The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
DIARY
Book 536
June 3 and 4, 1942
Book
Alcohol Tax Unit
Page
Trial of 22 officers indicted in New York on charges
of having accepted bribes - Irey memorandum - 6/4/42..536
Alien Property Custodian
298
Authority for Alien Property Custodian and Foreign
Funds Control discussed by FDR, Foley, and Bernstein -
6/4/42
286
Authority for Alien Property Custodian and Foreign
Funds Control discussed by Rosenman, Foley, Pehle,
Bernstein; Markham, Jones, and Tucker for Alien
Property Custodian - 6/6/42: See Book 537, page 204
Foley-Cox-HMJr conversation concerning - 6/13/42:
Book 538, page 231
Cox reports on talk with Biddle - 6/16/42:
Book 539, page 224
American Federation of Labor
See Financing, Government: War Savings Bonds
(Payroll Savings Plan)
-B-
Bullitt, William C.
Kamarck memorandum on inaccuracies of reporting on
European situation - 6/4/42
360
-CCapital Issues Control Committee
Inventories (See also Book 533 - Inflation):
Conference; present: representatives of Treasury,
Securities and Exchange Commission; Jones, Henderson,
Eccles, Nelson, Ruml, and Currie - 6/4/42
Cincinnati, Ohio
197
See Financing, Government: War Savings Bonds (Ohio)
Contracts, War
See Revenue Revision
Cuba
See Latin America
Customs, Bureau of
Duty-free List: FDR order expanding - 6/4/42
301
-DDetroit, Michigan
Ford plants at Willow Run and Dearborn:
Inspection trip by Nelson, Captain Lyttleton, and
HMJr discussed by HMJr and Nelson - 6/3/42
16
Dows, Olin
HMJr consults Dows concerning fee to be paid Jamieson
who is painting in Treasury for HMJr personally - 6/3/42.
DROTTNINGHOLM, SS
See Foreign Funds Control
292
Book
Page
536
184
Exporte
Freight Situation - Haas memorandum - 6/3/42
-7Financing, Government
May Financing: Summary sent to various members of Cabinet,
Senate, and House of Representatives - 6/3/42
War Savings Bonds:
75,102
See also Savings, Individual
F and G Bonds (See also Book 529 and 532: Financing,
Government--Victory Fund Committees--War Savings Bonds):
Conference; present: HMJr, Bell, Buffington,
Odegard, Gamble, Haas, Stewart, and Graves 6/3/42
1,24,33,217
Conference of State representatives - 6/5/42:
See Book 537, page 9
a) Bell's memorandum to guide discussion:
Book 537, page 31
b) Conference with presidents of Federal
Reserve Banks described to above group:
Book 537, page 33
Issuing Agents: Report for week ending May 30, 1942 6/3/42
131
Sales: Series E. F, and G - 6/3/42
New York City: Dropping of leaflets from airplane
136
discussed in LaGuardia-Kuhn-Patterson correspondence -
6/4/42
329
a) LaGuardia-HMJr conversation: LaGuardia is going
to arrest Army man who dropped leaflets:
Book 540, page 30
b) HMJr, Kuhn, Foley, and Gamble confer on "a way
out": Book 540, page 36
c) Nevil Ford (New York office)-HMJr conversation 6/12/42: Book 540, page 44
1) Patterson and Pope with LaGuardia
2) Patterson's proposed apology:
Book 540, page 55
d) Greenbaum-HMJr conversation - 6/17/42:
Book 540, page 51
Ohio asks HMJr to speak in Cincinnati late in June 6/4/42
336,338
a) Trounstine's letter regretting HMJr's absence:
Book 538, page 98
Payroll Savings Plan:
Northern Pump Company, Minneapolis, Minnesota:
Correspondence concerning interpretation of Treasury
request (May 21, 1942)
American Federation of Labor field promotion program report on - 6/4/42
345
347
- F - (Continued)
Book Page
Ford Motor Company
See Detroit, Michigan
Foreign Funds Control
DROTTNINGHOLM, SS: Seisure of currency from passengers Gaston memorandum - 6/3/42
(Monnet, Jean
536
174
(Murnane, George
See also Book 524
Foley-Pehle memorandum - 6/3/42
178
Authority for Alien Property Custodian and Foreign
Funds Control discussed by FDR, Foley, and Bernstein 6/4/42
286
Freight, Export
See Exports
-Individual Savings
See Savings, Individual
-JJamieson, Mr. (Artist)
See Dows, Olin
-LLaGuardia, Fiorello (Mayor, New York City)
See Financing, Government: War Savings Bonds
(New-York City)
Latin America
Cuba: United States currency control on dollar exchange
rate - Treasury memorandum to Minister of Finance 6/4/42
356,358,359
-M-
Military Reports
British operations - 6/3-4/42
Coordinator of Information reports:
British Home Intelligence Report, period ending
May 26, 1942 - 6/3/42
British Political Warfare guidance - 6/4/42
The War This Week, May 28-June 4, 1942
Kamarck summaries - 6/3-4/42.
"Naval Station in the Pacific" - Kamarck report - 6/4/42.
Monnet, Jean
See Foreign Funds Control
Murnane, George
See Foreign Funds Control
191,366-368
193
370
373
196,375,376
374
-NNew York City
See Financing, Government: War Savings Bonds
Book Page
Northern Pump Company - Minneapolis, Minnesota
See Financing, Government: War Savings Bonds
(Payroll Savings Plan)
-0Office of Facts and Figures
*Public Opinion on the Economic Front" - 6/3/42
Ohio
536
160
See Financing, Government: War Savings Bonds
-RRevenue Revision
House Ways and Means Committee through Doughton asks
HMJr to appear in connection with HMJr's radio statements,
press conference, and PM article concerning Committee
and its work - 6/4/42
a) Conference; present: HMJr, Gaston, Kuhn, Blough,
and Bell
258,263,
264,276
266
b) Paul-HMJr conversation
280
Corporations having extensive war contracts - Sullivan
report on investigations of - 6/4/42
Robertson, A. W.
304
See Westinghouse Electric and Manufacturing Company
Ruml, Beardsley
See Capital Issues Control Committee
S-
Savings, Individual
Volume and composition of, during first quarter of 1942 Securities and Exchange Commission report - 6/3/42
a) Securities and Exchange Commission will present
113
to Treasury before releasing in future:
See Book 537, page 89
b) See also discussion at conference
June 18, 1942: Book 540, page 124
Compulsory - Department of Commerce report indicating
existing voluntary program for War Bonds is a failure -
6/3/42
Securities and Exchange Commission
116
See Savings, Individual
Silver
Sweden: Sale of Swedish silver in New York discussed by
Magnusson (Financial Counselor of Legation), White,
and Ullann - 6/4/42
Sweden
See Silver
297
--Victory Fund Committees
See Financing, Government: War Savings Bonds
Book Page
-VWar Contracts
See Revenue Revision
War Savings Bonds
See Financing, Government
Westinghouse Electric and Manufacturing Company
Robertson (Chairman) plan to finance war, prevent
inflation, and aid post-war recovery - 6/4/42
536
310
1
June 3, 1942
9:35 a.m.
WAR BONDS
Present:
Mr. Bell
Mr. Buffington
Mr. Odegard
Mr. Gamble
Mr. Haas
Mr. Stewart
Mr. Graves
H.M.JR: This is the way I feel, that between
now and Friday night we have got to get this F and G
thing straightened out, and no fooling. Now, I have
got to settle it.
As near as I can find out, the War Savings Staff
hasn't got an F and G organization. Is that right or
wrong?
MR. GAMBLE: That is correct, yes, sir.
H.M.JR: That is correct?
MR. GAMBLE: Yes, sir.
H.M.JR: We certainly don't have an F and G man
here, as I told Harold yesterday.
MR. ODEGARD: That isn't altogether true, Mr.
Secretary. We have F and G committees which are set
up and are being set up.
MR. GAMBLE: Well, we have a number - I think
the Secretary is familiar with that - of States that
did have them, and we extended that, at your request,
thirty days ago.
2
-2-
H.M.JR: And they didn't come through.
MR. GAMBLE: In what respect, Mr. Secretary?
3
H.M.JR: In production, sales. I mean, look at
the figures.
MR. GAMBLE: I think in the last ten days of
May--
H.M.JR: Well, the thing - I don't see where
they did.
MR. ODEGARD: The figures that we look at are
figures that are measured against the quotas that we
set. It may not be a reflection on the promotion of
F and G's; it may be a reflection on the quotas that
we set.
H.M.JR: No. I have got two sets of figures. I
have got a quota set, and I have got a set comparing
May with April, and they just squeaked by and sold a
few million dollars more of F and G's in May than they
did in April.
Let me run through the thing - I mean, let's say
everything that has happened up to date is out of the
window. Let me run through the thing, say what is in
my mind. I haven't talked to anybody. This is my own
idea.
Here I am faced with a situation-(Mr. Graves entered the conference.)
H.M.JR: We are talking about this F and G thing.
I made a remark, and I am not asking at the moment for
any comments - I am just giving you the benefit of what
I thought about over night on F and G's. What I am
talking is generalizations; in some places it may be a
little bit too easy, some places too hard. But this is
the way I feel.
3
- -3-
I have got to sell eight hundred million dollars'
worth of Bonds this month, no fooling. I have got to
sell whatever the proportionate F and G's are. By and
large, the War Bonds, I say, have no F and G selling
organization. Some places they may have; some places
they may not. We haven't pushed it, for various reasons.
In the room here, one of the main reasons was that you
(Graves) told me you didn't want to start it going too
soon because you wanted to save the big push for May
when we would need it - I mean for June.
MR. GRAVES: That is right; in fact, we gave our
instructions that way.
H.M.JR: And I acquiesced. But now here we have
got, and this again is another thing whi ch really is
more or less - well, Dan and I took a quick look at
what we are going to do to raise the money necessary
for June through regular channels. The chances are
it is going to be a six-months' note, which gives this
Victory Fund Committee nothing to do.
Now, it is like the example I gave of the Inter-
national Harvester, in the old days, anyway. They always
had two sales organizations and two show rooms in every
city, every town, one a light line and one a heavy line.
The Victory Fund boys are pretty well organized.
They want to do something. They have got nothing to
sell. I don't want to do what Eccles suggested, split
the quotas; I can't do that. But there ought to be a
way out on it. The question of the human being is
involved. Take New York where you would sell the
most - what is the name of your man there?
MR. BUFFINGTON: Perry Hall.
H.M.JR: And I don't know who the F and G man is
for Dick Patterson. Let's call him Dick Patterson.
Dick Patterson and Perry Hall ought to be able to sit
down and say, "Let's just try this thing out for the
4
-4month of June. This is what is running through my
mind: "I, Dick Patterson, will designate you, Perry
Hall, in charge of my committee for F and G Bonds,
and I am going to ask you, Perry Hall, to take this
over and take it off my shoulders for me for the month
of June. I have got more than I can attend to on the
E Bonds. Now, will you come in, and we will put your
name on a glass door here and we will give you a title;
but you can do your work wherever you think it is
necessary. For the month of June I am asking you to
run this thing for me." This is Dick Patterson speak-
ing. "Now, we will see how it goes; if it works out
all right, O.K., and anything that I am doing or anybody I have got working on it, I am going to tell him
he has got to talk to you, Perry Hall."
I mean - now it is a question of getting Dick
Patterson down here tomorrow. Perry Hall is here
today, and we will put these two fellows together.
Now, if I were Dick Patterson I would grab it. I don't
think we have got much to lose. We would have no
publicity here. Let them straighten out t heir own
publicity in New York in the New York newspapers.
MR. GRAVES: That is the precise arrangement
whi ch we had in mind.
H.M.JR: But had not accomplished.
MR. GRAVES: That is right. We had not accomplished
it because the situation was obscure in the field. People
were befuddled as to where their jurisdiction was, who
had the responsibility for this thing; but that is
exactly the plan.
H.M.JR: Pulling a Roosevelt? You dreamt it last
night, too?
MR. ODEGARD: No, Mr. Secretary.
MR. GRAVES: That is in a memorandum.
5
5-
MR. BUFFINGTON: I don't think it is.
H.M.JR: Listen, Harold says it is. Then I am
just going to go along with Harold.
MR. GRAVES: I don't want to say it is the precise
arrangement, but the arrangement that was contemplated
by the instruction which we were on the point of send-
ing out was that there would be this cooperation between
the War Bond organization and the Victory Fund organization.
H.M.JR: But will the way I have outlined it leave
you perfectly happy?
MR. GRAVES: Well, it has got to be subject to some
variation. I don't know just what. I suppose it is the
second Federal Reserve district.
H.M.JR: Well, I am thinking of just the State of
New York.
MR. GRAVES: Well, that is the point, that this
Victory Fund organiza as I understand it, goes
according to the Federal Reserve districts, whi ch don't
always correspond to State lines, and that kind of
thing. But those are variations that we can take care
of.
H.M.JR: Harold, don't worry about State lines. I
don't know - I don't care, but as far as I am concerned,
in this example Perry Hall is just the State of New
York. He may be in the State of New Jersey, too, I
don't know; but let's just say, for example, that as
far as I go he is the State of New York.
MR. GRAVES: There will be no trouble about it,
in my opinion.
H.M.JR: Let me get the War Bond side. There will
be no trouble?
MR. GRAVES: I don't think so.
6
-6H.M.JR: Gamble?
MR. GAMBLE: No, sir, I do not, if that is what is
going to happen. I mean, if Mr. Perry Hall is going to
be in charge of it and take over all our people, there
will be no trouble; but if Mr. Hall and a committee of
eight or nine people take over our people, there might
be some trouble. In other words, I think that you ought
to stop with some one man at the head of this joint
committee. I don't think you want to superimpose a
group of eight or nine stock exchange people or investment bankers or Federal Reserve people over our existing F and G committee.
H.M.JR: No, no.
MR. GAMBLE: The membership of their committees
should be merged with the membership of our committees,
with one man at the head.
MR. GRAVES: We can work it out.
H.M.JR: All these things get down to two things.
I am thinking of getting Dick Patterson down here
tomorrow morning, in this room, and Perry Hall, having
Dick Patterson prepare - I will say, "Look, Dick, will
you invite Perry Hall to take over F and G's for you
under your wing and if Perry Hall is smart I think he
will say yes.
MR. BUFFINGTON: I think that will work very
nicely. In other words, Dick Patterson will be using
Perry Hall's facilities, and such other facilities as
Dick Patterson can turn over to him, in the sale of
F and G Bonds during the month of June.
H.M.JR: There will be one boss.
MR. BUFFINGTON: That is all we ever tried to get,
one person with the responsibility.
7-
H.M.JR: I mean, in New York State, if I want to
know why F and G's aren't going well I will call up
Dick Patterson and say, "Look, Dick, how is Perry Hall
getting along?"
MR. GRAVES: There is this further thing that we
have got to remember. Patterson has sixty or so county
organizations in his State. I don't know the exact
number, something like that, I think, and he is going
to have F and G activity in every one of those counties.
I doubt whether Mr. Hall's organization has gotten to
the point where he is going to have any organization
down in each one of Dick Patterson's counties.
H.M.JR: Let's say that you are right, then he
would have Greater New York where he can go to town
and where the money is, and then if these other people
are organized in the sixty-odd counties of New York
State, whatever it is, then let them go ahead that way.
(Mr. Haas entered the conference.)
MR. GRAVES: That is right, and using Hall's
facilities wherever he has them.
H.M.JR: But it is a question of getting these
two people together, two human beings, and saying - Hall
says, "I have got a better organization in New York;
you have got a better organization in Dutchess County
so you can take it in Dutchess", and so forth and so
on, "But Greater New York, leave that to me.
MR. GRAVES: I think we can work this out that
way.
H.M.JR: Now, it won't make a very pretty chart;
in fact, there should''t be any chart. It is just a
matter of human relations. I can't explain it to the
press and don't want to explain it to the press, but
it gets down to - here is a fellow - do you know Perry
Hall?
8
-8MR. STEWART: No.
H.M.JR: He is supposed to be a tip-top man, ready
to go, anxious to go, and we have got nothing for him
to do for this month. I want a lot of F and G's sold,
and Patterson is swamped with his pledge campaign and
everything else on his E Bonds, more than he can
possibly do.
What do you think, Peter?
MR. ODEGARD: I have never had any doubt but what
an arrangement of this kind would work, but I was im-
pressed yesterday, in talking with a man named Stubbs in
Mr. Buffington's office, with the idea that it is not
going to be as simple as we may think here to work it
out on that basis.
H.M.JR: The basis I am talking about?
MR. ODEGARD: I heard Mr. Stubbs say distinctly,
not once but twice, that he didn't think it would work
unless you had an F and G committee, a Victory Fund
Committee that had nothing whatever to do with the War
Savings Staff.
MR. BUFFINGTON: Well, that is the strictest
interpretation. These fellows are human, just like the
Secretary says, and I think an arrangement can be
worked out.
I wish that you would give these boys, Perry
Hall and Stubbs, five minutes because I haven't yet
checked this idea with them.
H.M.JR: I will sometime during the day. I haven't
talked to Bell yet. What do you think, Bell?
MR. BELL: Well, one, I think you ought to work
through Allan Sproul instead of Perry Hall. That is
still a matter of detail. Now, he is in charge of the
9
-9 committee, and I think that Dick Patterson and Allan
Sproul ought to be working together, and of course
Perry Hall as manager will be in.
I made this suggestion yesterday at our meeting,
and I think something could be worked out along this
line. Have George Buffington and one of Harold Graves'
men go to New York and Philadelphia and spend three
or four days in each place and work out this coordination between Dick Patterson and Allan Sproul in New
York, and Williams and - who is the fellow in Philadelphia?
MR. BUFFINGTON: Bendere.
MR. BELL: Then use that as a model for the rest
of the country.
H.M.JR: I can't wait.
MR. BELL: That can be done the rest of this week.
MR. BUFFINGTON: The way the Secretary has this
thing set in his mind, I believe those two men - this
is my opinion - will get together in five minutes on
this thing, no need for people going around.
H.M.JR: If they are good men they can do it.
Now, Sproul is here today, and Perry Hall. The only
man that isn't here is Dick Patterson.
MR. GRAVES: We could have him here, if you wanted,
this afternoon.
H.M.JR: And I think by talking to this group
for five or ten minutes myself I could settle it right
here.
MR. BUFFINGTON: Yesterday I had a call from
Francis Patton, who is the executive manager in Chicago.
He said, "If you will just draw this line as to how you
want it done, we will have no difficulty working out an
arrangement. Those men are experienced in doing that
10
- 10 -
sort of thing. They have worked with groups and syndicates; they know how to do it. That is my opinion.
MR. BELL: Let's don't make another decision we
will have to change next week; let's work it out on a
practical basis.
H.M.JR: This wouldn't change it. It still would
leave it nominally under War Bonds.
Bonds. MR.
GRAVES: More than nominally - fully under War
MR. ODEGARD: Not only nominally.
MR. GRAVES: I don't think it would do to have an
arrangement which would merely leave it nominally under
War Bonds. These fellows are going to have a great deal
of territory to cover which the Victory Fund Committees
cannot cover, anyway.
H.M.JR: Well, Harold, look, let me talk to these
people and talk the way I have to you. I don't want a
chart; I don't want anything in writing. See? But
this is a human question of Sproul and Patterson and Perry
Hall sitting down together, the hree of them, with a map
of the State of New York before them, and saying, "Now I
can do this, and this is why I can do this one. "I can
do Buffalo, but I can't do Albany or Schenectady." "I
can do New York; just give me Greater New York for June."
If I were this man Hall I would just say, "Give me
Greater New York, particularly inasmuch as you have got
your sales campaign going there." This committee just
takes Greater New York; and Philadelphia, Greater
Philadelphia; and Boston, just Greater Boston, and leave
the outside parts.
MR. GRAVES: I don't think there will be any
trouble.
11
- 11 -
H.M.JR: Then I tell you what you do. Don't rush
off. You can go into Bell's room, if you need to - I
don't see why you need to. I don't see why you can't
now invite your State administrator for New York, for
Pennsylvania, and Massachusetts - aren't those the three
spots?
MR. BUFFINGTON: Yes.
H.M.JR:
to come down here tomorrow, plus the
heads of the Federal Reserves.
MR. BELL: Tomorrow is a bad day. Allan Sproul
and Williams are in town, and tomorrow there is a
directors' meeting.
H.M.JR: I can do it Friday morning. That will
be my last chance.
MR. GRAVES: If you are going to do that, I would
suggest we have, in addition to those, our man from
New Jersey and our man from Ohic, and possibly from
Chicago.
H.M.JR: For Friday morning.
MR. GRAVES: That will cover the high spots of
our situation, and you can have the Fed people in from
those places, in additi
H.M.JR: What do you think?
MR. GAMBLE: It is all right.
H.M.JR: You see, Harold Graves and I are going
away Friday night for a week. We are leaving it to
you, Peter, and Kuhn, to run the show.
MR. GAMBLE: I think it just needs' to be defined.
I think we can lay out the work for these people. That
is the important thing.
12
- 12 -
H.M.JR: You see, here I am - the setup is I am
chairman of the Victory Fund Committee and of the War
Savings Bonds, and they both - they are all working
for me, and I ought to be able to say, "One place you
do it one way", another place another, one kind of
troops in one place, another kind in another. For the
time being I will leave it the way the order says,
that
the
State chairman of War Savings will be the man
in
the
State.
What do you think, Walter?
MR. STEWART: It sounds good to me.
H.M.JR: Just a matter of human relations, what?
MR. STEWART: I suppose the Victory Fund Committee
will have plenty to do later. This is just for June?
H.M.JR: Yes, they will have plenty later, but they
have nothing to do in June. If it works all right, they
will continue this way. They are crying for it; they are
asking for it.
MR. BUFFINGTON: That is correct.
MR. STEWART: If they have more than they can do
later in their own province, the question is whether
you
are building something they will hav e to take care
of later.
H.M.JR: That was my original worry.
MR. GRAVES: I don't think you will, Walter,
because if you set this thing up the way the Secretary
is suggesting you have a structure there that you can
man with other people later on, if people now in it have
to pull out to do some other thing.
H.M.JR: For instance, again referring to this
Canadian report, they have got all their salesmen - it
13
- 13 -
has only worked partly well, but they will only use a
salesman for two days from his regular work, and then
send him back. I mean they use him two days, then let
him go back to his bread and butter, you see. I mean,
there are all kinds of wrinkles, but--
MR. BELL: Do you want me to ask the presidents of
the Federal Reserve Banks to be here Friday, these five?
H.M.JR: Yes.
MR. BELL: Sproul, Williams, Fleming, Young, and
Paddock.
MR. BUFFINGTON: Do you want to talk with these
men before deciding to talk to these people? If these
boys like this idea, as I think they will, I think it
can be done with the State administrators over the
telephone.
H.M.JR: You mean you want me to talk to who?
MR. BUFFINGTON: Perry Hall and Stubbs.
H.M.JR: I will talk with them between now and
lunch time, and let you know.
All right?
MR. GRAVES: Yes. There is just one thing
further that I think this group should be told, something of the dimensions of this June sale that we
expect to realize. We have two hundred and fifty of
F and G Bonds in our June quota, and that is not enough
if we are going to meet the June quota over-all.
MR. BUFFINGTON: What do you want in F and G's,
Harold?
MR. GRAVES: Well, I would say that to be safe
on our June quota we ought to have three hundred and
fifty million dollars out of F and G.
14
- 14 -
H.M.JR: You mean you think you are going to run
short a hundred million on the E's?
MR. BUFFINGTON: You told me never to express an
opinion, so I won't do it.
H.M.JR: Go ahead.
MR. BUFFINGTON: I don't think there is any problem
in selling three hundred and fifty million this month.
MR. GRAVES: It should be stated, in my opinion,
just the same, what the dimensions of this job are.
H.M.JR: Out of eight hundred you have only got,
F and G's, two hundred and fifty?
MR. GRAVES: That is the formula that we use, that
is, five hundred and fifty of E and two hundred fifty
of F and G.
MR. BELL: Didn't you leave F and G's on a straight
level, two hundred and fifty straight through, so every
month your E goes up and the F and G's remain steady?
MR. GRAVES: As I said yesterday, we are not
taking that too seriously.
H.M.JR: How many E's sold in May?
MR. GRAVES: About four twenty - four twenty-four,
I would say.
H.M.JR: You are giving these boys a very high
hurdle.
MR. GRAVES: We are giving them the same hurdle
that e had set for ourselves. We have always known
that our hard month was June, harder than July, and
long ago we anticipated this thing and told our people
15
- 15 -
they were going to have to make a drive on F and G
Bonds in June to make up for a deficiency in E Bond
sales.
H.M.JR: Then there is all the more reason, Harold--
MR. GRAVES: That is right. All I am saying is I
believe these fellows should be told what volume we
have got to produce.
H.M.JR: Between now and twelve o'clock I will see
these people.
MR. BELL: I don't see any use of me having a
meeting this afternoon. I scheduled a meeting for three
o'clock.
MR. BUFFINGTON: Can't we wait until after this
meeting?
H.M.JR: Yes.
15
- 15 -
they were going to have to make a drive on F and G
Bonds in June to make up for a deficiency in E Bond
sales.
H.M.JR: Then there is all the more reason, Harold--
MR. GRAVES: That is right. All I am saying is I
believe these fellows should be told what volume we
have got to produce.
H.M.JR: Between now and twelve o'clock I will see
these people.
MR. BELL: I don't see any use of me having a
meeting this afternoon. I scheduled a meeting for three
o'clock.
MR. BUFFINGTON: Can't we wait until after this
meeting?
H.M.JR: Yes.
16
June 3, 1942
10:38 a.m.
HMJr:
Hello.
Operator:
Mr. Nelson.
HMJr:
Hello.
Donald
Nelson:
Good morning, sir.
HMJr:
How are you?
N:
HMJr:
N:
HMJr:
N:
Fine, thank you. When I had lunch with you
the other day, I told you that I would like
very much to have you go to Detroit with
Captain Lyttleton and myself.
That's right.
We're planning to go Saturday.
Oh, oh. Saturday, I see. How long are you
going to be out there.
Oh, just for the day. We'll come back that
evening.
HMJr:
Just for the day.
N:
Just for the day.
HMJr:
When are you leaving?
N:
We'11 leave early Saturday morning.
HMJr:
I see.
N:
It'11 give you a good opportunity to have a
good talk with Captain Lyttleton to see that,
and we thought we'd fly out there and land at
the Willow Run plant
HMJr:
N:
Yeah.
and go through that, and then go over to
the Dearborn plant for lunch
16
June 3, 1942
10: 38 a.m.
HMJr:
Hello.
Operator:
Mr. Nelson.
HMJr:
Hello.
Donald
Nelson:
Good morning, sir.
HMJr:
How are you?
N:
HMJr:
N:
HMJr:
N:
Fine, thank you. When I had lunch with you
the other day, I told you that I would like
very much to have you go to Detroit with
Captain Lyttleton and myself.
That's right.
We're planning to go Saturday.
Oh, oh. Saturday, I see. How long are you
going to be out there.
Oh, just for the day. We'll come back that
evening.
HMJr:
Just for the day.
N:
Just for the day.
HMJr:
When are you leaving?
N:
We'11 leave early Saturday morning.
HMJr:
I see.
N:
It'11 give you a good opportunity to have a
good talk with Captain Lyttleton to see that,
and we thought weld fly out there and land at
the Willow Run plant
HMJr:
N:
Yeah.
and go through that, and then go over to
the Dearborn plant for lunch
17
-2HMJr:
N:
HMJr:
N:
HMJr:
Yeah.
and then go through the tank arsenal in
the afternoon.
Well, first may I thank you for remembering
me. That's the first thing.
Well, sir, you didn't think I'd forget that.
That wasn't an idle invitation.
And the second, let me just talk one minute.
Have you got a minute?
N:
Yes, certainly.
HMJr:
Because I'm breathless. How would you go?
N:
Well, we'd go by plane.
HMJr:
Would you want to go in my plane or your plane?
N:
Well, it doesn't make any difference. Whichever ours isn't as comfortable for three, but it can
carry three.
HMJr:
Well, mine I can very comfortably carry one,
two, three, four, five. I've got a Lockheed.
N:
Which one, the
HMJr:
The big one.
N:
The big one. We have a little one.
HMJr:
Well, I've got the big one. Would this - I
wonder if this would be wasteful? You might
think about it, and I'll be thinking about it.
I just don't - and if we went - you see, I'd
want to go back to the country, because I was
starting a week's holiday Friday night.
N:
Well, we could have our plane, you see, come
to Detroit also. You can go right to the country,
and we can come back here.
HMJr:
Then we can go out in my plane, and I can go
18
-3 back to the country, and you could come back
to Washington in yours?
That's right.
N:
N:
Is that all right?
That's perfectly all right.
HMJr:
Could I have twenty-four hours to think it over?
N:
Certainly. You don't need to let us know, as a
HMJr:
You'd leave very early Saturday morning.
N:
We'd leave early Saturday morning.
HMJr:
Well, it sounds thrilling, and I'd love to go.
HMJr:
N:
matter of fact, until Saturday. Just
Well, I think you'd have an awfully good time,
and you'd see something that - well, you just
must see, because it's just the greatest thing
in America.
HMJr:
N:
HMJr:
Yes.
And you'd have an opportunity to get well
acquainted with Captain Lyttleton and talk
to him, and if you can do it, swell.
Well, I'm certainly going to try to, because
it's something I really would like to do; and
I'11 get in touch with you tomorrow.
N:
All right, sir.
HMJr:
Thank you 80 much.
N:
Good-bye.
19
June 3, 1942
11:22 a.m.
HMJr:
Hello.
Operator:
Secretary Knox.
HMJr:
Hello.
Operator:
Go ahead.
HMJr:
Frank.
Secretary
Knox:
Yes, Henry.
HMJr:
How are you?
K:
I'm fine.
HMJr:
Did you see the statement that made in regard
to advertising?
K:
No, when?
HMJr:
Oh, didn't you see that that I explained what
the definition, what they could and couldn't
advertise?
K:
HMJr:
No, I'd like to see it.
oh, for heaven's sake. It's words right out of
your mouth.
K:
(Laughs)
HMJr:
I took your advice and protected myself.
K:
I see. Well, that's good. I'm glad you did,
Henry. It's a wise thing to do.
HMJr:
Now, Frank, I want something that isn't going
to cost the Navy one God damn cent, see.
K:
Sounds bad.
HMJr:
Well, it's not bad.
K:
(Laughs)
20
-2HMJr:
On, I think, the sixth or seventh of June,
England, in their generosity, are sending us
ten heroes that we're sending around the
country to
K:
Murals?
HMJr:
Heroes.
K:
Zeroes?
HMJr:
No, heroes.
K:
Heroes, oh, yes.
HMJr:
Men who have been over Germany and successfully
bombed Germany.
K:
HMJr:
I see.
Now, we want to send a couple of Army men, and
Mr. Stimson, with his usual generosity, is providing the gasoline and feeding these fellows,
and giving us two top men.
K:
Yeah.
HMJr:
The Navy is giving us zero.
K:
(Laughs)
HMJr:
Now, we want two good men from the Navy, because
I don't want it all English.
K:
What do you mean? Two men that have had overseas service?
HMJr:
Who have done some outstanding thing and who
have been decorated, and we haven't been able
to get anywhere with your fellows, or otherwise
I wouldn't bother you.
K:
Uh huh.
HMJr:
But I've got to see the top fellow.
K:
I see.
21
-3HMJr:
But I don't want it all English. The Navy the Army is giving us a couple of fellows,
and it isn't going to cost you a penny, 80
you can't give me that line.
K:
Yeah. Yeah.
HMJr:
Now, can't I.....
K:
When do they start?
HMJr:
They start Monday from New York.
K:
Next Monday?
HMJr:
Yes, sir. And they really - it won't do the -
K:
Yeah.
HMJr:
K:
it won't hurt the Navy one bit, you know.
It's going to be a good show, and they're going
clear across the country, and we've got the
arrangements in twenty cities.
Uh huh. All right. Well, I'11 see what I
can do.
HMJr:
K:
Well, now, how can I follow up on this 80 I.....
I'll call you back, Henry.
HMJr:
Will you?
K:
Yeah.
HMJr:
Two top fellows.
K:
Yeah.
HMJr:
Are you going to have luncheon today?
K:
Would Admiral Hart be all right?
HMJr:
Admiral Hart?
K:
Yeah. How high are the rank of these boys that
are coming over?
22
-4HMJr:
I think they're Squadron Leader.
K:
No, they'11 be lower rank, considerably.
HMJr:
K:
HMJr:
=
I think that's as high as they are.
Uh huh. What are the - who are the Army sending?
Just a minute. Let me ask Kuhn.
(Aside to Mr. Kuhn) Who are the Army sending?
Captain Wheless, whom the President decorated,
K:
HMJr:
who was in the Philippines in charge of a bomber.
Oh, yes. Yeah.
Captain Wheless - and who else? Some others,
I don't know who, but they're giving us several.
K:
I see. Well, all right.
HMJr:
And it's that kind - I mean, the English are
sending these fellows that went over that city,
you know, at two hundred feet, and dropped those
bombs on them.
K:
Yeah.
HMJr:
Augsburg.
K:
Yeah.
HMJr:
That'e the kind of fellows they're sending.
K:
Uh huh.
HMJr:
And a couple of Commandos.
K:
Uh huh.
HMJr:
And - somebody that the Navy - you know - what
we asked for was this Coast Guard Officer who
took that submarine crew, but they don't seem
to want to let us have him.
K:
The Coast Guard Officer?
23
-5HMJr:
Yeah, the Coast Guard Officer that captured a
K:
Oh, yes, uh huh.
HMJr:
That's the kind of fellow we'd like.
K:
Uh huh.
HMJr:
See?
K:
Well, he's a Coast Guard fellow, eh?
HMJr:
Well, he's under you.
K:
Yeah.
HMJr:
But he's in the Coast Guard.
K:
Uh huh.
HMJr:
But that's the kind of fellow we'd like.
K:
Uh huh.
HMJr:
whole submarine crew.
Somebody that did something outstanding that
you're proud of and the American people will
be proud.
K:
I see.
HMJr:
See?
K:
All right, Henry. I'11 see what I can do. I'll
call you back.
HMJr:
Thank you.
K:
All right.
24
June 3, 1942
12:05 p.m.
WAR BONDS
Present:
Mr. Graves
Mr. Buffington
Mr. Gamble
Mr. Bryce
Mr. Hall
Mr. Stubbs
H.M.JR: This isn't new because we talked about
it this morning, but this is the way I would like to
have it done, if possible.
I would like to have in here at ten o'clock Friday
morning the State administrators of War Bonds of New
York, Massachusetts, Pennsylvania, and Ohio. Want anybody else?
MR. GAMBLE: Illinois.
MR. GRAVES: And New Jersey.
MR. STUBBS: Could I have Connecticut? Massachusetts
and Connecticut are my two best bets.
H.M.JR: Then what I would like you to do, Harold
and Gamble, on your end, is explain to the State administrators before they come into this office that what
I am suggesting to them to help them out, so that they
can get for me the three hundred and fifty million dollars
that I need for F and G's in June, is that they invite
the presidents of the Federal Reserve districts in their
various districts, plus the sales managers, or whatever
your title is; have them sit down with them and go over
locality by locality and decide in each locality who is
the best man to sell F and G's in that locality. See?
25
-2They say to the president of the Federal Reserve,
"Now look, on this thing I am looking to you to do
this thing. If you have got some better men you do
it; if we have some, we will do it. But it is up to
you to sit down with our people, county by county,
locality by locality. Will you take this thing off
my hands, come in as my assistant on this thing, and
help me put this thing over? I am all up to my neck."
MR. GRAVES: It is the presidents of the Federal
Reserve banks our people will be talking to?
H.M.JR: Yes, that is what these gentlemen want and say, Will you come in as my assistant and help me
put this thing across" - look to them on the F and G's.
MR. HALL: Look to them to direct sale of F and G.
MR. GRAVES: No, that is a different thing. That
is something different.
MR. HALL: I don't mean it to be.
MR. GRAVES: You said we were to say to the presi-
dent of the Fed that we were going to look to them to
direct the sale of F and G, a very different thing from
what the Secretary said.
MR. HALL: Of course I don't mean by that - look,
Mr. Graves, could I paraphrase it once more? I hate
to be repetitious. In New York Dick Patterson and
Nevil Ford will go to the president of the Federal
Reserve Bank, Sproul, and say, "We have got a big job
to do here selling F and G Bonds in June. You have
organized the Victory Fund Committees. It is headed
up by you people. We need some help; we want
you to help us during the month of June to sell those
Bonds. I have got some place, maybe, a better
organization than you have; somewhere maybe yours
is better. I would like to feel I can call on your
machinery, headed up by you people, to get all these
26
-3- - -
banks, all these investment bankers to go to work in
the month of June on the sale of F and G Bonds. Some-
body has to di rect it. I am asking you to do that to
help us meet our quota. There maybe are some places
where our present organization is better than yours;
if so, we will agree on that. But you sit down and
go over each community. We will divide our places up
into districts; we will take each district and go over
it."
I don't think you can get it done unless you have
that machinery harnessed in that manner.
MR. STUBBS: I don't think so.
MR. HALL: We don't care how obscurely we work
in this thing. I have been on this since January.
MR. GRAVES: What did you mean when you said our
man should say to the president of the Federal Reserve
bank, "We look to you to direct the sale of F and G"?
MR. HALL: Just as simple as this: Sproul will
send a letter out appointing chairmen in each one of
these districts, all divided. I won't go into that.
'We have been asked by the State authorities, which is
Patterson. Our job for the month of June is selling
F and G Bonds. We want your help. We have been asked
by the State Administrator to provide that help, and
we are charged with the responsibility to assist them
in selling those Bonds, but our primary function is the
sale of F and G Bonds.
MR. GRAVES: That is all right, if that is what you
mean, but when you said that Mr. Collins in Chicago
would say to Mr. Young in Chicago, "We expect you to
direct the sale of F and G Bonds, that is a very different thing.
MR. HALL: Who is going to direct it? We are
quibbling, maybe, over words.
27
-4MR. BRYCE: Someone has to run the show for the
best results.
ft
MR. GAMBLE: I think it is all right as you have
said it now, but the point Mr. Graves is raising is
that we have an organization in New York charged with
the responsibility of selling a lot of Bonds, as you (Hall)
know.
MR. BRYCE: He is the head of that committee.
MR. GAMBLE: And there are a number of people who
are not associated with investment bankers, not associated with the Federal Reserve, not associated with
banks, and we don't want to hit them over the head.
MR. HALL: It would be foolish to do it.
MR. GAMBLE: We don't think it is necessary. We
think that certainly our people are flexible enough,
Mr. Secretary, that they can work, as you suggested this
morning, with the president of the Federal Reserve or
anyone else, so long as we understand--
H.M.JR: But look, Ted, let's get down to something. I have got to look to somebody who is going to
put across this F and G in June. Now, here you have
got a lot of people in some places, strong in some
places, and they are saying that they are willing, not
necessarily under the name of Victory Fund but under
the wing of the State administrator of the War Savings
Bonds, to come in and sit down. I wouldn't put anything in writing, and wherever they are strongest they
will go where the fellow is; but you have got to have
somebody who is sales manager.
MR. GRAVES: That is my point.
H.M.JR: You have got to have somebody who is
director of sales for the State of New York. Now who
is that going to be?
27
-4MR. BRYCE: Someone has to run the show for the
best results.
MR. GAMBLE: I think it is all right as you have
said it now, but the point Mr. Graves is raising is
that we have an organization in New York charged with
the responsibility of selling a lot of Bonds, as you (Hall)
know.
MR. BRYCE: He is the head of that committee.
MR. GAMBLE: And there are a number of people who
are not associated with investment bankers, not associated with the Federal Reserve, not associated with
banks, and we don't want to hit them over the head.
MR. HALL: It would be foolish to do it.
MR. GAMBLE: We don't think it is necessary. We
think that certainly our people are flexible enough,
Mr. Secretary, that they can work, as you suggested this
morning, with the president of the Federal Reserve or
anyone else, so long as we understand--
M.JR: But look, Ted, let's get down to something. I have got to look to somebody who is going to
put across this F and G in June. Now, here you have
got a lot of people in some places, strong in some
places, and they are saying that they are willing, not
necessarily under the name of Victory Fund but under
the wing of the State administrator of the War Savings
Bonds, to come in and sit down. I wouldn't put anything in writing, and wherever they are strongest they
will go where the fellow is; but you have got to have
somebody who is sales manager.
MR. GRAVES: That is my point.
H.M.JR: You have got to have somebody who is
director of sales for the State of New York. Now who
is that going to be?
28
-5MR. GRAVES: It ought to be our organization who
will direct the sales effort on F and G Bonds.
MR.ofSTUBBS:
I don't think that would work up in
our neck
the woods.
MR. GRAVES: I am convinced of it.
H.M.JR: Well, I am not.
MR. STUBBS: May I just speak a second here. We
have got an army organized in District Number One which
has got the top personnel, and the Secretary's concept
of this thing has just clicked and caught fire - they
are keen to work. I would suggest that the general of
the army, Paddock, who is president of that district,
be asked to put his army to work on F and G Bonds, all
the credit to go to the War Savings Staff but that he,
Paddock, as an individual, be the man to whom the Secretary
would look to see that it was done. He, Paddock, would
direct the sales.
MR. GRAVES: For the whole of New York?
MR. STUBBS: District Number One. I am New
England; I have got six States, you see.
H.M.JR: Could I just make this difference, and I
hope that this is cleared up. I am not going to look
to Paddock, head of the Federal Reserve.
MR. STUBBS: That is just a name, that is all.
H.M.JR: But our State chairman - what is his
name?
MR. STUBBS: Doherty in Massachusetts.
H.M.JR: Doherty is the man. I would call up
Doherty and say, "How are F and G's going," and Doherty
is right up on them. F and G will be his organization.
29
-6MR. GRAVES: That is all right.
MR. GAMBLE: I am agreeable to that.
H.M.JR: What is the difference?
MR. HALL: I don't see any difference. That was
my idea.
MR. STUBBS: I do, sir.
H.M.JR: I mean, I can call up Doherty; I can call
up Patterson. I am not going to invite your fellows
to come in. That is why I don't want to send this telegram which was drafted for me to sign. Mr. Patterson
or Mr. Doherty will invite you to come in and meld these
organizations, and the people that they are going to
invite to come in is the president of the Federal Reserve Bank, who has a sales organization. Some places
it is strong; some places it isn't; but they are going
to sit down, county by county, and fix it up. But I
still am going to hold Graves and each State chairman
responsible. Where the hell are we apart?
said.
MR. GRAVES: We are not apart on what you have
H.M.JR: Let me take one at a time. Mr. Hall, how
about it?
MR. HALL: I don't think we are apart, if it is
understood this way, Mr. Secretary, that Mr. Patterson
or Mr. Ford, probably both, would come and speak to
Mr. Sproul and Sproul would go and talk to Perry Hall
about it, say, "Now look here, here is our message. We
have got to sell F and G Bonds. What is the best way
to do it?" "All right, here is my organization; it
is at your disposal. Now, do you want me to set the
dogs running, or don't you?"
I mean, I am-willing to do it, but if they are
going to say, "We will give the instruction to the
30
-7 heads of every bank that has got a letter from Sproul",
it isn't going to work. We give the instructions which
Patterson tells us to give. You see what I mean? He
says, "I want you to handle this thing and sell Bonds.
Use my men if you want to.'
H.M.JR: But haven't you been doing this up to
now for Patterson, so you have been on both sides?
MR. HALL: Yes, both sides. I have been on a
committee since January, Mr. Secretary. I am familiar
with all of the problems, I can tell you that. I have
known Nevil all my life because he is in the bank. There
is going to be no friction on our part at all.
H.M.JR: I could sit here all day long, and I
couldn't write instructions which would go for New York,
Boston, Philadelphia, Chicago, and Cleveland. It is
just a question of human beings sitting down and working
this thing together; and the point that Harold Graves
wants to make, correctly, is that through him, through
the State administrator, to the president of the Federal
Reserve Bank - that is the way the authority will flow
on this thing.
MR. HALL: Absolutely, and it is just as simple,
I think, Mr. Graves, as when you said to me, "Your task
now is to follow up on the telegrams." All right, we
did it. "Follow up, if you will, and get all of New
York going" - I was chairman of the State on these
certificates of indebtedness, and we did that.
Now, Nevil Ford or you will say, "Your job for
June is F and G, go to town on it", then we do it. But
there wouldn't be any conflict about it.
H.M.JR: What is the matter with that?
MR. GRAVES: Nothing wrong about it.
H.M.JR: Mr. Hal 1?
MR. HALL: I am satisfied.
31
-8H.M. JR: Are you satisfied?
MR. GRAVES: Yes.
MR. GAMBLE: Yes.
H.M.JR: Now, what can I do to make you happy?
MR. STUBBS: I will tell you what I think we have
just got to clear up between Mr. Graves and me. I think
I see exactly what the trouble is, and I am sure he
does. That is, I don't think the orders below the
president of the Federal Reserve District to his army
can be given by the State administrator. I think once
the State administrator has asked the help of the
president of the bank for that district, the president
of the bank of that district must direct the Victory
Fund Committees in their efforts and have a free hand
absolutely.
of--
MR. GRAVES: I agree with that. What I am thinking
H.M.JR: Is that all?
MR. STUBBS: This is dandy.
MR. GRAVES: We have a State which hasn't been
mentioned, which I think we should bring in here.
That is Indiana where they have had a strong F and G
organization in the War Savings.
MR. BRYCE: Ed Wuensch, whom we all know. We got
him in there, and he is good.
MR. GRAVES: I don't think anything should be
done which will supersede that organization.
MR. BRYCE: We got him. He is marvelous.
MR. GRAVES: We should bring people in to augment
and help that group.
32
-9- -
H.M.JR: Harold, I am trying to say I don't think
any two States are the same. I don't think any situation
within the State is the same - Buffalo is one, New York
is another. That is why I don't want to send any telegram. I don't want to send anything else.
MR. BRYCE: Chicago has already merged.
H.M.JR: If you fellows are satisfied on this,
let's go along on that basis. I repeat myself, that I
am saying to Graves, please get hold of your State
administrators before Friday at ten o'clock and explain
to them that I am suggesting to them, or requesting
them, to please ask the presidents of the Federal Reserve
Banks in each of their districts to coordinate the sales
organizations on F and G, but that Mr. Patterson and our
State administrators will still be responsible.
MR. GAMBLE: No information will go out to these
people until it comes - only through the State administrators.
H.M.JR: I have got to go.
33
June 3, 1942
4:25 p.m.
WAR BONDS
Present: Mr. Graves
Mr. Buffington
Mr. Gamble
Mr. Odegard
Mr. Bell
Mr. Gaston
Mr. Kuhn
Mrs. Klotz
H.M.JR: I am going to do one of the things which I
very seldom do. I am going to be boss, and I am not
arguing. I am telling. Now, this is the way - where
is Bell?
(Mr. Bell entered the conference.)
This is one of the few times that I am going to be
boss. I am not arguing. I am telling.
MR. BELL: When haven't you been?
H.M.JR: At staff everybody has his chance to talk
and I listen, I think, don't I?
MR. BELL: I agree up to a point.
H.M.JR: Now, what I want to do is, I want to sell
eight hundred million dollars worth of bonds in June,
and I want to strengthen the War Bond organization
the way I built an organization for Governor Roosevelt
in New York State.
When I went into action to get a farm leader, I
wasn't interested in whether he was a member of the
Grange, a member of the Dairymen's League, whether he
was a Democrat or a Republican. I wanted the best man
in each county to advise me on agricultural problems.
34
-2 We got together a committee of twenty-one, of which
eighteen were Republicans, but we had the very best
man in each county.
Now, I want in each county in the United States,
and each city, the very best securities salesman I can
get. He may be a lawyer; he may have a lot of trust
funds; or he may be a member of the New York Stock
Exchange, or a member of an investment house. But what-
ever he is, I want him to help my State Chairman, and I
want him to come there under the auspices of his State
chairman.
Now, in order to get these people, and to corral
them and use them - I am perfectly willing to use
my fiscal agents in connection with the F and G Bonds
as a central point to corral these people around, and
my State chairman should ask the president of the
Federal Reserve Bank in his district to help him get
the best men in each county to act, to sell these F
and G Bonds beginning with Monday.
Now, I have wasted entirely too much time sitting
around here arguing and not selling, and if Mr. Eccles
or Mr. Sproul don't like it they have just got to be
told so as this is what I want. I started eight years
ago and I had my knock-out, drag-out fight with the
Federal Reserve of New York as to who was to be the
boss, and as Mr. Roosevelt's representative it was
decided that the Treasury should be the boss of the
monetary matters. It has been that way now for eight
years, and I am going to keep it that way. After
having won this fight for eight years - I don't want
to be demagogic or excitable - for the people, I am
going to keep it just as long as I am here. And Mr.
Eccles and Mr. Sproul and the rest of them will have
to do as I want.
Now, any security salesman that Mr. Sproul or the
directors invite to come in and help us, if he doesn't
want to help us - we are asking him to contribute his
time - this is God's own free country - I want to keep it
that way. It is volunteer with a capital "V", and no
salesmen - after all, if we go tap the man on the shoulder
35
-3and say, "Will you please come in. We understand you are
the best man in Rochester, New York, and we would like
you to help," and if he doesn't want to do it, that is
his business. See? I mean, nobody has to come in.
After all, we are asking them to give their time, but
I have taken a year and a half to build this organization
independent of the Federal Reserve, and we have worked
like hell now for almost a year and a half. There is
no reason why I should give it up, and I am not going to.
Now, I am being a little extra tough this after-
noon because I would much rather be a little tough with
Mr. Eccles and Mr. Sproul, particularly, and then after
they are in the fold be nicer to them than to be nice
now and then get them in the fold and then have them
say, "Well, Morgenthau, we didn't understand this, and
you got us in under false representation." But if I
make the conditions a little bit harder, tougher, under
which I want them to come in, then after they are in
I will be a little extra nice to them.
I think that is perfectly clear, isn't it?
MR. BELL: Do you contemplate getting these salesmen around the presidents of the Federal Reserve Banks
as part of the Victory fund Committee or as individuals?
H.M.JR: I don't want any tags; I don't want any
labels. I don't want them as a Democrat, a Republican,
or a member of the Elks, or a Moose, or as a member of
the New York Stock Exchange, or anything else.
MR. BELL: What I am trying to find out, are you
giving them a new function? You have told them to
organize these Victory Fund Committees. Now, is it
going to take their committee members to do this job?
Is this a new function they have got to do as fiscal
agents?
H.M.JR: Let me go over this once more.
MR. BELL: I understand except that one point.
36
-4H.M.JR: No, I can't answer that; that is the whole
point of this thing. I don't know my bankers. Mind
you, I haven't gone to conventions; as you know, I
purposely and carefully and studiously have not been on
intimate terms with them. It is no accident that I am
not on intimate terms with them.
(Lieutenant Stephens handed the Secretary a news
release.)
Now, I have known this since twelve o'clock, and
while I am sitting here the Japanese have been in the
midst of a raid on Dutch Harbor, Alaska, and I have
got to sit here and argue about this business while
this thing is going on. I am sick over the fact that
I didn't know it when I called up Frank Knox. But I
have known this since lunch time. And then we sit
here arguing about who is going. to do this thing when
this thing happens.
Let me explain why. The man from New York - what
is his name ?
MR. BUFFINGTON: Perry Hall.
H.M.JR: A member of J.P. Morgan. He understood
perfectly what I wanted and was perfectly willing to
go along with you.
MR. GAMBLE: That is correct.
MR. GRAVES: And Mr. Stubbs.
H.M.JR: Well, Stubbs was difficult, but Hall was
perfectly willing. The man, Dan, that I want in Rochester
or Utica or Albany or Buffalo may be a member of the
Victory Fund Committee or he may not be a member, but
the man that I want - and Perry Hall, quoting him, said
to me, "Mr. Morgenthau, I understand perfectly what you
want. I know your man in New York, but I have been chairman for F and G for Colonel Patterson since January," and
he said, "In some places I may have the best man in my
37
-5capacity as chairman of the F and G Committee for
Patterson, and in another place in another capacity
I may have the best man under the Victory Committee."
But he said, "What I don't want" - and that is what
I don't want - r don't want two men both going down the
same side of the street and both soliciting the same
person, both representing Henry Morgenthau, Jr. any
more than what I found in New London, Connecticut.
There were seventeen representatives of the Treasury
in New London, Connecticut, when they arrested a man
who happened to be both a narcotic man, a smuggler and
a counterfeit man, and seventeen Treasury agents all
in New London - or Bridgeport?
MR. GRAVES: Bridgeport.
H.M.JR: And as a result of that I made Harold
Graves coordinator of Treasury police because I had
seventeen men all there investigating the same man
because he happened to have committed five crimes against
the Treasury. And I don't want five salesmen representing
five different organizations, but all representing me,
soliciting the same fellow. Therefore, I can't answer
your question. As the man, I want the best man, independent
of who he belongs to.
MR. BELL: I think you have answered it. What you
are after is individuals. I think you have answered my
question.
H.M.JR: I want the best salesman.
MR. BELL: You want the best salesman regardless of
the organization to which he belongs, and you don't
want him as a Victory Fund Committee member, even though
he happens to be one, or you don't want him a member
of the other committee just because he happens to be
on it. You want a setup for this purpose, and you want
the best available.
H.M.JR: That is right.
38
-6MR. GRAVES: And you want that in every county in
the country.
that?
tor?
H.M.JR: Every county. What is the matter with
MR. BELL: And that is to be under the State administra-
H.M.JR: The State administrator, but he using the
president of the Federal Reserve Bank to corral these
people for him.
Now, if I were State administrator this is what I
would do in New York State. I would go to Allan Sproul
and say, "Look, Allan, I am up to my neck trying to get
my E Bond thing. I am worried," If just the way he told
me, "I don't know what is wrong. Will you help me out
and take this thing off my hands, and corral these
people wherever they are, and get me the best man. Now,
if you do that you save my life. Will you do that for
me?" That is what I would do if I were Dick Patterson,
and that is what I want Harold Graves to tell Dick
Patterson to do.
MR. GRAVES: Friday morning.
H.M.JR: See? To tell him so that he can concentrate on his pledge campaign and everything else,
but to call a spade by a spade. I am not going to
give up the control to the Federal Reserve.
MR. BELL: I know. I don't think you want to.
H.M.JR: I don't know, but I have strong suspicions
to think that that is what they want, but as I say,
make it tough. You might just as well tell Eccles right
on the line and Sproul and then treat them like gentlemen
afterwards.
MR. BELL: I think you will probably have less trouble
in "ew York than any other because of the close friendship
39
-7-
between the New York organization and Allan Sproul's
organization, and the fact that Perry Hall is chairman
of that committee. You are going to have less trouble
there than any place else.
H.M.JR: What is wrong with what I am saying?
MR. BELL: I don't know that anything is wrong with
it. I think what they are afraid of, what the Victory
Fund Committee is afraid of - you have done a grand thing
setting up this committee; you have gotten a lot of en-
thusiasm throughout the entire country. We announced
in the press release that they were going to do F and
G Savings Bonds. The New York Stock Exchange and the
other organizations affiliated with it have sent out
similar announcements. Allan Sproul made his announcement, all on the same basis. Now, you are dampening
and killing that enthusiasm, and they are afraid they
won't get it back.
H.M.JR: Well, that is their fault. They had no
right to jump to that assumption.
ment.
MR. BELL: It was in the original press state-
H.M.JR: That we were going to do-MR. BELL: Am I right about that?
MR. BUFFINGTON: That they would really cover the
39
-7 between the New York organization and Allan Sproul's
organization, and the fact that Perry Hall is chai rman
of that committee. You are going to have less trouble
there than any place else.
H.M.JR: What is wrong with what I am saying?
MR. BELL: I don't know that anything is wrong with
it. I think what they are afraid of, what the Victory
Fund Committee is afraid of - you have done a grand thing
setting up this committee; you have gotten a lot of enthusiasm throughout the entire country. We announced
in the press release that they were going to do F and
G Savings Bonds. The New York Stock Exchange and the
other organizations affiliated with it have sent out
similar announcements. Allan Sproul made his announcement, all on the same basis. Now, you are dampening
and killing that enthusiasm, and they are afraid they
won't get it back.
H.M.JR: Well, that is their fault. They had no
right to jump to that assumption.
ment.
MR. BELL: It was in the original press state-
H.M.JR: That we were going to do--
MR. BELL: Am I right about that?
MR. BUFFINGTON: That they would really cover the
40
-8larger investors.
MR. GRAVES: The statement was not clear about F
and u Bonds.
H.M.JR: We carefully weighed it.
MR. GRAVES: We substituted a reference to dealing
with larger investors. Mr. Kuhn made those changes.
H.M.JR: What was the thing?
MR. KUHN: I don't remember exactly, but we emphasized
other Government securities. Isn't that right, harold?
MR. GRAVES: That is right.
H.M.JR: We weighed that very thing carefully.
MR. BELL: I wasn't here, but 1 thought I read in
the papers it was in that.
H.M.JR: We weighed that very carefully. I think
there was a little skulduggery, because it did get out
that - but the thing was very, very carefully weighed,
and it said that they would solicit the larger investors.
Is that the way-MR. KUHN: That is right.
MR. BUFFINGTON: If my recollection is correct, in
the original memorandum of understanding there was a
reference to the I and G Bonds, and it was from that
memorandum which was sent to each Federal Reserve president
that they picked up the notice about the F and G Bonds
and included it in the memorandum which each president
of the Federal Reserve Bank sent out to the banking
institutions in his district.
-9-
41
H.M.JR: Well, Dan, and all of you, right or
wrong, I am not, after eight years, going to give up
my birthright, and that is what it looks to me as
though they are asking me to do. I am not going todo it. On the other hand, I am going to ask, through
the president of the Federal Reserve Bank - through
my State administrator, to my president of the Federal
Reserve Bank who is my man, my fiscal agent - God, you
(Bell) of all people have fought and bled to keep those
fellows as my fiscal agents as against working through
the Board. I mean, nobody has fought harder than you
to keep that.
MR. BELL: That is right, and I still fight.
H.M.JR: And you have got to watch it every single
minute. You have watched it like a watchdog. As I say,
I don t know whether you can do five States, but you can
certainly do New York and set the example. But, Dan,
now between the first and second conferences is there
any doubt in your mind what I want?
MR. BELL: No, but there is a difference in what I
thought this morning and I know now.
H.M.JR: That is why I asked for this meeting. Any
doubt in your mind, Harold? God knows you ought to be
satisfied.
MR. GRAVES: I am. Incidentally, we have invited
ten administrators to come here Friday.
H.M.JR: You have got to prepare them beforehand.
nine.
MR. GRAVES: I asked them to be in my office at
H.M.JR: Do a little better job than George did on
his boys today.
MR. BELL: You are still going to have the conference
Friday, and you want those presidents here? I haven't
sent out word yet. I was waiting--
42
- 10 -
H.M.JR: I think you had better have it, because
I think - George came back and said, "I am going to have
trouble with Eccles."
MR. BUFFINGTON: I only said I had failed to sell
Eccles on the program that we had outlined.
MR. BELL: As I left the conference, it was agreed
that Allan Sproul and Al Williams would write a memorandum of what they thought ought to be done, but at the
same time saying it was your decision, that on any decision
you made you would get their full cooperation. They
would feel that the way they had set out, it could be
done best.
H.M.JR: You understand we are going to tell them
now, when you get them in, after hitting them over the
head, and it turns out that two-thirds of them are
Victory Fund Committees, O.K.; but I don't want any
labels, I don't want any tags. I want the best man,
wherever he is, or best woman. Peter, O.K.?
MR. ODEGARD: I think that is swell.
H.M.JR: George, can you deliver?
MR. BUFFINGTON: To make it clear-cut, could we
not say to these Victory Fund Committees, those members
of the Committees now able to sell F and G Bonds report
to the State administrators for direction on selling
Bonds during the month of June Then there is no
question left.
H.M.JR: No, no, I want to keep the president of
the Federal Reserve Bank in the picture. He is there,
and I want to keep good faith with him. He is my
fiscal agent.
MR. ODEGARD: He will serve as the man to recruit
these people for the State chairman of the War Savings
Committee.
H.M.JR: Yes, yes, sure.
- 11 -
43
MR. BUFFINGTON: Then as you get into this question
those men may or may not work under the executive manager;
they may work under the State administrator, whichever
the State administrator wants.
H.M.JR: No, George, look, the way I would do it,
if I were State administrator, so there would be no
confusion, so you wouldn't have the same men or three
men ringing the same doorbell, using the same name, I
would say to Allan Sproul, "Look, Allan, I haven't got
the time to do E Bonds. You have asked for it, you
wanted to do it, so I want you to recruit all the sales-
men that are going to sell F and G Bonds for me and see
that there is no duplication. I am going to hold you
responsible to see that we get the best salesmen in
every country that you, Allan Sproul - it is up to you
to see that all of these salesmen who have volunteered
their time are organized and given certain blocks, certain territories to go out, and certain concerns. Now,
what I have got is yours, and I hope what you have got
is mine. But it is up to you to get these fellows so
they are not falling all over each other. I" - God for-
bid - "Patterson, have got some people, some of them are
yours, and you have got some of mine; so to keep from
having these fellows crossing over you, Allan Sproul,
you organize the F and G Bond salesmen for me.
MR. GRAVES: Well, that is certainly practical in
a community like Greater New York. When it comes to
your down-State counties in New York, whoever is recommended or suggested by Sproul, a lot of people will have
to be fitted into our county committee, that is, you
might need seven people.
H.M.JR: Look, each thing - I have laid down the
principle. Now, take the principle and then make it
work.
MR. GRAVES: We can make it work.
H.M.JR: While they are taking Dutch Harbor, don't
let's sit around here and fiddle around while I have to raise
this money - how you are going to raise it in each county.
- 12 -
44
Certainly the principle is clear, isn't it, Dan?
MR. BELL: Yes, I understand what you want.
H.M.JR: Do you understand?
MR. BUFFINGTON: Yes.
H.M.JR: Herbert, I wanted you just to have the
background so you wouldn't be out of touch with us.
MR. GASTON: All right. I don't fully understand
where this leaves the Victory Fund Committees, but I
can find that out later.
H.M.JR: When they do.
MR. BELL: It leaves them out in the cold as such.
H.M.JR: Excuse me - no, wait a minute. When we
have something for them to go at on the regular Treasury
thing-MR. BELL: I meant on F and G.
H.M. JR: Well, Dan, I have thought - this isn't
something I have arrived at as snap judgment.
MR. BELL: I understand that.
H.M.JR: And I am just - no use going over and over
it again. I mean, I am interested in the individuals.
I am not interested in labels. That is what I want, and
I don't want to, after starting in in January and February
to build up an organization like we have got in War Bonds
to throw them to the dogs for an organization that still
has to make good.
I hope I wasn't too serious.
evening
06
6-2-42
612
First
110-
4th haff 453.42
DRAFT OF SECRETARY MORGENTHAU'S BROADCAST, WEDNESDAY JUNE 3.
This is the first of a series of nationwide broadcasts
by leaders of the Government to follow up the President's
seven-point economic program of April 27th.
Five weeks have gone by since President Roosevelt
outlined a national economic policy for fighting the
war on the home front. He called for heavier taxation,
for fixing prices and rents, for rationing scarce commodities,
for stabilizing wages and farm prices, for checking instal-
ment buying, and finally, for rigid self-denial and saving
and the investment of billions more in War Bonds.
Those were America's marching orders from the
Commander-In-Chief They called for patriotic effort
and real sacrifice to meet a crisis that is without
precedent in our country's history. "We cannot fight
this war," the President said, "we cannot exert our
maximum effort on a spend-as-usual basis. All of us
C
--
46
are used to spending money for things we want but which
are not absolutely essential. We will all have to forego
that spending. We cannot have all we want if our soldiers
and sailors are to have all they need.' "
In the weeks since the President spoke, the American
people have shown that they are ready to back up the men
at the front by effort and sacrifice at home. It has been
immensely encouraging to us in Washington to see the voluntary
cooperation that has come from all parts of the country and
from all sections of the people, especially in the fields
of price fixing, rationing and saving. That voluntary
cooperation will be more and more necessary in the months
ahead. A great change in national economic habits cannot
be accomplished merely by saying "pass a law" or "write
-3an Executive Order". The President's program can be
carried through to success only if there is active and
constant cooperation from each and every one of us.
Essentially, the President's program is a call
for self-restraint -- not just by a few of us, but by
all of us; not just occasionally, but every day as long
as the war may last. Our war industries need all the
materials and all the labor they can get. Our fighting
men and our allies in all parts of the world need those
materials to win the war. If we spend our money extravagantly, carelessly, or even to satisfy what would have
been our normal wants in normal times, we handicap our
war production program. We take away from our fighting
forces the supplies they need for victory. At the same
time we create pressure on the prices which will be a
47
-4-
48
menace both to our war effort and to our economic future.
The patriotic conscience of every American should
extend into every American pocketbook. Every time you
are about to spend your money, that conscience should ask
you "Do you really need what you are going to buy? Can't
you do without it? Why not wait until after the war? Why
not build up a nest egg for your family in the future, and
put your money at your country's service now?"
I am in dead earnest when I say that any man or
woman who chooses this time to go on a buying spree is
committing an act of sabotage against our war effort.
The patriotic thing to do, and the intelligent thing as
well, is to make old clothes last longer, to eat simpler
meals, to patch up old household appliances instead of
buying new ones, and to do everything else that is possible
-5to cut down on personal spending. The critical point
in the battle on the home front is not in Government
offices nor in the halls of Congress, but right in
your own pocketbook.
We at the Treasury have a rather special interest
in the American pocketbook, as you all know. It is our
job to finance this greatest and costliest of all wars,
a war that is already costing 130 million dollars every
day. It is also our job to finance the war in such a
way that it will not bring uncontrolled pressure on
prices and will not interfere with war production. To
accomplish these purposes we at the Treasury have two
chief instruments at our disposal: the first is taxation,
and the second, which depends upon voluntary effort, is
the sale of War Bonds and other Government securities.
49
50
-6-
Each of them is a vitally important part of the President's
seven-point program.
The Administration has already recommended new taxes
that should yield $8,700,000,000 of additional revenue.
That is a colossal sum; yet war expenditures alone are
many times that amount even now, and it seems to me the
very least that we can afford to ask of the American
people at this critical time.
In line with the basic principle of the ability
to pay, we have proposed sharply increased taxes on
corporations and higher individual incomes In the same
way, we have urged Congress to abolish a number of special
privileges by which a comparatively few wealthy taxpayers
have been able in past years to escape their fair share
of the burden. We have also recommended the taxation of
-C
51
-7millions with small incomes who have never had to pay
direct taxes before, but we recommended this upon the
assumption that Congress would tax the higher incomes
more heavily and at the same time close the loopholes
in the law.
To be certain that we are taking the profit out
of war, we have recommended a basic tax rate of 90 cents
on every dollar of excess profit beyond a reasonable rate
of return, and in a few cases where profits are exceptionally
large we have recommended a tax of 100 cents on every dollar.
I know that the American people are determined that no
one shall be allowed to amass riches out of this war,
and our tax program must do everything possible to prevent it.
I have been shocked, to put it mildly, at evidence
that some companies profiting from war contracts are
D-C
-8distributing extravagant amounts in salaries, bonuses
and other corporate expenses, so that they might escape
paying full and fair taxes on profits to the Government.
We are watching the tax returns of every company engaged
in war production, not only to protect the interests of
the Government but to protect the great majority of
American corporations which are reporting their earnings
fairly and honestly. We are in a position to expose and
prevent any cheating on tax returns. We are determined
to make the offending companies pay what they really owe.
The Ways and Means Committee is now hard at work
writing a new tax bill. It is not for me to discuss the
details of what they are about to recommend. I should
like to make only this comment: I hope it cannot be said
of the new tax bill that it was too little and too late.
-C
52
-9The people of this country have shown in a thousand
ways that they are not in a mood for half measures,
either financial or military. They will be critical
only if the burdens are unfairly distributed. They will
be disappointed in their leaders only if those leaders
fail to ask them for all-out effort.
The same willingness has been shown by millions
of Americans in the past year, especially in the past
few months, in the buying of War Bonds and Stamps. I am
very happy that we went over our national quota for the
month of May and that our total sales for the month
reached $634,000,000. But we shall have to do much
better in June and in the following months. The quota
for June has been fixed at $800,000,000, and in July and
every month thereafter we expect a billion dollars. If
we are to reach those quotas and carry out a vital
53
- 10 -
54
part of the President's program, all who get a regular
income will have to cut down on personal spending and
put an average of at least ten percent of current earnings
into War Bonds.
The steady fulfilment of War Bond quotas, month
by month, will be much more than a big step toward financing
the war. It will mean that we are building the kind of
future we want for ourselves and our children. A great
deal has been said and written in recent weeks about the
political and economic system we want after this terrible
war is over. But it is perfectly plain that no Government
or group of governments can decide the shape of the post-
war world simply by writing a constitution or waving a
magic wand.
- 11 -
55
We can do a great deal to shape our future -- now.
Our actions -- now -- will to some extent determine the
kind of world we shall have after the war. Whatever
success we achieve now by voluntary cooperation will
help to set the pattern of the post-war world. Whatever
we do now to assure economic stability in future years
will be worth all the speeches, all the resolutions, all
the ambitious paper plans in which the post-war world
is being outlined for us.
I feel strongly that every War Bond bought today
is a brick in the foundation of the free and democratic
world order that we are fighting to achieve. Millions
in this country today are quietly establishing a reserve
of spending power for themselves in the years after the
war, and in that way they are guarding against the terrors
D-C
of unemployment and want and fear.
56
- 12 There is nothing dramatic in saving your money,
bit by bit, to buy War Bonds; there is nothing dramatic,
for that matter, in any of the President's seven-point
program. There are no medals in this war for self-denial,
no matter how much courage or sacrifice it may involve.
Yet it will be a tremendously dramatic thing if the
patriotic effort of the people themselves can finance
the people's victory. We have a great opportunity, right
now. We are going to rise to that opportunity. In the
President's words, "We can, we will, we must.'
D-C
57
READING COPY OF SECY'S RADIO TALK
JUNE 3, 1942
FOLLOWING UP PRESIDENT'S SEVEN POINT
PROGRAM
58
Five weeks have gone by since President
Roosevelt outlined a national economic policy
for fighting the war on the home front. He called
for heavier taxation, for fixing prices and rents,
for rationing scarce commodities, for stabilizing
wages and farm prices, for checking instalment
buying, and finally, for rigid self-denial and
saving and the investment of billions more in War
Bonds.
Those were America's marching orders from
the Commander-In-Chief. They called for patriotic
effort and real sacrifice to meet a crisis that is
without precedent in our country's history.
92
1424
-2-
59
"We cannot fight this war," the President said,
"we cannot exert our maximum effort on a spend-as-
usual basis. All of us are used to spending money
for things we want but which are not absolutely
essential. We will all have to forego that
spending. We cannot have all we want 1f our soldiers
and sailors are to have all they need."
Pause
In the weeks since the President spoke, the
American people have shown that they are ready to
back up the men at the front by effort and
sacrifice at home. It has been immensely encouraging
to us in Washington to see the voluntary cooperation
that has come from all parts of the country and from
all sections of the people, especially in the fields
of price fixing, rationing and saving.
225
1291
-3-
60
voluntary cooperation will be more and more
necessary in the months ahead. A great change
in national economic habits cannot be accomplished
merely by saying "pass a law" or "write an
Executive Order". . The President's program can be
carried through to success only if there is active
and constant cooperation from each and every one
of us.
Essentially, the President's program is a
call for self-restraint -- not just by a few of
us, but by all of us; not just occasionally, but
every day as long as the war may last. Our war
industries need all the materials and all the
labor they can get.
-4-
61
Our fighting men and our allies in all parts of
the world need those materials to win the war.
If we spend our money extravagantly, carelessly,
or even to satisfy what would have been our normal
wants in normal times, we handicap our war production
program. We take away from our fighting forces
the supplies they need for victory. At the same
time we create pressure on the prices which will
be a menace both to our war effort and to our
economic future.
The patriotic conscience of every American
should extend to every American pocketbook. Every
time you are about to spend your money, that
conscience should ask you "Do you really need what
you are going to buy?
452
1064
- -5-
62
Can't you do without it? Why not wait until after
the war? Why not build up a nest egg for your
family in the future, and put your money at your
country's service now?"
I am in dead earnest when I say that any man
Pause
or woman who chooses this time to go on a buying
spree is committing an act of sabotage against our
war effort. The patriotic thing to do, and the
intelligent thing as well, is to make old clothes
last longer, to eat simpler meals, to patch up old
household appliances instead of buying new ones,
and to do everything else that is possible to cut
down on personal spending. In this battle on the
home front the wage-earners and consumers of
America hold the key positions.
584
932
-6-
63
It is our job at the Treasury to finance
Paul
this greatest and costliest of all wars, a war
that is already costing one hundred and thirty
million dollars every day -- a dollar a day for
every man, woman and child in the country. It is
also our job to finance the war so as to avoid,
as far as possible, upward pressure on prices and
interference with war production. To accomplish
these purposes we at the Treasury have two chief
instruments at our disposal: the first is taxation,
and the second, which depends upon voluntary effort,
is the sale of War Bonds and other Government
securities. Each of them is a vitally important
part of the President's seven-point program.
704
812
-7-
64
The Administration has already recommended
new taxes that should yield eight billion, seven
hundred million dollars of additional revenue.
That is a colossal sum; yet war expenditures alone
are many times that amount even now, and it seems
to me that eight billion seven hundred million
dollars is the very least that we can afford to ask
of the American people at this critical time.
In line with the basic principle of the
ability to pay, we have proposed sharply increased
taxes on corporations and on higher individual
incomes. In the same way, we have urged Congress
to abolish a number of special privileges by which
a comparatively few wealthy taxpayers have been
able in past years to escape their fair share of
the burden.
829
687
-8-
65
We have also recommended the taxation of millions
of people with small incomes who have never had
to pay direct taxes before, but we recommended
this only as part of a program which would include
taxing the higher incomes more heavily and at the
same time closing the loopholes.
I know that the American people are determined
that no one shall be allowed to amass riches out of
this war, and we have recommended a tax program to
give effect to the people's determination. We
have, for example, recommended a basic tax rate of
ninety cents on every dollar of excess profit
beyond a reasonable rate of return.
937
579
-9-
66
I have been shocked at evidence that some
companies profiting from war contracts are
distributing extravagant amounts in salaries,
bonuses and other corporate expenses, so that they
might escape paying full and fair taxes on their
profits. We have made it our first concern to
examine promptly the tax returns of every company
engaged in war production, not only to protect
the interests of the Government but to do justice
to the great majority of American corporations
which are reporting their earnings fairly and
honestly. We are determined to make the offending
companies pay.
1031
485
- 10 -
67
The Ways and Means Committee is now hard
at work writing a new tax bill. It is not for me
to discuss the details of what they are about to
recommend. I should like to make only this
comment: I hope it cannot be said of the new tax
bill that it was too little and too late. The
people of this country have shown in a thousand
ways that they are not in a mood for half measures,
either financial or military. They will be critical
only 1f the burdens are unfairly distributed. They
will be disappointed in their leaders only if those
leaders fail to ask them for all-out effort.
1144
372
- 11 -
68
The same willingness has been shown by
millions of Americans in the past year, especially
in the past few months, in the buying of War Bonds 3
and Stamps. I am very happy that we went over our
national quota for the month of May and that our
total sales for that month reached six hundred and
thirty-four million dollars. But we shall have to
do much better in June and in the following months.
The quota for June has been fixed at eight hundred
million dollars, and in July and every month
thereafter we expect a billion dollars. If we are
to reach those quotas and carry out a vital part
of the President's program, all who get a regular
income will have to cut down on personal spending and
put an average of at least ten percent of current
earnings into War Bonds.
1789
227
- 12 -
69
The steady fulfillment of War Bond quotas,
month after month, is an indispensable part of
the financing of the war. But it means even more
than that. It means that we are building the kind
of future we want for ourselves and our children.
We can do a great deal to shape our future --
now. Our actions -- now -- will determine the
kind of world we shall have after the war.
Whatever success we achieve by voluntary cooperation
will help. to set the pattern of the post-war world.
I feel strongly that every War Bond bought
today will play an essential part in the building
of a free and democratic world.
1400
116
- 13 -
70
Millions in this country today are quietly
establishing a reserve of spending power for
themselves in the years after the war, and in that
way they are fortifying themselves against the
terrors of unemployment and want.
There is nothing dramatic in saving your
money, bit by bit, to buy War Bonds. There are no
medals for self-denial in this war, no matter how
much courage or sacrifice it may involve. Yet
the combined effort of one hundred and thirty
million people can achieve the great drama of the
people's victory. We have a great opportunity,
right now. We are going to rise to that opportunity.
In the President's words, "We can, we will, we must."
-000-
1516
0
71
Treasury Department
Division of Monetary Research
Date 6/5/42
To:
Miss Chauncey
From:
H. D. White
19
I think the Secretary may be interested
in reading the report of this conference.
It
72
Conference in Mr. White's Office
June 3, 1942
2:45 P.M.
Present: Mr. White
Mr. Will Hays
Mr. Will Hays called at his own request on June 4. He
began hesitatingly to explain that apparently there was some misunderstanding with respect to whose responsibility it was - the
State Department or the Treasury - to undertake the negotiations
with the British Treasury for release of the moving picture industry's blocked funds. He said that the State Department had
given him to understand that Secretary Morgenthau complained of
the State Department's taking the initiative in the earlier negotiations without consulting the Treasury and the State Department
is now reluctant to do anything about it and feel that the
Treasury here may feel that it should do it.
Mr. White replied that he couldn't see how that misunderstanding had developed in view of the fact that the Secretary had made
it quite clear to Mr. Long, when he had called on the Secretary to
discuss the matter, that Secretary Morgenthau felt that the negotiations were the responsibility of the State Department. The
Secretary had made it quite clear that if the State Department
was convinced the moving picture industry constituted a case de-
serving of special treatment, it was still up to the State Department to take it up. Mr. White went on to explain again the ground
covered in an earlier interview as to why the Treasury was not the
appropriate agency to raise a question of that character at this
stage of the negotiations, though the British Treasury itself might
later raise the question with the U. S. Treasury if it wished to do
so. Mr. White repeated the Treasury was eager to help in any way
it could but didn't feel that this was a matter that lay within
the purview of the Treasury at this stage of the negotiations.
Mr. Hays apparently was disappointed that we would not go forward
with it and Mr. White deduced from Mr. Hays' general remarks that
he had not had much success in getting the State Department to
initiate negotiations and that the State Department had been urging
him to get the Treasury to do so.
When Mr. Hays saw that he was not having much success in
getting Mr. White to agree that the Treasury Department should
take up the matter with the British, he altered his tone and said
he could see Secretary Morgenthau was not interested in the moving
picture industry; that he was interested only when he wanted things
out of them. Mr. White replied that he was certain Mr. Hays
74
-3to do was to ask for an interview with Mr. Phillips and that it
would be granted. Hays then said he thought maybe he would get
Halifax to introduce him since he knew Halifax. Mr. White said
Hays would be the best judge of that. Haya then said he would
try to get in touch directly with Phillips.
Mr. Hays again telephoned Mr. White on Thursday morning and
seemed to be very contrite and apologetic. He said that Phillips
had already left and that he didn't want the Secretary or Mr. White
to feel in the slightest bit that he wasn't 100 per cent cooperative
and fully appreciated the Treasury's position and he didn't want
Mr. White to exert the slightest pressure to make an appointment
with the Secretary. He realised the Secretary was going away and
he said in the meantime he might prepare a memorandum setting forth
their position and give the Secretary a chance to look it over upon
his return. He appreciated the Secretary's attitude and efforts
and he didn't want, in any way, to suggest anything which would
bother the Treasury.
75
THE SECRETARY OF THE TREASURY
WASHINGTON
June 3, 1942
Financing During May
The following is a statement showing for the month
of May (1) financing operations which produced cash, and
(2) financing operations which involved only refunding:
1. Cash Financing (Market Issues)
Sold a 2-1/2% registered non-banking
bond of 1962-67
Sold regular 2% 1949-51 Treasury
bonds
$882M
1,292
Additional Treasury Bills
303
Treasury Tax Notes (net)
355
U. S. Savings Bonds (net)
618
Total cash
$3,450M
2. Refundings (Market Issues)
2-1/4% HOLC bonds ($875M outstanding)
1% RFC note ($276M outstanding)
$ 847M
272
Refunded into a 1-1/2% 4-1/2-year
Treasury note (December 15, 1946)
1,119
(Note: While this financial operation
was carried out in May the new
securities are dated June 5)
Total financial operations in May
PORDEFENSE
BUY
UNITED
STATES
SAVINGS
BONDS
$4,569M
76
June 3, 1942
Dear Mr. Taber:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) R. Morkeathen, IN
Hon. John Taber,
House of Representatives.
By Messenser Shey 4:30
For
77
June 3, 1942
Dear Mr. Cannon:
I am reading you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) B. Morgenthan. and
Hon. Clarence Cannon,
House of Representatives.
By Messenger Shey 4:30
78
June 3, 1942
Dear Senator Nye:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) a. Morgenthan. and
Hon. Gerald P. Nye,
United States Senate.
by Messenger Sley 4:30
79
June 3, 1942
Dear Senator Glass:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) a. Borgeathan, is.
Hon. Carter Glass,
United States Senate.
By Messenger Shey 4:20
80
June 3, 1942
If
Dear Charley:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. Charles L. McNary,
United States Senate.
By Messenger Shey 4:30
81
June 3, 1942
Dear Walter:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. Walter F. George,
United States Senate.
By Messenger Shey 4:30
82
June 3, 1942
Dear Sam:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. Sam Rayburn,
Speaker of the House of Representatives.
By Messenger Shey 4:30
83
June 3, 1942
Dear Col. Halsey:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
in.
Col. Edwin A. Halsey,
Secretary of the Senate.
By Messenger Shey 4:30
84
June 3, 1942
Dear Bob:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. Robert L. Doughton,
House of Representatives.
By Messenger they 4:30
85
June 3, 1942
Dear Alben:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. Alben W. Barkley,
United States Senate.
By Messenger Shey 4:30
86
June 3, 1942
If
Dear Joe:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. Joseph w, Martin, Jr.,
House of Representatives.
By Messenger Shey 4:20
87
June 3, 1942
Dear John:
I am sending you herewith for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. John W. McCormack,
House of Representatives.
By Messenger Shey 4:30
88
June 3, 1942
Dear Frances:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. Frances Perkins,
Secretary of Labor.
By Messenger Singisting
89
June 3, 1942
Dear Jesse:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. Jesse H. Jones,
Secretary of Commerce.
By Messenger Sturgie 4:20
90
June 3, 1942
Dear Claude:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(signed) Henry
Hon. Claude R. Wickard,
Secretary of Agriculture.
By Meesenger Seargies t:20
91
June 3, 1942
Dear Harold:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. Harold L. Ickes,
Secretary of the Interior.
By Messenger Stanging 4:20
92
June 3, 1942
Dear Frank:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
Hon. Frank Knox,
Secretary of the Navy.
By Messenger Saug 4:20 pm
93
June 3, 1942
Dear Francis:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. Francis Biddle,
The Attorney General.
By Messenger Sough 4:30 pm
94
June 3, 1942
Dear Henry:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(signed) Henry
Hon. Henry L. Stimson,
Secretary of War.
By Messenger Staggis 4:20pm
95
June 3, 1942
Dear Cordell:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Honorable Cordell Hull,
Secretary of State.
By Messenger Stang's 4:20 pm
96
June 3, 1942
Dear Henry:
I am sending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. Henry A. Wallace,
The Vice President.
By Messenger Shey 4:30 gam.
97
June 3, 1942
-
Dear Steve:
If
I am s ending you herewith, for
your information, a summary of the Treasury
financing for the month of May.
Yours sincerely,
(Signed) Henry
Hon. Stephen Early,
Secretary to The President.
4:45
98
June 3, 1942
My dear Mr. President:
I am sending you herewith,
for your information, a summary of the
Treasury financing for the month of
May.
Yours sincerely,
(Signed) Henry Morgenthau, Jr.
The President,
The White House.
S.S. agent 4:45pm
99
June 3, 1942
My dear Mr. President:
I am sending you herewith,
for your information, a summary of the
Treasury financing for the month of
May.
Yours sincerely,
(Signed) Henry Morgenthau, Jr.
The President,
The White House.
101
THE SECRETARY OF THE TREASURY
WASHINGTON
June 3, 1942
Financing During May
The following is a statement showing for the month
of May (1) financing operations which produced cash, and
(2) financing operations which involved only refunding:
1. Cash Financing (Market Issues)
Sold a 2-1/2% registered non-banking
bond of 1962-67
Sold regular 2% 1949-51 Treasury
bonds
$882M
1,292
Additional Treasury Bills
303
Treasury Tax Notes (net)
355
U. S. Savings Bonds (net)
618
Total cash
$3,450M
2. Refundings (Market Issues)
2-1/4% HOLC bonds ($875M outstanding)
1% RFC note ($276M outstanding)
$ 847M
272
Refunded into a 1-1/2% 4-1/2-year
Treasury note (December 15, 1946)
1,119
(Note: While this financial operation
was carried out in May the new
securities are dated June 5)
Total financial operations in May
FOR DEFENSE
BUY
UNITED
STATES
SWINGS
BONDS
$4,569M
102
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
June 3. 1942
MEMORANDUM FOR THE SECRETARY:
Summary of Financial Operations as of the Month of May
Public Debt
Total gross public debt at the end of May amounted to
$68,571,000,000 and the guaranteed debt outstanding amounted to
$5,687,000,000, or a total gross public and guaranteed debt of
$74,258,000,000.
The gross public debt increased during the month of May
by $3,609,000,000. This was made up by an increase in outstanding
marketable obligations of $1,292,000,000 2% 1949-51 Treasury bonds,
$882,000,000 of registered non-banking 2-1/2% 1962-67 Treasury bonds,
$303,000,000 of additional Treasury bills, $355,000,000 (net) of tax
notes ($399,000,000 sold, $44,000,000 redeemed), and $618,000,000
(net) of War Savings Bonds ($640,000,000 receipts, including monthly
interest increment, $22,000,000 redeemed); an increase of special
issues of $160,000,000, most of which is in the Unemployment Trust.
Receipts and Expenditures
The total receipts for the eleven months, exclusive of
social security, amounted to $10,307,000,000, of which $563,000,000
was received in the month of May.
The total expenditures amounted to $27,867,000,000, of which
$22,131,000,000 represented war expenditures and $5,736,000,000 represented other budgetary expenditures. For the month of May we spent
a total of $3,953,000,000, of which $3,553,000,000 represented war
expenditures.
The total budgetary deficit for the eleven months amounted to
$17,560,000,000, of which $3,391,000,000 was for the month of May.
Our budgetary deficits are now running at the rate of about $3,500,000,000.
PORDEFENSE
BUY
UNITED
STATES
LAVINGS
SONDO
103
-a month, exclusive of tax-paying months. These will gradually increase
and will be slightly in excess of $5,000,000,000 in the month of October.
Corporations and credit agencies
In addition to the above budgetary items, Governmental corporations and credit agencies spent approximately $430,000,000 during the
month of May: $253,000,000 was spent by the Commodity Credit Corporation
and $221,000,000 by the Reconstruction Finance Corporation. There were
credit items in the transactions of the other agencies which brought
the aggregate of these two items down to the net figure.
DWB
104
THE SECRETARY OF STATE
WASHINGTON
June 3, 1942
Dear Henry:
Thank you very much for your note of June
second enclosing a report of the sale of war
bonds during the month of May.
With best wishes,
Sincerely yours,
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
105
The Speaker's Roome
Honer of Representatives n.a.
Machington.ID.C.
June 3, 1942
The Secretary of the Treasury,
Washington, D. c.
Dear Henry:
Thank you for the note of the 2nd concerning the
sale of War Bonds.
I have noted with a great deal of pleasure the fine
increase in sales of "E" Bonds.
With every good wish, I am
Sincerely yours,
have
106
THE SECRETARY OF THE NAVY
WASHINGTON
June 3, 1942
My dear Henry:
Thank you for your note of June 2 giving me a report
of the sales of war bonds during the month of May.
I congratulate you on the magnificent showing you have
made.
Yours sincerely,
From
The Honorable Henry Morgenthau
Secretary of the Treasury
Washington, D. C.
107
June 3, 1942
Dear Henry:
Thank you for your note of June 2.
I was greatly impressed with the progress made
in the sale of "E" Bonds in May.
Sincerely,
Claude
Hon. Henry Morgenthau, Jr.
Secretary of the Treasury
108
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
DE
WASHINGTON
M.S.SZYMCZAK
MEMBER OF THE BOARD
SECURITY
June 3, 1942.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
My dear Mr. Secretary:
It was thoughtful of you to send me a copy
of "THE MINUTE MAN", with reference to the highlights of the Treasury Department's Quota Campaign
to raise at least a billion dollars a month through
the sale of War Savings Bonds.
You have my thanks and sincere personal regards.
Sincerely yours,
M. S.
MSS ams
109
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 3, 1942
Secretary Morgenthau
TO
FROM
Mr. Has
Subject: Preliminary Results of the Poll Concerning War
Savings Stamps and Their Redeemability
Mr. Wilson of the Office of Facts and Figures called
us from New York this morning to give us the preliminary
results of the poll which they have just conducted at your
request concerning War savings stamps and the possibility
of making them nonredeemable for cash until after the war.
The questionnaire was considerably revised from the form
in which we cleared it last week.
There were 480 persons interviewed. The questions
used and the answers given are summarized below:
(1) Have you or your husband, or wife, bought
any Government war bonds?
Yes
47%
No
51
Don't know
2
Total
100%
(2) Have you or your husband, or wife, bought
any Government war stamps?
Yes
55%
No
44
Don't know
1
Total
100%
(3) If you bought war bonds, did you buy the
bonds outright or did you buy war stamps
first and turn them in on the bonds?
Bought outright 27%
Bought stamps
first
Both
10%
10%
Total who bought
war bonds
47%
110
Secretary Morgenthau - 2
(4)
If you bought war stamps, have you turned
in any war stamps for cash?
Yes
Don't know
1%
53
1
No
Total who bought
war stamps
55%
(5) As you know, you can cash in war savings
stamps any time you want to now and get
your money back. Would you be in favor
of changing this 80 war stamps could not
be cashed until after the war, provided
you could still buy bonds with the stamps
and cash in the bonds just as you can now?
Yes
No
63%
24
Don't know
13
Total
100%
Mr. Wilson informed us that they are going ahead with
the analysis of the replies in order to determine what conclusions may be reached on the basis of the factual information which was also obtained. He said we would probably
have the complete analysis by about Friday of this week.
111
6-3-42
Sales of Series E Savings Bonds by the Bank of America
The Bank of America is offering Series E Savings Bonds for
sale in more than 300 cities and towns in the State of California.
For the first 4 months of this calendar year the aggregate sales
of the Bank in its various offices and branches amounted to 30
percent of the total sales of Series E Savings Bonds in the State
of California. Monthly sales of other issuing agents in the
State of California appear in the table below. Sales by the
bank in the various cities and towns in the State of California
appear in the worksheets attached.
Sales of Series E Savings Bonds in California
(In millions of dollars)
Month
America
Other
Total
Issuing
Agents 1
Percent Sold
by Bank of
America
:
Bank
of
Jan.
15.6
35.8
51.4
30
Feb.
9.5
22.1
31.6
30
Mar.
7.5
16.8
24.3
31
Apr.
6.2
14.9
21.1
29
38.8
89.6
128.4
30
Total
1
Including postoffices.
Treasury Department
Division of Monetary Research112
o
Date June 4
1942
To: Miss Chauncey
Owing to the publicity being given
the S.E.C. release, the Secretary would
be interested in reading the first paragraph of the appended memorandum.
MR. WHITE
Branch 2058 - Room 2141
113
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 3, 1942
TO
Mr. White
FROM
Mr. Gass
Subject: Individual Saving in the First Quarter of 1942
1. The Securities and Exchange Commission has published figures on individual
savings in the first quarter of 1942 which have been widely interpreted in the
press to suggest that there has been a decline in voluntary individual savings
during the first quarter of 1942. This interpretation is mistaken. Rightly
understood, the Securities and Exchange Commission's figures show that individual savings, defined as we have defined them in the past (to include the
purchase of residential housing), are now running at an annual rate of slightly
over $20 billion - about 50 percent higher than the average for 1941.1/
While this does not give us the volume of voluntary individual savings which
we will need in fiscal 1943 - about $35 billion --, there has been no regression.
The S.E.C. figures show, for the first quarter of 1942, about $3.7 billion
of liquid individual saving and $.5 billion of expenditures on residential
housing. This total of $4.2 billion compares with only $2.3 billion for the
corresponding quarter of 1941. The total for the last quarter of 1941 was
$4.7 billion, but direct comparison between the last and first quarters of
2.
the year is misleading because of the seasonal pattern of income and tax pay-
ments. While individual incomes (not seasonally corrected) were $.9 billion
lower in the first quarter of 1942 than in the last quarter of 1941, individual income tax payments (Federal only) were $1.1 billion higher. This
seasonal factor -- and not any decline in the pattern of saving - explains
the drop from $4.7 billion to $4.2 billion. Savings of $4.2 billion in the
first quarter mean a level of over $20 billion for the year.
3. In our memorandum of April 30, 1942, we estimated that individual saving
during the first quarter of 1942 was running at an annual rate of about
$20 billion. We have estimated further (memos. of April 6 and May 18) that,
on various price and income assumptions, even after the new tax and Social
Security programs, individuals would be prepared to save $17 or $18 billion.
There is as yet no reason to revise these estimates. They are in themselves
sufficiently pessimistic about the adequacy of voluntary saving to meet the
inflation problem. There is no valid reason for drawing even more pessimistic conclusions from the S.E.C. reports.
I have checked this conclusion with Mr. R. B. Bangs, the Dept. of Commerce
expert on saving, and he is in complete agreement with this position.
1
For Release in MORNING Newspapers of Friday, May 29, 1942 114
SECURITIES AND EXCHANGE COMMISSION
Philadelphia
STATISTICAL SERIES
Release No. 709
The Securities and Exchange Commission today made public an analysis of
the volume and composition of saving by individuals in the United States during
the first quarter of 1942, continuing a series of quarterly figures recently
inaugustrated.
come was
billion
billion
The more important results of the analysis may be summarized as follows:
1. Individuals saved somewhat less in the first quarter of 1942 than Seasonal
they did in the last quarter of the preceding year.
2. Individuals' purchases of Government bonds increased to some extent,
but apparently at the expense of other forms of saving, particularly
cash and deposits.
3.
4.
Individuals failed to add to their cash holdings and deposits notwithstanding the high level of income. This is in marked contrast
to the large increase in cash and deposits in the preceding quarter
and in prior quarters of 1940 and 1941.
Individuals' debts were reduced substantially in the quarter. This
appears to have resulted chiefly from the inability to purchase automobiles and certain other durable consumers' goods. There is no indication that the decrease in debt reflects voluntary debt reduction.
Individuals' gross saving in the first quarter of 1942 amounted to 6.0
ally billions. Their liquid saving, i.e. saving exclusive of expenditures on durable goods, amounted to 3.7 billions. Both of these figures represent a drop
in saving from the high point reached in the fourth quarter of 1941. The large
but 20 decrease in gross saving appears to be attributable primarily to the reduction
expenditures on automobiles and other durable consumers' goods as a result
of scarcities. The decrease in liquid saving probably reflects the lower level
of income in the hands of individuals after payment of taxes. The volume of
fliquid saving is higher than might be expected on the basis of the past relationships between such saving and income alone. This seems to be explainableand
largely in terms of the restrictions placed on the purchases of automobiles
other durable consumers' goods and on the extension of credit for such purchases, resulting not only in an enforced decrease in expenditures on these
goods but also in an automatic decrease in outstanding debt. However, there is
little evidence in this period of any unusual voluntary diversion from consumption into liquid saving.
Federal government securities accounted for 2.2 billions in the first
quarter of 1942 compared with 1.9 billions in the preceding quarter. This type
of saving constituted 60 percent of individuals' liquid saving in the first
quarter of 1942, compared with 46 percent in the last quarter of 1941, 17 percent in the first quarter of 1941, and 8 percent in 1940. As noted above, the
analysis indicates that a considerable part of saving in Federal government securities was financed by the curtailment of current saving in other forms
rather than by curtailment of consumption. In reflection of this tendency, individuals' cash holdings and deposits actually showed a small decline in the
first quarter of 1942. This dis-saving was in sharp contrast to the substantia
saving in this form in 1940 and 1941, which had amounted on the average to 1.2
/billions quarterly. The decrease in cash and deposits is the more striking in
view of the fact that disposable income in the hands of individuals in the
first quarter of 1942 was higher than in any preceding quarter with the exception of the last two quarters of 1941.
The figures for the first quarter of 1942 also show that individuals'
total expenditure on automobiles and other durable consumers' goods was 1.7
billions, a marked decline from the expenditure of 2.6 billions in the last
quarter of 1941, 2.5 billions in the first quarter of 1941, and even higher
-2-
S 709
in the other two quarters of 1941. A incurred substantial in reduction the of 0.8
levels in individuals' debt which had been due purchase of auto.
mobiles billions and other durable consumers' goods was recorded, and, to a lesser principally to
the sharp decline in expenditures
of on credit. such goods Individuals were compelled extent, to to
the
granting
the off restrictions installment on debt previously incurred, at the same time occurring less
pay new debt than usual. The resulting reduction in debt was the highest for any
quarter on record.
of the remaining components of individuals' saving in the first quarter,
on homes amounted to 0.5 billions, somewhat less than the amount
expenditure the last quarter of 1941, but almost identical with the figure for, the
in first quarter of that year. As in the past, there was a sizable growth in in.
dividuals' equity in insurance and pension reserves, amounting to 0.6 billions
in private insurance and 0.4 billions in Government insurance. This increase
was in line with the level of income. Finally, there was not much change in
individuals' net absorption of corporate securities.
The above discussion is based on data presented in the following table
and the appended charts.
GROSS SAVING OF INDIVIDUALS IN THE UNITED STATES 1
1940-1942
(Billions of dollars)
1941
1942
1940 1941 Jan Apr. - July- Oct Jan.
1940 1941 Mar. June Sept. Dec. Mar.
Gross Saving
Liquid Saving 2
16.23 24.73 4.78 6.04 6.52 7.38 5.96
4.87 10.42 1.75 1.83 2.81 4.04 3.69
Gross Saving by Type
1. Currency and bank deposits
2. Savings and loan associations
3. Insurance and pension reserves
a. Private insurance
b. Government insurance
C. Total
4. Securities
a. Federal
+3.70 +5.60 +1.00 +1.50 +1.70 +1.40 - .20
+ .25 + .45 + .05 + .15 + .15 + .10
0
+1.70 +2.04 + .53 + .46 + 49 + 57 + 57
+1.24 +1.76 + .31 + .46 + .53 + .46 + .41
+2.94 +3.80 + .83 + .92 +1.02 +1.03 + .98
+ .38 +3.11 + .30 + .51 + .45 +1.86 +2.21
b. Municipal
C. Corporate and other
d. Total
5. Nonfarm dwellings 3
a. Expenditures 4
b. Change in debt
C. Saving (a minus b)
6. Automobiles and other durable
- .19 - .22 - .06 - .06 - .05 - .05 - .05
- 35 - .65 - .06 - .20 - .13 - .25 + .10
7. Liquidation of debt, not
+9.06 +11.44 +2.51 +3.47 +2.84 +2.63 +1.75
consumers' goods 5.
elsewhere classified 6,
- .16 +2.25 + .18 + .25 + .27 +1.55 +2.26
+2.31 +2.87 + 53 + .75 + .88 + .72 + .52
.90 +1.01 + .21 + .29 + .27 + .25 + .18
+1.41 +1.86 + .32 + .45 + .62 + .47 + .34
+
- .97 - .67 - .11 - .71 - .06 + 21 + .83
1 Does not include business or government saving.
2 Gross
saving excluding
on homes as well as on automobiles and
other durable
consumers'expenditures
goods.
One- to four-family nonfarm homes.
All new construction less net acquisition of properties by non-individuals.
Expenditures. Based on a new, more inclusive, series published by the Department of Commerce. The figures shown above include all passenger cars
sold in the United
States. No adjustment has been made for dealers overallowances
on trade-ins.
3
4
E
6
Largely attributable to expenditures on automobiles and other durable consumers' goods, although including some debt arising from purchases of consumption goods. The other segments of individuals debt have been allocated
to the assets
to which
they pertain,
viz., saving in savings and loan associations,
insurance,
securities
and homes.
Note: Figures are rounded and will not necessarily add to totals.
The foregoing data have been compiled by the Commission from many different
sources.
Because
of the
figures, current data are necessarily
estimates and,
therefore,
arenature
subjectoftothe
revision.
-3 -
115
COMPONENTS OF INDIVIDUALS SAVING
1940 - 1942
HA
DOLLARS
S-709
DOLLARS
BILLIONS
BILLIONS
B
8
AUTOMOBILES & OTHER
DURABLE CONSUMERS' GOODS V
NON-FARM DWELLINGS
SECURITIES
7
7
X
INSURANCE a/
CURRENCY & DEPOSITS a/
6
6
5
5
4
4
3
3
2
2
1
1
0
o
-1
-1
QUARTERLY AVERAGE
1940
JAN.- MAR.
APR.- JUNE JULY-SEPT. OCT. DEC
1941
JAN. MAR.
1942
1/ INCLUDES *LIQUIDATION OF DEBT NOT ELSEWHERE CLASSIFIED* SEE FOLLOWING CHART FOR BREAKDOWN.
2/ INCLUDES SAVING IN GOVERNMENT INSURANCE FUNDS.
DS-2109
3/ INCLUDES SAVING IN SAVINGS AND LOAN ASSOCIATIONS.
-4 -
S-709
INDIVIDUALS' EXPENDITURES ON DURABLE CONSUMERS' GOODS 1/
AND THE RELATED LIQUIDATION OF DEBT
1940 - 1942
DOLLARS
DOLLARS
BILLIONS
BILLIONS
4
4
EXPENDITURES
LIOUIDATION OF DEBT
3
3
2
2
1
1
0
0
-1
QUARTERLY AVERAGE
1940
-1
JAN. MAR
APR.- JUNE JULY - SEPT. OCT.- DEC.
1941
JAN. MAR.
1942
1/ AUTOMOBILES AND OTHER DURABLE CONSUMERS GOODS.
2/ DEBT. NOT ELSEWHERE CLASSIFIED FIGURES BELOW THE BASE LINE INDICATE AN INCREASE IN DEBT. 1.e. DISSAVING.
Treasury Department 116
Division of Monetary Research
Date
June 4
19 42
To: Miss Chauncey
I don't know if the Secretary
would want to do anything about this.
But merely to keep himself
informed, he might like to know the
Department of Commerce's verdict on
the voluntary sale of War Bonds and might, justly, conclude that such
comments by a Government agency ought
to first be cleared through the
Treasury.
MR. WHITE
Branch 2058 - Room 2141
TREASURY DEPARTMENT
117
INTER OFFICE COMMUNICATION
DATE June 3, 1942
Mr. White
TO
FROM Mr. Gass
Subject: The Department of Commerce on Compulsory Saving
1. In its confidential bulletin on Domestic Economic Developments, dated
May 23, 1942, the Department of Commerce -- by implication -- describes the
existing program of voluntary sale of War Bonds as a failure and calls for
a compulsory program.
This bulletin estimates the total necessary individual saving for the
fiscal year 1943 as about $35 billion. Such an estimate is in broad agreement with Treasury studies on this subject.
2.
The bulletin estimates further that sales of War Bonds to individuals
are now running at an annual rate of about $5 billion. It contends that the
Treasury hardly hopes to raise sales to individuals above the rate of $10 billion a year. And it argues that sales of anything like $35 billion can only
be achieved by a drastic compulsory system.
The scheme advocated by this bulletin is a compulsory one, with exemptions, and on a graduated scale. The bonds involved would also be non-re-
3.
deemable except on proof of need.
4. The bulletin argues that the only real alternative to compulsory saving
as a borrowing policy is the selling of securities principally to banks in
exchange for new deposits. This policy is rejected as undesirable because:
(a) it would make the task of price control almost impossible, (b) it would
necessitate over-all rationing, and (c) it would allow the accumulation of
an immense reserve of cash and idle balances which would be hard to control
in the immediate post-war period.
5. Great -- perhaps undue - emphasis is laid in this bulletin on the
advantage of compulsory saving in preventing a post-war inflation. It is
argued that other controls would be relaxed as soon as the war was over,
but the funds accumulated under compulsory saving could be released gradually as consumer goods became available for purchase.
May 23, 1942
118
CONFIDENTIAL - NOT FOR PUBLICATION
DOMESTIC ECONOMIC DEVELOPMENTS
$77,000 MILLIONS-THIS IS THE ESTIMATE OF FEDERAL EXPENDITURES IN FIS-
CAL 1943-a sun identical with the total 1940 national income.
Attention recently has been concentrated on the ability of the war
agencies to spend that much in one year. It seems pertinent, therefore, to consider briefly some of the problems relevant to the
procedure of raising that much money in fiscal 1943.
THERE IS NO DOUBT THAT THE GOVERNMENT CAN FINANCE THESE CONTEMPLATED EX-
PENDITURES. Their sources are common knowledge. Some will be derived
from taxation, some more from customs and other revenues, some from
bond sales purchased out of savings, and the remainder-whether it is
one or seventy billion-from bond sales to banks through credit or
currency creation.
Come what may, there need to no recourse to the ancient and dishonorable methods of printing fiat money or debasing the currency.
With the perfection of modern banking technique, the procedure of
creating note or deposit currency is effected simply by the sale of
Government bonds to the commercial banks or directly to the Federal
Reserve banks. The banks pay for the bonds by creating new deposits
to the credit of the Government. If the bonds are used as collateral,
Federal Reserve notes may be issued equal to their par value. The
only legal limit to such expansion of note and deposit credit is the
gold reserve of the Federal Reserve banks. With the present gold
stock, our banking system could unquestionably absorb an additional
$70 billion of Government bonds and more if necessary. In short,
there is no doubt that the Government will be able to finance the
$77 billion in fiscal 1943.
NOR IS THERE ANY POSSIBILITY OF PASSING ON AN APPRECIABLE PART OF THE
WAR COST TO LATER GENERATIONS. War materiel flowing currently into
our war effort is at the expense of our current standard of living.
Abstinence on the part of Americans in 1960 will not give us more
war supplies today, nor will abstinence be required of future generations because we choose to make guns instead of butter today. In
general, then, 1943 Government expenditures must be, and can be,
paid for in 1943. The only problem is the best way by which to do
it.
THE WAR MIGHT BE FINANCED ENTIRELY BY TAXATION. This would involve
the collection of $77 billion in Federal taxes and other revenue in
fiscal 1943. Such a program is, for a number of valid reasons, impracticable. It might make the war unpopular. It would enforce
hardships on many people. It would adversely affect the incentives
and motivation to increased production. It would ruin many business
concerns which serve a useful, though militarily nonessential, purpose
in our economy. It would, finally, be politically impracticable because
of the difficulty of making such a rapid and extreme adjustment.
2.13114
-2-
decision has apparently been reached to raise only $24 of the
126billion The
$77 billion through taxation and other revenue in fiscal 1943. This
billion figure includes the currently debated $7 billion Revenue Bill of 1942.
corporation revenue Hence unless the tax program is severely stepped up in the near
future, the major decisions with regard to financing the war will
center on the best means of borrowing the remaining $53 billion.
The sale of Government securities to mutual savings banks, insurance
companies, and business concerns is not likely to expand greatly in
the future, and in any case is not a very large source of financing
could
easily
to the Treasury. Computed at the same rate of purchase as in 1942,
these sales are estimated to yield a total of $5 billion for fiscal
be
1943. This estimate is admittedly rough and uncertain, but a variatim of a billion or so dollars one way or another does not alter the
aggregate financing picture much. As estimated, these purchases will
reduce the financing requirements to $48 billion.
12 billion
WITH THE PROPOSED $2 BILLION INCREASE IN SOCIAL SECURITY TAXES the various
Government trust funds can be counted upon to absorb $5 billion of the
remaining bond offerings. The remainder- $43 billion. must be sold to
individuals and/or to the commercial banks. The source of funds used
to purchase this debt-whether out of the pockets of individuals or
by credit newly created by the commercial banks-is the crucial
problem of war finance.
Table 1.
Estimated Revenue of Federal Government by Sources, Fiscal 1943
(Billions of dollars)
79
29
so
Required Federal income
Total net revenue
24
Total deficit financing
Sale to Saving Institutions and business
53
Sale to Government trust funda2
Remainder to be financed by bond sales to
individuals and banks
1 Bureau of the Budget estimate.
2 U. S. Department of Commerce estimate.
least
77
5
5
43
and
this level
income
With income payments estimated for fiscal 1943 at $117 billion, direct
personal taxes of $10 billion would make individuals' disposable income $107 billion. $70 billion worth of consumption goods and services
will be available for purchase, leaving a balance of $37 billion which
60-65
has depreciation, etc. be savings the $35 form billion of offsets
billion, at
to be saved.
If $2 billion take to
there remains a maximum of which might
used for the purchase of war bonds. The commercial banks would then
be called upon to take the remainder of the bonds-only $8 billion.
2-13114
-3-
119
Table 2.
Estimated Maximum Savings of Individuals, Available for
War Bond Purchases, Fiscal 1943
(Billions of dollars)
Income payments
Direct personal taxes
Disposable income
Value of goods and services
117
10
107
Offsets to depreciation, etc.
70
2
Individuals' maximum savings available for bond
purchases
35
1 Source: All estimates by U. S. Department of Commerce
THE ALTERNATIVE TO THIS PROGRAM OF MAXIMIZING BOND SALES TO INDIVIDUALS
would be to sell to individuals at the current rate-85 billion a
year-and let the banks absorb the balance of $38 billion. Whichever
program of financing is adopted will have tremendous economic effects,
and these should be carefully analyzed.
The prerequisite to selling $35 billion of war bonds to individuals
is the adoption of a program of deferred pay, or compulsory savings
through bond purchases. The current voluntary purchase program will
be judged highly successful by the Treasury if $12 billion of war bonds
are sold. Presumably somewhat less than $10 billion of these would be
taken by individuals, the rest by institutions other than commercial
banks. To expand the maximum voluntary sales by three to four times
would undoubtedly call for rather drastic compulsion to purchase.
If $35 billion of war bonds were to be sold to individuals during
fiscal 1943, the effects would be roughly as follows:
(1) The danger of inflation would disappear. Consumers
would be left with 370 billion and there would be available
for purchase $70 billion worth of goods and services, when
valued at March 1942 prices. Some commodities which were
in particularly short supply due to diminished imports or
extensive diversion to war uses would be subject to strong
upward price pressure and these goods would have to be price-
stabilized through selective price controls, and very likely
these commodities would have to be rationed. The need, how-
ever, for over-all price controls as promulgated on April 28
would be greatly reduced as also would be the case with
rationing.
(2) The liquifying of these savings held by individuals
after the war would insure that there would not be a deficiency
of purchasing power leading to post-war deflation and depression,
as was the case generally after the last war. This would be
possible through refunding the public debt by bond sales to the
commercial banks.
2-13114
-(3) The possible inflationary effect of this program would
arise from the fact that many individuals might be tempted to
turn in their bonds for redemption either during the war,
when additional consumer goods for purchase are not available,
or immediately after the war, before industry has been reconverted to a peacetime basis. This danger would have to be
guarded against by means of placing certain restrictions on
the right of redemption, and possibly leaving the maturity date
of the bonds to the discretion of the Government-adiscretion
that would be exercised in terms of available supplies ut consumption goods.
(4) The maximization of sale of Government bonds to individuals would have the effect of achieving a more equitable
distribution of the public debt than would otherwise be the
case-for people in the lower and lower-middle income groups
would be expected to make purchases roughly proportionate to
their incomes. Many of the difficulties which otherwise
would arise in the post-war period from the fact of an unequally distributed public debt would therefore be avoided.
In fact, such a bond distribution would be a most powerful
stimulant to post-war reconversion.
IF BOND SALES TO INDIVIDUALS ARE NOT MAXIMIZED, BUT STAY AT THE CURRENT
level of $5 billion a year, the banks will be called upon to purchase
$38 billion of bonds. The economic consequences of this expansionary
financing would be highly undesirable.
(1) Price controls, which now fix ceilings on most of the costof-living commodities, would have to be extended to include all
consumption goods, and perhaps some capital goods (farms, houses,
etc.) if inflation of their prices is to be avoided. Individuals
would have $30 billion to spend for & few uncontrolled goods,
and an inflationary rise in their prices would be certain.
(2) With over-all price controls, over-all rationing would
be necessary. With the available goods and services totaling
only $70 billion, and with consumers having $100 billion to
spend, the only way to insure an equitable distribution of
commodities would be to initiate an all-inclusive goods rationing
system
rationing
to 70
cents or
of else
every
dollar. of disposable funds of consumers
(3) Price control and rationing regulations would be ex-
tremely difficult to enforce if individuals had, as they would
fixed have, both the desire and the money to pay higher than the
prices for goods-or to buy more goods than their
rationed allotment. The avoidance of a large-scale black
market would be difficult if not impossible.
2.13114
-5-
120
(4) The problem of inflation would not be removed, but only
temporarily shelved. With individuals building up cash hoards
and idle bank balances at the rate of $30 billion a year, the
liquid purchasing power available at the end of the war would
be staggering. Millions of individuals will then want to purchase the cars, suits, radios, furniture, etc., of which they
will have been deprived for so long. Obviously, the goods
will not be available in even moderate quantities until after
industry has been reconverted to peacetime production, and
even then industry will normally be able to distribute as
much in purchasing power as it produces in product. Consumption expenditures will have to be restrained then as now, and
the obvious method is to continue price controls and ration-
ing. The removal of such controls would initiate the inflation
they were created to avoid on April 28. Price controls and
rationing would continue necessary until an extremely high peace-
time productivity is reached.
of the two alternatives, obviously the former-maximization of bond
sales to individuals with minimum reliance on bank financing-has
the greatest advantages and the fewest disadvantages. As indicated,
it would have to be compulsory. To avoid injustices, the percentage
of income devoted to bond purchases would have to be on a progressive
scale. Exemptions for dependents and for essential expenditures
would have to be worked out. Allowance for unforeseen financial
demands would have to be made.
Further, the bonds would have to be, as is now the case with Series
E war bonds, nontransferable and not usable as collateral on loans.
In addition, they should not be redeemable at the owner's pleasure,
nor should they become payable in the post-war period until after a
sufficient lapse of time for consumption goods on which the proceeds
would be spent, to be available on the market.
The advantages of this program of war financing become obvious when
comparison is made with the fiscal program of the last war, or of
the first 21-month period of the present defense-war period (July
1, 1940 to March 31, 1942).
During the last war, each major belligerent power placed primary
reliance on expansionary financing through sale of bonds to the
banks, especially central banks. They suffered, as a direct result,
extensive inflation which was not only the cause of much discontent
and economic maladjustment during the course of the war, but the
source of many of the devastating post-war upheavals. This is such
common knowledge that it is only necessary to point out that, in
1914-15 Germany financed 73 percent of her expenditures by loans,
Russia 78 percent and Italy in 1915-16, 81 percent. From April 5,
1917 to June 30, 1919, the United States Government met 72 percent
2-13114
- -6-
of its expenses by borrowing. If now we again refuse to pay for
a large portion of the war costs by taxation, the least we can do
is to avoid the pit-falls of expansionary financing by borrowing
from individuals rather than banks.
SO FAR, OUR RECORD HAS BEEN SOMEWHAT BETTER THAN IN THE LAST WAR. Tax
and other revenue receipts were more than twice as great in the first
9 months of fiscal 1942 than in the comparable period of fiscal 1940.
But the trend, as indicated in the budget for fiscal 1943, and as
shown below, is unmistakably in the direction of increased expansionary borrowing (i.e., borrowing from banks which leads to purchasing power expension). Whereas taxes and other revenue paid for 68
percent of expenditures in fiscal 1940, they paid for only 40 percent
in the first 9 months of fiscal 1942. Conversely, the percentage of
expenditures met by borrowing has increased from 32 to 60 in the
same period.
Table 3.
Treasury Income by Sources. Fiscal 1940-42
(Millions of dollars)
July 1, 1940 to
March 31, 1942
21-month defense
and war period
Dollars
Direct personal taxes
Other revenue
Total net receipts
Increase in public debt.
Total
4,408
12,250
16,658
19,452
36,110
Percent
12
1940 1941 1942
-- Percent
17
13
12
34
51
44
28
46
68
57
40
54
32
43
60
100
100
100
100
Source: U. S. Treasury Department. 1/ First 9 months only.
THE 20 INCREASE IN BORROWING, WHICH TOTALED $19.5 BILLION DURING THE FIRST
months of the defense and war program (July 1, 1940 to February
28, in 1942) has obviously been expansionary in its effect. As shown
this table 4, the commercial banks were called upon to absorb one-third
of increase in the public debt. If all factors are considered,
it is expansionary.
probable that, on balance, as much as one-half the increase
was
2-13114
121
-7Table 4.
bebtoob
Purchase
Consider
base
to
of Government Securities,
July 1. 1940 to Feb. 28. 1942
(Billions of dollars)
has
3.3
6.4
1.5
Individuals war bond and tax note purchases
Commercial banks
Insurance companies
Savings banks
.6
2.7
Government agencies and trust funds
5.0
All others
19.5
Total
Source: War bond and tax anticipation note sales from Treasury
data. All other items computed from Federal Reserve Board
data (July 1, 1940 to December 31, 1941) and from Treasury
data (December 31, 1941 to February 28, 1942).
Although other factors have undoubtedly played a part, two outstanding developments can be traced directly to this inflationary financ-
ing. First, the volume of circulating media in the country has
increased, as shown in table 5, by $15 billion during this 20-month
period. Second, there was a 14 percent rise in the cost of living.
These constitute warning signs that cannot be disregarded.
Table 5.
Circulating Media, June 29, 1940 and March 31, 19421
(Millions of dollars)
June 29. 1940 March 31, 1942 Increase
All bank deposits
Money in circulation
Total
60,582
7,848
68,430
1/ Source: Federal Reserve Bulletin.
72,000
11,566
83,566
2 Estimate - actual data not yet available.
2-13114
11,418
3,718
15,136
-8SIGNIFICANCE: Fiscal measures which soon must be decided and
adopted by the Government, will determine whether the national
economy shall work in the shadow of a mighty reservoir of dammed-
up funds. The crux of the problems shall all or a major portion
(of. the war bonds not absorbed by Government trust funds and by
savings institutions, be sold to individual savers or to banks?
The amount in question is $43 billion in fiscal 1943 and many more
scores of billions during the rest of the war.
If the bonds are sold to individuals, the war will be financed
largely out of the surplus purchasing power of consumers. If they
are sold to banks in return for newly created deposits or note
currency, the war will be financed by money and credit expansion.
In the latter instance, consumers will remain in possession of a
vast and swiftly growing reservoir of surplus, idle purchasing
power. The price ceilings will prevent these idle funds from
causing inflation as long as the ceilings are effectively enforced.
Comprehensive rationing will be necessary to prevent consumers from
attempts to convert these funds into commodity hoards. Even if we
assume the complete effectiveness during the war of both price ceil-
ings and rationing, in sterilizing this reservoir of accumulated
purchasing power, continuance of both these controls well into the
post-war period would be necessary to avert an inflation of destructive force when these dammed-up funds burst into the relatively
denuded consumer goods markets after the war.
Clearly what before the inauguration of price ceilings was called
the inflation gap should not be allowed to form such a vast reservoir of unused purchasing power. The obvious measure for the
Government to adopt is the absorption of these funds by the sale
of bonds to individual savers on the necessary large scale. However difficult the administrative problems may be, the correctness
of the principle is beyond challenge.
Bureau of Foreign and Domestic Commerce
Washington, D. C.
2-13114
v
150 Central VR. South
New york City
Jacu 3, 1942.
Dear Mr. Morgen than,
Thank you so much
for your telegram of
June second I do
appreciate the interest
you and Mrs. ningenthan
Love shown, and I am
looking forward to
meeting Professor helch
Must sincerely,
Lucy mours
123
June 3. 1942.
and dear Professor Welch: field 6/1
I have just carefully read your
memorandum of June 1st, and am most
enthusiastic about the suggestions that
you have made. Please continue along the
lines that you have suggested yourself.
I feel confident that the Treasury is
going to benefit greatly from these suggestions.
Whenever you are ready to talk to
me further, I will be at your disposal. I
am going away, I hope, on June 5th for a
week. If you have any ideas, please either
write me or telephone no at the Farm.
Yours sincerely,
(Signed) N. Morgenthas. the
Professor Roy D. Welch,
Princeton University,
Princeton, New Jersey.
n.m.c.
cc-
mn. Graves
124
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 3, 1942
TO
Mrs. Klotz
FROM
Secretary Morgenthau
Please see that Harold Graves gets a copy of
Professor Welch's memorandum to me and a copy of my
letter to Welch, with a note to Graves that he should
distribute this to anybody in his organization
who he thinks would be interested. Sent to Grames 6/3-
125
June 3, 1942
Mr. Graves
Secretary Morgenthau
Would you please distribute copies of the attached
to any one in your organization whom you think may be
interested.
126
AIR MAIL
June 3, 1942.
Dear Mayor McCrary:
I am writing with some advance information which
I wish you would treat with strict confidence. Sometime between the 8th of June and the 4th of July, an
Army plane will arrive at your city with about a
dosen outstanding war heroes who have distinguished
themselves in actual conbat. Some of these mon will
be from our own Army, Havy and Coast Guard; some of
then will be British bamber crown, Commandos, and
other fighting men who are being flown to this country
at the invitation of the Treasury Department. The
group will tour the principal cities of the nation to
tell the story of their experiences and thereby to
help in promoting the sale of War Bonds and Stamps.
Fort Worth has been selected as one of a number
of the more important cities to be visited by this
group of heroes in uniform. To attain the best possible results, we feel that a public rally and parade
should be staged in your city to welcome them.
It goes without saying that we shall need your
active assistance. I realise, of course, that your
time is severely taxed, but I shall appreciate your
designation of a member of your official family or
some other outstanding citizen who can take charge
of all the arrangements. A member of the War Savings
Staff of Fort Worth will call on you and discuss the
various details with you. For your information, we
would suggest July 2nd as a tentative date on which
the visitors could appear in Fort Worth.
Sincerely,
(Signed)
Hon. I. N. McCrary,
Mayor of Fort Worth,
Fort Worth, Texas.
FK:eg
n.
Borgeathes,
⑉
n.m.
Copies to Thompson
127
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
June 3, 1942
Secretary Morgenthau
FROM Vincent F. Callahan
Portions of the inter-racial rally in New York
at Lewisohn Stadium tonight will be broadcast
locally by Stations WNYC, WOV, WBYN, and possibly
one or two others.
The rally will NOT be broadcast over any nationwide network. The networks declined the broadcast,
pointing out that a similar rally had already been
broadcast from Chicago. Because of this, and because
of the fact that we are constantly asking them to do
other broadcasts, I did not think it wise to press
the network companies on tonight's program.
For your information, on tonight's show there
will be Barry Wood, Marian Anderson, Paul Robeson,
Olivia de Havilland; speeches by Thomas E. Dewey
and Pearl Buck; music will be by the Fort Jay band.
Vincent 7. Callaha
128
Song submitted by Mr. Callahan 6/5/42
129
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Mrs. Klotz
FROM
Vincent F. Callahan
June 3,1942
Secretary Morgenthau this morning asked
me to get a record of the song "The Old Flag Never
Touched the Ground". I have checked and found that
no recording has been made of this song. However,
I am getting a copy of the sheet music and I will
send it over some time tomorrow.
Vincent7.Collehen
130
June 3, 1942
Vincent Callahan
Secretary Morgenthau
I see in the Chicago Daily News that they sang
a song entitled "The Old Flag Never Touched the Ground"
This was written by James Rosamond and sung in Chicago
by the Metropolitan Church Choir under the direction of
J. Wesley Jones. I wonder if there is a record of this
song. I would like to hear it very much. Please try and
get me one, and please send it direct to Mrs. Klotz so
that I will receive it promptly.
131
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
FROM
Mr. Haaa
JUN 3 1942
Subject: Issuing agents for war savings bonds qualifying
during the week ended May 30.
Attached to this memorandum are 3 tables present-
ing the most recent data on corporations qualifying
as issuing agents for war savings bonds. A summary
of the data incorporated in the tables follows:
(1) During the week ended May 30 there were 134
new corporations qualified as issuing agents
(Table 1), bringing the total number of cor-
porations qualified to date to 1,887. In
the aggregate, these companies employ nearly
1.3 million workers, or 26 percent of the
total number of employees in all companies
having payroll savings plans (Table 2).
(2) With respect to the larger corporations, the
number with 500 or more employees which had
qualified as issuing agents was 1,240 at the
end of last week, or 26 percent of the total
number of companies of this size with payroll
savings plans. The Federal Reserve Banks
of Richmond, Minneapolis, and Cleveland are
behind the other banks in qualifying larger
corporations as issuing agents (Table 3).
The slow progress of the 3 Reserve Banks referred
to in the foregoing paragraph has not been entirely
unexpected. It is accounted for as follows:
(a) Richmond. The bank has had some difficulty
in clearing up final details with some of
the companies contacted. At the moment,
there are a great many cases in process.
Included a mong these are the Chesapeake and
Ohio and the Atlantic Coast Line Railroads
and the large tobacco companies.
132
2 -- Secretary Morgenthau
(b) Minneapolis. Last fall the large commercial
banks in Minneapolis and St. Paul made arrangements with the large corporations in the
District to issue the bonds sold under the
payroll savings plan. The service has been
good and these corporations are now unwill-
ing to disturb their existing fiscal re-
lationships.
(c) Cleveland, Corporations in this area feel
that as long as the Federal Reserve Bank is
in a position to provide good service, they
The Bank is equipped to handle triple its
present volume of bond inscriptions -- and
to turn out this volume in 3 or 4 days from
need not hurry to become issuing agents.
the time the applications arrive. This per-
formance 18 so much better than the corporations expect to be able to do that many of
them are unwilling to consider becoming
issuing agents until some later date.
133
Table 1
Corporations with Payroll
as Issuing Agents
May 2,Plans
1942 Appointed
to date
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
9
:
Boston
May
2
May
May
16
23
11
:
Federal Reserve District
May
May
30
5
10
26
26
24
9
7
8
16
18
11
6
6
11
6
7
21
25
8
24
16
23
26
2
14
20
7
13
2
1
1
3
2
4
11
4
35
41
8
3
11
2
10
4
1
3
8
7
4
3
7
8
6
-
Dallas
San Francisco
Total
Office of the Secretary of the Treasury,
Division of Research and Statistics,
108
2
144
1
16
21
29
149
129
134
June 2, 1942.
134
Table 2
Corporations Acting as Issuing Agents for Savings Bonds
January 31, 1942 to date
Purchased by Their Employees Under Payroll Savings Plans
the country
:
:
agents
:
corpora-
tions with
payroll
plans in
:
agents
ing as
issuing
ing as
issuing
tions act-
in all
:
tions act-
in corpora:
Date
Percent of
employees
:
corpora-
Number of
Number of
employees
:
Number of
employees
in corpora-
tions acting as
issuing
agents
15,000,000
January 31
351
February 28.
686
# 17,000,000
March 28
931
19,000,000
April 18
1,110
3,179,349
19,500,000
16.3
April 25
1,223
3,449,927
19,700,000
17.5
May 2.
1,331
3,934,448
19,900,000
19.8
May 9
1,475
4,401,738
20,000,000
22.0
May 16
1,624
4,917,904
20,000,000
24.6
May 23
1,753
5,083,890
20,000,000
25.4
May 30
1,887
5,286,402
20,300,000
26.0
#
Office of the Secretary of the Treasury,
Division of Research and Statistics.
Not available.
#
June 2, 1942.
135
Table 3
Progress of the Federal Reserve Banks in Appointing Corporations
with 500 or More Employees as Issuing Agents
Week Ended
May 23 : May 30
:
issuing agents
:
appointed as
:
or more employees
:
:
:
:
:
:
in the Federal
Reserve District
rations with 500
:
:
:
:
:
Reserve District
more employees
Number of corpo:
Federal
corporations
with 500 or
:
Number of
Percent
appointed
as issuing
agents
Week Ended
May 23 : May 30
:
:
Boston
475
91
98
19
21
New York
902
231
247
26
27
Philadelphia
427
157
163
37
38
Cleveland
592
104
109
18
18
446
50
53
11
12
228
54
59
24
26
868
282
303
32
35
St. Louis
152
54
58
36
38
Minneapolis
Kansas City
Dallas
San Francisco
101
12
13
12
13
147
28
32
19
22
72
19
19
26
26
368
65
86
18
23
4,778
1,147
1,240
24
26
Richmond
Atlanta
Chicago
Total
Office of the Secretary of the Treasury,
Division of Research and Statistics.
June 2, 1942.
CONFIDENTIAL
UNITED STATES SAVINGS BONDS - SERIES E
Comparison of June sales to Gate with sales during the
same number of business days in April and May 1942
(At issue price in thousands of dollars)
:
:
June
:
:
:
sales
:
daily
Cumulative sales by business days
June as
April
May
: percent of May
:
:
:
Date
June
:
:
June 1942
1
2
$19,834
$ 19,834
$ 12,679
$ 12.993
8,008
27,841
24,263
24,256
fice of the Secretary of the Treasury,
Division of Research and Statistics.
156.4%
114.7
June 3. 1942.
urce: All figures are deposits with the Treasurer of the United States on
Note:
account of proceeds of sales of United States savings bonds.
Figures have been rounded to nearest thousand and will not necessarily
add to totals.
CONFIDENTIAL
137
UNITED STATES SAVINGS BONDS - SERIES F AND G COMBINED
Comparison of June sales to date with sales during the
same number of business days in April and May 1942
(At issue price in thousands of dollars)
:
May
April
:
June
:
:
:
:
sales
Oumulative sales by business days
:
daily
:
:
:
:
Date
June
June as
percent of May
:
June 1942
1
2
$ 9.705
$ 9.705
$ 7,302
$ 11,987
7,895
17,601
15,168
21,677
Office of the Secretary of the Treasury,
Division of Research and Statistics.
132.9%
116.0
June 3. 1942.
Source: All figures are deposits with the Treasurer of the United States on
account of proceeds of sales of United States savings bonds.
Note:
Figures have been rounded to nearest thousand and will not necessarily
add to totals.
CONFIDENTIAL
UNITED STATES SAVINGS BONDS - TOTAL - ALL SERIES
Comparison of June sales to date with sales during the
same number of business days in April and May 1942
(At issue price in thousands of dollars)
:
:
:
:
:
sales
June
May
: April
:
daily
Cumulative sales by business days
:
Date
: June
June as
:percent of May
:
:
June 1942
1
2
$29,539
$29.539
$19,981
$24,980
15,903
45,442
39,430
45.933
Office of the Secretary of the Treasury
Division of Research and Statistics.
147.8%
115.2
June 3, 1942.
Source: All figures are deposits with the Treasurer of the United States on
account of proceeds of sales of United States savings bonds.
Note:
Figures have been rounded to nearest thousand and will not necessarily
add to totals.
Sales of United States Savings Bond 139
June 1-2, 1942
Compared with Sales Quota for Same Period
CONFIDENTIAL
(At issue price in millions of dollars)
:
:
:
:
:
:
:
17.6
19.7
:
:
7.9
80.2%
89.3
:
:
:
:
1
2
8
9
30
530.6
550.0
:
29
:
27
373.0
390.0
413.5
441.1
466.8
489.2
:
26
236.5
251.1
271.3
295.2
317.4
336.9
$ 12.1
:
25
120.0
132.4
149.6
170.0
189.0
205.6
$ 9.7
:
23
24
32.0
46.4
63.6
79.6
93.7
$ 9.7
Quota
:
22
27.8
91.2%
86.9
Daily
June 1
to
Date
:
20
:
19
8.0
$ 21.7
Date*
: as % of
:
18
$ 19.8
Date
to
:
17
$ 19.8
to
to Date
:
16
Daily
June 1
Actual Sales
Quota,
June 1
to
Date
Quota
87.3
87.8
$ 29.5
$ 29.5
$ 33.8
15.9
45.4
51.7
78.3
31.9
42.4
51.0
57.6
106.0
130.6
151.3
69.6
77.3
89.5
100.0
108.6
115.1
189.6
209.7
239.1
270.0
297.6
320.7
127.2
134.8
147.1
157.6
166.2
172.7
363.7
385.9
418.4
452.8
483.6
509.6
184.8
192.4
204.6
215.2
223.7
230.3
557.8
582.4
618.1
656.3
690.5
719.5
242.4
250.0
Sales
to Date
as % of
:
15
:
13
to
:
12
to
June 1
:
10
11
: June 1 : June 1 : to Date
as % of
: Date : Quota
Date
Sales
:
Daily
Sales
:
Date :
: Quota,
Total
:
Actual Sales
Series F and G
Actual Sales
Quota,
:
Series E
773.0
800.0
June 3, 1942.
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 and will not necessarily add to totals.
Takes into account daily trend within the week, but does not take into account the trend by weeks during the month.
140
Are meeting of 6/4/42
June 3, 1942
RUML:
We have two kinds of information on current customer activity
in and around Macy's along the lines I discussed with Mr. Haas last
week. Inferences from both must be recognized as tentative.
A. Statistics on What Consumers Have Done.
1. There has been little evidence as to date of the release of
powerful buying pressure except for the scare buying spurts in
lines such as Silk Hosiery, Underwear, Radios, Refrigerators
and other major electric appliances, Sheets, Woolen Yard goods,
Coats, Suits and Blankets. Mostly, these occurred previous to
the past four months.
2. There has been a substantial drop in Dollar volume during the
last two weeks (three, if this week ends as it started).
Explanations are varied and difficult to establish. The
institution of ceilings may have taken some of the incentive
out of buying now rather than later. Newspaper Publicity on
other phases of the Government's attack on inflation is also
cited as an explanation.
3. Physical volume, as measured by transactions (and on investigation this appears to be warranted) is substantially below
last year in most lines. Exceptions are Men's Suits and Coats,
Women's Underwear, Toys, Radios, Refrigerators and other
electrical appliances, Pianos, Jewelry, Sportswear (Men's,
Women's and Children's).
4. There has been some shift in purchasing from lower to higher
price lines in these types of merchandise where this can be
quickly studied, such as Women's Dresses, Slips and Shoes.
On the whole, the customers seem to have continued to buy the
same quality at the new higher price, but in smaller quantity.
There are some exceptions such as Silverware where plated ware
is being replaced by the lower price ranges of Sterling, which
is still more expensive.
5. Customer traffic is in general not very much different from
last year (some days higher, some lower). But consistently we
have been getting fewer transactions per customer during the
last few months.
-2-
141
6. Cash Time (Instalment) sales have been lagging behind total
Store sales, all of this year and part of last.
B. What Consumers Say about What they are Doing.
The statistics are fragmentary and may cover up rather than
reveal the answers. We felt that we should experiment with an attempt
to find out from the people what their own ideas are about their
situations, how they have been spending and saving, and what they
might do in the future.
We therefore talked to twenty-four people in an informal fashion
to test the kind of information we could get and the problems we
might have getting it. I am attaching our report on these "case
studies". It is difficult to summarize them and if you possibly
can, I suggest you read them over carefully in order to get the
"feel" of the situation.
We talked to people in Macy's, in Bamberger's Basement, outside
a defense plant in Edgewater, New Jersey and Parkchester (The
Metropolitan Life Insurance Company's housing project in the Bronx
for 12,000 middle income families - civil service workers, etc.).
We found three groups:
1. Those who had more real income than last year.
2. Those who had the same dollar income but less real income.
3. Those who had less dollar income.
We found, and this is tentative, but possibly significant, that:
1. People seem to be quite willing to tell their government not
only that they are behind it, but specifically what they would
like it to do.
2. Except for isolated items like rubber pants for babies, there
seems to be little consciousness as yet of any shortages.
3. When asked what they would do if they suddenly had to adjust
to a lower income, a number said they would cut down on
clothing, entertainment and amusement. Considering the possible goods and services that might be expanded with less
effect on war production than others, this kind of answer is
interesting. It might be desirable to pursue this further.
4. A number of people did not expect any further raises. This
might also be a good thing to look into further.
5. A number of points that may be of interest even though they
might be true of only a minority of people-such as some
confusion over the rights of the owner of war bonds, etc.
142
-3-
It is our feeling that it would be wise for some agency to
go much further along the second line of talking with the
consumer. The few cases we have indicate the consumer's
willingness to talk, and, we think, the fact that she has
important things to say. We think this is the kind of
question where much more than a set of averages is required
for a real answer. You will undoubtedly find more in the
twenty-four cases than the few points I have mentioned.
A. Hackman
143
FIRST COPY
144
R. H. MACY & CO.1 RESEARCH DIVISION
June 2, 1942
EXPLORATORY REPORT ON A PROPOSED CONSUMER POLL
PART I: PURPOSE
Stated simply, the problem posed to us was this: In the coming year it is
estimated that there will be an excess of something like 17 or 18 billion
dollers in purchasing power over and above the total value at retail of
consumers' goods and services available. (This is on the basis of March
1942 prices.)
The question is how people will spend their money under these circumstances.
One way of finding out is to ask them what they have been doing and what they
think they might do under certain conditions. We thought it would be wise
before attempting to construct anything like a rigid questionnaire just to
talk with consumers. Among the things we tried to determine are:
1. What kinds of date we could get. This involves the degree of
clarity and insight which people have on their own problems,
as well as their willingness to talk (depending of course on
their trust in the interviewer, his official status, etc.).
2. Whether there are distinct groups of consumers different from
each other in important respects as regards this problem, i.e.
their income and expenditure patterns. If such groups can be
established and can be distinguished from each other in terms
of simple measures: for example, occupation, age, income, etc.,
then we have a proper basis for the construction of a sample that
will represent a good cross-section of the population.
3. Whether a quick estimate could be made of how far the problem
has already developed: Possible shortages in goods and services,
possible excess purchasing power, etc.
4. How specific the information is that we might be able to get,
in terms of kinds of merchandise, other outlets for expenditure,
whether there are immediately discernible any clear reactions
to already instituted means of combating the inflationary gap
(i.e. price ceilings, voluntary payroll deductions for bonds, etc.).
Page 2
145
There is as yet no sample to speak of. Several clues have been revealed,
however, which indicate that polling consumers in this fashion can yield
interesting data, and that the method might be pursued. From the 25 interviews conducted 80 far, we found the following general clues:
1. People seem to be quite willing to tell their government not only
that they are behind it, but specifically what they would like #
to do.
2. Except for isolated items like rubber pants for babies, there
seems to be little consciousness as yet of any shortages.
3.
It is possibly significant that a number of people, when asked
what they would do if they suddenly had to adjust to a curtailed
income, said they would cut down on clothing and entertainment.
We know that these items are optional as compared to food and
housing, and part of the significance of the answer resides in
the fact that the expansion of the supply of precisely these
most-easily-curtailed things would least cut in on resources
(plants, materials, labor, etc.) needed for war production.
4. Certain groups appeared who showed similar patterns of responses,
and who may be somewhat typical of larger groups in the population.
This seems to indicate that we would be able to build up a representative sample using certain occupational, regional, and income groups
in the population (for example, defense workers in New Jersey,
factory workers in Long Island City, white-collar workers in
Manhattan, etc.).
The exploratory interviewing so far has missed certain types of people and
certain lines of questioning, as for example: Women who work, families from
which the chief earner has just been drafted, people with high incomes, and
also questioning designed to get at a very detailed breakdown of expenditures,
etc. Such temporary gaps would of course be remedied in future interviewing.
The interviewing so far was done in four places: R. H. Macy & Co.,
L. Bamberger & Co., Macy's Parkchester, and Edgewater, New Jersey.
Page 3
146
PART II: METHOD
The interviewing so far was done in four places, for the following reasons:
1. We thought we might be able to pick up some wives of defense
workers in the basement of L. Bamberger & Co., Newark, N.J.
2. The customers of R.H. Macy & Co., N.Y.C., represent a fair
cross-section of the city's population.
3. There are several defense factories in Edgewater, N. J.,
and we expected that we might find a large increase in income
among those workers.
4. We thought we might find typical white-collar and professional
workers at Macy's Parkchester store, Bronx, N.Y. This community
was developed by the Metropolitan Life Insurance Company, and
the residents were carefully chosen for their stability and
financial security. We thought therefore that it would be
likely that the jobs and salaries of these people have remained
the same, and that their real income consequently had probably
decreased.
The interviews were made in an informal "chatty" fashion, encouraging the
respondent to talk spontaneously as long as he wished. 25 interviews have
been made so far. The following questions were used as a reminder list of
certain topics to be covered, rather than as a formal questionnaires
I. General Status Information
1. Occupation (very specific)
2. Age, sex.
3. Merital status ... how long married.
4. Address how long lived there where lived before.
5. Any children how many how old.
6. Any dependents how many
for how long have you supported them.
7. Salary (including overtime pay).
how much was it ... when do
8. When did you get your last raise
you expect another raise how much do you expect.
Page 4
147
9. What salary were you making a year ago was it on the same job
are you planning to stay in your present job if not, what have
you in mind do you think it will be at a higher salary.
(Ask same questions about the spouse, or any other earning members of
the family.)
II. Expenditure Information
1. Do you feel you have more money to spend than last year, or less, or
the same amount.
2. What are you spending your added money on, and/or what have you cut
down, and/or what expenditures have remained the same.
(Supplement the spontaneous information by inquiring about the specific
items listed in the following checklist: Clothes, furniture, amuse-
ments, entertaining, housewares, house improvements, food, rent,
medical care, savings, defense bonds, contributions (Red Cross, etc.),
taxes, tax anticipatory notes, car, gasoline, jewelry, other luxuries,
other department store merchandise, debts, mortgages, installments, etc.).
3. On the separate items, are you spending more (or less) for single
items, or has the price gone up (or down) for the same item, or are
you buying more pieces (or less) of that item.
4. Have you noticed much of a price rise in things you usually buy
in what things how has this affected you.
5. Have you a car if yes, do you have any additional money due to
if so, what are you doing with that extra money.
using it less
(Also inquire about any extra money that may be released by the
rationing of typewriters, refrigerators, stoves, building materials,
etc.)
III. General and Attitude Questions
1. What would happen if your income were reduced about 10%
would you
have to cut down on anything what might you have to cut down on.
2. How do you feel about price ceilings ... have you noticed any price
differences since the ceiling ... have they affected your "pocketbook"
in any way.
3. Have any shortages inconvenienced you ... have you been able to get
what things have you been unable to get.
all the things you want
4. Where are you doing your buying now where did you used to buy.
5. What is your reaction to the thought of buying a home since you have
more money now (if the person does have).
Page 5
148
PART III: DETAILED EXAMPLES OF INTERVIEWS
Three major types of income patterns appeared: 1) Those who have more real
income now, 2) those who have the same actual income (and usually less real
income), and 3) those who have less actual income now (i.e. who have suffered
any actual cut in income). Each of these groups - illustrated below by
one representative case given in full detail. Further cases are summarized
more briefly in a later section. (Part IV)
GROUP I: THOSE WHO HAVE MORE REAL INCOME NOW (Primarily Defense Workers)
Case 1: Mr. X, a man of 45, works at the Aluminum Company of America. He used to
drive a trolley car and then he lost that job. He tried to get another job but
couldn't seem to land one because he had no particular training. His meager
savings dwindled during this period and finally he was forced to borrow from
his brother and friends who didn't have much money themselves. He moved with
his wife and two children f rom a small apartment into one room. He finally
decided that he must learn a trade and so he borrowed money to take a machinist's
course. After a year and some months of unemployment he picked up his present
job about a year ago.
Through overtime and regular wages his salary is now nominally about $60 to $65
per week. He expressed some surprise to me that a salary which he once considered
munificent still is not sufficient to give him everything he wanted. For one
thing, his actual salary is much smaller. Several deductions take away parts
of it before he ever sees it: His union agreed by vote that all members should
put 10% of their salary in war bonds. The company deducts this and when the
sun collected is sufficient, gives him the bond. There is a hospitalization
and insurance plan for which the company deducts. Unemployment insurance and
old age pension deductions are made regularly. Union dues are checked off.
Incidental contributions to the Red Cross and other charities further deplete
his salary. His actual present income is more of the order of $46 to $50, than
$60 to $65. This is still more money than he ever had before.
With this amount of money coming in regularly, he has done the following things:
1. The first thing he did was start paying back the loans from his brother
and friends, and also paying the doctor and dentist whom he had owed for
a long time. He pays each something out of each week's salary, but thinks
it will be quite some time before it is paid off. He told me that I would
be amazed if I knew how much he owed. He said "You try living without any
money for a year."
2. He moved into an apartment, "so that the wife and kids can have a decent
place to live in for a change." This costs twice as much as the room did.
He thinks he is overpaying, but expects that of course everything goes up
in war time. (He would like to see the government fix rents at levels of
two years ago. His theory is that, if the owners could make a profit out
of those rents, why should they make more of a profit in war time at the
Page 5
148
PART III: DETAILED EXAMPLES OF INTERVIEWS
Three major types of income patterns appeared: I) Those who have more real
income now, 2) those who have the same actual income (and usually less real
income), and 3) those who have less actual income now (i.e. who have suffered
and actual cut in income). Each of these groups illustrated below by
one representative case given in full detail. Further cases are summarized
more briefly in a later section. (Part IV)
GROUP I: THOSE WHO HAVE MORE REAL INCOME NOW (Primarily Defense Workers)
Case 1: Mr. X, a man of 45, works at the Aluminum Company of America. He used to
drive a trolley car and then he lost that job. He tried to get another job but
couldn't seem to land one because he had no particular training. His meager
savings dwindled during this period and finally he was forced to borrow from
his brother and friends who didn't have much money themselves. He moved with
his wife and two children f rom a small apartment into one room. He finally
decided that he must learn a trade and so he borrowed money to take a machinist's
course. After a year and some months of unemployment he picked up his present
job about a year ago.
Through overtime and regular wages his salary is now nominally about $60 to $65
per week. He expressed some surprise to me that a salary which he once considered
munificent still is not sufficient to give him everything he wanted. For one
thing, his actual salary is much smaller. Several deductions take away parts
of it before he ever sees it: His union agreed by vote that all members should
put 10% of their salary in war bonds. The company deducts this and when the
sum collected is sufficient, gives him the bond. There is a hospitalization
and insurance plan for which the company deducts. Unemployment insurance and
old age pension deductions are made regularly. Union dues are checked off.
Incidental contributions to the Red Cross and other charities further deplete
his salary. His actual present income is more of the order of $46 to $50, than
$60 to $65. This is still more money than he ever had before.
With this amount of money coming in regularly, he has done the following things:
1. The first thing he did was start paying back the loans from his brother
and friends, and also paying the doctor and dentist whom he had owed for
a long time. He pays each something out of each week's salary, but thinks
it will be quite some time before it is paid off. He told me that I would
be amazed if I knew how much he owed. He said "You try living without any
money for a year."
2. He moved into an apartment, "so that the wife and kids can have a decent
place to live in for a change." This costs twice as much as the room did.
He thinks he is overpaying, but expects that of course everything goes up
in war time. (He would like to see the government fix rents at levels of
two years ago. His theory is that, if the owners could make a profit out
of those rents, why should they make more of a profit in war time at the
Page 6
149
expense of people with low incomes.) He also bought some furniture to
fill up the new apartment.
3. He bought an old jalopy so he could get to and from work. He said he
could not afford to buy a new one.
4. He bought the oldest kid a nice bicycle which he had always wanted. He
said he never minds spending money on the kids.
5. He bought his wife a new coat and some new dresses and shoes and a new
hat and a carpet sweeper. He reminded me that she had been without these
things for a long time. He also bought himself a new suit which he wishes
he would get a chance to wear, but he can't because he works so much
overtime. He thinks there is no sense in buying himself any more clothes
till after the war, but he loves to surprise his wife with gifts of clothes
Just yesterday he bought her a new pocketbook which cost him $4. He said
it was probably the most expensive pocketbook she ever had. But he admitted
he had been extravagant, and anyway she bawled him out.
6. He pays more for food, and he wishes the government would put "a good
stiff ceiling" on food prices. He gives his wife the money each week
for food. He says that it seems to him every day he has to give her
more than the day before.
7. He intends to s end his wife and kids away to the seashore this summer
with a friend. He has saved a little money for that, and knows where
they can get acheap bungalow.
He wishes he could put a little money away, but there never seems to be anything
left over. He has had to do all the things mentioned above. slowly, because
food, rent, and deductions take away about 75% of his income. He would love
to save because he doesn't feel secure. He does not know how long the job will
last, and he is afraid that as soon as the war is over he will be out of work
again. He thinks he will need some ready cash at that time, and so he is trying
to save it up. He thinks he will need it before his bonds mature, and would
not like to cash them in ahead of time. But he is afraid that if times are
bad right after the war, he may have to.
"
He wishes he could get a raise because then he might save a little, but he
does not expect one.
I asked him whether it might not be a good idea to start buying a home now
that he has some money. He said he would be afraid to do that, because it
certainly would not be paid off by the end of the war, and then he might
lose the whole investment. He said that if he kept his job after the war
and could depend on it, then he would think of buying a house.
When asked about the effect of a reduction in income, he said, "You must be
talking about compulsory savings. I've read a lot about that in the papers
lately." He said he certainly hopes the government does not do that what yet,with
because he certainly could not save, and would have to go very easy down
paying taxes, etc. He is afraid if that happens he may even have to cut
Page 7
150
on the amount of defense bonds he is buying. He said, "Please tell the government about guys like me, and then they won't do things like that. I think they
misunderstand the situation." He was not resentful just hoping they would
not misunderstand. He wanted me to suggest to the government" that at least
the compulsory savings should be in some sort of bonds that you could cash in
right after the war but still get some interest on them, because he was sure
that was when the money would come in handy. , the been
He has not been affected by any shortages, and has not had any trouble getting
everything he wanted to buy. He has been shopping in his local area, except
for "big" things, such as some furniture he bought recently, because in town
he would have more choice.
Cases 2 and 3: Two other men I spoke to who worked at defense factories in Edgewater
had very similar stories: Both had more income now than formerly. Both mentioned the payment of private debt, and one was also paying off installments
on furniture he had bought when less prosperous. He also had just bought a
piano for his wife, and was paying installments on that. Both mentioned that
they were willing to make short-term commitments, but not long-term commitments
like a house, since they were not sure of their jobs after the war. Both had
not been affected by shortages.
One felt that taxes were a little too heavy but added that if it helped win the
war, he would not complain. Both are trying to save but finding it difficult.
One went from $30 to $45 a week, and the other who had always worked in the
factory went from $40 to $70 a week. Overtime was largely responsible. Although
the amount of their expenditures differed, the pattern was essentially similar.
Both had moved into more expensive apartments. One whose wife was managing to
save something thought it would mainly go for taxes. When asked, both felt
that the price ceilings would help. One said it should have been put on a year
ago.
Page 8
151
PART III: DETAILED EXAMPLES OF INTERVIEWS (Cont'd)
GROUP II: THOSE WHOSE ACTUAL INCOME HAS REMAINED THE SAME BUT WHOSE REAL
INCOME
HAS USUALLY DECREASED. (Primarily White-Collar Workers and Unskilled Labor)
Case 4: An Assistant Manager of a drug store, interviewed at L. Bamberger & Co.,
was fairly typical of this group. In the last year he has received two $2
raises, and now makes $40 a week. His wife does not work. He feels that
he really has less money now than previously because: 1) he is buying bonds
and has two $25 ones already, 2) he is saving for taxes, and 3) food costs
a lot more, and prices in general are up.
He says that food rises are really what take his money away. He feels that
food increases hit the poor person unjustly. He has to spend four or five
dollars more per week, "and that adds up". In order to meet these added
expenses, he and his wife are not buying as many clothes, and are going out
less often. He feels that clothing is one of the few things one can cut down
on since one cannot do without food, and one cannot move out of a leased
apartment.
Since he just got married he planned to furnish his new apartment nicely, but
somehow they never managed to save up the amount of money needed, and so he
had to cut into his savings. He doesn't like the installment plan, and so he
bought it all for cash.
He feels that ceilings have helped considerably but that they should have been
put on long ago, particularly on food since that is such a necessity. He
stressed that clothing is practically a luxury compared to food. He had
originally planned to buy more bonds but has since found that he couldn't
afford it.
He hasn't noticed any shortages, and doesn't expect to be affected by them
for a long time.
When asked what a curtailment of his income might mean, he replied that they
would simply have to stop buying clothes altogether, since that is the only
thing he could think of that he really could cut down on. He is using the
remainder of his savings so that they can have a good vacation. On his salery
alone they could no longer afford one.
He has not tried to get a defense job for two reasons: 1) He has no training,
and 2) he expects to be drafted soon and does not want to give up the vacation
that is coming to him. Also he would have to move, etc., and so prefers to be
comfortable in his present position until he has to go into the army even though
he thinks he could pick up more money elsewhere. He has been paying off certain
private debts (such as for the pharmacy course he took recently) as rapidly as
possible, even cutting into his savings to do so, because he would like to get
rid of them so that they won't bother his wife after he is drafted. There is
nothing he would like to do better than add to his savings, but thinks that at
this point it is practically impossible.
Page 9
152
PART III: DETAILED EXAMPLES OF INTERVIEWS (Cont'd)
GROUP III: THOSE WHOSE ACTUAL INCOME HAS DECREASED
Case 5: This woman, about 36, was interviewed at L. Bamberger & Co. Her husband
worked in a garage but, since the severe gas rationing, has just been laid
off. At first he WBB glad because he thought he could easily pick up a defense
job for more money. He has been looking for one for over a month now but
hasn't been able to find anything, since he has no particular training. He
thinks the factories to which he has gone are too choosy for their own good,
since he is sure that he is capable of catching on to anything if simply
given a chance to watch others for about a week. He is still hopeful of getting
something, but is becoming a little discouraged.
His wife works at the American Can Company as a secretary and now they are
living on her salary alone, or about $1500 a year. First they cut into their
savings. When those were used up the first things they cut down on were
clothes, amusements, and entertaining. Finally they gave up these things
altogether. They buy absolutely nothing except vital necessities, since it
is all they can do to buy food and pay the rent. She hopes he will get a
job soon so that they don't have to move.
When he gets a job, she says that the first thing she will do will be to try
to build up a small bank account. This experience has scared her. She says
"This certainly taught me the value of having something to fall back on". The
next thing she would do is replenish their clothes which are beginning to run
low and get shabby. She would also like to be able to purchase bonds, but of
course can't do so at the moment.
Page 10
153
PART IV: FURTHER CASES SUMMARIZED BRIEFLY
Case 6: Waitress, interviewed at R. H. Macy & Co. Has part-time job. Works from
November to May every year. She, her husband, and two children live in Astoria.
She earns about $20 a week including tips. Has gottn no raise, and salary this
year is lower than last. Tips are much smaller since now has more women patrons
who don't tip as well as men. Her husband is also a waiter. He earns about
$35 a week. Their basic salaries without tips are respectively $5 and $12. (?)
He expects a $1 weekly raise next week. Last year he averaged $45 a week, but
this year there are fewer parties, except for parties of soldiers who don't tip
as well. He has no intention of changing his job. He feels he knows what he
has but doesn't know what he might get.
She feels she has less money this year, and what little she has is used to pay
bills. She has cut down on everything, particularly clothes. Feels rise in
prices, particularly food. "Wouldn't be able to live" if prices rise further,
or if income is cut. If it happened, however, she would have to cut down on
everything, especially chothes. Would like to move to larger apartment because
children becoming too old to have same room, but this would be impossible if
income was reduced. Pays $40 rent no will pay no more than $45. Sold car last
month because needed money, and with gas rationing doesn't need car. Hasn't
been at all affected by shortages. Has offered to give sugar to someone who
needs it. Feels we must win the war, and willing to do whatever government
says is necessary.
Case 7: Male, married, about 40, white-collar worker, dependent wife and daughter,
partially dependent parent. Received a $5 raise this year on a $45 salary. The
raise doesn't seem to have helped much. Very little to show for it. Doesn't
expect another soon. Thinks he will stay in present job unless drafted for army
or war work, but wonders if he should not try to get into defense work where wages
are higher, so that he could save more. (Saves a little, but very little has
bought some defense bonds). Expects that after the war it will be very likely that
younger men will be coming back from the army and will replace older men in jobs.
Worried that he ought to be putting away money against such a possibility.
Case 8: Housewife of Arlington, Va. Husband owns small defense plant in Baltimore.
Feels she has more money to spend but spends less. Puts a great deal into defense
bonds. Doesn't buy much because she feels she shouldn't with conditions as they
are, and for no other reason. Has cut down on clothing, and is more careful of
food (Uses leftovers, etc.). Hasn't felt price increases much except on food.
Is trying to cut down on gas use. All money saved is going back into the business
for the necessary expansion to meet government contracts. (Family income in region
of $6000 to $7000.)
Case 9: Woman, past 40, single, lives alone, interviewed at Macy's. Income is about
$1300. Is a dressmaker. Does not feel pinched in present situation. Living
pattern simple. Any extra money used to go into travel and amusements, (Movies,
etc.). Now any surplus goes into bonds. She had savings in the bank and still
has. She lives from day to day, and has no plans for the future. She has no
debts and gives as much as she can to War Relief Societies. She doesn't feel that
this year is worse than any other.
Page 10
153
PART IV: FURTHER CASES SUMMARIZED BRIEFLY
Case 6: Waitress, interviewed at R. H. Macy & Co. Has part-time job. Works from
November to May every year. She, her husband, and two children live in Astoria.
She week including tips. Has gotten no raise, and salary this
year is lower than last. Tips are much smaller since now has more women patrons
who don't tip as well as men. Her husband is also a waiter. He earns about
$35 a week. Their basic salaries without tips are respectively $5 and $12. (?)
He expects a $1 weekly raise next week. Last year he averaged $45 a week, but
this year there are fewer parties, except for parties of soldiers who don't tip
as well. He has no intention of changing his job. He feels he knows what he
has but doesn't know what he might get.
She feels she has less money this year, and what little she has is used to pay
bills. She has cut down on everything, particularly clothes. Feels rise in
prices, particularly food. "Wouldn't be able to live" if prices rise further,
or if income is cut. If it happened, however, she would have to cut down on
everything, especially chothes. Would like to move to larger apartment because
children becoming too old to have same room, but this would be impossible if
income was reduced. Pays $40 rent no will pay no more than $45. Sold car last
month because needed money, and with gas rationing doesn't need car. Hasn't
been at all affected by shortages. Has offered to give sugar to someone who
needs it. Feels we must win the war, and willing to do whatever government
says is necessary.
Case 7: Male, married, about 40, white-collar worker, dependent wife and daughter,
partially dependent parent. Received a $5 raise this year on a $45 salary. The
raise doesn't seem to have helped much. Very little to show for it. Doesn't
expect another soon. Thinks he will stay in present job unless drafted for army
or war work, but wonders if he should not try to get into defense work where wages
has
are higher, so that he could save more. (Saves a little, but very little
bought some defense bonds). Expects that after the war it will be very likely that
younger men will be coming back from the army and will replace older men in jobs.
Worried that he ought to be putting away money against such a possibility.
Case 8: Housewife of Arlington, Va. Husband owns small defense plant in Baltimore.
Feels she has more money to spend but spends less. Puts a great deal into defense
bonds. Doesn't buy much because she feels she shouldn't with conditions as they
are, and for no other reason. Has out down on clothing, and is more careful of
food (Uses leftovers, etc.). Hasn't felt price increases much except on food.
Is trying to cut down on gas use. All money saved is going back into the business
for the necessary expansion to meet government contracts. (Family income in region
of $6000 to $7000.)
Case 9: Woman, past 40, single, lives alone, interviewed at Macy's. Income is about
$1300. Is a dressmaker. Does not feel pinched in present situation. Living
pattern simple. Any extra money used to go into travel and amusements, (Movies,
etc.). Now any surplus goes into bonds. She had savings in the bank and still
has. She lives from day to day, and has no plans for the future. She has no
debts and gives as much as she can to War Relief Societies. She doesn't feel that
this year is worse than any other.
Page 11
154
Case
10: An extremely neat, not too well-off woman of about 55. Lives in Manhattan with
one daughter (30) who works for the N.Y. State Employment Service. On recent death
of husband has been trying to get a job. Now working as vacation relief at Spring
St. Dispensary. She says far more men come in for medical treatment to this Dispensary who are not on relief than in the past because food costs are so high that
they can't pay for medicine. Daughter has been one year with the N.Y. State Employ-
ment at $6 a day. No cost-of-living raise and no other raise.
Thinks price rises are "terrific". Says every bit of foodstuff has gone up in
price. Daughter is buying bonds now - but slowly. Next year's taxes she refuses to think about. Is already cutting clothing expenditure in favor of food.
Would be very hard up if income should be reduced in any way.
for
11: Parkchester housewife, about 39. Her husband is an engineering salesman from
a heating concern. Have 2 children - 16 and 1 year old. Husband and his brother
are the complete support of his parents. Husband has held this same job for 20
years. Salary $2700 a year. At present her husband has 2 months' leave from his
job because it's a Black season, and he is working as a draftsman in an airplane
factory in Rome, N.Y., at $80 a week. Husband is going back to the salesman job
at the end of 2 months. When asked what she was planning to do with her extra
money, she replied, "We're not people to splurge. I have doctor's bills to pay,
and we'll save the rest." She thinks the price rises are terrific, and price
ceilings haven't helped a bit. They are buying bonds regularly by the stamp method.
Case 12: Postal clerk, 32, who has lived in Parkchester 2 years. His wife is a teacher
on maternity leave, and they are struggling to pay last year's taxes (his wife was
then earning also) out of his present $2100 fixed salary. He answered interview
questions as if he were on a soapbox. He is ardently pro-union. Thinks the government is influenced too much by capital and too little by labor groups. Besides his
wife and 3-months old son, he has no other dependents. Post-retirement pension
deduction used to be 3% is being increased to 5% on July 1st. Owns a car but
never used it very much and is completely unconcerned about gas rationing. Is
buying defense bonds but not by salary deductions. He believes that he is expressing the working man's viewpoint when he says that government taxation is hitting
for too hard on the little man: "Roosevelt was going to limit all incomes to
$25,000 per year, and now you never hear anything about it." He says that labor
is afraid of wage fixing. Price fixing came far too late and on too high a level
to do any good. By March, the wholesaler and manufacturer Dad already picked up
plenty of gravy, and as far as the consumer was concerned the March price level
was still far too high in comparison to wages.
Case 13: A Parkchester housewife, 28, whose husband is a clerk in Wall St, with a banking firm. Last September he had a 10% cost-of-living increase which brings his
have a 1 old child and no other dependents.
has had the same for 12 She they are "insurance poor".
Her Her salary husband up to $3200 per year. job They years. year says
husband's parents are well off. When her husband first started working, his
parents paid most of his expenses and he put almost his entire earnings into insurance, which is now very difficult for them to keep up. They have bought $150 worth
of bonds since February. They bought them outright, not by stamps or salary deductions. She does not feel that prices have risen too much, but from other things
she said, I gathered that she does not keep close track of grocery prices. She
simply pays an accumulated bill every 2 weeks. The only shortage she has felt
so far is that she can't buy rubber pants for her baby any more in Macy' B-Parkchester.
Page 11
154
Case 10: An extremely neat, not too well-off woman of about 55. Lives in Manhattan with
one daughter (30) who works for the N.Y. State Employment Service. On recent death
of husband has been trying to get a job. Now working as vacation relief at Spring
St. Dispensary. She says far more men come in for medical treatment to this Dispensary who are not on relief than in the past because food costs are so high that
they can't pay for medicine. Daughter has been one year with the N.Y. State Employ-
ment at $6 a day. No cost-of-living raise and no other raise.
Thinks price rises are "terrific". Says every bit of foodstuff has gone up in
price. Daughter is buying bonds now - but slowly. Next year's taxes she refuses to think about. Is already cutting clothing expenditure in favor of food.
Would be very hard up if income should be reduced in any way.
for
Case 11: Parkchester housewife, about 39. Her husband is an engineering salesman from
a heating concern. Have 2 children - 16 and 1 year old. Husband and his brother
are the complete support of his parents. Husband has held this same job for 20
years. Salary $2700 a year. At present her husband has 2 months' leave from his
job because it's a Black season, and he is working as a draftsman in an airplane
factory in Rome, N.Y., at $80 a week. Husband is going back to the salesman job
at the end of 2 months. When asked what she was planning to do with her extra
money, she replied, "We're not people to splurge. I have doctor's bills to pay,
and we'll save the rest." She thinks the price rises are terrific, and price
ceilings haven't helped a bit. They are buying bonds regularly by the stamp method.
Case 12: Postal clerk, 32, who has lived in Parkchester 2 years. His wife is a teacher
on maternity leave, and they are struggling to pay last year's taxes (his wife was
then earning also) out of his present $2100 fixed salary. He answered interview
questions as if he were on a soapbox. He is ardently pro-union. Thinks the government is influenced too much by capital and too little by labor groups. Besides his
wife and 3-months old son, he has no other dependents. Post-retirement pension
deduction used to be 3% is being increased to 5% on July 1st. Owns a car but
never used it very much and is completely unconcerned about gas rationing. Is
buying defense bonds but not by salary deductions. He believes that he is expressing the working man's viewpoint when he says that government taxation is hitting
for too hard on the little man: "Roosevelt was going to limit all incomes to
$25,000 per year, and now you never hear anything about it." He says that labor
is afraid of wage fixing. Price fixing came far too late and on too high a level
to do any good. By March, the wholesaler and manufacturer Dad already picked up
plenty of gravy, and as far as the consumer was concerned the March price level
was still far too high in comparison to wages.
Case 13: A Parkchester housewife, 28, whose husband is a clerk in Wall St, with a banking firm. Last September he had a 10% cost-of-living increase which brings his
salary up to $3200 per year. They have a 1 year old child and no other dependents.
Her husband has had the same job for 12 years. She says they are "insurance poor".
Her husband's parents are well off. When her husband first started working, his
parents paid most of his expenses and he put almost his entire earnings into insur-
is
now
to
have
bought
worth
since
them not by stamps or
She does have risen too much, but from other
I close track of grocery
ance, of bonds which February. very difficult They bought for them outright, keep up. They salary $150 de- things
ductions. she said, gathered not that feel she that does prices not keep prices. felt She
simply pays an accumulated bill every 2 weeks. The only shortage she has
so far is that she can't buy rubber pants for her baby any more in by's-Parkchester.
Page 12
155
Woolworth's, she said, quit carrying rubber pants last November. When asked about
a reduction in income, she said she doesn't know how they would get along if her
husband's salary were reduced. As it is, ahe plans to cut clothing and entertainment expenditure. She and her husband wanted to move to the country this Fall with
the idea of renting now, with a view to buying or building later, but now they are
afraid to take this step.
Case 14: Housewife, East Bronx, with 3 children at home, oldest 21 and self-supporting.
Husband is defense worker in a shipyard. Says that people are frequently laid off
at his place, and he is not at all sure of his job. There do not seem to be enough
ships to repair. He explains it by the fact that most ships these days are sunk
outright, and the ones that are not go to the nearest port, and don't try to come
all the way to N.Y. At any rate, last week 1500 men were laid off. They were all
told that they might be called back any day and so shouldn't be too discouraged.
There is another rumor going around now that more will be laid off, and he is afraid
he will be one of them.
He was formerly in business for himself, but failed last year. Salary about $90 a
week if works a full week. Paid by the hour and has been laid off occasionally for
a week or so in the past. Had a raise last month of 7$ an hour. Expects a raise
in about 2 months of about 16 an hour. Was a building contractor last year and
had no steady income. Has more money to spend but has a lot of debts to pay. Is
fixing up his home while he can, buying various home furnishings, curtains, rugs,
etc. Feels the price rise in food particularly. Is trying to put away a regular
amount of money eachweek. If income were cut, would find it necessary to tighten
up a bit on luxuries (entertainment, beauty parlor for wife, etc.), but is willing
to do all this if it becomes necessary in any way. Has not felt shortages at all.
Case 15: Housewife, has no children or dependents. Lives in East Bronx. Husband is stock
manager and now makes about $2000 a year. Received a raise of $4 a week about 6
months ago. Doesn't expect another raise for quite a while. Plans to stay on
present job. Doesn't particularly feel the rise in prices except in food. Has not
found it necessary to out down on anything, although she feels she has less to spend
this year than last year. Husband has payroll deduction for war bonds and thinks
it is a fine idea, Doesn't feel that she is able to spare or put away a specific
amount each week. If she had to retrench, however, she would have to cut down all
across the board, especially entertainment and clothes. The only shortage she has
felt so far is tea.
Case 16: Housewife, 23, lives in Parkchester. Is expecting a child shortly. No other
children. Her husband is a defense worker who now makes about $4000 a year. Three
months ago he received a raise of 7$ an hour. Last year he made $30 a week at a
different job. He expects another raise next month. She feels she has more money
Her husband
than last year, and is spending it primarily on furnishing the home. Because
of
this she is unable to spend more on other items or to save,
works out of the state and therefore has living expenses. He also has unemployment
insurance, social security, and 10% for war bonds deducted from his salary. She
has definitely felt the rise in prices because drapes, lamps, furniture, and other
home furnishings have all gone up. Lamps with metal bases are unobtainable any more
because of priorities. She wishes she had been able to furnish her home a few years
gotten have risen
ago when she could have anything she wanted and at the old prices. She is
saving regularly. She says she has felt no shortages except that "prices
Page 13
156
so sharply that maybe it means there is a shortage behind the scenes.
Case 17: Housewife, interviewed at Parkchester. Husband is an actuary whose salary has
in no way been affected by the war. Make $7,500 a year, got a $500 raise (per
year) last year, but expects to remain at this present salary for a while. She
feels she has less to spend but has not had to cut down on anything. Definitely
feels the rise in prices. Is at the moment, and has for the past few years, been
saving. Now puts some of this into war bonds. She puts away a definite amount
each week now, and intends to increase the amount spent for defense bonds. Feels
no shortages whatever.
Case 18: Young woman, married two years, moved to Brooklyn from Washington 8 months ago.
Has no children. Supports her mother. Used to work as a secretary, but is not
working any longer. Her husband is an auditor in the Navy Dep't. Salary $2400.
He recently got a raise and doesn't expect another. While she worked, their
income was about the same as now. Living costs have risen due to higher rent, gas,
electricity, and telephone. In order to move, they used up a lot of their savings.
Her husband is pledged to convert a potion of his salary to bonds. They have cut
down on clothes expenditures. They had planned to spend on furniture for their new
apartment, but don't seem to have the money. Another extra expense is her husband's
return to school. Her attitude toward shortages is interesting: She had planned
to buy things, such as electrical appliances, but with talk of shortages in these
things, she has decided to do without them for the duration, even though they are
available tobuy. When asked what she would do if her income were reduced, she said
she wouldn't mind too would simply limit herself to necessities. She
expects taxes to take more of her income. Her biggest worry is that her husband
will be drafted. She doesn't mind what else happens so long as not that.
Case 19: Research worker in advertising agency, male, about 28. Wife worked as a sec-
retary until recently. She quit in order to have a baby, which will come in a few
months. His salary alone is now, the same as their combined salaries were when she
was working. He received a tremendous raise recently. Several people in important
positions were drafted out of the agency. He was asked if he would take over the
space-buying along with his research work. He accepted, and they doubled his salary.
He said this has happened quite a bit among professional people he knows. People who
haven't been drafted have benefitted financially from the drafting of others in their
offices. Actually, they are now getting about $10 per week more than they used to
when his wife was earning. They are trying to save something for the baby, but not
putting away as much as they would like to. There never seems to be as much left
over as they plan. They have moved into an apartment that costs exactly twice as
much as their old one. That uses up all of the extra money. They had planned to buy
furniture, since they had more money, but so far they haven't been able to afford it.
there is for furniture. is
Somehow
be never
anyknow
money
lefthis
over
Hewill
afraid
it won't
might
befor
drafted and
doesn't
what
wife
do then,
buthehe
thinks
quite a while yet, and is trying to save against such an emergency.
Case 20: Housewife, about 26 years old, married three years. Has no children. Has lived
in Parkchester two years. No dependents. Her husband works at the Brooklyn Navy
(
He went to a He earns $58 a week, works 10 hours a days
Arithmetic
Yard. aDaily
week.rate
is training
$8.48.seems
school. peculiar.
(? Interviewer did day, not 4
check at the time.) He is expecting a raise. He was formerly employed as a soda
clerk and earned $30 per week. Also received his breakfast and lanch. She also
too
worked then as a cashier. Their joint income was $50 a week. Her husband is planning to stay in his job. Expenditure pattern: She does not feel that they have
Page 14
157
much more money - in fact, practically none. As part of a voluntary deduction
plan, $3.75 of her husband's weekly salary goes toward bonds - about a bond a
month. They think it is a wonderful system and a good form of savings. They
also undertook private savings for income tax payments. They feel that they should
not spend too much because they want to insure the future. As yet, however, they
haven't done any real cutting down - their standard of living is about the same.
They carry a little insurance.
They have no car and are not spending money on their home. Nor do they have any
debts. Whatever increases in dollar income they may receive, she is not planning
any spending spree. So far they haven't bought much, and after savings, bonds,
and taxes, she feels they will have enough simply to meet the cost of living.
Shortages have not affected her. As for sugar, she doesn't use her full ration.
At the moment she feels there is plenty of everything.
Case 21: Housewife, about 24 years old, married 4 years, has 1 baby. Has lived in Parkchester for 2 years. Her husband is a lawyer with his own practice where he intends to stay. Last year he averaged about $53 to $55 a week. This year he gets
about $60. During the first 2 years of marriage she worked as a secretary. Their
joint income then was about the same as now. Money does not go as far today. Of
course, the baby is an additional expense. Nevertheless food prices are way up,
and she feels this is one of the major increases in the cost of living. Also included are clothes as an additional cost item. They are not spending their additional money if they can help it. Whatever is extra, if any is, goes into bonds.
They have had increased expenses due to medical care for the baby, and they both
carry insurance. She herself has made no plans for saving toward increased taxes.
She says her husband takes care of the finances. If cutting were necessary, she
said the first expense she would cut would be entertainment, and then clothes.
Shortages have produced a decline in the quality of dresses. Now she has to pay
more for the same quality or to meet her own standard of quality. She is sure she
has not been splurging. She feels that in her family, they just manage to meet
their needs.
Case 22: Housewife, married 2 years, have lived at Parkchester a year. They have a
baby. No other dependents. Her husband is a dress cutter. His work is seasonal.
He has been doing it for 10 years. He is paid by the hour. Their annual income
this past year was about $2,000. It increased recently and he has been promise
another raise. The minimum base pay is $45 for a 35 hour week. He makes about
$52 a week now. She feels they have more money actually, but less to spend on
account of the price increase. They were buying for their home, but stopped about
6 months ago. At present they only purchase necessities. They have also beeth
buying bonds. They own a car, but sometime ago decided to cut down the use of it,
even before the rationing of gas. That money saved has simply gone into necessities.
They have had no debts. They carry some insurance. They would prefer to buy more
bonds than pay higher taxes. She considers it more as a personal savings which
she can expect to get back, unlike taxes. If her income were curtailed, the
first
thing to and rent. As for shortages: she ordered
a
for her and it has not
explanation is that it is because of freight business,
bassinet go would baby be 3 months the car ago garage yet because been delivered. trains cannot Her
travel unless full. She believes this story and thinks it is reasonable. Also
rubberized things are difficult to get, such as rubber pants. So are things with
Page 15
158
metal parts such as sterilizers. When they can't get things like that, they buy
substitutes of porcelain and enamel.
ase
Parkchester housewife with year old baby. Husband is a teacher. She is 32 and
married 6 years. Has one other partial dependent. Husband's salary is $3000 a
year. Gets a regular yearly increase of $150. Was making $2850a year ago. Is planning to stay on present job. Wife taught part of last year before she had the baby.
23:
Her salary was under $1000. She feels she has much less money to spend than last
year. "Income tax was a sock." Curtailments have been spread over all classifications. However major curtailments were amusements (said the new baby forced
this anyway), clothing (not at business this year, so not the same need anyway),
some charities (for teachers there are many "must" charitable contributions), food
little). She feels food prices are up greatly. As for shortages: Husband
mentioned recently that there was some sort of photographic material he couldntt
get. She didn't know what it was or what he was doing about it. Also she couldn't
get rubber pants for the baby. She has two pair on hand, and is not concerned about
what she will do when they wear out. Her general philosophy is that things always take
care of themselves Anyway she said, everybody will be in the same boat, and who cares,
if it helps win the Bar. She also had trouble with other rubber items for the baby.
As for food, she has not been personally affected by shortages of canned salmon, etc.,
as she does not use them. But she knows people who are affected. She says "They
will simply have to learn to make other things, because there are other things more
important these days than salmon." She isn't worried any about food.
Her attitude is generally very level headed. She says she is Ono alarmist". "As
new shortages and situations arise, we will find other ways of doing things. Does
not think we ("middle section of population", as she calls herself) will feel any
actual shortages. Ign't worried about food, and for other things, "the middle
section can float along for some time on what they have now. We will simply learn
to preserve and conserve what we already have. We can get by on the clothes we
have already. We have enough for a few years. We'll figure out something now to
do with the curtains and drapes instead of hanging new ones, and so on. The middle
section has a lot to fall back on, will not be pinched."
"Except in higher food prices we have felt the war so little. I think that's why
we are 80 complacent." (She stressed this point. Thinks middle section won't feel
any real pinch unless the war lasts a long time. "10 years of war would be a
different story.") This attitude was particularly interesting in view of the
greater income to which this women was accustomed.
ase 24: Salesman, 35, male, married 5 years, has 1 child one year old. No other
dependents but expects to have one soon (mother) "when the army gets my brother".
Earns $2500 a year. Got a $2 a week raise 2 months ago. "God knows" when te'll
get another raise. Had the same job a year ago but made about $3 a week less.
Will probably stay in same job. Feels he has much less money to spend than last
year. Has cut down mainly on clothing, amusements, and food. "Prices are certainly
much too high. There should be price readjustments. The ceilings were too late.
The top prices had already been reached. Everyone had jumped on the band wagon and
raised prices just about as far as the consumer would take them. Particularly
benefiting were the manufacturers of raw materials. They caused the damage. Their
prices should have been limited and should be readjusted now. Its a disgrace the
the that
way prices have gone up on domestic goods that have no excuse for having risen
way. For example, tuna fish at 41$ a can - salmon from inland waters. Yes,
army has taken some, as they have of cottons and woolens, but look at the huge
surpluses we had, particularly of cotton. Dairy products and local eggs have gone
Page 16
159
up. No excuse for such increases. Manufacturers and woolen mills have benefited."
(Gave the impression that he had close connections with these manufacturers. Seemed
to feel that he was talking directly to Washington and was very fervent.)
Wife had come along in the meantime, and when I explained that the government was
interested in finding out how people are spending their money, she snotted "What
money!" She mentioned magazine price increases and said she would simply have to
buy fewer magazines and also fewer books. The husband made quite a speech at the
end with which the wife agreed: "The administration has done a remarkable job with
incredibly complex problems. Maybe they haven't kept the price of salmon down, been
when you think of the millions of items in the U.S., what a job they're doing! We're
living in historical days ." He seemed very sincere in this speech. Husband
had explained to wife that I was doing interviewing so the government could help
them.
For a while they were suspicious of me and of my of ficial status because I had no
printed forms, but as we talked they got over this. As I left, the father said to
the baby, "Stop chewing the carriage, Junior, you're not going to get another one."
V, MILES
Security
CONFIDENTIAL
National Economic Policy
Information Reports
OFFICE OF FACTS AND FIGURES
No. 2, June 3, 1942
Public Opinion on the Economic Front
(A summary compiled by Office of Facts and Figure's Bureau of Intelligence)
160
161
Year ago, when drought and aluminum were bringing on a power
shortage in the south, authorities in the Tennessee Valley tried to encourage
voluntary reduction in the non-essential use of electric power. In this,
they were pretty successful, but there were snags. Individual merchants
hesitated to darken their windows until they could be sure that competitors
would do so as well. Entire communities hesitated to darken Main Street
unless they could be sure that the neighboring towns wouldn't attract shoppers
by keeping their lights on. Rain, fortunately, saved the situation.
In the Fall, when the problem became again acuto, power saving was
made mandetory rather than voluntary. This time, when each could be sure
that the other would have to stay in line, individuals and communities vied
with each other for 100% compliance and were proud of the result. The under-
lying attitude appeared to be not "Let George do it," but rather "I'll gladly
do it if George does too."
This attitude is worth stressing because it pervades the American
scene today. Farmers will take price limits on their produce if they are
sure nobody is taking advantage of them. Labor will take wage limits if it
is sure that management isn't going to profit thereby. John Jones will take
an A card if John Smith does not get an undeserved B card.
Americans went into this war with the 1929 collapse far enough behind
them so that they could see it in relation to the last war. Some of them
could still remember price trends of 1918, remember 1921 as well as 1929, and
1933. Americans went into this war, therefore, with vague but deep misgivings
about the economic future. Seven out of ten expected to be financially worse
off after the war; six out of ten expected wages to be lower and money to be
worth less; three-quarters expected widespread unemployment at the war's end.
In this frame of reference, the people wanted the government to take
positive action.
162
-2Before the Seven Point Program
Even before our entry into the war, public opinion polls had shown
the majority favoring government control of prices and rationing of goods in
which shortages might develop. Shortly after Poarl Harbor, many people still
viewed the war, fiscally, as a boom sandwiched between two depressions. Two
out of five at that time thought wages should go generally higher. Eighteen
per cent thought rising prices were generally a good thing, even though nine-
tenths of all the people said they had felt the pinch of rising prices in
their own lives.
In February, seven out of ten were expecting prices to keep on increasing and four out of ten expected them to increase drastically.
By March and April, eight out of every ten people interviewed said that
they wanted the government to control prices and the same number wanted ration-
ing. Nearly three-quarters expressed confidence that the government would be
able to control prices if it tried to, but there was widespread ignorance of
the moves the government had already taken.
By the end of April, the number expecting drastic price rises had
fallen to less than one-third of the people. Those who were expecting prices
to stay about the same, or go up only slightly, indicated plainly that they
were counting on the government to hold prices down. At that time, just
before the seven point program was launched, 98% said they had felt the pinch
of prices since the war began. Items most affected: food (72%) clothing (12%).
In the interviewing conducted just before the President's seven point
message to Congress and speech to the nation it appeared very plain that while
people might not understand the economic program, they wanted and expected the
government to take the action it did. Nine out of ten, for example, said that
the government should fix prices during the war so they wouldn't go any higher.
163
-3A sizeable majority wanted prices fixed on everything, and those who would
discriminate said it was the government's business and not theirs as to what
articles should be fixed. The same pattern held with rents. There was a
general belief that rents had increased and it was the desire of eight out
of ten people to have the government keep them from going any higher.
More than eight out of ten wanted a limit on profits. 82% wanted
rationing and were willing to let the government decide what should be rationed and how much each person should get. And when asked why they favored ration-
ing, people gave the preponderant answer "so that everyone will get a fair
share".
Intensive interviews of the conversational type have also brought out
a genuine feeling that rationing is the f air way to distribute available goods the democratic way to make sure that those who have the money or get to the
store first are not allowed to get more than their share while others have to
do without. Even 78% of the retailers are in favor of rationing in these terms;
80% of the farmers; 84% of the f actory workers; 87% of the white collar people.
In more specific terms, people were asked, "Do you think that the rationing of automobile tires by the government is necessary or not necessary?" 76%
answered "necessary" almost exactly the same percentage that had answered
affirmatively three months before.
Not so with sugar, however. At the end of April while 59% thought that
the rationing of sugar by the government was necessary, 28% said it was not.
The reasons for a sugar shortage had apparently not been fully put across to
the public. About one-third of the retailers in the sample also said that
sugar rationing was not necessary and another sizeable retail group didn't
give any opinion.
164
-4The same people who overwhelmingly wanted to ration goods and fix
prices, profits and rents were less enthusiastic at the idea of wage fixing.
Two-thirds of the farmers and retailers thought that wages and salaries
should be fixed so that they couldn't go higher during the war. But only
half of the labor group and lower-bracket white collar workers felt this way.
Earlier interviewing of factory workers had shown the reason for this lack of
enthusiasm. Large numbers of workers (a majority in Detroit, for example)
distrusted their management. They felt that factory owners had been to
slow to convert to war work, were keeping too sharp an eye on their profits,
were using war pressure as a weapon to wipe out some of labor's social gains.
Although three out of four people expressed confidence that the govern-
ment would actually be able to control prices, newspaper editors, particularly
those in the east, had less confidence. Then the President's Message went to
Congress on Monday afternoon, the 27th, there was hardly a one who was not
sharply critical or, at the least, dubious, and they were cheered only slightly, if at all, when the vast price ceiling was banged into place for Tuesday's
late evening editions. Too undeldy, they called it. About wages, a ceiling
was needed, not a vague directive. About farm prices, the Bloc would never
accept parity. About bond-buying, only compulsion would work. About income
limits, it was a political gesture unrelated to economic fact. News stories
predicting the Program's defeat in Congress were predominant in the East's
most influential newspapers on the day of the speech.
Quick Reaction
The President went on the air over all four networks at 10 p.m.,
Eastern Mar Time, and addressed an audience estimated by the Cooperative
Analysis of Broadcasting to have included 69.5 per cent of all radio-telephone
165
-5families in cities of more than 100,000 population. (For the February 23 and
December 9 speeches, this figure was 83.)
Immediately thereafter the same private agency began telephone inter-
views in 33 large cities. "What," listeners were asked, "did you consider
the most important statement the President made in regard to the effect on
your family?" Twenty-one per cent, more than the total selecting any of the
other five Points,* answered "Price ceilings." At least two factors might be
involved in this answer, (1) the fixing of ceilings was the one action by
which the majority of the President's listeners stood to gain, (2) it was the
one action which actually had been taken, which had not still to run a gauntlet
into the uncertain future. (News editors that night, almost without exception,
put the "banner" on price-fixing above the "banner" on the speech.)
Fifteen per cent thought all points equally important. Another 15 per
cent, unclassified, offered these typical comments:
"We should try to do everything to win, no matter what the sacrifice."
"He didn't say anything about the unions."
"Salaries don't go up, but prices do."
"I'm glad to do it."
When Americans were asked, "In general, were you pleased or dissatisfied
with the way these problems were handled," only 3 per cent of them said they
were definitely dissatisfied. ("To me, it was not explained explicitly enough.")
Eighty per cent were pleased, the remainder uncertain. ("I don't know, I'll
have to wait and read it in the newspaper.") Of those who were pleased, comments
like, "He's the greatest man living," were frequent. "I'm all for him,' said
one man, adding, Why doesn't the Government do some economizing?" "Just the
* The point about installment buying and debt paying was not included.
166
-6- -
thing it will take to win," said another. (Comments of this latter type recurred sufficiently often to suggest that the Speech did a good job of tying
the fighting abroad to sacrifice at home.)
Having expressed greatest approval of price ceilings, those interviewed expressed least approval for Wage Stabilization and Farm Prices, but
here they were also most uncertain. Questioned on those points they disliked
most, price ceilings had least opposition, wage stabilization had most. More
persons had "no opinion" on price ceilings than on any other point.
Editorial Reaction
Against this background, the newspapers next morning and on succeeding
days published editorials which discussed the Message, the Speech and the Price
Order, interchangeably or simultaneously. (About 5 per cent discussed those
portions of the Speech which did not deal with the Message - all offered high
praise.) The editors did not materially modify the views they expressed on
Tuesday morning, although there was a significant change in the tone of the news
stories. The New York Times for instance, went from "Ways and Means Committee
Lukewarm on Salary Ceilings" and "Farm Groups Stick to 110% Parity Ceilings"
on Tuesday to "President's Plan Held Likely to Tin Congress Support" on Thursday.
The eastern metropolitan press, always more searchingly critical of
Administration fiscal policy, had only 12 of an even 100 editorials which fully
approved the Speech (and/or Message.) In the rest of the press, the percentage
of complete approval was 64. One modifying factor should be noted: only the
largest newspapers, such as those represented in the eastern metropolitan press,
can afford financial writers capable of authoritatively analyzing so vast a
program as the President proposed. Many writers were likely expressing either
confidence or lack of confidence in the Government when they approved or disapproved of the Program.
167
-7- Only 6 per cent of the press disapproved of the Speech in its
entirety, but one of these newspapers was the influential and liberal St.
Louis Post-Dispatch, which captioned its editorial, "A Disappointing
Speech" and urged the President to give his audience "more meat to chew
upon." Another was the authoritative Wall Street Journal, which discussed
only the Program.
The remainder of the press was divided evenly between complete
approval and partial approval, with disagreement on specific points.
Greatest volume of comment was on the price ceilings, but greatest disapproval was on wage stabilisation. Next in gross volume of disapproval,
although not in percentage, came the ceilings and then the recommendations
concerning profits and incomes. On this latter point, while editors were
perhaps surprisingly mild, the columnists were denunciatory. Fourteen out
of 17 who discussed it were in thorough disagreement - Westbrook Pegler
alluded to "Mother Russia" and David Lawrence saw it actually reducing
Treasury collections because high-salaried men will slash their taxable incomes to a point below the minimum.
On farm prices, comment W as low in volume and a third, all non-
Eastern, disliked the President's recommendation. The points on rationing,
bond-buying and credit were together at the bottom of the list, and except
for those who were dubious about the effectiveness of voluntary bond-buying,
everyone thought the President was right.
The business, financial and news magazines accepted the plan, but with
no evidences of enthusiasm. (Since their first articles, they have come to
urge a sales tax and to regard the $25,000 limitation as a Rooseveltian
pleasantry.) The liberal intellectual weeklies and the religious magazines
were enthusiastic; the leading labor weeklies offered no opinion, but reported
168
-the Program in great detail, indicating a degree of approval which it was
perhaps not expedient to make known immediately.
Only Newsweek, of 21 magazines which commented, had no good word to
print that first week.
Current Opinion
The press opposition to the $25,000 limit on incomes-after-taxes did
not find a ready response in the public. Three-quarters of a sample interviewed the second week in May agreed with the President rather than with the
press - and this was not a cross-section, it was a sample of community
leaders.
Farm interviewing conducted in May reveals that farmers, long used to
having a bottom limit on their prices, are somewhat/confused about the idea
of a oeiling. The general farm attitude, however, appears to be one of willingness to accept ceilings, provided, and only provided, that the farm cost
of living and cost of operating can also be kept down. Farmers are more
likely than other groups to feel that they have already benefited from war
economy, but they are somewhat afraid of a aqueeze. They approve price
control, though by a smaller majority than obtains elsewhere, perhaps because
they more than any other group have been burned before by successive inflation
and collapse.
Cross-section interviewing conducted about the middle of May shows
that the public is overwhelmingly behind the general program and is prepared
in some cases to go further.
- 89% approved the general price order. Only 3% thought it a bad idea,
with 8% giving qualified answers or saying they didn't know.
- 83% approved restrictions on installment buying, with only 8% saying
they actually objected.
- 73% would favor a law to limit business profits for the duration of the
-9-
169
var, with 13% opposed and 15% on the don't know or qualified answer
column.
- 56% would favor having the government take a percentage of each person's
wages or salary for defense bonds and stamps - not redeemable during the
war except in the case of family emergency. 26% are opposed and 13%
gave qualified answers, saying that it depends on the size of the family
and the size of the family income. 5% gave no opinion.
- 35% would favor a Federal sales tax on everything, including food and
another 26% would favor it on everything except food, 25% are opposed
to any general Federal sales tax, even if food is excepted. 7% gave
qualified answers and 7% don't know.
- Over 2/3 of the people would favor a withholding tax. of those who
already pay income taxes, or expect to pay them this year, 64% are in
favor, 29% opposed. Of those who have not paid taxes or do not now
expect to pay them, 73% would prefer to have such taxes, if paid, deducted from their pay throughout the current year, with only 14%
opposed and the balance not expressing opinions.
- On limitation of wages and salaries, the public prefers the middle
ground. Only 15% are in favor of setting no limit to wages and salaries;
48% are in favor of setting ceilings for different kinds of jobs; 20%
are in favor of freezing mages and salaries as they are right now. 7%
gave qualified answers, saying that it depends on cost of living or on
the job. 10% expressed no opinion.
Interrelation
Intensive interviewing during the first three weeks of May showed that
while practically everybody is aware of rising prices nearly half the people
feel financially better off than they did a year ago. Only a few make the
mental connection between purchasing power and prices. When asked specifically
why they thought the price of meat had gone up, 4% attributed the rise to
more money in circulation or greater purchasing power on the part of more
people. Much more popular explanations were profiteering, shortages, increased
production costs.
Even when asked directly, "Mill extra spending have an effect on prices?"
only about half felt that it would have an effect and only 13% answered in
terms which ahowed a real understanding. (The law of supply and demand was
never popular). About the same number would attribute price rises to pure
170
-10cussedness, feeling that when there was more money in circulation dealers and
others would mark up their goods for greater profits.
Bonds
People also fail to see, or at least to express, the c onnection between
bond buying and inflation. Two-thirds of those interviewed gave reasons for
buying bonds in general patriotic terms. Some of the also looked on bonds as
a safe personal investment as a hedge against the expected post-war depression
But as might have been expected only 3% said that a prime reason for buying
bonds was to keep money out of circulation or to curtail current purchasing
power. Polled majorities have indicated a willingness to have a percentage of
their pay deducted at the source for purchase of war bonds and stamps. But
a majority are opposed to governmental coercion, hoping that it will not be
necessary. When reasons for opposition were given, the most popular was that a
compulsory plan would not permit the individual to adjust his buying to personal financial emergencies.
Sugar, Tires, Gas
Although only 12% of the people are convinced that the sugar shortage is
serious and a large number of others think that the shortage is a mild one,
people expressed very little dissatisfaction with sugar rationing. Most people
felt that the 1/2 pound a week allowance was adequate. Some farmers felt,
however, that the allowance for canning and preserving was much too small.
General acceptance of sugar rationing, coupled with a belief on the part of
many people that it really isn't necessary, is a paradoxical pattern which can
not be expected in terms of all other commodities. There is reason to believe
that the high approval of tire rationing is partly conditioned by the feeling
that the tire shortage while real enough now will be alleviated before the
present tires wear out. About one-third of the people interviewed have this
171
- 11 -
expectation, and another one-half of the car owners feel that when their
tires do go they can shift to other means of getting about without entirely
changing their mode of existence. Farmers, however, are already harder hit
by the tire situation and are much more pessimistic about the future.
The gasoline rationing situation in the east presents a more immediately
disturbing picture. Sizeable numbers of people do not feel that there is a
real gasoline shortage and do not yet see the connection between rationing
gasoline and conserving tires. There is widespread evidence of grumbling.
Some of the independent dealers feel that the big companies are favoring
their chain stations with plenty of gasoline and many observers are reporting
that while some stations are out of gasoline or allowing only three gallons to
a customer, others are giving it out freely without even punching ration cards.
It is significant, however, that while 20% specifically complain about
favoritism, chiseling, laxity in gas rationing, less than 1% complain about
gas rationing being administered too strictly in their communities. Thus, the
people show once again that they can take it - if other people take it too.
Putting one detail on top of another, the public attitude on the whole
economic front can be summed up as:
A. A general personal willingness to sacrifice and undergo restrictions.
B. An insistence that everybody be in the same boat - there must be
equality of sacrifice.
C. A widespread lack of understanding of the interrelationships between the various aspects of the economic program.
172
June 3, 1942
Dear Frank:
I am sending you enclosed
herewith a marked copy of my
statement before the Joint Committee on Internal Revenue Taxation.
I think you will be
particularly interested in my
remarks about advertising on
Page 6.
Sincerely yours,
(Signed) Henry
Honorable Frank Knox,
Secretary of the Navy.
n.m.c.
(Mayzer 1942
By Messenger Stangie 4:20 pro.
173
OFFICE FOR EMERGENCY MANAGEMENT
OFFICE OF DEFENSE HEALTH AND WELFARE SERVICES
WASHINGTON D.C.
Director
FEDERAL SECURITY ADMINISTRATOR
suns.g. Forbush
JUN 3 1942
Dear Mr. Secretary:
I have your letter of May 29. We shall be glad to
have you refer to us the letters on liquor control around
Army camps, although there is very little that we can do about
it except to provide a form letter calling attention to the
existing powers of State Liquor Commission, as well as to the
misrepresentation of the facts which is being widely spread
by certain groups.
You will be interested to know, for instance, that
Clarence Hall, the editor of the Christian Advocate, Chicago,
Illinois, who visited all the camp areas a year ago in March
and wrote what seemed to me rather lurid accounts of the situation at that time, has just written us again to say that
the situation has changed profoundly for the better and congratulating all those concerned upon the accomplishment. We
have, for instance, secured the closing of more than 220 red
light districts near camps; and, along with that, much improved
law enforcement in connection with taverns, juke joints, etc.
There is much to be done, but the record of the Federal
Government and local cooperation in this field is one of which
we can be proud.
Sincerely yours,
Charles p Tal
Charles P. Taft,
Assistant Director,
Defense Health & Welfare Services
The Honorable
The Secretary of the Treasury,
PORTICTORY
BUY
IIII
Washington, D.C.
uger
7BB
71.7
174
June 3, 1942.
MEMORANDUM
TO:
Secretary Morgenthau
FROM: Mr. Gaston
RE: Seizure of Currency from
DROTTNINGHOLM Passengers
The ticker item of 1:15 p.m. is based on
the press release attached, which was prepared in
the General Counsel's office. Customs personnel,
on the arrival of the DROTTNINGHOLM, acted as agents
of the Foreign Funds Control in taking from all
American passengers on the ship, including diplomats
and newspapermen, currency in excess of $250 each.
The authority was General Ruling No. 5 of the Foreign
Funds Control, which relates to securities, and an
opinion that currency is included in the term "securities". The primary reason for the application of
the ruling in this instance was the suspicion that
there would be considerable amounts of American
currency come in which had been purchased on the
black market in Europe. The results seem to justify
that suspicion. A total amount in excess of $100,000
was taken from the American passengers, some of it
from our own diplomatic employees, which was done
after prior consultation with the State Department.
The largest amount taken from any one passenger was
$14,800, but there were several rolls running from
$9,000 down to $5,000. A great deal of the seized
currency was in the form of the old large-size notes
and some of it in gold certificates, including a high
proportion of $100 bills and some $1,000 bills, the
type of currency which is customarily hoarded.
The excess over $250 for each passenger was
deposited in the Federal Reserve Bank where the
passengers may make application for it but will be
required to state fully the circumstances under
175
-which it was acquired. It may be that considerable
parts of this currency will be held indefinitely
if satisfactory explanations are not made.
In the case of the Latin Americans who were
passengers on the ship, they were merely asked to
state on their baggage declarations the amount of
currency they brought in. The excess was not taken
from them and they were informed that they would
be free to take the entire amounts to their home
countries. The matter of full declaration and the
disposition of the currency is, in fact, left to
their individual sense of honor. This method of
dealing with the Latin Americans was also on the
advice of the State Department, I am told.
176
TREASURY DEPARTMENT
Washington
Press Service
FOR IMMEDIATE RELEASE
No. 31-90
Wednesday, June 3, 1942.
The Treasury announced today that heavy amounts of currency
were taken up by Customs officials on the arrival here Monday of
the S. S. DROTTINGHOLM. The DROTTINGHOLM carried many American
and Latin American diplomats and other citizens returning from
Axis areas.
One incoming passenger had declared that he had only $249
in his possession but, upon being searched, was found to have
concealed over $9,000 in a BOOK. The currency discovered was
taken into special oustody.
Treasury officials said that as a whole they considered
the results of the search for currency most gratifying. No
announcement was made as to the disposition of any of the currency which was taken other than the statement made by Customs
officials that it would be turned over to the Federal Reserve
Bank of New York for further action by the Treasury Department.
-000-
Treasury-currency seized
CUSTOM OFFICIALS SEIZED "NEAVY AMOUNTS OF CURRENCY FROM PASSENGERS
WHO ARRIVED ON THE BROTTNINGHOLM LAST MONDAY, THE TREASURY
ANNOUNCED.
M
THE AMOUNT OF CURRENCY IN THE POSSESSION OF EACH PERSON, INCLUDING
DIPLOMATS, WAS LIMITED TO $250. CUSTOMS OFFICERS REPORTED THAT ONE
PASSENGER, WHO HAD DECLARED ONLY $249, WAS FOUND TO HAVE HIDDEN MORE
THAN $9,000 IN A SOCK.
THE CONFISCATED CURRENCY WAS TURNED OVER TO THE FEDERAL RESERVE BANK
OF NEW YORK AND THE TREASURY WILL DECIDE WHETHER TO RETURN IT TO THE
INDIVIDUALS OR TO FREEZE IT AS HAS BEEN DONE TO OTHER FUNDS COMING INTO
THIS COUNTRY FROM AXIS-OCCUPIED TERRITORIES.
TREASURY OFFICIALS SAID THAT THE SEARCH WAS MAINLY TO UNCOVER
HIDDEN AMERICAN CURRENCY, BUT THAT CURRENCY OF OTHER NATIONS ALSO WAS
SUBJECT TO CONFISCATION.
6/3--R115P
An
178
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
2vd
DATE
NO
JUN
6
TO
FROM
Siv 1942
Secretary Morgenthau
Messrs. Foley and Pehle
Re: Jean Monnet and George Murnane
In response to your recent request, the following is a
summary of the more significant facts now available to us
concerning Jean Monnet and George Murnane.
JEAN MONNET
Jean Monnet was born in France and came to the United
States in 1931. Prior to that time he had been deputy head of
the League of Nations where he was in close association with
the Earl of Perth, who for many years was head of the League
of Nations and more recently British Ambassador to Italy.
Viscount Strathallan, son of the Earl of Perth, later became
affiliated wi th the London office of Monnet, Murnane & Co.
and played a significant role in obtaining payment in dollars
for certain properties held in Germany.
In 1935 Monnet became associated with Murnane in the
partnership of Monnet and Murnane, and, from November 1939
to the time of the French armistice in June 1940, he acted as
chairman of the coordinating committee of the British and
French governments. Since August 1940 he has been in the
service of the British Government here in Washington as a
member of the British Supply Council in North America.
Monnet may be connected by marriage with one of the Gianninis
in view of the fact that he has a step-daughter, Anna Boucline
Giannini and that in 1929 he was the Paris representative of
the Bancamerica Blair Corporation.
Jean Monnet's principal source of income seems to be derived
from the New York partnership and the Hongkong corporation in
the name of Monnet and Murnane, although he appears to have been
inactive in the New York partnership since early in 1940. In
1937 he borrowed $37,500 from John Foster Dulles, senior partner
of Sullivan & Cromwell. This loan was repaid in 1940.
179
- -2 -
During the decade 1930-1940, Monnet spent a substantial
portion of his time in Europe and some time in the Far East.
In fact, his income tax return for the year 1939 discloses that
he filed as a non-resident alien although he had previously filed
as a resident alien for some years. Monnet has had accounts in
Paris with Worms et Cie., and accounts in London with Lloyds
and Lazard Freres and Company, Ltd. He is a director of Kreutoll
Realization Co., Wilmington, Delaware; J. G. Monnet & Co.,
Wilmington, Delaware; and Societe des Proprietaires Vincote de
Cognac, France. Monnet's TFR-300 report on himself shows assets
in the United States in 1941 of $109,000, of which $99,000 is
represented by his interest in the Monnet-Murnane partnership.
We have no information as to his assets abroad. His gross
income for 1940 was $54,000.
GEORGE MURNANE
Murnane was born in Brooklyn, New York, in 1887. From 1919
to 1928 he was deputy commissioner for the French-American Red
Cross, and, during the same period, vice president of the New
York Trust Company. From 1928 to 1935 he was a partner in
Lee Higginson Company. Since that date he has served principally
as a member of the partnership of Monnet, Murnane & Co. and the
Hongkong corporation of the same name.
Since the outbreak of the war in 1939, Murnane seems to
have been the active member of the partnership. His important
contacts in Europe have included Ivar Krueger, Dr. Mannheimer
(Mendelssohn & Co.), the Wallenberg family of Sweden, Ernest
Frohnknecht (former president of Continentale Handelsbank), and
the Petscheks of Czechoslovakia. An example of Murnane's close
relationship with some of these persons is the fact that in 1938
Mannheimer carried a securities account for Murnane in excess of
$185,000 under an arrangement whereby Murnane received the
profits and Mannheimer bore the losses. This account was closed
out in 1939 when Mendelssohn failed.
The international flavor of Murnane's personal contacts is
reflected in his business connections. For instance, he is the
voting trustee for the foreign-owned shares of the American
Bosch Corporation. Together with Eli Whitney Debevoise, a New
York lawyer, and John C. Traphagen, a New York banker, he acts
as voting trustee for 300,000 shares of common stock of the
Solvay-American Corporation (all of the common stock outstanding),
180
-3which is held for the benefit of Solvay et Cie. of Brussels.
Solvay-American Corporation is an investment trust with a
portfolio aggregating over $90,000,000. The principal asset of
this portfolio consists of 500,000 shares of Allied Chemical and
Dye stock having a value of over $76,000,000. Murnane is also
one of the voting trustees holding all of the stock of the York
Commercial Corporation, which has assets of about $2,000,000 in
the United States. The York Commercial Corporation is associated
with the Continentale Handelsbank, which is allied with the German
Potash Syndicate. This stock is apparently held for the benefit
of Ernest Frohnknecht, previously referred to above, a Dutch
Jewish refugee banker, who states in a TFR-300 report that he is
holding funds in the United States which he believes to be
beneficially owned by Germans. As also indicated in a previous
memorandum, Murnane claims to have recommended to the Wallenbergs
that Batt be made the president of S.K.F. and also recommended
Batt as a director of American Bosch.
These "voting trusts" are devices adopted by prominent
financial interests in Europe in order to insulate their business
operations against the effects of war. By transferring the "legal"
control of their enterprises into American names, they have hoped
to avoid being designated as "enemy" or "enemy controlled," thus
escaping the restrictions against trading with the enemy and the
possible seizure of their property. It is signifiant that Murnane
has been very active in these operations.
A recent application filed with the Foreign Funds Control by
the Finnish-American Trading Corporation, which is a Finnish
Government organization, indicates that George Murnane is the
president and director of the corporation and that he is continuing as president and as director "at the request of the
Export-Import Bank of Washington, in view of the large interest of
the United States Government as a creditor of Finnish-American
Trading Corporation." In this connection, it is reported that
Mr. Murnane is a friend of Jesse Jones.
MONNET, MURNANE AND COMPANY, NEW YORK
This partnership was formed in 1935 under an agreement which,
up to December 31, 1940, provided that Monnet and Murnane divide
the income equally between them. The partnership agreement was
drawn up by Sullivan & Cromwell. The activities of the firm
appear to consist primarily of giving financial and business
181
-4-
advice to various clients, particularly with respect to relationships of their clients to the United States and foreign governments.
During 1940 the partnership's net income was $78,000, which
was derived from 17 clients. Included in this income was $15,000
from the American Bosch Corporation. The rest of the income
represented directors' fees paid to Murnane and income from
service contracts with the partnership. The partnership's net
income in 1941 was $110,000 derived from 22 clients. Participation in the partnership profits was changed so that beginning in
1941 Murnane received 75 percent and Monnet 25 percent.
When Mendelssohn failed in the summer of 1939, German Bosch
was fearful lest the stock of American Bosch be sold by the New
York Trust Company to competing interests. George Murnane and
his partner, Jean Monnet, participated in negotiations to prevent
the sale of the American Bosch stock to interests who would not
be friendly to German Bosch.
MONNET AND MURNANE, LTD., HONGKONG
At the same time that the New York partnership was set up,
Monnet and Murnane organized a Canadian company by the same
name. Actually the capital in such Canadian firm was furnished
by John Foster Dulles and W. N. Cromwell of the firm of Sullivan
& Cromwell, who acquired the 1,000 shares of preferred stock for
$100,000 against the 2,000 common shares owned by Monnet, Murnane
with a value of $10,000. In August 1937, this company was
liquidated and the interest of Dulles and Cromwell was extinguished.
At the same time a new company, Monnet and Murnane, Ltd., Hongkong,
was organized, all of the stock of which is divided equally between
Monnet and Murnane. This corporation was apparently set up to
receive the fees paid in connection with transactions effected
outside of the United States. For example, the $200,000 fee
received by Monnet and Murnane in connection with the Petschek
coal sale described below was paid to the Hongkong corporation.
Viscount Strathallan, previously referred to in connection with of
Monnet, although working out of London, was on the payroll
Monnet and Murnane, Ltd., Hongkong.
182
-5It is interesting to note that while Monnet actually with-
draws very little money from New York, he has "borrowed" substantial sums from the Hongkong company. In fact, the Hongkong
corporation seems at present to be the real source of his funds.
The Hongkong corporation has assets in the United States totaling
about $70,000. We have no information concerning other assets
of the corporation.
OPERATIONS OF MONNET AND MURNANE
A previous memorandum has discussed the operations of Monnet
and Murnane in connection with the American Bosch deal.
Another interesting transaction engineered by Monnet and
Murnane was the liquidation of the Petschek coal holdings in
Germany. The Petschek family (Jewish) was one of the leading
industrial families of Czechoslovakia, holding important coal,
chemical, paper, and textile properties throughout central Europe.
In 1937 the Petscheks became convinced of the necessity of
liquidating certain valuable coal properties held by them in
Germany. Viscount Strathallan, who was on the payroll of Monnet
and Murnane, Ltd. of Hongkong, negotiated with important political
and industrial interests in Germany. Strathallan, with the
consent of Petschek, retained a Mr. Weisman who was a former
assistant to Hjalmer Schacht, president of the Reichsbank, and
the son of a former Prussian secretary of state. Through Weisman
contact was made with a Mr. Flick, head of the Mittel Deutsche
Steel Works. (A recent British intercept indicates that there
is now a Weisman connected with Monnet, Murnane and Company who,
in the autumn of 1940, was apparently interested in certain
similar transactions.) As a result of these negotiations, the
Petschek family received a purchase price of six and a quarter
million dollars paid to them in the United States in 1938,
despite the drastic regulations then in effect in Germany. For
these services, Monnet and Murnane, Ltd., Hongkong, received a
fee of $200,000.
It will be recalled that Viscount Strathallan, who participated actively in these negotiations, is the son of the Earl
of Perth, who was head of the League of Nations at the time that
183
-6Monnet was deputy head. The Earl of Perth was subsequently
British Ambassador to Italy.
*
#
*
Certain phases of this investigation are still under way.
Two leading members of the Petschek family are scheduled to
appear at the Treasury Department on Wednesday, June 3,
accompanied by counsel (Sullivan and Cromwell) to discuss pending
applications. At such time we intend to inquire into their
activities, particularly into the sale of the coal properties
in Germany. We are also going to question Murnane in detail
about his activities and the services he renders to the various
clients from whom the partnership derives substantial fees.
Jus.
T.N.7L.
184
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 3, 1942
Secretary Mergenthau
TO
FROM
Haag
It Situation.
Subject: Mr.
Export
Freight
Lighterage freight in storage and on hand for unloading
at New York increased last week by 146 cars to 20,992 cars.
(See Chart 1.) The amount of rail storage space occupied at
New York on June 1 was 14,555 carloads, and there was addi-
tional storage space available for 5,328 carloads.
Exports from New York decreased last week by 758 cars to
5,633 oars -- a drop of 12 percent. (See Chart 2, upper
section.)
Receipts for export at New York also decreased. They
fell from 6,626 cars to 5,764 cars -- a decrease of 13 percent.
Receipts for export at 9 North Atlantic ports also dropped
by 13 percent to 3,237 cars. However, receipts for export
at 6 Pacific ports increased by 476 cars to 3,365 cars -gain of 16 percent over the previous week. (See Chart 2,
a
lower section.)
LIGHTERAGE FREIGHT IN STORAGE
AND ON HAND FOR UNLOADING IN NEW YORK HARBOR'
1942
1941
CARLOADS
Thousands
CARLOADS
Thousands
24
24
22
22
20
20
18
18
16
16
14
14
12
12
10
10
++++++++
8
JAN
MAR
MAY
SEPT
JULY
NOV
JAN
MAR
MAY
1941
JULY
SEPT
NOV
1942
.
8
Largely export freight but about 10% represents freight for local
and coastal shipment Figures exclude grain
I of - - I
Office of the Secretary of the Treasury
C-303-D
EXPORT FREIGHT MOVEMENT
1942
1941
CARLOADS
Thousands
CARLOADS
Thousands
Exports
10
10
9
9
8
8
From New York
7
7
6
6
5
mmm
4
3
HILL
#
2
MAR
JAN
MAY
SEPT.
JULY
NOV.
LUIH
JAN.
U III
MAR
111
MAY
JULY
SEPT.
19 42
1941
-
5
4
3
2
NOV.
CARLOADS
CARLOADS
Thousands
Thousands
Receipts for Export
10
10
9
9
8
8
At New York®
7
7
6
6
mm
4
At 9 other North
Atlantic Ports ..
X
3
3
5
4
5
2
2
I
I
At 6 Pacific Ports
.
0
o
THE
JAN.
ILL
MAR
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
1941
MAY
JULY
SEPT
NOV.
1942
As estimated from date of general managers' association of New York.
Association of American
I -/ - -
c 302-B
Office of the Secretary of the Treasury
-
Chant
187
HRL
Chungking
This telegram must be
paraphrased before being
Dated June 3, 1942
other than a Governmental
Rec'd 12:25 p.m.
communicated to anyone
agency. (BR)
Secretary of State,
Washington.
655, June 3, 3 p.m.
FOR SECRETARY OF THE TREASURY FROM FOX: TF 43
One. In hour conference with Generalissimo on
June 2 he EXPRESSED appreciation for American financial
assistance to China as had Dr. Kung previously.
Two. Learn from Hs1 TEMOU his trip to the
United States indefinitely postponed.
GAUSS
EDA
188
C
0
P
REQUIRED
Y
13686
"(Prepared in compliance with State Department
instructions of July 5. 1941, File 102.81/5004.-)
STRICTLY CONFIDENTIAL BACKGROUND REPORT
MEXICO
CONFIDENTIAL - VIA COURIER
STRICTLY CONFIDENTIAL
From:
Lew B. Clark Senior Economic Analyst
Economic Unit, American Embassy, Mexico
Date of Completion: June 3. 1942
Date of Mailing: JUN 5 1942
Approved:
Thomas H. Lockett,
Commercial Attache
Copy:lc:6/19/42
189
EXCERPT FROM BACKGROUND REPORT - MEXICO
United States Paper Currency in Mexico
In connection with the ruling of the Treasury Department
of the United States Government whereby "United States and
foreign currency imported or otherwise brought into the United
States on and after May 19. 1942, shall be deemed to be
'securities or evidences thereof' for the purposes of this general ruling," the Banco the Mexico, S. A. has obtained the
following figures in order to learn the value of American paper
currency held by Mexican banking institutions. The figures
represent practically complete returns as of May 30, 1942:
Holdings of Banco de Mexico
and its branches through
out Republic on May 30th
2,343,243 U. S. cy.
Holdings of other Mexican
banks
351,988 U. S. cy.
2,695,231 U. S. cy.
The manager of the Bank of Mexico does not think that
holdings of dollar currency by exchange dealers constitute an
important sum. He said, however, that Spanish Republican
interests were estimated to have about another $1,000,000 U. S.
currency in their possession in Mexico, which he thought his
bank could buy in providing this would be agreeable, or that
there would be no objection on the part of the United States
Treasury Department.
The Bank of Mexico, in order to show its good faith and
to cooperate with the United States Treasury in its effort to
control the movement of dollar currency from Mexico into the
United States, immediately upon receipt of notice of the
Treasury's order, inaugurated precautionary measures of its own
to restrict purchases or sales of United States dollars by all
its offices and branches throughout Mexico. The manager states
that the Banco de Mexico will only buy dollar durrency from
sources and in amounts which the bank can satisfy itself are
legitimate, such as tourists and bona-fide merchants and business
firms. On this basis the Bank of Mexico and its branches acquired during the period May 22 to May 30 (on balance) $60,585
U. S. currency.
The manager of the bank seemed somewhat dubious about the
effectiveness of such control however, evidently because he felt
that other banks might issue checks on banks in the United
190
-2-
States against purchases of dollar currency, which checks an
undesirable medium might then in turn cash or have cashed in
United States currency on the other side of the border.
Copy: 1c:6/19/42
191
COPY NO.
13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 186
Information received up to 7 A.M., 3rd June, 1942.
1. NAVAL
2nd. Photographic reconnaissance of GDYNIA showed battle cruiser
GNEISENAU with one turret removed and two turrets under repair.
2. MILITARY
LIBYA. 1st. Mopping up operations carried out against isolated detachments of enemy around KNIGHTSBRIDGE. An attack on Free French North of BIR HAKEIM
by mixed force of tanks and Italian Infantry WAS repulsed. A notorised column ongaged enemy M.T. in same area.
3. AIR OPERATIONS
WESTERN FRONT. 1st/2nd. Attack on ESSEN area was made by 726 aircraft
dropping 795 tons of incendiaries and 440 tons of H.E. Accurate identification of
target was difficult owing to ground haze and cloud but many intensive fires were
reported. Three enemy aircraft shot down.
2nd. Approximately 650 Spitfires carried out offensive operations over
Northern FRANCE. Bostons successfully attacked DIEPPE. Hurricane bombers hit two
ships of 5,000 tons off USHANT and 3 Mosquitos bombed ESSEN. A vessel of 3,000 tons
near STAVANGER was also hit. Enemy lost 3 fighters destroyed, 3 probably destroyed
and 8 danaged. Our losses were 8 Spitfires and 2 Hurricane bombers, 2 pilots safe.
2nd/3rd. Aircraft despatched ESSEN 195 (86 heavies), DIEPPE 6, sea
mining 10, leaflets 4. 14 bombers (6 heavies) missing. Approximately 38 enemy aircraft were active over South East ENGLAND with main concentration in CANTERBURY area
and two over Central LONDON. Results at CANTERBURY are not considered serious and
casualties are expected to be few. In LONDON no damage or casualties caused. Four
enemy aircraft destroyed, 1 probably destroyed and two damaged.
LIBYA. 1st. Operations seriously hempered by sand storms.
MALTA. 2nd. Spitfires destroyed 1 enemy aircraft, probably destroyed
mother and damaged four. One Spitfire missing, pilot safe.
MEDITERRANEAN. 1st/2nd. Albacores claimed two hits on a 7,000 ton
rossel South West of SICILY.
4. INTELLIGENCE
Absence of invasion activity imposed by the situation in other theatres
continues, except for long term projects such as extensions to BOULOGNE Harbour and
construction of invasion craft. These meanwhile are being used for other purposes
such as supplementing flak defences in channel ports and elsewhere.
Treasury Department
Office of the Secretary
Date
To:
192
19
her K when R 332
From: amk
193
UNITED STATES GOVERNMENT
COORDINATOR OF INFORMATION
WASHINGTON, D.C.
OR
SECRET
@
OF INFORMATION
June 3, 1942
The Honorable
The Secretary of the Treasury
Washington, D. C.
Dear Henry:
The attached is the Weekly British
Home Intelligence Report for the period
ending May 26.
Sincerely,
Price
William J. Donovan.
-
194
SECRET
COORDINATOR OF INF
There is continued general state of optimism and confidonce, due to the Russian successes, Churchill broadcast, and
Leeds "top-of-ridge" speech, feeling that "all is not well
inside Germany", and assurance of an ultimate continental invasion.
However there is impatience over Parliamentary war de-
bate, dissatisfaction at the slackening air offensive, failure
to sink the Prinz Eugene, anxiety over the coal situation and
increasing strikes.
Eight regions report the belief that the war will end
this year, that is Germany will be finished off, if not the
Japs. This belief is not in every case confined to the
minority and is parelleled by fear that complacency may roduce a slackening of the war effort.
The Parliamentary war debate is generally thought a
waste of time. The general public has "so thoroughly regained
any confidence they may have previously lost in Churchill"
that there seems more irritation with criticisms than anything
else.
There continues to be decline in public interest in the
Far East. There is almost no interest in Burma. There is
growing anxiety over supplies for China.
The public generally welcomed the United States' firm
stand on Martinique but there was some disappointment that
the negotiations "ended in nothing more than demilitarization
of warships" and the U.S. is still not understood though
Swing's broadcast of May 16 "explained the position very
clearly."
Cripps. Although his standing in Scotland is skyhigh,
London region finds (a) big business growing suspicious of
him and (b) workers wondering what game he is playing.
195
-2-
According to one report Cripps in the role of government
spokesman is losing some popularity.
In two regions the appeal for longer working hours.
brought the following response:
(a) Although office workers are prepared for longer
hours, they express a strong feeling for a parallel announce
ment on overtime. "If some of the staff is dismissed, called
up or not replaced and others work correspondingly longer,
managements should not benefit by money saving."
(b) Some employers and Trade Unionists in the
cotton industry are "strongly against measures where juveniles are concerned. Fatigue is believed damaging to production."
In widespread areas of one region growing antisemitism
is reported, for boasts by yound Jews of evading callup, for
rationing infringement and black market allegations.
196
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
FROM
June 3, 1942.
Secretary Morgenthau
Mr. Kamarck
Subject: Summary of Military Reports.
Raid on Essen
On the night of June 1/2, the R.A.F. sent 1,036 planes
out. 956 of these, including 310 heavy bombers, were directed to
Essen; the remaining 80 planes attacked German airdromes in the
Lowlands and France.
The same night, the Germans used 40 bombers to bomb targets
in England. (This is about the average magnitude of the German
"reprisal" raids.)
/U. K. Operations Report, June 2, 19427
Russo-German War
(The following cautious analysis by British Military Intelli-
gence is certainly one of the most optimistic reports on the
immediate prospects of the Russians that I have yet seen from an
authoritative source. British Military Intelligence has had an
excellent record of accurate analysis in the Russo-German War
to date.)
The Russian Kharkov attack threw off the German dispositions
for starting a major offensive in the South. A major German
offensive in the South in June is still, however, to be expected.
The Russian attack caught the Germans completely by surprise.
They were forced to employ armored units which they had been saving
for operations later. These units have now been reduced by
casualties.
The German Air Force has now about 2,300 planes on the Russian
front. (This is considerably under last summer's peak of around
3,500.) More than half of these are in the South. The German
Air Force on the Russian front at its present strength 18 considered inadequate to meet large-scale attacks on a number of
widely separated sectors.
In the Kerch Peninsula attack (an attack on a 15-mile front),
the Germans used nearly all the available dive bombers and fighters
they had in the East.
U.K. Operations Report, May 21-28, 19427
197
June 4, 1942
9:05 a.m.
Ementonics
CAPITAL ISSUES CONTROL
Present:
Secretary Jones Mr. HendersonMr. Nelson-
Mr. Eccles-
Mr. Bell
Mr. Buffington
Mr. Ruml -
Mr. CurrieMr. Kuhn
Mr. Stewart
Mr. Purcell+
Mr. Pike+
Mr. Haasv
Mr. McCormack
H.M.JR: We have been meeting informally with the
SEC on capital issues. As a matter of fact, we haven't
told the President, haven't bothered him. We have just
gotten together and put before us in an informal manner
the issues to come out before they come out.
In that discussion came up the question of inventory,
what, if anything, we could do. I had lunch the other day
with Mr. Nelson, and I mentioned to him the possibility
through the financial channels of sending out word in an
informal manner, if that was the thing to do, discouraging
banks and insurance companies and other financial agencies
from lending money to certain businesses who wish to accum--
late inventories. You two gentlemen didn't want them to
do it, and Mr. Ruml and I are working on something else, a
little different angle on this thing. He is helping me
on the question of spot purchasing.
So instead of considering whether we should let
Macy's get out an issue or not - that is settled, I hope,
successfully for you?
198
2-
MR. RUML: For us, yes.
H.M.JR: That is the purpose. Now, I don't know
who wants to lead off or whether somebody wants to
state the inventory problem or what we think we can do.
What do you think, Donald?
MR. NELSON: I can state our problem very simply
on this question of inventory in a few words. We have,
as you know, a rapidly-mounting war program, and along
with that there will be a decreasing amount of-(Mr. Stewart entered the conference.)
MR. NELSON: I started to state this, that, of course,
as our war program mounts rapidly, the amount of material
for goods begins to decrease for the civilian. Now,
unless we get a flow of these goods through without undue
accumulations anywhere, you are just going to have a major
disturbance in the economy, because a lot of people, a
few of the bigger concerns, will get the goods that are
available, and a lot of the smaller companies will not be
able to get them.
In the retail field we have been thinking about some
method of controlling that. We haven't found the answer.
We don't know what the answer is yet, but the problem is
controlling the inventories in the retail field, to pre-
vent the bigger concerns from taking all of the goods
that are available and leaving the smaller ones without
an adequate supply to carry on a business.
In the manufacturing field it is pretty much the
same general sort of thing. We feel today that from the
standpoint of the-(Mr. Eccles entered the conference.)
MR. NELSON: We feel that this control of inventories
in order to assure a proper flow of goods - I mean, we
look at it from the standpoint of getting a flow of goods
through the economy of what is available as being a very
important thing.
199
-3Now, we try to control it through orders of one
kind or another. This would be an additional help in
controlling it, to control it from a monetary point of
view, so that we feel that it is a very desirable thing
to do.
H.M.JR: I haven't had a chance to talk to other
members of this - for a better name, we call it a volunteer committee on capital issues, but could you, for
instance, indicate which particular kind of businesses
you would like the banks to tighten up on on their credit?
MR. NELSON: Well, particularly in the retail field.
I think there is no question but what the retail field
has to be tightened up - I think in practically every
field where the material that goes into it is important
from the standpoint of making other things. Now, I per-
sonally haven't been disturbed by the tobacco companies,
although that may be a problem I don't know anything about.
H.M.JR: It only was a problem because they happened
to borrow - American Tobacco - a lot of money with which
to pay off the banks; they have been accumulating back
inventories. In the discussion we raised the point: Does
Agriculture want so much tobacco grown? If they do, do
they want the people to borrow the money to stock up on
it? I mean, that would be something, I would think, that
Agriculture-MR. NELSON: From our point of view, I am trying to
indicate types of companies. We can get you a list very
easily of the types of companies, just give you an informal
list of the types of things that we are anxious to see
under control. Now the companies making items for war we have a method now of getting control on their inventory. We are sending out every quarter a form which they
fill out, showing their inventory, what they have received,
and what they expect to get. We want to get a tight control on their companies, even our own arsenals and
Government manufacturing plants, in order to assure a
steady flow, a stream, a movement of this inventory, and
not allow it to be stagnant if as it stagnates it can
200
-4only hurt the economy. I would say that was true in
almost anything except the agricultural companies. Now
that I know nothing about, companies making stuff that
agriculture grows. I don't know about their problem.
H.M.JR: Do you want to say something on it before
we get down to whether we can or cannot be helpful,
Leon'
MR. HENDERSON: My thinking runs along somewhat
Don's line. We are interested in the flow. I would like
to underline what I think has gotten to be so much of a
day-to-day thing with him that perhaps if it isn't mentioned, it might not - we are just as impressed with it,
that is, that production that you can get now is worth
three times as much as anything that we could get next
year. The civilian economy is fat right now, and this is
the time for our forbearances and forgoings, and we are
at points in certain things--
(Secretary Jones entered the conference.)
H.M.JR: We are talking about inventories.
MR. HENDERSON: We are at a point now in several
items where any brakes that we could put on the demand
for production are well worth while. That is, we are
decidedly limited in the totality of the military production by the limitation on certain metals.
You may have seen in the papers that Batt and Henderson,
A. I. Henderson, yesterday were talking about something we
have had to face in the last three months, and we faced
it very, very reluctantly and unwillingly, because we would
have liked to have seen many months ago expansion in copper
and zinc, lead, steel, all those things. That is, the
position that Mr. Nelson and I have taken on that is well
known, and we were just right up against the point where
we have seen for several months that we have got to just
simply get rid of our ideas of expansion on steel and on
copper. In other words, we have got to eat our seed corn
right now.
Now fortunately, as far as the retail inventories
are concerned, we are at a very good point. The fast-moving
201
-5prices in the early part of the year, the thing which
finally lead us to the over-all ceiling, I mean, were
really compelling the accumulation of inventory by
merchandisers who wanted to be on top of things.
Beginning the first of No-year, the line of
inventory in relationship to sales made a distinct
jump, and the inventory got ahead. Now, we face -
that is out of the picture as far as a stimulant
to inventory accumulation, but we have got another one,
which the larger stores and larger companies are aware
of much more acutely than the smaller ones. Now,
beginning with June 1 there is a termination of the
actual manufacture of any consumer goods, and independent
of any price consideration it will be a stimulus to
the well-informed groups to over-accumulate the items
that are tending to disappear. In my opinion, it would
be well to take any steps we could to prevent that bad
distribution of the remainings; from the standpoint of
maintaining the economy in any kind of a balance, we
would be better off not to have an excessive amount of
inventory accumulation in those items.
On the general matter of retail inventory control,
while we shared the general uneasiness about the little
trial balloon that was sent up recently, and Don had
to move in pretty strenuously to assure the entire trade
that we had no such intentions - there has been no
consideration at the eye level of strategy in WPB about
that.
I don't think there is any doubt but what we are
coming to some kind of a retail control. We favor that
very decidedly, and in that, of course, I think control
over finance and capital issues would be helpful. I
have no great feeling, however, Henry, that you can get
at it through the capital issues. I think that there
are other ways, particularly in Marriner's bailiwick, of
getting at it, which would be extremely helpful; and
as far as the type of things that need to be restrained,
I think what Marriner and our staff have been doing,
202
-6that is, his staff, ours, and WPB's, on the type of
things that ought to be particularly curtailed by the
installment method, would give us a key, if you needed
it, by items. I am not sure that you need to know by
items exactly what you ought to restrain.
I am more inclined towards Don's general approach,
that is, there will be some things in which it is a case
of who owns it - tobacco, somebody is going to own it.
Eventually the tobacco companies are going to have it
if they go out and get it. At the present time that
involves merely a shifting of dollars. I don't think
that that is such a serious thing. Certainly the kind
of a grabbing for inventory which induces production,
and particularly induces violation of priorities and
diversions and black markets is something we ought to
curtail.
H.M.JR: Well, I was thinking of that more than I
was thinking of installment buying. I mean, that is
controlled by the retailer, so to speak, at the spigot,
isn't it? I was thinking more about--
MR. HENDERSON: It is controlled by the regulation
W, not X, the regulation W, as amended, and it is one
of the most effective controls that we have been
employing. I mean, the amount of reduction in credit
and the prevention of any expansion on it that has taken
place by reason of regulation W is really amazing. It
is an instrument of control. I haven't talked to
Marriner lately, but certainly as far as effective-
ness, it has exceeded our guesses as to what it could
do. Isn't that your--
MR. ECCLES: Yes, we estimate that this year at
least one-third of the entire outstanding consumer credit,
that is, all types of consumer credit, loans as well as
open account and installment credit, will be paid, possibly
three and a half billion dollars of contracts in the
outstanding open installment and cash lending business.
Now, that is a real deflationary - will have a real
deflationary effect so far as that field is concerned.
203
-7It is one way of making people pay their debts, and
the effect it has, of course, upon the demand for
merchandise is that the terms are less favorable. They
are so unfavorable with reference to the requirement of
the down payment, with reference to the requirement of
the monthly payment, whether on the installment basis or
whether on the open account basis, that a great many
people are prevented from purchasing where otherwise
they would purchase, so where you get at it is from the
demand source, that is you reduce the demand for the
goods because of the unfavorable credit.
MR. HENDERSON: What it has prevented in the way of
expansion, that is, what would have been the normal expansion related to income, has been tremendous. We
have got an effective working tool there which can be
adjusted to the things which are not competitive to
the war industry. We haven't done as good a job there
as we can do when the smoke clears away out of these
curtailments. We ought to be able to relax on some
places to give us an expansion where it is non-competitive
with the war industries.
(Mr. Kuhn entered the conference.)
H.M.JR: Marriner, the thing I would like to hear
your expression on is this: Supposing installers want
to go and stock up on some goods that they can buy,
the chances are they TO to the banks to borrow the
money in order to buy this merchandise. The thing that
I had in mind and I was groping for was this, that through
your studies, contact on the inventory, and if either
Nelson or Henderson would let us know, say, which kind of
merchandise they didn't want people to stock up with,
couldn't we, through either the Federal Reserve System
or bank examiners send out word informally to the banks
and to the insurance companies that the Administration
would rather that no new loans be made for this particular
kind of merchandise so people can stock up. That is what
I had in mind. You see, it is the buying at the stores
rather than the consumers-
(Mr. Haas entered the conference.)
204
-8MR. HENDERSON: I am saying that the information
that we get, you are partly responsible - at least you
will be held accountable at the bar of justice for
regulation W, but that is one place where Marriner and
I really got you, you see. We do the work. (Laughter)
H.M.JR: The only place? (Laughter.)
MR. HENDERSON: That is one place. But in the
drafting of the schedules as to the percentage of limitations and installment credit curbs, we have supplied
Marriner with the information as we have gotten it from
the War Production Board of what the limitation orders
on manufacture would be, and I am saying the same kind
of information that we get there would be valuable on
any restraint here.
H.M.JR: But, Leon, I am thinking a little bit differently. I believe what you are talking about is
restriction of credit for the consumer. What I am talking about is can we do anything about the credit of the
store who buys the goods.
MR. HENDERSON: It is the same thing.
H.M.JR: It isn't the same thing.
MR. HENDERSON: Yes.
H.M.JR: I don't think it is. I think there are
two separate steps.
MR. NELSON: I think there are two separate steps.
MR. HENDERSON: Two separate steps, but they derive,
in terms of regulation, from the same basic idea; they
derive from the L orders, the limitation orders on
manufacture, and the limitation orders are based upon
what we have to conserve in the way of material.
MR. NELSON: That is right, Leon, but you get into
the whole textile field, the furniture field - there are
very few technical limitation orders, and you are going
to have soon a tremendously big buying program in these
textile lines for the Army and the Navy, between us. As
205
-9that begins to create a shortage, you are going to have
stores rushing in to buy, even though their present inven-
tories are very high. Leon is right, as applied to the
things that we put the limitation order, on, because those
are mostly the consumer durable goods or the luxury goods
made out of the metal lines.
Now, they have been curtailed, and as of the first
of June they are practically gone as far as original
manufacturing is concerned, or opportunity to stock up,
that will hurt the economy. Radios, bicycles, washing
machines, phonographs, all of those things, are practically
through as far as manufacturing is concerned - just cleaning up inventories. But you have got the great textile
field, you have got the wood field, and the furniture
field, which is going to get scarce, and is scarce now.
In these woods, as we get into more and more manufactur-
ing of wood planes - anything like spruce, we just haven't
a third enough at the present time to supply the British
and ourselves. Furniture is going to begin to get
tighter. We have had to close down on mahogany because
shipments and other things get tighter and tighter; as
they begin seeing those, the forward-looking ones start
rushing in to buy inventory. It is that sort of thing
that will precede the other. That is what Leon is--
MR. HENDERSON: I am saying that what we have been
doing as far as regulation W is that we are in the WPB
and when we see something coming over the horizon that
is going to be limited - even before it gets limited,
our staff has been working with Marriner's in the way of
drafting the additional restraint by way of the install-
ment credit curbs. Now, as we see them coming in the
soft goods field, the same mechanism would be available
if we are giving information as to what the restraints
on store credit should be.
MR. NELSON: That is the point. The W order won't
catch things that I am talking about.
MR. PIKE: It furnishes you with the credit to buy
those other things. In other words, this three and a
half billion comes back to the stores, switches it from
206
- 10 receivables to inventories. The only one who had to
borrow money didn't have any receivables and had to
increase his inventory. These fellows with long credit,
squeezed down, throw it from long-term receivables into
inventories.
MR. ECCLES: You can't get at it from a credit
mechanism. I think that we are approaching it from the
wrong angle. I think at least the extent to which you
can get at it is very, very limited. There are a great
many merchants that have cash of their own and don't
have to use credit, and the ones who are the larger ones,
the ones who are the best off, they either have the cash
or they will get the cash from this restriction of install-
ment credit, in a lot of instances reducing their open
account and giving cash instead of accounts, or they may
get private credit, get credit from friends, get credit
from members of the firm. There are different ways of
getting credit without going to the banks, or an individual
may borrow from a bank on securities; and you can't follow
the dollars somewhere else. It is impossible to earmark
and follow those dollars. You can't say that because
money is borrowed from a bank that that money is going to
purchase these goods which you want to restrict the purchase of; they will use cash to purchase those goods and
use the credit for something else.
H.M.JR: Can I interrupt you a minute? We were
successful, for instance, in stopping a department store
in Baltimore from borrowing a million or two million
dollars every time we got out an issue, to get a free
ride in Government bonds. Now, it took a little time, but
here we found a department store which every time we got
an issue, borrowed a couple of million dollars, bought
Government bonds, got a free ride, and then sold out.
MR. ECCLES: But you could stop the department store
by not accepting the subscription easier than you can
stop these with the credit.
H.M.JR: I am just saying you don't know who is
going to borrow the money to do what, but anyway--
207
- 11 MR. ECCLES: I was just going to say you may get
at a few instances, but the little fellow that needs
the credit, we will say, the one that doesn't have the
cash, is usually the fellow that will make the most noise
politically. They are not the big buyers, but they are
scattered the country, and they will claim that
because they are small they are discriminated against,
and this fellow that has got the cash, he can g in and
buy. I think what you have got to do - I think you have
got, to make this thing effective - you have got to get
at it through allocation, the question of controlling
the purchase by the institution in relationship to the
business that they have been doing.
In other words, you have got to ration the short
supply of goods to the merchant, rather than undertake
to get at it through the rationing of credit, because
where they don't use credit they have got money of their
own. The only way you can restrict the demand for these
limited supplies of goods is to ration the goods.
MR. NELSON: To answer Marriner, I am not worried
about the small fellow buying; I would like to see him
buy. It is to get - what I would like to see is the
inventory control on the larger ones, so that there will
be enough for the smaller ones.
H.M.JR: That is what you said at lunch.
MR. ECCLES: And you are going to let the smaller
ones have credit?
MR. NELSON: Yes.
MR. ECCLES: How are you going to see who gets
credit and who doesn't?
MR. NELSON: I don't think-I wouldn't like to
see a real fine control. Now, you talk about rationing
goods - that would take thousands and thousands of people,
hundreds of thousands of people.
MR. ECCLES: Same thing on credit.
208
- 12 MR. NELSON: Not if you can roughly control large
blocks of credit. All I am interested in seeing is the
large blocks controlled.
MR. ECCLES: If it is a question of where there is
capital issues by merchants and it is quite evident they
are out to buy, or where large bank loans - where you
get into the question of large bank loans for large merchants, you can get at that.
MR. NELSON: That is all 1 am talking about.
MR. ECCLES: I thought we were talking about a
national credit.
H.M.JR: No, no. All I was saying was that there
was a possibility - and God knows if these people don't
need it as a stopgap until they could see this thing
through - that all in twenty-four or forty-eight hours
word could go out from the Federal Reserve and the
Treasury to the banks and insurance companies on certain
items, furniture, and so forth, and so on, that we want
to discourage inventory. If it was seventy-five percent
helpful, it would just help you gentlemen to that extent.
MR. NELSON: That is all just very rough.
H.M.JR: Excuse me. If it was a flop, you would be
no worse off.
MR. NELSON: No worse off.
H.M.JR: If you people wanted us to do it, asked us
to do something we could do over the week end, we could
move that fast - you see what I mean, if it is something
that you and Henderson wanted. That is all, not settling
anything great, but just as a stopgap, Marriner.
MR. ECCLES: What I am afraid of is if you announce
that credit on furniture and certain articles must be
restricted, the first thing you know fellows with cash,
everybody that can get hold of anything, runs to get
furniture; the consumer runs to get furniture.
209
- 13 MR. PURCELL: He is going to do that anyway as you
take up your credit installment; he is going to have more
cash as the supply of goods gets less.
MR. ECCLES: Yes, but that is the effect, that it
will start to tighten, but it isn't done in a panicky
rush of buying which usually comes when there is a public
announcement of action with reference to specific articles.
It seems to me that we could well get out, possibly,
a letter to the banks that with reference to a policy we
would like to see them adopt in the extension of credit to
merchants and jobbers and to ask them to scrutinize closely
existing loans and also any applications for new loans;
and where the loans are being made to increase inventories,
to purchase inventories, or to maintain excessive inventories, that these loans should be either refused or an
effort should be made to collect them where they got
excessive, put him under pressure.
Now, the idea is that examiners will be asked that
whenever they come to the bank that they will give close
scrutiny to the loans made to see whether or not the banks
have cooperated with the Government in their credit policy.
Now, that would have, I think, a wholesome general effect
without trying to regiment the thing too tightly, which I
think would take hundreds of people and would get you
involved in detail regulations and a lot of trouble.
H.M.JR: That is all I had in mind.
MR. ECCLES: I think that sort of thing would possibly
get at it.
MR. NELSON: Plus one other thing.
H.M.JR: That is what we were talking about.
MR. NELSON: Plus one other thing you suggested - I
don't know enough about your mechanism - that the *Govern-
ment would discourage capital issues to bail out the banks
where they had made loans against inventories.
210
- 14 H.M.JR: We would have to make the movement Marriner
talks about first, and then after having made that move,
it then would be fair within a reasonable time to say,
"Well, you were put on notice, you were told not to do
this thing. Now we are very sorry, we are not going to
let you make this public issue to bail yourself out; you
have had a month or two months' notice. But to say that
tomorrow no retail store could offer public issues to
bail out a bank when they had no previous notice wouldn't
be fair.
MR. HENDERSON: I would like a little more than a
month or two. There are enough forced sales right now.
H.M.JR: Well, I mean, Leon, you have got whatever
time is necessary, but certainly the letter Marriner is
talking about will have to come first.
MR. HENDERSON: Yes, like these private loans, no
payment where you are doing that through the examination.
MR. ECCLES: Yes, that is what you would-MR. HENDERSON: This matter you were talking about,
I think that the real effective control will come when
we simplify our inventory-control mechanism, and I feel
encouraged after the last two or three days - Don, I
don't know whether you have been in on it recently.
MR. NELSON: Yes, I have.
MR. HENDERSON: And also on this thing of allocation,
Marriner, we probably will be coming back in sometime on
the manufacture of limited volumes of simplified and
standardized items, consumer items. Now, we will be able
to make sure that you get a distribution of them, that
is, so that they go to the outlets that they normally went
to; on the whole range of merchandise, that is just
impossible.
MR. ECCLES: I think that credit to the manufacturer
to hold items is all right. For instance, you are going
211
- 15 -
to have the canners, a big stock, all kinds of food
processors, and there are going to be large inventories
in the hands of manufacturers for which credit should be
furnished, and there should be no objection to supplying
whatever credit a manufacturer might want to hold consumer goods. It seems to me--
MR. PURCELL: Is that true in all fields?
MR. ECCLES: I can't think of one that isn't true
because the prices are controlled on those goods, and
what you want to get at is not letting certain retailers
gobble up all the supply of consumer goods in the hands
of the manufacturers. The difficulty is that the inven-
tories are not in the hands of the manufacturers because
certain retailers have tended to build up, or are tending
to build up, excessive inventories so that they are in the
hands of the retailers and not in the hands of the manufacturers. It would be much better if the inventories were
in the hands of the manufacturers, then they could be
distributed, so I would think in the question of credit
you would want to be very careful not to so restrict
your manufacturer that you may even curtail his production.
That is one point.
I would think if you are going to cover this credit
thing in a general way, you had better confine it to the
accumulation of inventories by the retailers and the
jobbers, and keep out of the manufacturing end of the
thing, or you are going to get it, possibly, very con-
fused.
MR. PURCELL: Might I ask a question of Mr. Nelson
on that point? In the textile and furniture fields that
you have used as an example, Mr. Nelson, would you want
bank credit or financing through public channels to go
unwatched or unrestricted in those fields where the
manufacturer might accumulate an inventory of goods which
he would go ahead and process in a fashion which would
not be consistent with your desires?
MR. NELSON: Well, of course that is a hard question
to answer, certain ones yes and others no. About the
212
- 16 holding of goods, we want to see an orderly liquidation,
not a panicky one. It should be orderly and should come
down - we want to find a mechanism to bring it down in
an orderly fashion and not have people dump goods because
that will waste them. If forced sales go on, the goods
are dumped, and a lot of goods are wasted. In other
words, a lot of people buy, attracted by the price, that
don't need it, just buy it to be buying. In certain
fields we want the manufacturer to produce what he can
because we prevent him at the limitation of his material,
so that whenever he can produce something out of prac-
tically nothing today, we want him to do it.
MR. ECCLES: You don't want to curtail the credit
with, it seems to me, so much the manufacturer because,
as Don says, he is restricted on the allocation.
MR. PURCELL: Except in fields where he isn't
restricted.
MR. ECCLES: In fields where there is a supply
you don't want to restrict him; let him use the credit.
.here there is a shortage of goods you allocate, which
restricts it; you do it by credit. Where there isn't a
shortage, let him produce all he can. I don't think
you want to restrict production in any aspect of this
thing by the use of credit, which is a very different
field than the hoarding of inventories in the hands of
the retailers.
H.M.JR: That is all you and I are talking about.
MR. NELSON: That is right.
H.M.JR: Can I just ask Dean RumlMR. RUML: Well, I have a number of mixed impres-
terrific
on
have credit today
think that Marriner's general suggestion is a
is a very inexpensive operation,
into account; and accordingly it does seem to me that
of it sions. good people one. I who There is good a inducement everything to borrow the because taken part
just to make - so that the public, so that everyone will
213
- 17 -
feel that there has been a fair deal all around that
there should be some measures taken which Marriner speaks
of. I think there is a very important statistical illusion
in this thing, which I was referring to yesterday,
namely, that the thing we tend to watch is 8 comparison
of last year's inventories. The thing that is really
happening is lengthening the period of your commitment,
and it depends what period you are lengthening your
commitment and what bases you are comparing, whether
your percentage increase is going up or down.
Now, for example, at the present time you are
extending your commitment into a heavy fall season, as
against a spring season, which from this point on tends
to go up in volume and accordingly the percentage increase
will go up, even if your policy doesn't change absolutely.
MR. ECCLES: I don't think you make that clear, B.
What you mean is that deliveries are so much slower now.
MR. RUML: They are very irregular now.
MR. ECCLES: That is right. Therefore, because of
the slowness of deliveries-MR. RUML: Here we have perhaps in Macy's a normal
six weeks' average period of inventory. If we extend it
to three months, we have doubled our inventory. If
extended three months in the fall season and compared
to a spring season in inventory, we perhaps have trebled
our position as compared to a year ago, whereas another
institution that has a normal three months' period, if
they extended it another six weeks their increase is
only fifty percent. There are a great many factors
there that come up through the period of commitment
that are quite independent of the price factor itself.
MR. NELSON: Yes, but those things are relative, B.
They are always relative, relative as of any period of
the year.
MR. ECCLES: Every concern is in the same boat.
214
- 18 MR. RUML: Yes, but it depends a great deal on how
long or how short the normal period is, whether a fixed
period of extension has a large percentage factor or
small percentage factor; but the reason that I am
attracted to Marriner's suggestion is that it gives a
good deal of latitude in the first instance, at any
rate, for the consideration of regional considerations
and all the rest that are involved in this type of commitment. I also think that the problem of protection I don't know whether you call it the small retailer certainly for the man that doesn't have complete access
to the markets it is to become more and more acute, and
I think that the whole industry requires some sort of
protection against that contingency.
H.M.JR: Just to get down to brass tacks, because
I see you are going to step out-MR. NELSON: Captain Lyttelton is coming over at
ten, so I have to.
H.M.JR: Three minutes?
MR. NELSON: Yes.
H.M.JR: Such a letter as Eccles suggests going out,
you think - talking now from the standpoint of the retailer,
do you think it would be in any way unfair?
MR. RUML: No, I do not.
MR. NELSON: A very good thing.
MR. RUML: I definitely do not think it would be
unfair.
H.M.JR: Unfair?
MR. RUML: No, I think it would be good. I think
it would be good, because it-MR. HENDERSON: It would be fair, because eventually
we are going to impose some inventory controls, so this
would put them on notice about it.
215
- 19 -
H.M.JR: Would you like to see the Federal Reserve
do this sort of thing?
MR. NELSON: Yes, I would.
MR. HENDERSON: Yes.
H.M.JR: Jesse, do you want to express yourself?
MR. JONES: I don't know enough about it. I see
no objection. If we are all in favor, certainly I have
no objection.
H.M.JR: Well, could we leave it this way? Marriner,
would you be willing - well, certainly the members of
your committee, if we can have a look at it, plus these
two gentlemen, (Nelson and Henderson) before it goes out,
do you think it could go out over the week end?
MR. ECCLES: Well, I would like to think - of course,
now under what authority - this is merely a letter of
persuasion. I mean, it is no - you see, the regulation
W is an executive order. When we put that into effect,
it had some teeth in it. A letter of this sort could be
sent to all of the member banks, which would include
all the national banks and all the State member banks,
which represents possibly eighty-five percent of the
resources of all the banks; but we have no control whatever over the non-member banks, which in number make up
more than half the banks in number, although in resources
it is possibly fifteen percent.
H.M.JR: I think we could get the FDIC to take care
of those.
MR. ECCLES: Yes. Well, let me think about this
and discuss it as to the best means of putting it out,
whether the Fed should put it out alone or whether we
should put it out as a group letter, or how it should
be done. I think if we do put it out we should be
privileged to say that as a result of the conference
with these people here in the discussion of this problem
216
- 20 it was decided or requested that the Federal Reserve
advise all of the banks, and we could advise the FDIC
banks on that kind of a score. In other words, if we
are sort of informally put in here as the agent, we
will say, for this committee, to advise the banks,
rather
basis--
than simply do it on strictly a legal, formal
MR. JONES: Not too dictatorial.
MR. ECCLES: No, it can't be dictatorial because
we haven't any teeth in it. It has to be a question of
persuasion, of asking for their cooperation in this thing.
MR. NELSON: I can send you a copy, Marriner, of
the letter I wrote to the retail associations on this
subject of inventory.
MR. ECCLES: I would like to have that.
MR. NELSON: I think you will see in that a basis
for some sort of an action in this direction.
MR. HENDERSON: You and I, Don, both could write a
letter to Marriner or the committee, which would be the
basis on which you would make your advice. I think they
should draft that.
MR. ECCLES: That would be fine if we could do that,
then, as a request - asa result of a request of you and
Don, Leon.