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DIARY
Book 528
May 13 - 15, 1942
-Book
Page
528
185
Agfa-Ansco Division, General Aniline and Film Corporation
See Foreign Funds Control
Airplanes
Aircraft production, January-March, 1942 - 5/13/42
Shipment to U.S.S.R. - Kamarck report - 5/13/42
Aircraft despatched, week ending May 12, 1942 British Air Commission report - 5/15/42
188
417
Amheret College
Honorary degree arrangements for HMJr - 5/15/42
a) Program - 5/17/42: See Book 529, page 52
353
b) Frankfurter's congratulations - 5/18/42:
Book 529, page 61
Appointments and Resignations
Hinckley, William Wheeler: Carey (Congress of Industrial
Organizations) and HMJr discuss Treasury's refusal
to reinstate - 5/13/42
128
a) Thompson memorandum - 5/14/42
221
Armaments
See Post-War Planning
-BBellanca, Dorothy
See Financing, Government: War Savings Bonds
British Posters
See Financing, Government: War Savings Bonds
-C
Censorship Policy Board
Seditious and Axis propaganda publications discussed
in Foley-Gaston memorandum - 5/15/42
Meeting of Board - 5/19/42: Book 529, page 266
345
Chicago Tribune
Summary of tax refund to, prepared for FDR - 5/14/42..
Clear, Warren J. - Lieutenant Colonel
See Military Reports
240
Contracts, War
See Post-War Planning
Correspondence
Mrs. Forbush's resume - 5/15/42
392
-EExports
Freight Situation - Haas memorandum - 5/13/42
Exports to Russia, Free China, Burma, and other blocked
countries, during 10-day period ending April 30, 1942 White memorandum - 5/14/42
196
264
Book Page
Far East
See Military Reports: Clear, Warren J. - Lieutenant Colonel
Financing, Government
New York Herald-Tribune editorial on diversification
in order to reach every conceivable reservoir of
investible funds - 5/14/42
a) Copy to FDR
War Savings Bonds:
528
224
223
New York meeting - discussion by HMJr, Graves,
Gamble, Kuhn, and Odegard - 5/13/42
4
a) HMJr to attend incognito
b) Promotion plans from present to July 1
sketched
c) Knox- HMJr discuss British heroes'
participation in War Bond drives
d) Patterson-HMJr conversation concerning
British heroes, etc
British posters presented to HMJr - 5/13/42
Bellanca, Dorothy: Detroit meeting and Iseby's
manner of presenting appeal discussed in letter
to Mrs. HMJr - 5/14/42
Rosenwald, Lessing J.: Forwards letter containing
critical points on program - 5/14/42
22
41
192
225
227
a) Gamble explanation - 5/21/42:
See Book 530, page 186
Unfilled orders as of May 13, 1942 - 5/15/42
Horowitz, Vladimir: Offers services - 5/15/42
363
368
General Motors Corporation: Campaign progress 373
5/15/42
a) Copies of report to Senators and Congressmen:
Book 529, page 10
Payroll Savings Plan: Progress report - 5/15/42
377
Foreign Funds Control
General Aniline and Film Corporation:
(Agfa-Ansco Division
(Ozalid Division
Present improved situation reported to Veterans'
Administration, National Advisory Committee for
Aeronautics, Federal Security Agency, Department
of Interior, and Alley Dwelling Authority 5/15/42
335
Freight, Export
See Exports
--
General Aniline and Film Corporation
See Foreign Funds Control
General Motors Corporation
See Financing, Government: War Savings Bonds
Gold
See India
Gore, Albert (Congressman, Tennessee)
Milton report concerning reactions - 5/15/42
409
-HBook Page
Herald-Tribune, New York
See Financing, Government
Hinckley, William Wheeler
See Appointments and Resignations
Horowits, Vladimir
See Financing, Government: War Savings Bonds
-IIndia
Gold and silver position - cable from American
Consulate, Bombay - 5/14/42
528
274
-LLend-Lease
Testimony before Special Committee to Study and Survey
Small Business Enterprises, United States Senate,
that Procurement Division is still operating under
emergency system - 5/15/42
United Kingdom: Federal Reserve Bank of New York
statement showing dollar disbursements, week ending
May 6, 1942 - 5/15/42
U.S.S.R.: Report (secret) on status of aid program as
of April 30, 1942 - 5/15/42
407
412
419
-M-
Military Reports
British operations - 5/13/42, etc.
201,277,
278,433
Coordinator of Information reports:
British Political Warfare weekly general directive 202
5/13/42
The War This Week, May 7-14, 1942.
Kamarck summaries - 5/13-14/42.
Clear, Warren J. - Lieutenant Colonel: Kamarck
summary of report on Far East - 5/15/42.
Morgenthau, Henry, Jr.
Amheret College: Honorary degree arrangements - 5/15/42..
a) Program - 5/17/42: See Book 529, page 52
b) Frankfurter's congratulations - 5/18/42:
Book 529, page 61
-NNew York Herald-Tribune
See Financing, Government
281
205,282
434
353
-0Book
Page
528
194
Office of Facts and Figures
See Speeches by HMJr
Osalid Division, General Aniline and Film Corporation
See Foreign Funds Control
-P. Portugal
Federal Reserve Bank of New York authorised to acquire
3,500,000 Swiss francs against United States dollars
placed to the credit of Banco de Portugal's account 5/19/42
a) Acheson-White conversation: See Book 529,
page 135
Posters, British
See Financing, Government: War Savings Bonds
Post-War Planning
Armaments and War Contracts: White memorandum advising
immediate cessation at the end of active hostilities 349
5/15/42.
Procurement Division
See Lend-Lease
-RResearch and Statistics, Division of
Priority rating changed from Class 5 to Class 3 by
Budget Bureau - 5/13/42
Report on projects during February 1942 - 5/13/42
136
138
Revenue Revision
$25,000 Incomes: A super-tax on everything above memorandum on - 5/14/42
237
Rosenwald, Lessing J.
See Financing, Government
Rubber
Bill providing for procurement of raw natural rubber
from sources in the Western Hemisphere - Treasury
letter to Chairman Somers recommending against 5/14/42
259
-SShipping
Building report (secret) - 5/14/42
Losses reported by Kamarck - 5/19/42: Book 529, page 290
Silver
See India
Soldiers
See Treasury Building
423
- S - (Continued)
Book
Page
528
381
Speeches by HMJr
Office of Facts and Figures (MacLeish) told HMJr will
make one of the speeches to follow FDR's antiinflation message - 5/15/42
Stern, Edgar
See Financing, Government: War Savings Bonds
(Rosenwald, Lessing)
Switzerland
See Portugal
-TTaxation
See Revenue Revision
Teletype Machines
Re-assigned to War Savings Bonds branch offices 5/14/42
256
Tennessee
Gore, Albert (Congressman, 4th District): Milton
report concerning reactions - 5/15/42
Treasury Building
Soldiers quartered in sub-basement and on fourth
floor: HMJr recommends to FDR that new quarters be
established - 5/13/42
a) FDR prefers square opposite State Department;
Treasury concurs - 5/15/42.
b) Brigadier General Lewis thanks HMJr for his
assistance - 5/21/42: See Book 530, page 182
409
130
290
Treasury Employees (Women)
Report for February and March - 5/13/42
135
-UU.S.S.R.
See also Lend-Lease
Shipment of planes and tanks - Kamarck report 5/13/42
-.WWar Contracts
See Post-War Planning
War Savings Bonds
See Financing, Government
Women Employees of Treasury
See Treasury Employees (Women)
188
1
May 13, 1942
8:55 a.m.
HMJr:
Hello.
Operator:
I have Mr. Donald Nelson on the wire.
HMJr:
Thank you. Hello.
Donald
Nelson:
Hello.
HMJr:
Is this Donald Nelson?
N:
Yes, sir.
HMJr:
This is Henry talking.
N:
Oh, good morning, sir.
HMJr:
How are you?
N:
Fine, thank you.
HMJr:
Two things happened. One, I got a memo from
the President yesterday. Evidently he'd read
carefully the memo I gave him about a certain
gentleman.
N:
Yes, sir.
HMJr:
And he said in the thing, "Continue to keep
N:
Fine.
HMJr:
Now, I wondered if this announcement I read about
Nelson informed. #
in the paper had anything to do with that.
N:
HMJr:
N:
No, sir. It did not.
It did not.
It Was a case there of just having to divide up
the work because there was too much in one place.
HMJr:
It had nothing to do with it.
N:
No, sir.
2
-2HMJr:
Well, as far as I'm concerned, I have nothing
more on it.
N:
Well, I read that very carefully, and one of
these days when I have the pleasure of having
lunch
with you again, I'd like to talk to you
about it.
HMJr:
All right. What are you doing tomorrow?
Let's see, tomorrow. Just a minute. Let me
N:
see my --no, I tell you. I have to be over at
the Brooklyn Navy Yard tomorrow.
HMJr:
N:
Oh, I see.
I'm going over to the Brooklyn Navy Yard with
Mr. Fulsom and Forrestal. If we can get together, suppose we get together next week.
HMJr:
We'll get together next week.
N:
Fine.
HMJr:
But do you think I ought to call that gentleman
up and tell him that I've turned over the thing
to the President and you.
N:
Yes, I do. I really do.
HMJr:
And as far as I'm concerned, I'm through.
N:
That's right. I would do that, sir. I think
that you - would be the square thing to do.
HMJr:
But that I've given 8 report to the President
and you
N:
HMJr:
N:
HMJr:
That's right.
and the matter rests with the President and
you what, if anything, to do. But I'm finished.
I think that's the wise thing to do, sir.
I'll do that.
3
3
N:
Okay.
HMJr:
Thank you.
N:
Good-bye, sir.
-
4
May 13, 1942
9:45 a.m.
WAR STAMPS
Present:
Mr. Graves
Mr. Gamble
Mr. Kuhn
Mr. Odegard
Mrs. Klotz
H.M.JR: I am making my plans to go Sunday night
with Mrs. Morgenthau to that meeting, and then to stay
there. I thought I could spend a forenoon-MR. GRAVES: In New York?
H.M.JR: Yes. Which of you two gents will be
there?
ing.
MR. GRAVES: Mr. Gamble is going to run that meet-
H.M.JR: All right, what time do you start?
MR. GAMBLE: Nine o'clock.
H.M.JR: At the headquarters?
MR. GAMBLE: At the headquarters.
H.M.JR: Could I sit in the back with dark glasses
on?
MR. GRAVES: That will be difficult. They will
probably want you right up front.
H.M.JR: No, I will sit in the back.
5
-2-
MR. GRAVES: That is what I would like, too, to
have the meeting just as if you weren't there.
MR. GAMBLE: That can be very easily done. It was
done in Chicago. I would recommend you come about ten
o'clock. By that time we will be in the middle of the
meeting.
H.M.JR: What am I going to do from eight to ten?
MR. GAMBLE: Then come at nine.
H.M.JR: I will do what I did one other morning.
It is marvelous in the park at seven in the morning.
(Discussion off the record)
H.M.JR: If it won't embarrass you, Ted, I think
I will just drop in and sit in the back and see how the
meeting is going.
MR. GAMBLE: Fine.
H.M.JR: Are you going up, to o?
MR. KUHN: Up to New York? I think so.
H.M.JR: Why don't you stay at the meeting and come
back with me? I will just stay there in the forenoon and
then come back. I think it would be good for you.
MR.
KUHN: I can do it.
(Mr. Odegard entered the conference)
H.M.JR: Hello, Peter. Have you been watching us
from your observatory? How are we getting along?
MR. ODEGARD: I have been reading examination papers,
Mr. Secretary, grading examination papers.
H.M.JR: Let me put the question another way. Are
6
-3you conscious of increased tempo when you sit up at
Amherst, of what we are doing?
MR. ODEGARD: No.
H.M.JR: Through newspapers, stores, radio?
MR. ODEGARD: No, I am not conscious of it. I think
one reason is that western Massachusetts has not been
pushed.
H.M.JR: Supposing, just as though Peter and I didn't
know a thing about it, either Graves or Ted take long
enough to sketch what our plans are for promotion from
now until the first of July.
to.
MR. GRAVES: Ted, I will yield to you, if you care
H.M.JR: Would you like to hear it?
MR. ODEGARD: I would, very much.
MR. GAMBLE: I think you would both be very much
interested, by way of prefacing these remarks, if you
were to see the number of papers that have been coming
in from all over the country.
Yesterday I received newspapers from the State of
Kansas, from small towns. In Manhattan, Kansas, for
instance, where the story of our stepped-up activity
broke on the same day as the fall of Corregidor, the
fall of Corregidor is a subhead to the main headline
eight columns across the top of this paper, which I have
on my desk, announcing the Treasury's new drive for
ten percent.
We have several other papers from that same region
showing the reaction of the country to this drive for
ten percent of everyone's income in the sale of the
bonds.
Peter, in your absence this Advertis sing Council
material was completed and is going out within the
-week to some thirty-five thousand firms. It is a complete
kit - will be a complete plan, not only telling employers
what they should do but showing them how to get together
and and
with force
employees.
This a
would come through management and
not
them into
is suggesting that labor labor-management management arrangement. get together It
- prosecute
fully this whole matter of pay-roll savings.
It tells them a half a dozen steps that they should take
and that other firms have taken that have been successful,
and
it will supply them with certain aids in taking these
steps.
This same material will be extended, Peter, to cover
every firm in the country of fifty or more persons. We
will have available that much material for our field
organizations right away.
This is to be supplemented by ten-percent posters,
ten-percent billboards. We are even going to have tenpercent buttons. The buttons do not say 'At Least Ten
Percent of Everybody's Pay Every Pay Day", but the "Ten
Percent" is symbolic of our drive, to make people con-
scious of the drive, that anything less than ten percent
likely is not to be acceptable.
I make that qualification because I don't think
Peter is very crazy about buttons. It is for its promotional value that we are getting out the buttons more
than the idea of recognizing only those persons that
have-MR. ODEGARD: A symbol of individual participation.
MR. GAMBLE: Yes, but it ties in with all of the
other things we are going to do on this program of
selling the ten-percent idea. In addition to that,
there will be a series of advertisements to tie in all
of the small communities of America: "Mansfield, Ohio,
answers the call forty-four thousand strong, with spon-
sorship to be by local merchants, tied up with the
Outdoor Advertising Association.
All of the billboard posting companies in the
country are going to erect in all of these communities
8
-5large poster pamphlets. I think you saw those before you
left. Some replica of a plane or tank or gun or jeep
to be filled in as the town makes its quota.
will be put on this billboard and be filled in - stencil
That, in brief, is the promotional job that is being
done. That, of course, is being advertised by the radio
and all the mediums that have access to promoting this
ten-percent idea.
We are conducting at the present time this tour.
Mr. Sparks and Mr. Englesman visited seven or eight
States, the large States. There are ten States where
sixty-five percent of all E bonds are sold, and they are
personally presenting this stepped-up activity.
H.M.JR: That is a new figure.
MR. GRAVES: Two-thirds of our total sales are
occurring in the ten largest States. It is those States
we are hitting.
MR. GAMBLE: We are getting this to them now. They
are getting it in advance, and by the time this tour has
been completed the first State will start getting its
material. This material is designed to supplement the
General Electric mailing and the General Motors mailing,
and we feel it comes at a very appropriate time, selling
this to employers and employees alike. We don't feel
that any time has been lost because we feel people have
absorbed just about as much as they could and about as
fast as they could. It is well timed, the delivery of
this material to them.
We also are training - as a concrete example, it
was decided in Cook County, Illinois, to increase their
pay-roll savings committee from seven hundred and fifty
people to fifteen hundred people, in order to get this
job done by June 15; and a very concerted effort is
going to be made in every community of doubling the
pay-roll savings forces.
MR. GRAVES: By the way, have you heard anything
from Detroit?
9
6-
MR. GAMBLE: I haven't heard anything - to get done
by June the 15th and to complete all of the installation
in all the firms of a hundred or more, involving twentytwo million people and a drive in that period for a ten
percent participation by everybody in the plants This
has been done in a sales way. It is to be presented to
all of these people as a top selling job, not one of
pressure, but one of promotion. I think we have taken
about every step we can take under the head of salesman-
ship to do this job, and hitting about as hard as we
can hit without grabbing them by the coat lapel and
telling them they had to sign. I think we have drawn
a good line and you will be well pleased.
MR. ODEGARD: Did the CIO plan come through?
MR. GAMBLE: It has not. They have suggested that
a labor-management committee be set up to run this whole
program, five from labor, five from Government, five from
management, to run the War Savings Bond activity so far
as the CIO people are concerned. But Houghteling told me
last night that he was convinced after some further conversation that this was a plan by Carey and not Murray's
idea and that he was going to have that straightened out,
he thought, right away.
MR. ODEGARD: Savings incidental?
MR. GRAVES: No, it was a plan for the purchasing
of the War Savings Bonds only under those auspices.
MR. KUHN: Wasn't the chairman of that committee
to be the chairman of the whole War Savings program?
MR. GRAVES: What they said was that the executive
secretary of that committee would be the executive
director of the War Savings. It was a very grandiose
and an ambitious scheme.
MR. KUHN: Accent on the "ambitious."
MR. ODEGARD: What about these hundred and seventy-
five organizers?
10
7-
MR. GAMBLE: That is the AF of L, one hundred and
fifty organizers of the American Federation of Labor
that have been assigned by Mr. Green to cooperate in
this program. They are going to do that through four
sections of the country. For example, Mr. Hyatt
in the northeastern part of the country will have a
portion of those organizers assigned o him; they will
contact locals and contact local labor people and even
go down into the plants and talk to the stewards about
increased participation on the part of the employee,
all independent of management and all independent of
our people, so far as the program is concerned. It is
just some promotion of their own design to do this job
a little quicker than has been done.
That is one phase of it, Peter, and the second
phase of the work has to do with the solicitation of
those persons not available through savings. That
stands about where it did when you left. You are
familiar with that. You sat in on it. It is not
worked out, with the exception that California has
since approved its plan and is going ahead on the
twenty-fourth. California will be the first.
H.M.JR: That is the certificate, the cash and
carry?
MR. GAMBLE: That is correct. California will be
the first State to give us a report on that. They will
do this job on the twenty-fourth day of May. That is
just twelve days away. Their first canvass will be
done in Los Angeles County, involving about two million
people.
MR. ODEGARD: They will get ahead of New York?
MR. GAMBLE: They will be ahead of New York.
I would like to repeat myself a little, Mr.
Secretary. I have a feeling from hearing you yesterday,
and from hearing Mr. Odegard just now, that you don't
feel that the stepped-up activity is being felt in the
11
-8-
country. I think just the opposite is true. I don't
think at any time in the year that we have been in this
program have things been at as high a point of enthusiasm,
and public reaction and public consciousness of what we
are trying to do was never higher than right now.
H.M.JR: That is what I asked. The President gets
his reaction in Hyde Park; I get mine in East Fishkill.
I can't find out who they appointed in Fishkill. I can't
find they appointed anybody in East Fishkill, although he
said they had six hundred canvasses going. Thank heavens
they had canvassed Franklin D. Roosevelt's Library; that
had been done before he got up there.
MR. KUHN: I think you can tell from the number of
rallies and other celebrations that are being held
throughout the country, and we get the repercussion of
that in requests for statements. More than ever before
you can see it in the newspapers, in the department store
advertising, and the publicity.
H.M.JR: I don't think there is as much in the
department store advertising as there was a month ago,
two months ago.
MR. GAMBLE: Much more, Mr. Secretary.
H.M.JR: Go back a month - you had three full-page
ads in Washington in a week.
MR. GRAVES: Did you see the "Washington News"
yesterday? It was just full.
MR. KUHN: "Washington News" had a special section.
MR. OD GGARD: I think the thing that impressed me,
perhaps unduly, was this retailers' meeting in Chicago.
I thought that was very hopeful.
H.M.JR: Were you out there?
MR. ODEGARD: Yes.
12
9-
H.M.JR: I didn't know it. I mean, I just feel
this way, gentlemen; I am nervous as a wet cat about
this thing. As I said yesterday, there is nobody in any
Government agency that is going to give us a hand.
Everybody is trying to find a way to trip us.
I was sitting here with Carey alone here yesterday,
and he put it very well. "He said, "You know, Mr. Morgenthau, we have had several meetings with the Henderson
group. I had one this afternoon, and they are scared,
actually scared, of handling it. We think they should
handle it, but they think it is much easier to ration
money than commodities," so therefore they are for rationing money and they want us to do it.
I never heard it put quite so simple. He says they
are scared of it and that they want us to do it. He
said, "They are trying every way possible to get you to
do it" and, he said, That is the situation over there."
MR. ODEGARD: Didn't you say, Ted, that Henderson
had denied making--
MR. KUHN: That was the strangest business.
H.M.JR: Yes, I want to see those clippings.
MR. KUHN: The "New York Times" carried his d enial
in full, including compulsory savings, but they had a
piece in the next column by Arthur Krock playing with
Henderson as a dodger, that is, showing how he has
changed.
The "Herald Tribune" ran only a piece of what he
said. They did not run his denial about compulsory
savings, and they had an editorial based upon the
erroneous story of the day before.
The "Washington Post" didn't carry a line of his
denial and had an editorial based on the erroneous
statement of the day before.
(Clippings handed to the Secretary.)
13
- 10 -
Here
is a thing called "Leon the Leaper"
in theH.M.JR:
"New York
Tribune."
MR. GRAVES: Mark Sullivan had a story.
MR. KUHN: That was not inspired by Henderson
thing.
MR. GRAVES: No but just as damaging.
H.M.JR: Don't think I don't realize everybody is
working like hell, but I am just going to - it is not
here (indicating clippings).
MR. KUHN: "New York Times" had it in full this
morning.
H.M.JR: Must have had a different edition than I
have got.
Will you (Lt. Stephens) ask Mr. Schwarz to get
together any clippings on Mr. Henderson's statement of
last night.
(Mrs. Klotz entered the conference.)
MR. GAMBLE: I don't think in Manhattan, Kansas,
for example, that the people are vitally concerned
about and I don't think they hear as much about what
goes on here in Washington as we do right here and as
they do in New York. I think by and large that our
program has so completely overshadowed anything that
has been detrimental to it that our work has not been
impeded in the slightest, and I believe that we should
perhaps get together for you right away a sampling of
press material from over the country so you can see what
the reaction is.
H.M.JR: Well, you see, we are talking here quietly.
Well, now that we have this room, if I don't go in -
it is my own room, you have a whole room at your disposal,
and I don't think you give me enough. I keep having to
14
- 11 -
live off my own juice and have to keep charging my own
batteries; but I don't get enough juice. As an example,
I have had only two letters back from anybody, McKellar
and somebody else, in regard to our bonds. Well, he
says there are a lot of letters - give me some good stuff.
MR. GAMBLE: There are two things I picked up yester-
day because of the remark you made.
H.M.JR: I mean, in other words, don't overlook I mean, I am sold and I am giving everything I have got
to this thing; but I need ammunition. I may run out of
ideas.
MR. KUHN: You got a swell letter from William Allen
White. I think he is in a pretty good position to know
what the Middle West is thinking about this thing. It
might be a good idea for you to ask him in to lunch some
time to talk about it. He is completely with us on
voluntary savings on all aspects of this thing, and he
is a pretty good observer of his own part of the country.
MR. GAMBLE: May I augment that by saying if that
is a good idea why wouldn't it be a good idea to have a
half dozen newspaper people, picked at random around the
United States, come in here and have lunch with you, and
let them tell you how our program is--
H.M.JR: They would misunderstand it, think I was
trying to sell them--
MR. KUHN: White wouldn't.
H.M.JR: If they are sold, I would leave them alone.
They don't have to be sold on my program. But if you
have any good news it doesn't do any harm to give it to
them. If I sent for them, they might think I am going
to ask for a favor. I know these newspaper men; you send
for them and they think, "What does Morgenthau want?"
I invited Henderson and he called Eccles trying to find
out what I am going to sell him.
15
- 12 MR. GAMBLE: Our program will stand that kind of a
test. That was my point.
H.M.JR: I think you have got the newspapers. Give
me some stuff I can use for the President, the Vice
President. There isn't a Cabinet meeting that it doesn't
happen I need more ammunition.
I don't think I would invite newspaper men in.
Harold, who over there is in charge of mail, the
stuff going out?
MR. GRAVES: That is done in the Public Debt
Service, the old division of Savings Bonds.
H.M.JR: Is it well done?
MR. GRAVES: Well, we have had a lot of trouble,
but I think it has been remedied. Our difficulty was
in duplications, people appearing on more than one list
getting two sets of material, or three or five sets of
material.
H.M.JR: Is that Broughton?
ment.
MR. GRAVES: Yes, that is Mr. Broughton's departH.M.JR: Who is immediately in charge?
MR. GRAVES: Wilson.
H.M.JR: This is just a shot in the dark-MR. GRAVES: They are moving that, by the way,
to Chicago.
.M.JR: Just a shot in the dark, but ask them
as of this morning how many unfilled orders they have
on hand and how old are the orders they have on hand.
MR. GRAVES: You mean for poster material?
- 13 -
16
H.M.JR: Anything. Send somebody down and-MR. GAMBLE: You asked me to--
H.M.JR: How much have they got on hand, how old
is it that is unfilled, as of this morning.
MR. GAMBLE: It takes forty-eight hours to take
material out of here, poster material and things that
the War Savings staff has.
H.M.JR: That is a day too long.
MR. GRAVES: As I say, they are moving that activity
to Chicago.
H.M.JR: It will be the same people?
MR. GRAVES: Same people.
on.
H.M.JR: Might have to put some younger fellow
MR. GRAVES: I think, as a matter of fact, they
have done very well, with that single difficulty of
duplication.
H.M.JR: Just check it.
MR. GRAVES: I will.
H.M.JR: Peter, you will be interested; we are
going ahead wi th four meetings for the Negroes.
MR. GAMBLE: Be five altogether, sir.
H.M.JR: Five, with Robeson, Marian Anderson, as
the drawing cards.
MR. ODEGARD: I hope these are from the ground up
rather than from the top down.
17
- 14 -
H.M.JR: Take a look at it while you are here.
I don't know. I hope so.
MR. GRAVES: While he is here - he is here for
good now.
MR. ODEGARD: Not until after commencement.
H.M.JR: When are you going up for commencement?
MR. ODEGARD: Probably Saturday.
H.M.JR: Want to go up with me Saturday morning?
MR. ODEGARD: Like very much to.
H.M.JR: Want to come back with me? We are leaving
right after commencement, and we are going to hear
Robeson sing and go in the morning and hear him (Gamble)
lecture Monday morning.
MR. ODEGARD: Gamble lecture? I would like that
very much.
H.M.JR: To hear Robeson sing?
MR. ODEGARD: To hear Gamble lecture.
H.M.JR: That is the program.
MR. ODEGARD: Lieutenant Stephens wired the other
day to find out, and I said four-thirty provided you
could shake loose of the well-wishers.
H.M.JR: We will get away from there by five.
MR. ODEGARD: I think the students were a little
puzzled by my reference "better allow time to get rid
of the well-wishers."
H.M.JR: We don't make any allowances, but think
18
- 15 -
it over, if you would like to go up Saturday morning,
then to New York and hear him (Gamble) lecture Monday
morning. I will leave there around noon to come back.
Would you like to do that?
MR. ODEGARD: Very much.
H.M.JR: Have you been to one of these meetings?
MR. GAMBLE: There have only been two, one in
Chicago Monday, one in Detroit yesterday.
H.M.JR: What are all these rumblings that you
tell me about the Women's Division?
MR. KUHN: No rumblings. We told you some time
ago that we were looking over the whole of that set-up
over there to try to lick it into shape. We are working
on that right now.
H.M.JR: You said you couldn't touch the women
until Peter got back.
MR. KUHN: I mean the whole thing, we were all going
to talk about it. Peter has been looking into it already.
H.M.JR: Why can't you touch any of the women until
Peter gets back? (Laughter)
MR. KUHN: He has got an inside track.
H.M.JR: All I asked was before you make any move
I would like to see what you are going to do.
MR. KUHN: We don't know yet the move that is
needed.
H.M.JR: This is not for Kuhn to hear, but all the
rest of you, any of you that have influence with Kuhn I have not - but I want you to get, without his knowledge to engage a very able man writer and a very able woman
19
-16- -
writer who can write speeches so that Kuhn isn't doing
that except for me or for some special occasion. I have
begged him now for months--
MR. GRAVES: He wants to write them himself?
H.M.JR: He wants to write them himself.
MR. KUHN: I would be delighted to get somebody.
H.M.JR: A very able man and a very able woman.
I think there are enough people. If you haven't got
the money, let some of these people go, some of these
pamphleteers, and get it so that he is left to help me,
for all these important committee meetings to which he
goes, and not be bogged down with writing speeches for
Mr. Eugene Meyer, things like that.
MR. KUHN: Oh, that.
H.M.JR: But, anyway, would you talk to him some
time when you see him?
MR. KUHN: I have still got two things to discuss
with you: First, this Cincinnati business, and secondly,
these war heroes. On that I really think that it is
going to require a talk on your part with Lovett or
somebody in the War Department, and somebody of equal
rank in the Navy, to make sure that we get our people
for that.
H.M.JR: Why don't I do it this way: Let me talk
to either the Secretary of War, and Navy, or the Acting
Secretary, and ask them who is in charge of public
relations, tell them what I want, and would they please
tell these people that this is something that I want
very much and that you will be in touch with them. I
want them notified from the top down.
MR. KUHN: I just think it needs some pressure
from the top. I think the trouble with the public
relations people over there is that they are not
20
- 17 -
authorized to do the kind of thing that we want.
H.M.JR: Suppose I tell them you would like to
see Mr. Lovett. It would be much better, you know, to
go to Lovett than to General Arnold and Admiral - who
is the head of the air corps in the Navy?
LT. STEPHENS: Admiral Towers.
MR. KUHN: They are very strict about these things;
they will only send one man for one occasion. They won't
put any of these people on tour.
I know Knox's assistant, Adlai Stevenson.
H.M.JR: I will let him name the man, somebody that
has got authority to act. I will get him for you right
now.
MR. ODEGARD: You mean that is for the American
heroes, too?
MR. KUHN: I am thinking of the Americans. The
British are actually sending theirs over any time we
want them; but I want to get a dozen or so Americans,
like people from the Marblehead crew who are back here
now.
MR. ODEGARD: They insist on that on an individual
basis?
MR. KUHN: Individual basis.
MR. ODEGARD: It doesn't do if you plan the meet-
ings in advance so that they know specifically in
advance what is involved?
MR. KUHN: Well, we sometimes plan meetings around
the people that we can get.
MR. ODEGARD: I was just thinking I can understand
their reluctance not to go in blind.
21
- 18 -
MR. KUHN: All I would like to have is a list of
the people who would be available to us if we wanted
them.
H.M.JR: Have you got your Greek friend?
MR. GAMBLE: He has been cleared by the incometax people.
H.M.JR: You will have to move fast on this thing.
MR. KUHN: Also talk about the financing of these
trips. It is going to be a problem there who is going
to foot the bill.
(The Secretary held a telephone conversation with
Secretary Knox, as follows:)
22
May 13, 1942
10:21 a.m.
HMJr:
Hello.
Operator:
Secretary Knox.
HMJr:
Hello. Frank?
Secretary
Knox:
Yes, Henry.
HMJr:
How are you?
K:
I'm fine.
HMJr:
Good. I'm calling up for some help.
K:
Yeah.
HMJr:
Frank, I got the idea several weeks ago that if
we could get - bring over to this country some
of the English heroes, some of the people that
bombed Germany, and put them on tour in this
country for a War Bond drive, it would help us,
you see.
K:
Some of the flyers, the British flyers?
HMJr:
Yeah.
K:
Uh huh.
HMJr:
Now they've agreed to it.
K:
The British have?
HMJr:
Yeah.
K:
Uh huh.
HMJr:
And they've agreed to send over some Commandos.
K:
Uh huh.
HMJr:
Now, what we want 18, we'd like when this - in
the first place we need some help. We want to
send American Naval heroes and Army heroes with
23
-2-
K:
them, so it isn't just Englieh, you see?
(Laughs)
hot
water. Henry, look out, or you'll get me into
HMJr:
Why?
K:
Because I'm being bombarded from every quarter to
send Buckley and send O'Hare and send
HMJr:
I know.
K:
And it just disrupts the whole damn
HMJr:
That'e all right. I've got to raise the money,
though.
K:
I know, but you can't have active combat officers
to raise money. You've got to use fellows that
can't do the combatting.
HMJr:
Well, that isn't going to impress the people.
K:
I don't think you need any American people with
them if you've got these Britishers. That'll be
enough.
HMJr:
Oh, sure, now.
K:
Huh?
HMJr:
And listen - and furthermore, I want you to help
me finance it. You can do a little Navy recruiting
along with us.
K:
No, that's out, Henry. I got your letter. We'll I'll make you this proposition, and it's all I
can do.
HMJr:
K:
Yeah.
And that is that I'll supply the men whenever I can
or the bands, but I can't pay for the transportation,
because I haven't got anything to pay for it with.
There's no provision for anything of that sort.
When they come down from Chicago - to Chicago from
Great Lakes, the people in Chicago have to raise
24
- -3 -
the money to get them down there. I literally
have no money for that purpose at all, and I'll
contribute the men and the organization; but
somehow or other you've got to find ways to
transport them.
HMJr:
Un huh.
K:
I went over it in full with General - with Admiral
King and Horn and Jacobs this morning when I got
your
letter.
HMJr:
Uh huh.
K:
And we all agreed that we'd make you that definite
proposition that whenever we could, we'd supply
the organization to participate in these affairs,
transportation for that purpose.
but we cannot and have no means of paying for
HMJr:
God, you sound tough this morning.
K:
(Laughs)
HMJr:
Regular quarter deck stuff.
K:
(Laughs) Well, I've got a tough gang here to run.
HMJr:
Yeah.
K:
It makes a man tough.
HMJr:
Well, you know - this giving stuff is both ways,
you know.
K:
HMJr:
What?
Giving is both ways. You may want something to-
morrow.
K:
Now don't you go threatening me now, young feller.
HMJr:
No, I'm just holding out a carrot.
Holding out a carrot or a mailed fist, which.
K:
HMJr:
No, a carrot and a rose.
25
4K:
(Laughs)
HMJr:
Here you send - I get these mysterious letters
from the President to look up all this stuff
about the Chicago Tribune, where they get the
paper from and everything.
K:
(Laughs) Well, I'11 help you on that.
HMJr:
Yeah, yeah.
K:
(Laughs)
HMJr:
And I turn myself inside out to get something on
K:
Well, you go ahead and do it. That'11 be a public
HMJr:
Yeah.
K:
It won't be for the Navy alone.
HMJr:
Yeah. Well, loosen up a little bit.
the Tribune.
service.
HMJr:
I'm loosened up to the extent of all the men you
need that I can possibly supply.
Yeah. Now - now - well, now let me ask
K:
You've got to have some expenses selling your
K:
bonde, Henry.
HMJr:
Yeah.
K:
You just can't duck it.
HMJr:
No.
K:
HMJr:
And I think it's a proper Treasury expense. If
I supply the characters in the play, you ought
to supply the train to take them there.
Well, some months ago, somebody - I don't know
who it was - I think it was you or Forrestal said,
"We ought to hook up on this Navy recruiting thing."
26
-5K:
Well, I didn't say it; and if Forrestal did, he
wasn't familiar with the way it's being handled.
HMJr:
I see.
K:
It can't be done.
HMJr:
Well, now, look. Who can we contact BO as not
to have to bother you again, seeing that you've
given me everything that I want.
K:
Well, let's see.
HMJr:
Who can talk for you?
K:
Jacobs - that's in the personnel, and properly
falls in the Bureau of Navigation, and
HMJr:
What about this fellow Adlai Stevenson?
K:
All right. He's very good.
HMJr:
Would he be all right?
K:
He would be quite all right, yeah.
HMJr:
What?
K:
Yeah.
HMJr:
Would you speak
K:
And he can go directly to Jacobs, and needn't
bother me about it.
HMJr:
Well, Kuhn
K:
All I'll do is settle the policy, and then let
them work it out.
HMJr:
Well, Kuhn, K-u-h-n, will represent me.
K:
K-u-h-n.
HMJr:
Ferdinand Kuhn.
K:
What?
27
-6HMJr:
Kuhn, K-u-h-n.
K:
All right.
HMJr:
Adlai Stevenson knows him well.
K:
All right, fine.
HMJr:
And
K:
Now, while I have you on the phone.
Yeah. Now what do you - yeah.
HMJr:
aren't you going to buy me a meal one of
K:
these days.
HMJr:
Yes, sir.
K:
(Laughs)
HMJr:
How about tomorrow?
K:
Is tomorrow Thursday?
HMJr:
Yes, sir.
K:
I think so.
HMJr:
About one o'clock?
K:
Yeah, uh huh.
HMJr:
And to show you how much I love you, I don't want
anybody else.
K:
Yeah. Don't you want me to bring Ernie King along?
HMJr:
Well, if you can it would be very nice
K:
(Laughs)
but you alone would be sufficient, but if -
HMJr:
hello.
K:
Yeah.
28
-7HMJr:
K:
If you got King, it would be a very nice addition.
I'll see 1f Ernie 18 free. If he is, I'11 bring
him along.
HMJr:
Tomorrow.
K:
Uh huh.
HMJr:
That'11 be wonderful.
K:
What?
HMJr:
That'll be wonderful.
K:
All right, Henry.
HMJr:
I thank you.
K:
Good-bye.
HMJr:
I expect you anyway.
What's that?
K:
HMJr:
I expect you in any event.
K:
All right, I'11 be there. Yeah.
HMJr:
Okay. Thank you.
29
- 19 -
H.M.JR: That's all I do all day long.
You (Kuhn) find out through Mr. Graves and the
finance people before these people get here that you
have got the money in the bag. We don't want another
Donald Duck.
MR. KUHN: That is what I want to ask about.
H.M.JR: Anybody over at the War you would rather
work with? McCloy?
MR. KUHN: McCloy would be fine, wonderful.
MR. GAMBLE: Our big problem is not so much
transportation as it is gasoline and places to take
care of these planes, as they travel around the country.
H.M.JR: No trouble about that.
(Discussion off the record)
MR. KUHN: There is the matter of transportation
from England, for example. The English probably won't
pay that.
H.M.JR: My God, here I am working - gave them a
check ten days ago for seventy million dollars, which
they couldn't get. I got another one for a hundred and
ten million dollars. Get Sir Frederick Phillips in on
this thing. You had better have the thing all signed,
sealed and delivered.
MR. GRAVES: We must; we cannot make a move until
we know where we stand on financing.
H.M.JR: That is your responsibility.
MR. GRAVES: I have already told these people that
the first thing is to make sure that we can pay.
- 20 -
H.M.JR: No Donald Duck stuff.
MR. GRAVES:
That's right.
H.M.JR: Are you (Odegard) going to give us full
time now?
MR. GRAVES: Yes, he is; he doesn't know it.
(The Secretary held a telephone conversation with
Under Secretary of War Patterson, as follows:)
30
41
May 13, 1942
10: 31 a.m.
HMJr:
Operator:
Hello.
Secretary Stimson is in conference. I have
Mr. Patterson.
HMJr:
Okay.
Operator:
Go ahead.
HMJr:
Bob.
Robert P.
Patterson:
Henry.
HMJr:
Are you Acting Secretary of War today?
P:
I believe not.
HMJr:
Oh, I don't know. I asked for the Secretary or
Acting Secretary, but
P:
He came back - the Secretary came back yesterday.
HMJr:
Well, anyway, they gave me you, so as far as I'm
concerned, you're the Acting Secretary of War.
P:
All right.
HMJr:
Ig that okay?
P:
You bet.
HMJr:
Bob, several weeks ago I asked the English whether
they would send over some national hero who had
bombed Germany, you see
P:
Yeah.
HMJr:
that we could use, and put on a tour on the
country to help us sell War Bonds.
P:
Yeah.
HMJr:
Now, they're going to do it.
P:
Yeah.
42
-2HMJr:
And they're sending over the man that actually
P:
What's his name?
HMJr:
Just a minute.
P:
Paddy Finucane?
HMJr:
Nettleton.
P:
Yeah.
HMJr:
Nettleton.
P:
Yeah.
HMJr:
went over and bombed Lubeck, or one of those
places, you see.
Not Paddy Finucane. I asked for Paddy, but I
didn't get Paddy.
P:
(Laughs) All right.
HMJr:
That's who I asked for. And they may send us
some Commandos.
P:
Uh huh.
HMJr:
I'm asking both War and Navy whether they will
help us, because I'd like - I think it would be
nice if we sent some outstanding Army hero along
with it, you see?
P:
Yes.
HMJr:
HMJr:
So that it wouldn't be just English.
Yes. How long is it going to take?
They say they'11 be - I don't know.
P:
A couple of weeks?
P:
HMJr:
A couple weeks. And we'll need help from the
Air Corps to help us when these men land at
different air fields, you know, to look after
them.
43
-3P:
Yes.
HMJr:
You may want to designate somebody to go with
them, you see.
P:
Yes.
HMJr:
Now - 80 that - I mean, that they're taken care
of from place to place where they go.
P:
Yes, I understand.
HMJr:
Now, who could handle that for you, so that we
could go to somebody and work out the details.
P:
Well, I think probably - oh, anybody - Greenbaum
or Bob Ginsberg, or Bob Lovett. Whoever you'd
like.
HMJr:
Well,
it's - well, I don't know. It's Air Corps
business.
P:
It's Air Corpe business, all right, and they'd
have to get the man. Suppose it's Bob Lovett?
HMJr:
Well, he'd be fine if you'd tell him to do it.
That's the point.
P:
Yes, I will.
HMJr:
I mean
P:
I'11 tell him to. Who's handling it for you?
HMJr:
Ferdie Kuhn.
P:
Kuhn?
HMJr:
Yes.
P:
Yes.
I'll see that Bob Lovett gets in touch with
him.
HMJr:
But the point is, from the time they land here
until the time they leave the country, I think
an Air Corps man should be with them, don't you?
44
4P:
Very likely, yes.
HMJr:
What?
P:
Very likely. Have Kuhn call up Lovett, will
you?
HMJr:
Yes.
P:
That's the best thing to do.
HMJr:
And we can count on cooperation.
P:
You surely can, Henry.
HMJr:
And you can give us some Army hero, maybe, to
go along with them?
P:
If we can find one, yes. They're - they've been
a long way off, you know, and I don't think
there are many around.
HMJr:
P:
HMJr:
Well
They stay in Australia. But certainly 80 far
as - the other part of it is easy enough, that
is, the escorting of them around by an Air Corps
officer here. That can surely be done, Henry.
And giving them the - each of these airports that
I've been to always have an Army hangar and quarters
and all that sort of thing.
P:
Sure, they can put them up.
HMJr:
They can put them up, and feed them, and
P:
Yes, indeed.
HMJr:
P:
.....gas them, and that sort of thing.
That is right.
HMJr:
What?
P:
Will you have Kuhn call up Lovett?
45
-5HMJr:
Right.
P:
That's right.
HMJr:
And, of course, we wouldn't object if you want
to do some Air Corps recruiting along with it.
P:
(Laughs) Yeah.
HMJr:
What?
P:
Yes, there may be something doing there.
HMJr:
You see?
P:
Yeah.
HMJr:
You might want to hook up with Air Corps recruiting,
and we might even nick you for a little of the
expenses.
P:
Yeah. I'll ask Lovett to take it up; but if you
have Kuhn call Lovett, that's the best thing.
HMJr:
I'll do that.
P:
Fine.
HMJr:
Thank you.
P:
Good-bye.
- 21 -
MR.
46
KUHN: That is wonderful.
H.M.JR: I didn't think Greenbaum would be so good
as Lovett.
MR. KUHN: Lovett is the man we have been dealing
with on all these things.
H.M.JR: O.K., this was a good little talk and I
enjoyed it.
47
THE SECRETARY OF THE NAVY
WASHINGTON
May 13, 1942
lunch
My dear Henry:
I have talked with you over the 'phone about your
letter of May 11 concerning the Navy Department providing
officers and men for parades or color guards to attend
rallies designed to sell bonds.
I have discussed this, as I told you on the telephone
11
with Admiral King, Admiral Jacobs and Admiral Horne and our
combined judgment is that ye are ready to provide, whenever
we can possibly do so, the Manage Musical organizations
you desire on the condition that whatever expense for transportation or subsistence may be incurred may be provided by
the bond-selling organization of the Treasury Department.
In accordance with your suggestion, I am asking Adlai
Stevenson to represent the Navy Department in any future
arrangements of this character. My understanding is that
you will be represented by Mr. Kuhn.
Sincerely yours,
Fame
The Honorable Henry Morgenthau
Secretary of the Treasury
Washington, D. C.
48
May 13, 1942
10:53 a.m.
HMJr:
Hello.
Operator:
Miss Tully is with the President.
Well, leave word, will you please?
HMJr:
Operator: Yes.
HMJr:
And did Mr. Batt call back?
Operator:
No. I called over there and cancelled the
HMJr:
Well, if he's available, I want to talk to him.
All right.
Operator:
call.
May 13, 1942
10:55 a.m.
HMJr:
Hello.
Operator:
Mr. Batt.
HMJr:
Hello.
William
Batt:
Hello.
HMJr:
Batt, are you.....
B:
Good morning.
HMJr:
Good morning. Are you so you can talk?
B:
Yes. There's nobody in my office.
HMJr:
This is Morgenthau.
B:
Yes, sir. I knew that.
HMJr:
What I just wanted to say was this. I made a
report to the President of the situation that
48
May 13, 1942
10:53 a.m.
HMJr:
Hello.
Operator:
Mies Tully is with the President.
HMJr:
Well, leave word, will you please?
Operator: Yes.
HMJr:
And did Mr. Batt call back?
Operator:
No. I called over there and cancelled the
HMJr:
Well, if he's available, I want to talk to him.
call.
Operator: All right.
May 13, 1942
10:55 a.m.
HMJr:
Hello.
Operator:
Mr. Batt.
HMJr:
Hello.
William
Batt:
Hello.
HMJr:
Batt, are you.....
B:
Good morning.
HMJr:
Good morning. Are you so you can talk?
B:
Yes. There's nobody in my office.
HMJr:
This is Morgenthau.
B:
Yes, sir. I knew that.
HMJr:
What I just wanted to say was this. I made a
report to the President of the situation that
49
-
2-
we talked about the other morning.
B:
Yeah.
HMJr:
I gave a copy of it to Nelson.
B:
Yeah.
HMJr:
Now, as far as I'm concerned, the matter is in
B:
Good.
HMJr:
their hands.
And whatever they do 18, of course, is their
business; but I'm not - I put it in their hands,
and that ends it 88 far as I'm concerned.
B:
All right. I'll get ahold of Don's copy.
HMJr:
And
B:
I think I'd better not ask you over the telephone,
unless you want to tell me what conclusion you
came to.
HMJr:
I didn't come to any conclusion. I just tried to
give a factual report.
B:
Uh huh.
HMJr:
I didn't make any recommendations.
B:
Good. Well, then I'll get ahold of Don's copy
and see what suggestions may appear in order
from this end. I appreciate very much your
calling.
HMJr:
But anyway, it's there, and I gave it to him,
and as I say, as I recall it, I don't think I
made any recommendations or - of any kind - I
just - here were the facts as we saw it
B:
HMJr:
Yeah.
....and I just gave it to the President and a
copy to Nelson.
50
-3 B:
Okay.
Thank you very much for calling me.
HMJr:
Okay.
Thank you.
B:
Good-bye.
51
May 13, 1942
11:05 a.m.
Grace
Tully:
Hello, Mr. Secretary. How are you, sir?
HMJr:
I'm fine. I hear you didn't try our Dutchese
T:
No.
HMJr:
What?
T:
No, sir. I decided not to.
HMJr:
Good for you.
T:
(Laughs)
HMJr:
I can't remember whether the President has press
conference Friday morning or not, does he?
T:
HMJr:
T:
HMJr:
County air.
Yes. Friday morning at ten-thirty, uh huh.
That's a bad time to ask to see him then, isn't
it?
Yes, as a rule it is, because it holds him up in
the morning, you see, when he's trying to get
over here by ten-thirty.
Well, couldn't I get the first appointment after
press?
T:
I should think so.
HMJr:
What?
T:
If they haven't got it already sewed up, I should
HMJr:
Do you want to negotiate it, or
T:
Yeah, I'll do it. I'll ask Roberta.
HMJr:
What?
T:
think so.
I'11 ask Roberta if she has, say, eleven o'clock.
Huh?
52
-.2 HMJr:
Eleven.
T:
Eleven o'clock on Friday morning.
HMJr:
If I can have that, yes.
T:
Right.
HMJr:
That will be very nice.
T:
All right, fine, Mr. Secretary. I'11 let you
know.
HMJr:
I thank you.
T:
Right, sir. Good-bye.
53
May 13, 1942
11:15 a.m.
FINANCING
Present :
Mr. Eccles
Mr. Sproul
Mr. Hopkinson
Mr. Bryce
Mr. Buffington
MR. BUFFINGTON: The Secretary has not seen that.
(Paper handed to Secretary)
MR. SPROUL: I suppose the first business is to
present to you this report which Mr. Hopkinson and I
were asked to prepare by the security dealers industry
and the Federal Reserve Bank presidents in connection
with an organization for promotion and sale of Government
securities.
H.M.JR: May I read it now? Have you seen it?
MR. ECCLES: Yes, sir. I sat through the meetings
with the group. I sat through the meetings with the
group on Friday, and I am familiar with the developments.
H.M.JR: Have you got a copy of it?
MR. ECCLES: Yes.
H.M.JR: I would like to read it now, if I may. Is
this to be made public the way it is written now?
MR. SPROUL: Not intended that way - a more general
statement.
H.M.JR: If it was going to be made public, the
second paragraph of VII, I don't think at that stage
it reads too well.
MR. ECCLES: I wouldn't think that a statement of this
-2-
54
sort is designed for public release, would serve no
purpose.
H.M.JR: Those two sentences in VII really contradict
each other.
MR. SPROUL: The first one relates to the general
committees, the second paragraph relates to the salesmen
or the sales group working under the general committees.
MR. ECCLES: Look at the chart. That would maybe
help you to get a picture. That is on the next page
on the type of committee.
H.M.JR: When you say, "Whether or not some system
of compensation for a selling group--
MR. BUFFINGTON: Don't you mean, Mr. Sproul, in that
phrasing that it is the group that may be involved in
selling? It isn't the selling group in the sense we
think of it.
MR. SPROUL: Not in the securities industry. It is
the individuals, the salesmen who may be out spending their
time and their effort selling securities under the general
direction of a committee which is serving voluntarily.
H.M.JR: Who is going to be the executive manager?
MR. SPROUL: The executive manager would be appointed
by the committee, I assume, subject to your approval; and
in my thinking, at least, he would be the director of
the sales organization for the district under the committee.
H.M.JR: It is all right with me. As I say, the
only thing that bothers me is that VII.
too.
MR. SPROUL: That is the thing that bothered us most,
H.M.JR: Because you say "The members of all
committees will be volunteer workers," so good, and,
3-
55
"Whether or not some system of compensation for a selling
group will have to be devised will depend upon the extent
of the call made upon the services of salesmen-- Right
there, if I call on you a little bit you don't want to be
paid, or if I call on you a lot you do.
MR. ECCLES: That isn't the point.
H.M.JR: That is the way it reads to me.
MR. ECCLES: This list of committees, as I understand
it, shown on that chart, would not expect compensation
at all, but to the extent that they had thousands of
salesmen, for instance, the usual house-to-house or
institution- to-institution canvasser, it was just a
question of how much work you could get without compen-
sation to the salesman who is selling bonds or securities
for a living. That was the point rather than these
committees--
H.M.JR: I understand about the committees. But,
I mean, I read this thing, "Whether or not some system
of compensation for a selling group will have to be
devised will depend upon the extent of the call--" Well,
if-I make a call on you a day a month, O.K., if I call
on you a week a month, O.K., now, two weeks, no--
MR. SPROUL: There is some substance to that. It
was felt that a job could be done on a voluntary basis,
but not the thorough, complete job which in many of our
minds is going to be necessary and which would require
a substantial part of the time of security salesmen who
have nothing else to live on but their time.
MR. HOPKINSON: It also enters into the ability to
do it on an organized basis, where you can have a disciplined
and thorough recovery and require reports. I visualize
in many of these communities that it will be set up
on a basis somewhat the same as we had in our United
Charities and Community Chest drives in different
4
56
communities where there would be prepared under the
sales director and the district or regional committees,
detailed lists of people to be covered, not a house-to
house one that would interfere with the work your
other committees are doing, but people more of the
investor group. Those people would be assigned definite
sales organizations. They would be set up and sent out
maybe if you had an issue that was going to be open for
-
a week where a salesman would do nothing else but give
his time for a week or ten days in covering maybe a
dozen towns that weren't large enough to have their
own competent sales organi ation, and if that kind
of a coverage was going to be obtained with efficient
selling people who are used to talking securities and
comparing the merits of one type of security with another,
we don't believe it can be effectively done on a voluntary
basis when you get down to the lower strata. Now, it
may be that on many issues that the committees would
function, assist you on, there would be no such organization
required at all.
I think on things that ordinarily are the type where
you would open subscription books and close them reasonably
promptly and have subscriptions made, and where the principal purchasers would be informed buyers, no such
organization would be needed and no questions of com-
pensation involved in any phase of it. On other types
of issues we visualize the possibility of it. We didn't
try to cross the bridge-H.M.JR: Well, I couldn't accept this thing the
way it is written. I mean, can't accept it.
MR. BRYCE: You mean on that point, Mr. Secretary?
H.M.JR: Yes.
MR. BRYCE: Well, I can say to you --
-5-
57
H.M.JR: I mean, we are none of us children. I mean,
you have got to look at this thing from both sides of
the table. We set up this organization which is a swell
organization, get it all set up, get a lot of publicity,
all right; and then let's say - let's be frank about this
thing, that some minority group says, "Well, now, all
right we are not going to do this thing for the Treasury.
To hell with them unless they pay us. Then I am saddled
with a national organization, and I won't play ball because I won't pay them. Why let myself be put in that.
position? I am not going to. I am not going to. This
question of compensation wasn't raised. I don't want
anybody to work for me that can't afford to work for me.
MR. BRYCE: I think I can see your point.
H.M.JR: I don't want anybody to work for me - if
what we are asking is unfair, and unjust, and the men
can't afford to do it, then I am the last one to want to
ask a fellow to work for me that can't afford to. But
I am not going to be put in the position with tremendous
publicity, everybody going, and then one group, one
state, one city says, "We are not going to do this thing,"
and the thing spreads and I have got this big organization.
I am stuck.
MR. ECCLES: The way this matter came up--
H.M.JR: I am stuck. I am in an impossible position.
MR. ECCLES: The investment banking group, in dis-
cussing it, raised the question, as I recall the meeting,
as to what the extent of the work might be. Well, of
course, nobody knew. I mean, it was impossible to say
just what time might be required. And as I say, they
raised the question. Well, there will be no difficulty getting
a good many people on a volunteer basis for all their time,
and you will get - but to the extent that the average
salesman that has to sell securities for a living and
has no other income or means of support, and they said
there were thirty thousand, as I understand it--there
-6- -
58
are thirty thousand employees of the industry, wasn't
that right?
MR. HOPKINSON: I didn't have that figure. I think
I heard it. I wouldn't want to be responsible.
MR. ECCLES: The secretary of the association said
there used to be around fifty thousand within the last
two years, now been reduced to about thirty thousand.
People had gone in the Army, done other things. But
there were about thirty thousand people. Some of those
would devote a good part of their time on a volunteer
basis, but to be able to get the whole thirty thousand,
the whole industry--
H.M.JR: Marriner, look, the second paragraph, I
would much rather have the industry come and say, "Mr.
Morgenthau, we can't afford to have our salesmen work for
you for nothing--'
MR. BRYCE: They are not going to say that to you.
H.M.JR: All right, then you wait-MR. BRYCE: Because they don't all feel that way.
H.M.JR: All right, they say, "It is not fair or
just for you to ask these fellows who can't make an honest
living to go out and pound the pavement for you for nothing.
The United States Government is not fair. All right, I
will take the matter under careful advisement. I will
consider whether we can or cannot pay them. See? But
to have this thing here hanging over my head so I feel
as though every time I am asking them to do something
I am a beggar with a tin cup in my hand. I don't want
to do it.
MR. HOPKINSON: I don't think, sir, anybody wanted
to phrase anything in a way that would give you that
feeling and yet, on the other hand, I think where we have
a pretty wide representation of different parts of the
country here who are in touch with the dealers and who
59
know the problems over the country, they didn't feel that
it was fair to let an organization setup which, if we
carried out some of our plans, would use practically the
nation-wide manpower of the stock exchanges, and investment dealers all over the country and the Government
security houses, without realizing that to get some
part of that manpower, probably some system would have to
be devised to compensate that underneath personnel.
There are two types of problems. One, the fellow who is
working on commission and is dependent solely on his
commission for his living, and the other who is getting
a salary and possibly a supplemental commission from a
house that can't afford to pay that salary during a
period when the salesman might be completely unproductive
for two or three weeks.
H.M.JR: Look, Mr. Hopkinson, I don't mind anybody
in business coming in to me and saying, "Morgenthau, I
can't do this thing unless I get paid for it." That
is an honest, straight-forward proposition, and I can
consider it. Should I pay that man for his hire or
shouldn't I? That is a perfectly honest, respectable
thing, but I don't want the in-between.
MR. HOPKINSON: I think your district committees
will be faced with that problem if they come to - when
they come to try to set up the kind of extensive organ-
ization in the areas to be ready for your call. Now,
whether it is appropriate in any particular type of
call to couple a compensation feature with it or not
would depend upon the type of issue that you were dealing
with, and the kind of service it was going to require.
H.M.JR: We have got to settle it before we have
any announcement.
MR. ECCLES: Wouldn't this be the - the Secretary,
as I understand it, isn't asking here that any certain
number of people be employed or that any certain amount
of time be used; that here is a volunteer organization
setup, the committees are operating on a volunteer basis,
and such salesmen or such an organization in the community
-8-
60
that is willing to work on a volunteer basis make their
services available to that committee and do as good a job
as you can on a volunteer basis.
MR. BRYCE: I think you can get a good job there.
H.M.JR: Now, those that can't afford to do it on
a volunteer basis won't respond. Those that could would.
This is a volunteer job. If at some later date it was
announced that you couldn't get enough to do it on a
volunteer work, then it would be up to the Treasury to
say, "We need more assistants, we need more workers than
we are able to get on a volunteer basis." They could go
to Congress and say, "We have tried this thing on a
volunteer basis. It hasn't worked out as satisfactory
because we can't get enough people that will do it on
that basis."
MR. BRYCE: I think that is the way it ought to
be set up.
H.M.JR: That is all right, but I just don't want the
sword hanging over my head. I have just got to go to
Congress and say, "Gentlemen, I need a million dollars
in order to hire some security salesmen. Can I have it?"
I will find whether I can get it or whether I can't get
it, and the security salesmen can come up and make their
own appearance. But in fairness to me, they sought me
out. I didn't seek them out. Am I right?
MR. BRYCE: Surely. They have offered you their
services on a volunteer basis.
H.M.JR: I am satisfied to go along on the basis
that Mr. Eccles stated, provided that they lift that
second paragraph out of the report.
MR. HOPKINSON: I didn't, personally, think that
that second paragraph went any further than what Mr. Eccles
said.
MR. SPROUL: That is what we had in mind.
-9-
61
H.M.JR: I mean, if that second paragraph is in thereI have got my own standards of ethics--I couldn't go along
with it. I would feel very unhappy if that thing was in
there. I would feel that I was asking people to do something which I had no right to ask them to do. If Mr.
Bryce can come down here - I have never asked him - and
afford to be here for a dollar a year, that is his business.
He has decided he can do it. but if Mr. Bryce said,
"I will come down here and work for a dollar a year,
depending on how much you ask me to do," I would say,
"I am awfully sorry, I can't use you. Put depending
upon how much you ask me to do--
MR. SPROUL: That was not the sort of a question
we intended to raise there. The dilemma we faced was
to bring to your attention that a job can be done with
a voluntary organization.
MR. BRYCE: No question about it.
MR. SPROUL: But that the full job which may need
to be done probably cannot be done with a voluntary
organization.
H.M. JR: I am willing to have that - Eccles stated
it better than I can - I am perfectly willing to have--
it.
MR. ECCLES: Cross that bridge when you get to
H.M.JR: Yes, but not have it in writing.
MR. BUFFINGTON: There is one point that bothered
me since that meeting.
H.M.JR: I have to go to the Doctor's in five minutes.
- 10 -
62
MR. BUFFINGTON: On Friday - you are building up quite
an expensive organization to function here. I think the
Secretary should know at the outset whether that expense
is justified by knowing he has the follow through of these
men.
MR. BRYCE: He will get a good follow through on a
voluntary basis.
H.M.JR: This thing, for instance, I would like to
know how much the people actually had to go down in their
pockets during the past ten days for cash.
MR. BRYCE: They will have that.
H.M.JR: I would like to take a look at it. I would
be very much inclined to reimburse them for any cash outlay
they were put to, provided my red-tape boys tell me I can
do it without going to jail.
MR. ECCLES: That was another aspect of this that
was raised. There was the two aspects, what they called
actual out-of-pocket money such as telephones and the
use of a car.
H.M.JR: Marriner, if my red-tape boys whose job it
is to keep me out of jail - if they say I can do it, I
will say now I will do it.
MR. ECCLES: Don't you think, Mr. Hopkinson, that
that would go quite a ways to meeting some of the questions
that were raised there?
- 11 -
63
MR. HOPKINSON: Yes, sir, I think it would for everything except putting twenty or thirty thousand men out on
the streets for a full week, ten days, or two weeks.
MR. SPROUL: That is covered in this report, and I
think that the headquarters would be set up on a fiscal
agency reimbursable basis so that that is covered in
this organization; telephoning, telegraphing, and clerical
help would be covered. I think that is perfectly possible
without sending you to jail.
H.M.JR: I say, I will do it for what they spent the
last ten days, but I don't want Mr. Hopkinson to feel I
am trying to sell him a bill of goods. What I would like
you to do is take this thing - take as long as you want
to think it over, talk it over with your people; and if
you arrive at the decision-MR. BRYCE: You can settle it right this minute.
H.M.JR: Wait a minute, I don't want to rush you.
If you arrive at the decision that you would like to do it
leaving that paragraph out, with the understanding that
you will give me all the service that you can on a volunteer
plan, and if I am not satisfied, it is up to me to say so,
and decide what I am going to do about it.
MR. BUFFINGTON: I think that is very fair.
H.M.JR: I don't want to rush you. He isn't happy
about it. Hopkinson isn't happy about it.
MR. HOPKINSON: I only want to put this in, as far as
my services are concerned and the group of people that we
think of as members of these district committees, and even
of members of the original committees where you set up
original committees there, I don't think that any one of
them has the slightest thought that they would expect any
compensation of any kind. And it was only a feeling which
is reflected to us by the representatives of the security
houses all over the country that if you are going to turn
our sales forces loose for an extended period of time, we
have got to work out some plan where either their time is
paid for or they get some sort of a compensation in lieu
of the commissions they might otherwise be earning.
- 12 -
64
in selling other securities. How extensive you can get
an organization without that is something that I am not
in position to do any more than express a local point of
view about. There is a meeting of the Investment Bankers
Board of Governors next Friday, Saturday, and Sunday, week.
There is a meeting of the NASD Governors over this week end.
MR. BRYCE: I think you are going at that wrong. I
wouldn't formalize that way. I meant what I said. You can
settle this thing right here on the basis that Mr. Eccles
has put out. I listen to all these people, and I think you
can do that. How far it goes remains to be seen. I think
it would be a mistake - you ought to get this organized
and clicking.
MR. ECCLES: From the standpoint of the memorandum
why couldn't that aspect of it be deleted, in as much as
it has now been discussed verbally with the Secretary; and
he says that possibly sometime in the future the job may
not be done satisfactorily, and if it isn't, he will say
so, and we will consider another way. But so far as this
memorandum - this is a memorandum which is offering the
services of a volunteer organization to the fullest extent
that you can get people to operate on that basis. Now, if
that isn't adequate, then you cross the other bridge when
you get to it.
MR. HOPKINSON: I think - would it be satisfactory to
the Secretary if the brief statement you made, when you
first spoke, were substituted for that paragraph? You just
don't want anything in there now?
H.M.JR: I don't want anything in there. I don't
want to rush you.
MR. SPROUL: I am somewhat of the feeling that in
all of this discussion of compensation or no compensation
we have been talking a little in a vacuum, and that nobody
has in mind just what might be the method, the form, or
the extent, if there was any. I think, in addition to
whatever revision we make of this memorandum to you, we
ought to immediately make a study of the possible methods
- 13 -
65
so that if and when the time comes, we will know what we
are talking about, and how it might be done, and to what
extent it might have to go.
H.M.JR: I don't know just what you mean when you
say
- you are fiscal agent, you can take care of all this
stuff.
MR. SPROUL: I was talking of the office expenses
at headquarters, telephone, telegraph, and clerical help.
H.M.JR: That isn't what Buffington was talking to
gasoline or telephone calls, something like that - his
telephone bills increased twenty-five percent due to this.
me about this morning. The man who may have to use some
MR. ECCLES: Why couldn't that be handled likewise,
fiscal agency?
H.M.JR: Dan says it might run forty or fifty thousand
dollars.
MR. BUFFINGTON: I have no reason to make that statement,
except it is just a guess of what I think it might run.
H.M.JR: Well, you are talking about the work the
committee would do in the Federal Reserve building, but I
am talking about what the members of these committees will
do in their own offices.
MR. HOPKINSON: They weren't asked to keep any
record of expenses on this last job that they did. I have
no doubt it would be very welcome, some reimbursement
out of pocket. I know they sent out a questionnaire didn't tell the people in advance they were going to be
sent out - that questionnaire. The result is, nobody
paid any attention to it.
H.M.JR: You think this over. When you are entirely
satisfied that you want to do business, I am at the
stand here. I want you to sleep on it. Talk to your
members and take as long as you want; and only when you
are happy about it, come back and see me.
- 14 -
66
MR. HOPKINSON: I would say this, sir, as far as I
am concerned, that in the light of this conversation,
the subject of possible necessity of compensating some
portions of the security industry is one which we may have
to face at some time later on, that that accomplishes all
that the second part of that paragraph did.
MR. SPROUL: That is all that was intended.
MR. ECCLES: Why can't that be deleted?
MR. HOPKINSON: I think it can in that light, as premature, but the subject having been brought up for discussion, that accomplishes what we felt it was fair you
should have a realization of.
H.M.JR: I repeat myself, take all the time you want;
and when you are satisfied that it is fair to ask you to
take out that one paragraph, let me have it. But don't
rush yourselves.
MR. BUFFINGTON: It is out.
MR. HOPKINSON: It is out. If you want to proceed
with the organization of these district committees in
the likelihood that there may have to be a job done in
the near future of some kind, I don't want to be the
cause of any delay. And, as I say, that paragraph didn't
deal with any existing problem. It was merely putting at
a minimum a possible future problem, and the industry
didn't feel it was fair to you to let you feel that the kind
of job that might have to be done through industry could
be on an entirely volunteer vasis.
H.M.JR: Well, we are both on notice.
MR. HOPKINSON: That is all right, sir.
MR. BUFFINGTON: You agree?
MR. HOPKINSON: Yes, sir.
MR. ECCLES: That being the case, it will take quite
a while. Personally, I would like to see this thing set up,
- 15 -
67
because it will take several weeks before you really
get it going, and it would be fine if it could be done
here for the next financing.
H.M.JR: I would like it, but as I say, when we have
got volunteers.
volunteers I don't believe in rushing them. Volunteers
are
MR. HOPKINSON: Well, we are still volunteers, and
will do the top job you are asking us.
MR. SPROUL: It is important to get the organization
established,
whatever basis we are going to establish it
on.
MR. BUFFINGTON: Am I representing you in carrying this
forward?
H.M.JR: Yes.
MR. ECCLES: On that fiscal agency matter, it seems
to me that it may well be that you might be able to meet
the expense aspect of that thing. Did Dan say it could or
couldn't?
MR. BUFFINGTON: He said it could be done, that is,
the direct expense; that was fiscal agency expense.
MR. ECCLES: In other words, you have a man out in
his office using his phone to sell bonds for the fiscal
agent; it is another way of getting at it. Of course,
it is a legal question as you say. If your red-tape
boys say it can be done, that way--
H.M.JR: It is all right with me as long as I don't
have to go to jail.
MR. BUFFINGTON: Could we have a meeting and report
to you later this afternoon?
H.M.JR: Yes.
68
SUGGESTED ORGANIZATION TO ASSIST IN THE
DISTRIBUTION AND SALE or GOVERNMENT SECURITIES
I. National Committee.
The abole organization would be under the direction of the
Secretary of the Treasury.
(a) Presidents of the twelve Federal Reserve banks.
(b) Limison between Board of Governors of the Federal
Reserve System and the Treasury--Chairman of the
Board of Governors.
II. Basis of Organization.
11
The organisation throughout the country should be set up by
Federal Reserve Districts, with a committee for each district under
the chairmanship of the President of the Federal Reserve bank of
the district.
III. District Committees.
The District Committees would very in sise depending upon the
geographical extent of the district and the location and number of
its financial centers.
The personnel of the District Committees would be chosen primarily from the financial community including investment banker
security dealer groups and commercial bankers, but others shose
position or personality would make their appointment appropriate
and desirable could also be included.
The District Committee would be appointed by the President
of the Federal Reserve bank in each district, after consultation
with representatives of the accurities industry and the banking
community, appointments to be subject to the approval of the
Secretary of the Treasury.
A Secretary of the District Committee (and of Executive
Committee 1f appointed) would be appointed by the Chairman of the
Committee.
IV. Executive Committees.
If the circumstances of the District or of the work to be
done require it, in the judgment of the District Committee, a
small Executive Committee would be appointed from the District
Committee membership.
V. Regional Committees.
Committees for regional areas within districts would be
appointed where necessary in the judgment of the District Committee.
The sise of such committees would be determined by the District
Committee. Their personnel would be chosen, using the same
criteria as in the case of the District Committee. Appointment
would be by the Chairman of the District Committee subject to the
approval of the Secretary of the Treasury.
69
VI.
Handquarters Organization.
(a) Executive Manager who will have executive direction of
the sales effort in each district, under the District Committee
and its Executive Committee, if any.
(b) Quarters, equipment, and staff to be provided by the
Federal Reserve banks on a fiscal agency reimburseable basis.
(c) Franch or regional headquarters to be set up on same
basis in those districts where this is necessary.
VII. Compensation.
The members of all committees would be volunteer workers not
seeking nor expecting compensation for their services.
Whether or not some system of compensation for a selling
Group will have to be devised will depend upon the extent of the
call made upon the services of salesmen, which, in turn, depends
upon the thoroughness and continuity with which sales are to be
pressed and the kinds of accurities which are to be sold.
VIII. Field to be Covered.
This proposed organisation would be designed to assist in all
of the financing operations of the Treasury except the sale of
Series E. War Savings Bonds. In the sale of Series F and G Mar
lavings Bonds it would, of course, work with the existing War
Savings organisation.
70
May 13, 1942
4:05 p.m.
FINANCING:
Present: Mr. Buffington
Mr. Sproul
Mr. Hopkinson
Mr. Bryce
Mr. Eccles
Graves
Mr: Kuhn
MR. SPROUL: We have here a revised report we are
ready to present to you.
H.M.JR: All right, sir. I didn't expect the
Chairman back.
MR. ECCLES: You didn't? Now listen, boy, I am
never going to let go of a thing until it is finished
if I once get hold of it.
H.M.JR: It was a shame about Leon going up there.
He did a swell job, but the papers misquoted it. The
story is on the front page, and then he gave a formal
statement. The only paper that ran it was the New York
Times. Did you see it?
MR. ECCLES: Yesterday?
H.M.JR: It is in this morning's New York Times.
MR. SPROUL: I saw it in which he said what he said
to the committee, rather than what the members of the
committee said he said.
H.M.JR: Yes, but it is very unfortunate.
MR. ECCLES: You can't ever appear, though--
H.M.JR: Before an executive hearing.
-2--
MR. ECCLES: There isn't such a thing. You might
just as well have an open hearing. In fact, you had
better, because then you have got the record.
H.M.JR: Senator Couzens, you know, every time they
went into an executive hearing, he would walk out of the
room, he wouldn't stay.
MR. ECCLES: I found out when they wanted to have a
closed hearing on my confirmation, Glass and that group. they wanted to have a closed hearing, and Couzens insisted
that it be an open hearing. He wouldn't stay, and so he
forced him to have an open hearing.
H.M.JR: He wouldn't stay. He was an unusually good
public servant, Couzens.
What is different on this? (Indicating paper)
MR. SPROUL: Paragraph VII has been taken out entirely
and that is the only change.
H.M.JR: You took it out entirely?
MR. SPROUL: Yes.
H.M.JR: Fine. Are you happy?
MR. HOPKINSON: Yes, sir.
MR. BUFFINGTON: Mr. Secretary, that last paragraph,
number VII, now, relating to "F" and "G" Bonds, is not
strictly in accordance with my last conversation with you,
but Mr. Eccles and Mr. Sproul thought there were some
phases of it that they wanted to discuss.
H.M.JR: It is all right with me.
MR. SPROUL: It says that everything that will be done
will be done in cooperation with the existing War Savings
Staff, but we have in mind that you want to sell "F" and
"G" Bonds through the securities industry, through the
71
-3 banks wherever they can be sold, and we think that it is
a job that can be done by the banks as well as by others.
MR. ECCLES: It isn't - we felt that it would be a
mistake to make it appear that "F" and "G" were excluded,
that "F" and "G" are quite different than the pay-roll
deduction program, than the series "E"; that the real
market for "F" and "G" is to the large investor - and the
person that can take fifty thousand a year is not a small
investor - and that the banks and the security dealers, if
they are made to feel that it is their responsibility, as
well as the War Savings Staff, to try to sell these
securities to the people that they know they can interest,
we think we will get a wider distribution of those, which
in no way, it seems to me, prevents the War Savings Staff
from likewise selling them. But we felt if that wasn't
included that it may well be interpreted as being excluded,
and the banks and the security dealers will say, "Well, we
have got nothing to do with that."
H.M.JR: I think that is smart. I am glad it is in.
I am perfectly happy.
MR. BRYCE: I pointed out to them, Mr. Secretary,
that the War Savings Staff is putting a lot of stress on
"F's" and "G's" right now. This memorandum was sent out
yesterday on "F" and "G" suggesting that committees be
formed, and that all ties in the quota, and so forth.
MR. HOPKINSON: He will get his quota just the same.
H.M.JR: Yes, we need some help, because we are
running ahead on our "E's" for May, but we are running
behind on our "F" and "G's".
MR. BUFFINGTON: Graves didn't want anything done
that would infer this group was taking the responsibility
he had already assumed. When he and I talked he emphasized the importance of having investment bankers work
as individuals, not as members of this group. I don't
think it makes any difference in the ultimate.
72
4-
H.M.JR: This is all right (indicating "Suggested
Organization" paper). What do you do with this? How do
you let the public in on that?
MR. ECCLES: That is what we have been doing. We
weren't all this time taking--
H.M.JR: I am amazed that the Chairman gives us so
much time. I am amazed and pleased.
MR. BRYCE: We got him all stirred up, ready to go.
MR. BUFFINGTON: In quotes (indicating paper) is the
press release which will be included. This is a separate
copy of the press release.
MR. ECCLES: I can't separate this from the open
market committee job. You know how much time that takes.
I think this is closer related to the whole picture.
H.M.JR: I am not an English student. Down at the
bottom, the last three lines, "of which the Secretary of
the Treasury will be chairman and for which the Chairman
of the Board of Governors of the Federal Reserve System
will provide the liaison between the Reserve Banks and
the Treasury" - if I were writing it, I would say, "of
which the Secretary of the Treasury will be Chairman"
period. Then I would say, "Liaison between this Victory
Fund Committee and the Reserve Banks will be furnished
through Mr. Eccles, Chairman of the Board of Governors
of the Federal Reserve System." "
MR. SPROUL: I think that is a better statement
from
the standpoint of a press release, to have two
sentences.
H.M.JR: It should be two sentences.
MR. ECCLES: It is a long sentence this way.
H.M.JR: If you want to start off, say "The Chairman
of the Board of Governors" and just cut out "and for
-5-
73
which"--
MR. ECCLES: That is better.
MR. HOPKINSON: "The Chairman of the Board of
Governors of the Federal Reserve System will provide the
liaison between", that is better.
MR. ECCLES: I think that is smoother.
H.M.JR: If I didn't change a word I wouldn't think
I was contributing anything.
MR. SPROUL: You act like an editor with a blue
pencil.
MR. BRYCE: There is one important thing in that
wire that I call to your attention, Mr. Secretary, from
your standpoint, and that is the use of the expression,
which I am sure will be wonderfully used, "Victory Fund."
H.M.JR: I got that. I like it, and I would under-
line that in your press release.
Now, on page 2, "This organization in no way duplicates the work now being done by the War Savings Staff"--
MR. ECCLES: We didn't have that in at first, but
it was--
H.M.JR: I always hate to apologize. Why raise it
in the people's minds?
MR. HOPKINSON: For fear it would be raised.
MR. SPROUL: And that there might be confusion.
They might think this was superseding the War Savings
Staff, an impression which we wanted to avoid.
H.M.JR: Wouldn't it be better to say, "This
organization supplements" rather than "in no way duplicates."
-6-
74
MR. BUFFINGTON: Then use the word you used, "complements.
MR.Savings
BRYCE:
I think you have to say something about
the War
Staff.
H.M.JR: "This organization complements" rather than -
would you say "complements"?
MR. SPROUL: "Complements and in no way duplicates
the work now being done by the War Savings Staff."
MR. ECCLES: I think "complements" is better.
MR. HOPKINSON: Yes.
H.M.JR: "Complements and in no way duplicates the
work now being done by the War Savings Staff", it is all
right.
I want to do Graves and Kuhn the courtesy of letting
them look through it because it is fairly important. I
will make sure it is all right.
MR. BUFFINGTON: In the last sentence, Mr. Secretary,
the committee of the securities industry will send out a
wire direct to their people in the district, suggesting
that they get in touch with the Federal Reserve Bank.
That wire is being prepared.
H.M.JR: Is this the press release?
MR. BUFFINGTON: That is a telegram from you to the
Federal Reserve Bank presidents, and we included in it
the press release, which is on a separate paper.
MR. SPROUL: Mr. Eccles has a separate telegram,
which, as liaison man, he will send out.
H.M.JR: That is all right.
(Mr. Graves and Mr. Kuhn entered the conference.)
-7-
75
H.M.JR: Look, just you two gentlemen see if that
looks
paper)
all right to you, both of you, will you? (indicating
What is this, George, on my desk?
MR. HOPKINSON: That is the separate release which
is incorporated in the telegram.
MR. BUFFINGTON: The same changes will be made in
that that are made in the telegram.
H.M.JR: If you have got any objections, say them
now or hold your peace forever.
MR. GRAVES: I think there should be a positive
statement in this memorandum and in the release to the
effect that t he work of these Victory Fund Committees
will chiefly relate to the regular Treasury financing.
In other words, that is just repeating what is said
negatively
here, which I think ought to be said positively.
This sentence is: "This organization in no way
duplicates the work now being done by the War Savings
Staff." I think it might be well to add a sentence
there to the effect that the work of the Victory Fund
Committees will be chiefly in relation to the regular
Treasury issues and not the War Bonds.
MR. SPROUL: The word "chiefly" in there would fit
the situation. I think it is clear in the other state-
ment that we have in mind that this organization might
work with your organization and complement your organiza-
tion in the sale of "F" and "G" savings bonds.
H.M.JR: Couldn't you just add something on there,
"This new organization has been set up to chiefly take
care of the Treasury's regular borrowing", or whatever
they call it.
MR. GRAVES: That is the thought I have.
-8- - -
76
MR. ECCLES: It seems to me the difficulty about
that is that you are making a definition or prediction
as to the kind of financing that might be done. It seems
to me that this organization is set up to do whatever
Treasury financing that the Secretary of the Treasury
may require. He is chairman of the committee. He has
an organization set up, and I would expect that this
organization would be used to carry out any type of
Treasury financing that the future might require and
that seemed to be necessary to meet the situation; but
in the process of doing that it in no way would duplicate the work of the War Savings.
Now, when you don't - if you do as you say there,
it seems to me that you are attempting to groove it
into some pattern that is already made, which I don't
know that you could do.
MR. HOPKINSON: They might well be working, both
on the same issues of securities but in different fields
and through different mechanisms.
MR. GRAVES: What I am afraid of is the effect of
a memorandum or announcement of this kind on our War
Savings organization. They see this in the papers and
say, What has happened?"
MR. BRYCE: I looked out for that in getting some-
thing in this memorandum.
MR. GRAVES: But is it enough?
MR. BRYCE: It may not be. There wasn't anything
in it at all until I suggested that.
MR. SPROUL: We all recognize, then, that something
should be in, but we face the dilemma of not wanting to
try to define and limit in this statement what the
possible future fields would be. Therefore, we chose
this negative statement, which we thought gave your
organization the clearance without limiting future
operations.
-9--
77
MR. GRAVES: Of course I had the same thing in mind,
Mr. Sproul, when I suggested that we use the word "chiefly."
I think too,
that would
save
point,
as I see
it. this thing, and it meets Mr. Eccles'
MR. SPROUL: As far as I am concerned, that is all
right
me. I don't
think
we want is.
to bog down, as long
as
wewith
understand
what
the situation
MR. HOPKINSON: I think it weakens it a little bit.
MR. ECCLES: The thing I wanted to avoid was, the
Secretary in effect sets up a committee, a national committee, of which he is the chairman, and then undertakes
to give
a public statement that puts limitations upon
this
committee.
MR. SPROUL: I think that is right.
H.M.JR: Yes, but there is the other side of it.
You have got an organization that is under the most
terrific pressure right now to produce, and there are
enough troubles, with Henderson's mi isquoted statements
and Gore's proposed bill, and all the other things,
that undermine these people.
I don't think it hurts if you said something like
this, "This new organization is created to chiefly sell
the Treasury's regular financing."
MR. KUHN: I think that unless something is put
right in the lead it is going to be a confusing state-
ment rather than an informative one, and I would put
"to be made up of bankers and members of the securities
industry to aid in Treasury financing, chiefly in
connection with the sale of market securities", or
something of that kind.
Wouldn't that do it? I would like to put it right
up there. I don't think it circumscribes it too much.
H.M.JR: Graves and his people are under the most
78
- 10 -
terrific pressure today, and the last thing any of us
want to do is to undermine the thing. There is enough
undermining, and termites, around here now without trying to add to it.
MR. HOPKINSON: Would a possible >pproach be to
add to the last paragraph where it refers now to the
War
Savings Staff "which will continue all their present
activities"?
H.M.JR: No, I think Kuhn is right, in his newspaper
in
the training.
front. I think you ought to have something
MR. ECCLES: There is this thought, it seems to
me, you have got. You are going to have difficulty, in
my opinion, getting the kind of results that ought to
be gotten on your series "G" and "F" bonds without a
real responsibility and effort being made by the banks
and by the security dealers. But if it makes it appear,
this release, that this organization is designed
primarily for the purpose of handling market securities
only, that would seem to indicate that series "G" and
series "F" were outside of the scope of this organization.
If that is what you want, all right, but I think
that you will suffer very measurably if that is done
because the investors in series "F" and "G" bonds are
the kind of people that are going to be reached pretty
largely, not through your canvassers, not in the same
way that you will reach the people who will put their
money in "E" bonds - they have got to be reached - if
we could make the banks, make the investment houses,
feel a sense of responsibility to actually get out and
to sell these "G" bonds, I think that you will get a
much better result than if you make them feel that
they
largely excluded from it, which I think this
tendsare
to do.
MR. BRYCE: If you are talking bookkeeping - I
mean, we are all working for the Treasury and want to
- 11 -
79
sell as many bonds as we can. A bond man is going to
sell everything he can sell.
(The Secretary left the conference temporarily.)
MR. BUFFINGTON: That question was raised today over
the long distance from Chicago by the chairman of the
group who is now working with you on "E" "F", and "G",
and he said to me, "Does the formation of this new group
which we hear about mean that we can no longer put the
same kind of effort we are now putting on "F" and "G"
bonds?" I said, "No, it doesn't. It means that you
will do it as individuals" following your (Graves) and
my talk. He said, "We believe that if we can do it as
a member of this organization we will be more effective
to the War Savings Staff than we would be if we were
confined only to work on the other setup."
MR. ECCLES: I am perfectly sure that is true
with your banks.
MR. BRYCE: You want to be sure they go in the
quota.
MR. GRAVES: You are talking about two different
things. The functions of these Victory Fund Committees
will be perfectly well known to the members of those
committees. They will know, as I understand, that they
are at perfect liberty to put effort on the sale of
"F" and "G" bonds, and, for that matter, on "E" bonds
where they can do it.
I am thinking about the publicity aspect of this
thing, where suddenly there breaks in the paper an
announcement of new committees that are to have re-
sponsibility in connection with the financing or the
marketing of Treasury securities. If we were there in
that publicity to circumscribe this thing, as I suggested, to point out that their functions would relate
chiefly to the sale of open market issues, or what
not, that would in no way affect the actual work that
- 12 -
80
is to be done by these Victory Fund Committees. But
the newspapers wouldn't carry the story in such a way
as to disturb every one of our War Bond committees in
the whole country.
MR. BRYCE: We are with you a hundred percent.
MR. GRAVES: That is what I am afraid.of.
MR. ECCLES: It seems to me that instead of putting
this at the bottom, as you say - I wouldn't object to
putting it at the top, but my thought is that I don't
like the idea of making it appear that this committee
is set up to do a job of what we term marketing - the
usual Treasury marketable securities.
I think that in itself is a very limiting factor
that is unwise if you want to get the best results.
What is said here, "This organization complements
and in no way duplicates the work now being done by the
War Savings Staff", if that idea can be brought right
in the first part of it that is perfectly all right;
but it seems to me that that ought to be sufficient to
indicate here that you have got a War Savings Staff,
that there is another organization here that is available to assist and to do another job, and it doesn 't
duplicate it at all.
MR. HOPKINSON: I like your suggestion very much
of adding that as part of that first paragraph.
MR. GRAVES: I don't think that is sufficient.
MR. KUHN: It is still confusing, Mr. Eccles.
People
will say, "Well then, what is it, what does it
do?
MR. ECCLES: It sells largely series "E", and series
"G" and "F" to the fullest extent it can.
81
- 13 MR. BUFFINGTON: Suppose you amplify that sentence
in this way, "This organization will work chiefly on
general market issues and will in no way duplicate the
work now being done"--
MR. GRAVES: I think that will be all right. I
would rather just say "will in no way duplicate" and
leave out the "complements."
MR. BUFFINGTON: That sentence can be lifted, "will
work chiefly on general market issues and will in no way
duplicate the work now being done" and put that in the
first sentence.
MR. ECCLES: Whatever you fellows say. It has the
same objections, from my point of view. What I think is
if you are going to get your results on your series "F"
and "G" bonds you are going to have to actually get
this organization to work.
MR. BUFFINGTON: Mr. Eccles, after all, that is
their problem, so however you want it done to get the
greatest advantage from this group we want to do it.
MR. ECCLES: I am interested in it from the standpoint of open market, from the standpoint of reducing
the amount of financing we have to do in the open market.
We have a big job to do on what is going to be required
as an open-market thing, and I am tremendously interested
in getting as much as possible placed outside what we
term market securities, through the bank system; and so
you have an interest in getting the quota, and I have
an interest in helping you get it, and even exceeding it.
MR. GRAVES: That is right, and we want to take
full advantage of the work of this organization on all
our issues. There is certainly no intention on my part
to indicate that we don't want work to be done. We want as
much work to be done on the whole series of War Savings
Bonds as we can get. We just don't want our organization
to interpret anything that is said to mean that they are
in
any way relieved of the responsibility for working on
"F" and "G".
- 14 -
82
MR. HOPKINSON: Nor do we want to say something in
this that will make it difficult for us to get the kind
of men in this organization setup which we want. When
you speak of "chiefly on general market issues", most
people interpret that to mean the kind of things that
you open subscription books for and they are closed the
same day.
This organization is being set up to do something
much broader than that in tapping an investor market,
and I think that you can't just say "general market
issues", without either elaborating that or leaving it
to this other thing, without hampering us in our or-
ganizational setup.
(The Secretary re-entered the conference.)
MR. ECCLES: I said this to Graves, Mr. Secretary,
while you were out, that it is true he has the responsi-
bility for getting a quota here and that I feel, as the
chairman of the Open Market Committee, that I have a
responsibility of trying to get as many securities sold
outside of the banks as it is possible to do, tapping
every dollar of outside money that is possible to be
tapped. I am just as anxious that his quota be reached,
and exceeded, as he, and that is true of the Reserve
System as a whole.
We all, as you know, have been attempting in every
way possible to reduce the amount of open-market financ-
ing and increase the amount of sales to direct investors
rather than to the banks, so that - I mean, the Reserve
System has the same interest in this matter as the
Treasury.
H.M.JR: That is right.
MR. ECCLES: So that the question of selling
series "G" and "F" bonds, which are bonds to large in-
vestors, is, we feel, a responsibility that we have, as
well as you people have.
- 15 -
83
MR. KUHN: Mr. Secretary, could I read you a lead
that I think would do this job? It would be the begin-
ning of your statement, the beginning of the release:
"Secretary Morgenthau today announced plans for the
organization throughout the country of Victory Fund
Committees to be set up in each Federal Reserve district
and to be made up of bankers and members of the securities
industry to aid the Treasury's financing programs. This
organization will work chiefly on general market issues
and will in no way duplicate the work of the War Savings
Staff."
MR. SPROUL: That "general market issues" is undesirable because that has a certain connotation in
the market which, as Mr. Hopkinson says, is the one
where you open the subscription books this morning and
close them tonight. It may be like this two and a half
percent issue; that is not considered a general market
issue, and yet it would be just the kind this organization would want to work on.
I think if you are going to have any limiting
terminology it can't be general market issues." It
must be something else.
MR. ECCLES: If you are going to confine it to that,
there is no point in setting up the committee.
that.
MR. HOPKINSON: You don't need a committee for
MR. SPROUL: However, I think we understand our-
selves here as to the functions of these two organizations and where they do not duplicate, and where they
complement, and where they will be working together,
so we are just talking about a question of public relations and public reaction to a statement. We ought to
be able to find a way to state it which would not
violate what we know to be the fact.
MR. GRAVES: I am just afraid of frightening our
people, Mr. Sproul.
- 16 -
84
MR. SPROUL: I think we ought to be able to find
some way to state that.
MR. KUHN: The Secretary has a suggestion that
might get around this difficulty. Instead of talking
"general market issues" we say, "This organization will
work chiefly with the larger investors and will in no
way duplicate the work of the War Savings Staff."
MR. SPROUL: That suits me.
to do.MR. ECCLES: That suits me; that is what we expect
MR. GRAVES: I think that is all right.
H.M.JR: Does Mr. Eccles like that?
MR. ECCLES: Yes.
MR. SPROUL: Throw that up in the first paragraph?
MR. KUHN: Yes.
MR. ECCLES: That meets it. That leaves "G" and
"F" or any other series that is available to the large
investors open for this committee to work out. That
is what I didn't want to be excluded by saying "market
issues." That meets it.
MR. KUHN: May I raise one little point, also,
that confused me a little in here in reading this. You
say that "The organization announced today # # #
developed through voluntary assistance given the
Treasury by the banking and securities industries."
Certainly
the new assistance is also voluntary, isn't
it?
MR. ECCLES: Yes.
MR. BUFFINGTON: Yes.
85
- 17 MR. KUHN: I mean, it is not a question of paying
commissions or anything of that kind, which some readers
might read into that.
MR. SPROUL: The next paragraph goes on to say,
"The collaboration of these organizations will be
formalized with the establishment of the new Victory
Fund Committees. Heretofore it has been voluntary
but unorganized and not formalized. We go on to say
it will be formalized.
MR. KUHN: Could we add the word "voluntary" and
say "The voluntary collaboration of these organizations"?
H.M.JR: I am not prompting them on this. He doesn't
know about this morning's discussion.
MR. ECCLES: This has no relationship to it. This
question wasn't raised. You can take out the first
"developed through assistance." There is no point in
putting voluntary in.
MR. KUHN: I am just trying to eliminate any possible
confusion in the reader's mind.
MR. ECCLES: I think you either ought to take it out
of the one, or take it out of the other.
H.M.JR: It is all right with me. Now, Harold, I
don' want to rush you, are you all right?
MR. GRAVES: No, that is all right. I think we will
have to promptly get out a bulletin to our people and
explain exactly what is meant, and I don't think we will
have any difficulty. I am sure that they will all welcome
the help of this organization.
H.M.JR: I like "with the larger investors" and
yours (Mr. Graves) with the smaller investors.
MR. ECCLES: I don't want to give the banks and the
security dealers any opportunity for feeling that any
86
- 18 -
failure on the part of "G" and "F" is not their responsibility at all, that after all, I don t want them to be able
to say, "We had nothing to do with that. That was in
somebody else's hands.
H.M.JR: This is all right now?
MR. ECCLES: Yes.
MR. GRAVES: I don't want this impression to be left,
that this use of this phrasing in a press release or in a
memorandum is to be taken to mean that our people are to
stay away from larger investing.
H.M.JR: Doesn't it say "chiefly" with?
MR. GRAVES: That's right.
MR. SPROUL: The same as this new group might sell a
bond to a smaller investor.
MR. GRAVES: That is correct. I don't want our people
to be circumscribed in any way in the work that they do.
H.M.JR: Anything else?
MR. GRAVES: Nothing else. I think that is all right.
MR. ECCLES: All right with me.
MR. HOPKINSON: Yes, sir.
MR. SPROUL: All right with me.
MR. BRYCE: All right with me.
H.M.JR: When would this appear in the papers, so
Graves will know how much time he has to reach his people?
MR. BUFFINGTON: We had planned on releasing it for
tomorrow morning.
87
- 19 MR. GRAVES: That is all right; a day or two won't
make any difference with my crowd.
MR. ECCLES: It is going to take a week to get this
thing set up.
H.M.JR: Tell Chick Schwarz there is something coming.
MR. BUFFINGTON: He knows that.
MR. ECCLES: If that is the case, then, this wire to
the banks should get out over the wires tonight so that
they won't read this in the papers.
MR. HOPKINSON: Might it be wiser to hold the whole
thing and release it sometime tomorrow when you will
have a little more opportunity to get these things
rewritten and set up.
MR. BUFFINGTON: Schwarz suggested releasing it for
tomorrow morning's papers.
MR. ECCLES: The changes are just negative.
H.M.JR: Just as a matter of curiosity, is the
teletype in our various state offices?
MR. GRAVES: Not yet. We are working on it. That
is going to be hard, because of the lack of equipment.
H.M.JR: Can't get the equipment?
MR. GRAVES: There is difficulty, we are working on it.
H.M.JR: The War?
MR. GRAVES: Yes.
H.M.JR: There is a good joke on us. We have been
trying for I don t know how long to get two hundred thirtythree typewriter$ for our collectors of internal revenue.
88
- 20 As far as I am concerned, they needn't have a typewriter.
It means I don't have to have my income tax checked. We
are short two hundred thirty-three typewriters, and we
can't get them. The last I heard we haven t been able to
get
them,
two hundred thirty-three for the collectors of
internal
revenue.
MR. ECCLES: I wonder if the War Production Board is
short down there on anything.
MR. GRAVES: They are on the preferred list.
MR. ECCLES: I would think the Bureau of Internal
Revenue certainly ought to be on the preferred list right
now.
H.M.JR: But they are not. That is the joke.
MR. SPROUL: Nobody is anxious to have them on the
preferred list.
H.M.JR: The Director of the Budget doesn't see it,
but - well, I am very happy, I think it has been fine. I
think it is a fine spirit all the way through. I like
the name, it gives us another string to our bow. We will
need it. It just gives me that much more reassurance that
I can face this tremendous task that I have got with a
feeling that I can accomplish it. Thank you all very much.
SUGGESTED ORGANIZATION TO ASSIST IN THE
DISTRIBUTION AND SALE OF GOVERNMENT SECURITIES
89
I. National Committee.
The whole organization would be under the direction of the
Secretary of the Treasury.
(a) Presidents of the twelve Federal Reserve banks.
(b) Liaison between Board of Governors of the Federal
Reserve System and the Treasury--Chairman of the
Board of Governors.
II. Basis of Organization.
The organization throughout the country should be set up by
Federal/Reserve Districts, with a committee for each distriot
under the chairmanship of the President of the Federal Reserve
bank of the district.
III.District Committees
The District Committees would vary in size depending upon
the geographical extent of the district and the location and
number of its financial centers.
The personnel of the District Committees would be chosen
primarily from the financial community including investment
banker-security dealer groups and commercial bankers, but others
whose position or personality would make their appointment appropriate and desirable could also be included.
The District Committee would be appointed by the President
of the Federal Reserve bank in each district, after consultation
with representatives of the securities industry and the banking
community, appointments to be subject to the approval of the
Secretary of the Treasury.
The Secretary of the District Committee (and of Executive
Committee if appointed) would be appointed by the Chairman of
the Committee.
IV. Executive Committees
If the circumstances of the District or of the work to be
done require it, in the judgment of the District Committee,
a
small Executive Committee would be appointed from the District
Committee membership.
V. Regional Committee
Committees for regional areas within districts would be
appointed where necessary in the judgment of the District
Committee. The size of such committees would be determined by
the District Committee. Their personnel would be choesn, using
the same criteria as in the case of the District Committee.
Appointment would be by the Chairman of the District Committee
subject to the approval of the Secretary of the Treasury.
-2VI. Headquarters Organization.
(a) Executive Manager who will have executive direction of
the sales effort in each district, under the District Committee
and its Executive Committee, if any.
(b) Quarters, equipment, and staff to be provided by the
Federal Reserve banks on a fiscal agency reimburseable basis.
(c) Branch or regional headquarters to be set up on same
basis in those districts where this is necessary.
VII. .Field to be Covered.
This proposed organization would be designed to assist in
all of the financing operations of the Treasury except the
sale 01 Series E War Savings Bonds. In the sale of Series F
and G War Savings Bonds it would, of course, work with the
existing War Savings organization.
90
Secretary Morgenthau today announced plans for the organiza-
tion throughout the country of Victory Fund Committees to be set
up in each Federal Reserve district and to be made up of bankers
and members of the securities industry to aid the Treasury in the
sale of Government securities.
Because the nation's war needs have increased tremendously
the money-raising responsibilities of the Treasury, the Secretary
of the Treasury has accepted the offer of the banking and securities
industry to coordinate their efforts in helping to distribute
Government securities.
The organisation announced today, in which committees headed
by presidents of the Federal Reserve Banks will be set up in each
Federal Reserve district, developed through voluntary assistance
given the Treasury by the banking and securities industries.
The collaboration of these organizations will be formalized
with the establishment of the new Victory Fund Committees tied
together nationally by a committee of Federal Reserve Bank presidents,
of which the Secretary of the Treasury will be chairman and for
which the Chairman of the Board of Governors of the Federal Reserve
System will provide the liaison between the Reserve Banks and the
Treasury.
In some districts executive committees may be set up for
operating purposes, and district committees, with approval of the
Secretary of the Treasury, may set up regional subcommittees.
91
-
This organization in no way duplicates the work now being
done by the War Savings Staff.
92
May 13, 1942
TO PRESIDENT OF EACH FEDERAL RESERVE BANK
I am making public announcement this afternoon of plan for
organization of banking and securities industry by Federal
Reserve districts to promote sale of Government securities as
follows:
"Secretary Morgenthau today announced plans for the organiza-
tion throughout the country of Victory Fund Committees to be set
up in each Federal Reserve district and to be made up of bankers
and members of the securities industry to aid the Treasury in
the sale of Government securities.
"Because the nation's war needs have increased tremendously
the money-raising responsibilities of the Treasury, the Secretary
of the Treasury has accepted the offer of the banking and securit-
ies industry to coordinate their efforts in helping to distribute
Government securities.
"The organization announced today, in which committees headed
by presidents of the Federal Reserve Banks will be set up in each
Federal Reserve district, developed through voluntary assistance
given the Treasury by the banking and securities industries.
"The collaboration of these organizations will be formalized
with the establishment of the new Victory Fund Committees tied
together nationally by a committee of Federal Reserve Bank
93
-2presidents, of which the Secretary of the Treasury will be
chairman, and for which the Chairman of the Board of Governors
of the Federal Reserve System will provide the liaison between
the Reserve Banks and the Treasury.
=
"In some districts executive committees may be set up for
operating purposes, and district committees, with approval of
the Secretary of the Treasury, may set up regional subcommittees.
"This organization in no way duplicates the work now being
done by the War Savings Staff."
I would like you to act as chairman of organization for
your district and to proceed immediately with organization of
your committee or committees within general framework of report
prepared by joint securities industry Federal Reserve Bank group
which met in Washington last Friday.
National committee of securities industry will designate
representative or representatives to consult with you concerning
representation of securities industry on committee or committees
to be appointed by you for your district subject to my approval.
Secretary of the Treasury.
STANDARD FORM No. 14
APPROVED BY THE PRESIDENT
COPY
FROM
MARCH 10. 1926
TELEGRAM
94
BUREAU
CHG. APPROPRIATION Expenses of Loans A&E
OFFICIAL BUSINESS GOVERNMENT RATES
May 13, 1942.
To Presidents, Federal Reserve Banks:
Boston, Mags.
New York, N. Y.
Philadelphia, Pa.
Cleveland, Ohio
Richmond, Va.
Atlanta, Ga.
Chicago, I11.
St. Louis, Mo.
Minneapolis, Minn.
Kansas City, Mo.
Dallas, Texas
San Francisco, Calif.
I am making public announcement this afternoon of plan for
organisation of banking and securities industry by Federal Reserve districts
to promote sale of Government securities as follows:
"Secretary Morgenthau today announced plans for the organisation
throughout the country of Victory Fund Committees to be set up in each
Federal Reserve district and to be made up of bankers and members of
the securities industry to aid the Treasury's financing program. This
organization will work chiefly with the larger investors and will in no
way duplicate the work of the War Savings Staff.
"Because the nation's war needs have increased tremendously the
money-raising responsibilities of the Treasury, the Secretary of the
Treasury has accepted the offer of the banking and securities industry
to co-ordinate their efforts in helping to distribute Government
securities.
-2-
95
"The organisation announced today, in which committees headed by
presidents of theFederal Reserve Banks will be set up in each Federal
Reserve district, developed through assistance given the Treasury by
the banking and securities industries.
"The collaboration of these organizations will be formalized with
the establishment of the new Victory Fund Committees tied together
nationally by a committee of Federal Reserve bank presidents, of which
the Secretary of the Treasury will be chairman. The Chairman of the
Board of Governors of the Federal Reserve System will provide the
liaison between the Reserve banks and the Treasury.
"In some districts executive committees may be set up for operating
purposes, and district committees, with approval of the Secretary of
the Treasury, may set up regional subcommittees."
I would like you to act as chairman of organisation for your district
and to proceed immediately with organization of your committee or committees
within general framework of report prepared by joint securities industry
Federal Reserve bank group which met in Washington last Friday.
National committee of securities industry will designate representative or representatives to consult with you concerning representation of
securities industry on committee or committees to be appointed by you for
your district subject to my approval.
Henry Morgenthau, Jr.,
Secretary of the Treasury.
Initialed:
G.B.
F.K.
96
TREASURY DEPARTMENT
Washington
Press Service
FOR RELEASE, MORNING NEWSPAPERS,
No. 31-59
Thursday, May 14, 1942.
5/13/42
Secretary Morgenthau today announced plans for the organiza-
tion throughout the country of Victory Fund Committees to be set
up in each Federal Reserve district and to be made up of bankers
and members of the securities industry to aid the Treasury's
financing program. This organization will work chiefly with the
larger investors and will in no way duplicate the work of the War
Savings Staff.
Because the nation's war needs have increased tremendously
the money-raising responsibilities of the Treasury, the Secretary
of the Treasury has accepted the offer of the banking and securities
industry to co-ordinate their efforts in helping to distribute
Government securities.
The organization announced today, in which committees headed
by presidents of the Federal Reserve Banks will be set up in each
Federal Reserve district, developed through assistance given the
Treasury by the banking and securities industries.
The collaboration of these organizations will be formalized
with the establishment of the new Victory Fund Committees, tied
together nationally by a committee of Federal Reserve bank presidents, of which the Secretary of the Treasury will be chairman.
The Chairman of the Board of Governors of the Federal Reserve
System will provide the liaison between the Reserve banks and the
Treasury.
In some districts executive committees may be set up for
operating purposes, and district committees, with approval of the
Secretary of the Treasury, may set up regional subcommittees.
-000-
97
TELEGRAM
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
LEASED WIRE SERVICE
WASHINGTON
May 13, 1942
TO PRESIDENT OF EACH FEDERAL RESERVE BANK
Secretary of Treasury is today advising you of press release on
organization of banking and securities industry by Federal Reserve
districts to promote sale of Government securities and designating
you as chairman for your district. General form of organization will
be as outlined in memorandum sent to you on Saturday by Sproul. Only
change paragraph 7 of that memorandum eliminated so that organization
will be set up on voluntary basis except for headquarters and possible
sub-headquarters clerical staff, equipment, etc., which will be on
fiscal agency reimbursable basis.
Suggest you take steps to obtain as full publicity as possible on
organization within terms of Secretary's press release which he is
transmitting to you.
Ecoles
98
May 13, 1942
4:53 p.m.
HMJr:
Donald
Nelson:
HMJr:
Donald.
Yes, sir.
This is a tough one. (Laughs) Let me tell you
what happened. Are you so you can speak?
N:
HMJr:
N:
HMJr:
Yes, I am.
After I called you, I got hold of Batt, and I
said, "You know the matter that you and I talked
about, and I just want to let you know that I've
given - made a report to the President, and given
a copy to Mr. Nelson." He said, "Well, what did
you recommend?" I said, "Well, as I remember it,
I recommended nothing; I just gave the facts."
That's right.
And he said, "Well, did you come to no conclusions?"
I said, "No, I just stated the facts and the rest
is up to the President and Mr. Nelson. As far as
I'm concerned, I've done what I think 18 my
responsibility. " Hello.
N:
Yes.
HMJr:
So again he said, "Did you make no recommendation?"
I said, "No." So he said, "Well, I'm going right
in to get a copy of it." Well, he kind of took
my breath away.
N:
I see.
HMJr:
And I didn't say anything.
Well, you see, one of the principles I have, I
never release anything when a man tells me a secret
until he tells me so.
HMJr:
Well, I didn't say anything. I suppose I should
have said, "Well, you can't see it, or you can,"
but I made no commitment whateoever, because it
left me breathless.
N:
I see.
99
-2HMJr:
Now, of course, there's a lot of stuff in there
N:
Yes, that's the point.
HMJr:
N:
about another man.
And
there's a lot of stuff in there which, frankly,
I don't want him to see.
Well, now, may I just say this. I've returned it
to you.
HMJr:
N:
HMJr:
N:
HMJr:
N:
oh, I'm perfectly willing. Yes, it's my document.
It's your document. You gave it to me.
That's all right. I should carry it.
Well, I'll do it if you want me to.
No, because he's working for you.
You see, I don't like to dispute his honesty.
The only thing that makes it this way was - I
HMJr:
wouldn't hesitate at all, but I
Well, if he - you return it to me.
I'll do that.
HMJr:
Now, let me ask you this. If he insists on seeing
it, I'11 have the thing rewritten - or rather I'11
N:
HMJr:
take the part out.
Yes. That was the
I'll take everything out except the personal part
which affects him.
N:
That's right.
HMJr:
What?
N:
That's right.
HMJr:
What do you think of that?
N:
I think that's the thing to do. If it were just
that, I see no harm in it at all.
100
-3HMJr:
But all this stuff about the Bosch and all those
other people - I mean, immediately
N:
HMJr:
Well, there was too much - there's too much in
there about the other man, and I think it would
just be - why, that's why I just wanted to
exercise double discretion and have you tell
me that it was all right to do it.
No. You return it, and then if he insists on
seeing
I'll eliminate
this 1e it,
what
I sent in. the other man and say
N:
That'11 be all right. I see no harm in that.
As a matter of fact, I think that would be a
good thing to do.
HMJr:
N:
HMJr:
Well,
personally, if you talk to him, see, might
I make a suggestion.
Yee, certainly.
I don't know what you're going to have in your
mind, but if I could make a suggestion and say
this, that if you - Nelson - are going to do
anything, see
N:
HMJr:
N:
HMJr:
N:
HMJr:
N:
HMJr:
Yes.
take any action, then you will ask Morgenthau
to show it to you.
That's right.
But pending your taking any action, there's no
reason for him to see it.
That's
right. I think that's all right. I'11 do
that.
Isn't that all right?
That's perfectly all right.
I mean, in other words, if he's going to be on
trial, then he's entitled to see the evidence.
101
-4N:
That's right.
HMJr:
But if he's not on trial, then he isn't entitled.
N:
I would think that's a fair way to put it. I'll
do it that way.
HMJr:
Is that fair?
N:
Fair and straight.
HMJr:
Okay.
N:
All right, sir.
HMJr:
Thank you.
N:
Good-bye.
MEMORANDUM
102
from the desk of DONALD M. NELSON
May 13, 1942
Lieutenant Stevens:
In accordance with Mr. Nelson's
conversation with the Secretary, I
am sending over the secret document
which they discussed.
I. Thornton
STRICTLY CONFIDENTIAL
- 103
MEMORANDUM FOR THE PRESIDENT:
You asked me to bring up to date my memorandum
to you of January 30, 1942, concerning William L. Batt's
connection with American Bosch Corporation.
In that memorandum, a copy of which is attached,
I pointed out the following:
(1) Batt has been with SKF since 1919; practi-
cally all of his income is from salary as head of that
company; and under a voting trust agreement executed in
1941, he acts as trustee for the stock in SKF owned by
Swedish interests, which amounts to 95% of the stock of
SKF.
(2) When Mendelssohn and Co. nominally ac-
quired the German Bosch interest in American Bosch in
1934, George Murnane of Monnet, Murnane and Co. was
designated to represent Mendelssohn's interest in American Bosch. In 1938, Murnane reorganized American Bosch
STRICTLY CONFIDENTIAL
-2-
104
and put in as President, Donald P. Hess, who had been
recommended to him by Batt. At the same time Batt was
made a director of American Bosch. (Murnane stated
that ticuas upon his recommendation that Batt was made
President of SKF.)
(3) After the failure of Mendelssohn and Co.,
its interests in American Bosch were sold in May 1940 to
Swedish interests dominated by the Wallenberg family,
which family also owned a dominant interest in American
SKF. Murnane was designated as the voting trustee of
the Swedish interests in American Bosch.
The investigation of American Bosch which the
Treasury Department has recently concluded reveals the
following:
(1) In 1934 German Bosch, desiring to protect
itself against the Nasi foreign exchange control, transferred its interests in American Bosch, British Bosch and
French Bosch to Mendelssohn of Amsterdam, retaining an
option to repurchase the stock. Officials of German Bosch
went along to Amsterdan with the transfer of these shares
to insure continued German Bosch control over these
companies.
STRICTLY CONFIDENTIAL
105
-3. -
(2) Mendelssohn, contrary to its agreement
with German Bosch, pledged the stock of American Bosch
with the New York Trust Co. to secure some loans. When
Mendelssohn failed in the Summer of 1939, German Bosch
was very fearful lest the stock in American Bosch be sold
by the New York Trust Co. to competing American interests
who would refuse to resell the shares to German Bosch.
George Murnane and his partner Jean Monnet participated
in negotiations to prevent the sale of the American Bosch
stock to interests that would not be friendly to German
Bosch.
(3) Negotiations took place between Chemical
Bank and the German Reichsbank for the acquisition by
Chemical of the American Bosch stock against payment of
$1,000,000 in cash to be put up by Chemical, together with
$2,200,000 of standstill credits acquired by Chemical on
option from British banking interests. Under the proposal,
Chemical was to agree to resell the American Bosch stock
to German Boach after the war. For some reason these
negotiations fell through. The Reichsbank official told
Kollmar, the representative of Chemical, that there had
been too long a delay in concluding these negotiations and
STRICTLY CONFIDENTIAL
106
.4.
also that the German Government, to the embarrasement of
the Reichsbank, found out that enemy-owned German stand-
still credits would have been used to effectuate the
purchase by the Chemical.
(4) In May 1940, the shares of American Bosch
which had been held by Mendelssohn were purchased by The
Stookholms Enskilda Bank. Kollmar of Chemical Bank was
thereafter told by the official of the Reichsbank that
the stock had been sold to "Swedish friends", the Wallenbergs, on terms similar to those discussed with him,
namely, on the basis of the stock being resold to German
Bosch within two years after the war. Kollmar stated
that if the "Reichsbank makes any deal in Sweden it is
with the Wallenbergs, because I know who their confiden-
tial bankers are."
(5) It is my judgment that the Swedes in acquiring the stock in American Bosch have agreed to re-
sell it to German Bosch after the war.
The remainder of this memorandum relates to
the interrelated roles played by George Murnane, Jean
Monnet and William L. Batt in the American Bosch picture.
107
-
STRICTLY CONFIDENTIAL
George Murnane
George Murnane has disclaimed knowing that there was
any German interest in the American Boach stock when that stock
was held nominally by Mendelssohn. In that connection the
following testimony by Arthur T. Murray, President of American
Boa ch through 1937, is of interest:
.
.
Dr. Mannheimer further told me that
it was his desire and intent to hold the shares
in all of these companies as Agent for the German
owners until such time as the Nazi Regime no
longer existed, when they would be returned to the
real owners.
"I was talking with Mr. Murnane and I suggested
that some day both of us might find ourselves being
asked by the Government who really owned the Bosch
stock, because I felt then that sooner or later a
war between Germany and the United States and the
rest of the world was inevitable. Mr. Murnane
replied that he was going to see to it that he
never made any inquiry as to how the Bosch shares
came into the hands of Mendelssohn & Co. because he
always wanted to be in a position to say honestly
that so far as he knew the shares were the property
of Mendelssohn & Company. This conversation took
place some time during 1936 or 1937.
"Stuttgart wanted to be very certain that there
wasn't anything going through the mails that the
Nagi Regime might get ahold of to indicate that they
were the real owners of United American Bosch shares."
# Dr. Mannheimer was the head of Mendelssohn & Co. and his
suicide in August, 1939 led to the liquidation of
Mendelssohn & Co.
-6- STRICTLY CONFIDENTIAL 108
When Hess was being considered in January 1998
for the Presidency of American Bosch, he wrote a letter
to Batt, a copy of which is attached, in which he stated
in part as follows:
"Dear Bills"Just returned to Columbus yesterday se
this is the first chance I have had to tell
you that Mr. Murnane is in my opinion all
that you stated and was most willing to give
me all necessary data re United American
Besch. While this statement is somewhat pre-
nature, I am satisfied that he and I could
get along in a most satisfactory manner.
The general setup is exactly as you described
it with control (705) in Mendelssehn & Co.,
Rotterdam-which means German Bosch and
Murnane acts for them. He has apparently
as much authority as could be expected under
such circumstances.
The foregoing would clearly indicate that Hess
understood from Murnane as well as Batt that Mendelssohn
was acting for Besch.
In 1939 Murnane was in communication with
Rassbach, who was an official of German Bosch. They were
discussing National City Bank's effort to acquire the
shares in American Besch in exchange for blocked German
assets owned by National City. Murnane pointed out that
since National City was prohibited from retaining COMMON
STRICTLY CONFIDENTIAL
.7.
109
stock even though acquired in settlement of debts, National
City would be compelled within a reasonable period to sell
the shares of American Besch and that there would then be
a repetition of the existing situation. By this Murnane
meant that the National City Bank, like the New York Trust
Co., might sell the shares of American Bosch to interests
unacceptable to German Beach.
Murnane has said that in response to a ques-
tion he asked Mareus Wallenberg during a visit to this
country in the Fall of 1940, Wallenberg stated that
Swedish interests alone owned the shares in American
Bosch transferred from Mendelssehn, and therefore,
Murnane believed that there was no German interest in
American Bosch. At the same time Murnane stated that he
believed that where money matters were concerned the
Wallenbergs were the coldest-blooded people he had ever
met.
When Marous Wallenberg was in this country in
the Fall of 1940, he was making very substantial purchases
of German municipal and industrial bonds owned by Americans
at prices from 20 to 25 cents on the dollar. Wallenberg
STRICTLY CONFIDENTIAL
-8-
was making these purchases with funds transferred to the
accounts of the Stockholms Enskilda Bank from the accounts
of the German Gold Discount Bank. Wallenberg admittedly
was acting for the benefit of German authorities in making
these purchases. These activities by Wallenberg were widely
known in this country and must have been known by Murnane.
It is also interesting to observe that Marcus
Wallenberg admitted to an official of the Treasury in the
Fall of 1940 that Sweden had been negotiating with the
Germans in order to protect itself from a German invasion.
It is my belief that after the German invasion of
Norway, German and Swedish financial and industrial interests
drew closer together. Swedish interests were used by the
Germans to hold title to German owned property in the United
States during the period of the war and Swedish interests
were also used by the Gernans to engage in other financial
transactions here and elsewhere for the benefit of Germany.
In exchange therefor the Wallenbergs and other Swedish
interests obtained protection for their property holdings in
Germany and German occupied territories. Needless to say,
Germany also held the Swedish properties as a hostage to
compel Swedish interests to set on behalf of Germany.
STRICTLY CONFIDENTIAL 111
9Jean Monnet
I called in Jean Monnet, who is the partner of
George Murnane, who shares in Murnane's earnings as
Chairman of the Board of American Bosch and who is at
present a member of the British Supply Council. I told
him that our investigation of American Bosch indicated
that German Bosch retained an interest in the stock of
American Bosch even though the stock had been transferred
first to Mendelssohn and thereafter to the Swedish interests.
Monnet said that he did not believe that the
Germans retained any control over the shares in Swedish
hands and that if George Murnane was aware of any such
tie-up he would have made such information known to
Monnet. However, Monnet said he would question Murnane
about the situation and report back.
At a second conference which I had with Monnet
a couple of days later, Monnet said that he had talked
the matter over wi th Murnane, that Murnane had corrobor-
ated his impression that the sale from Mendelssohn to
the Swedish interests was wi thout any strings whatsoever
in favor of the Germans.
112
STRICTLY CONFIDENTIAL
- 10 I was not satisfied that Monnet was telling
all that he knew. Monnet unquestionably know all of
the aspects of the Bosch situation. On August 17, 1939,
a telegram was sent to Hess, the President of American
Bosch, by Dr. Otto Fischer, one of the watch-dogs of
German Bosch who worked out of the Mendelssohn's office.
In that telegram Fischer indicated that thanks to urgent
representations by Mendelssohns and Murnane, the invest-
ment in American Bosch had been kept intact and that it
looked as though desirable interests were going to be
able to raise the amount required for release of the
American Bosch shares which were held as collateral by
the New York Trust Co. Dr. Otto Fischer then stated:
"I am going to see Mr. Monnet
tomorrow in connection with this
project."
In a memorandum in the files of the New York
Trust Co., signed by C. E. Hunter, a Vice President,
he said that Murnane had told him on August 21, 1939,
that Monnet had gone to Amsterdam to investigate the
113
STRICTLY CONFIDENTIAL
- 11 situation respecting Mendelssohn and the American Bosch
shares. Monnet's report is stated in substance to have
included the following:
"Third parties have rights in those
shares, this right consisting of privilege
retained by Robt. Bosch G.m.b.H. to meet
any
potential
buyer's price within 30 days
of the
bid.
"A group in Amsterdan representing
Stuttgart--very responsible people, are
working feverishly to present a proposition to us. They are fully able to buy
all these shares we hold.
Monnet also told me that up until the latter
part of 1938 he was a believer in rapprochement between
France and Germany.
STRICTLY CONFIDENTIAL
12 -
William L Batt
I had a talk with Batt last Tuesday. I told his
I believed that German Bosch had retained an interest in
American Bescheren though the shares were owned first by
Mendelssohn and later by the Swedes. Batt stated that
he did not know that German Beach continued to have such
an interest while the shares were in Mendelssehn's name,
but that if the Treasury had come to that conclusion,
he would not question it.
During my talk I showed Batt a copy of the
letter that Hess had written to his in January 1938 in
which he said with respect to American Boach:
"The general setup is exactly as you
described it with control 70% in Mendelsseha
& Co., Retterdan - which means German Besch
and Murnane asts for them. He has apparently
as much authority as could be expected under
such circumstances."
I also recalled to Batt that in his letter of reply to
Hess, he had not denied the German Besch interest in
American Beseh.
115
STRICTLY CONFIDENTIAL
- 18 Batt said that he had never told Hess that he
believed the Mendelssohns were acting for the Germane
and this part of the letter was Hess' personal conjecture.
I asked Batt if he would have accepted member-
ship on the Board of Directors of American Bosch in 1938
had he known at that time that the Germans retained an
interest in the Dutch-held American Bosch shares. He
replied that he would have accepted the directorship at
that time even if he had been aware that the Germans con-
tinued to dominate the affairs of the company. Batt then
pointed out that he always believed there was a difference
between German industrialists and the Nasi party and that
he had always entertained the highest admiration and
effection for German industrialists.
I then asked him if he believed that the Swedes
were holding the shares in American Besch for the Germans
in consideration of an agreement on the part of the Germans
to protect the Wallenbergs and other Swedish interests in
German SKF. Batt denied that such an agreement existed,
stating flatly that he believed the sale from Mendelssohn to
the Enskilda Bank was without any reservations and that such
an inference had never even entered his mind. I then asked
-14STRICTLY CONFIDENTIAL 116
him if it was not possible for such an arrangement to
exist without his knowing about it, and he said it was
possible although he did not believe it. In response to
another question, Batt stated that so far as he knew there
had been no interference by Germany with SKF properties
in German-occupied Europe, and he assumed that these prop-
orties were being used to assist Germany in its war effort.
He then asked me what reason I had to infer that
the transfer of the Mendelssohn shares to the Enskilda Bank
included an agreement to resell to German Bosch after the
war. I told him of the information which had come to the
Treasury's attention, particularly the negotiations and
discussions between the Chemical Bank and the Reichsbank.
Notwithstanding that, Batt did not think it was conceivable
that the Wallenbergs could be acting on behalf of the Germans.
I then told Batt that we had information to the
effect that during the Fall of 1940 Marcus Wallenberg had
come to the United States for the purpose of purchasing for
the Reichabank German municipal and industrial bonds at a
discount and had told certain people that he had a free hand
in the purchase of these securities.
Batt confirmed what we had previously been told by
Murnane, namely, that the Wallenbergs were hard and cold in
matters of money, but that he had the highest
regard and affection for them.
STRICTLY CONFIDENTIAL 117
- 15 Batt said that he could understand the reasons for
our apprehensions and thought that if he were in our position he would require the Enskilda Bank to warrant that the
American Bosch shares would not be transferred for at
least 10 years after the war.
I told him that I appreciated his frankness,
but I wanted to think the matter over and would let him
know my conclusions later this week.
STRICTLY CONFIDENTIAL 118
January 30, 1942
MEMORANDUM FOR THE PRESIDENT:
You have asked me for information concerning William
L. Batt's connection with American Bosch Corporation.
1. In order to have a clearer picture it is necessary to mention briefly Batt's connection with SKF. Batt
has been associated with American SKF and its predecessors
since 1919. He was general manager from 1919 to 1923, when
he became president, which office he still holds. His
salary as president has ranged from $26,000 in 1935 to
$60,000 in 1940. He customarily files a joint return. He
and his wife have no significant income other than his
salary from American SKF Corporation.
On January 1, 1939, Swedish SKF owned 76 percent of
the outstanding stock of American SKF; certain other Swedish
interests owned approximately 18 percent. These shares were
transferred to Batt under voting trust agreements early in
1941. Batt himself owns a trifling amount of shares in
American SKF (65 shares).
STRICTLY CONFIDENTIAL 119
2. In 1938 Batt became a director of American Bosch
Corporation at a salary of $2000 a year. The records of the
company and the transfer agent do not reveal that he has ever
owned any stock in American Bosch. He resigned as director
of American Bosch on March 5, 1941.
The majority of the stock of American Bosch was reacquired in 1931 by the German Bosch Company. In 1934
Mendelssohn & Co. nominally acquired the German Bosch interest
in American Bosch. Shortly thereafter, George Murnane became
director of American Bosch and represented Mendelssohn's
interest in American Bosch. George Murnane is at present a
member of the firm of Monnet, Murnane & Co. and formerly was
a partner of Lee Higginson where he actively handled the
Kreuger and Toll matters. Murnane's partner, Jean Monnet,
formerly was chairman of the British French economic council,
and is now a member of the British Supply Council. Murnane became chairman of the board of American Bosch in June 1937 and
in 1938 effected a reorganization of the company. The financial
reorganization left the stock in Mendelssohn & Co. and the
managerial reorganization resulted in Donald P. Hess replacing
Arthur T. Murray as president. At the same time Batt was made
a director of American Bosch.
When Fritz Mannheimer, the head of Mendelssohn & Co.
committed suicide in August 1939, Mendelssohn & Co. failed
STRICTLY CONFIDENTIAL 120
and was liquidated. In May 1940, the Mendelssohn interests in
American Bosch were sold to the Stockholm Enskilda Bank which is
owned by the Wallenberg family. Murnane was then designated as
the voting trustee of the Swedish interests in American Bosch.
At the present time, therefore, the Swedish interests in
American SKF are represented by Batt, as voting trustee, and the
so-called Swedish interests in American Bosch are represented by
Murnane, as voting trustee.
******
3. In the course of our investigation of the personnel
and records of American Bosch, which we started last Saturday, we
have run across information which suggests that arrangements may
have been made whereby the Germans would protect SKF holdings in
German-occupied countries in exchange for efforts by the Wallenbergs to protect the German interests in American Bosch. Under
such an arrangement the Wallenbergs would hold the Swedish
interests in American Bosch until the end of the war when it
would resell such interests to the Germans.
Murnane reported to one of our Treasury investigators
that it was upon hisrecommendation that Batt was made president
of SKF and that Hess who succeeded Murray in 1938 as president
of American Bosch was suggested by Batt.
It has also been reported from another source that during
the liquidation of Mendelssohn & Co. (after the outbreak of
war) English interests were asked to buy the Mendelssohn-held
121
STRICTLY CCRFIDENTIAL
4
-
shares in Ameri can Bosch with the understanding that
at the end of the war the control would be resold at a profit
to German interests; but the English exchange authorities
refused to permit the transaction. Thereafter the Mendelssohn
interests in American Bosch were sold to the present Swedish
holders.
In view of the fact that our investigation of American
Bosch has just begun we can not warrant the accuracy of the
comments contained in section 3 of this memorandum.
(Signed) H. Morgenthau, Jr.
STRICTLY CONFIDENTIAL 122
DONALD P. HESS
Columbus, Ohio
January 8, 1938
Ma. L. Batt,
SKF Industries Co.,
Philadelphia, Pa.
Dear Bill:
Just returned to Columbus yesterday so this in the first chance
I have had to tell you th t, Mr. Murnane 10 in my opinion, all that
you stated and was most willing to give me all necessary data re
United American Bosch. While this statement 1s somewhat premiture,
I na catiefied that be and I could get along in a most satisfactory
manner. The general setup is exactly as you described it with
control (70%) in Mendelssohn & Co., Rotterdam - which means German
Bosch and Murnane acts for then. He has apparently, as much authority
55 could be expected under such circumstances.
From the standpoint of operations, 1. e., manufacturing and
merchandising, it looks good to - with real possibilities even
in view of D very erratic performance over the past even years. The
financial picture 1s not good - which is probably to be expected in
visw of past earnings, or rather lack of earnings, and it is giving ne a
good donl of concern. In analysing the last monthly statement it indicates
current sasets and liabilities about balance with a mall amount of each
on hand. In this I am considering all notos payable as current although
the statement does not show 0.9 such do (due?) to cartain rrangements as
to payments, etc. This year should show a small profit, but even this
is questionable as present inventories look high to me.
Mr. Murnane told me that the bankers are willing to convort
the notes into stock and he has additional funds to put into the
company to help the cash position. Summarizing the whole thing Bill, I
as auch inclined to take it on, but the financial outup bothers me, and
I want to give it considerable thought. Hope to give Mr. Murnane
something definite eithin the next two weeks. Incidentally if you hear
anything from his as to his feelings in my regard would greatly appreciate
your so advising me.
Sincerely yours,
/a/
Deni 14 ?. Esse
DPH-V
STRICTLY CONFIDENTIAL
123
May 13, 1942
5:34 p.m.
HMJr:
Hello.
Operator:
Mr. Hetzel has gone for the day.
HMJr:
Well, you can leave - you can leave word that
I called. See if Mr. Carey is in, will you
please?
All right.
HMJr:
See if Mr. Carey is in.
Operator: Right.
Operator:
May 13, 1942
5:36 p.m.
HMJr:
Hello.
Operator:
Mr. Carey.
HMJr:
Hello.
Operator:
Mr. Carey.
HMJr:
Hello.
Jemes
Carey:
Hello. How are you?
HMJr:
I'm fine.
C:
Good.
HMJr:
Look, Mr. Carey, I got a recuest from Ralph
about - to re-open a case in regard to a man
called Hinckley, who we let out of the Treasury,
Hetzel and Mr. Haywood to see me personally
you see.
C:
Yes, sir.
HMJr:
Now, I've reviewed the whole case myself, and
124
-2I'm satisfied that the man should have been
permitted to go. See?
C:
HMJr:
Yes, sir.
I haven't got the time to see these people,
see?
Yes, sir.
C:
HMJr:
If, on the other hand, that Mr. Murray wants me
to go into it personally, I will; but I'm not
going to do it unless Mr. Murray asks me to.
Uh huh.
C:
HMJr:
Because there's been a half a dozen people in
the Treasury who I've got confidence in, including myself, who have reviewed the case.
Now, Mr. Haywood, or the people that came here,
said if I wouldn't reinstate the man, they'd
go to the President. Now, for no other reason
rather than not have them bother the President,
I don't want them to bother him, and, frankly,
if I hadn't read the whole thing myself, I would
say, "Well, I'm not familiar with it," but I am.
You see?
C:
Un huh. Well, now, here was the part I played
HMJr:
Yeah.
C:
I was called for an opinion on it.
HMJr:
Yeah.
C:
And I told them, well, I wouldn't hire the fellow.
HMJr:
Yeah.
C:
I certainly wouldn't recommend him.
HMJr:
You did.
C:
Yes, sir, and it was a very frank statement that
in this.
I made.
-3HMJr:
Yes.
C:
However, someone in the Treasury Department
125
didn't use very much tact when they wrote a
letter to Mr. Haywood, saying that one of the
high officials of the C.I.O. and the C.I.O.
office said that the man should be sfired.
HMJr:
No.
C:
You see?
HMJr:
Yeah.
C:
And there was only one high official of the
C.I.O. and in the C.I.O. office, you see, and
he happens to be Mr. Murray.
HMJr:
Oh, yes.
C:
And then Mr. Haywood had an opportunity to send
a letter saying that we'd like to know the name
of this high official.
HMJr:
Yes.
C:
I don't know whether they gave him the name.
I don't think they did, but I was giving them
an opinion.
HMJr:
Well, do*you know who sent the letter from the
Treasury?
C:
I - offhand I don't know.
HMJr:
I'll find out.
C:
Well, that's not important, except that it would
prevent, you know, giving a real opinion on a
question like that on the basis of advice, do
you see.
HMJr:
Well, what I was calling - unless it puts you
in an embarrassing position
C:
HMJr:
No, I'm in it. It doesn't at all, and I.
If you'd simply say to Mr. Hetzel - I'd say,
126
4-
"Unless Mr. Philip Murray personally asks me to
go into this thing, I'm not going to do it."
C:
Uh huh.
HMJr:
See.
C:
Suppose I talk to Mr. Murray about it.
HMJr:
Will you?
C:
HMJr:
I'll do that.
Because I read the thing very, very carefully,
and I don't think Haywood has a place in the
Treasury.
C:
Hinckley.
HMJr:
I mean Hinckley.
C:
Uh huh.
HMJr:
Hinckley.
C:
I don't either.
HMJr:
See?
C:
No. of course, the opinion I gave was from long
experience and long association with the fellow.
HMJr:
Right.
C:
And I certainly - I was asked if I recommended
him. I took exception to it, you know, that
even a suggestion was made that I recommended
him. Then I was told that, well, they couldn't
understand the position of the C.I.O., that the
C.I.O. wouldn't cooperate in the Defense Bonds
program unless Hinckley was put on, reinstated.
HMJr:
Yeah.
C:
I said, "The C.I.O. is not taking a position of
blackmailing the Treasury Department."
127
-5HMJr:
Yeah.
And they're separate issues, and absolutely
separate issues. Then they said that the man
C:
was discriminated against for his union activity,
and I said, "I've known the fellow a long time,
and he hasn't had any union activity.
HMJr:
C:
Yeah.
He had Youth Congress activity.
C:
That's right.
Well, I think you ought to stand on your position.
HMJr:
What's that?
C:
I think you should stand on your position.
HMJr:
Okay. If Mr. Murray says. to me, "Morgenthau,
HMJr:
I'd like you to see these people; I'm not satisfied." If Philip Murray saye he's not satisfied,
I'll see them, but I'm not going to do it unless
Philip Murray asks me to.
C:
HMJr:
C:
I think it's a fine position.
Ie that all right?
That's all right.
HMJr:
Okay.
C:
Righto.
HMJr:
Thank you.
STRICTLY CONFIDENTIAL
128
May 13, 1942
6:03 p.m.
HMJr:
Yes.
Operator:
Go ahead.
HMJr:
Hello.
James B.
Carey:
Hello, Mr. Secretary.
HMJr:
Go ahead.
C:
Hello.
HMJr:
Yeah. Morgenthau.
C:
Oh, yes. This is Jim Carey.
HMJr:
Yes.
C:
Sorry to call you this late. I talked to Mr.
Murray.
HMJr:
Yes.
C:
He's in town now at the Carlton Hotel, but he's
leaving for dinner.
HMJr:
Yeah.
C:
And he told me that the Secretary should do whatever he thought best in this, and he' 1 S not going
to meddle into it.
HMJr:
No.
C:
And I told him how I felt about the situation,
and he completely agreed.
HMJr:
Well, I just think I'm going to tell them that
the matter is closed.
C:
HMJr:
C:
Yes, and I'll tell them, too.
I'm just going to say, "The issue is closed."
That's right.
129
-2HMJr:
C:
And I won't bring anybody in.
Yeah, I think that will be a good idea; and in
the meantime, I'11 tell them.
HMJr:
Yeah.
C:
I mean I'll tell both Haywood and Hetzel.
HMJr:
Yeah. Well, Hetzel - I tried to get him before
I called you, you see.
HMJr:
I wouldn't do anything on that score.
No, I'm just going to send word to them that
I've gone into the matter thoroughly myself,
and the matter is closed.
C:
That's right, and that's the position that I'll
C:
take and Mr. Murray will take.
HMJr:
Good.
in.
And I'm not going to bring you or Murray
C:
Well, I have no objection.
HMJr:
There's no - it isn't necessary.
C:
Uh huh.
HMJr:
C:
It'e not necessary. I'll simply say, "It's closed."
Yes, and I think that's the right thing.
HMJr:
Okay.
C:
Okay, and thanks a lot.
HMJr:
Thank you.
130
May 13, 1942
My dear Grace:
I am sending you herewith formal letter from
Secretary Stimson to the President. It is important to
get these soldiers into decent quarters for the following reasons:
1. The Army Medical Officer has declared the
space presently assigned as unhealthy because of poor
ventilation in sleeping quarters, and unsanitary because
of the location of the mess hall in former coal bunkers in
the Treasury yard.
2. The Commanding Officers state that, for tactical reasons, it is essential that these troops be assembled
at the most strategical point (Sherman Square).
3. It is planned to build around the Sherman
statue without disturbing the statue and only two small
trees will have to be relocated.
As far as I am concerned the soldiers can stay
in the Treasury as long as they want to. but it seems
inhuman, under Washington summer conditions, to leave them
living in the cellar of the Treasury with big steam pipes
running through their quarters.
I would greatly appreciate if you could bring
this to the President's attention, and if he agrees have
him issue the necessary orders to the Army to proceed with
the construction of necessary quarters, plans of which
you will find enclosed herewith.
Sincerely yours,
(Signed) Henry Morgenthan, Jr.
Miss Grace Tully,
The White House.
00 - Secretary Stimson
Delivered by S. S. Agent 5:40 p.a.
131
THE WHITE HOUSE
WASHINGTON
May 11, 1942.
MEMORANDUM FOR THE
SECRETARY OF THE TREASURY
Please speak to me about
this.
F.D.R.
WAR DEPARTMENT
WASHINGTON
MAY 9 1942
The President,
The White House.
Dear Mr. President:
It nas been requested by the Secretary of the Treasury
that the troops, now guardin the White House and the Treasury Building, be removed from the unsatisfactory quarters which they now OC-
cupy in the sub-casement of the Treasury Buildin It is desired
to construct a building to house those troops on a site which will
be readily accessible, under any conditions, to the buildings which
they are assi med to uard.
A site has been selected on Sherman Square, directly south
of the Treasury Buildin . It is planned to construct = building
there in a U-shape around the statue, in SUC. a manner that only two
of the existing trees will have to be relocated. The architecture
will be such that it will harmonize with the temporary office buildings now bein constructed throu hout Washington. This site has the
approval of the Secretary of the Treasury.
matsuitable
As this is the site that will enable the troops to
perform their military ....ssion of protecting the white House and the
United States Treasury, your approval of its use for this purpose is
requested.
Respectfully yours,
Frum Stunson
Secretary of far
133
May 12, 1942.
Mr. W. N. Thompson
Mr. Larson
The following information has been secured from the Commanding Officere of
the 71st Coast Artillery (AA) and the 703rd Military Polices
COAST ARTILLERY
Colonel Edward W. Timberlake stated that he requires quarters for 175 onlisted personnel and 5 officers. At the present, he has men quartered as follows
26 Senate Office Building
24 House Office Building
20 Old House Office Laboratory Building
24 4th Floor, Main Treasury Building
9 Sub-basement, Main Treasury Building
21 State Department Building
21 Commerce Building
21 Washington Building
14 Anticipated increase in personnel
180
Total
Colonel Timberlake intends to move all the men from the above buildings and
quarter them in the new barracks for the purpose of guarding the Treasury and
White House. At present the Capitol, the White House, and Treasury are inadequately guarded. For sanitary and tactical reasons, the Sherman Square site is
more suitable for the barracks.
The Medical Officer of Fort Myer stated that the mess hall used by 71st
Coast Artillery (AA) is unsanitary due to the fact that it is in the coal bunkers
in the Treasury yard and its underground location may cause illness among the mon.
MILITARY POLICE
Major Martin A. Fennell stated that he requires quarters for 185 enlisted
personnel and 6 officers. At the present time, he has 66 mon quartered in the
Sub-basement of the Main Treasury. of this number 40 soldiers are quartered in
one room, which has only one window. Many of the pipes for the various utilities
supplying the building are exposed in this area, such as steam heat, hot water,
electrical conduits, etc.
The meals are cooked at Fort Myer and conveyed to the Treasury by trucks,
and reach their destination cold and must be reheated before being served.
134
In case of emergency, the force must be doubled to adequately protect the
White House and Treasury, which requires 20 - 25 minutes in transit between
Fort Myer and the Treasury.
Sumarisings of the present contingent of 371 officers and enlisted men
assigned to the protection of the buildings listed, the Treasury building
supplies quarters for but 99. It has been stressed by the Commanding Officers
that, for tactical reasons, it is essential that the full complement of officers
and men on this assignment be quartered in one central location within immediate
proximity to the buildings under their protection. The matter of sanitation and
ventilation are, in themselves, extremely important.
Major Ashbridge, U. S. Army Engineers, has a directive to erect the barracks
and is only awaiting approval of the site.
Attachedbuildings.
hereto is blue print prepared by the U. S. Army Engineers showing
the proposed
135
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 13, 1942
TO
FROM
Secretary Morgenthau
Mr. Thompson
A survey of Treasury personnel for the months of February and
March last indicates that out of 4,335 appointments, 2,684, or 62
per cent, were women and 1,651, or 38 per cent, men. Most of the
appointments were as clerks, stenographers, typists and machine
operators. In the higher brackets, however, four women economic
analysts were appointed, one in Monetary Research and three in
Research and Statistics. Seventeen women were appointed in Foreign
Funds and War Savings in various grades of commercial, advertising,
and defense securities promotion specialists. Four women were
appointed as accountants and auditors in Internal Revenue.
from
136
EXECUTIVE OFFICE OF THE PRESIDENT
Bureau of the Budget
Washington, D. C.
May 13. 1942
My dear Mr. Secretary:
With reference to your letter of April 30, 1942
and Budget Circular No. 388, you are advised that the
Division of Research and Statistics has been trans-
ferred from Class 5 to Class 3. effective this date.
Very truly yours,
(Signed) Wayne Coy
Assistant Director.
The Honorable,
The Secretary of the Treasury.
137
APR 30 1942
The Director,
The Bureau of the Budget.
Sir:
With further reference to the priority classifica-
tions established by Budget Circular No. 388, and the
exchange of correspondence on this subject, I cannot
avoid the conclusion that the Bureau of the Budget has
improperly appraised this Department's operations in
their relation to the war program. At the same time
I appreciate that matters of this character cannot be
worked out to the entire satisfaction of all concerned
and am willing to operate under the Budget Bureau's plan
until such time as it may become evident that definite
impairment to the work of the Treasury Department will
result, when I shall renow the subject with you.
I should like now, however, to bring to your attention what impresses me as an inconsistent decision respecting the research work of my office. Under the original
classification the Division of Research and Statistics
was placed in Class 5, and subsequently it is understood
that the Division of Tax Research and the Division of
Monetary Research were placed in Class 3. All three of
these research units operate under my direct supervision
on work related to the War effort and there is no basis
for classifying them in different priority groups. They
should, in my opinion, all be in the same class as that
given to the office of the Secretary in matters of general
administration, which is in Class 3. It will be apprecisted if you will at your earliest convenience correct
this situation.
Very truly yours,
(Signed) B. Morgenthau, Jr.
Secretary of the Treasury.
c...n.m.c.
CRS.
File to Thompson
138
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Mr. Thompson
FROM
Mr. Haad
for
MAY 13 1940
In further response to your request of December 26,
1939, there is submitted herewith for the Division of
Research and Statistics a memorandum listing, with brief
descriptions, the studies or projects completed or under
way, and the names of persons working on each, for the
month of February 1942.
139
DIVISION OF RESEARCH AND STATISTICS
Report of Studies or Projects Completed or Under
Way, and the Names of Persons Working on Each,
for the Month of February 1942
For convenience of reference, the studies listed are
grouped under general subject heads.
The names shown for persons working on each project
include only those who participated fairly directly, as
explained in the introductory note to the corresponding
report submitted on December 28, 1939. No attempt has
been made to cover also persons whose responsibility in
each
particular case was mainly in planning, supervising,
or
consulting.
Financial Analysis
I. Projects or studies completed
1. A review of current developments in the high-grade
securities markets was prepared, and a memorandum
was transmitted to the Secretary on February 27.
Copies were given to Under Secretary Bell and to
Mr. Morris. - Mr. Haas, Mr. Murphy, Mr. Lindow, Mr. Foy,
Mr. Barnett, Mr. Rosen
This review contained, in addition to analysis of the
current 81 tuation, the following special studies:
(a) The new issue; open-market operations in the
medium maturity sector. - Mr. Foy
(b) Changing value of the partial tax-exemption
privilege. - Mr. Barnett
2. A memorandum was prepared, and was transmitted to the
Secretary on February 6, containing recommendations
with respect to the February financing, - Mr. Haas,
Mr. Robbins
Murphy, Mr. Lindow, Mr. Foy, Mr. Conrad, Mr. Rosen,
Mr.
3.
A maturity calendar was prepared as of February 1, for
each issue of direct and guaranteed bonds and notes
of the United States. The calendar was transmitted to
the Secretary on February 6. - Miss Lagos
-2-
140
4. Yields on public marketable securities issued by the
United States Government and by Federal agencies were
computed daily on the basis of the-counter closing
this information. Similar comparative information for
earlier periods was prepared in a weekly table. A
quotations. A daily table was prepared summarizing
chart for each issue was kept up to date showing daily
price and yield figures together with comparative
monthly data since 1935, since the date of issue, or
since the date first traded. In addition, yields were
computed daily on five high-grade corporate securities,
three municipal securities, and two British Government
issues. - Mr. Moody, Miss McCoy, Mr. Kroll
5. Preparation of reports regarding purchases in the
United States by the British Empire has been discontinued, in accordance with instructions from the
Secretary, and the work of closing out the project has
been completed.
6. Preparation of reports regarding purchases in the
United States by the Netherlands Purchasing Commission,
and by Lindeteves, Inc. has been discontinued, in accordance with instructions from the Secretary, and the
work of closing out the project has been completed.
7. In response to a request by the Secretary on January 21,
1941, that measures be taken to obtain information to
assist in carrying through the defense financing program, arrangements were made to obtain the necessary
detailed statistics on the holdings of each issue of
the public debt and of guaranteed securities by the
various classes of holders. - Mr. Haas, Mr. Tickton,
Mr. D. J. Leahy, Mrs. Barnes, Miss Westerman
Supervision was given in the preparation by the
Division of Loans and Currency of 100 tables, showing
the information as of January 31, received from 7,000
banks and insurance companies.
Special tabulations were prepared, and were transmitted
on February 5, to the Federal Reserve Banks of New York
and Philadelphia, covering ownership in the respective
districts, as of December 31.
141
- -3 -
tabulation was prepared, and was transmitted on
February 5, to the Board of Governors of the Federal
A
Reserve System showing, by classes of banks and by
issues, the amount of Government securities owned on
December 31, by the institutions covered in the survey.
A summary was prepared of the data received as of
December 31, consisting of brief explanatory text and
six tables for publication in the Bulletin of the
Treasury Department for February.
New letters were sent out to the banks and insurance
companies.
on February 26, requesting comparable data as
of
February 28.
8. At the request of the Secretary on May 12, 1941, ar-
rangements were made to prepare current statistical
reports on the sales of United States Defense savings
bonds, series E, F and G, and Defense Postal savings
stamps, on the basis of reports by the Treasurer of the
United States, the Federal Reserve Banks, and the Post
Office Department. The reports prepared during February
were transmitted according to instructions by the
Secretary. - Mr. Haas, Mr. Reagh, Mr. Brown, Mr. Tickton,
Mr. Kroll, Miss Wood, Mr. D. J. Leahy, Mrs. Grossman
(a) Daily tables were prepared, showing the dollar
volume, of savings bonds, series E, F, and G,
sold
by Post Offices and by banks, with cumulative
totals.
(b) Daily tables were prepared, containing a comparative statement of sales of bonds, series E, F, and
G, in the three latest months, sold by Post Offices
and by banks, with c umulative totals. The dollar
volume was shown, together with the absolute and
percentage changes in the latest month from the
preceding month.
(c) A table was prepared on February 2, showing sales
of savings bonds, series F, G, and E, by Post
Offices and by banks, in dollar volume, in each
month from May through January.
142
(d)
Supervision was given in the preparation by the
Division of Loans and Currency of a report
consisting of 177 pages, completed on February 28,
showing sales of savings bonds, series E, for the
month of January, in dollar volume, by Federal Reserve districts, by States, by cities, and by
counties,
classified by sales agent and denomination.
(e) A table was prepared on February 2, showing sales
of savings bonds, series E, in dollar volume, by
States, from May through July, and in each month
from August through December.
(f) Supervision was given the Division of Loans and
Currency in the preparation of a table completed
on February 7, showing per capita sales of savings
bonds,
States. series E, from May through December, by
(g) Supervision was given the Division of Loans and
Currency in the preparation of a table completed
on February 12, showing total sales in dollar
volume of Defense Postal savings stamps, by
States, from May through July, and in each month
from August through January.
(h) A table was prepared on February 13, showing
estimated total value of Defense Postal savings
stamps, and the number of units sold by denomination, in each month from May through January.
(1) At the request of Mr. Graves on February 10, for
the tabulation of pledges for the purchase of
Defense savings bonds, series E, and Defense
Postal savings stamps in Oregon, a statistical
procedure has been set up for preparation by the
Division of Loans and Currency, and the tabula-
tion is in progress.
9. In further response to the request of the Secretary on
December 28, daily tables were prepared from data wired
by the Federal Reserve Banks, showing the supply of
savings bonds, series E, on hand, unfilled requests by
dates, by denomination, and by Federal Reserve districts;
143
- 5.- -
total inventory, production, and sales. The tables
prepared in February were transmitted to the
Secretary. Copies were given to Under Secretary Bell,
Mr. Graves, Mr. Swope, Mr. Broughton, and Mr. Hall. Mr. Tickton, Mr. Mayo, Mr. Kelenson
10. At the request of Mr. Graves, estimates are prepared
of sales of Defense savings bonds, series E, as a basis
for determining the number of bonds to be printed. Mr. Reagh, Mr. Brown
(a) An estimate was prepared, and was transmitted to
Mr. Graves in a memorandum on February 3 of sales,
by denomination, during February.
(b) In reference to a memorandum from Mr. Swope dated
February 24, an estimate is being prepared of sales
during March.
11. In further response to the request of the Secretary on
December 31, weekly memoranda and tables were prepared
from data wired by the Federal Reserve Banks, showing
the number of agents qualified to issue series E,
savings bonds, by type, Federal Reserve district, and
by date. The reports were prepared, and were transmitted on February 3, 10, 17, and 24 to the Secretary.
Copies were transmitted to Under Secretary Bell, Mr. Graves,
Mr.
Mills, and Mr. Batchelder. - Mr. Tickton, Mr. Mayo,
Mr. Kelenson
12. In further response to the request of the Secretary on
December 15, for information on the progress of the
payroll savings plan for defense savings bonds,
series E, the following projects were completed. Mr. Haas, Mr. Tickton, Mr. Keats, Mrs. Barnes,
Miss Westerman, Mr. D. J. Leahy
(a) Supervision was given the Division of Loans and
Currency in the preparation of a memorandum and
table from reports direct from 1,500 large
companies participating in the payroll savings
plan during December. The table summarized the
companies classified by size group, by degree of
employee participation, and payrolls. The tabulation was prepared, and was transmitted to the
Secretary on February 9. A copy was given to
Mr. Graves. - Mr. Tickton, Mrs. Barnes,
Miss Westerman
144
-6(b) Supervision was given the Division of Loans and
Currency in the preparation of a list of firms,
showing for each the amount of bond sales under
payroll savings plans during December. The list
was completed on February 10. - Mr. Tickton
(c) Weekly tables were prepared, showing the number
of organizations with payroll savings plans,
Government and private, classified by size, type,
and State, together with the number of employees
eligible to participate. Tables were prepared as
of January 31, February 7, 14, and 21, and were
transmitted on February 6, 13, 20, and 27, accordingKeats
to instructions by the Secretary. - Mr. Tickton,
Mr.
(d)
A list was prepared from data received from the
State Administrators of newspapers and other
publications participating in the payroll savings
plan, together with the number of employees as of
January 24. The list was transmitted to Mr. Graves
for the Secretary on February 3. - Mr. Tickton,
Mr. D. J. Leahy
13. At the request of Mr. Graves on February 12, a list was
prepared, and was transmitted to him on February 17,
showing as of February 7, corporations participating in
the payroll savings plan, and having 5,000 employees or
more, with the number of employees in each, classified
by Federal
Reserve districts and States. - Mr. Tickton,
Mr.
Keats
14. A table was prepared, summarizing sales from August
through January, of Treasury notes, Tax Series A and
Tax Series B, in par amounts, by individuals and by
corporations. The table was transmitted to the
Secretary on February 10, and copies were given to
Under Secretary Bell, to Mr. Buffington, and to
Mr. Kilby. - Mr. Tickton, Mr. Mayo, Mr. Kelenson
15. A table was prepared, showing sales from August through
January, of Treasury notes, Tax Series A and Tax Series B,
in par amounts, classified by denomination. The table
was transmitted to the Secretary on February 10, and
copies were given to Under Secretary Bell, to Mr. Buffington,
and to Mr. Kilby. - Mr. Tickton
-7 -
145
16. Further progress was made in the study requested by the
Secretary on December 6 of the sources of funds for
Government borrowing. The reports and tables prepared
during February were transmitted in accordance with in-
structions by the Secretary. - Mr. Haas, Mr. Daggit,
Mr. Lindow, Mr. Breithut, Mr. Wagner, Mr. Weintraub,
Mr. Mayo, Mr. Cololough, Mr. Saunders
(a) A revision was made on February 4, of the
analytical table on the gross national product,
showing the flow of goods and services to the
Government and to private persons, and the
application of incomes made available by that flow
for Governmental and private use for fiscal 1943. Mr. Lindow, Mr. Breithut
(b) The table showing estimated sources of funds to
finance the budgetary deficit was revised on
February 4, to include preliminary initial esti-
mates for the fiscal year 1943.- Mr. Lindow, Mr. Breithut
(c) A meeting of the Fiscal Research Committee was
held on February 5, in the Office of Under Secretary
Bell, which was concerned mainly with discussion
of the disequilibrium analysis. Notes were prepared for use by the Under Secretary in leading
the meeting, and notes were prepared on February 12. Mr. Lindow, Mr. Breithut
(d) Reports on conf erences and correspondence with
members of the Fiscal Research Committee were
prepared in the period from February 11 through 24. Mr. Lindow, Mr. Breithut
(e) A memorandum was prepared for the Secretary on
February 10, containing a progress report on the
study to outline sources of funds to finance the
budgetary deficit. - Mr. Lindow, Mr. Breithut
(f) A correlation analysis was prepared on February 13
on national income and non-agricultural employment,
1929-41. - Mr. Lindow, Mr. Wagner
(g) A table and chart were prepared on February 4,
showing
Mr.
Mayo national income on adjusted basis, 1939-43. -
146
-g(h)
A memorandum and charts were prepared on February 25,
relating to the trend of residential construction in
1940-42. - Mr. Weintraub
(1) A memorandum was prepared on February 7, describing
the operations of the Kalecki plan to control consumer expenditure in Great Britain. - Mr. Weintraub
(j) A memorandum was prepared on February 9, comparing
the Keynesian plan of compulsory savings with the
Kalecki expenditure rationing plan. - Mr. Weintraub
(k)
A memorandum and tables were prepared on February 2,
explaining the differences in national income figures
and concepts as between those of Simon Kuznets and
the Department of Commerce, 1929-38. - Mr. Weintraub
(1) A memorandum was prepared on February 25, containing
a critical analysis of certain basic theoretical
problems arising from the sources of funds study. -
Mr. Weintraub
(m) A tentative analysis was prepared on February 25,
of the historical trend of the estimated national
product and expenditure at the market price. -
Mr. Mayo
(n)
A table was prepared on February 28, showing tax
revenue by type of tax and levying unit for
the calendar years 1929-41. - Mr. Mayo
(o) Memoranda and tables are being prepared reconciling
national income with income payments and national
income statistics with Federal budget figures. -
Mr. Breithut, Mr. Mayo
(p) Memoranda were prepared on February 23 and 25,
on estimates and disposition of consumer expendi-
tures. - Mr. Daggit
(q) A field trip was made to Chicago to investigate
certain statistical material available on consumer spending. A report of the findings is now
in process. - Mr. Daggit, Mr. Lindow, Mr. Wagner
(r) Further study was made of the curtailment in output
of consumers' goods. - Mr. Weintraub
-9-
147
(s) Three tables were prepared, and were completed
on March 2, showing detailed estimates of consumer expenditures and incomes for 1941 and 1942. Mr. Daggit
(t)
Further progress has been made in the compilation
of data for measuring monthly changes in consumers'
cash surpluses, for use in estimating the "infla" Preliminary charts have been drafted
to show the relative effect on prices of the in-
crease in consumer incomes and the decrease in
consumer goods production, for agricultural and
non-agricultural products separately. - Mr. Daggit,
Mr. Colclough, Mr. Saunders
(u) Further progress has been made in the analysis
of increases in individual incomes to determine
their disposition. The objectives of the 8 tudy
were largely covered by the tables listed in
item (e) above. Estimates of consumer expenditures are being made in their relation to current
business and price trenda - Mr. Daggit, Mr. Colclough,
Mr. Saunders, Mr. Weintraub
17. At the request of Under Secretary Bell, agenda, memoranda,
and minutes are prepared in connection with the TreasuryFederal Reserve meetings held for the purpose of discussingFoy,
financing
policyMr.
Mr.Rosen
Haas, Mr. Murphy,Mr. Lindow,
Mr.
Mr. Conrad,
(a) An analysis was prepared, and was completed on
February 2, of comments by the Board of Governors
and the Federal Reserve Banks on the proposal for
a special security to absorb idle funds. - Mr. Rosen
(b) At the request of the Secretary on February 10,
a memorandum was prepared, and was transmitted to
him on February 17, concerning the memorandum of
the Board of Governors of the Federal Reserve
System on future Treasury financing policy.
Copies were given to Under Secretary Bell and to
Mr. Viner. - Mr. Murphy
(c) At the request of Under Secretary Bell on
February 16, a memorandum was prepared, and was
transmitted to him on February 17, containing
suggestions for the open market financing pro-
gram. - Mr. Murphy
148
- 10 (d) At the request of Under Secretary Bell on
February 17, the memorandum described in (c)
was revised, and was transmitted to him on
February 19. - Mr. Murphy
(e) Notes are being prepared with respect to the
meeting with representatives of the Federal Reserve System held on December 18. - Mr. Murphy
(f) At the request of Under Secretary Bell on
February 20, a study is being made of a special
security for short-term funds. - Mr. Murphy,
Mr. Lindow, Mr. Foy, Mr. Conrad, Mr. Rosen
(g) At the request of Under Secretary Bell on
February 20, a study is being made of a special
security for long-term funds. - Mr. Murphy,
Mr. Lindow, Mr. Foy
(h)
An estimate is being made of the monthly amount
of financing necessary for the remainder of the
fiscal year 1942, and for the fiscal year 1943. -
Mr. Murphy, Mr. Lindow, Mr. Foy
(1) Minutes are being prepared of the two meetings
held on February 20, with representatives of the
Board of Governors of the Federal Reserve System. Mr. Foy, Mr. Lindow
18. A proposal of the RFC that the Secretary request that
corporation to purchase stock in a bank was examined. Mr. Murphy
19. In further pursuance to the request of the Secretary on
July 8, four tables were prepared, and were transmitted
to him on February 18, showing deliveries from August
through January of airplanes, flying boats, and fourengine bombers. - Mr. Tickton
20.
At the request of the Secretary on November 3, arrangements have been made to obtain certain information on
the progress of the programs under Lend-Lease, the
Maritime Commission, and the Army Air Corps. Mr. Haas, Mr. Lindow, Mr. Wagner
- 11 -
149
(a) A chart was prepared, showing appropriations,
allocations, obligations, and disbursements,
under the office of Lend-Lease, through
January 31. The chart was transmitted to the
Secretary on February 19.
(b) A chart was prepared, showing appropriations,
contracts awardod, and disbursements, under the Army
Air Corps, through December 31. The chart was
transmitted to the Secretary on February 11, and
was distributed in accordance with his instructions.
(c) A chart is in preparation, showing appropriations,
contracts awarded, and disbursements, under the
Maritime Commission, through January 31.
21. At the request of the Secretary on December 6, an
analysis is being made of the plant facilities for
war production. - Mr. Haas, Mr. Lindow, Mr. Wagner
(a) The progress of United States Government commitments, by type of industry, and by Government departments, through January 31, was shown in a chart com-
pleted, and transmitted to the Secretary, on
February 27.
(b) Commitments by the United States Government, by
private interests, and by the British Empire, by
type of industry and contracting authority, will
be shown in a monthly chart and table. This re-
port is in preparation.
22. A table was prepared on February 9, showing commercial
bank and trust company cash subscriptions to new money
23.
24.
offerings. - Mr. Barnett, Mr. Rosen
At the request of Under Secretary Bell on February 11,
a study was made, and a report telephoned to the Under
Secretary on that date with respect to past Treasury
experience in offering two or more securities with a
fixed amount named for the aggregate, but not for the
individual issues. - Mr. Murphy
At the request of the Secretary on February 11, a study
was made, and was completed on February 27 of a confidential unaddressed memorandum dated October 7, on
the financing program. - Mr. Murphy, Mr. Lindow, Mr. Foy
- 12 -
150
25. At the request of Under Secretary Bell on January 26,
a memorandum was prepared on Mr. Peyton's plan submitted by Mr. Allan Sproul with respect to Defense
savings securities. The memorandum was transmitted to
the Under Secretary on February 5. - Mr. Tickton
26. At the request of Mr. Blough on December 26, a table
was prepared, showing the distribution of Federal,
State, and local securities, by tax-status. and by
classes of holders. - Mr. Conrad, Mr. Barnett
27. A memorandum was prepared entitled "Why Banks Buy
Bonds -- The Effect of Taxes", and was transmitted
to the Secretary on February 19. - Mr. Murphy
28. Computations were made, and were completed on February 23,
of coupon rates on a 5-year security to be sold and re-
deemed at par, which are necessary to produce approxi-
mately four different series of yields. - Mr. Brown,
Mr. Kroll
29. At the request of Mr. Viner on February 9, a memorandum
was prepared on Mr. H. Walter Hargreaves' article on
"The Guaranteed Security in Federal Finance", and was
transmitted to Mr. Viner on that date. - Mr. Murphy
30. At the request of Under Secretary Bell on February 16,
a study was made of a proposal by Mr. H Frazier Sheffer
for the issuance of victory income certificates. The
analysis was incorporated in a memorandum transmitted
to the Under Secretary on February 24. A letter prepared
by Mr. Bell accompanied the memorandum, which was forwarded
to Mr. C. S. Bell on February 28. - Mr. Reagh, Mr. Barnett
31. At the request of Mr. Blough on February 18, a study was
made of a proposal relating to the sale of Government
bonds, entitled "Method of Handling Canadian Government
Securities by the Canadian Government". The study was
completed on February 19, and no action was taken. -
Mr. Murphy
32. A table and chart on domestic bond flotations were
brought up to date, and were transmitted to Mr. Morris
on February 12. - Mr. Rosen, Mr. Barnett
- 13 -
151
33. At the request of Mr. Viner on January 30, two tables
were prepared on deposits of insured commercial banks
classified as insured and non-insured, and by type
of deposit. The tables were transmitted to Mr. Viner
on February 5. - Mr. Barnett
At the request of the Division of Tax Research on
February 10, a study was made of material relating to
the taxation of banks. The study was completed on
February 19, and no action was taken. - Mr. Murphy
35. At the request of Mr. Kuhn on January 31, two letters
from Mr. Frank Lewin proposing that life insurance
34.
companies be placed under the Federal Government, were
answered by a letter to Mr. Lewin signed by Mr. Kuhn
on February 9. - Mr. Reagh, Mr. Brown
36. At the request of Under Secretary Bell on February 27,
data were prepared on the distribution of the Federal
debt for use by the Secretary in his testimony on increasing the debt limit. A memorandum was transmitted
to the Under Secretary on February 28. - Mr. Murphy
37. At the request of Under Secretary Bell on February 28,
a memorandum and tables were prepared, showing the
estimated distribution by classes of holders of interestbearing securities issued or guaranteed by the United
States outstanding at the end of each fiscal year 1932-41,
and on December 31, 1941. These data were transmitted
to the Under Secretary on February 28. - Mr. Robbins
38. At the request of Under Secretary Bell, four meetings
were attended in his office between February 23 and 28,
to revise a draft of the statement on the increase of
the debt limitation to be made by the Secretary. Mr. Lindow
39. At the request of Under Secretary Bell on January 26,
a study was completed of H. R. 6391, "The Patman Bill",
providing for the issuance of non-negotiable United
States bonds to Federal Reserve Banks and terminating
the authority of the Treasury to issue other interest-
bearing obligations to commercial banks. The analysis
was incorporated in a memorandum transmitted to the
Under Secretary on February 13. - Mr. Foy
- 14 -
152
40. At the request of Mr. Tietjens on February 1, a revision
was made of a letter to Senator George, Chairman,
Committee on Finance, for signature of the Secretary,
containing a proposed report on S. 2172, amending the
Social Security Act. The letter, under cover of a
memorandum to Mr. Heffelfinger, was transmitted to
Mr. Bartelt on February 17. - Mr. Rosen
41.
At the request of Mr. Bernard on February 9, a study
was made of H. R. 6485, authorizing the direct purchase
of Government obligations by Federal Reserve Banks, and
regulating the manner of distribution of such banks'
earnings. The bill was returned to Mr. Tietjens on
February 14, with no recommendation for action. -
Mr. Murphy
42.
At the request of Mr. Tietjens on February 10, a memorandum
to Under Secretary Bell and to Mr. Tietjens, and a letter
ing and Currency, for signature of the Secretary, were
to Representative Steagall, Chairman, Committee on Bank-
prepared containing an anal ysis of H. R. 6493, providing
a moratorium on foreclosures of HOLC mortgages for the
duration of the war. The memorandum with letter was forwarded to the Under Secretary on February 25. - Mr. Rosen
II. Projects or studies under way
1. A study 18 being made of the relative interest costs of
short- and long-term borrowing. - Mr. Foy, Mr. Barnett
Mr. Rosen
2. A study is being made of the effect of the maturity,
call period, coupon, premium, and size of issue on
the prices and yields of United States securities. Mr. Conrad
3. A memorandum is being prepared on a negotiable security
for continuous sale. - Mr. Murphy
4.
A study is being made of developments in the reserve
position of the banks. - Mr. Rosen, Mr. Barnett
5. Historical tables are being prepared which will present
various data on new Treasury notes and bonds and on
guaranteed new issues. Three tables have been completed. Mr. Conrad, Mr. Rosen
- 15 6.
153
A memorandum 1s being prepared on the advantages and
disadvantages of increasing the short-term debt. -
Mr. Foy
7. A revision is being made as of June 30, 1941, of the
estimates of the ultimate increase in interest costs
which would result from removal of the tax-exemption
privilege
Mr. Conrad from all public securities. - Mr. Lindow,
8. A memorandum is being prepared recommending legisla-
tion terminating miscellaneous types of tax exemption
analagous to the exemption of interest on Federal securities, but unaffected by the Public Debt Act of
1941. - Mr. Foy
9. At the request of Mr. Blough on December 26, an estimate is being made of the increase in interest costs
to the Federal Government, the States, and municipalities,
if the tax-exempt privilege were removed from future bond
issues. - Mr. Murphy, Mr. Lindow, Mr. Conrad
10. A study 18 being made of war-financing measures of
belligerent nations in the present war. - Mr. Simmons
11.
A study is being made of the market action of the
various maturity classes of Government securities in
12.
relation to the type of holder. - Mr. Conrad
At the request of Mr. Surrey on January 1, a study is
being made of the amortization of bond premium and discount. - Mr. Murphy
13. A memorandum is being prepared on Mr. Viner's proposal
for aTickton
new system of allotting Treasury bills. - Mr. Murphy
Mr.
14. A memorandum is being prepared on the desirability of
conducting the war finance as it was in the last World
War, by war loan drives. - Mr. Foy
15. At the request of Assistant Secretary Gaston on
January 20, a review is being made of "A Memorandum
on Financing
Mr.
Barnett the War" by Mr. Robert L. Owen. - Mr. Foy,
154
- 16 -
16. A study is being made of the sources of funds avail-
able for borrowing by the British Government comparable
to the study in progress for this country, as described
in Financial Analysis, I, item 17 above. - Mr. Simmons
17. A study is being made of the post-war effects of a
large volume of demand debt. - Mr. Murphy, Mr. Lindow
18.
At the request of Mr. Morris on December 16, an analysis
is being
made
of aFoy
proposed industrial loan corporation
bill
of 1942.
- Mr.
19.
At the request of Under Secretary Bell on February 12,
a study is being made of the proposed Public Debt Act
of 1942. - Mr. Murphy, Mr. Lindow, Mr. Tickton, Mr. Foy
20. At the request of Under Secretary Bell on May 31, 1940,
replies are being prepared to certain questions asked
by the Wagner Committee preparatory to its investigation of banking and monetary conditions pursuant to
Senate Resolution 125, 76th Congress, 3rd Session. Mr. Haas, Mr. Murphy, Mr. Foy
21. At the request of Under Secretary Bell on May 24, 1941,
cooperation was given in preparing replies to the
list of questions accompanying a letter from Senator
Tydings of May 5. The information is for use by the
Senate Committee created to find ways and means of
automatically balancing the Federal Budget in times of
peace. A proposed reply was sent to the Under Secretary
on June 18. - Mr. Murphy, Mr. Foy
Revenue Estimates
I. Projects or studies completed
1. The regular monthly statement was prepared, showing
the latest revised estimates of receipts, by months
and by principal sources of revenue, for the period
February-June 1942. The statement was transmitted to
the Bureau of Accounts. - Mr. Delcher
2. The regular monthly summary comparison was prepared,
showing estimated receipts and actual receipts in
January
1942 on the daily Treasury statement basis. Mr.
Delcher
- 17 -
155
3. The regular monthly detailed comparison was prepared,
showing estimated and actual receipts in January 1942,
based on the collections classification. - Mr. Delcher
4. In connection with the proposed revision of the revenue
laws in 1942, a number of revenue estimates, listed below, were prepared for use of the Division of Tax Research. - Mr. O'Donnell, Mr. Leahey, Mr. Smith,
Mr. Dambrun, Mr. Jorgensen, Mr. Kelly
(a) Estimates were completed, and were transmitted in
a memorandum to Mr. Blough on February 3, of the
revenue increase which would result if the corporation income tax and the individual normal tax each
were increased by 1 percent, and the additional
revenue if the increase were made applicable also
to tax-exempt interest; and of the loss in revenue
which would result from the exemption of interest
on Government obligations, with respect to the exemption of State and local securities and Federal
tax-exempt securities.
(b) Estimates were prepared, and were transmitted in
a memorandum to Mr. Blough on February 6, of the
revenue effect of restoring the privilege of fil-
ing consolidated returns for purposes of the normal
and surtax under the conditions stipulated in the
acts prior to 1934, on two assumptions.
(c) A revised estimate was prepared, and was transmitted in a memorandum to Mr. Blough on February 7,
of the revenue effect of changing the excess-profits
tax base
and of proposed corporation normal tax and
surtax
schedules.
(d) An estimate was prepared, and was transmitted in a
memorandum to Mr. Blough on February 17, of the
revenue yield which would result from a specified
method of gradually disallowing a deduction for
interest on corporate indebtedness.
(e) An estimate was prepared, and was transmitted in a
memorandum to Mr. Blough on February 17, of the
increase in corporation surtax rate which would be
necessary to secure the same increase in corporation
taxes as would result from the decrease in the average
earnings credit to 75 percent and the invested capital
credit to 6 percent.
- 18 (f)
156
An estimate was prepared, and was transmitted in
memoranda to Mr. Blough on February 18 and 19, of
the revenue effect of proposed revision in the
corporation income and excess-profits taxes as
outlined in Plans I and II.
(g) An estimate was prepared, and was transmitted in a
memorandum to Mr. Blough on February 19, of the increase in corporation surtax rates due to amendment
of Plan. I, referred to above, if the excess-profits
tax rate were increased by 10 percentage points in
each bracket instead of by 15 percentage points.
(h) An estimate was prepared, and was transmitted in a
memorandum to Mr. Blough on February 26, of the increased revenues if the proposal to reduce individual
income tax exemptions were superimposed upon a number
of the other specified recommendations
(1) A comparable revenue estimate to that above was
prepared by specified net income classes.
(j) An estimate was prepared, and was transmitted by
telephone on February 27, and in a memorandum to
Mr. Blough on March 2, of the amount of compulsory
savings which would result from a proposed plan.
(k) An estimate was prepared, and was transmitted in a
memorandum to Mr. Blough on February 27, of the
yield of a proposed corporation tax plan, with two
groups of specifications.
(1) Estimates were prepared, and were transmitted in. a
memorandum to Mr. Blough on February 28, of revenue
from the fifteen excise taxes recommended by the
Excise Tax Committee through February 17.
5. At the request of the Division of Tax Research on
February 18, in connection with the proposed revision
of the revenue laws, a review was made of a memorandum
containing proposed formulae for revising the tax base
for insurance companies. The review was completed and the
memorandum returned on February 28. - Mr. Reagh, Mr. Brown
II. Projects or studies under way
1. An analysis is in preparation of each component of the
September revised estimates of miscellaneous internal
revenue, excluding capital stock, estate, and gift taxes,
for the fiscal years 1942 and 1943. - Mr. Daggit,
Miss Spiegel
157
- 19 2. An analysis is in preparation of each component of the
Budget estimates of miscellaneous internal revenue,
excluding capital stock, estate, and gift taxes, for
3.
the fiscal years 1942 and 1943. - Mr. Daggit, Miss Spiegel
In connection with the proposed revision of the revenue
laws in 1942, a number of revenue estimates, listed below, are being prepared for use of the Division of Tax
Research. - Mr. O'Donnell, Mr. Leahey, Mr. Smith,
Mr. Dambrun, Mr. Lusk
(a) An estimate is being made of the additional revenue
if mutual non-life insurance companies taxable
under Section 207 of the Internal Revenue Code were
made taxable as stock non-life insurance companies
taxable under Section 204, and the exemption under
Section (11) were restricted to local mutual
companies of the assessment type.
(b) Estimates are being prepared of the revenue effect
of re-defining long-term capital gains and losses,
substituting for the two classes, one class beginning
at 18 months; on the basis of three long-term and
two short-term assumptions.
(c) Estimates are being made for a general sales tax
at several rates for three distribution levels,
assuming various combinations of exemptions for
food, clothing, medicine, and fuel.
(d) A revision is being made of the revenue estimates
for the years 1926-1940 of capital gain and loss
provisions applicable to individuals and fiduciaries.
Corresponding estimates are being made for the year
1941.
(e) A detailed estimate is being made of the revenue
yield of a net value added tax, assuming six different
taxpayers' bases, on two tax credit assumptions.
(f) An estimate is being made of the revenue yield which
would result if the Canadian corporate tax system
were substituted for the present system in this
country.
- 20 -
158
(g) An estimate is being made of the total revenue
yield and increase over the existing law which
would result from the adoption of the British
individual
and corporate income and excess-profits
tax structure.
(h) With reference to the excess-profits estimate
completed on January 17, a breakdown is being made
of the income and tax figures before and after the
proposed change in the excess-profits tax credit,
by detailed industrial and size classifications of
corporations.
(1) An estimate is being made of the revenue yield- of
a proposed tax on radio broadcasting companies.
(j) Estimates are being prepared of the revenue gain
if the deduction for State income taxes paid were
disallowed in computing Federal individual income
tax liability; and the loss in revenue to the States
if they all permitted the Federal individual income
tax as a deduction in computing State individual in-
come tax liability.
(k) Estimates are being prepared of the division of the
tax yield between short-term and long-term capital
transactions yearly beginning 1938.
(1) Estimates are being prepared of the revenue increase
from changes in the tax base of life insurance companies and insurance companies other than life.
(m) Estimates are being made for certain individual income tax rate schedules, by net income classes, of
individual income tax yield under the present law.
(n) Estimates are being made of the loss of revenue to
the Federal Government 1f it abandoned to taxation
by the States all individual incomes below specified
levels.
(o) Estimates are being made of yield from estate and
gift taxes on the basis of four changes, and their
combined effect.
159
- 21 (p) There are in preparation certain basic corporation
and individual income and tax data, actual for 1940
and estimated for 1941 and 1942.
(q) An estimate is being made of percentage depletion.
(r) Estimates are being made of the revenue effect of
the proposal for mandatory joint returns, on the
basis of the present law.
(s) With respect to the estimates listed under Revenue
Estimates, as items I, 4(h) and II, 3(c), estimates
are being made on the basis of eliminating earned
income credit; and requiring compulsory joint re-
turns, with certain relief accorded.
(t)
An estimate 18 being made of the revenue effect of
a revision of a portion of the corporation tax plan,
on which the estimate listed as I. 4(k) was based.
(u) With respect to the estimates listed under Revenue
Estimates as items I, 4(h), II, 3(0), and II. 3(t),
estimates are being made of the revenue effect of
specified changes in the surtax schedule.
Economic Conditions Related to Fiscal
and Revenue Matters
I. Projects or studies completed
1. Memoranda on the business situation were prepared, and
were transmitted to the Secretary on February 2, 9, 17,
and 23. - Mr. Haas, Mr. Daggit, Mr. Chevraux, Miss Ziegler
These memoranda contained in addition to analysis of the
current situation the following special study:
Movement of basic commodity prices and the percentage
change for individual commodities from the average
price during August 1939, from December 6, 1941, and
from the previous week. (Chart in memorandum of
February 16.) - Mr. Daggit, Miss Spiegel
- 22 -
160
2. Monthly or weekly reports are received from 25 individual companies, in response to the Secretary's requests
giving confidential data on new orders and sales. The
data in these reports are tabulated and charted currently
for the Secretary's information, and are also combined
into an index of new orders, which accompanies the
memorandum on the business situation. - Mr. Colclough,
Miss Spiegel, Miss McLachlan
3. Memoranda on employment under the Work Projects Administra-
tion were prepared on February 2, 9, 16, and 23. -
Miss McLachlan
4. Compilations were made of daily quotations on selected
commodities, and daily and weekly figures on selected
business indexes, foreign and domestic security transactions, security prices, exchange rates, as well as
other data for the Secretary's chart book. Mr. Chevraux
5. In further response to the request of Mr. Leon Henderson
on July 19, copies of eight charts on commodity prices
and the cost of living were transmitted to him, as indicated below. - Mr. Daggit
The movements of the NICB cost-of-living index compared
with the BLS wholesale price index of 889 commodi ties
were shown from 1936 to date. Four charts, as of
January 24, 31, and February 7 and 14, were transmitted
on February 3, 10, 17, and 24, respectively.
Two charts showed the movements of the indexes of 12 food-
stuffs and 16 industrial raw materials, and percentage
changes for each commodity from August 1940 to current
dates. These charts, as of January 30 and February 6,
were transmitted February 3 and 10, respectively.
Two charts showed the movements of the indexes of 12 food-
stuffs and 16 industrial raw materials, and percentage
changes for each commodity, from June 1941 to the current
date. The charts also showed percentage changes for each
commodity from August 1939 and from December 6, 1941, to
current dates. These charts, as of February 13 and 20,
were transmitted on February 17 and 24, respectively.
- 23 -
161
6. In further response to the request of the Secretary on
January 28, memoranda and charts were prepared on
export freight movements and lighterage freight in
storage and on hand for unloading in New York Harbor,
as of January 30, and February 7, 13, and 20, and were
7.
transmitted to him on February 4, 12, 19, and 25, respectively. Copies were given to Mr. Kamarck in further
response to his request of December 4. - Mr. Daggit
An analysis was completed on February 17, of the distribution of Defense savings bonds, series E, during
December, in relation to payrolls, and to national
income, by States. - Mr. Daggit, Mr. Cololough,
Mr. Saunders.
8. A new chart was prepared for use in the first memorandum
on the business situation of March, showing actual and
estimated retail sales compared with salaries and wages,
based on their average relationship to salaries and
wages, 1935 through 1940. - Mr. Daggit, Mr. Cololough,
Mr. Saunders
9.
At the request of the Secretary on February 7, a table
showing the Dow-Jones composite stock averages at the
end of each month from January 1941 to date was prepared,
and was transmitted to him on that day. - Mr. Daggit,
Mr. Chevraux, Mr. Colclough, Mr. Saunders
10. At the request of Mr. Buffington on February 12, a
memorandum and table on advertising expenditures were
prepared, and were transmitted to him on that date. Mr. Daggit, Mr. Chevraux, Miss Spiegel
11. A memorandum was prepared reporting a meeting held on
February 13 by the Bureau of Labor Statistics to discuss
the revision of the BLS cost-of-living index. - Mr. Daggit
12. At the request of Mr. Schwarz on February 2, a review
was made of an article, "The Midwest Speeds Defense" by
Under Secretary Bell. The article was returned to
Mr. Schwarz on February 3. - Mr. Daggit, Mr. Chevraux,
Mr. Colclough
13.
The figures used in the chart showing prices from 1939
to date compared with 1914 and 1918 were checked against
original source material. This chart was for use by the
Secretary before the House Ways and Means Committee in his
testimony on the proposed revision of the revenue laws. -
Mr. Chevraux, Miss Spiegel
162
- 24 Actuarial Problems
I. Projects or studies completed
1. At the request of Mr. Marc. Shield, Clerk of the House
Appropriations Committee on February 25, an estimate
was made, and was given him by telephone on February 26,
of the reduction in cost to the Government if appropriations to the Civil Service Retirement Fund had been made
on an actuarial basis from the effective date of the Act. -
Mr. Reagh, Mr. Brown, Mr. Kroll
2. At the request of Mr. C. S. Bell on February 9, computation was made of the annuity which the Secretary would
be eligible to receive under the amendment of January 24,
to the Civil Service Retirement Act. The figures were
given to Mr. Bell in a memorandum on that date. Mr. Reagh, Mr. Brown, Mr. Kroll
3. At the request of Mr. McReynolds on February 11, computation was made of the annuity which the President would
be eligible to receive under the amendment of January 24,
to the Civil Service Retirement Act. The figures were
given to Mr. McReynolds in a memorandum on that date. -
Mr. Reagh, Mr. Brown, Mr. Kroll
4. The Foreign Service Retirement Law, as approved April 24,
1939, Section 26(m) provides that the "Treasury Department shall prepare the estimates of the annual appropriations required to be made to the Foreign Service Retirement and Disability Fund and shall make actuarial valua-
tion at intervals of five years, or oftener if deemed
necessary by the Secretary of the Treasury". The State
Department has requested an estimate of the appropriation required for the fiscal year 1943. On the basis of
a valuation as of June 30, 1941, an estimate of the appropriation for the fiscal year 1943 has been prepared,
and was submitted to the State Department in a letter
signed by Under Secretary Bell on February 10. Mr. Reagh, Mr. Brown, Mr. Kroll
163
- 25 II. Projects or studies under way
1.
The Board of Actuaries of the Civil Service Retirement
and Disability Fund is laying out detailed plans for
tabulating and processing data for use in preparing
the regular five-year valuation of the Civil Service
Retirement Fund for the purpose of determining the
liabilities of the Government under the Civil Service
2.
3.
Retirement law. Under the law, such a valuation must
be prepared as of July 1, 1940. Valuation plans are in
process of preparation. - Mr. Reagh, Mr. Brown
At the request of Mr. Fisher, Chief, Retirement Division,
Civil Service Commission, on January 28, the Board of
Actuaries is preparing sets of factors to determine the
immediate annuities of those eligible for retirement
under section 1(d) and section 5(a) of the Civil Service
Retirement Act , as amended on January 24. A reply to
the request is being prepared by Mr. Buck, Chairman of
the Board, and will be submitted to us for consideration
and approval. - Mr. Reagh, Mr. Brown, Mr. Kroll
At the request of Dr. Falk of the Social Security Board
on January 7, a review was made of a preliminary draft
of the Second Annual Report of the Board of Trustees
of the Federal Old-Age and Survivors Insurance Trust
Fund. A final draft was received from the Board on
February 16 for Treasury approval. -Mr. Reagh, Mr. Brown
4. Several years ago a committee was organized for the purpose of studying ways and means to extend retirement
benefits to all Government employees regardless of
Civil Service status. The working committee, the Subcommittee on Retirement, has again become active. A
report has been prepared but has not yet been submitted
to the main committee. - Mr. Reagh, Mr. Brown
5. At the request of Mr. A. R. Pilkerton, Auditor of the
District of Columbia, an actuarial quinquennial valuation is being made of the Policemen's and Firemen's
Pension Fund of the District of Columbia. This valuation is being made by the Treasury Department in accordance with the 1942 District of Columbia Appropriation
Act, approved July 1, 1941. The work for the valuation
has been begun. - Mr. Reagh, Mrs. Grossman
164
- 26 -
6. At the request of Mr. Leon Frechtel, Assistant Director,
Attorney General's Committee on Bankruptcy Administration,
on February 19, estimates are being prepared of the
probable cost to the Government of a retirement system
for referees in bankruptcy courts to be set up under
Section 6 of H. R. 4394, a bill to amend the act establish-
ing the
Mr.
Krolluniform bankruptcy system. - Mr. Reagh, Mr. Brown,
Other Projects or Studies
1. Publications
(a) For the February issue of the Treasury Bulletin
data were prepared on average yields of long-term
Treasury bonds and high-grade corporate bonds. Mr. Barnett
All the material submitted for the February issue
was reviewed and edited. - Mr. Lindow, Mr. Lynch
The following tables were revised for the February
issue as follows:
1. A table showing the estimated ownership of
all Government securities, as of June 30,
1937-1941, and December 1941. - Mr. Lindow,
Mr. Lynch
2. The Social Security tables were revised and
expanded to show greater detail on the program
(including railroad unemployment and railroad
retirement). - Mr. Lindow, Mr. Lynch
3.
A table showing for public marketable securities
issued by the United States (except Treasury
bills and Federal Intermediate Credit Bank
debentures), prices and yields as of February 16,
and certain historical data. - Mr. Brown,
Mr. Kroll
4. A table showing sales of United States Defense
savings bonds since May 1, 1941, by series,
months, and denominations. - Mr. Brown,
Mr. Kroll
165
- 27 -
(b) For the publication Prices and Yields of Public
Marketable Securities Issued by the United States
Government and by Federal Agencies, computations
were made and copy was prepared for the issue
covering the month of January. - Mr. Brown,
Mr. Kroll
2.
At the request of Mr. Kuhn, a draft of a letter was
prepared on February 28 for his signature, to be foropinion on certain topics relating to the Committee on
warded to Mr. MacLeish, with expressions of Treasury
Publications of Statietics. On behalf of Mr. Haas, the
meeting of the Committee was attended on February 11. -
Mr. Lindow
3. Correspondence
Replies were prepared to letters received on subjects
relating to the work of the Division, and letters
drafted elsewhere and submitted to the Division for
that purpose were reviewed. - Miss Michener, Mr. Foy,
Miss Ziegler, and other members of the staff in appropriate
fields of work.
During February 377 letters were received in the Division
and 405 were handled as required.
4. Charts
Charts are prepared and continuously brought up to date
for use in memoranda and in chart books on special subjects, and corresponding photographic, photostatic, and
multilith work is carried on. This 18 done in the
Graphic Section under the supervision of Mr. Banyas.
statistical report on the work of the Graphic Section
for the month of February is attached.
A
166
Work completed in the Graphic Section. Division of
Research and Statistics, during February 1942
Type of work
For Division
of R & S
For
Others
Total
Graphic:
New charts:
54
Bond book charts completed
1
All other charts brought up to date
73
-
1
Charts brought up to date:
3 bond chart books brought up to date
19
24 times
693
-
Total charts completed
26
24(t)
719
Miscellaneous:
Total jobs
21
9
30
Photographic:
( hotographs:
Total jobs
72
49
121
301
211
512
Contact prints
261
497
758
Enlargements
286
148
434
196
116
312
6,412
2,597
5,211
701
11,623
3,298
4
16
Number ofNegatives
Photostate:
Total jobs
Number of-
Lettersise copies
All other copies
Multilith:
Total jobs
12
Number of-
Zino and paper plates
152
163
11
Miscellaneous:
Total jobs
12
6
18
167
Total
June
May
April
:
Mar.
1
73
Feb.
24(t)
30
16
719
512
121
758
18
163
312
434
3,298
11,623
2
81
Beginning Junuary 1942
26 (t)
19
17
764
116
409
837
376
31
144
297
Jan.
9,074
:
3,400
:
Graphic Section, Division of - and Statistics, by months,
Zinc plates
Lettersise copies
Negatives
Type of work
Contact prints
Enlargements
All other copies
Total jobs
Total jobs
New charts completed
Charte brought up to date
Bond book charts completed
Total jobs
3 bond books brought up to date
Multilith:
Photographs:
Miscellaneous
A. Graphic:
B. Photographic:
Total jobs
Number of-
Number of-
Number of-
Photostate:
Miscellaneous:
168
May 13, 1942
For the Secretary
After a further check with our District Chief Examiner
in Kansas City, Missouri, who has talked to the bankers in
Texas
Oklahoma and Kensas about the oil situation in the Southwest,
I find
(1) There seems to be no trouble at all about
loans to oil producers in those two states.
(2) The impression in Oklahoma is that the
Texas situation is improving rather than
growing worse.
(3) The First National Bank of Tulsa, Tulsa,
Oklahoma, and the First National Bank of
Oklahoma City, Oklahoma, have some loans
to oil producers in Texas. They have
assured their borrowers that as long as
they have adequate oil reserves and keep
their properties up, there will be no
difficulty about carrying their loans.
(4) The bankers in Tulsa and Oklahoma City
report that the oil men are much more
concerned about the "percentage depletion" proposal now before Congress than
they are about their loans at banks.
My
Upm
National League of Women Voters
726 Jackson Place, N. W.
Washington, D. C.
Price:
169
May 13, 1942
Memorandum on 1942 Tax Proposals
A. Size of Tax Program
The March 1942 Treasury Department recommendations for increased taxes were
designed to bring in $7.6 billion more than present tax laws. These proposals
were in line with President Roosevelt's Budget Message of January. Supplementary Teesury recommendations made in May increased this figure by $1.1
billion.
In view of the estimates of the amount of money that may be available for
spending in excess of goods on which to spend it, i.e., "the inflationary
gap," this recommended tax program is conservative as to size and should be
considered a minimum. See broadside, "Bigger Taxes Are Better Taxes," for
figures indicating the general situation in this respect. One expert,
A. G. Hart of Iowa State College, testifying before the House Kays and Means
Committee said that this year's tax program should be at least $12 billion.
Even with the levy of increased taxes as recommended, borrowings in the year
ending June 30, 1943 may total more than $50 billion.
B. Lower Income Tax Exemptions
1. First Treasury proposal on income tax
The first Treasury proposals included no recommendations for changes in
the personal exemptions or the exemptions allowed for dependents under the
personal income tax. At that time, dr. Morgenthau minimized the dangers of
greater inflation resulting from the buying of persons not already paying
income taxes, and emphasized the tax burdens already carried by that group.
The Treasury did however propose increased rates on the present taxpaying
group to bring in $3 billion more than at present.
2. Second Treasury Proposal
In May, after two months of consideration of new taxes by the House Ways
and Means Committee and after the movement for a sales tax had gained considerable headway, the Treasury put forth recommendations for a general
lowering of exemptions: for single persons from $750 to $600, for married
is
persons from $1,500 to $1,200, and for dependents from $400 to $300. It
estimated that this would bring in $1.1 billion additional revenue--$100
million from new taxpayers and $1 billion from those already paying. The
number of new taxpayers under this proposal is estimated at 6,900,000.
Mr. Leon Henderson immediately followed up this recommendation with an
endorsement and suggested that the reduction in exemptions might well go
further. Mr. Colin Stam, congressional tax expert, suggests the possibility
of exemptions of $1,000 for married persons and $500 for single persons and
& lowering of proposed rates on some of the present taxpaying group, so that
less of the burden of lowered exemptions would fall on the middle income
groups.
3. Pertinent points about lower exemptions
a) Fairer than sales tax
With the need for unprecedented amounts of revenue and with the need
to curb excess buying power because of the limited supply of goods on
which civilians can spend money, all groups will have to share the
resulting tax burden. Middle income groups will have to pay more, small
-2-
170
income groups will have to pay more, everybody will have to pay more.
The essential problem becomes one of sharing the burden as fairly as
possible. This is the basic reason for urging lower income tax exemptions. It would be better to impose even heavier rates than those
already suggested for the lowest income groups subject to an income
tax under the proposed reduced exemptions, than to have a sales tax.
A sales tax allows no exemption for the first dollars of spendable
income, it makes no allowance for the size of the family, and it hits
hardest the groups that spend most of their incomes on goods. The
movement for the sales tax has already made considerable headway. To
congressmen a sales tax looks like an easier solution to heavy taxation
than a broader income tax base: a sales tax doesn't appear to those
affected to be as severe as an income tax at the time it is levied;
also a sales tax is easier on the middle income groups than lower
income tax exemptions and congressmen are very loathe to increase the
burdens of the middle income groups. Congressmen need to be encouraged
to avoid a sales tax until better solutions such as lower income tax
exemptions have been tried.
b) Secure revenues promptly through collection at source
One of the goals of a tax program today is to draw off purchasing
power promptly. This is achieved under an income tax only if tax payments are withhold at the time wages and salaries are paid. The terms
"collection at source" and "withholding tax," although sometimes used
as if they meant different things, apply to the same fundamental idea-payment of all or part of the tax on income at the time the income is
received instead of later. Different proposals have been made from
time to time as to the rates that should apply for taxes collected by
this method.
In the original 1942 tax recommendations, it was recommended that
discretion be given to the Treasury to collect part of the income tax
at source. In recommending a broader base for income taxes no supplementary recommendation on a withholding tax was made.
Since it is important to collect promptly as much tax revenue as
possible, it seems unnecessary to give the Treasury Department discretion
about collection at source. It should be mandatory to collect as much
income tax revenue at source as can be arranged for. This not only
helps the government, but it is easier for the small taxpayer than
trying to find the cash to pay his income tax in a lump sum or in four
installments.
C. Joint Income Tax Returns
1. Treasury proposal
The Treasury Department has renewed the proposal made last year that
married couples be required to file joint income tax returns. The purpose
of the proposal is to eliminato tax avoidance through transfers of property
instead
from husband to wife and the paying of taxes on two smaller incomes
of one large one, and to eliminate the tax differential that favors the
eight community property states where the husband-wife relationship is
treated as a business partnership and income is divided with the result that to
lower income taxes are paid because lower rates apply to the shares than the
the total income. It is estimated that closing these tax loopholes by
requirement of joint returns would produce about $300 million in revenue.
-3-
171
The proposal is opposed not only by those who derive an advantage from
the present system, but also from women who fear that their hard won
independent legal status may be jeopardized.
2. Legal Status of Women
Mandatory joint returns would modify the principle of taxation that
treats taxpayers as individuals. But in this respect women are put at no
greater disadvantage than men. Furthermore, the recommendation for joint
returns as made by the Treasury provides that after the total tax is computed, the tax liability of each person may be determined and the taxes
paid individually.
AS far as women's status before the law is concerned, there seems to
be little to worry about. One woman lawyer sums it up in this fashion:
"It seems impossible to conceive that any court would hold that the
requirement of a joint income tax return for husband and wife would repeal
any of the statutos which enable a woman, though married, to own and control
her own property, convey and devise it, free from her husband's debts, own
and control her own earnings, sue and be sued, etc. All of these statutes
(which, it must be remembered, are state statutes), would remain in full
force and effect. The only change would be that, for the purpose of
federal income taxation, the husband and wife would be considered as one
taxable unit."
3. The issue
The primary issue in the joint tax return question is to close tax
loopholes. This is important when we are taxing everybody on an unprecedented scale. Woman's basic independent legal status would remain. If
a privilege she has enjoyed in the past is taken away, so also are the
privileges of many others .
However, of increased
if joint returns are adopted, it might be desirable to allow
some exemption for earned income. This would take account
household expenses which accrue when the woman works outside the home.
Some such allowance becomes increasingly important as income taxes are
levied farther down the income scale. It is also important not to
affect adversely the willingness of women to work outside the home by too
drastic measures with respect to earned income. The Treasury has recommended
a special allowance for earned income.
Other League Material on Taxes
Taxes: and A Quiz
These are good
background
)
Trends Vol. I, Nos. 1, 4, 5
)
Bigger Taxes Are Better Taxes, 100 for 75$
"Paying for 1942 the Defense After, Program" in Battle of Production, 10 reading
How Should Government Be Financed ) Those are good for
Taxes and Tax Trends
) reference purposes
Taxation Reference List, September 13, 1941
Supplementary Tax Bibliography, January 30, 1942
172
Bigger Taxes Are Better Taxes
The amount and kind of new taxes that are levied this year will
depend upon what Congress is willing to do. This will depend
in part upon what Congress thinks the country will accept.
And this will depend upon the extent to which people understand the measures necessary to pay for the war and to prevent
the disastrous consequences of inflation.
Why Big Taxes?
The more successful we are in organizing our productive machinery and turning out military equipment to defeat the Axis, the faster we will find ourselves with more money to
spend than goods on which to spend it. We will have substituted guns for refrigerators
and washing machines, but we will still have money which would normally be used to buy
goods that are no longer available. The better we tax ourselves, the better we will relieve
this unhappy situation. Furthermore, the more willing we are to tax ourselves now, the
more we will lighten the burden of debt to be carried after the war is over when incomes
are likely to be smaller and fewer people are likely to have jobs.
How Big?
The total dollar cost of the commitments we have made is so large that it means little to the
layman, but it is rapidly approaching the equivalent of what all the American people can
produce in two years at the rate we were working in 1941. In terms of the coming year if
we perform miracles and manage to build all the guns, tanks, and planes President Roosevelt
has asked for, we might find that for every $110 of income there would be only $50 worth
of goods on which civilians could spend it. It would then become necessary to dispose of
the other $60 so that it could not be used in a senseless competition for the $50 worth of goods.
On the basis of present laws, $18 of this $60 will be drawn off in federal taxes; people may
be willing voluntarily to reduce their expenditures enough to put $10 of it in defense
bonds;
some of it would go for such non-inflationary purposes as life insurance and
reductionand
of debts.
What about the remainder which might amount to almost $30 out of every $110 of income?
The Administration has recommended that taxes be increased to take almost $9 and that social
security payments be increased so that $2 more would be diverted to the Treasury. It is
obvious
that
this
is athis.
conservative proposal; we would probably do well if we increased
taxes even
more
than
How Many Must Pay?
At present only about 22% of the people with incomes pay income taxes to the federal
government, and that includes the two million who are paying this year who did not pay a
year ago. Enlarging this group by lowering tax exemptions has always met with resistance
partly because it is not a popular thing to do. Broadening the income tax base has also been
opposed because the people with the smallest incomes have carried heavy burdens of indirect
taxes, such as those that are hidden in the price of goods that are taxed by the federal, state,
and local governments. It has been estimated that people receiving less than $1,000 a year
have been paying between 18% and 22% of their incomes in taxes, compared with about
17.5% paid by those with incomes between $1,000 and $5,000. This is contrary to the generally
accepted standard of ability to pay, by which those with larger incomes pay a larger share
of their incomes in taxes than those with smaller incomes.
But times have changed and our tax policies must be modified to meet new conditions. To
get enough revenue and to decrease buying, it will be necessary to take a considerable portion of the new tax money from families of moderate and small means. At present a married
man with two dependents and a $2,500 income pays only about $11 in federal income taxes
per year, yet well over half of the national income is received by persons earning $2,500 or less.
How Shall We Pay: Sales Tax or More Income Taxes?
For Inflation Control: Either a sales tax or increased income taxes can be devised that
will check inflation by taking off sufficient purchasing power promptly. Under a sales tax
the money comes in currently as goods are purchased. Under an income tax we would
have to make arrangements for a faster method of collection through deductions from wages,
salaries, and dividends at the time they are paid. The present method of paying income
taxes-months after the close of the year in which the income was received-is too slow
to be helpful in checking inflation.
For Revenue: Either a sales tax or increased income taxes can bring in billions of dollars
but in either case stiff rates would be necessary. For example, to secure $5 billion from a
retail sales tax, we might have to pay a tax of 11$ on every $1 of goods we bought, excluding
food.
To get $5 billion from increased income taxes and at the same time to get it from those who
have much of the money that is spent on consumer goods, we would probably have to do
two things: reduce all exemptions and increase rates, especially in the lower income brackets.
At present, exemptions are $750 for a single person, $1,500 for married persons, and $400 for
each dependent. If these were reduced, income taxes would not only be collected from additional people but more money would be collected from those who already pay.
For Equity: The income tax has always been considered a fairer method of taxation than
a sales tax because it can be levied according to ability to pay. Under a sales tax those who
spend practically all their money on merchandise carry a heavier burden than those who
have a margin for savings or for expenditures beyond basic living expenses. This is true
even when food is exempt, and even when we must tax as heavily as we will have to this
year. An income tax works out more fairly than a sales tax, as long as there are exemptions
which afford some means of protection to a basic living standard and as long as small
incomes are taxed less than large incomes.
What Will the Answer Be?
It will take courage for Congress to tax on the scale that is necessary and there will be a
desire to do it as painlessly as possible. Income taxes are apt to seem more unpleasant than
sales taxes to a legislative body and therefore harder to levy. This is because the effect of
the income tax on the individual's total income is more direct and obvious than the effect
of a sales tax, which is paid in driblets and is associated in the mind with the value of the
goods that are purchased.
We may come to the point where a sales tax must be levied in addition to increases in income
taxes, but if citizens understand clearly why heavy taxes are vital and why income taxes
are preferable to sales taxes and are willing to support their Congressmen on a sensible course
of action, the day when a sales tax has to be used can be postponed.
NATIONAL LEAGUE OF WOMEN VOTERS
726 Jackson Place, Washington, D. C.
100 Copies 75 cents
173
National League of Women Voters
726 Jackson Place
Washington, D. C.
Price 1#
May 1942
WITHHOLDING TAX
The Treasury Department has now made a recommendation to the House Ways and
Means Committee for mandatory collection at the source of part of income taxos
10% of income in oxcess of personal exemptions and exomptions for dependents.
The committee has doferred action, apparently waiting to sound out public
opinion. The argument currently advanced against the proposal relates to the
burden it would place on individuals the year it is put into effect. Below
are a fow answers:
1. By the time the tax bill is enacted those who are paying last year's
income taxes in installmonts this year will likely be 3/4 paid
up. (Sopt. 15)
2. Tho amount proposed to be withhold would in most cases be loss than
the individual's total tax bill, very much loss in the case of middle
and highor income groups, thus loaving a considerable portion of the
tax to be paid as usual during the year after the income is earned.
3. There is no way of eliminating all of the pain of putting a withholding
tax into effect, but onco donc it is oasior on everybody to pay the
taxos as incomo is earned, rathor than in a lump sum or four
installments lator.
4. The Treasury proposal compared with the nood of drawing off purchasing
power promptly is not a burdensome ono; on the contrary it is puny.
Heroic problems domand heroic solutions.
174
5/13/ +2
OFFICE FOR EMERGENCY MANAGEMENT
The Office for Emergency Management was established in the Executive
Office of the President by Administrative Order of May 25, 1940, in
accordance with Executive Order No. 8248 of September 8, 1939. The
Office is to "advise and assist the President in the discharge of extraordinary responsibilities imposed upon him" by the emergency conditions
arising out of the unsettled world conditions; to serve as a division
of the Executive Office of the President in and through which the activities of private and public agencies could be coordinated during any
emergency; to serve as a channel of communication between such agencies
and the President, to keep the President currently advised of their
progress, to assemble and analyze information concerning additional
measures that should be taken, and to assist in the preparation of recommendations for any necessary legislation; and to provide and maintain
liaison during any emergency with other divisions of the Executive Office
of the President and with other agencies, public or private, for the
purpose of bringing about maximum utilization and coordination of their
services and facilities.
175
OFFICE FOR EMERGENCY
MANAGEMENT
MR. WAYNE COY
LIAISON OFFICER
DEFENSE COMMUNICATIONS
OFFICE OF DEFENSE
OFFICE OF PRICE
WAR PRODUCTION
WAR SHIPPING
BOARD
TRANSPORTATION
ADMINISTRATION
BOARD
ADMINISTRATION
OFFICE OF LEND-LEASE
ADMINISTRATION
ADMIRAL LAND
MR. STETTINIUS
MR. FLY
MR. HENDERSON
MR. EASTMAN
DEFENSE
COMMISSION
AND FIGURES
MR. MacLEISH
MR. ROCKEFELLER
MR. McNUTT
MR. McNUTT
MR. LANDIS
OFFICE OF FACTS
OFFICE OF THE COORDINATOR
OF INTER-AMERICAN AFFAIRS
WAR MANPOWER
OFFICE OF DEFENSE HEALTH
AND WELFARE SERVICES
OFFICE OF CIVILIAN
MR. NELSON
OFFICE OF ALIEN
WAR RELOCATION
NATIONAL WAR LABOR
PROPERTY CUSTODIAN
AUTHORITY
BOARD
AND DEVELOPMENT
MR. DAVIS
DR. BUSH
MR. CROWLEY
MR. EISENHOWER
OFFICE OF SCIENTIFIC RESEARCH
176
May 13, 1942
MEMORANDUM TO THE SECRETARY
Attached are copies of a proposed Executive Order,
Memorandum to the President, and a more detailed memorandum out-
lining the respective functions of the Treasury Department and
the Alien Property Custodian. Copies of these have been furnished to Leo Crowley for his consideration.
Essentially these documents:
(1) Propose amending the Executive Order of March 11, 1942
so that all the powers of section 5(b) of the Trading with the
enemy Act, as amended, be vested in both the Secretary of the
Treasury and the Alien Property Custodian. The Order will not
define the respective functions of each. Instead the Memorandum
to the President, signed by both of you, will define such functions and the President's approval will be requested.
(2) Propose that the Alien Property Custodian have complete
control over all enemy property (Germany, Italy, Japan, Rumania,
Bulgaria and Hungary), and over all foreign patents, trademarks,
copyrights and ships. The Alien Property Custodian will also
be charged with the responsibility of protecting the interests
of and representing enemy nationals in litigation, probate
matters, receiverships, etc.
(3) Propose that the Secretary of the Treasury shall have
everything except that referred to in (2) above. This includes
complete control over all foreign property except that of the
enemy and specifically includes the control of the assets of
the occupied countries (e.g., Dutch and French assets) as well
as those of the "neutrals" (e.g., Swiss assets).
(4) The Executive Order will also give the Secretary of the
Treasury exclusive jurisdiction over section 3(a) of the Trading
with the enemy Act (relating to trade and communication with the
enemy).
Obviously no program will eliminate grounds for friction
and dispute between the two agencies involved as long as they are
both dealing with aspects of the same problem. However, if both
exercise good faith and recognize that our only enemy is Hitler
and the Axis, there will be plenty of real work for each without
the need for encroaching upon the other.
8.1.7h.
177
THE SECRETARY OF THE TREASURY
WASHINGTON
MEMORANDUM TO THE PRESIDENT:
We have been studying the respective functions of the
Alien Property Custodian and the Treasury Department in the
field of foreign property control. It is our feeling that
the effectiveness of both agencies can be increased by each
exercising certain of the powers now vested in the other
under the Executive Order of March 11.
We have accordingly agreed upon and are submitting to
you herewith for approval an amendment of such Executive
Order. We believe this amendment will greatly facilitate
the effective discharge of the functions which you intended
to be administered by the Treasury Department and the Alien
Property Custodian. It will also tend to reduce the possibility for legal attack on the administration of these powers.
The amending Order submitted herewith delegates all
authority under Section 5(b) of the Trading with the enemy
Act, as amended by the First War Powers Act, to both the
Secretary of the Treasury and the Alien Property Custodian,
acting jointly or severally (and all powers under Section
3(a) to the Secretary of the Treasury). In this way there
will be no doubt that both agencies will have sufficiently
broad powers to carry out their respective functions.
It is proposed that in the exercise of these powers the
following functions will be performed by the respective
agencies:
Alien Property Custodian
(a) When the Alien Property Custodian deems it
PORDEFENSE
-
BUY
UNITED
STATES
COMPANY
in the national interests, completely controlling
(including vesting) any property or interest of any
enemy country (Germany, Italy, Japan, Bulgaria,
Hungary and Rumania) or nationals thereof, regardless of how such property is cloaked.
178
-2(b) Taking such measures under Section 5(b),
as the Alien Property Custodian deems necessary
in the national interests, with respect to:
(1) any enemy business enterprise doing
business within the United States and any
property or interest in such business enter-
prise, including in particular the vesting,
management and supervision of any such enterprise;
(2) any patent, trademark, copyright or
interest therein in which any foreign country
or national thereof has any interest;
(3) any ship or vessel in which any foreign
country or national thereof has an interest.
(c) Receiving notices in pending litigation on
behalf of persons within enemy and enemy-occupied
countries, and taking such steps as the Alien Property
Custodian deems necessary in connection with repre-
senting such persons in such litigation.
Of course, when the Alien Property Custodian, in accordance with the above, has notified the Secretary of the Treasury
that he has taken control of any property or interest therein,
the Secretary of the Treasury will release all control of any
such property or interest therein, to the Alien Property
Custodian, and will not exercise any power or authority with
respect thereto, except as authorized by the Alien Property
Custodian.
Secretary of the Treasury
Subject to the foregoing, the Secretary of the Treasury
will exercise such powers and authority as the Secretary of
the Treasury deems necessary to carry out the purposes and
objectives of the freezing orders and regulations.
If at any time the Secretary of the Treasury and the
Alien Property Custodian should agree that either one should
perform in any particular case the functions which have been
179
-3generally assigned to the other, the amendment submitted
herewith will, of course, enable this to be done.
If you are in agreement, it will be appreciated if
you will sign the annexed Order, and indicate below your
approval of the above.
Secretary of the Treasury
Alien Property Custodian.
APPROVED:
THE WHITE HOUSE,
May , 1942.
180
EXECUTIVE ORDER
AMENDING EXECUTIVE ORDER NO. 9095
ESTABLISHING THE OFFICE OF ALTEN
PROPERTY CUSTODIAN AND DEFINING ITS
FUNCTIONS AND DUTIES AND RELATED MATTERS.
By virtue of the authority vested in me by the
Constitution, by the Trading with the enemy Act of October
6, 1917, as amended by the First War Powers Act, 1941, and
as President of the United States, it is hereby ordered as
follows:
Sections 2, 3 and 4 of Executive Order No. 9095 of
March 11, 1942, are amended to read as follows:
"(2) In the exercise of the authority herein delegated,
the Alien Property Custodian shall be subject to the
provisions of Executive Order No. 8839 of July 30, 1941,
and shall designate a representative to the Board of
Economic Warfare in accordance with section 6 thereof.
"(3) All power and authority conferred upon me by
section 5(b) of the Trading with the enemy Act, as amended,
is hereby delegated to the Secretary of the Treasury and
the Alien Property Custodian, acting jointly or severally,
and acting directly or through any person, agency or
instrumentality designated by them or either of them.
181
-2-
All power and authority conferred upon me by section 3(a)
of the Trading with the enemy Act, as amended, is hereby
delegated to the Secretary of the Treasury.
*(4) This Executive Order shall not be deemed to modify
or amend Executive Order No. 8843 of August 9, 1941,
and the regulations, rulings, licenses and other action
taken thereunder. Any and all action heretofore taken
by the Secretary of the Treasury, or by any person, agency
or instrumentality designated by him, pursuant to sections
3(a) and 5(b) of the Trading with the enemy Act, as amended,
and any and all action heretofore taken by the Board of
Governors of the Federal Reserve System pursuant to
Executive Order No. 8843 of August 9, 1941, are hereby
confirmed and ratified."
THE WHITE HOUSE,
May
, 1942.
182
TREASURY PROPOSAL OF MAY 11, 1942
All the powers of section 5(b) be delegated by
Executive Order to the Secretary of the Treasury and the Alien
Property Custodian acting separately or jointly. That there
be an understanding between the two agencies covered by a
Memorandum to the President, approved by him dividing the
functions under section 5(b) substantially as follows:
1. APC to be able to exercise all the powers under
section 5(b) including the administration and complete
control (such as freezing control, blocking and unblocking of accounts, the licensing system, regu-
lations of every type, and outright vesting) over
the following:
(a) All property of every kind and description (including gold, bullion, currency, cash, bank accounts,
securities, choses in action, tangible and intangible personal property, real property, etc.)
belonging to enemy allens [including at the present
time only the six countries (Germany, Italy, Japan,
Hungary, Roumania and Bulgaria) with whom we are
formally at war, and all nationals of such six
countries, and excluding all other countries
(such as Poland, Finland, Denmark, Holland,
Belgium and all other over-run and nominally
neutral countries) and their nationals, as well
as Proclaimed List nationals and aliens residing
outside of the six enemy countries, but reserving
the right to include such countries, if any, and
their nationals, who may later become enemies
or belonging to any others who may be "fronts or
"stooges" for enemy aliens. [This latter means
that If property is held in the name of (for instance) a Swiss national but the real owner or
real party in interest is an enemy alien, then
for all intents and purposes it is the property
of such enemy alien and so comes under the control
of the APC. The determination of whether or not
an enemy alien is the real party in interest, and
of whether or not an enemy alien interest lies
behind another "front", shall rest with the APC,
who shall notify the Secretary with respect to the
183
-2existence of the enemy interests affecting
particular property.]
(b) Subdivision (a) shall also be deemed to include
any enemy business enterprise doing business within
the United States, including in particular the vesting, management, supervision and liquidation (judicial
and extra-judicial) of any such enterprise.
(c) All patents, trademarks, copyrights, and ships or
any interest therein owned by aliens. This is not
confined to enemy aliens but covers all foreign
interests.
(a) All litigation (including all probate and surrogate
court matters, bankruptcies, receiverships, and judicial reorganizations) in connection with any of
the foregoing, as well as litigation involving the
receipt of notices on behalf of persons within
enemy and enemy-occupied countries and representing
such persons in litigation.
(e) All powers of investigation and taking of census
and requiring of reports, etc. in connection with
any of the foregoing.
2. The Treasury to have the functions under section 5(b) more
fully described in a memorandum of May 4, 1942, handed to
the APC. This will involve continuance of functions present-
ly exercised by the Treasury except that when the APC, in
accordance with the above, notifies the Secretary of the
Treasury that he has exercised authority with respect to
any of the categories of property mentioned above, the
Secretary of the Treasury will release all control of
such property and will thereafter refrain from exercising
any power or authority with respect thereto except at the
request of the APC. In this way it will be possible for
the Government to carry on in the interests of the war
all necessary functions and bridge the transition during
which the APC builds up his organization to discharge
his functions. The Treasury will continue to exercise
all the powers under section 5(b) over matters such as
the following:
(a) All foreign-owned property except categories listed
above. This will Include the property belonging to
184
-3over-run countries, nominally neutral countries,
Proclaimed List nationals, China, etc.
(b) The taking of a census of foreign-owned property
within the United States and foreign claims against
American citizens together with a census of Americanowned property abroad and American claims against
foreign nationals. In addition, the conducting of
investigations in connection with any of the functions
of the Treasury Department under this memorandum.
(c) All censorship matters as they relate to the functions
to be discharged by the Treasury in coordination with
State, BEW, etc. on international financial and trade
controls.
(d) Ad hoe freezing of individuals and firms with the
view to being able to regulate their use of dollar
funds and obtain information as to activities in
which they are engaged.
(e) Securities and currency controls, including restrictions
on importations thereof and dealings in certain classes
of securities and currencies.
5/13/42
STRICTLY CONFIDENTIAL
185
Table I-A
Aircraft Production
January-March 1942
:
Type
March
January-March
1942
1942
:
Pursuit
776
2,406
Light and medium bombers
575
1,361
Heavy bombers
156
376
49
164
1,369
3,857
537
1,315
3,462
9,479
Naval patrol bombers
Trainers
Other military types
Total
Office of the Secretary of the Treasury,
Division of Research and Statistics.
Source: War Production Board.
May 13, 1942.
STRICTLY CONFIDENTIABE
Table I-B
Aircraft Production by Models
Type and model
March 1942
Pursuit
F2A
1
90
F4F-4
100
P-38-E
P-39D
70
P-39F
P-39J
P-40E-1
P-40F
P-43A-1
P-47-B
35
36
293
55
25
5
52
P-51
P-66
14
776
Total pursuits
Light and medium bombers
A-20
A-200
A-29
A-30
B-250
B-25D
B-26A
2
122
92
39
148
3
49
66
B-34
24
SBD-3
TBF
SBN-1
17
3
10
V-72
Total light and medium bombers
575
Heavy bombers
85
B-17E
71
B-24D
156
Total heavy bombers
Naval patrol bombers
49
PBY-5
(Continued)
STRICTLY CONFIDENTIAB?
Table I-B (Continued)
Aircraft Production by Models
Type and model
Trainers
AT-6, BNJ-3
AT-9.
AT-11, C-188
AT-17, T-50
BT-13, BT-15
NE-1
NP-1
PT-17, 752 27
PT-19, M-62
PT-22
Total trainers
March 1942
212
107
53
137
325
20
26
189
120
180
1,369
Other military types
C-47, R4D
38
C-54A
061, F-24
DC-3, 053, 068
1
14
19
GH
1
J4F, G44
J2F-5
JRF
Tayloraft
what
Schooley
0-58B
0-59A
0-57A
082N-1
0S2U-3
0-49A
YC-64
18, (Lodestar) 15, C-59, 60, 12
Total other military types
Office of the Secretary of the Treasury,
Division of Research and Statistics.
Source: War Production Board.
5
2
6
78
165
73
21
95
3
1
15
537
May 13, 1942.
TREASURY DEPARTMENT
188
INTER OFFICE COMMUNICATION
DATE May 13, 1942
TO
FROM
Secretary Morgenthau
Mr. Kamarck
Subject: Shipment of Planes and Tanks to the U.S.S.R.
Summary
1. In the last third of April, the United
States shipped to the U.S.S.R. 62 planes (30
pursuit, 32 bombers) and 66 tanks (44 light, 22
medium).
2. In April, only 174 planes were sent to
Russia, compared to 238 in February and 238 in
March. On the other hand, 503 tanks were shipped
to the Russians in April, compared to 210 in
February and 417 in March.
3. To the shipment of 503 American tanks
in April, there must be added the movement of
130 Canadian tanks (70 medium, 60 light) from
American ports to Russia during the month.
189
-2Table A
Shipment of Planes and Tanks from
the United States to the U.S.S.R.
Shipments
during
April 20-30
*
Cumulative total
January 1, 1942
to April 30,1942
Planes
Pursuit
30
Bombers
32
Total
367
343
710
62
Tanks
Light
44
Medium
22
Total
638
534
66
Based on export declarations received.
1,172
190
-Table B
Shipments of Planes and Tanks to
U.S.S.R. by months
Total
Fighters
January, 1942
Bombers
Planes
Light
Tanks
Medium
Tanks
Total
Tanks
56
4
60
20
22
42
123
115
238
172
38
210
March
68
170
238
159
258
417
April
120
54
174
287
216
503
367
343
710
638
534
1,172
February
Total 1942,
to May 1
Based on export declarations received.
191
-
4
Table C
Shipment of Canadian Tanks through
American Ports to the U.S.S.R.
Light
Medium
O
70
70
40
O
40
20
O
20
tanks
April 1 - 10, 1942
April 10 - 20, 1942
April 20 - 30, 1942
.
Total, April shipments
tanks
60
Total
70
130
Based on export declarations; may be incomplete due to
lack of complete coverage of Lend-Lease shipments.
Future reports on a monthly basis will be more complete.
192
my 13, 1943.
by dear Six Production
IS use very good of yes to present to the collection of Revings Postare need in Register
I as very gind to have these interesting of the campaign that has been earried on there.
with certifil segarate,
Sincerely,
(Signet) a. Borgorthen. ⑉
Sir Frederick Phillips,
Willand Hotel,
Weekington, D. c.
GEF/dbs
file n.m.c.
193
Willard Hotel,
Washington, D.C.
May 12th, 1942.
Dear Mr. Secretary,
I am leaving with this letter
a collection of Savings Posters used in
England. The set is complete except for some
large wall posters, which I could obtain if
you desire. They are, however, mainly reproductions, on a larger scale, of the designs
on the smaller posters.
Yours sincerely,
Hhillips
The Honourable
Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D.C.
194
MAY 13 1942
Dear Sires
This will confirm specific authorisation of the Secretary
of the Treasury of which you were advised by telephone today, to
purchase, as fiscal agent of United States, in accordance with the
letter of the Secretary of the Treasury to you dated September 4,
1934, for account of the fund established in Section 10 of the
Gold Reserve Act of 1934, from Banco de Portugal, Lisbon, foreign
exchange as follows:
About 3,500,000 Swiss france cable transfer
Zurich value May 18 at a rate not in excess of 23.30
cents per Swiss frane, against United States dollars
placed to the credit of Banco de Portugal's account
with you, it being understood that Treasury Department
would license propt conversion of such dollars into
gold earnarked for account of Banco de Portugal, Lisbon,
in your vaults.
The cost of the Swiss francs including out of pocket or
other necessary expenses is to be charged to the account on your
books designated "Secretary of the Treasury Special Account".
195
-2This will also confirm the authorisation and instructions
of which you were advised by telephone to arrange with the Banque
Nationale Suisse, Zurich, for the opening of a Swiss frane account
on its books, in your name as fiscal agent of United States, designated "Federal Reserve Bank of New York Account No. 2s, and to have
the above-mentioned Swiss franes paid to the credit of such account
with the Banque Nationale Suisse, Zurich.
Very truly yours,
(Signed) D. W. BELL
Acting Secretary of the Treasury.
Federal Reserve Bank of New York,
New York, New York.
BB/ma - 5/14/42
196
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
May 13, 1942
Secretary Morgenthau
FROM Mr. Have
Subject: Export Freight Situation
Lighterage freight in storage and on hand for unloading in New York harbor increased by 848 cars to 20,990 cars
during the last week. (See Chart 1.) Additional rail storage
space for 6,327 cars was available in New York at the end of
the week.
Exports from New York decreased by 24 percent to 5,904
cars. (See Chart 2, upper section.)
Receipts for export at New York dropped from 7,387 cars
to 6,668 cars in the past week. Receipts for export at
9 North Atlantic ports also dropped considerably from 3,488
cars to 2,725 cars, the lowest figure since January. However,
receipts for export at 6 Pacific ports increased by 27 percent to 3,591 cars. This is a peak since at least the middle
of February 1941. (See Chart 2, lower section.)
LIGHTERAGE FREIGHT IN STORAGE
AND ON HAND FOR UNLOADING IN NEW YORK HARBOR*
1942
1941
GARLOADS
CARLOADS
Thousands
Thousands
24
24
22
22
20
20
18
18
16
16
14
14
12
12
10
10
++++++++
8
JAN.
MAR
8
MAY
JULY
SEPT
NOV.
JAN
MAR
MAY
JULY
SEPT.
NOV
1942
1941
Lorgely expert freight but about 10% represents freight for local
- of - - -
and center shipment. Figures exclude grate.
Office of the Secretary of the Treasury
C-303-0
EXPORT FREIGHT MOVEMENT
1942
1941
CARLOADS
Thousands
CARLOADS
Thousands
Exports
10
10
9
9
8
8
From New York
7
7
6
6
5
5
mmm
4
4
BEER H LLLIH III e 2
3
3
2
JAN
MAY
MAR
SEPT.
JULY
NOV.
JAN.
MAR
MAY
JULY
SEPT.
NOV.
1942
19 41
CARLOADS
CARLOADS
Thousands
Thousands
Receipts for Export
10
10
9
9
8
8
At New York .
7
7
6
6
5
5
4
4
At 9 other North
Atlantic Ports ..
3
3
2
2
I
I
At 6 Pacific Ports
me
0
o
JAN.
MAR
JULY
MAY
SEPT.
NOV.
JAN.
MAR
1941
MAY
JULY
SEPT
NOV.
1942
As estimated from date of general managers' association of New York
Association of American Reitroods
Office of the Secretary of the Treasury
- / - Medical
ON
C-382-B
199
C
0
P
Y
GRAY
CHUNGKING
MJF
Dated May 13, 1942
Rec'd 5:27 p.m.
Secretary of State
Washington.
556, May 13, 2 p.m.
FOR SECRETARY OF TREASURY FROM ADLER
"TF 35. In view of interruption of naval radio
service please authorize Embassy Chungking through
State Department to pay for telegrams to Treasury from
beginning May accordance section V-45 Foreign Service
Regulation."
GAUSS
JRL
eh:copy
5-15-42
200
EJ
This telegram must be
paraphrased before being
communicated to anyone
other than a Governmental
agency. (BR)
Capetown
Dated May 13, 1942
Rec'd 8:47 R.M.
Secretary of State,
Washington.
67, May 13, 10 a.m.
The South African RESERVE Bank has informed ME
that the procedure outlined in the Department's telegram no. 36 of April 9, 2 p.m. for negotiating and
handling Treasury checks and United States currency
Exchanged for official purposes at the rate of $4.035
has now been put into operation in the Union of South
Africa,
The bank requests that the Federal RESERVE Bank
of NEW York approach it direct regarding telegraphic
transfers under this arrangement.
KEENA
RDS
201
COPY NO. 13
BRITISH MOST SECRET
(U.S. SECRET)
OPTEL No. 158
Information received up to 7 A.M., 13 May, 1942.
1. NAVAL
Motor Gunboats were in action with E-boats and light craft early
on 12th off the coast of FLANDERS and damaged at least 1 E-boat. 4 of H.M. Destroyers including LIVELY, KIPLING and JACKAL were attacked by aircraft on the
afternoon of the 11th to the north of the GULF OF SOLLUM and LIVELY was sunk. In
a subsequent attack, KIPLING and JACKAL were hit and the former sank. The latter
was taken in tow but sank the following morning. About 500 survivors from the
three ships were rescued. Boaufighters destroyed 1 and damaged 7 enemy aircraft.
One of H.M. submarines has been sunk, no details have yet been received. 3
British ships totalling about 17,000 tons and 2 Allied ships totalling about
10,000 tons, all in convoy to HALIFAX were sunk by U-boat on the 11th, 700 miles
west of IRELAND (R).
2. MILITARY
RUSSIA. Strong German bomber and dive bomber formations supported
their ground troops in the attack on the Russian positions on the KERCH PENINSULA
on 7th and 8th.
3. AIR OPERATIONS
MALTA. Between 1530/11th and 1100/12th, 11 bombers escorted by
many fighters (some carrying bombs) attacked. Our fighters destroyed 3 enomy
aircraft, probably destroyed 3 and damaged 9. Wo lost 4 Spitfires, 3 pilots safe.
BURMA. 11th. Throo Hudsono and two Wellingtons bombed the runways
and aerodrome buildings at AKYAB.
4.
Reconnaissence of DAKAR 10th and CASABLANCA 11th, showed no change
in the positions of French major naval units.
202
UNITED STATES GOVERNMENT
COORDINATOR OF INFORMATION
WASHINGTON, D.C.
May 13, 1942
The Honorable
The Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
The attached is a summary of
the British Political Warfare Weekly General
Directive. It is requested that none of
this be used for quotation, publication,
or open broadcasting.
Sincerely,
Drumman
William J. Donovan
Attachment
203
1. Strategy: (a) Russia. Large
SECRETfenCOORDILATOR or INFORMATION
sive improbable before second half of May or early June,
except in Crimea. Operations impeded by thaw conditions.
Soviet force which landed April 28th on southern shore of
Motovski Gulf are still operating behind German front line
positions on Litsa River. At present total number of German
(7mland- amk
forces, including Finnish, on Russian front amounts to 180
divisions. (b) Lybia. Patrol activity. (c) Malta. On
May 8th air offensive was resumed. 59 Spitfires arrived
during raid on May 9th with result that 21 enemy aircraft
definitely destroyed, 19 probably, and 28 damaged as against
three Spitfires lost.
2. Strategy guidance. (a) Russia. Emphasize
inadequacy of Luftwaffe on all fronts. Link it up with AS
shortage of manpower and seapower. Point out that the power
gap is inexorably widening. Emphasize that because he sees
his Nemesis approaching, Hitler armed himself against the
home front while preparing on the Russian front a last
desperate gamble. Remind Axis satellite nations that brunt
of attacks by superior Russian air force is falling on them.
(b) Madagascar. The Axis is anxious to convince the World
they hold the strategical advantage in geographical alignments, declaring that if Germany can advance to Persia via
India, the Allies will be caught in a pincer in the Middle
East. Reject this fantasy. Point out that it was to prevent the remote chance of a Japanese naval excursion across
Indian Ocean that we seized Diego Suarez and other key
points in Madagascar. Proof of Anglo-American dominations
of the seas can be found in fact that considerable expedi-
tion was convoyed without the loss of a single ship. (c)
Far East. Japs claim naval forces on western side of
New Guinea occupied Babo, Fafak, Manokwari, Hollandia,
205
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 13, 1942
TO
Secretary Morgenthau
Mr. Kamarck
FROM
Subject: Summary of Intelligence Reports
Morale in Germany
The British Political Warfare Executive from its
analysis of morale in Germany states that the main
British propaganda objective towards Germany is to
show the Germans that a United Nations victory is a
desirable goal for them. This is necessary in order
to undermine their desperate will to resist to the
bitter end, because of the fear of annihilation.
"A solid message of hope to individual Germans 18
necessary in the very near future.
(U.K. Political Warfare Executive, C.O.I.,
May 12, 1942)
Condition of the German Population
There are numerous indications that the hard work
and long hours of the rearmament period and of the war
have already considerably exhausted the German population. While the diet of the German people as a whole
has been adequate during the war, it must be recognized
that the "normal consumer" has had slightly less than
an adequate intake of calories. The recent cuts in
rations have fallen most heavily on the normal consumers,
and even war workers will now be slightly below adequate
standards. The reduction in rations added to the
accumulated fatigue of years of over-work is imposing a
very severe strain on large sections of the German people.
(U.K. Ministry of Economic Warfare, "Working
Capacity and Physical Exhaustion of German
Population", April 14, 1942)
-2-
206
Use of American Planes
"When in service in England, (the Flying) Fortresses
were handicapped by the almost constant grey skies of
Northern Europe and had little chance to exploit their
chief virtue - that of being able to operate at great
heights. When they were sent to the Middle East, sand
and rain-storms baulked them, and once more the R.A.F.
could not get the best from them. They dared not be used
for normal day-bombing operations because of their inadequate
armament. Doubtless, when the lessons of modern war have
been embodied in the design, and a means found for accurate
bombing from great heights, the Fortress will be a valuable
asset to any Air Force operating against targets not frequently hidden by a blanket of clouds.
("The Aeroplane", April 10, 1942, p. 402-3)
Finland
One evidence of increasing German control over Finland
is the report of the London Monitoring Office of the Federal
Communications Commission that control of Lahti, the official
Finnish radio, was taken over by Germany around January 10
of this year.
(Federal Communications Commission, Quarterly Review,
December 1, 1941 - March 1, 1942)
Vichy France
(An interesting comment on our appeasement policy towards
Vichy is the following report of the Federal Communications
Commission on the policy of the Vichy radio from December 1 to
March 1.)
"The degree to which commendation as against criticism
was dispensed to the United States bore a significant relation
to current diplomatic relationships between the two countries:
when Washington was friendly, it was apt to be attacked; when
the U.S.A. protested and warned, it was apt to be praised."
(Federal Communications Commission, Quarterly Review,
December 1, 1941 - March 1, 1942)
5713
207
TREASURY DEPARTMENT
Washington
Press Service
FOR RELEASE, MOANING NEWSPAPERS,
No. 31-59.
Thursday, May 14, 1942.
5/13/42
Secretary Morgenthau today announced plans for the organization throughout the country of Victory Fund Committees to be set
up in each Federal Reserve district and to be made up of bankers
and members of the securities industry to aid the Treasury's
financing program. This organization will work chiefly with the
larger investors and will in no way duplicate the work of the War
Savings Staff.
Because the nation's war needs have increased tremendously
the money-raising responsibilities of the Treasury, the Secretary
of the Treasury has accepted the offer of the banking and securities
industry to co-ordinate their efforts in helping to distribute
Government securities.
The organization announced today, in which committees headed
by presidents of the Federal Reserve Banks will be set up in each
Federal Reserve district, developed through assistance given the
Treasury by the banking and securities industries.
The collaboration of these organizations will be formalized
with the establishment of the new Victory Fund Committees, tied
together nationally by a committee of Federal Reserve bank presidents, of which the Secretary of the Treasury will be chairman.
The Chairman of the Board of Governors of the Federal Reserve
System will provide the liaison between the Reserve banks and the
Treasury.
In some districts executive committees may be set up for
operating purposes, and district committees, with approval of the
Secretary of the Treasury, may set up regional subcommittees.
-000-
208
May 14, 1942
11:25 a.m.
HMJr:
Hello.
Operator:
Schwarz.
HMJr:
Hello.
Charles
Schwarz:
Yes, sir.
HMJr:
Chick, I - if I called that thing an examination
tax, I misspoke myself. It's an examination fee.
S:
Examination fee.
HMJr:
See?
S:
I'll straighten it out.
HMJr:
Will you, please?
S:
I've already - I talked to Randoloh Paul and told
them - he doesn't have much doubt as to the
HMJr:
constitutionality.
But it's an - it'11 be an examination fee, not a
tax.
S:
HMJr:
S:
All right. Thanks.
Be sure that you catch it.
Right away. Thank you.
209
May 14, 1942
11:36 a.m.
Speaker
Rayburn:
HMJr:
R:
Hello, Henry.
Sam, I got a report from our Chief National Bank
Examiner in Dallas
Uh huh.
on this question of loans to oil wells.
HMJr:
R:
Uh huh.
HMJr:
Hello.
R:
Yes.
HMJr:
And so far everything's okay.
R:
Fine.
HMJr:
And there are some Chicago banks, though, that
have some loans down there that are not so
sympathetic.
R:
I see.
HMJr:
But we're watching it.
R:
Well, now, here's what we have done.
HMJr:
Yeah.
R:
We had Jesse yesterday, talking to him.
HMJr:
Yeah.
R:
And he says - told these boys that where it's a
bank like Chicago was fixing to move in on them
HMJr:
and was going to move in on them
What's that?
R:
Where a bank like the bank at Chicago
HMJr:
Yeah.
R:
.....Was going to move in on one of these fellows,
210
2-
to let him know
HMJr:
Yeah.
and he would try to get the thing refinanced
R:
before they closed them out.
HMJr:
Well
R:
I think it's a mighty good thing.
HMJr:
Good. And we're watching it also.
R:
All right. Now, Henry
HMJr:
Yes, sir.
R:
I saw Gore yesterday.
HMJr:
Did you?
R:
And I told him that I'd - I had information around
that movements like his might be disturbing their
bond sale effort.
HMJr:
R:
HMJr:
R:
Yes.
And he said, "Well, I'll do whatever you say
about it." Well, I said, "Albert, just let it
lie around and don't do anything about it awhile.
Let us see how we get along, and see whether we've
got to have these enforced sales or not. And he
said he'd be very glad to do it.
Well, that's fine.
And so you can let that out in a way - he didn't
authorize me to make a statement about it, but
he said he'd let it lie here as long as I said so.
HMJr:
Well, you don't mean I should say anything?
R:
No, no. I mean some way here it could get out
HMJr:
R:
that that bill's not going to be pushed.
Couldn't you.....
Couldn't
put it on me, that I said that that was
true.
211
-3HMJr:
You couldn't tip off some of the boys when you
come to see them? They'd take it so much better
coming from the Hill. See, there are different
boys cover the Hill than cover me.
R:
Yeah, that's right. Well, if some of the boys who
HMJr:
I get you.
R:
You could tell them to call me on the telephone
cover you were to drop by here
when you have a meeting with them.
HMJr:
That'
R:
One of your best ones.
HMJr:
I can arrange that.
R:
All right. You have them call me.
HMJr:
I can arrange that.
R:
Yeah. And I'll tell them that it's - our leadership decided to do nothing about that for awhile.
See?
HMJr:
I can arrange that.
R:
Yeah. All right, Henry.
HMJr:
Thank you.
R:
Thanks.
212
May 14, 1942
4:45 p.m.
HMJr:
Senator
Hello.
Truman:
Hello.
HMJr:
Hello, Senator.
T:
Hello. How are you, Mr. Secretary?
HMJr:
Fine. I called you while you were away. I didn't
know that you were away, but this question came
up on this appointment in St. Louis.
T:
Yes. Well, it was all right.
HMJr:
And I just wanted to make sure, but Bennett assured
T:
me it was all right.
It's one hundred per cent all right, and he's
right here in my office now, and you'll find he's
a grand person.
HMJr:
Well, I want to meet him.
T:
Well, I want you to meet him.
HMJr:
Yeah.
T:
I think you'll fall for him just like I have.
HMJr:
Well, I want to meet him.
T:
HMJr:
Well, I'11 arrange that.
But Bennett assured me - in fact, he said that
the suggestion originated with you.
T:
That's right. It did.
HMJr:
And
T:
And if you'll set a time, some time tomorrow or
the next day, when you want him to come down,
I'11 come down with him.
HMJr:
Well, let me just see a minute. It would have
213
-2to be tomorrow.
T:
HMJr:
T:
All right.
Just a minute. He's only going to be here tomorrow. Is four-thirty a good time?
It would be perfectly all right with me.
HMJr:
Well, then, supposing I put you down four-thirty
T:
Four-thirty will be perfect.
HMJr:
That'11 be grand.
T:
tomorrow, Senator.
Do you want me to come to that same door I did
before?
HMJr:
If you would, please.
T:
All right, I'll do that.
HMJr:
Thank you.
T:
All right.
214
May 14, 1942
5:03 p.m.
HMJr:
Hello.
Operator:
Mr. Daniels.
HMJr:
Hello.
Jonathan
Daniels:
Good afternoon, Mr. Secretary.
HMJr:
How are you? Mr. Daniels, I'm calling you up do you people interest yourself at all in doing
anything about draftees when they leave their
home town?
D:
Mr. Secretary, we have urged the councils - I
don't know whether we've urged them enough -
to do something about having meetings - little
meetings about it and escorting them into the
train.
HMJr:
Yeah.
D:
Now, I don't know whether we've done enough
about that, sir, and I think probably we ought
to do more.
HMJr:
Yeah. Well, I was interested, and I don't want
to appear in the thing, but perfectly frankly,
for instance, from Beacon, New York - B-e-a-c-o-n
D:
HMJr:
Yes, sir.
my boy goes on the twenty-first, and there's
a hundred boye go
D:
HMJr:
Yes, sir.
from that town, at six-forty-five; and I
wondered if that town's going to do anything to
see these boys off - it's in Dutchess County,
New York.
D:
HMJr:
Well, I wouldn't know about that, sir, but I can
find out for you, sir.
I just was kind of curious. I don't want to
appear in the matter, you see.
-
215
2-
D:
Yes. On the twenty-third, is that?
HMJr:
Twenty-one.
D:
Twenty-first.
HMJr:
And - from Beacon, New York, and I - if they were
going to do 140, do it on a county-wide basis.
I would - I mean, I just wouldn't single out
Beacon, you know.
D:
HMJr:
Uh huh.
But I - you could do it 1f you did it on the
basis to try to start something in Dutchess
County, because it's the home of the President.
D:
Uh huh.
HMJr:
How would that be?
D:
HMJr:
That would sound very good to me, sir, and let
me check on it and call you back tomorrow.
You see, on the basis that - just the way we're
doing extra things there - we did the Amenia
thing there - why don't we start something and
when any draftees leave from Dutchess County,
that we do something there.
D:
HMJr:
Yes. Well, that'11 be about a hundred boys?
There's a hundred boys going out on the twenty-
first.
D:
From Beacon?
HMJr:
Yes.
D:
Let me check on that, Mr. Secretary, and call you
tomorrow about it.
HMJr:
Thank you.
D:
Thank you, sir.
Treasury Department 216
Division of Monetary Research
5/20/12 19
Date
To:
From:
Miss Chauncey
H. D. White
For your files.
217
MEMORANDUM TO THE FILES
May 14, 1942.
Subject: Proposal to Freeze Argentina.
Meeting of Sub-Committee of the Board of Economic Warfare,
Room 5701, Commerce, May 12, 1942.
Present: Acheson, Duggan and Meltzer from State; White, Pehle,
Southard and duBois from Treasury; Pierson from ExportImport Bank; James from Coordinator of Information; Coe,
Anderson and Oppenheimer from Board of Economic Warfare;
and two others.
Mr. Coe acted as chairman of the meeting and began by asking Mr.
Acheson if he had any comment to make on the Treasury proposal to
freeze Argentine funds and grant Argentina a general license.
Mr. Acheson replied that he had had the Treasury memorandum for
only an hour and had not had an opportunity to examine the documents
referred to in it in order to see what was needed or what could be
done to cure each situation set forth by the Treasury. He stated
with considerable emphasis that the extension of freezing control to
Argentina was a very serious step which would be in opposition to
our whole Latin American policy. It would upset and reverse the
present perceptible trend against the Castillo Government in Argentina.
It would in addition cause a bad reaction in the other Latin American
countries. Admittedly, he said, steps need to be taken in view of
the Argentine situation but he urged that we not "walk in with a club
to kill a mosquito". He concluded by saying that there would be the
"most violent opposition" in the State Department to the extension of
freezing control to Argentina.
Mr. Acheson referred to Mr. Duggan's judgment of political consequences of the proposed step. Mr. Duggan simply said that he concurred
wholly with the position taken by Mr. Acheson.
Mr. White remarked that copies of a memorandum prepared in the
Treasury for the use of the Secretary were available and that he did
not think that the detailed examples contained therein needed discussion.
He asked that the whole Argentine picture be kept in mind. He conceded
freely that, of course, no one item is particularly important. The
broad and inescapable fact is that Argentina is not cooperating, has
no intention of cooperating and is a hotbed of intrigue against the
cause of the United Nations. Admittedly, freezing would not cure a
lot of individual matters in the Argentine situation but in view of
the whole problem freezing is required. If the State Department feels
that it can stop all the individual acts which are occurring under
the shelter of Argentine "neutrality" the State Department is, of
course, the best judge of the matter. If freezing is not possible
218
-in the judgment of the State Department there was hardly any use looking for more examples of financial operations from which Axis powers
benefited. Mr. White inquired whether the State Department had data
to refute the positions taken in the memoranda prepared by the Federal
Bureau of Investigation and the Coordinator of Information. He asked
why it was sensible to treat Argentina better than the four European
neutrals were being treated and expressed as his opinion that we were
offering no conspicuous advantages to the other 18 American republics
who are cooperating. In the final analysis, however, it would have
to be conceded that if the State Department wants to take no step
which might weaken the Government of Argentina there was little use
in discussing the matter further.
Mr. Anderson, BEW, asserted that it was up to the State Department to tell other agencies how to handle Argentina if the step suggested by the Treasury was not to be taken.
Mr. Acheson, replying to Messrs. White and Anderson, pointed out
that we had the opportunity at the Rio Conference of putting Argentina
and Chile "beyond the pale" but we did not take that course. He said
it should not be forgotten that the other countries of Latin America
are still suspicious of United States and that they would resent our
steps against Argentina. Of course, Argentina is cooperating less
than the other Latin American countries, but the question is how to
get that country to cooperate. The State Department believes there
is a growing popular opinion in Argentina against the Argentine Government and that nothing should be done to interfere with that development. Mr. Acheson denied that we are treating Argentina in the same
way as we are treating the 18 cooperating republics.
Mr. Pierson, Export-Import Bank, said that it was his opinion
that we freezing Argentina was the worst thing we could do and should
be done only as a last resort.
Mr. Southard reverted to the position taken by Mr. White and asked
Mr. Duggan if he would elaborate further on the politics relating to
two matters: (1) Why should we assume that the other American republics would resent the taking of strong steps against Argentina? Why,
on the contrary, would it not be assumed that the other republics are
at present resentful of the fact that while they have stuck their necks
out and broken off relations with the Axis Argentina is still sitting
on the fence and has not conspicuously suffered as a result? (2) Why
should we fear the consequences so far as Argentine reaction is concerned of placing Argentina in the same position as we have placed the
four European neutrals?
Mr. Duggan replied that the Argentines are a "proud and sensitive events
people" and cannot be pushed around bluntly. He reviewed the
following Pearl Harbor in which the Argentine Military and Naval Mission
219
-3 came to United States to get equipment. The State Department and
other agencies tried patiently to get the Mission to agree to certain
definite concessions (which Mr. Duggan refused to detail) in return
for equipment. The Argentine civil government refused to allow the
Mission to make these concessions and it went back with empty hands.
Since then the State Department considers that there is reason to
believe that the military authorities in Argentina are asking themselves whether a mistake isn't being made by Argentina and whether
a closer military cooperation with this country isn't advisable.
Since the present Argentine Government is maintained in power by the
Army and Navy, it is felt in the State Department that it is worth
while playing along with that state of mind. In addition the curtail-
ment of exports to Argentina, of which no secret is being made, is
having its effect in Argentina. The State Department's position is
that we cannot expect quick results from this policy of maneuvering
Argentina into a position of cooperation. We must go along patiently
with our friends in Argentina and do nothing to weaken their efforts
of swinging their country into line.
Mr. Duggan emphasized that we should never lose sight of the
deep-rooted suspicion of United States which still exists in Latin
America. It is therefore necessary that we lean over backwards to
avoid any step or policy which will fan that suspicion into activity.
This has been the policy for eight years. Therefore, we must have
100 percent justification before taking strong action against
Argentina in order to win the support of the other republics. It is
better to study the individual problems involved in the Argentine
situation and to find individual remedies for them.
Messrs. Oppenheimer and Anderson of the BEW asked further
questions of Mr. Duggan, expressing doubt that the Argentine change
in sentiment Mr. Duggan seemed to perceive was encouraging enough
to justify avoiding stronger steps and doubting that the Argentine
Military Mission could have been trusted even if it had given
guarantees.
Mr. White said that, of course, all of us agreed heartily with
the good neighbor policy and further agreed that it was one factor
in better Latin American cooperation with United States in this war
than in the last war. He said, however, that we should not lose
sight of the fact that the Latin American countries themselves
realize that they have greater reason for cooperating with us in this
war since clearly the threat to them in this war is much greater
than in the last war. Mr. White said further that he had understood
from second or third hand information at Rio that we had talked "tough"
to Argentina. Yet now after four months Argentina has taken no steps
to implement the Rio resolutions and is clearly waiting until the
war issue is clear. Our soft policy toward Argentina is becoming
hard to understand and may in fact be actually strengthening the
220
-4determination of the Argentine Government to go its own way. Another
possible consequence is that we are making the position of other Latin
American countries more difficult since their people may wonder whether
the Argentines haven't been smart to stay on the fence. He said he
wanted to make it clear that we are not asking that Argentina be put
"beyond the pale". On the contrary, we are asking only that Argentina
be placed in position of the four European neutrals. This is not a
severe step. Of course, Mr. White conceded, if the State Department
thinks this step will make matters worse with reference to our whole
Latin American policy that would settle the question, but he pointed
out that this decision is a matter of both fact and opinion. Mr.
Duggan agreed that this was the case. At this point Mr. Southard
emphasized that placing Argentina under a general license is not a
startling step since it serves only to prevent our monetary system
from being used by Argentine nationals for the aid of the enemy. He
suggested that there must be some misconception among several people
in the room as to the nature of a general license.
At this point Mr. Pierson observed that if we wanted to open up
a second front this might be a good step to take. Mr. White asked
Mr. Pierson if he had in mind that Argentina would join Germany and
attack Brazil. Mr. Pierson nooded in agreement.
Messrs. James and Pierson agreed that great caution should be
used in taking any such step as that proposed. James, however,
clearly misconceived the nature of a general license. Messrs. Oppenheimer and Southard expressed the opinion that firmness against
Argentina is likely to win respect for us in Latin America instead
of the contrary. Mr. Southard elaborated on his opinion, asking Mr.
Duggan if it was not possibly true that the Argentines were not over
popular in Latin America and we therefore might actually anticipate
favorable reaction from the other countries were we to place Argentina
under freezing control. Mr. Duggan agreed that Argentina was not
particularly popular and said that at two Pan-American conferences he
had attended there was much cloak room muttering against Argentina's
tactics of obstruction. Mr. Duggan did not follow through on this
observation, however, and did not openly concede Mr. Southard's suggestion.
Mr. Acheson said that in any event Argentine offenses should be
studied to see what cures could be found for each individual one.
At this point he had to leave the meeting and agreed, as he left,
that a sub-committee should be appointed consisting of Messrs. Coe,
White and Duggan to report the differences of opinion and the points
of agreement to the Board of Economic Warfare at its next meeting.
221
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 14, 1942.
Secretary Morgenthau
TO
FROM
Mr. Thompson
With reference to your telephone conversation with Mr. Carey
in the Hinckley case, Mr. Spingarn talked to Mr. Carey by telephone
and after discussing the case Mr. Carey stated: "Well you have a
decision to make. I know what I would do if I were in your place.
I would have no trouble about it. I would throw him out so fast he
would bounce."
Mr. Carey's name was never mentioned in Mr. Spingarn's conferences
on the subject with local CIO representatives, but he did mention to
Eleanor Nelson, Secretary-Treasurer of the local CIO, that a top-ranking
officer of the national office had indicated that the Department would
be making a serious mistake if it retained Mr. Hinckley in its employment. Subsequently, when Miss Nelson sent in a written protest on the
case, this statement, which previously had been made to her orally, was
repeated in the letter of reply. Mr. Spingarn advised me at the time
that he had checked through Leo Goodman of our War Savings staff in the
matter and that Leo had told him that Mr. Carey had stated to him that
he didn't care whether we used his name or not. However, as pointed
out, his name was not used, but Mr. Spingarn felt that it would dampen
the ardor of Miss Nelson if she know that a high-ranking officer at
national headquarters was on the Treasury side, and that was the basis
for the statement.
The
222
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 14, 1942.
TO
Mrs. Klotz
FROM
Secretary Morgenthau
I wish to send the editorial on Treasury financing
to the President today, also to my son, Bob.
Sent 5/14/42
223
May 14, 1942
My dear Mr. President:
I thought the enclosed edi-
torial in today's Herald Tribune
was very nice, and that you might
like to see it.
Sincerely yours,
(Signed) H. Morgentham, JR.
The President,
The White House.
n.m.c.
By Messenger Bury 4:45
224
NEW YORK
Tribune
Herald
MAY 14 1942
The Treasury's Operations
The chief characteristic of the Treasury's
borrowing program in the present war, as dis-
tinguished from that of World War I, is its
policy of diversifying the type of security offered with the idea of reaching every conceivable reservoir of investible funds.
Announcement that subscription books
would be closed at midnight tonight on the
offering of 21/2 per cent bonds of 1962-'67 calls
Morgenthau announced early this month that
it would be necessary to raise $2,000,000,000
in "new money" in May and June. At the same
time that books were opened on the abovementioned "tap" issue subscriptions were entertained for $1,250,000,000 nine-year bonds,
designed to appeal to the commercial banks.
and the regular weekly offering of Treasury
ninety-day bills was stepped up from $150.000,000 to $250,000,000. The nine-year bonds
were oversubscribed two and one-half times.
attention to the fact that the Treasury has
Assuming that the allotment aggregates the
scored another signal success in pursuing this
$1,250,000,000 originally sought by the Treas-
ury, we find the thumb-nail story of the May
sented a new departure in American financing. financing to be: $1,250,000,000 raised by the
It was the first American experiment with sale of bonds to the banks, $300,000,000
through additional sales of discount bills and
a type of offering now in use for some time in
Great Britain, the so-called "tap" issue. A $1,000,000,000 through the "tap" issue. Add to
"tap" issue is an issue on which the books are this $600,000,000 or thereabout realized
policy of diversification. This issue repre-
left open for an indefinite period and is through the sale of war bonds and you get
usually set up in such a way as to appeal to $3,150,000,000. The regular sale of bills asnon-commercial bank investors. The present sures $400,000,000 in June and the sale of war
issue follows these specifications. The bonds bonds should total at least another $600,000.are registered, rather than bearer; they are 000. If the Treasury should borrow an addinon-negotiable for a period of sixty days after tional $2,000,000,000 in the open market, as It
issue, and banks may not subscribe to them or is now expected to do. this would bring the
hold them during the first ten years of their total of "new money" raised in the two months
life. Despite this rigid exclusion of banks of to well over $6,000,000,000.
In other words, with almost no fanfare, and
deposit from participation, however, it is esti!with
probably comparatively few persons
mated that in the ten days since the books
were opened subscriptions have aggregated aware of the fact, the Treasury is in a fair
way to raising in this sixty-day period more
upward of $800,000,000. with $1,000,000,000 a
money than was raised in any of the Liberty
possibility by midnight tonight.
Incidentally, this very diversification of Loan campaigns of World War I. the simple
Treasury financing has tended greatly to exception being the Fourth Loan, when
minimize the really gigantic dimensions of the
operations of the Treasury these days. Mr.
$6,000,000,000 was sought and $6,965,000,000
subscribed.
225
May 14, 1942
TO:
Mr. Graves
FROM:
The Secretary
Mr. Gamble
I am sending you herewith a copy of a letter
from Mrs. August Bellanca.
see me.
Please speak to me about it the next time you
5/19- Graves reported
Finished"
226
COPI
AMALGAMATED CLOTHING WORKERS
OF AMERICA
15 Union Square
New York, New York
Mrs. Henry Morgenthau, Jr.,
2634 Belmont Road,
Washington, D.C.
My dear Mrs. Morgenthau:
On April 25th I attended a meeting of the American Slav
Congress in Detroit, Michigan, at which were present over 2400
registered delegates. They represented every important Slav organi-
zation in the country, including civic, fraternal, professional,
religious and labor groups. About 50% of the workers in the war
industries are made up of American workers with Slav background.
These groups also represented about 15 million Slavs in this country.
This Congress was organized for the specific purpose of helping in
every way the war efforts of our country.
At the afternoon session a Mr. Frank N. Isbey of Detroit,
supposedly in charge of the selling of defense bonds, made an appeal.
His approach to the matter, in my humble opinion, was very bad. He
spoke of the sacrifices we will be called upon to make, of the thousands of Gold Star mothers we will soon have, and the graves and
coffins of American boys fallen in battle. I know that it had a
bad effect on the delegates sitting around me, many of whom were
women.
The approach to an audience for selling bonds should be
rather on the strength of saving lives, in getting the equipment out
of the factories in such great quantities and supporting so effectively
our war effort that we can shorten the struggle much sooner than we
expect. It seems to me that instructions as to how to approach this
matter should go out from the Treasury Department to all those
assigned to sponsor the sale of war bonds.
I hesitated writing but I do think it is my duty to bring
this to your attention in the hope that you will pass it on to the
proper authorities. Please pardon my troubling you about this matter.
Very sincerely yours,
/s/ Dorothy J. Bellanca
DOROTHY J. BELLANCA
(Mrs. August Bellanca)
DJB:am
227
May 14, 1942
Dear Lessing:
I am returning herewith the
memorandum which you left with me last
week.
I have had my people get in
touch with Edgar Storn and also with
Colonel Patterson, in New York, as to
why Edgar Stern wasn't followed up.
Thank you very much for bring-
ing this matter to my attention.
Yours sincerely,
(Signed) Henry
Mr. Lessing J. Rosenwald,
Chief, Bureau of Industrial Conservation,
War Production Board,
Washington, D. C.
File n.m.c.
By Message Bunny +:45
NATHAN W. LEVIN
570 LEXINGTON AVENUE
NEW YORK.N.Y.
TELEPHONE PLAZA 3-7770
April 24, 1942
Lessing J. Rosenwald:
3006 Railroad Retirement Ally
Re: Savings, Defense and Kar Bonds
In accordance with my conversation with you I am enclosing a
schedule of Savings, Defense and War Bonds purchased through or supervised
by this office. You will note that the total maturity or par value is
divided by family groups as follows:
Lessing J. Rosenwald Group
.
Marion R. Ascoli
Adele R. Lew
Edith R. Stern
M
William Rosenwald
$ 630,125
Other Accounts
310,000
455,050
420,400
429,500
345,600
Total maturity or per value $ 2,590,675
The following is a summary classified according to series and period
of purchase:
$ 833,700
Prior to 5/1/41 (Series A to D)
1,085,350
5/1/41 to 12/31/41 (Series E, F & G)
1942 to date (Series E, F & G)
Total maturity or par value
671,625
& 2,590,675
The following is a classification of the total by series:
A - D - Maturity value
- Maturity value
- Maturity value
E
F
G
- Par value
$ 833,700
183,975
228,000
1,345,000
$ 2,590,675
This includes purchases I have made during the past week for your chilAdditional amounts may be purchased during the belance of the year for
other accounts but the amount will not be large under present regulations
rich limits Series F and G bonds to $50,000. In many cases it is necessary to
tpone purchases of War Bonds until the new tax rates are definitely determined
en.
I am also enclosing S fora letter sent to each of the owners of Series
F and G bonds by Vr. Morgenthau on March 20. I showed you a draft of any reply
Mr. Lessing J. Rosenwald
-2-
April 24, 1942
which I am also enclosing. While we probebly would not care to send this
letter to Mr. Morgenthau, it seems to me that the question of purchasing
more than $50,000 of Series F or G bonds out of current income was unnecessary. In order to invest more than $50,000 in Series F or G bonds out
of current income, one would have to have a fantastically large income before
taxes. For example, $300,000 of net taxable income leaves only $50,000 and
$500,000 of net taxable income leaves only $70,000 and a net taxable income of
$1,000,000 would leave $120,000. Even with a net taxable income of one million
dollars one could hardly invest more than $50,000 in Series F or G bonds out
of current income.
You will remember that I discussed with you the possibility of making
substantial commitments in additional Government bonds if the present limits on
Series F and G bonds were removed or if some other issue were floated by the
Government. There is approximately seven million dollars in cash in various
bond accounts in the office. After making provisions of $500,000 each for the
other members of the family for income reserves and after making other reserves,
I estimate that approximately $4,250,000 could be placed in Government bonds.
This may be summarized as follows:
Additional
Bond Cash
Lessing J. Rosenwald
William Rosenwald
Marion R. Ascoli
Adele R. Levy
Edith R. Stern and
Edgar B. Stern
-
Government Bonds ?
-
$ 2,200,000
1,400,000
2,200,000
$ 1,400,000
750,000
250,000
$ 6,550,000
$ 4,250,000
900,000
1,700,000
In addition to the above, there are other accounts in the office
which could make additional purchases of Government bonds. This would include
the Rosenwald Family Association if it were not decided to use the cash for
ther purposes.
I have not discussed this proposal with any other members of the family
though I expected to do so in the near future with respect to the question as
whether or not the bond balances should be retained in cash or whether or not
should continue to use the cash for municipal and state bonds. Dr. Edie and
both feel that it would be very desirable from many points of view to make
further purchases of state or municipal bonds, but to hold this cash for
esent or later investment in governments, especially if the Government put on
campaign to obtain funds from large investors. We realize of course that net
income on these bonds after taxes would be nominal.
I think you will be interested in the attached memorandum from
Mr. Juncker to me regarding subscriptions to War Bonds at a recent rally.
Edgar Stern pledged a total of $30,000 at this rally and Benay Deutsch $1,000.
Mr. Lessing J. Rosenwald
April 24, 1942
-3-
After all the trouble and expense of the rally and the contribution of
various people of their time and effort to stimulate the purchase of
War Bonds, apparently no record at all was kept of the pledges that were
made nor any mechanics for following through on the subscriptions. To say
the least it seems to me this was an awfully sloppy way in which to handle
these important matters. I am calling it to your attention in case you may
want to mention it to Mr. Morgenthau if you speak to him on the subject of
War Bonds.
I have not replied to Mr. Morgenthau's form letter of March 20 and
will await your suggestions as to whether or not any action should be taken.
If you need any additional information, please get in touch with me. I would
like very much to hear from you if and when you discuss this matter with
Mr. Morgenthau so that I may plan accordingly.
With kind regards, I am
ruly yours,
No hever
nwl h
enclosures
231
MAY 14 1942
Dear Harold:
Thank you very much for your letter of May 11,
commenting upon the material which we recently sent
out to companies and firms having the payroll allotment plan for the purchase of War Bonds.
I am very hopeful from the results thus far,
that the voluntary plan for the sale of savings
bonds to the people will be so well received that
it will never become necessary to consider seriously
the abandonment of this plan in favor of a scheme of
forced savings.
The payroll allotment plan for Federal agencies
will, I am told, be ready for circulation next Monday.
Your interest in this important program is much
appreciated.
Sincerely,
(Signed) H. Morgenthan, Jue
Hon. Harold L. lokes,
Secretary of the Interior.
HNG:fns
give mc.
Copies to Houper
232
THE SECRETARY OF THE INTERIOR
WASHINGTON
MAY 11 1942
My dear Henry:
I have read with interest the letter and the leaflet which you have
sent to 20,000 industrial plants having the payroll deduction plan on
Defense Savings Securities, copies of which you enclosed with your note to
me under date of April 25.
All of us of course would like to see a big portion of the war cost
paid out of voluntary bond and stamp sales. There is a question in my mind,
however, as no doubt there is in yours, as to how far or for how long we
could expect salary and wage earners to finance the war through systematic
payments made of their own volition. I make this observation without mean-
ing to reflect in the slightest on the will, the ability, or the patriotism
of the American people. There is nothing that we won't do as a people or as
individuals to win this war, but a little pressure here and a little there
is inevitably necessary to maintain a well-balanced victory drive.
Your statement that the per capita employee participation based on the
records of 50,000 pay rolls is $7.50 for 45 percent of the workers is especial-
ly interesting to me when brought into comparison with Department of the Interior figures of $8.41 per capita for 72 percent of the employees in Washington
alone. An audit by bureaus, to determine field participation as well, is being
made and will show that this Department as a whole is well over the $1,000,000
mark for the seven-month period beginning in September 1941.
You can rely on me for the fullest cooperation in the present campaign
among the 50,000 employees of this Department and in the inauguration of the
pay roll deduction plan when it is ready for installation in the Executive
Departments.
Sincerely yours,
Secretary of the Interior.
Hon. Henry A. Morgenthau,
Secretary of the Treasury.
87.0%
93.4
93.1
94.5
101.9
Quota
Sales
:
108.3
108.4
109.4
105.1
103.2
as & of
to Date
:
May 13. 1942.
to
77.3
41.7
94.9
120.3
Date
CONFIDENTIAL
May 1
144.3
167.3
186.0
239.2
221.6
264.6
311.6
288.6
383.5
365.9
330.3
408.8
432.8
455.8
474.5
510.1
527.7
$ 23.0
Quota,
553.0
577.0
600.0
:
Total
to
39.4
72.0
88.6
Date
122.6
May 1
157.9
201.5
181.4
232.8
246.8
$ 20.0
Actual Sales
19.4
32.6
16.6
34.0
89.2
98.0
35.3
23.6
31.3
20.0
14.0
Daily
$ 20.0
86.4
95.0
81.1%
97.0
Quota
Sales
to Date
:
95.4
87.7
90.0
100.8
as % of
:
to
16.0
37.1
29.5
49.8
69.3
60.3
89.8
76.3
97.4
Date
110.1
120.6
129.6
136.6
150.1
170.3
157.7
180.8
May 1
189.8
196.8
210.3
217.9
230.5
241.0
250.0
$ 9.0
Quota,
:
:
15.2
33.1
25.5
to
48.8
60.8
15.6
12.1
67.2
72.8
80.8
85.4
Series F and G
Date
May 1
$ 7.3
7.9
Actual Sales
7.6
6.4
5.6
8.1
4.6
116.5
117.3
115.3
113.8
109.7
131.8
141.8
128.7
152.0
161.3
23.3
From May 1 through May 12, 1942
10.3
Daily
$ 7.3
SALES OF UNITED STATES SAVINGS BONDS
:
(At issue price in millions of dollars)
Compared with Sales Quota for Same Period
90.7%
94.6
97.3
96.0
Sales
Quota
to Date
104.7
115.5
as % of
:
to
25.7
47.8
57.8
70.5
84.0
98.0
Date
May 1
154.5
168.0
182.0
193.7
215.8
225.8
238.5
252.0
266.0
277.7
299.8
309.8
22
23
25
26
322.5
336.0
350.0
27
28
29
Quota,
$ 14.0
:
:
Series E
24.3
to
46.5
55.5
73.8
97.0
114.2
Date
May 1
$ 12.7
Actual Sales
8.9
11.6
22.3
9.4
18.4
23.2
17.2
14.5
7
8
9
Daily
$ 12.7
1
2
4
in 6
5
11
Date
12
13
14
15
16
18
20
21
Source: Actual sales figures are deposits with the Treasurer of the United States on account of proceeds of sales of
Office of the Secretary of the Treasury, Division of Research and Statistics.
United States savings bonds. Figures have been rounded and will not necessarily add to totals.
94.5
87.0%
93.1
93.4
101.9
Quota
Sales
109.4
108.3
108.4
105.1
103.2
102.6
as % of
:
:
:
May 14, 1942.
to
77.3
41.7
94.9
144.3
120.3
Date
167.3
221.6
186.0
239.2
264.6
311.6
288.6
365.9
330.3
408.8
383.5
432.8
455.8
474.5
510.1
$ 23.0
May 1 : to Date
Quota,
527.7
553.0
577.0
600.0
CONFIDENTIAL
:
:
:
Total
to
39.4
88.6
72.0
Date
122.6
May 1
157.9
201.5
181.4
271.5
246.8
232.8
$ 20.0
:
:
Actual Sales
19.4
32.6
16.6
34.0
89.2
98.0
23.6
20.0
31.3
14.0
24.8
97.0
95.4
90.0
87.7
85.7
76.3
89.8
97.4
35.3
Daily
$ 20.0
:
:
:
81.1%
Sales
95.0
86.4
Quota
to Date
100.8
as & of
:
:
to
16.0
29.5
37.1
49.8
60.3
69.3
Date
Quota,
May 1
:
:
110.1
120.6
129.6
136.6
150.1
157.7
170.3
180.8
189.8
196.8
210.3
217.9
230.5
241.0
250.0
$ 9.0
:
:
to
15.2
Series F and G
25.5
33.1
48.8
60.8
67.2
72.8
80.8
85.4
94.4
Date
May 1
$ 7.3
From May 1 through May 13. 1942
Sales of United States Savings Bonds
Actual Sales
7.6
7.9
(At issue price in millions of dollars)
10.3
Compared with Sales Quota for Same Period
Daily
15.6
12.1
104.7
115.5
6.4
5.6
8.1
4.6
116.5
117.3
115.3
113.8
9.0
$ 7.3
:
90.7%
94.6
97.3
96.0
Quota
114.6
to Date
as % of
:
: Sales
to
25.7
Date
Quota,
47.8
57.8
70.5
84.0
98.0
May 1
109.7
131.8
141.8
154.5
114.2
128.7
152.0
161.3
177.1
23.3
168.0
182.0
193.7
215.8
225.8
238.5
252.0
266.0
277.7
299.8
309.8
322.5
336.0
350.0
22
23
25
26
27
28
29
$ 14.0
:
:
Series E
to
24.3
46.5
55.5
73.8
97.0
Date
May 1
$ 12.7
Actual Sales
8.9
11.6
Daily
22.3
9.4
18.4
23.2
17.2
14.5
6
7
8
9
15.8
48.
$ 12.7
1
2
4
5
11
12
13
14
15
16
is
9
20
21
Date
Source: Actual sales figures are deposits with the Treasurer of the United States on account of proceeds of sales of
Office of the Secretary of the Treasury, Division of Research and Statistics.
United States savings bonds. Figures have been rounded and will not necessarily add to totals.
235
Sales of Treasury Notes - Tax Series A and Tax Series B
August 1941 to April 1942
Classified by denomination
(Par amounts in millions of dollars - As reported
by the Federal Reserve Banks)
Series and
denomination
:: Dec.
Aug. :
Jan.
Feb.
Mar.
Apr.
.2
.2
.2
.2
.2
Total
Tax Series A
$25
50
100
500
1.8
2.5
.4
38.2
4.1
*
.5
5.4
4.6
61.9
.5
.5
1.1
.9
5.5
12.6
122.7
448.2
.3
.3
3.3
2.7
.3
.6
.6
1.0
.5
.9
42.5
6.1
3.3
3.6
8.7
.6
:30
.6
34.0
10.9
33.4
74.5
31.5
80.0
10.6
39.7
108.2
34.5
62.0
1,301.0
1,000
Total-Tax Series A..
.9
2.6
3.7
50.3
1.9
3.4
2.0
Tax Series B
$100
500
1,000
10,000
100,000
82.7
1.3
12.1
6.4
23.2
1,048.0
39.8
71.8
19.0
77.0
Total-Tax Series B.. 2,444.2
221.6
124.7
231.9
256.4
3,278.8
Total-Both Series
227.7
128.0
237.3
261.0
3,340.7
500,000
1,000,000
312.1
817.6
171.5
2,486.7
48.7
11.5
Office of the Secretary of the Treasury,
Division of Research and Statistics.
$500 and $1,000 denominations not sold prior to
January 1942.
1,120.8
268.0
May 14, 1942.
236
Classification by Type of Purchaser of the Sales of Treasury Notes
Tax Series A and Tax Series B
August 1941 to April 1942
(Par amounts in millions of dollars - As reported
by the Federal Reserve Banks)
Type of purchaser : Tax Series : Tax Series :
A
B
:
:
:
and month
Total
Individuals 1
August - December
January
36.3
5.4
142.5
178.8
60.7
66.1
26.7
April
4.9
4.2
23.8
23.9
33.0
Total
53.7
283.9
337.6
6.2
2,301.7
2,307.9
January
.7
160.9
February
.4
March
.5
100.9
208.0
April
.4
223.4
161.6
101.3
208.5
223.8
Total
8.2
2,994.9
3,003.1
42.5
2,444.2
2,486.7
221.6
227.7
February
6.1
3.3
124.7
128.0
237.3
April
4.6
256.4
261.0
61.9
3,278.8
3,340.7
February
March
Corporations
August - December
2.9
28.8
37.2
Total sales
August - December
January
March
Total
5.4
231.9
Office of the Secretary of the Treasury,
Division of Research and Statistics.
1 Includes partnerships and fiduciaries.
May 14, 1942.
237
May 14, 1942
MEMORANDUM FOR THE SECRETARY:
A Supertax on Individual Incomes
Above $25,000
Individual incomes, after taxes, could be limited
to $25,000 by a 100 percent supertax on net income
remaining after the regular income tax. The personal
exemption for this purpose would be $25,000.
The supertax would not affect persons whose
incomes before deductions did not exceed about $60,000
under the Treasury proposed rates or $40,000 under
present rates.
The tax is estimated to yield $211.8 million
(over and above the revenue from the Treasury proposed
rates) from approximately 17,000 persons if joint
returns are mandatory and $174.3 million from approximately 15,000 persons if separate returns are permitted.
The effective application of such a tax would raise
a number of problems.
1. Definition of the taxpayer
(a) Under the present option to file separate
returns, every member of the family would be allowed
$25,000. If joint returns were mandatory, the husband
and wife would together be limited to $25,000, but each
child could receive an additional $25,000. This could
be prevented by making consolidated returns mandatory
for the whole family for purposes of both the income
tax and the supertax.
(b) At present, trusts and estates are in some
cases subject to the individual income tax, regardless
of the number of beneficiaries and the income of each
from other sources. The application of the $25,000
limit to trusts and estates would work serious injustice,
particularly in the case of beneficiaries whose total
238
-2income (including their share of the trust) is relatively small. The exemption of trusts and estates,
on the other hand, would permit tax avoidance.
(c) The individual income tax now applies to
proprietorships and partnerships. The application
of the $25,000 limit to these groups would interfere
with business incentives and encourage wasteful
expenditures. A possible solution is noted in 2(d)
below.
2. Definition of taxable income
(a) A $25,000 limit would aggravate the problem
of defining taxable income. Defects which can be
tolerated under the income tax would be magnified
under the supertax, and in some cases could defeat
the whole purpose of the tax.
(b) To prevent avoidance by the conversion of
ordinary income into capital gains, taxable income
could not exclude such gains. The inclusion of gains
would encourage the taking of losses and the postponement of the realization of gains and, therefore, would
lead to an artificial market.
(c) The supertax would encourage the retention
of profits by corporations unless provision were made
for the taxation of undivided profits either to the
corporation or to the stockholders. Section 102,
which now imposes a penalty on corporations improperly
accumulating surplus, could be implemented to prevent
the more glaring evasions.
(d) The application of the supertax to unincorpo-
rated business would prevent the accumulation of
reasonable surpluses for normal capital growth and
business contingencies. The option of incorporation
offers little relief. The supertax could be confined
to owners' withdrawals from the business, with provision
for reasonable surplus accumulations.
239
3-
(e) The application of the supertax to State and
local interest would amount to the taxation of such
interest under the regular income tax. In the absence
of similar treatment of wholly-exempt Federal securities, present holders would enjoy a windfall, either
in the form of exemption from the supertax or in the
form of capital gains, resulting from the sale of
their securities to those subject to the supertax.
(f) For all those subject to the supertax some
charitable contributions would be costless; they would
be made at Government expense. Unless such contributions were limited (for example, to amounts contributed
in preceding years) the resulting income tax revenue
loss might exceed the yield of the supertax.
(g) Since State income taxes are deductible in
arriving at taxable income, States could increase their
tax rates applicable to the upper income brackets at
the expense of the Federal Government, without burden-
ing their residents. The limitation of deductions to
taxes due under laws in effect on January 1, 1942, may
be desirable.
(h) Special provisions would be required to prevent abuse of pension trust devices and depletion allowances and to minimize injustice to persons receiving
high incomes for services rendered over a period of
years.
3. Relief for fixed commitments
The supertax would make it difficult for some
individuals to meet such fixed commitments as life insurance premiums, mortgage amortization, non-business
leases, contributions pledged to charity, subscriptions
for stock, instalment purchases of business property,
and obligations to make payments for alimony, support
of relatives, and for annuities to servants.
The case for granting special relief for fixed
commitments is weak. Present law permits interest on
debt to be deducted in computing taxable income; therefore, those subject to the supertax could refinance
their fixed commitments without a net interest cost to
themselves. The problem of heavy insurance premiums could
be met by the rearrangement of insurance contracts. To
cases of real hardship, a Government lending agency could
be authorized to extend credit facilities.
240
MAY 14 1942
Dear Mr. President:
In accordance with the request
in your personal and confidential memorandum to me of May 7, 1942, with respect
to the Chicago Tribune matter, I am
enclosing a memorandum and a summary
thereof stating the facts. The memorandum concludes that the implications
of impropriety are without foundation.
Faithfully yours,
(Signed) R. Morgenthan,
Secretary of the Treasury.
The President,
The White House.
Enclosure.
File Please nmc
HC/fn
5/11/42
Delivered by 6.5.agent 3:20