Full text of Diaries of Henry Morgenthau, Jr. : Volume 5 : Part 1
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BOOK #5
PRESIDENT ROOSEVELT
January 1, 1942
thru
June 30, 1944
January 27, 1942
1061
Leo Crowley had lunch with the President Saturday. He
said that on the Alien Property the President said that I
had been annoying him with the details and, therefore, he
was thinking of putting it in OEM. Crowley said there was
somebody - he doesn't know whom - who is needling the
President on this. He said that the President said to him,
"Henry has plenty to do with his taxes and financing without
bothering with this.' But, according to Leo, the upshot
was that the President agreed to leave it here for the next
couple of months.
Then Leo said that for no apparent reason whatsoever
the President proceeded to give him the following lecture.
He said, "Leo, you know this is a Protestant country, and
the Catholics and the Jews are here on sufferance,
and he said, "It is up to both of you to go along with anything
that I want at this time." Leo said he was never so shocked
in his life. He said, "Something has happened to the President.
He has lost his touch with the people." He said, "This war
has suddenly made him think he has got to have his own way
or whatever it is." He said, "Why he should lecture me (Leo)
at this time is just beyond my understanding."
So I said, "Leo, what are we fighting for? What am I
killing myself for at this desk if we are just here by suffer-
ance?" and Leo said, "That's what I want to know." So I said,
"About a month ago I had something similar happen but not
nearly as bad at Cabinet. I talked to the President about it
afterwards, and he proceeded to give me a lecture and cited
as an example how there were two Catholic judges in Nebraska,
and he had refused to appoint a third. Leo said, "That's
not true. He appointed a third, and that was Delehanty."
Leo said, "I said to the President at the time. 'How can
you refuse to appoint a man with a wonderful life-long
record just because he is a Catholic?' Then he said at
that time the President asked him whether the Catholics would
be opposed to having him send U.S. troops to Russia, and
Leo said, "The Catholics will not feel any differently about
this than any other citizen."
2-
1062
Then Leo told me that Victor Emanuel, who is considering
hiring Wendell Willkie at $100,000 a year as special counsel
for Consolidated Aircraft, New York Shipbuilding, and some
other airplane company, told Leo that Willkie said to Emanuel,
"You know if I wanted to, by going out and attacking the Jews
and Catholics at this time, I could make myself President,
and I could also create a political revolution by hanging
this war on the Catholics and the Jews." Leo claimed that
he said to Emanuel, "How could you sit there and listen to
man like that?" So I said, "How could he hire a man like
that?" Leo then said that Emanuel likes to have his blue
chips on both sides of the table, so I said, "Something
a
like the Warburgs in Germany."
I told Leo that what he was telling me about the President
was far more disturbing to me than all the Alien Property
Custodian in the world, and he said that he agreed with me
and that he had not discussed it with another living soul
because he did not feel that he dared do so.
#########
1063
January 30, 1942
HM Jr gave the original of this memorandum to
the President today, and he seemed pleased that
there was something the matter with Batt.
1064
January 30, 1942.
MEMORANDUM FOR THE PRESIDENT:
You have asked me for information concerning William
L. Batt's connection with American Bosch Corporation.
1. In order to have a clearer picture it is necessary to mention briefly Batt's connection with SKF. Batt
has been associated with American SKF and its predecessors
since 1919. He was general manager from 1919 to 1923, when
he became president, which office he still holds. His
salary as president has ranged from $26,000 in 1935 to
$60,000 in 1940. He customarily files a joint return. He
and his wife have no significant income other than his
salary from American SKF Corporation.
On January 1, 1939, Swedish SKF owned 76 percent of
the outstanding stock of American SKF; certain other Swedish
interests owned approximately 18 percent. These shares were
transferred to Batt under voting trust agreements early in
1941. Batt himself owns a trifling amount of shares in
American SKF (65 shares).
DECLASSIF PED
-2 -
1065
2. In 1938 Batt became a director of American Bosch
Corporation at a salary of $2000 a year. The records of the
company and the transfer agent do not reveal that he has ever
owned any stock in American Bosch. He resigned as director
of American Bosch on March 5, 1941.
The majority of the stock of American Bosch was reacquired in 1931 by the German Bosch Company. In 1934
Mendelssohn & Co. nominally acquired the German Bosch interest
in American Bosch. Shortly thereafter, George Murnane became
director of American Bosch and represented Mendelssohn's
interest in American Bosch. George Murnane is at present a
member of the firm of Monnet, Murnane & Co. and formerly was
a partner of Lee Higginson where he actively handled the
Kreuger and Toll matters. Murnane's partner, Jean Monnet,
formerly was chairman of the British French economic council,
and is now a member of the British Supply Council. Murnane became chairman of the board of American Bosch in June 1937 and
in 1938 effected a reorganization of the company. The financial
reorganization left the stock in Mendelssohn & Co. and the
managerial reorganization resulted in Donald P. Hess replacing
Arthur T. Murray as president. At the same time Batt was made
S
a director of American Bosch.
When Fritz Mannheimer, the head of Mendelssohn & Co.
committed suicide in August 1939, Mendelssohn & Co. failed
-3-
1066
and was liquidated. In May 1940, the Mendelssohn interests in
American Bosch were sold to the Stookholm Enskilda Bank which is
owned by the Wallenberg family. Murnane was then designated as
the voting trustee of the Swedish interests in American Bosch.
At the present time, therefore, the Swedish interests in
American SKF are represented by Batt, as voting trustee, and the
so-called Swedish interests in American Bosch are represented by
Murnane, as voting trustee.
#
#
3. In the course of our investigation of the personnel
and records of American Boach, which we started last Saturday, we
have run across information which suggests that arrangements may
have been made whereby the Germans would protect SKF holdings in
German-occupied countries in exchange for efforts by the Wallenbergs to protect the German interests in American Bosch. Under
such an arrangement the Wallenbergs would hold the Swedish
interests in American Bosch until the end of the war when it
would resell such interests to the Germans.
Murnane reported to one of our Treasury investigators
that it was upon his recommendation that Batt was made president
of SKF and that Hess who succeeded Murray in 1938 as president
of American Bosch was suggested by Batt.
It has also been reported from another source that during
the liquidation of the Mendelssohn (after the outbreak of
war) English interests were asked to buy the Mendelssohn-
067
-4held shares in American Bosch with the understanding that
at the end of the war the control would be resold at a
profit to German interests; but the English exchange author-
ities refused to permit the transaction. Thereafter the
Mendelssohn interests in American Bosch were sold to the
present Swedish holders.
In view of the fact that our investigation of American
Bosch has just begun we can not warrant the accuracy of the
comments contained in section 3 of this memorandum.
(Signed) H. Morgenthau, Jr.
D
Apparently misfiled. See p. 1223-A
1068
February 10, 1943
(Dictated in presence of Messrs. White and Gaston and Mrs. Klotz)
Vice President Wallace has been asking me for the past
two months to have lunch with him and a newspaperman by the
name of Marsh from Dallas, Texas. Wallace said this man
could tell me all about Jesse Jones.
I got up there, and he said there was a big fight on
between Jones and Baruch as to who should control the
Democratic Party through financial contributions, but that
he (Marsh) felt that right now Hopkins was the man who
would be working for the President's fourth term, and
that Hopkins was playing in with Jones.
Wallace asked him, "What is it you want? What is
your plan?" He said, My thought was to raise clean
money to help finance this thing so that Jones and Baruch
will not control the Party." He also said that Baruch
would have Nelson out in a very short time, and that the
Government was being run from the Carlton Hotel by Baruch
through Patterson and Forrestal.
This man gradually got around to saying how I, HM Jr,
could get these people to give clean money. I said, "Do
you really mean this? and he didn't answer me. He kept on
talking in rather vague terms about how I could go to
Marshall Field, Kaiser, and people like that who are interested.
Then I said, "The man whom you really want to talk to is
Frank Walker because that is his headache. Why don't you
let the Vice President take you over there?"
To show that I had not misunderstood what they had
in mind, Wallace turned to Marsh and said, "Well, what
you are getting is the brush-off." So I said, "If I have
been invited up here to be asked whether I would be interested
in heading up the raising of money for Roosevelt's fourth
term or any other Democratic candidate's nomination, the
answer is no." I said, "My position is to raise money
for the United States Government, and I am not interested
in raising any money for any other cause."
So there goes my chance to be Secretary of the Treasury
under Wallace. I had my opportunity and kicked it overboard.
1069
February 26, 1942
This is the statement which I gave the
President today, and after he got through reading
it, he said, "I give it my blessing."
#######
February 26, 1942
1070
TREASURY TAX PROGRAM
Revenue
(approximate)
in millions
of dellars
I.
Individual Income Taxes.
3,000
Retain present exemptions
Eliminate earned income credit
Increase rates heavily throughout
schedule
II. Corporation Taxes
Retain the present excess-prefits
tax credit
Increase excess-profits tax rates
2,830
by 15 percentage points to a
top rate of 75%
Retain normal tax at 24 perceat
Increase surtax (to be designated
"war surtax") to 36% with lief
up to 20% for corporations having
reduced incomes
Smaller rate increases for calporation incomes under $25,000
Repeal capital stock tax and de-
clared value excess-profit tax
III. Estate and Gift Taxes
250
IV. Exoise Taxes
1,200
Distilled spirits increase from 84
to $6 a gallon
Gaseline increase from led to 3A
gallon
Cigarettes increase from 19.25 per M
to $3.50 per K on 10g brands and
84 per M on 15d brands.
Other excises
V.
284
245
163
508
Special Privilege and Hardship
Provisions
725
Tax-exempt securities: tex interest
from outstanding and future State
and local securities
Percentage depletion
Joint returns with special relief
for earned income
Capital gains
Life insurance companies
Mutual casualty insurance companies.
200
80
350
30
30
Other
Grand total
Less: Allowance for interrelated effects
Total
RB:mw
2/26/42
8,005
1,005
7,000
e
Cabinet march 6 THE WHITE HOUSE
1071
WASHINGTON
I brought wh much th
memo
of
march
5
helson in hant flames
Kumsin + part the Russinius.
I suy gested Andrew
7. D.R. sa send our
version of buying for
Russians based on
memo from nelson
7.19 K. said this was
good
ideafor
and mem ask. of
hulm
Einsen over - U.S.W.#.
567 million gale of mash emclhe
destroyed according to at. gen
kintwhy not (over) be
brandes questions
Cabinet march 6 STOT
th 1942
1071
I
helson in hant
memir I brought THE wh WASHINGTON WHITE of HOUSE march mark flames 5 the
Kumsin + part the Russians.
I suggested Anderson
7. D.R. sa send our
version of buying for
Russians based on
memo from nelson
7.19 K. said this was
hulm for
good idea and memo ask. of
Encen over - U.S.W.#.
567 million gals of mash withe
destroyed according to at. gen
brandes questionskeht.
why itean not he (over)
1072
Pres. says HH why not
increase tay on gas.
even higher than me
proposed.
'TREASURY DEPARTMENT
1073
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
March 5, 1942
MEMORANDUM TO THE SECRETARY:
In response to your request for information as to
the Russian Protocol items and the tonnage of each for
which we do not have allocations in order to meet the
April 1st delivery requirements, the following is a listing as of the close of business March 5th:
1489 Tons
Tool Steel
Steel Wire
37798
Steel Billets (Shell Steel) 38000 If
1165 If
Steel Alloy Tubes
Stainless Steel Wire
Cold Rolled Steel Strips
Hot Rolled Steel
108 "
19408 "
32000
#
It is very possible that the report to be submitted
by Mr. Nelson may show a reduction over the above quan-
tities due to further allocations not yet received by us
or allocations for production subsequent to April 1st.
Further, the Russians have submitted many requisitions for
items outside of the Protocol which will be included in
Mr. Nelson's report and will help the tomage picture.
Clifton E. Mack
Director of Procurement
a
FORDEFENSE
BUY
UNITED
STATES
SAVINGS
BONDS
AND STAMPS
1074
March 6, 1942
My dear Mr. Nelson:
I am informed by Mr. Clifton E. Mack that
as of the close of business March 5th, we do not
have allocations for the following Russian Protocol items in the tonnages specified in order to
meet April 1st delivery requirements:
Tool Steel
Steel Wire
1489 Tons
Steel Billets (Shell Steel)
Steel Allov Tubes
Stainless Steel Wire
Cold Rolled Steel Strips
Hot Rolled Steel
37798 "
38000 "
1165 "
108 "
19408 "
32000 "
Please let me know what you are going to do
about it.
It goes without saying that the closer-it gets
to the 1st of April without our receiving these allo-
cations, the more difficult it will be for us to com-
ply with the President's wishes.
Yours sincerely,
(SIGNED) HENRY MORGENTHAU JR.
Mr. Donald M. Nelson,
Chairman, War Production Board,
Washington, D. C.
1075
March 11, 1942
At my meeting with the President at 10 o'clock
this morning, the President said, "I do not want to
be in the same position as the English. The English
promised the Russians two divisions. They failed.
They promised them help in the Caucasus. They failed.
Every promise the English have made to the Russians,
they have fallen down on." He said, "The only reason
we stand so well with the Russians is that up to date
we have kept our promises. I suppose the reason we
are behind on our deliveries to Russia is because we
got into the war ourselves. (This is not the reason.)
The President said, "I would go out and take the
stuff off the shelves of the stores and pay them any
price necessary, and put it in a truck and rush it to
the boat and, he said, "Leon Henderson has to be satisfied and let us pay the necessary prices.'
He said, "Nothing would be worse than to have the
Russians collapse, He said, "I would rather lose New
Zealand, Australia or anything else than have the Russians collapse.
Then I reminded him that he gave me instructions
to keep the French going so that they could never blame
Roosevelt if the French made peace. "And," the President said, "you did and they have never blamed me.
00o-o0o
1076
MEMORANDUM.
1076
OFFICE OF THE ASSISTANT SECRETARY.
Mall
42
HMJ
This is critical
because (a) must
Knex new word
(b) because Russian
mointance currents
most factory
FM
Assistant Secretary.
1077
Railroad Traffic Bottleneck in the Philadelphia Area
1. On March 9, there were 14 vessels at Philadelphia
loading Lend-Lease cargo for Russia. One of these vessels
had been in port two weeks; five other vessels had been in
port for ten days or more. A list of the vessels in port
and the status of their loading appears in the attached
table.
2. There appears to have been a considerable delay in
Philadelphia in loading cargo destined for Russia. This
delay has been due in some part to a railroad traffic bottleneck that has developed in the Philadelphia area because of
a division of freight routing authority between the several
Government shippers. As a result of this division in authority, the facilities of the Penneylvania Railroad were
overtaxed as compared with the lesser burden placed on the
Baltimore & Ohio and the Reading Railroad. As a consequence
traffic has backed up at transit points such as Harrisburg
and Northumberland, more than 100 miles away. As the traffic
congestion increased, the policing problems became more acute
and the Moore-McCormick Lines, the steamship company handling
the Russian cargo, has experienced important delays in shipside delivery because of the unavailability of designated
freight cars at the time that shipping space becomes avail-
able.
3. The immediate availability of designated freight cars
is extremely important to the Russians who have specified
that complete units only be loaded on each ship (to avoid
loss of vital parts if a ship is lost at sea). This means
that a considerable volume of cargo coordination must be
handled at the port. In the case of trucks, for example,
freight care must be located containing cabs that came from
a factory in one town, chassis which came from a plant in
another, and spare parts which came from a plant in a third.
The loading of the ship is delayed if any of these care are
not immediately available.
Attachments
1078
VESSELS AT PHILADELPHIA MARCH 9, 1942
LADING LEND-LEASE MATERIALS FOR U.S.S.R.
Nationality, Rig.
Name of Vessel
1. AM. S/S BAYOU CHICO
Date Arrived
At Philadelphia
Feb. 23, 1942
2. AM. S/S ZEBULON B.VANCE Feb. 24, 1942
3. AM. S/S WINONA
Feb. 25, 1942
*Nature of LendLease Cargo Lading
Status of
Cause of Delay, if any,
to Lading or Departure
Lading
Departing 3/10/42
Foodstuffs, metals,
trucks, miscellaneous
3/8/42
Foodstuffs, trucks,
80% loaded
Departing 3/10/42
72% loaded
Fire in crew and gun crew
Completed
metals, miscellaneous
Foodstuffs, trucks,
quarters. Indefinite de-
metals, miscellaneous
lay but probably two days
or more
4. AM. S/S WACOSTA
5. AM. S/S MORMACSUL
Feb. 27, 1942
Feb. 27, 1942
Foodstuffs, trucks,
Fire in boiler room.
Indefinite delay, prob-
80% loaded
metals, miscellaneous
Foodstuffs, metals,
ably 15 days, expected
Rain one day-cars not
promptly placed. Expects
60% loaded
miscellaneous
finish loading 3/10/42
6. AM. S/S CARLTON
Feb. 27, 1942
Foodstuffs, machinery,
trucks, heavy metals
60% loaded
Broken cranes - cars not
promptly placed. Expects
finish loading 3/11/42
7. AM. s/s MORMACREY
Feb. 28, 1942
Foodstuffs, machinery,
60% loaded
Rain one day -expects
8. AM. S/S TEXAS
Feb. 28, 1942
Foodstuffs, trucks, met-
50% loaded
finish loading 3/10/42
miscellaneous
Cars not promptly placed
Expects finish loading
als, miscellaneous
3/13/42
9. AM S/S ALCO BANNER
March 3. 1942
Foodstuffs, trucks, tin-
No delay-expects finish
lading 3/18/42
35% laded
plate, miscellaneous
Franklin B. Receevel Mibrary
DECLASATION T.D. 160
RHP
8-
3-71
-2-
1079
CONCIDENT
VESSELS AT PHILADELPHIA MARCH 9, 1942
LADING LEND-LEASE MATERIALS FOR U.S.S.R.
Nationality, Rig.
Name of Vessel
10. AM. S/S SYROS
Date Arrived
At Philadelphia
March 5. 1942
*Nature of LendLease Cargo Lading
Foodstuffs, metals,
Status of
Lading
Cause of Delay, if any,
to Lading or Departure
12% loaded
No delay -Expects finish
machinery, miscellaneous
11. PAN. S/S TROUBADOUR
12. AM. S/S JOHN RANDOLPH
March 5, 1942
March 6, 1942
Foodstuffs, machinery,
metals, miscellaneous
17% loaded
Foodstuffs, trucks,
25% loaded
machinery, miscellaneous
13. BELG. S/S VILLE D'ANVERS March 7. 1942
Foodstuffs and miscellaneous
14. AM. S/S ALAMAR
March 7. 1942
loading 3/14/42
Foodstuffs, machinery,
metals, miscellaneous
No delay -Expects finish
loading 3/13/42
No delay-Expecte finish
loading 3/14/42
Started lad- No delay
ing 3/9/42
Started lad- No delay
ing 3/8/42
*Tanks laden or to be laden as top cargo on each of these vessels.
Franklin B. Recevelt Library
DECI LASSIFIER T.D.160
RHP 8-3-71
Steel Items in the Russian Aid Program
1080
The present allocations of the War Production Board do
of the seven steel items promised the Russians in the Moscow
Protocol. The amounts promised and the production for the
Russians
of each of these items are shown in the following
table:
1.
not provide for the full production by April 1 of the amounts
22
48,000 "
42,000 "
184,320 Tons
10,000
19,230
11
48,000
II
Total
120
820
"
Hot rolled steel
7,500 Tons
3,000
1,200
#
Shell steel (billets)
Cold rolled steel strips
42,000 Tons
April 1
"
Steel alloy tubes
Stainless steel wire
Production by
April 1
H
Steel wire
Tool steel
Promised by
7
Item
18,075 11
55,647 Tons
On the basis of present allocations by the War Production
Board, the commitments on the first six of the foregoing items
will not be met even by June 30. On that date, the shortage of
these six particular steel items will amount to 112,661 tons.
2.
3. By June 30, on an overall basis, the Russians will receive
more steel items under lend-lease than they were promised in
the Moscow Protocol but the items received will not be the exact
items promised. Thus, when compared with commitments, there
will be a shortage in the production allocated to the Russians
of 56,000 tons of shell steel and 36,000 tons of steel wire.
On the other hand there will have been allocated to the
Russians by June 30 the production of 60,000 tons of steel rails
and 58,000 tons of oil well casing and tubing which was not
included in the commitments in the Moscow Protocol.
The top part of the attached chart shows on an overall
basis the Protocol commitments to deliver steel items by
April 1, May 1, June 1, and June 30 (red bars), and the expected
production by these dates of these self-same items (green bars).
The overall deficiency in the items requested will amount to
4.
120,666 tons.
5. The bottom part of the attached chart adds to the production
of items promised the Russians the quantity of other steel items
being produced for them (cross-hatched green bars). The addition
of these unpromised items will mean that tonnage equivalent to
the Protocol commitment will be produced by May 1. This tonnage
will not consist, of course, of the exact items specified in the
Protocol.
Freeklin B: Receivers Mibrary
DECLASMENTER T. 0.16
1081
STEEL ITEMS IN THE RUSSIAN AID PROGRAM
Protocol Commitments Compared with Production
TONS
TONS
Thousands
Thousands
Part L-Steel Items Specified in Protocol Only
600
600
Commitment
Production
500
500
400
400
300
300
200
200
100
100
0
By May I
By June I
0
By April I
By June 30
1942
TONS
TONS
Thousands
Thousands
Part II-All Steel Items Allocated to Russians
600
600
Other Items
Commitment
Production
500
Protocol Items
500
400
400
300
300
200
200
100
100
0
By April I
0
By May I
By June I
By June 30
1942
1-189
1082
Charts on Progress of Russian Requisitions
for Steel Items
1.
The attached charts show the number of days it took
each of the Russian requisitions for steel wire and cold
rolled steel strips to progress from the "requisition
stage" at Lend-Lease up to the "shipment to port stage".
Time is measured horizontally on these charts. The
vertical scale shows the size of the requisition in tons -the largest requisition having the widest bar and vice
versa. The division of the bars into vertical segments
indicates partial clearances or partial shipments.
The delay in the Soviet Aid Program for steel items
can be traced in some part to the failure of the Russians
to present promptly the specifications of the items desired.
2.
Thus, only a minor fraction of the requisitions for steel
wire had been submitted by January 15, more than 3-1/2
months after the signing of the Moscow Protocol.
3.
The information on the number of tons of steel wire
and cold rolled steel strips that have reached port is not
yet available. This information is being developed by
Moore-McCormick Lines, the steamship company which is
acting as Amtorg's agent in Philadelphia and which is providing the vessels to carry the Russian cargo.
The attached charts are two of a series of seven charts
4.
covering steel items promised the Russians in the Moscow
Protocol. The five other charts will cover (1) tool steel;
(2) steel alloy tubes: (3) stainless steel wire; (4) shell
steel(billets); (5) hot rolled steel.
Attachments
1083
COLD ROLLED STEEL STRIPS
Progress of Russian Requisitions
At Lend
At Procurement
At
Lease
W.P.B.
At
At
Mill
JANUARY
DECEMBER
FEBRUARY
lin D.
DESL
At Ship:
Port
Shipment
Premises
side
At Sea
On
Ship
MARCH
APRIL
28
Dec 10,834 Tone
12,008 Tone
Jen.20, 18,630 Tene
INTERNATIONAL
Jan 28, 1,192 Tone
14
14
7
31
24
FEBRUARY
21
21
IT
JANUARY
"
.
10
18
APRIL
MARCH
T
18
3
a
1941
27
.
20
DECEMBER
1942
1-191
0
1884
STEEL WIRE
Progress of Russian Requisitions
At
At Lend
Lease
At Procurement
W.P.B.
DECEMBER
At
At
Mill
Port
Shipment
JANUARY
At Shipside
MARCH
FEBRUARY
On
Ship
At Sea,
APRIL
-
Feb 4
PARK
Feb
BY
14
.
it
,
14
i
13
JANUARY
MARCH
FEBRUARY
1942
.
-
,
#7
is
to
1941
..
.
DECEMBER
16.
Fab
APRIL
1085
April 2, 1942
I told the President when I saw him this
morning about our present offering and the way we
were doing it, and he was very much pleased.
1086
April 3, 1942
I got the idea yesterday talking to Hopkins
that if we had any troops to send to put them into
the most northern part of Russia.
I gave the idea again today to T. V. Soong,
and he said that that was the best idea he had heard
yet.
I have asked to see the President, and Miss
Tully asked me to come right over. It is now ten
minutes to four.
HHHHHHHHH
1087
April 15, 1942
I saw the President today and cleared with him about
coming for supper. He said he would.
I asked him whether we could go ahead with our plan
on selling the voluntary payroll allotment plan, and he
said, "Yes." He said, "Henry, you and I are the only people
who understand it. Everybody else is against it, but we
are going to do it. He said, "If you put 10% on as forced
savings, how much would you get?" and I said, "Seven billion.
Then I said, "If you do that the Treasury will lose 8
billion through voluntary savings. He said, "They just
don't understand it - that's all." I told him that we ought
to simply exhaust this thing before we think of forced
savings, and he agreed. I said, "You know, Mr. President,
I think it is just as important to use this vehicle to
make the country war-minded - there just isn't any other
vehicle to do it." He said, "You are right."
I showed the President the General Motors plan, and
he liked it. He said, "I want a sign in everybody's window
not just saying, 'I bought a War Bond,' but that 'I buy
a War Bond every month'
I then said to the President, "I would like to talk
to you once more about Harold Smith." I said, "He is like
a termite undermining the foundation of the Treasury."
The President said, "What?" and I repeated, "He is just
like a termite." I said, "I have got to raise $19 Billion
Dollars from now until the end of the year, and it is going
to take all of my brains, courage and ingenuity, and I
don't want a fellow like Harold Smith trying to undermine
me." I said, "I have heard him before a committee publicly
say that he wanted to have the taxing authority of the
budget as well as the expenditures. I said, 'He is trying
to get this thing all the time. He is constantly undermining
us in the Treasury, and I wish that you would tell him to
stop it." The President promised me that he would speak
to him. The President then said, "You don't mind National
Resources Board making long-term studies on taxation or
something like that?" and I said, "No, provided they will
check with the Treasury to see whether or not we are doing
the same thing." I said, "But the Budget should keep out
of it." "Well, he said, "Harold Smith is a very stick-to-i-tive
-2-
1088
person and he is always after something, but I will talk
to him." The President was very nice to me about it. The
last time I brought up the subject he resented it.
Then the President said, "You know that letter you
wrote to me about the sales tax - that was a good letter,
but I wanted to try it out on some average person like a
small taxpayer and see how he felt about it, so I gave it
to Steve Early to rewrite and bring it back to me so that
could use it at my press conference. He rewrote it and
brought me back an amazingly good letter." Then he said,
"I want to send it over to you to check because I want to
use it next Tuesday at my press conference." So I said,
"Well, Mr. President, there is no use sending it over to
us because that was prepared by Mr. Kuhn in the Treasury."
The
President
"That's
a joke. "said, "Was it?" I said, "Yes," and he said,
I
Well, I thought it was better for me to go and tell
Steve Early than to have him find it out someother way, so
I did. I dropped in and said, "I just wanted to tell you
this, Steve. I don't know whether the President was trying
to sound me out or whether I just talked too much, but
somehow or other I told him that that letter was prepared
in the Treasury." Early said, "Werl, I didn't tell him that
I prepared it. I didn't tell him where it was prepared.
So I said, "Well, just to avoid any misunderstanding I
thought I would tell you that I told him it was prepared in
theyou."
Treasury. I thought the President might lay a trap
for
I said to Steve Early, "What about Keith Morgan?
You know the President wants him to come down to work
for me." He said, "That fellow burns me up. He gets
$25,000 a year and God knows how much traveling expenses,
and he stands up there and talks about the poor crippled
children with $25,000 in his pocket. Sure the President
wants him to have a job because he is being dropped from
the Foundation." Early said he thought the President
wanted him to have something unimportant. He said that
Keith Morgan is good at interviewing people, etc., but
that is all, and the Foundation is planning to drop him.
So I said, Thank you.
-3-
1089
I found the President in a good humor but tired.
I said that to Grace Tully, and she said, "Well, who
has
a right to be more tired, but his patience is just
amazing.
Following me were Admiral Land and somebody from
his Commission and Anna Rosenberg, and does that woman
get around? When she came in, the President said, "Admiral,
what are you doing here today, or aren't you an Admiral?"
1.
F.W.R. what about
friday night ? 1090
2. Can Ignahead with
plans for 10% drive.
be for cangress Thursday
and with the among
and get a committed
Labor
+
industry
y
3. Harold Smith termite
at found d atimes of Treas.
-
where dv we st and
an tax propram.
EXTRA CONFIDENTIAL
May 6, 1942
1091
Mr. Paul
Present:
Mr. Kuhn
Mrs. Klotz
HM Jr: I just wanted you people to hear this.
At my conference with the President this morning, he said
to me, "At my conference with the leaders yesterday, I
discussed the question of joint returns, and then he said,
"I think I have a very good suggestion to make. I don't
see why we don't treat a woman as an individual. Why
shouldn't we recognize that she has the full status of
a man, and require her to file a separate return just the
same as every man has to file a separate return and every
boy or girl of 17 or 18 years of age has to file a separate
return? He said, "After all, I think that is the way it
ought to be and I have been giving a lot of thought to
this thing.
4
Well, I was biting my lips all the time he was
talking. Then I said, "Mr. President, if it is left up
to the individuals, how many married people do you suppose
would file separate returns? I think about 99% of them
would file separate returns." The President said, "Well,
I want to make it mandatory."
Then I said, "Well, Mr. President, that is just
the opposite from what we recommended. We recommended that
the family be considered as an economic unit. You are
simply suggesting that we carry on what we have been doing."
He said, Well, I talked a lot about it yesterday, and I think
it should be that way." I told the President that Speaker
Rayburn had called me up and said he was going to fight
me tooth and nail on my recommendation, and the President
said, "I knew that they felt that way. So I said, "Mr.
President, as long as we have made our recommendations and
since you have talked this way to the leaders, don't you
think we might as well let the thing alone, and let nature
take its course?" and he said, "I guess that is what I would
do.
1092
May 14, 1942
Present: Mr. White
Mrs. Morgenthau
The President of the United States telephoned
me at 12:30 p.m. today, and he said, "I understand you
are thinking of freezing the Argentine assets." He
said, "It just won't do. It would kill our whole goodneighbor policy." So I said, "Well, would you like to
know what we are doing?" He said, Yes, so I said,
"Well, there was a meeting last week which Wallace
called of the Economic Warfare Board to decide what to
do to drive the Nazis out of South America, and at
this meeting I suggested that we make a study of the
Argentine situation. Cordell Hull was sitting opposite
me and I asked him if it was all right with him and he
said it was. He approved it." The President said,
"Well, as long as it is a study, that's all right, but
I don't want to do anything to upset all the good work
that has been done in South America."
Then I said, "Well, I expect to see you tomorrow
and wouldn't you like to have me give you a confidential
memo on just what the Nazis are doing in the Argentine?"
He said, "Yes," and I then told him that I promise not to
show it to Arthur Krock. The President just howled with
laughter. I hope that Mr. Hull was sitting next to him
because if he was it would give the President a wonderful
chance to repeat what I said, and get even with Hull.
1093
May 15, 1942
The President told me this morning that he didn't
want the barracks for the soldiers on Sherman Square
because it was too conspicuous. However, he said it
would be all right to have it on a similar Square just
south of the State Department. I walked past the place
he suggested and found it to be much bigger than Sherman
Square. I insisted that General Watson be there. The
President told me that if I decided that the place was
all right he would direct the Secretary of the Interior
to have the thing done in view of the necessity of guarding the White House and State and Treasury Departments.
I told the President that sometime next week Leo
Crowley and I would come over and present some sug-
gestions to change the Executive Order covering the Alien
Property Custodian as the Order was badly drawn. However,
I told him that we wouldn't come over unless we had first
agreed on the changes. He said, "Fine." I didn't say
anything to him about showing it to anybody else.
He asked me if I had read his various memos on
American Bosch, etc., and he seemed very much pleased with
them.
I then brought up the Argentine matter. He said,
"Now, Henry, I had this question up yesterday on how to
organize this information group, and they had Rockefeller
in with the others. I told them, 'You know I am a juggler,
and I never let my right hand know what my left hand does.
He said, "I may have one policy for Europe and one diametrical-
ly opposite for North and South America. I may be entirely
inconsistent, and furthermore I am perfectly willing to
mislead and tell untruths if it will help win the war."
When he finished, I said, "Mr. President, don't you want
me to continue as your financial detective and give you
the information we learn of what the Germans are doing in
the Argentine?" He said, "Absolutely, and if the thing gets
worse, we will do something about it. Then I said, "Well,
all I am suggesting is that we treat them the way we
treat the Swiss; namely, freeze them and then give them a
general license." He said, "You keep out of there," and
-2-
1094
then he said, "If the thing gets worse I will send for all
of the representatives of the South American Republics,
and tell them what is going on in the Argentine." He said,
"I think even Chile would join us on that." So I feel
thoroughly satisfied and will keep on going.
I gave the President the report on the meeting of
the Finance Ministers, and his first reaction seemed to be
very good. He told me to take it up with Cordell Hull,
but I said, "No, if you don't mind, I would like you to
read it yourself because I think it is 80 important that
if anything is going to be done you will have to get behind
it, and that will be time enough for me to tell Cordell Hull."
He said, "Okay."
########
1095
Soldiers Guarding White House
(Combined Military Police
and Coast Artillery)
The War Department desires to increase the military
police to a total of 191 and in addition there are 180
coast artillery officers and soldiers manning the guns
on the State, Treasury, Commerce, and Washington Build-
ings for the protection of the White House and adjacent
buildings. This makes a total of 371 officers and men
which the War Department desires to house in the proposed
barracks building.
It has been stressed by the commanding officers
that for tactical reasons it is essential that the full
complement of officers and men be quartered in one cen-
tral location within immediate proximity to the
buildings under their protection.
1096
Soldiers Guarding White House
(Military Police)
1. There are at present a total of 77 enlisted men and
3 officers assigned to duty guarding the White House.
Quarters are provided for them in the Treasury building.
2. It is the wish of the War Department to increase the
77 men to an approximate total of 191, including enlisted
men, officers, and personnel operating scout cars, this
number being necessary in their opinion for adequate protection in the event of an emergency.
3. War Department regulations require a minimum of 500 cubic
feet per man for sleeping quarters. Chief Wilson states
that the new wing at the White House is not large enough
to provide these minimum space requirements for the
present contingent, and of course it would not, therefore,
accomodate the desired increase in personnel. Chief Wilson
feels also that it would be inadvisable to quarter the
soldiers on the White House grounds.
$
COPY
THE SECRETARY OF THE TREASURY
1097
WASHINGTON
May 13, 1942
My dear Grace:
I am sending you herewith formal letter from
Secretary Stimson to the President. It is important to
get these soldiers into decent quarters for the following reasons:
1. The Army Medical Officer has declared the
space presently assigned as unhealthy because of poor
ventilation in sleeping quarters, and unsanitary because
of the location of the mess hall in former coal bunkers in
the Treasury yard.
2. The Commanding Officers state that, for tactical reasons, it is essential that these troops be assembled
at the most strategical point (Sherman Square).
3. It is planned to build around the Sherman
statue without disturbing the statue and only two small
trees will have to be relocated.
As far as I am concerned the soldiers can stay
in the Treasury as long as they want to, but it seems
inhuman, under Washington summer conditions, to leave them
living in the cellar of the Treasury with big steam pipes
running through their quarters.
I would greatly appreciate if you would bring
this to the President's attention, and if he agrees have
him issue the necessary orders to the Army to proceed with
the construction of necessary quarters, plans of which
you will find enclosed herewith.
Sincerely yours,
(Signed) Henry Morgenthau, Jr.
Miss Grace Tully,
FORDEFENSE
BUY
UNITED
STATES
BONDO
The White House.
1098
WAR DEPARTMENT
WASHINGTON
MAY 9
1942
The President,
The White House.
Dear Mr. President:
It has been requested by the Secretary of the Treasury
that the troops, now guarding the White House and the Treasury Building, be removed from the unsatisfactory quarters which they now OCcupy in the sub-basement of the Treasury Building. It is desired
to construct a building to house these troops on a site which will
be readily accessible, under any conditions, to the buildings which
they are assigned to guard.
A site has been selected on Sherman Square, directly south
of the Treasury Building. It is planned to construct a building
there in a U-shape around the statue, in such a manner that only two
of the existing trees will have to be relocated. The architecture
will be such that it will harmonize with the temporary office build-
ings now being constructed throughout Washington. This site has the
approval of the Secretary of the Treasury.
mat suitable
As this is the only site that will enable the troops to
perform their military mission of protecting the White House and the
United States Treasury, your approval of its use for this purpose is
requested.
Respectfully yours,
Ham Stunson
Secretary of War
TREASURY DEPARTMENT
1099
INTER OFFICE COMMUNICATION
DATE May 12, 1942.
TO
Mr. W. N. Thompson
FROM
Mr. Larson
The following information has been secured from the Commanding Officers of
the 71st Coast Artillery (AA) and the 703rd Military Police:
COAST ARTILLERY
Colonel Edward W. Timberlake stated that he requires quarters for 175 enlisted personnel and 5 officers. At the present, he has men quartered as follows:
26 Senate Office Building
24 House Office Building
20 Old House Office Laboratory Building
24 4th Floor, Main Treasury Building
9 Sub-basement, Main Treasury Building
21 State Department Building
21 Commerce Building
21 Washington Building
14 Anticipated increase in personnel
180
Total
Colonel Timberlake intends to move all the men from the above buildings and
quarter them in the new barracks for the purpose of guarding the Treasury and
White House. At present the Capitol, the White House, and Treasury are inadequately guarded. For sanitary and tactical reasons, the Sherman Square site is
more suitable for the barracks.
The Medical Officer of Fort Myer stated that the mess hall used by 71st
Coast Artillery (AA) is unsanitary due to the fact that it is in the coal bunkers
in the Treasury yard and its underground location may cause illness among the men.
MILITARY POLICE
Major Martin A. Fennell stated that he requires quarters for 185 enlisted
personnel and 6 officers. At the present time, he has 66 men quartered in the
Sub-basement of the Main Treasury. Of this number 40 soldiers are quartered in
one room, which has only one window. Many of the pipes for the various utilities
supplying the building are exposed in this area, such as steam heat, hot water,
electrical conduits, etc.
The meals are cooked at Fort Myer and conveyed to the Treasury by trucks,
and reach their destination cold and must be reheated before being served.
-2-
1100
In case of emergency, the force must be doubled to adequately protect the
White House and Treasury, which requires 20 - 25 minutes in transit between
Fort Myer and the Treasury.
Summarizing: Of the present contingent of 371 officers and enlisted men
assigned to the protection of the buildings listed, the Treasury building
supplies quarters for but 99. It has been stressed by the Commanding Officers
that, for tactical reasons, it is essential that the full complement of officers
and men on this assignment be quartered in one central location within immediate
proximity to the buildings under their protection. The matter of sanitation and
ventilation are, in themselves, extremely important.
Major Ashbridge, U. S. Army Engineers, has a directive to erect the barracks
and is only awaiting approval of the site.
Attached hereto is blue print prepared by the U. S. Army Engineers showing
the proposed buildings.
15-42
101
MEMORANDUM FOR THE PRESIDENT:
I have had prepared in the Treasury the attached
study of a Stabilization Fund for the United and
Associated Nations and an International Bank for Reconstruction and Development. The purpose of these
two agencies is to meet the inevitable post-war
international monetary and credit problems--to prevent
disruption of foreign exchange and the collapse of
monetary and credit systems, to assure the restoration
of foreign trade and to supply the huge volume of
capital that will be needed abroad for relief, for
reconstruction, and economic development essential for
the attainment of world prosperity and higher standards
of living.
I would like very much to have you read the
appended extract from the study which briefly sets
forth why preliminary work for the establishment of
such institutions should be entered into now, and
gives some indication of their nature and scope.
I am convinced that the launching of such a plan
at this time has tremendous strategic as well as
economic bearing. It seems to me that the time is
ripe to dramatize our international economic objectives
in terms of action which people everywhere will
recognize as practical, powerful and inspiring.
In the flush of success our enemies always dealt
upon their "New Orders" for Europe and for Asia.
There could be no more solid demonstration of our
confidence that the tide is turning than the
1102
-2announcement of the formulation in concrete
terms, and the preparation of specific instrumentalities for what really would be a New Deal in
international economics.
If you think this idea is worth canvassing,
I would like to ask the Board of Economic Warfare,
State Department and Federal Reserve Board and
other appropriate agencies to work with the Treasury
on these plans with a view to your calling a conference to be held in Washington of Finance
Ministers of the United and Associated Nations.
In this connection you will remember that
Resolution XV of the Rio Conference already commits
the American Republics to participate in such a
conference.
To give some idea of the ground that might be
covered by a conference of that character, there
is also appended a file of a few preliminary docu-
ments which includes a suggested agenda which might
accompany
the invitations, and a suggested program
of
the conference.
(Aga) Hmorgenthan
HDW:dmh
5-14-42.
to assure the restoration of foreign trade; and to supply
the huge volume of capital t
1103
Suggested Plan for a United and Associated Nations
Statulation Fund and a Bank for Reconstruction and
Development of the United and Associated Lations
It is yet too soon to know the precise form or the
approximate magnitude of post-war monetary problems. But
one thing is certain. No matter how long the war lasts
nor how it is won, we shall be faced with three inescap-
able problems: to prevent the disruption of foreign
exchanges and the collapse of monetary and credit systems;
to assure the restoration of foreign trade; and to supply
the huge volume of capital that will be needed virtually
0
throughout the world for reconstruction, for relief, and
for economic recovery.
If we are to avoid drifting from the peace table into
a period of chaotic competition, monetary disorders, de-
pressions, political disruption, and finally into new wars
within as well as among nations, we must be equipped to
grapple with these three problems and to make substantial
progress toward their solution.
Specific plans must be formulated now.
Clearly the task can be successfully handled only
through international action. In most discussions of postwar problems this fact has been recognized, yet to date-though a number of persons have pointed to the solution in
general terms--no detailed plans sufficiently realistic or
1104
-2practical to give promise of accomplishing the task have
been formulated or discussed. It is high time that such
plans were drafted. It is time that detailed and workable
plans be prepared providing for the creation of agencies
with resources, powers and structure adequate to meet the
three major post-war needs.
Such agencies should, of course, be designed to deal
chiefly with post-war problems. But their establishment
must not be postponed until the end of hostilities. It
takes many months to set up such agencies. First, a plan
has to be perfected. Then it has to be carefully considered by a number of countries. In each country, again,
acceptance can follow only upon legislation. That alone
will consume many months and possibly longer. And even
when the plan is finally accepted, much time will be furperformance of the preliminary ground work which must be
done before effective operations can begin. Altogether,
a year may be required before a proposal can be transformed into an operating agency.
Obviously, therefore, even though no important imme-
diate ends will be served by having such agencies function-
ing during war time, it will be an error to wait until the
end of the war is in sight before beginning serious discussion of plans for establishing such agencies. No one
knows how soon the war will end, and no one can know how
0
ther consumed in the collection of personnel, and the
-3-
1105
long it will take to get plans approved and the agencies
started. Yet, if we are to "win the peace", which will
follow the war, we must have adequate economic instruments
with which to carry on effective work as soon as the war
is over. It would be ill-advised, if not positively dangerous, to leave ourselves at the end of the war unprepared
for the stupendous task of world-wide economic reconstruction.
Specific proposals will help win the war.
But there is an additional important reason for initiating at once serious discussion of specific proposals.
Such discussion will be a factor toward winning the war.
It has been frequently suggested, and with much cogency,
that the task of securing the defeat of the Axis powers
would be made easier if the victims of aggression, actual
and potential, could have more assurance that a victory by
the United Nations will not mean in the economic sphere, a
more return to the pre-war pattern of every-country-for-
itself, of inevitable depression, of possible wide-spread
economic chaos with the weaker nations succumbing first
under the law-of-the-jungle that characterised international
economic practices of the pre-war decade. That assurance
must be given now. The people of the anti-Axis powers must
be encouraged to feel themselves on solid international
ground, they must be given to understand that a United
Nations victory will not usher in another two decades of
-4-
1106
economic uneasiness, bickering, ferment, and disruption.
They must be assured that something will be done in the
sphere of international economic relations that is new,
that is powerful enough and comprehensive enough to give
expectation of successfully filling a world need. They
must have assurance that methods and resources are being
prepared to provide then with capital to help them rebuild
their devastated areas, reconstruct their war-distorted
economies, and help free then from the strangulating grasp
of lost markets and depleted reserves. Finally, they must
have assurance that the United States does not intend to
desert the war-worn and impoverished nations after the war
is won, but proposes to help them in the long and difficult
task of economic reconstruction. To help them, not pri-
marily for altruistic motives, but from recognition of the
truth that prosperity, like peace, is indivisible. To give
that assurance now is to unify and encourage the anti-Axis
forces, to greatly strengthen their will and effort to win.
Nor will the effect be on the anti-Axis powers alone.
Whether within the Axis countries the will to fight would
be weakened by such arrangements is not certain, but assur-
edly it would not be strengthened. And certainly the people
in the invaded countries, and the wavering elements in the
Axis-dominated and Axis-influenced countries would be given
additional cause to throw in their lot more definitely and
openly with the anti-Axis forces if there is real promise
that an orderly prosperous world will emerge from a United
Nations victory.
1107
-5Two International Government Agencies must be established
- Stabilisation Fund and a Bank for Reconstruction.
A vital part of that promise rests on international
monetary and banking collaboration. The United Nations
and the Nations associated with then must undertake 00-
operatively two tasks as soon as possible: first, to
provide an instrument with the means and the procedure to
stabilize foreign exchange rates and strengthen the mone-
tary systems of the United Nationa; and second, to establish an agency with resources and powers adequate to provide
capital for economic reconstruction, to facilitate rapid
and smooth transition from war-time economies to peace-time
economies, to provide relief for stricken peoples during
the immediate post-war period, to increase foreign trade,
and permanently increase the productivity of the United
Nations.
Those two tasks should be kept distinct. Though in
some of their facets and in many of their consequences
there is considerable interdependence and interaction, the
two are different enough to call for separate instrumen-
talities. Each is sufficiently specialized to require difforent resources, different responsibilities, and different
procedures and criteria for action. To supply the United
Nations with necessary capital not otherwise available
I
except possibly on too costly terms should be the function
of a bank created for that specific purpose; whereas mone-
tary stabilization--a highly specialized function calling
-6-
1108
for a special structure, special personnel, and special
organisation--would best be performed by a stabilisation
fund created to perform that special function.
It is therefore recommended that immediate consideration be given to formulating plans for the establishment
of two separate institutions:
1. A United and Associated Nations Stabilisation
Fund, and
2. A Bank for Reconstruction and Development of the
United and Associated Nations.
While either agency could function without the existence
of the other, the creation of both would nevertheless aid
greatly in the functioning of each. Doubtless one agency
with the combined functions of both could be set up, but
it could operate only with a loss of effectiveness, risk
of over-centralization of power, and danger of making costly
errors of judgment. The best promise of successful opera-
tion seems to lie in the creation of two separate institutions, linked together by one or two directors in common.
Proposals must be drafted by experts of many governments
meeting for that purpose.
It is hoped that some time soon, representatives of
various interested governments will meet in conference
to explore the possibility of working out a plan for the
establishment of an international stabilization fund and
bank. To facilitate the preliminary work of such a commit-
tee, and to provide the officials of the interested governments with a proposal set in specific enough terms to
1109
-7encourage and justify fruitful discussion prior to a
meeting, the following report has been prepared. It contains a suggested plan for a fund and for a bank, and
also some discussion of the various points involved.
Anyone familiar with the task of setting up new and
complex organisations such as the two envisaged will
fully appreciate that no single person, no matter how
well informed on the subject, can hope to draft a plan
that would meet with general approval. This is especially
true of a proposal calling for international collaboration
and requiring acceptance by several governments. To draft
a plan that is likely to meet with approval of various
governments is a task beyond the competence even of a group
of economists from any single country. The details of any
plan submitted for consideration would have to be subjected
to careful evaluation and examination by a number of men,
some of whom should be expert in the handling of international economic problems and monetary theory, and others
at home in related fields. In addition to monetary problems,
questions of sovereignty, of national interest, and of broad
economic policy are involved in some of the more important
provisions, and these inevitably must be the subject of
controversy and compromise. They are also matters that
must be discussed in detail and at length by high officials
whose responsibilities include the shaping and administration
of monetary and financial policy.
1110
-8The proposals and comments that follow are submitted
with the intent of providing a starting point for intelligent discussion and of calling attention to some of the
difficulties which would have to be satisfactorily not
before a workable and acceptable plan may emerge. The
proposals have been set forth only in outline and for the
most part only those points are included which are essential
to an understanding of the plan.
It is certain that some of the powers and requirements
included in the outline of the Fund and the Bank will not
survive discussion, prejudice and fear of departure from
the usual. Some may not stand the test of political reality,
and some may be unacceptable on technical grounds, while
others may be generally regarded as going too far toward
"intermationalism." Yet most of them appear as desirable
objectives in most writings or conferences on post-war
economies and are worth considering.
Willingness to depart from tradition and break new ground
is essential if meaningful results are to be obtained.
It will perhaps help toward understanding and induce
a more sympathetic approach to the proposals which follow
to state at the outset that something much more than the
usual banking and stabilisation functions are envisaged in
the plan. There is asgent need for instruments which will
I
pave the way and make easy a high degree of cooperation
and collaboration among the United Nations in economic
-9-
1111
fields hitherto held too sacrosanet for international
action or multilateral sovereignty. A breach must be made
and widened in the outsoded and disastrous economic policy
of ach-country-for-itself-and-the-devil-take-the-weakest
Just as the failure to develop an effective League of
Nations has made possible two devastating wars within one
generation, so the absence of a high degree of economic
collaboration among the leading nations will, during the
coming decade, inevitably result in economic warfare that
will be but the prolude and instigator of military warfare
on an even vaster scale.
The Fund and the Bank described in the following pages
are envisaged as economic instruments that most easily and
effectively can facilitate that high degree of economic
collaboration. It will be at once apparent that the resources, powers and requirements for membership, accorded
both agencies go far beyond the usual attributes of mone-
tary stabilisation and of banking. They must if they are
to be the stepping stone from/shortsighted disastrous
economic nationalism to intelligent international collabor-
ation. Timidity will not serve. It is my conviction that
the long-time effectiveness of both agencies will be
measured by the degree to which boldness and vision are
displayed in their organization and objectives.
1112
- 10 -
Part I, which follows, consists of an outline of
(1) a United and Associated Nations Stabilization Fund,
and (2) of a Bank for Reconstruction of the United and
Associated Nations.
Part II consists of a brief explanation and discussion of the proposed Fund, and Part III of the proposed
Bank.
1113
UNITED AND ASSOCIATED NATIONS
CONFERENCE ON THE ESTABLISHMENT OF AN
INTERNATIONAL STABILIZATION FUND AND
A WORLD BANK FOR RECONSTRUCTION AND DEVELOPMENT
I. Tentative Agenda for the Conference.
II. Formal Invitation by the President of the United States
to the Governments of the United and Associated
Nations.
III. Program of the Conference.
IV. List of Finance Ministers to be Represented at the
Conference.
1114
I.
Tentative Agenda for the Conference
I. An International Stabilization Fund, under which shall
be discussed:
A. Powers.
1. Purchase and sale of gold.
2. Purchase and sale of foreign exchange.
3. Purchase of wartime accumulations of frozen
balances.
4. Purchase and sale of securities of member
governments.
B. Size and Composition.
1. Minimum resources.
2. Gold, currencies, and securities.
3. Determination of contribution of each
participating government.
4. Voting rights of members.
C. Conditions of Membership.
1. Monetary policy.
2. Exchange policy.
3. Payments on outstanding loan interest.
4. Cooperation in restricting capital exports from
another participant.
D. Management.
1. Board of Directors, nominated by participating
governments.
2. Operating Committee.
II. A World Bank for Reconstruction and Development, under
which shall be discussed:
A. Powers of the Bank.
B.
1. Purchase and sale of gold.
2. Purchase and sale of securities.
3. Issuance of notes in new international currency
and acceptance of deposits in that currency unit
or in currencies of participants.
4. Issuance of securities.
-2-
1115
B. Lending operations.
1. Gold for monetary reserves.
2. Guaranteed loans for private investors.
3. Direct loans for improvement in standard of
living.
C. Capital Structure.
1. Total capital.
2. Apportionment of shares.
3. Voting rights of members.
D. Conditions of Membership.
1. Monetary policy.
2. Exchange policy.
3. Payment on outstanding loan interest.
E. Management.
1. Board of Directors and Alternates, nominated
by governments.
2. Selection of President and Vice-Presidents.
3. Delegation of powers.
1116
II.
Preliminary Suggested Draft
Formal Invitation from the President of the
United States to the Governments of the United
and Associated Nations
The President is deeply grateful at the cordial response
to his suggestion that there should be a Conference of the
Finance Ministers and Secretaries of the Treasury of the United
and Associated Nations, on the subject of Financial Agencies
for Post-War Reconstruction, in connection with which the
Establishment of an International Stabilization Fund will be
discussed, in accordance with Resolution XV, approved on
January 28, 1942, by the Third Meeting of Ministers of Foreign
Affairs of the American Republics.
The dangers of uncoordinated economic policies after the
armistice are readily apparent, in the light of the history
of the two decades of chimerical peace which ended in 1939.
The monetary and exchange difficulties of 1919-25 are even
more vividly remembered by the Other American Republids than
by the United States; the violent distortions of trade on the
European Continent in that period impressed the European
allies of the United Nations even more profoundly than the
United Kingdom. In all parts of the world the restrictions
upon international trade, which followed the collapse of
American foreign lending in 1929, brought painful readjustments.
To the depression which followed, and which struck most heavily
at Central Europe and at Latin America, we may ascribe the
accession to power of the Hitlerian regime in Germany. It is
believed that the United and Associated Nations have learned the
lessons of those twenty years. The approaching victory is
believed to be an opportune occasion for these nations to
-2-
1117
attempt the stabilization of exchange rates, commercial policies
and the flow of foreign lending, 80 that a repetition of the
cycle of economic collapse, commercial policies diotated by
unimaginative self-absorption, and armament programs may not
again plunge the world into a third and even more desperate
struggle. For even those peoples which felt most secure are
now reaping the consequences, in casualties and in hard
labor, of their failure to assist well-meaning business and
governmental organizations which were in a weaker position,
in the early months of the great depression.
In order to take effective steps, it is clear that the
United Nations must prepare plans and establish an organisa-
tion which will be ready to function on the day after the
armistice. To agree upon the plans, set up the organisations,
and provide adequate staffs will occupy months and perhaps
years. To encourage the business men and workers of the
United Nations and those who labor for them in the territories
now occupied by the enemy, and who may subsequently join
the United Nations, a definite organization must emerge while
the war continues. Protestations of good intentions must
be supported by tangible agencies, ready and capable of taking
quick and realistic action, if we are to give the necessary
reassurance which will bring forth the best efforts of all
our people. It is even more important that the United Nations
give some encouragement and some tangible evidence of their
ability to assist the populations of territories now oc oupled
by the enemy, so that these peoples will give their invaluable
assistance in destroying the enemy's supplies and communica-
tions behind his lines.
1118
-3As the date of the armistice cannot be predicted, it
is the earnest wish of this Government that, through an
interchange of views wi th the facilities afforded by a
Conference of Finance Ministers and Secretaries of the
Treasury, it may be possible to find a solution of the
international financial problems of the next era of peace,
of unquestioned importance even in the stress of war, that
is, such common understandings with respect to matters of
international financial concern as may serve to encourage our
populations for the struggle, promote an enduring peace, and
assure a rising standard of living for our peoples after
the victory has been won.
III.
1119
Tentative Program for the Conference of
Finance Ministers of the United Nations,
Washington, D. C.
1st Day -- Afternoon -- First Plenary Session.
A. Address by the President of the United States
stating broad objectives of Conference.
B. Nomination and installation of the Presiding
officer, the Secretary of the Treasury of the
United States.
C. Remarks of acceptance by the Secretary of the
Treasury of the United States, as Presiding
Officer.
D. Nomination and appointment of the Secretary of
the Conference (an official of the United States
Treasury Department).
E. Formation of Committee on Program and Procedure,
made up of the leaders of the delegations of
all countries represented.
F. Address by senior Finance Minister present,
expressing the gratification of all delegates at
their opportunity to participate in the conference.
2nd Day -- Morning -- First Session of the Committee on
Program and Procedure.
A. Recommendation that there be formed a Committee
of Financial Agencies for Reconstruction, made up
of delegates of all the powers represented, and
having authority to appoint sub-committees.
-2-
1120
1. Committee to consider and report on all
topics to the plenary sessions.
2. Secretary of Committee to prepare, without
official stenographic report:
a. A list of the Delegates and Secretaries present;
b. The course and result of the Committee's
deliberations;
C. Announcements to the press, approved
by the heads of delegations.
3rd Day -- Morning -- Second Plenary Session.
A. Address of the Secretary of the Treasury of the
United States, setting forth the need for and
objectives of the Stabilization Fund of the
United and Associated Nations, and the Bank
for Post-War Reconstruction of the United and
Associated Nations. (1 hour).
First Session of the Committee on
Financial Agencies for Reconstruction.
A. Resolution directing the appointment of SubCommittees to prepare interim and final reports
on the organization of the Bank and the Fund,
with the privilege of discussion, but not voting,
at such Sub-Committees, to be extended to all
delegations. Sub-Committee appointments to be
made as delegations, not as individuals. SubCommittees to have privilege of utilizing
technical personnel from any delegation not
a member of such Sub-Committee.
-31. Sub-Committee on Powers of Fund.
2. Sub-Committee on Powers of Bank.
3. Sub-Committee on Conditions for Membership in Fund.
4. Sub-Committee on Conditions for Membership in Bank.
5. Sub-Committee on Composition and Management of Fund.
6. Sub-Committee on Capital Structure and
Management of Bank.
7. Sub-Committee on the Preparation of
Organic Laws for the Fund, to prepare
legal embodiment of principles as soon
as accepted by the various Sub-Committees,
and to present these legal statements to
the appropriate Sub-Committee as soon
as drafted.
8. Sub-Committee on the Preparation of Organic
Laws for the Bank.
B. Appointment of Sub-Committees.
3rd Day -- Afternoon -- Third Plenary Session.
C. Address by representative of Republic of Brazil
(10 minutes).
D. Address by representative of Republic of China
(10 minutes).
E. Address by representative of Republic of Mexico
(10 minutes).
F. Address by representative of Kingdom of the
Netherlands (10 minutes).
G. Address by representative of Union of Soviet
Socialist Republica (15 minutes).
1121
-4-
1122
H. Address by representative of United Kingdom of
Great Britain and Nor thern Ireland (20 minutes).
4th Day -- Morning and Afternoon -- Four th Plenary Session.
A. Presentation of views by 28 other nations
represented.
5th to 8th Days -- Meetings of all Sub-Committees.
A. Preparation of interim reports for submission
to the Committee on Financial Agencies for
Reconstruction.
9th Day -- Morning and Afternoon -- Second Session of
Committee on Financial Agencies for Reconstruction.
A. First Interim Report of Sub-Committee on Powers
of Stabilization Fund.
B. Discussion of report.
C. Resolutions accepting portion or whole of report.
D. Resolution directing the Sub-Committee to reexamine any proposals rejected by the Committee
and to continue its discussions until prepared
to render a final report.
4
10th Day to 20 th Day -- Sessions of Committee'on Financial
Agencies for Reconstruction.
A. Reports of Sub-Committees and Resolutions thereon.
20th and 21st Days -- Sessions of Committee on Financial
Agencies for Reconstruction
A. Draft Resolutions on Stabilization Fund, for
Plenary Session.
B. Draft Resolutions on Bank, for Plenary Session.
1123
-5e
22nd Day -- Fifth Plenary Session of Conference.
A. Discussion of draft resolutions presented by
Committee on Financial Agencies for Reconstruction.
B. Formal adoption of resolutions.
C. Recommendations as to date of Sixth Plenary
Session.
D. Resolution directing continuance of meeting
of Committee on Financial Agencies for
Reconstruction.
1124
Note:
United Nations are those nations which
have agreed not to negotiate a separate peace
with the Axis nations.
Associated Nations are neutral nations
which have severed diplomatic relations with
the Axis powers.
1125
IV.
FINANCE MINISTERS TO BE
REPRESENTED AT CONFERENCE OF UNITED
AND ASSOCIATED NATIONS
United Nations
Commonwealth of Australia
1. Hon. J. B. Chifley
Treasurer
2. M. Camille Gutt
Minister of Finance Kingdom of Belgium
Minister of Finance Dominion of Canada
3. Hon. J. L. Ilsley
4. Mr. H. H. Kung
Minister of Finance Republic of China
5. Dr. Carlos M. Escalante Duran Minister of Finance Republic of Costa Rica
Minister of Finance Republic of Cuba
6. Dr. Oscar Garcia Montes
Minister of Finance Republic of Czecho7. M. Ladislav Feierabend
Slovakia
Minister of Finance Dominican Republic
S Sr. Virgillo Alvarez Pina
9. Sr. Rodrigo Samayoa
10. Mr. K. Varvaressos
11. Lic. Jose Gonzalez Campo
12.
Abel Lacroix
Minister of Finance Republic of E1 Salvador
Minister of Finance Kingdom of Greece
Minister of Finance Republic of Guatemala
Minister of Finance Republic of Haiti
13. Sr. Quesada
Acting Minister of
14. Sir Jeremy Raisman
Finance Member of
Republic of Honduras
Government of India
Minister of Finance
Grand Duchy of
15. M. Pierre Dupong
16. Jr. J. Alberda
Finance
Vice Regal Council
Luxemburg
Minister of Finance, Kingdom of the
Netherlands
A.I.
17. Hon. Walter Nash
Minister of Finance New Zealand
18. Dr. J. Ramon Sevilla Sacasa
22. Hon. J. H. Hofmeyr
Minister of Finance Republic of Nicaragua
Minister of Finance Kingdom of Norway
Minister of Finance Republic of Panama
Minister of Finance Republic of Poland
Minister of Finance Union of South Africa
23. Mr. Arseni G. Zverev
Peoples' Commissar
Union of Soviet
24 ir Kingsley Wood
Chancellor of the
United Kingdom of
25. Hon. Henry Morgenthau, Jr.
Secretary of the
America
Treasury
Minister of Finance Kingdom of Yugo-Slavia
19. Mr. Paul G. Hartmann
20. Sr. Jose Antonio Sosa
2.20 Mr. Henryk Strassburger
Mr. J. Sutej
for Finance
Exchequer
Socialist Republics
Great Britain and
Nor thern Ireland
United States of
1126
Associated Nations
7. Dr. Joaquin Espada
28.
Lr. Arthur de Sousa Costa
29. Dr. Carlos Lleras Restrepo
50. Dr. Vicente Illingworth
31. Sr. Lic. Eduardo Suares
32. Dr. Rogelio Espinoza
33. Dr. David Dasso
34. Dr. Javier Mendivil
Minister of Finance Republic of Bolivia
Minister of Finance Republic of Brasil
Minister of Finance Republic of Colombia
Minister of Finance Republic of Ecuador
Minister of Finance Republic of Mexico
Minister of Finance Republic of Paraguay
Minister of Finance Republic of Peru
Minister of Finance Republic of Uruguay
35. Dr. Alfredo Machado Hernandez Minister of Finance Republic of Venezuela
1127
Cabinit may 22
THE WHITE HOUSE
WASHINGTON
1127
Pres. said taxes an
$2,000 NO group may
to
too
Leavey,
When
you consider was Bands
10% with hilding + as
etc fair he mentioned
it to Henderson, also
covered same subject
with me this # M.
Pre. suggested when
gtold him what I chool
asked B. Rummel to
study to aok him to
take 10 important items
I
1128
1128
THE WHITE HOUSE
WASHINGTON
in net ail store and
ask first ret which
of there items there
is a greater and smaller
demand. also suggested
that we ask L. terstein
of Fibres to left
Pre s give tax
Layer sum for
paying off their defts.
Confining to smaller here
m 75. MO Preo
he does not
so
much
about
method
w as he owes about
1129
1129
THE WHITE HOUSE
WASHINGTON
results I asked if
he would he willin g
to fagest the $25. MO.
if we got it by He sliding
scale of nates
said O.K.
Melson and I to
offer before Silver
emmttee.
-
-
1130
June 16, 1942
I saw the President this morning, and he said, "I
talked strictly politics to the Big Four when they came to
see me about the tax bill." He said, "At the rate they are
going, they won't have this tax bill through until just
before election, and I suggested to them that they put
on a 10 or 15% increase on all excise taxes, and postpone
doing anything on corporate or individual taxes until after
election." He went on to say, "I don't think they will listen
to me. As far as I am concerned, I am in good shape, but
it is the Congress." He said, "I will have to go along and
sometime along in September, if they don't work any faster
than they have, I will just have to tell them that they
will have to postpone the bill until after election." He
said, "I can't let it go on the way it is.
I then told him what I said yesterday at my press
conference, and he said, "That's fine. Just stick to it."
I told him, "I am sitting and not sweating, and he said,
"Well, keep on sitting and don't do any sweating."
I
told him about my conversation with Speaker Rayburn
last night, at which time the Speaker approved of what
was doing; namely, not to ask for any additional money
I
from the House and to wait until it got over in the Senate.
The President gave me full approval of my position.
I explained to the President about our financing,
and what we were doing with the bills and certificates,
and he said, "That's fine." He gave it his entire approval.
I found the President looking much, much better today
than he did on Saturday. He was in very good humor, and he
sat and talked to me about the war for about 10 or 15
minutes.
********
1131
June 16, 1942
The President said to me, "The whole question of whether
we win or lose the war depends upon the Russians. If the
Russians can hold out thisSummer and keep 3-1/2 million
Germans engaged in war we can definitely win." I asked him
about shipments to Murmansk, and he said it was very difficult.
The convoys are losing 25 to 35% of the ships. He thinks
that Japan will attack the Russians in Siberia within the
next couple of weeks, but he says that it doesn't disturb
him if the Russians will handle themselves properly, and
I said, "What does that mean?" He said, "They should give
up Vladivostok and gradually withdraw." He said, "Siberia
is a big country and supposing they do retreat 500 miles or
more, what of it?"
The President said, "This attack on the Aleutian Islands,
I do not think was directed at the United States or Alaska.
I think it is part of their preparatory drive on Siberia.
He said, "We now know that at the beginning of the war
the Japanese Fleet was almost as big as ours." He said,
"However, once we lick the Germans, with the help of England's
Fleet we can defeat the Japanese in six weeks.
The amusing thing about the President is that he can
state these facts cooly and calmly whether we win or lose the
war, and to me it is most encouraging that he really seems
to face these issues, and that he is not kidding himself one
minute about the war. That, to me, seems to be the correct
attitude for a Commander-in-Chief to take.
###########
1132
July 3, 1942
HM Jr called Miss Tully at Hyde Park at 2:30 today,
and the following is the Secretary's end of the conversation:
"I had lunch with Dr. Weizmann today. This is the
story he tells me. There is a Colonel Wingate, an engineer,
who knows every foot of the desert and has successfully
fought in the desert. He was the man who put the King of
Abyssinia back on the throne. The English sent him to
India where he is now.
"Weizmann's suggestion is that if Wingate could be
flown back from India and put in charge of the 40,000
Jews in Palestine that they would all fight to the last
ditch. They all worship this Colonel Wingate. There is
no time to lose. The English know about him; also General
Dill knows about him.
"I have this suggestion - possibly the President
may want to see Weizmann this afternoon, and in that case
he could fly with me, or the President could see him tomorrow morning. If the President was convinced he might telephone
Churchill about Wingate. I was planning to fly up at three
o'clock. Could you get this story to the President before
three? Every Jew in Palestine is a commando, and they all
would follow Wingate to the last man."
Grace Tully telephoned HM Jr at 2:40, ten minutes
later, to tell him the President would call General Dill
himself tomorrow. HM Jr urged her very strongly to ask
the President to call General Dill today. She said she
would try her best.
July 4th heary 10.50. HiM, -
called grace Zulley
to check an F.N.R.
1133
yes he had spoke to
general whill and found
that shill knew all
about Col. Wingate
fun
shill
wasWeignen
To what back
family
to
7.1.
R.
when he Dill hand
from Lmdm,
I tild grace I would
would cleak back
with her minday
/
Jim messed an grace
of decision hous not
1134
July 7, 1942
Called on the President and asked him to
approve the Treasury's $2 billions financing, which
he did unhesitatingly.
The President then said, "I want to ask you
something which will interest you and me when we are
He
back in Dutchess County as gentlemen farmers."
asked me how much money we were raising today through
taxes and customs, and so forth and so on, and I said
my guess was $23 billions or $24 billions, but not to
use that figure because I was not sure.
He said, "Sometime either you or I ought to
make a statement to keep them from doing what they did
under Andy Mellon." He said, "After all, after the
last war they continued the taxes up to about 1926 when
they got political and they were writing off about
billions a year. Then they decided they would
lower the taxes with the result that we started in
1933 with a debt of about $20 billions where, if they
$2
had continued the higher taxes,we might have wiped all
the debt out." He said, "What I am thinking of is
supposing we end this war with a debt of $200 billions
and I could cut down the expenses of the Government to
about $10 billions a year -- (I was surprised he used
the word 'I') -- and our receipts were around $20 billions
a year, he said, "I could wipe out the debt in about
20 years."
He said, "I don't think either you or I have
expressed ourselves along the theory that we cannot
have prosperity unless the Government has a big debt."
I said, "I certainly have not." He said, "Well, I
have not." He said, "I know in Dutchess County a lot
of farmers think they must have a mortgage on their
farm." I said, "I have never subscribed to that.
I said, "I am scared to death to have a mortgage on
He
my farm. He said, "That's the way I feel.
said, "Sometime let's you or I say something about
1135
-2-
this so that we will keep future Congresses from
doing what Mellon did, namely, reduce the taxes and
in that way keep the debt up.
I don't think he had anything special in
mind, but evidently he had been thinking about it.
He picked up this afternoon's paper and said, "I
see that we have been bombing some of the places
behind the German line." He said, "You know that
the English have never done any day bombing or dive
bombing and if it is day bombing it must be the U. S.
because we are proficient in that and they are not."
I said, "I did not know the English do not do day
bombing," and he said, "Oh, no. They don't even
know how to dive bomb.
I said, "Are we letting them have many planes?"
He said, "Every single one I can lay my hand on and we
are sending them about 10 or 12 a day.
At some period during the conversation I took
up the question of Palestine and the Jews and what he
was going to do about Weizman's suggestion. While
Weizman had told me right after seeing the President
how charming he was, the President went on to pound
his desk and to say how he told Weizman that this was
positively no time to bring up this matter; that only
3 days ago the English thought that there was going to
be an Arab uprising and that the English were terrifically worried about having the Arabs stab them in the
back. So he said, "I told Weizman that for two reasons
this was not the time to do it," and the President, as I
said, pounded the desk, "because, in the first place,
it's so dangerous as to whether the Arabs have an up-
rising." He said, "As a matter of fact, I told Weizman
that the State Department was ready to get out a statement about the Jews in Palestine fighting and I killed
it." He said, "I told Weizman I have to look after
the diplomatic end." Then he said, "Another reason
-3-
1136
"we can't do it," he said, "we need 50,000 rifles and
10,000 machine guns and," he said, "where are you
going to get them from. We haven't got them. So
he said, 'I agree with Weizman that this Colonel
Wingate is the man to lead them as Commandos, but
our first consideration is to make sure that the
English are going to hold their present position and
keep Alexandria and Cairo from falling.
He said,
"If they can do that and if we can get rifles and
machine guns," he said, "then we ought to organize
the Jews under this Colonel Wingate as Commandos.
I said, "You know, Mr. President, they make
magnificent fighters and they have demonstrated their
courage." He said, "I know that, but we have just
got to wait" and he was very positive in his statements.
I can do.
So, for the time being, there is nothing that
While waiting for the President, I had a
chance to go over with Sam Rosenman Irey's memorandum
on Hamilton Fish and on the alcohol case in Cuba,
Mexico and WPB, and asked Sam would he be willing to
look into it if the President wanted him to and he
said he would.
I then showed Irey's memo on Fish and Trujillo
to the President, which was about 10 pages, and the
President read every single page of it and said, "This
is fine! This is grand!" The other case did not
seem to interest him very much, but he said I could
turn both of them over to Sam, which I did. Sam told
me that he had no staff. I said I appreciated that,
but we had and our people would be available to him.
The President loved the memo on Ferdinand
Hoyt heading a parade in his shorts. He said, "That's
the way we always start a candidate in Dutchess County."
He said, "We start them out in their shorts and we end
them up fully dressed." He just shrieked with laughter,
when he read it. He said, "Give Ferdie time. He will
get better known."
1137
-4-
Then I told the President about the Russian
flyers and he said it was all right for me to take it
up with Litvinoff. I told the President I wanted to
tell the Russians they ought to have these men as our
guests. The President said no; we should pay whatever
the actual cost of the food is, but no such figure as
30,000 rubles. Incidentally, the President thought
there were 10 men there; he didn't realize there were
only 5.
During the conversation I reminded the President that from the time he last turned the Alien PropertyForeign Funds matter over to Rosenman until today I never
mentioned
signed it. it to him, but I wanted to thank him for having
I also told him I hoped he would keep Sam Rosenman around to do many more chores; that I thought he
could be useful, and he said, "Yes, Sam is swell," and
I repeated that to Sam after I came out.
Sam Rosenman told me this. He said, "If I
had not been acting for the President," " he said, "I
don't know what I would have done to Crowley, I was
so angry and so mad." He said, "Here I was sitting
in the capacity of a Judge on this Foreign Funds thing
and Crowley comes in on Friday and says to me, 'By the
way, Judge. I need a couple of good business men for
the Aniline Dye and if there are any friends of yours
that you would like to put in there, just let me know
and I will be glad to put them into General Aniline &
Dye." Judge Ros enman said, "It's just like offering
me a bribe. If He said, "I don't know when I have been
so angry."
1138
-5-
Then he also told me that Crowley had been
around to see his friend Steve Early complaining about
this whole thing very bitterly and that when Judge
Rosenman took the release in to Steve Early, yesterday, for release he said) "Well, what about Crowley
in this thing?" So Judge Rosenman said, "Well,
Crowley is satisfied. Here's a letter from his
attorney, Markham."
"Well, that isn't Crowley. How
does Crowley feel?" So he said, "Well, I can assure
you Crowl ey is all right. So Early said, "If you
say so, I will take your word." So Sam called up
Crowley, or Crowley called him, and he said, "You know,
Early is worried about whether you are satisfied and I
wish you would please write a letter," and he said
Crowley did to Early and Early had just sent him a
letter. And Sam said, "This is Early's friend, Victor
Emanuel, who is behind this thing.
)
1139
July 10, 1942
(Dictated by the Secretary in the presence of Mr. Bell,
Mr. Graves, Mr. Kuhn, Mr. Gamble and Mrs. Klotz.)
I just wanted to dictate for my diary and I want you
to get the background.
At Cabinet, I first asked the Vice President what
the status was of the Farm Bill and particularly this
100% loan on farm products. He said frankly he did not
know; that the Department of Agriculture had not told
him, but he said he did hear yesterday that they were
for this thing. So I said I wanted to bring up at
Cabinet the fact that if they made a 100% loan it would
mean we would have to borrow that much more money which,
at this time, seems useless.
I brought it up at Cabinet and the President said
he did not understand the bill and was the 100% loan in
excess of vari ous benefit payments that the farmers would
receive? And he said he asked Paul Appleby, Acting Sec-
retary of Agriculture, and he did not know. Well, somebody said they thought this last 100% Loan Bill was that
it would save on parity payments, but nobody knew. So
I said my interest was -- it was purely from the Treasury
standpoint -- that naturally if they could borrow 100% on
these five various crops, everybody would borrow and it
would mean hundreds of millions more of what I considered
unnecessary borrowing.
Then the President said, "Well, on this question of
inflation, I see where they have advanced the price 15% on
certain canned goods. I think I will very shortly have
to make a speech on inflation," and he says to Frances
Perkins (I guess he has forgotten my position), "Listen
closely, I am going to have an over-all ceiling on every-
thing, including labor." So I said, "Well, Mr. President,
whatever you do you had better do it fairly soon, because
this thing is getting away from you."
At the end of the Cabinet, Jim Landis made his little
speech about how he would like to have much more coordina-
tion among vari ous agencies. They went into cities and
-2-
1140
asked for volunteers and got all sort of mixed up and
that they should be given a chance to show what they
could do. "Well, the President said, "I think you
are right. Get the Director of the Budget to fix up
something."
So I spoke up and said, "Well, just a
minute. Before this thing gets to the stage of an
Executive Order for the President, I would like to talk
the thing over, because Mr. Landis has written me a letter and we haven't found that we get very good cooperation from OCD, particularly in New York where we asked
for Air Raid Wardens and were turned down." I said,
"All I am asking for is before it gets into even the
draft form that we have our day in court. I said to
Landis, "Of course, if you want to raise the money, all
right, but I think one person should be held responsible."
Then the President said, "Jim, take my advice. Henry
has promised to raise $1,000,000,000 a month and he's got
his neck out and", he said, let him hang himself if he
wants to or else"- then he did this (gesture of hand across
the throat as if cutting it from ear to ear) -- "his head
goes caput!'
The purpose of my telling you this is this. I could
have answered the President in a half a dozen ways, but
didn't. This is either the second or third time he has
said this at Cabinet. And if sometimes I seem a little
unreasonable in my pressure on you, it's remarks like this
which are difficult to take. But to each one of you, particularly in War Bonds, I want you to know I don't feel
that way towards you fellows And you (Mr. Graves) don't
mind my repeating what I said to you -- I know each and
every person is doing his damndest and, win or lose, nobody
can do more than that. But at times if I get a little over-
excited, it's remarks like that which I think were most un-
fortunate before the Cabinet, and instead of coming away
with an inspiration, it would be depressing if I did not
happen to be feeling that everybody, including myself, is
doing all we can within reason to bring it to the public
and then it rests with the public. And I had it on the
1141
-3-
tip of my tongue to say, and almost bit my tongue off,
"However badly we do, Mr. President, it's better than
your campaign for rubber," but I did not say it and I
am glad. There are a lot of things which are going
badly for him and I suppose he thought he would take a
crack.
I wanted to explain it to you. I wanted to explain the kind of things that happen to me. On the
other hand, I think you ought to know it so if a week
from now I get excited -- it may take a week before it
boils up to the top -- but on the other hand, win or
lose, nobody could do as good a job as the Treasury is
doing and I just wanted to tell you that. I thought
you
to hear it because surely somebody will repeat
it to ought
a columnist.
That's the end of that!
On the $2,000,000,000 financing, he did not even
ask me and I volunteered to say I thought it would be a
success. Then he told the story about the church and
vestrymen -- that I offered them a champagne dinner if
they would buy a Government bond, and that was his only
comment on the $2,000,000,000. So I have to supply my
own yeast and my own dynamo.
Dan who was Director of the Budget for 41 years,
knows this almost as well as I do.
(Mr. Bell: I know what goes on.)
And sometimes it's awfully hard to take it. Dan
knows. He served 41 years and did not even get a letter.
(Mr. Bell: I am still Acting Director of the Budget.
My resignation has never been accepted.)
This has happened to me. I don't think it is going
to crop out in any unpleasantness, so I tell it to you.
Frankly, I don't feel that way. It's a tough job.
I
-4-
1142
could flash any one of a half a dozen things on them -our airplane producti on for June, less than May. Inexcusable. Bad management. Bad administration, etc.
But it's there. Should I or shouldn't I tell it to you.
Well, I like to think we have a happy family and I told
We will do the best we can. And as I told
you.
Harold, supposing we don't. It isn't a tragedy. Funny,
the President said word for word what I said to somebody
who was sitting there. "We have got to do this thing.
We have got to do this thing." The President said, word
for word, what I said. He said, "It's very easy for somebody to say "Get planes to the Middle East. Stop these
Russian sinkings, but,' he said, "then let somebody go out
and do it. It's not so easy." You know, Paul said, "It's
got to be done.' I said, "It's very easy to say that."
said, "The President can say, "Stop sinkings off the Atlantic Coast, but it does not happen. I don't mean by
I
that we should be complacent. We are not complacent.
We are doing everything humanly possible to do and I am
satisfied we are doing everything anybody could do and
doing it better than anybody could do.
This is very much in the room here. I don't mind
your discussing it among yourselves. I think we have
the best public relations with our clientele that any
Government agency has in the Government. I said our
own clientele. We are all right. You mustn't repeat
what I say here. Dan has seen me go through this thing.
I might react entirely different, but I think this is the
third time this has happened to me,so I get all in a lather.
Since Harold and I had our talk, 2g weeks ago, there has
been no lather, no soap. We are getting along all right.
1143
July 16, 1942
Saw the President and congratulated him on his
victory over the Farm Bloc. He seemed pleased.
Asked him if it was 0. K. to make Randolph Paul
General Counsel inasmuch as Foley was going in the Army.
He said yes.
Then he told me the story -- he said he had not
bothered to tell it to me before -- that John MacCormack,
of Massachusetts, had come in to see him and said that
the Committee wanted John Sullivan back because they did
not like Paul and that the President asked MacCormack
please to check and he said that he did and he said; "He
did the unusual thing. After checking," he said, "he
wrote me a letter and said his original information had
not come from a member of the Committee and that on
checking wi th the Committee, from Doughton down, they
all liked Paul and that he had been misinformed."
I then told the President that he had been pretty
rough on me at the last Cabinet on War Bonds. So he
said, "What did I do? What did I do?" I said, "You
were unnecessarily rough." "Well," he said, "there
isn't a day passes that either Wallace or Miss Perkins
does not go after me on compulsory savings." He said,
"What did I say?" I said, "Forget it, but I thought
you were pretty rough." Well, he took my criticism well
and I am glad that I brought it up, because I don't think
he will do it again.
We then got on the Tax Bill and I told him that I
wanted to go after the social inequities in the Bill very
hard. He said, "Fine!", and that George had been asking
to see him, but he had been postponing him. So he said,
"Tell you what we will do. We will have George in Friday
for half an hour. George says he wants to see me alone.
He said, "I will see George alone and then see you.
said, "Do you mind reversing it? See Paul and me and
I
then we will step out?" He said, "All right. So he
gave me a tentative appointment for 11 o'clock Friday.
-2-
1144
While sitting in the hall, first, Air Marshal Evill
comes out of Hopkins' room and stops and talks and then
he says, "You know, Hopkins is going to make another trip."
I
said, "Oh, really!' Then Admiral McIntire goes in the
President's room and then goes from there to see Hopkins.
And when I went in to see the President, he said, "Bring
everybody in," and Marvin McIntyre and Steve Early went
in with me and did their appointments, and the President
kept telling them to hurry because he had to clear his
decks for the morning. Well, he gave me all the time I
needed. After I left the President's rooms, I asked to
see Marvin McIntyre and was told that McIntyre and Early
were in with Hopkins. I give these incidents just to
show what Hopkins' position is in the White House.
I then told the President that I was seeing Wendell
Willkie and some of his movie people tomorrow and I expected to tell them they could not have any of their money.
I told him how Will Hays had misrepresented the tax situation. Also told him the story about how Winthrop Aldrich
had said when he asked Willkie to come down here that
Willkie said he wanted a special retainer and Aldrich had
said, "What am I paying you $100,000 a year for as Chairman of Twentieth Century Fox?" He said, "I wouldn't give
him a nickel to come down here." The President loved the
story and loved the story about Hays not knowing that all
the companies had paid their taxes except Twentieth Century
Fox.
Then, to my great surprise and again showing that it's
wise to tell the President about these things whenever I
can, he said he saw Will Hays about three weeks ago, and
he said that he told Will Hays, "You are taking your chances
on your money. You are gambling that England is going to
win." He said, "Why don't you do what I did?" He said,
"I formed a company and bought $4,000,000 worth of marks in
Germany. I gambled Germany would come back, and I invested
them in German real estate and I made $3,000,000 for my
stockholders.'
1145
-3-
He said, "Why don't you do the same thing and invest
this money in England in English real estate and after
the war is over you will have the money there in prop-
erty?" So Will Hays said no, he did not like that
idea. He said, "If you own this real estate in England
you can borrow on it in this country.
"
But I again say I am glad I put the President on
notice that I was going to turn down the movie people
tomorrow.
I said, lie
"They
have made their bargain and
bed.
Let them
in it."
00o-00o
1146
July 22, 1942
I had lunch with the President today, and found him
in a very good humor. From remarks he made later on, I
don't think he was referring to the war.
The President said, "I have got several questions I
want to ask you," and he had on his desk a draft of a joint
resolution which he evidently wanted Congress to pass. I
gathered that the so-called Big Four had turned him down
this morning. He said, "I have got to do something about
inflation and prices, and there are two ways of doing it.
One is through Congress and the other way is to do it
by getting an opinion from the Attorney General that I have
the war powers to do it." He said, "Which way would you
do it?" giving me no inkling as to how he felt.
So I said, "Well, you will have to give me an example."
He said, "Well, supposing I said to the cotton manufacturers
that the price of cotton can't go any higher and, therefore,
the price of cotton goods has to stay where it is, and then
I did the same with canned goods, and I told labor that they
would have to work for 40 an hour." So I said, "Well, are
you going to freeze wages?" He said, "No. There may be
some districts paying only 30 and they could raise it, but
if we continue to keep the cost of living stable there is no
reason for wages or individual prices to go up." "Well,"
I said, "I agree with you.
Then he said, "What is your thought? Would you advise
to do it myself?" I asked the President how long it would
take for it to get through Congress, and he said that they
me
couldn't get it through in two months because they want to
go back to get re-elected and they are all nervous. So I
said, "I can unhesitatingly advise you to do it yourself because it is something that has to be done right away. You
can't fool around with it." So he said, "That's good."
Then he went on to say that he had another question to
ask me. He said, "Supposing a manufacturer, due to the freezing
of prices, is in the red? Should we permit him to raise his
prices or should we make up the difference in his losses?"
I said, "I can answer that because any of these questions
on inflation we think about all the time. I would rather see
you pay a manufacturer what he is losing than to have you
increase the various prices and in that way break your ceiling."
-2-
1147
He said, "I am awfully glad you feel that way. That's fine."
I gathered that the Big Four were coming back tomorrow
to get his answer, and I also gathered that he would announce
this next week. I also asked him whether we could see it
before he makes it public, and he said that we could.
He then went on to talk about gasoline and rubber, and
he had a lot of ideas about what he proposed to do. The main
thing seems to be to separate the two in the minds of the
public.
I then told him I knew about the group in London, and I
asked him how they were getting along. He said, "I haven't
heard a thing. I don't know a thing about it.'
I told him about the latest information on the parachutists
in Dutchess County, and he was very much interested in that.
I told him I thought there should be a guard with Mrs. Roosevelt every night from now on up there, and I told him how we
protected her last Saturday and Sunday without saying anything.
He thought that was good.
I had him read my whole tax statement, and three or
four times he said, "That's good. That's fine." The only
suggestion he made was on the description about the man with
the $9,000 income, he said he would do it both ways - show
how much tax he has to pay and how much he has left. This
is what I asked my men to do and they haven't done it.
When I showed my tax statement to Barkley and George,
when we came to joint returns, Barkley said, "You know the
President has told us several times that he is opposed to
bringing this matter of joint returns up at this time. He
thinks it will only prolong the bill.' I said, "Well, I
don't doubt your word, but I have just come from the President,
and he has approved this statement." So Barkley laughed and
didn't say anything.
The President also told me that Chief Justice Stone
had turned down his request that he should act as arbiter
on the rubber business. The President said Stone's letter
was very friendly. I am not surprised that Stone turned it
down.
-3-
1148
While discussing inflation, I brought up the question
of the so-called coin systems in England, and I asked the
President whether he was familiar with it. I explained that
they give a book which limits you on how much you can
spend for clothing, and another book limits you on how much
you can spend for food. They really ration money, and I
said I thought that if this thing kept on much longer we
would come to that. I asked him if he would want to throw
out a hint to that effect in his statement on price control.
He thought for a moment, and he said, "No, that would just
raise another question for the people to think about,
and I don't want to do it at this time."
1149
August 7, 1942
At Cabinet, I asked the President whether the
State Department or Justice Department looked after
an infringement of the Lanham Act. The Attorney
General said he did.
I then said, "I have reason to believe that pos-
sibly Congressman Fish has violated that Act." The
President said he had no doubt but what he did. I
then asked the Attorney General if he would please
look into it, and I told him that U.S. District
Attorney Maloney had all the facts.
1150
August 21, 1942
The President went through a long discussion
on the whole question of prices and controlling
inflation, and when he got through the Attorney
General said, "Well, who is looking after this
for you? Who can I talk to? Should I talk to
Judge Rosenman?" The President said, "Nobody
is working
on it. I would like you to take care
of
it."
August 22, 1942
1151
I told the President about my inspection of the
various Army camps, and he was very much interested.
I said, "I would like to go overseas and inspect
the troops in England and Ireland and see how they
are over there," and the President unhesitatingly
said, "Okay."
I told the President that I didn't want any
publicity, that there had been none on this trip,
and I just wanted to make the trip under the auspices
of the Army. I told him that I didn't care whether
I saw Churchill or not. I said to him, "You're sure,
Mr. President, that it is all right?" and he said, "Yes,
of course. ('1) tell you how we will handle it.
I will announce that I am sending an intelligent
civilian observer who can be my eyes and report to me
on how he finds the Army."
Then the President said, "You know I would love to go
myself because you and I have got to get close to this
thing." Then he said, "What I am proposing to do is
to make a swing around the country and visit factories
and Army and Navy training stations and stop for a
short time at Warm Springs." He said that he would go
about the middle of September, and then he asked me
what I thought about it, and I said, "I think you
should certainly do it.
1152
August 25, 1942
I told the President this morning that tomorrow morning
I was convening this committee composed of myself as chairman,
General Hershey, Secretaries of War and Navy, and McReynolds,
to consider the question of drafting key Civil Service men
40 to 45 years of age, who are not fit for combat service.
The President questioned me about it, and then he said, "That's
all right." Then he got quite excited and he said, "But, Henry,
neither Knox nor Stimson are doing anything about stopping
giving commissions to young men who should be in combat service,
and I would like to see every one who has been given a commission and a desk job here in Washington cleaned out." And
I
said, "So would I, but that has nothing to do with what
I am talking about. He said, "I know it but this commission
business makes me awfully mad."
I
then talked to him about my going to England, and I
told him that Marshall felt that if it was announced I was
going over to inspect troops that Secretary Stimson might
want to go, and he thought that would be bad. The President,
while saying nothing, gave me the impression he agreed with
Marshall. I said, Marshall asked me whether it couldn't be
given some financial aspect," and the President said, "Yes,
it could." So I said, "Well, I could send for Sir Frederick
Phillips and tell him that I was coming. 11 The President told
that he wouldn't make it look as though it'was just the
English. He said, "I would say that you are going over there
me
to study world finance, including German finances, and
give it a world outlook." So I said, "Well, in that case, I
would like to take Harry White with me who is in charge of
that in the Treasury." He said, "That's all right." I really
don't think he knows who Harry White is. I asked the President
whether he would make the announcement at the proper time, and
he said he would.
During the course of my conversation with the President,
he said very quietly, "Henry, now that your War Bonds are not
going so well, what are you going to do about it?" and I said,
I am not going to do anything now because I think something
will come out of the present tax bill that will help us with
our War Bonds," and that ended the subject. This is the first
time the President asked me what I was going to do about it.
-2-
1153
The following was dictated in the presence of Messrs.
Gaston, White and Blough:
On the proposed spending tax, the President read the
memorandum and said, "That's all right." Then, perhaps
foolishly, I began to explain to him what is going to happen
to the people making $2,000 or less. He looked at the second
page and questioned me about the 100% on over $25,000. He
said, "Does that mean that a fellow is taxed 100% if he spends
$25,000 or does it just mean you change him 100% under the
schedule on what he would spend over $25,000. I told him I
thought it was the latter, and the President said, "That's
what it should be." Then he said, "Go ahead and try it."
The President also asked me, "What about the administrative
problems in connection with this?" and I said, "Well, they
are difficult but we can overcome them."
The fqllowing was dictated in the presence of Messrs.
Gaston and White:
When I went in to see the President, Early and Rosenman
were there, and Rosenman was arguing with the President about
whether he wanted to send this inflation message to Congress
and ask them to do something in thirty days, or whether he
wanted to do it under the War Powers Act. Listening to the
discussion, I got the distinct impression, which I later
substantiated with Rosenman, that the President was leaning
towards a message to Congress and a 30-day notice on it. I
also learned later from Rosenman that that was what Hopkins
was advising.
Rosenman said to the President, "Wickard would like you
to do it right away." So I spoke up and said, "So would I."
Then later on when I was with him alone I said, "I will go
out on the end of the limb, Mr. President, and definitely
recommend that you do this and not wait for thirty days while
they argue and muddy the waters. I think the public is ready
for something now, and I would like to see you do it right away."
I think I made a definite impression on him, and Rosenman told
me later, "I tried for five weeks to get the President to make
up his mind, and I can't get him to make up his mind either way."
-3-
1154
The following was dictated in the presence of Mrs. Morgenthau, Mrs. Klotz and Messrs. Gaston and White:
HM Jr: After leaving the President, I went down to see
Judge Rosenman and talked about various things. Then he said,
"How do you think Nelson is doing and what do you hear?"
So I said, "I hear nothing but criticism and that the thing is
justsaid,
falling
by the
I said, "What do you hear?
He
"I hear
theway-side."
same."
job?"
Then Rosenman said, "Would you be willing to take Nelson's
So I said, "Well, under certain conditions." He said,
"Well, what are they?" I said, "Well, about a year ago I sent
to the President a plan for a Ministry of Supply." He said,
"Yes, I got a copy of it." Then I said, "The Ministry of
Supply is still good and the man who has that job must have
control of labor. Rosenman said, "Well, Nelson has that.'
Then I said, "And he has to have complete control of all
financing of plants, and Nelson doesn't have that. He has to
work through Jones, and I don't think that Jones has made a
success of rubber and steel. I said, "The man who has that
job just doesn't have time to fight Jones and if it is left
the way it is now, he would have to spend all his time doing
that."
Then I told Rosenman about the call I had from Milo
Perkins at which time he told me of a three-hour experience
he had with Jones and Clayton which completely wore him out.
Perkins said they talked and argued and talked and argued
until he finally got up and said, "Goddamn you, I am going to
do it my way any way.' I said, 'If a man is going to make a
success of the job, he just hasn't time to fight with Jones."
I said, "Furthermore, I insist on sitting at the left
of the President where I sit now because you need the prestige
over the Army and Navy. #
Then Sam said, "Well, I think that your conditions in
regard to Jones alone is practically like saying no." So I
said, "I don't care who goes in there, as long as he has to go
to Jones everytime he wants to finance a plant or buy some
rubber, or do anything in connection with financing, Jones will
1155
-4-
always sabotage it, and the President sooner or later will have
to cross that bridge.'
Then Sam said, "The part of sitting at the President's
left, I think that could be arranged. Then he said what do
you think of Lillienthal? Do you think he could do it?"
I said, "Well, I don't know him so I couldn't advise you on
that.'
Rosenman said, "He needs somebody like you who doesn't
care what is going to happen afterward and who doesn't care
what he does in removing the business men now in there, and
who is willing to clean house thoroughly - lock, stock and
barrel - and I know you could do it.
Then he went on to say, "The thing that worries me is
the President is so complacent." He said, "The President
doesn't devote more than two days a week to the war. He
said, "I have tried one month to get him to look at this
Executive Order, and you heard him this morning." He said,
"I have been up at Shang-ri-la three times and he sits there
playing with his stamps. I said, "Well, maybe he thinks.
"
Then Rosenman said, "Outside of yourself, the White House staff
and General Marshall, he never has anybody come in in the morning
to see him. Nelson never gets to see him."
Rosenman left me with the impression that he was going
to suggest that I do this. I told Sam that I told the President
once that if he ever got stuck on this thing, I would be
willing to do this.
Rosenman said, "How does Hopkins feel about your going
in?" I said, "I don't think Hopkins would object now because
he has gotten himself into a position where he is interested
only in grand strategy of the war, and he isn't interested anymore in the manufacture of materiel for the war." Sam said,
"What does Hopkins know about that?" and I said, "I don't
know."
I think I am right in saying I wouldn't want to go in
there with Jones in his present position.
-5-
1156
White: That definitely would have been true a year
ago. A few things have happened since that which might make
that a little less important. One thing is that Jones has
been thoroughly scared, and I don't think he will forget that
so quickly. A second, and possibly more important, item is
that the financing of plants and building of plants has
become a little less important than it was a year ago. The
sabotage has been done, and much of the damage is a thing of the
past, and we are paying the price for it, but it isn't quite
the same now. Of course, that doesn't mean that I don't think
that you should have set those conditions.
Mrs. Klotz: Oh, it would be awful. You would have to
fight him all the time.
HM Jr: But look at the time you would be spending
fighting with Jones. With his friends on the Hill and a new
man
trying to fight Jones, the program would be continually
sabotaged.
Mrs. Morgenthau: I think it is difficult enough , SO
much more difficult than a year ago - that if you didn't have
the necessary allocation as to who was to do what, you would
spend too much of your time fighting Jones.
HM Jr: Yes, and Jones will go to Steve Early and he
will go to the President, and this one will say that, and somebody else will run to the President with something else, and
it will just keep on that way.
Mrs. Klotz: They will never change.
Mrs. Morgenthau: It is going to be a difficult enough
job with the necessary authority over Jones.
HM Jr: Big business would be against you and you would
get
a terrible press and it would be very difficult to convince
the public.
White: You would have to be prepared for not only a bad
press but very effective enemies.
O
6-
1157
HM Jr: Now, just let me tell you what Milo Perkins said.
He came over here to pour his heart out and he said, "You know
the trouble is we can't depend on anything. We do this thing
and we do that, but I never know what morning or night Jones
is going to reach the President, and then the President is
going
strain."to turn us down, and you are constantly under that
I also told Rosenman that I would insist also on sitting
down with Stimson, Patterson, Knox and Forrestal and coming to
an agreement with them, and make sure that the whole thing was
agreeable to them. I also said that I wanted to sit down with
labor. Rosenman said, "Oh, you will have to tell labor what
to do any way," which gave me a slant on how he feels on the
labor question.
Mrs. Morgenthau: You would have to get labor on your
side. You wouldn't have business; you wouldn't have the press,
so you must have labor, and I think that if labor realized a
man was in there who saw their viewpoint and was friendly with
it, they would realize that they could cooperate without risking
losing everything they have gained. Now they feel that if they
give
in an inch, somebody will take a little extra away from
them.
Gaston: It is the fighting support of labor that
would be your one big help and it would make up for the other
factions which will, of course, be against you.
HM Jr: Just to give you a little background on this ColoneI Greenbaum was at our house Sunday afternoon complaining
about a lot of different things. This was wrong and that was
wrong. He said, "Well, supposing the Russians quit and then
the Germans were in Africa and Brazil, and the Japs are
victorious, what would the President do?" I said; "Well, he
probably would move. So he said, "Well, why doesn't he
move now?" Then I said, "Why don't you tell Rosenman about
it at supper tonight?" and he said maybe he would.
-7-
1158
White: Do you suppose that is where Rosenman got the
idea from?
HM Jr: No, I asked him whether Eddie Greenbaum suggested
my name, and he said, "No. I got it in the bathtub."
Mrs. Morgenthau: I was just thinking of that little conversation with Carey. I have the feeling that if they have a
man whom they realize is interested in them and sympathetic
towards labor, they would be much more ruthless than they are
now and would give in a little more. Now they think nobody
is really interested and if they do give in a little bit some-
body will take a lot more away from them.
Mrs. Klotz: That's right.
Mrs. Morgenthau: They can't give in now. They feel that
the people who are running things will sabotage them.
HM Jr: I think I am right, and certainly I don't think
the President is going to do It because if he put me in there
under those conditions this thing would have to be pretty
desperate.
White: It should only be on your terms because that
would be the only way you could make a success of it.
HM Jr: I think we better get out that Order and dust
it off. Would you two and Paul take over that - the three of
you take a look at it.
White: In connection with this I would like to tell you
of a little incident. About two weeks ago, after one of these
luncheons, we were griping about the same subject, and as I
was going out, Lubin and a group of others - I don't remember
who they were but it was one or two others. I think Aubrey
Williams was there, but any way the other ones didn't say
anything. We had agreed to the same thing which we inevitably
agreed to and that was that Nelson ought to go and that he
should be replaced by a much stronger man. Then Lubin took
- -8- -
1159
me aside and said that he had heard your name mentioned several
times as a successor to Nelson, and Lubin said to me, "Do you
think your boss would take that job?" I said, "Well, under
the right terms. There is no one else.' Then he went on to
say, know."
"Do you think he could get it?" and I said, "Well, that I
don't
But that little incident suggests to me that there must
have been some discussion elsewhere.
Klotz: Sure there was. Rosenman never got that idea
out of Mrs.
the bathtub.
White: He must have interesting company in the bathtub.
HM Jr: Well, the point is that there is no use my going
in there unless it is on my own terms. Nelson's setup is
rotten and it can't work that way.
Gaston: Most of the press are leaning toward the comment
that Nelson is pretty bad but who else is there to take his place.
Whaley-Eaton and Kiplinger took that attitude, too.
White: They made a big noise out of him and now they
are trying to cover it up by saying that Nelson is all right
andthe
that
all he needs is a first-class assistant, and let Nelson
be
front.
HM Jr: Yes, the press made a fuss over Nelson when he
first went in there and now they don't know how to handle it.
White: Well, Mr. Secretary, what do you mean by saying
that you want to continue to sit to the left of the President?
HM Jr: I want to retain my rank as second in command in
the Navy.
Cabinet because that would give me prestige over the Army
and
White: You mean that you would want to remain as Secretary
of the Treasury and just turn over the actual working of the
place to an Assistant or Under Secretary?
-9-
1160
HM Jr: They could give me a leave of absence. You know
Stimson, even if he is an old man, always wants me to go
through the door first, and Knox the same way. Well, I don't
want to do that, but if I hold a Cabinet post superior to the
Army and Navy they will have to cater to you, and that is
important.
White: I think it is very important.
HM Jr: Yes, and then I can get on the phone and call up
Stimson and Knox and tell them I would like to have them come
to a meeting in my office, and they would have to come. But
if I was one of these people like Nelson, I would have to go
to them because I wouldn't have the necessary prestige.
White: They wouldn't create a new Cabinet position,
would they?
Gaston: No, I think that you should remain as Secretary
of the Treasury, and the work would have to be turned over to an
Under Secretary.
Mrs. Morgenthau: Yes, have somebody run the Treasury be-
cause you will need that prestige to put the thing across.
White: You will need both the power and the prestige
because I think it would be very unfortunate if you found
yourself jockeyed into the position of accepting something
with less prestige than that of the Secretary of the Treasury.
Mrs. Klotz: Yes, they would say that they were trying
to get rid of you.
HM Jr: Yes, but this way there would be no way they could
say that because I really would be in charge of both jobs, and I
would retain that prestige over Army and Navy.
White: Well, it is not only that. It is that, plus
something else. If you get this in addition to the Secretaryship,
then it is a public recognition that there is nobody else who
can do it and that it is because you are the best man that
you are getting the additional work. There is nobody else and
they just have to pile more work on you. If you don't do it
that way, some people may interrupt it otherwise.
- 10 -
1161
Mrs. Morgenthau: If he just took the other, it might
look as though it wasn't as good a job as the Secretary of the
Treasury, and that this was a good way to get rid of him.
HM Jr: Well, the trouble is I don't know whether the
President has to wait until they take the Caspian Sea or
what. Rosenman said to me, "You know when Molotov was here
the President practically promised him a Second Front but
nothing has happened."
The thought came to me that after my inspection trip I
don't think it is possible to send enough trained and equipped
troops to open a Second Front strong enough to divert the
Germans.
Rosenman said, "But the President publicly promised
Molotov a Second Front." And I said, "Listen, the President
has promised every member of the United Nations assistance,
and this is no different. Rosenman repeated, "But he did
this publicly and the others he didn't announce. "Well," "
I said, "He didn't set any fixed time for giving him a Second
Front.
And so that is that. But I just thought I would let you
boys listen to this and then you can be thinking about it.
1162
August 25, 1942
MEMORANDUM FOR THE PRESIDENT
The growing inflationary dangers inherent in the
present situation require a tax program larger than
the Treasury's $8.7 billion. The Congress, however,
is not likely to provide nearly that amount of revenue
from proposed tax sources except by resorting to a
general sales tax. There is a strong campaign under
way for a general sales tax.
This situation could be met by a spendings tax.
Such a tax would be imposed at progressive rates on
the amount spent on consumer goods and services.
Exemptions somewhat lower than the exemptions of the
income tax would be allowed. Debt payments, insurance,
and other forms of savings would be exempt.
For administrative reasons persons with incomes
of not over $2,000 or SO would be taxed on their incomes,
rather than on their spendings, and the amount so col-
lected would be held for return to them as a post-war
credit.
The spendings tax is not a sales tax. Personal
exemptions would be allowed and the rates would be progressive thus obviating the unfair aspects of the sales
tax. The spendings tax would not affect price ceilings.
The spendings tax is not an income tax. It avoids
the hardships which high income taxes involve for per-
sons having commitments to pay debt, and imposes a
more definite penalty on spending than does the income
tax. It would involve some administrative difficulties.
A group from OPA, WPB, Department of Commerce,
Federal Reserve Board, and the Treasury Department,
discussed the plan last night in my office in some
detail, and agreed that the principle of the plan was
sound and that it was a healthy step in the right direc-
tion. I believe the tax might well be suggested to
Congress even at this late stage in the progress of
the Tax Bill.
I am planning, with your approval, to discuss it
with Senator George at lunch today.
1163
Illustrative Rate Schedules for a
Spendings Tax
o
500 -
$
500
1,000 -
1,000
2,000
2,000 3,000 4,000 -
3,000
4,000
5,000
5,000 - 6,000
6,000 - 7,000
7,000 - 8,000
8,000 - 10,000
10,000 - 25,000
Over
25,000
Schedule
I
Schedule
II
:
$
:
exemptions
:
Expenditure brackets
in excess of
10%
10%
10
15
15
20
20
30
25
25
40
40
30
50
30
50
30
50
30
50
30
30
75
100
1164
August 30, 1943
On August 29th, I dreamed that I walked into the
President's office, and he was sitting there with
Lord Mountbatten, looking over a map. I took a look
at the map and saw that It was a map of Denmark, and
as quickly as they saw I was looking at it, the President
folded the map shut, and I said to myself in my dream,
"Ah ha! The President and Mountbatten are planning
to invade Denmark," and then when I woke up and turned
on the radio, the first think I heard was that the
Germans were taking a military position in Denmark.
1165
September 2, 1942
I saw the President this morning and told him a
little about what we were doing on taxes, and I also
told him I was going up on the Hill tomorrow and tell
them that as far as the payroll deduction plan is
concerned that we felt we had to swap that for post-
war credit, and that the amount was somewhere in the
neighborhood of $5,000,000,000. That's all I told
the President about it, and he seemed satisfied and
pleased.
I then went on to question him about his Monday
night's speech, and I urged him as emphatically
as I have ever urged him on anything to come out and
announce that under his special statutory powers - the
President said to be sure to call them statutory
powers and not war powers because he found out only
a couple of weeks ago that he had statutory powers -
that he could regulate the price of food, etc.
He said, "Well, Henderson, Wickard and the rest of them
are coming in with a plan, and I am going to ask Lubin
to check the figures to see if they are all right."
I said, "Supposing the figures are all right, don't let
that be the deciding factor." I said, "Take the bit
in your teeth and announce it and get it over with.
I know the public will like it." said, "Take my word
for it that the trend of commodity prices is with you
at this time, meaning that the trend of prices for
cattle and hogs is down at this time. "You have had
about three months of continuous bickering on this,"
I said, "and I know if you go all out you will get a
good press."
The President said, "Well, I have asked them to come
in with a plan and I am going to listen to them first.
Henderson only suggested this yesterday." I went away
with the feeling that I had impressed the President;
in fact, I saw Rosenman on my way out and told him I was
75% sure that the President would do what I recommended.
-2-
Rosenman said he thought that it would be decided over
the weekend at Hyde Park, and he asked me if I was
going to be upa there. I said, "Yes."
1166
1167
September 4, 1942
I phoned the President this morning and suggested
Bill Douglas to head up the Economic Stabilization Authority,
and he said he would have to resign. So I said, "Well, it
is worth resigning for." The President said, "I would rather
have Justice Byrnes because this is a very judicial job, and
he would only have a couple. of assistants and a couple of
stenographers."
The President said, "I talked to Alvin Barkley and
he is very much upset." He said, "I have a new thought to use an old plan which I used three or four years ago when
they gave me the power to reorganize, but I had to wait 60
days before putting it into effect. What I am thinking of
doing is to use the same plan, but give them only until
October 1st, because in spite of what Henderson says I do
not think he can hold prices beyond then." I said that
thought it had certain attractive features. When I said,
"You are daring Congress to tell you that you cannot do it,"
he said, "I am just laying it before them and if they do
not do something about it the plan goes into effect October 1st."
I
Then the President particularly cautioned me not to
tell anybody about it.
1168
September 7, 1942
Shortly before lunch today, the President called me
from Hyde Park. He told me about the Army enlarging the
airport at New Hackensack, and that they were going to demolish the Woronock Inn, one of the oldest Inne in the
County. There also is another house - he couldn't remember
the name of it - that they are demolishing. He asked me whether
I would please get in touch with the War Department and see if
they couldn't change their plans 80 that these two houses
would not be destroyed.
Why the President should call me and ask me to do this
rather than do it through one of his military aides, I don't
know, but he did.
Just before the President got in touch with me on the
phone, Herbert Gaston called me up and said he had read the
President's message to Congress and pointed out to me that
they had used most of what we had sent them on taxes, but had
left off the sentence in which the President would have said
that he was in favor of our spendings tax.
I said to the President, "I have heard from Mr. Gaston
about your message to Congress, and I see that you have not
mentioned our spendings tax." "Oh, no," he said, "I never
make any recommendations to Congress while a bill 18 pending
before them," and he repeated this very emphatically several
times. It completely took my breath away, and I couldn't
think quickly enough to give him a few examples, because there
are plenty of them, and there are plenty of examples right in
the statement he made to Congress. But I said something, and
then he kind of broke down and laughed, showing that he was
trying to put something over on me. Then he immediately made
the statement, "Well, you know, Henry, I always have to have
a couple of whipping boys," to which I replied, "Yes, I realize
that I am one of them and right now I am getting plenty of
whippings."
To show the kind of a mood he was in, he said, "I spoke to
Steve Early today and told him that when he saw the press in
the morning he should greet them as follows, 'Hello, suckers,
the idea being that they had been writing continuously that
there was to be a Mr. X and a board, and that they had guessed
wrong. Well, of course, they hadn't guessed wrong because the
President only changed his mind on Friday, and I can't imagine
-2-
1169
that the newspapermen liked it any better than I liked being
told that he has to have a couple of whipping boys.
September 9, 1942
1170
I called on the President this morning and cleared
my financing with him.
I then said, "Mr. President, I think your message to
Congress was excellent and everybody I talked to liked your
radio speech. They thought it was good and delivered in a
quiet manner." (I thought it was too quiet.)
I said, "If you don't mind my saying so I think that
the gap in your speech is a $20 billion gap. He said, "What
do you mean by that?" (The President explained it all either
in his message or his speech, so I was amused at his asking
me to explain it.) I said, Well, what it means is simply
this - the people have $20 billion to spend in their pockets
more than there are goods on the shelves to buy." He said,
"Oh, I understand." I said, "None of these suggestions which
have been made other than the Treasury suggestions will in any
way tackle this problem and, as I told you, I was very disappointed you didn't say something in your statement." So he
said, "Henry, I just couldn't. It was too new, too recent,
for me to say something. So I said, "Well, couldn't you
when you see the leaders and when you have a press conference
keep saying something about it to keep it before the public
because we have got to get something like it?" He said, "Yes,
I could do that.
The President said, "Let me give you a suggestion.
Why can't you go to the post office and say you would buy
$600 worth of stamps with which to buy goods. The first $600
would be exempt from taxes. Then you buy $600 more and on
that you would pay 10%, and for each additional $600 you pay
a higher tax. I said, "Well, there might be something in
that, and I will be glad to have it studied." The President
agreed with me that there will have to be some kind of a tax
on expenditures.
The President said, "What Congress really wants is a
sales tax, isn't it?" and I said, "Yes, they do, but I think we
have licked them on that."
The President read the attached statement which Mr. Paul
gave me.
-
1171
I said, "Mr. President, you may not remember but I was
planning to go to England on Monday. He said, "Yes, I do."
So I said, 'I think I better postpone it." He said, "Oh, yes,
I very definitely would postpone it because after all you have
to watch the tax bill." He also said, "I hope to get away
next week for two weeks to make my inspection trip and I certainly want you here while I am away." So I said, "Well, I
also will have to watch your price legislation," and he said,
"Yes, that's right." I said, Would you have any objection
to my going a month from now? and he said, "None whatsoever."
He was very emphatic that I shouldn't go now, and I am glad
that I suggested that I shouldn't go rather than have him
tell me not to go.
I then asked him if he saw any little rosy spots in
the war situation. He said, "No, but I don't see any very
dark spots either." He said, "I have said all along that if
the Russians can hold on until the 15th we are all right, and
I think they are going to." He said, "Certainly if they hold
on until the 1st of December (meaning if they didn't collapse)
they will be all right," and he seemed quite emphatic that
they would be able to hold out. I then said to him, "We
can't win this war from the air, can we? We will have to use
ground troops to accomplish it, and he said, "Absolutely, it
will have to be done on the ground."
Before seeing the President, I saw Harry Hopkins who
greeted me by saying, "My, you certainly are having a tough
time with your taxes. I said, "Yes, but I am mighty glad
that I came through with a good suggestion as to how to take
care of this inflation." I said, "I would only feel badly
if I hadn't done that." Hopkins said, "Yes, but now Congress
is blaming us because they have been so-slow about the tax
bill." Then I gave him the attached editorial from the Post
to read.
-3- -
1172
I then asked Hopkins how he felt about the war, and
he said, "Well, I am confident that the Russians will
hold Moscow, but I am afraid they are going to lose Stalingrad."
So I said, Will they get through to the Caspian Sea?" and
he said, 'I am afraid so." I asked him, "How much good can
we do from the air?" "Well, he said, 'We are doing very well,
but we haven't taken on any of the tough cities like Hamburg
or Brest where they are well protected and have a lot of
airfields. Until we take on some of the tough cities, I
don't know what the answer is." I said, "Isn't it going to
have to be done from the ground with ground troops? and
he said, "Yes, definitely.
So I said, "Well, the Germans were pretty successful
over England." He said, "True, but neither the Germans nor
the English have been successful to date with daylight
bombing." He said, "There are 18 good days left in September,
and let's see what we can do," but he repeated, "Until our
American bombers can prove that they can attack in daylight
the well guarded, well protected cities, I am not convinced
with what the air crowd can do."
Hopkins said, "I also am afraid that the Japanese
may attack us real hard this time at Guadacanal and the
Solomon Islands." He said, "Of course, we may get another
break like we did at Midway, but we have got to be prepared
for a hard attack from the Japs."
To sum it up, neither Hopkins nor the President are
very confident. Certainly everything they said was on the
negative side, and if they have any Second Front plans in
mind, they certainly are keeping them a deep dark secret.
1173
September 9, 1942
MEMORANDUM FOR THE SECRETARY
From:
Mr. Paul
Subject: Action of the Senate Finance Committee on
Tuesday, September 8, 1942.
1. Spendings tax: Senator Byrd's motion to reject
the entire Treasury proposal for a spendings tax was
adopted by a vote of 12 - 0. A few of the senators
present refrained from voting. Senator La Follette's
motion to adopt the Treasury spendings tax without
lowering exemptions below the Senate Committee levels
of $500, $1,200, and $300, was rejected.
2. Sales tax: Senator Danaher' 8 motion for a 10 percent retail sales tax to be used for the purchase of nonnegotiable war bonds was rejected. Senator Guffey's
motion to adopt a retail sales tax at a 5 percent rate
without exemptions for food was rejected by a vote of
13 - 6. An amendment by Senator Taft that food be exempt
from of
the9sales
vote
- 9. tax had been previously rejected by a tie
3. "Victory" gross income tax: On motion of
Senator George, the Committee adopted, 13 - 6, a "victory"
tax of 5 percent on all gross incomes in excess of $624
(without any deductions ordinarily allowed under the
income tax). The tax is to be collected at source.
A post-war credit of part of the tax would be provided,
a tax
credit would be allowed for
insurance, debts, and
This would have the
percent tax to a net of to
Stam estimated that the tax would produce
percent. reducing payments against bonds within which of the Mr. life 5 limits. purchase 2-1/2 effect currently of 3-3/4 of war
$3.6
billion
gross post-war
and $2.5credit.
billion net after allowing
for the
refundable
At the beginning of the afternoon session the Treasury,
at the request of the Chairman, commented briefly on the
victory tax to the effect that (1) the exemptions were
below the minimum subsistence level for families, (2) it
would be preferable to integrate the proposed victory tax
on a net basis with the in come tax instead of adding a new
gross income tax, and (3) that the post-war credit was
defective
and would result in at least ten million refunds
each year.
Before ,adjournment the Treasury was instructed to
bring in on Wednesday morning various alternative methods
of integrating the "victory" tax on a net basis with the
regular income tax. The sales tax seems to have been
finally rejected and the question today will be whether to
increase rates upon net income on a low exemption basis or
go over to Senator George's gross income tax.
RET
1174
Table 1
Individual surtax rates and cumulative surtax:
H.R. 7378 and H.R. 7378 increased by 5 percentage points
:
by 5 per-
:
centage
:
points
: increased
H.R. 7378: by 5 per: centage
: points
:
H.R. 7378
: H.R. 7378
:
:
: increased
:
:
:
:
:
$
:
(000)
: Total surtax cumulative
H.R. 7378
:
:
Surtax
net income
Bracket rate
0-2
138
18%
260 $
360
2-4
16
21
46
580
780
20
25
980
6-8
24
29
28
33
32
37
36
41
1,280
1,860
2,520
3,260
4,080
4,980
5,940
6,960
8,040
10,320
13,920
17,700
21,660
25,740
32,840
40,240
47,940
55,940
64,140
106,140
149,140
192,640
236,140
323,140
410,140
627,640
845,140
8-10
10-12
12-14
14-16
16-18
18-20
20-22
22-26
26-32
32-38
38-44
44-50
50-60
60-70
70-80
40
45
43
48
46
51
49
54
52
57
55
60
58
63
61
66
63
68
66
71
69
74
72
77
75
80
77
82
80-90
90-100
100-150
150-200
200-250
250-300
300-400
400-500
500-750
82
87
750-1,000
82
87
1,000-2,000
2,000-5,000
over 5,000
79
84
81
86
82
87
82
87
82
87
82
87
82
87
82
87
82
87
$
1,460
2,020
2,660
3.380
4,180
5.040
5.960
6.940
9,020
12,320
15,800
19,460
23,240
29,840
36,740
43,940
51,440
59,140
98,640
139,140
180,140
221,140
303,140
385,140
590,140
795,140
1,615,140
4,075,140
-
1,715,140
4,325,140
-
1175
Table la
Amount of tax and effective rates:
H.R. 7378 surtax rates increased by 5 percentage points;
exemptions of $500 for a single person, $1,000 for a
married couple and $250 for each dependent
Single person -- No dependents
:
:
:
:
:
:
-
600
15
and lower
exemptions
-
H. R. 7378
with
with higher
surtax rates
Senate 1
exemptions
and lower
exemptions
-
-
:
500
with higher
surtax rates
H. R. 7378
:
:
:
Senate 1
exemptions
H. R. 7378
:
:
H. R. 7378
with
Effective rates
:
Not income
before
personal
exemption
Amount of tax
$
$
20
2.5%
44
4.9
$
700
34
800
52
67
900
71
91
6.5
7.8
1,000
1,200
1,500
2,000
2,500
3,000
4,000
5,000
6,000
8,000
10,000
15,000
30,000
25,000
50,000
100,000
500,000
89
114
8.9
126
161
10.5
12.1
1,000,000
5,000,000
181
231
273
348
365
465
472
597
686
861
920
1,174
1,742
2,390
4,366
6,816
9,626
25,811
64,641
414,616
854,616
1,145
1,449
2,117
2,865
5,091
7,791
10,851
28,286
69,616
439,591
904,591
4,374,616
4,624,591
1 Maximum earned income assumed.
13.7
14.6
15.7
17.2
18.4
19.6
21.8
23.9
29.1
34.1
38.5
51.6
64.6
82.9
85.5
87.5
3.3%
6.3
8.4
10.1
11.4
13.4
15.4
17.4
18.6
19.9
21.5
22.9
24.2
26.5
28.7
33.9
39.0
43.4
56.6
69.6
87.9
90.5
92.5
1176
Table 1b
Amount of tax and effective rates:
H.R. 7378 surtax rates increased by 5 percentage points;
exemptions of $500 for a single-person, $1,000 for
a
married couple and $250 for each dependent
Married couple -- No dependents
:
exemptions
:
:
:
$
$
H. R. 7378
with
exemptions
41
-
13
64
1.0%
30
88
2.1
48
111
3.2
66
134
4.1
103
181
140
328
5.7
7.0
9.3
10.8
13.3
14.9
16.5
19.2
21.5
27.0
32.3
36.9
50.7
64.1
82.8
85.4
87.5
345
462
532
726
746
990
992
1,532
2,152
4,052
6,452
9,220
25,328
64,060
414,000
854,000
1,294
1,942
2,670
4,836
7,506
10,536
27,916
69,176
439,126
904,126
4,374,000
4,624,126
:
Maximum earned income assumed.
exemptions
-
-
232
with higher
surtax rates
-
18
324
H.R. 7378
and lower
Senate
-
-
-
Effective rates
:
:
1
:
1,000,000
5,000,000
and lower
:
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,800
2,000
2,500
3,000
4,000
5,000
5,000
8,000
10,000
15,000
20,000
25,000
50,000
100,000
500,000
exemptions 1/
with higher
surtax rates
:
$
:
Senate
:
with
:
H. R. 7378
H.R. 7378
:
Amount of tax
Net income
before
personal
exemption
1.6%
3.4
4.9
6.3
7.4
8.4
10.1
11.4
13.8
15.4
18.2
19.8
21.6
24.3
26.7
32.2
37.5
42.1
55.8
69.2
87.8
90.4
92.5
1177
Table 1c
Amount of tax and effective rates:
H.R. 7378 surtax rates increased by 5 percentage points;
exemptions of $500 for a single person, $1,000 for a
married couple and $250 for each dependent
Married couple - Two dependents
:
:
$
Senate
: exemptions
38
-
61
--
18
$
13
85
26
108
44
131
63
155
81
178
100
202
118
225
210
342
400
591
614
855
836
1,352
1,948
3,800
6,140
8,872
24,914
63,562
413,472
853,472
1,139
1,767
2,475
4,601
7,221
10,221
27,546
68,736
438,661
903,661
4,373,472
4,623,661
Maximum earned income assumed.
with
--
--
-
:
1
and lower
: exemptions
:
1,000,000
5,000,000
: surtax rates
0.7%
1.3
2.1
2.9
3.5
4.2
4.7
7.0
10.0
12.3
13.9
16.9
19.5
25.3
30.7
35.5
49.8
63.6
82.7
85.3
87.5
H.R. 7378
: with higher
: surtax rates
:
:
:
0
:
: Senate
:
1,500
1,600
1,700
1,000
1,900
2,000
2,100
2,200
2,300
2,400
2,500
3,000
4,000
5,000
6,000
8,000
10,000
15,000
20,000
25,000
50,000
100,000
500,000
: with higher : H. R. 7378
with
!exemptions 1
$
H.R. 7378
:
;H. R. 7378
Effective rates
:
Not income
before
personal
exemption
Amount of tax
and lower
: exemptions
-1.1%
2.2
3.4
4.5
5.4
6.2
7.0
7.7
8.4
9.0
11.4
14.8
17.1
19.0
22.1
24.8
30.7
36.1
40.9
55.1
68.7
87.7
90.4
92.5
1178
Table 2a
Amount of tax and effective rates: H.R. 7378 surtax rates
with Senate exemptions plus an additional tax of 6 percent
on income in excess of exemptions of $400 for single
persons, $800 for married couples and $200 for
each dependent
Single person - no dependents
:
:
exemp-
:
tion of
:
$400
:
0
400
-
500
-
700
34
18
800
52
24
900
71
4.9
76
3.0
3.3
3.6
4.0
4.4
4.8
5.0
5.2
5.4
5.5
5.6
5.7
5.8
5.8
5.9
5.9
6.0
6.0
6.0
6.0
6.0
30
36
125
126
48
174
10.5
181
66
247
12.1
13.7
14.6
15.7
17.2
18.4
19.6
21.8
273
96
369
365
126
472
156
491
628
686
216
902
920
276
1,196
1,510
2,198
2,966
5,242
7.992
11,102
28,787
70,617
444,592
914.592
336
456
576
876
1,176
1,476
2,976
5,976
29,976
59.976
299,976
4,674,592
23.9
29.1
34.1
38.5
51.6
64.6
82.9
85.5
87.5
-
-
52
89
Combined
tax
$400
2,6
6.5
7.8
8.9
4.374.616
: tion of
2.5%
27
101
1,174
1,742
2,390
4,366
6,816
9,626
25,811
64,641
414,616
854,616
income
over
exemp-
1.2%
2.0
-
6
$
12
6% on
-
-
6
$
15
1,000,000
5,000,000
1
-
600 $
1,000
1,200
1,500
2,000
2.500
3,000
4,000
5,000
6,000
8,000
10,000
15,000
20,000
25,000
50,000
100,000
500,000
: exemp-
: tions 1
:
$
Senate
:
exemp-
tions 1
Combined
tax
with
:
:
Senate
: H.R. 7378
:
:
H.R. 7378
with
Effective rate
:
Net income
before
personal
exemption
6% on
income
over
:
Amount of tax
1.2%
4.5
7.4
9.5
11.2
12.5
14.5
16.5
18.5
19.6
20.9
22.6
23.9
25.2
27.5
29.7
34.9
40.0
44.4
57.6
70.6
88.9
91.5
93.5
The tax as shown is computed with the maximum earned income credit assumed.
However, the earned income credit should be eliminated to facilitate the
integration of the additional income tax with the tax levied by H.R. 7378.
1179
Table 2b
Amount of tax and effective rates: H.R. 7378 surtax rates
with Senate exemptions plus an additional tax of 6 percent
on income in excess of exemptions of $400 for single
persons, $800 for married couples and $200 for
each dependent
Married couple - No dependents
:
:
:
:
:
6
:
:
:
:
:
$
: tion of
6
$
-
-
12
12
-
-
18
18
-
-
24
24
-
13
30
43
30
36
48
42
$800
0.7%
0.7%
1.2
1.6
2.0
1.2
1.6
2.0
3.3
4.7
6.0
7.1
9.1
1.0%
2.3
66
2.1
90
3.2
66
48
114
4.1
2.6
2.8
3.0
103
60
163
5.7
3.3
140
72
212
7.0
3.6
232
102
334
9.3
4.1
324
132
456
532
192
724
10.8
13.3
14.9
16.5
19.2
21.5
27.0
32.3
36.9
50.7
4.4
4.8
5.0
5.2
5.4
5.5
5.7
5.8
5.8
5.9
6.0
6.0
6.0
6.0
746
252
998
992
312
1,532
2,152
4,052
6,452
9,220
25,328
64,060
414,000
854,000
432
1,304
1,964
2,704
4,904
7,604
10,672
28,280
70,012
443,952
913,952
4,673,952
4,374,000
552
852
1,152
1,452
2,952
5,952
29,952
59,952
299,952
64.1
82.8
85.4
87.5
:
:
1/
-
: exemp-
Combined
tax
:
:
0
$800
: over
Senate
: oxomptions 1
tax
:
1,000,000
5,000,000
tion of
:
:
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,800
2,000
2,500
3,000
4,000
5,000
6,000
8,000
10,000
15,000
20,000
25,000
50,000
100,000
500,000
exemp-
: Combined
: income
with
:
:
: exemptions 1
: H.R. 7378 : 6% on
:
:
Senate
:
900
income
over
:
:
0
$
6% on
:
H.R. 7378
: with
:
Net income
before
personal
exemption
Effective rate
:
:
Amount of tax
10.6
13.4
15.2
18.1
20.0
21.7
24.6
27.0
32.7
38.0
42.7
56.6
70.0
88.8
91.4
93.5
The tax as shown is computed with the maximum earned income credit assumed.
However, the earned income crodit should be oliminated to facilitate the
integration of the additional income tax with the tax levied by H.R. 7378.
1180
Table 2c
Amount of tax and effective rates: H.R. 7378 surtax rates
with Senate exemptions plus an additional tax of 6 percent
on income in excess of exemptions of $400 for single
persons, $800 for married couples and $200 for
each dependent
Married couple - Two dependents
: tions 1 : tion of :
: with
:
--
--
-
6
--
0
:31,200 :
: tions:
--
--
S
: exemp:
: income:
over :Combined
tax
: exemp-:
: Senate
Combined
tax
:
: $1,200
Effective rate
:H.R. 7378: 6% on :
:
:
1
:
: exemp-
:
: over
: Sonate
: exemp-
:
:
1,000,000
5,000,000
:
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2,500
3,000
4,000
5,000
6,000
8,000
10,000
15,000
20,000
25,000
50,000
100,000
500,000
0
: income
:
H.R. 7378
: with
:
Net income
before
personal
exemption
6% on
6
-
--
12
12
18
18
24
24
30
30
-
36
36
--
13
42
55
0.7%
26
48
74
44
54
98
63
60
123
81
66
147
100
72
172
118
78
196
210
108
168
318
614
228
842
836
288
1,352
1,948
3,800
6,140
8,872
24,914
63,562
413,472
853,472
408
1,124
1,760
2,476
4,628
7,268
10,300
27,842
69,490
443,400
913,400
-
--
-
400
4,373,472
528
828
1,128
1,428
2,928
5,928
29,928
59,92S
299,928
568
4,673,400
1.3
2.1
2.9
3.5
4.2
4.7
7.0
10.0
12.3
13.9
16.9
19.5
25.3
30.7
35.5
49.8
63.6
82.7
85.3
87.5
:
Amount of tax
:tion of:
-0.5%
0.5%
0.9
1.2
1.5
1.8
2.0
2.2
2.4
2.6
2.7
2.9
3.0
3.1
3.6
4.2
4.6
4.8
5.1
5.3
5.5
5.6
5.7
5.9
5.9
6.0
6.0
6.0
0.9
1.2
1.5
1.8
2.0
2.9
3.7
4.7
5.6
6.4
7.2
7.8
10.6
14.2
16.8
18.7
22.0
24.8
30.9
36.3
41.2
55.7
69.5
88.7
91.3
93.5
The tax as shown is computed with the maximum carned income credit
assumed. However, the earned income credit should be eliminated to
facilitate the integration of the additional inconc tax with the
tax lovied by H.R. 7378.
1181
Table 3a
Amount of tax and effective rates:
H.R. 7373 surtax rates with Senate exemptions; plus an
addi tional tax of 456 of income in excess of a uniform
exemption of 600 regardless of family status.
Single person -- No dependents
:
--
15
$
15
:
800
52
900
71
12
83
89
16
105
126
24
150
181
36
217
1,000,000
5,000,000
4
8
38
60
273
56
329
365
76
441
472
686
96
568
136
822
920
176
1,174
1,742
2,390
4,366
6,816
9,626
25,811
64,641
414,616
854,616
4,374,616
216
1,096
1,390
2,038
2,766
4,942
7,592
10,602
27,787
68,617
434,592
894,592
296
376
576
776
976
1,976
3,976
19,976
39,976
199,976
:7378 with : como in :Combined
:Senate ex-: excess
tax
:emptions 1/:of 600
--
34
$
Effective rate
:45 on in-:
:
:
S
-
--
700
1,000
1,200
1,500
2,000
2,500
3,000
4,000
5,000
6,000
8,000
10,000
15,000
20,000
25,000
50,000
100,000
500,000
1
of $600
: H.R.
:
:
600
1/ in excess:
-
500
Combined
tax
:
:
3
Amount of tax
: 4% on
: income
:
:
H.R. 7378
with Senate
exemptions
:
Net income
before
exemptions
4,574,592
2.5%
4.9
6.5
7.9
8.9
10.5
12.1
13.7
14.6
15.7
17.2
18.4
19.6
21.8
23.9
29.1
34.1
38.5
51.6
64.6
82.9
85.5
87.5
--
.6%
1.0
1.3
1.6
2.0
2.4
2.8
3.0
3.2
3.4
3.5
3.6
3.7
3.8
3.8
3.9
3.9
4.0
4.0
4.0
4.0
4.0
The tax as shown is computed with the maximum carned income credit
assumed. However, the earned income credit should be eliminated to
2.5%
5.4
7.5
9.2
10.5
12.5
14.5
16.5
17.6
18.9
20.6
21.9
23.2
25.5
27.7
32.9
38.0
42.4
55.6
68.6
86.9
89.5
91.5
facilitate the integration of the additional income tax with the tax
levied by H.R. 7378.
1182
Table 3b
Amount of tax and effective rates:
H.R. 7378 surtax rates with Senate exemptions; plus an
additional tax of 4% of income in excess of a uniform
exemption of $600 regardless of family status.
Married couple -- No dependents
-
-
-
.6%
.6%
:
:
:
4
8
8
-
12
12
-
16
-
-
-
16
24
24
48
36
84
140
56
196
232
76
324
96
308
420
532
136
176
668
746
992
216
1,532
2,152
4,052
6,452
9,220
25,328
64,060
414,000
854,000
296
1,208
1,828
2,528
4,628
7,228
10,196
27,304
68,036
433,976
893,976
4,374,000
-
4
-
376
576
776
976
1,976
3,976
19,976
39,976
199,976
922
4,573,976
:
-
0
$600
Combined
tax
:
:
:
:
:
1,000,000
5,000,000
:
-
-
$
tions 1/
:
800
900
: exemp-
:
-
: Senate
tax
40 on
income in
excess of
:
-
0
with
:
:
tions 1
700
1,000
1,200
1,500
2,000
2,500
3,000
4,000
5,000
6,000
8,000
10,000
15,000
20,000
25,000
50,000
100,000
500,000
:
exemp-
:
600
: in excess
: of 3600
Senate
: H.R. 7378
: Combined
:
$
: income
:
:
with
:
before
exemptions
:
Net income : H.R. 7378 : 4% on
Effective rate
:
Amount of tax
-
3.2%
7.0
9.3
10.8
13.3
19.9
16.5
19.2
21.5
27.0
32.3
36.9
50.7
64.1
82.8
85.4
87.5
1.0
1.0
1.3
1.6
2.0
2.4
2.8
1.3
3.0
3.2
3.4
3.5
3.6
3.7
3.8
3.8
3.9
3.9
4.0
4.0
4.0
4.0
4.0
1.6
2.0
5.6
9.8
12.3
14.0
16.7
18.4
20.1
22.9
25.3
30.9
36.1
40.8
54.6
68.0
36.8
39.4
91.5
The tax as shown is computed with the maximum earned income credit assumed.
However, the earned income credit should be eliminated to facilitate the
integration of the additional income tax with the tax levied by H.R. 7378.
1
1183
Table 3c
Amount of tax and effective rates:
H.R. 7378 surtax rates with Senate exemptions; plus an
additional tax of 4% of income in excess of a uniform
exemption of $600 regardless of family status.
Married couple - two dependents
:
:
:
:
900
1
:4% on in-:
4$
4
8
-
-
-
8
12
12
-
-
16
16
-
-
24
24
-
36
36
-
-
-
48
48
26
56
82
118
76
194
210
96
306
400
136
536
614
176
790
836
216
1,352
1,948
3,800
6,140
8,872
24,914
63.562
413,472
853,472
296
1,052
1,648
2,324
4,376
6.916
9,848
26,890
67,538
433.448
893,448
4,373,472
376
576
776
976
1,976
3.976
19,976
39,976
199,976
: come in :Combined
: excess
tax
:emptions 1/: of $600
-
-
$
$
: H.R.
:7378 with
:Senate ex-
Combined
tax
:
800
1,000,000
5,000,000
:
-
700
1,000
1,200
1,500
1,800
2,000
2,500
3,000
4,000
5.000
6,000
8,000
10,000
15,000
20,000
25,000
50,000
100,000
500,000
:
$
Effective rate
4,573,448
1.3%
4.7
7.0
10.0
12.3
13.9
16.9
19.5
25.3
30.7
35.5
49.8
63.6
82.7
85.3
87.5
:
Amount of tax
: 4% on
Net income : E.3. 7378
:
income
with
Senate
before
: in excess
exemptions 1
exemptions
: of $600
0.6%
1.0
0.6%
1.0
1.3
1.6
2.0
2.4
2.7
2.8
3.0
3.2
3.4
3.5
3.6
3.7
3.8
3.8
3.9
3.9
4.0
4.0
4.0
4.0
4.0
1.3
1.6
2.0
2.4
2.7
4.1
7.8
10.2
13.4
15.8
17.5
20.6
23.2
29.2
34.6
39.4
53.8
67.5
86.7
89.3
91.5
The tax as shown is computed with the maximum earned income credit assumed.
However, the earned income credit should be eliminated to facilitate the
integration of the additional income tax with the tax levied by H.R. 7378.
1184
Table 4a
Amount of tax and effective rates:
H.R. 7378 surtax rates with Senate exemptions plus an
additional Victory tax on the excess of gross income
over $624.
Single person -- no dependents
Amount of tax
2/
:
:
800
900
2
$
tax
: excmp- :credit
$
17
6
40
52
10
62
71
14
85
89
18
107
126
27
153
181
39
220
273
60
333
365
81
446
472
102
574
686
143
829
920
185
1,174
1,742
2,390
4,366
6,816
9,626
25,811
64,641
414,616
854,616
4,374,616
227
1,105
1,401
2,052
2,783
4,968
7,626
10,644
28,058
69,665
441,863
909,640
310
393
602
810
1,018
2,247
5,024
27,247
55,024
277,247
:Senate :post-war : tax
:tions 1/: 2/
:
1
15
34
1,000,000
5,000,000
2
$
700
1,000
1,200
1,500
2,000
2,500
3,000
4,000
5,000
6,000
8,000
10,000
15,000
20,000
25,000
50,000
100,000
500,000
after post-:
war credit
4,651,863
2.5%
4.9
6.5
7.8
8.9
10.5
12.1
13.7
14.6
15.7
17.2
18.4
19.6
21.8
23.9
29.1
34.1
38.5
51.6
64.6
82.9
85.5
87.5
.3%
.9
1.3
1.6
1.8
2.3
2.6
3.0
3.2
3.4
3.6
3.7
3.8
3.9
3.9
4.0
4.1
4.1
4.5
5.0
5.4
5.5
5.5
Maximum carnod income assumed.
Computed by assuming that deductions are 10 percent of gross incomo;
that is, that gross income is ton-ninths of net income.
:
:
600
: Victory tax: Combined
:
:
$
:
:
:
exemptions 1
:
Sonato
:
:
H.R.7378 with
Effective rate
:H.R.7378:Victory :
: with :tax after:Combined
:
Net income
bcfore
personal
exemption
2.8%
5.7
7.8
9.4
10.7
12.8
14.7
16.7
17.8
19.1
20.7
22.1
23.4
25.7
27.8
33.1
38.1
42.6
56.1
69.7
88.4
91.0
93.0
1185
Table 4b
Amount of tax and effective rates:
H.R. 7378 surtax rates with Senate exemptions plus an
additional Victory tax on the excess of gross income
over $624.
Married couple -- No dependents
:
:
:
:
1
$
700
-
800
-
900
-
11
-
1,000
1,200
1,500
2,000
2,500
3,000
4,000
5,000
6,000
8,000
10,000
15,000
20,000
25,000
50,000
100,000
500,000
1,000,000
5,000,000
: exemp- : credit :
-&
1
$
.7
.7
-
1.0
1.0
1.2
1.5
1.8
5
8
8
11
-
15
15
-
-
21
21
-
3.2
7.0
9.3
48
31
79
140
48
188
232
65
297
324
81
405
10.8
532
115
647
746
148
894
992
181
1,532
2,152
4,052
6,452
9,220
25,328
64,060
414,000
854,000
248
1,173
1,780
2,467
4,533
7,100
10,035
27,075
68,584
440,747
908,524
13.3
14.9
16.5
19.2
21.5
27.0
32.3
4,374,000
481
648
815
1,747
4,524
26,747
54,524
276,747
4,650,747
36.9
50.7
64.1
82.8
85.4
87.5
.2%
.2%
5
315
tax
: tions 1/:
:
-
$
with :tax after: Combine
: Senate :post-war :
:
2/
:
:
: war credit
: exemptions 1
:
: after post-
Senate
: H.R.7378:Victory
Combined
tax
:
:
:
600
:
0
Victory tax
:
H.R.7378 with
Effective rate
:
Amount of tax
:
Net income
before
personal
exemption
1.2
1.5
1.8
2.1
2.4
2.6
2.7
2.9
3.0
3.0
3.1
3.2
3.2
3.2
3.3
3.5
4.5
30.2
35.5
40.1
54.2
68.6
5.3
88.1
5.5
5.5
90.9
93.0
5.3
9.4
11.9
13.5
16.2
17.9
19.6
22.3
24.7
1 Maximum earned income assumed.
2 Computed by assuming that deductions are 10 percent of gross income; that
is, that gross income is ten-ninths of not incomo.
1186
Table 4c
Amount of tax and effective rates:
H.R. 7378 surtax rates with Senate exemptions plus an
additional Victory tax on the excess of gross income over
$624.
Married couple - Two dependents
Amount of tax
:
:
war credit
2/
700
-
1
2
exemp- :credit 2/
4
4
-
-
7
7
900
-
11
11
-
-
14
14
-
-
20
20
-
-
29
29
26
45
71
118
60
178
210
76
286
400
107
507
614
138
752
836
169
1,005
1,583
2,242
4,249
6.745
9,632
26,461
67,886
440,019
1,352
1,948
3,800
6,140
8,872
24,914
63,562
413,472
853,472
4,373,472
231
294
449
605
760
1,547
4,324
26,547
54,324
276,547
Combined
tax
:tions 1/:
1
:
$
800
1,000,000
5,000,000
1$
-
$
-
1,000
1,200
1,500
2,000
2,500
3,000
4,000
5,000
6,000
8,000
10,000
15,000
20,000
25,000
50,000
100,000
500,000
:
600
:
exemptions 1/
:
Senate
:
Victory tax:
After post-
Combined
tax
:
$
:
H.R.7378 with
:H.R.7378:Victory
:tax after:
with
Senate :post-war
:
Net income
before
personal
exemption
Effective rate
907.796
4,650,019
-
1.3%
4.7
7.0
10.0
12.3
13.9
16.9
19.5
25.3
30.7
35.5
49.8
63.6
82.7
85.3
87.5
0.2%
0.6
0.9
1,2
1.4
1.7
1.9
2.3
2.4
2.5
2.7
2.8
2.6
2.9
2.9
3.0
3.0
3.0
3.1
4.3
5.3
5.4
5.5
0.2%
0.6
0.9
1.2
-1.4
1.7
1.9
3.6
7.1
9.5
12.7
15.0
16.8
19.8
22.4
28.3
33.7
38.5
52.9
67.9
88.0
90.8
93.0
Maximum earned income assumed.
Computed by assuming that deductions are 10 percent of gross income; that
is, that gross income is ten-ninths of net income.
WASHINGTON POST - SEPT. 9, 1942
Inflationary Gap
One of the striking facts brought out
in President Roosevelt's Labor Day message to Congress has yet to receive the
attention it merits. The headlines were
given to his demand for farm-price and
wage stabilization. That was proper, of
course, for these are the points which
stood out most sharply. But a second
1187
When the President turned his attention more specifically to taxation he dethe most
our to stabilize
clared: costs weapons "One in of fight powerful living
is taxation." Such stabilization
cannot be maintained, he said, "without
heavy taxes on everyone except persons
with very low incomes." Yet his only
reading of the message is certain to em-
specific recommendation in this sphere
was a renewal of his plea for a $25,000
phasize the fact that price and wage
stabilization alone will not avert the
limit on individual incomes, after payment of taxes. The President did not
danger of inflation.
even specifically back up the Treasury's
"Even if the process of stabilization
of all prices and wages at present levels
were to be brought about," Mr. Roosevelt said, "there would still remain the
great upward pressure on the cost of
living created by the vast amount of purchasing power which has been earned in
all sections of the country
This purchasing power now exceeds by an estimated 20 billions the amount of goods
which will be available for purchase by
civilians this year. The result obviously
is that people compete more and more
for the available supply of goods, and
the pressure of this great demand compared with the small supply-which will
become smaller and smaller-continually
The inescapable fact is that the proposed ceiling on personal income would
be utterly ineffective in mopping up the
threatens to disrupt our whole price
inflationary 20 billions. Why doesn't
structure."
That paragraph is an elementary lesson in economics. The President went
on to show that most of this inflationary
20 billions is in the hands of wage earners.
Indeed, he showed an increase of more
THE WA
spending-tax proposal, thus paving the
way for its rejection yesterday by a vote
of 12 to 0 in the Senate Finance Committee.
the President face this problem with the
same courage and determination that he
has shown in demanding lower ceilings
on farm prices? Here is the most dan-
than 31 billion dollars in annual wage
and salary disbursements since the beginning of the war, Obviously the infla-
gerous sort of gap in the anti-inflationary
program. To close it, both the Administration and Congress will have to demonstrate far more leadership, courage and
imagination than they have manifested
tionary influence of this purchasing
to date.
power which cannot be used because
of the shortage of goods will not be
eliminated simply by stabilizing farm
prices and wages. The President ended
his discussion of the inflationary 20 bil-
lions by pointing out "how essential it
is to control that purchasing power by
taxation and by investment in war
bonds."
1188
- Cabinet Oct. 2. 1942
THE WHITE HOUSE
1188
WASHINGTON
Pres. said Hany Stimson
told me about Hings
top to Fut this and
how I saw
so many
as drafter
old men "Pres said lets
get ahead with taking
18. of 19 in old new. Pres
asked Nucmy
mutt and he
backed up recommendation
emphatically.
I wes wen was very happy to
see the results of my
truf frest into effect.
But Patterson told me
THE WHITE HOUSE
1189
WASHINGTON
he reported what I tad
told him at a staff
meeting in thinsens office.
I feel the army as result
of taking in 18+ 19 olds
will be a much better any
at Cabinet Mr mill gave
me letter To Pres on Soscial
Security question Plus letter
to Walter george Bof bloughton
1190
Cabinet. - Oct 9. 1942 1
7.I.R. said he was impressed
the with fact that there were
too many grey beards
in the any and he was
going to say something
about it monday night in
his brodcast. He
will advocate taking
the 18 and 19 year old
into the army.
This attitude of F,LOR
all
goes
back
to
my
trip to Can't this
and last cabinet mothing
November 6, 1942
1191
Hopkins told me that he didn't think McNutt ought
to head up the War Manpower Board since he was running
for office. He asked me for any suggestions, and I
suggested Herbert Lehman. I told him he stood very well
with labor and that I thought he would do an excellent
job. I told Hopkins that I thought McNutt did head up
the War Manpower, and he said in order for McNutt to
really be in charge the President would have to give him
much more authority including Selective Service.
I also told Hopkins I had suggested to the President
that he bring over Bevin to discuss manpower.
Harriman, who came in with Hopkins but did not stay
for lunch, told me today he heard I was working on the
Mustang plane and to keep up the good work. Hopkins
said to keep after it and that I should see Bob Lovett.
1192
November 12, 1942
(Dictated in presence of Messrs. White and Gaston
and Mrs. Klotz)
I said to the President, "Would you care to tell me
what you are going to do with Herbert Lehman?' He said,
"Oh, haven't I told you about that?" He said, "I am doing
the meanest, dirtiest thing I have ever done and I am enjoying it more than anything I have ever done." He said,
"I am going to make Herbert Lehman Director General of
Kelief for after the war, and in order for the starving
Germans and starving Italians to get something to eat
they will have to go to that Jew, Herbert Lehman." He
said that Lehman will have the same position that Herbert
Hoover had in the last war. He said that Herbert is very
much excited about it, and will start in in North Africa.
The President also said, "I hope very shortly to have com-
plete agreement with the entire membership of the United
Nations to make Lehman Director General for all the United
Nations." Herbert told the President that he is going to
resign on December 1st and let Poletti be Governor for a
month.
(Messrs. White and Gaston left the room)
I said to the President, "Had you expected Darlan?"
and he said, "No, absolutely not, but he worked out all
right and he gave the orders to cease firing." However,
the President told me that they had the most terrible time
with General Giraud at Gibraltar because he wanted to have
everything to say over the English, Americans and Free French,
and it finally got to the point where they had to tell him
that they would send him back to France. I said, "I want
to personally congratulate you on this great success and on
the Franklin D. Roosevelt brains and luck." The President
knocked on wood and said it was a piece of luck. He also
said that Churchill's remarks on when they started talking
about North Africa were true.
1193
November 17, 1942
I saw the President this morning, and I said that I
wanted to talk to him about something that affects my soul.
He was very nice to me and must have talked to me fully 20
minutes, giving me the full military background.
The President told me that General Marshall said it
would take six weeks to conquer these people because they
had to protect the rear and clean up the tribes, etc., and
that this was something that affected American lives. He
said, "Instead of taking from 6 to 10 weeks, we are going
to do it in a couple of weeks with very few lives lost.
He said, "Darlan says he hates Giraud and the head of Dakar the Governor - hates Darlan, but Darlan drops in our laps
because he is the only man who can represent the part of
France which is still left. Darlan wants to save lives and
in some way keep a semblance of power for Petain. The
President said, "It is purely a military matter, and I told
Stimson last night what I am going to use at my press conference." The President said, "There is an old Bulgarian proverb
which goes like this: 'You can walk with the Devil as far as
the bridge but then you must leave him behind'.' The
President said, "Do you think that will satisfy the people?"
and I said, "Yes, I do."
Then I said, "But I think it is terribly important that you
tell the people what you have done about the Nurnberg Decree and
political prisoners. Can't you say something about giving the
people the right to vote?" He said, "Well, some believe that
should be done and some don't," and then he went on to tell me
how he had instructed Eisenhower that all of the public
facilities, such as electric power, water, etc., such be run
by the local people, and that he had given Eisenhower most
explicit instructions on how the government should be run.
I told the President that I was satisfied if he personally
was running the whole show, and he satisfied me that he was.
Furthermore, the President assured me that there have been no
promises of any kind made to Darlan as to the future, and they
can throw him overboard any minute they want to. Apparently,
the President is telling Eisenhower just what to do. Under
-2- -
1194
these circumstances, and knowing that it has saved thousands
of lives, there isn't much you can say about it. The President
said that it is a matter of timing as to when to make the
announcement on the Nurnberg Decree and the political
prisoners, but he said, "I am going to get a bad press on
this.
He was not in any way irritated, and he seemed very
sympathetic. I was with him 40 minutes and we discussed
not only this but every other problem of the war. I believe
the President when he says that he won't tie up with the Darlans
and the Flandins, and I suppose that Eisenhower is looking at
it purely from a military standpoint. McCloy says that both
Eisenhower and Clark are soldiers and have no political ideas,
that Eisenhower is a farm boy, and that it is merely a matter
of
military strategy. I hope they are all right, but I do
believe the President, and I am confident that Stimson wouldn't
be a party to a tie-up with any Fascists because his whole
life has been against that kind of thing.
I am glad that I called up Patterson and saw Stimson
last night because they gave me the background of the situation;
otherwise, when I saw the President I might have gone off
half-cocked due to lack of information. However, having heard
Eisenhower's own telegram read on the situation, I was pretty
well posted before I saw the President.
Then I talked to the President about financing, but he
wasn't much interested. He wanted to talk about taxes, and
he told me his mother's estate had decreased about 10% but that
the dividends had kept up just the same. He wondered why that
was. Then I gave him this memo from Rosenman (see attached),
and I told him he better leave that alone the rest of the year,
and he agreed with that. On the Victory Tax of 5%, he wants
to make that progressive.
Then the President went into this whole question of a
48-hour week and paying for the extra eight hours with War
Bonds. I asked him whether labor or management wanted that,
and he said, "Labor doesn't want it but management does,"
so I said, If it's management, to Hell with it !" I said, "If
you pay the extra 50% the people get for time and a half in
War Bonds, it is just the same as paying cash except they
-3-
1195
can't get it until the war is over. I told him it really
was something on which I didn't have any definite opinion,
but that if they did that it would raise Hell with our Volunteer
Payroll Savings Plan. The President said that labor is
willing to have 10% taken out of their pay but they want the
time and a half and they want it in cash.
The President asked me again whether England wasn't
financing herself through the printing press. This is the
second or third time he has asked me this, but I told him
that they were not.
Just before I left, the President read the attached
memo on financing. He said, "Do you think you can do it all
right?" and I said, "Yes, I can.
Then I told him about my plan on the tax bill and that
I intended to have Paul clear it with everybody at this end
who had any ideas on taxes, and then I thought before we took
it up on the Hill I should talk to him about it, and he
liked that idea.
When I came in, he had just come back from meeting
Mrs. Roosevelt at the airport, and he told me the only thing
she said was how cold she was. She told him three times how
cold she was, and when I saw her, she was in fine humor and
she told me how cold she was.
1196
THE WHITE HOUSE
WASHINGTON
November 11, 1942
MEMORANDUM FOR
THE SECRETARY OF THE TREASURY
Will you speak to me
about this?
F. D. R.
1197
THE WHITE HOUSE
WASHINGTON
November 7, 1942
MEMORANDUM FOR
THE PRESIDENT
Now that the $25,000 limitation
of salary has been put into effect, I
think it would be well to ask Congress to
authorize doing the same thing for all incomes. What is true of salaried people
should be true parti ducarly of those who
do not work but get their income solely
from tax-exempt coupons.
for
SAMUEL I. ROSENMAN
1198
2
DECEMBER - JANUARY FINANCING
(In millions of dollars)
:
:
:
600
200
Funds from banks -
Treasury bills
800
7/8% Certificate
2,000
-
2,000
1-3/4% Treasury bond
2,000
-
2,000
4,600
200
4,800
Funds from non-banking sources -
0
7/8% C/I and 1-3/4% bond
750
-
750
Tax notes
1,200
2-1/2% "tap" bond
1,750
-
1,750
Savings Bonds (E, F and G)
1,000
1,800
2,800
4,700
2,600
7,300
9,300
2,800
12,100
4,800
1,000
Balance at end of period
800
2,000
:
4,800
:
1,000
TOTAL
:
Balance at beginning of period
JANUARY
:
DECEMBER
November 18, 1942
1199
HM Jr called the President and told him how pleased
he was with the statement he made on Darlan, and also his
request for the liberation of all prisoners in Northern
Africa who have been imprisoned because they opposed the
Nazi efforts to dominate the world.
The following is the conversation between the Secretary
and the President in part:
The Pres.: In Algiers and Morocco, the Arabs feel that
they have been discriminated against for years. There has been
a problem. The Jews are allowed to vote and the Arabs are not.
It is a domestic problem and I have been very careful in taking
the prosecution off the Jews for fear the Arabs would say,
"Why not give us the right to vote?" I am removing all the
persecution status of the Jews and I am saying to the Jews
and the Arabs, "Forget about the voting for neither of you
is going to vote. There will be no election until we are
good and ready." It is all right. I am going to say,
Forget about this voting stuff.'
HM Jr: That is most heartening.
The Pres.: I am sure it will be all right.
Winston Churchill is having a hell of a time with his
Parliament. He telegraphed me last night saying he was very
happy.
HM Jr: I thought your remarks on the radio last night
were very touching.
The Pres.: Are you going up on the Hill? They are
having some kind of a meeting of the Ways and Means Committe.
HM Jr: There is no public hearing. There is an
organization meeting.
After he finished talking to the President, Mr. Morgenthau
said that the President found out that the Jews could vote and
the Arabs could not, and if he gave political freedom back it
would mean the Jews could vote again and the Arabs could not,
and he said for the time being there will be no election and
nobody would vote.
1200
December 3, 1942
I saw the President this morning and told him about my
financing, and he was very much pleased.
Somehow or other he mentioned Palestine - I can't remember
just how it came up - and so I said, "I am having a meeting at
my house tonight to discuss Palestine at the suggestion of Sam
Rosenman. The President said, "Listen, Henry, take my advise
and go easy on that because I have pretty well made up my
mind as to what I am going to do." I said that I would be very
much interested in hearing about it. The President said, "Well,
what I think I will do is this. First, I would call Palestine
a religious country. Then I would leave Jerusalem the way it
is and have it run by the Orthodox Greek Catholic Church, the
Protestants and the Jews - have a joint committee run it. They
are doing it all right now and we might as well leave it that
way." Then the President went on and said, "I actually would
put a barbed wire around Palestine, and I would begin to move
the Arabs out of Palestine." I asked him how he would do
that and I said, "Would you have the Jews buy up the land?"
He said, "No, but I would provide land for the Arabs in someother part of the Middle East, and I know there are plenty of
places. Each time we move out an Arab we would bring in another
Jewish family.' I asked the President, "Would you propose that
the majority should be Jews in Palestine?" and he said, "Yes,
90% of them should be Jews, but I don't want to bring in more
than they can economically support, and I think that point
has been reached. I said, Well, what kind of a place would
it be?" and he said, "It would be an independent nation just
like any other nation - completely independent. Naturally,
if there are 90% Jews, the Jews would dominate the government."
He said, "There are lots of places to which you could move the
Arabs. All you have to do is drill a well because there is this
large underground water supply, and we can move the Arabs to
places where they can really live.
Then I said, "Well, Mr. President, so much for Palestine,
but what about the two or three million Jews who are still in
the heart of Europe?" He said, "Well, I have been working on
that right along with Isaih Bowman, and I had a conversation
sometime ago with Ilo, the President of the Republic of Columbia."
-2
1201
The President said, "He has a very interesting idea. On the
west side of the Andes, there is this virgin territory which
President Ilo has visited, and what he is willing to do is
to open up this country by way of highways over the Andes.
He proposes that if there are 100 people a third of them must
be citizens of Colombia and the other two-thirds can be made
up of refugees from Europe, but not more than 10% of any one
group - of any one race or nationality - so that they will
be assimilated." The President went on to say that this could
be done not only in that part of the Upper Amazon which is
Colombia but also in Ecuador. The President also said, "Then
I am studying many other places in the world where the
refugees from Europe can be moved." All I said when he had
finished was, "Well, Mr. President, when we are back in
Dutchess County, I wish you would keep me in mind because
this is something in which I am very much interested and on
which I would like to help," and he said he would. I asked
whether this would cut across Herbert Lehman's field, and he
said, "No, the two of them will dovetail. Herbert has to do
with feeding the people but when it comes to moving them out,
that is something else.'
I was surprised to find that the President was studying
this thing with so much interest and had gone as far as he had
in making up his mind on what he wants to do. It was most
encouraging to me and most heartening.
Then I went on to the subject of taxes. I said, "Mr.
President, I want your guidance on a problem which may come up.
We have been getting along first rate with Jimmy Byrnes, but
what I want to know from you is whether or not you expect us to
continue to prepare the tax bill as we have in the past and
present it as we have in the past. He said, "Absolutely."
I said, "I didn't know whether Byrnes was thinking of something
else, and I wanted to find out whether you said anything to him
or to the leaders on the Hill because I am having lunch with
Doughton today and I would like to know." The President said,
"I haven't said anything to anybody - absolutely nothing."
The President added, "You just go ahead the way you always
have." (This proves to me that Byrnes is groping for the
power and hasn't gotten any directive from the President.
It
also proves I am right in thinking that one should not be
scared by anybody like Byrnes. The only thing to do is to go
-3-
1202
direct to the President and find out where you stand.)
The President told me to take the following message
to Doughton. He said, "Now, Henry, you tell Doughton that
if the Democrats keep on fighting amongst themselves the
way they have been recently, we are going to elect a
Republican President." He said, "We had better stop fighting
amongst ourselves.
(The two previous paragraphs on taxes, etc., were
dictated in the presence of Mr. Paul and Mr. Bell.)
The President was dying to tell me about what he said
on the $25,000 limitation at his press conference because he
had tried to tell me two or three times about how smart he
was on that. He said, "You know I always like to attack
and never to apologize. At my press conference I said that the
newspapers are giving the country an entirely false impression
as ta the salary limit. They are all writing the story that
the limit is $25,000 when it is actually much more than that."
He said, "I said if the newspapers can't get the story right
I will have to go on the radio and explain it to the people,
and it is a wonderful club to hold over the newspapers because
they don't want me to go on the radio.'
Then I said, "Well, Mr. President, I don't agree with
you on this $25,000 limitation in doing it this way. I think
you should do it through progressive taxation." He said he
agreed with that but we would never get it through Congress.
I told him that it would be so much easier to administer, so
I got that off my chest.
I asked the President whether he wanted to make public
the fact that he is buying a $1,000 bond for each of his
grandchildren, and he said, "No." He also told me that this
money is coming out of his capital and not out of his income.
I asked the President how the war was going, and he said
that we are behind schedule in Tunisia, and he said, "On this
Guadacanal thing, one day you are up and the next day you are
down, and I am kind of worried about that."
-4-
1203
I asked the President whether I could invite my
father for next Tuesday night, and he said, "Of course."
Then he said, "You just wait until I see Uncle Henry. I'm
going to tease him about that black beard of yours. I'm
going to have a good time teasing him."
1204
December 4, 1942
I saw Hopkins before I saw the President, and he
was very talkative. He was sort of worried about Tunisia,
and he talked as though he was directing the war. I have
never heard him talk that way before.
He said that there are about 12,000 German troops
in Tunisia, but he said that that doesn't worry him so much
as what they are going to do with the 1,000,000 English and
American troops in North Africa after they have cleaned up
Tunisia because they have no plans for them. Hopkins said
that when you ask the Army what their plans are they get
irritated. So I said, Would we attack Italy?" and he
said, "Before we do that, we would have to clean up
Corsica and Sardinia from the air first." Then I asked him
whether anybody had considered going up through Salonika
and attack Bulgaria and Roumania. He said that they were
considering that also, but they were talking about going
through Italy, and that isn't so good because you come up
against the Brenner Pass. I told Hopkins that they went
up through Salonika in World War I and that I favored that
method.
#HHH#*HH
December 4, 1942
1205
The President of the United States called me and said,
"What is this about your going into John L. Lewis' and the
United Mine Workers' income tax?" He said, "Never mind
where I heard it, but I understand they are going to find
out a lot about political contributions. Of course, you
don't know about it, but a couple of your people are looking
into it who are unfriendly to this Administration, and they
want to give the information to Congress or to some newspaper columnist."
Then I said, "Mr. President, I know all about it. As
a matter of fact, Sen. Guffey has been trying to get us to
stop, and before the elections, the statement was made that
we had offered to call off the investigation if John L. Lewis
would support the Democratic Senator in Illinois. I said,
"Gaston is watching this for me personally, and for your
information this is a bona fide investigation, and the whole
thing was started through information given me by Phil Murray."
I said, "Furthermore, we have already found that the owner
of a Mine B in Southern Illinois was given several hundred
thousand dollars which he failed to report. He was given
this money to shut the mine down in order to break a union
which was in opposition to the United Mine Workers." I also
said, "I think that as we go into this we will find where
or how or when John L. Lewis received money from the Axis."
The President then said, "I have heard enough now, and
I want you to keep me posted in another two or three days."
I gather that somebody had come into the room and he
didn't want to discuss it any more. Before I told him the
above, I asked him if it was all right to talk about it over
the phone, and he said, "Yes."
1206
December 5, 1942
My dear Mr. President:
I am enclosing herewith several
clippings and cartoons from the
St. Louis Post-Dispatch and the
St. Louis Daily Globe-Democrat,
which I am sure will interest you.
Sincerely yours,
(Signed) H. Morgenthau, J.
The President,
The White House.
1207
December 5, 1942
My dear Mr. President:
I am enclosing herewith several
clippings and cartoons from the
St. Louis Post-Dispatch and the
St. Louis Daily Globe-Democrat,
which I am sure will interest you.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
The President,
The White House.
ST. LOUIS POST-DISPATCH
St. Louis, Sunday Morning, November 8, 1942
How Much Miners Pay.
conservative estimate of the
Board Man Questioned
UMW MINE 'LOAN'
WAS KEPT FROM
Members of the union Interrogated from the floor Jack Glasgow of Taylorville, a member of
the executive board of District 12
the state organization. The board
is the only state-wide elective body
for a union directed by provisional
appointees of John L Lewis, pres-
ident of the UMW. The charter
was surrendered in 1933 to the in
THE RANK AND FILE
ternational union because of district indebtedness, since eradicated.
Glasgow replied he had not been
25,000 Who Pay Dues in
Illinois Learned of
Transaction Only From
the Post-Dispatch.
STATE BOARD ALSO
KNEW NOTHING OF IT
informed of any payments, al-
though the fact that "loans" were
made to Elshoff was admitted to
the t-Dispatch by Thomas Ken.
nedy, secretary-treasurer of the
International UMW organization,
and by Walter James, secretary.
treasurer of District 12, who said
the union held Elshoff's note as
security.
"Had this reported proposal or
any similar proposal come before
the board, I would have opposed
it," Glasgow told the Post-Dispatch
today. "Advancing money or lend-
News of Reported $300,000 Advance 'a Thun-
derclap'-District Run
ing money to mine operators isn't
my Idea of rank and file unionism.
Glasgow. who was one of the
UMW leaders in that union's bitter
conflict with the Progressives, was
Post-Dispatch.
(Copyright, 1942 by MakingCo.)the Pullisses Pub.
SPRINGFIELD III. Nov. 7.-
The State Executive Board of the
United Mine Workers of America
and the rank and file of the
25,000 UMW minera in Illinois had
no knowledge of the reported
$300,000 "loan" by the United Mine
Workers to Carl Elshoff, lessee of
mines A and B here, to finance
the freezing out of the rival Progressive Miners of America, the
Post-Dispatch learned today.
It was not until exclusive publication by the Post-Dispatch on
Oct. 30 that the "loan" was under
an income tax investigation by
agents of the United States Bureau of Internal Revenue that the
secret transaction became known
to the dues-paying miners,
When it was disclosed one of
the principal union chapters in
this area, Local 49 comprising 350
tions,
Current dues going to the state
organization, he said, consist of A
flat monthly levy of 20 cents plus
2 per cent of the miner's monthly
earnings. Monthly earnings fluo
tuate according to the miner's
classification and the market.
Some miners, such as machine op-
erators, get $9.80 a day, drillers
and "shooters" get $8.55 a day:
there are other classifications,
with the minimum received by
common labor $6.75 per day. Over-
time compensation is calculated
and helps to swell the District 12
budget. The International union
gets 90 centa per month per man,
and the local chapters get about
80 cents
Revelation that minera' dues
were going to mine operators, Mar-
tin said, would strengthen an in-
creasingly vigorous demand for
autonomy. the right of the miners
of Illinoia to elect their own dia-
trict officers and obtain from
to the International Board.
ing hastily called by Ray Edmund-
tional UMW convention at Cincin-
nati last month. It was referred
In Illinois, Martin said, the UMW
son, president of District 12 by
appointment of Lewis, the day
after Lewis delivered a radio ad.
dress for the Republican candidate prior to the 1940 election
locals and the State organization
a key man in an Intensive UMW
taining to the mines represented
Previously, Edmundson had been
campaign for Roosevelt in the
1936 election. Federal agents
talked to both Edmundaon and
James in the current Investiga
tion. finally obtaining the union's
books.
are "directed entirely by provision-
al officers appointed by John L.
Lewis
Meetings of local unions, he said,
consist of disposing of matters per-
by their membership. As far as
general union policies are con-
cerned, he added, the membership
does not play a pivotal part.
The UMW has Invested more
"Like A Thunderclap
than A million dollars of the funds
hit union members "like a thunderclap." Robert Martin, serving
operations, as in mysterious Mine
News of the Elshoff mine deal
of the miners in private mining
his third consecutive term as presi-
handled through A UMW subsidlary. Lewmurken, Inc. More than
dent of Local 49, told the
Post-Dispatch
Martin said the membership
throughout Illinois hadn't been
given a financial report since
Lewis put Edmundson in office in
1935 nor had a state UMW con.
vention been held since 1931. two
years before the surrender of the
charter to the Lewis-dominated
International Board
The first provisional president,
William Sneed, was succeeded by
the state headquartere
action
defer
"It's a hall of a union polley to
hand over our dues to a mine op
the Federal
with market and mining condi-
of Wendell i. Willkie at meet-
tion of the presidential candidacy
miners at Mine 53 of Peabody Coal
Co., discussed appointing an Inves-
to ascertain
headquarters, without an accounting. he said, would be $75,000. In
previous years the amount varied
Indorsement by the state organiza-
executive board who opposed the
By S. R. McCULLOCH
A Staff Correspondent of the
current monthly revenue contributed by the miners to state
them regular financial accountIngs. This demand was made repeatedly from the floor at the na-
one of two members of the six-man
by Lewis Men.
A
Edmundaon in 1935.
erator," Martin said.
B deal. Some investments were
$500,000 advanced by this concern
has gone into Rocky Mountain
Fuel Corporation in Colorado
In the report of the International
officers, submitted at last month's
convention, it is stated that this
dummy corporation has made
loans "In the best interests of our
membership and the organisation."
The joint report of the Interna-
tional officers at the Cincinnati
convention showed a balance on
hand of about $6,845,000 In cash
and bonds,
ST. LOUIS POST-DISPATCH
SI-19178-F, SI-19084-F
Oo tober 30, 1942
men. During the height or the
mine feud, which was marke by
U.S. INQUIRY INTO
violence and intimidation, Mine B
WILE closed for long periods, finally
reopening with UMW crew
Edmundson Questioned
Federal agents talked to Ray
$300,000 UMW IS
ALLEGED TO HAVE
Income Tax Investigation
at Springfield, III.,
Nears Completion Ray Edmundson, Union
Head, Questioned.
principal lleutenant of John L
Lewis, head of the international
vote of 404 to 25 Edmundson had
urged his members not to partici-
12, United Mine Workers and long
NLRB election at Mine B by a
union, and Edmundson turned over
to them the books of the union
pate in the election.
The election came after the Progreasives had worked the mine for
of District 12 which embraces IIII-
several years and complained when
nots, also was asked for certain in-
formation.
James told the t - Dispatch to
day that his union had lent Els
hoff sum which he described as
"less than $200,000" and that the
advance had first received the ap
proval of the union's International
officers.
"It was & legitimate loan - James
Asserts Sum Advanced to
Operator Was Less
Than $200,000 and
Was Secured by His
Personal Note.
Staff Correspondent of
Post-Dispatch
(Copyright, 1942 the Pulitaer Pub
SPRINGFIELD III., Oct. 30.-An
its expiration in 1939.
Resumption of operations with A
UMW crew was halted by re
straining order issued by United
States District Judge J. LeRoy
Adair. He also barred the PMA
from mass picketing at the mine
Inspected by our lawyer, to establish it."
marking the long controversy.
Elshoff told the Post-Dispatch
terlude in sporadic operations
To emphasize the importance of
the mine to the Progressives lead
era pointed out that its operation
Mine B Coal Co., which operates
by PMA crew would signify the
turning point in the union's long
amount or for any reason."
He declined to say whether any
larger mines of Illinois.
Mines A and B, any money or any
advances had been made to him in
his individual capacity.
Edmundson conferred in Wash
ington recently with Lewis regard
ing the progress of the Investiga
tion, which has been underway for
struggle for recognition in the
Charges Against Operator.
Subsequently, after further lits.
gation, the mine was reopened un-
der an NLRB stipulation which
gave the Progressives bargaining
rights for the-entire crew but per-
mitted the UMW to establish a
local there.
several months He was assured
Bontjes estate of Peoria and held
in the name of Citizens Coal Min-
the
tion the contract was valid until
It then shut down for another in
of Lewis' support
The two mines are owned by the
By SPENCER R. McCULLOCH
Elshoff signed contract with the
UMW. The UMW took the posi-
said, "and we have Elshoff's note,
Workers have never loaned the
TELLS OF 'LOAN'
Federal Court here of conspiracy
to bomb coal trains during the
first phase of the State-wide mine
conflict, the Progressives won an
today that "the United Mine
ANOTHER OFFICER
time 36 men, most of them Progressives, were found guilty in
Edmundson, president of District
Walter James, secretary-treasurer
'LENT' MINE MAN
NLRB Election in 1937.
In December, 1937, at about the
ing Co. Elshott leased Mine B.
long storm center of the bitter
UMW-PMA controversy in 1925
and acquired the lease of Mine A
last year, purchasing It from an
When the mine reopened In the
fall of 1939, the Progressives began
contract negotiations with Elshoff
but failed to reach an agreement
After two years of futile dickering
the Progressives charged that Els
hoff had deliberately refused to
recognize them and consistently
hired only UMW men. Dozens of
affidavits signed by Progressives
other mine operator.
of the Bureau of Internal Revenue
into a reported "loan" of $300,000
declared they were told by mine
boases to join the UMW if they
litigation under provisions of the
wanted work.
America to Carl Elshoff, lessee of
eral years been a scene of violence
income tax investigation by agents
by the United Mine Workers of
mines A and B here, is nearing
completion, It was learned today.
The completed report, it is un-
derstood, will be forwarded to
Washington for consideration
Treasury Department officials
by
The investigation is said to hinge
advances reportedly made by
United Mine Workers during
successful campaign of that
union to oust the rival Progressive
Minera of America from mines A
and B, the principal mines in this
1
area, each employing about 400
Mine R was involved in lengthy
Wagner Act after it had for BOY-
during the outset of the Illinois
mine war. This area was regard
ed as a strategic battle ground
because It was headquarters for
So bitter did the controversy be
come that a Federal Injunction
was issued against violence on the
premises of Mine R Several UMW
members were ordered to appear
before United States District Judge
the State organization of the UMW
c. G. Briggle after Progressives
militant Progressives.
beating of & Progressive as be
as well as containing a nucleus of
charged they were involved in the
worked underground
SI-19178-F, SI-19084-F
Page 2
U. 8. Inquiry Sought.
A Federal investigation was requested by United States Attorney
Howard L Doyle, who announced
the situation at the mine "may fos-
ter the worst type of violence.
The Progressives appealed to the
National Labor Relations Board,
but the board held it could not cite
another labor union for unfair la.
bor practices.
Enough UMW men had enrolled
for work at the mine to enable the
UMW to win an NLRB election in
January, 1941. The mine, which
had been idle during one of its
sporadic shutdowns, promptly reopened.
When Mine A was acquired by
Elshoff under lease it remained
closed until the UMW had ob
tained a majority. It opened then
under a closed shop contract and
both mines now have UMW contracts.
6
MILLION IN UMW
FUNDS INVESTED
Loan Under Inquiry
Kennedy said one of the "invest-
menta" was the loan to Mine B
at Springfield, III. This, as WAS
told exclusively in the
Post-Dispatch on Friday, is one of
the transactions involved in an income tax Investigation conducted
by agents of the intelligence unit
of the Bureau of Internal Revenue
IN MINING FIRMS
Handled by Union's Sub-
sidiary, Lewmurken,
Inc., Which Is Really
John L. Lewis.
MORE THAN $500,000
PUT IN ONE CONCERN
in Springfield Intelligence agents
One 'Investment.'
Staff Correspondent of the
A
Post-Dispatch
(Copyright by the Pullisar Publishing Co.)
WASHINGTON, Oct. 31.-More
than one million dollars of the
funds of the United Mine Workers
of America has been Invested in
money spent has been an is
testment that will return divi
dends in many ways to our members.
Walter James, secretary-treasures
of District 12, about the matter.
convention can justifiably concur
in and approve the reports of re
head of UMW's District 12. and
Beginning in 1939 and-extending
well into 1941, the financial reports of the United Mine Workers
"With these facts before US. this
ceipts and expenditures since our
last convention, RS covered in the
regular six months' reports to our
show. under "miscellaneous expen-
local unions and approve as well
from $50,000 down to $5000. These
policies of our organization.
draft for loan with security notes
ternational organization, in emergency situations involving the sta-
ditures." A series of loans, ranging
are listed merely as "New York
RS collateral."
Although the rank and file of
the UMW had no way of knowing
It. these were for the most part
payments made to take up bonds
cording to one tabulation, made by
A former associate of Lewis, these
advances totaled about $500,000 by
the middle of June, 1941
After June of 1941, sizable ad
vances were made to Lewmurken
Inc. which had been created by
the International Executive Board
this report on the general fiscal
"Over A period of years the in
bility of contracts and of employment, has made corporate loans to
several corporate entities In the
coal industry. These loans were
made in the best Interest of our
membership and the organization
The results have justified the de
cisions of the international officers
and the International Executive
Board, which approved them.
As to Lewmurken, Inc.
"In making such corporate loans
we naturally took collateral in the
dominated by John L. Lewis to
form of bonds, stocks, notes, etc
On Aug 12, 1941, an advance of
felt the United Mine Workers of
and on Dec. 24 there was an ad
zation hold such securities, There
handle such financial transactions
By
reported to our members. All If
have talked with Ray Edmundson
of Rocky Mountain Fuel Co. Ao
Company of Former
Treasury Aid Illinois
Loan Under Inquiry
"The affairs of your union are
efficiently managed The receipts
and expenditures are audited and
$129,182 was made to Lewmurken,
ditional loan of $50,000 to this same
wholly owned subsidiary.
Besides the advances to LewContinued on Page 5. Column 3
In the case of bonds and stocks we
America should not, RA an organk
fore, there was organized A cor
poration, by authority of the In
ternational Executive Board
known as Lewmurken, Inc.
private mining companies through
the medium of a wholly owned
subsidiary of the UMW. A company called Lewmurken, Inc., It is
shown by statements of the UMW.
The greater part of this Invest-
ment in private enterprise-well
in excess of $500,000-has gone into
SUNDAY MORNING
TCH
Million in UMW Funds
Rocky Mountain Fuel Co. in Colo
Invested in Mine Firms
rado. Exactly how much has been
invested in this company, which
is controlled by Miss Josephine
Roche, a former assistant secretary of the Treasury, United Mine
Worker officers will not divulge.
"We have made loans to several
companies," Thomas Kennedy, sec
ry-treasurer of the United Mine
rkers, said to the Post-Dispatch
"The amounts have not been made
public, although whenever Invest-
been the amounts
listed financial
orta of the United Mine
Continued From Page One.
murken, there were three entries
of "New York draft for corporate
loan with bonds as collateral' for
$9000, $79,895 and $25,000 These,
added to the $500,000. make a total
of about $800,000.
Ambiguous Report.
In the report of UMW's interna-
tional officers to the last convention, recently concluded in Cincin-
nati, there was a curiously a.m.
biguous. reference to these Joans
The statement on finances said, ID
part:
poration creating Lewmurken,
Lewis and the other two trustees
can do just about what they please
with any funds which pass from
he treasury of the United Mine
Workers to the subsidiary corpora-
tion. The certificate of incorpora-
tion gives them the right to engage
in almost any form of -financing
or business activity.
a stock is owned by the United
, Workers of America, with
three International officers oi
: successors as trustees. This
oration holds in trust for th
ed Mine Workers of America
collateral as has been secured
Not long before the latest advances made to Rocky Mountain
Fuel Co. out of UMW funds, Miss
Roche sought & loan from Redon
struction Finance Corporation. Her
attorney at that time was Francis
Biddle, now Attorney General. then
in private practice in Philadelphia.
re notes are Involved the intional union has them in its
With Biddle, Miss Roche ap.
ken, Inc. It is further the purof this corporation to pura from time to time stock in
to come due in succeeding months.
Considerable pressure was exert-
ession, but intends, when exnt, to turn them over to Lew-
us companies so that we may
in case of necessity, a stock
r's Interest in securing in-
ation and other material that
be of advantage to our ortation.
I this matter We believe we
adopted a sensible, construc-
proached Jesse Jones, head of the
RFC. in hopes of obtaining A loan
to take up the bonds which were
ed on Jones for the loan. After
an investigation, he agreed to a
loan not to refinance the company
but merely to provide for Installation of new machinery. This loan
for $72,000, made in 1938, has since
been repaid.
First With Union Pact.
Miss Roche, who inherited minor-
course: one that is fully pro-
Ity control of Rocky Mountain
bership: one that is deserving
e approval of the Internation-
first mine owner in that area to sign
1 over the period is $1,052,470.
Prior to the formal loans made by
the UMW, Lewis is said to have
made advances to insure the continuing operation of the company
Later the full amount was COV-
re of our organization and our
invention. The total of these
her similar loan in the amount
30,000 was charged against a
let as a loan and has since
repaid by the district to the
national union."
Power Given to Lewis,
der this polley, Lewmurken-
h is really Lewis himself-
Fuel Co. from her father, was the
a union contract. Her friendship
with Lewis dates from that time
ered by loans recorded on the
UMW books.
Of the approximately four million dollars in bonds outstanding
Lewis, through Lewmurken, has
1 use the funds of the UMW
y controlling Interest In any
to hold Miss Roche's stock as part
Irst syllables of the names of
. Philip Murray, now head of
that William Taylor, a West Vir
ginia coal operator friendly to the
/ chief, and Kennedy.
Izing coal properties, be put In
any that he might choose. The
Lewmurken was formed from
CIO and at odds with the
rray, in response to an In, told the Post-Dispatch he
not signed the papers of inration for Lewmurken and
nothing about its financial
ties. His successor as vicedent, named at the recent con-
on, was John O'Leary, who
became one The
new of Lewmurken,
approximately $800,000. He is said
of the collateral for the UMW
loans. At one time he "suggested"
UMW and experienced in mechan-
charge. This was done.
Of the balance of the bonds out-
standing. the majority are held by
Individuals who have agreed that
the principal shall not become due
for several years. It is reported,
however, that about $200,000 of this
amount comes due next April 1
Presumably funds will have to be
found to take up these bonds,
Haday the certificate At Incort
0St. Louis Daily Globe-Democrat. celednesday @tlorning. (1
BACK TO THE MINES
U.M.W.
JOHN
REG-MANNING
C. 1.0
The Bull Walks Out of the China Shop