The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
THE SECRETARY OF COMMERCE WASHINGTON May 19, 1942 Dear Henry: I had a visit with George Jessel on his recent trip to Washington, and he seems anxious to do what he can in connection with the war. He told me he had written you. I think very well of George, and believe he could be helpful in providing entertainment for the boys in camp. Sincerely yours Honorable Henry Morgenthau, Jr. The Secretary of the Treasury Washington, D. C. 186 TREASURY DEPARTMENT WASHINGTON May 21, 1942. MEMORANDUM FOR THE SECRETARY: Following is a quotation from a letter received from Mrs. Douglas Gibbons, Chairman of the Booth Committee, War Savings Staff, New York City, concerning the matter you had no check on regarding Mr. Rosenwald's crowd at the Danny Kaye night club rally; "The situation about the pledges made at Danny Kaye's nightolub rally is entirely the fault of my department of volunteers. That rally was the first one we covered and we were 'green' and untrained. Our one idea was to find out what type of bonds each subscriber wished and to . end the application as quickly as possible to the Federal Reserve Bank, 33 Liberty Street, New York City, hence the letter. "We did not know at that time that we could send the pledges to the Federal Reserve and have it handle them in a way befitting the dignity of the Treasury Department. I did learn of that shortly afterwards and all pledges since then have been forwarded to Mr. Boyd. I regret very much this incident. Colonel Patterson and his staff had nothing whatsoever to do with it. I take entire blame for myself and my department and the only exouse was ignorance and over-enthusisam." I am advised by Colonel Patterson that they are pursuing this matter further in an effort to see that the pledges materialise in bond purchases. FOR DEFENSE I I have written to Mr. Edgar Stern explaining this to him. BUY UNITED STATES BONDS Ted R. Gamble 187 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE May 21, 1942. TO THE SECRETARY FROM TED R. GAMBLE In answer to your suggestion while in New York that we make a motion picture of the War Bond solicitation, please be advised that arrangements have already been completed for the use of ten separate subjects, two to be attached to each of the five newsreels servicing all the theatres in the New York area. Five of these subjects will be attached to the newsreels ten days in advance of the Pledge Campaign, and five of them will go out three days in advance of the Pledge Campaign and carry over during the actual solicitation. Sales of United States Savings Bonds From May 1 through May 20. 1942 Compared with Sales Quota for Same Period (At issue price in millions of dollars) : 9 11 12 13 14 15 16 19 20 21 22 23 25 26 27 28 29 Quota : 8 : 7 Date Daily May 1 to Date May 1 to Date* to Date as % of Actual Sales Daily Quota Sales Quota, to to to Date as % of Date Date Quota $ 20.0 $ 23.0 94.5 May 1 May 1 $ 7.3 $ 7.3 $ 9.0 94.6 7.9 15.2 16.0 95.0 19.4 39.4 41.7 10.3 84.0 98.0 109.7 97.3 96.0 104.7 115.5 116.5 117.3 25.5 33.1 48.8 60.8 67.2 72.8 29.5 37.1 49.8 60.3 69.3 76.3 86.4 89.2 98.0 100.8 97.0 95.4 32.6 16.6 34.0 35.3 23.6 20.0 72.0 88.6 122.6 157.9 181.4 201.5 77.3 94.9 120.3 144.3 167.3 186.0 93.1 93.4 101.9 109.4 108.4 108.3 152.0 161.3 177.1 194.0 208.9 223.2 131.8 141.8 154.5 168.0 182.0 193.7 115.3 113.8 114.6 115.5 114.8 115.2 8.1 4.6 80.8 85.4 94.4 102.1 108.9 114.1 89.8 97.4 110.1 120.6 129.6 136.6 90.0 87.7 85.7 84.7 84.0 83.5 31.3 14.0 24.8 24.6 21.7 19.5 232.8 246.8 271.5 296.2 317.9 337.4 221.6 239.2 264.6 288.6 311.6 330.3 105.1 103.2 102.6 102.6 102.0 102.1 247.5 257.4 271.1 215.8 225.8 238.5 252.0 266.0 277.7 114.7 114.0 113.7 9.4 123.5 127.7 138.9 150.1 157.7 170.3 180.8 189.8 196.8 82.3 81.0 33.7 14.0 24.9 371.1 385.1 410.0 365.9 383.5 408.8 432.8 455.8 474.5 101.4 100.4 100.3 $ 12.7 $ 12.7 $ 14.0 11.6 24.3 25.7 22.3 8.9 18.4 23.2 17.2 14.5 46.5 55.5 73.8 97.0 114.2 128.7 47.8 57.8 23.3 9.4 15.8 16.9 14.9 14.3 24.3 9.8 13.7 : 6 : 5 Date : 4 to Date as % of Sales : 2 : 1 to to May 1 : Daily Sales : Date Quota, May 1 Total : Actual Sales Series F and G Quota, Actual Sales : Series E 70.5 90.7% 7.6 15.6 12.1 6.4 5.6 9.0 7.7 6.8 5.2 4.2 11.2 210.3 217.9 230.5 241.0 250.0 299.8 309.8 322.5 336.0 350.0 81.1% 81.6 $ 20.0 510.1 527.7 553.0 577.0 600.0 Office of the Secretary of the Treasury, Division of Research and Statistics. Source: Actual sales figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Figures have been rounded weeks during the month. frend bytotals. ant the addato does notand will not necessarily you trend within 87.0% May 21, 1942. 8 8 Sales of United States Savings Bonds From May 1 through May 20, 1942 Compared with Sales Quota for Same Period CONFIDENTIAL (At issue price in millions of dollars) Date 1 2 4 5 6 7 8 9 11 12 13 14 15 16 8 19 20 21 22 23 25 26 27 28 29 : to to Date : May 1 Daily Quota, May 1 Sales to Date as % of Daily Quota Total Sales to to to Date as % of Date Date* Quota May 1 : Date Series F and G Actual Sales Quota, Series E May 1 Actual Sales Sales to to to Date as % of Date Date Quota May 1 Daily Quota, May 1 : Actual Sales $ 18.7 $ 12.7 $ 14.0 $ 7.5 $ 7.3 $ 18.0 $ 20.0 $ 20.0 $ 26.0 11,6 24.3 25.7 94.6 7.9 15.2 21.4 71.0 19.4 39.4 47.1 83.7 22.3 46.5 8.9 55.5 73.8 97.0 114.2 128.7 97.3 96.0 104.7 115.5 116.5 117.3 10.3 7.6 25.5 33.1 48.8 60.8 67.2 72.8 39.4 49.3 64.9 76.9 86.1 92.6 64.7 67.1 18.4 23.2 17.2 14.5 47.8 57.8 70.5 84.0 98.0 109.7 75.2 79.1 78.0 78.6 32.6 16.6 34.0 35.3 23.6 20.0 78.0 88.6 122.6 157.9 181.4 201.5 87.2 107.1 135.4 160.9 184.1 202.3 82.6 82.7 90.5 98.1 98.5 99.6 23.3 9.4 15.8 16.9 14.9 14.3 152.0 161.3 177.1 194.0 208.9 223.2 131.8 141.8 154.5 168.0 182.0 193.7 115.3 113.8 114.6 115.5 114.8 115.2 8.1 4.6 104.2 110.6 120.8 129.3 136.5 142.1 77.5 77.2 78.1 79.0 79.8 80.3 31.3 14.0 24.8 24.6 21.7 19.5 232.8 246.8 5.2 80.8 85.4 94.4 102.1 108.9 114.1 236.0 252.4 275.3 297.3 318.5 335.8 98.6 97.8 98.6 99.6 99.8 100.5 24.3 9.8 13.7 247.5 257.4 271.1 215.8 225.8 238.5 252.0 266.0 277.7 114.7 114.0 113.7 9.4 4.2 11.2 123.5 127.7 138.9 153.0 159.2 169.6 178.4 186.1 192.3 80.7 80.2 81.9 33.7 371.1 385.1 410.0 368.8 385.0 408.1 430.4 452.1 470.0 100.6 100.0 100.5 299.8 309.8 522.5 336.0 350.0 90.7% 15.6 12.1 6.4 5.6 9.0 7.7 6.8 60.8% 14.0 24.9 L.5 96.2 17.9 337.4 204.9 212.5 226.2 238.7 250.0 office of the Secretary of the Treasury, Division of Research and Statistics. Actual sales figures are deposits with the Treasurer of the United States on account of proceeds of sales of Source: United States savings bonds. Figures have been rounded and will not necessarily add to totals. Takes into account both the daily trand during the week and the monthly trend during month. 76.9% 504.7 522.3 548.7 574.7 600.0 May 21, 1942. 190 May 21, 1942. Dear Mr. Addes: I read your letter of April 24 with a great deal of interest, and have not acknowledged it before this because I wished to make some informal inquiry in connection with the matter of which you wrote. I have verified the fact that the A-20 Bomber will be discontinued, inasmuch as it is scheduled for replacement by a new light bomber, which is more useful from a tactical point of view. It is felt by those in charge of the program that the work which has been laid out for the Murray Body Corporation, both by Boeing and Curtiss-Wright, should be sufficient to employ the corporation's present facili- ties at an efficient rate. I am told that the present needs of the service call for the steady and uninterrupted production of Flying Fortresses, and for the production of the P-47 Pursuit planes in the greatest possible numbers and in the shortest possible time. It is believed that by patriotic effort on the part of the company's management, and of its workers, the gap which must exist between the termination of one line and the beginning of another, should be shortened and bridged. I feel sure that the Under Secretary of War would be glad to have you write to him directly and to give you any assistance within his power in connection with this problem. Sincerely, (Signed) H. Morgentham. in Mr. George F. Addes, International Secretary-Treasurer, UAW-CIO, 281 West Grand Boulevard, Detroit, Michigan. GEF/dbs/HEG/pm Photo fies file Thompson n.m.e. WAR DEPARTMENT OFFICE OF THE UNDER SECRETARY WASHINGTON.D.C May 16, 1942 The Honorable, The Secretary of the Treasury. Dear Henry: This acknowledges the receipt of your letter of April 30, 1942, wherewith was transmitted a communication from Mr. George F. Addes, International Secretary-Treasurer, UAW-CIO, urging con- tinued production of the A-20 Light Bomber, and in which you asked the advice of this office as to an appropriate reply. For your information, production of the A-20 Bomber is scheduled for curtailment beginning in March, 1943, and for complete discontinuance by August of the same year. Its place in the tactical picture is to be taken by the A-26, which model is an improvement over its predecessor, the A-20, and is much better adapted to its indicated tactical mission. It is for this reason that, at this time, consideration cannot be given to a continua- tion of production of the A-20 Bomber. The work as outlined for the Murray Body Corporation contemplates the construction of wings for Flying Fortresses under a subcontract with the Boeing, Seattle, plant; and of wings for the P-47 Pursuit, under a subcontract with the Curtiss-Wright Corporal on. Production on the former airplane is scheduled for a stead increase, month by month, until the middle of 1944; prod- uction the P-4:7 by Curtiss, Buffalo, is scheduled for initiation in Sept ber of this year and accelerates rapidly to its peak in March, r. Addes should be informed that consideration cannot be given to the continuance of the A-20 line because it is scheduled for replacement by a Light Bomber which is more useful, tactically, and that the work which has been laid out for the Murray Body Corporation, both by Boeing and by Curtiss, should be sufficient to employ the corporation's present facilities at an efficient rate. It is recommended that your letter to him should be closed by point- the ing out the fact that the present needs of the Service call for for steady and uninterrupted production of Flying Fortresses, and the production of the P-47 Pursuits in the greatest possible numbers An the shortest possible time; and that patriotic effort on the part of the company1.6 management and of its workers should serve shorten and to bridge the gap which must exist between the termination of one line and the beginning of another. so This office will gladly furnish such additional assistance AS may be desired. Sincerely yours, RL PP# ROBERT P. PATWERSON Under Secretary of War 193 April 30, 1942 Dear Bob: Would you please advise me how to answer the enclosed letter? Sincerely, (Signed) Henry Honorable Robert P. Patterson, Under Secretary of War. file n.m.c. MOBILE AIRCRAFT AGRICULTURAL IMPLEMENT WORKERS of AMERICA (UAW-CIO) RJ GEO April Twenty-fourth TERNITIONAL PHONE LAPAYETTE 7900 1942 Henry J. Morgenthau, Jr., Secretary United States Treasury Treasury Building Washington, D. C. Dear Sir: Appreciating your very deep interest in the production of war material and as we have been unable to obtain any satisfactory results from the other governmental offices, I submit to you, information relative to a production job on the A-20 Bomber now being produced in the Murray Body Corporation, Detroit, Michigan. There is approximately $3,000,000,000 worth of equipment. The company employs 6,400 trained aircraft workers. Production on the inside wing of the A-20 Bomber averages approximately 42 units per week with a very definite assurance on the part of the workers that 50 units could be produced, The Murray Body Corporation has informed its employees there will be 700 more units produced and then the three million dollars' worth of equipment is to be stored as the present A-20 Bomber will no longer utit, any contemplates doing parts on the P-47 Pursuit fighter. They indicated to the workers that by March 1943 they will have employed people, contention this company has sufficient floor space at the time to commence tooling up for the P-47 rather than wait until part of August when the 700 units of the A-20 Bomber will be nderstand this company is now working on a Boeing job, and that the workers on the A-20 Bomber will be transferred to the Boeing such time as the P-47 tooling job is completed, There dil be people affected by August 1 - well trained and experienced workers. genthau, Jr., H. Secretary U.S. Treasury -2- April 24, 1942 PET information received this Douglas A-20 Bomber is an excellent medium From bomber with a range of about 750 miles. It is also purported that 11.1 A-20 medium bomber is an excellent night fighter used by the Brisish. The workers and leaders of the Murray Body local union are truly patriotic and deeply concerned with the progress of the war effort. They have asked me to bring to your attention the feasibility of continuing the production of this bomber which could be used by the Russian forces since the distance between their operating base and the front is less than 750 miles, We are aware of the fact that warfare strategy is the responsibility of the high-ranking officers of our armed forces, however, it was our thought we call this matter to your attention since we the workers can produce a greater quantity than the present schedule requires. Many months were spent in equipping the plant with the necessary tools, jigs and fixtures needed to build this plane. And, from very reliable sources we understand this plane could be converted into & pursuit ship such as the commonly known "night fighter". We trust our letter will merit your serious consideration and receive some favorable action. Sincerely yours, Geo TO Added INTERNATIONAL SECRETARY TREASURER 26 GFA:fh VICTORY THROUGH EQUALITY OF SACRIFICE 196 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE MAY 21 1942 TO Secretary Morgenthau DA Subject: Retail prices in Washington grocery stores. FROM Mr. Haas In response to your request, we have compiled a series of weekly price quotations for selected staple items sold in chain grocery stores of Washington, D. C., taken from local newspaper advertisements. In making this tabulation, it was found that the Safeway Stores were the only group publishing an adequate list of quotations over the past year which satisfied the requirements of reasonable frequency in quotations for a given item and consistency in description of grade, size, etc. Nevertheless, quotations for some items were rather infrequent, and in some cases minor adjustments had to be made to put the quotations in terms of consistent units. The attached Table 1 (2 pages) is a summary table com- paring quotations for selected items in April and May this year with those in the corresponding weeks last year, as advertised by Safeway Stores on Friday of each week. The items are arranged in two major groups: (1) Those placed under ceilings on May 18, 1942, and (2) those exempt from the ceilings. The influence of the price ceilings will not be fully apparent until quotations are available for Friday of this week, since the latest data are for last Friday, May 15. Marked price increases over last year are noticeable in canned goods, shortening (Crisco, etc.), salad dressing, coffee, eggs, and flour. It should be noted, however, that items which show the sharpest price increases tend to disappear from the list of advertised products, since the advertisements are designed to sell goods that are in plentiful supply. For example, we found it difficult to get sufficient quotations on pork products and on canned goods, two groups of staple products which show marked price in- creases over last year. BLS data for April 15 show price increases of 36 percent for pork chops, 40 percent for canned peaches, and 41 percent for canned tomatoes. -2- 197 The complete price tabulation is given in Table 2 (3 pages). . This contains a somewhat larger number of items than the summary table, the additional items being those for which relatively few quotations were available in April and May, usually because of seasonal factors or because of developing shortages. sold by Safeway Retail price comparisons for selected foods- Stores, Washington, D. C. April and May, 1941 and 1942 (In cents per unit) 198 Table 1 April 3/ Item Unit Year 10 3 May 3/ 17 24 25 25 15 22 25 23 23 29 27 17 17 16 16 31 31 29 29 10 10 8 1 29 Items under ceiling: 2 Meats: Rib roast of beef Chuck roast Sirloin steak 1b. 1b. 1b. 1941 1942 27 1941 1942 19 1941 1942 33 19 18 19 21 23 33 33 qt. 1941 1942 Coffee cream pt. 1941 1942 20 Fruit cocktail #1 oan 1941 1942 10 Peaches, Del Monte #21 can 1941 1942 1b. can 1941 1942 12 12 12 12 Miscellaneous: Crisco or Spry 3 1b. can 1941 1942 Salad dressing pt. jar 1941 1942 20 20 20 23 23 10 10 14 14 i4 14 14 10 14 13 21 21 21 21 12 12 6 6 6 6 6 71 71 69 69 47 47 47 69 4 4 4 4 Beans with pork 31 37 Dairy products: Milk, Grade A Canned goods: 25 15 15 22 22 22 22 22 22 22 8 Bread, J. L. Wright 1b. Coffee, Nob Hill 1b. Coffee, Maxwell House 1b. 1941 1942 1941 1942 1941 1942 8 8 g 8 3 Dates in 1941 are one day later than stated. 17 15 25 25 25 27 32 32 1 Quotations are for comparable units, brands and qualities. 2 Effective beginning May 18, 1942. 8 25 25 27 25 15 8 8 199 Table 1 (continued) Retail price comparisons for selected foods1 sold by Safeway Stores, Washington, D. C. April and May, 1941 and 1942 (In cents per unit) Item Unit Year 3 April 3/ 10 17 24 May 3/ I 8 15 22 29 23 25 29 29 Items not under ceiling: Meats and poultry: Chickens, Plymouth Rock 1b. Chickens, Sanico 1b. Leg of lamb 1b. Dairy products: Butter, Land o 'Lakes 1b. Milk, condensed 3 tall cans Cottage cheese 1b. Eggs, candled doz. Eggs, Grade A doz. Flour: 1941 1942 27 27 27 27 27 27 25 28 29 29 30 30 29 30 1941 1942 31 31 31 32 33 33 34 34 34 1941 1942 22 22 21 1941 1942 23 23 42 43 43 1941 1942 19 28 25 1941 1942 10 10 1941 1942 1941 1942 10 10 26 23 27 37 22 25 25 25 10 10 : 26 30 31 45 : 47 Kitchen Craft 12 1b. sack 1941 1942 39 25 10 10 25 25 27 31 32 43 43 37 43 1941 1942 3/ Dates in 1941 are one day later than stated. 18 37 12 1b. sack Effective beginning May 18, 1942. 19 4i Gold Medal 24 45 43 10 48 45 59 59 58 49 49 41 49 1 Quotations are for comparable units, brands and qualities. 2 21 28 49 49 28 200 Table 2 Retail prices of selected items 1/ in Safeway Stores, Washington, D. 0. each week, April 1941 to date (In cents per unit) 4 25 16 23 28 2 9 13 20 27 6 August July June May 18 11 4 18 11 NO April Unit Item I 25 22 15 8 29 Items under oeiling: 2 Meats: 25 1b. 25 25 25 1b. Stew Rib roast beef, of boneless beef Round steak, top Chuck roast Sirloin Steak Briggs frankfurters Dairy produote: Milk, Grade A Coffee cream 20 1b. 1b. 31 33 17-oz. can 12 Peaches, Del Monte Beans with pork #2 can 10 20 20 10 10 29 29 31 33 31 33 35 18 18 35 19 33 33 33 10 10 .. .. 20 10 20 20 35 19 19 31 20 10 10 10 20 20 20 10 10 10 10 19 .. .. 10 20 19 14 13 1b. can 3-1b. can 15 15 15 * pt. jar 49 49 49 47 47 pt. jar 15 15 15 53 53 52 52 15 11 10 10 10 1b. 8 8 8 1b. Corn flakes Puffed wheat 6-oz. pkg. Coffee, Maxwell House 1b. 5 5 5 pkg. Coffee, Nob Hill 1b. Ivory flakes 12 oz.pkg. Octagon soap 33 33 7 Bread, J. L. Wright 31 5 Misoellaneous: 17 8 Peanut butter 29 16 8 Mayonnaise 29 21 21 4 Salad dressing 31 25 25 25 25 19 19 5 Shortenings, etc. Crisco or Spry . 28 10 10 Green Giant peas #1 can 29 29 31 20 16 16 17 17 31 qt. otn. 20 Fruit cocktail 18 33 33 33 1b. 1b. pt. Canned goods: 19 19 19 29 29 31 24 24 25 25 23 23 23 25 25 20 20 20 19 23 23 5 cakes 27 27 25 Items not under ceiling: Meats and poultry: Chickens, Plymouth Rook Chickens, Sanico Lamb chops Leg of lamb Dairy products: Butter, Land o'Lakes Milk, condensed Kraft cheese, American Cottage cheese Eggs, candled Eggs, Grade A Fresh vegetables: Onions, new Texas Potatoes, Idaho Flour: Gold Medal Kitchen Craft Miscellaneous: Prunes, dried 1b. 1b. 1b. 1b. 27 27 27 31 31 31 27 27 27 25 23 25 29 29 25 29 29 28 27 25 32 29 31 27 25 31 29 .. 24 27 25 31 29 43 27 27 27 39 22 22 21 25 25 25 23 42 1b. 3 tall cans 2 1b. box 42 39 19 19 18 22 10 10 25 25 1b. 10 doz. 26 doz. 23 37 26 27 10 10 28 28 23 22 49 10 35 29 37 1, Quotations are for comparable units, brands and qualities. 9 10 13 10 51 12 1b. sack 47 12 1b. sack 39 2 1b. pkg. 15 23 3 lbs. 5 lbs. Effective beginning May 18, 1942. 49 49 10 22 22 48 15 15 15 201 Table 2 (continued) Retail prices of selected items 1 in Safeway Stores, Washington, D. C., each week, April 1941 to date (In cents per unit) 19 1 Unit 12 17 24 31 10 26 19 5 December November October September 3 Item 14 21 28 7 19 26 12 5 Items under oeiling: 2 Meats: Rib roast of beef Stew beef, boneless Round steak, top Chuck roast Sirloin steak Brigge frankfurters 1b. 1b. 21 1b. 37 1b. 21 1b. 1b. qt. otn. Canned goods: Green Giant peas 17 oz. can Peaches, Del Monte Beans with pork #2 can Fruit cocktail Shortenings, etc. Crisco or Spry Salad dressing Mayonnaise Peanut butter Miscellaneous: 39 39 39 22 35 35 12 12 12 25 25 27 19 21 21 21 35 35 31 31 29 22 21 21 19 19 35 31 31 29 35 35 35 35 37 23 21 21 19 12 12 12 12 12 22 22 14 14 14 12 #1 can 1b. can 3-1b. can pt. jar à pt. jar 1b. 1b. Puffed wheat pkg. Coffee, Maxwell House 1b. Corn flakes 6-oz. pkg. Coffee, Nob Hill 1b. Octagon soap 39 21 21 pt. Bread, L. Wright Ivory flakes 39 21 21 31 Dairy products: Milk, Grade A Coffee cream 21 21 24 25 27 27 27 55 55 61 48 57 57 65 65 65 12 5 5 5 27 23 21 19 28 30 28 21 12 oz.pkg. 5 cakes Items not under ceiling: Meats and poultry: Chickens, Plymouth Rook Chickens, Sanico Lamb chops Leg of Lamb Dairy products: Butter, Land o'Lakes Milk, condensed Kraft cheese, American Cottage cheese Eggs, candled Eggs, Grade A 1b. 1b. 1b. 25 27 27 25 1b. 25 25 25 25 29 29 29 29 43 27 27 27 23 25 27 41 43 1b. 3 tall cans 25 25 25 25 2 1b. box 57 57 39 38 37 57 36 37 37 13 11 13 25 25 37 37 41 41 25 57 57 10 10 10 1b. doz. 28 25 41 39 39 38 doz. 14 Fresh vegetables: Onions, new Texas Potatoes, Idaho 3 lbs. 5 lbs. Flour: Gold Medal 12 1b .sack Kitchen Craft Miscellaneous: Frunes, dried 10 20 19 19 20 20 21 20 17 54 50 45 12 lb.sack 2 1b. pkg. 15 19 1/ Quotations are for comparable units, brands and qualities. 2/ Effective beginning May 18, 1942. 19 17 17 19 Table 2 (Continued) Retail prices of selected items 1 in Safeway Stores, Washington, D. C., each week, April 1941 to date (In cents per unit) 194 2 Item 16 9 2 30 23 13 20 27 6 April March February January Unit 13 20 27 6 May 10 17 24 3 I 8 Items under ceiling: 2 Meats: Salad dressing Mayonnaise Peanut butter Miscellaneous: Bread, J. Wright Corn flakes Puffed wheat Coffee, Nob Hill Coffee, Maxwell House Ivory flakes Octagon soap .. .. #1 can #2g can 1b. can 3 1b. can pt. jar # pt. jar 1b. .. 12 22 22 14 .. 14 14 20 20 20 12 14 14 14 14 il .. .. 21 21 21 21 21 .. 6 35 35 12 12 23 23 14 14 14 14 14 14 14 14 21 21 21 21 14 .. 35 12 12 12 12 12 12 12 22 22 22 22 22 14 14 14 .. .. 12 12 : 14 6 6 6 5 5 5 8 65 65 .. .. .. 15 65 22 22 67 67 67 65 65 22 15 15 15 67 69 69 69 71 22 22 22 22 15 15 15 .. 8 1b. .. 23 1b. .. 12c-oz. pkg. 10 23 10 10 10 23 23 23 23 23 23 31 31 31 31 .. 8 17 .2. 8 8 .. 10 9 24 .. 24 25 .. .. 22 22 .. 22 22 22 22 23 30 28 31 31 32 25 32 32 22 31 .. 22 5 cakes 22 22 22 15 15 15 8 9 22 22 15 15 15 71 8 5 pkg. 1b. 22 22 .. 5 6-oz. pkg. 22 16 15 13 67 5 Shortenings, etc. Crisco or Spry 17-oz. can 12 12 12 35 8 Peaches, Del Monte Beans with pork .. 35 .. 43 8 Fruit cocktail pt. 35 35 35 23 37 8 Green Giant peas qt. ctn. 12 12 39 21 8 Canned goods: 1b. 31 21 23 5 Coffee cream 39 6 Dairy products: Milk, Grade A 1b. : 21 21 23 23 6 Sirloin steak Briggs frankfurters 22 6 Chuck Roast 35 39 22 25 25 25 25 25 25 25 25 25 6 Round steak, top 21 23 1b. 1b. 1b. 29 27 27 27 25 27 29 27 6 Rib roast of beef Stew beef, boneless 1b 25 25 25 22 23 23 Items not under ceiling: Meats and poultry: Chickens, Plymouth Rock Chickens, Sanico Lamb chops Leg of lamb 1b. 1b. 1b. Milk, condensed Kraft cheese, American Cottage cheese Eggs, candled Eggs, Grade A Fresh vegetables: Onions, new Texas Potatoes, Idaho Flour: Gold Medal Kitchen Craft Miscellaneous: Prunes, dried 33 27 29 31 33 25 25 1b. 41 41 41 42 42 3 tall cans .. 28 2 1b. box 1b. doz. doz. 27 25 28 39 .. 49 49 49 49 45 37 23 61 19 19 1/ Quotations are for comparable units, brands and qualities. 42 42 28 28 63 10 10 35 35 43 19 19 23 42 .. 40 39 12 1b. sack 12 1b. sack Effective beginning May 18, 1942. 42 .. 38 24 25 10 3 lbs. 5 lbs. 2 1b. pkg. 37 63 10 34 34 45 1b. Dairy products: Butter, Land ''Lakes 29 42 : 28 28 28 32 32 32 1 35 25 23 42 42 42 12 25 63 63 63 10 10 10 .. 41 41 19 19 21 29 30 33 33 34 23 23 42 43 28 : 25 28 30 29 30 34 34 34 25 .. 10 32 32 32 29 1 29 32 28 41 10 27 10 .. 37 25 25 .. 57 10 10 30 31 41 43 31 43 19 24 24 61 61 24 61 61 61 49 49 49 49 49 49 49 21 .. 21 21 23 23 59 59 61 22 21 49 49 49 49 ASSISTANT SECRETARY OF THE TREASURY May 21, 1942. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston The Office of Coordinator of Information is selecting from draftees and candidates who are to be inducted into the Army some 2,000 men for a special service. They would like us character to makequick some surveys in the home localities of the men. If this is to be done, it will, of course, require your approval. posts 204 May n. 1942. Dear Archies I was gind to have your letter of May 10, and a copy of the radio speech broadwast w K. P. Chen. I have read this with much interest and thank you for your thought is contine " to no. with best regards, Sincerely, (Signed) 1. Morgenthan, and Mr. Archie Lockhead, President, Universal Trading Corporation, 630 Fifth Avenue, New York, New York. GEF/abe Firnme. 205 UNIVERSAL TRADING CORPORATION 630 FIFTH AVENUE ARCHIE LOCHHEAD NEW YORK, N.Y. PRESIDENT May 19th, 1942 My dear Mr. Secretary: On May 12th, Mr. K. P. Chen made a speech which was broadcast from Chungking over the International Broadcasting Station. Unfortunately, it was impossible to secure a good reception of this broadcast in the Eastern States, so that many of his friends were unable to hear it. However, it was received very clearly on the West Coast, and as I thought you might be interested in his remarks, I am taking the liberty of enclosing a copy herewith. Sincerely yours, CLASS Archie Lochhead The Honorable Menry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. 206 CHINESE NEWS SERVICE NEW YORK, N. 1250 6TH AVENUE Cable Address: SINONEWS Phone: Circle 6-5225 Now York, May 12, 1942 THIS WAR IS OUR BUSINESS By K. P. Chen, B.C., Pennsylvania '09 Chairman of the Chinese Currency Stabilization Board Note: The following is the eighth of a series of broadcasts by Chi nese alumni of American universition under the auspices of the Chinose-American Instituto of Cultural Relations. Each wook a member of the Institute, an alumnus of an American university, spoaks from Chuncking over the International Broadcasting Station on a subjoot boaring on the cultural relations botwoon the Allied ropublics, China and the Unitod Statos. The program is broadcast overy Wednosday ovor Station XGOY (9635 K.C.) at 14:30 Groonwich Moridian Time (10:30 a.m. EWT). The Chinoso-Amorican Instituto of Cultural Rolations was founded in Chungking on Goorgo Weshington's Birthday in 1939 to furthor strongthon tho tios of friendship betwoon the two countries. Tho Prosident of the Instituto is Dr. H. H. Kung, Vice Prosident of the Exocutivo Yuan and Ministor of Financo in the Chinoso Government, Madamo Chiang Kai-shok and Secrotary of War Honry L. Stimson are Honorary Prosidonts, Dr. Chih Mone, Diroctor of China Instituto in America, is Liaison Socrotary for the organization in the United Statos. Mr. Chon the o1 ghth spoakor on this special program, who rado the broadcast on May 6, is ono of China's votoran bankora and a prominont alumns of tho University of Ponnsylvania, whore he graduated from the Wharton School of Finance in 1909. Mr. Chon is woll known in Washington circles, as howas thoro in 1936 as hoad of a Chinoso financial mission to doal with silvor probloma and again, in 1939, to successfully nogotiate the first American loan to China at war. Ho subsequently bocamo director of Universal and Foo Shing Trading Corporation whose efforts in importing China wood oil nado possiblo the recont repayment of the $25,000,000 loan two years ahoad of schodule. A formor hoad of the Chinoso Foroign Trado Commission, Mr. Chon is now Chairman of the Chinoso Currency Stabilization Board. My Amorican friends: I am glad of this opportunity which the Sino- American Cultural Association has givon mo to spoak to my friends in America, First of all, as an alumnus of the Univorsity of Ponnsylvania I wish to bring gractings to my Alma Mator from all graduates of the Univorsity now in this country. I also wish to tako advantage of this opportunity to any "hollo" to all the friends which I have rado during my many visits to America. Evor sinco my studont days over thirty years ago I have enjoyed the most antisfactory personal as woll as business rolations with my many friends in Amorion first in my school days at the Wharton School of the Univorsity of Ponnsylvania and subsoquently through long experience in banking and business. I have learned to adri ro American business officioncy and ways of lifo and ofton droamod of the innonso possibilities of Sino-American cooporation in the advancement of common idoals. In recont years my experience gained through the two financial missions which I took to the United States on bohalf of my government and work of tho Curroncy Stabilization Board convinced mo of the oxistence of a long-standing common interest which undorlios the traditional friendship botwoon the two countrios. From Friendship to Allionoo Now, sinco the ovontful day on December 7 our traditional friendship has riponed into an alliance. Not only a oommon intorest but a consion dostiny now binds us togothor, a common idoal inspiron us and all our common actions load to the attainment of the common objoctivo of defoating the Axis. (noro) 207 May 12, 1942 K. P. Chen 2 As I stand here speaking to you, my friends, I can vividly visualize to myself the millions and millions of men and women in the United States mobilised for war production. I can see them busily working day and night in factories, in shipyards and in the numberless offices that have lately sprung up in response to war needs and requirements. I can 800 how millions of the flowering manhood of America are pouring into training camps to emerge again as fliers and expeditionary forces destined sooner or lator for some distant parts of the world to fight in the cause of liberty. I can see your determined looks and your burning zoal. I want to salute you all. Friends, I want you to realize, as no doub` you do, that free peoples of the entire world are looking up to you, to every one of you, for the great part you are playing and are bound to play in delivering the crushing blow to the aggressors and for even the greator task of remaking this world to our liking. I an speaking to you from Chungking, the spot from which the Chinese people have for nearly five years directed their struggle against the Japanose aggressor. I nood not toll you the dovastations we have borne, the sacrifices we have mado in defense of our froodon. Right at this moment fiorcost battlos are being wagod in Burna whore our main link with the outside world and chiof routo of communications with America and other Domooracios is at stako. Wo Gain Timo: You Produce I know you understand fully the gravity of the situation and there is no nood for no to romind you of it. If I take this opportunity to montion it, it is becauso I want you to know that however overwhelming are the odds WO are dotor cinod to fight on until TO win. I wish to give special emphasis to the fact and to assure you that though temporarily outnumbered and short of aquipment WO are determined to catch our flosh and blood against the bombs and sholls of the enory so that overy ninuto wo thus help to main pay bo used by you in the manufacture of arms, of tanks, of bombors and of battloships. It is truly hoartoning to road reports from the Unitod States that you are making satisfactory progress in your war production. Wo people horo have an inplicit faith in American officiency. To thoroughly realize that the reason you have not boon ablo to produce more than you do now is bocause the onany had the clear advantago of a hoad start and the fact that they had this head start is because aggressors are always botter propared than their poaceful noighbors, just as bandits are sure to bo arnod while the houses which they go to rob are usually unarrod. Wo know that although you are not well propared, bocauso you novor aim attack others, onco you are attacked, on 00 the bandit is in your yard and onco your mind is made up to beat back the attack and capture the bandit we know that you DOBN business. Wo know that once your nind is nade up you noan business. Without fear of oxaggoration wo can say this war is the biggost business that human boings have over engaged in. I think that 170 all share the fooling that unloss wo nako this business a success use will not be ablo to pursuo any other busto inoss in ponce and happiness. Right Goods to Right Places This war is a war of life and death, a war in which all that nakes life docent and worthwhile living is at stake. The rost of froo nankind and continrents of your own soldiora are fighting tonaciously on all fronts, are all confidont that you will soon bring forth the production which will turn the tido of this titanic strugglo. Wo have faith in America's mastory of war cornony and toohniquo. The challongo to turn out as many goods as fast as possiblo was answord by the Apori- nachine with its initiative and The of victory is the to right The of can prorequisito industrial gotting custonary right onorgy, goods places. ingonuity. triumph American war production is already assured. 170 in China no less confidently await the triumph of American war distribution. c 208 COPY THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA Box 680 Benjamin Franklin Station Washington, D. C. Telephone: REpublic 7860 CONFIDENTIAL May 21, 1942 My dear Dr. White, I enclose a copy of the draft Chinese Agreement which has at last arrived from London. Even now I am not entirely certain that there may not have been some alterations in the draft of which we have not been notified. I think, however, that if there are any changes they could only be of alight importance. Yours sincerely, T.K. Bewley Dr. H. D. White Director of Monetary Research United States Treasury Washington, D. C. DRAFT FINANCIAL AID AGREEMENT 209 Whereas the Government of the U.K. of Great Britain and Northern Ireland, in pursuance of their policy of closest cooperation with China in the financial as well as in the military sphere in the war which they are waging against their common enemies have decided to offer certain measures of assistance to China; And whereas the Government of the Republic of China (hareinafter referred to as Chinese Government) for the purpose of prosecuting the war, desire to obtain facilities for the acquisition of arms, munitions and military equipment, and for the purchase of material necessary for national pur- poses in China, arising out of the war, and to provide for the cost of services in connection with such purchases, and for the cost of other services required for war purposes; And whereas the Government of the U.K. have agreed that they will not claim reimbursement of the cost of any arms, munitions and military equipment which it is possible for them to supply for use of the Chinese armed forces; Now, therefore, the Government of the U.K. of Great Britain and Northern Ireland and the Chinese Government have agreed as follows: ARTICLE I 1. The Government of the U.K. shall make available to the Chinese Government at the request of the Chinese Government sterling sums not ex- ceeding in the aggregate 50 million pounds sterling for all or any of the following purposes: (1) for payments during the war in respect of purchases of material necessary for national purposes in China, arising out of the war being material which shall be produced or manufactured in countries within the sterling area; or -2- 210 (2) for the cost of services incurred in the sterling area in connection with such purchases; or (3) for provision of rupee currency required by the Chinese Government to meet pay and local expenditure of Chinese forces in Burma and for the cost of such other services for war purposes incurred within the sterling area as the two governments pay may from time to time agree; or 10 (4) up to a million pounds sterling for guaranteeing internal Chinese loans. 2. The method of making available the sume referred to in sub- paragraphs (1) and (2) of paragraph 1 of this Article shall unless otherwise agreed between the two governments be that the Government of the U.K. shall pay on behalf of the Chinese Government suns payable by the Chinese Government under contract for the purposes referred to in paragraph 1 of this article which are concluded with the concurrence of the Govern- ment of the U.K. before the termination of hostilities with Japan. 3. In this Article the expression "the sterling area" shall have the meaning assigned to it for the purpose of the regulations in force in the U.K. in regard to Exchange Control, provided that if the Government of the U.K. shall at any time amend the definition of the sterling area for the purpose of the said regulations, such amendment shall apply to the definition of the sterling area for the purposes of this agreement as from the date of notification of the amendment by the Government of the U.K. to the Chinese Government. 211 - -3. - ARTICLE II Except as may be otherwise agreed between the Governments any supplies for which orders or contracts have already been placed under the terms and conditions of the agreements of the eighteenth day of August 1939 and the 5th day of June 1941 shall continue to be dealt with in accordance with the arrangements made under these agreements. ARTICLE III The final determination of terms upon which this financial aid is given including the benefits to be rendered to the United Kingdom in return is deferred by the two contracting parties until the progress of events after the war makes clearer the final terms and benefits which will be in the mutual interest of the United Kingdom and China and will promote the establishment of lasting world peace and security. In determining the final terms and benefits full cognisance shall be given to the desirability of maintaining a healthy and stable economic and financial situation in China in the post war period as wall as during the war, and to the desirability of promoting mutually advantageous economic and financial relations between China and the United Kingdom and the bettement of world wide economic and financial relations. ARTICLE IV In this Agreement the expression "termination of hostilities with Japan" means the signature of a general armistice or treaty of pence (which- ever is the earlier) with Japan to which the U.K. and China are parties. ENDS. 212 May 21, 1942 MEMORANDUM FOR THE SECRETARY The attached memorandum summarizes a report sub- mitted by Ambassador Winant, at our request, on the effects of the high individual income tax rates in Great Britain. The British income tax reaches a maximum rate of 97 percent on that part of individual incomes in excess of $80,000. An individual has to receive about $500,000 in order to have $25,000 left after taxes; an additional $100,000 before taxes adds only $2,500 to his income remaining after tax. There is no evidence that the high income groups are maintaining pre-war expenditure levels by liquidating assets. Living standards appear to have been reduced sharply. Only part of this is due to tax policy. Ra- tioning and shortages of goods, services, and particularly domestics have been a contributing factor. The high taxes have not seriously affected the incentive in the upper income groups to continue in gainful occupation. Social pressure towards taking an active part in the war and special privileges attaching to war occupations tend to keep those in the upper income groups at work. Some relief has been provided taxpayers with con- tractual obligations by requiring that persons with claims against others obtain the leave of the courts before instituting procedure against their debtors. Some tax relief has been provided those with suddenly reduced incomes. There is no evidence that the high taxes have stimulated new tax evasion and tax avoidance devices. Attachment Roy Blough 213 MEMORANDUM FOR THE SECRETARY Effects of high individual income tax rates in Great Britain The extremely severe taxation of individual incomes in Great Britain has entailed sharply reduced living standards, special provisions for relief of taxpayers with contractual obligations or with suddenly reduced incomes, and additional provisions against evasion and fraud. Apparently it has not seriously reduced the incentive in the upper income groups to continue in gainful occupation, because of other incentives present under war conditions. 1. Living standards: There has been a tre- mendous decrease in the scale of living of the upper income classes during the war, not all of it due to tax policy. Other factors have been rationing or shortages of goods, restriction of travel and entertainment facilities, and in particular shortage of domestic service owing to absorption in the war effort. Liquidation of assets in order to maintain former living standards has not occurred on an important scale, though liquidation has occurred be- cause of inability to operate large estates, the conversion of property to new uses, the requisi- tioning of property by the Government, and altered patterns of living generally. 2. Contractual obligations: Special relief has been provided for individuals burdened with contractual obligations, including debts. Under the Courts (Emergency Powers) Act of 1939 persons with rights against others must obtain leave of the Court to proceed against them for nonpayment of money or nonperformance of obligations attributable directly or indirectly to circumstances connected with the war. Further, under the 1941 amendments to this Act provision 18 made for the 214 -2appointment of liabilities adjustment officers, and the settlement of creditors' claims in the light of debtors' ability to meet their obligations under circumstances arising from the war. 3. Relief for reduced earned income: Special hardship of stiff increases in the rate of tax where income has dropped sharply. In the case of individ- provision has been made since 1939 to mitigate the uals whose earned income, through circumstances con- nected with the war, is reduced from the previous year's level by as much as 20 percent, it has been provided since 1939 that in effect the later year's earned income might be substituted for the statutory previous year's earned income as the basis of tax assessment. 4. Tax evasion and avoidance: Legal avoidance of tax by people who have found loopholes has been a continuing problem dealt with year after year. Considerable evasion and avoidance have occurred, but it is hoped that loopholes have now been effectually closed. Should individuals find new ones, they have been warned that "the Chancellor of the Exchequer considers himself free to take action retrospectively. With respect to fraud, the Finance Bill of 1942 contains some new clauses designed to strengthen the hands of the revenue authorities; such as extension in such cases of the time limit on assessments or penalties, admissibility in evidence of disclosures voluntarily made by the taxpayer in hope of a pecuniary settlement, and the empowering of the Commis- sioners to require production of books and records. In effect the provisions would enable Inland Revenue to proceed against a taxpayer and throw the burden of proof upon him whenever there 18 even the appear- ance of an intent to defraud and even if the parti- cular device used is of itself within the letter of the law. The Chancellor of the Exchequer expressly stated, however, that these clauses are not due to any increase 215 3- in the number of cases involving fraud, there being no evidence of such increase, but that they result instead from an adverse court decision indicating that the powers of the Inland Revenue in dealing with fraud are weaker than had been thought. 5. Incentive to work: The fact that high tax rates in the upper income groups have not seriously reduced the incentive to work is ascribable probably to the counteracting incentives resulting from the war. Social pressure towards taking an active part in the war effort, such tax-free remuneration as liberal expense accounts or other perquisites and special privileges, greater social prestige and per- haps more command over consumption goods and services than would otherwise be enjoyed have been sufficient inducement in most cases, though not in all, for continuance of the wealthy in productive occupations. 216 May 21, 1942 MEMORANDUM FOR THE SECRETARY The attached memorandes sumerises a report m mitted by Ambassador Winent, at our request, on the of- feets of the high individual income tax rates is Great Britain. The British income tax reaches a maximum rate of 97th percent on that part of individual incomes in 02eess of $80,000. An individual has to receive about $500,000 in order to have $25,000 left after taxes; an additional $100,000 before taxes adds only $2,500 to his income remaining after tax. There is no evidence that the high income groups are maintaining pre-mar expenditure levels by liquidating assets. Living standards appear to have been reduced sharply. Only part of this is due to tax policy. Ra- tioning and shortages of goods, services, and particularly domestics have been a contributing factor. The high taxes have not seriously affected the incentive in the upper income groups to continue in gainful occupation. Social pressure towards taking an active part in the war and special privileges attaching to war occupations tend to keep those in the upper income groups at work. Some relief has been provided taxpayers with con- tractual obligations by requiring that persons with claims against others obtain the leave of the courts before instituting procedure against their debtors. Some tax relief has been provided those with suddenly reduced incomes. There is no evidence that the high taxes have stimulated new tax evasion and tax avoidance devices. Attachment ERited 5/21/42 217 MEMORANDUM FOR THE SECRETARY Effects of high individual income tax rates in Great BRAND The extremely severe taxation of individual incomes in Great Britain has entailed sharply reduced living standards, special provisions for relief of taxpayers with contractual obligations or with suddenly reduced inconce, and additional provisions against evasion and fraud. Apparently it has not seriously reduced the incentive in the upper income groups to continue in gainful occupation, because of other incentives present under war conditions. 1. Living standards: There has been a tre- mendous decrease in the scale of living of the upper income classes during the war, not all of it due to tax policy. Other fasters have been rationing or shortages of goods, restriction of travel and entertainment facilities, and in particular shortage of domestic service owing to absorption in the war effort. Liquidation of assets in order to maintain former living standards has not occurred on an inportant scale, though liquidation has occurred be- cause of inability to operate large estates, the conversion of property to new uses, the requisitioning of property by the Government, and altered patterns of living generally. 2. Contractual obligations: Special relief has been provided for Individual burdened with contractual obligations, including debts. Under the Courts (Emergency Powers) Act of 1939 persons with rights against others must obtain leave of the Court to proceed against then for nonpayment of money OF nonperfersance of obligations attributable directly or indirectly to circumstaness conneeted with the war. Further, under the 1941 amendments to this Act provision is made for the 218 appointment of liabilities adjustment officers, and the settlement of creditors' claims in the light of debtors' ability to meet their obligations under circumstances arising from the war. 3. Relief for reduced earned incomes Special hardship of stiff increases in the rate of tax where income has dropped sharply. In the ease of individ- provision has been made Since 1939 to Miligate the uals whose earned income, through circumstances con- neeted with the war, is reduced from the previous year's level by as much as 20 percent, 18 has been provided since 1939 that in effect the later year's earned income might be substituted for the statutory previous year's earned income as the basis of tax assessment. 4. Tax evasion and avoidances Legal avoidance of tax by people who have found leepholes has been a continuing problem dealt with year after year. Considerable evasion and avoidance have occurred, but it is hoped that leepholes have now been effectually closed. Should individuals find new ones, they have been warned that "the Chanceller of the Exchequer considers himself free to take action retrospectively. with respect to fraud, the Finance Bill of 1942 contains some new clauses designed to strengthen the hands of the revenue authorities; such as extension in such eases of the time limit on assessments or penalties, admissibility in evidence of disclosures voluntarily made by the taxpayer in hope of a poonniary settlement, and the empowering of the Conniesioners to require production of books and records. In effect the provisions would enable Inland Revenue to proceed against a taxpayer and throw the burden of proof upon him whenever there is even the appear- ance of an intent to defreed and even If the parti- cular device used is of itself within the letter of the law. The Chanceller of the Exchequer expressly stated, however, that these clauses are not due to any increase 219 -3is the number of cases involving fraud, there being no evidence of such increase, but that they result instead from an adverse court decision indicating that the powers of the Inland Revenue in dealing with fraud are weaker than had been thought. 5. Incentive to works The fast that high tax rates is the upper income groups have not seriously reduced the incentive to work is ascribable probably to the counteracting incentives resulting from the war. Social pressure towards taking an active part in the war effort, such tax-free resumeration as liberal expense accounts OF other perquisites and special privileges, greater social prestige and per- hape more consand over consumption goods and services than would otherwise be enjoyed have been sufficient inducement in most cases, though not in all, for continuance of the wealthy in productive occupations. ESC: jaw 5/20/42 220 May 21, 1942. MEMORANDUM FOR THE FILES Mr. Hamilton, State Department, telephoned Mr. White on May 21 at 9:45 A.M. to say that Sir Frederick Phillips and the British Foreign Office men in charge of the Far Eastern Division were going to call on him to get his views on their contemplated loan which he said involved cessation of the credit concomitantly with the cessation of war. Mr. White told Mr. Hamilton that Sir Frederick Phillips had left a similar question here. but the Secretary had not yet answered it. Hamilton said he planned to tell the British that the terms of financial aid in the loan had already been made and there was therefore no possibility of modifying them. He went on to say he did think the basis of the financial aid was war but he said he would tell the British that he did want to discuss the matter with the Treasury. He said that he would then speak to the British of the growing Chinese animosity to the British in the Far East which partly reflected itself on their attitude toward us as well. He said he would urge that they should hesitate long before doing anything that might further antagonize the Chinese in the light of the delicate situation in the Far East. Mr. White commented that he thought the British Foreign Office knew of the status in China and it seemed to him that the terms the British incorporated in the agreement was a matter between the British and Chinese Governments. Mr. White added, however, the matter had not been discussed with the Secretary and he did not know how the Secretary would feel about it. Mr. White told Mr. Hamilton he would appreciate knowing what he told the British and he would let Mr. Hamilton know what the Secretary said to Phillips about the matter. H. D. White 221 OF STATE SECRETARY DEPARTMENT OF STATE WASHINGTON May 21, 1942 reply refer to The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits herewith for his information a copy of an Aide Memoire from the British Embassy at Washington, dated May 20, 1942, concerning the proposed agreement between the governments of the United Kingdom and Iran concerning the acquisition of rials against sterling. Enclosure: Copy of Aide Memoire, from British Embassy, May 20, 1942. OP DEFENSE BUY STATES STATE BONDS s 222 AIDE MEMOIRE Agreement has now been reached with the Iranian Government on the following lines: The Iranian Government undertake to supply us with all the rials we need against sales of sterling. All such transactions will be at the controlled rates, which will be buying rate 128 rials - L1; selling rate 130 rials - L1. We have undertaken to do our utmost as regards providing Iran with supplies from the sterling area. As regards the sterling balance in the hands of the Iranian Government we have undertaken: (1) to guarantee this balance against depreciation in terms of gold; (11) to convert the sterling into gold so far as may be needed to pay for essential supplies from North America, which are available, can be shipped, are not covered byylend-lease, and cannot be paid for out of dollars otherwise available to the Iranian Government from any other source; and (111) to convert 40% of the unspent sterling balance into gold at the end of each half year. The Agreement has not yet been signed, but signature is expected as soon as certain points of detail have been settled. In the meantime the Iranian Government have authorized banks to resume dealings in sterling at the rate quoted above. BRITISH EMBASSY WASHINGTON, D.C. MAY 20th, 1942. M 223 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE May 21, 1942 TO Secretary Morgenthau FROM Mr. Kamarck Subject: Shipment of Planes and Tanks to the U.S.S.R. 2 Summary 1. In the first third of April, 57 planes and 53 tanks were shipped to the-Russians. 2. According to this report, 20 twin- engined pursuit planes were shipped. These must be, of course, Lockheed P-38 or "Lightning" fighters. This movement represents the first time these fighters were turned over to any of the United Nations in any sizeable number. 224 Table A Shipment of Planes and Tanks from the United States to the U.S.S.R.* Shipments Cumulative total May 1-10 January 1, 1942 to May 10, 1942 during Planes Pursuit - single-engine - twin-engine Total Pursuit Bombers 32 399 20 20 419 348 52 5 Total Planes 767 57 Tanks Light 17 Medium 36 Total * Based on export declarations received. 655 570 53 1,225 225 Table B Shipment of Planes and Tanks to U.S.S.R. by months * Total Fighters Bombers Planes Light Total Tanks Medium Tanks Tanks 56 4 60 20 22 42 123 115 238 172 38 210 March 68 170 238 159 258 417 April 120 54 174 287 216 503 52 5 57 17 36 53 419 348 767 655 570 1,225 January, 1942 February May 1 10 Total 1942 to May 10 Based on export declarations received. # 226 FEDERAL RESERVE BANK OF NEW YORK C 0 Fiscal Agent of the United States P Y May 21, 1942. Sir: Attention: Mr. Frank Dietrich Reference is made to the Treasury Department's telegram dated May 8, 1942, authorizing and instructing the Federal Reserve Bank of New York, as fiscal agent of the United States, in accordance with instructions received by the Treasury from the Soviet Ambassador, to make arrangements with the Bank of Canada to transship 99 cases of gold, arriving in Argentia, Nowfoundland about May 9, 1942, from Argentia to New York and deposit the gold in the United States Assay Office at New York, In accordance with the above-mentioned telegram, arrangements were made with the Bank of Canada whereby the gold was transshipped from Canada via Railway Express Agency, Incorporated, and delivered to the United States Assay Office at New York on May 9. 1942. At that time the gold was deposited by us, as fiscal agent of the United States, in the Assay Office for account of the Secretary of the Treasury of the United States by order of the Government of the Union of Soviet Socialist Republics. We are pleased to inform you that we received a United States Assay Office check today in the amount of $6,711,359.10 drawn to the order of the Federal Reserve Bank of New York for credit to the Secretary of the Treasury - Special Account in payment for the gold and that pursuant to our telephone conversation of today, we have credited the Secretary of the Treasury - Special Account on our books $6,711,359.10 and have made appropriate entries in the transcript of the Secretary of the Treasury - Special Account to reflect the 1/4 of one per cent charge of $16,778.88 as a handling charge on gold. In connection with the transshipment of this gold from Canada to New York shipping expenses amounting to $16,783.69 were incurred and have been paid to the Railway Express Agency, Incorporated. This amount was charged to the account of the State Bank of the U.S.S.R., upon instructions received in their cable No. 27, on May 14, 1942. Enclosed for your files, is a copy of the letter sent by us to the United States Assay Office at New York together with copies of the receipted bill for shipping expenses and the cables exchanged with the State Bank of the U.S.S.R. regarding the above shipment. Respectfully, H. L. Sanford, H. L. Sanford, The Honorable, The Secretary of the Treasury, Washington, D. C. Encs. Copy:ine 5/22/42 Manager, Foreign Department. 227 C 0 P Y AS FISCAL AGENT OF THE UNITED STATES May 9. 1942. The Superintendent, United States Assay Office at New York, New York, New York, Dear Sirs: Pursuant to instructions received from the United States Treasury Department, we, as fiscal agent of the United States, are today delivering to you the following gold for account of the Secretary of the Treasury of the United States by order of the Government of the Union of Soviet Socialist Republica: No. of Cases 99 No. of Said to Contain Value at $35 Bars fine ounces per fine ounce 495 191,789.428 $6,712,629.98 We understand that the Treasury Department will furnish you with instructions regarding the disposition of the above-mentioned gold. Very truly yours, H. L. Sanford, Manager, Foreign Department. Copy:ine 5/22/42 228 (876) (2-40) STATEMENT 0 0 P May 12th. 1942. Y The Federal Reserve Bank of New York, Attn: Mr.Foreign Lang Dept. 33 Liberty Street, New York. yment of bills required within ven (7) days after date rendered, any charges are subject to adjust- at, return the items deducting them on total bill and remit the balance. To RAILWAY EXPRESS AGENCY Incorporated 65 Broadway, (Street and Number) New York N.Y. (City) livery Sheet Receipt No. n Date 5/6/42 Article 99 brs Charges Gold Bullion Fr: Bank of Canada, Halifax N.S. Value $6,712,629.98 (U.S.) . $2.50 Manifest at Halifax Manifest at Montreal Entry Fee at Montreal $16,781.58 .50 .11 1.50 $16,783.69 GEIVED PAYMENT eck $16,783.69 ILWAY EXPRESS AGENCY (Sgd.) M. G. Votee K. 14/42 pylime 22/42 229 0 0 P OUTBOING CABLEGRAM May 12, 1942 State Bank of the U.S.S.R. Moscow No. 23 Refer our No. 20 your No. 22 Express charges of $16,783.69 incurred by us on further shipment delivered to United States Treasury May 9. Please cable. FEDERAL RESERVE BANK OF NEW YORK Copytime 5/22/42 230 C 0 P INCOMING CABLEGRAM Y May 14, 1942 Moscow, May 13. 1942 Federal Reserve Bank of New York New York No. 27 Your number 23 Charge our account and pay yourselves $16,783.69 State Bank of the U.S.S.R. Copy:in 5/22/42 231 C P Y DEPARTMENT OF STATE WASHINGTON May 21, 1942 In reply refer to FF 840.51 Frozen Credits/6415 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits herewith for his information paraphrased copies of telegram no. 81 of May 18, 1942 which has been received from Lourenco Marques, Mozambique, Portuguese East Africa, concerning the funds received by the German and Italian Consuls. Enclosure: From Lourenco Marques, no. 81, May 18, 1942. 232 PARAPHRASE OF TELEGRAM RECEIVED FROM: AMERICAN CONSUL, Lorenco Marques, Africa DATED: May 18, 1942, 5 p.m. NUMBER: 81 In the first three months of this year the local German Consul received from the Reichs Kredit, Berlin 2,832,270 escudos. The source of this information, an employee of the Banco Nacional Ultra Marino, also indicated that during the same period the local Italian Consul received 1,207,607 escudos through the Bank of Portugal, Lisbon. PRESTON Copy bj:5-22-42 233 my m. 1940 Mr. Livera in Metrich will you please seas the attached setegran to m Mercian Segation, "You Boftish free white / TELEGRAN Mr. E. J. Reflich American Tobassy I Tel Ostam Make inquiry of Canada authorities why exports of silver from Ganada to the Waited States are declining. Inquire also as to the prospects of silver exports from Ganala to the United States during the remainder of this year. L. White 5/21/43 234 C 235 0 P Y TELEGRAM SENT MJF May 21, 1942 This telegram must be paraphrased before being 6 p.m. communicated to anyone other than a Governmental agency. (BR) AMLEGATION OTTAWA, (CANADA) 88 FOR HOFLICH FROM WHITE, TREASURY. Make inquiry of Canadian authorities why exports of silver from Canada to the United States are declining. Inquire also as to the prospects of silver exports from Canada to the United States during the remainder of this year. HULL (FL) FD:FL:MLB Copy:bj:6-1-42 236 CORRECTED COPY Suva BR This telegram must be being paraphrased beforeanyone to communicated other than a Governmental agency. (BR) Dated May 21, 1942 Rec'd 1:05 p.m. Secretary of State, Washington. 25, May 21, 5 p.m. My 24, May 8, 1 p.m. Please inform Treasury "Fiji Treasurer today informed this office and the Bank of NEW South Wales and the Bank of NEW Zealand that after consideration and in order to follow uniform procedure throughout sterling area he had decided not to adopt Treasury's scheme for disposal of United States paper currency described in Department's twenty April 27, 5 p.m. but to adhere to procedure outlined in Bank of England's notice F. E. 182' relative to this matter. Despatch will be forwarded by air mail giving particulars of local Exchange rates fixed on the basis of dollars 4.03-1/2 per pound net." ABBOTT WWC C 237 0 P Y DEPARTMENT OF STATE WASHINGTON May 21, 1942 In reply refer to FF 840.51 Frozen Credits/6419 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits herewith for appropriate consideration copies of telegram no. 110 of May 19, 1942 from the American Consul at Zurich, Switzerland, concerning certain persons purported to be receiving funds from the United States while their sympathies and sometimes their activities are directly or indirectly aiding the Axis powers. The Secretary of State would appreciate being advised of the reply to be made to the telegram under reference. Enclosure: From Zurich, no. 110, May 19, 1942. C 238 0 P Y NMC Zurich This telegram must be paraphrased before being Dated May 19, 1942 communicated to anyone other than a Governmental agency. (BR) Rec'd 2:35 p.m. Secretary of State, Washington. 110, May 19, 5 p.m. CONFIDENTIAL It is my opinion that certain aliens and even former Americans in this consular district are receiving funds from the United States while their sympathies and sometimes their activities are directly or indirectly aiding the Axis powers. If possible please cable whether the following persons are receiving funds from the United States with the approval of the Treasury Department or the Federal Reserve Board: Claire von Gontard holder of Liechtenstein passport, her sister Mrs. Wilhelmine Borchardt German passport and Lily Claire Berghaus German passport daughter of former and wife of prominent Nazi in Germany all formerly bearers of American passports believed in Munich. It would be very helpful if Department could pouch air mail monthly revised lista of residents of this consular district approved by Treasury Department showing remittances authorized in order that any adverse information obtained might be cabled to the Department and the possibility of the United States supplying funds to persons working with Axis might be avoided. ALTAFFER WWC Copy bj:5-23-42 239 COPY NO. 13 BRITISH MOST SECRET (U.S. SECRET) OPTEL No. 167 Information received up to 7 A.M., 21st May, 1942. 1. MILITARY RUSSIA. In KHARKOV Sector, Russian attacks and strong German counter attacks are continuing. On the south side of the Mussian salient, south of KHARKOV, the Germans have advanced into the ISYUM area. 2. AIR OPERATIONS WESTERN FRONT. Our aircraft engaged 19th/20th included 30 R.C.A.F., 12 R.A.A.F. and 9 New Zealand aircraft. 74 tons of high explosives and 213 tons of incendiaries were dropped at MANNHEIM. Many large fires were reported in the city and dock area. The enemy attack on HULL was on a larger scale than at first reported, about 50 aircraft crossing our coast, causing casualties which are now reported as 35 killed, 68 seriously injured. 20th. 5 enemy fighter-bombers flew inland, 1 being destroyed by a motor launch and another by anti-aircraft gunfire. MEDITERRANEAN. A Wellington obtained hits against a ship escorted by 3 destroyers off TRIPOLI (L). Later 3 Albacores estimated hits with torpedoes on this ship and one of the destroyers. 240 COPY NO. 13 BRITISH MOST SECRET (U.S. SECRET) OPTEL No. 173 Following to 21st is supplementary rosumo of operational events covering the period 14th May. 1. NAVAL North Russian Convoys. The enomy has about 20 submarines in Northern NORWAY and sufficient aircraft to send a force of 35 dive bombers and bombers against e convoy on 14th followed by 25 aircraft against another torpedo 15th. SCHEER is believed to be in NARVIK area and LUTZOW joined TIRPITZ and HIPPER on TRONDHEIM on 20th. The long period of daylight and the range of energy aircraft at expose our convoys to attack for several days on passage north of NORWAY. As ice belt moves northward conditions should improve. ARCHANGEL and neighbouring the ports should be free about the end of the month. Those ports have been developed during better served by railway than MURMANSK. They are also further the fromwinter enemyand air are bases. Home Waters. The R.A.F. minolaying offensive alrondy shows encouraging results in enemy losses, dislocation of traffic and increased nine-swoeping efforts. Submarines. There were eight attacks on enemy submarines by surface craft and nine by aircraft during the period. Of the latter, three were promising, in MEDITERRANEAN, BISCAY and U.S. Areas respectively. During the week ending 17th 109,000 gross tons of shipping were lost, mainly in Western Atlantic. Imports into U.K. in convoy during the week totalled 593,000 tons including 136,000 tons of oil. Far East. Japanese main naval concentration is now in home waters and to the eastward. There are no indications of immediate offensive intentions in Southwest Pacific or Indian Ocean. Japanese submarines have appeared off QUEENSLAND and NEW SOUTH WALES and one ship was attacked off NEWCASTLE. Indian Ocean. 309 sorties from two aircraft carriers wore flown during the DIEGO SUAREZ operations. Our casualties wore nine aircraft, of which four were by enomy action. Malta. A Greek submarine has successfully completed the passage ALEXANDRIA - MALTA and return with stores. repairable. Red Sen. The large floating dock at MASSAWA has been raised and is French Shipping. During March and April, 37 ships are known to have smiled from FRANCE to NORTH AFRICA with part cargoos of war material, especially motor transportation delivories continued during May. 2. MILITARY A German offonsivo in RUSSIA on a large scale still sooms probable in June, although its opening date may have been slightly put off by the Baspian attacks noar KHARKOV. It seems probable that it may be accompanied by Gorman conbinad operations against the eastern shores of the SEA OF AZOV from SARIUPOL area. A move by GERMANY against TURKEY, CYPRUS or SYRIA this summer sooms unlikely, though an assault on MALTA is still possible. In LIBYA. An offensive by Hommol is likely, but even if successful it could not be extended towards the Delta till towards Autumn. It is improbable that the Japanese will attempt a land advance from BURMA into INDIA for two months ct any rate. They are unlikely, apart from the possible occupation of YUNNAN to advance further into CHINA at present. Japanese plans for extending operations in the SOLOMON ISLANDS area seen to be in aboyance. In considering the above opere- tions, it is worth that the Germay in spite of heavy casualties, a certain reduction in and morale as compared with a year ago, only inferior in and now has 25 armoured as and groups slightly observing strength divisionsunits LIBYAinwhose against morale is *(33 is corrupt)* as in the casequality of itsarmy, armoured good, is of low fighting value. The efficiency and morale of the Japenese army is as high as ever. It is also increasing in size, although its expension is likely to ba dependent upon the equipment available. The morale of the Russian to army is high, but lack of information prevents any accurate forecast of its ability defent the Germans. 241 23. AIR OPERATIONS WESTERN FRONT. Adverse weather curtailed our Fighter and Bomber operntions by day and restricted our night bombing to one heavy attack on MANNHEIM. Nevortheless, a large amount of son mining was done and 306 mines were laid, 11 aircraft being lost in the process. In addition to the successful attack on two convoys off the Dutch coast already reported, other enemy ships and small craft were damaged by aircraft of Coastal Commend and by Spitfiros and Hurricane bombers. MALTA. The number of enemy bombers used was much roduced but they were accompanied by some bomb-carrying fighters and large fighter oscorts reaching an average of 80 fighter sorties per day. Our Spitfires, recently greatly increased in numbers, inflicted many casunlties with the result that our aircraft losses on the ground have almost censed, wherens the enemy casualty rate in proportion to aircraft employed has mounted considerably. 4. EXTRACTS FROM PHOTOGRAPHIC AND INTELLIGENCE REPORTS ON RESULTS OF AIR ATTACKS ON ENEMY TERRITORY IN EUROPE KIEL. Photographs on eighth cover an area not previously taken and reveal much additional damage mainly by fire. 5. OPERATIONS AIRCRAFT BATTLE CASUALTIES METROPOLITAN AREA British in the Air Bombers 25 Fighters 17 19 Constal Total Three pilots safe. Probably destroyed ENEMY Destroyed 61 Damaged 4 Bombers 3 3 10 14 - Fighters Miscellane- 19 1 ous 23 Total 13 18 MIDDLE EAST (including MALTA) British On the Ground In the Air Bombors 3 Fightors 14 Others 1 Total 18 Four pilots and one crew are safe. Enemy Destroyed Probably destroyed Danaged 8 1 Bombors 14 Fighters 24 Total 25 12 33 13 38 Includes one destroyed and six damaged by A.A. NOTE: No account is taken of enemy aircraft destroyed on the ground in any theatre or of British Naval sircraft casualties. 6. HOME SECURITY Estimated civilian casualties for week ending six A.M., 20th. Killed 42 seriously wounded 72, including 35 killed at HULL. 242 SECRET NUMBER 32 COORDINATOR OF INFORMATION THE WAR THIS WEEK May 14-21,1942 SECURITY Printed for the Board of Analysts Copy No. 6 The lectulary of the Jermy SECRET MAY 14-21, 1942 Coordinator of Information THE WAR THIS WEEK In Burma-as in Malaya-the Japanese have loosed an offensive of unexpected power. They have rapidly driven the British to the borders of India, where the threat would be even more serious but for the imminence of the monsoon. They have moved northward to occupy Fort Hertz and close the last of the alternative land supply routes to China. Finally, they have invaded the western reaches of Chinese Yunnan, and cautious military observers are speculating on the possibilities of a widening Japanese offensive in this area, perhaps even coordinated with a renewed drive in Central China and aiming at final liquidation of the "China incident." In the west the situation-both political and military-is in & state of flux. The occupation of Crimean Kerch gives the Germans a position of some strategic importance if they plan a subsequent drive on the Caucasus. But farther north in the Kharkov sector, neither Russian nor German claims give any precise clues as to the nature and timing of the anticipated Nazi offensive. At Vichy Laval is treading a cautious course, and his failure to espouse a more openly collaborationist policy is now said to be irritating his German masters. And in the Mediterranean outward evidence continues to suggest a lightening of Axis pressure, but an area where air power is of such primary importance is also one where the element of surprise must enter all calculations. 1 SECRET SECRET Burmese Offensive. With the conquest of Burma substantially complete, the Japanese have already invaded China on the east and have thrust toward India on the west. Although these drives have been momentarily halted by the barriers of the Salween River and the Arakan Mountains, military observers point out that the Japanese air and troop concentrations in Burma are larger than required for the mere consolidation of gains already made. Hence they anticipate further moves in the direction of China or possibly of India. The Chinese appear to have recuperated from the first shock of the rapid Japanese advance up the Burma road They have thrown back the invaders from the west bank of the Salween and have stifled the immediate threat to the strategic air center at Paoshan. In the face of this check, Japanese columns have branched out both to the north and south, with the apparent intention of preparing other cross- ings at Teng-yueh and Kunlung (see map). They have already occupied Teng-yueh, through which the only other road in this area leads across the Salween, to join the Burms road at Paoshan. At Kunlung, where a projected railroad foreshadow a Japanese attack up the Mekong River valley designed to flank the Salween River defenses. Japanese Intentions In the past Chinese leaders at Chungking-including Chiang Kai-shek-and certain Chinese in Washington have tended to discount the possibility of a major offensive against Free China from Burma. News dispatches, however, now quote a Chungking government spokesman as warning the United States that Japan is on the verge of an "all-out" offensive against China and that the latter needs help with the utmost urgency. The Chungking radio also reflects the belief that China will be next on the Japanese list, according to both FCC analysts and BBC broadcasters. American observers in China have not been unimpressed with the pos- sibilities of attack from Burma, and in fact have advised all Americans to leave the Tali area. At Kunming, Chinese army headquarters have issued a proclamation suggesting that civilians leave and citing the precedent at Paoshan, recently raided by a small Japanese force. from Burma to Kunming was to bridge the Salween, the terrain also might facilitate a crossing. The most considerable Japanese concentrations are believed to be in this vicinity, but farther south, near Kengtung, the Chinese have reported heavy fighting. Estimates of Japanese strength in this region have ranged from 10,000 to 30,000 troops, with one report that both heavy tanks and artillery were being brought into action, but with actual developments still remaining somewhat obscure. This action may have been precipitated by Chinese efforts to regain contact with troops by-passed by the Japanese in their mechanized thrust up the Burma road. It may also Test for War Lords and Appeasers Whatever their military intentions, the Japanese will doubtless attempt to capitalize to the utmost the crisis which has been created for the Chinese. Thus the threat of imminent danger, following close on the heels of failure in Burma, will not only furnish Chinese appeasers with new arguments but may place a severe strain on Chiang Kai-shek's rather tenuous arrangements with local war lords. After the fall of Hankow and Chiang's retreat to the western provinces, the central government established a modus vivendi with the former war lords, largely without resort to 3 2 SECRET SECRET actual military showdowns. By judicious concentration his forces and much compromise, Chiang has obtain substantial administrative authority over their areas while leaving them considerable local power-political economic, and military. In Yunnan (where there have been strong concentrations of Central Government troops) the testing period s opened auspiciously. Governor Lung Yun has announced that the Japanese would be met with "several hundred thousand troops." News dispatches have even reported him dramat. ically rallying a weary Chinese formation to counterattack after their own general had committed suicide, following an unsuccessful attempt to stem the Japanese at the Salween The pressure, however, is not yet serious, and there are other regions-notably Sikang and the Chengtu plain-where local war lords still have considerable military power. There are no signs as yet of a strongly organized peace faction in China, according to reliable observers, although Tokyo is making claims to the contrary. But in the complex mosaic of the Kuomintang there are several cliques which have been long and widely suspected of leaning toward an arrangement with Japan. Every military reverse, moreover, adds to the strength and boldness of Chungking appeasers, whose numbers have been augmented recently by wealthy refugees from Hongkong, Singapore, and the Netherlands East Indies, who are now cut off from their property. different from that in Malaya or the valley of the Irrawaddy. Here there are no jungles through which to infiltrate, and the country is so broken by precipitous mountains that mechanized equipment will be largely restricted to the few existing roads. Although the Japanese have already driven to the very edge of the Salween, they are now only at the beginning of the difficult terrain (see map). At the Burma Road crossing, there is a drop of 4,500 feet from the top of the mountain pass to the bank of the Salween. With the bridge destroyed, tanks and trucks must find a means to cross a river which is only 150 yards wide but which is swift and deep. Once across, they must again use the road, the only possible means of travel, even for tanks, in the Salween gorge. Off the road, fighting must be done on foot or in the air, and this is true of much of the country through which the Burma Road passes. The latter will be the key to any fighting in Yunnan. Strong air support which could harass the opponent's move- ments along this road-and destroy his artillery emplacements-might thus be decisive, either for the Japanese or the Chinese. Invasion Routes from Southern Yunnan If the Japanese should elect to drive on Kunming, they would probably coordinate an attack along the Burma Road with flanking movements through southern Yunnan, tactics suggested by the current fighting in the Kengtung area. Terrain in Yunnan If the Japanese launch an offensive in southwest China, they will face both lengthening supply lines and a difficult terrain Hitherto they have succeeded not only in overcoming obstacles offered by terrain, but they have actually turned them to advantage. In Yunnan, however, they face a situation Farther to the east, there are at least four other possible invasion routes-from Indochina. From Laokay, whose importance was emphasized this week by an AVG bombing, the Yunnan-Indochina Railway might be followed. The chief difficulty offered by this route is the precipitous nature of the mountains through which the railway passes, and the 5 4 SECRET SECRET fact that there are no roads until Kaiyuan is reached them of access to a valuable base of operations against Japan. distance of 124 miles. Moreover, the Chinese have long since blown up the bridges, and are also reported torn up the tracks. Some observers believe, however, that Free China's own continuance in the war depends more upon the effect of the A second and easier route leads from Indochinese Hanoi by highway to Ha Giang, thence by trail to Wenshan, and finally by motor highway to Kunming (see map). Two further routes lead from Lai Chau by trail-one to Kaiyuan and the motor highway there, another through broad valleys to Oshan and by highway to Kunming. Japanese Interest in Central China Military observers are closely watching Japanese move ments in other parts of China. In Chekiang Province reports indicate that Japanese troops are seeking out air bases poten- tially useful in bombing Japan. More important still, $ fresh drive on Changsha in Hunan Province appears to be developing. Chinese leaders themselves view the Japanese campaign in Hupeh Province as the greatest current danger to Free China. The Japanese have long held Ichang in this province, but between Ichang and Chungking lie the gorges of the Yangtze, serious handicaps to military operations. An alternative route to Chungking extends along the Han River valley to Nan-cheng, thence through a break in the Tapa range, where the Kialing River valley stretches down to Chungking and the Chengtu plain. The Chinese recently Japanese offensive upon her morale, since no particular area is of sufficient strategic importance to her to make its loss a decisive factor. Aid to China by Air The conquest of Burma has cut the land routes from India and left the air as the sole avenue of supply. But transport planes, flying from Assam to Yunnan, face the handicap of long hops and heavy gasoline loads (which must in general be sufficient for the round trip). In northeastern Assam the best airport for transport planes is Sadiya (see map). Before the Japanese captured Mandalay, plans had been made for flying supplies from Sadiya to Myitkyina, a distance of only 200 miles. With Myitkyina in Japanese hands, freight must be flown from Sadiya to Yunnanyi (about 375 miles) or from Sadiya to Sichang (about 400 miles). There is as yet little indication that the Japanese will now attempt such a grand-scale pincers movement on Chungking as might here be implied. Such an offensive, if successful, Air experts still maintain that by using about 50 Douglas C47 or Curtiss C53 transports, supplies can be forwarded to Yunnanyi or Sichang at the rate of 4,000 to 6,000 tons per month. But it would be essential for this purpose to maintain sufficient air strength (including anti-aircraft defenses) in northeast India to prevent the Japanese from knocking out Sadiya, and in China to protect the Chinese air terminals. Sadiya is of critical importance in this scheme, because if it were lost transport planes would be obliged to use the airport at Tezpur, almost 200 miles west-southwest of Sadiya, making the trip from Tezpur to Sichang, for example, nearly 600 miles. Two-motored transports, such as the C47 and the would be a serious blow to the United Nations, depriving C53, cannot make this trip with a pay load of any size. If reported they had stopped a Japanese drive up the Han River valley, although comparatively small forces appear to have been involved. 7 6 SECRET SECRET Tezpur is to be used, four-motored transports would be quired. Meanwhile, if the Japanese should push on by or land into eastern Bengal and Assam, they would effec. tively upset all these plans. Air Raids for India With the British falling back from Burma to the northwest, the Japanese find themselves in a position to threaten India as well as China. Air attacks alone might deal a serious blow to the Calcutta area, containing about four-fifths of India's war industry. Here native morale is low, and some reliable observers expect the workers to take to the hills at the first bombing. Actual invasion of Assam is another matter. With the summer monsoons imminent, this area is subject to the full force of the rain-laden winds from the Indian Ocean. The advantages of this season are by no means all with the defenders. The Japanese now hold the Mandalay basin in Burma, sheltered from the monsoon by the Arakan Mountains, comparatively dry and available for bombers all during this season. The Japanese also have an all-weather field at Akyab on the Burmese coast, some 300 miles by air from Calcutta. On the other hand, the defenders themselves have several all-weather fields at Calcutta, but no such fields elsewhere in this part of India. British press dispatches meanwhile report that General Alexander, while discounting the possibility of a Japanese invasion during the monsoon season, is preparing for this The Battle of the Coral Sea in Retrospect Further reports now make it possible to clarify certain elements in the Battle of the Coral Sea. Advance Japanese naval units came southward into the Coral Sea area, then diverged eastward, apparently to seize points in the Solomon Islands and thus secure their flank. An American naval force attacked these units in Tulagi Harbor, sinking seven naval vessels. Presently the main Japanese force entered the Coral Sea by the same route, presumably on its way to attack Port Moresby. An engagement followed on May 7 and 8 between this force and American naval units and naval aviation, near the Louisiade Islands. The Japanese losses were one aircraft carrier sunk and one damaged, and one cruiser sunk and one damaged. American losses have not yet been reported. During the Battle of the Coral Sea American Army Aircraft were not idle. Based on northeastern Australia, Army Aircraft made a series of heavy raids nearby on Lae and Rabaul, and on Buka, Woodlark and Deboyne Islands, between May 4 and 11. One mission returning from an attack was reported by the press to have stumbled on the battle and to have taken aerial photographs of the action. Another was dispatched on May 8 against a "Japanese convoy" (near the scene of the battle) which was not located. Still another was sent on May 9 to intercept a Japanese carrier, but darkness intervened. Although the air duel over Australasian bases continues unabated, major Japanese fleet units appear to have moved eventuality. Fresh troops of the Indian Army guard the frontier, across which the weary survivors of the Burms elsewhere. The lull which has followed the battle has led some observers to anticipate a naval attack in other areas, and the possibility of attack against United States bases is campaign are beginning to return. not ruled out. 9 8 SECRET SECRET Mop-up on the Kerch Peninsula Soviet resistance on the Kerch peninsula ering out. In the opinion of a well-placed military observer, remaining Russian forces are simply holding beachheads permit the withdrawal of the bulk of the army. Unless the Soviets reinforce this army from the mainland, it appears unlikely that it can prolong its resistance. Nor does a German attack across the straits toward the Russian naval base at Novorossiisk seem to be the next logical move. The crossing would be difficult and might expose the Nazis to a Soviet counterattack. Furthermore, with the fall of Kerch, the Germans would presumably be In the opinion of the Russian ambassador to Turkey, the Soviets launched the assault in an effort to disrupt the greatest German concentration of war equipment, including planes and tanks, on the entire Eastern Front. Berlin vigorously denies that it has relieved Nazi pressure in the Crimea or interfered with the German military program. But the ambassador is sure that even if the attack fails in its main purpose of capturing or destroying large quantities of German equipment, it will succeed in seriously disorganizing Nazi plans for a full-scale offensive. Such considerations may account for the apparent vigor of German counter-attacks in the Kharkov sector. in a better position to attack Novorossiisk from the air. Likewise an assault on Sevastopol at the other end of the Crimean peninsula would be an expensive operation at the present time. It seems far more likely that the Germans will continue to soften up Sevastopol by bombardment until such time as they can attack it with comparatively small losses. Attack on Kharkov As though to counterbalance the German success on the Kerch Peninsula, the Soviet radio and the Allied press have been playing up the Russian attack toward Kharkov. Despite the fanfare with which it has been launched, American military observers do not regard this drive as an all-out offensive. If it had been such, they point out, it would probably have taken the form of a large enveloping action rather than a head-on attack, and by now it would have achieved a more clear-cut success than press despatches yet reveal. A more likely hypothesis is that it is a local attack which has already brought the Soviet forces within striking distance of the city of Kharkov. 10 Laval Continues to Temporize Although Pierre Laval has now been head of the Vichy government for a little more than a month, he has taken no step of an overt character leading to full collaboration with Germany. As Minister of the Interior, he is purging the regime of known opponents, and appointing men of his own choice to key positions. Marshal Pétain, in turn, is reported to "look forward to working in his garden," relieved to be spared the burdens of office. Pétain is still a factor in the picture, however, for as supreme chief of the French armed forces overseas, his orders are obeyed by administrative officials and officers who might not stomach Laval alone. A current report describes what are believed to have been Laval's intentions respecting collaboration when he came to office. He is said to have been reconciled to German domination of the Continent, but to have revived his earlier idea of forming a Latin bloc to act as a sort of counterweight to the Nazis, He appears to have met checks here, however, in Italy's territorial demands and in Nazi hostility to his qualified collaboration. The Nazis have evidenced their 11 SECRET SECRET displeasure in the Giraud case and in the current executions in occupied France. They are said to be dissatisfied and to be giving encouragement to men like Doriot. Laval has been anxious to avoid any decisive step that might sever relations with the United States. He is taking advantage of the apathy of the French people to establish himself, and is carefully cushioning his position with regard to Franco-American affairs. Apparently with Nazi approval he has plastered Vichy with posters, which declare: wish to say again that a final rupture between our two countries will not come from France." Reactions in French Africa Diplomatic sources report that since Laval's return to power, gasoline and trucks are again reaching Rommel's armies via French North Africa. French officials in North Africa, however, have hinted their continuing friendliness to us and would like to see us renew our economic assistance to North Africa, thereby avoiding the threat of French de- Vichy is exploiting to the full the recent clash off Algiers involving French and British planes and light naval units, action which resulted in the loss of one plane by each side. an Vichy is presenting it as an example of wanton aggression: "Once again the French see what means our former allies are using." Negotiations in Martinique In Martinique Admiral Robert, after the issuance of a virtual ultimatum from the United States, has agreed to the immobilization of French warships. He has also agreed in general that the United States will exercise effective supervision of the islands with continued recognition of the French position of de jure sovereignty and possession. Meanwhile, Laval, obviously irritated by the attempt of the United States to negotiate directly with Admiral Robert, has attempted to suggest that such negotiations can only be carried on with Vichy, thus confusing the issue in the public mind. pendence on Germany. The German Armistice Commission is urging that French Azis Pause in the Mediterranean defenses of Morocco be improved. It is stated that the Germans are now shipping armaments to this area, with further shipments of synthetic gasoline to follow 8000. Malta contiaued to enjoy a relative respite as Lord Gort, former head of the B. E. F. in France, arrived from Gibraltar General Juin is ostensibly complying, but has expressed the opinion that he would rather see Moroccan defenses improved under American than under German direction. On the other hand, rumors suggest that certain high French officials have to succeed bomb-worn Sir William Dobbie in command of the island fortress. There were clear signs that German bomber strength in Sicily has been reduced for use elsewhere, but diplomatic sources believe that considerable parts of Kesselring's staff and air fleet are still in Sicily. been won over to Laval's policy, and that Boisson, the Governor-General of strategic Dakar and former political protégé of Laval, has declared himself as highly pleased with the changes in Vichy. Indications are that Axis forces in Cyrenaica will not launch any major offensive against Egypt this spring. They are, however, prepared for lesser operations, with supplies estimated to be sufficient for onemonth of active campaigning. 13 12 SECRET SECRET Their forces, including two armored and one motorized sions, are well-located and in good condition. Skirmishes is by enemy tanks this week, especially in the region southwest of Gazala, broke a quiet period on the desert front. A Report on the Near East Turkey continues in her determination to defend herself against any and all invaders, a seasoned observer reports, writing at the end of March from Istanbul. Her army is kept in the field and she wants all the arms she can get. Her great fear is that either Germany or Russia will win a clear. cut victory. To forestall the results of either eventuality the Turks expect to call in Allied help. Diplomatic sources report that the Soviets plan to develop the recent RussoTurkish détente once the bomb trial is over. The Turkish government, our observer writes, has the complete confidence of the people in political and military affairs, but in economic matters the situation is acute. Trade interruptions, budget strain, abrupt price rises, shortages, and governmental inefficiency in handling the situation have brought about a general uneasiness as to the economic future. In Syria the Free French, the majority of whom are apparently suspicious of British designs on Madagascar and Syria, are themselves generally regarded as the old imperial- ists operating with reduced efficiency. British and American prestige has also declined due to military defeat and association with the Zionist cause, an issue exploited by the Axis radio. In Egypt our observer found public opinion in a bad state, with the British, the Palace and its satellites, and the Wafd all hard at work interfering with one another in a snarl of old methods and lack of coordination. Drought Comes to Northeastern Brazil Northeastern Brazil is suffering one of its periodic droughts. This region of "elimatic calamities," which is triangular in shape, reaches the coast between São Luiz and Natal, and extends southwestward to an apex somewhere in western Baia. Throughout this area rainfall is uncertain; there are places where in one hundred years there have been fifty years of either flood or drought. In this region no rain has now fallen for more than a year. The vegetation is parched, and the sources of water rapidly disappearing. As usual, under these circumstances, the inhabitants are flocking into the coastal cities, and domestic and wild animals are being widely slaughtered. Coming at this time, the drought may have several consequences. The homeless and starving refugees will consti- tute a serious burden on the food supply and on coastal shipping. Civil disorders may be expected, including raids on the food stores in the cities, and a fertile field exists for enemy agents bent on spreading confusion and chaos. It is even possible that the airfields in this region may be in danger of attack, either by disorganized groups or by bands under Axis leadership. On the other hand, prompt action might avert disaster through the recruiting of laborers for work in the rubber forests of the Amazon-a repetition of the great migration into the Amazon under similar cir- cumstances which took place during the historic drought of 1877-1879. This would require coastwise shipping to carry the workers from places like Fortaleza in Ceara to the Amazon. The Dominican Republic "Elects" a President The Dominican Republic went through the formality of a presidential election on May 16 in which Generalissimo 14 15 SECRET SECRET date. Rafael L. Trujillo was the unopposed and successful A former president of the country from 1930 candi he will replace M. de. J. Troncoso de la Concha. to 1938, 1930 Trujillo has been the acknowledged dictator Since country, and on January 20 of this year he was of the by the president to the supreme command of the Army s appointed Navy.toPresent world conditions were used to justify his return the presidency. The election was the first in the history of the country in which women were allowed to vote. Dominican exiles Cuba and Venezuela carried on a vigorous pre-election in paign against Trujillo's dictatorship as inconsistent with cam- the democratic principles of the United Nations. They tested particularly against the decision of the University pro- of Pittsburgh to award Trujillo an honorary degree. Never. theless, the election was not accompanied by any reported disturbances. Although Trujillo's term was not scheduled to begin until demonstration fomented by the government. It is alleged that Trujillo gives lip service to the democracies in order to obtain United States support for his regime. Chile Moves Toward a Break with the Aris Chilean Government leaders are reconsidering the possibility of a break in diplomatic relations with the Axis powers, current indications suggest. The Socialist Party, headed by Oscar Schnake, has recently been adding its influence to that of the Communist Party in favoring such a move. While the United States has avoided any appearance of bringing pressure to bear on Chile for a break with the Axis, it has become apparent to Chile's leaders that no substantial economic aid will be forthcoming from us until this issue is squarely met. It may be partly for this reason that the proposed visit of a Chilean Commission to the United States to discuss Chile's critical economic needs has been delayed. August he took office immediately. President Troncose appointed him Secretary of State for War and Navy to sue- ceed his brother, Hector Trujillo, just resigned. Troncose then submitted his resignation to the National Assembly which unanimously accepted it. Then in accordance with the constitution, Trujillo automatically succeeded to the Presidency. Reliable evidence indicates that the Nazis are carrying on widespread activity in the Dominican Republic despite the fact that the government has declared war against the Axis. Since 1935 the Dominican government has maintained close relations with and the along Nazi lines. The no no party except is to exist. liberty, was diplomatic reorganized and Germany, Trujillo's permitted press Trujillo enjoys party Army officers are Nazi sympathizers. Nazi agents are either still at large or have been released as a result of "popular" 16 17 SECRET SECRET APPENDIX I THE PROBLEM OF RUBBER IN THE SOVIET UNION APPENDIX II THE JAPANESE POSITIONMETALS IN FUELS AND NON-FERROUS In the field of synthetic rubber the Russians probably led the world in 1941, both in experience and production, according to a current report Just by the East-European Section of the Coordinator's office. The Russian prepared of preparedness, designed to obtain a maximum degree of self-sufficiency policy strategic raw materials, had led to a rapid expansion of synthetic rubber is tion in the Soviet Union. Before the outbreak of the war in 1939, the Russian produce Lack of fuels and non-ferrous metals will not notably handicap the Japanese war effort, according to such estimates as can be made on the basis of available information. Nor do the Japanese lack facilities for mining strategic fuels and metals Of fourteen of these, Japan is not completely self-sustaining in any. But she can supply her deficits adequately for three-tin tungsten, and coal- rubber industry had accomplished an almost complete change-over from natural from functioning occupied territories. development of domestic sources of natural rubber. But the actual production the sufficient stocks with which to service her economy without restriction, until she can restore to former capacity sources in conquered areas which have been disorganized by recent military operations (the assumption here is that she will not For five othersmanganese, chromium, aluminum, oil, and lead-she has to synthetic rubber. In recent years it has also given much attention to of this type of rubber still remained small in June of last year. Even with this farsighted program, in 1940 Soviet domestic production of NY rubber, plus importe-the total estimated at somewhat more than 103,000 metzie tons a year-was probably inadequate to fill Russia's consumption requirementsestimated at 110,000-117,000 tons, Thus, if these estimates are correct, Russia in 1940 was drawing on previously accumulated stocks for & part of her current consumption. Nor is it likely that the war has eased the situation. For is be handicapped by difficulties of organization or by the renewal of war in these areas). In the case of lead, invisible stocks, such as pipe in buildings, are large and easily recoverable, so that Japan should suffer no shortage until the captured mines can be reorganized. For another metal, sine, stocks are insufficient unless the captured mines can start producing very soon. creased military demand in all likelihood has offset even the most severe restric tions on civilian consumption. It is estimated that synthetic rubber (made almost entirely from alcohol) so counted for a production of 82,000 metric tons in 1940. During the first few months of the war synthetic production probably declined to a rate of about 36,000-48,000 metric tons per year. There is some ground for thinking however, Mineral Period stocks will bridge Adequate sources Manganese 6 years Philippine Islanda, British Malaya, Chromite 4 years 2 years Philippine Islands. 2 years Netherlands Indies. 6 months Negligible Burms. Bauxite and Netherlands Indies combined. Netherlands Indies and British Malaya combined. that in recent months the output has increased Nevertheless unless both in ports and domestic production have recently increased very substantially, it , Oil almost certain that the Soviets face an acute shortage of raw rubber, a shortage Zine Lead Burma. which may, unless alleviated, necessitate a very substantial curtailment of the use of this commodity in essential military equipment One favorable factor in the situation is that the very large military establish- For the rest-copper, nickel, molybdenum, antimony, and mercury-sources ment economizes rubber by the extensive use of tires of steel and hard-rubber 00 now available to Japan will be insufficient after she exhausts her present stocks. artillery equipment, and by the widespread substitution of caterpillar-tractors for pneumatic-tired trucks as prime movers for artillery. Through the conquest of the Far Eastern area, however, Japan could fill her deficits in nickel and antimony and improve her position in the other three. Japan has productive copper mines and could increase their output adequately by the time stocks run low. Stocks of nickel, mercury, and molybdenum are sufficient for two years or more. But Japan has drawn heavily on her antimony stocks in the last two years and has endeavored, as yet without success, to gain control of the transport system in the Chinese province of Hunan (Changsha), which contains the principal Chinese antimony mines. 18 19 SECRET SECRET Proportion of Metal requirements covered by Stock Pile sources now Limit available Chief Countries (Percent) Nickel Antimony 50 2 yr 15 3 mo Mercury JAPAN'S PRESENT POSITION IN IMPORTANT FUELS AND NON-FERROUS METALS Unconquered Far-Hastern 21/6 yr Proportion Japanese Empire and Manchuria Production is 1940 New Caledonia China (Hunan) China (Kweichow) 5 Molybdenum 40 15 yr Australia Copper 55 16 mo Australia and India Do. Other Occupied areas Commodity Entire deficit Consump- Produc- tion tion Stocks Far- 1942) 20 percent 18 percent 10 percent World total Eastern (Jan. Organised Disor- coun- ganised tries In thousands of metric tons 120 25 20 90 60 Lead Zine 90 10 120 70 300 60 40 9 Tungsten ore (60% WO2) 80 2.5 2.5 5 1, 750 30 190 1, 815 136 21 338 800 75 866 5, 250 193 107 1, 210 3.6 (1) 245 4, 627 16 130 32 10 In metric tons Antimony 600 20 Mercury 2, 500 1, 000 1, 400 126 390 0 4,000 150 7. 372 21, 220 34, 000 117 6, 000 55 0 125 0 300 Molybdenum 0 alloys of manganese, chromium, nickel, tungsten, and molybdenum are more or less interchangeable, a fact which probably accounts for tremendous additions to 10 277 7 Nickel 25 (1) 0 Manganese Chromite 100 2, 300 88 0 Aluminum 0 Bauxite 600 1, 633, 600 26 54, 3 300 2 12 Tin today with reasonable accuracy, are shown in the appended table in conjunction with estimates of the present situation in the Japanese empire. The use of other ores besides bauxite for the production of aluminum explains the inclusion of both. The aluminum content of bauxite is between 20 and 25 percent. Ferro (1) (1) 000 15 2, 850 (1) 9 140 0 reliable 1940 data, however, are available for production in Far Eastern area outside the Japanese empire. These data, which probably reflect potentialities 14, 600 (1) 110 0 mates, which may vary substantially, about the present Japanese position. Fairly 000 2 In view of the fact that Japan has not issued pertinent statistics since the inception of the China incident in mid-1937, one must in general resort to ati Copper 70, 230 4 of the United States, and any substantial increase would involve great difficulties for a country of Japan's industrial War This Week, April 16-23, pp.potential 21-24). already engaged in a major war (7b 000 75, 6 circumscribed by her steel capacity. This capacity is still only one-tenth that Coal 0 Processing these minerals after they are mined may present difficulties, the effective military use of most minerals which Japan controls in abundance and stocks of some-especially molybdenum-when supplies of others were cut of In thousands of barrels 2, 639 75,000 0 tutes (35,000) to [50, 000 5, 700 0 Petroleum substi- 77,000 160 2, 150, 000 300 6, 0 Petroleum 110, 000 Japanese Empire: Japan, Korea, Formosa, Southern Bakhalia. Organised occupied areas: Indochina Thailand occupied China Disorganised occupied areas: British Borneo, Burma, British Malays, Netherlands Indian Philippine Islands Hongkong (lead). Other Fst-Eastern countries: Australia Free China, India (British and Portaguame), New Caledonia, New Zealand, Papus (manganese), Northern Bakhalin (petroleum). Continental Blberia is not included Negligible Four additional metale-magnesium, vanadium, cobalt, and beryllium-are 20 21 . important in war, but pertinent data concerning them are almost completely lacking. Reports indicate that Japan is producing unprecedented amounts of magnesium, which occurs in large quantities and presents chiefly a problem of extraction. The Japanese have not greatly developed the use of vanadium in alloys and presumably obtain all they need from byproducts in the burning of SECRET SECRET fuel oil-especially oil from Venezuela and Colombia, rich in Little is known about the Japanese positions in cobalt and beryllium vanadian cobalt production and stocks are low in relation to potential demand, but Japan's ...tels can take the place of cobalt in ferro-alloys with minor exceptions. lium, a comparative newcomer in the field of alloys, has as yet little Beys in oreJapan, in 1940 and 1941. although she imported at least ten tons metal content of application beryllin APPENDIX III SCANDINAVIA AND THE GERMAN WAR ECONOMY since Germany overran Denmark and Norway in 1940 as a preliminary Ever Western offensive, Scandinavia has had a triple importance to the war. to her air and naval bases have served in operations against Britain and the Norwegian supply lines to Russia; Finland's bases and troops have been employed northern against Russia and the Murmansk supply route; finally the strategic resources of the entire region have contributed substantially to German war production. The accompanying chart shows the relative importance of Scandinavian min- eral production to the German economy. Scandinavian mineral and timber resources, manufactured products, and, to some extent, foodstuffs are now being exported to Germany. Although, in return, Germany sends some commodities the area, notably coal and pig iron to Sweden, and foodstuffs to Finland, the balance to is heavily in her favor. It is not, however, the size of Germany's favorable trade balance, but rather the strategic nature of several Scandinavian prodnets that makes the area of importance to the German economy. Iron ore.-Germany has no shortage of iron ore. In the Ukraine alone Germany holds resources, probably unused, of fully 16 million tons a year. Nevertheless Swediah ores, which are believed to be going to Germany at a rate of 12 million tons per year, are of great importance to the Nazi economy. They are of high metallic content, averaging 60 percent, and their conversion to steel, therefore, involves savings in coke and manganese, both of which are relatively scarce in Germany. Also to change over German furnaces, labor and transport facilities for the use of other ores would involve loss of time and efficiency. Molybdenum.-German technology has been making increasing use of molyb- denum as a substitute in various steel-hardening alloys, of which the Reich is believed to have barely adequate supplies. Scandinavian sources, amounting to at least 22 percent of the total German molybdenum supply, are thus of some importance, and may be enhanced if recent reports of large scale increases in Norwegian output are correct. Nickel.-Norwegian nickel production (1,250 tons) normally constitutes about one-third of the total continental supply. Reports indicate that an additional 5,000 to 10,000 tons (metal content), not shown on the accompanying chart, will be exported from the Petsamo district of Finland in 1942. This may significantly case Germany's tight position in steel-hardening alloys. Copper.-The German position here is barely adequate. Loss of the copper flowing from Scandinavian areas, amounting perhaps to 30 percent of the total current German supply, might have repercussions on the war economy. Recent reports indicate that Scandinavia is expanding its contribution here. 23 22 SECRET SECRET Aluminum.-Scandinavis is not a major element in the 500,000 aluminum which Germany was estimated to control in 1942 lone production of 30,000 tons was cut in half by the war, and German Norway's your STRATEGIC MINERALS IN SCANDINAVIA expansion have apparently been abandoned in favor of a Hungarian Pyrites.-Germany has ample sources of pyrites, and thus sulphur, program deposits and Portugal The loss of only slight reorganisation in the system. deposits Tungeten.-Swed would in Germany, probably Italy, tungsten involve Spain the sulphur eupor Boandinaria output is small relative to Portugal, principal source. It is in fact likely that Germany is not receiving Germany's Swediah tungsten, though benefitting indirectly from the high grade directly Moto coming from Sweden. Timber and its products.-Aside from the strategic minerals Scandinarial largest contribution to the German war effort consists of its significant PYRITES TUNGSTEN COPPER timber, paper, and wood pulp. The demand for wood pulp has increased exported being an important element in the manufacture of explosives and collube textiles and fodder. Should this long-established source of pulp, paper substitute cardboard be lost, Germany would have extreme difficulty in finding adequate and alternative sources or substitutes. Foodstuffs.-At present Finland is a deficit food area, drawing some importa, largely sugar and bread grains, from the Reich and from Sweden, itself & slight surplus area except for fodder. Norway is under an enforced food abortage MI result of sending quantities of fish to Germany. Shipbuilding.-In 1941 Norway and Sweden produced together an estimated 185,000 tons of merchant shipping, amounting to fully 26 percent of the estimated tonnage turned out from shipyards under German control Despite the probable existence of considerable idle shipyard capacity in Europe, this contribution MOL YBDENUM IRON ORE NICKEL ALUMINUM important because the Scandinavian yards are well-run and well-manned Industrial Production.-Sweden is importing coal and coke in quantity from Germany to maintain her economy. In return she exports semi-manufactured metals and finished machinery, tools, motors, etc. These items were 22 percent of Sweden's exports in 1938, and production has probably not declined This 100% 100% saves Germany much skilled labor of a type notably scarce on the Continent Summary.-The net contribution of Scandinavia to the German war effort though not large in monetary terms, is thus extremely important strategically most notably so in the cases of steel-hardening alloys, machinery, copper, and to: 75% 75% lesser degree, iron ore, shipbuilding, and wood pulp supplies. Account must be taken, however, of the goods which Germany provides Scandinavia in exchange 50% 50% 40 25% 15% 10% 5% APPROXIMATE PERCENTAGE OF TOTAL EUROPEAN AXIS SUPPLY IN SCANDINAVIA 24 25 SECRET SECRET Aluminum.-Scandinavia is not a major element in the 500,000 aluminum which Germany was estimated to control in 1942 production of 30,000 tons was cut in half by the war, and German STRATEGIC MINERALS IN SCANDINAVIA expansion have apparently been abandoned in favor of a Hungarian 3.-Germany has ample sources of pyrites, and thus program deposits and Portugal. The loss of with male deposits only slight reorganization in the system. Tungsten.-Swedish would in Germany, probably Italy, tungsten involve Spain sulphur, the sulphur Boandinarim output is small relative to Portugal, principal source. It is in fact likely that Germany is not receiving Germany's coming Sweden. Swedishfrom tungsten, though benefitting indirectly from the high grade steel directly peodacts Timber and its products.-Aside from the strategic minerals largest contribution to the German war effort consists of its significant Scandinavia) timber, paper, and wood pulp. The demand for wood pulp has increased, exported being an important element in the manufacture of explosives and substitute collection PYRITES TUNGSTEN COPPER textiles and fodder. Should this long-established source of pulp, paper cardboard be lost, Germany would have extreme difficulty in finding adequate and alternative sources or substitutes. Foodstuffe.-At present Finland is a deficit food area, drawing some importa largely sugar and bread grains, from the Reich and from Sweden, Itself A alight surplus area except for fodder. Norway is under an enforced food shortage MA result of sending quantities of fish to Germany. Shipbuilding.-In 1941 Norway and Sweden produced together an estimated 185,000 tons of merchant shipping, amounting to fully 26 percent of the estimated tonnage turned out from shipyards under German control Despite the probable existence of considerable idle shipyard capacity in Europe, this contribution MOLYBDENUM IRON ORE NICKEL ALUMINUM important because the Scandinavian yards are well-run and well-manned Industrial Production.-Sweden is importing coal and coke in quantity from Germany to maintain her economy. In return she exports semi-manufacture metals and finished machinery, tools, motors, etc. These items were 22 percent of Sweden's exports in 1938, and production has probably not declined This 100% 100% saves Germany much skilled labor of a type notably scarce on the Continent Summary.-The net contribution of Scandinavia to the German war effort though not large in monetary terms, is thus extremely important strategically most notably so in the cases of steel-hardening alloys, machinery, copper, and les 75% 75% lesser degree, iron ore, shipbuilding, and wood pulp supplies. Account must be taken, however, of the goods which Germany provides Scandinavia in exchange 10% 50% 40 25% 15% 10% 5% APPROXIMATE PERCENTAGE OF TOTAL EUROPEAN AXIS SUPPLY IN SCANDINAVIA 24 25 SECRET SECRET than the "first line strength" as defined above. With a given first line strength, number of planes ready to fly is less during periods of active operations than in periods of inactivity, since increased activity requires increased time spent in the servicing. APPENDIX IV ESTIMATES OF GERMAN AIR STRENGTH Estimating the air strength of our enemies is at best a tricky business computation contains so many variables and so many unknowns that Any estimates necessarily show wide variations. Yet there is apparently substantial CUSTOM agreement on certain figures; experts currently regard 1,800 to 2,000 average for German monthly production of combat types, and 4,300 to 5,000 MR a sm fair estimate of first line strength. It is in the figure for reserves that the real discrepancies occur. Competent estimates run all the way from less than 2,000 to more to 10,000 planes. source of these variations is the incompleteness of our figures on German air I One It is obvious that a small percentage variation in the estimates of losses per will cause a very large percentage variation in the estimate of reserves at date. While RAF reports on planes shot down on the Western Front or & is give the Mediterranean are no doubt reliable, any totals for German aircraft lost in Resident are simply estimates. Furthermore, non-combat losses and the wastage of comba planes in training schools are impossible to gauge with any exactitude: the rule of thumb ratio of 1:1 used in estimating combat as against non-combat losses may be too optimistic. Variation in the method of computing reserves is a further source of discordant figures. The most obvious method is, of course, to add German production since the start of the war to an estimate of air strength in September 1939, and from The Labor Factor A second factor is the labor supply situation in Germany itself. It is probable that & working force of about a million would be required in German airframe, engine, and equipment factories to produce 2,500 new planes a month (all types), provide spare parts, and repair damaged aircraft. This production figure implice an expansion of 29 percent from an estimate of 1,900 planes a month for the beginning of 1941. Such an expansion would have required an increase of something like 250,000 workers in factories alone-plus those employed in con- structing the new plants themselves, in providing raw materials, and in supporting services. In other words, although the German government assigns a high priority to aircraft production, it is at least questionable whether they have been able to make available a labor supply adequate for contemplated expansion. Prior to the Russian campaign, they followed a practice of releasing men from the armed forces for industrial work in periods of military inactivity-thus relieving estrain on industrial manpower. Since the spring of 1941, however, when the Nazis undertook full mobilization in preparation for the Russian campaign, they have been unable to continue this policy and in recent months have resorted to additional call-ups and comb-outs for military service. Although the government has sought to offset this drain by the employment of women and foreign workers in increased numbers, and by curtailing certain civilian industries, it is doubtful whether such measures have been effective enough to permit further expansion of armament production. this total to subtract combat, other operational, and training lomes. A more usual method is, however to base deductions on the number and activity of place actually committed in certain critical theaters. Exponents of the first method are likely to arrive at a considerably higher figure than those who follow the second method, and to suggest the existence of a hidden reserve of strength not yet a posed to combat Definition of First Line Strength Two further factors are of prime importance in any estimate of German sit power. The first is the definition of first line strength-here considered to is clude all combat types assigned to operational units, but to exclude transports trainers and combat types used for training or held in stored reserves. One is bound to note the smallness of first line-strength in relation to the volume of resources-men, materials, and equipment-necessary to sustain that strength under active conditions of operation and combat. Furthermore, a considerable part of a plane's life is spent undergoing routine maintenance and repair. Con sequently the number of planes ready to fly at any one time is considerably smaller 27 26 U.S. GOVERNMENT 96 94 102 BURMESE THEATER OF OPERATIONS Fronts as of May 21# Reiledy (IM Gouge Relieer Dismonited Releasy Under Construction Airfield Trail Scale apo 0 are 94 96 98 100 104 102 106 DRAWK N THE GEOGRAPHY DIVISION, GOI 546-MAY 21,1942 J 243 May 22, 1942 10:05 a.m. GROUP Present: Mr. Gaston Mr. Sullivan Mr. Bell Mr. White Mr. Paul Mr. Blough Mr. Haas Mr. Buffington Mr. Thompson Mr. Kuhn Mr. Odegard Mr. Schwarz Mr. Foley Mrs. Klotz H.M.JR: I see you tax boys are attracting a lot of attention around the country. MR. PAUL: That is the intention of the Committee. They are getting a feel on the thing through us. H.M.JR: I see. Do you think ten-percent withholding is enough? MR. PAUL: That question is academic; if you get that, you will be doing well. H.M.JR: I see. MR. PAUL: I hope you noted this morning that you got support on your tax exempts and on depletion from Lindley, and T. V. Smith made a very good speech last night. 244 -2- - H.M.JR: Have you been talking with Lindley? MR. PAUL: Yes, right along. Another man that supported you was T. V.-- H.M.JR: Soong? (Laughter) MR. PAUL: He is a retired businessman. MR. FOLEY: I didn't think Lindley's column was awfully good. H.M.JR: I thought it was lousy. MR. PAUL: At least he supported us. H.M.JR: "Morgenthau's and Treasury's program is inadequate but"-- MR. FOLEY: It is not as inadequate as the House's. MR. PAUL: The New Republic had one this week, too, supporting you on tax exempts. MR. BLOUGH: That is what is called praising you with faint damns. H.M.JR: Yes; the dam has got a hole in it. Well, anyway, for that which we receive we are thankful. MR. BLOUGH: The Smith speech was pretty good, though - T. V. Smith. H.M.JR: Is he the Congressman? MR. BLOUGH: Formerly; he is out now. H.M.JR: Oh, he is a professor at the University of Chicago, isn't he, or Northwestern? 245 -3MR. FOLEY: Chicago. He used to be in the Senate out there in Illinois and ran for Congress. H.M.JR: Did he get licked? MR. FOLEY: He was here one term. MR. BLOUGH: He got licked, that is right. MR. PAUL: There are two other things I would like to bring up. One is that Time magazine is after us on this charitable limitation and wants an interview this noon. What would be our policy on that? It is just on the one you decided, not the one we debated. Should we indicate to them some of our more detailed - the estate tax, not this business income-- H.M.JR: I am all right on the estate tax. MR. PAUL: Do you think it would be a good idea to tell Time a little about it? H.M.JR: No. Did you read their article today? I mean, there is nothing friendly there. If they are interested, they are only interested for ulterior motives. Of course what I would do, and I have been here now for nine years - I have tried awfully hard to only give information to the regular Treasury press crowd, and every time that I go out of that I am sorry about it afterwards. If you give a special explanation to Time and don't give it to the Treasury press crowd, after a while they get down on you. MR. PAUL: On the other hand, I don't know what Time will write up if they don't get the straight story. H.M.JR: Have you given it on the Hill yet? MR. PAUL: No. 246 -4- H.M.JR: I certainly wouldn't, then. I would tell them to wait until you give the explanation on the Hill. MR. PAUL: The only other thing is that we are going to give you later today, in about an hour, or two hours, a statement we propose to make on the Hill regarding the twenty-five thousand limitation; and we would like to get clearance on it as soon as possible. H.M.JR: Well, I am awfully sorry, but I am leaving this afternoon. I won't get a chance to see you. MR. PAUL: Will you be back Monday? H.M.JR: Yes. MR. BLOUGH: Would you like to take it to the country? H.M.JR: No. The President said, & "It is a detail, isn't it, the Treasury could explain. MR. PAUL: Well, we feel-- H.M.JR: When are you going to explain it? MR. PAUL: We put them off yesterday. We ought to explain it early next week. We can stall them until Monday, I guess. H.M.JR: All right. I am sure they won't weep. MR. PAUL: They won't weep; they have said merely that they will give courteous attention. H.M.JR: Of course if Roy wants to fly with me to Charleston he can go along and explain it on the way down. MR. BLOUGH: Well-- H.M.JR: He is sick. 247 -5- MR. BLOUGH: I will be sick by the end of the afternoon. H.M.JR: All they say is, thundershowers on the way down. 3 MR. BELL: A little rough. MR. BLOUGH: I am always glad to do my duty, but I would a little rather that that wasn't my duty. H.M.JR: Do you feel we have to clear it today? MR. PAUL: We will clear it Monday. MR. BLOUGH: I don't think it needs to be cleared that badly. H.M.JR: I want it on the record I gave you an opportunity. MR. BLOUGH: Well, we may yet take that up but only if the Committee presses us hard this morning. H.M.JR: If you don't want to go, Kuhn is a candidate. MR. SULLIVAN: Send them to Scranton some time; that will toughen them up. MRS. KLOTZ: If you always threaten to take them along, they will never press you. MR. PAUL: I wish you would put it down for Monday because there are a number of policy questions. H.M.JR: I will. (Mr. Schwarz entered the conference.) MR. PAUL: I must go if I am going to talk to Helvering. 248 -6- H.M.JR: All right, give him a little B1. MR. PAUL: Some kind of vitamins - he needs them. MR. SULLIVAN: He is all right. MR. BLOUGH: The Committee is not; they are not happy; they are afraid it is an entering wedge for more social security. H.M.JR: The plane leaves at three-thirty. MR. BLOUGH: Well, I might be there, but I hope not. (Mr. Blough and Mr. Paul left the conference.) H.M.JR: When he got off the plane I didn't realize he had been ill. I said, "Isn't it wonderful to get up here and get this Dutchess County air and see the green fields. " MR. BELL: rie was green otherwise? H.M.JR: Yes. Norman, have you got that thing? (Paper handed to the Secretary.) I am making Ted Gamble an Assistant to the Secretary at a dollar a year. Now, that doesn't mean, does it, that - that doesn't really use up that title? MR. THOMPSON: That is right. H.M.JR: And for those in War Bonds, he is going to stay with me as long as I want. I didn't put much pressure on him, but all I told him was that if he left Harold Graves would have a collapse, and that if Harold Graves had one I would. Otherwise everything was nice; I left it to him to make up his own mind. MR. SULLIVAN: Did Harold go to Chicago? 249 -7H.M.JR: Cleveland. Otherwise, I would let him make up his own mind; but he is a swell guy. He admits that since he has come to Washington his business has improved steadily. MR. SULLIVAN: Is he the little fellow, very nice? MRS. KLOTZ: Able. H.M.JR: Very able. What else? MR. THOMPSON: That is all. H.M.JR: Want to settle this two weeks question? I am in a good humor this morning. I understand Harry White thinks one week is enough. MR. WHITE: I didn't say that, but I do think there ought not to be any specific term unless it is a week. I think it ought to be, rather, left in general terms, such as people to take as much as they need, with the assumption that it will rarely be more than one week. But to say two weeks - I mean, supposing the workers were to say, "We want two weeks' vacation and-- MR. THOMPSON: It isn't intended to require two weeks - not in excess at any one time. H.M.JR: Which side are you on, Harry? MR. WHITE: Well, I think a good many of them can be satisfied with one or two weeks, but the only questi on in my mind is the pronouncement that it shall be two weeks. I thought that was the term. MR. FOLEY: If you do it just the way Norman suggested, Harry, then it would be all right - not in excess of two weeks at any one time. MR. THOMPSON: That was the Personnel Council's recommendation. 250 -8- H.M.JR: Not in excess of two weeks at any one time? MR. THOMPSON: That is right. MR. WHITE: Not in excess of two weeks during the war, you mean? MR. FOLEY: No, I wouldn't say that. MR. BELL: No, during this year. H.M.JR: I wouldn't even say that. MR. BELL: I wonder why you have to say anything. Is anybody going to get more than that? MR. FOLEY: Put them on notice. MR. BELL: I haven't seen anybody that is counting on any vacation. MRS. KLOTZ: They don't know unless there is an announcement. MR. SULLIVAN: I think they ought to get it. MR. WHITE: They ought to get enough to obtain their highest efficiency, whatever that may be. It varies in different cases. MR. BELL: Thirty days. MR. THOMPSON: The employees will want a day off at a time, or two days, but their real vacation is not to exceed two weeks. H.M.JR: Go ahead. MR. THOMPSON: It is going to be uniform. 251 -9- H.M.JR: Dan, tell these fellows for a minute or two about the financing. I think that they ought to be sufficiently interested. I don't think they think I am doing anything these days. Just tell them for a minute or two. MR. BELL: You mean about what we have got to do next week? H.M.JR: Yes, and why not also just give them three minutes on what we have got to do for the next two months. MR. BELL: Well, we have got a refunding operation, which will be announced Monday, aggregating one billion one hundred fifty-one million, composed of two and a quarter percent HOLC's in the amount of eight hundred and seventyfive million, and one and a half percent RFC notes, amounting to two hundred seventy-six million, both maturing on July 1. We expect to offer a note in exchange for those securities on Monday; that note will be in the area of four or five years. During the month of June we have got to raise as much as a billion seven hundred and fifty million dollars in cash on major financing operations, in addition to whatever we sell in tax notes and savings bonds. We estimate that we ought to get in about seven hundred and fifty million dollars from those two sources. In July we will have to raise approximately two billion dollars on major financing operations, in addition to approximately a billion two hundred and fifty million from savings bonds and tax notes; and from there on our major financing operations will get larger and larger until they reach possibly three and a half billion dollars in the fall a month. So that, as the Secretary said, if you think he is not doing anything, this is a program that needs his constant attention. We won't any more than get through 252 - 10 with one and we will have to start on another one. H.M.JR: I want to say what I said Monday when he came in and said there was going to be a refunding this week. MR. BELL: I don't remember. H.M.JR: I swore a little bit. I said, "What, another?" I shocked Dan. He doesn't hear me swear much. What else? MR. BELL: You asked me to discuss with Eccles the question of the F and G savings bonds limitation, which I have done. He is against raising it, raising the limit, but has no objection if you want to go ahead. He thinks that the two and a half percent is pretty rich for that twelve-year security, and yet you are giving away something, although he has no objection. H.M.JR: What did I tell Graves? MR. BELL: You said that we would go ahead and raise the limit to a hundred thousand on July 1. I am sorry Harold isn't here because he raised the question day before yesterday that if we are going to raise it we ought to announce it now and not wait until we get up against the quota in July and announce it and then have them say that you are doing it in order to fill the quota; if you are going to do it, you ought to announce it immediately that we are going to do it beginning July 1. It will take about that long to get the literature and the bonds, and everything. We have been working with Interior, War, and Navy on a setup in Hawaii to protect the currency and securities out there in case of invasion. that we plan to do is have a special kind of security or take our regular security and put the word "Hawaii" on it and have a perforated "H" punched through all of the securities, and the currency can't circulate outside of the Territory of 253 - 11 - Hawaii. What we want to do is have the War Department send a cable to the military governor of Hawail outlining the plan in rather general terms, asking him to consult other people out there and let us know whether or not that would have any material effect on the morale of the populace if it were announced. H.M.JR: There is a man out there that Ickes has who is running the show for us. MR. FOLEY: He is back now. He called up, and he is stimulating this thing. His name is Ben Thoron. H.M.JR: Isn't that t he man you suggested several times that I take in the Treasury? MR. FOLEY: He is the fellow, yes; you talked with him one time with McReynolds. H.M.JR: That you wanted to be suggested-- MR. FOLEY: I think very well of him. He was the financial man over in PWA. He is a good man. H.M.JR: Ickes thinks the world of him. MR. BELL: This has been worked on for a long time, and this conference was held in the Interior Department. H.M.JR: Do you want me to sign something? MR. BELL: No, I just wanted to tell you it was going forward. H.M.JR: I think that ought to be kept secret. MR. BELL: It is confidential. It will go in code out there. We have about two billion eight hundred million dollars of Federal Reserve notes with the gold clause in 254 May 22, 1942 9:55 a.m. Operator: HMJr: Genson Go ahead. Hello. Purcell: Mr. Secretary. HMJr: Talking. P: Ganson Purcell speaking. HMJr: Good morning. P: Good morning, sir. I'm calling because the R. H. Macy proposed bond issue has been speeded up by the Macy people, and they're asking for effectiveness of it tomorrow. HMJr: P: HMJr: Yes. It - the issue follows the pattern of American Tobacco, Philip Morris, and National Distillers. Yeah. And pay off bank loans and promissory notes that have been incurred and accumulating in- ventory, SO as to put themselves in a position where they can accumulate further inventory. HMJr: Yeah. You'll remember that in discussing this matter we were asked to get in touch with Henderson and Nelson to ask their views on the accumulation of inventory of non-essential character, such as department stores. HMJr: Yeah. I haven't yet been able to - I haven't received an answer from my letter to Nelson. HMJr: Yeah. Henderson has been out of town a good deal, but 255 -2one of our people saw him and spoke briefly to him in general terms, and he expressed opposition to the idea of department stores and the like accumulating inventory HMJr: Yeah. but I haven't had an opportunity to discuss with him the type of case. P: HMJr: Yeah. I have talked to - I'm sort of polling the P: committee because of this sudden change in their course and not being able to get it I talked to Lauch Currie. He pointed out, of course, the similarity of this issue to others before the committee before effectiveness. which we have approved HMJr: P: Yeah. but he wondered if perhaps the committee shouldn't request the Commission to ask the Macy people to hold up for two or three days, so that we can get an expression of the policy from the war agencies. Now HMJr: Oh, I don't think I'd do that. P: You'd - your view of it would be HMJr: Well, we're too uncertain ourselves and P: It's difficult, very difficult. HMJr: Well, until - I don't think it's fair to Macy - P: I mean, if we don't have a policy ourselves that we should ask them to stall while we try to formulate a policy. I see. It - yes, it 18. It has its elements of unfairness. HMJr: What? P: There are the elements of unfairness, certainly. 256 -3HMJr: And - I mean, they do thie, and next week if somebody has a policy and some other department store comes along, we simply say, "Well, this is a new policy. Yesterday you could have gasoline; today you can't, and we're sorry." P: (Laughe) Well, perhaps that's the best way of handling rather people at it, this time.than spring it on these HMJr: Oh, you start up a whole thing, then they go to Nelson and they go to Henderson - neither know P: HMJr: about it - and you don't know what they'11 say. Yeah, that's. right. I mean, they immediately bombard them and say, "Well, what's this?" And they're unprepared. something which is helf-baked and it would throw it into Nelson's and Henderson's lap, and they wouldn't know what it was all about I think - it will be again one of these - doing P: HMJr: Very true. and you'd only - all you'd get is bad publicity. Well, I'll tell you what I'11 do then, sir. I'll push on Henderson and Nelson and get their reply. We'll let this go through according to schedule. HMJr: P: That's what I'd do. Unless they have - they have some accounting difficulties which may hold them up. HMJr: Well, that's something else again. P: Yeah. HMJr: But as far as I'm concerned, I wouldn't hold this up while Washington is trying to make up its mind. P: All right, sir. 257 -4HMJr: Okay. P: All right. Thank you. HMJr: Good-bye. 258 - 12 them, gold statement, and about four hundred and fifty million of Federal Reserve bank notes in our vaults. The Federal Reserve Board has asked us two or three times as to whether we couldn't work out some way of circulating those notes and save the expense of printing and at the same time save paper. We think we can do it, and I am in touch with Eccles. We are going to have a conference next week and see whether or not we might be able to line it out workable in gold and issue a very carefully-drawn press statement at the time we issue the notes. We think we can protect ourselves le gally. H.M.JR: I still think that to prevent hoarding that that suggestion that we shouldn't print anything above a twenty-dollar bill-- MR. BELL: Well, I am still considering that. I have got one memorandum and have been promised one from Haas. H.M.JR: I don't see, except to have some par ticular form of security to exchange between banks so the banks can settle their balances - for the public I think a twenty-dollar bill is plenty. MR. WHITE: What would you do with those that are outside? H.M.JR: They will get worn out. The thing is if somebody wants to hoard the chances are nine out of ten that he goes to the bank. MR. FOLEY: You can call them in. MR. WHITE: You can call them in, but there are a lot of angles to it. It is not as easy as it seemed at first; the more one goes into it, the more difficult it is. It is not impossible, but it raised a lot of physical difficulties. MR. BELL: We have been considering it, but, as Harry says, there are a lot of angles to it. 259 - 13 H.M.JR: Anything else? MR. BELL: Congressman Haines brought in a thousand- dollar savings bond yesterday and donated it to the Treasury on behalf of the Sons of Italy of York, Pennsylvania. I wonder if you would sign a letter to him. (Letter handed to the Secretary.) H.M.JR: All right. MR. BELL: Just one other item: The Bureau of Internal Revenue has drawn up regulations to take in United States savings bonds in payment of taxes, under the provisions of that amendment we got to the Public Debt Act this spring. I don't believe we ought to do that now, do you? I think we just ought to shelve it for the time being because when we are trying to sell the other notes - it will make it easy for them to turn them in. I think it. ought to be shelved. MR. SULLIVAN: Whatever you say. MR. BELL: I think it ought to be shelved and not permit them to turn them in in payment of the taxes unless we get more pressure for it. H.M.JR: O.K. Anything else? MR. BELL: That is all. H.M.JR: While I think of it, I didn't see it but Mrs. Morgenthau said she cut it out. She said they had some meeting up at Harvard, which was reported yesterday in the Times, of psychiatrists. They went into the whole question of psychology, and she noted it and was particularly interested because it took the side which I have been preaching and g etting nowhere on, on what we should do on war psychology. Did you see it? MR. ODEGARD: No. I just saw the heading, didn't read it. 260 - 14 - H.M.JR: You might take 8 look at it. She thought it was good because I have been taking that angle for some months now. They evidently were talking about they couldn't understand why MacLeish didn't have a psychiatrist on his staff, for instance. MR. ODEGARD: Well, I - you mean for the staff? (Laughter) MRS. KLOTZ: That is not so funny. H.M.JR: I am going to read it. Harry? MR. WHITE: Did you want to take up the question which the British.have raised with respect to their Chinese agreement at the same time a S the British LendLease? They are awaiting a word from you before-- H.M.JR: I hope to get back - I sent you word. MR. WHITE: For Monday? H.M.JR: No, I said I would get in touch with you if it is a rainy day and you are not playing tennis Sunday I may ask you to come over. MR. WHITE: All right. H.M.JR: If it is a nice day I won't bother you, but if it is a rainy day, or something, when I get back, if you come over I will give you as many hours as you need to clean up a lot of stuff. MR. WHITE: You always say that, but somehow it always ends up - well, less than that. H.M.JR: Well, it is the carrot - it is the carrot before the nose. 261 - 15 - MR. WHITE: I have benn called many things but not a donkey. Well, let's not be meticulous. H.M.JR: Particular? MR. WHITE: Meticulous I said. H.M.JR: After all, I have seen some very fine, thoroughbred horses eat carrots. MR. WHITE: Yes. We never think of donkeys in Washington. You may be interested in knowing that there is a resolution, H.M.JR: Listen, Professor Odegard, isn't that the second Freudian thing he has said? MR. WHITE: Maybe we do need a psychiatrist here. H.M.JR: Notice he refers to the thing as a donkey; he leaves it sexless. MR. WHITE: Well, resolution six of the Rio conference called for a-MRS. KLOTZ: They won't give you a chance. MR. FOLEY: Better take it up Sunday. MR. WHITE: This isn't important. a meeting of central bankers to discuss foreign-exchange control here. The State Department has indicated they would expect the Treasury to take the lead in it, and there are quite a few negotiations, and preparation on the agenda is going forward. We will probably hear a little more about it after it finishes. H.M.JR: Did you hear from A. A. Berle? 262 - 16 - MR. WHITE: He called up. I suggested that we might try a draft of a bill, and he said he had a draft then which he said he would be glad to send over. I am turning it over to the le gal division to work out somethingfamiliar to present are with.to you. His general idea I gather you H.M.JR: Yes. If some of these countries need some money, why, O.K. MR. WHITE: There doesn't seem to be, off-hand, unless the boys feel differently, any existing authority to use funds of that character, certainly not as far as the Treasury is concerned. H.M.JR: What is item seven? MR. WHITE: Pardon? H.M.JR: Anything else? MR. WHITE: There was a Board of Economic Warfare meeting. Maybe if you want to hear about it, I can tell you very briefly here. H.M.JR:- Yes. Did the President's announcement as to who was boss of that come before or after the meeting? MR. WHITE: Maybe some persons knew about it before, but I didn't; but there is no doubt now. H.M.JR: What happened at the meeting? MR. WHITE: Two things were raised, Sweden - and Batt was present to-- H.M.JR: To represent SKF or American Bosch? MR. WHITE: I think there he represented the WPB; he spoke on why aid should be given to Sweden, but I think he prefaced his remarks by saying he was biased. 263 - 17 - The result of the discussion was that a subcommittee has been appointed to consider some of the details. Stimson and Patterson both took the view rather strongly that nothing that was vital to us should go to Sweden because Sweden's war effort, even on our side, was unimportant relative to the use which could be made of the materials. A subcommittee is going to consider that now. Knox felt that they should be given crude oil because we have got plenty of it, provided they come over and get it. H.M.JR: Give Sweden crude oil? MR. WHITE: Yes. H.M.JR: I think that it is terrible. MR. WHITE: Well, as the discussion first went, it seemed as though they were almost going to give everything to Sweden. I raised the question that if it was so helpful to the Allies why was it that Germany was letting it through, because they previously said Germany would let it by. I couldn't understand that, since Germany certainly knows as much about what is going on in Sweden as we do. That led to a discussion, and then Stimson joined in and Patterson joined in and they took a rather strong position. Argentine was the second thing they took up. Wallace said after the subcommittee report which was presented, which was rather a good one, stating the Treasury posi ti on and the position of the State Department, among the other agencies - Wallace said that it was his understanding that the Treasury was going to make the study. I said I thought it was my understanding tha the Treasury was going to continue but that the other The agencies were going to continue as they had been. 264 - 18 - way Wallace put it,it was the Treasury's total responsibility. Wallace said he might be wrong. I said I would clear it up, that I might have misunderstood. H.M.JR: What I told the President was this. I said, "We consider we are your financial detectives, and as such do you want us to continue?" I didn't talk about any other agency, and the President said, "Absolutely." I think what I would do is this: So that they don't go back on us again I would continue to take the full responsibility, asking the State Department to give us the help, which now Breckinridge Long says he will do, and asking J. Edgar Hoover to give us the help which he said he would, and ask any other agency. But I think otherwise they would go back, and they will say - the President will say, "I didn't tell that to Morgenthau. I told him he should go in." See? MR. WHITE: Acheson had some material there which he said they were forwarding to their Argentine Embassy, which he said he was clearing with the Treasury, which indicated they were taking much more aggressive and effective action. H.M.JR: I would assume the responsibility to do that job, asking everybody else to help us. MR. WHITE: Do you still think that we ought to - send somebody down, because if so, I think we can send I would like to send Southard down. The reason I would like to is that we are going to lose him anyway in a week or so, and maybe we can postpone it on that basis. H.M.JR: O.K. MR. WHITE: Take that up with the State Department? H.M.JR: I would. MR. WHITE: Maybe send some man with him. 265 - 19 - H.M.JR: I would take it up with Breckinridge Long. MR. WHITE: As you said when I was here with two or three men from the Treasury, if you feel you want to continue to take the responsibility it is the information that we could get not what they would want to give us. H.M.JR: I would take it up with Breckinridge Long, and tell him we would have to be under the wing of the ambassador down there. MR. WHITE: Mr. Long? H.M.JR: I would take it up with Mr. Breckinridge Long. MR. FOLEY: I have got a good fellow, John Lawler. He speaks Spanish. MR. WHITE: Yes. H.M.JR: Just as long as they think there is a chance of getting moving-picture money out of England they will treat us all right, Harry. MR. WHITE: Well, let's keep them waiting. That is all that happened there, really. They asked for you. H.M.JR: Breckinridge Long is ambassador extra- ordinary plenipotentiary for Mr. Hull to me to try to get us to help the moving-picture industry get their money out of England, Mr. Kennedy no longer being there. MR. SULLIVAN: Stopford called me - I think that is his name - of the British Embassy, on the Marlene Dietrich thing. She owes us one hundred and sixty-five thousand dollars in taxes, and the money is frozen over there. 266 - 20 H.M.JR: Do you know the name of the corporation she operates under over there? MR. KUHN: Isle of Man. H.M.JR: She is incorporated in England under the name of Isle of Man. (Laughter) MR. WHITE: She must have a lot of subscribers to stock. (Laughter) MR. SULLIVAN: I think if American taxpayers owe us money and have no other assets with which to discharge their tax liabilities that if we can get the money out of there we should do it. H.M.JR: Mr. Kuhn is looking after Marlene, so you had better see him. MR. SULLIVAN: No. They just took care of her when she was in town; it is on my desk now. Have you any objection to our getting that money out if we can? H.M.JR: You have to talk to Harry. I am serious now. I don't know, but we are taking the position - this is the position that we are taking. It is very amusing. Jones calls up Harry, and Frank Walker - Harry says he never knew him before to call up; Mr. Hull sends this fellow over here, Breckinridge Long - all the pressure in the world. We simply say, Is this a special case? Does the State Department say it takes special consideration over all other American business?" "Oh, no, no." 266 - 20 H.M.JR: Do you know the name of the corporation she operates under over there? MP. KUHN: Isle of Man. H.M.JR: She is incorporated in England under the name of Isle of Man. (Laughter) MR. WHITE: She must have a lot of subscribers to stock. (Laughter) MR. SULLIVAN: I think if American taxpayers owe us money and have no other assets with which to discharge their tax liabilities that if we can get the money out of there we should do it. H.M.JR: Mr. Kuhn is looking after Marlene, so you had better see him. MR. SULLIVAN: No. They just took care of her when she was in town; it is on my desk now. Have you any objection to our getting that money out if we can? H.M.JR: You have to talk to Harry. I am serious now. I don't know, but we are taking the position - this is the position that we are taking. It is very amusing. Jones calls up Harry, and Frank Walker - Harry says he never knew him before to call up; Mr. Hull sends this fellow over here, Breckinridge Long - all the pressure in the world. We simply say, Is this a special case? Does the State Department say it takes special consideration over all other American business?" "Oh, no, no. 267 - 21 MR. WHITE: There is an amusing story Joe O'Connell told me yesterday. He met somebody up at Aniline and Dye who said he had encountered these movie men in New York, and he said, "Is there anybody you know who knows Harry White? If we can only get to him." They think that decision rests with me. I didn't disillusion them, because - (Laughter) So I expect to get some subtle offers. H.M.JR: Good. MR. WHITE: I can't stand temptation. MR. FOLEY: Not the subtle kind. H.M.JR: All right. MR. SULLIVAN: If Harry agrees with me on this thing, will we go ahead? H.M.JR: No, sir, any special money out of England I want to know about. Go ahead, Harry. Are you finished? MR. WHITE: That is all. H.M.JR: Chick? MR. SCHWARZ: We caught that announcement at ten o' clock on the ticker. 268 - 22 - H.M.JR: Good. Peter? MR. ODEGARD: No, I haven't anything. H.M.JR: Where do you people stand vis-a-vis General Motors on the thing they want to do? MR. KUHN: The General Motors people were told that they could use seventy-five percent of their material, but that we did not approve of the use of the figure. They said they had their doubts about it, too. They rushed back to Detroit to kill "Mr. Axi" and all his manifestations, and invited us to submit our own suggestions for a substitute, so everything was friendly, and they took it very well. H.M.JR: When are you going to do that? MR. ODEGARD: They are going to come here today, I understand. H.M.JR: But you were holding out for Low cartoons against-- MR. KUHN: I have a figure which I saw in the book that Mrs. Morgenthau-- H.M.JR: I thought you were holding out for Low. for. MR. KUHN: I couldn't find what I was looking 269 - 23 H.M.JR: I knew you couldn't. MR. ODEGARD: There is a nice figure by - is it Szyk? H.M.JR: May I once in a while have a little thing my way? Is this fellow a Pole, this man? MR. KUHN: I think so. MR. ODEGARD: Yes. H.M.JR: Well, I would like him to do a new figure for us. Let us see if there isn't something there. What's his name? MR. KUHN: Szyk. H.M.JR: I would like him to do the figure. MR. KUHN: One figure he has got in there is perfectly good, as far as I am concerned. H.M.JR: Don't let's fool around with it. I mean, let's-MR. KUHN: I would like to show it to them and see if they couldn't use it. H.M.JR: Send for this man to do another one. If not, you take up my suggestion with General Motors. Take it up; get them to do one picture with Disney. MR. KUHN: Disney is coming to Washington Monday, and I gather that his idea hasn't progressed. I would like to find out definitely from him whether he is going ahead with it. H.M.JR: I can tell you now he won't, so now what about getting General Motors to take it up? MR. KUHN: I think one obstacle is Disney himself. 270 - 24 - I don't think he wants to do it any more. H.M.JR: Supposing he thinks he is making a tie-up with General Motors - I mean, is that thing being pushed? MR. KUHN: Yes. It would have to be put up to Disney, also. H.M.JR: Yes, but General Motors - get General Motors to say they are willing to do it. Can you get them to- gether on Monday? MR. KUHN: I can try. H.M.JR: You are handling that? MR. KUHN: Yes, sir. H.M.JR: I very, very much want to get one Disney picture done. Who in General Motors did you talk to, how high up? MR. KUHN: Who was the man they suggested the other day? MR. ODEGARD: Well, the man who was coming here is a fellow named Walker. MR. KUHN: Walker. H.M.JR: I rode on a train last night, and a man introduced himself; he was the General Motors' man in charge of General Motors' publicity. What's his name? MR. ODEGARD: Garrett - Paul Garrett. H.M.JR: Yes. Now, Ferdie, I would like you to get on the phone this morning to Paul Garrett and tell him that Henry Morgenthau, Jr. would like him to take a look at this Disney picture - I would like this done this morning without fail - and that I am very much interested 271 - 25 - to see whether they would be willing to take this over. Now, what Garrett is doing - they are way ahead of us on all of this stuff and they are sending me down, as a result of meeting this man on the train - they say they simply can't have their workmen grinding away each day on a little piece of a tool and not know what is going on in the world, so they have developed their own technique to keep the workmen sold on what is going on in the world, where the machines are used, what battle fronts. They are going to send me a complete set of that, and, after all, General Motors is way ahead of some of these other things. Now, I would like to meet varrett myself next week. They have that on bulletin boards and radio records, and everything else; they are going to have a continuous sale, just like the Russians do to their people, to let these workmen know what the fighting is for, whether their are say ontheyfront. are let are trouble machines them know. They the Russian having They going getting to re- leases from the Army to do this stuff, but they are doing just as much as they can. And Garrett is the man, and I would like to see if we can't sell Garrett this Disney picture. MR. KUHN: I will call him. H.M.JR: And I would like to see him next week, myself. George? MR. HAAS: Would you like to know the status of this Dr. Likert job? H.M.JR: Very much. MR. HAAS: I called him back, but he had gone over and seen the people at BLS and also the Budget Bureau and then he talked to people in Facts and Figures, and - check me, Ferdie - and there is a man over there in charge of another survey. His name is Dubois. He thought he could do a better job than Dr. Likert thought he could. - 26 - 272 MR. KUHN: He is Likert's own man. They all work together, and they do the kind of survey that each is fitted for. MR. HAAS: The situation is this. They have a list of two thousand families which they are using for another purpose, and they could get this type of information. They get income as of a year ago by income classes, and income now by income classes. They can't give a breakdown and find out how much the family is saving; that involves a very complicated schedule, but they can ask them the amount of bonds and stamps they are purchasing. Now, I would say that if you feel you need another source to get some information, all right; they need three thousand dollars, which we would have to pay them to get this. H.M.JR: George, this is what I want to know and I don't want to be told how difficult it is; that doesn't interest me, see? But I want to know, are people buying silk shirts or aren't they buying silk shirts; are they going to spend this money, or are they going to keep it? The only way to find it - I haven't got the time to go-out and talk to families myself, but I want somebody to do it so that I can know. I mean, what are these people doing? MR. HAAS: That is what I was coming to, Mr. Secretary. They cannot get that. To do that type of job would cost the BLS three hundred and fifty thousand a year, Home Economics four hundred and fifty thousand, and they would not have this even fragmentary information until July 7. I would be inclined to stay with BLS and the Bureau of Home Economics. They are trained in this work; they are experts in it. These other people - it is a side line to them and a diversion into a very technical field. They know little about it. H.M.JR: George, they are all blind. George, give me a man or a woman - I don't care - out of your office who is intelligent. Let me talk to them for five minutes, and I will send them into the field. Let me make a check. Let me send one person. - 27 - 273 MR. HAAS: Well, I mean - anything you want, be glad to, but my recommend tion would be that this data wouldn't be worth the effort you put out. H.M.JR: Let me find out. I sit here, and I haven't got anything. Do all the other things, but give me some man or woman, somebody out of Home Economics and Cornell, some trained person. MR. GASTON: What about Beardsley Ruml? H.M.JR: I am going to pull a Roosevelt on you. I had dreamt it; I thought of that yesterday. MR. GASTON: Perfectly all right. H.M.JR: I thought of that yesterday. I am glad you reminded me. MR. GASTON: Half a dozen cities-- H.M.JR: That is thought transference. I will ask him. MR. GASTON: Have Donald Nelson name a man in their organization. H.M.JR: I will tell Beardsley Ruml he can do it. MR. HAAS: You can tell what types of goods they are buying. I thought you wanted to know that a man makes so much, and how much spent, how much saved; and of the amount he spends, what does he spend it for, and of the amount of savings, where does he put it. H.M.JR: Yes, but more about how he feels. MR. HAAS: Then this man will do that job, the attitude job. H.M.JR: More how they feel. 274 - 28 MR. HAAS: These men can do that. . I am mi sunder- standing what you are after. H.M.JR: No, I started with the thing - I want their mental attitude. MR. HAAS: That is different. They can do it. Let them go ahead. H.M.JR: Will you? MR. HAAS: Glad to. H.M.JR: How much does it cost? MR. HAAS: Three thousand dollars. H.M.JR: I am going to have Ruml do it besides. MR. GASTON: The reactions that I have seen are reflections of the War Savings Bond publicity, giving back to us what has been emphasized in the publicity. H.M.JR: You mean it is not satisfactory? MR. GASTON: Well, I think it is a good clue for us as to what change of emphasis may be needed. I think we are just getting back to us what have been the emphatic points of the sales promotion on the Savings Bonds. MR. ODEGARD: That is what happens with most of those surveys; that is, the public-opinion polling tends to be polling of newspapers. MR. GASTON: They show you how you need to change direction, but they are not spontaneous. MR. ODEGARD: Likert gets deeper than the others because Likert let's people talk. 275 - 29 H.M.JR: Let's spend three thousand, George. MR. HAAS: I think it is all right for that purpose. The other, the BLS and Home Economics, will give you some information you can use in the determination of your fiscal policy. This information is for your sales campaign. The other thing is these new orders you have been getting for a number of years now are on a very confidential basis, and they are not of much use under these conditions. I thought it would be a nice gesture if you would be willing to sign a thank-you letter and say to resume it after the war. H.M.JR: Just thank them - yes, O.K. I wouldn't say anything about resuming. I would just stop them. MR. HAAS: All right, that is all. There is one other thing in connection with some of this information that Kamarck needs for you on munitions production, and so on. There are a couple of very confidential reports that Stacy May gets out. Is it all right to ask them to send them over to you? He sent some but didn't send these two particular reports. H.M.JR: Yes. Ferdie? MR. KUHN: Admiral Conard wants to launch his intraGovernmental, interdepartmental scheme for pay-roll savings by means of a big meeting in Constitution Hall, at which there would be fifty or a hundred people from each agency who will have the direct responsibility of sales. He thinks it will have a psychological effect on the country, showing the country that the Government workers are on their toes in this effort. He wants to have a couple of big speakers. He would like to have you there that evening, early in June, and he was thinking of asking Leon Henderson, and Nelson, and Eccles, subject to your approval. I am not sure that he is right in his choice, but it is his show. H.M.JR: No. Let it go for a day or so; hit it Monday. (The Secretary held a telephone conversation with Mr. Beardsley Ruml.) 276 May 22, 1942 10:49 a.m. HMJr: Hello. Operator: I have Mr. Ruml at his New York office. HMJr: Hello. Operator: Go ahead. HMJr: Hello. Beardsley Ruml: Hello, Mr. Secretary. HMJr: How are you? Can you hear me? R: Yes, sir. HMJr: I wonder if you could give me & little help. R: Yes. HMJr: It's more in your capacity with Macy's that I'm thinking about, or in any capacity. I am very much interested in trying to find out week to week what the - hello R: Hello. what the munitions workers - men and HMJr: R: HMJr: women - are doing with their money. Hello. Yes, sir. Are they saving it? Are they paying up back doctors' bills, or is it going into luxuries, or are they - is it a pressure on the market to drive up prices? R: Yes. HMJr: Now, you people, through your own stores and your own connections, could let me know from week to week. I mean, is the price ceiling working or is there so much pressure that you can't hold it down? Hello. 277 -2Yeah. R: HMJr: Do you get the idea? Yes. I will have to do it by observing our R: customers, principally, of course. HMJr: R: Well, that's what I was thinking. It's the attitude of the shoppers who come in. Hello. Yes, sir. I'm thinking while you're talking as to how we can do it. We'11 do the best we can, and we'll see how - what - I understand perfectly what you want. The thing you want is a flash as to what consumers are doing with their money. HMJr: Well, now, you, for instance, have a lot of trained people who aid people in their shopping, don't they? R: Yes, but that's mostly on the de luxe level, Mr. Secretary. HMJr: Well R: But even so, we can find something. HMJr: Well, the thing - we're all talking about this R: Yeah. HMJr: Well, now what I'd like to do is to get right R: Yes. HMJr: seventeen billion dollars. down behind the counter where the man and woman come to do their buying and what's happening to that money and how much pressure is there. R: Yes. HMJr: You see? R: Quite right. 278 -3HMJr: R: HMJr: R: We may all be on the wrong track. Well, that's my suspicion. I don't see it. You don't see it? I don't see it, and furthermore, I just stepped out of an executive committee meeting over at Bamberger's. Instead of running twelve per cent ahead, they're running twelve per cent behind this week as a result of the automobile situation. HMJr: R: Yeah. Now, Ruml, if you need any money to help you - clerical help or anything else. Yeah. we'd be glad to furnish it. HMJr: R: Well, we've got a little research unit here, that I think we probably can turn right to work on it. Is there someone in the Treasury that is especially responsible HMJr: R: Yes. .....80 that I can put Mr. West in touch with him? HMJr: George Haas. R: George HMJr: H-a-a-s. R: Oh, I know George, sure. HMJr: Yes. And he R: Well, he knows all about it, does he? HMJr: R: Yes. And he's working on the Government end, whatever we can get from BLS and from the Department of Agriculture. Yee. 279 -4HMJr: And we have Dr. Likert out - L-1-k-e-r-t. Yes. R: HMJr: R: HMJr: R: You know Likert? No. Well, he's up - he's doing some work - but I'm not satisfied with anything that I'm getting and I'm just playing a hunch. Yeah. Well, I tell you, you ought to use some people in addition to us, on account of the fact that New York is not very typical. We have a store in Toledo HMJr: R: HMJr: R: Yeah. which is a defense area, but I would rather - let me think about it Well, would you think about it, and then what other organizations we should contact; but I'd like to get your own brain on this. Yeah. Well, I'll - are you going to be in your office tomorrow? HMJr: No, but I'11 be here all of next week. R: Yeah. HMJr: And I'd like very much to sit down with you. R: All right. Well, let me do what I can on it, and I'11 HMJr: We can have a meal together and talk about it. R: All right, fine. HMJr: Does it interest you? R: Very much. I think it's very important, and I have exactly the same feeling you have that 280 -5if all these statistics are true, where in hell is the inflation? HMJr: R: Right. What? HMJr: Okay. R: All right. HMJr: Thank you. R: Good-bye. 281 - 30 H.M.JR: He says he has exactly the same idea I have. If all these statistics are true, where the hell is all this inflation? He says he just stepped out of a meeting from the Bamberger Store, and their sales are off twelve percent. He says - and that is indicative - he says, "Where the hell is it all?" He says he has got exactly the same hunch I have, but he says he needs other chain stores besides because he says they are not sufficiently in industrialhis, areas. MR. FOLEY: I think that the gasoline rationing has probably had more effect than people realize on making people aware of it. H.M.JR: But the thing is, everybody talks about the gap, and the funny thing is that they have all gone, to my way of thinking, absolutely orthodox in their economic thinking on this thing - a seventeen billion dollar gap, and you have to have inflation. Now, I am not sure at all that this is true; and where there is terrific pressure on me to do things on taxes and everything else, I want to know; and when I want to know, I keep digging and digging until I find out. If 1 can't find out, I will go out and sit behind a counter myself and listen, but I am going to meet the buyer at the market where he buys. I am going to find out. But, as I say, if I have got to go and sit in a radio store in Hartford, Connecticut, or Detroit, I will go and do it for a day, and I will learn more that way than I will anywhere else; but I am going to find out. And all these other people, they just absolutely are single track in their thinking. They may be right; I have a hunch they are not. But Ruml is a smart fellow; he said he would love to do this. They have their own little research staff in Macy's. Are you all right - take it up Monday, Ferdie. MR. KUHN: I would like him to get started. H.M.JR: All right. I will come myself; you can count on me. - 31 - 282 MR. KUHN: Good, and then he can ask somebody else. He probably won't get Henderson. H.M.JR: I think we ought to have somebody rather than Nelson. In my own conscience I think we should have some civil-service employee - I think somebody like McReynolds, somebody like that. MR. BELL: Yes. MR. KUHN: Who is the best speaker you can think of among civil-service men? MRS. KLOTZ: Danny Bell. MR. BELL: There aren't any. MR. THOMPSON: Burlew, Kerlin, and Dan. MR. FOLEY: I think Dan is the best, and I think Dan is the most popular, that they would rather hear it from Dan than these other fellows. H.M.JR: If that is the case, it might be better not to have me appear at all, and then it would be on a level of one civilian employee-- MR. KUHN: This is not a Treasury affair; it is intradepartmental. H.M. JR: No, but if I come as a Cabinet officer and if Dan comes, a man who is the highest-ranking civilservice employee in the Government-- MR. FOLEY: That's right. H.M.JR: He is the highest-ranking civil-service employee in the Government; and if he comes and talks, it would be much more effective than my talk. MR. FOLEY: He could be introduced in that fashion. H.M.JR: Yes, he is the highest-ranking civil-service employee. Dan accepts. 283 - 32 - MR. BELL: I accept. H.M.JR: All right. Do you check, Mrs. Klotz? MRS. KLOTZ: Yes, I introduced it. I suggested it. H.M.JR: You suggested it? MR. BELL: Just a dream, as far as you are concerned. MRS. KLOTZ: I said it. Somebody suggested McReynolds, and I suggested Dan Bell. utes. H.M.JR: All right. I have got to stop in three minMR. BUFFINGTON: Nothing. MR. SULLIVAN: You want me to talk with George, or rather, with Doughton, on that joint committee to hear you with Heintz and the rest of them? H.M.JR: Any time - Tuesday or Wednesday. MR. SULLIVAN: That is all. MR. FOLEY: Harry and I saw Jones in connection with the sale to the Metals Reserve Corporation of the five million ounces of silver ordinary. I was going to-H.M.JR: What is silver extraordinary? MR. FOLEY: We haven't gotten any of that. I think you have to have it longer to get extraordinary. It is just ordinary now. The other thing is we have extended the license to include not only securities but also currency, so that all currency that comes in now over two hundred fifty dollars in amount goes to a Federal Reserve Bank, and there the person has to explain where he got it, what he intends to do with it. - 33 - did? 284 H.M.JR: Were you boys in on the thing that Brazil MR. WHITE: Yes, in the earlier stages. When he was down here, he raised the question. He initially wanted us to do something. Foley said I would see about it when I came back. We talked about it, and this resulted finally from that. Ed sent them a cable yesterday congratulating them on their prompt cooperation. H.M.JR: All right, the best way is you walk over with me. As we wait for the President, you can talk to him. MR. GASTON: On this letter of Jesse Jones asking that the Secret Service protect the silver, not only in transportation but in the hands of the ultimate users, Frank Wilson talked to me about that several days ago. I had to go back and tell Jesse Jones' representative we wouldn't do that after looking at the contract, which makes them solely responsible, but we would give them the advice on how to guard it. Then Jesse writes you this letter in which he asks the same thing, that we undertake to guard the silver. There are just two. things we could do. I could write and tell him we won't guard it but will give advice in forming an organization for guarding it, or we could write and tell them we will assign a man or two to them and let them organize and develop a guard organization, for which we will not be responsible. H.M.JR: Which do you recommend? MR. FOLEY: They also could provide in their lease that the lessee-MR. WHITE: We ought not to have anything to do with it. MR. FOLEY: I wouldn't, either; let them make that provision. MR. GASTON: We have already told them that we will suggest to them - give them advice about what kind of an organization is desirable. We referred them to Maloney 285 - 34 - particularly, in New York, who is an expert in that sort of thing. I think that is as far as we ought to go. H.M.JR: I will leave it with you. Whatever you do will be O.K. Anything else? MR. GASTON: You might be interested to know that some time ago Turkey offered some opium in trade for wheat; and we put it up to the Board of Economic Warfare, and the State Department didn't want to trade wheat for opium. The British made the trade of wheat for opium, and then passed it over to us. The State Department and the Defense Supplies Corporation assumed responsibility for the contract, and the price, measured by the current price of wheat, is just about twice the going price for opium. Now, Turkey offered another thousand chests of opium. Ambassador Steinhardt has accepted their proposition at a price which is again just exactly twice the going price for opium. I say it is a State Department matter between them and RFC, whether they want to go through with a thing like that; but Turkey is just holding us up, and I don't think they are going to get any good will out of it. H.M.JR: They have a word in Turkey for that, known as "Baksheesh." MR. GASTON: They have been playing a smart game, thirty-three dollars a pound. H.M.JR: Well, maybe you can use some of the State Department sterling, moving-picture sterling, in England to pay for it. MR. GASTON: They may have some if Turkey-- H.M.JR: Incidentally, if you want any moving-picture stars, Harry White is the fellow to see now. MR. ODEGARD: That is the kind of carrot Harry White needs. (Laughter) He doesn't need much, either. MRS. KLOTZ: That is marvelous. H.M.JR: O.K. MR. WHITE: I had a dream last night. 286 MAY 22 1942 Mr. Ted R. Damble, War Savings Staff. Sirs You are hereby appointed as Assistant to the Secretary, with compensation at the rate of 81.00 per anima, payable from the appropriation "Expenses of Loans, Ast of September 24, 1917, as Amended and Extended," the appointment to be effective today. Very truly yours, (Signed) Henry Morgenthau, Jr. Secretary of the Treasury. 287 May March 22, 1942. Dear Jesse: This is in response to your letter of May 19 on the subject of guarding the Treasury silver which is to be lent for use as bus bars and for other industrial purposes in order to relieve the shortage of other strategical materials. This matter has been discussed, informally, by your representative with Chief Wilson and Assistant Chief Murphy of the Secret Service and we have come to the conclusion that it will not be feasible for us to supply a Secret Service force adequate to safeguard the silver during its transportation, fabrication and use. Our force, under present conditions, is simply not adequate to supply the necessary number of men. By my direction, however, Chief Wilson will stand ready to give such advice as he can as to appropriate measures for safeguarding the silver and may be able to assist your people in recruiting the necessary organisation. I regret that it does not seem possible for us to do more than this. Sincerely, The Honorable The Secretary of Commerce. n.m. c. photo file 7 is is thompson By Messenger Brown 9:16 5/26/42 HEG:pm THE SECRETARY OF COMMERCE WASHINGTON May 19, 1942. Dear Henry: In connection with the program to use Treasury silver for bus bars and other purposes in order to relieve the shortage of other critical and strategical materials, it is necessary that the utmost protection be afforded in guarding the silver particularly during such times as it is in transit by truck and in the cossession of the various fabricating companies. I feel that this can be most adequately accomplished by the use of the Secret Service Personnel who are experienced in this respect. I am advised that this has been discussed informally with representatives of the Secret Service and can be accomplished if you are agreeable. It would be appreciated if you would advise mc as to your willingness to make this arrangement as soon as possible. Cordially yours, Jone from The Honorable, The Secretary of the Treasury, Henry Morgenthau, Jr., Washington, D. C. 289 ESTIMATED PUBLIC DEBT OPERATIONS FOR JUNE AND JULY July June Trust fund investments Savings bonds - $ 800 M $ 130 M 1,000 Treasury bills 400 500 Tax notes 150 250 1,750 2,000 $3,100 M $3,880 M Major financing Treasury bill and Tax note maturities in June disregarded for purposes of this statement. May 22, 1942 seen tooth Lot llaw 5/22/42. cc - Mr. D. Bell CONFIDENTIAL 290 Enter with May 22, 1942 3:13 p.m. Merriner Eccles: Hello. Henry? HMJr: I was just going out of the door. E: HMJr: E: Oh. I got this letter from you on this Chicago situation. Yeah. I didn't want to reply in a letter at this time, and I wanted to tell you that I appreciate getting the letter, and I've been authorized by the Board HMJr: Yeah. E: ..... HMJr: Good. E: So I'm going to get him on the phone HMJr: Good. and have him come in here. E: HMJr: E: HMJr: to ask this fellow for his resignation. Yeah. I also think that there are others involved. I think this fellow Cummings, if we could get at it, I'm sure we'll find he's - this fellow Lewie is rather a naive person Yeah. and he's a fellow I'd like to have had E: out of there, but Szymczak and some others felt he ought to serve this year out. HMJr: E: HMJr: Yeah. And - I mean, they felt this last year, when we didn't want to appoint him. Yeah. 291 -2E: But I'm sure he's just Cummings' man. Yeeh. And I think that what he's done, he's done no doubt with Cummings' assistance. HMJr: E: Well, Marriner, I'll be back here late tomorrow, and Monday I'll get in touch with you. Bell is entirely familiar, but I'd like to sit down and talk to you about it myself. Well, we're going to send an examiner HMJr: Yes. HMJr: a fellow out there to see what - to be sure that there's nobody in Fed involved, and likewise whatever we can find additional, we'd like to find it. In the meantime, there's enough on this other fellow that we're going to bring him in and ask for his resignation. And just to show no favoritism, we're going into the other banks. E: Well, that's - I think that's a good thing. HMJr: We're going into the other banks. HMJr: E: Well, it wouldn't - there's nothing illegal about it, but the thing that gete me is It's unethical. here's a fellow that's a chairman of the Federal Reserve Bank and the Federal Reserve Banks have got the job of policing this very thing. HMJr: Yeah. And - I mean, that in itself is - well, it's an immoral thing to do. HMJr: Yeah. I agree with you a hundred per cent. So I just wanted to let you know that we're 292 -3going to follow through on it. HMJr: Well, I'm delighted, and I'd like to talk to E: Yeah. Okay. HMJr: I thank you. E: Good-bye. you about it Monday. 293 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE May 22, 1942 Secretary's files FROM Ferdinand Kuhn, Jr. Time Magazine is apt to be stupid and sarcastic about any public figure, and I think it would be unwise and futile to have such a talk with a Time representative. J.K. 294 May 22, 1942. Ferdie Kuhn ,ecretary Morgenthau I wish you would read Time magazine this week and their write-up on me - the stupid, sarcastic manner in which they refer to me. I don't know whether anything can be done, but I wonder if you would be willing to sit down and have a talk with them on how they cover the Treasury and me, in particular. Only do this if you are so inclined and think well of it. See Kuhn's memo 05/03/92 295 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE May 22, 1942 Secretary Morgenthau FROM Mr. Haas Subject: Recent changes in Prices and Yields of Government Securities Taxable bonds were strong during the week ended last night. The 2-1/2's of 1967-72 gained 12/32, rising to 101-5/32. This compares with a price of 100-27/32 on March 19. The premium on the new 2's of 1949-51 reached a new high at 16/32 yesterday, as compared with 11/32 a week ago. The market for taxable notes was practically unchanged during the week. The announcement in the press yesterday morning that the July HOLC and RFC securities would be refunded into a Treasury note occasioned no weakness in the note market yesterday. In general, long-term taxable securities are somewhat above their March 19 prices, while medium and short-term taxable securities remain below. A similar situation obtains with respect to tax-exempt securities. (See attached chart and tables.) For the first time in two months, the bill rate of the current week did not increase over that of the previous week. This week's rate of 0.365 percent was down fractionally from last week. Certificates of indebtedness closed last night unchanged from a week ago, being quoted at 0.49 percent. After several successive weeks during which the Federal Open Market Account increased its holdings of Government securities, there was a net decline of $17 millions in its holdings during the week ended last night. Purchases of $14 millions during the week, consisting almost entirely of bills, were offset by bill maturities aggregating $21 millions and by sales of certificates amounting to $10 millions. It is reported that increased demand in the market for bills and certificates was responsible for the cessation of portfolio increases by the Account. Attachments. 296 Table I Price and Yield Changes of United States Securities May 14, 1942 to May 21, 1942 (Based on mean of closing bid and asked quotations) Yields Prices Security May 14, May 21, 1942 1942 Change May 14, May 21, 1942 1942 (Percent) (Decimals are thirty-seconds) .37 .36 -.01 .49 .49 .00 .00 .52 .52 .00 .00 +.01 .89 .96 .89 .96 .00 .00 .00 1.10 1.10 .00 +.06 +.03 1.80 1.93 1.76 1.92 +.05 1.95wi 1.93 +.07 +.09 +.08 1.99 2.08 2.13 2.26 1.96 2.05 2.10 2.23 -.03 -.03 -.03 -.03 - 111a Change - Average rate last issue artificates - - 11/1/42 rable Notes 100.06 99.22 99.08 99.20 9/15/44 12/15/45 3/15/46 rable Bonds 100.03 103.22 101.04 102.28 101.12 103.08 +.12 +.12 2.46 -.02 101.05 2.44 100.25 .04 100.21 100.29 100.26 100.26 101.04 101.01 100.20 101.09 100.25 -.01 +.01 .20 .02 .09 -.02 100.20 100.30 -.01 -.02 -.02 -.01 -.02 -.03 .37 .39 103.00 103.15 104.16 102.31 100.11wi 2-1/2 2-1/2 2-1/2 6/15/62-67 9/15/67-72 Notes 12/15/42 1-1/8 1-1/8 6/15/44 9/15/44 3/15/45 Bonds 2-3/4 2-1/2 4-1/4 2 2-3/4 2-1/2 3-1/8 2-1/2 2-1/2 2-3/4 4/15/44-46 12/15/44-54 9/15/45-47 12/15/45 2 2-1/4 2-7/8 2-3/4 2-3/4 2-3/4 107.24 105.21 105.10 3/15/46-56 6/15/46-48 6/15/46-49 10/15/47-52 12/15/47 3/15/48-51 109.22 107.11 107.24 115.08 104.20 107.19 9/15/48 12/15/48-5 12/15/49-5 12/15/49-53 9/15/50-5 6/15/51-51 107.00 104.18 110.22 106.14 12/1 -.04 -.01 -.02 101.10 100.17 100.16 100.10 103.31 101.04 100.14 2-1/2 2-1/4 100.06 99.22 99.09 99.20 106.19 108.15 110.20 105.02 103.18 105.02 110.01 109.07 109.14 110.01 - 1/2% 100.25 100.24 101.02 101.00 100.18 101.06 100.22 103.15 104.16 107.23 105.19 105.09 109.21 107.10 107.23 115.04 104.20 107.20 107.00 104.19 110.24 106.18 106.26 108.23 110.26 105.08 103.22 105.09 110.08 109.19 109.26 110.08 Treasury Department, Division of Research and Statistics. 43 .44 .43 45 .45 .48 -.11 +.02 +.04 +.03 +.02 +.03 .48 +.03 -.03 47 .50 +.03 -.01 .60 .58 .79 -.02 -.04 .00 .00 .75 .86 .95 -.01 -.02 -.01 -.01 -.01 -.01 -.04 .00 :45 .88 .96 1.02 1.03 +.01 .99 .99 .00 1.16 1.15 1.18 1.32 1.14 1.16 1.15 1,18 1.34 1.14 +.01 1.39 1.38 .00 1.34 1.34 1.27 1.61 1.58 +.01 +.02 +.04 +.07 1.28 1.62 1.60 1.65 +.08 1.74 +.06 +.06 1.76 +.04 +.07 +.07 +.12 +.12 +.07 -.02 -.01 1.68 1.65 1.78 1.99 2.01 2.06 2.10 1.62 1.71 1.74 1.65 1.63 1.76 1.97 1.98 2.03 2.08 .00 .00 .00 +.02 .00 -.01 .00 -.01 -.01 -.02 -.03 -.03 -.02 -.03 -.02 -,02 -.02 -.03 -.03 -.02 May 21, 1942. 297 Table II Price and Yield Changes of United States Securities March 19, 1942 to May 21, 1942 (Based on mean of closing bid and asked quotations) Prices May 21, 1942 1942 Change March 19, May 21, 1942 1942 (Decimals are thirty - seconds) Taxable Bonds 12/1 2-1/2 2-1/4 2-1/2 2-1/2 2-1/2 5/15/62-67 9/15/67-72 Wholly Tax-exempt Notes 9/15/42 12/15/42 6/15/43 1-1/8 1 1-1/8 Partially Tax-exempt Bonds 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 99.31 99.21 99.09 .37 .52 +.15 .76 .84 .89 .96 1.02 1.10 +.13 +.12 +.08 1.76 1.92 1.93 1.96 2.05 2.10 101.28 101.04 -.18 -.19 1.67 1.83 100.12 103.23 101.06 101.10 100.17 100.16 100.10 103.31 101.12 -.02 103.05 103.08 +.03 1.96 2.09 2.12 2.24 100.27 101.05 +.10 2.46 101.04 101.11 100.20 100.30 100.25 100.24 101.02 101.00 100.18 101.06 100.22 -.16 -.13 5/32* 2/32* 102.31 -.22 -.23 -,22 -.20 -.19 -.19 101.04 101.03 101.16 100.27 101.16 101.00 3/15/46-56 /15/46-48 6/15/46-49 10/15/47-52 110.08 107.28 108.08 115.20 105.06 108.11 106.06 105.28 104.23 103.15 104.16 107.23 105.19 105.09 109.21 107.10 107.23 115.04 104.20 .49 +.08 +.06 -.11 -.11 -.14 -.10 -.09 -.10 -.10 -.19 -.18 -.17 -.16 -.03 .22 -.02 .02 .09 .39 +.17 +.18 +.11 39 .48 .48 +.11 +.09 .41 .50 +.09 .41 .58 +.17 .57 .72 .75 +.18 +.14 +.04 .34 .37 .91 .86 .95 1.03 .99 1.11 1.09 1.16 +.05 1.15 1,18 1.34 +.06 1.13 1.33 1.14 -.01 1.38 .00 +.01 9/15/48 12/15/48-50 12/15/49-52 12/15/49-53 -.07 -.02 1.33 1.28 1.34 1.27 +.02 1.61 1.60 +.06 +.05 1.66 1.74 1.58 1.62 108.18 110.24 106.18 106.26 108.23 1.65 110.20 110.26 +.06 +.11 +.12 1.78 1.74 1.70 1.65 1.68 1.63 +.13 1.80 2.00 1.76 1.97 2.01 2.07 2.10 1.98 2-1/4 6/15/58-63 12/15/60-65 110.00 105.08 103.22 105.09 110.08 109.19 109.26 110.08 +.08 +.09 +.14 +.08 +.05 +.01 1.15 107.00 104.29 103.10 104.28 110.00 109.10 109.12 +.09 +.09 .94 .90 107.07 104.21 110.22 2 +.17 .44 .45 3/15/48-51 2-1/4 -5/32* -4/32* .43 .26 .26 -.08 9/15/51-55 .00 2.44 107.20 +.02 +.09 2.23 107.28 106.16 106.20 +.09 -.04 -.02 -.01 1.38 104.19 +.16 -.06 -.09 -.12 -.09 99.20 103.21 104.06 12/15/47 100.06 99.22 99.29 6/15/43-47 10/15/43-45 4/15/44-46 12/15/44-54 9/15/45-47 12/15/45 2-3/4 2-7/8 2-3/4 2-3/4 2-3/4 100.12 101.10 6/15/44 9/15/44 3/15/45 2-3/4 2-1/2 - 12/15/45 - Taxable Notes - 11/1/42 .36 .20 - Certificates 1/2% - - Average rate last issue (Percent) - Bills Change - March 19, - Security Yields 1.71 2.03 2.08 -.01 -.04 -.02 -.04 -.03 -.04 -.05 -.05 -.04 -.03 -.03 -.04 -.02 May 21, 1942 Treasury Department, Division of Research and Statistics. Excess of price over zero yield. TREASURY DEPARTMENT 298 INTER OFFICE COMMUNICATION DATE May 22, 1942 ecretary/Morgenthau FROM M Mr. Has I and transmitting herewith a group of rough charts that compare by Federal Reserve Districts the amount of savings bonds sold since the beginning of the month with the quota for the month of May. 1 The figures are presented cumulatively 80 as to show the aggregate progress that has been made to date in each district. The sales of war savings bonds are below the quota, it is noted, in the three Federal Reserve Districts along the northeast Atlantic coast -- the Boston, New York and Philadelphia Districts. These are the three Districts in which the market for F and G bonds lies, and any failure of F and G sales to reach the established quota 18 immediately reflected in the charts. We should like to portray this situation more clearly, however, and are accordingly undertaking to have the figures for the charts classified 80 as to show E bond sales separately from the sales of F and G bonds. Attachments 1 The May quota for the country as a whole has been distributed pro rata by Districts. The resulting figures take into account the adjustments that have been made in the national totals for the seasonal trend of the total sales by the days of the week, and the F and G bond sales by the weeks of the month. 009 OF CUMULATIVE DAILY QUOTAS AND SALES U.S. RESERVE SAVINGS of Dollars) (At Issue Price DISTRICTS. HAIT 1942 FIRST DISTRICT BOSTON sales 12 15 16 1922 18 19 120 21 22 23 2F 27 28 CUMULATIVE DAILY QUOTAS AND 1300, U.S. SAVINGS (A) issua price in Billions of BONDS, dollars) BY FEDERAL - DISTRIOTS, MAT. 1942 SECONT DESTRICT a TOME quota ( sales CUMULATIVE DAILY QUOTAS AND 304 OF U.S. SAVINGS BONDS, BY FEDERAL RESERVE DISTRICTS, MAY 1942 (At Issue Price In Millions of Dollars) THIRD DISTRICT - PHILADELPHIA Tuotes sales 6 4 8 9 11 12 13 14 15 16 7 2 5 MAT, 1942 2 18 19 20 21 32 23 25 26 27 as 29 1 CUMULATIVE DAILY QUOTAS 303ALES OF (At U.S. Issue SAVINGS Price BONDS, In Millions BY FEDERAL of Dollars) RESERVE DISTRICTS. MAY 1942 FOURTS DISTRICT 4 CLEVELAND Sales 5 quotas 16 MAZ, 1942 18 18 20 a 22 23 25 27 and CUMULATIVE DAILY QUOTAS AND SALES OF U. 8. SAVINGS BONDS, BY FEDERAL RESERVE DISTRICTS. MAY 1942 30% Issue Price In Millions of Dollars) FIRM DISTRICT - RICHMOND sales quotas B 9 11 12 13 14 7 MAY. 1942 1 2 15 16 15 18 21 CUMULATIVE DAILY 304 QUOTAS AND SALES OF U. S. SAVINGS BONDS, BY FEDERAL RESERVE DISTRICTS, MAY, 1942 (At issue price in millions of dollars) SIXTH DISTRICT ATLANTA of dollars water quotas 4 a 11 8 7 6 9 12 13 14 15 5 MAY 1942 16 18 19 20 21 22 23 25 26 27 as 29 1 CUMULATIVE DAILY 305 QUOFAS AND SALES SAVINGSof BONDS, BY FEDERAL RESERVE DISTRICTS, MAY. 1942 at issue price.OFinU.S. millions dollars) SEVENTH DISTRICE CHICAGO salas qubtas 11 8 5 7 6 4 9 12 13 14 15 16 18 19 20 21 22 23 25 26 27 28 29 1 2 CUMULATIVE DAILY QUOTAS AND-BALES 306 OF U. S. SAVINGS BONDS, BY FEDERAL RESERVE DISTRICTS, MAY 1942 (At Issue Price in Millions of Dollars) dollars RIGHTS DISTRICT - ST. LOUIS sales quotas 6 7 is B in 12 13 14 15 16 MAY. 1942 15 18 20 21 22 23 25 26 27 23 28 CUMULATIVE DAILY SALES OF U.S. SAVINGS BONDS, BY FEDERAL RESERVE DISTRISTS, MAY 1942 (At Issue Price In Millions of Dollars) NINTH DISTRICT - MINNEAPOLIS quotas sales E 9 11 12 13 14 15 16 MAY. 1942 18 19 20 21 22 23 25 25 27 23 29 308 CUMULATIVE DAILY QUOTAS AND SALES OF U.S. SAVINGS BONDS, BY FEDERAL RESERVE DISTRICTS, MAY 1942 (At Issue Price In Millions of Dollars) TENTH DISTRICT - KANSAS CIFF quotas 5 5 7 8 9 11 12 13 14 15 16 1 19 20 21 22 23 25 26 MAT. 1942 27 28 29 CUMULATIVE DAILY QUOTAS AND SALES OF U. 8. SAVINGS BOEDS, BY FEDERAL RESERVE DISTRICTS. MAY 1942 309(4) Issue Price in Millions of Dollars) DIORNIOS - DAESAS set of dollars WHISE been 6 9 is n MAY. 19.12 CUMULATIVE DAILY QUOTAS 310 OF U.S.(At SAVINGS BY Millions FEDERAL of RESERVE DISTRICTS, MAY 1942 IssueBONDS, Price In Dollars) + SAN FRANCESOO que the salca Y 8 9 11 12 13 14MAT 15 1942 16 18 19 20 a 22 33 25 26 27 TREASURY DEPARTMENT copy the Mrs. m. 311 5/28/42- WASHINGTON May 22, 1942. MEMORANDUM FOR THE SECRETARY: Chicago Rally: Amphitheater, Wednesday, May 27. Tentative program for Rally as of May 22, Assembly Music - Army Band and local orchestras (white and colored). Invocation - Leading colored minister. STAR SPANGLED BANNER - Army Band and audience. Oath of Allegiance to the Flag - Ranking Army Officer. Chicago Symphony Orchestra. Introduction of local committeemen by State War Savings Official. Marian Anderson - solo. Mayor Kelley. Richard Crooks - solo Olivia de Havilland - Introduction. Introduction of local enlistees. Benediction by leading white minister. DEFENSE BUY UNITED STATES BONDS locations Ted R. Gamble cohios to Murs m. enjoyed Mrs. m 8/28/42TREASURY DEPARTMENT WASHINGTON May 22, 1942. MEMORANDUM FOR THE SECRETARY: New York Rally, Lewischn Stadium, Wednesday, June 5. Tentative program for Rally as of May 22. Assembly Music - Army Band and local erohestras (white and colored). Invocation - Leading colored minister. STAR SPANGLED BANNER - Army Band and audience. Oath of Allegiance to the Flag - Ranking Army Officer. Introduction of local committeemen by State War Savings Official. Marian Anderson - solo. Secretary Inkes. Paul Robeson - solo. Local Choirs. Olivia de Havilland - Introduction. Induction of local enlistees. Benediction by leading white minister. We are working on the Tuskegee Quartette. DEFENSE BUY UNITED STATES SAVINGS BONDS AND STAMPS Ted R. Gamble Copy to Mrs. m. 5/55/42 313 TREASURY DEPARTMENT WASHINGTON May 22, 1942. MEMORANDUM FOR THE SECRETARY: Detroit Rally: Olympia Stadium, Sunday, May 31. Tentative program for Rally as of May 22, Assembly Music - Army Band and local erchestras (white and colored). Invocation - Leading colored minister. STAR SPANGLED BANNER - Army Band and audience. Oath of Allegiance to the Flag - Ranking Army officer. Introduction of local committeemen by State War Savings Official. Marian Anderson - solo. Justice Murphy. Paul Robeson= solo. Local Choirs. Olivia de Havilland - Introduction. Induction of local enlistees. Benediction by leading white minister. Ted R. Gamble DEFENSE BUY STATES SAVINGS BONDS AND STAMPS 99.8 99.6 98.6 97.8 98.6 99.6 98.5 98.1 90.5 82.7 82.6 83.7 76.9% 100.6 100.5 102.2 100.5 100.0 Quota Sales as % of to Date : May 22, 1942. to 87.2 47.1 Date 430.4 408.1 385.0 368.8 335.8 318.5 297.3 275.3 252.4 236.0 202.3 184.1 160.9 135.4 107.1 504.7 470.0 452.1 600.0 574.7 548.7 522.3 May 1 Quota, $ 26.0 : Total 88.6 72.0 39.4 to 385.1 371.1 337.4 317.9 296.2 271.5 246.8 232.8 201.5 181.4 157.9 122.6 440.0 410.0 Date May 1 $ 20.0 Actual Sales 35.3 34.0 16.6 32.6 19.4 14.0 31.3 20.0 23.6 30.0 24.9 14.0 33.7 19.5 21.7 24.6 24.8 Daily $ 20.0 83.8 81.9 80.2 80.7 80.3 79.8 79.0 78.1 77.2 77.5 78.6 78.0 79.1 75.2 67.1 64.7 71.0 60.8% Sales Quota as % of to Date to 204.9 192.3 186.1 178.4 169.6 159.2 153.0 142.1 136.5 129.3 120.8 110.6 104.2 May 1 Quota, 92.6 86.1 76.9 64.9 49.3 39.4 21.4 250.0 238.7 226.2 212.5 Date* $ 12.0 : : 94.4 85.4 80.8 72.8 67.2 60.8 48.8 33.1 25.5 15.2 to 149.5 138.9 127.7 123.5 114.1 108.9 102.1 Series F and G Date May 1 $ 7.3 Actual Sales 10.6 11.2 12.1 15.6 10.3 4.2 9.4 5.2 6.8 7.7 9.0 4.6 8.1 5.6 6.4 7.6 7.9 Daily From May 1 through May 21, 1942 $ 7.3 Sales of United States Savings Bonds (At issue price in millions of dollars) Compared with Sales Quota for Same Period 96.0 97.3 94.6 90.7% 115.3 113.7 114.0 114.7 115.2 114.8 115.5 114.6 113.8 115.3 117.3 116.5 115.5 104.7 Quota Sales to Date as % of to 98.0 84.0 70.5 57.8 47.8 25.7 Date Quota, 309.8 299.8 277.7 266.0 252.0 238.5 225.8 215.8 193.7 182.0 168.0 154.5 141.8 131.8 109.7 322.5 350.0 336.0 May 1 $ 14.0 : Series E account to 97.0 73.8 55.5 46.5 24.3 12.7 247.5 223.2 208.9 194.0 177.1 161.3 152.0 128.7 114.2 290.5 271.1 257.4 Date May 1 into 9.8 13.7 9.4 8.9 Actual Sales 12.7 11.6 18.4 22.3 23.2 17.2 14.5 15.8 23.3 16.9 14.9 14.3 19.4 24.3 Takes United States savings both the daily trend during the week and the monthly trend during the month. Actual figures bonds. Figures have been rounded and will not necessarily add to totals. of the Secretary of the Treasury, Division of Research and Statistics. Daily 1 Date 2 4 5 6 7 8 9 11 12 13 14 15 16 18 19 20 21 22 23 25 26 27 28 29 Source: office sales are deposits with the Treasurer of the United States on account of proceeds of sales of 93.4 93.1 94.5 87.0% 105.1 108.3 108.4 109.4 101.9 102.6 103.2 102.6 101.4 102.1 102.0 100.4 101.7 100.3 Quota Sales as % of to Date : May 22, 1942. to 94.9 77.3 41.7 Date 186.0 167.3 144.3 120.3 311.6 288.6 264.6 239.2 221.6 330.3 365.9 383.5 408.8 432.8 337.4 371.1 385.1 410.0 440.0 14.0 24.9 30.0 81.6 82.7 455.8 474.5 510.1 577.0 553.0 527.7 600.0 May 1 Quota, $ 23.0 : Total to 88.6 72.0 39.4 157.9 122.6 Date 317.9 296.2 271.5 246.8 232.8 201.5 181.4 May 1 $ 20.0 : Actual Sales 32.6 19.4 35.3 34.0 16.6 23.6 31.3 20.0 24.8 14.0 33.7 19.5 21.7 24.6 Daily $ 20.0 86.4 95.0 81.1% 89.2 95.4 97.0 98.0 84.7 85.7 87.7 90.0 83.5 84.0 81.0 82.3 100.8 Quota Sales to Date as % of : to 89.8 76.3 69.3 60.3 49.8 37.1 29.5 16.0 97.4 157.7 150.1 136.6 129.6 120.6 110.1 Date* May 1 189.8 180.8 170.3 217.9 210.3 196.8 230.5 250.0 241.0 Quota, $ 9.0 : to 85.4 80.8 72.8 67.2 60.8 48.8 33.1 25.5 15.2 94.4 114.1 108.9 Series F and G 102.1 123.5 127.7 9.4 4.2 138.9 149.5 11.2 10.6 Date May 1 $ 7.3 : 5.6 6.4 7.6 7.9 7.7 9.0 4.6 8.1 5.2 6.8 Actual Sales 15.6 10.3 12.1 $ 7.3 Daily From May 1 through May 21, 1942 : : Sales Savings Bonds : (At issue price in millions of dollars) Compared with Sales Quota for Same Period 96.0 97.3 94.6 90.7% to Date 115.3 117.3 116.5 115.5 104.7 Quota Sales 115.3 113.7 114.0 114.7 115.2 114.8 115.5 114.6 113.8 as % of : : to 25.7 47.8 98.0 84.0 70.5 57.8 109.7 131.8 154.5 141.8 350.0 336.0 322.5 309.8 299.8 277.7 266.0 252.0 238.5 225.8 215.8 193.7 182.0 168.0 Date May 1 $ 14.0 Quota, Series E to 12.7 24.3 46.5 55.5 73.8 97.0 Date 114.2 128.7 152.0 161.3 177.1 194.0 208.9 223.2 247.5 257.4 290.5 271.1 May 1 8.9 11.6 18.4 22.3 9.8 9.4 Actual Sales 23.2 17.2 14.5 Takes 15.8 23.3 16.9 14.9 14.3 24.3 16 18 13.7 19.4 20 21 United into account daily trend within the week, but does not take into account the Grend by weeks during the month. Actual sales figures are deposits with the Treasurer of the United States on account of proceeds of sales of States savings bonds. Figures have been rounded and will not necessarily add to totals. Daily $ 12.7 : 1 2 4 5 6 7 8 9 11 12 13 14 15 19 22 23 25 26 27 28 29 Source: Office of the Secretary of the Treasury, Division of Research and Statistics. Date 316 TREASURY DEPARTMENT WASHINGTON May 22, 1942, MEMORANDUM FOR THE SECRETARY: Dr. W. I. Meyer of Cormell, has agreed to give us a hand and will have considerable time during the months of July and August to spend on our agricultural program. He was delighted to know that you wanted him to counsel with us. I am to contact him again on June 1, to take care of all the formalities relative to his acceptance. Ted R. Gamble DEFENSE BUY UNITED STATES MVINGS BONDS (request by the seey 5/27/95 317 FIELD MEMORANDUM Subject: Methods and appeals in the War Savings quota Campaign. May 22, 1942. The response to the War Savings Staff's intensive quota campaign has been heart-warming and encouraging. Editorials and news stories from every part of the country have been enthusiastic in their praise of the manner in which the campaign is being conducted. There is ample evidence that the War Savings Staff now enjoys the confidence and good will of an overwhelming majority of the American people. This good will is a priceless asset, indispensable to our continued success, and we must therefore be on guard against doing anything by word or action that will endanger or undermine it. Every case of intimidation, threat, or coercion in promoting the sale of War Savings Bonds and Stamps will tend to undermine public confidence in the sincerity of our intention to make this a truly voluntary effort. It is therefore against Treasury policy for anyone connected with the War Savings Staff, or acting under its auspices, to use intimidation or threats of any kind to induce -2- 318 people to sign pledges, payroll authorisation cards, or bond applications. An example of the kind of appeal we must avoid is the following from a recent speech delivered at a war bond rally in an Eastern city. In the course of his remarks the main speaker on this occasion said: # "If there is any person in this hall or in this city, who cannot subscribe to these pledges, they do not belong here, but should march forthwith to an internment camp where they will be properly guarded with others of their type whom the F.B.I. has taken out of circulation for the duration." In addition to the harmful effects which such methods have upon the general morale of the people, there is one practical consideration which we must always keep in mind. War Savings Bonds and Stamps may be redeemed for cash. There is nothing to prevent the purchaser of ambond from turning it in for cash sixty days after the date of issue. If any considerable number of people are compelled to buy these securities unwillingly under duress, the ratio of such redemptions to total sales is almost certain to increase, The result would be in all such cases that the Treasury would have nothing to show for its pains but a rather expensive bookkeeping transaction. This means simply that ours is a "selling" job in the best sense of the word. We must persuade people to buy War Savings Bonds willingly and enthusiastically, by bringing then to realize -3- 319 that in doing so they serve their country today and themselves tomorrow. We must not only "sell" bonds and stamps but we must see to it that they stay sold for the duration of the war at least. This memorandum is being sent to you solely because in one or two instances things have been done and said by over-zealous people, acting in our behalf, which are not consistent with the Treasury's basic policy of making this a genuinely voluntary savings program. The number of such cases has thus far been negligible. The fulsome praise and wholehearted support we have received in every section of the nation and from leaders in every walk of life are well earned. We have a right to be proud of the record we have made. I an enclosing with this memorandus a few representative quotations from newspaper editorials which should serve as an inspiration to us all. I know that when the war is won and our work is done we shall all take justifiable pride and satisfaction in having had a part in an enterprise which so clearly demonstrates a working democracy at its best. (Signed) a. Morgenthan, in 320 1. TIME MAGAZINE - May 25, 1942 COMPULSORY VOLUNTEERING: "The U. S. thought back to the whoopla, the tormented emotions, the naked coercion of the Liberty Loan drives of World War I. and it didn't like what it remembered. Houses of non-buyers, then, were painted yellow by vigilantes. Citizens were free to buy voluntarily -- provided they bought. Said Historians Charles and Mary Board: "Whoever refused to answer the call was liable to be blacklisted by his neighbors or associates and enrolled in the Doom Book in the Department of Justice. "Henry Morgenthau was not for this kind of "voluntarism -in a nation fighting for freedom, he still shied away from candid compulsion. And he was as yet unwilling to admit that truly volun- tary sales will not suffice." 2. COLORADO SPRINGS ( COLO.) GAZETTE - May 1, 1942 "Liberty Bond sales, nominally voluntary, were made all but compulsory, and some of the methods employed made up one of the blackest pages in the World War effort, a fact now seemingly overlooked." 3. CHATTANOOGA (TENN.) NEWS FREE PRESS - May 1, 1942 "There is no coercion in this campaign. Typical of the appeals made throughout the nation reads one from Oregon where a brilliantly successful campaign already has been waged, as follows: "This is still a voluntary program No coercion is to be used, either studied or thoughtless. Explanation, education, good salesmanship are certainly to be desired, but under no condition should any signer do 80 under duress of "sign this pledge or else". It is up to you to keep this a pleasant sales effort in your district. (This Oregon appeal is played up in bold-face type.) -2- 321 4. ATLANTA (GA.) CONSTITUTION - May 2, 1942. "The cooperation freely given by Atlantans to the War Bond campaign is an inspiring example of the single purpose of every American - the winning of the war. This is cooperation that can't be bought. It can't be coerced. It is the free ex- pression of free people in the cause of the country. # 5. JOPLIN (MO.) GLOBE - May 3, 1942 "If circumstances arise which make it ispracticable for you to pay as much as you pledge -even if later on you should have to stop buying Bonds and Stamps completely -- 80 stigma would attach to you, Uncle Sam would bring no pressure to bear to make you pay But if you have an income you are asked and expected to use some part of it as a loan to Uncle San to help prosecute this war. 6. GREENSBOROT NORTH CAROLINA? RECORD - May 1, 1942. "The Treasury Department favors a volun- tary rather than a compulsory plan for the sale of War Savings Stamps and Bonds, and in this its views coincide with the views of the vast majority of the American people. 7. PROVIDENCE (R.I.) JOURNAL, - May 1, 1942 "Secretary Morgenthau has staked his reputation as a prophet on his conviction that the American people will voluntarily buy the bonds necessary to victory. It will be a poor American who disappoints him. 8. NIAGARA FAILS ( N.Y.) GAZETTE - May 4, 1942 "So far, all sales have been on a volun- tary basis. Various pay roll allotment and similar plans have been put into effect, and have involved some pressure among sales groups to make records, but the proposal to levy part of all income. including wages and salaries, has not been advanced beyond the discussion stage. However, the Treasury Department believes that If the great campaign now under way does not yield a quota of $1,000,000 000 a month, some form of compulsory subscribing will be put into effect. "The canvass which is now being conducted is well organized and is a credit to the Treasury -3- 322 1 Department, the state and local organizations and the hundreds of thousands of workers who have qualified to carry the appeal into every home. 9. KENOSHA (WIS.) NEWS - May 1, 1942 "Sales of war stamps and bonds have been kept on a voluntary basis. The success or failure of this campaign throughout the entire country may decide whether or not this beneficial policy can continue." 10. ALBANY (N.Y.) NEWS - May 2, 1942 "An intensified caspaign for the sale of War Savings Bonds, with an ultimate goal of a billion dollars a month, has opened throughout the nation under direction of the Treasury Department. Tens of thousands of volunteer Minute Men will endeaver to bring the appeal to the more than 50 million income earners of the country to urge upon every one the duty of setting aside 10 per cent of income for the purchase of these securities. "Success of the campaign would be a rousing demonstration of democracy's capacity and will to carry the load by voluntary effort, Mr. Hitler would be very glad to see it fail. 11. AUGUSTA (GA.) HERALD - May 3, 1942 "It is obviously a matter of both patriotisms and good sense for every person who is financially able to support this pledge caspaign to the utmost of his or her ability It is entirely voluntary on your part, but upon the success of this campaign will depend the freedom of America, for without the tanks and gund and supplies to be purchased by your investment, we cannot win this war.' "So join willingly, cheerfully, in this mobilization of American dollars in order that America will continue to be free. Sign the pledge and do your part. 12. AUGUSTA (GA.) CHRONICLE - May 3, 1942 "The Chronicle strongly dislikes any inplication that the forthcoming War Bond and Stamp caspaign is a high-pressure job of solicitation which requires professional salesmanship to make it a success in this community. This is not the proper 4- 323 picture of the campaign at all It is a happy commentary upon our democratic way of life that this campaign is being conducted on a voluntary basis. 13. NEW HAVEN (CONN.) JOUR.-COURIER - May 2, 1942 "The Treasury has set as its goal for the intensified war-bond drive that opens thismaonth an annual sale equal to 10 per cent of the national income. Since the official estimate of the national income for 1942 is $117,000,000,000. that means a bond sale of close to $12,000,000,000-8 full Billion a month or just about exactly twice the April figure." "Many of President Roosevelt's advisers have been urging the adoption of a policy of COR- pulsory bond sales, a form of forced savings, Seore. tary Morgenthau has insisted that voluntary buying can meet the quota and has staked his campaign on his conviction. It was officially adopted as Administration policy for the present in President Roosevelt seven-point program. It is up to all of us now to make good on that policy." 14. BATON ROUGE (LA.) TIMES - May 2, 1942 "Thus far, there is no compulsion in the buying of these bonds and stamps. It is all voluntary. But there is no mistaking the fact that unless there is a big response to this call, Uncle San will be demanding, not asking, a percentage of your income for this purpose. 15. NIAGARA FALLS (N.Y.) GAZETTE - May 4, 1942 "The canvass which is now being conducted is well organized and is a credit to the Treasury Department. 16. PHILADELPHIA (PA.) INQUIRER - May 4, 1942 "If these quotas aren't filled voluntarily it is conceivable that some form of compulsory savings will have to be put into effect. But the free-will plan is vastly better, provided it brings results. 17. FALL RIVER (MASS.) HERALD NEWS - May 4, 1942. stand great majority of our people, we believe voluntary rather than forced buy- ing of War Bonds and Stamps. -5- 324 18. HARTFORD (CONN.) COURANT 2 May 9, 1942. "The Treasury's caspaign to persuade the public to invest 10 per cent of Its income in War less the public curtails its spending voluntarily compulsory measures may be adopted, since the Bonds are sold not only to finance the war but to curb Bonds is more of a command than a request. For un- inflation. "The Treasury prefers to adopt voluntary means of stepping up savings, because, as Mr. Morgenthau has pointed out. there are divergencies in the amount that each family can set aside that can best be adjusted by voluntary methods. But if these fail, the Government may resort to compulsion, which, in addition to being expensive, may work serious injustices on individuals. 325 Release for A. M. papers. May 22nd Address of NATHAN STRAUS on the occasion of the Third Annual Award for Meritorious Housing Service by The United Tenants Leagues of Greater New York Thursday, May 21, 1942 326 This is a speech about peace. For one evening let us try to forget the war. The war must be won. The war will be won. That is the most important job in the world. But peace has always come after every war, and peace will come again. "In time of peace, prepare for war" is an old proverb, and its wisdom has been proven by events. My slogan for to- night is: "In time of war, prepare for peace. " Unless we prepare for the days of peace now, the same mistakes and the same weaknesses that made a mockery of the ending of the first World War will threaten, at the end of this War, to engulf us. The peace to which we look forward must spell a better way of life, a happier world than any we have known before. Certainly, no people can be happy or even healthy unless they live in homes with at least minimum standards of comfort and convenience. For every human being, home lies at the root of true happiness. During the days of war, of necessity, the public housing program for slum clearance must stop. Public housing today is war housing -- homes for workers in war industries. The USHA has enlisted for the duration. But, though temporarily pushed 327 -2- into the background, slum clearance must not be forgotten. In loyalty to the leaders of public housing in America, President Roosevelt and Senator Wagner, we must carry on what they have 80 well begun, when peace returns to the world. The future of public housing will depend chiefly on those whom it is designed to serve. Organized into effective groups, such as this United Tenants League, they will provide the driving force for maintaining and expanding the slum clearance movement. The United Tenants League deserves our moral and our financial support. You call this a dinner to do honor to me. I appreciate it deeply. But you honor me only as a symbol of the slum clearanoe and public housing movement. It is my belief that you should forget the individual and honor the cause. Forget me and honor the USHA. As I grow older, the world seems to move at an ever accelerating speed, so that it is hard to recall a state of mind of even a few short years ago. Yet I do not know any way of measuring how much has been done and how far we have come in the field of public housing without attempting to recapture the mood of the days when the permanent public housing program was born in the fall of 1937. 328 -3So, let us try to think our way back to our feelings in that year. Can you recall the depression of 1932 and 1933 -the efforts to meet the impact of unemployment by the construc- tion of public housing for families from the slums? Do you remember those first tentative and groping attempts to find a way through the morass of ignorance, lack of technical skill and governmental experience? Now if similar experimentation in a new and uncharted field had been undertaken by any private corporation, the first unsuccessful experiments would have been generally accepted as something to be anticipated, under the circumstances. The read- iness of private capital to strike out into a field of which little was known and in which, therefore, many errors were bound to occur, would have been hailed as a new indication of the vitality and ingenuity of American business enterprise. That is our usual attitude toward experimentation by private business and its progress by the hard road of trial and error. However, our attitude toward government is altogether different. When our government proceeds to attack an unsolved problem such as the blight of the slums, we view the attempt with a coldly critical eye. When government tries in a new way to remedy an ancient evil, we are slow to praise and quick to blame. In private business, we realize that to err is human. But public enterprise in every field, including public housing, 329 -4- must be successful from the outset, wise in every decision and every act, if it is to escape public condemnation. So when the first brave attempts of the Housing Division of the PWA to create something out of nothing resulted in projects that, although a signal advance in design and construction over housing previously available to families of moderate income, proved faulty in many respects, the anvil chorus of the critics rose. Private business enterprise had failed in its efforts to clear the slums as evidenced by the persistence and growth of areas of blight throughout the cities and towns of the nation. Yet when the government's first attempt to clear slums was not com- pletely successful, criticism was loud and unsparing. The critics pointed out that construction costs had been too high in these first government housing projects, and reasoned that this was proof that they would always be too high whenever the government tried to build. Because rents in these first projects were above the means of families from the slums, of course they would always be too high. Yet I submit that those first halting steps in the years prior to 1937 must be regarded as the foundation on which it became possible to erect the sound edifice of the USHA program. Had there been no PWA housing program from 1933 to 1937, there never could have been, in my belief, a USHA program from 1937 to 1942. 330 -5- - The USHA, operating under a new statute, and working with the full, unqualified and loyal support of organized labor, faced the problems and met them. Construction costs in every city, large and small, average from 10% to 15% lower than the average cost of similar construction by private enterprise. The average shelter rent per dwelling in projects erected under the USHA program is $12.64 a month. In spite of predictions fore- dooming public housing to perpetual failure, the earlier errors of the PWA housing program were rectified and the critics confounded. The USHA program showed that low construction costs, low rents, re-housing of slum dwellers, elimination of slums, and the reclamation of blighted areas need not be idle hopes and empty dreams, but could become realities of timber, steel, brick and mortar. The USHA showed that legitimate private business need suffer no competition from the slum clearance program, since tenants were drawn only from those families who could not pay an economic rent. On the contrary, slum clearance and reclamation of areas of blight revitalized real estate and stimulated building of homes by private speculators for the higher income groups. But was criticism silenced by these achievements? I wish I could report this to be the case. But, unfortunately, it was not. Those who had been sincerely in doubt as to the ability of the government to do a job quickly, economically, and efficiently, saw their fears proved groundless by the success of the 331 -6USHA. But others, whose objections to public housing were rooted in the well founded belief, not that it was a failure, but that it was success, were far from silenced. The cries of the slum owners and their allies grew louder as they saw that a movement was being established which would spell the doom of the slums. Entrenched greed, fattening on human misery, felt its very founddations shaken by the success of the USHA. A Congressman, on the floor of the House of Representa- tives, thus did not hestitate to say, in debate on the USHA program on August 3, 1939: "Mr. Straus made a speech in New Haven in which he said 'the loans which the USHA makes to localities for financing the capital development of projects, are absolutely returnable -- every dollar -- with interest They do not cost the public a penny. IN The Congressman characterized my speech as "disseminating the most reprehensible, deceptive and misleading information." As a matter of fact, the Congressman made the unfortunate error of stopping at a semicolon in my speech, omitting the words which immediately followed, and which were as follows: "The USHA annual contributions, made to help bridge the gap between the rents which decent housing costs and the rents which the lowest income groups can afford to pay, are the only cost to the Federal Government. Under the present Act, these subsidies cannot exceed $28,000,000. per year." The Congressman's attack on the USHA was filled with distortions of facts and figures and misquotations of my own statements. But the attack proved effective. In fact, that -7 - 332 speech is the one generally accorded the dubious honor of having killed the bill to continue the slum clearance program. In December of last year, the President of the National Association of Real Estate Boards, with equal disregard of truth, stated: "The USHA has built housing beyond the means of the 'lowest one-third, forcing the slum dwellers to seek living accommodations elsewhere and thereby creating new slums and new slum conditions." This speech but echoed an assertion in the "Confidential Weekly Letter" of the National Association of Real Estate Boards, which said in October that "USHA housing is limited largely to those who can and should pay economic rents." These misstatements of facts, as you note, are systematically disseminated. I have repeatedly asked the National Association of Real Estate Boards to point to one family, among the more than 100,000 families living in homes built by the USHA program, that could afford to pay the rents charged for decent housing in that same community. I repeat that challenge tonight, with the added incentive that I will pay $1,000. to any institution or welfare agency the Real Estate Board may care to designate if it can name one family living in a USHA slum clearance project, which conforms to its description. But I am quite certain that the truth cannot convince some people. "There are none 80 blind as those who will not see." Yet it behooves those of us enrolled in the cause of better housing to accept abuse and misstatements with a smile of toleration. When I feel particularly unhappy on reading a 333 -8- deliberate untruth about the USHA program, I am consoled by the thought that the venom of an attack is often evidence that the critics and attackers sense that they are engaged in a losing fight. Be it free public education, free public roads, public health work, pure milk for babies, or better housing for the underprivileged, the pattern is the same, and we may be heartened by recalling that the world does move, and that truth is mighty and will prevail. Misstatements due to ignorance are natural and inevitable in any new program. Doubts of those who find it hard to believe that success has been achieved after so many failures, are quite natural. We must even accept as inevitable the opposition of those whose vested interests are threatened. But, in respect to housing, as in respect to other activites of our government, I would like solemnly to make a plea for fairness and justice in criticism. I believe that it is unpatriotic at a time like the present, to make false statements about a government program. This is a representative government, subject to the public criticism guaranteed by free speech. I plead that criticism be based on facts and figures, truthfully portrayed. With the end of the war and the return of peace, vast dislocations of occupation and employment will inevitably ensue. 334 -9What are we going to do with the doctors and nurses that have been trained to care for the casualties of the war? Will their skill be wasted, or will their activities be transferred from those of war to those of peace? Will we utilize this reservoir of medical skill to attack preventable disease and to heal curable disabil- ities? As an indication of what might be done, I would like you to know the opinion expressed by one of the highest medical author- ities in this country recently, who said: "More than half of the disabilities, which disqualify men from the armed services, could be remedied at an average cost of $10.00 per man. What are we going to do with the large acreage that has been put into the production of food now needed to feed the armies and the civilian population of the Allied Nations, when peace returns to the world and men return from the battlefields and munition-making to their old pursuits of tilling the soil and reaping the harvests in the nations of Europe and Asia? Will we have any use for our excess food production, built up to meet the needs of the war emergency? The answer may be found in a statement by Milo R. Perkins, Chairman of the Board of Economic Warfare: "If all the people in the United States now living on less than half of the army ration, were brought up to half of the army ration, 2 billion yearly would be added to the nation's food bill and 35 million additional acres would have to be put into cultivation. The greatest excess of war production will, however, be in the realm of industrial activity -- factories no longer required 335 - 10 - to make materiel of war, labor trained for war production and threatened with idleness. There is need for a re-employment program which will not compete with private business enterprise, which will provide the maximum of new employment for every dollar of expense, and which will result in the creation of assets of permanent social and economic value. Perhaps the answer to a large part of this problem may be found in the field of housing. Almost one-third of the dwellings of America are below minimum healthful standards today. This means that they are lacking, either in essential sanitary facilities, or are in such dilapidated condition as to afford inadequate protection from the elements. One-third of the houses of this country are in such con- dition. This fact is most significant when considered in connection with the fact that one-half of all the babies born this year in the United States will be born to families with incomes of less than $1,000. a year. Those are the families who live in the dilapidated and Insanitary dwellings. Thus our baby crop, the most precious crop we have, is brought into the world and raised, to the extent of about 50%, in housing that is sub- standard. The persistence of disease breeding and miserable slums, and the need for a great program of public works to cushion the impact of the post-war period, both impel us to plan now for an America of tomorrow without a slum. I would ask you tonight to 336 - 11 - plan on the basis of concrete facts and demonstrated achievement. Of course, the major portion of home building, when the war is over, will be done by private enterprise. But, in spite of all the stories you hear about pre-fabricated houses and mass production of homes, private enterprise has produced practically no decent housing within the means of families with incomes of less than $1,400. a year. Thus all private home building is for the top income half. Let us plan tonight for a building program for the other half. I propose that we resolve to do the whole job of wiping out every slum, rural and urban, in the U. S. A. I propose a public housing program, after the war ends, of about 300,000 new homes each year, or 41 million new homes in 15 years. These would replace 4 million tenements, hovels, and rural shacks. The program would represent an annual investment in slum clearance public housing of approximately 1 billion dollars a year. In terms of New York City, with its population of about 5% of the population of the country, the program I recommend would mean 15,000 new homes a year for 15 years, or a total of 225,000 new homes for nearly a million people. It has been said that there is no pain like the pain of a new idea. Yet I do want to make you realize tonight that the program which I am proposing, to clear away all of the slums throughout the country, is a feasible, practicable plan, based on -facts that are known, and figures that have been tested. 337 - 12 - The mechanism to carrv out that task exists today, and is being continually refined and improved. I refer, of course, to the more than 600 local housing authorities, many of whom are now engaged in building war housing, and all of whom will be ready to build slum clearance housing in collaboration with the USHA when the time comes. This entire slum clearance program can be financed from sources other than the Federal Government. A simple but effective amendment of the U. S. Housing Act would, in the opinion of qualified experts in banking, make it possible for all public housing to be financed by the sale of local housing authority bonds to banks and institutional and private investors. The only cost of this comprehensive slum-clearance program would be the amount of the annual subsidies. Over a period of 60 years, these subsidies would amount to less than the cost of the War for the next six months. The assets oreated, good homes in place of bad, happy communities in place of areas of blight, would serve to benefit not only the families re-housed, but the entire country. Let us rededicate ourselves to public housing and its fruit, the America of tomorrow where every family will live in a good home. 338 MEMORANDUM FOR THE SECRETARY. At May 22, 1942. Mail Report The mail continues to deal largely with the subject of income tax and covers varying aspects of the situation. The question of lowered exemptions has brought forth a storm of protest, although here and there a voice is raised in favor of the recent proposal. The ratio of general comment is 40 unfavorable to 3 favorable, but there are literally hundreds of letters protesting higher taxes in general. Partic- ular adverse comment comes from: Single men who believe that they are penalized by the new proposals; married men wanting larger exemptions for family expenses; Government employees with rising living costs and static salaries; office workers; wives of laborers; anti-labor groups; etc. In other words there is protest from almost every group and walk of life, with definite facts and figures to show how taxes will affect the person registering the complaint. However, the Secretary's suggestion of a flat fee for filing income tax returns has met more favorable response than any other individual suggestion. This particular levy has been suggested in the past in much of the fan mail. Present mail reflects the same attitude shown in previous letters -- that such a levy should fall on those who do not normally pay income tax, rather than by an additional tax on those who file a return. However, the general idea is approved. There are three letters against joint returns to one in favor. A number of letters urging exemption 339 -2Memorandum for the Secretary. May 22, 1942. for educational expenses, but 3 times the number begging for relief from income tax payment on money spent for necessary medical attention. There were 4 letters from men paying alimony, urging some sort of adjustment, and 4 letters from men who have dropped their insurance because of income tax increase. A number asked whether they should do this in order to buy bonds, and this type of inquiry is increasing. Letters in favor of the sales tax are 24 as against 13 opposing it. There are, in addition, 10 resolutions from organized labor opposing the sales tax. There were 2 protests on the Rosenberg case and 2 on the release of Earl Browder. There are also a number of abusive letters, the anonymous ones outnumbering signed letters by 20 to 2. Some of the anonymous ones are signed "I am an American" and came in early in the week, after the celebration of "I am an American day". General suggestions for additional taxation include: A tax on enemy aliens, on saloons, unions, dogs, etc. The suggestion that income tax deductions for War Bond purchases be allowed has increased steadily during the week. 340 -1General Comments on Present Emergency Emery L. Gaydos, (Barber), Weirton, W. Va. Enclosing $5 in check as a donation to my Government toward winning this war, and I hope to keep it up each month for the duration. With my 6 dependents, my yearly income is too small to pay an income tax, so my family and I will try to make this sacrifice for this worthy cause. Christopher W. Asche, N.Y.C. (Letter addressed to Mr. Gaston) Allow me to express my feelings in poetry toward National Defense, as per -Listen Herbert E. Gaston what my one-cent-a-day plan will do On this auspicious occasion in the year nineteen forty-two. It will bring one million dollars ready cash a day For needed armament and Air Training Schools without delay. Steven J. Avyan, Central Y.M.C.A., Waterbury, Conn. (Graduate of State School of Paris.) This small Armenian Congregation of the First Congregational Church in New Britain, Conn., gave me the honor of being the principal speaker, and in response to my appeal for voluntary contributions for National Defense, pledged a free will offering of $100. A check for this amount, bearing the signature of the Minister of the Church, Dr. Yervant Hadidian, is enclosed. * I find pleasure in doing my little bit for my adopted country. # I was a Lieutenant in the French Army. I know four languages -- Armenian, French, Turkish and English. I am experienced in public speaking and can be used to arouse the patriotic spirit of the people to buy Bonds and to give money freely for national defense. * Ever since I came to this land of freedom three years ago, I found a way of life that one who has lived in other lands cannot cease being grateful for. So I am at the disposal of the American Government to do everything within my power to win the war. 341 -2"An Ex-Soldier", Washington, D. C. I am a soldier in the Soldiers' Home. I draw a Spanish American War pension, while some men here draw only $2 per month. Now I know it is not quite fair for some to have pensions while others have nothing. I am willing to turn all my pension money back to the Government but $10 a month, provided all others do the same while in an institution. I think all men in a Soldiers' Home should have $10, no more and no less. # * Now if the men here knew I wrote this, I would be the most unpopular man in the Home. Yet it is my desire to do all I can to help win the war which we are very deeply in, and which I believe means a great deal more than the average American seems to realize. Abe Goodman, Shreveport, La. I have great confidence in the outcome of this war, which, in my opinion, this country will wind up Victoriously in the next 15 months. I base it on this -- as long as we have such men at the head of our Government as the President, the Secretary of the Treasury, and Secretary of State, I am confident our Victory is not far off. -3- 342 Favorable Comments on Taxation Hugh R. Brown, Dallas, Texas. (Telegram) Your article suggesting that every American to pay tax that files return is positively right and should be made a law. I tried to pay in my last return and couldn't. That 77% has always been willing to pay and wanted to pay. They won and paid for the last World War and will eventually pay for this one. You suggest $5 for each return. This 77% is willing to pay $5 every month so long as the struggle lasts. Why don't our Congress awaken to the needs and willingness of the people involved? I am a travelling salesman and will gladly sign to pay $5 each month for liberty. Eugene A. Hildreth, Toledo, Ohio. The citizens want to pay as we go for more of the war cost than has been indicated, than either you or the President think they do. On all sides, we hear a willingness expressed to do more than has yet been asked by the Government, so let all men help pay as we go. The only fair way to do it is by a direct Sales Tax so all can share. As a nation, we are used to making monthly payments. We won't be making them "for the duration" to the usual creditors, so let's make regular payments to Uncle Sam. Newton A. Burgess, N.Y.C. I have noted with interest newspaper reports on the suggestion of making a charge for each Federal income tax return filed, and note also that a fee of $5 on each return would amount to something in the neighborhood of one hundred million dollars. It has occurred to me that a much more equitable arrangement for the country as a whole would be to make a flat charge of $5 for each person over certain ages who did not file an income tax return. This has the advantage of requiring each citizen within certain age limits to pay something to the Government, and certainly $5, or some amount in this vicinity, could not be regarded as much of a burden. It hardly seems fair to add even the small sum of $5 to the burden of the income taxpayer, leaving the vast majority of the citizens to pay nothing whatever. 343 -4Miss Belle C. Smith, Brooklyn, N.Y. I have been tempted to write to you for a long time about something which has been on my mind, but have refrained from doing so because I know how busy you must be these days. (Relates income tax problems.) # * * I shall close by saying have a very high regard for you. You are such a quiet, unassuming man who goes about his task in a quiet, unI noticed fashion. Your task is not an easy one, to be sure, and perhaps I should not add an extra burden by asking you to clear up the above matter for the peace of my own mind. Francis H. Fitzgerald, Duluth, Minn. I was interested to note your plan for a proposed $5 tax. On December 15, 1941, I suggested a $5 tax to be paid by all men and women, You will reach a group becall it a Citizens Tax. tween zero and the lowest income bracket, who are quite able to pay a share of the expenses of the Government they benefit by and from, and who, under the present Tried to 62. system, never pay a cent and never will. get a job on Army construction work, too old, so Wrote the President about it, but had no reply! Adjutant General regrets present age limit causing Army to lose thousands I am of valuable men. How come? Dr. F. C. Seids, Perry, Okla. Year after year as I make up my income tax returns and consider the deductions, this thought occurs to me. Why all the accounting of benefits and losses to the Government? It is no fault of the Government if I make a bad loan, or some smooth angler takes me for a fast swim after a highlyThere colored lure, to is in my my treasury's utter exhaustion. * opinion only one way to overcome these drawbacks. Make the tax a gross tax on all receipts. It would need be a very small one to bring into our Treasury double the revenue which it now receives, and I do believe it would be paid in a more cheerful manner. 344 5- Unfavorable Comments on Taxation H. S. Blossom, LaMesa, Calif. It seems incomprehensible that any one should even suggest such drastic cuts in lower brackets of income, on both married and single people. * And in addition, you endeavor to make compulsory a 10% draft on all incomes to buy Stamps and Bonds. Your iniquitous proposition would fall upon all salaried men (other than Government employed), bank clerks, business clerks, elderly couples whose incomes are pre- carious. Your proposition has the effect of making all taxable incomes pay the deficit caused by those who are exempted by law from paying any income tax on their salaries, which includes all the Supreme Court, down to labor organizations. Miller Munson, Chicago, Ill. Feeling that the Government is disposed to be as fair as possible in its money raising program, I want to detail my personal situation - which, at the same time represents the problem of others. (Tells of salary cut, alimony and insurance payments.) # * * Now there is the strong possibility of enforced savings, plus the certain knowledge of increased income taxes. Presuming the income tax increases 50%, and the enforced saving plan is 10%, this would take an additional $710 from me, leaving only $1,923.60 out of $5,100. Is this fair? And, more important, how can I get along? Those of us who made unfortunate marriages did not do so on purpose. We do not pay alimony for the fun of it. Why, therefore, should we, who already have the burden of supporting two families, have to pay taxes on the same basis as those who support only one? The facts are, we just can't do it at present and contemplated tax levels. Formerly, we could get by" and did, but now it is impossible. Lillian Freeman Hoover, Hotel Stillwell, Los Angeles. I most earnestly suggest you come to California at once and see the poorly clad, undernourished people who are strug- gling to exist - to get enough to eat and a place to sleep for themselves and family, and then see if you feel the income tax exemption should be lowered. For the few who are making more money, there are a hundred whose wages are still the same, and cost of living has doubled. I am a business woman, travel a great deal and I can't find any of these people you men in Washington think are living so high that you must take more and more away from them. 345 - -6Miss J. F. Seligman, Rochester, N.Y. A lot of people paid a few dollars to have some one help them make out their Federal income tax return but if they did so, they got the individual's attention for as long as was necessary. Three years ago I received courteous help gratis from a Federal Agent. This year, however, I was expected to bring in a completed, perfect report for 1941, so that the Agent could, by a single operation, complete what I had to pay. I had to omit an exemption claim allowed later by the State of New York, because no one could answer my question. When I was through, I was physically exhausted. The $5 fee will enable you to hire more Agents so as to make the filing of an income tax report less of an ordeal. If the Government can claim $5 for our filing the report, we have a claim to more attention and help in the effort. Earl C. Webb, South Bend, Ind. I have a peacetime obligation in the form of a mortgage. I don't know why any tax program should be enacted to cause a repudiation of these obligations. If these taxes are necessary, as well as compulsory, I believe the masses of people are entitled to a moratorium which will permit them to retain their property. I would become very bitter and resent any program which permitted the bankers to wax fat by interest accumulations because a home buyer would have to default his payments. My income is such that I am willing to have 50% go into a program that will end this war, but I believe every one is a better citizen to own his home and be permitted to do so. I want to be assured I can own it, and be permitted to meet my peacetime obligations. Miss E. G. Ryan, N.Y.C. The radio and newspaper headlines tell the sad story: That the erstwhile discrimination against single persons, in the matter of Income Taxes, is to return, in all its glory # This is just one more demonstration of Congress idea of "democracy" -- and there would be no better time to slip it over than just now, when the vast majority of unmarried men of the Nation are in service, here or abroad, and not likely to be able 346 -7to cast their votes at the next election. No doubt they 11 appreciate not only giving more protective service - perhaps their lives - to their country, but also being permitted the privilege of paying more than their pro- portionate share of the taxes -- again, just because they are single. E. H. Pfefferle, Cincinnati, Ohio. I think it is a shame that you should even consider reducing tire income tax exemption on children. If taxes should be paid according to the ability to pay, the single man or the man without children certainly is a way ahead of the man with children. Prices have increased much faster than the little advantage a man gets for his children's exemption. If you have any children of your own, you ought to know how much it costs to feed and clothe them. (A single man protests!) Emilio Coneiteo, Long Branch, New Jersey. And once again the screw has been turned against the single men, as though we were a class of dogs. The single men are the last to be hired, the first to be fired, the most heavily taxed, why? Single menSo forall the draft, single men here, single men there. of you old men of knowledge and experience should know that single men cannot carry the saddle for the rest of the community. You can force me to disgorge most of my wages, but I can quit my job and not work at all. When I work, married men do not come to help me. I well know what the Japs did at Hong Kong, and what they will do here if we lose. The married men know that too, but they do not move to go and protect their wives -- do their best to get deferred, send their wives to cry before the draft board; in short, I have to go to fight for them, I have to pay the expenses of the war for them. Sir, that does not go, we want equal duties and equal rights. E. E. Dean, Los Angeles, Calif. The Public is waiting to hear you suggest and cause to be put in force TAXES ON ALL GOVERNMENT PAID SALARIES ! For God's sake, why not? None are more easily earned. -8- 347 Favorable Comments on Bonds Mrs. Rich-no M. Samuel, Flushing, N.Y. Tonight on the Treasury Department Program some colored men from Tuskeegee Institute sang "America". My husband and I sat in our parlor breathless - our eyes filled with tears. We considered ourselves so sophisticated that we could hardly believe those tears the result of anything other than our cigarette smoke. But we had to realize that we had had a musical and patriotic experience that could be felt only by those who had heard that rendition of "My Country 'Tis of Thee" May I suggest that a recording of that song, by those singers, be made to be sold for War Bonds or Stamps? * Hill Lakin, Blue Island Publishing Corp., Blue Island, Ill. The enclosed list of merchants and business men of this area have already underwritten ten weeks' campaign on War Bond purchases and are volunteering to do so again in many instances. * * This is an industrial town of very mixed population. One of the first service men to be missing from this area was a Marine -- Tony Lepore, son of an Italian immigrant. Tony was last heard from on Wake Island. A boy named Peetz, whose father was president of the GermanAmerican Club here, was at Pearl Harbor. We are proud of our community, Germans, Italians, Swedes, English, Polish and Mexicans -- they are all fine AMERICANS. Every man in service from this community gets the home paper through a special Citizens Organization. H. G. Garnett, Tulsa, Okla. It would be interesting for the people of this country to know that the President, Members of the Cabinet, Members of Congress, and the tax flight Government employees have all signed pledges for Bond purchases such as the rank and file are asked to sign. Mrs. Anna E. Hamilton, Pensacola, Fla. I listened in on your beautiful Treasury Hour Program last evening. Won't you please have those singers sing, "My Country 'Tis of Thee"? Oh, it was glorious. We race through it so fast that we do not have time to think about it, but sung slowly and devoutly as it was last evening, it became holy and # Mrs. Morgenthau has a splendid radio voice. dignified. She enunciates well, has no affectations, speaks her piece and quits. It is a fine radio voice. That means so much. 348 - -9Hon. Leon Henderson, Administrator, Office of Price Administration, Washington, D. C. # * * I think you are going at this job in a very thorough and effective way. The pamphlet, explaining the operation of the plan among General Electric employees, is particularly well done, and provides what seems to me to be a complete manual answering all conceivable questions. Furthermore, it is well laid out and should prove an excellent sales medium. I wish you every success with it. Philip Strauss, Manager, Pine Plains Theatre, Pine Plains, New York. # # # A patron of mine was criticized yesterday because he drove five miles in his small truck with his family to attend my theatre. The contention was that he should not have used valuable gasoline for that purpose. Of course, while attending the theatre, they saw and heard Secretary of War Stimson and yourself, and Miss Dorothy Lamour appeal to them to buy War Bonds and Stamps, was shown why to buy his winter's supply of coal now, Gary Cooper urged them to contribute to Army and Navy Relief, which he did, and paid twelve cents in admission tax. They also obtained several hours of much needed relaxation. My theatre is located in a rural community where about 70% of my patronage comes by car. I seek a clarification as to whether our Government feels the use of gas is worthwhile for this purpose. Maxson F. Judell, Hollywood, Calif. I happened to "catch" the Texaco program last night on which appeared Mrs. Morgenthau. To use a colloquialism -- I like to give the "devil" his due and, having originally projected Eddie Cantor in a major way for radio, discovered Gracie Allen for radio, etc., may I say that Mrs. Morgenthau was most excellent on the air. Her voice had the proper shadings - came clear - and, best of all, had appeal. I heard it for the first time. The first feeling is - well, she's on because she's the wife of Mr. Morgenthau. Therefore I say to YOU -- and by all means, tell her -- that she got by with flying colors on her merits. Never praising except on performance, she -- and you -- can take the compliment as meant. # * Mrs. Morgenthau's Aaron M. Frank, Portland, Oregon. eloquent speech and program, which we heard last Sunday, was inspiring and magnificently done. 349 - 10 - John C. Nichols, Representative, The Mutual Life Insurance Company of N.Y., Grand Rapids, Michigan. The agents of our Company are extremely proud of the job that our Company is doing in its percentage of in- vestment in Government Bonds compared to its total assets. We believe that this is the patriotic thing for our Company to do, as well as it being the ultimate in security for our policy-holders. We also believe that all of the larger insurance companies should adopt the same principle for their investment policy, particu- larly during our national emergency. One of our larger companies, however, is not investing in Government Bonds to the extent that they should during this war, nor did they do so during the last war. Statements for January 1, 1941, showed that The Mutual Life Insurance Company of New York had an investment in United States Government Bonds of $401,858,397. That figure now is roughly $540,000,000. In the same period, The Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin, with approximately the same amount of assets, had an investment of United States Government Bonds of only $119,856,747. This in spite of the fact that the Govern- ment was instrumental a short time ago in relieving Northwestern, through Government emergency loans, of an extremely large amount of farm investments that were not good. * * * Agents of The Northwestern Mutual, after the last war, bragged that their company did not invest in Liberty Bonds during the war but waited until after the war, when they could be bought at a fraction of their face value. * # # Certainly the situation will bear investigation. Criticism of one large company reflects upon the character of all mutual life insurance companies. 350 - 11 Unfavorable Comments on Bonds H. G. Waite, Huron, Ohio. As president of the local bank, I have sort of been put on the spot by the current drive to sell War Bonds. On January 15 I suffered a light stroke and am just getting ready to go back to work; in addition, my son has had to have an operation for appendi- citis. Naturally I have incurred some medical bills. Should these bills be paid before buying Bonds? I notice there is talk of taking 10% of a person's salary for Bonds, in case voluntary subscription is not a success. My salary is $2,720 per year, and I have 4 children aged 10, 14, 16 and 19. The oldest, a boy, is just completing his second year in college. I have had an operating loss every year since 1937, which has been absorbed by selling securities bought before my family upkeep became so large. Do you feel that the 10% deduction is fair for people who are already operating in the red? Or should I sell Kansas City Southern at 4, which cost me 60, in order to meet expenses and buy Bonds? Most stocks, as you know, are selling prices much below the average. This letter is not written in a pirit of criticism, but because I feel there must be similar cases and from your experience, you should be able to advise in matters of this kind. Mrs. Laura Lambert, Point Cedar, Ark. I live in a rural district of about 175 or 200 people, and we have had pleas from the board of national defense to sign up to buy Bonds and Stamps, but what we want to know is, how can we buy the Stamps when no one here is allowed to get them to sell? The Postmistress has written to the Post Office Dept. and was told there weren't enough people here to afford this. The 4-H Club boys and girls have been asked to at least buy a 10g Stamp each week. We can't buy if our merchants or Postmistress aren't allowed to have them. There aren't so very many of us around here able to buy a whole Bond at one time, but we could buy from 10 to $1.00 in Stamps about every week until after a while it would be a Bond. Will you please tell us how? 351 - 12 - Ray W. Druckenmiller, Allentown, Pa. In my business (life insurance) prospects, people who need the benefits of life insurance are more and more advancing as the reason they cannot purchase, the fact that the Government wants them to "Buy Bonds". They say their immediate superiors at work insist that they Buy Bonds". They agree they need life insurance protection but can't afford both. # In my opinion, expression of some kind from your Depart- ment, suggesting in effect that where an individual needs the benefits of life insurance protection for his family, he should not purchase U. S. Bonds at the expense of prop- erly providing for his family. "An Employee", State Social Security Commission of Missouri, I work in the city office of this St. Louis, Mo. organization, and it has hundreds of employees. Not one of them, from the City Director down to the janitors, buys a Bond, but knocks you and our fine leader, President Roosevelt. However, they can draw their fat salaries every month for doing practically nothing. Robert E. Sherwood, Chairman, Board of Trustees, The First Church of Christ, Springfield, Mass. On May 5, 1941, this church purchased through their Agents, 10 Defense Bonds, Series "G", 21%, 1953, for the Church Endowment Fund. The Trust Company had them registered as follows: "Trustees of the Funds of First Church of Christ, Congregational in Springfield, Mass., Endowment Fund". You have forwarded the Bonds to the Springfield Safe Deposit & Trust Company, which also furnished you a copy of the Church By-laws per- taining to this authorization. This is sufficient data for you to send the check for the interest made payable, as Bonds are registered, to the Springfield Safe Deposit &Why, Trust Company, State Street, Springfield, Mass. in the name of common sense, does your Department insist that we, the Trustees, make out so many forms which do not relate to our purchase of Defense Bonds? The income from the Bonds is not sufficient for us to hire a lawyer to untangle the mess of forms we are receiving from the Treasury Dept. (1) Why waste paper? (2) Why hire a pack of It Attorneys who delight in the "sport" of red tape? Just will not be for you to reply to this letter. send the interest necessary check to the same source from which you received the funds for the Bonds and all will be well. 352 - 13 M. T. Halbrooks, Birmingham, Ala. On the 14th of May I went into the Post Office in Talladega, Ala. with money enough in small change that my wife and I had saved in new money to buy a Defense Bond. The clerk in charge of the Defense Bond window informed me that they did not count small change, and I would have to put it in wrappers before he would accept it. I went to the Talladega Bank where they gladly counted it and sold me a $25 Bond. In view of the appeal that you are making for citizens to buy Bonds, and you take money to a Government institution for that purpose, and it is refused because a clerk won't count it, I don't see where you can expect the cooperation of the public. M. R. Batty, Chicago, Ill. On March 31, I wrote you regarding the possibilities of diverting installment loan payments directly into the purchase of War Bonds. The proposal was not a selling idea. The thought expressed therein was the desirability of absorbing excess current income into War Bonds without allowing the income to get back into the current spending stream. * I received no answer from you and naturally believed that, after examining the proposal, the Treasury had decided there was no merit involved. Yesterday morning I noted an article in the Chicago Journal of Commerce indicating that the Colonial Trust Company of Pittsburgh, Pa., was using a plan exactly as outlined in my previous letter. Earlier in this letter I indicated that I had not received a reply from you. This is true, although I did get a letter from Harold Graves informing me that I could get information regarding War Bonds at Room 300, #105 West Adams Street. I was not submitting a selling idea -- I believed I was submitting, and still believe I was submitting, an anti-inflationary measure. *** I admire your stand for voluntary purchases of War Bonds as an anti-inflationary measure. I do not believe your War Saving Staff, in general, is cognizant of that prime factor in the War Bond and Stamp program. I am in daily contact with dozens engaged in this effort, and it is very seldom that I hear any one of them mention the antiinflationary element in the program, that the purchases should come out of the current income. The almost universal observa- thought of the War Savings Staff, from my personal tion, is sales, regardless of the source of the funds. 353 - 14 P. J. McGuire, President, General Service Corp., St. Louis, Missouri. This organization subscribed for 2% and 2% Bonds on December 13, 1941. There has been considerable delay in issuing these Bonds because of the regulations and restrictions of your Department. The 21% didn't come through until May 5, and we are still short the 2%, although we have made a number of requests for them, and I want to state this is delaying this organization in getting our Bond account straightened out so we can invest possibly more money in future issues. For that reason I am taking the liberty of addressing you on the subject. Karl M. Wehinger, N.Y.C. I find much reluctance on the part of patriotic citizens who want to buy and who are in a position to do so, but who feel they cannot. The reason is readily understandable and seems to me to be easily corrected without disturbing any of the objectives of our Government. The fly in the ointment is the restriction that the beneficiary may not be changed during the life of the Bond. This produces many complications. The removal of such restriction should help materially. It may also permit business men to use their Bonds as collateral for emergency loans, somewhat after the fashion of life insurance policies. Charles L. Seleway, Salina, Kan. I am the chairman of a committee in our local Council of Defense, which approves any campaign for the raising of money for war aid purposes, and the sale of Stamps and Bonds. Our county is to sell during this current month, something over $103,000 worth, and under the plan devised, 600 Air Wardens in our city will make a house to house and business to business campaign during the last week of this month in the hope of notIt only seems reaching, but going over the assigned quota. * to me, and I am sure that it must appear as entirely in- consistent to every one who knows about the "mooching take" of Mrs. Anna Rosenberg's from the treasury for alleged social services rendered, that our school children, low income families, and others, should be asked to buy 10 Stamps, and those who can afford to buy Bonds. I was an ardent New Dealer in 1932, and in 1936 felt that we should continue that plan of Government, but my interest in the New Deal has radically changed because of the utter waste, extension of special privileges and emolument to supporters of this present chaotic and extravagant outlay of public finances. 354 - 15 Anonymous, Detroit, Mich. There would be a wonderful pick-up in the purchase of Defense Bonds if Washington would only give a straight, heart-to-heart talk to the people (in print and over the radio), to the effect that Defense Bond money will be used solely to lick the enemy, and that no more of it will be wickedly wasted through graft and crazy projects of all kinds. Joe A. Taylor, Jonesboro, Ark. We have just about finished the drive on the sale of Bonds and Stamps. Every one was enthusiastic about them in helping the war effort, but it burns people up to know that a part of the money goes to WPA, CCC and other such agencies, especially the WPA. I bought the first Bond sold in Jonesboro, May 1, 1941, and have bought a $500 Bond every month since, and I hate like h--1 to think that one dime will be squandered on WPA, CCC, NYA or any of the rest of the agencies you are squandering money on. Arthur W. Soine, U. S. Naval Base, Trinidad, B.W.I. It is my impression that your Department is strongly urging the purchase of War Bonds. There are thousands of U. S. citizens working on construction of military bases in the Trinidad area. We are told that absolutely no provisions have been made for the sale of Bonds out- side the U.S.A. It seems strange to me that the opportunity of readily purchasing Bonds be denied to us. I will appreciate a reply. Miss Helen Peck Young, Montclair, N.J. With President Prado in this country, may I ask that you kindly use your influence to obtain for citizens in this country back interest payments on Peru Bonds purchased in 1928 -- or better still, our capital? The newspaper states that Dr. Prado had been President of the Central Reserve Bank of Peru for five years, prior to his election as President of Pery, so he must be fully aware of Peru's obligations. He should be reminded of these obligations. # 355 THE SECRETARY OF THE INTERIOR WASHINGTON OF THE SECURITY MAY 22 1942 My dear Henry: I have received the Acting Secretary's letter of May 15 regarding the General Aniline and Film Corporation, which was the subject of previous correspondence. I shall be glad to see that the clearance of this Corpora- tion is conveyed confidentially to the proper officials in the Department. Sincerely yours, Secretary of the Interior. Hon. Henry Morgenthau, Jr., Secretary of the Treasury. 356 BRITISH AIR COMMISSION - 1785 MASSACHUSETTS AVENUE WASHINGTON. D.C. TELEPHONE HOBART 9000 LEASE QUOTE FERENCE NO With the compliments of British Air Commission who enclose Statement No. 34 - Aircraft Despatched - for week ended May 19, 1942. The Honourable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. May 22, 1942. 0ST 357 SECRET STATEMENT NO. 34 AIRCRAFT DESPATCHED FROM THE UNITED STATES DURING WEEK ENDED MAY 19th. 1942 FLIGHT DESTINATION ASSEMBLY POINT Canada Canada South Africa Capetown BY SEA BY AIR DEL'D FOR USE IN CA A 7 Crane IA SS bawk IA Middle East Port Sudan New Zealand Auckland Hudson IIIA Canada Canada AC 151 U.K. Canada Canada on route New Zealand Auckland Australia Sydney 7 8 23 6 ED V IIIA 1 3 Canada 1 12 OP NCE ALS sh Air Commission 1st, 1942. 5 54 3 9 358 May 22, 1942 Dear Mr. Ambassador: I have just had the pleasure of reading the foreword you have written for tba-British edition of "There Were Giants In The Land." As you know, this book was undertaken at the suggestion of the Treasury Department, and we are quite proud of the finished product. I am so glad that you thought well enough of this collection of essays about great Americans to want to give them your blessing. Still more important are the understanding comments you have made. I am sure they will have their effect in further strengthening the COMMON Anglo-American purpose. Sincerely, (Signed) 1. Morgenthan, is. His Excellency, The Right Honorable the Viscount Halifax, British Ambassador, Washington, D. C. FK/cgk Plote file n.m.c. ties to Thompson FOREWORD One effect of the war has been greatly to increase the interest which the people of Great Britain and the United States now take in each other. This collection of twenty eight short studies of famous Americans of the past by twenty eight American writers of contemporary fame, will nourish the desire of English readers to learn more about their great fellow democracy across the Atlantic. Historical knowledge is no mere luxury today, but of all necessities the most vital. The more the nations of the world know of each other's past the better will they understand each other's present, and the future role which each may play. Knowledge of any nation is incomplete if nothing, or little, is known of those who have contributed to its national heritage. You cannot know the mind of a people unless you know something of its heroes - by which term I mean not merely its great / 360 great captains, but all those men and women whose memory illumines the ideals by which a great people lives. The collection presented in this volume constitutes a parade of great Americans from the time of Roger Williams who founded Rhode Island in the seventeenth century, to Associate Justice Benjamin Cardozo who died in 1938. Only twenty eight names are here. Many great Americans who helped build their country in the field of Science, Industry and Invention have been set aside to make room for others who have contributed to the spiritual life of the nation. The influence of men such as Thomas Edison or Wilbur Wright can be seen every day and in every country. The importance of men such as Walt Whitman, or Cardinal Gibbons, is less easily understood even in the United States itself. Some of the names will be well known to English readers - George Washington, Abraham Lincoln, Robert E. Lee, and Theodore Roosevelt. other names will be familiar but will be little more / more than names, such as that of Julia Ward Howe, author of the "Battle Hymn of the Republic". Others may be almost unknown. Few, probably, have heard of Frederick Douglass, who was born a negro slave but rose to serve his country as its Minister in Haiti. When one of America's best known biographers, Carl Sandburg, the author of a life of Abraham Lincoln which has already become a classic, was asked to contribute to this collection he agreed with the words "This country has been good to me". The United States has indeed been good to Americans whether native born or like Carl Schurz, immigrants from Europe. Americans know it, and are eager to repay their debt to America. In these pages they will find new strength to bear the sacrifices they know to be necessary for America's salvation. And we may here gain insight into the great traditions that inspire the people of the United States. Helifax May 1942 SECRET 362 May 22, 1942 Exports to Russia, Free China, Burma and other blocked countries, as reported to the Treasury Department during the ten-day period ending May 10, 1942 1. Exports to Russia Exports to Russia as reported during the ten-day period ending May 10, 1942 amounted to nearly $29,000,000. Military equipment was the principal item, totalling $9,292,000. However, due to changes in reporting procedure by the Department of Commerce, these figures and those given below do not give a complete report for the period under review. (See Appendix c.) 2. Exports to Free China and Burma Exports to Free China during the ten-day period ending May 10, 1942 amounted to about $296,000, of which military equipment accounted for considerably more than half. (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 blocked countries are given in Appendix A. Most important were exports to Sweden amounting to $85,000. ISF/ess 5/23/42 STRICTLY CONFIDENTIAL SUMMARY OF UNITED STATES DOMESTIC EXPORTS TO SELEOVED COUNTRIES AS REPORTED TO THE TREASURY MEANTHEST FROM EXPORT DISGLARATIONS REGREVED DURING THE PERIOD INDICATED V July as, 192 to May 10, 1942. (In thousands of dollars) July 28 Period ended to 1 Total Denealts April 20 April 30 Period May 10 my $397,731 $80,988 $28,683 $477,36 less Ohina 70,866 2,837 296 73,989 Summa al 12,196 1. S. S. R. 6 France 3/ Occupied France occupied France 2 28 12,196 - - - - 6 - - 2 28 - pain 2,849 M M 2,840 Switterland 9,783 223 5/ 10,006 17,492 155 Sunden Portugal 8,744 French North Africa w 6,283 52 - 85 al 17,732 8,795 6,283 May 20, 1942. Treasury Department, Division of Nonetary Research / Many of the expert declarations are received with a lag of several days or more. of Therefore this compilation does not accurately represent the actual shipment a particular period. The longer the period covered. the closer will these figures come to Department of Commerce revised figures. From September 11. 1941 to date - " is promoted that a large percentage of material listed here, consigned to Summ, is destined for Free China. Includes both Occupied and Uncompled France through week ending October 4. 19a. Occupied and Unoccupied France separated thereafter. Includes Moroaco, Algeria, and Sunisin, Less than $600. Due to changes in reporting procedure by the Department of Commerce, this report is incomplete for the period indicated. 5/20/42 364 SECRET APPENDIX B Exports from the U. s. to Free China, Burna and U. S. S.R. as reported to the Treasury Department July 28, 1941 - May 10, 1942 (Thousands of Dollars) Exports to Exports to Free China July 28 - Aug. 2 Aug. 4 - Aug. 9 Aug. 11 - Aug. 16 Aug. 18 - Aug. 23 Aug. 25 - Aug. 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. 18 Oct. 20 - Oct. 25 Oct. 27 - Nov. 1 Nov. 3 - Nov. 8 Nov. 10 - Nov. 15 986 309 2,735 1,023 4,280 5,217 2 1 20) 2,281 110 1,225 5,312 Feb. 1 - Feb. 10 y Jan. 12 - Jan. 17 Jan. 19 - Jan. 24 Jan. 26 - Jan. 31 Feb. 10 - Feb. 20 Feb. 20 - Feb. 28 Mar. 1 - Mar. 10 Mar. 10 - Mar. 20 Mar. 20 - Mar. 31 6 Apr. 1 - Apr. 10 Apr. 11 - Apr. 20 Apr. 21 - Apr. 30 May 1 - May 10.12 Total 2,333 1,157 6,845 1,924 5,623 4,484 4,552 323 269 403 4,772 1,672 342 58 2,677 3,581 2,436 88 2,851 791 Dec. 29 - Jan. 3 Jan. 5 - Jan. 10 449 684 35 5 Dec. 1 - Dec. 6 Dec. 15 - Dec. 20 Dec. 22 - Dec. 27 752 3,822 1,226 3,239 Dec. 8 - Dec. 13 U. S.S.R. 4,523 395 lov. 17 - Nov. 22 Nov. 24 - Nov. 29 Burna 3/ Exports to 1,021 1,364 3,609 12,040 64 18 2,337 111 1 8 4,580 196 1,829 1,073 3,993 8,247 1,695 447 - 3,885 6,938 4,889 4,853 923 2 35 91 2,921 2,879 1,054 583 23 8,058 2 4,836 5.335 2,827 296 876,592 5,874 3 2 447 639 - $11,083 9,608 13,315 26,174 28,119 32,509 28,556 42,435 51,698 66,906 50.958 26,652 $477,832 1. These figures are in part taken from copies of shipping manifests. 2. Figures for experts to Free China during these weeks include exports to Rangoon which are presumed to be destined for Free China. S Appendix B Exports from the U.S. to Free China, SGBET Page 2 Burna, and U.S.S.R. 3. It destined is presuned that China. a large percentage of experts to Burna are for Free 4. Beginning with February 1 figures will be given for 10-day period instead of week except where otherwise indicated. 5. 8-day period. 11-day period. 7. Due to changes in reporting procedure by the Department of Commerce, this report is incomplete for the period indicated. reasury Department, Division of Monetary Research F/af 22/42 May 22, 1942 Sf6RET APPENDIX 0 Principal Exports from U. s. to U.S.S.R. as reported to the Treasury Department during the ten-day period ending May 10, 1942 V (Thousands of Dollars) TOTAL EXPORTS $ 28,652 Principal Items: Military equipment Motor trucks Eggs, frosen, dried or canned Insulated copper wire 9,292 4,232 2,348 1,045 Steel sheets 935 Sausage, canned 875 615 Steel bare Pork, earned Armor plate Refined copper 535 452 438 1. Due to changes in reporting procedure by the Department of Commerce, this report is incomplete for the period indicated. May 22, 1942 Treasury Department, Division of Monetary Research ISF/af 5/22/42 SECRET 367 APPENDIX D Principal Exports from U. S. to Free Ohina as reported to the Treasury Department period during theMay ten-day ending 10, 1942 1/ (Thousands of Dollars) TOTAL EXPORTS $ 296 Principal Items: Military equipment Ore and reek crushing and sorting machinery Other mining quarrying machinery and parts Iron and steel pipe, n.e.s. Telephone equipment and parts Relief supplies - surgical and hospital equipment 188 59 43 your 2 1 1. Due to changes in reporting procedure by the Department of Commerce, this report is incomplete for the period indicated. Treasury Department, Division of Monetary Research May 22, 1942 ISF/af 5/22/42 368 C 0 P Y LB Capetown This telegram must be paraphrased before being Dated May 22, 1942 communicated to anyone other than a Governmental agency. (BR) Rec'd 1:25 p.m. Secretary of State, Washington. 94, May 22, 10 a.m. Referring to the Department's telegram No. 11, February 11 to the Legation. The Consulate General on May 21 took delivery of United States currency totaling $20,650 from the South African Reserve Bank. DENBY LMS Copy bj: 5-25-42 369 0 0 P Y DEPARTMENT OF STATE WASHINGTON In reply refer to FF 840.51 Frozen Credits/6401 May 22, 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 dated May 13, 1942, received from a confidential source within the Government: "Payments to German Firms by Argentina" "As of possible interest to you, information has been received from a reliable confidential source which advises that in March 1942, the Argentine Government made payments to German firms on behalf of the Argentine Purchasing Commission Abroad, Lisbon, Portugal, as follows: Amount 182.25 Reichmarks Dresdner Spiralfedernfabrick Strobel & Company, Dresden, Germany 1,607.70 Reichmarks 2,000.00 Reichmarks eh:copy 5-25-42 Franz Seiffert & Company, A.G. Berlin, Germany Joseph Meissner, Transportation and Warehousing Expenses" J.N.P 370 Hay 22, 1948 Mr. Liveray Mr. District will you please send the following cable to the American Rio do Jahoire, "so Exchange Director, Beak of Brasil". Please have included is this eable the signature of 3. E. Folay, Sr., Acting Secretary of the Treasury. Mr. Felor wishoe that this cable be sent today without delay. FD:bj:5-23-48 371 GAME EXCHANGE DIRECTOR TO: DAEK OF MASIL The Treasury Department wishos to express its deep appreciation of the cooperative attitude taken by Brasil in controlling transactions in dollar currency to prevent any benefit being derived from such transactions by the Axis countries. The action takes w Brasil as reported in the moining press will facilitate the enforcement of the reliage of the Treasury Department on the centrol of such currency. (Signed) B. E. Felay, Jr. E. E. Feloy, Jr. Acting Secretary of the Treasury mm/ja 5/21/43 372 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embassy, Chungking, China. DATE: May 22, 1942, 2 p.m. NO.: 588. The following is a message from Adler for the Secretary of the Treasury and is marked TF-39. Section 1. 1. April retail prices in Chungking (index of Farmers Bank-January to June 1927 equalling 100) General Index 3800 Food 3040 These of more than 40 and 50 per cent on January and of 12 and nearly 18 per sent on March respectively. 2. The circulation of legal tender notes in April was CNS18540 million. This was an increase of nearly 16 per cent over January and 5.7 per cent over March. The increase of retail prices was more than triple that of the note issue between January and April. 3. Up to May 20, CN855 million worth of saving certificates had been sold. 4. Information was received from the Vice Minister of Finance, Mr. Yui, that the plan for the formation of a market for government bonds was deferred. Section 2. Shanghai financial conditions up to April 16 were as follows: 1. Originally the notes of the puppet Central Reserve Bank were issued at par with fapi. The number of banks per- mitted to engage in financial transactions is limited to 60. The amount for money changers with each bank is limited to $40,000, and the amount for each person per day to $300. No fapi issued by the Farmers bank in or before 1940 will be accepted. Central Reserve banknotes in circulation on the 373 -20 the 11th of April reached a total of 8778.4 million. This was $77.8 million more than the March total and treble the total reported for December. 2. Military yen on January 20 equalled 3.9 fapt and on April 12, 7. fapi. Subsequent to a fall in December to 2.65 fapi the Hong-Kong dollar recovered to 4.70 fapi. Last reports of the U.S. dollar were at 33 fapi recovering from an earlier fall to 15.30 fapi. The price set on gold bare by the Central Reserve Bank 10 $18,650. 3. Only central reserve notes are acceptable to the municipal council, although fapi are acceptable at the official discount. The Shanghai total of fapi in circulation is decreasing. (Reports indicate that materials from free China are being purchased with fapi by Chinese in occupied areas. 4. Allied banks are continuing to liquidate. All deposits of non-belligerent nationals in these banks may be withdrawn by stages, but only up to $2000 is permissed to nationals of beliigerent countries. The Nitsubishi 10 receiving by transfer all deposite originally in the National City. The Japanese are buying all the United States dollar notes which were in vaults of British banks at 5 Japanese, 55 fapi. They will be sold on the open market. The notes which were in the National City's vaults are being held. The Japanese are selling at falling prices bonds which were held by four Chinese Government banks. Remittances to the South Seas are being monopolized by the Yekohama Speeie Bank. 5. Barter agreements have been made by the enemy between Central China and North China, Mongolia and Manchuria. An import and export permit system for trade between Japan and occupied areas and Shanghai has been instituted. Resumption of South Seas trade is reported as being planned. 6. Prices of textiles, foods, and other essentials increased between two and three times between January 20 and April 2. The bulk of the increase occurred last month and it is said to be due to private hoarding and speculation. with the exception of the price of rice, daily prices are still far below Chungking prices. Apparently 374 -3- Apparently because of the high cost of rice many people are buying Steps to control prices are being taken by the flour. authorities. In striet confidence. (A report made available by Mr. K. P. Chen was the primary source for Section Two. Mr. Chen's report was based on clippings from Chinese newspapers in Shanghai up to the 16th of April.) GAUSS 375 TELEGRAL SENT May 22, 1942 KD This tologram must bo paraphrased boforo boing communicated to anyone other than a Governmental agency. (BR) 10 p. m. AREMBASSY, QUITO(ECUADOR). . 349, Department's 298, May 5, 10 p.m. ; 310, May 9, 3 p. m. Treasury asks whon it may expect roply. HULL (FL) FD:FL:BM RA EO c 376 0 P Y DEPARTMENT OF STATE WASHINGTON In reply refer to May 22, 1942. FD The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses copies of telegram no. 25 dated May 21, 1942 from the American Vice Consulate, Suva, Fiji Islands, regarding Fiji Treasurer's decision not to adopt Treasury's scheme for disposal of United States paper currency described in Department's 20, April 27, 5 p.m. Telegram no. 24 dated May 8, from Suva, referred to herein, was transmitted to the Secretary of the Treasury with the Department's letter of May 8. Enclosure: From Vice Consulate, Suva, no. 25, May 21, 1942. ehicopy 5-22-42 377 Suva HRL This telegram must be paraphresed before being communicated to anyone other than A Governmental Dated May 21, 1942 Rec'd 1:05 p.m. Agency. (BR) Secretary of State, Washington. 25, May 21, 5 p.m. My 24, May 8, 1 p.m. Please inform Treasury "F1j1 Treasurer today informed this office and the Bank of NEW South Wales and the Bank of NEW ZEALAND that after consideration and in order to follow uniform procedure throughout sterling area not to adopt Treasury's scheme for disposal of United States paper currency described in Department's twenty April 27, 5 p.m. but to adhere to procedure outlined in 'Bank of England's notice F.E. 182' relative to this matter. Despatch will be forwarded by air mail giving particulars of local Exchange rates fixed on the basis of dollars 4.03-1/2 DER pound net." ABBOTT WWC 878 COPY NO. 13 BRITISH MOST SECRET (U.S. SECRET) OPTEL No. 168 Information received up to 7 A.M., 22 May, 1942. 1. NAVAL Attacks on shipping by U-boat. An outward convoy to FREETOWN was attacked on 20th/21st 140 miles oast of the AZORES. 1 ship was sunk. A fleet auxiliary was badly damaged and had to be sunk by gunfire. 2. MILITARY RUSSIA. The Russian advance on KHARKOV continues. The German advance northwards into the ISYUM area is now developing into a serious threat to the Russian salient south of KHARKOV. 3. AIR OPERATIONS WESTERN FRONT. 21st/22nd. 48 bombers vore sent sea mining off the French Atlantic Goast. About 30 enemy aircraft operated between FLAMBOROUGH HEAD and the WASH. MALTA. 1 ME 109 was shot down. 4. BORDEAUX. Submarine shelters are being constructed in the port. They are designed to accommodate 15 submarines but are unlikely to be finished for several months. 1hoy are similar to those at BREST, ST. NAZAIRE and LA PALLICE. The work is being carried out by the Germans O.D.T. Organization although BORDEAUX is only used by Italian submarines. 379 UNITED STATES GOVERNMENT COORDINATOR OF INFORMATION SECRET WASHINGTON, D. c. COOKINATOR OF INFORMATION May 22, 1942 The Honorable The Secretary of the Treasury Washington, D. C. Dear Henry: The attached is from the British Ministry of Information Weekly Guidance. This item is purely informational and not for pub- lication. Sincerely, Bill William J. Donovan Attachment 380. SECRET INFORMATION COORDINATOR 1. German forces Eastern Front probably as great as those with which Summer Campaign 1941 commenced. Satellite forces not more than five per cent. But note paragraph two. 2. Eastern Front. General policy: Still reckon with probability vast German offensive with considerable initial gains. Offset with wastage German manpower, immensity Russian reserves, Russian genius for manoeuvring in vast spaces at their command. Do not let Germans get away with picture of substantial united European army fighting on Russian Front and set contri- butions of satellite forces in proper perspective. 3. Far East. Liveliest Japanese strategy southwest Pacific completion of occupation New Guinea rather than attempted immediate invasion Australia. Don't regard Coral Sea battle as conclusive but preliminary fight for control of those waters. 4. Inside Europe. Stress increasingly reports of sabotage disaffection executions, German manpower shortage which dominates every other European problem. But make clear nobody expects coliapse Germany Italy until military defeat shakes existing regimes. 381 GO UNITED STATES GOVERNMENT SECRET COORDINATOR OF INFORMATION WASHINGTON, D.C. COOKDINATOR OF INFORMATION DONNO May 22, 1942 The Honorable The Secretary of the Treasury Washington, D. C. Dear Henry: I am attaching for your information a report on the British Political Warfare German directive (proposed) for the week of May 31 to June 6. Sincerely, Bill William J. Donovan 3SR SECRET COORDINATOR of INFORMATION Plug Goering's speech of May 20. Significant points are: a. Admission war must be long and last three harvests bad. b. Over dramatic version of Eastern campaign. Propaganda aim of speech to justify speedup, special powers at home by enlarging suffering of soldiers. C. No attacks on Britain. Jew only enemy. Significant connection with attempted negotiated peace. d. Goering accepted story Hitler personally decided not retreat in Russia. P.W.E. suggested comment: a. Expose trick painting Russian winter black to justify events at home. b. Bad harvests make intense suffering inevitable in long war. C. Goering trying comevack by highlighting Fuehrer's genius in Russia. 383 UNITED STATES GOVERNMENT STATE SECRET COORDINATOR OF INFORMATION WASHINGTON, D.C. COONDINATOR OF INFORMATION May 22, 1942 The Honorable The Secretary of the Treasury Washington, D. C. Dear Henry: I am attaching for your information an advance report on the British Political Warfare Italian directive for the week of May 22 to May 28. Sincerely, Bill William J. Donovan 384 SECRET INFORMATION 1. Do not comment on campaign against France or Mussolini's visit to Sardinia. 2. Explain new fiscal measures when they announced as inevitable result Mussolini's mistaken policy with main burden falling on classes least able to bear it and as inadequate solution which fails to help finance the war. Real costs of war are being concealed by Fascists. 3. Do not draw conclusions from withdrawal of German bombers from Malta; stress Mediterranean Allied activity as successful effort to divert Axis forces from Russian front. 4. Report Russian fighting objectively. 5. Stress news to show Allies are able to attack Western Europe to refresh Axis apprehension of possible Allied invasion. 6. Political Warfare Executive will follow above line, but no reason why we should not, and may be reason why we should comment on Italian claims for Nice, Corsica, following line Mussolini repeating show of independence while using customary stab in back tactic of claiming really unimportant spoils from weakened defeated French. 7. If Italians get Corsica agreed line may be: a. Stab in back; b. Corsica, Nice are useless, will not help economically; C. move made for prestige only is certain to prejudice Italy later by alienating all decent people, solidifying French American opposition at peace table. M 385 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE May 22, 1942 TO Secretary Morgenthau FROM Mr. Kamarck Subject: Summary of Military Reports Vichy France The actual circumstances of the clash between the R.A.F. and the French air force are as follows: On May 18, a Catalina on anti-submarine patrol was attacked by a French fighter and was forced to alight on the sea, twenty miles north of Algiers. A British destroyer rescued the crew, two of whom were wounded. Later, two French fighters shot down a naval Fulmar fighter, which was protecting British naval units in the Mediterranean. (It is clear from this report that the French attacks on the British airplanes were without any excuse and can only be regarded as acts of provocation.) (U.K. Operations Report, May 19, 1942) German Navy The German pocket battleship, Admiral Scheer, is now at Narvik. The remaining German pocket battleship, the Lutzow, is on its way to join the Admiral Scheer. The Prinz Eugen and four destroyers have arrived at Kiel. (All of the German major naval units which are in a fit condition to fight are now in Trondheim and Narvik in position to threaten the supply line to Russia.) (U.K. Operations Report, May 7 - 14, 1942; May 19,20) Malta In the afternoon of May 18, further reinforcements of seventeen Spitfires reached the Island. (The British now have around 100 planes of all types on the Island.) (U.K. Operations Report, May 19, 1942) -2- 386 Libya Rommel has finally reached the strength necessary to be able to undertake an offensive, should the strategic situation demand it of him. (The British also are in the similar position of not being completely ready, but being able to take the offensive, if necessary.) (U.H. Operations Report, May 7 - 14, 1942) Conditions in Greece The police in Athens demand the return of the bread ration card of any deceased person, before they will issue a burial permit. As a result, it is a common sight in the streets of Athens to see dead left on the sidewalks during the night with pillows under their heads and their hands crossed piously on their breasts. All identification is removed. In this way, desperate families are able to hold on to the additional bread card. (Report from C.O.I. representative in Ankara, May 20,1942) Use of American Planes (Douglas Bostons, or A-20's) " The aircrews, who have been taking their Bostons over France, have some interesting tales to relate. We recently visited a squadron which has made daylight raids on such objectives as the power station at Comines, Hazebruck and Abbeville railway yards, shipyards at Le Trait, shipping at Le Havre, and the Matford motor works at Poissy, near Paris. "With the intense flak thrown up over these areas, which are highly protected by the Germans, the turn of speed of the Boston III is a useful asset, though this advantage cannot be utilised to its full when the attack is made in formation. A peculiarity of flying through highly concentrated antiaircraft fire is that damage is caused more by the rain of falling shell fragments than by direct hits or near explosions. A spent shell fragment is not harmless when hit while travelling at omething over 300 m.p.h., so the crew, with the exception of the rear gunner, wear steel helmets. The rear gunner cannot wear one as he is operating in an open cockpit,and the slipstream would be sufficient to break his neck if it caught under the helmet. 387 -3- "One air gunner we spoke to was very proud of having shot down one of the new Focke-Wulfe F.W. 190 fighters. The F.W. 190 is very manoeuvrable and fast, but, by present standards, poorly armed, having only six machine guns. "By virtue of the protection given by our fighters and the fire power of the Bostons themselves, for they each carry no fewer than four fixed guns forward under the control of the pilot, and two free guns pointing aft, no " Boston has yet been brought down by enemy fighters. (Source: "Flight", April 16, 1942, p. 373)