The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
241 SUMMARY OF MEMORANDUM ON CHICAGO TRIBUNE REFULD The attached memorandum, based primarily on the file record of the case, concludes that the implications of impropriety in its handling are without foundation. The Chicago Tribune imported newsprint paper which was entitled to free entry, if it possessed the characteristics of paper chiefly used in the printing of newspapers at the time of the passage of the Tariff Act of 1930. The Bureau, after investigation of independent sources, found that at that time there was in such use a class of newsprint paper having an ash content ranging from 2% to 6-1/2%. It accordingly modified a previous finding that the ash content of free newsprint paper did not exceed 2% and directed refunds in the amounts of $79,072.64 and $87,627.18 to be paid the Tribune Company. Exceptions to this action were taken by the General Accounting Office on procedural grounds and did not impugn the finding on ash content. The 242 2- exceptions raised questions of law which were fully considered in conference by the Chief Counsel of Customs, the Assistant General Counsel in charge of Customs, and the General Counsel of the Treasury and were held to be without substance. The refund was accordingly paid. On January 23, 1942, an employee of the General Accounting Office intimated that someone in the Bureau of Customs had been improperly influenced in the matter and that he intended to cause court action to be instituted in the case, if possible. Such court action could be taken only by the Department of Justice. The Attorney General has advised the Treasury Depart- ment in a formal opinion that the Comptroller General is without jurisdiction to review the acts and decisions of the Secretary of the Treasury and the Collectors of Customs in the performance of their statutory duties. Recently two newspaper men have inquired about a scandal connected with a refund paid to the Chicago Tribune. They were assured that there was no scandal and the case was outlined to them. HC/fn 5/11/42 243 MEMORANDUM Chicago Tribune Refund The following extract from a letter was communicated to the Secretary by the President for investigation on May 7, 1942: "I understand that within the last two years, the Customs Bureau picked up an item running well over a million dollars in additional pulp tax due by the Chicago Tribune on the importation of pulp paper which had not come up to the grade permitted under the free importation provisions. what happened in the Customs, according to my tale, sounds at least a little screwy. As a matter of fact, I understand that the Regulations or the Law were later fiddled with to purge the Chicago Tribune situation. This latter information I cannot vouch for, but that there is something to look into I am confident. I thought you might want to pass it along. If I pass it along, it will probably die because it would get into the very hands of the people who might have acted with less than propriety." (1) An examination of the file discloses that on July 22, 1939, the Collector of Customs at Chicago submitted to the Bureau of Customs for decision the question whether newsprint paper containing more than 2% ash content was "standard newsprint paper" within the meaning of paragraph 1772 of the Tariff Act of 1930, 244 -2and as such, entitled to free entry. The paper had been imported by the Chicago Tribune and was entered for consumption at the Port of Chicago. The Collector was of the opinion that the paper was entitled to free entry. (2) Title II, sec. 201, par. 1772 of the Tariff Act of 1930 provides that "standard newsprint paper", when imported into the United States, shall be exempt from duty. The phrase "standard newsprint paper" first appeared in the Tariff Act of 1922, and the Secretary of the Treasury, for the purpose of carrying out the provisions of the Act, provided a series of tests and standards for determining what standard newsprint paper was. T.D. 39778, T.D. 40996, T.D. 44317, T.D. 45128, T.D. 45418(4), and T.D. 49874. This practice (but not the particular tests and standards) was approved by the United States Customs Court of Appeals. T.D. 43358. One of the standards so established was that the ash content should not be more than 2%. T.D. 40996. (3) In response to the Chicago Collector's request for a ruling, the Bureau held, by letter dated 245 -3August 10, 1939, that because the merchandise under consideration had an ash content in excess of 2% it was not entitled to free entry under paragraph 1772. (4) The matter was re-opened in November, 1939, by counsel for the Tribune Company and by counsel for the Import Committee of the American Paper Industry. A statement was submitted by these counsel asserting that from time to time newsprint paper has been made with fillers producing an ash content ranging from 2 to 7% and that the chief use of such paper has been for newspapers. The statement also asserted that at least one donestic mill in 1930 and the years immediately prior thereto manufactured newsprint paper with an ash content of approximately 6 to 6-1/21, and that such paper was used almost solely for printing a newspaper. The will referred to was identified as that of the International Paper Company, located at Livermore Falls, Maine. The paper was developed specially for the New York Daily News, but was subsequently sold in comparatively small quantities to other New England 246 newspapers for special purposes. As an independent check, the Bureau of Customs consulted the Public Printer, who confirmed that the ash content of newsprint paper manufactured by the International Paper Company for the New York Daily News and other news- papers (including Christian Science Monitor, Boston Post, and Atlanta Constitution) prior to 1930 had an ash content ranging from 3.3% to 8.2% Copies of the New York Daily News for March 1, 1930, and April 1, 1930, were analyzed by the chief chemist of the Customs laboratory in New York. His analysis showed that the ash content ranged from 4.48% to 5.95% (5) On November 29, 1939, the following anonymous telegram, addressed to the Commissioner of Customs and signed "A Publisher", was received: "HAVE YOU ASKED THE MANAGER OF THE AMERICAN PAPER ASSOCIATION WHY HE AND HIS CUSTOMS EXPERTS HAVE NEVER REPORTED TO YOU OR ANY OTHER OFFICER AS TO THE NEWSPRINT NOW BEING IMPORTED BY THE CHICAGO TRIBUSK AND THE NEW YORK NEWS AND HAVE YOU HAD TOUR CHEMISTS EXAMINE IT (6) On March 19, 1940, the Commissioner of Customs stated, in a letter to the Collector at 247 -5Chicago, that after a careful consideration of the entire record the Bureau was satisfied that at the time of, and immediately prior to, the passage of the Tariff Act of 1930 a class of newsprint having an ash content ranging from 2% to 6-1/2%, but conforming in all other respects to the specifications for standard newsprint paper as published in the Treasury Decisions cited in paragraph (2) hereof, was chiefly used in the printing of newspapers. The Commissioner, there- fore, ruled that newsprint having an ash content up to 6-1/2%, but conforming in all other respects to the specifications of standard newsprint paper, as previously defined, was entitled to entry free of duty under paragraph 1772 of the Tariff Act. This ruling was published as T.D. 50120(4). (7) In a letter dated May 11, 1940, the Chicago Collector of Customs advised the Commissioner of Customs that exceptions had been taken by the Investigator in Charge, Customs Field Audit, General Accounting Office, against the liquidation and reliquidation of the importation of standard newsprint paper which had been the subject of the Bureau's 248 6 ruling of March 19, 1940. The Collector stated that two checks in refund were drawn on April 30, 1940, in the sum of $79,072.64 to cover refunds under liquida- tion, and $87,627.18 covering re-liquidations. Because of the exceptions, the Collector retained possession of both checks. The Collector enclosed a memorandum from the Investigator in Charge, General Accounting Office, setting forth the grounds of his exceptions. (8) The exceptions involved matters of law and were referred to the Legal Division of the Treasury Department for study. The exceptions did not go to the merits of the case, but involved questions of procadure. That is to say, the General Accounting Office did not question the findings of the Bureau with respect to the ask content of newsprint in use immediately prior to the passage of the Tariff Act of 1930, but questioned the authority of the Department to authorise the liquidations and re-liquidations. The exceptions were considered in conference by the Chief Counsel of Customs, the Assistant General 249 Counsel in charge of Customs, and the General Counsel of the Treasury Department, and were held to be without substance. Accordingly, a telegram, signed by the Asting Secretary of the Treasury, was sent to the Chicago Collector instructing him to release both checks to the Tribune Company. A letter, signed by the Acting Secretary of the Treasury, was also sent to the Collector setting forth the grounds upon which the Department felt obliged to disregard the exceptions. A copy of this letter was also sent to the Investigator in Charge of the General Accounting Office. This action apparently closed the matter. (9) At the beginning of the year 1942, the Assistant Secretary of the Treasury in charge of Customs and the Assistant General Counsel of the Treasury in charge of Customs had a conference with the Comptroller General. For some time past, correspendence between the General Accounting Office and the Treasury Department, relating to Custons matters, had been marked by an acerbity which it was thought wise to eliminate, if possible. It was agreed at the conference 250 -8with the Comptroller General that steps looking to that end should be taken. Accordingly, a further conference was held on January 23, 1942, attended, on behalf of the Treasury Department, by the Assistant General Counsel in charge of Customs, the Commissioner of Customs and one of the latter's assistants. Two employees of the General Accounting Office, but not the Comptroller General, attended the conference. During the conference, the Chicago Tribune case came up and one of the officials of the General Accounting Office intimated that some one in the Bureau of Customs had been improperly influ- enced in the matter. He stated that he intended to cause court action to be instituted in the case, if possible. The results of the conference, including the intimation of improper influence, were reported to the Assistant Secretary in charge of Customs and the General Counsel for the Department of the Treasury. There have been two inquiries from newspaper- men on the matter. About two weeks ago, the head of the Washington Bureau of the Chicago News said that he -9 - 251 had a message from his office asking him to inquire about a story that there was a scandal connected with a refund in a large amount, said to be a million dollars or more, to the Chicago Tribune on imports of newsprint and that the PUMOR was that a Civil Service official of the Bureau of Customs had been "reached". He was assured that there was no scandal connected with the matter and the case was outlined to him. A few days later there was a quite similar inquiry from a Washington columnist who was given the same information. Conclusion It appears from the file record that the implications of the communication quoted at the beginning of this memorandum are without foundation. Any court action contemplated by the General Account- ing Office could be instituted only by the Department of Justice. The Attorney General has advised the Treasury Department that the Comptroller General - 10 - 252 has no authority to review determinations of Collectors of Customs with respect to quantity, value and classi- fication of imported merchandise, or the duties appli- cable thereto, affecting the liquidation of import entries, or to review the acts and decisions of, the Secretary of the Treasury and the Collectors of Customs in the performance of their statutory duties. Op. No. 131, vol. 39, June 24, 1940. HC/fn 5/11/42 THE WHITE HOUSE WASHINGTON May 7, 1942. PERS IAL AND CONFIDENTIAL EL.ORANDUM FOR H.M.Jr. A good friend of mine sent me the following: "I understand that within the last two years, the Customs Bureau picked up an item running well over a million dollars in additional pulp tax due by the Chicago Tribune on the importation of pulp paper which had not come up to the grade permit under the free importation provisions. What happened in the Customs, according to my tale, sounds at least a little screwy. As a matter of fact, I understand that the Regulations or the Law were later fiddled with to purge the Chicago Tribune situation. This latter information I cannot vouch for, but that there is something to look into I am confident. I thought you might want to pass it along. If I pass it along, it will probably cie because it would get into the very hanos of the people who might have acted with less than propriety." Would you have someone you trust look into it and let me know? F.D.R. 254 May 13, 1942 Telegram received from Mr. L. A. Warren, President, Safeway Stores, Inc. In accordance with request for daily report, sales Saturday May 9th show no significant trend attributable to general maximum price regulation. 255 May 14, 1942. Harold Graves and Norman Thompson Secretary Morgenthau I wish you would look over the various teletypes we have, particularly in Customs. I know we have some that we do not even use at a $10. minimum. It seems to me. we might take some of these and put them in the 10 most important States for War Bonds. Please make a quick study of this situation. For instance, I know at Nogales, they practically never use the tiletype, and maybe in other @epartments of the Treasury, there are teletypes. We ought to be able to pick up 10 teletypes within the Treasury and assign them to the War Bond Section for the 10 key States at once. Please report to me on this without any undue delay. See Thompson's memo TREASURY DEPARTMENT 256 INTER OFFICE COMMUNICATION DATE May 14, 1942. TO Secretary Morgenthau FROM Mr. Thompson Mr. Irey has arranged for the release of ten teletype machines from the following offices: Secret Service: Atlanta, Ga. Philadelphia, Pa. Fort Hunt, Va. Chicago, Ill. Customs: Nogales, Aris. Bottineau, N. D. St. Paul, Minn. San Pedro, Calif. San Ysidro, Calif. Narcotics: Houston, Tex. Mr. Graves has been notified of the above, and his Staff is arranging for the transfer of the machines to the principal field offices of the Savings Bond organization. The O.K. I'm M . 257 5/14/42 OFFICE FOR EMERGENCY MANAGEMENT For the current fiscal year (1942), funds available to the Office for Emergency Management aggregate $190,500,000. This includes a direct appropriation of $121,500,000 to "Salaries and Expenses, Office for Emergency Management", and allocations from the President's Emergency Fund and other sources of $69,000,000, or a total of about $190,500,000. (See statement attached.) According to the printed budget, $4,326,000 of the $121,500,000 directly appropriated is allocated to the Office of Liaison Officer (Mr. Wayne Coy), who heads the central administrative office of the Office for Emergency Management. An 258 OFFICE FOR EMERGENCY MANAGEMENT APPROPRIATIONS, ALLOCATIONS AND CONTRACT AUTHORIZATIONS FOR SALARIES AND EXPENSES, FISCAL YEAR 1942 Direct appropriations: Public Law 150 7/3/41 (Second Deficiency) 1942 2nd Sup. 282 10/28/41, 1942 3rd Sup. 353 12/17/41, 1942 3rd,Sup. 353 12/17/41, 1942-43 Total appropriations $36,500,000.00 10,000,000.00 13,012.00 75,000,000.00 121,513,012.00 Allocations from Emergency Funds for the President: 1 Unexpended balances, 1940-42 Public Law 28 4/5/41 (I.O. Appn. Act, 1942) 1942 Public Law 353 12/17/41 (3rd Sup.) 1942-43 8,289,198.24 13,119,834.00 23,607,472.00 Defense Aid: Unexpended balances 89,961.68 889,604.00 Allocations Total allocations Contract authorisations: 45,996,069.92 Public Law 150 7/3/41 Public Law 28 4/5/41 3,000,000.00 20,000,000.00 Total contracts 23,000,000.00 GRAND TOTAL AVAILABLE 190,509,081.92 1 Determination of availability for salaries and expenses requires analysis of allocation letters. 259 MAY 14 1942 Dear Mr. Somere: Further reference is made to your letter of April 27, 1942, relative to H. J. Res. 295, "Providing for the procurement of raw natural rubber from sources in the Western Hemisphere". The Treasury Department recommends against enactment of the measure in its present form in view of the appropriation provision in section 1, which authorises the sum of $250,000,000 to be appropriated "out of any unexpended amounts of the stabilization fund established by section 10 of the Gold Reserve Act of January 30, 1934, or out of the gold reserve established by section 2 of the Cold Reserve Act of January 30, 1934". This Department feels that the contemplated plan should not be financed with funds now comprising the Stabilisation Fund, which was established by Act of Congress on January 30, 1934, and extended by subsequent acts of Congress specifying definite periods for its continuation. The Stabilisation Fund is a potent instrument in facilitating the solution of the complex international economic problems with which we are now confronted and can perform a great service in the promotion of general economic recovery in the post-war period. In view of the present critical international situation and the value of the Stabilization Fund in such periods, the Treasury Department recommends against depletion of the fund in the manner contemplated by H. J. Res. 295. The Treasury Department also recommends against the alternative provision of the authorisation to appropriate funds out of the "gold reserve established by section 2 of the Gold Reserve Act of January 30, 1934". Since all the gold held by the Treasury (with the exception of approximately $24,000,000 in the Treasurer's working balance) is already allocated for specific purposes, an appropriation of any portion of such gold would require a general appropriation to reimburse the gold account so charged, or would operate to change the structure of the monetary reserves of the country which the Treasury Department deems inadvisable for the purpose specified. 260 -2The foregoing views of the Department are not intended to reflect any opposition to appropriate legislation designed to increase our supplies of raw natural rubbor. However, the Department believes that such legislation should contain appropriation provisions of the same general character as those regularly incorporated in legislation providing for the procurement of strategic materials. In view of the need for expedition, it has not been possible to secure Budget clearance of this report. Very truly yours, (Signed) a. Morgenthan. and Secretary of the Treasury. Honorable Andrew L. Somers, Chairman, Committee on Coinage, Weights, and Measures, House of Representatives, Washington, D. C. Photofree n.m.c. PHinlf 5-9-42 (Original ant to Mr. miling) SEVENTY SIXTH CONGRESS M Y.. House of Representatives .. . Committee on Coinage, Wrights, and Measures Washington, D.C. April 27, 1942. Honorable Henry Morgenthau, Jr., Secretary of Treasury, Washington, D. C. My dear Mr. Morgenthau; closed is A copy of H.J. Res.295 which is before this Come ttee for consideration. The Committee would very much appreciate a report from your Department on this legislation.It is quite likely that the Commitee will consider the Resolution next Monday or Tuesday. Sincerely yours, Andrew L. Somers, Chairman. SEA LAUISIATIVE 262 77TH CONGRESS 2p SESSION H. J. RES. 295 IN THE HOUSE OF REPRESENTATIVES MARCH 16, 1942 Mr. FADDIS introduced the following joint resolution; which was referred to the Committee on Coinage, Weights, and Measures JOINT RESOLUTION Providing for the procurement of raw natural rubber from sources in the Western Hemisphere. Whereas it is of the utmost importance that the United States supplement its supply of raw rubber in order to enable our workers to go to and from their daily work on our farms and in our mines and mills; and Whereas raw rubber would be of more practical value to the United States in time of this emergency than much of the gold we now hold; and Whereas there is raw rubber in South and Central America which can only be made available within a reasonable time by extraordinary effort; and Whereas there are in other parts of the world many persons who are acquainted with the acquisition and preparation of raw 2 rubber who can be organized and employed in exploiting the raw rubber in Central and South America: Therefore be it Resolved by the Senate and House of Representatives 1 2 of the United States of America in Congress assembled, 3 That there is hereby authorized to be appropriated, out of 4 any unexpended amounts of the stabilization fund established 5 by section 10 of the Gold Reserve Act of January 30, 1934, 6 or out of the gold reserve established by section 2 of the Gold 7 Reserve Act of January 30, 1934, the sum of $250,000,000 8 for the purpose of securing the services of, from whatever 9 part of the world they can be procured, persons having the 10 experience, physique, knowledge, and ability to bring into 11 the possession of the United States as much of the natural 12 rubber as is possible of the nations in Central and South 13 America with whom the necessary arrangements can be 14 concluded. 15 SEC. 2. That for the purpose of carrying out the provi- 16 sions of this joint resolution there shall be established under 17 the War Production Board a bureau for the procurement of 18 raw American rubber and that this Board be endowed with 19 all the powers necessary to carry out the provisions of this 20 joint resolution: Provided, That the chief of this bureau must 21 be a man who has been a successful producer of raw rubber 22 in the region of the East Indies, that the field forces of all 23 grades must be men who have had experience in the produc- 3 1 tion of raw rubber either in the East Indies or in Central or 2 South America. SEC. 3. There are hereby authorized to be appropriated, 3 4 out of any money in the Treasury not otherwise appropriated, 5 such sums as may be necessary to provide for the transpor- 6 tation, maintenance, rotation, and storage within the United 7 States or any of its Territories or possessions of any materials 8 acquired under the provisions of this joint resolution. 9 SEC. 4. The Department of State is hereby authorized and 10 directed to carry on whatever negotiations are necessary with 11 any foreign nation to assist in or to further the purpose of 12 this joint resolution. Treasury Department Division of Monetary Research 263 Date May 15 To: Secretary Morgenthau From: Mr. White 19 42 The original of this report is appended to prepared letter to the President. SECRET 264 May 14, 1942 Exports to Russia, Free China, Burma and other blocked countries, as reported to the Treasury Department during the ten-day period ending April 30, 1942 1. Exports to Russia Exports to Russia as reported during the ten-day period ending April 30, 1942 amounted to nearly $51,000,000 as compared with approximately $67,000,000 during the previous ten-day period. Motor trucks and land planes were the two principal items. (See Appendix C.) 2. Exports to Free China and Burna Exports to Free Ghina during the period under review amounted to about $2,827,000, of which military equipment accounted for more than ninety percent. (See Appendix D.) No exports to Burma were reported. 3. Exports to France No exports to France were reported during the period under review. 4. Exports to other blocked countries Exports to other blooked countries are given in Appendix A. Most important were exports to Switzerland and Sweden amounting to $223,000 and $155,000, respectively. ISF/efs 5/16/42 STRICTLY CONFIDENTIAL 265 INDUARY or - STATES REPORTS so - COUNTRIES AS REPORTED so - TREASURY REPARTMENT FROM EXPORT DURING SEE PHIION INVIGATION V July 28, 19a to Agent so, 1949. (In thousands of dollars) - July 28 Period ented April 20 to Period ended Appll TO Total $830,881 $66,880 180,988 www.ccc - China 65,832 8,335 2,837 13,008 June al 11,557 U. s. S. R. France y 6 Occupied France a Unoccupied France 28 6 - 18,196 - - 6 - - 2 - - as y 2.00 2,003 223 10,006 17,472 19 165 19,646 Peringal 8,488 258 a 8,795 Treath North Africa y 6,283 Spain 2,845 s Suitserland 7,690 Sunder y treasury Department, Avidica oz Memotary Research 6,283 May 12, 1/ Many of the export declarations are received with a lag of several days or more. Therefore this compilation does not assurately represent the actual shipment of a particular period. the Longer the period severed, the elocer will these figured come to Department of Commerce revised figures. a From September 11. 1942 to date - 10 is progned that a large percentage of material listed here, consigned to is destined for Free Pains. y Includes both Occupied and Uncomplet France through week ending October 4 19a. Occupied and Decompled France organized thereafter. y Includes Algoria, and Suita by bess them $800. JWhr1 5/12/42 SECRE APPENDIX B 266 Exporte from the U. s. to Free China, Burna and U.S.S.R. as reported to the Treasury Department July 28, 1941 - April 30, 1942 (Thousands of Dollars) Exports to Exports to Exports to Free China July 28 - Aug. 2 Aug. 4 - Aug. a Aug. 11 - Aug. 16 Aug. 18 - Aug. 23 Aug. 25 - Ang. 30 Sept. 2 - Sept. 6 Sept. 8 - Sept.13 Sept.15 - Sept.20 Sept.22 - Sept.27 Sept.29 - Oct. 4 Oct. 6 - Oct. 11 Oct. 13 - Oct. is Oct. 20 - Oct. 25 Oct. 27 - Nov. 1 Nov. 3 - Nov. 8 309 2,735 204 2,281 3,822 V/V 110 1,225 5,312 752 449 684 2,333 1,157 6,844 403 342 as 1,022 1,38 791 64 2,337 iii 18 1 196 8 2 35 1,073 Jan. 12 - Jan. 17 Jan. 19 - Jan. 24 Jan. 26 - Jan. 31 1,695 Feb. 10 - Feb. 20 Feb. 20 - Feb. 28 5/ Mar. 1 - Mar. 10 Mar. 10 - Mar. 20 Mar. 20 - Mar. 31 6/ 4,853 2,921 2,879 583 4,836 5.322 447 639 876,296 $11,083 Feb. 1 - Feb. 10 y Apr. 1 - Apr. 10 Apr. 11 - Apr. 20 Apr. 21 - Apr. 30 Total 323 5 269 Dec. 8 - Dec. 13 Dec. 29 - Jan. 3 Jan. 5 - Jan. 10 1,023 4,280 5,217 1 Nov. 10 - Nov. 15 Nov. 17 - Nov. 22 Nov. 24 - Nov. 29 Dec. 15 - Dec. 20 Dec. 22 - Dec. 27 U.S.S.R. 4,523 395 4,772 1,672 2,851 1,225 3,239 Dec. 1 - Dec. 6 Barna 3/ 6.938 923 1,054 5.633 4,552 2,677 3,581 2,436 3,609 12,040 4,580 1,829 3.993 8,247 5,874 9,608 13,315 26,174 28,119 23 8,058 90,958 $449,180 1. These figures are is part taken free copies of shipping manifests. 2. Figures for exports to Free China during these weeks include exports to Rangoon which are procused to be destined for Free China. 3. 4. It is presuned that a large percentage of exports to Darma are destined for Free China. Beginning with February 1 figures will be gives for 10-day period instead of week except where otherwise indicated. 5. 8-day period. 6. 11-day period. 1st/eru 5714742 Department, Division of Monetary Research May 14, 1942 SECRET 267 APPENDIX c Principal Exports free U. s. to U. s.s. a. as reported to the Treasury Department during the ten-day period April 30. 1942ending (Thousands of Dollars) e 50.958 TOTAL EXPORTS Principal Items: Motor trucks Landplanes - bonbardment Dried egg products Lard Landplanes - pursuit, intereeptor and fighter 6,424 4,800 3,037 2,275 1,930 sheets and stripe 1,841 1,792 1,761 1,757 1,633 Explosive shells and projectiles 1,231 1,223 Sausage, eanned Other aircraft parts and accessories Military tanks - medium Irea and steel Pork, eanned Military tanks - light Copper wire, insulated Aircraft engines Armor plate 966 962 844 Tires and inner tubes Steel bare Aircraft engine parts and accessories Diesel Barine engines Relief supplies - elothing Pork, pickled or salted Metallie cartridges Treasury Department, Division of Hometary Research Isflers 5/14/42 626 592 May 14,1942 SECRET 268 APPENDIX D Principal Exports from U. S. to Free China as reported to the Treasury Department during the ten-day period ending April 30, 1942 (Thousands of Dollars) TOTAL EXPORTS Principal Items: Military equipment Road rollers Auto replacement parts Medicinal chemicals Vitamines and vitasterols, n.e.s. Photographic apparatus and supplies $ 2,827 2,653 84 44 16 10 10 Treasury Department, Division of Monetary Research May 14, 1942 ISF/efs 5/14/42 269 May 14, take Files Mr. Districh with reference to w - of May s relating to the of 99 casee of gold bullies from the U.S.S.E. which was expected to arrive as angentia, nonfoundand, about Now 9. Mr. Groupine informed me today that the seviet School had received confirmation from Heason that this shipment was consigned to the Federal Reserve Beak of New Test and that 19 we incured w the Soviet coverement. 1 sectioned to Mr. Groupito that the Federal Reserve Bank of New Tools had cabled the State Beak of the U.S.S.R. relative to the payment of the express charges of $16,783.69 and that the state Beak had instructed the Federal to debit its account with this assent. (2) C 270 0 Y DEPARTMENT OF STATE WASHINGTON In reply refer to May 14, 1942 FD 893.51/7483 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses copies of telegram no. 556. dated May 13, 1942, from the American Embassy, Chungicing, China, transmitting a message for the Secretary of the Treasury from Mr. Adler. Enclosure: From Embassy, Chungking, no. 556, May 13. 1942. eh:copy 5-15-42 271 - 24, 19th Mr. Liven Mr. District will you please and the attached abile to the American Senten. "Yes from the Secretary of the is nick 272 Yes L. W. Gasaday American Lender, England From: The Secretary of the Treasury In answer to year No. 2297 of April so and No. 2614 of New 18. Assess already sent w airmail. Savings stamps are issued w the Postal Savings System and are nodeemable in each or accepted is payment for War Savings Dends at any time at United States Test offices. 5/14/48 273 TELEGRAM SENT PLAN NMC May 14, 1942 AMEMBASSY, LONDON (ENGLAND) 2157, Fourteenth FOR CASADAY FROM THE SECRETARY OF THE TREASURY QUOTE. In answer to your 2297 of April 30 and no. 2614 of May 13. Answer already sent by airmail. Savings stamps are issued by the Postal Savings System and are redeemable in cash or accepted in payment for War Savings Bonds at any time at United States Post Offices. HULL (FL) FD:FL:BM 274 C 0 P Y DEPARTMENT OF STATE WASHINGTON May 14, 1942 In reply refer to FD 845.51/222 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses a copy of despatch no. 490, dated April 27, 1942, from the American Consulate, Bombay, India, concerning in- formation requested by the United States Treasury regarding gold and silver position in India, as requested in telegram no. 133 of April 16, 1942, sent at the request of the Treasury Department. Enclosure: From Consulate, Bombay, no. 490, April 27, 1942. Copy bj:5-14-42 C 274 0 P Y DEPARTMENT OF STATE WASHINGTON May 14, 1942 In reply refer to FD 845.51/222 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses a copy of despatch no. 490, dated April 27, 1942, from the American Consulate, Bombay, India, concerning information requested by the United States Treasury regarding gold and silver position in India, as requested in telegram no. 133 of April 16, 1942, sent at the request of the Treasury Department. Enclosure: From Consulate, Bombay, no. 490, April 27, 1942. Copy:bj:5-14-42 275 C BY AIR MAIL 0 P AMERICAN CONSULATE Y Bombay, India, April 27, 1942 No. 490 SUBJECT: Information Requested by the United States Treasury Department Regarding the Goldsand Silver Position in India THE HONORABLE THE SECRETARY OF STATE, WASHINGTON. SIR: I have the honor to refer to the Department's telegram No. 133 of April 16 (1942) 7 PM, requesting certain information regarding the gold and silver position in India, data concerning the budgetary position of the Government of India, and various other economic information such as indices of production, foreign trade, and so forth. Very little of this information is available in published form and I accordingly addressed a letter to Sir James Taylor, Governor of the Reserve Bank of India, requesting that the Consulate be supplied with as much of this information as the Government of India might feel inclined to release. Sir James replied under date of April 25th as follows: "Will you please refer to your letter of the 25th, regarding the gold and silver position in this country? As you will appreciate, the Reserve Bank is merely the agent of the Govern- ment of India in all matters regarding silver. I should therefore have to obtain their approval before communicating any information beyond that contained in the ordinary published returns. I shall let you know as soon as I hear from them, but I have no doubt that they will agree to put as much information at your disposal as they can." Some time will undoubtedly elapse before a reply is received from the Government of India. It should also be pointed out that statistics of foreign trade are available only in a restricted form. Moreover, the compilation of a weekly telegram of this nature will be an extremely difficult task for this Consulate in its present understaffed condition. However, every effort will be made to supply the desired data but delays may result because of the foregoing reasons. Respectfully yours, Howard Donovan 102.1 HD-eag American Consul In quintuplicate to the Department by air mail Confirmation copy of the Department by sea mail Copy to the office of the Personal Representative of the President of the United States. New Delhi - Copy to Consulate General, Calcutta Copy:imc:5/19/42 276 C 0 P PARAPHRASE OF TELEGRAM RECEIVED Y FROM: American Legation, Tehran, Iran DATE: May 14, 1942 No. : 154 Informal agreement on financial matters has now been reached by Iranians and British along lines indicated in Legation's telegran 137 of May 3 with provision that the rial be pegged at 130 for selling and at 128 for buying, sterling exchange being free but dollar still controlled, with cross rate between the dollar and pound being maintained. Conversion of sterling into gold for Iranian purchases of dollars would be guaranteed by the British and it is also expected that forty per cent of unused sterling balances would be convertible into gold. The full text of the draft agreement has been sent to London by telegraph by the British Legation here with request for instructions concerning certain minor points which have not been fully agreed upon. It is the expectation that the new exchange rate will go into effect within a few days and that the formal agreement will be signed soon after. When the agreement has been signed it will be presented to the Majlis in open session, but no difficulty in obtaining ratification is expected by the Prime Minister. DREYFUS Copy:bj 5-16-42 COPY NO. 13 BRITISH MOST SECRET (U.S. SECRET) OPTEL No. 159 Information received up to 7 A.M., 14th May, 1942. 1. NAVAL Five of our motor torpedo boats and motor gun boats intercepted a large ship off BOULOGNE yesterday and an engagement onsued with her escort. An enemy torpedo boat was possibly torpedoed. One M.T.B. last seen pressing home her attack is prosumed lost and the other 4 ships returned to harbour damaged. The enemy ship is reported to have reached BOULOGNE. One of H.M. Minolayers arrived at MALTA on 10th and unloaded an important cargo. She was slightly drmaged by noar misses while in herbour but left again as planned. Two more British ships totalling about 8500 tons wore sunk in a further attack on 12/13 on the outward HALIFAX convoy. here other British ships and one Dutch, total tonnage about 16,000 reported torpedood in Western Atlantic between 10th and 12th. One small British ship damaged by aircraft and beached at SOUTHAMPTON on 12th. 2. MILITARY BURMA. The withdrawal of our forces ncross the CHINDWIN at SHWEGYIN was carried out in the face of greatly increased enomy pressure. We suffered severe losses in guns, armoured vehicles and mechanical transport. An attompt to envelop our forces was repulsed. 3. AIR OPERATIONS WESTERN FRONT. 13th. 3 Wellingtons bombed objectives in the RUHR. 13th/14th. 4 Hudsons and 2 Beauforts were sont to attack shipping off the Norwegian coast. In the AALESUND-STATLAND area a 6,000 ton ship which was ashore was hit and left a total wrock and a 5,000 ton ship TESLS hit and left listing heavily. LIBYA. 12th. 8 long range Kittyhawks and 4 Beaufighters intercepted 20 Ju 52's and 3 Mo 110's north of DERNA. 13 Ju 52's and 2 Me 110's were destroyed and the remaining 7 Ju 52's were either probably destroyed or damaged. 1 Bonufighter is missing. MALTA. Between 3.30 p.m. 12th and 2 p.m. 13th about 25 bombors with fighter escort attacked. Our fighters destroyed 5 enemy aircraft, probably destroyed 2 and damaged 4. 2 Spitfires wore lost, one pilot safe. BURMA. 12th. Four Fortresses bombed MYITKYINA. 13th. 4 Hudsons attacked AKYAB destroying 2 aircraft on the ground. 278 13 COPY NO. BRITISH MOST SECRET (U.S. SECRET OPTEL No. 165 Following is supplementary resume of operational events covering the period 7 - 14th May, 1942. 1. NAVAL 21 attacks were made upon enemy submarines during the wook, 10 by sur- face craft, 10 by aircraft and 1 by submarine. There was a resumption of U-boat attacks on convoy routes in Mid Atlantic and North of the CAPE VERDE ISLANDS. Shipping losses were again heavy. Out of 20 ships reported attacked by U-boats 9 are known to have been sunk. Losses during April so far reported were 105 ships, totalling 571,253 tons. About 38% of this tonnage was British and included 30 tankers of which 6 were British. This total although about 100,000 tons less than March was the 4th highest since the war started. U-boats accounted for about 70% mainly in the Western Atlantic. The tonnage of ships damaged by enemy action was also heavy. During the wook ending 13th May, 1,087 ships were convoyed. Imports into the United Kingdom by ships in convoy during the week ending 9th May amounted to 692,000 tons and included 110,000 tons of oil. It is reported that ADMIRAL SCHE (is at NARVIK where she will be joined by LUTZOW when the latter is worked up. Three ships totalling about 8,000 tons runched BENGHAZI, this is the smallest total for some weeks. 2. MILITARY RUSSIA. The German attack in the CRIMEA has succeeded to the extent that the Russians may be obliged to abandon the KERCH PENINSULA. In the KHARKOV sector, the Russian attack is being made in considerable strength. LIBYA. The enemy's tanks and armoured cars are still being kept for th most part east of the DERNA-MEXILI line. Axis strength is being steadily built up and although Hommol's forces are not yet at full establishment, he is probably sufficiently ready to undertake an offensive should the strategic situation domand it of him. BURMA In the North West the British troops from the MANDALAY area are now West of the CHINDWIN on the KALEWA-TAMU road. Owing to the low capacity of the ferry, nearly all the tanks and most of the guns had to be abandoned and destroyed. In the North East MYITKYINA and LUNGLING have fallen to the Japanese but Chinese forces still remain further South and one formation is reported to be advancing Northwards to try to recapture MYITKYINA. 3. AIR OPERATIONS WESTERN FRONT. Day - 91 Squadrons of fighters were employed in escort reaction to bomber operations and sweeps over enomy occupied territory. There was no by enemy fighters except on one day when one was destroyed. Night - Owing to unfavourable weather, only one attack was carried out by Bomber Command. The objective was WARNEMUNDE and the Heinkel factory there. 283 tons of H.E. and incendiaries were dropped. Severe enemy opposition from search- lights, anti-aircraft artillery, hight fighters and balloon barrage was met. In anti-shipping operations, it is estimated that about 60,000 tons of enemy shipping 2919 damaged in home and Norwegian waters. 238 sea mines were laid. MALTA. Air raids were again on a reduced scale. The total amounted to 24 bombers escorted by fighters some of then bomb-carrying. The enemy losses heavy mile our own were much lighter than previously, 4. EXTRACTS FROM PHOTOGRAPHIC AND INTELLIGENCE REPORTS ON RESULTS OF AIR ATTACKS ON ENEMY TERRITORY IN EUROPE ROSTOCK. In addition to the damage at the Hoinkel works and other indastrial plants alroady reported, recent photographs show that about 130 ccres of the old town including nearly 1,000 houses have been devastated mainly by fire. Ther are two other areas of destruction by fire outside the old town. A complete stoppage is reported of all war supplies to DENMARK via ROSTOCK-WADNEMENDE and the train ferry 279 -2COLOGNE. Photographs 6th show a locality not previously covered. Two large shope in the Citroon works have been gutted as well as the corner of a large shop in the Humboldt Deuts Motor Works. WARNEMUNDE. Photographs 9th show damage to Heinkel works assombly hall, aerodromos unserviceable, seaplane station damaged, direct hits on two large dock buildings, serious damage to railway station and extensive destruction among commercial and residential property. HAMBURG. The local press states that on the nights 3rd and 4th May, almos+ all bombs fell in densely populated residential districts. Photographs on 7th homeland show extensive damage in the harbour area as well. GENERAL. The ROSTOCK attacks have caused nervousness in all Baltic towns especially STETTIN where A.R.P. and defance measures have been strengthened. Occupied Territory - Direct hits on quays, dockyard buildings, railway communications, locomotive sheds, coking plants, oil depots, etc., during daylight attacks are confirmed by recent photographs of DUNKIRK, LS HAVRE, DIEPPE, ZEEBRUGGE, BRUGES and FLUSHING. 5. OPERATIONAL AIRCRAFT BATTLE CASUALTIES METROPOLITAN AREA British In the Air Bombers 28 Fighters 8 Coastal 5 Total 33 Probably Destroyed 3 Bombers 7 Nil Fightors 9 14 11 3 Total Damaged 5 Destroyed Enemy MIDDLE EAST (including MALTA British On the Ground In the Air Nil Bombers 4 1 Total 25 1 Fighters 21 One crow and 9 pilots are safe. Damaged Destroyed Probably Destroyed Enemy Bombers 34 23 Fighters 25 17 Miscellaneous 13 (includes Junkers 52) 72 28 7 3 Total 39 74 43 of the above totals, 13 were destroyed, two probably destroyed and five damaged by A.A. FAR EAST On the Ground 2 1 Nil 2 Fighters Others 1 Bombers In the Air 1 British and Allied Total 3 4 280 -3 Enemy Destroyed Probably Destroyed Fighters Miscellaneous 24 27 Total Damaged 3 5 3 Nil Nil 3 5 NOTE: No account is taken of enemy aircraft destroyed on the ground in any theatre or of British Naval Aircraft casualties. 6. HOME SECURITY Estimated civilian casualties for week ending 0600/13. Killed 24 Seriously wounded 57 281 SECRET NUMBER 31 COORDINATOR OF INFORMATION THE WAR THIS WEEK May 7-14,1942 CO D GOODSNO Printed for the Board of Analysts Copy No. 6 The of the Treasury V SECRET MAY 7-14, 1942 Coordinator of Information THE WAR THIS WEEK American sea and air forces lashed out at the Japanese this week in the northern reaches of the Coral Sea to win a victory in which they sank or damaged 21 naval vessels. Although Japanese naval units finally retired from the scene of the battle, the enemy has apparently continued the occupation of the Solomon Islands. Moreover, the availability of naval reinforcements makes it perfectly possible that the Japanese will shortly attempt to renew their forward movement in this area, possible prelude to an assault on Australia. In Burma continuing Japanese successes carried them northward to Bhamo and Myitkyina and effectively closed the last of the practicable alternative land routes from India to China. At the same time they drove up the Burma road into China and struck northwestward toward India, bombing Imphal and Chittagong. This simultaneous interest in three primary sectors of the war-Australia, China, and India-left some confusion in the minds of observers as to where the Japanese would strike the next serious blow. In the west the Germans launched an offensive action in the Crimea and claim to be moving rapidly on Kerch. Despite the impressive nature of this thrust, observers were inclined to believe it was still part of the process of "cleaning up" preliminary to the main offensive, rather than actually a part of that more ambitious drive. A recapitulation of this process during the past few weeks reveals that the Nazis have pretty well eliminated existing Russian salients and 1 SECRET SECRET now find themselves less than a hundred miles from Moscow. A current situation map prepared for this issue focusses attention on the somewhat limited accomplishments of the Harbor in the Solomon Islands. This may have been an operation aimed ultimately at the invasion of Australia itself, but the immediate purpose appears to have been the establishment of a secure base on the Japanese east flank, Russian winter offensive, and suggests the extent to which even reliable organs of the American press have distorted designed to protect an attack on Port Moresby. The Meanwhile, the declining intensity of the attacks on Malta may mean that the Germans are husbanding air strength for occupation of this port on the Papuan coast of New Guinea would protect the rear of any attempted invasion of northeastern Australia. Moreover, it would eliminate an advanced Allied air base which is close enough to Japanese bases in Northeast New Guinea to supply fighter support for bombers. this picture. the offensive in Russia and that during the period of that drive the control of the sea lanes to Tripoli will be of less importance to them. At the same time, as the ice goes out of the White Sea and an increasingly larger flow of lend-lease supplies can be directed to the port of Archangel, the Nazis have intensified their attacks on the Arctic sea route. The Battle of the Coral Sea In the Battle of the Coral Sea the Japanese suffered a serious naval setback, sustaining heavy losses while the American forces appear to have won the battle at relatively light cost. The two Japanese aircraft carriers put out of action-one sunk and another probably a total loss-may have been among Japan's newest and largest, carrying upwards of 60 planes, although there is as yet no official word on this. In addition, the loss of two heavy cruisers-one sunk and one damaged-is a serious blow. As for light cruisers, the recent action apparently leaves the Japanese with only seven which are afloat, and a number of these-including one in the Coral Sea-probably have been put out of action temporarily. The Mission of the Japanese Task Force The action in the Coral Sea was precipitated when a naval task force was sighted on May 4 moving toward Tulagi The Action and the Results While light Japanese forces were concentrated in Tulagi Harbor, the initial Allied air attack was made, resulting in the sinking of a light cruiser, two destroyers, four gunboats, and a supply ship, and damage to other ships. On May 5 and 6 aerial reconnaissance in the Coral Sea located two aircraft carriers, seven cruisers, 17 destroyers, 16 unidentified warships, two submarines, one submarine tender, and 21 transport or supply ships. On May 8 American units made contact with this Japanese force near the small Louisiade Islands, southeast of New Guinea. In the resulting engagement the American forces sank or damaged both carriers and four of the seven cruisers. On Monday, May 11, it was announced that two Japanese submarines had been sunk in the Coral Sea area, raising the total of Japanese ships sunk or damaged in this action to 21. Meanwhile the Japanese probably have succeeded in setting down light occupation forces on Tulagi, Gavutu and Makambo Islands in the Solomon group, although this has not been confirmed. Control of these islands, which com- mand Tulagi and Gavutu Harbors in the southeastern Solomons, would allow the Japanese virtually to dominate these islands. Harbors at the opposite end of the chain 3 2 SECRET SECRET have been under Japanese control for several weeks. News paper dispatches report that seaplane tenders have landed some stores and equipment also in the Louisiade Archipelago. Since the Japanese appear to have stepped up air operations against both Port Moresby and Horn Island, off north- eastern Australia, further naval action at an early date is perfectly possible. The Japanese can always move naval units rapidly southward to the New Britain region from the Truk area in the Carolines. reports indicate that they have assembled notable naval strength. Imbroglio in New Caledonia Concomitant with these serious Japanese threats in the Coral Sea area, political difficulties have arisen to plague the Free French rulers of New Caledonia, and the High Commissioner there has been suspected even of playing deliberately into the enemy's hands. The trouble arose apparently as a result of popular distrust of D'Argenlieu, the High Commissioner. Governor Sautot had been recalled to Free French headquarters in London in what General de Gaulle later termed a purely routine administrative move, but he refused to leave, apparently at popular behest. He was then arrested by the High Commissioner, along with four prominent members of his administrative council. The upshot was a general strike of all workers, and some mob violence. Somewhat enigmatically, the High Commissioner himself has now been arrested and will soon leave the island, according to a reliable report, but the status of Governor Sautot remains in doubt. With American troops now bolstering the defenses of New Caledonia, which occupies a position of great current strategic importance, the situation is one of unusual delicacy. The Japanese Advance in Burma In northern Burma the Japanese drive has swept on to envelop strategic Bhamo and Myitkyina, thus cutting the last of the practicable alternative land routes from India to Yunnan and leaving only air transport as a means of travel and supply. In the northwest the Japanese continue to push the British back on Kalewa along the route to India. On the Burma road, however, the Chinese caught an overextended Japanese mechanized column which had advanced as far as Chefang, some 25 miles inside China. Subjecting the column to annihilating artillery fire, the Chinese forced the Japanese to withdraw, lifting the immediate threat to Paoshan, important station on the India-Burma air route, Press reports indicate, however, that the Japanese have already recovered, and with reinforcements they now seem to be moving forward once more in Yunnan. Meanwhile Chinese units, previously isolated at Taunggyi and virtually given up for lost, have fought their way nort and captured Maymyo. Using tactics reminiscent of the fighting in China, they threatened the Japanese rear as the latter were drawn into the artillery trap at Chefang. It is reported that the Japanese, now reinforced, are attempting to retake Maymyo. Reaction in Chungking Although the Generalissimo has lost some prestige as a result of the collapse in Burma, and some defeatism has appeared in Chungking, no faction is strong enough to oust Chiang, and it is generally believed that he will continue the fight against Japan, according to a very reliable and highly placed source. The Chinese still do not believe that the Japanese can conduct a major invasion of Yunnan at this time, in view of the weather and terrain, and there is no 4 5 SECRET SECRET indication of a major Japanese move from Indochina, our Stressing the friendly note on which the conferences be- Chiang is reported to have told his Army Council that he blamed the Burmese debacle in part on lack of cooperation tween Cripps and the Congress leaders closed, our observer suggests that back of all the issues on which the negotiations broke down was the solid fact that Britain was already com- from British military leaders. But the Generalissimo in- mitted to India's defense. The Indian leaders knew that if sisted that Japan has now reached the high-water mark of her Britain should win, her offer would in effect still be open. On the other hand, if Japan should win, the Indians could explain source concludes. effort and cannot maintain her present drive much longer. The coming months will be hard he added, but China will come through. Meanwhile, if Russo-Japanese hostilities break out, he expects a renewal of fighting on the Hunan or Chekiang sectors. that they had not cooperated with the British. What was really at stake in the negotiations over the defense issue was, then, the implicit issue of whether or not India should be given a position in which she could, if she so desired, make a separate peace. Indian Defense Again With the Japanese in control of Burma and with the bombing of Chittagong and "a small country town in Eastern Assam" (identified by the Japanese as Imphal), the defense of India has become something more than an academic question. General Wavell has already announced the reorganization of the Army into three mobile commands, and General Brereton has suggested that American air forces will play a significant part in the defense of the peninsula. Apparently the British and American commanders are experiencing few hindrances arising from the Congress party's objections to foreign control of Indian defense. One well placed British observer recently returned from India suggests that the defense of the peninsula is primarily a pro- fessional matter and that the failure of the Cripps' mission has actually made little difference. If the Congress had accepted Cripps' proposals, it would have helped chiefly in securing better air-raid precautions throughout India, and perhaps in limiting the number of strikes in industrial plants, and in stiffening public morale. Our observer concludes that when the opportunity arises, some Indian leaders-besides those like Rajagopalacharian already pledged to cooperation in the war effort-may take a stand for armed defense. Nehru certainly has no illusions about the effectiveness of non-violent non-cooperation as a weapon against Japan, and he is definitely anti-Japanese. Moreover, Gandhi's lieutenant, Ghose, has actually advocated cooperation with the British. Communist elements, many of whose leaders are still in jail, favor vigorous prosecution of the war. And many younger men, sons of wealthy parents and university graduates, show strong sympathy toward Russia. For the present, at least, apathy rather than enthusiasm or hostility to the British seems to characterize the Indian defense effort. Latest reports on India's morale indicate general pessimism, among both official and native groups. Nor is there any apparent readiness to adopt a scorched-earth policy in the event of a Japanese invasion. Attack in the Crimea While it is as yet too early to draw conclusions about the current Nazi attack in the Kerch peninsula, it is probable 7 6 SECRET SECRET air concentrations. According to a Soviet press source, they the southern front than the map shows (most of the "allied" units are apparently operating in this area; German communiqués point out that Rumanian troops are participating in the attack on the Kerch peninsula). Nevertheless, it is probable that the Nazis, even if they do decide to throw their main weight into a southern offensive, cannot leave merely a small holding force against Moscow. The length have even used gas. of the Russian front is so great, and the Soviet army so large, The accompanying map suggests the success of German local attacks during the past few weeks. Although the lines and shaded areas are based simply on competent estimates rather than on specific reports, they do indicate that the Nazi attacks have already gone far to wipe out the more advanced that a stripping of one sector to permit the concentration of overwhelming force in another area-as envisaged in the that this movement, far from being the long-awaited "spring offensive," is simply a continuation of local efforts to straighten the German lines in preparation for a concerted attack later on (The War This Week, April 30-May 7, p. 15). Here, and in the parallel attacks in the Donets area, the Nazi ground troops have apparently had the aid of strong Soviet salients established last winter. To the north, the Germans have apparently drawn their lines tighter around Leningrad, and may even have relieved the beleaguered 16th Army at Staraya Russa. In the center, the Soviet pincers north and south of Smolensk have largely disappeared, and the Nazis still stand less than 100 miles from Moscow. To the south, the Germans have apparently succeeded in reliev- original Von Schlieffen plan for attacking France-would here appear to be out of the question. Ordeal in Leningrad In the Leningrad sector, it is the Russians who will probably suffer most from the spring thaw. Here a series of Soviet attacks have apparently failed to relieve the city. And soon the ice will be out of Lake Ladoga-thus eliminating Lenin grad's chief supply line, the railroad laid this winter across ing the almost-encircled city of Kharkov (where the Rus- the lake itself. sians claim to have launched an offensive of their own), and their line remains anchored at Taganrog on the shores of the A report from Kuibyshev suggests that before the completion of this line, the food shortage in Leningrad had reached critical proportions. And even after the new link went into service, while workers had enough to eat, babies and non- Sea of Azov. In sum, then, the significant net gains of the Russians after a winter of ostensibly unremitting counter-offensives, are first, the reconquest of Rostov and large areas of the Crimes and the Eastern Ukraine; second, the relief of Moscow, including the capture of Mozhaisk; and third, a large scale infiltration in the Valdai Hills area, apparently lightly held by scattered German units. The distribution of Nazi strength on the map is likewise an estimate. Some of the figures may already be out of date. For instance, there may be by now a greater concentration on essential people in general starved in large numbers. A report from Helsinki, ostensibly based on the testimony of deserters and prisoners-of-war, adds further details: evacua- tion and death have lowered the population of Leningrad from about 3.2 million to an estimated 2.5 million this spring. Of approximately 150 large factories in the city, the report continues, the Russians have transferred from a third to a half inland, many to the Ural area. Those remaining have endeavored to maintain their output by lengthening the 9 8 461017-42-2 SECRET SECRET working day to even as much as 18 hours. But bombard. ment and a shortage of raw materials, electricity and fuel, Russia. One report maintains that the Don, in one area coupled with the poor physical condition of the workers, have greatly reduced production. wide. A lack of adequate bomb shelters, the report concludes, has been responsible for many civilian casualties. Nevertheless, a service of 70 airplanes has maintained the city's hospitals. Now, with the ice going out of Lake Ladoga, Leningrad is girding itself for the coming summer ordeal, although apparently the Russians are confident that they can continue to supply the city by establishing a boat service across the where it is normally a mile across, now forms a lake 30 miles Spring Comes to the Arctic Ocean The battle for the supply routes to Russia continues with redoubled intensity. In a recent engagement, the Germans had one destroyer sunk, and another damaged, while the British lost the light cruiser Edinburgh and five supply ships from two convoys-of which, according to Allied reports, 90 lake. percent of the supplies reached Russia in safety. Such losses suggest that both sides regard the northern supply route as a Will the Germans Use Gas? most critical theater, in which they are willing to suffer Prime Minister Churchill's speech, with its clear warning to the Germans about the use of chemical warfare, corroborates suspicions expressed by several neutral sources. The Turkish ambassador to Berlin, for example, is evidently of the opinion that Hitler will not scruple to employ gas-and bacteria also-on the Russian front. But the German army leaders are hesitant and would consent to the use of these methods only as a last resort. Other observers believe that the recent Nazi propaganda line-including Hitler's reference to British use of "new means" of warfare-indicates a readiness to employ gas. In Russia, they point out, weather and terrain are favorable, inordinately heavy damage. The months of early summer are the least unfavorable of the year for naval or air action, according to a study recently prepared in the Geographic Division of the Coordinator's Office. While weather conditions are relatively adverse all year round, both for convoys and for their attackers, in winter northerly gales and long hours of darkness make naval opera- tions unusually difficult and air activity often impossible. In summer, the dense fogs characteristic of the season would apparently favor the escape of Allied convoys from air reconnaissance. On the other hand, the long hours of daylight would be of considerable aid to attacking planes. and the Germany army and chemical industry are well prepared; the latter has been working at high pressure in anticipation of the coming summer. It may be that Nazi preparations for using gas are responsible in part for the current delay in launching an eastern offensive. A more plausible reason for that delay, however, is the spring flooding of the rivers in Central and Southern The Opening of Archangel About the middle of this month, the White Sea port of Archangel will be substantially free of ice. A study prepared in the East-European Section of the Coordinator's Office suggests some of the implications of the opening of Archangel as a terminus for American and British convoys. 10 11 SECRET SECRET Since late December, convoys bound for Russia have used much the capacity of the Soviet ports and railways, as the the port of Murmansk, open all through the winter with the occasional assistance of an icebreaker. Besides its freedom amount of shipping which Britain and the United States from ice, Murmansk has at least two advantages over The Intentions of the Finns Archangel: first, it is nearer to Britain and the United A further argument in favor of the continuing use of Murmansk is the comparative quiescence of the Finnish army. A report from Helsinki suggests that the Germans, fearing a Finnish collapse, will-not ask the Finns to take Soroka this summer. (Once in possession of Soroka, the Finns would control the railroad connecting Soroka with the Archangel- States; second, its port facilities may be adapted to more varied shipments, since in the years before the outbreak of war, Archangel was important chiefly as an export point for lumber. On the other hand, Murmansk is far more exposed to enemy attack. Already the Finns have cut the Murmansk-Leningrad railroad south of Soroka. Shipments this winter have had to go over the new railroad from Soroka along the southern shore of the White Sea to Obozerskaya, the junction with the railway from Archangel south to Vologda and Moscow. Furthermore, the capacity of Murmansk is considerably smaller than that of Archangel-about 90,000 to 120,000 tons per month for the former, and possibly 290,000 tons for the latter. In short, it seems likely that from now on, the Soviets will use both ports. Despite German bombing of the railway south from Murmansk, its capacity is probably still adequate to keep the port clear-that is, barring further damage from the air. Even in that event, the Russians are used to making rapid repairs on this railroad, having at least once rebuilt a ruined bridge in as little as a day and a half. The railroad south from Archangel, coupled with the river facilities of the Northern Dvina, can probably keep clear the port of Archangel and the neighboring ports of Bakaritsa and Ekonomija. Furthermore, south of the junction with the Murmansk railway system at Obozerskaya, the Russians have very nearly completed the double-tracking of the line, making a bottleneck at this point unlikely. In fact, the chief limiting factor in the whole Russian supply problem may be not SO 12 make available for this route. Vologda-Moscow line, thus making Murmansk useless as a port of entry.) The Nazis feel, according to the report, that if they are victorious over the main Soviet army, the Russian forces in the north will be obliged to withdraw of their own accord. Meantime, in the Kiestinki sector, the spring thaw is apparently working considerable hardship on the Finnish and German troops. Adequately supplied with food and ammunition, they are, however, unable to evacuate their wounded over the soggy roads to their rear, and must rely on airplanes to bring in medical supplies. The Russians, on the other hand, have adequate all-weather roads in this area, the report concludes. French Reactions to the Descent on Madagascar The British descent on Madagascar appears to have provoked two rather different reactions in metropolitan France. The official attitude of Laval's government was hostile, and both Pétain and Darlan sent messages of encouragement to the resisting French troops. On the other hand, reports suggest that the popular reaction in France was one of understanding tinged with a feeling that the act was inevitable. The De Gaullists are a case apart. The relatively calm attitude of the French public fully justified the exclusion of 13 SECRET SECRET the Free French from the attack, it is felt in British govern. ment circles. But in the De Gaullist camp, reports picture great disappointment and distinct resentment, a sentiment not mollified by current negotiations at Martinique. In any event, observers are contrasting the notably different French popular reaction in the case of Madagascar and in that of the earlier joint British-Free French invasion of Syria. A more recent British announcement that the Free French are to assist in the administration of Madagascar may allay to some extent initial De Gaullist resentment. Laval's Difficulties The Germans are already contriving difficulties for Laval and are now once again tacitly supporting renewed Italian claims to the cession of Nice and Corsica, according to reports which lend some color to the continuing rumors that one of the Parisian collaborationists may presently replace the new Vichy premier. Meanwhile it is said that the Germans are offering Laval the repatriation of a sizeable number of French prisoners for the return of General Giraud, who is still at Vichy and not, as some newspapers have reported, in the hands of the Germans or the Swiss. The Nazis appear to be considerably disturbed about the plans of the General, who is reported to be as antiGerman as ever and as being "happy to work with the United Africa's economic plight is reflected in a recent statement by General Nogues that the Moroccan government is seeking an exchange with metropolitan France of food products for certain commodities needed in Moroccan industry. The General emphasized the importance of haste and declared that "minutes are precious." Respite for Malta In one 72-hour period this week the defenders of Malta shot down 101 attacking planes, according to Allied press reports. Coupled with a continuing let-up in air raids over the island, perhaps indicating a shift of Axis strength to the Eastern Front, the current success of Malta's defenders may presage a respite for the coming months. That such a respite would be more than welcome to the island was ap- parent in an official British announcement that threequarters of the buildings in Valetta are now uninhabitable. Yet if the Axis is to continue the neutralization of Malta, steady bombing attacks will still be necessary. Of course if the Nazis had decided to attempt the capture of the island, they might have ended this drain on their resources once for all. Now, with the sinking of three British destroyers by German bombing, it is apparent that the Axis still has a powerful air fleet in the Mediterranean, and that Malta may be enjoying only a temporary respite after all. States." In North Africa recent reports picture certain high French officials as still hopeful that Pétain may hold out against Axis pressure and that North Africa may yet reenter the war on the Allied side (with the help of the United States), what- ever may happen in metropolitan France. To accomplish this end, however, continued American economic assistance is essential, these officials insist. The seriousness of North 14 15 SECRET SECRET APPENDIX I THE CONSEQUENCES OF MALNUTRITION A case study of the effects of inadequate diet, strictly enforced by effective rationing, has just been received from Belgium, and it will hardly encourage those who look forward to the day when the United Nations might count upon assistance through internal revolt of peoples under Nazi control. Rather this study suggests that the rationing of conquered Europe might serve the German effort to maintain order more effectively in the long run than will Nazi firing squada. Moreover, it is particularly among the urban middle and lower classes that the spirit of revolt is likely to become progressively weaker, as food conditions demand that more and more commodities become subject to rationing. Today there is no country in which all consumption is rationed. Rationing is generally introduced for specific commodities as shortages develop. The percentage of total calories provided by rations varies from virtually none in Portugal to some 90 percent in Germany. Hence, legal rations can nowhere be used as the sole measure of consumption Nor does the existence of a rationing system mean that the system works Certain groups may fare better than others-notably the rural producers who can withhold their product, and the well-to-do who can purchase in the black market This frequently means that adequate quantities are not available for the urban consumer in the lower income brackets. Indeed, many such people receive even less than the rationed amounts of particular foods. From the beginning of the war, there has been a gradual extension of the num- ber of countries with some degree of rationing. More important is the everlengthening list of commodities to which control is applied. There is reason to believe that for most countries the extent of control will become more severe, and the opportunities to obtain free supplementary foods will become more and more limited. Rations will therefore comprise progressively larger percentages of the total consumption of citizens in any country. Belgian rations are on a scale similar to those in force elsewhere in Europe. It is not likely, moreover, that the nutrient values supplied by these rations will be markedly increased in the future, Hence it is worthwhile to examine the effects-physical and mental- of consumption at the level prescribed. The particular observations reported are from a Belgian prison, where for many months the inmates are known to have been fed nothing more than the legal rations. Such a stark view of rationing enforced in its complete rigor suggests some of the results which prolongation of the war may bring for an ever-widening element of the population of Europe. The legal Belgian rations provided the prisoners with diets of 1,500-1,850 calories, less than three-quarters the number of calories needed to sustain life when no physical activity is undertaken. The diet was unbalanced: it was markedly deficient in protein, mineral salts, and vitamins. The first effect was hunger, so severe that the prisoners frequently became diazy, subject to fainting spells, and temporarily blinded. The sensation of hunger was so acute that sleep was often impossible. In many cases these 16 effects were intensified by an inability to eat even the meager food allotments because of inordinate swelling of the submaxillary glands, and of the tongue, and indeed the whole mouth. In such circumstances, adynamia is almost gums, always present: the feet drag; climbing stairs is most painful; all processes which necessitate keeping the arms extended even for brief periods are performed with difficulty. Soon the nervous system is affected, so that motor control becomes yet more difficult. There is a numbness of the limbs which hinders all activity. Urinary troubles arise and marked disorders in the alimentary canal develop. There are severe cases of constipation, and even more commonly diarrhea sets in and will not respond to treatment. This soon brings increased weakness and the loss of weight. Indeed, loss of weight is general and progressive, from about one month after the rationed diet is instituted. The organism exhausts its store of fats; then the muscular tissues deteriorate. All bones become more prominent. Losses of 50 and more pounds during one year are common; and there are cases of weight reduction to the extent of 50 percent. Actually, this weight loss is concealed to some degree by "famine oedema". which occurred among some 90 percent of the inmates receiving no food other than rations, This is a condition in which liquid which cannot be eliminated accumulates in the body. Though it is usually localized in the lower limbs, it sometimes spreads and thus hinders breathing and circulation (the oedema disappears quickly if sufficient quantities of Vitamin B1 are administered). Despite the suffering accompanying these dietary deficiencies, death by starva- tion appeared to be painless. Without additional symptoms, many of the prisoners passed away during sleep. Cases of such malnutrition are undoubtedly to be found throughout Europe today. There are as yet, however, few areas where the bulk of the inhabitants must live on such curtailed dietaries. From all the evidence, it appears that such conditions prevail most nearly in Greece. Recent accounts (coming from Ankara) reveal a situation in many Greek cities not very different from that described above. These accounts tell the same story of weakness, sleeplessness, weight loss and oedemic conditions, alimentary and urinary disordere-as peaceful death. Published reports of a survey among normal consumers in Belgium, from September 1940 to April 1941, again show conditions differing only in degree from those of the prisoners living solely on legal rations. Other studies give similar evidence of the results of malnutrition brought about by the First World War, according to an anlysis now in progress in the Bureau of Home Economics of the United States Department of Agriculture. All these studies put considerable stress upon other than the physical effects of malnutrition. Investigators of the early 'twenties pointed out that there was a complete lack of mental aggressiveness among the hungry. During the present war. a state of apathy is regularly reported as characterizing the inhabitants of Greece. In the Belgian prison, the inmates were subject to states of acute depression: listlessness, lassitude, and lack of interest in life itself were common. The evidence clearly indicates that persons suffering from malnutrition are not desperate men readily moved to rash activity. Rather, they are apathetic and indifferent people who accept their lot without marked protest. Such men can scarcely be relied upon to assist the United Nations by fomenting internal revolt. 17 SECRET SECRET APPENDIX II JAPAN'S ECONOMIC GAINS IN THE PHILIPPINES The economic resources which the Japanese have gained in the Philippines, while not vital to her war economy, are nevertheless of considerable strategic importance. In the case of iron, chrome, and manganese ores-commodities which Japan needs-the comparatively short haul from the Philippines will Southern Luson the Japanese are said to have found 1,000 tons of drill steel, 500 tons of structural steel, and 1,000 tons of manganese balls ready to ship. And although a considerable amount of petroleum was set afire or used in military operations, there were on hand in the Philippines at the end of November 1941 about 1,100,000 barrels of stocks. A complete estimate of the amount of this which fell into Japanese hands is not yet available. doubtless influence the Japanese to exploit these resources immediately. Although information on the demolition accomplished in the islands is by no means complete it is not believed that "scorched earth" tactics have been very successful The Philippines offer Japan considerable resources in iron ore, which in the past has been one of her most critical needs. Annual production, averaging 60 percent iron content, has run about 1,250,000 tons in the islands. Some of the iron mines were reported to have been flooded and at least one was dynamited But in the open pit mines of Mindanao, the area of greatest production, destrue. tion is not practicable. A very large unexploited reserve will allow for consider. able expansion in mining. The fact that the Philippine mines are nearer than those in Malaya, and that the Philippine ore is of high quality, may lead to intessified exploitation of these resources. Philippine chrome is believed to be sufficient to fill the gap in Japanese require ments. Approximately 150,000 tons of medium grade ore (40 to 48 percent) were mined there annually prior to the Japanese occupation. The known reserves in Zambeles Province, on Luzon, are estimated at more than 10,000,000 tons, and they are easily accessible. In this area there was some destruction: at Santa Cruz, trucks were removed and the loading pier burned, and at Masinloe the pier was demolished and all equipment was removed. With respect to manganese, an annual Philippine production of 60,000 tons of ore considerably improves Japan's position. The average content is 50 percent Again the supply is nearer than that in Malaya. The largest and best deposits are on Busuanga, a small island about midway between Palawan and Mindoro Smaller quantities of high-grade ore also are located on the island of Masbate No information is available on demolition. Japanese dependence on stockpiles to meet current requirements for copper will be to some extent relieved by requisition of the small Philippine outputabout 9,000 tons of metal annually. Japan will also gain a monopoly control of hemp, more than 50,000 tons of which were ready for movement when the attack began last December. It is not known how much of this was destroyed, but in any case an annual production of 200,000 tons will become available to her. Japan is nearly self-sufficient in sugar, but about 300,000 tons were milled, bagged, and awaiting shipment when the Japanese arrived, and annual production is about 1,000,000 tons. The Philippines' 280,000 tons of molasses per year will be useful to Japan for alcohol distillation, as a supplement for fodder, and also M a source for potash. Timber resources will augment the Japanese supply of this important product, and her requirements of copra and coconut oil will be assured Some reports indicate that trucks and passenger cars obtained in the Philippines already are being shipped to Japan for scrap. In the Paracale mining area is 18 GOVERNMENT PRINTING OFFICE 1941 19 282 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE May 14, 1942 Secretary Morgenthau TO Mr. Kamarck FROM Subject: Summary of Military Reports French Navy The following lists the location of the French battleships and battle cruisers under control of Vichy: Toulon Strasbourg (26,000 tons, 13-in. guns), ready for action. Provence (22,000 tons, 13-in. guns), ready for action. Dunkerque (26,000 tone, 13-in. guns), being repaired, will not be ready for nine months. Casablanca Jean Bart (35,000 tons, 15-in. guns), still incomplete, has only one turret mounted. Dakar Richelieu (35,000 tone, 15-in. guns), one gun of her main armament out of action (is little more than a floating battery). (U.K. Operations Report, April 30 - May 7, 1942) Dakar Reconnaissance over Dakar on May 10 showed no change in the French naval units in port. (That is, the French have at Dakar: the Richelieu, three light cruisers, three destroyers, and ten submarines.) (U.K. Operations Report, May 13, 1942) 282 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE May 14, 1942 Secretary Morgenthau TO FROM - Mr. Kamarck Subject: Summary of Military Reports French Navy The following lists the location of the French battleships and battle cruisers under control of Vichy: Toulon Strasbourg (26,000 tons, 13-in. guns), ready for action. Provence (22,000 tons, 13-in. guns), ready for action. Dunkerque (26,000 tons, 13-in. guns), being repaired, will not be ready for nine months. Casablanca Jean Bart (35,000 tons, 15-in. guns), still incomplete, has only one turret mounted. Dakar Richelieu (35,000 tons, 15-in. guns), one gun of her main armament out of action (is little more than a floating battery). (U.K. Operations Report, April 30 - May 7, 1942) Dakar Reconnaissance over Dakar on May 10 showed no change in the French naval units in port. (That 18, the French have at Dakar: the Richelieu, three light cruisers, three destroyers, and ten submarines.) (U.K. Operations Report, May 13, 1942) 283 -2Philippines According to the information available to our army, our forces on Mindanao have surrendered to the Japanese, the commander feeling that the odds against him were too great." Mindanao was next to Bataan and Corregidor the main center of resistance to the Japanese in the Philippines. (U.S. Military Intelligence Information, May 13, 1942) R.A.F. Activity Intelligence reports are to the effect that bombing damage in Cologne is such that the authorities can no longer clear the debris away quickly. The attempts to hide damage by erecting board walls have been abandoned. In the raids on Rostock, twelve direct hits with heavy bombs were made on the Heinkel works. The walls of the largest assembly shop fell inwards and destroyed the planes on the production lines. On February 16, in a raid on Kiel, a bomb fell on an assembly shed at the Marinewerft (naval dock) and killed most of the night shift there. (U.K. Operations Report, April 30 - May 7, 1942) German Air Force (In spite of Hitler's speech threatening reprisals against the British, no strengthening of the German bombing force in the west for this purpose has occurred. Rather the western bombers were diverted from other uses.) In the first week of May, an average of 60 German bombers operated on three nights, making reprisal raids on towns in England. These activities caused a reduction in German mine-laying and anti-shipping operations. (U.K. Operations Report, April 30 - May 7, 1942) -- 284 Voice of the Chief' "The time has not yet come when it will be self-evident where I am and who I am. Until then, I can only tell the se propaganda scribes that it is none of their concern. "The way things are in Germany today no compatriot is safe any longer. Even the most faithful and conscientious citizen cannot be sure that he will not be dragged from his bed, and robbed of his freedom and his property, only because one of these shysters of the 'party community' is interested in having him disappear. "Under this hypocritical pretense of 80-called necessity of the state, government officials are discharged, judges are dismissed, compatriots are imprisoned, dispossessed and decapitated. This state interest is interpreted every time as best suits the private interest of the petty official in the community." " (Federal Communications Commission, May 12, 1942) 285 May 15, 1942 4:10 p.m. HMJr: Hello. Operator: Mrs. Morgenthau calling. HMJr: Okay. Operator: Go ahead. HMJr: Hello. Mrs. Morgenthau: Hello, dear. HMJr: You're on the loudspeaker. I just gather you have your headache again. HMr Yeah, how do you What? HMJr: Yeah. I had it all day. Isn't that a shame. HMJr: Henry's sitting here. I see. Anyone else there? HMJr: Just Henry. M: Oh. Because you said I was on the loudspeaker, I thought maybe you had a room full of people. Well, I was expecting Mr. Ginsburg. HMJr: What about? X: Oh. HMJr: Oh, I'm - of Henderson's office. Oh, that Ginsburg. HMJr: Yeah. X: I thought you meant Ginsburg from the Army. HMJr: No. 286 -2M: HMJr: M: HMJr: General Ginsburg. No. Ginsburg of Ginsburg, Ginsburg, and Ginsburg. I see. I was - does your head hurt you much? Oh, just - you know I've been eating honey. I may be allergic to it. M: Maybe. HMJr: Yeah, I'm going to stop it. M: Everything we have is cooked with honey these days. HMJr: M: Yeah. I've got to go back to the White House at five. I see. I had a telegram from Margaret asking me when we were coming. HMJr: M: HMJr: Yeah. And I thought I'd better phone her. Well, here's the point. Yes. HMJr: They're not sure about the weather yet for tomorrow. M: HMJr: M: HMJr: At all? Well, they don't know. They may have to go in the morning. I see. And I really don't think you can tell her yet whether we'll come for lunch or not. M: oh, I think the thing we ought to do, if I send a wire, I can't explain very well, can I? Don't you think the best is to phone her HMJr: Yes. 287 -3 M: HMJr: M: HMJr: M: HMJr: and tell her that - I can't phone her after seven, because we have to be at the Russian - so I thought I'd put in a personal call. Well, I'll know by the time I come home. = No, we - I might know right now. Wait a Is that terrifically expensive? minute, will you, because All right. .....he was talking to Sinton right now. Just a minute. M: All right. HMJr: Hold on, please. (Talks aside) What do you know about the weather, anything? Mrs. Morgenthau's on the line. Well, could he let us know tonight yet? Well, I don't - doesn't he normally go to bed earlier when he's going to fly? Cen't somebody else do it? Why can't you call - well, let me just - stay on a minute. (To Mrs. Morgenthau) Hello. Yes. HMJr: As it stands now, they don't think we can go in the morning. M: They don't think we can go in the morning. HMJr: No. M: Do they think we can go in the afternoon? HMJr: Well, that they don't - they won't know before M: ten-thirty tonight. I see. Well, I think the thing for me to do is to call her. Don't you? 287 -3 X: HMJr: M: HMJr: M: HMJr: and tell her that - I can't phone her after seven, because we have to be at the Russian - so I thought I'd put in a personal call. Well, I'll know by the time I come home. Is that terrifically expensive? No, we - I might know right now. Wait a minute, will you, because All right. .....he was talking to Sinton right now. Just a minute. M: All right. HMJr: Hold on, please. (Talks aside) What do you know about the weather, anything? Mrs. Morgenthau's on the line. Well, could he let us know tonight yet? Well, I don't - doesn't he normally go to bed earlier when he's going to fly? Cen't somebody else do it? Why can't you call - well, let me just - stay on a minute. (To Mrs. Morgenthau) Hello. Yes. HMJr: As it stands now, they don't think we can go in the morning. They don't think we can go in the morning. HMJr: No. Do they think we can go in the afternoon? Well, that they don't - they won't know before ten-thirty tonight. Iissee. Well, thing for me to do to call her.I think Don'tthe you? 288 -4HMJr: M: HMJr: M: Yes. And just tell her that we can't go in the morning Yeah. noon. and that we hope to get off in the after- HMJr: Yeah. M: Don't you? HMJr: Yes, maam. M: And I'll have to explain to her about the rushing away, otherwise she may be making plans and I think I ought to also tell her we won't be there for lunch. M: That's right. Okay. And so I think the best is to out in a personal call and just tell her when we're ready to leave we'll wire. HMJr: That's right. M: What does it take us, about two hours, from here? HMJr: But to her home will be about three hours. M: Three hours. HMJr: Two hours and a half. M: Well, we wouldn't get there until after seven HMJr: in any case. HMJr: Yeah. Okay. M: Oh, are you taking your dinner coat to New York? HMJr: No. M: No. 289 -5HMJr: M: HMJr: No. Well, I'm taking my good dress. Yeah. M: All right, darling. HMJr: Okay. M: Good-bye. HMJr: Good-bye. 290 May 15, 1942 4:16 p.m. HMJr: Hello. Operator: General Watson is on his way to Charlottesville. HMJr: I beg your pardon. Gee whiz, this is terrible. Operator: Give me - what 18 Roberta's last name? Barrett? HMJr: What? Operator: Barrett? HMJr: Yeah well, I - no, give me the Chief Clerk, what's -his name? Operator: Forster? HMJr: Forster. Operator: Right. May 15, 1942 4:17 p.m. HMJr: Hello. Operator: Mr. Forster. HMJr: Hello. Mr. Forster: Yes, Mr. Secretary. HMJr: How are you? F: Fine. HMJr: F: HMJr: Forster, you've got to help me out as my life saver. (Laughs) Yeah. This morning I went in to see the President about where we could house some soldiers that 291 2- guard the White House F: HMJr: Uh huh. .....and told him about a place here off the corner of the Treasury, which he said he didn't like. F: HMJr: F: HMJr: F: Uh huh. So he said, "Go look at the square opposite the State Department." See? Yeah. And he said, "If that's all right," - I had Watson in there - and he said, "If the Army likes that, they can have it, and I, as Commander-in-Chief, will tell Harold Ickes he should do it." Uh huh. HMJr: Now Watson's gone down to Virginia. F: Yeah. HMJr: And I'd like to get this thing cleared today. Now, could Norman Thomoson walk this over to you? F: HMJr: Uh huh. And would you take - if you want to, you can check up with the President on it, but - I got a little plan and everything, but he said if it was all right with the Army, it W8.8 all right with him and he would order it done. F: Uh huh. HMJr: And I'd like to get it cleared still today. Yeah. HMJr: Should Norman bring it over to you? F: Yeah. 292 -3HMJr: F: HMJr: F: HMJr: See? Yes, that'd be fine. will you? It's for the soldiers that guard the White House. I've really got no business in this thing, but I'm right in it, anyway. Uh huh. Yeah, I'IL- be on the look-out for him. Norman will bring it over himself. F: All right. HMJr: Thank you. F: All right. 293 May 15, 1942 4:21 p.m. Mr. C. Devid Ginsburg: Hello, Mr. Secretary. HMJr: How are you? G: Very well, sir. HMJr: Well, as near as I can make out, you're the 0: That's right. HMJr: What? G: King for a day. HMJr: King for a day. G: That's right. HMJr: bose today. Listen, Mr. Ginsburg, when I went over to see the President today, I told him what a swell job Leon did for us on the Hill. G: HMJr: Yeah. Then I went on to say what a lousy press Leon got G: HMJr: It really was. and then how he got out a statement and the papers didn't carry it. G: HMJr: That's right. Now, the President asked me to get together for him the misstatements that the President the papers made G: HMJr: That's right. and then to show just what papers did and didn't carry it. I mean - as far as I know, the New York Times, I think, was the only one that I saw. And he said he would use it as an example 294 -2at his Tuesday's press conference. G: HMJr: Well, I'm sure we could do something. Now, the point is, it's really up to you to get that stuff together and send it over to Steve Early. G: Fine. HMJr: Not later than Monday night. 0: We'll be very glad to have it there. HMJr: HMJr: And the President said he would use it Tuesday, and he definitely wants it. Well, that's very good. Now, may I forget about it? Surely, and I'11 get in touch with Steve and give him the material. HMJr: And explain to him the circumstances. Fine. I'11 be very glad to do that. HMJr: Thank you. G: Thank you very much, Mr. Secretary. HMJr: Good-bye. 295 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE TO FROM May 15, 1942. Secretary Morgenthau W. N. Thompson Forster tells me that the President instructed Marvin McIntyre to clear the barracks building project with Secretaries Hull and Takes. Mr. McIntyre was unable to do this this afternoon but will take it up with them tomorrow. you 296 May 15, 1942 4:23 p.m. HMJr: Hello. Operator: Mr. White. HMJr: Oh, yes. Hello. Herry White: Hello. HMJr: Harry. V: Yes, sir. HMJr: The President said to carry on our investigation in Argentine. Yeah. HMJr: To continue. Yeah. HMJr: See? Yeah. HMJr: And if the situation got bad enough, he personally would bring it to the attention of the various republice of South America. I see. HMJr: See? All right. HMJr: Continue our study. Okay. HMJr: Now, I think that you ought to send one of the very ablest men that you have to the Argentine. All right. Well, we'll talk it over and we'll have a recommendation for you. 297 -2HMJr: Right. And the other thing, your - the work of your life - I can't think (Laughs) I hope not. HMJr: What's the Latin word? Magnus opus? HMJr: HMJr: Yes. Well, it's hardly in that class, but anyhow Well, the first blush on it, the President liked it. Y: Yes. Well, that's good. HMJr: And he wanted me immediately to give it to Hull, and I said, "No, I want you to study it and if you like it, it can only happen if you get behind it." W: Yeah. HMJr: "And then if you like it well enough, then I'm willing to take it to Mr. Hull." I see. Very good move. HMJr: So I thought you should know that. That's a very good move. Well, we have some copies HMJr: on that and we're ready to give it to him. All right. Yeah. Okay. Well, that's fine. Well, you think he may read it then over the week-end? I think the chances are excellent. Well, that's good. All right. We'll get in touch the other - I'11 thing, get and in touch we'll with have the some lawyers sort of on a 298 -3recommendation prepared for you. HMJr: W: Good-bye. All right. Good-bye. 299 Treasury Department Division of Monetary Research Date D May 15 19 42 Mrs. McHugh To: - From: L. Shanahan Mr. White took the original of this o the Secretary this morning. The Secretary felt it was not adapted o his purpose, so did not use it. 300 THE SECRETARY OF THE TREASURY WASHINGTON MEMORANDUM TO THE PRESIDENT Pronosal to Deal with Axis Activity in Argentina 1. Having in mind the growing evidence that Argentina is being used as the focal point for Axis activities in this hemisphere, I proposed to the Board of Economic Warfare at its meeting on May 7 that the Board consider the steps which might be taken to prevent the use of the American monetary system by Argentine nationals for purposes which would aid the enemy. I proposed specifically that consideration be given to extending foreign funds control to Argentina as it now applies to the four European neutrals. This would be done by the issuance of a Presidential Order simultaneously with the granting of a general license permitting legitimate Argentine transactions to be freely conducted. After some discussion in the Board the Vice President appointed a committee consisting of State, Treasury, Commerce and the Board of Economic Warfare to report to the Board at its next meeting on May 21. The Treasury Department prepared the attached memorandum. At the committee's meeting on May 12 the following points were brought out: (a) There is considerable evidence of Axis activity in Argentina to our distinct herm; (b) the State Department opposes extending freezing control to Argentina in view of its possible effect on our Good Neighbor policy. It was unanimously agreed to present a report to the Board of Economic Warfare at its next meeting. 2. You may be interested in knowing how Argentina is being actively used by the enemy to undermine our war effort. The Argentine Government has done nothing to prevent Axis funds from finding refuge in Argentina. The absence of effective control in Argentina has permitted it to be used by the Axis to cloak important economic and financial opera- tions. We have numerous instances in which Argentine companies are holding large sume for Axis nationals or the nationals of ROD DEFENSE BUY STATES STATES BONDS COSTAMES 301 -2occupied Europe. While it is possible for us to ferret out a few of these companies and to freeze them on an individual basis, it is impossible to keep pace with the rapid maneuvers presently possible through Argentine companies without some over-all control. Argentina is an agency for the transfer of Axis funds. Argentina is the one remaining country from which currency and securities stolen in Europe by the Axis can be disposed of. Argentine banking institutions have permitted transfer of funds to and from the Axis which the banking institutions of other countries have refused to handle. Remittances from Argentina provide the Axis with large sums in free exchange. In fact, the Brazilian Government expressed to the Argentine Government its concern regarding the transfer of funds to and from Axis countries through Argentina. Argentina has recently concluded commercial and payments agreements with Spain and France which facilitate transfers to and trade with Axis Europe. We are informed by the British that two German agents carrying quantities of looted United States currency are enroute to Buenos Aires as members of the Spanish Commercial Mission. It may also be pointed out that the Argentine Government has not broken off relations with the Axis; has taken suppressive action against the expression of views favorable to the United Nations and at the same time has freely permitted expressions in support of the Axis; has permitted Buenos Aires to become the center of Axis espionage and propeganda in Latin America; and the Acting President has selected several well- known pro-Nazis to act on his Advisory Council. In general Argentina has taken no effective steps to carry out the reso- lutions adopted at the R1o Conference. 3. We have received from other agencies supporting information concerning events and actions in Argentina which are inimical to our war effort. You may be particularly interested in memoranda from the Federal Bureau of Investigation and the Coordinator of Information, which are attached. 4. It should be emphasized that the proposal under consideration is aimed at preventing the use of the American monetary system for transactions by Argentine nationals on behalf of the enemy andrestriction. that legitimate Argentine transactions would continue without I am fully appreciative of the complex political considera- tions which, as the State Department has indicated, are involved in placing Argentina under general license. I venture to suggest, 302 -3however, that our 18 Latin American neighbors that have taken the risk of breaking off relations with the Axis feel that it is about time for us to make some clear differentiation between them and Argentina which is persistently sitting on the fence waiting to see who will win the war and which is carrying on or permitting such extensive financial, economic end subversive activities on behalf of our enemies. 303 farmet may 15,1942 THE WHITE HOUSE WASHINGTON Put President quezon an the air for War Bonds Peter Od, #1,00 White should send some extra good man to arjentina emcute barge - self propelled 304 This was the agreement which was reached at the meeting held at the White House at 5:00 p.m., on Friday, May 15th, at which were present V.P. Wallace, Secretary Wickard, Secretary Morgenthau, and Senators Russell, McNary and Bankhead. SENATOR RUSSELL OFFERED THE SENATE A NEW COMPROMISE IN THE DISPUTE BETWEEN THE BADM ales AND THE ADMINISTRATION OVER THE SALE OF SURPLUS AGRICULTURAL COMMODITIES. IN CONNECTION WITH A LIMITATION IN THE $680,000,000 AGRICULTURE DEPARTMENT APPROPRIATION FOR 1943 PROHIBITING THE SALE OF GOVERNMENT OWNED OR CONTROLLED SURPLUSES AT BELOW-PARITY PRICES, RUSSELL PROPOSER THAT THE GOVERNMENT K AUTHORIZED TO SELL GRAINS FOR FEEDING PURPOSES ONLY AS LOW AS 85 PER CENT OF CORN PARITY. AN ADDITIONAL LIMITATION WOULD PREVENT THE SALE OF MORE THAN 125,000,000 BUSHELS OF WHEAT FOR SUCH PURPOSES. 5/19--2147P 305 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE May 15, 1942 TO FROM Secretary Morgenthau Mr. Haas Subject: Farm-retail price spreads for food products. The attached report from the office of the Secretary of Agriculture shows rather clearly the extent of the rise in farm prices of foods during the past year, as compared with the smaller increases in wholesale and retail food prices. This is brought out particularly in Figure 1 on page 5, and in Table 8 on page 14. The price data in this chart and table are compared by expressing each price series as an index, with the average for the 5-year period 1935-1939 taken as 100. It will be noted (Table 8, page 14) that in March 1941,food prices were approximately at their 5-year average level at retail, at wholesale, and at the farm. In the 12 months since March 1941, the three indexes show the following increases: retail food prices, from 98 to 119 (21 percent); wholesale food prices, from 95 to 122 (28 percent); and farm prices of 58 foods, from 100 to 138 (38 percent). The respective increases are shown graphically in the chart on page 5. The relatively greater increases in food prices at wholesale and at the farm obviously create a difficult problem in maintaining ceilings on retail food prices at their March levels. Marketing margins The report also makes a comparison of retail food costs for 58 foods with the amount paid farmers for these same foods, and computes the marketing margin. (Table 1, page 2.) It will be noted that during the 12 months from March 1941 to March 1942, the estimated annual cost of an average family's purchases of 58 foods rose from $321 to $384 an increase of $63 or 20 percent. of this $63 increase, $54 went to the farmer, and $9 represented an increase in the marketing margin. The farmer's share of the retail value rose from 44 percent in March 1941 to 51 percent in March 1942. -- 306 Recent tendencies During the 3-month period January-March 1942, as shown in Table 1, the amount paid to farmers has held nearly unchanged, rising from $194 to $195 (0.5 percent) while the cost at retail has risen 1.6 percent. The greater rise in retail costs during this period doubtless represents in large degree the delayed influence of the sharp rise in farm prices between November and January. The report covers price movements only through March. Farm prices of foods rose sharply in April. Preliminary and confidential figures from the Department of Agriculture show that the amount paid to farmers for 58 foods rose in that month to $201 from $195 in March, an increase of 3.1 percent. This compares with a rise of only 0.8 percent in April (confidential) in the cost of foods at retail. 307 . DEPARTMENT OF AGRICULTURE Mr Hane= WASHINGTON 35997 May 9. 1942 The Honorable The Secretary of the Treasury Dear Mr. Secretary: Before leaving town last night Secretary Wickard asked me to send you the enclosed publication on farm-retail price spreads, The underlined material has a bearing upon the discussion held in your office Thursday noon. Sincerely yours, Carl Hemilton Assistant to the Secretary Enclosure 308 UNITED STATES DEPARTMENT OF AGRICULTURE Bureau of Agricultural Economics FARM-RETAIL PRICE SPREADS March 1942 Cost at retail of foods produced on American farms increased less than 1 percent from mid-February to mid-March, accompanied by a slight rise in prices paid to farmers for food products. The spread between payments to farmers and cost at retail, comprising the marketing margin, continued to advance. Wholesale markets showed a rise of about 2 percent in prices of farm products and foods from mid-March to mid-April. According to preliminary information, retail prices of foods continued to rise slightly during late March and early April. Payments to farmers for food products have remained practically unchanged during the first 3 months of 1942 with marketing charges absorbing most of the increase in retail food costs. The farmer's share of the consumer's food dollar remains unchanged for the third month at 51 cents. The farmer's share has not yet risen above the level of September 1941, although his share increased substantially during the preceding 6 months. April 27, 1942 General trends in food prices and marketing margins In table 1 is shown retail cost of a family's annual food basket consisting of domestic farm products compared with equivalent payments to farmers and the spread or marketing margin measuring total charges for marketing services occurring between fermers end consumers. -2- Table 1 Annual family purchases of 58 foods Cost at Year and month retail Dollars Paid to farmers Marketing margin Dollars Dollars 118 Farmer s share of retail value Percent 1915 1916 258 134 137 134 285 155 130 1920 514 272 242 404 179 225 1929 415 195 220 47 1932 270 88 182 33 1937 1938 1939 1940 353 160 193 45 321 130 126 191 40 41 342 178 48 1941 132 164 185 182 1935-39 average 332 141 191 42 Jan. 310 132 178 42 July 316 128 188 41 Mar 321 141 180 327 151 May 331 153 June 345 161 176 178 184 46 Apr July 348 348 2/170 49 357 2/172 2/181 2/178 2/176 2/176 361 180 181 50 365 366 2/182 50 /189 2/183 2/177 378 381 194 194 184 187 384 195 189 252 1913 1914 258 1921 311 314 1940 1941 - Aug. Sept Oct Nov Dec 121 124 53 1942 Jan. Feb. Mar. 1 1/ 42 44 46 47 2/49 51 52 51 51 51 Important food products produced by American farmers combined in quantities representing annual purchases by a typical workingman's family. 2 Revised. Retail price averages for 51 cities from U. S. Bureau of Labor Statistics. Farm prices estimated by Agricul tural Marketing Service. -3- 309 During the first 3 months of 1942 the rate of increase in retail food costs was about half the rate for the last 10 months of 1941, which averaged about 1-1/2 percent a month. At $384 in March the retail cost of the family food basket was less than 1 percent above the $381 in February, 20 percent above the cost of $321 in March of 1941, and 16 percent higher than the 1935-39 pre-war average of $332. In 1929 retail cost of the same foods was $415 and the high point on record was $514 in 1920. There has bocn practically no rise in prices peid farmers for foods during the first 3 months of 1942. Farmers received $195 in March for the products included in the food basket. This represented a slight rise above the $194 received for the same products in January and Februery. Payments to farmers in March were 38 percent higher than a year earlier and 38 percent above the pre-war level of $141. March payments to farmers equalled the 1929 average but were 28 percent below the record high of $272 in 1920. Most of the persistent increase in retail food cost occurring since December has been absorbed into higher marketing charges. Of the $22 by which the retail cost in March exceeded the cost in December, only $6 WES passed back to farmers, while $16 represented increases in marketing charges. The marketing margin for the food basket at $189 in March hed not yet risen to the pre-war level of $191, but had regnined most of the decline occurring from 1937 into 1941. Estimated average family income rose 1 percent from February to March, approximately in line with increased food costs. (table 2 2). Price trends of food and fiber products at three levels of marketing Figures 1 and 2 picture the trends in prices of food and fiber products at the farm sale level, at the wholesale market level, and at the consumer purchase level. The price index of raw materials represented at the farm level fluctuates more widely than indexes of prices at the higher sholesale and retail levels. This is a result of the relatively greater stability in marketing charges than in prices. The discrepency in applitude of variation is less marked in food products where the farm price averages about 45 percent of retail equivalent than for fiber products where farm price is nearer 10 percent of retail value. Commedity prices and nargins Retail prices of oranges rose by 10 percent from February to March while rolled cats rose 11 percent, peanut butter 8 percent, rice 5 percent, and pork 4 percent (table 4). The composite price cf principal perk products in March was 28.5 cents, about 13 percent higher then the pre-wer average of 25.3 cents. Lamb cuts are absu 6 percent higher at retail than during pre-wer after declining from January and February. 4 Year and month Nonfarm family income and cost of family food purchases for selected periods : Table 2 1 Retail : Retail : Food cost as percentage Family : cost of :cost of 58: of income income Dollars :all foods: foods : All foods 58 foods Dollars Percent Dollars Percent 1,847 688 514 37 28 1920 1,968 540 415 27 21 1929 1,116 343 264 31 24 1933 1,645 1,888 394 314 24 19 1940 1941 430 342 23 18 474 476 378 23 18 381 22 18 Feb. 2/ 2,095 2/ 2,122 2,143 483 384 23 18 Mar. 1942 Jan. 1 For sources of material used in this table see "Farm-Retail Price Spreads December 1941", p.5. (Note at foot of table 2.) 2 Revised. 3 Preliminary estimate. FARM FOOD PRODUCTS PRICES OF MARKETING. UNITED STATES, 1913-42 INDEX NUMBERS 1935-39=100 PERCENT Prices received by farmers for food products 175 150 Wholesale prices 5 of food * 125 100 Retail prices of food* 75 50 1913 1917 1921 1925 1933 1929 1941 *BASED ON DATA FROM B.L.S. NEG. 42051 FIGURE U.S. DEPARTMENT OF AGRICULTURE 1937 BUREAU OF AGRICULTURAL ECONOMICS FARM FIBER PRODUCTS: PRICES AT THREE LEVELS OF MARKETING. UNITED STATES, 1913-42 INDEX NUMBERS ( 1935-39=100) PERCENT Prices received by farmers for cotton and wool 250 200 Wholesale prices of textile products * 150 100 Retail prices of clothing * 50 1913 1917 1925 1921 * U.S. DEPARTMENT OF AGRICULTURE 1933 1929 1937 1941 BASED ON DATA FROM B.L.S. FIGURE 2 NEG. 42052 BUREAU OF AGRICULTURAL ECONOMICS 311 Price 1942 spreads March between the farmer and the consumer - food products, Retail commodity : Retail Table: No. Unit 1 :Price Quantity Value Cents Pork products Dairy products Hens Eggs 11 :1 1b. prin. :pork products 12 :100 lb.milk :equivalent 13 :1 1b. 14 :1 doz. 15 :1 1b. 28.5 393.5 35.7 Rolled oats Corn flakes Sheat cereal Rice 21 :1 1b. 11.9 Corn meal :Actual percent:margin :age of :retail :price Cents 1.90 1b.live Cents Percent 23.4 5.1 82 100 lb.milk equivalent 1.11 1b. 2/193.9 2/199.6 49 20.0 15.7 13.9 39.7 1 doz. 17 :1 1b. 18 :1 1b. 19 :8-oz.pkg. 20 :28-oz.pkg. White bread 16 :1 lb. :value ag hog 5.2 8.6 4.7 9.2 7.2 24.1 White flour : Farm Farm equivalent : -3 : Table 1.41 lb.wheat .97 lb.wheat 1.5 lb.corn 1.78 lb.oats 25.8 2.5 1.7 2.1 2.7 6.9 2.6 6.3 56 65 48 20 45 lb.corn 2.065 lb.wheat 2.9 1.8 5.4 25 3.6 20.5 15 1.51 1b. rough 5.7 6.2 48 1 1b.dry beans 4.6 4.4 51 1/17 box 7.7 21.2 27 1.275 rice 32 Navy beans 22 :1 1b. Oranges 24 :1 doz. Potatoes 25 :1 1b. 3.2 1 1b. 1.7 1.5 53 Apples 35 :1 1b. 6.2 1 1b. 2.7 3.5 44 Lamb products 37 :1 1b. prin. 22.4 6.3 78 9.0 28.9 28.7 :lamb cuts 2.16 1b.live lamb Sweet potatoes 38 :1 1b. 5.0 1 1b. 1.8 3.2 36 itye bread 39 :1 1b. 9.1 .39 lb.rye & 1.6 7.5 18 40 :1 1b. 9.9 .64 lb.wheat .92 1b. wheat 1.6 8.3 16 1b. 14.2 1.72 1b.durum 2.7 11.5 19 1.9 14.5 12 10.4 13.0 44 hole wh. bread Macaroni :1 41 wheat Soda crackers 42 Peanut butter 44 58 foods combined / :1 1.085 lb.wheat 1b. 16.4 1b. 23.4 1.73 1b.peanuts : Annual family 8 :consumption Annual family $384 consumption $195 $189 51 Table numbers rofer to numbering in original 1936 report and annual supplements entitled "Price Spreads Between the Farmer and the Consumer. 2/ Preliminary. Retail prices from the United States Bureau of Labor Strtistics. -&- 4 - Price spreads between the farmer and the consumer - food products, retail prices Retail price Retail unit Commodity 1935-39 average Mar. Jan. Feb. Mar. 1941 1942 1942 1942 Cents Cents Cents Cents :Percentage :change to Mar. :1942 from Mar. 1941 :1 1b. prin. Pork products 25.3 21.0 26.5 27.3 28.5 324.0 338.5 392.4 392.9 393.5 32.1 29.4 34.2 46.4 5.1 8.6 5.2 8.2 5:0 7:4 7.8 24.3 4.2 7.7 4.2 7.1 7.2 23.4 4.5 7.8 4.6 7.2 8.3 7.2 23.9 24.0 24.1 Hens :1 1b. 31.7 Eggs :1 doz. 36.0 White flour :1 1b. :1 1b. :1 1b. :1 1b. White bread Corn meal Rolled oats Corn flakes 4:5 35.2 42.2 8.6 35.7 39.7 5.2 8.6 4.7 9.2 Wheat cereal Rice 1 lb. 8.2 8.1 10.2 11.3 11.9 Navy beans 1 1b. 6.9 6.5 8.8 9.0 9.0 31.5 27.5 29.1 26.2 28.9 1b. 2.5 2.0 3.1 3.3 3.2 1b. 5.5 5.3 5.8 6.1 6.2 27.2 26.2 29.6 28.8 28.7 4.4 5.3 4.9 5.0 5.0 Oranges :1 doz. Potatoes :1 Apples :1 1b. prin. Lamb products :lamb cuts Sweet potatoes :1 1b. Rye bread 1b. 9.1 8.6 9.1 9.1 9.1 Whole wh.bread 1b. 9.3 9.2 9.9 9.9 9.9 :1 lb. 15.0 13.8 14.1 14.1 14.2 1b. 16.9 15.0 15.3 16.2 16.4 1b. 19.3 17.7 20.5 21.7 23.4 $378 $381 $384 Macaroni Soda crackers Peanut butter :1 : Annual family : combined + 36 + 16 consumption $332 $321 Percent +4 + 1/ 11 + +1 35 + + + + - 6 24 0 12 0 12 2 +11 30 + 7.2 8-oz.pkg. 28-oz.pkg 58 foods Percent :pork products Dairy products :100 1b. milk equivalent :1942 0 0 + 4 3 47 + + 5 38 0 +10 + 5 60 + - Cents Feb. : Table 3 17 + 10 + - + + 1/ 0 6 0 6 0 8 +1 + 3 +1 + 9 + 8 32 20 +1 1 Less than 0.5 percent. Retail prices are 51-city averages as published by the United States Bureau of Labor Statistics. 312 Prices received by farmers declined slightly from February to March for dairy products, eggs, navy beans, and lambs (table 5). Farm prices of beef cattle, hogs, and chickens rose moderately. Oranges showed the greatest increase for the month, the farm price advancing by 50 percent, but remaining below the 5-year pre-war average. Marketing margins between retail prices and equivalent farm values rose moderately from February to March and are generally higher than March of 1941, although for pork, lamb, and sweet potatoes margins are substantial- ly lower than a year ago (table 6). In using the data on margins and farm value as percentage of retail price it is necessary to emphasize the neglect of byproducts for most of these comparisons. Two examples where the omission of byproducts are most striking are pork products and lamb products. For pork the comparison is based upon 52.6 pounds of principal fresh and cured products, neglecting the value of about 16 pounds of minor edible products and all inedible byproducts. Inclusion of minor products and allowance for byproduct values would reduce the ferm value percentage by 10 to 15 points. Allowing for only the pelt value on lambs would reduce the equivalent farm value and the farm value percentage of retail price by about one-fourth. Price controls in farm products During the past month the CPA has made no important extension of price ceiling orders for foods beyond amendments to the meximum price regulations effecting canned fruits and vegetables and pork products. Price schedules for textile products were broadened to include more descriptions of product when it Was discovered that producers tended to shift production to unrestricted items and high profit items. The base reference period defined in the pork product regulation was March 3-7 and the preferred basis for price determination was company price lists. It was found that a number of firms had anticipated the OPA order and had issued price lists for the base period incorporating price increases out of line with the general market. To avoid favoring those firms the determinaticn of prices for the March 3-7 period was redefined, effective April 20, to be the highest list or actual sales price for February 16-20 plus stated increases by cuts representing market price changes between the two periods. Prices cf important groups of farm products remained below 110 per- cent of parity on March 15, including poultry, ebcs, cost grains, some fruits and vegetables, and cotton. Uniter terms of the Emergency Price Control Act of 1942, ceilings cannot be imposed upon farm products in raw cr processed form which would reflect prices tc farmers below 110 percent of parity. Labor costs in marketing Hourly earnings f labor employed in food marketing in February were percent higher than the average for the 1935-39 pre-wer neriod and had risen by 9 percent over March 1941 (table 9). Eernings in food processing for February were 24 percent above pre-war. In Class I steam railways the 18 -10- Table 5 - Price spreads between the farmer and the consumer - food products, farm value Farm value 1935-39 Faverage Cents Mar. : equivalent Jan. : Commodity Feb. : Farm :Percentage :change to Mar. :1942 1941 1942 Cents Cents 20.0 Mar. 1941 Cents 22.1 from Mar 1942 Conts :1942 :1942 Percent : : 146.0 1/13.4 1/156.0 16.5 21.7 16.0 16.4 18.9 31.3 19.3 27.5 20.0 25.8 2.0 1.3 1.8 1.9 1.6 1.7 1.2 1.5 1.9 1.3 2.5 2.5 1.7 1.9 2.8 1.7 2.5 1.7 2.1 1.7 2.1 Rolled oats Corn flakes :1.41 lb.wheat :.97 1b. wheat :1.5 1b.corn :1.78 1b.oats :1.275 lb.corn 2.9 1.7 2.9 1.8 Wheat cereal :2.065 lb.wheat 2.9 2.5 3.7 3.6 3.6 Rice 2.5 3.3 5.3 5.4 5.7 Navy beans :1.51 lb.rough trice :1 1b. dry beans 3.5 2.7 4.9 4.8 4.6 Oranges :1/17 box 9.3 1.2 6.2 1.6 2.4 5.1 1.7 1.9 6.9 0.9 2.0 2.5 7.7 1.7 2.7 16.2 19.3 22.2 22.6 22.4 1.5 1.7 1.7 1.8 1.8 + :.39 1b.rye & :.64 lb.wheat 1.3 1.1 1.6 1.6 1.6 +45 Wh.wheat bread: .92 lb.wheat 1.3 1.1 1.6 1.6 1.6 +45 2.3 1.9 2.7 2.7 2.7 +42 1.9 + 46 Pork products :1.90 1b.live hogs 15.7 Dairy products:10 lb.milk :equivalent :1.11 1b. Hens doz. Eggs White flour White bread Corn meal Potatoes :1 1b. :1 1b. Apples : Lamb products :2.16 1b.live 23.4 $ Perce 75 +6 24 .2 + 25 +4 + 57 -6 1/202.0 1/198.8 2/193.9 47 + 0 42 + 0 + 40 0 53 + 0 38 + 6 44 + + 0 +6 73 + 70 12 -4 +51 89 0 35 + 16 + :lamb Macaroni :1.72 1b.durum :wheat Soda crackers :1.085 lb.wheat 1.5 1.3 1.9 Peanut butter :1.73 1b.peanuts 6.1 6.0 8.8 9.4 10.4 $141 1/$141 194 194 195 foods combined 1 1.9 Annual family consumption Revised 2 Preliminary Farm values are calculated from U.S. average farm prices. 73 38 0 0 Rye bread 0 6 0 Sweet potatoes:1 1b. 0 -116 Price marginsspreads between the farmer and the consumer - food products, :Percentage Margin : : :1 1b. :1 doz. ens EES hite flour ite bread orn meal blled oats orn flakes heat cereal ice average Jan. 1942 1942 Cents Cents Cents Cents Feb. :1942 from - Mar. 1942 : products :1 1b. prin. :pork products airy products:100 1b. milk equivalent brk :change to Mar. Mar. 1941 : Commodity 1935-39 : Retail unit 7.6 6.5 5.2 5.1 178.0 1/182.5 190.4 1/194.1 2/199.6 16.1 15.3 15.1 15.9 14.7 15.7 13.9 2.6 2.7 6.9 2.5 5.4 :1 1b. :1 1b. :1 1b. :1 1b. 2.5 6.9 3.2 5.5 :8-oz.pkg. :28-oz.pkg. 6.2 13.0 1941 Feb. :1942 Percent Cents 9.6 15.2 14.3 Mar. : able 313 Percent -2 -33 + +3 9 -1 2 -5 + 7 2.6 5.0 5.5 20.2 5.5 2.7 6.9 2.6 6.3 5.4 21.4 2.5 6.5 2.7 5.2 5.9 20.9 20.4 20.5 -8 -2 :1 1b. 5.7 4.8 4.9 5.9 6.2 +29 + 1b. 3.4 3.8 3.9 4.2 4.4 +16 + + + avy beans 6.9 + + 8 0 6 0 .4 +4 +17 +21 -2 + 3 5 5 ranges :1 1b. 22.2 20.6 22.9 21.1 21.2 tatoes :1 1b. 1.3 1.1 1.5 1.6 1.5 +36 ples :1 1b. 3.6 3.3 3.4 3.6 3.5 + 11.0 6.9 7.4 6.2 2.9 3.6 3.2 1b. 7.8 7.5 wh.bread:1 1b. 8.0 1b. 3/ 3 -6 6 -3 6.3 -9 +2 3.2 3.2 -11 7.5 7.5 7.5 8.1 8.3 8.3 8.3 12.7 11.9 11.4 11.4 11.5 da crackers :1 1b. 15.4 13.7 13.4 14.3 14.5 anut butter :1 1b. 13.2 11.7 11.7 12.3 13.0 $191 1/$180 $184 $187 $189 products 1b. prin. :lamb cuts eet potatoes:1 1b. bread ole caroni foods combined :1 Annual family consumption Revised. Preliminary. Less than 0.5 percent + 0 0 0 2 O -3 + 6 +11 + + 1 + + 1 6 1 - -12- Table 7 -- Price spreads between the farmer and the consumer - food products, farm value as percentage of retail price Farm value as a percentage of retail price 1935-39 average Percent Mar. Jan. Feb. 1941 1942 1942 1942 Percent Percent Percent Percent : Commodity Mar 64 75 81 82 46 51 51 49 52 50 55 55 56 60 56 67 65 65 White flour 44 40 49 48 48 White bread 16 16 20 20 20 Corn meal 36 36 42 46 45 Rolled oats Corn flakes 26 27 36 35 32 25 Pork products 62 Dairy products 45 Hens Eggs 21 18 24 24 Wheat cereal 12 11 15 15 15 Rice 30 41 52 48 48 Navy beans 51 42 56 53 51 Oranges 30 25 21 19 27 Potatoes 48 45 52 52 53 Apples 35 38 41 41 Lamb products 60 74 75 78 78 Sweet potatoes 34 32 35 36 36 Rye bread 14 18 18 18 13 Whole wheat bread 14 12 16 16 16 Macaroni 15 14 19 19 12 12 Soda crackers 9 9 44 19 12 44 Peanut butter 32 34 43 43 58 foods combined 42 44 51 51 51 314 interes in -13- Fubruary employees' average compensation per hour was 122 on a 1935-39 base, 15.percent above. November of last year, which was the last month preceding the general wage rate increase. In February average hourly compensation was 88 cents compared with 78 cents a year earlier. Are current marketing margins normal? It is difficult to judge at any time what should constitute a normal or fair margin. Adequate determination of such e value would involve appraisal of all current costs, in entory situations, and agreeing upon a fair return upon investment and a fair allowance to management. An alternative is to select a base period average and to assume simply that normal marketing charges would vary in line with their typical historical relation to price levels. One such test has been worked out using the 1935-39 prowar average margin as a base and projecting the margin to higher price levels prevailing in March of 1942. Preliminary analysis indicates that in relation to the pre-war 1935-39 period current marketing mergins for cotton products between farmer and consumer are somewhat higher than normal. Cotton mill margins are at record highs, but processing costs have been rising, particularly unit labor costs. On the other hand, farm-to-retail price spreads on food products are generally far below normal when judged in relation to 1935-39. It may be expected that margins will rise toward normal levels if retail prices are controlled so that a higher retail level would be required to support prices now received by farmers for food products. -14 Foods : month : of city families Whole Farm sale :Farm Retail sale Sprices:prices:prices:paid Retail:Whole-:prices:pricesiprices : ofall: of ofall :cotton: of of of prices: sale of prices: all foods : and WholeFarm living Fibers : Cost of Year Indexes of prices at several levels of marketing, Farm products: 1935-39 = 100 Table 8 58 foods farm :cloth-itextile:and pro- ing ducts 2 wool :pro- :pro:ducts :ducts 4 2 3/ 3 1 1 80 111 94 95 81 77 97 94 95 80 78 99 111 111 100 174 128 193 131 281 195 190 141 174 193 201 232 282 198 199 162 126 138 115 127 167 138 137 123 81 95 69 1913 1914 71 72 82 82 97 70 1916 1918 1920 1929 1932 1935 1936 1937 1938 1939 1940 78 91 96 110 108 134 151 143 169 122 132 62 91 77 55 63 61 106 98 97 100 109 104 102 100 104 108 98 101 114 106 107 100 111 114 114 105 94 81 90 89 98 100 98 85 86 88 97 94 102 104 97 89 92 99 105 116 106 119 131 108 115 105 96 85 80 96 85 84 83 94 101 91 90 98 95 95 92 98 95 91 94 110 101 91 93 89 91 104 99 89 91 96 91 102 96 89 89 88 97 101 95 100 102 101 94 101 98 107 102 108 98 104 Apr. 102 110 114 97 98 103 102 101 109 103 117 105 105 114 103 119 108 103 105 106 111 June 119 129 101 May July 105 121 121 141 108 110 6 /122 124 149 Sept Oct. 108 111 113 6 128 126 128 113 118 131 6/129 6/134 114 128 128 168 160 115 120 123 Aug. 106 105 107 111 113 105 107 118 107 154 119 127 115 129 157 125 135 6/138 116 6/132 164 6/133 134 171 133 137 136 174 135 137 1941 1939 Aug. Sept 98 86 77 98 100 99 101 103 105 108 113 103 107 101 98 93 92 102 99 95 89 89 100 97 90 105 105 101 100 1940 Jan. Mar. 100 July 1941 Mar. Nov. Dec. 1942 Jan. Feb. Mar. 1 2 81 102 - 109 110 112 112 113 113 110 113 114 6/112 /113 116 114 117 119 6/119 120 122 138 138 119 124 86 100 100 131 140 100 107 109 112 113 115 117 118 119 From "Changes in Cost of Living" Bureau of Labor Statistics. Calculated from figures of the Bureau of Labor Statistics. Based on figures published by the United States Department of Agriculture. Cotton and wool prices weighted by production in the period 1935-39. Preliminary Table food costs, consumer income and of charges and hourly earnings in marketing, 1935-39 - 100 9 Monthly :Retail:Nonagri- earnings Year and month : Payments :cost cultural : per of 58 foods : : income :employed :payments :factory 1/ :worker 2 to farmers for Marketing margin of 58 Class I steam 58 foods Hourly earnings in marketing enterprises foods railways 3 Food processing Food marketing Cotton processing 4 4/ 5/ - - - 1929 125 122 118 138 115 93 1935-39 average: 100 100 100 100 100 100 100 100 100 1940 95 113 111 94 95 105 110 1941 133 131 116 93 106 116 105 110 106 103 1941 Mar 97 126 121 100 94 DOG Apr 98 127 123 92 May 130 129 June 100 104 107 109 93 133 133 114 96 104 104 104 114 114 July 105 134 134 121 Aug. 103 103 92 104 109 110 110 135 139 140 7/122 7/128 Oct Nov Dec 136 136 138 92 Sept 105 108 128 95 7/140 7/144 140 7/143 7/129 7/134 Jan 114 146 150 Feb Mar 115 116 7/148 6/150 7/149 6/150 2 3 110 122 124 103 111 7/130 7/96 106 121 113 130 7/93 7/119 123 7/114 130 138 138 96 119 122 125 124 117 118 6/138 6/99 93 98 111 110 110 121 7/131 131 United States Department of Commerce estimates. Adjusted for seasonal variation. Prepared in the Bureau of Agricultural Economics from data of the U. S. Bureau of Labor Statistics, adjusted for seasonal variation. Compiled from data published by the Interstate Commerce Commission. 4 United States Bureau of Labor Statistics. 5 Weighted composite of earnings in steam railways, food processing wholesaling, and retailing. I/ Revised. Preliminary estimates. 5 109 115 116 116 117 117 115 115 115 118 1942 - 1 108 108 110 119 316 LET THE EVER NORMAL GRANARY HELP WIN THE WAR A radio talk by Claude R. Wickard, Secretary of Agriculture, broadcast Friday, May 15, 1942, in the Department of Agriculture period, National Farm and Home Hour, by Blue Network and 100 associated radio stations. Grave issues are before the nation in the pending Senate vote on 1943 the provisions of the agricultural appropriation bill relating to the / sales of corn and wheat from the Ever Normal Granary. Shall the huge stocks of feed now on hand in this country be released at prices that will make it possible to reach the vital war goals for production of meat, milk, and eggs? Or shall these feed stocks be held at prices which will slow down the war food program and lessen the supply of food for the American people and their allies? Those are the questions before us. So much is involved that every farmer -- and every consumer - should understand the matter clearly. That is why I an discussing it with you. We have accumulated vast supplies of corn under Government loan. We have under loan also huge stocks of wheat, part of the largest amount of wheat ever on hand in this country. We need meat, milk, and eggs and need them very much. We have been selling Government stocks of both grains for feed/ at prices somewhat under parity so as to stimulate the production of mat, milk, and eggs. But for months a struggle has gone on over the question of holding Governmant-owned grain until the price is forced up to parity. The group who hold the view that this should be done were successful in the House of Representatives' action on the 1943 appropriation bill. The bill went to the Senate Committee on Appropriations. After 317 -2- full hearings and thorough consideration of all the issues involved, that group came to what I regard as a statesmanlike conclusion, I want to pay tribute to the patience and the level-headed judgment of the men on this committee who went exhaustively into the whole matter and came out with the legislation now under consideration, which would continue the present system of handling Ever Normal Granary feed stocks. Now, feeding the Ever Normal Granary stocks of corn and wheat is the key to success in the farmers' drive to set new records in production of meat, milk, and eggs. Only by using the Ever Normal Granary feeds will we be able to turn out the food our fighting men, our people and our allies must have to win the war. These feeds will be liberally used by farmers, and the food turned out as long as the ratio between the price of feed and the price of meat animals, milk, and eggs is right. We have proved this the past year. We have kept the prices of feeds at the loan levels, and supported the prices of hogs, milk products, eggs, and poultry. The result has been the greatest output on record for these foods. Corn and wheat growers have not been penalized by holding feed prices at the loan levels. The grain growers have received fair prices because of the Government parity payments. These payments make up the difference between the loan or the market price and parity. The cooperating grower receives through loan plus payments a fair price - a parity price. now Here are the net results of the present system: Corn and wheat growers receive parity. Stockmen, dairymen, and poultrymen are able to produce to the limit. Consumers' food costs are held down. The danger of runaway inflation is lessened. 318 -3- Under the bill as reported out by the Senate committee, the Congress authorises continuing the present system, including the payments that assure parity to grain growers. But some people claim. ing to speak for farmers now urge that the system shall be wrecked. Their plan is to require that the feed stocks be sold at not less than parity. Their plea is that this is required to serve the grain farmers. I think they are wrong, because farmers are assured of parity now. I think that continuing the present system is in the interest of the nation and all its people, and especially the farmers. This is doubly true now. We have set out to keep down costs of living and prevent ruinous inflation that would hold us back in fighting the war and torture us after the war. As part of this program, the Government has placed ceilings on prices, holding them to the highest levels reached in March. The prices of meats and milk are controlled by ceilings. They can go no higher than the highest point reached in March. Now observe what would happen if the price of feeds should be forced up 15 percent or more as proposed by the people who want to forbid sales of Ever Normal Granary feed stocks at less than parity. The costs of farmers producing milk and meat would rise. With costs up and prices held steady, many farmers would have to quit producing. Then we would have less bacon and ham, lard, evaporated and dried milk, eggs and other vital products. That would not help win the war. 319 Milk production has not increased quite as much as we had hoped. This is largely because the costs of dairy farmers have gone up more than their prices. As I have pointed out, price ceilings recently were put on fluid milk. Although there is no price ceiling on butter, consumers doubtless regard the present price as comparatively high. Now if we increase feed costs to dairymen as is being advocated, either we will have to break hines the ceiling prices on milk and raise both milk and butter, or we face a cut in production of milk, I don't believe the nation wants to do either one. Let's continue our present system of making the huge supplies of feed available at prices that bring about heavy production of milk - and of meat and eggs. If feed prices rise as the result of restrictions put on the sale of corn and wheat, we will either (1) have to risk inflation by breaking the price control structure; or (2) have to risk putting our soldiers abroad, our allies, our own people on short rations. I am satisfied that farmers generally are not in favor of running the reckless risks of shoving Ever Normal Granary feed prices to parity. It doesn't make sense. Grain farmers would earn no more than they do now. Livestock farmers would earn less, or else the price control structure would have to be jeopardized. If the latter happened, consumers would pay out a billion dollars a year more for their food, and the inflationary sweep would be on. The whole thing would hurt farmers tremendously - also consumers. Most important, it would hamper us in winning the war. 320 - -5 - In these times we view things in a new light. We set new standards and objectives. Our aim above everything else is the success of our country's cause, Thousands upon thousands of farmers have boys in the fighting forces and boys overseas. These boys are facing death and this nation is facing its greatest trial. If we lose this war, we have lost everything. I can not for the life of me see how anyone can seriously advocate something which would not help farmers but which would injure our entire war effort. I feel that some of those who are supporting this proposal simply haven't thought this thing through. We stored up the vast supply of feed in the Ever Normal Granary on the theory that we would use it in time of emergency. If we are ever going to have an emergency we've got one now. So I say let's use every- thing we've got to whip the Axis. Restrictions on the use of feed can be just as devastating as restrictions on the use of munitions. Let's use our enormous supplies of feed to help win the war. 321 MAY 15 1942 MEMORANDUM FOR THE PRESIDENT: (See Book 526, P 111 I have had prepared in the Treasury the attached study/ of a Stabilization Fund for the United and Associated Nations and an International Bank for Reconstruction and Development. The purpose of these two agencies is to meet the inevitable post-war international monetary and credit problems--to prevent disruption of foreign exchange and the collapse of monetary and credit systems, to assure the restoration of foreign trade and to supply the huge volume of capital that will be needed abroad for relief, for reconstruction, and economic development essential for the attainment of world prosperity and higher standards of living. I would like very much to have you read the appended extract from the study which briefly sets forth why preliminary work for the establishment of such institutions should be entered into now, and gives some indication of their nature and scope. I am convinced that the launching of such a plan at this time has tremendous strategic as well as economic bearing. It seems to me that the time is ripe to dramatize our international economic objectives in terms of action which people everywhere will recognize as practical, powerful and inspiring. In the flush of success our enemies always dealt upon their "New Orders" for Europe and for Asia. There could be no more solid demonstration of our confidence that the tide is turning than the announcement of the formulation in concrete terms, and the preparation of specific instrumentalities for what really would be a New Deal in international economics. 322 -2If you think this idea is worth canvassing, I would like to ask the Board of Economic Warfare, State Depart- ment and Federal Reserve Board and other appropriate agencies to work with the Treasury on these plans with a view to your calling a conference to be held in Washington of Finance Ministers of the United and Associated Nations. In this connection you will remember that Resolution XV of the Rio Conference already commits the American Republics to participate in such a conference. To give some idea of the ground that might be covered by a conference of that character, there is also appended a file of a few preliminary documents which includes a suggested agenda which might accompany the invitations, and a suggested program of the conference. E. Margarthan, Jr. HDW:dmh/grs 5/14/42 323 Suggested Plan for a United and Associated Nations stabilization Fund and a Bank for Reconstruction and Development of the United and Associated Nations It is yet too soon to know the precise form or the approximate magnitude of post-war monetary problems. But one thing is certain. No matter how long the war lasts nor how it is won, we shall be faced with three inescapable problems: to prevent the disruption of foreign exchanges and the collapse of monetary and credit systems; to assure the restoration of foreign trade; and to supply the huge volume of capital that will be needed virtually throughout the world for reconstruction, for relief, and for economic recovery. If we are to avoid drifting from the peace table into a period of chaotic competition, monetary disorders, de- pressions, political disruption, and finally into new wars within as well as among nations, we must be equipped to grapple with these three problems and to make substantial progress toward their solution. Specific plans must be formulated now. Clearly the task can be successfully handled only through international action. In most discussions of postwar problems this fact has been recognized, yet to date though a number of persons have pointed to the solution in general terms--no detailed plans sufficiently realistic or 324 -2practical to give promise of accomplishing the task have been formulated or discussed. It is high time that such plans were drafted. It is time that detailed and workable plans be prepared providing for the creation of agencies with resources, powers and structure adequate to meet the three major post-war needs. Such agencies should, of course, be designed to deal chiefly with post-war problems. But their establishment must not be postponed until the end of hostilities. It takes many months to set up such agencies. First, a plan has to be perfected. Then it has to be carefully considered by a number of countries. In each country, again, acceptance can follow only upon legislation. That alone will consume many months and possibly longer. And even when the plan is finally accepted, much time will be further consumed in the collection of personnel, and the performance of the preliminary ground work which must be done before effective operations can begin. Altogether, a year may be required before a proposal can be transformed into an operating agency. Obviously, therefore, even though no important imme- diate ends will be served by having such agencies function- ing during war time, it will be an error to wait until the end of the war is in sight before beginning serious discussion of plans for establishing such agencies. No one knows how soon the war will end, and no one can know how 325 -3long it will take to get plans approved and the agencies started. Yet, if we are to "win the peace", which will follow the war, we must have adequate economic instruments with which to carry on effective work as soon as the war is over. It would be ill-advised, if not positively dangerous, to leave ourselves at the end of the war unprepared for the stupendous task of world-wide economic reconstruction. Specific proposals will help win the war. But there is an additional important reason for inftiating at once serious discussion of specific proposals. Such discussion will be a factor toward winning the war. It has been frequently suggested, and with much cogency, that the task of securing the defeat of the Axis powers would be made easier if the victims of aggression, actual and potential, could have more assurance that a victory by the United Nations will not mean in the economic sphere, a mere return to the pre-war pattern of every-country-for itself, of inevitable depression, of possible wide-spread economic chaos with the weaker nations succumbing first under the law-of-the-jungle that characterized international economic practices of the pre-war decade. That assurance must be given now. The people of the anti-Axis powers must be encouraged to feel themselves on solid international ground, they must be given to understand that a United Nations victory will not usher in another two decades of -4- 326 economic uneasiness, bickering, ferment, and discuption. They must be assured that something will be done in the sphere of international economic relations that is new, that is powerful enough and comprehensive enough to give expectation of successfully filling a world need. They must have assurance that methods and resources are being prepared to provide then with capital to help them rebuild their devastated areas, reconstruct their war-distorted economies, and help free then from the strangulating grasp of lost markets and depleted reserves. Finally, they must have assurance that the United States does not intend to desert the war-worn and impoverished nations after the war is won, but proposes to help them in the long and difficult task of economic reconstruction. To help them, not pri- marily for altruistic motives, but from recognition of the truth that prosperity, like peace, is indivisible. To give that assurance now is to unify and encourage the anti-Axis forces, to greatly strengthen their will and effort to win. Nor will the effect be on the anti-Axis powers alone. Whether within the Axis countries the will to fight would be weakened by such arrangements is not certain, but assur- edly it would not be strengthened. And certainly the people in the invaded countries, and the wavering elements in the Axis-dominated and Axis influenced countries would be given additional cause to throw in their lot more definitely and openly with the anti-Axis forces if there is real promise that an orderly prosperous world will emerge from a United Nations victory. 327 -5Two International Government Agencies must be established a Stabilization Fund and a Bank for Reconstruction. A vital part of that promise rests on international monetary and banking collaboration. The United Nations and the Nations associated with them must undertake CO- operatively two tasks as soon as possible: first, to provide an instrument with the means and the procedure to stabilize foreign exchange rates and strengthen the mone- tary systems of the United Nations; and second, to establish an agency with resources and powers adequate to provide capital for economic reconstruction, to facilitate rapid and smooth transition from war-time economies to peace-time economies, to provide relief for stricken peoples during the immediate post-war period, to increase foreign trade, and permanently increase the productivity of the United Nations. Those two tasks should be kept distinct. Though in some of their facets and in many of their consequences there is considerable interdependence and interaction, the two are different enough to call for separate instrumen- talities. Each is sufficiently specialized to require different resources, different responsibilities, and different procedures and criteria for action. To supply the United Nations with necessary capital not otherwise available except possibly on too costly terms should be the function of a bank created for that specific purpose; whereas mone- tary stabilization--a highly specialized function calling 328 -6- - - for a special structure, special personnel, and special organization--would best be performed by a stabilization fund created to perform that special function. It is therefore recommended that immediate consideration be given to formulating plans for the establishment of two separate institutions: 1. A United and Associated Nations Stabilization Fund, and 2. A Bank for Reconstruction and Development of the United and Associated Nations. While either agency could function without the existence of the other, the creation of both would nevertheless aid greatly in the functioning of each. Doubtless one agency with the combined functions of both could be set up, but it could operate only with a loss of effectiveness, risk of over-centralization of power, and danger of making costly errors of judgment. The best promise of successful opera- tion seems to lie in the creation of two separate institutions, linked together by one or two directors in common. Proposals must be drafted by experts of many governments meeting for that purpose. It is hoped that some time soon, representatives of various interested governments will meet in conference to explore the possibility of working out a plan for the establishment of an international stabilization fund and bank. To facilitate the preliminary work of such a committee, and to provide the officials of the interested governments with a proposal set in specific enough terms to 329 -7encourage and justify fruitful discussion prior to a meeting, the following report has been prepared. It contains a suggested plan for a fund and for a bank, and also some discussion of the various points involved. Anyone familiar with the task of setting up new and complex organizations such as the two envisaged will fully appreciate that no single person, no matter how well informed on the subject, can hope to draft a plan that would meet with general approval. This is especially true of a proposal calling for international collaboration and requiring acceptance by several governments. To draft a plan that is likely to meet with approval of various governments is a task beyond the competence even of a group of economists from any single country. The details of any plan submitted for consideration would have to be subjected to careful evaluation and examination by a number of men, some of whom should be expert in the handling of international economic problems and monetary theory, and others at home in related fields. In addition to monetary problems, questions of sovereignty, of national interest, and of broad economic policy are involved in some of the more important provisions, and these inevitably must be the subject of controversy and compromise. They are also matters that must be discussed in detail and at length by high officials whose responsibilities include the shaping and administration of monetary and financial policy. -8 - 330 The proposals and comments that follow are submitted with the intent of providing a starting point for intelligent discussion and of calling attention to some of the difficulties which would have to be satisfactorily met before a workable and acceptable plan may emerge. The proposals have been set forth only in outline and for the most part only those points are included which are essential to an understanding of the plan. It is certain that some of the powers and requirements included in the outline of the Fund and the Bank will not survive discussion, prejudice and fear of departure from the usual. Some may not stand the test of political reality, and some may be unacceptable on technical grounds, while others may be generally regarded as going too far toward "internationalism." Yet most of them appear as desirable objectives in most writings or conferences on post-war economies and are worth considering. Willingness to depart from tradition and break new ground is essential if meaningful results are to be obtained. It will perhaps help toward understanding and induce a more sympathetic approach to the proposals which follow to state at the outset that something much more than the usual banking and stabilization functions are envisaged in the plan. There is urgent need for instruments which will pave the way and make easy a high degree of cooperation and collaboration among the United Nations in economic 331 -9fields hitherto held too sacrosanct for international action or multilateral sovereignty. A breach must be made and widened in the outmoded and disastrous economic policy of each-country-for-1tself-and-the-devil-take-the-weakest Just as the failure to develop an effective League of Nations has made possible two devastating wars within one generation, so the absence of a high degree of economic collaboration among the leading nations,will during the coming decade, inevitably result in economic warfare that will be but the prelude and instigator of military warfare on an even vaster scale. The Fund and the Bank described in the following pages are envisaged as economic instruments that most easily and effectively can facilitate that high degree of economic collaboration. It will be at once apparent that the resources, powers and requirements for membership, accorded both agencies go far beyond the usual attributes of mone- tary stabilization and of banking. They must if they are to be the stepping stone from shortsighted disastrous economic nationalism to intelligent international collabor- ation. Timidity will not serve. It is my conviction that the long-time effectiveness of both agencies will be measured by the degree to which boldness and vision are displayed in their organization and objectives. 332 - 10 - Part I, which follows, consists of an outline of (1) a United and Associated Nations Stabilization Fund, and (2) of a Bank for Reconstruction of the United and Associated Nations. Part II consists of a brief explanation and discussion of the proposed Fund, and Part III of the proposed Bank. 333 MAY 15 1942 MEMORANDUM TO THE PRESIDENT: In connection with your memorandum of May 11, on the foreign ownership of American corporations, I think you may be interested in knowing that we have been studying certain phases of this problem for several months. (1) At the time we extended freezing control to Germany and Italy (June 14, 1941) we ordered a census of all property in which any foreign country or its nat- ionals had an interest. This was the most comprehensive census of foreign property ever undertaken by this country, and included complete and detailed information on the securities held by every foreign country and its citizens. We have received about 600,000 census returns and all of these data have been reduced to punch card form so that we can speedily obtain figures on any phase of foreignowned property in this country. For example, we can readily ascertain the extent of foreign ownership of American corporations. (2) In December, 1941, when we drafted Title III of the First War Powers Act, amending Section 5(b) of the Trading with the enery Act (statutory basis for freezing control), provision was made to give you complete and plenary regulatory power over securities in which any foreign government or foreign citizen has any type of interest. The bill as enacted contained these provisions. While we are again reviewing the possible need for further legislation, we strongly suspect that this Act already confers upon you authority to adopt a program to carry out the objectives stated in your memorandum. (3) We also have been taking specific measures. On February 3, 1942, we issued a regulation under the 334 -2freezing orders, prohibiting the acquisition by a blocked national of more than 1 per cent of the securities of any American corporation. Detailed reports are required which permit us to guard against any effort to evade this regulation by using several brokers or several different foreign purchasers. We can spot any such trend in advance and take corrective measures. While this regulation does not as yet cover citizens of countries not frozen nor does it compel the liquidation of existing holdings in excess of 1 per cent, ft was intended to be a step in the direction to which your memorandum points. of course under the above-mentioned provision of the First War Powers Act we could control and limit security holdings by foreigners without any further general extension of freezing control. (4) In furnishing you with this information, I want to assure you that we appreciate that there is still much to be done in this field. We recognize that there are some major policy problems involved in dealing with the post-war aspects of this matter, particularly in view of our present and prospective position as an international investor and creditor. I did want you to know, however, that we have been doing some thinking on the subject and I believe we have the facts and the law with which to do a lot more. (5) I shall keep you advised from time to time regarding the results of our studies and our suggestions for further action. Secretary of the Treasury AFL-BB:ash - 5/15/42 335 MAY Dear General Hines: You will recall that on January 14, 1942, the Department forwarded to you a memorandum relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ozalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German, aliens or German-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American manage- ment of unquestioned loyalty. Some forty-oad executives and employees of the company have been re- moved because of doubts as to their loyalty, and the Department and the management are proceeding as rapidly 336 -2- as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has net been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 14, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, (Signed) E. H. Foley, dr. Acting Secretary of the Treasury Brig. Gen. Frank T. Hines Administrator of Veterans' Affairs Veterans' Administration Arlington Building Washington, D. C. 5-14-42 337 MAY 15 1942 Dear Dr. Hunsaker: You will recall that on January 14, 1942, the Department forwarded to you a menorandum relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ozalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service mon (in some instances German aliens or Gernan-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American manage- ment of unquestioned loyalty. Some forty-odd executives and employees of the company have been re- moved because of doubts as to their loyalty, and the Department and the management are proceeding as rapidly 338 -2- as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 14, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, (Signed) R. B. Foley, Jr. Acting Secretary of the Treasury Dr. J. C. Hunsaker Chairman National Advisory Committee for Aeronautics Navy Building Washington, D. C. 5-14-42 339 MAY 15 1942 Dear Mr. Maluutt: You will recall that on January 14, 1942, the Department forwarded to you a memorandum relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ozalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or German-born American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American management of unquestioned loyalty. Some forty-odd executives and employees of the company have been re- moved because of doubts as to their loyalty, and the Department and the management are proceeding as rapidly 340 -2- as possible with a program calculated to remove every vestige of German control or influence. Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 14, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, (Signed) E. B. Foley, dr. Acting Secretary of the Treasury Hon. Paul V. McNutt Administrator, Federal Security Agency 25th and E Streets, N. W. Washington, D. C. 5-14-42 341 MAY 15 1942 Dear Mr. Secretary: You will recall that on January 14, 1942, the Department forwarded to you a memorandum relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ozalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or Germanborn American citizens) had access to many defense plants and Government offices; that the Agfa Anaco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American management of unquestioned loyalty. Some forty-odd executives and employees of the company have been removed because of doubts as to their loyalty, and the Department and the management are pro- ceeding as rapidly as possible with a program calculated to remove every vestige of German control or influence. 342 -2- Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 14, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, (Signed) E. H. Foley, Jr. ActingSecretary of the Treasury. The Honorable, The Secretary of Interior. 5-14-42 343 MAY 15 1942 Dear Mr. Lynn: You will recall that on January 14, 1942, the Department forwarded to you a memorandum relating to a number of situations found to exist in connection with the operations of General Aniline and Film Corporation, at that time owned and controlled by German interests and operating under Treasury Department supervision. We called your attention to the fact that the Ozalid Division of the company was in an unusually good position to obtain defense secrets, inasmuch as its sales and service men (in some instances German aliens or Germanborn American citizens) had access to many defense plants and Government offices; that the Agfa Ansco Division of the company processed and developed official Government films of a confidential nature; and that the company in general could be used as a cloak for subversive activities in many respects. Since that time the situation has changed materially and the purpose of this letter is to bring you up to date. The Government took title to the foreign-owned shares of the Corporation on February 16, 1942, and has installed a thoroughly competent American management of unquestioned loyalty. Some forty-odd executives and employees of the company have been removed because of doubts as to their loyalty, and the Department and the management are pro- ceeding as rapidly as possible with a program calculated to remove every vestige of German control or influence. 344 -2- Although the reorganization of the affairs of the company, particularly the elimination of all personnel of doubtful allegiance, has not been completed, I can say with confidence that the situations described in the memorandum accompanying our letter of January 14, 1942, have been corrected, and that you may safely deal with the corporation on the same basis as any other American company. Sincerely yours, (Signed) E. H. Foley, Sr. Acting Secretary of the Treasury. Honorable David Lynn, Chairman, Alley Dwelling Authority, Room 1202, 1300 E Street, Washington, D. C. 5-14-42 35 TO: The Secretary I think this is all right and I have initialled it. The memo states that the Treasury (Foreign Funds) will decide whether to freeze the funds of any publishing corporation. That should be clearly understood and should not be left to any interdepart- mental committee. To prevent the use of alien funds for seditious propaganda in the U.S. is certainly a legitimate objective of Foreign Funds Control. But the power should be used with great caution to avoid the charge that a mandatory censorship has been instituted by devious means. mr FROM: MR. GASTON TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE May 15, 1942 Secretary l'orgenthau FROM E. H. Foley, Jr. Re: Seditious and Axis Propaganda Publications A subcommittee of the Censorship Policy Board, consisting of representatives from the Post Office Department, the Department of Justice, War Department, and the Office of Facts and Figures, has been formed to deal with the problem of seditious and Axis propaganda publications. A meeting was held on May 13 at which represen- tatives of this Committee and representatives of the Treasury and the Alien Property Custodian were present to discuss among other things the part that the Treasury Department will take in this work. Justice suggested that Treasury, under the freezing order, could be of great assistance in dealing with the problem. A suggested procedure was discussed. The policy to be followed toward such publications would be determined by the subcommittee of the Censorship Board and Justice. Justice would notify Treasury of the -2spapers that it was desired that Treasury should freeze and investigate. If, in the opinion of the Treasury, the acts of the particular case brought the newspaper under the freezing order, the Treasury would freeze the funds of the newspaper, investigate the newspaper, and install personnel on the premises of the newspaper. Any informa- tion gathered in such investigation would be made available to Justice and other interested Government agencies. If a newspaper continued to publish subversive material or Axis propaganda, it would be forced to liquidate by the Treasury denying it a "do business" license. It is not envisaged that the Government would install people to run such newspapers as we did in the General Aniline & Film case. As you know; the Treasury through freezing control has already shut down the Bund paper in New York and has in- westigated a pro-Axis paper in Philadelphia. I believe we can do a constructive job by cooperating with other Govern- ment agencies along the lines indicated. If you approve Foreign Funds Control continuing this activity, please indicate below. Approved SHTH. Mr Treasury Department Division of Monetary Res 348 Date May 15 To: Miss Chauncey From: Mr. White 1942 I mentioned this at the staff meeting and the Secretary said he would like to have a memorandum on it. He might like to read it over the week-end. 349 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE May 15, 1942 Secretary Morgenthau TO FROM H. D. White The cessation of active hostilities will bring a sudden and complete end to the need for more armaments. By that time we will have all the armaments that could possibly be needed for years to come. If to the amount of armaments then on hand were to be added equipment that is more than (say) 90 percent completed and some of the armaments certain to be taken from the Axis, there can be no doubt that any additional production of military supplies would represent a complete and inexcusable waste of labor, material and facilities. By this fall the Treasury will be spending more than $150 million every day on armaments. If the war goes on to the spring of 1943, we will be then spending close to $200 mil- lion a day. It is the soundest kind of financial statesman- ship to anticipate the end and to be prepared to stop at once production of armaments by the cancellation of all war contracts, in view of the fact that every day's delay would mean $100 to $150 million more added to the tax and debt burden of the public. There will be a temptation on the part of business, the Army and Navy, and labor to stall in the matter of cancellation of contracts, but the government should be prepared to be ruthless in this matter. Aside from unemployment, to be discussed in a moment, there isn't a single good excuse to continue turning out armaments once hostilities have ceased. Cancellation of contracts will involve, of course, loss of potential profits on the part of producers. It is assumed that adjustments will be later made for losses so sustained. Doubtless also the government will have to take over the material in various degrees of completion, but it would be a criminal waste of the public's money to complete armaments and supplies merely because they have been started. Exceptions to this might be certain ian uses.types of equipment and material which would have civil- But, sudden, wholesale cancellation of war contracts would create a bad situation unless steps are prepared ahead of time to take care of the millions of men and women that would be precipitously thrown out of work. Conversion of their war savings bonds will provide something but not nearly enough, and besides it seems most unreasonable to expect the wage earners 350 -2- Division of Monetary Research to use up all their accumulated savings during the first few months of peace in an effort to keep body and soul together. If plans do not exist by the time war ends to provide the many millions of disemployed with some substantial income, the pressure for very gradual reduction of armament production will be irresistible. The result will be that armament production will go on for many months, though at a diminishing rate, and from $10 to $20 billion will be thrown away with no return except junk. Plans must be prepared, and legislation secured, which will provide for continued income of disemployed--possibly up to half or two-thirds of the weekly wage--for several months while industry is converted to peace-time uses. The quicker and more effective the cancellations of war orders, the sooner will industry be converted to peace-time production, and the shorter will be the period of unemployment. Presumably the National Resources Board has plans ready for creating opportunities for employment, in addition to what private industry will do. This memorandum is not concerned with that point. It is concerned with the question of stopping what would be a stupendous daily waste of public funds while at the same time providing for a sufficient maintenance of purchasing power to prevent social disruption and to provide for the demand for consumers' goods necessary to speed industry to full production of civilian goods. The following points should be emphasized: Cancellation of contracts will raise many complex problems which are easier to settle in advance by appropriately drawn up legislation while there is time to prepare such legislation, and while the public is in no mood for large profits to be made after the war out of the war effort. 1. 2. There will be, in any case, terrific pressure from powerful vested interests to continue armament production. Many arguments will be advanced--need for military security, possibility of outbreak of civil wars, "it is only an armistice and hostilities may soon begin again, "not all the enemy is defeated yet, there is much left to be done," "we can't throw millions of people suddenly out of work." To render these arguments less effective proper legislation needs to be prepared to meet the situation. 3. It will be a long task to get Congress to pass a bill providing for adequate unemployment payment for millions of disemployed. 351 -34. Division of Monetary Research Arrangements must be prepared for wholesale cashing of savings bonds, and aid to industry in their program of conversion back to civilian production. A tax program designed especially for the immediate post-war period-in which some of the objectives were different than those which prevail now, should be prepared by the Treasury. All this takes much time, and since the war might end this year we ought to begin serious study and preparation now. 5. Don't you think it would be worth while calling a meeting in your office of the persons having a direct interest in the matter? A memorandum on the subject can be prepared for distribution to them at the meeting. A committee of technicians could be suggested at the meeting to study the matter and bring back a report in a couple of weeks to that informal committee. The end result after a few meetings should be a drafted bill and report representing the opinion of the appropriate departments to be submitted to the President. The justification for the Secretary of the Treasury to take the lead in the matter is that one of his responsibilities is to suggest ways of keeping the Treasury's debt and tax burden from increasing unnecessarily, and every day's delay after the fighting stops will cost the Treasury many millions of dollars. This would, I think, provide a good starting point for a renewal of the committee meetings of the now defunct "Fiscal and Monetary Advisory Board." (Incidentally, last week's luncheon with Nelson, Henderson, et al, was very nice, but if anything more was accomplished than a pleasant lunch, I missed it.) Unless you indicate disapproval, I am having a report prepared on the experience of the last war with respect to the matters discussed above. 352 May 15, 1942. Mr. Heffelfinger Secretary Morgenthau Just as soon as you have the final figures on the 2}'s today, let me know; and let's get out a release for Saturday morning's papers. Taken can can'of 5/15/90 353 IDARD FORM No. 14A TREASURY DEPARTMENT PROVED BY THE PRESIDENT MARCH 10 1926 TELEGRAM OFFICIAL BUSINESS-GOVERNMENT RATES WASHINGTON CHARGE TREASURY DEPARTMENT. APPROPRIATION FOR H.(TheMorgenthau Jr - Personal appropriation from which payable must be stated on above line) a&--- MAY 15 1942 Mr Wm. J. Newlin, Secretary to the Faculty, Amherst College, Amherst, Massachusetts. Please cancel room reserved Lord Jeffery Inn Staying with friends thanks Henry Morgenthau Jr 354 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION TO FROM Mrs. Klotz DATE May 15, 1942. Secretary Morgenthau Please check my correspondence with Amherst. I think they are holding a room for me at the Hotel. If that is correct, please send them a telegram this morning cancelling the room, and say that I am staying with friends. Thank you. 355 AMHERST COLLEGE Amherst, Massachusetts OFFICE OF THE SECRETARY OF THE FACULTY April 26, 1942 Hon. Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Dear Mr. Secretary: We have made a reservation for Mrs. Morgenthan and yourself at the Lord Jeffery Inn, where I am sure they will do everything to make your stay comfortable. Mrs. King will have the tickets for you: and you will find the academic costume ready for you in the Founders' Room at the Alumni Gymnasium at the time of the Commencement exercises. We are most appreciative of the honor of your presence on this occasion. Very sincerely yours, WJN/C Vm. J. . Newlin 356 April 21, 1942. Dear Mr. Newline Thank you for your pleasent and certial letter of April 16th. I as looking forward very such to my forthcoming visit to Amborst. I should like to have you reserve a FOOD at the Lord Jeffery Ins for Mrs. Morgenthan and no. I also would appreciate 10 if you would let us have six tickets. If I find that we do not use all these, I shall see to 11 that any extra ones are returned to you. Thank you also for your offer to provide the academic contune. I do not have a cap and gova and should like to have you procure these for me. I wear size 7) hat, as 6 feet tall, and weigh 189 pounds. with thanks for your assistance in those various matters, Sincerely, (Signed) E. Morgentbaus its Mr. Va. J. Newlin, Secretary to the Faculty, Amboret College. Amboret, Massachusette. GEF/abo AMHERST COLLEGE 1942 COMMENCEMENT NAME CLASS COMPTROLLER Please make Dormitory reservations for: My Wife Ayself o was Daughters 357 Address Age Amount Enclosed $ Age DO NOT USE SPACE BELOW Others: Advance Payment Pratt or Morrow at $3.00 per person Total Charges North or South at $2.00 per person Remarks: Am't Date By Refund or Collect Assignment Dormitory Room Arrived 358 AMHERST COLLEGE BULLETIN VOLUME 31, NUMBER 4 MAY, 1942 Commencement Week MAY 15-17, 1942 *PRELIMINARY PROGRAM Friday. May 15 7:30 P. M. Prize Speaking 9:00 P. M. The Masquers present "The Girl of the Golden West" by David Belasco. Saturday. May 16 9:00 A. M. Meeting of Massachusetts Beta of Phi Beta Kappa. 9:45 A. M. Senior Chapel Service. 10:45 A. M. Ivy Oration and Poem. 11:30 A. M. Annual Meeting of the Society of the Alumni. 12:30 P. M. Alumni Dinner. Alumni Parade to Pratt Field 3:30 P. M. Amherst-William Baseball Game on Pratt Field 8:00 P. M. Senior Night. 8:30 P. M. Alumni Singing. 9:30 P. M. Senior Service. 10:00 P. M. Dancing. Sunday. May 17 10:45 A. M. Baccalaureate Sermon 2:30 P. M. Band Concert. 3:00 P. M. Commencement Procession 3:30 P. M. The One Hundred and Twenty-first Commencement. *Owing to the national emergency the exact hours of various events are subject to further adjustment Commencement Information Commencement Room Reservations CLASSES SCHEDULED FOR REUNION, 1942 The dormitories are available to provide glumni and their '77, '82, '87, '92, '97, '02, '07, '12, '17, '22, 27, '32, '36, '39, '41. families with economical accommodations Although the dormitories ALUMNI HEADQUARTERS - Walker Hall. have not all the conveniences of a modern hotel, reasonable effort is made to provide satisfactory quarters Hours: Thursday 4 P. M. to 12:00 P. M. Fri.Sat. 9 A. M. to 12:00 P. M. Sunday 9 A. M. to 6:00 P. M. The following matters will be taken care of: Alumni Registration Alumni Trustee Election Dormitory Rooms for Alumni Reference File - off-campus rooms Tickets for all Commencement Activities In general, the older classes are assigned to Pratt or Morrow and the younger classes to North and South In either case, fam. ilies may be together or in nearby rooms In Morrow, and in most rooms in Pratt, couples are assigned to double rooms with twin beds In a few rooms in Pratt and in North and South, the nature of the rooms necessitates assigning a group of several men in one room or suite and their wives in a nearby room or suite Rooms are not allotted for single occupancy. General Information The prices are $3.00 for Pratt or Morrow and $2.00 for North TICKETS Alumni and their families will receive class buttons for admission to Senior Night Tickets required for the Alumni Dinner, the Baseball Game and the Masquers may be obtained at Alumni Headquarters or South. per person for the Commencement period. with no reduction for a shorter stay. Rooms may be occupied from 4 P. M. Thursday. until Monday noon Applications should be made early. Allotments are made just before Commencement to permit grouping by classes. Appli- MAIL Alumni may have their mail sent to "Alumni Headquarters, Walker Hall, Amherst, Mass." Such mail will be forwarded to home address if not called for GOLF The Amherst Golf Club invites the Alumni to use the Mt. Doma course during the Commencement season MEALS cations will be acknowledged but specific allotments cannot be learned until arrival at Alumni Headquarters Applications will be accepted only if accompanied by a remittance (payable to Amherst College) for the price of the root If the amount is incorrect, the difference will be adjusted at Alumni Headquarters Please use the enclosed application which provides for the information needed in making assignments All inquiries should be addressed to the Comptroller. The Dining Rooms of Valentine Hall will be open during the Com- At Alumni Headquarters there will be maintained an informa. tion file of rooms available in private houses, but the college mencement period cannot undertake to make reservations of such rooms 359 AMHERST COLLEGE Amherst, Massachusetts OFFICE OF THE SECRETARY OF THE FACULTY April 16, 1942 The Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Dear Mr. Secretary: I am very happy to learn that you are to be the recipient of an honorary degree at the Amherst Commencement exercises. Professor Peter H Odegard has been appointed as your escort, and he will meet you in the Founders' Room in the Alumni Gymnasium, at three o'clock, War Time, on Sunday, May seventeenth. If you do not have your own academic costume, we shall provide you with a cap and gown to be worn during the exercises. The hood of the degree will be provided by the College, and will be placed on your shoulders when the degree is conferred. Will you kindly let us know whether you wish us to provide you with an academic costume, and, if so, will you send us your weight, your height and your hat size? I shall be very happy to arrange for reserved seat tickets for the exercises, for the members of your immediate family, if you will let me know the number. If you are to come to Amherst by train, and will let us know when you expect to arrive at Springfield or Northampton, we shall be glad to have you met at the station and brought to Amherst. Would you like to have us reserve a room at the Lord Jeffery Inn for Mrs. Morgenthau and yourself, or are you expecting to stay with your sisterin-law in Northampton? I hope you will feel free to call upon me for any further information you may desire. Very sincerely yours, mon 62-2 In. Vm. J. Newlin, Secretary of the Faculty 6 189. it's 12 360 February 4, 1942 Dear President King: Thank you very much for your letter of January 29th in which you tell me that the Trustees of Amherst College have decided to confer an honorary degree upon ne on May 17th. This is a high honor, and you may count on my being present at Commencement to receive it at your hands. of course I shall keep this information entirely confidential until the College makes it public. In the meantime, please convey to the Trustees my sense of deep appreciation. Sincerely, (Signed) a. Morgenthan, in. President Stanley King, Amherst College, Amberst, Massachusetts. FK/cgk File n.m.c 2/3/42 361 Mr. Kuhn: Received from Miss Chauncey. She says the Secretary asked that you please prepare reply. The answer is Yes". 362 AMHERST COLLEGE Amherst, Massachusetts OFFICE OF THE PRESIDENT January 29, 1942 (Personal and Confidential) Honorable Henry Morgenthau, Jr., The Secretary of the Treasury, Washington, D.C. Dear Mr. Secretary: It is a profound satisfaction to me to advise you that the Trustees of Amberst College at their meeting on January 26th voted unanimously to confer upon you the degree of Doctor of Laws, honoris causa, at our forthcoming commencement, which takes place Sunday, May 17th. You know how happy I am at this action and how deep a satisfaction it will give me to hang an Amberst hood upon your shoulders. I hope that your plans will permit you to join us at commencement. The degree is conferred in accordance with the usual custom in such cases, on condition that you are able to be present to accept it in person. In the meantime, I must ask you to hold this information in entire confidence until such time as the College shall make public, just preceding commencement, the list of those on whom honorary degrees will be conferred. With cordial greetings, I am, Faithfully yours, SFanley King 363 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE TO FROM May 15, 1942. Secretary Morgenthau Harold Graves In accordance with your request, I attach a report of unfilled orders in the Division of Savings Bonds as of May 13. I am informed that the Division of Savings Bonds is up to date on its distribution. 364 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE TO May 13, 1942 Mr. McDonald FROM Mr. Augustus Confirming our telephone conversation of this morning, listed below is the information you requested. UNFILLED ORDERS AS OF MAY 13, 1942** ADDRESSEE TITLE OF MATERIAL Mr. Lynch "Stamps For Uncle Sam" 26,500 "Stamps For Uncle Sam" 49,250 QUANTITY if 6 Washington, Building ) Room 439 Hon. Steven P. Vidal State Administrator War Savings Staff 101 Federal Building Albuquerque, New Mexico Walter Phillippsen 246 Lynox Avenue Bridgeport, Connecticut Attached List Distribution> new waterial Mr. Melcher DeMoll Building Washington, D. C. "Keep It Up", posters 75 - 2-sheet "Help Win The War With The Money You Save" "Stamps For Uncle Sam" 170,500 300 Major Connelly War Bond Officer Headquarters, Third Corp Area Baltimore, Maryland ** Note: "Help Win The War - " 1,000 The reason for the above listed orders not being filled is due to the fact that material requested has not yet been received from the contractor doing the printing. Upon receipt of this material orders will be immediately shipped. 365 367 366 Mr. Eugone Meger The Washington Post UNTIL CONFIDENTIAL RELEASED PUBLIC OPINION NEWS SERVICE For Release Friday, May 15, 1942 One-Third of U.S. Adults Have Bought No War Bonds or Stamps, National Survey Finds of your wages or salary each pay day to buy war savings bonds or Compulsory Savings Plan to Purchase Bonds Found Acceptable to stamps for you?" Twenty-five per cent of all employed persons say they Two-Thirds of Nation's Wage Earners a are already covered by plan in which the employer deducts part of their wages for bonds. Another 43 per cent say they would be willa ing to take part in such Compulsory Savings program. The remaining 32 € Claiming that voluntary savings are as "archaic and inade quale for total tear as reliance on voluntary enlistment in the armed forces," Rep. Gore of Tennessee has introduced in the per cent expressed themselves unwilling at this time to accept the pay deduction THE PUBLIC House a bill to require wage earners to put a certain percentage Although of their earnings into war bonds or stamps. The reaction of the country to the principle of compulsory savings, and an indication of the amounts people are willing to set aside, is shown in savings little of adults bought cost scheme. Gallup Poll the following report by the Gallup Poll. stamps have AMOUNTS NAMED the not single bond. To shed light on the question of much people in each income believe they can afford to spend for war bonds or stamps, the By GEORGE GALLUP put this question to all fewer have purchased either Director, American Institute of Public Opinion or bonds than in any other employed persons interviewed: PRINCETON, N. J., May 14-Interviews with a crosssection of the American public from coast to coast reveal two salient facts concerning the sale of war level. Only half of this group have bought bonds or bonds and stamps. 75 per cent have bought. and in stamps?" the group earning more than $45 The average amounts indicated by people in various income brac- 1. Two out of every three em- 2. Although war stamps can be ployed persons in the country either ployer to deduct have regular duction plan. bought for as little as ten cents. their part of one-third of all adults in the coun- their each pay day to buy try have not yet bought a single ready begun such an arrangement. Of every 100 persons in the for them. or have al- war bond or stamp. a willing to accept a wage de stamps. In the income group earning between $30 and $45 a week. week. 86 per cent. In order to measure the public reaction to a payroll deduction plan, the Institute asked all employed persons: "Would you be willing to have The other one-third are not at group earning less than $30 your employer take a regular part is the largest amount out of each dollar of your salary or you would be able to put savings bonds or kets is shown below: Amt. of Earnings Amt. Willing to Have Deducted Less than $30 . week More than $30 . week 8% 10 VLADEMINE HORDWITZ May 7, 1942 Henry Morgenthau Jr. Treasury Department Washington, D.C. Dear Mr. Morgenthau: I am sincerely sorry that I could not fulfill my agreement to perform on the America Preferred series this month, but when I had accepted your kind invitation far this appearance, so me months ago, I had no idea whatsoever of the technical circumstances sur- rounding the broadcast -and subsequently found them to be artistically unacceptable. However, I am stil profoundly desirous of contributing my energies and services toward the great and vital job of selling War Savings Bonds, and I feel certain there are ways in which my professional re- sources might be utilized at a greater profit to the Treasury Department. The other day I had a long conversation with Mr. Rachmaninoff, who shares intensely my enthusiasm to serve this great cause, and he has suggested a plan whereby we might both have the utmost opportunity to do our parts -and in a way that we feel would obtain the highest possible results. If the Treasury Department could secure the donated services of the Philadelphia Symphony Orchestra for one date during the early part of next Fall, (the first few days in October), we could give a concert at Carnegie Hall with Mr. Rachmaninoff as conductor. and myself as soloist in a program of his compositions. The audience for the hall would gain admission by the purchase of War Savings Bonds of the higher denomina- tions, and the concert could simultaneously be broadcast over a wide hook-up to reach a very considerable listening public -who might be urged to buy Stamps and Bonds by some speaker from the Treasury Department. Thus you would achieve the double pur- pose of actually selling Bonds; and also contacting a vast radio audience to activize their interests in this direction. I shall await your opinion on this project. Yours very sincerely, Vettorobity c/o Toscanini 254th Street & Independence Avenue Riverdale, New York 370 May 15, 1942 My dear Mr. Minister: It may interest you to know that the marketing, advertising and selling power of the entire drug industry has been coordinated in the United States this month to sell War Stamps. The entire activity has been conceived, planned and executed by men representing all branches of the drug industry. I write you about it because of your interest in our War Bond and Stamp campaign and because of your own splendid promotional record in Canada. More than 50,000 drug stores are now displaying and selling War Stamps to their 15,000,000 daily customers. About 4,000 salesmen representing more than 400 wholesale druggists are delivering War Stamps to the retail druggists, and more than 7,000 salesmen of drug manufacturers are calling on the drug stores to stimulate the sales activity of their salesclerks. Manufacturers and their advertising agencies created the selling theme of the campaign, which is "Bullets 25d a dozen at your drug store in the form of 25% War Stamps". Special display material, including a novel 25g coin card, was mailed to every drug store. On April 30th, the May sales drive by druggists was inaugurated in a half hour radio show broadcast coast-to-coast. It is estimated that over $10,000,000 worth of War Stamps will be sold during this thirty-day drive by the nation's drug stores. I understand that Mr. W. B. Tingle, Mr. Harry Boothe, Mr. William H. Budden and Mr. B. R. Hanna attended the Treasury's Retailers Clinic meeting in Chicago on May 4th and that this campaign was discussed at that time. However, I thought that this splendid promotion should be brought personally to your attention. Sincerely, Hon. J. L. Ilsley, Minister of Finance, egk Department of Finance, Ottawa, Canada. (Signed) H. Morgenthan, Jr. n.m.c Copies 371 May 15, 1948 Dear Archie: Thank you for your letter of May 4th, and for your interest in our payroll savings program. The letters to employers were prepared before the enunciation of the President's seven-point program, but I can assure you that we shall keep the seven points in mind in future letters, as we are already doing in all of our promotional work. Sincerely, (Signed) Henry Hon. Archibald MacLeish, Director, Office of Facts and Figures, Washington, D. C. FK/cgk Photofile n.m C. By Messenger Hame 2:35 fill to Thouphon OFFICE OF FACTS AND FIGURES WASHINGTON May 4, 1942 Dear Mr. Secretary: I have seen with such interest the letter and leaflet dealing with the payroll savings bond program, which you sent to me under date of April 25. Both of these docurents are done with great skill, and I cunt to congratulate your department on the thorough and conscientious job which it has done in preparing this gigentic campaign. The one suggestion which I would make would be that more emphasis be luic on the connection between the purchase of war bonds and the other parts of the President's national economic program. The letter to employers which you have sent to me properly lays emphasis on the necessity of hond les to stem inflation. It would appear to me most useful if, in future publicity along this line, something on the following order were pointed out to employers: The prices of the things you make and of the raw materials which you buy have been fixed by the Government, and the President has asked for the stacilization of the wages of your employees. These things must be done in order to prevent & run-away inflation, which would be disastrous to our war effort and to post-war rehabilitation. These things cannot be done unless excess purchasing power is drawn off. The large-scale purchase of war bonds constitutes a primary means of drawing off this purchasing power. As you perhaps know, the Office of Facts and Figures is now preparing a program for coordinating information on all points involved in the President's national economic program. I shall keep you informed of further developments of this program. Faithfully yours, ancen Archibald MacLeish The Director The Honorable The Secretary of the Treasury Washington, D. C. 373 GENERAL MOTORS CORPORATION BROADWAY AT 57 TH STREET NEW YORK, N.Y. Washington Office 200 HILL BUILDING AND EYE STS. N. W. May 15, 1942 Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: Mr. Gamble, of your office, inquired as to the result achieved from the campaign starting on April 16 to increase participation in the purchase of War Bonds. This campaign was known as the "GENERAL MOTORS EMPLOYES BOND DRIVE FOR VICTORY." We are pleased to inform you that from an employe participation of 31 percent as of April 1, the participation of all General Motors employes now stands at 99.2 percent as a result of this drive. As a percent of the payroll, the participation of employee increased from 1.9 percent for March to 6.9 percent for April. General Motors has ninety seven plants and units within the United States. Employes of each of these units have subscribed for and purchased War Bonds far in excess of our expectations. In eighty four of these units, 100 percent of the employes are purchasing War Bonds. In the remaining thirteen units, between 95 percent and 99.9 percent of employes are participating. There is attached a list of General Motors plants and units and the percent of participation of each of them. The following is a summary of the results of the drive: Number of Employes Working (U.S.) Total Payroll Number of Employes Purchasing Bonds Amount Subscribed for Purchase of Bonds Subscription Per Employe Per Month BEFORE CAMPAIGN AFTER CAMPAIGN MARCH 1942 APRIL 1942 222,819 $51,224,330 70,395 $965,529.50 Bond Purchases as a Percent of Total Payroll Percent of Employee Participation $13.73 235,090 $54,457,053 233,197 $3,756,173 $16.10 1.9% 6.9% 31.5% 99.2% *These are prelimary figures based upon individual employe pledges and projected on a. monthly basis. 374 -2- The bond drive was developed and directed by experienced executives of the Corporation with splendid cooperation from all employes. In the mass meetings, various representatives of employee played an active part in building up patriotic interest and enthusiasm for the entire program. In reviewing the foregoing, consideration should be given to the short period of time since the drive started. Among the points stressed in the promotion of bond sales were the following: 1. Furnishing necessary funds for the war effort. 2. Establishing reserves to help carry employes through any post-war readjustments. 3. Constructively decreasing available purchasing power in line with diminishing supplies of consumer goods. The employes in the plants are currently averaging 46 hours of work per week and earnings have been stabilized at high levels. Earnings were low during December, January and February as a result of the curtailment* of nondefense production. While the resulte are gratifying to date, the next phase of the program will be directed toward encouraging employes to increase their weekly or monthly subscriptions. The slogan will be:- "NOT LESS THAN ONE BOND PER EMPLOYE PER MONTH." We anticipate an increase in weekly and monthly subscriptions as the war program develops and hours of work and overtime pay are increased. I wish to take this opportunity to express our appreciation for the help and cooperation we have received from the Treasury Department in preparing this campaign and which we feel contributed materially to its success. Very tmly yours, #. W. Anderson Vice President hwa-em encl. GENERAL MOTORS EMPLOYES BOND DRIVE FOR VICTORY * * SALES STANDINGS * 374 CONGRATULARTORY FINAL STANDINGS % PARTICIPATION Aeroproducts RANK 100 Allison 100% Argonaut 100% 1 100% , 100% 100% 1 100 100% 1 100% 1 100% 1 1 100 1 100% 1 100% 1 100% 1 100,0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 100% 100 100 100 100 100 1 100% 1 100 100 1 100% 1 Fishor - Export Fishor - Flootwood 100% 1 Fishor - Dio & Machino 100 100% 1 Fishor - Detroit Stamping 100 100% 1 Fishor Dotroit ...iroraft 100% 1 Fishor - Control Devolopment Fisher - Contral Enginooring Fishor - Contral Plants Fisher - Cloveland 100 100 1 Eloctro-Notivo 100% 1 Dolco Romy - Muncio 100% 100% 1 Dolco appliance 1 100 100% 1 100% 100% Dotroit Diosol Dotroit Transmission Eastern Aircraft - Baltimoro Eastorn Aircraft - Lindon Eastern Aircraft - Tarrytown Eastorn Aircraft - Trenton 1 100% 1 100% 1 100 100% Doloo Remy - Antioch Foundry 1 100% 100% Chevrolet - Transmission Doloo Brake Dolco Radio Doloo Romy - Anderson 1 Chovrolot - Tolodo 100% 1 Chovrolet - St. Louis Chevrolot - Tarrytown 100% 1 Chevrolot - Muncio Chevrolet - Norwood Chevrolet - Oakland Chovrolot - Spring & Bumpor 1 Chevrolet - Atlanta Chevrolet - iviation Engine # 2 Chevrolet - Baltimore Chevrolet - Bay City Chevrolet - Bloomfield Chevrolet - Exporimental Chevrolet - Flint Chevrolet - Grey Iron Foundry Chevrolet - Indianapolis Chevrolet - Janesvillo Chovrolet - Kansas City Chevrolet - Motor & Axle 1 Brown-Lipe-Chapin Buick Motor Cadillac **PLEASE ANNOUNCE TO YOUR ELPLOYES**PLZ.3E GIVE YOUR STORY TO YOUR NEWSP..PERS 376 -2- 100 100% 1 1 1 1 1 1 100% 1 100% 1 100, 1 100,0 1 1 2 3 4 5 5 6 7 Chovrolet - Forge Buick Aviation 1 Pontino 1 100% 100% 99.46 99.2 98.8 98.43 98.0 97.8 95.0 Eastern Aircraft - Bloomfield 1 100,5 Detroit Contral Office Cloveland Diosel 1 100% 100, 100, 99.2 Doloo Products 1 100% AVERAGE ALL GENERAL MOTORS New York Central Office 1 100% 100, Fisher - Flint # 1 Chovrolet Goar & xxlo Chevrolet Control Office 1 100% 99.99 99.97 99.96 99.9 99.9 99.89 99.84 99.79 99.73 99.7 Chevrolet - Entiro 1 100% 100/ AC Spark Plug Fisher Tornstodt 1 100% 100% 100 Oldsmobile 1 100% United Motors Now Doparturo - Bristol Fisher - Entire 1 Sunlight Electric 100% 1 Southorn California 100% 1 Motors Holding Motors Insurance New Departure - Koridon Packard Electric Rochostor Products Saginaw Malloable Iron Saginaw S. G. # 1 Saginaw S. G. Machino Gun 100 1 Modern Housing Morning Products 100% 1 Guide Lamp Harrison Radiator Hyatt Boarings Inland Mfg. 100% 1 G. M. Proving Ground G. M. Research 100 100, 1 G. M. Oversoas 1 G. M. Instituto 100% 1 G. M. A. C. G. M. Building 100% 1 Foreign Distributors Frigidaire G. E. I. C. 100% 1 Fishor - Tank Floot Sales 100% 1 Fisher - Lensing Fisher - Momphis aircraft Fisher - Pontino Fisher - Service 100% 1 Fisher - Garage Fisher - Grand Rapids Stamping 8 9 10 11 12 13 14 15 16 17 377 Analysis of Exposure to Payroll Savings Plans May 9, 1942 Number exposed to payroll savings plans Total number in the country (estimated) Percent of total exposed Part A - Summary by Number of Organizations Exposed I. Business Organizations (1) Firms with 500 employees or more (2) Firms with 100 to 499 employees 16,759 6,520 26,920 (3) Subtotal - large firms 21,820 33,440 (4) Firms with less than 100 employees 54,510 III. Grand total 78 62 65 76,330 . (5) Total business organizations II. Governmental organizations 5,061 76,330 Part B - Summary by Number of Employees Exposed (5) Total business organizations 3,573,016 18,739,984 1 * (4) Firms with less than 100 employees . (3) Subtotal - large firms 15,166,968 1 # I. Business organizations (1) Firms with 500 employees or more (2) Firms with 100 to 499 employees 1,246,701 19,986,685 30,400,000 2, 397,981 66 II. Governmental organizations (2) (1) Federal Government State and local governments 1,073,881 1,700,000 2 2,700,000 (3) Total governmental organizations 1,471,862 4,400,000 III. Grand total 21,458,547 34,800,000 2 Office of the Secretary of the Treasury, Division of Research and Statistics. 1 Revised. Excludes agricultural employees, military personnel, employees on WPA or NYA or CCC projects, proprietors, firm members, self-employed, casual workers and persons in domestic service. Data not available. 2 23 40 33 62 May 15, 1942. 378 Firms Employing 100 to 499 Persons Participating in Payroll Savings Plans (As reported by the Defense Savings Staff's State Administrators) Northern California Southern California Colorado Connecticut Delaware : Arkansas : : Arizona : : Alabama savings plans Total number of firms (estimated) : State Number of firms with payroll Percent of total having payroll savings plans Apr. 18 May 9 Apr. 18 May 2 149 167 18h 285 52 43 47 48 6la 67 73 44 45 47 142 31 32 33 512 536 555 555 92 97 100 756 783 792 1,171 65 67 68 124 91 622 45 92 45 48 May 9 May 2 59 75 113 115 277 279 116 282 21 32 40 84 25 38 34 35 38 94 52 53 57 152 Florida 147 155 157 157 94 99 100 Georgia Idaho 133 167 175 589 23 28 30 31 31 31 39 79 79 1,386 2,252 60 62 475 586 71 78 81 61 65 68 District of Columbia Illinois Indiana 1,300 1,352 415 456 Iowa 165 175 185 271 Kansas 276 276 276 276 100 100 100 Kentucky 136 179 151 151# 206 312 4h 48 48 384 47 53 54 60 68 70 198 30 34 35 Maryland 177 204 210 405 44 50 52 Massachusetts Michigan 639 652 658 1,523 42 43 43 689 740 764 1,022 67 72 75 Minnesota 376 379 406 406 93 93 100 60 61 143 41 62 59 43 Missouri 472 516 531 664 71 78 80 Montana Nebraska 40 40 41 41 98 98 100 85 86 Louisiana Maine Mississippi 203 103 105 106 123 Bls Nevada 14 14 16 21 67 67 76 New Hampshire New Jersey 89 93 96 145 61 64 66 549 867 53 60 63 79 79 New Mexico New York North Carolina North Dakota Ohi 463 523 33 33 2,060 2,218 282 290 14 14 1,126 1,164 42 79 2,304 4,239 49 305 499 57 29 48 1,173 1,739 65 33# 140 52 54 58 61 48 48 67 67 49 Oklahoma 166 167 170 345 48 48 Oregon 211 239 248 271 78 88 92 1,682 1,743 1,780 2,032 83 86 88 154 165 167 224 69 74 75 71 81 87 174 41 47 50 91 Pennsylvania Rhode Island South Carolina South Dakota 21 21 21e 23 91 91 Tennessee 199 199 199 449 Wh lils 44 Texas 326 361 394 1,375 24 26 29 38 38a 111 32 34 34 36 60 60 63 94 95 95 281 310 328 338 83 92 97 234 246 76 76 134 278 323 272 72 137 680 17 17 247 140 312 17* 17 Virginia Washington West Virginia Wisconsin Wyoming 59 Alaska 51 61 43 46 100 100 100 100 100 100 2 Total 2* 2 Railroads 294 50 49 2 Utah Vermont 49 49 49 52 94 94 94 15,365 16,265 16,759 26,920 57 60 62 office of the Secretary of the Treasury, Division of Research and Statistics. Date are for May 2, inasmuch as no May 9 report was received. May 15, 1942. . 379 Firms Employing 500 Persons or More Participating in Payroll Savings Plans (As reported by the Defense Savings Staff's State Administrators) Number of firms with payroll 18 41 Arizona 9 16 122 123 123 123 125 25 26 26 114 115 115 15 17 17 32 32 32 Delaware District of Columbia Florida 28 29 savings plans (estimated) Apr. 18 73 16 121 Percent of total having payroll of firms 49 16 Colorado Connecticut 41 9 Arkansas May 9 Total number May 2 56 May 9 56 67 12 9 Alabama May 2 : Apr. : State Northern California Southern California : savings plans 75 75 22 73 73 73 173 70 71 71 75 76 78 93 96 96 76 76 71 71 161 27 151 29 24 63 53 60 60 64 44 45 60 45 Georgia 86 Idaho 97 97 111 11 77 11 87 11 87 391 11 400 100 401 100 100 88 101 101 25 26 Illinois Indiana Iowa 22 535 73 Z5 75 62 39 56 64 67 100 165 Kansas 23 Kentucky 23 24 24 96 38 96 Louisiana 39 39th 70 29 54 56 Maine 76 38 LA 1 41 58 83 88 91 105 80 82 Maryland Massachusetts Michigan Minnesota 31 51 53 86 84 87 56 83 237 242 24h 267 346 68 271 70 271 308 71 86 88 79 79 88 79 84 26 28 94 94 29 37 70 108 76 103 110 132 78 82 100 100 100 74 77 77 80 80 80 31 94 94 94 192 74 79 79 100 100 100 71 73 73 65 71 74 Mississippi Missouri 31 9/8 83 Montana 3 3 23 24 4 3 Nebraska Nevada 24 31 4 4 142 151 5 North Carolina North Dakota 29 29 152 5e 5 New Mexico New York 29 5 New Jersey 5 New Hampshire 759 778 103 112 778 117 1,071 158 0 0 0 560 561 613 61 68 69 81 West Virginia Wisconsin 89 50 63 12 50 72 12 93 96 49 50 36 127 Wyoming 39 130 102 92 5e 50 102 72 143 8a 12 14 12 o 84 69 71 100 100 90 91 92 75 82 100 100 49 44 50 50 57 57 57 100 100 100 96 93 69 39 61 1 1 30 3 3 3 Total 109 4,864 109 5,024 109 5,061 115 .520 Office of the Secretary of the Treasury, Division of Research and Statistics. Data are for May 2, inasmuch as no May 9 report was received. 90 49 59 84 97 70 70 64 64 86 87 100 100 100 100 100 100 95 95 95 75 77 78 Alaska Railroads 85 87 100 71 152 84 49 100 10 86 65 50 132 85 92 97 1 84 B Virginia Washington 48 8 Vermont 52 52 5 Utah 52 33 5 Texas 490 551 South Dakota Tennessee 419 5 Rhode Island South Carolina 48 0 Pennsylvania 31 418 0 Oklahoma Oregon 412 0 Ohio May 15, 1942. . 93.4 93.1 94.5 87.0% 108.3 108.4 109.4 101.9 105.1 103.2 Quota Sales 102.6 102:6 as & of to Date May 15. 1942. to 77.3 41.7 94.9 120.3 Date May 1 239.2 221.6 186.0 167.3 144.3 264.6 311.6 288.6 330.3 365.9 383.5 150.1 157.7 408.8 432.8 455.8 474.5 510.1 527.7 553.0 180.8 189.8 196.8 210.3 217.9 230.5 577.0 600.0 $ 23.0 Quota, : : Total to 72.0 39.4 Date 88.6 122.6 157.9 34.0 35.3 201.5 232.8 246.8 23.6 20.0 31.3 14.0 97.0 95.4 90.0 87.7 89.8 97.4 181.4 296.2 271.5 May 1 $ 20.0 : Actual Sales 19.4 32.6 95.0 86.4 16.6 24.8 24.6 Daily $ 20.0 : : 81.1% 89.2 98.0 to Date 85.7 84.7 110.1 120.6 100.8 Quota Sales as % of : to 29.5 16.0 Date May 1 Quota, 37.1 49.8 69.3 60.3 76.3 136.6 129.6 170.3 250.0 241.0 $ 9.0 : 15.2 25.5 33.1 48.8 67.2 60.8 72.8 80.8 85.4 94.4 to 102.1 Series F and G Date May 1 $ 7.3 : 6.4 7.6 7.9 5.6 8.1 117.3 115.3 9.0 4.6 7.7 Actual Sales 15.6 10.3 12.1 From May 1 through May 14, 1942 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% 97.3 96.0 104.7 115.5 116.5 84.0 98.0 113.8 115.5 114.6 as % of to Date : 94.6 Quota Sales : to 25.7 47.8 57.8 70.5 109.7 131.8 141.8 154.5 168.0 182.0 193.7 215.8 238.5 225.8 252.0 277.7 266.0 309.8 299.8 350.0 336.0 322.5 Date Quota, $ 14.0 May 1 : : : Series E 24.3 to 46.5 55.5 73.8 97.0 114.2 Date 128.7 152.0 161.3 177.1 194.0 15.8 16.9 $ 12.7 May 1 : 9.4 8.9 Actual Sales 11.6 22.3 18.4 23.2 17.2 14.5 23.3 United States savings bonds. Figures have been rounded and will not necessarily add to totals. Actual sales figures are deposits with the Treasurer of the United States on account of proceeds of sales of Daily $ 12.7 1 Date 2 4 5and6 7 8 9 11 12 13 14 15 16 18 19 20 21 22 23 25 26 27 28 29 Source: Office of the Secretary of the Treasury. Division of Research and Statistics. 381 May 15, 1942 Dear Archiez This is just to tell you that I would be very glad to make one of the speeches in your series to follow up the President's anti-inflation message. I have no speaking engagements in the next three weeks, and I shall do my best to be available on any date you may suggest. As soon as you have a definite date in mind, I suggest that you communicate with Mr. Kuhn. Sincerely, (Signed) Henry Hon. Archibeld MacLeish, Director, Office of Facts and Figures, Washington, D. c. FK/cgk By Messenger Harmon 2 35 Photo file n.m.c. Ong filste Thompan OFFICE OF FACTS AND FIGURES WASHINGTON DIRECTOR May 9. 1942 The Honorable The Secretary of the Treasury Dear Henry: In & conversation with Harold Smith about the President's 7-point national economic policy, he suggested the desirability, even the urgency. of a special series of speeches which would follow up the President's recent message and speech. From what I can learn about public opinion at the moment, I am persuaded that such a series by high officers of government could perform an invaluable service. The purpose would be fourfolds to spell out more fully the meaning of each of the seven points; to show the relationship of each point to the others; to explain how the needs of war compel us all temporarily to reduce our living standards; and to demonstrate that the Government is attacking inflation with a united front. The program is of such overwhelming importance, affecting the whole public so vitally, that only the highest officers of the Government can present it authoritatively. Would you be willing to make one of the speeches? We should like to schedule the speeches as a series, and plan to arrange radio time for them. If you can participate -- and I very much hope you can - you may wish to explain both the var bond drive and the new tax program, and the determination of the Government to tax profits down to a reasonable level. We find that relatively few persons know the details of the pending tax programs. We also have discovered, through recent field interviews, that a significant number of industrial workers suspect industry of profiteering on war contracts. It would be most helpful, it seems to us, if all of the speeches in this series could include a reiteration of the seven points in the national economic policy, so that in time the public say become thoroughly familiar with them. Will you let me know your decision as soon as you conveniently can? If this office can be of any assistance, please call on us. Faithfully yours, water Archibald MacLeiah Director, Office of Facts and Figures 383 THE WHITE HOUSE WASHINGTON May 15, 1942 Dear Henry: Many thanks for your explanation of the delayed pay checks for now employees. I do hope the matter can be corrected promptly. Affectionately, M.P. V 384 MAY 13 1942 Dear Kleenors The situation to which you refer in your letter of May 9th, as to delays in receiving their pay experienced by new employees coming to work in Washington, is not due to any Tree- sury inaction but to the failure of administra- tive agencies to place the employees' names on the payrolls and to certify them to the Treasury Division of Disbursement. I am told that the Office for Energency Management has had difficulty in this respect and it is probably true of other newly created war agencies. It is a situation which should be corrected and I have directed that it be taken up with the various agencies concerned. Affectionately, (Signed) Henry Mrs. Franklin D. Roosevelt, The White House. "P.S. Thank you for thinging this to my attension Filin.m.C. Any WNTIaja 5-13-42 By Messenger Sincone 5:25 385 THE WHITE HOUSE WASHINGTON May 9, 1942 Dear Mr. Morgenthau: I am getting more and more protests from people who are becoming aware of the fact that Civil Service employees coming to work in Washington do not get their pay for several weeks after they get here. People have come across case after case where young people actually cannot eat and have to bor- row money. Sometimes they get so discouraged they quit and go home after working a month. Is there nothing which can be done to overcome this situation? Even in the armed forces, the question of getting paid on time is one of the things that concerns people more than anything else. Very sincerely yours, Viaua Roncevelo ghayoon Muye 386 May 15, 1942. Ferdinand Kuhn Secretary Morgenthau As you know, - Fritchie of Cleveland is in town. I don't know what conversations you have had with Henry about him, but I understand that there is some talk about taking him on in the Treasury. Whatever you have in mind, I just wanted to suggest that he is available this morning. During the morning you might speak to me about this, because the idea is not clear in my own mind. Thank you. Finished 5/15- 387 May 15, 1942 Telegram received from R. E. Wood Sears Roebuck and Company Chicago "Fifty large test stores report sales increases during week ending May 7th over last year slightly better in dresses and much better in all other soft lines than increase ratio during week ending April 16th. Furniture, floor covering, farm equipment increases May 7th much less than increases week April 16th. Major appliances decrease ratio May 7th 62 percent against April 16th 24 percent. Small hard lines decrease 11 percent May 7th against increase 9 percent April 16th." 388 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATEMay 15, 1942 Secretary Morgenthau TO FROM Mr. Hasa 44 Subject: Recent Changes in Prices and Yields of Government Securities During the week ended last night, the market for taxable Treasury bonds and notes showed a strong tone (see Table I). The premium on the new 2 percent issue stood at 11/32 last night as compared with 6/32 a week ago, and there was oom- parable strength in the longer maturity issues. The 2-1/2's of 1967-72 are now selling at a premium of 25/32, or only 2/32 less than on March 19. In general, long-term taxable issues are now at approximately the same level they were on March 19, while short-term securities remain substantially weaker than they were on that date (see Table II and the attached chart). The bill rate was up to 0.37 percent this week as compared with 0.36 percent last week, but this week's offering was the first of the enlarged bill program. Certificates of indebtedness have shown some improvement, closing last night at 0.49 percent as compared to 0.50 percent last Thursday. During the week ended last night, purchases of Government securities by the Federal Open Market Account aggregated $47 millions, consisting of $33 millions of bills, $14 mil- lions of certificates, and a minor amount of bonds ($137,000). On the other hand, there were $17 millions of sales of certi- ficates and $10 millions of bills matured. The net changes in the portfolio of the Account, therefore, consisted of an increase of $23 millions of bills and a decrease of $3 millions of certificates. As of yesterday afternoon, total subscriptions to the new 2-1/2 percent bond aggregated $859 millions. Late subscriptions, including those postmarked before midnight last night, will, of course, increase the total amount of this issue. 389 Table I Price and Yield Changes of United States Securities May 7, 1942 to May 14, 1942 (Based on mean of closing bid and asked quotations) Prices Security Yields May 7, May 14, 1942 1942 Change May 7 May 14. 1942 1942 (Decimals are thirty-seconds) Bills Average rate last issue - Certificates 11/1/42 Taxable Notes 3/4 12/15/45 3/15/46 Taxable Bonds 2 1 2-3/4 2-1/2 3-3/4 3-1/8 4-1/4 2 2-3/4 2-1/2 2 3-1/8 2-1/2 2-1/2 2-3/4 2-1/4 2 2-1/4 2-7/8 2-3/4 2-3/4 2-3/4 .49 -.01 100.06 99.21 99.08 99.19 100.06 99.22 99.08 99.20 .52 .89 -.01 -.01 .00 .53 .90 .96 .96 .00 +.01 1.11 1.10 -.01 101.02 100.10 100.06wi 100.01 103.17 100.28 102.24 101.04 100.14 +.02 1.81 100.20 .00 +.01 2.47 2.46 -.01 100.21 100.29 100.26 100.26 101.04 101.01 100.20 101.09 100.25 -.01 -.01 -.02 -.01 -.02 -.03 -.03 -.02 -.04 .05 .20 .33 .37 .04 .20 -.01 103.00 103.15 104.16 107.24 105.21 105.10 -.02 -.01 .59 .80 .60 .79 .00 .90 .88 12/15/44-54 9/15/45-47 12/15/45 103.02 103.16 104.16 107.24 105.24 105.12 3/15/46-56 6/15/46-48 6/15/46-49 10/15/47-52 12/15/47 3/15/48-51 109.24 107.13 107.25 115.10 104.20 107.20 9/15/48 12/15/48-50 12/15/49-52 12/15/49-53 9/15/50-52 6/15/51-54 9/15/43 12/15/43 6/15/44 9/15/44 3/15/45 Partially Tax-exempt Bonds 3-1/4 3-1/4 .50 - +.05 6/15/62-67 9/15/67-72 1 3/4 +.01 2.27 6/15/52-55 3/15/56-58 Wholly Tax-exempt Notes 9/15/42 12/15/42 1-3/4 6/15/43 1-1/8 3/4 .37 2.08 2.13 2.26 2 1-1/8 .36 - -.01 -.02 -.02 -.01 -.02 -.02 -.01 3/15/48-50 6/15/49-51 9/15/49-51 2-1/2 2-1/4 2-1/2 2-1/2 2-1/2 (Percent) 6/15/43-47 10/15/43-45 4/15/44-46 9/15/51-55 12/15/51-53 1.95 1.80 1.93 1.97wi 1.95wi 100.03 +.02 2.00 2.10 1.99 101.04 102.28 +.08 +.04 2.15 100.25 100.22 100.30 100.28 100.27 101.06 101.04 100.23 101.11 100.29 +.04 100.11wi +.05 103.22 +.05 - 1/2% Change .38 .39 .41 .43 .43 .37 .39 .41 .43 .45 :45 .47 .96 .00 +.04 +.02 +.03 +.04 +.04 +.02 +.04 +.01 -.01 -.02 -.02 .00 .98 -.03 -.02 1.00 1.02 .98 .99 109.22 107.11 107.24 115.08 104.20 107.19 -.02 -.02 -.01 -.02 1.16 1.16 1.15 1.18 1.32 1.14 -.01 1.39 .00 107.01 104.16 110.25 106.14 106.18 108.16 107.00 104.18 110.22 106.14 106.19 108.15 -.01 110.19 104.31 103.16 105.00 110.03 109.09 109.15 110.03 110.20 105.02 103.18 105.02 110.01 109.07 109.14 110.01 .00 -.01 +.02 -.03 .00 +.01 -.01 +.01 +.03 +.02 +.02 =.02 =.02 -.01 -.02 1.15 1.18 1.32 1.15 1.39 1.34 1.29 1.61 1.60 1.66 1.74 1.77 1.69 1.65 1.79 1.98 2.00 2.06 2.09 1.34 1.28 1.62 1.60 1.65 .00 .00 .00 .00 .00 -.01 +.01 1.74 .00 1.76 1.68 1.65 1.78 -.01 -.01 1.99 2.01 2.06 2.10 May 14, 1942. Treasury Department, Division of Research and Statistics. +.02 +.01 .00 -.01 +.01 +.01 .00 +.01 389 Table I Price and Yield Changes of United States Securities May 7, 1942 to May 14, 1942 (Based on mean of closing bid and asked quotations) Prices Security Yields May 7, May 14, 1942 1942 Change May 14, May 7. 1942 (Decimals are thirty-seconds) Bills Average rate last issue Certificates 11/1/42 Taxable Notes 9/15/44 3/4 3/15/46 Taxable Bonds 3/15/48-50 6/15/49-51 2% 2 /15/49-51 2 2 2-1/2 2-1/4 2-1/2 2-1/2 2-1/2 /15/52-54 6/15/52-55 3/15/56-58 6/15/62-67 9/15/67-72 1 1 3/4 1 3/4 2-3/4 2-1/2 3-3/4 3 3-1/8 4-1/4 2 2-3/4 2-1/2 2 3-1/8 2-1/2 2-1/2 2-3/4 .50 .49 -.01 .00 .53 .52 +.01 .90 .96 .89 .96 .00 1.11 1.10 -.01 - - 100.06 99.21 99.08 99.19 100.06 99.22 99.08 99.20 101.02 100.10 101.04 100.14 +.02 +.04 100.03 103.22 101.04 102.28 +.02 100.06wi 100.01 103.17 100.28 102.24 .00 +.01 -.01 -.01 1.81 1.80 1.95 1.93 -.01 -.02 -.02 -.01 -.02 -.02 1.97wi 1.95wi 1.99 2.08 +.04 2.00 2.10 2.15 2.27 2.26 -.01 100.11wi +.05 +.05 +.08 2.13 - 2.47 2.46 -.01 100.22 100.30 100.28 100.27 101.06 101.04 100.23 101.11 100.29 100.21 100.29 100.26 100.26 101.04 101.01 100.20 101.09 100.25 -.01 -.01 -.02 -.01 -.02 -.03 -.03 -.02 -.04 .05 .20 .04 .20 -.01 6/15/43-47 10/15/43-45 4/15/44-46 12/15/44-54 9/15/45-47 12/15/45 103.02 103.16 104.16 107.24 105.24 105.12 103.00 103.15 104.16 107.24 105.21 105.10 -.02 -.01 3/15/46-56 6/15/46-48 6/15/46-49 10/15/47-52 109.24 107.13 107.25 115.10 104.20 107.20 107.01 104.16 110.25 106.14 106.18 108.16 6/15/43 9/15/4 12/15/4 3/15/44 6/15/44 9/15/44 3/15/45 12/15/47 3/15/48-51 9/15/48 12/15/48-50 12/15/49-52 12/15/49-53 9/15/50-52 6/15/51-54 9/15/51-55 2-1/4 2 2-1/4 2-7/8 2-3/4 2-3/4 2-3/4 +.01 +.05 Partially Tax-exempt Bonds 3-1/4 3-1/4 .37 100.25 2% 1-1/8 .36 - 100.20 Wholly Tax-exempt Notes 9/15/4 1-3/4 12/15/42 1-1/8 (Percent) /15/58-63 12/15/60-65 - 1/2% - Change 1942 110.19 104.31 103.16 105.00 110.03 109.09 109.15 110.03 .33 .37 .00 +.04 .37 .39 +.02 .38 .41 .43 .45 .45 .47 .60 +.01 .80 .79 .88 .96 -.01 -.02 -.02 .39 .41 .43 .43 .59 .00 .90 .00 .98 -.03 -.02 1.00 1.02 .98 .99 109.22 107.11 107.24 115.08 104.20 107.19 -.02 -.02 -.01 -.02 1.16 1.16 1.15 1.18 .00 1.15 -.01 107.00 104.18 110.22 106.14 106.19 108.15 -.01 110.20 105.02 103.18 105.02 110.01 109.07 109.14 110.01 +.02 1.15 1.18 1.32 1.34 1.28 -.01 1.66 1.74 +.01 +.03 +.02 +.02 1.77 1.69 1.65 1.79 1.98 2.00 2.06 2.09 .00 .00 1.62 1.60 1.65 1.74 +.01 1.76 1.68 -,01 -.01 1.65 1.78 1.99 .00 .00 -.01 +.01 2.01 +.01 2.06 2.10 +.01 May 14, 1942. Treasury Department, Division of Research and Statistics. .00 1.34 1.29 -.01 -.01 -.02 .00 .00 1.39 .00 =.02 .00 -.01 +.01 -.02 +.02 +.01 1.32 1.14 1.39 1.61 1.60 -.03 +.03 +.04 +.04 +.02 +.04 .00 390 Table II Price and Yield Changes of United States Securities March 19, 1942 to May 14, 1942 (Based on mean of closing bid and asked quotations) Yields Prices Security March 19, May 14, 1942 1942 Change March 19, May 14, 1942 1942 (Percent) (Decimals are thirty-seconds) Bills Change .20 - +.17 .37 Average rate last issue Taxable Notes 3/15/43 12/15/45 3/15/46 taxable Bonds 6/15/49-51 9/15/49-51 2 2-1/2 2-1/4 2-1/2 2-1/2 2-1/2 3/15/56-58 6/15/62-67 9/15/67-72 Wholly Tax-exempt Notes 9/15/45 1-3/4 1-1/8 1-1/8 12/15/43 3/15/44 6/15/44 9/15/44 3/15/45 Tax-exempt Bonds 2-3/4 2-1/2 3-1/8 4-1/4 2 2-3/4 2-1/2 2 3-1/8 2-1/2 2-1/2 2-3/4 2-1/4 2-7/8 2-3/4 2-3/4 2-3/4 5/45-47 12/15/45 3/15/46-56 6/15/46-48 6/15/46-49 10/15/47-52 12/15/47 3/15/48-51 9/15/48 12/15/48-50 12/15/49-52 12/15/49-51 9/15/50-52 6/15/51-54 12/15/60-65 - 99.29 100.06 99.22 99.08 99.20 101.28 101.04 101.04 100.14 100.12 99.31 99.21 - 100.11wi - .49 - - Certificates 11/1/42 1/2% .37 en .52 +.15 .76 +.13 -.13 -.09 .84 .89 .96 1.02 1.10 +.12 +.08 -.24 -.22 1.67 1.83 1.80 1.93 +.13 +.10 1.99 2.08 +.03 2.12 +.01 +.02 .00 -.06 -.09 1.95wi 100.12 103.23 101.06 103.05 100.03 103.22 101.04 102.28 -.09 -.01 -.02 -.09 1.96 2.09 2.24 2.13 2.26 100.25 -.02 2.46 2.46 100.27 100.21 100.29 100.26 100.26 101.04 101.01 100.20 101.09 100.25 -.15 -.14 -.10 -.09 -.12 -.09 -.07 -.07 -.07 5/32* 2/32* .04 101.04 101.11 101.04 101.03 101.16 101.10 100.27 101.16 101.00 .22 .37 -5/32* -4/32* +.15 .26 .26 .34 .37 .39 .41 +.13 +.15 .43 +.09 +.08 103.21 104.06 105.06 108.11 106.06 105.28 103.00 103.15 104.16 107.24 105.21 105.10 -.21 -.23 -.22 -.19 -.17 -.18 .72 .91 .94 1.02 +.16 +.05 +.08 .90 .99 +.09 109.22 107.11 107.24 115.08 104.20 107.19 -.18 1.11 110.08 107.28 108.08 115.20 104.23 107.28 -.17 -.16 -.12 -.03 -.09 1.09 1,13 1.33 1.16 1.15 1.18 1.32 1.14 1.39 +.05 +.06 107.07 104.21 110.22 106.16 106.20 108.18 107.00 -.07 -.03 1.33 1.28 1.65 110.20 104.29 103.10 104.28 110.00 109.10 109.12 110.00 110.20 105.02 103.18 105.02 110.01 109.07 109.14 110.01 104.18 110.22 106.14 106.19 108.15 .00 -.02 -.01 -so3 .00 +.05 +.08 +.06 +.01 .20 .45 -.01 47 +.06 +.06 .41 .60 +.19 .57 .79 .88 +.22 .39 1.15 1.38 1.60 1.66 1.74 1.78 1.70 1.68 1.80 2.00 -.03 2.01 +.02 +.01 2.10 2.07 45 .96 +.05 -.01 -.01 +.01 1.34 1.28 1.62 1.60 1,65 +.01 1.74 .00 1.76 1.68 1,65 1.78 -.02 -.02 -.03 -.02 -.01 1.99 2.01 .00 -.03 .00 -.01 .00 2.06 -.01 2.10 .00 May 14, 1942. Treasury Department, Division of Research and Statistics. Excess of price over zero yield. . 391 TREASURY DEPARTMENT WASHINGTON May 15. 1942. TO THE SECRETARY: Total public debt receipts during the month of May to the close of business May 14 are approximately as follows: (In Millions) Treasury Bills Treasury Notes, Tax Series War Savings Bonds $200 90 300 Treasury Bondet 2% of 1949-51 2-1/2% of 1962-67 1,292 859 $2,741 Payment for the 2% bonds of 1949-51 will be made today. wid DEFENSE BUY STATES STATES BONDS 392 MEMORANDUM FOR THE SECRETARY. May 15, 1942. Mail Report Responses to new income tax proposals dominated the mail during the week ending May 15. Needless to say, unfavorable comments far outnumbered those in favor of the lowering of exemption for dependents, and the lowering of the personal allowance. Out of 15 representative comments on the subject, 12 were unfavorable, 1 favorable, and 2 simply commented on the result of such action. It is interesting to note that a number of the unfavorable ones come from parents of large families and attack the Secretary for "penalizing" those who have several children. Out of 44 letters speaking of the lowering of per- sonal exemption, 39 are unfavorable, 4 favorable, and 1 neutral. In addition, there have been perhaps 50 let- ters from wives who outline their present budgets down to the last cent, and who ask the Secretary how he would suggest their changing the various items in order to pay heavier taxes. Some of these letters are extremely pathetic, and almost all of them represent an honest attempt to meet the problem and deal with it in the best possible way. While the writers are naturally unhappy over the prospect of additional taxation, they are not abusive, but simply seeking help in working out their personal problems. There has been, however, a great increase in the abusive mail during the past week. The anonymous letters outnumber the signed ones by 15 to 3. In addition, there are many anonymous ones which cannot be classified as abusive, although they protest additional taxes and the Secretary's part in making the recommendations. 393 -2Memorandum for the Secretary. May 15, 1942. The theme of economy in Government runs through a great many of the oritical letters. There have been 12 letters which speak only of economy, without mention- ing taxation. There also have been 3 letters mentioning the Rosenberg andofofit.the 3, 2 say they will buy no more bonds expose, as a result One letter was extremely critical of the Roosevelt family in regard to the $25,000 a year income ceiling. "Tax the Unions" continues to be the outstanding suggestion for more revenue; closely followed by the appeals for a national lottery. This week, advocates of the Sales Tax outnumbered those who opposed it by 39 to 7. There was a dwindling in the protests from employees of telephone companies who feared pension cuts, but a sharp increase in protests from other types of pensioners older people living on a small, fixed income, and unable to see how they can "get by" if these stipends are taxed. Many of these older persons-list their medical expenses and suggest exemption for those who must meet doctors' bills, and similar charges incident to their advancing age. Several letters from those in the income brackets between $5,000 and $10,000 speak of heavy life insurance policies which will have to be given up, and ask whether this will not hurt rather than help the Government's financial standing. Others speak of the necessity of curtailing their plans for the education of their children, but few specifically mention the proposal to permit exemptions, in connection with future income tax changes, for educational purposes. There have been a few letters complaining of the interest rates charged by small loan companies, and it is evident that the current income tax payments have 394 3- Memorandum for the Secretary. May 15, 1942. stimulated the business of these companies. One writer complains that the farmer has had credit facilities made available to him by his Government, but that the city dweller has no Government agency to which he or she may turn for simpler credit needs. There is one belief which is constantly appearing in the mail, although it is not as widespread as it used to be. That is, the question of income tax payment by the President, Government officials, and Government employees. There are evidently many who still think that none of these pay any income tax at all. This statement appears particularly in abusive mail, and letters which sharply criticize the President, Members of Congress, etc. It might be well in some future statement on taxes to include a sentence or two that would remove this misunderstanding. Gabrutte E. Forburk 395 -1General Comments on Present Emergency Mr. A. V. Powell, Utah Copper Company, Garfield, Utah. Enclosed herewith is money order in the amount of $18 from the Yard Gang of the Utah Copper Company, Magna Plant. This fund is made up of odd pennies and change donated by members of the Yard Gang over a month under the slogan of, "Slap A Jap", and it is our wish that this money be used-in the war effort to whatever use you feel it is most needed. It will give us a lot of pleasure to feel that it is going to the Japs in the form of some non-returnable donation that will hit them in their most tender spots. John S. Taylor, Taylor Cable Products, Kansas City, Kan. Judging from our experience the widely heralded New Deal for Small Business and The Forgotten Man has proved a dud. Instead of the help promised, many in this less-fortunate class are now being pauperized through Priority discrim- inations, Bureaucratic control, and the Monopolistic activities of Big Business. # * * For your information, the writer was among the first in America to engage in the manufacture of Battery Cables, was first to simplify and produce an Interchangeable Cable, has several patented im- provements to his credit, and for 20 years has supplied this essential product to distributors throughout the U.S.A. All this has now come to a halt, having been compelled to cease production in our factory until we can obtain a priority order that will be honored, or until other relief can be had that will enable us to procure the small amount of material we need to resume operation. This material would not only continue our one means for earning taxes and making a living, but would provide employment in an essential industry, and make use of productive capacity now going to waste in a fully equipped plant. We direct attention to the fact that while production in our plant has been stopped and its productive capacity wasted, Big Business using the same materials, has been working overtime, some even build- ing plant additions that will further extend their control over our industry. 396 -2The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses a copy of a despatch from the American Vice Consul at Victoria, Brazil, enclosing his check payable to the Treasurer of the United States in the amount of $208.32, representing one month's salary, as his personal contri- bution to the funds for the prosecution of the war. E. D. Thompson, Vice President, Stevens Metal Products Co., Niles, Ohio. Attached to this letter you will find copies of certain correspondence which we have had with the Finance Dept. of the U. S. Army, located at Fort Baltimore, Md. * # # About 35 days after the invoice date, the Finance Dept. at Fort McHenry sent us a voucher to sign, deducting 1%, which is only earned if the bill is paid within 10 days from invoice date. We sent this voucher back to them three times and they have McHenry, refused to correct it. I am therefore writing to you to place the details before you and see if the policy of the U. S. Government, who places strict restrictions on us as to quality and time of delivery, with a penalty for failure to deliver, is such that you can arbitrarily deduct a cash discount, which has not been earned. If the Government does not observe these terms, it is very unwise fornot us to be- offer any discount for prompt payments. * I do lieve that the U. S. Government, who expects full cooperation from all of its citizens, should try to "chisel" from its suppliers, discounts to which they are not entitled. Scott Newcomb, Inc., St. Louis, Mo. We have been attempting to get $40,000 loan from Federal Reserve Bank in St. Louis for carrying inventory on stirrup pumps developed by OCD for civilian use. Bank has refused loan even though we have factory worth double amount of loan, and we have many additional assets. The manufacturing of all our products has been ordered stopped by WPB, and our inven- tories are also frozen by W.P.B. Is it the intention of Government officials to ruin all small business without any consideration for them? Newspapers have carried articles stating that the Government was going to be liberal in making loans to small business. Please wire us collect. 397 3- Maxwell Desser, New York City. During the past four years I have been associated with Mr. Wm. H. Rankin of the Wm. H. Rankin Co. On my first trip to Washington, Mr. Rankin gave me cards of introduction to about a dozen of his friends. When I arrived in Washington, the first thing I did was to go over to the Government Information Bureau. If this Bureau is as helpful to all new visitors to Washington as they were to me, they will not only save themselves time and money, but will cause Washington to have a far better reputation -- the City, the Workers, and the Information Bureau! Mr. Rankin feels that the Dies Committee, Senator Byrd and the newspapers have been most unfair to one of the best public men - Mr. Lowell Mellett. H. H. Banker, Cincinnati, Ohio. In the course of my daily contacts, I occasionally hear the expression from men whom I respect as sincere and able, that the Government vouchers in payment for goods delivered usually require from 60 to 90 days to clear in Washington. If this is true, and were it possible through the assignment of an expeditor to this function, to reduce the time element to 30 days, it might bring some relief to the short-term money market. In other words, those same funds would then perform double or triple duty in financing the war effort. C. A. Liddle, President, Pullman Standard Car Manufacturing Co., Chicago, Ill. Your letter of the 4th instant with regard to the contribution by the employees of the Hammond plant of this Company of check in sum of $4,372.75, which is the equivalent of the value of one Howitzer carriage and one 81 mm. Mortar, is acknowledged herewith. Your letter of appreciation is being bulletined among our employees and I can safely say that your expression of appreciation will in turn be appreciated by them. I might add that they have by their laudable daily performance for many months shown their appreciation of our national emergency, and their loyalty to its cause. 398 4- Richard S. Ely, Alexandria, Va. In the light of the staggering increase in income taxes, made and proposed, not to mention schemes for forced saving and perhaps new restrictive credit regulations, what is to become of the middle class fathers and mothers whose only offense is that in years long past, they undertook heavy commitments for life insurance and a home, who have children over 18 to whom they would like to give a college education, as their parents gave them, and who for years have had no surplus with which to fan the fires of inflation? In view of the fact that this class has been following the very course recommended by the President as anti-inflationary, and also in view of the very far reaching economic and social implications involved, may it not be possible to frame a program which will not bear too devastatingly on these people, and such highly desirable objectives? Thomas B. Roscoe, Hackensack, N.J. I am raising a family of five and having a hell of a time doing it. Exemptions for children should be increased to at least $500, not lowered to $300. We should strive for larger American families, not smaller ones. They have almost reached the vanishing point as it is. Frank A. Spencer, Boonton, N.J. As a father of a family of two boys, 13 & 15 respectively, and a property owner in the State of New Jersey, I wish to protest the reduction of exemption from $400 to $300, as reported in the Chicago Daily News. # * Are you penalizing men who have the courage to raise families? If so, God help America. 399 5- Favorable Comments on Bonds Hon. Jerry Voorhis, House of Representatives. You asked for my comments, and I have briefly three: First, I think your letter is a very fine one. Certainly if a sufficiently large volume of War Bonds can be sold on a voluntary basis, it will be of very real psychological advantage. I earnestly hope this voluntary effort will be successful, but I frankly have serious doubts that it will be -- particularly from the standpoint of building up a substantial backlog of buying power for the lower income groups for the post-war period. My second comment would be that I like very much your em- phasis on the constructive attitude which labor has taken with regard to this whole question of the importance of the purchase of War Bonds. * * # The only further suggestion I would have would be that I think you might well have emphasized the importance of the effect on our post- war economy and the problems associated therewith of having a considerable number of Bonds in the hands of the people generally, and particularly those of the comparatively low income groups. It seems to me this would be a strong argument to use with businessmen. Norman C. Kurth, Detroit, Mich. I, Norman C. Kurth, employee of the Packard Motor Car Company, do hereby pledge to give 10% of my earnings to the United States Treasury, my contribution to help defeat the Axis powers and for the preservation of Democracy. Beginning with May 16, 1942, a check will be sent to you and also each week thereafter for the duration of the war. Mrs. B. B. Sapp, Austin, Texas. On behalf of the Board of Trustees of the Teacher Retirement System of Texas, I should like to express our satisfaction with the new financing policy involved in the Treasury offering of recent date, whereby eligible subscribers to the 21% Treasury Bonds of 1962/67 were allowed an allotment in full amount of their subscription. Our subscription of $525,000 was entered through our local depository, but we do want to give credit to those who not only informed us but urged us to make it an all-out drive, and offered their services free in connection with the placing of our subscription. The bankers and security dealers of Texas have been very active in their support of the regular Treasury financing program and in the sale of War Savings Bonds. -6 - 400 Fred W. Allison, Pottstown, Pa. The writer being out of a position as salesman on account of being forced out of business, offers himself and a cane. This cane was once the property of President Grover Cleveland and was given to my father, and to me, before his death. This cane is carved with the following: A head of Thomas Jefferson, and the words, This cane was cut suggesting it be used in helping sell Bonds. near Jefferson's Tomb". Helen Ruggles, Detroit, Mich. You are absolutely right in fighting compulsory savings. People will strain to the breaking point to buy Bonds of their own volition. If they start forcing them, they will buy only what they have to and not one cent more. 7- 401 Unfavorable Comments on Bonds Donald A. Rock, Superior, Wis. I have heard on several occasions in the past week or two that the U. S. Government plans to issue an order in the nature of a freezing order prohibiting the cashing in of Defense Bonds. This letter is written for the purpose of securing a frank official statement from you as Secretary of the Treasury as to whether or not the Government intends to issue any such freezing order prohibiting the cashing in of War Defense Bonds, to the end that I may decide whether or not it will be safe for me to make any further purchase of Bonds. It is very possible that this and other such rumors may be in circulation in other cities throughout this country. If you can give me definite assurance that there will be no restriction on the cashing in of war defense bonds, I will then feel free to buy as many bonds and stamps as I can possibly afford to buy out of my savings and current income. If, on the other hand, you are unable to give any such commitment, my war bond purchases will then be limited necessarily to what I can afford to buy out of current income only. E. E. Michael, Manager, Birmingham Plant, Chicago Bridge and Iron Company, Birmingham, Ala. We have been much interested in your correspondence on the subject of increasing the subscriptions of our employees for the purpose of buying War Bond. We have also been doing quite a few things to encourage our various employees to buy more Bonds and to buy them oftener. * * * Here in Birmingham, our Bond business has appeared unwelcome to those whose duty it is to fill out Bonds. At one time we were buying Bonds from a suburban branch of one of the larger banks, but we found the service so slow that we determined to do business with the downtown Post Office. The Post Office told us they were unable to handle our business, but suggested that we go to the Birmingham Branch of the Federal Reserve Bank. For the past few weeks, we have been able to get service in from 3 to 5 days from the Birmingham Branch of the Fed. Reserve Bank of Atlanta, but this week we are disappointed 402 8- and have been told that we must wait until next week to secure the Bonds which we requested on Tuesday of this week. In the meantime, we have received a letter from the President of the Federal Reserve Bank of Atlanta suggesting that we qualify as an issuing agency. My suggestion is that the Government has before it a most excellentopportunity to demonstrate to its people that the Government itself is sincerely interested in winning this war, and is willing to give its citizens some snappy service. There must be thousands of employees of the various Government offices who are now engaged in non-essential activities, but who could be transferred to other duties which would make it possible for the Federal Reserve Banks or for the Treasury Department itself to issue Bonds in not more than 24 hours after receipt of the application. J. Fred Anderson, Springfield, Ohio. I want to object to the fact that apparently you permit banks and other financial institutions to do what amounts to a misrepresentation of the bonds which are now being sold for the war effort. I have known of many instances where people with some accumulated savings have bought Series G Bonds in good faith, thinking that they pay 21%, and after they get the Bonds, if for any reason they have to have their money within six months, they would receive the handsome sum of 50g for the use of $1,000 for six months. Your method of advertising I submit is decidedly productive of lack of confidence in Government. The people of the United States are not all infants. They can take it, and they should be told in no uncertain terms what will happen if they cash in their Bonds. Charles Bell, Cicero, Ill. I have been purchasing a War Bond through the payroll deduction plan. For an $18.75 Bond, the company has charged me $19.00. Is this 25g a handling charge and should this be paid by me? If I pur- chase Bonds through my bank, I am not obliged to pay this 25d, and I think it is to my advantage to buy them through the bank, and not by the payroll deduction plan. Would you please let me know if this 25g is a legal charge? 403 -9- - E. A. DeMeritt, Dover, N.H. I visited the Dover, N.H. Post Office today, or my wife did, to buy ten $100 Bonds. The clerk in charge said he was too busy to make them out, and we would have to come back again in an hour. Mrs. DeMeritt could not wait, and we will have to make another trip tomorrow. We will have to walk as we have sold our car to help conserve gas and tires. This is something that should not happen when you are asking every one to buy bonds; this way of handling a sale was not salesmanship. Gerald Fox, N.Y.C. Attached is a copy of a letter addressed to the Chief of the Division of Loans & Currency under date of May 1st. As ten days have elapsed without receiving a reply, may I ask that you have someone in authority take the matter in hand? Surely you do not want to penalize me for a clerical error, but rather you want to encourage my family and myself to continue the purchase of War Bonds to the extent that our resources permit. * * Incidentally, I am Secretary-Treasurer of Oneida Paper Products, Inc., N.Y.C., and when you requested us to Install the Pay Roll Allotment Plan for War Bonds, we gladly and speedily took steps to comply. 404 - 10 Favorable Comments on Taxation Linden C. Weimer, Dayton, Ohio. In my opinion, you are absolutely right on your new proposition to Congress in reference to income taxes. This country has to face severe taxation. Of course, nobody enjoys it, but after all, we have so much more left than other countries enjoy, we should not complain about it. If Congress won't stand for your bill, they will have to resort to a heavy sales tax, but I think your plan is preferable. Your war bonds of small denomination should have that clause, that you can cash them at the expiration of 60 days, changed that the time should be at least one year, for I have very definite information that a great many people feel they are compelled to buy these bonds, but they will cash them as soon as possible. Mrs. Edwin A. Graff, Chicago, Ill. I have been much interested in your new suggestions for income taxation. I have always thought every one having an income of $500 a year should pay an income, as we all share the benefits from taxes, and should all add, no matter how little, to the amount. The collection of the tax could be in stamps on the order of the Defense Stamps; receipts given when paid - thus not requiring extra paid help. The Sales Tax is another way. Every one pays that on a purchase. Billie Blessingame, Akron, Ohio. I am in full agreement with your lowering the Income Tax exemptions, instead of putting a 10% tax on food and clothing. I was born and reared in Georgia and I know how hard it is for the people in the Southern States to exist now, for as a rule most of the families there are rather larger than they can feed and clothe properly now. 405 - 11 Unfavorable Comments on Taxation Carl F. Morgan, Hapeville, Ga. The workers and women are burned up about your request for taxing the wages of those who find it hard to eke out a bare existence. They want to know why the billions in the banks are not taxed, and they want to know why there are restrictions on all decent legitimate businesses, while there is absolutely none on the whiskey and beer saloons, which are run mostly by foreigners who have always sent their money to Europe before the war, and who are now hoarding it. The poor people are willing to sacrifice. In fact, the sacrifices already placed on the people are not re- sented by the workers and housewives. am Thomas S. Egan, M.D., Mapleton, Ill. country Doctor. I get a check from A.T.&T. every three months for $344.25. Since December, 1941, I have done this: bought one Bond - $100. January, dividend day, I bought 4 Bonds - $300; deposited in bank, separate account for I a taxes - $44.00; I spent the 25%. April 16, I repeated the same act. I will do this every three months as long as I receive the checks. from my practice. * I am unable to buy Bonds Now, the A.T.&T. reading from March 1 report -- F.D.R. has 500 shares; the 700,000 stockholders received in dividends 168 million dollars. You can tax all the 168 million dividends away if you and Congress care to do so, but it will be mighty hard on the 273,000 workers in the telephone company who are small holders. I hope I have made myself clear, and that we will win, but do not tax away all the feathers on the goose that lays all the eggs, or she will DIE. T. G. Evensen, Minneapolis, Minn. I am whole-heartedly in accord with the President's view that the paying of debts out of income is a very effective anti-Inflation weapon. I have been in debt since 1929 and except for higher income taxes, now and for the next few years, I probably would be in a position to pay off these debts. Increased taxation makes any reduction almost an impossi- bility. Isn't it reasonable to suggest that those of us who are in this position should be given some deduction in our income tax statements for payments made on these old debts, provided the payments are made out of earned income? 406 - 12 - W. C. Brownlee, Inglewood, Calif. The State of California levies an annual Franchise Tax which is 4% of the net income for the preceding year, and the State of Arizona has a similar tax of 5%. This Franchise Tax is, of course, deducted in computing income subject to Federal taxes for the ensuing year, but if the high rate of activity should terminate suddenly, it is probable that in the ensuing year there would be no taxable income. The Franchise Tax based on the preceding year's income would nevertheless have to be paid, with the result that Cali- fornia and Arizona Corporations, and those of other states having similar laws, will be required to pay to the two governments in respect of income of the preceding year in total combined tax of more than 100% of the income over and above the excess profits credit. * So long as the emergency activity is at a high level, corporations can pay a given year's taxes out of the income of the past year, but it is our belief that when the emergency terminates, many of them will be bankrupt by their inability to pay taxes for the last year of high activity because in the ensuing year there will be no income available with which to make payment. It is therefore necessary for any management which has any concern for solvency to refrain from making any expenditure which does not constitute a deduction in computing taxable income. If the tax bill now under consideration is passed, we will be afraid to expend large amounts for experimentation for fear of impairing our ability to make our tax payments, inasmuch as expenditures for experimentation are not deductible. The experimentation which we have carried on in prior years has resulted very beneficially to the war effort, in that we now have demands the from the Military Services for more than we can make of products which were thus developed. We urgently sug- gest that due consideration be given to the above-mentioned points, to the end that the near-confiscatory rates would not be enacted, or, if enacted, would be coupled with provisions which will enable corporations such as our own to serve to the best of their ability during the war and to survive the post-war period so they could again serve as a medium for restoring normal business processes and the employment of labor. 407 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE MAY 15 mm TO Secretary Morgenthau FROM Mr. Foley For your information, there is attached a copy of the Hearings on "Tire Dealer and Rebuilder Programs" before the Special Committee to Study and Survey Problems of Small Business Enterprises, United States Senate. An item which should be of particular interest is marked in red on page 456. In that item, Mr. Harry C. McCreary (President, McCreary Tire & Rubber Co., Indiana, Pa.) states, in effect, that he is having difficulty in getting lease-lend business from the Procurement Division of the Treasury Department, which Division, he says, is working under an emergency system at the present time. So 7h. 408 V PROBLEMS OF AMERICAN SMALL BUSINESS HEARINGS Su paye456 BEFORE THE SPECIAL COMMITTEE TO STUDY AND SURVEY PROBLEMS OF SMALL BUSINESS ENTERPRISES UNITED STATES SENATE SEVENTY-SEVENTH CONGRESS SECOND SESSION PURSUANT TO S. Res. 298 (76th Congress) A RESOLUTION TO APPOINT A SPECIAL COMMITTEE TO STUDY AND SURVEY PROBLEMS OF AMERICAN SMALL BUSINESS ENTERPRISES PART 2 MARCH 3, 4, 5, AND 6, 1942 TIRE DEALER AND REBUILDER PROBLEMS Printed for the use of the Special Committee To Study and Survey Problems of Small Business Enterprises UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON : 1942 PROBLEMS OF AMERICAN SMALL BUSINESS 456 normal times, because they require deliveries all over the United States. Well, 80 percent of our entire production is sold in the State of Pennsylvania alone. So you can see our facilities for complying under the general schedule are just automatically out of the window. Senator ELLENDER. Does the quality of your product meet their specifications? Mr. McCREARY. Oh, yes; and exceeds it very materially. Senator ELLENDER. You say you have no difficulty in obtaining work through the lease-lend operation Mr. McCREARY. I won't say we have no difficulty. We have had difficulty in getting some lease-len business Senator ELLENDER. Just why is that Is that because it is handled by a different agency of the Government Mr. McCREARY. It is the Procurement Division of the Treasury Department. The CHAIRMAN. They have a different procurement system? Mr. McCREARY. Yes: they are working under an emergency system at the present time and that is one reason I can't quite understand the Quartermaster Corps. The CHAIRMAN. Do the big national concerns get lease-lend business also Mr. MoCREARY. Yes, sir. The CHAIRMAN. If you were not in competition with the bigger concerns, you would be able to get more business from lease-lend 1 mean to say, you could supply much more to the lease-lend, if you were able to get the contracts with them Mr. McCREARY. Yes: that is true, However, the requirements of lease-lend are so tremendous I think it will take all that all of us can produce to supply them. The CHAIRMAN. Then why are you not getting more orders? Why aren't you getting more orders from the lease-lend Mr. McCREARY. I have no knowledge why I am not getting more. The CHAIRMAN. But you are not McCREARY. No: am not. I am in there fighting for it. Senator ELLENDER. Now, coming back to this other matter. let me ask you this: You spoke awhile ago of getting some work through a subcontract, did I understand Mr. McCREARY. Yes. Senator ELLENDER. Well, now, how did you manage to get that subcontract Mr. McCREARY We just went out and went after it, like we go after any commercial business. Senator ELLENDER. To whom did you apply! Mr. MoCREARY. To the prime contractor, who is the manufacturer of the original vehicle. Senator ELLENDER. Was it given you because he was so generous, or was it that he could not manufacture it Just how did that happen Mr. McCREARY. Well, of course, you see the point is that the original equipment of the manufacturer, the manufacturer's vehicle does not have: he does not make the tire, and we as tire suppliers are in that position. Senator ELLENDER. I see. It is not rubber Mr. McCREARY. Oh, no: it is not rubber. Oh, no. 409 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE 5/15/42 TO Mr. Harold N. Graves FROM George Fort Milton Here is a summary of what I told you earlier about Albert Gore, and his Fourth District of Tennessee, together with one or two new facts. Gore, a native of the Cumberland Plateau, comes by his attitudes understandably enough. He lives on the Upper Cumberland River at Carthage, a town of 2,000 - and about the third largest in the District, being exceeded only by Lebanon (5,000) and Cookeville (3,500), of Tennessee's 95 counties, 16 are in the Fourth: before 1941's reapportionment, to increase the number of districts from 11 to 12, there were 18 in it. It has about 240,000 population. These are the names of the counties: Bedford, Clay, Cannon, Coffee, Cumberland, Dekalb, Fentress, Jackson, Lincoln, Marshall, Moore, Overton, Pickett, Putnam, Smith and Wilson. The two that were lost last year were Franklin and Rutherford. The terrain of the district ranges from thin top-soil plateau to semi-mountain, with quite a small fraction of the whole in rich creek - or river-bottom land. Last year's movie on Sergeant York, was laid in the Fourth District, and pretty faithfully picturized the contrasts in physical geography. The people, who are somewhat less accurately pictured in the movie, exist chiefly through small farming. Throughout the District agriculture is a way of life, not an extractive industry, for yields are small on steep hillside corn patches. Some luck has been had with the Cumberland potato, and with sorghum, and with apples and cherries. A few rafts of logs still come down the Cumberland, and a few raftsmen still tell stories of the prowess of Cordell Hull's father in that work. There is comparatively little industrial labor. Forty years ago coal mining was a large factor, but most of the veins of the Sewanee seam, and the Cumberland seam have been mined out. The miners have been on relief for a decade. There are a few hosiery mills and other small establishments. But labor is no more than a minor factor in the emotional pattern of the Fourth. -2- 410 The people are 99 per cent native American, and about 97 per cent of Anglo-Saxon (or African) origin. There is, at Wartburg, a colony of Morayians established in the early 'Seventies; as there 18 at Harrowgate, one which Thomas Hughes set up to Americanize his Rugby scheme. Neither noble experiment outlasted a generation. About 40 per cent of the folk are Scotch-Irish, an equal number English, some (chiefly miners) Welsh, and a good sprinkling of French Huguenots from South Carolina. There is much poverty, but not of a proletariat type. Most of the farmers feel themselves independent farm owners, des- pite mortgages on their farms. The tenancy relations are not of Black Beet type, and hunger and hearbbreak is not so large. The chief economic interests are in mixed farming, sheep raising, horticulture. The dulcimer is still played in mountain cabins, to accompany "Barbara Allen," and the vocabulary is the closest to Elizabethan English in America. Such is the scene of Albert Gore's political operations. "I am from Judge Hull's District" is part of Gore's stock in trade; But he isn't Hull's choice. On the contrary, he was Commissioner of Labor in Governor Browning's Cabinet, 1934-1936; Browning is a Luke Lea follower, and Hull likes neither Lea, nor Browning, nor the latter's supporters. By the same token, Gore and McKellar are on opposite sides in Tennessee Democratic politics. Gore used his State Labor job as a springboard to get to Congress. He came here with tremendous ambition and energy. And he came here with a smart, attractive young wife, an ex-school teacher, who is his thinking general staff. She determines to find some way for him to short-cut the path to National attention and influence. Hull advised Gore, as he does all new Democratic Members from Tennessee, to pick out two or three things, specialize on them, and give them hell, whether right or wrong: That this was the way to become something of a National man, and get ahead. Gore's first shot was an attack on the New Deal's housing schemes; the folk of his District liked it, and so did embattled reactionaries over the country. Then about a year ago the better idea came of hooking up with Bernie Baruch. To this end he wrote the latter a short, seemingly naive note that B.M. liked, and was promptly taken on experimentally. Since then he has been Bernie's chief fugelman in the House, as Arthur Krock is in newspaperdom. And now he is all-out for the Baruch total plan. A few days ago my own Congressman, Estes Kefauver, asked Albert about his mail from the District. It is fairly heavy, with practically no criticism of the items he insists on. A few farmers write that they think the 110% parity would help them. But don't make much of a point of it. Practically all who write like the antimillionaire, anti-labor ceilings. They don't know much of what the 411 -3- shooting's all about, but they indorse these targets. And they are proud of "Our Albert" for having gotten into the front-page headlines; they like this sign that he's an up and coming fellow. My guess, which Kefauver confirms, is that the Fourth likes Gore's fight. He has no opposition for renomination, though Wednesday's afternoon papers had an A.P. squib that Alvin York was thinking of doing so. I doubt if York could beat him - his conduct at home has been so greedy and grasping that he has lost most of his Fentress County and Fourth District friends. Nor is there much question of Gore's reelection;isexcept in such a landslide as the Harding 1920 one, the District securely Democratic. It would not be hard to get a spot checkup of this picture of District opinion. If I were to go down to do it myself, the folk on the spot would quickly identify the reason, and the Treasury interest, my official hookup being well known in Tennessee. My idea is to get a dependable chap, who knows how to do it. I have such a man, J. Charles Poe, who was my Managing Editor on the late lamented Chattanooga News from 1924 until 1939, when he became Commissioner of Conservation in the Cabinet of the present Governor Prentice Cooper, and continues such today. In this work, he runs about 37 State parks, several of which are in Gore's District. Poe appoints their staff, visits them frequently, has weekends at them, etc. And he would gladly go out for such a check-up if I asked him, for he is a dear and intimate friend of mine. George Fort Wilton George Fort Milton, Consultant 412 TREASURY DEPARTMENT OFFICE OF THE SBORMPART May 15. 1942 Received this date free the Federal ReserveMent of New York, for the confiden- tial information of the Secretary of the Treasury, compilation for the week ended May 6. 1942, aboving dollar disbursements out of the British Repire and French adocuate at the Federal Reserve Bank of New York, and the means by which these expenditures were financed. lap-5/17/42 413 C 0 FEDERAL RESERVE BANK OF NEW YORK May 14, 1942 CONFIDENTIAL Dear Mr. Secretary: Attention: Mr. H. D. White I am enclosing our compilation for the week ended May 6, 1942, showing dollar disbursements out of the British Empire and French accounts at this bank and the means by which these expenditures were financed. Faithfully yours, /8/ L. W. Knoke L. W. Knoke, Vice President. The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. Washington, D. C. Enclosure Copy:vv: 5-16-42 Strictly ANALYSIS OF BRITISH AND FRENCH ACCOUNTS (In Millions of Dollars BANK OF ENGLAND (BRITISH GOVERNMENT War period through 2,792. December 1940 Second year of war (Official)(b) Credit(s) Balance Gold 421.4 456.9 1,098.4 900.2 198.2 +220.1 722.1 - 13.2 38.9 4.8 34.1 8.8 - 8.8 30.1 154.1 35.3 0.3 - 0.3 0.5 - 0.5 0.2 150.1 41.9 0.3 - 0.3 0.3 - 0.3 133.6 -21.5 16.1 16.1 51.5 -36.9 0.8 0.8 0.4 0.4 0.5 68.8 - 33.0 0.2 0.2 0.4 1.0 56.2 171.4 70.1 -30.0 0.1 0.3 0.4 0.2 04 2,793.122,109.5 108.0 575.6 1,193.7 274.0 2.0 109.0 77.3 156.1 20.1 0.8 111.6 150.9 134.6 88.4 69.6 18.8 51.5 Jan. Jan. 28 102.3 73,2 29.1 69.3 Jan. 29 Feb. 25 Feb. 26 - Apr. 1 87.2 Oct. 30 - Dec. 3 Dec, 4 - Dec. 31 878.3 1,356.7 176.2 1,0 - - 1942 121.4 Apr. 2 Apr. 29 98.1 - 57.2 63.8 23.4 86.4 64.2 35.0 171.2 33.9 70.6 0.5 50.0 -27.5 WEEK ENTED Apr. 15 22 29 May 6 24.8 18.6 18.4 31.0 17.6 12.9 14.7 23.9 7.2 5.7 3.7 7.1 2.0 22.8 14.1 22.8 14.1 4.5 13.4 13.4 5.0 78.2 Average Weekly Expenditures Since Outbreak of War France (through June 19, 1940) 199.6 Million England (through June 19, 1940) 27.6 million England (since June 19, 1940) 38.4 million *For monthly breakdown see tabulations prior to April 23, 1941 ofFor monthly breakdown see tabulations prior to October 8, 1941. (See attached sheet for other footnotes) in Balance 10.8 1,425.6 35.0 31.7 44.5 Decr. (-) +229.0 35.0 105.9 Credits 195.1(e) 420.1 140.9 Other Sales 900.2 52.0 2,189. of Gold 1,0953(e) 1,356.1 410.8 Total Debits Credits 449.7 1,828.2 1,792.2 tures (d) Other 416.6(e) 1,187.6 2,203.0 Total Debits Net Incr. (+) or 866.3(c) 605.6 1941 Aug, 28 Oct. 1 Oct. 2 Oct. 29 Decr. (-) FRANCE CREDITS Proceeds - - - 1,793.2 Securities Other Gov't Expendi- 0.1 0.2 - First year of war (8/29/79-8/28/20) Total Credits (+) or - Total Expendi- Other Debits tures(a) Debits OF DEBITS Net Incr. Proceeds of Sales of Gov't PERIOD BANK CREDITS DEBITS Contidentina Week Ended May 6, 1942 - 0.1 0.1 - 0.1 0.1 - 0.1 0.1 0.1 0.1 78.2(f) +.47.2 Transfers from British Purchasing Commission to Bank of Canada for French Account Week ended May 6. 1942 Cumulation from July 6, 1940 162.7 - - - - - 0.4 15.7 0.4 0.4 0.4 0.2 0.3 0.4 0.3 0.4 - 0.3 +0.2 0.1 - 0.1 - - +0.1 0.1 0.1 million million +0.1 (a) Includes payments for account of British Purchasing Commission, British Air Ministry, British Supply Board, Ministry of Supply Timber Control, and Ministry of Shipping. (b) Estimated figures based on transfors from the New York Agency of the Bank of Montreal, which apparently represent the proceeds of official British sales of American securities, including those effected through direct negotiation. In addition to the official selling, substantial liquidation of securities for private British account occurred, particularly duringthe early months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuracy, According to data supplied by the British Treasury and released by Secretary Morgentbau, total official and private British liquidation of our securities through December, 1940 amounted to $334 million, (c) Includes about $85 million received during October, 1939 from the accounts of British authorised banks with New York banks, presumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October, 1939 apparently represent the acquisition of proceeds of exports from the sterling area and other currently accruing dollar receipts, (d) Includes payments for account of French Air Commission and French Purchasing Commission, (e) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day, (f) Includes: (a) $70 million paid to the British Purchasing Commission by Treasury of United States for diversion of planes to U. S. Government and (b) a transfer of $500,000 from Commonwealth Bank of Australia account here. ANALYSIS OF CANADIAN AND AUSTRALIAN ACCOUNTS (In Millions of Dollars) BANK CANADA (and Canadian Government) OF DEBITS Total Debits PERIOD First year of war (8/29/39-8/28/40) Proceeds Official British of Other Total Debits Credits Gold Transfers Other Net Incr. (+) or Decr. (-) Credits in Balance British A/C For Own Sales A/C For French A/C REDITS DEBITS Transfers from Official to A/C COMMONSEALTH BANK OP AUSTRALIA (and Australian Government) CREDITS Transfers Strictly Confidential Week Ended May 6, 1942 Total Debits A/C Net Incr. Proceeds to Official British of Other Total (+) or Decr. (-) Gold Other Credits in Balance Debits Credits Salea 323.0 16.6 306.4 504.7 412.7 20.9 38.7 32.4 +181.7 31.2 3.9 27.3 36.1 30.0 6.1 4.9 December. 1940 177.2 16.6 460.6 707.4 534.8 20.9 110.7 41,0 <230.2 57.9 14.5 43.4 62.4 50.1 12.3 4.5 Second year of war (8/29/40-8/27/41)** Aug. 28 - Oct. 460.4 460.4 462.0 246.2 3.4 123.9 88.5 1.6 16.7 9.0 21.2 81.2 2.8 18.3 52.2 0.5 55.5 10.2 62.9 23.1 72.2 10.7 2.1 0.7 7.9 37.4 52.7 47.7 19.7 32.5 22.2 11.9 19.3 17.3 5.9 9.0 0.2 2.1 0.2 2.6 1.3 2.6 1.1 - 39.5 33.0 27.0 10.8 6.3 - 34.1 35.7 - 46.5 99.3 12.4 20.5 37.4 35.9 14.2 7.6 3.7 5.1 2.9 3.5 1 23.1 - - 31.0 - 1941 52.8 0.1 47.7 1942 Jan. 1.- Jan. 28 39.5 Jan. 29 - Feb. 25 34.1 Feb. 26 - Apr. 1 Apr. 2 - Apr. 29. 46.5 37.4 - - - - 7.8 17.7 8.2 5.5 2.7 8.0 13.2 20.3 10.3 6.9 3.4 11.6 1.8 2.1 2,8 4.9 25.5 3.9 - 6.0 6.5 23.3 1.6 4.5 8.4 - 7.7 - Oct. 30 - Dec. 3 Dec. 4 - Dec. 31 37.4 - Oct. 2- Oct. 29 29.1 71.1 52.8 7.8 4,5 10.8 5.3 1.3 3.1 6.5 1.6 3.6 8.0 2.9 16.8 16.8 5.9 1.1 12.3 12.3 11.2 2.1 1.6 2.1 3.1 1.6 2.7 0.3 0.3 1.4 - 21.7 1.5 10.9 4.2 6.2 0.3 1.1 5.9 5.2 5.0 4.3 3.0 0.2 1.3 1.7 0.5 1.2 - War period through - - 1.6 6.8 3.6 4.2 NEEK ENDED: 22 7.6 5.9 29 16.7 16.2 7.9 11.8 6.7 5.9 5.9 10.3 Apr. 15 May 6 - 5.9 Weekly Average of Total Debits Since Outbreak of War million 7.9 Through May 6. 1942 For monthly breakdown see tabulationsprion to April 23 1941. - .. For monthly breakdown see tabulation prior to October 8, 1941. - - - 3.8 6.8 10.0 417 BRITISH AIR COMMISSION 1785 MASSACHUSETTS AVENUE WASHINGTON. D. c. TELEPHONE HOBART 9000 PLEASE QUOTE REFERENCE NO With the compliments of British Air Commission who enclose Statement No. 33 - Aircraft Despatched - for week ended May 12, 1942 The Honourable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. May 15, 1942. 418 NORT SECRET STATEMENT NO. 33 AIRCRAFT DESPATCHED FROM THE UNITED STATES DURING 1204 MAY 1942 TIPE DESTINATION ASSEMBLY POINT BY SEA BY AIR FLIGHT DELIVERED FOR USE IN CANADI BOEITE B 178 Fortress II U.K. Canada en route 1 CESSIA AT 17 Crane TA Canada Canada 5 CURTISS Kittyhawk IA Australia Melbourne 20 Middle East Port Sudan 11 U.K. Canada en route U.K. U.K. 12 Russia Baarah 20 A 29A AC 151 U.K. Canada en route Ventura U.K. Canada en route Mustang U.K. U.K. Harvard Canada Canada - L CO SOLIDATED 2 Liberator II FAIROBILD 24 19 GLEWN MARTIN Ba utimore LOC 8 TH AMERICAN Writing Air Commission O 15th,1942. 107 25 6 TOTALS 44 1 C 14 419 OFFICE OF LEND-LEASE ADMINISTRATION FIVE-FIFTEEN 22d STREET NW. WASHINGTON D.C. E R. Stettinius, Jr. Administrator May 15, 1942 The Honorable The Secretary of the Treasury Washington, D. C. Dear Mr. Secretary: I am sending you herewith, by special messenger, a copy of the secret report on the status of the Soviet aid program as of April 30, 1942. A copy of the letter of transmittal to the President is attached. Sincerely yours, Floores B.le:Cala Thomas B. McCabe Acting Administrator Attachments SECRET 420 May 15, 1942 Dear Mr. President, In compliance with your letter of March 17, 1942 requesting that you be kept advised as to the status of the Soviet aid program, we are transmitting herewith the report as of April 30, 1942. The report shows the amount of each class of material that has been made available under the terms of the protocol; also, for the first time, the proportion that has actually been shipped, subdivided according to that which has arrived, been sunk or is still on route. A quick overall view of results is provided by the first page of charts. Since the inauguration of the program, exports to U.S.S.R. have approximated $450,000,000, two-thirds of which have occurred during the last two months. It is unfortunate that exports this month have had to be curtailed on account of convoy difficulty. Real effectiveness in getting the supplies to seaboard had been attained and the necessary ships had been made available, in conformity with your directive that the protocol commitment be fulfilled. Sincerely yours, Thomas B. McCabe Acting Administrator The Honorable The President of the United States JDE/m SECRET 421 SCHEDULE OF AVAILABILITY OF MATERIAL AND SHIPPING FOR U.S.S.R. - AS OF APRIL 30, 1942 Office of Lend-Lease Administration THIS DOCUMENT CONTAINS INFORMATION APPROTING THE NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE ACT, U.S.C. 50:31 and 32. THE TRANSMISSION OR THE REVELATION OF ITS CONTESTS IN ANY MANNER TO AS UNAUTHORIZED PERSON IS PROHIBITED BY LAW." SCHEDULE OF AVAILABILITY OF MATERIAL AND SHIPPING FOR THE U.S.S.R. As of April 30,1942 Graphic Summary of Shipping and Exports Tabular Statement of Exports, Arrivals, Losses and Availability Graphic Summary of Exports, Arrivals, Losses and Availability Statement of Shipping to U. S. S. R. Reports of Non-Protocol Items Office of Lend-Lease Administration SECRET EXPORTS TO U.S.S.R. CUMULATIVE SINCE OCTOBER 1,1941 Millions of Dollars MONTHLY LEND-LEASE EXPORTS TO U.S.S.R. IN % OF TOTAL LEND-LEASE EXPORTS 600 50% 500 40 LOST 400 30 300 EN ROUTE 20 200 10 100 ARRIVED o 0 Oct Nov Dec Jan Feb Mor Apr May Jun 1942 1941 Oct Nov Dec Jon Feb Mor Apr May Jun 1942 1941 e NUMBER OF SHIPS SAILING FOR U.S.S.R. CUMULATIVE MONTHLY 300 100 250 80 TO PERSIAN GULF AND LOST 200 FAR EAST 60 150 EN ROUTE 40 100 TO NORTH RUSSIA 20 50 ARRIVED o 1941 1942 Oct Nov Dec Jan Feb Mor Apr May Jun 1942 1941 e Oct Nov Dec Jon Feb Mor Apr May Jun 1 SECRET Sheet 1 EXPORTS AND AVAILABILITY OF MATERIAL UNDER THE MOSCOW PROTOCOL Exports Item and Protocol Number Oct. 1 to April 30 LA Planes Bomber Arrived Lost to to April 30 April 30 Scheduled as of Feb. 28 to Made Available to April 30 be Available. Cumulative to Protocol Commi twont April 30 May 31 June 30 411 266 18 Planes Pursuit 434 530 612 754 900 460 135 85 520 2A Tanks Medium 520 620 720 900 666 130 68 792 818 972 1,125 1,125 720 95 70 841 832 978 1,125 1,125 200 6,751 52,367 4,198 61,594 74,280 5,000 90,000 1,984 49,000 66,572 99,372 108,000 85,600 108,000 306,069 52,103 23,501 354,323 337,464 427,464 523,666 562,900 285 450 450 0 263 5,000 350 423 729 929 900 10,667 5,466 11,960 5,466 14,510 17,360 1,400 1,400 5,936 1,400 5,936 1,400 18,000 4,500 1,200 0 428 1,433 940 715 1,313 340 659 3,920 33,590 1,268 4,200 810 4,000 2,831 37,000 3,800 36,700 3,800 43,500 3,800 45,000 6,268 2,700 45,000 1,365 1,074 6,800 6,750 6,750 6,750 6,750 2,686 2,569 1,167 553 637 203 133 104 102 2,755 2,700 1,400 2,355 2,100 1,400 2,755 2,400 1,600 2,995 2,700 1,800 2,700 2,700 1,800 8,946 7,400 9,000 9,000 9,000 3,579 1,400 900 4,570 34,000 67,000 4,500 63,000 72,000 63,000 59,160 72,000 72,000 72,000 0 0 13 342 391 0 650 900 1,150 0 0 0 636 0 4,857 15,157 19 0 0 0 0 0 0 125 0 12,867 14,380 43,519 0 13 604 1,100 9,000 1,670 3,120 36,000 14,000 43,000 24,000 57,000 20,000 34,000 34,000 36,000 54,000 52,000 45,000 43,200 59,160 900 0 4,953 29 Tool Steel (tons) 30 Calibrated Steel (tone) 31 Hot Rolled Steel (tone) 34 C.R. Steel Sheet (tons) 55 5,000 7,660 4,867 546 32 Steel Billets (tons) 756 1,697 28 High Speed Steel (tons) 33 C.R. Steel Strip (tone) 152 10,415 14,891 0 ($1,000) 63 576 0 25 Armor Plate (tons) 26 Hard Alloys & Cutting Tools 63 4,906 30,847 44,239 0 24 Ferrochrome (tons) 63 0 23 Ferrosilicon (tons) 4 22 Copper Products (tone) 0 15 Molybdenum (tone) 18 Rolled Bress (tons) 20 Zinc (tons) 4 14 Nickel (tone) 0 11A Alumina (tons) 118 Duralumine (tone) 0 8 Field Tel. Cable (miles) 9 Underwater Cable (km) 10 Submarine Cable (km) 4 7 Field Telephones 4 68 Trucks 63 4 64 1/4 Ton Rec. Cars 63 4 4 Anti-Tank Ouns 2 23 Tanks Light 3 Anti-Aircraft Guns SECRET Sheet 2 EXPORTS AND AVAILABILITY OF MATERIAL UNDER THE MOSCOW PROTOCOL 0 0 0 73 Scheduled as of Feb. 28 to be Available. Cumulative Protocal to Commitment to April 30 April 30 May 31 June 30 33,000 12,000 28,000 22,500 2,500 32,000 37,500 6,500 36,000 45,500 10,800 36,000 63,000 10,800 400 900 1,800 1,800 1,800 40 110 180 180 8 163 Made Available 12 255 160 180 180 180 34,042 14,773 30,400 11,547 35,100 14,774 10,000 40,000 18,000 12,000 36,000 18,000 10,000 0 12,659 2,334 3,059 7,896 5,250 360 507 6,655 7,000 2,983 182,890 339 545 4,283 5,033 4,900 5,133 4,007 182,890 3,533 115,420 180,000 200,000 220,000 958 256 41 960 1,080 180,000 1,060 655 113 67 700 588 1,260 1,078 360 244 1,300 1,777 1,300 1,300 1,800 650 661 2,104 34,042 91 0 0 391 0 476 32 0 50 Dimethylaniline (tons) 51 Diphemylamine (tons) 0 49 Dibuty1 Phthalate (tons) 0 47 Sodium Bromide (tons) 48 Phosphorus (tons) 0 44 Phenol (tons) 45 Petroleum Products (tone) 46 Ethylane Glycol (tons) 0 41 Barbed Wire (tons) 42A Toluel (tons) 428 T.N.T. (tons) 1,764 0 40 Nickel Chrone Wire (tons) Lost to April 30 161 37 Steel Wire Rope (tone) 38 Steel Alloy Tubes (tone) April 30 6,814 29,205 5,674 39 Stainless Steel Wire (tons) to 0 36 Steel Wire (tons) April 30 Arrived 0 35 Tin Plate (tons) Oct. to 0 Exports Item and Protocol Number 52 Colloxylin (tons) 1,810 123 53 Machine Tools (pieces) 2,420 565 50 243 900 900 2,050 1,300 2,200 2,200 760 990 1,200 1,200 600 750 900 900 2,234 2,688 2,741 2,700 3,073 3,073 3,689 4,233 102 60 68 83 140 123 123 175 245 627 1,860 1,429 2,460 3,060 1,997 3,660 2,709 2,700 3,600 744 900 54 Electric Furnaces (pieces) 102 55 Forging &Press Equip. (pieces) 115 26 6,199 1,714 686 971 296 92 59 Graphite Electrodes (tons) 1,403 140 64 Sole Leather (tons) 66 Army Boots (1,000 prs.) 67 Army Cloth (1,000 yds.) 7,543 1,846 1,367 1,200 7,697 1,400 9,197 1,600 13,500 16 8,000 1,367 6,197 555 1,275 272 75 1,455 1,192 1,192 1,192 1,000 13 13 13 1 0 0 803 1,429 Arming of U.S.S.R. Merchant 4 4 4 108 26 0 Boats 4 Armanent for 3 Ice-breakers Packard Engines for Torpedo 13 13 13 4 Ships 1,600 3 58 Abrasives ($1,000) 5 56 Misc. Ind. Equip. ($1,000) 210 100 100 100 50 SECRET SHEET 1 AVAILABILITY OF MATERIAL UNDER MOSCOW PROTOCOL CUMULATIVE SINCE OCTOBER 1,1941 PLANES BOMBERS PLANES-PURSUIT 1000 Commitment 800 800 to Avet 600 Exported Exported Lost Mode 400 600 Made Lost Avail: En Route 400 able Avail: able able 400 En Route 200 En Route 200 Arrived 200 Arrived Arrived o Feb Mar Age May Jun TANKS LIGHT o Feb Mor Apr May Jun Feb Mar Age May Jun ANTI-AIRCRAFT GUNS ANTI-TANK GUNS 1200 Commitment 175 800 Commitment Commitment 150 1000 Scheduled o Avoil 800 600 Exported <Lost 1000 Schedule to be Aveil Scheduled to be Avoil 1200 Commitment Commitment Scheduled Mode TANKS MEDIUM 1000 to Avoil 600 125 800 Exported Lost 100 600 400 Mode 75 Avoil able 400 En Route 50 200 Avoil Arrived ----- Exported Avail: 25 Arrived able Feb Mor Age May Jun 200 Made Exported Mode Scheduled Scheduled to be Avoil able to be Avoil E-En Route 0 o Feb Mor May Age Jun Feb Mor Age May Jun , 1/4 TON REC. CARS FIELD TELEPHONES TRUCKS 65000 Exported 100,000 120,000 Commitment Lost Commitment Commitment 4000 Scheduled to be Avoid to Avoil. 3000 Mode 100,000 80,000 Scheduled 80,000 Scheduled 60,000 to be Aved Avoit 60,000 Mode En Route 2000 Avoid able 40,000 Exported Lost Mode Lost 1000 Exported 20,000 En Route 20,000 able Arrived Arrived Feb Mer Apr May Jun o FIELD TEL. CABLE (miles) Feb Mor Age May Jun Feb Mer Age May Joe o Arrived SUBMARINE CABLE (km) UNDERWATER CABLE (km) 600,000 Commitment 40,000 En Route Avoil: o able 500 1000 400 800 Commitment Commitment 500,000 Scheduled to Avoid 400,000 to Avoil 300,000 Lost Scheduled to be Avet Mode 200 Avail able 600 300 Scheduled Exported 200,000 En Route - Mode 400 Avent Exported 200 100 100,000 En Route Feb Mo Apr May Jun o Office of Lend-Lease Administration - May 14,1942 o Feb Mar Agr May Jun Feb - Age May - o Arrived SECRET SHEET 2 AVAILABILITY OF MATERIAL UNDER MOSCOW PROTOCOL CUMULATIVE SINCE OCTOBER I, 1941 Scheduled ALUMINUM (tons) DURALUMINUM (tons) 20,000 6,000 Scheduled Commitment Avoil: Exported 16,000 5,000 Lost to be Aves 12,000 1,500 Made to Avoid Scheduled be Avoil, NICKEL (tons) Exported able OL200 Commitment 4,000 Mode Lost Avoil MODE Exported Avent 900 able 3,000 En Route 8,000 able Lost 600 2,000 En Route 4,000 En Route 300 1,000 Arrived Arrived o Jun May Feb MOLYBDENUM (tons) Exported 4,000 Mode Mor Apr ROLLED BRASS (tons) Scheduled Avoil Scheduled Commitment En Route 2,000 7,000 40,000 Exported 5,000 4,000 able 3,000 En Route En Route 1,000 2,000 10,000 May Jun Apr Feb Mar Age May Jun o 0 Feb Mor Jun May 1,000 Arrived Arrived Apr 6,000 Lost 30,000 Arrived Mor Commitment able Lost Mode Avoil* Mode Avoil 20,000 Feb Scheduled to be Avoil -Exported to Avoil 3,000 Jun ZINC (tons) 50,000 Commitment to be Avoil LOST Feb Mar Apr May Jun May 0 Apr o Mor o Feb Scheduled to be Avoid (tons) FERROSILICON (lons) 3,000 Commitment FERROCHROME (tons) 2,000 Commitment to be Avoid 2,500 Exported 3,000 Scheduled Lost to be Avoil 2,000 2,000 Lost able 1,500 Lost 1,000 Mode Avoits 1,000 Exported 1,500 Mode En Route 1,000 able En Route Avoil able 500 Arrived Arrived Arrived o Jun Feb ARMOR PLATE (tons) Mar Age May Feb Jun ALLOYS a CUTTING TOOLS($1000) 10,000 Commitment Apr May Jun HIGH SPEED STEEL (tons) 4000 8,000 Scheduled Mar 1,500 1,200 3000 Scheduled to be Avoil to be Avoid Commitment 0000 6,000 Exported 2000 Mode to Avoil Avoitable En Route Exported Scheduled 4,000 1000 2,000 Commitment Exported o 10 Office Age May Jun Feb Mer Age May Just of Lend-Leose Administration - May 14,1942 400 Mode Avail 300 able En Route Feb Me Age May Jun o May o Age 500 En Route 500 Mor 1,500 Exported Mode Aveil: Feb Commitment Scheduled 2,500 o COPPER PRODUCTS SECRET SHEET 3 AVAILABILITY OF MATERIAL UNDER MOSCOW PROTOCOL CUMULATIVE SINCE OCTOBER I, 1941 TOOL STEEL (tons) CALIBRATED STEEL (tone) 5,000 35,000 Commitment to be Avoil 25,000 Scheduled 50,000 to be Avoil 3,000 20,000 2,000 15,000 1,000 Exported 40,000 Exported Mode Lost Avoit able Aveil* o Feb STEEL BILLETS (tons) Mor so Apr May Jun Feb C.R. STEEL STRIP (tone) 80,000 80,000 Commitment Mar Apr C.R. STEEL SHEET (tons) 80,000 Commitment 60,000 Scheduled to be Aveil 40,000 Exported 40,000 20,000 Mode o Age May TIN PLATE (tons) able STEEL WIRE (tons) 40,000 Commitment En Route Feb Mar Apr May Jun Jun 70,000 Commitment Exported Lost 20,000 En Route Mode Avoit- able En Route Mer 20,000 Exported Avoit o Exported Feb Mor Agr May Jun STEEL WIRE ROPE (tons) 12,000 Commitment 60,000 30,000 o Feb 40,000 Lost to be Avoi. Avoil 60,000 Scheduled to Aven Scheduled Jun May Commitment 60,000 Mode 10,000 En Route En Route Feb Mor Apr May Jun 20,000 Exported able 5,000 able En Route 30,000 Made 10,000 o Mode Avoit Commitment 60,000 Scheduled Scheduled - 70,000 30,000 4,000 to be Avoil, HOT ROLLED STEEL (tons) 10,000 50,000 Scheduled 8,000 to be Avoil. Mode 40,000 Scheduled 20,000 to be Avoil. En Route Exported Mode Arrived 4,000 10,000 Aveil able o Fab Mar Age May Jun o Feb Mor STAINLESS STEEL WIRE (tons) 2,000 Apr NICKEL CHROME 200 Commitment Jun May WIRE (tons) Commitment . 150 Loss 1,000 100 so Mode Scheduled Avoit- to be Avet 200 Exported Commitment 1,500 Scheduled 2,000 Mode Avoil En Route able STEEL ALLOY TUBES (tona) to Aven 20,000 10,000 Feb Mer Age May Jun 6,000 Scheduled 30,000 o Avail to be Avoil. En Route 100 Scheduled to be Avoil. 500 50 50 Arrived Mode Avoilable o o Office of Lend-Leose Administration - May 14,1942 Feb Mar Age May Jun Feb Mer Age May Jun o Feb Mer Apr May Jun SECRET SHEET 4 AVAILABILITY OF MATERIAL UNDER MOSCOW PROTOCOL CUMULATIVE SINCE OCTOBER I, 1941 Scheduled to be Avor. BARBED WIRE (tons) TOLUOL (tons) T.N.T. (tons) 40,000 20,000 12,000 Scheduled Exported to be Aveil . Commitment Lost Commitment 30,000 10,000 Scheduled 15,000 Commitment to be Avot. 8,000 Mode Aveil En Route able 20,000 Mode 10,000 Exported Avoil able Lost Avoit 10,000 5,000 En Route 6,000 Exported Mode 4,000 able En Route 2,000 Arrived Arrived Arrived o Apr May Feb Jun PHENOL (tons) 5,000 Scheduled Mar Apr Jun ETHYLENE GLYCOL (tons) 250,000 Exported Mode 3,000 Commitment to be Avoid 200,000 Commitment Lost 1000 Exported Mode Avail Lost able Avails Exported 1200 Scheduled Scheduled to be Avoid 4,000 800 150,000 able Lost Mode May PETROLEUM PRODUCTS (tons) Commitment to be Avet. Feb Mor Age May Jun o Mer o Feb En Route Avoil 600 En Route able 100,000 2,000 400 En Route Arrived 50,000 1,000 200 Arrived May - o Apr Feb Mer Apr May Jun o Mo Feb Mor Agr May Jun 0 Arrived Feb Scheduled PHOSPHORUS (tons) SODIUM BROMIDE (tons) to be Aven Commisment to be Avoil 800 Avoil- Scheduled Exported Commitment to Aven 1200 able 2000 Lost 1000 Exported Commitment 600 En Route Mode able En Route 400 200 Arrived Feb Mar Age May Jun o Jun Arrived Feb Commitment to be Avoil Age May - 3000 Scheduled Commitment to be Aveil Commitment Scheduled to Aveil 1000 Mor COLLOXYLIN (tons) 1000 #1200 Scheduled 500 able DIPHENYLAMINE (tons) DIMETHYLANILINE (tons) En Route Mode o Arrived May 1000 Avoit 200 Apr Exported 600 400 Avoit 1500 800 o Lost Mor 2500 Mode Scheduled Feb DIBUTYL PHTHALATE (tons) 1400 1000 2500 800 800 Exported 600 2000 Lost 1500 600 Exported Mode Avoit Lost 400 400 able Mode Avail Exported Made Avoil 1000 En Route able able 200 En Route 200 500 En Route Arrived o Off of Land-Lease Administration - May 14,1942 o Feb Mor Apr May Jun Feb Mar Age May Jun o Feb Mar Age May Jun SECRET SHEET 5 AVAILABILITY OF MATERIAL UNDER MOSCOW PROTOCOL CUMULATIVE SINCE OCTOBER I, 1941 MACHINE TOOLS ELECTRIC FURNACES 5000 FORGING a PRESS EQUIP. 150 700 Came 4000 Scheduled 125 to be Aveil Scheduled - be Avoit Avoil: Lost to be Avot 300 En Route 50 En Route Exported 200 Mode 1000 Avail: 25 Arrived Lost able o Feb Mar. Apr May Jan Feb ABRASIVES ($1000) 10,000 3500 Age 4000 Commitment 2000 4,000 1500 Mode En Route 1000 Lost able 2,000 Mode Avail En Route 1000 En Route able 500 Arrived Arrived Arrived o Feb ARMY BOOTS (1000pairs) Mar o o Feb Mar Apr May Jun SOLE LEATHER (tons) 2000 Exported Exported Avoil Age Jun May ARMY CLOTH (1000 yds) 14,000 Commitment 3000 Scheduled to be Aveil 6,000 Feb Mot Apr May Jun Jun May GRAPHITE ELECTRODES (tone) Commitment 2500 to be Avoid Exported Lost Mar 3000 Scheduled 8,000 Arrived o MISC. IND. EQUIP ($1000) 100 En Route Arrived Feb Mor Apr May Jun 400 Scheduled 75 able 2000 able 500 100 Mode o Mode 600 Exported 3000 Exported Avoil Commitment 1,750 1,750 Commitment) 12,000 Scheduled Exported to be Avail. 1,500 Lost 1,250 Scheduled ,Loss 6,000 Mode 1,000 En Route Commitment 750 able 750 En Route 4,000 able to be Avoil. #1000 En Route 500 2,000 250 Arrived Arrived 500 250 Arrived o Feb Mar Age May Jun ARMING OF U.S.S.R. MERCHANT SHIPS o Feb Mor Apr May Jun Feb Mer Age May Jun o Avoit L250 Scheduled Mode Avoit Avail able to be Avoil 8,000 Exported 1,500 Exported Lost Mode 10,000 PACKARD ENGINES ARMAMENT FOR 3 ICE-BREAKERS FOR TORPEDO BOATS 14 able Scheduled 12 250 4 Avail 5 Commitment Mode 200 Made Avail: able Scheduled to be Aveil. to be Avoit 10 Commitment 150 as a Completed Made Scheduled Avail to be Avoit able 100 6 2 Completed Exported 4 En Route . 2 Arrived o Office of Lend-Lease Administration - May 14,1942 o Feb Mar Age May Jun Feb Mar Age M Jan o Feb Mar Age May - 000 SECRET STATEMENT OF SHIPPING TO U.S.S.R. As of May 9, 1942 Number Sailed Month October To North To Persian Russia Gulf To Soviet Far East 10 5 Total Arrived 15 En Route As of May 9 Lost 14 1 November 1 9 3 13 12 1 December 14 7 4 25 22 1 2 January 20 4 24 18 2 4 February 13 2 2 17 12 2 3 March 31 April 62 May 11 6 6 6 10 43 22 20 78 73 5 14 3 1 14 (To May 9) Total To May 9 170 25 34 229 105 112 To date there has been a total of 229 sailings for Russia. of these, 49 have been of Russian ships (32 from the West Coast, and 17 from the East Coast), 14 of British, 1 of Swedish, and 165 of American. In addition to the 229 sailings for Russia, there have been 22 ships carrying cargoes primarily for other countries which carried partial cargoes for Russia (chiefly deckloads of bombers). The 229 sailings were made by 212 ships, 17 ships having sailed twice. At lease 20 of the 95 ships now on route to North Russia have been diverted to ports in the British Iales. Figures given above are on the basis of most recent data which explains certain discrepancies between this and previous reports. For example one ship reported as lost in March has recently been reported as having arrived safely in North Russia. 12 SECRET EXPORTS OF NON-PROTOCOL ITEMS TO THE U.S.S.R. October 1,1941 - April 30, 1942 Item Quantity Value Military Items Observation Planes $ 1,359,949 30 Army Webbing and Duck 469,302 Other Military Items 21,179,658 Non-Protocol Steel R. R. Rails and Equipment Oil Well Drilling Equipment Sheet Steel Other Steel Items 16,422 tons 10,773 tons 1,813 tons 1,300,091 1,281,941 29,271 tons 5,030 tons 23,782 tons 1,485 tons 6,216 tons 6,563 tons 1,216 tons 22,889,975 2,230,158 7,007,383 1,097,497 13,960,151 79,303 199,539 Food Canned Meats Fat Backs Lard Pork Products Dried Eggs Dried Beans Butter 832,669 917,401 221,024 963,958 525,757 31 tons Seeds Rolled Oats 3,350 tons 2,360 tons Other Food Chemicals Aniline 011 920 tons 316,181 gals. 6,750 tons Tetra-ethyl Fluid Methanol Other Chemicals 274,400 1,422,063 793,125 1,082,714 Miscellaneous Truck Tires and Tubes Radio Tubes and Equipment 1,867,040 86,500 pcs. 593,565 432,025 315,604 815,411 - Vulcanised Fibre Sheets 597 tons Motion Picture Equipment - Other Miscellaneous Items Total $84,111,703 EXPORTS TO THE U.S.S.R. Cumulative Since October 1,1941 in Millions of Dollars Protocol Items Non-Protocol Items Oct Nov Dec Jan Feb Mar Apr 16 27 53 78 139 230 362 12 28 84 7 2 4 5 Treasury Depar 422 Division of Monetary Research Date 5/15/12 To: 19 Miss Chauncey From: H. D. White Please call this to the Secretary's attention. 423 Treasury Department Division of Monetary Research Date To: May. 14, 1942 Mr. White From: Mr. Ullmarn Shipbuilding In a Commerce Report marked "Secret", the shipbuilding program in the first quarter of 1942 completed 66 vessels of 513,000 grost tons - or less than 10 percent of the President's goal for 1942 (5.5 million gross tons). Furthermore, production fell off in March Total 513,000 gross tons, . March Output 123,000 196,000 194,000 . January February 424 m. - s I -u- m. a. a. mase w reference to with - m. - 23. a p. - - I / oper secretary of the - - will - please authorise the - - to - tw - - to the - from the beginning of - is / with section v - w. / service - 425 - 19. who m. w. was you please and the attached estic to the - adopt. eyes casaler from the secretary of the - mm/dd/yy 426 for Mr. Seares w. United States Below Senion, Regions From the Secretary of the Transacty Please seal w air 1 comples of local - monthood in year cable No. w of - 5. If British authorities are interested in seeing - complee of the films used here for stailar purposes, w will to - to send them. 5/28/43 427 TELEGRAM SENT MJF This telegram must be persphresed before being communicated to anyone. other than A Governmental Agency. (BR) May 15, 1942 11 p.m. AMEMBASSY, LONDON, (ENGLAND) 2194 FOR CASADAY FROM THE SECRET' RY OF THE TREASURY. Please send by air pouch SAMPLES of local news- reels mentioned in your cable No. 2391 of May 5. If British authorities are interested in seeing BO ME samples of the films used here for similar purposes, WE will be happy to send them. HULL (FL) FD:FL:ME 428 STATE DEPARTMENT WASHINGTON In reply refer to FF 8510.51/20 May 15, 1942 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and quotes for his information the following excerpt from a report received from a confidential source within the Government. #French West Indian credits in Argentina "As of possible interest to you, information has been received from a reliable, confidential source to the effect that in the early part of January, 1942, M. F. G. Pollak, Buenos Aires, Argentina, was informed by his bank which presunably is also in that city, that a credit of $30,000 had been opened in his favor by M. Louis Damoiseau of Pointe-a-Pitre, French West Indies and that three credits of unknown amounts had been opened in favor of Swift Company of La Plata, Argentina, by some unknown individual in Guadeloupe, French West Indies." Copy:ine 5/15/42 COPY 429 DEPARTMENT OF STATE WASHINGTON In reply refer to FF 862.6341/1 May 15, 1942 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and quotes for his information the following excerpt from a report received from a confidential source within the Government. "German Soldiers Acquiring Gold "An ordinarily reliable source abroad has furnished information indicating that according to an article appearing in "Phas", Greek newspaper, published in Cairo, despite German propaganda to the effect that gold has no value in the "New Order", German soldiers in Greece, Bulgaria and Roumania are selling food, tobacco and other commodities for gold. The article further states that German soldiers seem very anxious to obtain gold coins, both old and new." eh:copy 5-15-42 430 C P Y DEPARTMENT OF STATE Washington In reply refer to May 15, 1942 FF 853.248/58 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and quotes for his information the following excerpt from a report received from a confidential source within the Government. "Purchase of airplane engine parts by Portugal from the United States "Information of a confidential character has been received from a reliable source abroad indicating that the Portuguese Minister of Finance in February, 1942, advised the Chase National Bank in New York to place $3,375 at the disposal of a Portuguese government official for the payment of spark plugs intended for use by Aeronatucia Naval (Fleet Air Arm). "It was further reported that authorization was also granted for the payment and shipment of seaplanes without engines, the engines to be shipped separately. # eh:copy 5-15-42 431 C 0 P Y DEPARTMENT OF STATE WASHINGTON In reply refer to FF 740.00115 European War 1939/3232 May 15. 1942 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and quotes for his information the following excerpt from a report received from a confidential source within the Government. "Swiss francs transferred to the Uruguayan Minister in Germany. "As of possible interest to you, information has been received from a reliable, confidential source to the effect that during the latter part of January, 1942, approximately twenty-two thousand Swiss france had been furnished to the Uruguayan Minister in Berlin, Germany. This was for the purpose of repatriating Uruguayan nationals residing in Germany or in the occupied countries should there be a severance in the diplomatic relations between any of the Axis powers and Uruguay." Copy 10:5/15/42 C 432 0 P Y PMW Tehran This telegram must be paraphrased before being Dated May 15, 1942 communicated to anyone other than a Governmental agency. (BR) Rec'd 8:20 a.m., 16th Secretary of State, Washington. 158, May 15, 1 p.m. Referring to my no. 154, May 14, 11 a.m. The Ministry of Finance yesterday issued an order fixing exchange rate at 128 rials per pound for buying and 130 for selling. DREYFUS RR Copy: :bj :5-18-42 433 . COPY NO. 13 BRITISH MOST SECRET (U.S. SECRET) OPTEL No. '160 Information received up to 7 A.M., 15th May, 1942. 1. MILITARY LIBYA. 13th. Marked general increase in enemy tank movement, especially in SIDI BREGHISC area. The enemy withdrew on engagement. RUSSIA. The Russian offensive in the KHARKOV area has made some progress, but on the KERCH PENINSULA they have carried out a withdrawal. 2. AIR OPERATIONS WESTERN FRONT. 14th. A total of 10 fighters attacked minor objectives in Northern FRANCE and BELGIUM. Four enemy aircraft crossed the DEVONSHIRE Coast. One was shot down by anti-aircraft fire. MALTA. Between 4 p.m. 13th and 1030 a.m. 14th, ten bombers escorted by fighters, some of which carried bombs, attacked. Our fighters destroyed 8 enemy aircraft, probably destroyed 2 and damaged 5. One Spitfire was shot down and another crashed. 3. GERMAN AIR FORCE The German long range bomber effort against GREAT BRITAIN from January-May this year was about 20% of the effort of the similar period last year. During the two weeks 25th April-9th May, which included the "Reprisal" raids, about 25% of the, total long range bomber sorties were made by reserve training unit aircraft. 434 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE May 15, 1942 Secretary Morgenthau TO Mr. Kamarck FROM Subject: Summary of Report on Far Eastern War by Lt. Colonel W. J. Clear, U. S. General Staff (This is a summary of a written report made by Lt. Colonel Clear to the U.S. General Staff on his recent return from the Far East. The American Army sent Colonel Clear to the Far East in July, 1941 to investigate and to report on the advisability of establishing a system of secret intelligence in the Far East. He was in the Philip- pines when the Japanese attacked and remained there until February, 1942. He left Corregidor in a submarine on February 5 for Java and was there for about a month. On the fall of Java, Colonel Clear flew to Port Darwin, Australia. Colonel Clear's information agrees in general with that of Colonel Brink, whose experiences were reported to you two weeks ago. The following summary covers the information which is supplementary to Colonel Brink's report.) 1. Japanese Psychological Preparations for War In preparing the Japanese people for the war, the Nazi error of holding up the glittering prospect of a short and easy war was avoided. The Japanese people were told that the war would be long and hard. Despite the fact that the Japanese are intensely patriotic, reliance in maintaining morale has not been placed on love of country alone. Studies made before the war had emphasized that it is important to give the officers and soldiers the vision of specific rewards. The soldiers are promised that they will come back to a Japan in which their future 18 assured. The Japanese forces are imbued with the conviction that they are fighting for not only national, but personal, material gains. Every man is persuaded that he and his family will be guaranteed freedom from want or unemployment in the post-war world. -2- 435 In its propaganda among the natives of the Far East prior to August, 1941, the Japanese had concentrated on long-range educational and cultural propaganda designed to win friends for Japan. With the arrival in the Far East in August, 1941, of Captain Fritz Wiedemann, former German consul-general at San Francisco, emphasis was shifted to a short-run policy of creating as much enmity against Western Imperialism in the Far East as rapidly as possible. The appeal was made to all the millions in the Orient who are cold, wet, and hungry that the western powers were solely responsible for their misery. When the Japanese troops came into the British and Dutch colonies, it was under the guise of friendship for the natives and hostility to the western masters. Japanese scrip currency, similar in appearance to the Malayan and the Dutch, was given away to the natives. The natives were invited to move into or loot the homes and property of the British and Dutch estates. 2. The Japanese Military Forces The ten years' of campaigning on the Asiatic mainland taught the Japanese army many valuable lessons and gave it much valuable experience. Contrary to the impression given in the press of the United States, the Japanese Command does not expend infantry carelessly or callously. Soldiers are not encouraged to get themselves needlessly killed, if tanks, planes and artillery can do the hard work for them. The Japanese, like the Germans in the western campaigns, discovered that bluff is more economical than force. Infiltrating parties use every possible device to make their presence known, once they have reached points behind the enemy lines. By bursts of machine-gun fire, flares, rattles and fire-crackers, they shake the confidence of the opposing troops. The troops believe they are being cut off by large enemy forces, instead of merely being harassed by small, lightly-equipped groups. The freshly inducted divisions of "McArthur's Army" in the Philippines were panicked in this manner. The Japanese army is peculiarly vulnerable to guerrilla attack in the new territories it has over-run. The Japanese forces of occupation in the new conquests are incredibly small, as they are relying on the docility and helplessness of the natives. There are in all these countries thousands -3- 436 of natives who would welcome the opportunity to strike at the Japanese if they were organized and trained. Preferably, guerrillas should be the natives of the country in each instance. It is physically possible to send white soldiers into Java and the other territories today, but they would stand as much chance of escaping detection and death as a small Japanese force in San Francisco. Untrained guerrilla units are now operating with limited success against the Japanese in Java, Borneo, Sarawak and Amboina, Timor, New Guinea and New Britain. Guerrilla operations in the Philippines are more widespread and successful than in these regions. The Germans are helping the Japanese air force. Prior to the war, the Germans sent several thousand German tech- nicians to work in the Japanese aircraft industry. These men are helping the Japanese to produce a new model Messer- schmidt 109. (The Me-109 is the best German fighter.) All Japanese fighter planes lack armor protection for the pilot and engine and are not as fast as our latest types of fighters. They are, however, highly maneuverable. The Japanese "Zero" fighter has proved itself in combat to be definitely superior in maneuverability to our P-40. In the highly successful Japanese air raid on Port Darwin on March 19, the Japanese demonstrated a new trick in air fighting. In this attack, eleven out of seventeen ships were sunk and direct hits were made on the power station, telephone central and other important targets. Although American P-40 fighters were up on patrol and saw the bombers coming, no warning was received by the ground defenses of the Japanese attack. The Japanese found the radio frequency of our planes and jammed the attempted reports. The radio at the operations office at the airport merely received an increasing roar. This was finally interpreted as indicative of an air-raid, but it was too late to warn the personnel at the field. 3. Malaya The loss of Malaya can be attributed primarily to British lack of preparation for the defense of the Peninsula and Singapore. From the moment the campaign began, the military leadership was hampered and bedeviled by lack of planes, troops and equipment by which to meet successive situations. -4- 437 The military leadership was not entirely blameless, as, for example, the necessary number of airfields were not prepared on the Peninsula. The British suffered from being over-mechanized and over-trucked for jungle warfare, rather than from the lack of equipment. As a result, the British system of supply was cumbrous and made necessary keeping to the roads with long transport columns that were vulnerable to attack from the air and ambush by small enemy parties. The Indian troops, with the exception of the Ghurkas, were disaffected. The Sikhs threatened to mutiny before and during the campaign. The civil government of British Malaya did not render reasonable assistance to the armed forces. The government did not keep communications and transportation running efficiently. Fire fighting defenses were not provided. Dock labor for unloading supplies was not properly provided or cared for. The civil government did not assist in the preparation of emergency defenses. At Singapore, 80,000 British soldiers surrendered to 20,000 Japanese. By this time, there was only a disorganized mass of human beings confronting the Japanese. Squads had lost their corporals; platoons their sergeants; companies theircolonels. captains; and battalions and regiments their majors and 4. The Campaign in the Philippines The main reason for the reverses suffered in the Philippines was the lack of a continuing, consistent foreign policy in the Pacific, and the resulting refusal in the interests of political expediency, to consider and support the recommenda- tions and requests of responsible military and naval authority. Philippines. In Manila, a considerable number of Chinese The Japanese Fifth Column had had some successes in the appeared to have been in the pay of the Japanese. The American army and naval officers were particularly indiscreet in guarding their information. American troops performed well under fire, even those experiencing combat for the first time. The successful defense of the Bataan Peninsula was not a static defense of infantry and pill-boxes in trenches waiting for an attack. detachments of 75 mm. artillery on half-track trucks and antiSuccessive enemy attacks were smashed by small, highly mobile tank guns. Bataan was not whipped; it succumbed to dysentery, malaria and weakness induced by inadequate rations.