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221 THE UNDER SECRETARY OF THE TREASURY WASHINGTON March 10, 1942 MEMORANDUM FOR THE FILES Mr. Harold Smith, the Director of the Budget, called me about one o'clock today, saying that he had received instructions from the President to draft an executive order setting up an Alien Property Custodian office, giving that office authority over the alien property in the country and leaving with the Treasury the administration of the foreign funds control. I asked him if we could see a copy of the order which he would present to the President, and he said that he could not give us a copy as he was under instructions from the President to get the order to him as quickly as possible and he did not want him to confer with a lot of people outside of his office on the matter. He said that he asked the President specifically if he could tell the Secretary of the Treasury that such an order was going to be issued and while the President was not very definite in his approval of this suggestion he did say that if he did tell the Secretary of the Treasury about it, he did not want any long wrangles and conferences over the matter. I then told Mr. Smith that, speaking from memory, I thought the Secretary had recommended at one time to the President that an executive order be issued setting up an Alien Property Custodian and giving him authority over any of the alien properties which he wanted to take over. As he took over the properties, the Treasury would issue to him a general license freeing the funds of the concerns involved. This would leave the foreign funds control in the Treasury. I told Mr. Smith also that this contemplated a committee composed of the Treasury. State and Justice (the Alien Property Custodian representing the Department of Justice) to pass upon the property so taken over by the Custodian. I told him it was my recollection that this draft of executive said order was sent to him some time about a month ago. He he did not recollect it. RODEFENSE BUY UNITED Mr. Smith said he wanted me to tell the Secretary insist of our conversation and that he hope the Secretary would not assured seeing a copy of the order; that he could rest upon that the Budget would do everything within its power to protect 222 -the interests of the Treasury; and that he thought it might be better in the long run if, after the order is out, the Secretary could say that he had never seen it. I related the foregoing to the Secretary at approximately 2:45 p.m. and he immediately called in Foley, Bernstein, Gaston and Kuhn and asked me to repeat what I had told him of my conversation with Mr. Smith, which I did. In his office there was a general discussion as to what the Secretary should do with the press releases that he proposed to issue tonight for tomorrow morning's papers on the General Analine Dye situation. After some discussion he decided that he would send the releases to the White House, asking the President to give him a final clearance for their release tomorrow morning. He then asked me if I would mind calling the Director of the Budget again and asking for an opportunity to look at the draft of the executive order in view of the situation in which he finds himself. I came back to my office and immediately called Mr. Smith. told him that the Secretary had conferred with the President on Thursday of last week and went over very carefully with him the situation with respect to the General Analine Dye and what I he contemplated doing with that company. The President authorized the Secretary to go ahead with his plans and clean up that situation with respect to this company, and also indicated that he wanted him to go ahead and clean up the situation with respect to other firms in the same status. I told Mr. Smith that the Secretary did not want to release these press statements and then find that the whole authority had been transferred to some one else who might reverse his decisions and make.it embarrassing not only to him but to the President. Smith said he could not furnish the Treasury a copy of the executive order unless he cleared it with the President. He said he would try to talk with the President again today about it and if he was able to get to him, he would tell me about it. He said that in view of the situation in which the Secretary finds himself, he suggests that he hold up the issuance of any press release on the General Analine and that he, Smith, would have no objection if the Secretary talked further to the President about the matter. I then told him that the draft of executive order referred in our previous conversation Was sent to him with the Secretary's letter to of January 2. 1942, in which letter Crowley and the Secretary alien had agreed on a division of authority as to foreign funds and this property. He said that since talking to me he had discovered 223 - -3- - letter and also the executive order and had read it over, and that he could definitely advise me now that the idea of a committee is out. Mr. Smith left the impression with me that he was proceeding under orders from the President to draft this executive order along certain definite lines and that he could not give the Treasury, and probably any one else, although he did not say so, a copy of this order. He promised. however, to call me if he got any word from the President on the matter. DWB My conversation with Mr. Smith - March 11, 1942 Harold Smith telephoned me about 5:30 P.M. today, saying that the President had signed the executive order setting up the office of the Alien Property Custodian and appointing Leo Crowley as its head. He then told me that he had discussed this order with the President this morning and told him of our conversation yesterday and about my request on behalf of the Secretary for a copy of the order before its issuance. He advised me that the President said, "You leave this order with me and I will take care of that end of it." He said that he had wondered when he saw it on the ticker whether the Secretary had seen the President. I told him he had seen the President early this morning but 80 far as I knew the question of alien property was not discussed. Mr. Smith said that he WB.S calling the because he wanted to keep our records straight. He had promised to ask the President about the matter, he had done that, and the result was that the President said he would take care of it. awly 224 March 10, 1942 3:30 p.m. ALIEN PROPERTY CUSTODIAN Present: Mr. Gaston Mr. Bell Mr. Foley Mr. Bernstein Mrs. Klotz H.M.JR: Dan, for the benefit of those who haven't heard, tell them please of Harold Smith's conversation with you. Will you once more? For the benefit of those who don't know, he is the Director of the Budget. (facetiously) MR. BELL: Harold Smith called at about five minutes of one and said that he had been given directions, I take it, last week-- MR. GASTON: My answer is, says you. by the President to draft an Executive Order which would set up an Alien Property Custodian and splitting - allowing the Treasury to keep the Foreign Funds end of it, allowing the Alien Property Custodian to take over the properties and operate them, and as they operate them there is some sort of an agreeas to handling funds. Then I told MR. BELL: about the agreement between and ment Harold with Smith the Treasury this the Secretary split would Leo Crowley some months ago AS to where be made. I was talking from memory, that the Alien Property Custodian would take over the properties and when he took them over the treasury would issue him, as I recall, a general license under which he could operate them. He said, "That is apparently just about what the President had in mind. He said, 'I am new in this thing. I have "I only been dragged in in the last ten days. He said, take it that the President got that idea from the Secretary then back there." He said, "That is just about what he -2- 225 wants. " Then he went on to say that he had a draft of an Executive Order before him which he wasn't satisfied with and he had been working on. He said the President directed him to have an Executive Order on his desk Monday, yesterday, and that he had found some things in this Order that he didn't think were right and therefore he had taken a longer time to submit it to him. One thing he said that there were several things in the Trading With The Enemy Act which, at the present time, is lodged in no one. He didn't think the Treasury had them, and he didn't think the Treasury needed them or wanted them, but he said that this Order picked them up. "Now," he said, "I don't think that whoever is Alien Property Custodian ought to have them either. I don't know what they are. He said Wallace's board wants them and should have some of the powers enumerated. MR. GASTON: You had better look out for that because we have got some there that we want and I think he had ought to take a look at that thing. Huntington has made quite a study of the Trading With The Enemy Act. MR. BELL: He also said he thought the Order was broad enough to take over the Federal Reserve functions of con- trolling installment credit. I asked him about seeing the Order and he said that he thought it would be better if we didn't see the Order because he was directed to get it back to the President and do as little conferring as possible, and he said he could assure the Treasury that the Budget would take care of its interest and he thought it would be better after the Order was out and was being discussed, if the Treasury could say that it hadn't seen the Order and had had nothing to do with its drafting. That is about the story, as I remember it. H.M.JR: Well, I have had time to think it over since you talked to me and I have no reason to believe that the Director of the Budget will take care of the Treasury's interest. He never has. I would like you, subject to what these people say, to ask to see it. If he wants to turn me down, that is his business, but I certainly would like our boys to take a look at it. -3- 226 MR. GASTON: By all means. H.M.JR: and then if he wants to say to you, "No, you can't see it,' then we can always say, "Well, we didn't see it. We asked to see it and we couldn't. But I have every reason to believe he would do anything in the world to cut my heart out and no reason in the world to believe he would look after my interest. MR. FOLEY: I wouldn't trust him to take care of our interests because I don't think he knows enough about it. MR. GASTON: This thing about what he mentioned about the Trading With The Enemy Act, that is a very intricate thing, and there are a lot of things involved there. we certainly ought to have a look at that because the Treasury had the full administration of the Trading With The Enemy Act in the last war and several people around here have been at pains to go into that Trading With The Enemy Act very carefully. I don't know why we have to - this thing creating an Alien Property Custodian, because we had an Alien Property Custodian in the last war everybody seems to think that is the way to do it. And it worked damn badly in the last war and it resulted in a scandal, and I don think that power ought to be given to any one man, and I think that point ought to be made. I think there ought to be an Alien Property Committee with an executive - with an administrator under the Alien Property Committee so that several important, upright, reputable people would have a check and a watch on what is being done. MR. KUHN: Why shouldn't we ask to see the Order? I mean, what is it - what harm could come from asking to see it? H.M.JR: I sent him our draft on January 7th. MR. BELL: Well, I think he ought to have that called to his attention. H.M.JR: well, he has it. -4- 227 MR. BELL: But he said he didn't remember it and he didn't think he had it. Maybe he has looked since I talked to him. I told him I thought he had it and he said he didn't remember it. But I think he feels that he is under some instructions from the President to do as little conferring as possible outside of his own office. H.M.JR: Well, Dan, unless you say you don't want to do it, then I want it done. I would like you to ask him - that we would like to see it. MR. BELL: I don't mind asking him. H.M.JR: Do you have any inhibitions about it? MR. BELL: No, I don't. H.M.JR: Then I would like to be on record that we asked him, very, very much. Now, there is something awfully funny about this business. I go and see the President Thursday morning and he tells me to go ahead with the three companies. He saw Harold Smith right after me. That was on the ticker and McCloy told me so. That was when he got the order to go ahead. Now, unfortunately, due to circumstances over which we have had no control, we are not able today to take Aniline and Dye, are we? MR. FOLEY: No, we can't get a forum of the board before next Monday and that is what I was talking to Crowley about, and Crowley said when I was just over there that Smith was working on an Executive Order to create a new independent agency. He said, "I think what you are doing on General Aniline is just right and I think they are playing horse with you in so far as getting that board to ether up there is concerned because they think some kind of an Order is going to come out, and I think you ought to announce your president of your new board and if you want to send a memorandum to the Secretary of the Treasury to that effect I will join with you in making that recommendation, and if this Order should come out I want you to go right ahead with that and 228 -5- - - I want to confer with you on Aniline and Schering and American Bosch, and I would like to see you fellows complete what you have started on those things before anything is signed. H.M.JR: Before what is signed? MR. FOLEY: The Executive Order setting up the independent agency. So he apparently knew-- H.M.JR: I don't care what anybody is doing, this is more important because this is - the thing that we settled one thing, Dan. You don t mind calling up when you leave here, do you? Let Mr. Eccles and all wait because I have spent more hours on this thing than almost anything in the Treasury. Now, supposing we go ahead based on a joint memorandum from you and Crowley to me. MR. FOLEY: les. H.M.JR: And announce this to the press, you see. MR. FOLEY: Yes. H.M.JR: In the first place, let me go back a minute. Is Crowley going to be the Alien Property Custodian? MR. FOLEY: I gather he thinks so. H.M.JR: And I get this memorandum and we give it Now everybody think carefully. And you can't get and so forth and so on out. your board together Executive to ratify it, and supposing before the Alien - this Monday Order comes out and they reverse us. MR. FOLEY: It would be very bad. H.M.JR: For whom? MR. BELL: You mean who reverses us? H.M.JR: The President of the United States. ne says, "I don't want Mr. McConnell as the president of -- 229 this corporation. I want John E. Mack." Who is it bad for? MR. BELL: It is bad for you. H.M.JR: I don't agree. MR. FOLEY: It is bad for the President. H.M.JR: Exactly. MR. FOLEY: He told you to go ahead. H.M.JR: Yes. MR. BELL: Yes, but you are not going to say that. H.M.JR: I certainly am. MR. BELL: Then you have changed. H.M.JR: No I have not. I certainly will say I went in to see the President on Thursday morning and asked him for this and he told me to go ahead. MR. KUHN: No, it will be bad for the Administration because it will create the sense of confusion and cross purposes here in Washington which is just the worst thing to spread at this time. H.M.JR: Well, I am not causing it, Ferdie. MR. KUHN: No, you were asking what would happen if you were to give this to the press. H.M.JR: This is the time for you to do your stuff, Herbert, that you did yesterday. You made your little speech yesterday and I was very honest and said it wasn't necessary. This is the time to do your speech. MR. GASTON: About making a fight for this thing? -7 - 230 H.M.JR: Yes, this whole thing. Why should I let the President - what do you want me to do - I mean, sit here and now wait another two weeks? The President could call me up on the telephone. I happen to know this but supposing I didn't know it. Ed Foley recommended this thing this morning before he knew anything about it, Bell, and I am simply following the plan that Ed recommended before he knew about the President. Ed recommended this this morning and I said to him as soon - I got five minutes for him to sit down and we cleared it. He hasn't changed one bit since this morning. Since this morning this thing comes in. MRS. KLOTZ: What if the President insists on John E. Mack? Are you going to go out and have a fight with him about it? MR. FOLEY: He can't. I don't see how the President can insist on John E. Mack. He told the Secretary to clean this thing up for him. We have called in these fellows. It has gotten all over the place. That is why I want to announce it right now, a, to clarify the air, and b, to forestall anything that John E. Mack and these members of the board might attempt to do between now and the time we can get the board together and take their resignations and put in a new board. I mean, it is pretty public. We have told each one of the directors of this company to see if we could get a quorum before Monday and told them what we had in mind, and the men that were in here yesterday know. I believe once the thing gets rumored around it is better to make a public announcement of it when you are dealing with somebody else's property than it is to allow rumors to float around. MR. KUHN: Ed, the rumors in the first place are not widespread. I mean, they are here in Washington in Jerry Klutz column and such places, but you wouldn't call it all over the country. MR. FOLEY: I wasn't thinking about that. I was talking about putting this new board of directors and this new president in the General Aniline and Film. MR. KUHN: But it isn't really a public issue. The -8- 231 public isn't very much interested, and I was only thinking in terms of telling this to the press now when you know perfectly well that there is a danger that the whole thing may be reversed next week. MR. GASTON: The whole question, as far as I can see it, is what is the most effective way to stop an order going through that is going to put this thing in the wrong hands. H.M.JR: That is right. MR. GASTON: The question to be considered is whether our taking this action now will tend to cause them to revise that order so that it will be an order along the right lines or will the President be enraged by this thing and think that you have slipped something over on him, and then go ahead and make a single Alien Property Custodian, and Leo Crowley the man. H.M.JR: You have changed. MRS. KLOTZ: I haven't changed. I would be off of giving it to the press, but knowing you, you have never done this. Will you want to do it? H.M.JR: Well, let's say that Foley came in this morning. MR. FOLEY: Sure. H.M.JR: I am going - you see, what we are doing is this. We are doing it - I am doing it. I am raising in you people's minds that the President having told me to do this Thursday, that he will direct the new Alien Property Custodian to reverse me, you see. MR. GASTON: That he will not direct the new Alien Property Custodian to reverse you. H.M.JR: No, that he will. Now, the right attitude to take is, the President has never done that to me in his life and the President told me to go ahead, so I have -9 - 232 nothing to worry about because I know the President won't reverse me. MRS. KLOTZ: But supposing he does. MR. GASTON: Is this communication from-- MRS. KLOTZ: There is always a first time. H.M.JR: The point I am trying to make with you is that I am not doing anything against the President. 1 am simply carrying out his orders. MR. BELL: You are not doing anything against the President in carrying out his orders, but if he should reverse you, I still don't think you can give out to the press, "Well, I can't help it, I had the President's approval." You never have done that. I agree with Mrs. Klotz. MR. GASTON: That is immaterial. The press will know that he did it with the President's approval. MR. BELL: But I don't think he will make a statement publicly that he did it with the President's approval. H.M.JR: I have got a solution that will satisfy everybody. It is a compromise. The press release will be written with a memorandum from Leo Crowley. I will send it over to Miss Tully and say I am releasing this for the Monday morning papers, but before I do it, as a final -"The President has told me to go ahead, but just as a final thing will you please get clearance from him?" MR. GASTON: Check. MR. KUHN: That is the better. it. MRS. KLOTZ: Supposing he says no, you can't release H.M.JR: Then I won't. - 10 - 233 MRS. KLOTZ: I think you are much better off then. MR. GASTON: Be might come back on you and say, "Well, I told Harold Smith to talk to you. You knew this order was coming out. H.M.JR: But whatever he says-MR. GASTON: Doing it this way there is no comeback. That was my feeling, that it ought to be rechecked. H.M.JR: Does it take care of you? MRS. KLOTZ: I, for one, would be game enough to just give it to the press. That is my own feeling, but knowing you, I want you to be sure-- H.M.JR: But if I do it this way? MRS. KLOTZ: Well-- MR. BELL: According to Harold Smith the President didn't tell him to talk to the Secretary. MR. GASTON: be did not? MR. BELL: He did not. He raised the question and the President said, "Well,--" MR. FOLEY: Why Monday? H.M.JR: Why what Monday? MR. FOLEY: You mentioned Monday in this thing you take over to - you said for the Monday morning press. H.M.JR: No, for tomorrow morning's press. MR. FOLEY: Oh, I see. MR. GASTON: Yes. MR. FOLEY: I won't wait until Monday. - 11 - 234 H.M.JR: No, for tomorrow morning's press. MR. FOLEY: All right. I didn't understand you. H.M.JR: No, for tomorrow morning's press. MR. BELL: 1 understood you to say Monday too. H.M.JR: 1 said for tomorrow morning's press. MR. FOLEY: I thought you said Monday morning's press. H.M.JR: How about that? MR. KUHN: That is good. MR. GASTON: Yes. If you were thinking about-- H.M.JR: Do you know that will be the third time I have gone back to the President on this? MR. KUHN: Because then-H.M.JR: Excuse me. MR. KUHN: I mean if the release comes out with Presidential approval there is much less chance of the reversal next week. MR. GASTON: I think he ought to be stopped if there is any way to stop him from creating a single Alien Property Custodian. H.M.JR: You can stop him. The answer is, Mrs. Klotz, if the President says no, that is it. MRS. KLOTZ: That is what you have to be prepared for because he may say no. H.M.JR: Oh yes, absolutely. That is his privilege. MR. KUHN: If he says, "I don't care--" - 12 - 235 H.M.JR: Oh no, Grace Tully - I will simply say to Grace Tully, "Here is the thing. Now, the President told me to go ahead with this on Thursday, but just as a final precaution, because there is so much gossip around, before giving it around to the press, I would like you to show it to him, and I would like him to approve it because there is so much gossip in the paper. MR. KUHN: That accomplishes Herbert's purpose of being a check on this Executive Order next week. H.M.JR: And I will take up a hat pool with anybody that wants it that he will approve it. MR. FOLEY: Yes, he will approve it. H.M.JR: I think that is the way to do it, and then there is no question - then if it is out and I have got his approval, I think the chances are ninety-nine out of a hundred he will stick by it. MR. BELL: Yes, I think so. I should think he would reverse it anyhow in view of what Leo has said. Leo has gone along with him. MR. FOLEY: Leo has gone along with it, yes. H.M.JR: Now, how long before you can get this thing written? MR. FOLEY: Well, I told Joe to get it up and to dictate it over the telephone in draft to my secretary and he said She would do it right after lunch, so it may be back there now. If it isn't, I will call him on the phone and we will get it over. H.M.JR: Well, how about getting Leo's? MR. FOLEY: Well, then I will call him and I will tell him that I would like to have a concurrence from him in my recommendation to you that we put out such a release, as he told me he would be willing to do, and I think I can get that right away. - 13 - 236 H.M.JR: What? MR. FOLEY: Just as soon as.I have the release, I will draft a memo randum. H.M.JR: Ask your office now whether it is there. MR. BERNSTEIN: Part of the pressure for this Order might very well be the hope of these people to be' able to get him to sign before the Secretary moves. The Secretary moving as he is will undermine that. Once they have lost their position they may not fight so much. H.M.JR: Well, go back and let me know. MR. FOLEY: I will go back and call him. H.M.JR: God they are slow up there. They are ungodly slow. MR. FOLEY: Do you want me to go ahead and get a clearance from Crowley? H.M.JR: Yes. 237 March 10, 1942 3:32 p.m. HMJr: Hello. Robert Doughton: Henry. HMJr: Hello, Bob. D: HMJr: D: HMJr: D: HMJr: D: HMJr: Bob Doughton. How are you? We just passed your bill increasing the debt limit and amending the Second Liberty Loan Act and all that kind of thing through the House by three sixty-seven to nothing. Three sixty-seven to nothing? Yeah, I think that's what it was. You just did that? Just got through. I think it was three sixtyseven. There was no votes against it. Three sixty-seven I think it 18. Well, I always said you were my favorite Congressman. D: (Laughs) Well, all you've got to do is brag on me a little, you know. HMJr: Oh, I said you were my favorite Congressman. D: Thank you. Well, I want to be helpful when I can, you know. The Committee all went along together fine, the boys all did. HMJr: D: Yeah. There was a good deal of debate under the five minute rule, but it was mostly about spending too much money and all that kind, but there were no amendments offered. -HMJr: D: 238 Can you put the tax bill through the same way? No. No, we can't. We come up to great tribu- lations and trials on that. We'll do the best we can, though. HMJr: Okay, Bob. D: Come down and see us. HMJr: I will. D: Good-bye. 239 March 10, 1942 3:53 p.m. HMJr: Hello. Yes. Operator: Go ahead. Fiorello LaGuardia: Hello. HMJr: Hello. L: Oh, Henry. HMJr: Yes, Fiorello. L: I'm sorry to trouble you, but I just wired you again on that Armory which the Coast Guard and the Customs are using for identifying the waterfront workers. HMJr: Yes. L: The Coast Guard and the Customs both told the Armory Board - even after your telegram - that they had no money to pay for it. Now, I can't control that, Henry. The Commanding Officer will close that Armory, if just for the out-ofpocket disbursement for light and heat HMJr: L: Yeah. and it'11 look awfully bad if in the midst of your work the Colonel will close it and as usual I'11 get the blame. HMJr: Have you sent me a telegram on this? L: Yeah. HMJr: L: When did you send it, Fiorello? Just a few minutes ago. I wanted you to know about it. HMJr Oh. L: And it refers to your previous telegram. 240 -2HMJr: Well, the minute it comes in I '11 pick it up. L: HMJr: L: Yes. It's one of those things that all these people that jump on us for every little thing will take delight in doing it. I see. And it isn't something that I can control, nor can I appropriate for other than city use. HMJr: Yeah. L: So I wired you, and you attended to it; but HMJr: they didn't carry it out. Well, as soon as your wire comes in, I'll pick it up. L: Okay. Thanks. HMJr: I'11 let you know. L: Okay. HMJr: Thank you. 241 March 10, 1942 4:30 pm The Secretary phoned Grace Tully and the fol- lowing is his end of the conversation: "I will have a newspaper release which I am proposing to rive out to the morning papers in regard to General Aniline and Dye. Mr. Crowley is Initialing it, but just to make 100% sure, on account of all the gossip I read in the gossip columns, I wanted the President to see it before I send it out. "I am going to send you the original. "llow late, because they haven't got it quite ready yet. "Until about 5:30? "Well, I will try to get it over by 5 and I will send it by messenger to your office. "A Secret Service man can wait and bring it back. "But you get the idea? lie told me to go ahead, last Thursday, but I am just a cautious fellow from Dutchess County. "I want his approval before I release it." 242 March 10, 1942 MEMORANDUM FOR THE SECRETARY'S DIARY Re: General Aniline & Film Corporation Leo Crowley invited me to take lunch with him. When told him I had a previous engagement, he asked me what I was doI ing right after lunch. I told him I was not tied up at that time and would come by his office and bring him up to date on the developments of General Aniline & Film since last Thursday. I went to Mr. Crowley's office around 2:30 o'clock and told him that we had selected Robert E. McConnell, Robert E. Wilson, A. E. Marshall and George Moffett to be managing directors of General Aniline and that we contemplated making Robert E. McConnell president and chairman of the board. I pointed out that this entailed getting the present board of directors to- gether at the earliest possible moment, securing their resignations as well as the resignation of John E. Mack as president, and the installation of our panel of directors to supplant the present board. Mr. Crowley told me that this action is entirely agreeable to him and thought that we should proceed at once to put it into effect. I told him we were having difficulty in securing a quorum of the present board for a meeting and didn't think that we could get the present board together much before next Monday. Mr. Crowley felt that this was too long to wait and indicated that the present board probably was playing for time hoping that some Executive Order, which Mr. Crowley said was being worked on over in the Budget to set up an independent agency to handle alien property, might forestall the action which we contemplated to take. Mr. Crowley told me that if he were made Alien Property Custodian he would not interfere with anything which we had done and would leave in General Aniline & Film the men we had installed. As a matter of fact, Mr. Crowley told me that he wanted us to finish our program for Americanizing General Aniline & Film, Schering Corporation and American Bosch Corporation, no matter what happened, and hoped that we would press to completion our work in this connection as soon as possible. 243 -2I told Mr. Crowley that we were contemplating releasing to the press the names of the new directors for General Aniline & Film and the action which we contemplated taking to secure the resig- nation of the present board of directors and president. He thought this was an excellent idea and said he would join me in recommending to Secretary Morgenthau that he make the announce- ment at once so that the announcement of the ignature of possible Executive Order could not be employed as a basis for a further dilatory action by the present board. After I left Mr. Crowley's office, the Secretary called me and told me he wanted me to come to his office at once as some- thing had broken on General Aniline & Film. I went to the Secretary's office about 3:00 'clock where he told me that Mr. D. W. Bell would bring me up to date and that he would call a meeting in his office as soon as he had finished his next appointment. D. W. Bell told me that Director of the Budget Smith called him and told him that he had been ordered by the President to draft an Executive Order to create an independent agency to handle alien property; that the President had given him an order which went much farther than his ideas which were to leave Foreign Funds Control in the Treasury and that he would protect the Treasury's interest in drafting the Order and thought it would be better for the Treasury not to know just what he was doing in the matter. Around 3:30 o'clock Messrs. Bell, Gaston, Kuhn, Bernstein and I conferred with the Secretary and Mrs. Klotz. The Secretary decided that he wanted Bell to ask Smith to show us the proposed Executive Order. It was also decided that we should draft the release announcing the appointment of the new managing directors at once; get Leo Crowley's approval to it; and send it over to the President. At 4:30 o'clock I took the attached release to Secretary Morgenthau which he approved. I then obtained Mr. Crowley's approval of it and sent it by Secret Service representative to Miss Tully at the White House. In the meantime, Secretary Morgenthau had called Miss Tully and tola her that the release 244 - was coming over and though it had been approved by Mr. Crowley, he was again bringing it to the President's attention before putting it out in an over-abundance of caution because of all the gossip which was going around Washington in regard to the appointment of an Alien Property Custodian. Around 5:00 o'clock the Secret Service man returned to me the envelope containing the release unopened and said that Miss Tully had told him that the President didn't want to look at it; that it was a matter for the Secretary of the Treasury to handle and since the Secretary and Crowley had got together, they should go ahead without bothering him with it. I then put in a call for Miss Tully to get the exact message and was told she was with the President. Around a quarter of six, Miss Tully called me and said that the President's instructions were as follows: "It is the Secretary's responsibility and as long as he and Leo Crowley okeh it, it is all right to go ahead. He doesn't feel familiar with the set-up and if the Secretary and Leo agreed, it ought to be given out without coming to him at all. The Secretary called me and said he was sending it over and the President felt that as long as they handled it, it should not be given to him at all." Around 6:30 Secretary Morgenthau called me from Bradley Farms and I repeated to him the above message. He instructed me to put out the release at once. I called Shaeffer who was at home and asked him to return to the office and put out the release pursuant to Secretary Morgenthau's instructions. I had already arranged to have the release mimeographed and it was ready for Mr. Shaeffer when he arrived at the Treasury. 9.1.7h Release for morning papers of march 1942 11 Released 3-10-42 245 The Secretary of the Treasury announced today that he had selected Robert E. McConnell, Robert E. Wilson, George Moffett, and A. E. Marshall to act as managing directors of General Aniline and Film Corporation. It is anticipated that Mr. McConnell will act as President and Chairman of the Board. General Aniline and Film Corporation has been under supervision of the Treasury Department for several months and on February 17, 1942 the Department took title to 97% of the stock which was registered in the name of foreign nationals. The General Aniline and Film Corporation had previously been under German domination. Mr. McConnell is the Chairman of the Engineers Defense Board comprised of five representatives of each of the large engineering societies and consulting engineer to the War Production Board. He has had a very wide experience in business and industry. Mr. Robert E. Wilson, is the President of the Pan American Petroleum and Transport Company and is a well-known chemical engineer. He was formerly petroleum consultant to OPM and is now both Chairman of the Committee on Petroleum Economics of the Petroleum industry War Council and consultant to the National Defense Research Committee. Mr. A. E. Marshall, who is President of the Rumford Chemical Works of Rumford, Rhode Island has been connected with the 246 with the management of chemicals for the past thirty years. He is a former president of the American Institute of Chemical Engineers and a former chairman of the Society of Chemical Industries. Mr. George Moffett, Chairman of the Board of Corn Products Refining Company has for some time assisted the Reconstruction Finance Corporation in its program for the procurement of strategic materials and other commodities. A meeting of the present Board of Directors of the Corporation has been called for next Monday, at which time the by-laws will be amended to provide for a smaller board, the present board being 12 in number; the four men elected by t he Government will be installed as managing directors; beasked to and the President and the entire present board will resign. 1 Approved: MM 10 1942 Hmmthanf (ear crowly 247 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE PRESS SERVICE Tuesday. March 10, 1042 No. 30-64 The Secretary of the Treasury announced today that he had selected Robert E. McConnell, Robert E. Wilson, George Moffett, and A. E. Marshall to act as managing directors of General Aniline & Film Corporation. It is anticipated that Mr. McConnell will act as Precident and Chairman of the Board. General Aniline & Film Corporation has been under supervision of the Treasury Department for several months and on February 17, 1042 the Department took title to 37% of the stock which was registered in the name of foreign nationals. The General Aniline & Film Corporation had previously been under German domination. Mr. McConnell is the Chairman of the Engineers Defense Board comprised of five representatives of each of the large engineering societies and consulting engineer to the War Production Board. He has had a very wide experience in business and industry. Mr. Robert E. Wilson is the President of the Pan American Petroleum and Transport Company and is is well-known chemical engineer. He was formerly petroleum consultant to OPM and is now both Chairman of the Committee on Petroleum Economics of the Petroleum Industry War Council and consultant to the National Defence Research Committee. Mr. A. E. Marshall, who is President of the Rumford Chemical Works of Rumford, Rhode Island, has been connected with the management of chemicals for the past thirty years. He is a former president of the American Institute of Chemical Engineers and a former chairman of the Society of Chemical Industries. Mr. George Moffett. Chairman of the Board of Corn Products Refining Company has for some time assisted the Reconstruction Finance Corporation in its program for the procurement of strategic materials and other commodities. A meeting of the present Board of Directors of the Corporation has been called for next Monday, at which time the by-laws will be amended to provide for a smaller board, the present board being 12 in number: the four men elected by the Government will be installed as managing directors; and the President and the entire present board will be asked to resign. -000- 248 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 10, 1942. TO FROM Secretary Morgenthau Mr. Thompson Immediately following December 7th, the need for surveillance of General Aniline and Film Corporation and other similar companies became a responsibility of major importance, and in the absence of a staff of Treasury guards Mr. Irey through his District coordinators detailed Treasury investigators to do this job. Subsequently Mr. Irey recruited guards for this purpose, and as guards became available the investigators were relieved of this responsibility. Simultaneously with the recruitment of guards the need for investigators to perform personnel investigations arose, and the investigators who had been engaged on guard duty at the General Aniline plants and offices were, at the suggestion of Mr. Klaus and Mr. O'Connell, assigned to investigative duty at Albany, Binghanton, Linden, New Jersey, and New York City. As indicated above the men originally assigned to this work were selected for guard duty and not to make personnel investigations. Had the original request specified investigative responsibility, undoubtedly a different group of men would have been furnished. It is understood that Coordinator Maloney checked the efficiency of these investigators with Mr. Klaus and Mr. O'Connell and was informed that they were performing their tasks satisfactorily. Secretary Morgenthau - 2 249 On February 25th, you inquired of Mr. Foley whether or not he knew the personnel working on these assignments. Mr. Foley informed you that he could vouch for the attorneys, but did not know the investigators. It was decided between you and Mr. Foley that Mr. Bernard would conduct an investigation of the investigators. Mr. Bernard went to New York and conducted such an investigation in company with Mr. Maloney, the coordinator for that district, checking with Mr. Irey before his departure, and, in fact, Mr. Irey called Mr. Maloney in New York and asked him to cooperate with Mr. Bernard. Mr. Bernard talked to each of the 20 men assigned to this work. His inquiries were extensive, the details of which were reported to you in a separate memorandum. It appeared that Mr. Bernard was satisfied with respect to the loyalty and character of all 20 men, but found some question respecting the competency of nine of the men for the type of investigative work to which they were at that time assigned. On February 27th, you indicated in a memorandum to Mr. Foley that you wanted high class investigators assigned to this work. On March 5th, Mr. Bernard held a meeting with Mr. Irey, Mr. Harney, and Mr. Maloney. It was understood that Mr. Maloney would contact Mr. O'Connell in New York and arrange any replacements thought desirable to put the personnel on a higher plane. Attached is copy of an order to clarify the situation issued by the Chief Coordinator to Mr. Maloney on March 9th. 250 Secretary Morgenthau - 3 To avoid future confusion, it is recommended that no investigator be assigned to any task outside of his regular organizational assignment without the approval of the Chief Coordinator, and that in no case may an investigator's duties on such an assignment be changed without his approval. In the instant case it appears that investigators were furnished to perform guard duties with the approval of the Chief Coordinator, and that thereafter these men were put on investigative duties, the nature of which was not known to him. fi 251 March 9, 1942. Mr. James J. Maloney, District Coordinator, Treasury District Nos. 2 & 4, New York, New York. Dear Mr. Maloney: We now have assigned to work in the General Aniline and Film Corporation with Mr. O'Connell's organization, about twenty investigators connected with our enforcement agencies. As you know, the fitness of some of these agents to perform properly the duties assigned to them has been questioned. It is desired that you relieve from these duties any agents who are not qualified to perform satisfactorily the assignment. It is further desired that a competent investigator from one of the enforcement agencies be selected to supervise the entire group of investigators engaged on the General Aniline case. This officer should perform his duties under your immediate direction and should see that the agents engaged in the work are competent and are conducting themselves in a proper manner; further, that they are deligently performing their duties with a view to bringing their work to a conclusion at as early a date as practicable without detriment to the case. It is not expected that all detailed instructions for in- vestigations will flow through this supervisory agent, as this would, of course, tend to retard the work. However, it is expected that he will keep in touch with the agents and be familiar with what they are doing to the end that there may be no question with respect thereto. Very truly yours, (Signed) Elmer L. Irey Elmer L. Irey, Chief Coordinator. ELI:pka 252 MAR 10 1942 My dear Mr. Secretary: It is understood that the products manufactured by the Matthiessen & Hegeler Zine Company of La Salle, Illinois, are of great importance in our war program. I am, therefore, sending to you herewith a memorandum con- taining certain information regarding this concern. On the basis of the information now available, it appears that certain owners of Matthiessen & Hegeler Zinc Company may have pro-Nazi tendencies. The bank accounts of the concern have been blocked, and the Treasury Department now has control over financial transactions. It may be thought advisable, however, to take additional steps to assure continuation of production, and, accordingly, the matter is being brought to the attention of the War Department. Considerable additional information is contained in the files of the Foreign Funds Control Division of this Department, and such information is available at any time. 253 -2The Treasury Department, of course, will be glad to cooperate in any action that you may consider advisable in this situation. Very truly yours, (Signed) R. Morgenthau, J2. Secretary of the Treasury. The Honorable The Secretary of war. Enclosure. n.m.c. copies cotaly by Messenger Sturger 5.05 EHC:abc 2/18/42 254 MEMORANDUM February 18, 1942. Re: Matthiessen & Hegeler Zinc Company, La Salle, Illinois. Matthiessen & Hegeler Zinc Company is engaged in the smelting of zinc concentrates and the manufac- ture of sulphuric acid and rolled zinc products. The stock of the company is almost entirely owned by members of the Carus family and employees. Over a period of several months Internal Revenue Agents conducted an investigation of the company and of the members of the Carus family. The results of the investigation are set forth in several lengthy reports, copies of which are in the files of the Treasury Department. The Treasury Department has also obtained certain information from an individual who formerly held an important position in Europe as a representative of a large American metal corporation. This individual is now residing in La Salle, Illinois, where he formerly spent a number of years. He impressed the Foreign Funds Control representative with whom he talked as a trustworthy man of considerable ability and sound judgment. The head of the family in La Salle is E. H. Carus, whose mother was Mary Hegeler Carus. Two of Mary Hegeler Carus' sisters married German citizens and are now residing in Germany. One of these, Mrs. von Vietinghoff, owns practically 17-1/2 percent of the stock of Matthiessen & Hegeler Zinc Company. The other sister, Mrs. Camilla Bucherer, does not own any interest in either of the concerns. It is understood, however, that in 1939 or 1940 she withdrew $145,000 from her accounts in the United States to be paid to the German Government, apparently as a penalty for not having re- vealed the existence of certain of her assets in this country. /20/12 255 -2- The wife of E. H. Carus is reported to be extremely pro-Nazi and he is said to be completely under her domination. Both Mr. and Mrs. Carus have made many trips to Germany, including two trips in 1939, and their children eithertime werethere. educated in Germany or have spent considerable Evidently over a number of years, meetings have been held at the Carus home for the purpose of furthering the German cause. One of the constant visitors was Dr. Auhagen, a German agent. It is stated that one of the purposes of these meetings was to arouse pub- lic opinion against various pro-British legislation pending in Congress. Mary Louise Carus, daughter of Mr. and Mrs. E. H. Carus, has evidently been extremely active in the interest of the Nasi Government; and it is reported that she has been closely associated with various Nazi agents and has helped them with their work. Our informant in La Salle describes the Carus family and its group as "a Nazi Cell" similar to many with which he had to deal in Europe. The president of Matthiessen & Hegeler Zinc Company is Robert McClurkin. He occupies this position under an agreement between the Company and the Conti- nental Illinois National Bank. From all reports, McClurkin appears to be reliable, but he evidently is on friendly terms with the Carus family. The Matthiessen & Hegeler Zinc Company is now operating for the first time in many years on a profitable basis, and it is thought that the Carus family is not apt to resort to sabotage because of the direct resulting injury to their own interests. Any danger of pro-German activities on the part of the Carus family would appear to be, to a large extent, separate and apart from the Matthiessen & Hegeler Zinc Company except inasmuch as their position right give them an opportunity to engage in espionage work. 256 -It is to be noted, however, that a large part of the popula tion of La Salle and of the adjoining town of Peru is of German descent, and a substantial number are reported to be more or less pro-German. Prior to the declaration of war, there were many German clubs in both towns. Employees of Matthiessen & Hegeler Zinc Company come from this part of the population. In a periodresort of stress, it is possible that such employees might to sabotage. 257 MAR 10 1942 My dear Senator: I appreciate your letter of March 6, 1942, and wish to say that the Treasury will be glad to furnish you with any information you may desire in connection with sales taxation. You are quite right in assuming that we have done considerable work on this subject as a basis of our opposition to a general sales tax. We have a number of studies of different types of sales taxation, estimates on the yield of various sales taxes with various exemptions, and additional material of a miscellaneous character. In order to expedite consideration of the subject I have asked Mr. Paul to contact you and make available to you whatever information is in our possession. with best personal regards, Sincerely, (Signed) E. Korgenthiu. Jr. Secretary of the Treasury Honorable Arthur H. Vandenberg. United States Senate REP:mrm 3/10/42 mn to the Hill with him Paid United States Senate COMMITTEE ON FOREIGN RELATIONS KENNEDY, March 6, 1942. Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: I should like to see the question of a general sales tax squarely raised and brought to a vote in Congress in connection with the pending revenue measure. I fully understand that you and the Treasury Department will take 8 firm stand against any use of a general sales tax in connection with the pending measure - although the President himself has conceded that this recourse may be ultimately unavoidable. I do not quarrel with your present position. I fully respect it and I understand very well that persuasive arguments can be made for your position. The fact remains that there is a large element in Congress and in the country which believes that a considerable portion of this new revenue should be sought through a general sales tax; and I believe that the country will be better satisfied with the ultimate verdict - even though it be adverse to the use of a general sales tax - if the issue can be squarely drawn in the current debate. This leads me to the question which I wish to propound. It is manifestly impossible for any individual member of Congress - or any Congressional group - to perfect in adequate detail any alternative tax progrem which involves the use of a new tax instrumentality. Furthermore, if any such alternative is to be embraced the Treasury Department has a primary interest that the alternative plan shall be as sound and as textually correct as possible. So I am moved to submit this inquiry to you. My question now follows. Although the Treasury Department is unequivocally opposed to the use of a general sales tax at present, nevertheless, has not the Treasury Department developed a general sales tax plan for consideration in some future emer- gency? In other words, has not your large staff of experts fully explored this subject and come to reasonably definite conclusions as to what general les tax ought to be embraced if it has to be embraced? If such a plan is vailable may it not be placed in my hands for such use as I have described in the enrlier paragraphs of this letter - always with the distinct under- tanding that the Treasury Department takes no responsibility whatever for at the moment and recommends against it? th warm personal regards and best wishes, Cordially and faithfully, 259 March 10, 1942 MEMORANDUM FOR THE SECRETARY From: Mr. Blough Subject: Letter of Assistant Secretary of Navy Bard asking for the exemption of contracts from State taxes. The letter to which you referred in your memorandum of February 24 was the report of the Navy Department on the so-called Cochran bill to immunize defense contractors against State and local sales, use,and gross income taxes. This report was, of course, not cleared with the Treasury Department. However, representatives of the Treasury, War and Navy Departments appeared before the Budget Bureau on opposite sides of the bill. The Budget Bureau gave all three Departments permission to write reports to the Ways and Means Committee. The Committee has held public hearings and decided to report the bill favorably, thus upholding the War the Treasury Department. The new bill containing Ways and Means Committee revisions is H. R. 6750. It is understood that the Committee will seek a rule to permit early consideration of the bill by the House. and Navy Departments and going against the position of Congressman Cochran recently wrote the Treasury asking if it had changed its position. Mr. Paul 1e preparing a reply indicating that the Treasury has not changed its position. The estimate by Congressman Cochren that as much as $1,500,000,000 of revenue to the States (and presumably cost to the Federal Government) may be involved seems very high. RB 260 MAR 10 1942 Dear Marriners I have your letter of March 5. 1942, enclosing a copy of a resolution adopted by the Presidents of the Federal Reserve Banks with regard to the financing program suggested in the memorandum which you sent me with your letter of January 28. 1942. I appreciate your making this resolution available to me. Very truly yours, (Signed) H. Korgenthau, in Secretary of the Treasury Honorable Marrinor S. Eecles, Chairman, Board of Governors of the Federal Reserve System, Washington, D. c. photofill n.m.c. Ong file to Bill DWB: ce 3-9-42 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN March 5, 1942 Dear Henry: I am sending you for your information a copy of a resolution adopted by the Presidents of the Federal Reserve Banks in regard to the financing program suggested in the memorandum which I sent to you with my letter of January 28, 1942 and which has been the subject of subsequent discussions between Federal Reserve repre- sentatives and members of the Treasury staff. The Presidents were fully advised during the course of their Conference in Washington on March 2 as to the discussions which had taken place and, as you will see, the resolution contains their unanimous approval of these proposals, together with an offer of their wholehearted services as agencies for the promotion of the general financing program and the sale of the securities recommended in the memorandum of January 28, 1942. I am sending a copy of this resolution to Dan Bell. Sincerely yours, Marring M. S. Eccles, Chairman. Enclosure Honorable Henry Morgenthau, Jr., Secretary of the Treasury. STATEMENT OF THE CONFERENCE OF PRESIDENTS OF THE FEDERAL RESERVE SYSTEM At its meeting March 2, 1942, the Conference of Presidents of the Federal Reserve Banks had before it the general statement involving Treasury financing, which was submitted to the Secretary of the Treasury by certain of the members of the Board of Governors of the Federal Reserve System, of the Federal Open Market Committee, and of the Presidents' Conference, under cover of a letter of January 28, 1942, signed by Chairman Ecoles. After thorough consideration, the Presidents of the Federal Reserve Banks expressed their unanimous approval of the general terms of this memorandum. They also expressed the unani- mous opinion, based on their knowledge of conditions in their respective districts, that a substantial amount of funds might be obtained for financing the war effort through the offer of the special types of securities recommended in the memorandum; and that the business and financial community is eager and wait- ing for & clarification of the financing program, which will enable it to assume its appropriate part in that program. The Presidents further offered the wholehearted services of their respective banks to the Treasury, as agencies for the promotion of the general financing program and for the sale of the securities recommended in the memorandum referred to above. 3/9-Follawed of milth 263 Bills fire lefe Draves has told Pill I h mill approve any memo Bill prepares. 3/9- P.M. Bell's free says "till on Bells desk- furnished 3/10 264 MAR 10 1942 MEMORANDUM FOR GENERAL WATSON: This is in reply to your memorandum of March 5. 1942, enclosing a copy of a telegram of February 14, 1942, from Bud Abbott and Lou Costello, and a memorandum dated February 26, 1942. from Colonel Mickelwait, Julge Advocate General's Office, all regarding the proposal of Abbott and Costello to earmark their salaries during a tour of the Nation's theaters for the purpose of purchasing n bomber. The Treasury has been accepting gifts from individuals and organizations when they are freely given and without any restrictions. Such gifts are covered into the General Fund of the Treasury and become available for all governmental purposes, including National Defense. We have no authority at the present time to otherwise accept such gifts. There is, however, a provision in the Second far Powers Bill now pending in Congress which would give the Secretary of the Treasury authority to accept or reject gifts made on condition that they be used for a particular war purpose. You night advise Abbott and Contello that as soon as this bill becomes law, the Secretary of the Treasury will be glad to accept their donations and see that the proceeds are applied to the purpose for which the donation is made. (Signed) E. Ecrwenthane DWBice 3-9-12 Whole ile 22 INC. Delivered 265 March 7, 1942 D. W. Bell Harold Graves Secretary Morgenthau Please let me have a joint report on the attached not later than Monday. THE WHITE WASHINGTON March 5, 1942. Personal MEMORANDUM FOR THE SECRETARY OF THE TREASURY: I attach herewith copy of a telegram addressed to the President by Lou Costello and Bud Abbott, Hollywood comedians, together with a copy of the Judge Advocate General's opinion. You will note that Abbott and Costello wish to present this money to the President when they have earned it. This of course cannot be arranged, as we have done away with all such presenta- tions since the beginning of the war. If you are accepting these contributions, will you let me know how it should be handled and what further reply I should make to these gentlemen. Thank you. EDWIN M. WATSON Secretary to the President. C O P Y Hollywood, Calif. Feb. 14 President Franklin D. Roosevelt White House Deer Mr. President: In view of the recent Congressional criticism leveled at members of the entertainment profession we thought you might like to know that after our next picture at Universal we are going to tour the nations theatres and earmark every dollar of salary we earn for the purchase of a bomber. We dont know how many weeks of five shows a day it will take us to earn $350,000. But we shall not stop short of our goal. When this sum is finally realized, we hope to have the honor of presenting it to you in person. Respectfully submitted. Bud Abbott Lou Costello. Military Affairs JAG 005 ORANDUM for the Secretary, General Staff. Subject, Donation of money to the United States for the purchase of aircraft (bomber). 1. By disposition form dated February 18, 1942, an informal menorandum was requested as to the legal aspects of the proposed gift of money to the United States for the purchase of a "bomber", as outlined in the inclosed telegram dated February 14, 1942, to the President from Messre. Bud Abbott and Lou Costello, reading as follows, "IN VIEW OF THE RECENT CONGRESSIONAL CRITICISM LEVELED AT MEMBERS OF THE ENTERTAINMENT PROFESSION WE THOUGHT YOU MIGHT LIKE TO KNOW THAT AFTER OUR NEXT PICTURE AT UNIVERSAL KE ARE GOING TO TOUR THE NATIONS THEATRES AND EARMARK EVERY DOLLAR OF SALARY AE EARN FOR THE PURCHASE OF A BOMBER. WE DONT KNOW HOW MANY KEEKS OF FIVE SHOWS A DAY IT WILL TAKE US TO EARN $350,000. BUT WE SHALL NOT STOP SHORT OF UP GOAL. WHEN THIS SUM IS FINALLY REALIZED, WE HOPE TO HAVE THE HONOR OF PRESENTING IT TO YOU IN PERSON 2. The legality of a proposed donation for a similar purpose has been considered by this office in a recent opinion (JAG 080, Dec. 24, 1941), and it was there held that although there is no legal objection to the acceptance by the lar Department of unconditional gifts of personal property donated by individuals or organizations, in a gift of money is conditioned upon its use for the specific as purpose of purchasing an airplane, such a gift is not regarded the unconditional and the money would have to be deposited in Treasury. It follows that statutory authority would be a the necessary prerequisite to the acceptance of the gift of money for purpose mentioned. It is true that a gift of money to the United States which is is conditioned on the purchase of specific property even the meaning unconditional, not expressly within of the rule stated above, for the the desire that it be used purchase though the donor but such expresses gifts must be covered into the Treasury subject of aircraft appropriation and cannot otherwise be specifically id., allooated to congressional to the purchase of aircraft (JAG 005, July 28, 1924, Jan. 19, 1942). 3. In connection with the foregoing proposal, attention La invited to the bill (s. 2197, 77th Gong.) introduced in the Senate on January 12, 1948, providing that when the person making a an of money for the purchase of war materials shall specify the partion ular material or materials for which he desires such gift to be good, the gift shall, insofar as possible, be nood to purchase such materials. This bill was referred to the Committee on Neval Affairs. Another bill (s. 2208, 77th Cong.) passed the Benate on January 28, 1942, and is now pending in the House of Representatives, providing. mong other things, authority for the Secretary of the Treasury accept orwas reject gifts made on condition that they be used for atoparticular purpose. 4. It is the opinion of this office that under existing Laws the proposed donation by Neears. Abbott and Costello could properly be accepted by the President or Secretary of Year only as an conditional gift for deposit in the Treasury to the credit of miscellaneous receipts. For The Judge Advocate General, C. B. Mickelwait, Colonel, J.A.G.D., Chief of Section. 270 MAN 10 1942 MEMORANDUM FOR GENERAL WATSON: Attached is a draft of a letter for your signature to Congressman Forand, in reply to his memorandus of March 3. 1942. Hang. n.m C. Photofile DWBICE file to Bell 271 DRAFT My dear Mr. Forands I have your memorandum of March 3. 1942, enclosing a copy of your remarks on the floor of the House on February 24, suggesting that persons purchase 25# Defense Stamps, cancel them, and send then to the President as a gift toward victory, these stamps never to be redeemed by the Treasury. 3 I have discussed this matter with the Treasury Department and I am advised that 18 is always glad to accept gifts to the Uni ited States Government which are freely given and have no restrictions attached to them. It has had a great number of suggestions from individuals that a campaign be put on to secure gifts from the American people to help finance the war. The Treasury has not adopted any such plans because it feels that the principal methods of financing this war are through taxation and loans. If a campaign were instituted to secure gifts, donations would in all probability come only from those who were highly patriotic and in many cases from people who could not afford to give. It would mean in these cases that we would be getting the money from those who could not afford it and borrowing from and paying interest to others who night be able to afford to give but who are loaning their funds to the Government. Very truly yours, ROWIN M. WATSON Secretary to the President Honorable Aime J. Forand, House of Representatives. DWBice 3-9-42 24 he?2 THE WHITE HOUSE WASHINGTON letter 3-5-42 MEMORANDUM FOR: THE SECRETARY OF THE TREASURY Will you please be good enough to have someone in your office look this over and prepare suitable draft of reply for my signature? Thank you. Communities Secretary to the President EDWIN M. WATSON WASHINGTON OFFICE HOUSE OFFICE BUILDING Congress of the United States PHOTO POST OFFICE BUILDING PAWTUCKET House of Representatives Washington, D.C. March 3, 1942 Memorandum to: General Edwin Martin Watson From: Aime J. Forand, M.C., First District, Rhode Island This memorandum is in compliance with yoursuggestion during our telephone conversation early this afternoon. Attached you will find a copy of my remarks on the floor of the House on February 24, suggesting that persons purchase twenty-five cent Defense Stamps, cancel them and send them to the President as a gift toward victory, these stamps never to be redeemed by the Treasury. The first response that I received was a sheet of one hundred stamps sent to me by my own Post of the American Legion, the James Stanton Post No. 5, of Central Falls, Rhode Island, whose membership is one hundred. All to whom I have mentioned this suggestion have endorsed it enthu- siastically, realizing that if fifty million people should each pur- chase a twenty-five cent stamp, cancel it and send it to the President as a gift, that would mean an outright gift to the Treasury of $12,500, 000. dollars. My hope is that I may be permitted to present these stamps to the President personally because I realize that if this can be done the national publicity that will result is bound to bring into the Treasury millions of dollars as outright gifts. Now that the Second War Powers Bill has been passed and that there is contained therein, under Title 12, provisions for the Treasury Department to receive gifts and also penalties for embezzlement or theft of such gifts, I believe it would be proper to develop my suggestion for all it is worth. I fully realize how busy the President is but I know from long experience his great willingness to lend his good offices to the March of of Dimes, the Red Cross, the Community Funds and other similar methods raising money to help worthy causes and, honestly, I know of no cause more worthy than to encourage patriotism of our citizens through which contributions are to their Government to defray the expenses of the war in we engaged. This war must and will be won and this would help to pay for it. Congress of the United States House of Representatives Washington, D.C. After you have discussed the subject with the President, I would appreciate hearing from you as to his decision. Sincerely yours, - WASHINGTON OFFICE HOUSE OFFICE BUILDING PHOOS ROADS Congress of the United States POST OFFICE BUILDING PAWTUCKEY House of Representatives Washington, D.C. 1942 1616 CONGRESSIONAL RECORD-HOUSE PERMISSION TO ADDRESS THE HOUSE Mr. FORAND. Mr. Speaker, I ask unanimous consent to address the House for minute The SPEAKER Is there objection to the request of the gentleman from Rhode Island? There was no objection. CANCEL A DEFENSE STAMP SO UNCLE SAM WILL NEVER HAVE TO CASH IT Mr. FORAND. Mr. Speaker. every American is anxious to do something to help our country win the war. Whether in the armed forces, in a factory. in & shop, or in an office. all of us can contribute B share to defeat the enemy by doing to the best of our ability the work In which we are engaged. A new and novel way to add to that which we are now doing by our labor purchase of Defense stamps been out nary procedure, which is a most mendable one. we only loan our money to the Government when we purchase and Edward Barber and bonds by points our Barber, has just of that my home suggested under State the by com- ordi- Mr. Mr. and gift. he of the Club a few days ago member of the Lions Clubs purchase a 25-cent Defense stamp and cancel it by writing his name on It, and then send it Defense make fellow a members direct stamps bonds. suggested Cranston Why Why not to Lions each not his to President Roosevelt as a contribution? I heartily approve of Mr. Parber's suggestion, Mr. Speaker, and I pass the sug- gestion along In the hope that millions of American citizens will adopt It. and A million persons, each purchasing canceling a 25-cent Defense stamp, would thereby make a gift of $250. to Uncle Sam and help purchase victory. A nice, tidy sum, I say, and I sincerely hope It will be realized. FEBRUARY 24 276 MAR 10 1942 Dear Mr. Sproul: I have your letter of March 5. 1942, advising that various administrative and operating problems connected with the issue, sale, safekeeping and redemption of Defense Savings Bonds was considered by the Conference of Presidents of the twelve Federal Reserve Banks held at Washington on February 28-March 2. 1942, and it was the unanimous opinion of the Presidents that it might be helpful to both the Treasury and the Reserve Banks if a committee of operating men for the Reserve Banks could meet with members of the Treasury staff to discuss the mechanics of the Defense Bond campaign. I believe that this is an excellent suggestion and I have turned your letter over to Bell and Graves to work out with the Banks the questions to be considered at such a conference and the place where it should be hold. You will hear from Bell within the course of the next few days. Very truly yours, (Signed) 1. Korgesthaw, Jr. Secretary of the Treasury Mr. Allan Sproul, Chairman, Presidents Conference Committee on Defense Savings Securities, Federal Reserve Bank, New York City. Photo jile n.m.c. Onj file Bell DWB:ce 3-9-42 FEDERAL RESERVE BANK OF NEW YORK March 5, 1942. Honorable Henry Morgenthau, Jr., tary of the Treasury, treasury Department, hington, D. C. Dear Secretary Morgenthaus A Conference of Presidents of the twelve Federal Reserve Banks was held at Washington over the week-end February 28-March 2, 1942. Among the subjects considered by the Conference were the various administrative and operating problems connected with the issue, sale, safekeeping and redemption of Defense Savings Bonds. It was the unanimous opinion of the Presidents that it might be helpful to the Treasury, and would certainly be helpful to the Reserve Banks, if & committee of operating men for the Reserve Banks could meet with the members of the Treasury's staff-both those who determine policy and those in charge of operations-to discuss the mechanics of the Defense Bond program. With a better knowledge of what the Treasury's policy and procodure is, these men from the Federal Reserve Banks, who are intimately acquainted with the problems encountered in the field, would be able better to plan the work of the Federal Reserve Banks. Unless there is such planning ahead, we shall increasingly run the ask of a breakdown in the mechanical side of this operation which has thus for been so successful. This WAS considered by the Presidents of the Federal erve Banks to be an urgent matter. I shall, therefore, appreciate your ting me know whether or not the suggested conference meets with your approval when representatives of the Federal Reserve Banks might come to the Treasury canvass the problem. the Yours faithfulls Allan Chairman, Presid nts Conference Committee on Defense Savings Securities. FEDERAL RESERVE BANK OF NEW YORK March 5, 1942. Dear Dan: Enclosed is a copy of a letter which I was directed at the Conference of Presidents of the Federal Reserve Banks to write to the Secretary. If the conference suggested therein is arranged, it should be at an early date and, if it is to be successful; it should include those members of the Defense Bond staff who make the decisions as well as those who supervise the mechanics of the operation at the Treasury. Yours faithfully stan Sproul. Honorable Daniel W. Bell, Under Secretary of the Treasury, Treasury Department, Washington, D. C. Ro can for This a than in the right direction V. 279 Dear Sir: The United States Treasury hopes that the urgency of the hour will lead you to consider at your earliest convenionce the enclosed Defense Savings Program for colleges and universities. For many institutions it will merely confirm the beginning they have already made. For others it will suggest steps to be taken at once and the scope of organization necessary for an effort to be continued throughout the war. The Program is prepared in answer to numerous requests from colleges to the Treasury Department. The proposals en- bodied in it are the fruit of consultations with presidents of colleges at the meeting called by the National Committee on Education and Defense held in Baltimore in January. We are sending five copies in order that you may make two of them available to faculty and two available to student leaders in the campus defense savings effort. Additional copies may be obtained through the local Defense Ssvings Committee of your community, or from your State Defense Savings Committee. Sincerely, (Signad) Henry korgenezally JR. AK 10 1044 280 THE UNITED STATES TREASURY To The College Presidents Of The United States: Flames still lick the carcase of Singapore as this message goes to press. There is no knowing what city will lie in rubble when it reaches you. But certainly the place will be closer to home. This is not said in an effort to rouse fear, but to remind you that every hour is precious; that every delay will cost lives-American lives--lost because soldiers lack a canopy of planes and a moving fence of tanks. You have, no doubt, already established machinery for payroll savings in your institution. But this is not enough, in view of the long hard road ahead. If the effort to finance the var is to succeed, our institutions of higher learning must be more than collection agencies for the contributions of faculty and maintenance staff. The Defense Savings Program must be a long-term, continuous effort. The motive that makes continuous effort possible is reason. The force that has built civilization therefore, has power to save it. Because reason is its mainspring, the Defense Savings Program must make full use of the methods and resources of education. To use educational methods is to contribute to the enlightenment of the 281 -2American people. Colleges and universities have, therefore, a function that is unique among American institutions. The Treasury Department urges that higher education consider these educational objectives for its work in the Defense Savings Program: The purchase of Defense Bonds and Stamps by the people on the campus should be as systematic as the soldier's guard or the sailor's watch. Higher education should furnish and train leadership which will promote understanding, both on the campus and in the comsunity, of the Defense Savings Program, and its relation to the impact of war on the economic and social life of the Nation. The Treasury Department recommends that in each institution there be a Faculty Defense Savings Committee and a Student Defense Savings Committee which cooperate closely with each other and with the Local and State Defense Savings Committees organized by the Treasury. In every state there is a State Defense Savings Committee made up of leading representatives of education, banking. labor, women's organizations and other groups. Local committees of similar makeup are being formed thoroughout the country. The various representatives both state and local - are forming subcommittees for education, labor, banking and so on. There are in each state, paid Treasury representatives - an administrator and frequently a deputy administrator - who work with the State Defense Savings Committee and maintain headquarters in one or more 282 -3 or the principal cities of the state. They will be glad to supply Treasury literature and aid the institutions of higher education in every way they can. They will also arrange to have one of the traveling representatives from the Education Division of the Treasury's Defense Savings Staff in Washington visit any insti- tution that can profit by his services. What the Faculty and Administration Can Do The first thing that the faculty and administration of an institution of higher education can do is organize a committee by presidential appointment, faculty election or any other method deemed appropriate. This committee ordinarily will bear a relation to the institution's Defense Council, agencies sponsoring volunteer civilian participation in the var, and especially to the Local and State Defense Savings Committees. The Faculty Committee requires personnel able to tie to- gether a well-knit organization. Its work requires the special devotion of persons able to make this their main interest. This Committee should comprise a representative of the administration, of the extension services, and of as many departments as practical. The primary responsibility of the administration representative is to make arrangements for faculty Defense Savings by the "payroll savings plan." His work should also entail a study of college funds with a view to the practicability of their investment in Defense Securities. 283 -4Still another phase of the responsibilities of the administration representative is advising with a Student Defense Savings Committee in planning its work. The duty of the representative of the extension services is to apply the services of his department as well as the institution's radio program to the education of the public in matters pertaining to war finance. Because his work has immediate ranifications beyond the campus, he particularly should work closely with the Local Defense Savings Committee and the State Committee. The duty of the departmental representatives on the Committee is to integrate material concerning war finance and Defense Sav- ings with the curriculum. Defense Savings, in its broader aspects. offers an opportunity for putting var itself to educational uses. Whether full advantage is taken of this opportunity will depend upon the vision and resourcefulness of both students and faculty members in their concern with the curriculum. Almost every subject taught in the colleges. bears a relation to the was and what citisens can do to make victory more sure. Certain courses in government. economics, and sociology can, especially. be made more alive and more significant. more educa- tionally creative through the introduction of Defense Savings problems and information. The Treasury is prepared to offer concrete suggestions for the accomplishment of this purpose and 284 -also to furnish materials on the economics of defense. Departments of speech can assist in the training of speakers enrolled in the Speakers' Bureau of the Local Dan fense Savings Committee: they can tanin their own students as speakers for community service, and they can furnish community meetings with these trained speakers. The institution's library should provide a special collection of literature on Defense Savings, war finance. and related subjects. This service will ingrease in value to the extent that it is used not only by the students but by the general public through channels opened by the Local Defense Savings Committee and the institution's adult education services. What Students Can Do It is important that every citizen be aware that he, as well as the soldier and the government official, is enlisted in the var effort and has a personal responsibility toward it. The Defense Savings Program offers every citizen a direct and effective activity that will help to win the var. 285 - The students should organize their own Defense Savings Committee. Democratic procedure suggests that all major student groups be represented: Student government, the inter- fraternity councils, Y. M. and Y. W. C. A., the religious or- ganizations, the intellectual societies, etc. This extracurricular student participation is one of the important avenues of American student preparation for democratic citizenship in the adult world. The Student Defense Savings Committee on the campus should be established as a significant arm of the total student civilian war effort. Its operations will appropriately divide themselves into: The promotion of plans and activities including meetings and discussion groups by each of the various student organ- izations or all of them unitedly. The publicity activities involving the student newspaper and other publications. The regular nows releases issued by the Treasury to the collegiate press should be of assistance in promotion work on the campus. The establishment of exhibits, sales booths, and the maintenance of other accessible sales outlets for Defense Stamps in connection with the college store, the cafeteria, etc. The organization and development of a corps of student Defense Savings speakers as well as the creation of musical, dramatic, artistic, and radio work to serve the Defense Savings promotion of both the college and its nearby community. The maintenance of continuous close relations with the student government, the mar or defense council and faculty advisers. -The Relation of Higher Education to the U. 3. Treasury While advancing this series of suggestions to the institutions of higher education, the Treasury does not advise that any attempt be made to follow the Program point by point mechanically. Nothing that the Defense Savings staff in Washington can do will take the place of imagination and initiative and hard work on a given campus. Without exception the suggestions embodied herein are the fruit of consultations held by representatives of the Treasury with presidents of colleges and universities all over the country, with student leaders, with officials of the United States Office of Education, the American Council on Education and the Office of Civilian Defense. Each of the proposals that are made in this program has been tried and found to work in at least one and more often in many institutions. This program is prepared in answer to numerous requests for guidance from the institutions of higher education. These requests reveal that the temper of the campus is on the alort. If this patriotism can be disciplined through organization, the Nation can look with confidence to a greatly accelerated program of Defense Savings. 286 287 MAR 10 942 My dear Phil: It was nice to have your letter of February 23, suggesting a certificate be awarded workers of the Payroll Allotment Committee of Cincinnati in recognition of their fine services. My people tell me that there would be objection to our furnishing a facsimile of my signature to be used in manufacturing a proper certificate locally, for reasons which doubtless will occur to you. It would apparently be preferable to manufacture an appropriate card here, and I am asking the Defense Savings Staff to take steps to have this done and to communicate with you direct with reference to the details of the matter. Needless to say, I am very much pleased that you are associated with the Defense Savings project, and I greatly appreciate your interest and cooperation. Sincerely, (Signed) Henry Mr. Phil. J. Trounstine, 1121 Keith Building, Cincinnati, Ohio. HNG:fns fils n.m.c. capic to Thompson 288 Miss Chauncey brought this in. Whatever Mr. Graves decides will be all right with the Secretary and would he, Mr. Graves, be good enough to prepare answer for Secretary's signature. FNS 289 TREASURY DEPARTMENT WASHINGTON March 2, 1942. MEMORANDUM FOR MISS CHAUNCEY: Mr. Trounstine is a member of the Ohio State Defense Savings Committee. He is also a member of the Cincinnati Defense Savings Committee. The idea of giving out certificates to volunteer workers who have done an outstand- ing job is a good one. I do not, however, like the idea of furnishing the Secretary's facsimile sig- nature to the Cincinnati Committee to be used by them in printing certificates like those proposed. We could readily print these certificates here, and if the Secretary wishes, I will be glad to have this done. CREATES. 2 PHIL. J. TROUNSTINE 1121 Keith Bldg. Cincinnati, Ohio February 23, 1942 The Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. My dear Henry: The Pay Roll Allotment Committee of Cincinnati, under the leadership of Guy D. State of Ohio in contacting and installing the pay roll allotment plan in firms having one hundred or more employees. Most of these men are Life Underwriters of the Cincinnati Association. Randolph, has made the best record in the It is the desire of the local com- mittee to reward those workers who have done an outstanding job. Therefore, the local committee has designed a card or certificate, sample of which is attached, to be presented to those who have earned it. They want your permission to use your signature on this certificate or card. If you grant this, a out could be made here and used for this purpose only. Will you please advise me personally whether or not this can be done. Sincerely, Phil J. Trounstine PJT:EK TREASURY DEPARTMENT DEFENSE SAVINGS STAFF OFFICE OF STATE ADMINISTRATOR A picture of the "Minute Man" would appear in pale buff ink in the center of the card or certificate. Size of card 2 I sin or certificate 7" I 9". - x UNETED STATES TREASURY.,DEPARTMENT STAFF + COMMENDS x * FOR MERITORIOUS SERVICE TO His COUNTRY Henry SECRETARY The card would be white stock with pale buff ink for the "Minute Man" with the seal and lettering in blue ink. If the working, "For meritorious service to his country" is too strong, then it could be changed to "for meritorious service on the Payroll Allotment Committee." However the former is preferred. 292 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 10, 1942 TO Secretary Morgenthau FROM Mr. Hand 404 1. Attached to this memorandum are tables showing (1) the number of agents qualified to issue Defense Savings Bonds, Series E, at the close of business on agent, by Federal number of such agents on 1941. 2. other qualified to issue Series E 20,356 on March 7, an increase of 28. 3. March there were corporations qualifiedin to issue on payroll allotment accordance instructions contained in your telegram of the Agents, On plans Reserve March selected 7, 7, savings Districts, Series classified than dates 191 bonds E post since savings with and since December by 763 numbered offices, February (2) type the May bonds the 27 7, of to Federal Reserve Banks. This represented an increase of 77 corporations over last week. Attachments. Number of agents qualified to issue Series E Savings Bonds, May 7, 1941 to date 1942 Feb. 1941 : 31 28 March 7 : : : 7,676 11,571 13,688 14,097 14,240 14,264 739 1,481 2,064 2,434 2,560 2,584 389 1,368 2,080 2,479 2,536 - - 351 686 763 - - 37 63 65 7 27 28 99 137 144 8,430 13,468 17,148 19,098 20,165 20,356 15,812 16,429 16,883 17,123 17,928 18,059 24,242 29,897 34,031 36,221 38,093 38,415 Commercial and savings banks Building and loan associations Credit unions 8 Other corporations 1 - Investment industry All others - Total other than post offices Grand total 3 : 30 7 Post offices Jan. Sept. May Jan. Office of the Secretary of the Treasury, Division of Research and Statistics. 1 In accordance with telegram of December 27, 1941. March 10, 1942 Classification of the moer of agents qualified to issue Series E Savings Bonds, on March 7, 1942 Building: and Credit loan Banks associations unions Other Invest- :corpora- ment tions 1 industry All others Total 2 Corporations and associations: Federal Reserve District of: Boston 837 242 223 50 1 14 1,367 1,168 254 409 56 11 16 52 850 113 115 174 - - 1,955 1,252 Cleveland 1,178 383 342 46 7 2 Richmond 1,025 191 136 31 Atlanta 1,026 157 185 25 - - 1,393 Chicago 2,339 480 262 234 17 27 3,359 St. Louis 1,376 158 70 42 8 2 Minneapolis Kansas City Dallas 1,281 58 73 4 1,773 188 175 17 860 122 234 59 551 238 312 25 14,264 2,584 2,536 - - - 14,264 2,584 2,536 New York Philadelphia San Francisco Subtotal Post offices Grand total Office of the Secretary of the Treasury, Division of Research and Statistics. 1 2 In accordance with telegram of December 27, 1941. Except post offices. 8 1 3 2 35 1,958 1,392 1,656 1,419 2,190 1,283 3 5 3 3 763 65 144 20,356 - - - 18,059 763 65 144 38,415 1,132 March 10, 1942 Daily changes in the stock of Series E savings bonds on hand 1 (In thousands of pieces) IBM : Number of : Number of pieces : Stock on hand deliveries at close of manufactured :pieces sold this day day this day : this day : : : Feb. 23 214 800 21,905 24 55 800 22,650 1,600 25 104 800 23,346 700 26 158 800 23,988 875 27 240 800 24,548 660 28 162 24,386 none-closed none-closed none-closed 304 500 24,386 24,582 160 500 24,922 171 500 25,251 200 500 25,551 210 500 25,841 211 25,630 none-closed none-closed none-closed 25,630 344 500 25,786 Mar. 1 2 3 4 5 6 7 8 9 - - - 625 - 625 - 625 - - March 10, 1942 Office of the Secretary of the Treasury, Division of Research and Statistics. Includes stock in hands of (1) Federal Reserve Banks and branches, (2) Post offices, (3) Federal Reserve Bank issuing agents, and (4) Treasury vaults 1 in Washington. CONFIDENT'S UNITED STATES SAVINGS BONDS Comparative Statement of Sales During First Seven Business Days of March, February and January 1942 (March 1-9, February 1-9, January 1-8) On Basis of Issue Price (Amounts in thousands of dollars) : : $ 43,894 over -$ 5,301 - 49,101 -$ 9,918 - 15.6% - 22.6% 26,160 - 36.7 24.3 - 32.5 - 36.8 - 40.5 10.7 39.2 55.5 - 35.8% 26.3% : Series E - Total 113,201 15,298 67,573 167,602 24,207 113,526 151,362 17,394 73,022 - 54,401 - 8,909 - 45,953 16,240 6,813 40.504 $196,072 $305,336 $241,777 -$109,264 $63.559 Total over : February 84,526 Series F - Banks Series G - Banks February January : February Series E - Banks 107,467 March over January $ 33,976 133,627 $ 28,675 : : January : February : : : Series E - Post Offices February March over Percentage of Increase or Decrease (-) : : March or Decrease (-) : : Item Amount of Increase : Sales Office of the Secretary of the Treasury, Division of Research and Statistics. March 10, 1942. Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. UNITED STATES SAVINGS BONDS Daily Sales - March, 1942 On Basis of Issue Price (In thousands of dollars) Post Office Date All Bond Sales Bank Bond Sales Bond Sales Series E Series E Series F Series G Total Series E Series F Series G $ 5,811 $ 15,868 $ 2,043 $ 8,726 $ 26,636 $ 2,043 $ 8,726 $ 32,447 2,975 3,395 3,869 4,179 3,480 8,459 8,833 10,448 10,696 11,586 1,629 2,658 1,680 1,759 1,586 8,780 12,558 11,870 10,825 6,328 18,868 24,048 23,998 23,279 19,499 $ 21,678 11,434 12,228 14,317 14,875 15,066 1,629 2,658 1,680 1,759 1,586 8,780 12,558 11,870 10,825 6,328 21,843 27,443 27,867 27,458 22,979 4,967 18,636 3,944 8,488 31,068 23,604 3,944 8,488 36,035 $ 28,675 $ 84,526 $ 15,298 $ 67,573 $167,397 $113,201 $ 15,298 $ 67,573 $196,072 Total March 1942 2 3 4 52 6 7 9 Total Office of the Secretary of the Treasury, Division of Research and Statistics. Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. March 10, 1942. CONFIDENTIAL Classification by Type of Purchaser of the Sales of Treasury Notes 298 Tax Series A and Tax Series B August 1941 to February 1942 (Par amounts in millions of dollars - As reported by the Federal Reserve Banks) Type of purchaser and month Tax Series Tax Series A B Total Individuals 1 January February 16.0 6.2 5.2 3.5 5.4 5.4 2.9 50.0 21.1 20.4 14.3 36.7 60.7 23.8 66.0 27.3 25.6 17.8 42.1 66.1 26.7 Total 44.6 227.0 271.6 3.7 1,024.9 1,028.6 August September October November December Corporations August .7 160.9 100.9 261.2 412.1 302.5 303.5 161.6 101.3 7.3 2,563.5 2,570.8 19.7 1,074.9 1,094.6 November December 7.1 5.8 4.1 5.8 281.4 431.9 316.2 339.8 288.5 437.7 320.3 345.6 January February 6.1 3.3 221.6 124.7 227.7 128.0 51.9 2,790.5 2,842.4 September October November December January February Total .9 260.3 .6 411.5 .6 301.9 303.1 4 Total sales August September October Total Office of the Secretary of the Treasury, Division of Research and Statistics. 1 Includes partnerships and fiduciaries. March 10, 1942 299 Sales of Treasury Notes - Tax Series A and Tax Series B August 1941 to February 1942 Classified by denomination (Par amounts in millions of dollars - As reported by the Federal Reserve Banks) Series and denomination :Oct. &: Aug. & : Nov Sept. Dec Jan. Total Feb. Tax Series A $25 50 100 .9 .6 .3 1.2 24.7 .7 .6 8.6 4.9 500 1,000 Total-Tax Series A * 2 .2 2.2 .2 3.1 4.1 2.0 44.3 .5 .3 .8 .9 .6 1.5 4 26.8 9.9 5.8 6.1 3.3 51.9 1.7 4.0 40.2 165.3 478.1 91.0 576.0 1.0 2.6 .9 .6 .3 2.1 23.3 88.1 218.6 58.5 356.0 19.2 58.7 120.9 22.0 116.0 1.3 12.1 39.8 71.8 19.0 77.0 4.5 10.6 Total-Tax Series B 1,356.3 748.1 339.8 Total-Both Series 1,383.1 758.0 345.6 Tax Series B $100 500 1,000 10,000 100,000 500,000 1,000,000 Office of the Secretary of the Treasury, Division of Research and Statistics. $500 and $1,000 denominations not sold prior to Jenuary 1942. .6 48.7 11.5 101.2 375.1 938.1 202.0 34.0 1,159.0 221.6 124.7 2,790.5 227.7 128.0 2,842.4 6.4 23.2 March 10, 1942 300 March 10, 1942. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston I have just handed to George Haas (9:45 A.M.) Mr. Shamhart's report on the fourteen ships loading Lend-Lease cargo for Russia at Philadelphia. Shamhart furnished a tabular report and a memorandum as to causes of delay. Last night after my conversation with you W. R. Johnson called Collectors or Customs Agents by telephone at the following ports: Boston, New York, Philadelphia, Baltimore, Norfolk, New Orleans, Port Arthur, Galveston and San Francisco. He talked to Fred Gardner, Supervising Customs Agent at San Francisco, and asked him to relay the message to San Diego, Los Angeles, Portland and Seattle. He asked for a telephone or teletype report today from all these ports and continuing daily reports. At all these ports, with the exception of Port Arthur, there are teletype facilities available either in Customs or Coast Guard. At Port Arthur we have been using the teletype in the office of a steamship company. A teletype will be installed there. The report from Philadelphia is limited to Russian cargoes, but in communicating with the other ports we have asked for reports on all Lend-Lease shipments. wear 301 Vessels in American Ports Loading Lend-Lease Materials for STRIETLY CONFIDENTE United Kingdom March 10, 1942 Port Name of vessel Date of at which arrival in loading port Date loading began Br. S/S Empire Cougar Balto. Feb. 12 Mar. 9 Br. S/S Baron Inchcape New York Feb. 19 Unknown Norw. S/S Henrik Ibsen New York Feb. 20 Feb. 20 Percent loaded 29 Expected date of departure Mar. 18 Nature of cargo Unknown delay in loading if any Steel, cotton, airplanes Unknown Reasons for Repairs Steel ingots, bombs, wire 85 Mar. 12 Steel, copper, food, machine parts Br. S/S Bosworth Boston Feb. 22 Feb. 24 95 Br. S/S Maritima Boston Feb. 25 Feb. 25 88 Pan. S/S Leonatus New Feb. 26 Mar. 6 90 Charleston, Feb. 27 Feb. 27 50 Br. S/S Badjestan Tractors, oil, Repairs Mar. 13 Trucks, tractors, food, steel Repairs Unknown Food, naval stores Mar. 12 ammunition Orleans Mar. 14-18 S.C. ammunition, food Repairs In drydock 89 Mar. 12 Auto parts, steel 50 Mar. 12 100 Mar. 11 Steel, lumber Rubber, machinery Mar. 5 80 Mar. 13 Steel, foodstuffs Phila. Mar. 4 Mar. 5 10 Mar. 25 New York Mar. 4 Mar. 7 20 Mar. 17 Br. S/S Empire Porpoise New York Feb. 27 Mar. 2 Br. S/S P.L.M. #13 Br. S/S Lancastria New York New York Mar. 2 Mar. 3 Mar. 3 Mar. 3 Br. S/S Torr Head Norfolk Mar. Br. S/S Flowergate Br. S/S Queen City Prince (Continued) Steel billets, cotton, lumber, 4 billets airplane parts lumber, propellers Steel billets, wire Wire, wool, tires ammunition Discharging ballast 302 Vessels in American Ports Loading Lend-Lease Materials for STRICTLY United Kingdom March 10, 1942 (Continued - 2) Port Name of vessel Dutch S/S Zypenberg Norw. M/S Kollbjorg at which loading Date of arrival in port Date loading began Balto, Mar. 5 Mar. 6 New Mar. 5 Mar. 12 Orleans Br. S/S Everleigh Phila. Br. S/S Consuelo As. S/S Steel Traveler Percent loaded 15 Expected date of departure Nature of Mar. 19 Lumber, machinery Unknown - (will start) cargo food, steel Aviation gasoline 100 Steel ingots Potash, wall board, airplane parts. 33 Unknown Motor trucks Mar. 7 New York Mar. 6 New Mar. 8 Mar. 8 Mar. 11 - 64 delay in loading if any Mar. 16 Mar. 11 Mar. 5 Mar. 6 Reasons for Repairs Orleans Br. S/S Pacific Shipper New York Mar. 8 Br. S/S Arabian Prince New York Mar. 8 Mar. 10 66 Br. S/S Tindarens New York Mar. 8 Mar. 9 Br. S/S Fort Churchill Seattle Mar. $ Norw. S/S Solstad Br. S/S Ocean Vision Galveston Seattle Mar. 8 Mar. 8 Am. S/S Swiftlite Galveston Mar. 9 Not Er. S/S Generton Balto. Mar. 9 Mar. 10 Swed. S/S Axel Johnson New York Mar. 9 Mar. 10 3r. S/S Empire Ptarmigan Phila. Unknown Mar. 20 (will start) Rubber, mach'y., airplane parts Mar. 19 Steel, machine & 70 Mar. 12 Copper Mar. 9 75 Mar. 12 Wood pulp, ply- Mar. 8 50 Mar. 11 Lubricating oil Mar. 9 75 Mar. 11 Wood pulp Unknown Diesel oil airplane parts wood - Pump ballast started Feb. 19 5 6 50 Mar. 17 Locomotives, Mar. 14 food, trucks Machinery, food, Mar. 18 Machinery, food chemicals Lack of cargo: repai rs 303 Vessels in American Ports Loading Lerd-Lease Materials for STRICTLY CONFIDENTIAL British Empire (Excluding United Kingdom) March 10, 1942 Port Name of vessel at which loading Date of arrival in port Date loading began As. S/S Cathlamet New York Feb. 5 Mar. 9 Dutch S/S Kota Tjandi New York Feb. 17 Feb. 17 Br. S/S Dalcross Phila. Feb. 18 Feb. 19 Br. S/S Antigone New York Feb. 26 Mar. 2 Br. S/S Tredinnick New York Br. S/S Bernard Br. S/S Empire Field Percent loaded Expected date of Reasons for Nature of departure cargo 90 Mar. 14 Tin plate, 100 I Unknown delay in loading if Destination any steel sheets Trucks, auto parts In drydock, Br. W.Africa Awaiting sailing Br. India Feb. 5 Mar. 9 orders 79 Mar. 13 Auto parts Repairs Br. India 100 Mar. 11 011, tires, Diversion of Egypt Feb. 27 Mar. 3 35 New York Feb. 27 Mar. 4 50 New York Feb. 27 Feb. 28 Mar. 14 ammunition Machine parts, Bad weather ammunition, steel Mar. 16 ship Br. India 2 days Steel, wire, Repairs Br. India Steel billets, Br. India ingots 100 Mar. 12 ammunition, tanks 10 Mar. 19 10 Mer. 15 Steel billets Repairs Steel, tractor Mar. 7 30 Mer. 14 Steel Mar. 4 Mar. 8 50 Mar. 12 Mar. 5 Mar. 5 30 Mar. 15 Food, trucks, auto parts Auto parts, airplane engines,medicinal Br. S/S Empire Wagtail Phila. Mar. 2 Br. S/S Harmattan New York Mar. 2 Mar. 9 Mar. 2 Br. S/S Orfor New York Mar. 4 Am. S/S Mormacawan New York Br. S/S Appledore New York parts, trucks Discharging ballast Br.Middle East Egypt Br. India Suez Egypt stores Br. S/S Port Halifax Newport News (Continued) Mar. 7 Mar. 9 35 Mar. 13 Planes, oil, tinplate Repairs Australia 304 STRICTLY CONFIDENTIAL Vessels in American Ports Loading Lend Lease Materials for British Empire (Excluding United Kingdom) (Continued 2) Date of arrival in port Mar. 8 Date loading : began : : Percent Mar. 9 loaded Expected Nature of departure cargo date of Mar. 14 62 Reasons for : New York : Am. S/S Courageous at which loading : Port Name of vessel delay in loading if Destination any Steel Br.Ministry, Buenos Aires Br. S/S Thursobank New York Br. S/S Empire Hawk Phila, Mar. 10 Unknown Mar. 11 (will start) Mar. 12 (will start) - - Mar. 13 Chains, cable Unknown Unknown Suez Repairs Egypt 305 MAR 10 1942 Dear Mr. McCabe: I have received your letter of March 3 and its enclosures. I notice it is your understanding that the Army intends to pay in cash for materials diverted from British dollar contracts, notwithstanding Mr. MeCley's statement that they would pay in kind for such materials. I should like to be certain of the final decision, and shall therefore greatly appreciate your sending me a copy of Mr. McCloy's reply to you. Sincerely yours, (Stened) E. Morgestham, Jr. Secretary of the Treasury. Mr. Thomas B. McCabe, Deputy Administrator, Office of Lend-Lease Administration, Five-Fifteen 22nd Street, , N.W., Washington, D. C. Phone File me By onlosingle String 5.03 Jallagre - 3/6/42 file to rimbia OFFICE OF LEND-LEASE ADMINISTRATION FIVE-FIFTEEN 22d STREET NW. WASHINGTON, D.C. March 3, 1942 My dear Mr. Secretary, In an exchange of letters between Mr. Stettinius and Mr. McCloy, Assistant Secretary of War, concerning the procedure for handling diversions of equipment to the War Department from British dollar contracts in this country, Mr. McCloy stated that it was the intention of the War Department to reimburse the British in kind for such equipment. A copy of Mr. McCloy'a letter was forwarded to the British for their information. Recently, Mr. Cox received a letter from Sir Frederick Phillips, a copy of which is enclosed, raising the question whether Mr. McCloy's statement should be understood as being in conflict with a previous statement by Under Secretary Patterson, in a letter to Sir Frederick, that the War Department would pay the British in dollars for all such equipment diverted to its own uses. It is our understanding that the War Department still intends to pay the British in dollars for all aircraft and aircraft material diverted to its own uses as agreed by Under Secretary Patterson. I have written Mr. McCloy requesting him to confirm this and will forward to you a copy of his reply. Very sincerely yours, Floores B.lu: Calce Thomas B. McCabe Deputy Administrator ENSE Hon. Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. BUY Enclosure COPY THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA Telephone: Republic 7860 Box 680 Benjamin Franklin Station Washington, D. C. February 12, 1942 Dear Mr. Cox, Mr. Childs has shown me your letter of the 9th February enclosing correspondence with the War Department on the question of material diverted from lend-lease requisitions and British dollar contracts. So far as regards diversions from British dollar contracts the arrangements mentioned however do not seem to be in accordance with the undertaking, of which I enclose a copy, contained in Mr. Patterson's letter of 27th December, namely that the War Department would pay cash as soon as the figures were ascertained. The letter referred to aircraft material, but that is the vast bulk of the material in question. Yours sincerely, /B/ F. Phillips Mr. Oscar Cox, General Counsel, Office of Lend-Lease Administration, 515 - 22nd Street, N.W., Washington, D. C. COPY DEPARTMENT WAR OFFICE THE OF UNDER SECRETARY Washington, D. C. December 17, 1941. Sir Frederick Phillips, British Supply Council, Willard Hotel, Washington, D. C. My dear Sir Frederick, I refer to our recent telephone conversation relative to remunerating the United Kingdom for aircraft contracted for by it and which were recently taken over by the United States. At the moment it seems impossible to reach a definite conclusion as to the actual money value of the articles taken. This reaction was subscribed to by personnel in the Air Corps and in the British Purchasing Commission. This is to inform you that it is the definite intention of the War Department to make payment at the earliest practicable date in United States dollars for the amount found to be due. Sincerely yours, /s/ Robert P. Patterson, Under Secretary of War For Miss Chauncey 309 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 10, 1942 Secretary Morgenthau TO Mr. Dietrich FROM STRICTLY CONFIDENTIAL Official sales of British-owned dollar securities under the various vest- ing orders since February 19, 1940: No. of Shares $ Proceeds of Nominal Value $ Proceeds of Mar. 2 Shares Sold of Bonds Sold Bonds Sold - - - Sold - - 4 - - - - - - 5 - - - 6 - - - - 7 - - - - Sales from Feb.22,1940 to Feb.21,1942 9,847,610-1/6 281,858,763 45,647,516 37,473,716 Sales from Feb.22,1940 to Mar. 7,1942 9,847,610-1/6 281,858,763 45,647,516 37,473,716 D For Miss Chauncey 310 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE March 10, 1942 Secretary Morgenthau TO FROM Mr. Dietrich STRICTLY CONFIDENTIAL Official sales of British-owned dollar securities under the various vest- ing orders since February 19, 1940: $ Proceeds of Shares Sold Bonds Sold - - - Total - - Mar. 2 $ Proceeds of - 3 - - 4 - - - 52 - - - 6 - - - 7 - - Sales from Feb. 22, 1940 to Feb.28,1942 281,858,763 37,473,716 319,332,479 281,858,763 37,473,716 319,332,479 Sales from Feb. 22,1940 to Mar.7,1942 319,332,479 $ proceeds of non-vested securities sold Feb. 23, 1942 - Feb. 28, 1942 $ proceeds of non-vested securities sold 243,600,000 $ proceeds of non-vested sold Sept. 1, 1939 securities 1942 1942 243,900,000 243,900,000 GRAND TOTAL 563,232,479 - Feb. 21, Sept. 1. 1939 - Feb. 28, 300,000 $ Jan. 7. 1942 - Cash Dividend on 156 Shares Jan. 9. 1942 - Partial Liquidating Dividend 9 Units sold from Aug. 18, 1941 - Feb. 14, 1942 Shares Stock Dividend sold Aug. 18, 1941 - Feb. 14, 1942 for 56,007 Rights sold from July 24, 1941 - Feb. 14, 1942 for 11 61 125 42 123 102,938 For 311 Chauncey TREASURY DEPARTMENT OFFICE OF THE SECRETARY March 10, 1942 CONFIDENTIAL Received this date from the Federal Reserve Bank of New York, for the confi- dential information of the Secretary of the Treasury compilation for the week ended February 25. 1942. showing dollar disbursements out of the British Empire and French accounts at the Federal Reserve Bank of New York, and the means by which these expenditures were financed. A dm:3/10/42 For Miss Chauncey 312 FEDERAL RESERVE BARK OF NEW YORK March 5. 1942 CONFIDENTIAL Dear Mr. Secretary: Attention: Mr. H. D. White I am enclosing our compilation for the week ended February 25. 1942, showing dollar disbursements out of the British Empire and French accounts at this bank and the means by which these expenditures were financed. Faithfully yours. /s/ L. W. Knoke L. W. Knoke. Vice President. The Honorable Henry Morgenthau, Jr.. Secretary of the Treasury. Washington D. C. Enclosures Copy:vw:3-10-42 BRITISH AND FRENCH ACCOUNTS (In Millions of Dollars Week Ended February BANK OF ENGLAND (BRITISH GOVERNMENT) Proceeds of Gov't Total Debits BANK Total Sales of Securities OF DEBITS CREDITS DEBITS Net Incr. (+) or FRANC CREDITS (o) Net Inor. Gov't Expendi- Other tures (d) Lebits Total Credits 866.3(e) 416.6(e) 449.7 1,09536) 900.2 195.1(e) +229.0 900.2 198.2 +220.1 Proceeds of Gold Other Sales Credits Expendi Other tures(a) Debits Credits Gold 605.6 1,187.6 1,828.2 1,356.1 52.0 420.1 35.0 2,792.3 1,425.6 1,356.7 2,793.1 2,109.5 108.0 575.6 10.8 878.3 421.4 456.9 1,098.4 Treatment 2,203.0 1,792.2 410.8 2,189. 1,193.7 274.0 722.1 - 13.2 38.9 4.8 34.1 8.8 - 8.8 30.1 105.9 176.2 20.1 2.0 35.3 0.3 0.5 - 0.5 0.2 0.8 - 0.3 0.3 - 0.3 - 133.6 - 21.5 -36.9 0.3 0.3 16.1 - 150.9 154.1 150.1 111.6 69.6 35.0 31.7 44.5 18.8 - 16.1 - 0.8 0.4 0.4 23.2 29.1 63.8 23.4 PERIOD (Official)(b) Other Decr. (-) Credits(in Balance Total Debits Decr. (-) in Balance First year of war 1.793.2 period through 1940 - year of war 1945 Aug. -Oet. 1 Oct. Oct. 29 Oct. 30 -> Dec. 3 Dec. - Dec. 31 140.9 109.0 156.1 88.4 77.3 - 1.0 134.6 51.5 - - 51.5 + 41.9 0.8 - - 0.4 0.4 - 15.7 + 0.2 + 0.3 1942 Jan Jen. 28 Jan. 29 - Fab. 25 Feb. 4 11 18 25 R 0030 102.3 87.2 27.9 19.2 17.7 22.4 19.0 14.3 14.8 15.7 69.3 57.2 4.9 17.8 10.2 2.9 6.2 14.9 14.3 8.9 Since Outbreak of ar Telrous June 19, 1940) 19.6 Busion KnmLand (through June 19. 1940) 27.6 million Mand (since June 19. 1940) 40.0 million (See breakdown see tabulations prior to April 23, 1941 and tabulations prior to October B. 1941. for other footnotes) 0.5 68.8 1.0 56.2 - 17.8 9.2 1.0 14.9 33.0 30.0 0.2 0.2 0.4 0.4 0.3 0.3 0.1 0.1 0.1 0.1 0.4 10.1 9.0 2.8. 14.3(s) 8.1 - 0.1 - 0.1 Transfers from British Purchasing Commission to Bank of Canada for French Account Week ended February 25, 1942 Cumulation from July 6, 1940 162.7 million million +0.1 +01 +0.1 (a) Includes payments for account of British Purchasing Commission, Britksh Air Ministry, British Supply Board, Kinistry of Supply Timber Control, and Ministry of Shipping. (b) Estimated figures based on transfers from the New York Agency of the Bank of Montreal, which apparently represent the proceeds of official British sales of American securities, including those effected through direct negotiation. In addition to the official selling, substantial liquidation of securities for private British account occurred, particularly during the early months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuracy. According to data supplied by the British Treasury and released by Secretary Morgenthau, total official and private British liquidation of our securities through December, 1940 amounted to $334 million. (c) Includes about $85 million received during October, 1939 from the accounts of British authorized banks with New York banks, presumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October, 1939 apparently represent the acquisition of proceeds of exports from the sterling area and other currently accruing dollar receipts. (d) Includes payments for account of French Air Commission and French Purchasing Commission. (e) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day. (f) Includes $7,500,000 transferred from New York account of authorized banks. Sook Transfers Proceeds to official PERIOD British Debita A/C First year of war DEBIT CREDITS DEBITS Total BANK OF AUSTRALIA Canadian Government BANK of Gold Total For Own For French Credits Sales A/O A/C CREDITS Transfers Transfers from Official British A/C Other Debite Soda Other Net Incr. (+) or Decr. (-) Credits in Balance Proceeds to Official Total Debits British A/C of Other Total Debits Credits Gold Sales Net Incr. (+) or Other Decr. (-) Credits in Balano 306.4 504.7 412.7 20.9 38.7 32.4 +181.7 31.2 27.3 36.1 30.0 6.1 4.9 16.6 3.9 323.0 460.6 707.4 534.8 20.9 110.7 41.0 +230.2 57.9 14.5 43.4 62.4 50.1 4.5 16.6 12.3 477.2 460.4 462.0 246.2 3.4 123.9 1.6 72.2 16.7 55.5 81.2 62.9 23.1 52.2 21.2 88.5 31.0 29.1 10.7 0.5 10.2 2.8 2.1 18.3 0.7 9.0 7.9 - 17.7 8.2 5.5 2.1 - 7.8 5.9 11.9 8.C 19.7 2.7 37.4 - 10.3 6.9 3.4 11.6 9.0 32.5 19.3 +1.3 52.7 13.2 2.0 17.3 1.8 2.1 2.8 2.6 17.7 22.2 G.2 NM - 1.1 Jan. Jan. 28 39.5 33.0 27.0 6.0 6.5 4.5 10.8 39.5 Jan. 20 Feb. 25 34.1 34.1 35.7 12.4 23.3 1.6 8.2 Oct. 37.4 29 52.8 A-Dec. 37 - - 0.1 19/2 - - - 4.9 WEEK ENDED: 11 18 25 7.6 5.2 16.4 4.9 - Feb. 4 - - 2.6 8.7 0.5 5.2 10.8 5.9 16.4 10.3 3.3 4.9 5.9 2.7 lookly Average of Total Debits Since OutbreakMobilion of War through February 25, 1942 7.8 . For monthly breakdown see tabulations prior to April 23, 1941. ⑉ For monthly breakdown see tabulations prior to October 8, 1941. - - - 4.9 7.0 3.2 -20.3 - 25.5 +1.1 +5.6 3.9 4.5 10.8 1.6 8.4 5.3 3.1 1.6 6.5 5.3 1.2 0.7 0.7 0.1 0.1 -61 1.5 1.5 0.2 0.2 0.2 0.2 +1.0 0.2 0.2 0.6 0.6 + Oct. Oct. 23.1 1 - AUG. -Oct, - - Leo.4 0.2 + year - 1940 + 18/29/29-8/28/40)* Bar period through 6.3 6.8 -5.8 -1.4 +0.4 316 MAR 10 1942 My dear Mr. Secretary: I am enclosing copy of report on our exports to some selected countries for the period ending February 28, 1942. Sincerely yours, (Signed) E. Horgeathan. Jee Secretary of the Treasury The Honorable The Secretary of State, Washington, D. C. Enclosure m.m C. copie to Dh. White HDW:mah 3/9/42 By Messenger Singis 5:05 317 MAR 10 1942 My dear Colonel Donovan: I am enclosing copy of report on our exports to some selected countries for the period ending February 28, 1942. Sincerely yours, (Signed) E. Horgentham, JE. Secretary of the Treasury Colonel William J. Donovan, Coordinator, Office of Coordinator of Information, old National Institute of Health Building, 25th and E Streets, N. W., Washington, D. C. Enclosure n.m.c. cape to Dr.w hite HDW:meh 3/9/42 By Messenger Surger 5:05 t 318 MAR 10 1942 My dear Mr. Perkins: I am enclosing five copies of the report of our exports to some selected countries for the period ending February 28, 1942. Sincerely yours, (Signed) E. Eorgenthau, Jr. Secretary of the Treasury Mr. Milo Perkins, Executive Director, Board of Economic Warfare, 2501 Que Street, N. W., Washington, D. C. Enclosures n.m.c. copy Dr.Whate HDW:mch 3/9/42 By Messenger Sturgistion in to by offers 319 MAR 10 1942 My dear Mr. President: I am enclosing report on our exports to some selected countries for the period ending February 28, 1942. Faithfully, (Signed) A. Korgenthau. JR. Secretary of the Treasury The President, The White House. Enclosure n.m.c. copie to Dr.white HDW:meh Delivered by SS age 6.00 3/9/42 Ris to her office 320 March 6, 1942 Exports to Russia, Free China, Burne and other blocked countries, as reported to the Treasury Department during the 6-day period ending February 28, 1942. 1. Exports to Russie Exports to Russia, as reported to the Treasury during the eight-day period ending February 26, 1942 amounted to more than $26,000,000. Landplanes accounted for nearly $12,000,000 of this total. (See Appendix C.) 2. Exporte to Tree China and Bursa Exports to Free China during the period under review amounted to Approximately $2,900,000. Landplanes accounted for more than 75% of the total. (See Appendix D.) No exports to Buraa were reported during the period under review. 3. Exporte to France No exports to Occupied France were reported during the period under review. Exports to Unoccupied France amounted to $26,000. 4. Exporte to other blooked countries Exports to other blooked countries are given in Appendix A. 321 STRICTLY CONFIDENTIAL NOT FOR PUBLICATION SUMMARY OF UNITED STATES DOMESTIC EXPORTS TO SELECTED COUNTRI 5 AS REPORTED TO THE TREASURY DEPARTMENT DECLARATIONS FROM DURING PERIOD EXPORT INDICATED THK RECEIVED 1/ July 28, 1941 to February 28, 1942 (In thousands of dollars) July 28 Period ended to Feb. 10 S.S.R. res China urus 2 Period ended Total February 20 February 28 $121,472 $ 26,174 $ 28,063 $ 175,709 41,982 4,853 2,921 49,756 10,499 583 rance 3 - - 6 Donestic Exports 11,082 6 mupied France - 2 2 occupied France pain itserland oh 2 2,637 2 26 28 146 2,785 7,116 6,818 115 183 13,280 569 5 13,849 rtugal 5,697 548 60 6,325 each North Africa 6,283 edea - easury Department, Division of Monetary Research - 6,283 March 5, 1942. Many of the export declarations are received with a lag of several days or more. Therefore this com ilation does not accurately represent the actual shipment of a particular week. The longer the period covered, the closer will these figures come to Department of Commerce revised figures. From September 11, 1941 to date - It is presuned that . large percentage of material listed here, consigned to Summ, is destined for Free Chima. Includes both Occupied and Uncounted France through week ending October 4, 1941. Occupied and Unoccupied France separated thereafter. Includes Morocco, Algeria and Tunisia. Less than $500. :jdj 3/5/42 322 APPENDIX B Exports from the U. S. to Free China, Barea and U.S.S.R. as reported to the Treasury Department July 28, 1941 - February 28, 1942 (Thousands of Dollars) Exports to Exports to Exports to Free China July 28 - Aug. 2 Aug. 4 - Aug. 9 Aug. 11 - Aug. 16 1 Aug. 18 - Aug. 23 Aug. 25 - Aug. 30 Sept. 2 - Sept. 6 Sept. 5 - Sept.13 Jep$.15 - Sept.20 Sept.22 - Sept.27 Jept.29 - Oat. 4 Det. 6 - Oct. 11 cet. 13 - Oct. 18 Det. 20 - Oct. 25 let. 27 - Nov. 1 lov. 3 - Nov. 8 NOV. 10 - Nov. 15 F. 17 - Nov. 22 OV. 24 - Nov. 29 Dec. 1 - Dec. Dec. 8 - Dec. 13 & Dec. 15 - Dec. 20 ee. 22 - Des. 27 Dee. 29 - Jan. 3 Jan. 5 - Jan. 10 Jan. 12 - Jan. 17 Jan. 19 - Jan. 24 Jan. 26 - Jan. 31 Feb. 1 - Feb. 10 Feb. 10 - Feb. 20 Feb. 20 - Feb. 28 Total L. P. 3. Burna 3/ U.S.S.B. 395 4, 523 309 986 2,735 2 1,023 4,280 5,217 1 204 2,261 3,822 752 110 the 1,225 684 5,312 1,157 5 35 269 403 4,772 1,672 2,851 1,228 3,239 58 323 6,845 1,924 5,623 4,484 88 4,552 2,677 1,021 1,364 2,436 342 791 64 2,337 18 111 8 1 196 35 2,333 2 3,581 3,609 12,040 4,580 1,829 3,993 8,247 5,874 91 1,073 1,695 447 - 3,885 6,938 4,889 4,853 923 9,608 1,054 52,359 9,969 2,921 583 13,315 26,174 28,119 176,118 These figures are in part taken from eopies of shipping manifests. Figures for exports to Free Ghim during these weeks include exports to Rangoon which are presured to be destined for Free China. It is presumed that a large percentage of exports to Suras are destined for Free China. Beginning with February 1 figures will be given for 10-day period instead of week except where otherwise indicated. 6-day period. sury Department, Division of Monetary Research March 9. 1942 323 APPENDIX 0 Principal Exports free V. S. to U.S.B.R. as reported to the Treasury Department during the eight-day period ending February 28, 1942 (Thousands of Dollars) TOTAL EXPORTS 8 28,119 Principal Items: Landplanes (bomber) Military tanks (light) Motor trucks and chassis Military tanks (medium) Brass and bronze plates and sheets Pork, canned Military teak parts and accessories Explosive shells and projectiles Weel eloth Milling machines Aircraft parts and accessories, N.E.S. Light reconnaissence ears Lamdplanes (pursuit, interceptor, and fighter) Iso-pentane (blending agent) Marine engines Sole leather Wheat flour Trinitro teluene (T.N.T.) Relief supplies - hearital Copper wire (insulated) Leather beets and shoes Engine parts and accessories Machine guns, sub-machine guns or parts Other ammunition Tin plate Vaeuua tubes Relief supplies - elething Lathes Teluene Metallie containers (drans) Treasury Department, Division of Monetary Research 11,698 1,711 1,465 1,180 1,141 871 821 692 674 592 566 469 450 419 362 340 262 208 206 205 201 176 171 159 154 154 151 143 141 128 March 6, 1942 324 APPENDIX D Principal Exports from U. 8. to Free China as reported to the Treasury Department during the eight-day period ending February 25, 1942 (Thousands of Dollars) TOTAL EXPORTS 8 2,921 Principal Items: Landplanes (pursuit, interceptor, and fighter) Refined copper Printed matter (beak notes) Landulanes (partiel shipment) Treasury Department, DIVISION of Monetary Research I8F/efs 3/9/42 2,340 286 247 47 March 6, 1942 325 Letter from the National City Bank of New York, New York - March 10, 1942 In Reply Please Quote Initials: JAH Mr. D. J. Cameron, Manager, Foreign Department, Federal Reserve Bank of New York, 33 Liberty Street, MAR 10 1942 New York, New York. Dear Mr. Cameron: With reference to our letter of March 5 and yours of the same date we are now in receipt of an authenticated cable from Amministrazione Pontificia per le Opere di Religione, Citta del Vaticano, dated March 9, reading as follows: "REFER TO YOUR WIRE OF THE 7TH CONCERNING FEDERAL RESERVE BANK OF NEW YORK WE INFORM YOU THAT TERM(S) AND CONDITION(S) ARE AGREEABLE TO US AND WE ASK (COMPLETE MUT.) OPERATION(S) GOLD. THANK(S)* In view of this will you kindly advise whether it is agreeable to you to complete the additional purchase of gold for $2,000,000 as requested in the cable we quoted in our letter to you dated March 5. and, if so, inform us of the amount you require in cover thereof. Very truly yours, THE NATIONAL CITY BANK OF NEW YORK Perpro (Signed) J. A. Herber (Received by telephone from Federal Reserve Bank of New York, N. Y. 11:35 a.m. March 11, 1942) VW C 0 0 P 326 Y DEPARTMENT OF STATE WASHINGTON In reply refer to March 10, 1942 NE The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and refers to & conversation which took place in the Department of State on March 4, 1942, between an officer of the Division of Near Eastern Affairs and Mr. E. D. Batchelder, of the Treasury Department, concerning the type of currency used in Liberia. There is transmitted for the information of the Treasury Department in this connection a copy of a paraphrase of a telegram dated March 8, 1942, which the Department has re- ceived from Mr. Harry A. McBride, special representative of this Government in Liberia. There is also enclosed a copy of a plan for the reform of the monetary system in Liberia, prepared by Dr. Edwin W. Kemmerer, of Princeton University, in 1939, which the Treasury Department might wish to consider in connection with the proposal now advanced to change the circulating medium in Liberia from British to United States currency. Enclosures: Paraphrase and copy of Plan Copy:bj:3-11-42 327 PARAPHRASE OF CONFIDENTIAL TELEGRAM RECEIVED FROM AMERICAN LEGATION, MONROVIA, NO. 62, MARCH 8, 10 A.M. Referring to the Department's telegram No. 36 of March 5, 8 p.m. I have studied the currency problem since my arrival in Liberia and have consulted with President Barclay, the manager of the Bank of Monrovia and with the Financial Adviser. President Barclay said last week that he would like to discuss this matter at our next conference on March 9 or 10. The cost involved in insurance and freight in returning British silver to Great Britain and in transporting American silver to Liberia in replacement has heretofore been the most serious obstacle. Liberia has not had funds available to cover these expenses, estimated at from $100,000 to $150,000. The unwillingness of Great Britain to purchase the British silver in circulation in this country is a further obstacle at the present time. An opportunity, which may never occur again, for Liberia to obtain American currency in considerable quantities without cost to this country is presented by the arrival of American forces and I believe that it will be the President's desire to take advantage of it, especially if, in addition to the needs of the American forces, the War Department would consent to send to the Bank of Monrovia, without charge for insurance and freight, some $500,000 in United States currency from the funds of the bank in New York. 328 -2- Anticipating its future requirements in Liberia to the extent of about $1,500,000, the War Department might be willing to send out this sum in American currency, which could be deposited with the Bank of Monrovia and drawn against as needed by our disbursing officers. This would solve the problem of obtaining an initial supply of United States currency adequate to enable the Bank of Monrovia to handle conversion here. While small quantities of bills in denominations of five dollars and upwards could be included for larger bank transactions, the money should otherwise be confined to metal from one-cent pieces to silver dollars. Dollar bills should not be sent since they are not suited to native circulation. Paymasters and commissars should be instructed accordingly on this point. As regards British currency for withdrawal, there is in circulation in Liberia approximately two million dollars worth, all in silver coins. I would recommend that the United States Government arrange, if feasible, for the shipment, without charges for insurance and freight, on Warshing homeward bound, of such quantity of British silver as can be collected, the United States Treasury then arranging with the British Government to take this off the hands of the Treasury or of the Bank of Monrovia over a certain period of time 329 -3- at such a rate of exchange as would cause no loss to the Bank of Monrovia or to Liberia. Perhaps it would be more satisfactory if the Treasury Department could arrange with the British to accept this currency, delivered at Freetown by American warships, credit for the money being established in New York. Conversion should be effected here at the rate of four dollars to the pound. At this rate, expence is equivalent to exactly ten cents United States currency. The Bank of Monrovia would have to be given a guarantee, if conversion to American currency were made at this rate, that the British currency withdrawn from circulation could be disposed of at the same rate, without any charges for insurance or freight. Other details could be worked out later, such as the exchange here of Liberian copper for American one-cent pieces. I will discuss the matter further with President Bercley and will report as soon as practicable. Meanwhile, it would be appreciated if the Detartment would consult with the Treasury and War Departments on the suggestions made above. Copy j:3-11-42 330 PLAN FOR MONETARY REFORM REPUBLIC OF LIBERIA by EDWIN WALTER KEMBERER Part I The Currency Problem Confronting the Republic of Liberia A critical situation exists at the present time with reference to the currency circulating in Liberia. The chief money of the country is British silver, and in the face of a constant need to obtain additional quantities of this currency to satisfy the increasing demands of business and to offset the seepage of coin out of the country, its further exportation from England has been prohibited because of the war emergency. Thus, Liberis is confronted with the likelihood of a shortage of money in the very near future. In addition, the economic life of the country has been subjected to severe dislocation by reason of the depreciation that has already taken place in sterling exchange under the stress and strain of WCT, and because of the possibility that a further decline in the dollarsterling exchange rate may result. While salaries and wages are paid in starling and prices in the stores are established in the same currency, the Government's accounts are kept in Liberian dollars, which by statute have the same gold content as the United States dollar, but by authorized executive decree have been assimilated to English sterling at the rate of $4.80 to the pound. This means, since the country's taxes and customs are levied on the basis of gold dollars, that the burden of these charges will be increased by about 20 per cent when the Government takes official cognizance of the decline in sterling from $4.80 to approximately $4.00. Furthermore, practically all of the country's foreign debt of $1,615,911 and its internal floating debt of $241. 864, according to the most recent figures available, are fixed in terms of U. S. dollars, and the burden of this debt is similarly increased by a decline in the dollar value of sterling. To alleviate the situation at this time, two courses of action may be considered: 0 331 -2- 1. Question of continuing to use British currency as at The first possible course would be to continue to use British present: currency, with such amendments and modifications of the existing system as are necessary to allow it to operate under war-time conditions. To do this would probably result in substantially increasing the burden of the Republic's foreign debt, which is payable in American dollars, and the interest and amortization charges of which would require an increasing amount of sterling, if and as the dollar value of sterling should further depreciate under the pressure of war. It would also pre-suppose that arrangements could be made to obtain British silver coin from time to time to meet the recurring needs of the country for additional money. Even if this condition could be met, the advisability of Liberia's continuing with its present currency system is extremely doubtful. While the increased burden for interest and amortization payments on the foreign debt might with difficulty be met for the time being, even this would not eliminate the problem of what disposition would be made of the debt when the present war had ended. If the war continues for some time, as now appears probable, the prospects are strong that sterling will depreciate much further. It is also believed to be unlikely that the British Government after the war will again bring the pound back to its pre-war gold value or dollar value, as it did after the last World War. The result of these conditions would be to leave Liberia with a currency that is much lower in its dollar exchange value than it is at the present time, and with a foreign debt expressed in dollars, that might prove very burdensome. 2. Question of shifting from a sterling currency to United States currency: The second possible course would be to shift from a sterling currency to United States currency. Such a reform of the currency has much to commend it. As far back as 1935. the Liberian Government passed a law (amending Section 1210 of the Revised Statutes) which established a gold dollar containing 15 and 5/21 grains of gold, .900 fine--the exact gold equivalent of the United States dollar--as the monetary unit of Liberia. This law also authorized the President to fix by decree the relation between the Liberian doller and foreign coins circulating in the Republic. The Revised Statutes (Section 1213) empower the Secretary of the Treasury to demonetize the British silver coins now in circulation. Thus, all the necessary legislation for the introduction of United States money and the integration of the Liberian Konetary system with that of the United States already exists on the statute books. 332 -3- Strong economic considerations also favor the adoption of United States currency at this time. More of Liberia's exports CO to the United States than to any other country: the bulk of imports in turn are purchased from the United States. This foreign trade could be conducted more easily if wages in Liberia were paid in United States money, so that costs of production and incomes of the people of the country were both fixed in terms of the same monetary unit. Liberia's foreign debt, which is payable in U. S. dollars, has already been considered. Obviously, it would be easier for the Government to maintain interest and amortization charges on the debt if the nation's finances were on a sound basis and no disorderly fluctuations should occur in the relationship between the local currency and the dollar. These various considerations lead to the conclusion that for Liberia to continue using a sterling currency would be only a stop- gap measure at best, with a strong possibility that a shift to United States money would have to be made anywey in the not-too distant future, when conditions night not be as propitious as at the present time. An immediate change from the sterling basis to the United States currency basis is therefore recommended, upon the assumption that the existing English and West African silver coins now current in Liberia can be imported into England and Sierra Leone respectively, during the period of the conversion plan, and accepted for deposit in Banks at face value and that such deposits, by some fessible process, can be re-converted into dollars. Copy:1c:3/11/42 333 Part II Suggested Steps to be Followed in Introducing United States Money into Liberia If it is decided to substitute United States money for the British silver coins now circulating in Liberia, certain important considerations in effecting the change should be kept in mind; First, nothing should be done to discredit in the public mind either the American money which is to be introduced, or the British money which is to be withdrawn from circulation. If steps are taken which bring dis- credit on either of the two moneys, Gresham's Law will come into operation and the discredited money will tend to drive the other money out of circulation, thereby jeopardizing the success of the reform. In the second place, the exchange can be conducted with the greatest effectiveness only if the general principles to be followed and each successive step of importance are planned in advance in order to avoid, BO far as possible, any mishap which might tend to weaken confidence in the currency. In the third place, while it is important that the reform should be effected promptly, the appearance of haste should be avoided. Undue haste in carrying through the exchange or evidence of anxiety as to its success might interfere with the orderly progress of the work and prevent its early completion. In currency reforms, delicate matters of volatile and emotional mass psychology are often of great importance. It is urgent that the confidence of the public should continually be maintained. With these considerations in mind, the following steps to be followed in introducing United States money into Liberia are suggested: 1. Establishment of rate of conversion: With the pound sterling in the neighborhood of $4.00, the United States dime is almost exactly equivalent to 6 pence of British 334 0 -5- British money, the United States 5-cent piece is approximately equal to 3 pence British money, and the United States dollar to 60 pence. It is therefore suggested that until further notice these rates be established for the conversion of British money into United States money. To facilitate the transition to United States currency, it would be desirable to encourage the people of Liberia to think of the dime as their monetary unit. This unit would be a convenient size for a country like Liberia. It is in fact larger then the monetary unit of many other countries, including France, Belgium, Brazil, and Chile. If the dime is accepted as the basic unit, then as other United States coins are introduced they would be thought of, not B.B fractions of a dollar, but as sub-divisions or multiples of the dime. A 5-cent piece, for example, would be a half-dime; a 50-cent piece would be five dimes, and a dollar would be ten dimes. 2. Further importation of British coins should be prohibited: In view of the danger of a further decline in the dollar exchange value of sterling, which would increase the difficulty of keeping exchange in Liberia at the determined rate, it is essential that no additional British coins be allowed to come into the country. 3. Advance announcement of currency changes: As soon as the Government decides to introduce United States money and all essential plans are drawn up for the ac- complishment of the reform, it would be well for the President to issue a statement along the lines of the attached draft (Annex A) explaining what is contemplated and arousing anticipation and confidence in the minds of the people in the new United States money. In this way, public interest will be stimulated, the element of surprise will be avoided, and the people will have opportunity to adjust their minds in advance to the new state of affairs. To the extent possible, the contents of the President's statement should be transmitted throughout the country by word of mouth and through all the various other channels of communication that are available. 4. United States currency needed in Liberia: The next aspect of the problem to be considered is the question 335 O question of the kinds and quantities of United States money needed in Liberia. It is believed that in the earlier stages of the monetary reform the coins that will prove most acceptable in Liberia and at the same time will involve the least confusion and difficulty in the process of introduction are the United States 10-cent piece and 5-cent piece. These coins are of denominations well adapted to a large proportion of the transactions in the Republic. They are attractive coins. The dime is of approximately the weight and dimensions of the British six-pence, although it contains about 59 per cent more pure silver. In addition, to aid in the conduct of larger business transactions while the shift to United States money is in progress, it will probably be advisable to have a quantity of silver dollars available. For the present and until most of the existing circulation of British coins of one shilling and of one florin have been withdrawn from circulation and the public has become thoroughly familiar with United States coins of the denominations of 10-cents, 5-cents, and one dollar, no American quarters or half dollars should be put into circulation. The early introduction of these coins would be likely to confuse the public and to jeopardize the smooth functioning of the reform by bringing into operation against the quarters and half dollars the force of Gresham's Law. The British shilling has a gross weight of 87.27 grains, is .500 fine, and contains 43.64 grains of silver. The American quarter tains or twice the coins of similar one to value of 25 United States cents. The more in appearance reason of its larger and its for some for small insist the that were the same atofto has a gross weight of 96.45 grains, only about 11 per cent greater than the shilling, but being .900 fine con- newness. quarter, value, merchants cents as 86.80 much by size, end grains furthermore, The as to tendency of public expected shilling. fine money would silver, large the Here be and circulate two silver would time the would approximately coins attractive other would be content be at likely at two the be 20 do the same. The result would be that the quarters when received would be held back and hoarded while the shillings would be spent. One keeps the coin he considers to be the better and spends the coin he considers to be the poorer, so long as the two coins are acceptable at the same 336 -7- same value. This is Gresham's Law. It is another way of saying that one buys as cheaply as possible or that he buys in what he believes to be the best market. The same principle would apply in the relationship between the British florin and the American half dollar if they were circulating side by side in the earlier stages of the reform. The florin has a gross weight of 174.54 grains, is .500 fine, and contains 87.27 grains of fine silver. The half dollar has a gross weight of 192.90 grains, only about 11 per cent greater than that of the florin, but being .900 fine contains 173.61 grains of fine silver or about twice as much silver as the florin. If the market insisted on accepting the two coins, which are of similar weight and dimensions, at the same value, as it would be likely to do, the florin would tend to keep the half dollar out of circulation. The result would be that the public instead of accepting the half dollar as the equivalent of 30 pence, as it should, according to the official rate of equivalence, would accept it as only 24 pence. The American silver dollar, which is dissimilar to any coin now circulating in Liberia, if placed in circulation, would not cause difficulties like those just described as applying to the quarter and half dollar, and would serve the purpose of providing a coin of large denomination during the period of transition to the new currency basis. The silver dollar, however, may be too heavy a coin and too large a denomination for permanent use in Liberia on any considerable scale, and, unless it should prove to be very popular, should be replaced by half dollars and quarters as soon as the withdrewel from circulation of the shilling and florin pieces has progressed far enough to make the slow introduction of these new coins safe. As to the quantity of United States money to be put into circulation; The best available data indicate that the British coins now in circulation in Liberia are as follows: English sterling silver, (consisting largely of florins, shillings, 6 penny bits and & 160,000 3 penny bits) estimated to total British West African "palm tree" silver estimated to total & 40,000 Estimated total & 200,000 On 337 0 -8- On the basis of these estimates, it would appear that the total amount of British money now in circula- tion may be equivalent to approximately $800,000.00 at current rates of exchange. It should therefore be planned to introduce approximately $800,000.00 of United States money into circulation in effecting the reform. Subsequently, additional United States money will have to be imported from time to time, as has been done with British silver, to meet the requirements of increasing business and to allow for the seepage of coins out of the country. At this distance and without more information as to the habits and customs of the people of Liberia in the use of money, it is difficult, if not impossible, to moice detailed recommendations as to how the United States coins to be imported should be divided according to denominations. Figures obtained from the General Manager of the Bank of Monrovia, Incorporated indicate a preponderance of larger British coins in the vaults of the Bank, but this is to be expected and probably does not represent the situation as regards general circulation throughout the country. There is obviously a tendency for the larger coins to move towards the coast cities and into the Bank. Concerning the first step in determining how the initial shipment of United States money should be divided as to 5-cent and 10-cent pieces and silver dollars, it is suggested that the ideas of officials and banking authorities who are on the ground and familiar with local conditions be obtained, together with a statement of the reasons for their conclusions. 5. Disposition of Liberian Bronze and silver coins: In addition to the British money, for which United States money will be substituted, the following Liberian coins are understood to be either in circulation or in the Bank of Monrovia: Liberian silver (consisting of 50$ 25$, and 10$ coins) $10,000 Liberian bronze (consisting of 24, 1f. and 1/2 coins) 30,000 Total $40,000 The Liberian 2-cent, 1-cent, and 1/2-cent coins represent 338 -9- represent appropriate sub-divisions of the new United States money and fulfill a natural need for small change. Furthermore, the people are already accustomed to using them. It is therefore recommended that these coins be allowed to continue to circulate. On the other hand, the Liberian silver coins, which are now in the vaults of the Bank of Monrovie, have never circulated to any considerable extent. With the intro- duction of United States money, there is danger that the Liberian 50-cent, 25-cent, and 10-cent silver pieces, 1f put into circulation, would be confused with the corresponding United States coins. To avoid any possible misunderstanding and confusion and in the interest of currency simplification and uniformity, the suggestion is made that the Government discose of its silvor coins by having them melted down and sold as bullion at the best price obtainable, and that it use the proceeds to obtain an additional supply of Liberian bronze coins of exactly the same kind as those already in circulation. The new bronze coins would then be put into circulation gradually, but only as the need for small change and the economic condition of the country required. Offsetting the loss in seigniorage involved in melting the silver coins would be a gain in seigniorage on the sinting and circulation of the bronze coins. 6. Putting the United States money into circulation: When the first United States coins arc received, they should be put into circulation as soon as possible. Announcement that this was being done should be made by the President. The technique of getting the new coins into circula- tion would be to have them used in reasonable propor- tions, along with other coins now in circulation, by the Government in paying its employees and in purchasing supplies, and likewise by private concerns in meeting their payrolls, and in their local purchases, and by the Bank of Monrovia and its branches in payments to depositors. Because the United States coins are brighter and contain more silver than the coins now passing current, the people of Liberia may prefer them for hoarding and show a tendency to hold them back from circulation. It is essential that everything possible be done to keep both moneys in circulation side by side at the official -10- O parity for the time being. This can be accomplished by receiving them on an equality in all payments to the Government and the Bank of Monrovia, and by publicly emphasizing the equivalence of the two moneys at the stated rate of exchange. The local habits and customs of the people will suggest to the authorities various other ways for solving this problem. Those in charge of the exchange program on the ground in Liberia can con- tribute greatly to the satisfactory progress of the work by reason of their knowledge of local conditions. 7. Removal of British and West African silver: As additional quantities of United States currency are put into circulation, those directing the reform should gradually take out of circulation the sterling and West African silver coins RB they are received by the Bank of Monrovia from the Government and the public in the usual course of business. Care should be exercised, however, not to do this too hastily. As the British coins are removed, they should be disposed of promptly in the most favorable market. 8. The accomplishment of the contemplated reform will require the financing of the importation of the new coins and the exportation and sale of the retired British silver. It is assumed that for this purpose the Government will avail itself of the instrumentality of its official depositary. The appended draft contract (Annex B), prepared by Judge F. C. Fisher, is believed to be satisfactory with respect to the procedure contemplated, which follows the plan herein outlined, but it is not within the province of the writer to express an opinion concerning its legal sufficiency or the terms upon which it is processed therein that the Bank of Monrovia be indemnified with respect to the outlay involved. E. W. Kemmerer Princeton, N. J. October 12, 1939 1 3 Copy:vw:bj:eh: 339 -11- 340 o ANNEX A Statement Suggested for President of Republic of Liberia in Announcing Forthcoming Introduction of United States Currency In 1935 the Liberian Government passed a law (amending Section 1210 of the Revised Statutes) which provided that the monetary unit of the Republic should be a gold dollar of 100 cents containing 15 and 5/21 grains of gold, .900 fine, which is the exact gold equivalent of the United States dollar. This law authorized the President by decree to fix the relation between the Liberian dollar and the foreign coins circulating in the Republic. It has been the desire of the Government for some time, pursuant to the provisions of this law, to have United States money circulate in Liberia, but the fulfillment of this desire has been unavoidably delayed. The present European war, in which Great Britain is a belligerent, and which therefore compels the British currency to function under the stress of war conditions, makes an into effect beginning the gradual replace the A a money backed by the States, existing this authority shipment the introduction gold circulation opportune of standard and United prestige of United time of law States British of for of States 1935 money, Liberia the coins. United by money to put to which has always been one of Liberia's closest friends in the family of nations, will soon leave New York for Liberia. When this money arrives here, it will be put into circulation side by side with the British silver coins and the other coins that are now in use, with the expectation that the United States money will gradually replace the British money, so that in time Liberia will have a uniform money based on gold, a money that will be recognized throughout the world. Meanwhile, -12- Meanwhile, the United States money and the British money will be freely interchengeable at the current rate of exchange. Anyone who may prefer the current British silver coine may have them, and those who want to use the new United States money will be able to do so. Both United States money and British silver coins will be equally acceptable at the prevailing rate of exchange, for the present, in payment of custome dut taxes, and other government obligations. 341 -13- 0 On the basis of current exchange values and the price of gold in London, a dime or 10 cents of United States money is ecual to 6 pence, and a half dime or 5 cents of United States money is equal to 3 pence. This for the present will be the rate of ecuivalence between the two currencies. As soon as it is known when the first shipment of United States money will reach Liberia, a public announcement of that fact will be made by the President. In the near future, therefore, we may expect that our monetary law, enacted in 1935, will be given full effect, to the great benefit of Liberia's economic security and progress as a nation. 342 343 ANNEX B This agreement, made and entered into by and between the Government of the Republic of Liberia (hereinafter called the Government) and Bank of Monrovia, Incorporated, a foreign Banking corporation engaged in Banking in Liberia, (hereinafter called the Bank) Witnesseth that: Whereas, the Government is desirous of discontinu- ing the use of British silver as a circulating medium in the Republic and of substituting therefore silver and nickel coins and other legal money in the United States: and Whereas, the President of Liberia, pursuant to the provisions of the Act of June 7. 1935, has issued a proclamation, dated the day of 1939, announcing the intention of the Government to introduce such American coins; and Whereas, the Government wishes to avail itself of the services and co-operation of the Bank in effecting the contemplated monetary reform, Now, therefor, the parties hereto have agreed as follows: SECTION I. The Bank, from time to time, 88 soon as shipping facilities will permit, will bring into Liberia the necessary silver end nickel coins of the United States in such amounts and of such denominations as in its judgment shall be best adapted to bring about the substitution of such coins for the British silver coins now in circulation in Liberia; provided, nevertheless, that the Bank, to meet emergency conditions, may from time to time import and out into circulation in Liberia dollar bills now or hereafter lawfully current in the United States of America, which bills shall be redeemed at face value in American silver or nickel coin, and withdrawn from circulation when such coins in sufficient volume are available in Liberia, if the Government shall desire such withdrawal. SECTION II. 344 -15- SECTION II. The Bank, subject to the limitations established by SECTION VIII hereof, will pay and receive such American coins and dollar bills as the equivalent of British silver coins now current in Liberia in the ratio of one United States dime to one English sixpence. SECTION III. The Government undertakes and agrees that until such time as the Bank shell recommend the demonetization in Liberia of British silver, all taxes and dues payable to the Government shall be so payable in United States silver or paper money at the rate of ten United States dimes for each Liberian dollar, as defined by the said Act of June 7. 1935. or in such British silver at the rate of sixpence for each such dime. SECTION IV. The Bank, as rapidly, as the acceptance of United States money by the people of Liberia and its availability in the requisite volume make it advisable in its judgment to do so, (but not later than the period fixed for the duration of this contract by SECTION VIII hereof) shell withdraw from circulation the British silver coins now and hereafter lawfully in circulation in the Republic coming into its hands and from time to time shall export them for disposal abroad at the best price obtainable in United States dollars. SECTION IV. The Government undertakes that from and after the date hereof the importation into the Republic of Liberia of British silver coins, or other foreign money) except coins and currency of the United States) shall be and is prohibited. SECTION V. The Government further undertakes and agrees that during the term of this agreement, as fixed by SECTION VIII hereof, no silver or nickel coins or paper money, except the silver and nickel coins and the paper money of the United States and the existing British silver coins, shall be permitted to circulate as money in Liberia; provided, nevertheless, that this prohibition shall not apply to the existing bronze fractional currency heretofore or hereafter coined pursuant to the provisions of the Act of the twenty-seventh day of November, 1936, and to the provisions of SECTION VII hereof, which said bronze currency shall continue to circulate end shall be acceptable as legal tender within the limits now prescribed by law; end provided further that for the term of not less than two years after the expiration of this 345 -16- this agreement the circulating medium shall be limited to U.S. silver and nickel coina and Liberian fractional bronze currency. SECTION VI. The existing deposits by the Government in the Bank, made pursuant to the provisions of the Depositary Agreement of 1935, and such deposits of British silver as the Government may make hereafter during the term of this Agreement shall be converted into or accepted for deposit as Liberian dollars, as defined by the said Act of June 7, 1935, at the ratio of one dime for each sixpence: and the Government, during the term of this agreement will accept and cause to be accepted in payment of checks drawn by it unon the Bank as its Depositary either United States silver coin or paper currency or British silver (English or West African) at the same ratio of sixpence to the dime. SECTION VII. The Liberian silver coin now on deposit in the Bank shall be sold by the Government as bullion at the best price obtainable and the proceeds of such sales applied to the coinage of such additional Liberian fractional bronze currency as car be obtained therewith. Said additional fractional bronze currency shall be placed in circulation when and as required to meet the monetary needs of the Republic. SECTION VIII. The term of this agreement shall be two years from the date hereof or until in any given period of two successive months the value of the United States coins received by the Bank from the general public for deposit shall be ninety per centum or more of the value of the total amount deposited in coin. SECTION IX. The Government agrees, in consideration of the undertaking of the Bank hereunder, that it will: a) Pay the cost of transportation and insurance of the United States money imported by the Bank into Liberia hereunder; b) Pay interest upon the amount of each shipment at the rate of 5 per cent er annum from the date of such shipment until placed in circu- lation in Liberia: c) Pay ) -17- c) Pay the cost of transportation and insurance upon each shipment of British silver withdrawn from circulation end exported by the Bank as herein provided, from the port of shipment in Liberia, to the port of ultimate destination, as determined by the Bank: d) Pay the Bank the difference between the cost to it of such British silver at the rate of one dime, United States currency, for each sixpence thereof, as herein provided and such lesser amount in United States currency or its equivalent as the Bank may obtain from the sale or conversion of such British silver; provided that the Bank may and shall exercise its best but uncontrolled discretion as to the time and rate of the sale or conversion of such money or any part thereof. SECTION X. From time to time as the Government becomes indebted to the Bank hereunder in sums of $1,000.00 dollars, United States currency, or multiples thereof, or the equivalent of such sum in any other currency, the Government shall cause its Fiscal Agent, The National City Bank of New York, to issue and deliver to the Bank, or to its order, in New York $1,000.00 Bonds of the Liberian Loan of 1926 of the nearest equivalent per value, which said Bonds shall be in all respects identical, as regards interest, amortisation and otherwise, with all other Bonds then outstanding under the Liberian Loan Agreement of 1926. SECTION XI. The Denositary Agreement of 1935 now in force between the Government and the Bank shall be deemed to be modified to conform to this Agreement, in any matter or matters in which the former Agreement, as it was executed, is incompatible with this Agreement. SECTION XII. The obligation of the Bank to commence or continue the exchange of English silver coin in Liberia for United States money as herein provided is and shall at all times hereafter be contingent upon the continuing willingness of the British Government to permit the importation of such English silver coin so obtained into England, and its acceptability by banks there for deposit, without limit as to amount, at its 346 347 -18- face value and that such deposits, by some feasible process, can be immediately converted into United States dollars; and the obligation of the Bank to commence or continue the exchange of West African silver coin in Liberia for United States money as herein provided is and shall at all times hereafter be contingent upon the continuing willingness of the Government of Sierra Leone to permit the importation of such West African silver coin so obtained into Sierra Leone, and the willingness and ability of one or more banks doing business there or of the West African Currency Board to accept such West African silvermoin for deposit, without limitation as to amount, at its per value, and to accept it, at its parity with British sterling as of September 1st, 1939, in payment of drafts for an equal number of pounds sterling, payable in London, and that the proceeds of such drafts, by some feasible means, can be immediately converted into United States dollars. SECTION XIII. This Agreement shall take effect as 1939. upon its ratification, without amendment, modification, or reservation, by the Legislature of the Republic of Liberia. day of In witness whereof Copy:eh:bj 3-11-42 . of the 348 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE March 10, 1942 TO Secretary Morgenthau FOR FROM CONFIDENTIAL Mr. Dietrich Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns Purchased from commercial concerns £140,000 £ 96,000 Open market sterling remained at 4.03-3/4, with no reported transactions. The Canadian dollar continued to weaken, closing at a discount of 11-13/16%. At the end of last week the quotation was 11-1/2% The Venezuelan bolivar, which has been quoted in the neighborhood of .2800 since the beginning of March, advanced to .2822. In New York, closing quotations for the foreign currencies listed below were as follows: Argentine peso (free) Colombian peso Mexican peso .2370 .0516 .5775 .2064 Uruguayan peso (free) .5295 Cuban peso 7/32% premium Brazilian milreis (free) There were no gold transactions consummated by us today. The Federal Reserve Bank of New York reported that the Bank of Canada shipped $2,740,000 in gold from Caneda to the Federal for account of the Government of Canada, for sale to the New York Assay Office. In London. spot and forward silver remained at 23-1/2d, equivalent to 42.67 The Treasury's purchase price for foreign silver was unchanged at 35$. Handy and Harman's settlement price for foreign silver was also unchanged at 35-1/84. We made no purchases of silver today. Copy No. 13 349 BRITISH MOST SECRET (U.S. SECRET) OPTEL No. 81 Information received up to 7 A.M., 10th March, 1942. 1, NAVAL The TIRPITZ was located by aircraft from the Home Fleet 80 miles west of the LOFOTEN ISLANDS at 8 a.m. on the 9th. Naval aircraft attacked but no details have been reported, Air reconnaissance showed the SCHEER and PRINZ EUGEN at TRONDHEIM at 11.30 s.M. 9th. Reference OPTEL No. 80, para 1, one of H.M. sloops has now reached port. A British 5,000 ton ship was sunk by submarine south-west of CEYLON on the 20th. 2. MILITARY BURNA. During the 6th the situation on the PEGU Front deteriorated. An Indian Brigade in PEGU was out off and an attempt to break out during the night 6th/7th failed, Landings occurred south of RANGOON, the city was evacuated and the demolition scheme was put into operation at 2 p.m. on the 7th. Our forces, less the Indian Brigade, retired up the PROME ROAD. A strongly held enemy posi- tien with anti-tank guns astride the road which resisted attack on afternoon 7th was successfully cleared early on 8th. NEW GUINEA Japanese landing at SALAMAUA on 8th has been confirmed, SALAMAUA and LAE are reported to be in their hands, RUSSIA. Russian attacks have made progress East and South-East of KHARKOV. 3. AIR OPERATIONS WESTERN FRONT. 8th/9th. About 180 tons of bombs, including 26 4,000 pounders, as well as 27 400 incendiaries including 77 of 250 pounds were dropped on ESSEN in moderate visibility, many fires were reported. 7 R.C.A.F. and 11 New Zealand bombers took part without loss. 9th. 6 Bostons attacked the power station at GOSNAY, Northern FRANCE. Fighter escort destroyed 5 enemy aircraft and damaged 5 more for the loss of 4 Spitfires, 9th/10th, 202 aircraft, including 36 heavy bembers, were despatched, ESSEN 188, BOULOGNE 9, sea-mining 5. 3 aircraft are missing and 3 crashed on return, Preliminary reports indicate that about 70% of aircraft attacked the objective in good visibility, many large fires were seen, EGYPT. 8th. Kittyhanks destroyed 3 German dive-bombers and 6 Italian fighters over TOBRUK without loss. MALTA. 8th/9th and 9th. A total of 134 aircraft attacked. 4 Wellingtons deswere burnt out at LUQA aerodrome where headquarters and squadron offices were destroyed. 4 enemy aircraft were shot down by fighters, 3 more were probably troyed and 9 damaged. 350 UNITED STATES GOVERNMENT COORDINATOR OF INFORMATION WASHINGTON, D.C. March 10, 1942 Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. Dear Henry: The attached is a summary of the British Home Intelligence Report for the week ending March 2. Sincerely, Biy William J. Donovan Attachment 351 In general, public feeling remains unsettled and confused, although the slight recovery of spirits noted in the previous week continued in eight out of thirteen regions. Predominant in five regions are many reports of anxiety, despondence, and pessimism. There are reports of war weari- ness, coupled with belief that the conflict will last for a long while. In addition, some realization has now appeared that we can lose the war. "Disquieting signs of an increasingly questioning mood, coupled with doubt as to the worthwhileness of the struggle" are prevalent. The spirit of determination and urgency so apparent after Dunkirk is now nowhere evident. A "show-me" reaction greeted even the Cripps speech in the Hous e on February 25th. "On the whole, the public is more depressed this week than for many months." A feeling of "hopeless muddle somewhere" is also evident. What people desire above everything else is an offensive attitude on the part of the fighting forces instead of continual retreat and defense, efficient and strong leadership at home towards a real total war effort and some clear cut goal to strive for in the future." The event of the past week was Cripps' speech. It was praised for its realism and call for greater simplicity of living. "There would be considerable response to the call to austerity, but any restriction should fall as heavily on the pleasures of the rich as those of the poor." The cabinet changes were received with a "wait and see" attitude, except for Cripps. The enthusiasm over the dismissals was greater than that for the final result. Only where the cabinet proves itself by action will the public give it a hand. In regard to the Far East, the fall of Singapore caused a growth of bewildered criticism. The disclosure that seventythree thousand British and Imperial troops were lost stunned the public. Why the High Command sent reinforcements when they knew that they could not hold the enemy remains a mystery. There are continued comparisons with MacArthur. -2- 352 There is increasing anxiety for an interest in India. There is fear that in three or four months the Japs will make a landing in Calcutta. The attitude of the government toward India is being discussed more critically and widely than ever before. There is genuine sympathy for Indian aspirations and demand for generous action. The point is increasingly made that the enlightened liberality of the American treatment of the Filipinos is responsible for Philippine resistance. Regarding Russia, the renewed successes and the Red Army birthday have brought a wave of gratitude and admiration which for the last month had been slightly in abeyance. Less apprehension over the Nazi spring drive is now felt. People feel much admiration for Stalin and there is much controversy over the declaration that the Nazis and not the German people are Russia's enemies. "Some take it as a preliminary to an invasion of Germany. Others fear that when he has driven the invaders from Russian soil he will sue for a separate peace. " "Surprisingly little comment" was aroused by Roosevelt's speech on the twenty-third. It is suggested that Cripps' speech overshadowed it. There is a feeling of disappointment over "America's inactivity" despite intense public admiration for MacArthur. The knowledge of American criticism of the British as gathered from the speeches of the President and Halifax increased British r sentment. Working class critics say: "Lend-lease means that after the war we shall have to work for America for nothing." 353 RESTRICTED MID 319.1 Situation 8-11-41 No. 654 M.I.D., W.D. 11:00 A.M., March 10, 1942. SITUATION REPORT I. Pacific Theater. Philippines: No change in the situation to report. Burma: General Wavell's Headquarters confirms the fall of Rangoon. Australasia: Japanese bombers attacked Port Moresby for the tenth time on March 10. R.A.A.F. reconnoitered Japanese shipping off southeastern New Guinea. II. Western Theater. British planes are reported to have attacked Essen on March 9. III. Eastern Theater. There is no change in the ground situation to report. (A situation map will not be issued this date.) IV. Middle Eastern Theater. Increased ground activity is reported from this area. The Axis air force continues the bombing of Malta. The R.A.F. are dividing their efforts between supply bases in Libya and Aegean ports. The Italian High Command announced that British planes have attacked Athens. RESTRICTED