. This figure is comprised of
two things-the value of articles transferred from other than
Lend-Lease appropriations,* and expenditures under the two
Lend-Lease appropriation acts. As of November 30th, the
value of goods transferred from other than Lend-Lease appro-
Lend-Lease countries. "Articles Awaiting Transfer or Use"
country or to be used in the manufacture of other articles for
such countries; in this category would be a finished airplane
ready to be flown to the point of transfer. "Articles in Process"
represents expenditures for items such as ships, upon which
payment is made by the Government as the work progresses;
this category does not include the great majority of Lend-Lease
articles in process of manufacture which are not paid for until the
finished goods are delivered. 'Servicing and Repair of Ships"
includes the cost of repairing, servicing and reconditioning the
TOTAL LEND-LEASE AID
Millions of Dollars
Cumulative
Month of
to Nov. 30,
November
1941
1941
TOTAL LEND-LEASE AID
Millions
MONTHLY
Millions
CUMULATIVE
$
400
Defense articles transferred
723
168
Articles awaiting transfer or use
140
40
Articles in process of manufacture
92
Servicing and repair of ships
79
23
Rental and charter of ships, etc
92
32
Production facilities in U. S
75
11
$
Type of Aid
1600
300
1200
9
200
800
100
400
L-10a
Miscellaneous expenses
1
0
Total
1,202
283
1941
1942
1941
1942
Table No. 4
priations was 138 million dollars and the total of expenditures
Chart No. 2
for goods, services and production facilities, under the first
and second Lend-Lease appropriation acts was 1.1 billion dol-
lars, bringing the total of Lend-Lease aid to more than 1.2
billion dollars.
*Section 3 of the Lend-Lease Act provides that a maximum of $1,300,000,000 of goods
procured from appropriations made prior to March 11, the date of the Lend-Lease Act, may be
transferred to Lend-Lease countries.
ships of Lend-Lease countries in United States ports. "Rental
and Charter of Ships, etc.," represents the cost of transporting
Lend-Lease cargoes to foreign countries. "Production Facilities in United States" represents production facilities being
built in this country for the manufacture of Lend-Lease goods.
12
13
"Miscellaneous Expenses" includes the cost of administration and other items not otherwise classifiable.
Chart No. 3 shows exports to the British, by months,
broken down by direct purchase exports and exports under
Acceleration in Lend-Lease Aid.
Chart No. 2 shows how Lend-Lease aid has grown. Aid
each month has exceeded that of the preceding month and
reached a high of 283 million dollars in November. The
actual monthly amounts of aid are shown in Table No. 5.
EXPORTS TO BRITISH EMPIRE
AND EGYPT
MILLIONS OF DOLLARS-MONTHLY
500
500
400
400
300
300
TOTAL
LEND-LEASE AID EACH MONTH
EXPORTS
Millions of Dollars
200
200
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
100
18
40
60
85
134 :
150
207
225
DIRECT PURCHASE
283
100
EXPORTS
LEND-LEASE
Table No. 5
EXPORTS
0
Exports.
1940
1
1939
1941
1942
Chart No. 3
The value of exports of Lend-Lease items to November 30,
1941, was 595 million dollars. The difference between this
figure and the total value of articles transferred is principally
due to three facts: First, the amount of transfers under the
ships category is not included in the exports figure; second,
certain goods are transferred to Lend-Lease countries for use
in the United States, such as equipment and supplies for airplane pilot training programs; and, third, it is necessary to
maintain some inventory of stocks of finished articles at the
Lend-Lease. One of the purposes of the Lend-Lease Act was
to take up the slack resulting from the completion of current
British contracts. The black area in the chart may be expected to increase rapidly, whereas the shaded area will tend
to decline. The important consideration is to keep total
exports at steadily increasing levels.
various warehouses at the points of export, so that there
always will be plenty of material ready to be loaded as shipping space becomes available.
Lend-Lease aid alone is only a part of our total aid to those
fighting the aggressors. Thus, since the beginning of the war,
our exports to the British alone have amounted to nearly 53/4
billion dollars, most of which was financed by the British
with their own dollars.
14
15
Chapter 2
DISTRIBUTION OF
LEND-LEASE COUNTRIES
WORLD LAND AREA AND POPULATION
AREA
Descriptions of allocations and expenditures of funds cannot
give an adequate impression of Lend-Lease activities. The
Lend-Lease program must be viewed as it actually operates
throughout the world. The defenses of 32 countries and the
British Empire have been declared vital to the defense of the
United States. Steps have been taken or programs are being
formulated to strengthen the defenses of these countries.
POPULATION
All Other
21%
All Other
29%
United
States
7%
United
States
Lend-Lease
Countries
LEND-LEASE COUNTRIES
7%
*Lend-Leose
Countries
72%
64%
*Include occupied territory of following governments which receive Lend-Lease aid:
Argentina
Egypt
Bolivia
El Salvador
Free Belgium
Panama
Free France
Greece
Peru
Brazil
British Empire
Chile
China
Paraguay
Colombia
Costa Rica
Guatemala
Haiti
Honduras
Cuba
Iceland
Dominican Republic
Mexico
The Netherlands
Ecuador
Nicaragua
Norway
Greece,
Holland,
Norway,
Poland, Yugo-Slavia,
and countries which are eligible for,
but
have not
yet received,
Lend-Lease
aid.
Chart No. 4
Turkey
tic; only in America are there the raw material resources,
the productive capacity and the manpower to complete the
job. There must be guns and tanks and planes in quantities
Uruguay
beyond any production we have yet accomplished or planned.
Poland
Russia
Venezuela
Yugoslavia
Some of these countries have DOD as yet received Lend-Lease aid.
Although a vastly increased program of aid is required,
Lend-Lease activities have already contributed substantial
support to the fight in the air, on sea, and on land.
The fight from the British Isles is supported by men and
ships from Norway, Poland, Belgium, Greece, the Netherlands, Yugoslavia, and Free France. Linking the war zones of
Russia and North Africa are the strategic defenses of Turkey.
Greeks and Yugoslavs in Egypt and Greek ships in the Mediterranean are aiding the British forces in North Africa. Free
French and Belgian troops stand ready in French Equatorial
Africa and the Belgian Congo to check any attempted Axis
drive southward in Africa. In the Far East stand the combined forces of China, the Netherlands East Indies, Australia,
New Zealand, and India.
Lend-Lease countries, as shown by Chart No. 4, cover two-
thirds of the earth's surface and contain nearly two-thirds of
its population.
The task of Lend-Lease is to supply the millions of men
who are resisting or stand ready to resist Axis aggression with
the tools to make that resistance effective. The task is gigan16
17
Chapter 3
and ammunition have been provided and materials have been
THE FIGHT ON LAND AND IN THE AIR
sent for the maintenance of Russia's lines of transportation
and communication. Metals, materials for explosives, con-
British Empire.
struction equipment, furnaces, machine tools, and other sup-
The defense of the British Isles and the effectiveness of the
forces in Lybia have been strengthened by materials of all
plies have been furnished to Russian war industries. Large
kinds. Guns, ammunition, airplanes, tanks, fire-control
instruments, scout cars, supply trucks, communications equip-
ment, gasoline, oil, fire-fighting equipment, medical supplies
and other military supplies shipped under Lend-Lease have
aided Britain's home defenses. Tractors, earth-moving equipment, paving materials and the like have provided means for
strengthening air bases and military supply lines.
Besides contributing finished military supplies, much has
quantities of gasoline and other petroleum products are fueling
Russia's war machine. Medical supplies and equipment are
being provided. Under our agreement to provide one billion
dollars worth of Lend-Lease aid by June 1942, additional
assistance is being given.
China.
With Lend-Lease assistance and with the $100,000,000 she
has borrowed from the Export-Import Bank since 1934, China
war materials. Iron and steel and other metals have been
supplied to British tank and gun factories. Chemicals have
been provided for the manufacture of explosives. Lumber,
is adding to her defenses and strengthening her important
supply line, the Burma Road. In large degree the main work
of aiding China to date has centered around the transport
problems of this lifeline. American equipment and personnel
raw and semifinished materials, machine tools, and construc-
have done much to improve this line of supply and thousands
tion equipment have kept British war production at full
Lend-Lease fuel and oil.
been done under Lend-Lease to increase British production of
operation.
In increasing measure, the productive enterprise of the
British Isles is being coordinated with production here.
A careful study of British machine tool requirements and
operations has provided a basis for determining where our
limited supply can be most effectively used. In all fields of
production we are benefiting from a constant exchange of
technical information arising from actual operations.
Similar support is being given to other parts of the British
Empire where a coordinated scheme of war production is being
carried out. In the main the Dominions are manufacturing
their own war materials. Machine tools, raw materials, and
construction material have been sent to Australia, New Zealand, India, and South Africa to increase their wartime production.
of American trucks are now moving over it, supplied with
With the improvement of transport facilities well advanced,
future Lend-Lease assistance will include more and more direct
aid to the Chinese Army. The army has already been supplied
with rifles, machine guns, field guns, airplanes, ammunition,
telephone and radio equipment, combat vehicles, and signal
and engineering equipment.
Other Nations.
Countries overrun by the aggressors still have large areas
and large numbers of men free of subjugation. They are
receiving Lend-Lease aid in the fight against the Axis. The
Netherlands East Indies and Dutch Guiana are receiving
military and naval equipment and machinery for war production. Poland has a troop-training center in Canada which is
being outfitted under the Lend-Lease program. Belgian troops
Russia.
in the Belgian Congo, who are collaborating with the British
Even before Lend-Lease shipments were sent to Russia in
November, representatives of this Government had assisted
in expediting Russian purchases here. Tanks, airplanes, guns,
18
in the Middle East, have been furnished combat vehicles and
field guns. The Free French troops in French Equatorial
Africa have been provided with tanks and are to receive numer19
ous trucks needed to meet their supply problems. Turkey,
which is today outside the conflict, is having her defenses
Chapter 4
strengthened under Lend-Lease. A substantial program of aid
to countries of the Western Hemisphere is under way.
THE FIGHT ON THE SEA
The production of arms is not enough; the arms must be
delivered to the fighting men at the front. The quantities
of materials to be transported are enormous and they must be
carried to fighting forces all over the world. Supplies must
be delivered over many thousands of miles of water-to
Britain, to Suez, to Burma, to the Arctic Ocean, to Siberia,
to the Persian Gulf. No supply problem of this magnitude
has ever been encountered before.
Hundreds of ships carrying airplanes and guns and food and
machines and other cargoes are required for each supply route.
Some indication of the work to be done and of the transporta-
tion problems involved is given by the quantities which can
be included in a typical loading of a small cargo steamer: 24
pursuit planes; 12 medium tanks; 8 light tanks; 140 tons of
ammunition; 200 trucks; 1,000 drums of petroleum products;
170 tons of barbed wire; 200 tons of explosives; 100 tons of
chemicals; 500 tons of metals.
The service of supply means more than merely loading and
dispatching vessels. It means the construction of a vast new
fleet- the bridge of ships"-to replace losses and to furnish
the increased tonnage needed for carrying the mountains of
material which will pile up when the production program
attains its full stride. It means repairing and refitting damaged vessels, installing protective equipment and additional
gear on many ships, and constructing new facilities in ports
of debarkation.
Construction of Merchant Ships.
First in the battle for the seas is the battle of the shipyards.
The greatest ship construction program in history is rapidly
taking shape.
On the East and West Coasts, on the Gulf and on the Great
Lakes, 26 shipyards in 18 States are at work building LendLease ships. The total Lend-Lease construction program
calls for an expenditure of $530,750,000 to build 292 new merchant vessels including 213 large cargo vessels and tankers, 45
small freighters, 8 coastal tankers, and 26 harbor tugs. Already
about 70 keels have been laid and it is estimated that the
20
21
first Lend-Lease vessels will be delivered in the early part
of 1942. New facilities are being added under Lend-Lease
to speed this construction. Fifty-six new shipways costing
some $55,000,000 are being built at 14 shipyards, and increased plants for the production of marine engines are
under construction.
Lend-Lease construction supplements our own emergency
program for greatly enlarging the American Merchant Marine.
Under this emergency program there are under contract 707
ships, in addition to the 292 being constructed with LendLease funds. We are now launching two ships every week;
by the middle of 1942 we will be launching two every day.
ships to sea, special types of equipment peculiar to British
ships have been assembled at our navy yards.
Alterations and repairs have been made on hundreds of
merchant ships. Included among these were British, Dutch,
Norwegian, Greek, and Russian vessels, and also interned Axis
ships. Damage caused by heavy weather, by fire, and by
enemy action through aerial, submarine, and surface attack,
has been repaired. General overhauling has included regunning and re-tubing of boilers and condensers and repairs
to main and auxiliary machinery. High-speed marine engines, electric generators, sets of radio equipment, and gyrocompasses have been installed.
Lend-Lease is fueling, provisioning, and loading a constant
stream of vessels, carrying supplies to the war fronts. Cloth-
Shipping Aid.
Although ships being built under the Lend-Lease program
have not yet been completed for delivery, we have given sub-
ing and food for the men and fuel and ship stores of every
description for the ships have been provided. Hundreds of
vessels have been furnished these services.
stantial aid from our merchant fleet to the fleets of the coun-
tries we are aiding. Under the control of the Maritime
Commission, 2 million tons of United States owned shipping
have been made available along with 36 interned Axis ships.
Vital cargoes of war materials are being hauled to the Red Sea,
to Burma, to Russia, to Iceland, and the British Isles. Despite
all hazards involved, our ships continue their steady transport of war supplies.
The ever-increasing quantities of Lend-Lease materials being
shipped to the fighting fronts are straining our shipping service
to the utmost. The effectiveness of the entire Lend-Lease
program may well depend upon the ability of American shipbuilders to expedite and expand their construction of ships.
Repair and Outfitting of War and Merchant Ships.
Under the Lend-Lease program war and merchant ships
continuously put into American ports for repair of battle
damage, overhauling, provisioning, or outfitting. Many
British warships, including battleships, cruisers, destroyers, submarines, aircraft carriers, and other naval craft
have been serviced in our shipyards. The Free French sub-
marine Surcouf, the largest in the world, was overhauled
as part of the same program. Some British warships are
presently under repair. In order to expedite the return of
23
22
British Food Allowances.
Chapter 5
THE FOOD FRONT
Within recent weeks Lend-Lease foods marked "Produce of
the are beginning to appear in sizable quantities on
grocers' shelves and in the kitchens of Great Britain. Since
the last report to the Congress, Lend-Lease food has moved
steadily and in increasing quantities over the bridge of ships,
bringing new strength to the bodies and new hope to the minds
and spirits of the British people.
To appreciate Britain's urgent need of foodstuffs it is necessary to understand the serious plight of a nation which before September 1939, had imported 63 percent of her foodstuffs
and which saw her sources of supply cut off one by one by
enemy occupation or reduced by submarine warfare. Britain
was faced a year ago with a quarter less animal protein foods
than she had before the war. Had this continued, the health
and the working and fighting efficiency of her people would
have been undermined.
Since the beginning of Lend-Lease, we have shipped to the
British food and farm produce totalling 2,796,000,000 pounds
with a value of $292,000,000. Of this total, 1,892,000,000
British food allowances for important food items have been
affected by arrival of Lend-Lease cargoes. The present British
rationing system includes most of the important protein foods.
The weekly allowance of bacon is 4 ounces, half of average
pre-war consumption. Civilians can have 3 ounces of cheese
a week while farm workers and miners are permitted 12 ounces.
The
to 10weekly
ounces.fat ration has recently been increased by 2 ounces
Increasing quantities of Lend-Lease food shipments make
themselves felt in many ways. In certain instances, as in
the case of bacon, the already low ration would have had
to be reduced but for Lend-Lease assistance. Other ship-
ments have permitted increases in the rations. Canned meats
and canned fish, because of supplies we have furnished, are
now appearing on the ration lists for the first time. In the
month of December, the housewife will be able to buy with
one person's monthly allowance a half pound of canned meat,
a quarter
beans.
pound of canned fish and a pound tin of pork and
Lend-Lease is supplementing the shortage of fresh milk
through shipments of canned evaporated milk and skim
milk powder.
pounds with a value of $181,000,000 have been supplied in the
Outside the rationed articles, there are two types of foods:
Foods such as bread and potatoes which are plentiful; and
last three months. The steady increase of our aid is shown
by the fact that the tonnage provided in the last three months
certain foods so scarce that even the smallest amounts cannot be guaranteed to everyone.
is twice as great as that provided in the preceding six months.
Eggs are being allocated so that a Britisher can get from 2 to
3 a month instead of the 14 eggs which represented average
The British are expanding their production of bulky foods,
such as wheat and potatoes, and have greatly increased their
truck gardening. Since 1939, acres under cultivation have
increased from 12,000,000 to 16,000,000 and some further
expansion is expected. To aid this source of production,
tractors and other farm equipment have been supplied by
Lend-Lease and deliveries of seed are planned.
So far as food is concerned the British are better off today
than a year ago. But their food allowances remain at a low
level. In a country highly geared for war production, having
an average industrial working week of 56 hours, nutrition
has a special relation to the war effort.
24
pre-war consumption. Shipping and packaging difficulties
have prevented our giving any great addition to the low
British supply of shell eggs, but sizable quantities of dried
and frozen eggs are being supplied.
We have made no more important contribution on the food
front than our shipments of concentrated vitamins, which,
being small in bulk, have frequently been transported to
Britain by bomber. Supplemented by supplies of concentrated fruit juices from the United States, these vitamin shipments are largely responsible for a new project of free distri-
25
bution of vitamins to children under 2 years of age. Begin-
Chapter 6
ning in December, over 1,300,000 small children are receiving,
through maternity and child-welfare clinics and local food
officers, a regular supply of concentrated orange or blackcurrant juice, and of cod liver oil compound.
HOW THE LEND-LEASE PROGRAM WORKS
The Lend-Lease Administration is responsible for coordinating and expediting the procurement and delivery of Lend-
Lease goods and services. In carrying out the Lend-Lease
MECHANICS OF LEND-LEASE OPERATIONS
CONGRESS
LEND-LEASE COUNTRIES
Appropriates Lend-Leose funds.
Make request for old.
program, however, the Lend-Lease Administration acts with
the assistance
of other Government agencies, which may be
classified
as follows:
(1) The procurement agencies, consisting of the War
Department, the Navy Department, the Department of
Agriculture, the Procurement Division of the Treasury
Department, and the Maritime Commission. These agencies procure the defense articles and services to be transferred
to countries we are aiding.
LEND-LEASE ADMINISTRATION
Reviews request for aid and determines the
amount and nature of aid to be rendered.
Allocates funds to procuring agencies for
procurement of designated goods and services
Authorizes procuring agencies to transfer
completed goods to Lend-Lease countries.
(2) The advisory agencies, consisting primarily of the
State Department, the Economic Defense Board, and the
Office of Production Management. These agencies regularly participate in the making of Lend-Lease decisions
which impinge on their respective fields of responsibility.
(3) The special service agencies which are called in from
time to time for assistance on special problems peculiar to
their fields. For example, the Public Health Service of
PROCURING AGENCIES
WAR DEPARTMENT
TREASURY DEPARTMENT
the Federal Security Agency arranged for the sending of
medicine and a medical mission to combat malaria on the
Burma Road.
NAVY DEPARTMENT AGRICULTURE DEPARTMENT
MARITIME COMMISSION
The Lend-Lease Administration does not buy anything.
Enter into contracts with suppliers for goods and services,
Its task is to coordinate and expedite the Lend-Lease program.
thereby obligating Lend-Lease funds.
The task of the procurement agencies is to obtain materials
Make expenditures upon receipt of bill from supplier.
and services with funds allotted by the Lend-Lease Adminis-
Direct supplier to transfer finished goods or services to
tration and to see that they get to the places where they will
do the most good. In this way the program is administered
Land-Lease country.
with a minimum of duplicating effort, and with the fullest
SUPPLIERS
Furnish goods and services
to Land-Lease countries.
possible use of existing procurement facilities.
When the Lend-Lease program was first put into operation,
all allocations of funds to the procurement agencies and all
directives to these agencies to transfer Lend-Lease goods were
signed by the President. Gradually, as policies were formulated and as the requests for assistance multiplied, it became
advisable to delegate these functions. On October 28th,
26
27
therefore, the Office of Lend-Lease Administration was estab-
lished by Executive Order, and there was delegated to Mr.
Edward R. Stettinius, Jr., as the first Lend-Lease Administrator, the function of allocating the Lend-Lease appropriations
to the various procurement agencies and of authorizing these
agencies to transfer defense articles and services to the coun-
tries whose defense the President should find to be vital to
the defense of the United States.*
Under the Executive Order, the President retains the au-
thority to determine what nations shall receive aid under
the Lend-Lease Act, and he continues to determine all major
policies for the guidance of the Lend-Lease Administrator.
The State Department is authorized to negotiate the master
agreements setting forth the general terms and conditions
under which countries receive Lend-Lease aid, with the advice
of the Economic Defense Board and the Lend-Lease Adminis-
tration. All matters affecting the economic defense of the
United States are brought to the attention of the Economic
Defense Board. Procurement of strategic and critical mate-
rials is subject to the review of the Office of Production
Management. Provision is thus made for insuring that the
Lend-Lease program will be in accord with latest developments in America's foreign policy, its economic defense, and
its strategic production situation.
Within this frame work, the Lend-Lease Administrator
has been delegated full authority to carry out the Lend-Lease
program. This delegation has materially speeded up the
operation of that program. It has obviated the necessity of
forwarding to the White House hundreds of documents which
previously had to be signed by the President.
A similar speeding-up of Lend-Lease procedure has recently
been effected in the administrative handling of the requests
for defense aid by the Lend-Lease Administration and the
various procurement agencies. Substantial reduction has
been made under the new procedure in the time which elapses
between the filing of a request for Lend-Lease aid and the
granting of authority to the procuring agency to place the
order. This procedure has been designed so as to combine a
maximum of care in examining requests for aid with a miniThe Executive Order is set forth in Appendix IV.
t See Chapter 7.
mum
of delay
in getting the tools of war into the hands of
the
fighting
forces.
Allocations
funds to the procurement agencies are now
handled
in twoof
ways.
First, allocations are made on a program basis to cover
items the need for which can be readily foreseen. Under the
procedure recently adopted, these programs are submitted to
the Lend-Lease Administration by the various agencies in
collaboration with representatives of the Lend-Lease countries. If a program is approved by the Lend-Lease Administration, the funds required to put it into operation are allocated to the appropriate agency. The submission and review
of programs in this manner have the great advantage of presenting the needs of the Lend-Lease countries in their proper
perspective. An airplane program or a steel program for 6
months, for example, can be more quickly and more accurately
evaluated, in terms of need, available funds and available
supplies, than can piecemeal and recurring requests for small
quantities of defense articles.
Second, blanket allocations are made to cover the cost of
the many items which cannot readily be planned in advance
on a program basis, such as emergency ship repairs. These
items must be handled separately, from day to day, as critical
needs arise. These blanket allocations are available to the
procurement agencies for "spot" and other rush purchases
and are replenished from time to time as they are depleted.
In either case, a requisition must be filed with the Lend-
Lease Administration by the country seeking aid. This
requisition must set forth the use to which the requested
article or service is to be put and the reason why it is needed.
No items are approved, whether on a program or an individual
basis, unless the following conditions are met:
One. The Lend-Lease aid requested must be for a use
essential to the war or defense effort of a country whose
defense the President has found vital to the defense of the
United States.
Two. Lend-Lease funds must be available to supply the
requested Lend-Lease aid or it must be available for transfer
from appropriations made prior to March 11, 1941.
Three. The requested Lend-Lease aid must come within
the legal scope of the Lend-Lease Act.
28
29
Four. The defense aid requested must not be obtainable,
as a practical matter, by payment therefor in American
dollars or other currency available to the requisitioning
country.
Five. The requested Lend-Lease aid must be of the most
economical and efficient type suitable for the intended use.
If the requisition meets these conditions, it is approved by
the Lend-Lease Administration and sent to the procurement
agency to buy the goods or services. These agencies do not,
as previously, have to come back to Lend-Lease for funds,
since they have already been made available. If for any reason the agency does not feel that it should procure a particular
article-for example, because it believes the article should be
retained in this country for our own defense-the agency will
notify the Lend-Lease Administration and the matter will be
worked out in consultation between them. In almost all
cases, however, as has already been pointed out, these matters will have been thoroughly checked and agreed upon in
which delivery of the finished articles will be made, and the
time, method, and other details of their actual shipment.
In this way it keeps in close touch with the procurement proc-
ess and can carry out its function of coordinating and
expediting Lend-Lease aid.
Once articles are transferred to a Lend-Lease country, they
may not be retransferred, either to private individuals or to
other countries, without the consent of the Lend-Lease Ad-
ministration. This consent is granted only where it will
further the total war effort so to permit such retransfers.
Even after the goods are sent, the Lend-Lease Administra-
tion is making every effort to keep in touch with their use.
It our determination to see that the material assistance being
provided by the United States under the Lend-Lease Act will
be made available in the shortest possible time and will be
used in the most effective possible manner.
advance and the agency will be prepared immediately to
proceed with procuring the defense articles or services.
The Office of Production Management plays a very consider-
able role with respect to the consideration of requests for
strategic and critical materials. Accordingly, there is close
collaboration between the Office of Production Management,
the procuring agencies, and the Lend-Lease Administration,
to insure that our own defense and civilian needs are properly
coordinated with the Lend-Lease program.
Once a requisition is approved, the procurement agency
designated buys the articles and services just as it would buy
them for its own purposes. In almost all cases, the LendLease Administration now authorizes the transfer of these
articles at the time it approves the requisition. The department or agency charged with procuring the articles bears the
responsibility of obtaining the goods and assuring that they
are delivered. The grants of authority to the various procuring agencies to procure and to transfer articles manufactured
or supplied with funds already allocated are thus combined
in one operation.
The Lend-Lease Administration obtains reports from the
procuring agencies showing when defense aid contracts are
placed, the progress being made under them, the date on
30
31
Chapter 7
LEND-LEASE AGREEMENTS
We have already negotiated Lend-Lease agreements with
some of the nations we are aiding and other agreements are
in process of negotiation. These agreements embody the
general terms and conditions upon which Lend-Lease assist-
ance is given.
The agreements also confirm certain preliminary obligations
undertaken by each foreign government before any Lend-Lease
aid is transferred to it. Those obligations include an undertaking not to permit the use of any Lend-Lease material or
information by anyone not an officer, employee, or agent of
the transferee government without our consent. They also
include an undertaking to protect the rights of all citizens of
defense information invaluable to our own armed forces.
We have received new plans and new designs for guns and
planes
which are enabling us to improve the efficiency of our
latest
models.
The agreement now in process of negotiation with Great
Britain will set forth the terms and conditions under which
Lend-Lease aid is being rendered. Discussions regarding the
British agreement have been going forward both here and in
London. These discussions have covered a wide range of
subjects. The two governments have exchanged statements
of the basic principles which they believe to be applicable,
and, as a result of further discussion of their views, substan-
tial progress has been made toward a mutually satisfactory
formulation. In view of the pending discussions, 2 more
detailed report would not be advisable at this time.
the United States who have patent rights in and to any articles
or information transferred under the Lend-Lease Act.
Lend-Lease agreements and Lend-Lease aid have, of course,
created certain problems for our export trade. These problems are receiving continued study, with the view to protecting American interests in foreign trade so far as is compatible
with the war effort. Policies relating to some of these problems were announced in the British White Paper of September
10, 1941 (Eden Memorandum) the text of which is included
in Appendix V. Policies and procedures for meeting all of
the repercussions of the Lend-Lease program on our foreign
trade are being developed and will be fully discussed in the
next Lend-Lease report.
Great Britain.
Iceland.
Recently the defense of Iceland was declared to be vital to the
defense of the United States. A Lend-Lease agreement was
concluded, providing that Iceland could, through Lend-Lease,
procure on a cash reimbursement basis its vital requirements
within this country. Supplementary arrangements were made
in order to furnish Iceland the necessary dollar exchange and
to supply the British with foodstuffs available in Iceland.
Under these arrangements the United States will purchase
Iceland's fish and fish oil for dollars. The dollar exchange
representing the purchase price will be credited to Iceland's
dollar balance in the United States and will be used by Iceland
to pay for its purchases here. The fish and fish oil purchased
by the United States will be transferred to the British as
The agreement with Great Britain will rest on principles
of common defense and mutual assistance which have been
dominant in Anglo-American relationships since long before
defense aid. As a result of the Lend-Lease agreement and
these arrangements, we shall fulfill our pledge to supply
the enactment of the Lend-Lease Act. Over a year ago, Great
Iceland with its vital necessities and essential shipping space
will be conserved by supplying Britain from a source near her
Britain, in return for 50 over-age destroyers, gave the United
shores.
States the right to establish defense outposts and naval bases
on British island possessions in the North Atlantic. Since
then, the Lend-Lease program has made it possible for the
United States to fill out its ring of strategic North Atlantic
bases. Under that program we have aided in the construction
of new naval bases. We have also obtained from the British
32
Russia.
In exchange for the war supplies now being furnished her
under the Lend-Lease Act, the Soviet Government has agreed
to reimburse the United States in dollars or in materials over
a 10-year period to begin 5 years after the war is over. The
33
Soviet
has also agreed to expedite sales of raw materials
vital
toUnion
our defense.
The Netherlands
These Lend-Lease agreements are merely one strand in
larger pattern of hemispheric unity and hemispheric defense. a
Accordingly, the benefits from our hemispheric Lend-Lease
We have recently concluded an agreement with the Dutch
under which they are paying us in advance dollar for dollar
for the Lend-Lease articles we are supplying them. They in
turn sell to us from the Dutch East Indies large quantities of
such vital products as rubber, tin, quinine, and petroleum.
Most of our bauxite, the basic material from which aluminum
is made, comes from Dutch Guiana, situated at the northern
tip of South America, where our troops, at the invitation of
the Dutch Government, have just established another important military base. In addition, the Netherlands government is working together with Great Britain and the United
States to establish a collaborative system of export control.
The Western Hemisphere
At the Inter-American Conference which was held in Lima,
Peru, in 1939, the 21 American republics, in their Declaration
of the Principles of Solidarity of America expressed their
common concern and determination to make effective their
solidarity in the face of any threat to the peace, security, or
territorial integrity of any one of the American republics.
Since that conference, the governments of the American republics have collaborated to translate that declaration into
effective action.
Collaboration is proceeding with a single immediate objec-
tive-to mobilize the resources of this hemisphere for the
struggle against aggression. Under that policy, we are
developing a broad program of Lend-Lease deliveries of military and naval supplies to the countries of the Western Hemisphere. In connection with that program we have concluded
agreements with Bolivia, Brazil, Cuba, the Dominican Republic,
Haiti, Nicaragua and Paraguay, and are negotiating agreements
with various other American republics. All of the agreements which have been concluded provide that the country
receiving defense aid shall pay some proportion of the cost of
the defense articles transferred. These proportions vary in
accordance with the varying economic positions of the coun-
tries involved.
program cannot be measured simply in terms of the commitments embodied in formal agreements. Many of the valuable
defense measures adopted by the other American republics,
even though not required by a Lend-Lease agreement, undoubtedly flow from our Lend-Lease program and the hemispheric unity which it promotes. These measures all add up to
a broad and growing program of military and economic
defense for this hemisphere.
A number of countries have given permission for our naval
vessels to make use of their ports under appropriate condi-
tions. The construction and expansion of important airports by Pan American Airways has been made possible
only by the consent of several American republics.
Supplementing these measures, there has been significant
cooperation on the part of the other American republics in a
broad program of economic defense. This program assumes
more and more importance as production, commerce, and
finance become increasingly the tools of defense. In order to
make materials available to us and to prevent their leakage
to those with purposes hostile to the welfare of this hemisphere, these republics have instituted systems of export con-
trol. In addition, the other American republics have concluded or are negotiating with the Federal Loan Agency
arrangements whereby $500,000,000 of strategic materials
will be imported into the United States annually. As a result, we are securing vital supplies of antimony, copper, lead,
mercury, tungsten, zinc, and other important materials.
All of the American republics have recently adopted a plan
for placing into service the Axis ships immobilized in this
hemisphere. This action has added a substantial number of
vessels to the active merchant marine of this hemisphere and
will permit the release of other vessels for supplying other
demands.
Many of these republics are also actively cooperating with
our Proclaimed List program whose underlying purpose is
to eliminate Axis influence in the social and economic life of
this hemisphere.
34
35
Through the Lend-Lease program we are establishing ties
of friendship and cooperation with the other free nations of
the world, nations which are willing to subordinate individual
interests to the common interest of all.
APPENDICES
36
37
Appendix I
LEND-LEASE ACT
Further to promote the defense of the United States, and for other
than from funds authorized to be appropriated under this Act,
not be disposed of in any way under authority of this paragraph shall
to
the extent
by the Congress in the Acts appro- except
priating
suchhereafter
funds orauthorized
otherwise.
Be # enacted by the Senate and House of Representatives of the United States of
(3) To test, inspect, prove, repair, outfit, recondition, or otherwise
to place in good working order, to the extent to which funds are made
available therefor, or contracts are authorized from time to time
America in Congress assembled, That this Act may be cited as "An Act to
Promote the Defense of the United States''
the Congress, or both, any defense article for any such government, by or
to procure any or all such services by private contract.
Section 2.
As used in this Act(2) The term "defense article" means(1) Any weapon, munition, aircraft, vessel, or boat;
(2) Any machinery, facility, tool. material, or supply necessary for
the manufacture, production, processing, repair, servicing, or operation of any article described in this subsection;
(3) Any component material or part of or equipment for any article
described in this subsection;
(4) To communicate to any such government any defense information,
pertaining(2)
to of
any
defense
article furnished to such government
under paragraph
this
subsection.
purposes.
(4) Any agricultural, industrial or other commodity or article
for defense.
Such term 'defense article" includes any article described in this subsection:
Manufactured or procured pursuant to section 3, or to which the United
States
or any foreign government has or hereafter acquires title, possession,
or control.
(b) The term "defense information' means any plan, specification,
design, prototype, or information pertaining to any defense article.
Section 3.
(2) Notwithstanding the provisions of any other law, the President may,
from time to time, when he deems it in the interest of national defense,
authorize.r Secretary of War, the Secretary of the Navy, or the head of
any other department or agency of the Government(1) To manufacture in arsenals, factories, and shipyards under their
jurisdiction, or otherwise procure, to the extent to which funds are
made available therefor, or contracts are authorized from time to time
by the Congress, or both, any defense article for the government of any
country whose defense the President deems vital to the defense of the
United States.
(2) To sell, transfer title to, exchange, lease, lend, or otherwise
dispose of, to any such government any defense article, but no defense
article not manufactured or procured under paragraph (1) shall in
any way be disposed of under this paragraph, except after consultation
with the Chief of Staff of the Army or the Chief of Naval Operations
of the Navy, or both. The value of defense articles disposed of in
any way under authority of this paragraph, and procured from funds
heretofore appropriated, shall not exceed $1,300,000,000. The value
of such defense articles shall be determined by the head of the department or agency concerned or such other department, agency or officer
as shall be designated in the manner provided in the rules and regulations issued hereunder. Defense articles procured from funds hereafter
appropriated to any department or agency of the Government, other
38
(5) To release for export any defense article disposed of in any way
under this subsection to any such government.
(b) The terms and conditions upon which any such foreign government
receives any aid authorized under subsection (a) shall be those which the
President deems satisfactory, and the benefit to the United States may be
payment or repayment in kind or property, or any other direct or indirect
benefit which the President deems satisfactory.
(c) After June 30, 1943, or after the passage of a concurrent resolution by
the two Houses before June 30, 1943, which declares that the powers conferred by or pursuant to subsection (a) are no longer necessary to promote
the defense of the United States, neither the President nor the head of any
department or agency shall exercise any of the powers conferred by or
pursuant to subsection (a); except that until July 1, 1946, any of such powers
may be exercised to the extent necessary to carry out a contract or agreement with such a foreign government made before July 1, 1943, or before
the passage of such concurrent resolution, whichever is the earlier.
(d) Nothing in this Act shall be construed to authorize or to permit the
authorization of convoying vessels by naval vessels of the United States.
(c) Nothing in this Act shall be construed to authorize or to permit
the authorization of the entry of any American vessel into a combat area
in violation of section 3 of the Neutrality Act of 1939.
Section 4.
All contracts or agreements made for the disposition of any defense
article or defense information pursuant to section 3 shall contain a clause
by which the foreign government undertakes that it will not, without
the consent of the President, transfer title to or possession of such defense
article or defense information by gift, sale, or otherwise, or permit its use
by anyone not an officer, employee, or agent of such foreign government.
Section 5.
(a) The Secretary of War, the Secretary of the Navy, or the head of any
other department or agency of the Government involved shall, when any
such defense article or defense information is exported, immediately inform
the department or agency designated by the President to administer section
6 of the Act of July 2, 1940 (54 Stat. 714), of the quantities, character,
value, terms of disposition, and destination of the article and information
so exported.
(b) The President from time to time, but not less frequently than once
every ninety days, shall transmit to the Congress a report of operations
under this Act except such information as he deems incompatible with the
39
public interest to disclose. Reports-provided for under this subsection
shall be transmitted to the Secretary of the Senate or the Clerk of the
House of Representatives, as the case may be, if the Senate or the House of
Representatives, as the case may be, is not in session.
Section 6.
(a) There is hereby authorized to be appropriated from time to time,
out of any money in the Treasury not otherwise appropriated, such amounts
as mayofbe
to carry out the provisions and accomplish the purposes
thisnecessary
Act.
(b) All money and all property which is converted into money received
under section 3 from any government shall, with the approval of the Director of the Budget, revert to the respective appropriation or appropriations
out of which funds were expended with respect to the defense article or
defense information for which such consideration is received, and shall be
available for expenditure for the purpose for which such expended funds
were appropriated by law, during the fiscal year in which such funds are
received and the ensuing fiscal year; but in no event shall any funds so
received be available for expenditure after June 30, 1946.
Section 7.
The Secretary of War, the Secretary of the Navy, and the head of the
department or agency shall in all contracts or agreements for the disposition
of any defense article or defense information fully protect the rights of all
citizens of the United States who have patent rights in and to any such
article or information which is hereby authorized to be disposed of and the
payments collected for royalties on such patents shall be paid to the owners
and holders of such patents.
Section 8.
The Secretaries of War and of the Navy are hereby authorized to purchase
or otherwise acquire arms, ammunition, and implements of war produced
within the jurisdiction of any country to which section 3 is applicable,
whenever the President deems such purchase or acquisition to be necessary
in the interests of the defense of the United States.
Section 9.
The President may, from time to time, promulgate such rules and regulations as may be necessary and proper to carry out any of the provisions of
this Act; and he may exercise any power or authority conferred on him by
this Act through such department, agency, or officer as he shall direct.
Section 10.
Nothing in this Act shall be construed to change existing law relating
to the use of the land and naval forces of the United States, except insofar
as such use relates to the manufacture, procurement, and repair of defense
articles, the communication of information and other noncombatant
purposes enumerated in this Act.
Section 11.
If any provision of this Act or the application of such provision to any
circumstance shall be held invalid, the validity of the remainder of the
Act and the applicability of such provision to other circumstances shall
not be affected thereby.
Appendix II
FIRST LEND-LEASE APPROPRIATION ACT
Making supplemental appropriations for the national defense to provide
aid to the government of any country whose defense the President
deems vital to the defense of the United States, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States
of America in Congress assembled, That to enable the President, through such
departments or agencies of the Government as he may designate, to
out the provisions of An Act to Promote the Defense of the United States, carry
approved March 11, 1941, and for each and every purpose incident to or
necessary therefor, there is hereby appropriated, out of any money in the
Treasury not
otherwise
appropriated, the following sums for the following
respective
purposes,
namely:
(2) For the procurement, by manufacture or otherwise, of defense articles
for the government of any country whose defense the President deems vital
to the defense of the United States, including services and expenses in con-
nection therewith, as follows:
(1) Ordnance and ordnance stores, supplies, spare parts, and materials,
including armor and ammunition and components thereof,
$1,343,000,000.
(2) Aircraft and acronautical material, including engines, spare
parts, and accessories, $2,054,000,000.
(3) Tanks, armored cars, automobiles, trucks, and other automotive vehicles, spare parts, and accessories, $362,000,000.
(4) Vessels, ships, boats, and other watercraft, and equipage, supplies, materials, spare parts, and accessories, $629,000,000.
(5) Miscellaneous military equipment, supplies, and materials,
$260,000,000.
(6) Facilities and equipment, for the manufacture or production
of defense articles, by construction or acquisition, including the acquisition of land, and the maintenance and operation of such facilities
and equipment, $752,000,000.
(7) Agricultural, industrial, and other commodities and articles,
$1,350,000,000.
(b) For testing, inspecting, proving, repairing, outfitting, reconditioning, or otherwise placing in good working order any defense articles for
the government of any country whose defense the President deems vital
to the defense of the United States, including services and expenses in consection therewith, $200,000,000.
(c) Not to exceed 20 per centum of any of the foregoing eight appropriations may be transferred by the President to any other such appropriation,
but no appropriation shall be increased by more than 30 per centum.
(d) For necessary services and expenses for carrying out the purposes of
such Act not specified or included in the foregoing, $40,000,000.
(c) For administrative expenses, $10,000,000.
(f) In all, $7,000,000,000, to remain available until June 30, 1943.
Section 2.
If any defense article procured from an appropriation made before March
11, 1941, is disposed of, under such Act of March 11, 1941, by any depart-
APPROVED, March 11, 1941.
40
41
ment or agency to the government of any country whose defense the Presj.
dent deemed vital to the defense of the United States, the President may
transfer, from the appropriations made by this Act to the appropriate
appropriation of such department or agency, an amount equivalent to the
value (as computed for the purposes of the $1,300,000,000 limitation contained in section 3 (a) (2) of such Act of March 11, 1941) of the defense
article so disposed of, but not to exceed in the aggregate $1,300,000,000.
Section 3.
Act to promote the defense of the United States, approved March 11,
and for each and every purpose incident to or necessary therefor, 1941, the
following sums for the following respective purposes, namely:
(a) For the procurement, by manufacture or otherwise, of defense
articles, information and services, for the government of any country whose
defense the President deems vital to the defense of the United States, and
the disposition
thereof, including all necessary expenses in connection
therewith,
as follows:
Any defense article procured from an appropriation made by this Act
shall be retained by or transferred to and for the use of such department or
(1) Ordnance and ordnance stores, supplies, spare parts, and materials, including armor and ammunition and components thereof,
$1,190,000,000.
agency of the United States as the President may determine, in lieu of being
disposed of to a foreign government, whenever in the judgment of the
President the defense of the United States will be best served thereby.
Section 4.
No part of any appropriation contained in this Act shall be used to pay
the salary or wages of any person who advocates, or who is a member of
an organization that advocates, the overthrow of the Government of the
United States by force or violence: Provided, That for the purposes hereof
an affidavit shall be considered prima facie evidence that the person making
the affidavit does not advocate, and is not a member of an organization
that advocates, the overthrow of the Government of the United States
by force or violence: Provided further, That any person who advocates, or
who is a member of an organization that advocates, the overthrow of the
Government of the United States by force or violence and accepts employment the salary or wages for which are paid from any appropriation in this
Act shall be guilty of a felony and, upon conviction, shall be fined not more
than $1,000 or imprisoned for not more than one year, or both: Provided
further, That the above penalty clause shall be in addition to, and not in
substitution for, any other provisions of existing law.
Section 5.
This Act may be cited as the "Defense Aid Supplemental Appropriation
Act, 1941".
(2) and
Aircraft
and aeronautical
material, including engines, spare
parts,
accessories,
$685,000,000.
(3) Tanks, armored cars, automobiles, trucks, and other automotive vehicles, spare parts, and accessories, $385,000,000.
(4) Vessels, ships, boats, and other watercraft, including the hire
or other temporary use thereof, and equipage, supplies, materials, spare
parts, and accessories, $850,000,000.
(5) Miscellaneous military and naval equipment, supplies, and materials, $155,000,000.
(6) Facilities and equipment for the manufacture, production, or
operation of defense articles and for otherwise carrying out the purposes of the Act of March 11, 1941, including the acquisition of land,
and
the maintenance and operation of such facilities and equipment,
$375,000,000.
(7) Agricultural, industrial, and other commodities and articles,
$1,875,000,000.
(b) For testing, inspecting, proving, repairing, outfitting, reconditioning, or otherwise placing in good working order any defense articles
for the government of any country whose defense the President deems vital
to the defense of the United States, including services and expenses in
connection therewith, $175,000,000.
(c) For necessary services and expenses for carrying out the purposes of
the Act of March 11, 1941, not specified or included in the foregoing,
APPROVED, March 27, 1941.
$285,000,000.
(d) For administrative expenses, $10,000,000.
(e) In all, $5,985,000,000, to remain available until June 30, 1943.
Appendix III
SECOND LEND-LEASE APPROPRIATION ACT
Making supplemental appropriations for the national defense for the fiscal
years ending June 30, 1942, and June 30, 1943, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, That the following sums are appropriated,
out of any money in the Treasury not otherwise appropriated, for the
national defense for the fiscal years ending June 30, 1942, and June 30,
1943, and for other purposes, namely:
Section 101.
To enable the President, through such departments or agencies of the
Government as he may designate, further to carry out the provisions of an
42
(f) Each of the foregoing appropriations shall be additional to, and
consolidated with, the appropriation for the same purpose contained in
sections 1 (a), 1 (b), 1 (d), and 1 (e), respectively, of the Defense Aid
Supplemental Appropriation Act, 1941: Provided, That, with the exception
of the appropriation for administrative expenses, not to exceed 20 per
centum of any such consolidated appropriations may be transferred by the
President to any other of such consolidated appropriations, but no such
consolidated appropriation shall be increased more than 30 per centum
thereby.
Section 102.
The President may, from time to time, when he deems it in the interest
of national defense, authorize the head of any department or agency of the
Government, to enter into contracts for the procurement of defense articles,
information, or services for the government of any country whose defense
43
the President deems vital to the defense of the United States, to the extent
that such government agrees to pay the United States for such defense
articles, information, or services prior to the receipt thereof and to make
such payments from time to time as the President may require to protect the
interests of the United States; and, upon payment of the full cost, the
President may dispose of such articles, information, or services to such
government: Provided, That the total amount of the outstanding contracts
under this section, less the amounts which have been paid to the United
States under such contracts, shall at no time exceed $600,000,000.
Section 103.
Any defense article procured pursuant to this title shall be retained by or
transferred to and for the use of such department or agency of the United
States as the President may determine, in lieu of being disposed of to a
foreign government, whenever in the judgment of the President the defense
of the United States will be best served thereby.
Section 104.
This
title may be cited as the "Defense Aid Supplemental Appropriation
Act,
1942.
to any nation of whose defense the President shall have found to be
the defense the United States: Provided, That the master vital to
each nation receiving lend-lease aid, setting forth the general agreement with
conditions the under State which such nation is to receive such aid, shall terms be and
tiated by Department, with the advice of the Economic Defense negoBoard and the Office of Lend-Lease Administration
3. The Administrator shall make appropriate arrangements with
Economic Defense Board for the review and clearance of lend-lease the
actions which affect the economic defense of the United States as defined trans- in
Executive
Order No. 8839 of July 30, 1941.
4. Within the limitation of such funds as may be made available for that
purpose, the Administrator may appoint one or more Deputy or Assistant
Administrators and other personnel, delegate to such Deputy or Assistant
Administrators any power or authority conferred by these orders, and make
provision for such supplies, facilities, and services as shall be necessary to
carry out the provisions of this Order. In so far as practicable, the Office
of Lend-Lease Administration shall use such general business services and
facilities as may be made available to it through the Office for Emergency
Management.
APPROVED, October 28, 1941.
Nora.-The above is a reprint of Title I of the Act, the part having to do with Lend-Lease
operations.
5. Executive Order No. 8751 of May 2, 1941, establishing the Division of
Defense Aid Reports and defining its functions and duties, is hereby revoked.
FRANKLIN D. ROOSEVELT.
THE WHITE HOUSE,
Appendix IV
EXECUTIVE ORDER ESTABLISHING
October 28, 1941.
Appendix V
OFFICE OF LEND-LEASE ADMINISTRATION
By virtue of the authority vested in me by the Constitution and statutes
of the United States, and particularly by the Act of March 11, 1941, entitled "An Act further to promote the defense of the United States and for
other purposes" (hereafter referred to as the Act), and by the Defense Aid
Supplemental Appropriation Act, 1941, approved March 27, 1941, and acts
amendatory or supplemental thereto, in order to define further the functions
and duties of the Office for Emergency Management of the Executive
Office of the President in respect to the national emergency as declared by
the President on May 27, 1941, and in order to provide for the more effective
administration of those Acts in the interests of national defense, it is hereby
ordered as follows:
1. There shall be in the Office for Emergency Management of the Executive Office of the President an Office of Lend-Lease Administration, at the
head of which shall be an Administrator, appointed by the President, who
shall receive compensation at such rate as the President shall approve and,
in addition, shall be entitled to actual and necessary transportation, subsistence, and other expenses incidental to the performance of his duties.
2. Subject to such policies as the President may from time to time
prescribe, the Administrator is hereby authorized and directed, pursuant to
Section 9 of the Act, to exercise any power or authority conferred upon the
President by the Act and by the Defense Aid Supplemental Appropriation
Act, 1941 and any acts amendatory or supplemental thereto, with respect
BRITISH WHITE PAPER
OF SEPTEMBER 10, 1941
FOREIGN OFFICE, S. W. I,
10th September 1941.
Mr DEAR AMBASSADOR: With reference to the conversations about lend-
lease material which have recently taken place in London and in which
you have participated, I enclose a memorandum on the policy of His
Majesty's Government in the United Kingdom with regard to exports from
this country and with regard to the distribution here of lend-lease material.
I shall be glad if you will transmit it to your Government.
Yours sincerely,
ANTHONY EDEN.
His Excellency The Honourable John G. Winant.
Memorandum.
1. All materials which we obtain under the Lend-Lease Act are required
for the prosecution of the war effort. This principle governs all questions
of the distribution and use of such goods and His Majesty's Government
have taken and will continue to take action to secure that these goods are
not in any case diverted to the furtherance of private interests.
2. Lend-lease materials sent to this country have not been used for export
and every effort will be made in the future to ensure that they are not used
44
45
for export, subject to the principle that where complete physical
gation of lend-lease materials is impracticable domestic consumption of segre- the
lend-lease.in question shall be at least equal to the amounts received under
material
3. His Majesty's Government have not applied and will not apply any
materials similar to those supplied under lend-lease in such 2 way as to
enable their exporters to enter new markets or to extend their export trade
at the expense of United States exporters. Owing to the need to devote all
available capacity and man-power to war production, the United Kingdom
export
trade
is restricted
to the
irreducible
or
obtain
materials
essential
to the
war effort.minimum necessary to supply
4. For some time past, exports from the United Kingdom have been
more and more confined to those essential (I) for the supply of vital requirements of overseas countries. particularly in the sterling empire; (II) for the
acquisition of foreign exchange. particularly in the Western Hemisphere
His Majesty's Government have adopted the policy summarized below:
(I) No materials of a type the use of which is being restricted in
the United States on the grounds of short supply and of which we
obtain supplies from the United States either by payment or on LendLease cases
terms will be used in exports with the exception of the following
special
(a) Material which is needed overseas in connection with supplies essential to the war effort for ourselves and our Allies, and
which cannot be obtained from the United States.
(b) Small quantities of such materials needed as minor though
essential components of exports which otherwise are composed
of materials not in short supply in the United States.
(c) Repair parts for British machinery and plant now in use,
and machinery and plant needed. to complete installations now
under
construction. so long as they have already been contracted
for.
power. and retard the war effort In the distribution of lend-lease goods
there will be no discrimination against United States firms.
6. Food is a special case. Only some 5 or 6 percent in tonnage of the
total British food supply is coming from the United States and without
great practical complications it would be impossible to have a separate
system for the distribution of lend-leased food. Food distribution is carried out in the United Kingdom by wholesalers, to whom the Government
sells food as principals. In fact, the Ministry of Food has established a close
control over all distributive margins so that neither the wholesalers nor the
retailers receive any greater remuneration than is adequate to cover the
cost of the services performed. No food obtained on lend-lease terms is
or will be sold at uncontrolled prices. Thus th: general arrangements as
regards the issue of lend-leased food fit into His Majesty's Government's
policy of stabilizing the whole price level of foodstuffs, a policy to which
the Government contributes £100 millions a year.
7. In some cases direct free distribution is practicable and will be adopted
For example, some milk products (including lend-leased supplies from the
United States) are distributed direct and free of charge to children and
others in need through schools, clinics and hospitals. The distribution is
undertaken
by State agencies and the cost of the distribution is borne by
the Government.
Acknowledgment.
LONDON, September 10, 1941.
DEAR MR. EDEN Thank you for your letter of September 10th. enclosing
2 memorandum on United Kingdom export policy and on the distribution of
lend-lease material. I have caused the memorandum to be transmitted
immediately to Washington for the information of my Government.
Sincerely yours,
JOHN G. WINANT.
Steps have been taken to prevent the export (except to Empire and Allied
territories) of such goods which do not come within the exceptions referred
(a), (b). and (c) above
The Right Honorable Anthony Eden, M. C. M. P., etc., etc, etc.,
Foreign Office, S. W.
September 10, 1941.
(II) Materials similar to those being provided under lend-lease
which are not in short supply in the United States will not be used
for export in quantities greater than those which we ourselves produce or buy from any source
5. The general principle followed in this matter is that the remuneration
received by the distributors whatever the method of distribution, is controlled and will be no more than a fair return for the services rendered in
the work of distribution The arrangements rigorously exclude any
opportunity for a speculative profit by private interests from dealing in
lend-leased goods. In most cases, lend-leased supplies will be distributed
through organizations acting as agents of His Majesty's Government in
the strict sense of the term and not as principals. Where for strong practical reasons this cannot be done a full explanation will be supplied to the
United States administration and their concurrence sought beforehand in
any alternative arrangements proposed. The justification for retaining
existing channels of distribution operating under strict Government
control, is that the creation of elaborate new organizations in their place
would inevitably result in loss of efficiency and the wasteful use of man46
47
48
TREASURY DEPARTMENT
365
INTER OFFICE COMMUNICATION
DATE December 13,1941
Secretary Morgenthau
TO
Mr. White
FROM
Subject: Exports to Russia, China, Burma, Hong Kong, Japan, France
and other blocked countries, as reported to the Treasury
Department during the week ending December 6, 1941.
1. Exports to Russia
Exports to Russia as reported to the Treasury during the
with $2,436,000 during the previous week. The principal item
WHE landplanes which accounted for about fifty percent of the
total. (See Appendix C.)
week ending December 6, 1941 amounted to $3,609,000 as compared
2. Exports to China, Burma and Hong Kong
Exports to Free Ohina were valued at $791,000, the lowest
figure for any single week since October 25. (See Appendix D.)
Exports to Occupied China amounted to $61,000. (See Appendix E.)
Exports to Burma totalled only $64,000 as compared with
$1,364,000 during the previous week. A large percentage of
these exports may be destined for Free China, (See Appendix F.)
No exports to Hong Kong were reported during the week under
review.
3. Exports to Japan
Exports to Japan were negligible, amounting to less than
$500.
4. Exports to France
No exports to France were reported during the week ending
December 6, 1941.
5. Exports to other blocked countries
Exports to other blocked countries are given in Appendix A.
366
SUMMARY OF UNITED STATES
DOMESTIC EXPORTS TO SELECTED COUNTRIES
AS REPORTED TO THE TREASURY DEPARTMENT
FROM EXPORT DECLARATIONS RECEIVED
DURING THE PERIOD INDICATED 1
July 28 to December 6, 1941.
(In thousands of dollars)
July 28
Week ended
to
Week ended
December 6
Total
Domestic Exports
Nov. 22
November 29
$52,061
$ 2,436
$ 3,609
$58,106
Occupied China
10,403
120
61
10,584
Free China
21,962
3,239
791
25,992
U. S. S. R.
Japan
1,870 2
Burma 3
5,354
France 4
Occupied France
-
64
6,780
6
2
.4
-
-
-
-
2
44
-
2,216
11
237
4,856
9,502
690
188
10,380
305
48
24
377
Spain
2,216
Switzerland
4,608
Sweden
French Indochina
1,870
5
1,362
6
Free France
-
5
Treasury Department, Division of Monetary Research
December 10, 1941
1 Many of the export declarations are received with a lag of several days or more.
Therefore this compilation does not accurately represent the actual shipment of
a particular week. The longer the period covered, the closer will these figures
come to Department of Commerce revised figures,
Of this total $1,864 thousand was reported from July 28 to August 23, inclusive,
and shipped prior to freezing orders.
2
Domestic exports from August 23 through week ending Nov. 22, amounted to $6,053.
From September 11, 1941 to date - It is presumed that a large percentage of material listed here, consigned to Burma, is destined for Free China.
Includes both occupied and Free France through week ending October 4, 1941. Occupied and Free France separated thereafter.
3
4
/
Less than $500.
APPENDIX B
Exports from the U.S. to China, Burma, Hong Kong, Japan and U.S.S.R.
as reported to the Treasury Department, July 28, 1941 - December 6, 1941
(Thousands of Dollars)
Exports to China
1
Total To Japanese TO Chinese
controlled controlled
ports
July 28 - Aug.
937
542
2,794
16
2,794
1,278
969
309
23
1,352
1,352
2
30
736
897
735
693
757
2
Aug. 4 - Aug.
Aug. 11 - Aug.
Aug. 18 - Aug.
Aug. 25 - Aug.
9
Sept. 2 - Sept.
Sept. 8 - Sept. 13 3,038 2
Sept.15 - Sept. 20 3,978
462
Sept.22 - Sept. 27
6
2
Sept.29 - Oct.
Oct. 6 - Oct. 11
Oct. 13 - Oct. 18
Oct. 20 - Oct. 25
Oct. 27 - Nov.
1
Nov. 3 - Nov. 8
Nov. 10 - Nov. 15
Nov. 17 - Nov. 22
Nov. 24 - Nov. 29
Dec. 1 - Dec. 6
Total
ports
1,305
5,864
Exports
to
to
Burma 3
449
684
654
983
235
234
742
634
456
389
810
297
1,157
5
35
395
1
204
2,281 2
156
352
3,822
80
1,225
5,312
110
269
5,210
1,836
3,009
1,701
3,359
403
4,772
1,672
2,851
1,228
3,239
58
1,021
1,364
852
61
791
64
28,488
5,665
39,548
11,060
Exports
Exports
to
to
Hong Kong
-
552
267
399
438
164
158
473
120
272
668
Exports
U.S.S.R.
Japan
1,657
4,523
159
551
986
42
-
2,735
1,023
-
4,280
-
5,217
-
752
-
2,333
-
323
6
1,233
-
584
6,845
-
1,243
-
1,924
5,623
4,484
624
283
303
600
-
1,325
-
-
-
342
88
11,629
5
-
-
1,869
4,552
2,677
3,581
2,436
3,609
58,454
These figures are in part taken from copies of shipping manifests.
1
2
Figures for exports to Free China during these weeks include exports to Rangoon which are
presumed to be destined for Free China.
3 It is presumed that a large percentage of exports to Burma are destined for Free China.
368
APPENDIX 0
Principal Exports from U.S. to U.S.S.R.
as reported to the Treasury Department
during the week ending December 6, 1941
(Thousands of Dollars)
TOTAL EXPORTS
$ 3,609
Principal Items:
Landplanes, powered
Military tanks
Motor trucks and chassis
Searchlights and airport beacons
Refined copper
Electric motors and bases
Tires and tubes
Cotton duck
Auto replacement parts
Telephone instruments
Gun parts
1,812
612
466
324
117
78
44
40
28
24
19
Treasury Department, Division of Monetary Research December 12,1941
369
APPENDIX D
Principal Exports from U.S. to Free China,
as reported to the Treasury Department
during the week ending December 6, 1941
(Thousands of Dollars)
TOTAL EXPORTS TO FREE CHINA
$ 791
Principal Items:
Landplanes and parts
Motor trucks and chassis
Zinc castings
Petroleum asphalt
Metallic cartridges
Brass and bronze bars and rods
Steel bars
300
203
104
51
40
36
25
Treasury Department, Division of Monetary Research December 12,1941
370
APPENDIX E
Principal Exports from U.S. to Occupied
China as reported to the Treasury Department
during the week ending December 6, 1941
(Thousands of Dollars)
TOTAL EXPORTS TO OCCUPIED CHINA
$ 61
Principal Items:
Leaf tobacco
Medicinal preparations
Silk hosiery
Fountain pens
34
17
2
1
Treasury Department, Division of Monetary Research December 13,1941
371
APPENDIX F
Principal Exports from U.S. to Burma
as reported to the Treasury Department
during the week ending December 6, 1941
(Thousands of Dollars)
TOTAL EXPORTS
$ 64
Principal Items:
Steel sheets
Motor trucks and chassis
Well and refining machinery
Relief supplies - hospital
Wall board
21
14
10
NO
6
Box shooks
Auto replacement parts
MD
Treasury Department, Division of Monetary Research December 13,1941
372
PARAPHRASE OF TELEGRAM SENT
TO:
American Embassy, Chungking, China.
DATE:
December 13, 1941, 7 p.m.
NO.:
298.
THE FOLLOWING IS FROM THE TREASURY FOR A. MANUEL FOX.
With respect to Taylor and Frese leaving Hong Kong,
please tell them that the Secretary of the Treasury has
instructed you to the effect that they should follow your
directions.
HULL
(WDM)
373
Y
BY SAFE HAND
W.T. 1024/103/41
BRITISH EMBASSY,
WASHINGTON, D.C.
SECRET
13th December, 1941
Dear Mr. Dietrich,
I enclose copy of a letter which I have
sent to Mr. Acheson today covering two memoranda
about financing the French Missions abroad.
Yours sincerely,
Mr. Frank Dietrich,
U.S. Treasury Department,
Stabilization Office, Room 279,
Washington, D.C.
RJS:0SB
Copy:ec:12-15-41
(Signed RJStopford)
374
Y
BY SAFE HAND
BRITISH EMBASSY,
WASHINGTON D.C.
SECRET
13th December, 1941
Dear Mr. Acheson,
I enclose two memoranda covering information with
regard to the provision of finance for French Missions abroad,
to which Mr. Hall referred in his talk with you yesterday.
The source of the memorandum marked "B" is a French
Consul in Central America who recently resigned and joined the
de Gaulle movement.
Yours sincerely,
Mr. Dean Acheson,
Assistant Secretary of State,
State Department,
Washington, D.C.
RJS:0SB
cc: Mr. Frank Dietrich
Copy:ec:12-15-41
(Signed RJStopford)
SECRET
375
MEMORANDUM
We have learned from a most secret source which must on
no account be compromised that authority has been given to the
French Embassy in Washington to inform the State Department that
they had sent $1,000,000 in bank notes to Rio in addition to the
500 kilogrammes of gold which they already had there and a further
$1,000,000 in notes probably to Buenos Aires as a reserve against
their requirements in South America or elsewhere. These amounts
have not been included in budgets for Chanceries and it is not
intended to use them for the finance of the South American posts
unless absolutely necessary. For this reason these sums were not
included in the particulars of the resources of the Chanceries which
had been given to the United States authorities. If it was now
thought advisable to inform the United States authorities of the
existence of these resources the instruction was to emphasize that
it would be an unusual step for the United States Government to
refuse to release funds unless the French had no other means of
financing these expenditures.
BRITISH EMBASSY,
WASHINGTON, D.C.,
12th December, 1941
Copy:ec:12-15-41
C
376
0
P
DEPARTMENT OF STATE
Y
WASHINGTON
December 13, 1941
In reply refer to
FF 840.51 Frozen Credits/4600
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and transmits
herewith paraphrases of certain telegrams with reference
to the Department's circular telegram of December 8, 1941
to all diplomatic and consular establishments in the
American republics. The paraphrases are as follows:
Number
220
1417
520
From
Date
Asuncion
Buenos Aires
Quito
12/10/41
12/10/41
12/10/41
12/10/41
12/9/41
744
Mexico City
528
Montevideo
The Secretary of State also encloses herewith copies
of certain other telegrams with reference to the Department's circular telegram of December 8, 1941. These are
as follows:
Number
From
Ciudad Juarez
532
Enclosures:
As stated.
Copy :bj:12-16-41
Montevideo
Date
12/10/41
12/10/41
c
0
377
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMLEGATION, Asuncion
TO :
Secretary of State, Washington
DATED:
December 10, 1941, 5 p.m.
NUMBER:
220
$67,000 of Japanese funds in the Bank of Republic
have been blocked by the Government pending interAmerican agreement in the matter.
Copy :bj:12-16-41
0
0
P
Y
378
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMEMBASSY, Buenos Aires
TO:
Secretary of State, Washington
DATED:
December 10, 1941, 3 a.m.
NUMBER:
1417
Today there was delivered to the Foreign Office a
note embodying the substance of Department's circular of
December 8, 6 p.m. The Foreign Office was assured that the
matter would be promptly taken up with the Finance Minister.
Again this afternoon the subject was discussed with
Grumbach of the Central Bank and a copy of the note was
handed to him. Grumbach informed me that Central did not
instruct commercial banks to consult Cao prior to permitting
Japanese funds to be transferred, as suggested by him
yesterday that may be possible because of the regulations
in the Bank's circulars 244 of September 1 and 246 of
September 12, make it unnecessary. Under the provisions of
these circulars, transfers of Japanese funds without
Central Bank authorization are prevented with certain
exceptions. Confidentially he added that only in certain
limited cases involving "normal" requirements of the
Japanese Embassy was such authorization being granted.
379
The question is being promptly and carefully studied as
to whether necessity would require additional measures,
he stated, and that in the interim of government could
rest assured that no Japanese Government or bank funds
would be released. He said that the October shipment of
Japanese gold was used to pay for Argentine products sent
to Japan, with the exception of one million pesos being
held here as appraisement security for gold already
blocked. Commenting upon the Embassy's note, he said
the economic measures enacted by the United States were
measures of "a country at war", thus implying that the
adoption of certain measures, such as blocking Japanese
residents' peso accounts, were not contemplated by the
Central Bank.
Copy:ec:12-16-41
C
0
380
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMLEGATION, Quito
TO :
Secretary of State, Washington
DATED:
NUMBER:
December 9, 1941, 6 p.m.
520
The same measures as contained in Department's
circular of December 8 has been adopted by Ecuador,
according to the Finance Minister with the following
exceptions: (1) concerning safety deposit boxes, banks
will be advised tomorrow; (2) instructions have not been
placed upon the use of their funds within Ecuador by
Japanese residents; (3) as stated in Legation's telegram
508, December 8.
Copy : bj:12-16-41
C
0
381
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMEMBASSY, Mexico City
TO :
Secretary of State
DATED:
December 10, 1941, 7 p.m.
NUMBER: 744
Between four and five million pesos comprising in
large part collection funds in Mexican banks pending
transfer to Japanese banks blocked by recent Mexican
Treasury freezing order. This order is rigid and permits
no withdrawals for any purpose due to this freezing order
and to the conflict between United States and Japan. On
December 8 two million pesos and on December 9 six million
pesos were withdrawn from banks by French and Spanish
nationals and today withdrawals continue heavy. Such
withdrawals indicate fear by Spanish and French that
their funds may be blocked, but this action does not
present a probelm for the Bank of Mexico. There is an
increase in the sale of gold coins and large peso bills
by the banks for hoarding purposes.
The controls contained in the Department's circular
under reference will be submitted by the Foreign officer
to the Minister of Finance for adoption to the extent in
which they can be applied to Mexico.
Copy:bj 12-16-41
C
0
P
382
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMEMBASSY, Montevideo
TO:
Secretary of State, Washington
DATED:
December 9. 1941, 6 p.m.
NUMBER:
528
Contents of both messages from the Department were
immediately discussed at length with Guani and cooperation
was promised by him. He has now approached the Minister of
Finance and consideration is being given for an appropriate
decree in the matter.
Guani instructed the Bank of the Republic to block any
Japanese funds without awaiting decree. This has been done
and the Bank is cooperating fully. Cooperation of private
banks has also been enlisted.
Very limited Japanese funds are held here according to
best available information. From 80 to 100 dollars of such
funds is held by the Bank of the Republic according to its
statement. Accounts in private banks, it is believed, are neg-
ligible or non-existent. It is believed by the National City Bank
that Japanese firms for some time have been transferring to
Buenos Aires funds collected here. Only the Bank of the
Republic can clear Japanese merchandise now lying in customs
valued at two million yen.
Copy:1c: 12/16/41
C
0
P
383
Y
PH
PLAIN
Ciudad Juarez
Dated December 10, 1941
Rec'd 8:41 p.m.
Secretary of State,
Washington.
Tenth.
All Japanese funds have been frozen including Mexican
naturalized Japanese by banks in this district acting
under instructions of Mexican Government. Details airmail.
GW
Copy: 1c:12/16/41
BLOCKER
C
0
P
384
Y
AMT
PLAIN
Montevideo
Dated December 10, 1941
Rec'd 4:22 p.m.
Secretary of State,
Washington.
532, tenth.
Department's Triple Priority circular Eighth,
6 p.m.
Uruguayan Government issued decree yesterday
prohibiting the transfer abroad of funds, merchandise,
or securities, of any kind and under any circumstances
for Japanese nationals or entities. At the same time
the decree prohibits any local financial or other
transactions on the part of Japanese nationals or
entities with the sole exception that drafts on Japan
or on Japanese firms already issued may be sold and
the proceeds impounded in the bank of the Republic.
Full text of decree follows by air mail.
JRL
Copyilc:12/16/41
DAWSON
385
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE December 13, 1941
TO
Community
Secretary Morgenthau
FROM Mr. Dietrich
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£24,000
Purchased from commercial concerns £10,000
Open market sterling remained at 4.03-3/4. The only reported transaction
consisted of £5,000 purchased from a commercial concern.
The Argentine free peso, which reached a new high of .2405 yesterday, reacted to close at .2395 today.
In New York, closing quotations for the foreign currencies listed below
were as follows:
Canadian dollar
Brazilian milreis (free)
11-3/4% discount
Uruguayan peso (free)
Venezuelan bolivar
.0516
.5775
.2065
.5310
.2665
Cuban peso
1/32% discount
Colombian peso
Mexican peso
There were no gold transactions consummated by us today.
No new gold engagements were reported.
A
386
BRITISH EMBASSY
WASHINGTON, D.C.
13th December, 1941.
PERSONAL AND SECRET
Dear Mr. Secretary,
I enclose herein for your personal
and secret information a copy of the latest
report received from London on the military
situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
(For the Ambassador)
R.I. Captell
The Honourable
Henry Morgenthau, Jr., ,
United States Treasury,
Washington, D.C.
Copy No.
13
387
BRITISH MOST SECRET
(U.S. SECRET)
OPTEL No. 32
Information received up to 7 a.m. 11th December, 1941.
(I) NAVAL
H.M.S. PRINCE OF WALES and H.I.S. REPULSE were sunk by air
attack at about 0650 on 10th, 140 miles North North East of SINGAPORE, One high
level and 3 torpedo bombing attacks were made on H.I.S. PRINCE OF WALES and hits
scored with one bomb probably a one thousand pounder and 4 or 5 torpedoes. One
high level attack and one torpedo bombing attack were made on H.M.S. REPULSE and
hits scored with one or more bombs and 2 or 3 torpedoes. Each torpedo bombing
attack was carried out by 9 aircraft and all attacks were pushed well home and
skillfully carried out. About 7 aircraft were shot down,
On 5th, one of H.M. submarines in Southern approaches to
Straits of MESSINA obtained one hit on a 4 thousand tons half laden merchant
vessel in convoy escorted by torpedo boats. Owing to counter attack, the result
could not be observed.
A homeward bound convoy from CANADA was attacked on 10th
about 300 miles West of IRELAND. 2 unknown ships were torpedoed but are still
afloat,
(II) MILITARY
LIBYA. 9th. Our mobile forces had a successful day and
continued to harass the enemy in a Westerly direction from EL ADEM, Junction
between our forces in TOBRUK and those outside has not been firmly established
and road from East has been opened. Our artillery shelled concentrations of M.T.
Southwest of EL ADEM, Enemy gun positions covered by armoured cars were attacked
and about 40 enemy tanks were engaged by our armoured forces. In coastal area
our patrol are clearing up remnants of enomy and near the TRIGH CAPUZZO they
located and destroyed 38 enemy tanks in work shops. MERSA LUCCA was occupied
by our troops in evening.
10th. Mopping up in EL ADEM area continues. Small pockets
of enemy infantry and armoured cars possibly of Ariete Division were located in
area North of BIRHAKEIM.
MALAYA. At KELANTAN patrol troops have been reorganized
and are reported nearly intact. It is estimated that (?about) one enemy division
has landed in this area.
-2-
388
Our central column on KROH road has met slight enemy oppo-
sition.
KEDAH Area. Contact with enemy was established in early
hours just North of CHANGLUN,
KUANTAN. No further enemy attacks reported. Heavy scale of
air attack has made majority of Northern aerodromes unserviceable; demolitions
have been carried out at ALORSTAR aerodrome.
RUSSIA. The Ruesian claim to have retaken TOKHVIN is be-
lieved to be correct.
GILBERT ISLANDS. Japanese have apparently landed at TARITARI
and TARAWA,
U.S. It is believed Japanese troops have occupied GUAM and
TAKE ISLANDS and have landed on North and West coast of LUZON, PHILIPPINE Islands,
STAM. A Japanese Force of about 2 divisions is continuing
to move into SIAM from Southern INDO-CHINA, 2 to 3 Japanese Divisions have been
landed on East coast of KRA Isthmus.
(III) ATR OPERATIONS
10th. 8 Hampdens laid mines off Dutch coast and 8 other
attacked military objectives near mouth of EMS, A Hudson probably hit a 2500
ton merchant vessel off NORWAY.
LIBYA. 8th/9th and 9th, Dispersed aircraft at DERNA and
EL TMIMI aerodrome and M.T. in the vicinity were bombed.
9th. Fighter sweeps were carried out throughout the day
over EL GOBI-EL ADEM-TOBRUK area during which several formations of German
fighters were met. 7 enemy aircraft were destroyed, one probably destroyed, and
6 damaged. 9 of our aircraft are missing and certain more have not returned but
may have landed at TOBRUK.
9th/10th. Wellingtons in a 6 hour attack dropped over 36
tons of bombs on store depots West of TRIPOLI. At least 6 large buildings were
destroyed and numerous fires were started which merged into one large conflagration. M.T. vehicles were also machine gunned,
(IV) ENEMY ACTIVITY
JAPAN. It is estimated that there are now about 400 aircraft in French INDO-CHINA and SIAM. A general air movement Southwards continue
About 80 long range fighters have moved to PATANI aerodrome near Northern
Malayan Frontier.
TREASURY DEPARTMENT
389
INTER OFFICE COMMUNICATION
DATEDecember 13,1941
Secretary Morgenthau
TO
Mr. Kamarck
FROM
Subject: Summary of Military Reports
Pacific Front
According to our Military Intelligence, there are two
Japanese divisions attacking the British in Melaya in the
Singapore thrust. The strength of the Philippine landings
is still undetermined. The British estimate two divisions
are attacking Hong Kong.
It is believed that two Japanese aircraft carriers
attacked Hawaii and that these were the Saryu (carrying
12 fighters, 12 torpedo bombers, and 18 dive bombers) and
the Ziukaku (carrying 12 fighters, 36 torpedo and/or dive
bombers). American bomber reinforcements from California,
taking off from Hawaii, were unable to find the carriers.
The Japanese landings against Malaya were covered by
one battleship, two cruisers, one aircraft carrier, and
a number of destroyers.
If Japan is able to protect her shipping, she will be
able to secure valuable supplies of strategic commodities
from Thailand. Together with the Indo-Chinese supplies,
Japan will have a surplus of rubber, valuable supplies of
tin, substantial quantities of rice more than enough to
meet her needs, useful supplies of hides, and small but
useful quantities of wolfram (tungsten) and zinc. Prior
to occupation, Japan secured all the rice and hides she
asked
for, most of the rubber, but less than one-third of the
tin.
(U.K. Embassy, Operations Report, December 11,1941;
M.I.D., Situation Report, December 12,1941)
-2- 390
Western European Front
In the week, November 27 to December 4, there was no
submarine activity on the North Atlantic convoy routes.
The U-boats are now concentrated in the area east and west
of Gibraltar. At least four are operating in the South
Atlantic. (This may be another indication of German preparation for a move into Spain and Northwest Africa).
(U.K. Embassy, Operations Report, December 11,1941)
The German Air Force appears still to be pursuing its
policy of saving their long-range bombing force on the
Western Front. (Thirty of the long-range Ju-88 bombers,
it was lately reported, were moved from Holland to Sicily).
(U.K. Embassy, Operations Report, December 11,1941)
Russo-German Front
The Spanish division in Russia has been reduced from
20,000 men to less than 14,000 by battle casualties and
sickness. The division is now believed to be employed in
protecting lines of communication in the southern sector.
(The division arrived in Russia fairly recently and has
already sustained casualties of 30 percent).
(U.K. Embassy, London Report, December 11, 1941)
According to the British, the Russian Air Force is
very active in all sectors. It is giving remarkably good
support to its own troops, while making continuous attacks
on the Germane. During the past few weeks, the Russians
have had numerical and operational superiority on the whole
front south of Kursk (1.e., the Southern Front) and local
air superiority at a number of points between Kalinin and
Tula (i.e., the Moscow front).
The continued low scale of German air operations on
all sectors of the Russian front is probably due to prolonged
bad weather (which apparently does not hamper the Russians
as much) and the withdrawal of all types of units to Germany
for refitting. The German ground troops have, thus, been
deprived of their habitual scale of air support and at the
same time, the Russian air force has been enabled to operate
with increasing effect.
-3- -
391
The Russian success at Rostov also helps the air
situation. Taganrog had been made an important advanced
air base. Loss of this will hurt the effectiveness of
German operations in this area. The loss of the supplies
and equipment accumulated in the forward area must inevitably have a delaying effect on further air operations
directed against the Caucasus.
The Russian counter-attack at Rostov will retard by
at least three weeks and possibly much longer the German
time-table for a subsequent move into the Caucasus.
(U.K. Embassy, Operations Reports, December 10,11)
Libyan Front
In Libya the R.A.F. has maintained air superiority
while the German Air Force has not been very active. This
is probably due to Axis supply difficulties, British
attacks on airdromes, and the lack of fighters. The
Germane appear to have difficulties in maintaining the
serviceability of their Ju-88 bombers under desert conditions.
(U.K. Embassy, Operations Report, December 11,1941)
Balkans
It is estimated that the total number of German divisions in the Balkans remains at 14 (280,000 men). (This
would indicate that, as yet, the Germans are not preparing
for a move against Turkey).
(U.K. Embassy, Operations Report, December 11,1941)
The rise in the level of the lower Danube due to heavy
rains indicates that the river is unlikely to freeze early
this winter, (thus the German oil transport will be helped).
(U.K. Embassy, Operations Report, December 11,1941)
RESTRICTED
G-2/2657-220; No. 568
392
M.I.D., W.D. 11:00 A.M., December 13, 1941
SITUATION REPORT
I.
Pacific Theater.
No change reported in Hawaii. Navy reports contact with
Wake, Johnston, Palmyra, and Midway as of 6:00 a.m., the 12th. Navy-confirms loss of Guam. Hong Kong: Press reports state Japanese have
made substantial gains on the Chinese mainland toward the harbor.
Thailand: Netherlands submarines are reported by the press to have
sunk four Japanese troop ships off Patani in South Thailand. Malaya:
The situation apparently is unchanged. Costa Rica: Punta Arenas
fishing boat, with Japanese crew, carrying fuel oil cargo and flying
American flag, was forced to return to port by U.S. Naval patrol planes. Crew arrested.
II.
Eastern Theater.
Ground: The situation at Leningrad remains unchanged.
The Soviet Information Bureau announces that the
Russian forces in general counterattacks on the Moscow front have
cleared the Dmitrov salient to the Moscow-Kalinin road. In a coun-
terattack against the Tula-Ryazhsk salient the Germans have been defeated and the Russians have captured Yenev, Stalinogorsk and Yepifan.
The Germans deny defeat and claim to be retiring to a previously se-
lected line and stabilizing for the winter.
III.
Western Theater.
Air: It is reported that British bombers attacked the docks
at Brest and Dunkirk in occupied France last night. Bombers of the
Coastal Command attacked the oil refinery at Donges, near St. Nazaire,
starting a large fire. Yesterday, British fi giters maintained offensive patrols over occupied territory. R.A.F. bombers carried out their
third consecutive day of offensive over northwestern Germany and occu-
pied territory. An oil refinery at Emmerich, on the Dutch-German border, was attacked. Other objectives were bombed at Nieuport in the
Netherlands and Calais.
IV.
Middle Eastern Theater.
Ground: Pursuit of Axis forces northwest of Gazala continues, Axis rear-guard at that point having been by-passed. Axis materiel and personnel losses have been heavy. Situation in frontier area
unchanged.
Air: British raids yesterday at Comiso and Crotone in the
Calabria area of southern Italy and on Sicily were admitted by the
Italian High Command. The British were also admitted to have made
raids on Tripoli in Libya and Patras in Greece. According to Italian
High Command, German planes in Libya made dive bombing attacks on Brit-
ish motorized columns. Ten British planes were said to have been shot
down by the Axis in Libya yesterday.
RESTRICTED