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STRICTLY CONFIDENTIAL 93 MOVEMENT OF RUSSIAN LEND-LEASE MATERIALS Report of conferences attended by Mr. S. G. Tickton, April 15, and April 16, 1942 At the request of the Secretary, I visited Mr. Lewis Douglas at his office at the Maritime Commission to discuss the movement of lend-lease materials to the Russians from eastern seaboard ports. I showed Mr. Douglas the table on ships loading at Baltimore and gave him the facts on the Baltimore situation as I had obtained them last week. I explained to Mr. Douglas that it appeared that one contributing factor to delays in loading was the Procurement Division's inability to obtain more than 24 hours' notice of ship arrivals. Mr. Douglas said that the Maritime Commission was estimating ship arrivals weeks in advance and that he was surprised that Procurement did not have the information available to them. He turned me over to Mr. Wilcox, the Commission's Director of Transpor- tation, who called in Mr. Blumfield, his assistant, and Mr. Brandreth, the Commission's representative on the War Department's Transportation Control Committee. These the gentlemen disputed my facts 80 I 'phoned Mr. Walsh of Procurement Division, who came over immediately with Messrs. Hayghe and Munro, of his Traffic Section. In the general discussion that followed the following was brought out: (1) The Procurement Division has been able to obtain notices of ship arrivals only from the Moore-McCormack representatives in the various ports. The information obtained is frequently incomplete or in error. (2) The Maritime Commission makes estimates monthly (and revisions weekly) of the arrival of ships at the various ports, but these estimates have not been made available to Procurement. That they should be made available to Procurement, in summary at least, was agreed to between the gentlemen present, and the mechanics for the transmittal of these estimates was set up. (3) There are a great many loose ends in the procedure concerned with the movement of materials to the Russians. No one appears to be in a position of authority to clear them up. A transportation control committee composed of representatives of the War Shipping Administration, the Office of Defense Transportation, the British Ministry of War Transport, and the War Department, has been established to coordinate inland transportation with available shipping 94 -2- space but the committee has no chairman and there is considerable doubt as to who controls its policy. (4) There are no priority lists on materials to be shipped to the British or Russians. As a result, Procurement tells manufacturers to go ahead on specified items without knowing: (a) Whether shipping space will be available immediately upon the completion of the manufacturing process. (b) If shipping space will not be available immediately, whether the items ordered will have a high order or low order of preference when future space becomes available. (c) Whether it will be necessary to store the items for a long or short time near the plant or near the port. (5) The matter of shipping papers is an irritant to all parties concerned with the movement of lend-lease cargo, but no progress with respect to their simplification has been made. I reported the foregoing to the Secretary, who suggested that I see General Gross of the War Department's Service of Supply about clearing up the loose ends. I visited the General at his office in the Munitions Building in company with Mr. Walsh and the aforementioned members of his staff. General Gross called in Colonel Wylie and in the discussion that followed the following was brought out: (1) The War Department is "taking over" the transportation problem. They are making their own estimates of available shipping space and are setting up all the mechanics connected with the movement of cargo to shipside. Whether their operations are (a) in cooperation with, or (b) in spite of, the operations of the Office of Defense Transporta- tion was rather vague, but the Procurement representatives were told that the War Department would furnish answers when questions arose. 95 -3- (2) A statement of the priorities of Russian and British desires will be made available to Procurement through the Lend-Lease Administration how much is be Lewis available Douglas to the decides Russians tonnage as soonAlikely as to and the British, statement will take prepare. picture has been it is for the Russians may be expected within ten days or so; the British The statement British probably confused, longer to said, by requirements for the movement of lend-lease items accepted by the British some time ago but still held in storage in this country. (3) The War Department is undertaking to solve the problems connected with the preparation of shipping papers. It feels it is making considerable progress toward their ultimate simplification, and will be able to announce a general agreement between all parties concerned in the near future. SECRET OFFICE OF LEND-LEASE ADMINISTRATION 96 FIVE-FIFTEEN 22d STREET NW. WASHINGTON D.C. E R. Stettinius. Jr. Administrator April 16, 1942 MEMORANDUM To: The Honorable Henry Morgenthau From: Thomas B. McCabe Subject: Status of the Soviet Aid Program I am sending you herewith, by hand, a copy of the extremely confidential report on the status of the Soviet aid program as of March 31, 1942. A copy of the letter of transmittal to the President is attached. Thomas B.lu. Cake Attachments SECRET 97 April 15, 1942 Dear Mr. President, Herewith is transmitted, in accordance with your request, a report on the status of the Soviet aid program as of March 31, 1942. You will note the substantial progress that Was made during the month of March, both in regard to goods made available and actually shipped. Further improvement in the flow of goods to Russia is being made in April. This is indicated by the 45 ships sailing during the first 14 days as compared with the 44 ships which sailed during the entire month of March. Data on the amount of goods lost through sinkings are included in this report for the first time. Value of cargoes sunk to March 31st was equivalent to 12% of the value of shipments to that date. On a tomage basis the percentage would be somewhat less. In addition to the amount of goods made available under the Moscow protocol, substantial shipments of nonprotocol items have been made. The amounts are shown in the table on the next to the last page of this report. Sincerely yours, Thomas B. McCabe Acting Administrator The Honorable The President of the United States SECRET 98 SCHEDULE OF AVATEABILITY OF MATERIAL AND SHIPPING FOR U.S.S.R. - AS OF MARCH 31, 1942 office of Lend-Lease Administration is 99 SCHEDULE OF AVAILABILITY OF MATERIAL AND SHIPPING FOR THE U.S.S.R. As of March 31, 1942 Tabular Statement of Availability and Shipments Graphic Summary of Availability and Shipments Statement of Russian Shipping Shipments of Non-Protocol Items Graphic Summary of Total Shipments OFFICE OF LEND-LEASE ADMINISTRATION 100 SECRET Sheet 1 SHIPMENTS AND AVAILABILITY OF MATERIAL UNDER THE MOSCOW PROTOCOL Actual Item and Protocol Number Sink- Made Shipments ings to to Mar. 31 Mar. 31 Available to Mar. 31 Scheduled to be Available Protocol Cumulative to April 30 March 31 May 31 June 30 Commitment LA Planes Bomber 322 373 418 18 Planes Pursuit 530 642 754 900 344 85 420 420 2A Tanks Medium 520 620 720 900 404 58 634 664 818 972 1,125 1,125 406 80 686 686 832 978 1,125 1,125 0 4 0 63 63 756 5,000 85,600 489 3,298 3,198 38,657 34,223 48,234 31,672 4,198 61,594 66,572 5,000 74,280 99,372 5,000 90,000 108,000 108,000 167,039 22,749 247,464 231,174 337,464 562,500 450 450 175 423 729 929 900 9,450 3,411 1,244 9,450 11,980 3,411 5,466 1,400 14,510 5,936 17,360 5,936 1,400 18,000 4,500 3,800 31,700 6,750 3,800 36,700 43,500 2,700 45,000 6,750 6,750 3,800 45,000 6,750 2,400 1,600 2,995 2,700 1,800 2,700 2,700 1,800 9,000 9,000 9,000 391 0 0 664 1,400 810 3,800 3,823 30,947 1,074 6,750 2,882 1,231 637 2,005 24 Ferrochrose (tons) 620 102 2,882 1,800 1,200 1,200 2,355 2,100 1,400 25 Arnor Plate (tons) 849 3,776 4,000 7,400 2. Copper Products (tons) 23 Ferrosilicon (tons) 190 26 Hard Alloys & Cutting Tools ($1,000) 0 207 1,023 48 366 1,334 0 284 2,302 5,155 0 34 .R. Steel Sheet (tons) 0 32 Steel Billets (tons) 33 C.R. Steel Strip (tons) 342 3,579 900 900 1,150 1,400 900 555 820 4,000 18,000 1,670 14,000 43,000 3,120 24,000 57,000 4,570 34,000 67,000 4,500 3,422 10,595 63,000 10,000 18,000 18,200 34,000 36,000 43,200 54,000 52,000 59,160 72,000 63,000 59,160 72,000 72,000 72,000 0 30 Calibrated Steel (tons) 31 Hot Rolled Steel (tons) 864 2,755 6,750 580 536 0 29 Tool Steel (tone) 3,800 1,200 158 o 28 High Speed Steel (tons) 1,800 0 20 Zinc (tons) 0 18 Rolled Brass (tons) 1,400 7,975 10,560 27,117 Delivery depends upon shipping facilities and U.S.S.R. cargo allocations. Deficiency results from diversion at request of U.S.S.R. of part of ingot commitment to fabricated products. Includer products diverted from cluminum commitment. 0 0 0 847 0 1,433 3,095 22,724 3,965 523,464 285 0 5,040 2,744 1,244 427,464 55 0 15 Molybdenum (tons) 63 1,438 2,584 10 Submarine Cable (km) 14 Nickel (tons) 152 63 2,283 19,052 27,775 9 Underwater Cable (km) 11A Aluminum (tons) 2/ 11B Duraluminum (tons) 3/ 0 8 Field Tel. Cable (miles) 4 7 Field Telephones 4 6B Trucks V/ 4 6A Jeeps 63 4 4 Anti-Tank Guns 4 1 2B Tanks Light 3 Anti-Aircraft Guns 3 101 SECRET Sheet 2 SHIPMENTS AND AVAILABILITY OF MATERIAL UNDER THE MOSCOW PROTOCOL ings to Available to Mar. 31 Mar. 31 to Mar. 31 0 0 0 O 24,000 7,500 May 31 June 30 28,000 22,500 32,000 37,500 36,000 2,500 36,000 63,000 10,800 900 1,800 1,800 1,800 20 40 110 180 180 180 180 180 35,100 40,000 18,000 12,000 36,000 18,000 10,000 5,033 220,000 1,080 180,000 175 140 160 21,636 2,828 26,283 8,320 25,700 8,320 4,764 5,000 30,400 11,547 7,000 619 6,500 45,500 10,800 11 25 2,463 3,205 Commi teant April 30 118 0 45 Petroleum Products (tons) 46 Ethylene Glycol (tone) 0 44 Phenol (tons) 0 41 Barbed Wire (tone) L2A Toluol (tons) 428 T.N.T. (tons) 24,007 3,546 March 31 0 23 Protocol Cumulative to 0 1,601 833 39 Stainless Steel Wire (tons) Scheduled to be Available Made 16,176 38 Steel Alloy Tubes (tone) 40 Nickel Chrone Wire (tons) Sink- 0 35 Tin Plate (tons) 36 Steel Wire (tons) 37 Steel Wire Rope (tons) Actual Shipments 0 Item and Protocol Number 1,653 526 2,925 2,783 160,000 11,929 160,000 160,000 566 41 960 960 14,774 10,000 3,533 180,000 4,283 200,000 4,900 1,080 47 Sodium Bromide (tone) 412 67 450 433 588 744 900 900 48 Phosphorus (tons) 832 244 1,146 1,246 1,300 1,250 1,300 1,800 1,300 2,050 1,300 900 2,200 2,200 407 530 760 990 1,200 1,200 504 500 600 750 900 900 1,756 1,780 2,234 2,688 2,741 2,700 1,985 2,536 3,073 3,689 4,233 59 52 60 68 83 140 81 74 123 175 245 627 3,060 1,997 3,660 2,709 2,700 3,600 93 308 51 Diphenylamine (tons) 310 52 Colloxylin (tons) 712 1,612 11 55 Forging & Press Equip-(pleces) 75 252 0 54 Electric Purpases (pieces) 56 Misc. Ind. Equip. ($1,000) 50 5 53 Machine Tools (pieces) 91 0 50 Dimethylaniline (tons) 0 49 Dibutyl Phthalate (tone) 4,709 672 58 Abresives ($1,000) 919 264 1,574 1,860 2,460 59 Graphite Electrodes (tons) 682 78 888 888 1,429 64 Sole Leather (tone) 66 Army Boots (1,000 prs.) 67 Army Cloth (1,000 yds.) 1,000 6,197 1,200 7,697 37 5,064 1,011 4,697 798 1,400 9,197 1,600 13,500 1,600 1,208 115 1,395 1,192 1,192 1,192 1,192 1,000 13 13 4,959 881 Arming of U.S.S.R. Merchant 4 4 100 100 4 7 0 4 0 0 24 100 4 Boats 100 100 13 13 4 Packard Engines for Torpedo 13 13 100 3 Ships Arment for 3 Ice-breakers 50 102 SECRET SHEET 1 AVAILABILITY OF MATERIAL UNDER MOSCOW PROTOCOL CUMULATIVE SINCE OCTOBER I, 1941 TANKS-MEDIUM PLANES PURSUIT PLANES BOMBERS 1000 1200 Commitment Commitment . Commitment 1000 800 800 1000 Scheduled to be Aven Scheduled Scheduled to be Avail to be Avoil 800 600 600 600 Mode Made 400 Mode Avoit Shipped able Shipped Avoil: 400 Avoil Shipped able 400 able 200 o Mor Apr May Mor Feb Jun Apr May Jun o Feb 200 Fab Mor Apr May Jun ANTI-TANK GUNS ANTI-AIRCRAET GUNS TANKS-LIGHT Commitment o 200 1200 800 175 Commitment Commitment 150 1000 Scheduled 600 to Avail 125 800 100 400 600 75 Mode Shipped Avoit 400 able 50 200 Mode Made Shipped Scheduled Avoil- 0 Mor Apr May Mor Feb Jun 25 to be Avoil able to be Avoil ******** able Feb Scheduled Avail JEEP CARS Apr May 0 200 Fab Jun Mor Apr Jun FIELD TELEPHONES TRUCKS 120,000 100,000 06000 Commitment Commitment Scheduled May Commitment 10 be Avail 100,000 80,000 4000 Scheduled 80,000 to be Avoil Scheduled 60,000 3000 to Aves Mode Avoils Shipped 60,000 Mode able 2000 Avoils 40,000 40,000 able Mode 1000 20,000 Shipped Shipped Avoit 20,000 cole 0 o o Feb Mor Apr May Feb Jun Mor Age May Feb Jun Apr May Jun SUBMARINE CABLE (km) UNDERWATER CABLE (km) FIELD TEL. CABLE (miles) Mor 1000 500 600,000 Commitment Commitment Commitment 500,000 800 400 400,000 Scheduled to be Avoil 300,000 600 300 Scheduled to be Avoil 200 Mode Avgil= 200,000 Shipped able 400 200 100 100,000 o o Mor Apr May Jun Feb fice of Lend-Lease Administration - April 14, 1942 Mon Apr May Jun Feb Mor Apr May Jun 0 Feb 103 SECRET SHEET 2 AVAILABILITY OF MATERIAL UNDER MOSCOW PROTOCOL CUMULATIVE SINCE OCTOBER I, 1941 NICKEL (tons) DURALUMINUM (tons) ALUMINUM (lons) 1,500 Scheduled 6,000 20,000 Mode Scheduled Commitment Avoit to be Avoil 5,000 16,000 to be Avoil. Shipped able 04200 Commitment Commitment 4,000 12,000 Scheduled Avail 3,000 Shipped able to be Avet. Made 900 Mode Avoid 600 8,000 able 2,000 Shipped 300 4,000 Feb Mor Apr May Jun 0 Jun 0 May Apr 4,000 Commitment Mode Mor Feb Age to be Avoil able 40,000 to Avoil 3,000 7,000 Commitment Scheduled to Avoil Scheduled Shipped Jun 50,000 Scheduled Aven May ZINC (tons) ROLLED BRASS (tons) MOLYBDENUM (tons) o Mor Feb 1,000 6,000 Mode Avoil* 5,000 able . Commitment Shipped 30,000 Mode 4,000 Avgil- 2,000 Shipped able 3,000 20,000 2,000 1,000 Feb Mor Age Moy Jun o May Apr Jun FERROCHROME (tons) FERROSILICON (tons) COPPER PRODUCTS (tons) 2,000 3,000 3,000 Shipped Feb Mor Apr May Jun o Mor 1,000 0 Feb 10,000 Commitment Commitment Commitment 2,500 2,500 1,500 Scheduled to be Avoid Mode Scheduled 2,000 Avoil to be Avoil 2,000 Scheduled to be Avoil. able Shipped Made Made Avoit Avoil 1,000 1,000 1,500 1,500 1,000 able Shipped able 500 500 500 o Feb Mor Age May Jun o Mor Moy Apr Jun o Fab Feb Mor Apr Moy Jun ALLOYS a CUTTING TOOLS($1000) HIGH SPEED STEEL (tons) ARMOR PLATE (tons) 4000 10,000 1,500 Commitment 1,200 6,000 Scheduled 3000 to be Aven 0000 6,000 Commitment 2000 Scheduled 10 be Avail. 600 Scheduled to Avoi. 4,000 Mode Mode 1000 Avoil- 2,000 able Commitment Avoit able Shipped 300 Shipped o o Mor Apr May Jun Feb C# of Lend-Lease Administration - April 14, 1942 Mor Apr May Jun Feb Mor Apr May Jun o Feb 104 SECRET SHEET 3 AVAILABILITY OF MATERIAL UNDER MOSCOW PROTOCOL CUMULATIVE SINCE OCTOBER I, 1941 TOOL STEEL (tons) 5,000 CALIBRATED STEEL (tons) 35,000 HOT ROLLED STEEL (tons) 70,000 Commitment Commitment 30,000 4,000 to be Avoil 25,000 3,000 2,000 Scheduled Scheduled to be Avoil May Apr Jun 60,000 40,000 40,000 o 40,000 Scheduled Scheduled to be Avoid to be Avail. 20,000 20,000 Mode Avoil Mode 20,000 Mode Avail: Shipped able able Avoil Shipped o Mor Feb Jun Apr Moy Jun STEEL WIRE ROPE (tons) STEEL WIRE (tons) 12,000 70,000 40,000 Commitment Commitment 30,000 Commitment 60,000 10,000 50,000 Scheduled to be Avoil Mode 8,000 40,000 Scheduled 20,000 Avoit Feb Mor Apr May Jun 0 May 0 Shipped TIN PLATE (tons) able 80,000 Commitment . 60,000 to be Avoil. Age Jun C.R STEEL SHEET (tons) Commitment Scheduled Mor May Apr 80,000 60,000 Feb Mor Feb C.R. STEEL STRIP (tons) 80,000 Commitment able 10,000 able Shipped 40 Mor Feb Jun STEEL BILLETS (tons) 20,000 Avails Commitment Shipped May 30,000 5,000 able Apr 15,000 Mode Avoil= Mor 40,000 Mode able Feb 20,000 o Mode Aveil 50,000 10,000 to be Avoil 1,000 60,000 Scheduled to Avoid. 6,000 Scheduled 30,000 Shipped to be Aven. 4,000 20,000 10,000 2,000 10,000 Mode Aveil: Shipped o able o o Feb Mor Apr May Jun Feb Mor Age May STAINLESS STEEL WIRE (tons) STEEL ALLOY TUBES (tons) Feb Jun 2,000 Apr May Jun NICKEL CHROME WIRE (tons) 200 Scheduled to be Avor 200 Commitment Commitment@ Commitment 150 1,500 150 Mode Avoil able Shipped 100 100 1,000 Scheduled Mor Scheduled to be Avoil to Avoil 50 50 500 Mode Avoil: able o of Lend-Lease Administration - April 14, 1942 o Feb Mor Apr May Jun Feb Mor Apr May Jun o Feb Mor Apr May Jun 105 SECRET SHEET 4 AVAILABILITY OF MATERIAL UNDER MOSCOW PROTOCOL CUMULATIVE SINCE OCTOBER I, 1941 TOLUOL (tons) BARBED WIRE (tons) 40,000 T.N.T. (tons) 20,000 12,000 Scheduled to be Avoil Commitment Commitment 30,000 to Avoil Mode Avails able 10,000 Commitment 15,000 Scheduled 6,000 Scheduled Shipped 20,000 to Aver 10,000 Mode Avoils 6,000 Mode able Avails 10,000 5,000 4,000 Shipped able Shipped o PHENOL (tons) 5,000 Apr May Jun 0 Mor Feb Feb Mor Apr May Jun PETROLEUM PRODUCTS (tons) o Fab Mor Apr May Jun 2,000 ETHYLENE GLYCOL (tons) 250,000 Commitment 1200 Scheduled Commitment to be Avoil 4,000 Mode Scheduled Avoil- to be Avoi. able Mode Commitment Avoil Scheduled able to be Aven Shipped 3,000 1000 200,000 800 150,000 Mode Shipped Avoil able 2,000 Shipped 600 100,000 400 50,000 o 0 Feb Mor Apr May Jun 200 o 1,000 Mor Feb SODIUM BROMIDE (tons) Apr May Jun Feb 800 Apr May Jun DIBUTYL PHTHALATE (tons) PHOSPHORUS (tons) 1000 Commitment Mor 2500 1400 Made Avoil Scheduled to Avoid able Commitment 1200 2000 Scheduled 1000 to be Avoid Mode Shipped 1500 800 600 400 Avail: Scheduled to be Avoil, Commitment Shipped 600 1000 able 400 Mode 200 500 Avoit 200 able Shipped Mor Apr May Jun o o Feb Feb May Jun 3000 1000 #1200 Commitment Commitment 2500 Commitment 1000 800 Scheduled to be Avoid Scheduled Apr COLLOXYLIN (tons) DIPHENYLAMINE (tons) DIMETHYLANILINE (tons) Mor o Feb Mor Apr May Jun 2000 800 Scheduled 600 to Avoil to be Avoil. 1500 600 400 Avent cole Shipped 400 Mode Shipped Avail Made 1000 Avoil able able Shipped 200 500 200 o o Feb Mor Apr May Jun Feb of Lend-Lease Administration - April 14. 1942 Mor Age May Jun Feb Mor Apr May Jun o Vade 106 SECRET SHEET 5 AVAILABILITY OF MATERIAL UNDER MOSCOW PROTOCOL CUMULATIVE SINCE OCTOBER I, 1941 ELECTRIC FURNACES MACHINE TOOLS FORGING a PRESS EQUIP. 5000 150 700 Commitment Commitment 600 125 4000 Scheduled to Avoid 500 100 3000 Scheduled Made able 75 able 2000 Avail 400 to be Avoil Avoit Mode 300 Scheduled Shipped to be Avoil 50 200 Mode Avoil 1000 25 able 0 Mor 0 Feb Apr May 0 Feb Mor Apr May Jun 100 Shipped Shipped Jun Feb ABRASIVES ($1000) MISC. IND. EQUIP ($1000) Mor May Apr Jun GRAPHITE ELECTRODES (tons) 4000 3500 10,000 3000 Scheduled 8,000 Commitment Commitment 2500 to be Avoil, 6,000 3000 Scheduled 2000 to be Avoil 2000 Shipped 1500 4,000 Mode Avoil- 1000 Shipped able Mode able 500 o Feb Mor Apr May Jun Shipped o o ARMY BOOTS (1000 pairs) SOLE LEATHER (tons) Commitment Commitment Jun Scheduled to be Avoil able Scheduled Commitment to be Avoil. 10,000 1,250 8,000 1,000 Scheduled May 1200 Mode Avoil: 1,500 12,000 Apr LOTH (1000 yds) ARMY 1,750 14,000 Mor Feb to be Avoil 800 Mode 6,000 600 Avoils 750 able Shipped Mode Avoil Shipped Shipped 200 250 2,000 Feb Mor Apr May Jun 0 0 Feb Mor Apr May Jun Feb Mor Age May Jun PACKARD ENGINES ARMING OF Commitment 12 Mode Avoilable Scheduled Scheduled to be Avoil to Avoil 4 Scheduled to be Avoil. 120 , 14 Mode FOR TORPEDO BOATS ARMAMENT FOR 3 ICE-BREAKERS U.S.S.R. MERCHANT SHIPS Avail= 400 500 4,000 able 01000 o Feb Mor Apr May Jun 1000 Avails 2,000 able 100 Mode Avoit able 10 Completed 80 03 Commitment 8 Completed 60 Commitment . 6 2 40 4 I 2 o of Lend-Lease Administration - April 14, 1942 0 Of Feb Mor Apr May Jun 20 0 Fab Mor Apr Moy Jun Shipped Feb Mor - Age May Jun SECRET STATEMENT OF RUSSIAN SHIPPING Sailed Arrived Month En Route Lost Number October November 15 14 13 12 1 1 December 26 23 1 2 January 24 February 17 March 44 42 45 45 18 2 4 3 April (To Apr. 14*) 12 2 2 On berth April 14 for April sailing--15 To date there has been a total of 184 sailings for Russia. of these, 133 have been of American ships, 42 of Russian (26 from the West Coast and 16 from the East Coast), and 9 of British. In addition to the 184 sailings for Russia, there have been 20 ships carrying cargoes for other countries, which carried deck loads of bombers for Russia. The 184 sailings were made by 177 ships, 7 ships having sailed twice. Program of Ship Allocation March 56 April 56 May 56 June 56 The foregoing allocations are in addition to any Russian and British ships which may be available. The Russian ships transport primarily food from West Coast ports. April 14, 1942 107 108 SECRET SHIPMENTS OF IMPORTANT NON-PROTOCOL ITEMS TO THE U.S.S.R. October 1, 1941 - March 31, 1942 Observation Planes Other Military Items Graphite Crucibles Medical Supplies Quantity Value $ 1,359,949 30 - Item 374 tons 12,419,469 172,215 Sugar 12,847 . 2,332,554 1,313,500 Canned Meats 7,484 . 10,326 . 1,573 " 4,947,895 3,561,913 Dried Eggs - Lard and Other Pork Products Edible Tallow - Wheat 26,830 " Wheat Flour 24,778 " Linseed Oil - Metallic Sodium Methanol Vulcanized Fibre Sheet Locomotive Wheels, Axles, and Rails - Anti-Knock Compound Formaldehyde 485 " 877 . 2,349 . 132 . 2,115 . Radio Tubes and Equipment - Other Items - Truck Tires and Tubes - 153,995 1,744,113 985,737 1,260,423 383,486 1,278,153 59,796 252,492 271,292 69,843 134,127 544,094 629,103 1,345,563 $35,219,712 Total ALLOCATION OF NON-PROTOCOL STEEL In addition to the steel items already delivered and scheduled for delivery under the Protocol, approximately 255,000 tons of non-protocol steel has been allocated for production for the U.S.S.R. by June 30, 1942. Included in these allocations are 33,000 tons of aircraft steels, 75,000 tons of railroad rails and accessories, and 114,000 tons of oil well equipment. 109 SECRET SHIPMENTS TO THE U.S.S.R. SINCE OCTOBER I, 1941 VALUE OF SHIPMENTS MILLIONS OF DOLLARS MONTHLY CUMULATIVE 200 500 160 400 120 300 NON-PROTOCOL NON-PROTOCOL ITEMS ITEMS 80 200 TOTAL TOTAL 40 PROTOCOL ITEMS 100 PROTOCOL ITEMS o 0 No. Feb Det Mor. Apr von vor oft Mor Feb June 1942 of Lend-Lease Administration - April 14, 1942 1941 1 1941 1942 Treasury Department 110 Division of Monetary Research Date April 17,19 42 To: Miss Chauncey From: Mr. Southard The substance of this cable has been brought to the attention of the Secretary in other ways. I think, there- fore, it can go to his files. MR. WHITE Branch 2058 - Room 214} Treasury Department 111 Division of Monetary Research Date April 17, 1942 To: Mr. Southard From:Mr. Gass I do not believe that it is necessary to bring this detailed list to the Secretary's attention. We have already indicated to him the content of the summary cable, for which this is merely a supporting document. 112 C 0 P Y DEPARTMENT OF STATE WASHINGTON April 16, 1942 In reply refer to FD 851.515/158 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses a copy of despatch no. 1295. dated March 26, 1942, from the American Consulate General, Algiers, Algeria, concerning gold shipments from Algiers to France. Enclosure: From Consulate, Algiers, no. 1295, March 26, 1942. Copy:1c:4/17/42 113 0 DUPLICATE TO DEPARTMENT P Y Strictly Confidential Air Mail 1295 American Consulate General Algiers, Algeria, March 26, 1942. Subject: Gold shipments from Algiers to France The Honorable The Secretary of State, Washington. Sir: I have the honor the attached detailed report of gold movements from Algiers to France during the period January 1, 1942, to March 13, 1942, inclusive. This information has been obtained by Vice Consuls Boyd and Knox from a confidential and reliable source, This despatch is sent forward in confirmation of telegram 185 of March 26 noon to the Department. It is presumed that this gold is of Belgian or Polish origin. Respectfully yours, Felix Cole American Consul General 863.4 JCK/ew Enclosure: 1. Detailed report of transfer of gold from Algiers to France In quintuplicate to the Department Copy to American Embassy at Vichy Copy to American Legation at Tangier Copy:1c:4/17/42 Enclosure No. 1 No. 1295 of 3-26-42 from American Consulate General, Algiers, Algeria MEMORANDUM Subject: Detailed report of transfer of gold from Algiers to France. The following are ore shipments of gold from Algiers (airport at Maison Blanche) to France, transferred by air: January 1 Kilograms 460 2 Date Kilograms February 1 320 620 N Date 430 3 155 215 3 5 4 610 270 7 610 215 110 8 5 500 6 9 10 110 11 12 230 110 13 380 15 480 20 615 17 380 21 610 10 425 13 315 14 480 15 580 18 320 22 300 19 1,200 23 2,330 20 215 24 580 23 110 26 545 24 215 28 380 25 1,000 27 160 30 270 31 160 II Total 8,720 March 220 1 330 3 Total 8,295 10 440 11 430 13 410 Total GRAND TOTAL 1,830 18,845 John H. Boyd John Crawford Knox Algiers, Algeria, March 26, 1942. Copy:1c:4/17/42 114 115 AS This telegram must be paraphrased before being communicated to anyone other than a Governmental agency, (BR) Sydney Dated April 16, 1942 Rec'd 11:41 a.m. Secretary of State, Washington. 220, April 16, 3 P.M. Referring to the Department's telegram no. 100, March 14. Aggregate amount Treasury checks received from Commonwealth Bank last night £55,921.66. PALMER WSB Treasury Department Division of Monetary Research116 April 17 Date 19 42 Q To: Mrs. McHugh From: L. Shanahan Returned, as requested. Mr. White has noted. 117 MINISTER FOR FOREIGN AFFAIRS REPUBLIC OF CHINA April 16, 1942 Dear Mr. Morgenthau, I am in receipt of a message for you from the Generalissimo, sent from Chungking on April 15th, a translation of which I am enclosing. I have as yet no reply from the Generalissimo to the telegram I despatched after our private conversation last week. Yours sincerely, tateway Enclosure The Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. 118 TRANSLATION OF A TELEGRAM FROM THE GENERALISSIMO, CHUNGKING, APRIL 15th, 1942. "I am grateful for your letter of February 16. "The people of China and I personally are deeply appreciative of the recent great financial assistance rendered by the United States to China, and in particular of your own esteemed part in these deliberations. The consummation of the recent loan is not only a manifestation of the high ideals of the United States in assisting a comrade-in-arms, but is also evidence of your appreciation of the new spirit of China, for which we shall be ever- lastingly grateful. Chiang Kai Shek" TO CORNTARY OF STATE B.C. DEPARTMENT OF STATE WASHINGTON In reply refer to FB 893.51/7440 April 16. 1942 My dear Mr. Secretary: There are enclosed herewith in duplicate copies of a note of March 23, 1942, from the Chinese Ambassa- dor, in which the Ambessador certifies to certain matters in connection with the agreement of March 21, 1942, between the Governments of the United States and China concerning financial aid to the extent of $500,000,000 to China. The Department is of the opinion that the statements made by the Chinese Ambassador in the note herewith en- closed may be accepted as authoritative official assurance that the Government of the Republic of China has full power and authority to enter into the agreement of March 21, 1942; that Dr. T. V. Soong, Minister for Foreign Affairs The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. -2- Affairs of the Republic of China, was duly and legally authorized and empowered to execute and deliver the above- mentioned agreement on behalf of the Republic of China; and that the above-mentioned agreement represents the valid and binding obligation of the Republic of China in accordance with its terms. Sincerely yours Delly hoting Secretary Enclosure: From the Chinese Ambassador, March 23, 1942 (in duplicate). 121 CHINESE EMBASSY WASHINGTON March 23, 1942 Sir: Reference is made to the agreement dated March 21, 1942, between the United States of America and the Republic of China relative to the 500,000,000 of financial aid to China. I now have the honor to certify that the Government of the Republic of China has full power and authority to enter into the above-mentioned agreement; that Dr. T. V. Soong, Minister for Foreign Affairs of the Republic of China, was duly and legally authorized and empowered to execute and deliver the above-mentioned agreement on behalf of the Republic of China, and that the above-mentioned agreement represents the valid and binding obligation of the Republic of China in accordance with its terms. I shall be grateful if you will transmit copies of this letter to the Secretary of the Treasury. Accept, sir, the renewed assurances of my highest consideration. HU SHIH Honorable Cordell Hull, Secretary of State 122 April 16, 19th Mr. F. Liveray Mr. Districh will you please send the attached eable to the American General. Bonbay, "From the Secretary of the treasury". Finish 4-16-68 123 to american General. Donbuy Agent 13. 1948 From Secretary of the threasury Decemes of current concern with Indian financial and coonomic conditions, please cable weekly report giving currently information requested below. It is recognised that same of the information requested may be considered confidential by the Government of India. the proper Indian officiale my be informed that the information is not for public consumption but for the information of United States treasury officials. Revever, in no case is the Government of India to be ungel to give information which 10 is relasiant to give. (a) Prices of gold and pilver; (b) Action being taken by Reserve Bank of India and Government of Intis regarding rise is price of silvers (e) Velume of silver sein in circulations (a) Extent to which hearting of gold and silver is taking place and affituie of Government and Reserve Bank of India towards this heardings (e) Silver and gold reserves of Reserve Bank of Indian (f) Use to which silver is put at present in Indias (g) Velume of silver and gold exporte and importe during recent mother (a) Assistato of Reserve Beak and Government toward permitting importe of silver into Indian (1) from of prices in Indian (1) Production of gold and alives is India and any estimate of volume of gold and silver being hold by Deaks and private individuale) (k) Dulgetary position of the Indian Governments (1) Beenenie information. such as indices of production. foreign trate, etc. chicow 4-16-43 124 TELEGRAM SENT B.S This telegram must be paraphrased before being communicated to anyone other than a Governmental agency. (BR) April 16, 1942 7 p.m. .MERICAN CONSUL BOMBAY (INDIA) 133 From the Secretary of the Treasury QUOTE. BECAUSE of current concern with Indian financial and Economic conditions, please cable WEEKLY report giving currently information requested below. It is recognized that SOME of the information requested may be considered confidential by the Government of India. The proper Indian officials may be informed that the information is not for public consumption but for the information of United States Treasury officials. However, in no case is the Government of India to bE urged to give information which it is reluctant to give. (a) Prices of gold and silver; (b) ..ction being taken by RESERVE Bank of India and Government of India regarding rise in price of silver; (c) Volume 125 -2- #133, April 16, 1942, 7 p.m. to Bombay, India (c) Volume of silver coin in circul tion; (d) Extent to which hordring of gold end silver is taking place and attitude of Government and RESERVE Lank of Indir towards this honrding; (E) Silver and gold reserves of RESERVE Bank of India; (f) USE to which silver is put at present in India; (g) Volume of silver and gold exports and imports during recent months; (h) Attitude of RESERVE bank and Government toward permitting imports of silver into India; (1) Trend of prices in India; (j) Production of gold and silver in Indic end any Estimete of volume of gold and silver being held by banks end private individuals; (k) budgetory position of the Indian Government; (1) conomic information, such ES indices of production, foreign trade, Etc. WELLES LCTING (FL) FD:FL:BMcB C 8913 0 P 126 PLAIN Y Bern BR Dated April 16, 1942 Rec'd 2:24 a.m., 17th Secretary of State, Washington. 1545, Sixteenth. (SECTION ONE) Press April 15, 1942, gives supplementary information relative new trade agreement Switzerland Turkey signed March 28 at Ankara. Since agreement May 30, 1940 not renewed by August 1, 1941, no agreement has governed economic relations two countries. Because present conditions agreement envisages reciprocal deliveries goods merchandise within possibilities supplies rather than rigid quotas individual items. Turkey engages facilitate exports Switzerland, notably feedstuffs, especially oil cake, raisins, olives, peanuts, tobacco, raw hides, oleaginous fruits, carpets and possible cotton, wool and certain metals. Switzerland exports to Turkey will include particularly machinery, watches, instruments, pharmaceutical and chemical products and certain cotton cloths. Payment merchandise trade will be effected by private compensation or through free currencies, this offsetting delivery against merchandise it delivers, of merchandise from other country. Settlements through banks emission of each country. Provision also made for resumption servicing Turkish public debt held Switzerland as well as transfer certain private Swiss financial credits. NK ehicopy 4-25-42 HARRISON 127 0 P Y KD Bern This telegram must be paraphrased before being Dated April communicated to anyone other than a Governmental agency. (BR) Rec'd. 2:48 p.m. Secretary of State, Washington. 1545. April 16 (SECTION TWO) Competent Swiss official statespress report not official communique but from official source and accurate. (END OF MESSAGE). HARRISON RR eh:copy 4-25-42 128 C 0 P Y DEPARTMENT OF STATE WASHINGTON In reply refer to FD 861.51/2950 April 16, 1942 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses copies of telegram no. 316, dated April 15, 1942, from the American Embassy, Kuibyshev, (Moscow), Union of Soviet Socialist Republics, announcing the issuance by the Soviet Government of the 1942 National Defense Loan in the amount of ten billion rubles. Enclosure: From Embassy, Kuibyshev, no. 316, April 15, 1942. 129 DM PLAIN (Moscow) Kuibyshev Dated April 15, 1942 Rec'd 1:30 p.m. Secretary of State, Washington. 316, Fifteenth. The Soviet Press of April fourteenth announces the issuance by the Soviet Government of the 1942 National Defense Loan in the amount of ten billion rubles for a term of twenty years. New features of this loan are that only one third of the lottery bonds will win prizes, instead of all as before and that the interest bearing bonds are to be sold only to collective farms and other cooperatives. The amount of this loan is 500 million rubles more than the 1941 National Defense Loan which is reported by the Soviet press to have over subscribed by almost one billion five hundred million rubles. Repeated to Moscow. REINHARDT Copy:bj:4-17-42 130 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE April 16, 1942 TO FROM Secretary Morgenthau Mr. Dietrich Reference is made to Telegram #264, April 8, 1942, from Montevideo, Uruguay. The State Department has informed us that the phrase "Inveighed francs", in the two places that it occurs in this telegram, should read "Swiss francs". 131 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE April 16, 1942 hauncey TO Secretary Morgenthau For FROM Mr. Dietrich CONFIDENTIAL Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns Purchased from commercial concerns £83,000 £ 7,000 Open market sterling held at 4.03-3/4, with no reported transactions. The Argentine free peso moved off 6 points to close at .2368. Earlier this month the prevailing quotation was .2370. In New York, closing quotations for the foreign currencies listed below were as follows: Canadian dollar Brazilian milreis (free) 12-7/8% discount Uruguayan peso (free) Venezuelan bolivar .0516 .5775 .2064 .5295 .2830 Cuban peso 3/16% premium Colombian peso Mexican peso There were no gold transactions consummated by us today. No new gold engagements were reported. 42.67 In London, spot and forward silver remained at 23-1/2d, equivalent to The Treasury's purchase price for foreign silver was unchanged at 35$. Handy and Harman's settlement price for foreign silver was also unchanged at 35-1/8. We made no purchases of silver today. A 132 Copy No. 13 BRITISH MOST SECRET (U.S. SECRET) OPTEL No. 125 Information received up to 7 A.M., 16th April, 1942, 1. NAVAL INDIAN OCEAN. A Japanese force consisting of one battleship and one oruiser on a Westerly course was sighted by aircraft one hundred miles south of CEYLON yesterday afternoon local time. 2, MILITARY LIBYA. 14th. A South African column was attacked in the EL ACGARA area by a force including tanks and self-propelled guns. Two enemy tanks were destroyed and five others damaged, One of our tanks was knocked out and five others besides, three anti-tank guns are missing, The main enemy M.T. concen- tration is now in the area north of SENGALI (30 miles S.S.W. cf TNIMI). RUSSIA, In the RENEV sector there has been some heavy fighting without territorial change but south west of YUKHNOV the Russians have made a slight advance. In the DONETS sector, no operations of importance have taken place probably owing to bad road conditions and the rising level of the River DONETS. 3. AIR OPERATIONS WESTERN FRONT. 14th/15th. DORTMUND. About 161 tons of H.E. and incendiaries were dropped in good weather but with considerable ground haze. Numerous fires were seen. 15th. Bostons and Hurricane bombers attacked CHERBOURG docks, an aerodrome and railway communications in Northern France, fighter escorts and offensive sweeps involved 46 squadrons, 3 enemy fighters were destroyed, four probably destroyed and 8 damaged. 3 Spitfires are missing. A Hudson scored four hits on a merchant vessel nerth of BERGEN and another Hudsoh two hits on a large tanker beached off the Dutch Coast. 15th/16th. 197 aircraft were despatched - DORTMUND 152, ST. NAZAIR 18, Sea-mining 11, Four are missing. Over DORTMUND varying cloud was met. MEDITERRANEAN. 14th. Eight Beauforts with fighter escort attacked with torpedoes a southbound convoy of four vessels and four destroyers, 100 miles south east of MALTA. Results were not observed. Two Me 109's were destroyed over the convoy. Five Beauforts from which some survivors were picked up and a shadowing Hlenheim were lost. 133 -2MALTA. 14th. A further 59 enemy bombers attacked, The W/T mast at RINELLA was destroyed and TAKALI aerodrome was rendered unserviceable for night flying. A.A. destroyed 4 bombers. Fighters and A.A. damaged a further 5 aircraft. The enemy maintained continuous fighter patrols over MALTA during 14th. 4. FOCKE WULF FIGHTERS It is estimated that there are 90 - 120 (initial equipment) F.W. 190's in the German Air Force first line, All units known to be equipped with them are in FRANCE and the Low Countries chiefly in the PAS DE CALAIS area where they amount to roughly 75% of the German single engined fighter force there. Fstimated maximum speed 380 M.P.H. at 20,000 ft. compared with 370 M.P.H. of the Me. 109 F. Armament believed four guns calibre unknown against 2 M.G. and 1 cannon in Me. 109 F. 134 Copy No. 13 BRITISH MOST SECRET (U.S. SECRET) OPTEL No. 131 Following is supplementary resume of operational events covering the period 9th-16th April, 1942, 1. NAVAL Escorts for our Russian convoys have been increased by additional desm troyers with heavy ships of the Home Fleet acting as cover, nearly all ships have arrived and discharged their cargoes safely although some damage has been caused by ice and enemy action. Our main Naval forces have withdrawn from the vicinity of CEYLON. There are indications that a raider is in the South Atlantic. The main U-boat concentration was still in the West Atlantic. Two submarines, probably Italian, were off BRAZIL and one or two in the FREETOWN area, A number have been operating against the North Russian convoy route, there are believed to be 20 based in Northern Norway, 25 ships, including 13 tankers, were reported attacked by submarines during the week, of which 18 were in the Western Atlantic and West Indies, 15 of them are known to have been sunk. Allied shipping losses during March (136 ships totalling 642,014 tons) were the highest yet recorded. This includes 42 tankers, of which 12 were British, 13 United States and 11 Dutch. About 80 percent of ships were sunk by submarines, mainly off the West Atlantic seaboard and in the Caribbean. Nevertheless, 450 ships arrived in ocean convoys in the United Kingdom during the month without any loss from enemy action. Less than one third of the tonnage sunk during March was British, 2. MILITARY are RUSSIA. Owing to the rapid thaw of unusually deep snow, the rivers rising and roads are becoming unusable, The Germans must have been greatly hampered in carrying out their complete arrangements of withdrawing Divisions for refi by the continuous Pussian pressure during the last three months, these two factors may induce a slight postponement of the likely date of the expected German attack to the latter part of May at earliest. The impression that the next major operation by GERMANY will be against RUSSIA rather than via SYRIA or TURKEY and/or EGYPT towards IRAQ still stands. JAPAN. Evidence of any complete joint plan between the German and Japanese General Staffs is still lacking. It is still impossible to ascertain whether the Japanese intention is to move against North-East INDIA or whether she considers she has ventured far enough for the present and should consolidate her gain, The possibility of becoming involved with RUSSIA may influence her strategy. Meanwhile her successes in BURMA continue while she maintains forces in the NEW GUINEA area threatening the UNITED STATES-AUSTRALIA supply route. FRANCE. There are signs that since the ST. NAZAIRE raid the Germans have become increasingly preoccupied with coastal defences, particularly in the south-west where a number of defensive precautions have been reported. 3. AIR OPERATIONS Western Front. Fighter Command flew 4,022 sorties by day during the week. Enemy reaction to our fighter sweeps varied, some were vigorously opposed and in by large numbers of fighters, during others opposition was not determined, and some cases no enemy fighters appeared, Bomber Command despatched 1,020 DORTMUND sorties heavily attacked ESSEN (418 tons high explosive and incendiaries) and (290 tons high explosive and incendiaries). 118 sea mines were laid. MALTA. Air raids continued on a heavy scale, involving more than 850 Aerodromes were cratered on several occasions and two were temporarily unserviceable. sorties, 15 of our aircraft were destroyed on the ground, Harbour works anti- and naval units were damaged. Our fighters shot down 7 enemy aircraft and aircraft artillery destroyed 22, RISSIA. Increased German air activity in CRIMEA. 135 -24. EXTRACTS FROM PHOTOGRAPHIC AND INTELLIGENCE REPORTS ON RESULTS OF AIR ATTACKS ON ENEMY TERRITORY IN EUROPE. WEECK. Photographs 12 April, Nearly half the city, as distinct from the suburba, has been almost totally destroyed, principally by fire although there are traces of the marks of 1,000 1b. bombs. Severe damage has been caused to warehouses at the docks and railway station to the North West. COLOGNE. The raid on 5th/6th April is reported as more severe than the one on 13th/14th March. The greater part of the RHINE Harbour was destroyed to- gether with its railway approaches. It is said that the debris in this district will take some weeks to clear. MATFORD WORKS. Photographs 10th April, Serious damage by fire and high explosive confined almost entirely to the objective and immediately adjacent factories. There is little doubt that the effect is serious although it is not yet possible to say definitely that the works will be permanently closed down, 5. OPERATIONAL AIRCRAFT BATTLE CASUALTIES METROPOLITAN AREA In the Air British Bombers 49 Fighters 29 Coastal 6 Total 84 5 pilota safe. Destroyed Enemy Bombers Probably Destroyed N11 N11 18 13 Fighters Miscellaneous Total Damaged 4 35 N11 1 3 39 14 21 MIDDLE EAST (including MALTA) In the Air British Bombers 11 Fighters 18 Others On the Ground 11 4 1 1 Total 16 30 12 pilots and 2 crews are safe Destroyed Probably Destroyed Enemy Damaged 21 30 Fighters 3 Bombers 13 14 2 34 Total 44 5 Of the above totals, 25 were destroyed, 3 probably destroyed and 14 damaged by anti-aircraft fire, FAR EAST In the Air British and Allied 7 Bombers 9 Fighters Miscellaneous Total 4 20 4 pilots and 1 crew are safe Destroyed Probably Destroyed Enemy Bombers 2 Fighters 29 Miscellaneous 14 Total 45 Nil Nil Damaged N11 9 2 14 14 11 136 -3NOTE: No account is taken of enemy aircraft destroyed on the ground in any theatre or of British naval aircraft casualties, 6. H'ME SECURITY Estimated civilian casualties for week ending 6 a.m. 15th. Killed 20, seriously wounded 33. 137 UNITED STATES GOVERNMENT SECRET COORDINATOR OF INFORMATION WASHINGTON, D.C. COUNCINATOR OF INFORMATION NO April 16, 1942 The Honorable The Secretary of the Treasury Washington, D. C. Dear Henry: The attached is from the General Weekly Directive of British Political Warfare Executive. Sincerely, Bill William J. Donovah Attachment 138 SECRET COOKERATOR OF INFORMATION 1. Strategy: (a) Russia - Point out that the Russians still hold the initiative, maintaining pressure and continuing to deny the Germans the respite needed to refit and rest. Extensive areas are being rendered impassable by the thaws and large scale operations are impracticable. (b) Malta - Emphasize that the Axis effort against Libya and Malta represents a considerable diversion, particularly of the Luftwaffe from the Russian front. (c) Burma- The outlook is ominous because air support is lacking and the native population hostile. (d) India and Ceylon - Avoid the linking of strategical positions of the European and Eastern theatres of war. Enemy has air and naval superiority due to presence of powerful Japanese naval squadrons including several aircraft carriers in the Bay of Bengal. This is a threat to the Ganges, Delta, Ceylon, the Malabar Coast and our sea communications A large British convoy has reached Bombay with war material and reinforcements. 2. Propaganda Policy (a) We should not make a defensive response to distortions by Germans of closer links between America and Britain; and between India, Australia and America. "The helpful interest presently being taken by America in the security of Australia and India, in close accord with the British Government, is but another sign of what the Prime Minister once described as a certain mixing up of Anglo-American relations as a result of our common purpose in this war. This form of mixing-up can be represented as covering both moral and material aspects of war. The process of Lease-Lend has presently taken the form of America lending a Commander-in-Chief to Australia and of the lending of her good services in the settlement of the Indian problem. America's interest in world affairs, misrepresented by German propaganda, on the contrary is welcomed warmly in this country." 139 -2- (b) The major theme for our propaganda should be the conflict between Hitler's new order and the Christian church. The great significance of the resignati on of the Norwegian bishops should be pointed out. 140 NUMBER 27 SECRET COORDINATOR OF INFORMATION THE WAR THIS WEEK April 9-16,1942 Printed for the Board of Analysts Copy No. 6 The V APRIL 9-16, 1942 SECRET Coordinator of Information THE WAR THIS WEEK The Japanese have now deserted more cautious alternatives and have opened a wide attack in the Bay of Bengal, possible prelude to a more extended action in India itself, where British efforts at political conciliation have failed. At the same time German intervention has produced a collaborationist victory at Vichy under the leadership of Pierre Laval. These moves are interrelated, although by no means necessarily the product of coordinated effort by the two Axis partners, notori- ously given to the close pursuit of their own immediate objects. If their offensive eventuates in the occupation of such bases as those in Ceylon, the Japanese could then harass vital communication lines with the Middle East, notably the oil supply lines for the Allied effort in India. Such a campaign could be of significant benefit to Germany as well as to Japan. If the Nazis, in turn, can now wrest from Vichy the effective cooperation of the French fleet, then the naval responsibilities of Britain in the west will be substantially increased and her position in the Indian Ocean area potentially weakened. That situation would serve the immediate interests of the Japanese. Meanwhile events continue to emphasize the central importance of the Indian and Russian theatres of war. Prepa- rations are going rapidly forward for a Nazi spring drive against the Russians. The Japanese offensive in Burma is pushing the British and Chinese steadily northward. And 1 V APRIL 9-16, 1942 SECRET Coordinator of Information THE WAR THIS WEEK The Japanese have now deserted more cautious alternatives and have opened a wide attack in the Bay of Bengal, possible prelude to a more extended action in India itself, where British efforts at political conciliation have failed. At the same time German intervention has produced a collaborationist victory at Vichy under the leadership of Pierre Laval. These moves are interrelated, although by no means necessarily the product of coordinated effort by the two Axis partners, notori- ously given to the close pursuit of their own immediate objects. If their offensive eventuates in the occupation of such bases as those in Ceylon, the Japanese could then harass vital communication lines with the Middle East, notably the oil supply lines for the Allied effort in India. Such a campaign could be of significant benefit to Germany as well as to Japan. If the Nazis, in turn, can now wrest from Vichy the effective cooperation of the French fleet, then the naval responsibilities of Britain in the west will be substantially increased and her position in the Indian Ocean area potentially weakened. That situation would serve the immediate interests of the Japanese. Meanwhile events continue to emphasize the central importance of the Indian and Russian theatres of war. Prepa- rations are going rapidly forward for a Nazi spring drive against the Russians. The Japanese offensive in Burma is pushing the British and Chinese steadily northward. And 1 SECRET SECRET on the "negative" side Rommel's offensive in Libya has now proved to be essentially a reconnaissance in force. Japanese activities in the Solomons suggest a cautious and tentative "feeling out" process and not a clear-cut and determined offensive. And in Siberia the Japanese have allowed the initial favorable period for an offensive to pass: the ice will soon be going out of the rivers, and mechanized operations then become difficult for some weeks to come. Sir Stafford Goes Home It was in an atmosphere of disillusionment that the political discussions between Sir Stafford Cripps and Indian National- ist leaders broke up. Earlier press optimism proved unfounded, as both of the two leading Indian parties rejected the British compromise proposals, and Sir Stafford himself departed for London. The Moslem League, despite its gratification over the fact that the Cripps plan implicitly recognized its pet doctrine of Pakistan or Indian partition, seemed unwilling to leave the question of membership in the proposed Indian Union to popular sentiment, even in the provinces with Moslem majorities, but suggested instead that provincial boundaries be redrawn. The objections of the All-India Congress went still further to the heart of the matter. In trenchant form, the party of Nehru and Gandhi laid down the already anticipated bases of its definitive refusal. First of all, in the interim period before the end of the war, when the British constitutional plan would go into effect, the Congress found that British control over defense would make of Indian self-government "a farce and nullity," since defense would cover "almost every sphere of life and administration." Second, under the Cripps plan, the native states would remain as an "enclave" where "foreign authority" would still prevail. 2 Finally, the recognition of Moslem separatism would prove an "apple of discord" in the new India. Cripps' Counterblast Cripps himself countered with a blast against the "critical and unconstructive attitude" with which Nationalist leaders had met his plan. A real Indian ministry, as proposed by the Congress, would, he maintained, "constitute an absolute dictatorship" of the Hindu majority, answerable only to party chiefs. A weary Sir Stafford was apparently laying the blame for the failure of conciliation squarely on the shoulders of Indian Nationalist leaders. In this he seems to have represented the feelings of the average Britisher, whom a despatch from London has pictured as skeptical of the success of Cripps' mission from the start and uninformed as to the basis of Indian intransigence. Somewhat later, Cripps denied that the United States had played any significant part in the negotiations. On this one point, he was apparently in agreement with Indian leaders. A press report from New Delhi suggests that the latter have been profoundly irritated by impatient and uninformed American newspaper comment, and by the predominant role assigned to Louis Johnson, the President's personal representative in India, as the deus ex machina of the-whole trans- action. Fundamentally, India still seemed unconvinced of Britain's magnanimous intentions. After the collapse of the negotiations with Cripps, Pandit Nehru summarized Indian public opinion with ominous candor: "The fundamental factor today is dislike of the British Government." Pledging that his country would not "embarrass" Britain's war effort, Nehru called on all Indians to rise in defense of their land-implying, apparently, that the new situation made India rather than Britain primarily responsible for its own salvation. 3 SECRET SECRET Japanese Alternatives The Calcutta Area In the opinion of a close observer of the Indian scene, how. ever, the failure of the Cripps mission will make little differ. ence in the conduct of India's defense. That is largely a professional matter, in which the chief factors are the apathy of Bengal would appear to be an almost ideal objective for a raid or a troop landing. The British have anticipated an attack on Calcutta from the east just as little as they pre- a great part of the population, an acute shortage of equipment, and practically no time for improvising new divisions. Last week the Japanese were keeping the Allies guessing as to where they would strike next on India's long and vulnerable coast. The sinking of two British heavy cruisers and the aircraft carrier Hermes apparently indicated fairly complete air supremacy over the Bay of Bengal-and the formidable strength of the Japanese fleet in Indian waters (including, on Mr. Churchill's estimate, at least three battleships and five aircraft carriers) suggested some sort of major offensive. Apparently the inhabitants of Madras, about a fifth of whom are reported to have fled to the interior, feared that their city might be the next Japanese objective. Strategic considerations pointed to Ceylon and Bengal, however, as more likely to be attacked. The air assaults on Trincomalee and Colombo have already indicated Japanese interest in Ceylon, British fleet headquarters and pivot of Indian Ocean defense. Prime Minister Churchill has suggested its limitations as a naval base-at least in comparison with Singapore. Nevertheless, a Japa- nese attack here-probably in the form of naval action followed up by troop landings-would constitute a major assault against a main center of British resistance. Hence some observers think it more likely that such an assault would be preceded by an attack on the rich and vulnerable province of Bengal, precipitating panic and economic disorder in that area. viously reckoned on a land offensive against Singapore. As a result, they have left the coast defenses of this area weak, and in the past they have never garrisoned or trained any considerable number of troops in Bengal (see The War This Week, February 19-26, pp. 6-7). Despite its extensive docks and repair facilities, Calcutta's position, far up the winding Hooghly river, makes it a poor naval base. British fleet units defending Bengal would probably operate from Ceylon, while the Japanese would have an excellent anchorage in the Andaman islands. If the latter seized the Burmese port of Akyab (as an erroneous press report announced about a week ago), they would have an air base only a little more than 300 miles from Calcutta. The port of Calcutta is completely exposed to air attack. Its principal wharves are located in enclosed basins, access to which is through narrow channels. The destruction of a ship or bridge in one or all of the channels would seriously impair Calcutta's usefulness as a port of entry. As a major railway junction for shipments to China, Calcutta would be the logical place for the Japanese to interfere with supplies going in that direction. Furthermore, the industry of the Calcutta area would be extremely vulnerable to bombing attack. The jute mills lining the Hooghly river, the mines and iron works of western Bengal and eastern Bihar, are near enough to the sea to be vulnerable to carrier-borne aircraft. An attack on these latter establishments would go far to paralyze the railways, railway workshops, ordnance factories, shipyards, and engineering shops of Calcutta, which are almost completely dependent on them (see The War This Week, February 19-26, pp. 16-17). 4 5 SECRET The Population Factor SECRET The Japanese Press Forward in Burma In Bengal, 60 million people crowd into an area about size of Kansas. Undernourished and sickly, about 60 the cent are said to suffer from malaria annually. Bitter reli. per gious disputes characterize the relations between Moslems and Hindus; the former have a slight numerical preponderance. Living just at the subsistence level, the inhabitants of the Calcutta area would starve in large numbers if military operations should interfere with their normal production of food, especially rice (1938-39 crop: 7.5 million tons in Ben- gal alone). Bengal has a huge livestock surplus, but the religious scruples of the Hindu population would prevent the killing of any cattle. Such considerations indicate that the war morale of the people of Bengal would probably be extremely low. The 563,000 factory workers (80 per cent concentrated in metropolitan Calcutta) would, moreover, form a potentially dangerous element. Observers agree that these workers would be extremely subject to panic in the event of air attack. The intrigues of the Bose brothers (see The War This Week, March 12-19, pp. 9-10) have, moreover, created in India an embryo fifth column. According to a report from London, the grand strategy of their pro-Axis movement is in the hands of Subhas Chandra Bose, who recently broadcast two messages to Sir Stafford Cripps from Berlin. But the actual liaison with the lunatic fringe of Indian leaders, and the tactical execution of the plans formulated in Germany, seem to be in the hands of Ras Behari Bose, now resident in Japan. The technique of the Bose brothers is apparently & clever mixture of sensationalism and confusion, as revealed in the recent contradictory reports of Subhas' death in an airplane crash in Japan, just on the eve of his second broadcast from Berlin. The Japanese drive in Central Burma has been gathering intensity, and both Chinese and British defenders have again been pushed northward toward Mandalay. Chungking news despatches report strong Japanese reinforcements en route to Burma and the opening of a new front on the Shan plateau designed to cut the Mandalay-Lashio railway far above the present battle areas. The situation in Burma is admittedly most critical, and the outcome of the campaign there will probably depend above all on the rapidity with which Allied air reinforcements can be sent, in the view of close observers of the scene. One London commentary is reported to have gone so far as to characterize the campaign now as little more than a stubborn rearguard action designed to give India time to prepare for invasion. In the Irrawaddy Valley sector, held by the British, the Japanese were reported to be within a few miles of Magwe, gateway to the oil region (see map on inside of back cover). In this area also, a heavy attack southwest of Taungdwingyi apparently was aimed at disrupting British and Chinese communications across the low-lying Pegu hills and at separating the two Allied forces. After having been attacked from three sides at Yedashe, the Chinese were reported to have fallen back 22 miles along the Mandalay road. One reason for this retirement, according to reports from the Chinese front, was the necessity of maintaining a line generally east of the British. The map makes clear the difficult tactical problem which faces both Chinese and British forces in maintaining secure communication lines across the Pegu hills. The new drive across the Shan plateau, reported in news despatches from Chungking, may constitute a formidable threat to the whole Allied position in Burma. Originating 6 7 SECRET SECRET on the northern Thai border, it apparently is designed utilize the fair-weather road between the border and to separated by the Pegu hills, offer natural advantages for Tung on the Shan plateau before the rainy season begins, Keng defense by separate forces. But the Pegu hills are not then take advantage of an all-weather road, toward Hsipaw, on the Mandalay-Lashio rail line. If this rail line were Chinese forces in the Sittang River sector would be separated cut, itself. from those on the Shan plateau and in fact from Chungking The recent lull in the activities of the AVG (attributed by a military spokesman in New Delhi to lack of ammunition and other supplies) was broken when members of that unit shot down 18 enemy planes in two days of fighting, but the Japanese continued intensive air activity in support of their advancing troops. In Burma and the Bay of Bengal area impassable-a fact which might readily lead to a Napoleonic strategy of mountain fighting, aiming to subdue the defenders in detail. A glance at the map will show, however, the improbability of such a venture as that predicted by some newspaper accounts-a landing at Akyab designed to "outflank" the British from the west. While a landing at Akyab to seize the airfield located there is not at all improbable, an attempt to outflank the British by a movement of troops across the formidable Arakan Yoma range is thought by observers to be highly unlikely. generally, the air strength of the Japanese, including aircraft on carriers, is now placed by military observers at 700 planes-a considerable increase over former estimates. Operations on the Salween River near Mawchi remained on a small scale, although Japanese troops were said to have occupied this tin and tungsten center. Military observers anticipated no large-scale offensives in this area, either by the Chinese or their opponents. Meanwhile, Generalissimo Chiang Kai-shek has visited the Burmese front, where he is reliably reported to have conferred with Allied military officials regarding a united command in Burma. The Coming Rainy Season in Burma Weather also is an important factor in the Burma fighting, but perhaps not so important as is popularly supposed. The Southwest Monsoon movement of humid air from the Indian Ocean to the land normally begins to develop in May and early June, but heavy rains generally do not break until about the end of May, according to data supplied by the Geographic Division of the Coordinator's office. The exposed Arakan district, around Akyab, is subject to very heavy rains. The central basin area around Mandalay, however, lying in the lee of the Arakan Yoma range, receives consider- Topography and Strategy in Burma The peculiar topographic features of Burma are significant conditioning factors in the strategy of the Japanese. Shielded on the Indian frontier by the great Arakan Yoma range, whose peaks rise in some places to 10,000 feet, and on the east by the Shan plateau, the rich central basin provides a compact but deceptive battleground. The two "corridors," ably less rain and in fact is characterized as a "dry" belt. The highlands of the Shan plateau also are relatively dry. The fighting in central Burma already is moving beyond the southern delta region where floods would be a more serious handicap to military movement. Nevertheless, the rivers in central Burma are considerably extended during the rainy season, owing to drainage from the mountains. One observer has noted that at Bhamo the 8 9 SECRET SECRET Irrawaddy river changes from a shallow stream strewn with most navigable. The number of rainy days increases in May Digboi in Assam probably could supply a service of 400-500 jeeps running into Upper Burma, but the loss of Burmese oil fields and refineries will seriously handicap traffic from northern Burma to China. and June, averaging from five to ten per month in the Mandalay basin, but this is hardly more than the normal The Oil of Burma sandbanks to a river two miles wide. But he also that it is during the rainy season that the Irrawaddy becomes notes number of rainy days during the same months in areas with comparatively dry climates. The evidence available in fact indicates that at no time during the rainy season, which lasts into October, would weather alone bring about any considerable cessation of military operations in central Burma. The advance of the Japanese in the Irrawaddy valley has put them within reach of the two most important oil fields between the Netherlands East Indies and the Middle EastSingu and Yenangyuang (see map). The oil fields of Burma altogether have an annual average production totaling The Isolation of China The establishment of a defensive line running from the Andaman Islands in the Bay of Bengal, through Akyab, Kalewa, and Bhamo, is thought by some observers to be the present objective of the Japanese in the Burma campaign. With alternative routes from India to China in their present incipient stage, it would hardly be necessary to extend the line farther north than Bhamo to intercept traffic for the Burma Road. Myitkyina (north of Bhamo and not shown on the map) might become an objective, if construction on a proposed northern route from Ledo were to be completed (see The War This Week, February 12-19, pp. 5-6). At present, however, if the Japanese succeed in capturing the rail center at Mandalay, land routes to China via Burma will for all practical purposes cease to exist. The proposed Ledo-Myitkyina route in the north appears to have been traversed by jeep trucks and might be useful as a fair-weather road if it could be treated with crude oil from the Burma oil fields. Even so, its chief utility would be as & slightly over 1,000,000 metric tons, of which nearly 90 per cent is produced by these two fields. By capturing the refineries at Syriam, near Rangoon, to which oil had been piped and transported by barge from the fields in central Burma, the Japanese already have virtually nullified the effectiveness of Burmese oil production for the Allies, although a few diminutive refineries are located near the producing areas and might conceivably still be in use. Russian Route to China Faced with the possible loss of supply routes from India, the Chinese have begun more intensive diplomatic exploration of the possibilities of a new route through Iran and Turkestan. Last summer, however, the former Russian supply route to China was delivering only some 50 tons a day in Chungking, roughly one-tenth the amount which has since been reaching Kunming over the Burma Road, according to an American observer. Even on the assumption that the supply route to the defenders of northern Burma, if only Russian authorities could and would cooperate, routes through Central Asia are very long and very costly. The exploration because of the gasoline factor. The oil fields and refinery at of supply possibilities via these back-door routes to China 10 11 SECRET SECRET is interpreted by one observer to be more of a gesture of Chinese determination than anything else-coming as it does after the successive closures of more practicable routes. Civilian Exhaustion in Free China Three Americans who have recently returned after con- Resistance also appears to be continuing on Cebu, where early in the week the Japanese landed an estimated 12,000 troops at six beachheads on the island. Some observers an- ticipated that further attempts to extend control over the southern and central islands of the Philippines would be made by the Japanese with troops freed after the fall of Bataan. siderable first-hand observation in Free China are unanimous in pointing out that, although the farming population is no worse off than usual, the professional classes are suffering seriously from poverty and malnutrition. Reaction to the Fall of Bataan Axis propagandists, including the Japanese, have made whole is definitely incapable of taking the offensive. Our almost no capital out of the fall of Bataan. Tokyo radio beamed an alibi to India: the Japanese did not wish to chief objective, according to these observers, should therefore be to keep China in the war, rather than to aim at obtaining her vigorous assistance. Concentrated pharmaceutical prod- inflict heavy slaughter on the Filipinos. Berlin radio sympathized with the "poor doughboys," taking it as another occasion to attack American leaders, but making no dis- In addition, it is said that after five years, Free China as a ucts might thus be just as important in the maintenance of Free China as artillery and munitions. Resistance in Manila Bay The defense of Corregidor and its auxiliary forts at the entrance of Manila Bay will continue, according to a message by General Wainwright to his troops, "with all the resources at our command." From bases in Australia, a 4,000-mile bombing attack on Japanese positions in the Philippines has given Wainwright's statement sensational punctuation. After the fall of Bataan, the Navy had announced that "most" of an estimated 3,500 sailors and marines had escaped to Corregidor. Under continuous air and artillery attack, with as many as 22 raids in two days, Corregidor appeared still to be able to return the enemy's fire, although the Japanese have claimed that the guns on the north side of the island have been silenced. 12 paraging references to the fighting. The British press joined in tribute to the defenders, ranking the defense of Bataan with the long-drawn-out resistance of Malta, Tobruk, and Sevastopol. Pro-Ally journalists in neutral Turkey blamed the defeat upon the exhaustion of men and supplies only, and found in the ardent fighting of the Filipinos the fruits of an enlightened colonial policy. In Tangier, too, the press pointed particularly to the Filipinos who "fought violently" alongside the Americans. Resumption of Activity on New Guinea Japanese land forces, operating from their base at Lae on the Huon Gulf, appear again to have begun an advance up the Markham Valley, after having been driven back to their coastal bases some weeks ago by torrential rains. No contacts between ground troops of the United Nations and the Japanese have been reported on New Guinea since the initial Japanese landings at Lae and Salamaua on March 8. 13 SECRET SECRET The air duel between Allied fliers and the Japanese in Australasia continues daily, with heavy and successful attacks particularly on the important Japanese bases at Rabaul, New Britain, Koepang in Dutch Timor, and Lae. A direct hit on an aircraft carrier at Rabaul has been officially confirmed. Two Japanese carriers are believed to be operating in this vicinity. The Japanese have again bombed Tulagi and Gavuty Japan and Russia may clash as a result of Anglo-American intrigues. Various important Japanese have recently been recalled to Japan for conferences, including General Akamato, an expert on the border defenses of Manchuria, and the military attaché to Russia with all his staff. And it just reported that Tatekawa has secretly been appointed advisor on Russian military strategy to the Manchukuo Warongai River in New Britain. Japanese raids on Port Army. It may also be significant that Japanese broadcasts are beginning to contain opprobrious allusions to communist activities in several strategic Asiatic countries. Moresby and Port Darwin are less frequent, although the most recent figures on Japanese air strength in this area Collaboration Wins the Day at Vichy islands in the Solomons. It is reported also that they are building a small base for submarines at the mouth of the indicate that it has been maintained at about 650 operational planes. Quiet in Eastern Siberia With the virtual end of the spring period of favorable weather for a Siberian blitzkrieg, quiet continued to reign in that theatre. As the ice breaks up on the frontier rivers (usually beginning about April 20), the latter again become barriers with gunboat patrols, and the bordering alluvial areas become so swampy as to prevent military operations on any large scale. There are a few places devoid of alluvium, which should dry up early in May, but Russian defense of these small sectors should be relatively easy (see The War This Week, March 12-19, pp. 21-22). Complimentary statements by General Tatekawa, the retiring Japanese ambassador to Russia, are being broadcast currently from Tokyo concerning Russian efficiency and amicable relations with Japan. But the Hsinking radio in Manchuria, which has often (as before the outbreak of the Pacific War) foreshadowed Japanese policy, warned that is With the return of Laval as Vice President of the Council at Vichy, the Germans have apparently won a clear-cut victory, although its precise character will not be known until Laval returns from his negotiations with the Nazis in Paris. It is expected that he will then form his government and clarify the important issue as to what the future position of the Marshal is to be. Meanwhile Pétain has agreed that Laval shall not only be Vice President of the Council but that he shall hold the four key portfolios of Foreign Affairs, Interior, Propaganda and Information, and National Economy. Darlan, it is announced, is to continue in the post of Minister of National Defense. Although Otto Abetz, German Ambassador to Paris, was reported at one time to have expressed Berlin's displeasure at having Laval as the French champion of "collaboration," the latter has obviously been chosen again by the Germans to force the issue at Vichy and to remove American influence and sympathy with the Allies from places of importance around Marshal Pétain. Probably taking his cue from Laval himself, the collaborationist oracle Jean Luchaire, director of the German controlled 14 15 SECRET SECRET Nouveaux Temps in Paris, declared on April 7 that French "neutrality" is not neutrality at all but in reality a tacit alliance between Vichy and Washington. Luchaire also pointed out that the "new government will conduct affairs of France in such a way that she may take her rightful pl in the new European order and derive appropriate benefits from this European collaboration." As an indication of what changes this "new conduct of the affairs of France" may bring in the French domestic scene is the announcement that the Riom trial has been suspended: its scope may be broad. ened so that future proceedings may include "political and military mistakes which led to war and defeat." The full significance of Laval's advent to power must await the commentary of events. Speculation at once suggested the dangerous possibility of fleet cooperation and the surrender of French base facilities. Certain observers believe that the Germans are seeking to protect their rear against the danger of invasion at a moment when they are about to renew the eastern offensive, and one press report declares that Laval will function as "civil supervisor of all France," perhaps even leaving strictly "military supervision" to the Germans. In this connection it is to be noted, how. ever, that the Germans already control the north and west French littoral, and that only German troops could be relied upon to repel an Allied invasion attempt on this area. The Nazis must also face the danger that a violent swing to collaborationism may alienate large numbers of the French people and increase the probability of sabotage and active aid to a possible invading force. From North Africa comes a report that Doriot's Parti returned to power, he would fight to get back for Vichy the Free French colonies, presumably in Africa and the Pacific. There are also reliable reports of increasing tension in Morocco with certain military precautions being taken by the Frenchin apprehension, it is reported, of what the British may do. Simultaneously highly placed French officials in North Africa continue to urge that America make economic aid available to that region at a time when economic stringency is reported to be grave. An Aris Squeeze Play? As Vichy gravitated toward the Axis, the fast battleships Dunkerque and Strasbourg, now reunited at Toulon, were the chief stakes in the risky game of Mediterranean naval bal- ance. If these and other units of the French navy were suddenly to pass under Axis control, the British would face a significantly strengthened naval force in that area just at the time when the defense of India may demand naval reinforcement in the East. The sinking of the Italian heavy cruiser Trento by a British submarine, plus the report that both of the two new Italian battleships were under repair at Taranto, indicated that the naval balance in the Mediterranean had improved somewhat, and that the Italians might not be able to contribute very significantly to any contemplated squeeze play. A recently compiled list of Italian sinkings reveals that since the start of the war Italy has lost perhaps 44 per cent of her merchant shipping, about half her submarines, more than one-third of her destroyers, and about a third of her light Populaire Français has received 80,000,000 francs from the cruisers. Although the British have sunk none of the six Nazis which it is to use in propagandizing North Africa in favor of Nazism. At the same time there is a report to the effect that Laval has recently announced that, should he be Italian battleships, only the three old vessels Giulio Cesare, Caio Duilio, and Andrea Doria are apparently now fit for service. Of the seven heavy cruisers with which Italy 16 17 SECRET SECRET entered the war, the Zara, Polo, and Fiume were lost at Cape Matapan, and the Gorizia went down at Messina. With recent loss of the Trento, then, the Italians have left only the Bolzano and the Trieste, at least one of which is now under repair. third on this run. Press reports from Stockholm, however, announced that another Allied convoy had reached Murmansk in safety. S. A. Lozovsky, Soviet vice-commissar for foreign affairs, declared that "all sorts" of war materials were now reaching Russia from the United States. And Admiral Standley, on his arrival at Kuibyshev to assume his Action in Malta and Libya Last week Malta withstood its worst bombing thus far. Evidently the Axis was meeting with some success in neutral. functions as American Ambassador, predicted that the current month would see the flow of goods from the United States at last equaling American commitments. izing the fortress lying athwart its supply lines to Libya. But it was at heavy cost: somewhere between five and ten per cent of the 100 to 200 planes that flew over the island daily were reported lost. Airmen generally consider ten per cent losses as an uneconomic wastage of air strength And at a time when the RAF has launched a major offensive against industrial centers in northern France and Germany, and when the Nazis are apparently preparing for a spring push in Russia, the losses over Malta may make themselves felt in other theaters of the war. The Flow of Lend-lease Goods to Russia On all except the northern sector of the Russian front the spring thaw had apparently stalled both Soviet and Nazi armies last week. There was marked activity in the Lake Ilmen area alone, where the Germans admitted a Russian break-through. But they added that they had cut the supply lines of the Soviet advance detachment, leaving them isolated and without reinforcements. As the zero hour of the anticipated German spring offensive drew near, the lend-lease shipping lane to Murmansk was again the focus of Allied interest. The Germans claimed that they had set fire to two merchant ships and damaged a 18 19 GOVERNMENT PRINTING 141 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE April 16, 1942 Secretary Morgenthau TO Mr. Kamarck FROM Subject: Military Report: British and American Military Survey Far East The United States has 500 planes and 30,000 men in Australia. The total Allied armed forces in Australia, at present, come to around 200,000. The Japanese are in control of Cebu Island in the Philippines. The loss of Cebu is fairly important since it was used as a way station between Corregidor and Australia. The army still has no news of the fate meted out to the Bataan defenders by the Japanese. The situation in Burma appears to be deteriorating. Both the British and the Chinese are suffering from almost total lack of air support. A large British convoy of troops and supplies arrived in Bombay, India on April 9. (Military Intelligence - April 15, 1942; U.K. Operations Report, April 2 - 9, 1942) Russia According to information which our army has received, the Germans are asking the Japanese to attack Siberia on June 15. There is no indication whether the Japanese have agreed. Germany continues to marshal her forces against Russia. In addition to mobilizing the bulk of her surface fleet and to Russia, a concentration of U-boats is being built up off a large number of bombers against the northern supply route Norway. 142 -2German armored divisions on the Russo-German front have been increased from 21 to at least 23 divisions. (The Germans, therefore, have at least 15,000 tanks at the front, without counting any reserves in Germany. This agrees with the estimate made by U.S. Military Intelligence.) About 2,000 German first-line aircraft are now at the front. This is to be compared with about 1,600 at the beginning of the year (and 2,500 in June of 1941). Most of the recent reinforcements are units which have returned after A rest period for overhauling, following their efforts at the end of 1941. The thaw is likely to affect the German airdromes and the serviceability of units on the Russian front remains low. Consequently, the effectiveness of this force 18 likely to be somewhat less than the normal average of the German air force. That the Germans are not yet ready to start their offensive against the Russians is indicated by the fact that they are still interchanging infantry divisions between Russia and France, bringing up the troops which have rested during the winter, and sending the others to France for rest. (U.K. Operations Report + April 2 - 9, 1942) The following is the present strength of the German allies on the Russian front: 4 2 . Slovaks 6 - . Italians 16 divisions - - . Finns Romanians (Military Intelligence - April 15, 1942) Mediterranean The British do not believe that the Axis is ready for an offensive in Libya. The British still have air superiority and have about 600 tanks compared to 400 tanks for the Axis. The British themselves, however, will not be ready for an offensive before the middle of May or June. (Military Intelligence - April 15, 1942) 143 TREASURY DEPARTMENT FOR RELEASE, MORNING NEWSPAPERS, Washington Friday, April 17, 1942 The Secretary of the Treasury, by this public notice, invites tenders for $150,000,000, or thereabouts, of 91-day Treasury bills, to be issued on a discount basis under competitive bidding. The bills of this series will be dated April 22, 1942, and will mature July 22, 1942, when the face amount will be payable without interest. They will be issued in bearer form only, and in denominations of $1,000, $5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity value). Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o'clock p. m., Eastern war time, Monday, April 20, 1942. Tenders will not be received at the Treasury Department, Washington. Each tender must be for an even multiple of $1,000, and the price offered must be expressed on the basis of 100, with not more than three decimals, e. g., 99.925. Fractions may not be used. It is urged that tenders be made on the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Branches on application therefor. Tonders will be received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of 10 percent of the face amount of Treasury bills applied for, unless the tendors are accompanied by an express guaranty of paymont by an incorporated bank or trust company. Immodiately after the closing hour, tondors will be opened at the Federal Reserve Banks and Branches, following which public announcement will be mado by the Secretary of the Treasury of the amount and price rango of accepted bids. Those submitting tendors will bo advised of the acceptance or rejection thereof. Tho Socrotary of the Treasury exprossly reservos the right to accept or rejoct any or all tondors, in whole or in part, and his action in any such respect shall be final. Payment of accoptod tenders at the prices offored must be made or completed at the Federal Resorve Bank in cash or other immodiately available funds on April 22, 1942. The income derived from Treasury bills, whother interest or gain from the salo or othor disposition of the bills, shall not have any exemption, as such, and loss from the salo or othor disposition of Treasury bills shall not have any special treatment, as such, under Fedoral tax Acts now or hereaftor enacted. The bills shall 31-22 (ovor) -be subject to ostato, inhoritance, gift, or other exciso taxes, whether Foderal or State, but shall bo exempt from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions of the United States, or by any local taxing authority. For purposos of taxation the amount of discount at which Treasury bills are originally sold by the Unitod States shall be considered to bo interest. Under Sections 42 and 117 (a) (1) of the Internal Rovenue Codo, as amended by Soction 115 of the Revenue Act of 1941, the amount of discount at which bills issued hereunder are sold shall not be considered to accruc until such bills shall bo sold, redeemed or otherwise disposed of, and such bills are oxcluded from consideration as capital assets. Accordingly, the owner of Treasury bills (other than lifo insurance companios) issued heroundor nood include in his income tax return only the difference between the prico paid for such bills, whother on original issue or on subsequent purchase, and the amount actually received oithor upon salo or rodomption at maturity during the taxable year for which the return is made, as ordinary gain or loss. Treasury Department Circular No. 418, as amended, and this notice, proscribe the terms of the Treasury bills and govern the conditions of their issue. Copies of the circular may bo obtained from any Fodoral Reserve Bank or Branch. -000- 144 April 17, 1942 8:41 a.m. HMJr: Hello. RAYBURN: Henry. HMJr: Yeah. R: That thing changed in the House about three times yesterday. HMJr: R: I see. They're all together on eliminating the whole thing, and, then they had another meeting yesterday morning. HMJr: Yeah. P: And the Republicans are all for the retaining of something. HMJr: Yeah. R: And then they had a meeting yesterday afternoon and all the House committee is back in favor of eliminating it all. HMJr: R: Good. So, now I haven't got much influence in the Senate, you know HMJr: R: I don't believe that. But, that's where you got to work. Cannon and McCormack came by to see me yesterday afternoon late, you know - HMJr: R: Yeah. And, that's the situation Cannon says, so now I don't know - McKellar hasn't said anything yet - he's one of these fellows that - it's his amendment I understand, wasn't it? HMJr: He's one of the what? R: Wasn't the amendment his? HMJr: Yeah, I think so. 145 -2R: I think so. Well now, you and the Boss can work on the Senate,and but our crowd's Republicans Democrats. all right, both sides - HMJr: Republicans and Democrats? R: Yeah, that's what Kenneth told me yesterday afternoon at six-thirty. HMJr: The trouble is, I don't believe Barkley's in town. R: I don't think he is. I told Cannon this - HMJr: Yeah. R: He was all in a jitter about it - I said, "Well, hell, just go over there" and he said, "Well, what are we going to do at the meeting?" and I said, "Just go over there and sit there awhile and get up and leave". HMJr: Yeah. R: And, this bill doesn't have to come in tomorrow night, and it doesn't have to come in Monday. HMJr: Yeah. R: With an important thing like this in it, why, let it hang around awhile. HMJr: Well, how would it be if I called up McKellar and asked him if I could meet with him and you, and Cannon? Would that be it? R: Well, I'm not going to be here after eleven-thirty, Henry. HMJr: Well, if I get him at R: Yeah, I could be there immediately at ten o'clock, or any time. HMJr: What? R: I can meet any time with you between now and eleven o'clock. HMJr: Oh, isn't that the thing to do? R: It might be. I don't know. Now, sometimes those Senators would rather you'd talk to them, separate you know. -3HMJr: I'll - I'll put in a call for him. R: All right, Henry. HMJr: And - R: I'll do anything I can about it 146 HMJr: I can get you either at your home or at the office? R: Yeah, I'll be, I'11 be at the office by ten o'clock, certainly HMJr: How's your cold? R: Oh, it's some better. HMJr: Take care of yourself. R: HMJr: R: I'm all right. I'll put in a call right away. Thank you. 147 April 17, 1942 9:00 a.m. HMJr: Hello. Operator: Senator McKellar doesn't answer his apartment, and he hasn't reached the office. HMJr: Is his secretary there? Operator: No, his secretary is not there either. HMJr: Oh, oh. Operator: HMJr: They say he usually comes in a few minutes after nine. Well, I'd try it every five minutes. Operator: Right. HMJr: And if you get his secretary, I'd like to talk to him or her. Operator: All right. HMJr: Please. April 17, 1942 9:05 a.m. HMJr: Hello. Operator: Senator McKellar. HMJr: Hello. Senator McKellar: All right, Mr. Secretary. HMJr: How are you? Henry Morgenthau speaking. Mc: Yes, sir. HMJr: Senator - let's see, I want to get my dates straight. Yesterday the President asked me whether, on his behalf, I wouldn't look after this six per cent profits limitation bill. 148 -2Mc: Yes. HMJr: That 18, for this end of the avenue. Mc: Yes. HMJr: And I wondered - he - talking for the President would likebill. to see it dropped out and handled in the tax Hello. Mc: Yes. HMJr: Now, what, if anything, can I do to be helpful? Well, I tell you what we did. You remember the House put in the provision of the six per cent Mc: limitation on profits. HMJr: Yes, I do. Mc: Well, that was not a workable measure. HMJr: Yes. Mc: And so when the bill came over to the Senate, I took it uo with the War Department, the Navy Department, and the Shipping and the Marine - Merchant Marine. HMJr: Yeah. Mc: Not the Merchant Marine - what do they call it? The Maritime Commission. HMJr: Yes. Mc: The Maritime Commission. HMJr: Yes, sir. . Mc: And asked them to go into it very carefully and say whether they wanted that and if they didn't want that, would they prepare a substi- tute for it. HMJr: Yes. Mc: Now, they acted very fine in the matter. They 149 -3said that they knew that this matter ought to be corrected, and they thought that they could they stated time that they thought they could correctatitthe themselves HMJr: Yeah. Mc: but that it would be better to - they thought that while would be better, they then prepared a section init its place HMJr: Yes. Mc: that said that they could work and it wouldn't interfere with their work and it wouldn't stop production in any way, or would not slow down production in any way HMJr: Yeah. Mc: .....88 they thought. HMJr: Yeah. Mc: They worked on it for quite a while, maybe for a week, and they brought us - they all testified before the committee and brought us this copy of what they thought would be workable, and the Senate adooted it and then went one step further and adooted Senator Thomas' provision - section he had a section called F. The Senate committee adopted Senator Thomas' Section F, which provided a sliding scale of profits, from two to ten per cent. HMJr: Yes. Mc: Well, the Department was very much opposed to that - all three Departments were very much opposed to that. HMJr: Yes. Mc: And that went out in the Senate. HMJr: Yes. Mc: And leaving the amendment, with some minor cor- rections that didn't amount to anything one way 150 4 or the other, just as the three Departments had prepared it and brought it to the Senate. HMJr: Yeah. Mc: Now, since it passed HMJr: Yeah. Mc: the three Departments have taken it again yesterday when it came up for hearing, the House and they made some other minor amendments, and felt that it would be better not to take any - have any legislation at all, and the Senate conferees unanimously disagreed with that HMJr: Yeah. Mc: and there it remains today and will have to Secretary, the provisions that the Departments be threshed out today. As I look at it, Mr. themselves prepared would seem to me to be very proper, and should aid them tremendously in preventing the large profits that have been sort of a scandal in the newspapers and it would be better for us to go ahead and adoot them. That's the way I feel about it HMJr: Well Mc: and that's the way our committee feels about it. HMJr: Because I've been, for over two years, talking about "take the profits out of war." Mc: Sure. HMJr: So - and I - and, of course, we feel Mc: I think it's along the general lines that you and I believe in, and I don't think it will hurt - they say that it won't hurt production and I'm sure it won't hurt production. Now, it's true that all three Departments say they could do this very thing all by themselves. Well, they might, but I think it would be better for them to have this provision that 151 -5they themselves have written. HMJr: Well, have twice met with the three Departments,Iand Mc: Do you have an appointment with them? HMJr: What? No: Do you say you have an appointment with them? HMJr: No, I met with them the last two-days. Mc: Oh, you met with them several days, so you know their position. HMJr: Yes, I know their position. Mc: Well, I've stated it correctly, I think. HMJr: oh, yes. Mc: Yes. HMJr: Now, could I just ask this. Mc: Yeah. HMJr: I've been in touch with the Speaker this morning and yesterday. . Mc: Yes, sir. HMJr: And I'd like a little advice from you. Mc: Yes, sir. HMJr: But I don't know how to proceed. He's leaving town at eleven-thirty this morning. Mc: Yes. HMJr: And I wondered if you thought it would be at all helpful if you and the Speaker and the Under Secretary of War and Navy and I could sit down any time now and have a little chat. 152 -6Mc: I have no objection to it at all. HMJr: Do you think that would be helpful? Well, I don't know. The Senate committee Mc: has pretty wellit.made up its mind, but I'll be glad to do HMJr: Well, the House side seems to have also, and I had a new suggestion which I thought might possibly break the log jam. Mc: Well, now, when do you want us to meet? HMJr: Well, I - that's up to you, sir. I can get Mc: HMJr: Mc: our end of the people to come anywhere that is agreeable to you and the Speaker. Well, whatever he saye about it. Well, he will it meet in his office, or will it meet in your office? HMJr: No. Would it all Mc: The Appropriations Committee Room - the Senate Appropriations Committee Room - anywhere you say. HMOr: Well Mc: I think it would probably be better in his office or my office or your office. Well, my office - I don't - I'11 - we'll come HMJr: up there. Mc: All right. HMJr: You name the place, and I'11 get our people. Mc: I'd rather yield to the Speaker on that, and we '11 either meet in his office or mine. HMJr: He said he'd be at his office at ten, he'd be available. 153 -7Mc: All right. We'll go there, then. HMJr: Ten o'clock? Mc: That will be all right with me. At his office. HMJr: Mc: HMJr: Mc: HMJr: Yes, sir. And I'11 bring these other two gentlemen with me. All right. Is that all right? Mc: Yes. HMJr: Thank you 80 much. 154 April 17, 1942 9:15 a.m. HMJr: Hello. Operator: Speaker Rayburn. HMJr: Sam. Speaker Rayburn: Yee, Henry. HMJr: R: HMJr: McKellar will be at your office at ten 'clock. I'll be there. And I'm bringing Patterson and Forrestal with me. R: That'11 be fine. HMJr: We'll be there at ten. R: HMJr: R: I'11 be there. He was very nice about it, but - as to where to meet, but he's adamant about the other thing. I see. Well, we'll see what we can do with him. HMJr: What? R: We'll see what we can do with him. HMJr: Right. R: All right, Henry. HMJr: Ten o'clock. R: All right. HMJr: Thank you. 155 April 17, 1942 9:18 a.m. Robert Patterson: Yes. HMJr: P: HMJr: Sam Rayburn called me at eight-thirty this morning and said that they were absolutely in a log jam. The House wants to kick it out, and McKellar doesn't. Hello. Yeah. And I've arranged at Sam Rayburn's office at ten o'clock a meeting with Rayburn, McKellar, you, Forrestal, and I. P: Yeah. What - at Rayburn's office? HMJr: Ten o'clock. P: Rayburn's. HMJr: Speaker of the House. P: Speaker Rayburn. HMJr: Speaker of the House. P: Yeah. I'll be there. HMJr: Ten o'clock. P: Thank you, Henry. HMJr: Thank you. P: I'll be there. 156 April 17, 1942 9:20 a.m. HMJr: Hello. Operator: Forrestal. HMJr: Jim. James V. Forrestal: Yes, Henry. HMJr: Good morning. F: Good morning, Henry. HMJr: Sam Rayburn called me at eight-thirty this morning on this six per cent thing. He said that they've got it licked in the House, but not in the Senate, and I had to help. Hello. F: HMJr: Yes. I just got through with a long talk with McKellar. F: Yes. HMJr: And he's adamant, but he's agreed to meet us at the Speaker's room at ten o'clock this morning. F: HMJr: Yes. And I'd like you and Patterson to accompany me. F: Sure. HMJr: Patterson's agreed. F: At the Speaker's room of the House? HMJr: At ten o'clock. F: Sam Rayburn's room. HMJr: That's right. F: Okay. And incidentally, Henry, Taft said to 157 -2 me that from the Republican side, that the Senate would have no trouble in beating McKellar's amendment. HMJr: Good. F: And he said that the - what McKellar did was to tell us that this or worse would go through and Taft believes that is not sound information. HMJr: F: HMJr: Well, now, what I'm going to do is, as long as the President's given it to me and as long as Iare know withthat me Frank Knox and you, as I gather, Yes. I'm going to use my own bean, if I get about telling him we're going to have this stuff Tuesday. F: HMJr: Yes. Because I understood that you were with me on that. F: On the use of this - these figures. HMJr: Yes. F: Yes, provided, Henry, you take a look before you show him, to see - in other words, to see what the effect is - 18 it good enough. HMJr: Well, if it isn't, we'll promise to make it good enough. F: HMJr: Yeah. Well, that's the answer. But Frank Knox spoke to me about it last night, because when I had luncheon I gathered that he was definitely in my corner. F: HMJr: Oh, there's no question about that. And - but I'm not going to use that unless I find we're licked, and then I'm going to 158 -3say, "Well, won't you wait until Tuesday so we can all take a look at these figures." F: Yeah. HMJr: See? F: Yeah. HMJr: And then if the figures - if we find that the present tighten ittax up.bill doesn't do the job, we'll F: Okay. Have these other fellows been at Eccles and 80 forth - have they been doing any gum-shoe work, do you think? HMJr: You're so suspicious. Eccles always works out in the open. F: Yeah. (Laughs) HMJr: Okay. F: HMJr: F: HMJr: All right, Henry. I'll see you there. Thank you. All right. (Laughs) All right. (Laughs) 159 April 17, 1942 9:30 a.m. HMJr: Hello. DOUGHTON: All right, Henry, how are you? HMJr: Fine. That was mighty nice of you to let us come up there yesterday. D: Well, it was a great day. It was fine for you to come. It was the most helpful session and hearing that we've had, I think, and made the finest impression; and I want to say another thing, that I'm so glad that you and I are in harmony so far as in agreement - so far as falling back and increasing the amount of the tax bill now, trying to raise it about twice that much - about as much again HMJr: Yeah. D: .... tocrowd please- Henderson and Eccles, and Smith and that HMJr: That's right. D: Or about this question of - other question of selling bonds. Why, I know you're right on both questions. And I'm so glad that our views are together, and the President's just falling right in line, as fine as just in the finest disposition - just as fine as you ever saw, you know. HMJr: Well, it's mighty nice, and these boys ought to tend to their own backyard. D: Well, that's exactly what I say. That's what I told our folks up here. I said if Henderson wants anything and involve - to our back - and try to get the President to jump in on something of the President's - more of our Committee, he should not go around there the Secretary's always recommended and we've started out on. HMJr: Yeah. D: But if they've got something that they want us to know, come straight up here and tell us before the Committee, not go into - not go into - and try to hit us in the back. HMJr: Well, I think we've taught them a lesson, Bob, with your help. 160 -2D: HMJr: D: Well, I thank you - well, I tell you, I hever had a more satisfactory or pleasant conversation with anybody than I had with the President the other day. Well, that's mighty nice. Just fine, and I'm trying my best to work along with you in a way that we won't just jog down one road a piece and then turn right around and back our cart and go some other way. HMJr: That's right. D: I congratulate you, because you certainly have rendered a great service and it's 80 fine we can work together that way. HMJr: Well, that's the way I like it, Bob. Yeah, well, that's the way I like it too. D: HMJr: Now Bob - I need a little help. I don't know whether they're going to advertise it, but I'm meeting McKellar in the Speaker's Room at ten o'clock on this six per cent bill, and I'm trying to kill it and throw it into your Committee, you see. Hello? D: I hear you - I'm here, but I didn't get just what you meant. HMJr: D: Well, I meant this way You're meeting McKellar in the Speaker's Room at what time? HMJr: Ten o'clock. D: Ten o'clock. HMJr: D: And I'm - I'm going to have to have Paul with me. Do you think you could spare him for half an hour? Yeah, let him come in later and I'll put some other somebody else on the stand. I think Clay Williams is here to discuss the tobacco tax. HMJr: I see. Well, he won't be more than half an hour over there. D: Well, he can come out and sit around with me and we may not put him on until the middle of the afternoon - 161 -3- you can't tell - it'11 be perfectly all right. HMJr: Well, if that's all right, because the President asked me to step into this thing and he wants this thing killed, the tax bill. and he wants it to be handled through D: Well, all right. HMJr: See? D: All right. HMJr: So - now the House are with us but the Senate is not. D: The wants to lead off into another direction, doesSenate it? HMJr: Yeah. And - D: Well, you send Paul on up there and whenever he gets through, then he can come on over and be at our whenever we need to call him. HMJr: Thank you. D: Yeah. HMJr: Thank you. D: And I want to thank you again for that splendid presentation. It was just the very thing that we needed - seems to me like - and I think it'11 have an excellent effect on the country. I think it was just fine. HMJr: Good. O.K., Bob. D: All right, I'm going to run down home tonight - be back by Monday or Tuesday, so call me whenever you need me in anywhere, where I can pull or pounce. HMJr: O.K. D: Thank you - good-bye. 162 April 17, 1942. Mr. Graves, Kuhn and Odegard Secretary Morgenthau I think from now on all our copy should include something about saving - be careful how we spend our money - and not to hoard. I wish you would talk to me about that at our meeting at 11 o'clock today. 163 Harold Graves April 17, 1942 Secretary Morgenthau At the 11 o'clock meeting, I understand they are going to submit some new copy on advertising to me. I want your five section heads there plus Odegard, Kuhn, Ted Gamble and Mr. Weir. After I look at the copy, we will excuse Mr. Weir, and then I want to get down and talk organization to the group. Please submit a list of whom will be there at the 11:00 meeting to Lt. Stephens so that I can make sure the people are coming whom I want. I hope you will be ready to talk plans with me about the quota for May and June and how we are going to proceed. Also bring up the question of an advisory committee from the Chamber of Commerce, NAM and the labor unions. I want to get that appointed just as fast as I can if we decide to go ahead with it. 164 April 17, 1942 11:25 a.m. DEFENSE SAVINGS BONDS Present: Mr. Graves Mr. Callahan Mr. Mahan Mr. Kuhn Mr. Houghteling Mr. Gamble Mr. Sloan Mr. Odegard Mr. Weir Mrs. Klotz H.M.JR: Let's do this thing first. MR. GRAVES: The advertisements? H.M.JR: Yes. MR. GRAVES: This is just one series of advertisements. It is not by any means a complete set-up of what they are working on. (Mr. Mahan exhibited a set of advertising posters.) MR. MAHAN: As Mr. Graves said, Mr. Secretary, this is only part of the program. We will have next week the posters, the promotion motion pictures and all the other promotions that Duffus handles. Now, the first advertisement is the bridge from the 165 -2old to the new, bringing back the Minute Man and establishing the fact that the present bonds are War Bonds are same as Defense Bonds. now, Bonds issued to the Defense Government's and title Series 'United E, exactly F, and States the G Savings you Bonds. have "Up born Your to considerable investment in printing and other materials in connection with these bonds has now largely been used up. These bonds are the same as Defense Bonds. The only change is in the name. As before, these bonds are guaranteed both as to principal and interest by the United States Government. They are the world's safest investment", and so forth. This introduces a new theme, "Think war, act war, buy United States War Bonds," with the "defense" crossed out and "war" substituted. Then here, rather than art work and so forth, there is a very direct, straight message as to what the goal is. "Here is America's all-out war program: an over- whelming, fully equipped fighting force, sixty thousand airplanes, forty-four thousand tanks, eight million new tons of naval and supply shipping, a hundred and thirty million war-working citizens, one billion fighting dollars in War Bonds every month." "What is the price of priceless freedom?" I will read just a couple of these. H.M.JR: Yes, because my whole thing - everything has been shot this morning and I am an hour and a half behind time, you see. Where I thought I would have - I have got to boil everything down. MR. MAHAN: Well, I will run through these quickly. I am merely reading them to give you the tone of it. This is the first one and the goal, which is a billion dollars every month. "Let's not kid ourselves, and there the thought is that we are not sacrificing, we are not giving, we are lending. "What are you doing about this war?" A very direct 166 -3appeal to the person himself, personalizing the war to the man. Using here our theme, "It is time to think war, act war, buy War Savings Bonds." "Let's talk about money. "Let's all fight," and again the job that we as entire program is all concerned - too doas stand far the firing the "You, have to on line. Then, "What your money buys. Here is what the boy himself is doing, the things that he is doing here is what we can do to support him. "They are fighting for independence today. MR. KUHN: It is the Fourth of July type. MR. MAHAN: Here is a new series that we will know if we are going to be able to get it. "Mein Kampf or the Holy Bible. by men-- It will be an editorial type of thing written H.M.JR: Let's just start. You are going into something new, you see. I realize it is unfair to give you so little time, but what you have shown me up to now just doesn't mean anything to me. I don't know who did it, and I don't cold. want to know. Up to this point, it just leaves me MR. GAMBLE: Mr. Secretary, these are all, of course, very rough and the principal reason of bringing them over to show them to you is to tell you what the copy is that is contained in them, the selling copy itself. H.M.JR: Look, just sit down a minute, Mr. Mahan. want to really get this because I hope to be back here Monday to help, you see. This doesn't give me what I want I at all. Now, I don't want to be too critical, but I don't like the way it is set up. It leaves me absolutely cold. The thing that I would like to get over and would like to see some copy done on is this idea that we have got to - this thing that we wrote for the President. I don't know whether he uses it or not. It is unpatriotic to buy more than you actually need. You shouldn't go out and buy twelve cases of soap, when one cake of soap will do you. You shouldn't go out and buy a lot of things - in the first 167 -4place, against hoarding. The second thing, even buying what you actually need, you have got to school yourself that that isn't enough, and that by conserving your pur- chasing power, what you would normally spend by conserv- ing that, you are going to help in production and help win the war. And then the money that you accumulate through not spending as much each day as you would normally, you get along with a little less of this and a little less of that, that that money which you save through that self policing, carrying out this voluntary end, that money can be invested in Government bonds. Now, it is in this part we gave the President. I would like Weir to have a copy of it so he can take it home. That is what we hope the President will take. But that is what I would like to get over. MR. MAHAN: We have worked a great deal of that into this presentation. MR. KUHN: It is in the copy, Mr. Secretary. H.M.JR: Well, there is too much here. I haven't got the time. It just doesn't do anything to me and it doesn't make me mad. I mean, the people laughed at me when we first started. I think you (Callahan) were here, I know Mrs. Klotz was here, and we brought down this band leader when we started out on the Treasury Hour. Was it Goodman? MR. CALLAHAN: Yes. H.M.JR: And Goodman said to me, "What do you want this program to do?" This was last summer, wasn't it? Early last summer. I said, "What I want the Treasury Hour to do is that when the fellow is through listening to it that he wants to go out and spit in Mr. Hitler's eye," and I told him that early last summer, and Goodman said, "I understand what you want.' Well, I never got it. But that is what I want now. There is nothing in there that will make a fellow want to either conserve his money - now, the whole thing that the Henderson crowd are talking about is this gap. I have fought the toughest fight that I have ever fought almost since I have been 168 -5here in Washington to maintain the volunteer war savings program. Now, I have won. Now, the thing that they have been fighting about, and on their side where they are right as to their objectives, my objectives, is that we want to keep this country from having inflation, and what they are worried about is this eleven or fifteen billion dollars which will be in the pockets of people and no place to go, and that this will compete for the limited amount of goods and, therefore, drive prices up. Therefore, and theyso want forth on. higher taxes and forced savings and so Now, one of the ways to accomplish it would be through the Treasury propaganda to try to get the people to restrain themselves; and, if we could accomplish that, we could go a long ways through the volunteer method of doing what I don't believe you can do through all the legislation in the world. I mean, you can pass all the legislation in the world and when you get through and done, unless you have complete regimentation and the people have fifteen billion dollars more money in their pockets than there is goods to buy, they are going to have a black market, and they are going to compete. Now, what I want to get across on the radio and so forth and so on is to drive this thing home, that the most cruel thing in the world on the home front is in- flation. There is nothing as cruel as that. It goes up, it is a snare, and you think at the moment you are enjoying prosperity. Then Humpty Dumpty falls off the wall. Give Mr. Weir my Boston speech on inflation. We don't want that to happen. But that is what I want to drive home through this copy, that these fellows have now suddenly got excited about this thing, that that is the thing that we want to do, that plus this thing of "Let's get mad about this war. Now, that is all the time I can devote to that this morning, but that is what I want to do, as sales manager for this organization. Now, I would like to just have two minutes. You people stay here and if Mr. Graves and Mr. Weir would come with me out in the hall one minute. 169 -6(The Secretary, Mr. Graves, and Mr. Weir left the conference temporarily.) H.M.JR: The thing that I told this morning, the three-point program: One, let's get this country mad at the Nazis; two, let's get the people to spend less so that they will have more to invest in War Bonds; three, a straight sales talk, why they should buy. Now, that is the way I feel. Now, what I wanted to say to this crowd is this. I have been through some fight, and I have won in that the President is with me and Congress is with me that they are going to give us from now until the first of July to demonstrate whether we can do this thing that practically everybody says we can't do. Now, I want, Harold, just as soon as I can have it, a plan of quotas by states and by counties that I can approve or disapprove. I want to know how we are going to do this thing in the month of May. We ought to launch this thing by the first of May so that we can get May and June and get going. They asked me again yesterday how long I wanted, and I said to the first of July. In other words as I told Ted Gamble - I don't know whether you had a chance to repeat it - I don't want to stop any pledge campaign in the middle, but I don' want to start any new ones. I want everything concentrated on this thing. Did he tell you? MR. GRAVES: He told me. I don't know whether I understand what you mean. H.M.JR: I don't want any more pledge campaigns. I want quota campaigns. MR. GRAVES: Well, are they not the same? H.M.JR: Listen, Harold, the best example - let me give you this thing. You sign up for five dollars a month for the Community Chest, you see, and then somebody comes around once a month and says, "Give me your five dollars. In your pledge campaign you signed up a contract and said you were going to do so much and nobody ever follows you up. I have got very little strength left, but there is just as much difference as day and 170 -7 night between a pledge campaign and the quota campaign. If I go to South Carolina Monday and say, "I want you to start in South Carolina and sell fifteen million dollars worth of bonds," they will say, "Mr. Morgenthau, we are all exhausted. We have just gone through this thing." I only want to go to the door once. When I go to the door, I want to stand there with my hat in my hand and say, "I want a hundred dollars from you this month." MR. GRAVES: You mean you want us to send salesmen around to take orders, take checks, take money? H.M.JR: I certainly expect these state and county committees to do the way they did in the World War. How are you going to do this thing? In my town of East Fishkill we had a quota, and they had a committee for the Liberty Bonds. I hope we are thinking along the same line. MR. GRAVES: I had never thought of that. H.M.JR: In the town of East Fishkill we had to raise so many Liberty Bonds and everybody was tagged and every- body did it. I am not going to fool around with this phoney pledge campaign that doesn't sell a bond. I am sunk, Harold, if that is what you people think. MR. GRAVES: Well, I would like you to tell us what you want us to do because-- H.M.JR: Well, I thought we were talking the same language. If we are not, that is the purpose of this meeting. I want a quota for every county in the United States. Then I want a committee by counties and by townships, and I want these people to go out and get the money. MR. GRAVES: And collect the money from the people, take the orders? H.M.JR: Have them subscribe through this bank or 171 -8whatever it isit?and - yes, turn it in. How else are you going to get MR. GRAVES: I think we are going to have to do a lot of studying about that. H.M.JR: How else are you going to do it? Here the Post fellow takes me aside yesterday and said, "Your sales are falling off every day, Mr. Morgenthau. What makes you think you can do this thing?" And he only wrote a little piece, but if you are going to go around and get these people to sign a piece of paper and then leave them cold - I expect mind. to sell them. I don't know what you have got in MR. GRAVES: I had never heard anybody suggest before that we-- H.M.JR: What do you call a quota system? MR. GRAVES: Well, a quota system is to announce to each county organization the amount that we expect to be sold in that county per month, but it doesn't, in my opinion, involve our setting up any selling agencies other than the post offices and the banks and the other agencies that we now have. H.M.JR: Well, Harold, if that was the case - if we are going to do it that way, I will call up the President on the telephone and tell him I am wrong. MR. GRAVES: Well, I think we will have to do some studying. H.M.JR: It isn't a question of studying. This is what I want. Ted, I - didn't you get the impression-MR. GAMBLE: Yes, sir, Mr. Secretary. H.M.JR: I went all through this with you, and you said to me - I have been talking to you for two days, and 172 -9you said to me, "Mr. Morgenthau, at any time I don't agree with you, I will tell it to you on the spot." MR. GAMBLE: I do agree with you now, but I think we are arguing with you instead of against you. H.M.JR: Isn't that what you said to me? MR. GAMBLE: That is correct, yes, sir. to you.H.M.JR: I didn't think I was talking a dead language MR. GAMBLE: Only on one point that Mr. Graves just raised. I didn't interpret your remarks to mean that you thought we were going to go out and deliver the bond on the spot and sell it, deliver it and collect. it, and our organizations were going to do that, but I did expect we were going to go out and raise these quotas in every one of these counties. We have had the machinery in motion, Mr. Morgenthau, for four months to do just that, and we are getting ready to do that. Let me show you how it works if I can just have a minute. H.M.JR: You can have five minutes. I am sick over this thing. MR. GAMBLE: The pledge was not designed to get a phoney pledge on the part of the person, but the pledge campaign was designed to go into a plant where there were three thousand people employed. Maybe twelve hundred are buying bonds. Our pledge people are going to call on all three thousand of them and get the eighteen hundred other people to sign up to buy bonds, and I think we are very fortunate in that we have had this pledge organization ready now to work on this quota campaign. H.M.JR: Now look, Ted, on the pay-roll deduction plan your pledge campaign - I mean, it is a very nice gesture, but the people are going to have to do what General Motors did where there are pay rolls and get it that way. Right? 173 - 10 MR. GAMBLE: That is correct. H.M.JR: And the pledge thing is window dressing. I can't see that it is anything else. Then they said to me, "How are you going to get the fellows in the rural communities who don't work in factories?" and I said, "How are you going to get them?" MR. GAMBLE: And I answer, "Instead of having them sign a pledge, we have them sign a bank draft order at the same time.' But we have got the pledge organization to do it, Mr. Morgenthau. We can reach thirty million of our people on pay-roll savings and fourteen million through the pledge campaign and get them to sign up and buy. H.M.JR: Say it once more slowly, will you. MR. GAMBLE: Yes, sir. H.M.JR: Say it again. MR. GAMBLE: We can simply have our pledge campaign people not only ask them to sign but carry a bank draft order, an order on the post office, to sign at the time they call on them. H.M.JR: A firm order, in other words? MR. GAMBLE: Yes, sir, a firm order. That is the only change we will make in the pledge campaign. We will support the pledge campaign with a firm order for a purchase. H.M.JR: But it is different than your pledge campaign. MR. GAMBLE: Yes, sir, it is augmented, but our whole campaign is different now, sir. We were not in a position to do that before. H.M.JR: Let me see if you and I are talking the same language. We will use our field organizations, is that what they are? 174 - 11 MR. GAMBLE: Yes, sir. H.M.JR; Our field organizations to go out and instead of getting the fellow to say, "I promise to deduct so much a month," this field organization will take the order. MR. GAMBLE: Yes, sir. It is the difference between a pledge and takingH.M.JR: an order. MR. GAMBLE: That is right. H.M.JR: That is right. MR. GAMBLE: And there is this one exception, Mr. Morgenthau, that when he calls on a farmer, the farmer says, "I don't get my money until November 1." Instead of signing an order, he gets the pledge and that is the exception. He takes the pledge, and they have a record of that, and they can go back the first of November to collect the farmer's money. H.M.JR: Yes, but that doesn't apply to your dairy man in Oregon who gets his checks once a month, or the poultry man. You are thinking of the apple grower. GAMBLE: of theMR. wheat farmer. That is correct, and I am also thinking H.M.JR: That is all right, but they can be taken care of through the Department of Agriculture who have a War Committee in every county. MR. GAMBLE: That is correct, sir, and we have them already organized. We have a man attached now to the Department of Agriculture. H.M.JR: Harold stands. You and I are together. Let's see where MR. GRAVES: Here is the trouble. I suppose this comes from my long practice as a bureaucrat, but you can't 175 - 12 have people who are not under precise Treasury supervision authorized to go around indiscriminately and take money or checks. Mr. Bell ought to be in on this thing, because thisI think is no matter-H.M.JR: No, I don't want any more reasons, Harold, why I can't do it, because I can do it. I will do it. MR. GRAVES: You can do it, but you are running a very, very grave risk in my opinion if you authorize thousands and millions of people to go around ringing door bells and authorize them to take money from people. MR. GAMBLE: They don't have to take money. MR. GRAVES: You have got to take money if there is any point in having them take applications for bonds. H.M.JR: Listen, Harold, I have since the first of January worked with you and Bell to try to get this thing through on this so that you can get the thing with the factories, and I have sweated all this week myself to try to get this thing, and this thing could have been done months ago and it isn't done yet, and here we are for five months trying to get people like the Ford Company and those people that can do this thing, and now don't tell me that this thing - it was done in the last war and the people came around and saw me and said, "Mr. Morgen- thau, how many Liberty Bonds are you going to buy,' and you are going to buy it, and they worked it out some way locally with the bank that I bought my bonds. I went down to Fishkill and bought my bonds at the little savings bank. We are sunk if you are going to shadow box on this thing. MR. ODEGARD: Mr. Secretary, in the fifth Liberty Loan four billion dollars of that money was in the banks and the purpose of this campaign, I understand, is - one of the major objectives is to close the inflationary gap. H.M.JR: That is right. MR. ODEGARD: And the bonds we have are registered 176 - 13 bonds which can't be sold as interest-bearing currency in the same way in which the Liberty Bonds were sold. The Liberty Bonds, as you very well. know, were little more than interest-bearing currency and if we could - if we had a security like that to sell, we could do it that way, we wouldn't close the inflationary gap that way, but as they didn't then. H.M.JR: Now listen, Peter, don't tell me I am out on the end of a limb and you fellows haven't got any plan. MR. ODEGARD: Oh, no, sir; no, sir, not at all. H.M.JR: I don't know. You told me - you wrote me a year ago that - don't tell me that I am facing this organization and we haven't got any plan? MR. ODEGARD: No, that is not true. H.M.JR: And that they haven't thought through the mechanics of the thing. I mean, here I have fought and bled for you - I won't say for you - for what we have stood for for two weeks, and I take it somebody has had the brains to think this thing out, how they are going to do this thing. MR. GRAVES: Well, all that I am saying is that I don't think that it is practical or proper for us to authorize the miscellaneous solicitors of the type that we are going to recruit to handle Government funds. We would be in great jeopardy every minute. H.M.JR: But, Harold, you don't have to have them. Listen, the man in Hyde Park - you say to this man, "How many bonds are you going to buy?" "Well, I can take a twenty-five dollar bond." "Will you sign up?" "All right." We stick the order in our RFD box and have the fellow 177 - 14 - bring it to you or, "Do you want to go down and see your bank or do you want to see your post office, and the fellow says, "Yes, I will do it, and then it is up to us to go back in a week from now and see that he did it. MR. GRAVES: That is effectually what is involved in the pledge. We simply ask the man to agree to do the very thing that you are talking about. We ask him to agree to buy a certain amount of bonds each week or each month and to designate how he is going to buy, through his bank or his post office. H.M.JR: But you never follow it up. MRS. KLOTZ: But he intends to. MR. GAMBLE: We would follow it up under this plan. MR. GRAVES: You say we have never followed it up. We haven't gone far enough that we have reach any follow- up stage, but it is theoretically possible to follow it up. We have the man's pledge, he tells us how he is going to buy, and except for the very great volume of these pledges, it would be possible for us to check to see that he has gone through and bought, and we have always thought, Mr. Morgenthau, that we would make a follow-up, not on a possible thirty million pledges, but on samples of pledges to see the extent to which people were complying with their pledges. H.M.JR: Harold, you have got to work a way out, just the way I said, that every door bell has to be rung once to find out how much the fellow is going to get, and you have got to go back within the month and see that he did it. If you don't, this is a flop. I am sick over this thing. This pledge campaign, I have studied the thing. It doesn't show any results. And here I am facing this thing, I have made this fight, and here every day I pick up my sales figures and every day they are less than March. that. MR. GRAVES: Well, I think there are good reasons for 178 - 15 - H.M.JR: All right, but the fact remains, what have you fellows been doing? I should think you would have something for me. MR. GRAVES: Well, I think we have something for you. It may not be in line with what you have thought we should have, but we have been ready for some time to send these quotas out. You, of course, asked us to hold all of that up. We have been ready for some time to circularize the mailing list of fifty thousand companies. H.M.JR: But Harold, how are you going to get the orders in hand, that is what I want to know. How are you going to get these fellows to close the deal, I mean to sign, so the man makes a sale. I want to make a sale. I want to stop this shadow boxing. MR. GRAVES: Well, there is no sale-- H.M.JR: There isn't a book agent in the country - a book agent goes around and gets to the place and calls on you, and he signs you up, and then he says, "Goodby. I mean, use the book agent, use the Fuller Brush, use any direct sales organization where they go around from house to house and do a canvassing, and then they deliver the merchandise later on. I mean, there are a thousand techniques of things. MR. ODEGARD: What you are suggesting, Mr. Secretary, is making more accessible the distribution of order forms rather than the actual sale orders of a bond or the receipt of money at the time and then the follow-up on those order forms through our organization to see that the order form is sent in or to learn why not. H.M.JR: Right. Look, I have gone to college and I have gone to school. I have had all kinds of direct sales- men call on me and there is a whole technique that has been worked out on this thing. You sold Fuller Brushes. Take our newsboys. I mean, as I understand it, they take the order and then somebody else delivers the stamps or something. 179 - 16 MR. MAHAN: They deliver the stamps. They take the order and deliver the stamps the following week. MR. SLOAN: And collect the money. H.M.JR: They take the order and then go back. All right. Now, that is one way and that is the thing that worries Harold. MR. GRAVES: That doesn't worry me, about stamps. H.M.JR: No, but on bonds. MR. MAHAN: In that case the newspaper has already bought the stamps and gives them to the boy. H.M.JR: The RFD fellow is taking an order now and is coming back and delivering a bond. They are doing it right in my place. MR. GRAVES: Yes, he is a bonded officer of the Government. H.M.JR: That is one way, but, Harold, please don't tell me that I am facing doing this thing through the pledge campaign method. I don't care what you call it, get the order and then go back next week and deliver the goods, or get the fellow to go and deliver the goods. There are a thousand techniques, and if we haven't got the right kind of bond, we will change the bond. We will give them a different kind of a piece of paper. MR. GRAVES: Well, of course if you do-MRS. KLOTZ: Give them a temporary one. MR. GRAVES: If you give them a bearer bond which would be susceptible to that kind of sale, you completely withdraw the object of what you are doing because these bonds would gravitate into the hands of the bankers and into other people's hands. They would pass practically as money the minute you make them bearer securities. 180 - 17 H.M.JR: Now, look, Harold, you know we have dis- agreed on sink a lotorofswim. this stuff. Now, I am in this thing up to here, MR. GRAVES: I am with you. H.M.JR: No, you are not. I mean nobody-- MR. GRAVES: I differ with you in detail. H.M.JR: I have made the fight alone on the Hill and with all of these people. I have done this thing alone. So I am in this thing. Now, please for God's sake don't give me arguments why the thing can't be done and turn salesman on this thing and tell me how it can be done. Now, I can't tear my body apart, I can't do any more than I have in the last two weeks to do this thing, and you sit here and keep telling me why I can't do it. MR. GRAVES: I sit here and tell you that you can't, in my opinion, give all of these representatives of ours-H.M.JR: All right, then tell me some way how to do it. I mean, there isn't a single direct sales organization in America that is going to go out and get a fellow to sign a slip and leave it to the man to go and get his merchandise. There isn't an organization in the world to do that. I mean, it is crazy to think that the fellow is going to - that he is going to break down the sales re- sistance and go and get the merchandise. You have got to bring it to them. I mean, you sell a Fuller Brush thing, and you take his order and you don't expect the fellow to go ten or fifteen miles to get his brush and pay for it. The man comes back and brings it to him, doesn't he? MR. ODEGARD: Surely. H.M.JR: And the same thing on a vacuum cleaner or on a set of books, or the Grand Union Tea Company, and their sales wagons that go around. I mean, I am not talking as though I was trying to discover a new technique of selling, but this is what I had in mind. What did I want OCD for? What did I want all these volunteers for? What did I 181 - 18 - want all these volunteers for? MR. ODEGARD: Mr. Secretary, the brushes that we used to deliver weren't registered in the name of the people to whom we were delivering, and they could do what they wanted with those. H.M.JR: But the trouble is, there was a case in the last war where some fellow in the Government for ten years argued about some bonds, see, and it wasn't that he had sold- there was a scarcity, and this is the thing that Harold has in mind - but a few bonds were sold with duplicate numbers, and they sold twice too many of that bond and the Government got double pay, as I understand it, in this case where it took ten years to be settled. The Government got paid twice, not half enough. There was only one case, wasn't there? MR. GRAVES: Yes. That was just an error in the Bureau of Engraving and Printing. There was no irregularity beyond the mechanical stage, but what I, of course, was thinking about was the great danger of fraud and defalcation, and people going around representing themselves to be Treasury agents who would take money and pocket it and run away. This thing would be full of risk, and I don't think, although I don't recall definitely, that in the first World War that anything of this kind went on except where people had actual physical custody of the bonds and made delivery, a thing which they could do because they were bearer securities. H.M.JR: Well, look, will you gentlemen have for me Monday a plan whereby we can have the people ring the door bells of this country beginning with the first of May and sell whatever it is that we plan, six or seven hundred million dollars? MR. GRAVES: Seven hundred. H.M.JR: Whatever it is, and whatever you set for June, and between now and Monday you have got to give me something, Harold, not how I can't do it, but how I can do it, and talk to anybody in the United States, I don't 182 - 19 care who there is, who has ever sold or who has ever bought direct, and ask them if you can go in and get a piece of - a man or woman to sign a piece of paper, "I will buy ten dollars' worth of bonds, h and then leave it to that man or woman to go and get it entirely on their own initiative. It can't be done. Am I wrong on this thing? MR. ODEGARD: I think you are right. H.M.JR: I am just talking as a salesman. MR. ODEGARD: I do think there are problems in this type of security that weren't there at the time of the World War. MR. KUHN: Well, you want a follow-up, Mr. Secretary. What troubles you is that there is no follow-up. H.M.JR: After all, take the twenty-five dollar bond, I don't know how, but certainly there must be some way I can't stretch myself any further unless you fellows want to break me down physically by this constant resistance. I mean, this constant - everything I want to do, there is always this resistance. I can't fight any more. If we can't do it, I would much rather make a public statement on Monday that I was wrong. I would much rather come out publicly, because I can't fight this whole crowd of you. I am just one against eight of you. If you haven't got the solution by Monday, then I would much rather tell the President I am sorry, I am wrong, let's do it the other way, and I will just quit on the thing. But it is quite evident that nobody has a plan that will work. MR. GRAVES: Well, we never had a plan that involved actual delivery of the security or acceptance by canvassers of the money. I myself don't believe that that is fatal. I have some confidence that without that, with the kind of activity that I think will result from the mere announce- ment of quotas for counties and states, I have some confidence that these quotas can be attained. H.M.JR: Well, they can't. 183 - 20 MR. GRAVES: Especially when you couple that with quotas for companies, which we have been ready for some time to announce. I personally don't believe that this matter of what you do when you ring the door bell is quite as important as you think. H.M.JR: Well, Harold, I have been solicited enough and sold enough. Unfortunately, I have never done this kind of selling, but I have been sold enough to know that I won't put my reputation on this thing if it is just going to be the way you have in mind. Ted Gamble and I seem to be together on this thing. MR. GAMBLE: I think, Mr. Secretary, that we all are together on it, and I just think we haven't tied it together. I mean by that, I don't think that any of us are looking at the whole job as one thing we have to do. We are going to reach the bulk of these people in the way that you want to reach them and that is that we are not only going to sign them up, we are going to get them to do certain things each and every month for the duration of the war. That is the important market which will ultimately sell four hundred fifty to five hundred million dollars' worth of bonds a month. That is the big, important E Bond market. The approximately fourteen million people that are left are not difficult to reach. Seven million of them are the so-called white-collared class, professors, teachers, the individual businessman, and seven million of them are farmers, and we certainly can devise a plan to supplement this so-called organization of ours, this pledge campaign organization, so that they can take some type of an order when they call on these people, those fourteen million. If they have ascertained that a fellow is on pay-roll savings, they don't have to take an order from him, but if he isn't, they can take some kind of an order that will go through the post offices or the banks or the Federal Reserve. H.M.JR: That is all I am asking for. MR. GAMBLE: And I don't think it is half as involved as we all are making it here. 184 - 21 H.M.JR: You have only been in the Government a short time so that you are not ruined by red tape. (Laughter) I have been here nine years, and they haven't got me down yet, but they have damn near got me down. If we are going to take a defeatist attitude on this thing - I am still sweating, and I have got Dan and everybody else trying to find a way so that the man can get the bond under nine weeks, that is at the Chrysler plant, and I haven't got it yet. Your pay-roll plan won't work until the bonds flow. Now, I am certainly not going to start out on a door bell ringing campaign and find out that after - by the first of July that the thing didn't work because we couldn't get the bonds to them. MRS. KLOTZ: That is something else again. MR. GAMBLE: I believe, Mr. Secretary, that we can give you a brief statement. H.M.JR: Well, you have got to. I have gone so far on this thing you have just got to, that is all. I am not going to take any no. I am just not going to take a no. After what I have gone through the last two weeks, I am not going to take no, and there has got to be enough originality, Harold, amongst you bureaucrats that you can lick this thing, and I have always said that I couldn't run the Department without the Civil Service people, and I still say so. Now, it is up to you Civil Service fellows to find a way over the week end to do this thing. MR. ODEGARD: I think we can give you an organization, Mr. Secretary, with a plan for doing this that will beat even the Fuller Brush plan. H.M.JR: Well, I would be willing for it to be just as good. I mean, something or other which looks to the man as though he was signing a check. I mean, I am too tired to think up anything new, but supposing you just had a blank check, Treasury check-MRS. KLOTZ: Draft order. 185 - 22 H.M.JR: where do draft order, and the fellow said, "Well, you - " all right, maybe I have got the answer. "Well, I bank with the First National Bank of Fishkill." "All right, will you sign out the thing. Make it out to the order of yourself." And go there, and then the bank gets it and mails it back to him, or this fellow brings it back to him - I don't know - or the postmaster delivers it to him, or the RFD fellow delivers it to him. MR. GAMBLE: At one time that was entertained as a possible supplement to the pledge effort, and I think it can be cut through in detail so that it can be a very definite part of it, and it is the only way we can answer this problem. H.M.JR: And the thing to do is to - if South Carolina is well organized or some place close by, is to go right down there immediately and make our test, but we are cramped. Here it is the seventeenth of April and we are supposed to double our sales in May. How are we going to do this thing? MR. KUHN: We have the pay-roll savings thing to meet your specifications because you actually get the money the moment the fellow signs up. It is deducted from his pay. H.M.JR: Ferdie, the pay-roll thing is all right once we get this thing solved of how they can get these issuing agents, but here we are, we have been going along all this time and here is a list of employees, the ones who haven't got the thing. United States Steel, no; General Motors, yes; Bethlehem Steel, no; Pennsylvania Railroad, no; General Electric, yes; New York Central, no; Ford, no, Sears Roebuck, yes; Westinghouse Electric Company, no; Swift, yes; Republic Steel, no; Western Electric, no; DuPont, no; A and P, no; Southern Pacific Lines, yes, Baltimore and Ohio, no; International Harvester, yes; and so forth and so on. Those are the big employers. Two- thirds of them haven't got it. MR. GRAVES: You meanare not issuing agents. 186 - 23 H.M.JR: Yes. MR. GRAVES: two-thirds are not. That is right. I imagine more than H.M.JR: Are not issuing agents. Now, Harold, you sum up, be willdone? you, so that I can go home feeling that this thing can MR. GRAVES: Well, we will try the best we can to work out something that is more effective than the pledge and have it for you by Monday, some machinery that can tie the man down or that will permit us to follow up. MR. KUHN: That is what you want. You wanted a supplement to the pay-roll thing, people who aren't reached. H.M.JR: The pay-roll thing, I am not worrying about. I am worrying about the other people, the memorandum that they asked me about yesterday. Take your Department of Agriculture that has got a committee in every place. I mean, you can handle it separately. Here there are a million members of the Grange that are promised with this thing. I would trust the Grange with a thousand dollars worth of bonds. I would trust the county agent or the president of the county agents' association. Supposing on the sale - I mean, I will shock you thoroughly. Supposing on the sale, supposing we are fortunate enough to reach a billion dollars a month and supposing we lose one million dollars of these bonds, which would be the outside figure. MR. ODEGARD: Mr. Secretary, is that quite the point? Isn't the point, the minute any agent turns up to be dishonest you undermine the confidence of the public in the entire method? As soon as you get one or two - it isn't a question of losing a hundred million dollars. It is a question of undermining confidence in the entire organization. H.M.JR: Well, to the extent that when you get a counterfeit bill that your confidence in the U.S. - 24 - 187 currency is undermined. MR. ODEGARD: I think it would bealittle different in this case. MR. KUHN: I wouldn't trust the OCD field force with the handling of all that money. MR. GAMBLE: I don't think it is necessary to handle any money at all. H.M.JR: I don't think it is either, but I think instead of signing a piece of paper you are going to sign a check on your bank or a money order on your post office. MR. GRAVES: Of course, the vast bulk of the people that we are trying to reach, Mr. Morgenthau, I think, do not have checking accounts. H.M.JR: - Well, there were sixty million of them when we sent out those statements. MR. GRAVES: The most of the folks that we are after, I am afraid, would give us money and you would be right up against the difficulty then-- MR. GAMBLE: Wouldn't the answer to that-- MR. GRAVES: Let us study this thing over. H.M.JR: Harold, I have got to have a plan Monday, and I am going to ask the President to make this talk for us. We are all out on the end of a limb. I thought you fellows would come in with a program and you haven't. It isn't there. Just establishing a quota - I mean, if I am selling shoes and I say I want you to sell a million pair of shoes at so much, unless you have got a plan you can't sell them. There is no difference. There is no use talking about advertising or anything - 25 - 188 else until we get a method, a technique of doing this. MR. GRAVES: Well, let's try. H.M.JR: Let's do it. MR. GRAVES: I mean, let's try to figure out a method. H.M.JR: You can do it, Harold. Get Eddie Bartelt in. He has got a good original brain. Get some of these fellows. Poor Danny, he is weighted down with too many things. MR. GRAVES: All right. H.M.JR: As I say, we will meet again on Monday. 18 J- I /a2 7 in 4/17 Y RING THE BELL FOR UNCLE SAM (00% GENERAL MOTORS EMPLOYES BOND DRIVE FOR VICTORY -60 =50 BOND IN ZERO VICTORY EMPLOYEE BOND DRIVE FOR VICTORY BOND DRIVE VICTORY 192 April 17, 1942 Dear President MacCracken: Thank you for your letter of April 9th in which you tell of some of Vassar's activities on behalf of War Savings Bonds. It is most encouraging to all of us at the Treasury to know that the Vassar faculty and student body are doing so much to help in financing the war effort. I should like you to know how much I personally appreciate all that you are doing for US. Sincerely, (Signed) 1. Morgenthan, the President Henry Noble MacCracken, Vassar College, Poughkeepsie, New York. FK/cgk n.m.c. Photofier mayorther VASSAR COLLEGE POUGHKEEPSIE NEW YORK Office of the President April 9, 1942 Dear Mr. Secretary Two copies of your recent Defense Savings Program have been placed on the college bulletin board in our Main Building, where they will be seen by everyone. The other three copies have been sent to the Emergency Committee of the Faculty and Students, which is under the chairmanship of Miss Leila Barber, of our Department of Art. An important address by Professor Newcomer has been delivered at a college assembly at which the attendance of all students was required. The local Vassar Bank, where practically all the students have account s, is selling Defense Bonds, and the Defense Stamps are sold in the Vassar Post Office. A special campaign this week was inaugurated in which direct personal solicitation is to be made through centers of student activity. Sincerely yours, Hurry n Ale The Hon. Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. 194 April 17, 1942 Dear Mr. Cashen: I am very sorry that it was not possible for me to accept your invitation to meet with the members of your Association this week. I hope that I shall be able to meet with you in the near future, since I think it is more important than ever that we discuss the voluntary War Savings plan and other features of the Treasury's program which your organization has been supporting. I have been much encouraged by reports coming from different parts of the country telling me of the fine work on payroll savings plans which is being done by joint committees of labor and management on many of the railroads. I understand that these committees are personally contacting all the railroad workers, explaining the payroll savings plan and urging them to do as much as they possibly can in the systematic purchase of War Savings Bonds. This is a good example of the democratic spirit, and it shows that the American people are undertaking individually to supply the money to protect their free Institutions. The Treasury's program involves the financing of at least twelve billion dollars of the cost of the war up to July 1, 1943, through the sale of War Savings Bonds to the people themselves. This means that we shall have to put aside more than ten percent of our entire national income in War Savings Bonds. As the lowest paid groups probably will not be able to allocate ten percent of their earnings for bond purchases, it is necessary for the higher paid trades and crafts like many of yours to exceed the average. As an example of what can be done by groups of workers earning relatively good pay, it may interest you to know that the United Automobile Workers, C.I.O., have just promised me that they will set aside not ten percent but twenty percent of their entire earnings for the war effort. 195 As you know, I have been under great pressure in the press and elsewhere in recent weeks to abandon the voluntary system of savings and to substitute for it a compulsory savings plan imposed by law. Yesterday I told the Ways and Means Committee of the House of Representatives that we were going to have another chance to prove that the voluntary system could do the job. This means that the Treasury needs the support of labor more than ever before; and by "support" I mean the active work of all your general chairmen and organizers in seeing that your members really save the sub- stantial share of their earnings which is needed to finance the war. Neither the Government nor the employers are as well qualified to reach the workers with this appeal as are the workers on labor organizations. I am confident that you and your organization will give me that support. Sincerely, (stamed) N. Mr. Thomas C. Cashen, Chairman, Railway Labor Executives' Association, Washington, D. C. FK/egk n.m.c. copy to m.Houghwelling 196 April 17, 1942 TO: MR. HAROLD N. GRAVES FROM: VINCENT F. CALLAHAN SUBJECT: PROGRESS REPORT FROM DEFENSE SAVINGS STAFF PAYROLL SAVINGS Approximately 4,000 additional concerns installed the Payroll War Savings Plan this week, bringing the total to 59,366 firms with 19,560,000 employed workers. The United Auto Workers, CIO has installed the Payroll War Savings Plan for its staff and is encouraging the investment of 20 per cent of its members' wages in Bonds. The General Motors Corporation is undertaking a special promotional drive to secure complete cooperation in purchases by all of its employees. RETAIL STORES DIVISION The National Cash Register Company is printing new stickers and cards featuring our new name "War Savings Stamps and Bonds" for use on cash registers throughout the country. The Drug Industry Council, representing 65,000 drug stores, is printing and distributing large quantities of display material, which will tie in with the special drive being planned for all retailers during May. 8/2/10 197 -2PLEDGE CAMPAIGN The Pledge Campaign has been completed in Oregon and is underway in the following states: Texas Utah Iowa Colorado Idaho Florida Montana Nevada New Mexico South Carolina South Dakota April 6 May 1 (tentative) Virginia April 13 April 13 April 13 April 13 Wyoming Wisconsin April 7 Minnesota April 13 April 13 or 20 March 31 in 3 counties April 1 in 17 counties April 6 April 6 County by County Starting dates for other states are as follows: Alabama Arizona Arkansas Connecticut Georgia Illinois Indiana June 9 Nebraska April 20 April 27 New York City & Buffalo May 1 May 3 (in rural regions) North Carolina May 10 (else- Northern Calif. May 11 Ohio where) April 27 North Dakota Oklahoma April 15 June 14 (Some counties in May) May 4 May 24 April 27 May 1 May 15 Louisiana May 4 (tentative) )Pennsylvania Southern Calif. May 15 Maryland May 4 April 16 April 22 (tentative) May 19 May 3 Kansas Massachusetts Michigan Mississippi Missouri April 20 to May 5Tennessee May 11 & 12 only Vermont April 20 (week or 10 days later in St. Louis & Kansas City) Washington May 3 April 19 (tentative) 198 -3PLEDGE CAMPAIGN (Continued) States which are still unreported are: Delaware District of Columbia Kentucky Maine New Hampshire New Jersey Rhode Island West Virginia Alaska Hawaii In New York State the Pledge Campaign will begin on June 14 and it is anticipated that at least 200,000 canvassers will participate. Attached is a copy of a special PLEDGE FOR VICTORY advertisement contributed by Philadelphia banks and newspapers on the day their Pledge Campaign started. At least a dozen states have celebrated their own MacArthur Day as a day for the purchase of War Savings Bonds and Stamps, and the idea is being taken up in other states. MAIL ORDER DIVISION The Mail Order Division reports total sales through April 15 of $26,633,894, an increase of $227,393 since the previous week. NEWSPAPER CARRIER PLAN An analysis of the sales of War Savings Stamps by newspapers using the carrier plan shows a total sales of 199 -4NEWSPAPER CARRIER PLAN (Continued) 226,529,000 stamps by 862 newspapers - an increase of 10,764,000 stamps over the returns shown the previous week. FEBRUARY STAMP SALES An analysis of sales of War Savings Stamps in February, with a detailed chart showing total sales for May 1941 through February 1942, is attached. SPECIAL EVENTS A group of eight Jemez Indians from New Mexico have been appearing before various groups in Chicago through the courtesy of the Santa Fe Railroad, and they are now touring 13 other cities in the East and Middle-West. A series of three rallies in Hartford, Connecticut on April 13 raised $3,000,000 in Bonds. Featured at the rally were Carole Landis, Dorothy Mackaill, Raymond Massey, Barry Wood, Edna Ferber, and Clem McCarthy. More than 75 name stars have appeared at the Victory House Movie Celebrity Hour in Los Angeles since February 1. 200 -5NEWSREELS The newsreel crews are now working in Alabama, California, Louisiana, Mississippi, Tennessee, and Virginia. WOMEN'S DIVISION A total of 25 states have entered a pledge-signing contest sponsored by the General Federation of Women's Clubs in connection with the Pledge Campaign. The special War Bond Program prepared by the Good Housekeeping Club Service and reaching 22,000 unaffiliated women's clubs is bringing in many requests for information on the Pledge drive. In the week following the production of the Girl Scout pageant in Constitution Hall, close to 1,000 requests for copies of the War Savings Pageant were received. Arrangements are being made for representatives of the Treasury to speak at twelve conventions meeting during the latter part of April and May. ADVERTISING The special Victory Supplement No. 2 issued by Metro Newspaper Service with suggested advertising material on War Savings Bonds to be sponsored locally, is attached. 201 -6RADIO "Youth Builders" boys and girls in New York have started the Junior Minute Man on the air in behalf of War Savings Bonds; a press feature on this is attached. A total of 746 radio stations now broadcast the Treasury Star Parade three times a week. WPAD of Paducah, Kentucky furnishes special publicity on the Treasury Star Parade. (Attached). . A total of 459 radio stations now have the Payroll Savings Plan, with 356 of them 100 per cent. Radio attachments (3 to 7) show special material sent out this week, including letters to station sales managers with special kit of announcements for looal sponsorship; ten stories for home economics directors; a set of "Do's and Don'ts" for use in the Pledge Campaign; and a set of baseball announcements. A special bond announcement given during a news-cast is shown in attachment 9; the Chicago plan for achieving maximum cooperation of radio stations is given in attachment No. 10; an original announcement by station WAIT is shown in attachment No. 11. 202 -7PRESS An editorial on Victory Bonds and War Bonds appearing in the New York Daily Mirror and the new "Buy War Bonds" masthead of the Daily Mirror are attached. Also, a cartoon from the Saoramento Bee of April 8, showing their interpretation of the change-over from "Defense Bonds" to War Bonds" is attached. CARTOONS - A new half-page Sunday comic feature, "Small Fry", to be released twice each month, was offered this week to all newspapers carrying a weekly comic section. Replies are now beginning to come in but no definite indication of the feature's success can be ascertained yet. Proofs of this feature are attached. Attached are proofs of the special cartoons drawn for us by artists who release through King Features Syndicate. These cartoons were sent out directly by them. MAGAZINES - Attached is the front and back cover of a special magazine issued by Fawcett Publications, entitled "MacArthur, Hero of Destiny", with a full page Bond ad on the back cover. Through the cooperation of Fred Sammis, our volunteer fan magazine contact man in New York, Fawcett Publications are running this full-page ad in five magazines of their Women's Group in the June issues. The magazines are MOTION PICTURE and MOVIE STORY. 203 -8BUSINESS PUBLICATIONS Returns have been received showing that 302 business publications have requested our special half-page ads, "A Target For Tonight" and "The Axis Wants Your Business". Returns from 40 per cent of all audited farm publications indicate that they will run our special farm ads. This covers twenty publications with a circulation of 3,835,000. Attached is the special kit sent to 2,000 company publication editors. AUTHORS Two additional authors have agreed to write special articles on the Bond program, and eight others have promised to cooperate later; thus, bringing to thirty-six the total number of outstanding poets and writers who are now cooperating. Manuscripts have already been received from ten of the authors. A similar program will soon be launched among leading illustrators and gallery artists. LABOR PRESS Attached is a proof sheet of special labor pictures mailed this week in mat form to all labor papers. Also attached is the feature in the current issue of BUSINESS WEEK, showing how labor and management are cooperating in pushing the sale of War Bonds through the Payroll Savings Plan. 204 -9- CHURCH PRESS Church publications show all types of our material being used. Many of the leading Jewish and Catholic magazines are writing articles and editorials urging the purchase of Bonds. Several Catholic and Protestant missionary and educational institutions are tying their campaigns for money with that of the War Bond Campaign. Special news material was released to the Religious Press this week. Attached are proofs of pictures sent to the Church Press showing leading churchmen who are serving as Radio Minute Men. 205 Analysis of Exposure to Payroll Savings Plans April 11, 1942 Number exposed to payroll savings plane Total number in the country (estimated) Percent of total exposed Part A - Summary by Number of Organizations Exposed I. Business organizations (1) Large railroads (2) Other firms with 500 employees or more (3) Other firms with 100 to 499 employees 158 167 95 5,733 14,815 7,329 26,839 55 (4) Subtotal - large firms 20,706 34,335 (5) Firas with less then 100 employees 38,660 . (6) Total business organizations 59,366 . II. Governmental organizations 78 60 - . . III. Grand total 59,366 Part B - Summary by Number of Employees Exposed (4) Subtotal - large firms (5) Firms with less than 100 employees (6) Total business organizations 1,273,260 14,167,288 3,207,764 18,648,312 910,879 . I. Business organizations (1) Large reilroads (2) Other firms with 500 employees or more (3) Other firms with 100 to 499 employees 19,559,191 30,400,000 1 397,981 64 II. Governmental organizations (2) State and local governments 1,006,755 1,700,000 1 2,700,000 (3) Total governmental organizations 1,404,736 4,400,000 (1) Federal Government III. Grand total 20,963,927 34,800,000 1, Office of the Secretary of the Treasury, Division of Research and Statistics, 1/ Excludes agricultural employees, military personnel, employees on WPA or NYA or CCC projects, proprietors, firm members, self-employed, casual workers and persons in domestic service. Data not available. 32 60 April 17, 1942 206 Firms Employing 100 to 499 Persons Participating in Payroll Savings Plans (As reported by the Defense Savings Staff's State Administrators) State Jan. 10 savings plans Apr. 4 Percent of total having payroll Total Number of firms with payroll savings plans number of firms Apr. 11 (estimated) Jan. 10 Apr. 4 Apr. 11 17 137 137 285 48 Alsbame 48 Arizona 15 42 42 58 26 72 72 Arknness 22 43 47 142 15 30 30 160 501 501 501 32 100 100 495 744 1,171 42 64 753 64 64 112 38 66 66 16 44 45 20 21 Connecticut 100 Delaware 276 17 0 District of Columbia 112 277 170 622 18 84 0 Colorado 6 Northern California Southern California 33 34 99 100 10 21 21 38 60 60 50 51 152 Florida 48 143 145 145 Georgia Idaho 56 124 126 589 19 30 30 50 48 1,163 1,245 40 2,252 400 151 153 271 114 275 275 275 75 120 120* 312 167 167 384 0 59 60 198 2 150 165 405 0 3 Maryland 32 68 69 56 56 100 100 41 24 8 0 4 Louisiana Maine 0 Kentucky 52 1 Knness 586 55 2 8 Indiana lows 5 Illinois 33 38 38 43 43 30 30 37 41 40 41 65 66 604 626 664 670 1,523 1,022 181 370 376 399 12 93 94 Misciesippi Missouri 58 58 145 21 41 41 30 452 472 664 68 71 Montana 22 98 100 79 82 0 Nebraska 171 145 391 436 869 45 50 34 94 94 33 2,008 4,239 260 270 499 12 29 1,062 1,080 1,739 161 164 345 187 197 271 1,612 2,032 35 79 713 1,655 147 148 224 22 66 49 13 69 71 174 18 19 19 182 199 448 266 36 285 36* 59 258 Washington 71 227 85 0 Wisconsin 0 Wyoming 1 40 41 95 100 41 44 19 21 12 32 32 63 47 92 94 76 78 70 72 31 33 265 338 232 123 91 272 264 267 680 17 17 17 22 39 16 100 100 100 100 88 94 94 13 53 55 2 2 0 3,541 81 516 111 0 46 26 1,375 2* Alaska 73 6 31 48 69 0 Virginia 47 0 58 62 9 13 61 5 5 74 41 0 0 7 31 14 7 o 21 52 8 4 29 44 12 8 29 30 Total 20 33 Vermont Railroads 61 1,871 Tennessee West Virginia 58 55 12 South Dekota Texas Utah 89 9 Rhode Island South Carolina 80 58 37 0 Pennsylvania 24 505 Chio Oklahoma Oregon 14 6 North Carolina North Dakota 7 New York 14 55 5 New Mexico 123 8 New Hampshire New Jersey 40 101 39 6 Nevada 40 97 0 Michigan Minnesota 53 137 3 Neasachusetts 49 49 52 14.346 14,864 26,891 April 17, 1942 Office of the Secretary of the Treasury, Division of Research and Statistics. Date are for April 4, inasmuch as no April 11 report WAS received. . 207 Firms Employing 500 Persons or More Participating in Payroll Savings Plans (As reported by the Defense Savings Staff's State Administrators) Number of firms with payroll 17 18 33 94 17 160 196 58 82 82 170 72 98 100 69 61 81 52 82 82 170 Colorado 22 26 26 Connecticut 97 35 Idaho Kentucky 19 Louisiana 42 Maryland 40 Kassachusetts 41 60 61 56 53 53 66 27 143 24 42 10 60 100 43 100 10 10 425 435 634 44 23 74 133 180 17 79 48 100 43 53 33 33 33 45 45* 70 87 12 69 67 74 81 105 154 280 281 370 46 78 100 100 26 68 69 11 76 76 100 100 98 333 333 92 103 105 63 98 103 as 61 17 17 61 28 162 162 100 97 100 80 100 68 98 60 100 100 100 100 5 98 4 5 41 40 5 5 3 17 New Hampshire 64 45 333 40 28 Nevada 54 EG 100 64 27 55 106 157 0 Montana Nebraska 39 25 305 Mississippi Kissouri 185 30 30 242 249 30 57 249 74 97 83 100 32 64 29 65 67 100 100 100 100 6 New Mexico 66 6 6 5 4 49 1,350 868 885 110 112 168 514 557 51 41 62 22 0 1 1 0 Rhode Island South Carolina 35 38 0 Kaine Pennsylvania 35 56 9 16 Oklahoma Oregon 57 23 52 29 42 Kaneas Ohio 28 133 41 Iowa North Carolina North Dakota 185 17 6 277 Indiana New York 152 16 2 Georgia New Jersey 151 29 12 18 Michigan Minnesota 32 61 Florida Illinois 94 21 167 District of Columbia 100 21 123 Delaware 66 100 21 160 114 66 71 5 Northern California Southern California Apr. 11 12 6 Arkaneas 76 50 Apr. 4 Jan. 10 0 Arizona 50 15 of firms (estimated) Apr. 11 Apr. 4 savings plans number 7 Alabama Jan. 10 9 State Percent of total having payroll Total savings plans 507 285 40 22 51 70 70 572 579 326 58 73 27 73 70 90 96 73 35 65 73 100 66 100 12 625 74 92 91 64 92 64 81 28 76 75 100 93 82 76 100 4 4 E 10 13 Virginia 41 99 77 100 41 8 100 43 65 74 LE 67 147 2 147 1 146 84 59 57 1 1 0 Wyoming 13 13 64 44 West Virginia Wisconsin 57 71 0 3 Vermont 14 10* 10 0 0 Total 98 3,185 100 99 100 86 88 64 67 99 100 100 100 100 100 3 Railroads 3° 71 100 3 Alaska 33 33 19 187 61 61 Texas Utah 106 68 66 36 Washington 64 4 Tennessee 4 South Dakota 62 109 109 5,768 5,842 115 85 95 95 444 43 77 76 April 17, 1942 Office of the Secretary of the Treasury, Division of Research and Statistics. . Data are for April 4, inaemuch as no April 11 report was received. over March - 12.3% : : - 31.3 - 27.3 - 28.5 - 35.7 - 30.3% : February CONFIDENTIAL April 17, 1942. or Decrease (-) over - 15.0% March - 13.6 - 14.0 - 13.3 - 13.7 - 13.8% Percentage of Increase : : : April : : over March -$141,313 208 -$ 7,022 : : - 66,181 - 73,202 - 9,524 - 58,587 : February or Decrease (-) Amount of Increase over April March -$ 7,554 : : : : -$ 44.904 - 19,723 - 27,277 - 3,193 - 14,435 : 33,449 211,330 164,119 268,582 $466,150 $ 57,253 : : February : UNITED STATES SAVINGS BONDS 23,925 145,149 Sales 105,532 195,380 $324,837 $ 50,231 (Amounts in thousands of dollars) : March Comparative Statement of Sales During : First Fourteen Business Days of April, March and February 1942 (April 1-16, March 1-17, February 1-17) On Basis of Issue Price 20,732 April 125,426 91,097 168,103 $279,933 $ 42,677 : : : : : of sales of United States savings bonds. All figures are deposits with the Treasurer of the United States on account of proceeds Item Total Source: Office of the Secretary of the Treasury, Division of Research and Statistics. Series G - Banks Series E - Total Series E - Banks Series E - Post Offices Series F - Banks Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. 24,980 Total 20,953 18,214 18,790 28,352 18,497 19,623 18,880 17,615 10,762 33,228 13,074 14,312 22,652 $279,933 CONFIDEN April 17, 1942. 7.570 6,235 5,334 8,027 8,983 6,562 5,715 5,261 2,720 8,604 3.333 5.374 7.773 $ 9,608 Series G $ 91,097 834 2,119 All Bond Sales 1,185 1,387 2,329 955 1,142 668 1,573 2,432 1,076 1,251 1,400 $ 2,380 Series F $ 20,732 8,680 11,263 10,794 12,070 17,996 8,665 7,374 11,919 12,210 10,782 7,686 22,192 13,480 $ 12,993 Series E $168,103 8,613 17,953 Total 14,992 16,013 23,391 15,539 17,314 15,974 28,609 14,885 10,561 11,728 19,180 $ 22,504 $237,255 7,570 6,235 5,334 8,027 8,983 6,562 5,715 5,261 2,720 8,604 3,333 5,374 7,773 $ 91,097 $ 9,608 Series G 834 668 955 On Basis of Issue Price (In thousands of dollars) Daily Sales - April, 1942 2,119 UNITED STATES SAVINGS BONDS 1,185 1,387 2,432 1,573 1,142 2,329 1,076 1,251 1,400 Bank Bond Sales $ 20.732 $ 2,380 Series F 8,264 7,572 5,722 9,292 9,610 9,304 8,052 6,152 5,224 5,102 10,008 17,572 13,035 $125,426 $ 10,517 Series E 2,999 3,222 2,778 4,961 2,958 2,309 2,906 2,730 2,150 4,619 2,513 2,584 3,472 $ 42,677 $ 2,476 Series E Post Office Bond Sales sales of United States savings bonds. 1 2 3 4 6 7 8 9 10 11 13 14 15 16 Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. Total Date Source: All figures are deposits with the Treasurer of the United States on account of proceeds of Office of the Secretary of the Treasury, Division of Research and Statistica. April 1942 210 Draft A presented to Secretary at 9:25 am, April 17, 1942 mino characcy 211 This broadcast celebrates the completion of a quarter of a century of communal service on the part of the Jewish Welfare Board. Twenty-five years ago, during the first World War, the Jewish Welfare Board was organized as a service agency with two main objectives. One was to minister to the religious interests of Jewish soldiers; the other, and by far the more important, was to give recreation and comfort and companionship to all men in uniform. Now we are at war again, and again the Jewish Welfare Board has risen to its full wartime duties. It has joined hands with other organizations through the U.S.O. and it has worked to the limit of its resources to make all service men -- soldier, sailor, marine, and -2- 212 aviator -- feel at home wherever they may be. We civilians so often wish in this war that we could show our admiration and our gratitude to the men who have given up so much to fight for us. We wo have had se little opportunity to take uniformed men 1 into our home for a meal or to cheer them on parade, or to take away from the loneliness that all of them feel in strange places far from home. Nothing that we civilians can do on the home front can possibly be compared with the sacrifices by the men who have inter- rupted their careers and offerred their very lives in the service of their country. I believe that the Jewish Welfare Board and similar service agencies are doing civilians just the kind of job that we would like to be doing for our fighting men. For that reason, if for no other, the -3- 213 work of these agencies deserves every bit of support and encouragement that we can give. that For this reason we can all be thankful for the existence of these fine organizations, but there is another reason just as compelling. The services of these agencies -- Catholic, Protestant and Jewish -- reflect the essential unity of our country in a time of crisis like this. In peacetime, the Jewish Welfare Board is concerned primarily with Jewish problems. Through many kinds of activity it awakens new pride in the Jewish moral heritage and encourages our young people to take advantage of the opportunities which this free country of ours gives them. In time of war, however, the Jewish Welfare Board unites at once with all other agencies to do the utmost for our men in 214 -4uniform, regardless of their religion or of the country from which their people came. Our enemies like to point to our peacetime differences and to our many national and religious strains in the hope that they can divide us in wartime. What they fail to realize is that the freedom enjoyed by every creed and group in our nation creates precisely that unity which we are showing now in our war effort. We are welded together our diversity in this emergency not in spite of but because we have been free under the American system to develop our spiritual differences. The Jewish Welfare Board takes its place among the service agencies in the same way and in the same spirit as our soldiers and sailors meet the enemy. It serves without a thought of difference, and it remembers only our common cause and our common faith in America. 215 Draft B presented to Secy at 2 pm April 17, 1942 216 DRAFT OF SECRETARY MORGENTHAU'S BROADCAST OVER THE BLUE NETWORK FOR THE JEWISH WELFARE BOARD, FROM STATION WKIP, THE NELSON HOUSE, POUGHKEEPSIE, NEW YORK, 9:25 PM APRIL 18, 1942 This anniversary broadcast has given all of us, I think, a clearer understanding of the great work that the Jewish Welfare Board and other service organizations are doing for our men in uniform. We have needed that clearer understanding This is a war in which we stay-at-homes can see very little of the men who are training in far-off camps or serving in still more distant posts of duty abroad. We civilians often wish that there were some way of showing our admiration and gratitude to the men who have given up so much to fight for us. We have had too little opportunity to invite soldiers and sailors into our homes for a meal, or to cheer them on parade, or to do anything to take away D-B -2- u 217 from the loneliness that all of them feel in strange places far from home. Now, thanks to this broadcast, we know that this kind of friendly service is being done. The Jewish Welfare Board and similar service agencies are doing precisely what so many of us would like to do for the soldiers and sailors if we could. Starting its work twenty-five years ago in the First World War, and now war in this far greater struggle, the Jewish Welfare Board ^ has joined hands with Catholic and Protestant service organizations to make all men in uniform feel at home, wherever they may be. It does much more than care for of Jewish faith the religious needs of Jewish soldiers. It does its best to give recreation, comfort and companionship to all -3- 218 service men, whatever their religion, and wha tever the country from which their people came. For this reason I believe that the work of these agencies deserves every bit of support and encouragement that we can give. We on the home front will be asked to maked sacrificesin many ways to win this war, but nothing we can do can possibly be compared to the sacrifices by the men who have interrupted their careers and offered their very lives in the service of our freedom. We cannot go to the camps and battle stations to lighten the load of the men in uniform, but at least we can be thankful to the service organizations which are doing that job on our behalf. They are developing the qualities of heart and mind that have always marked American fighting men. They are helping to build an army and navy of free men that will outfight, outlast anddestroy all the drilled and regimented armies of our enemies. 219 April 17, 1942 2:18 p.m. Norman Thompson: Yes sir. HMJr: Norman. T: Yes sir. HMJr: I want to give the combined Kuhn-Odegard-Graves T: over my name without my seeing it. I see. HMJr: Reinstate that. T: I see - all right. HMJr: The three of them can T: HMJr: T: HMJr: trio the right to send any telegrams or letters Yes, you want the three to go over each individual Well, anything - anything that the three agree ontwo out of three. Two out of three. Yes sir. T: All right, I'll take care of it. HMJr: Two out of three. T: HMJr: 0. K. sir. All right 220 April 17, 1942 MEMORANDUM TO: Mr. Graves Mr. Kuhn Mr. Odegard Referring to my semorandum of yesterday, it is not intended that the requirement that communications over the name of the Secretary must receive his personal approval or signature shall apply to communications in connection with the Defense Savings program if all three, or at least two, of you clear any such communications. (SIGNED) W.N. THOMPSON Administrative Assistant to the Secretary. MNTsaja 221 April 16, 1942 MEMORANDUM TO: Mr. D. W. Bell Mr. Gaston Mr. Sullivan Mr. Foley Mr. Blough Mr. Buffington Mr. Graves Mr. Heas Mr. Kuhn Mr. Odegard Mr. Paul Mr. Pehle Mr. Schwarz Mr. Tarleau Mr. White The Secretary desires that no communication of any kind be sent out from the Department bearing his name unless in each instance it has received his personal approval or signature. It will be appreciated if you will see that the Secretary's instructions in this connection are complied with. (SIGNED) W.N. THOMPSON Administrative Assistant to the Secretary. 222 April 17, 1942 2:40 p.m. HMJr: Hello. JONES: Henry? HMJr: Yes, Jesse. J: How are you? HMJr: I'm alive. J: Henry, a friend here who's - it's a - the motion picture fellows, you know have a lot of blocked money in England and Australia and around. They wonder if there could be any way that you could take - say, for instance - use the blocked sterling in some of your payments HMJr: I don't know, but if they'd come over and see Harry J: White, he'd be glad to listen to them. I'll send them over to see Harry. HMJr: Would you do that? J: Certainly will. I wonder if he could do it this afternoon? HMJr: Ah J: I'll put in - I'll make the appointment. HMJr: Will you? J: I'll call him. HMJr: Righto. J: Thank you very much. HMJr: Thank you. J: Bye - 223 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE TO FROM Secretary's files Ferdinand Kuhn, Jr. I have let her know. Memo of 4/16/42 April 17, 1942 224 Ferdinand Kuhn April 16, 1942 Secretary Morgenthan Mrs. Morgenthau is leaving at 4 o'clook today. Please telephone her and let her know just what arrangements you have made for her in New York. Dono-4/16/97 225 April 17, 1942 TO: MR. FOLEY FROM: THE SECRETARY You should read the editorial in today's Post on patents. 4/17/42 " 226 Jr took original of this with him farm today to show to the President. 227 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE April 16, 1942. TO Secretary Morgenthau FROM George Buffington G.S. RE: PAUL SHIELDS I have talked in confidence with three men who know Mr. Shields personally and have had business relations with him extending over ten years. In certain respects the information is conflicting and it is difficult to express a conclusive opinion in answer to the President's question without knowing more about the reason for the inquiry. Mr. Shields is regarded as a dynamic personality and a man of considerable ability. He is honest, tough, and selfish. He has a great many very close friends and, as one man expressed it, an equal number of enemies. He has been successful in business. He likes to run things and is only interested when he can dominate a situation. He took a prominent position in New York Stock Exchange affairs, following Richard Whitney's defalcation, in an effort to clean up the Exchange. One man with whom I talked who has worked with Mr. Shields closely on various business matters says he is a man with unlimited crust. / 228 THE WHITE HOUSE WASHINGTON April 11, 1942. MEMORANDUM FOR THE SECRETARY OF THE TREASURY What do you think of Paul Shields? F. D. R. A in ew ster ar 229 April 17, 1942. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston Two members of the Uniformed White House Police are about to be inducted into military service unless we request deferment. Under the law we have to recruit these men from the Metropolitan Police. The Metropolitan Police asks permanent deferment for all its officers. It has become almost impossible to get any more men from the Metropoli- tan Police on this account. Their officers advise them not to transfer. Supervising Agent Reilly and Chief Wilson recommend that we adopt the policy of asking permanent deferment for White House police officers. This would be inconsistent with our policy as to Secret Service agents of the White House detail, who are much more valuable and have better training. I recommend the following: (1) That we ask six months deferment only for men often of the White House Police who may be selected for in- duction into military service. (2) That we seek an amendment of the law which will permit us to select and train our own police officers instead of relying on the Metropolitan Police. This seems to be desirable wholly apart from the selective service consideration and Chief Wilson agrees to this. Mrs. The Mr. 230 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE April 17, 1942 TO FROM Secretary Morgenthau Mr. Haas Subject: Current Developments in the High-grade Security Markets; Carrying Values of United States Government Bonds Held by Banks SUMMARY (1) Prices of Treasury notes have lost an average of about 2/32 since April 1, while Treasury bonds have gained about the same amount (Chart I). (2) The average carrying value of United States bonds held by New York City banks is substantially in excess of that for the same issues for banks outside of New York City. The average carrying value of New York City banks, however, is substantially below the market. (3) Corporate and municipal bond flotations continue at a low level and constitute no present hazard to the Treasury financing program (Chart II). (4) Municipal bond prices continued to rise during April. During the two weeks ending April 11, the Treasury average of high-grade corporate bond yields fell 3 basis points (Chart III). 231 Secretary Morgenthau - 2 I. United States Government Securities During the past two weeks, trading in the Government se- curity market has continued the quiet pace that prevailed in the preceding two-week period. Since April 1, Treasury notes have undergone a slight general decline, losing an average of about 2/32. Treasury bonds gained about the same amount (Chart I). The following table shows price changes by maturity classes since April 1 for taxable and tax-exempt notes and bonds: Average price change : : issues April 1-April 16 : Taxexempt All Taxable issues issues : : : (Decimals are thirty-seconds) Notes - .02 1 to 3 years 3 to 5 years 1 - .02 - .02 - .02 - .02 + .03 + .02 + .01 + .03 Bonds 5 to 15 years to call 15 years and over to call + .01 + .04 II. Carrying Values of United States Government Bonds Held by Banks Figures have recently become available on the average member carrying values of United States securities held by banks. These data were compiled by the bank supervisory agencies at the request of the Treasury Department. 1 No issues outstanding. 232 Secretary Morgenthau - 3 The average carrying values of Treasury notes and bonds held by member banks inside and outside of New York City are shown and compared with thetable: average market prices of these securities in the following Carrying Values Banks Banks out- in New Notes Bonds under 10 years maturity Bonds over 10 years maturity Total notes and bonds side New : York City York City Average market value 100.15 100.18 100.52 104.22 101.26 105.48 104.55 102.78 106.57 103.02 101.93 105.34 NOTE: Decimals are true decimals rather than thirty-seconds. Bonds aredate. classified by final maturity rather than first call The higher carrying values of bonds in the portfolios of the New York City banks are rather striking. It probably reflects the greater amount of trading carried on by these banks. In a rising market this naturally tends to realize trading profits and to push up average carrying values. It should be noted, however, that carrying valuee even in the case of New York City banks were substantially (more than 2 points) below average market values prevailing at the end of the year. III. Corporate and Municipal Bond Flotations The volume of corporate and municipal bond flotations has continued at a low level during 1941 and the first three months of 1942 Chart II). The only month in which new capital flotations exceeded $150 millions was August, when the American 233 Secretary Morgenthau - 4 Telephone and Telegraph Company offered a $234 million new money bond issue to its stockholders. Total flotations in March amounted to only $143 millions, of which only $77 millions was for new money. The problem of competition between Government and private capital issues is thus not a serious one at the present time. IV. Other Domestic High-grade Securities Municipal bond prices continued to rise during April. The Dow Jones average yield of 20 municipal bonds declined (prices rose) 6 basis points from 2.47 to 2.41 percent during the two weeks ending April 11. During the same period, the Treasury average of high-grade corporate bond yields declined by 3 basis points, and the average yield of taxable Treasury bonds fell by one basis point (Chart III). Attachments. 234 Chart I CHANGES IN THE PRICES OF U.S. SECURITIES Points Plotted Represent the Difference from December 6, 1941 Price of Each Maturity Class JANUARY MARCH , 34 14 24 1942 FEBRUARY 28 21 7 POINTS POINTS APRIL 28 21 1942 DEC JAN FEB. MAR. APR MAY JUNE JULY AUG. SEPT. OCT NOV. 25 THE POINTS (Net Change) (Net Change) (Net Change) Saturday Quotations Daily +2 +2 I + +1 NOTES 3-5 Years NOTES 3-5 Years + 0 0 NOTES I-3 Year's 0 o NOTES 1-3 Years -1 BONDS - -15 Years to Call - -2 -2 BONDS BONDS Over 15 Year to Call 5-15 Years to Cell -3 -3 -1 -1 -2 -2 4 -4 -2 -2 BONDS Over 15 Years to Call 5 -5 -3 -3 -6 -6 -3 -3 4 -7 -7 -4 34 JANUARY 7 24 14 FEBRUARY 7 - - - India Office of the Secretary of the Treasury 14 20 21 17 21 DEC JAN. FEB MAR. APR MAY JUNE JULY AUG. SEPT. OCT NOV. 1942 III -4 MARCH 20 4 LEE 111 111 III 111 III 8 = -8 18 25 4 APRIL 1942 F-153-H Chri II TOTAL DOMESTIC BOND FLOTATIONS (EXCLUDING FEDERAL) DOLLARS DOLLARS Millions Millions Total Excluding Federal Government and Federal Agency 800 Total 800 Refunding New Capital 700 700 600 600 500 500 400 400 300 300 200 200 100 100 0 0 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 700 700 Domestic Corporate 600 600 500 500 400 400 300 300 200 200 100 100 0 0 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 400 400 State and Local 300 300 200 200 100 100 --o 0 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 236 Chart III AVERAGE YIELDS OF LONG-TERM TREASURY AND CORPORATE BONDS 1942 .. .... 1941 MAY MAR SEPT JULY NOV. JAN 1942 MAR MAY JULY SEPT. NOV MAR MAY APR PERCENT PERCENT (Inverted Scale) INTERPERCENT (Inverted Scale) WEEKLY Saturday Quotations (Inverted Scale) DAILY 1.6 1.6 1.7 1.7 1.6 1.7 1.8 1.8 1.8 1.9 Partially tax-exempt 1.9 Treasury Bonds 1.9 2.0 2.0 2.0 Partially tax-exempt Treasury Bonds 2.1 2.1 2.1 2.2 2.2 2.2 2.3 2.3 2.3 Taxable Treasury Bonds Taxable 2.4 2.4 Treasury Bonds 2.4 2.5 2.5 2.5 2.6 2.6 2.6 2.7 2.7 2.7 High-Grade 2.8 Corporate Bonds 2.8 2.8 High-Grade Corporate Bende 2.9 2.9 2.9 3.0 3.0 JULY SEPT. : NOV. JAN. 1 MAR. MAY JULY SEPT. 1942 . as MAY NOV. , . - . 4.19 MAR MAR ........... APR . . JAN .. .. " " . 3.1 " 3.1 04 . 3.0 3.1 as MAY 1942 1941 *Change in composition of Long-Term Treasury everage F-SEPA 237 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE April 17, 1942 TO Ferdinand Kuhn, Jr. FROM Herbert Merillat EDITORIAL OPINION ON THE HOME FRONT: THE BATTLE ON INFLATION The growing danger of inflation has occupied the editorial mind more and more in the past fortnight. In "inflation control" the press has found & rubric to cover its chief demands for measures to combat the nation's domestic ills -- measures such as restrictions on labor, limits on war profits, over-all price control, increased taxation on low incomes, and compulsory savings. Editorial friend and foe alike are demanding that the Administration take the lead in an integrated all-out attack against inflation. The White House conference of the President with Secretary Morgenthau, Price Administrator Henderson, Federal Reserve Chairman Eccles, and Budget Director Smith aroused hopes that the Administration would at last push such a campaign on a broad front. The press prophets jumped to the conclusion that the program would include 238 -2- freezing of wages, freezing of all prices, limits on profits, higher taxes than those recommended by the Treasury, and compulsory savings. News reports throughout the country thus outlined the program in the most authoritative tones -- whether from a belief that this would actually be the Administration program or from a desire to bring pressure for such a program, it is impossible to say. In any case, later developments changed the prognosticators' tune. Congressional leaders' reluctance to impose higher taxes and Secretary Morgenthau's pro- posal to push bond sales on a voluntary basis have knocked out two items on the program. Neither development has yet aroused much editorial comment. The Richmond News-Leader says "Mr. Morgenthau still is overconfident in his judgment of what can be effected by the voluntary sale of government securities." The Washington Post also thinks the Secretary's hope is a forlorn one. It says that the pay-roll deduction method is not likely to succeed without pressure from above. Moreover, it says such a plan designed for sales 239 -3to industrial workers will not reach the self-employed or persons not employed at all. It suggests that banks be given some financial inducement to push bond sales. The Wall Street Journal is "glad Secretary Morgenthau is reluctant to adopt the idea" of compulsory savings. "Indeed, we think its final and definite rejection might be a considerable stimulant to voluntary sales." The Philadelphia Inquirer also thinks "there is every reason to believe that" the Secretary's "confidence is not misplaced." It is optimistic over the possibilities of a sales campaign conducted by an army of volunteer workers. General editorial reaction, however, has not yet become clear. Two recommendations predominate in the editorial demands for an inclusive program against inflation -- "over-all" freezing of prices, including wages, and heavier taxation of low incomes. An over-all price ceiling on the Baruch model has widespread press support, as it did last year. In "I-told-you-so" tones many commentators remark that selective price control was bound to fail so long as 240 -4wages and farm prices were not subject to effective restrictions. The eastern metropolitan press, which discusses over-all freezing more critically than the press in general, points to the difficulties of now freezing retail prices, wholesale prices, wages, and profits in such a way that great injustice will not result. Sales Tax Additional taxes on low income groups are also insistently demanded by a large section of the press as a necessary item in the anti-inflation program. The first choice of most papers continues to be the sales tax. The President's recent reaffirmation of his dislike for a sales tax provoked editorial charges that he is unrealistic in continuing to oppose a measure needed to raise revenue and check inflation. The Wilmington Journal's comment is typical: "Time and again the President, Secretary Morgenthau, and other Administration leaders have served notice on the country that inflation must be avoided whatever the cost. Their warnings would have a ring of greater sincerity if they themselves were 241 -5not so studiously determined to sidetrack the one plan -a general sales tax -- which would most effectively check a buying rush and the consequent sky-rocketing of prices." 242 MEMORANDUM FOR THE SECRETARY. ns April 17, 1942. Mail Report There has been a decided lull in the mail on tax matters, etc., during the past week. The proportion remains about the same with protests against the sales tax far outnumbering endorsements for it. In the postal card campaign against the sales tax, there have been 164 cards. General mail against it outnumbers requests for it by two to one. There are still protests inspired by telephone companies who have convinced their workers that the Government's program will work a hardship on those receiving old-age pensions from the companies. Toward the end of the week a number of letters were received commenting on the recent issue of "Our America". These are included under Bonds Favorable and Unfavorable. Gatabush 243 -1General Comments on the Present Emergency Ramona Reach, Canovanas, Puerto Rico. I am a girl 12 years old. I am in the 7th grade of the Andres Flores School in Canovanas, P.R. I am enclosing my "First Dollar Received" to help our country win this war. I earned it by helping my mother in her housework. Fred L. Haskett, Dallas, Texas. (Travel Service) Conditions are growing worse in this part of the nation, especially among independent business men. Many firms have closed during the past week, and each week henceforth, unless changes come about, will find many more firms closing. Last week a daily newspaper in Dallas with many years of life, ceased and folded up. There will be many more newspapers to fold up during the next few months to come. The reason: Excessive taxes, loss of advertising and increased labor and material costs. In the newspaper business there are two types of advertisCurtailment of national ing -- local and national. advertising is forcing most of the advertising agencies out of business. Little advertising agencies, dealing entirely with local clients, are quitting business. * # # If depletion charges in oil production are not allowed, it means that every independent oil producer in Texas, Oklahoma, Kansas, and other states will go broke. Also: If the OPA does not permit at least 25 cents a barrel increase in price of oil from "stripper" wells, it means that soon at least 40,000 stripper wells in Texas will be closed down, and taking other states with stripper production, perhaps not less than 100,000 strippers will produce no more. If these wells closed for a few months, they can never again be placed in production. The economic loss to the nation, and our supply of crude, will be staggering. * William A. Hoke, Cashier, The Delta National Bank, Delta, Pennsylvania. It appears a number of our customers heard the radio address yesterday of Senator Millard E. Tydings. We did not hear it, but apparently he said something in the address that lead customers of banks to believe that 244 -2deposits in banks would be taxed or were to be assessed for the purpose of helping to finance the war. We have had a number of calls today from persons who were going to withdraw their money if this were the case. While we think that if this were the case, and they would withdraw their money to escape from being assessed, they would not be very patriotic, but we do not believe this to be the case, and would like to go on record as opposing radio addresses or even newspaper articles that are misleading or may be interpreted to mislead the public. We tried to assure the persons inquiring that no such plan had been suggested by the Treasury Department. Anything that you may be able to do to get the public straightened out in regard to the above will be appreciated. Anna A. Goldbeck, Philadelphia, Pa. Two old ladies, one nearly 79 years old, have decided to send their Government $25. We think to do this when we can is better than buying Stamps and Bonds, as we are not likely to be here when they mature. (Encloses check for $25.) Edward A. Vaughan, Publisher, Dallas, Texas. Knowing as I do that our wonderful President is your friend, I am mailing you a copy of my paper with an article about the finest man that ever went to the White House. I hope you like same. You are doing a fine job yourself -- just keep your health, and if the jackals snap at you, just let them. They can't hurt a man that is giving his Country all his best efforts. Best wishes always. 245 -3- Favorable Comments on Bonds Maurice Mayer, Yonkers, N.Y. I deeply appreciate your several letters, which naturally are in recognition of my systematic purchase of Bonds, and want to assure you of my continued buying - to the utmost of my ability. I read an article written by you in the magazine, "Our America", which gives me more inspiration, and should inspire every red-blooded American. Leona J. Beidleman, Toledo, Ohio. Thank you for the pamphlet, "Our America". It came today, just as the disheartening news came over the air of the desperate plight of our gallant and hard-pressed men on Bataan Peninsula. It made me suddenly realize how little I have been doing to help in this great war of ours. # I cannot go out and work in defense industries, as I have two young children who need my care, but I can help by buying twice the amount of Bonds estimated on your scale from my husband's weekly wage. In our apathy, I truly wonder if we do deserve our beloved General MacArthur and our brave boys who are fighting and dying for us. Allon Wolsey, Camp Pendleton, Va. As we buy our Defense Stamps and Bonds, little by little, it often seems to me a sin that we should loan our resources and earnings (be they ever so little) to our Govt. at interest. It is a privilege to be able to be of some help in the gigantic war effort being carried on for the defense of our lives, homes and way-of-life. May I therefore urge the offering of interest-free obligations for those to whom money has secondary importance? America can and must win. R. J. Thomas, International President UAW CIO, Detroit, Mich. (Telegram) I am proud to announce that National UAW CIO has reached goal of fifty million dollar Defense Bond sales pledged to you December, 1941, to replace USS ARIZONA on which a UAW CIO boy was killed in action. The UAW CIO now pledges a second fifty million dollar Defense Bond drive. With our Defense Bond drive going 246 -4into high gear, we are sure that we will reach the second goal quicker. We want to provide another battleship. We fight a two ocean war and the UAW CIO wants to have a ship in each ocean so that we can carry the struggle against Fascism to Tokyo and Berlin. Many of our membership urge that second ship be christened the USS UAW CIO to symbolize the unity and might of organ- ized labor, and its part in the world struggle to throttle the aggressor nations. Would appreciate state- ment from you for our membership. Frank Hollmann (Class of 1945), Patchogue High School, Patchogue, N. Y. The following pupils of Patchogue High School wish to ask if the Government could issue a $5 War Bond. We believe this would encourage us to save and buy more Stamps. As it is now, many can only save 10g a week, and this means about four years before obtaining a Bond. We want to do our share in winning this war, but we feel that very few of us can purchase sufficient Stamps to obtain a $25 Bond. Glenn Herrick, Ithaca, N.Y. When I returned home today from a special visit to the bank to buy War Bonds, I found a copy of "Our America" on our doorstep. I sat down and read it through. * # I sat quietly in the exultation of spirit induced by these patriotic pleas and in the contemplation of my country and of the love and labor and anguish with which our forefathers wrought its foundations of freedom. # Suddenly came a most depressive reaction. What could I accomplish for my Government in this crisis by the purchase of a few small Bonds when the Administration engulfs the proceeds at once in its millions of non-defense expenditures? Charles F. Potter, Pasadena, California. A copy of "Our America" came in the mail today. Glad to see it and to read it. Let me congratulate you upon the fact that we may now buy Bonds and not have the word "defense" attached to them. Defense is very suggestive of "defeat" and we out in California do not like it. John C. Gillies, Trenton, N.J. I have just finished read- ing the latest issue of the Treasury Department's publica- tion, "Our America". Heartiest congratulations. It brings out the feelings that lie deep down in one's heart and which seldom are put into words. More important, however, it brings out the dollars! 247 -5Unfavorable Comments on Bonds J. N. Johnsonbourgh, Altoona, Pa. I am informed that a meeting was held at Philadelphia the other day, and a setup was made whereby any persons with the set rate of 97c hourly should buy one Bond a month; 74% hourly, a Bond every two month; 54 hourly, a Bond every three months. I want to do everything possible to win this war, but all men's obligations are not the same, and this plan does not make allowances for this. # I am a former service man - was in France a year, and am registered in the last selective service call. I am now paying for a Bond by the monthly payments, but I am informed that this will be no longer accepted. I have asked to be permitted to buy one every three months, and have been told this cannot be arranged -- one a month only. I feel that this pressure has gotten almost to the point of intimidation. I would like to know, from impartial source, if this is correct. "An Irate Citizen", Denver, Colorado. I notice in this pamphlet that 10g Defense Stamp buys 5 cartridges for our boys at the Front. I'd like to know how many cartridges could be bought with money spent for this propaganda! (Encloses copy of "Our America") We know there's a war on and that it costs money. Martin B. Myer, St. Davids, Pa. Time, space, energies, materials and what not are being expended in urging the purchase of War Bonds and Stamps, and rightly so. But the effectiveness of all this is being lost on a great many workers at the Philadelphia Navy Yard, where deductions have been made from pay envelopes but for some reason or other Bonds paid for have not been delivered to the purchasers. There appears to be a question in some workers' minds whether to purchase more. This should not be, and surely some agency at your Department's disposal can cor- rect the situation. I am not a Navy Yard employee but in a good listening post. Chas. R. Athey, Los Angeles, Calif. There is a story being circulated among the workers of the Douglas Aircraft Co. of Long Beach, Calif., that U. S. Defense Bonds are 248 -6cancelled by the Government in case of death, and that the estate cannot cash the Bond at maturity. They also state that Bonds purchased by man and wife jointly cannot be collected by the wife, should the husband pass on first. Will you be good enough to give me a letter covering these points, as I find some workers have stopped buying Bonds since these reports have been circulated. M. E. Stout, Waverly, Va. I am returning the picture on the front cover of "Our America", left in my mail box yesterday. May I ask what you and other leaders in our Government intend to do with those who do not agree with you? Hitler puts all who do not agree with him in un- speakable concentration camps, or else shoots them. Do you in Washington intend to follow the same course? If not, you, our leaders, had better watch your steps, even if in good intention, as such pictures are sure to brew trouble for those who do not believe in compulsory Flag Salute; and then your slogan, "Justice and Liberty for All", is gone with the wind Wm. E. Zeuch, School of Organic Education, Fairhope, Ala. Various agencies of the Treasury over the radio, in the press and by word of mouth are constantly repeating the statement that U. S. Savings Bonds are the safest and best of investments. I would like to know how you expect any intelligent person to believe that, as things now stand, or how any honest agency of the Govt. could keep on making such statements. Several months ago I bought some U. S. Bonds. Since then, prices have been going up at the rate of about 2% a month. That means that the value of my Bonds, in terms of what they will buy, has been declining at the rate of about 2% a month. The small rate of interest received on those Bonds is a joke as an offset to the declining value. In the face of this fact, how can you, or any honest person, tell me or any other American citizen that U. S. Bonds are a good investment? 249 -7 R. B. Mateer, Philadelphia, Pa. (Encloses copy of "Our America") The attached came around with the regular mail today, and I am wondering if you have the approval of the Securities & Exchange Commission to this bit of propaganda. You are subject to this creation of the present Administration as is the individual or the corporation. So, I suggest you had better clear or blue sky this advertisement, seeking to sell question- able paper. Individual purchases of more Bonds are de- ferred (1) until you put through the Smith Bill prohibiting strikes, (2) until a general sales tax bill is enacted, (3) until the principal is restored to the Social Security Board, and, (4) until unnecessary vote catching mediums, such as the NYA and the ccc, are eliminated. J. A. Hearon, Jobbers and Wholesale Grocers, Bishopville, South Carolina. Many of our Southerners are not going to buy Bonds unless this Administration cuts out the foolishness that is being carried on, especially the commodity stores giving away food to people who do not need it. Very few indeed need to be fed by the Government. This giving away business has brought about a very serious condition here in the South. People who once worked on farms and other kinds of business are now loafers and idlers, and cannot be hired at any price. When we offer to give them employment, they tell us they do not have to work because the Government feeds them and takes care of them. We feel that if we bought Bonds, our money would be used to support these loafers. It is high time to do away with all foolishness and politics, and unless this is done, and done quickly, we will lose the war and our America will become a subjugated nation. John B. Reimer, Jamaica, N.Y. I have a grievance against you, based on the following facts: On February 24, 1942, I sent to your Fiscal Agent, the Federal Reserve Bank of New York, by registered mail, various Bonds for redemption. Among these Bonds was one for $10,000, No. X 18485, pur- chased April 29, 1941, and registered in theReserve name of Mrs. The Federal Bank Dorothy Reimer Bleecker. negligently failed to send me a receipt for this Bond, and as I feared that it might have been lost, strayed or 250 -8- stolen, I went in person to the Bank on March 7th and made inquiries. The young woman in charge said that it would take some time to look it up, and to come back in a half or three-quarters of an hour. When I came back at the appointed time, the young woman had "gone to lunch". # I finally got some other clerk to listen to my complaint. He looked up the papers and showed me that the Bank had received the Bond, but that it could not be paid until April 1st. On March 4th I wrote them to send me a receipt which was done the following day, but the receipt was dated as of February 25th. On April 1st I received a check from the Federal Reserve Bank for $9,880. As I had previously received, on November 1st, a check for $125 for interest, this made a total of $10,005 which I got back from you for a Bond purchased April 29th, 1941. In other words, I got $5 interest for $10,000 loaned to you for a period of almost one year. Of all Loan Shark games, this is the worst one I have ever come across. I probably should be grateful that I got back anything. Nobody in the Federal Reserve "gave a darn" as evidenced by their failure to even send the customer a receipt. Neither was there any one to tell the customer to hold the Bond for another 30 days in order not to lose six months' From this personal experience, I am interest. justified in saying that the Federal Reserve Bank in their Bond Redemption Department are careless and in- efficient, and have the same care for the personal welfare of the clients of the U. S. Government as a personal loan shark. # Ira Jewell Williams, Philadelphia, Pa. I have been receiving at my home, copies of a publication called "Our America". Will you please, if possible, discontinue these, as I regard them as an unnecessary expense. I think the public could spare them. Vernon Ward, Aurora, N. C. (Enclosed copy of Credoto Politico by Vernon Ward, an eleven-page pamphlet of author's political beliefs.) This morning the Treasury Dept. sent through the mail the pamphlet, "Our America, One Nation Indivisible with Liberty and Justice for All". How can you so desecrate a noble idea as to apply it to this tyrannical, money-ridden land? # 251 -9- William Richard Twiford, Miami, Florida. Yesterday I received your highly colored and expensively printed (paid for by the taxpayers) appeal to buy Bonds, bear- ing the title, "Our America". In the first place, I was surprised to learn that you and the money trust racketeers you represent would be so bold as to boast that America is yours. But you are dead right in this. Woodrow Wilson declared, shortly before he died, that America was more under the domination of predatory wealth than any other nation on earth. It has now progressed from domination to ownership. And I am glad to see you admit it. * Mrs. George Woodward, Jr., Chestnut Hill, Philadelphia, Pa. It is most discouraging to receive at the beginning of the shortage of essential household paper products the first and, I hope last, copy of "Our America". It contains nothing that is not covered daily by press and radio. Most disheartening to see the Govern- ment appropriating so much paper when the public must cut down to less than the minimum requirement. * * * Mrs. A. A. Spaur, Sidney, Mont. (Enclosing religious tracts.) We received in our mail a pamphlet called "Our America", a beautiful picture of junior boys and girls saluting Our Flag and saying, "One nation indivisible with liberty and justice for all." There isn't one in America that can say with a clear conscience, "This is true". You know it's false, and so do thousands more, and those who have it in their power are letting thou- sands of boys and girls suffer and almost starve. * * Do you think it is right to rob these poor boys and girls of their dimes for Defense Stamps and Bonds, and the old people too, and let the beer barons have all they want? Etc., etc. (Strongly anti any alcoholic liquors ).) E. Perry, Lansing, Mich. You have had broadcast over this section of the country a brochure entitled, "Our America", quite commendable. There are some things I would like to call to your attention that the Government - 10 - 252 has failed apparently to heed. "War is never cheap", true but there are a lot of unnecessary expenses made. Money means nothing to you. You are not seeking economy, but you are asking the people to economize. When you get all our money what are you going to give us who haven't any left -- after the war when the depression hits us, as it surely will? Harry Armstrong, Armington, Mont. I have a copy of "Our America", which I have read with interest and consequent thought. * * * The line in "Our America" that impressed me most is, "Every time you throw away a dime on useless expenditure, etc. The way money is being spent in Washington for "useless expenditures", those not directly for the conduct of war, it is going to be very difficult to get the majority of the people to buy War Bonds. # # The advice not to throw away a dime" is very sound, but unless Washington sets the example, it is similar to a father asking his son not to drink or smoke, while the father conspicuously and undeniably indulges in both. Thomas L. Puryear, Newark, N. J. The postman has just delivered to me a leaflet titled, "Our America". Across the cover and below the wording above is printed these words, "Our America". Under these words appears a picture of a number of white children who are saluting. The purpose of this letter is to respectfully suggest how un-American the picture is. # The leaflet does not include children of the darker races who constitute Every negro a considerable part of our population. who sees the leaflet will want to know why a negro was not included in the group. 253 - 11 Unfavorable Comments on Taxation Frederick Bohrer, Executive Secretary, Brotherhood of Telephone Workers, N.Y.C. As representatives of employees of the New York Telephone Company, we are con- cerned in the "Trust Fund Tax" which you are reported to have recommended for legislation. Our information on that subject, at present, consists of newspaper items and statements by the management, and their satellites among the employees. In our quest for reliable information, we find it necessary to appeal to you Sir. There are several men in Washington, D. C., lobbying in behalf of the Telephone Company's "Pension Plan". They are appearing as representatives of the New York Telephone Company Employees, by virtue of holding office in the United Telephone Organizations, a conglomeration of Company inspired, subsidized and dominated Employees Associations, located in districts which follow the Company lines of demarcation. You understand Sir, the average worker's lack of understanding of the vagaries of "high finance". How the "Pension Plan", held in trust by the Bankers Trust Company of New York, could be used for purposes alien to that of providing a beneficence to superannuated employees, is not common knowledge. * # Unarmed with authentic facts, we are unable to pierce the hysterical din and clamor of "letters and telegrams to Congressmen saying 'save our pension plan', etc.' The appeal to help save the Company's "Pension Plan", by # exerting political pressure, is a radical departure-from an established, and stubbornly maintained policy. Never before was employee cooperation solicited in matters re- lated to that Plan. All efforts by employees towards participation in the Plan were flatly and definitely re- pulsed, except as recipients of the Company's benevolence. # The Brotherhood of Telephone Workers will be honored if you reply Sir, despite the intrusion upon your time and thoughts. Dr. Alice Gregory, Secretary, N. Y. Infirmary for Women and Children, N.Y.C. We wish to draw your attention to the following resolution voted at the recent meeting of 254 - 12 the Board of Trustees of the N. Y. Infirmary for Women and Children: "It was resolved that this organization, being a charitable hospital, chartered December 13, 1853, under the laws of New York State, staffed by women physicians and surgeons, the majority of the Trustees being women, and being supported by contributors, the vast majority of whom are women, feels that the joint income tax returns for husband and wife will work to its disadvantage and therefore opposed as vigorously as pos- sible for the welfare of the Hospital." Myron E. Lawson, Webster Groves, Mo. I want to believe that it has not come to your attention that there is on your staff a person named Randolph Paul. This letter is in strong protest against his recommendations which would force the discontinuance of the present Bell System Pension Plan. As a Bell System employee with 17 years' service, I know our plan has operated very satisfactorily for over 29 years. # I realize a lot of money is needed for the conduct of the war, but it should come from we working people now, not out of the pockets of the aged, after they retire from a lifetime of toil. Can't we postpone until after the war, these experiments in Communism? Harold V. Boggs, Oakland, California. Feeling that I would like to keep a year ahead on my Income Tax and have my money do the most for my Govt., I applied for $900 worth of Series A Tax Bonds, to be made out in the name of myself and my wife. I received the Bonds which were made out in my name only. Of course, this was not satisfactory, and I asked to have them changed to the way I ordered them. However, these Bonds can't be made out in two names, so I am told -- and that to me does not make sense. * * These Bonds were issued by your office for a purpose, and why not let them fully serve that purpose? My interest in my country is sincere -- I want every dollar I can spare to go into Government Bonds. I now have $10,000 maturity value Savings and War Bonds, Series A to E, inc. I mention this only to show my thinking. Savings Bonds were not issued to be used for taxes, but Series A. Tax Bonds are. Can't you make it possible for me and others like me to buy them on a basis of serving the needs of the small taxpayer in California? - 13 - 255 J. B. A. van Oort, Honolulu, T.H. The undersigned hereby asks for your cooperation to have incorporated in the new tax regulations the status of married people in cases where evacuation of wife and children in danger areas, as in the Hawaiian Islands, is required or desired. We who are working for the defense of the Islands, and who have double living expenses and all the hazards and war risks, we are not entitled to the same credit for personal exemption as married people living under normal conditions on the mainland. In my opinion, this is an injustice. An answer to this letter will be greatly appreciated. 256 APR 17 942 Dear Mr. Secretary: This has further reference to your letter of April 8, 1942, making inquiry as to the present status of General Aniline and Film Corporation. You will recall that on January 10, 1942, the Department forwarded to you a memorandum relating to a number of situations found to exist in connection with the operations of this corporation, at that time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ozalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or German-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American manage- ment of unquestioned loyalty. Some forty-odd 257 2. executives and employees of the company have been re- moved because of doubts as to their loyalty, and the Department and the management are proceeding as rapidly as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 10, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. With respect to the operations of the Ozalid Division of the company, to which you adverted specifically in your letter of April 8, 1942, I am in a position to advise you that all German-born employees of the division engaged in either sales or service work have been removed from these positions, and that all employees in that division who would ordinarily have any contact with or access to any defense plants or Government establishments are American born and presumably to be trusted. Further- more, arrangements have been made that any information obtained by such employees which would be proper for them to have in connection with the legitimate business of the division will, when and if forwarded to the main office of the division, be seen and handled only by company personnel whose loyalty is unquestioned. Sincerely yours, (Signed) E. SW. Secretary of the Treasury. The Honorable The Secretary of the Navy. JJO'C.Jr/lsw 4-14-42 CONFIDENTIAL THE SECRETARY OF THE NAVY WASHINGTON Serial No. 0849116 AA 8 1942 Sir: In connection with the recent transfer to the Treasury Department of the stock of the General Aniline and Film Corporation - including its subsidiaries, such as Ozalid Corporation - it is requested that the Navy Department be advised as to the present status of the company. It would be of particular interest to know whether all personnel of questionable loyalty to the United States have been divorced from the above mentioned corporations in order that the Navy Department may resume normal busi- ness relations with those corporations. Respectfully, Frank Knox The Honorable, The Secretary of the Treasury. CONFIDENTIAL 259 C THE SECRETARY OF THE NAVY 0 P Washington Y April 21, 1942 My dear Henry: Thanks for your letter of April 17 touching upon the situation and present status of General Aniline and Film Corporation. I am very glad to have the information which you now supply and I am passing this along to the proper bureau which deals with this Company. Yours sincerely, (signed) The Honorable Henry Morgenthau Secretary of the Treasury Washington, D. C. Frank Knox 260 APR 17 we Dear Colonel Donovan: You will recall that on January 10, 1942, relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that the Department forwarded to you a memorandum time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ozalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or German-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansoo Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American manage- ment of unquestioned loyalty. Some forty-odd executives and employees of the company have been re- moved because of doubts as to their loyalty, and the Department and the management are proceeding as rapidly 261 2. as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 10, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, (Signad) H. Morgonthans the Secretary of the Treasury. Col. William J. Donovan, Coordinator of Information Twenty-fifth and E Streets Washington, D. C. JJO'C.Jr/1sw 4-14-42 n.m.c. capie to taley 262 APR 17 1942 Dear Mr. Purcell: You will recall that on January 10, 1942, the Department forwarded to you a memorandum relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ozalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or German-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American manage- ment of unquestioned loyalty. Some forty-odd executives and employees of the company have been re- moved because of doubts as to their loyalty, and the Department and the management are proceeding as rapidly 263 -2as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 10, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, (Signed) N. Norgenthen Jr. Secretary of the Treasury. Mr. Ganson Purcell, Chairman, Securities and Exchange Commission, 18th and Locust Streets, Philadelphia, Pennsylvania. n.m.c. JJO'C.Jr/1sw/mdm 4-14-42 264 APR 17 Dear Mr. Secretary: You will recall that on January 10, 1942, the Department forwarded to you a memorandum relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ozalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or German-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American manage- ment of unquestioned loyalty. Some forty-odd executives and employees of the company have been re- moved because of doubts as to their loyalty, and the Department and the management are proceeding as rapidly 265 2. as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 10, 1942. have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, (Signed) 1. Morgenthes, and Secretary of the Treasury. The Honorable The Secretary of Agriculture. JJO'C.Jr/1sw 4-14-42 n.m.c. 266 APR 17 1942 Dear Mr. Secretary: You will recall that on January 10, 1942, the Department forwarded to you a memorandum relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ozalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or German-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American manage- ment of unquestioned loyalty. Some forty-odd executives and employees of the company have been re- moved because of doubts as to their loyalty, and the Department and the management are proceeding as rapidly 267 2. as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 10, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, (Signed) K. Morgantbax Secretary of the Treasury. The Honorable The Secretary of Commerce. JJO'C.Jr/1sw 4-14-42 n.m.c. 268 APR Dear Mr. Coy: You will recall that on January 10, 1942, relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that the Department forwarded to you a memorandum time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Osalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or German-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American manage- ment of unquestioned loyalty. Some forty-odd executives and employees of the company have been re- moved because of doubts as to their loyalty, and the Department and the management are proceeding as rapidly 269 2. as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 10, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, Secretary of the Treasury. Hon. Wayne Coy Office for Emergency Management State Department Building, Washington, D. C. JJO'C.Jr/1sw 4-14-42 n.m.c. 270 APR 17 1942 Dear Mr. Attorney General: You will recall that on January 10, 1942, relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that the Department forwarded to you a memorandum time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Osalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or German-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American manage- ment of unquestioned loyalty. Some forty-odd executives and employees of the company have been re- moved because of doubts as to their loyalty, and the Department and the management are proceeding as rapidly 271 2. as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 10, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, Secretary of the Treasury. The Honorable The Attorney General. JJO'C.Jr/1sw 4-14-42 n.m.c. 272 APR 17 1942 Dear Mr. Secretary: = You will recall that on January 10, 1942, the Department forwarded to you a memorandum relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ogalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or German-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American manage- ment of unquestioned loyalty. Some forty-odd executives and employees of the company have been re- moved because of doubts ns to their loyalty, and the Department and the management are proceeding as rapidly 273 2. as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 10, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, (Signed) W. Morkouthes, The Secretary of the Treasury. The Honorable The Secretary of State. n.m.c. JJO'C.Jr/1sw 4-14-42 274 n?? 1 APR 17 1442 Dear Mr. Secretary: You will recall that on January 10, 1942, relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that time owned the Department forwarded to you a memorandum and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ozalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or German-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American manage- ment of unquestioned loyalty. Some forty-odd executives and employees of the company have been re- moved because of doubts as to their loyalty, and the Department and the management are proceeding as rapidly 275 2. as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 10, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, (Signed) W. with Secretary of the Treasury. The Honorable The Secretary of War. JJO'C.Jr/1sw 4-14-42 n.m.c. 276 Dear Mr. Warrent You will recall that on January 10, 1942, the Department forwarded to you a memorandum relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ozalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or German-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of & confidential nature; and that the company in eneral could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American manage- ment of unquestioned loyalty. Some forty-odd executives and employees of the company have been re- moved because of doubts as to their loyalty, and the Department and the management are proceeding as rapidly 277 2. as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 10, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, (Signed) H. Morganthas. JR. Secretary of the Treasury. Hon. Lindsay C. Warren Comptroller General of the United States General Accounting Office Building Fifth and F Streets Washington, D. C. JJO'C.Jr/1sw 4-14-42 nm.c. 278 OFFICE OF THE ATTORNEY GENERAL Washington, D. C. April 20, 1942 My dear Mr. Secretary: I have your letter of the seventeenth with reference to General Aniline and Film Corporation, and have noted that the reorganization of the company has not been completed. Sincerely yours, /s/ Francis Biddle Attorney General The Honorable The Secretary of the Treasury 279 DEPARTMENT OF COMMERCE Office of the Secretary Washington April 21, 1942 My dear Mr. Secretary: I have for acknowledgment your letter of April 17, furnishing current information relating to the operations of the General Aniline and Film Corporation. The Department appreciates this information and its dealings with this company will be on the basis of the facts contained in your communication. Sincerely yours, /s/ Wayne C. Taylor Acting Secretary of Commerce. The Honorable, The Secretary of the Treasury, Washington, D. C. 280 OFFICE OF THE ATTORNEY GENERAL Washington, D. C. C 0 P Y April 17, 1942 The Honorable, The Secretary of the Treasury, Washington, D. C. My dear Mr. Secretary: The receipt is acknowledged of your letter dated April 1, 1942, relative to the employment of Henry L. Stimson as Special Assistant to the Attorney General in the Spanish silver cases. As requested there is attached hereto the usual certificate, signed by Assistant Attorney General Shea, for your use in connection with the settlement of Mr. Stimson's claim. Sincerely, /s/ Francis Biddle Attorney General. Enc. 281 DEPARTMENT OF JUSTICE Henry L. Stimson, In re: Spanish silver cases. I hereby certify that the services set forth in the foregoing account were actually rendered as stated, and that the same could not be performed by the Attorney General, or Solicitor General, or the officers of the Department of Justice, or by the district attorneys, and the account is approved for payment. FOR THE ATTORNEY GENERAL, Assistant Attorney General