Full text of Diaries of Henry Morgenthau, Jr. : Volume 481 : Part 2

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Book No. - 481
continued
from

Page 248

248
January 2, 1942
5:05 p.m.
HMJr:

Grace.

Grace

Tally: Yes, sir.
HMJr:

I'd like to ask you something, and then you use

your judgment, you see?

T:

Yes, sir.

HMJr:

Have you got a moment?

Yes, sir.
About three weeks ago I had Leo Crowley, and the
Attorney General, and Ed Foley for lunch, on this
question of where and what we should do with the
alien property custodian.
Yes.
HMJr:

And at the lunch we came to a satisfactory agreement.

Uh huh.
HMJr:

And I forgot about it. Ever since then, there's

been the fighting and skirmishing and so forth;
and Jimmie Byrnes got in it and so forth.

T:

Uh huh.

HMJr:

Well, we agreed to a satisfactory arrangement at
the luncheon.

Uh huh.
HMJr:

And I was satisfied, the Attorney General said he
was satisfied, and Leo and Ed here.

Uh huh.
HMJr:

Now, without the Attorney General saying anything
to me of any kind, he sends an Executive Order over
to Jimmie Byrnes. Jimmie was kind enough to let

249

-2me see it.
Yes.

I told him I couldn't agree to it. I understand

he sent it down to the President.
Uh huh.
HMJr:

But it's not what the Attorney General and Leo and
I agreed to.

T:

I see.

HMJr:

They haven't said "boo" to me.

T:

Uh huh.

HMJr:

Now, if and when the President should take a look

T:

When did it come down? Do you know when it came?

HMJr:

at it

Well, I just understood from Byrnes that he was
supposed to have sent it to the President, but he
may have sent it to Hockins.

:

Oh.

HMJr:

He may have sent it to Hooking.
Yes.

HMJr:

But if and when it should reach the President, and
before he does anything, I'm asking that he give me
P chance to talk to him about it.
Uh huh.

HMJr:

Because I'm willing to stick by my original agreement, but this just takes the whole thing out of
the Treasury.

Yes.

And Ed Foley and the boys he done a wonderful
job.
T:

Yes.

250

-3HMJr:

And there's just no reason to punish them that
way.

T:

Uh huh.

HMJr:

There's just no reason.

T:

No.

Well, all right. Let me - I haven't seen the

Order, but I'11 check and see whether it - I know
he signed one Order today. I don't know what it
was, but I'll check on it right now and see; and

if that isn't it, then I'll check and find out
where it is and if Harry hae it; and then I'll

HMJr:

out a memo on the front of it, you see, for the
President to read 80 that he won't sign it.
That's right.

T:

Right.

HMJr:

I mean, I don't want to add any to his burdens,
but I just think that - he can hold it up - there's
no rush about it.

T:

No.

HMJr:

He can put it off until after these Englishmen get
away.

T:

Yes, uh huh.

HMJr:

And after they're away and he's rested, why

T:

You'll have a chance to talk with him about it.

HMJr:

Yes. And in the meantime, nothing's going to happen.

T:

Yes. All right, fine. And - look, Mr. Secretary,

on that thing we discussed the other night, I gave
the President a memorandum saying that you were

going to get some legislation or something to start
this fund for the widows and children of men lost
at sea et cetera

HMJr:
T:

Yes.

and he said, "Okay". So now I have this

251
4

telegram and I'll write to the people, and do I
say to make the check out to you, or how else
shall I tell them to make the check and send it,
for a thousand dollars from this Eastern Star
chapter in Philadelphia.

HMJr:

T:

Well, I tell you what you'd better do. Couldn't
they hold the money until we get it, or do you
want to have it in the
Well, they just say, "Please direct us as to where
we should send it, and to whom, and how it should
be made out?" They're awaiting our instructions,

HMJr:
T:

HMJr:

you see. And also, I haven't thanked for it yet,
because it - you know - it went over to you and then
I pulled it back again.
Well, I tell you what you do.
At least, I pulled the telegram back.
Put the whole thing in a letter and send it over
to me.

T:

I see. All right.

HMJr:

And I'll find out what we can do in the meantime.

T:

Uh huh. And then will you thank for it?

HMJr:
T:

HMJr:

'11 take it all
I haven't thanked for it or given them any instructions;
but if you'll do that, then we won't have to do anything about it.

If you'll send anything like that over to me, I'll
see that it's taken care of and advise you - in
each case, send you a carbon copy how we do it.

T:

All right. Grand. That's fine.

HMJr:

Then you - and address it to Mrs. Klotz.

T:

Mrs. Klotz. All right, fine. I'll do that, Mr.
Secretary.

HMJr:

And we'll acknowledge it, and send you a copy and

252

-5take that off your hands.
T:

All right, grand. That's wonderful.

HMJr:

Thank you.

T:

Thank you so much, Mr. Secretary. Good-bye.

253
January 2, 1942
5:10 p.m.

HMJr:

I came home with a little bit of good news. I

got Grace, and Grace says she hasn't seen any
Order; but if any order comes down, she's going

to out & red slip on it that the President shouldn't
sign it until he talks to me.

Edward

Foley:

Good.

HMJr:

And I told her if it came, she could put it away

F:

until after Churchill left.
Yeah. I think that's fine.

HMJr:

So she said she'd do that.

F:

Good.

HMJr:

Now, the other thing

F:

Yeah.

HMJr:

we might as well do this. Oscar Cox told me by what authority I don't know - that he was drawing
8 statute so that we in the Treasury could set up
Spitfire fund. That's - I mean, you know, accept
money for a definite thing like a bomber or somea

thing like that.

F:

HMJr:

F:

HMJr:

Yeah.

Now, of course, he was doing that in connection
with his work with the Attorney General.
Yeah.

Now, what I'm going to ask you to do is to set up talk to Bell and get something like that so that
we can create a fund so that we can save for a
bomber or for a gun or for any special thing so
it doesn't go in the general fund, you see?

F:

Yeah.

HMJr:

And work it through Harold Graves, you see?

-

254

HMJr:

All right.
Fix it un with Bell, and then let Bell send it

F:

Yeah.

F:

HMJr:

over to Harold Graves.

And we'll work particularly now with Harold Graves.
We can't get any worse treatment. I mean Harold
Smith.

Harold Smith.
HMJr:

I mean Harold Smith. We can't get any worse

treatment there: and we'll work through Bell, to

Harold Smith, you see?
F:

All right. I got a memorandum here that came over

from Lovett's office, signed by General - or Major,

rather - Horner, where he says, "Lovett has asked
me to check the following with you," and they' ve

got this plan for getting money for different types
of aircraft.

HMJr:

Well, this is the way, let's us do it, instead of

the Attorney General and Oscar doing it, you see?

Yeah.
HMJr:

We'll just go ahead and give it to Bell.

F:

Whatever legislation would be necessary to create
special funds.

HMJr:
F:

HMJr:

F:

HMJr:

F:

And do it through the Director of the Budget.
And we'll do it through the Director of the Budget.
Okay. And Grace said that she's going to take care

of this for me, end she will.
Well, that's fine.

Then instead of finally having a row with these

other people, I'll have it - when the President
wants it, he'll send for me.

Well, I think that's the only wey. I think you

-3-

255

ought to spare yourself the torture of going
through one of these face to face things.
HMJr:

Well, I'd rather enjoy it.

F:

Well, I know, but I mean, you've got to save your

HMJr:

That's right.

F:

And the only place that it could be effective is

HMJr:

That's right.

F:

And we'll do whatever he wants.

HMJr:

Thank you.

F:

Okay. Good-night.

strength.

over there with the President.

256

WV221 40

AV NEWYORK NY 2 45P
HON HENRY MORGENTHAU JR

- 81

SECRETARY OF THE TREASURY

BY SAN 2 PM 6 14

TREASURY DEPT

IS THERE ANY CHANCE OF SEEING YOU EITHER
MONDAY OR TUESDAY. IN RECENT CORRESPONDECE

GREENWITH THE PRESIDENT, HE SUGGESTED I
TAKE UP A MATTER WITH YOU WHICH I HAVE
DISCUSSED WITH HIM. PLEASE WIRE TIME
AN APPOINTMENT IS POSSIBLE
MORRIS L ERNST.

me call term

monday

257

UNITED STATES FLEET

January 2, 1942

The Honorable

Henry Morgenthau, jr.,
Secretary of the Treasury,
Treasury Building,
Washington, D. C.

My dear Mr. Secretary:

I wish to thank you very much for your kind
note of December 24th.

I am confident that you understand and appreciate the "busyness" which has delayed my acknowledgment.

with all good wishes for the New Year, I am
Yours sincerely,

I King

Admiral, U.S. Navy

258

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 2, 1942
TO

FROM

Secretary Morgenthau
Mr. Haae

Subject: Supply of Series E Savings Bonds in the Field
1. Attached to this memorandum are (1) a chart
and table showing the number of days' supply of

Series E savings bonds in the field, and (2) a table

showing the number of savings bonds delivered each
day since December 1 by the Bureau of Engraving and

Printing. The daily table showing unfilled requisitions
of sales agents was not brought un to date today
owing to the fact that no new figures were available,
the holiday having prevented delivery to the Reserve
Banks of the consignments of savings bonds that were

awaiting them at their local post offices.
2. The production of 400,000 pieces of savings

bonds at the Bureau of Engraving and Printing yesterday established a new peak record. Production next

week is expected to be sustained at a still higher
level.

Attachments

259
Number of days supply of Series E Savings Bonds on hand,
December 1, 1941 to date

(Based on Sales of $300 millions per month)
Denomination
Date
1941
Dec.

1

2

3

4

SN

6

7

8

9

10
11

12
13
14

15
16
17

18
19
20
21

22

23
24

25
26
27
28
29
30
31

1942
Jan.

1

$1,000

$25

$50

$100

$500

23.0
23.6
23.9
24.0
24.0
23.8
23.8
23.7
23.4
23.3
23.2
23.6
24.4
24.9
24.3
24.1
24.1
23.7
23.8
24.3
26.5
25.6
26.5
27.8
30.6
29.4
31.6

44.1

29.5

44.1

29.8
30.4
31.2
31.9
31.6
31.6
32.2
33.0
33.9
34.6
35.2
34.8
36.6
35.0
37.6
36.4

74.5
76.0
77.6
78.9
78.3
78.1
78.1
77.4
76.9
76.4
76.8
76.1
78.3
87.9

64.0
65.5
67.0
68.3
67.7
67.5
67.5
66.8
66.3
65.8
66.2
71.1
73.2
73.2
71.5

101.0
99.8
98.3
96.9
95.5
95.5
92.6
91.3
89.8
89.8
86.4
87.4
89.4
88.4
89.4
89.5

79.4

90.1

44.1
43.8
43.6
43.3
43.3
42.9
42.7
43.2
43.3
42.6

42.0
42.0

40.3
39.8
38.6
37.1
35.7

34.9

33.5

34.1

43.0

33.8
35.3
36.5

43.2

45.7

32.1
32.4
30.1
29.7
28.9
29.8
27.4
27.8
29.3
27.8
28.3
27.9

38.7

46.1

28.2

36.0
38.4
37.9
39.3

40.5
43.1
41.3
40.4

45.6

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

101.5

106.9
105.5

104.1
102.7
102.7
99.7
98.4
97.0
97.0
93.5
94.5
96.4
95.4

96.3
96.3
97.0

260
U. S. Savings Bonds - Series E
Number of pieces produced December 1, 1941 to date
(In thousands)
Total

Denomination
Day

1941
Dec.

1

2

:denominations

10

10

25

10

10

10

40

10

10

50

10

50

10

10

50

10

50

130
130
130
130
110

$50

$100

$500

75

10

25

75

10

60
3

4

all

$1,000

$25

-

and

-

-

-

-

-

-

-

-

-

-

-

6

-

-

7

8

9

10

50

15

10

110

-

-

50

-

-

-

-

75

10

30

30

50

11

40

20

50

12

80

-

50

-

30

13

121

-

10

15

15

14

44

-

70

50

15

80

-

-

80

16

28

-

120

-

45

17

92

-

-

-

155

18

92

-

-

-

-

19

120
150
175
160
180
220
225
180
240
200
205
200
240

-

-

-

-

-

-

-

-

-

20
21

22
23

24
25
26
27

28
29
30
31

1942
Jan

50

1

270

5

5

-

-

110
120
160
161
164
160
193
247
92

50

10

10

80

55

10

10

95

55

10

10

100

55

10

10

60

55

10

10

120
200
260
260
300
325
340
270
310
355
375
375
375

50

60

10

10

400

50
75

10

75

25

85

35

80

25

80

35

50

40

-

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

-

-

-

-

-

-

-

-

-

-

261
UNITED STATES SAVINGS BONDS

Comparative Statement of Sales During
First Business Day of January, 1942, and December and November 1941
(January 1, December 1, November 1)

On Basis of Issue Price

(Amounts in thousands of dollars)

:
:

November

1942

1941

1941

over
December

$ 3,982

$ 2,976

$ 1,017

$ 1,006

:

December

$ 1,959

:

January

December
over
November

:

January

over
December
33.8%

Series E - Banks

10,229

3,904

1,750

6,325

2,154

162.0

Series E - Total

14,211
1,964
7,605

6,880
1,333
7,220

2,767

7,331

4,113

567

631

766

4,201

385

3,019

106.6
47.3
5.3

$ 23,780

$ 15,434

$ 7,535

$ 8,346

$ 7,899

Series F - Banks
Series G - Banks
Total

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

: December

January

:

or Decrease (-)

Percentage of Increase
or Decrease (-)
:

Series E - Post Offices

:

Item

Amount of Increase

:

Sales

over
November
192.6%
123.1

148.6
135.1
71.9
104.8%

54.1%

January 2, 1942.

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.

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

January 2, 1942.

$ 23,780

$ 7,605

$ 1,964

$ 14,211

$ 19.798

$ 7,605

$ 1,964

$ 10,229

$ 3,982

1

January 1942

Total

Series G

Series F

All Bond Sales

Series E

Total

Series G

Series F

Bank Bond Sales

(In thousands of dollars)
On Basis of Issue Price
Daily Sales - January 1942
UNITED STATES SAVINGS BONDS

CONFID

262

Series E

Series E
Bond Sales

Post Office

Date

262- A

January 2, 1942

HAROLD N. GRAVES

TO:

SUBJECT: PROGRESS REPORT FROM DEFENSE SAVINGS STAFF

SALE OF BONDS

Actual cash receipts from the sale of E, F and G Bonds
for the complete month of December totalled $528,599,000,
an increase of 126.4 per cent over sales during November.
November sales totalled $233,487,000, while October sales
were $270,713,000.

Sales of series E Bonds during December increased 211.6
per cent over November. December series E Bond sales

totalled $341,085,000, as compared with $109,475,000 in
November.

PAY ROLL SAVINGS PROMOTION

As a result of direct advertising in business publications, more than 450 business concerns already have written
in asking for complete information about the Pay Roll Savings
Plan.

To date 85 labor newspapers, with an aggregate circula-

tion of approximately 1,300,000, have advised they will
publish special labor pay roll savings advertisements in
early issues.

262-B
-2-

PAY ROLL SAVINGS PROMOTION (Continued)

A special newspaper "clip sheet", devoted exclusively

to the Pay Roll Savings Plan, is now in preparation. This
four-page paper, with editorial and advertising copy,
together with mats, will be mailed to all newspapers - daily,
weekly, labor, Negro and foreign language press - and will
be sent also to all State Administrators and to State and
Local Committees.

Approach is being made to the Associated Press, United
Press, International News Service, Scripps-Howard, King
Features, Western Newspaper Union, Central Press, and the
Newspaper Enterprise Association, asking them to make arrange-

ments for installation of the Pay Roll Savings Plan in their
organizations on a one hundred per cent basis - and then to

publicize this fact. Plans to ask similar cooperation from
all newspapers are being readied.
A two-column boxed statement from Secretary Morgenthau on

Pay Roll Savings is being prepared, which will be sent in mat
form to all newspapers. This will be supplemented with six
smaller, single-column boxed messages - all emphasizing the

vital importance of Pay Roll Savings. A new Minute Man mat,
accompanied by War Copy and pointing up Pay Roll Savings, is

also in preparation for all newspapers.

262
-3-

PAY ROLL SAVINGS PROMOTION (Continued)

Ed Reed, cartoonist, serving as consultant to the
Defense Savings Staff, is contacting nationally-known artists
to do special comic cartoons on Pay Roll Savings. These

will be mailed as early as possible. Editorial cartoonists
will also be contacted on a similar basis.
Likewise, for newspaper use, special Pay Roll Savings
copy is being prepared for women's pages, end the Labor and
Negro Press.

A four-man committee headed by Robert Newcomb, specialist

in house magazine publication, and including the publication

directors of General Electric, Western Electric and the CocaCola Company, will work in Washington for two weeks beginning

January 5, to prepare a detailed plan through which house
magazines can best be reached with Pay Roll Savings information.

These house magazines, 3300 in all, have a circulation of
15,000,000.

The decision to name this special committee was reached

at a meeting of fifteen leading house magazine editors with
Treasury officials, held in Washington on December 30.
In radio 95 Pay Roll Defense Savings announcements are

set for January on coast-to-coast sponsored network programs.

262
-3-

PAY ROLL SAVINGS PROMOTION (Continued)

Ed Reed, cartoonist, serving as consultant to the
Defense Savings Staff, is contacting nationally-known artists
to do special comic cartoons on Pay Roll Savings. These

will be mailed as early as possible. Editorial cartoonists
will also be contacted on a similar basis.
Likewise, for newspaper use, special Pay Roll Savings
copy is being prepared for women's pages, end the Labor and
Negro Press.

A four-man committee headed by Robert Newcomb, specialist

in house magazine publication, and including the publication
directors of General Electric, Western Electric and the CocaCola Company, will work in Washington for two weeks beginning

January 5, to prepare a detailed plan through which house
magazines can best be reached with Pay Roll Savings information.

These house magazines, 3300 in all, have a circulation of
15,000,000.

The decision to name this special committee was reached

at a meeting of fifteen leading house magazine editors with
Treasury officials, held in Washington on December 30.
In radio 95 Pay Roll Defense Savings announcements are

set for January on coast-to-coast sponsored network programs.

262-D
-4PAY ROLL SAVINGS PROMOTION (Continued)

These include "Big Town", "Burns and Allen", "Helen Hayes
Theatre", and the "American Album of Familiar Music" broadcasts.
Nineteen sponsors already have placed Pay Roll Defense

Savings promotion on 78 network programs. All Radio Minute Men

are prepared to exploit this type of copy. Pay Roll Defense
Savings announcements have been sent to all 868 radio stations,

and special copy on this angle has been prepared for all women's
programs and for foreign language programs and stations.
Under date of December 31, 1941, letters were issued to the

Secretary of War and the Secretary of the Navy requesting that
general instructions be issued by those Departments to their

officers in charge of construction throughout the country that
Pay Roll Allotment plans for the purchase of Defense Savings
Bonds are no longer prohibited by the Bacon-Davis or Copeland
Law (kick-back Statute) among employees working for contractors

engaged in public buildings or public work.
The Department of Justice is inaugurating a Group Agent
Plan among its employees, both in Washington and in the field.
Two outstanding Pay Roll Allotment plans have been installed
by E. I. duPont de Nemours and Company, Wilmington, Delaware,

and by Vultee Aircraft, Downey, California. In the Bremerton
Navy Yard at Puget Sound, Washington, where a Pay Roll Savings

Plan was installed recently, approximately 12,000 of the 16,000
employees were signed up immediately.

262.E
-5-

MAGAZINES

For the first time Bonds and Stamps are being featured
extensively in national magazines. The magazine cooperation
is steadily growing.

At a conference with Treasury officials, Walter D.
Fuller, president of the Curtis Publishing Company, verbally
stated: "Our board of directors has decided to give active
assistance to the Bond and Stamp Campaign. We will donate

advertising on a continuing basis in the "Saturday Evening
Post", "Country Gentlemen", and "Ladies Home Journal". Also,

we will give editorial assistance from time to time".
Advertisements are now being prepared. Mr. Fuller desig-

nated Mr. Burt Gallagher, Publicity Director of the Curtis
Company, as liaison officer between the Treasury and the Curtis

Publishing group. Mr. Ross Barrett, Jr. will represent the
Treasury.

In addition, "News Week" has given us a full page in the
December 29 issue. (Page 2 - copy attached).
The "New Yorker" for the second time has given us a full
page. (Copy attached).
The "Good Housekeeping" magazine has an entire fiction

story which centers around a Defense Bond. It is titled
"Promise Kept". (Copy attached).
Also attached are other clippings from magazines.

262-F
-6ADVERTISING

Next Week Defense Savings Staff officials are
meeting in New York with representatives of "Saturday

Evening Post", "Collier's", and "Life" to discuss an
advertising project which will run for one year, involving $1,000,000 in paid advertising. The plan
is to have corporations engaged in defense activities
sponsor the advertising. The plan has been worked out
by the Defense Savings Staff.
SPECIAL NEWSPAPER

Attached are copies of "Defense Savings Staff News",

a four page publication which gives a detailed report
of the Chicago meeting.
RETAIL ADVERTISING

The highlight of the week's publicity activity was
the publication in New York newspapers this week of
scores of retail advertisements featuring Bonds and
Stemps.

This plan is to be followed in other cities of the country

262. G
-7-

NEWSPAPER CARRIER SALES

Preliminary reports on Stamp sales through the Newspaper

Carrier Plan were received this week. As of January 2nd, 213
of the 850 newspapers participating have reported selling
13,630,945 ten-cent Stamps ($1,363,094.50 worth), or the
equivalent in Bonds and Stamps of larger denominations. These

newspapers have had the plan in operation for from one to four
weeks, with the average about three weeks.

These figures do not include reports from the Philadelphia
Evening Bulletin, which in fifteen weeks has sold 4,124,550

ten-cent Stamps. A record of the Bulletin's weekly sales is
attached.

DIRECT MAIL

Direct mail sales of Defense Sevings Bonds, all denomina-

tions, as of January 1 totalled $14,238,629. Total sales for
the week since December 24 were $1,490,532.

The newest mailing, the Second Customer Mailing to 894,000
newly available names, has produced sales totalling $910,369
in twenty days.
RADIO

The number of Defense Savings radio announcements used in

December on all stations increased 300 per cent over November.

-8-

RADIO (Continued)

Commercially sponsored network programs increased from an

average of five mentions per day to 38 per day, an average

daily increase of 700 per cent.
A special two-column box has been set up with "Radio

Daily" setting forth the best promotions worked out by
stations and programs for the Defense Savings Program. (See
copies attached).
David Sarnoff, RCA president and chairman of the Board

of NBC, will serve as head of the National Defense Savings
Minute Men. The appointment of 29 other Minute Men has been

also announced. (See attached New York Herald-Tribune story
of January 1). .

Telegrams announcing Secretary Morgenthau's special broadcast over the NBC-Blue Network and the Columbia Network on

Sunday, January 4 from 7:15 to 7:30 P.M., were sent to all New
York and Washington radio editors. These wires were supplemented by telephone calls and the announcement was teletyped

by the networks to all their local station publicity outlets.
Defense Bond announcements were carried to the New Year's

Day's largest radio audience, estimated at 3,000,000, during
the broadcast of the Rose Bowl Game. Similar announcements

262.I
-9-

RADIO (Continued)

have been set for the broadcasts of the East-West football
game on January 3 and during the Joe Louis-Buddy Baer fight
on January 9.

Major Benjamin H. Namm spoke on Bonds and Stamps at the

Sugar Bowl game in New Orleans and over the radio.
PRESS

Comic cartoons with a Defense Savings theme, prepared

especially for the Treasury by the nation's leading comic
artists, are being mailed regularly to the nation's press.
Two go out weekly to the daily newspapers and one each week

to all other publications. One editorial cartoon a week is
being mailed to all newspapers.
Samples of several cartoons published during the Holiday
Season are attached.

Special press release was sent to all Washington, New
York, Philadelphia and Chicago newspapers, and to Associated

Press, United Press and the International News Service,
announcing Secretary Morgenthau's special broadcast of Sunday,
January 4 on "The Job Ahead".

262-J
-10-

PRESS (Continued)

Samples of Defense Savings mentions in college athletic

pamphlets and publications are attached. This is the result
of contact made by mail several days ago.
MOVIE AND RADIO STARS

Dorothy Lamour is devoting her time and talents, at her
own expense, throughout the month of January to the promotion
of the Defense Savings Program. Enroute to New York, she
urged purchases of Defense Bonds and Stamps at stops in
Alberqueque, New Mexico; Kansas City, Missouri; and Chicago,

Illinois, with resultant photographic and radio publicity.
Sabu, the young Alexander Korda star, will make a tour
of the nation to contact newspaper boys taking part in the
Newspaper Carrier Sales Campaign. Korda is paying all

expenses of the trip.
David Rubinoff will make a tour of the country and in

addition to special broadcasts from radio stations, will urge
all-out participation in the Defense Savings Program at
appearances at schools and clubs.
Arrangements are being made to obtain photographs of

Ethel Barrymore, Paul Lukas, Boris Karloff and others, shown

262.K
-11-

MOVIE AND RADIO STARS (Continued)

with stage hands, electricians, wardrobe women and other

screen employees, participating in the Pay Roll Savings Plan.
These photographs will be used for newspaper publicity and

also will be incorporated in the Pay Roll Savings "clip sheet".
These stars are now working in New York studios. Arrangements

are being made for similar participation and photographs by
stars in the Hollywood studios.
DEFENSE HOUSES

Copies of Los Angeles newspapers reporting activities of
the Los Angeles Defense House are attached.
NEWSREELS

Paramount News is showing a short of Bing Crosby's four
sons making their first screen appearance buying Defense Bonds.

(Copy of the Paramount News sheet to exhibitors attached). . In
addition, Paramount and Universal Newsreels are showing

patriotic Americans buying Bonds and Stamps. (Copy attached).

262-L

-12-

FIELD FORCE

Estimate of the status of the Field Organization is now
as follows:
States

State and local committees
organized

37

State Committees Organized

11

Administrators and/or

Chairmen appointed

3

Not started

1

Changes Since
December 27, 1941
+2
0

-2
0

52 (including D. C., Alaska,
Hewaii, and two field

divisions in California)

(See Map attached)

*******

Bureau of Bay

263

TAX PROGRAM FOR FISCAL YEAR 1943

Additional Revenue

(billions of dollars)
Liabilities

Closing loopholes in existing individual income
($700 million) and estate taxes ($300 million)

1.0

Corporate income and excess profits taxes

1.5

Additional individual income tax with low exemptions,
collected at source a

2.0

Social Security Taxes (broader coverage, higher rates,
and new benefits effective after one year)

2.0

Excise Taxes Selected

General business excise tax (8 percent rate on
"valie added," credit for 5 percent employers'
payroll tax)

.5

3.0

10.0

1/ Collections between 1 and 1-1/4 billion less in fiscal 1943
About 20 percent of this would come from incomes below $2,000,
50 percent from incomes below $5,000.

264

MEMORANDUM FOR THE SECRETARY

January 2, 1942.
Mail Report

Now that the first impact of the war is over, the
mail is beginning to show the effect of "second thoughts"
on various national conditions.

For the first time this week, we have begun to re-

ceive some more abusive letters and postal cards, mostly

anonymous. They attack the President for getting us into
war, are critical of war profits, want to know how much
Government officials are putting into war Bonds, etc.
The news item in regard to the cost of launching ships

continues to call forth letters of criticism.

There has been a marked increase of mail urging greater
Government economy. Almost all of these endorse the report
of the Byrd Committee, but others report local extravagance

in various projects, or criticize different aspects of the

Government's program.

So far as the Treasury is concerned, actual complaints

are very few. They are largely in regard to lack of Bonds,
or duplication of sales material.
There are also complaints as to delays in acknowledg-

ing contributions. These are distinct from letters from

would-be givers who ask about special funds and whose let-

ters need more detailed reply. In one case, a contribution

was sent to the White House on December 10th; the White

House informed the sender that it was being referred to the
Treasury, and we received a complaint on December 30th that

we had not acknowledged it. In 90% of the gift letters is

a definite request that the money go toward some specified

object. People want to know that their contributions go
for a bomber or some such concrete bit of war activity.
There are funds for penny contributions and similar popular

drives starting all over the country, and all ask for this
type of definite assignment for their gifts. One group of

265
-2Memorandum for the Secretary.

January 2, 1942.

workers which had voted to work New Year's day and give

their salary for a bombing plane, gave up the idea when
informed the Treasury could not accept "ear-marked" gifts

of this sort. However, even when the letters specified

that they would like to have the money directed to some
special end, there has been a great outpouring of generous
contribution to the Government for the war effort, and
there have been few criticisms when the writers were told
that these definite assignments could not be met.
Suggestions in regard to Defense Bond campaign con-

tinue to pour in, with many alluding to the Liberty Loan
organization for active and dramatic selling. Many buyers
want a button, flag or other insignia showing they have
made purchases.

Figures on the White House mail received in the
Treasury during 1941 may be of interest. Although the
mail shot up in December, being double that received in
October, it was not the peak month. We received 833 pieces
of mail from the White House in December, and 838 in May.

In all, 6,933 pieces of mail were received and handled in

1941 -- 4,241 being acknowledged in the Correspondence

Division. I may say that this is letter mail and does not

represent the money mail sent from the White House, received,
checked and passed on from our file room. In one morning
we received 106 pieces of money mail, totalling over $4,000.

As these contributions, and those received by mail to the
Treasury direct, are immediately transferred to the Division
of Bookkeeping and Warrants, we do not add up the daily totals for an accurate day-by-day count.

In addition to the outright gifts, there are many

offers of novelties, bond posters, songs, manuscripts, and
other "gadgets" or outpourings which the inventors and
authors wish the Treasury to finance, with a view to receiving everything from a 10% royalty to the entire proceeds.

Gabrielle, E Forburk

--

266

Comments on the Present Emergency

Jeffersonville Boat & Machine Co., Jeffersonville, Ind.
We had you herewith our check in the amount of

$4,419.46, payable to your order, as a contribution to
National Defense. The amount of this donation is derived
from the wages due our employees who worked on Sunday,

December 14th, amounting to $3,410.46, and the contribu-

tion of the Company of $1,000. It is the wish of the

employees and the Company that you use this money for

national defense purposes as you see fit.

Alfred B. Strauss, N. Y. C. I was born in Germany and
I am a resident of the United States since 1915, a citizen
since 1921. I was profoundly shocked by the outrageous

attack upon us by Japan. It is the duty of all Americans
to assist their Government in the prosecution of this war.
Were I a younger man I should feel it my obligation to

enlist in the armed forces of this country. In lieu of

active participation denied me, I am enclosing a check

for $25,000 as my initial contribution to a war chest for
"offense" # I sincerely request that my identity not
be disclosed as I have a brother living in Holland.
Clement Mordes, Dearborn, Mich. Enclosed please find

check for 10.90 francs, issued in Paris, France, Dec. 20,
1918, to the writer for one day's ration while on detached service ferrying a "crate" from the 2nd Aviation
Instruction Center to Issodun, France. The aviation field
is now in the hands of the same HUNS and at war with the

U. S., and I wish at this time to present the check to the
Government for national defense material. During World

War #1, I was too young to register for the draft and volunteered in the U. S. Air Service at the age of 19, and
was among the first group of soldiers to be on foreign soil.
Now I find myself eligible for the draft and have resumed
flying to be of service again. In 1917 we tried to get
the "crates" up - and in 1941 the boys are keeping the
"ships" flying. 12 # * After 23 years I am parting with this
check and hope that the Government will make use of same.

267
-

Arthur B. Koontz, Vice President, Charleston National
Bank, Charleston, W. Va. This is merely a note to say
we want you to feel free to command us in any way you

see fit, in connection with the organization or carrying
out of any part of the defense program. We believe our

contacts, both direct and through our corresponding banks,

may be utilized to advantage, and all of us are anxious

to assist. # " #

"One of the White Collars", N.Y.C. While the Government
is checking up on excess profits, you ought to give some

attention to the F. W. Woolworth Stores. Are they

profiteering: I'll say so: Things go up 5-cents overnight. Articles sold for 25-cents two weeks ago are now
selling for 39-cents. It stands to reason that the cost

to them has not gone up in proportion to what they charge.
No wonder they have millions!

John Zerr, Fort Madison, Iowe. This firm will pay a $100
Defense Bond to the first Aviator, American or Phillipine,
to drop a bomb on Japan, or, will pay $100 in cash to the
crew members of the one plane, the money to be divided

equally. " # # We make this offer to help speed the day when
American forces will bomb the living hell out of these

yellow rats. I don't think any red-blooded American will

now accept anything less than blowing Japan clear off the
face of the earth. Let us hope that Uncle Sam does not
again get soft-hearted and immediately forget Pearl Harbor
and Manila. The sooner we are called upon to pay the $100,

the better we will like it.

Mrs. Alma Climo, New Orleans, La. (Letter addressed to

Mrs. Roosevelt). Having received official notice of the
death of my only son, Aviation Machinists Mate, First Class,
Raphael August Watson, in the attack on Pearl Harbor on
Sunday, December 7th, I am sending $10 as a contribution

to the defense fund to help save other boys from a like
fate. I shall from time to time send as much as I can for
the same purpose - until the death of all these boys has
been avenged.

268
- 3.- -

Katherine Kennedy, Detroit, Mich. As you are more aware
than any of us, a wave of hoarding is again sweeping over
the country, one writer stating there is almost $6,000,000, ,000

hidden away. It can be believed that this situation is
brought about not only by fears of the country's future,

but by the whispering campaign conducted by Hitlerites as
the Axis would no doubt be glad to see a 1933 banking crisis
dumped on top of our unprepared state. The campaign takes
the form of rumors of the dire things which the Government

is going to do to the deposited money in banks. I think

it would be a smart thing if the Government would crack

down instead on the hoarders.

Henry H. Amende, Automotive Dept., Syracuse, Nebraska.

The enclosed check, No. 491,953, in the amount of sixteen

hundred and five dollars and eighty-five cents, represents
what was left of my Government insurance policy, when it

was paid at that time. I have been holding this check as
a nest egg for the purpose of buying just the right kind
of a small acreage, but have decided to cash it in and buy
$1,500 worth of Defense Bonds from the First National Bank

here.

--

269

GENERAL COMMENTS

Stanley Beaubaire, Publisher, Hanford Daily Sentinel,

Hanford, Calif. St # " What I have to say is written
with great care and after a series of talks I have had
with many publishers in the west and east. It is related to the terrific waste of paper, ink and man power

that is today going on all around you in Washington.
There are numerous instances, of course, but I will stick
to one at the moment. It is the enormous tonnage of un-

warranted "press" releases which emanate daily from
Washington and which accumulate in waste baskets of edi-

tors throughout the nation. I doubt if you, or other

members of the Cabinet, realize the flood of useless materials sent out under your name. We get stories printed
on good bond paper (in exceptionally good envelopes) from

your office, for example, telling that Mr. Joe Smith has

been named director of something or other in Aberdeen,
S. D., and that Mr. John Brown has been appointed to something else in Oshkosh, Wis., and that 100 young men in
New Orleans are heartily in support of Mr. Joe Palooka
who has been named to another job some place else. Did
you know that such stupid releases are being mailed to
hundreds and hundreds of newspapers throughout the country?

Probably each release is of interest to one or two papers
in the communities concerned, but certainly they are not
of interest to many of the newspapers throughout the country.
This week-end a group of California newspaper pub-

lishers met in the San Joaquin Valley. Every editor present
raised this question, and protested feebly against the

amount of propaganda that arrives on his desk every morning.
Each publisher reported that 99% of this material was
promptly thrown in the waste basket. Several expressed

concern for the fact that frequently newsworthy reports

might be hastily thrown away with the bad reports because

the recipient does not have sufficient time to read them all.
If you could use your influence in Washington to see that
all departments and bureaus are ordered to curtail all propaganda activities to a necessary and helpful minimum, I believe you would find a warm response from the newspapers

throughout the nation. # * While I am writing you, please

accept my heartiest congratulations on the splendid manner
in which you have administered an extremely difficult job.

This work is the important thing and everything else is a
side issue.

-5-

270

John W. Geiger, Changewater, N.J. Yes Sir, I have bought
U. S. Savings Bonds, Defense Bonds and Stemps, but I can

no longer refrain from voicing my protest against certain
conditions that exist in my own community and all over

the country. Three men in my immediate neighborhood where

live were forced to pay $50 tribute to a gang of labor
racketeers for the privilege of working on the defense
housing project at Phillipsburg, N.J., and another neighbor
who never cared much for real productive labor is appointed
as a collector to see that the other boys pay, and to
I

dictate to the employer who shall and who shall not work.
I understand his salary is $50 per week, for which his particular job produces not 5g worth of essential material. He
spends his time running up and down the highways, using

vital defense materials, such as gasoline, rubber and so

forth, using his time to dictate how jobs shall be run and
collecting tribute from the real workers. I can give names
and addresses. # # 42 My protest is against the fact that
such a condition is allowed to exist in this country where
we are supposed to have the right to work and earn our

living without interference from anyone. * * * Now I am

perfectly willing that fifteen per cent of my salary be

withheld for real, honest-to-Goo defense of my country,
but I cannot hold the proper feeling in regards to such
taxation when I know it is going to be handed over to
another who is nothing more or less than a leech on society.

I am going to continue buying Bonds and Stamps and of course

have no control over what I may be taxed, but I just wondered
how you folks in Washington felt about such affairs.
E. I. Dail, President & Gen. Manager, Dail Steel Products
Co. Lansing, Mich. About 40% of our employees have been

discharged and a balance have been placed on a schedule of
two days a week. They can hardly be expected to buy Defense
Bonds on a combined earning and unemployment compensation

ranging from twelve to sixteen dollars per week, notwithstanding our continued efforts for the past ten months to

secure defense contracts during which time we have bid on
approximately twenty different jobs, but have been unsuccess-

ful in securing any of this work, excepting a few small subcontract jobs.

-6-

271

Mrs. P. F. Murray, Montebello, Calif. On dec. 5th I
wrote you a letter protesting the 15% withholding tax.

Yesterday I received a reply from Mr. Ferdinand Kuhn, Jr.
Probably my letter never came to your personal attention,

and I certainly hope that it did not, as it was a very

rude letter, and I am exceedingly ashamed and regretful

for having written it. The day following my childish outburst, we were attacked by Japan and all our domestic difficulties seem so infinitesimal that I wonder how I really
ever became so roiled that I was prompted to write such an

unkind, sarcastic letter. My husband and I are still confronted by the same financial problems, but they do not

seem so important now. I realize, regardless of the insinuations in my previous letter, that you are not really
a "bloated plutocrat", just lying in wait, ready to pounce
upon our meager stipend, but rather, that you are just a
sadly harrassed Government official, attempting to fulfill

your job, as we are trying to do ours. * # I am truly sorry.
R. P. Hickson, Treasurer, North American Dye Corporation,

Mount Vernon, N. Y. # # Too often it seems as if the tax
plan was prepared to cover the big, very successful concern

with but little thought of what it will do to the thousands
of small but very useful plants. In our own case, we have
lost money for ten years, and the new social security and
unemployment taxes have been paid out of capital, which is

unfair and in the end unwise. This year our faith in the
superiority of our product is being justified, and we will

make a small profit. Because of the losses in previous
years, however, there will be no chance for any income for
our stockholders, and if there are to be increases in social
security and unemployment taxes, which may again come out of

capital, as they have before, the question before us will be
- shall we shut down and save what we can of our capital?

In that case, all of our effort to keep our help employed
and our organization intact will have been in vain.

272

-7UNFAVORABLE Comments on Bonds

Evelyn G. Sharkey, Bellaire, Long Island, N. Y. On
Christmas day one of the stations on the radio made a
broadcast to the effect that if the U. S. Treasury Bonds
did not go over in a big way, the Treasury intended to
have legislation passed to deduct 15 or 25 per cent of
each wage earner's salary at the source. As a clerk,
working at a fixed salary of $25 per week, with three
dependents, may I make a protest against such legislation.

In the first place, I believe it is unconstitutional and

undemocratic, and savors of the Gestapo methods used in

hated Germany -- that is, Do it-or else!

Mrs. Mary L. Stackpole, Seattle, Wash. "I am writing you
personally" to say that you had better save paper for the
grand U.S.A. instead of writing letters to thank people
who are saving their own skins. Also, I would feel much
better about buying bonds if some of the graft and foolishness could be eliminated. Such as $60,000 for an officers'
Club House, swimming pools, etc. If all the money went
for defense, we would have plenty. Also a few salaries
might be cut.

Charles B. Smith, Jr., Stamford, Conn. Last week I was in
the Pennsylvania Depot and later in Grand Central Station,
while in New York. I wanted to buy a few medium denomination Defense Savings Stamps. I looked all about the two
main waiting rooms at Penn but found no place to make a

purchase. At Grand Central I did likewise - found none and
had to go to the Post Office nearby. There should be a
booth at both stations. The great mural, the presence of
so many uniformed men, the fresh headlines in newly bought
papers, and natural patriotism make stamp and small bond-

buying a psychological desire. " # the It is a simple matter

to arrange a closed-time repository of stamps and money with

night depository of nearby bank or hotel safe, or terminal
cashier.

Virginia P. Wilner, Washington, D. C. Could you make some
plans so that we children could buy defense stamps at school?

I am nine years old, and often it is very inconvenient to
get to a Post Office. If we could get the stamps at school,
it would encourage us to buy them. Then we too would be

helping America.

273
-8- -

Mrs. Joseph C. Sweltzer, Willington, N. J. (Encloses
clipping showing "Buy Defense Bonds display.) If you

knew the working people as I do, you would know that
they do not want a paper saying, Received from Mrs. B.
$75 for one Bond". They want a Bond for said money.
# "Remember Pearl Harbor": Yes we do, and never

will forget it. But the workers want something to show
for their money - so let us have Bonds and more Bonds.

You may be sure they will buy all they can get. We are
all Americans. We all know that the Bonds are selling
quickly, as they should. The radio and newspapers are
saying, "Buy Bonds". Well give them to us to buy.
President of the Fidelity Savings & Loan Assn. of Spokane,
Wash., sends copy of letter addressed to the Federal Reserve Bank of San Francisco. This morning we received
$4,750 maturity value in Defense Bonds, which represents

just one-half of our order of Dec. 15th. We also have
with your office an order of Dec. 17th for Bonds totaling
6,175, including some $500 Bonds, wherein we mention that
we are out of $500 Bonds. to to # We wish to emphasize the

fact that we are not ordering Bonds just to have them on
hand, but because we need them to fill the demands of our
daily customers. We were entirely out of small denomination Bonds for the two days before Christmas when many

people wanted them for Christmas gifts. We find that in
a great many cases, people are not satisfied to place their
order for the Bonds and await future deliveries. We also
note that they will not, in many cases, go to the bother
of going from one place to another or to the Post Office
to secure the Bonds. * * * The supply we received this
morning is over half gone, and it is just noon on Friday.
Letter addressed to Senator Scott W. Lucas by B. P. Alschuler,

Aurora, Ill. * " I sent my office boy to one of our

banks this morning to buy some war bonds, and the Bank had

none. I then sent him to our local Post Office with a
check made out to the Postmaster, and after waiting in

line for a half hour, he was told that the P. 0. would not

accept the check. This, despite the fact that we always
pay for stamps with our firm checks. He came back and reported to me, and I sent him to the bank to have the check

9

274

certified. He again waited in line and was again told

that they would not accept the check. He then saw some

local Post Office official who referred him to the Post-

master, and the Postmaster took the check, gave him a

receipt for it and told him that he couldn't get the

Bonds until the next day. Of course I wanted the Bonds
so he will go back to get them, but I can well appreciate
that some people would get sufficiently mad about the

situation after being put to all such trouble so that they
wouldn't buy the Bonds.

Holt S. McKinney, Counsellor at Law, N. Y. C., sends a
complaint in regard to rulings on the purchase of Defense
Bonds by husband and wife, each buying the limit individually
with his or her own funds, and making the other the beneficiary. The Treasury notified Mr. and Mrs. McKinney they
would have to surrender one or the other. Mr. McKinney's
letter, addressed to Mr. Bell, (copy sent H.M.Jr.), summarizes
the correspondence and says further -- "ey " # At the time
said purchases were made, the Irving Trust Co., 1 Wall Street,
N.Y.C. advised me that it was entirely in order to have each
purchase registered either in the name of the individual
purchaser of said Bonds or in the joint names of such pur-

chaser, and that of the husband or wife. It was in accordance with this advice that the individual purchases by each
of us were registered in our joint names. Since the receipt
of your letter of Nov. 10, 1941, I have shown it to the
Irving Trust Co., and they still say that the purchases as
made and recorded are perfectly proper and in full accord

with the law. " # * May I take this opportunity to offer a

suggestion, which I hope will be accepted in the same friendly
manner in which it is submitted, namely, the voluminous mail
matter sent out by the Treasury Department in a case of this

kind. As you will note from the second page of your letter

to me, there were 7 enclosures accompanying this letter, com-

prising a total of 25 pages, in addition to the letter itself.
I wonder how many people, other than lawyers, would undertake

to read all this stuff without getting thoroughly disgusted

with the whole business. It takes more than a lawyer to
understand what all this reading matter is about, and as
evidence of this fact, I am attaching for your information
a letter recently written by Mr. George P. Whaley to Mr.
Eugene W. Sloan of the Treasury Dept. I might add that Mr.

Whaley was a former director of the Chase National Bank."

Mr. Whaley's letter lists six points in which Savings Bond
literature "leaves us in doubt respecting certain questions -

9

274

certified. He again waited in line and was again told

that they would not accept the check. He then saw some

local Post Office official who referred him to the Post-

master, and the Postmaster took the check, gave him a

receipt for it and told him that he couldn't get the

Bonds until the next day. Of course I wanted the Bonds
so he will go back to get them, but I can well appreciate
that some people would get sufficiently mad about the

situation after being put to all such trouble so that they

wouldn't buy the Bonds.

Holt S. McKinney, Counsellor at Law, N. Y. C., sends a
complaint in regard to rulings on the purchase of Defense
Bonds by husband and wife, each buying the limit individually
with his or her own funds, and making the other the beneficiary. The Treasury notified Mr. and Mrs. McKinney they
would have to surrender one or the other. Mr. McKinney's
letter, addressed to Mr. Bell, (copy sent H.M.Jr.), summarizes
the correspondence and says further -- "ss * * At the time
said purchases were made, the Irving Trust Co., 1 Wall Street,
N.Y.C. advised me that it was entirely in order to have each
purchase registered either in the name of the individual
purchaser of said Bonds or in the joint names of such pur-

chaser, and that of the husband or wife. It was in accordance with this advice that the individual purchases by each
of us were registered in our joint names. Since the receipt
of your letter of Nov. 10, 1941, I have shown it to the
Irving Trust Co., and they still say that the purchases as

made and recorded are perfectly proper and in full accord

with the law. * * * May I take this opportunity to offer a

suggestion, which I hope will be accepted in the same friendly
manner in which it is submitted, namely, the voluminous mail
matter sent out by the Treasury Department in a case of this

kind. As you will note from the second page of your letter

to me, there were 7 enclosures accompanying this letter, com-

prising a total of 25 pages, in addition to the letter itself.
I wonder how many people, other than lawyers, would undertake

to read all this stuff without getting thoroughly disgusted

with the whole business. It takes more than a lawyer to
understand what all this reading matter is about, and as
evidence of this fact, I am attaching for your information
a letter recently written by Mr. George P. Whaley to Mr.
Eugene W. Sloan of the Treasury Dept. I might add that Mr.
Whaley was a former director of the Chase National Bank.
Mr. Whaley's letter lists six points in which Savings Bond
literature "leaves us in doubt respecting certain questions -

10 -

275

answers to which are needful for decision", and asks clear
and categorical reply to each point.
Mrs. Cordie Webb Ingram, Roxton, Texas. On October 16,
1937, I bought a $100 U. S. Savings Bond. # 41 12 The Bond

became lost or destroyed. I wrote the Treasury Dept. when
discovered my loss of $100 Bond C 1937, No. C 562,386 C.

I

I then met all the requirements made of me, but nothing
has been done toward furnishing me with a duplicate Bond.
Before buying, I was repeatedly assured of the safety of
investment in Government Bonds, and what happened to me

could happen to you or to anyone else. I am in a position
now to invest in some Defense Bonds, but feel that I cannot
do so when refused relief on the loss of described Bond,
all my correspondence being open for examination and to

verify my statements. I am asking you to please find out
for me why relief to me is being held up indefinitely.

-- 11 -

276

FAVORABLE Comments on Bonds

B. P. St. John, Cashier, First State Bank, Webster City,
Iowa. # $2 * I am of the opinion that the banks of this

country can sell between fifty and sixty billion dollars

worth of these Bonds without undue pressure, and unreason-

able effort. Do you, as head of the Treasury Department,
have a goal in mind for the distribution of Defense Bonds

as to total for subscriptions? If you have anything you
would like to suggest, I would appreciate it. Up to this
date our little bank has sold about $10,000 worth of
Defense Bonds, and we have not scratched the surface in

so far as the possibilities are concerned. We are learning to "talk" Defense Bonds more intelligently and feel
that results are forthcoming.

Walter R. Alvin, Special Agent, State Land Board, Salem,

Oregon. In reply to your recent letter, I beg to state
that I am buying a $100 Defense Bond each month for the

duration of the war. I have purchased these Bonds each
month since last July. Under the superb leadership of

our great President, America will win this war. During
the years past it appears that he glimpsed far horizons

that the average man could not discern; thus, his wisdom

and foresight will sustain us in our hour of trial.

Matthew J. Cash, Jamaica, Long Island, N.Y. I am a Lieut.
in the Police Department of the City of New York and that
$1,000 Bond which I purchased, represented practically all
of my lifes savings, since my salary is $4,000 per year,
and I have the various obligations so common to the average
American family, and so therefore cannot pledge to buy up

to the limit allowed in one year. Believe me Sir, I am
not one of those who have felt that "It can't happen to us".
I realize the seriousness of the situation and only regret
that the part I am playing is very limited. If in my capacity as a Police Officer or that of a private citizen, I
can be of service to my country, consider me at your service
and ready to answer any call. "

Morris Dubnow, Allentown, Pa. I am an American naturalized

citizen of the Jewish race, and living 21 years of my life
under the Czar of Russia, I can appreciate my Golden 36

years of life in this the God's best country in the world.

Now I am starting to pay by buying every week a Defense

277
- 12 -

Bond, and advising all my friends to do the same.
Hyman Solomon helped George Washington to win liberty,

let us, his descendants, help to preserve it. Yours for
Victory and Liberty.

278
For your information.
January 2, 1942.

To

Archibald MacLeish

From Alan Barth
EDITORIAL OPINION
ON FOREIGN AFFAIRS:
TESTAMENT OF FAITH

Responsibility

Whatever the failings of the American press, it has faced

this time of crisis with a high sense of responsibility. It has
reported defeat to the American people -- what The Washington Post

defines as our "most important military defeat in more than a
century" -- and has reported it without the smallest suggestion
of defeatism.

Neither editorial writers nor radio commentators gave the

public adequate preparation for this defeat. It is apparent,
indeed, that they were themselves the victims of a complacent
contempt for Japanese power. But now, having at last grasped

the dimensions of the Pacific problem, they present it in perspective as merely one phase, an initial phase, of what must be
a long struggle on many fronts against the Axis as a whole.

Editorial eyes have focussed on the entire target.

--

279

Faith

Newspapers and radio currently express completely restored
confidence in American armed forces. The shakeup in the Far
Eastern command assuaged the shock of Pearl Harbor losses. The

difficulties besetting the Army and Navy and the demands of overall strategy are now commonly recognized. The military and naval
chiefs are represented as proceeding in accordance with reasoned
plans.

It seems noteworthy that there have been almost no hysterical
demands for the preservation of American soil at the expense of
larger objectives. Nor has there been undue clamor for a demonstration of American strength by immediate reprisals against the
Japanese. Even the loss of the Philippines is now calmly presented,
perhaps with a trace of complacency, as a probable cost of winning

the larger battles of the Pacific and the Atlantic.
Despite the emphasis on reverses and difficulties, there is
no apparent diminution of long-run confidence. Great pride is
expressed in the courage displayed by American and Filipino fighting
men; perplexity rather than annoyance is the expressed response to

Pravda's taunts of "cowardice"; commentators express only the highest
praise for General MacArthur's management of his responsibilities.
The pledge made to the Philippines by the President and by the Navy

-3-

280

is a principal keynote of editorial comment. In'a typical
expression of opinion, The St. Louis Post-Dispatch declares:

"Their freedom may be lost, but it will be redeemed. There
can be no doubt that as American strength is mobilized, and the
original Japanese advantage of surprise attack is counteracted

by superior force, the invaders will be blasted off the islands
and swept into the sea." "
Offense

Winston Churchill's rhetorical question in his address to
Congress -- "What kind of people do they think we are?" -- has
been made the theme of innumerable editorials. The anger engendered by the surprise assault on Hawaii has been inflamed by the

bombing of Manila. Editorial comment reflects a rising temper,
particularly against the Japanese, and a growing eagerness to
carry the fighting to the enemy; there appears to be a widespread

desire for air raids which will punish the Japanese people.
This offensive psychology manifests itself, too, in pronounced
editorial impatience toward Vichy. Editorial writers showed some
willingness to defend the State Department protest on the Free
French seizure of St. Pierre and Miquelon; they did so, however,

with a distinct air of apology. They recognized that the Free
French action was awkwardly inopportune and acknowledged the

-4-

281

technical justification for Secretary Hull's sharp rebuff. But
the prevailing feeling seemed to be one of regret that democratic
solidarity had not been given precedence over technical considerations and the placation of Marshal Petain. Many commentators

now urge tough tactics in dealing with the Vichy Government; they
regard it as being in the Axis camp beyond redemption and recommend

American occupation of all France's Atlantic possessions. "Straight
thinking," says The Dallas News, for example, "asserts that there
is no de facto government in France nor even a de jure one, that
France is governed from Berlin and that De Gaulle, if anybody,
represents the real wish of the French people."
Everywhere, in comments on the war production, on the enlarge-

ment of Lend-Lease aid, on the conversion of plant facilities, on
civilian sacrifices, there seems to be a genuine eagerness to carry
on the war as aggressively as possible.
Defense

Counteracting this aggressiveness, of course, there is a latent

isolationist sentiment, now temporarily silenced. It evidences
itself in occasional demands for the hoarding of American strength
and the protection of the home front.

282
-5-

It is significant, however, that the press has been responsible
for almost no suggestions that naval or military forces be concentrated on home defense assignments. The accent has been entirely

on civilian defense activity.
The feeling is extremely prevalent among editorial writers

that air raids on the United States, particularly in the coastal
areas, are both possible and probable. The dominant view is that

such raids are likely to be only of a "token" nature; but some
raiding is expected from the Germans, even more than from the
Japanese. Commentators urge vehemently that the lesson to be

learned from Pearl Harbor is that we must be prepared for any

eventuality. They are by no means satisfied with the air raid
precautions taken to date. Army control over civilian defense
is commonly advocated.

The commentators show small awareness that home defense may

divert important productive facilities from the offensive war
effort. Both press and radio reflect a high degree of confusion
as to proper domestic precautions. Clarification of the genuine
civilian defense needs may avert the growth of a defensive point

of view in the public mind.

283

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 2, 1942
TO

Ferdinand Kuhn, Jr.

FROM Joseph Melia
EDITORIAL OPINION
ON THE HOME FRONT:
THE SHADOW OF SACRIFICES

The 50-billion dollar war program and the impending shutdown of automobile production have had a sobering effect on the

nation's press. Newspapers are considering with increased thought-

fulness the sacrifices that will be necessary on the home front
to win a long and hard war.

Editorial writers throughout the country stand solidly behind

the President in his effort to bring about a swift transition from
peacetime to total war production. They accept the far-reaching
economic implications and the steep increase in taxation inherent

in the new war program as part of the inevitable cost of victory.

But while anticipating and willing to accept a tax rate higher
than at any time in our history, the press insists that the government cut non-defense expenditures to the bone and put all its

energy into the efficient prosecution of total war.

2-

284

War Taxes

Newspapers as a whole want the war financed as far as possible

on a pay-as-we-go basis. They tend to evaluate the wisdom of
various war tax proposals by three standards. New taxes, they

insist, should (1) raise a large revenue quickly, (2) divert
purchasing power, and (3) encourage rather than "stifle" business.
Judged by these standards, a federal sales tax is favored

by most editorial writers. The opposition to a withholding tax,
although still widespread, seems to be diminishing. And there
is a tendency to fear that increased taxes on business profits

will "kill the goose that lays the golden eggs" by destroying the

initiative of private enterprise. The possibility of enforced
savings is receiving almost no editorial attention at this time.
Editorial comment on withholding taxes, sales taxes, and
increased business taxes can be summarized as follows:

Withholding Tax: It is generally recognized that a withholding tax, graduated in proportion to income, would be an easy
way to raise income and at the same time siphon off purchasing

power. But many newspapers still attack the idea on the ground
that such a tax would be "confiscatory," would work undue hardships
on employers because of the bookkeeping involved, and would lead
to demands for increased wages.

-3-

285

Sales Tax: The press as 8 whole prefers a general sales

tax to a withholding tax as an income-raising and anti-inflation
measure. Many editorial writers recognize that a sales tax in
ordinary times would be highly inequitable. But as taxes increase

and become more general, this objection, it is argued, is apt to
become academic. Some newspapers, among them the Baltimore Sun,

urge that expenditures for such essentials as food, clothing,
medicine and housing be exempted from any sales tax.

Business Taxes: A number of newspapers, large and small

and in various sections of the country, have recently editorialized
that this must be a war without "war millionaires." Nevertheless,
these newspapers maintain that the present excess-profits tax and
corporate-income tax on the whole are adequate, and they hark back

to Senator George's statement that "this is no time to experiment
with new tax theories." They express the fear that the coming
Treasury recommendations may tax small business out of existence

and may destroy the profit-earning and revenue-raising capacity
of big business.
In contrast to the sentiment expressed by most newspapers,

the minority liberal and labor press is opposed to a sales tax.

Liberal and labor publications favor instead a stiff increase of
excess profits and income taxes.

--

286

Non-defense Spending

Although willing to accept a greatly increased tax burden,
newspapers throughout the country are demanding with more insistence

than ever that the cost of the war be offset as much as possible
by a paring of non-defense expenditures. Editorial writers view
with increasing impatience the New Deal activities that do not
directly advance the war effort, no matter how important these

activities may be in the long run. "Billions for defense," the
Houston Post editorialized, "but not a dollar for useless projects
useless at least in this time of stress and storm."
The Byrd Committee report continues to win wide support.
Leading newspapers in the farm belt agree with the Committee's

proposals to slice agricultural benefits, but make little mention
of Secretary Morgenthau's suggestion that parity payments should
be cut.

287

1/2/92

STRIGTER CONFIDENTIAL

PRINCIPAL BUSINESS INTERESTS OF VICTOR EMANUEL AS DERIVED FROM PUBLISHED SOURCES
(Interests do not necessarily represent control)
December 1941

Victor Emanuel

AVIATION AND

REPUBLIC STEEL

CHANUEL AND

TRANSPORTATION

STANDARD POWER

ALBERT CHANTEL

CORP.

AND LIGHT

COMPANY INC.

COMPANY

CORP.

Victor
Fister

Vistor Beneal

Streeter and

Limited Partner

Chairmen the

CORP.

Vister Drannel

Member

heart and President

Vistor Brancel

President

President

Executive

AVIATION CORP

STANFARD DAB AND

Meter themel

ELECTRIC COMPANY

27 SUBBID.

/yes/dest

TARIES
Vistor Chairman Manual

Finance Committee =

Omeraking

and Streetor

AVIATION MFG.

AMERICAN

AMERICAN

MFG CORP

AIRLINES INC.

ENDINE CORP

Director

Lycaming
214.

100% Steek
Ownership

FULTER

KOCCEVELT

FIELD INC.

M Stock

States 26.

ALMATS
the

MOUNTAIN

CELANOMA GAS

SOUTHERN

OREGON POWER

STATES

AND ELECTRIC

COLORADO POWER

COMPANY

POWER COMPANY

COMPANY

COMPANY

Deserving

PAR AMERICAN

AIRCRAFT INC.
Skinson

20% (Steek

Spencer

1004 Stock (wherehip

NEW TORE

SHIPBUILDING

CALIFORNIA

CORP

AIRPLANE AND

Hotor

105 Stock

100% Sheek

MARKET STREET

LOUISVILLE GAR

NORTHERN

RATLWAY

AND ELECTRIC

STATES PORCH

COMPANY

WISCONSIN

PHILADELPHIA

PUBLIC SERVICE

COMPANY
COMPANY

COMPANY

CORP.

PACIFIC GAS
AND ELECTRIC
COMPANY

625 Stock

CONSOLIDATED

AIRCRAFT CORP
345 Stock

19 SUBBID.
TARTER

(starchip

3 SUBSID
IARIES

. SUBBID.

20 BUSSID-

TARIES

TARIES

MEMOMINEE AND

10 STREET

MARINETTE

RATEMAT

LIGHT AND

COMPANIES

TRACTION co.

PRONTINM

ROWN

FLEXT

ENTERPRISE

AIRCRAFT

AIRCRAFT

INC.

CORP.

DEGRESSE

LIGHT 00.

Ltp.

"Aviation Corporation's Interest to the stock of American AIF Lines is held In trust by ***** Joses. Secretary of
Source: Moody's Manial of Investments

11 OTHER

SUBSIDIARIES

OTHER

SUBSIDIANTES

TORONTO

AERODROME LTD.

Ownership

Depensible

.

AUBURN CENTRAL

es Stock

5 SUBSID.
TARIES

288
WAR DEPARTMENT

OFFICE OF THE UNDER SECRETARY
WASHINGTON, D.C.

January 2nd, 1942.

Honorable Henry Morgenthau, Jr.,
The Secretary of the Treasury,
Washington, D. C.
Dear Henry:

The order for 65,000 trucks from Dodge was

one of a series of the orders entered in the last three days.

These
orders total some 380,000 trucks. The have been placed
as follows:
Company

Quantity

Type

12/30

1/1/42
Diamond T.Motor Car Company

Studebaker Corporation
"

Chevrolet Motor Company

Yellow Truck & Manufacturing Co.
"

Mack Manufacturing Company
Yellow Truck

2,400
5,100
12,000
35,415
122,781
14,700
700

3,908

3/4-ton 4x4 Trucks
1/4-ton 4x4 Trucks

4-ton 6x6 Trucks
6-ton 6x6 Trucks

1/4-ton 4x4 Trucks
1/2-ton, 4x4 Trucks

40-ton tank transporter tractor trucks
22-ton 6x6 Trucks

2-ton 6x6

12-ton 4x4
2>-ton 6x6
2s-ton 6x4
10-ton 6x4 Cargo Trucks.
23-ton 6x6 Trucks.
"

Willys-Overland Motors, Inc.
Fargo Motor Corporation (Dodge)

64,918
63,146
5,156
1,803
43,601
8,150

"

Ford Motor Company
Diamond T Motor Car Company
The White Motor Company

"

Fargo Motor Corporation (Dodge)

Trusting that this information will be of ser-

vice to you, and with best regards, I am

Sincerely yours,

RL P.P.H
rpp:lm

Robert P. Patterson,
Under Secretary of War.

289

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE 1/2/42
TO

Secretary orgenthau

FROM

Yr. Foley

You have inquired concerning the material relating
to the procurement of supplies for the armed forces dur-

ing the wer of 1914-1918 that is collected in the six
volumes of the "War Memoirs of David Lloyd George" (19331937), and the two volumes of David Lloyd George's "Lemoirs
1

of the Peace Conference" (1939).

An examination has been

made of those volumes, and the significant material therein relating to the procurement of war supplies is summarized below.

1. The Outbreak of the Mar.
The beginning of the war found English forces with
insufficient cannon, shells, machine guns and other sup-

plies. The traditional military reactionism and dislike
of responsibility created a bottleneck, in that the ..ar
Office was distrustful of business men and unwilling to

deal with other than their usual sources of supplies, although those sources were hopelessly swamped.

The

290

-2-

shortage of shells soon became acute, and at Lloyd George's
insistence, a Committee on Munitions Supply was appointed.

The Committee met with manufacturers and offered financial

assistance in expanding plants. Orders were also placed
The indiscriminate enlistment of
in the United States.
3

all who presented themselves, resulted in a shortage of

skilled workers. The failure of the War Office's main contractors to furnish adequate supplies led that Office to
instigate a scheme for the transfer of skilled workers
from other industries. The objection raised by various

firms to the transfer of their workers led to a survey of

plant facilities with a view to utilizing additional plants
4

either as sub-contractors or as direct contractors.
The shell shortage became so acute that it was not
possible to maintain an adequate defense, much less an
offense. On February 22, 1915, Lloyd George addressed a
memorandum to the Cabinet members calling attention to
available resources and suggesting that they be comman-

deered if necessary. This resulted in a conference which
authorized an investigation of available machinery for
5.

the production of war supplies.

291

-3In arch 1915, the Third Defense of the Realm Act
was passed, authorizing the commandeering of plants and

machinery, but the War Office was reluctant to make use
of the new power. Another Council meeting was held and
a Committee appointed. The War Office, however, insisted

upon restrictions which practically nullified the effectiveness of the Committee. The first tasks of the Committee were a study of French production, and a scheme
6

for regional organization of munitions firms.

Growing

unrest in Parliament and among the people over the muni- -

tions issue among others resulted in the foundation of
a coalition Cabinet. In that Cabinet Lloyd George became
7

Minister of Munitions.
Lloyd George strongly deplored the shortsighted attitude of England and France in 1914 in not sending equip-

ment to Russia where men were available to fight the
8

Germans but where equipment was scanty.

2. The Ministry of Munitions 1915-1916

The duty of the Ministry of Munitions, of which
Lloyd George was Minister from June 1915 to July 1916,

was to supply the kind, quality, and quantity of munitions

292
9

ordered by the War Office.

The Ministry was responsible

for the production and supply of ammunition, rifles, machine-guns, mechanical transports, trench warfare stocks,
optical instruments and glassware, metals and materials,
tanks, bombs, poison gas, railway material, machine tools,

timber, electrical power, agricultural machinery, mineral
oils and building materials. Four departments were set
up: Munitions Supply, Explosives Supply, Engineers Muni-

tions Department, Secretarial and Organization of Labor.
Those departments were in turn subdivided. The Ministry
was then organized on an area basis, the Government sup-

plying material and advice, and local organization being
left to local Boards of Management. Each district had an
Area Office composed of an Organizing Secretary, Superin-

tending Engineer, and a Labor Office. To those Offices,
the Boards of Management were responsible. The Boards of
Management undertook orders and distributed them among

various firms. It was endeavored to eliminate divided
authority. Everything having to do with munitions was to
10

be under the control of the Ministry of Munitions.
A Health of Munitions Workers Committee was appointed to

293

-5-

advise on industrial fatigue, hours of labor, personal
health and physical efficiency. Later, a Welfare Section

of the inistry was set up. The Ministry built flats and
houses and obtained accommodations for other workers and
11

provided canteens and mess rooms in factories.

The Ministry was set up with business men as the heads

of all departments. In contrast to former ..ar Office procedure, the Ministry itself undertook to organize firms
and labor for munitions production. In order to secure
the maximum results, Lloyd George thought it necessary to
secure the advice from men who had personal experience of

the practical exigencies of the situation on the battle-

field. He also thought it imperative to have more intimate contact between the Governments of France and England

on the question of munitions supply. It was Lloyd George's

opinion that by giving large orders, it would be possible
to secure earlier deliveries, because it encouraged firms

to increase their power of output. If an excess were produced, it would be invaluable as a reserve to assist all
allies. To secure maximum efficiency, control by the
Government of the finished article made inevitable control

of the preliminary states of manufacture. Construction of

-6-

294

new plants and expansion of existing plants were necessary

to produce the quantity needed. Best results were to be
obtained by close cooperation with the particular trade
or industry controlled. The armament firms were to build
and manage the new factories and additions to their existing works with the Government providing all the capital

both for the building and running of the plant. The
factories would belong to the Government with the firms
getting a percentage commission on the output. The greater

the production, the smaller would be the cost of the fin12
ished article.
The labor problems raised by the production of war
supplies were manifold. Men with experience and initia-

tive were required in all branches of production for maxi-

mum results. It was essential to utilize to the utmost
the knowledge of science in research, test, and design.
New inventions and changes in method and design were es-

sential to increase production. To secure those objectives, it was necessary (1) to check the enlistment of
skilled men, obtain their return from the armed forces
and "dilute" them with unskilled labor where possible,
*

To "dilute" was to intermingle unskilled labor with
skilled labor so as to reduce the number of skilled
laborers required.

295

--

(2) to induce better time-keeping by employers and to

prevent constant job changing, (3) to control drinking
in munitions areas, (4) to train and employ women, and

(5) to bring labor and work together by transferring
workers or spreading production. By the Third Defense of
the Realm Act, provision was made for the compulsory trans-

fer of labor, and factories were given E defense against

actions based on their non-fulfillment of civil manufacturing contracts. The problems of strikes and"dilution" were
settled by the Treasury Agreement between the Government

and the Trade Unions. In order to settle the labor problem, it was necessary to limit the profits of manufacturers
by the Munitions of War Act of 1915 which13 also dealt with

strikes, lockouts, and mobility of labor.

Legislation

was obtained permitting control of the sale and supply of
alcohol in production or transportation areas, and under
14

it 8 Central Control Board was set up.

Supplies were of no value without sufficient railroad

facilities to move them to the required destination.
Therefore, construction of new roads, under the control of
men experienced in that field of operation was deemed

-8-

296

15

necessary by Lloyd George.

3. The Food Supply, 1915-1917

The supply of food, for civilians as well as soldiers,
was a foremost problem of the war. The final event of the
war depended more on food than on fighting, for famine was

2. most powerful offensive weapon which led directly to 16the
fall of Russia and the collapse of Austria and Germany.
It was Lloyd George's opinion that one person should

be selected, with all the necessary legislative, administrative, and financial powers, to organize the food sup-

plies, including purchase, production, distribution, and
prices. England should be as self-sufficient as possible.
The manufacture of machinery for cultivation should be
increased. The acreage of land which produces vital food

products should be extended. Utilization of all
available
17
labor was necessary for agricultural purposes.
Lloyd George was of the opinion that with planning
the production of food in England could be doubled.
Accordingly, a Food Production Department was established

on January 1, 1917. It was an independent department, re-

sponsible to the Minister, but otherwise unrelated to the
Board of Agriculture. There was commenced an extensive

297
-9program of cooperative and compulsory measures to increase

harvests. Land formerly used for merely ornamental pur-

poses, or not adequately cultivated, was requisitioned,
manpower to work in the field was procured, and minimum

prices to farmers for crops and minimum wages to farm
work18

ers were guaranteed. The results were gratifying.
In December 1916, the Office of Food Controller was
established, and by May 1917, a far-reaching system of

control over supplies was instituted. The distribution
of food was the main concern of the Office in order to insure sufficient food supply for the civil population and
the armed forces. Not until a general system of compul-

sory rationing was introduced were the difficulties of
securing an approximately fair distribution of the available supplies surmounted. The rationing of food, requi-

sitioning of food, restrictions on the sale of food, and
food price control were under the jurisdiction of the
Office. It was a decentralized system in its later development: local Food Control Committees were appointed
19

to exercise many important functions.

An inter-allied (international) food control was proposed. Several international bodies were actually set up

298

- 10 20

to deal with specific commodities.
In the autumn of 1916, a Ministry of Shipping was

set up in order to insure the national control of shipping and to restrict imports to essentials. George concluded that such a step should have been taken as soon

as it was known that it was going to be a long war.

Restriction by means of a rise in the price of freight
had not been effective. The only satisfactory solution
was planned control to secure vital imports and to ex21

clude non-vital imports.
4. The Equipment of the American Army

Lloyd George concluded that the equipment of the

American Army for the war effort was "a lamentable story

of indecision and bustling inefficiency". The reason
for such a situation he found primarily in the refusal
of American industrial leaders who were charged with the

duty of equipping the American Army to give consideration
to the experience of England and France in war production

in 1914-1917. He asserted that those industrial leaders
insisted on using American designs and patterns of war

materials to the exclusion of designs developed in Europe
during the war. That fault was not remedied because

299
- 11 there was no American governmental leader who could give

direction, impulse, and inspiration to those that were
laboring in war industries. President Wilson did not
have the temperament to fill such a role. Lloyd George
maintained that the men placed in charge of the organization of the resources of the United States "all seemed

to hustle each other-- but never the job". The result
was that American-made airplanes, guns, tanks, and
ships
22

were not available for effective use in the war.
5. Canadian Effort
In 1914, a voluntary Shell Committee was formed in
Canada to organize Canadian peace-time industrial capac-

ity for munition production. General Sam Hughes was the
head of that Committee which was superseded at the end

of 1915 by the Imperial Munitions Board, a voluntary body
under the chairmanship of Sir Joseph Flavelle. The

Imperial Munitions Board was subject to the control of

the British Ministry of Munitions. The total value of
the Canadian shipments of military supplies exceeded
23

200 million pounds.

E.N 7h

300
- 12 Footnotes

1. Printed in England under the title, "The Truth About
the Peace Treaties" (1938).

2. 1 War Memoirs, pages 112-125.
3. 1 War Memoirs, pages 125-134.
4. 1 War Memoirs, pages 134-135, 146-149.
5. 1 War Memoirs, pages 149-154.
6. 1 War Memoirs, pages 158-167.

7. 1 War -emoirs, pages 196-207.
8. 1 War Memoirs, pages 397-405, 413.
9. 1 War Memoirs, pages 208-237.

10. 1 War -emoirs, pages 237-250.
11. 1 War emoirs, pages 301-308.
12. 2 War Memoirs, pages 17-109.
13. 1 War Memoirs, pages 250-277.
14. 1 War Memoirs, pages 282-300.

15. 2 War -emoirs, pages 222-236.

16. 3 War -emoirs, pages 43, 45, 77, 135-136, 199, 220.
17. 2 War Memoirs, pages 371-378.
18. 3 War Memoirs, pages 199-246.
19. 3 War Memoirs, pages 204-209, 246-260; 4 War Memoirs,
pages 191-195.

20. 3 War Memoirs, pages 260-267.

301

- 13 21. 3 War Memoirs, pages 15-16, 172-198.
22. 5 War Memoirs, pages 448-453.
23. 6 War Memoirs, pages 327-328.

302
Volume V. WAR MEMOIRS OF DAVID LLOYD GEORGE (1917-1918) pp. 448-453.

When we come to the equipment of the American Army for the

task, it is a lamentable story of indecision and bustling incompe-

tency. The record of Britain's first ten months of blundering in the
matter of equipment robs us of the right to point the finger of
scorn at America's effort. But it must be remembered that when
America entered into the struggle her industry was already largely
organised for war by the immense Allied orders for war material of

every kind which her industries had been executing for the Allies.
In rifles, explosives, and artillery the work which had been turned
out in American workships ran into thousands of millions of dollars.

In addition to that, they had at their disposal the experience acquired by the Allies in two and a half years of actual war. Allied
officers were sent over to instruct the American War Office as to
where the Allies had failed, and how they ultimately succeeded, what
had been their difficulties and how they overcame them. Unfortunately,
their advice was too often disregarded and somewhat discouraged.

It cannot be said that the Allied Commissions were altogether resented by the great industrial leaders who were charged
with the duty of equipping the new American Army, but the impression
was created of a sentiment that where mechanisation was concerned,
America had nothing to learn from Europe. There was more than a

lingering trace of the fixed idea that European methods were effete
in industry as well as in government. "Europe" and "effete" were
inseparable words in all popular American rhetoric at that date.

-2- -

303

As far as European workshops were concerned, certainly before the War,

there was undoubtedly a great deal of justification for this conviction.
So when we thought America might like to profit by the lessons we had

learned in the trials of actual warfare, the American industrialists
were inclined to regard our lectures as an invitation to them, who
were masters of all the manufacturing arts, to take a post-graduate
course at a dame's school. Hence they would have none of our

aeroplanes nor of our cannon. They assumed on traditional principles

the inferiority of these and they decided to have patterns of their
own, which would demonstrate to antiquated European craftsmen what

could be done by a nation which had demonstrated its supremacy in

machinery. The world was to be impressed with the superiority of
American workshops. No allowance was made for the practical con-

sideration that finish and precision in every detail were essential
to the weapons of war, and that for that reason, new patterns took

a long time to evolve, to test and perfect. The serious delays that
occurred in equipping the great army of men that America sent to

Europe were largely attributable to this psychology.
All this would have been remedied, if there had been any

real drive at the head of affairs. It is only the man at the top
who can give direction, impulse and inspiration to those who labour

at the miltifarious tasks of Government. It is only the man who
wields authority who can accept responsibility for decisions which may

involve an overriding of national pride and susceptibilities. It is

-3-

304

he alone who can supply the necessary push which saves valuable time

and produces quick results. Languor at the top means flaccidity all
round. Hesitancy at the top means vacillation and confusion of
counsel and of action in every department of State. Procrastination
at the top encourages sloth and slackness down below.

President Wilson was not cut out for a great War Minister.
He knew nothing about war. Why should he? It was not his training,

nor his temperament. He certainly had no delight in it. He shuddered
at the thought of it. The turning-out of weapons for human slaughter

not only did not interest him, it horrified him. When he was forced
into declaring war, he could not adapt himself to the new conditions
that were imposed upon him by this departure from pursuits and incli-

nations of a lifetime. He had a stubborn mind and walked reluctantly
along paths he disliked, however necessary he had discovered it to be
that he should tread them. No push or drive for war could be expected

from a temperament so antipathetic to all its exigencies. To ask him
to turn his mind on to the manufacture of cannon and bombing machines

was just as if you expected him to oversee the output of electric
chairs because the execution of criminals was an integral part of good
government.

This attitude on the part of the President marked the essential
difference between him and Lincoln; between a man brought up and dwel-

ling in academic circles whose instinct was to lead the nation up to
ideas of culture in an atmosphere of tranquillity, and the man who was
reared and trained in hard surroundings where nature had to be fought

-4-

305

at every step for every ounce of bread. Lincoln also detested war,

and especially did he shrink from the fratricidal conflict which he
had done his best to avert, but which circumstances he had failed to

control had in the end forced him to wage. But here came the difference between him and his distinguished successor. Having reached

the conclusion that the shedding of blood was the only alternative to
the rupture of America, he threw the whole of his strong personality
into the preparations for a successful termination of the struggle.
With indomitable energy, he took steps to raise and train men to
battle, and to manufacture adequate weapons to equip them for victory.

It is one of the inexplicable paradoxes of history, that the greatest
machine-producing nation on earth failed to turn out the mechanism

of war after 18 months of sweating and toiling and hustling. The men

placed in charge of the organisation of the resources of the country
for this purpose all seemed to hustle each other - but never the job.
Let us take the aeroplanes as an example. When America

entered the War, the British and French aeroplanes were as efficient

as any that hovered over the battlefields of Europe. In their production the experiences of the War had taught designers what defects
needed remedying, and by this time most of the snags had been over-

come. For some time, the Germans had acquired a fortuitous superiority

through the ingenuity of a great Dutch inventor, but owing to the lucky
mistake which landed a German Fokker machine behind the Allied lines,

- -5- -

306

we had achieved a design comparable with the best German machines.

There were no better pilots in any army than the daring and skilful
aviators of the French and British Air Forces. American manufacturers
would have been wise to start their enterprise by manufacturing to
French and British designs. They could have gone on improving and
perfecting as experience taught them, wherever amendment and im-

provement were desirable or attainable, but unfortunately their
untimely pride intervened. They considered that it would be a reflection on American inventiveness and ingenuity merely to keep to
European patterns. They must have something original to send to

Europe; something which would astonish the natives and drive the
inferior German planes into the clouds to seek refuge from this new

terror from the West. So the "Liberty" machine was projected, but
refused to be invented. One machine after another was tried but
each turned out to be as great a disappointment as its predecessor.
When at last a new design had been achieved which seemed to be ef-

fective, and was ready for manufacture, General Pershing's Staff
intervened with suggestions for further improvement. When these
alterations had been made instructions came from General Pershing for

fresh alterations. The result was inevitable. No American aeroplanes
were sent across the Atlantic during the whole of 1917. Even during
the great battles of April, May and June, 1918, American aviators had

to fly in French machines for they had none of their own. It was
July, 1918, before the paragon was fully developed and then it turned

- -6-

307

out no better than, in fact not as good as, the thousands with
which the British and French aviators had already won the command

of the air before the "Liberty" machines had left the workshop or
even the draughtsman's table.

When the Armistice was signed November 11th, half the
aeroplanes used by the American Army were of French and British
make.

The same tale of fussy muddle can be repeated in the matter

of guns, light and heavy, for the new American Army. The light and
medium artillery used up to the end of the War by the American Army

was supplied by the French. The heaviest artillery was furnished by
the British. No field guns of American pattern or manufacture fired
a shot in the War. The same thing applies to tanks. Here one would have
thought that the nation who were the greatest manufacturers of automobiles

in the world could have turned out tanks with the greatest facility and
in the largest numbers, but not a single tank of American manufacture

ever rolled into action in the War.
Transport was so defective that ships sometimes took a

couple of months to turn round at the ports, and on land it was so
badly organised that, in spite of help which was forthcoming from other
armies, a large number of the American troops who fought so gallantly

in the Argonne in the autumn of 1918 were without sufficient food to

sustain them in their heroic struggle in a difficult terrain. The
American soldiers were superb. That is a fact which is acknowledged,

not only by their friends and British comrades, but by their enemies
as well.

-7There were no braver or more fearless men in any army,

but the organisation at home and behind the lines was not worthy
of the reputation which American business men have deservedly won

for smartness, prompitude and efficiency.

308

TREASURY DEPARTMENT

309

PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR

WASHINGTON

January 2, 1941
1942
MEMORANDUM TO THE SECRETARY:

We have been making purchases during the latter part of

December of semi-finished steel requirements for the British, totaling 772,000 tons for delivery during the first quarter of 1942.
This tonnage was allocated to twenty-two steel mills, the bulk of
the requirements having been allocated to U. S. Steel Corporation
and the Bethlehen Steel Corporation.

With the exception of the U. S. Steel Corporation and
Bethlehem Steel Corporation, orders have been placed with all of
the mills at prices which we have paid previously. The U. S. Steel

Corporation and Bethlehem Steel Corporation, however, have taken the

position that we should pay the published trade prices (as published
in the "Iron Age",) we to pay such published prices in effect as of
dates of actual shipments from the mills with the added stipulation
chat such prices would not exceed the price ceilings of "Federal
regulatory agencies". The point is that these companies evidently
question the legality of OPA.
We have refused to close on this basis as this practice
would encourage inflation and would nullify the effect of price con-

trol. Further, such a precedent, if permitted, would be sought by

other industries.

Mr. MacKeachie has asked me to attend a meeting next Monday

with Under Secretaries of War and Navy, Patterson and Forrestal, and
Mr. Henderson for the purpose of cooperating in this matter as both
Army and Navy are faced with the same proposition and I understand

that Mr. Patterson has taken the position that the steel mills should
fix a firm price for quarterly periods, which has been the usual trade
practice, such prices, of course, to be within OPA limitations, the
alternative being to obtain steel under the requisitioning act which
provides for determination and payment of a fair price.

FORDEFENSE

BUY
WATER
AWINGS

BONDS
AND STAMPS

I will keep you currently informed of the developments.
Clifton E.
Director of Procurement

States

310
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 2, 1942

Secretary Morgenthau

TO

H. D. White

FROM

Subject:

Conference on Lend-Lease Purchases of Completed

Defense Articles in Canada, January 2, 1942.

Members of the Division met this morning with Mr. Noyes

of Lend-Lease. After discussing the Canadian dollar position
and the probable effect on it of the Lend-Lease decision not
to purchase completed defense articles in Canada for transfer
to United Kingdom, the group unanimously agreed that:

1. Canada's present gold and dollar holdings are now
about $185 million. Even if the Lend-Lease authorities do
not modify their position, the dollar position of Canada will
probably not drop below $175 million by June 30, though it may
drop to $100 million by the end of 1942.

2. In view of the fact that Canada's dollar assets are
not yet low and will not greatly diminish by June 30, the
Treasury does not feel justified at this time in informing
the Lend-Lease authorities that the Canadian dollar position
is critical. The Lend-Lease Administration is most reluctant
to reverse its decision not to purchase completed defense articles in Canada for transfer to the United Kingdom unless
the Treasury is willing to say to the Lend-Lease authorities

that the Canadian dollar position is critical.

3. The Canadians maintain that the decision of the LendLease Administration is contrary to the spirit of the Hyde-Park
Agreement and also of the recent Joint War Production Committee.
We do not feel that we can agree with them in this view.
The Canadians are going to be very disappointed, however,
if the Treasury does not bring about a change of decision by
the Lend-Lease authorities. They have over $20 million of
scout cars suitable for the Libyan dessert which our Army wishes

to buy at once for Lend-Lease to British forces in Libya.
4. The Canadians can, of course, check a drain on their

gold and dollar assets when such a drain becomes really serious

by making direct Lend-Lease arrangements, which our Lend-Lease

authorities would prefer, or through the sale of some of its
holdings of U. S. securities.

311

Revised Outlook for Canadian Exchange Position

On the basis of data submitted by Dr. Clark on December 29,

Canada's holdings of gold and available U. S. dollars as of the
end of each quarter through March 1943, will be as follows:

(Millions - U.S. dollars)
1941, December 31

1942, March 31
June 30
September 30
December 31

1943, March 31.

185

219 - 224
181 - 191
140 - 155
91 - 112

30 55

The above figures are based on the assumption that receipts of
Canadian dollars, January 1942 - March 1943, will fall below the
estimates submitted by the Canadian Government in November, by the
following amounts:

(Millions - U.S. dollars)
Tourist receipts

25 50

Newly-mined gold

20

Ships

30

Other war exports (if Young
ruling stands)

23

Total

98 - 123

These estimates do not allow for a possible expansion of
Canadian exports to the United States which may be expected to

follow abrogation of duties on war imports into this country, nor
for the effect upon non-military trade which may be expected to
result from direct rationing of civilian goods in both countries.
The attached appendix gives more detailed information on the

revisions and the distribution by quarters of the expected decline
from the earlier forecast.

312
Statistical Appendix
Revised Estimates of Canadian Dollar Position

The earlier estimate of tourist receipts, amounting to $101 million

during the fifteen months ending March 31, 1943, has been reduced by
$25 - 50 million, in accordance with the statement made on page 2 of
Dr. Clark's memorandum of December 29. In this memorandum Dr. Clark

reports: " it is not improbable that U.S. tourist expenditures in

Canada, which are to a very large extent based on automobile travel, will

fall off materially - perhaps as much as $25 - 50 million."

In the November estimates, receipts from newly mined gold were fixed

at $181 million in 1942, as compared with $187 million in 1941. It seems
improbable that strikes and the pressure on marginal mines can together
reduce this figure below $165 million per annum, or $204 million for the
entire fifteen months.
In November, receipts from the sale of ships to the United States

during the entire period were estimated at $160 million. of total

exports under the Hyde Park Agreement, in the amount of $501 million,
$81 million represented components purchased in the U.S. If it be assumed

that approximately 1/5 of the $160 million to be derived from ships would
have been paid out in the purchase of steel plates and other supplies in
the U.S., the net dollar receipts on this account, for the period ending

March 31, 1943, should not exceed $130 million, even under the November

estimates. Allowing for a continuation of the current lag of three months,
as a result of failure to obtain sufficient plates, it has been assumed
that approximately $100 million net may be expected from ships during the
fifteen months ending March 31, 1943.

Finally, with respect to the Young ruling, only $32 million was included

in the November estimates for contracts with the War Department which are not

now firm contracts, and hence subject to this administrative restriction.
After allowing for the proportion of these which would not be sold to the
United Kingdom as finished goods, and for the U.S. components of these

contracts, it is believed that net dollar receipts might be reduced only
$23 million as a result of the Young ruling.

In order to arrive at some statement of the gold and dollar balances
held at the end of each quarter, a more or less arbitrary distribution by
quarters has been made, as follows:

313
-2- Deficiency (-) or Excess (f) by Comparison
with November estimates

(Millions of U.S. Dollars)
1942

II

I

Ships
Gold

War supplies
(Young ruling)

Tourist receipts
(Maximum figure)
Total

I

--

/10

-15

-15

4

-4

-4

-4

-4

-3

-8

-7

-4

-1

-5

-20

0

0

-10

-25

-6

-4

-32 to

-46 to

+2t

- 5 to

-95 to

-93 to

-98 to

-110

-114

-123

0

-5
-17 to
-22

Cumulative Total

IV

-10

Tourist receipts
(Minimum figure)

III

1943

-17 to
-22

-37

-49 to
-59

-51

-4

-9

By applying the cumulative deficiency totals to the earlier data, the
balances in gold and dollars held at the end of each quarter have been
estimated, and set forth in the body of this memorandum.

Treasury Department, Division of Monetary Research

December 31, 1941

TREASURY DEPARTMENT

314

INTER OFFICE COMMUNICATION

DATE January 2, 1942
TO

Mr. White

FROM

Mr. Ullmann

Subject:

U.S.S.R. - Lend-Lease

1. According to Lend-Lease authorities, the total value of
requisitions already cleared for purchase is estimated at $800 million.

All the military supplies in the Moscow Protocol have been requisitioned.

2. Since the fulfilling of the Moscow Protocol will involve between $1 billion and $1.3 billion, between $200 million and $500 million

remains to be requisitioned.

3. Requisitions should not be confused with either the placing of
orders or the delivery of goods. Requisitions are merely the first step
in the process.

4. Of the $800 million requisitioned, $575 million is to be paid
out of U. S. Army appropriations -- not out of Lend-Lease funds. Therefore, while the Russians will have the benefit of an advance of $1 billion,
Lend-Lease funds will be used to the extent of not more than $425 million.
5. Lend-Lease authorities are inclined to classify the advance to

the Russians as a commerical loan rather than as "Lend-Lease", since the
Russians anticipate repaying the whole amount.

Because of this, I am told, the Russians are very careful about
the prices paid for the articles purchased under the agreement.

315

For Miss Chauncay

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 2, 1942
TO

FROM

Secretary Morgenthau

Mr. Dietrich

CONFIDENTIAL

Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
Purchased from commercial concerns

£65,000
£22,000

Open market sterling was quoted at 4.03-3/4, and there were no reported

transactions.

The Canadian dollar continued to recover from the current low of 14-5/8%
discount reached on December 30. Today's closing quotation was 13-3/4%

In New York, closing quotations for the foreign currencies listed below

were as follows:

Argentine peso (free)

Uruguayan peso (free)
Venezuelan bolivar

.2345
.0516
.5775
.2065
.5310
.2660

Cuban peso

1/8% premium

Brazilian milreis (free)

Colombian peso
Mexican peso

A few days ago, the Federal Reserve Bank of New York received an order

from the Bank of Sweden to sell 250,000 Argentine pesos at best. Owing to the
thinness of the peso market, the Federal requested that the Bank of Sweden leave
this order open until next Tuesday, which the latter agreed to do. Today, the
Federal sold 100,000 Argentine pesos in New York at the rate of .2350.
In order to increase the Stabilization Fund's gold balance, we purchased

$300,000 in gold from the General Fund.

No new gold engagements were reported.

42.67

In London, spot and forward silver were fixed at 23-1/2d, equivalent to

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
35-1/84.

We made no purchases of silver today.

A

315

Liss

For

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 2, 1942
TO

Secretary Morgenthau

CONFIDENTIAL

FROM r. Dietrich

Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns

£65,000

Purchased from commercial concerns

22,000

Open market sterling was quoted at 4.03-3/4, and there were no reported
transactions.

The Canadian dollar continued to recover from the current low of 14-5/8%
discount reached on December 30. Today's closing quotation was 13-3/4%

In New York, closing quotations for the foreign currencies listed below
were BE follows:

Argentine peso (free)

Brazilian milreis (free)

Colombian peso
Mexican peso

Uruguayan peso (free)
Venezuelan bolivar
Cuban peso

.2345

.0516
.5775
.2065
.5310
.2660

1/8% premium

A few days ago, the Federal Reserve Bank of New York received an order
from the Bank of Sweden to sell 250,000 Argentine pesos at best. Owing to the
thinness of the peso market, the Federal requested that the Bank of Sweden leave

this order open until next Tuesday, which the latter agreed to do. Today. the

Federal sold 100,000 Argentine pesos in New York at the rate of .2350.

In order to increase the stabilization Fund's gold balance, we purchased
$300,000 in gold from the General Fund.
No new gold engagements were reported.

In London, spot and forward silver were fixed at 23-1/24, equivalent to
42.67d.

The Treasury's purchase price for foreign silver was unchanged at 35%
Hendy and Harman's settlement price for foreign silver was also unchanged at
35-1/88.

We made no purchases of silver today.

A

316

P

Y

DEPARTMENT OF STATE

Washington

In realy refer to
340.51 Frozen Credits/4897

January 2, 1942.

The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and transmits
herewith S paraphrese of telegram no. 2230 of December 29,

1941 from the American Embossy at Rio de Janeiro, stating
that the French Embassy here has received instructions

from the Vichy Government to distribute one million
dollars to French diplomatic missions in the American
republics.

Enclosure:

From Rio de Janeiro,
no. 2230, December 29,
1941.

eh:cooy
1-5-12

0

0

317

P

PARAPHRASE OF TELEGRAM RECEIVED

FROM: American Embassy, Rio de Janeiro, Brazil.
DATE: December 29, 1941, 7 p.m.

NO. : 2230

The Embassy refers to its telegram No. 1069, 1 p.m.,
dated the 13th of August.

Instructions from the Vichy Government to distribute
the $1,000,000 to French diplomatic missions in South
America and Central America have been received by the
French Embassy here.
CAFFERY

eh:copy
1-5-42

318

C

0

P

Y

DEPARTMENT OF STATE

Washington

In reply refer to

January 2, 1942

FD

The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury and
encloses copies of the paraphrase of telegram no. 5.
dated January 1, 1942, from the American Embassy,

Rio de Janeiro, Brazil, concerning negotiations between
the Governments of Brazil and Great Britain relative to
the use of sterling by Spain to buy cotton during 1942.

Enclosure:

From Embassy, Rio de Janeiro,

no. 5. January 1, 1942.

Copy:hmd:1/3/42

C

319
P

Y

PARAPHRAS OF TELEGRAM RECEIVED

FROM: American Embasay, Rio de Janeiro, Brazil

DATE: January 1, 1942. 9 p.m.

NO.: 5
I have received information to the effect that the
Spanish Government will be authorized by the British
Government to utilize sterling to buy eighteen thousand

tons of cotton during each quarter of 1942 on conditions
as follows:

1. Quarterly 9.000 tons are to be purchased from

interests of Great Britain on the African west coast;
2. Quarterly 9.000 tons are to be purchased in

Brazil if the Government of Brazil will agree to credit
the sterling to an account which will be utilized only
for the settling of claims of Great Britain caused by the
Brazilian Government's recent action in expropriating
the Brazil Railway Company's procerties.

Negotiations by the British Embassy here with the
Ministers of Finance and Foreign Affairs are now being
made, and I was told yesterday by a member of the staff

the reaction was favorable at the very first.
CAFFERY

Copythad:1/3/42

Treasury Department

320

Division of Monetary Research
Date

January 5

To:

Miss Chauncey, Room 285

From:

Mr. White

1942

I do not believe this is of
sufficient importance to be called
to the Secretary's attention. The
problem it presents is being taken

up at a Foreign Funds Control
meeting.

D

321
0

P

Y

DEPARTMENT OF STATE

Washington

In reply refer to

January 2, 1942.

FD

The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
copies of the paraphrases of telegram No. 1110, dated
December 26, 1941, and telegram No. 1074, dated
December 18, 1941, from the American Embassy, Madrid, Spain,

concerning the disposition of United States dollar currency held
in Spain.

Enclosure:

1. From Embassy, Madrid,
No. 1110, December 26, 1941.

2. From Embassy, Madrid,
No. 1074, December 18, 1941.

eh:copy
1-3-42

C

322

0

P

PARAPHRASE OF TELEGRAM RECEIVED

Y

From: American Embassy, Madrid, Spain.

Date: December 26, 1941, 7 p.m.

No. : 1110.
PUSH.

Again the Director of the Exchange Institute has inquired in regard to our
views concerning shipment of American currency as reported in my telegram No.
1074, 9 p.m., dated the 18th of December.

London is being urged by the British Embassy to grant navicerts for monthly
shipments of $50,000.

My opinion is that in all probability encouraging the Government of Spain
to remove U. S. currency which it is now holding to the U.S. might be better; (my
understanding is that this currency amounts to approximately $1,000,000) and that
thereafter according to an agreement with Great Britain to give consent to

perfectly legitimate shipments in the future which represent current legitimate
transactions which are not to exceed B stated amount. Control of the movement

of the corresponding credit would thus be permitted to us; further, the posliability of this quentity felling into German hands, in the event of a German
invasion of Spain, would be removed. The policy of acting openly by the exchange
control authorities who are now friendly would be encouraged and the temptation

later to act as intermediaries for "dumping" on the part of the Axis would be
discouraged.

We could insist that the Institute give us permission to examine its records
in order to assure ourselves that the amount of this currency which is now held,
or subsequent purchases thereof WAS not then or is not now germinated from
transactions with Axis powers or as payments for Spanish goods mede by them.
WEDDELL

eh:copy 1-3-42

0

PARAPHRASE OF TELEGRAM RECEIVED

P

323

Y

From: American Embassy, Madrid, Spain.
Date: December 18, 1941, 9 p.m.

No. : 1074.
I have been informed by the Director of the Foreign Exchange Institute
that he has been buying dollar paper currency from returning Spaniards, vessels,

tourists, etc., which he has been shipping until recently to the U.S. at the
rate of (*) dollars each voyege on the Spenish vessels Marquis de Comilas and

Magellanes. Navicerts for continuing these shipments have been refused by the

British authorities. Since he cannot send this currency to the U.S. he is,
therefore, faced with two decisions. One is to 80 reduce the rate quoted that
sales would be discouraged and the other is to refuse to purchase dollar

currency. The Foreign Exchange Institute Director is unwilling to take steps
such 88 these without letting the Government of the United States know about

the situation. He would appreciate being informed as to whether, in order to
overcome this impasse, the Government of the United States would intercede

with the authorities of Britain. His estimation is that the amount to be
shipped would not exceed $50,000 in any one month. The Director said that

he was willing to allow an Embassy representative to investigate his records
which show the source of purchase of this currency. The Embassy would
appreciate the Department's comments.
WEDDELL

(*) Apparent omission.
eh:copy
1-3-42

324

V

BRITISH EMBASSY,
WASHINGTON.

PERSONAL

ND SECRET

January 2, 1942.

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,

Hahfax
the Honourable

Henry Morgenthau, Jr.,
United States Treasury,
Washington, D.C.

325

Copy No. 15
BRITISH MOST SECRET

(U.S. SECRET)

OPTEL No.

Information received up to 7 a.m., 1st January, 1942.
(I) NAVAL

Attacks on shipping. 28th Dec, A British ship of small
tonnage was sunk by enemy action in the Eastern MEDITEPRANEAN,

31st Dec. A British tanker was torpedoed about 200 miles
north west of the BUTT OF LEVIS,

(II) MILITARY

LIBYA. Enemy is now believed to have the remnants of five
Italian infantry divisions and one Italian and two German armoured divisions
in the JEDABYA area, round which several strong points have been constructed.

There is also a line of defended posts stretching thirty miles south eastwards
towards EL HASEIAT, From which place the enemy had been forced to withdraw
by one of our mobile columns,

30th Dec. During the morning there was another tank battle
between forty enemy tanks and fifty-eight of our own some fifteen miles south
east of JEDABYA, Tank casualties are not yet known but are likely to be con-

siderable on bcth sides, In the afternoon, our armoured forces withdrew northwards to protect the left flank of the troops engaging the strong enemy post
north east of JEDABIA,

31st Dec. The assault on BARDIA with tanks

and infantry commenced early in the morning after heavy air and artillery preparations. It is believed that good progress has been made,
HALAYA, In PERAK our position in unchanged. During 30th

Dec. the Jennese, supported by artillery and mortar fire, appeared to be
feeling our defences, There has been minor enemy air activity against our CODmunications, On the East Coast, a small party of Japanese have penetrated
southwards from TRENOGAND towards KUANTAN where they are being engaged.

RUSSIA. Heavy fighting is continuing south west of KALININ.
Tne Germans have made a further withdrawal west of KALUGA,

(III)

AIR OPERATIONS

IFSTERN FRONT. 31st Dec. and 31st Dec./lst Jan, No of-

fensive operations undertaken by our aircraft and enemy activity was negligible,

326

-

MEDITERRANSAN. LIBYA. 30th Dec. Three squadrons Blenheims

bombed thirty tanks and 200 mechanical transport which were attacking our troops
twenty-three miles south east of JEDABYA. All bombs burst among the mechanical

transport Four other squadrons heavily attacked enemy positions at BARDIA.
B lenheims attacked mechanical transport on the HOMS-TRIPOLI and TRIPOLI-ZOUARA
roads,

30th/31st Seven Wellingtons attacked barracks and mechanical transport sheds at MISURATA, Repeated hits were scored on the targets.
MALTA. 30th/31st. Twenty-three enemy aircraft dropped bombs
on the island demolishing a number of houses,

31st, Three enemy raids, one of which consisted of fortysix bombers and fighters, attacked TAKAU aerodrome. One ME 109 was destroyed,
No damage to aerodrome reported,

FAR EAST, MALAYA. 30th, Enemy aircraft attacked KUALA
LUMPUR and PORT SUETTENHAM, No reports of damage.
(IV) INTELLIGENCE

011. In their efforts to reduce the consumption of petrol
still further, the Germans are reported to be ordering large quantities of producer gas apparatus for use on mechanical transport on the Russian Front, They
have not delivered any oil under their agreement with SWEDEN since October and

have intimated they will not recommence deliveries in the near future.

327

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 2,1942
TO

Secretary Morgenthau

FROM

Mr. Kamarck

Subject:

O.C.I. Report;
Finance.
Source:

"Germens and Rumania, Currency and

Official in Rumanian National Bank, End
of October.

Inflation is on the way in Rumania. The note issue
hee increased from 64 billion Lei in December, 1940, to
90 billion Lei in September, 1941 (n 40 percent increase
in nine months) and 18 now increasing at A rate of 5 to
6 billion A month. The inflation is being caused by
government financing of the war by advances from the
National Bank and by German exploitation. If the letter
is not soon stopped, the situation will get out of hand.
a. The Germans have been buying heavily in
Rumania and have run un a clearing debt

of 15 1/2 billion Lei (around $100 million)
in the last few months. The National Bank,

of course, has had to compensate Rumanian

exporters to this amount.

b. The Rumanians still have to pay one billion

Lei a month for the German Army of Protection which is no longer in Rumania. The money is

being used to buy controlling interests in
Rumanian industry.

C. At the beginning of October, the National

Bank refused to convert any more Reichmarks

into Lei. It also refused to accent the Le1

notes the Germans secured in Bulgarian-occupied
Dobrudja.

328

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 2, 1942

Secretary Morgenthau

TO

Mr. Kamarck

FROM

Subject:

Summary of Military Reports

German Threat to U. S. Shipping

The British believe that it is probable that German

submarines may be moving towards the western Atlantic.

(Probably the purpose is to attack coastal shipping off
our shores as in the last war. )
(U.K. Operations Report, December 18-25, 1941)
Far East

The British estimate that the Japanese air force now
to 560 airplanes of all types. The number of land-based
heavy bombers in the Pacific Islands has been increased to

operating in Indo-China, Siam and Malaya has been increased

a total of 24. (The latter planes are, of course, to put

up a screen of air protection for Japanese operations in
the western Pacific.)

The present Japanese strength on the Malay Peninsula

is estimated by the British at 4 divisions and 1 tank regi-

ment.

Our army believes that the Japanese have at least 6

divisions in the Philippines.

(U.K. Operations Report, December 18-25,30;
U.S. M.I.D., December 31, 1941)
Submarines Refueled in Spanish Harbor

German prisoners taken by the British (presumably

from captured submarines) state that some German submarines

refueled from merchant ships lying in Vigo, Spain (just
north of the Portuguese border) about the middle of December. (On August 23, the Assistant Collector of the Customs
at Port Arthur, Texas, wrote a letter to the State Department

-2-

329

informing the Export Control Division that German submarines

were being fueled off Vigo with American oil sent to Spain.
(U.K. Operations Report, December 18-25, 1941)
Russo-German Front

The British state that Russian pressure is preventing

the Germans from executing 8 planned withdrawal. There is
no immediate prospect of the Germans succeeding in stopping

the Russian advance and in stabilizing the front.
At Archangel the ice situation is becoming serious. The
British believe, however, that more extensive use of Mur-

mansk can improve import conditions.

(U.K. Operations Report, December 18-25, 1941)

The French Military Attache in Finland believes that
the withdrawal of Nazi specialist troops from Finland to
be sent to Russia as the cadres for new units, indicates

high German casualties in the war.

(O.C.I., "The War This Week, December 24-31, 1941")
Libya

General Rommel's two armored divisions now consist of

some 50 tanks, (or around ten percent of his original
strength). British pursuit is being hampered by rain and
mud on the supply routes. The Germans are suffering from
a shortage of transport and mechanical repair difficulties.
The future of the battle now depends on the British ability
to transport and maintain supplies in sufficient volume.

(General Rommel, according to our army, is now digging in
while waiting for reinforcements. The German bombers based
on Crete, and the German submarines in the Mediterranean

are attempting to interfere with any British supplies

moving along the Cyrenaican coast to Benghazi.)

(U.K. Operations Report, December 18-25, 1941)

-3-

330

Next German Offensive

No German troop movements have been reported to sub-

stantiate the numerous rumors of an imminent attack on
Spain.

There have been several reports of German preparations

for future military action based on Bulgaria.

Enemy activity against Malta has increased by day and
night.

(U.K. Operations Report, December 18-25, 1941)

The Nazis are reported to have sent heavy air reinforcements to southern Italy, and units of ten different

air force wings from Russia and one from Norway have been

seen on northern Italian airfields. Air units in Greece

are also being strengthened.

Vichy has ordered French North African officials to
deliver 3,600 tons of gasoline to the Axis at the Libyan
border.

(O.C.I., "The War This Week," December 24-31, 1941)

(The foregoing reports fit into the pattern of a German
move into French North Africa via Italy and Sicily, or of
defensive preparations against a British push to Tripoli. )
Italy
British raids on Naples have completely destroyed half
of the Royal Arsenal, caused severe damage to the torpedo

works and damage to the Alfa Romeo (airplane engine) works,

an oil depot, and the roofing of the airframe works.
(U.K. Operations Report, December 18-25, 1941)

331
RESTRICTED

M.I.D., W.D.

G-2/2657-220; No. 588

11:00 A.M., January 2, 1942

SITUATION REPORT
I.

Pacific Theater.

Philippines: Manila was occupied by the Japanese in the
early afternoon of January 2, Enemy air activity has moderated slightly.
No important news from the front lines. Jolo, the capital city of Jolo
province (island in Sulu group) has been occupied by a small Japanese

landing force. Hawaii: No further reports of hostile action. Malaya:
Hostile air raids on Singapore resulted in small damage. There is no
change in land operations. Caroline Islands: The press states that

Australian planes have opened an offensive on the Japanese Mandated

Caroline Islands. China: Press reports allege that the Japanese are
on the outskirts of Changsha. West Coast: No further reports of

hostile activity.

II. Eastern Theater.
Ground: There is little change in the situation on the Russian
front. The Russians claim the capture of Staritsa (30 miles northeast

of Rzhev and 40 miles southeast of Kalinin).

Air: The Press reports that German planes in the Crimea have
counterattacked Russian troops which recaptured Kerch and Feodosiya.
The Germans claim a Russian freighter and a small warship were sunk by
these attacks.

III. Western Theater.
Air: British bombing attacks on airdromes of northern France
continued.
IV.

Middle Eastern Theater.

Ground: In the Agedabia sector there is a decrease in activity.

The Axis forces under General Rommel apparently have dug in, awaiting

reinforcements, while the British are gathering strength to continue
their push into Tripolitania.
In the Frontier Area, Bardia is under heavy attack by British
forces.

Air: According to the Press, Axis aircraft have attacked
British land forces on the Agedabia front at the eastern edge of
Tripolitania. The British planes carried out attacks against Misurata
and El Melaha deep in Tripolitania.
RESTRICTED

STRICTLY CONFIDENTIAL

332

January 3, 1942.
MEMORANDUM FOR THE SECRETARY'S FILES

The following decisions were made by the Secretary in conference
with Mr. White at 9:30 Saturday morning, January 3, 1942.

1. Letter to the President on Procurement-Lend-Lease was signed.
2. The Secretary approved of the purchase from Russia of $20

million of gold for future delivery. The Secretary suggested that

Russia might avail herself of the advice and assistance of TreasuryProcurement for the purchase of non-military goods, such as tractors,
etc., which she is buying.

3. Cochran's report. The Secretary instructed me to have a copy
sent to Secretary Hull, over Secretary Morgenthau's signature, but did
not approve of sending one to Mr. Knoke.
4. Stabilization Fund Section arrangements. Mr. White spoke to
the Secretary with respect to making changes in the Stabilization Fund

Section.

(a) The Secretary said that that was my (White's) responsibility and to go ahead and do whatever I thought neces-

sary.

(b) I spoke to him about Professor Brown's survey of
stabilization fund history and he instructed me to have
Mr. Brown wind up his activities. He did not approve of
Mr. Brown's going any farther with the study.
(c) I suggested an increase in Mr. Southard's salary

and the Secretary approved a $500 increase.

5. Sir Frederick Phillip's letter on shipbuilding facilities sale

to the Naritime Commission. The Secretary signed the letter to the Maritime Commission recommending the sale and suggested that a copy of the

letter be sent to Sir Frederick.

6. Canadian request for Treasury assistance to modify Lend-Lease

interpretations. The Secretary decided to sit tight on it and said:

"Let's see what Canada will do with the Scout Cars." He stated that he
felt Canada ought to sell them or Lend-Lease them to England. He added
that Canada can always come in under Lend-Lease if she is in financial

difficulties,
matter.

but concluded that we should not take any action in the

7. The Secretary signed the letter to the Minister of South Africa

about gold mining.

333
-28. The Secretary stated it was all right to go ahead with
attempting to secure legislation for the minting of silver coin.
9. The Secretary approved my (White's) suggestion that I could
raise with Welles the question as to whether or not he would wish to
have prepared a proposal on an Inter-Allied Stabilisation Fund for the
Rio conference. Mr. White explained to the Secretary that the proposed resolution was not drafted but that if Mr. Welles was interested,
we could draft one and clear it with Secretary Morgenthau before giv-

ing it to them. Mr. White stated he would explain to Mr. Welles that

Secretary Morgenthau had not yet cleared any draft but was favorable

to the idea of presenting it in Rio if the State Department thought
it would be helpful for their purpose.

HPW

334

JAN 3 1942

My dear Mr. Minister:

I have received your letter of December 27.

I shall be glad to examine the material on
your dollar exchange problem, as soon as I receive

it.

Very sincerely yours,
(Signed) K. Morgenthan, 32.

Secretary of the Treasury

Mr. Ralph if. Close,
Minister,
Legation of the Union of South Africa,
Washington, D. C.

n.m.c
E.N.
my/ori
1/1/42

mawhite

FILE COPY

335

C.50

58/9

58/8/2/1.
LEGATION OF
THE UNION OF SOUTH AFRICA
WASHINGTON,D.C

27th December, 1941.
My dear Mr. Morgenthau,

Thank you for your letter of the 15th instant.
Though it is obvious that we can do nothing but bow to the
ruling of the Committee concerned, I must frankly express my great

disappointment.

You refer to a principle adopted at a recent meeting of
representatives of Departments interested, that high preference rating
for equipment and supplies for Gold Mining should be given only in
special circumstances.

I had realised that, in view of the position as it was
understood to be, a special case would have to be made for Gold Mining
equipment and supplies for each country concerned: but I did hope

until I received your letter that I had made out an absolutely strong
special case for the steel neded for our particular South African Gold
Mining Industry - on my showing, inter elie, 1.

That the steel was essential for the maintenance (not the
development) of our Gold Mining Industry.

2.

That the particular steel in question is obtainable only in
the United States as it cannot be produced in the Union of

South Africa.
3.

That the war economy of the Union of South Africa absolutely
depends on the Gold Mines as one third of our revenue comes
from Direct Taxation and one third from Indirect Texation of
the Gold Mining Industry.

All this has been clearly and repeatedly shown in urgent telegrams from our Prime Minister, of which I told you the full substance.
- These The Honourable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Treasury Department,
Washington, D.C.

336

-2-

These showed that the serious interruption of the War Economy which would

result from the Gold Mining Industry being left short of essential steel
as in this case if our application fails, would have most serious repercussions on the War Effort of the Union: and howe serious that would in
turn be for our common War Effort I am sure it is needless for me to do more
than allude to. This logical "chain of seriousness" did seem to me to

be complete.

The Committee on the other hand obviously did not agree.

I do hope, however, that the ruling in question (based
apparently on the views that this "chain of seriousness" is not
special circumstance for the purpose of obtaining a high preference
rating) is only a temporary one and will be open to reconsideration.
a

In the meantime I am awaiting the answer to a telegram which

I sent to our Prime Minister asking for the full data which, in
your letter you indicate will be necessary from the "Dollar Exchange"
point of view for the Treasury to have if it is to take any action
to assist us in our problem.

Very sincerely yours,

Minister.

337
January 3, 1942
9:56 a.m.
Philip
Murray:

Mr. Secretary, how are you this morning?

HMJr:

How are you? Mr. Murray?

You've done a remarkably fine job there.
HMJr:

What's that?

Oh, now, I shouldn't have to spend the next
half hour explaining what you've done to the
country this morning.
HMJr:

Oh. (Laughs)
(Laughs)

HMJr:

What I've done?
Yes.

HMJr:

Well, I appreciate that you lifted that one
sentence

All right. Well, that's
because my wife is a very hard-headed lady,
and felt that might start A whole train of attack
on the President.

I see. Well, we didn't went that.
And she said it's the kind of thing that - well,

to use her own - well, that you might expect from

Wheeler or Lindbergh.

That's right.
HMr

And she was afraid that there might come another
ad from the Gold Star Mothers.
I see.
You see?

Uh huh. I understand.

-Jr:

338

And I think that if she felt that way, other
people might feel that way.

M:

That's right, that's right. Well, we lifted

it anyhow.
HMJr:

Well,
when that was lifted, she was thrilled with
the ad.

M:

Well, it looke mighty good to me in the morning
paper, anyway.

HMJr:

And I listened to this radio commentator at a ouarter
of eight

M:

HMJr:

Uh huh.

whatever - Earl Godwin.
Oh, yes.

HMJr:

M:

HMJr:

And he started off with this thing, and then came
the story of the twenty-four nations afterwards.
Oh, well. That's remerkable.
And he gave it a very friendly angle.
He fid?
Uh huh.

Oh, I think it's a bombshell.
M:

Oh, it is; and that, coupled with what Henderson
had to say in the Post this morning.

HMJr:

Wasn't that wonderful?

Wonderful.
I think that one just sort of supports
the other there.
HMJr:

(Laughs) If anybody's accused of helping you, I
think it will be Henderson.
Yeeh. More than likely they'11 be saying that
Henderson has done this damned cirty job this

morning.

339

-3HMJr:

(Laughs)

M:

(Laughs)

HMJr:

Aren't you happy about it?

M:

Yes. I'm feeling quite good about it this
morning, Mr. Secretary.

HMJr:
M:

HMJr:

I am. I think it's a powerful thing.
I think it is myself.
Yeah. I think it's the most powerful thing that's
happened in this town for a long time.

M:

I think it is. I think it's going to have a

decidedly good effect, too.
HMJr:

Tell me, what other papers are you running it in?

Well, I'm running it in the Detroit paper this
morning, I believe, one of the Detroit papers.

The New York Times, see, is going to get it Monday

morning.
HMJr:

Oh.

M:

PM, of course, is carrying it, almost in full.

HMJr:

I see.

M:

And then the Washington papers are carrying it again

Monday, see?
HMJr:

I see. The same ed.

M:

The same ad, yeah.

HMJr:

I see.

M:

Yes. That's right.

HMJr:

Well

M:

So it will get them all.

340
4HMJr:

I'll be curious to know what kind of repercussions

you get.
M:

All right. And let me know what you get, also,

HMJr:

Well, I'm - yes, yes.

M:

Fine.

HMJr:

So nice of you to call me.

M:

Well, thanks, Mr. Secretary. Good-bye.

will you?

341
Mr. OPM:

You read the news.

The Marines at Wake Island at first fought off the Japanese

with only four planes. Then, they fought them off with two.
Finally, in the desperate end, they fought with one plane.
Wake Island is lost. Guan is lost. The Philippines are in
dire straits. The United States, the nation with the greatest
mass production machinery, has been unable to match Japan in
equipment.

Why is that, Mr. OPM?

You know that to bring the war to a quick, victorious end,
we have to produce a maximum of the implements of war as rapidly
as possible.

You know that our automobile industry is the greatest mass
production organization in the world. We have the basic machinery,
the plant space, the skilled man-power, the managerial force to
produce tanks and planes, guns and trucks. We can give our country

and our allies unquestioned military superiority over our enemies.
Mr. OPM, why aren't we doing it?

Half of the nation's auto plants today are closed down.
Virtually all of the m will be down by the end of January -- blacked
out not by Hitler and Japan.
Approximately 250,000 automobile workers, men trained in

precision, mass production methods, and highly skilled tool and

die makers, are now idle. Fully 400,000 will be idle by the end
of January.

The nation has lost 2,000,000 man days every week incar pro-

duction thru failure to put the 400,000 automobile workers to work.
Does this make sense, Mr. OPMY

Our war production is scattered. It is on an insignificant
scale, in inadequate quantities. Only a few plants are turning

34%

out the vital materials of war. Only one General Motors plant
has been finally converted. We are promised accomplishments
many months from now when new plants will be completed.

This is the record of the costly price we have paid for
permitting business-as-usual to shunt aside the needs of national
security.

Here is what the Tolan Committee of the House of Represent-

atives thinks of our war production today:

1. "Only a negligible part of this (the automobile industry's) plant capacity is presently employed in the war effort."
2. "A great automobile corporation showed that it was producing the tools of war at a rate, which, if general, would require fifteen years for the completion of the armament program
already projected."

3. "Manufacturers have been reluctant to convert their

production facilities from civilian to military production, and
the defense agencies of the Federal Government have not required
such conversion."

Mr. OPM. more than a year ago, the Congress of Industrial

Organizations presented a simple, practical plan for utilizing
and adapting the available machinery in the automobile industry

for plane production. The program, drafted by Walter P. Reuther
and other members of the CIO's Automobile Worker's Union, was

referred to you for study and recommendations. You did nothing
about it.

Labor is ready and determined to do its part in the national

war effort. It is willing to accept the bitter necessities of
a righteous war.

Labor has the right to expect that industry shall also do
its part.
Tomorrow in Washington, representatives of automobile labor,
automobile management, and of OPM will meet to determine what part

-3-

2

343

the automobile industry is to play in America's war effort.
It is a conference long overdue.
Mr. . OPM. the responsibility of war production is yours.
What are you going to dot

344

THE WASHINGTON POST: SATURDAY. JANUARY 3. 1942

12

An Open Letter. to Mr. OPM
Mr. OPM:
You read the news.

The Marines at Wake Island at first fought off the Japanese with only four planes. Then, they
fought them off with two. Finally, in the desperate end, they fought with one plane.
Wake Island has been taken. Guam has been taken. The Philippines are in dire straits. The United States,
the nation with the greatest mass production machinery, has been unable to match Japan in equipment.

Why is that, Mr. OPM?
You know that to bring the war to a quick, victorious end, we have to produce a maximum of the implements of war as rapidly as possible.

You know that our automobile industry is the greatest mass production organization in the world. We
have the basic machinery, the plant space, the skilled man-power, the managerial force to produce tanks and
planes, guns and trucks. We can give our country and our allies unquestioned military superiority over our
enemies.

Mr. OPM. why aren't we doing it?
Half of the nation's auto plants today are closed down. Virtually all of them will be down by the end of
January-blacked out not by Hitler and Japan.
Approximately 250,000 automobile workers, men trained in precision, mass production methods, and highly
skilled tool and die makers, are now idle. Fully 400,000 will be idle by the end of January.
The nation has lost 2,000,000 man days every week in war production thru failure to put the 400,000
automobile workers to work.

Does this make sense, Mr. OPM?
Our war production is poorly allocated. It is on an insignificant scale, in inadequate quantities. Only a
few plants are turning out the vital materials of war. Only one General Motors plant has been converted. We
are promised accomplishments many months from now when new plants will be completed.
This is the record of the costly price we have paid for permitting business-as-usual to shunt aside the needs
of national security.
Here is what the Tolan Committee of the House of Representatives thinks of our war production today:

1. "Only a negligible part of this (the automobile industry's) plant capacity is presently employed in the war
effort."
2. "A great automobile corporation showed that it was producing the tools of war at a rate, which, if general,
would require fifteen years for the completion of the armament program already projected."

3. "Manufacturers have been reluctant to convert their production facilities from civilian to military production, and the defense agencies of the Federal Government have not required such conversion."
Mr. OPM, more than a year ago, the Congress of Industrial Organizations presented a simple, practical plan

for utilizing and adapting the available machinery in the automobile industry for plane production. The program, drafted by Walter P. Reuther and other members of the CIO's Automobile Workers' Union, was referred to you for study and recommendations You did nothing about it.
Similar plans for increasing production of steel, aluminum, copper and other materials vital to the successful
execution of the war program were proposed. You did nothing about them.

Labor is ready and determined to do its part in the national war effort. It is willing to accept the bitter
necessities of a righteous war.

Labor has the right to expect that industry shall also do its part.

On Monday in Washington, representatives of automobile labor, automobile management, and of OPM
will meet to determine what part the automobile industry is to play in America's war effort. It is a conference long overdue.

The Automobile Workers' proposals for all-out production will again be placed before you.

Mr. OPM, the responsibility of war production is yours.
Whatareyougoingtodo?
CONGRESS OF INDUSTRIAL ORGANIZATIONS
Philip Murray, President

UNITED AUTOMOBILE, AIRCRAFT AND AGRICULTURAL IMPLEMENT WORKERS, CIO
Thomas President

George F. Addes, Secretary-Treasurer

346
January 3, 1942
10:43 a.m.
Grace

Tully:

Hello, Mr. Secretary; how are you?

I'm alive.
T:

That's good.

HMJr:

And kicking.
Yeah.

HMJr:

You called me at five minutes to six, mind you.

I called you at five minutes to six to give you

this message from the President, and I gave him
the message about the Executive Order and so forth.

HMJr:

Good.

And he said, well, that was two weeks ago or some-

thing. He says, "You tell Henry to keep his pants

up." (Laughs) And I called you to tell you to

keep your pants up.
HMJr:

He said that was two weeks ago?

HMJr:

(Laughs) About the Executive Order. Apparently
it isn't going to be signed or something. He
seemed to think that that was discussed two weeks
ago and then forgotten and then that was that.
I mean - well (Laughs) I know how to keep my pants
up.

T:

(Laughe) Not keep them on, but keep them up. (Laughs)

HMJr:

I don't get his message. What does it mean?

"Tell Henry to keep his pants up.' I don't know.

I said, "Well, all right, I'll call him right now

and tell him that," but you were gone and then I
didn't disturb you home.
HMJr:

But that was two weeks ago.
What?

-2HMJr:

347

Would you gather that he isn't going to do anything?

I gather it from that, yes. Uh huh.

T:

HMJr:

What?

And it was discussed and talked, and apparently
he isn't going to sign any Executive Order. That's
what I took from that.

T:

HMJr:

I wonder if you're right?

T:

Yeah, I'm pretty sure.

T:

You're pretty sure.
And also, he also knows now that if it comes before

HMJr:

He was perfectly pleasant about it?

T:

Oh, yes. Heavens, yes.

HMJr:

Thank you.

HMJr:

him, you see, that you don't wish him to sign it
until you've had an opportunity to talk with him.

And laughed about it and said, "You tell Henry to
keep his pants up, If SO I was just calling you
HMJr:
T:

Well, I've got
to deliver the message. (Laughs)

HMJr:

Tell him I'm wearing suspenders and a belt.

T:

(Laughs) All right. Fine, I will.

HMJr:

Thank you.

T:

All right, Mr. Secretary. Good-bye.

HMJr:

Good-bye.

348
January 3, 1942

1:06 p.m.
HMJr:

Hello. Mr. Gromyko.

Andrei A.

Gromyko: Yes.
HMJr:

This is Mr. Morgenthau.

G:

How do you do, Mr. Secretary.

HMJr:

I just wanted to tell you

G:

Uh huh.

HMJr:

G:

HMJr:

that we'll be very glad to buy twenty million
dollars of gold
Uh huh.

and if you will see Mr. White, he'11 work
out the details.

G:

Very well. Thank you very much.

HMJr:

We'11 do it today.

G:

HMJr:

Very well. I shall see him today at two o'clock.
Fine. Well, he'll give you a check.

G:

Very well.

HMJr:

We'll pay for it. We'll do it today.

G:

HMJr:

Very well. Thank you very much, Mr. Secretary.
Your credit is very good with us.

G:

Thank you very much.

HMJr:

Keep up killing the Germans.

G:

Yes, repulse them. (Laughs) Very good news.

HMJr:
G:

Keep on. Kill a few more.
We shall try to go on

-2
HMJr:

Fine.

with our stuff.

G:

HMJr:

349

Good.

G:

(Laughs)

HMJr:

Keep on till you get to Berlin.

G:

(Laughs) All right. Oh, it's very - too far to
Berlin. It's a shorter step to Minsk - from
Smolensk to Minsk.

HMJr:

Well, it may not be as far from where you are
to Minek as it is from Minsk to Berlin.

G:

(Laughs) That is right.

HMJr:

All right.

G:

Thank you very much, Mr. Secretary.

HMJr:

Good-bye.

G:

Good-bye.

January 3, 1942

AP. Kuhn took this draft to the
Secretary's house for discussion this
afternoon (Saturday).

350

DRAFT OF SECRETARY MORGENTHAU'S BROADCAST
"THE JOB AHEAD"

351

January 4th, 1942

Tonight I can give you proof that the country
remembers Pearl Harbor. I am happy to report to you
that Defense Bond sales in the month of December produced

more than five hundred million fighting dollars for
fighting men. Actual cash deposits from Defense Bond
sales reached the record total of $528,000,000, about
twice as much as the average for the previous seven months.

This grand response is just one sample of what our

people will do, in every field of the war effort, now
that they are awake and aroused to their country's danger.
It is especially good news to me that $341,000,000
of the December total came from the sale of the Series E

Bonds, the "people's bonds", that start at a price of $18.75.
The sales of Series E Bonds were almost three times what

-C

--

352

they had been in previous months. All this indicates
that more and more people with moderate and-emall incomes

are acquiring the good habit of saving for their country.
The rush to buy bonds was so great that in some places

the supply of bonde ran out for a time. We just couldn't
print the bonds fast enough after Pearl Harbor. In
Honolulu, while the smoke from Pearl Harbor still darkened

the sky, the citizens of Hawaii replied to the bombs by
buying bonds ten times as fast as before, (and we had to

authorize the issuance of temporary receipts in place of
bonds to meet the demand As a result of that superb
demonstration, and many others like it throughout the
country, we promptly placed the Bureau of Engraving and

Printing on a three-shift 24-hour basis. We're glad that

D-C

-3-

353

the country is pushing us. We like to be pushed. The

presses are at work all night, every night. While there
still are shortages in some cities, we are now accumulating
several weeks' advance supply of bonds to meet the demand

which, I am confident, will never slacken until the war
is won.

It is important, however, to keep in our minds the
relation between Defense Bond sales and the total amount
of money that we have to borrow. In December your Govern-

ment spent about four times as much on the war effort as
you subscribed in Defense Savings Bonds. In the months

to come it will spend at a far greater and ever increasing
rate. You read the President's statement of last week

that we shall have to devote half of our entire national
income to the war effort. That statement foreshadowed

D-C

-4-

354

such huge expenditures in the coming year that even the

half billion dollar record you established in the purchase
of Defense Bonds in December will seem to be almost insig-

nificant.
War is never cheap, but let me remind you that it's
a million times cheaper to win than to lose. The French,
the Czechs, the people of a dozen conquered and ravaged

countries, can tell us what it costs to lose. We have
made up our minds to win. We have made up our minds to

produce and to fight with such an overwhelming number of

planes, of ships, of tanks, of guns and of trained and
fully equipped men, that the Nazis and Japanese and their

kind can never again threaten our freedom. The cost of
our war effort should frighten no one but our enemies.

so us, it is just a necessary measuring of the size of
the job ahead.
D-C

--

355

If this were a different kind of war, I should not

you about the

thereofle
be speaking to in your homes tonight job ahead
that faces us. But this is a people's war. Everything
that the people of this and other free countries have won
through centuries is now at stake. You will want me, as
Secretary of the Treasury, to finance this people's war
by going to the people themselves for the sinews of war.

I am not going to finance it by depending primarily on
a few financiers. I am depending on you, on each and
every one of you who may be listening to my voice this
40

evening. In particular, I am depending on the $5,000,000
American men and women who earn regular pay.

You may ask "What is the Treasury's goal? Can't the

Treasury give us some figure to shoot at?" The Treasury's
goal is to make every pay day Bond Day. It is to have

D-C

-6-

356

every wage-earner and salary-earner put aside a part of
every pay check, every week, for the purchase of Defense
Bonds and Stamps. And when I say "a part" I do not mean

a mere token contribution of a few nickels every week, or
the mere contribution of one percent or two percent of

the weekly pay check. This is not a token war. It is
not a two percent war. It is not a war that can be won
with spare change. Each of us will have to figure out
the very most that we can set aside to buy Defense Bonds,

for our own good and for our country's good, as long as
the war may last.

The industrial workers of this country are making

a good start. Voluntary payroll saving plans are now
in operation in thousands of factories, and in most of
our largest business concerns, to make it more convenient

D-C

-7-

357

for workers to accumulate their savings for the purchase
of Defense Bonds.

Many of you already know about these payroll saving

plans. The most popular of them is a method by which you
or your union can tell your company how much you wish to

set aside from your pay, to be saved for Defense Bond
purchases. Your company accumulates your savings for
you, and when you have enough to buy a Defense Bond your

company will deliver the bond to you, registered in your

own name. That is all there is to it.
Until now a very small fraction of employees have
taken advantage of these plans, and a comparatively small

proportion of companies have agreed to provide the facilities
Since Japan attacked us the extent of participation has

D-C

-8-

358

been much greater, from labor and from management alike.

I am receiving reports already of some companies in which
90 percent or more of the employees are making good use

of this easy road to voluntary saving. In this connection
I should like to pay a sincere tribute to the labor unions
which are urging their members in all parts of the country
to get behind the Defense Savings effort.

But the response from industrial workers so far is

only a beginning. If you haven't heard how to join in

a voluntary payroll saving plan, or if the details haven't
been explained to you, or if your company has refused to

install such a plan for you, I wish you would write to
me at the Treasury Department in Washington. It's the

Treasury's responsibility to tell you about payroll saving;

C

-9-

359

our State organizations are ready to tell you all about
it, and will cheerfully send someone to your factory

to explain it to you.
I am in dead earnest when I say that millions more

must take part in these payroll saving plans, and must

invest hundreds of millions of dollars more, if we are

to do our job. Our plans at the Treasury for financing
the war are based upon the belief that the American people
,

will want to assume a big share of the cost of the war,

of their own free will. The response to payroll saving

will tell us whether that belief is right or wrong.
I have such faith in the American people that I believe

they will want to do the job in the voluntary way -- but

it is up to you to prove it. -

D-C

- 10 -

360

I suggest, then, that each of us sit down this very
evening to study our family budget; that each of us decide

this very evening, not the least but the most that we can
afford every week for the purchase of Defense Savings Bonds;

that we then translate that amount into a percentage of

our pay, five, ten, or even fifteen percent, whatever we
choose, and stick to it by setting that percentage aside
week after week without fail. Remember, the more bonds

we buy, the more planes will fly. Remember, every bond

we pledge ourselves to buy will add to the weight of the
bombs that will fall on Tokyo and Berlin. Remember, also,
that every dollar we pledge to set aside now will come
back to us with interest after that happier day when

victory is ours.
Now is the time for all of America to line up as
130 million united people, using their dollars to support
D-C

361

- 11 -

and sustain their fighting men in the front line. Those
fighting men are looking to us right now. They are looking
to us in our homes and factories, looking from the Philippines

and Iceland, from the silent gray ships that are guarding
our shores, from all the posts of danger in all the seven
seas -- looking to us to keep them supplied and to do our
men

part as they are doing theirs. Those have the right to
look back home and see us standing shoulder to shoulder,

with all sections, all groups, all the old divisions and
dissensions swept away in our united resolve to win this
war.

I don' t pretend that purchase of Defense Bonds is

all we need to do here at home to achieve victory. But
I do say that the buying of Defense Bonds is the first

D-C

362

- 12 -

thing we can do. It is the first concrete test of
our willingness to back up our soldiers and sailors
and airmen. At first sight the amount of money we
have to raise through borrowing and taxes may seem

impossible, but we in the Treasury have struck the

word "impossible" out of our dictionary. With your
help we are going to do the job.

our

Let us, then, resolve to be worthy of these men
N

in uniform. Let us prove that we will lend to defend
our right to be free -- that we will pour out a mighty
torrent of dollars "to defend life, liberty, independence
and religious freedom

against savage and brutal

forces seeking to subjugate the world. u

C

363
OF THE PRIME

1
CANADA

Personal

Ottaws,

January 3, 1942

key due her. Secretary :
I was indeed sorry not to
in Washington, or for that matter to

have had a chance to see you while

have so much as a word with you over

the phone. I discovered, however,
that I was none the less much in your
own thoughts, for I carried away with
me the new records which you had so
kindly sent to the Mayflower to replace
the ones which, unfortunately, fared

so ill an their journey.

The new records are in

perfect condition and I am looking
forward with delight to sharing them,
from time to time, with colleagues
and other of my parliamentary friends.
Churchill, while here,
recalled how we had shared together

at Chequers the music of one of the
records. We came nearly repeating
the performance at Laurier House,

and would have done so had we had just

a little more time for recreation than
the evening with me afforded.

364
What a wonderful success

his visit to America and Canada

has been !

Please let this line bring,

with my renewed thanks for your gift,
my warmest and best of wishes for
the New Year, to Mrs. Morgenthau,
Joan, the boys and yourself.

fours my
checkmark_ntt

The Honourable Henry Morgenthau, Jr.,

Secretary of the Treasury,
Washington, D.C.,
U. S. A.

365

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE

TO

FROM

Secretary Morgenthau

January 3, 1942.

E. H. Foley, Jr.
I have spoken over the telephone this morning with Mr. Edy
of the FWA and Mr. Dryden of the WPA in regard to the Washington
and Richmond Self-Help cooperatives.

Mr. Edy told me that Mr. Hunter had been ill for several

weeks which accounts for the fact that we have not been able to
get him on the telephone. He said Mr. Hunter probably would be

away from his office for some time in the future. His office,
however, is not giving out this information.
Mr. Edy told me that he had spoken with Mr. Martin, one
of Dryden's assistants, and had gotten general information in
regard to the attitude of WPA toward these projects:
As to the Richmond project, Edy reported that Hummel,

the local WPA director, was in favor of continuing the project.
Instructions, however, had been sent to WPA regional directors
to continue only projects which were necessary for defense.

Because of these instructions Hummel was to obtain a recommen-

dation from the local defense director.

As to the Washington project, Edy reported that they
were attempting to shift people from WPA rolls to the training
program in so far as this could be effected.

I told Edy of your interest in both projects. Specifically
I said that if anything were done to curtail either project

during the current fiscal year, you would want an opportunity
to speak to General Fleming before such action was taken. Edy
suggested that I speak directly with Dryden and said if I didn't
get satisfaction there, he or General Fleming would be glad to
speak to you or me about the matter. Accordingly, I telephoned
Dryden and Dryden assured me that nothing would be done in the

way of curtailing either project without first speaking to us
about it.

I have given this information to Mrs. Doyle.

S.N.7h.

366
TREASURY DEPARTMENT
WASHINGTON
DEFENSE SAVINGS STAFF

January
3

1942

The Secretary of the Treasury,
Treasury Department,
Washington, D. C.

Dear Sir:

Enclosed you will find 3 new set of Defense Bond
and Stamp announcements. T-89 through S-100, which we

would like to have you use whenever possible during
January. Toward the end of the month you will receive

a new return postcard on which to indicate the total
number of Defense Bond and Stamp announcements used on

your programs during the month of January.

Once again. hearty thanks to you for the spleniid
cooperation you are giving the Treasury Department's
Defense Savings Program.

Best Wishes for a very happy and prosperous New
Year.

Sincerely,

Mayories
Marjorie L. things
Springs,
Chief, Women's Programs,
Radio Section.

FORDEFENSE

BUY
UNITED
STATES

SAVINGS

BONDS
AND NTAMPS

367
367

Treasury Department
Defense Savings Staff

WOMEN'S PROGRAM
Announcement

WAR COPY!
W-89
"It is not a sacrifice to buy more Bonds

rather it is a privilege."

And with these words, our President has said what each and every
American woman must now realize. Yes, a privilege to aid in defeat-

ing the back-stabbing, bloodthirsty, and power-crazed aggressors.
A privilege to give our valiant forces the guns and ships, the bombs,

bullets, and planes that will bring these international criminals to
their knees, pleading for mercy. For as surely as I am standing
here, that day will come.
So buy all the United States Defense Bonds you possibly can today
and every pay day hereafter. Get them at your bank, or post office,

or savings and loan association. Get Defense Stamps from your
newspaper carrier boy or retail store. Do this at once. No home
that can afford it can be called a truly American home unless it buys
United States Defense Bonds and Stamps and continues to buy them.

BUY

(The Treasury Department urgently requests you to use this
announcement as many times as possible)

368

Treasury Department
Defense Savings Staff

WOMEN'S PROGRAM
Announcement

WAR COPY!
W-90

If you buy United States Defense Bonds now, your savings will
increase. After a few years, you'll have more dollars to spend.

After we are victorious over the Axis, you will be offered more
and better goods of all sorts, and you'll have more money with
which to purchase them. Buy Defense Bonds at your bank, post
office, and savings and loan association. Make it a pay-day habit
to buy Defense Bonds.

FOR DEFENSE

BUY

(The Treasury Department urgently requests you to use this
announcement as many times as possible)

369

Treasury Department
Defense Savings Staff

WOMEN'S PROGRAM
Announcement

WAR COPY!
W-91
Mothers of America! I am here today to ask you to join with me
a pledge that will do much to speed the

in a solemn pledge

day of victory

to bring the cruel, ruthless aggressors to their

knees.

As you cherish America as you hold dear the blessings of
liberty

I ask you to stand, and with your hand on your heart

to take this oath with me:

"I swear to put every dollar and cent I can into buying the ships,
the guns, tanks, and planes that are needed by us and our democratic allies for sure and inevitable VICTORY.

"I swear, too, to go today or tomorrow and buy United States
Defense Bonds or Stamps at my post office, bank, savings and loan

association or from my newspaper carrier boy or retail store
and to keep on buying them every pay day hereafter."
FORDEFENSE

BUY

Billions are needed

needed fast. Mothers, can you afford

NOT to help?

(The Treasury Department urgently requests you to use this
announcement as many times as possible)

370

Treasury Department
Defense Savings Staff

WOMEN'S PROGRAM
Announcement

WAR COPY!
W-92
You've often heard the expression

"as safe as a Government

Bond." You know that a Bond, put out by the Treasury and
"backed by the full faith and credit of the United States Govern-

ment" is safe. As safe as the strongest nation in the world. So
you realize you won't be running any risk when you go to your
post office or savings and loan association or bank to buy one or

more Defense Bonds. For the smallest Bond, you pay eighteen

dollars and seventy-five cents now. In ten years
back to you thirty-three-and-a-third percent "richer"
of twenty-five dollars.

it comes
a total

Start today to buy Defense Bonds-

as many as you can-as often as you can, for savings for yourself

and for Victory for your country.

FOR DEFENSE

BUY

(The Treasury Department urgently requests you to use this
announcement as many times as possible)

371

Treasury Department
Defense Savings Staff

WOMEN'S PROGRAM
Announcement

WAR COPY!
W-93
At this very minute, scores of thousands of valiant Americans are

manning the defenses of our great Nation. Sailors, soldiers,
marines, flyers-are in the line of battle on land, on sea, and roaring

through the skies. These men are doing their duty. Are YOU
doing yours? Are you investing every cent and dollar you can in
United States Defense Bonds and Stamps? If you are not, please
bear this in mind:
Billions are needed

and needed fast. Billions to buy the planes,

the ships, the tanks, the guns that will protect America from the
horrors of merciless dictatorship-and that will speed OUR day of
victory!!

So buy United States Defense Bonds at your bank, post office, or

savings and loan association. Buy Defense Stamps from your
newspaper carrier boy or retail store. There is no time to waste.

So buy today and regularly thereafter-BUY EVERY PAY DAY
BUY

UNTIL THIS WAR IS WON!!
(The Treasury Department urgently requests you to use this
announcement as many times as possible)

376

Treasury Department
Defense Savings Staff

WOMEN'S PROGRAM
Announcement

WAR COPY!
W-94

Have you heard about Uncle Sam's amphibian tractor? It floats
on the water, crawls up on a beach, and speeds across country.
It's used by the Nation's famous fighting force, the United States

Marine Corps. You'd like to see the Marines well supplied with

these armored, land-and-water cars, wouldn't you? Then buy
more United States Defense Bonds.

These Bonds provide all

kinds of arms and equipment to all your fighting men in the Army,
Navy, and Marines. Buy Defense Bonds at your bank, post office,

and savings and loan association. Invest profitably in your own
Victory.

POP DEFENSE

BUY
UNITED
STATES

(The Treasury Department urgently requests you to use this
announcement as many times as possible)

373

Treasury Department
Defense Savings Staff

WOMEN'S PROGRAM
Announcement

WAR COPY!
W-95

Even as I speak to you now, thousands upon thousands of American

soldiers, sailors, and flyers are protecting you and me from the most

ruthless gang of international cutthroats in all history. It is your
duty and mine, and the duty of every American woman, to give our
valiant forces the tanks, ships, planes and arms they need to bring
the dictators to their knees.

So go today or tomorrow to your bank, post office, or savings and

loan association and buy United States Defense Bonds. Get
Defense Stamps from your newspaper carrier boy or your retail

store. Billions are needed needed-FAST! Mothers of
America

can you afford NOT to help?

FORDEFENSE

BUY
RONDS

(The Treasury Department urgently requests you to use this
announcement as many times as possible)

374

Treasury Department
Defense Savings Staff

WOMEN'S PROGRAM
Announcement

WAR COPY!
W-96

See if you know the answers to four important questions about
your money. Here are the questions. What is a Defense Bond?
It is official proof that you have loaned money to the United States

Government. Can I get my money back if I need it? Yes, the
Government stands ready to buy back your Bond, even before
maturity-but smart Defense Bond owners hold on to their Bonds

and get good interest. What is the smallest amount of money I
can invest in Defense Bonds? Eighteen dollars and seventy-five
cents for a Bond that will be worth twenty-five dollars in ten years.
Where can I get Defense Bonds? At post offices, banks, savings

and loan associations, through the voluntary pay-roll allotment
plan where you work, or direct by mail from the Treasurer of the
United States, Washington, D.C
RODDEFENSE

BUY

a
(The Treasury Department urgently requests you to use this
announcement as many times as possible)

375

Treasury Department
Defense Savings Staff

WOMEN'S PROGRAM
Announcement

WAR COPY!
W-97
Yesterday, I met an old and very dear friend of mine. She said
something that startled me at first, until I realized it was the absolute

truth. She said, "No home that can afford it can be called a truly
American home unless it owns U.S. Defense Bonds or Stamps."

Think it over a moment, and you'll see it's true. For each and
every one of us is threatened
freedom and happiness

our Nation is in danger our
our very souls. We are in this war

together. And not one of us will rest safely until the bloodthirsty
aggressors have been brought to their knees. It is your duty
my duty

and the duty of every single American to buy all the

United States Defense Bonds and Stamps we possibly can.

So go to your bank, or post office or savings and loan association

today and every pay day hereafter to buy Defense Bonds. Get
Defense Stamps from your newspaper carrier boy or retail store.

But buy them. Alliyou can
BUY

and buy them regularly. Your

President has said, "It is not a sacrifice to buy more bonds
rather it is a privilege."

(The Treasury Department urgently requests you to use this
announcement as many times as possible)

376

Treasury Department
Defense Savings Staff

WOMEN'S PROGRAM
Announcement

WAR COPY!
W-98

Keep 'em flying
Air Corps

all those young eagles in the United States

trained for Victory! And how can you "Keep'em

flying?" By purchasing more and MORE Defense Bonds. Buy
Defense Bonds at your bank, post office, or savings and loan asso-

ciation. Already, liberty-loving Americans have bought Bonds
enough to buy swarms of war planes for American pilots. But,
for final Victory, we need many, many more planes. Keep 'em

flying. Keep on buying. If you can't afford a Bond today, buy
Defense Stamps, at your retail store, or ask your newspaper car-

rier boy to deliver them, every week. Defense Stamps grow into
Bonds. Buy United States Defense Bonds today and every dayas many as you can, for Victory.
FOR DEFENSE

BUY

(The Treasury Department urgently requests you to use this
announcement as many times as possible)

377

Treasury Department
Defense Savings Staff

WOMEN'S PROGRAM
Announcement

WAR COPY!
W-99
Yesterday I met an attractive young wife who lives down the street

from me. She told me something that I think you and I, and every
American woman, must realize now that war is here.

She said she's been saving for over a year now to get a fur coat

she'd set her heart on. It seemed so terribly important. But
suddenly, America was thrust into war. And nothing mattered
quite so much as the defense of America. And so, without a moment's hesitation, this young wife took the pennies and dollars she

had so lovingly saved up took the entire amount and
bought all the United States Defense Bonds and Stamps she could.

Her little chin was strong and determined when she told me this.
And then, I want to tell you, I was looking at a real patriot.
I've told you this because today you and I can and must do our part
in bringing victory to our country. We all must go to our post office,
bank, or savings and loan association and buy as many United States

Defense Bonds as we possibly can. Get Stamps from your newsPOP DEFENSE

paper carrier boy or retail store. Billions are needed

needed

BUY

fast. Can you afford NOT to help?

(The Treasury Department urgently requests you to use this
announcement as many times as possible)

378

Treasury Department
Defense Savings Staff

WOMEN'S PROGRAM
Announcement

WAR COPY!
W-100

Your dollars do count

those dollars you put into United

States Defense Bonds. Already patriotic Americans have put
enough dimes and dollars into these safe Bonds to buy many
hundred submarines. And maybe you think Uncle Sam's Navy

isn't glad to see such a possibility assured by your savings!
The Navy is doing its part to speed your Victory over the Axis
and your Bonds help. Buy Defense Bonds at your bank, post

office, or savings and loan association. For Victory for you and
your country-buy Defense Bonds today and every day.

FORDEFENSE

BUY

mill

(The Treasury Department urgently requests you to use this
announcement as many times as possible)

3.1%

25.6

11.9

over

- 2.4

- 2.6

- 4.3%

December

November

:

:

:

January 3. 1942.

or Decrease (-)

18.6

over

108.9%

91.8%

105.6

178.0

222.7

January
December

Percentage of Increase

:

:

:

53
189

322

1,325
over

$
-

-

:

$ 761

-

November

December

1,136

:

:

2,414

2,065

or Decrease (-)

14,468

over

19,048

Amount of Increase

January

$ 23,526

$ 4,579
December

:

:

5,171

9.565

2,009

1941

13,292

$ 24,866

$ 4,394
November

1,956

6,496
UNITED STATES SAVINGS BONDS

Comparative Statement of Sales During

First Two Business Days of January, 1942, and December and November 1941

1941
(November 1-3. December 1-2, January 1-2)

12,970

10,701

On Basis of Issue Price

(Amounts in thousands of dollars)

$ 25,627

$ 4,205

Sales

December

4,021
1942

January

20,964

15,384

29,749

$ 49,153
$ 8,784

of sales of United States savings bonds.

All figures are deposits with the Treasurer of the United States on account of proceeds

Item

Total

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

Series E - Total
Series E - Post Offices

Series E - Banks

Series F - Banks

Series G - Banks

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

Total

25,373

$ 49,153

$ 23,780

CONFIDENT

7.779

January 3, 1942.

$ 15,384

$ 7,605

Series G

2,056
All Bond Sales

$ 4,021

$ 1,964

Series F

15,538

$ 29,749

$ 14,211

Series E

20,571

Total

$ 40,369

$ 9.798

380

7.779

$ 15,384

$ 7,605
Series G

On Basis of Issue Price

(In thousands of dollars)

2,056
Bank Bond Sales
UNITED STATES SAVINGS BONDS

Daily Sales - January, 1942

$ 4,021

$ 1,964
Series F

10,736

$ 20,964

$ 10,229
Series E

4,802

$ 8,784

$ 3,982
Series E

Post Office

Bond Sales

sales of United States savings bonds.

1

2
Total

Date

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

Source: All figures are deposits with the Treasurer of the United States on account of proceeds of

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

January 1942

381

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 3, 1942

TO

Secretary Morgenthau

FROM

Mr. White

Subject:

Elimination of nickel from 5-cent coin

1.

O.K.

1mm

It is proposed to eliminate nickel and some of the copper
from the 5-cent piece by minting a coin containing equal
parts of silver and copper.

2. The reasons for this step are the following:
(a) OPM requests elimination of nickel from United
States coinage, which took nearly one-fourth of
estimated non-defense nickel consumption in
November 1941.

(b) It will be easier to refuse Latin American requests for coinage nickel, and to induce the
British Empire to stop minting nickel, if the
United States also no longer mints nickel. It
is estimated that Latin America during 1942 will
ask for 1.4 million pounds of nickel or 80 percent
more than the nickel consumption of the United
States Mint in 1941.

(c) A silver-copper 5-cent piece would provide an outlet
for about 25 million ounces of Treasury-held silver
a year, at the current rate of minting 5-cent coins.

3. The Mint reports that there are no technical difficulties
in minting a silver-copper 5-cent piece of a fineness of
about .500. The silver in this coin would exceed 5 cents
in value if the market price of silver should rise above

62.2 cents an ounce. Such a coin would be the same weight

and diameter as the present coin but would be slightly

thinner. It is believed this would not materially complicate slot machine operation. The shift from nickel to
silver in the 5-cent piece will result in a seigniorage
loss of about $11 million dollars per year.

382

-24.

Division of Monetary
Research

There is at present available in the General Fund
1.3 billion ounces of silver, which could be used for
the manufacture of minor coins. The 25 million ounces
which it is estimated would be required annually for the
new coin would be about 2 percent of this total.

5. If this change in our coinage has your approval, it will
be necessary to revise the coinage laws to provide for a
silver-copper 5-cent piece. The Legal Division is drafting legislation to authorize the minting of such a coin
for a 5-year emergency period.

383
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE December 17, 1941
Mr. White

TO

FROM

Mr. Southard

Subject: Summary of silver coinage proposal for new 5-cent piece

(1) Mr. Jordan, nickel expert at OPM, insists the nickel situation is
very bad and that the saving of 400 to 500 tons of nickel, made
possible by this proposal, would be most welcome. It is also
possible that the British Empire can be induced to abandon nickel
in coinage if WC lead the way. Moreover, Latin American countries
will be more likely to acquiesce in our refusal to allow them

nickel for their coins.

(2) The amount of silver required to replace nickel and some of the
copper in our present 5-cent piece (on the basis of a half silverhalf copper coin) would be 25 million to 30 million ounces per

year. This is less than 3 percent of the 1.3 billion ounces of

silver at present held in the General Fund of the Treasury (see
Mr. Hicks' memorandum). Mr. Hicks estimates that the re-coining
of all outstanding nickels would require only about 177 million
ounces of silver, or less than 14 percent of the silver held in
the General Fund.

(3) Silver has been acquired under the Silver Purchase and Gold Reserve

Acts at prices ranging from 35 cents to 72 cents per ounce. But,
as shown in a memorandum by Mr. Hawkey, 1.2 billion ounces were

acquired at prices ranging from 35 cents to 45 cents an ounce,
of which 183 million were acquired at 35 cents per ounce,

(4) I am informed that the Legal Division's memorandum will state that
the availability of silver in the General Fund presents no problem.

384

TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

DATE December 18, 1941
TO

Mr. White

FROM

Mr. Hawkey

Subject: Silver purchases contracted for at
various prices under the Silver
Purchase and Gold Reserve Acts,

1934 1941.

As shown in the attached table, since 1934 we have contracted for
the purchase of about 2,047,504,000 ounces of silver .999 fine under the
Silver Purchase and Gold Reserve Acts. Of this, about 1,195,255,000 ounces
were bought at prices ranging from 35 to 45 cents per ounce .999 fine, such
prices being subject to minor adjustment. The remaining 852,249,000 ounces
were bought at various prices, ranging from 40.57 to 76.38 cents. Extensive
investigation would be recuired to determine the specific prices paid for

this latter silver.

The figures in the table are based on a New York Federal Reserve
Bank table listing monthly purchases and price ranges. Comparison with our
own daily memorandum records resulted in a fairly accurate indication of the
prices paid for more than half of the contracted purchases.

Exact calculation of the net price paid for every lot of silver
delivered against the contracts would require extensive investigation, probably calling for examination of the detailed records maintained by the New
York Federal Reserve Bank. One of the main difficulties would be to determine the net cost, including all shipping expenses, of the large amount of
silver bought in London during 1934 and 1935, at widely fluctuating prices.
Impossibility of finding net costs of these London purchases at short notice
was the main reason why the 852,249,000 ounces (mainly bought in 1934 and

1935) were grouped in the table at the 40.57 to 76.38 price range.

385

Silver purchases contracted for at various

prices under Silver Purchase and Gold Reserve
Acts, 1934 - 1941 1

Price in cents
per ounce .999 fine 2

Number of ounces

.999 fine
525,732,000
3,043,000
475,914,000
4,543,000
1,788,000

45.00
44.00
43.00
40.00
38.50
38.00
36.75
35.00

582,000
979,000
182,674,000

Total purchased at
above prices

Other purchases, at various
prices from 40.57 to 76.38 3
Grand Total

1,195,255,000

852,249,000

2,047,504,000

1 Note that all amounts shown represent silver purchases
contracted for. Actual deliveries may vary somewhat from
contract amounts. Gold Reserve Act purchases included in
above figures have been transferred to Silver Purchase Act
account.

2 All prices subject to minor adjustments for commissions
and other expenses.

3 Most of this silver was purchased in 1934 and 1935, at
prices ranging from 40.57 to 76.38 cents, but mainly above
45 cents. Much of it was bought in London. The net cost of
such purchases cannot be determined without detailed exami-

nation.

386

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE December 18, 1941
TO

Mr. White

FROM

Mr. Hicks

Subject: Silver Available for Coinage of 5-cent pieces.
The attached table shows the monetary silver stocks of the

United States expressed in millions of ounces. It will be noticed
that there is at present more than 1.3 billion ounces of silver
bullion in the Treasury's General Fund. This silver is not legally
required for securing silver certificates, and, presumably, could
be used for the manufacture of minor coin. In addition to this

silver, there is in the silver certificate fund about 9.6 million

ounces of silver in excess of legal requirements, which might also

be available.

In the fiscal year ended June 30, 1941 315 million 5-cent pieces
were struck, with a gross weight of 50.4 million ounces. To coin an
equal number of 5-cent pieces with an alloy of 50% copper and 50%

silver would require 25.2 million ounces of silver, or less than 2%
of the silver held in the General Fund. There are now in circulation about 2.2 billion 5-cent pieces. To re-coin all of these with
the 50-50 alloy would require only about 177 million ounces of silver, or less than 14% of the silver held in the General Fund.
On the basis of the volume of coinage done in the fiscal year
ended June 30, 1941, use of this coin for new coinage would save:

432 tons of nickel or all nickel used last year for
minting,

432 tons of copper, or 9% of the copper used last
year for the minting of all coins, 33% of the copper

used last year in nickels.

If all nickels now in circulation were re-coined in this alloy
materials saved would be:

3,034 tons of nickel,
3,034 tons of copper.

387

MONETARY SILVER OF THE UNITED STATES

(millions of ounces)
October 31,

December 12,
1941

1941

(final)

(preliminary)

1,133.9

1,138.5

377.0

374.8

5.1

2.0

-

-

Silver held in Treasury

Securing silver certificates
Silver bullion
Silver dollars
In general fund
Subsidiary coin

Bullion for re-coinage
Bullion

1,358.7

1,360.5
2,876.5

Total held in Treasury

2,874.0

Silver outside Treasury

Silver dollars
Subsidiary coin

46.2
343.5
389.7

Grand Total

3,266.2

Treasury Department, Division of Monetary Research

December 17, 1941

388

December 13, 1941.

MEMORANDUM

TO:

The Honorable, The Secretary of the Treasury.

FROM: Nellie Tayloe Ross, Director of the Mint.
In accordance with your instructions, experiments have been

conducted at the Philadelphia Mint to determine whether suitable

substitutes could be found for the strategic metals in minor coins.
Tests with many alloys have been made. As a result, recommendation is

made that there be adopted, for the five-cent piece, an alloy of 500 parts
silver and 500 parts copper. This alloy would present no mechanical

difficulties and would entail no necessity for a change of design.
Two sample coins, struck from the proposed alloy, are herewity

submitted. The bright, silvery color they now present while newly
coined, will gradually assume a yellowish appearance, after they have

gone into circulation.
Another saving of strategic motal can be made by reducing the

tin content of the one-cent piece to a mere trace. This would not

materially affect the quality or appearance of the coin. The law permits
the Director of the Mint to make this change by administrative action, as
"

it reads:

the alloy of the one-cent piece shall be ninety-five per

centum of copper and five per centur of tin and zinc, in such proportions

389
-

as shall be determined by the Director of the Mint."
This change, assuming you have no objection, will be promptly

made, and the effort will be continued to find a way to reduce the copper

content. On the basis of the production in the fiscal year 1941, thirtyfive tons of tin can be saved by this recourse.
In further reference to the proposed change in the five-cent
piece, the following observations are offered:
1. Weight and Size
Experimentations were made upon the premise that

there should be maintained the present size, weight and non-

magnetic property of the coin, in order not to destroy its
adaptability to mechanical devices of subway stations, the

telephone company and countless commercial enterprises which
merchandise goods through vending machines. An appreciable

alteration in any of these respects would render the coin unfit
for use in these established mechanical devices and would thereby visit widespread injury upon business enterprises. The
samples submitted are the same weight and diameter as the fivecent piece now being made but slightly thinner.

2. Change in law prescribing content of the coin, and effect
upon its monetary value.

The monetary value, established by law, of the silver
in the subsidiary coins is $1.384 per ounce. The use of silver
in the five-cent piece in the same ratio, preserving its present
size, would result in a silver content of only 225 parts in 1000,
and would produce a coin brassy in appearance, similar to the cent
piece. This would undoubtedly be confusing to the public. Moreover, the objective of saving strategic metals would not be
achieved for while less nickel would be used, more copper would
be consumed. In order to conserve strategic metals it is recommended, therefore, that a change of legislation be secured which will
permit a content of one-half silver and one-half copper.
The result would be to eliminate all the nickel now
used in the coin, and one-third of the copper. Based upon theof
production of 1941 (fiscal year) it would amount to a saving
435 tons in nickel and 435 tons in copper, per year.

390

-3Upon the basis of 77.16 grains, the weight of the
coin at present, the silver content of the new coin would be

38.58 grains. This is slightly more silver than is contained

in the dime (34.722 grains). The monetary value of the silver
in the new piece would be $0.622+ per ounce.

3. Silver to be used
It will be necessary to use Silver Purchase Act
silver in the manufacture of this coin, because of its low

monetary value. Newly-mined domestic silver has been purchased

at a rate higher than the monetary value of the silver that would
be in the coin, and thus a loss would be incurred. As you know,
none of the Silver Purchase Act silver except the #nationalized"
has yet been used in coinage and it may be necessary to ask for
a change in the law to permit its use for this purpose. At the
end of November, the average price of the stock of this silver
held by the Mints and Assay Offices was $0.467328 per fine ounce.
4. Seigniorage
Upon every thousand nickels we now turn into the
General Fund approximately $48.00 in seigniorage. The adoption
of the now coin would mean a reduction to approximately $12.00
on every thousand. We would be substituting material costing

thirty-five cents an ounce for that costing thirty-five and

twelve cents a pound.

If you approve of these changes, the General Counsel's office

will be asked to draft the legislation necessary to put them into effect.

Approved:

391
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR

WASHINGTON

January 3, 1941 1942
MEMORANDUM TO THE SECRETARY:

Supplementing my memorandum to you of yester-

day's date relative to the position of U. S. Steel Corporation and Bethlehem Steel Corporation that they re-

quested contracts with price stipulations open, such

prices to be fixed as of dates of shipments of steel, it
is now indicated that these companies are willing to concede to the Government's request that firm prices be
quoted for quarterly requirements which has been the prac-

tice heretofore.
Accordingly the meeting scheduled for Monday

morning will not be required and we are now taking steps

to close for the first quarter of 1942 steel requirements

on the basis of firm prices for the quarter.
Cliffron E. Mack,
Director of Procurement

FORDEFENSE

BUY
UNITED
STATES

SAVINGS

BONDS
UNDSTAMPS

392

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE

Secretary Morgenthau

TO

FROM

Mr. Foley

Jan 3.1942

The Department of Agriculture is still disturbed
about the farm situation on the west coast, not so much as an
immediate problem, but because they feel that the situation is
still sufficiently disturbed to prevent planting of new crops.
The problems they raise are briefly as follows:
1. Non-Japanese laborers, particularly Filipinos,
are refusing to work under Japanese proprietors
or foremen.

2. Japanese farmers (either proprietors or lessees)
are not cultivating their farms for fear that
their investment in fertilizer, seed and labor
may be lost through cancellation of their leases,
or otherwise.
3. There are not enough competent white farmers immediately available to replace the Japanese farmers.

4. Some pressure is developing within the State to
have the Attorney General reexamine leases covering Japanese-operated land in view of the
California alien land laws, and to persuade appropriate authorities to take over the Japaneseoperated farms.

Agriculture feels that the immediate problem of the
distribution of crops has been taken care of, but that there
remains a psychological reaction which must be met if these
Japanese farmers are to continue to work the land.
At the request of Agriculture, Norman Towson and John
Lawler are leaving immediately for San Francisco, where they will

explore the subject in detail with representatives of the Department of Agriculture and other government and state agencies
in an effort to aid in the solution of the problem.

E.N. 7h

393

THE SECRETARY OF STATE
WASHINGTON

January 3, 1942

My dear Mr. Secretary:

I want to thank you for your letter of December
sixteenth and the enclosed export report.
My associates and I greatly appreciate your send-

ing these regular reports to us and, if not inconvenient,
would be very glad if you could continue to do so.
With best wishes,
Sincerely yours,

6

The Honorable

Henry Morgenthau, Jr.,

Secretary of the Treasury.

394

January 3, 1942

Dear Mr. Keller:
Thank you so much for sending

me copies of the Detroit News and the

Detroit Times. I was delighted to
read the stories on the truck orders
which they both carried so prominently

on their first pages.
With kind regards,
Yours sincerely,
(Signed) B. Morganthan. Jr.

Mr. K. T. Keller,

President, Chrysler Corporation,
Detroit, Michigan.

file n.m.c.

395
CHRYSLER CORPORATION
Detroit.Michigan
K.T.KELLER
PRESIDENT

December 31, 1941.

The Honorable Henry Morgenthau, Jr.,
The Secretary of the Treasury,
Washington, D. C.
Dear Secretary Morgenthau:

Herewith are copies of the
front pages of The Detroit News and the
Detroit Times, of December 31st, headlining

the story of the truck orders.

With kind regards, I
remain
Yours

1-Theller

KTK.LS

396

IN THE

I

Huss Reveals Hitler's Secret Weapon Against the United States

NEWS

DETROIT

TIMES

42ND YEAR NO. 92 DETROIT. MICHIGAN WEDNESDAY, DECEMBER 31, 1941

PAGES

THREE

CENTS

RED

LINE

CHRYSLER WAR ORDER

TO GIVE 25,000 JOBS
Japs at Manila's Gates
$80,000,000

THE BRITISH RAID ON THE GERMAN-HELD NORWAY COAST

Nippons' Bombers

Cost Includes

Control the Air

New Vehicle

Capital Strafed, Americans Open

Tokio Reports Last-Ditch Fight

End Williams
Ouster Hearing:

The Weather

Up to Governor

Jap Sneak Blitz
Fuehrer's Blow

Detroit's Aliens
Told to Turn In
Cameras, Radios

alter Winchell

PAGE #

Detroit Times Feature Page

December

On Broadway

Roosevelt, Aides

Obituaries

End Williams

Work Furiously

Thomas F. McNamara

Ouster Hearing:

On War Strategy

32 Years City Fireman

Up to Governor

Admits
Aiding

Williams

Funeral Friday

Percy Thomas

Durling

On the Side

Seize Cameras

Of Aliens Here

Sol Hess

Young Gangster
Again in Toils

Chrysler Gets
80 Million Order
THEY'LL DO IT EVERY TIME

By Jimmy

M. Will Train
Ordnance Inspectors

Auto War Council
Alvan Macauley Calls for United Action to Push

Sane Life in War
Stay Away
Psychiatrist Urges Detroiters
From Gossip, Have Faith in Experts
to

Industry's Arms Output to the Limit

The Detroit News

Market
Edition
MARKETS ON PAGE 16
(Fourth Edition)

THE HOME NEWSPAPER

22 Pages-THREE

BO MILLION CHRYSLER WAR ORDER
Williams Named in Sale of Doctors' Jobs

JAPS SMASH NEARER MANILA
Case Is Rushed

0 Governor
Must Stop

Assures

Jap Armies Press Still Closer to Manila

Work for
25,000

RAGOZA
TARLAC

LUZON

IBA

80,000 Units to Go

POLILLO
IS

ussians'
Hitler

MALOLOS

BALANGA

Gets Order in

Foe Reported

20 Miles Away
Japanese Due

for Surprise
Churchill

MANILA
Lamon Boy

Talk

CORRECIDOR

LUBANG

BOAC

Prayers Rise
to New Year
Services Reflect War,

Wallace May Become

War Industry Czar

President's Plea

Wally Is Voted

Best Dressed

Allies Start
Nerve War
Tokyo Reported
Sniping

Couzens' Gift
Adds $20,000
to Red Cross

Death Ends Little Old Lady'
24-Year Sitdown Strike

398

BRITISH AIR COMMISSION
1785 MASSACHUSETTS AVENUE
WASHINGTON D. C.
TELEPHONE HOBART 9000
PLEASE QUOTE
REFERENCE NO

With the compliments of British Air Commission,
who enclose Statement No. 13 - Aircraft Shipped for the week ended December 30, 1941

The Hon. Henry Morgenthau, Jr.
Secretary of the Treasury
Washing ton, D. C.

January 3, 1942

399
STATEMENT NO. 13.

AIRCRAFT DESPATCHED FROM THE UNITED STATES WEEK ENDED

DECEMBER 30, 1941.

TYPE

DESTINATION ASSEMBLY POINT BY SEA BY AIR FLIGHT DELIVERED OFR
USE IN CANADA

-

CESSNA

T-50

Canada

CONSOLIDATED

Catalina I A

Canada

-

-

-

7

--

7

--

NORTH AMERICAN

Mustang

U. K.

TOTAL

U. K.

2

6

-

8

In accordance with a request made by Mr. Kamarck from the Office of

B.

the Secretary of the Treasury to P. S. to D. G., a separate list is being prepared
and will be issued as soon as possible showing cumulative totals by Sea, by Air, and
Flight Delivered for Use In Canada, for the year ending December 31, 1941.

ritish Air Commission,
January 2, 1942.

400

JAN 3 1942

My dear Admiral:

Sir Frederick Phillips had informed me that
the British Government would like to sell to the
Maritime Commission, directly or through the
Defense Plant Corporation, the shipbuilding faci-

lities that have been constructed for it at the

Todd Bath Shipbuilding Corporation Yards in South

Portland, Maine, and at the Todd California Shipbuilding Corporation, Richmond, California.
In view of the British Government's need for
dollars, I believe the United States Government
would be justified in purchasing these Yards, and
I should like, therefore, to recommend their
purchase to you.

You will appreciate, of course, that the
Treasury, in making this recommendation, does not
wish to be understood as passing judgment on the

price which the British Government has set for
the properties.
Very sincerely yours,
(Sicked) S. Morgenthen. Sr.

Secretary of the Treasury.
Admiral E. S. Land, Chairman,
U. S. Maritime Commission,
Commerce Building,
Washing ton, D. C.

By Messenger
cco

in white

n.m.c.

2-41

E COPY

401

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 1, 1942

Secretary Morgenthau

TO

H. D. White

FROM

Subject: British Request that the Maritime Commission Purchase

Todd Shipbuilding facilities owned by the British.

There is attached a memorandum from Sir Frederick

requesting your assistance in selling two British-owned
shipyards to the Maritime Commission. Sir Frederick says
that purchase of the California Yard is urgent because
the Maritime Commission is ready to place contracts for
building ships in the Yard when the British ships are

comoleted next October. The Maritime Commission would not

buy these Yards if its own policy were the sole criterion,
but it is willing to do so if you write to Admiral Land
and state that the purchase would provide for the British
dollars that the Treasury believes they need.
The Maritime Commission for its own part would prefer

to lease the Yards at a nominal rental. They would like
to pay a "nominal" rental because Maritime Commission ships
are turned over to the British for a "nominal" hire.
Sir Frederick states that the cost of the two Yards

is $14 million. However, in the list of British contracts

submitted to the Treasury in February, the Yards were listed
at $8 million, and in 8 British document submitted to the
Treasury in August the Yards were listed at $9 million.

In view of the fact that the war in the Far East will
make Britain's dollar position considerably more difficult,
I think you should recommend the purchase of these shipyards to the Maritime Commission. The question of price,

however, should be their responsibility. The British sale
of these shipyards is similar to their sale of armament
facilities in this country, and I see no grounds, therefore,
upon which we could refuse to assist them in selling shipyards.
Land.

I am attaching a proposed draft of a letter to Admiral

402

Willard Hotel,

Washington, D.C.
December 31, 1941.

Dear Mr. Secretary,

By virtue of contracts entered into with

Todd-Bath Iron Shipbuilding Corporation and
Todd-California Shipbuilding Corporation, His
Majesty's Government in the United Kingdom will

shortly acquire title to two shipyards located

in Portland, Maine, and Richmond, California. The
cost of these yards amounts to approximately
7,500,000.00 and $6,500,000.00 respectively. Both

yards appear to be eligible for eventual sale to
Defense Plant Corporation, and in view of certain
repairs and improvements which must shortly be
made, an immediate sale of the California yard

is desirable. I attach a somewhat fuller state-

ment on this.

The possibility of effecting a sale of

one yards ha. been briefly discussed with the

General Counsel of Defense Plant Corporation, who
suggested that the Meritime Commission should be

first CO sulted. The Commission not unnaturally

takes the view that in the usual course of its business it would prefer a lease of the facilities at
a nominal rental to purchase. It has indicated,
lowever, that it would consider a purchase of
the yards, either directly or through Defense
Plant Corporation, if it were assured that such
a purchase is desirable from the point of view

01 the British dollar position, and if it were
also assured that the purchase could be made

without any diversion of funds from its planned
programs of shipbuilding.

You will recollect that the sale of
capital facilities in this country created by the

use of our own dollars before the Lend-Lease Act,
is a recognised method for obtaining dollars, and
has already been applied at the Memphis Powder
Plant and in other cases.

Could I prevail upon you to indicate to
Admiral Land that in order to provide relief for the

British dollar position it is desirable that the yards
be purchased rather then leased at a nominal rental ?
Yours sincerely,

The Honourable

Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington,
C.

Heillips

403

TODD-CALIFORNIA SHIPBUILDING DIVISION OF
PERMANENTE METALS CORPORATION,
RICHMOND, CALIFORNIA.

This Corporation has two contracts with
the British Purchasing Commission, one for the

construction of facilities in which to build thirty
(30) cargo vessels and the other for the actual
construction of the vessels.

The facilities consist of a 7-way
shipyard with necessary fitting-out berths, etc.
The construction of the facilities has

been entirely paid for with british dollars. Title

passes to the United Kingdom Government on completion

and the formalities for this are now under way.
The cost of the facilities has been

approximately $6,500,000.

The Maritime Commission wishes to place

immediately a contract for ships of its own emergency

type (EC2) to follow on the British order which will
be completed about October 1942. To fit the facilities
for this further construction, considerable work of

repair and improvement must be carried out. The
Maritime Commission proposes to provide the funds

required, and it is now urgently necessary to devise
some means of allowing them to do this without delay.

Washington, D.C.,

December 31, 1941.

THE SECRETARY OF THE TREASURY
WASHINGTON

January 3, 1942.

My dear Mr. Ambassador:

Pursuant to and in confirmation of the conversations had between you and the Secretary of the Treasury

it is agreed as follows:

(1) The Government of the United States hereby
purchases from the Government of the Union of Soviet
Socialist Republics 602,000 fine troy ounces of gold
which 602,000 fine troy ounces of gold the Government
of the Union of Soviet Socialist Republics hereby agrees

to deliver to the United States Mint at San Francisco or

to the United States Assay Office at New York within 180
days from the date hereof for the account of the Secretary

of the Treasury of the United States.

(2) The purchase price of such gold will be at
the rate of $35 per fine troy ounce less 1/4 of 1% and
less usual mint charges. Twenty million dollars, con-

stituting an advance payment, shall be paid by January 5,
1942 to the Government of the Union of Soviet Socialist
Republics by credit to the account of the State Bank of
the U.S.S.R., on the books of the Federal Reserve Bank of
New York. Final adjustment will be made after the gold
is melted, weighed and tested at the mint or assay office.
(3) The Government of the Union of Soviet
Socialist Republics agrees to reimburse and indemnify the
Government of the United States and the Secretary of the
Treasury for any advance payments and expenses in the

event that the gold herein purchased is not delivered as
herein provided within 180 days from the date hereof or
in the event that the gold is under weight. All risk of
loss remains with the Government of the Union of Soviet

Socialist Republics until delivery of the gold at the

-2United States Mint at San Francisco or the United States
Assay Office at New York, and all expenses incurred in
connection with the delivery of the gold to such mint or
assay office shall be for the account of the Government
of the Union of Soviet Socialist Republics.
Very truly yours,

Secretary of the Treasury.

His Excellency

Maxim Litvinoff,

Ambassador of the Union of Soviet

Socialist Republics.

The foregoing is agreed to on behalf
of the Government of the Union of
Soviet Socialist Republics

Ambassador

Union of Soviet Socialist Republics.

406

Dear Mr. President:

Reference is made to your letter of

December 28, 1941, informing us of your

desire that the Soviet Aid Program, as
provided in the Moscow Protocol Agreement,
be restablished beginning January 1, and
that existing deficits are to be made up
and shipped from this country not later
than April 1.
You can be assured that the Treasury

Department, in the carrying out of its
part of the Soviet Aid Program, will do
everything in its power to meet the achedule which you have set. In the past, the
Treasury has placed orders immediately
upon receipt of the requisitions from the
Lend-Lease authorities. Similarly, in the

future, no time will be lost in the placing
of orders. At all times, the Treasury is
pressing dealers to make deliveries as
rapidly as possible.
de are appending a table which shows

the status of Treasury operations in relation to specific items in the Protocol
Agreement, and to your expressed desire
that the deficits be made up by April 1.
very sincerely yours,
Secretary of the Treasury
The President,
The White House.

Delivered by Leave Service 30
CEM:HDW:as

1/2/42

co. Sen halling of Lea Leave

407

MUSCOW PROTUCUS AGREEMENT

STATEMENT at THE U. - TREASURY DEPARTS 157. PROCUREMENT DIVISION, GE
STATUS OF PURCHASES UNDER THE AGREEMENT AS OF DECEMBER 31, 1941. (Cont'd)
(a) ADVANCE NOTICE RECEIVED or REQUIREMENT AND PRELIMINARY PURCHASE
STEPS TAXES PENDING RECEIPT OF COMPLETE REQUISITION.

APRIL 1, 1942

REQUIREMENT

600 Tons

900 Tons

3,000 .

4,500

Not Specified

Cold Rolled Steel Sheets

72,000

Steel Wire

63,000

Not Specified

Not Specified

.
.

.

.

.

.

.

.

.

.

.

.

.
.

.

.
.

.

.
.
.
.

Cose Crushers

10 Pieces

.

.

Centry Creaes

500

600 .

.

.

Cracking Plants

.

Pumps

2,000 Tons

.

Gas Enginee with Compressors

72,000 .

.

Diesel Drilling Unite

1,996.5 Tons

.

Electric Sealers

42,000 .

.

Drill Sharpening Machines

8,050

.

Bress Wire

1,245 .

48,000 .

10,800

Steel Wire Hope

Alloy Steel Ball Rod

48,000 Tons

10

26 .
79

2

72,000 Tons

2,300,000 Lbs.

.

Cold Rolled Steel Stripe

500 .

5,960 Tons

.

Calibrated Steel

500 Tons

2

Not Specified

IN PROCESS

.

Tool Steel

REQUISITIONS ARE

.

High Speed Tool Steel

AMOUNT FOR WHICH

.

MATERIAL

Abresives

ST PROTOCOL BY

9

PROTOCOL

SHIPMENTS REQUIRED

.

TOTAL

14 .

.

(c) ITEMS OF CHARACTER USUALLY PURCHASED BY PROCUREMENT DIVISION
UNDER LEASS LEND, BUT NO NOTICES OR REQUISITIONS THE RECEIVED.

Not Rolled Steel

Steel Billets (Shell Steel)
Steel Allog Tubes

Steinless Steel Wire
Forging and Press Equipment

63,000 Tons
72,000
1,800
180

$36,000,000.00

42,000 Tons
48,000
1,200

120 .
$24,000,000.00

--

--

STATEMENT BY THE U. a. TREASURY DEPARTMENT PROCURED DIVISION, OR
STATUS or PURCHASES UNDER THE AGRIGORANT AS OF DECEMBER 31. 1941

(A) ITEMS OF WHICH REQUISITIONS HATE EXP RECEIVED IN VEDDLE OR IN PART.

TOTAL

SHIPMENTS REQUIRED

AMOUNT FOR WHICH

BY PROTOCOL BY

REQUISITION

PROTOCOL

APRIL 1. 1942

REQUIREMENT

MATERIAL

12,000 Tons

18,000 Toss

Aluminum

Not Established

1,200

Nickel

1,800 Tons

2,700

Molydenum

SHIPMENTS

AMOUNT

TO DATE

PURCHASE

RECEIVED

6,000 Tons

6,000 Tons

3,700 Tons

1,200

1,200

1,200
900

900

900

15,000

3,186

30,000

15,000

45,000

3,000

3,000

4,500

3,000

6.750

1,800

1,650

1,650

2,700
2,700

1,800

900

Ferro-Silicon
Terro-Chronium

1,800

1,200

20,000

2,000

24,000

20,000

36,000

12,000

12,000

24,000

12,000

36,000

Rolled Cartridge Brass Strip

Zinc, Electrolytic
Copper Goods

(Tubing and other items of copper)

Timplate

Barbed Wire

200

600

-0

180

180

65 .

3,900

3,900

2,400

3,600

Graphite Electrodes

300

900

600

120

180

Bichrose Vire

731

VARIOUS INDUSTRIAL EQUIPMENT

1

.

50

9

3

.

.
9

4,773 Gross Tons

3

50

.

.
.

.

.

.

.

.

.

.

.
.

.
.

.

.

.

.
.

.
.

Crucibles

,

Air Compressors

.

Electric Purpases

75

5

.

Melting Purpaces

7

Rotary Hearth Parances

.

75

Slush Purps

7

.

Alumisum Rolling Mill

Carburizing Purpases

24 Pieces

.

24 Pieces

.

Not Specified

.

Not Specified

$6,026,409.73

$4,026,409.73

-0-0-0-

.

$16,000,000.00

1

Get Carburising Farnaces

$27,000,000.00

.

TOTAL

4,773 Gross Tons

-0

.0-0
-0

409
THE WHITE HOUSE
WASHINGTON

December 28, 1941

Confidential

My dear Mr. Secretary:

I desire that the Soviet aid program as provided in the
Protocol Agreement be re-established beginning January 1.

Existing deficits are to be made up and shipped from this
country not later than April 1.
I realize that some amendments such as relate to antiaircraft guns and their ammunition must be made as to times of
delivery but I wish if possible when such amendments must be
made you would give consideration to increasing the Protocol in
other items essential to the Russians.

The whole Russian program is SO vital to our interests I
know that only the gravest consideration will lead you to
recommend our withholding longer the munitions our Government
has promised the U.S.S.K.

: wish, therefore, that all items go forward promptly
after January 1, unless I authorize the specific amendment.
Very sincerely yours,

the Honorable

The Secretary of the Treasury.

410
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR

WASHINGTON

January 3, 1942

MEMORANDUM TO THE SECRETARY

There is submitted herewith the operating report of
Lend-Lease purchases for the week ended January 3, 1942.

In addition to the usual requisitions from the British
and Russians, we received advance copies of requisitions

from the Chinese for gasoline and lubricating oil requirements, totalling approximately 330,000 druns. During the
past week there were purchased various drugs for Turkey and
numerous clothing items for Poland.
Mr. Stettinius announced yesterday that Czeckoslovakia

has been added to the list of countries entitled to receive
aid under the Lend-Lease Act.

Director of Procurement
FORDEFENSE

BUY
UNITED
STATES

SAVINGS

BONDS
MIDSTAMPS

Sports

411
OPERATING REPORT - LEND-LEASE PURCHASES

WEEK ENDED JANUARY 3, 1942

TOTAL ALLOCATIONS
LESS:

REVOLVING FUNDS
FUNDS AWAITING

CLEARANCE BY O.P.M.

$602,869,220.00
$125,330,609.00
8,722,125.00

134,052,734.00
$468,816,486.00

NET ALLOCATIONS

*REQUISITIONS APPROVED FOR

$485,755,718.88

PURCHASE

PURCHASES PREVIOUSLY REPORTED

PURCHASES THIS WEEK
TOTAL PURCHASES

$341,715,321.30
21,770,386.51
363,485,707.81

REQUISITIONS IN PROCESS INCLUDING THOSE AWAITING
SPECIFICATIONS

$122,270,011.07

*THE DIFFERENCE BETWEEN NET ALLOCATIONS AND REQUISITIONS APPROVED
FOR PURCHASE REPRESENTS ALLOCATIONS IN EXCESS OF COMMITMENTS, REQUISITIONS TRANSFERRED TO OTHER AGENCIES, AND CANCELLED REQUISITIONS.

C

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DEPARTMENT OF STATE

Washington

In reply refer to
FF 840.51 Frozen Credits/4901

January 3, 1942

The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and transmits
herewith a copy of air mail despatch no. 3744 of December 24, 1941 from the American Embassy at Buenoa Aires,

together with translations of circulars nos. 202, 244, 246,
and 262, concerning the financial measures adopted by the

Argentine authorities effecting transactions with or for the
benefit of the Axis countries.

Enclosure:

From Buenos Aires,
no. 3744, December 24,

1941, with enclosures.

eh:copy
1-6-42

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No. 3744
SUBJECT:

Buenos Aires, December 24, 1941

STATUS OF FINANCIAL MEASURES ADOPTED BY THE
ARGENTINE AUTHORITIES AFFECTING TRANSACTIONS
WITH OR FOR THE BENEFIT OF THE AXIS COUNTRIES

CONFIDENTIAL

The Honorable,

The Secretary of State,
Washington.

Sir:

I have the honor to submit below a summary of the existing measures in

Argentina affecting transactions with or for the benefit of the Axis countries.
Reference is made to the Embassy's telegrams Nos. 1402 of December 8, 12 midnight, 1417 of December 10, 3 a.m., 1422 of December 10, 7 p.m., 1431 of
December 11, 9 p.m., and 1532 (en clair) of December 23; and despetches Nos.
3683 of December 10, 1941, and 3735 of December 22, 1941. The discussions on

the subject had with the Foreign Office and with authorities of the Central
Bank and the notes presented, are reported in the telegrams and despatches
aforementioned.

The only measure of this nature thus far adopted by the Argentine
authorities since December 7 and up to December 22 was the issuance by the
Central Bank of Circular No. 262 of December 11, 1941, which was reported to

have been the result of instructions by the Ministry of Finance following the
receipt of the Embassy's Note No. 636 of December 9. A translation of that

circular is enclosed herewith (errors in the translation of the circular previously reported were corrected in the Embassy's en clair telegram no. 1532

of December 23). The circular indicates in the preamble that the only purpose
is to suspend the movements of funds and securities between Argentina and Japen,

2-

414

with such exceptions in particular cases as the Central Bank might deem
necessary, and provision is made for the suspension of such transactions.
The circular goes further, however, than merely providing an embargo on trans-

fers of funds to and from Japan, for it "freezes" accounts of funds and securities in Argentina of persons or firms domiciled in Japan (as well as prohibits
deposits in such accounts), although operations may be conducted if expressly

authorized by the Central Bank. The Central Bank has intimated that the
amount of Japanese funds in Argentina is probably several million pesos, which

includes a million pesos held by the Central Bank for the credit of the
Yokohama Specie Bank in connection with the shipment of Japanese gold here last

October, reported to have had a value of approximately 10,000,000 pesos.
Although an official of the Central Bank has informed a member of the

Embassy staff in confidence that the Bank intended to be sparing in granting

authorizations in special cases, there is, of course, an important deficiency
in the measure in that there are not blocked internal transactions of Japanese

nationals residing in Argentina. These peso assets are left freely at the
disposition of such individuals and firms and they are thus, in at least some
degree, under the control of Japan and perhaps the other Axis countries. The

Central Bank has indicated that the taking of this further step was not being
contemplated. The number, however, of Japanese residents in Argentina is
estimated to be under 7,000.

Of much greater importance is the problem of commercial transactions for

the benefit of the other Axis countries, more particularly Germany and Italy.
It was hoped that with the entry of those two countries into the war against
the United States and certain other countries of the Western Hemisphere, the

Argentine authorities would take the same action as in the case of Japan, but
it now seems unlikely that this will be done in any event before the conference
next month at Rio de Janeiro.

-3-

415

Meanwhile, however, a degree of Central Bank control over commercial

transactions with Germany and Italy is provided by the Bank's circulars Nos.
244 of September 1, and 246 of September 12. The former of these (which

refers to Decree No. 66,230 of June 26, 1940, and the Bank's circular No. 202
of June 27, 1940) makes provision for the cases in which transfers of payment
may and may not be made without authorization between Argentina and the

countries with which it has compensation or payments agreements (which include

Germany but not Italy). The general rule is that such transfers may be made
only within the accounts provided by the agreements.

Circular No. 246 of September 12 after referring to "difficulties in
regularly effecting arbitrage against dollars" and to Decree No. 100,316 of
September 9, 1941, which makes it necessary to obtain the authorization of

the Central Bank in order to conduct "arbitrage operations of foreign ex-

change in direct or indirect form," appears to place, for purposes of transfere of payment, all the countries of continental Europe, as well as China
and Japan, in the same category as the countries with which Argentina has

compensation or payments agreements. As to the decree itself, the limitations

which it places on arbitrage transactions might seem to be significant in
view of the difficulty in obtaining lira and marks in the Buenos Aires market
and the need, therefore, to make remittances to those countries by way of

neutral or other third countries. In practice, however, the facility with which
Swiss france may be purchased here has until now, despite circular no. 246,
rendered it comparatively simple to make remittances to Germany and Italy

without having to resort to actual arbitrage. It has not been difficult
to obtain Swiss-franc telegraphic transfers, apparently on the theory that they
were officially presumed to be in pursuance of legitimate trade transactions,
and it has even been possible to do this without furnishing any information.

--

416

After obtaining the transfer, the remitter would have little difficulty in
arranging with a Swiss bank or other agency in Switzerland for conversion of

the france into marks or lira. Other currencies have also been used as
intermediate currencies for such transactions, although to a less conspicuous
extent. However, the Central Bank has just issued a new circular, No. 264, dated
December 22, 1941, which, according to Dr. Edgardo Grumbach, head of the foreign-

exchange department of the Bank, is designed to prevent remittances of this

character by placing on the local organization furnishing the transfers the

onus of the legitimate character of the transactions. It will probably still
be possible, however, to obtain remittances to Switzerland for conversion
into Axis currencies through the less scrupulous exchange brokers. Copies and

copies of translations of this circular will be submitted to the Department
in the next airmail pouch.
Estimates of German and Italian investments in Argentina were submitted
to the Department in the Embassy's despatch no. 3467 of November 7. 1941. These

figures, which were compiled by the Committee of the National Congress investi-

gating Nazi activities and which were stated to be substantially correct by
the Central Bank, showed for Germany 35,549,000 pesos (approximately $8,500,000

U.S.cy. at the prevailing free-market rate of exchange), this figure being
entirely for direct investments, while for Italy, they showed 77,213,000 pesos
(approximately $18,400,000) for direct investments and 1,861,000 pesos (ap-

proximately $450,000) for portfolio investments.
Copies of the Central Bank's circulars Nos. 202, 244, 246, and 262 have
been previously sent to the Department as they have been issued without covering

despatches. There are now enclosed, however, three additional sets of these,
including Decree No. 66,230 of June 26, 1940 (which is an annex of Circular No.
202 of June 27, 1940) and decree No. 100,316 of September 9. 1941 (which is an

417

- -5-

/8 Annex of Circular No. 246 of September 12, 1941). There are enclosed also transl-

ations of the four circulars and the two decrees.

Respectfully yours,
For the Ambassador
James W. Gantenbein
Second Secretary of Embassy

Enclosures:

1. Circular No. 202 and annex
2. Circular No. 244
3. Circular No. 246 and annex
4. Circular No. 262
5. Translation of Enclosure No. 1
6. Translation of Enclosure No. 2
7. Translation of Enclosure No. 3
8. Translation of Enclosure No. 4

Qn.

851

JWG:dnb

A true copy of the
signed original
dnb

1-c-h

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Enclosure No. 5

Despatch No. 3744

(TRANSLATION)

CIRCULAR No. 202

(Accountancy Department)
CENTRAL BANK OF THE ARGENTINE REPUBLIC

Buenos Aires, June 27. 1940
TO AUTHORIZED INSTITUTIONS AND BROKERS

We take pleasure in addressing you in order to inform you that by
virtue of the provisions of Decree No. 66,230 of the 26th instant, a copy
of which is attached herewith, operations involving persons of real or
juridical standing residing or domiciled in the countries with which there
exist agreements of compensation of payments (1), shall be made from this

date in accordance with the following rules:

1. - Transfers of funds in favor of such countries:
a) Remittances that have to be made through compensation accounts

(circulars No. 126 of December 30, 1937. No. 162 of April 1,
1939, No. 181 of January 11, 1940 and No. 198 of June 10, 1940):
will continue to be made as hereto, as established for each

country by the provisions in force, with the exception of the
provision regarding temporary character established in the
following paragraph.

Transfers of funds to France, its colonies, protectorates
and territories under mandate, to be paid through the "FrancoArgentine Accord", shall be effected only after being previously
authorized by this Central Bank.
2. - Other operations.

A permit granted by this Central Bank will likewise be required for
the following operations:
a) Remittances of bonds or securities of any kind, in national or
foreign currency, in favor of such persons.
b) Debits in accounts in money, bonds or securities of any kind,
in national or foreign currency, already existing or which may be
opened in the country in the name of the persons to whom reference
is made in the preceding paragraph.

c) Change of domicile registered on this date in such accounts in

money, bonds or securities, unless such changes are made within

the territory of each one of those countries.
We remain

Very truly yours,
Annex

Tr:AA:dnb

BANCO CENTRAL DE LA REPUBLICA ARGENTINA

(One signature illegible) (Signed:)E.Grumbach
tpresent:Germany,Spain,France and the British Empire.

419
Y

(TRANSLATION)

ANNEX TO CIRCULAR NO. 202 (Accounting Department)

Buenos Aires, June 26, 1940.
THEREAS:

It is advisable to take measures for the better fulfillment of the
existing agreements of compensation of payments, guaranteeing that all
remittances to the countries with which there exist such agreements may be
effected through compensation accounts in the measure allowed by funds
accumulated therein in payment of our exports to the respective countries:
THE PRESIDENT OF THE ARGENTINE NATION DECREES:

ARTICLE 1 - All remittances to the countries with which there exist
agreements of compensation of payments shall be effected

through the accounts provided for in the respective

agreements.

ARTICLE 2 - With a view to the strict fulfillment of the provisions of the
preceding article, the following operations are subject to

control by the Central Bank of the Argentine Republic, which
will regulate the conditions under which they may be connected:
a) All remittances of bonds and securities of any kind and
transfers of funds in national or foreign currency having to be
made by banks and firms of this country in favor of persons or
entities having legal standing, resident or domiciled in the
countries referred to under Article 1.
b) All operations the amount of which has to be debited in
accounts in money, bonds or securities of any kind, in national
or foreign currency, already existing or which may be opened in
banks or firms of the country in the name of the persons to whom
reference is made in the preceding paragraph.

ARTICLE 3 - Let this be communicated, etc.
(Signed) ORTIZ
P. Groppo.
DECREE NO. 66,230
COPY

Tr:AA:bk

Copy:hmd:1/6/42

ENCLOSURE NO. 6 DESPATCH NO. 3744

420

(TRAISLATION)

CIRCULAR No. 244

(Accountancy Department)
CENTRAL BANK OF THE ARGENTINE REPUBLIC

Buenos Aires, September 1, 1941
TO THE INSTITUTIONS AUTHORIZED TO
OPERATE IN FOREIGN EXCHANGE

In accordance with Decree No. 66,230, a copy of which was sent as an

annex to our circular No. 202 of June 27, 1940, all remittances to the countries
with which Argentina has compensation or payment agreements (1) must be made
through the accounts established in the respective agreements and movements of

funds or securities outside of those accounts may be effected only by special
authorization of the Central Bank.

In order to simplify the conducting of the last named operations, the
Central Bank has decided to empower the authorized institutions, after the
verifications to be made in each case, to issue directly the vermits requested
of them in accordance with the provisions of the present circular and, in
order to avoid confusion, there are summarized below all the regulations which
will govern such movements of funda or securities:
I - Operations, the execution of which may be authorized directly

by the institutions:

1.) The transfers of funds by compensation or payments accounts which will

remain in effect as to the present date, according to the conditions
established for each country by the regulations in force.

2.) The receipt of funds (credits or deposits) in accounts in pesos of

national currency opened in the authorized institutions in the name
of depositors residing or domiciled in countries included in the said
decree, provided that they pertain to direct operations between Argentina
and the countries where the respective depositors of the accounts reside
or are domiciled.

3.) The reaoval of funds (debits or withdrawals) from the accounts indicated
in the preceding paragraph when the said funds are destined:
a) to effect remittances by intermediary of commensation or payments
accounts:

b) to transfer them to other accounts in pasos of national currency
opened in the authorized institutions in the name of persons established
in the country itself where there is domiciled the holder of the
account who provides the funds:

(1) At present; Germany, Spain, France and the British Empire.

-2-

421

c) to effect expenditures, payments, or investments in the country
in accordance with the following:
- expenses for cables and postage, imposts, taxes and banking
commissions;

- current expenses in connection with real estate located in the
country, being property of the holder of the account, the
administration of which is in charge of the authorized institution which grants the permit;
-- payment to navigation companies, steamship agencies, and captains
of ships whenever the funds are destined to meet expenses of
ships in Argentine ports;

- payments to insurance companies resident in the country provided

that they pertain to the fulfillment of reinsurance contracts;

-- in order to acquire Argentine bonds or securities; provided that
these are deposited in the names of the holders themselves.

4.)

Semi-monthly, the institutions shall inform the Central Bank concerning
the amount and scope of the operations included in points 2 and 3 of
this chapter, for whose execution they are given authorization.

II - Operations for which there will be required a permit issued by
the Central Bank.

1.) All movements in the aforementioned accounts in pesos of national currency
which are not expressly indicated in the preceding chapter.
2.) Transfers of funds in favor of the aforementioned countries which may
not be effected by means of the compensation or payments accounts or by
the intermediary of the accounts in pesos of national currency to which
reference has been made.

3.) Withdrawals from the accounts of bonds and securities and from the
accounts in foreign currency opened in the name of persons resident or
domiciled in the aforementioned countries.

4.) Remittances of bonds or securities of any nature in favor of persons
domiciled in such countries.
Changes of domicile of the holders of the accounts subject to the regulations
of Decree No.66,230 may be registered only in the respective accounts if there
is a previous authorization of the Central Bank.
Very truly yours,
CENTRAL BANK OF THE ARGENTINE REPUBLIC

(One signature illegible) (Signed) E. Grumbach
Tf:JWG:dnb

Copy:bj:1-6-42

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ENCLOSURE NO. 7 DESPATCH NO. 3744
TRANSLATION

CIRCULAR NO. 246
ACCOUNTING DEPARTMENT

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Buenos Aires, September 12, 1941
TO THE INSTITUTIONS AUTHORIZED TO OPERATE
IN FOREIGN EXCHANGE

Owing to the difficulties in regularly effecting arbitrage

against dollars - to which reference is made in Decree No. 100,316
of the 9th current, a copy of which we enclose - the Central Bank,
with a view to normalizing the system of payments with the
countries affected (1), has decided to consider the accounts which
the authorized institutions may maintain in their correspondent
banks in the countries mentioned, in the respective currency, as
compensation or payments accounts.

For this purpose, there will be applied to the movements of
funds and securities between said countries and our country, the
regulations in effect pertaining to Germany, Spain, France and the
British Empire, communicated in our circular no. 244 of the 1st
instant.

By virtue of the provisions of the aforecited Decree, ve
request you to be good enough to consult the Central Bank regarding
the arbitrage operations which have to be conducted abroad or in
the country for your own account or for the account of third persons.
Very truly yours,
CENTRAL BANK OF THE ARGENTINE EXUBLIC

(One signature illegible) (Signed: E. Grumbach)
Annex

(1) By virtue of the monetary measures adopted
in the United States there may not now be regu-

larly arbitraged against dollars currencies of

the countries of continental Europe, China and Japan.

423
(TRANSLATION)

Annex to Circular No. 246
(Accounting Department)
MINISTRY OF FINANCE
OF THE NATION

Buenos Aires, September 9. 1941
WHEREAS:

There does not exist at the present time the possibility of
buying or selling regularly by means of arbitration against
dollars, currencies of the countries whose funds are affected in
the United States by the monetary measures in the said country:

By virtue of this, the Central Bank of the Argentine
Republic has had to conduct special operations for procuring
foreign exchange of the said countries in order to be able to
pay for the importation of essential articles proceeding from
them;

Availing itself of the facilities offered by the local free

market there are meanwhile being conducted overations outside of
arbitrage which respond in general to movements of funds not
connected with transactions of our own country and create disturbances in the development of our forei n exchange operations;

In order to avoid those disturbances, it is desirable to
limit the operations of arbitrage to those which pertain exclusively

to direct transactions between Argentina and the respective countries,
these having prior authorization;
Article 14 of Law no. 12,160 empowers the Executive Power to

establish the rules to which there are to be adjusted the operations
of foreign exchange, the handling of which has been transferred to
the Central Bank,

THE VICE PRESIDENT OF THE ARGENTINE NATION
IN EXERCISE OF THE EXECUTIVE POWER

DEC R E E S:

ARTICLE 1 - For such time as it is not possible to effect regularly
arbitrage operations in certain foreign exchanges
against dollars, there will be required the previous
authorization of the Central Bank of the Argentine
Republic in order to perform arbitrage operations in
foreign exchange in direct or indirect form.

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2-

ARTICLE 2 - The preceding regulation will govern for arbitrages
which are executed in foreign markets, ordered from
Argentina, and for those which must be executed in the
local market by virtue of orders given from abroad.
ARTICLE 3 - The Central Bank of the Argentine Republic will regulate
the conditions in which there may be effected the movements of funds abroad which may involve, in direct or
indirect form, operations of arbitrage.
ARTICLE 4 - Let this be communicated, etc.

(Signed) Castillo
Carlos Alberto Acevedo

DECREE No. 100,316

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Y

Enclosure No

Despatch No. 3744

8

(TRANSIATION)

CIRCULAR No. 262

(Accountancy Department)
CENTRAL BANK OF THE ARGENTINE REPUBLIC

Buenos Aires, December 11, 1941
TO THE INSTITUTIONS AUTHORIZED TO OPERATE IN FOREIGN EXCHANGE

We take pleasure in addressing you in order to inform you that
owing to the state of war existing between the United States and Japan,
the Ministry of Finance has decided, pending the adoption of measures
which the circumstances may deem advisable, to suspend for the time
being and until the adoption of further measures, movements of funds
and securities between Japan and Argentina.
At the same time we hereby inform you that the Central Bank has
been empowered to authorize as exceptions operations which by their
nature cannot be delayed without causing disturbances or inconveniences
which it may be desirable to avoid.
Consequently there may not be conducted the following operations
without an express authorization from the Central Bank in each case:

1. Transfers of funds or securities abroad, in national
or foreign currency, in favor of or for the account
of or by order of real or juridical persons who are
resident or domiciled in Japan.

2. Transfers of funds or securities from abroad in
national or foreign currency in favor of, for the
account of or by order of real or juridical persons
who are resident or are domiciled in Japan.

3. Withdrawals (egresos) of funds (debits or withdrawals)
from accounts in national or foreign money now existing
or which may be opened in the country in the name of

real or juridical persons resident or domiciled in
Japan.

4. Deposits (ingresos) of funds (credits or deposits) in
accounts in national or foreign currency referred to
in the preceding paragraph.

5. Deposits or withdrawals in or from accounts of stocks
or securities opened in the names of the aforementioned
persons.

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--

Changes of domicile of the holders of the accounts to which the
preceding provisions refer may be registered in the respective accounts
only if previously authorized by the Central Bank.
We request that you be good enough to consult us with respect to

all other operations in which there may be a direct or indirect interest
on the part of real or juridical persons domiciled or resident in Japan.
We remain

Very truly yours,
CENTRAL BANK OF THE ARGENTINE REPUBLIC

dnb

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(One signature illegible) (Signed:)E.Grumbach

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DEPARTMENT OF STATE

Washington

In reply refer to
FD

January 3. 1942

The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
copies of the paraphrase of telegram no. 3. dated January 1,
1942, from the American Embassy, Rio de Janeiro, Brazil, concerning an offer made by the Italian Embassy to the Bank of
Brazil.

Enclosure:

From Embassy, Rio de Jeneiro,

no. 3. January 1, 1942.

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PARAPHRASE OF TELEGRAM RECEIVED

FROM: American Embassy, Rio de Janeiro, Brazil.
DATE: January 1, 1942, 7 p.m.

NO. : 3
An offer has been made by the Italian Embassy here

to sell 100,000 in American currency to the Bank of

Brazil. I believe that this is a portion of the
$2,500,000 in United States currency which was brought

from the United States to Brazil by couriers of Italy.
(Reference is made to telegram no. 590 sent by the
Embassy on November 14, 1940 at 7 p.m.) The Italian
Embassy was informed by the Director of Exchange that
the proposal would be considered.

The Director of Exchange thinks that steps to control
currency of the United States which is being circulated
in foreign countries should be taken immediately by our

Government. He made the point that similar control by

the British of sterling notes has worked very well.
He is getting ready to cooperate and he seems to think

that assistance will be given by the central banks in the
other American countries.
CAFFERY

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TREASURY DEPARTMENT

429

INTER-OFFICE COMMUNICATION

DATE January 3. 1942
TO

FROM

Secretary Worgenthau

Mr. Dietrich

CONFIDENTIAL

Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
Purchased from commercial concerns

£36,000

£ 8,000

In addition to the above figures, one of the New York benits purchased £55,000

in registered sterling from the Export-Import Bank.

Open market sterling remained at 4.03-3/4. The only reported transaction

consisted of £1,000 purchased from a commercial concern.

In New York, closing quotations for the foreign currencies listed below

were as follows:

Canadian dollar

13-7/8% discount

Argentine peso (free)

Uruguayan peso (free)
Venezuelan bolivar

.2345
.051c
.5775
.2065
.5310
.2660

Cuban peso

1/8 premium

Brazilian milreis (free)

Colombian peso
Mexican peso

There were no gold transactions consummated by us today.
No new gold engagements were reported.

D

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BRITISH EMBASSY
WASHINGTON, D.C.

January 3rd., 1942.

PERSONAL

AND secret

Dear Jr. Secretary,

I enclose herein for your
personal and secret information a copy of the
latest report received from London on the

military situation.
Believe me,

Dear Mr. Secretary,

Very sincerely yours,

Halifax
The Honourable

Henry Morgenthau, Jr.,
United States Treasury,
"ashington, D.C.

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COPY NO

14

MOST SECRET

(U.S. SECRET).
OPTEL No. 2.

Information received up to 7 A.li. 2nd January 1942.
(1)

NAVAL

Cno of H.I. Submarines claims three hits with torpedoes on
laden 6,000 ton tanker off Cephalonia on 30th December. The British

Tanker reported yesterday torpedoed is still afloat. A small British
Merchant Vessel, in South bound East Coast convoy was sunk by mine
yesterday.
(2)

MILITARY

Libya.

The first objectives in our attack on Bardia were taken
by noon on 31st December, in spite of a partially successful counter attack,
they were all regained and consolidated. About 1,000 enemy prisoners,
including some Germans, were captured. Operations continue. In the
forward area, E1 Haseiat was reported clear of enemy on the 31st.
Malaya.

In Perak, slight contact has been made with the enemy

to the North West of Kampar. At Kuantan, our troops hold the River
line immediately South and South West of the town.
Russia.

In the Kaluga sector, the Russian advance is continuing,
and at least 16 German divisions have suffered serious losses.
(3)

AIR OPERATIONS.

Western Front.

1st and 1st/2nd. No operations by ourselves or the
enemy worth reporting.
MEDITERRANSAN.

Greece.

30/31st. 10 Le'lingtons bombed Salamis. The submarine
base and a munition factory were hit. Other Wellingtons bothbed the Piraeus,

starting a fire among cil eisterns and causing explosions at 1 chemical
factory. A large fire was also started at Megara seeplane base, and
attacks were also made on two aerodromes in Crete. 2 Wellingtons dropped

supplies for British troops still at liberty in Southern Greece.

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432

Libya.

31st. Blenheims, escorted by fighters, bombed
mechanical transport Southeast of Jedabya and some tanks and other

mechanical transport North East of the town. Two tanks were hit and
several vehicles probably damaged. Other Blenheims supporting our attack
on Bardia scored many hits on gun emplacements, mechanical transport and

buildings in this area.
Malta.

31st December/1st January and 1st. Bombs were dropped

on the Island by a total of about 40 aircraft, but no damage has been
reported.
FAR EAST.

Malaya.

30th. Two enemy aircraft bombed and machine gunned one

of the Singapore aerodromes, rendering the runway temporarily

unserviceable. Enemy attacks were also made on Kuala Lipis with damage to
the railway, Jerantut, where damage was caused to civil property, and Betong

where a train was hit. In the evening, raid was made on the Naval base at
Singapore and anti-aircraft positions in South Johore.
30th/31st. Two Catalinas bombed Sungei Patani aerodrome

with unobserved results.
4.

INDO CHINA.

Japanese troops, strength not stated, and large numbers of horses
and horse transport are reported to be moving from Saigon into Siam through
Phnom Pen.

TREASURY DEPARTMENT

433

INTER OFFICE COMMUNICATION

DATE January 3,1942

Secretary Morgenthau

TO

Mr. Kemarck

FROM

Subject:

Summary of Military Reports

Libyan Campaign

The Axis is believed by the British to have the
remnants of five Italian infantry divisions and one
Italian and two German armored divisions in the Jedabya area, (on the Gulf of Sirte, 100 miles south of
Benghazi). Around this area several strong points
have been constructed. At the same time, a line of

defended posts stretching 30 miles towards the south-

east has been set up. (This force is all that is
left of the original Axis strength in Cyrenaica. Evidently, none of it has escaped to Tripoli. The Axis
strategy apparently is to hold this position until
help arrives. If the British are able to move their

air bases forward rapidly enough, very few of the
Axis troops will be able to escape, should An attempt
be made, since the only road to Tripoli will be under
constant air attack.
(U.K. Operations Report, January 1, 1942)
Mediterranean

A British convoy escorted by cruisers and destroyers arrived at Alexandria from Malta on December
29. The force had been several times attacked by
enemy aircraft en route. (That the British could
continue to send convoys through the Mediterranean
through the gauntlet of German and Italian air and
submarine attacks, would never have been believed
before the war.)
(U.K. Operations Report, December 31, 1941)

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German 011 Situation

In their efforts to reduce the consumption of gasoline
still further, the Germans are reported to be ordering

large quantities of producer gas apparatus (producing gas
from coal or wood) for use on mechanical transport on the

Russian front. They have not delivered any oil under their
agreement with Sweden since October. They also have intimated
that they will not recommence deliveries in the near
future.
(U.K. Operations Report, January 1, 1942)

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G-2/2657-220; No. 589 M.I.D., W.D. 11:00 A.M., January 3, 1942
SITUATION REPORT

I.

Pacific Theater.

Philippines: Ground activity yesterday desultory. In five-

hour air raid over Fort Mills, enemy sustained material losses from

American antiaircraft fire. Japanese air units active against our
land forces. Hawaii: Negative reports. Malaya: Sharp fighting

in both the Perak and Kuantan areas as Japanese pressure increases.

Air attacks on Singapore continue, with little danage. Burma: No
further reports have been received. British Borneo: Japanese air
reconnaissance intensified. China: The Press reports severe fighting around Changsha, which apparently is still in Chinese hands.

West Coast: No further reports of hostile activity.

II. Eastern Theater.
Ground: The situation on the eastern front remains unchanged. Russian pressure west of Moscow continues. The Russians

claim the capture of Maloyaroslavets. (A situation map will not
be issued this date).
Air: The Russian communique reports increasing aerial
activity and states that the Russians destroyed 31 Gerran planes
on Wednesday and 28 on Thursday.

III. Western Theater.
Air: According to the Press, British planes last night

attacked naval bases at Brest and St. Nazaire on the French coast
and laid mines in enery waters.
IV.

Middle Eastern Theater.

Ground: Activity on the Agedabia sector has diminished.
Apparently both forces are awaiting supplies and reinforcements. The
British communique states that Imperial troops staged a successful
assault on Bardia. Over 1000 British prisoners of war were liberated

by the fall of the city.

Preliminary bonbardment was by air, artillery, and naval
units. South African troops supported by artillery and tanks then
staged the successful assault.

Air: R.A.F. activity in the Agedabia sector and along the
Tripolitanian coast continues with raids on harbors and boubing of motor
transport. The R.A.F. made raids on Naples. No results have been
reported.
RESTRICTED