Full text of Diaries of Henry Morgenthau, Jr. : Volume 480 : Part 1

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DIARY

Book 480

December 30 and 31, 1941

-Book Page

Airplanes

Production picture (present) discussed by Lovett and

HMJr - 12/30/41
Alien Property Custodian

480

36

Olson (Governor of California) wires HMJr concerning
set-up - 12/30/41

107

Byrnes 'phones HMJr concerning appointment of
Crowley - 12/31/41

192,194

a) Foley told of conversation - 12/31/41
Byrnes asks Foley's opinion of Order "vesting in
designated officers certain powers and authority
with respect to property in which there is a
foreign interest" - 12/31/41
a) Byrnes tells HMJr of conversation with

Hopkins - 12/31/41
b) Foley memorandum on conference with Byrnes 12/31/41

196

202
211

212

-Berlin, Irving
"I Paid My Income Tax Today" - HMJr thanks Berlin
for song - 12/30/41
(See also Book 482, page 285 - 1/6/42)
British Purchasing Mission
Vesting order sales - 12/31/41

82

270,271,
272,273

-China

Burma Road: Leland Stowe's story of conditions there
discussed at 9:30 meeting - 12/31/41

170

Crowley, Leo

See Alien Property Custodian

-DDefense, National

Transfer of functions and consolidation of agencies:
Budget asks Treasury canvass - 12/31/41

264

Defense Savings Bonds
See Financing, Government

-EExchange Market

Resumes - 12/30-31/41

164,305

Exports

To Russia, China, Burne, Hong Kong, Javan, France, and
other blocked countries, week ending December 20. 1941

142,275

-FBook Page

Financing, Government

Great Britain--U.S.S.R.: Cancellation of indebtedness
to United States arising from first World War

covered in draft of bill sent to FDR - 12/31/41

Defense Savings Bonds:

480

285

Series E - Supply in the Field: Haas memorandum 12/30-31/41

Voluntary Payroll Allotment Plan: Letter to

103,250

Secretary of Navy and Secretary of War concerning -

12/31/41

235,241

-G-

Great Britain
See Financing, Government
H-

Henderson, Leon

See Office of Price Administration and Civilian Supply

-I"I Paid My Income Tax Today"

See Berlin, Irving; Reyenue Revision

-LLend-Lease

Allocations and obligations through December 29, 1941.
Libraries - Joint Committee on Importations

268

Licensing of importations from Germany and Germandominated countries discussed in Foley-Pehle
memorandum - 12/30/41

88

-M-

Military Reports
Reports from London transmitted by Halifax 12/30-31/41

Coordinator of Information reports:
The Burmese and the War - 12/31/41
The German Military and Economic Position - Summary
and Conclusion - 12/31/41
"The War This Week" - 12/24-31/41
German Morale, Winter 1941-1942
Kamarck summaries - 12/30/41, 12/31/41

Minister of Supply
See Supply, Minister of

166,307
313
315
316
317

168-A,378

-0Book

Page

480

173

Office of Price Administration and Civilian Supply
Henderson's request to see income tax returns
discussed by 9:30 group - 12/31/41

Olson, Culbert L. (Governor of California)
See Alien Property Custodian

-PProcurement Division
Tires: Lubin asks HMJr concerning arrangement whereby

Procurement would contact dealers direct rather
than do business with factories - 12/30/41
a) HMJr-Mack conversation

b) HMJr tells 9:30 group of conversation with
Lubin - 12/31/41

69

72

172

-R-

Research and Statistics, Division of
Report on projects for September 1941

109

Revenue Revision

"I Paid My Income Tax Today" - HMJr thanks Berlin
for song - 12/30/41
(See also Book 482, page 285 - 1/6/42)

82

-SStowe, Leland
See China: Burma Road

Strauss, Alfred B.
$25.00 contributed toward "War Chest for Offense" 12/30/41

231

Supply, Minister of
Cox tells HMJr Byrnes and Monnet both endorse
him (HMJr) - 12/30/41
a) Byrnes-HMJr conversation - 12/31/41
Switzerland

Privilege asked of transfer of part of gold now on
deposit in New York - 12/30/41

-TTaxation
See Revenue Revision
Tires

See Procurement Division

-UU.S.S.R.

See Financing, Government

1

201

156

1

December 30, 1941

Oscar Cox called up last night and said that he had

talked to Judge Jimmy Byrnes in the morning (that was where
he was instead of coming to my nine o'clock meeting yester-

day morning), and he is entirely sold on a Minister of
Supply and that I am the only person who can do it. He

had lunch with Jean Monnet, who had been a strong advocate
of giving more power to the Army and Navy, and at the end

of an hour yesterday Monnet was enthusiastic for a Minister

of Supply and for me to do it.

Cox said that the thing which was so amazing to him

was that it took a full year to appreciate what I did prior
to the 15th of March. He has not as yet run into anybody
who is not for me for the job.

1

December 30, 1941

Oscar Cox called up last night and said that he had

talked to Judge Jimmy Byrnes in the morning (that was where
he was instead of coming to my nine o'clock meeting yester-

day morning), and he is entirely sold on a Minister of
Supply and that I am the only person who can do it. He

had lunch with Jean Monnet, who had been a strong advocate
of giving more power to the Army and Navy, and at the end

of an hour yesterday Monnet was enthusiastic for a Minister

of Supply and for me to do it.

Cox said that the thing which was so amazing to him

was that it took a full year to appreciate what I did prior
to the 15th of March. He has not as yet run into anybody
who is not for me for the job.

2

December 30, 1941

H.M.JR: Senator Walter George called me in answer

to my telephone call of yesterday. He was very friendly.
I told him the whole story, how I had expected to hear

from Senator Walsh two Fridays ago before Cabinet, that

he finally called me and said he couldn't give me an
answer until he talked to Martin Dies and Landis and
his conduct of the Bridges trial, and I said it seemed

to me that it wasn't up to Senator Walsh to criticize
Landis, who was sitting as a judge. It wasn't his
personal opinion. Then he was to let me know last
Tuesday, and he didn't and I said, "I may have done

something very foolish, but I did it." I said, "I

want you to know about it. Senator Walsh told me that
the Democrats in Massachusetts would be opposed to Landis,'

and that I had gotten in touch with Mayor Tobin and Mr.
Daugherty, Commander of the American Legion for Massa-

chusetts, and John McCormack. They all were for Landis,
and they had all promised to speak to Walsh, as a result

of which walsh is very angry at me. I said I had been
in touch with Senator Barkley and that he said he didn't

know whether the position of Undersecretary was subject

to the usual rules of the Senate or personal privilege.
George suggested there was some question about it.

Barkley talked to him, but he said he was under the

impression the last time that he talked to Walsh, that

Walsh was going to go along, and he was survrised to

hear that he wasn't. So I said, "Well, Walter, I would
like to put myself in your hands and Alben Barkley's

hands and if you say I can go ahead, the two of you say

I can go ahead, I will go ahead, and if you say I should

drop it, I will drop it, but I am going to put myself

in your hands and in Barkley's hands. " So he said,
"Well, I will get in touch with Barkley and Walsh and
call you back this afternoon." If Barkley and George

say to me, "No go"--

MRS. KLOTZ: Then there is nothing you can do.

3

December 30, 1941
9:12 a.m.
HMJr:

Robert
Nathan:
HMJr:
N:

HMJr:

I'm sorry to have bothered you, but I'm seeing the
President this morning at ten-thirty.
Well,
then. I'd better arrange to come over right away
And I wondered 1f you had that bomber thing.

Yes. I'11 come over right away with it.
Well,
if you get here by ten o'clock, it would
be time enough.

N:

Fine.
All right, I'11 be in your office by ten,
sir.

HMJr:

Thank you.

N:

All right. Good-bye.

4

December 30, 1941
9:15 a.m.

PRESIDENT'S BUDGET MESSAGE

Present: Mr. Blough
Mr. Haas

Mr. Knollenberg

Mr. Bell

Mr. Paul
Mr. White
Mr. Tarleau

Mr. Sullivan

Mrs. Klotz

H.M.JR: Mr. Bell has got some information as of

last night which will throw some light on the matter
(Paul). Well, we have got a new slogan in the Wall

Street Journal, "Win the War Taxes.

MR. PAUL: And it is the Wall Street Journal, too.

H.M.JR: I like it. I think it is a swell slogan,

"Win the War Taxes."

Did you see the headlines in this morning's Washington Herald on those few little remarks I made yester-

day?

MR. PAUL: I read an account of it.

H.M.JR: The point of Bell's story is that the
President's victory program is not ready, so it is not
going to be included in the budget. Your fifty-six

5

-2-

billion-MR. PAUL: Oh, I see what you mean.

H.M.JR: It is a much lower figure.
(Mr. Bell and Mr. Knollenberg entered the conference.)

(The Secretary, Mrs. Klotz, and the reporter left
the conference temporarily after a telephone call to

the Secretary from Senator George.)

MR. BELL: On the 1943 budget the expenditures are

estimated at forty-three billion five. That does not

include the victory program which will go up within the
next thirty days. This victory program, as I understand
it will amount to somewhere around thirty million and
they expect to spend out of that victory program approximately ten billion dollars in 1943, which will make
your expenditures for that year, as far as they can see

them now, around fifty-five billion dollars. Your

receipts are estimated, exclusive of Social Security

taxes, at sixteen billion four. That leaves you a
deficit on the basis of the budget of twenty-nine bil-

lion, and if you add the expenditures--

MR. PAUL: That compares with the forty we had
before.

MR. BELL: That is right, but the forty included
the victory program. If you add ten billion out of the
victory
dollars. program, it gives you around thirty-nine billion
MR. PAUL: So we are not so very different.

MR. BELL: Not so very different, no.
MR. WHITE: Is that two billion RFC money that

you spoke of?

MR. BELL: No, one million in 1943 of RFC money

6

-3-

makes thirty billion dollars that we will have to
borrow in 1943 exclusive of the victory program. Adding
the victory program, it will be just forty billion
dollars and that is exclusive of new taxes.
H.M.JR: Do it now once more for me, Dan.
MR. BELL: From the beginning?
H.M.JR: Yes.
MR. BELL: The 1942 budget, expenditures are now

estimated at twenty-nine billion five hundred million.
Receipts are eleven billion nine. It gives you a
deficit of seventeen billion six. The RFC is estimated

at two billion.

H.M.JR: Which way?

MR. BELL: Expenditures. That gives you nineteen

billion six that you have to borrow in 1942. Your

deficit to date is running a little over seven billion,

so you have still got to borrow eleven or twelve billion

between now and the end of the year.

H.M.JR: Oh, this is for the rest of the year?
MR. BELL: Well, this is the whole year. What

your deficit is up to date is about - well, I would
say eight billion, including RFC, so that you will

have to borrow about another eleven billion in the next
six months.

H.M.JR: Well, when you and I went out on the end
of a limb on eighteen billion exclusive of RFC which we

didn't have in mind, we weren't so far off.

MR. BELL: Well, that was national defense. That
was nineteen billion dollars in expenditures.

H.M.JR:
confuse
it now.No, deficit. Well, anyway, we won't

4

MR. BELL: That is the '42 picture. Half of it

is gone. The 1943 budget, total expenditures exclusive

of the victory program, forty-five billion five hundred
million. Receipts, sixteen billion four.

H.M.JR: Just a minute. This forty-five, five

is expenditures, what?

MR. BELL: Yes, sir. Receipts, excluding Social
Security, sixteen billion four. That gives you a
deficit of the twenty-nine billion one. The RFC net
expenditures are about a billion, so that gives you
total borrowing
of about
billion
point one for
1943. thirty billion dollars, thirty
Now, the victory program will go up within the
next thirty days and there will be approximately thirty

billion dollars, of which we will spend ten in 1943.

H.M.JR: Well, now, let's just stop there a minute.

You and I have gone through a lot of these budget things
with the President. Didn't he once leave out WPA and

do it later to make the picture look better?

MR. BELL: Yes, and I think that is what is going

to happen here.

H.M.JR: But, Dan, just check me.

MR. BELL: Yes, he did that on a number of occasions.

H.M.JR: Well, if he says to us, "What is the
picture? Do you want to go beyond that? Don't you
think it is up to the Budget Director?" we can say,
"Of course, Mr. President, we don't know what your
victory program is."
(Mr. Haas entered the conference.)

MR. BELL: Oh, I don't think we need to discuss
any of these figures. I think the President has had
them before him and he knows the victory program and

-4--

MR. BELL: That is the '42 picture. Half of it

is gone. The 1943 budget, total expenditures exclusive

of the victory program, forty-five billion five hundred
million. Receipts, sixteen billion four.

H.M.JR: Just a minute. This forty-five, five

is expenditures, what?

MR. BELL: Yes, sir. Receipts, excluding Social
Security, sixteen billion four. That gives you a
deficit of the twenty-nine billion one. The RFC net
expenditures are about a billion, so that gives you
total borrowing
of about
billion
point one for
1943. thirty billion dollars, thirty
Now, the victory program will go up within the
next thirty days and there will be approximately thirty
billion dollars, of which we will spend ten in 1943.

H.M.JR: Well, now, let's just stop there a minute.

You and I have gone through a lot of these budget things
with the President. Didn't he once leave out WPA and

do it later to make the picture look better?

MR. BELL: Yes, and I think that is what is going

to happen here.

H.M.JR: But, Dan, just check me.

MR. BELL: Yes, he did that on a number of occasions.

H.M.JR: Well, if he says to us, "What is the
picture? Do you want to go beyond that? Don't you
think it is up to the Budget Director?" we can say,
"Of course, Mr. President, we don't know what your
victory program is.
(Mr. Haas entered the conference.)

MR. BELL: Oh, I don't think we need to discuss
any of these figures. I think the President has had
them before him and he knows the victory program and

8

-5knows it isn't going in the budget.

H.M.JR: Well, look, I just want to stop at
this pointinafor
minute
if you don't mind. Have you put
anything
new taxes?
MR. BELL: No, sir, there is nothing in there.

H.M.JR: Well, we would start right there. I am
going to do a little kidding myself, too. I am going
to take a leaf from Roosevelt. The reason I am going
to do it is this, gentlemen: If we stop at thirty
billion dollars and then the President - and fix a
tax program to take care of that, and then the President sends up twenty, thirty, or forty billion dollars
on top of it, then we come along with another tax
bill.
MR. PAUL: That is right.

H.M.JR: I mean, I am going to take a leaf out of I didn't know this. How could I know this?
MR. PAUL: In other words, our tax program is based
on these figures.

H.M.JR: All right?
MR. KNOLLENBERG: All right.

H.M.JR: And that lets me kind of slide around on
your side. Then in February, when he comes along with

twenty, thirty, or forty billion, well, my God, how
should I know? That is terrible. I need another ten
billion taxes. The idea is this, George and Harry,

these gents, these extreme left wingests, taxers, you
see, these lovers of great business, can give me a

little two by four tax bill, see. It was so small it

just shocked me. I had to go to bed. I couldn't
take
it. All they
could possibly scrape up was another
five billion
dollars.
MR. SULLIVAN: No.

-6-

9

MR. PAUL: No, that isn't quite right.
H.M.JR: Exclusive of-No, no, exclusive of Social Security,
sevenMR.
andSULLIVAN:
a half.
H.M.JR: Now, wait a minute, you have got to do it

all over again. Individual income taxes, one, O.K.;
estate,That
two hundred,
three.
is three-- O.K.; the corporate taxes,

MR. PAUL: That is a range figure, two to three.

H.M.JR: I am taking the highest to give you the
benefit. Four billion two. The most on the whole
thing was five hundred million.
MR. PAUL: I think that is too small.
MR. SULLIVAN: I think it is too big.
MR. KNOLLENBERG: I think it is about right.

H.M.JR: Well, add another two hundred fifty million

to split the difference. It is still not five billion.
MR. SULLIVAN: You have got Social Security of
two billion
there.
H.M.JR: The statement I made was, exclusive of

Social Security, it is a scant five billion dollars.

MR. SULLIVAN: That is right, and I say you take
out yourinSocial
dollars
taxes.Security and you can get your two billion
H.M.JR: And the two hundred million estate and

don't get
a year or two afterward, so
Igifts
saidyou
a scant
fiveuntil
billion.
MR. PAUL: It might go bigger, though. I think

10

-7 we can get up loopholes, but I can't get the boys to
go up on me. I think we might be able to get that
one billion top up, but I haven't had time to check
it through a rate schedule.
H.M.JR: Now, what I want, Dan, what this is, you

see, is a scant five billion. Now, with the thirty
billion dollars, you, as my chief fiscal officer here,
what is your reaction?

MR. PAUL: Before Dan speaks, can I use my adjective

on that program? You called it scant. Yesterday I
called it anemic. (Laughter)

H.M.JR: All right.

MR. BELL: Well, if you get - is this five billion

dollars in 1943 or is it just an annual program?
MR. SULLIVAN: No, '43.

MR. BELL: Five billion dollars in 1943?
MR. SULLIVAN: At the annual rate of that.

MR. BLOUGH: It won't give you five in '43.

MR. BELL: It will not?
MR. SULLIVAN: About two thirds of that.

MR. PAUL: That will partly depend on what part of

it we make withholding.

MR. SULLIVAN: That would give you less than forty-

five percent of your program in taxes and if you add the
victory program, it is even going below forty.

H.M.JR: Well, let's forget the victory program,
because I am saying, in the room, there is a victory

program, and then we come along with another tax bill.

MR. BELL: I think it is enough if you are going

-8-

11

after another program, after the victory program.

MR. PAUL: I called Jack Viner last night after
I left you to get his views, and he was tentatively he said just like Dan says, "We will have to have
another bill later in the year." "

MR. BELL: Well, the basis of forty billion
dollars, I don't think it is enough.
H.M.JR: Forty billion?
MR. BELL: Yes, but on the basis of this deficit,
I would say it is enough.

H.M.JR: Well, let's just talk this deficit,
because I take it this is what is going to be referred
to in the budget message, a deficit of thirty billion.
If we
get another five, does that lower your deficit
to
twenty-five?

MR. BELL: I understand you won't get five.
Twenty-nine billion and take off five, and it would

give you twenty-four billion dollars. That is still

a sizeable
month.

borrowing program, two billion dollars a

H.M.JR: Are you satisfied with that?
MR. BELL: I would rather talk about the whole

program.

H.M.JR: But you can't, Dan.

MR. BELL: I am not satisfied with the five billion

dollar program.

H.M.JR: But you can't.

MR. BELL: For this picture that is facing us.
H.M.JR: Look, we have got to do a little kidding

12
9-

here and when the other thing goes up we will make a

reservation. What do you call it before the court?
MR. PAUL: An exception?

H.M.JR: An exception.
MR. SULLIVAN: When is this going up, sir?

H.M.JR: Well, if you had asked me yesterday
afternoon, as a betting man you could have collected
a lot of money from me, because I would have given you
odds of three to one it was in the message. I am

simply astonished it isn't, and I think the country
is going to be. What is the use of everybody fooling
around? If the President of the United States doesn't
know what his victory program is - that thing - I will
tell you what the date was. I was told by Stimson.

He had orders to have it ready either September 8 or
September 11, with the orders that he had from the
President. Either September 8 or September 11 of this

year.

MR. BELL: It was published a month ago.
H.M.JR: September 8 or September 11.

MR. SULLIVAN: Do you think it will be going up

there before the first of February?
MR. BELL: Yes, I do.
John.

H.M.JR: Your guess now is as good as anybody's,

MR. SULLIVAN: I don't think it would be wise for
us to come in and get caught ten days later with this
other thing.

H.M.JR: Well, it might not be wise, but it might

be necessary.

MR. BELL: Well, I don't know--

- 10 -

13

MR SULLIVAN:
to avoid
that, sir. I think we ought to take every step
MR. WHITE: Though you may technically go on this

basis, I think Congress and the public have a right
to expect that you are not wholly blind as to what is
in the wind. Therefore, with respect to what you say,

you must know there is a very large program coming.

You don't know what it is going to be, but you know

it is going to be large. So it is all right if you

like to come forth with this kind of a program providing your exception is clearly stated that this program is based upon present deficit expenditures, that
if there is going to be any--

H.M.JR: Don't counsel, Harry. I can't take it

today.

MR. BELL: I am not so sure, Mr. Secretary, that
the program is not yet going in the Budget, but last
night they thought that it could not be gotten ready,
but I should think that the President would say some-

thing
in his message about a supplemental coming along
for
victory.

H.M.JR: This makes us look awfully foolish. Don't

use
victory over there. He hates it. The victory program is how much?
MR. BELL: Thirty-three million dollars that has

been submitted.

H.M.JR: Let's say thirty billion just for argu-

ment. Then we come along and say after the thirtieth that
we want another five billion in taxes.

MR. BELL: Well, let's put it this way, Mr.

Secretary. This budget shows an increase of sixteen

billion dollars over the '42 and you are asking for
five billion dollars in taxes to cover that additional
expenditure which is only one third. Now, if the
victory program is going to add to your budget only

- 11 -

14

ten half
billion
dollars
for '43, I don't think you can ask
for
of that
increase.
H.M.JR: But that is your estimate, Dan, of what

they are going to spend.

MR. BELL: Well, that is the budget estimate, it
isn't mine. Now, on that basis, I don't think the
five billion is enough.
MR. PAUL: Of course, where we are going to be

driven beyond the five billion, we may as well realistically recognize. There are only two places. One

is sales taxation and the other is a terrific wallop

on the low income groups.

MR. KNOLLENBERG: I don't think that is wholly
accurate, Randolph, because--

MR. PAUL: I don't see where else-MR. KNOLLENBERG: We could very much more wallop

the corporations than we are proposing to do.
MR. PAUL: Thre billion?

MR. KNOLLENBERG: We can. I mean, the money is

there. do
There
may be reasons of policy why Congress
won't
it, but--

MR. PAUL: I would like to get all we can. If we
can wallop them, let's do it now.
MR. KNOLLENBERG: If we adopt the English system,

we obviously could get at least another billion.
H.M.JR: And also on the individuals.

MR. KNOLLENBERG: And also the individuals and

our own brackets. There are a tremendous amount of

funds indicated by the British taxes. Some how they
are collecting them there. There are those two responsibilities.

- 12 -

15

MR. PAUL: Of course if we did what the papers
said this morning, which might be a good thing-H.M.JR: What is that?

all-- MR. PAUL: Put a ceiling of twenty thousand on
MR. KNOLLENBERG: The British didn't do that.

H.M.JR: I don't think we are ready for that yet.
MR. BELL: That is what Walsh suggested the other
day, twenty or twenty-five thousand dollars would be
the top income and everything else would be taken.

H.M.JR: Harry, where are you on this question of

the amount of taxes necessary?

MR. WHITE: Well, I think that this five billion
is all right as you stated it with the thirty, because
I don't think that the public are psychologically ready
for trimming where it is really going to hurt. This
five billion won't really hurt. What will really

hurt is when you begin trimming the fat on the middle
and lowincome brackets and on the corporations by

trying to squeeze an extra three or four billion out,
and anything of that character must be set into a
psychological setting which can be built up only by
recognition of the magnitude of the victory program,
so that I think that if the victory program is going
to come out before your tax plan, then you can't go
much forward. If it is not, then you can get it ready
because you know what is happening, but I think the

publicity has to know what is in the offing in the

way of expenditure.

MR. HAAS: I would say this: If you are not going
to have more than five, I wouldn't mention it in the
budget. I am inclined to agree with Harry that until

the victory program dimensions are out, you can't
really fix the amount of taxes necessary. Another

16

- 13 -

thing, from the point of view of inflation, I am

beginning to feel that the most important weapon we

are going to have is rationing anyway, that you can't

levy taxes in adequate volume, and, if you did, it would
be very inequitable and disturb our whole economic

structure too radically.

MR.Budget.
BELL: There is this possibility, of showing
it in the
H.M.JR: Can you hold your thought a minute?
MR. BELL: Yes.

H.M.JR:
Because I have got the answer. Can you
hold yours
a minute?
MR. BELL: Yes.

H.M.JR: If the President in the budget message
says there is going to be a victory program coming,
then in the same sentence he should say, "If there is,

we will also, of course, have to have additional taxes.
If he says nothing about the victory program, then I am

not going to ask him to say anything about taxes.
MR. SULLIVAN: You mean about amount?

H.M.JR: No. If the President of the United States
says, "Now, I am just telling Congress that within a

month or two I am going to send up a victory program,"
and of course accompanied with it will be a request for
additional taxes, but if he says nothing, then I shouldn't
ask him to say anything.
MR. SULLIVAN: Well, when you say additional, you
mean beyond that that is already contemplated to be
started on January 15?

I.M.JR: Oh, yes, sure. If what we do here is
this - the way you people feel - if he says to me
this morning, "Well, what is your figure, Henry, stop

17

- 14 sparring, what is your figure?"

"Well, my figure is five hillion dollars net,

exclusive of Social Security, Mr. President, on the

present program." "

MR. SULLIVAN: Does that contemplate an additional

two billion in Social Security?
H.M.JR: Sure.

MR. SULLIVAN: All right.
MR. BELL: Now, supposing he asks you what is it,
including the victory program?

H.M.JR: Well, then-MR. PAUL: What is the victory program?
H.M.JR: Yes.

MR. BELL: He says the victory program contem-

plates
for '43. ten billion dollars of additional expenditures
H.M.JR: On that, Dan, I think I would say, "Well,
Mr. President, I haven't had those figures. Give me
twenty-four hours and I will give you an answer. I
haven't had them. I need twenty-four hours."
MR. PAUL: Well, we may as well approach this
around the other end now if you are going to have that

additional program. If you think you need a certain
amount in relation to your borrowing program, then we
have
to get it.

H.M.JR: Well, I would want to stall twenty-four
hours to come back, but I am being politic, and I am
going on the assumption that this is the line he is
going to take from what Dan found out last night, and
then if he wants to temporarily withhold the information

18

- 15 -

from the public, we can do the same, that is all.
MR. SULLIVAN: I think if this victory program is
going into effect, and you are forced with the necessity
of raising a larger part out of taxes, you have to

rexamine your position on Social Security, because
every
you get out of that cuts down your possible
take ondime
taxes.
H.M.JR: You started to say something, Dan.

MR. BELL: Well, they often have done this. As
a matter of fact, they have had an item in the budget

every year called supplemental items, and those supple-

mental items have been explained in a general way. It
just says, "These are additional expenditures that we
contemplate during the year will be made out of supplemental appropriations submitted." Now, they may put
in the budget a ten billion dollar expenditure item
on the supplementals and then just say in the budget
message that this represents the expenditures out of
the victory program which will be submitted later, so
that your expenditure item would be in the budget but
no detail of the victory program. They could do that.
Then you would be faced with the necessity of putting

your
tures. taxes on the basis of fifty-five billion expendi-

MR. WHITE: There is another possible alternative.
I wonder whether it has any merit. Supposing you take
the position with the President that you know and he
knows there will be large expenditures, and your tax

program will fit the picture as soon as he gives it
to you. It is only a question of a few weeks or a

month's delay, and say, "As soon as you tell me what
you are going to spend, we will give you a tax program."
Then they would come out simultaneously to the public.
H.M.JR: He won't do that. The President wants

balanced figure. The shock to the public - if they
got a gross figure of forty-five billion and receipts
of sixteen, deficit of twenty-nine and no tax program,
a

19

- 16 -

it would be terrific. He should give it attention. He

should have had his victory program ready. I can't
understand why he hasn't. It is going to be a shock.
One shock won't hurt them half as much as two will.
mean,
if they give them all the information at one
time.
I

MR. SULLIVAN: I think that is right, Mr. Secretary, and I think we will be put in a very unfortunate
position if we have to go in twice. We will appear to
be stupid. We will appear to be completely out of

touch with what is going on around the town, and I
would
at once.much prefer even to wait a week or two to do it

H.M.JR:
a figure
in. But you can't do it. He will want to put
MR. SULLIVAN: No, I am talking about when we go
up.
If on January 15 they are not ready, I think it
would be very much better--

H.M.JR: That is something else, but certainly
I am not going to go over and say to the President,

"I understand from so-and-so who has told me that so-

and-so said that you are thinking of a victory program

of thirty billion dollars additional. Therefore, I

want ten billion taxes to finance it." You don't know.
His
victory program may be fifty billion by the time
Churchill gets back.
MR.
BELL: It probably will be by the time June
30 rolls
around.
MR. PAUL: If we lose Manila?
MR. BELL: Yes.

H.M.JR: I mean, Churchill and Beaverbrook are
going to
stay here, my guess is, until they get a decent
victory
program.
MR. WHITE: They have already fallen down on this

20

- 17 -

deficit for this fiscal year. They will never reach
that deficit. In order to reach that deficit we just

figured out they would have to reach a rate of monthly
expenditure by May of three and three-quarters billion

dollars. In other words, they will have to more than

double the monthly rate of expenditures in four months,
because they haven't even reached two yet. That means

that there will be even a greater deficit in subsequent
years or the production program is going to be very

much less than anybody hopes for.

MR. HAAS: The British are financing about forty
percent
revenue, and they have got their prices
stabilizedinnow.
MR. WHITE: From the point of view of prices, of
course, the Social Security tax is equal to a tax.
From the point of view of financing, the United States
can appropriately finance a much smaller part of its
war expenditures than any other country - can stand a

much smaller proportion.

(The Secretary held a telephone conversation with

Mr. Charles Shaeffer as follows:) see shaeffers

report of 143.

December 30, 1941
9:55 a.m.

Charles P.

Shaeffer:

Hello. Shaeffer.

HMJr:

Shaeffer, this is the Secretary speaking.

S:

Yes.

HMJr:

Have you got a pencil?

S:

Yes, sir.

HMJr:

S:

HMJr:

21

I want to ask you to do something for me, then
tell me whether you're equipped to do it promptly.
Yes, sir.
I'd like to know what OPM, the Bureau of the
Budget, and the Treasury have said at any time

since the first of January, publicly, on what
the deficit would be for this year.

S:

Yes, sir.

HMJr:

Hello.

S:

Yes, sir.

HMJr:

That's number one.

S:

Yes, sir.

HMJr:

Or anybody - well, I mean, just look through.
It's just the Treasury, OPM, and the Bureau of
the Budget.

S:

Yes, sir.

HMJr:

And then also, please go back to July first, 40,
and see what Mr. Knudsen has said that he would
do about the so-called "500 bomber per month"

program.
S:

Yes, sir.

HMJr:

I mean on performance - what public statements he's
made about performance and delivery and so forth.

-2S:

HMJr:

22

Yes.

Now, are you equipped to do that?

S:

Yes, sir.

HMJr:

You are?

S:

Yes, sir.

HMJr:

And do you need any help?

S:

I believe unfemiliar people would be a hindrance
rather than a help, Mr. Secretary.

HMJr:
S:

Miss Diamond, of the Library, might help you.
Yes, sir.

HMJr:

Our Miss Diamond.

S:

Uh huh. Yes. All right, sir.
I'd like it by tomorrow if possible.
I'll do my best, sir.

HMJr:
S:

HMJr:

Thank you.

S:

Right.

23

- 18 -

H.M.JR: I think we are all right. We have had a
conference with the Director of the Budget. We are in

complete accord with him.

MR. PAUL: Our program lines up-MR. BLOUGH: He suggests ten.

H.M.JR: Is that what he suggests?

MR. BLOUGH: Eight, really. Eight plus Social
Security.
MR. PAUL: I have got his way, Mr. Secretary.
H.M.JR: Here I wrote to the President on December
24, and I have asked Harold Smith to go over this

draft with me, and I am sure that he and I can get
together. Then I sent a letter to Harold Smith, and

we
heard from Harold Smith. He has been up in
Newhaven't
York.

MR. PAUL: There is his against ours, and you see--

H.M.JR: He is just up in New York.

MR. PAUL: And the difference is, he isn't quite
as hard on corporations. He is a little higher on the
individuals, but his real difference is this value
added tax.
H.M.JR: If I take this, where does that leave you?
MR. PAUL: That is all right.
H.M.JR: Well, did he have the victory program in

mind when he talked about ten?

MR. PAUL: That, I don't know. It is not entirely

clear to me, I must be honest enough to confess, just

what the term means.

MR. WHITE: It is a program that is supposed to bring

24

- 19 us victory, a program of expanded production.
MR. PAUL: Beyond anything contemplated?
MR. WHITE: Beyond anything--

H.M.JR: From now on, as far as taxes, I am taking
my slogan from the Wall Street Journal, "Win the War

Taxes. If It is good enough for me. No, John, this
isn't the easiest thing for you to conduct in the

front line trenches of the Hill, but-MR. SULLIVAN: What isn't?

H.M.JR: To do it the way I am suggesting.
MR. SULLIVAN: Two bites?

H.M.JR: Yes. But I am ready for one bite, and I

would like to do it in one bite, but I can't do it
in one biteif the President is going to take two.

MR. SULLIVAN: Frankly, Mr. Secretary, I am think-

ing more of the country than the Hill. I mean, they,
too, have gotten letters out of the blue sky up there,
and they can understand the position we are in, but
the country never will.

MR. BLOUGH: Is it going to be at all embarrassing-H.M.JR: Supposing I went over there and was silly
enough to pound the desk and say to the President, "You
have got to make up your mind what your victory program
is today"?
do.

MR. SULLIVAN: I will beat you to the door if you
H.M.JR: He would either laugh or get angry, so

I am trying to deal with realities, so fortunately

Dan's people over in the Budget there can tell him
what is going on so that he knew last night. Otherwise

- 20 -

25

I would have gone in there, and we would have tortured
ourselves for the last forty-five minutes where would
we get the additional taxes.

MR. BELL: I think this program will be discussed

at this conference. I think it will come out before

we are. through.

H.M.JR: I understand that the President was supposed

to have left the whole morning open for this.

MR. WHITE: Mr Secretary, I know you will like
that slogan, but do you really think that taxes can
win the war?
MR. SULLIVAN: I think Harry has got something

there and in this exerpt for the budget message, that

the American people are prepared to produce what is
needed,
whether it is guns or money, that "or" ought
to be "and."

H.M.JR: Do you prefer an all out tax program?
MR. WHITE: That is better because you can win

the war with expenditures. You can't win the war
with taxes. You can ruin the war and help lose it

with taxes. You might help win it. I mean, you are
putting the emphasis on the very thing that you haven't
been placing it on all this time, which is production
expenditure.

H.M.JR: I didn't write it. That is the Wall

Street Journal.

MR. WHITE: That is probably why it is no good.

H.M.JR: Our appointment is ten forty-five.

Well, I think we are all right, don't you?
MR. BELL: Yes.

H.M.JR: Do you think, Dan, that I should call up

- 21 -

26

Harold Smith and say, "I haven't heard from you. Where

are we? We are going to argue this all out in front
of the President"? or should I just sit? My letter
was very explicit.

MR.
BELL: I wouldn't be inclined to call him up,
I don't
think.
H.M.JR: That is my inclination.
MR. PAUL: I have been over the whole budget draft
with those people, and I know just where the disagree-

ment is. It is only at one point.
H.M.JR: And that point is--

MR. PAUL: It is the value added tax.
H.M.JR: What is a value added tax?

MR. PAUL: I don't know. Roy can tell you.
MR. SULLIVAN: It is a type of sales tax.
H.M.JR: Roy, can you tell me?
MR. BELL: Sugar coated, is it?

MR. BLOUGH: It is a type of sales tax in which

you put the tax, instead of putting it on one sale at
the final sale of the goods, you put it in pieces on

different producers, each producer paying on the amount

he adds to the product. The fellow who starts with
the ten dollar raw material--

H.M.JR: Give me an example. Start with a pair
of socks.
MR. BLOUGH: To start with a pair of socks, the
fellow who produces the yarn may pay a dollar for his

raw material and sell his product for two dollars. He
will have added a dollar of value to it, and the fellow -

- 22 -

27

I will give you the simple first and then add a few
complications. The fellow takes the yarn at two dollars

and he sells it at three fifty after he has died it
or knitted it. He has added a dollar and a half of

value. So as you go along each person buys the raw

material furnished him by the previous fellow, and he

sells it at a higher price, and the difference is the

value added by him.

Now, in this particular proposal, in order to
offset the effects of the Social Security payroll tax,

those
deducted.
on
thisare
value
added. They propose an eight percent tax
H.M.JR: Starting where?

MR. BLOUGH: Starting at the first dollar.
H.M.JR: And every time you add a dollar or what-

ever it is, you pay eight percent?

MR. BLOUGH: That is right. If a fellow buys it
at a hundred dollars and sells it at a hundred and fifty
dollars, he pays four dollars in tax, eight percent of

the difference between a hundred and a hundred and fifty,

except
that it.
he can deduct his Social Security payroll
taxes from

MR. KNOLLENBERG: From the tax or from the amount
of added value?
MR. BLOUGH: From the added value.

MR. PAUL: I have got a letter from OPA in which

they are practically blue in the face in opposition to
this, saying it will be very inflationary and will
raise the cost of living seven percent.
MR. SULLIVAN: It is the worst kind of a sales

tax you could have.

H.M.JR: Didn't I send you in a letter from the

- 23 Vice President
program?

28

and an answer when I sent him this last

MR. PAUL: I sent in an answer, drafted it.
H.M.JR: But I wonder whether we could quote him?

MR. PAUL: Well, I returned the letter to you.
Then
it is here. But I mean, you keep
usingH.M.JR:
that as a
Bible.
MR.
If it is from the Vice President, it
should
be WHITE:
the Koran.
it?

H.M.JR: That isn't what they use up in Tibet, is
MR. WHITE: Not in Tibet, no.

H.M.JR: I just wondered - here is a suggestion.

"Might it also be possible to work out a scheme whereby
half the amount by which the net income of 1942 exceeds
the net income of '41 would have to be invested in compulsory savings which could not be drawn up - " well,

that isn't very different from what we had from Barnard.

O.K., gents, if you come back here at ten-thirty,
Mr. Bell and Mr. Sullivan and Mr. Paul, we will go over.

29

December 30, 1941.
TO:
FROM:

Secretary Morgenthau
Charles Shaeffer

The enclosed is what we have been able to assemble

on definite subjects attributed to various persons and agencies.
The complete data is being held for your convenience.

Chuffs

30
TREASURY OFFICIALS ON DEFICIT

January 29, 1941

Secretary Morgenthau, on several occasions, told the
House Ways and Means Committee, then discussing the Public

Debt Act of 1941, that the combined deficits for the fiscal
years 1941 and 1942 WO 1d be $15 billion.
February 12, 1941

Secretary Morgenthau told the subcommittee of the Senate
Finance Committee, then considering the Public Debt Act of

1941, that estimated expenditure programs then would result
in combined deficits of $15,400,000,000 for the fiscal years
1941 and 1942.

April 17, 1941 (At a press conference)
Secretary Morgenthau stated he would have to borrow

$6,300,000,000 in the next fiscal year.
April 24, 1941
Secretary Morgenthau told the House Ways and Means Com-

mittee, then considering the Revenue Revision of 1941, that,
assuming $3,500,000,000 of new taxes were raised, the deficit

for the fiscal year 1942 would still be "approximately"
$6,300,000,000." This statement was repeated several times

during the hearing. Later on in the hearing, Assistant Secretary
Sullivan repeated this statement several times.

-2-

May 7, 1941

Under Secretary Bell told the National Association of
Kutual Savings Banks at Philadelphia that, even with additional

taxes of $3,500,000,000, "We will still have a deficit of
$7,200,000,000."
October 23, 1941

Assistant Secretary Sullivan, addressing the Associated
Industries of Nassachusetts in Boston, cited estimates indica-

ting a deficit of $12,583,000,000 for the fiscal year 1942.

31
BUDGET BUREAU ON DEFICIT

Budget Message of January 8

The President estimated that the net deficit for the new
fiscal year would be $9,210,000,000, and that for the current
fiscal year, ending June 30, 1941, it was estimated at
$6,200,000,000. These deficits were foreseen despite the
prospect that Treasury income for the next fiscal year probably
will exceed any figure on record.
First Revision - May 31, 1941

A $3,557,000,000 increase in the Nation's budgetary deficit
was predicted by Director Smith above the January estimate of
$9,210,000,000, bringing the total to $12,767,000,000. This

increase, he said, was the likely result of the stepping up
of the defense program since the regular annual estimate was
made.

The total of appropriations, authorizations and recommendations for defense amounted to $28,500,000,000 as of January 3rd,

he said. Since that time, a lend-lease a propriation of
$7,000,000,000 has been added, and the program for the production

of planes, ships and other vital defense materials greatly expanded. The defense program (appropriations, authorizations and
recommendations) as of this date is $43,000,000,000, or
$14,500,000,000 greater than the amount on which the January
estimates were based.

32
-2-

Second Revision - October 4, 1941

With defense expenditures for the current fiscal year
expected to reach $18,000,000,000, Director Smith forecast a
1942 Federal outlay of $24,681,000,000, or $7,000,000,000 more
than the figures submitted to Congress in January.

As the result of these revised estimates, the gross deficit,
including debt-retirement charges, for the 1942 fiscal year was
estimated at $12,683,000,000, compared with a deficit of
$5,167,000,000 for the fiscal period ended June 30, 1941.

33
OPM ON DEFICIT

December 30, 1941.

I am unable to find any published data concerning the

public deficit attributed to OPM. However, I am in possession of an office memorandum prepared by Barrow Lyons,

a research statistician of that agency, dated June 7, 1941,
addressed to Bob Horton, Public Relations Director, on the
subject of "Government Financing through 1942."

I am, of course, unable to judge the propriety of this
memorandum, but it takes sharp variance with Treasury figures.
The lead of this memorandum is quoted below:

"A preliminary estimate of the Federal deficit
for the fiscal year 1942, if the defense effort were

to take full advantage of the funds Congress has
provided, places the amount very close to $22,500, 000,000.
A preliminary estimate for the calendar year 1942

places the deficit for the year at close to $29,300, 000,000.
The estimates do not allow for any marked change in
prices of defense materials, and do include an estimate of greatly increased taxation. It is likely that
the deficit would be considerably greater than these
estimates,taxes
if inflation
were
to take place, or if the
estimated
could not
be raised.
"No estimates approaching these magnitudes have

come to my attention nor have I seen any proposals
to raise such huge amounts by the sale of Government
securities."
"

34
KNUDSEN ON BOMBER PRODUCTION

September 11, 1940

Mr. Knudsen announced that airplanes would reach a peak

production of 3,000 planes per month in July, 1942. At the
times of these remarks, Mr. Knudsen said that of planes destined
for American service 60% were combat planes, including bombers.
May 21, 1941 (At a press conference)

Mr. Knudsen reported that new contracts would be signed
with Ford Motor Company and several airplane firms to step up
the output of 4-motor bombers from 100 to 500 a month. In
addition, Mr. Knudsen declared at the same conference the output
of twin-engine bombers, then approximately 200 a month, would

also be increased considerably, but he gave no figures to
indicate how great this new program would be.
The new plan of 500 heavy bombers a month would include

planes to be assembled at Government-built plants at Tulsa,
Oklahoma and Fort Worth, Texas, which are expected to be in

production by early fall of 1942.
September 22, 1941 (In Chicago before businessmen and civic
leaders at the Union League Club.)

Mr. Knudsen said there are now 79,000 planes of all types
on order. In December, 1940, they were being turned out at the

rate of 500 a month, he said. At that time he estimated production in December, 1941, would be 1,800 a month, and by the

middle of 1942 the rate would be 3,000 a month -- 36,000 a year
and nearing President Roosevelt's goal of 50,000 planes a year.

35
-2-

December 11, 1941 (At a press conference)

Mr. Knudsen urged a production goal of 1,000 4-engine
bombers per month as an essential point in the Victory program.
He withheld, as essential military information, any estimate
as to when this goal might be reached.

36
December 30, 1941

10:36 a.m.
HMJr:

How are you?

Robert

Lovett:

I'm fine, thank you, sir.

HMJr:

Look, before I go out on the end of a limb, I

wondered if the statement that I'm going to make,

if you'd care to tell me whether it's correct,

you see.
L:

Yes, sir.

HMJr:

I have some statistics which were furnished me
by OPM; and for May 5, 1941, they call it the
8-E. Program, down through to date, there's no

change in their forecast on the four-engine

bomber.
L:

From May 5 to date?

HMJr:

Yes.

L:

No, I don't think that's correct.

HMJr:

Well

Do they mean the forecast of production or

Well, this shows on May 5, under the 8-E
Yes.

it shows that you go up to 500 - you reach
the 500 in June, 143.
L:

Yes.

HMJr:

And on October 27, 41, it shows you reach 502.
Yes.

HMJr:

HMJr:

Two more, in May - in June, 143.

Yes. Well, I think that's incorrect.
It's incorrect.

37
2

L:

Yes, because the sights have been raised, of
course, from the 500 ceiling to double that

HMJr:

Yeah.

L:

and we are getting - for example, in 1942 let's take Boeing, for example - they promised us

45 in January - promised us 35 in December, and
we're getting fifty something - and 45 in January,
and we're getting 75.
HMJr:

Well, my.....

L:

So that we will get more - we will get the 500 a

month rate earlier than the first of July, 142 143, I mean.

HMJr:

Well, how much earlier?

L:

Well, it's pretty hard to say: but I should think
it would be a matter of several months.

HMJr:

Several months.

L:

Yes.

HMJr:

Well, that's - all I've got is this - I have the

thing which OPM furnished me. The last one I got

is their 8-G., which is dated October 27.
L:

Yes.

HMJr:

I have nothing other than that.

L:

Well, we don't use those, Mr. Secretary. We have
the Materiel Division estimates, which is scheduled

into the critical items

HMJr:

Well

L:

.....

that show production related to shortages.

HMJr:

Well, let me ask you this. I'm not talking about
whether it's two months earlier or three months
earlier.
Have there been any contracts let other
than these?

L:

Any contracts

38

-3- HMJr:

What
other - for four-engine bombers other then
what I have from OPM.

L:

HMJr:

No, the fourth supplemental includes contracts
to raise it to a thousand a month.
But those haven't been let.

L:

Those have not been let.

HMJr:

Well, then

They have not been let - in fact, they have not
yet been approved by the Bureau of the Budget.
They've been there since the 23rd or 24th of
November.
Well, then, 1f I make the statement to the President
that since the fifth of May there's been no contracts let for four-engine bombers, that statement's
correct.
L:

There have been no funds available for four-engine
bombers for Air Corps. I think there's been some
Lend-Lease funds provided in his most recent appropriation; but I know of no contract signed which
extended to the thousand a month, which was only
recently requested.

HNJr:

And is this statement also correct, that with the
exception of Ford, that there's no automobile

L:

company that has a contract for four-engine bombers?
No, sir.

HMJr:

That's not correct?

L:

No, sir.
What is the correct statement?
Well, if you mean by bombers, you mean air frames.
Yee.

That's correct, except that Chrysler and others
are making the - you're talking about four-engine?

4

39

HMJr:

Yes.

L:

There's some sub-contracting work there, but
there are three automobile companies making the
engines.

HMJr:

Yeah, that I understand.

I:
HMJr:

But it's rather meaningless to say that there's
none in the four-engine picture.
But the fact remains that this thing would show
that on May 5th, the plans were for 500 fourengine bombers a month. To date, there's been
nothing done since May 5th to increase that by

letting any additional contracts.
L:

Yes.
The funds were not available on Mey 5th,
you understand.

HMJr:

Well, and you say

L:

I mean, the plan wasn't approved until May 5th.
The funds were obtained, I think, June 30th or
something like that

HMJr:

Yes.

from the appropriation.

L:

HMJr:

And now you say that

L:

I'm not sure that - I mean, if you make your state-

HMJr:

ment that way, I don't think it's accurate.
Well, it's accurate enough. I mean, for this all I'm going on is the various schedules which

OPM gave me. You've given me my answer, and that
L:

HMJr:
L:

is the additional 500 bombers is what you want,
but it has not yet cleared the Budget.
That's right.

What?

That's right. And the only contracting done was
done within the limits of the appropriations which

-5-

40

were made available on the 30th of June.
HMJr:

Now, one more question. Thank you for your
patience with me.

L:

HMJr:

Not a bit, sir.
One more question. When would you - if you

get
by the Budget, et cetera, et cetera
Hello.

L:

Yes.

HMJr:

I just was interrupted. When you - I mean when would it be reasonable to expect that we'd
reach a thousand bombers a month - four-engine

bombers?
L:

I should think toward the end of 143.

HMJr:

Toward the end.

L:

Yes.

HMJr:

November, December.

L:

Probably - let's say December, to be conservative.
Okay. I'm very much obliged.

HMJr:
L:

Now, that, of course, is based on the present
scheduling. With our new plants, we're going

in
for 933 million dollars worth of additional
facilities

HMJr:

Uh huh.

I.:

I would expect that we would pass that
figure some months earlier. I'm unable to guess
when.

HMJr:

I see. Well, thank you. I may call back again,

but that takes care of me for the time being.
L:

All right, fine. That's based, you understand,
on the facilities which are likewise in this
request for additional appropriation.

-6HMJr:

I understand.

L:

All right, sir. Fine.

HMJr:

Thank you.

L:

Good-bye.

41

STRICTLY CONFIDENTIAL

42
December 30, 1941.
MEMORANDUM FOR THE SECRETARY'S FILES

Conference in Secretary Morgenthau's Office
December 30, 1941
3:15 P. M.

Present: Secretary Morgenthau
Mr. Murray, C.I.O.
Mr. Pressman, C.I.O.

Mr. Reuther, C.I.O.

Mr. White

Mr. Murray stated that he had hoped to get in touch with the
Secretary earlier but he had been tied up for a long while at a
conference with Madam Secretary Perkins. Mr. Murray stated he had
heard what Secretary Morgenthau had been able to do for the boys
from the Dodge plant that came down from Detroit, and he thought
it was a swell job.

Mr. Murray said that the situation which the automobile industry has been left in by the OPM was little short of criminal.
He said he presumed that the Secretary was familiar with the situation in the automobile industry and with the fact that it would be
practically "blacked out" during the coming months. He said that

Labor was willing and eager to make whatever sacrifices were necessary for the defense effort but that Labor should have some parti-

cipation in the planning.

Mr. Murray further stated that at a time when all the effort

should be directed toward increased production, it WAS most unfor-

tunate that part of their energies should have to be diverted to
protect labor against attacks against their basic rights. He said

he was much disturbed by the latest developments in which the Army
was going to undertake to work with and through the leaders of

local units in the Union, passing right over the regional and
national offices. He said he had proposed several times in the
past that they operate with the aid of union groups but that his
ideas had always been scoffed at. Now that the situation was so
critical, they were going to adopt some of the ideas, but do it in
such a way as to virtually threaten labor unity and independence.
He said the next thing the Army would do would be to tell the
workers what they could and could not do, and where they could or
could not go, and what wages they could get. He thought it was

terrible for the Administration to move in that direction.

43

-He then said he thought the Secretary would be interested in

some data Mr. Ruether had to present and some comments on the forthcoming conference in Washington.

Mr. Ruether reminded the Secretary of his talk with him of a
year ago about his proposed plan and the support the Secretary had
given him. He said, as the Secretary probably knew, he got nowhere
at all with the OPM. He said a conference was scheduled to take
place on Monday in which the automobile industry unions had been
asked to participate. The Union men intended to go to that meeting
and either get some action on their proposals, or on some program,
or they were going yo "blow the lid off". Ruether than submitted
some data of the unemployment situation in the automobile industry
and related some erisodes indicating how little the automobile industry WAS sharing in the defense effort.

The Secretary thought it might be very helpful to their cause
and to defense production as a whole if preparatory to their going
into the meeting the Automobile Workers' Union took a full page ad
in the local papers here for a couple of days and bring their story
before the people. Someone suggested it be an open letter to the
President, but the Secretary thought it would be much better to
make it an open letter to Mr. OPM.
Messrs. Murray, Pressman and Reuther all thought it was an ex-

cellent idea and said they would take it up with Detroit at once.

44

Jues 12/30/41.

UAW-CIO CONVERSION & REEMPLOYMENT PROGRAM

guestay?

win be me Thursday
By Phil hurrry and Reuther
Submitted by:
UAW-CIO DEFENSE EMPLOYMENT COMMITTEE

R. J. Thomas
INTERNATIONAL PRESIDENT

George F. Addes
INTERNATIONAL SECRETARY TREASURER
DEFENSE EMPLOYMENT COORDINATOR

R. T. Frankensteen
W. P. Reuther

R. E. Reisinger

UAW-CIO CONVERSION & REEMPLOYMENT
PROGRAM

45

300,000 auto workers throughout the country are facing the
prospect of total unemployment by the end of January. These workers,
together with their families and their communities, will be among the
first to feel the sharp impact of transition to a war economy which
our nation is now carrying through. Auto workers recognize the need

for this curtailment of production of automobiles as a thing essential
to the common cause of victory for Democracy. They realize the primacy
of the nation's interest in the fight against axis domination of the
world. As workers they recognize dictatorship as the greatest menace
to their lives, liberties and hopes.

At this time of our country's need the first task of all

Americans is to do everything within their power to secure the immediate conversion of auto plants to the production of tanks, planes,

guns, shells and other necessities of war. Auto workers call for an

immediate end to the situation in which a large section of American
industrial power is standing idle while hundreds of thousands of
skilled workers are facing a long period of unemployment.

The first concern, therefore, of automobile workers in the
present emergency is to secure the earliest and complete utilization
of their skills and the tremendous equipment of the automobile industry
in the creation of that full stream of armaments which will guarantee

victory to this country and its allies.
program:

To secure this purpose, the UAW-CIO submits the following

1) We call upon the President of the United States to establish
in the immediate future a central body to coordinate and
regulate policies of all procurement agencies of the armed
forces. Only by such a measure can genuine planning and

organization, essential to full production, be implemented.
It will be the duty of such a centralized body to advance
delivery dates on present arms contracts. It will, by placing
contracts to the limit of productive capacities, guarantee that
selfish corporate interests do not hold out essential equipment
from the service of the victory program.
If the productive power of such an industry as the automobile

industry is to be called upon, an agency of this kind is
imperative; for experience has shown that the initiative of
manufacturers in this industry is not sufficient for an allout effort. The continued refusal of certain major companies

46

of this industry to prepare for war work is a crime against
the nation, which must no longer be tolerated. Auto workers

will support any move by the United States Government to end

this situation.

We call for this coordinated procurement agency empowered to
place contracts upon the basis of standard costs wherever they
may be fulfilled, and to demand full performance in the name

of national safety.

In addition, such a procurement agency alone can be the instru-

mentality for effective sub-contracting on military orders. It
can write provisions for sub-contracting into every contract
let out to a major manufacturer.

That a fact finding Committee of technical experts be appointed
to examine and determine what parts in Army and Navy Ordnance

(including aircraft motors) could be manufactured with greater
limits of tolerance than now demanded in order that many parts

would be more amendable to mass production methods.

Many of the limits placed on war material now being manufactured
are the same as when this material was in experimental stages.
2)

Further, we call upon the President of the United States to
establish a national industry council representing labor, government and management as outlined by President Philip Murray of the
CIO.

In each of the primary defense industries a similar council should

be empowered to work out basic policy for the full utilization of

productive power and for the successful conclusion of the victory
program. Establishing basic policy for, and operating through
such a procurement agency as has been described, these industry

councils will unleash the giant forces of American industrial power.

3)

We call upon the Supplies, Priorities and Allocation Board to meet
at once with the representatives of the UAW. Such a conference
should lay the ground-work for establishing jointly with industry

specific plans for the full conversion of the auto industry to

military production.
4)

We cell upon the Congress of the United States, in the interest

of preserving civilian morale, in the interest of avoiding dis-

ruption to the established labor force of the automobile industry,
to take the following steps:

-2-

47

(a) To appropriate additional funds for the purpose of

to displaced
the

supplementing present unemployment compensation
payments

to

present benefit pay-

eliminate version payments. insure unemployment the income Such disparity supplementary to workers during between waiting through will periods, be con- used

ment levels and a living wage level, and to continue
payments following established expiration dates.
(b) To appropriate the necessary sums for the payment of
automobile workers as they undergo training for arms
production jobs which will be available in the months
to come.

(a) To establish control of wholesale and retail prices
without freezing of wage rates.
WE CALL UPON THE OFFICE OF PRODUCTION MANAGEMENT:

(a) To adopt the UAW-CIO Tool Procurement Program offered
herewith.

(b) To take immediate steps for the convening of a joint
conference between its representatives and the repre-

sentatives of labor and management in the machine tool
industry. Such a conference should be devoted to

expanding the production of the machine tool industry.

(o) To work out arrangements for the transfer, at govern-

ment expense, of displaced auto workers whose services
may be immediately needed elsewhere in the expanding

program of military production.

PROGRAM FOR IMMEDIATE USE OF IDLE MACHINES IN CLOSED AUTO PLANTS

The first line of attack for a short term program is to put into

immediate use for war production all available machines now lying idle in
the auto plants due to curtailment of production.
Even at the present time there are standing idle in many automobile plants machines such as Gear Cutters, Milling Machines, all types
of lathes and screw machines suitable for making shells, and small parts
for all types of war material. All these machines are ready for immediate

war work with a minimum of conversion tooling.

-3-

48

At the present time there is a terrific bottle-neck in
machine tool industry. Many of the machines for which the machine the tool

builders
orders
and which
will take many months to build are now
lying
idlehave
in the
automobile
plants.

A program should be developed whereby either the work that was
to be done on the machines now on order would be done on these idle
machines thereby giving additional work to workers in the automobile
industry orfor
that
machines
usethe
in Government
other areas. should temporarily requisition these
We recommend that the government immediately release short term

defense
parts, etc. contracts which call for little tooling, as for shells, standard
We recommend immediate release of both light and heavy truck
jobs, for which Congress has already appropriated money. Where tires
are lacking, trucks can be stored until rubber is available. We ask
that the government push this job through now.

uopwa=26-cio

49

UAW-CIO TOOL PROCUREMENT PLAN

December 29, 1941

Prepared under the direction
George F. Addes
INTERNATIONAL SECRETARY TREASURER
DEFENSE EMPLOYMENT COORDINATOR

UAW - CIO

50

The UAW-CIO Tool Procurement Plan offered herewith, while

primarily planned for the rapid conversion of the Automobile Plants to
the war effort, is adaptable on a broader scale to the entire nation
and on a narrower scale to other industries and other areas.
TOOLING FACILITIES OF THE AUTOMOBILE INDUSTRY

In the Detroit area there are upwards of 800 tool and die
jobbing shops and upwards of 50 so-called "captive" shops with tool
manufacturing facilities.
These range in size from "alley" jobbing shops with 5 or
machines employing from 8 to 10 skilled men, to the large jobbing
6

shops with 100 or more machines employing upwards of 400 men.

Among the captive shops are many small specialized plants
with small tool and die manufacturing departments. They do not have

complete tooling facilities. Their work require tools made on certain
types of machines, such 8.8 lathes. They employ from 30 to 60 skilled

men.

Then, there is the larger plant such as Ford with several

thousands of machines employing some 4,500 skilled workers and 8 number

of apprentices with varying degrees of skill.
STATEMENT OF THE PROBLEM

Our recent survey shows that these facilities are being
utilized but 46.3% of the time available, based on a 168-hour week.
Breaking this figure down to two types of machines which have a high
degree of utilization in the war program, Lathes and Boring Mills, we
find:

In Captive Shops

In Job Shops

Lathes idle

Boring Mills idle

52% of the time
35.3% of the time

53.4 of the time
Boring Mills idle 40.7% of the time

Lathes idle

Most job shops in the Detroit area are at present working
two 10-hour shifts per day, (since the making of the survey) 7 days per
week. Day shifts are operating with a full complement of men, while most

afternoon shifts are operating at 1/3 of full capacity. By adding another
shift, these facilities could be utilized an additional 4 hours per day
or 28 hours per week, and by bringing all shifts up to full man-power,

51

from 35% to 40% additional use of facilities would be obtained.
Most of the captive shops would permit of even greater
Expansion by the utilizing of the die manufacturing divisions of these
plants and expanding them to their man-power limits. During recent years
these plants have contracted most of their new work out to the jobbing

shops, maintaining in their own plants mere "skeleton" crews for maintenance
and repair work.

The largest Die Shop in the world is the Fisher Body, Plant

E. 23 located in Detroit. It employs at its peak of production 6,000

Ciemakers. Today, there are less than 2,000 skilled men working in the
plant, and these men are working on jobs which could be placed on a proluction basis.

The Die Shop in Briggs Manufacturing Company, Vernor Plant,
employs 2,500 men at its peak of production. Today, less than 250 men

are employed at that plant on all shifts.

The Die Shop in the Dodge Main Plant employs 900 men at its
beak of production. Today, less than 250 men are employed on all shifts.

We could cite many more instances, but these indicate the
problem.

As mentioned above, the toolroom in these captive shops are
operating with skeleton shifts for maintenance and repair and could,
therefore, be greatly expanded.

Expansion of man-power and use of facilities is but a part
of the solution of the problem. Allocation of the work to be done to
shops which are capable of doing it accurately and rapidly is another
consideration.

Under the present "hit or miss" method of allocating tool
work, many of our shops with equipment and personnel that would permit
them to contract for close limit precision work, are loaded to capacity
with "rough" work requiring little precision, while other plants capable
of doing this rough work are lying idle because their facilities forbid
contracting for precision work now available.
A tool manufacturer might have the type of job in his shop
that would over-tax his machining facilities. This machine work could
be re-allocated among other smaller shops having the facilities to do
the work. Large volumes of machine work could be done in many of the

captive shops without interfering with work they are new doing. They
have lathes, milling machines, shapers, planers, etc., in maintenance

departments, machine repair departments and electrical departments that

could be utilized. Also, when production ceases because of curtailment,

-2-

52

screw machines, lathes and milling machines on production work could be
used for some type of tool work.
THE UAW-CIO TOOL PROCUREMENT PLAN

1) Allocation of Production jobs to the automobile industry by a
proper governmental agency.

(a) Allocate specific jobs to prime contractors.
(b) Designate the urgency with which jobs are required.

Prime contractors plan entire tooling program for the job and
submit blue-prints and requisitions for tools to a Central Tool

2)

Procurement Agency.

3)

4)

5)

Central Tool Procurement Agency to allocate specific jobs to
specific shops based upon the facilities of the shop to do the
work, and distribute the work out over a sufficient number of
shops to insure early delivery.
(a) Central Tool Procurement Agency to have authority to
place jobs in any shop or plant (job shop or captive).
Central Tool Procurement Agency to maintain a "follow-up"
department whose function shall be to search out "bottle-necks"
and assist in eliminating them.
A committee composed of equal representation of Management, and
Union and one representative of Government would formulate policy
for the Central Tool Procurement Agency - adjust problems where

possible and act as liason agents for their respective principals.

6)

Abolition of the present priorities system insofar as it relates
to the shops and plants under the jurisdiction of the Central
Tool Procurement Agency.

(a) The Central Tool Procurement Agency, based on information
given by the U. S. Government agencies, would assign a
number to a job, based on the urgency with which it was
required by the government. Thus, for example:

"If tools for an anti-aircraft gun were allocated and
government agencies had determined that it was required
in advance of any other job under the jurisdiction of
the Central Tool Procurement Agency then that tooling

-3-

53

job would receive a No. 1 rating from the Agency and

all tool shops would be required to give that job

right of way through their shops. This would not mean
the cessation of work on other jobs unless such work
on other jobs interfered with the work on No. 1 job.
The next most urgent job would be numbered 2, next 3,
etc."

The progress of all jobs through the shops would depend
on their rating by the Central Tool Procurement Agency.

This plan for utilization of facilities and priority of jobs in

the shops is not new, but it is on a broader basis than ever
before attempted by the automobile industry. Its success would
depend upon rigid enforcement of its policies and rules.
DEVELOPMENT OF SUB-CONTRACTING

The successful functioning of this Tool Procurement Plan

will not materially aid our country's war efforts if the principle of
sub-contracting is not developed to its fullest extent on production

work.

In the Chrysler Tank Arsenal in the City of Detroit, the
machining divisions are working three shifts a day, 7 days a week to
furnish material to an assembly division that only works one shift per
day. If the Chrysler Corporation had sub-contracted more of their
tank job, they could be assembling tanks three shifts per day.
If an "Hawaiian week-end" should strike Seattle, Washington,
and certain California towns at the same time (say, as we are sitting
here) it would be a long, long time before the army would again have a

source of supply of "Flying Fortresses", admittedly the best of the long
range bombers in the world. It is our contention that the Boeing job

should be given GO the automobile industry, tooled in its tremendous
tooling facilities and sub-contracted among the hundreds of plants in the
industry. We believe this could be done along with contracts for guns,
gun carriages, shells, etc., which involves over 90% machine work in their
construction and would not interfere with bomber construction.
During the past 18 months there have been a large number of
0-called educational orders placed with various manufacturing concerns
in order that they might solve production and tooling problems on war work.

believe that all war work should be removed from the competitive field
and that there be no hoarding of these tooling and production techniques
developed at government expense or otherwise.
4-

54

RESULTS IF PLAN IS ADOPTED

We believe that if this program is adopted, providing as

it does for the utilization of all the tooling facilities of the auto-

mobile industry as a single unit - allocation of jobs to as many shope
as is practicable - and a simple direct priorities system enforcing the
one job at a time plan, as advocated herewith, it will result in the
tooling and conversion program being completed in at least one half the
time.

This will result in production and assembly lines turning
out a greater volume of production and at an earlier time than 80 far
anticipated and releasing to our men in service vast quantities of war
material so vital to the defense of our democracy.
This will also result in the re-employment of unemployed
automobile workers and return them to defense usefulness.

We reiterate, the time for talking is past. The time for
ACTION is here. This comprehensive plan for the development of the

automobile industry as a single unit for the war effort is the best that
has been offered up to this time. It is logical, sound and workable.

We believe that action should be taken on it this week in order to harness
the man power of 300,000 auto workers to the war program in as short a
time as possible.

uopwa#26-cio

55

December 30, 1941
4:20 p.m.

RE PRESIDENT'S BUDGET MESSAGE

Present: Mr. Bell

Mr. Sullivan
Mr. Paul

H.M.JR: Did you do anything on that?
MR. BELL: That order?
H.M.JR: Yes.

MR. BELL: I tried to get Jesse Jones and Wickard,
call back in a few minutes.

and they are both tied up in conferences. They will

H.M.JR: Look, gentlemen, you will have to have a

little charity with me. I can't tell you much more. It
isn't that I am withholding it. It is not a withhold-

ing tax. My answer is, as far as the budget message is

concerned, the annual message, or any other kind of
message, I just won't put my mind on anything today or
tomorrow because I am just tired. You had better go on

up, see, and you (Paul) will get two days, one day of
holiday and one day in the dentist's chair.

MR. PAUL: No, I will get more than that. I will
only be in the dentist's chair about fifteen minutes.
H.M.JR: Then come back Friday and I hope by that

time--

56

-2MR. PAUL: We can very well use this time because
we are scraping bottom now. We have organized a search

for revenue and it is going to require a considerable

amount of ingenuity to find that seven billion. I
think we can do it, but we will be in a better position
to tell you something by Friday.

H.M.JR: Well, thank you for the hope, faith, and

charity.

And then I think if you (Bell) would give the
Director of the Budget a ring tomorrow, and then I
think I will just - I haven't looked at anything today.
I haven't done a thing.
MR. BELL: Are you going to try to be away over

the weekend?

H.M.JR: I just got this notice, and I haven't

seen that all day, but we are expected at the White

House tomorrow night.

MR. BELL: Tomorrow night?

H.M.JR: So let me catch my breath, and I will
come up for air tomorrow morning and we will all have

a talk except you (Paul). But I won't talk taxes until
Friday.

MR. PAUL: Suits me.

57
December 30, 1941

4:30 p.m.
HMJr:

Hello.

Beeil

O'Connor: Yes.
Hello. Doc?
HMJr:
0:

Hello.

HMJr:

Is this Doc?

C:

Hello.

HMJr:

Doc O'Connor?

C:

Hello, Henry, how are you?

HMJr:

I'm okay.

O:

Happy New Year to you.

HMJr:

Many of them. Go ahead. Hello.

C:

Hello.

HMJr:

Hello.

0:

Are you feeling pretty good?

HMJr:

Why, what do you want?

0:

HMJr:
C:

Well, I want to have a conversation with you,
and I don't want you to get cross about it.

(Laughs) Go ahead. I never got cross at you.
I don't know if anything can be done about it,
Henry, but here's the situation.

HMJr:

Yeah.

0:

And it may sound awfully pin-headed what I'm
going to say to you

HMJr:

Yeah.

0:

but, of course, we do have this Birthday

-2-

58

celebration coming on the thirtieth.
HMJr:

Yes.

O:

And I think it's important. It's not only
important in its own field, but I think it's
important that it go over better than ever

before.
HMJr:
O:

HMJr:
O:

Yeah.

I don't mean by that eight or ten times better,

as evidenced that the people of this country are
really personally behind the ball.
Yeah.

Now, naturally we're confronted with a lot of
difficulties. We've got good old Norman out
wanting fifty million, driving in the same period;
and we ve got your fellows out doing the same
thing, which I certainly am not going to suggest
should be stopped.

HMJr:
0:

All we want is fifty billion.
The real problems I'm running into with you,
and I'm trying to take them up with you as
graciously as possible, is this. In the first
place, generally speaking, I'm informed - don't
hold me too rigidly to my statements - you've
usurped all the spot time on the radio, of which
we usually got a great amount in the month of
January.

HMJr:

O:

No, No, no. Somebody's kidding you. Somebody's kidding you.

Well, I've got a memo here in front of me which
is the base for my information.

HMJr:

Yeah.

O:

Now then the other thing is that

HMJr:

Well, look, to show you how that is - when the
Red Cross drive was along - I mean, they threw

59

-3a lot of those announcements in, and I hear all
kind of announcements for different drivee on

the air all the time.

0:

Yeah. Well, now the only other specific thing there are others - that I want to take up with
you is, that I understand that you've got a pledge
drive coming on on January tenth; and, of course,
our real drive starts on January twelfth.

HMJr:

Yeah.

O:

Now, I don't know as I can tell the Government

HMJr:

O:

HMJr:
O:

to go out of business while I'm in the field.
Ishould.
don't think you can, Doc. I don't think you
No, of course not. But do you suppose it would
do any good if a couple of my men went down and
talked with your men that's handling this?
Sure. We'd be delighted to see them. Sure.
It would prevent any of my men giving me a sob

story that there isn't any basis in, you see?

HMJr:

No, nobody's more interested than I am in this
polio work.

O:

Well, you got the letter I wrote you last night,
didn't you?

HMJr:

No, I didn't get it.

0:

Well, I sent you one last night, which, of course,
is really amusing.

HMJr:
O:

Well, unless it's air mail special
And I said in that letter that I certainly didn't

have to defend you on your attitude towards polio.

HMJr:

No.

0:

Well, Henry, who's the man down there that they
should see?

60

-4HMJr:

Well, let me just think a minute.

O:

Yeah.

HMJr:

Let them come and see a man by the name of

0:

Good. Is he an old Treasury man?

HMJr:

That's right.

0:

Good man.

HMJr:

Yes, he is.

0:

Harold Graves.

HMJr:

Yeah.

0:

Well, now, I'll have - I tell you who'11 come

Harold Graves. G-r-a-v-e-B.

down. It'11 be Tom Wrigley.

HMJr:

Tom who?

0:

Wrigley.

HMJr:
O:

Wrigley? Wrigley's gum?
Yeah - the same kind of a name.

HMJr:

Yeah.

0:

And tell Graves that they'11 wire him for an
appointment.

HMJr:

Okay.

O:

Fine.

HMJr:

0:

They'11 get a sympathetic hearing, but don't
let anybody kid you.

I don't like to, Henry; and that's why I'm
calling you.

HMJr:

Fair enough.

0:

And you I re not cross?

61

-5HMJr:

Not what?

O:

You heard me.

HMJr:

Cross?

O:

Yeah.

HMJr:

Why? I'm delighted you called me.

O:

Well, you've got a real problem there and I

HMJr:

Oh, Doc, you've never called me unless it's

don't want to be in a position of
something important.

0:

HMJr:
O:

HMJr:

0:

HMJr:

I don't want to be pin-headed on the thing.
Of course, I am very anxious that this go over
better than ever before. Now, as I said, I
don't mean by that twice as good or three times
as good, but better than ever before
Well

.....80 that we can say, "Now you see" - to
these other fellows - "Now, you see what the
country thinks of this fellow." And I suppose
you have the same interest, I know that.

Well, within the realms of the fact that we're
at war

That's right.
.....and we'll do everything that we can to be

helpful.
O:

Okay, boy.

HMJr:

Thank you.

O:

Thanks a lot.

62
December 30, 1941
5:13 p.m.
HMJr:

Mr. E. T.

Hello.

Taylor:

Hello, Mr. Morgenthau.

HMJr:

Hello, Mr. Taylor.

T:

Lord Beaverbrook said that you might like to see

HMJr:

That's right.

T:

Well, you name the time: and I'll suit your con-

HMJr:

Well, Mr. Taylor, we've got one more day of the

me some time.

venience.
year.

T:

That's right. (Laughs)

HMJr:

And it's kind of a tough day tomorrow.

T:

Yee, I know.

HMJr:

I will get in touch with you - it sounds silly -

next year.
T:

Well, that's fine; and I'll just hold myself in
readiness.

HMJr:

Will you do that?

T:

Yes.

HMJr:

And I wish you a very happy and victorious New Year.

T:

The same to you.

HMJr:

And I'm looking forward to seeing you.

T:

Thank you so much. Good-bye.

63
December 30, 1941

Mr. Keller of Chrysler came in to see me this afternoon, and told me that he had gotten an order for 73,000

trucks and that he is all set. He said that he wanted to
tell me that he had accomplished what he had been trying
to do since September 17th.

Keller said, "I hope you won't mind this but a number
of people are saying, I see you have the Secretary of

the Treasury working for you'. I told him that I didn't

mind if he didn't. He said, "We never could have gotten
it without you." He said that he would announce it in
Detroit today.

Then he gave me an estimate of how many Bofors guns

he could make. He said that he could make 750 by August,

and he said if they would actually give him the order he

could double that.

I then called Philip Murray and told him about the
73,000 truck order and he was delighted. I tried to get

Miss Tully but she wasn't in so I dictated it to her
assistant and asked her to please give it to Miss Tully
to give it to the President.

Mr. Keller gave these to HM Jr when he 64
One in on December 30th.

Dender Truck Plant

10.838

1/2

Ton 65

4x4

military
7 the got in Wodge

Juck assembly
until april 15th

63.000 trucks

givin
money
wh
an new
3/4tool
Ten
Enne in for Production

in april 15th -

reach 700 a day by Jenul

trying
toget
this
ader fina left 17th

66

Keller
)
Martin B.26 1

Oct. 1940
center section

final drawing
Ymas day
O

67
December 30, 1941

5:21 p. m.

HMJr:

Philip

Hello.

Murray:

Hello, Mr. Secretary.

HMJr:

Mr. Murray.

M:

Yes.

HMJr:

I thought you'd like to pass it on to these two

men who came down from Detroit.

X:

Uh huh.

HMJr:

Hello.
Yes.

HMJr:

Mr. Keller just left here.
Yes.

HMJr:

M:

HMJr:
M:

HMJr:

And he said in two days he succeeded in getting
what he's been trying to get since September 17th.
Well.

He got an order for 73,000 trucks for Dodge.

Uh huh. And that'll put the plant back to work
now, will it?
He says it will keep it going for awhile, and by
April 15th he'll be on a schedule of 700 a day
he thinks
Uh huh.

HMJr:

or thereabouts.

HMJr:

Well. Uh huh. Well, that's mighty fine.
He said that he's been trying to get it since
September 17th, and he said that by my raising
such hell he got it in two days.

M:

Well, that's remarkable, Mr. Secretary. Mighty

fine for you. Congratulations. Very fine.

-2-

68

He's going to announce it in Detroit tomorrow.
Solendid.

He'a going to announce it.

That's very fine.
But it just shows what can be done if a fellow
gets a little tough.
That's right. Certainly, it does.
What?

It certainly does, Mr. Secretary.

I thought you'd like to pass it along.

Very fine. I certainly will. Thanks for calling.
Good-night.
Good-night.

69
December 30, 1941
5:23 p.m.
HMJr:

Hello.

Operator:

Dr. Lubin. Go ahead.

HMJr:

Hello.

Dr. Isador

Lubin:

Hello. Mr. Secretary.

HMJr:

Yes, Lub.

L:

Some of Leon's boys were talking to me today

about this tire business, and the fact that
there'll out
be something
like 30,000 of them being
forced
onto the street.
Yeah.

L:

Now, in talking to some of your people from Procurement, one of the men said that he thought
you'd be favorable to some arrangement whereby
Procurement would turn over to these dealers the

job of providing tires for the various agencies

supplied by Procurement, rather than the present
system whereby the factories do it directly.
They asked me whether I could talk to you, and,
if you weren't too busy, whether you could see
one or two of Leon's people about it.
Ch, God no. Look
Now, who should they see?
HMJr:

I mean, I just cen't - they can see Clif Mack.

What I'll do is, I'll call up Clif Mack, see?
Yeah.

And tell him that you've got something and that
he'll hear from you direct?
Yeah.
HMJr:

How's that?

I can call him - yeah, I'll do that. That'll be
all right.

70

-2You give me just a minute's headway
Yeeh.

and if he's there - if he's not, I'11 leave
word to expect a call from you, and I'll tell him
to cooperate with you on this plan. How's that?

Swell. That'll be wonderful.
I mean - now, let me see if I understand it. What
1 E it you want?

You see, the way - now,all tires secured by Government agencies now through Procurement are under
contract between Procurement and the manufacturer.

That's right.
Now, the idea would be that instead of doing it
that way, that you use these small dealers
oh.

as your supply outlet, thus keeping them in
business - otherwise, they're thrown right out on
the street, you see?

Well, that's difficult, Lub, because I've got a
hard and fixed rule, no middlemen.

Well, that's the trouble, and that's why I wanted
to talk to you.

No, I don't - I'11 let you talk to Clif Mack, but
don't think - God, we've fought this out with
the British from hell to high water. But - take
I

HMJr:

Clif on first, but I - we've just cut cut all

middlemen.

Well, I mean, from the point of view of public
interest, this is going to be a tough one.

Well, this ien't - but I've got my responsibility

to Congress to buy these tires as ches as possible.

Yeah.

-3JJr:

71

I really don't - you can talk to Clif, and I'll

tell him; but I don't think I can 60 along with

you on that.

Well, what we'll do is talk it out; and if Clif

sees some way around it, we'll come back to you
about it.

But I've got a hard and fixed rule on that. Why
hell, we've done this - we're kicking about the
English. That's what the English are doing, and

distributing the American food through the middleman and when we raised hell about it and Harry

Hopkins raised hell, they said, "Why, we're subsidizing the middlemen to the tune of R hundred
million dollars now.'
Well

Harry Hopkins and I have been all through that
in England on the distribution of food, and also
on the question of their using the middleman.
That we've stopped.

Yeah.

But you talk to Clif.

I'll do that.
I understand it, but I'm afraid I'm agin ye.
Okey.

All right.

All right, sir.

72
December 30, 1941

5:28 p.m.

HMJr:

Dr. Lubin called up just now. He said there are
some people over at Leon Henderson's office who've
got the idea that we should distribute the Govern-

ment tires that we buy through the middleman, in
order to keep him in business.
Clifton
Mack:

I see.

So I seid that I had a hard and fast rule that we
did business with the factories direct and no
middlemen.

That's so.
HMJr:

And I said that I was absolutely opposed to it,
but they could talk to you.
Very good.

HMJr:

So - but I just wanted to tell you that I gave their
no encouragement - in fact, told them that I was
absolutely opposed to it, and how the hell was I
going to justify before Congress that we use the
any tires.
Well, that's so. We have contracts, you know, with

middlemen because Leon Henderson doesn't give them

all of the tire manufacturers.

I know. Now, what they want to do is to get in
on that; and I can't increase our cost by 25 or FO
per cent profit to the middlemen.

Well, that's exactly it. That's exactly the point.
No.

And I'll be glad to see him - will I get in touch
with him?

No, they're going to call you; but I wanted to let

you know that I told him I'm absolutely opposed to
it.
Well, very good.

-2HMJr:

73

So don't let anybody tell you anything else.
Fine.

Are
we going to be able to get the tires for the
Government cars?
I think so. They had the thought over there that

any Government agency that wants tires should get
them through these local rationing boards.
Yes.

And I told them, rather we told them, that was
oh, no.

that was ridiculous, because
oh, Leon Henderson's on the spot, and I'm not

going to let him use us.
Oh, no.

We'll go ahead with our usual Government purchasing
procedure.

That's exectly it; and when we get these figures
together, then we 11 offer this as one thing.
Here are the all-over requirements.
Yeah.

And get clearance on the one lot.
Yes. Okay.

Then, of course, we're asking each of the Government

agencies they've got to justify what they want:
we're not going to give them just what they ask for.
Well, I'm not going to pull Leon's chestnuts out

of the fire.

Yes. Yes. Well, that would be hot, I know.

All right.
Very good.

-3HMJr:
M:

Thank you.

Yes, sir.

74

TREASURY DEPARTMENT

75

PROCUREMENT DIVISION
EFICE OF THE DIRECTOR

WASHINGTON

December 30, 1941
MEMORANDUM TO THE SECRETARY:

The attached draft is the proposed order which
we will have mimeographed and ready for distribution today.

The language of the order will permit determinations both as to purchase policy, which is contained in
Executive Order 6166, and OPM authority with relation to
availability and should provide a workable control.

Consolidated purchases will be effected in furniture January 1. Information as to total requirements for
automotive equipment, also tires and tubes, is now being
obtained and we will start surveys on heavy equipment,

also selected items of electrical equipment, likewise
chemicals, within the new few days.

The attached order is satisfactory to Mr. MacKeachie. If you approve it will be released today.

Clifton E. Mack,
Director of Procurement

original signed by 76
Hajp returned to Mr.
mark, 12/30/41
December 29, 1941

TO THE HEADS OF ALL DEPARTMENTS AND INDEPENDENT ESTABLISHMENTS:

In order to coordinate the procurement of items of supply of
a commercial nature and avoid competition between Government agencies

securing their requirements for supplies, material and equipment that

are becoming increasingly difficult to obtain, the following policy
has been established in conjunction with the Division of Purchases,
office of Production Management pursuant to the provisions of Executive
Order No. 6166, dated June 10, 1933, and the Regulations Governing the

Operation of the Branch of Supply, Procurement Division, Treasury Department, approved by the President April 12, 1935.

1. All Government agencies shall furnish forecasts of needs for
the balance of the fiscal year for selected major items to be designated.
2. Purchases of such major items of supply will be consolidated
either in the Procurement Division or in one or more executive departments, due consideration being given to any statutes authorizing a

specific agency to procure the particular commodity and the availability

of special facility for the purchase of the commodity, such consolidation
to be effected as conditions surrounding these items warrant.
3. The procurement of such requirements will be coordinated with
the Division of Purchases, Office of Production Management, so that there

77

-2-

may be adopted the best means to provide Government agencies with

their essential needs of the designated articles in the light of the

availability of such articles.

Director
Child CLIFTON of E. Procurement. MACK, Mass

APPROVED:

H. Morgenthau, Jr.
Secretary of the Treasury.

Initialled by WNT
HNG
LB

TAK:af

78
TREASURY DEPARTMENT
THE ADMINISTRATIVE ASSISTANT TO THE SECRETARY

WASHINGTON

Il

December 30, 1941

Dear Mr. Secretary:

My associates and I genuinely appre-

ciate the nice expressions in your letter
of December 29, 1941.

We all join with you in the definite
hope that the coming year, which will be a
I

tough one, may nevertheless be a victorious
one.

Sincerely yours,

The Honorable,

The Secretary of the Treasury.

79
THE COMMANDANT OF THE UNITED STATES COAST GUARD
WASHINGTON N

30 December 1941.

My dear Mr. Secretary:

I appreciate more than you will
know your kind and thoughtful note of 29
December 1941, extending New Year's greetings
to the Coast Guard.

May I again say it is an inspira-

tion to work under your leadership, and on

behalf of our every officer, man, and civilian

employee, I reciprocate your good wishes for
better days to come.

Faithfully yours,

anuserch
Hon. Henry Morgenthau, Jr.,
The Secretary of the Treasury,
Washington, D.C.

80
ASSISTANT SECRETARY OF THE TREASURY
WASHINGTON

December 30, 1941.

Dear Mr. Secretary:

For those in my office as well as
myself I write to thank you for your kind
note of December 29. Our hope for the

new year is that we may merit your continued
confidence and with it go our most sincere
wishes for your personal happiness and for a

year of victory.

Sincerely yours,

The Honorable

The Secretary of the Treasury.

81

WASHINGTON.D.C.

WREATOP
ENGRAVING N PRINTING
OFFICE OF THE
DIRECTOR

December 30, 1941.

Dear Mr. Secretary:

On behalf of the entire personnel of this
bureau I extend thanks and appreciation for your
message of December 29.

The employees of the Bureau of Engraving and

Printing will solve any issue that lies ahead.

A copy of your letter and my reply will be on
all bulletin boards this afternoon.
Sincerely yours,

forman
A. W. Hall
Director

The Honorable,

The Secretary of the Treasury.
EFENSE

BUY
ROADS

82
December 30, 1941

Dear Mr. Berlin:
The more I think about your new song,

the more I wonder how you ever managed to do

the job so well.

It wasn't an easy assignment to make

people sing about taxes, but you have done it

beautifully, and you have also hit the nail
on the head as far as Treasury policy is concerned. I know that the song will do the

country a great deal of good.

We are in your debt again, not only

for the song itself, but for your unfailing
willingness to help. I appreciate your
contribution more than I can say.

I am looking forward now to hearing
the record which you are having made. In the
meantime, here are my very best wishes to you
for 1942.

Sincerely,

Mr. Irving Berlin,
799 Seventh Avenue,

New York, N. Y.
FK/hkb

12/30/41

AIR MAIL
SPECIAL DELIVERY

Copus to Hompson

n.m.c.

December 26, 1941

I PAID MY INCOME TAX TODAY

Words and Music By:
IRVING BERLIN

VERSE

I SAID TO MY UNCLE SAM
OLD MAN TAXES HERE I AM"
AND HE -- WAS GLAD TO SEE ME
LOWER BRACKETS THAT'S MY SPEED
MR. SMALL FRY YES INDEED

BUT GEE -- I'M PROUD AS CAN BE.

CHORUS

I PAID MY INCOME TAX TODAY
I'M ONLY ONE OF MILLIONS MORE
WHOSE INCOME NEVER WAS TAXED BEFORE

A TAX I'M VERY GLAD TO PAY
I'M SQUARED UP WITH THE U. S. A.
YOU SEE THOSE BOMBERS IN THE SKY

ROCKEFELIER HELPED TO BUILD THEM, so DID I
I PAID MY INCOME TAX TODAY.

2nd CHORUS

I PAID MY INCOME TAX TODAY
A THOUSAND PLANES TO BOMB BERLIN

THEY'LL ALL BE PAID FOR AND I CHIPPED IN
THAT CERT'NLY MAKES ME FEEL OKAY
TEN THOUSAND MORE AND THAT AIN'T HAY
WE MUST PAY FOR THIS WAR SOMEHOW
UNCLE SAM WAS WORRIED BUT HE ISN'T NOW
I PAID MY INCOME TAX TODAY.

3rd CHORUS

I PAID MY INCOME TAX TODAY
I NEVER CARED WHAT CONGRESS SPENT

BUT NO. I'LL WATCH OVER EVERY CENT
EXAMINE EV'RY BILL THEY PAY
THEY'LL HAVE TO LET ME HAVE MY SAY
I WROTE THE TREASURY TO GO SLOW
CAREFUL MR. HENRY JUNIOR THAT'S MY DOUGH

I PAID MY INCOME TAX TODAY.

83

84
85
Mr. Kuhn's memo on the Westinghouse

ENT

Advertisement and Mr. Robertson.

ON
DATE

TO

Secretary Morgenthau

FROM

Ferdinand Kuhn, Jr.

December 30, 1941

This advertisement was written by Mr. Robertson

himself, as it is an excerpt from a speech that he made in
1939. I am told that he writes his own speeches, and believes

in the value of ringing statements of this kind.
Robertson himself came up from humble beginnings in
up-State New York. He sold aluminum house-to-house, was then
a schoolteacher, and came to the Chairmanship of Westinghouse

from the practice of law. He is said to fancy himself as a

rail-splitter, which he isn't, but I am told that he approaches

it. He is a big man, about 6' 3", about fifty-eight years old,
and has always taken an intense interest in the advertising
department of Westinghouse.

I can get more information about him, including
copies of some of his speeches, when Mr. Mahan gets back to
Washington from New York tomorrow.

J.K.

86

This is an excerpt from an address delivered
before the Cincinnati Chamber of Commerce on
March 3, 1939, and now emphatically repeated.

I

would like to see all of us now
rededicate ourselves to our coun-

try's cause and say, with Adams,
Franklin, Jefferson, and the others
who founded it: "We mutually pledge

to each other our Lives, our Fortunes, and our sacred Honor" - and

from this time henceforth we are
not business men, consumers, capi-

talists, or employees, but Citizens.

See finican find
A.W. ROBERTSON

Chairman of the Board, Westinghouse Electric & Manufacturing Company

out who wrote go
7.11 her 7 end

Westinghouse

inda

87

December 31, 1941
MEMORANDUM FOR THE SECRETARY'S FILES

Conference in Mr. White's Office
December 30, 1941
12:00 Noon

Present: Mr. White
Mr. Zoltowski, Polish Embassy
Mr. Ullmann

Mr. Zoltowski called to pay his respects. He said that

he is the Polish Commissioner for Lend-Lease, that he has no

official business at this time, and that he may call on the Treasury
later to ask its help in financing Polish dollar expenditures.

88

Secretary Morgenthau

DEC 30 1941

lessrs. Foley and Pehle

The Joint Committee on Importations of the
ilrary Associations of America have requested us to license

the importation of certain scientific and research periodicals

from Germany and German-dominated countries during the year

1042. The Committee has urged that files of learned and
scientific journals in American libraries be kept complete

in order to maintain research facilities for defense
industries. It is estimated that the absolute minimum cost

for necessary periodicals is $250,000. The Cerman publishers

live indicated to the Committee that all subscriptions must
be paid for in advance and in free dollars.
The Joint Committee on Importations represents

the American Library Association, the Association of College
and Reference libraries, the Association of Law Libraries,
the Association of Research Libraries, the Medical library
,ssciation, the Music Library Association and the Special
library Association (industrial firms, banks, insurance

companies, etc.).

A representative of the Foreign Funds Control
recently got in Louch with Mr. archibald MacLeish, and

r. acLeish referred him to Dr. Luther evens, executive
Librarian, for discussion of this problem. The views of
UP. evans may be set forth ES follows:

1. Much of the literature which it is proposed to
import will make important direct or indirect
contribution to our war effort. Dr. evens cited
the following two examples:

(a) articles appearing in German publications on
air paid precautions and civilian defense methods
have been photostated and given to the Office for
Civilian Defense.

89

-2(b) An article appearing in a German publication
relative to the construction of tanks has been put

into the
hands of American companies engaged in
tank
production.

2. Already many libraries and committees are complaining
that their research men are unable to procure the
necessary publications. Dr. Evans mentioned in

particular resident Conant of Rapvard, who is

Chairman of the National Research Committee.

3. P. Evans said the Library of Congress looked
favorably upon the proposal of the Joint Committee
on Importations and said he would have no hesitation
at all in recommending approval of their request.
The Department of State has also indicated its

42 roval for the proposed importations. If you agree, we will

receed to
Committee.

license the subscriptions approved by the Joint
(Signed) J. W. Pehig

(Eigned) E. B. Foley, Jv.

O.K.
Hmy

90

December 30, 1941.

The Honorable

The Attorney General.
My dear Mr. Attorney General:
For Secretary Morgenthau I desire to acknowledge

receipt of your letter of December 29, with which was

enclosed a copy of a confidential directive issued by
the President on December 23, 1941, centering in the

Federal Bureau of Investigation the responsibility for
intelligence work within the Western Hemisphere.

Very truly yours,

Herbert E. Gaston

Assistant Secretary of the Treasury.

Copy to Secretary's Files, together with original
incoming letter and copy of directive of the President.

Sintly Special messanger 9:20am 12-31-41
HEG/mah

ga for 91

OF

Office of the Attorney General
SECURITY

Washington D.C.

I

December 29, 1941
CONFIDENTIAL

The Honorable

The Secretary of the Treasury
My dear Mr. Secretary:

By direction of the President I enclose for
your information a copy of a confidential directive
issued by him on December 23, 1941, centering in the

Federal Bureau of Investigation the responsibility
for intelligence work within the Western Hemisphere.
Sincerely yours,

tuncer indl
Attorney General

92

CONFIDENTIAL DIRECTIVE ISSUED ON DECEMBER 23, 1941, BY THE
PRESIDENT TO THE HEADS OF THE GOVERNMENT DEPARTMENTS AND AGENCIES
CONCERNED:

In accordance with previous instructions the Federal
Bureau of Investigation has set up a Special Intelligence Service
covering the Western Hemisphere, with Agents in Mexico, Central
America, South America, the Caribbean, and Canada. Close contact

and lisison have been established with the Intelligence officials
of these countries.

In order to have all responsibility centered in the
Federal Bureau of Investigation in this field, I hereby approve
this arrangement and request the heads of all Government Departments

and Agencies concerned to clear directly with the Federal Bureau of

Investigation in connection with any intelligence work within the
sphere indicated.

The Director of the Federal Bureau of Investigation is
authorised and instructed to convene meetings of the chiefs of the
various Intelligence Services operating in the Western Hemisphere

and to maintain liaison with Intelligence Agencies operating in the
Western Hemisphere.

(Signed) Franklin D. Roosevelt

THE WHITE HOUSE
WASHINGTON

December 30, 1941

Respectfully referred to the
Secretary of the Treasury.

By direction of the President:

M. H. MCINTYRE

Secretary to the President

Marron
THE WHITE HOUSE
WASHINGTON

December 29, 1941

MEMORANDUM FOR MR. EICHER:

I have your memorandum of December 17, 1941, giving
me the Security and Exchange Commission's current thoughts

on the desirability of a Capital Funds Committee.
As you know, this matter has come up at various times

during the past year or so - the last time being in April
1941, when Henry Morgenthau, Jr., following a talk with
Jerome Frank, discussed it with mo.

In view of this, I am asking him to go into the matter
again and give me a recommendation. In the meantime, I

suggest you get in touch with him.

(Initialed) FF. D. R."

12/17/41

O

The President

FROM : Edward C. Eicher, Chairman
Securities and Exchange Commission

Here is a subject we believe vital
to Defense which I had no opportunity

to discuss with you yesterday. I would

like, before I leave, to give my
colleagues a green light from you.
We are armed to the teeth for the job!

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
CHAIRMAN

the
Dec
December 17,

WHITE

1841

MOUSE
MORANDUM FOR THE PRESIDENT

Re

Received ANVII

I Capital Funds Control
The too hasty conclusion that we do not need capital funds

control at this time because there is no shortage of capital seems
dangerously erroneous. It disregards the vast problem of conservation
of industrial assets for war and post-war purposes.
A simple but striking example of the tendency of corporations

to dissipate the increased earnings resulting from defense activities
is found in the alarming number of increased dividends and extra
dividends that have been declared this year-end. Such dividend dis-

tributions are inflationary in character and must inevitably dilute
the funds available for investment in defense. A portion, of course,
is absorbed in taxes, and another portion is used to purchase Defense
Bonds; but the bulk unquestionably goes into peacetime consumers goods,

If these dividends were retained by the corporations, they
could either be invested in necessary additional defense plant and

production, or they would be easily available for large-scale
investment in Defense Bonds. With the latter type of investment
the corporations would have a comfortable cushion of cash reserves
to

be used when they are most needed for the protection of the
illness and the security holders.
?

Other examples of the need for powers to prevent the
diversion of corporate resources from the defense requirements can
be given.

Because of its vast experience in corporate affairs, this
is a job which could be done by the Securities and Exchange Commission

much better than by any other agency. It would be simply an extension
of our work under many sections of the Holding Company Act. It could
and should be done either in cooperation with the Treasury or other
appropriate Defense agency, such as the Economic Defense Board, in

order that it be integrated with the entire Defense effort.

Eciden

Edward C. Eicher
Chairman

98
TREASURY DEPARTMENT

Washington

Press Service

FOR RELEASE, MORNING NEWSPAPERS,

Tuesday, December 30, 1941.

No. 29-33

12/29/41

The Secretary of the Treasury announced last evening that the

tenders for $150,000,000, or thereabouts, of 76-day Treasury bills,
to be dated December 31, 1941, and to mature March 17, 1942, which
were offered on December 26, were opened at the Federal Reserve
Banks on December 29.

The details of this issue are as follows:
Total applied for - $317,107,000

Total accepted - 150,004,000

Range of accepted bids: (Excepting two tenders totaling
$80,000)

High - 99.961 Equivalent rate approximately 0.185 percent
Low - 99.927
0.346
If

"

If

Average

Price - 99.935

0.310

(65 percent of the amount bid for at the low price was accepted)

-00o-

UNITED STATES SAVINGS BONDS

Comparative Statement of Sales During
Last Twenty-three Business Days of December, November and October 1941
(October 6-31, November 1-29, December 2-29)

On Basis of Issue Price

(Amounts in thousands of dollars)

:
:

:
:

:

Total

$ 54,181

$ 3,103

210,172

71,478

70,441

138,694

302,350
28,182
132,562

109,475
18,978
105,035

105,335
19,133
99,548

192,875
9,204
27,527

5,487

$463,093

$233,487

$224,016

$229,606

$ 9,471

:

Series G - Banks

$ 34,894

:

:

Series F Banks

$ 37,997

:

:

Series E Total

$ 92,178

December
over
November

:

:

:

:

Series E - Banks

October

:

:

:

Series E - Post Offices

over
November

November
over

Percentage of Increase
or Decrease (-)
:

:

: December : November : October

or Decrease (-)

December :

:

Item

Amount of Increase

:

Sales

November
over

October

142.6%

8.9%

1,037

194.0

1.5

4,140

176.2
48.5
26.2

3.9
0.8

155

Office of the Secretary of the Treasury, Division of Research and Statistics.

98.3%

5.5
4.2%

December 30, 1941.

Source: All figures are deposits with the Treasurer of the United States on account of proceeds
of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.

UNITED STATES SAVINGS BONDS

Daily Sales - December 1941
On Basis of Issue Price

(In thousands of dollars)

Post Office
Date

All Bond Sales

Bank Bond Sales

Bond Sales

Series E

Series E

Series F

Series G

Total

Series E

Series F

Series G

Total

$ 2,976

$ 3,904

$ 1,333

$ 7,220

$ 12,458

$ 6,880

$ 1,333

$ 7,220

$ 15,434

1,229
1,510
2,411
2,015
1,001

2,592
2,734
4,036
4,805
2,293

623

5.750
5,289
7,530
12,357
2,776

8,964
8,893
12,292
18,314
5.725

3,821
4,244
6,447
6,820
3,294

623

5,750
5,289
7,530
12,357
2,776

10,193
10,403
14,703
20,329
6,726

3,282
1,828
1,651
1,909
2,773
2,767

4,764
3,877

1,011
491

5,030

584

9,585
9,475
6,668
8,905
9,437
7.734

8,046
5,706
5,217
6,672
7.785
7.798

1,011

3,566
4,763
5,012

3,810
4,996
2,612
3,423
3,768
2,120

3,810
4,996
2,612
3,423
3.768
2,120

12,866
11,304
8,320
10,814
12,211
10,501

7,185
2,113
4,164
5,382
5,995
4,091

11,679
3,956
9,750
11,630
10,205
11,890

1,022

4,462
1,901
6,327
6,826
5,214
5,921

17,162
6,750
17,257
19,793
16,591
19,081

18,864
6,069
13,914
17,012
16,201
15,981

1,022
1,180
1,337
1,172
1,270

4,462
1,901
6,327
6,826
5,214
5,921

24,347
8,863
21,421
25,175
22,586
23,172

10,916
4,393
3,613

23,269
10,642
13,085

2,490

8,067
6,831
8,900

33,826
19,445
23,613

34,185
15,035
16,698

2,490
1,972
1,629

8.067
6,831
8,900

44,742
23,838
27,226

29,934
6,412

3,536
530

10,076
3,255

43,547
10,197

39,527
9,915

3,536

27

9.593
3.503

530

10,076
3,255

53,140
13,700

29

8,852

24,247

3,060

10,353

37,661

33,100

3,060

10,353

46,513

$ 95,154

$214,076

$ 29,515

$139,782

$383.374

$309,230

$ 29,515

$139,782

$478,527

December 1941
1

2

3

4

5

6

8

9

10
11
12

13
15
16
17
18
19

20
22
23

24
26

Total

870
726

1,152
656
601
719

658

893

1,180
1,337
1,172
1,270
1,972
1,629

870
726

1,152
656

601
491
719

658
584

893

December 30, 1941.
Office of the Secretary of the Treasury, Division of Research and Statistics.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales

of United States savings bonds.

Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.

UNITED STATES SAVINGS BONDS

Comparative Statement of Sales During
First Twenty-three Business Days of December, November and October, 1941
(October 1-27, November 1-29, December 1-27)

On Basis of Issue Price

(Amounts in thousands of dollars)

:
:

:

:

:

Total

over
November

:

Series E - Total

Series F - Banks
Series G - Banks

over

October

Percentage of Increase
or Decrease (-)
December : November
:

:

:

Series E - Banks

:

:

Series E - Post Offices

over
November

:

: October

:

:

:

: December : November

:

:

Item

Amount of Increase
or Decrease (-)
December : November

:

Sales

over

October

$ 86,301

$ 37,997

$ 36,429

$ 48,304

$ 1,568

127.1%

4.3%

189,829

71,478

69,616

118,351

1,862

165.6

2.7

276,130
26,455
129,429

109,475
18,978
105,035

106,046
19,650
104,902

166,655
7,477
24,394

3,429

152.2
39.4
23.2

3.2
3.4
0.1

$432,014

$233,487

$230,598

$198,527

672

-

133

$ 2,889

Office of the Secretary of the Treasury, Division of Research and Statistics.

85.0%

1.3%

December 29, 1941.

Source: All figures are deposits with the Treasurer of the United States on account of proceeds
of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.

UNITED STATES SAVINGS BONDS

Daily Sales - December 1942
On Basis of Issue Price

(In thousands of dollars)
Post Office
Date

Bank Bond Sales

Bond Sales

All Bond Sales

Series E

Series E

Series F

Series G

Total

Series E

Series F

Series G

Total

$ 2,976

$ 3,904

$ 1,333

$ 7,220

$ 12,458

1,229
1,510
2,411
2,015
1,001

$ 6,880

2,592
2,734
4,036
4,805
2,293

$ 1,333

$ 7,220

5,750
5,289
7.530
12,357
2,776

8,964
8,893
12,292
18,314
5,725

$ 15,434

623

3,821
4,244
6,447
6,820
3,294

623

5,750
5,289
7,530
12,357
2,776

10,193
10,403
14,703
20,329
6,726

3,282
1,828
1,651
1,909
2,773
2,767

4,764
3,877
3,566
4,763
5,012
5,030

1,011

3,810
4,996
2,612
3,423
3,768
2,120

9,585
9,475
6,668
8,905
9,437
7,734

8,046
5,706
5,217
6,672
7,785
7,798

1,011

3,810
4,996
2,612
3,423
3,768
2,120

12,866
11,304
8,320
10,814
12,211
10,501

7,185
2,113
4,164
5,382
5,995
4,091

11,679
3.956
9.750
11,630
10,205
11,890

1,022

17,162
6,750
17,257
19,793
16,591
19,081

18,864
6,069
13,914
17,012
16,201
15,981

1,022

1,180
1,337
1,172
1,270

4,462
1,901
6,327
6,826
5,214
5,921

1,180
1,337
1,172
1,270

4,462
1,901
6,327
6,826
5,214
5,921

24,347
8,863
21,421
25,175
22,586
23,172

10,916
4,393
3,613

23,269
10,642
13,085

2,490
1,972
1,629

8,067
6,831
8,900

33,826
19,445
23,613

34,185
15,035
16,698

2,490
1,972
1,629

8,067
6,831
8,900

44,742
23,838
27,226

9,593
3,503

29,934
6,412

3,536

43,547
10,197

39,527
9,915

3,536

530

10,076
3,255

530

10,076
3,255

53,140
13,700

$ 86,301

$189,829

$ 26,455

$129,429

$345,713

$276,130

$ 26,455

$129,429

$432,014

December 1941
1

2

3

4

5

6
8

9

10
11
12
13

15
16

17
18
19
20
22
23

24
26
27

Total

870
726

1,152
656

601
491
719

658
584

893

870
726

1,152
656

601

491
719

658

584

893

Office of the Secretary of the Treasury, Division of Research and Statistics.

December 29, 1941.

Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales
of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.

TREASURY DEPARTMENT

103

INTER OFFICE COMMUNICATION

DATE December 30, 1941

Secretary Morgenthau

TO

FROM

Mr. Haas

Subject: Supply of Series E Savings Bonds in the Field

1. At the close of business last night, December 29,
there were approximately 4-1/2 million pieces of Series E
savings bonds in the field. A very large proportion of
these bonds was in the hands of selling agents but a
considerable number were in the mail in transit. Most of
the bonds in transit last night will have been delivered
by the close of business today.
2. The stock of $25, $50, and $100 denominations

of savings bonds in the field is equivalent to about one
month's supply, it appears from the latest data available,
and the stock of $500 and $1,000 denominations is equivalent to about a three months' supply. Data on the supply
of bonds in the field are shown for the period since
December 1 in the attached chart. It should be noted, in
connection with using this chart, that a month's supply
of bonds in the field is not sufficient to prevent local
shortages from occurring. It takes a very large number of
bonds to keep all agents stocked up and in the same geographic area agents with a rapid turnover of their stock

may run short of bonds at a time when agents with no turnover may have plenty of stock on hand.

3. After it was brought out in a meeting in your

office yesterday that there are local shortages of some

denominations of savings bonds, we asked each Federal
Reserve Bank to wire us daily the number of bonds

requisitioned from them by agents that was in excess of
the banks' supply on hand ready for shipment. We asked
the Post Office Department's central office for the same
information. The telegrams received this morning indicated
that last night local shortages of bonds amounted to 927,000
pieces. A summary of the information telegraphed appears
in table I attached.

104
Secretary Morgentnau - 2

4. The shortage of bonds reported in the telegrams will be taken care of by the bonds in transit
last night between Washington and the Federal Reserve
Banks plus four days' production of bonds in excess of
sales. The Bureau of Engraving and Printing is now
delivering 375,000 bonds a day seven days a week. These
deliveries, it appears from latest reports, are about
200,000 pieces a day in excess of current sales.

5. The Bureau of Engraving and Printing advises
us that they expect to continue production at the rate
of 375,000 a day for a week or two after which production
will rise to 475,000 pieces a day. These production
figures, it might be noted, compare with a production of

130,000 pieces of savings bonds on December 1. The number
of pieces of savings bonds produced since December 1
appears by days in Table 2 attached.

6. In order to safeguard against local shortages,
the field stock of savings bonds should be increased,
as you have indicated previously, to the equivalent of
three months' sales.

Attachments

Agents' requests for savings Londs unfilled at the close
of business, December 29, 1941
(In thousands)

Denomination
#25

$50

$100

43

21

21

lo

31

25

-

-

$500

$1,000

Total

Federal Reserve Banks
Boston
New York

Philadelphia
Cleveland
Richmond

-

-

Chicago

92

St. Louis
Kansas City
Dallas
San Francisco

89

-

75

3

2

-

-

2

-

22

25

2

11

5

8

1

-

-

-

-

-

-

51

49

7

-

199

9

5

-

-

18

2

-

-

-

4

Minneapolis

1

9

11

Atlanta

3

-

27

17

3

4

15
-

2

3

-

2

64

-

12

11

8

-

-

-

19

Post offices

200

200

-

-

-

400

Total

412

357

136

19

3

927

Office of the Secretary 01 the Treasury, Division 01 Research and Statistics.

105

Number of pieces produced December 1, 1941 to date
(In thousands)
Total

Denomination
Day

all

$25

$50

$100

$500

75

25
25

10

75

10
10

60

10

40

10

10
10
10

50

10

50

10

10

50

10

50

-

-

-

-

-

-

-

-

-

-

-

-

-

-

8

50

10

50

-

-

110

10

50

-

-

75

-

-

110
120
160
161
164
160
193
247

December 1
2

3

4

5
6

7

10

$1,000

9

15

10

30

11

40

30
20

50
50

5

5

30

15

12

80

-

50

-

13

121

-

10

15

14

44

-

70

50

-

15

80

-

-

80

-

16

28

-

120

-

45

17

92
92

-

-

-

155

-

-

-

-

-

-

-

-

50

-

-

-

75

10

-

-

75

25

-

-

85

35

-

-

80

25

-

-

so

35

-

-

50

-

18
19
20
21

22
23
24

25
26
27
28
29

120
150
175
160
180
220
225
180
240
200
205

40

-

-

50

10

10

80

55

10

10

55

10

10

95

"

denominations
130
130
130
130
110

92

120
200
260
260
300
325
340
270
310

355
375

30
31

Office of the Secretary of the Treasury,
Division of Research and Statistics.

December 29, 1941

105

Treasury Department

107

TELEGRAPH OFFICE

05 GS 61 NL
SC SACRAMENTO CALIF DEC 29 1941
1941 DEC 30 AM 8 39

HONORABLE HENRY MORGENTHAU JR

SECRETARY OF THE TREASURY
WASHN DC

WOULD GREATLY APPRECIATE INFORMATION FROM YOU AS TO SELECTION OF ALIEN
PROPERTY CUSTODIAN FOR CALIFORNIA AND PERSONNEL FOR HANDLING THIS WORK.

I HAVE IN MIND AS SUITABLE APPOINTEES MEN OF OUTSTANDING ABILITY AND
CHARACTER, WHOM I SHOULD LIKE TO RECOMMEND. I AWAIT YOUR ADVICE REGARDING
THE CONTEMPLATED ORGANIZATION OF ALTEN PROPERTY CUSTODIANSHIP BEFORE
SUBMITTING SUCH NAMES FOR YOUR CONSIDERATION REGARDS
CULBERT L OLSON
GOVERNOR OF CALIFORNIA

754AM DEC30

108

Freezing Control
Honorable Culbert L. Olson
Governor of California
Sacramento, California

December 30, 1941
12:45 noon

RE YOURTEL THE PRESIDENT HAS NOT ISSUED ANY EXECUTIVE ORDER
SINCE THE OUTBREAK OF WAR DEALING WITH THE CUSTODIANSHIP OF

ALIEN PROPERTY stop

WE ARE CONTINUING TO ACT UNDER OUTSTANDING

FREEZING CONTROL ORDERS

SECRETARY OF THE TREASURY.

Ensth.
EHF:BB/ 12/30/41

TREASURY DEPARTMENT

109

INTER OFFICE COMMUNICATION
DATE

TO

Mr. Thompson

FROM Mr. Haas

In further response to your request of December 26,
1939, there 18 submitted herewith for the Division of
Research and Statistics a memorandum listing, with brief
descriptions, the studies or projects completed or under

way, and the names of persons working on each, for the

month of September 1941.

December 30, 1941

110

DIVISION OF RESEARCH AND STATISTICS

Report of Studies or Projects Completed or Under
Way, and the Names of Persons Working on Each,
for the month of September 1941

For convenience of reference, the studies listed are

grouped under general subject heads.

The name 8 shown for persons working on each project

include only those who participated fairly directly, as
explained in the introductory note to the corresponding

report submitted on December 28, 1939. No attempt has
been made to cover also persons whose responsibility in
each
particular case was mainly in planning, supervising,
or
consulting.

Financial Analysis

I. Projects or studies completed
1. Two reviews of current developments in the high-grade
securities markets were prepared, and memoranda were

transmitted to the Secretary on September 5 and 17. Mr. Haas, Mr. Murphy, Mr. Foy, Mr. Matlock, Mr. Robbins,
Mr. Barnett, Mr. Rosen

These reviews contained, in addition to analysis of

the current situation, the following special studies:
(a) Major swings of Government, municipal, and
high-grade corporate bonds since the outbreak of the war (Review of September 5,

pages 4-5). - Mr. Foy

(b) Relative expansion of bank deposits in
selected countries, 1939-41 (Review of
September 5, pages 5-7). - Mr. Matlock

(c) Maturity preferences of various classes of

inventors in Government securities (Review
of September 17, pages 3-5). - Mr. Robbins

-2-

111

2. A maturity calendar for each issue of direct and

guaranteed bonds and notes of the United States was
prepared, showing by year, month, and day, with calendar year totals, the amounts outstanding, clas-

sified by fixed maturity issues and by callable 18sues, according to the maturity, first, and final

callable dates. The calendar was prepared as of
September 2, and was transmitted to the Secretary on
September 30. - Miss Lagos

3. Yield rates on Treasury bonds and notes and on
securities guaranteed by the United States, were
calculated daily. All yields were computed on the
basis of over-the-counter closing quotations. These
were summarized each day in a table showing for each

issue the closing bid and asked quotations and yields
to call and maturity dates on that day, the changes
in prices and yields from the preceding day, and the
price range since the date on which first traded, and
also for the year 1941 to date. A chart for each
issue was kept up to date showing daily price and
yield figures together with comparative monthly data
since 1934, since the date of issue, or since the

date first traded. Prices and yields of Treasury

bonds, notes, and bills, pre-war bonds, securities
guaranteed by the United States, and securities of
Federal agencies not guaranteed, will be presented

in a revision of the publication now entitled
"Market Prices and Yields of Outstanding Bonds, Notes,
and Bills of the United States", described in this
report under "Publications". In addition, yields

were computed daily on five high-grade corporate securities and two British Government issues. Mr. Moody, Miss McCoy, Mr. Kroll

4. At the request of the Secretary, arrangements have
been made to secure periodically from the British
Empire purchasing missions certain information regarding purchases in the United States by the

British Empire. Various reports and tables are prepared from this information, and all are transmitted
according to instructions by the Secretary. -

Mr. Haas, Mr. Lindow, Mr. Wagner, Mr. March, Mr. Mayo,
Mr. Marcus

112
3-

(a) Weekly statements are received covering the
itemized purchases by British Empire Governments through the various missions, and the
itemized purchases made by these Governments
with the knowledge of the missions but not

through their facilities. Similar statements

are received showing, by itemized contracts,
deliveries made with respect to orders placed
by the United Kingdom through the missions.
The details with respect to orders and de-

liveries are classified by some twenty-five commodity
groups designed especially for the purpose.
These data are reviewed and edited in the Division each week and a report 18 then prepared
summarizing in dollar volume the information
on orders and deliveries, by commodity groups.
This report consists of eight statements: the
first three summarize orders placed by the
individual governments of the British Empire
for the current week and the totals to date;
the next three statements summarize total

orders of the British Empire on an historical
basis; and the last two statements present data
on deliveries with respect to orders placed by

the United Kingdom through the British missions.

These weekly commodity statements were prepared,
and were transmitted on September 6, 12, 19, 26,
27, and 30.

(b) The Division also receives each week the data
required to prepare statements giving the details concerning the physical volume of airplane
and airplane engine orders in the United States

by the British Empire. The material for these

statements is contained in a group of work sheets
prepared by the British Purchasing Commission,

but it is necessary for the Division to consoli-

date and coordinate the information contained in
the Commission's statements. The finished tables
show, by company and by type of plane or engine,

the following information: (1) summary of orders,
deliveries, and exports; (2) history of orders;

(3) history of deliveries; (4) history of exports;

-4-

113

(5) scheduled deliveries of unfilled orders;
(6) options: scheduled deliveries; (7) spare
parts: orders, deliveries, unfilled orders, and
options; and (8) secondhand units: orders, deliveries, and scheduled deliveries of unfilled
orders. These aircraft reports were prepared,
and were transmitted on September 6, 12, 19,
26, and 27.

(c) A series of six tables has been developed to show
each week the disposition of airframes and airplane engines inspected in the United States by
the British purchasing missions, and the status
of airframes and airplane engines on hand in the
United States. Separate tables for airframes and
airplane engines show, by company and by model:

(1) the disposition of units inspected; (2) the
status of these units; and (3) the physical location of the units awaiting export. These tables

were prepared, and were transmitted on September 2,
8, 15, 22, and 30.
(d) Reports are prepared each week showing commitments

by the British Empire Governments for capital expenditures in the United States and for extraordinary charges designed to expedite deliveries.
The data for these statements are provided by the
British Purchasing Commission but the tables

actually are prepared in the Division. Tables
showing capital commitments were prepared, and

were transmitted on September 6, 12, 19, 26, and
27.

(e) A group of seven analytical tables on British
Empire orders of iron and steel is prepared
monthly. Four of these cover commercial iron
and steel, excluding ferro-alloys and drop
forgings, and are classified by product. One
table covers ferro-alloys and silicon metals,

and also is classified by product. The last two
tables cover drop forgings and are classified by
manufacturer. Statements showing British Empire
orders of iron and steel as of July 31, were pre-

pared, and were transmitted on September 8.

114

-5- (f)

Arrangements have been made to receive informa-

tion on a physical volume basis for the orders,
deliveries, and dates of scheduled deliveries
on unfilled orders, with respect to several other

important commodities. For each of these commodities the following tables are being prepared:

(1) current delivery status of orders; (2) history
of orders; (3) history of deliveries; and (4) scheduled deliveries of unfilled orders. The data in

these tables are broken down by particular products,
particular
models in each case, and particular
manufacturers.
Statements covering various commodity groups were

prepared, and were transmitted as follows:

Explosives and propellants, on September 2
Ships, small boats, and marine engines, on
September 2.

Ordnance, on September 2 and 22
Small arms ammunition, on September 2 and 22

Motor vehicles, on September 6
Nonferrous metals, on September 6 and 30
Shells and bombs, on September 19

Airplane propellers, on September 26 and 27
Chemicals, on September 26 and 27

Sub-machine guns, revolvers, and rifles, on
September 26 and 27

In addition tables are being prepared on the

following commodity groups:

Small arms (fully automatic)
Tanks and tank equipment

(g) Certain financial information concerning the orders
placed in the United States by the British Empire
is presented in a monthly report. This report

consists of three tables, showing by commodity
groups a summary of the status of payments on dollar orders placed; the history of payments made;
and a forecast of future payments on unpaid commitments. The report was prepared, and was transmitted

on September 19.

-6-

115

(h) Arrangements have been made with the Citadel

Merchandising Company, Ltd., a Canadian Govern-

ment corporation, to receive regular reports
showing orders placed for machine tools in the
United States, and deliveries on these orders.
From this information the Division prepares a
report consisting of three tables showing the

current status of orders; the history of orders;
and the history of deliveries. A report as of

August 31, is being prepared.

5. At the request of the Secretary, arrangements have been
made to secure periodically certain information regarding purchases in the United States by the Netherlands
Purchasing Commission, and by Lindeteves, Inc. Mr. Haas, Mr. Lindow, Mr. Wagner, Mr. March, Mr. Mayo,
Mr. Marcus

Statements are received covering the itemized purchases
by the Netherlands Purchasing Commission in the United
States, and the volume of deliveries made thereon.
Similar statements are received concerning the activ-

ities of Lindeteves, Inc., a large private commercial
organization operating in the Dutch East Indies. The
details with respect to orders and deliveries for these
purchasing agencies are classified by the same twentyfive commodity groups used for reporting orders placed

in the United States by the British Empire.
These data are reviewed and edited in the Division.

Reports are then prepared for each of these agencies
summarizing the information on orders and deliveries,
classified by commodity groups. These reports con-

sist of three statements: the first shows the history

of orders placed; the second shows the history of deliveries made on these orders; and the third shows
the current delivery status of orders. These commodity statements covering orders of the Netherlands
Purchasing Commission were prepared, and were trans-

mitted on September 6, 12, 27, and 30. Similar statements for Lindeteves, Inc., were prepared, and were
transmitted on September 6, and 27. Both groups were

transmitted according to instructions by the Secretary.

-7-

116

6. At the request of Under Secretary Bell, various

memoranda and charts were prepared for use in the

Friday discussion group meeting fortnightly to consider matters of general interest in connection with
defense financing. - Mr. Haas, Mr. Daggit
The material prepared during the month included the

following, presented on September 12:

Analyses were made of recent movements of commodity

prices illustrated by three wall charts.

Comparisons were shown in the first chart of price
indexes for all commodities and for foods in the period
1939-41 and the period 1914-16, on the basis that July
1914=100 in the World War period, and August 1939=100
in the current period.
The second chart, on the basis that 1926=100, showed

the monthly movement of the NICB cost-of-living index

compared with the BLS index of 889 commodities from
1935 through September 6, 1941. On the same chart
were shown the weekly movement of the BLS index of 889
commodities and the BLS index of 28 basic commodities
from August 1939 to mid-September 1941.

The third chart showed, on the basis that August 1939=100,
the weekly average movement of the index of 11 imported
commodities and of the index of 17 domestic commodities
from August 1940 to September 1941, and their daily
average movement from May 24 through September 6. On
the same chart were shown also for each of the 28 commodities, the percentage price changes from the August
1940 low to August 13 and to September 10, 1941.

7. In response to a request by the Secretary on January 21,
that measures be taken to obtain information to assist
in carrying through the defense financing program, arrangements were made to obtain the necessary detailed

statistics on the holdings of each issue of the public

debt and of guaranteed securities by the various classes
of holders. - Mr. Haas, Mr. Tickton, Mrs. Wolkind,
Mr. D. J. Leahy, Mr. Blitman, Mrs. Barnes, Mr. Alter,

Mr. Robbins

-8-

117

A summary was prepared of the data received 88 of

July 31, consisting of brief explanatory text and

six tables for publication in the Bulletin of the
Treasury Department for September.

The information as of August 31 received in response
to our letter of August 29, from 7,000 banks and in-

surance companies was coded, tabulated, and analyzed.
A comprehensive analysis was prepared, consisting of

100 tables, showing this information, classified by
type of institution, by issue, by geographic area, by
call classes, and by tax-exemption provisions.

New letters were sent out to the banks and insurance

companies on September 29, requesting comparable data
as of September 30.

Special tabulations were prepared and were transmitted
to the Federal Reserve Banks of New York and Philadelphia,
covering ownership of securities issued or guaranteed by
the United States, as of July 31, 1941.
8. At the request of the Secretary, arrangements have been

made to prepare current statistical reports on the sales
of United States Defense savings bonds, series E, F, and
G, and Defense Postal savings stamps, on the basis of

reports by the Treasurer of the United States, the

Federal Reserve Banks, and the Post Office Department.
The reports prepared during September were transmitted

according to instructions by Mr. Graves. - Mr. Haas,
Mr. Reagh, Mr. Brown, Mr. Tickton, Mr. Kroll, Mr. D.J.Leahy

(a) Daily tables were prepared, showing the dollar
volume, on the basis of the issue price, of sales
of savings bonds, series E, F, and G, by Post

Offices and by banks, with totals. The first

table, prepared on September 2, presented these

data for each business day of August, with totals
for the month. The next table, prepared on
September 3, showed these data for September 2,

with totals. Succeeding tables showed the data
for each additional business day of September,
with cumulative totals. The table prepared on

September 30 covered the period from September 2
through September 29.

118
-9-

(b) Daily tables were prepared, containing a comparative statement of sales in September, in
August, and in July, for each of the three series of bonds, by Post Offices and by banks.
The dollar volume of sales was shown on the basis

of the issue price, together with the absolute

and percentage changes in September from August,

and in August from July. The table prepared on
September 2 showed these data for the full months

of August, July, and June. The first table show-

ing the comparison for September, August, and
July, prepared on September 3, showed the data for

the first business day of each month, with totals.
Succeeding tables showed the data for each additional business day, with cumulative totals. The

table prepared on September 30 covered the first
24 business days of the month, representing the
periods of July 1-29, August 1-28, and September 1-29.

(c) A table was prepared on September 2, showing sales
of savings bonds, series E, F, and G, by Post
Offices and by banks, in dollar volume, on the

basis of the issue price, in May, in June, in
July, and in August, with totals.

(d) A table was prepared on September 16, showing

sales of savings bonas, series E, F, and G, in
dollar volume, on the basis of the issue price,
in May, in June, in July, and in August, with
totals.

(e) A table was prepared on September 16, showing

sales of savings bonds, series E, in August, in
dollar volume, on the basis of the issue price,
by States, and by type of sales agent, with totals.

(f) A table was prepared on September 16, showing sales

of savings bonds, series E, in dollar volume, on
the basis of the issue price, by States, in May,

in June, in July, and in August, with totals.

(g) A report consisting of 150 pages, was completed

on September 30, showing sales of savings bonds,

series E, for the month of August, in dollar
volume, on the basis of the issue price, by Federal
Reserve districts, by States, by cities, and by
counties, all classified by sales agents and denominations.

- 10 -

119

(h) A table was prepared on September 8, showing the
estimated total value and number of units of
Defense savings stamps, classified by denomina-

tions,and
soldininAugust,
the month
May, in June, in
July,
withoftotals.

(1) A memorandum was prepared on September 26, showing

the estimated total number of purchasers of savings bonds, series E, F, and G, the estimated
number of purchasers of series E bonds, and the
estimated volume of sales of savings bonds, E, F,
and G, with total, from May 1 through September 24.

(j) At the request of the Secretary on September 12,

a chart was prepared showing monthly sales of
United States savings bonds, including Defense
savings bonds, from March 1935, the date of their

inception, through August 1941. Copies of the
chart were transmitted to Mr. Schwarz for release.

9. A proposed improvement in the procedure for reporting
sales of Defense savings bonds and a method of preparing statistics showing direct sales by geographic areas

were discussed with the fiscal officer of each of the
Federal Reserve Banks. - Mr. Reagh, Mr. Tickton

10. At the request of Mr. Graves, a proposed reply was
prepared, for signature of the Under Secretary, to a
letter dated September 8 from Mr. L. P. Bethea,
Assistant Secretary of the Board of Governors of the
Federal Reserve System, transmitting a letter dated
September 5, from Mr. Robert G. Rouse, Vice President
of the Federal Reserve Bank of New York, requesting cer-

tain data in respect to sales of savings bonds. In

connection with this reply dated September 23, a memoran-

dum was prepared dated September 12, summarizing the

status of each statistical item requested by Mr. Rouse. -

Mr. Brown

11. Two proposals of the RFC that the Secretary request
that corporation to purchase stock in two banks were
examined. - Mr. Barnett, Mr. Rosen

- 11 12.

120

A table was prepared, and was transmitted to the
Secretary on September 10, summarizing sales during
August of Treasury notes, Tax Series A and Tax Series
B, inTickton
par amounts, by individuals and by corporations. Mr.

13. A table was prepared, and was transmitted to the

Secretary on September 10, showing sales during
August of Treasury notes, Tax Series A and Tax Series
B, in par amounts, classified by denomination. Mr. Tickton

14. At the request of the Secretary on September 29, a

memorandum was prepared, and was transmitted to hTm

on September 30 on a "Proposal for Offering 10- and
15-year Treasury Securities on Each Quarterly Date".

Mr. Hass, Mr. Murphy

-

15. At the request of Mr. Heffelfinger on September 12, a
memorandum was prepared on his memorandum dated
September 10, 1941, with respect to Indian Trust Funds,
andSandelin
was transmitted to Mr. Heffelfinger on September 26. Mr.
16. At the request of Mr. Kades on September 8, a table
and a chart were prepared showing a comparison of the
spread in yield between corporate and municipal bonds
with the Federal income tax, 1900-1941. Copies were
transmitted to Mr. Kaces on September 30, for his use
in connection with a speech before the National Tax
Association. - Miss Lagos
17. At the request of Assistant Secretary Gaston on August 29,
amemorandum was prepared for the Secretary on "Excess

Reserves, Credit Controls, and Treasury Financing". The

memorandum was transmitted to the Secretary on September 2. -

Mr. Haas, Mr. Murphy, Mr. Foy, Mr. Barnett

18. A streamlined version was prepared of the memorandum

listed in the item immediately above, and was entitled
"Relative Merit of General and Selective Credit Controls
in the Present Situation". - Mr. Murphy, Mr. Foy,
Mr. Rosen

- 12 19.

121

At the request of the Secretary on September 4, there
was prepared and transmitted to him on September 5, a
"Digest of Policy Letters on Federal Reserve Discount
Rates during the War and Immediate Postwar Period".
Mr. Murphy, Mr. Foy, Mr. Sandelin
-

20.

At the request of the Secretary, meetings were attended
which were held by representatives of the Treasury Department and the Board of Governors of the Federal Reserve System for the purpose of discussing general and
selective credit controls. Various memoranda, reports,
and the minutes were prepared for use in connection
with the meetings, which were held in the Office of
Under Secretary Bell on September 5, 8, 10, 11, 20, and
22, and on the last date a meeting was held also at the
Office of the Board of Governors. - Mr. Haas, Mr. Murphy,
Mr. Lindow, Mr. Villard
(a) Notes were prepared on a meeting held in the
Treasury Department on September 19, attended
by members of the staff of the Board of Governors
of the Federal Reserve System, Office of Production
Management, Office of Price Administration, and
the Treasury Department, to discuss the question
of extending the priorities system as a means of

control to augment selective credit controls.
(b) A report was prepared on the regulation of capital
expenditures and capital issues by the minority
member of the Subcommittee on the regulation of

capital expenditures and capital issues.
(c) Assistance was given in preparing a proposed
statement for the press relative to the increase
in reserve requirements.

(d) Assistance was given in preparing the report of

the Subcommittee appointed at the meeting on
September 19 to consider the question of extending the priorities system as a means of augmenting

selective credit controls.

122

- 13 21.

At the request of Under Secretary Bell on September 26,

a meeting at the Office of the Board of Governors of

the Federal Reserve System was attended, and a memorandum

was prepared entitled, "Report on Installment Credit,
Friday, September 26, 1941 which was transmitted to
the Under Secretary on September 30. - Mr. Murphy

22. At the request of the Secretary a special field trip

was made to investigate a complaint registered by
Mrs. Eva Cohen on the impossibility of adequately
financing small business. A report was submitted to
the Secretary on September 25, and to the Board of

Governors
of the
Mr.
Haas, Mr.
FoyFederal Reserve System on September 29. -

23. In connection with the sale of Defense savings bonds,
reviews are being made of various announcements and

interviews for use in radio programs, and manuscripts
being prepared by the Defense Savings Staff. - Mr. Villard
24. At the request of Mr. Kuhn on September 9, a review was
made of galley proofs of a booklet on "Total Defense",
prepared by the Defense Savings Staff for use in the
schools. The proofs were revised and were returned to
Mr. Kuhn
on September 16. - Mr. Villard, Mr. Matlock,
Mrs.
Wolkind
25. At the request of Mr. Kuhn on September 15, a memorandum

was prepared containing suggestions for Secretary
Morgenthau's Speech to the American Bankers Association,
and was transmitted to Mr. Kuhn on September 16. -

Mr. Murphy

26. At the request of the Secretary on September 30, assistance was given Mr. Kuhn on that date in connection with
the proposed speech to be given by the Secretary before
the Annual Convention of the American Bankers Association
in Chicago on October 2. - Mr. Murphy

II. Projects or studies under way
1. A study is being made of the relative interest costs
of short- and long-term borrowing. - Mr. Foy,
Mr. Barnett, Mr. Rosen

123

- 14 2. A study 18 being made of the available sources of

funds for Treasury financing. - Mr. Villard

3. A memorandum 18 being prepared on a negotiable "tap"

security - Mr. Sandelin, Mr. Murphy

4.

A
18 being
of the probable excess reserves
in study
1941-42.
- Mr.made
Barnett

5. Tables are being prepared which will present various

data on new Treasury notes and bonds and on guaranteed
new issues. - Mr. Conrad, Mr. Rosen

6. A memorandum is being prepared on the advantages and

disadvantages of increasing the short-term debt. -

Mr. Foy

7. A revision is being made as of June 30, 1941, of the
estimates of the ultimate increase in interest costs
which would result from removal of the tax-exemption

privilege from all public securities. - Mr. Conrad

8. A memorandum is being prepared recommending legisla-

tion terminating miscellaneous types of tax exemption
analagous to the exemption of interest on Federal

securities, but unaffected by the Public Debt Act of

1941. - Mr. Foy

9. A study is being made of war-financing measures in

belligerent countries in the present war. - Mr. Matlock
10. A comparison is being made of the British Fiscal
Program 1941-42 with the Keynes plan proposed in

"How to Pay for the War" by Mr. J. M. Keynes. -

Mr. Matlock

11. At the request of Under Secretary Bell on October 14,

1940, a memorandum is being prepared on a memorandum

submitted by Mr. John Evans, President of the First
National Bank of Denver, Colorado, in reference to

United States Government bonds now owned by the Federal
Reserve System and its member banks, and suggestions

concerning a refunding and change in form which would
appear to be in interest of the Treasury Department,
the Federal Reserve System, the member banks, the
Federal Deposit Insurance Corporation, and the public
generally whose money is deposited in member banks. -

Mr. Murphy

124
- 15 -

12. In response to a request by Under Secretary Bell on

January 27, comments are being prepared on a memorandum

by Mr. George Eddy to Mr. White, in regard to a plan of
Mr.
N. E.Program".
Peterson,
entitled,
Defense
- Mr.
MurphyA Means of Financing the
13.

At the request of Under Secretary Bell on February 5,
an analysis is being made of his plan for investing
savings banks' and insurance companies funds in

special 2 percent Treasury certificates. - Mr. Tickton

14.

At the request of Under Secretary Bell on February 11,
a memorandum is being prepared to the Secretary regarding a letter from Mrs. Sylvia F. Porter, New York Post,
dated January 22, suggesting a plan for the distribution of United States Government securities. - Mr. Haas,
Mr. Murphy

15. At the request of Under Secretary Bell on April 21,

a memorandum is being prepared on Mr. Salant's memorandum on "Limitation on Purchases of Defense Savings
Bonds". - Mr. Murphy

16. At the request of Under Secretary Bell on September 12,
a memorandum is being prepared on Considerations Involved in Reducing the Interest Rate on the 2 Percent
Special Obligations" - Mr. Haas, Mr. Lindow, Mr. Foy,
Mr. Rosen

17. A table is being prepared for Professors Viner and
Stewart, showing prices and yields of selected obligations of the United States. - Mr. Foy, Mr. Rosen
18. Sixteen tables are being prepared showing yields on
hypothetical securities under various combinations of
coupon rates, maturities, and premiums. - Mr. Kroll
19. At the request of Under Secretary Bell on September 24,
cooperation is being given the Division of Tax Research
and the Office of Press Relations in the preparation
of a proposed statement to be released for the purpose

of publicizing tax anticipation notes. - Mr. Brown

- 16 -

125

20. At the request of Mr. South Trimble, Clerk of the
House of Representatives, in a letter dated
September 17, certain statistical information on
banks is being prepared. A part of the information
was transmitted to Mr. Trimble in a letter signed by
Under Secretary Bell on September 29. - Mr. Conrad

21. At the request of the office of the General Counsel
on August 14, a reply is being prepared to a letter
from the Senate Committee on Banking and Currency,

requesting the opinion of the Secretary on S. 1797,
the Farm Credit Act of 1941. - Mr. Foy

22. At the request of Under Secretary Bell replies are

being prepared to certain questions asked by the
Wagner Committee preparatory to its investigation
of banking and monetary conditions pursuant to Senate
Resolution 125. - Mr. Haas, Mr. Murphy, Mr. Foy

23. At the request of Under Secretary Bell on May 24,
cooperation is being given Mr. Bartelt and Mr. Blough
in preparing replies to the list of questions accompanying a letter from Senator Tydings of May 5. The replies
are for use by the Senate Committee created to find ways
and means of automatically balancing the Federal Budget
in times of peace. - Mr. Murphy, Mr. Foy
Revenue Estimates

I. Projects or studies completed
1. The regular monthly statement was prepared, showing

the latest revised estimates of receipts, by months
and by principal sources of revenue, for the period
September 1941-June 1942. The statement was transmitted to the Bureau of Accounts. - Mr. Delcher

2. The regular monthly summary comparison was prepared

showing estimated receipts and actual receipts in
August
1941 on the daily Treasury statement basis. Mr.
Delcher

3. The regular monthly detailed comparison was prepared
showing estimated and actual receipts in August 1941,

based on the collections classification. - Mr. Delcher

- 17 4.

5.

126

At the request of the Bureau of the Budget on
September 29, estimates for the fiscal year 1942
were revised, and preliminary and tentative estimates of the revenue were prepared for the fiscal
year 1943. The estimates were transmitted on
September 30. - Mr. Haas, Mr. O'Donnell, Mr. Daggit,
Mr. Leahy, Mr. Chevraux, Mr. Bronfenbrenner,
Mr. Butters,
Miss
Hagedorn Mr. Smith, Mr. Colclough, Miss Spiegel,
At the request of Mr. McCandless on September 5,

estimates were prepared of the population of Alaska
and of the insular possessions of the United States
as of June 30, 1941. The estimates were transmitted
in aBronfenbrenner
memorandum to Mr. McCandless on September 13. Mr.
6.

In connection with the hearings on H. R. 5417, the
Revenue Bill of 1941, a number of revenue estimates,
listed below, were prepared for use of Assistant
Secretary Sullivan. - Mr. O'Donnell, Mr. Leahey,
Mr. Bronfenbrenner, Mr. Butters, Mr. T. L. Smith

(a) Estimates were prepared, at income levels forecast for the calendar year 1941, of the calendar
year 1941 income tax liabilities under the present
law, and of the increased or decreased income tax

liabilities by items under a full year's effect

of the income tax provisions of H. R. 5417, as
approved by the Senate Finance Committee on

September 2. The estimates were shown in a table

transmitted
September
2.

to Assistant Secretary Sullivan on

(b) Estimates were prepared, and were transmitted in

a table to Assistant Secretary Sullivan on
September 2, comparing for corporations and the
total income tax, the yield under H. R. 5417,
and the yields at four surtax rates, and their

increase or decrease over the yields under

H. R. 5417.

- 18 -

127

(c) Estimates were prepared of the total surtax
rate required to yield the same income tax
revenue as H. R. 5417, as onapproved by the
and surtax were
as a
in the

excess-profits tax, all other provisions of

and the Senate the used normal Finance tax deduction Committee September computation computed 2, first if of

H. R. 5417 remaining unchanged. The estimates
were transmitted in a memorandum, with table
to Assistant Secretary Sullivan on September 2.
(d) An estimate was prepared, and was transmitted
to Mr. Stam on September 10, as requested by

Assistant Secretary Sullivan. of the effects on

individual income tax liabilities of reducing

personal exemptions to $1,500 for married persons

and heads of families, and to $750 for single

persons, not heads of families. Increases in tax
liabilities were shown for individuals taxable

under H. R. 5417, as passed by the House of

Representatives, and for individuals made tax-

able by the Senate amendments, together with
incomes
in the numbers of newly-filed and newlytaxable returns.

(e) A comparison of the estimated full-year revenue
effect of H. R. 5417 as passed by the House of

Representatives on August 4, and by the Senate
on September 5, was prepared, and was shown in a

table containing a detailed classification under
income, capital stock, estate, and gift taxes,
excise taxes, and miscellaneous taxes, with totals.

Estimates for corporation and individual income
taxes and the gift tax were based on income levels

forecast for the calendar year 1941; all other
the fiscal year 1942. The figures in the table
were transmitted orally to the Senate Finance.

estimates were based on income levels forecast for

Committee on September 11, in accordance with

instructions by Assistant Secretary Sullivan.
(f) A comparison of the estimated full-year revenue

effect of H. R. 5417 as agreed upon in Conference

September 11, was prepared, and was shown in a

mimeographed table containing a detailed classi-

fication under income, capital stock, estate, and

128

- 19 gift taxes, excise taxes, and miscellaneous taxes,
dividual income taxes and the gift tax were based
on income levels forecast for the calendar year

with totals. Estimates for corporation and in-

1941; all other estimates were based on income

levels forecast for the fiscal year 1942. Copies
by instruction of Assistant Secretary Sullivan,
of this table were transmitted on September 12,

to Senator George, Representative Doughton,
Representative Cooper, and Mr. Stam.
(g)

An estimate was prepared, of the increase in
revenue in the fiscal year 1942 from the Revenue

Bill of 1941, and by instruction from Assistant
Secretary Sullivan, was transmitted orally on

September 5, to Mr. Rapp, Minority Clerk of the
Committee on Ways and Means.

7. A review has been completed of the tax revisions made
by the Revenue Act of 1941, in order to prepare studies
for the next revenue estimate. Changes in rates have
been analyzed, testimony given before the House and
Senate Committees has been studied, and the results
were incorporated in the September revenue estimate. Mr. Colelough, Miss Spiegel, Miss Hagedorn

8. Studies were completed of the following projects for

revising and improving methods of estimating revenues

from the taxes listed below: - Mr. Daggit, Miss Spiegel
(a) Automobile parts and accessories
(b) Radio sets
(c) Large cigars

(d) Lubricating oil
(e) Firearms and shells
(f) Wines, domestic and imported
(g) Fermented malt liquors

(h) Electrical energy
(1) Small cigarettes
(1) Tires and inner tubes

- 20 -

129

(k) Telephone and telegraph, etc.
(1) Admissions

(m) Distilled spirits, domestic and imported
9. New studies were completed for estimating revenues
from the following newly-imposed taxes listed below:
Mr. Daggit,
Miss
HagedornMr. Chevraux, Mr. Colclough, Miss Spiegel,
-

(a) Phonographs,
instruments phonograph records, and musical

(b) Rubber articles
(c) Transportation of persons
(a) Matches

(e) Electric, gas and oil appliances

(f) Electric light bulbs
(g) Electric signs
(h) Refrigerators,
conditioners refrigerating apparatus and air(1) Washing machines

(j) Business and store machines
(k) Photographic apparatus
(1) Optical equipment
(m) Luggage

(n) Sporting goods

(o) Telephone bills
(o) Use of motor vehicles and boats
(a) Coin-operated amusement and gaming devices

130

- 21 -

(r) Bowling alleys, and billiard and pool tables
(s) Articles made of fur
(t) Jewelry
(u) Toilet preparations
II. Projects or studies under way
1. At the request of the Division of Tax Research on
July 12, 1940, an estimate is being made of the additional revenue which would be derived if mutual insur-

ance companies other than life insurance companies
taxable under Section 207 of the Internal Revenue Code
were made taxable in the same manner as stock insurance
companies other than life insurance companies taxable
under Section 204, and at the same time the exemption

under Section 101(11) were restricted to local mutual
companies of the assessment type. - Mr. Leahey

2. Further progress was made on the following projects
for revising and improving methods of estimating revenues

from the taxes listed below: - Mr. Daggit, Misa Spiegel

(a) Passenger automobiles and motorcycles
(b) Automobile trucks
Economic Conditions Related to Fiscal
and Revenue Matters

1. Projects or studies completed
1. Memoranda on the business and price situation were
prepared, and were transmitted to the Secretary on
September
Mr.
Chevraux 2, 9, 16, 22, and 29. - Mr. Haas, Mr. Daggit,

2. Monthly or weekly reports are received from 25 individual companies, in response to the Secretary's requests, giving confidential data on new orders and sales.
The data in these reports are tabulated and charted currently for the Secretary's information, and are also
combined into an index of new orders, which accompanies
the weekly memorandum on the business situation. -

Miss Washabaugh

131

- 22 3.

Memoranda on employment under the Work Projects Administration
were
prepared on September 8, 16, 22,
and
29. - Miss
Hagedorn

4. At the request of the Secretary, a table is prepared
each week summarizing exports of petroleum products,

scrap iron, and scrap steel, from the United States
to Japan, the U.S.S.R., Spain, and Great Britain,
as indicated by departure permits reported daily by
the Office of Merchant Ship Control. The tables were
prepared for the weeks ending September 6, 13, 20, and
27. On September 8, 15, 22, and 29, the original and
13 photostats were transmitted to Assistant Secretary
Gaston. - Mr. Tickton, Mr. D. J. Leahy

5. At the request of the Secretary four special tables
were prepared, and were transmitted to him on
September 17, showing exports of petroleum products

to Japan, the U.S.S.R., Spain, and Great Britain by

four-week periods from January 4, to September 13, 1941,

andLindow
for similar
Mr.

periods in 1940 so far as available. -

6. Compilations were made of daily quotations on selected
commodities, and daily and weekly figures on selected
business indexes, foreign and domestic security transactions, security prices, exchange rates, as well as
other data for the Secretary's chart book. - Mr. Chevraux
7. At the request of the Secretary on September 17, a compilation was made of daily, weekly, and monthly figures
on cotton, wheat, flour, and bread prices, which will
be kept up to date for his use in connection with the

gharts
listed
Mr.
Colclough

in item 8 of this section. - Mr.Daggit,
8. At the request of the Secretary, the following charts
were furnished him on September 17, showing cotton,
wheat, flour, and bread prices, which will be kept up

to date daily: - Mr. Daggit, Miss Hagedorn, Mr. Cololough
(a) BLS prices of wheat flour and wheat feeds (bran
and middlings)
1940
to date. at Minneapolis, weekly, September

(b) Cotton prices: Market price (average, 10 spot
markets) and our estimated farm price, weekly

- 23 -

132

from August 1940 to date and daily from August
1941 to date, compared with the Department of

Agriculture monthly farm price and parity price.
(c) Wheat prices: Market price (average of Number 2
red winter at Chicago, Number 1 dark northern
at Minneapolis, and Number 2 hard winter at
Kansas City), weekly from August 1940 and daily
from August 1941 to date, compared with the Department
of Agriculture monthly farm price and
parity
price.

(d) BLS retail prices of bread and wheat flour in
51 cities, monthly from August 1940 to date.

9. At the request of the Secretary, a memorandum with
three tables and a chart, was prepared, and was transmitted to him on September 26, showing employment in

theLindow,
aviation
industry as of July 31. Mr.
Mr.manufacturing
Wagner
10. At the request of the Secretary, a memorandum, with
table, was prepared, and was transmitted to him on
September 25, comparing total non-agricultural and
total direct defense employment. - Mr. Lindow
11.

At the request of Mr. Leon Henderson on July 19, copies
of ten charts on commodity prices and the cost of
living were transmitted to him.
The monthly movements of the NICB cost-of-living index
compared with the BLS index of 889 commodities were
shown from 1935 to date. On the same chart were shown
the weekly movements of the BLS index of 889 commodities
compared with the BLS index of 28 basic commoditie from
August 1939 to date. Both comparisons were on the basis

that 1926=100. Five charts, as of August 23 and 30, and
as of September 6, 13, and 20 were transmitted on
September 3, 8, 16, 23, and 30, respectively.
Five other charts showed weekly and daily movements of
the indexes of 11 basic imported commodities and 17

basic domestic commodities from April 1940 to date, on
the basis that August 1939=100. On the same charts were
shown percentages for each of the 28 commodities from
the August 1940 low. Successive charts showed the
changes to August 22 and 29, to August 29 and September 5,
to September 5 and 12, to September 12 and 19, and to
September 19 and 26. These charts were transmitted also

on September 3, 8, 16, 23, and 30, respectively.

- 24 -

133

12. At the request of the Secretary on September 2, information was prepared with regard to the wheat sur-

plus in Canada, import duties and quotas on Canadian
wheat, and feed shipments into New England, and was
transmitted
Miss
Hagedornto him on September 3. - Mr. Daggit,

13. At the request of the Secretary on September 12, a

memorandum was prepared on the use of farm surpluses

for inflation control within the framework of the

Administration's agricultural policy. The memorandum
was prepared in cooperation with Mr. Cairns, and was
transmitted
the Secretary on September 12. Mr.
Haas, Mr.toDaggit

14. At the request of the Secretary on September 16, a

memorandum was prepared on the amount of cotton owned

by the Government, and was transmitted to him on
September 16. - Mr. Daggit

15. At the request of the Secretary on September 27, a
digest of the Brookings Institution report on "Effects
of the Defense Program on Prices, Wages and Profits"
was prepared, and a memorandum was transmitted to him
on September 30. - Mr. Daggit

16. At the request of the Secretary, data were furnished

on September 4 and September 5 in connection with the

Secretary's
speech of September 9, at Boston. Mr.
Daggit

17. At the request of the Secretary on August 6, assistance
was given in preparing the statement made by the

Secretary before the House Committee on Banking and

Currency on the Price Control Bill, H. R. 5479, on

September 24. - Mr. Haas, Mr. Murphy, Mr. Daggit,

Miss Michener, Miss Hagedorn

18. Basic data have been assembled, for use in revenue

estimating, on the retail and wholesale selling prices

of commodities on which taxes are imposed, in order to
determine the percentage which the tax represents of the
actual price. - Miss Spiegel, Mr. Colclough, Miss Hagedorn

- 25 19.

134

For use in revenue estimating, a study was completed

to be used as a basis for forecasting salaries and
wages of the Department of Commerce series on a
quarterly basis, the July 1941 revision, from the
Department of Labor index of factory payrolls, the
January
1941 revision. - Mr. Daggit, Miss Spiegel,
Mr.
Colclough

20. For use in revenue estimating, a revision has been
completed of our method of forecasting the BLS index
of factory payrolls on the basis of the revision of
January 1941. - Mr. Daggit, Miss Spiegel
21. A forecast was made of the following basic business
series for calendar years 1941 and 1942 and fiscal
years 1942 and 1943, for use in estimating Federal
revenues: FRB index of industrial production
(September 1941 revision); BLS index of wholesale
prices; BLS index of factory payrolls (January 1941
revision); our index of the value of industrial production; Standard Statistics index of 420 stock
prices; Department of Commerce series on salaries and
wages (July 1941 revision); FRB series on bank debits
outside New York City; and New York Times series on
volume
of stock
transfers.
Mr.
Colclough,
Miss
Hagedorn- Mr. Daggit, Miss Spiegel,

22. At the request of the Secretary on September 3, a memorandum, with chart, was transmitted to him on
September 4, comparing newspaper advertising in World
War I and in the present war. The chart showed the

Printers Ink index of newspaper lineage, on the basis
that the monthly average, 1935-39=100, compared with
industrial production indexes, from 1914 to date. -

Mr. Daggit, Mr. Colclough, Miss Hagedorn

23. On September 26, a memorandum was forwarded to the

Secretary asking if he would like to see the weekly
report
Mr.
Haas by Dr. Lubin on the "Economic Picture". -

24. A memorandum was prepared, and was transmitted to the

Secretary on September 29, attaching a report received
from Dr. Lubin on the "Economic Picture". - Mr. Haas

- 26 -

135

25. A study of the volume of installment buying and consumer credit has been discontinued, because the new
Index published by the Department of Commerce ade-

quately serves the purpose of the study. - Mr. Daggit

II. Projects or studies under way
1.

With respect to the "Index of consumer expenditures,
in dollar value" progress has been made in developing
Individual series, in determining their suitability
for inclusion and the necessary adjustments. These
series have been classified in two broad groups:
durable goods and non-durable goods. The purpose of

the index is to cover as large as possible a proportion
of the purchases of ultimate consumers. This project
is temporarily in abeyance. - Mr. Colelough
2.

A project in process is designed to develop an index
of industrial production that will indicate week by
week the approximate level of the FRB index. It will
include a larger number of weekly series than are included in any current business indices, with weightings

and seasonal adjustments approximating those in the FRB
index.
ThisMr.
roject
Mr.
Daggit,
Smithis temporarily in abeyance.-

3. An analysis is being made of the State distribution of
United States Defense savings bonds series E, during

July, in relation to payrolls, and to national income,

by States. - Mr. Haas, Mr. Daggit, Mr. Colclough
4.

A letter was received on September 28 from Mr. Leon E.
Truesdell, Bureau of the Census, requesting comments
on proposed table forms showing data obtainable from
proposed labor force tabulations on wages, salaries,

hours, and related subjects. A review is being made of
the Villard
forms. - Mr. Murphy, Mr. O'Donnell, Mr. Daggit,
Mr.
5. At the request of Under Secretary Bell on September 25,
a review is being made of the testimony by the Secretary
on the Price Control Bill, H. R. 5479, before the House
Banking and Currency Committee on September 24. Mr. Murphy, Mr. Foy

- 27 -

136

Actuarial Problems

I. Projects or studies completed

1. In response to a letter of August 14, from the office
of the General Counsel, transmitting a copy of S. 1800,
a bill to amend further the Civil Service Retirement
Act, as amended, for a voluntary report if desired, a
memorandum was forwarded to Mr. Bernard on September 9,

stating-that
the Division did not wish to make such a
report.
Mr. Reagh
2.

A review of a report by the Bureau of Accounts at the
request of the Chairman of the Senate Finance Committee,

on S. 1775, a bill to extend the benefits of Federal

old-age and survivors insurance to certain State employees,
was made in response to a request by Mr. Heffelfinger,
September
17,25.
and
was
transmitted to the Under Secretary
on
September
- Mr.
Reagh

II. Projects or studies under way
1.

The Board of Actuaries of the Civil Service Retirement

and Disability Fund is laying out detailed plans for
tabulating and processing data for use in preparing
the regular five-year valuation of the Civil Service
Retirement Fund for the purpose of determining the
liabilities of the Government under the Civil Service
Retirement law. Under the law, such a valuation must be
prepared as of July 1, 1940. Valuation plans are in

process of preparation. - Mr. Reagh, Mr. Brown
2.

The Foreign Service Retirement Law, as approved Aoril 24,
1939, Section 26(m), provides that the "Treasury Department shall prepare the estimates of the annual appropriations required to be made to the Foreign Service Retirement and Disability Fund and shall make actuarial valua-

tion at intervals of five years, or oftener if deemed

necessary by the Secretary of the Treasury". The State
Department has requested an estimate of the appropriation
required for the fiscal year 1943. An outline of the data
required for making an actuarial valuation has been submitted to the State Department. The data are now in
process of preparation. - Mr. Reagh, Mr. Brown, Mr. Kroll

137

- 28 3.

At the request of Mr. A. R. Pilkerton, Auditor of the
District of Columbia, actuarial valuations are being

made of the Policemen's and Firemen's Pension Fund,

and Teachers Retirement Fund of the District of
Columbia. These valuations will be made by the
Treasury Department in accordance with the 1942 District
of Columbia Appropriations Act, approved July 1, 1941.
An outline of the information required for the valuations was submitted to Mr. Pilkerton in a letter dated
September 13. - Mr. Reagh, Mr. Brown

4. At the request of Under Secretary Bell on July 10, a
memorandum is being prepared in regard to the 1941
legislative program of the Social Security Board. Mr. Reagh
5. A memorandum was received under date of September 29,

from the office of the General Counsel, transmitting
a copy of H. R. 5568, a bill for the relief of certain
widows of Foreign Service officers, for a voluntary
report if desired. - Mr. Reagh

6. A communication was received under date of September 30,

from the office of the General Counsel, transmitting a
copy of S. 1932, a bill to amend the Social Security
Act to provide for general pensions, and suggesting that
the Division might wish to cooperate with the Bureau of
Accounts in any action concerning the bill. - Mr. Reagh
Other Projects or Studies

1. At the request of the Legal Division on July 1, in response to a request from Senator Elbert D. Thomas, in

a letter of June 27, a report 18 being prepared on
S. 1666, a bill to coordinate Federal reporting services,
to eliminate duplication and reduce the cost of such
services, and to minimize the burdens of furnishing re-

ports and information to governmental agencies.
Memoranda requesting comments on the bill were prepared

for signature of the Administrative Assistant to the

Secretary, and were forwarded to the various bureaus and

divisions of the Department on July 16. Replies have
beenMichener
received and a report 18 in preparation.
Miss
-

- 29 -

138

3. Publications
(a) For the September issue of the Treasury Bulletin
data were prepared on average yields of longterm Treasury
bond B and high-grade corporate
bonds.
- Mr. Rosen

All
thewas
material
submitted
for the September
issue
reviewed
and edited.

Revisions are being considered for future issues. -

Mr. Lindow, Mr. Lynch

(b) For the publication Market Prices and Yields of

Outstanding Bonds, Notes, and Bills of the United

States. computations were made and copy was pre-

pared for the issue covering the month of August.
This publication shows by securities the coupon
rates, maturities, interest payment dates, and
amounts outstanding; and for each day of the month,
together with a monthly average, closing market
quotations (accrued interest to be added), and
yields.

A revision is being made in this statement. Beginning with the issue for September all prices
will be on the over-the-counter basis and in add1-

tion to the categories hitherto included, there will

be added securities guaranteed by the United States
and securities of Federal agencies not guaranteed. -

Mr. Reagh, Mr. Brown, Mr. Lindow, Mr. Moody,

Miss McCoy

(c) Manuscript for the Annual Report of the Secretary
of the Treasury for the fiscal year 1941 18 being
given an editorial review as received. The usual
handling of the material 18 going forward. Miss Westerman, Mr. Tickton

(d) At the request of Assistant Secretary Gaston on
July 17, an article is being prepared on the operations of the Treasury Department during the year
1941
to be incorporated in the 1942 Americana Annual. Mr. Barnett

- 30 -

139

(e) At the request of Mr. Collie on September 17,
data are being prepared on holdings of United
States Government securities for Moody's Manual
of
Government securities). Mr.Investments
Conrad
4. Correspondence

Replies were prepared to letters received on subjects
relating to the work of the Division, and letters
drafted elsewhere and submitted to the Division for
that purpose
were
reviewed.
- Miss of
Michener,
Mr.
Lindow,
Miss
Ziegler,
and
other
members
the
staff
in
appropriate fields of work.
During September 291 letters were received in the Division and 272 were handled as required.
5. Charts

Charts are prepared and continually brought up to date
for use in memoranda and in chart books on special subjects, and corresponding photographic, photostatic,

and multilith work is carried on. This is done in the
Graphic Section under the supervision of Mr. Banyas.
A
statistical report on the work of the Graphic Section
for the month of September is attached.

140
Work completed in the Graphic Section, Division of
Research and Statistics, during September 1941
Type of work

For Division
of R & S

For

Others

Total

phic

New charts:
26

34

8

1

-

1

Total charts completed
Bond book charts completed
Charts brought up to date:

3 bond chart books brought up to date
All other charts brought up to date
iscellaneous:
Total jobs

27 (times)

-

27 (times)

726

31

757

16

10

26

60

27

87

tographic:
Photographs:

Total jobs
Number ofNegatives

138

27

165

Contact prints

167

805

972

Enlargements

50

32

82

146

19

164

876

1,195

5,633

353

2,071
5,986

Photostats:

Total jobs
Number of-

Lettersize copies
All other copies

ultilith:
Total jobs
Number of-

Zinc plates

16

4

20

122

13

135

17

12

29

iscellaneous
Total jobs

10-7-41

LBiwt1jtp

Statistical Report on Completed by the

Graphic Section, Division of Research and Statistics, by months,
beginning July 1941.
:

July

Aug.

Sept.

:

:

:

A. Graphic:
New charts completed

Charts brought up to date

34

43

721

727

Bond book charts completed

34

757

58

2

1

Bond books brought up to date

26(times)

26 (t)

27 (times)

Miscellaneous

27

31

26

91

59

87

193

B. Photographic:
Photographs:

Total jobs
Number ofNegatives

Contact prints

173

165

254

654

972

Enlargements

141

335

82

169

202

164

2,802
7,519

1,287
5,276

22

22

153

166

34

37

Photostats:

Total jobs
Number of-

Lettersize copies
All other copies

2,071
5,986

Multilith:
Total jobs
Number of-

Zinc plates

20

135

Miscellaneous:

Total jobs

LB:wlt
8-1-41

9-18-41

29

Oct.

Nov.

Dec.

:

Type of work

Total

TREASURY DEPARTMENT

142

INTER OFFICE COMMUNICATION

DATE December 30,1941

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
during the week ending
December
20, Department
1941.
1. Exports to Russia

Exports to Russia as reported to the Treasury during the

week ending December 20, 1941 amounted to about $4,500,000.

The
items
were
motor C).
trucks and chassis and military
tanksprincipal
and parts.
(See
Appendix
2. Exports to China, Burma and Hong Kong.

Exports to Free China were valued at approximately $111,000
as compared with over $2,000,000 during the previous week. The
principal
item
was machineand
heavy ordnance guns, carriages and
parts. (See
Appendix
D.)
Exports to Occupied China amounted to $12,000. (See Appendix E)

Exports to Burma totalled only $8,000. (See Appendix F.)
review.No

exports to Hong Kong were reported during the week under

3. Exports to Japan.
review.No

exports to Japan were reported during the week under

4. Exports to France

No exports to France were reported during the week ending

December 20, 1941.

5. Exports to other blocked countries
Exports to other blocked countries are given in Appendix A.

143
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 20, 1941

(In thousands of dollars)
July 28
Week ended

to

Dec. 6

December 13

Week ended
December 20

Total
Domestic Exports
$74,726

$58,106

$12,040

$ 4,580

Occupied China

10,584

678

12

Free China

25,885

2,337

111

U. S. S. R.

Japan

1,870 2

Burma 3

6,780

France 4/

1,870

-

6,806

8

6

-

2

5

Free France

.4

Spain

2,216

Switzerland

4,856

French Indochina

28,333

-

18

6

ccupied France

Sweden

-

11,274

-

2

-

.4

112

2,329

161

42

5,059

10,380

17

703

11,100

377

17

10

404

1

Treasury Department, Division of Monetary Research

December 23, 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.

2/ Of this total $1,864 thousand was reported from July 28 to August 23, inclusive,
and shipped prior to freezing orders.
Domestic exports from August 23 through week ending Dec. 6, amounted to $6,106.

3/ From September 11, 1941 to date - It is presumed that a large percentage of mate-

ria] 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.
5/ 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 20, 1941
(Thousands of Dollars)
Exports to China
Total To Japanese To Chinese
Exports
Exports
Exports
Exports
controlled
controlled
to
to
to
to
1

ports

July 28 - Aug.

2

Aug. 4 - Aug. 9

Aug. 11 - Aug. 16
Aug. 18 - Aug. 23
Aug. 25 - Aug. 30

Sept. 2 - Sept. 6

Sept. 6 - Sept.13

Sept.15 - Sept.20

Sept.22 - Sept.27

Sept.29 - Oct. 4
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

Dec. 8 - Dec. 13
Dec.15 - Dec. 20
Total

937

542

2,794
1,278

2,794

1,352

1,350

736
897

3,038 2
3,978 2
462

1,305
5,864

969
735
693
757
156
352
80

ports

Burma 3

Hong Kong

395

654
983
235

-

309

1,657

4,523

159

551
986

42
6

449
684

742
634
456
389
810
297

1,157

1,233

-

35

584

-

403

1,243

-

58

624
283

-

303
600

-

1

204

2,281 2
3,822 2
1,225
5,312

U.S.S.R.

234

2

110

Japan

-

752

-

2,333

-

3,359

552
267
399
438
164
158
473
120

852

61

3,025

791

64

-

-

688

18

-

123

2,337

-

12

111

8

-

-

11,760

30,936

272
668

5,210
1,836
3,009
1,701

42,696

5

269

4,772
1,672
2,851
1,228
3,239

1,021
1,364

342
88

5,691

1,325

11,629

2,735
1,023
4,280
5,217
323

5

-

-

1,869

6,845
1,924
5,623
4,484
4,552
2,677
3,581
2,436
3,609
12,040
4,580

75,074

1 These figures are in part taken from copies of shipping manifests.
2

3

Figures
fortoexports
to Free
during these weeks include exports to Rangoon which are
presumed
be destined
forChina
Free China.
It is presumed that a large percentage of exports to Burme are destined for Free China.

Treasury Department, Division of Monetary Research

December 29, 1941

145

APPENDIX C

Principal Exports from U.S. to U.S.S.R.

as reported to the Treasury Department
during the week ending December 20, 1941
(Thousands of Dollars)

TOTAL EXPORTS

$ 4,580

Principal Items:
Motor trucks and chassis

Military tanks and parts
Refined copper

Aluminum plates, sheets, bars,

strips and rods
Stamping or shearing machine
Sole leather
Coated wire, n.e.8.
Metallic containers (drums)

Telephone instruments
Machine and heavy ordnance guns and carriages
Barbed wire

1,849
920
244
130
109
92
89

86
79
75
73

Treasury Department, Division of Monetary Research December 29,1941

146

APPENDIX D

Principal Exports from U.S. to Free China
as reported to the Treasury Department
during the week ending December 20, 1941
(Thousands of Dollars)

TOTAL EXPORTS TO FREE CHINA

$ 111

Principal Items:
Machine and heavy ordnance guns,

carriages and parts
Insulated copper wire

107
3

Treasury Department, Division of Monetary Research December 30,1941

147

APPENDIX E

Principal Exports from U. S. to Occupied
China as reported to the Treasury Department
during the week ending December 20, 1941
(Thousands of Dollars)

TOTAL EXPORTS TO OCCUPIED CHINA

$ 12

Principal Items:
Radio apparatus

Relief supplies - biologics

Pencils and pens

4

3

1

Treasury Department, Division of Monetary Research December 30,1941

148

APPENDIX F

Principal Exports from U.S. to Burma
as reported to the Treasury Department

during the week ending December 20, 1941
(Thousands of Dollars)

TOTAL EXPORTS

$8

Principal Items:
Newsprint paper

6

Treasury Department, Division of Monetary Research December 30,1941

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

M
149

DATE January 1, 1942.
TO

FROM

Subject:

Secretary Morgenthau

H. D. White

Digest
of Appended
Ambassador
Gauss Cable Received Last Night from

1. Dr. Soong called on me yesterday afternoon at
his request. He said that the Finance Minister,

H. H. Kung, was ill with typhoid. He stated there
would be a message from his Government to this
Government asking for economic assistance, but

that the request was in terms probably too vague
to merit immediate serious consideration. He ex-

pected that in a few days he would have more de-

tails and would bring them at once to the Treasury.

2. That same afternoon, the appended cable was

received. Following is a summary of it.
a. General Chiang, in an interview with

Ambassador Gauss on December 30, appealed

to the United States for financial help in
order to prevent further deterioration in

China's economy. This, he said, would do
much toward strengthening morale and silenc-

ing the critical and doubtful elements.

Morale in Free China has been affected by
the early Japanese successes and by the way
thepropaganda.
Japanese have exploited them for purposes
of

b. The proposed loan is for $1 billion, of
which he has asked the British Government to
provide one-half. It would be used partially
to support
a domestic bond issue intended to
curb
inflation.
C. The British Ambassador has been approached
the matter to his Government.

for the loan from Great Britain and has referred

150
PARAPHRASE OF TELEGRAM RECEIVED

FROM: American Embassy, Chungking, China

DATE: December 30, 1941, 6 p.m.
NO. : 548

Today I called on General Chiang at his request.

After briefly reviewing recent measures for political
and military collaboration with the United States and
Great Britain, he passed on to the economic situation
in substantially the following terms:
While there is no lack of confidence on the part of
intelligent Chinese that the anit-Axis Powers will be
victorious in the end, there is such lack of confidence
emong the uninformed masses, the sceptics, and the asso-

ciates of the Chinese traitors. Morale has been affected
by the early Japanese successes and by the way the

Japanese have exploited them for purposes of ropaganda.
Specific mention was made of the radio appeal for Agiatic

solidarity against westerners which was recently made to
Chiang by the Prime Minister of Thailand. China can
contribute fighting man power to the common cause but the

United States and Great Britain must give Ohina financial

help in order to prevent further deterioration in economic
fundamentals, loss of confidence in the Chinese currency,
etc. Such help would do much toward stren thening morale
and

151
-2-

and to silence the oritical and doubtful elements.
The credit he wants 18 about one billion United States
dollars, of which he has through the British Ambassador
asked the British Government to provide about one-half or
one hundred million pounds, expecting America to provide

the rest or about five hundred million dollars.
Chiang asked that in transmitting his request to my
Government I should emphasize the importance such aid at

this time would have to Chinese morale in overcoming
Japanese propaganda and because of the needed support it

would give to the economic structure of China. He pointed
out that the present currency issue exceeds thirteen billion
paper dollars and that the 1942 budget shows a deficit of

at least nine billion Chinese dollars, and said that the
proposed loan would be used artially to support a domestic
bond issue intended to curb inflation.

I replied that of course I would faithfully and
immediately report his request and his discussion to my
Government which I was confident would be disposed to

consider with sympathy any reasonable proposals to aid

China in resisting Japan. However, I suggested that to
Resist consideration of his request and in approaching
Congress for legislation necessary to authorize participation by the United States in a credit or loan to China,

a carefully prevared outline of the needs of the situation
on the

152
-3-

on the basis of the studies and recommendations of the
financial advisers and experts of the Chinese Government

should be submitted together with an outline of the measures
contemplated to be undertaken to meet the situation includ-

ing the measures which Ohina will take to help herself.
I explained that what I was suggesting was not an outline
of the terms of any proposed loan but an outline of the
needs of the situation and of the definite measures which
should be taken to meet these needs.

Chiang said that experts and advisers were working

out plans for the use of the proposed credit or loan but
that he desired me in the meanwhile to make the proposal

to my Government. The proposals for application of the
loan could be put forward when the loan is assured.
I learned from the British Ambassador that he was
a pproached for a loan of one hundred million ounds from
Great Britain and has referred the matter to his Government.
He equally lacked any specific proposals as to how the

loan, if granted, would be applied to the difficulties of
the economic situation of China; Chiang had said that he
considered it an urgent necessity that he should be enabled
to demonstrate to the Chinese people and armies that the

British Government had sufficient faith in victory to give
quick and (9) aid to China.
I am telegraphing comment.
GAUSS

Treasury Department

Division of Monetary Research

153

Date December 30,
To:

Secretary Morgenthau
Mr. Kamarck

From:

The attached article might be

of interest. It describes how the

Russians have ingeniously developed

new anti-tank weapons to offset the
Nazi tank superiority.

The anti-tank plane, in parti-

cular, has been very successful.

1941

154
SOVIET AIRFORCE AND INFANTRY LEARN TO
STOP TANKS

(Source: Soviet Embassy, Information Bulletin, December 24,1941)

The Soviet aircraft designer Ilyushin has devised a special
new anti-tank plane, protected by stout armor which only heavy

anti-aircraft shells can pierce. It is very light and maneuverable, flies handily at heights under 500 feet -- 80 that it

is safe from enemy pursuit planes which cannot fly so low -and is armed with a cannon whose shells pierce any tank ermor.
The pilot can take absolutely accurate aim. Instead of dropping

bombs atseparately.
random on a concentration of machines, he aims at each
machine

Ilyushin's invention does not stand alone. Another means
of combating tanks is the small box packed with mines, weighing
several pounds, with A handle for carrying it from place to
place. It looks like a box of phonograph records. These boxes
are placed on roads in checker arrangement. When they explode
beneath
the weight of A tank, they damage at least the cateroillar
track.
To avoid this danger the Germans used to send special
scouts behind their motorcyclists. Sometimes they drove centive

Red Army men or non-combatants ahead of their tank columns.
Now Red Army men have devised a new way to use the

"suitcases," as the boxes loaded with mines are called. A small,
camoufleged trench for three or four men is dug beside the road.
The boxes are placed on the other side, A wire is attached to
the hendles and extended to the first trench, covered with
earth and snow where it crosses the road.
Motorcyclists or scouts seldom notice the wire -- they
can't dig uo the entire road to find it. When the tanks appear
the men in the trench pull the wire, bringing the boxes to the
middle of the road. A tank usually runs at such high speed and

its visibility is so bad that there is hardly a chance that the
boxes will be noticed. If they are, it is too late.
The men in the trench are safe from the halted tank's fire,
and if the tankmen climb out they are shot down. In such cases

the Red Army men's purpose is not only to destroy as many tanks

as possible,
cannot
pass.

but to bar the road with blown-up tanks so others

C

0

155

P

Y

DEPARTMENT OF STATE
WASHINGTON

December 30, 1941

In reply refer to
FF 840.51 Frozen Credits/4847

The Secretary of State presents his compliments

to the Honorable the Secretary of the Treasury and
transmits herewith a copy of telegram no. 2179 of December

23. 1941 from Rio de Janeiro, quoting a telegram from the
Consul General at Sao Peulo, concerning the operation of
Germen banks there under new restrictions.

Enclosure:

From Rio de Janeiro,
December 23, 1941.

Copy: 1c: 1/3/42

Rio de Janeiro

AF

Dated December 23, 1941

Rec'd 9:35 p.m.

Secretary of State,
Washington.

2179, December 23, 10 p.m.

Following telegram has been received from the
Consul General at Sao Paulo.
"December 23. 2 p.m.

Reliable information indicates both German

banks in Sao Paulo operating under severe restrictions.
No deposits being made for fear funds will be blocked.
Every transaction over two hundred milreis carefully
scrutinized before approval granted."
CAFFERY

EDA

Copy:1c:1/3/42

C

0

P

156

Y

DEPARTMENT OF STATE
WASHINGTON

In reply refer to
F2 840.51 Frozen Credits/4594
December 30, 1941

The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and trans-

mits herewith for his information a copy of despatch
no. 1938, dated November 12, 1941, from the Legation

at Bern, concerning the desire of the Swiss National
Bank to transfer to Switzerland some of its gold on
deposit in New York.

Enclosure:

From Legation at Bern,
no. 1938, November 12,

1941, with enclosures.

157
Bern, November 12, 1941
No. 1938

Subject:

Desire of Swiss National Bank to transfer
toNew
Switzerland
some of its gold on deposit
in
York.

CONFIDENTIAL

The Honorable

The Secretary of State,
Washington.
Sir:

I have the honor to refer to the Legation's telegram No. 229
of October 15, 9 a.m., 1941, concerning the desire of the Swiss National
Bank to transfer to Switzerland some of its gold now on deposit in
New York, and to transmit herewith in that connection a corry of a
letter dated November 7 addressed to the Legation by the Consulate
General at Zurich.

Respectfully yours,
Enclosures:

Leland Harrison.

From American Consulate Gen-

eral, Zurich, November 7,
1941, with enclosures.

File No. 851.6
WMC/mlc

Original and six copies to the Department
Copy for Division of Commercial Affairs
Copy to American Consulate General, Zurich

A true cory
of the signed

original. (mk)

COPY

158

File No. 851.6
AMERICAN CONSULATE GENERAL

Zurich, Switzerland, November 7, 1941.
Confidential
The Honorable

Leland Harrison,

American Minister,
Bern.

Dear Mr. Harrison:

I had a call this morning from Dr. G. Bachmann, President of the
Board of Directors of the Swiss National Bank, and during the course of

our conversation he referred to the difficult position of the National
Bank as a result of the blocking of a large part of the reserves of the

banks, amounting to 1,3 billion Swiss francs now on deposit with the
United States Federal Reserve Bank. He referred to the gentleman's

agreement between the National Bank and the Swiss banks with which you

are familiar, and he stated that the chief difficulty at present was that

the United States was refusing to release funds to pay for purchases of
necessary food imports. He referred particularly to purchases of foodstuffs in Portugal which had to be paid for in escudos. Since the National

Bank did not have sufficient escudo exchange, attempts were made successively
to purchase them with dollars and, subsequently when this failed, with

gold on deposit in New York. This application was likewise refused. The
Portuguese Government thereupon, seeing the difficulty in disposing of
dollar exchange, refused to accept dollar currency in payment. After considerable negotiations with the Portuguese Government, it finally receded
from this position and agreed to accept dollars in New York. In other
words, there was to be a transfer of funds belonging to the Swiss National

Bank to the Portuguese National Bank on the books of the Federal Reserve
Bank. To the great disappointment of the Swiss, the United States Govern-

ment refused its approval to this transaction. Dr. Bachmann stated that he
was in the dark as to the reason for the refusal, since it was necessary

to pay for much needed foodstuffs for Switzerland purchased in South
America, such as wheat, rye, coffee, etc.

When asked concerning the amount of the foreign exchange required by
the National Bank to pay for the merchandise in Portugal, Dr. Bachmann

stated that this was very small, amounting only to $10,000. He pointed out,
however, that this could be regarded only as a test transaction to determine
the procedure to follow in the other cases. He stated that at that time
24 days had already elapsed since the application was filed and that no

decision had been yet rendered on it.

The representations of the Swiss Minister in Washington, and of Mr.
Gautier, the special representative of the Swiss National Bank in New York

had so far been without result. It was significant, however, that the

159

-2-

suggestion about the transfer of funds to cover the Portuguese transaction emenated from the United States Treasury Department, indicating
that
the Treasury was in sympathy with the Swiss application, at least
in principle.
Dr. Bachmann referred to the fact that the Swiss Government had under

consideration the sending of a special mission to the United States to
discuss financial matters growing out of the blocking of Swiss funds
there. I informed him that I had heard rumors to the effect that Dr. Hans
Sulzer was being considered for this mission. He stated, confidentially,
that there Was some difficulty in the way of sending such a mission becausethis
of the
natural
reluctance
the Swiss Minister in Washington to
have
matter
taken
out of hisofhands.

My visitor referred to the difficulty of the National Bank in making

up its annual balance sheet and the dilemma facing it as to how to show
its large reserves in the United States, over which it now has no control.
These reserves, strictly speaking, were a part of the gold coverage of
the Swiss currency, and in the circumstances Swiss gold notes could not
be paid on demand as the present currency system provides. It is particularly embarrassing to Dr. Bachmann inasmuch as the sending of the large
reserves to the United States was carried out largely on his recommendation,

and he was looked upon by many as being responsible for the move.

As you are probably aware, there is some agitation at present for
the revalorization of the Swiss franc emanating from Mr. Duttweiler and
his friends of the "Landesring der Unabhangigen" (Independent Party).
Discussions of this project taken from the "Frankfurter Zeitung" of
November 6, 1941, and from the "Finanz-Revue" of Zurich of November 5,

1941,
enclosed,
and
the are
Department.

in translation, as of possible interest to the Legation
Sincerely yours,
JAMES B. STEWART

American Consul General
Enclosures:

From the Frankfurter
Zeitung, November 6,

and from the FinanzRevue, November 5, 1941,

both in translation.

(From "FRANKFURTER ZEITUNG", November 6, 1941)

160

RUMORS OF SWISS REVALORIZATION PLANS

For the past few days there have been rumors of Swiss revalorization
plans. The reason for this is presumably the ever decreasing purchasing
power of surplus, idle capital, and the increased cost of imported foreign
goods, and this led to the suggestion being made by varioud sides that the
Swiss franc be revalorized. The chief spokesman is the creator of "Migros"
and the "Hotel Plan", Duttweiler: his importance doubtless gave more weight
to the revelorization debate. The main argument represents the theory
that a 10 to 15 percent revalorization of the Swiss franc would not only
reduce import prices and increase export values, but would also neutralize

the fear of a further depreciation of the franc and the resulting flight

of capital, and that finally prices could be controlled without Government
interference, discount rates could be consolidated, and the purchasing power
would be increased. It is surprising that such suggestions, obviously
caused by the distorted inner and outer economic conditions, could be made

in all seriousness. Just as it is still to be debated whether or not the

then seemingly inevitable 30% depreciation of the Swiss franc in 1936 was
of any real value to Swiss economy, so now the argument that a further

surrender on the question of currency stability would destroy all faith in
that currency, must not be overlooked. A one-time reduction in the price
of gold and, correspondingly, of other values, would, so long as other
actual motive powers continue in full force, not put en end to the tangible
investment psychosis, but would only force it down a little. The equally
active Swiss party advocating free money goes much further than Duttweiler,
in that they
would likeactivity.
to see currency manipulation made a permanent
feature
of economic

Duttweiler's argument that a revelorization of the Swiss franc would,

at one blow, correspondingly improve the foreign balance of trade, seems

to be quite wrong. He has completely overlooked the fact that there is no

longer any free exchange of currency on the world markets now, so that
an alteration in exchange rates would actually be impeded by already existing

clearing and transfer agreements. It can be definitely assumed that
responsible Swiss circles are not actually considering a revelorization
policy. The National Bank, for instance, has every possibility of increasing, at its own discretion, the value of the Swiss franc as compared
with the American dollar. All that it need do, and thanks to the American
policy of freezing currencies it would have every right to do so, would be
to declare the official dollar exchange rate to be Swiss francs 4.31; it
could easily do this, as there are no other dollar purchasers. Actually,
however, the Swiss franc would not profit thereby either in Switzerland
or abroad, for as long as those currencies which, in the near future, will
continue to dominate Switzerland's foreign trade, are not also revalorized.
Responsible circles admit, however, that much ES it reflects on the Swiss
purchasing power, the real reason lies in the inadequate official price
control system, the taxation policy, and the present form of market control.
The coming increased war profit texation, end the further draining of the

money market through loans to finance the mobilization and war costs, may,
It is hoped, be another step towards reducing the present uneasiness as
regards the currency problem.

(From "FINANZ REVUE", November 5, 1941)

161
HANDS OFF NEW CURRENCY EXPERIMENTS

The constantly ascending trend in prices which is not fully reflected in the official cost of living index, is causing great anxiety
in large circles of the population, and at the same time, there exists
: natural desire to eliminate or at least check this trend which is
equally detrimental to our economic and social life. Government authorities
and voliticians are making efforts to discover means to arrest this rise
in the
cost
of living, and it is to be hoped that these efforts will soon
meet
with
success.
Still more alarming is the fact, however, that suggestions are advanced from certain quarters, which sprear very alluring on the surface;

realization promises quick results, but they have one little fault, i.e.,
their realization is impossible, and thus their sole purpose suparently is
to serveispolitical
and,more.
instead of easing anxiety of the population,
apt to agitation
incite it still
We are referring especially to the proposed experiment to actually

revalue the Swiss franc upward which, for some time, has been advocated

by & personality known for his initiative. As a matter of fact, it would
appear that someone has again discovered the secret of "the egg of Columbus".

The whole thing is very simple: the Swiss franc is appreciated; prices of
innorted goods are automatically reduced; export prices increase: domestic
trices remain stable; fear of a currency inflation and the alleged soaring
of
prices cease:
and the whole difficult problem of prices has found a
setisfactory
solution.
"On hearing it thus explained, it sounds pretty good", one is apt
to say offhend, and there arrears to be no doubt that the provosition by

its simplicity and clerity will find wide-spread approval. As a matter of
fact, is it at all fessible to appreciate the Swiss frenc at present?
Those recommending this measure correctly point out that the present higher

cost of living is to a large extent e consequence of the depreciation of
the Swiss franc in 1936 - which we had persistently oprosed - whose disastrous effects are now becoming fully apparent. This fact was recently

stressed in a lecture in Basel by Jacobson, the Swedish Economist and
economic adviser of the "Benk of International Clearing", who, as editor

of the annual report of the Institute proved himself to be an outstanding

expert in international economic matters. Official statistics indicate

that the cost of living has risen 30 percent since the beginning of the
war, whereas our depreciation resulted in a 40 rercent appreciation of
foreign currencies still based on the gold standard. This devreciation,
according to the statements of the aforenamed, has contributed to 9 great
extent in causing higher prices inasmuch PS the exchange value of the
Reichsmark, based on its old gold value, at present dominates practically
the entire currency and price systems on the Continent, by reason of the

political power which Germany has gained.

-2-

162

In view of this remark, the difficulties of an appreciation of
the Swiss franc become at once evident, since it would only be possible
under free trade and money traffic, which, however, is a thing of the
past. Our commerce with foreign countries is at present largely carried
on through the clearing system, under which prices are often determined
less by economic than by political factors. Considering the dependency of
our requirements for foodstuffs and raw materials on foreign countries,

the latter are at all times in a position effectively to determine prices,

and it would appear highly naive to assume that, for instance Germany and

Italy, to mention only two countries with which a large portion of our

foreign trade is transacted, would immediately agree, after an autonomous
appreciation of our franc, to accept smaller quantities of Swiss goods
than heretofore in payment of the goods that they delivered. Furthermore,
it must be anticipated that these countries would simply raise the prices

of coal, iron, foodstuffs, etc. As a matter of fact, the proposition is

doomed by the hard, but undeniable fact that Switzerland is dependent on
imports,
andcountries.
can only export if the necessary raw materials are obtained
from
foreign

Under present circumstances Switzerland is not at all in a position
to pursue an autonomous economic policy beyond its frontiers, or is it

possible to believe that, for instance, one of the few countries still

pursuing free commerce, as the United States, would pay more dollars for
Swiss francs simply because we nullified our depreciation wholly or partly
through a stroke of the pen? That would, of course, be possible if a
strong demend for Swiss francs prevailed in those countries, which, howover, is not the case. The world today requires foreign exchange less
then goods, and no currency experiments will be able to supply us with
more and cheeper goods in a time of growing scarcity of merchandise, unless we are in a position to provide those supplying countries either with
the goods or dollars which they need. Another unfortunate circunstance is
the fact that we have huge dollar credits blocked, which can only be used
for commercial purposes, so that the United States would hardly accept an
appreciation of the Swiss franc without taking counter measures which might

result in greater difficulties for realizing these dollar credits.

To a slight extent we have moreover already proceeded with the proposed appreciation, inasmuch as the National Bank has, as a result of
heavier dollar sales, gradually lowered the dollar rate from 4.46 francs
in May 1940, to 4.31 francs in November 1941, which corresponds to an appreciation of the Swiss franc of 3.41 percent, which had become depreciated to
a higher degree. Such slight differences in the rate were only possible
at a time when the Swiss dollar credits could be freely discosed of, which,
as is known, is impossible under the American measures of blocking funds,
and incidentally also with regard to free currencies which are based on
the dollar, or countries with which there exists no clearing system, such
as Portugal, Sweden and the Argentines.

-3-

163

If, therefore, it is impossible to reduce the price of imported

merchandise through an appreciation of our currency, then the results

in the country will be of little importance. Perhans certain psychologi-

cal effects night develop which, however, should not be overestimated.
The demand for goods would possibly be reduced, although it is still
dependent on the purchasing power and rationing, so that the appreciation,
same as any deflationary measure - and as such it should be designated night produce economic disadvantages. Furthermore, after e while, the
factors which heretofore have determined the price formation, i.e.,
shortage of rew materials and goods, would again tend to increase prices,
especially
if the currency
experiment
and
be abolished
at the end
of the war.should have only a limited duration

We are therefore of the opinion that we should engage in no further
exveriments with our currency. If we recommence any currency menipulations,

the confidence in the Swiss frenc, which suffered already slightly through
the devaluation of 1936, is bound to disappear entirely end then a rush
to invest in goods would certainly develop and have just the opposite results as those aimed at. Therefore, hands off such dangerous experiments,
which would cause enormous losses in the gold and dollar reserves of the
National Bank, which would fall on the tax payers, after a covetous and
short-sighted policy of the note issuing bank would have absorbed and
distributed the currency stabilization fund.
One must bear the consequences of one's mistakes. The consequences

of the depreciation which enlightened people had predicted, cannot be offset simply by taking counter measures. We must now resign ourselves and
realize that en appreciation of the Swiss franc would be a total failure.
The plan of ambitious politicians who advocate it might be furthered, but
our economic life would only be threatened by new disturbances and convulsions,
which in the present troublesome times must under all circumstances
be
evoided.

164

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE December 30, 1941
TO

Secretary Morgenthau

FROM r.r. Dietrich

CONFIDENTIAL

Registered sterling transactions of the reporting banica were as follows:
Sold to commercial concerns

£59.000
£17,000

Purchased from commercial concerns

Open
transactions.

market sterling held steady at 4.03-3/4, and there were no reported

In fairly light trading. the Canadian dollar discount continued to widen.
A new current low of 14-5/8% was reached at the close, which compares with 14-1/86

last night. One of the New York banks reported that it was a seller of Canadian
dollars representing life insurance premia collected by Canadian affiliates of

certain American insurance companies.

The Argentine free peso moved off 5 points to close at .2350. It is re-

ported that there are orders in the market to sell at least 300.000 pesos, which
ave not yet been executed. Attempts to sell this amount may lead to a further
decline in the rate, owing to the market's thinness.
The Venezuelan bolivar, which declined 10 points yesterday, fell another
points today, closing at .2650.

In New York, closing quotations for the foreign currencies listed below

were as follows:

Brazilian milreis (free)

Colombian peso
Mexican peso

Urugueyan peso (free)
Cuban peso

.0510

.5775
.2065

.5310

1/86 premium

A New York bank reported that its Manila office was now quoting nominal
Duying and selling rates of $.4902 and $.5000, respectively, for the Phillipine
peso. Before December 8, the prevailing levels were $.4969 buying and $.4981

selling. The Bank of England'a official rates for the peso were lowered today
: the equivalent of $.4908-1/2 buying and $.4981-1/2 selling.
Ke sold $19,950,000 in gold to the Swiss National Bank, which was added to

is All
ofearnerked
the
used
this transaction
was by
General
Fund. In order
to increase the
Stabilization
Fund's gold
its
from
thein
account.
gold
purchased
balance.we also purchased $7,400,000 in gold from the General Fund.
NO new gold engagements were reported.

165

-2In London, spot and forward silver were unchanged at 23-1/2d and 23-9/16d,

respectively. The U. S. equivalents were 42.67$ and 42.78

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

Ye made no purchases of silver today.

A
CONFIDENTIAL

166
BRITISH EMBASSY
WASHINGTON, D.C.

30th 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,

Halfax
The Honourable

Menry Morgenthau, Jr. ,

United States Treasury,
Washington, D.C.

167
Copy No. 14
BRITISH MOST SECRET

(U.S. SECRET)
OPIEL No.

Information received up to 7 a.m., 29th December, 1941.
(I) NAVAL

Light forces and two infantry assault ships returned yesterday
after & successful operation on the Nerwogian Coast. Military batteries were demolished and industrial plants destroyed. Ninety-six prisoners were taken and
heavy casualties were inflicted on the enemy. Five merchant vessels, two armed
trawlers and a tug were destroyed or sunk. Naval casualties were light and army

casualties included two officers and fifteen other ranks killed which were not
heavy considering the severe opposition in street fighting. A Dutch submarine
sank 5 Japanese destroyer on the 24th near KUCHING.
(II) MILITARY

LIBYA. Evening 27th, Air reports indicate that the enemy in
the JEDABYA area is obtaining supplies and petrol by sea. Latest reports indicate
that our armoured forces are well round the enemy's Southern Flank with patrols
as far Test as MERSA BREGA, Six enemy tanks were destroyed near JIDABYA on the

evening of the 27th. Motorised troops were in contact with the enemy's NorthEastern flank some fifteen miles from JEDABYA while elements seen to have ventured

considerably further into the enemy's position and are reported to have shelled

transport three miles North of the town, Air observation report identification
difficult owing to our columns being intermixed with the enemy.
MALAYA. PERAK. Our troops have withdrawn to positions about
trenty miles South of IPOH.

BURMA An attempt to dislodge the enemy from BOKPYIN on the 27th

failed, We suffered some casualties but details are not yet known. This place is
= the Coast between VICTORIA POINT and MERGUI, there are no roads to it but there

is a small landing ground, A small concentration of troops in Sismese uniform

with several lorries is reliably reported on the Sismese border in the area of the
upper reaches of the MEKONG River,
(III) AIR OPERATIONS

WESTERN FRONT. 27th, Beaufighters and Blenheins (including

t

R.C.A.F.) protecting raval units operating off the Norwegian Coast drove off all
enemy aircraft and destroyed two German fighters three bombers and damaged three

other aircraft. Three of our aircraft are missing. 27th/28th, DUSSEIDORF. tens of H.E. and 11,000 incendiaries were dropped. Many large fires were started

168

-in the town and near the railway centres. At BOULOGNE and BREST 33 tons. Burst

were seen in the docks area, 16 R.C.A.F., 23 R.A.A.F. and 14 R.N.Z.A.F. aircraft
took part in these operations. 28th. Two merchant vessels of about 5,000 tons
were attacked by R.C.A.F. Hudsons off the Dutch Coast. One was hit amidships and

the other was thought to be hit, 28th/29th. 222 aircraft were sent out - WILHEIM
SHAVEN 86, HULS 81, EMDEN 40. Intruder Operations 10. Visibility was good and

results are believed to have been effective. Seven medium bombers are missing.
About seventeen enemy aircraft were operating, most of which are suspected of sea
mining in the THAMES ESTUARY,

MEDITERRANEAN. LIBYA. 27th. Four squadrons of Blenheims suc.

cessfully attacked enemy positions in the BARDIA area. Tomahawks destroyed three
vehicles and damaged about fifty others between JEDABYA and EL AGHEILA, Two

Tomahanks are missing. Enemy fighter activity in the battle area was very slight.
27th/28th. Naval aircraft laid mines off TRIPOLI (L) and eleven Wellingtons attacked shipping in the harbour, 25 enemy aircraft made raids on 27th. 27th/28th
and 28th. No important damage resulted. One bomber was shot down by Hurricanes,
FAR EAST. MALAYA. 27th/28th. Six Blenheims attacked SUNGEI

PATANI aerodroms. At least seven fighters were destroyed and five fighters and
three bombers damaged on the ground. 28th, Three enemy airóraft attacked PORT
SWETTENHAM, One was shot down by Kua and another probably destroyed.
(IV) AIRCRAFT CASUALTIES IN OPERATIONS OVER AND FROM THE BRITISH ISLES

German 27th. Five destroyed, three damaged.

British 27th. Three Missing
27th/28th. Seven missing
Total

Ten.

168.A
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

Secretary Morgenthau

TO

DATE December 30,1941

Mr. Kamarck

FROM

Subject:

Summary of Military Reports
Use of American Planes

In Russia

As of December 27, the Russians state that 35 out of
226 p-40's are completely out of commission. The rest are
operating but without generators.

Russian officials decline to give our Military Attache

information on the air routes used to deliver American planes
from Basra, Iraq to Russia. They state that the agreement
in Washington was that the planes would be delivered to them

at Besrs and, therefore, it is not necessary to furnish
information on the route the planes follow after that. (The
Russians are consistently following the policy of giving
only the information that it is absolutely necessary to know,
only to those whom it is absolutely necessary to inform, and
not an 1ots more. Their interpretation of what 1s absolutely
necessary is also a very rigid one. In view of the surprise
they provided the German Army, it is difficult to argue that
they are wrong. Our army, however, feels strongly that it
1s not getting enough information.)

(Kuibyshev, U.S.S.R., U.S. Military Attache,
December 28, 1941

In Libya

Four Flying Fortresses (B-17C) reached the Middle East
on November 1, 1941. Since then, three high altitude daylight
missions were performed. Each time 11 1/4 tons of bombs were
carried and the average flying speed was around 200 miles per
hour.
On November 8, two planes were sent to bomb Benghazi,

R total distance of 1,240 miles. On the way home, one plane

--

168-B

made A forced landing 200 miles from its base, due to lack of
fuel. The plane was destroyed, but the crew was unhurt. The

loss was attributed to errors by the service crew and pilot.

On November
14, one plane was sent to bomb Benghazi, A
distance
of 720 miles.
On November
19, one plane was sent to bomb Derna, A
distance
of 860 miles.

Since then, no missions have been performed because of

excessive oil consumption by the two inner engines. The plenes

have
been grounded, while attempts are being made to discover
the cause.

Among the other difficulties which developed are the

following:

The bomb doors failed to close when opened. Cause is

unknown.

There WAS a loss of engine power caused by exhaust mani-

fold leakage.

(Cairo, U.S. Military Attache, December 27, 1941)
Use of American Tanks in Libya

Because the mechanical performance of the American tanks

used in Libya has been relatively so satisfectory, and because of the comparatively small distances PR yet covered,
no
large-scale overhauls of the tanks have been required,
AS yet.

(Cairo, U.S. Military Attache, December 29, 1941)
Russo-Germen War

Our Military Attache in Russia reports that Russian
"use of armored motor sleds, at least experimentally, is
probable! (This 18 an understatement, in view of the fact

that the Russians used such sleds in the Russo-Finnish War
with considerable success.)

(Kuibyshev, U.S.S.R., U.S. Military Attache,
December 28, 1941)

168-0
-3NEWS ITEMS OF POSSIBLE INTEREST

Libyan Campaign

The R.A.F. officially announced that the Axis air
forces in Libya lost 476 planes from the start of the
Libyan offensive to December 23. The British lost 195
planes in the same period. The main reasons for the
greater Axis losses were: the Royal Air Force had the
initiative, Axis air activity was hampered by shortage
of fuel (due to naval and air attacks on the supply
lines), advancing British troops were able to capture
disabled enemy planes before they could be repaired.

(The loss of 476 planes is over two-thirds of the
total Axis air force of 600-700 in Libya.)
Argentina

Lieutenant-Colonel Edmundo Sustaiti and Major
Bernardo Menendez have been appointed to new air force
posts in the Argentine Army, the War Office announced on

December 27. (These two officers were active participants in the pro-Axis plot of September 23 and were
arrested at that time. Sustaiti was the commander of
the aviation school at Cordoba, which was the center
of the plot.)

169

December 31, 1941
9:30 a.m.

GROUP MEETING

Present:

Mr. Haas

Mr. Graves
Mr. Gaston

Mr. Morris

Mr. Kuhn

Mr. Foley
Mr. Blough

Mr. Bell

Mr. Thompson

Mr. Sullivan

Mr. White

Mrs. Klotz

H.M.JR: Well, have I seen you, Harry, since Keller

was here?

Well, I don't know how many of you know I have

been working on this, to get these orders for these

people. Mr. Keller came in last night at five o' clock

and told me that in two days he had succeeded in getting
an order for seventy-three thousand trucks, and he
had been at it since the seventeenth of September and
had been unsuccessful, and he went home last night with
en order of seventy-three thousand trucks for the Dodge

plant.

MR. WHITE: Are those the military trucks?
H.M.JR: Ten thousand eight hundred and thirty-

eight are half ton four by four military trucks which
will fill the gap in the Dodge assembly plant until

April 15. Sixty-three thousand are new three-quarter

170

-2ton trucks which will be in production by April 15 to
reach a production of seven hundred a day by the

fifteenth of June, and they have given them extra
money to tool up for the Russian thing. That is what

they call the low silhouette truck. He said, "I

hope you won't mind, but everywhere I went in the War
Department they kind of winked at me and said, 'I see
you have got the Secretary of the Treasury working as

your agent helping to get orders. I said, " I don't
mind if you don't.' He says, "I don't. I have got
seventy million dollars out of it." Two days.

And the other thing which I checked, it is the

Martin B-26 which he was asked to make the central
section of the main body for and it was only on Christmas

Day that he got the final drawings. He was originally

asked to meet Knudsen on the first of October of 1940
in New York and they planned the thing then, and he got
the final drawings on Christmas Day, 1941.
MR. WHITE: Fifteen months.
H.M.JR: Mr. Gaston?
MR. GASTON: I suppose you noticed Leland Stowe's

article last night on the Burma Road?
H.M.JR: No.
it.

MR. GASTON: It would be worth your while to read

H.M.JR: All right.
MR. WHITE: I started some other inquiries about

it, so after you read it we will try to get another
check up on that. It is quite a story.

MR. GASTON: This fellow is an absolutely reliable

fellow, I think.

H.M.JR: The one that had about their running
luxuries over the thing?

171

-2MR. GASTON: Yes, all kinds of graft. Nothing
moves without payment of graft, and they shunt mili-

tary supplies
aside
wines
and so on
in. in order to run private cars and
MR. WHITE: There is certainly a good deal of

truthknow.
in it.
don't

Whether it is wholly as bad as that I

(Discussion off the record.)
MR.
Castle.

WHITE: It would be bringing coals to New

H.M.JR: Harry, that is very unpatriotic.
MR. WHITE: This is south of the Chinese border,
Mr.
Secretary. It is in Burma, controlled by the
English. (Laughter)
MR. GASTON: I haven't anything.
MR. FOLEY: Nothing.

H.M.JR: John L., of New Hampshire?
MR. SULLIVAN: We have had a long conference with
representatives of the War Department. You remember

you wrote to Stimson when he told you he wouldn't have
time to sit down and talk over that Panamerican Airways
contract, in which the War Department agreed to indemnify
Panamerican
against increases in taxes. Do you recall
that?

H.M.JR: Yes, I recall it.
MR. SULLIVAN: Well, anyway, we fought it out and

in the course of the conference they admitted to us that

Panamerican Airways was holding a gun to their head, and
they
to
dowere
it. doing it because they had to, and we refused
H.M.JR: I remember that.

172

-3MR. SULLIVAN: And finally new language has been
worked out for the contract with the War Department
and Panamerican Airways which Mr. Foley and Mr. Kades
and I think
is satisfactory, and we would like to go
ahead
with that.
H.M.JR: O.K.
MR. SULLIVAN: And I have a memorandum of that

conference which I think you probably would like.

H.M.JR: Put it in my file, will you please.
MR. SULLIVAN: Yes, sir. You had some correspondence
with Leon Henderson about his request to microfilm a
very large number of returns in the Bureau.
H.M.JR: Yes.

MR. SULLIVAN: He was allowed to get some of them.
He wants all of them. There has been prepared an
Executive Order which would enable him to get those.

H.M.JR: Nuts, says I.
MR. SULLIVAN: Well, I didn't know anything about

the previous transaction, but going over it, I think we

are going to be in a difficult position if we are refusing him any information that is helpful to him.
H.M.JR: Well, when he needs it. I am not going
to have the income taxes of all the corporations of
America floating around in Leon Henderson's office.

Now, let me tell you the absolutely asinine

request he made of me last night through Lubin. Lubin
calls me up, would I see a couple of men from Henderson's
office because they want the Government tires that we

buy at factory prices to clear through local dealers,

and let them make the commission because the poor dealers,

tire dealers, are going to starve on account of action
that Henderson took, and I told Lubin I wouldn't think

173

-4-

of doing it, and I repeated it last night. I was

there at Wickard's house with Wayne Coy and Oscar

Cox, and they said it would be perfectly ridiculous.
Then the next request he makes was, would I

distribute the Government tires through his local

committees, and I refused to do that. I said it is

perfectly proper when we get a lump sum of how many
tires we need for Leon Henderson or somebody in

Washington to say, "You want a million tires for the
Government. You can only have a half million. That

is within their province. But for me to do the other
thing, to pick his coals out of the fire - and they
all agreed with me last night. He has got to give me if he, for instance, needs to know how much for particular reasons some corporation's or some industry's

profit,
I will
blank
check.

consider it, but I will not give him a

MR. FOLEY: Well, Mr. Secretary, I don't think

you have got the whole story.

H.M.JR: I am not going to do it.
MR. FOLEY: He is not asking for the returns and

that isn't what this order does. He did ask for the

returns and we told him he couldn't have them unless
he could give us a good reason.

H.M.JR: That is right.
MR. FOLEY: Now, he came back, and he did give

us a good reason.

H.M.JR: What is it?
MR. FOLEY: And we are suggesting through this
order that we give him merely the information that we

take off on these cards, and it isn't the return.

H.M.JR: But let him specify the industry. If

he wants the tire industry, as he needs an industry,
let him specify.

174
5-

MR. SULLIVAN: Mr. Secretary, we don't have them

classified by industries over there.

H.M.JR: We don't, but he does. He takes one
industry at a time.
MR. SULLIVAN: But that means we have to go pick-

ing out returns all over the place and that would be

expensive.

H.M.JR: I am sorry, I am not going to give him

a blank check. I won't do it. If he is interested in
the price of cigarettes and wants the cigarette industry,
tobacco industry, I am willing to give him that. If
he wants the tire industry, I will give him the tires.
I am not going to have the thing floating around. I
won't do it, that is all. He has got to say, 'I am
about to study - I have got to know what the tobacco

people make, so I can fix the price on cigarettes. I

have got to know what they are doing so I can fix the
price on remade tires or cotton goods. O.K. Then
let
him
them
out.give us the list of concerns and we will pick
MR. SULLIVAN: He doesn't have that list, you see.

H.M.JR: Well, they told a story last night, Oscar

Cox did, about a hundred and eighty thousand tires to
China. They challenged that. Oscar said, "I have got

seven people and they wanted - Henderson's organization
wanted us to do all the work for them, about how many

tires - the whole business, and he has got a thousand

people over in his office and I have got seven. I

told him why should I try to justify it on a basis of
whether a hundred and eighty thousand tires for China
is fair or isn't fair?"
He wants everybody to do his work. I won't do it.
MR. SULLIVAN: We have been offered--

H.M.JR: I mean, the stuff by industries - if he

175

-6doesn't know it, what are the thousand or two thousand
or three thousand people he has got over there doing?
MR. BLOUGH: There is a register of American
listed corporations from which a lot of this information can be taken.
H.M.JR: You (Sullivan) have got to take somebody.

Well,
is all. look, you can quote me, I won't do it, see. That
MR. SULLIVAN: We have been offered the cover of
Liberty magazine for March 11 for Disney to do some of
the characters on the income tax business, and they

called this morning. They have got a dead line of
eleven-thirty and they wanted to know which of the three
circulars that have been di stributed, "Know Your Taxes,
"How to File Your Income Tax," and the "Tax Saving Plan,"
we would like to have reproduced. They may be willing

to reproduce all three of them in that issue, but I

would like to talk with Ferdie and Harold Graves, and
then call them up and tell them.
H.M.JR: O.K.

MR. SULLIVAN: And also tell them that we will be
glad to have the cover on that magazine.

H.M.JR: Fine. Well, the President shot the works.

I was so overtired last night I couldn't tell Bell and

you and the rest of them what he said.
MR. SULLIVAN: We read it.

H.M.JR: And as far as I am concerned, I don't have

to go up and hear his annual message.

You know, it was terribly funny. He said to Harold

Smith, "Now get busy." And Harold Smith kept saying,

"Well, Mr. President, I don't know what you want. I
don't know what you want. Well, he has got it now.
MR. BELL: There it is.

176

-7H.M.JR: Harold Smith was in an awful spot yesterday because he didn't know the first thing, you see,

having been away for three days.

MR. BELL: Did he want Harold to write the "State of

the Union" message for us?

H.M.JR: No, but this whole question about pro-

duction, and he gave him Stimson's memorandum that just
came in on the victory program and Beaverbrook's memo-

randum
which just came in and that kind of stuff, you
see.
MR. SULLIVAN: Were you asked to prepare certain
parts of the message?
me.

H.M.JR: No, but Smith is going to consult with
MR. SULLIVAN: Well, the reason I inquired is,

when he came out, you remember you stayed in for a

while. He says, "Now you fellows have got to go to
work." I said, "How so?" He said, "Well, the President
asked the Secretary to prepare drafts.

H.M.JR: Well, Bell has been trying to get him.
MR. BELL: Yes, I tried to get him.
H.M.JR: And when you talk to him ask Smith
whether he would like to come over and have lunch with
us on Friday at one o'clock.
MR. BELL: On Friday?
H.M.JR: Yes.

MR. SULLIVAN: Are they going to put that figure

on taxes in the message?
H.M.JR: Yes.

176

-7H.M.JR: Harold Smith was in an awful spot yesterday because he didn't know the first thing, you see,

having been away for three days.

MR. BELL: Did he want Harold to write the "State of

the Union" message for us?

H.M.JR: No, but this whole question about pro-

duction, and he gave him Stimson's memorandum that just
came in on the victory program and Beaverbrook's memo-

randum which just came in and that kind of stuff, you

see.

MR. SULLIVAN: Were you asked to prepare certain
parts of the message?
me.

H.M.JR: No, but Smith is going to consult with
MR. SULLIVAN: Well, the reason I inquired is,

when he came out, you remember you stayed in for a

while. He says, "Now you fellows have got to go to
work." I said, "How so?" He said, "Well, the President
asked the Secretary to prepare drafts."

H.M.JR: Well, Bell has been trying to get him.
MR. BELL: Yes, I tried to get him.
H.M.JR: And when you talk to him ask Smith
whether he would like to come over and have lunch with
us on Friday at one o'clock.
MR. BELL: On Friday?
H.M.JR: Yes.

MR. SULLIVAN: Are they going to put that figure

on taxes in the message?
H.M.JR: Yes.

177

-8MR. SULLIVAN: Do you think I ought to talk with

them up there?

H.M.JR: No, no.

MR.
asking.

SULLIVAN: I don't think so either. I am just

H.M.JR: No.

This came last night by air mail, Ed. I know you

can't do it, but let Mrs. Lehman know what we can do.
She wants to send nine hundred dollars to Paris. Can

we send any money to Paris?

MR.
It all depends on whether it is a
citizen
or FOLEY:
not.
H.M.JR: The application is attached there, and
if you have any questions, call up Mrs. Lehman direct,
yourself.
MR. FOLEY: All right.
H.M.JR:
But I don't think you can send more than
a hundred
dollars.
MR. FOLEY: That is right, a hundred dollars and

twenty-five dollars for each dependent. If it is not

a
citizen, that is. If it is a citizen, five hundred
dollars.
H.M.JR: Well, clear it with her.
O.K.?

MR. MORRIS: Nothing.

H.M.JR: Harold?
MR. GRAVES: Nothing.

H.M.JR: You don't know. Here are my follow-ups.

178

-9Incidentally, George, I read your memorandum
carefully, and I am glad you are going into the field. very
I have also dictated you a memo that whatever you give
me see.
you should give Bell, Graves, Broughton, and Hall,
you
MR. HAAS: Oh!

H.M.JR: Because Hall kind of tells me, "I am just

in thelight
dark.
little
on.I don't know." Well, we will turn a

HAAS: Yes, those reports turned considerable
lightMR.
on it.
H.M.JR: Yes.

Harold, I won't embarrass you publicly. I will

hand you this follow-up.

MR. SULLIVAN: Not much! (Laughter)
else?

H.M.JR: Well, I feel very mellow today. Anything
MRS. KLOTZ: There is another in there.

H.M.JR: Oh, wait a minute, while you are on your

feet, Harold. Here is another.

MR. GRAVES: Would you like me to tell you now

about this?

H.M.JR: Oh, I would love it. I would just faint

with delight.

MR. GRAVES: About the motion picture theater

thing, there is a committee of the industry that has
been organized with headquarters at New York and this

proposition has been laid before that committee. Many

feel that they are already doing this. We think that

the wise way to function will be through that committee

179

- 10 of the motion picture industry.
H.M.JR: Will you give me an answer next year?
MR. GRAVES: I will, next year.
On the Gallup thing, we have prepared the questions,

a series of question on this - no, this particular thing

has already gone, this question of whether they want

war savings bonds or Defense Savings Bonds. That was

sent to Gallup right after you asked me to do it, and
I suspect we will have some result from that very
shortly. What was the other thing?

MR. KUHN: There was also a proposition of asking
Gallup or someone in the field to do a survey about the
payroll allotment and the questions will be turned over
Tuesday to Elmer Roper who does these things for MacLeish,

and it will be done as a Government project through the
MacLeish
organization. They say they can do it quickly
and
effectively.
H.M.JR: Fine.
MR. KUHN: Without charge.
H.M.JR: O.K.

Harold, while I have got you here face to face, how
about my desire to have a couple of people sitting at
a table outside of the windows of the post offices?
MR. GRAVES: You asked me over the phone night before

last. I told you that would have to be done, as matters
stand, by sending Treasury personnel, volunteer people

not being trustworthy with the issuance of bonds. You

asked me to see that that was done in a branch near the

Navy Yard.

H.M.JR: Yes.

MR. GRAVES: Well, there is a branch near the -

180

- 11 eight blocks from the Navy Yard, but there is no lobby
that would permit the installation of any such facility.
There is a contract station in the Navy Yard, and we
are studying that with a view to seeing whether it would
be feasible to put such a booth in that contract station.
We are met with the refusal, as before, on the part of

the Post Office people, to do this. It will be neces-

sary, once
wePostmaster
have a plan
prepared, for us to get in
touch
with the
General.

H.M.JR: I will call him up. When will you be

ready? Does that come under you or come under outlets?

MR. GRAVES: It comes under outlets. It is a
matter that really should be handled in Dan's office
because it is a matter of taking personnel from the
organization and putting them out in these places.
H.M.JR: Would you (Bell) be ready if the Postmaster
about it?General could see you this afternoon to talk

MR. BELL: I don't think so. I would like to know
what this experiment we carried on here in Washington
the last two or three months has shown.
MR. GRAVES: Well, that experiment was carried on

at a number of department stores and at the Willard
Hotel and that was done for the purpose of testing out
the sale of tax savings certificates, although bonds

and stamps were also sold at the same booth.

H.M.JR: Listen, boys, I can't take it. I want

in a - in one or two post offices in Washington, if
they have got to be Treasury paid personnel in the first
instance, all right, but then we can swear people in
and get volunteers all over the country if it works.

Who is going to go and see Frank Walker for me? I

will make an appointment.

MR. BELL: I will see him, but let me see my

schedule, will you please?

181

- 12 H.M.JR:
morning?

Can I make an appointment for you Friday

MR. BELL: Yes.

H.M.JR: Does that give you a breathing spell?
MR. BELL: Sure.

H.M.JR: O.K.?

MR. BELL: You don't have to bother with it. I

can make the appointment.

H.M.JR: No, I want to talk to him. I want to

remind him it is his suggestion.

MR. GRAVES: On this point of the Navy Yard--

H.M.JR: In the post office building right down

here, Frank Walker's building.

MR.BELL: All right. But in the Navy Yard's we

have got now a duplication, and they are having much

difficulty in getting the statistics.

H.M.JR: Dan, if we sell enough, then work out a
way that we can enroll volunteers to do this thing and

bond them. It is a swell volunteer job.
MR. BELL: And bond them?

H.M.JR: Sure, whatever is necessary.
MR. GRAVES: I don't think that would be a matter

of any--

MR. THOMPSON: In the Treasury Post Office there is
a window just for them.

H.M.JR: Well, I want a desk right out in front.

182

- 13 MR. GRAVES: I don't think that will prove anything because it is just going to divert business from
the windows to that desk which you would get anyway.

H.M.JR: Well, this one time you are going to
have to humor the old man. I want to try it in a couple

of post offices, right out in front, the same idea that

you went to your banks when you took your vice president

and stuck him out in front instead of the private
offices. How long ago did you do that in the banks?
MR. MORRIS: Some haven't come to it yet.
H.M.JR: Some have, though.

MR. BELL: They are going back now. (Laughter)
MR. FOLEY: They always had him stuck out, Mr.

Secretary.

Well, I know some banks where the presidentH.M.JR:
sits right
out in front.

MRS. KLOTZ: He is not afraid.
MR. MORRIS: Well, we have always sat out in front,
but you say the banks. Some of them haven't done that

yet.

H.M.JR: Well, I want to try it-MRS.

KLOTZ: There is a reason.

H.M.JR:

and I am asking to try it, please, and
talk to the Postmaster, will you, Dan?
MR. BELL: O.K.
argue.

H.M.JR: I am very weak these days, and I can't
MRS. KLOTZ: You can have anything you want this

morning, Mr. Secretary. It is very novel.

183

- 14 MR. SULLIVAN: No New Year's resolutions, now.
argue.

H.M.JR: Don't worry. I am just weak. I can't

MR. BELL: I would like to mention the Investment

Bankers Association want to be designated as agent and
the presidentand
hashejust
taken
cooperative,
wants
to--office and he is very

H.M.JR: I am for it.
MR. BELL: He wants to live down some of the past.

H.M.JR: I am for it.
MR. BELL: If we just hold it to the main organi-

zation,
it is branches.
all right,
ten
thousand
back.

but I think they have got about

H.M.JR: Well, wait until George Buffington gets
MR. KUHN: I have a message for you from George

Buffington who was on the phone from Chicago. He is
seeing Vanderpool, and Vanderpool will be coming to
Washington next week. George will be here next week.

H.M.JR: For a trial?
MR. KUHN: Well, to talk about it. He is not sure
that he can make the change, but George likes him very

much. He is much impressed.

H.M.JR: Anything else?

MR. KUHN: I would like very much to talk to you
again about going on the air, very soon. I mean, it
ought to be in the first week in January.

H.M.JR: Well, I am in this.mellow mood. It is
your privilege to talk to me about it every day. Also

- 15 -

184

you
can good
write phrases
a speech
you want to and put in some
of those
of ifmine.
pool?

MR. GASTON: Did you get my memorandum on Vander-

H.M.JR: Yes.

MR. GASTON: I think it is a great mistake. They
are doing good work for the Administration. It is a
great mistake to put him in the Government service.

Secretary
Judge(The
Byrnes.)

held a telephone conversation with

MR. KUHN: Mr. Secretary, only this about the talk.
There is one spot on Tuesday night, and I will be
delighted to write the speech.
H.M.JR: Next Tuesday?
MR. KUHN: Next Tuesday night.

H.M.JR: I couldn't mentally get myself in shape.
MR. KUHN: It is only ten or fifteen minutes.
H.M.JR: Well, you have all got my New Year's

invitation for lunch today? You are all going to have
lunch with me, I hope. At least you are all invited.
MR. GASTON: Thank you.

H.M.JR: It will be the last luncheon of the year
together at one o'clock. If I am sober at that time,

talk to me again, Ferdie.

MR. GASTON: Before lunch. (Laughter)

H.M.JR: Harry, that Russian protocol thing?
MR. WHITE: We worked on it yesterday and we will

finish it up this morning, Cliff Mack and I. We are

- 16 -

185

trying to get something good.

H.M.JR: You didn't say anything about Bell at the
time, so I am not saying anything.
MR. KUHN: He won't be here next week.

H.M.JR: How are you feeling?
MR. BLOUGH: Much better, thank you.

H.M.JR: Under this order which Bell and I are going
to get out to keep the Treasury open tomorrow, we find
there are six other departments open as a demonstration
to the country that Washington works. You stay home
tomorrow.
MR. BLOUGH: Thank you. I will be very glad to.
MR. BELL: He has got a number of people, too,
that have worked very hard.

H.M.JR: The President's thought was that we are
asking the people to work in the machine shops and
munitions plants, and it is up to Washington to show
they also can work on New Year's Day. But if anybody

particularly like Blough or somebody isn't feeling well,

then I think
tomorrow.

it would be a good thing to order them home

I have got some new data on the Maritime
chartMR.
andHAAS:
the aircraft
chart.

H.M.JR: I will get around to it.
MR. HAAS: Do you want to take a look at it?
H.M.JR: Hand it to me now.
MR. HAAS: And, Mr. Secretary, you suggested about

two 'clock for these sales figures and also at the same

time send in the supply figures on Savings Bonds?

- 17 -

186

H.M.JR: What is that?
MR. HAAS: You suggested about two o'clock that
the sales figures could come in from my shop and also

the supplies picture. The supply picture would be
impossible because of the steel reports to get in by
that time.
probably get it in by three o'clock.
Would
thatWe
be could
all right?
H.M.JR: No, when they are together, give them to
Stephens,
mark them urgent and tell him to bring them
in
to me.
Harry?

MR. WHITE: You asked on November 26 that we get

from England the information on the procedure and ac-

tivities of the British Select Committee on national

expenditure. Forty-two reports have come in by pouch.
We
them. can either turn them over to you or we are digesting
H.M.JR: On economy?
MR. WHITE: On economy.

H.M.JR:
Turn it over to Bell and he will give it
to Bill
Heffelfinger.
MR. BELL: That is right.
MR. WHITE: Right.

H.M.JR: And Heffelfinger will give it to Mr. "X."
MR. WHITE: The gold which is at Martinique, the

Consul has written about it. He is only allowed to
count the cases. If we have any responsibility in it

whatsoever, we feel we ought to do more than that,
lead.
because
the cases may be empty or they may be full of

H.M.JR: You want to stick your finger in, do you?

- 18 -

187

MR. WHITE: Yes, practically - virtually - figuratively speaking.If (Laughter)
the don't
Treasury
responsibility.
we haven't,If we
care.has any

H.M.JR: It has, it has. Well, you and Bell get

together. Bell may think you should only put your
thumb in, I don't know, but you and Bell handle it.
(Mr. Bell made motions of thumbing a ride.) (Laughter)
MR. WHITE: I was talking about gold, Danny. I
don't know whether you understood me or not. (Laughter)
We asked the Mexican Government, Treasury, for all

their data on their exchange operations, stabilization.
They are going to give us all their confidential data
if we hold it very confidential. They have not yet

ratified that arrangement, you may know. There are
a number of departments here who - defense depart-

ments who are able to hire non-citizens. It is becoming increasingly difficult for us to get very com-

petent men and we think we are going to lose some more

men. We have lost quite a few.

H.M.JR: What do you want now?

MR. WHITE: There are two men, one British and
one Canadian, very excellent economists that we would

like to take on. There is no question about their -

as
tary.consultants. The defense agencies do it, Mr. Secre-

H.M.JR: If you can clear with Norman it is all

right with me. They are our associates.

MR. WHITE: Well, Norman will just pass the buck

and say whether it is all right with you.

H.M.JR:
legally.

I say it is all right, if you can do it

MR. WHITE: Yes. If we can do it legally, it is
all right.
MR. THOMPSON: They would have to be citizens.

188

- 19 -

MR. WHITE: They don't have to be citizens, Mr.

Secretary.
I am sorry to disagree. If it is legal,
is
it all right?

H.M.JR: If my General Counsel will pass on it,

it isaall
right.
.Is that
all right
get
written
opinion;
Norman?

with you, if you

MR. THOMPSON: Yes, it is perfect.

H.M.JR: If my General Counsel--

MR. WHITE: Fine. If it is illegal, we certainly

wouldn't want to do it, and I don't think they would
let us. (Laughter) Ecuador has just renewed its application on the Stabilization Fund. They have sent a
lot of material in. We will go over it again. We have

a man down in Ecuador. We have extended his stay to
six months, which is up to the end of January. He is a
very good man, and I want him back. Ecuador says he

is very important to them, and they want him to stay
some more. The State Department would like to satisfy

Ecuador.
If it is all right with you, unless they
insist, I would like to have him back.
ment?

H.M.JR: Is it between you and the State DepartMR. WHITE: Yes.

H.M.JR: I am with the State Department, as usual.

I will tell you what, flip a coin, Harry.

MR. WHITE: I have got a double-headed coin.

MR. BELL: Harry, I thought we were going to send
him to some other country after January.
MR. WHITE: We were before the war started, to
Bolivia, but under the circumstances--

H.M.JR: Harry, you decide and take full responsibil lity

- 20 -

189

vis-a-vis the State Department.

MR. WHITE: All right, I will do that.
H.M.JR: I hope you are through. (Laughter)
WHITE: How can I go on after that? I happen
to beMR.
through.

H.M.JR: That is all, Harry?
MR. WHITE: I am through.
H.M.JR: Thank you.

MR. BELL: This is the vote on the Library of

Congress thing. We have already agreed to it.

H.M.JR: All right.
MR. BELL: Here is Mr. Straus of New York who
donated twenty-five thousand dollars to the Government.

I thought you might like to sign the letter.
H.M.JR: Straus?

MR. BELL: Yes, he is the German in 1915 who came

over here and has since become a citizen. He doesn't
want any publicity or doesn't want his name to be
mentioned.
H.M.JR:
would prepare a letter and send a copy
of that
to Mr. IRoosevelt.
MR. BELL: Yes.

H.M.JR: Have you got the Russian and English
war debt thing for me?

MR. BELL: I will have it at ten o'clock tomorrow.
MR. THOMPSON: In view of the fact that Chief Deasy

- 21 -

190

will not be with us full time, I am trying to get an
engineer
officer and
the chief of engineers has this
retired
brigadier
general.
H.M.JR: Wonderful, fine.
girls.MR. THOMPSON: Here is the uniform for the messenger

H.M.JR: Now, that is important.

MR. BELL: It looks important from this side.

(Laughter)

MR. SULLIVAN: Is that the uniform for the new

hostesses
windows?

at the desks outside of the post office

MR.
I wasn't.

BELL: Then I am in favor of it. Before that,

MR.
uniform.

MORRIS: Do you get the same quality inside the

MR. HAAS: The filler, you mean. (Laughter)
MRS. KLOTZ: That is cute.

H.M.JR: Yes. I asked them to draw one for me
and the Treasury seal up on their caps and on their
arms.
MR. THOMPSON: Yes.
braid.MR.

WHITE: They ought to have some gold and silver

H.M.JR: And a pocket.
MRS. KLOTZ: They have two pockets below.

H.M.JR: That is all right.

191

- 22 MR. HAAS: Air raid wardens, I guess.

H.M.JR: That is fine.
MR. THOMPSON: I think they look very chic.

H.M.JR:
All right.
Class is adjourned. I will
see you
all at one
o'clock.

192
December 31, 1941

10:05 a.m.

Operator: Go ahead.
HMJr:

Justice

Hello.

Byrnes:

Hello. Henry?

HMJr:

Yes.

B:

This 18 Jim Byrnes.

HMJr:

Good morning. I still haven't recovered from
listening
to that thousand dollar radio of
yours.

B:

(Laughs) Twenty dollars. That's the way it's
gone
me askup
youin price on account of the war. Let

HMJr:

Yeah.

B:

.....are you busy right now?

HMJr:

I'm never busy when you call.

B:

Well, I'm wondering this. I want to talk to you
and see if you and I can't save the boss some
headaches on this alien property custodian.

HMJr:

All right.

B:

Have you got the newspaper fellows hanging outside

your office if I came by there?
HMJr:

No.

B:

Well,
could
I see
you there and I can be there
in about
seven
minutes.
HMJr:
B:

In seven minutes.
Yes.

HMJr:

No, I tell you what we'll do. Do you know East

Executive
Avenue? We're on one side - the Treasury
is
- you see?

-2-

193

Yes.

And entrance. you come in at East Executive on the south

South entrance. All right.

And - it's all blocked, but I'll have a Secret

Service men there to meet you to bring you in.

All right. Fine, Mr. Secretary.
And let him come up my private elevator.

All
right.
I'11 be there in from five to
seven
minutes.
RMJr:

Okay.

194
December 31, 1941

H.M.JR.: I said to Jimmy Byrnes, "Jimmy, how can

a man who is getting fifty to seventy-five thousand

dollars as Chairman of Standard Gas and Electric, and

who is the personal front and representative here for

Victor Emanuel, be Alien Property Custodian?"

He thought a minute and he said, "Well, I will
tell you something, Henry. The President was ready

to make Leo Crowley Chairman of the National Democratic
Committee. He, being an Irish Catholic and coming from

Wisconsin, would have been fine, but I told the President he couldn't do it for that reason and objected,
and that was why Leo Crowley didn't become Chairman of
the National Democratic Committee."

So I said, "Well, if you did that, as you say,

for political reasons, how about for ethical reasons,
that this man can't be this thing?" So he said, "You

are right, but who is going to tell him that?" So I

said, "I think you should. You know the President
won't. Or Francis Biddle." He said, "Well, You know
Francis Biddle won't do it.
So I sent for Haas. I remembered that when I
went to visit the Lycoming plant I had had a whole study
made of Victor Emanuel's organization. I showed it to
him and I said, "On the right hand he has got Associated
Gas and Electric and on the left hand he has got this New
York Shipbuilding and Vultee and now Consolidated Aircraft with between five and seven hundred million dollars
worth of war contracts," and I said, "He is smart enough
to have Leo Crowley, Chairman of the FDIC, as his front
in Washington."

Then I said, "Francis Biddle said this to me:

'You know, I not only want Leo Crowley to be Alien Pro-

perty Custodian, but I want him to look after political
appointments for me in the Department of Justice, and
Jimmie Byrnes said, "Do you mean to say that he said

-2-

195

that to you?" I said, "So help me God." He said,
"That is the most outrageous thing I ever heard.

I said, "If you want to run this thing in a nice,

clean manner and have the man at the same time handle
the politics,
won't
any
better
Palmer
duringitthe
last be
world
war."
" than A. Mitchell

So he said, "Are you sure that Biddle said that?"

I said, "Yes, Biddle said that." So he says, "Well,
he certainly ought to give it up." So I said, "Well,

if you make this a necessity on Crowley's part he will

resign from the Alien Property Custodianship and then

you can give the thing to the Treasury." I said, "I
am come
putting
all my
cards on the table. I said, You
will
to that
anyway.

He said, "I think you are right." The last thing
he said before he left was, "Well, I am going to bring
it to the President's attention. He said, 'I agree
with you, it is a very bad situation because the President had promised him the job." I said, "Well, you

make those conditions and maybe Leo Crowley will decide
he would rather work for Victor Emanuel than be the
Alien Property Custodian.

And that is why I think we have got a very ood

chance that it will stay here, and I told him, "Our
boys can run this thing and they will run it well and
there will be no trouble or scandal of any kind." He

said, "I agree with you.

196

December 31, 1941
12:00 m.

ALIEN PROPERTY CUSTODIANSHIP

Present: Mr. Foley
Mrs. Klotz

H.M.JR: T think you are going to be pleased and

I hope so. It took about an hour. Justice Byrnes

came down here and he says this is the first person
he has called on since he has been up in the Court.
He gave me this talk about the President asked him to
do this thing, and he wants to save the President a
lot of headaches. He doesn't want to have to have a
meeting over at the President's so he could decide whether
the Treasury gets it and so forth and so on. The
President made a suggestion that Leo Crowley be given

this responsibility and that he be given an assistant

from the State Department and an assistant from Treasury

to help him administrate it, but he would get the whole
works, as I understood it. He said that was out of the
question and that his own feeling was that it should go
to one place or the other. He said that Leo Crowley
has said flat-footedly that he would not come to the
Treasury, which he didn't tell you or me.
MR. FOLEY: No. Well, I thought he would be
reluctant to come here because of the situation.

H.M.JR: Furthermore, that the trouble with the
President is that the President has made Crowley this

offer, promised it to him. Therefore, he feels as a
compromise that he would like to recommend to the

President that all of the work of the Foreign Funds stay in
the Treasury, that Crowley be set up in the Department of

197
--2-

Justice as Alien Property Custodian to run these busi-

nesses. If and when he needs any money, which we have

frozen on the particular business, he will have to
sign a certificate, which I said would have to come
through requesting that all or part of the money of
that business be released to him so that he could run
that business because otherwise if they didn't do it
that way Crowley could say he made a failure of the
business because the Treasury wouldn't give him the

money.

So I said, on second thought, both you and Acheson

and Crowley, that to have a divided responsibility
wasn't wise and that we here felt very, very strongly
that we could do the best job. We have done it and
there hasn't been a single complaint from the Hill,
and Jimmie said, "That is right. I haven't heard any
complaint from the Hill.' He said, "There has been

no complaint." He said, "I would hear it if there

were any. I said, "This is the place to do it, and
I feel that very strongly, but rather than to have a
row with the President or make it more difficult for
him, if that is what you are going to decide, all
right." So the last thing he said was, "Well, I am

going to make my recommendations to the President that

it should be in one place and if he won't accept it,

then I am going to do it. He said, "I feel, Jimmie
Byrnes, that it should be in the Treasury."

Well, isn't that the best that you could hope
for? I mean, lacking his simply getting it, the whole
thing?

MR. FOLEY: Yes, I think so.
H.M.JR: Would you do anything different than I

have done?

MR. FOLEY: No, I don't suppose so, no.

H.M.JR: Be quite frank.

MR. FOLEY: Well, I think that is all we can do.

198

-3-

It is a practical matter.
H.M.JR: That is what you told me, Ed. You said

you didn't want this committee of you and Acheson and
Crowley to do it.

MR. FOLEY: I think that is right, yes.
H.M.JR: You told me you didn't want that conmittee

plan any more.

MR. FOLEY: Yes, that is right, and that never
would
work. That would just put all the headaches in
the committee.
H.M.JR: Well, this would leave Foreign Funds with

the Treasury and they (the committee) would decide when

they want to take over the businesses, which I told him
I thought was all wrong. He said the President didn't
understand the thing. "Well," Jimmie said, "I have

tried to explain it to him, but the trouble is the

President has made a promise to Crowley. " He also

said the President wouldn't touch it while Churchill
was here. He couldn't have been nicer. He said, "I
would like to see it here in the Treasury, but you
see this fellow Crowley, he tells you, 'I won't come
to the Treasury. , If

MR. FOLEY: Well, I can understand that.

H.M.JR: And I told him, "I don't want another Jeff
'Conner situation," and he said, "You shouldn't have
it. If

T.

Well, that is it.
MR. FOLEY: O.K.

H.M.JR: Do you think it is so bad?
MR. FOLEY: Well, I think we lost it.
H.M.JR: Do you think so?

-4-

199

MR. FOLEY: Yes.

H.M.JR: I am not so sure. There was talk of
taking the whole thing out and setting up an independent agency. I don't think we have lost it. Let's
be practical. The President of the United States

publicly offers Leo Crowley Alien Property Custodianship. What might have happened to it is, he might have
taken the whole Pehle organization over there with him.
MR.John
FOLEY:
Well,
I mean,
wouldn't
go.I don't think they would go.

H.M.JR: No, but I meant the whole - all the money.
MRS. KLOTZ: Well, supposing they put it here in

the Treasury and Leo Crowley refuses to come? Then

what?

H.M.JR: Well, Byrnes will be tickled to death.
MRS. KLOTZ: That is it. It may come out that way.

H.M.JR: May, yes. Oh, it may? Yes, it may.
MR. FOLEY: I mean, the difficulty is that when you
put one phase of the property in one department and the
rest of the properties in another department because
money, securities, businesses, they are all property
in which foreigners have an interest, you are getting

the thing so inter-related and so tied up together, it
is hard to break it off and it all ought to be in one
place or the other.
H.M.JR: I agree and that is what he is going to

recommend, but he says as a compromise, would I go
along, and there was only one answer.

MR. FOLEY: Yes, I think as a practical matter-H.M.JR: Suppose I said no, I wouldn't? Then he
would say, "Well, do you mean to say you are going to

200

-5take the President's time to see all these people and
you are not going to let me, a Justice of the Supreme

Court, settle this thing?" That was his attitude,
and he is right. But the President hasn't told him

yet,
He has been unable to get any answer
fromyou
the see.
President.
MR. FOLEY: I see.

H.M.JR: Other than this thing which - about Leo
and the two assistants. But he is convinced it should
be in one place, and he things it should be here, and
he said, "We have done a swell job here and it should

be
here. Don't take it too hard. The battle isn't
lost."
MR. FOLEY: O.K.

I called up Mrs. Lehman's secretary, and I told
her we could do this under our general license and for
her to get in touch with Kimball at the bank in New
York,
we are calling Kimball and telling him she
will
be and
down.
H.M.JR: You prepare an answer for me.

201

December 31, 1941

When Jimmy Byrnes called this morning, he got on this

question of Minster of Supply, and I said, The President

ought to have one man who raises the crops like Wickard,
and one man who raises the money like myself, but I think
he is going to have a committee do the supply thing."
Byrnes said, "Henry, this will never work. The President
must give it to one man.

201

December 31, 1941

When Jimmy Byrnes called this morning, he got on this
question of Minster of Supply, and I said, "The President
ought to have one man who raises the crops like Wickard,
and one man who raises the money like myself, but I think
he is going to have a committee do the supply thing."
Byrnes said, "Henry, this will never work. The President
must give it to one man."

202

TO:

Mr. Klotz

12/31'41
4 p.m.

The original copy sent to the
Secretary along with this letter

I am taking with me to hand
to Mr. Justice Byrnes - as he
suggested. The attached original

for your files is an exact copy
of the Order sent to the Secretary.
Ed Foley

diary

)

MR. FOLEY

203
Supreme Court of the United States
Washington D.C.

December 31, 1941

Dear Henry:

In case the President should decide not to

place all property in the Treasury, but resort to a
compromise along the lines I discussed with you this
morning, I want Ed Foley's opinion of the attached
Order.

I know Ed does not approve the policy, but
I want to know what objection he would have to the
language as carrying out the policy we discussed.
Ask Ed, after reading, to come to see me or
telephone me, returning the Order.

sincerely yours
Jackson JAMES F. . BYRN Byrnes

Hon. Henry Morgenthua, Jr., ,
Treasury Department,

203
Supreme Court of the United States
Washington D.C.

December 31, 1941

Dear Henry:

In case the President should decide not to

place all property in the Treasury, but resort to a
compromise along the lines I discussed with you this
morning, I want Ed Foley's opinion of the attached
Order.

I know Ed does not approve the policy, but
I want to know what objection he would have to the
language as carrying out the policy we discussed.

Ask Ed, after reading, to come to see me or
telephone me, returning the Order.

sincerely yours,
F. BYRNES Byrnes
JAMES

Jane

Hon. Henry Morgenthua, Jr. ,

Treasury Department,

12/31'41

204

EXECUTIVE ORDER

VESTING IN DESIGNATED OFFICERS CERTAIN POWERS
AND AUTHORITY WITH RESPECT TO PROPERTY IN
WHICH THERE IS A FOREIGN INTEREST

By virtue of and pursuant to the authority vested in
me as President of the United States and particularly by the
"Trading with the Enemy Act," approved October 6, 1917 (40 Stat.
411), as amended, and the "First War Powers Act, 1941," approved

December 18, 1941, it is hereby ordered as follows:

Section 1. Vesting and Administration of Enemy Property.
(s) Except as provided in Executive Order No. 8389 of April 10,
1940, as heretofore and herein amended, all the powers vested in me
by the provisions of the Trading with the Enemy Act, as amended, and

of Title III of the First War Powers Act, 1941, in so for as they
relate to enemy property or property owned or controlled by any
national or n: tionels of any enemy country, are hereby delegated to
the Director of Enemy Property, to be exercised by him under the
supervision of the Attorney General through the Division of Enemy
Property of the Department of Justice.

(b) Any enemy property shall vest in the Director at
such time or times and upon such terms and conditions as he may pre-

scribe pursuant to rules and regulations issued by the Attorney

General with the approval of the President. The Director shall take
all necessary steps to secure title to and possession of or control
over such property and shall hold, use, administer, licuidate, sell

or other ise deal with such property in the interest of and for the
benefit of the United States in accordance with rules and regulations
issued by the Attorney General.

205

Section 2. Supervision of Certain Business Intererises.

If the Director determines, after investig tion, that any business
enterprise is subject to the influence of an enemy or of a national
of an enemy country, he may appoint 2. supervisor for such business

enterprise and such supervisor shall, subject to the direction and
control of the Director, regulate and supervise the business and

affairs of such business enterprise to the extent necessary to

regulate, restrain, eliminate or control such influence or to aid
in the successful prosecution of the war.
Section 3. Amendment to Executive Order No. 8389, as
Amended. (a) Executive Order No. 8389, as amended, is further
amended by adding at the end of Section 3 thereof a new section
reading as follows:

3(a) All powers vested in me by
Section 3(a) of the "Trading Fith the
Enemy Act", as amended, are hereby

delegated to the Secretary of the

Treasury.

(b) Executive Order No. 8389, as amended, is further
amended by excepting from its provisions: (1) enemy property, and

trans ctions relating thereto, whenever such property shall, pursunnt to the provisions hereof, have vested in the Director,
(2) any property or business enterprise, and transactions relating

thereto, upon certification of the Attorney General to the Secretary

of the Treasury that all or part of the stock thereof or other
interest therein has vested in the Director and that the exercise
of the powers conferred under said Executive Order No. 8339, as

amended, is no longer necessary with respect thereto; and (3) the
transactions and property of business enterprises for which, as
provided herein, the Director has appointed a supervisor.

206

Section 4. Investigations, Records and Reports. The
Director is authorized, to the extent necessary in his judgment to
enable him to carry out effectively the provisions of this Order
and under such rules and regulations as the Attorney General may

prescribe, to make investigations, to require any person to keep
records and furnish information under oath at any time or times,

in the form of reports or otherwise, and to require the production
of and, if necessary to the national security or defense, to seize
books of account, records, contracts, letters, memoranda or other

papers. The Director shall have access to all reports and other
information which have been obtained by any agency of the Government

relating to any national, or to any property which may be owned by
any national, or to any business enterprise which may be subject to
the influence of an enemy or of a national of an enemy country.

THE WHITE HOUSE

207
December 31, 1941

2:30 p.m.
Justice
Syrnes:

Hello. Henry?

HKJr:

Yes.

Jim Byrnes.
HAJr:

Henry talking.

This is Mr. Justice, James F. Byrnes.
(Laughs) Yeah, I know.

Oh, I didn't think you got my voice. Let me tell

you what I rang you for.
HNr.

I know your voice.

B:

You don't mind - you didn't mind my telling Harry
Hopkins about this Standard thing?

HMJr:

Standard?

Yeah, gas.
FMJr:
B:

No.

All right, good. I was talking to him and I told
him that if he got a chance tonight, that I thought
he ought to call the chief's attention to this
thing with the thought that he ought to ask him
to cut loose from one or the other.

HMJr:

Yes.
And

DJr:

What did Harry think?

3:

Well, he agreed. He said, "I think that's about
right.to" He
said, "It looks to me like he wouldn't
want
do that.

HNJr:

Yeah.

And I told him then that when the President had a

208
2-

moment's
and or
heme.
could - he might do it
better
thanleisure,
either you
HMJr:
3:

HMJr:
B:

HMJr:
B:

Did Harry think that that was unreasonable?

No. I told him that you were very reasonable
about it.
it - about the whole thing - he knows all
about
He does?

Yeah, Hopkins does.

But you told him that I was willing to go along.
I told him that if the chief wanted to go through,
that you had agreed on what we thought would be
the best way if he had to divide it, that you
thought that it ought to - because of the records
in the Treasury - that it ought to stay in the

Treasury, but that if he wanted to compromise about

for peace in the family, that you were entirely

reasonable and would agree to the proposal that I

had made as about the best thing to compromise on.
HMJr:

That's right.

But nevertheless, that you called attention to this
fact in that I thought too that it was a matter of
importance and that in all of the things he had on
him he may have overlooked it, and to make sure that
he had given thought to it and to the position that
Biddle would be in
HMJr:
B:

That's right.

.....SO that it wouldn't be said that he had just

overlooked it.
HMJr:

That's right.

B:

And that puts it up to him, and I think that Hopkins
has the best chance to do it.

HMJr:

Fine.

B:

Now, I sent to you awhile ago by messenger

HMJr: I got it.

209

-3and I thought that you'd ask Ed

B:

HMJr:
B:

It's already in Foley's hands.

Oh, all right. It got there quicker than I thought.
And if you'd ask Ed to send it back to me reasonably
now, that's Justice. That's why I want Ed Foley I got after Biddle saying that if this should happen
to be done, I want something in my possession repre-

senting your views as to the way it was carried out.
HMJr:
B:

Oh, Justice drew that?

Right. That's what I wanted to tell Foley when he
came to see me, and therefore I want Foley to go
over it - I changed in there one word to have the

Attorney General make the request.
HMJr:

Yeah.

Because he wanted - he had the custodian.
HMJr:

Yeah.

B:

But that's Biddle.

HMJr:

Yeah.

B:

And therefore I want Foley to look over the language.
So far as I could see in reading it, it is a compliance with the request that I made of him.
HMJr:

Fine.

B:

But nevertheless, Ed can look at it from his angle;
and then if he'd tell me about it, I can stick it
in the desk, and if the chief wants to see it, we
can give 1 t to him.
HMJr:

How soon do you want to see Ed?

Well, I was hoping that 1f Hopkins could talk to
the President about the thing tonight, that he might
take it up before Churchill got back.
HMJr:
B:

Well, then you'd like to see Ed today yet?
Yeah, I'd love to.

-

-4HMJr:
B:

210

I'11 tell him that.
Yeah. He may have - if he isn't on other things,
ask him to look at it, because it won't - he's
looked at so many of them, I know, he can

HMJr:
B:

I'll tell him to look at it and
If he has any views, to come down here and tell
me
what they are and we'll see if we can get together.

HMJr:

Yeah.

B:

If it's done, I would like to tell the President

that regardless of different views on policy, that

you and Biddle do not want to have him holding a
trial about it and that this, whatever it is, would
represent the views of the procedure by which the
compromise policy could be effective.
HMJr:

B:

HMJr:

Would
it be convenient if I have Ed up there, say,
by four o' clock?
Fine.

I'11 tell him to be at your office at four.
Fine.

HMJr:

Thank you so much.

B:

Good-bye.

211
December 31, 1941
3:40 p.m.
HMJr:

Hello.

Justice

Byrnes: Yes.

HNJr:

Jimmie.
Yes.

HxJr:

Foley
and Pehle
are here with this copy of a draft
from Justice,
you see?
Yes.

HAJr:

There's no justice in that dreft.
What does it do?

HAJr:

3:

Well, it givee them complete control; and Foley will
come up, but I just didn't want him to take the entire
brunt,
you see. And he'll point out to you where
it's absolutely

That's all right.
It doesn't do what you and I were talking about.
Tell him to come up here.

HMJr:

But I didn't want to leave the brunt on him.

No. I'll be glad to go over it with him to see just
exactly what it does to.

HMJr:

But
order.from our standpoint, there's no justice in that
Well, you tell him to come out here and I'll see
what criticisms he has and then see if I can't fix
it to accord with what you and I talked about.

Well, if you can do that, I'll be satisfied.
All right. All right. Good-bye.
EMJr:

Thank you.

212

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE December 31, 1941
TO

FROM

Secretary Morgenthau

E. H. Foley, Jr.
I had a one-hour conference with Mr. Justice Byrnes

relative to the alien property order which he submitted

to you today. Pehle and Bernstein were with me.

I described to Byrnes the compromise agreed to at
the luncheon conference and said that our draft of the

Order faithfully carried out that agreement. I told

Byrnes that the Order which Justice drafted and which
Byrnes sent to you today represented no compromise at

all, but gave to Justice the full control over practically
all property which is now frozen. In particular I pointed
out:
(1) The vesting provision was not limited to

enemy business enterprises in the United States but
covered any enemy property, including bank balances,
gold, securities, etc. of any enemy or invaded country

or their nationals.

(2) The Order also gave the Alien Property
Custodian authority to supervise any blocked business
enterprise whenever he deemed it appropriate.

At first Byrnes said that it was not intended under
the order to give Justice the power to deal with the gold

or dollar balances of foreign governments, banks, etc.

As we discussed the matter, Byrnes concluded that the
order was no compromise, and was intended to give Justice

and Crowley the full power to deal with all of the blocked

property when they were ready to do so, and that when they
were ready to deal with the property the Treasury was to
have nothing whatever to do with it.

213

-2-

With respect to our compromise proposal, Justice
Byrnes stated that he thought the Committee idea was
unworkable and that one man should be tagged with the
responsibility. Byrnes quoted Biddle and Crowley as
saying that they would have nothing to do with the alien

property if the committee idea prevailed. Justice Byrnes
seemed to indicate that he would not submit either our
compromise order or Justice's order to the President,

but would simply tell the President that the responsibility
for dealing with all the property should be in one place

and it would be for the President to decide between

Justice and the Treasury.

E1.7L