The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
201
August 26, 1942
(Dictated
in the presence of Mrs. Klotz, Mr. Gaston
and Mr. White)
Near the end of my luncheon today with Frank Knox
and Admiral King, I asked them how things were going with
Donald Nelson, and King said, "Not too well." He said,
"After all, Donald Nelson has taken about three months to
realize that we of the General Staff, plus the Combined
Chiefs of Staff, meaning England and the United States,
are operating under a charter from Churchill and Roosevelt which gives us complete authority to tell Donald
we wish to have ordered of
I looked
up
"Ifevery
are
Nelson article just of war."
how much
So and
said, you
operating under that, I didn't know about it. I have
never heard it." Knox said, "Oh, yes. Everybody else
understands it." So I said, "No, you are wrong. I don't
think there has ever been any announcement on that," and
I said to them, "If that is the case it seems to me that
with a lot of bad news coming along, it would give the
public confidence and take the heat off the President if
it was announced that that is the way the thing works and
that is the way the orders are placed."
He said, "Take a man like Admiral Vickery who is
ambitious. His orders are to build 24 million tons of
shipping, and he has told them to build 28 or 29 million
tons.' He said, "Here is another illustration. Last
Monday Hopkins had lunch with me and he was talking with
me about whether they couldn't keep these various people
off the President's neck who have various schemes for
extra production in this direction and that direction,
He said that Hopkins had been talking with him and with
Admiral Leahy. When he told me that Hopkins had come to
him about it, it didn't make me quite so sure that this
charter was functioning properly.
To show that Knox really didn't know about it, at
Cabinet the other day Knox said, "I want to increase the
number of escort vessels," and the President approved it.
Knox said, "Shall I take it up with the Chiefs of Staff?"
and King said, "No, Mr. Secretary, I would take it up with
the President and he will refer it to the Chiefs of Staff.'
202
-2-
Well, I pleaded with him for publicity on this charter
arrangement, and I think I made an impression on King because
he said that the only thing he questioned was whether it
might not give comfort to the enemy, and I said, "No, I
think it would do just the opposite."
If there is such a charter - and I believe King - and
it is functioning, all this stuff in the paper about Nelson
telling the Army and Navy what to do is all the bunk.
I said, "Take Kaiser for example. What would he do
with his idea on the boats?" and King said, "He would have to
clear that with the Chiefs of Staff.
I repeated again, "The public doesn't even know that
you people exist as far as materiel is concerned." Now
am not going to leave it all up to them because I think
that if the public knew about this it would give it a great
deal more confidence. So I have asked Elmer Davis to
come over to see me so he can get the story on it.
I
203
August 26, 1942.
2:15 p.m.
Elmer
Davis:
Hello.
HMJr:
Morgenthau speaking.
D:
Yes, sir.
HMJr:
D:
HMJr:
You aren't SO situated that you could drop over for
a little talk with me some time this afternoon?
I might towards the end of the day.
How late is that?
D:
Oh, say, five-thirty?
HMJr:
How?
D:
Five-thirty? Would that be possible?
HMJr:
That's a little - that's a little old for me.
D:
Five?
HMJr:
Yeah.
D:
All right.
HMJr:
You couldn't make it any earlier?
D:
I'm afraid I couldn't possibly.
HMJr:
oh. Well, now let me just see about tomorrow
because there's this dern formal dinner tonight,
you see?
D:
Yeah, well, I live at the Carlton and I'm close
at hand, you see?
HMJr:
How about tomorrow morning?
D:
Tomorrow morning, let's see. What about eleven?
HMJr:
Eleven would be perfect.
D:
Yes. I might be two or three minutes late because
I am a long way down here, but I'11 do my damndest
to be on time at eleven.
204
-2HMJr:
D:
Well, do you want to make it eleven-fifteen?
No, I tell you, I'd rather make it theoretically
eleven, because that will give me a swell excuse
to
get rid of the fellows that are coming in at
ten-thirty.
HMJr:
I see, uh huh.
D:
All right, I'11 do my best to be there on the dot.
HMJr:
Well, I've got an idea which I think may be help-
ful on the - and I'd like to explain it.
D:
Right
HMJr:
You may want to throw it in the trash basket, but
D:
that's all right.
All right. Probably not. Anyway, I'11 be delighted to hear it.
HMJr:
Righto.
D:
Thank you.
HMJr:
Thank you.
205
August 26, 1942.
2:37 p.m.
HMJr:
Grace
Hello.
fully:
Hello, Mr. Secretary. How are you, sirt
HMJr:
I'se all right. How's you-all?
T:
Fine, thank you. Mr. Secretary, there's a man
in New York by the name of Bernheim, who is a
silversmith and who makes our frames when we
get - when people come - distinguished visitors
come and we give them a picture in a frame, a
silver frame.
HMJr:
T:
I can't give you any silver. I'm awfully sorry.
No. Well, look at - this gentleman reports
that he can't get any more silver. You have to
have a priority, and the President says it's
crazy. He says, "You call Henry Morgenthau.
We've got more silver than we know what to do
with. That' . He said, "He may have gone
out of business, but it wasn't because he
couldn't get silver."
HMJr:
No, the man's right.
T:
Is he?
HMJr:
Yeah, and I - it isn't me - it's - well - you
got a minute?
T:
Yes.
HMJr:
Well, back in '34 there was a man by the name
of Roosevelt who was interested in silver
legislation.
T:
Yeah.
HMJr:
And he's - they passed the Silver Purchase Act....
T:
Yeah.
HMJr:
....and now they've got the thing so tied up,
that you can't - I mean, the Silver Senators and
Donald Nelson and Leon Henderson
206
-2Yeah.
T:
... one fellow puts it on the bottom, the other on
HMJr:
the top.
Yeah.
T:
HMJr:
...and, by golly, the silversmiths cannot get any
silver.
Well, that's what he said, and the President said,
"He's crazy. He may have gone out of business,
but for another reason. I bet it wasn't because he
T:
couldn't get silver."
HMJr:
T:
HMJr:
T:
HMJr:
No, the man's right.
Well, then that's all I want to report to him, and
he'11 probably go into it - look into it then.
Tell him he's not orazy. He's....
He says there's plenty of silver. He saye we - if
they were going to make even silver - if we were
going to use it for plumbing, there's so much silver.
No, the President is behind times. Tell him he's
not orazy, he's kosher.
(Laughs) All right. (Laughs) Well, you see, I
T:
wanted to order just another frame or two to have
it on hand in case we had some distinguished guests
come along, and I - he said he couldn't get it unless
I'd ask for a priority. Well, of course, I wouldn't
HMJr:
Ah hah!
and so - so I said to the President, "If we want
to get a frame or two, we'd have to ask for a
T:
priority."
HMJr:
Hoarding, eh?
T:
Huh?
HMJr:
Hoarding.
T:
Hoarding, yeah.
207
-3 And so - of course, we can do without silver
frames. We'11 just have to explain we can't get
silver and we will get some other kind of a
frame, a leather one.
T:
HMJr:
Wood, no, leather's
T:
Wooden one.
HMJr:
Wooden one.
T:
I see.
HMJr:
You tell the President that.
All right, fine, I will.
T:
HMJr:
Okay. What other big problems?
T:
I haven't any other big problems.
HMJr:
Not any?
T:
It's just silver today.
HMJr:
Any more lobsters dying on your hands?
T:
No. enough died last week. I don't want any more.
(Laughs)
HMJr:
(Laughs) Okay,
T:
All right, fine. (Laughs) Goodbye.
HMJr:
Goodbye.
208
August 26, 1942.
3:05 p.m.
HMJr:
Are you at all familiar with a request from
the Joint Distribution Committee to get funds
through to Shanghai?
John W.
Pehle:
I am.
HMJr:
Well, now they've written me a letter -- Mr.
P:
from Welles and he hasn't heard a thing. Hello
Yes, sir.
HMJr:
You know, he went over to see Welles.
P:
That's right.
HMJr:
Well, now is there any way of getting - of finding
Hyman, Joseph C. Hyman -- that he was to hear
out what Mr. Welles is going to do about it?
P:
I think so.
HMJr:
How can you do that?
P:
Well, I'11 check through the special division
there. That would normally be handled by Joe
Green
HMJr:
P:
HMJr:
Yes.
but he'e away for a month or so, and one of
his subordinates probably can tell me.
Well, you see - let me just look at the date
here a minute. Let's see what day they - Green
was present - I don't know, let me see. On
July 22 they saw Welles. Let's see, July 22,
and asked him to go over the whole question of that apply to refugees with Bell, Foley, Bernard,
Bernstein, and Schmidt. Now let me see.
"Immediately after our discussion, we called on
Summer Welles, who had with him Joseph Green.
And my God, that's - that's a month.
P:
That's right.
209
-2HMJr:
And - I - I - and Welles said that he would talk
to them. Now what I suggest is this - are any
of those men your men?
P:
Yes, Schmidt is, and I'm fully familiar what
HMJr:
Well, I - I wish you'd look into it. I - I -
happened - with what happened during my absence
on that.
I mean, and see what if anything can be done,
you see?
P:
Yes, well, we canvassed it here, Mr. Secretary,
you remember
HMJr:
Yes, I.
and also with Mr. Bell before you
P:
HMJr:
I know.
assigned the thing
P:
HMJr:
P:
Yeah.
and I think everybody here was pretty well in
agreement that - that there was nothing that
could be done
HMJr:
P:
HMJr:
Well
and then they said, should they go to Welles,
and Mr. Bell told them that of course, they could
talk to Mr. Welles about it and see whether he
felt any differently, and that was the last we
heard of it.
Well, let me send you over a - this original
letter, then you send it back to me. Mrs. Klotz
will send it over to you, see? You better read
it because in this letter they - they seem to
think that they can work out $240,000 through
the International Red Cross.
P:
I see. I'll do that, and also try to find out
whether there'e anything pending in State and
how Mr. Welles feels about it.
210
-3HMJr:
I don't - don't keep any copy of this letter,
see?
P:
I won't.
HMJr:
I don't want you to keep any copy of this letter.
P:
No, sir.
HMJr:
P:
HMJr:
P:
HMJr:
I'll send it oven - it'11 be over within the half
hour, and before "sunset see if you can't do something about it and let me know.
I will do that.
Let me know in the morning, will you?
Yes, sir.
It's dragged entirely too long. I mean, either they
should be told they can or cannot do anything.
Okay.
P:
Right.
HMJr:
Have you - thank you.
P:
All right.
HMJr:
Have you got a man by the name of - oh, be's gone.
211
August 26, 1942
5:15 p.m.
I just spoke to Judge Rosenman, and he said it
was decided about five o' clock that the President
will give out a message and make a speech on Labor
Day on inflation, and he is going to include both
labor and agricultural prices. He is going to do
it with a direct message and not ask Congress to
consider it. He is not going to have a board but
he is going to have a Mr. X who will consult with the
other Department heads. Rosenman said the provision
which I wanted is still in the statement, and he
promised to let me see a copy of the message before
it is released.
212
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 26, 1942
TO
FROM
The Secretary
Walter W. Stewart
wwsc
Concerning a Contemplated Trip
An announcement prior to your departure should be
brief, but sufficiently definite to prevent rumors and
speculation as to the reasons for the trip.
My preference would be for a statement that you
were going as the eyes of the man sending you, not to
take decisions or attend conferences but to report
back what you saw. Because of your position as
Secretary of the Treasury the announcement should
make it clear that you were not on a financial mission.
Also, I would like the press to be told informally
something of your part in the defense program prior
to our entry into the war, when you were assigned
tasks by the President which were not limited to
financial questions and when "all-aid short-of-war"
meant literally all the aid in any form, domestic
and foreign that could be furnished. This trip is
in fact a logical sequence to such assignments and
it is partly because of the role you played then
that you are now asked to take this trip. The
advantage of calling attention to this background
is that there is no one else in the government who
has these particular qualifications. It is one of
the reasons why your "eyes" are used rather than the
eyes of someone else.
213
August 26, 1942
I have told Blough to tell Paul to handle this
by submitting this question to Sam Rosenman as
part of whatever the President says to Congress
in regard to taxes and inflation.
214
August 25, 1942
MEMORANDUM FOR THE SECRETARY
Yesterday, in response to your instructions, I
talked at length on the telephone with Mr. Altmeyer,
regarding the President's letter to Congress on
social security. Mr. Altmeyer made the following
points:
1. The letter or message when sent to
Congress should go into the whole matter at
length since there has been as yet no detailed
description of the proposals made by the Board
or the reasons for their adoption.
2. The letter should, if possible, be
delayed until perhaps next month, for several
reasons. The letter should not be sent until
it would not interfere with the prompt passage
of the Tax Bill. It should not be sent until
Congress returns from its vacation and can
turn its attention to the problem. The relation of Social Security to the National Service Act can be further considered and will
be considerably clearer by next month. The
message should, however, go up by all means
before election.
I explained that you had asked for a draft of
the letter and that you wished to furnish such a draft
despite the fact that the Social Security Board believes
the letter should not be sent at this time. He was glad
to comply and his office has sent to me the attached
draft.
If, under the circumstances, you wish to submit
a letter to the President at this time, I should like
a few hours more to recast some of the language and
would like also to know if there is anything in the
letter which, in your opinion, should be eliminated.
Attachment
RoyBlaugh
215
August 25, 1942
Summary of Social Security Board's
"Suggested Draft of President's Message on
Social Security Expansion
1. Extend the Federal old-age and survivors
insurance system to virtually all of the employed
and self-employed population.
2. Extend unemployment compensation to many
excluded groups and make protection more adequate.
3. Provide protection against wage loss due
to permanent total disability and to sickness, and
provide hospital benefits.
4. Consolidate all of the social insurances,
including unemployment insurance, into a single comprehensive Federal social insurance system.
5. Provide special Federal aid to low income
States to pay for more adequate assistance to needy
aged, needy blind, and dependent children.
6. Consider the provision of Federal grants-in-
aid for general relief.
7. Protect the accrued social insurance benefit
rights of persons entering Government military and
other defense activities.
216
Suggested Draft of President's Message on
Social Security Expansion
TO THE CONGRESS OF THE UNITED STATES:
I herewith transmit a report of the Social Security
Board, making recommendations for improving the effective-
ness of our social security system. I trust that it will
be possible for Congress to give early consideration to
this subject.
Today this nation is engaged in a great war designed
to protect and preserve our democratic way of life from
destruction at the hands of aggressor nations. There can
be no question as to our success. Our country has the
natural resources and our people have developed a system
of free enterprise which all history demonstrates is productive of the greatest efficiency as well as the greatest
satisfaction. The best bulwark of our democratic system
of free enterprise is an adequate social security program
which provides a basic security for all of our citizens
and encourages each one to increase his own security
through his individual efforts.
This nation has already gone a long way in a short
time in promoting social security. It is only seven
years since the Social Security Act became law. Three
years ago that law was greatly improved by converting the
Federal old-age insurance system into a system which provides benefits for widows and orphans, as well as old-age
retirement benefits.
But there are still important groups of our people
who do not have protection. We have now had sufficient
administrative experience so that we should be able to
extend the Federal old-age and survivors insurance system
to virtually all of the employed and self-employed population of this country. Likewise, we should now extend
protection against unemployment to many groups now excluded and we should make this protection more adequate.
In addition, we should provide protection against
wage loss due to permanent total disability which in a sense
constitutes premature old age. We should also provide protection against wage loss caused by sickness. Moreover,
provision should be made for each day that an insured
worker or a member of his family is confined to a hospital.
217
-2Providing compensation for a portion of the wage loss and
providing hospital benefits will furnish considerable protection against the economic loss due to ill health in
this country.
I strongly recommend that all of the foregoing types
of social insurance be consolidated into a single comprehensive social insurance system. This would necessarily
involve merging the present Federal-State unemployment insurance system into such a system. Since all of the em-
ployees of the State agencies administering unemployment
insurance have been employed in accordance with civil service systems meeting Federal standards there would be no
difficulty in bringing them under the Federal civil service.
The advantages of a single Federal old-age, survivors,
disability, hospitalization and unemployment insurance
system are clear. Such a system would be safer and sounder,
particularly in the case of unemployment insurance, because
of the wider spreading of the risks and the more effective
utilization of reserves. It would provide more adequate
protection for all workers, particularly those employed in
more than one State. It would equalize the cost of unemployment compensation and other risks in the various States.
It would provide a truly national employment service which
we have already discovered essential for the successful
prosecution of the war. It would be much more adaptable to
unforeseen changes in industrial conditions; and it would
provide simplified, economical administration.
While all of the States have enacted unemployment
compensation laws, these laws vary widely in the adequacy
of the benefits they provide, in the adequacy of the
reserves they are building up, in the contribution rates
that are charged employers with the same unemployment ex-
perience, and in the administrative procedures which are
followed. Since employers in each State compete with employers in other States, each State government acting alone
is at a disadvantage in its attempts to provide more
danger of exposing its employers to unfair competition by
employers in other States who may be permitted to pay lower
contribution rates. Therefore, we should proceed at once
to reconstruct our unemployment insurance system 80 that it
constitutes a real first line of defense against unemployment; not a thin, irregular line under divided direction
which crumbles in spots at the first major attack upon it.
adequate benefits and more adequate reserves because of the
218
-3The expanded social insurance program I am recommend-
ing will afford protection to the workers of this country
against the major economic hazards to which they are exposed. It will spread the cost of these hazards evenly
among many instead of unevenly among some.
This protection will involve higher costs which must
be financed. Since this is an insurance program it is
important that the increase in cost be fully covered by
increased contributions. We cannot afford to increase
expenditures for these purposes without providing adequate
revenues to meet the added cost. Accordingly existing
rates of contribution will need to be increased substantially.
In paying for this comprehensive program of economic security
employer and employee should stand side by side as partners,
preferably contributing on a fifty-fifty basis.
A contributory social insurance system can and will provide protection to employed persons against future hazards
but it cannot provide protection against hazards that
have already occurred. A public assistance program is necessary to provide protection to needy persons already out
of employment because of old-age, disability or some other
reason. Our present system of Federal grants to States
to cover 50% of the cost of assistance to the needy aged,
the needy blind and dependent children has done much to
provide protection to these groups. Only a small percentage
of the aged, for example, are still dependent on relatives
and friends. The two chief complaints regarding assistance
to the needy aged are that the test of need is too strict
and that the amount of cash assistance is too small. Both
of these complaints arise to a considerable extent because
the low-income States have difficulty in meeting their 50%
of the cost.
The most effective way to enable the low-income States
to pay more adequate assistance to their needy aged is to
provide special Federal aid to such States, in addition to
the 50% Federal grant all States receive. This special aid
could be related in an objective manner to the economic
capacity of these low-income States to meet their share of
the cost. Such special Federal aid should of co urse be
made available not only for the needy aged but for the
needy blind and dependent children as well.
I also recommend that Congress give consideration to the
question of providing Federal grants-in-aid to better enable
the States to relieve the distress that exists among persons
219
who are not eligible for assistance under the existing
Federal-State categories of the aged, the blind and dependent children. Most of these people are in distress
because of some physical handicap which renders them
unable to engage in gainful work. Many States and
localities have inadequate resources to meet the needs
of such persons and whatever resources they do have are
used disproportionately to help needy persons who are
eligible under the three categories for which the
Federal Government now shares the cost. The extent to
which the additional grants-in-aid would lessen or
otherwise affect other Federal expendi tures and activities
for the relief of distress is a factor which should be
taken into account by Congress in considering these ques-
tions.
I recommend that Congress also take steps to protect
the accrued social insurance benefit rights of persons
entering the government service to engage in defense activi-
ties, particularly those who enter the military service.
Persons serving their country in military as well as in
civilian work should receive as much protection by way of
social insurance as persons in private employment. Certainly such persons should not lose any benefit rights
they may have accumulated as a result of such service.
The social security program I am recommending will
better prepare us as a nation to meet not only the prob-
lems of today but the problems of tomorrow when the war
has come to an end and we face the necessity of returning
to a more normal period of industrial activity. It will
bring a far greater degree of security into every home in
the country. Furthermore, it will help greatly to
stabilize general economic donditions. During a period
of economic expansion it will help to curb inflationary
tendencies since larger sums are collected in contributions than are paid out in benefits. During a period of
economic recession it will help to sustain mass purchasing power since much larger sums will be paid out in
benefits than are collected in contributions.
This social security program I am convinced willprovide a maximum amount of security for the individual at a
minimum cost to the government. If we are to reap the
greatest advantage we should act now.
220
August 26, 1942
Dear Admiral Waeschet
Allow me to express my appreciation
for the splendid manner in which Lieutenant
Commander W. E. Sinton, and his crew in the
V-188, Ensign E. T. Preston, Aviation Chief
Machinist's Mate Lonnie Bridges and Chief
Radioman A. G. Brace, performed their duties
during ay recent five-day inspection tour
of Army installations.
Sinton and his crew are to be com-
mended for the skill and efficiency they
exhibited in maintaining an arduous flight
schedule which contributed largely to a
successful trip.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Vice Admiral Russell R. Waesche,
Commandant, U. S. Coast Guard,
1300 age Street, N. W.,
Washington, D. C.
File in Diary
221
WAR DEPARTMENT
WASHINGTON
August 26, 1942.
My dear Henry:
It was very considerate of you to
send me a letter like yours of August 21 in
relation to the help of our Public Relations
Division to your War Savings Program. It has
made me feel very happy that we have been able
to give you any such lift in your arduous labors
and you may be sure that I will do everything I
can in the future to renew the same assistance.
As always,
Faithfully yours,
Though Stewmon
Hon. Henry Morgenthau, Jr.,
The Secretary of the Treasury,
Washington, D. C.
222
WAR DEPARTMENT
THE CHIEF OF STAFF
WASHINGTON
August 26, 1942
My dear Mr. Secretary:
Thanks for the copy of your Roanoke address
last Thursday.
Your generous expressions regarding the army
will be helpful and are gratifying to me.
I will let you know about September 15th arrangements in a day or two.
Faithfully yours,
Material
The Honorable
The Secretary of the Treasury
Washington, D. C.
VII
10
223
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
FROM
AUG 26 1942
Secretary Morgenthau
Mr. Haas
Sub ject: lected
Operation
of the payroll savings plan in seindustries.
On June 27 at your request we prepared a series
of tables showing the operation of the payroll savings plan in a group of selected industries. There
is attached to this memorandum a report bringing up
to date the data heretofore submitted for 25 of the
nation's important industries. For purposes of analytical comparisons, the report arranges industries
in the order of the highest average monthly salary
per employee. Within each industry the companies
are arranged in accordance with size of employment.
A review of the report indicates that although
there are wide variations and some exceptions, there
is a rough correlation between the size of the aver-
age monthly salary per employee, and the dollar
amount deducted per employee for the purchase of war
savings bonds. Roughly, larger amounts are deducted
for the purchase of bonds in industries and companies
paying a high level of wages and salaries than in
those paying a lower level of wages and salaries.
There is no definite relation percentage-wise, however, between bond purchases and wages. These situations, you recall, have been noted previously.
Attachment
CONFIDENTIAL
224
UNITED STATES SAVINGS BONDS - TOTAL
Comparison of August sales to date with sales during the
same number of business days in July and June 1942
(At issue price in thousands of dollars)
:
$ 26,267
$ 28,418
:
:
:
:
:
1
38,765
27,023
25,835
40,450
38,184
24,218
3
4
5
5
6
June
:
:
$ 26,267
August
:
sales
July
:
ugust 1942
daily
Oumulative sales by business days
$ 29,539
65,032
92,055
117,890
158,341
196,524
220,742
52,687
79,964
126,495
157,605
201,056
240,974
45,442
67,046
98,208
132,341
154,085
192,659
261,763
277,037
301,761
324,518
353,022
365,852
288,729
324,856
372,020
402,122
435,929
467,599
206,523
236,552
259.772
281,724
303,163
334,398
7
8
41,021
15,274
24,724
22,757
28,504
12,830
10
11
12
13
14
15
17
18
19
20
21
22
24
25
41,806
14,551
27,756
23,791
22,187
13,246
41,029
19,667
407,659
422,209
449,965
473,756
495,943
509,189
550,219
569,885
505,257
527,186
580,443
602,129
636,640
670,075
703,062
722,572
345,497
368,782
387,369
414,804
429,158
468,812
485,338
510,446
:
Date
August
August as
:percent of July
92.4%
123.4
115.1
93.2
100.5
97.7
91.6
90.7
85.3
81.1
80.7
81.0
78.2
80.7
80.1
77.5
78.7
77.9
76.0
78.3
78.9
August 26, 1942.
ffice of the Secretary of the Treasury,
Division of Research and Statistics.
ource: 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
225
UNITED STATES SAVINGS BONDS - SERIES E
Comparison of August sales to date with sales during the
same number of business days in July and June 1942
(At issue price in thousands of dollars)
Cumulative sales by business days
July
June
:
August
:
:
sales
:
daily
:
August
:
:
Date
August as
:percent of July
:
:
August 1942
1
3
4
52
6
7
8
10
11
12
13
14
15
17
18
19
20
21
22
24
25
$ 14,044
$ 14,044
$ 15,821
$ 19,834
22,178
14,575
12,988
23,004
24,959
16,429
36,222
50,797
63,785
86,789
111,748
128,176
30,701
47,523
77.320
95,044
116,643
139,390
27,841
40,811
58,199
82,988
98,197
125,245
118.0
106.9
82.5
91.3
95.8
92.0
26,805
9,885
15,921
16,356
18,760
9,578
154,981
164,866
180,787
197,143
215,903
225,481
164,161
183,238
209,787
225,532
243,938
261,766
134,157
154,242
169,920
186,470
201,700
225,684
94.4
90.0
86.2
87.4
88.5
86.1
28,683
9.737
17,650
15,525
16,026
9,881
254,163
263,900
281,550
297,075
313,101
322,982
284,111
296,344
327,712
339,951
358,135
376,396
233,218
249,033
261,321
280.742
291.729
321,114
89.5
89.1
85.9
87.4
87.4
85.8
30,522
13,692
353,504
367,195
394,984
405,679
331,806
347,673
89.5
fice of the Secretary of the Treasury,
Division of Research and Statistics.
88.8%
90.5
August 26, 1942.
ource: 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
226
UNITED STATES SAVINGS BONDS - SERIES F AND G COMBINED
Comparison of August sales to date with sales during the
same number of business days in July and June 1942
(At issue price in thousands of dollars)
1
5
6
7
8
15
17
18
19
20
21
22
24
25
:
13
14
June
:
:
:
:
12
:
:
11
:
10
July
:
4
sales
Cumulative sales by business days
August
:
August 1942
daily
:
Date
August
August as
!percent of July
$ 12,222
$ 12,222
$ 12,597
$ 9,705
16,587
12,448
12,847
17,447
13,225
7.789
28,810
41,258
54,105
71,552
84,777
92,566
21,986
32,441
49,175
62,561
84,413
101,585
17,601
26,235
40,009
49,353
55,888
67,414
131.0
127.2
110.0
114.4
100.4
91.1
14,216
5,389
8,803
6,401
9,744
3,253
106,782
112,171
120,974
127,375
137,119
140,372
124,568
141,618
162,232
176,590
191,991
205,833
72,366
82,310
89,852
95,254
101,464
108,715
85.7
79.2
13,124
4,814
10,106
8,266
6,161
3,365
153,496
158,309
168,415
176,681
182,842
186,207
221,147
230,842
252,731
262,178
278,505
293,679
112,279
119,749
126,048
134,062
137,429
147,698
10,507
5,975
196,715
202,690
308,077
316,893
153,532
162,774
ffice of the Secretary of the Treasury,
Division of Research and Statistics.
97.0%
74.6
72.1
71.4
68.2
69.4
68.6
66.6
67.4
65.7
63.4
63.9
64.0
August 26, 1942.
ource: All figures are deposits with the Treasurer of the United States on
account of proceeds of sales of Unit ed States savings bonds.
Note: Figureshave been rounded to nearest thousand and will not necessarily
add to totals.
Sales of United States savings bondown
August 1 through August 25. 1942
Compared with sales quota for same period
CONFIDENTIAL
(At issue price in millions of dollars)
1
la
7
8
20
21
15.5
16.0
22
9.9
24
30.5
25
13.7
26
27
28
29
31
:
19
9.7
17.6
:
18
Daily
$ 12.2
$ 12.2
$ 7.7
76.5
83.3
76.0
80.9
83.1
83.2
16.6
12.4
12.8
17.4
13.2
7.8
28.8
41.3
54.1
71.6
84.8
92.6
21.5
29.6
45.4
58.7
68.8
76.3
134.0
139.5
119.2
122.0
123.3
121.4
190.6
205.1
227.1
247.9
271.0
287.7
81.3
80.4
79.6
79.5
79.7
78.4
14.2
5.4
8.8
6.4
9.7
3.3
106.8
112.2
121.0
127.4
137.1
140.4
87.9
94.1
105.1
114.0
120.9
126.4
121.5
119.2
115.1
111.8
113.4
111.1
41.0
15.3
24.7
22.8
28.5
254.2
263.9
281.6
297.1
313.1
323.0
319.2
332.2
353.0
373.6
397.4
415.1
79.6
79.4
79.8
79.5
78.8
77.8
13.1
3.4
153.5
158.3
168.4
176.7
182.8
186.2
135.8
141.3
151.9
161.0
168.3
174.3
353.5
367.2
449.0
462.9
484.5
505.0
527.8
544.2
78.7
79.3
10.5
6.0
196.7
202.7
184.8
191.0
203.0
213.2
221.4
228.1
575.0
4.8
10.1
8.3
6.2
240.0
158.4%
Total
Quota,
August 1
to
Sales,
date
to
to
as $ of
date
date
quota
:
28.7
:
17
:
9.6
:
15
:
18.8
as % of
: quota
:
13
14
:
26.8
:
25.0
16.4
:
155.0
164.9
180.8
197.1
215.9
225.5
23.0
:
50.8
63.8
86.8
111.7
128.2
date
August
:
14.6
47.3
61.0
84.0
107.3
134.4
154.1
to
to date
Actual sales
1
36.2
9.9
15.9
16.4
11
12
:
22.2
:
87.5%
date
:
$ 16.0
to
August 1
Sales
:
$ 14.0
$ 14.0
Daily
August 1
: Quota,
:
: quota
Actual sales
:
to
date
13.0
10
as % of
to
date
Daily
Series F and G
:
August 1 : August 1 : to date
Date
AND
Sales
:
Series E
: Quota,
Actual sales
$ 26.3
$ 26.3
$ 23.7
38.8
65.0
92.1
117.9
158.3
196.5
220.7
68.8
90.6
129.4
166.0
203.2
230.4
94.5
101.7
91.1
95.4
96.7
95.8
12.8
261.8
277.0
301.8
324.5
353.0
365.9
278.5
299.2
332.2
361.9
391.9
414.1
94.0
92.6
90.8
89.7
90.1
88.4
113.0
112.0
110.9
109.8
108.6
106.8
41.8
14.6
27.8
23.8
22.2
13.2
407.7
422.2
450.0
473.8
495.9
509.2
455.0
473.5
504.9
534.6
565.7
589.4
89.6
89.2
106.4
106.1
41.0
550.2
86.8
19.7
569.9
633.8
653.9
27.0
25.8
40.5
38.2
24.2
111.0%
89.1
88.6
87.7
86.4
87.2
687.5
718.2
749.2
772.3
815.0
Office of the Secretary of the Treasury, Division of Research and Statistics,
Source: Actual sales figures are deposits with the Treasurer of the United States on account of proceeds of sales of
United States savings bonds. Figures have been rounded and will not necessarily add to totals.
Note: Quota takes into account both the daily trend during the week and the monthly trend during the month.
August 26, 1942.
228
August 26, 1942
Dear Eleanor:
The following are some figures which you requested
for your column comparing the cost of living and corpora-
tion profits in the first six months of our participation
in World War I and in the similar period during the pres-
ent wars
From April, 1917, to September, 1917, the cost of
living rose 10.4 per cent compared to the preceding six
months, from October 1916, to March, 1917. From Janu-
ary, 1942, to June, 1942, the cost of living rose only
5.6 per cent compared to the previous six months, from
July, 1941, to December, 1941.
As to corporate profits, the profits of 68 leading
industrial corporations in 1917 were 7.7 per cent less
than in 1916, according to reports published by Standard
Statistics Incorporated. The profits of 290 leading
industrial corporations in the first half of 1942 were
34.6 per cent less than in the first half of 1941, as
reported by the National City Bank. Some of this de-
crease may be due to the fact that corporations have made
excessive allowances for taxes. The true picture of 1942
profits cannot be seen until after the passage of the new
tax bill and the start of a new year.
If there is any additional information you desire,
please do not hesitate to call upon me.
Affectionately yours,
(Signed) Henry
Mrs. Franklin D. Roosevelt,
The White House.
By Secret Service Agent
12:58 8/26/42.
File to NMC.
229
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
FROM
Ferdinand Kuhn, Jr.
August 26, 1942
Mrs. Roosevelt requested figures comparing the
cost of living and corporation profits in the first
six months of our participation in World War I and
in the similar period during the present war.
From April 1917 to September 1917 the cost of
living rose 10.4 percent compared to the preceding
six months, from October 1916 to March 1917. From
January 1942 to June 1942, the cost of living rose only
5.6 percent compared to the previous six months, from
July 1941 to December 1941.
As to corporate profits, the profits of 68 leading
industrial corporations in 1917 were 7.7 percent less
than in 1916, according to reports published by Standard
Statistics Incorporated. The profits of 290 leading
industrial corporations in the first half of 1942 were
34.6 percent less than in the first half of 1941, as
reported by the National City Bank. Some of this decrease
may be due to the fact that corporations have made excessive
allowances for taxes. The true picture of 1942 profits
cannot be seen until after the passage of the new tax bill
and the start of a new year.
F.K.
230
August 26, 1942.
My dear General Kallairs
1 have received the map prepared by the
Army Orientation Course, Special Service
Division, Service of Supply. and I as very
glad to have 18. I am looking forward to
having these move pape as they are prepared
and appreciate your arranging for - to
receive a copy each week.
with certifical regards,
Sincerely,
(Signed) H. Morgenthau, Jr.
Montement General L. J. Hellair,
Army Ground Foresa,
Army Var College,
Washington, D. e.
HEF/dbs
File in Diary.
231
HEADQUARTERS
ARMY GROUND FORCES
ARMY WAR COLLEGE
WASHINGTON, D.C.
August 26, 1942.
Honorable Henry Morgenthau Jr.
Secretary of the Treasury
United States Treasury Department
Washington, D. C.
Dear Mr. Secretary:
Colonel Philips of my Staff has advised
me of your interest in the Weekly News map prepared by the
Army Orientation Course, Special Service Division, Service
of Supply.
Arrangements have been made for you to
receive a copy of the map each week.
Please accept this one with my compliments.
Sincerely,
L.D. Minair
L. J. McNAIR,
Lt. Gen., U.S.A.,
Commanding
POR VICTORY
BUY
WAR
BONDS
STAMPS
WALL
232
August 26, 1942.
Honorable Henry Morgenthau Jr.
Secretary of the Treasury
United States Treasury Department
Washington, D. C.
Dear Mr. Secretary:
Colonel Philips of my Staff has advised
me of your interest in the Weekly News map prepared by the
Army Orientation Course, Special Service Division, Service
of Supply.
Arrangements have been made for you to
receive a copy of the map each week.
Please accept this one with my compliments,
Sincerely,
(Signed) L. J. McNair
L. J. MoNAIR,
Lt. Gen., U.S.A.,
Commanding
011981
233
August 26, 1948.
Honorable Henry Morgenthau Jr.
Secretary of the Treasury
United States Treasury Department
Washington, D. C.
Dear Mr. Secretary:
Colonel Philips of my Staff has advised
me of your interest in the Weekly News map prepared by the
Army Orientation Course, Special Service Division, Service
of Supply.
Arrangements have been made for you to
receive a copy of the map each week.
Please accept this one with my compliments.
Sincerely,
(Signed) L. J. McNair
L. J. MONAIR,
Lt. Gen., U.S.A.,
Commanding
011981
234
AUG 26 1942
Dear Milos
Thank you for your thoughtfulness in
sending me a copy of your letter of August 13th
to the Manpower Commission, concerning the
effect of the Selective Service draft upon
your organisation.
Sincerely yours,
(Signed) H. Morgenthan, Jr.
Secretary of the Treasury.
Mr. Mile Parkins,
Executive Director,
Board of Economic Warfare,
Washington, 3. c.
File in Diary
Infraja from
235
BOARD OF ECONOMIC WARFARE
ECONOMIC DEFENSE BOARD
WASHINGTON, D.C.
and
glampson
)
OF THE EXECUTIVE DIRECTOR
August 25, 1942
P
The Honorable,
The Secretary of the Treasury.
Dear Mr. Secretary:
Adlai Stevenson told me about & meeting you
are having tomorrow morning and I am taking the liberty
of enclosing a copy of a letter which we recently
wrote the Manpower Commission regarding the effect of
the draft upon our own organization. I am taking the
liberty of doing this simply to help round out the
picture for you.
Respectfully yours,
Milo Perkins
Executive Director
Enclosure
236
COPY
August 13, 1942
Mr. Fowler V. Harper
Deputy Chairman
War Manpower Commission
Washington, D.C.
Dear Mr. Harpert
This is in reply to your note of July 24, suggesting that I bring
to your attention matters of peculiar concern to the Board of
Economic Warfare in the manpower program.
As you know, the Board of Economic Warfare has been charged with
responsibilities in the war effort which require a considerable
number of men working here in this country and abroad. Whether here
or abroad, the men upon whom we must depend to get the job done must
bring to their assignments training, experience and competence of the
highest order. You will understand that the job of finding men this
qualified is a tough one; and naturally not a few of them are eligible
for service inthe armed forces.- less for their special competencies which
are 80 important to us than that they are able-bodied and can be trained
for combat service.
Furthermore, since the Board of Economic Warfare is a war agency created
to meet wartime emergency needs for which established governmental and
business institutions were not prepared, many of the operations which
we are called on to perform are in fields new to both government and
business, and the techniques essential to their performance can be
acquired nowhere but in our own organization. This means that men who
have been trained in these techniques are in an unusual sense indispensable
to us. For, generally speaking, when these men are taken by the draft, we
cannot turn elsewhere for persons already trained for the job in hand; we
can only pick a prospect and train him ourselves. And this takes time
and it means that the job is being less efficiently done in the meantime.
It has been drious to us for some time that, unless the Manpower Commission
formulates policies which will preserve for us the services of this type of
personnel, our job in the total war effort will be made almost impossible
for us.
What I have just said relates to men an our own staff. Moreover, in our
program of economic warfare, particularly in this hemisphere, we are
receiving from private business concerns of the United States operating
in the area, or their Latin American affiliates, significant assistance
by means of trade wars against their axis-controlled competitors. The
effectiveness of their opposition to these enemy-controlled businesses will
depend, of course, on the strength of their competitive position which will
be largely measured by their ability to maintain in key positions on their
staffs technically trained personnel essential to their successful operation.
Here again, not a few of these men are subject to the draft.
237
It is also true that, as the Latin American countries begin taking
over axis-controlled concerns for the purpose of eliminating axis
personnel, the gaps thus created in the staffs of these concerns
will have to be filled largely from the supply of technically trained
men in the United States. For it is a fact, that generally speaking,
to remove the German technicians is to eliminate the only local source
of supply. Obviously, it is in the direct interest of hemispheric
defense and of the war effort generally for the United States to be in
a position formerly occupied by axis nationals or sympathisers. The
draft status of such men is, of course, of primary importance.
These are the three categories of personnel upon which we may expect
the draft to have its most serious impact. And the Board of Economic
Warfare is convinced that the Manpower Commission should consider the
formulation of policies which will assure the deferment in appropriate
cases of men falling in these categories.
As to the first - men on our staff - we suggest that the Commission's
policy recognize that men essential to the operation of the Board of
Economic Warfare are essential to the total war effort and should
therefore be allowed to temain in this branch of the service rather
than being taken by some other for which they are less well fitted,
thus diminishing their contribution by appropriate directives to the
Selective Service System.
As to individual members of staffs in private business carrying on
trade wars against axis interests, no recommendations by the Board will
be made. Rather, the Board will undertake to certify to the Commission
that the particular business concern is engaged in such activity. This
will leave to the concern itself the burden of making a case of indispensability to Selective Service to the end that deferment may be
obtained. That is to say, certification by the Board in these cases
would not relate to the person conorned with the draft but would be confined to an establishment of the fact that the business employing him is
engaged in anti-axis activity of importance to the war effort.
This procedure would also, generally speaking, apply to these axis concerns which are taken over or controlled by the Latin American governments
because of axis activities and which must replace axis technicians with
technically trained United States citizens.
I should liek to emphasize my conviction that the active assistance of the
Manpower Commission is essential to an effective economic warfare program.
Needless to say, I shall be glad to develop with you at your convenience
the subject matter of this letter.
Sincerely yours,
Executive Director
5-30-22
238
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE AUG 26 1942
Secretary Morgenthau
TO
FROM
Randolph Paul
Some time ago we received from the State Department
a despatch transmitted by our Embassy in Panama indicating
that there exists in Panama widespread commercial and
financial activity on behalf of the enemy. The Embassy
mentioned specifically suspicious activity in the diamond
trade, in foreign exchange transactions and in activities of
international holding companies cloaked under Panamanian
names. It was stated that these activities may be enabling
the enemy to obtain dollars for subversive purposes.
In reporting these circumstances to the State Department, the Embassy pointed out that adequate investigation on
its part was impossible due to the limited staff of the
mission. It was requested, therefore, that arrangements be
made either with the Treasury Department or the Federal
Bureau of Investigation to have two experienced agents
assigned to the Embassy for the purpose of making a thorough
investigation of these developments. The State Department
recently cabled the Embassy to ascertain whether the need
still exists for such investigation and has just been informed
that the current situation is serious. The State Department
has now asked that we send some men to Panama.
Subject to your approval, we are prepared to assign
immediately two experienced Foreign Funds Control investi-
gators to our Embassy in Panama to cooperate in the
investigation of these dangerous financial and commercial
activities.
RSP
Approved: Mnn.
undy Provided they give our men
caseSrofthat
trouble.
diflomatic status.
we can get them
8/26/42
239
Signed by H. Morgenthau, Jr., , and
copies returned to Mr. Mack.
240
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
August 26, 1942
MEMORANDUM TO THE SECRETARY:
The Manila Trading and Supply Company, Manila, P. I.,
are the owners of 100 Ford Truck Chassis now in storage
at the Haslett Warehouse Company, Harbor No. 2 Warehouse,
San Francisco, California, but have been denied
ship outlicense
of this country
as
was
originalexport
intended.
We
to
an
ly have a Lend-Lease requisition from the
British calling for 100 Ford Truck Chassis to be used
for the New Zealand armed forces and the 100 Chassis
stored at San Francisco can be applied to this order.
Accordingly, it is proposed to requisition these
trucks because the owners are located in the Philippine
Islands and they do not have representatives in this
country with whom we can deal.
Clifton E. Mack
Director of Procurement
VICTORY
BUY
241
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
August 24, 1942
MEMORANDUM TO THE SECRETARY:
There are enclosed herewith pursuant to the Act of October
10, 1940 (54 Stat. 1090), as amended, Executive Order 8942, dated
November 19, 1941, and Executive Order No. 9040, dated January 24,
1942, Treasury Department No. 11 "Proposals for the Requisitioning
and Disposal" of 100 Ford Truck Chassis, and a proposed determination
of facts upon which such requisition is based. The proposals are in
the form required by the foregoing executive orders.
Requisition No. 12084 has been received from the British
Ministry of Supply Mission for 100 Ford Truck Chassis described in
the enclosed proposals to be used for the purpose specified therein.
Existing manufacturing facilities have stated an inability to supply
the quantity required for a considerable period of time because of the
need of filling existing urgent orders. The British Ministry of
Supply Mission has indicated that the need for these Truck Chassis
is urgent and any extended delay in filling the requirement would
seriously interefere with its war program. It will be noted that the
articles proposed to be requisitioned are of the type which have been
denied exportation under the Provisions of the Act of July 2, 1940
(54 Stat. 712), and may, accordingly, be requisitioned under the
foregoing Act of October 10, 1940, as amended, for the purposes
specified therein provided the enclosed determinations have been
made and such requisition is certified by the Chairman of the War
Production Board to be consistent with his program of priorities and
allocations.
With respect to the material covered in the enclosed proposals,
the information in possession of this Division indicates that the
business of the beneficial owners of such materials was, at the time
exportation thereof was denied, located in Manila, P. I. Assuming
that under existing statutes this Department had authority to conduct
PORVICTORY
BUY
-
242
negotiations for the purchase of such materials, direct negotiations
cannot be carried on because of inability to contact beneficial owners,
and indirect negotiations cannot be entered into because no representatives of such beneficial owners with authority to conclude the sale of
such materials have been located.
In view of the foregoing, it is my belief that the above
described materials should be requisitioned so as to fill the present
British requirements.
Clipton & Mack
yes
Director of Procurement
243
SUBMISSION OF PROPOSAL
FOR REQUISITIONING AND DISPOSAL OF PROPERTY
UNDER ACT OF OCTOBER 10, 1940, AS AMENDED
Date
Treasury Department No. 11-2
The Treasury Department herewith submits to the Chairman of the War Production
Board the following proposal for the requisitioning and disposal, under the
Act of October 10, 1940 (54 Stat. 1090), as amended, of the property described
below for determination as to whether it is consistent with the priorities and
allocations program and the general production and supply plan of said Chairman,
the head of the department or agency submitting this proposal having heretofore
determined that:
(a) such property is of the type which may be requisitioned
under said Act; and
(b) there exists a necessity for requisitioning the property
in accordance with the provisions of section 1 of said Act.
1, Description of Property
100 Ford Truck Chassis, described as follows:
Total
27 cases
Cases Nos.
7077/7103
Nos. 1/8 - 26/31 226/232
Nos.
Nos.
Nos.
Nos.
Nos.
201/225
251/254
255/256
170/174
25 crates
011
Enamel
Closed cabs on skids
1117 - 1121 -
Nos. 14851/14920 - 21751/
No.
No.
177
No.
Nos. 276 - 277
Nos. 278 - 279
No.
7161
4 drums
2 pails
5 unbaxed
9 cases
21769/21773 1139 - 1140
21768
1126
1138
115
.
34/57 - 76/99 - 100/124 151/169 - 175/176 -
Wheels & Auto Parts
88 bundles
1 crate
1 carton
1 case
2 bundles
2 cases
1 case
-2-
244
All the above are marked
284 Total
Ford Manila or M.T.S. Manila.
2. Present locations
Now in storage at the Haslett Warehouse Company, Harbor
No. 2 Warehouse, San Francisco, California.
3. Beneficial owners
Manila Trading and Supply Company
Manila, P. I.
4. All other persons known to have or claim an interest in propertys
The Chase National Bank
City of New York
New York
5. Intended use or disposition of property by present owners
Unknown
6. Personal to whom Requisitioning Authority proposes to sell or
otherwise dispose of the propertys
The Procurement Division, Treasury Department proposes to
ship this material to the United Kingdom (Government of
New Zeeland) under the provisions of the Act of March 11,
1941, Public No. 11, 77th Congress, 1st Session.
7. Use to be made of property by person described in 6g
The material requisitioned will be used to equip the New
Zenland Arned Forces.
The determination of the Chairman of the War Production Board should be
transmitted to The Director of Procurement, Procurement Division Building,
7th and D Sts., S. W., Washington, D. C.
For the Treasury Department
By
Secretary of the Treasury
245
-3-
Determination of the Chairman of the War Production Board
The Chairman of the War Production Board hereby certifies that he has
determined that the requisitioning and disposal proposed above is/is not
consistent with the priorities and allocations program and the general
production and supply plan of said Chairman.
Dated
, 194
Chairman of the War Production Board
By
Chief, Bureau of Priorities
246
Pursuant to the Act of October 10, 1940 (54 Stat. 1090), as amended,
and Executive Order No. 8942, dated November 19, 1941, I herewith determine:
(1) That the property described below has been ordered,
manufactured or procured for export, the exportation
of which has been denied in accordance with the
provisions of the Act of July 2, 1940 (54 Stat. 712),
as amended;
(2) That such property is the type of property which may
be requisitioned under the Act of October 10, 1940,
as amended, and Executive Order 8942, and
(3) That there exists & necessity for requisitioning the
property in accordance with section 1 of said Act.
100 Ford Truck Chassis now in storage at the Haslett
Warehouse Company, Harbor No. 2 Warehouse, San
Francisco, California, described as follows:
Total
27 cases
Cases -
Nos. 7077/7103
Nos. 1/8 - 26/31 -
34/57 - 76/99 - 100/124 151/169 - 175/176 226/232
Nos. 201/225
Nos. 251/254
Nos. 255/256
Nos. 170/174
115 .
25 crates
4 drums
011
Enamel
Closed cabs
on skids
Nos. 1117-1121 -
2 pails
5 unboxed
9 cases
21769/21773 1139 - 1140
Nos. 14851/14920 - 21751/
21768
Wheels &
Auto Parts
No.
No.
1126
1138
No.
177
1 carton
1 case
2 bundles
2 cases
1 case
Nos. 276 - 277
Nos. 278 - 279
No.
88 bundles
1 orate
7161
All the above are marked
Ford Manila or M.T.S. Manila
284 Total
Secretary 01 the Treasury
247
AUG 26 1942
Dear Lew:
I have your letter of August 24, 1942, with
regard to the circulation of vital shipping information.
This Department is in agreement that every of- fort should be made to reduce to a very minimum the
distribution of the sailing dates of ships and their
destinations. The use of the internal form to which
you refer and any similar forms is being reexamined
in order that any information of this type which is
not required in the war effort may be promptly eliminated from such forms and the information required in
the war effort put on forms which are given strictly
limited circulation and marked "SECRET" in a conspicuous manner.
Sincerely,
(Signed) Henry
Secretary of the Treasury
Mr. L. W. Douglas,
Deputy Administrator,
Mar Shipping Administration,
Washington, D. C.
JwPehle:mgt 8/25/42
Photostat NMC
File to Thompson
WAR SHIPPING ADMINISTRATION
WASHINGTON, D. C.
August 24,1942
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Treasury Department,
Washington, D. C.
Dear Henry:
The War Shipping Administration has in the past been
a little bit lax in regard to circulation of vital shipping in-
formation. It is now proceeding to tighten uo insofar as it does
not interfere with the efficiency of operations, and to take
measures designed to make it difficult for the enemy to obtain
shipping information that would be of value.
Among other things, we are trying to reduce to a very
minimum the distribution of the sailing dates of ships and their
destination, both in interdepartmental communications as well as
within the departments. One of your forms, Internal Form TNF-1,
Treasury Department, Foreign Funds Control, indicates dates which
many ships are to sail and the ports from which they are to clear.
am wondering whether the sailing date and the name of
the ship is necessary; and secondly, whether the ultimate consignee
I
is necessary on this particula r form. If this type of information
is required for effective discharge of the Treasury's responsibilities, I wonder whether the names of ships, dates of departure,
destinations, ultimate consignees and so forth cannot be put on
form of which the circulation is reduced to & very minimum, and
that is clearly marked in a conspicuous manner "Secret".
&
Sincerely yours,
Thank
N. Douglas,
Deputy Administrator.
PORTICTORY
BUY
STAMPS
Why can 7 we /much logether
249
AUG 26 1942
Dear Donald,
I am enclosing a photostat of a letter
which Mr. D. W. Bell has received from Mr. W. S.
Murphy of the Hiscellaneous Minerals Branch of the
War Production Board with reference to silver
problems.
I should appreciate your advising me
whether Mr. Murphy's letter represents your views
and suggestions.
Sincerely,
(Signed) Henry Morgenthau, Jr.
Secretary of the Treasury.
Honorable Donald M. Nelson,
Chairman,
War Production Board,
Washington, D. C.
Enclosure.
Photo file NMC
File to Thompson
Photo to Bunstein
BB:nrd - 8/24/42.
250
WAR PRODUCTION BOARD
WASHINGTON D. C.
August 17, 1942
IN REPLY REFER TO
Materials Division
Branch MM
Room 1204
Tempo R
The Honorable
Daniel W. Bell
Under Secretary of the Treasury
Washington, D. 0.
Subject:
Treasury Assistance to Relieve
Temporary Stringent Silver
Situation
Dear Mr. Bell:
It is suggested that approximately 5,000,000 ounces of
"silver ordinary" held by the Treasury be made available to industry
for use in the production of essential materials as soon as possible.
The release of this silver is requested as a means of relieving a
temporary stringent situation. The release of this amount of silver
will permit filling promptly current rated orders for material
essential to the war program, with the exception of orders involving
some 2,100,000 additional ounces.
1. There is now an under-supply of foreign silver for
is arrived at as follows:
essential use approximating 7,100,000 ounces. The latter figure
Handy & Harman outstanding rated orders* 8,000,000 ounces
Handy & Harman inventory**
3,000,000 "
Shortage
5,000,000
Other outstanding rated orders
2,100,000
Total shortage
7,100,000
*(Handy & Harman account for 70% of the distribution
of silver)
**(Our estimate of the under-supply of remaining
distributors--ho account for 30% of total silver
distribution)
251
Mr. Daniel W. Bell
-2-
August 17, 1942
2. Release of the amount of silver as proposed will be of
assistance in preventing precipitation of an inopportune controversy
over the country's monetary policy, in the guise of war necessity.
Handy & Harman, on July 31st, issued a circular letter to
all fabricators of silver, stating that war demands will soon
absorb all newly-mined foreign and domestic silver. Their circular
letter continued:
"Therefore, after no more domestic silver is
available, the only possible way that silver
can be obtained to keep silversmiths, platers,
jewelry manufacturers, mirror manufacturers,
photo engravers and other fabricators from
going out of business will be to arrange for
the release of silver from the stocks now held
by the United States Government by whatever
means are possible to accomplish this purpose."
In my opinion, the obvious purpose of this statement was to
excite the silverware and jewelry industries to a point where they
would agitate for the release of substantial and continuing quantities
of silver from the country's monetary stocks in order to keep alive
these luxury industries indefinitely. Subsequently, Mr. Niemayer,
President of Handy & Harman, sent a telegram to the Secretary of the
Treasury, calling attention to the temporarily stringent silver
situation. In addition, Mr. Niemeyer called on several agencies of
the War Production Board, in order to emphasize the condition.
Fortunately, it has been possible to nullify this two-pronged
campaign, but it is desirable that the silver for future use
requested herein be made to serve in essential directions.
3. The present shortage of silver supplies is due primarily
to the withholding of approximately 2,500,000 ounces of foreign
silver by Mexican interests and to purchase by the Federal Reserve
Bank, over the past two months, of approximately 3,500,000 ounces
for Australia. The Mexican silver referred to above is, according
to a statement by Senor de los Monteros, representative of the
Mexican Government, being withheld in Mexico due to a desire on
the part of some to benefit from a hoped-for rise in the price of
foreign silver. The silver purchased by the Federal Reserve Bank
was, we understand, taken from the Canadian market, and therefore
is silver which should ordinarily have been made available for
purposes essential for war products.
252
Mr. Daniel W. Bell
-3-
August 17, 1942
Senor de los Monteros has agreed to use his best efforts
to obtain release to us, at 35-3/8 cents, of the silver mentioned
above. There is, however, no assurance that he will be successful,
and, in any case, it would not be available for a month or more.
Should the Treasury agree to release the 5,000,000 ounces
BE proposed, it is suggested that the precise nature of the
transaction be carefully guarded, in order to avoid controversial
questions which might arise and also to overcome establishment of
a precedent whereby luxury industry might be placed in a position
to ask for additional supplies.
Sincerely yours,
W. Wernly
W. S. Murphy
Miscellaneous Minerals Branch
CC: Mr. A. I. Henderson
253
C
0
August 26, 1942
P
Y
Dear Mr. Long
I have received your letter of July 30, addressed
to the Secretary, enclosing a copy of a dispatch of
May 27, 1942 from the American Legation at Canberra,
and a copy of the letter of May 20 from Mr. J. B. Chifley,
Australian Treasurer, to Mr. F. McN. Ackland, Chairman
and Chief Executive of the Motion Picture Distributors'
Association of Australia. These materials are
appreciated.
I believe Mr. Hays would have received a copy of
Mr. Chifley's letter directly from the Australian Motion
Picture Distributors' Association and that it should
not be necessary, therefore, to send him a copy at this
time. However, should the State Department wish to
send the letter to Mr. Hays, the Treasury would, of
course, have no objection.
Sincerely yours,
(Sgd) Herbert E. Gaston
Assistant Secretary of the Treasury
Honorable Breckenridge Long,
Assistant Secretary of State,
Washington, D. C.
JEHigrs
8/22/42
254
July 31, 1942
Dear Sir:
For the Secretary, receipt is acknowledged of your
letter of July 30, 1942, transmitting for consideration
a copy of a despatch of May 27, 1942, and enclosure,
received from the American Legation at Canberra concerning
remittances of revenue due to American motion picture
companies derived from their operations in Australia.
This matter will receive prompt attention and you
will be further advised.
Very truly yours,
(SIGNED) W.N. THOMPSON
Administrative Assistant
to the Secretary
Hon. Breckinridge Long,
Assistant Secretary,
Department of State,
Washington, D. C.
aka 7-31-42
OFFICIAL
255
14731
HIS NO.
COMMINIC
MUST
SECRETARY OF STATE
WASHINGTON a.c.
APPEAR ON GENERAL COUNSEL
PINK SLIP SHOWING "ACTION
TAKEN"
DEPARTMENT OF STATE
WASHINGTON
n
reply refer to
847.4061 Motion Pictures/108
July 30. 1942
My dear Mr. Secretary:
I enclose for your consideration and an expression of
your views in the matter a copy of a despatch of May 27,
1942, and of the enclosure thereto, received from the
American Legation at Canberra concerning remittances of
revenue due to American motion picture companies derived
from their operations in Australia.
Under existing Australian exchange restrictions
American motion picture companies at present are only
allowed to receive a portion of the revenue they derive
from their business in Australia, the remainder being kept
in a segregated frozen fund in Australia. You will observe
that in this despatch reference is made to the possibility
of affording relief on Lend-Lease terms. I shall appreciate being informed whether in your opinion a copy of the
enclosed despatch should be transmitted to the Honorable
Will Hays, President of the Motion Picture Producers and
Distributors of America, Inc., and if so, with what comments.
Sincerely yours,
For the Secretary or State:
Breckinridge Long
Assistant Secretary
Enclosure:
From Legation, Canberra,
No. 124, May 27, 1942,
with enclosure.
of
31
DEFENSE
BUY
UNITED
STATES
The Honorable
Henry Morgenthau, Jr.,
SAVINGS
BONDS
Secretary of the Treasury
3
1915
256
QUINTUPLICATE
No. 124
AIR MAIL
Gamberra, Australia, May 27, 1942.
Subject: Remittances of Revenue Due to
American Motion Picture Companies.
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to refer to my air mail Despatch
no. 118, dated May 23, 1942, relating to the above
subject.
Under date of May 25. 1942, Mr. Ackland, Chief
/1
Executive of the Motion Picture Distributors Association
of Australia, transmitted to me a copy of a letter to
him, dated May 20, 1942, from the Federal Treasurer, the
Honorable J. B. Chifley. A copy of the Treasurer's letter
is attached.
It will be noted that Treasurer Chifley advised the
Motion Picture Distributors Association that although he
cannot recommend to the Australian Government that it
authorize any increase in the dollar provision made last
year, he is prepared to offer to the members of the
Association an agreement for the year ending February 28,
1943, along somewhat similar lines to last year's agreement.
Under the agreement in effect last year, the distributors
were permitted to remit to their principals in America
revenue to the extent of $2,300,000.
Attention is invited to the last paragraph of Mr.
Chifley's letter of May 20. 1942, in which he again advances
the thought that American films night be provided on
Lend-Lease
257
Lend-Lease terms. In his closing sentence he stresses
the point that such a plan would perhaps depend to a
great extent OR the desire of the United States Government
to give such material assistance to the picture industry.
Respectfully yours,
Nelson Trusler Johnson
Enclosure:
Copy of letter dated
May Commonwealth to Mr. 20, Askland, 1942 Treasurer from Chief the
Executive, Notion Picture
Distributors Association
of Australia.
840.6
103/vr
To the Department in Octuplicate (one copy marked
"For Division of Commercial Affairs").
A
or
the
original
R
copy
258
Enclosur no. 1 to Despatch no. 124. dated May 27, 1942,
from No1 in Trusler Johnson, America Minister at Canberra,
Australia, on subject of "Remittances of Revenue Due to
American Motion Picture Companies".
Copy - VF
GOIMONWEALTH TREASURY
GANBERRA A.C.T.
20th May, 1942.
F. MeN. Ackland Esq.,
Chairman and Chief Executive,
Motion Picture Distributors
Association,
of Australia,
Room 301 N.L.C. Building,
Martin Place,
SYDNEY
Dear Sir:
I refer to the representations made by the sub-
committee of your Association and set out in the memorandum
of March, 1942 and later conversations that the Exchange
Control furnish dollar exchange in full for film hire, etc.
received in Australia by your eight member companies for
the current financial year and for all suns in respect of
which dollar exchange has been held up during the two years
ended 28th February, 1942 under the agreement between the
Commonwealth and your Association.
I have considered this matter from its numerous angles
but in particular from that of our control of our available
foreign exchange.
The position of debtor and creditor as suggested in
your representations does not really come up because the
Commonwealth Government as such does not owe your member
companies anything in money. Rather it is that the
Australian brenches of your companies hold local funds
which because of our Exchange Control policy they cannot
remit to U.S.A. through their bankers as they would have
done in normal times.
As you know, this Government has had to place many
restrictions on local industries and production, on imports
and exports, on the use of overseas funds and many other
things for the effective use of our resources, both
physical and economic, for war purposes. Payment in
dollars for services of a non-essential character has
been banned although in many cases approval has been
given for payment in Australian currency where the
parties desired to continue such services under existing
contracts. In other words. we have been forced into
regulating our overseas funds to the best advantage for
war purposes.
You know, of course, that for a considerable time
past, the provision of dollars has been refused to the
theatrical and allied industries for the introduction of
artists and acts because it is considered that these
types of entertainment, although desirable as entertainmont for both troops and populace, do not serve any
war purpose that warrants the expenditure of dollar funds.
On the other hand payment for such services in Australian
currency is not opposed.
so
259
-2-
so far as the moving picture interests are concerned
it has been generally accepted that the import of some
film was warranted because this did give some assistance
by providing the main basis of programmes into which
Was propaganda could be liberally inserted and these
combined assisted also from a point of view of sustaining
morale.
The alternatives existed of:-
(a) reducing the import of film to a quantity
of a nature suitable to necessarily restricted requirements but that would
conform to our limitation of dollar
funds available to meet film hire; or
(b) permitting full import on the basis of
payment in dollars to the extent of such
limitation and payment in Australian
currency, which could only be used in
Australia, until restrictions are
removed, to the extent of the balance
of the hire charges.
The application of (a) would have affected the gross
production receipts of your member companies which I assume
preferred not to interfere with production if it could
reasonably be avoided. Your member companies having
expended large sums on the production of film for their
home market and for perhaps the United Kingdom would not
be called upon to expend more than a minor sum for such
additional film as they send to Australia for use and
take it they preferred the application of (b) to the
limitation on import of film. So far as the Government
was concerned alternative (b), if obtainable, appeared to
be the more suitable to our needs and it was, with the
I
acquiescence of your member companies, adopted.
I am afraid that the position so for as Australia is
years of war. We still would prefer to retain method (b)
concerned has not altered favourably after nearly three
and make available moving picture entertainment to the
troops and people but unless we have the co-operation
of your companies, obviously this cannot be and we would
then be forced to explore the possibilities of import
still keep our expenditure within the limits determined
restrictions to give some measure of entertainment and
upon by this Government having in mind our own difficulties
in conserving overseas funds for the essential needs of
our war economy.
I therefore regret that I cannot see my way clear to
recommend to the Government any increasein the dollar
provision made last year and can only offer your member
companies an agreement for the year ended 28th February
1943 along somewhat similar lines to last year's arrangement.
Although in this letter I have referred to two
alternativos, there is now a possible third in U.S.
lend-lease but of course this would depend entirely on
the
the goodwill and acceptance by the U.S. Government of
a proposal that film being essential to provide ester.
tainment for the purposes of marale and propaganta should
be provided on lease-lend terms. This alternative,
however, has not been explored but having in mind the
reciprocal lease-lend arrangements between Australia and
U.S.A.g from which the United States Government will
benefit very materially, it is a possible means of
avoiding the application of (a), referred to earlier,
if (b) becomes quite unacceptable to your member companies.
The application of this suggestion would perhaps depend
to a great extent on the desire of the United States
Government to give such material assistance to the U.S.
picture industry.
Yours faithfully,
(signed) J. B. Chifley.
Treasurer
Insurance
SAPI - E DUA
to adidivi(I
dossessH credenoM
Treasury Department 26
Division of Monetary Research
Aug. 28, 1942,
Date
Miss Chauncey
Please call to the Secretary's
attention.
H.D.W.
MR. WHITE
Branch 2058 - Room 214
:
262
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 26, 1942
TO
Secretary Morgenthau
FROM Mr. White
subject: Committee.
Progress Report of the Canadian-U.S. Joint War Production
Attached is a copy of the report submitted by the Joint
War Production Committee to President Roosevelt and Prime
Minister King of Canada, covering the first six months of the
Committee's activities. The report brings out the following
interesting facts:
1. U. S. Government contracts placed with War Supplies,
Ltd., of Canada, increased over $500 million from January 1
to June 30, or from roughly $230 million on the former date
to $750 million on the latter. (These figures do not allow
for the expansion of $130 million in the materials contracts
made by the Metals Reserve Company.)
2. Canada's production of war goods more than doubled
during the nine months ending June 30, 1942. The value of
deliveries rose from an annual rate of $940 million in the
last quarter of 1941 to $1,910 million during the second
quarter of this year. This represents 35 to 40 percent of
the total value of all goods and services being produced in
Canada.
3. Only one-third of Canada's output of war goods is
from U. K. and nearly one-fifth on orders from U. S. These
goods are pooled with U. S. output for assignment to various
for her own account -roughly - one-half is produced on orders
theaters of war.
The Committee has been instrumental in bringing
about the adoption of a number of measures which have facilitated the further integration of the war production programs
of Canada and the United States. These measures include:
4.
a. Increase in the number of common types of
munitions used and produced in the United States and
Canada by effecting changes in designs.
263
Division of Monetary
Research
-2-
b. Elimination of inefficient duplication by
concentrating production in the most efficient plants.
C. Promotion of exchange of design and production
information.
d. Diversion of supplies and equipment across the
border to close emergency gaps, thus preventing temporary
interruptions in production.
Diversion of transportation facilities to more
essential or more efficient uses--specifically the use
6.
of Canadian grain boats this summer and fall to carry
iron ore between U. S. ports, and the movement of U. S.
trucks carrying materials between the Detroit and the
Niagara areas across Ontario.
f. The abolition of tariffs on war goods shipped
between the two countries.
Appended to the main report of the Joint War Production
Committee, is a progress report for each of the ten joint
technical subcommittees.
264
JOINT WAR PRODUCTION COMMITTEE
CANADA AND UNITED STATES
UNITED STATES SECTION
HTH
- BUILDING
WASHINGTON. D.C.
July 27, 1942
The Honorable
The Secretary of Treasury
Dear Mr. Secretary:
Enclosed is a copy of a report and press release on the
six months' progress of the Joint War Production Committee,
United States and Canada. This was recently submitted by
Chairman Sheils and myself to the President and to the
War Cabinet in Canada.
The report and the accompanying reports of the Sub-committees
give a good many examples of the kind of work which has been
done to integrate the war production of the two economies.
I thought you would be interested in these as concrete illustrations of international production cooperation in wartime.
Sincerely yours,
Milo Parkins
Chairman
Enclosures - 2
ADVANCE RELEASE
X1379
OWI-168
265
DVANCE RELEASE: This story will be released simultaneously in Ottowa and
Washington at 11 a. m. EWT. Friday, July 24, 1942.
OFFICE OF WAR INFORMATION
The first report of the Joint War Production Committee of the United States
and Canada was submitted today to the President and the Prime Minister. Covering
the first half year of the Committee's activity in coordinating the productive
recources of the North American Continent, the report was transmitted by its
chairmon, Milo Porkins of the United States Section and G. K. Sheils of the
Canadian Section.
The Committee reported action taken so far to increase the war output in
both countries by roducing duplications, rovising specifications to increase the
number of common-typo woapone, arranging more rapid oxchanges of supplies to
avoid production delays, broaking transportation bottlonecks, eliminating tariff
and other barrior and promoting tho full exchange of information on production
mothods and dosigns.
The annual rate of Unitod Statos munitions production for tho second quartor
of 1942 was up nearly four time ovor 1941. Canadian production, including many
critical itoms, was up noarly throo timos for the samo period. Futuro schodulos
call for still sharpor incroasos, ospocially in tho Unitod Statos, whoro the all-
out production offort got undor way at a later date than in Canada.
"Whon tho Prosident of the United Statos approved tho Committoo's original
statement of policy," tho report points out, "ho contrasted Hitlor's mothod of
invasion and conquost with tho North Amorican mothod of coordination through
domocratic processes and friendly consent. The Committee is confident that these
processes of friendly cooperation have in only a few months yielded results
impossible in-Hitler's Europe, although much progress is still to be made."
Gear-meshing the war industries of the two countries, to insure maximum
output, is being directed by ten joint technical subcommittees. Those initiate
and develop programs. They also maintain day-to-day contacts with those in charge
of production in each country. This coordination work ranges from small arms,
chemicals, guns, shells and communications, to tanks, airplanos and ships.
Production is being stopped up in many ways through the Joint Committee's
integration:
Duplication in production has been greatly reducod. For instanco, arrangements
wore made for concentration on one type of airplano propollor in the United States,
and on anothor typo in Canada. This rosulted in moro officient total production
to moot tho noods of both countries. In another instanco, cloarance through a
joint subcommittoo mado it possible for Canada to avoid costly plant expansion to
produco a critical chomical, adequate supplies boing obtained from tho Unitod
Statos.
Exchange of designs and information about production methods has been stimulated.
The Joint Committee opens channels and arranges visits by key production officials
to plants across the border, and makes possible continuous exchange of developing
X1379
ONI-128
1379
information: This increases joint officiency.
Manufacture of common types of material has been increased. For
tion of specifications for a Canadian gun carrier brought about use example, of
facilities in both Canada and the United States, to supplement each other
turning out finished munitions for armies of the United Nations.
-3-
OWI
266
and-Lease Administrator; and H. L. Vickery, Vice Chairman, United States Maritime
demission.
alter
in
Short-term gape in supplies and equipment have been closed, by getting
from the other country. Canada shipped to the United States 500,000 each materials
bodies, fuses and tracers for a certain type gun, during a period when of de
Members of the Canadian Section, in addition to Chairman Sheils, are J. R.
Donald, Director General, Chemicals and Explosives Branch, Department of Munitions
and Supply; H. J. Carmichael, Director General, Gun Production Branch, Department
Munitions and Supply; R. P. Bell, Director General, Aircraft Production Brench,
coarment of Munitions and Supply; H. R. MacMillan, President, Wartime Morchant
Chipping Limited; and Hume Wrong, Assistant Under-Secretary of State for External
supply was running ahead of schedule. The shells were loaded, and are Canadian
Affairs.
body to
castings
for aship
certain
type shell,
with the
that Canadian shipped plante 150,
able
load and
finished
rounds
on result
schedulo.
Rebecemittee nombors for the United Statos are drawn from the War and Navy
Dopartments, the War Production Board and the Maritimo Commission; while Canadian
subcommittoe members are dream from the Department of Munitions and Supply.
Steel plates and framos for Canadian merchant shipbuilding were dolivered from
Unitod Statos, following action by the Maritime Commission. As a result,
Other joint United States and Canadian var agencies area the Pormanent Joint
Board on Defenso, the Matorial Coordinating Committoo and the Joint Economic
used by United States troops. On the other hand, the United States now below
hundred thousand tons of merchant shipe will slido down Canadian ways in 1942. SOUTH
Without the platos, output would not havo been more than two-thirds of this. It
another instanco, working through the Joint Committoo, the Unitod Statos Mary
Department
got
dolivery from Canada of 30,000 pounds of urgontly nooded
optical glass
forquick
sights.
Transportation facilities have been divorted to more essential war work. Canadia
Great Lakes grain boats will be switched this summor and fall to the movement
iron are
between
Unitedmillion
States tone.
ports. This will make possible the shipment of of
extra
two
and one-half
Elimination of tariffs at the border has wiped out bere to effective integration
of production facilities. By a series of broad Orders in Council, Canada permits
by entry, free of duty and taxes, of practically all war production goods purchased
the the Department of Munitions and Supply or its duly authorized agents. On its
part United States, under provisions of an Executive Order of June 1, 1942,
Canada susponds tariff barriors on all var supplies imported by Government departments.
in bond is modifying her regulations with respect to the movement of goods by true
of all across
Ontario between Michigan and Now York so as to permit free moveme
var materials.
United States orders for Canadian munitions have than doubled in rocest
months. along the Those lines orders have assisted Canada in coping with more hor exchange problems,
Canadian of the Hydo Park Declaration of Concentration of
export resources on production of munitions, and April 1941. to maintain add
United schedules, had made it difficult for Canada the pay inability for importe from the
States which are essential to her war production. to
and
still Measures to insure continued integration of the developing production program
and the subcommittees. groator over-all officioncies, will be undertaken by the Joint Committee
to
extension changes in of the the strategic machinery Special situation. for coordination, attention will permitting be given constant to improvement adjustment and
addition Present to Chairman membership of the United States Section of the Joint Committee,
Brigadier General W. Perkins, H. 18 J. V. Foreortal, Under Secretary of Nary;
War Department; R. P. Patterson, Harrison, Under Director Secretary Procurement of War: and E. Distribution R. Stettinino, Division Sr.,
Committoos.
267
102/1mm
Don
not
MORSOLDONG
art
(Logoach
SECRET
to
SECRET
JOINT WAR PRODUCTION COMMITTEE
CANADA AND UNITED STATES
Certained
REPORT OF THE JOINT WAR PRODUCTION COMMITTEE, CANADA AND ass THE as UNITED
STATES, TO THE PRESIDENT OF THE UNITED STATES AND THE PRIME MINISTER
OF CANADA
sotalaIN
best
and
in
and
this
No
The meeting of the President of the United States and the Prime
11
"shirt
Minister of Canada at Hyde Park on April 20, 1941, emphasized the
mutual, if not inseparable, interest of the two countries in world
both
affairs and the urgent necessity of cooperation for defense. There
are now in existence four Canadian - U.S. Joint Committees, of which
the Joint War Production Committee of Canada and the United States
is one. The others are the Joint Raw Materials Coordinating Committee,
the Permanent Joint Board on Defense, and the Joint Economic Committee
of Canada and the United States.
The Joint War Production Committee was set up to deal with the
complex problems of coordinating and integrating the production of
war materials in the two sovereign countries, each with separate
alministrative machinery and separate programs of production. The
Committee was formed on November 22, 1941, with Mr. Milo Perkins and
twitt
Mr. G. K. Sheila as joint chairmen.
The first meetings of the two sections of the Committee occurred
just before the attack on Pearl Harbor. The first joint meeting was
hold just one week after the United States' entry into the war.
to
268
Method of Operation
Statement of Policy
At its initial meeting the Committee drew up a statement of
policy sotting forth the objectives of subsequent work, This state.
ment was approved by the President and by the Prime Ministor and the
War Cabinet of Canada. The objectivos were declared to bo:
1. Maximum war production in both countries in the shortest
possiblo time.
2. Maximum use of the labor and raw material facilities of
both countries.
3. Integration of the production and resources of both countries
towards a common program of requirements for the whole war
effort.
The detailed, difficult and painstaking work of integrating and
accelerating the production of war materials in the tiro countries
has boon placed in the hands of the following ten tochnical subcommittees, functioning undor the general guidance of the main committoo, and headed in each case by joint chairmon, usually the mon
having the direct responsibility for the carrying out of their rospective countries' production programs:
Airplane Production
Chemicals and Explosivos
Communications and Fire Control
Guns
30
Mechanization and Mechanical Transport
has
Morehant Shipbuilding
Naval Shipbuilding
Shells and Sholl Filling
Small Arns and Small Arms Ammunition
4. Concentration of each country upon the parts of the joint
program which will give the greatest and quickost possible
total output.
5. Allocation of scarce raw materials and goods to make the
maximum contribution in the minimum time.
6. The suspension for the duration of the war of all legislative
Tanks
as
and
The work of those sub-connittoos, involving numerous decisions
as to procurement, administrative controls, productive capacity,
mothod, design, and other matters, constitutes 0 now tochnique 'in
international cooperation. Those sub-comnittoes have achieved results
which neithor country could have achieved independently of the other.
and administrative barriers or impodiments to war production,
Boccuso of the intimate relationship between the joint chairmon of the
including tariffs, import duties, customs and transportation,
sub-committees and their relationship to the committee as a whole, a
Following tho adoption of this statement of policy directivos were
beginning has been made toward fitting the surpluses in productive
issued by the appropriate authorities in Canada and by the U.S. Army
capacity of one country into the deficits of the other, and the think-
and Navy adopting and implementing those general statements of principle.
ing and action of the top production and procurement executivos of
269
both countries have been directed, in a major degree, toward on
of the Canadian Army but for the benefit of Great Britain, Australia
integrated North American program, rathor than two parallel programs,
each operating in separate compartments.
and other Empire countries. Some of this development had rolation
to the expectation that Groat Britain would continuo to be bonbod
1000
This report illustratos only a fow highlights of the work of
the Committee. The hard, ofton routine, day-to-day job of maximizing
war production across international boundary linos appears in detail
in the attached reports of the sub-committees which cover their
operations since their incoption.
Whon the President of the United States approved the Committoo's
statemont of policy, he contrasted Hitler's method of invasion and
honvily. The successful defense of the British Isles, resulting in
virtual cessation of those aorial attacks, left available a cortain
-
amount of capacity for the production of types of ammunition and
equipment/common to United States, Groat Britain and Canada, or which
could be readily converted to the production of United States types
closely similar to those of the British.
NOO
It thas natural, if not inevitable, in these circumstances that
conquest with the North American method of coordination through
United States ordnance officers, faced with the necessity for securing
domocratic procossos and friendly consont. Those processos of friendly
equipment and arna for fast growing American fighting services, should
cooperation have bogun, in only a for months, to yield results impossi-
find and use in Canada an immediate source of supply. The sub-committees
blo in Hitler's Europo and have made valuable progress toward accom-
of the Joint War Production Committee proved officient channols for the
plishing the gigantic task ahood.
conclusion of such arrangements. Canada could produce difficult con-
Spood and Volume of War Output
a. Canada's Position Prior to December 7. 1941
The Joint Sub-committee chairmen found on examination of the
productive facilition of the two countries that under the stimulation
of the grave dangor following the fall of France and tho aerial attack
on the British Isles, Canada, proviously only a partly industrialized
country, had made tremondous strides in the development of capacity
for the production of practically overy type of war material. Many
of Canada's munitions facilities had boon developed not for the uso
ponents at comparatively short notice. A throatened deficiency of
spare 90 m. gun barrols for anti-nircraft uso found ready solution in
a Canedian plant which had boon developod for the production of spare
3.7" and 4.5" A.A. gun barrels no longer nooded at a timo whon anti-
aircraft gun fire in England had dimished. Again Canada had all
the capacity and all the materials necessary for the building of
norchant ships except for perhaps 1,000 tons of stool plate per ship.
Examination of this problem by the Morchant Shipbuilding Sub-comittoo
will
tablet
with
270
-
led to a solution which will add at loast 30 more 10,000 ton ships
Canada to proceed with greater confidence in carrying out plans alrondy
to the morchant floots of the Unitod National in 1942 than otherwise
in contemplation for still further expansion of output of items required
would have boon possible. Probably 50 riore such additional ships
on Empire account. Assurance of a demand from eithor the United Statos
will be available in 1943 through the same arrangements.
b. Orders
2001200000
or the United Kingdom often resolved uncortainties as to planning which
U.S. contracts placed with War Supplies, Limited, the Canadian
otherwise right woll have lod to dolays or comproniso,
Canadian Exchango Problem
Government agency in Washington, increased by $525 million from
The Canadian exchange problem has normally boon that of converting
Much of this voluno of orders is simply an extension of previous
transactions under the Hydo Park Doclaration. It is safe to say,
however, that an important proportion of the total of these War
Supplios, Limited, orders consists of itons, the procurement of
which in Canada has boon directly arranged by the joint sub-committoes
and which have gono to increaso and accelerate the combined output
of the North Amorican continent of vitally needed war material.
c. Current Production Mark do fichioned
In recont months Canadian output of minitions has more than
sterling derived from a favorable balance of nerchandise trado with
Britain into dollars to offset the United Statos dollar deficit. The
0
January 1 to June 30, 1942, and other substantial orders' are pending.
effects of the war have boon to make this conversion impossible, first
by reason of practical exhaustion of Britain's gold and dollar rosources and, secondly, by increasing greatly Canadian inports of tools,
nachinory and components from tho United States for their Own nunitions
program and for production of munitions for Great Britain.
Thus a scarcity of United Statos dollar exchange placod sovero
linitations on Canada's civilian economy and throntoned to restrict
her war program. It tras to noct this situation, as wall as to pronote
doubled, the value of deliverios rising from an annual rate of $940
an intogration of resources for defenso, that the President of the
million in the last quarter of 1941 to $1,910 million in the second
United States and the Prino Ministor of Canada joined in the Hyde Park
quarter of 1942. Much of.this the coring into
Doclaration of April, 1941. As one stop toward mooting the Canadian
fullor production of factorios which had been in the organization and
shortage of Unitod States dollars, it was agrood that the United States
tooling up stage in 1941. Some of the now orders placed from the Unitod
would purchase nunitions and other war material from Canada.
States contributed directly to this expansion, but the groatest effect
of the functioning of the Joint War Production Committee was to enable
With the ontry of the Unitod States into the var and the consoquent
vast expansion of the production of munitions, increased production goels
have replaced exchange factors 0.8 roal considerations. The Joint War
271
-8
-
Production Committoo policy has onphasized production. The policy
programs depend upon the Unitod Statos for notors, transmissions and
of all-out joint war production has roduced the Canadian exchange
other major components.
problem to a purely incidental role, the printo purpose being increased
with
Canadian production of nunitions for the joint cause.
The Committoo's first Statonont of Policy recommended that scarco
W
In rough torns, ono-half of Canada's nunition output is being
raw materials and goods nooded in both countrios should be so allocated
as to nako the naximum joint contribution in the minimum period of tino.
produced directly for tho United Kingdom and nearly ono-fifth for
This principle VILLE subsequently widely accepted. But implonentation of
the United Statos. Thoso figuros, incidentally, indicato the nood for
the principlo requiros numorous practical arrangements to nako sure that
co-operativo planning of nunitions production, sinco two-thirds of
row materials and equipnent do got to the place where they will do the
Canada's total output is for other countries.
nost good.
millow
ndn
alastin
The orders which have beon placod since December 1, 1941, together
The so-called Nolson-Borkinshow agroonont on priorities recognizod
with other ordors in the offing, are obviously a substantial contribu-
this problem and gave oqual priority to finished munitions boing pro-
tion toward oasing the dollar exchange problon of 1942 and 1943. In
ducod on oither sido of the border. Changos in the systom of priorition
real torns, the orders go a long way to onable Canada to pay for the
and alloentions have gronted specific problons, but have loft the
Unitod States materials and nachine tools necessary for hor war
production.
principle unaltered.
U.S. menbers of the sub-connittees, approciating the significance
of particular Canadian programs, have used their influence and knowlodge
Inports from the United Statos
Tho flow of supplies from the United States for the Canadian
munitions program has been maintained and facilitated. The expansion
of the administrativo machinory on their side to broak log-jans and
spood nooded components to Canadian factories. The Mar Production
Board has detailed priority specialists to Ottawn, while rociprical
or even naintenance of Canadian munitions output is vitally affected
arrangements in Washington have boon most helpful and thus interruptions
by this novonont. In peacotino the Canadian economy depends upon the
of production have been hold down to a ninimum.
United Statos for many raw matorials, seni-finished goods, manufactured
producers goods, and manufactured consumers goods. Likowiso, war produce
tion in Canada roquires a constant flow of materials from the U.S. If
Canada is to produce many ships she must got certain kinds of stool
plato from the United Statos. Similarly, the Canadian aircraft and tank
Composition of Canadian Program
In recent months the Canadian nunitions program has boon poro
closoly goared to United Nations requirements. Present production
272
- 10 -
schedules show much greator concentration upon critical itons. Those
changes are the result of changing requirements of Canadian forces,
joint planning with the British, and joint planning with the U.S.
The extent of the changes can best be indicated by several lists.
The first list shows C number of itoms where present programs show
substantially greator production than did those of the recont past.
It will be noticod that those increasos in schedules are not confined
to the "easy" itoms but, on the contrary, show increases for a number
of the most critical products.
Output Scheduled for the Fourth Quarter, 1942
Schodule nade in
ITEM
December, 1941
40 m. Anti-Aircraft Gun Barrol
25 Pounder Gun
Bren Machine Gun
Boys Anti-Tank Riflo
40 ml. High Explosive Ammunition
(000's)
.303 Ball Amountion (000,000's)
Cordite, Rifle (000's lbs.)
D. N. T. (000's lbs.)
Aumonium Nitrate (000'a lbs.)
N. C. Powdor (cannon) (000's lbs.)
2,040
150
10,500
15,000
975
Schedule made in
June, 1942
3,500
285
15,000*
22,500
1,350
215
251
720
1,515
2,100
1,800
81,900
6,000
100,350
7,500
*By the and of the first half of 1943 production will be at the rate
of 30,000 per quarter.
The following are some of the totally new articles in the Canadian
program cricing from the activities of the Joint Lar Production Committee:
11
12
Items added to the Canadian Program
Botwoon December 1941 and Jung 1942
Curtiss Divo Bonber
273
At the outset the Committee recognised that it was necessary to
20
start with the existing production programs and that it would not be
75 m. A, P. Shot
20 m. Anti-Aircraft Gun and Ammunition
90 I.I. Anti-Aircraft Gun Barrol
possible to achieve the full integration which night have been gained
Cortain Anti-Tank Mines
Anti-Tank Gronados
if joint planning had been in effect from the start. Accordingly,
the sub-committees have worked to introduce desirable changes while
The production schedulos for cortain other itens were roduced,
The following table indicatos the output planned in Docember, 1941,
for the fourth quarter of 1942, and that planned for the sane period
six months later on June 1, 1942.
a. Common Types
The number of common types has been increased through the action
of the sub-committees in placing United States requirements in Canada
Schedule Made in
ITEM
keeping facilities in operation.
December. 1941
Valentine Tanks
Arnored Care
3.7" Anti-Aircraft Gun Barrol
2 Pounder Arnor-piorcing Shot (000's)
Schodulo Made in
June. 1942
370
231
540
440
720
360
900
and effecting changes in design. Common types have been developed
in guns, tanks, airplanes and other items of the program.
In some cases those arrangements have required substantial
changes in the Canadian program. In other cases only slight changes
50
in specifications have been necessary to make an instrument useful to
The following items are no longer expected to be produced in the
fourth quarter of 1942, although last Decombor they were scheduled for
production in that period.
Tigor Moth Trainor Plano
Floot 60 Trainor Plano
4.5" Anti-Aircraft Gun Barrel
both countries. For instance, recently specifications for the Britishtypo Bron Gun Carrier manufactured in Canada have been altered so that
the troops of all throo countries can use the same equipment. As a
result, it will also be possible for facilities in the United States
and Canada to supplement each other for certain components.
Intogration
Integration of the Canadian and Unitod States programs has pro-
b. Parts Manufacture
When the sub-committees began operations, they found that a
grossed rapidly in recent months. The number of common types has been
substantial portion of Canadian munitions production has boon built
increased, more spocialization in the manufacture of components has
up on the basis of highly important components from the United States.
boon effected, inefficient duplication has boon clininated and oxchange
This was truc of tanks, airplanes and other items. This process has
of designs and of information about production nothods has boon stimulated.
13
274
been furthered in many instances, and at the present time parts of
work, Canada has progressively out its production program for .30
finished munitions are flowing aerose the border in both directions.
In the manufacture of airplanes, the Airplane Production Sub-
calibro ammunition, which is boing produced on an enormous scale in
the United Status, and has expanded its production of British type
committoo has sot up a sorios of international production committoes
.303 calibro which is more important in the British Enpiro program.
which are carrying out dotailed arrangements for parts manufacture
The result has boon to increase the over-all capacity for both types.
and subcontracting. Those arrangements assure complete interchange
The Shells and Shell Filling Sub-committee found that Canada had
ability of parts and assomblios. In addition, the Airplano Production
Sub-committoo has arrangod for a reciprocal system of inspection
element in priming mixtures), and that, if this equipment were trans-
whoroby each country puts into effect in its production the inspection
standards required by the other.
C. Duplication
in
-
facilities for the manufacture of lead azido (used as a percussion
has
forred to the United States, output could be increased. This diversion
was carried out.
ml
The sub-committoos have oliminated a good donl of inefficient
Informed that the Canadians wore about to extend their plants in
Canada for the production of dibutylphthalato, the sub-committee on
duplication. They have attempted to concentrate production in the
Chonicals and Explosivos nado arrangements to supply the increased
most efficient-plants, and to increase total output by transferring
requirements of Canada from United States capacity, thereby saving
the released facilities to other uses. A fow concrote illustrations
timo, duplication, and the unnecessary use of critical materials and
will show the kind of work that has boon carried on.
The Airplano Production Sub-committoo doalt with a caso whore
Canada was engaged in producing two types of propollors. The sub-
labor.
d. Exchange of Design and Production Information.
The sub. committees have served as fooal points for the exchange
committee succedded in concentrating production of one type of
of design, tochnical information and production knowledge. This
propellor in the United Statos, arranging to satisfy Canadian require-
exchange is now part of the regular work of these sub-committees.
monts from this plant. The Canadian facilities word used to produce
The Committee is making arrangements for exchange of production infor-
an expanded output of the other propellor.
action at other lovels. Production managers from both sides of the
The same type of specialisation has been effected by the Small
Arma and Small Arms Ammunition Sub-committoo. As a result of its
border are to be brought together at key factories for conferences on
production mothods.
15
275
16
Shortly after the formation of the Committoe, the U.S. Moriting
f. Transportation
Commission began sponsoring visits by Canadian shipbuilding officials
As a result of action taken by the Connittee, Canadian Great
to United Statos yards and supplying Canadian officials with deteiled
plans and specifications.
Lakes grain boats will be divorted this summer and autumn from the
shipping of grain to the movement of iron ore between United States
With the pano gonoral intontion of spronding knowlodge of how to
ports. The divorsion will add two and one-helf million tons to Great
overcomo production bottlonocks, the Committoo is sponsoring the
Lakes ore shipping capacity.
proparation of a moving picture short, which will foature some good
examplos of conversion of equipment in Canadian plants.
O. Energoncy Gaps in Supplies
The Connittoo has also been instrumental in arranging that nove-
pent of par materials and components by trucks will be permitted in
class
howes
each direction across Ontario, between the Ningara and Detroit areas.
In a number of enorgencios, the sub-comnittoes have provod uooful
This is an energency order for the duration of the war only, but it
instruments. One kind of action has boon the spoody diversion of
is of najor importance both as a transport necsure and for conserva-
supplies or equipment across the bordor to prevent interruptions of
tion of rubbor and gasoline.
production. At 0 tino when the production in Canada of sholl bodies
and fusca for 40 m. anti-aircraft commution excooded the loading
Tariffs
capacity in that country, the sholl bodica and fuses wore transferred
In its initial statement of policy the Connittee recommended that
to the Unitod States where extra loading capacity was available. In
tariffs and other border obstacles to the froo flow of war supplies
this way the total output was increased. A million fuse parts word
should be susponded for the duration of the war. Both countries have
shipped from the United States to Canada to spood the completion of
taken stops to carry out this recommendation.
badly nooded fuses; one hundred and fifty thousand body castings for
By a series of broad Orders in Council and other internal arrango-
3" trench nortar bonbs use shipped from the Unitod States to Canada
ments Canada now permits entry, froc of duties and taxes, of all war
whore they woro in urgont donand. At still another tine the Coconttee
goods, except weapons and supplies required specifically for the
WCA the nonna for locating Canedian capacity for a considerable Navy
donand for optical glass.
Canadian arned services. Under these Orders, procedures have been
worked out to facilitate the novement of post components across the
,
border without duty or delay.
,
- 17
18
On the United States side, the Committee drafted comprehensive
Further Work
legislation to pornit the susponsion for the duration of the war of
-
all inpodinents to the var effort in the form of duties, processing
taxes, and other inpodinents to procurement, construction and trans-
portation. This legislation was transmitted to the War Production
Board, which agrood to sponsor it in Congress.
Moanwhile, the Committee was instrumental in obtaining a sus-
The foregoing statement of progress indicates some of the pos-
sibilities of such a program of coordination and integration, Military
requirements for munitions change frequently. The interdependence of
Canada and the United States for many supplies makes it desirable that
the two munitions programs should be adjusted in accordance with joint
pension of custons dutics on government imports of all 17ar materials
plans. The expansion of both programs and the resultant shortage of
under Exocutivo Order No. 9177 issued Juno 1, 1942. This Order,
raw materials and equipment increase the importance of proper
integration.
together with a groutly expanded list of critical and strategic
materials subject to the Order, serves to suspend the tariff barriors
on practically all government purchases of war supplies. In addition,
administrativo action has greatly simplified the procodures for the
export of commodition and technical data. Authorization has boon
obtained for waiving compliance with the vessol inspection and navigation laws and logiclation to suspond the processing taxes on certain
commodition has already been passed by the House of Representatives.
The Committee has worked constantly to eliminate bordor pro-
The Connittoo and the sub-comnittoes will continue to give attention to:
1. The uso by the United States of Canadian facilities where
this is advantageous in terms of the requirements of the
grand stratogy of the war.
2. Problems of furnishing by each country of supplies and
materials essontial for munitions production.
3. Joint planning for speed in adjustments necessitated by
changes in the strategic situation.
4. Furthor spocialization and climination of duplication.
codures which have delayed production and has helpod the interested
5. Improvements and standardizntion in design.
governmental departments to doviso and use simplified practices. In
The Committee may also prove to be of service in onabling nili-
fact, today, the domostic controls within the two countries run so
tary and naval officers in oither country, when facod with problems
closely parallol that the Board of Economic Warfare in the United
of the design of now worpons, to secure more ready contact with the
States has renoved as unnecessary practically all specific licenses
covering the movement of strategic materials across the Canadian border.
production brains and facilities of the other country. The wolding
togother of the vor production of two countries, of which one has
276
277
19 -
a potential many timou that of the other but of which the snoller
is to be expressed in torms of billions of dollars, is not simple
Appendix I
nor can it bo accomplished in full in any short tine.
It can be said in all cortainty that a good start has boon nade.
It is equally cortain that much renains to be done. Given the
onthusinan, mitual confidence and friendly cooperation in the future
which have charactorized the fow months which have passed there is
good reason for the boliof that the Connittco will carry out the
highest expectations of thoso whose vision and understanding lod
to its fornation.
/a/ G. K. Shoils, Cheirman
Canadian Section
Joint War Production Committee
/a/ Milo Porkins, Chairman
Unitod States Section
Joint War Production Comnittoo
PROGRESS REPORT OF JOINT TECHNICAL SUB-COMMITTEES
278
JOINT WAR PRODUCTION COMMITTEE
UNITED STATES AND CANADA
Joint Technical Sub-Committees
Mechanization and Mechanical Transport Sub-Committee
(Armoured Cars, Trucks, Universal Carriors, Bron Carriers, etc.) Canada
J. H. Berry, Chairman
Motor Vehicles Controller
Director ,General, Automotivo
Branch
Department of Munitions & Supply
United Statos
J.S. Gamble, Chairman
Assistant Chief Staff
Branch
(War Production Board)
for Combat Cars
Col. John K. Christmas (Army OD)
for Mechanical Transport
Licut. Col. Goorge F. Doriot (Army)
John H. Middlokamp
M. A. McKonna
Tank Sub-Committee
Canada
B. D. Beamish, Chairman
Director General, Tank Production
Branch
Department of Munitions & Supply
United Statos
J. S. Gamble, Chairman
Assistant Chief Staff Branch
(War Production Board)
Col. John K. Christmas (Army OD)
Gun Sub-Committoo
Canada
H. J. Carmichnol, Chairman
Director General of Gun
Production Branch
Member of Joint War Production
Committoo
United States
Frank B. Boll, Chairman
Asst. Chief Ordnance Branch (WPB)
Commander A. D. Blackledge (Navy)
for Small Arms
Col. G. H. Drowory (Army Ord.)
for Artillery
Brig. Gen. G. M. Wolls (Army Artillery)
Small Arms Ammunition Sub-Committoo
Canada
Colonol D. E. Dowar, Chairman
Director Gonoral of Arsonals and
S.A.A. Branch, Dopt. of M. & S.
Colonel A. Theriault
United States
Frank B. Bell, Chairman
Asst. Chief Ordnance Branch (WPB)
Col. G. H. Drowery (Army Ord.)
Charlos H. Jackson
Sholl Sub-Committee
Canada
E. J. Brunning, Chairman
Director General of Ammunition
United States
Frank B. Bell, Chairman
Asst. Chief Ordnance Branch (WPB)
Branch
Department of Munitions & Supply
Brig. Gen. J. B. Rose (Army Ord.)
Captain A. D. Mayer (Navy)
279
Merchant Shipbuilding Sub-Committee
United States
Canada
R. MacMillan, Chairman
President of Wartimo Shipping Ltd.
Vice Admiral Chairman H. L. Vickery, Chairman
U.S. Maritime Commission
Member Joint lar Production Committee
Member Joint War Production Committoo
Captain J. O. Gawno
Asst. Chief Shipbuilding Branch
(Har Production Board)
Neval Shipbuilding Sub-Cormittoo
Canada
Desmond A. Clarke, Chairman
Director General of Naval
Shipbuilding Branch
Dept. of Munitions & Supply
United States
Roar Admiral C. A. Jones, Chairman
(Navy)
C. W. Flesher
Capt. A. C. M. Davy
Canadian Navy
(U. S. Maritimo Commission)
Alternate on Joint War Production
Committee
Mr. H. J. Cox
British Admiralty Technical
Mission in Ottawa
Captain J. 0. Gawno
Asst. Chiof Shipbuilding Branch
(War Production Board)
Chemicals, Explosives & Sholl Filling Sub-Committoo
Canada
J. R. Donald, Chairman
Director General of Chonicals and
Unitod States
Brig. Gon. J. B. Rose, Acting Chairman
(Army Ord.)
Explosives Brench
Department of Munitions & Supply
Member of Joint Mar Production Connittoo
Frank B. Boll (WPB)
Lieut. Commander N. S. Primo (Navy)
E. J. Brunning
Director General of Amountion
Production
Communications and Firo Control Sub-Connittoo
Canada
Colonel H. E. Tabor, Chairman
Director of Signal Design in
Department of Munitions & Supply
United States
Frank B. Boll, Chairman (WPB)
Colonol E. V. Elder (Army Sig.)
Communications
J. Paddon
Altornato
Colonol G. M. Taylor (Army Ord.)
Fire Control
Commander Elmor Kiohl (Navy)
Airplano Production Sub-Committee
R. P. Boll, Chairman
Unitod States
T. P. Wright, Chairman (WPB)
Commander P. E. Pihl (Navy)
F. T. Sayo
Col. h. F. Volandt (Army)
Canada
08
II x
SEELLINNOO-EDS TVOINHOELL INIOS 40 SUSHINGH
Progress Report Submittod by the Technical Subconnittoo for
MECHANIZATION AND MECHANICAL TRANSPORT
to
Milo Porkins, Chairman
United Statos Section
G. K. Shoils, Chairman
Canadian Section
Joint War Production Cormittoo
Unitod States and Canada
May 12, 1942
with Preference to your request for G report on the activities, progress
and futuro program of the Mochanization and Mochanical Transport Subcommitteo, wo submit the following:
1. Gonoral Policy Agrood
It is agreed that the Subcommittee should cover general,matters of
coordination and principle starting with & study of the present
program from a standpoint of:
(a) Design
(b) Utilization of material
(c) Standardization
(d) Speeding of production by the efficient use of North American
facilities
It is further agreed that the Chairmen would maintain continuous
contact advising one another of the following details:
(a) Free capacity in the United States and Canada
(b) Free interchange of information concerning now requirements
(c) Free interchange of information concerning new developments
2. Action and Spocific Accomplishments
(a) Complete Canadian program sent to U. S. chairman, including
monthly schedules. This detail was required so that comparison
of production loading could be made.
(b) There wore also sent to the U. S. chairman complete sots of
Canadian specifications of major production itoms for a study
by the Q.M.G. office of material, usago, design features and
intorchangeability. Similar details will shortly be sont to
the Canadian chairman covering Q.H.G. vohicles produced in the
United States so that information of standard types available in
North America will be available both in the United States and
Canada.
281
282
(c) Details of recently developed Canadian "wood" bodies for
Q.M.G.
trucks were sent for the information of the United
States
Q.M.G.
(1) Utilization of oxisting designs and facilities - At the
monont two arnoured vohicles, scout cars and universal Bron
gun carriors, are boing manufactured in Canada on International
Aid.
(d) A list was provided of components required from the United
States for Canadian production (for 1942 program), together with
names of United States sources, so that properly coordinated
allocations could be made for the joint program.
(e)
Those conbat vohicles woro placod for manufacture in Canada
because, in the case of the universal carrier, production was
already under way, and in the case of the scout car, tooling
and design were practically complete.
Liaison Letters - The Canadian Army Engineering Design Branch
issues monthly a Linison Letter to other Dominions and the U. I.,
covering all development work on mechanical transport. This
Letter is a comprehensive survey of the work that is being done
in Canada and will provide more particularly a record of develop-
(j) Recently, on an International Aid requirement, for the United
Kingdon, 30,000 universal carriers were set up, which is more
than can be produced by Ford of Cancda. The U. S. Ordnance Departnent, cooperating with the Canadian Government, has revised
the design of this carrier so as to improve its performance and
ments being carried out to avoid possible duplication in the
United
of such
work. Copies of these Letters are being
sent to States
the U. S.
chairman.
make it a better production vehicle; also, in its revised form,
it will be of more potential use for United States troops and
in thectres of war where United States and British troops desire
to use this vehicle. The 30,000 units recently financed will
be obtained, in snell part, by additional production from Ford
(f) Considerable discussion has taken place covering complete or
semi-complete vehicles required by Canadian Forces from U. S.
factories, more particularly in relation to having these
vehicles scheduled at such a rate that they can be finished
of Canada, and the bulk or repoinder will be obtained from Ford
in Detroit. Ford of Canada will go over to making the revised
design developed by the U. S. Ordnance Department when the
change can be made without interfering with production flow BC
that eventually both plants will be naking the same nodel. Considerable intercompany cooperation has been and will be carried
in Canada and used by Canadian Forces at the same rate, after
the bulk allocations have been ando. This detail has been
successfully worked out, and should provent vehicles being
delivered
to Canada faster than they can be handled and put
into service.
out on this project.
(g) A United States Government survey of constant velocity joint
production indicated a severo overload on United Statos facilities.
(h)
Since the inception of this Subconsittee sufficient problems have been
discussed and actod on which have producod definite results in output of
both countries.
The U. S. chairnon placed the matter boforo the Subconsittee; and
Canada, by the expendituro of a comparatively small sun for tools
in Canada was able to caso the load considerably, Further problens of this nature will be approached in a similar manner.
The benefits derived have definitely provod the value of this close working
relationship and it is our hope this can be continued and expanded.
Priorities - In viow of the continuing critical material and
facilities situation, it because apparent that wo wore operating
In linc with the general direction of the Joint War Production Cornittoo
it was folt that a joint and agrood report on activities from this Sub-
on a priority rating too low to pornit the filling of schoduled
programs. Action was, therefore, takon by the United Statos
Q.M.G. to obtain a bottor priority rating for this program.
Subconnittoo, in the interest of a coordinated North American
program requested and obtained similar higher priority ratings
committoo should be presented.
The
Respectfully submittod,
for Canadian production,
/o/ J. H. Borry
Canadian Chairman
A further study of the prioritios situation indicated that the
Unitod States and Canadian military classifications for vehicles
/o/ Jofferson S. Ganble
United States Chairman
Mechanization and Mochanical Transport
Subcomittoo
did not allow the sano priority rating to bo applied in both
countries. This matter was discussed in full and cleared up
vory satisfactorily.
,
283
Progress Report Submitted by the Technical Subcommittee for
TANKS
to
Milo Perkins, Chairman
United States Section
G. K. Sheils, Chairman
Canadian Section
Joint War Production Committee
United States and Canada
May 12, 1942
Referring to your request concerning the activities, progress and future
program
follows: of the Joint Technical Subcommittee on Tanks, we would report as
General Policy Agreed:
It was agreed that the Subcommittoe should cover general matters of
coordination
and of:
principle, starting with a study of the present program
from
a standpoint
(a) Design and engineering
(b) Utilization and allocation of materials and components
(c) Standardization
(d) Speeding
facilitiesof production by the efficient use of North American
It was also agreed that we would maintain continuous contact, advising
one another of the following:
(a) Open capacity in the United Statos and Canada for materials
or components for uso in the North American program.
(b) Free interchange of information concerning requirements to
foster production of tanks in the United Statos and Canada.
(c) Free interchange of information concerning new developments.
Action and Specific Accomplishments:
The first decision made by the Joint Committee USB to the effect that the
tank programs in both Canada and the United States would be henceforth
looked upon as one, the North American program. with this in mind,
actions by the Committee have been based on mutual cooperative efforts.
At the time this Joint Subcommittee was appointed, there was considerable
doubt in the minds of the Chairmen as to the future of the then existing
programs in both countries. Although each country had a definite objective, it was conceded that there was the possibility of major changes
in their programs. This was due to the forthcoming meeting between
representatives of the British and U. S. Government.
284
-
It was, therefore, decided in committee to hold in abeyanco any discussions
of matters portaining to the future operation of the Canadian Pacific
Railway Company's facility, for the interim. However, decision was
and shortly thereafter acted upon to expand the facilities of the Montroal
Locomotivo Works Arsenal in Montreal with joint Canadian and United
States capital assistance, in order to onable thom to produce 12 tanks
por day rathor than 5 por day. It vas agreed, duo to certain limitations
in Canadian production of such components as ongines, transmissions,
castings, etc., that the U. S. Ordnanco Dopartment would develop their
Unitod Statos sources to an extont to cover the requirements of the
Montroal Loconotivo Arsonal for such itoms.
There have boon many matters discussed and actod upon by the Subcomittoo,
in c nanner nutually satisfactory to all concerned. Those discussions
machino
word
ontools.
such itons as transmissions, onginos, tank track, castings and
made
This Subconnittoo was not ablo to proceed at once at the time of its
inception with the coordination of the whole policy, duo to the neeting
of the aforenontioned mission. Novortholoss, thore have been definito
accomplishments achieved and production improved by the contacts created
through the Subconnittee It is hoped that through the continuod efforts
of
the Subcemnittoo further strides will load to onhancod production
during the balanco of 1942 and through 1943.
At mootings of the British Mission with representatives of the United
Statos and later with Canadian representatives, it was docidod, with
regard to the Valentino Tank, being made in the Canadian Pacific Railway
Angus shops in Montrol, that this tank should be discontinued at-the
earliest moment, that the facilities could be divorted to the manufacture
of the M-4 tank or its components. It was further decided that the
In accordance with the directivo of the Joint war Production Connittoo,
100 hereby submit this as a joint and agrood report.
Respectfully submitted,
Hontroal Locomotivo Works Arsonal program should bo continued on the
basis previously discussed and approved by Canadian and United Statos
/o/ B. D. Boanish
Canadian Chairman
authorities, that is, for the production of 12 tanks por day. This
information was convoyed to our Subcommitteo.
/a/ Jofforson S. Ganble
Tanks Subcommittoo
At the moment of the writing of this report, there is not a meeting of
the minds of the Canadian and the United States Committees 00 to the
utilization of the Canadian Pacific Railway Company's facility, which
includes several large sub-contractors.
The United States Army Ordnance Department has advised the United States
Committee that it is their desire for these facilities to be used for the
manufacture of any tank components, except engines, that can be used in
the North American program. The Canadian Committee, on the other hand,
is desirous of continuing the complete manufacture of tanks in this
facility. They are willing to consider the nonufacture of additional
components, to be specifically named later, beyond the requirements of
the Canadian program, and to be utilized in the United States program.
The matter of the utilization of this facility will be analyzed further,
and a definite course of action agrood upon at the next meeting of the
Subconmittee to be hold in Washington.
The Canadian Committee submitted through the United States Committee a
proposal to expand the facilities of the Dominion Foundries and Steel
Company, Homilton, for the costing of hulls and turrets. The U. S. Artry
Ordnance of Department, in reply to this proposal, assured the Subconmittoo
its ability to supply all the cost hulls and turrets required by the
Canadian
facilities in 1943, thoroby eliminating the necessity for such
an expansion.
s
United States Chairman
Progress Report Submitted by the Technical Subcommitteo for
285
GUNS
to
Milo Porkins, Chairman
Unitod Statos Section
G. K. Shoils, Chairman
Canadian Soction
Joint War Production Committee
Unitod Statos and Canada
April 30, 1942
The following summary of spocific achievements and other probloms on-
countered and don't with is submitted in answer to your request.
Specific Achiovoments
There has boon very close collaboration between the Canadian and Unitod
Statos Gun Divisions. Comploto Canadian program has boon placod in the
hands of the Unitod Statos Section. Regular monthly mootings have been
hold.
6-Pounder Gun. Mark III. Tank and Anti-tonk
Dominion Engineering Works Ltd., Longuouil, Quoboc
Production of this gun has boon increased in Canada from an original program of 100 por month to a presont program of 800 por month, to be attainod in the last quartor of 1942. Of this capacity, 250 por month have boon
allocated for dolivery on War Supplies Limited order, on a basis of 100
for anti-tank uso and 150 for tank uso, the tanks to be built in Canada
for Unitod Statos account. Present F. S. L. orders total 2,166 which will
bo completed before the end of 1942, loaving an open capacity available
for further orders of 3,000 6-pounder units which tho United States Soction
has signified its intontion of utilizing.
6-Pounder Anti-tank Carriagos
Regina Industrios, Ltd., Regina, Saskatchowan
Original capacity established for 100 por month. Expanded to 500 por
month, of which 125 por month allocatod for Mar Supplies Limited orders.
Nar Supplies Limited orders at present total 500 firm and 360 contemplated
for Chineso requirements, leaving an open capacity available for further
1943.
United Statos orders of 1,875 to be shippod complete by the and of
The carriago program is behind schodulo due to the inability to obtain is
machino tools on A-1-d rating as originally promisod. Every offort
boing mado to build spocial singlo-purpose machinos, and by various
other ingomitics, it is hoped that maximum production of 500 carriagon
per month will be attained by October, 1942.
2ª Bomb Throwors, Mark I
Canadian Elovator Equipment Co., Ltd., Toronto
Original Canadian program called for production of 200 per month. This
was then expanded to 1,800 per month, and upon increased requirements, month, with
Caneda agrood to stop up production facilities to 3,000 por producon expendituro on machino tools of approximately $20,000. Pook
-3tion will be attained in November, 1942. Presont War Supplies Limited
ordors for 30,971 will be completed in May, 1943, loaving an available
capacity
open of
approximately
15,000 to the and of 1943, after taking
care
of present
known
Canadian requirements.
3.7" Anti-Aircraft Guns on Mobilo Mountings
Guns
- Gonolco Limited, Potorborough, Ontario
Mountings - Hamilton Munitions, Ltd., Hamilton, Ontario
Original Conodinn program: 20 a month. This wns expanded to a maximum
of 120 por month at the request of the United States Government. This
maximum monthly rata will be ronchod in Fobruary, 1943 - throa months
later than the original promiso duo to the late dolivory of machine tools,
This hns now boon overcomo, wo think, by the granting of A-1-a priority
on all machino tools for this project. Prosont orders will bo completed
by the and of the first quarter of 1943 and there is available opon-espocity to the and of 1943, if required, of approximately 700 complete units.
3.7" Anti-Aircraft Sparo Tubus
Homilton Munitions Limited, Hemilton
Maximum production planned: 300 per month. Caneda undertook to relieve
Unitod Statos contractors by taking contracts with Nor Supplies Limited
totalling 2,400 sparo barrols. Regular shippents to schedulo have been
not to date. This production will be curtailed as a result of the survey
nodo in England and Canada whon tho Unito States Soction roquested help
on their 90 m. spare barrel program. This survey disclosed the fact
that it would bo possible for us to hold up our production of 3.7" spare
barrels and convort production of 200 por month to assist the United
Statos program. An order through War Supplies Limited has boon accepted
and production promised at the rate of 200 por month, commencing in July,
1942. This also meant discontinunnee of the program on the 4.5' anti-
aircraft barrols after backing forgings which woro nado up
before this program was suspended in favor of the 90 m. requirements.
40 MH. Bofors Barrels
Otis-Fonson Elevator Co. Ltd., Hanilton
Canadian 1,000 program stopped up from original program of 100 por month to
ellocated por month, to bo attained in September, 1942. 500 of these are
completed to War Supplies Linited orders which total 7,832, all to bo
to by January, 1943. Canada offered to increase this production
that 1,500 per month if required by United Statos Ordnance upon condition
500
forgings
bo
from the Statos for
Canadian
forgings
cannot bo available.
nodo
machining the
additional
if shipped
Unitod
25-Pounder Field Gun. Corriggo and Trailor
Gun Trailor and Carriage - Sorol Industrios Linited, Sorol, Quobee
Present
- Frost and Wood Co. Ltd., Smiths Falls, Ontario
the additional Canadian 25 program: por month 50 per month. Boing expanded to 75 por month,
with Chine. Although order has not for boon United Statos work account is boing to be proceeded shipped to
and initial shiphonts will start recoivod, in July.
286
Problems Encountered and Donlt With
There have boon no problems and coordination has been smooth. Canadian
facilities at the prosont tino are boing utilized to the very fullost
extent with their own and British requirements plus the additional
commitments that they have undertaken for the Unitod States through Ner
Supplies
Limited
order. Continuing orders have boon promised by the
Unitod
States
Section.
Canada could possibly increase the output of 6-pounder guns for tank or
anti-tank uso by 200 por month should the United Statos Section foel
those are required, without any additional nachino tools from the United
Statos
orders. over and above those presently instelled or undolivered on present
Respectfully submittod,
/s/ H. J. Carnicheol
/a/ G. M. Wells
Canedian Cheirton
United States
Gun Subcomittoe
Progross Report Subuitted by the Technical Subconnittoc for
287
SMALL ARUS AND SMALL ARMS ALMUNITION
to
Milo Porkins, Chairman
United States Section
G. K. Shoils, Chairman
Canadian Section
Joint War Production Committoo
United States and Canada
April 30, 1942
The
following
report to
ofyour
our activities,
submitted
in answer
request. progress and future program is
Specific Achievements
Complete schedules of all Canadian production, giving capacities and their
attainment
date,related.
have been filed with the United States Section. Programs
will
be closely
Rifle No. 4. Mark 1 - Small Arms Limited, Long Branch, Ontario.
Capacity of this plant in Canada was doubled in order to assist in meeting
the requirements for this weapon. An order for 100,000 was placed in
Canada. Deliveries are being made and it is anticipated that War Supplies
Limited order for 100,000 will be completed the last quarter of 1942. The
capacity set up to fill this order will be utilized for continuing orders.
Bren Guns - John Inglia Company Limited, Toronto, Ontario
Capacity has been increased for a planned maximum of 2,500 per month to
5,000 per month, 1,500 of which have been allocated to War Supplies
Limited orders. Shipments are being maintained on schedule, having now
reached a maximum promised capacity for shipment to China of 1,500 per
month. Present contract will be completed during the last quarter of
1942. New orders are being placed to take this capacity at the contiming rate to the end of 1943. The balance of the production is being
shipped on British-Canadian account.
Boys Anti-Tank Rifle. Mark 1 Star - John Inglis Co., Ltd., Toronto, Ontario.
Original capacity of 2,500 per month has been increased to 7,500 per Pre- month
to noot the increased requirements of Var Supplies Limited orders.
sent War Supplies Limited orders total 28,000. Shipmonts started on
schodulo. Presont orders will be completed January 1943. Canadian rifles repro-
sentatives agree they will maintain an open capacity up to 60,000
by the and of 1943, which is required to fill present known requirements inof the U. S. Ordnanco. Canadian representatives further agree to
crease
capacity to 10,000 a month if this is doomed nocessary by
the
Jointtheir
Committoo.
288
-2-
Browning Machino Cun. H 1919A4 - Border Ontario. Citics Industries Ltd., Windsor,
Capacity established in Canada to meet present Canadian requirements of
2,000 per month. There will be a surplus capacity of 2,000 per month
starting January 1943 to assist the United States expanded program if
required.
303 Ball Ammunition, Mark VII
Orders placed: 150,000,000 rounds - Sar Supplies Limited, for shipment
to China. Canadian representatives agree that Canada is prepared to
expand its capacity at its own expense, to supply all the necessary
material, 80% machine tools in Canada and would require 20% of the neces.
sary machine tools from United States production. This expansion program
and present open capacity would permit the placing of additional orders
in
Canada
if same are required to the extent of 950,000,000 rounds of
.303
ammunition.
.303 A.P. Mark 1 and .303 Tracer G. Eark II and IV
Canada agreed to increase its production 10,000,000 rounds per month to
15,000,000 rounds per month, the additional 5,000,000 for shipment to
China
with
the present
effective
January
1943. contract for .303 Ball. Increased capacity to be
9 m Parabellum Ammunition
Canada's present capacity is 25,000,000 rounds per month. Canada agreed
to expand its capacity to 50,000,000 rounds per month and to accept an
unallocatod ordor for approximately 260,000,000 rounds to be completed
by the ond of 1943. If there are further requirements, they are prepared
at their own expense, on the sance basis as applied to the expansion of
.303, to make an additional 50,000,000 rounds por month. A decision
as
oarly as possible should be arrived at to take caro of necessary
facilities.
.55 Boys A.P. Ammunition
Canada agreed at its own expense to oxpand capacity 2,000,000 rounds per
month, tional which is more than ample to take care of requirements for addiquantitios required from Canodian production.
Problems Encountered and Doalt With
the On boing advised by the United Statos Small Arms Accumition Division of
seriousness of the nachine situation on the production of the expanded
programs for scall artis commution, Canada has agrood on all its expansion
Canada, programs submitted through the Joint Coumittoo to produce horsolf in
thereby eighty per cent of the necessary now nachinory for all expension;
fornerly withdrawing to a great extent frou the American norkot which
Canada.
in supplied
almost 100% of the machines necessary for this program
Canada agrood to discontinue the manufacture of .30 ammition which
they were producing on a snall scale and this type will be supplied from
the United States.
All expansion programs contemplated on American-type cornution word
cancolled in view of the onornous expansion program taking place in the
Unitod Statos. Canadian requirements will be procured from United
Statos increased capacity.
There are no known continuing problems except the finelizing of actual
contracts between the two countrios when the requirements are known to
the and of 1943.
Wo bolieve that with the full utilization of the oxisting information in
the hands of both Subcorrittoe chairson, there is full knowledge of the
ability of oach to assist the other, and that c moximum of cooperation
and coordination has boon attained.
Canadian representatives have expressed their willingness to consider
any expansion program decrod desirable on the types presently boing
nonufactured should the dounds BOOL to indicate this necessary,
particularly on weapons that are non-standard with the Aporican pattorn.
Respectfully submitted,
/o/ D. E. Dowar
Canadian Cheirnan
/o/ E. C. Frenklin
United States Chairm
Small Arce and Spall Area Accumition
Subcomrittee
289
Progress Report Submitted by the Technical Subcommittee for
SHELLS
Milo Perkins, Chairman
United States Section
G. K. Sheils, Chairman
Canadian Section
Joint War Production Committee
United States and Canada
May 8, 1942
with respect to your request we are submitting this report covering the
achiovements made and problome faced by our subcommittee, While there
word many exchanges of data and information which in the sum total has
been
montion:important, the following itons are worthy of special and separate
1. The recent divorsion of a conploto lay-out of equipment for
the manufacture of load azido from Canada to the United States,
whore the shortage in the United Statos 100 critical.
2.
The loan of 150,000 body castings for tronch nortar commition
from an American plant to Canada, which onabled the Canadian
plants to load and ship conplote rounde on schedule.
3. Transfer of 500,000 each of sholl bodies, fuzes and tracers
for 40 m. H.E., A.A. rounds from Canada to the United Statos,
Thoso notal components woro all loaded in the United Statos.
The Canadian supply of onpty copponents was ahood of its
capacity for complote rounds to on extont that those con-
pononte could bo spared. It is interesting to note that those
couponents word actually on route to the Unitod Statos a fow
days after the arrangonents voru nado in the nooting of the
Annunition Division, and the 40 III. rounds using those CODpononts are alroady in the hands of Unitod States troops.
4. The recont transfor of ono fuzo part for approximately one
million British Type No. 119 fuzos from an American plant
manufacturing this fuzo to Canada, boccuse of the failure
in tost of this particular part in Canodian production,
5. Thoro have boon novoral instancos of nonufacture of fusos
and of fuze parts in one country or the other (not both)
where the total deconds were not such as to parrant duplication of equipnent in both countries.
6. The recent case of sensible utilization of the A.P. shot plant
of Andover Kent, Inc., (Hartford District). This facility
was completing a contract for 2 pounder shot for the British
Purchasing Commission. The basic nachine tool equipment was
290
floxible upward in capacity to manufacture 57 no. (6 pounder)
shot. After standardization of the latter shot by the United
Statos, tho Ammunition Division placod an order with Andover
Kont. Howover, a period of from two to throe months HEB ro.
quired for retooling, and during this period trained labor
would have been loid off and scattered. It was found that
Canada, at that tino, was sonowhat short of 2 pounder shot to
balance their complete round lines, and was glad to place an
order for 200,000 2 poundor shot for April and May delivery
with Andover Kont, thus tiding that facility ovor without
important
57 m. shot.intorruption, into the United Statos ordor for
charging the brass for this fuse to the allotment of the Ammunition
Division would result in actual curtailment of ammunition production for
the United States. The Subcommittee, therefore, considered the possibility
of asiding the British to furnish brass rod from Canada. Mr. Brunning
stated that ample capacity existed for extruded brass rod in Canada, and
thought that this request could be dealt with, but will check up on it
on his return to Canada, The current practice of Carter Carburotor is
to machine this fuze from brass forgings. However, the bress rod which
would be furnished from Canada could go to the usual forging facility on
which Carter now depends for conversion into brass forgings.
The Subcommittoe considered the current shortage of 57 mm. cartridge cases
7. To date, tho Appunition Division, Army Ordnanco, has placed
contracts with War Supplios Ltd. to the extent of 16 contracts
for Loaso-Lond natorial at a total contract price of $75,247,436.90
and 10 contracts for Unitod Statos use totaling $36,968,400.00.
Of thoso 26 contracts, 3 woro for anhydrous armonia and 1 for
amonium nitrato, totaling loss than five million dollars. All
other contracts in the list are for commition components and
comploto rounds, coming within the purviow of this subcommitted.
The Accunition Division, Industrial Service, Unitod Statos Army Ordnance,
now has on file a comploto summary of existing Canadian capacity both for
notal components and for communition londing, togothor with datos on which
now capacity
willAmerican.
become available from the tormination of curront orders,
oithor
British or
in relation to other components. Unfortunately, a quite similar situation
with respect to this balance of components exists in both the United States
and Canada, such that neither country is able to be of any assistance to
the other without interference to complete round production.
Mr. Brunning brought to the attention of the meeting that he understood
thore was a possibility of 2 pounder requirements materially reducing in
volumo in the near future. This would rolcaso capacity that could be turned
over for the production of 6 poundor shot, cartridgo case, primor, etc. When
the Canadian lines for the various components of the 2 poundor round woro
installed, oversized equipment was used, and all of those lines are floxiblo upward
to take the corresponding components for the 57 m. (6 pounder)
round
by rotooling.
it was agroed that sholl filling and all consunition loading and assombly
cane within the purview of the Shell Subconnittoo rathor than of the Subcommittoo on Chemicals and Explosivos. Formorly, sholl filling had
The Canadian representatives stated that it would be very desirable if a
representativo of the Department of lunitions and Supply, having special
knowlodge of cartridge caso manufacture, could bc allowed to attend the
noxt mooting of cartridgo caso manufacturors in the Unitod Statos, for the
special purpose of following closely the developing tochniquo for the
manufacture of cartridge cases from stool.
since its incoption, included in its purview all notal components of
artillory communition
and bonbs, including fuzos, cartridgo casos and
complete
rounds.
The Subcommittoo agrood that as a general moans of gotting the maximum
joint ammunition output of the Unitod States and Canada in the minimum time,
the common types of ammunition which are already in production in Canada
In the morning sossion with the Subcomittoo on Explosivos and Chemicals,
boon coupled with chordcals and explosivos undor the chairmanship of
Brig. Gonoral J. B. Roso and J. R. Donald, The Shell Subconnittoo has,
The subcommittoo considored the matter of Requisition No. 51653 (U. K.),
covering 225,000 Fuzo No. 231, British typo, submitted with the idoo that
it would be placed as a continuation order for the sano fuzo with the
Cartor Carburotor Corporation, St. Louis, Missouri. It.: understood that
thopo fuzes are to balance stocks of 7.2" artillory sholl now being namefactured in Canada. The requisition has boon informally submitted to the
Ammunition Division, Army Ordnanco for discussion. Colonol Davis statod
that the machining capacity for those fuzos would bo available in the
Cartor Carburotor plant without interruption or postponoment of other
var orders in that plant. Ho raised the quostion, however, of tho consupption of brass in this fuze, which will amount to approxinatoly
a 450,000 pounds. The acuto ituation with respect to copper has lod to
rationing of the Accumition Division on copper clloys such that
should be continued in production on present British (U. K.) specifications
of
and drawings. The main idos for this gonoral policy.i the provention
the serious delays which would result if the Canodian plants producing
common typos of communition components (i.c., common for British and American
guns) had to be retooled to moot Unitod States specifications and drawings.
have
Continuous production can be obtained from current facilition which
boon working to British specifications if the original specifications be ro- are
adhored to, whoreas, a delay of several months for rotooling would followed in
quired if a spocification change were mado. This policy was
the caso of components and comploto rounds for the 40 mm. A.A. Bofors gun
and for the 57 mm. (6 pounder) gun. This, of course, doos not apply or to to the
manufacture of American components which have no British counterpart production.
components of any type where Canadian plants are not yot in
Respectfully submitted,
/s/ Brig. Gon. J. B. Roso
/a/ J. Brunning
Canadian Chairman
Unitod States Chairman
Sholl Subcomintoo
Progress Report Submitted by the Technical Subconmittoo for
291
MERCHANT SHIPBUILDING
to
Milo Porkins, Chairman
Unitod Statos Section
G. K. Shoils, Chairman
Canadian Section
Joint War Production Committoo
Unitod Statos and Canada
May 12, 1942
This Technical Subcommittoo has not at frequent intervals to discuss such
problems of nutual intorest as affect morchant shipbuilding in the U. S. A.,
and in Canada. The following accomplishments have resulted from those
discussions:
1. The U. S. Maritino Commission has facilitated the visiting of
Canadian shipbuilders and of officers of Wartine Merchant Shipping,
Limited, to American shipyards, where the best methods of production
have been established. The information made available on such
visits has resulted in the adoption of improved and quicker methods
of shipbuilding in Canada.
2. The U. S. Maritine Commission has freely given advice on technical
problems to officers of Wartine Merchant Shipping, Limited, and has
provided Wortine Merchant Shipping, Limited, with detailed plans
and specifications - securing such plans and specifications has
saved tine and cost in Canada.
3. Hartine Merchant Shipping, Limited, has been able to supply engines
and other components to the U. S. Maritine Commission.
4. Wartine Morchant Shipping, Limited, is in the course of adopting for
uso hereafter in Canada the designs of a ship that has been worked
out in the U. S. A. as being the nost suitablo to build.
5. In view of the fact that Canadian stool mills, engineering works,
shops, and shipyards, are able to produce everything required for a
complete ship, excepting a proportion of stool platos and france,
the U, S. Maritino Corrission officials have cleared the way for
the necessary stool platos and france to be shipped from the U. North S. A.
to Canada. This is in accordance with the policy of using all
American resources to the bost advantage to produce the greatest
possiblo North American output.
6. Discussions are now under car which nay load to increased production by
of Dorchant ships in Canada, subject to a survey being conducted labor,
Wartino Morehant Shipping, Limited, to ascertain if management, found in
materials, and components for furthor shipbuilding can be
Canada more roadily than in the U. S. A.
Respectfully submitted,
/a/ H. R. LineMillan
Canadian Chairnan
/o/
H.
L.
Vickory
United States Chairman
Morchant Shipbuilding Subconnittoe
292
Progress Report Submitted by the Technical Subconmittee for
NAVAL SHIPBUILDING
to
Nilo Perkins, Chairman
United States Section
G. K. Sheils, Chairman
Canadian Section
Joint War Production Committee
United States and Canada
May 4, 1942
With reference to your request, we are submitting this report indicating the achievements, progress and continuing problems of this subcommittee.
General discussion was had on the best type of escort vessels to construct, the standardisation of vessels and improved production and
interchangeability of components and repairs. The type of escort ves-
sel being built in the United Statos is of the type which could be built
only in Canada in case certain materials and equipment were furnished
from the United States. The productive capacity of the United States
for those vessels is controlled by the production of equipment, such as
main propulsion machinery and not by the fabricating capacity of the
shipyards. On this basis there would be no increased production by
building duplicates of those vessels in Canada. In regard to the matter
of standardization, this is now being accomplished insofar as practicable
by direct contact and interchange of information botwoon the United States
and the British Technical personnol. The inability to fully standardize
is caused by lack of production of such itoms as ammunition, torpedoes
and dopth charges of identical design.
The exchange of plans and specifications is now. in full force between
the British and the United States, and it is assumed that for ships
being built in Canada this information is available from the British
Technical Section, The Committoo discussed at longth the matter of
exchange of plans, design data and technical information. It is the
conconsus of the Committoo that requests for information of this type
should bo handlod through the Navy Department organizational sot-up as
at present. If for any reason information is not furnished promptly or
satisfactorily, the matter could thon be taken up directly with the Navy
Department and the Canadian Government's Naval representative on this
Committeo for a possiblo improvement in the procodure. It might be
advantagoous for the Canadian Government to have a technical officer
permanently on duty with the United States Navy Department in order to
koop
them currently informed on production, design and shipbuilding
problems.
There are no corvettos boing produced in the United Statos other than
the 14-1500 ton escort vossols.
293
The full productivo capacity of the United States, particularly as
regards electrical manufacture, is boing fully utilized on the national
defense program of the Unitod States at the presont time. As a matter
of fact, all industrios capable of manufacturing items and equipment
necessary to the defenso program are now boing expanded. The Naval
Shipbuilding Program production rate is entirely dependent on the availability
of materials and oquipment and not on the fabricating capacity
of
the shipyards.
Admiral Jones stated that ho would bo plossod to invostigate any questions
of procurement where difficultics word being exporienced on materials for
shipbuilding projects by Canada in the United Statos in connection with
their Naval Shipbuilding Program.
Theinvostigated
matter of socuring
additional
be
by Admiral
Jones. Fairbanks engines for mineswoepers will
The United Statos Navy is socuring goods from Canada, but at the present
time no specific difficulty is known. In case any difficultion develop,
this matter will be taken up with the Chairman of the Canadian Committoo.
Tho objoct of tho Joint War Production Committoo was discussed fully
and it was genorally agrood that the roal value of the Committee was
bringing into close porsonal contact representativos of the two countrios
chargod with the responsibilitios of the Naval Shipbuilding Program. It
was folt that this personal contact will bo of groat bonofit to both
countries in their defense effort.
If available, it is considered advantagoous that the Unitod Statos Navy
Department have a list of the industrinI concorns in Canada having a
surplus manufacturing capacity which could be utilized in connection
with the Naval Shipbuilding Program. It would bo well to have a statomont covering the type of equipment capablo of boing manufactured in
those plants accompany the list, Whore tho plants are now fully ongaged,
a included. statemont as to whon surplus capacity would bo available should be
Respectfully submitted,
/o/ Roor Admiral C. A. Jones /3/ Mr. D. A.Clark
Canadian Chairman
United Statos Chairman
Neval Shipbuilding Subcornittee
Progress Report Submitted by the Technical Subcommittee for
CHEMICALS, EXPLOSIVES AND SHELL FILLING
to
Milo Perkins, Chairman
United States Section
G. K. Sheils, Chairman
Canadian Section
Joint War Production Committee
United States and Canada
May 8, 1942
With reference to your request for a report on recent progress, we submit
the following summary of problems which have been discussed and agreements which have been reached:
I. (a) Explosives and Propellant Program
The Canadian Explosives and Propollant Program and the intogration of this program with the Unite States program was
discussed, having in view the two programs, with a view to
maximum production from existing facilities.
Informal discussions between the officers of the U. S. Ordnance
Department, Chemical Warfare Services and the War Production
Board and officers of the Canadian Department of idinitions
and Supply were reported upon.
It was generally agreed, having regard to the program and requirements of both countries, that prioritios in explosive
manufacturing should give first priority to N. C. Powder,
secondly to T.N.T. and thirdly to Cordite.
(b) Ammonium Nitrate - Ammonia
The United States desire to obtain all possible surplus aumonium
nitrate and ammonia from Canadian production with shipments of
8,500 tons per month ammonium nitrate and 50 tons per day of
ammonia maintained as a minimum. Any additional quantitites
available are urgently required. To insure maximum ammonia
ammonium nitrate production in Canada at the carliost possible
date, the U. S. Ordnanco is to endeavor to assist doliveries
of equipment to the Calgary armonia and ammoniummitrato plant
which is scheduled for production in July.
(c) N. C. Powder
To assist production of N. C. powder in Canada, the U. S. month Ordnance
make available 200,000 pounds of nitrocellulodo per available
will for conversion in Canada. If additional quantitics Canada. are
from the United Statos, they can be utilized in
294
-2(d) Additional Requirements of Dibutylphthalato
Additional Canadian dibutylphthalate production was discussed
and it was generally agrood that United States capacity could
mcet the increased Canadian requirement and under the circumstances the plant extension in Canada sconod unnocessary.
(o) Diphonylamino
Additional diphenylamine requirements for N. C. production were
discussed in view of anticipated shortage in the U. S. A. due
to probable demand for synthetic rubber manufacture. Canada
will
endeavor to increase production to meet Canadian requirements.
(f) Double Base Powder
The U. S. Ordnance has inquired na to the possibility of marmfacture of double base powders for the United States in Canada
It was agreed that Canada would immediately investigate possibility of manufacture at one of the Canadian cordite plants.
(g) T.N.T.
The U. S. Ordnance Department anticipates a shortage of toluol,
This may limit increased production of T.N.T. in Canada from
existing plants. It vas agreed, however, that Canada should
requisition toluol for maximum T.N.T. production and operate
T.N.T. plants at naximum capacity based on available toluol.
(h) Mercury Fulminate
(b) H-S
Arrangements by which manufacture of H-S in Canada is boing
undortaken with the cooporation of the U. S. Chomical Warfare
Service and the supply of H-S preliminary to manufacture in
Canada were assured. Mr. Donald called attention particularly
to the assistance and cooperation of the Chemical Warfare
Service, by which general plant design, ordering of equipment
and training of personnel have been mode available to Canada
by the Chemical Warfare Service.
(c) Hexnchlorethane
Attention was called to the possibility of increased manufacture
of hexnichlorethnine in Canada, whereby considerable additional
tonnage can be made available for export to the United States
and continuous supply assured.
(d) Perchlorethylene
Through the cooperation of WPB, perchlorothylene from A Dupont
operation in the United States is being imported into Canada
and converted into hexnchlorethone.
(e) Arsonic
Major Devino stated there UGD likely to be a largo requirement
for arsonic oxide or trichlorido in the United States. The
Canadian representatives undertook to investigate the supply
position in Canada.
III. GENERAL ITEMS
As a result of discussions with the U. S. Ordnance officials,
it was generally agreed that United States capacity for manufacture of fulminate of mercury was adequate to take care of
(a) Carbido
Canadian demond but the general question as to whether Canada
Nogotiations between WPB and the Canadian Government relative
very much equipment.
some 50,000 tons per connin for export to the United States proceed word
should provide facilition for manufacture was folt to be a
decision that should rest with Canada as it would not involve
II. CHEMICAL WARFARE
(a) Activated Carbon
Canadian requirements of Activated Carbon for military and
civilian use were discussed and the availability of United
Statos supply as against the question of additional plant
facilities in Canada in being investigated. The urgency of
supply of present Canadian order of 400 tons was called to the
attention of the mooting.
to installation of a now Carbido furnace in Canada to produce
Canada has signified her willingnose to with
with reported this upon. project and a contract is now under nogotiction
Defonse Plant Corporation.
(b) Ammonium Forchlorato
have been completed whereby Canada is installing with sone
additional Arrangements capacity to supply the United States Navy
200,000 pounds per annun.
295
Progross Report Submitted by the Technical Subcommittee for
COMMUNICATIONS AND FIRE CONTROL
(c) Methanol Hexanine
to
Canadian requirements of hexamine for bethite production were
discussed and the general plan whereby Canada would install
production facilities at the Calgary Annonia Plant with conversion of the nethanol to Hexanine were approved. It was
G. K. Sheils, Chairman
Milo Porkins, Chairman
United Statos Soction
Canadian Soction
Joint War Production Committee
United States and Canada
agreed that surplus above Canadian requirements from the proposed production of 40 tons of nethanol per day could be
absorbed into the United States program.
May 12, 1942
(d) Polyvinyl Chloride
Mr. Donald expressed appreciation of the assistance received
from the WPB in obtaining the necessary priorities for the
completion of polyvinyl chloride plant in Canada being erected
to supply British and Canadian requirements.
(o) Glycerine
With reforence to your roquest, DO are submitting the following report.
It rolatos to information exchanged in subconmittoo discussion and to
the achiovements and futuro program of the Subcomittoo. Several orders
have been placod in Canada by the United Statos Services for important
items of equipment. Those have boon the topics of our discussion,
1. No. 19 Radio Sots:
The supply of glycorino for explosive manufacture and the possible
increased donand due to additional requirements of double base
powders was discussed. Requirements of glycerino for the next
ten months to a your BOOD adequate, but the situation beyond
that is being studied.
(f) Interchange of Information
Canada has contracts, as follows:
WSL 72-29, DATE 227 so 93, for 2,000 sots
WSL 72-153, W2124 so 288 (DA), for 9,950 sets.
(all sot kits)
The overall schodulo to May 9, 1942 is:
1,975
1,048
Estimated
It was agroed that steps should be takon to facilitate interchange of information between the United States, Canada and
also the U. K. The nood for such interchange of information
in connection with accidents which may occur at the various
plants was particularly stressed.
(g) Movement of Tar Materials across U. S. - Canadian Border
The question of difficultion in shipment of var materials betwoon
the United States and Canada again caric up for discussion. The
Subcomittee folt that immodiato action should be taken to overcomo the difficulties now boing oncountered.
Respectfully submittod,
/s/ G. W. Gurd for
J. R. Donald
Rose
United StatesChairsen
Canadian Chairnan
Chonicals, Explosivos and Shell Filling
Subcorrittoo
Actually producod
Actual shipments on V.S.L. contracts
800
The schodulo of production of the complete sets, as outlined to
the Signal Corps, was:
Fobruary, 1942
March, 1942
50
350
750
April, 1942
May, 1942
Juno, 1942
July, 1942
August, 1942
September, 1942
October, 1942
800
1,000
1,500
1,575
2,000
2,500
and 2,500 por month from thon on.
It is anticipated that War Supplies Limited contracts will that be is, completed no will
on schodulo, ovon though they are behind at this timo, capacity
be complete about the and of October and wo will have orders. open
from that dato on 2,500 sots por month on continuing
The abovo production in Canada wns decided upon after 6, a nooting 1942, with
hold
at the Office of the Chief of the Signals on January radio
the Signal Corps officers and representatives of the Canadian
296
industry and Var Supplies Linitod, Colonol Cuny expressed the opinion
that
Canada would
givonifcontinuing
orders.go into production, in all likolihood it would be
It was Colonol Eldor's recommendation that tho production schodulo in
Canada bo roducod to 1500 sots por month for W. S. L. account, in vice
3. a. C. I. Equipments
A Signal Corps contract for 204 has been placed in Canada. Eight sets
have been shipped to date. The delivery schedule for completion is as
follows:
of the fact that tho British have roducod their total requirements for
June and July, 1942
August, 1942
1942 and 1943, and also as ho has sot up throo sources in the Unitod
Statos to make those sots, The Canadion Section agrood to consider
onconooting.
and roviow the whole picture with a view to reporting on
itthis
at at
0 lator
Dynonotors:
Thoro are 500 sot kits comploto at the factories awaiting
dynanotors
(Eicor).
Dynanotors are the bottlo-nock at this time as they are all coming from
the Unitod Statos. McKinnon Industrios of St. Cathorinos, Ontario, are
tooling up to produco dynanotors and it is expected they will bo in
12 each month
16
and the same monthly production from then on,
completing the order for 204 sets by June, 1943.
Colonel Elder intimated the U. S. Signal Corps were developing a similar
type of equipment which might possibly replace the present type. Here
again, the Canadian Section feels that facilities that were used to fill
present orders should be considered in any continuing orders.
production in August.
4. G. L. Sets
Colonol Eldor agrood it was very ossontinl that Canadian facilities be
sot up bocauso oven though they are not required for the No. 19 sots,
thore is sufficiont shortago of this typo of component that facilities
could be vory onsily used whon thdy are ostablished.
One set for testing has been delivered to Fort Monmouth, on separate
2. A.S.V.
order.
An order for 400 sets has been given and production has been planned as
follows:
June
1,700 have boon completed with tho exception of transmittors, of which
1,149 are completed, The Signal Corps are expoditing the dolivory of
the transmitters and the ontiro contract for 6,114 will bo complete the
and of August, loaving on opon capacity of 750 por month for which
Canada will require continuing orders.
Colonol Eldor advised that his Air Corps have indicated a roduction of
their present requirence rather than any possible chance of continuing
orders. The Canadian Soction thought a study should be made of the
situation and ovon though the dosign may bo off and oven though there
are sufficiont facilition for taking care of the U. S. Army and Navy
requirenents,
they should bo considered a continuing sourco for the
not
type under devolopment.
N. T. 99 Tubo: This tube to replace the VT 90 was discussed. The
Canadian would representative informed Colonol Eldor that sample production
which would start in Juno at a monthly capacity of about 2,000 month,
porcontago, be bottor by October and ho would be advised as por to what
W. S. L. orders. if any, of the Canadian production could bo allocated for
7
A Navy contract for 300 has boon completed. The following progress has
boon nodo on a Signel Corps contract for 6,114 sotat
2
July
August
September
October
28
41
60
and 60 per month to completion
of order in March, 1943.
The delay on the G. L. Seta has been caused by the changing of the added
specifications. For instance, the third truck has recently been
to the equipment and the specifications are not yet complete.
In viow of the fact the Canadian Government set up, at their S. own Signal expense,
those expanded facilities to moot the requirements of the U. to utilize
Corps, we feel that every possible offort should be extended similar
same before creating now facilities in the United Statos for
equipment of this kind.
5. 2 C
boon
A United Statos Navy order for 25 has boon placod. Sixtoon be completed have
shipped to date. It is estimated that the balance will further orders.
May 16, 1942. Opon capacity will then be available for
-4 -
Progress Report Submitted by the Technical Subcommitted for
297
AIRPLANE PRODUCTION
osest cooperation and collaboration of all our efforts
to
assistance
very and
ions,
the Canadian
Government,
through its contract
including
ongineering,
specifications,
sign and manufacturing data, to facilitate the American
0 earliest possible production at the very minimum of
Respectfully
/o/ Eugeno V. Eldor
United States Chairman
Milo Perkins, Chairman
United States Section
G. K. Sheils, Chairman
Canadian Section
Joint War Production Committee
United States and Canada
submittod,
May 11, 1942
/a/ H.E. Taber per
R. G. Pours
Canadian
Chairs
Communications and Fire Control Subconnity
The following outline of our activities, progress and future program is
submitted in answer to your request:
1. Specific Achievements:
(a) Utilization of available facilities in the following Canadian
plants to assist the U. S. Victory Programme: Canadian propellers, Limited; Boeing Aircraft of Canada, Limited: Canadian
Vickers, Limited; Fleet Aircraft, Limited; Canadian Car & Foundry
Co., Limited, Fort William; Forging Plant of the Aluminum Company
of Canada, Limited, Kingston.
(b) Co-ordination of inspection of the R.C.A.F.; Bureau of Aeronautics, U. S. Navy; and U. S. Army Air Corps.
(c) Establishment of co-ordination production committees, comprising
representatives of the aircraft companies concerned and the
War Production Board, Department of Munitions and Supply, and
U. S. Navy and/or Army.
(d) Interchange of statistical and production information.
2. Problems encountered and don't with, 800 above.
3. Continuing Problems:
(a) Removal of various border obstaclos, for example:
(1) Tariffs - In the opinion of this Subcommittoo, all
tariff restrictions and border regulations of any
character whatover, as far as aircrafts are concorned,
should be wiped out for the duration of the war.
(2) The necessity of obtaining an export license from the
U. S. Government in the case of transmission of design
data, drawings, tochnical information, specification,
etc., from the United States to Canada.
(3) Increasing delay in connection with the interchange
of porsonnol.
(b) Complete elimination of P.N.R. restrictions.
2
298
4. Prospects for Maximising Joint War Output in Minimum Timo:
(a) Additional
business
to Aircraft,
utilizo facilities
available at
Fairchild
Limited.and organization
(b) Expansion of Aluminum Forging Plant, Kingston.
SECRET
(c) Utilization by the United States of miscollanoous facilition
in Canada, in connection with aircraft parts, equipment, etc.
If and whom the situation at Fairchild Aircraft, Limited, is provided for,
the primo contracting facilities for complete aircraft in Canada will
bo fully occupied with a programme that will take care of our capacity
to the utmost,
Docomber
casos
until theuntil
middle
of 1944.31st, 1943, in all casos, and in DOBO
J. v. Forrestal
William H. Narrison
R. P. Patterson
An inspection trip, conducted by the majority of the mombers of the
United States Section, was made to all but two of the main Canadian
aircraft factories for the purpose of determinings
(a) The most suitable modelo for production at the plants, and
AUG 26 1942
Mile Perkins
TO:
E. R. Stettinine, Jr.
H. L. Vickory
Hale T. Shonefield
Acting Executive Secretary
FROM:
(b) The possible output of each factory.
Respectfully submitted,
/s/ T. P. Wright
United States Chairman
/a/ Ralph Bell
Enclosed are the July figures for the following reports which
are to be filed in your copy of the Statistical Reports for
the Joint War Production Committee:
Canadian Chairman
Report No. 2. War Supplies Limited Contracts
during July Classified by Type
Airplane Production Subcommittee
of Munitions Ordered.
Report No. 6. Canada's Munitions Production
is July Compared with Forecast.
Report No. 7. Changes between July 1st and
August 1st in the Canadian
Munitions Production Program.
00: Mr. Currie
Mr. Taub
Commander Strauss
Mr. MeDiazmid
Mr. Shonefield
Mr. Nathan
Mr. Tarshis
Secretary Morgenthan Mr. White
Mr. Goe
Report No. 2. August 14. 1942
Secret
Socret
299
HAR SUPPLIES LIMITED CONTRACTS DURING JULY CLASSIFIED
BY TYPE OF UNITIONS ORDERED
(Summary)
Subcommittoo
Total to July 31 1942
Mochanization & Mechanical Transport
Tank
$ 77,600,619.28
527,500.00
Guns
110,939,946.96
144,823,557.80
37,951,499.00
Sholl
Small Arms Ammunition
Chemicals and Explosivos
Merchant Shipbuilding
10,556,103.50
158,143,465.88
Naval Shipbuilding
.00
Airplano
172,545,282.94
67,279,670.41
31.021.453.48
Communications & Firo Control
Unclassified
GRAND TOTAL TO DATE:
$ 811,389,099.25
(Dotailod Tablo)
Itoma Ordered in July, 1942
Value
MECHANIZATION AND MECHANICAL TRANSPORT:
Universal Carriors, 13 I
$36,112,500.00
Miscollaneous
103.38
Total in July
$36,112,603.38
Add Revaluation on Earlior Contracts:
Universal Carriors & Spares
449,299.18
$ 36,561,902.56
Not July Total
TANKS:
SMALL ARMS AMJUNITION
MERCHANT SHIPBUILDING:
No Contracts in July
NAVAL SHIPBUILDING:
GUN
6-Pdr., 7 Cwt. Guns, Hark III
Bron Machine Guns & Spares
Not July Total
$ 2,400,000.00
7.921.280.40
$ 10.321.280.40
Page 2, Report No. 2, August 14, 1942
300
Secret
Itoms Ordered in July, 1942
Value
SHELL:
25-Pdr. Smoke Sholl, Q. F.
25-Pdr. Sholl, Q. F. H. E.
Hiscollanoous
Secret
Report No. 6, August 19. 1942
(Dotailed Table)
Canada Munitions Production in July Compared with Forecast
July Production
$ 1,609,200.00
7,405,200.00
Scheduled
7,150.00
Selected Items for which July Production Exceeds Schedule
Net July Total
$ 9,021,550.00
Bolingbroke Medium Bomber
Harvard Advanced Trainer
Tiger Moth Trainer Plane
CHEMICALS AND EXPLOSIVES:
Nitric Acid & Cloun
Actual
Item
Net July Total
$ 38,100.00
17
55
64
50
152
120
Bren Gun
4,794
Browning Aircraft Machine Gun, .303
4th Smoke Generator Discharger
2,761
3,500
2,500
40 mm. Bofors Anti-Aircraft Gun, Complete
$ 38,100.00
32
63
303 Ball Cartridge, Mk VII (000's)
3rd Trench Mortar Bomb, H.E. (000's)
149
108
88,745
83,000
126
100
AIRPLANE
Hiscollanoous
5 12,630.00
Selected Items for which July Output is Below Schedule
Total in July
12,630.00
jooden Minesweepers
0
Fairmiles Motor Torpedo Boats
Hurricane Pursuit Plane
Anson Advanced Trainer Plane
Valentine Tank
1,725,000.00
4,377.50
Total Revaluation
1,729,377.50
Not July Total
$ 1,742,007.50
0
Miscollenoous
18
80
99
150
50
78
Ram Tank
74
125
Scout Cars
13
Armored Cars
AddRadar
Revaluation
Dovicos on Earlier Contracts:
53,377.00
Not July Total
8 54,085.17
27
81
19
80
.303 Tracer Ammunition (000's)
.303 Armor Piercing Shot (000's)
.55 Armor Piercing Shot (000's)
40 mm. H.E. Shell (000's)
1,800
7,967
3,478
11,200
6,000
750
408
75 - Smoke Shell (000's)
19
2-Pdr. Armor Piercing Shot (000's)
2° B.T. Bomb, Smoke (000's)
80
29
UNCLASSIFIED
- Joint War Production Committee -
Miscollaneous & Rovaluations on Earlior Contracts
GRAND TOTAL - JULY. 1942
$ 12,305.72
$ 57.751.231.35
2,000
576
0
$ 708.17
3
1,592
Sten Submachine Gun
$ 708.17
Total in July,
55
150
Reconnaissance Armored Cars
Miscollanoous
150
0
6-Pur. Anti-Tank Gun
2-Pdr. Anti-Tank Gun
Boys Anti-Tank Rifle
COSTIMICATIONS AS FIRE CONTROL:
13
6
Add
Revaluation on Earlior Contracts
SB20-1
450
100
300
100
301
Secret
Report No. 7. August 14. 1942
Secret
Changes between July 1st and August 1st in the Canadian
Munitions Production Program
Revisions in the Canadian munitions program during the
past month were few in number but not unimportant. There was a
change for the good in the aircraft program as a result of the
queision to eliminate one of the large number of types now reprosented in that program. At the same time, schedules between
important combat planos were increased effectivo in the and of
1943. The medium (M-4 typo) tank program has been scaled down.
Thoso and other important changos are listed below.
(Table A) Selected Itoma for which schodulos have boon increased
Botwoon July 1st and August 1st
Production Schodule for 1943
Item
July 1st
August 1st
Ourtiss Divo Bombor (SB2C)
Twin-Engine Fighter Bombor (DH-98)
40 m. Bofors Anti-Aircraft Gun
6-Pdr. Tank and Anti-Tank Gun
636
670
932
1,028
3,400
9,600
22,000
3,600
(Table B) Selected Itoma for which schedulos have been decreased
Betwoon July 1st and August 1st
Production Schedule for 1943
August 1st
July 1st
M=4 combined)
840
3,450
3030 Mark I Tracer Ammunition
2,400
- Joint War Production Committee -
2,700
0
Tigor Moth Trainer Plano
Modium Tank (Ram I & II and
0
Itom
302
303
August 26, 1942
Dear Dr. Kung:
Dr. Currie has kindly delivered to me your letter
of August 6th. It was indeed good to hear from you,
and I hope that this letter will find you in the best
of health. The excellent tea you have sent me is very
much appreciated, and I am sure that it will be most
refreshing during these hot days in Washington.
May I express my deep pleasure in the confidence
you have shown in the Treasury by welcoming its advice
and suggestions? It is another demonstration of the
spirit of mutual trust and good will which has distinguished
the relations between your Ministry and this Department
and the depth of the understanding and comradeship which
link our two countries.
I have not as yet had the opportunity to review
with Dr. Currie the various matters which he discussed
with you, but I hope to be able to do so very soon.
Sincerely,
(Signed) H. Morgenthau, Jr.
Dr. H. H. Kung,
Minister of Finance,
Chungking, China.
Sent via Diplomatic Pouch
to State Dept. 8/26/42 at 5:07
by Messenger Bundy.
File to NMC
FK/egk
COPY
304
TO:
Mr. Bernatein 8/24/42
This is the letter from Dr. Kung
to which the Secretary has asked
prepare a reply. I wonder
and Harry White could help,
dally in suggesting a reply to
second paragraph.
(initialed) F.K.
MR. KUHN
305
Dear Dr. Kungs
Dr. Currie has kindly delivered to me your
letter of August 6. It was indeed pleasant to
hear from you and I trust that this letter will
find you in the best of health. Thank you very
wash for the excellent tea you have sent me and
I - sure that 16 will be meet refreshing during
these hot days to Washington.
May I express my deep pleasure in the confiits advice and suggestions. It is another domon-
dence you have shown in my Department by welcoming
stration of the spirit of antual trust and good-
will which has distinguished the relations between
your Ministry and my Department and the depth of
the understanding and containship which link our
two countries.
I have not as yet had the opportunity to
review with Dr. Currie the verious matters which
he discussed with you but hope to be able to do
se very seen.
Sincerely yours,
Secretary of the Treasury.
Dr. H. H. Kung,
Minister of Finance,
Chungking, China.
ISF/efs
HDn3125/42
FILE COPY
AUG 22 1942
MINISTRY OF FINANCE
PERSONAL
Chungking, August 6, 1942.
Mr. Henry Morgenthau, Jr.,
Secretary of Treasury,
Washington, D.C., U.S.A.
Dear Mr. Secretary,
We are very happy that Dr. Currie was
able to visit us again. During his sojourn here,
I have had opportunities to disouss with him comprehensively the various phases of China's pre-
sent financial and economic conditions. I trust
he will, after his arrival in the States, have
a full exchange of views with you on his observations.
We are constantly conscious of what
you have done for China and are ever grateful
for your sympathetic assistance. I shall be
most pleased for any advice or suggestions which
you think will further strengthen our financial
collaboration against the common enemy.
The heat in Chungking reminds me of
the humid summer weather in Washington. It is
my hope that your health, which has weathered
your many responsibilities, will also enable
you to stand well the heat.
306
307
MINISTRY OF FINANCE
-Secretary Henry Morgenthau, Jr.
Availing myself of Dr. Currie's kindness, I am asking him to present to you, with my
compliments, two tins of Chinese tea which will
help quenching your thirst in this weather.
with best wishes,
Yours sincerely,
H.
of H. H. If Kung
Seey
308
COPY
FEDERAL RESERVE BANK
OF NEW YORK
Fiscal Agent of the United States
August 26, 1942
Attention: Mr. Frank Dietrich
Sir:
We have today received the following tested telegram dated
August 26, 1942 from the Denver Branch of the Federal Reserve Bank
of Kansas City:
"WE CREDIT YOUR ACCT $5,624,029.07 DEP BY
US MINT DENVER CREDIT TO YOURSELVES ACCOUNT
SEC OF TREAS SPECIAL ACCOUNT NUMBER OF FINE
OUNCES GOLD 160,691.139 TOTAL DOLLAR VALUE
$5,624,189.87 REGULAR HANDLING CHARGE
$14,060.47 MINT CHARGES DEDUCTED $160.80
DATE GOLD RECEIVED AT MINT AUGUST 10, 1942"
In accordance with the above telegram and pursuant to our
telephone conversation of today, we have credited the Secretary of
the Treasury - Special Account on our books $5,624,029.07 and have
made the appropriate entries in the transcript of the Secretary of
the Treasury - Special Account to reflect the 1/4 of one per cent
charge of $14,060.47 as a handling charge on gold.
Respectfully,
(Signed) H. L. Sanford,
H. L. Sanford,
Manager, Foreign Department
The Honorable
The Secretary of the Treasury
Washington, D. C.
COPY: lap 8/28/42
Seey
309
0
0
P
Y
TREASURY DEPARTMENT
United States Mint Service
Denver, Colo.
August 26, 1942
VIA AIR MAIL
Secretary of the Treasury,
Room 223,
Treasury Department,
Washington, D. C.
Attention Mr. Frank Dietrich.
Dear Sir:
In accordance with the telegram of August 10,
received from Mr. D. W. Bell, Acting Secretary of the
Treasury, we are enclosing ten copies of our report on
the deposit made at this mint on August 10 for the account of the Secretary of the Treasury of the United
States by order of the Government of the Union of Soviet
Socialist Republics.
Our check in payment of this deposit has been
drawn to the order of the Denver Branch of the Federal
Reserve Bank of Kansas City, for account of the Federal
Reserve Bank of New York for credit to the Secretary of
the Treasury Special Account. The Denver bank is today
telegraphing to the Federal Reserve Bank of New York the
amount of the check together with other information in
regard to the deposit.
Yours very truly,
/s/ Mark A. Skinner
Mark A. Skinner, Superintendent.
Encls.
Copy:vw:8-27-42
UNITED STATES MINT
AT DENVER, COLORADO
Date
451
Mint Form 42R
BULLION DEPOSIT-MEMO REPORT
Memos Required
by Depositor
8/10/42
(Revised)
SOURCE DATA
Silver Price
or Class
State U.S.S.R.
10
County
Other Data
"SECRETARY OF THE TREASURY
Mine
SPECIAL ACCOUNT."
310
Sheet 1.
Description
of Deposit
Assay
Number
Dec
Ounces
Refin
ASSAY CERTIFICATE
FINENESS
After Melt
Before Melt
Ounces
S.R. Fine Au.
21/16
WEIGHTS
Dec
Gold
Silver
Cts.
Base
GOLD
FINE OUNCE
SILVER
FINE OUNCE
Per Oz.
"A"
Bars
7,626.244
7627.90
7627.77
999.8
0
533
534
7695.75
7695.61
999.8
0
535
7714.00
7713.85
999.7
0
20
7,711.535
536
7754.70
7754.55
999.8
0
20
7,752,999
20
537
7722.37
7722.24
999.8
538
7761.20
7761.06
999.7
539
7735.57
7735.43
999,8
540
7740.13
7739.99
999.8
541
7798.38
999.7
0
20
7793.53
542
7687.87
7687.73
999.8
0
20
543
3106.20
3106.18
999.7
0
20
20
7,694.070
2
16
20
24
28
-32
-36
-40
-12
20
20
20
8
BLE BY CHECK
AS NOTED
0
7,720.695
0
7,758.721
0
7,733.882
0
7,738.442
7,796.040
7,686.192
3,105.198
NOTE:- THIS REPORT IS FOR THE INFORMATION
OF THE DEPOSITOR AND IS OF NO OTHER VALUE
to Denver Branch, F.R.B. for
Pansfer by telegraph to F.I.B.
W York City for a/o Depositor.
Melting
Refining
Handling
Other Chg.
TOTAL CHRGS
VALUES, $
NET VALUE
Bars
Cash
Check
Calculator
BULLION DEPOSIT-MEMO REPORT
UNITED STATES MINT
AT DENVER, COLORADO
(Revised)
Memos Required
by Depositor
8/10/42
451
Mint Form 42
"SECRETARY Date OF THE TREASURY
or Class
10
State U.S.S.R.
Other Data
SPECIAL ACCOUNT.
County
Mine
Sheet 2.
Description
of Deposit
Assay
Number
WEIGHTS
Ounces
ASSAY CERTIFICATE
FINENESS
After Melt
Before Melt
Dec
SOURCE DATA
Silver Price
Ounces
Dec
Gold
Silver
Refin
Cta.
Base
Per Oz
GOLD
FINE OUNCE
311
SILVER
FINE OUNCE
S.R. Fine Au.
22/17 "A"
Bars
544
7815.40
7816.24
999.8
20
545
7707.00
7706.88
999.8
19
546
7336.75
7336.65
999.8
16
20
547
7740.85
7740.71
999.7
20
20
548
7700.62
7700.49
999.8
24
20
549
7786.47
7785.32
999.8
28
20
550
7740.10
7739.96
999.8
32
19
551
7376.70
7376.57
999.8
6
20
552
7606.22
7606.08
999.8
2
LE BY CHECK
0
7,813.676
0
7,705.338
0
7,335,182
0
7,738.387
)
20
7,698.949
0
7,783.762
0
0
0
7,738,412
7,375.094
7,604.558
NOTE:- THIS REPORT IS FOR THE INFORMATION
OF THE DEPOSITOR AND IS OF NO OTHER VALUE.
to Branch, F.R.B. for
VALUES, $
Melting
T AS NOTED
insfer by telegraph to F.R.B.
York City for a/c Depositor.
Refining
Handling
NET VALUE
Bars
Other Chg.
Cash
TOTAL CHRGS
Check
Calculator
"SECRETARYDAN THE TREASURY
SPECIAL ACCOUNT."
S.R.
Number
or Class
10
State
Other Data
Total sheet 1, 2, & 3
WEIGHTS
Before Melt
Ounces
ASSAY CERTIFICATE
Refin
FINENESS
Cts.
After Melt
Dec
Ounces
Dec
Gold
Silver
Base
U.S.S.R.
County
Melting charge $160.80
Sheet 3.
Assay
(Revised)
SOURCE DATA
Silver Price
Memos Required
by Depositor
AT
451DENVER, COLORADO 8/10/42
Description
Mint Form 42R
BULLION DEPOSIT-MEMO REPORT
UNITED STATES MINT
312
Mine
GOLD
FINE OUNCE
SILVER
FINE OUNCE
Per Oz.
22/17 "A"
Bars
0
2
20
553
7740.70
7740.55
999.8
10
554
3835.60
160729.63
3835.53
999.8
1 - 416
0
7,739.001
0
3,834.762
160,691.139
LE BY CHECK
NOTE:- THIS REPORT IS FOR THE INFORMATION
Branch, F.R.B. GO THE DEPOSITOR AND IS OF 169180 VALUE.
after by telegraph to F.R.B.
York City for a/o Depositor.
VALUES, $
Melting
Refining
Handling
14,060.47
Other Chg. 14,221.27
TOTAL CHRGS
NET VALUE
5,624,189.87
5,609,968.60
Bars
Cash
Check
Calculator
313
NOT TO BE RE-TRANSMITTED
COPY NO.
13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 292
Information received up to 7 A.M., 26th August, 1942.
1. NAVAL
24th/25th. Our light craft were in action off FLUSHING with 4 steam
trawlers at least one of which is believed to have been torpedoed. One motor torpedo boat and 2 motor gunboats were slightly damaged. One of H.M. Submarines be-
tween the 16th and 18th off SARDINIA sank a 50 ton sailing vessol, a 250 ton
ammunition schooner and a 10,000 ton empty tanker.
2. MILITARY
Nothing of importance to report.
3. AIR OPERATIONS
WESTERN FRONT. 24th/25th. FRANKFURT. About 167 tons of H.E. includin
50 of 4,000 lbs. and 40 of 2,000 1b. and 224 tons of incendiaries were dropped in
the FRANKFURT area. Late arrivals reported a good concentration of fires in the
town.
25th. A JU 88 crashed in this country from unknown cause.
25th/26th. 24 aircraft were sent against shipping. Proliminary reports indicate that 2 ships were hit off the Dutch coast and an E-boat set on fire
off CALAIS. A tanker off LA PALLICE was attacked with unobserved results.
MEDITERRANEAN. 24th. An escorted tanker in the North Ionian Sea was
attacked with torpedoes and bonbs by aircraft. A JU 88 was destroyed and one
Beaufort is missing. The attack was continued at night when oil surrounding the
tanker was set alight.
AUG 28 134
OFFICE OF STRATEGIC SERVICES
WASHINGTON, D. C.
August 26, 1942
SECRET
The Honorable
The Secretary of the Treasury
Washington, D.C.
My dear Mr. Secretary:
The attached is the British Home
Intelligence Report for the week ending
August 17.
Sincerely,
him
Mountain
William J. Vonovan
Director
315
SECRET
General confidence is similar to last week. There
is continued and widespread anxiety and uneasy depression
regarding the Caucasus news and the sense of frustration
has deepened. The Solomon Islands and the British Governments's
firm stand on India are having a reassuring effect but only
on a slight scale. In several regions there is apathy and
indifference, partly due to preoccupation with holidays,
harvest, etc. However it is thought that people are not
sufficiently alive to the horrors occurring daily on the war
fronts and in the occupied countries, feeling that such things
are unreal and can't happen here. Public is reported to feel
uneasiness at earlier blackout, dread of another war winter
with new possibilities of transport difficulties and fuel
shortage.
It is reported that the Churchill-Moscow visit
eased the criticism of the Government for "not wanting to
help Russia much." However, on the other hand, it was
recalled that he went to France just before the collapse.
There is grave concern regarding Russia. Public
confidence in her ability to resist is difficult to assess,
although sympathy and admiration for her remain deep and
widespread. At one end is a minority convinced that
Timoshenko has something up his sleeve and which expects a
counterblow. At the other end there is anxiety, doubts of
ultimate victory and fear of separate peace.
Second front: same as last week.
Eight regions report heated comment and bitter
condemnation still on the Lady Astor speech. Some people
suggest her detention under 18 B (law regarding subversion)
or some action against her". Factory workers particularly
criticize her remarks.
There is general approval of the government's attitude on India. Although there is some sympathy for India, the
general feeling is that "self-government must be left until
Gandhi is called a blackmailer. The approval
after the war.
-2-
316
of the government is tinged with regret that the problem
was not tackled years ago.
On the whole there is little interest in the Solomons
although it is "heartening" and welcome. People are "waiting
to hear the results before jubilating." There is some feeling
that the U.S. is now strong enough to hold the Japs. This
is balanced by fears (three regions) that the "absence of
definite news may mean that the battle cannot be going too
well," and doubts about the high prices in ship losses which
the landings may require. A thoughtful minority sees the move
as a diversion upsetting the Jap plans for attack on Russia.
There is not much comment on the Mediterranean
convoy battle except in Plymouth Portsmouth areas. A reserved
attitude results from the lack of definite information.
There is considerable apprehension that losses were heavier
than announced. Action shows "insecurity in the Mediterranean,"
but elsewhere confidence is renewed.
Little comment on Egypt.
Recent R.A.F. raids have not captured the public
imagination and the public is disappointed the aiva. There
is continued demand for raids on Italy and Berlin.
In a number of regions appreciation of U.S. troops
in Great Britain is reported. Troops are described as
"singularly good fellows," setting an example for other
visitors. In regions where troops are stationed residents
are anxious to be hospitable and are devising entertainment
for them. In northwestern and southwest regions adverse
comment is reported regarding colored troops, arising over
girls who "walk out with them." The criticism is directed
at the girls rather than at the troops themselves. As a
solution the introduction of colored women auxiliaries is
widely advocated as it is felt that "repressive measures"
are unsatisfactory with "certain types of girls." At the
same time the extremely pleasing manners of the colored troops
are remarked. In three regions there are references to
drunkenness among U.S. troops. Complaints of alleged excessive
charges by shopkeepers in Northern Ireland have recently been
investigated. The only specific complaints found concerned
coffee and whisky prices. It was however gathered that any
317
-3intervention by the Government to protect troops in the
matter of whisky prices would be regarded by the American
authorities with mixed feelings. Commanding officers seem
to think, "their troops would have more money for drink,
with prices stabilized or reduced and this they do not wish."
Rumors of what America said over drink are declinig.
318
OBILIZINGMANPOWER
ITELLIGENCEFOR
REPORT
WAR 8.26.42
CONFIDENTIAL
WAR
CONTENTS
SUMIARY
MOBILIZING MANPOWER FOR WAR
Tradition
Unawareness of Problem
The Problem Ahead
Attitudes Toward Selective Service
Occupational Deferments
page 1
page 1
page 2
page 3
page 4
page 6
Dependency and Disability
Deferments
Draft Dodging
Determinants of Complaints
The Draft and Anxiety
The Press and Selective Service
The Home-Front Manpower Problem
Willingness to Accept War Work
Compulsory vs. Voluntary
Kobilization
Augmenting the Labor Force
Conclusions
page 7
page 8
page 8
page 9
page 10
page 10
page 12
page 13
page 14
page 15
SUMMARY
In part because people have adapted themselves to the inevitability
of conscription, the Selective Service System has aroused a minimum of
dissatisfaction. Of a cross section of the public interviewed in early July,
only nine people out of every hundred felt that it was unfair in its operation.
Even
fewer
respondents
felt that they, or their closest relative or friend,
had been
classified
unfairly.
Only about one person in ten had any criticism to make with regard to
the general administration of Selective Service or present policies and
practices with regard to occupational, dependency, and physical disability
deferments. Many of the criticisms made cancelled out; some thought that
standards were too strict, others that they were too lax. Few people felt
there was much draft dodging.
In contrast, the need for manpower mobilization is not generally
recognized. Continued unemployment during recent years has made it difficult
for people to appreciate the existence of labor shortages. Only one respondent in four had given any serious thought to the impending manpower crisis,
Only two people in ten felt that it is necessary to resort to compulsory
mobilization of manpower. A very large number of those who regarded such a
step as unnecessary believed that a large labor supply is still available.
Despite their unawareness of the labor shortage, four people in ten
were willing to give up their present jobs to do war work. Almost as many
were willing to be shifted into war work by the Government. A large group of
respondents would be willing to change jobs if they were convinced that such
a step is necessary and if certain reasonable conditions are fulfilled. Only
one person in four was definitely unwilling to shift jobs.
The most important determinant of readiness to shift into war work
was the present situation of the respondent. People who were poorly paid
and dissatisfied with their work were more willing to change jobs than those
who were well-paid and contented.
People expressed some preference for a voluntary system of mobilizing
manpower. This does not mean, however, that a compulsory system would be
resisted if it were regarded as necessary. A sizable group already favors
compulsory mobilization, and there was a general disposition to accept what-
ever`measures the country's wartime Government deems best.
MOBILIZING MANPOWER FOR WAR
The American people have accepted, almost without reservation, the
necessity of mobilizing the nation's manpower for military service and they
overwhelmingly approve the system which has been established for effecting
it. In contrast, they are largely unaware of the fact that a civilian manpower crisis impends and are only partially ready for a mobilization of
manpower for war production.
Yet mobilizing men for the fighting front and mobilizing men and women
for the production front are not only analogous; they are two aspects of a
single problem - marshalling the nation's manpower to meet the demands of
the war effort. As a preliminary to developing better public understanding
of the manpower problem as a whole, it is important to understand the diver-
gence in public attitudes with regard to these two phases of the problem.
Tradition
Tradition unquestionably has a great deal to do with the sharp contrast
which exists. To draft the most eligible males for service with the armed
forces when danger threatens is such an established practice that it is accepted
by most people almost without thought; an interviewer commented that the draft
seemed as inevitable to many people as death and taxes.
In contrast, the idea of directed mobilization of workers for civilian
employment seems either vaguely or sharply at variance with American traditions.
While most people do not have a theoretical understanding of the close re-
lationship between a free labor market and our form of economic and political
system, they probably do recognize that any system under which the Government
would allocate the available supply of manpower would threaten their customary
freedom of action.
there is a plethora of workers may forget that in other sections of the
country the labor situation is already critical. In July there were already
Unawareness of Problem
The difference in the extent to which there is an appreciation of the
need for additional manpower in the fighting forces and on the production
front also contributes importantly to the divergence in viewpoint toward
the two types of mobilisation. Even before America was at war people felt
sufficiently threatened by the continuing aggressions of the Axis powers to
appreciate the necessity for expanding the nation's Army and Navy.
While the world situation was a constant reminder of the need for expanding our armed forces, the domestic economic situation made it difficult
for people to appreciate the present need for augmenting the labor force.
In the thirties people became inured to the idea of unemployment; today
shortages of male workers in 35 of the 160 major labor market areas of the
country, and shortages were anticipated in 81 additional areas. People aware
of conversion unemployment and unemployment caused by shortages of materials
tend to forget the temporary nature of these situations.
People who point to the existence of unemployment may also forget that
there are many persons who, because of permanent disabilities, chronic illness
or psychological factors, cannot be readily absorbed into the labor force.
The Social Security Board estimates the number of persons with permanent disa-
bilities and chronic illness at more than 2,000,000. While England's war labor
experience indicates that many people who are regarded as unemployable can
ultimately be absorbed in industry, in part-time if not full-time employment,
the process promises to be a slow one.
they can scarcely credit the existence of labor shortages.
People are aware of the fact that unemployment persists in some fields.
In various parts of the country, including New York City, they note that
The Problem Ahead
People generally are unaware of the rapidity with which new plants are
there are still large numbers of people cut of work. And in such important
being built and productive capacity expanded. As of July 1942, approximately
production centers as Detroit, people are acutely aware of the layoffs and
12,500,000 workers were making material for the fighting fronts of the United
loss of jobs caused by the conversion of plants to war production and by
States and its allies. By 1943 it is estimated that 18 million workers will
material shortages.
be needed for war production; by 1944, 20 million. Simultaneously, we must
Thus many people are actually misled by the evidence they obtain
find the manpower to more than double our armed forces and to expand farm
from first-hand observation. The oversupply of workers in some fields ob-
production. The contraction of many businesses and industries not connected
scures the fact that severe shortages exist in others; by September it is
with the war will free millions of workers to meet these demands, and between
estimated that shortages will exist in 138 of 491 skilled and semi-skilled
now and 1943 perhaps a million additional workers can be recruited from the
occupations essential to war industries. Similarly, people in areas where
ranks of those now in the labor force but unemployed. When full allowance is
-4-
-5-
SATISFACTION WITH
SELECTIVE SERVICE
made for these possibilities, it is estimated that five million additional
people must be recruited into the labor force by 1943, if war production goals
are to be met. An almost incalculable amount of shifting from peace to war
industries will be necessary. What the War Manpower Commission rightly calls
"the biggest personnel job in history" looms ahead.
IS THE DRAFT BEING FAIRLY HANDLED AROUND HERE?
Pain
Unjain Dont know
Attitudes toward Selective Service
65%
13%
13%
The Selective Service System has aroused a minimum of dissatisfaction.
As the chart on the opposite page shows, only nine people out of every 100,
of a cross section interviewed by the Bureau of Intelligence in early July,
WERE YOU (OR WAS YOUR CLOSEST RELATIVE
OR FRIEND) CLASSIFIED FAIRLY?
Fair
Qualified SAUNER
feel that it is unfair in its operation. Even fewer feel that they - or their
93%
brothers, sons, relatives or friends, if they themselves have not been classified - have been classified unfairly.
In view of the direct effect of the decisions of draft boards on people's
personal security, and the security of their loved ones, this response is little
short of amazing. But it does not mean that the public feels that the Selective Service System has been perfect in its operation. The view that "they
have made some mistakes" is widespread. The response indicates rather that
people have adapted themselves to the inevitability of conscription and feel
ANY COMPLAINTS ABOUT....
Occupational deferments?
88%
Dependency deferments?
88%
that, in general, the Selective Service Boards have done as well as could be
expected, considering the size and complexity of the job which confronted
them. There is little disposition to find fault.
Few people criticized the general administration of the draft. The
Physical disability deferments?
90%
Administration in general?
most frequent criticism was that deferments are too easy to obtain, and it
was voiced by only eight per cent of those interviewed, most of them men who
expected to be drafted themselves and were naturally eager to see that no
81%
To complaints Complaints
-
eligible person on the list ahead of them escaped being called. There were
scattered additional complaints - about inefficiency, contradictory policy,
discrimination and politics - but they were seldom made with any real heat.
Many who were critical added comments to the effect that perfection could not
be expected in so vast an operation as the draft.
On the other hand, 12 per cent of the sample believed that no occupational
deferments should be granted.
Dependency and Disability Deferments
About the same number who complained about occupational deferments were
Occupational Deferments
Respondents were also asked to give their views about the fairness with
which occupational, dependency, and physical disability deferments were being
granted. As the chart shows, there were few complaints about the practice of
draft boards with respect to any of these types of deferment. It is significant, too, that, in the case of both occupational deferments and physical
disability deferments, about the same proportion felt that standards are too
lax as felt that they are too strict; evidently, boards are succeeding well
in striking a happy medium.
critical of current dependency deferment practices. Two complaints predomin-
ated. About seven per cent of those interviewed felt that there had been
injustices and inconsistencies in the classification of men with dependents,
resulting in inequality of sacrifice. In some cases the decisions questioned
were attributed to inadequate review. There was no disposition to criticise
the basic system under which decisions are based on the merits of individual
cases.
Five per cent of the group complained that the draft had broken up
families unnecessarily. It should be pointed out that both these complaints,
and complaints about inconsistency of policy, are likely to increase as more
A small group of respondents felt that there is some ambiguity in Selec-
tive Service policy with respect to the deferment of vital workers. Their
criticisms did not appear to reflect any dissatisfaction with the policy of
making decisions on the merits of individual cases; but they were puzzled by
what appeared to them to be inconsistencies in the practice of local boards
with regard to occupational deferments. While they evidently feel that clearer
directives should be issued as to what constitutes an "essential occupation",
they are content for the Government to make the decision, and seek no change
in the present flexible type of system.
married men have to be called. The fact that different draft boards will ex-
haust their list of single registrants at different times is particularly
likely to give rise to complaints.
Forty-four per cent of those interviewed favored deferring men with
wives and children. Another 16 per cent felt that men with wives unable to
support themselves should be deferred; nine per cent favored deferment for
all married men. But no matter what position they took, most respondents
made it clear that they realized that dependency deferments were practicable
and desirable only so long as military exigencies permit.
More than half of all those interviewed favored the deferment of vital
defense workers, and two people in ten believed that all defense workers
should be deferred. Twenty-three per cent favored the deferment of farmers.
Only about ten per cent of the group critinized present practices of
granting deferments for physical disabilities. Two per cent complained about
inconsistencies of policy. Four per cent falt that the army's physical
-
standards are too high; they were matched by another group, of equal size,
who felt that they are too low.
allies. And those few respondents who believe that America should concern
herself primarily with production were more critical of Selective Service
Draft Dodging
Another index to the nation's satisfaction with the draft is the absence
than those who recognize the necessity of expanding our armed forces.
A realization of the seriousness of the war influenced the kind of
of any widespread suspicion about the prevalence of draft dodging. Only one
complaint respondents made. Those who took a grave and even pessimistic
respondent in ten felt that there is a good deal of draft dodging. Fiftyseven per cent felt that there is little or none.
view of the position of the United Nations were most impatient with proce-
This satisfaction was also reflected in the refusal of three respondents
dures which seemed to them to postpone our all-out participation in the war.
The Draft and Anxiety
in four to specify any group as being particularly prone to try to escape the
provisions of the draft. There was little tendency to find scapegoats, as
there would be if there were a great deal of resentment about the operation
of Selective Service. No one group of supposed draft dodgers was named by
more than four per cent of the respondents, and the groups were rather vague
in composition ("lazy good for nothings", "money grabbers and big shots", etc.)
The rumors which have arisen in certain places aboutdraft dodging by various
minority groups - notably the Jews - are not manifest in spontaneous responses.
While the operation of Selective Service has given rise to relatively
few complaints, it does not follow that the draft has not generated a great
deal of anxiety. Anything which threatens personal security as directly as
conscription for military service inevitably arouses a great deal of fear
and concern on the part of both eligible men and their families.
Men who expected to be drafted expressed most concern about the effect
upon their families; frequently they mentioned financial worries. Few showed
evidence of considering the hardships and dangers of the battlefront. In
contrast, the danger to which the draftee would be subjected was mentioned
Determinants of Complaints
The amount of complaining about the draft was directly related to
people's closeness to it. Those who were eligible for service, or who had
members of their immediate families eligible, were most inclined to be
critical - chiefly out of the natural fear that others more eligible for
service might be unjustly deferred.
A small group of those who find fault with Selective Service are people
who question our war aims, are critical of the President, and carp at our
far more frequently by their families than any other factor.
To some extent the responses of both draft eligibles and their families
were undoubtedly influenced by what it is socially acceptable to say. Many
men may be reluctant to confess a fear of death, but one is supposed to be
concerned with the welfare of one's family. It may be assumed that the
anxieties of draft-eligibles and their families are not as different as the,
appear to be, and that both groups have more fears than they are likely to
confide to interviewers.
10
11 -
This survey showed, as have many previous ones, that large numbers of
Americans expect a post-war depression. Members of the families of men likely
to be drafted were somewhat more inclined to be apprehensive than the men the
AS the chart also shows, only two people in ten felt that it is necessary to mobilise manpower by compulsory means. Most of those who opposed
such & step believed that there is a large labor supply still available.
selves. Possibly the men were more concerned about the more pressing danger
of being drafted. On the other hand, the prospect of the breadwinner or a con-
AWARENESS OF THE MANPOWER PROBLEM
tributor to the support of the family being drafted "may have intensified his
relatives' fears about the remote, as well as the immediate, future.
The Press and Selective Service
THOUGHT GIVEN TO MANPOWER PROBLEM (INTERVIEWERS' RATINGS)
Serious
thought
28%
Superticial
The satisfaction the public feels with the operation of Selective Ser-
vice has been reflected in the Selective Service has received relatively little criticism in the nation's newspapers, although there has been
considerable discussion of deferment and exemption provisions.
What criticism has been expressed has been directed largely at the
inefficiency of local boards. The national administration of the draft has
not been criticized with any volume or severity. The July 14 directive
stressing the need for local boards to take into consideration both the
economic relationship of a man to his family and his work status received
almost universal approval. The decision to utilize men with minor physical
defects for limited military service was also well received.
The Home-Front Manpower Problem
As the chart on the opposite page shows, only one person in four has
thought
Tie thought
41%
26%
Totascer.
Tainable
as
DO YOU THINK IT'S NECESSARY FOR THE GOVERNMENT
TO DRAFT WORKERS FOR INDUSTRY?
Vehu naces.
easy
It depends"
That neces.
sary
Don't know
It should perhaps be added that, though people were unaware of the
manpower problem, they showed by their responses to many questions that they
given any serious thought to the impending manpower crisis. Some of the
were keenly conscious of the importance of production. Some respondents,
reasons which explain this situation have already been discussed.
indeed, appeared to have an exaggerated faith in the part which production
can play in the winning of the war.
12
13
Willingness to Accept War Work
ultimate economic loss, or to the loss of status, which such a change would
Despite the general lack of appreciation of the seriousness of the
labor shortage, four people in ten expressed a willingness to quit their
entail.
A number of respondents maintained that their present jobs were im-
present jobs for work in connection with the war. Almost as many were will-
portant, even if they were not directly related to the war effort. Others
ing to be shifted into war work by the Government, Only one person in four
was definitely unwilling to shift jobs.
felt that they were not in a position to shift into other work because of
A large group of respondents expressed a willingness to change jobs,
or to comply with a compulsory mobilization scheme, under certain conditions.
their age, the necessity of caring for children, or the fear that they could
not be trained for war work.
While of primary importance, such personal considerations were not the
They want to be sure they will be placed in the sort of work for which they
only determinants of people's willingness to enter into war jobs. The amount
are suited; that they will have opportunities to get training; that wages
of thought they had given to the manpower problem and their realization of
and working conditions will be satisfactory; and that provisions will be
made for the care of their children.
the gravity of the war also exerted a certain amount of influence.
By all means the most important determinant of readiness to shift into
war work was the present situation of the respondent. The individuals who
Compulsory vs. Voluntary Mobilization
Those interviewed were told "It was announced in Washington the other
were unhappy in their present work - who were not earning enough to meet their
day that we've got to have ten million workers for war industries this year."
needs and who recognized the opportunities in war work for better pay and
They were then asked to tell what they regarded as the fairest method of get-
pleasanter working conditions - were most willing to shift jobs. Low income
ting that many workers. The chart below sumarizes their responses.
workers, unemployed, Negroes and subsistence farmers had a high level of
readiness for war work. People whose job security was threatened by material
shortages or other economic repercussions of the war were also willing, in
many cases, to shift into war work.
On the other hand, people who were earning good money in their present
WHAT IS THE FAIREST WAY TO GET THE ADDITIONAL WORKERS
NEEDED FOR WAR INDUSTRIES?
Voluntary
Voluntary Lor some
occupation comput
sory for others
Voluntary unless
jobs, who had high seniority, and were happy and secure in their work, were
compulsory becomes
necessary
naturally reluctant to have the pleasant web of their lives broken by a shift
Compulsory
into war work, They seldon opposed the principle of mobilizing the country's
30%
205
decide
manpower for the war effort, but gave reasons of a personal nature for not
Don't know and not
being able to change jobs themselves. Many pointed to the immediate or
ascertainable
18%
14
15 -
The replies to this and other questions indicate that people have a
slight preference for mobilizing the nation's manpower through voluntary
means. Some respondents expressed the belief that voluntary mobilization is
more in accordance with democratic principles. But an even larger number of
the proponents of voluntary mobilisation defended their position on the
reservations most frequently mentioned being that women should not be asked
to do work beyond their strength and that family life should not be disrupted.
The suggestion that women work on farms encountered more resistence.
Only one-third of the sample endorsed the idea, and two respondents in ten
vehemently rejected it.
ground that the compulsory allocation of workers isn't necessary - an
The necessity for women accepting jobs in war plants is not generally
opinion they night change if given additional information. It is to be
appreciated. Less than half of those interviewed believed that it is now
noted, too, that three respondents in ten explicitly stated that they would
be willing to accept compulsory mobilization if it appears to be necessary.
necessary. Thirteen per cent were convinced that it is unnecessary. Many
people had not formed any opinion on the question.
Thus the present division of opinion by no means indicates that the imposition
of a compulsory system of mobilization would encounter strong opposition.
People showed a marked disposition to accept whatever measures their wartime
Government felt to be best.
The idea of utilizing older workers more extensively, to replace young
sen drafted into the Army, met with general approval. But the possibilities
in this direction are distinctly limited. As of June 1942 there were only
a half million unemployed workers 55 years of age and over in the labor
A sizable group already favors compulsory mobilization. Proponents
force.
of a compulsory system argued that it offers the quickest way of getting
Conclusions
needed manpower, that drastic steps are necessary now, and that a compulsory
system provides the best guarantee of equality of sacrifice.
Augmenting the Labor Force
The problem of keeping people satisfied with the operation of the
Selective Service System appears to present no special difficulties. As
married men and, ultimately, even men with children are drawn into the armed
Whatever method of manpower mobilization is employed, millions of
forces in greater numbers, more resistance to the draft may be encountered.
additional people must be recruited into the labor force. Those interviewed
Particularly if some draft boards are dipping into these groups before others
were asked to give their views about the employment of women and the wider
have exhausted their lists of single men, special informational efforts may
utilization of older workers,
become necessary. But these problems are remote, and their solution will be
As in previous surveys, half of the sample approved, without quali-
fication, of the employment of women in war industry. Only five per cent
disapproved. The remaining respondents expressed qualified approval, the two
facilitated by the confidence people now feel in the essential fairness of
the Selective Service procedure.
Developing an awareness of the serious manpower shortage in prospect
16
on the production front, and preparing people for the drastic measures
which may be necessary to meet the problem, is a more difficult and pressing
Sources of the Report
task. The statements issued thus far by Government spokesmen have not suc-
ceeded in arousing the country to the urgency of the manpower problem.
There are, however, several encouraging factors. People are well
aware of the importance of production. The urgency of the manpower shortage
can perhaps be effectively conveyed if it is closely and continually linked
with the tas's of meeting production goals.
Secondly, in addition to the substantial minority of Americans who
are now willing to accept war Joba or to be shifted into war work, there is
a large in-between group of people who are ready to accept such measures as
soon as they are persuaded that they are necessary. Many of these people
insist on certain conditions being not, but these conditions seem eminently
reasonable.
This report is based on the following materials
Bureau of Intelligence Reports
"The American Public and Selective Service,"
Division of Surveys, Report #22
"Mobilising American Manpower," Division of Surveys,
Report #23
"The Press Views Selective Service," Media Division,
August 22, 1942
"The 'Manpower' Topic in Media, June 15-July 31,"
Media Division, August 22, 1942
Special memoranda from Sources Division
Other Reports
"Labor Supply and Demand in Selected War Occupations,
March - August, 1942," Bureau of Employment Security,
Social Security Board, Federal Security Agency.
"Estimates of Manpower Requirements, Revised, August
22, 1942, Bureau of Labor Statistics, U. S. Depart-
A final encouraging factor is that, in the Selective Service System,
an acceptable model already exists for any machinery which it may be neces-
sary to establish to handle the manpower problem. The Selective Service
System is accepted because it is a vitally necessary part of the war effort;
because it scrupulously respects traditional American attitudes toward the
family; and because, through its combination of a national policy and
decentralized boards with the power to make decisions on the merits of individual cases, it achieves a maximum of fairness and flexibility. These same
characteristics will spell the success of any system which may be needed to
deal with the manpower problem on the home front.
ment of Labor
"Age of Employed and Unemployed Persons, April 1940June 1942," Special Memorandum #13, July 31, 1942,
Work Projects Administration, Federal Works Agency
The Bureau of Intelligence reports are available to authorized
individuals upon request to the Bureau.
319
August 27, 1942
9:30 a.m.
GROUP
Present: Mr. Paul
Mr. Graves
Mr. White
Mr. Schwarz
Mr. Thompson
Mr. Haas
Mr. Buffington
Mr. Gaston
Mr. Blough
Mr. Kuhn
Mr. Sullivan
Mrs. Klotz
H.M.JR: Are you going on the Hill?
MR. PAUL: Yes, I would like to be up there at
ten. I only have a couple of things.
H.M.JR: Well, you come first.
MR. PAUL: Would you like to have Mr. Cairns
come in as I go?
H.M.JR: No. Is he outside?
MR. PAUL: No, but I can send him in.
H.M.JR: Any way that you want. Go ahead, you
won't miss anything. (Laughter)
MR. PAUL: We have a request from the War Depart-
ment for six thousand tons of silver from our free
stocks. This matter has been up before. It has been
320
2-
discussed with Dan Bell. It is for a very secret
purpose, not disclosed now, but it would be more
particularly disclosed after the arrangements have
been made. The legal authority is all right. The
only question I can see is whether - I don't think
you need to clear it wi th the Attorney General in
view of an earlier opinion of his. You might want
to clear it with the President, because he approved
your making silver available to the Government or
privately-owned war plants. I don't know.
H.M.JR: The only trouble is I have pledged all
the silver in the Treasury to Nelson, the forty-nine
thousand tons. Is that the right figure, Harry?
MR. WHITE: That is right, but their estimates
would not seem to indicate that they will use it to
the last bit. It may well be that to grant this
silver will sooner or later deprive them of some
that they would like to use. They are pulling it
out pretty fast now, and they have just begun.
H.M.JR: Is this to go as a loan to be returned?
MR. PAUL: It is to be returned; and while you
do not enter into an agreement, you want to be protected.
H.M.JR: Why don't they come to me through
Nelson? He is either in charge of production, or
he isn't.
MR. WHITE: This is an identical arrangement
with the one you already agreed on, except that it
is through the War Department. Why they are keeping
it secret, I don't know.
H.M.JR: Well, I can't do it. Either Nelson
is in charge; or he isn't. I pledged it all to
Nelson, forty-nine thousand tons.
321
-3MR. PAUL: Why don't we make them clear it
through Nelson? They are in a hurry for it, though.
H.M.JR:
Nelson can give them an answer in thirty
minutes.
.
MR. PAUL: Then if it is satisfactory to Nelson,
is it satisfactory to you?
H.M.JR: It is on the same basis, to be returned?
MR. PAUL: Oh, yes.
H.M.JR: Do you know what it is for?
MR. PAUL: No, I don't, but they said-MR. WHITE: Non-consumptive use.
MR. PAUL: They will enter into an agreement in
the form of a letter - if agreement is reached, they
will give you a secret letter or memorandum indicating
in greater detail the purpose for which the silver
will be used.
H.M.JR: Tell them they should clear it with
Nelson. If it is all right with Nelson, it is all
right with me.
MR. PAUL: Only one other thing, this memorandum
from the President, sending over a memorandum from
Wayne Coy. I don't see but that all the President
simply asks is for you to talk with Wayne Coy.
H.M.JR: I want to send for Wayne Coy. I want
to get it off my chest, what I think of the Bureau
of the Budget.
MR. PAUL: The question in my mind was whether
you should write anything to the President. I don't
think so.
322
-4H.M.JR: No, no, but I want to see Wayne Coy
about other things.
MR. PAUL: That is all I have.
H.M.JR: On the silver thing, in the room, it
was very amusing. Miss Tully called up and said
they ordered a couple of silver frames from somebody up in New York. The man said they couldn't
have them unless they got a priority, that they
had no silver. So she said that the President
called her in to say that the man was crazy, that
he just didn't want to make the silver frames. So
I said, "You tell him the man isn't crazy, that is
perfectly correct." She said, "The President said,
The man doesn't know, 1" so I am sending a memoran-
dum. I am sending one; White is preparing a memorandum. Evidently the President doesn't know what has
happened on silver.
Are you all right?
MR. PAUL: That is all.
H.M.JR: Aren't you a little bit extended today
here? (Indicating chest.) Well, you swallowed Ruml.
(Laughter.)
MR. PAUL: If I swallowed Ruml, literally that
would put several things in my chest. (Laughter)
H.M.JR: I thought you rumbled. (Laughter) I
was gradually leading up to that. (Laughter)
323
-5-
MR. PAUL: You haven't ever seen Ruml as I have.
H.M.JR: I have seen him after he has taken this
pep medicine. What do you call this stuff?
MR. GASTON: Benzadrine.
MR. SCHWARZ: Benzadrine Sulphate.
H.M.JR: He told me he takes that medicine.
MR. PAUL: He had taken it at one of the recent
times I had seen him after he had been up all night
until ten o'clock in the morning.
H.M.JR: Are you all right for the moment?
MR. PAUL: Yes.
H.M.JR: One Sullivan tells me somebody called
up about Pratt and Whitney, said we are not giving
them credit for their high rate of their percentage.
I looked through this thing of Haas'. (Indicating
charts.) They have aviation manufacturers, but
they don't seem to have engine manufacturers.
MR. HAAS: He may have left that out. I thought
he had that in the other time. I thought that was a
duplicate.
324
-6-
H.M.JR: Maybe I am wrong, but I can't find it.
(Charts handed to Mr. Haas.)
MR. GRAVES: After Mr. Sullivan spoke to me yesterday, I talked with an administrator in Connecticut. We
had word that - Mr. Wilson?
MR. SULLIVAN: Gene Wilson wired.
MR. GRAVES: We had wired him on July 30 the usual
message of commendation, and Mr. Tom Smith, in Connecti-
cut,investigated that and told me it was a cock-and-bull
story - that Mr. Wilson was not in the least displeased
or dissatisfied, and that they wanted me to talk to
one of the officers of the company that was coming down
here in a few days.
H.M.JR: This is most likely an attorney trying to
make a fee.
MR. GRAVES: There is nothing in it at all.
H.M.JR: Anyway, the only reason I brought it up
was I was trying to look up Pratt and Whitney in Haas'
figures.
MR. GRAVES: They are probably not in the latest
report that Mr. Haas would have, anyway, because they
reached that figure, as I remember, about mid-July, and
I do not think George's figures are that recent.
H.M.JR: Last night I saw Alben Barkley, I said,
"Alben, you are getting good on the Hill. You have got
no oil wells down in Kentucky. Why don't you pass that
depletion thing?"
He said, "You don't think that would floor me, do
you?" I said, "Yes." He said, "It might."
MR. PAUL: He was very helpful yesterday.
325
-7-
H.M.JR: It sounded like that. He said, "It might."
Were you through, Harold?
MR. GRAVES: Yes. You merely asked that question.
M.JR: George, it is not in there, is it?
MR. HAAS: There are some engine - small engine
companies like Rangers, uui not the large engine
companies. I will check up and see why not.
H.M.JR: Norman?
MR. THOMPSON: Just as a matter of interest, Colonel
McIntyre sent over a telegram received by the President
from the Illinois State Conference of Building and Construction Trades, stating they wished to donate a hundred
thousand dollars for the purchase of a bomber. Colonel
McIntyre wanted us to give him a draft of a reply.
H.M.JR: O.K. Do I sign anything?
MR. THOMPSON : No, sir.
H.M.JR: Harold, do we name any of these bombers
after cities, or anything?
MR. GRAVES: We did in the earlier stages of our
campaign.
H.M.JR: But you stopped it?
MR. GRAVES: We have not done it lately, so far as
I know.
MR. KUHN: The War Department has given us per-
mission to do that. They said that they will do it.
MR. GRAVES: We did it in Buffalo, as I recall,
didn't we, and in-MR. KUHN: Then after that, as I remember it, the
326
-8War Department, through Lovett, said they were willing
to do that for us as long as we limited it to one bomber
per community. They would do it for a city but not
for the Elks Club the Woman's Club, or whatever it
was in that city. That has not been rescinded on their
part.
H.M.JR: I was just curious.
Harold, do you want to bring up anything?
MR. GRAVES: Nothing.
H.M.JR: Mr. White?
MR. WHITE: With respect to silver, the ceiling
price on silver has now been raised to forty-five
cents.
H.M.JR: I saw that.
MR. WHITE: That makes it possible for us to sell
that five million ounces without any loss, which is
what disturbed us before, but we still think the Metals
Reserve Corporation ought to handle it. Is it all right
with you if we go back to Jones with a new proposition?
He never accepted the old one about buying it at forty-
five and selling it at thirty-five, but this way would
not involve a loss, and I am sure he would be glad to
handle it.
H.M.JR: Who would he sell it to?
MR. WHITE: He would have the job of allocating it
to those who have high priorities, as indicated by
Nelson's organization. That is what we would like to
get out of. Otherwise we would just as soon sell it,
but it is not simply a question of selling it; it is
a question of assuring that the silver goes to users
who are supposed to be most helpful in the war effort.
H.M., JR: It is all right with me.
327
-9 - -
MR. WHITE: We will approach Jones on the new
basis.
H.M.JR: What else?
MR. WHITE: There was a meeting yesterday at
Stettinius' office with respect to the valuation of
Lend-Lease in Reverse. He has a cable and a proposal
which, in general, I think is in line with your idea of
having some value put on wherever possible. We will
draft an official reply which he wants, with your signature on it.
I raise the question there of the apparent basis of
exports from England needing a re-examination, because
they are exporting goods to South America and taking
up a lot of shipping, merely because they can use sterling,
whereas, I think the situation is changed now, and we
might be willing to spend dollars if we can save shipping.
He is going to re-examine that and let us have it.
We have a new report on the Canadian dollar position
which we have prepared. Will it be all right to send
copies to the men who have been at the meetings here?
H.M.JR: Yes.
MR. WHITE: I have a couple of other matters. I
can either take them up here or-H.M.JR: No. I can see you at eleven, today.
MR. WHITE: All right, sir, then I will keep the
others for that.
H.M.JR: Chick?
MR. SCHWARZ: Can I have about a half a minute
after meeting?
H.M.JR: Have you got another song? (Laughter)
All right.
328
- 10 MR. SCHWARZ: The group here might be interested
in the late flashes that the war is breaking out all
over the fronts.
MR. WHITE: What do you mean, "war is breaking
out"? (Laughter)
MR. SCHWARZ: Seriously - Africa, Asia - fighting.
I
H.M.JR: Anybody that is interested in production
in Washington, I recommend their reading the August 31
copy of "The New Republic," called "Chaos in Production,"
by Thomas Sancton. Also for those very critical of
Arthur Krock, his column today is distinctly worth reading.
Anything else, Chick?
MR. SCHWARZ: No.
H.M.JR: You are coming in atten, aren't you?
MR. HAAS: Yes, sir.
H.M.JR: You (Buffington), too.
MR. KUHN: You asked yesterday about a thing
called the Victory Center. The first report I have
it is not a very good one. They particularly are
on
interested in inventions that have been turned down by
the Government, and the man in charge of it is named
Scully. I am trying to find out something about him.
I will write it for you.
H.M.JR: I just heard about it. The President's
little birdie told me. I was curious.
MR. KUHN: On the other thing, I . have an ad, and
I do not know whether you wrote all of it or part of
it, but it is very good. It is a really good ad. I
am going to try to get it used by us - have maps made
up of it and sent out. (Indicating advertisement in Time.)
H.M.JR: "Spare dollars or slacker dollars." You
took my "slacker dollars" out of my speech. You never
329
- 11 -
said anything to me. I never realized it until three
days later. (Laughter)
MR. KUHN: I know it. I am sorry.
H.M.JR: I accept your apology, Mr. Kuhn, one week
later. I noticed it about three days afterwards. What
did you get, a secret message from Graves, or something?
I had that right in there. It was a good speech the
way I first wrote it - "spare dollars or slacker dollars".
MR. KUHN: I think the whole ad is good.
H.M.JR: No, the fact that you took it out - anyway,
I accept your apology. That is interesting, isn't it,
I mean Kuhn bringing it in now. His conscience-- (Laughter)
MRS. KLOTZ: His conscience caught up with him.
H.M.JR: What else did you do that is worrying
you that affects me?
MR. KUHN: That is all.
MR. BLOUGH: By evening I expect to have in your
hands some tabular and other material showing how the
spendings tax would affect specific people and specific
situations.
H.M.JR: I sat next to Mr. Jones last night, and
he told me that his boys reported to him what had
happened here at the Treasury, and that he was very
much intrigued with it, and thought it looked like a
very good plan.
Mr. Buffington?
MR. BUFFINGTON: Following my discussion with you
yesterday, Harold Graves and I talked about the F and G
situation as it affects the operations of the Victory
Fund Committee, and we agreed that as of September
first we would send out a directive suggesting that the
Victory Fund Committee no longer give assistance to the
.
330
- 12 War Savings staff in the sale of F and G, but State
administrators could feel free to call upon the individual members as individuals to work with the State
administrator's staff. It would go a long way toward
clarifying the differences that seem to have developed
between the two organizations. I think Harold feels
that if that is done, that it would no longer cause
any conflict in connection with this out-ui-pocket
expense as are new paying to the Victory Fund
Committees. Is that correct, Harold?
MR. GRAVES: What I said was that if instructions
were given that the Victory Fund Committees were no
longer to concern themselves with the sale of F and G
bonds, it wouldn't be any concern of our organization
whether they had out-of-pocket expenses or not.
MR. BUFFINGTON: But if the State administrators
would be free to use any members of the organization,
as individuals, if they wanted them to work with their
State organizations in the sale of F and G's-MR. GRAVES: Yes.
H.M.JR: All right. Now this thing (indicating
advertisement in Time magazine) as a streamer in the
papers, just that thing at the bottom, would be
awfully good, Harold. I mean, just that bottom thing,
to put across a show window. Why don't you have a
hundred thousand of those printed, just that lower
part?
MR. GRAVES: Yes, sir. We will do it.
H.M.JR: You see what I mean? I would order a
hundred thousand, just to put in show windows. It
could go in the lower half of the window. They had
something like that - something on production. I
mean something about a foot high, you see, Harold.
But I do hope you will push that poster, "Let's all
Fight." Will you check up what they are doing on that?
MR. GRAVES: Yes, sir.
331
- 13 H.M.JR: Are you through?
MR. BUFFINGTON: Since the wire asking the presi-
dents of the Feds to give what assistance they could to
the State administrators in the sale of F and G's went
out over your signature, do you want to send out a wire
suggesting that they no longer work, or shall I send it
out at your direction?
H.M.JR: No, no, you and Harold get together and give
me a wire with both your initials on it and I will do
it. Who sent it out in the first instance?
MR. BUFFINGTON: You sent it out to the Victory
Fund Committees, or the Federal Reserve Banks, over your
signature, and a copy of that wire went to the State
administrators.
H.M.JR: You and Harold and Heffelfinger had better
all get together and send something.
MR. BUFFINGTON: That is all.
H.M.JR: Mr. Sullivan?
MR. SULLIVAN: Nothing, sir.
MR. GASTON: I have nothing.
H.M.JR: John, I would like to suggest that you
begin to look at some of your field offices and see how
they are getting along. I think you ought to make a
couple of trips.
MR. SULLIVAN: I was going to discuss that with
you.
H.M.JR: I would not wait too long. I think you
ought to get out and see how they are clearing this
stuff - not necessarily to New York, but I meant, oh,
just drop in on a couple of your field offices and see
how this organization is getting along.
332
- 14 -
MR. SULLIVAN: I think you are quite right.
H.M.JR: I wish you would do that.
(The Secretary held a telephone conversation with
Lord Halifax.)
H.M.JR: That was about Bonar Law's son. What is
his first name?
MR. KUHN: Richard Law.
H.M.JR: Three-thirty, Tuesday. You might give me
a little memo on it before then, who he is and what he
is.
MR. KUHN: He is a very smart fellow.
H.M.JR: Give it to me by Monday, please.
Are you through?
MR. SULLIVAN: Yes.
MR. GASTON: I don't have anything.
H.M.JR: You are not sore about anything, are
you? (Laughter)
MR. GASTON: No. That project you spoke to me
about the other day is under way, the survey.
H.M.JR: Oh, yes. You haven't hit any "gold in
them thar hills" yet?
MR. GASTON: No. We are just organizing. It is
quite a job.
H.M.JR: Or lead?
MR. GASTON: No.
H.M.JR: O.K.
333
August 27, 1942.
9:54 a.m.
HMJr:
Hello.
Operator:
Operator.
HMJr:
Yes.
Operator:
Put the Ambaesador on?
HMJr:
Put him on.
Operator: Right.
Hello, hello.
HMJr:
Operator:
Go ahead.
HMJr:
Hello.
Lord
Halifax:
Hello.
HMJr:
Hello.
H:
Good morning.
HMJr:
How are you?
H:
Good morning. Look here.
HMJr:
Yes.
H:
This is Halifax here.
This is Morgenthau.
I called you up to know whether you're going
to manage next week to let Richard Law, our
Under Secretary of the Foreign Office, Bonner
Law's son
HMJr:
H:
Yes.
who's over here and having some informal
talks with the State Department people -
whether you could manage to let him come and
see you for a half an hour sometime.
HMJr:
Surely.
H:
He' d like to see you very much before he goes
back.
334
-2-
HMJr:
Ah
H:
Any
time next week that you could make, he would
make.
HMJr:
Well, how about three-thirty Tuesday?
Three-thirty, Tuesday, perfect. Is that so -
H:
is that all right for you?
HMJr:
Oh, fine.
Ifdon't
anything
turns
up 80.
that you want to change it,
hesitate
to do
H:
HMJr:
Fine.
H:
Good. Thank you so much, and I'll tell him.
HMJr:
Thank you.
H:
Three-thirty, Tuesday, at the Treasury.
HMJr:
Right.
H:
And should he come in the way that I generally
HMJr:
Yes, that will be all right.
come in?
H:
Right. Fine. Thank you so much.
HMJr:
Thank you.
H:
Goodbye.
HMJr:
Goodbye.
335
August 27, 1942.
10:25 a.m.
Judge Samuel
Rosenman:
Henry?
HMJr:
Hello, Judgie.
R:
How are you?
HWJr:
I'm fine.
I've got some good news for you.
R:
HMJr:
Honest?
Yeah.
R:
HMJr:
Go ahead.
R:
I won't be able to have dinner with you.
HMJr:
(Laughs) Well, what's the matter?
R:
(Laughs) What?
HMJr:
What's the matter?
R:
Well, I've got to work tonight. You've read
HMJr:
Yeah, I read in the paper about them.
about these three speeches.
R:
HMJr:
And they're in addition to inflation and &
message, and I - I've got to work tonight
Oh.
to have the draft for him for the week-end.
R:
HMJr:
R:
HMJr:
Oh.
He's going to work on it - on a couple of these
things, 80 I really have - have to spend every
minute at it, and I wanted to ask to be excused.
Well, I'm sorry, Sam, that you - that you won't
buy us a meal tonight, but
336
-2I will - the last speech is at - is on Labor Day,
R:
HMJr:
Yeah.
and I promise you that shortly thereafter I will.
R:
HMJr:
Okay.
R:
Well, do you understand?
HMJr:
R:
HMJr:
Oh, perfectly. Business before eating.
Yeah. (Laughe) All right, and....
Okay.
R:
.... will you explain to Ellie?
HMJr:
I will.
R:
And I regret it.
HMJr:
Okay, Sam.
R:
I'll make good on it.
HMJr:
Thank you.
R:
Thank you. Goodbye.
337
cc-Mr. Kuhn
August 27, 1942.
11:32 a.m.
Operator:
HMJr:
J. Buell
Go ahead.
Hello.
Snyder:
Hello,
there. This is Congressman Buell Snyder
of Pennsylvania.
HMJr:
How do you do?
S:
How is yourself?
HMJr:
Fine.
I'm glad to hear that. I wish you'd do yourself
a favor and me a favor and the Nation a favor
all at one time.
S:
HMJr:
That would be wonderful.
S:
Wouldn't it?
HMJr:
(Laughs)
Well, you send a telegram to Mr. John I. Scull S-c-u-1-1. Is your secretary on there getting
S:
this?
HMJr:
S:
No, no, I'm on.
Oh, you have a pen in your hand.
S:
Yeah, I'm writing it down.
John I. Scull.
HMJr:
Yeah.
HMJr:
S:
HMJr:
He's the chairman of the Wer Bond salee in
Somerset, Pa., for that county
Yeah.
Somerset County, Somerset, Pa.
S:
HMJr:
Yeah.
338
-2S:
They just had a b1g rally Saturday and in that
small of
mountain
worth
bonds. county - and sold $105,000
HMJr:
Wonderful.
S:
And I wish you'd send him a telegram, if you
please, of - of congratulations, or write him
HMJr:
a letter. I don't care which.
I'11 do that. Now I got the name, and that - that'll
go out today.
S:
I wish you'd do that. I - I informed you.
HMJr:
Yes.
S:
of this, and he's the head of the banks up
there and 9 very, very fine fellow, and "this
above all, to thine own self be true," somebody
said, you remember?
HMJr:
S:
Yeah. Well, I appreciate your bringing it to my
attention, and
He's a - he's - he was a - a rabid Republican to
start out with
HMJr:
Yes.
when I came to Congress, and when you came here.
S:
HMJr:
Yeah.
S:
And now he's got the spirit of the new idea of
doing things
HMJr:
S:
HMJr:
S:
HMJr:
Yeah.
.... and he's with Mr. Roosevelt and you and I in
this thing of doing things.
Wonderful.
Isn't it?
Well, it will go out - it will go out today, and
I'11 send you a copy.
339
-3S:
That's a good boy I
HMJr:
It will go out
S:
HMJr:
worth something.
this wonderful work.
This is
Congratulations to him for
And I'll send you a copy.
S:
Thank you.
HMJr:
Thank you.
S:
Goodbye.
of
340
August 27, 1942
3:32 p.m.
John W.
Pehle:
HMJr:
Yes, sir.
Pehle?
P:
Yes, sir.
HMJr:
What happened on - with Mr. Welles?
P:
Well, I ohecked all the files in the State
Department. He attended that conference in
company with Joseph Green.
HMJr:
Yes.
And Joseph Green is out 111.
P:
HMJr:
P:
HMJr:
I know. You told me all that yesterday.
That's right.
You also were going to let - I asked you to let
me know this morning how.
P:
That's right. I called Fitzgerald before ten
HMJr:
You didt
o'olook.
P:
HMJr:
P:
HMJr:
P:
Yes, sir.
There's no record of it. Now just a minute,
just a minute. (Talks aside) Did Mr. Pehle
call me this morning? You didn't give it to
me. Yes. Well, the fault's on my outer office.
They didn't give it to me.
Well, I asked him, as a matter of fact, to come
over because I thought I'd like to talk to you
about it.
No, they didn't give
Now I also checked the Red Cross to see if they
were doing anything. They said they weren't
anything, but some of their people came
doing in on the Gripshola from Shanghai, and they as
would give me a report from them as soon
they got here as to anything they knew.
341
2
HMJr:
P:
HMJr:
P:
HMJr:
P:
Yes.
The people down the line at State were a little
reluctant to check with Welles, but said we
would - they would do it if we wanted to press
it. Now why I wanted to talk to you was that
as I understood it, the matter was turned over
to Bell and to Foley, and they went into it
rather thoroughly with the people from the
J. D. C.
Yes.
And the Treasury's view was, at that point,
that we were not in favor of taking action here.
Did you read the letter I sent you?
Yes, sir.
HMJr:
Well, from that they - certainly
P:
It sounded like Mr. Welles gave then some encour-
agement.
HMJr:
Yeah.
P:
That's right.
HMJr:
Yeah.
P:
Although the people that had been handling it
at State beforehand didn't seem to feel that
way. Now before we went to State and tried
to find out if Mr. Welles was willing to do
something, I just thought that I'd like to
position is.
have your decision as to what the Treasury's
HMJr:
Oh, for heaven's sakes ! I mean, why be so damn
legalistic about this
P:
No I don't think it's legalistic. I - it's -
it
I don't want to take a position. I think that
was fairly obvious, isn't it, that Mr. Bell
isn't here and Mr. Foley isn't here, and I'm
I
HMJr:
short-handed and I'a asking you to help out.
Now you're trying to put me on the spot.
342
-3P:
No, that's
HMJr:
Forget it, Mr. Pehle.
P:
.... that's what I don't want to do, Mr. Secretary.
HMJr:
Well, that's what you are doing, and I wasn't born
yesterday, and forget it, and '11- I'11 - I'11
handle
P:
HMJr:
Well, Mr. Secretary, I'd like to come over and talk
to you about it because that's the last thing I
want to do is to put you on a spot.
Well, what else
and these peop their position
very well. The people in the Treasury that had
gone over this whole thing felt that it was the
stronger position to take from the Economic Warfare point of view
HMJr:
P:
Yes.
that if we started to push off and make exceptions in certain cases, that we would have
difficulty holding our ground. Now if the Treasury
feels that we - we can make an exception here, it's
easy enough to work out. I think I can work it
out.
HMJr:
Well, who is the Treasury?
P:
Well, that's for you to decide.
HMJr:
Well, I did, and I asked Mr. Bell to take it off
my hands and he
P:
That's right. He - he did, and I have a memo as to
the conference and the decision that they made at
that time was that it shouldn't be done, and when
they talked to the people from the J. D. C. and explained why, they said, well, they weren't going
to question the decision. They didn't want to take
it any further, and that was that they understood
that reason.
343
-4HMJr:
Well, your superior is Mr. Paul, isn't it?
P:
Yes, sir.
HMJr:
All right. Well, I'm going to ask - I just -
you're - the thing that you re asking me to do
is exactly what I don't want to do.
P:
Ijust
- I appreciate that, Mr. Secretary. I-I
HMJr:
Well, then why ask me to make up my mind
P:
HMJr:
P:
about it?
Well - well, I just want whoever is going to
decide the Treasury's position to decide it
Well, I
.... because if they decide the position, then
there won't be any - any - then we'll know where
we stand.
HMJr:
P:
HMJr:
Well, I'm going to turn this over to Mr. Paul,
in the absence of Mr. Bell, and ask him to take
care of it for - for the Treasury.
Well, I'm - I'm sorry that you think I was trying to put you on the spot. That's exactly what
I was trying to avoid.
Well, you - you don't
P:
But you see, I have before me the report that
HMJr:
Yeah.
P:
.... their published report.
HMJr:
P:
HMJr:
the J. D. C. files
Look, Pehle, I don't want to argue. There there are eighteen thousand people in Shanghai
who are dying of starvation
That's right.
and I'm not going to sit on the telephone
and harangue with you. Now I - I - I've - here's
a letter from them saying that Mr. Welles is
willing to do it, and I want somebody in the
Treasury to call up Mr. Welles and I'11 ask
(cont.)
344
-5-
(oont.)
Mr. Paul to do it, and then I'll see what
happens.
So - so - if you'11 - let's drop
the matter.
P:
All right.
HMJr:
344A
SECRET
WAR DEPARTMENT
HEADQUARTERS OF THE ARMY AIR FORCES
WASHINGTON
August 27, 1942
The Honorable,
The Secretary of the Treasury.
Dear Mr. Secretary:
The Chief of Staff has advised me that you wish to go
to England on September 15th. I have, accordingly, directed
General George, Commanding General of the Air Transport Command,
to have an airplane ready for you and your party of two or three
to depart from the National Airport on that date.
In order to facilitate the final arrangements, may I
suggest that you have someone in your office communicate with
General George if you should wish to make any changes in your
departure date. He will also advise you concerning all necessary
details and plans. Arrangements can also be made with George
concerning your return to the United States.
Very sincerely yours,
H. H. ARNOLD,
Lieutenant General, U.S.A.
Commanding General, Army Air Forces
POPVICTORY
BUY
BONDS
STAMPS
SECRET
8/27/42
4:50 on
345
DRAFT OF SECRETARY MORGENTHAU'S
BROADCAST AT THE WAR BOND RALLY
AUGUST 31, 1942
Standing here on the south steps of the
Treasury today, I can see thousands of soldiers,
sailors and Government workers at this great War
Bond Rally. They have come to applaud the motion
picture stars who are giving all their time and
talent to sell War Bonds during September. Speaking
for the Treasury Department I should like to pay my
tribute to these actors and actresses, and the entire
putting their special relents to work
motion picture industry. They are doing their charge
to help win our common victory.
the
But this crowd is not all I see from this Treasury
building. I can also picture our marines fighting through
the jungle in the Solomon Islands, our sailors patrolling
the Atlantic sea lanes, our flyers in battle on a dozen
fronts around
-2-
346
the globe. And we can also see millions of our sons
and husbands and brothers training in Army camps,
from dawn till long after dark, for the hardships
and the sacrifices of war.
As we think of this grim effort by our fighting
men, let's ask ourselves whether we on the home front
are doing all we can to train and toughen ourselves
for the coming battles.
This is going to be a hard war, and it may be
a long one. Here on the home front we have not even
begun to sacrifice the easy and pleasant and comfortable
things of life. We have not even begun to live with
the spirit of the American pioneers, who used to say
"Eat it up--wear it out--make it do." We have not
even begun to scrimp and save, as we shall have to
do before this war is won.
-3--
347
Each of us will have to ask himself every
morning "What am I personally going to do today to
help win this war? What can I give up or do without,
so that our soldiers and sailors can have the weapons
they need?"
Remember, the weapons of victory--the planes and
guns and bombs and battleships--all have got to be
paid for. Some of us build them. Some of us will
fight with them. But all of us have got to pay for
them-with was Bonds.
The need is great. The time is short. The
hour of effort is here. We on the home front must
not fall behind our fighting men. We, too, must
take the offensive -- now!
348
August 27, 1942
Dear Grace:
I am sending enclosed herewith a photostat of a
letter which I have just received from the Apostolic
Delegate.
The service that we rendered to them was to make
1: possible for them to get the Swiss france with which
to pay the various foreign missions of the Church in all
countries, with the exception of Germany and Italy. The
Vatican had tried in every manner to gat these Swiss
francs, but had failed before coming to me. I was fortunate in working out an original method with which to
supply the Vatican with the necessary funds to carry on
their foreign missions.
I think the President would be interested in knowing about this and I would appreciate it if you would
bring it to his attention.
Yours sincerely,
(Signed) H. Morgenthan, Jr.
Miss Grace Tully,
By S. 8. Agent 2:00
The White House.
File in Diary
8/28/42
ANGTOLIC
9339. Massachusetts Avenue
UNITED STATES OF AMERICA
Washington, D.C.
No 262/42
August 25,1942
THE ANSWER
Mr. Henry J.Morgenthau, Jr.
Secretary of the Treasury
Washington, D.C.
My dear Mr. Secretary,
In view of the very satisfactory solution of the problem
of transferring Vatican funds from currency of the United States
to that of European countries which has been effected recently
through the good offices of your Department, His Eminence, the
Cardinal Secretary of State of His Holiness, has charged me
with the happy duty of conveying to you, Mr. Secretary, and to
your esteemed Assistants in the Treasury Department the assurance
of his own personal gratitude and of that of the Holy See for
your considerate attention and comprehension in this matter.
His Eminences writes that the understanding cooperation
of the United States Government regarding the use of these funds
will not only enable the Holy See to effect those transactions
which are necessary for its own work and for the internal needs
of the Vatican City State, but will also insure the continuance
of its world-embracing mission of charity to the suffering and
the needy. His Eminence would have you know, Mr. Secretary, that
the recognition thus accorded the supra-national aims of the
Church and its strictly impartial attitude in its ministrations
to the unfortunate victims of war has been a source of profound
satisfaction to the Holy Father, for in the face of the constantly
increasing number of requests for assistance the spirit of willing
ccoperation manifested by the American Government greatly facilitates the furtherance of this necessary work.
I am happy at the same time, Mr. Secretary, to assure you
of my own personal gratitude and of the sentiments of esteem with
which I am
Very sincerely yours,
nd.Archbishop
G. Ecognam
of Laodicea
Apostolic Delegate
350
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
FROM
August 27, 1942
Mrs. Klotz
Randolph Paul
I understand that you spoke to Mr. Blough about a
newspaper flash quoting, "A Treasury expert who declined
to be quoted by name said, 'Wage and farm price stabiliza-
tion, taxes, savings, price ceilings, and rationing are
all necessary to prevent inflation, which means a rise in
cost of living. If the President puts the emphasis at the
moment on wages and farm prices, don't get the idea that
the other things won't get attention too.'"
Mr. Blough tells me that he has stated that he knows
nothing about who could have made this statement. I know
nothing either. I certainly was not the Treasury expert.
LEP
351
August 27, 1942
MEMORANDUN FOR THE SECRETARY
From: Mr. Blough
Subject: Taxation of outdoor advertising.
A tax on outdoor advertising signs night be imposed
either to raise revenue or to penalize and eliminate the
use of such signs. If the purpose were not to raise
revenue but to discourage the use of signs in order to
clear public highways of matter which was aesthetically
objectionable, the tax would need to be adjusted carefully to eliminate the obnexious without affecting the
acceptable. Considerable study would be necessary to
determine just what classes of advertising signs were
objectionable and how the tax should be applied.
As a measure intended to raise revenue, the tax would
be disappointing, as 18 would present many difficulties
and raise relatively little money. It would discriminate
against this form of advertising compared with other forms.
It would be very expensive to administer on an equitable
basis because of the necessity of dealing with sumerous
taxpayers owning one or a few small signs. A large number
of outdoor advertising signe are owned by the advertisers, and
of the approximately 500,000 leased outdoor advertising
signs, many are owned by small concerns. To be even reasonably administerable the tax would necessarily contain inequitable discriminations among sign owners.
The tax included in the House version of the 1941
Revenue bill was estimated to yield $1,700,000. It is
doubtful if such more than this could be raised at the
present time even if the coverage were extended and the
rates increased, since the volume of outdoor advertising
business has been falling rapidly is recent months due to
shortages of goods, deeline in automobile traffic, and
discuts.
In short, a tax on outdoor advertising signs would
be discriminatory, difficult to administer, and productive
of little revenue.
The attached memorandum analyses this tax as a
revenue measure.
Attachment
RB:aw 8/27/42
I
352
Tanstion of Outdoor Minertieing
1. A large part of outdoor advertising is provided w advertising concerns to advertisers ea a lease basis. Some
advertisers ova their our advertisements. A large part of the
business is concentrated in a small member of the concerns
leasing outdoor advertising space. There are estimated to be
approximately 500,000 outdeer advertisements new in we.
2. Decause of shortages of goods, decline is automobile
traffic and dim-outs, the volume of outdeer asvertising has Dees
falling rapidly is recent months and the trend is likely to
continue.
3. If a tax were to be imposed es outdees advertisements,
the most equitable form of each a tax which would appear to be
administratively fossible would be use imposed - all lessers
of outdoor adverts sing space and all warra of over-tilled
advertisements not loanted es the business premises of the even,
the tea rate being graduated asserting so the sine of the display.
Displays located in OF on consis marriervahieles and facilities
would be excluded.
4. The yield of the tax on outdoor advertising included is
the 1941 Revenue Bill as passed w the House of Representatives
was octivated to be $1,700,000. with higher rates and
vider seeps, the revenue sight be senechas larger. The maximum
yield could set be substantial, hovever, because of the limited
total volune of business and the highly competitive of the
advertising intentry.
5. The barten would be chared betreen the advertising canceras and the abvertisors. shifting to consumers would occur only
if price coilings were revised.
6. A tax as outdoor advertising could be justified only on
the bacis that such advertising is objectionable. Actually,
while some forms of outdoor advertising way be undesirable, other forms clearly are not.
7. Such a tax would create serious inequity. Is is impossible
to develop a tax es outdeer advertising which would be equitable
and administratively fessible. The tax indicated above would
353
- 11 -
discriminate against expers and were of outdoor advertisements
is peer locations, of ease 1dle a part of the year, and these
supplying space to charitable organizations and governments free
of charge. The tax would discriminate against were of one type
of advertising and interfere with use of the type conternal.
8. IS is concluded that a tax on outdoor advertising is
inedvinable. Only a small - of revenue could be obtained
and such ettes is accountly Centrol of
undesirable outdoor advertisements should be obtained, if at all,
w direct regulatory measures.
354
Texation of Outdoor Advertising
******
I. The outdeer advertising industry
A. Number of conserve
The Faresa of the Genous estimates that is 1939 there were
679 establishments readering outdoor advertising service. y IS
is the belief of the Outdoor Advertising Association of America
that these figures are see lov, since the Association has about
950 sembers who conduct appreciately 90 percent of all the lesser
ouideor advertising business. 21 On the basis of 100 membership
figures, the Association estimates that there are about 1,200
concerns is the United States engaged in the business of leasing
outdoor advertising space. In addition, many advertisers ove their
eva billboards.
3. Member of billboards, by else of billboard
The Outdoor Advertising Association estimated that is 1941
there vere the following numbers of lesser-event OF operated bill-
boards, by sine of billboard, is the United States
100 - 200
200 - 300
300 - 400
400 - 600
Over 600
:
Net more that 100
$
Square feet of
advertising space
Number of
billboards al
100,000 v
100,000 y
275,000
25,000
25,000
1,000
a Estimates made in 1941 by SecretaryPreseurer Stewart of the Outdoor Advertising Association. These estimates agree
with the figures given in the
submitted to the Treasury is 1941 by the
President of the Outdoor Advertising
Association, except in the two lovest
breakete. In the nontranium, no figure is
given for the 100-200 sise class and a
figure of 55,000 is given for the 100 and
under sise class.
Rough estimates intended to indicate mastwas number of billboards.
1
2
Conona of Business, Service Netablishments, 1939.
Statements respecting the Outdoor Advertising Association were
made is 1941 by Seeretary-Treasurer Stevart of the Association.
355
The number of over-utilized boards is not known.
C. other
Outdoor
is relation to
media
The following table above the assents spent during the period
1925-1941 on outdeer advertising and amounts spent on advertising
through the four other principal medial neverapers, segasines,
radio, and farm papers.
Estimated advertising expenditures in five media, 1928-1941
Yara
4
Badie
papers
:
(Millions of dollars)
Total a/
Year
Outdoor
Neverpapers
Magasines
1928
$85
$760
$225
$ 20
$35
40
35
60
30
$1,115
1,199
1,065
940
1929
80
800
240
1930
65
700
210
1931
50
620
170
so
20
120
80
13
35
boo
740
1932
110
is
665
30
450
10
1933
145
90
780
30
500
14
1934
35
150
105
16
1935
530
635
170
120
935
45
500
20
1936
190
145
1,000
50
600
20
1937
50
145
145
875
1938
520
17
50
525
170
17
1939
150
910
160
200
970
90
545
15
1940
610
180
225
16
1,096
1941
&
Totals have bees readed to a 85 million.
In preparing the 1941 estimate additional items of expenditure
on outdoor advertising. totaling $8,500,000, that were not
previously included vere added.
Source: weld, L. D. E., McCann- Zrickeen, Inc., Printers' Isk.
March 1, 1940, April n. 1941. and March 27. 1942.
The date contained in the table indicate the rapid growth of
radio as the expense of the other four media. Since the depression
low of 1933. the volume of outdoor advertising has rises relatively
less rapidly than radio advertising, but more rapidly than nevepaper and sugarise advertising. During 1941. the amount spent for
356
-
outdoor advertising constituted less than 6 percent of the total
amount spent for advertising in the five media.
D. Concentration of volume of
business in the industry
Three concerns, General Oatdoor Advertising Company, Fester
and Kleiser, 1 Walker and Company. do approximately 35 percent of
the business of leasing outdoor advertising space. 1/ of the 679
enterprises managed in outdoor advertising reported in the 1939
Census of Business, Service Establishments, 170 and gress receipts
in excess of $50,000 and 586 in excess of $3,000.
E. Prespects for the outdoor advertising industry
Standard and Poor's corporation, in its May 15. 1942. survey
of the entire advertising. printing and nubhishine industry,
estimated that advertising expenditures would drop substantially
during the coming months due to increasing sharteree in mods,
especially dayable communer goods. It is likely that outdoor ad-
vertising will suffer more serious decline than other types of
advertising. Billboards located in rural areas will be rendered
less useful advertising media as gasoline rationing and sare shortages ourtail auto travel. The utility of many of the illuminated
city billboards will be lessend by increased use of dis-eate in
the Atlantic and Pacific seaboard areas. Cartailment of production
of electric signs and light bulbs, and shortages of electricity in
certain areas can be expected to check expansion of electric signboards and may interfere drastically with their used
The view that outdoor advertising will dealine in volume is
borne out by figures already available for the current year. In
the first six months of 1942 outdoor advertising fell 9.2 percent
below the figure for the same period of 1941 in June 1942, the
decline was 18.1 percent below June 1941. 2 All advertising for
the first six months of 1942 was 8.6 percent below the SAME period
in 1941; in June the decline was 7.9 percent. 3/
17 Estimates based OR comparises of gross Income. sales, and net
sales for 1941 as reported for these three companies in Heady's
Manual of Investments, "Industrial Securition," 1942, with estimate
of total expenditures for outdoor advertising in 1941 prepared by
L. D. H. Weld for Printers' Inko (See table on preceding page.)
2/ Printers' Ink July 31, 1942.
Idem., August 7. 1942.
357
.4.
F. Profits derived by leasers of
outdoor advertising space
During 1941 the not income of the three largest outdoor advertiring concerns what
1Net income
1808 incomel
: before : Federal : after
Grees
sales
lincome and: excess- income and
$ excess- : prefits : excess-
:
: prefite 1 taxes I prefite
taxes
1
-
taxes
I
Company
1 Federal lineone and Federal
$
General Outdoor
$14,592,724 $2,548,243 $425,000 $1,123,243
Advertising
Fester and Kisiser
Velker and Company
...
Total
5,644,665
352,967
90,000
262,967
2,710,585
387.657
153,000
234,697
$22,947.974 $2,265,867 $668,000 $1,620,867
Source: Meety'n Industrials, 1942.
Assusing that the ratio of gross income to not incone for these
three companies is representative of the industry, 11 is estimated
that the net income of the industry is 1941 was:
Net income before Federal income and
$6,484,042
excess-profits taxes
Federal income and amount-profits taxes. 1,892,351
Net income after Federal income and
4,591,691
excess-prefite taxes
11. Possible forms of a tax on outdoor advertising
A. Keone of tax
From the standpoint of asverage, there are several forms which
the tax could take. The tax could be applied to:
1. All outdoor advertisiments, including these on
the premises of the advertiser.
358
2. Leased outdoor advertisements.
3. Leased outdoor advertisements and those
utilised by the ovaers but not located on the business
premises of the owner.
4. Separate structures erected especially for
advertising purposes, when lessed OF utilized by the
owners but not located on the business premises of the
ovaer.
The first basis would be difficult to administer because of the
very large number of small taxpayers under such a plan. Virtually
every business employs some outdoor advertising. Application of the
tax to leased advertisements relatively easy to administer,
since the number of taxpayers would be reduced to a sinimum.
However, this basis discriminates against the firms which lease
advertising space as compared with those which ove their own advertisements, and night drive the outdeer advertising companies out of
business. The most equitable basis which is capable of administra-
ties is application of the tax to all oaideer advertisements leased
and those utilized by the owners but not located on the business
premises of the evers. This basis will increase somevhat the
number of taxpayers ever what would be the case If only leased
boards were taxed but will eliminate most of the inequity that exists
in the case of the other type of tax. The final possibility, to
confine the tax to separate structures erected especially for advertising purposes, would discriminate as among users of the various
forms of outdoor advertising. In addition, there would arise serious
administrative problems of determining what constitutes separate
structures erected especially for advertising purposes.
Regardless of the sature of the scope of the tax in other
respects, it would be desirable to exclude advertisements located
in or on commen enrrier vehicles, stations, and structures which
are used in the conduct of the business. These signs are substantially
different in nature and earning power than ordinary billboards, and
unless they are excluded from the tax or taxed at very low rates,
the use of such cards night be eliminated. The States which tax outdoor advertising have found 11 desirable to exclude advertising of
this type.
359
.6.
3. Taxpayors
The tax could be levied upon
1. Lessors and owners of over-ubilised
taxable advertisements
2. Location owners
-
Placing of liability en lessore and over of taxable over
utilised advertisements would involve the emallest number of taxpayers, since the number of taxpayers in this case would be far
less than the number of advertisers or number of persons supplying
location for eroctics of advertisements. The lesser-ovner basic
would be somevhat less equitable than the advertiser basis, since
the ability of the taxpayer to shift the tax to the advertiser
would not be uniform in all situations, especially where contracts
have been made for relatively long periods. This difference does
not appear to be significant. The location-ovaer basis would not
only involve a large number of small taxpayers, but would also be
least satisfactory from an equity standpoint, since is most cases
relatively long-term contracts exist between location ovner and
lessor.
C. Tax_rate
There are three possible types of tax rate which warrant con-
sideration:
1. Flat rate on each display
2. Nate adjusted to sise of display
3. Percentage of green proceeds from
lease of outdoor advertising space
The most equitable rate which would be administratively feasible would be a rate adjusted to the size of the display. either by
use of a specific rate per square feet of display space or by use
of a graduated rate scale such as that provided in the 1941 Revenue
Bill as passed by the House of Representatives. 1/ This basis is
V The rate schedule was as follows:
For each billboard having an advertising space of --
Not more than 100 square feet
Nore than 100 and not more than 300
200 square feet ...
...
$1
2
.
3
#
200
400
More than 600 square feet
400
600
...
5
S
11
360
-7not entirely equitable since billboards of similar size differ
substantially in earning power, which depends primarily on suitsbility of location. 1/ The gross preceeds from lease basis, which
would provide the only equitable system, however, is not adminis-
tratively feasible. In the case of owner-utilized boards, there
is no lease price and an estimate of the lease value would have to
be made. In the case of the leased displays, it would be difficult
for the Bareau of Internal Envenue to check carefully on the
correctness of the reported annual rent figures. It would be
difficult to prevent the lessors from evading tax by giving compensation other than cash restal.
The flat rate basis would be the easiest form to administer
but would be extresely inequitable.
III. Yield
The official estimate for the yield of the tax on outdoor advertising included in the 1941 Revenue Bill was $1, 700,000. By
the use of vider coverage and higher rates, a somewhat larger
amount of revenue night be obtained. There obviously are limits
to the potential revenue. however. As indicated above, the total
money spent on outdoor advertising in 1941 was estimated to be
$65,000,000; the figure for 1942 apparently will be substantially
less. Since the various forms of advertising are highly competitive,
it does not appear that the tax revenue could exceed a relatively
scall percentage of total expenditure on outdoor advertising.
IV. Shifting of the tax
The portion of such a tax levied on owners of owner-utilized
advertisements would be borne directly by the advertiser-sners of
the advertisements. In the case of lessed displays. 11 is to be
expected that the burden would be passed forward to the were,
although the existance of relatively long term contracts and the de-
creasing utility of outdoor advertising would lesson the ability to
shift and leave part of the barden on the advertising concerns. To
the extent that the burden was borne by the advertisers, prefite of
these companies would be reduced unless price deiling readjustments
1/
Some States have adjusted the rates of their taxes on outdoor
advertising according to the population of the counties or other
areas in which the signs are located. Since there are 00 many
other factors than population of the geographical areas which
effect earning capacity of signs, such an adjustment might
increase inequity rather than lessen it.
361
.8could be obtained. Thus, in general, most of the burden would be
borne out of reduced profits of various enterprises. Corporation
and individual income tax revenue would be reduced by an amount
equal to a substantial share of the tax revenue.
V. Equity considerations
A. Justification for the tax
Apart from revenue considinations, which could be used to
justify almost any type of tax under present conditions, the only
justification for a tax on outdoor advertising is that this form
of advertising is undesirable and persons should be penalized for
making use of it. Without question, much billboard advertising
along otherwise sconic highways is objectionable and even dangerour to the safety of automobile drivers. However, a tax on outdoor
advertising would apply to many types of advertisements to which
there can be no objection. Many billboards, especially those in
cities, do not in any way interfere with the beauty of the surroundings or create hasards of any kind. Some actually hide unsightly
damps and wrecking yards. Furthereore, many of the signs are
informative, as for example hotel advertisements on the outskirts
of cities. Even in the case of those that are objectionable, it
would seem that regulation should be left to the States or
exercised in connection with Federal highway greats. This is
especially true at a time when Federal tax collection resources
are required for were important purposes.
B. Insurity arising from such a tax
In several respects inequity arises from the imposition of a
tax on outdoor advertising. In the first place, as indicated above,
11 is impossible to devise such a tax which is both equitable and
administratively feasible. The most satisfactory form of the tax
which is fescible, one levied on lessors of outdoor advertisements
and ovners of owner-atilized advertisements, at a rate graduated
according to the size of the display. discriminates against over re
and users of these advertisements of relatively low earning capacity.
There is a substantial range of earning power among outdoor advertisements, the earning power depending primarily upon location.
Also, some boards may be idle for a substantial part of the year.
Space on others may be donated to charitable organizations and
governments. Furthermore, ability of lessors to shift the tax to
advertisers will not be uniform.
362
Secondly, any type of tax ea outdoor advertising is necessarily
discriminatory se long as other forms of advertising are not saved.
Various forms of advertising are competitive, and to make one more
costly relatively to the others by the imposition of a tax will lend
to interfere with the use of that form. Justification for such
discrimination eas be found only on the basis of objectionability
of this type of advertising. As indicated above, by no means are all
types of outdoor advertising objectionable even though some may be.
VI. Administrative difficultion
Mest of the administrative problems that would be encountered
have been mentioned is previous sections, but they will be communised
briefly here.
1. Problems of interpretation of the tors "billboard" or
"outdeer advertisement" will arise regardless of how carefully the
term is defined in the Bar law.
2. Unless the Sex rate were a specific amount per sign, 11
would be necessary to determine else of billboards or amount of
leases and estimated lease value of over-utilized boards. When 18
is recognised that there are perhaps 509,000 billboards, the diffi-
cultica involved is this task are divides.
3. It would be accessary to check to issure that tax had been
paid on all taxable billboards.
4. If tax vere please only upen lenses. it would be difficult
to prevent tax eveidence by change of method of doing business from
lease to some other basis.
5. While a large part of the total volume of business is cancentrated in the hands of a relatively small number of come-res.
there would be a relatively large number of very small texpayers, of
many not paying a sufficient amount of tax to cover the costs
handling their returns.
VII. Conclusion
Imposition of a Federal tax on billboards and other time. forms The of out-
door advertising would not be advicable at the present adminis-
yield of the tax could not be substantial and considerable tax on
cost would be almost inevitable. Any
outdoor trative advertisements effort and that would be administratively feasible would
involve considerable inequity.
363
- 10 .
Furthermore, the tax would discriminate againstone particular
type of advertising. While some forms of outdoor advertising are
considered to be objectionable, many types are not. Kg would not
be advisable to penalise all more of outdoor advertisements when
direct regulatory measures could be used to eliminate those
considered undosisable. It seems highly undesignable for the Federal
Government at the present time to use 185 administrative facilitive
on the collection of a tax yielding very 16992. revenue and designed
primarily to provide regulation of . type of activity the control of
which might best be left to the States.
Treasury Department
Division of Tax Research
JTD-SP
August 22,1942
364
STRICTLY CONFIDENTIAL
AUG 27 1942
Dear Mr.
I should like very such to obtain the
reaction of the Board of Governors to the
proposals for changes is the existing series
of tax notes which are contained is the
attached telegram which I have sent today
to the presidents of each of the Federal
Reserve Banks. IS seens to me that the
proposed changes would bring the rates on
the Series a notes is lime with existing
market conditions and increase the flex-
ibility and saleability of both series as
tax notes. IS would be of great help to
as as the Board could give me their views
on this matter some time tomorrow.
Sincerely,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
Mr. Renald Ranson, Vice Chairman
Board of Governors of the
Federal Reserve System
Washington. D. G.
Enclosure
By Mess. Harmon 3:55
8/27/42
Copies to Thompson
co-NMC
HOM/Jpm 8/27/42
365
Exp. Loans
August 27, 1942
To Presidents, Federal Reserve Banks:
Boston, Mass.
New York, N. Y.
Philadelphia, Pa.
Cleveland, Ohio
Richmond, Va.
Atlanta, Ga.
Chicago, I11.
St. Louis, Mo.
Minneapolis, Minn.
Kansas City, Mo.
Dallas, Texas
San Francisco, Calif.
Saturday
Because of possible effect on current sales following
inquiry should be treated in strict confidence by you
and officials of your bank Stop Would you please advise
me by wire not later than Friday of your reactions to the
following proposed changes which have been suggested as
improvements in present series of Tax Notes Stop Series A
Notes change amount which may be tendered for taxes from
Twe Ive Hundred Dollars to Five Thousand Dollars a year
and increase maturity to three years Stop Series B Notes
increase interest rate from four cents to six cents per
month per hundred dollars Stop Permit redemption for
cash with interest on thirty days' notice after six months
from date of issue Stop Permit notes to be pledged as
collateral somewhat along the lines permitted in the case
of the restricted 2-1/2's of 1962-67 Stop Increase maturity
to three years Stop Cash redemption with interest would
not apply to banks accepting demand deposits Stop These
changes will bring rate in line with present market conditions
and provide increased flexibility Stop Also they will
permit holders of Series B Notes to pay tax installments
entirely in cash if they 80 prefer which will facilitate
work in Collectors' offices.
MORGENTHAU
WTH:NLE
366
0
0
P
August 27. 1942
Y
Dear Mr. Ransom:
I should like very much to obtain the
reaction of the Board of Governors to the
proposals for changes in the existing series
of tax notes which are contained in the
attached telegram which I have sent today
to the presidents of each of the Federal
Reserve Banks. It seems to me that the
proposed changes would bring the rates on
the Series B notes in line with existing
market conditions and increase the flex-
ibility and saleability of both series as
tax notes. It would be of great help to
me if the Board could give me their views
on this matter some time tomorrow.
Sincerely,
(signed) H. Morgenthau, Jr.
Mr. Ronald Ransom, Vice Chairman
Board of Governors of the
Federal Reserve System
Washington, D. 0.
Enclosure
TANDARD FORM NO. 14
367
FROM
APPROVED BY THE PRESIDENT
MARCH 10. 1926
TELEGRAM
BUREAU
OFFICIAL BUSINESS GOVERNMENT RATES
CHG. APPROPRIATION EXPENSES OF LOANS,
ACT OF SEPTEMBER 24, 1917, AS
AMENDED AND EXTENDED
AUGUST 27, 1942
To Presidents, Federal Reserve Banks:
Boston, Mass.
New York, N. Y.
Chicago, Ill.
St. Louis, Mo.
Philadelphia, Pa.
Minneapolis, Minn.
Kansas City, Mo.
Dallas, Texas
Cleveland, Ohio
Richmond, Va.
Atlanta, Ga.
San Francisco, Calif.
Saturday
BECAUSE OF POSSIBLE EFFECT ON CURRENT SALES FOLLOWING
INQUIRY SHOULD BE TREATED IN STRIOT CONFIDENCE BY YOU
AND OFFICIALS OF YOUR BANK STOP WOULD YOU PLEASE ADVISE
ME BY WIRE NOT LATER THAN PRIDAY OF YOUR REACTIONS TO THE
FOLLOWING PROPOSED CHANGES WHICH HAVE BEEN SUGGESTED AS
IMPROVEMENTS IN PRESENT SERIES OF TAX NOTES STOP SERIES A
NOTES CHANGE AMOUNT WHICH MAY BE TENDERED FOR TAXES FROM
TWELVE HUNDRED DOLLARS TO FIVE THOUSAND DOLLARS A YEAR
AND INCREASE MATURITY TO THREE YEARS STOP SERIES B NOTES
INCREASE INTEREST RATE FROM FOUR CENTS TO SIX CENTS PER
MONTH PER HUNDRED DOLLARS STOP PERMIT REDEMPTION FOR
CASH WITH INTEREST ON THIRTY DAYS NOTICE AFTER SIX MONTHS
FROM DATE OF ISSUE STOP PERMIT NOTES TO BE PLEDGED AS
COLLATERAL SOMEWHAT ALONG THE LINES PERMITTED IN THE CASE
OF THE RESTRICTED 2-1/2's of 1962-67 STOP INCREASE MATURITY
TO THREE YEARS STOP CASH REDEMPTION WITH INTEREST WOULD
NOT APPLY TO BANKS ACCEPTING DEMAND DEPOSITS STOP THESE
CHANGES WILL BRING RATE IN LINE WITH PRESENT MARKET CONDITIONS
AND PROVIDE INCREASED FLEXIBILITY STOP ALSO THEY WILL
PERMIT HOLDERS OF SERIES B NOTES TO PAY TAX INSTALLMENTS
ENTIRELY IN CASH IF THEY so PREFER WHICH WILL FACILITATE
WORK IN COLLECTORS' OFFICES
MORGENTHAU
367
TANDARD FORM NO. 14
FROM
AMMOVED BY THE PRESIDENT
MARCH 10 1926
TELEGRAM
BUREAU
CHG
OFFICIAL BUSINESS GOVERNMENT RATES
EXPENSES OF LOANS
ACT OF SEPTEMBER 24, 1917, AS
AMENDED AND EXTENDED
AUGUST 27, 1942
To Presidents, Federal Reserve Banks:
Boston, Mass.
New York, N. Y.
Chicago, Ill.
St. Louis, Mo.
Philadelphia, Pa.
Minneapolis, Minn.
Kansas City, Mo.
Dallas, Texas
Cleveland, Ohio
Richmond, Va.
Atlanta, Ga.
San Francisco, Calif.
Saturday
BECAUSE OF POSSIBLE EFFECT ON CURRENT SALES FOLLOWING
INQUIRY SHOULD BE TREATED IN STRICT CONFIDENCE BY YOU
AND OFFICIALS OF YOUR BANK STOP WOULD YOU PLEASE ADVISE
ME BY WIRE NOT LATER THAN PRIDAY OF YOUR REACTIONS TO THE
FOLLOWING PROPOSED CHANGES WHICH HAVE BEEN SUGGESTED AS
IMPROVEMENTS IN PRESENT SERIES OF TAX NOTES STOP SERIES A
NOTES CHANGE AMOUNT WHICH MAY BE TENDERED FOR TAXES FROM
TWELVE HUNDRED DOLLARS TO FIVE THOUSAND DOLLARS A YEAR
AND INCREASE MATURITY TO THREE YEARS STOP SERIES B NOTES
INCREASE INTEREST RATE FROM FOUR CENTS TO SIX CENTS PER
MONTH PER HUNDRED DOLLARS STOP PERMIT REDEMPTION FOR
CASH WITH INTERES? ON THIRTY DAYS' NOTICE AFTER SIX MONTHS
FROM DATE OF ISSUE STOP PERMIT NOTES TO BE PLEDGED AS
COLLATERAL SOMEWHAT ALONG THE LINES PERMITTED IN THE CASE
OF THE RESTRICTED 2-1/2's of 1962-67 STOP INCREASE MATURITY
TO THREE YEARS STOP CASH REDEMPTION WITH INTEREST WOULD
NOT APPLY TO BANKS ACCEPTING DEMAND DEPOSITS STOP THESE
CHANGES WILL BRING RATE IN LINE WITH PRESENT MARKET CONDITIONS
AND PROVIDE INCREASED FLEXIBILITY STOP ALSO THEY WILL
PERMIT HOLDERS OF SERIES B NOTES TO PAY TAX INSTALLMENTS
ENTIRELY IN CASH IF THEY so PREFER WHICH WILL FACILITATE
WORK IN COLLECTORS' OFFICES
MORGENTHAU
368
BOARD OFOFGOVERNORS
THE
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE VICE CHAIRMAN
AMERICA
STRICTLY CONFIDENTIAL
August 28, 1942.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Dear Mr. Morgenthau:
In reply to your letter of August 27 enclosing a copy of
a telegram to the Presidents of the Reserve Banks the Board of
Governors agrees entirely with the proposed changes in the Series A
tax notes. We also agree that some changes in the Series B notes are
desirable and in some respects essential, but we again recommend a
graduated scale of rates instead of the flat rate proposed. We feel
that, while the proposals are in the right direction, the notes will
not reach the maximum amount of funds that can be obtained from this
type of issue, unless the rates are sufficiently attractive for
maturities beyond seven months, and, even more important, the notes
will not be held for extended periods of time, unless the rates are
so arranged on a graduated scale as to offer a strong inducement to
holders to retain them.
We have considered the objections raised by members of
your staff to a graduated scale of rates on the tax notes. While
we recognize the merit of these objections, we do not believe that
they are sufficient to outweigh the advantages of a graduated scale
of rates. These advantages are that (1) the higher average rate
would attract a much larger amount of funds and attain a much wider
distribution than would be reached by the flat rate of only 0.72
per cent per annum for three years and (2) the increasing scale of
rates would be a real incentive to investors to hold the notes to
maturity. With an attractive schedule of rates these notes could
be actively promoted by the Victory Fund Committees and in our opinion
would raise a large amount of funds, probably between $500,000,000
and $1,000,000,000 in September.
The objection that has been made to the offering of a
different issue each month is that the work of the internal revenue
collectors would be greatly complicated. We believe that the im-
portance of this objection has been overemphasized. The graduated
scale of rates would apply only to the Series B notes, which are
purchased in large blocks by corporations and wealthy individuals.
We suggest that the Series B notes be issued in $5,000 units and
only to investors purchasing at least $5,000. The Series A notes
would be available up to and including $5,000.
369
Honorable Henry Morgenthau, Jr.
-2-
A substantial part of these notes would be purchased for the
investment of idle funds and would not be redeemed for tax purposes.
Another substantial part of the notes, although purchased for tax
poses, would be redeemed in cash, since many corporations and individuals pur-
would prefer to pay their tax bills by check rather than by turning
in the tax notes. The internal revenue collectors would be involved
with only the remaining portion of the notes that would be turned in
for tax payments, and their work would be simplified by having the
redemption values printed or stamped on the face of each note. The
additional work imposed on the internal revenue collectors would not
appear to be insurmountable, and the results that would be achieved
by obtaining the largest possible amount of funds from nonbanking
investors would certainly offset this disadvantage.
This matter has been discussed with Chairman Eccles and he
is in agreement with the statements contained in this letter.
Very truly yours,
Dana
Renald Ransom,
Vice Chairman.
370
A
H
46
A
1942 AUG 28 OM
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B3WASH B289 NY 28-440P
ORGENTHAU
259
EPLY OF BOARD OF GOVERNORS OF FEDERAL RESERVE SYSTEM TO YOUR LETTER
AUG 27, 1942, WITH RESPECT TO PROPOSED CHANGES IN EXISTING SERIES OF
NOTES HAS BEEN DISCUSSED BY MEMBERS OF EXECUTIVE COMMITTEE OF
ERAL OPEN MARKET COMMITTEE WHICH 18 BODY WITHIN THE FEDERAL
ESERVE SYSTEM WITH WHICH TREASURY HAS MAINTAINED PRIMARY CONTACT
ON TREASURY FINANCING PROBLEMS. MEMBERS OF EXECUTIVE
COMMITTEE ARE IN FULL AGREEMENT WITH THE VIEWS EXPRESSED
IN BOARD'S LETTER AND DESIRE STRONGLY TO RECOMMEND THAT BOARD'S
SUGGESTIONS BE GIVEN CAREFUL CONSIDERATION BEFORE
E
L
E
ECISION IS REACHED AS TO CHANGES TO BE MADE IN TAX NOTES
G
ALLAN SPROUL, VICE CHAIRMAN,
EXECUTIVE COMMITTEE, FEDERAL OPEN MARKET COMMITTEE..
R
A
371
1942 AUG 29 DM 12 7
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A
P
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11WASH B131 BOS 29-1243₽
T
ORGENTHAU
R
E
A
EPLYING YOUR WIRE AUG 27 CONCERNING TAX NOTES BELIEVE
S
U
PROPOSED CHANGES VERY DESIRABLE. AGREE WITH SUGGESTIONS IN
Y
LETTER BOARD OF GOVERNORS TO YOU AUG 28 RELATIVE MORE
T
ATTRACTIVE AND GRADUATED SCALE OF RATES FOR SERIES B
E
PAIDOCK.
L
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372
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1942 AUG 29 DM I 34
Y
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NLONG WASH B142 NY 29-114P
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MORGENTHAU
R
A
YOUR WIRE AUGUST 27 CONCERNING MODIFICATION OF TAX NOTES.
SUGGESTED CHANGES IN SERIES A NOTE SEEM WHOLLY DESIRABLE IN VIEW
T
R
OF FAILURE OF EXISTING NOTE TO ATTRACT SUBSTANTIAL
E
A
VOLUME OF FUNDS AND IN VIEW INCREASED TAX RATES SINCE
S
PRESENT LIMITS OF USE FOR TAX PAYMENT WERE FIXED.
U
R
POSSIBILITY OF LARGER INTEREST RETURN INHERENT IN RAISING LIMIT
Y
TO $5000 AND LENGTHENING MATURITY SHOULD LEAD
E
TO FURTHER ANTICIPATION OF TAX PAYMENTS BY THIS METHOD ON PART OF
L
E
SUBSTANTIAL GROUP OF INDIVIDUAL TAXPAYERS.
G
BUGGESTED CHANGES IN SERIES B NOTES RAISE A BROADER QUESTION. IN
R
A
P
OUR VIEW THEY WOULD CREATE A DUAL PURPOSE NOTE CONTAINING
H
FEATURES NOT NECESSARY IN A PURE TAX ANTICIPATION
H
HENRYB S MORGENTHAU, JR
WASH.
259
T
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32C81-82 BOOK
A
Y
373
T
E
EET TWO
L
E
G
NOTE AND YET NOT DESIGNED FOR MAXIMUM EFFECTIVENESS
IN ATTRACTING AND RETAINING IDLE SHORT TERM FUNDS HELD BY NONBANK INVEH
STORS. TO ACCOMPLISH DUAL PURPOSE MOST EFFECTIVELY
A GRADUATED SCALE OF RATES GEARED TO THE TERM THE SECURITY
E
IS HELD SHOULD BE ADDED TO OTHER SUGGESTED CHANGES.
A
S
U
A FLAT RATE OF 72/100THS OF 1 0/0 WOULD BE ADEQUATE
COMPARED WITH PRESENT MARKET RATES FOR
T
THE MINIMUM HOLDING PERIOD OF SIX MONTHS PLUS THIRTY DAYS
L
BUT THIS 18 A FIELD ALREADY PRETTY WELL COVERED BY CERTIFICATES OF
E
G
INDEBTEDNESS. IT WOULD NOT BE ADEQUATE FOR LONGER
R
NATURITIES AND INCENTIVE TO HOLD TO MATURITY WOULD BE
A
P
LACKING. THE IMPORTANCE OF INCREASING SALES
H
OF SHORT TERM SECURITIES OF THIS GENERAL TYPE
OUTSIDE THE BANKING SYSTEM WARRANTS DEVISING THE BEST TYPE OF
T
R
SECURITY FOR THE JOB AND OVERCOMING TECHNICAL
E
A
(BSTACLES TO ITS ISSUANCE.
SPROUL.
Y
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1942 AUG 28 DM a 51
R
374
Y
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G
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A
P
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82 C PHILA 28-602P
T
A
IN RESPONSE TO YOUR TELEGRAM OF AUGUST 27,1942, OUR COMMENTS ON
U
THE PROPOSED CHANGES IN THE TERMS OF TAX SAVINGS NOTES ARE AS FOLLOWS:
R
SERIES A NOTES- WE FAVOR THE PROPOSED INCREASE IN THE AMOUNT
WICH MAY BE TENDERED FOR TAXES FROM $1200 TO $5000 A YEAR, AND IN
NATURITY FROM TWO TO THREE TEAMS. THERE CHANGES ARE DESIRABLE AND
L
E
OULD MAKE FOR INCREASED SALES TO INDIVIDUALS, PARTICULARLY IN
G
R
VIEW OF THE PENDING TAX BILL.
SERIES B NOTES- WE ALSO BELIEVE THAT THE PROPOSED CHANGES WITH
A
P
H
ESPECT TO REDEMPTION, COLLATERAL AND MATURITY PROVISIONS IN THE
ERIES B NOTES ARE DESIRABLE AND THAT THE RATE OF INTEREST SHOULD
ALTERED IN LINE WITH OPEN MARKET RATES. BUT WE DOUBT SERIOUSLY
ADVISABILITY OF RETAINING THE FLAT RATE, EVEN AT THE PROPOSED
IGHER LEVEL, PRIMARILY ON THE GROUND THAT THE PROPOSED FLAT RATE
A
S
U
IILL NOT ATTRACT AS LARGE AN AMOUNT OF FUNDS AS IT SHOULD AND THAT
R
Y
IT WILL NOT PROVIDE A SUFFICIENT INDUCEMENT FOR HOLDERS TO RETAIN
T
THESE NOTES BEYOND TAX REQUIREMENTS. WE STRONGLY FAVOR THE
E
L
DOPTION OF A GRADUATED IN SCHEDULE OF RATES ADJUSTABLE AT SEMI-
E
G
NINUAL INTERVALS, THE RATE TO BEGIN AT RX 0.60 PERCENT FOR THE
FIRST SIX MONTHS AND THEN RISING TO 1.32 PERCENT IN THE SECOND
R
A
P
AR AND MAINTAINING THAT RATE THROUGH THE THIRD YEAR.
H
T
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375
E
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SHEET 2
G
R
A
H
T
SOME SUCH SCHEDULE OF RATES WILL BE IN LINE WITH THE CURRENT
R
E
ARKET RATES ON SHORT-TERM SECURITIES AND so WILL BE ATTRACTIVE
A
S
0 CORPORATIONS AND WEALTHY INDIVIDUALS. WE BELIEVE THAT A
U
RADUATED SCHEDULE OF RATES AS SUGGESTED HERE WILL (A) DRAW
SUBSTANTIALLY LARGER AMOUNT OF FUNDS THAN WOULD A FLAT RATE,
(B) RESULT IN INCREASED DISTRIBUTION OF NOTES AMONG CORPORATIONS
T
E
L
BOTH LARGE AND SMALL, AND (c) PROVIDE A GENUINE INCENTIVE TO
G
INVESTORS TO HOLD THESE NOTES UNTIL MATURITY.
SERIES B NOTES, WITH THE PROPOSED CHANGES AND WITH A GRADUATED
R
A
P
EDULE OF RATES, WOULD PROVIDE THE VICTORY FUND COMMITTEES WITH
H
INSTRUMENT FOR WIDE DISTRIBUTION AND INCREASE THE AMOUNT OF
SALES TO A MUCH GREATER EXTENT THAT HAS BEEN POSSIBLE INERETOFORE.
IN SEETEMBER WOULD REACH A8 MUCH AS $750 MILLION. THE SALE OF
THESE NOTES CAN BE EASILY SUSTAINED ON A HIGHER LEVEL FROM MONTH
A
S
EP
E
IT SHOULD NOT BE UNLIKELY THAT THE TOTAL SALES OF THESE NOTES
U
R
TO MONTH THAN CAN BE DONE WITH THE PROPOSED FLAT RATE OF 0.72
PER ANNUM FOR THREE YEARS.
Y
T
T
376
2 SHEET 3
E
L
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(
G
R
WE RECOGNIZE SOME OF THE MECHANICAL DIFFICULTIES ARISING
A
ON THE OFFERING OF A DIFFERENT ISSUE EACH MONTH BUT WE DO NOT
H,
LIEVE THAT SUCH DIFFICULTIES CANNOT BE OVERCOME. SERIES B
T
R
TES, WITH A GRADUATED SCHEDULE OF RATES WOULD ATTRACT, IN
E
A
INSIDERABLE AMOUNTS, UNUSED CORPORATE BALANCES ARISING FROM
$
CREASING INVENTORIES AND DEFERRED CAPITAL EXPENDITURES.
U
R
WE MAKE THE FOREGOING SUGGESTIONS IN THE BELIEF THAT TAX
Y
VINGS NOTES THEN WILL BE IN LINE WITH THE PRESENT AND PROSPECTIVE
E
DIDITIONS, WILL PROVIDE REAL FLEXIBILITY IN THE RATES OF SERIES B
L
E
ND WILL PROVIDE AN EFFECTIVE MEDIUM FOR ATTRACTING LARGE
ON-BANKING FUNDS. OUR VICTORY FUND ORGANIZATION CAN DO A GOOD
G
R
A
JOB IN MARKETING THESE NOTES IN THIS DISTRICT.
ALFRED H. WILLIAMS.
377
E
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G
R
A
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1942 AUG 28 DM 3 49
T
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A
$
73G14WASH D92 CLEVE 28-345
U
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ORGENTHAU
299
ETEL 27TH A AND B SERIES NOTES
T
BELIEVE PROPOSAL 18 STEP IN RIGHT
E
L
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DIRECTION
G
FLEMING.
R
A
P
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T
(
10
RICH 29-1035
CRETARY MORGENTHAU
209
-
E
A
S
1942 AUG 29 AM in 43
N
REPLY TO YOUR TELEGRAM OF AUGUST 27, I THIK THE
U
R
Y
T
E
29WASH RH
378
L
E
PROPOSED CHANGES IN THE SERIES A TAX NOTE ARE VERY DESIRABLE.
G
REVIOUSLY THE SERIES B TAX NOTE MUST BE CHANGED IN SOME PARTICULARS.
R
A
- THINK THERE WOULD BE SOME DEMAND FOR A NOTE SUCH AS YOU OUTLINED
5
UT BELIEVE SALES WOULD FALL FAR SHORT OF WHAT COULD BE ACCOMPL ISHED
WITH A THREE YEAR NOTE WITH A GRADUATED RATE. A RATE OF .72 PERCENT
- YEAR FOR THREE YEARS 18 NOT SUFFICENTLY ATTRACTIVE TO PRODUCE THE
ESIRED RESULTS IN THIS AREA. WHILE THERE 18 NO WAY OF KNOWING IN
EVANCE OF A TRIAL JUST HOW MANY THREE YEAR NOTES WITH AN APPROPRIATE
DUATED RATE COULD BE SOLD TO NONBANK INVESTORS, I FEEL QUITE
U
R
STRONGLY THAT THE VOLUME WOULD BE SUBSTANTIAL. I MIGHT ADD THAT
THIS WAS THE UNANIMOUS OPINION OF THE TEN MEMBERS OF OUR DISTRICT
M
VICTORY FUND COMMITTEE WHO PREPARED THE MEMORANDUM ON TREASURY
FINANCING WHICH WE FORWARDED TO YOU ON JULY 22. IN THE ABSENCE OF
GRADUATED RATE, THERE WOULD SEEM TO BE LITTLE INDUCEMENT TO HOLD
THE NOTES TO MATURITY
LEACH.
Y
T
DM 3 24
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1942 AUG 28
A
379
P
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53WASH F119 ATLA 28-321
A
S
ORGENTHAU
259
U
R
Y
OUR WIRE 27 REACTIONS HERE TO PROPOSED CHANGES IN SERIES A AND
T
E
TAX NOTES ENTIRELY FAVORABLE AND WE RECOMMEND THAT THE CHANGES
L
E MADE
E
Q
MCLARIN.
R
A
P
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A
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380
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61G01WASH GX191 CGO 28-513
NON. HENRY MORGENTHAU JR
259
ECRETARY OF THE TREASURY
E
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A
P
H
1942 AUG 28 PM 6 34
T
R
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EURTEL AUGUST 27 REGARDING PROPOSED CHANGES IN TAX NOTES
A
ERIES A AND B. OUR REACTIONS ARE FAVORABLE TO ALL PROPOSED
S
U
ODIFICATIONS WHICH WE BELIEVE ARE CALCULATED AS STATED TO BRING
r
ISSUES IN LINE WITH PRESENT MARKET AND PROVIDE INCREASED
EXIBILITY.
T
E
L
DESIBLY FURTHER CONSIDERATION SHOULD BE GIVEN TO PROGRESSIVELY
E
G
ICREASING THE RETURN ON SERIES B NOTES IF HELD BY PURCHASER
R
ER ONE YEAR WITH A VIEW TO MAKING NOTES ATTRACTIVE FOR
A
P
ESTMENT AS WELL AS FOR TAX PURPOSES.
H
18 ALSO SUGGESTED THAT PROPOSED MODIFICATIONS IN SERIES B ARE
T
R
SUBSTANTIAL AS TO WARRANT NEW DESIGNATION SUCH AS SERIES C.
E
A
EFERRING TO LAST SENTENCE OF YOUR WIRE, IF SERIES B HOLDERS
$
IMIBIT PRONOUNCED DEBIRE TO PAY TAX INSTALLMENTS ENTIRELY IN
U
ASH, TREASURY MAY BE FACED WITH ABNORMALLY LARGE DEMANDS FOR
EDEMPTION BETWEEN THE FIRST AND FIFTEENTH OF MARCH, JUNE,
EPTEMBER, AND DECEMBER, AT WHICH PERIODS TREASURY'S BALANCE
IGHT BE EXPECTED TO BE AT A RELATIVELY LOW EBB.
G
YOUNG.
R
A
P
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A
381
3662WASH (LONG) H48 STL 29-1143
1942 AUG 29
PM
57
H
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R
ENTHAU
E
A
S
TEL AUGUST 27 TAX NOTE CHANGES. APPROVE SERIES A CHANGES. INCREASE
U
R
LIMIT TO FIVE THOUSAND DOLLARS in YEAR APPEARS ESPECIALLY DESIRABLE
Y
VIEW OF MUCH HEAVIER NXXX INDIVIDUAL INCOME TAX LIABILITY IN
T
E
ENDING TAX LEGISLATION. APPROVE AND WELCOME SERIES B SUGGESTED
L
E
NANGES AS BEING IN RIGHT DIRECTION. INCREASE IN RATE NECESSARY
DER PRESENT MARKET CONDITIONS. IF IT 18 ANTICIPATED THAT CORPORATIONS G
R
ILL BUY NOTES ON MONTHLY BASIS IN THE AMOUNT OF THEIR CURRENT NET
H
COME THE NOTES WOULD BE TURNED OVER ON AVERAGE OF ABOUT ONE YEAR
T
QUARTERLY TAX DATES AND CONSEQUENTLY SEVEN OR EIGHT CENTS PER
R
E
ONTH PER ONE HUNDRED DOLLARS WOULD APPEAR TO PUT RATE MORE IN LINE
TH RRSEX PRESENT MARKET FOR ONE YEAR SECURITIES. 4 IF RATE WAS
A
$
U
INCREASED, HOWEVER, IT WOULD APPEAR ADVISABLE TO REDUCE THE
R
Y
MOUNT OF INTEREST PAID IF REDEEMED FOR CASH BETWEEN SIX MONTHS
T
NO ONE YEAR. PERMISSION TO PLEDGE NOTES AS COLLATERAL SHOULD DO
E
L
UCH TO STIMULATE SALES ESPECIALLY AMONG SMALLER CORPORATIONS BECAUSE
E
UNCERTAINTIES REGARDING CASH NEEDS IN THESE TIMES. PROVISION
FOR CASH REDEMPTION WITH INTEREST WOULD SEEM TO ELIMINATE ANY
EJECTION TO INCREASING MATURITY TO THREE YEARS. SINCE AGREEING
x ABOVE AS POSITION OF THIS BANK, WE HAVE RECEIVED COPIES OF
ELEGRAMS OF BOARD AND EXECUTIVE COMMITTEE OF OPEN MARKET COMMITTEE
IMMENTING UPON PROPOSED CHANGES SENT YOU AUG 28. BELIEVE INTRODUCTION
A GRADUATED SCALE OF RATES ON TAX NOTES WOULD GREATLY BROADEN MARKET
A
S
FOR THEM IN THIS DISTRICT AND VICTORY FUND COMMITTEE WOULD WELCOME
U
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PPORTUNITY TO PROMOTE WIDE DISTRIBUTION.
Y
DAVIS.
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,
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382
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1942 AUG 29 PM 12 32
H
18G26WASH 122 MPLS LONG 29-1110
T
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ORGENTHAU-TREASURY
E
A
S
THE ABSENCE OF PRESIDENT PEYTON OFFICERS OF THIS BANK
U
AVE CONSIDERED YOUR TELEGRAM OF AUGUST 27 REGARDING TAX
R
Y
DTES STOP WE ARE IN FUL! ACCORD WITH PROPOSED CHANGES IN
T
E
ERIES A NOTES STOP BELIEVE THE PROPOSED CHANGES IN SERIES
L
ALSO DESIRABLE EXCEPT THAT WE FEEL INTEREST RATES SHOULD
E
ON GRADUATED SCALE SUFFICIENT TO ATTRACT FUNDS NOT ONLY
G
R
OR ANTICIPATION OF TAX PAYMENTS BUT FOR OTHER PURPOSES STOP
A
P
MAY BE DESIRABLE TO CONSIDER LIMITING ISSUE OF SERIES B
$100,000 A YEAR AND ISSUING WITHOUT L IMITATION A NEW
H
T
R
ERIES C TAX NOTE WITH THE SAME FEATURES AS SERIES B
E
XCEPT WITH LOWER GRADUATED RATES STOP BELIEVE IT DESIRABLE
A
S
TO INCLUDE PRIVILEGE TO PEXXX PLEDGE AS COLLATERAL IN ALL
U
R
ERIES
Y
T
E
SWANSON.
G
R
383
I
1942 AUG 29 PM
L
11
0G75WASH J75 KC 29-1155
T
E
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E
RGENTHAU
G
R
ELLING YOUR WIRE OF AUGUST 22 REFERENCE PROPOSED CHANGES IN
A
RESENT SERIES TAX NOTES, I THOROUGHLY FAVOR CHANGES SUGGESTED FOR
H
ERIES A NOTES. I ALSO FAVOR INCREASING INTEREST RATE ON SERIES B
T
OTES BUT FEEL THAT RATEI IUSHOULD BE AT PROGRESSIVELY HIGHER
MRSM RATES FOR EACH SIX MONTHS' PERIOD, RATHER THAN A FLAT RATE
THROUGHOUT TERM, IN ORDER TO PROVIDE INDUCEMENT TO HOLD NOTES FOR
U
R
PERIODS APPROACHING MATURITY. OTHER CHANGES SUGGESTED SEEM TO ME
TO BE DESIRABLE
LEEDY.
384
T
R
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A
$
U
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Y
1942 AUG 29 - "
55
G
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#58G89WASH M26 DLS 29-1034A
T
MORGENTHAU
R
E
A
REPLYING YOUR TELEGRAM AUGUST 27. THINK PROPOSED CHANGES IN SERIES.A
$
TAX NOTES ARE DESIRABLE AND WILL INCREASE SALES. FAVOR PROPOSED CHAMB
CHANGES IN SERIES B NOTES AND THINK THEY WILL ESTIONABLY INCREASE
SALES BUT SERIOUSLY DOUBT IF RATE SUGGESTED IS SUFFICIENTLY
ATTRACTIVE TO ACCOMPLISH THE PURPOSE DESIRED. BELIEVE THAT GRADUATED
SCALE OF RATES SOMEWHAT HIGHER THAN PROPOSED RATE WOULD INCREASE SALES
G
R
SUBSTANTIALLY. THE SCALE SHOULD BE ARRANGED 80 AS TO INDUCE PURCHAX
A
P
PURCHASERS OF NOTES TO HOLD THEM UNTIL MATURITY. IN MY OPINION, THE
H
PROPOSAL REFERRED TO IN YOUR TELEGRAM MIGHT CAUSE INVESTORS TO LIMIT
PURCHASES OF SERIES B NOTES TO AMOUNTS THAT COULD BE USED IN PAYING
TAXES WITHIN ONE YEAR, OR CAUSE LARGE TAX PAYERS TO PURCHASE OUTSTANDING MARKET ISSUES MATURING AROUND TAX DATES, WHEREAS A GRADUATED
U
SCALE OF RATES AT SOMEWHAT HIGHER LEVEL MIGHT INDUCE LARGE TAX PAYERS
TO PURCHASE SUBSTANTIAL AMOUNTS OF NOTES AND THUS IN EFFECT PAY THEIR
E
XES THREE YEARS IN ADVANCE, AND AL80 IT MIGHT RESULT IN THE INVEST-
L
E
MENT OF LARGER AMOUNT OF TEMPORARILY IDLE FUNDS
G
GILBERT.
A
385
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Y
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1942 AUG 29 PM 12 16
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A
69GO8WASH (LONG)8 SF 28-830-29
ORGENTHAU
T
E
A
INSWERING YOURS 27TH AGREEABLE TO PROPOSAL THAT TAX NOTES
$
U
ERIES A BZ INCREASED TO $5,000 WITH 3-YEAR MATURITY AND NO
CHANGE IN INTEREST RATE. ONLY 3 CHANGES RECOMMENDED IN
R
Y
T
EXISTING TERMS OF SERIES B:
E
FIRST THAT MATURITY BE EXTENDED TO 3 YEARS;
L
E
SECOND THAT RATE BE INCREASED FROM 4 TO 6 CENTS AFTER FIRST
YEAR AND TO 8 CENTS AFTER SECOND YEAR (SEE OUR LETTER TO
G
A
UNDER SECRETARY BELL, NOVEMBER 7,1940);
THIRD THAT INTEREST BE PAID ONLY WHEN REDEMPTION OF NOTE IS
EFFECTED BY CHECK ISSUED IN FAVOR OF COLLECTOR OF INTERNAL
REVENUE FOR USE IN PAYING TAXES OR IF NOTE HAS RUN 12 OR MORE
R
E
MONTHS.
A
STRONGLY ADVISE AGAINST USE OF TAX NOTES AS SECURITY FOR LOANS.
FACT THAT ISSUE REDEEMABLE AFTER 60 DAYS FOR CASH UPON 30 DAYS
$
U
R
Y
NOTICE GIVES NECESSARY LIQUIDITY AND ABSENCE OF INTEREST WHEN
EARLY REDEMPTION IS UNRELATED TO TAX PAYMENT 18 INCENTIVE TO
T
E
L
KEEP ISSUE IN ITS PROPER CATEGORY AND UNCONFUSED WITH
E
G
IPLICITY OF OTHER ISSUES.
R
CLERK-29.
A
H
Secretary
386
Room 192
Exp. Loans A and E
August 27, 1942.
To Presidents, Federal Reserve Banks:
Boston, Mass.
New York, N. Y.
Philadelphia, Pa.
Cleveland, Ohio
Richmond, Va.
Atlanta, Ga.
Chicago, III.
St. Louis, Mo.
Minneapolis, Minn.
Kansas City, Mo.
Dallas, Texas
San Francisco, Calif.
In order to clarify the activities of both the Victory Fund
Committee and the War Savings Staff, after September first
the Victory Fund Committees as such will no longer concern
themselves with the sale of war Savings Bonds. No objection
will be made, however, to individual members of such committees
serving with War Savings Committees, at their request, in the
sale of such securities.
MORCENTHAU
O.K. HM Jr
387
August 27, 1942
Dear George:
I was glad to have your letter of August 21.
Mr. Graves has told me of the conferences
here yesterday between yourself and Mr. Andrews
and representatives of the Treasury, looking to
the selection and use of qualified life insurance
agents to aid in the sale of F and G Bonds.
The life underwriters in many States have
already done splendid work in the installation of
effective payroll savings plans by commercial and
industrial employers. I very much appreciate this
further evidence that the life insurance business
wants to contribute in a substantial way to the
success of the War Savings program.
Thanking you for your fine cooperation, and
with kind regards, I am
Sincerely,
(Signed) Henry
P. S. Sorry to have missed you. Do let me know in
advance the next time you come to Washington.
Mr. George L. Harrison,
Chairman, Life Insurance
Coordinating Committee,
51 Madison Avenue,
New York, New York.
HNG/FKik
Photostat to NMC
File to Thompson
Life Insurance Coordinating Committee
51 Madison Avenue, New York, N. Y.
Executive Committee:
FRANKLIN D'Out
August 21, 1942.
ANDREWS,
COLLINS
GEORGE L HARRIBON
LEROT A. LINCOLN
GERARD S. NOLLEN
JOHN A. WITHERSPOON
V.T. GRANT
Last A. LINCOLN
Looms
McANDLESS
ORLAND & NOLLEN
R.B. RICHARDSON
GRANT TADGART
Hon. Henry Morgenthau,
Secretary of the Treasury,
Treasury Department,
Washington, D. C.
Dear Secretary Morgenthau:
SRABORN T. WRATLET
A. WITHERSPOON
You will remember that several weeks ago I had
a talk with you and Mr. Graves about the possibility of
organizing a selected group of life insurance agents who
might be made available to the Treasury Department and
through it to the various State Administrators, the War
Savings Committees or the Victory Loan Committees, as
the case may be, to aid in the sale of "F" and "G" bonds.
Since that time several meetings, composed of
representatives of the different interests of life insurance, have been held with a view to developing a program
which we might present to you. In all of those meetings
there was an enthusiastic response on the part of all
concerned to the suggestion that we participate in such
a program to the extent that the Treasury might find it
desirable. But the meetings went even further and have
organized an over-all committee representing practically
the entire field of life insurance for the purpose of
A
coordinating and making more effective the various efforts
-2-
Hon. Henry Morgenthau
8/21/4289
of the life insurance business to aid in the prosecution
of the war. While the several life insurance associations,
the life insurance companies themselves and their agents
have been and are now making substantial efforts to assist
in the prosecution of the war, it was felt that through
unified direction and centralized planning their efforts
may be better consolidated and made even more effective.
To accomplish this and to insure the most com-
plete cooperation of the life insurance business as a
whole, the committee whose names appear on this letter-
head was appointed. I want you to know formally of its
existence and of the earnest desire of the life insurance
business to cooperate in any way that is possible and
practicable in aiding the government in the prosecution
of the war. A sub-committee is now at work trying to
develop ways and means of making selected groups of life
insurance agents available to aid in the sale of "F" and
"G" bonds. We have, however, reached a point where it
is difficult to proceed further without some advice from
you or Mr. Graves as to the way of accomplishing most
conveniently to the Treasury what we and you have in mind.
Accordingly, I hope we may be able to arrange a meeting
either with you or Mr. Graves.
For your information and records, I am enclos-
ing a copy of a letter which I addressed on August 14 to
the president of every life insurance company in the
country. On the whole the response to it has been most
-3-
Hon. Henry Morgenthau
8/21/42
enthusiastic and I feel sure that if there is any way
in which you or other departments of the government
may want our cooperation, it will be readily offered.
Faithfully yours,
line
GeorgenL.Harriso,
Harrison, Chairman.
Enc.
Life Insurance Coordinating Committee
51 Madison Avenue, New York, N. Y.
Chairman:
FORGE L. HARRISON
August 14th, 1942.
Executive Committee:
FRANKLIN D'OLET
LARIS ADAMS
GEORGE L. HARRISON
VILLIAM H. ANDREWS,
LEROT A. LINCOLN
ATRICK A. COLLINS
GERARD S. NOLLEN
LANKLIN D'OLIER
JOHN A. WITHERSPOON
C.T. GRANT
BROT A. LINCOLN
MES Luz LOOMIS
McANDLESS
CHARD S. NOLLEN
B. RICHARDSON
SANT TAGGART
LABORN T. WHATLET
WN A. WITHERSPOON
For your information I am pleased to enclose a copy of
a press release issued August 6, 1942 following the first meeting
of the committee recently appointed by the Association of Life
Insurance Presidents, the American Life Convention, the National
Association of Life Underwriters, the Institute of Life Insurance,
and the Life Insurance Sales Research Bureau.
At that meeting it was suggested that I should write to each life
insurance company to outline a little more fully the genesis of the committee
and the possible scope of its work. This I am glad to do.
Some weeks ago, after conversations with the Treasury Department and
with some of the executives of the local War Savings and Victory Fund Committees,
it became apparent that the sale of War Savings Bonds, particularly the "p"
and "G" bonds, could he greatly facilitated if a carefully selected group of
life insurance agents from all sections of the country were made available to
thehours
War Savings
various States. prepared to work an agreed number
of
a week Staffs
underofitsthe
direction.
It was recognized that life underwriters all over the country have
performed a splendid service in aiding in the sale of "B" bonds and in the
establishment of Payroll Deduction Plans. It is believed, however, that it
will require a carefully prepared program to assure appropriate machinery
to obtain life insurance agents of the type necessary to cooperate in the
sale of "F" and "G" bonds. This is especially true in view of the need to
avoid duplication
individual
prospects.of effort and duplication of appeals in the solicitation of
Accordingly, on July 20, 1942, an informal meeting of representatives
of some of the companies, the Life Underwriters, the Life Institute, and the
Research Bureau was held in New York to discuss ways and means of organizing
an appropriate number of selected agents who might be made available to the
Administrator
in each
State.
At it was of sug- at
State
of
War
Savings
that
meeting
gested that it would be advisable to hold another meeting to be composed
least two representatives of each of the five organizations mentioned above.
Such a meeting was arranged and held in New York on July 29, 1942.
There were present: Claris Adams, President, Ohio State Life Insurance Co.;
William H. Andrews, Jr., Jefferson Standard Life Insurance Co., and a Trustee
-2-
of National Association of Life Underwriters; James A. Fulton, President, Home
Life Insurance Co.1 W. T. Grant, President, Business Men's Assurance Co., of
America) George L. Harrison, President, New York Life Insurance Co; Leroy A.
Lincoln, President, Metropolitan Life Insurance Co John Marshall Holoombe,
Jrh Manager, Life Insurance Sales Research Bureau; Holgar Johnson, President,
Institute of Life Insurance; A. J. MoAndless, President, Lincoln National Life
Insurance Co.1 Gerard 8. Nollen, President, Bankers Life Company; Seaborn T.
Whatley, Vice President, Aetna Life Insurance Co.; John A. Witherspoon,
President, National Association of Life Underwriters.
During the course of the disoussion.on July 29 it was agreed that a
small sub-committee be appointed to develop the plans by which the agents of
the country could be given an opportunity to volunteer their services. to the
Treasury for-the pumpoor of-selling night and "G" bonds. That committee is now
at work. More importantly, however, it was also suggested that rather than
limit our joint efforts to aid the government solely to the sale of "3" and "G"
bonds, some sort of responsible over-all committee should be appointed by the
five different insurance organizations for the purpose of coordinating and
making more effective the various kinds of efforts of the life insurance business to aid in the prosecution of the war. To accomplish this it was voted
to recommend to each of the five different insurance organizations that they
appoint a specified number of representatives as members of this coordinating
committee.
As a result of this recommendation these five organizations appointed
from their respective memberships the following committee:
Claris Adams, President, Ohio State Life Insurance Co.
William H. Andrews, Jr., Trustee, National Association of Life
Underwriters (Manager, Jefferson Standard Life Insurance Co.)
Patrick A. Collins, Chairman, Board of Directors, Life Underwriters
Association of the City of New York (Metropoliten Life Insurance Co.
Franklin D'Olier, President, Prudential Insurance Co. of America.
W. T. Grant, President, Business Mon's Assurance Co., of America,
George L. Harrison, President, New York Life Insurance Co.
Leroy A. Lincoln, President, Motropolitan Life Insurance Co.
James Lee Loomis, President, Connecticut Mutual Life Ins. Co.
A. J. MoAndless, President, Lincoln National Life Ins. Co.
Gerard S. Nollen, President, Bankers Life Co.
R. B. Richardson, President, Western Life Insurance Co.
Grant Taggart, Vice President, National Association of Life
Underwriters (California-Western States Life Insurance Co.)
Beaborn T. Whatley, Vice President, Aetna Life Ins. Co.
John A. Witherspoon, President, National Association of Life
Underwriters (John Hancock Mutual Life Ins. Co.)
This committee (Mr. Taggart was the only absentee) met at the Hotel
Waldorf-Astoria on August 5 for the purpose of organization and to discuss in
general terms what might properly be regarded to be the functions of the com-
mittee and the scope of its work. While it was agreed that our first task would
be to complete the plans for making life insurance agents available for the sale
of typ and "G" bonds, nevertheless, there might be other fields of effort in
which life insurance might be affirmatively helpful to the government, such
as selection of personnel with special skills in different fields of activity
or studies to ascertain the amounts of funds which might be available for investment in government securities of different types.
-3-
It was felt that the committee, to render/the greatest service, should
be the focal point for whatever the government may need from the life insurance
business and that it should be representative of the entire business. It was
recognized, of course, that initially it should not be too ambitious or under-
take too many steps at one time, believing that it would bo necessary to oomplote the study and report on the use of agents in the sale of "F" and "G" bonds
before other steps were undertaken. The committee, while appointed by the five
organizations which represent in their membership practically the entire field
of life insurance, realized, of course, that it could not necessarily speak for
or bind every individual company. It was felt, however, that each company will
want, as far as it is possible, to aid the government in the prosecution of the
war and that it will, therefore, wish to participate, if its own circumstances
permit, in programs that might be proposed with that as an objective. The
ultimate purpose of the committee in to effect n comprehensive and coordinated
method of bringing the best service of ire insurance companies and their field
representatives to the assistance of the government in the present emergency.
The
committee would like to assure that you will bo in agreement with this
broad objective.
You will be kept advised from time to time of any steps to be taken
by the committee or any programs of procedure worked out with any department
of the government. The committeo would also liko to hope that if you have any
suggestions or proposals which you would like to make to the committee that you
will please be good enough to advise it.
The committee appointed me as its Chairman and asked me to select from
its members an Executive Committee having due regard to accessibility for meeting purposes. I have asked Messrs. D'Olier, Lincoln, Nollen, and Witherspoon
to serve on the Executive Committee with mo.
A secretary will be employed as soon 83 practicable. In the meantime,
however, should you wish to communicate with the Committee, may I suggest that
you address me at 51 Madison Ave., New York, N. Y.
Cordially yours,
George L. Harrison, Chairman.
394
AUG 27 1942
Attention: C. B. De Wolf
My dear Colonel Bouve:
In accordance with the conversation of
Mr. De Wolf with Mr. Bray of the War Savings
Staff, it is requested that the assignment and
title fee for the songs entitled "Everybody
Every Payday" and "Jolly Molly Pitcher", which
are to be copyrighted in the name of Henry
Morgenthau, Jr., Secretary of the Treasury, and
which will be used in furtherance of the War Bond
program, be waived.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Colonel Clement L. Bouve,
Register of Copyrights,
Copyright Office,
The Library of Congress,
Washington, D. C.
BSMirgs
8/26/42
Letter sent to Mr. Meyer,
Room 334b, for delivery
to Col. Bouve 8/27/42.
co-NMC
395
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 27, 1942
TO
FROM
Secretary Morgenthau
Mr. Callahan
As reported in my memorandum to you dated August
24, I am listing below the Blue Network stations which carried
your speech from Roanoke:
WFCI - Pawtucket, Rhode Island
WFIL - Philadelphia, Pa.
WCBM - Baltimore, Maryland
WMAL - Washington, D. C.
WRNL - Richmond, Virginia
WWVA - Wheeling, W. Virginia
WHAM - Rochester, New TOTAL
WEBR - Buffalo, New York
KQV - Pittsburgh, Pa.
WHK - Cleveland, Ohio
WAKR - Akron, Ohio
WXYZ - Detroit, Michigan
WISH - Indianapolis, Indiana
WOWO - Ft. Wayne, Indiana
WENR - Chicago, Illinois
KXOK - St. Louis, Missouri
KFRU - Columbia, Missouri
WTCN - Minneapolis, Minnesota
KSO - Des Moines, Iowa
WIZE - Springfield, Ohio
- Shenandoah, Iowa
KSCJ - Sioux City, Iowa
KXL - Portland, Oregon
WOSH - Oshkosh, Wisconsin
WSAI - Cincinnati, Ohio
WELI - New Haven, Connecticut
KALB - Alexandria, Louisiana
WCBT - Roanoke Rapids, N. C.
WEED - Rocky Mount, N. C.
WGNC - Gastonia, N. C.
WAYS - Charlotte, N. C.
WMFD - Wilmington, N. C.
WMRC - Greenville, S. C.
WFTC - Kinston, N. C.
KFBI - Wichita, Kansas
WAGE - Salina, New York
WJHP - Jacksonville, Florida
WMFJ - Daytone Beach, Florida
WSUN - St. Petersburg, Florida
WKAT - Miami Beach, Florida
WING - Dayton, Ohio
WNAB - Bridgeport, Conn.
WMPS - Memphis, Tennessee
WSGN - Birmingham, Alabama
WQBC - Vicksburg, Miss.
KRMD - Shreveport, Louisiana
KBUR - Burlington, Vermont
WMUR - Manchester, N. H.
WTRY - Troy, New York
WMFF - Plattsburg, New York
WKIP - Poughkeepsie, New York
WLEU - Erie, Pennsylvania
WFMJ - Youngstown, Ohio
WHMA - Anniston, Alabama
WGH - Norfolk, Virginia
WCBS - Springfield, Illinois
WKBB - Dubuque, Iowa
KTHS - Hot Springs, Arkansas
WSLI - Jackson, Mississippi
WGRM - Greenwood, Mississippi
KOME - Tulsa, Oklahoma
KTOK - Oklahoma City, Oklahoma
WFAA - Dallas, Texas
KXYZ - Houston, Texas
KFDM - Beaumont, Texas
KGFF - Shawnee, Oklahoma
KVSO - Ardmore, Oklahoma
KBIX - Muskogee, Oklahoma
KCRC - Enid, Oklahoma
396
4UG 27 1942
Dear Henry:
Thank you very much for your letter
of August 21, outlining the steps which
have been taken by the War Department to
bring its civilian employees under a pay-
roll allotment plan conforming to that
developed by the Interdepartmental War
Savings Bond Committee.
Your interest in this matter is
greatly appreciated.
Sincerely,
(Signed) Henry
The Honorable,
The Secretary of War.
HNG/mff
Aug. 26, 1942.
Photostat to NMC
File to Thompson
Ini green
WAR DEPARTMENT
=
WASHINGTON
main
AUG 21 1942
The Honorable,
The Secretary of the Treasury.
Dear Henry:
Receipt is acknowledged of your letter of August 6, 1942,
concerning participation of civilian employees in the Army Pay Reservation Plan for the purchase of War Savings Bonds.
In reply thereto you are informed that on August 13, 1942,
I approved recommendations of the Chief of Finance, U. S. Army, sub-
mitted to me on August 3, 1942, which, when placed in effect, will
result in the Army Pay Reservation Plan for the purchase of War Savings
Bonds being uniform to the plan developed by the Interdepartmental
War Savings Bond Committee appointed by the President, insofar as
civilian employees of the Military Establishment are concerned. I
approved the following specific recommendations.
&.
That competitive methods be authorized.
b. That quotas be permitted.
authorized.
c. That the publication of competitive statistics be
d. That letters of commendation, certificates of award,
streamers, etc., for up-to-standard or exceptional participation
be authorized.
e. That stickers for windows, lapel buttons, etc., be
authorized for individual up-to-standard or exceptional partici-
pation.
f. That minimums be increased from $5.00 per month to
$12.50 per month, except for employees paid less than $1500.00 per
annum, who may be permitted to make reservations of $3.75 or $5.00
per month, whichever sum is 10% of their pay.
g. That the Chief of Finance be authorized to approve
and place in operation any suitable devices or procedures which, in
his opinion, will insure the success of the program.
h. That every effort be made to secure from alvilian
employees of the Military Establishment at least 90% participation
in the
program and subscriptions of not less than 10% of total
pay
rolls,
Instructions carrying into effect these approved recommendations_are now being perfected, and when they are published, an
results.
intensive promotional campaign will be initiated to secure the desired
I feel confident that the Tvilian employees of the Military
Establishment will fully cooperate in making the Army Pay Reservation
Plan for the purchase of War Savings Bonds a success.
Sincerely yours,
Secretary of War.
- 2-
399
CONFIDENTIAL
UNITED STATES SAVINGS BONDS - TOTAL
Comparison of August sales to date with sales during the
same number of business days in July and June 1942
(At issue price in thousands of dollars)
:
1
6
7
8
10
11
12
13
14
15
17
18
19
20
21
22
24
25
26
:
5
:
4
July
June
:
:
3
:
:
August 1942
August
:
sales
Cumulative sales by business days
:
daily
:
August
:
Date
August as
:percent of July
$ 26,267
$ 26,267
$ 28,418
$ 29,539
38,765
27,023
25,835
40,450
38,184
24,218
65,032
92,055
117,890
158,341
196,524
220,742
52,687
79,964
126,495
157,605
201,056
240,974
45,442
67,046
98,208
132,341
154,085
192,659
123.4
115.1
93.2
100.5
97.7
91.6
41,021
15,274
24,724
22,757
28,504
12,830
261,763
277,037
301,761
324,518
353,022
365,852
288,729
324,856
372,020
402,122
435,929
467,599
206,523
236,552
259.772
281,724
303,163
334,398
90.7
85.3
81.1
80.7
81.0
78.2
41,806
14,551
27,756
23,791
22,187
13,246
407,659
422,209
449,965
473,756
495,943
509,189
505,257
527,186
580,443
602,129
636,640
670,075
345,497
368,782
387,369
414,804
429,158
468,812
80.7
80.1
77.5
78.7
77.9
76.0
41,029
19,667
25,385
550,219
569,885
595,271
703,062
722,572
776,393
485,338
510,446
533,097
78.3
78.9
76.7
Office of the Secretary of the Treasury,
Division of Research and Statistics.
92.4%
August 27, 1942.
Source: All figures are deposits with the Treasurer of the United States on
account of proceeds of sales of Unit ed States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily
add to totals.
CONFIDENTIAL
400
UNITED STATES SAVINGS BONDS - SERIES E
Comparison of August sales to date with sales during the
same number of business days in July and June 1942
(At issue price in thousands of dollars)
:
August
:
:
sales
Cumulative sales by business days
July
:
:
daily
June
:
August
:
:
:
Date
August as
:percent of July
:
:
August 1942
1
4
5
6
7
8
10
11
12
13
14
15
17
18
19
20
21
22
24
25
26
m
$ 14,044
$ 14,044
$ 15,821
$ 19,834
22,178
14,575
12,988
23,004
24,959
16,429
36,222
50,797
63.785
86,789
111,748
128,176
30,701
47,523
77,320
95,044
116,643
139,390
27,841
40,811
58,199
82,988
98,197
125,245
118.0
106.9
82.5
91.3
95.8
92.0
26,805
9,885
15,921
16,356
18,760
9,578
154,981
164,866
180,787
197,143
215,903
225,481
164,161
183,238
209,787
225,532
243,938
261,766
134,157
154,242
169,920
186,470
201,700
225,684
94.4
90.0
86.2
87.4
88.5
86.1
28,683
9,737
17,650
15,525
16,026
9,881
254,163
263,900
281,550
297,075
313,101
322,982
284,111
296,344
327,712
339,951
358,135
376,396
233,218
249,033
261,321
89.5
89.1
85.9
280,742
291,729
321,114
87.4
87.4
85.8
30,522
13,692
16,107
353,504
367,195
383,303
394,984
405,679
438,256
331,806
347,673
362,550
Office of the Secretary of the Treasury,
Division of Research and Statistics.
88.8%
89.5
90.5
87.5
August 27, 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.
401
UNITED STATES SAVINGS BONDS - SERIES F AND G COMBINED
Comparison of August sales to date with sales during the
same number of business days in July and June 1942
(At issue price in thousands of dollars)
1
10
11
12
13
14
15
17
18
19
20
21
22
24
25
26
:
8
:
7
:
:
:
no
:
5
:
4
sales
August
:
3
daily
July
:
:
August 1942
Cumulative sales by business days
June
:
Date
August
August as
:percent of July
97.0%
$ 12,222
$ 12,222
$ 12,597
$ 9,705
16,587
12,448
12,847
17,447
13,225
7,789
28,810
41,258
54,105
71,552
84,777
92,566
21,986
32,441
49,175
62,561
84,413
101,585
17,601
26,235
40,009
49,353
55,888
67,414
131.0
127.2
110.0
114.4
100.4
91.1
106,782
112,171
120,974
127,375
137,119
140,372
124,568
141,618
162,232
176,590
191,991
205,833
72,366
82,310
89,852
85.7
14,216
5,389
8,803
6,401
9.744
3,253
101,464
108,715
68.2
13,124
4,814
10,106
8,266
6,161
3,365
153,496
158,309
168,415
176,681
182,842
186,207
221,147
230,842
252,731
262,178
278,505
293,679
112,279
119,749
126,048
134,062
137,429
147,698
69.4
68.6
66.6
67.4
65.7
63.4
10,507
5,975
9,278
196,715
202,690
211,968
308,077
316,893
338,137
153,532
162,774
170,547
63.9
64.0
62.7
95,254
79.2
74.6
72.1
71.4
August 27, 1942.
Office of the Secretary of the Treasury,
Division of Research and Statistics.
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.
402
Sales of United States savings bonds
CONFIDENTIAL
August 1 through August 26, 1942
Compared with sales quota for same period
(At issue price in millions of dollars)
22.2
14.6
36.2
50.8
63.8
86.8
111.7
128.2
47.3
61.0
84.0
107.3
134.4
154.1
155.0
164.9
180.8
197.1
215.9
225.5
13.0
23.0
25.0
16.4
26.8
1
3
4
7
8
9.6
17
28.7
19
20
21
9.7
17.6
15.5
16.0
22
9.9
24
30.5
25
13.7
26
16.1
27
28
29
31
to
date
date
quota
:
87.5%
to
:
$ 16.0
:
$ 14.0
Sales :
to date
as % of
August 1
:
$ 14.0
15
18
:
quota
Daily
:
date
14
13
as % of
date
9.9
15.9
16.4
18.8
12
to
August 1
:
10
11
to
Series F and G
Actual sales
Quota,
Total
Actual sales
August 1
Quota,
August 1
:
Daily
5
Sales
: August 1 : August 1 to date
Date
6
Quota,
:
Actual sales
:
Series E
Sales
to date
to
to
as % of
date
date
quota
$ 26.3
$ 26.3
$ 23.7
65.0
92.1
94.5
101.7
91.1
95.4
96.7
95.8
Daily
$ 12.2
$ 10.2
$ 7.7
76.5
83.3
76.0
80.9
83.1
83.2
16.6
12.4
12.8
17.4
13.2
7.8
28.8
41.3
54.1
71.6
84.8
92.6
21.5
-2.0
45.4
58.7
68.8
76.3
134.0
133.0
119.2
122.0
123.3
121.4
38.8
27.0
25.8
40.5
38.2
24.2
117.9
158.3
196.5
220.7
68.8
90.6
129.4
166.0
203.2
230.4
190.6
205.1
227.1
247.9
271.0
287.7
81.3
80.4
79.6
79.5
79.7
78.4
14.2
5.4
106.8
112.2
121.0
127.4
137.1
140.4
87.9
94.1
105.1
114.0
120.9
126.4
121.5
119.2
115.1
111.8
113.4
111.1
41.0
15.3
24.7
22.8
28.5
12.8
261.8
277.0
301.8
324.5
353.0
365.9
278.5
299.2
332.2
361.9
391.9
414.1
94.0
92.6
90.8
89.7
90.1
88.4
254.2
263.9
281.6
297.1
313.1
323.0
319.2
332.2
353.0
373.6
397.4
415.1
79.6
79.4
79.8
79.5
78.8
77.8
13.1
4.8
10.1
153.5
158.3
168.4
176.7
132.8
186.2
135.8
141.3
151.9
161.0
168.3
174.3
113.0
112.0
110.9
109.8
108.6
106.8
41.8
14.6
27.8
23.8
22.2
407.7
422.2
450.0
473.8
495.9
509.2
455.0
473.5
504.9
534.6
565.7
589.4
89.6
89.2
89.1
88.6
353.5
367.2
383.3
449.0
462.9
484.5
505.0
527.8
544.2
78.7
79.3
79.1
10.5
196.7
202.7
212.0
184.8
191.0
203.0
213.2
221.4
228.1
106.4
106.1
104.4
41.0
550.2
569.9
595.3
633.8
653.9
687.5
718.2
749.2
772.3
575.0
8.8
6.4
9.7
3.3
8.3
6.2
3.4
6.0
9.3
240.0
158.4%
13.2
19.7
25.4
111.0%
87.7
86.4
86.8
87.2
86.6
815.0
Office of the Secretary of the Treasury, Division of Research and Statistics.
August 27, 1942
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,
Note: Quota takes into account both the daily trend during the week and the monthly trend during the month.
403
TREASURY DEPARTMENT
WASHINGTON
August 27, 1942.
My dear Mr. Morgenthau:
I accept gratefully your invitation to remain with
the Treasury for as long as I may be of use. The relation
of my work to that of the rest of the War Savings Staff
has been made clear and, to me, perfect1, satisfactory.
Let me thank you again for your confidence in me and
for this opportunity to have a part in the major effort
of our time.
Very sincerely yours,
R.D.Webe.
R. D. Welch,
Consulting Expert,
Treasury Department,
Room 118 Treasury Building.
Henry Morgenthau, Jr.,
Secretary of the Treasury.
FOR VICTORY
BUY
BONDS
STAMPS
404
ME ORANDUM
TO:
SECRETARY MORGENTHAU
FROM:
MR. PAUL
August 27, 1942
The Widener resolution was considered in
the House today by unanimous consent and was
passed without objection.
It will probably go to the President for
approval on Monday.
REP.
405
August 27. 1942.
Dear Sant
I am sending you herewith a copy of
The New Republic for August 31. I strongly
recommend that you read "Chaos in Production"
by Thomas Sanoton. This confirms what you
and I were talking about the other day.
Yours sincerely,
(Signed) Henry
Judge Samuel Rosenman,
The White House.
File in Diary
Enclosure.
Sent By Serrat Service
10:45A.M.- 8/27/4-
406
August 27, 1942
Dear Claude:
I have read with great interest
your recent speech which you were kind
enough to send me, and I want to congrat-
ulate you on it. I think it took real
courage on your part to publicly change
your attitude on 110 per cent of parity.
I think your speech ought to be very
helpful to the President, particularly
at this time.
You certainly have "guts" and that's
what it takes right now.
Yours sincerely,
(Signed) Henry
Honorable Claude R. Wickard,
Secretary of Agriculture,
Washington, D.C.
File in Diary
By Mess. Sturgis 4:40
8/27/42
407
THE SECRETARY OF THE TREASURY
WASHINGTON
August 27, 1942
Dear Claude:
I have read with great interest your recent
speech which you were kind enough to send me, and
I want to congratulate you on it. I think it took real
considerable courage on your part to publicly
change your attitude on 110 per cent of parity.
I think your speech ought to be very helpful to
the President, particularly at this time.
You certainly have got "guts" and that's what
it takes right now.
Yours sincerely,
Hear
Honorable Claude R. Wickard,
Secretary of Agriculture,
Washington, D. C.
408
DEPARTMENT OF AGRICULTURE
DEPARTMENT
WASHINGTON
STATE
August 21, 1942
The Honorable
The Secretary of the Treasury
Dear Henry:
As you requested today at Cabinet, I am enclosing a
copy of the speech I made over the Blue Network
Wednesday night.
You will note that this speech mentions several
things that we discussed at the luncheon we had
together recently.
Sincerely yours,
Claude R Wickard
Secretary
Enclosure
409
UNITED STATES DEPARTMENT OF AGRICULTURE
Washington, D.C.
For August 20, 1942 Papers
WE MUST UNITE FOR VICTORY
(ADVANCE - TO BE HELD FOR AUGUST 20, 1942 PAPERS)
An address by Claude R. Wickard, Secretary of Agriculture, August
19, 1942, at 10:30 p.m., E.W.T., over the Blue Network.
Day by day the hard facts of war are coming home to America. Wreckage from
torpedoed ships washes up on seacoasts. The casualty lists lengthen out. More
and more families know the anxiety of waiting for word from sons, husbands,
brothers at foreign posts in or near the battle zones.
Day by day 8.8 we face the hard facts of war, the conviction grows that only
fow things really matter now here at home. One thing that mattors is managing
our affairs so as to make sure that the boys who 60 into battle for us have equip-
ment and food to back up their courage and skill. Another thing that mattors is
managing our affairs so that the boys who como back from the battles may resume
civilian life in an America and a world that is worthy of the sacrifice made by
those who don't come back.
I want to talk briefly tonight about some of the things WO must do here on
the home front to accomplish those war purposes. Up to now WO have done fairly
woll in the management of our wartimo affairs.
But wo havo not done half well enough. It is clear that we can' just continuo at our present paco and wait for victory. It is not a question of when WO win
the war; it is K question of if WO win the war.
The Unitod Nations are not yot winning the war. Thoy still are losing it.
The fooling that time fights on our aido is only half truo. Our resources for
5502
357-43
-2CORPORATION
details
making war still are suporior to those of the Gormans, Japanoso, and Italians.
But resources thomsolvos don't win victorice. Thoy must bo made into implements
of var. That takes timo, and timo can run out.
410
-3at
$3.50
blood
02
old torms of group advantage than in torme of the Nation's wolfare.
or
All of those people are making a tragic mistake. What will it profit any
This is not a timo to congratulato oursolves over the work WO have dono.
It is not a timo to cling to idoss of "businose AB usual and "living as usual,
and try to be patriotic on the side. We can't fight this war with one eye on the
group to win a temporary advantage and lose the whole wart Ask the business men
of Germany, or the labor leaders of Norway, or the farm cooperative londers of
Denmark.
flag and the other on our pocketbooks.
I an sure that the vast majority of Americans know how foolish it is to try
On the home front the war job is everybody's job. We can't get it done if
to conduct business as usual in a world at war.
any group hange back and lete others carry the load. If we do not free ourselves
from our own greed and solfishness, we will end up as slaves to the greed and
selfishness of the Axis masters.
On the home front a solf-sacrificing America must wage two great battles
I think I know particularly well how the great majority of American farmers
feel. I know their cound common sense and their willingness to face facts and make
sacrifices. This year's production of crope and livestock above where farmors
stand. Despite limitations of labor and fertilizer and machinery, farmers are
the battle for production and the battle against inflation. We are running into
mashing all records -- not only for total production, but in the particular
trouble in both of these battles. But not through the fault of every-day loyal ,
roducts that are nooded most for winning the war. They have converted to war
Americans. We are gotting into trouble mainly through tho doubts and delays caused
needs. They are working the longest hours of any group in the country, and the
tactics of shortsighted group interests, who are either interested in making
mothers and childron are working along with the mon to carry on the battle of
every dollar they can now, or in trying to see that their own businesses or organis
Food-for-Froodom. They are being called on to produce more and more with less
tions will be in a favored position after the common people of the country have was
the war for them.
and less.
Now most of these obstructionists do not even roalize they are unpatriotic.
But farmers will keep on doing their best to win the battle of production,
and-I know they will do their part in the battle against inflation, too.
For the time has oono for united action, across the whole front, to keep up
Their minds simply are set in the old grooves of sooking or maintaining advantage.
Such non sit in many places. There are business mon who still would take
production, and to hold down increases in industrial prices, farm prices, and wages.
It would be a national catastropho for us to have an inflationary wartine
nooded materials and transportation away from the war effort 80 that they can main-
tain their business organizations 88 usual. There are individuals in Government
boon and a post-war crash. It would be particularly unjust to our soldiers. We
who rosist changes, oven though those changes now are imperative. There are mon
must not allow then to be mustered out of war into an econonic DOSS of our own
in positions of londorship in labor and agriculture who still think more in the
making.
357-43-2
No one would be hardor hit by doflation than the farmers. So farmers are
357-43-3
411
-5-
rondy to do their part in the Prosident's broad anti-inflation program. They nro
a bottor position to share in this battlo than they have been in many years. Fan
The unusual wartime domands for meat have kept livestock prices going up.
income for this year will be the highest on record. The average of farm prices has
There has been no ceiling on livostock prices although there are ceilings on the
reached parity, and has reached it at a time of the largest farm production we ever
retail price of meats. This situation, inevitably, has caught many neat packers,
have had. Though I realize that many individual farmers still have low incomes,
particularly the smaller firms, in a squeeze.
the combination of fair prices and large production assures a good national farm
sam
Apparently this squeeze is caused by the fact that those packors who are
income. The great majority of farmers nok nothing further. They do not want to
are for
grasp for more at the expense of the Nation's safety.
able to do so are bidding up the price of livestock in order to get enough supply
However, I know that in recent months some people have accused farmora of
dressed out of the livestock will bring under existing price ceilings. They are
to fill their expanding orders. They are bidding more for livestock than the meat
being profiteors. Those charges are unjustified, but I can soe that there are
doing this because they are willing to give up profits temporarily in order to keep
reasons why a section of the public may think that farmers are trying to profiteer.
their line-up of customers. and 2208 stodic validate to
One reason is the present moat scarcity in a number of arons in the East.
As a result, some packers who are unable to compete on this basis, have
Many people BOOM to fool that farmers are holding back their animals for still
either closed their plants already or are faced with closure.
)
(
hi ghor pricos. This is untruo. Farmors have not only givon the country a record
In ordinary times this is A situation which could be left to work itself out.
production of most animals, but they have boon sending animals to market in record
But these are not ordinary times. We are at war and the nation needs every avail-
quantition. Cattlo and sheep marketings during the past month have been the highest
able packing plant facility to handle the great run of hoge and cattle that will
on record. Hog marketings are near a record and are running a million a month sheet
of last year's marketings.
start coming to market in the late fall. For the sake.of the Nation we must keep
But along with the record production of meat animals and the tremendous
all packing plants in running order. in assistion middling cast JUA Force abb
Furthermore, the squeeze has become ao tight that there is great danger of
quantities that are moving to market, we are faced by two war-time conditions. One
vide-open violations of the price ceilings for meats. Unless something is done,
is the large amount of meat that must go to our armed forces here and abroad, and
the whole structure of price control may be jeepardized.
to our allios. This wartime demand divorte a part of our supply from the civilian
was
With the nation at war, the question of who 10 to blame for the price squeeze
population. At the Bana time, due to great increases in purchasing power, civilians
ceases to be the problem. The problem becomes one of keeping the packing industry
are able to buy much more neat than they normally would. In addition there are
is operation full tilt, and of preserving the price coilings.
other wartino dielocations which produce noat scarcitice in acmo Arona rathor than
in others. But those local shortagoa of most cannot be blanod on the farnors of
the country.
blood
add
With the facts and the problem before them, I am sure that the farners of
the Nation will approve the plan of action which I as now going to explain.
357-43-5
357-43-4 ,
will
cause
-74, as Socretary of Agriculture, must give approval before the Office of
412
Every day makes it clearer that we must put everything wo've got into winning the
var. Also every day makes it clear that we must take drastic steps to check in-
Price Administration can place ceilings on livestock prices. I am prepared to give
flation.
this approval if a practical plan for livestock marketing can be evolved. Such a
plan must not permit abnormal profits to anyone in the industry at the expense of
the producers or consumers. With the necessary measures, such as allocation of
Today the 110 percent provision is being pointed to by other groups to
prove that farmers are asking for more than their fair share. It is being used
as an argument to alow down economic controls in other fields.
supplies, the plan must facilitate a more equitable distribution of moate. Also,
the plan must be one that not only will protect packers from high prices, but also
will protect farmers from low prices.
Under present circumstances I believe it would be wise to repeal this provision.
It is my earnest hope that the prices of each farm commodity can be held at
I want to say this to consumore: There has been an impression abroad that
lack of ceilings on livestock prices WILD the cause of the neat shortage in some
areas. As I have explained, this is not true. It follows that putting ceilings
on livestock prices will not-increase the supply of meat to consumers. The reasons
for putting the ceilings on livestock prices are to keeping the packing industry in
full operation, and to safeguard the price-control structure.
the level which will make completely effective the price-control part of the
President's wartime economic program.
I am not forgetting that production is all-important, and that we may need
to increase returns to farmers on some products in order to get production of vital
var commodities. In instances where changes within the frenework of price controls
cannot accomplish this, I think it is in the national interest to give farners in-
So much for the first reason why farmers are being accused of profiteering.
Another reason is the continued discussion of the provision in the Price
Control Act that prohibits ceilings on processed farm products if the ceiling price
reflects a farm price of less than 110 percent of parity.
creased returns through subsidies rather than through conceased prices which may
endanger the price-control structure.
Farmers want action now to win the batt' int inflation. They favor controle cloar across the board. But action is being hold up behind a log-jan of un-
Now let no say right hero that I have changed my own thinking on this ques-
willingness of each of the great economic groups to accept controls unless at the
tion. I have changed because conditions have changed. A year ago whon I tostified
same time controls are placed on the others. Farmors are ready to lead in breaking
before a House Committee in support of the price control bill I approved the 110
the log-jam.
percent limitation, At that time many prices were far below parity. It seonod to
me that they could novor average parity unloss thore was an opportunity for some
of the to be slightly above parity at least part of the time. Now the situation
is different. Farm prices have roached parity on an average. Wo are in war.
357-43-6
We cannot have continued risos in farm prices, or in any other prices, with-
out losing the battle of inflation, and I an tonight asking the farmers of America
to take the load in this battle as they have taken the lead in the battle of and produc- we
tion. The tine hns come to sottle down to the business of winning this var, the farmers
are not going to win it by talk. It is time for action. I an sure that
of America stand roady to accept thoir full responsibility.
357-43-7
Treasury Department 413
Division of Monetary Research
Date Aug. 28, 1942 19
To:
Miss Chauncey
I spoke to the Secretary about
this today and he said to hold it in
beyance.
H.D.W.
MR. WHITE
Branch 2058 - Room 214
414
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 27, 1942
TO
Mr. White
FROM
L. W. Casaday
Subject: Need for Savings in U. S. Armed Forces
There are many obvious reasons why voluntary savings should be
encouraged in the U. S. Armed Forces generally, but this memorandum will
be confined to the situation existing in the British Isles.
The fact that American troops enjoy far higher pay scales than do
the British or any other, has produced considerable friction. Americans
on leave, it is said, fill all the best hotels, pubs, restaurants,
theatres, get all the best girls and, in general, monopolize and exhaust
the limited supply of entertainment facilities in the communities where
they are located. It is suggested that this situation is detrimental,
not only to comradeship in arms during the war, but also to the hopedfor British-American understanding in the post-war period.
Evidences of the irritation were found or heard nearly everywhere
I went in England in connection with the Savings assignment. It seemed
most marked (a) where British and American posts were located near the
same small town, where facilities were at best limited; and (b) where
British and American troops were commingled in the same unit. In some
reported cases a British commanding officer received less pay than
American privates under him.
(I have brought with me a large quantity of material describing
in detail the scheme now being used to promote savings among British
troops. Our own Forces in Britain have made arrangements to allow and
even to encourage the men to allot part of their pay checks to savings
or to relatives, etc., at home, but this device is not comparable to
the more elaborate savings scheme the British have developed for their
troops all over the world.)
Treasury Department 415
Division of Monetary Research
Date Aug. 28, 1942, 19
To:
Miss Chauncey
I spoke to the Secretary at
Staff Meeting this morning about this.
He said to hold up action on it for a
while.
H.D.W.
MR. WHITE
Branch 2058 - Room 2141
416
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 27, 1942
TO
Mr. White
FROM
L. W. Casaday
Subject: Should American troops be allowed to purchase British Savings
Securities?
As the attached correspondence shows, Americans assigned to British
units have been inquiring whether they are permitted to buy British
savings stamps and certificates and whether these will be readily cashable in the United States. The British Treasury sees no difficulties
as to cashability but asks specifically whether the U. S. Government
has any objection to the purchase of British savings securities by
Americans. Is such purchase illegal under the Johnson Act?
An answer to these questions is being awaited by the British
National Savings Committee.
Attachment
417
NOT TO BE RE-TRANSMITTED
COPY NO.
BRITISH MOST SECRET
U.S. SECRET
13
OPTEL No. 300
Following is supplomentary resume of operational events covering
the period 20th to 27th August, 1942.
1. NAVAL
HOME AND NORTHERN WATERS. A number of encountors took place with
enemy light craft mainly engaged in mine laying off the Easu coast and in the
DOVER STRAIT. The arrival of a floating dock at GDYNIA and the reported transfer
of personnel and equipment from KIEL, togothor with the presence of SCHARNHORST,
GNEISENAU and the new Aircraft Carrier suggest the development of this port as a
Naval Base at a safer bombing distance from the U.K. than KIEL --
SUBMARINE WARFARE. Upwards of 80 U-boats are believed now to boe
operating in the ATLANTIC. Attacks on convoys continued in the Atlantic and off
the Brazilian Coast, one outward convoy boing attacked in mid-Atlantic by a concentration of at least six U-boats. West Indian and North American waters were
quieter. There were no attacks off the U.S. Eastern Scaboard. Provisional figures
for the week ending 23rd give sixtoon ships sunk by U-boat in the Atlantic of
which eleven were in convoy. There were twelve attacks on enemy submarines by
British air and surface and thirty-nine by U.S. forces, of these three by British
and four by U.S. were promising. There was comparatively little traffic from
ITALY to NORTH AFRICA and this was to TOBRUK but coastal traffic from TOBRUK to
MERSA MATRUH was heavier than of late. In Brazilian orts there are four ex-
Gorman ships totalling about 20,000 and eleven ex-Italian totalling about
56,000 tons. All of them had already been taken over by BRAZIL provious to her
declaration of war.
TRADE. Imports into the U.K. in convoy for week ending 22nd
woro 614,000 tons including 207,000 tons of oil. During July imports totalled
2,208,500 tons including 1,128,200 tons raw materials manufactured goods, etc.,
and 996,600 tons of food.
2. MILITARY
LIBYA. Activity limited to patrolling. Germans appear to be ro-
grouping their forces and 10 18 possiblo that their present reinforcement progranmo is completed with the recent arrival of a parachute formation, elements of
which are in the line. This suggosts that at least some of them are to bo used as
ground troops, although the possibility of a parachute operation cannot bo discounted.
BURMA. Japanese are apparently reoccupying KALEMYO from which
they wore driven ov Allied bombing. Situation on Frontier remains quiot but our
patrols are active. One of our parachute detachments dropped in MYITKYINA Area
(Upper BURMA) has reached FORT HERTZ and has ascertained that the Japanese are
about 3,000 strong and are occupying widely separated outposts.
3. AIR OPERATIONS
WESTERN FRONT. A woek of poor flying weather. U.S. Fighters flo
220 offensive and defonsive sorties during the wook. R.A.F. Fighters flow 2,101
off Consive and defensive sorties as woll as 630 shipping protection sorties. Our
night bombers made one modium scale attack on FRANKFURT, hoavy cloud covered the
objective but fires were started and some crows reported P. concentration in the
city.
MEDITERRANEAN. Sandstorms curtailed operations. TOBRUK was
hoavily attacked by modium and hoavy bombors on five nights. Four small enemy
convoys escorted by destroyers and in two cases by Aircraft as well, on the ITALYAFRICA supply route were attacked by our aircraft. Two tankers, one of them 8,000
tens, two Merchant Vessels and two Destroyers were hit by bombs and other Destroyors ware attacked with machine gun and cannon fire.
418
-2 MALTA. Only a small number of enemy aircraft dropped bombs. Other
bombers approached but when intercepted by our fighters dropped their bombs in the
sea and made off. Small formations of fighters both German and Italian crossed the
Coast at a great height but many others turned back avoiding our fighter patrols.
4. EXTRACTS FROM PHOTOGRAPHIC AND INTELLIGENCE REPORTS ON RESULTS OF AIR ATTACKS ON
ENEMY TERRITORY IN EUROPE.
FRANKFURT. Photographs 26th show about four acres devastated by
fire. Two large warehouses have been completely burnt out and another large building
severely damaged.
SEA MINING. A report from a reliable source states that during
June and July 14 coal carrying ships were sunk by mines between ROTTERDAM and the
BALTIC. The train ferry from DENMARK to SWEDEN is still preceded by two minesweepers.
5. OPERATIONAL AIRCRAFT BATTLE CASUALTIES
METROPOLITAN AREA
British
Enemy
In the Air
Dest.
27
Bombers
Fighters
10
Fighters
Coastal
Total
9
3
14
8
8
Misc.
1
Damaged
5
Bombers
Prob. Dest.
-
-
1
14
38
23
11
MIDDLE EAST
Including MALTA
British
Enemy
In the Air On the Ground
1
1
31
2
9
Fighters
9
6
Misc.
2
-
1
1
Bombers
Damaged
5
Total
18
-
Others
12
Prob. Dest.
1
Bombers including 2 U.S.
Fighters
Dest.
15
7
13
1 crew and 8 pilots are safe.
6. HOME SECURITY
A small ammunition dump was exploded at WELLINGBOROUGH otherwise
no war damage reported. Estimated civilian casualties for week ending 6 A.M., 26th Killed 36, seriously wounded 48.
419
NOT TO BE RE-TRANSMITTED
COPY NO.
13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 293
Information received up to 7 A.M., 27th August, 1942.
1. NAVAL
NORTHERN WATERS. 3 of H.M. Destroyers, one of which was slightly
damaged, sank a German auxiliary of 3,000 tons on 25th approximately 300 miles
East of BEAR ISLAND.
MEDITERIANEAN. 2 of H.M. Destroyers bombarded the DABA area during
night 25th/26th.
ATTACKS ON TRADE. Between 22nd and 25th August 8 ships were reported
torpedoed. One Swedish ship in North-West approaches, 2 British ships in convoy
in WEST INDIES, 1 Swedish ship off Brazilian coast, 1 British ship in FREETOWN area
a British and a Norwegian tanker west of FREETOWN area and a British ship in the
MEDITERRANEAN. A British ship was mined off LOWESTOFT on 25th August. One U.S.
and 1 Panamanian ship were reported overdue.
2. MILITARY
No further information of importance received.
3. AIR OPERATIONS
WESTERN FRONT. 26th. 7 F.W. 190's passed the south and east coast
causing very slight damage. 1 was shot down by A.A.
26th/27th. About 12 anemy aircraft flew over SUFFOLK and ESSEX,
casualties slight.
EGYPT. 24th/25th. R.A.F. Naval and U.S.A. aircraft bombed TOBRUK,
targets in the central sector and on the MERSA MATRUH - EL DABA Road.
25th. A suspected H.Q. in central sector and M.T. in the southern
sector were attacked. 5 of our fighters lost, 4 pilots safe.
420
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATTION
DATEAugust 27, 1942
TO
FROM
Subject:
Secretary Morgenthau
Mr. Hoflich
Raid on Dieppe.
Secret British reports contain further evidence
that the Allied raid on Dieppe was a costly and
difficult operation.
An
Of the 6,100 troops (including 40 Americans)
employed, about one-third are missing. Naval
casualties are stated to be 100 men missing. Out
of 167 landing craft, 42 are missing.
Great difficulty was experienced in demolishing
the sea-wall to enable the tanks to get through. Due
to the heavy artillery fire, only 18 tanks were landed.
These operated most of the day on the Casino grounds
(near the landing place), but strong tank obstructions
prevented them from breaking into the town. The
tanks were destroyed before leaving.
Fifty German prisoners were taken to England.
(British Operations Report, August 13-20, 1942)
421
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATEAugust 27,1942
TO
FROM
Subject:
Secretary Morgenthau
Mr. Hoflich
Soviet 011 Production.
German forces have taken the Maikop oil fields
and are within 80 miles of those in the Groznyi area.
The main Caucasian oil fields near Baku lie in a less
exposed position. But the Nazia obviously intend
either to capture the Baku fields or to render them
largely useless to the Russians by disrupting traffic
on the Caspian Sea and the Volga River.
With these possibilities in mind, it is interesting
to note the estimates of Soviet crude oil production
(table attached) prepared by the office of Strategic
Services. According to these estimates, Russia is
slightly less dependent on Caucasion oil than in 1940.
In 1940, the Baku fields produced 70 percent of total
Russian crude oil putput, but only 67 percent this year.
In the same period total Caucasian oil production declined from 86 percent to 79 percent of the total, and
production from the Ural-Volga and Asiatic fields has
increased from 14 percent to 21 percent.
Russian military requirements for oil are estimated
to be nearly five million tons per year. The loss of
the Caucasian fields would deprive Russia of all but 7t
million tons per year. This would take care of purely
military needs, but would leave only 2 million tons for
essential industrial, agricultural and civilian requirements
of 8 to 10 million tons per year.
(office of Strategic Services, "The
War this Week,"
August 13-20, 1942)
422
Russian Crude 011 Production
1940 and 1942
Estimated 1940
Production
Estimated 1942
Production
Areas
Thousands of
Metric
Tons *
22,900
Baku
Groznyi
2,466
Maikop
2,950
Percent
of
Total
Total Ural-Volga
3,435
11
)
Total Asia (minus
Sakhalin)
Sakhalin
GRAND TOTAL
690
450
32,891
Total
of
67
8
1,400
9
86
Tons
2,700
7
28,316
Percent
24,000
70
Total Caucasus
Thousands of
Metric
4
28,100
79
7,500
21
35,600
100
2
1)
100
* 1 metric ton = approximately 2,204.6 lbs.
Hitler's Oil Strategy
T
HE GERMAN HIGH COMMAND'S STRATEGY is now
clear: it centers around the most vulnerable
sector of the Russian front. The campaign in
southeastern Russia, in the Don and Caucasus regions,
was launched for three reasons.
A direction was to be followed that would offer the
highest economic prize. The oil of the northern and
southern Caucasus, the coal mines of the eastern Donets
Basin, the grain and cattle riches of the Don and Kuban
areas were the objectives. Above all, the present desperate campaign demonstrates Hitler's urgent need for
new oil resources to continue his global war. He is now
waging an oil strategy at all costs.
Of course the German campaign is being waged for
territorial conquest too. The Black Sea is to become a
German lake, Hitler's own Mare Nostrum. The Caucasus and the Ukraine combined are earmarked as a
German colonial, agricultural, raw-material and industrial area. No other region along the entire Russian
front could open up to Hitler such a rich economic
vista.
423
which in this sector lacks direct communication with
the main forces. Under such circumstances the Russian
defense of the Caucasus must become an independent
action, waged for the most part with local forces. On
the central front, the German army had to reckon
with all available Russian reserves, since these reserves
could be continuously replenished from the rear. But
in the southern sector the German army need fight
only against limited Red Army effectives. In addition
to being numerically stronger, the Germans have the
additional asset of fighting in strategic
Hitler's war plan in 1941 was based on a grand
continental strategy, a strategy designed to bring about
final military decision. Today Hitler has shifted from
a continental strategy to an oil strategy. He has renounced the continuation of the chain of great battles
initiated by the invasion. As yet he is not seeking revenge for the defeat before Moscow. The Caucasian
campaign might have grave and far-reaching consequences for both sides, but in a military sense the
German army is waging it as a limited operation.
Of all the limited operations that Hitler might have
been able to launch on the Russian front, the struggle
for the Caucasus is indeed the most effective. It is
The second goal of this German offensive is to cripple Russian resistance, not by exterminating the Red
Army in the field, but by cutting off the Russian economic centers, by throttling the enemy's industrial and
raw-material supplies. Hitler is now waging a kind of
economic blockade against the Soviet Union, carried on
by land forces. It is a strategic jujitsu, designed to paralyze the enemy instead of crushing him by a knock-out
blow. After the loss of the Donets coal supplies, each
subsequent loss of oil centers or disruption of oil deliveries is a grave threat to Russian industry and transportation, and even more so to mechanized Russian
agriculture and the Red Army supply system.
waged for economic objectives of tremendous importance. But it places the German army in a peculiar spot.
Large offensive forces of the German army are now
concentrated on Asiatic soil (the river Manych is the
geographic frontier between Europe and Asia). The
German army is operating on a relatively narrow sector
of some two hundred miles, which is the extreme south-
Third and last, the present German drive was
ing German divisions are steadily moving southward,
away from European Russia; their distance from the
planned, of course, with a view to actual military ad
vantage and opportunity. The campaign was to be conducted on a front sector in which the German army
could be certain of a steady operational and numerical
superiority. The extreme southern wing of Timoshenko's front filled the bill. Once the three Russian rail
lines-Rostov-Voronezh, Rostov-Stalingrad and Tikho-
resskstalingrad-were cut, the Russian forces in the
Caucasus would be deprived of all railroad communication with European Russia. They could then receive
supplies and reinforcements only by way of the Caspian
Sea, From there they would most likely have to be
carried to the Caucasus front from Makhach-Kala, the
small Caspian port and railway junction, some two
hundred miles northwest of Baku. Between the Black
Sea and the Middle Don, on the southern side of the
big bend in von Bock's front, the German army can
hurl huge masses of troops against the Red Army,
ern flank of the whole Russian front. The German
offensive is menacing approximately one-third of Timo
shenko's front and one-third of his forces. The attack-
central front is constantly growing. The lines of the
German front in the south are steadily lengthening.
The regrouping of forces to consolidate the central
front is getting more difficult. The German army is
now fighting on peripheral lines, thus forcing von
Bock's troops to lose contact with the German armies
in central Russia.
During the further course of the Caucasian campaign the Russian defenders can make use of two natu-
ral obstacles: the almost impassable chain of the
Caucasian mountains and the difficult desert terrain of
the northeastern Caucasus. No base of operations can be
built upon these Kalmuck steppes, which are without
railroads and water, and almost uninhabitable. The
Red Army will carry on delaying actions at the foot
of the Caucasian mountains, and Russian soldiers are
past masters in all aspects of the ancient Caucasian
mountain war tradition, a type of warfare utterly unknown to the Germans.
But the real test for the staying power of Timoshenko's armies will be the defense of Stalingrad, at
present the main Russian strategic position in the south.
Without Stalingrad, the German penetration into the
Caucasus will be like a movement inside of a large
pocket, which could be endangered from the rear. If
Stalingrad should, in a military sense, become the Moscow of southeastern Russia, the German Caucasus offensive would still be very dangerous, yet at the same time
it would be only a local operation.
The German press has said that the break through
at Rostov was the Sedan of the Russian front. The com-
parison is misleading. Sedan marked the beginning of
the French army's collapse. The Battle of Flanders
was only a preliminary to the smashing of the main
French front on the Somme, and the very same aray
of von Bock, which encircled the Anglo-French forces
at Dunkirk, turned to the south and took Paris. The
German campaign in France was planned and carried
out as an uninterrupted sequence of battles, which overran the whole French front.
The German campaign in Russia in 1941 followed
Hitler is losing time with his Caucasian campaign and
is exposing his southern anmies to real danger. Within
the next few weeks they will encounter tremendous
difficulties. Large German forces are being thrown into
Asia and taken far away from the Russian central from,
and from their communication lines with central Europe. It is out of the question that they could be shifted
to western Europe. The German armies are now more
widely scattered than ever before. A combined AngloAmerican-Russia counter-offensive on a large scale has
better opportunities today than it has had for a long
time.
Hitherto Britain has not waged an offensive oil
strategy. British strategy has been more defensive in
type, aimed chiefly at protecting the British oil fields
in the Near East. Hitler's oil strategy is offensive. It
aims at seizing the enemy's oil or at least cutting him
off from his oil resources. But it has the same final
objectives as the former British strategy and, like it,
it shifts the emphasis to the oil regions. That is why
the present German strategy, just like previous British
strategy, is compelled to neglect the actual military docisions on the European continent. Up to now Hitler's
great continental strategy has been the strongest aspect
of his war plan. He has struck at his opponents in
the same method. The entire front was regarded as one
battlefield, and blows were delivered along the whole
major land battles, each of which has given him added
area, from Leningrad to Rostov. A leading German
military analyst, Capain Weiss, the oditor-in-chief of
the Volkische Beobachter and Hitler's personal confidant, wrote in November, 1941, about this main feature of German strategy as follows:
footholds on the European continent. The fact that
he is today trying to avoid a decision against the bulk
of the Red Army in the field indicates that the Russian resistance of 1941 has taken effect, in the sense
that Hitler does not dare a repeat performance of the
great battle for Moscow.
The crucial task the German Commander-in-Chief had
to master in Russia consisted of directing uninterrupted
operations according to his will, on this, the mightiest batt
field in the world. He had to see to it that there was not
even a moment's intérference with the unbroken sequence
of engagements and battles over a front at least 720 miles
wide.
Today the picture is entirely different. The German
offensive is concentrated upon a relatively narrow sec.
tor, and not a single major German operation has been
waged north of the Voronezh-Kursk line. It means
that about two-thirds of the Red Army has not been
attacked since the summer campaign started. So far,
Hitler has not tried to bring about a military decision
on the Russian front.
The situation on the southern front remains grave.
In 1941 Russian tactics were able to stop the German
blitzkrieg. Now the crisis on the Russian front concerns
the whole United Nations strategy. The disruption of
the German war plan, whose purpose it is to throttle
Russia's war economy, is a task for a war of coalition;
longer an isolated Russian affair. Hitler stopped
great continental strategy and turned toward an oil
strategy. The hour has now come for the grand coalition strategy of the Anglo-American-Russian bloc.
If Hitler now relinquishes his continental strategy,
then the United Nations have an excellent chance of
hitting back with a continental strategy of their own.
There can be no doubt that the tangible goal of the
Anglo-American-Soviet coalition is the coordination of
military action, aimed at the European continent. The
requirements of a United Nations coalition strategy are
these: the Red Army must launch a great counteroffensive on land and the ground and air forces of the
Anglo-American bloc must invade the European continent. The European continent is the joint goal at which
the Anglo-American-Soviet forces should be directed.
Only with such a goal can the effective coordination
and unification of the anti-Hitler forces be accomplished. It has not been the technical difficulties, the
lack of shipping, etc., that have paralyzed the coalition
strategy against Hitler in the last few months On the
contrary, the delay in coalition planning accounts for
the failure to attack existing technical bottlenecks. The
offensive forces of Hitler Germany are limited and
now they are being used up in the fight for oil. A
United Nations coalition strategy can at the present
time make use of the enemy's various difficulties to
counteract Hitler's oil strategy with the continental
MAX WERNER
strategy of a two-front war.
424
NUMBER 46
SECRET
OFFICE OF STRATEGIC SERVICES
THE WAR
THIS WEEK
August 20-27, 1942
Printed for the Board of Analysts
Copy No. 6
the S of
AUGUST 20-27, 1942
SECRET
Office of Strategic Services
THE WAR THIS WEEK
Coincident with a decrease in the speed of their Caucasus
campaign, the Germans this week have launched their gen-
eral offensive on Stalingrad. Here Timoshenko has committed the reserves of his Southern Army and evidently
intends to make a major defensive effort. In the Southwest
Pacific, the Japanese also have begun a major effort-a large-
scale attempt to recapture our newly won bases in the
Solomons, which may already have resulted in considerable
damage to Japan's remaining carrier strength. At the same
time, however, the Japanese have succeeded in moving into
Milne Bay in New Guinea, considerably augmenting the
threat to Port Moresby.
In the west, the Allied raid on Dieppe, characterized by
the largest air combat since the Battle of Britain, has drawn
attention to the strain placed upon the Luftwaffe by its
present far-flung commitments.
In Egypt, Allied observers expect that a renewal of Rommel's offensive-despite constant United Nations attacks on
German supply lines-may come at any moment. Meantime, the disagreements between De Gaulle and the British
over the present political status of Syria and the Lebanon
have reached a critical state. In France itself, reports suggest that the Germans may be planning to keep Laval in
power for the present at least. Further evidence that the
Nazis are attempting a penetration of French North Africa
has appeared in the arrival there of German agents disguised
as students.
1
SECRET
The pro-Congress agitation in India is
on accompanied by a
tailment form and of India's direction, beginning perceptible to take our
steel and aircraft production.
must now reckon with the Moslem
on the
creation
of a separate
stubborn promise efforts
insistence
League's
Moslern Comstate, as expressed in the recent resolution of the
In China, Chiang
have Working reoccupied Committee Kai-shek's League's troops
several towns in Kiangsi and Chekiang in
the wake of Japanese withdrawals for which as yet there is
no adequate explanation.
Brazil's declaration of war on Germany and Italy
a rapprochement
foreshadows and the further between President probably
Vargas pro-democratic elements of the country.
her "moral with
American nations
non-belligerent nation, Portugal while has expressed several South solidarity" have her extended sister
rights to Brazil. The Brazilian action has
probably
strengthened elements in Chile favoring a rupture
with the Axis,
The Battle of Stalingrad
As the Germans have at length established a new bridgehead over the Don southeast of Kletskaya and have advanced
railway as far as it
for the centers of
evident and along Groznyi the that Caucasus the battles strategic Mozdok, has Stalingrad become
are reaching a crisis. Around the Volga river
city, the Russian command has apparently adopted & system
of defense in depth, and is throwing its best troops into the
battle. Beyond Kotelnikovo, the southern German pincer,
advancing slowly and at heavy cost, has broken at least one
Soviet defensive line. In this sector, however, the Russians
may now have air superiority.
Both sides apparently face serious supply difficulties The
northern German pincer has probably cut the railroad run2
SECRET
ning south from Povorino to Stalingrad, and the Nazi air
force has continued to bomb shipping on the Volga. These
developments have doubtless forced the Russians to depend
for their supplies to an increasing extent on the narrow river
roads on each side of the Volga. The Germans themselves,
however, are operating at the ends of only two railroads, the
Tikhoretsk-Kotelnikovo-Stalingrad line, and the line from
the Donets basin through the Don bend to Stalingrad. The
necessity for retracking these railroads may partially account
for the recent delay in launching a general attack in this
sector. Furthermore, the German troops on the bridgehead
southeast of Kletskaya are obliged to operate with no railroad
supply line.
The Battle of Groznyi
Meantime the German advance eastward toward the
Caspian has notably slowed. Here two Nazi mechanized columns are apparently trying to close a pincer on the Groznyi
area. Yet it seems unlikely that the Russians will make the
same sort of last-ditch stand for the oil fields around Groznyi
that they are making north and south of Stalingrad. Farther
north, the Nazi mechanized column that captured Elista
several days ago, instead of going on toward Astrakhan, has
apparently turned south to protect the left flank of the
German forces advancing on Groznyi. Nazi propagandists
are now making capital of the fact that German mountain
units have planted their flag on Mt. Elbrus, the highest peak
of the Caucasus. More important, they probably also have
taken several passes through which they may be able to
attack the Russian defensive position south of the mountains.
To the west, the Red Army is still holding the low mountain passes before Novorossiisk and Tuapse. In this sector
the Nazis have taken the small town of Krymskaya near
Novorossiisk and the port of Temruk, and now control the
3
SECRET
SECRET
entire Sea of Azov. Farther to the west the Germans are
apparently beginning to use the Crimean port of Feodisiya as
a forward base; this development suggests that with the
steady retirement of the Soviet navy, German shipping is now
venturing into the eastern part of the Black Sea.
able new force, assembled in the Marshall or Caroline Islands
far to the north.
While this engagement was in progress, the Japanese succeeded in occupying Milne Bay, a strategic position at the tip
of the Papuan peninsula in New Guinea. The move, accom-
plished despite Allied air attacks, considerably augments
Developments in the North
In brief, except around Stalingrad, the week has seen
notably small changes on the southern front. On the central
front, the Russians now report a 25 to 30-mile advance in the
Rzhev area, while air operations have been actively pressed
in all sectors. In Finland, reliable reports suggest that the
Germans have taken over the whole front from Rukajarei
to the Arctic, and are constructing permanent installations
for another winter. They have subjected Archangel to
heavy bombardment, and are continuing preparations for an
assault on Murmansk. According to another report, however, repeated German bombing of Murmansk has thus far
failed to interrupt the unloading of supplies from Britain
and the United States.
Second Round in the Solomons
Counterattacking in strength, the Japanese this week set
about their expected attempt to reconquer lost positions in
the Solomons-an attempt which at last account was still
the threat to Port Moresby.
The naval-air engagement in the Solomons was preceded
by at least one earlier Japanese attempt to infiltrate our
positions, Some 700 Japanese soldiers, landing at nightpresumably on Guadaleanal, the site of our air base-were
discovered and virtually annibilated by the defending marines.
(Thirty survivors were captured.) A strong enemy air attack
on Guadalcanal Sunday afternoon (August 23) was intercepted and at least 21 enemy aircraft were shot down. With
this auspicious beginning, the engagement apparently was
progressing favorably, although details were still lacking on
Thursday.
Japan's Carrier Strength
Prior to the present battle, Japan's carrier strength may
have consisted of as many as five regular carriers and five
converted carriers. Of the regular carriers, three may be of
the large, new Shokaku class, two of which have apparently
been kept with the home fleet up to the present, and one of
which was damaged in the Coral Sea engagement. One and
possibly two carriers of this class may be taking part in the
continuing. A battleship, two carriers, and "several" cruisers
have been damaged by our land- and carrier-based planes,
present battle, one already having been hit. Two smaller
according to a naval communiqué. The striking force
carriers, the Ryujo and the Hosho, until recently were oper-
approached our bases in the southern Solomons from the
northeast. Since considerable enemy naval activity previously had been sighted to the northwest, in the vicinity of
the Faisi and Fauro Islands (south of the large island of
Bougainville), the enemy evidently was committing a size-
ating in the Aleutians area. The first of these is now reported as damaged and burning in the current battle.
Japan's carrier losses to date can be estimated as follows:
the large carriers Akagi and Kaga and the smaller carriers
Hiryu and Soryu, sunk in the battle off Midway, and one
5
4
SECRET
SECRET
converted carrier (erroneously reported as the Ryukaku), lost
in the Coral Sea engagement.
Dieppe and German Air Power
The Dieppe raid on August 19 resulted in the heaviest
engagement of Allied and Axis air forces since the peak of the
Battle of Britain in September, 1940. The Germans, who
have been reluctant to accept battle in the frequent British
daylight sweeps over France and the Low Countries, appar-
ently could not risk the chance of invasion which a land
attack in force implies. In the resulting action they lost
heavily in air casualties-perhaps as many as 170 planes
lost and 140 damaged, if both combat and accidental losses
are taken into account.
Further incursions on German air power, at the scale set
by the Dieppe raid, would weaken German first-line plane
strength appreciably, according to our current analysis of
the German air position (see AppendixI). The total combat
strength of the Luftwaffe already was declining by at least
20 to 120 planes each month-the estimated average rate at
which German losses exceeded production in the three months,
May to July. For the first time, apparently, the German Air
Force is feeling the strain of its far-flung commitments, and
would hardly welcome many repetitions of the Dieppe affair.
Reactions on the Continent to the Dieppe Raid
The Dieppe raid was given an extraordinary amount of
attention in the Axis press and radio. The general picture
presented was that an ill-planned invasion attempt had been
undertaken, but had been repulsed with heavy losses by
Germany's "line of iron". Axis and collaborationist propaganda showed confusion in their simultaneous assertions (1)
that Stalin had given Churchill a 12-day ultimatum for the
6
launching of a second front, and (2) that German forces had
defeated an invasion based on months of planning. There
was no single propaganda "line", but Axis propagandists
widely emphasized the point that Nazi forces repelled the
attack without having to call on reserves. In the general
tide of jubilation some observers noted an undercurrent of
relief.
First reports from France indicate that a considerable
percentage of the population applauded the action, although
regretting that it was not the long-hoped-for establishment of
a second front. The British broadcasts, announcing that it
was only a commando raid and that Frenchmen were therefore not to jeopardize their security by hostile action against
the enemy, appear to have made a favorable impression in all
quarters. The collaborationist Vichy Information Ministry,
however, has followed the German line and endeavored to
convince the French that a British invasion attempt has
been defeated.
Attack Expected in Egypt
Rommel is expected to launch his long-delayed offensive
in the next few days. Axis forces have been reinforced and
regrouped, and the 19th Light Division (which has been part
of the spearhead of previous attacks) has been shifted to the
southern end of the line near the Qattara depression, according to press reports. The increased activity of motor transport and aerial reconnaissance in the southern sector indicates
preparations for an attack. The British have engaged in
harassing actions.
Rommel is now believed to have approximately 70,000
combat troops at his disposal, although some estimates of his
total forces run higher. More than half of these are Germans.
Precise knowledge of Axis armored reinforcements is lacking,
but enemy tank strength is placed by some observers at
7
SECRET
SECRET
about 400. Paratroops, frequently reported in Crete, have
also appeared in Egypt. To date they have been used
exclusively as infantry.
Extensive Allied attacks on enemy ports, shipping, lighters,
motor transport, and supply dumps have seriously complicated Rommel's problem, and may have forced him to delay
his attack until the present. However, considerable tonnage
has been reaching North Africa despite Allied plane and
submarine assaults, and in general it is assumed that Rommel
has been able to accumulate sufficient supplies to sustain
active operations. He is probably now making some use of
the railroad. The pressure on his supply lines may urge him
not to delay his attack any further.
The British have also received added strength. Allied
forces have a clear superiority in air power which the enemy
has not as yet attempted to overcome. Whether Rommel is
given large reinforcements in aircraft at this critical juncture
may possibly offer some guide to the quantity of German air
reserves available at this time.
In Cairo Churchill had lunch with Premier Nahas and a
brief interview with the King. The latter parried Churchill's
efforts to get down to brass tacks with remarks verging on
levity, and did not favorably impress his guest.
Anglo-French Tension in Syria
There has been no relaxation of the acute situation that
came to a head with De Gaulle's arrival in the Near East. (A
sketch of the background of Franco-British relations in this
area appears in Appendix IV.)
De Gaulle has made it clear that the Fighting French can
cooperate with the United Kingdom in the Levant only if the
British there refrain from political interference in local affairs.
They must respect French "rights" as defined in the several
agreements to which, De Gaulle asserts, the French have
8
faithfully adhered. He discounts the British explanation
that their present political activities are necessary on grounds
of military security, and implies that the British aim is to
displace the French in the area. While lamenting the effect
of this controversy on the whole Arab world, De Gaulle is
prepared to use force against the British if a solution is not
worked out.
Although insisting on the maintenance of France's position
in the mandate, De Gaulle states that the Fighting French
have declared the independence of the Levant states so far
as is compatible with war conditions. Elections will come
"as soon as the situation permits." De Gaulle is now at
work trving to improve French relations with local leaders.
Meanwhile the British show no sign of altering their policy.
For instance, General Spears this week summoned the
Syrian Government to a formal meeting. While recognizing
that France enjoys the political initiative in the Levant,
Churchill cannot agree that British agents are meddling
beyond their necessary military concerns. Besides her busi-
ness and army interests in the area, Britain is committed,
along with the French, in the declaration of freedom for
the Levant made by Catroux in 1941. The British government considers the De Gaullists' status in the Levant to be
different from that of previous regimes, but hopes that the
cooperation of the Fighting French may be obtained.
In a more general way De Gaulle has emphasized that the
Fighting French must maintain France's rights intact all over
the world, or they would have no reason to justify their being.
To have French help in the war and in the coming peace, the
Fighting French must be treated as an independent ally.
Any other action or status, he insists, merely lends color to
the propaganda of Vichy and the Axis. The Fighting French
in London are also disappointed with the failure of the
United States to extend to them "political" as well as "military" recognition.
9
SECRET
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Laval's Position at Vichy
New evidence that the Germans may be planning to keep
Laval in power, at least for the time being, appeared in a
B. article from Berlin that was carried in all the Paris
press except Doriot's Cri du Peuple (and even that has ceased
its attacks on Laval). The article praises Laval as the first
Frenchman who adheres without reserve to the "Montoire
policy" of collaboration, and who recognizes that France's
first objective must be an accord with Germany inside the
New Order. Laval and Pétain have created a "climate of
confidence" and a new internal order, it states, despite
difficulties which Germany fully appreciates and is endeavoring to help Vichy overcome.
On the other hand, recent visitors in Vichy returning to
North Africa have expressed the belief that Laval's present
tenure of office may not last beyond October.
A clash between Laval and Guerard, the Secretary General
to the Chief of the Government, is reported from Vichy. The
conflict is supposed to have arisen from a clash of personalities
and from Guerard's willingness to agree to full military collab-
oration with the Axis if the French warships at Alexandria
were sunk. Laval, according to this report, was unwilling
to adopt such an extreme policy. He is therefore trying to
have Guerard transferred, probably to a ministerial post; but
the latter's close relations with the Nazis are alleged to make
this transfer a delicate matter.
Economic Conditions in France
A report from Vichy, describing economic conditions in
France in the early summer, states that, while crops on the
whole were expected to be quite good, the lack of fertilizer,
farm implements, lubricants, chemicals, cattle fodder, and
agricultural labor is causing considerable concern. Domestic
10
commerce is greatly hampered by lack of merchandise, administrative regulations and delays, and the lack of transport
facilities. The wine trade has apparently all but ceased.
Trade with the North African colonies has been active, es-
pecially with Morocco, but France is unable to supply the
needed industrial products in return. International commerce has consisted almost exclusively of exports to Germany,
while commerce with such foreign countries as Switzerland,
Spain, Hungary, and Finland has constantly diminished.
To ease the economic situation in the Empire, Vichy has
requested that trade between the Antilles and Morocco be
allowed to resume, under conditions similar to those existing
prior to the entry of the United States into the war.
News From French North Africa
In the guise of students, Germans are reported to be going
to North Africa for the purpose of working on the natives.
Meanwhile the German press continues its agitation about
Morocco.
Morale in French Morocco is reported to be very low, a fact
attributed to Axis successes in the east and to the general
feeling that Vichy is disintegrating and is not supporting the
French in Morocco. Any move to replace Laval by Doriot
or Deat would give an impetus to the separation of the
French Protectorate from Vichy, one informant believes.
Meanwhile Vichy has forbidden the departure of United
Nations citizens from Morocco, regardless of age or sex; but
there are indications that Vichy has not yet reached a final
decision on this question.
Evidence of firmness appeared in a report that after the
recent convoy battle in the Mediterranean, a French Admiral
demanded the release of British prisoners on board an Italian
vedette within French territorial waters. He sent French
police aboard the vedette and removed the prisoners. The
11
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Italian Admiral replied by issuing orders that Frenchmen
who engaged in such activities in the future would be fired
obedience. Devadas Gandhi, son of the Mahatma, is
reported to have declared that the British have only a few
upon.
days in which to "come to their senses"; after that, he warns,
the movement will have achieved such momentum that even
Optimistic Note From Spain
the elder Gandhi will not be able to stop it.
In general, reports suggest that the outbreaks of dis-
A well-placed American observer fe 13 that Spain is without
obedience have already begun to show more signs of corre-
aggressive intentions in North Africa. Spain is strengthen-
lation and direction. Although the cities have been calmer
ing herself in the Canaries for defensive purposes, our observer
than in previous weeks, the countryside 1100 been a good deal
more agitated, and disorder has spread to the native state of
believes, and is determined to stay there even if it means
diverting strength from North Africa.
Another report, however, suggests that Spanish restraint
regarding Morocco may be due to Germany's withdrawal of
her support of Spanish annexationist demands. At the same
time the Germans are reported to be increasing their pressure
on the Spanish to speed up the construction of their coastal
defenses in northwest Spain.
The Caudillo's office has ordered the Spanish press to publish
United States communiqués, and this is now being done by
even the Nazi-owned Informaciones.
Friction between the Falange and the Monarchists flared
up when prominent Falangists tossed grenades into an assembly at Bilbao. Several people were killed and injured.
The attack is believed to have been directed at Varala, the
War Minister, who is a Royalist, although not actively involved in any restoration efforts.
India: The New Pattern of Civil Disobedience
In India, the third week of revolutionary outbreaks has
been considerably calmer than its predecessors. Yet American observers concur in stating that this apparent lull is only
the calm before the storm. Under cover of the current
hooliganism, Congress leaders have methodically proceeded
with their organization of the real campaign of civil dis12
Mysore. At least two strikes are now perceptibly affecting
India's war production-one at the Hindustan aircraft plant
at Bangalore, and one at the Tata iron and steel works at
Jamshedpur. In the latter plant, where 4,200 out of approximately 4,800 skilled workers have walked out, the
strikers say they will not return to work until India has a
national government. Unconfirmed reports from Calcutta
state that walkouts have forced the Steel Corporation of
Bengal to shut down; this plant, and Tata produce 90 percent of India's steel. Official spokesmen maintain, however,
that India's war effort has not yet been seriously curtailed,
and that special methods of transport are keeping up the
distribution of coal, despite the current disorganization of
the railroad system. To this disorganization heavy rains
and floods in northwest India have added, and in certain
areas food is becoming increasingly scarce.
Pressure for Conciliation; the Moslem Stumbling-block
Although the viceroy has refused to consider a letter sent
to him from prison by Gandhi, the most diverse political
groups are now apparently putting pressure on the Govern-
ment to temper repression with conciliation. Even such
conservative newspapers as the Times of India are suggesting
some sort of settlement. Fazlul Huq, Premier of Bengal,
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SECRET
has sent a telegram to the Viceroy (to be passed on to Presi-
dent Roosevelt, Churchill, Stalin, and Chiang Kai-shek),
stating that the freedom and peace of the world demand a
compromise in India. Sir C.P. Ramaswamy Aiyer, Information Member of the Viceroy's Executive Council, and generally conceded to be one of its ablest members, has resigned
from that body. His ostensible reason was the pressure of
his duties as prime minister of the state of Travancore. An
radical settlement of India's problems by playing the League
against the Congress. The last group especially is apparently
in considerable dread of the Congress' socialistic doctrines on
land tenure. Moreover, a recent resolution of the conference
of Moslem divines, the Jamiat-ul-Ulema, supporting the
general position ... the Congress rather than that of the
League, would suggest that this latter body does not represent
the views of Moslem theological orthodoxy.
observer on the spot suggests, however, that his resignation is
actually expressive of his disapproval of the Government's
current policy, particularly as regards the press.
Hopes of compromise hinge to a great extent on the Moslem
League and its leader, Jinnah, to whom Rajagopalacharian
has already addressed a powerful appeal. In a recent conversation, however, Jinnah has displayed a fundamental dis-
Chungking Challeng Russian Influence in Sinkiang
Sheng Shih-ts'ai, the Governor of Sinkiang, is being persuaded by Chungking to bring his largely autonomous and
Russian-influenced province under the authority of the
Kuomintang and of the Central Chinese Government, according to a highly placed observer in Chungking. Sheng
trust of the Congress and a stubborn insistence on his pet
idea of Pakistan (the creation of a separate Moslem State).
has already shown himself agreeable to the proposition that
Similarly the Working Committee of the Moslem League has
passed a resolution stating that the League would be willing
vised by Chungking Government personnel.
Forthcoming exchanges of Russian gasoline for Chinese
strategic materials, which our observer reports will take place
shortly in spite of the fact that no formal agreement between
to enter into any provisional government of India-provided
the British pledge themselves to hold a plebiscite on the
Pakistan issue and to abide by the results of that plebiscite.
According to one American observer, the League, far from
moderating its stand, has now spoken out for Pakistan more
boldly than it did last winter, since the Cripps proposals have
all transport matters within his province should be super-
China and Russia has as yet been concluded, will make
control of Sinkiang communications attractive to Chung-
proved that the British are willing to go a long way toward
king. Moreover, Sinkiang produces some 25,000 gallons of
gasoline monthly, and production can probably be stepped
up. The whole development, according to our observer, is
complying with its extreme demands.
an effort to take advantage of the U. S. S. R.'s present
Meantime available evidence suggests that the Moslem
League is far less representative a party than the casual
American newspaper reader might imagine. A report from
weakness to gain control of the oil and communications of
New Delhi states that its financial backing comes chiefly from
the Indian princes (Hindu and Moslem), the British financial
with Chungking is not yet clear. Sinkiang has long been
practically autonomous with regard to China, and it has
community (especially in Calcutta), and the large Moslem
been tied to Russia economically ever since the completion
landowners-all groups that are interested in averting a
of the Turk-Sib railroad in 1930. Sheng himself achieved
Sinkiang.
How far Sheng Shih-ts'ai will go in the way of cooperation
15
14
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power in 1933 largely through Russian aid, and he has con-
Chinese troops are pressing toward Ch'u-hsien, railroad and
stantly drawn on Russian assistance in money, materials,
and technical assistance, to consolidate his position. Rus-
not expected to relinquish. If the Chinese should now
airport city of central Chekiang-a base the Japanese were
local Turki majority, and Russian garrisons are found today
recapture Ch'u-hsien, it would be strong evidence that the
Japanese are willing to write off many of the gains which
they made in Chekiang this spring and summer.
in various towns of the province.
Several factors, however, may impel Sheng to lean toward
The Elusive Japanese Army
Chungking. Chinese Central Government troops are now
stationed in North Kansu, where they make a direct contribution to Chungking's influence on Sinkiang. Moreover
The advance of Chiang Kai-shek's armies in east central
China against weakened Japanese forces poses an enigma:
where the strong Japanese units previously in that area have
Sheng appears to be having troubles with Communist groups
disappeared-northward for a possible attack on Siberia or
sian troops have occasionally intervened to aid Sheng against
uprisings of the Tungans (Chinese Mohammedans) or of the
within his province. These Communists, unlike those in
Kansu or Shensi, have direct Russian support, are very
southward against India or Australia. Some Japanese
powerful, and operate in the open, according to our observer.
Sheng may well be utilizing Chungking to rid himself of these
urging the abandonment of any plans against India and con-
competitors, while at the same time he counts on Russian
proximity to spare him from too great subservience to Chung-
king. That important negotiations may now be underway
is indicated by an unverified report that Chiang Kai-shek
has been in conference with Sheng at Lanchow.
Chinese Gains in Kiangsi and Chekiang
Chungking has claimed the recapture of many of the towns
along the Hangehow-Nanchang railway, including Kuangfeng, I-yang, Heng-feng, Kuei-chi and Shang-jao. Chungking
has also announced the recapture of Wenchow, important
port in southeast Chekiang, and the seizure of Lin-ch'uan
(Fu-chou), the Japanese base in Kiangsi which American
army flyers bombed some weeks ago. These various
Chinese claims seem to indicate a fairly general Japanese
withdrawal eastward toward the Chekiang seaboard, and
westward toward Nanchang. Chungking claims also that
16
newspapers have appealed frankly for the former course,
centration on Siberia in order to exploit Russia's present
embarrassment. Despatches from Tokyo have even intimated a military agreement with Hitler to invade Siberia as
soon as General von Bock reaches a specified-but undisclosed-locality in Russia proper. Another reason for delay
may be that Japan hopes to wait until some time in September
when the bulk of the Japanese fish catch in Siberian waters
will be completed.
A report from a well-placed observer tells of a Japanese
troop concentration in Kalgan at the edge of the central
Mongolian plateau. To substantiate this report, word has
arrived that a Japanese division moved northwards a fort-
night or so ago to Kalgan from Taiyuan, in central Shansi
province. The observer understands that the concentration,
by threatening Russian dominated northern Mongolia, aims
to give more force to a forthcoming Japanese attempt at
mediating a compromise peace between Stalin and Hitler.
The Japanese War Office has announced the appointment
of two new generals to command the headquarters of the
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Central and Northern Defense Areas in Japan proper, which
changes may indicate an endeavor to strengthen home defense
against anticipated Russian or American air raids.
Brazil's Declaration of War
Overcoming the initial hesitation of the Army high command, which urged the government to limit its retaliation
against Axis sinking of Brazilian shipping to economic
Japanese Defensive Outpost in the Aleutians
There is as yet little indication that the Japanese will be
able to use their foothold at Kiska for an advance along the
Aleutian chain. They are now employing only fighter seaplanes at that point, indicating the absence of carriers and
the lack as yet of a field for land-based planes. The hard
rock (overlaid by little or no soil) makes the construction of
an airfield a difficult task. Aerial reconnaissance, however,
has disclosed a new camp on the western side of Kiska Bay,
whence a road has been completed to what is probably the
best site for an airfield, although even this is none too good.
American air raids, carried on under the handicap of almost
continuous fogs, while seemingly fairly effective against
shipping in the harbor, probably only temporarily obstructed
the preparation of the field and the industrious consolidation
of land defenses. Since our reasonably successful air and
surface raids of the early part of this month, the Japanese
have camouflaged their camps and gun emplacements in
preparation for September, the clearest month of the year.
Their anti-aircraft fire is effective.
If they succeed in completing their airfield, it will be just
as difficult for them to operate against our Aleutian bases as
it is for our planes to operate against their bases. Until the
Japanese finish their airfield at Kiska, they can use only
seaplanes, whose range is not long enough for them to reach
our bases. Despite these offensive difficulties, Kiska is
already an effective defensive outpost.
reprisals, President Vargas on August 22 finally issued the
decree which declared Brazil at war with Germany and Italy.
This marks the culmination of a 10-month period of increas-
ingly positive pro-United Nations orientation on the part
of the Vargas government, including closer military and
economic cooperation with the United States, the elimination
of prominent Fascists from the Government, and the begin-
nings of a rapprochement between Vargas and long harassed Brazilian pro-democratic elements.
The declaration of war is expected to accelerate these
tendencies. The defenses of the northeast bulge, invasion
gateway to the entire continent, will be strengthened.
French Guiana, Vichy's base adjoining the all-important
bauxite mines of Surinam, will be placed under increased
surveillance. Full mobilization and early strengthening of
the Brazilian army will also offer greater protection against a
sudden uprising by the German colonists in Rio Grande do
Sul and Santa Catarina (see Appendix II, "Axis Colonies in
South Brazil"). Outright confiscation of Axis shipping and
banking houses represents the first effective economic measures taken against Axis interests. Further progress in dealing with the clandestine fifth column can also be expected, as
well as an eventual truce and perhaps a working agreement
between Vargas and his political enemies of recognized antiAxis convictions, such as the imprisoned Communist leader,
Luiz Carlos Prestes.
For Latin America as a whole, Brazil's entry into the war
will serve as a powerful anti-Axis stimulant. Reports from
Chile indicate a growing anti-Axis feeling in government
circles which may hasten the recent trend toward a break in
19
18
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relations with the Axis. The most serious repercussions of
combined with close association with Spain and Brazil.
the Brazilian declaration of war are likely to occur in the Rio
Salazar weighs carefully his relations with the Axis.
A mixture of cultural, economic, and strategic considerations therefore probably shaped Portugal's official statement.
This communiqué reaffirmed Portugal's strict neutrality, but
declared that it was never intended to affect historic bonds,
and wound up by expressing brotherly ecteem and moral
de la Plata region. Tension is apt to increase in Argentina,
where widespread popular anti-Axis feeling exerts constant
pressure against the pro-Axis Castillo government. Castillo,
however, will probably not make any important concessions
to this pressure. There are the further possibilities of a
Nazi-inspired "incident" on the Argentine-Brazilian border,
or of disturbances among the colonies of people of German
descent in South Brazil. In Uruguay, the Government
doubtless fears that a declaration of war might involve the
country in Argentine-Brazilian difficulties.
Several Latin American countries including Argentina,
Chile, Uruguay, Peru and Bolivia, have already declared
Brazil to have the status of a non-belligerent, and the other
countries are expected to follow this lead promptly.
Significant also is the widespread husiasm of the Brazilian people for the war, an enthusiasm which far exceeds
that of any other belligerent Latin American country. Violent anti-Axis demonstrations are reported from most Bra-
zilian cities, from Manaus to Porto Alegre. Large scale
destruction of German and Italian property took place with
the tacit approval of the government. In Porto Alegre,
for example, the police were instructed to prevent fire and
robbery, but not to intervene otherwise in the protection of
property belonging to Axis nationals or to Naziophile GermanBrazilians.
Portuguese Expressions of Sympathy for Brazil
The sympathy of the Portuguese people for Brazil was
expressed in a flood of friendly telegrams from all parts of
Portugal and all classes of people. But the Brazilian declaration of war has complicated the balance that Salazar has been
maintaining- a balance of neutrality toward the belligerents
solidarity with Brazil "in the defense of that which it considers its honor and its right". No amplification has been
given of the meaning of this communiqué; it has been variously interpreted, but with general agreement that Portugal
intends to continue a cautious policy.
The Portuguese press, after pausing to receive its cue, has
stressed the friendship between Brazil and Portugal. One
paper, A Voz, stated in an editorial that "crimes committed
against Brazil have found an echo in Portuguese public
opinion as though they were acts of violence committed
against Portugal."
Visit of Chile's President to the United States
The impending visit to the United States of President Rios
of Chile indicates to certain qualified observers that a diplomatic break between that country and the Axis has become
more likely, and that it may precede the presidential visit,
scheduled tentatively for October. During his recent trip
to Santiago, Chile's Washington Ambassador appears to
have corrected the impression among certain Chilean government leaders that the public in the United States has approved Chile's neutral position. Ambassador Michels was
able somewhat to allay Chilean resentment over wartime
shortages of gasoline and other necessities, and perhaps to
reassure his government concerning our ability to assist
Chile in defending itself against possible attack. There are
indications that President Rios may prefer to time a break
in relations so that it comes before his visit.
21
20
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SECRET
The New Cuban Cabinet
The new Cuban cabinet, which was appointed on August
16 after an acute governmental crisis, (The War This Week,
August 13-20, p. 22) includes members from neither of the
opposition parties and from only three of the seven parties
which form the government coalition. One of the opposition
APPENDIX I
THE DIEPPE RAID AND GERMAN AIR STRENGTH
The United Nations' raid of August 19 against German forces in Dieppo
parties, the mildly liberal Partido Revolucionario Cubano, led
resulted in the heaviest engagement of Allied and Axis air forces since the peak
by Grau San Martin, precipitated the crisis by refusing to
of the Battle of Britain in September 1940. Prior to the raid, the German Air
Force had apparently been avoiding full-scale combat with R. A. F. firhters in
their sorties over France. The Dieppe raid, with its accompaniment of attack
and high-altitude bombers and screens of fighter planes, forced the German AL
run give battle. As a result, the G. A. F. suffered casualties on a scale which,
endorse President Batista's appeal for national unity and for
the suspension of politics during the war. They likewise
declined to accept any cabinet position. The other opposi
tion party, the conservative A. B. C., however, agreed to
support the president.
Within the government Coalicion Socialista Democrática,
the chief obstacle to the formation of an all-party war cabinet
came from the Democrata party, the strongest element in the
coalition. They refused to participate in any cabinet which
included a representative of the Union Revolucionaria
Comunista, the Cuban Communist party, even though the
latter party reaffirmed its complete support of Batista's war
program. By an arrangement designed to exclude the
Communists, the Demberata party yielded the post of prime
minister to a Liberal, Ramón Zaydin, former president of the
Cuban Chamber of Deputies. One of their members, however, José Augustín Martinez, who had been minister without
portfolio, received the post of Minister of State. Other
cabinet changes were insignificant, affecting only the Depart-
ments of Health, Public Works, and Agriculture.
Including members of the Liberal, Demdcrata, and Nacion-
if it were to continue even for a short period, would make serious inroads on German sin power, according to a memorandum prepared by the Economics Division
of the Office of Strategic Services.
German Air Casualties
The Air Ministry report for the Dieppe raid claims 93 German planes shot
down, 39 "probably destroyed," and 140 damaged-272 planes in all. Experience
suggests that half of the "probably destroyed" and 30 percent of the damaged
planes may be counted as actually destroyed. If these percentages held true in
this case, a total of 155 German planes were shot out of the air. The remaining
117 planes are treated as damaged and may be expected to be out of action for an
average of two months while they undergo repairs.
Air Ministry reports do not as a rule include estimates of planes destroyed or
damaged on the ground as a result of strafing or bombing attacks. Nor do they
attempt to estimate enemy operational accidents which inevitably occur in an
engagement of the character of Dieppe. Flying Fortresses of the U. S. Army Air
Force attacked a German fighter airdrome at Abbeville, and while no claims were
made, planes undergoing repair in hangars were doubtless destroyed or damaged,
and flying accidents probably were increased as a result of damage to runways.
With the inclusion of a conservative allowance for losses on the ground and in
accidents behind the lines, it may be estimated that the Dieppe raid resulted in
the total loss of 170 German planes and damage to 140 more.
Monthly Rate of Losses in Western Europe
Losses in the one-day Dieppe action were considerably above the months. average
alista parties and five members without party affiliation, the
monthly rate of loss in the western European theater for the three previous include
new cabinet has only a slightly broader party representation
Air Ministry reports of enemy losses in the Metropolitan Area, which destroyed
German bombers shot down over England as well as enemy planes the
than the old. While all the coalition parties have agreed
to support it, most of them, particularly the Union Revolu-
by the R. A. F. over the Channel, France and the Low Countries, present
cionaria Comunista, consider it inadequate for the war needs
of Cuba and believe it will be short-lived.
22
following figures:
23
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SECRET
Destroyed
Probably
Destroyed
Damaged
May
89
20
69
June
128
37
123
47
12
32
July
Average
88
23
75
Estimated
Total
Destroyed
134
204
Losses on the Eastern Front
German air losses on the Eastern Front are quantitatively more important than
casualties inflicted by the R. A. F. Unfortunately, the only information emansting from this theater consists of German and Russian admissions of their own
losses and claims of cast Itles inflicted on the enemy:
70
Russian Losers
German Losses
136
Russian
Claims
German
Admissions
German
Claims
Russian
Admissions
1 Including customary proportions of total losses in "probably destroyed" and "damaged," together with
allowance for operational non-combat Josees.
May
June
The apparent hesitance of the G. A. F. to engage the R. A. F. in western Europe
on a full-scale, until forced to do so by the Dieppe raid, may be explained by the
fact that the German position in air reserves has become somewhat strained.
German Production Figures
That German air reserves are under strain is attested by the daily operational
intelligence of the R. A. F. and by the fact that G. A. F. losses of combat planes
in all theaters, estimated on a minimum basis, almost equalled production in
May and were in excess of output in June and July.
German production of combat aircraft, according to best current estimates, is
about 1,250 planes per month. Total airplane output, including training types
and transport planes, is of course in excess of this figure but probably below 2,000
planes per month. Of the 1,250 combat types produced monthly, 200-300 are
required each month for use in operational training of new crews. The remaining
950-1,050 are available each month for allocation to theatres of war or to build
up reserves.
152
1,419
500
1,551
145
1,640
618
1,535
211
,548
803
2,506
169
1, 536
640
1,877
July
Average
Russian claims of German losses may be taken to be an exaggeration of the
truth because of the absence of evidence that German air strength is declining at
rate indicated by these figures. German admissions of their own losses, on the
other a hand, are too low in relation to the known intensity of air fighting on the
Eastern Front.
Conveniently between the two figures are Russian admissions of their own
losses. This series may be taken as a rough minimum measure of German casualties for two reasons: (1) the Russians are naturally unwilling to render comfort to the enemy and may therefore be expected to admit losses no higher at
least than those known to have been inflicted on the Germans; (2) if Russian
losses have been as high as admitted, German losses must be equally large since
Germany has not won clear superiority of the air along the Eastern Front.
Losses Inflicted by the R. A. F.
The R. A. F. engages the Luftwaffe in western Europe, in the Mediterranean
(including Malta, Sicily, Libya, Egypt, etc.), and in northern Norway. Air
Ministry reports of losses in these three areas for the months of May, June and
July were as follows:
Total German Losses
If the conservative assumption is made that the Russian admissions of their
losses be taken as a measure of total German casualties on the Eastern
own Front, including may losses on the ground and those suffered in non-combat in accidents, theaters
Destroyed
Probably
Destroyed
Damaged
Estimated
Total De
stroyed
minimum estimate for total German losses of combat-type planes
a of war may be compared with estimated production available for combat as
follows:
Destroyed
by A.P.
May
223
88
222
370
June
222
74
215
360
352
110
318
559
July
266
91
252
430
Average
Including customary proportions of total losses in "probably destroyed" and "damaged," together with
and NonCombat
Operations
370
Production
Destroyed
on
Eastern
Total
Losses
Front
500
870
618
978
Available
for Combat
950-1,050
950-1,050
May
360
June
803
1,362
950-1,050
559
640
1,070
950-1,0
430
July
allowance for operational non-combat losses.
Average
25
24
Juncer
Hitter
SECRET
This calculation makes no allowance for the fact that while the scale of opera
tions has been rising, a growing number of damaged aircraft have been put out of
action for an average period of two months.
On the basis of the foregoing estimates, which understate rather than exaggerate
recent German losses, G. A. F. strength declined 20-120 planes on the average
each month during May, June, and July. The Dieppe raid with its further loss
of 170 planes, will bring the net depletion of German strength to 200-300 planes,
ifmonths.
the August level of wastage on other counts equals that for the three previous
Whatever the proper estimate of German first-line plane strength-and this
question still encounters differences of opinion-its diminution by 200-300 plants
a month even for a short period would appreciably weaken it.
APPENDIX II
AXIS COLONIES IN SOUTH BRAZIL
In South Brazil (and to a lesser extent in neighboring parts of Argentina and
Paraguay), Latin America has its most important concentrations of people of
Axis descent Their role in the war against the Axis, now joined by Brazil, has
yet to be clarified In general, the colonista present no very great menace to
Brazil's security, according to a report of the Latin American Section of the Office
of Strategic Services. The people of German descent might be troublesome,
nevertheless, and if assured of outside assistance, the menace might assume
significant proportions.
Neither the Japanese nor the Italians will probably play any significant role in
possible disturbances. The Japanese are comparatively few in number in South
Brazil and are settled largely in northern Parana, near the border of Sao
Paulo State. The Italian colonies are few and isolated and there has never been
any feeling of close sympathy between the German and Italian settlers (see
accompanying map).
The German colonies, while more numerous and more thickly populated, likewise
are poorly located for united action. Considering their distribution, the nature of
the terrain between them, and the presence of a majority of non-Germans in the
same regions, it is unlikely that a revolt would succeed in seizing and holding any
large extent of contiguous territory. Rebel German colonists might succeed in
maintaining themselves for a time in the widely separated districts where they are
most numerous, but control of these areas would threaten neither important sources
of raw materials nor main lines of communication essential for the war effort. And
unless these nuclei could be supplied from overseas, they could scarcely resist
for any length of time. The chief danger of such a revolt would be that it might
come at some critical moment and divert essential matériel or fighting units from
more important objectives.
26
CONFIDENTIAL
54"
52*
53"
48*
SOUTH BRAZIL
AND
NEIGHBORING REGIONS
so
so
100
MILES
Ville Rice
from
PARAGUAY
o
Premises
CATAR
N
IIII
S
LEGEND
0
ARGENTINA
specking HISHOMATIMARIA
people
PORTO
nation-spacking minerities
Access of Jesseese settlements
RAILROADS
Stenders 1.43m
Name pauge 1.0 m
Norrae 0.76m
Narrow 0.6 m
-
URU GUAY
ROADS
All weather reads
Good dry weather
Other dry weather reads
53
so
NO 957 AUGUST 19. 1942
57"
88"
50*
DRAWN IN THE GEOGRAPHY DIVISION G.S.B
SECRET
The Attitude of the German Colonists
Before the beginning of the present war in Europe, most of the people of German
descent in South Brazil were loyal to the Germany which existed before 1914,
but were by no means necessarily pro-Nazi. The pioneering communities consisted
of a peasant democracy of small farmers, among whom many of Hitler's ideas
would not have found favor. Since 1918, however, a new, aggressive group of
immigrants has come to Brazil preaching race superiority and world conquest.
Today many of the older people are bewilderer and unhappy (suicides have increased notably). Many others, while not in sympathy with the Nazi cause, do
not dare to oppose the clandestine organization which has been imposed on them.
The presence of these people offers the dangerous elements an excellent cover for
their operations, and no doubt a r'bstantial following has been recruited from
among the younger people.
Location of Aris Concentrations
The following table shows estimates of the present population of German,
Italian, and Japanese origin throughout this region:
Total Population
Paraná
PARAGUAY
Japanese
300,000
50,000
100,000
100
3,336,000
516,000
182,000
1,243,000
275,000
168,831
31,000
4,000
508,261
936,000
000
17,000
22,000
10
7,000
600
ARGENTINA:
Misiones
Corrientes
Italian
126,000
498
6,241
0
BRAZIL:
Rio Grande do Sul
Santa Catarina
German
These figures for whole political units give a somewhat distorted impression
of the strength of Axis elements. Actually the Germans and Italians occupy
only small parts of the total area, but they usually constitute in these parts a
very high proportion of the population. For example, in the zone stretching
along the northern side of the Jacuf Valley from north of Porto Alegre to Santa
Maria, the Germans comprise 60 to 70 percent of the population. In the rural
district around Blumenau the proportion is as high as 75 percent, although in the
city of Blumenau it is only 63 percent. In the zones indicated on the accompanying map as having a German minority, the proportion varies between 10
and 30 percent. The balance of the population in these various areas is predominantly of Portuguese descent with a sprinkling of Italians, Spaniards, Poles,
and other Europeans.
The Portuguese of Rio Grande do Sul are good fighters and are probably in
sufficient strength in the open country around Porto Alegre to prevent the Jacuf
Valley Germans from seizing that city and gaining a sea outlet in that district.
On the other hand, the Germans in the protected mountain valleye around
Blumenau in Santa Catarina might muster sufficient force to fight their way downstream to one or more of the ports and receive supplies from such Axis ships as
could run the United Nations blockade. But they would find it difficult, because
of terrain, to advance in other directions. (The Brazilians for the same reason
would be equally handicapped in suppressing such a revolt.)
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Terrain and Communications Unfasorable for Axis Activities
The Statistical Breakdown
The nature of the terrain throughout South Brazil and neighboring regions
places difficulties in the way of an organized revolt. Large areas remain even
today a wilderness. Most of Rio Grande do Sul south of the Uruguay Valley,
except the Jacuf Valley, is open grassland used for livestock, with only widely
tered ranch headquarters. The western parts of Parana and of Santa Catarina
are will forested, with no permanent settlers. In Argentina, Corrientes is also
chiefly ranch country, while sparsely settled Misiones is mostly uncleared forest.
The southern states of Brazil are poorly supplied with railroads and all-weather
highways. The railroads are narrow gauge, single track lines with steep grades
and many sharp curves. Furthermore, as the map indicates, the main north-south
rail line does not pass through the chief areas of settlement. An all-weather highway is being built from Sao Paulo to Porto Alegre. It has been completed through
From the summer of 1939 to the beginning of 1942, the number of female wage
and salary earners covered by Labor Office statistics increased from about 8.1
millions to about 9.4 millions. This impressive increase of 1.3 millions of women
workers has generally been accepted in the United States as proof of the success
of the recruiting program which the German government has carried out under
the pressure of war requirements. The following tables reveal, however, that
the effective net increase in the number of gainfully occupied German women was
actually about 600,000, of which 50,000 was due to the natural Increase in population. Importation and annexation were responsible for the rest.
Grande do Sul sections of this route are passable only in dry weather. The roads
A. Wage and Salary Earners
Table 1.-Germany (1939 area): Gainfully Occupied Women
May. 1939
Change
January, 1942
Curitiba, Joinville, and Blumenau to Florianopolis. But in the state of Rio
to the western parts of Rio Grande do Sul and of Santa Catarina are only rarely
passable for ordinary motor vehicles. The Parana Plateau north of the Uruguay
Valley is capped with a lava formation, which weathers into "terra roxa" (purple
soil) virtually impossable when wet. Since rainfall is fairly heavy there the
year round, ordinary motor traffic on unsurfaced roads is often interrupted for a
day to a week at a time.
To organize and carry on any considerable movement of military matériel over
either the roads or the railroads of South Brazil would be a difficult undertaking
and one which could scarcely pass unnoticed.
B. Independents
C. Family Helpers
D. Officials
3,260,000
9,160,000
1,000,000
6,500,000
150,000
1,000,000
14,910,000
Total
+900,000
-170,000
5,330,000
+50,000
200,000
780,000
5,690,00
Census figures. Figures for wage and salary earners include certain minor groups not included in Labor
Office statistics
Table II.-Germany: Women Wage and Salary Earners
8,260,000
Women Wage and Salary Earners, May 1939
Additions:
APPENDIX III
WOMEN AS A LABOR RESERVE IN GERMANY
Despite the optimistic forecasts of Nazi officials and German economic journals,
there has actually been little increase in the rate of gainful occupation of German
women since 1939, according to a study prepared by the Economics Division of
the Office of Strategic Services. To no great extent have German women served
as substitute labor for men inducted into the army. The apparent increase of
women gainfully employed, as revealed by statistics published in Germany since
the outbreak of war, is due mainly to the annexation of new territories and to the
influx of foreign women.
By the summer of 1939 the reserve of female labor in Germany appears to have
been virtually exhausted. According to the German census of May 1939, 50
percent of all German women from 14 to 65 were then gainfully occupiedcompared with 25 percent of American women (according to the census of 1940).
Furthermore, an exceptionally large part of the real national income of the
German people depended upon the labor of the housewives of the Reich, whom
the official census does not count as gainfully employed.
50,000
(1) By Natural Population Growth
(2) By Internal Recruitment
550,000
Total, German women
600,000
300,000
(3) By Importation
9,160,000
Total, 1939 area of Germany
400,000
(4) By Annexation
9,560,000
1,300,000
Women Wage and Salary Earners, January 1942
Increase, May 1939-January 1942
Yet even the numerical increase of 600,000 does not represent a corresponding
increase in the German labor force. Part of the increase in wage and salary
earners was at the expense of other categories of gainfully occupied women, as
shown in Table I. The net loss from these other categories amounted to 120,000.
Finally, the statistics on wage and salary earners include part-time workers, and
there is evidence to suggest that the number of these actually has increased at a
relatively higher rate than the number of full-time workers. Official statistics
reveal that the average working week for women dropped during the period 19381942 from 46.2 hours to 44.6 hours-and this in spite of the fact that large numbers
of full-time women workers were working longer hours in 1942 than in 1938.
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The Invisible Industry: Housekeeping
The gainful occupation rate for German women has therefore not increased
substantially since the outbreak of war. The reason for this paradox lies in the
fact that German housewives were already carrying an extremely heavy work
load in 1939 a load which has become considerably heavier under war conditions
Although housewives are not counted as gainfully occupied, & very large part of
the real income of the German people has depended upon the arduous labor and
superior domestic skills of these women.
The introduction of war restrictions on consumption has resulted in an automatic
shift of a large amount of work to the German housewives. Whatever "reserve"
of labor existed among them was largely tapped in the kitchen itself, by the device
of shifting a considerable part of the work previously done by the consumers'
industries onto the household economy. Lack of soap, lack of clothing, lack of
fuel, lack of food, have all in part been made good by extra labor on the part of
housewives. By 1939 Germany had already reached the point where the withdrawal of women from household duties resulted in increased demands on the
trades and services which were already short of workers. By the spring of 1942,
the "marginal" woman in the German economy was worth as much in housework
as in industry.
APPENDIX IV
BACKGROUND SKETCH OF ANGLO-FRENCH RELATIONS
IN THE NEAR EAST
(The following study has been written by an American authority on FrancoBritish relations in the Levant)
The present Anglo-French crisis in Syria, precipitated by British enorts to
carry through plans for elections in the fall, highlights the deep-eeated and chronic
nature of British and French rivalry in this strategic area.
The relations between the Spears Mission and the De Gaullist authorities,
never cordial, are not likely to improve so long as the British government tacitly
approves of the political activities of General Spears; and, - the main roots of
the conflict go back to the first World War, it is improbable that the British will
modify their present policy, which De Gaulle feels is directed at undermining the
French position in Syria
Conflicting Interests in the Region
French influence in the Near East, essentially commercial and cultural in
modern times, developed into full-fledged political aspirations shortly after the
outbreak of war in 1914.
Britain on the other hand, has been interested for many years in the eastern
Mediterranean chiefly as a strategic transit area. British policy, on the whole,
therefore, was dictated by the fear that these regions might be closed by an
unfriendly power intent on isolating her from India. She has sought to prepare
the way for the creation and maintenance of a British-controlled land route to
India, and thus was led to stand guard for many years over the territorial integrity of the Turkish Empire. She therefore favored for many years the retention
of the status quo, or failing that, she preferred to benefit by any shift in the Near
Eastern balance of power.
The First World War
The first World War, with its catastrophic effects on the Near and Middle East,
presented British policy with only one reasonably effective substitute for a buffer
area, until then the role played by Turkey. This was the establishment of a loose
confederation of Arab states out away from the old Ottoman Empire and placed
under British tutelage.
British plans, a composite of frequently conflicting and mutually exclusive
policies, fell short of their ultimate purpose largely because of French claims in the
same area, acknowledged formally by Britain to her war-time ally.
These claims, referred to by the British even in the midst of the first World
War as "persistent but sentimental", never ceased to plague and 'embitter
Anglo-French relations from that time onward. The British government, conscious of the enormous disparity between British and French military forces in
the Turkish campaign, and unimpressed by the French plea of preoccupation
with the Western Front, refused to permit French participation in the Turkish
armistice. Serious impairment of French authority throughout the eastern
Mediterranean dates from this event.
Post-War Settlements
Following unsatisfactory attempts to solve the Near Eastern question at the
Paris Peace Conference, Anglo-French relations continued to deteriorate as French
troops ousted the Arab Government set up by British arms in Syria, and French
diplomacy negotiated a separate peace treaty with Turkey. The Greeo-Turkish
war, largely intelligible as an Anglo-French struggle behind the scenes, ended in
1922 with the overwhelming defeat of the Greeks. An open break between
Britain and France was only narrowly averted at this time.
The comparative stabilization of great power politics in the Near East following
the Treaty of Lausanne in 1923 and the suppression by France of the Syrian revolt
in 1927 ushered in a brief interlude of reasonably cooperative Anglo-French relations in the eastern Mediterranean.
The French Attitude
Opinion in France throughout the interval between world wars has, however,
been largely inclined to blame continued French difficulties in Syria on British
policy, considered basically antagonistic to the presence of France in the eastern
Mediterranean. French lack of enthusiasm for enlisting Arab aid in destroying
Turkish power, with the consequent French antipathy to British-supported Arab
post-war aspirations, were the main manifestations of an inherently irreconcilable
conflict between Britain and France in their Near Eastern diplomatic aims.
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France regarded her Syrian acquisitions as a logical development of her Near
Eastern economico-cult real interests and of her military contribution to the
common victory. This attitude, reinforced in the French view by the secret
treaties, has been maintained, despite intermittent changes of heart of Leftist
administrations, by successive French governments in the ensuing years. The
early vigor of British opposition gradually subsided with the passage of time.
Throughout the past twenty years France's role of andatory power in Syria
has not been a happy one. French opinion has been inclined to look unfavorably
on the whole idea of a mandate for Syria, seeing in it a heavy burden, with few
compensating privileges. Various influential newspapers have attributed many
of France's Syrian troubles to Anglo-American insistence on imposing an unwork.
able system upon a people who, according to the French thesis, were incapable of
governing themselves under conditions of modern international relations. These
critics have considered the principle of the mandate a shackle and the basis of one
of the greatest difficulties France has encountered in the administration of the
Levant states.
Recent Treaty Agreements
The Blum Government's decision in 1936 to terminate Syria's mandatory regime
after a three-year period was widely regarded in France as the result of French
failure to carry out the terms of the mandate entrusted to her by the League of
Nationa-a mission which French critics considered fatally handicapped from the
start by British interference and duplicity.
France's reluctant cession of the Alexandretta Sanjak to Turkey in 1938, sequel
to the Franco-Syrian Treaty promising independence to Syria in 1939, has been
generally construed as French recognition of Turkey's unwillingness to tolerate
Syrian Arabic sovereignty over Turkish minorities in the Sanjak. French
nationalist circles, however, have interpreted the cession as due primarily to
British pressure, aimed to secure, at France's expense, the support of Turkey in
the threatening months ahead.
Conclusion
More than a quarter-century of Anglo-French diplomatic conflict in the Near
East, an intermittently acute phase of the hundred odd years of chronic colonial
rivalry between the two Powers, is again at fever-heat. The heritage of mutual
distrust and the memory of bitter struggles for the attainment of divergent aims
will undoubtedly prejudice the chances for a peaceful solution of the current
crisis. If strategic considerations override British reluctance to risk the adverse
propaganda repercussions of military action against her Fighting French allies,
French authority may disappear from a region never under the effective military
control of France since the Crusades.
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U.S. GOVERNMENT PRINTING OFFICE 1943