Full text of Diaries of Henry Morgenthau, Jr. : Volume 5 : Part 2

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December 16, 1942

1215

I saw the President of the United States this
morning and told him about my trip to North Carolina.
I told him that it was even more successful than I had

hoped for.

I then gave the President quite a sales talk on

the necessity of having somebody who is close to him and
who admires him meet the criticism that the Administration is getting on the community level. The President
didn't argue with me, or didn't say what he thought of

it or anything else. I pressed my point quite hard. I

said I didn't know exactly who should do it except possibly OCD, but I didn't think Landis could do it because
he is too austere, and the President agreed. I spent

considerable time on it, and I told him that I didn't

want to have happen to him what happened to Woodrow

Wilson, and the President didn't mind my going after him
the way I did.

I asked the President whether I could discuss it
with Hopkins, and he said emphatically that I could do that.
I said, "Don't you think about a half dozen of us ought to
get together some evening to talk about it?" and he said,

Yes, we will do that," but I am sure that I will have to

keep after him.

After that I talked to the President about his Budget
Message. I said we would like to prepare something and have
it ready for him by Christmas and he said that would be fine.
I told him that what we are doing is simply to lay down the
formula and not go into any specific tax recommendations,
and he said that was right.
I then asked him about the war, and specifically about
Tunisia. He said, "The thing the people don't seem to appreciate
is the tremendous distances involved, and the difficulty was
moving up the troops. He said that at present only one-eighth
of the troops attacking Tunisia were American troops.

I told him that I might want to fly down to see Bob,

and he said it was okay.

1216
December 21, 1942

At twenty minutes of seven Sunday night I called up Roy
Blough and told him I would like him to put down as Plan A
of the Tax Program: a very stiff withholding tax, rationing
on all scarce articles, increase the personal incomes and
corporate tax and social security tax, and nothing on the

compulsory lending or saving. Did he think that that would
do the job? He said, "Yes, it would." He asked me how much
did I think the volunteer plan could do? Was it good for
$12 billion? I said I certainly thought that it was. Then
I asked him to write me a letter to the President whereby I
would point out the defects in the present plan of the socalled $25,000 limit, and recommend that we limit personal
income, both in salaries and invested capital, to a progressive income tax. Roy Blough said that he believed in that
himself end would be very glad to do it.
I personally believe that if we could get enough money
to close the gap and control inflation without borrowing more
money from the people through compulsory saving and can get

it through the volunteer plan, that it's an important part of
the morale situation on the home front. I don't know how the
plan would set with Congress, but I wish I could find out,
and I now have a telephone call in for the President to see

whether he would let me talk to Walter George and Doughton
and try out the plan on them before I see him next Wednesday.

I talked to the President at five minutes to seven and
said that I'd like to consult with George and Doughton and
lay the problem before them. Should we have a diagnosis of
the problem or should we diagnose it and make recommendations?
He said he'd be delighted to have me talk to them. I'm delighted and it nuts me in a much stronger position when I see

him and also a stronger position in relation to the other

agencies. I told him that we knew what the Jimmy Byrnes'
crowd wented and what the Budget crowd wanted and what the
C.I.O. crowd wanted, and he said, "Well, how are things be-

tween all of you? Are they quiet?" And I said, "Yes, all

relations are very friendly," and that seemed to please him.
I said had he heard anything about the war? He said, "No, I
haven't heard anything in two days and was hoping to hear
something soon." He sounded in a very good humor.

1217
December 29, 1942

When I saw the President this morning, I asked

him about the attached letter which I sent to him on

December 18, 1942. , He said he had discussed it with
Elmer Davis.

The President felt that there should be really

two committees - one headed by Elmer Davis which would
be the operating committee, and another group organized

along the lines I suggested which would set the policy.

The President seemed to like the idea, but for
some reason wanted to postpone it, and I think the reason
is because he has too much on his mind. I am going to
follow it up with the President again.

1218
P

DEC 18 1942

Y

My dear Mr. President:
During our conversation on Wednesday morning we

discussed the need of keeping the people of the country
better informed as to the measures necessary on the home

front for a more effective prosecution of the war. I am
convinced that much of the misunderstanding that prevails
can be traced to the lack of coordination in the efforts

of departments and agencies dealing directly with the people.
Different departments and agencies go to the people with

different appeals and different programs. The result is
often bewilderment and confusion.

In the Joint Chiefs of Staff you have an organization

to advise you as Commander in Chief on military matters.
I think you should have a somewhat comparable organization
dealing with the home front.

I would like to offer a proposal which should contribute
in my opinion to greater public understanding and result in
more intelligent cooperation by the people as a whole.
I suggest for your consideration the creation of an informal
committee, including Claude Wickard, Leon Henderson or his
successor, Paul McNutt, James Landis, Elmer Davis, and myself
all heads of departments or independent agencies dealing

directly with the people -- to take up the problem of coordi-

nating our programs and appeals to the people in the community.
This committee would meet once a week, or as often as is
necessary.

The coordination achieved here in Washington would make

possible, as I visualize it, corresponding coordination in
the field. If, as an instance, we have a War Bond meeting,
or a meeting to explain the Victory tax in any\oommunity,
the representatives of the other departments and agencies
dealing with the people should be present so that all matters

-2-

1219

involving oivilian aspects of the war effort might be

handled at one and the same meeting. In this way the
people in each, community would be apprised in a detailed
and at the same time systematic way of the things that
are required of them for the more effective prosecution
of the war. They would understand better the reasons why
it is so necessary to interfere now with normal oivilian
life. Cooperation as a team by different Government
agencies, both in Washington and in the communities,
would serve to stimulate a corresponding cooperation

by the people in each community.

I would like an early opportunity to discuss this

matter further at your convenience.

Sincerely yours,
(Sgd.) Henry Morgenthau, Jr.

The President,
The White House

1220

Jan. 1, 1942

1220

I asked the Secretary today whether he
wanted to do anything about the
suggestions which the President made on

taxes, and he said, "No, let it ride. "

II
Cabinet. Dec 31.1942
THE WHITE HOUSE
WASHINGTON

1221

cross rate maclagescar

u.K. balances

Type

sujar M. x blocks

0

trince uar 27. ,

Pres. said we should
look into sliding scale

tax an sales similar to

one used in France during

w old was me. (over)

1222
THE WHITE HOUSE
WASHINGTON

Pres, says we ought to

raise 50% this caning

year
revenue
Whichthen
means
another
$

0.

16 bileian in taxes the
Pres. said.

Shawed this to Pres ,and Cobmet-

were D1. 1942

1223

THE UNDER SECRETARY OF THE TREASURY
WASHINGTON

December 31, 1942

TO THE SECRETARY:

Figures as of December 29 on Victory Fund

Drive are as follows:
From Banking Sources:

$ 900 M

Treasury bills
7/8% Certificates

2,117
2,058

1-3/4% Treasury bond

$5,075M

From Non-banking Sources:

168% certificate and

$2,684
2,830

1-3/4% Treasury bond

2-1/2% "tap" bond

Tax notes

973
838

Savings bonds (E, F, and G)

7,325
$12,400M

We are fairly certain that when the final
figures for the end of the month are in for Savings

Bonds and Tax Notes, we wi 11 exceed $12,500,000,000.
D. W. B.

-

FOR VICTORY

BUY
UNITED

WAR

BONDS
AND

STAMPS

1223-A

1000
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
FrankWalker 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.

1224
February 11, 1943

I spoke to Grace Tully at a quarter to one.
She said that I had mentioned it to her last night
when I spoke to her at 6:45 that the ship was
going to land today, but that she had not had time to

tell the President. She said she would tell him that

it was my recommendation that we pay them out of any
one of two or three funds and then reimburse the
funds later on.

1225
March 18, 1943

In discussing my trip abroad, the President sug-

gested that I might visit the Caribbean. I then reminded him of my trip to England and asked him if he
didn't think that that had been successful, and he
said definitely, "Yes." I then told him that I had
a very warm invitation from General Walter B. Smith,
Chief of Staff, to come to North Africa prior to

March 15th and, of course, I could not come, but that

this is the time that I would really like to go. The

President said, "Okay." # I then asked whether it was
okay for me to discuss it with General Marshall,

and the President said, "Yes." The President told

me that when I went I should see Lord Swinton who

is a member of the British Parliament representing
them in (I don't know whether he said North Africa
or West Africa).

1226
March 24, 1943

The Secretary saw on the ticker that Mr. Paul
had a 12:45 appointment with the President. He phoned
Pa Watson and told him that it was his understanding
that the President would never see any one from the
Treasury without having the Secretary present. Pa

Watson said that the appointment had been cancelled,
and that the President had wanted to ask Paul some-

thing but that he had forgotten what it was he wanted

to see him about.

March 29, 1943

1227

I telephoned the President and told him to withdraw
his securities from Lazard Freres. I had recommended

this to him at least three times over a period of the
last ten years and, to my amazement, I found that his
securities are still there. The President said that

for eleven or twelve years he had not bought or sold
a share of stock through Lazard Freres, and that he
simply let the income accumulate there. He seemed
very pleased that I had advised him to do this, and
he said he would withdraw the securities at once.
I told the President about Lazard Freres and how they
had let some money get through to Switzerland. I also
told him about Frank Altschul, and that he most likely
would get out of the firm but leave his money in.

The President said that this is just like the case
of Jacob Schiff in World War No. 1. Naturally, this

remark disturbed me, and I want to get all the facts

about Lazard Freres and send them to the President:
also our recommendations as to how the reorganization
of the firm should be handled.

1228
April 1, 1943
Mr. McConnell, President of General

Aniline and Film, gave this information
to the Secretary several days ago.

fire
WHITTHE Oilg

april 13

1229

Victor Enamel

if
1020

Becames, chairman

Henry Lockhart
Head of n. y Shiphing

Lewis Johnson
Pres of general chy stuffs

$60.00000 ?

caused for Standard gas.

think also Consolidated
airplane and Vultie

Charle. makeheace
formery V.P. chase 1230

Harbut galagen
Formerly Sinclair

Broo
John He Hirty
suggested by Harry Hopkins

Tom O'hara
ass of Jam gindler

Civerdale
Caverdal Culpruty

3830

1231

mat
Hickey
dealer in Publicun
uttibles
,

C

ass to Col Johnson
in general Lay stuffo

April 1, 1943

1232

When I saw the President this morning, I gave him a copy
of the attached memo, marked "Exhibit A", plus a copy of George
Haas' chart on Victor Emanuel.

I said to the President, "I have something disagreeable

to tell you," so he said, "Oh, I have written Lazard Freres
taking my account away." I said, "No, that isn't it. I have
this information and I feel I should give it to you. Then

I told him the story about how Leo Crowley - who gets $50,000
a year as head of the Standard Gas and Electric Company, a
so-called Victor Emanuel company - in his capacity as Alien
Property Custodian, was inviting the man from whom he gets his
salary, namely, Victor Emanuel, to come in with his whole
business family to more or less take over this government-

held corporation. I told the President that I thought it was
terrible, and the President unhesitatingly agreed with me.
I then explained the various ramifications to him.
The President said, "Well, I will take it up with the
Attorney General," and I said, "I don't think that would be
very helpful because, frankly, he fought me tooth and nail

when I was trying to get your Executive Order changed so that
Crowley would not control the Treasury." The President said,

"No, that wasn't the battle. Biddle simply felt that APC
should be a separate agency." I said, "Well, what about Sam

Rosenman?" and the President said, "No, he has been sick. He

has something the matter with his eye. Then I said, "Well,
what about Jimmy Byrnes?" Although I didn't say so to the

President, Byrnes was also against me on that Executive Order.

The President said, "I will turn it over to both Jimmy Byrnes
and Biddle."

I said, "Well, Mr. President, I wish you would leave me

out of it and simply say a little birdie gave you this." I

told the President, "When they find out that you know about it
they will most likely say they never had any idea of doing
that and drop the whole matter."

2 I doubt very much if the President knew a thing about it

from the way he questioned me.

********

which
1233

I have been reliably informed that
on April 13th at the annual meeting of
the General Aniline and Film, Mr. Victor
Emanuel will become Chairman of the Board.
Mr. Victor Emanuel is Chairman of the
Finance Committee of the Standard Gas

and Electric, of which Mr. Leo Crowley
is President and Chairman.

Mr. Henry Lockhart of the New York
Shipbuilding Corporation, which is known
as a Victor Emanuel Company, will also

be elected a Director.
Mr. Louis Johnson, President of
General Dyestuffs Corporation, at a reputed
salary of $60,000 a year, will become a
Director. All of the stock of General
Dyestuffs is owned by Alien Property
Custodian. Mr. E. K. Halbach, the de facto
President of General Dyestuffs, is supposed
to still be receiving $80,000 a year and
actually running the company. The APC
never cleaned the Germans out of General

Dyestuffs. General Dyestuffs was controlled
by I. G. Farben Company of Germany up to
the time that APC vested the stock.
Mr. Louis Johnson is supposed to be
counsel for Standard Gas, Consolidated

Airplane and Vultee Airplane, all known
as Victor Emanuel Companies.

Another Director will be John Hertz

of Lehman Brothers.

A.

1234
April 1, 1943

Secretary discussed these matters with the
President when he saw him this morning.

Stabligation
going before senate monday
House munday u Tuesday

Want to release same

time as English if
hossible
Invasion curren cies
Future

Tax Bill
going
with
him
thright

1235
May 25, 1943

The President called HM Jr today at 2:40, and the following
is HM Jr's end of the conversation:
"Hello?

"She is getting along quite successfully. She had a very
bad night, but each day she is better, and it is what you would
call a successful operation. And she is in very good hands. They
say she will be at the hospital for three weeks, and before she

will feel like herself it will take from six months to a year,

but once it is over they say she will be a new woman, and then

they say I will have to perk up a bit.
"What I wanted to say is this and I am no - Marriner told
Bell he was over there talking to you. We have tried every way
possible to try to get together with these fellows, and I worked
at it every day that I was up in New York. They want to run the
show and take the whole responsibility.

"Do you want to know what I said to them about John Lewis?
I said that labor was entirely happy with the War Bonds Organization,

and that I didn't want to wait until something went wrong and then

try to have to do something in two weeks. That's all I said.
It is true. It is much deeper than that - it goes much deeper than
that. We are going to try once more tomorrow to try to get together.
"Well, I think we can come out that we will work together but

not the way we have in the past because we have our own organization
and, quite frankly, from what other bankers have told me in New
York this is something very deep.

"I am making every effort to get together with them. I never

tried so hard in my life. But I just wanted to tell you that we
will finance this thing the next time just the same. We can go

ahead with our War Bond organization and expand it. That's all.
"I think we can come out and say we are going to cooperate

but, after all, you have to look to one person to raise this money,
and all I am saying to you is that I will make every effort I can
to get together with them, but if I can't we will raise the money
just the same. All I want is to continue to get cooperation from
them.

-2- -

1236

"I mean you take a fellow like Lauch Currie, whom I have

kept posted. He thinks I have gone too far in trying to conciliate
them. Take a conservative fellow like Walter Stewart-- he thinks
that what I am doing is right.
"Well, all I heard was that they didn't get together this
morning on the bill. What I hear is by the grapevine. Byrnes

has been seeing them himself. We are working on a letter which
is on the principles without any details, which I may send over
to you.

"Take a look at it. The point we have been working on is
you said you didn't want this, what do you want. Then if we could
give you anything additional, we would.
"On this other thing, I can assure you I have never been so

patient.

"I told them the story about George Harrison and Owen D.

Young, and I just can't help it. It was in my office - not in
the newspapers.

"I can work it out but on a little bit different basis, and

there won't be any calling of names in the papers and there won't
be any dirty linen washed. But I am going to count on your
support.

"Now Churchill has asked me to come over to see him at

five o'clock, and I can't say anything because I don't know anything.

"I can assure you of one thing - there won't be any dirty

linen washed.

"Goodbye."

After the Secretary hung up, he said the President told him
we should try to lock ourselves in a Cabinet and not to leave any
bad taste in the mouth. He said we must try to get together.
Eccles told the President that I had compared them with John L.
Lewis, George Harrison, and etc. The President said HM Jr should
take Eccles to lunch and come out with their arms around each other.

The President said he didn't want any statements because he wants

-3

1237

to get the tax bill through first. The President said he had been
up half the night trying to act as moderator between the two

Combined Chiefs of Staff.

1238
July 6, 1943

At lunch with the President last Saturday, when

I was talking to him about Mr. Jones, I said, You

know Marvin Jones never saw your veto message on

Commodity Credit," and the President said, Oh, yes,

he did - it was read to him." When I had lunch with
Jones he told me that he never saw the veto message,
and he told me the same thing when I talked with him
on the phone this morning, so there is something wrong
somewhere, but I believe Jones when he says that he
did not see the veto message.

July 6, 1943

1239

At lunch on Saturday the President said, "I think

I know how I am going to settle the controversy between
Wallace and Jones. I am going to take about five of
these agencies, like BEW, Rockefeller's organization,
and some others, and put them all in the State Department,

and settle the argument." So I said, "Well, who is going
to handle it for you over there? You have nobody to

take care of it, " and he said, "Well, I will have to
get somebody to run it, but I will put the whole thing
over there.

1240
July 15, 1943

The Secretary talked to the President last
night about the article in the Chicago Daily News on
John L. Lewis.

July 23, 1943

1241

As soon as the President sat down at Cabinet he
said, "I want to ask the Cabinet something. Henry Morgenthau has asked me to sign a proclamation for War Bonds.

What do you think about it?" So I said, "I have just given
Miss Tully a copy of two proclamations which Woodrow

Wilson issued during World War I. May I get them?" The
President sort of smiled, and said, "No, let's hear what
the Cabinet has to say about it." Well, Hull said maybe
he ought to wait until the Fourth War Loan Drive. Then
I gave a fighting talk about the need of it, and how we had
to get 40,000,000 people each to lend us $75.00 in cash, and
I said it was an almost impossible goal and I needed the
help not only of the President but every other instrument

available to aid us in putting it across. The President
did a little more talking and then he said with a smile,

"Oh, all right I will sign it."

August 10, 1943

1242

I saw the President this morning for about three quarters
of an hour. I found him looking well and in excellent humor. We
talked about a book which he kept calling "The River", and he
asked me whether I had read it. I told him that I didn't remember the name, and then I finally discovered what he really
meant was "The Robe". The President said, "My Eleanor said that

I shouldn't read it. What do you think?" I said, "You should
read it by all means, especially if you like religious, semimystic books. He said, 'I love them - I really do." So I
said, "Well, then you ought to read that book by all means because
you would enjoy it.
Then I said, "Mr. President, I sent you a letter just before
you left in regard to this tax thing.' He didn't let me get any
further than that. He said, "Did you get my very snooty note?"
I said, "Yes, I did and I didn't think it was snooty. I thought
it was darling and I enjoyed it. I loved it." Then I tried to
start talking to him about it again, and he said, "Now let me do

the talking first.' I said, "That's your privilege. So he

went ahead and said, "In the first place, Jimmy Byrnes feels in
his new position that taxes are a part of his over-all responsi-

bility as well as other matters." I said, "You don't mean

Jimmy Byrnes - you mean Mr. Vinson. He said, "No, no. Vinson

has nothing to do with this. It is Jimmy Byrnes. "Well," I

said, "Jimmy Byrnes has shown no interest in taxes," and he said,
"Well, it's Jimmy Byrnes and not Vinson. Forget about Vinson."
Well, I knew right away what he was trying to put over.

I said, "Well, look, Mr. President, all I want you to say
is that you want me to go ahead.' The President said, "You go
ahead as you always have. Get your tax bill ready - I take It
you have a tax bill - and about the 24th I will be ready to see

you and Paul and anybody you want to bring along to go over the

tax bill with you and give you the okay. After that I would like
to see George and Doughton. I told the President that I would
like to be present when he sees George and Doughton and he
said, "That's fine."
I asked him, "Do you really want a tax bill?" and he said,
"Yes, I do." Then I told him what we are going to do this afternoon and he said, "That's fine. Then he said, You need
$12,000,000,000 in taxes, so I think you should put up to
Congress various plans which total $18,000,000,000, so that

-2-

1243

they can pick a number of schemes which will raise $12,000,000,000.
He said, 'Now we used to give Congress a plan which would raise a

definite amount and they didn't like it, so we have been giving

them suggestions with the result that the newspapers said we have
no plan. (He spoke to me about that once before at Cabinet.)

He said, "Now, of course, we have a plan but we have changed our

method of presenting it to Congress. This year let's give them
alternative plans to raise $18,000,000,000 and then let them select

what they want." I asked him if he wanted a good, stiff tax bill,
and he said, "Of course, I do.

Then I told him what Wayne Coy told me about our spending

closer to 85 or 90 billion than one hundred billion six, and he
said, "Wayne Coy has no business doing that. Even if he told you
that as a guest, he shouldn't have said it." He said, "He had no
business saying that. That isn't the job of the Director of the
Budget nor of his Assistant."
So to sum up, the President was very firm in that he wanted
me to go ahead as I have always done previously. He also was
very definite that he doesn't want to sign any memorandum to

Byrnes or Vinson. He said, "This is all one big family and you
don't do things that way in a family." He was very definite that
he wants a strong tax bill.
I said, "Now you know, Mr. President, if you don't want me
to do this and you want Vinson or Byrnes to do it, all you have
to do is say so, and I will do whatever you want me to do." He

said, "No," very quietly. He went on to say, "I want you to do this
just the way you always have." "Well," I said, "All I want from
you is for you to tell me what my orders are and I will abide by
them. If I can't carry them out I will tell you so, and if you
don't think that I am carrying them out the way you want me to
I wish you would tell me." I said, "I am sick and tired of these
family fights and I just can't carry on that way. I have lost

my young men like Foley and Cox and I am just too tired to always

fighting with somebody." I repeated two or three times that I
was sick and tired of always fighting back and forth. Now if
this doesn't help, I will just have to go back to the President
be

again.

I told the President that what I really needed was a trip

to Italy. He said, "That's all right. That's fine." I said,
"That's really the carrot that I need held before my nose."

-3-

1244

Then the President said, "What about your invasion money?"

so I- sort of brushed that one off. Then I went on to tell him
about Halifax and Sir Kingsley Wood and what we had done on

the raw materials under Lend-Lease in Reverse. He said, "I heard

it differently. I'm glad to get it from you.' So I said, "Well,

I wish when you see Churchill that you would tell him this because
both Halifax and Wood did a very gracious thing." He said that

he would.

I showed the President the Whaley-Eaton letter which said
I had gone to him again about Vinson taking over the tax picture,

and he said, "Don't pay any attention to that - don't pay any
attention to that. If

I think there is no question but what he has talked with
Vinson, and I will go along and see what happens. If I see that
he is crossing up on me again, I will have to go to the President
again. I can't stand it again and I won't stand it.

********

THE SECRETARY OF THE TREASURY
WASHINGTON

1245

July 27, 1943

My dear Mr. President:

I am badly in need of your help and guidance as

to the Treasury's present responsibility and its
relations with others in the Administration and with
Congress in matters of tax policy. The situation now

seems to be one of muddle and confusion which I think
only you can clear up.
During the last ten years you have looked to me
as Secretary of the Treasury to direct tax research and
planning and to represent you before Congress. It has
not been an easy job because, as you know, we have been

pressing constantly for increases in revenue, for the
removal of rank discriminations in the tax laws and
for other salutary reforms in which you have been keenly
interested. The fight has often been bitter and the
Treasury has been the subject of criticism and abuse by
the political and economic foes of your Administration.
I have been fortified, however, by your support and the
fact that you looked to me to carry forward so important

a part of your general program.

Now the situation has taken a different turn and
I am in doubt whether you want me to go on doing for you
what I have done in the past.

A combination of circumstances has led to the belief
in Washington and throughout the country that the Treasury

is "out of the tax picture" so far as tax policy and
legislation are concerned. First Mr. Byrnes, the Director

of War Mobilization, and more recently Mr. Vinson as
Economic Stabilization Director, are represented as

"tax policy makers." I have had no notice from you of

any such transfer of responsibility, and you will recall

that when you set up the Office of Economic Stabilization

FORDEFENSE you exempted the Treasury from the direction of the
BUY
UNITED

STATES
BONDS
AND STAMPS

- -2-

1246

head of that office. Nevertheless Mr. Vinson has undertaken negotiations on tax matters with the chairmen of
the two committees of Congress and has called members

of the Treasury staff to meet with him and representatives
of the staff of the Joint Committee on Internal Revenue
Taxation to discuss tax policy and changes in the law.
Newspaper stories reflect the conclusion that he is in
charge of coordinating Administration tax views and may
even present an Administration program to Congress.

This creates a situation which makes it very difficult for me and for members of my staff to work effectively
on tax matters. Our authority to get the views and

assistance of other departments and agencies of the
Government is made doubtful and we can't even carry on
with any confidence dealings with the Committee leaders

and their staff representatives.

The whole atmosphere is one of doubt and uncertainty

which I think will very greatly prejudice your ability to

make recommendations on taxes to which Congress will give

serious heed. My own view- and I think it agrees with yours-is that we need very substantial additional taxes, both for
revenue and to combat inflation. There is a different
view on the Hill. I should like to see your views presented
in a manner to make them most effective. I don't think
that can be done if the present confusion of authority
continues.
I urge therefore that you give me a clear and definite
answer to two questions and that you make your decision
public. The questions are:
(1) Do you continue to look to me as your Secretary
of the Treasury to coordinate the views of others in the
Administration and to present a tax program to you for

your approval?

(2) Do you wish me to be in charge of presenting such
a program to the Congress, as I have been doing over the
last ten years?

-3-

1247

I am taking the liberty of enclosing a form of
directive which would indicate your affirmative answer
to both these questions.

Sincerely,

Secretary of the Treasury

The President,
The White House.

(co hy)

THE WHITE HOUSE

1248

WASHINGTON

To:

The Secretary of the Treasury
The Director of War Mobilization
The Director of Economic Stabilization

It is my desire that the Secretary of the Treasury
as the chief fiscal officer of the Government shall
continue to be in charge of the formulation of tax
policies and of a tax program to be submitted to me
and shall represent me in presenting the Administration's program to Congress.

The Secretary of the Treasury, in the formulation
of the tax program, will be expected to consult with
and to obtain the views of the Director of War Mobilization, the Director of Economic Stabilization and
representatives of other interested departments and
agencies.

1249

THE WHITE HOUSE
WASHINGTON

1249

July 30, 1943.
AW HEN:

The weather is hot and I

am goin' off fishing.
I decline to be serious
even when you see " gremlins

which ain't there !

fill

F. D. R.

1250

TO:

Mrs. Klota:

1250

I have had the attached pamphlet
prepared which contains certain documents

which are not in the President's pamphlet.

The Secretary will then have two pamphlets
which he can take to the meeting with him,
one being the same as the President's
pamphlet, and the other being the attached.

gio
Cocher
MR. J. E. DUBOIS

1251

CONTENTS
1. Letter from Secretary Morgenthau to James Byrnes
dated August 24, 1943.

2. Memorandum from the President to Secretary
Morgenthau dated July 30, 1943.

3. Letter to the President from Secretary Morgenthau
dated July 27, 1943.

4. Memorandum to Secretary Morgenthau from Mr. Gaston
dated October 3, 1942.
5. Memorandum to Secretary Morgenthau from Mr.
DuBois dated August 23, 1943.

1252

1253
August 24, 1943

Dear Jimmy:

I wish to acknowledge receipt of your

letter dated August 18, in reply to my letter

of August 17.

I welcome your suggestion that you, Judge
Vinson, and I meet with the President to discuss

certain issues raised in our letters. I'm sure

that we are both anxious to have the scope of

our respective responsibilities clarified as soon

as possible.

Since the Treasury is about to initiate the
Third War Loan Campaign and plans to present
within a few weeks a tax program to the Congress,
the sooner a decision can be reached on these

questions
be served. the better the national interest will
Sincerely yours,

(Signed) Henry Morgenthau, Jr.

Honorable James F. Byrnes,
Director

Office of War Mobilization
Washington, D. C.

1254

1255
THE WHITE HOUSE
WASHINGTON

July 30, 1943.

AW HEN:

The weather is hot and I am goin'

off fishing.
I decline to be serious even when you

see "gremlins" which ain't there!
F. D. R.

1256

1257
July 27, 1943

My dear Mr. President:

I am badly in need of your help and guidance as

to the Treasury's present responsibility and its
relation with others in the Administration and with
Congress in matters of tax policy. The situation now

seems to be one of muddle and confusion which I think
only you can clear up.

During the last ten years you have looked to me
as Secretary of the Treasury to direct tax research and
planning and to represent you before Congress. It has

not been an easy job because, as you know, we have been

pressing constantly for increase in revenue, for the
removal of rank discriminations in the tax laws and

for other salutary reforms in which you have been keenly

interested. The fight has often been bitter and the

Treasury has been the subject of criticism and abuse by
the political and economic foes of your Administration.
I have been fortified, however, by your support and the
fact that you looked to me to carry forward so important
a part of your general program.

Now the situation has taken a different turn and
I am in doubt whether you want me to go on doing for you
what I have done in the past.
A combination of circumstances has led to the belief
in Washington and throughout the country that the Treasury

is "out of the tax picture" so far as tax policy and
legislation are concerned. First Mr. Byrnes, the Director

of War Mobilization, and more recently Mr. Vinson as
Economic Stabilization Director, are represented as
"tax policy makers." I have had no notice from you of

any such transfer of responsibility, and you will recall

that when you set up the Office of Economic Stabilization
you exempted the Treasury from the direction of the

-

-2-

1258

head of that office. Nevertheless Mr. Vinson has undertaken negotiations on tax matters with the chairmen of
the two committees of Congress and has called members

of the Treasury staff to meet with him and representatives
of the staff of the Joint Committee on Internal Revenue
Taxation to discuss tax policy and changes in the law.
Newspaper stories reflect the conclusion that he is in
charge of coordinating Administration tax views and may
even present an Administration program to Congress.

This creates a situation which makes it very difficult for me and for members of my staff to work effectively
on tax matters. Our authority to get the views and

assistance of other departments and agencies of the
Government is made doubtful and we can't even carry on
with any confidence dealings with the Committee leaders

and their staff representatives.

The whole atmosphere is one of doubt and uncertainty

which I think will very greatly prejudice your ability to

make recommendations on taxes to which Congress will give

serious heed. My own view--and I think it agrees with yours-is that we need very substantial additional taxes, both for
revenue and to combat inflation. There is a different
view on the Hill. I should like to see your views presented
in a manner to make them most effective. I don't think
that can be done if the present confusion of authority
continues.

I urge therefore that you give me a clear and definite

answer to two questions and that you make your decision

public. The questions are:

(1) Do you continue to look to me as your Secretary
of the Treasury to coordinate the views of others in the
Administration and to present a tax program to you for

your approval?

(2) Do you wish me to be in charge of presenting such

a program to the Congress, as I have been doing over the
last ten years?

1259

-3I am taking the liberty of enclosing a form of
directive which would indicate your affirmative answer
to both these questions.

Sincerely,

Secretary of the Treasury

The President
The White House

1260

TO:

The Secretary of the Treasury
The Director of War Mobilization
The Director of Economic Stabilization

It is my desire that the Secretary of the Treasury
as the chief fiscal officer of the Government shall
continue to be in charge of the formulation of tax
policies and of a tax program to be submitted to me
and shall represent me in presenting the Administration's program to Congress.

The Secretary of the Treasury, in the formulation

of the tax program, will be expected to consult with
and to obtain the views of the Director of War Mobilization, the Director of Economic Stabilization and
representatives of other interested departments and
agencies.

1261

1262
October 3, 1942
Secretary Morgenthau
Mr. Gaston

Miss Roberta Barrows, at the White House,

attempted to get me on the phone at 6:00 'clock last
night when I was on my way home. I called her

back and she told me that there was to be a meeting
with the President at the White House at 8:45, which
I was asked to attend. She asked me if I knew what

was to be the subject of the meeting. I told her I

did not. She then told me the names of some of
those who were to be present, including Jesse Jones,

Francis Biddle, Leon Henderson, Harold Smith, Sam

Bledsoe, of Agriculture, and Will Davis. A little

later Randolph Paul got me on the phone and said
that Sam Rosenman had called him over to the White
House during the afternoon and that he was about to
go back again. Sam had shown him a penciled draft of
a so-called directive, presumably to be addressed to

the director of the new Economic Stabilization Authority,
instructing him that salaries were to be limited to

$25,000 a year, after taxes, and Randolph was told
that this was to be enforced through the War Contracting
Agencies and also through the Bureau of Internal Revenue,
which was to disallow expenses for salaries above this
amount. Rosenman had also told Randolph, casually and

incidentally, that the Executive Order creating the
Economic Stabilization Authority had been redrafted
so as to leave out the paragraph specifically exempting
the Secretary of the Treasury from obedience to

directives by the head of the Authority, but that in-

stead reference to Treasury powers had been eliminated
from the paragraph outlining the functions of the new
Authority. Sam explained that the reason for this was
that there had been objection by the other departments
and agencies to this specific exemption of the Treasury
Department and that it stuck out like a sore thumb,

but that the new language would accomplish the same

effect. Randolph was permitted to glance at the paragraph outlining the Authority's functions and it

-2-

1263

seemed to confirm what Rosenman had said. Not knowing

definitely what was to be the subject of the evening's

meeting and in view of these conversations between
Rosenman and Paul, it seemed to me that it might be

better for Randolph to represent the Treasury at the

meeting. I put in a call for you over the Treasury

switchboard and found that you were then t alking to
Stephens, who had called me a few minutes before to
ask me for advice as to whether he should call you
and tell you about the meeting and that I was planning
to

go. Randolph called me back after his second trip

to the White House to report that Rosenman had accepted

his redraft of their proposed directive. While I was

talking with him the operator told me that you were on
the line in response to my call and I asked Randolph

to stay on. I outlined the situation to you and

Randolph said he thought I should go, since I would

be in a better position to ask for delay on both the

matters he had discussed with Rosenman. You agreed

with this and said you would rely on me to protect the
Treasury's interests.
I reached the Treasury about 8:15 and reviewed the
situation with Randolph before going to the White House.
The President saw us in the study at about 9:00 p.m. Those
present were: Senators Barkley and Prentiss Brown,
Congressman McCormack, Jesse Jones, Francis Biddle, Leon

Henderson, Harold Smith, Will Davis, of the War Labor
Board, Sam Bledsoe, of Agriculture, Oscar Cox and Isadore
Lubin. Sam Rosenman stuck his head in the door a couple
of times, once to call Oscar Cox out for a conference,
but was not present through the meeting. Harry Hopkins
came in as the meeting was breaking up.

Almost the entire meeting was devoted to a dis-

cussion of the Stabilization Bill, which had gotten

through conference and been passed late in the after-

noon. The President had the official No. 1 copy of
the engrossed bill before him and signed it near the
end of the conference. I noticed that Leon Henderson,
who sat at my right, also had a copy of the engrossed

bill. Francis Biddle had only the latest Senate print,

1264

-3which was the same as I had with me. The President
congratulated the leaders, especially Barkley and Brown,
as having done a magnificent job and asked them a
number of questions as to their understanding of the

bill. He showed particular interest in the compromise
language, which, after providing that parity shall be
the guide on agricultural prices, permits the "weighting"

of the cost of farm labor as a final factor. The con-

sensus appeared to be that this language did not mater-

ially disturb the parity formula. The President, in
this connection, took considerable time in talking

about his conversations with people in various parts

of the country during his trip about agricultural labor.

The substance was that the problem of farm labor scarcity
was being solved by the use of school children and by
townspeople who suspended business in order to get out

and help with the harvest. A dairyman from Maine told
him that he expected to take care of his hand-milking
problem by getting boys attending school to help him,
and the President told how various towns in California
had shut up shop for a day or two so that the whole
population could go out and work the fields. He thought

this was a matter that Lubin couldn't get at in his
statistics.

Something was said about the policies which the

different agencies were to follow in giving interpretation to the Act and the President said flatly that the

agencies would not determine the policies but that they
would get their orders from "Mr. X". Turning to me,
he said that would not apply to the Treasury Department
and explained in much the same terms as Rosenman had

explained to Randolph Paul that he had thought it best
to eliminate the specific exemption as to the Treasury
and instead to eliminate from the powers of the Authority

all reference to Treasury functions. "The Treasury will
not be affected," he said. After the meeting Davis said
to me that the President's statement in that respect

was not quite accurate because of the provision in the

bill regulating salaries. I told him I knew of that

provision.

-4-

1265

There was reference to the so-called Norris Amend-

ment to the bill, which would have given the President
complete power over public utility rates. The substitute
provision permits "timely intervention" by agencies of
the Federal Government in any application for change of
rates by any regulating authority and there is a 30-day
waiting period before the hearing. Barkley said that
Norris accepted this substitute provision and he believed
it would accomplish the necessary results, with which
the President seemed to agree, as he pointed out that
it would give an opportunity for delay and for complete
publicity.
The President questioned the various people around

the room as to their opinion of the effectiveness of the
bill. Everybody agreed that it gave very broad powers
to the President, but doubt was expressed that it would
completely prevent increases in the cost of living.

Oscar Cox thought it might hold increases within a range

of 10%, to which Sam Bledsoe agreed, and the President

called them pessimistic. When the President said that
the director of the Authority would have complete con-

trol over policy, Barkley interjected that he had dis-

-

cussed with Leon Henderson the policies to be applied
and had given assurances to the Senate based on Leon's

statements. He thought it was necessary to interpret

the bill in the light of Congressional intent and that

this statement of his ought to be taken into consideration.
The President said he would issue a statement on

the signing of the bill, and Barkley said he hoped he
would be able to include some praise of the manner in
which Congress had acted. The President agreed he would
do this and in that connection mimicked the almost tearful plea made to him by Sam Rayburn when the President's
message asking for the bill was about to go up. Rayburn
had asked the same thing as Barkley was now asking.

After the meeting broke up, I spoke to the President and said that I hoped his statement would not
give the impression that this bill was the complete

answer to controlling the cost of living. I said we

1266

-5thought that there must be a further tax increase and

some fiscal legislation to control spending. The
President replied that he intended to say in his statement that the authority granted under this bill must
be supplemented by other legislation in the tax and

fiscal field.

1267

1268
August 23, 1943
MEMORANDUM FOR THE SECRETARY

1. When the President issued an executive order
in April, 1942, giving the Board of Economic Warfare
broad powers to handle the Government's stockpile program

of essential and critical materials acquired abroad, in-

cluding the power to represent the United States Government
in dealing with the economic warfare agencies of the United

Nations, a bitter dispute arose as to the effect of this

order upon the functions of the Secretary of State in the
formulation of foreign policy. The President

ofand
the
State
and
issued
public
statementclarifying
dispute
in
favor
Department
settled
a this
interpreting
the above
mentioned

executive order. This statement provided in part that:

the making of the

will continue to the primary

responsibility its 'In officers and decisions, recognize Board and

position, under the President,
of the Secretary of State in the formulation and
conduct
of our
foreign policy and our relations
with
foreign
nations.
and further provided that:
"The Board will continue to recognize that

it is the function of the Department of State to
conduct or authorize the conduct of all negotiations

with foreign governments in Washington and abroad."

2. At the time that the proposed Executive Order for
Establishing an Office of Economic Stabilization was under
discussion, Treasury took the position that such Order should
not interfere with the primary responsibility and position
of the Treasury in the formulation and conduct of executive
policy with respect to taxation and public finance. A draft

of an executive order was submitted to Judge Rosenman which

contained a provision protecting the Treasury's responsibility with respect to taxation and public finance, comparable

1269

-2 to the provision contained in the above mentioned statement

by the President protecting the responsibility of the State
Department in the field of foreign relations. The provision

which we suggested read as follows:

"With respect to taxation and public finance,

the Board shall make such recommendations as it
deems desirable to the Secretary of the Treasury,

recognizing at all times in the discharge of the
functions of the Board, the primary responsibility
and position, under the President, of the Secretary
of the Treasury in the formulation and conduct of
executive policy with respect to taxation and public
finance.
This paragraph was eliminated from the executive order

finally issued. You will recall that at the time Judge

Rosenman explained that although the executive order had

been redrafted so as to leave out this paragraph, at the

same time reference to Treasury powers had been eliminated

from the paragraph outlining the functions of the new
Stabilization Director. Judge Rosenman explained that the
reason for this was that there had been objection by the other
departments and agencies to this specific exemption of the
Treasury Department and that it stuck out like a sore thumb,
but that the new language would accomplish the same effect.

You also will recall that at the conference in the
President's office on the day the stabilization order was

issued, the President explained in much the same terms as
Judge Rosenman had that he had thought it best to eliminate
the specific exemption as to the Treasury and instead to

eliminate from the powers of the Stabilization Director all
reference to Treasury functions. He stated that the Treasury

would not be affected.

3. The executive order providing for the establishment
of the Office of War Mobilization issued on May 27, 1943
gave the Office broad powers, acting in consultation with
the War Mobilization Committee, and subject to the direction

1270

-3and control of the President, to develop unified programs
and to establish policies for the maximum use of the national

resources for military and civilian needs, the effective use
of the national manpower not in the armed forces, for the
maintenance and stabilization of civilian economy, and for
the adjustment of such economy to war needs and conditions.

In so acting, the Office is given power to issue such directives on policy and operations to the Federal agencies as

may be necessary to carry out the program developed, the
policies established, and the decisions made under the order.

Although there was no provision in this original order
specifically exempting the functions of any particular agency
of the Government, it should be noted that when this order

was supplemented on July 15, 1943 so as to give the Office
of War Mobilization power to coordinate foreign economic

affairs, a specific provision was placed in this supplementary
order fully protecting the interests of the State Department

in the field of foreign relations. Thus, Section 4 of this

supplementary order specifically provided that:

"4. The functions of the Office of War Mobilization shall include the authority to arrange for the
unification and coordination of the activities of the
Federal Government relating to foreign supply, foreign
procurement and other foreign economic affairs in conformity with the foreign policy of the United States
as defined by the Secretary of State. In providing
for such unification the Office of War Mobilization
may utilize the facilities of other departments and
agencies, including the machinery for the coordination
of foreign economic affairs established in the Department of State."

August 11, 1943

1271

I saw the President around five o'clock this evening.

He said, Jimmy Byrnes talked to me about what you and I
were talking about yesterday morning in regard to Vinson.
Jimmy Byrnes said that Bob Doughton said that he needs
Vinson to help him, and that Vinson is the only man who

can help him with the bill." Then the President sort of
put it up to me as to whether that would be all right
with me. So I said, "That would be fine. Paul and I
see Vinson at least two or three times a week, and if
he can give Bob Doughton any help, as far as I am concerned, that would be fine.

The thing isn't quite clear in my mind other than
apparently after I saw the President, the President must
have discussed my conversation with Jimmy Byrnes, and
Byrnes must have said that Doughton had asked for Vinson's

help
and
that
he should have Vinson's help. Well, I will
do the
best
I can.

I told the President about the meeting we had yesterday and how well it went. He said, "Weren't there any

fights?" and I said, "No fights. Everything was swell."

Then the President told me that he had seen the
Netherlands Finance Minister, and he wanted a loan to buy
materials for after the war like locomotives from Sweden.

So I said, "Well, Mr. President, we have no authority
to make a loan like that." The President said, "I know

you haven't but Jesse Jones has." I said, "I think it

would be a great mistake for Jones to make loans such as

that without consulting Congress. I think it would be

wrong to give them a loan to buy locomotives in Sweden
now to use after the war is over because when the war

is over our own men will be laid off and we could build

the locomotives and sell them to them then. said, "I
don't think our people would like it if they knew that we

were loaning money to the Netherlands to buy locomotives

in Sweden now for use after the war." He said, "That's
right." Then I said, "You give me my instructions as to
what you want me to do and I will do it," but he said,
"No, all I want you to do is to see them so that the

Finance Minister can go home." However, the President
left me with the impression that he did make the Finance
Minister some kind of a half-way promise.

1272
August 11, 1943
4:45 p.m.

(Dictated in presence of Mr. D.W. Bell)
The President of the United States just called me, and

he said, "I want you to issue that license to the bank in
Michigan." He said, "There are only two banks out there;
one is controlled by General Motors and the other one by
somebody else." He said, "You ought to let that bank

have this license." Then he said, "Don't you worry - this
isn't another case like the Giannini's with a whole lot
of branches.

So I said, "Well, Mr. President, I think this is a

mistake," so he said, "Well, we have to do something

politically for Michigan." I said, "Well, they are raising

a fuss in Congress on this thing. He said, "I know they
are regarding the new legislation, but this is something
we ought to do." Then I said, "Well, I know this is
something Prentiss Brown has wanted for a long time. I

haven't got all the facts right now. I'm not up-to-date
on it, but it is wrong."

The President said, "Well, any way will you talk to

Jimmy about it?" I said, "Sure, I will, but let me get
a brief together, and I am sure that Jimmy Byrnes will
see differently about it after he has the facts. The
President said, "Well, you see Jimmy." I said, "Sure,
but let me get the facts first and I will send them over
to him in the morning."

1273
August 24, 1943

Governor Lehman had lunch with me today. He read
my letter to Jimmy Byrnes and Byrnes' answer to me.

He felt there was nothing in my letter which anybody
could make objection to as far as its being courteous
is concerned. However, he felt that I was not on very
strong grounds if I was thinking of resigning because
I objected to Byrnes' speech on enforced savings.
Furthermore, he said he would regret my even considering such a thing. However, if the President said to
me that I had to take my orders from Jimmy Byrnes

then there would be nothing left for me to do but to
resign. He was sure, however, that the President

wouldn't make any such statement.

1274
August 26, 1943

Vice President Wallace lunched with me today. As a result of a number of questions, Wallace said the reason he
acted the way he did after the President had slapped him down
was that he felt that the powers behind the Republican Party
were so much worse - worse than the worst in the Democratic

Party - that he did not want to do anything to hurt the
Democratic Party. He unquestionably said that he did not
submit his statement to the White House before he gave it
out, which is contrary to what the columnists said.

Wallace said that Hull tells people he is confident the
Republicans will win in 1944, and that Hull does not want
anybody to do any post-war planning. He believes in following the people and not leading them.

He said that Hull, through Krock, for six weeks has been

planning to get rid of Welles. He said that Paul Porter,

who has worked for Byrnes and Marvin Jones, says that these

men have absolutely no executive ability. Wallace is conscious
of the fact, as he put it, "That the President has surrounded
himself with ex-Congressmen who have lost their influence
on the Hilland simply know the tricks and nothing more."

1275

any 29,1943

after lunch had talk with Pres. for
about ten minutes. I felt that the knew
what I wanted to say, from a remark
to

he dropped. "He said" you want talk

about Jimmy Brynes and compularory

parings" Isaid "that is only had of it
Bymes says he can issue directions

to me. the Pres. said very emphatically,

that is sidu culous. Bymes call only
issue directives there the Pres." Isaid,

Well I dont think he should issue
any dine times to the Cabinet and
The Pre agreed (9felt/ althrugh he

made no mt comment. so again

I said, HE Bymes should issue no directions

I then she 1 showed my suggested
better from Pres. to Bymes and me.

and the Pres. in a very nice way

said y in know Henry, I hate to

but it in writing, but I will get

you and Buyme together and fix it
st in there minutes." Pres. said, "I 1276

will see that Bynes makes no mac

statements an compulary savings we

are for the vo hunter not flan until
find it will getresults Let's see to how
the next loan goes, time enough
way about some then method when the

volumter fails."

I said " when you were in the insurance snow

business and had to sell, you
how difficult it is if someone the thouble under minis

you all the time." I said, he in

is Byrnes believes what he reads the
hapers. namely that is acting-Pres."
(That, remark registered to my advantage.)

then explained about my plan to

emavidate social insurance with
Be
tax hill Prior 9 have hun groking
for and something see me with I like george your x idea: Houghter before sure

Sept 14 th.

Prs. was may nice then whole interview1277

the told me story and lease statement
to congress had han "K'd by Hany
Hot pins without his sums it. Several
had mistakes Particularly Last which
mentioned forgiveness of debts. I said

I was surfused by that myself was

sure that he would have discussed it

with me first said he will have
to change it when formal c oby goes
to a compers. I then remin and him
how at Press conference ce he had
been misundersto ad m compulsory
savings and then two days later he

conected it I # said that was all

I was asking Bymes to do but

he had refused
I got my story men in a very statements quiet

but forceful way I told Pres how
likeWhen
Bymes
undermined
my
muale.
it was all over Pies. asked me
to go down in train with him tonight. Which

also was a friendly gesture on hishant.
. althought knowing the man the way 9 ,

do I got as much out of him asI might

expect after all he might derfectly
well have said I must take rds from

Bymes Iamawfully Had I saw

him first

I now can go ahara ahead until
the next sumpus
1278

1278-A
6

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.

************

1279
September 16, 1943

I saw the President and told him about what happened

last night on the Hill on the postponement of the tax bill.

He said that he thought the thing went very well yesterday.

I reminded the President that I wanted to go to visit
North Africa and Sicily, and possibly Italy, leaving here
on October 10th. He was entirely agreeable to my going. I
told him I wanted to see him before I went and have him tell
me what was going on, and he said he would. Evidently there
is going to be some kind of a Russian Mission in the Middle
East because he said that he particularly wanted me to see

the Russians. He never heard of General Hilldring. I told the
President that I wanted General Hilldring to go along.
I then returned the Byrnes' letter to him, plus the
clipping from the Wall Street Journal, which evidently was in
the late edition. I said to the President, "People like Byrnes
and Vinson are going to get Congress in such a frame of mind

that I can't work with them, which you know isn't true, and
I don't know how valuable I am to you, but if they keep this
thing up you and nobody but you can stop them." He didn't
answer me. I then said, "I was surprised to see how angry
Byrnes was the other day." He said, "Oh, Byrnes was all

right. That is the first time I have ever had to talk to him

that way." The President meant that he had to pound the desk.
The President's attitude towards me is always very

friendly, and I gather he thinks the whole thing is rather

funny. So I don't see any sense of my becoming tragic about

it, but I will just have to continue to look after my own
interests.

He told me a long story in greatest detail about how
Princess Martha's nurse had heart failure and was sent to
Ward's Island by the doctor, and how Princess Martha had to
look after her own children because she was minus a nurse.
I gathered all this was relayed to him over the telephone
yesterday.

1280
-

I then asked him how Hopkins was and whether I could

see him. He said, "Yes, but only stay a few minutes.

When I went in to see Hopkins, he said, "It certainly
is wonderful how your Bond Drive is going. All of the smart
boys around town said that you couldn't raise the money and
that it would be a failure. He said that it made him very
happy to see how good it was going. He said he was going
over to see the War Department Show this afternoon himself.
Then Hopkins started asking me about taxes, and I

gathered the President told him about it. He kept me there
for over a half hour talking about it. Rosenman dropped in
and Hopkins got more and more excited about the social
security part. He wanted to know how we could organize the

people. I told him that almost everybody was against it,
and that Lauch Currie was the only one really for it and

maybe Bernie Baruch, but I wasn't sure about that. He said,
"Well, you can't count on Bernie." Then he changed it to
say that you had to keep after Baruch. Hopkins certainly
gave me the impression this was something he was in favor of.
He asked me whether there was anything I could send him on

it, and so I sent over to him this morning my own copy on
the tax suggestions.

THE WHITE HOUSE

1281

WASHINGTON

September 14, 1943 .
MEMORANDUM FOR

THE SECRETARY OF THE TREASURY:

I really think this ought to
be followed up. Can't you get the
Secret Service to try to trace the
source of information which Mike
Flynn used?
F.D.R.

OFFICE OF WAR MOBILIZATION
WASHINGTON D.C.

September 13, 1943

1282

James F. Byrnes
Director

Dear Mr. President:
Last Thursday afternoon Grace telephoned me substantially as

follows: "The President asked me to say that on the ticker there appeared
a story indicating there was a leak by someone as to what occurred at the
conference this morning and that the character of the story indicated that
it had not come from Mr. Morgenthau."

I was greatly disturbed. If the story did not come from the

Treasury, then it could have come only from me or from Vinson or Rosenman

or some person with whom we talked. A little later I told you that I had

been busy all afternoon and had not seen the ticker or any afternoon news-

paper, but that certainly the story did not come from me or my office. You
then wondered whether it could have come from Fred's office and so did I. I

determined to investigate.

Vinson assured me he had not discussed the conference even with

the assistants in his office. No one in my office had discussed the matter
with any person or was in position to do so. No afternoon newspaper carried

the story. The only ticker service I see,-the P.-carried no story. The

Friday
carried no story except the statement that a conferencemorning
had beennewspapers
held.
However, I learned Friday that on Thursday afternoon the A.P.
ticker service had carried a story about the conference. I have never been

able to find it but I learned definitely that the story on the ticker was

written by Mike Flynn of the Wall Street Journal. Vinson advised me he had
not spoken to Flynn about the conference. I have not talked to Flynn in
six months. No one in my office had talked to Flynn. Flynn did not publish
in Friday's issue of the wall Street Journal any story of a controversy but
on Saturday there was published in his newspaper an article written by his,

the man who placed the story on the ticker. That article is attached. If

Flynn was guessing when he wrote the article, he is a good guesser. The
article shows that if he talked with anyone who attended the conference, it

was not Rosenman, Vinson or Byrnes.

Sincerely yours,

/JAMES F. BYRNES Bymen

POR VICTORY The President
BUY
WAR

White House

Jane

OFFICE OF ECONOMIC STABILIZATION

1283

WASHINGTON, D.C.

FRED M. VINSON
DIRECTOR

September 13, 1943.

Dear Mr. Presidents

I dislike to bother you.
However, I feel that I must state to you that I am not
in any way responsible for the story on the ticker following

your tax conference on Thursday, September 9th; nor responsible
in any way for the subsequent story appearing in the Wall
Street Journal on Saturday, September 11th.

A reading of the Wall Street Journal story should make it
quite clear that it did not emanate from me. I have had no
communication with any newspaper man, including Mr. Flynn of

the hall Street Journal who, I understand, is the author of
the stories, relative to the tax conference in your office.
Further, I wish to emphasize that I purposely refrained from
discussing with anyone, even my own staff, any part of the
tax conference referred to in these stories.
Respectfully,

Director

The President
The White House
BUY
WAR
STAMPS

Superint

Tax Program Delayed

first all

tice it

As Byrnes and Vinson
Oppose Morgenthau

send from

with tz
peaceti
key me
scheme

Svo

.

THE

WASHINGTON-The Treasury's 1943 tax
President Roosevelt.

decisive

Mariupol
Azov.

pture of
lino in

Ukraine
theast of
75-

ed-

to

seeking

of the

union II

strict th
are mei

In fact, the Chief Executive has not even
seen the proposals, although the House Ways
and Means Committee is scheduled to start
its tax work only nine days hence.
The main obstacle to White House clearance, it has been discovered, is the currentt
inter-agency wrangle over tax jurisdiction
The new taxes were brought to the White
House conference Thursday by Secretary
Morgenthau who-to his surprise found no
opportunity to lay them before the President

nalists.

secretar
hearted)

implicat
The

val be
ently

rietors

or the
But 1

ivalry I
The T.
that the

and the other conferees.

The conference had previously been scheddesiry

- the specific purpose of talking de.

nidway

tails of the new revenue-raising and Inflation.
checking plans worked out by Treasury ex-

4 Volpol.

fall had
Germany

for the
d Italy's
the Axis

"son of

ire. He
rould be
speed

IT em.

However, the discussions at the meeting
turned immediately to the jurisdictional dis.

Italian
heel.

hursday

ntrol of

it some
to conhe Gerbattlein

ends

firma.

hat .
oving
bania

1

The very nature of the new proposals, it
is understood, is such that the Treasury re.
fuses to bring them into the light for exami.
nation by anyone else before they have been
first studied and passed upon by the Prealdent. This has aggravated differences among
officials over jurisdiction.
It is strongly indicated that the new proposals are unorthodox, as taxes usually go, in
that they are supposed to block Inflation as
well as raise revenue. The proposals are knit
together so closely that the Treasury sponsors
feel they have to be adopted as a whole in
order to be effective. Unleas Mr. Roosevelt
backs the proposals 100% Treasury men fear.
the outlook for their adoption by Congress is

not too good.

Vinson

Instead he listened while an effort was
chico to get
THE responsability for formulation of a tax
promom It had been understood previously
would be the Dingle except
the O.E.S. executive order placing all

Social

in financi
perform

of the S
ket in the
among b
With

other agencies and department under the
LAUBO or Judica Vita or The order ICUT

debt. dis
capital; ,

Administration understanding that that was

bility of

30em Day so. been an inner

developm

financing

mity of

As of this moment, it appears, the Treas
ary head retains his status as top man on
taxes and is outside the jurisdiction of O.E.S.

domestic

refuse to
CIVI

and boy.
manufac

shoes fo
AUT

Ing her
ren unde
reduced

locked in the Secretary's briefcase.
Proposals Believed Unorthodox

y

marke
incurred

proval on the proposals and also the concurrence of hbs associate Mr. By.nes and Mr.

rely so 1

lead the

ply owin
lies of le

ties with regard to taxation in light of the

to

first line

between

War Mobilization Director Byrnea and Eco-

executive order establishing the O.W.M. and
O.E.S. as bosses of the home front. This dis.
cussion - which became heated-lastetd
good hour and a half and the conference then

b

st.

they can

White House amemblage. By doing so, he
expected to get the Roosevelt stamp of ap.

the case.

pute.

nomic Stabilization Director Vinson launched
a discussion over the Treasury's responsibili-

in

Since

receipts,

Another Conference Soon

It is

perts.

adjourned with the new tax proposals still

min

of labo
strikes.
responsi

a

" Rus.

who sha

ed

Secretary Morgenthau was fully prepared
to spread the entire program, which had been
completed only a short while ago, before the

An

the Prev

not in
during

quently

p. m. to
along hi
ployed M

FUR
discount
Now

financed

practice
count

ms

This/
houses no

even ma
dated Go

and O.W.M.

High authorities yesterday insisted that

the question of forced savings was not taken
up at the Thursday meeting. However, the
fundamental issue between Secretary Mor.
genthau and the other officials named has
been over forced savings with the Treasury

firmly opposing any recommendation to

Congress.

President Roosevelt must call another tax
conference very soon to examine the Treas
ury's proposal because of the nearness of the
opening date for tax considerations on Capitol

Hill.

If he supports the recommendations, which

are designed to raise $12 billion on an annual
basis, they may yet be presented to Congress
on schedule in about two weeks. If he should

disagree with any of the main features it
may become necessary to ask the Ways and
Means Committee to postpone the date for
the Administration's appearance in order to
give the Treasury the time necessary to make

revisions.

THE

Hitler's f
which Ch
to pursue

ing Dunk
eliminatic
Before

clamor f
should be

has only
the Atlan
the same
necessary
now beco

only hav
invading

plies to I
terial, m

this const
Nothin

the amas
have gais

making .
Germany

the Ukral

I

program (there is one) is not yet sold to

reported

lenoa and

a regre
press t

From THE WALL STREET JOURNAL Washington Burees

south of

lgiers an-

were de

years o

cludes Revenue Plans

peared to
ored divi-

with or

sibility for Home Front In-

the greatsnean the
were unsea and

o land by

wirepul
ing afte

OWM, OES Say Their Respon-

Germans

the battle

1284

service

ing the

1285
September 20, 1943

I telephoned Grace Tully at Cape May today at 2:15. She said
she had spoken to the President before she went away on her
holiday, and had tried to get me but couldn't reach me. The
President, I gathered, talked to Jimmy Byrnes and asked him if
he knew how the story got out in the Wall Street Journal, and
Jimmy Byrnes seemed very much surprised and pleaded ignorance.

She also said that the President thought that something should
be done and done publicly. Tully advised me to remind the
President in view of the fact that Congress was meeting, and

that the sooner it was done the better, and he ought to do it at

his press conference tomorrow morning.

After talking to Grace, I put in a call to the President,

and the following is my side of the conversation:
"Hello, I am back in Washington.

"Oh, yes, and it really was a thrilling experience to
broadcast from the portico of Monticello, and it was the first
time in years that it was lit up at night. They told me I was

good.

"Oh, yes, it was one of the most powerful I have ever drank,
and I had Mrs. Watson and her niece cry at the broadcast so I

guess it was all right.

"The reason I am calling is that I sent a message to you
through Grace about that story in the Wall Street Journal, and
Grace said that in talking with you you said you would say something publicly as to whom was to be in charge. Grace said I had
better call you to remind you because she was not there, and she
thought perhaps you would do it tomorrow morning at your press

conference. Can you tie a string around your finger? It would

be most helpful.

"That will be fine.
"Byrnes, Vinson, Gaston, Paul and I met this morning, and we
had a very peaceful meeting, and we have an appointment with

you tomorrow. I think they put it down for either 11:00 or
11:30. After all, you will decide what you want, and then

we thought Wednesday morning if George and Doughton came down

we could tell them. And then Thursday I am planning to make
another speech in St. Louis.

-2-

1286

"It is coming very well. In 2-1/2 days we sold over

$2,000,000,000.

"I think until October 1st. We are very choosey. We are

not allowing the banks to subscribe this time. It is all from
the people. A bank cannot take a subscription for itself.

That's the difference.

"I look forward to seeing you.
"Thank you.'

The President did not know what I was talking about. He

didn't remember a thing. Then he said, "Oh, that thing. Oh,

yes, I asked Jimmy Byrnes about that, and Byrnes said it was
impossible for him to have done it because he was in a conference all afternoon." Then I said, "Will you say something about
it at your press conference?" The President turned to Sam

Rosenman who was apparently with him, and said, "Please remind me

to

say at my press conference that the Treasury is the manager of the

tax bill.

The President was very friendly and very talkative and said
that he (the President) had subscribed $5,000 in bonds through
his New York Bank, and he wanted to be given credit for it

amongst the White House employees. Then he said that Grace checked
up and found that 90% of the White House employees had subscribed, and
he said, "Even Steve Early subscribed."

The President said, "Did Pa Watson give you a Mint Julep?" and

that was when I said, "Yes, a good stiff one. As a matter of
fact, it was not a Mint Julep. It was what Pa Watson calls a

Toddy, which is whiskey, water, sugar and ice.

1287
October 3, 1943
Present:

the President:

Mr. Gaston

HM Jr: This morning I wrote this letter to
"My dear Mr. President:

"I feel in fairness to you and myself, I ought

to let you know how I feel about presenting the

Administration tax program on Monday.

"In suggesting a form of compulsory saving
in the face of the most amazing response to the
Third War Loan, on the part of the American people,

I feel that I am selling them down the river.

Whether they will feel that too, time will tell.
"When you placed me in the Treasury in
November, 1933, the confidence of the American
people in Government securities had reached an

all-time low. Since then, by hard work, I have
built up the confidence in the Government security
market to an all-time high. In fact, since we

have been at war, money has been the most stable

commodity we have, with the result that so far I
have been able to finance the most costly war in
history at the lowest rate of interest ever known.
"I have grave doubts as to what will happen
during. the next few months, as a result of my not

keeping faith with the millions of investors in

America. Whether I can undertake a Fourth War

Loan successfully, time only will tell. -- HM Jr"
I read this letter to Mrs. Roosevelt and she
thought I ought to send it. I told her that one of the things

that was disturbing me was the fact that when I saw our War

Finance Committee Chairman of Indiana, he questioned me about

what he had read in the papers on the new tax suggestions, and
he said that if the papers were correct then he would have to

resign. Mrs. Roosevelt told me that I ought to put that in
the letter.

-2-

1288

Then I said to her, "But I have asked Sam to tell
the President how I feel about this matter." She said, "Oh,
you can't depend on Sam. He will never tell the President
about any controversial matters.
I called up Judge Rosenman after that, and I said,

"Sam, what did you do with the memo I gave you? What did you

tell the President about it?" He said, "Well, I couldn't get
to see the President so I just gave him what you gave me, and
underlined the important parts in it." I said, "Didn't you

give him a memo telling him how I felt about this, and how
I thought that it would hurt us with the volunteers who put
across the Third War Loan?" Sam said, "No, no - I didn't tell

him anything. I just underlined the parts that I thought
should be brought to his attention particularly.
Then I read this draft of my letter to the President
to Sam, and after I finished he said, "Well, I think the letter

takes too much credit for yourself on the success of the Government

credit, and the President probably will feel that he should share

in it. He also said that he wouldn't use the expression "sell

the people down the river" because he thought that would only
annoy the President. Then he said he would end the letter by
asking the President whether he wouldn't reconsider this matter

of a post-war refund at the 11th hour. I said, "Well, that's
why I am writing this letter." Then Rosenman said, Better yet I wouldn't send the letter at all. I would just phone and get
this information to him.'
So I thought it over and talked it over with

Mrs. Morgenthau, and we decided to do the thing by phoning rather

than to send the letter. I called Miss Tully about four times,
and finally she called me back at a quarter to three. I told

her that I was calling up because I had asked Sam to tell the
President how I felt about the compulsory savings angle after

we had just made such a success of the Third War Loan Drive.

I said, "I find that Sam didn't tell the President, so I am

asking you to tell him that." I said, "I feel it is a great

mistake," and then I told her of my conversation with our

Chairman from Indiana, and I said, "I don't know how many more

of our people will quit if this goes up the way it now is, and
I don't know whether I could put over a Fourth War Loan."

-3- -

1289

I said, "I wish the President would reconsider this question

of a post-war credit." She said, "All right, I will give him

your message, and I can let you know either before or after
dinner." I asked her what time dinner was, and she said a
quarter to seven. So I said, "I am going down to Washington,

and I will call you after I get there."

After I returned to Washington I phoned Grace
Tully, and copies of the conversations are attached.

So you see what the President did. When I said
that I didn't know whether I could put across a Fourth War
Loan, he decided that he couldn't change the whole thing, but
he probably said, "Well, I won't ask Henry to put that up as
a flat recommendation. He can put it up as a suggestion."
Oh, yes, and while I was talking to Judge Rosen-

man he said, "You know, Henry, I have always been for compulsory

savings. I never thought you would be able to put across this

loan, but you have done such a swell job and I can see now why
you are worried."

Gaston: So Tully's conversation was really in

reply to your call rather than to the memorandum which we

wrote him. She worded it rather peculiarly - "But now as
to the amount of the refundable tax" - the amount of the refundable tax.

HM Jr: Well, just stop and think for a minute.
Here I go to this man and put this thing up to him, and then
he comes back and says, "Okay, you don't have to make it a
It

flat recommendation.

Gaston: He could have said that you could put

up the two alternatives, but he didn't say that at all. He
didn't say that all.
HM Jr: Well, Herbert, this is what I think. You

see the President has always backed me up on the volunteer plan.
Now I say to him that I don't know whether I can do a Fourth

War Loan. He begins to think and he says, "Well, I can't tell
him not to do it because that would annoy Vinson and Byrnes,

-4-

1290

so I will tell Henry that he doesn't have to make a flat

recommendation - he can just suggest it." Now just in this
room, isn't that typical of the man?
Gaston: Yes, yes.

HM Jr: It really worked out wonderfully well

for me, don't you think so?

Gaston: Yes, yes.

1291

HOPEWELL JUNCTION
DUTCHESS COUNTY. NEW YORK
TELEPHONE BEACON #11

my dear me President:

I fal in

faimers to you and my self

Tought to let y on know
how I fue about husenting
the administration tax program
on monday. .

I M sug gesting a

tax form of compulancy

saving in the face of the

change your mind we could still

2f you statement

1292

most amaging respance
- to the 3diver loan, an
the hast of the american
fire I 1 am feel selling

them down the river. (?)

Whether they will feel
that way time only with
tell. too timeplaud
will tell.
When you, me in the
Leasing in November 33
the confidence of the american

1293

3

HOPEWELL JUNCTION
DUTCHESS COUNTY. NEW YORK
TELEPHONE BEACON 211

had ward

hope in gov. securities ^

stude an all time Cour.
since then by hand work

I have built up the

confidence in the giv. security

market to air all time

high In fact sina me

have been at was money
has ban the most stable
connordity in we have With

(4

the result that so far 1294

I Lave fun able to finance
the most costly was in
history at the lowest rate
interest
ever
known
f
Ihave grane doubts as to

will happen during the
next few months as a result

if my not keeping faith
with
the
millims
of
investors in ameri ca.
Whether I can undertake

a truth war bow successfully

1295
October 3, 1943
6:59 p.m.
HMJr:

Yes.

Operator:

Miss Tully.

HMJr:

Thank you. Hello.

Miss

Tully:

Hello, Mr. Secretary.

HMJr:
T:

I'm here at the Treasury.
Yes. So I hear.

HMJr:

Go ahead.

T:

The President says - now on the amount of the

refundable part of the tax he would merely
mention it as a possible action for Congress
to take, but he wouldn't recommend it flatly.
HMJr:

He wouldn't recommend a flat rate?

T:

He wouldn't recommend it flatly.

HMJr:

Flatly?

T:

That's right. He would merely mention it as
possible action for Congress to take, but not
recommend it flatly.

HMJr:

Now, wait a minute - are you in a great hurry?

T:

No.

HMJr:

Well, I mean - let me repeat this to Mr. Paul.
I want to know whether this is feasible - he is

here. Have you got two minutes?
T:

Yes, sir.

HMJr:

Well, let me repeat this.

T:

All right, sir.

HMJr:

on the amount

T:

will recommend that this

-T:

tax

1296

on the amount of the refundable part of the

HMJr:

Yes.

T:

the President would merely mention it as
possible action for Congress to take

HMJr:

Yes.

T:

but not recommend it flatly.
I see. Now, what

HMJr:
T:

Now, the other thing is - on the increased tax,
the termination of the war in which it should
be eliminated. That they determine the date. In
other words, six months after the war or whatever
whatever they think about it.
he suggests that Congress make the date after

-

HMJr:

I mean - that this thing should be eliminated?
Yeah. He suggests that Congress, after the
termination of the war

HMJr:

Yes.

T:

give the date on which it should be eliminated I mean the - the special tax - the war tax.

HMJr:

I see.

T:

Yeah.

HMJr:
T:

You mean just on this refundable?

On this increasedtax - that this - low-income tax

people - low-income people.
HMJr:

I see.

T:

The extra tax.

HMJr:

T:

The while
extra tax
people should only
last
the for
warthe
is low-income
on.

Well, for a certain date after the termination

of the war and the date to be determined by the
Congress - as to when it can be eliminated.

-3T:

I see. Well, go ahead.
That's it.

HMJr:

Is that all he said? Hello?

T:

Yes, sir. That's all.

HMJr:

Well, now what about my two pages on Social Security?

T:

He didn't say anything about it. Maybe I better

HMJr:

Gosh, yes.

T:

Uh - huh.

HMJr:

Isn't it the last two pages?

T:

What?

HMJr:

I mean - on the last two pages I'm counting -

HMJr:

1

1297

check that with him.

I'm talking about a recommendation that Congress
should do something on Social Security.

T:

Uh - huh.

HMJr:

Have you got the statement there?

T:

I haven't got it right in front of me. He read
it, and that - that's what he gave me, but let

me check the Social Security angle of it and call
you back.

HMJr:

I want to make awful sure that he wants me to do that.

T:

Right. All right, Mr. Secretary, I'll do it.

HMJr:
T:

Will you do it before your supper?
Yes, sir.

HMJr:

Well, I'm sitting here in the Treasury.

T:

Fine.

HMJr:

You'll call me back?

T:

Right, sir.

HMJr:

Thank you.

T:

All right, Mr. Secretary. Good-bye.

October 3, 1943
7:04 P. M.
HMJr:

Hello.

Operator:

Miss Tully calling back.

HMJr:

Hello.

Operator:

Miss Tully calling back.

HMJr:

Go ahead please.

Operator:

Go ahead.

1298

W. H.

Operator:

Hello, Mr. Secretary, Miss Tully.

HMJr:

Thank you.

W. H.

Operator:

Here you are.

Miss Tully:

Hello.

HMJr:

Hello.

Tully:

Hello, Mr. Secretary. I've checked that now, and the
President says that you've made it perfectly clear

that it has nothing to do with the Tax Bill, therefore,

it's all right.

HMJr:

Wonderful.

Tully:

Thanks. All right.

HMJr:

Now wait a minute, Grace. You've got all the people
puzzled here, but I mean -- he is satisfied with the
Social Security thing.
He says you've made it perfectly clear that it has

Tully:

nothing to do with the Tax Bill and, therefore, it's

all right.

HMJr:

Yes. Now, the way we're interpreting this thing

that he's saying is -- that on this refund, I'm
bringing it to their attention as a possibility.
not making a positive recommendation, I'm just

Is that the way you understand it?

Tully:

Yes, You're just mentioning it. I mean -- give
them the suggestion.

1299

-2HMJr:

On the refund?

Tully:

Yes, on the refundable part of the tax, you
merely mention it as possible action for the
Congress to take.

HMJr:

That's right.

Tully:
HMJr:

But you don't recommend it.
I don't make a flat recommendation

Tully:

You don't make a flat recommendation, this is what

you want done, but you make a suggestion, or mention

it as possible action for them to take.
HMJr:

I see.

Tully:

Yes.

HMJr:

Now wait a minute. Let me just tell this to Paul.

Will you wait a minute?

Tully:

Yes.

HMJr:

Have you got a minute?

Tully:

Yes, certainly.

HMJr:

(Talks aside). Grace.

Tully:

Yes.

HMJr:

What I -- I take it that the thing that the President
has in mind is that he's sort of taking the middle
of the road.

HMJr:

Hello.

Tully:

Yes.

HMJr:

And that inasmuch as we first talked about a threeand-a-half million dollar refund, and then on second
thought, I only wanted to make it two or two-and-a-

half.
Tully:

Yes.

HMJr:

I bring this to Congress attention as a possibility.

-3Tully:

That's right.

HMJr:

As a

Tully:

Yes, as possible action for them to take.
Possible action ...

HMJr:

1300

for Congress to take itself.

Tully:
HMJr:

Right.

Tully:

But not as a flat recommendation from you.

HMJr:

Now one other thing, -- did he go through the statement
fairly thoroughly?

Tully:

Yes. That 18, very carefully.

HMJr:

Tully:

Very carefully.
Very carefully.

HMJr:

Did he like it?

Tully:

Yes.

HMJr:

He liked it?

Tully:

And as far as he could see it was all right.

HMJr:

And has no. other suggestions?

Tully:

No, had no other suggestions.

HMJr:

Well, I'm ever 80 much obliged; I'll do the best I
can.

Tully:

Fine, Mr. Secretary.

HMJr:

And, thank you, again.

Tully:

You're very welcome.

HMJr:

Good-bye.

Tully:

Good-bye, Mr. Secretary.

1301
October 5, 1943

The President said that he did not think we ought to

change the present rate for the Italian Lira, and that it

is all right the way it is.

1302
October 11th-1913
I saw Mrs. Roosevelt with Hopkins and she said she
would be glad to ask the President to make his speeches
standing up but she thought that Admiral MacIntyre would

not allow it. Hopkins said he would. He said Admiral

MacIntyre said the President was well enough to go through
the campaign and make his speeches standing up. I told

her that if she didn't mind, I would like to make a suggestion, namely that she put it up to the President on
the following basis:

That if he stood and made no fight, not only would
the politicians criticise him, but he would be very much

dissatisfied in his own heart. If, on the other hand, he
would put up a real fight and lost, he not only could not
blame himself, but nobody else could - and Eleanor agreed

with me. I also made my suggestion to her that the
President get politicians and non-politicians together and
sit around and discuss various plans and strategy for the

campaign - on the same basis that he talked with Churchill
at Quebec in regard to the war and other things. She said
she would do that.

1303
October 11th-1943

Hopkins says did I know that Hull had written a letter
to the President in which he referred to a previous conversation with the President objecting strenuously to my heading up this committee on Lend Lease with the British, and
that the matter should head up with the State Dept. and
that they would consult with the Treasury.
I told Hopkins that I had seen the President Sunday

night and that he had not rasised it, so he said the
President knew all about it by Sunday night, and if he did
not raise it then, he most likely was not going to do so.
I said there were a lot of things like that which would have
to be straightened out after Election.
Hopkins said what did I think about the President's public
appearances; that if anything could defeat the President it

was these rumors going around about his health; that he had

not worn his braces for over a year and Hopkins felt it was
Miss Sutcliff who was telling the President what is the use
of your bothering about another election - why put yourself
through all this trouble and pain putting on your braces ?"
He asked what I thought, so I said that the President just
had to put on his braces and face the crowd, that it was just
damn nonsense.

I told him how Eleanor Roosevelt had gotten the
President's interest Sunday night in Dutchess County and local

politics, so he looked sort of surprised and said, Is Eleanor
interested in this ?" And I said, very much so". So he said,

well he would go and see her and then he thought a while and
said, "you would be much better than I" so I said, we would

both go together. I said I did not think anybody could get

him to do this except Eleanor Roosevelt. He said, should we

have Anna present and I said,no. If he ever tells that to
Anna (which he will) it will just slay me - but you could see
that Hopkins was really worried and evidently has run into
this same lackadaisical attitude of the President on the
election which I did Sunday night.

Cabinet nors, ( I 19431304
THE WHITE HOUSE
WASHINGTON

gave Pres. memo military

on stopping, Lend Lease

to French He
liked idea very much .

want copy for my

files.
I want to sheak to
H. White about

following this uh

1305

11/5/73.

Speak
w
the
President

about finn
time ?
F.N.R.

-

JSKG

said O.K
go ahead

1943

- Pre sail.) news,
THE WHITE HOUSE
WASHINGTON

1306

Dr. Weigman

is supposed to
have sent English

as schae oligist to
Sandi -ambia who
offerd him 100 million

English Z as a

bribe if he would

be two - Palestine

Since
feeling
have then
beenhishurt
Pustold Jelses he c could

I

not send Jane the Sand Garaliza

November 6, 1943

1307

Hopkins was here from 3:00 until 4:20. He does not feel
that the end of the war is in sight the way so many people do

around town. I asked him what made people so optimistic, and
he said-General Arnold and the Air Corps have spread the word

that the war will all be over soon. He said that it has made
General Arnold very cocky, and he is asking for a lot of

additional material. He said, "I will say this for him - he

does make good use out of what we give him." He said that
General Arnold says we can easily lick the Italians because
they have no air power, but that Eisenhower does not agree.
Hopkins told me how the Germans are fighting with half as much
tonnage and ammunition and food as we have, and how they are

maintaining the battle in Italy by moving everything by night
without any air support, contrary to many modern military theories.
Clark has been promised amphibious craft, so that he ought
to be able to make rapid progress around the rear of Rommell's

Army. I had heard this before, and it is very encouraging. When
I was with Clark they had taken everything away from him, but
evidently they decided not to do that, and are going to leave

it there long enough for him to use it. As a matter of fact, Hopkins

said that he could have it from now until the 15th of December.

Hopkins was very much interested in what I had to say about
King Peter and King George. He did not realize that they were
located at Cairo, and was very much upset when he heard it.

I told him I felt that neither the King of Italy, King Peter,

nor King George should be picked by us, and he agreed entirely.
He agreed there would be a revolution if we forced these people
to accept these Kings. But Hopkins said, "You know the President

has a warm spot for royalty." He said, "King Otto of Austria
is hanging around here in Washington also."

I told Hopkins that Paul was thinking of resigning because
he thought that Congress had let him down. He said that nobody
should take that attitude, and that one shouldn't quit when they
are under fire. Then I asked him how he felt about having Oscar
Cox come over here. He said, "Well, I see Oscar about once a week,
and Oscar could send me suggestions from the Treasury just as
well as from Crowley's outfit." He said that maybe Crowley
wouldn't want to let Cox go but that as far as he was concerned
he would just as soon have him in the Treasury as not.

I found Hopkins very friendly, very talkative, and in an

excellent humor, and I think he would have answered any question
I asked him.

1308

November 12, 1943

The President called me and said that Mr. Alvin
Wirtz had been to see him and told him that I personally
was pushing a tax case down in Texas. I told the President
that I was not. The President asked me to see Mr. Wirtz

and I said that I would.

1309
December 18, 1943

The President asked me did I think he should

veto the revenue bill if they did not change the
re-negotiation contract, if it was not workable.
I said, "You are asking me a question pretty fast,
but my answer to you is yes - you should veto it."

1310
MEMORANDUM FOR THE DIARY

December 18, 1943

The President told me today after lunch that he had sent
a message to Generalissimo Chiang Kai-shek that he had seen me,

Morgenthau, and discussed the question of finances with him,

and so evidently he thought it was that important.
He then took from me the memorandum which I had, also my

carbon copy, and we'll have to get another copy from E. M.

Bernstein for my diary. I also told Miss Tulley that when
the President was ready, I'd be glad to see him to discuss

it with him; that I was in no hurry but he seemed to be in
a hurry.

1311
December 20, 1943

I asked Miss Tully what the President had done
about my letter on the Collector of Customs for Boston
and she said that the President had read it and would
call up Mr. McCormack today or tomorrow and tell him
that he would have to recommend somebody else. So

she said, "The only thing I can't decide is whether

the President will do it now or wait until after
Christmas." So I thought a little bit and said he

had better do it now so that when McCormack goes home

he would be thinking of getting somebody else.

1312
December 20, 1943

The President very carefully in my presence
read my memorandum on China for the first time.
He also had not read Ambassador Gauss' cable before,
although Hull told me it had gone over there.
He said, "This looks good," and "What would

you think if I sent your memo in toto to General
Chiang Kai-shek?" I said, "Nothing the matter with

that. So he said, "That's what I am going to do.

I had ample time to tell the President about
George Harrison being financial adviser to Stimson;
reminded him about 32; that George Harrison would
be sitting here pulling the strings on what was going
on in London; I gave him the names of the various

people recommended; how I had recommended to Stimson

that he wait until he got back; how Stimson said he

did not want Foley (whom I had not recommended) or
anybody else connected with any other Department.

The President said, "That's just too bad." He said,
"Who do you want?" I said either Lauch Currie or
Jim Landis. He said, "I think Lauch Currie would
be good. He is doing lots of odds and ends and this

will give him a lot to do. I said, "If you don't

want a repetition of '32 you had better do something."

He said he would.

I reminded him again he had better talk about

organization politics. He said just as soon as he

got through with his speech he would.

Then I said, "You know, on the Argentine thing,

Cordell is taking an interest but he's awful slow.
I said, "This last move on the part of Bolivia looks

as though there had been an overthrow in Bolivia as a

result of scheming from the Argentine." I said,
"If you want to get the low-down on it, why don't

1313

-2-

you send for General Strong and he will give it

to you. The President said, "I will send for

Cordell Hull and General Strong. "

I

said,

"Make

Bolivia the excuse so that he does not smell
Morgenthau." The President said he would.
I was with him almost an hour.

314

December 18, 1943
MEMORANDUM FOR THE PRESIDENT

You have spoken of the request of Generalissimo Chiang-

Kai-Shek for an additional $1 billion of financial aid to
China to be used to help control inflation and for postwar
reconstruction.
I

The facts regarding inflation in China and the possi-

bility
of its control through the use of dollar resources
are as follows:

Inflation in China, as you well know, arises from the
civilian consumption. Supplies have been drastically re-

grave inadequacy of production for war needs and essential
duced by enemy occupation and the cutting off of imports
except the small amounts that come by air or are smuggled
from occupied territory.
The Chinese Government cannot collect sufficient taxes
or borrow from the people in adequate amounts. As a consequence, the Government has been issuing 3.5 billion yuan a
month, twice the rate of a year ago.

The official exchange rate for yuan is now 5 cents;
before China entered the war it was 30 cents. The open
market rate for yuan in U. S. paper currency is one cent
and in terms of gold one-third of a cent.
You have suggested the possibility of our selling dollar currency for yuan to be resold to China after the war
at no profit to us. No doubt something could be done to
alleviate inflation through the sale of gold or dollar currency in China. I have received the following message from

Dr. Kung dated December 14:

"You will be pleased to hear that the recent
gold shipment is one of the outstanding factors
contributing to the strengthening of fapi, because

people believe that the arrival of gold has in-

1315
2-

creased the much needed reserve of our currency,

thereby influencing the stability of prices. The
to the Chinese people that, despite difficulties
arising from the blockade and the cumulative offects of over six years of war against the in-

action of the United States Government re-affirms

vasion, China has a powerful friend desirous of
strengthening China's economy as conditions permit."
However, while something could be done to retard the
rise in prices, the only real hope of controlling inflation
is by getting more goods into China. This, you know better
than I, depends on future military operations.
II

China has tried two similar monetary remedies for
alleviating inflation without marked success.
1. The Chinese Government issued and sold dollar

securities for yuan, setting aside $200 million of the
aid granted by this country for the redemption of the
securities. (These securities were sold at exorbitant
profit to the buyers. Por instance, a person holding
$100 in U. S. currency could have quadrupled his money
in less than two years by selling the currency for yuan
on the open market and buying the dollar securities
issued by the Chinese Government.) I believe that the
program
made no significant contribution to the control
of inflation.
2. The Chinese Government has recently been selling
gold at a price in yuan equivalent to $550 an ounce,
about fifteen times the official rate. We have shipped
to China more than $10 million of gold and they have

sold about $2 million of gold for yuan. This program has
not been tried sufficiently to warrant any definite conclusion as to its possible effect.

China now has $460 million of unpledged funds in the
United States and is getting about $20 million a month as

a result of our expenditures. China could use these funds
in selling gold or dollar assets for yuan, although in my
opinion such schemes in the past have had little effect

except to give additional profits to insiders, speculators

and hoarders and dissipate foreign exchange resources that
could be better used by China for reconstruction.

1316

-3Under the circumstances, a loan to China for these

purposes could not be justified by the results that have
been obtained. It is my opinion that a loan is unnecessary at this time and would be undesirable from the point
of view of China and the United States. Large expenditures on ineffective measures for controlling inflation

in China would be an unwise use of her borrowing capacity
which should be reserved for productive uses in other ways.

On reconstruction, it is too soon for us to know the best
use or the best form of the aid we might give to China.
Recommendations

For the past five years I have had a deep admiration

for the valiant fight that the Chinese people, under the

leadership of Chiang-Kai-Shek, have waged against Japanese

aggression. Therefore, I am in complete sympathy with

your position that no stone be left unturned to retard the
rise in prices. Using the tools we have at hand, I recom-

mend the following:

1. All U. S. expenditures in China, currently $400 million yuan a month and rising rapidly, be met through the
purchase of yuan with gold or dollar currency at whatever
price we can get them for in the open market. This is
equal to more than 10 percent of the present rate of. issue.
2. Accelerate the shipment of gold purchased by China
to twice the amount we have previously planned to send. It
should be possible to raise gold shipments from 86 million
a month to about $12 million. At the present price for
gold in the open market this would be equal to the present

3.5 billion of yuan currency that is being issued.

The impact of this two-fold program should contribute

to retarding inflation, always bearing in mind that the
basic reason for inflation in China is the shortage of

goods.

1317

January 3, 1944.
FOR: GENERALISSIMO CHIANG KAI

I have had the #flu* for the past few days and am only
just able to attend to the vast amount of work.
The Secretary of the Treasury has sent me a recommendation

which I hereby quote to you just as it was written:
. 1. The facts regarding inflation in China and the possibility of its control through the use of dollar resources are
as follows:

Inflation in China, as you well know, arises from the
grave inadequacy of production for war needs and essential
civilian consumption. Supplies have been drastically reduced
by enemy occupation and the cutting off of imports except the
small amounts that come by air or are sauggled from occupied

territory.

The Chinese Government cannot collect sufficient taxes
or borrow from the people in adequate amounts. As a consequence,
the Government has been issuing 3.5 billion yuan a month, twice

the rate of a year ago.
The official exchange rate for yuan is now 5 cents;
before China entered the war it was 30 cents. The open market
rate for yuan in U. 8. paper currency is one cent and in terms
of gold one-third of a cent.
You have suggested the possibility of our selling
dollar currency for yuan to be resold to China after the war at
no profit to us. No doubt something could be done to alleviate
inflation through the sale of gold or dollar currency in China.
I have received the following message from Dr. Kung dated

December 14:

I You will be pleased to hear that the recent
gold shipment is one of the outstanding factors
contributing to the strengthening of fapi, because
people believe that the arrival of gold has increased the much needed reserve of our currency,

thereby influencing the stability of prices.

-2-

1318

The action of the United States Government

re-affirms to the Chinese people that, despite
difficulties arising from the blockade and the
cumulative effects of over six years of war
against the invasion, China has a powerful
friend desirous of strengthening China's
economy as conditions permit
However, while something could be done to retard the

rise in prices, the only real hope of controlling inflation is

by getting more goods into China. This, you know better than I,
depends on future military operations.
2. China has tried two similar monetary remedies for
alleviating inflation without marked success:
1. The Chinese Government issued and sold dollar

securities for yuan, setting aside $200 million of the aid granted
by this country for the redemption of the securities. (These
securities were sold at exorbitant profit to the buyers. For

instance, a person holding $100 in U. S. currency could have
quadrupled his money in less than two years by selling the
currency for yuan on the open market and buying the dollar
Securities issued by the Chinese Government.) I believe that
the program made no significant contribution to the control of

inflation.

2.

The Chinese Government has recently been selling

gold at a price in yuan equivalent to $550 an ounce, about
fifteen times the official rate. We have shipped to China more
than $10 million of gold and they have sold about $2 million of

gold for yuan. This program has not been tried sufficiently
to warrant any definite conclusion as to its possible effect.

China now has $460 million of unpledged funds in the

United States and is getting about $20 million a month as a result
of our expenditures. China could use these funds in selling gold
or dollar assets for yuan, although in my opinion such schemes
in the past have had little effect except to give additional
profits to insiders, speculators and hoarders and dissipate
foreign exchange resources that could be better used by China
for reconstruction.
Under the circumstances, a loan to China for these
purposes could not be justified by the results that have been
obtained. It is my opinion that a loan is unnecessary at this
time and would be undesirable from the point of view of China
and the United States. Large expenditures on ineffective measures
for controlling inflation in China would be an unwise use of her
orrowing capacity which should be reserved for productive uses

-3-

1319

in other ways. On reconstruction, it is too soon for us to know the
best use or the best form of the aid we might give to China.
Recommendations

For the past five years I have had a deep admiration for
the valiant fight that the Chinese people, under the leadership
of Chiang Kai-shek, have waged against Japanese aggression.
Therefore, I am in complete sympathy with your position that no
stone be left unturned to retard the rise in prices. Using the
tools we have at hand, I recommend the following:
1.
All U. S. expenditures in China, currently $400
million yuan a month and rising rapidly, be met through the
purchase of yuan with gold or dollar currency at whatever price
we can get them for in the open market. This is equal to more
than 10 per cent of the present rate of issue.
2. Accelerate the shipment of gold purchased by China
to twice the amount we have previously planned to send. It
should be possible to raise gold shipments from $6 million a
tonth to about $12 million. At the present price for gold in
the open market this would be equal to the present 3.5 billion
of yuan currency that is being issued.
The impact of this two-fold program should contribute
to retarding inflation, always bearing in mind that the basic
reason for inflation in China is the shortage of goods."

I think, however, that in addition to this program we

should have a very high-class Commission visit Chungking and
confer with both you and Dr. Kung and try to work out a complete

meeting of the minds on this difficult matter.
This happens to be the first telegram I have sent in

1944 and it carries to you and to Madame Chiang very warm regards
from my wife and myself.
ROOSEVELT

THE WHITE HOUSE

1320

WASHINGTON

January 3, 1944

MEMORANDUM FOR

THE SECRETARY OF THE TREASURY:

FOR YOUR INFORMATION.

F.D.R.

Dism

The Roceevelt-Stalin axis is gaining strength and the Roosevelt-Churchill

ax . 3 is losing strength in about equal ratio.
That is the opinion of Leo Crowley and it is based on what the Prex

SO. I at the Cabinot maeting right after his return. plus culet conversations
travley has had elsewhere, plus, he admit s, SOME reading between the lines on

hi. part.
"If I were going to write & story I'd certainly sq. that Roosovalt iad
tc play the role of peacemaker both at Cairo and Teheran," Crowley said, "and

th ne thoroughly relished that role. There could be no mistaking that they
wa he taliced at the cabinet meeting. I'm besing that statement on what WES
aad at the mesting.

"It was quite obvious, too, that Churchill didn't deviate an iota from
his announced position--that he isn't roing to preside at the liquidation of the
Brotish empire. So he was at odds with Chiang at Cakro and also with Stalin

at Pohorar, I cortainly would suggest that Roosevolt sat in the middle at
bot! conferences and that it was necessary for him to be there-in the middle-to reserve peace.
"Of course, Roosevolt was in a commending position at beth conferences
bec : use BOOK of him he had our enormous industrial output, whiah our allies

think of in terms of lend-lease, and 8C neither one was going to get tough with
him.

1

DOPE--2

"But it was perfectly obvious that the President is very much impressed
with Strlin and not quite 60 much impressed as he has been with Churchill.

I suppose that it is natural, in view of the President's views as shown in this

country. In core waya it is disturbing to a person like myself. I oan understand Churchill's point of view; : think he is suspicious of the whole business.
He known what Britain has and he intends to keep it if possible, but, of course,

he isn't in any position to get tough with the President and that puts him in
a bad spot as far 0.6 Chiang and S+alin are concerned booause the President is
improssed with them."

It is hard to put in words, but it is obvious that Crowley, and
undoubtedly a lot of mon with him in the Government, is a bit approhensive

himsolf about the Presidential partiality toward Stalin. Crowley said, for

example, that ha the the people of this country could do business better in
the long run with Oritain than they could with Stelin. He also said that the
"White H,ure orowd," casually mentioning Hopkins and Nilcs to illustrate the
ones he mount, would be glooful at the Presidential turn toward Stalin.

"I'm Just guessing at this," Crowley said, "but I'll bot you that when
Churohill stayed at the White House that time and had occasion to talk with a
lot of those followe at various times, he went to bed many a night and said to
himself: 'I'm dealing with a bunch of Cod-damn fools."

-0-0-0Crowley is in bad humor because too many of his top mon in FEA are dis-

playing what he calls prima donna oharaoteristics. They are, ho says, Jealous
of each other and gorstantly complaining because they think some colleague is
Cotting more recognition th m he deserves. Among the complainors are Currie

and Schubart, the latter a New York banker. Crowley is going back to his
Wisconsin homo for the holidays but it is conceivable that he may start R housecloseing when he gots back if the complaining basn't subsided.

-0-0-0-

1323
January 4, 1944

I spoke to Mrs. Brady at the White House and
told her that we were opening the Fourth War Loan Drive
on January 18th, and that we would like to have the
President go on the radio for a few minutes between

nine and ten o'clock on the night of the 17th.

Mrs. Brady said she would give the message to the
President and let me know.

1324
January 8, 1944
3:40 p.m.
FRENCH CURRENCY - Conference with the President

Present: Mr. Bell

Mr. White

Mrs. Klotz

H.M.JR: Come on, Harry, if you want to get in on this

meeting!

Mr. McCloy and I just saw the President. We were with

him about forty-five minutes. We tried our best to get him

to agree to have the words "Republique Francaise" on the
money. He objected strenuously. He said, "How do you know
what kind of a government you will have when the war is

over? Maybe it will be an empire; maybe we'll have an
emperor again."

I said, "That is just what we don't want to imply."
He said, "I don't want to do anything in any way to indicate
what kind of a government it is going to be."
So I said, "Well, it seems to me if you put on the
words "Republique Francaise, it isn't going to tie your
hands at all." He said, "Henry, you talk just like the

British Foreign Office. I said, "Mr. President, I have

never been so insulted in ten years!"

The argument went on and on and on. And the answer
always came back that he didn't want anything on the money

which would indicate what kind of a government it is going
to be. I argued and McCloy argued, and while the President

was in a grand humor, he had all his Dutch up," and you

couldn't budge him at all.

He said, "I have heard all these arguments. De Gaulle
is on the wane.
Anyway, I can give you all kinds of arguments, but the

President doesn't like it. We got off the "Liberte, Egalite,
et Fraternite." He said we couldn't have that. He also
asked for "La France. We got that off. So it gets back

-2- -

1325

to the flag and nothing else.
MR. BELL: What are those other words on there that you

had this morning?

MR. WHITE: That is off.

MR. BELL: No, that is on.
MR. WHITE: All words are off.

H.M.JR: "Liberte, Egalite, et Fraternite" are off.

You have a flag.
that?

MR. BELL: This up here (indicating) is in. What is

MR. WHITE: "Issued in France." There probably will
have to be something here, although not necessarily.
MR. BELL: What are the words this morning which you
were suggesting be put on there?

MR. WHITE: That is all. That is, "Emis en France" -

issued in France.

MR. BELL: I see. That is not English; that is French.
H.M.JR: You don't recognize my pronunciation. I am

talking in English! I'm so tired I don't know whether
I'm coming or going.

MR. WHITE: Who did he say was on the up-and-up, if
De Gaulle is on the wane?

H.M.JR: He wouldn't say. But besides his own
prejudice against De Gaulle, he now says that Stalin has no

use for any Frenchman.
MR. WHITE: So?

H.M. JR: So Stalin -

MR. BELL: Now, we'll hear the other side.
H.M.JR: In the first place, the new Government cannot

-3-

1326

include anybody - this is Stalin speaking - who had ever

been a Member of the French Government before, of any
government.

In other words, if you had been a Member of the
Government, you can't be a member of the new government

and you can't be over forty years old.

MR. WHITE: Oh, oh. Stalin is beginning to issue

orders, is he?

MRS. KLOTZ: You watch the old boy!

MR. BELL: The flag stays on.
MR. WHITE: Unless they think they want to put something

on here - the numbers.

MR. BELL: This is a good note. That note is beyond
counterfeiting, do you know that?
H.M.JR: Why?

MR. BELL: They have blended those colors in such a

way that it is impossible to counterfeit. They can't
separate them.

MR. WHITE: The significance of the meeting is far

beyond the currency.

H.M.JR: He went on. I don't want to dictate the thing,

but he went on and you could see that here is the Acting
Secretary of War - which he is - and he took up conversations which he had had with the President. I don't think
he had seen the President since Cairo.
They went into the whole invasion question and every-

thing else. I got up to go and I stood on my feet for
twenty minutes. I could have stayed there another hour,
but I was tired. I wasn't bored; I was just tired. The

President was in one of his talky moods, in a grand humor.
He was in bed, but the second he started talking I knew the

thing was lost. I don't know what is in him, but he doesn't
want to have anything to do with Comite'. He says this is

4-

1327

an indication. He said, "How do we know?" It absolutely

doesn't hold water, you know.

MR. WHITE: It is ridiculous.
H.M.JR: McCloy handled himself very well. He said,

"If you fix it 'Republique Francaise, then there is one
less worry that De Gaulle is going to be a dictator."

MR. WHITE: And it doesn't mean what government you are
going to have. You can have any group.

H.M.JR: I can't get it.
Now, for the record it seems that Hull has come around.
While we were waiting, he told me and McCloy this. Jimmy
Dunn has been working on him. While he still calls
De Gaulle a polecat, he is working around, and it seems
the person who keeps needling Roosevelt is Churchill.
MR. WHITE: Against De Gaulle.

H.M.JR: He thinks Churchill is going to turn any
minute in favor of De Gaulle and leave Roosevelt high and
dry. So I said, "Well, maybe you better get Hull to see
him. Stimson is now for De Gaulle." He said, "Well, I
don't know whether I go that far."
You get Hull and Roosevelt in the same room - what would

come out, I don't know! (Laughter)

MRS. KLOTZ: Nichts zum lachen! That wasn't French, Dan.
MR. WHITE: That was very amusing, when McCloy said,

"We don't want any supporters of Franco." I don't know
whether you got that or not. Dunn was one of Franco's
staunch boys. He is.

H.M.JR: Yes, I gathered they had a big meeting. He
said Dean Acheson told him last night there was a big

meeting yesterday in the State Department on Argentina.

It was a very interesting meeting, but the Army has got
something on their hands to get the President to go along.
He says that they have nobody they can talk to about going
into France. They are not allowed to talk to anybody. He

- -5-

1328

said, "Mr. Morgenthau, we are doing more for Tito than
we are doing for the French, because we are not permitted

to sit down and talk to anybody." I didn't realize that.

MR. WHITE: It is a very strange situation. There must
be something behind it that is not at all observable,

because here you have a group that are unquestionably

desirous of restoring a republic. There is nothing they

have done which is in any way suspicious - I mean compared

to what is going on in Greece and Yugoslavia and Italy
and Northern Africa. You would think they would dine and
wine these fellows day and night; on the contrary, they
are adamant in dealing with them. There is no alternative
group. If there were one that is more democratic - but
there couldn't be. Everything they have said indicates
greater democracy. I don't understand it.
H.M.JR: Harry, my sensitivities were exposed and keyed

to try to listen. While I was tired, I was listening every
minute to try to figure it out. What is it that is back
of this thing? I swear I don't know.
MR. WHITE: Has Leahy anything to do with it?

H.M.JR: It is interesting, your asking that. McCloy

said on a number of questions the President quotes Leahy.
The order came through from the General - the Commander in

Chief of the Staffs - on this request I made, did we have
any objection to the English paying off Portugal. McCloy

said, "I got it." He said, "My God, here is a chance to do
something to get permission to land on the Azores."
MR. WHITE: Well, you see -

H.M.JR: Wait a minute. So I said, "That is what I
thought you might use it for." He said the Combined Chief
of Staff didn't see it.
MR. WHITE: They sent Neff to see me yesterday morning.

They didn't quite understand this had to do with balances.
I told them the Secretary thought they might want additional
inducement to land at the Azores. He said, "Of course that

will interest us. I'll go right back and tell them." That

was yesterday morning.

-6-

1329

H.M.JR: Who is Neff?

MR. WHITE: Neff is Patterson's representative.

H.M.JR: That is funny. McCloy said he caught it last

night.

MR. WHITE: Well, I don't know; but Neff came to see me
yesterday morning.

H.M.JR: Neff is a civilian?
MR. WHITE: Yes, but he represents the War Department.

He is not a dictator - an incipient dictator.

H.M.JR: Gentlemen, this was interesting. God, when
the President gets this way, you just wonder what is back

of it.

MR. WHITE: Churchill is playing a funny game, because

the French believe--all the representatives believe and all
the subordinates act as though they are strongly supporting
De Gaulle. So if Churchill has these views, it doesn't
seep down very far.

H.M.JR: What's-his-name said it is Churchill, but he
says he thinks MR. BELL: Who said that?
H.M.JR: McCloy.

This is just an amusing thing. Mrs. Roosevelt went
down to the airport last night to meet her son-in-law,
John Boettiger, who was returning from the front.
MR. WHITE: Is he a Colonel now?

H.M.JR: Still a Major. And also the Under Secretary
for War was coming in. Well, he got in first, and they say

he is a very pompous fellow.

Mrs. Roosevelt was standing there, and all the English
mission was standing waiting for the Under Secretary of War.

-7 -

1330

"Why, Mrs. Roosevelt, how thoughtful of the President
to send you down here to meet the Under Secretary of War.'
MRS. KLOTZ: Is that embarrassing!
MR. BELL:

What did she do?

H.M.JR: I don't know. She most likely laughed at them.
Listen, do you people want to see me spit in the State
Department's eye on the British-Argentine thing?
MR. BELL: It would be a pleasure!

1331

January 17, 1944

I spoke to the President at 9:15 Sunday night and went

into the passage about "My stringing up the ring-leaders of
hate and letting them hang there until they are dead." He

said, "Fine". He liked it and thought it was good. I said,
"Are you sure?" And he said, "Yes, but you might add the

word 'proven' before ring-leaders. The reason that I
called him was that my family had some doubt and thought

I might be letting myself in for criticism. They were also
very anxious to get the President's reaction as they questioned

whether he would like this paragraph. Evidently he liked it
very much. He joked and kidded with me and seemed to be in a

grand humor. So evidently what I went to see him about at a
quarter of one on Sunday left no unfavorable reaction in his
mind about myself which is encouraging. I was very serious
when I saw him at a quarter of one, and he didn't seem to

like it too much. However, it left no bad after-effects in
his mind as far as I am personally concerned. Therefore, I
hope he will see the thing through that I went to see him
about.

1332
February 2, 1944
TO SECRETARY MORGENTHAU

You have been generous in your praise of the
part we played in getting this Government to take
action designed to forestall Hitler's plan to exterminate the Jews and other persecuted peoples of
Europe.

We who have worked toward this goal for months

and are intimately acquainted with the facts regarding
its achievement take this opportunity to express our
deep admiration for the truly great contribution
which you and you alone made to this cause - a contribution of courage and statesmanship.

The change which has been brought about in this
Government's attitude toward saving the Jews and other
persecuted peoples of Europe from extermination as

the result of your efforts is, we know, more than
sufficient reward for you. Nevertheless, the fact

is that the courage and statesmanship you have displayed will live always with you and with those
who know what you really did.

handers

John au Psale
Harry D White
Josich E. Amal of Luffant Drigors,Jr.

1333
February 4, 1944

I went over to the White House, and I sat out-

side in Mrs. Brady's little office - she now has a
separate office from Miss Tully - Miss Tully being

in with the President.

About ten minutes past two, Miss Tully came out.
She had in her hand the release which the President
okayed yesterday in regard to Pehle.

I said, "Well, now, what do I do about this
release? Do I take it up at Cabinet, or what have you

done?"

She seemed a little confused and said, "No, the
President said that inasmuch as this is only an appointment as an Acting Director, he wants the Treasury to
do it; and also he wants the thing shortened up a little
bit.

I said, "Fine."

Not thinking I'd have time, I said, "Will you

telephone Mrs. Klotz to do it through Mr. Gaston?" But
I stood at her side while she phoned Mrs. Klotz.

I then asked her whether it had left Early's office.

She said no, that it. was being done this way, which he
agreed to. She gave no other reason.

1334

March 3, 1944
3:25 p.m.
RE: CABINET MEETING

Present: Mrs. Klotz

H.M.JR: At Cabinet Paul McNutt said, "As long as you
have handled Stettinius, I wish you would handle me."

He said, "Last Saturday I was talking at Des Moines

and making this speech about how well the exemptions in

industry were going, and in the middle of my speech it

came over the ticker that you had signed this memorandum

cancelling all industrial deferments. It was the most

terrible body blow. It is just upsetting everything.
He said, "We can't give you the production with this
order; we just can't give it to you."
L

The President said, "What order? I don't know
what order you are talking about."
"Why," he said, "you signed one. You signed an

order."

The President said, "I don't know what you are
talking about.

Well, everybody in the room got excited. Ickes and
everybody said that people have just been drafted right
and left, and the President said, "I never heard of the
order. I don't know what you are talking about. Who

had something to do with it?" Nobody knew.

Stimson said, All I know is, you told me you
wanted something like this done and I turned it over to
General Marshall before I went to South Carolina."

1335

-The President said, "I never heard of it; I don't
If

know what you are talking about.

Nelson said, "We can't give you this, and we can't

give you that. It has just completely upset everything."
So the President kept saying to McNutt, "You find
out where the order came from and where it originated."

McNutt said, "Your signature is on it, Mr. President."
The President said, "You find out where it came from.
Byrnes, did you have anything to do with it?"

Byrnes said, "The first I saw of it was in the paper,
Mr. President." He is Director of War Mobilization.
I have never seen a performance like it. That is why
all of our people have been drafted.
MRS. KLOTZ: Is that the same thing that has to do

with Hines?

H.M.JR: That is why all of these young married men
have suddenly been drafted overnight. The President completely washed his hands of it.

1336

March 3, 1944

At Cabinet the President turned to me and said,
"How are you going to get the additional $8,000,000,000?".

So I said, Well, I was up on the Hill this morn-

ing and saw Doughton and George; had a very pleasant

meeting with them, very friendly; and I am going to talk

with them some more next week and I said to them if we got
anywhere we would want to come over and see you, Mr. President, before we went any further.

1337
March 7, 1944.

Saw the President this morning.
Took up the question about Mike Reilly and asked

the President how he felt about Reilly and he said,

Reilly has been giving me excellent service. So I said,
Well, I d'on't think there is any question but what he has
been drinking to excess and he admits it.
Well, the President said, he never has when he is

around me.

So I went into the thing, reviewed it, and told

him how Reilly had offered, yesterday, to go and see his
priest and take an oath of total abstinence, and I had

told him to go ahead. So I said, Well, I would like to
tell him that I talked to you, Mr. President, and if Mike

Reilly does not keep his word with his priest then he's
out and he's on probation.

The President hesitated a little while and said,

All right, you can tell him that.

I said, As to the other men in the White House

detail, while they are on duty they also have to refrain

from imbibing in any kind of alcohol. If they get a

week's leave, they can do what they want.

Then the President said, a little later on, I

would give them a week's leave fairly frequently. So
I said, After a hard trip, and he said, Yes, I would give
them fairly frequent leave so they can go on a binge.
So we agreed on that.

Then I got on the Brown-Root case and I told him
that we had decided after an investigation by Mr. Palmer
that we could not prove fraud and we could not prove that
they had made political contributions although we were

1338
-2-

satisfied that they had.

So the President said, Well, it's like that ap-

pointment you and I made in Arizona. He said, The
Senators came to us and said it's the custom to bribe

Mexican officials. It's the custom in Texas for people
there to make these contributions. But, he said, the
thing that gets me is you go after Congressman Lyndon
Johnson of Texas. But, he said, I am satisfied that
they did make these contributions to this man, Lyndon

Johnson. But, he said, I am also satisfied that Senator

O'Daniel's contributions amounted to $500,000 and, he said,
why don't you go after him and investigate his contribu-

tions?
It looks as though you are just investigating
the Democrats.

I said, Well, there is something to that. Now,

I said, in this memorandum to me about Gaston (because
re-read that memorandum; that's a terrible memorandum

from the President.), I said, Get Gaston straight.
said, There isn't a more loyal person in town.

I

He said, Well, maybe he's dumb.

I said, He's not dumb. I said, After all, he

handled politics opposite Ed Flynn the whole time Flynn

was in and Flynn was satisfied, but, I said, the trouble

is people come around and aggravate these cases and then
the boys go after them.

He said, That's all right, but I want to know why

they don't go after Senator O'Daniel.

I said I would look into it. I said, I know Bob

Hannegan told you all this and I think he's all wrong and
I am going to see him at lunch and talk to him.

Then I gave the President the report on what they
have been doing over in the Refugee Board Committee. The
President was very much interested and he read the stuff

1339
-3-

very carefully, but I had difficulty getting him to

listen to me because he wanted to talk about Palestine
and I was trying to get over my refugee story.
He said, This Rabbi Silver and Wise. How do
you get along with Wise?

I said, I get along fine.
He said, But Silver is just a little political, isn't he?
I said, Yes.
Well, you could see the thing bothered him because
every time I would bring up something about the refugees
he would go back to them.
to

He said, Now, what I am trying to get the English
do is this. They don't want to change the White Paper,

but I want to get them to say publicly, if I am successful

through the Refugee Committee of bringing any Jews out of

Europe, they will let them go to Palestine and I want them
to say that.

So I said, Well, you know they said that in Parliament last Fall.

He said, I know it, but they didn't get it across.

I want them to say it now that any Jews that we are suc-

cessful in getting out, they will let them go to Palestine.
He mentioned Palestine by name. So I said, Well,

that will be fine. I said, Well, read that cable that the

State Department just sent to all their Missions abroad
about assisting refugees.
He

read it carefully. But, he said, it doesn't

say anything about Palestine.

I said, No, that wasn't the purpose of that.

1340
-4-

He said, I want them to mention Palestine by name.

So he said, This is all good. Everything you have given
me is fine. When Silver comes around I am going to use
it.

So I said, Pehle and his boys have done a fine job.
He said, I can see they have and it's about time

we said SO publicly.
terday?

I said, How ab out the declaration we sent you yes-

He said, I don't know what you are talking about.
to you.

I said, Stettinius gave it to Steve Early to give
He said, It has not reached me.

And I repeated about three times he should ask
Steve Early for it and he said he would, but I am going
to follow up through Grace Tully.

Then I gave him the clipping book and particularly
drew his attention to the Manchester Guardian which I knew
would please him, and it did, and also drew his attention
to the fact that we had gotten telegrams from 800,000
members of Jewish organizations

He said, You know, the Arabs don't like this thing.

And, he said, Ibn Saud of Saudi Arabia keeps saying that
he was bribed by Weizmann to the tune of $100,000.

I said, But, Mr. President, that has been answered.
He said, I know it, but Ibn Saud does not believe
it and said two or three times that Weizmann was a liar
and that he was offered this bribe. Now, the President
said, how could we get that out of Ibn Saud's mind?

1341
-5-

I said, "Are you asking me?" and he said, Yes,

I am asking you. I said, I can't give you an immediate
answer, but let me think about it. Well, the President
gave me the feeling that he wanted definitely to talk
about this thing and he wanted me to help him. Of course,
I am glad to help him, but it's not easy to. do.
Then I got on the Argentinian thing and I said,

Mr. President, I am very much worried about this Argen-

tinian thing. This is going to spread all through South

America and what you have accomplished in the last eleven

years is all going up in thin smoke.

What he said amazed me. He said, Yes, but we

can't prove anything on the Argentines. We can't prove

anything on them.

So I said, It seems to me, Mr. President, we
have really got to get tough wi th them, and if we get
tough they will buckle under.
He said, We can't prove anything.

I said, What more, Mr. President, do you want?

The German and Japanese Military Attaches were freed and
are out.
And he said, We don't know what happened on the

night of the revolution with Ramirez. He said, We just
don't know what happened.

I said, Are you waiting for the thing to go under?

(I did not put it just like that, but I implied it.)
No: No! But we just can't prove anything.

So I said, I certainly hope sometime this week

you will have Stettinius and me come over.

Well, we have no case against them. We have no

1342
-6-

case against them.

Now, he said, what the trouble is ever since

Summer Welles left, we really have nobody of importance
in the State Department who can handle South America.

The only person who might do it is Rockefeller and, he
said, we got these additional Secretaries, maybe we will

make Rockefeller an Assistant Secretary.

He asked me what I thought of Rockefeller and I
said I thought he was good.
Then he went on a lot about Welles and you could

see that he definitely missed Welles. And I don't want
to even dictate it, but he went into the whole question
of Bullitt and Welles and he said he thought it was unfortunate that Bullitt had acted the way he had. He said,
After all, Bullitt has been after Welles' job for six
years. But, he said, the interesting thing is Cordell
Hull is a Tennessee feudist and their psychology is to
get rid of a man but not to put a man back into office.
He said, In fact, night after night Mrs. Hull would cry
and carry on with Cordell to have him give Bullitt a job.
?And he said he has been trying to give him a job. (Incidentally, I heard this through another source. I had
heard all of this before from Mrs. Roosevelt through
Mrs. Morgenthau that they offered Bullitt the Ministry
to Saudi Arabia, which he turned down.)

Then I said, Mr. President, I want to stop being

official; I want to be personal.
He said, Go ahead.

I said, I have just read this book 'Microphone'.

He said, Oh, yes! I have heard about it.
And I said, They paint a picture of me sitting

1343
-7-

at my desk gazing out the window and not doing a nything.

With that the President just howled. Funniest
thing he ever heard. He just howled. Not in any nasty
manner. I said, The only thing I have to do on War Bonds
is to shake hands with the movie stars. He again laughed,
but he was laughing with me, not at me.

I said, It's the most amazing thing. They write

the thing up as a War Bond job, but you wouldn't know I
had anything to do with War Bonds. I said, You know.

Mr. President, if occasionally I do something good, like

the Fourth War Loan, you would say so publicly, then it
would be some answer to the people who say I don't do

anything and, I said, not only for me, but other people

around
you who do well if you would occasionally compliment
them.
it?

He said, Do you think the newspapers would print

I said, At least you can try.

He said, I will. It's a good idea. He said,

You take your own case. You were at fault, because you

sent me a memorandum about the success of the Fourth War

Loan, but you gave all the figures on the radio Thursday
night and then expected me to do something Friday and
left me nothing to do.
So I said, To take you wholly in my confidence,
I wanted to ask you to send me a telegram which I could
read over the radio complimenting me on the thing and the
people around me advised me not to do it because it seemed
too forward to ask you.
He said, That was the thing to do and I would
have done it, but the next morning I could only repeat
everything you had said. But, he said, when you go on

the radio on the next loan I will say something.

1344
-8-

To repeat, I said, For your own sake, to answer
criticism about the people around you who are doing well,
you should publicly compliment them, and he said, I think

you are absolutely right and I am going to do it.
000-000-000

Home
THE WHITE HOUSE

1345

WASHINGTON

PRIVATE AND
CONN IDENT IAL

February 24, 1944.

MEMORANDUM FOR

H. M., JR.

I think that Herbert Gaston is
making a mistake -- or trying to
cover up. It seems pretty well
established that a letter does

exist in the Treasury files, in
spite of Herbert's inability to
find it.

This is really important and
I think you ought to put a sleuth
on it.
F. D. R.

OFFICE

OF

TREASURY DEPARTMENT

1346

WASHINGTON
SECRETARY

March 1, 1944

TO:
FROM:

Secretary Morgenthau
Mr. Gaston

In re: Brown and Root, Inc.
Houston, Texas

The investigation of this case was begun in June, 1942
by five Internal Revenue Agents and in July, 1942 they were
joined by a Special Agent on the theory that fraud existed
in the case. This theory was based on reports made to the

investigating officers by two former Deputy Collectors of
Internal Revenue. The inquiry covered a wide range of transactions by the taxpayer on which it was proposed to base
recommendations for additional taxes in the sum of over
$1,000,000. Some of the items involved were of a technical
nature and contained no element of fraud. Others appeared to
be of a fraudulent nature, and of this number some involved
the question of political contributions. These were supposed

to have been made by the taxpaying corporation through bonuses

to officers and employees and by the latter delivered as political contributions.
Because of complaints coming to the Department that polit-

ical prejudice was involved in the investigation, one of the
most capable and experienced agents of the Intelligence Unit,
Mr. Palmer, who is in charge at Atlanta, Georgia, was detailed
to go into the situation. Mr. Palmer examined the complete
files in the case and interviewed the various agents engaged
in the inquiries. His report showed that Brown and Root,
Inc. were engaged in urgent and vital war production for the
United States Navy; that gross income of the corporation
appeared to have been correctly reported, and that the issues
related solely to deductions taken by the taxpayer against
gross income in arriving at net income.
He found that gross receipts of $5,947,031.33 for 1940

and
FORDEFENSE

BUY
UNITED
STATES

WINGS
BONDS
LAND SLAMPS

$7,401,649.22 for 1941 were reported by Brown and Root,

Inc. The examining agents proposed to disallow as expense
deductions and add back to income totals of $782,773.69
and $1,040,894.99 in the two respective years. The
greater portion of this proposed additional income was

I

1347
based upon either technical issues or the disallowance of
capital expenditures charged to expense. Adjustments of
this nature are not ordinarily considered by the Bureau
as constituting fraud.
Special Agent in Charge Palmer regarded only two features

of the case as affording a basis for consideration of fraud.

These relate to bonuses and additional compensation authorized

for payment to six officers and three employees in the amount
of $168,308.50 for the year 1940, together with checks in substantial amounts issued by Brown and Root, Inc., and related
corporations which were converted to cash during a senatorial
political campaign in Texas. For purposes of establishing
fraud, Agent in Charge Palmer found that both of these issues
were fatally handicapped by technical complexities or inadequacy of direct proof.
It was the conclusion of Mr. Palmer that the facts now
in hand would not successfully sustain a prosecution, and
that the likelihood of developing proof adequate for that
purpose was too remote to justify further extension of the
investigation. He accordingly recommended that the examining agents be requested to submit their reports on the
basis of facts in hand with the view of placing the case

in line for disposition in the field under routine procedure.

The conclusion and recommendation of Special Agent in
Charge Palmer were concurred in by Acting Commissioner

Graves, Assistant Secretary Sullivan, Mr. Irey and myself,

and memorandum with recommendation to that effect was sub-

mitted to you.

You directed that the matter be gone into further in

your absence and disposed of by me after consultation with

the officials interested. This resulted in the conclusion
that the recommendation of Mr. Palmer should be approved

and instructions were issued accordingly to the Bureau of
Internal Revenue. These instructions were conveyed to the
field officers and the case is now in process of preparation for the assessment of taxes. Settlement will be made
in the field under the decentralization procedure.

-2-

100

1348

thank in Cairo
1348

on Presidents return

from Cas a Blan ca
Riley was dunk

in miami day

before
Pres
got
in
On Train Math from

Miami also dimbin g
Wilson coained

him left- 1942

about drinkin
after
that gotcrast
Johnskin west
R

.

1349
March 17, 1944
4:10 p.m.
RE CABINET

Present Mr. Luxford
Mrs. Klotz

H.M. JR: I can't give you more time than a split
second, but Mr. Hull - and this is just for your guidance - reporting on the Argentinian situation said that

when President Ramirez of Argentina resigned, the
statement that he made, whatever it was, bore out

Mr. Hull's contention that he - I don't know what it
was, but it bore out Mr. Hull's contention. And that
Mr. Hull had been looking into the question of sanctions

and had come to the decision that inasmuch as the English

couldn't go along, it was not feasible, had too many
ramifications, and that they thought that they would wait

now a few days and that possibly from within Argentina
something would happen which would be helpful. And
anything that they did in the way of sanctions, which

wouldn't be complete in its effect, would only be an

irritant.

The President spoke up and said, "I agree with that

conclusion. "

I just thought I would tell you that. I hope to

get a chance to see him.

(The Secretary takes call from General Hershey,
as follows:)

1350
2-

H.M.JR: That is the first time I have understood
the thing. Hershey has the authority as to who should

be drafted and who should not. McNutt wants to have the
sole authority to tell Hershey what classes and what
groups. Hershey says that is his authority; Congress gave

it to him. And McNutt sits there and is misleading the
President into the position of thinking that that is

McNutt's prerogative.

Now he says, "What I want is to sit around at a
table with the agencies affected whom I can consult with

and then make up my own mind. Unfortunately, somebody

has to sit at the table. Maybe you'd be the right person
to be Chairman."

I said, "No, no, no." My only interest is the Army

and the Navy, and the President who is getting sold down

the river on this thing. This fellow McMutt talks at

Cabinet the way he would talk to an open audience of ten

thousand people - I am not exaggerating. His voice is

pitched the way you would talk to ten thousand people.

And in the meantime, people from thirty to forty
years of age with children and everything else are all
being taken while McNutt is jockeying for position. It
is important.

When will you be ready to talk about the Argentine?
MR. LUXFORD: I am ready at any time you are. We
had the memorandum prepared, Mr. Secretary, the morning
you handed me the --

H. M.JR: This is the one. (Refers to letter from
General Marshall, dated March 17, 1944) This is terribly

confidential; I .haven't read it. I'll leave it in your
safe-keeping tonight.

MRS. KLOTZ: Can you get it back to us tonight?

MR. LUXFORD: I'll have it back tonight.

1351
March 17, 1944

At Cabinet, after Paul McNutt had been bellowing
for about an hour on the war manpower situation, I
sent the President the attached note.
I also gave the President a memo and said, "I
recommend that you send for Hershey, and instead of

getting this bad publicity, you might get good
publicity." He agreed that he would send for Hershey
over the weekend.

g don't sec how you
can
take
it,
Hope frimp ctemelatop in P

1353
March 23, 1944

The Secretary telephoned Mrs. Brady, and told her
he had called off the idea of taking on Oscar Cox as

General Counsel, and would she be good enough to

so inform the President. (Telephone conversations with

Leo Crowley explain the reasons why HM Jr decided not

to do this.)

The Secretary also told Mrs. Brady to remind the
President about his sending for Tom Corcoran.

1354
March 24, 1944

I talked to Miss Tully, and gave her the personal

explanation as to whom Joe O'Connell is and what a

swell guy he is. She said that she did not know who he
was, but with the explanation I gave her she would now

call it to the President's attention.

Miss Tully also told me that the President was going
to give out the Declaration on the war refugees, and would
also tie it up with the announcement making Pehle
Director of the Board.

e
1355
CONFIDENTIAL

K - Eibrary
DECLASSIFIED per T.0.160
March 27, 1944

A suggestion for the President:
That he set up a Committee of Hull, Crowley and myself

with General Strong as Director and Executive Secretary to
push economic warfare on our enemies with the objective to

deprive them of highly critical strategic materials. The
motto of this Committee would be, "What can we do to end
the war sooner?"

1356
April 3, 1944

I asked to speak to Grace Tully and the

President got on himself. He said that Cordell

Hull had spoken to him this morning about the

monetary conference and it was all right to hold
it in May.
Then I asked him about Joe O'Connell, whether

I

could send his name over. He sort of hesitated

and he said, "Yes, I think it is all right to. Don't

tell him I have a memorandum on him, but send it over

anyway. "

/

1357

April 6, 1944
12:16 p.m.

HMJr:

Hello.

Operator:

Miss Tully.

HMJr:

Hello.

Miss

Tully:

Hello.

HMJr:

Good morning.

T:

HMJr:

T:

HMJr:

Hello, Mr. Secretary. How are you?
All right. You could have almost bowled me over
the other day when the President got on.
(Laughs)

I couldn't remember what I wanted to talk to

him about.

T:

Huh?

HMJr:

I couldn't remember then what I wanted to talk

T:

HMJr:

to him about.

Oh. Well, that was too bad, but he - he wanted
to talk to you about something, so he said when -I told him you were going to call in, and he said,
"When he calls in, I want to talk to him".
Well, it was very pleasant for me.

T:

Good.

HMJr:

Grace, now that he's here a little longer, I wonder
if I couldn't see him a few minutes on some politics.

T:

Well, now, I don't know -- he hasn't been seeing
anybody.

HMJr:
T:

HMJr:

He hasn't been seeing anybody?

No, and I don't know whether they're going to relax
the rule on him or not.
Oh. You mean he hasn't seen Hull or anybody?

1358
2

T:

Well, I think he did have one luncheon with Hull

HMJr:

Uh huh.

a few days ago.

T:

HMJr:

Yeah.

T:

But actually he has had no appointment

HMJr:

Hello?

T:

Yes. I say, he has had no appointment list, you
see.

HMJr:

No.

T:

I mean, maybe one person has been in but that's

HMJr:
T:

about all in his day -- or in two or three days.
Yeah. Well, I'll leave it with you.

All right. I'll keep it in mind. I had it in
mind anyway.

HMJr:

Well, I -- it's something I'd like him to know

T:

Yes, sir. Well, let's see then if he has any

about before he leaves.

appointments, if we can arrange one for you.

HMJr:

It's some -- it's some people around him I'm
afraid are selling him down the river.

T:

Uh huh.

HMJr:

And fairly important people.

T:

Yeah.

HMJr:

And I've got a -- and I'd like to -- if I had

T:

Right.

HMJr:

I mean, I think he ought to know about it.

T:

Uh huh. Well, all right, Mr. Secretary, I'll

a chance, I'd like to show it to him.

try and give you a ring

-3HMJr:

: 359

Ag I say it's not my -- it's -- if I could get

it to do
him
you know. Well, you see what you.
can
for--me.

T:

HMJr:
T:

I will.
How is he feeling?

Well, I think he's feeling better. He's still

not
to snuff,
butwas.
I think he' S feeling a good
dealup
better
than he

HMJr:

I understand the day now is Saturday.

T:

I'm not sure yet. I didn't know anything had
been determined. I know it was being put off
until toward the end of the week or -- but I
didn't know it was definite.

HMJr:

Yeah.

T:

Uh huh.

HMJr:

Okay.

T:

All right, Mr. Secretary. I'll keep it in mind

and give you a ring.
HMJr:

Thank you.

T:

Fine, sir. Good bye.

1360

April 7, 1944

I gave the attached to the President. He read
it very carefully and said, "I see somebody is talking

out of turn. If there is any more, I would like to
see it. "

1361
The Roosevelt-Stalin axis is gaining strength and the Roosevelt-Churohill

in

axis is losing strength in about equal ratio.
That is the opinion of Leo Crowley and it is based on what the Prex

said at the Cabinet meeting right after his return, plus quiet conversations
Crowley has had elsewhere, plus, he admits, some reading between the lines on

his part.

"If I were going to write & story I'd certainly say that Roosevelt had
to play the role of peacemaker both at Cairo and Teheran," Crowley said, "and

that he thoroughly relished that role. There could be no mistaking that they
way he talked at the cabinet meeting. I'm basing that statement on what was
said at the mesting.

"It WS.S quite obvious, too, that Churchill didn't deviate an iota from

his announced position--that he isn't going to preside at the liquidation of the
British empire. So he was at odds with Chiang at Cairo and also with Stalin
at Teheran. I certainly would suggest that Roosevelt sat in the middle at
both conferences and that it was necessary for him to be there-in the middle-to preserve peace.

"Of course, Roosevelt was in a commanding position at both conferences

because book of him he had our enormous industrial output, which our allies
think of in terms of lend-lease, and 80 neither one was going to get tough vs th
him.

1362
DOPE--2

"But it was perfectly obvious that the President is very much impressed
with Stolin and not quite so much impressed as he has been with Churchill.

I suppose that it is natural, in view of the President & views as shown in this
country. In come ways it is disturbing to a person like myself. I oan understand Churchill's point of view; I think he is suspicious of the whole business.
He knows what Britain has and he intends to keep it if possible, but, of course,

he isn't in any position to get tough with the President and that puts him in
a bad spot as far as Chiang and S+alin are concerned be a a u se the President is
impressed with them."

It is hard to put in words, but it is obvious that Crowley, and
undoubtedly a lot of mon with him in the government, is a bit apprehensive

himself about the Presidential partiality toward Stalin. Crowley said, for
example, that ho thought the people of this country could do business better in

the long run with Britain than they could with Stalin. He also said that the
"White H, use orowd," casually mentioning Hopkins and Nilos to illustrate the

ones he meant, would be glooful at the Presidential turn toward Stalin.

"I'm just guessing at this," Crowley said, "but I'll bot you that when
Churchill stayed at the White House that time and had occasion to talk with a

lot of those followe at various times, he went to bed many a night and said to
himself: 'I'm dealing with a bunch of God-damn fools."

-0-0-0Crowley is in bad humor because too many of his top men in FEA are dis-

playing what he calls prima donna oharaoteristics. They are, he says, jealous
of each other and constantly complaining because they think some colleague is

getting more recognition than he deserves. Among the complainers are Currio
and Schubart, the latter a New York banker. Crowley is going back to his
Wisconsin home for the holidays but it is conceivable that he may start, a houseclearing when he gots back if the complaining hasn't subsided.

-0-0

1364
April 22, 1944
WIRE TO THE PRESIDENT

Elinor and I deeply appreciate your having us notified

that Bob is well and safe. Affectionate regards.
Henry Morgenthau, Jr.

1365
April 22, 1944
WIRE TO THE PRESIDENT

Elinor and I deeply appreciate your having us notified

that Bob is well and safe. Affectionate regards.
Henry Morgenthau, Jr.

1366
APR 2 4 1944

J.

HM The is five
My dear Mr. President:

for

You will recall that, at the time of
the creation of the War Refugee Board, Myron

Taylor was somewhat disturbed about the confusion

and difficulties that might arise in relations
between the new Board and the Intergovernmental

Committee on Refugees. In view of his perturbation

,

at that time, you may be interested in learning
the most recent developments.

As a result of a talk I had with
Mr. Taylor, Sir Herbert Emerson, Director, and

Mr. Patrick Malin, Vice Director of the Intergovernmental Committee, came to Washington to carry

on conferences with Mr. Pehle and to meet with the
Board. These meetings have been extremely cordial,
a complete agreement has been reached on relations,

1367

-2and the future seens most promising. In a recent
conversation with me, Mr. Taylor has expressed his
complete satisfaction at the way the whole matter is
progressing.

Faithfully yours,
(Signed) E. Mergentham, Jr.

Secretary of the Treasury.
3

The President
The White House.

,

1368
Memorandum of a Conference at the White House
May 18, 1944, 12:30 P.M.

Present: The President

Ambassador Winant
Secretary Morgenthau
Mr. White

Mr. John Winant remained with the President from his previous conversation when we were called in. After some conversation between the
President and the Secretary regarding the rescue of the Secretary's son
at sea, the Secretary stated the purpose of his request to see the
President.

The Secretary described very briefly the progress that had been
made toward getting agreement on the principles for an International
Monetary Fund, and the President commented, "Fine." The Secretary said
that he had previously informed the President we had hoped to have a
meeting of the monetary conference in May but too many difficulties
presented themselves to have it cleared up by May and so we wanted to
call the conference for July 6. The President wanted to know why not

have it at the end of June. The Secretary replied that that might

interfere with the Republican Convention, which opens on the 19th of

June. The President smilingly replied that he didn't see why that
should interfere. "We ought to provide our guests with some entertainment", he laughingly said. The Secretary said he felt that for

several reasons July 6th would be a better date and the President said

that it was all right to go ahead and call it for the 6th of July. I

commented that the conference might carry over beyond the Democratic

Convention. The President didn't feel that that was important and said
smilingly that that too might provide the guests with some entertainment.
The President reminisced on a story about Keynes and then asked me
whether Keynes was friendly. I replied that Keynes was an extremely

able and tough negotiator with, of course, a thorough understanding of
the problems that confronted us, but when not negotiating or discussing
points of differences that he was quite friendly.
The Secretary commented that Winant had done an excellent job for

us in London in getting the British to come along.
The Secretary mentioned that the Russians had cooperated very nicely
and the President remarked that we seemed on the whole to be getting
along well with the Russians on a number of matters.
I mentioned that the President would have to welcome the delegates.
He wanted to know how many there would be and I thought that there would

1369

-2be several hundred. The President replied that it would be difficult
to get them in the White House but it was agreed if necessary the top

man of each delegation could appear.

The President asked where the conference is going to be held and
the Secretary replied that we do not know yet, that French Lick had been

suggested but that it was hot there in the summer. The President said,
"How about Portsmouth, New Hampshire?" The Secretary thought that
might be an excellent place.
The Secretary then said that he was hoping the President would

agree to participate in the opening of the Fifth Bond Drive on June 12.

The President smilingly replied, "Now let's see. I didn't speak in the

Fourth Bond Drive and it ran very well without me." The Secretary
replied, "That may be but this next one is more important." The
Secretary described briefly the kind of program they had in mind for
the opening day and he said that Orson Welles was in charge of the
program but that it would be a serious affair in which the scenes were
to be carried to many homes-- the homes of soldiers-- depicting what

,

Nazism means to that home, and the program to wind up by going to the
President's home, saying what Nazism means to his home. The President
replied, again smilingly, "We don't have any Nazism in our home." The
President said he would like to have Orson Welles repeat the performance

of the invasion from Mars. He laughed and said that it "scared the
pants off a lot of people" and he would like to hear it. The President
made some other facetious remarks, but the Secretary returned to the
point and said they would like to have him participate in the program.
The President said, "Well, I may be here; I may be in Hyde Park or in
Shangri-La." The Secretary said, "Well, I will take that as acquiescence.
I will take that as agreement on your part to participate." The President

did not comment on-the Secretary's remark.

The conference lasted about 20 minutes. Mr. Winant remained after
our departure.
H. D. White

Read
6/447

June 8, 1944
1:00 p.m.

1370

WHITE HOUSE CONVERSATION

Present: Mr. Pehle

H.M.JR: Mr. Pehle will dictate to his people what
happened as far as the War Refugee Board, and will give it
to us for our diary.

first?Then I said to the President--which should I take up
MR. PEHLE: The Belgian-Dutch currency.

H.M.: JR: "Some time ago we put up to you the question
of our furnishing General Eisenhower with Belgian and
Netherlands and Norway paper currency and simply giving

them a book credit and not paying them dollars for this,
the reason being that we felt that they would charge us

for invasion, the cost of invasion, and this would give

you the opportunity to have something to trade with them

when the war was over."

Well, he thought a minute and said, "Fine, fine; you
have a bit of Scotch blood in you. I see."
I said, "Well, you told me when I first came down

here if I got fifty-fifty with the English, it was good."

Well, he said, "You are learning.
He was very much pleased.

I said, "The only person who is pushing me on this
thing is Dean Acheson, who is quite excited about it."

I said, "Watson will have to do a little lying to say I

have been trying to get in to see you, because I didn't
want to bother you this week."

He said, "That is right." I said, "Winant isn't

worried about it."

"That is all right," he said, "I'd like to sit down

1371
2-

with the Queen of the Netherlands."
He rubbed his hands and said, "How much are they

going to charge us?" He said, "Just keep on the way you

are.

Is that about right?
MR. PEHLE: Exactly right.

H.M.JR: But he was distinctly pleased with it.
Then I said, I reminded him about Winthrop Aldrich
having been over to see Hull, and his having okayed the

memorandum to Jesse Jones.

He interrupted me and said, "We killed that."
MR. PEHLE: That is right.

"Yes, but if you want some fun," I said, "you kid

Stettinius about old man Morgenthau looking after the

New York banks and private enterprise and how much the

State Department has gone State Socialistic.'

He says, "Whom should I kid?" I said, "You kid

Stettinius. He said, "I will; that is wonderful.
Isn't that about the gist of the thing?
MR. PEHLE: That is right.

H.M.JR: Did I bring up anything else?
MR. PEHLE: I thought there was something else. I

was trying to think.

H.M.JR: I thought there were three things.
MR. PEHLE: Oh, yes, the Republican man.

H.M. JR: Oh, yes. I said we were waiting to hear

from Barkley, and as soon as we heard from him, why, would

1372

-3he care to announce this thing Friday.
And he said that he would be glad to.
(To reporter: Send a memorandum to Fred Smith,

before he leaves tonight, to see whether we have the full
list of the delegates to announce at the Friday press

conference. Also, let Mr. Bell read these notes, if you

type them up, so he knows what has happened.)

(Secretary holds telephone conversation with
Senator Barkley, as follows:)

137,3

-4(Secretary speaking to Mr. Early over White House phone:)
Hello, Stephen

I just saw Gamble and Smith, and they are bubbling

over with enthusiasm. I think it is a wonderful idea of
yours

It will
That is true
Steve, Pehle and I saw the President, and he has

finally cleared this thing of bringing these people over
to this country, and he would like to announce it tomorrow
Yes

Now, what time could Pehle come to see you to give

you the details

Write them and send them to you?

I'll have him get them to you this afternoon
Right

You're welcome

(End of conversation)

Write them and then send them to him - the details.
MR. PEHLE: Something the President can read from?

H.M.JR: Yes. I don't know whether it is the telegram to Murphy - or give him enough so that he can under-

stand what it is about--the President. If it is too much,

that is all right.
Okay?

MR. PEHLE: Right.

1374
POINTS FOR DISCUSSION

1. Obtained camp from Army.

(a) Within 24 hours (Jack McCloy)
(b) Fort Ontario or Madison Barracks
(c) Either camp will house at least 2000 refugees;
Miss Laughlin visited both camps; either camp

ideal; brick buildings and well built barracks;
heat; hospital; gymnasium; theater; fully
equipped; either camp can be made ready in 24
hours; excellent railroad facilities to both
camps; both camps in farm labor shortage areas.

2. Administration of camp by War Relocation Authority.
(a) Approved by Ickes
(b) Security precaution by Army
3. Financing of camp.
1

(a) Housing and equipment by the Army
(b) Personnel by War Relocation Authority

(c) Food and other supplies - Foreign War Relief
appropriation. (Estimated amount - $250,000
per year.)
(d)
Board also has funds and private agencies have
indicated willingness to contribute
4. Documents ready to put program into effect.
(a) Cable to Murphy
(b) Memorandum to agencies involved

5. Message to Congress.

(a) Recommend that it not be sent at this time.
(b) Includes statement on what other countries
are doing and on what we are trying to get
them to do.

JED:JWP:mgt 6/8/44

1376

MEMORANDUM FOR:

Secretary of War
Secretary of Navy

Secretary of Interior

Director of Budget
Executive Director of the War Refugee Board

There is attached a cable which I have dispatched to Robert
Murphy in Algiers, requesting that he make arrangements for the
departure to the United States as rapidly as possible of approximately 1,000 refugees now in southern Italy.

These refugees will be brought into this country outside of
the regular immigration procedure and placed in Fort Ontario near

Oswego, New York. While the War Refugee Board is charged with the

overall responsibility for this project, the Army shall take the

necessary security precautions so that these refugees will remain
in the camp and the actual administration of the camp is to be
in the hands of the War Relocation Authority.

,

Accordingly, the following steps should be taken as expeditiously

as possibles

(1) The War Department and the Navy Department shall send

whatever instructions are necessary to the military authorities in
Italy and North Africa to expedite the transportation of these
refugees to the United States.

(2) The War Department shall arrange to furnish and properly
equip Fort Ontario to receive these refugees; shall arrange for their
transportation from the port of arrival to the camp; and shall arrange
for the necessary security precautions.
(3) The War Relocation Authority shall make arrangements to
handle the actual administration of the camp, which will be designated
as an Emergency Refugee Shelter.

(4) Until UNRRA is in a position to assume the financial
responsibilities involved, the Bureau of the Budget shall make
arrangements for financing the project; using to the extent possible

any available funds of the War Department, the War Relocation Authority, and the War Refugee Board, and from the Foreign War Relief appropriation, and if necessary drawing upon the President's Emergency Fund.

Attachment.

1377
June 23, 1944

I suggested at Cabinet that they put Marshall and
King on the air to report to the people on what they saw
to counteract the stories that the war would soon be over.
Then I made the suggestion that War Bonds sponsor this
program, and they all laughed.

After Cabinet, I asked Grace Tully to take it up with
the President. Jimmy Byrnes later said to me that he

thought it would be a mistake to have War Bonds sponsor
such a program because then we would be criticized just as
we were on the Japanese atrocities.

1378
June 28, 1944

I saw the President this morning, and he seemed to be

very friendly. He immediately started off by saying that he

had seen Kung, and from the way he talked I gather he got my
message about referring Kung to me on foreign exchange because

he said that he had told Kung to take this matter up with me.
The President said - I don't know whether he suggested this to
Kung or whether he was giving it to me as an idea - "Why not
give the Chinese a new currency similar to what we had done

for France?" The President said "I am not recommending it.

I

just want you to think about it. Then he said that he had

also talked to Kung about getting more goods over the hump

(to fly it in) because he said that the only way to handle

the inflation problem was by getting more goods.

Then the President, on his own, got on to DeGaulle, and

I said that I understood there was a very friendly cable in.
The President said, "No, quite the contrary. It is very bad."
I asked him whether I could get it from Grace Tully, and he

said, "Yes," but Grace said she didn't know what he was talking

about, but she would look into it and if it came out of the

Map Room she would have it paraphrased and sent over. I asked
him whether he would want me around when DeGaulle is here, and

he said, "Very definitely.' He said they would devote one day

to finances and that I should be there that day. I said I would
take it up with Stettinius as to which day I should be in

Washington.

I was simply amazed how the President had in his mind

everything that I wanted to talk to him about. Even some of the
things which I hadn't written down, he brought up himself.
The President said, "Elmer Davis sent me a memorandum

yesterday after my press conference saying he thought it was a
mistake to put the three Generals on the air, and that the
country would think there was some terrible catastrophe and
that we were trying to quiet the country down against this."
Davis said he thought the people of the country would think that

the war was going much worse than it is. I said, "Well, I don't

know what is the matter with Davis. Maybe he's saying those

things because he didn't think of this himself." At first I

said to the President, "As far as I am concerned, I am not
doing this for the Bond Drive. We are going along fine and are

1379

-2about two and one-half billion above schedule." I said, "I am
only interested in getting over the idea to the people that the
war isn't over, and unless somebody else gives me a better idea,
I am for putting these three top military men on the air to tell
their story to the people." When we first started to talk about
it, the President seemed to have in mind that it was perfectly
agreeable to him to have the Treasury do it.
Then Pa Watson came in to try to get me out so that Halifax

could come in. I was a little late because the President had kept
me waiting 20 minutes. I said, "Well, this thing has to be
settled now," so the President told Watson to get Elmer Davis'

memo from Grace Tully and also to get the memo from Steve Early.

In Early's memo, he said that if it was going to be done, Treasury

should sponsor it.

Then Watson and Early and I got together, and Watson said

that the President didn't want Treasury to do it. Steve said that

Elmer Davis was working on a statement to be signed by these

three tep ranking fellows to go to the President, and he thought
that was the way to do it. To make a long story short, we

aren't going to have anything to do with it, and I gather that
these three top men are kicking about it any way.

During the early part of our conversation, I told the President
how upset I was last night after listening for two or three minutes
to Clare Luce, so he said, "Well, that surprises me because Pa
Watson and Eleanor Roosevelt thought she was wonderful." I said,
"She just turned my stomach. She made me sick. I said, "Who
is going to answer people like that?" The President said, "I am

going to do it very quietly. I am going to say that this is the

kind of thing I am sure the parents of soldiers don't want and
the soldiers don't want." He said he thought the Republican
Convention had slipped to an all-time low, and he just wasn't going
to get into any arguments with her. I said that I thought his
approach was a correct one.

I then told the President that I thought it was very necessary that Bob Hannegan get two or three top flight writers who
would prepare speeches to be put in other people's mouths to
answer these people. I didn't get very far with him on that. I.
then mentioned it to Steve Early, and he said he had an exact plan

1380
-

of that nature worked out with Postmaster General Walker, but

that nothing happened. So I said I thought that it ought to be

dug up again, and he said he would after the Democratic Convention.
Then Early asked me how I felt about Henry Wallace for

Vice President, and I said I thought the President ought to have
him run again mainly so that the people couldn't say that he
the President, was disloyal to Wallace. Well, we went on talking
and by the time we got through I said that I wouldn't want to see

Wallace President of the United States. I said that I couldn't
see much difference between Wallace and Bill Douglas. Then
Early asked me what I thought of Senator Lucas, and I said that

as far as I knew I thought he was fine. He said he was a wonderful

speaker, and he said that the Governor of Georgia told newspapermen

yesterday that the President told him that after the Armistice
and after the Peace Conference he, the President, want to go

home and look after his private affairs. Steve said that If that
got around it would be terrible.
When I went in, Pa Watson took a couple of seconds to tell
me how terrible he thought Wallace was. Steve said that yesterday
at the State Convention in Kentucky the delegates got up and tore
Wallace's picture down off the wall, and everybody cheered. He
said. that there was an article about it in today's New York Times.
I said I thought it hurt the President when he acted the way he
had over the Wallace-Jones fight, and Steve agreed. Then Early
asked me whether I knew that Jesse Jones had five doctors and was

very sick. I told him that I didn't know that. He said that

Jesse Jones still says he can straighten out the Texas political

situation, so I said, "Well, if he wants to he certainly can.

I asked the President if he wanted to be kept posted on
Bretton Woods, and he said that he did. He asked whether we would
have some sort of wire service and I said that I would see that we

did.
,

I never saw Steve Early so friendly towards me. He kept

stroking me on the knee, shoulder and arm.

1381

The President said, when he saw Kung and that he
referred Kung over to me on the money thing, "What I am

trying to find out, where is the Chinese army and why
aren't they fighting because the Japanese seem to be able
to push them in any direction they want to".