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STRICTLY CONFIDENTIAL TIME TAKEN TO PLACE ORDERS FOR LEND-LEASE INDUSTRIAL SUPPLIES FOR RUSSIA Part I. Summary as of October 5. Covering All Items Cleared by Lend-Lease Administration in August. AT PROCUREMENT AT LEND- At WPO LEASE OK'sp WAITING FOR 0K av ussk USSR 185 Requisitions for Classes Which Orders had been Placed, Summar by of Commodities 14 Requisitions for Which Orders had not Been Placed NUMBER OF D L 70 20 A COMMODITY 60 E $ A D 20 40 30 REQUISITIONS ELECTRIC 62 MAGNETIC STARTERS BALL DESIVAC POSTA NOTE ON SOME REQUISITIONS THE PERIOD or TIME LONG-LEASE THAT AGENCY EXCLUDES POWER STRICTLY CUNFIDENTIAL TIME TAKEN TO PLACE ORDERS FOR LEND-LEASE INDUSTRIAL SUPPLIES FOR RUSSIA Part I. Summary as of October 5. Covering All Items Cleared by Lend-Lease Administration in August. AT PROCUREMENT AT LEND- RAITING FOR 0K WY USSR OK'EP BY AT WPS LEASE USSR 14 Requisitions for Which Orders had not Been Placed 185 Requisitions for Which Orders had been Placed, Summarized by Classes of Commodities DAY$CLA DAY5ELAP$D 90 20 70 60 50 40 30 10 60 40 50 30 20 10 ELECTRIC 22 TESTING MACHINES 33 45 17 32 STEEL STEAM 19 19 HEARTH STEEL 32 15 POTASSIUM 14 24 7 MAGNETIC STARTERS 22 30 13 10 55 BALL 7 11 20 DESIVAC 25 16 DESIVAC 25 11 22 45 9 ROLLERS 16 11 18 10 16 10 12 PORCA 13 12 GALVANIZED 5 NOTE: SOME REQUISITIONS THE PERIOD of TIME AT LIND-LEASE 15 ACCOUNTED FOR IN PART BY NEGOTIATIONS BETWEEN THAT AGENCY EXCLUDES REQUISITIONS FOR FOUR POWER PLANTS WHICH ARE IN STAGE OF ENGINEERING DEVELOPMENT to 58 OCT 8 - 1942 My dear Jesses Thank you for your letter of October 5, 1942, inform ing me of the current status of the loan extended by the RFC to the British Government against British holdings of U.S. securities and other British investments in the United States. The British dollar position has improved steadily over the past year and the prospects are favorable for the future. Largely for this reason, I think is is likely that the British Government will not evail itself of the remainder of the loan. I - enclosing for your information a copy of the latest statement received from the British Government on its gold and U.S. dollar assets. IS shows that, as of August 31, 1942, the British Treasury held gold and U.S. dollars totalling $858 million, exclusive of 8110 million of gold borrowed from Belgium. These heldings have increased somewhat since that date. Sincerely, (Signed) H. Morgenthau, Jr. Secretary of the Treasury. The Honorable Jesse H. Jones, The liceratary of Commerce. Enclosure By Mess. Simmons 3:53 10/8/42. File direct to White's office TMKirl 10/7/42 Photo file in Diary. 59 BRITISH SUPPLY COUNCIL IN NORTH AMERICA September 9th, 1942. SECRET Dear Dr. Whites follows The gold and doller figures for August are as 7 AME. 15 INC. 28 Aug. 31 Total Gold (Incl. Helgian) 758 761 771 773 159 166 170 195 916 927 941 968 110 105 110 110 168 180 182 182 10 10 10 10 626 632 644 666 official Dollar Balance Total Gold and Dollars Less: Belgim Gold Seattered Gold Gold Reserve against inned- iste liabilities AVAILABLE GOLD AND DOLLARS. - - We had a special payment of 815 million for wool during the month. Yours sincerely, /a/ T. K. Bewley T. K. Benley. Dr. H.D. hite, Director of Monetary Research, U. S. Treasury, Washington, D. THE THE SECRETARY OF COMMERCE WASHINGTON a OCT 5 - 1942 Dear Henry: For your information, the British have taken $390,000,000 of the loan RFC authorized to them of $425,000,000. The balance is available to them upon request. This loan, as you know, was made to provide the British with dollar exchange without necessitating the forced sale of their American securities. The proceeds were to be used by Great Britain to pay for war supplies purchased in this country and contracted for prior to the approval of the Lend-Lease Act on March 11, 1941. Substantially all the collateral covered by the pledge agreement has been delivered. Collections to date aggregate approximately $42,700,000 which, except for a few small sales, came from income on the collateral. Of this, $23,500,000 has been applied on principal of the loan, the balance as interest or held as reserves. Due to increased taxes the income from the collateral undoubtedly will not be as good for some time to come, but it should be sufficient to service the loan according to contract. Sincerely yours, Sepretary of Commerce Honorable Henry Morgenthau, Secretary of the Treasury, Washington, D. C. VICTORY BUY High 61 C C P Y FEDERAL RESERVE BANK Of New York October 8, 1942 CONFIDENTIAL Dear Mr. Secretary: Attention: Mr. H. D. White I am enclosing our compilation for the week ended September 30, 1942, showing dollar disbursements out of the British Empire and French accounts at this bank and the meene by which these expenditures were financed. Faithfully yours, /8/ L. W. Knoke L. W. Knoke, Vice President. The Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Enclosure Copy:Inc:10/10/42 Strictly ANALYSIS OF BRITISH AND FRENCH ACCOUNTS (In Millions of Dollars) BANK OF ENGLAND (BRITISH GOVERNMENT Proceeds of Govis Debits PERIOD First year of war (8/29/39-8/28/40) tures'a Other Debits Total Credits Gold (Official)(b) Net Incr. (+) or other Decr.(-) Credits(s) in Balance Oct. 2- Oct. 29 Oct. 30 - Dec. 3 Dec. 4- Dec. 31 Gov't Expendi- tures (d) 866.3(e) 416.6(e) 449.7 1,095.30 900.2 195.1(c) +229.0 900.2 198.2 +220.1 8.8 30.1 0.5 0.2 0.3 0.4 -15.7 0.4 Qa4 0.4 0.2 Proceeds Other Total of Gold Other Debits Credits Sales Credits 1.828.2 1,356.1 52.0 420.1 35.0 2,792.3 1,425.6 1,356.7 2,793.1 2,109.5 108.0 575.6 10.8 878.3 421.4 456.9 1,098.4 2,203.0 1,792.2 410.8 2,189.8 193.7 274.0 722.1 - 13.2 38.9 4.8 34.1 8.8 140.9 105.9 77.3 111.6 35.0 31.7 176.2 150.9 20.1 0.8 2.0 154.1 3.3 0.5 44.5 134.6 0.3 0.3 0.3 69.6 18.8 51.5 109.0 156.1 88.6 150.1 0.3 0.3 de - - - 133.6 -21.5 16.1 - 16.1 0.6 - - 51.5 - 36.9 0.8 - 0.8 0.4 - 0.5 68.8 0.2 - 0.2 1.0 56.2 -33.0 -30.0 - 0.4 0.3 + 50.0 0.1 0.1 0.4 - 27.5 +61.7 +23.2 +18.3 02 - 0.2 0.4 - - = 0.3 - - - 0.3 0.1 0,3 4 43.9 +25.5 0.4 0.4 04 10.1 0.4 1.0 - 4.41.9 Net Incr. (+) or Dear. (-) Total Debits 187.6 1941 Aug. 28 - Oct. 1 CREDITS 605.6 Second year of war (8/29/10-8/27/41) Sales of Securities FRANCE OF DEBITS 1.7932 War period through December, 1940 BANK CREDITS - DEBITS Total Expendi- Week Ended September 30 1942 Confidential in Balance 1942 73.2 29.1 69.3 Jan. 29 Feb. 25 Feb. 26 - Apr. 87.2 121.4 98.1 63.8 86.4 57.2 171.4 104.0 64.2 81.4 23.4 35.0 33.9 22.6 165.7 89.9 72.6 12.3 113.6 Apr. 2- Apr. 29 3 Apr. 30 - June June 4 - July 1 65.1 NEEK ENDED, 70.6 20.2 PAY 19.3 110.1 28.0 90.6 - $77.4 - 0.5 - 70.1 165.7 0.5 113.1 - 115.2 Black 0.9 0.5 90.1 19.5 1.8 26.9 1255 8.2 4.6 22.6r 22.61 +10.1 11.1 13.4 30.0 11.1 30.00 B2 11.5 Average Wee 3Y Expenditure Since outbreak of War France (through June 19, 1940) 19.6 million England (through June 19. 1940) 27.6 million England (since June 19. 1940 34.7 dillion *For monthly breakdown see tabulations prior to April 23. 1941. **For monthly breakdown see tabulations prior to October 8, 1941. (See attached sheet for other footnotes) 0.5 26.4 - - - 0.1 10.1 - - - 7.4 - 02 10.1 10.16 - Week ended September 30. 1942 162.7 0.3 0.2 0.3 - + 0.3 0.3 0.3 0.3 0.4 0.2 - - - 0.4 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Transfers from British Purchasing Commission to Bank of Canada for French Account Cumulation from July 6, 1940 + 0.4 - - 0.3 0.3 0.4 - million million - + 102.3 - Jan. 1 - Jan. 28 - + + 9.7 0.1 0.1 0.1 10.0 (a) Includes payments For account of Brittah Purchasing Commission, British Air Ministry Britiah Supply Timber Control, and Ministry of Shipping. (b) Estimated figures based on transfers from the New York Agency of the Bank of Montreal, which apparently represent the proceeds of official British sales of American securities, including those effected through direct negotiation. In addition to the official selling, substantial liquidation of securities for private British account occurred, particularly during the early months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuracy. According to data supplied by the British Treasury and released by Secretary Morgenthau, total official and private British liquidation of our securities through December, 1940 amounted to $334 million. (c) Includes about $85 million received during October, 1939 from the accounts of British authorised banks with New York banks, presumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October, 1939 apparently represent the acquisition of proceeds of exports from the sterling area and other currently accruing dollar receipts. (d) Includes payments for account of French Air Commission and French Purchasing Commission, (e) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day. (f) Includes: $10.5 million transferred from Commonwealth Bank of Australia account here S 5.6 million deposited by the British Ministry of Supply S 1.0 million for credit of U. S. Navy. (g) $10.0 million transferred to French American Banking Corp. for account of French Government presumably representing reimbursement for previous expenses covering exports to French West Indies. STATE OF CANADIAN AND AUSTRALAN ACCOUNTS ( ubtions of Dollars) CREDIE Proceeds to Official Total Debits British Other Decr. (-) Total Credits in Balance Debits 412.7 20.9 38.7 32.4 +181.7 31.2 3.9 707.4 534.8 20.9 110.7 1.0 +230.2 57.9 14.5 460.4 462.0 246.2 3.4 123.9 88.5 1.6 72.2 23.1 52.2 21,2 31.0 29.1 37.4 52.7 19.7 11.9 32.5 19.3 13.2 47.7 22.2 17.3 39.5 33.0 27.0 34.1 35.7 12.4 45.5 37.4 99.3 20.5 14.2 54.2 35.9 44.9 47.2 72,9 14.7 16.6 306.4 504.7 477.2 16.6 460.6 460.4 AUE. 28 - Oct 1 23.1 Oct. 2 - Oct, 29 37.4 Dec. 4- Dec. 31 52.8 47.7 - 1941 Oct. 30-> Dec. 3 - 0.1 Gold Sales For Own For French - - - - - - - Proceeds to Official British A/C 323.0 @/29/40-8/27/41) () or A/C Total Credits A/C Other Debita - December 1940 Second year of war British A/C STRATE Transfers Net Incr. of First year of war (8/29/39-8/28/40)* War period through Transfers from official d1 of Other Total Gold Other Credits Net Inor. (+) or Decs. (-) in Balance Credits Sales 27.3 36.1 30.0 6.1 4.9 43.4 62.4 50.1 12.3 4.5 16.7 55.5 81,2 62.9 18.3 10.7 0.5 10.2 2.8 2.1 0.7 17.7 - 20.3 8.2 10.3 5.5 2,7 5.9 9.0 4,9 -25.5 3c4 3.9 1,8 2.1 8.0 11.6 2.8 2.1 6.9 6.0 6.5 4.5 4.5 10.8 23.3 1.6 8.4 3.1 71,1 21.7 52.8 7.8 32.2 6.3 10.9 13.2 58.2 25.7 9.5 6.5 2.9 3.7 1.6 3,6 1.5 5.3 1.3 8.0 2.5 0.5 2.0 28.2 61.9 3.3.1 19.1 15.0 7.7 3.1 28.0 20.5 13.8 10.0 7.8 A/C Debits 0,2 9.0 7.9 - 0.2 1.3 + Transfers PERIOD .⑉ CANAD (and Canadian Government) 2.6 2,6 + BANI - DEBIT Wook Ended Sept - 30,1942 1.1 - 1942 3 June 4 - July 1 July 29 July 30 - Sept. 2 Sept - Sept.30 47.2 - 402 65.1 45% 7.7 - - - - - - - 9.0 37.7 77.3 15.2 4938 53.6 13.2 40th 5.3 12.9 2.8 10.1 10.9 9.2 2.2 D.B. 0.2 15.7 - - 9 - +12.2 -7.3 - A 4.6 7.5 3.0 1.6 - - 19.5 17.1 18.1 - - 6.3 6.8 - 3.6 - 16.8 14.6 10.8 - - 37.4 - - - L.2 16.3 5.9 14.6 1.4 + Apr. A-rp-29 - Feb. Apr. 30 - June - 34.1 46.5 - - Jane 29 - Feb, 25 39.5 + Jan. Jan. 28 3.0 0.5 19.5 0.4 17.1 9.4 18.1 9.9 WEEK ENDED Sept. 12 6.3 13.2 23 9.3 3L 17.9 3.7 7.3 12.0 82 6.2 3.4 15.4G 20.0(a) +6.6 -2.8 0.05 +3.0 02 13.0 Weekly Average of Total Debits Since Outbreak of War million Through For monthly breakdown see tabulations prior to April 23. 1941. - For monthly breakdown see tabulations prior to October 8, 1941. transactions. Does (a Includes $13.1 million proceeds of U. S. Government checks deposi by War Supplies, Ltd. (c) Includes $12.0 the credit of the my. 3.8 0.5 0.5 10.5 2.6 0.5 0.7 0.5 2.5 14.5 2.6 0.5 0.5 14.5(c) - 11.2 65 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE Oct. 8, 1942 TO FROM Secretary Morgenthau Mr. Hoflich Subject: Shipment of Planes to British Forces 1. During the week ending September 29, 1942, 148 planes, including 42 combat planes, were sent to British forces from the United States. This is the smallest shipment of combat planes for seven months. 2. Ninety-four North American Harvard trainers were shipped to South Africa for use in the Middle East. This marks an all-time high for shipment of trainers to the British, as well as for number of trainers sent to the Middle East. -Table A - Shipments by Area 66 Total Shipped Total Shipped Week in 1942 Ending Sept. 29, .1942 0 the United Kingdom Light and medium bombers Heavy bombers Naval patrol bombers Pursuit Army Cooperation Trainers since to date Jan. 1, 1941 628 145 1,789 2 67 169 9 945 1,256 9 1 0 119 0 0 Total to the United Kingdom 249 150 24 1,904 21 3,637 o the Middle East Light and medium bombers Heavy bombers Naval patrol bombers Pursuit Army Cooperation Trainers 527 6 2 5 6 6 0 1,515 667 0 55 0 55 134 94 Total to the Middle East o the Canadian Forces Light and medium bombers Heavy bombers Naval patrol bombers Pursuit Trainers 857 0 244 76 0 2,714 1,389 100 10 276 1 0 23 0 30 72 12 644 1,885 Total to Canadian Forces 31 2,233 774 22 0 the British Pacific Forces Light and medium bombers Naval patrol bombers Pursuit Trainers 145 O o 27 0 200 363 0 12 117 Total to Pacific Forces 0 the British Indian Forces Light and medium bombers Pursuit Trainers 752 357 O 174 174 o 40 40 0 43 43 50 Total to Indian Forces 0 the British West Indian Forces Army Cooperation 245 0 6 6 0 Total to West Indian Forces 257 257 5 6 6 O otals Light and medium bombers Heavy bombers Naval patrol bombers Pursuit Army Cooperation Trainers Grand Total 30 1,550 3,309 1 146 255 2 96 233 1,882 3,246 o 180 211 106 833 2,345 9 148 4,687 9,599 -367 Table B - Shipments by Types Week Ending Sept. 29, 1942 Total Shipped in 1942 to date Total Shipped since Jan.1. 1941 light and Medium Bombers Boeing Boston III Brewster Bermuda Douglas Boston 1,11,III Lockheed Hudson A29A (AC-151) Ventura I Ventura Bomber Martin Marauder B-26A Baltimore Maryland 15 11 o 4 9 0 Northrop Vengeance Vought-Sikorsky Chesapeake Vultee Vengeance 11 509 1,521 1 1 0 12 12 0 313 313 57 3 57 353 285 2 ó North American B-25 39 17 551 4 150 6 0 111 111 5 142 142 O o 50 0 40 40 leavy Bombers 0 Consolidated Liberator laval Patrol Bombers Consolidated Catalina PBY-5B ursuit Bell Airacobra Brewster Buffalo Curtiss Kittyhawk Tomahawk GrummanMartlett Martlett IV Lockheed Lightning North American Mustang rmy Cooperation Fairchild 24 R-9 Pitcairn Autogiro Vought-Sikorsky 082U Vultee Stinson 049 1 2 0 42 62 104 193 96 233 315 469 168 0 O 0 868 1,250 0 0 544 0 57 98 9 85 85 0 3 3 629 549 0 0 117 O 0 139 5 Boeing B-17 0 53 53 0 10 14 0 97 97 o 86 700 118 235 118 1,132 297 298 (rainers Cesana Crane I-A (AT-17) T-50 Fairchild PT-26 Cornell North American Harvard II Stearman PT-27 Total 12 94 0 148 4,687 9,599 83 81 97 88 93 171 109 141 117 61 242 167 101 148 153 6 9,599 Total 1 29 6 8 4 30 18 19 46 26 11 36 28 35 106 2,345 3 1 ave6 0 0 8 0 6 0 0 38 0 20 17 211 Army Cooperation Trainers 17 9 0 0 55 27 27 24 70 20 26 81 36 11 139 3,246 Pursuit 3 1 0 3 3 2 4 6 7 8 4 2 2 13 11 233 Naval patrol bombers 2 Plane Shipments to the British by Weeks 8 4 17 O 0 9 3 o 0 0 0 2 1 11 255 Heavy - Bombers 36 35 77 42 66 39 32 59 60 25 33 31 57 58 30 Table C 3,309 medium bombers Light and Week Ended totals up to that date. Total includes planes shipped in 1942 prior to March 17 which are not included in the weekly Jan. 1, 1941 to date. 1 Total shipments since September 8, 1942 September 1, 1942 Weekly average of shipments in 1941 shipments in first Weekly average of 6 months of 1942 July 7, 1942 July 14, 1942 July 21, 1942 July 28, 1942 August 4, 1942 August 11, 1942 August 18, 1942 August 25, 1942 September 15, 1942 September 22, 1942 September 29, 1942 1 8 69 phot Z white Mary CANADIAN LEGATION WASHINGTON October 8, 1942. My dear Mr. Secretary: I have received your letter of October 7, and am very pleased to learn that the Treasury Depart- ment is willing to assist Canada in supplying certain information regarding Canadian bank balances in the United States. Following your suggestion, I shall discuss the problems involved with Mr. H.D. White before proceeding further. Believe me, my dear Mr. Morgenthau, I am Yours sincerely, AFWWH A.F.W. Plumptre Financial Attaché The Honourable H.M. Morgenthau, Secretary of the Treasury, Washington, D.C. 4 70 OCT 7 - 1942 Dear Mr. Plumptres This is in reply to your letter of September 16, 1942, requesting data from TPH-300 regarding Canadian bank balances in the United States. This Department will be glad to be of any assistance it can in this regard. I suggest that you discuss the problems involved with Mr. H. D. White before proceeding further. Sincerely yours, (Signed) H. Morgenthan, Jr. Secretary of the Treasury. Mr. A. F. R. Plumptre, Canadian Legation, Washington, D. G. File direct to Dr. White Photo file in Diary HDW:dal 10-5-42 CANADIAN LEGATION WASHINGTON September 16, 1942. Dear Mr. White: I understand that amongst the information collected by the Foreign Funds Control of the United States Treasury is information on the bank balances owned in the United States by residents of other countries. I have been told that this information was obtained for all amounts in excess of $1,000 on Form TFR 300, but of course, I have no knowledge of the way in which the data collected was tabulated. I would be very grateful if you could supply me with information on the bank balances in the United States of Canadian nationals resident in Canada. This information is for the confidential use of the Foreign Exchange Control Board. Yours sincerely A.F.W. Plumptre Harry White, Esq., Treasury Department, Washington, D.C. 72 OCT 8 1949 My dear Mr. Welless This is in reply to your letter of June 15, in which you informed us that the Government of Costs Rica was conducting negotiations with the Export-Import Bank for credits, and that the President of Costa Rica requested the services of one or two experts to advise the Costs Rican Treasury on matters of taxation and general fiscal policy. In this connection I note the cable of August 12 from our Mission in Costs Rica reporting that the negotiations for the credit had been approved and suggesting that exports be sent without delay to advise the Costs Rican Government in financial matters. The Treasury Department is now in a position to make available to the Costs Hiean Government a person suitable for this work. He is Mr. Norman D. Ness, of the Division of Monetary Research. There is appended a brief account of his training and experience. It is expected that if Mr. less is satisfactory to your Department, you will proceed with the necessary arrange ments for his assignment. Sincerely yours, (SIGNED) D. W. BELL Acting Secretary of the Treasury. The Honorable Summer Welles, Under Secretary of State. Enclosure HG:rl 10/2/42 Return to For -85 73 Norman Theadore Name Born December 5, 1903, at Nereress, Minnesota. Marital Status Married, no children. Educations Public schools at Norecose, Minnesota, and Steele, North Dakotas undergraduate work at Carleton College, Northfield, Minnesota (major, Economics minor, Spanish) from 1920 to 1925, B.A. degree; graduate work in Economics at the University of California (N.A., 1927) and Harvard University (Ph.D., 1938). Experiences Instructor of Economics (international trade and finance) at University of Nevada, 1927-1926, Instructor (1928-1931), Assistant Professor (1933-1938) and Associate Professor (1936 until now) of Economics (international trade and finance) at Persona College, Claremont, California. Instructor during summer of 1940 of a Harvard Summer School class entitled "South American Foreign Trade and Exchange" which visited Hamil, Uraguay and Argentina. Member of Inter-American Staff of National Planning Association, Washington, D. C., February to September, 1942. rising: Destoral dissertation on "The Movement of Capital into Bolivia." HG:rl 10/2/42 OFFICIAL COMMUNICATION TO THE SECRETARY OF STATE DEPARTMENT OF STATE WASHINGTON In reply refer to EO 818.51/995 June 15. 1942 My dear Mr. Secretary: There is now pending before the Export-Import Bank & request of the Government of Costs Fica for A credit of one million dollars to be utilized primarily in funding short-term obligations of that Government arising largely out of public works expenditures which are due to Costa Rican banks and supply concerns. During negotiations for this credit, the Department has received R request from the President of Costa Rica for the services of one or two experts of the United States to advise the Costa Rican Treasury in regard to matters of taxation and general fiscal policy. The budgetary situation of Costa Rica has become strained as a result of dislocations arising out of the war. and the Department feels that every appropriate assistance should be made available to that Government. I would therefore appreciate an indication whether your Department could make available to the Costa Rican Treasury the services of one or two experts on taxation and general fiscal policy for H period of about six months in order to make a complete study of the financial situation of that Government and to prepare a report and recommendations for submission to the Government of Costa Rica. Sincerely yours, For the Secretary of State: POR DEFENSE BUY The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. Under Secretary PARAPHRASE OF TELEGRAM RECEIVED 75 FROM: American Embassy, Chungking, China, via Karachi DATE: October 8, 1942, 9 a.m. NO.: 1147 This is a message from Mr. Adler for the Secretary of the Treasury, and is numbered TF-63. I spoke informally with Dr. Kung concerning the current economic situation, Sino-American financial relations and the work of the Stabilization Board. 1. Concerning the work of the Board Dr. Kung said that he hoped that the most lenient policy possible in granting exchange for commercial importe would be adopted. I said that we do this and pointed out that only very small amounts were involved since the only routes were from India via Tibet and were by air. He suggested that the Board might possibly grant exchange for imports of a COD- mercial nature from Russia, and pointed out that Rnasia is willing to accept payment in United States dollars for its exports to China. I said that I was sure that the Board would be willing to look into this possibility since it was very anxious to help imports into China. It would, therefore, be appreciated if you would let me know before the Board considers the question formally if the granting by the Board of United States dollar exchange for importe from Russia which are of a commercial nature has your approval. 3. As far as the present economic situation is concerned, Dr. Kung agreed that the main problem in China today is not political or military but economic. (a) It was his feeling that a drastic curtailment of the budget was necessary. (Yesterday I was informed by the head of the Political Department of the Executive Yuan, Dr. T. F. Tsiang, that in the draft 1943 budget the Executive Yuan was working on at present, expenditures cuts to the extent of six per cent to eight per cent could and should be included.) (b) He inclined to the opinion that in China it would not be practical to have a universal price ceiling scheme. (c) For the purpose of mopping up fapi held by the public he was considering establishing a free gold market and reducing maturity periods of the various Government of China security issues backed by United States dollars. 3. With reference to Sino-American financial relations, Dr. Kung indicated that he would take no action in line with paragraph 2(c) above until in accordance with his promise to consult you on the uses of the American loan to China, he had officially consulted you, which he intends to do before long. Dr. Kung told me that the amount of gold he is thinking of using for sale in China is about U.S. $20,000,000 since the Treasury had just been repaid in settlement of the stabilization arrangement of 1937. In the event that he -- 76 obtains your consent he plans to purchase, presumably with funds under the American loan of 1942, gold from the Treasury. Then he mentioned the question referred to in your 834, dated September 14, Part II (B) and said that he would soon consult you officially before taking any action on the matter. (b) The last point Dr. Kung raised was concerning the hardships experienced by foreigners resulting from price rises. He seemed greatly concerned about the lot of the United States Army and was anxious to alleviate it. A special exchange rate for the United States currency seemed to be the only special rate he was considering, of which at present the American Armed Forces in China are in receipt. GAUSS 77 NOT TO BE RE-TRANSMITTED COPY NO. 13 BRITISH MOST SECRET U.S. SECRET OPT L No. 348 Information received up to 7 A.M., 8th October, 1942. 1. NAVAL Home Waters. A northbound coastal convoy escorted by destroyers was attacked by 12 E-boats off CROMER early 7th. One motor launch, one roscue tug and three ships were sunk. BLACK SEA. A Russian submarine sank F 2,100 ton ship in convoy off Rumanian Const on 25th September. Attacks on shipping. From 3rd to 6th October 10 ships were reported to have been torpedoed, one U.S. tanker in convoy in West Atlantic, 2 British, 1 Dutch, 1 Panamanian and 3 U.S. ships in Trinidad - Guiana area; 1 Russian ship in Indian Ocean and 1 U.S. Tanker in North Pacific. In addition to those, 2 U.S. over due ships reported sunk by submarine in Trinidad and Indian Ocean areas in September also 2 other U.S. ships are reported overdue. 2. MILITARY EGYPT. Our patrols active along whole front night 5th/6th and 1 raiding party of U.K. troops killed the garrison of 30 of an enomy strong point in RUNEISAT Ridge area. 3. AIR OPERATIONS WESTERN FRONT. 6th/7th. Over 460 tons of bombs wore dropped at OSNABRUCK where good results included concentrations of large fires in the centre of the town and at main railway station. 27 F.C.A.F. (1 missing) and 14 New-Zoaland (1 missing) aircraft were engaged. 7th. 4 enemy aircraft crossed the South Coast causing some damage at RYE. EGYPT. 7th. Six attacks on enemy M.T. in battle area by 65 fighter combers caused considerable damage. At BOMBA one seaplane destroyed and 9 others di maged on water. Shipping at BENGHAZI attacked by U.S. Liberators. On enery airleft destroyed, 2 probably destroyed and 1 damaged. Betwoon 2nd and 6th 8 of our ircraft were lost. Enomy aircraft carried out a for fightor sorties in the bottle area and 1 fighter bomber attacked in the contral sector. EASTERN FRONT. 6th. Russian aircraft carried out a number of success ful raids on enemy defences in the VORONEZE Sector. 7th. Enerry bombod norodromen and supply areas on both sides of the VOLGA northwest of STALINGRAD. Divo bomboro poorted infantry attacks southeast of LAKE ILMEN. 78 NOT TO BE RE-TRANSMITTED COPY NO. 13 BRITISH MOST SECRET U.S. SECRET OPTEL No. 354 Following is supplementary resume of operational events covering the period 1st to 8th October, 1942. 1. NAVAL MEDITERRANEAN. Long range reconnaissance undertaken on the 2nd Octo- ber covered ports in the northern ADRIATIC for the first time. New Italian Battleship IMPERO seen at VENICE still incomplete and work on her apparently at a standstill. Battleship CAVOUR sunk at TARANTO autumn 1940 seen at TRIESTE, her main armament complete except for one turret and secondary armament incomplete. Building both of merchant ships and submarines was less than anticipated. Shipping from ITALY to LIBYA further decreased owing to our air and submarine attacks. Very few ships known to have reached Libyan ports during the period. BLACK SEA. On 19th/20th and 20th/21st September, Russian landing parties from light craft landed 20 miles west of NOVOROSSISK. Many enemy troops were surrounded and casualties inflicted. A patrol boat and a quantity of stores were destroyed. SUBMARINE WARFARE. Air protection for a recent trans-Atlantic convoy mainly provided by United States flying boats from ICELAND proved very efficacious. About six U-boats shadowed the convoy six attacks and five sightings by aircraft are reported. Over 100 U-boats are now operating in the Atlantic. They have been active west and south of TRINIDAD, in the FREETOWN area and off CAPETOWN. In the North Atlantic they have been concentrated in the gap between the spheres of air activity from CANADA and NORTHERN IRELAND. Excluding air attacks mentioned above, four promising attacks by British aircraft have been carried out, one by surface craft and two by United States aircraft. Provisional figures week ending 4th+October, 11 ships sunk by U-boats all in North Atlantic. Four convoys totalling 138 ships arrived U.K. without loss. Two outwardbound convoys totalling 85 ships arrived without loss. TRADE. Imports into U.K. in convoy week ending 3rd October - 570,260 tons of which 207,297 tons oil. ENEMY SHIPPING. Since middle of August 13 enemy ships reported mined in Danish waters of which seven known sunk. Reported from Massawa German LIEBENFELS (6,300 tons) taken in prime 30th September. Casualties, United States merchant service to 31st July, 1942 - killed or missing 2,301; British merchant service to 30th August - 17,046; British Naval casualties to 2nd September - killed or missing 30,992, prisoners 3,834. 2. MILITARY GERMAN DIVISIONS. Addendum to OPTEL No. 346. All divisions in GERMANY, POLAND and DENMARK, four or five of those in FRANCE and five in RUSSIA are morely either administrative headquarters or training divisions. Only change from last week is increase from 45 to 47 divisions in GERMANY, where two additional raining divisions have been identified. AIR OPERATIONS WESTERN FRONT. Bombing. DAY. One major operation against Potez Story near ALBERT by U.S. Fortresses. Mosquitos singly or in small formations atticked industrial objectives in the Low Countries and GERMANY. NIGHT. Operations four nights. Heavy attacks on KREFELD, AACHEN and OSNABRUCK. Raid on OSNABRUCK act successful of the three.Other two hampered by haze, darkness and bad weather. Total 1,698 tons H.E. including 238 4,000 1b. bombs and 889 tons incendiaries during period. Coastal Command sent 205 anti-U-boat sorties. A Sunderland attacked an enemy blockade runner off CAPE FINISTERRE which later put into FERSOL. 79 MEDITERRANEAN. In spite of bad weather, our fighters maintained patrols over the battle area and on one occasion successfully intercepted a heavily escorted dive bomber formation. Fighter bombers were active against enemy transport, vehicles and landing grounds. One heavy night bombing raid on TOBRUK. Enemy activity increased although still slight. In attacks on a convoy and other escorted ships, one tanker was set on fire and a 7,000 ton ship with escort turned into CORFU Harbour after attack. RUSSIA. Russian bombers continuously attacked troops and communications in the STALINGRAD and VORONEZH areas. Aircraft of the Black Sea Floot heavily bombed formations in the CAUCASUS and saw several German small craft and supply shipo in the BLACK SEA. Estimated number of Axis aircraft on Russian front still 2,400. Main effort maintained in the STALINGRAD and CAUCASUS sectors. Increase in enemyraids activity on LENINGRAD Front where about 500 German aircraft thought operating. Several on ARCHANGEL. 4. EXTRACTS FROM PHOTOGRAPHIC AND INTELLIGENCE REPORTS ON RESULTS OF AIR ATTACKS ON ENEMY TERRITORY IN EUROPE. MUNICH. Good small scale photographs first show damage mainly in centre and south of town. One engineering works completely destroyed by 4,000 1b. bomb. Two gas holders exploded, considerable damage residential and commercial property, and one area 5 acres devastated. Reports state Focke Wulf works again damaged. DUISBURG. Last attack seriously dislocated water communications. About 90 barges sunk rendering harbour temporarily unserviceable. 2,000 operatives of DEMAG, heavy engineering, stopped owing to severe damage to works. KASSEL. Reported production loss of 30 locomotives at Hanschel Factor ABBEVILLE aerodrome. Attack by U.S. Bombers complete surprise. At least 15 aircraft caught out of pens destroyed. 5. OPERATIONAL AIRCRAFT BATTLE CASUALTIES METROPOLITAN AREA British and Allied Enemy Prob. In the Air Bombers Dest. Dest. Damaged Fighters 43 Fighters 16 30 15 6 Total 49 MIDDLE EAST (Incl. MALTA) British and Allied Enemy Prob. In the Air Dest. Dest. Damaged Bombers (including Bombers Fighters 7 Others 7 7 Total 2 Total 10 3 14 2 2 U.S.) Fighters 17 5 10 7 23 our crows and 2 pilots are safe. FAR EAST British and Allied Enemy Prob. In the air 2 2 4 Total 86 4 - 4 1 15 70 - 1 Fighters Misc. - Total Bombers 1 Fighters - Bombers Dest. Dest. Damaged Note: No account is taken of enomy aircraft destroyed on the ground in any theatre or of British naval aircraft casualties. 6. HOME SECURITY Estimated civilian casualties week ending 6 A.M. 7th. Killed 15, seriously wounded 10. At TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE Oct.8, 1942 Secretary Morgenthau TO Mr. Hoflich FROM Subject: Summary of Military Reports Disposition of German Army The following estimate of the distribution of the German Army comes from British sources: North Africa Germany 7 2 . Balkans and Aegean 36 . Norway Denmark 8 . France and Low Countries 9 . Finland 178 divisions . Russia Poland 7 4 45 296 divisions (U.K. Operations Report, September 24 - October 1, 1942) Effectiveness of R.A.F. raids on Nazi industry The British report that coal production in the Ruhr, Sear and Aachen areas has fallen from 440,000 tons to 360,000 tons per day. The decline is attributed largely to damage by R.A.F. attacks. Cyril Falls, writing in the Illustrated London News, plants eastwards. I am told on good authority that something asserts that the Germans "have moved more and more of their like 60 percent are now in East Prussia, Brandenburg, Bavaria, Saxony, Bohemia, Austria and Poland - 80 that the hope of crippling production by bombing alone becomes more than ever illusory. (U.K. Operations Report, September 24 - October 1, 1942; Illustrated London News, September 12, 1942) 80 NUMBER 52 SECRET OFFICE OF STRATEGIC SERVICES THE WAR THIS WEEK October 1-8,1942 Printed for the Board of Analysts Copy No. 6 Tenney SECRET OCTOBER 1-8, 1942 Office of Strategic Services THE WAR THIS WEEK Handicapped by heavy casualties and a supply problem of exceptional difficulty, the Germans continue to inch their way painfully into Stalingrad, while the Russians are reported to have thrown 10 fresh divisions into the battle. Meanwhile, the Nazis are making preparations for a possible attack on Leningrad. In Russia's hour of difficulty, Stalin's blunt statement on the second front has emphasized once again Soviet disappointment with Allied cooperation. With a uniquely concentrated blast of oratory, German leaders have greeted the approach of winter with confident boasts that the "Fortress of Europe" is impregnable. But the remarks of Hitler and his associates are singularly free of the predictions of victory which were characteristic of their efforts in 1941. German difficulties in the occupied countries are steadily in evidence-in Norway, in Denmark, and in France, where Laval has in essence yielded on the labor conscription issue. In Egypt reports picture the Axis forces as holding resolutely to the defensive. Compromise moves are the order of the day in India, with Rajagopalachariar urging that the British give the adminis- tration into the hands of a broadly representative Indian government for the duration, while leaving military control to Britain and the solution of controversial questions for the peace. With the announcement that notable American forces have taken up positions in the Andreanof Islands, further Japanese moves in the Aleutians have been rendered hazard- 1 SECRET SECRET ous, and their sole remaining outpost at Kiska may soon be imperilled. In the southwest Pacific the Australians continue to advance behind the retreating Japanese along the Port Moresby-Buna trail, but reports from the Tulagi area Apparently awaiting the fall of Stalingrad to increase the tempo of their drives to the south, the German columns in indicate the landing of additional Japanese and suggest that a fresh crisis is approaching in the Solomons. the North Caucasus have made insubstantial progress. Along the shore of the Black Sea, Nazi units are meeting stubborn resistance before the ports of Gelendzhik and Tuapse. To the west of Groznyi, the southern arm of the Stalingrad's Resistance Continues German pincers has taken Elkhotovo, seven miles from DargKokh at the northern end of the Ossetian Military Highway, With the capture of the suburb of Orlovka, northwest of Stalingrad, the Germans have improved their position in the center of the city and have thus far stemmed the Russian counterattacks from the south of Stalingrad and from the north in the Kletskaya-Kachalino area. American military observers believe that the Nazis are still making slow progress in encireling the Soviet defenders and in cutting off their escape. The attackers, however, may be suffering losses of about 15,000 killed a week, with many more wounded. One can perhaps ascribe Stalingrad's prolonged resistance to three main factors. First, the Germans have to contend with a monumental supply problem. In place of the large net of railroads which they could use when they were still operating in the Donets basin, they have only the single track Don bend line; the railroad to the south from Tikhoretsk to Stalingrad is doubtless unusable, since the Germans have not yet had time to repair or retrack it along its whole length. Second, the Russians have brought up 10 fresh divisions previously in training in western Siberia; it is unclear just where the Soviets have thrown in these reinforcements, but they may well have added weight to the counterattack in the Kletskaya-Kachalino area. Finally, there is the intangible factor of Russian morale. The Soviet leaders, convinced that every day of Stalingrad's resistance is another day lost to the Germans for preparing a further offensive this autumn, have apparently imbued their troops with their own determination to hold the city at all costs. while Nazi units in the central part of this sector have captured the oil town of Malgobek, south of Mozdok. Preparations Before Leningrad On the central and northern fronts, the current German attacks seemingly represent an effort to restore defensive positions impaired by the recent Russian advances. For example, south of Lake Ilmen, the Nazis appear to be making a considerable effort to shorten their line in the swampy area between Rzhev and Staraya Russa, where a deep Soviet salient has long existed. Similarly, around Leningrad, the Germans may be trying to clear the south shore of Lake Ladoga prior to an attack on the city. Reports of preparations for such an assault have become increasingly frequent. According to a Finnish officer, the Nazis will probably force the Finns to participate in an assault on the city-that is, unless the Russian defenders attack first. Unconfirmed re- ports suggest that the latter have now added four or five divisions to their line between Lake Ladoga and the Gulf of Finland. An Esthonian informant adds further details. The Germans, he asserts, are shipping substantial quantities of food and matériel to Esthonian ports in preparation for an attack on Leningrad. This attack, he suggests, may first be directed against the Soviet salient near Kronstadt. With the elimination of this wedge the Germans could direct their heavy artillery upon the fortifications and warships of the 3 2 SECRET SECRET naval base, which will be icebound in a few weeks. Our informant concludes that an attack on Leningrad from the south can not come for almost another month, when the ice of the swamps will be frozen hard enough to bear artillery and armored vehicles. Finnish Apprehension Meantime, Russian submarine activities in the Gulf of reported statement concludes, a rupture in Finnish-American relations would be quite probable. Stalin and the Second Front Stalin's blunt statement in his letter to the Associated Press representative in Moscow that Allied aid to Russia "has so far been little effective" in comparison with Russia's contribution and that the possibility of a second front occu- Bothnia are proving a considerable source of worry to Finnish pies "a place of first-rate importance" in Soviet estimates naval authorities, according to reports from Helsinki. Al- of the current situation, has underlined once again Russia's though the submarines have thus far sunk no ships in convoy, they have destroyed three freighters outward bound from the disappointment with her Allies. According to one report, the Soviet Government for several days last month forbade port of Bjorneborg during the past month. Evidently, the printing of news stories about a second front-possibly Finnish ship owners prefer to make a quick dash to Swedish and fuel in going to a convoy rendezvous. The Russian fearing that the British and American delay in opening such a front might depress the morale of the Russian army and civilian population. Now, however, the press is freely pub- submarines apparently make a similar effort to save fuel by lishing stories about the public demand in the western charging their batteries at night and lying on the bottom democracies for a second front, along with speculation as to when such a front may be expected. Relations with Britain and the United States, nevertheless, have remained publicly cordial, and Stalin has intimated that most of the diplomats now in Kuibyshev will soon be able to move to Moscow. territorial waters across the Gulf rather than to waste time during the day. With a renewal of active hostilities between Finland and Russia possibly in the offing, the Finnish Foreign Minister has nevertheless asserted that tension between Finland and the United States has somewhat abated. Reports from Helsinki suggest, however, that the Finnish public is increasingly fearful of a declaration of war by the United States-particularly in view of the fact that many Finns are beginning to doubt the possibility of a complete German victory over the Russians. Nor has the Finnish press as yet published the statement of "an important Washington official" (as reported via Stockholm) that relations between Finland and the United States do not necessarily need to be broken off, providing the Finns do not renew the offensive against the Soviet Union. But if Finland should collaborate with Germany in a further attack on Russia, then, the Composite Report to the German Nation A spate of public statements by five German leaders within eight days-a performance unparalleled since the war beganhas revealed a new German propaganda line of "defensive confidence", according to data gathered by the Psychology Division of the Office of Strategic Services. On September 27 Ribbentrop spoke at the second anniversary of the Tripartite Pact; on the 30th, Hitler and Goebbels launched the Winter Relief Program, and while in Berlin for this occasion, Rommel gave one of his rare interviews to the press; four days 4 5 SECRET SECRET later Goering spoke to the nation for two hours from the Sportpalast-his first appearance of this sort in three years. While some parts of these speeches echo the "pep-talks" of last autumn-a general morale-boosting effort to offset the depressing prospect of another winter of war-the tone is more confident, but at the same time less aggressive, than & year ago. The German leaders are apparently concerned about the capacity of their people to "take" an indefinite continuation of hostilities and are therefore striving to build up a new and more reassuring picture of Germany's role in the war. For the first time a limited objective is set for the Wehr. macht by the Party's "big four": Russia is to be neutralized on the east; the Continent is to be defended on the north, west, and south: Rommel is to handle the situation in the Middle East. These limited objectives accomplished, Germany can rest on her oars. The blackest moment of the war, the winter of 1941-42, has been survived. Already the conquered territories are beginning to pay dividends. By next year the Ukraine will be feeding German mouths and factories. Germany will then be able to attain a new measure Scandinavia Faces a Second Nazi Winter The thud of British bombs dropping near Gestapo head- quarters in Oslo on September 25 announced with some emphasis the opening of a new season of anxieties for the Nazis and their puppets in Scandinavia. Quisling's plan to set up a corporative parliament called the Riksting seems to have been vetoed decisively by his German overlords, who wish no more trouble on their hands than they already have; and mass resignations from Quisling-controlled labor unions are rapidly stripping Quisling of even the semblance of working-class support. The increasing nervousness of the German occupation forces is sharply reflected, moreover, in the order of October 6, proclaiming a state of emergency from Trondheim to the Swedish border, with an all-night curfew and complete coastal alert. In Denmark, where the rate of sabotage has shown an upward spurt since midsummer, the Germans confront the embarrassing necessity of dismantling the "show-window of North Europe," their prized model of an occupied but "non- coordinated" protectorate. The Danish government has been forced to a choice of either resignation, with its consequences of Gestapo invasion, or virtual collaboration, which of strength, which will make her invincible. The war may go on for a long time, but Germany can never be beaten, implies doing the Gestapo's work for it. Either course can and she can outlast her enemies. be counted upon to increase Danish attempts at sabotage Whether realistic estimate or desperate rationalization, and resistance. Germany's new emphasis on the "Fortress of Europe' Sweden's recent gesture of defiance at the polls forecasts propaganda line is not likely to strengthen morale on the home front over any considerable period of time as long as shortages, casualties, air-raids, and the threat of a second front continue. For the moment, however, the Nazi leaders additional trouble for Berlin on the northern ideological front. Following up August's press-instigated purge of have put on an impressive show, and have probably boosted the popularity of their regime. Nazis in the army, the Swedes used their September provincial and municipal elections to oust from office five mem- bers of Nils Flyg's Nazi party and to give the Communists 16 additional seats. 7 6 SECRET SECRET Vichy Drafts French Labor believed to be more acceptable to Pétain and the country than Doriot. Prominent posts were also to go to Benoist- After several weeks of hedging, the Laval government has begun the virtual conscription of French labor for Germany. The heads of designated plants have had to submit lists of their employees, and the latter are being graded for priority of enrollment. Those with least family responsibility are to be taken first. The worker receives a letter which states that, "In order to ensure the relief of prisoners, you are designated Méchin himself and to Paul Marion, whom Laval may also soon try to oust from the Government. In Morocco the conspirators may have planned a coup in the absence of Noguès and the head of the Secret Police. They were also working up a violent demonstration against Allied representatives. Some PPF leaders there have since to work in Germany." If an individual does not sign his been jailed, and French authorities are reported to have employment certificate within 24 hours, his name "will be prepared drastic plans for maintaining control. included in a list which will be immediately transmitted to the Secretary of State for Labor, who will make a decision." A reliable informant believes that no actual force will be used before mid-October, but economic threats and intimidation may be employed in varying degrees. The Government is justifying itself by the assertion that only by such action could direct German conscription of French workers be avoided. Laval is stressing the duty of designated workers to serve their country in this way. Nevertheless, Hubert Lagardelle, Secretary of State for Labor, and 10 other officials of the Labor Ministry have resigned in protest against the forced-labor policies, according to the press. In response to German pressure it is reported that Vichy will also shortly decree that no male between 18 and 50 who is a citizen of a country fighting the Axis can leave France or its dependencies. The Benoist-Méchin Affair Further reports indicate that Benoist-Méchin and the Parti Populaire Français had developed a plan to displace the present Vichy regime prior to the time that Laval took action. Benoist-Méchin had apparently prepared a slate of ministers, Apprehension Regarding Dakar Apprehension-real or simulated-about an Allied attack on Dakar appears to have mounted in both German and French circles. While Vichy has indicated increasing concern, authorities at Dakar are rigorously enforcing black-out regulations and have registered European families in prepara- tion for possible evacuation. Public tension at Dakar has been acute since September, and the German Armistice Commission is showing apprehension. An increase in French submarine strength at Dakar is also reported. Meanwhile, Berlin broadcasts are continuing to emphasize the importance to France of accepting German military aid in the defense of the French Empire. French military and naval intelligence officers in North Africa are circulating for propaganda purposes the now notorious article by Professor Renner that appeared in the June 6th issue of Colliers. In this article Renner proposes that small parts of France and larger areas in North Africa be ceded to Spain and Italy in the future peace settlement. to be headed by the ambitious Admiral Platon, a man 8 9 SECRET SECRET Axis Defensive in Egypt Against heavy opposition, a British infantry force made a minor advance in the Deir El Munassib area on September 29-30, taking high ground and straightening the line. The force was able to consolidate and hold its position, despite Axis counterattack. Axis air patrolling is now more active, and the use of dive bombers has increased. Apparently to stiffen and control their defensive dispositions, the Germans have paired German and Italian armored divisions in the rear, and have mingled German units with the Italian infantry in heavy rains, the British column that had advanced from Majunga to Tananarive has now occupied Antsirabe, com- munications center to the south. This places the British in substantial control of Madagascar's railways. Some French and native troops have apparently withdrawn farther south. The civil population has been friendly, and local French officials have nearly everywhere been helpful. The French Council at Tananarive passed a resolution in favor of cooperation with the British. the forward area. Other reports also indicate that the enemy is, for the time at least, holding to the defensive in Egypt. The Axis radio has recently treated the North African theater in defensive terms, making no promises of an attack, and suggesting that the British army, which "has been uninterruptedly strengthening itself," is preparing an offensive. Rommel himself, in his remarks in Berlin, stated that fighting in Africa was increasingly difficult, admitted the stiffer opposition of American tanks, and apparently did not go beyond saying that "we propose to hold what we have in Egypt." The Axis supply situation continues to be tight, in large measure due to Allied air and submarine attacks on enemy shipping, ports, and supply lines. Sinkings during August may have amounted to over half the tonnage dispatched from southern Europe. The United States Air Force alone dropped almost a million pounds of bombs in this theater in the month of September. The port of Tobruk has been pounded almost nightly, and reports indicate that its efficiency may have been reduced to a fraction. Consolidation in Madagascar The British this week continued to consolidate their hold on Madagascar. Despite obstructions and the advent of India: Further Compromise Moves As new demonstrations flared up in New Delhi and Bombay, and observers anticipated large-scale Congress agitation during the week of Gandhi's birthday (October 2-9), nonCongress leaders started at least three lines of negotiation to resolve the current impasse. In New Delhi, the directing committee of the Hindu Mahasabha met to review the party's compromise efforts in the past and to work out further proposals for the future. Almost at the same time, Fazlul Huq, Prime Minister of Bengal, issued invitations to a varied group of party leaders to discuss the possibilities of compromise at the Indian capital during the first week of October. The most clear-cut proposals, however, came from Rajagopalachariar, moderate leader from Madras. Taking issue with the Manchester Guardian, Rajagopalachariar asserted that the British could very well start negotiations with Indian nationalist leaders now in jail as well as with those still at liberty. Such leaders, Congress and non-Congress, who are actually representative of Indian public opinion, he suggests, should be called on by the Viceroy to form a national government as a substitute for the present Executive Council. This government, he concludes, could carry on the Indian administration for the duration of the war- 10 11 SECRET SECRET leaving military control to the British, and postponing the settlement of controversial issues until the return of peace. Intensified Air Attacks on Kiska In the Aleutians, the only active Japanese base, Kiska, is now under fairly regular and heavy attack from the air, and the enemy position there is less secure than at any time since the first landings last June. Japanese air power in the area has dwindled, and, at one time in the past ten days, was thought to consist of no more than two or three serviceable planes. However, a later report indicated the Japanese were renewing construction of semi-permanent buildings and underground storage facilities, apparently with the expectation that the base can be held, and additional aircraft therefore are likely to be brought in. An enemy attack on peaks. Some of the volcanoes have erupted as late as 1930- 33 (Kanaga, Gareloi). The four largest islands are Atka, Adak, Tanaga, and Kanaga. Kanaga has extensive plains, fairly large and level, and all of the larger islands have some level or gently rolling land in the interior. There are several good harbors, but approaches to the islands by sea are strewn with numerous rocks and reefs. Originally inhabited by the Aleuts, most of the Andreanof Islands are now unoccupied except for occasional trappers. Until recent months, the only real settlement of the group was the town of Atka, a settlement of about 90 natives on well-protected Nazan Bay on the east side of Atka Island. Favorable Weather: September to November In spite of their high latitude, the Andreanof Islands have our new position in the Andreanof Islands on October 4, a mild climate, temperatures ranging from 32 to about 52 coupled with some fighter interception encountered by our own aircraft at Kiska, suggests that this may already have degrees above zero Fahrenheit. The best period for sea and air activities is the present one-September to November, when fogs, cloudiness, ceilings, and visibility all are the most favorable of the year. This is not to say, however, that weather in the Andreanofs is any different from the general run of Aleutian occurred. Geography of the Andreanof Islands The establishment of our new base in the Andreanof Is lands, announced after an interim period of several weeks during which the base had been secretly prepared and occu- weather. It is rainy, cloudy, and misty most of the time, with dense fogs sometimes 4,000 feet thick. Often the fogs are only a few hundred feet thick, however, and frequently they occur on the southern side of the islands and not on the pied, brings Kiska within range of our fighter-planes. The westernmost island of the group, West Unalga, is only 125 nautical miles distant from Kiska. The group as a whole, from Amehitka Pass on the west to Seguam Pass on the weather when other places are shrouded in fog. east, extends for 235 miles in the center of the Aleutian chain. Losses and Gains in the Southwest Pacific Amlia, the easternmost island, is 245 nautical miles from Dutch Harbor. The islands vary in size from mere rocks upward to 600 square miles-the area of Atka. The islands were built up from the floor of the Pacific by volcanic action, and many of them have rugged volcanic north, so that north side ports may have clear or broken In New Guinea, after losing their Ioribaiwa Ridge positions above Port Moresby September 28, the Japanese unexpectedly chose to avoid further battle. Australian forces as a result have advanced without serious opposition to the 13 12 SECRET SECRET Gap in the Owen Stanley Range. A small Japanese convoy northeast of Buna has been bombed, but whether it had landed or withdrawn troops at Buna-a clue perhaps to further Japanese intentions in this area-is not yet known. Prime Minister John Curtin, however, views the present Australian advance essentially as a "holding operation". according to press dispatches. A large-scale offensive could not be undertaken for at least six months, he adds, due to the demands of other fronts for men and matériel. Allied forces in New Guinea are in complete control of the air and have strafed and bombed Japanese bases and communication lines without let-up. In addition, Allied ground patrols are active north of the mountain range, where they have raided a Japanese concentration at Mubo, near Salamaua. On Guadaleanal, the Japanese are continuing to land reinforcements, and the situation there may again be approach- ing a crisis. New landings also have been made to the northwest at Viru and Rendova Harbors in the New Georgia group. On Guadaleanal itself, the main enemy concentrations now are at Kokumbona, on the north coast about eight miles west of our airfield near Lunga Point, and still farther west, at Cape Esperance. United Nations' aircraft have bombed these positions and others on nearby islands, and our forces continue to take a relatively heavy toll of attacking Japanese planes. At Japanese airdromes on Buka and Bougainville Islands in the northern Solomons, enemy air activity nevertheless has been considerably intensified, and some reinforcements evidently continue to arrive. Unusually large Japanese naval concentrations are still being maintained in the Japanese mandated islands north of Rabaul, presumably awaiting the outcome of Japanese efforts to establish air supremacy in the Solomons. While waiting, Japanese naval forces have completed the occupation 14 of the Gilbert Islands, which provide a screen for operations in the empty ocean spaces between the Solomons and the Japanese-held Marshalls. Chungking En Fête for Willkie Wei Erh-chi First-born, usually known as Wendell Willkie, has been holding considerably more than the center of the stage since his arrival in Chungking. The Chinese, who dearly love a to-do, and who are past masters at making one, welcomed Willkie with firecrackers and the ceremonial hot towel and proceeded to participate enthusiastically in the process of being taken by storm. Willkie's gusto and energy have made a wide appeal, and his visits to factories, munition plants, and universities have been cheerfully accompanied by complimentary speeches of welcome and frequent requests for autographs. The Chungking press has devoted its news columns to full accounts of Willkie's activities, while its editorial writers have vied with each other in enlightening their American guest on such matters as the necessity for increased aid for China, and the desirability of creating an active Pacific front and abolishing extraterritoriality. Meanwhile, Willkie has interviewed a number of Chinese leaders (including H. H. Kung, Minister of Finance, and Chou En-lai, Communist representative in Chungking) and has had several lengthy conferences with the Generalissimo. It is improbable that any of Willkie's hosts disagreed with the editorial writers above. Chinese Troops Training in India General Stilwell's headquarters has revealed the fact that several thousand of the Chinese forces which fought in Burma are being re-equipped with American arms at a camp in India, and are receiving training from American Army 15 SECRET SECRET Lombardo Toledano's Odyssey a officers. Correspondents who visited the camp have been impressed with the evident effects which good food and healthful life have had on these troops, and report that the American instructors are pleased by the keenness with which the Chinese take to their various tasks. The Chinese them. selves are thoroughly enjoying the unaccustomed luxury of training with real ammunition. In northern Burma the Japanese are evidently stepping up their own preparations for future events. A sharp in- Vicente Lombardo Toledano, foremost Mexican labor leader and President of the Federation of Latin American Workers (C. T. A. L.), has flown from Cuba to Colombia on his swing through Latin America. On reaching Barranquilla he was greeted by a telegram from President Lopez, welcoming him to Colombia as "a gallant representative of American intellectuals." This message suggests that he will be as well received by government and labor circles of Colombia as those of Cuba, crease in enemy air activity in this region has been noted by United Nations' reconnaissance planes. Construction is in progress at various Burmese airdromes, and there has been some evidence as well of heightened shipping activity. On September 28, eight large river craft and more than 400 addressed thousands of workers in speeches stressing the rail cars were observed at Mandalay. connection, he emphasized the need for Pan-American labor where he had an interview with President Batista and need for more intense Latin American participation in the war effort and the crucial role of labor in this effort. In this unity and declared that both the and the A. F. of L. Castillo Versus Justo in Argentina Taking advantage of his constitutional prerogatives, President Castillo has appointed a Federal Interventor for the province of Corrientes, thereby setting aside the duly elected provincial governor and legislature. As explanation, he made the traditional statement that he was acting in order to protect the political rights of the citizens of the province. The move, however, was widely and properly interpreted as aimed against General Justo, leader of the conservative opposition to Castillo and candidate for the presidency in 1943. Justo's political influence has long been dominant in this province. The Corrientes affair is symptomatic of the deepening conflict between the isolationist and interventionist branches of conservative opinion, and may soon touch off events of greater significance. had in principle approved holding an inter-American labor congress in Havana, but that failure by the A. F. of L. thus far to approve final plans had delayed the project. Lombardo Toledano's trip has not been without its domestic and peculiarly Mexican repercussions. Shortly before Lombardo left Cuba, Novedades, leading Mexico City daily with strong Catholic leanings, printed an exclusive dispatch from Havana quoting Lombardo as having declared in a public address that "the Pope is the leader of the world fifth column." Soon after, El Popular, daily newspaper of the Federation of Mexican Workers (C. T. M.), published affidavits by the editors of the leading dailies of Havana and by a number of important Cuban journalists to the effect that they were not aware of any such statement by Lombardo Toledano, This was the second attempt within six months by the rightist Mexican Press to attribute a forged and highly provocative statement to Lombardo Toledano. In each case 16 17 SECRET SECRET it has raised domestic storms which have done little if any injury to Lombardo but have served to distract attention from the more vital problems of the war. APPENDIX I Anti-Nazi Measures in Santa Catarina The Brazilian authorities are taking vigorous steps to control the activities of the Nazis in the southern states. At present about 500 Germans have been arrested in Santa Catarina alone, and these will eventually be placed in three special prisons in the state. About 400 persons, mostly Germans, have also been forced to move from the coastal area and from the Argentine frontier to specified interior towns more than 100 kilometers inland. The only restric- tion placed on their activities is that of reporting daily to the police authorities. GERMAN POLITICAL REFUGEES IN THE UNITED STATES 1. Unity in Diversity Since 1933, some 250,000 German emigrés have entered this country, at least 48,000 of them having been exiled for political rather than racial reasons. Not unnaturally, members of this latter group have formed cliques and coalitions and have sought to influence not merely the German-American populace here, but more especially the attitude of the United Nations toward the homeland. A current memorandum on these refugee organizations by the Foreign Nationalities Branch of the Office of Strategic Services indicates significantly that, beneath all their differences, there now flows a strong and common current of German nationalism, revived in the most mutually antagonistic groups by fears of the dismemberment or abasement the Fatherland may suffer at the hands of the Allies 2. Titles. The chief organized groups of German refugees in this country are the following: The Association of Free Germans, Inc., German Labor Delegation, the Goldsmith Group, German Study Group, American Friends of German Freedom, New Beginnen, the Strasser Group, the German-American Congress for Democracy, the Loyal Americans of German Descent, the German-American League for Culture, the German-American Emergency Conference, the German-American Anti-Axis League, and the Steuben Society. Of these, the four most important are: the American Friends of German Freedom; New Beginnen (sponsored by the Association of Free Germans): the Strasser Group; and the Steuben Society. 3. The Association of Free Germans, Inc. Probably the most active and powerful of them all, the Association reproduces in miniature the Weiman Coalition of Social Democrats, Catholic Centrists, and moderate Nationalists. It has as president, Albert C. Grzesinski, former Prussian Minister of Interior; as secretary, Rudolph Katz, former Aldermanic President of Altona; and as Director, Gerhart H. Seger, former member of the Reichstag. Though in its published sims the Association follows closely the program of the United Nations, supporting the Atlantic Charter and dedicating itself to the destruction of Naziism and German imperialism, there is reason to believe that there is nothing approaching unanimity of opinion within the group. According to reliable reports, members of the Association have disagreed violently over the issue of unilateral disarmament for post-war Germany, many of them holding the opinion that such a move would invite territorial aggression on the part of 18 19 SECRET SECRET Russia or Poland. The fear of Russian power is, in fact, one of the chief deter. minants of the members' real, as distinguished from their publicly expressed opinions. Rudolf Katz, the Association's executive secretary, has privately expressed the view that post-war Germany will fall into two camps: those who will fight with the Allies against Russia and those who will fight with Russia against the Allies. 4. American Friends of German Freedom: This organization is the chief supporter in the United States of the activities of Paul Hagen and New Beginnen, a small band of extreme leftist intellectual refugees with headquarters in New York and London. Founded sometime in the middle thirties by the late B. Charney Vladeck and Dr. Reinhold Niebuhr, the American Friends of German Freedom had as its original aim the financial support of underground work supposed to be carried on in Germany by the New Beginnen group. Since the outbreak of war in 1939 and the consequent almost complete rupture of underground contacts with Germany, it has continued to function as a publicity bureau for Hagen and to publish two periodicals: Inside Germany Reports, a digest of material supposedly collected through underground channels, and In Re: Germany, a bibliography of works dealing with the German problem are restricted by the inability of Otto Stresser to enter the country, the Group is not allowed to use the designation "Free German". which has been preempted by the Association of Free Germans, However, Strasser has received until re- cently ample publicity in this country by the publication of his pamphlets and articles, the latter having had a wide circulation through such magazines as Liberty and the American Mercury, as well as through the Washington Post, the Christian Science Monitor, and other papers. He has now turned to the GermanAmerican press for a major outlet for his views. The chief activities of Strasser's group are carried on in South America, where the movement is headed by Bruno Fricke in Buenos Aires. Fricke is a former member of the "Organization Consul" which executed the notorious Fememurders in the early days of the Weimar Republic. It should be added that Stresser's Free German Movement in South America has been repeatedly split by violent dissensions arising from charges of anti-Semitism and Fascism leveled at Fricke and Strasser. However, the split in the South American movement must be viewed not so much as a conflict between a Fascist and a democratic bloe as a quarrel between the revolutionary, National Socialist elements, including Fricke and Strasser himself, and the conservative German nationalists The fact that these two views could be reconciled even temporarily in a common organization again demonstrates the great cohesiveness of German nation- 5. New Beginnen: alism and points to the chief potential danger of Strasser's activities. On the Formed in 1931 by a small group of Marxist intellectuals, many of them supposedly former Communists, New Beginnen was dedicated to the task of com- cratie sentiment, he is strongly chauvinistic and stands for a form of National Socialism that would differ from Hitler's only in certain details. British authorities and German Social Democrats call Strasser the Trotsky of National batting Naziism by healing the German labor split created by Communist-Socialist dissension. basis of the record, there can be no doubt that despite his protestations of demo- Socialism According to its present platform, however, New Beginnen appears to have abandoned any ideological compromise with Moscow and stands for: (1) rejection of all forms of Communism: (2) rejection of the principle of a one-party, Socialist dictatorship; (3) support of an independent and democratic Socialist movement in Germany. Its chief spokesman, Paul Hagen, envisions European reconstruc- 7. The Steuben Society: tion as taking the form of a supra-national federation based on working class sions before the war played host to the American leaders of the Society. This cooperation within a Socialist economy, and subject to some form of world control connection, doubtless, goes far to explain the strong pro-German and only slightly disguised pro-Nazi policies of the Society, examples of which may be seen in the As a native Austrian and a Socialist, Hagen is a strong supporter of Austrian Evidence supplied by reliable sources indicates that the Steuben Society, which is made up entirely of German-American citizens, has maintained close relations with the Steuben Gesellschaft in Nazi Germany, which on several occa- inclusion in the Reich, and an advocate of free and equal participation for Germany following items: (1) the virulent, defentist, and anti-Administration column in a European federation. Correspondingly, he opposes unilateral disarmament occupation of Germany and all proposals for quarantining Germany by "political and military safety-belts". called the "Steuben Eeke" which appeared regularly in the pro-Nazi Philadelphia Thus, it is clear that the program of New Beginnen, though bitterly opposed to Prussian militarism and imperialism, is nonetheless Grossdeutach in its essential aims. Its numerical strength is negligible, its potential strength as a propagands agency considerable 6. The Strasser Group: According to reliable reports, the British consider this by far the most dangerous of the refugee groups. In Canada and Latin America, where it is most active, it is called the Free German Movement In this country, where its activities Herold until the recent suppression of that paper; (2) the part played by the Society in instigating and supporting the isolationist congressional investigation of the motion picture industry; (3) the continuing anti-British and anti-Administration propaganda being carried on even now in the Steuben News, the official house organ of the Society. 8. The British View: The above analysis of the political attitudes and activities of German refugees in this country can be corroborated by Britain's experience with the individuals and groups concerned. Through confidential sources it has been learned that the official British view of the German problem may be summarized as follows: Before the outbreak of war in 1939 German political refugees in their attacks on the appeasement policy at Munich were largely responsible for the propaganda 20 21 SECRET SECRET directed in this country against Anglo-French policy, which had the effect of buttressing the arguments of American isolationista. After 1939, however, saw in the possibility of an Anglo-French victory their sole hope of returning to they Germany, and consequently they did everything in their power to aid the British cause and curry their favor. This attitude held good, however, only until the fall of 1941, when it became apparent that Russia, far from collapsing under the Nazi attack, was able to assume the offensive and threaten Germany. once, according to the British view, the majority of the German political refugee regardless of class or party, developed an acute attack of nationalism and began to show signs of desiring a negotiated peace with the German Army subsequent to an overthrow of the Nazi regime. To this end certain leaders among the refe- gees have been engaging in subtle pro-German Army propaganda while at time fostering anti-Soviet sentiment in this country. Among the outstanding offenders in this connection the British count Dr. Hermann Rausehning, the former Nazi President of the Dansig Senate; Dr. Karl Splecker, former press chief of the German Chancellory under Bruening; Dr. Heinrich Bruening himself; and Prince Hubertus zu Loewenstein The British also believe, it is understood, that such self-proclaimed champions of democracy as Dr. Albert Grzesinski and certain of his associates in the Association of Free Germans share the hope that the Generals will bring peace to Germany. As for Strasser, the British believe that the machine which he is creating in both the United States and Latin America will be used ultimately for ultranationalist German propaganda, which will inevitably be prejudicial to British interests, and which may even prove to be a cause of friction with the United States Government. The British have been especially concerned over the inpression which Strasser has managed to convey in this country that he has the blessing of their Government, an impression which has gained credence from the fact that Strasser was allowed to proceed from custody in Bermuda to freedom in Canada. Although the British Foreign Office has officially expressed its strong disapproval of Strasser, they do not feel that there are at present sufficient grounds for asking the Canadian Government to intern him. Consequently, their present position is that Strasser's movement, like other "free" German groups, should be tolerated without being encouraged. In short, excepting a few individuals like Friedrich Wilhelm Foerster, the antiGerman publicist and author, and Dr. Eugen Guerster, a supporter of Bavariso separatism, the British believe that the German political refugees in this country are not to be trusted, and fear that should the refugees once achieve unity among themselves, they might exercise in Washington an influence adverse to Britain's national interests APPENDIX II THE ELITE GUARD AND THE STORM-TROOPERS Many close observers of the Nazi Reich anticipated that Germany's entry into the war would lead to the gradual eclipse of the Party formations and the ascend- ancy of the Wehrmacht. This prediction has been amply fulfilled 80 far as Sturmabteilungen, or storm-troopers, is concerned: the SA has been relegated to the position of maid-of-all-work in the war-time economy. But the more important 88 has much more than held its own in its rivalry with the Army, according to a memorandum prepared by the Central European Section of the Office of Strategic Services. In prestige, in numbers, in interpenetration of the whole governmental fabric, the Schutz-Staffel has not diminished but grown, and the Party's dominance over dissident elements must, in consequence, still be regarded as virtually unshaken. 1. Fate of the SA The rise of the 88 only throws into bolder relief the humble position of the SA. From being the swaggering "conquerors of the streets" of Ernst Roehm's day. the brownshirts have sunk to the status of bridge-guards, factory watchers, and air-raid wardens. For a time, five years after the June purge had nearly liquidated their organization, the SA appeared to be on the road back to power. Goering needed a counter- weight to the mounting influence of Himmler, who had, in the 88, a private army of increasingly dangerous proportions. The Wehrmacht, on its side, was restive after its political isolation following the Blomberg affair of 1938, and hoped to use the SA as a provisional ally. Accordingly, Victor Lutze, a "Goering man", became the SA's new leader, and the brownshirts were given the relatively important task of training the preconscripts and reservista of the nation in military matters. This enabled them, in the course of their labors, to indoctrinate millions of Germans with "the SA idea", to tout themselves as "a bridge between the Party and the Army", and to expand with a legitimate air their own forces. The war, however, dealt the SA's comeback a nearly fatal blow: 989,000 of their 1,400,000 followers were drafted into the Wehrmacht, and, with the exception of one SA unit, they gave up their identity entirely and were lost in the anonymity of field-gray. Worse, the SA's responsibility for military training on the home front was seriously encroached upon by the Hitler Youth and the Army, and in return the shrunken organization was charged with sundry other chores of some difficulty but little distinction: target practice for middle-aged civilians, guarding Army property and buildings, distributing ration cards, operating blood banks, harvesting crops, etc. The SA is by no means "finished": its numbers are still large and its hold over the Labor Front is an important advantage. But in current jockeying for power among the Army, the 88, and itself, the SA is now a not too promising third. 22 23 SECRET SECRET 2. Function of the SS The history of the SS, on the other hand, has been one of almost unchecked aggrandizement. It has grown with the growth of the Party, and for an obvious reason: just as the National Socialist Party is a "State within a State", 80 the 88 is a Party within a Party. As such, it is the indispensable instrument of Hitler in maintaining his grip upon both Party and State. The 88 was created by Hitler in 1925 as a squad of eight men to protect the Fuehrer and Party supporters from physical violence. Its "choicest" task still is the safeguarding of the Fuehrer. To this mission have been added the pootection of the German nation, its blood and unity; maintenance of internal rity; guarding and strengthening Party control in Germany; and finally the exposition and enforcement of National Socialist doctrines of the World Move ment. To fulfill these missions the SS has successively developed an intelligence service, a police force, and a closed community for the practice of Nationalist Socialist eugenies. It is now rapidly creating an army. 3. Effect of the War The coming of the war has caused the separation of the 88 into two groups: the General SS which has remained on "civilian" duty, and the Military 88 which is on active service at the front. The General SS is not to be regarded as a residue of office-workers: all its members have had at least the rudiments of military training and, of course, are subject to the very exacting discipline of the Elite Guard. The strength of the General SS has been estimated at anywhere from 750,000 down: the most probable figure lies between 100,000 and 200,000. The Military 88, in the early part of 1942, was believed to consist of at least 12 SS regular divisions and 5 SS police divisions, all of them at the front. In addition, regiments and smaller units were stationed in various sections of Ger- many and German-occupied Europe. It can be said safely that the size of the Military 88 is decidedly on the increase, even if rumors of its attaining 40 divisions are discounted The strength of the 88 is not to be measured, however, solely in numbers Quite as important is the way it makes its numbers count. The 88 controls the police, Gestapo, and Party intelligence services. It dominates the colonization and Germanization of conquered territories. Even the foreign service is taking on an 88 tint: both Ribbentrop and Abetz, for example, are high in its ranks 88 men are found in top jobs in the press, the Propaganda Ministry, education the Labor Front-indeed, all branches of the Government. Only the top-most brackets of the Wehrmacht have resisted penetration. members in special 88 regiments and divisions Some 88 men, of course, were judiciously placed in regular branches of the Wehrmacht, where they constitute valuable listening posts for the Security Service of the 88 Reich Leader. The bulk of the membership, however, was and is concentrated in formations of the Military 88 so that, in case of need, they can be withdrawn as fighting units and employed at the discretion of the Fuehrer. It may be not without significance that 88 divisions are distributed about equally among the several sectors of the Russian Front-a convenient allotment in case of mutiny. An official statement of the German General Staff, September 17, 1941, declared that, while the Military SS is in principle under the command of the SS Reich Leader, in the present war several units of the Military 88 are under temporary command of the Commander-in-Chief of the Army for performance of military missions. Members of these formations are soldiers in regard to rights and duties. Nevertheless, the 88 Reich Leader directs the indoctrination of 88 soldiers and retains the right of substitution. In the early part of 1942, indeed, it was reported that the Military 88 had achieved independent status as a sort of fourth arm, and certainly, there is considerable evidence that some, if not all, 88 divisions operate on more or less independent missions, being shifted from one corps to another after completion of a particular task. That friction would develop between the 88 and the Army was, of course, inevitable. Jealousy started right at the top: Himmler, chief of the SS, had been only an officer-candidate in World War I and had, following the Armistice, attempted to "crash" circles in Berlin frequented by the General Staff. He was rebuffed sharply and consistently, and salt was added to his wounds by the fact that Huhnlein, Leader of the Nazi Mounted Corps, and Hierl, Leader of the Reich Labor Service, both succeeded where he had failed. His present relations with the Generals, consequently, are characterized by a certain stiffness. Himmler's own feelings seem to be reflected in the ranks. The 88 men criticize the Wehrmacht as reactionary, and the Army, on its side, considers the 88 soldiers publicity-seekers. Saluting between the two forces is done either reluctantly or not at all. Unconfirmed reports, indeed, speak of brisk exchanges between Hitler himself and the Generals, Hitler charging the Army with wanton sacrifice of his 88 troops, and the Generals retorting that the losses of the 88 result from the men's own recklessness and incompetence. It would be & mistake, however, to assume that these bickerings have led or will lead in any discernible future to an open rupture. As long as the 88 remains an ill-absorbed lump in the Wehrmacht, there is bound to be a certain amount of mutual uneasiness. But the very presence of the SS at the front, constantly on the watch and still fanatically devoted to the Fuehrer, is Hitler's strongest guarantee of safety from a Putach by the generals. 5. Estimate 4. 88 Versua Wehrmacht There can be no question but that the coming of the war threatened the relative position of the SS. The vast enlargement of the Wehrmacht, its prestige and power, might well have caused a gravitational shift of influence toward the Generals leaving the 88 stranded The key to the success of the SS in surviving this menace was (unlike the unfortunate SA) its refusal to yield its identity within the Army. It kept its 24 As an organization, the 88 contains elements of both strength and weakness. In evaluating its power, one should not allow the indisputable cruelty of its concentration camps or other agencies to emotionalize one's judgment. For the 88 contains a definite component of idealism which has attracted some of the best elements of German youth: an emphasis on self-denying discipline and loyalty and a sense of dedication to the country. To those insensitive to this appeal, the 88 can offer a place in the Nazi aristocracy, an assurance of economic 25 YES in RECENT meeting of system interesting rather mounty extensive benefing and provides maternity wives bus will - result the as has been able to pick and choose among applicants only those with the highest qualifications In hand how scorpting personnel is thetangeous ranks thebrillianne, 88 has been blessed consistant earty has to any by the unearred fever of the Pushner And when to these real politicaleffective centralized as presention of the added strength Intelligence service thorough police. and contained anay. the - local 45 MADE of the most forces in the German picture Potentially lis weakness - these (1) the difficulty of proper indestrication and aminitation of the greatly expended Military 88 and (2) the profossionalisttics of as members serving in the police, Benerity Service and Military Service Both of these threets to the sen homogensity are being actively combating how Altogether, the danant that the War would push the 88 into comparative weakening the Party a reported and exalting the Wehrnack undely definitely past. The 85 . set NOT to atrophy. IN can destroyed only the destruction of German power itself APPENDIX III MONGO RUSSIAN ECONOMIC POTENTIAL IN SOUTHEASTERN SIBERIA The Mep: Reliable information - Siberte more - - them for any the part of The map. which " provinional only is coastable a - not is each differentiale between industrial *RUSSIAN ECONOMIC POTENTIAL IN SOUTHEASTERN SIBERIA plants is full operation and them Infirmed to be still under construction Only the major airfalds and esspiano bears are shows Roads are not differentiated as to qualify, and - possible that there are railwage under restruction in addition in them shown Despite Bovlet efforts to develop the economic potential of Boothearters Biberts, Industrial and spreatural production not sufficient to sustain effective - resistance to prolonged Japanese attack according current report of the a I European Section of the Office of Strategic Services Russian position the PAR would Second upon stock-plies and the Bow of supplies from other Large stocks of food probably are available, and there may have been - of industrial TAN materials and with stature the Sea of Okhaldi K-M - . SECRET products, although the extent of these accumulations is unknown. In view of the unsatisfactory prospects for maintaining a flow of supplies from outside in case of war, this least known element-the extent of stock-piles-may prove to be the most decisive factor in the economic situation. Industrial and Agricultural Manpower During the twelve-year period, 1926-1939, the population of Southeastern Siberia increased 77 percent, chiefly through immigration from European Russia (largely military personnel and urban workers and their families). In 1941 the total population of the area (represented on the accompanying map) is estimated at approximately 4,500,000. At the last census in January 1939, 45 percent of the population was urban, compared with 22 percent in 1926. But despite the influx of industrial workers, a labor shortage was reported in 1940, when it was estimated that at least 200,000 persons would have to be brought in from other regions of the U. 8. S. R. The principal shortages at that time-the latest season for which information is available-were in the critical coal, lumber, metallurgical, machine building, and building materials industries, and in rail and water transport. As of 1941, there was no evidence of manpower deficiency in agriculture. The Food Situation Southeastern Siberia as & unit is an area of food deficit. The very fact that progress has been made in industrialization and urbanization has contributed to the deficit. In the two administrative areas which lie farthest east and are most exposed to attack (the Maritime Krai and Khabarovak Krai), the excess of consumption over production is especially serious. However, there is reasonably good evidence that substantial stocks of food have been built up for local use in time of war, and particularly in the event that hostillties should put a stop to the flow of imports by way of the Trans-Siberian Railway. For the two easternmost Krais, imports of bread-grains in 1937, for example, when the local deficit was only about 320,000 metric tons, are shown by an analysis of statistics on freight movements to have been between 500,000 and 600,000 metric tons. The latest available statistics for freight movements indicate net grain imports greatly in excess of the local deficit. There is a very serious current deficit in livestock in the two easternmost Krais. A large proportion of the cattle, hogs, sheep, and goats in Southeastern Siberia (which had as a whole in 1938 about the same number of livestock per hundred of human population as the rest of Russia) are concentrated in the western half of the area-that is, in Chita Oblast and the Buriat-Mongolian Republic. The herds in the two easternmost Krais have been increased since 1938, but the deficit must still be very serious. Only in fish does Southeastern Siberia produce more than it consumes, and here the Khabarovak and Maritime Krais have a virtual monopoly. But the salt-water fishing industry constitutes the one form of food production that a Japanese attack would immediately reduce very notably, if not destroy. 27 SECRET SECRET The Industrial Situation The status of industrial development in Southeastern Siberia is shrouded in Soviet mystery, and data are most inadequate precisely where the production of war matériel is concerned. It is not possible, therefore, to verify Stalin's statement to British Foreign Secretary Eden that Russian military forces in this area can be fully supplied from the "many" plants there. However, several large new plants are known to exist, in addition to various old railway repair shops and shipyards. These former include the large locomotive plant at Ulan Ude, the reconstructed Dalzarod shipbuilding plant at Vladivostok, a similar plant at Khabarovsk, an automobile assembly plant, and others. Airplane fuselage plants are reported at Komsomolak and Vladivostok and an engine plant at Khaborovsk. Three fuselage plants which lie outside the immediate area under consideration also contribute to plane production for the Russian Far East, estimated altogether to consist of at least 200 planes per month. Tank factories are reported at Chita and Voroshilov, and at Voroshilov there is also said to be an "ammunition" plant, but no data on production are available whether either plant is producing pig iron as yet, but, pending full operation, the region must depend largely on imports. 4. Petroleum-Northern Sakhalin oil wells (including both Soviet and Japanese-concession wells) produce an estimated total of approximately 600,000 metric tons of crude oil annually, of which the Soviet share in 1939 was 469,000 tons. Despite this substantial production, imports from other parts of the U. R. totalled 400,000 metric tons in 1937, and it is very likely that a portion both of imports and of local production was stored. In the event of attack, the Sakhalin fields would be notably insecure. 5. Non-ferrous Metals.-Important zine-lead mines are located in the Tetiukhe district on the Sea of Japan, but they are immediately vulnerable to Japanese attack. Larger deposits are located in the Trans-Baikal district, but development of them has been retarded. Tin ores also occur in the latter area and there are several concentrators and smelters, but while Trans-Baikal is reported to be Soviet Russia's chief domestic source of tin, there is a complete dearth of statistics on production and consumption. 6. Cement.-If all the cement plants projected in the Third Five-Year Plan Raw Materials and Power The industrial capacity of the region depends in any case as much on the supply of power and of raw and semifinished materials as on the fabricating planta themselves. Here somewhat more is known, and the situation which the facts disclose is-like the food tution-relatively insecure. It may be summarized as follows: 1. Coal.-It is probable that an increased production of coal has been wholly balanced, if not more than balanced, by a similar increase in consumption. In 1937, when 6,300,000 metric tons were produced locally, the region imported about 1,500,000 tons, and it is believed all this was consumed currently. If this is true, the annual deficit is at least this large. And of the 10 producing coal fields in 1937, the four which produced about two-thirds of the local supply lie within 100 kilometers of the frontier and consequently are strategically the most (1937-1942) have been completed, Southeastern Siberia is self-sufficient in this product. One plant existed in 1937, at Spassk, producing in that year 164,000 tons, In the same year, 400,000 tons were brought in from the outside. Six additional plants, with a total capacity of 525,000-630,000 tons per year, were planned, but only one had been completed by 1939. Transport It is evident from the above analysis that the ability of the Russians to sustain a long war against the Japanese in Southeastern Siberia depends in large measure not only on rail transportation within the region but on transportation from the rest of the country to this region. In neither case can the present-day situation be considered satisfactory. The railway pattern which, with the Chinese-Eastern, perhaps provided adequate logistical support before the Japanese advanced to the Amur, can no longer insecure. 2. Electric Power.-The coal situation vitally affects the electric power supply, since most of the power stations are coal-burning. A few use oil, and the remainder. wood. There are no known hydro-electric plants. There is a wide range is estimates of the power produced by these stations (even if only those rated at 100 kilowatta or over are considered): if stations which were under construction in 1937 are now in operation, the probable total capacity lies somewhere between 93,000 and 207,000 kilowatts. The maximum figure is less than the amount of power currently supplied daily to consumers in Washington, D. C. 3. Iron and Steel.-Up to 1940 there was no steel production in Southeasters Siberia, and the output of pig iron did not exceed 5,000 metric tons annually. Is 1937 the region imported about 200,000 metric tons, some of which may have been stock-piled, although the lack of data on consumption prohibits any estimates as to quantities. Since 1940 two full-cycle iron and steel plants have come into partial operation. One, at Petirovsk, is supposed to have, when completed, an annual capacity of 95,000 metric tons of pig iron and 125,000 tons of steel; the other, at Komsomolsk, 150,000 and 250,000 tons, respectively. It is not known 28 be considered secure in the event of a Japanese attack. The double-tracked Trans-Siberian (the main line) runs roughly parallel to the frontier for 2,400 kilometers west of Vladivostok, never more than 120 kilometers from Japaneseheld territory. Several long bridges (notably the Amur bridge at Khabarovak, only 37 kilometers from the frontier) and numerous tunnels (in the Baikal section of the line) increase the vulnerability of the railway. The several branch lines from the Trans-Siberian to the frontier, while facilitating the deployment and supply of Russian forces along the frontier, also offer convenient lines of advance for Japanese thrusts against the main line. The Trans-Siberian Railway obviously is of the greatest strategic importance. Perhaps 75 percent of the population in this region lives within five miles of the railway. All of the seven cities of 50,000 or more, with the exception of Komsomolsk, are on this line. Five-sixths of the agricultural population which resides along the upper Amur and Ussuri valleys and in adjacent areas is likewise concen- trated near this railway. It is the only adequate supply line from regions west of Lake Baikal So long as it remains intact and in Russian hands, it has ample 29 SECRET capacity (91/2 million tons yearly, one way) to accommodate peacetime importa of supplies from the west, as well as local movement within the region. Without this rail line, the communications network virtually ceases to exist Aside from air transport, traffic from areas to the west of Lake Baikal would then be limited to the river-road route which makes use of the Lena from Kirenak and the road connection from the Lens south to Bolahol Never on the Trans-Siberian Motor transport is a very recent development in the region. Most of the roads are unsurfaced, and some are passable for motor transport only when frozen. 1932, this line will provide an east-west transport artery at a safe distance north of the frontier and will greatly strengthen the Russian logistical position. Some portions of this new line are in operation. The Amur River-the principal means of inland water transport-would be of little use above Khabarovsk in case of war, since it forms the boundary with Japanese-occupied territory. Maritime transport to Vladivostok and other Soviet ports on the Sea of Japan from overseas points likewise would be cut off. Overseas transport to Nikolaevak at the mouth of the Amur would depend on the degree of control exercised by Japan over the Kurile Strait, separating the Kurile Islands from Kamchatka (not shown on the map). Overseas supplies would probably be limited to the amount that could be brought in (a) by tractor-aled trains in winter from ports on the Bering Sea accessible to Alaska, (b) by sea is summer to the mouth of the Lena and thence upstream, and (c) by sea routes to European Russia and thence to Siberia by rail, in so far as the Trans-Siberian Railway remained in Russian hands. 30 .. GOVERNMENT PRINTING OFFICE 1948 la The most notable addition to the transport network, the Baikal-Amur Railway, is not yet completed, and probably will not be for some time. Begun 10/9/42 82 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Friday October 9, 1942. Press Service No. 33-55 10/8/42 Secretary of the Treasury Morgenthau announced last night that the subscription books for the current offering of 2 percent Treasury Bonds of 1950-52 and of 1-1/2 percent Treasury Notes of Series B-1946 will close at the close of business today, October 9. Subscriptions for either issue addressed to a Federal Reserve Bank, or Branch, or to the Treasury Department, and placed in the mail before 12 o'clock midnight Friday, October 9, will be considered as having been entered before the close of the subscription books. Announcement of the amount of subscriptions and the bases of allotment will probably be made on Tuesday, October 13. -000- 83 October 9, 1942 9:45 a.m. GROUP Present: Mr. Bell Mr. Buffington Mr. Haas Mr. Cairns Mr. Schwarz Mr. Gamble Mr. Gaston Mr. Graves Mr. Thompson Mr. Odegard Mr. Kuhn Mr. White Mr. Blough Mr. Sullivan Mr. Paul Mrs. Klotz H.M.JR: Herbert, do you want to see me later? MR. GASTON: Yes, I think so. I haven't any- thing important. H.M.JR: I got this very nice ad in this morning. (Indicating advertisement in the Wall Street Journal.) I don't know who is responsible for that. Which agency placed that ad? MR. BELL: The banks did that on their own, I think. H.M.JR: I wonder. MR. BUFFINGTON: Yes, the Victory Fund Committee talked to them about doing it. H.M.JR: The Advertising Council? 84 -2MR. BUFFINGTON: No, they used their own agency. H.M.JR: Which is that? MR. BUFFINGTON: I think it was Albert Frank. H.M.JR: One of those - Albert Frank has been working for us on one of the groups, hasn't he? MR. BUFFINGTON: They happened to be the advertis- ing agent, I think, for the Chase, and that is how they got into it. H.M.JR: Is that just in the Wall Street Journal? it in.MR. BUFFINGTON: It is the only one I have seen MR. BELL: I think the "Times" and the "Tribune" had it, but it was in the late issue. Bob Rouse told me it was in his paper, but it was not in the paper that I had. MR. BUFFINGTON: The text of the article in the "Times" said it was in the morning's paper, and I assumed it might have been a later issue. H.M.JR: It wasn't in. MR. BELL: Bob Rouse said it was in his, both the "Tribune" and the "Times." H.M.JR: There is one paragraph in a "New York Times" editorial that I have got to kid Paul about after he reads it. I have got to read it. I won't even paraphrase it - on the Senate, on the tax bill. It is marvelous. Herbert, have you got anything? MR. GASTON: No, I haven't anything. H.M.JR: Mr. Buffington? 85 -3MR. BUFFINGTON: You will recall that you talked to Chester Davis about suggesting a publicity man. He wrote you a letter suggesting Mr. R. Fullerton Place. I acknowledged the letter and told him you were consider- ing it. I would like to ask him to come down and talk to us, if you see no objection. H.M.JR: Well now, but you had better - we have kind of an over-all council on advertising, of which, I guess, Mr. Gaston is the senior member, so you had better talk with him-MR. BUFFINGTON: I will talk with him. ... so we don't get our wires crossed. Will you do that? H.M.JR: MR. GASTON: Yes, I think it would be a good idea. MR. BUFFINGTON: That is all. H.M.JR: Ted? MR. GAMBLE: I have nothing, sir. MR. KUHN: Nothing. H.M.JR: Kuhn gave me this bulletin which was addressed to farmers. I took it home last night. It was this-MR. KUHN: Farm pamphlet. H.M.JR: Yes, and I defy one farmer in a hundred to know what that chart in the middle means. We have the best people on charts in the Government working with George Haas, and it is silly not to make use of his facilities. The chart is just - it just doesn't mean anything. I read it three times last night. I think I know what it means, but that kind of stuff ought to go through George's shop. 86 -4- MR. GRAVES: Is that Doctor Myers' pamphlet? MR. KUHN: It is the farm pamphlet that the "Country Gentleman" prepared for us. MR. ODEGARD: We raised that very question, Mr. Secretary, at the time, and we were assured by the people in "Country Gentleman" that they had done this thing dozens of times. They knew what the farmers wanted and what the farmers understood. We didn't. H.M.JR: Who paid for it? MR. ODEGARD: We paid for the printing of it. H.M.JR: Well, Harold, in the future, if any pamphlet goes out from your group for anything that has to do with charts - statistics - will you clear it with George Haas, please? MR. GRAVES: Yes. H.M.JR: You might have read it once and under- stood it, but I read it and I think I know what - but it is silly, when we have good facilities, not to use them. Will you get out an order that sticks? MR. GRAVES: Yes, sir. I understand they did that - "Country Gentleman" did all of the make-up. 87 -5MR. ODEGARD: "Country Gentleman" did the whole thing - the make-up and the composition. H.M.JR: Talking of charts, I asked Tickton to make me a chart. I didn't realize he would have to stay up all night to do it; but it did go over last night to the President. I had discussed it with the President. This is just general information. I analyzed two hundred and some odd orders that we received in August to buy for the Mussians. Forty-two of them took over seven weeks from the time the Hussians placed the orders until they were executed. The Pro- curement averaged about three days; but forty-two orders took over seven weeks. There was one order for electric motors that took over ninety days, the time being consumed in WPB and Lend-Lease. I forget what the average was for the two hundred, but you couldn't strike an average because a lot of them, by October 5, had not yet been completed. MR. WHITE: Do you remember a year ago, or - about a year ago you had a meeting with Lend-Lease and WPB, and Lend-Lease promised at that time they would get it out in forty-eight hours at the latest, and twenty-four hours on the average. H.M.JR: It wasn't as long ago as that. I said something to the President. He said - the way he always said - "Give me some cases. " So we did this. The reason I thought of it was because George's shop did such a beautiful job. They went right through the night on it. I didn't realize what I was asking for. 2/s 88 -6Now we are doing one on English orders. I am interested to see whether they just pick on the Russians or whether it is just as bad on the orders for the Eng- lish. This is a very small piece. After all, we in Procurement are only doing a small part of the business and that is just placing orders. The next thing is when do they get deliveries. That is something else again. This is just actually signing a contract. MR. BELL: We got quite a story on metals for the Mint, too, with WPB - a change in decision every week. H.M.JR: Well, I am just passing it on - a bit of unpleasant news. Ted, are you all right? MR. GAMBLE: Yes,sir. H.M.JR: Kuhn? MR. KUHN: I have nothing. H.M.JR: Roy? MR. BLOUGH: Not changing the subject, I have a couple of charts I wonder if you have seen. (Charts entitled "Individual Income Tax" and "Estate Tax" handed to the Secretary.) H.M.JR: Not changing the subject, you were supposed to give me a memorandum yesterday morning for the President. MR. BLOUGH: I had the memorandum, but I didn't understand I was supposed to give it to you. I was awaiting your call. H.M.JR: Listen - no, I spoke to Paul and he said the two of you tried to get in, but then you never tried to get in again. 89 -7MR. BLOUGH: I didn't try yesterday morning at all, Mr. Secretary. H.M.JR: You should have. MR. BLOUGH: I am very sorry. We had the memorandum. H.M.JR: If you have got something and I asked for it at a particular time, don't act as though you were in the Army. (Laughter) MR. BLOUGH: I am very sorry, Mr. Secretary. H.M.JR: No, seriously, will you? MR. BLOUGH: We had the material. H.M.JR: That goes for everybody when I ask for something for the President. I have so much I can't always remember. Paul says he is glad you didn't give it to me because it wasn't a good memorandum. MR. BLOUGH: I don't think there was anything wrong with the memorandum, but I think the idea was probably bad. H.M.JR: Maybe that is what he said. (Laughter) MR. BLOUGH: You may have seen those. They were made a day or so ago. Mr. Paul wanted them, and I think they are very good. Maybe you can't understand some of those lines there. H.M.JR: Why is the center line sort of fat and then it fades out? MR. BLOUGH: I thought you might not understand that. Those lines that are fat, the center line and the Canadian line and the British line - the upper part of that represents - at the top side - represents the gross tax liability and the fatness represents the refund which is payable - the post-war refund which is 90 8- payable, or, in the case of the United States and Canada, part of that may never be paid in because of the deductions which are allowed for insurance, and that sort of thing. That is just the estate tax, straight (indicating chart). (Mr. Paul and Mr. Sullivan entered the conference.) H.M.JR: You (Paul and Sullivan) missed a good one between Roy and me. I was just telling Roy to please not sit down in his office and wait to have me send for him on this memorandum, but I said that I understood that the memorandum was not any good, anyway. He said, "No, the memorandum is all right, but the idea isn't any good." (Laughter) The idea was mine. (Laughter) MR. BLOUGH: I didn't realize the idea was yours, Mr. Secretary. (Laughter) H.M.JR: What else? MR. BLOUGH: I heard that the President had signed that letter on the Vandenberg amendment, but then there was a great silence. It was signed, was it? H.M.JR: It was signed Monday night. I spoke to Altmeyer, and he and McNutt have been trying to get it out from the White House and have not been able to. I told them they should keep at it. Mr. Paul had lunch Wednesday with the New York Times editorial staff. I just wanted to read this one paragraph. "The Senate has recently given us a fine demonstration of its traditional ability to rise above petty political considerations in a crisis. It could do the country another service now by writing into the new tax bill the Ruml plan, thereby providing for a genuine collection of these heavy income taxes at the source." But I mean, "The Senate has recently given us a fine demonstration of its traditional ability to rise above petty political considerations in a crisis. If 91 -9MR. PAUL: Especially yesterday afternoon. H.M.JR: I thought it was all-time tops. MR. BLOUGH: I have nothing further, Mr. Secretary. H.M.JR: But Mr. Paul told me, after being there, that he thought Mr. Bell had listened, but he didn't think anybody else had listened. Cairns? MR. CAIRNS: I have nothing. H.M.JR: Are you (Blough) and I all right? MR. BLOUGH: Yes. I feel very badly about not giving you that memorandum, but aside from that I feel all right. (Laughter) H.M.JR: As I say, maybe it was better to let it die unborn. I spoke to the President about taxes and so forth, drawing on my imagination, and got nowhere. You stay a minute afterwards, will you, Cairns? MR. CAIRNS: Yes, sir. H.M.JR: Haas? MR. HAAS: I have nothing. H.M.JR: Mr. Odegard? MR. ODEGARD: I have nothing. H.M.JR: Chick? MR. SCHWARZ: I have nothing. /s 92 - 10 MR. WHITE: Lend-Lease authorities have finally notified you that they are ready and willing to lend- lease silver under either of two schemes which would be acceptable to you. They said they prefer not to make a contract which would give them the silver back again. They prefer just to lend-lease it and get paid for it. However, they are willing to have it the way that you suggested. So I gather that the next step is to get a definite request from some country, which we have not yet had. H.M.JR: You can get one, can't you? MR. WHITE: We can get one, yes. H.M.JR: Harold? MR. GRAVES: I have nothing. H.M.JR: Bell? MR. BELL: I have nothing. I would like to see you sometime. H.M.JR: Could I clean up these little things? MR. BELL: Yes, no hurry. Are you going to be here tomorrow? H.M.JR: Oh, yes, tomorrow will be all right. I will have time today or tomorrow morning. I will be here this week end. MR. THOMPSON: I have two Internal Revenue deferment cases. (Papers handed to the Secretary.) H.M.JR: Incidentally, McCloy was in here yesterday. Now he has suddenly discovered a lot of old men in the Army he has gotten worried about. He has been in two or three camps. Mr. White: There was a lunch at which there were about fifteen men present and General Patterson repeated 93 - 11 - the story. It showed how you found a letter on McNutt's desk. He told it in some detail. He also expressed considerable criticism of the practices of permitting college boys to be enlisted in the Reserves. All the most physically able young men are keeping out of the war by a device which, in his opinion, has no justification what- soever. He said it is class legislation. H.M.JR: He is right. The Navy-- MR. WHITE: He is quite concerned over it. I don't know if he is doing anything about it. H.M.JR: Every time we meet here the Navy and he have a free-for-all, and nothing ever happens. MR. GASTON: They all agree as to the right answer and then do nothing about it. The right answer is to take them in and send them for education if they need certain specific things, with the Army and Navy paying the cost to get that particular thing. MR. WHITE: It is apparently an Army and Navy Reserve to be used after the war is over. (Laughter) H.M.JR: It isn't the Army. MR. WHITE: Yes, it is Army. H.M.JR: Is" it? I thought it was only Navy. MR. WHITE: No, cadets, or something or other. H.M.JR: I cut this to three months. (Deferment cases of Emil J. Nelson, six months, and Jacob S. Stern, three months, approved by the Secretary.) MR. THOMPSON: That isn't a very strong case. That is right. The reason for the mixup on the air raid yesterday was the President was to go down to the National Theater. They figured he would be back about five-thirty, and they wanted to have the air raid while he was out of the White House so as not to cause any inconvenience. But he got 94 - 12 - back about ten minutes to five. It broke up the plans so they postponed it then to five-thirty, and between five and five-thirty they decided to call the whole thing off. H.M.JR: It is silly. It is the silliest thing I ever heard of. Now, you two twenty-five-thousand-dollar experts, do you want to report? MR. SULLIVAN: Thanks for the raise. We had a very nice-- (Laughter) MR. PAUL: We have a big margin to get up to twenty-five thousand. (Laughter) MR. GASTON: After taxes and war savings bonds? (Laughter) H.M.JR: Will one of you report? MR. SULLIVAN: We had an hour-- H.M.JR: Tell them - they don't know where you have been. For all they know they just think you are late. (Laughter) MR. SULLIVAN: They know that I am not late. (Laughter) Randolph and I met with Byrnes, Ben Cohen, and Russell. H.M.JR: Russell? MR. SULLIVAN: Yes. MR. WHITE: He is Cohen's assistant. MR. SULLIVAN: He is the Spartansburg man you heard about. At five-thirty yesterday morning the Secretary was up, gentlemen. (Laughter) We discussed certain policy questions that we had to decide before we could submit final recommendations on regulations. The most interesting fea- ture that arose out of it was the feeling on everybody's part over there that so far as any allowance for insurance or retirement of debt was concerned that would not be avail- able to anybody who had other income than salary out of which they could pay that life insurance and pay the debt. They also felt that the restrictions were not to be limited to people -2 95 - 13 - who were working for taxable corporations and should be extended to people who were working for Government agencies, and Section 101, exempt corporations. So it looks like this is an Executive order in the best totalitarian form. It is all-out from here on, I think. H.M.JR: I wasn't far wrong when I called up Ben Cohen and said, "I am glad to see that you are on the left wing of the White House." MR. SULLIVAN: Yes, and the chair on the left side, sir. (Laughter) H.M.JR: He hadn't thought of that. He said, "What do you mean, the left wing of the White House?" I said, "Stand up and see where the sun is, and you can see which way you are." MR. SULLIVAN: This opens the door, I think-H.M.JR: East Executive. MR. SULLIVAN: I think this opens the door to counteract to a little extent yesterday afternoon's vote. H.M.JR: No, nothing can do that. MR. SULLIVAN: I think we have got a chance for the first time to impose a little bit more pressure on income from tax-exempt securities, because in determining whether a person has other income out of which they can retire debt and pay insurance premiums, we can specify that they will not be allowed that privilege if they have other income, whether that is taxable income or not. MR. PAUL: That doesn't prevent Tommy Manville's sixth marriage, though. H.M.JR: Should you try to? (Laughter) r-3 96 - 14 MR. PAUL: No, but make him pay. MR. SULLIVAN: It is the first opening. H.M.JR: Is everything else all right? MR. SULLIVAN: We are going back tomorrow morn- ing and discuss other things. MR. PAUL: We will prepare the regulations now along the lines cleared with them. I have one other thing, and that is we would like to block Mexican freight cars. The reason we want to do it is because a lot of time is lost in shifting loads from Mexican freight line cars to American at the border. We can't let the Mexican cars come in here - into this country - because there would be so many attachments against them, so therefore we suggest blocking them, which will prevent the creditors from seizing them and save a great deal of-- H.M.JR: Is that agreeable to the Mexican Embassy? MR. PAUL: Yes. We have to take it up with Beatty at the Board of Economic Warfare. MR. WHITE: You don't really have to. H.M.JR: Have you cleared it with the State Department? MR. PAUL: No, we haven't. H.M.JR: You had better clear it. I am all for doing things carefully with the State Department. MR. WHITE: We talked to them, but I don't think we got any official clearance. MR. PAUL: It is obviously a thing that ought to be done. 97 - 15 - H.M.JR: It is all right with me, but you had better get a clearance from Larry Duggan, or somebody. MR. SULLIVAN: Did you get my memorandum on him? H.M.JR: Yes. MR. SULLIVAN: I have one other thing, Mr. Secretary. The War Department has asked us - the Bureau to watch out in examining returns for companies that are making unreasonable profits on war contracts. We wrote to them and explained that our examination is a tax examination and not a cost analysis, but that whenever anything came to our attention that looked as though they were unreasonable - the profits - we would notify them. Now, I had a talk with a Captain Dilks - and I think Dan talked with him, too - who is doing that type of work. I told him about these audits we are making on these big war contractors. I thought it might be helpful to them if we sent them the list of these companies which we have where we have cut down executive salaries, and other disallowances. I think if we are really cooperating we should send that list to Army, Navy, WPB, and the Maritime Commission. I would like to do that. H.M.JR: O.K. All right. 98 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 9, 1942. TO Secretary Morgenthau FROM George Buffington GTS. I told you this morning I was of the impression that the full page advertisement appearing in the New York papers this morning was prepared by Albert Frank-Guenther Law, which is not the case. They are doing some work for the Chase National Bank in connection with tax notes which will probably be made available to the Victory Fund Committee of the Second District for general distribution. The advertisement this morning was prepared by Doremus and Company and paid for by the banks, Confidentially, the idea did originate with the New York Victory Fund Committee. 99 October 9, 1942 10:44 a.m. HMJr: Hello. Operator: Judge Patterson. HMJr: Bobt Robert P. Patterson: Yup. HMJr: Henry talking. P: Yup. HMJr: When we met here that time with Hershey, I asked you if you would be willing to send out some telegrams to the other reception centers to see whether their situation was similar to Fort Dix. P: Yes. HMJr: P: I wondered if you ever did it. No. I did make inquiry about it, and understood that that - the situation was not similar - that that was a rather exceptional lot, but HMJr: Oh. nevertheless, it's - it's bad enough. P: HMJr: You didn't - on second thought, you didn't want P: Yeah, I didn't send out the telegrame. HMJr: I see. P: But I - I made the inquiry around. HMJr: Oh. P: HMJr: to do it, was that it? here. Yeah. 100 -2P: It was thought not representative HMJr: Oh. but near enough that something had to be done. P: HMJr: Yeah. Well, McCloy was in here yesterday on another matter, and he said he's been to two or three places and he thought that they were getting many too old men. P: HMJr: P: HMJr: P: HMJr: P: That is true. I Yeah. ....I saw that myself two months ago. Yes. Okay, I just wondered. All right. We're trying to - we're trying to get that bill still out of the Budget. You are. I understood that they were going to lay it on the President's desk today. HMJr: Yeah. P: But they've told us that several times. HMJr: Right. Well, I'm working on it too. P: They've - they've been very dilatory about it. It's been there over a month, I think. HMJr: Yeah. P: It was down in McNutt's place for about three weeks, I believe. HMJr: Oh, yeah - I.... You got it out of there, didn't you? That's right. P: HMJr: - 3P: Yeah. HMJr: That's right. P: Okay. HMJr: Right. P: Goodbye. 101 101-A October 9, 1942 About half past eleven the President called me and said, "How are you getting along with that job, Henry?" and I said, "Pretty well. He said, "Are you about finished?" and I said, "No, we need more time." I said, "We didn't get anything in this haul." Then I said, "We haven't put the first pack back yet." So he said, "That's all right. We won't say anything more about it until I see you after Cabinet." He asked me whether that would give me time enough, and I said, "Yes." He said, "Good.' Then the President told me that they are having perfect "cat fits" over at the State Department, and it really is a scream, and he gave a good hearty laugh. I asked the President whether he wanted me to change anything and he said, "No, don't change anything until I see you after Cabinet. Leave everything in effect just as it is." I said, "I can stop now if you say so," and he said, "No, leave everything just the way it is. 101-B October 9, 1942 4:00 p.m. Present: Mr. Gaston Mrs. Klotz HM Jr: After Cabinet the President and I whispered into each other's ears, and he said, "I want to see you here because I am going to see Summer in my room afterwards." He said, "It is a perfect scream. Berle has been trying to get me. He called me all through the night last night, and I didn't answer the phone, and he has been trying to get me every five minutes today, so I am going to have a quiet talk with Summer now." The President said, "How are you getting along?" So I said, "Well, we expect to put the bags back on the boat using one of our own men disguised as a day laborer. ONI is going to clear the docks and get the FBI out of the way, and we hope to have the bags back any moment. He said, "What did you find in the Irish bags?" I told him that it was mostly food, and I also told him that in some of the Spanish bags we found they were sending magazines and documents from the Spanish Legation in Tokyo via Washington to Madrid. The President said, "What do you think?" So I said, "Well, I don't know. Of course, they are using a slow boat and evidently they didn't send anything very confidential, but we are apt to pick up some diplomatic pouches any moment. I said, What would you like us to do?" He said, "Well, what does Gaston think about it?" and I said, "Well, Gaston would like to keep on a little while longer, and maybe we will catch Clipper." So the President said, "Well, keep the thing in a sort of a flux, and we will see just how excited the State Department gets. If they get too excited, I may have to do something. If I do have to do something, I am simply going to a say that there was an important document which we were looking for, and through overzeal in looking for this document they opened too many pouches. He said, "I will simply tell them we found the document we were looking for, and so there won't be any more pouches opened.' 101-C -2The President asked me what kind of pouches we had opened, and I said, "Oh, we have opened a lot of pouches, and I want you to know particularly that we have broken the seals on a number of State Department pouches. I said, "I want you to know that," and I emphasized it. So the President said, "Well, the whole thing is just a scream, and I am going to see Sumner now and I am going to quiet him down. I said, "Well, you know, Mr. President, I really would like to have this settled one way or the other before I go on Monday because it is too great a responsibility to leave behind me." He said, "We will settle it." I said, "You know I am coming to the White House tonight at midnight when you have "This Is The Army" cast for supper, and if I have any news I will give it to you then." He said, "That will be fine." He evidently is enjoying this greatly. I also said to him, "You know,Mr. President, I just want to tell you that I looked up my conversation with Mr. Stimson, and I want to remind you of what he said. He said he called up Mr. Hull and told Mr. Hull that there were four out- rageous cases of misuse of the diplomatic pouch, and Stimson recommended to Hull that this privilege be cancelled." The President said, "Who said that?" and I said, "That was what Stimson told Hull." He said, "Good." I asked the President whether he got my memo from the Chiefs of Staff, and he said, "You know you mean the Joint Chiefs of Staff," and he seemed to be very much amused about that. He said, "Yes, I got it and I read it." The President said, "When will the next pouch either come in or leave the country?" and I said, "I don't know, but I will let you know just as soon as we find out. But the interesting thing is that he has had plenty of time to think the thing over and in spite of the fact that he said State Department was "having kittens", he still said we should go on. Gaston: Johnson checked on the Clipper and he says they have no information. Philadelphia had one case they inquired about but they said to let that go, and I agreed that was the right thing to do because it was the case of & Swedish pouch coming from Buenos Aires to the Swedish Embassy. That's not the same as if it was coming from Sweden. It's an incoming not an outgoing pouch. 101-C -2The President asked me what kind of pouches we had opened, and I said, "Oh, we have opened a lot of pouches, and I want you to know particularly that we have broken the seals on a number of State Department pouches. I said, "I want you to know that," and I emphasized it. So the President said, "Well, the whole thing is just a scream, and I am going to see Summer now and I am going to quiet him down. I said, "Well, you know, Mr. President, I really would like to have this settled one way or the other before I go on Monday because it is too great a responsibility to leave behind me." He said, "We will settle it." I said, "You know I am coming to the White House tonight at midnight when you have "This Is The Army" cast for supper, and if I have any news I will give it to you then.' He said, "That will be fine." He evidently is enjoying this greatly. I also said to him, "You know, President, I just want to tell you that I looked up my conversation with Mr. Stimson, and I want to remind you of what he said. He said he called up Mr. Hull and told Mr. Hull that there were four out- rageous cases of misuse of the diplomatic pouch, and Stimson recommended to Hull that this privilege be cancelled. The President said, "Who said that?" and I said, "That was what Stimson told Hull." He said, "Good." I asked the President whether he got my memo from the Chiefs of Staff, and he said, "You know you mean the Joint Chiefs of Staff," and he seemed to be very much amused about that. He said, "Yes, I got it and I read it.' The President said, "When will the next pouch either come in or leave the country?" and I said, "I don't know, but I will let you know just as soon as we find out." But the interesting thing is that he has had plenty of time to think the thing over and in spite of the fact that he said State Department was "having kittens", he still said we should go on. Gaston: Johnson checked on the Clipper and he says they have no information. Philadelphia had one case they inquired about but they said to let that go, and I agreed that was the right thing to do because it was the case of a Swedish pouch coming from Buenos Aires to the Swedish Embassy. That's not the same as if it was coming from Sweden. It's an incoming - not an outgoing pouch. 101-D -3- HM Jr: That's right. Summer Welles was certainly nice to me today, and made conversation about everything. The amusing thing that happened was this - the President is always kidding me about the fact that I promised to give the Trustees of his Church at Hyde Park a champagne dinner when they buy some Government bonds. He asked me how the bonds were going and I said, "Fine." Then I said, "If you want that champagne dinner you better act quickly because my champagne is almost exhausted." He said, "Well, I understand there is lots of it coming in on Spanish boats," and I looked at Welles and grinned from ear to ear. Gaston: When you called me, I had just hung up after talking to Johnson who, in turn, had just finished talking to New Orleans. The body is buried. Fleishman did as had been planned, and put this stuff in unlabelled truck, drove on to the dock, and he was challenged by the dock patrolman. They drove right on, but then they met a corporal who said, "What are you doing and why didn't you stop when he told you to?" Fleishman, who is a diplomat, said, Shut up", and they went on to the side of the vessel, put the stuff on the deck, and the mate who was there counted the bags checking them off on his fingers. He apparently made no other comment. The Master was on the ship was not in view. A Chief Petty Officer of the Coast Guard was there, and he said that these fellows were making a mistake, that they had no right to censor diplomatic mail, and again Fleishman, very diplomatically, said, "Why don't you button up your lip, fellow?" recognized. Fleishman said he was quite sure that he wasn't (At this point, HM Jr phoned Miss Tully and asked her to go in to see the President as promptly as possible particularly if Summer Welles was in there, and to tell him that all the fish were returned to the fish bowl at New Orleans.) HHHHHHHHH 102 October 9, 1942 11:53 a.m. HMJr: Hello. Operator: Mr. Murphy. HMJr: Joe? Joseph Murphy: Yes. HMJr: When I went up to the Hill to see Mr. Doughton of the Ways and Means, there'e one of your men spotted in front of the door. Now I don't know whether he called up Mr. Doughton's secretary, but he said, "What do you have to do? Have to have a bodyguard? What are you afraid of?" he said to me. Well, I asked my doorman about it, the man - Bouck on the door. M: HMJr: M: Yes. and he says he's got instructions to phone those instructions are, because it makes when I go out. Well, I'd like to know what Well, he didn't phone here. He must have phoned to the District Office, and they don't send any- one up there. HMJr: M: No, but they were there - I mean, I don't need anybody in the Capitol. No. No, I know what he means then. He must have - we have a man by the name of Pat Smith from Boston who has been on a detail up there and another fellow from Pittsburgh there. Twas about a year ago, and we've had them around the HMJr: Capitol for Well, now look, I don't - I don't want the man, Bouck, on the door. Don't know what it - if he'e got instructions to phone where I'm going, I don' want him to phone where I'm going unless he gets permission from me. M: Okay. That's countermanded then. 103 -2- HMJr: What? M: Yes, then we'll countermand that right away, if HMJr: Does he - does he phone - where else does he that's in effect. phone M: HMJr: M: Well, he would phone - he would phone the District Office. He didn't telephone up here ever. Is it - where I'm going? Well, he - I - to my knowledge, I never knew he did that. HMJr: M: HMJr: Well, look into it, and I want a written report on it. Yes, I'11 do that. I want to know what his instructions are and what he's been doing. M: Okay. HMJr: If you please. M: Okay. REFER TO FILE No TREASURY DEPARTMENT WASHINGTON D.C. OFFICE OF THE CHIEF U.S SECRET SERVICE October 9, 1942 Memorandum for the Secretary From: Chief, U. S. Secret Service In accordance with your telephone call today to Assistant Chief Murphy, instructions have been issued to Agent Bouck as per attached communication not to inform anyone regarding your destination when you leave your office unless you give him definite instructions to do so. Heretofore, as we had Agents on duty at the Capitol they have been given advance notice by our Field Office when you were to visit the Capitol in order that they might render such assistance to the Secretary as the occasion demanded. At other times during the day when you left your office for appointments at places other than the Capitol, no informati on to that effect has been given by Agent Bouck to others unless you gave specific instructions that it should be done. for POPDEFENSE BUY UNITED STATES SAVINGS BONDS 104 105 U. S. SECRET SERVICE INTER-OFFICE COMMUNICATION From To October 9, 1948 File AIC M. R. Allen Date Chief Frank J. Wilson Subject Information re Destination of Secretary In compliance with instructions received today from Assistant Chief Murphy, I have instructed Agent Bouck not to reveal the destination of Secretary Morgenthau to anyone unless he receives specific instructions from the Secretary himself. It has been the practice, for some time, for Agent Bouck to inform the Agent on duty at the Capitol, either directly or through mo, when he knows that the Secretary is going there so that the Agent there may be in the vicinity to assist the Secretary should there be occasion therefor. Agent Bouck has been instructed to report to me when the Secretary leaves the office for the day so that I may know when he discontinues his assignment, as we have endeavored to keep an Agent on duty at the Secretary's entrance at all times when he is in his office or expected to arrive. Inkalle M. R. Allen Agent in Charge 106 October 9, 1942 4:28 p.m. HMJr: Hello. Operator: Mr. Sproul. Allan Sproul: Hello, Mr. Secretary. HMJr: Right. Allan? 3: Yeah. HMJr: This thing - according to Bell, he doesn't think it's going too well, and - have you got the latest figures? S: I just have the figures here which are about a billion a hundred and seventy million. HMJr: S: HMJr: S: Well, now wait a minute. Well, these are the figures that he gave me: seven hundred and five of bonds and eight hundred and two of notes. Hello? Yeah. That's a billion five. Now what have you got? I have a billion one right here. HMJr: A billion one? S: Yeah. HMJr: How are they divided? S: HMJr: About six hundred and fifty of - of bonds, and about five hundred plus of the notes. Well, his four o'clock figures are what I - three o'slock. (Talks aside) What did you say? Now wait a minute. The figures that Bell gave me were three o' clock. S: Three o'clock figures? HMJr: Were the ones that he gave me. 107 -2S: Yeah. Well, now at three o'clock here HMJr: Yes. S: HMJr: S: we were about - a little under eight hundred million. So it's gone up four hundred million since And we're now over eleven fifty. HMJr: That's just the New York. S: Yeah. HMJr: Well, how do you think that is? S: HMJr: S: HMJr: Well, as far as this district's concerned, it looks all right. Well. Now let me just get it again. You've got a billion how much? A billion Well - a billion a hundred and fifty million. Hundred and fifty million. Well, it's just - the thing that we're sitting here talking about is should we ask Ecoles to do anything? Call up the presidents or anything. Hello? S: Well, I don't think with the three o'clock figures that you know enough yet. HMJr: Yeah. Well, I think the thing to do 18 - is for us to get the four o'clook and then the five o'clock figures - get them every hour. S: That's right, and I know that -- because I talked with him earlier HMJr: Yeah. S: HMJr: ...... that he has asked all of the presidents to stand by until he - they hear from him. Yeah, yeah. Well, then - then you'll be there and I'11 be here until this thing 18 settled one way or the other. 108 -3S: Right. HMJr: What is your own hunch on 1 77 S: I think it will go. HMJr: S: I see. All right, thank you. All right. 109 October 9, 1942 4:35 p.m. HMJr: Marriner Marriner? Eccles: Hello. HMJr: This thing - at the moment, our bond issue E: Yeah. HMJr: Now I'm sitting here, and we've had the three doesn't look like a sure success yet. Hello? o'clock reports. We haven't got the four o' clock yet. E: Yesh. HMJr: How long are you going to stay at your desk? E: Well, I'm going to stay here till it gets over. HMJr: Well, that's what I'm going to do. E: Yeah, I'11 - I'11 stay here as long as it - what I've done is advised every one of the bank presidents to stay on the job until we release them. HMJr: Yeah. E: To stay right where they are. HMJr: Now.... E: And I talked to Dan awhile ago about getting a six o'clock report. HMJr: E: HMJr: E: HMJr: Well, we're going to get a five o'clock report. Well, and even one at six. Keep it Oh, yes. Oh, yes. open - keep it right open until six. Yes, we'll get a five and a six. 110 -2- E: Yeah. HMJr: Now New York at four o'clock had one billion one hundred and fifty million, which was - I think they were up four hundred million in the - since three o' clock. E: Yeah. Now I just got a wire from Young at Chicago HMJr: Yes. E: HMJr: it says, "Subscriptions from Continental hundred and fifty million" I see. First National a hundred million" E: HMJr: Yeah. talked to bankers Indianapolis and Detroit, Des Moines, Milwaukee, and all have indicated they would increase their subscriptions to amount # E: necessary" E: HMJr: E: Yeah. also talked with fire and casualty companies and they will be subscribing this afternoon . Yeah. and - am sure Detroit will increase its . HMJr: subscription above amount previously discussed" E: HMJr: E: HMJr: Yeah. . HMJr: Will keep you advised. Young." . I see. Well You see, this is one of the dif difficulties on this issue. Yeah. - there's two 111 -3E: In the first place, as I - and Young - what Young told me typifies the thing. He saye that - that they were terribly disappointed yesterday morning over there, because New York had assured them HMJr: E: HMJr: E: Yeah. see, that there would be a one and three quarter and a two and a quarter issue Yeah. and that they felt - New York was so sure of it that - that the Chicago people had depended on it, he said. HMJr: E: Yeah. And then he said it was a big let-down to find out that New York wasn't right. (Laughs) HMJr: Yeah. E: So he said that was - one difficulty to overcome was the propaganda before. HMJr: E: HMJr: Yeah. Now another one he said was that we were so late making a decision Yeah. that - that they didn't get the stuff until E: late in the evening, and he said that the Victory Fund Committee didn't get off to a start, and so forth HMJr: Yeah. that he thought that if we had - could have E: announced it the day before HMJr: E: Yeah. and given them a little time to do some work, that they would have - it would have been easier. 112 - HMJr: Yeah. E: And I think that is true. We were awful late in HMJr: Well, Buffington told me he couldn't find out until giving them a - a chance to do anything on it. five-thirty Wednesday, and so he couldn't let his people know. E: Well, that's - I'm just saying that so far as the field is concerned, the trouble is they - today's about the only day they've really had a chance to do anything. It took yesterday to get organized, and - and get adjusted. HMJr: E: Yeah. So that it - it 18 unfortunate that we got off to a bad start, but of course this darn propaganda by those fellows HMJr: Yeah. and if we had followed their recommendations E: HMJr: E: Yeah. then, of course, it would have meant Chicago and New York decides the issues." the rest of the country to have said, "Well, New York - HMJr: Well, that's not 80 important. I mean, they know by now where the financial capital is. E: Well, they ought to. HMJr: They know it's in Washington. E: HMJr: E: HMJr: They ought to know it. Now - but we're going to keep these fellows in the banks. They '11 be there All right. and I - we'll get this thing over. All right. 113 -5E: If the banks directly don't come in and do it when I think they will HMJr: Yeah. E: we - we'll see that a subscription comes in from Fed for enough to do it, and then to the extent that enough stuff comes in the mail, why, we can - we can pull out what's necessary. HMJr: Yeah. E: You see? HMJr: Yeah, because I'd hate E: Oh, it's - no, as far as the public announcement is concerned, the thing will be fully subscribed HMJr: Yeah. E: and no one - no one - if Fed has to take some of it, no one taken it. necessarily needs to know whether they've HMJr: Well, you know how it is. They'11 know it. E: Well, the point is that - that, of course, we'd only do that as a last resort HMJr: Yeah. E: and - and whatever - we've put the subscription that you never know until tomorrow. That's right. in, and there'11 be a lot of stuff come in the mail HMJr: E: And to that extent we can reduce our subscription, and it may be enough come in the mail to completely offset it if we don't have enough tonight without it. HMJr: Well, I'11 keep in touch with you. I'11 be here with Dan. E: Yeah, okay. 114 -6HMJr: Thank you. E: All right. Goodbye. 115 October 9, 1942 5:23 p.m. HMJr: Marriner Hello, Marriner? Eccles: Hello, Henry. HMJr: We've got the four o'clock figures now E: Yeah. HMJr: E: HMJr: E: HMJr: E: HMJr: and the total for the bonds is one million one hundred and eighteen million Yeah. and for the notes is one billion and forty million. Yeah. So we've still got a long way to go. Yeah, yes, we have, and I've been talking to the I've been talking to the - most of the banks Yeah. and, of course, what you get at four o' clock E: is - is possibly what they got by three o'clock, I mean HMJr: E: HMJr: Ah ....isn't it? I don't know. It's - no, it's.... E: Yes. HMJr: Possibly, yes. E: HMJr: E: Yeah. Well, there's always quite a lag in it. Yeah, but this is Yeah, it's - it ought to be - it ought to be more. 2- 116 HMJr: It ought to be E: I, was just talking to Chester Davis in St. Louis HMJr: Yeah. and he says this is really only a one-day E: subscription for them because we were so late getting it that they didn't get their stuff in the mail until - that there - that no one got their circulars and letters until late last night. HMJr: E: HMJr: Yes. So itthat really they've had one day only to work on Yeah. which is unfortunate. E: HMJr: Yeah. E: But what we're doing is getting all we can get in and then we can bring in some of the bigger banks and put in subscriptions, you know, in the last end of the thing. HMJr: Yes, now - will - will they - will anybody be in these big banks? E: Well, I talked to Sproul in New York, and they can - they'11 keep - they'11 get in touch with some of these fellows. Now another thing we can do is Fed will put in a subscription. HMJr: Yes. and then we can withdraw it. Say, we can put E: in a subscription for tonight HMJr: Yeah. E: ....80 that it's subscribed HMJr: Yeah. E: and - and then we can - we can sell our sub- scription tomorrow, you see? 3- HMJr: E: 117 I see. You mean, still work on it tomorrow! That's - in other words, we can put in our subscription tonight, and then we can dispose of it tomorrow if need be. HMJr: Yeah. E: And I think we could work it that way. HMJr: Yeah. E: We're prepared - we've covered all the machinery here for Fed to put in whatever subscription is necessary. HMJr: Yeah. E: So that 80 far as the - so far as the - the thing HMJr: E: HMJr: being subscribed, it will be subscribed Yeah, but that... but we want - we'd like to avoid Fed doing it if we can. I got this reaction that you'11 be interested in Yeah. from A1 Williams in Philadelphia. E: HMJr: E: Yeah. A1 says that - that - that there's - it looked like, in talking to some of these bankers, that there'd been a ganging up HMJr: E: HMJr: Yes. that some of them were fine. There are two or three of them said, "Just let us know what you want," see? He said there was a couple of others they talked to, they said, "Well, you wouldn't give us what we wanted. Maybe you 11 learn. Maybe next time you will." I see. 118 E: Now that's a hell of an attitude. HMJr: Yeah. E: And it's - it's that sort of thing that these fellows are - that we - we've - I don't mind some direct purchasing to show bastards like that, because that's what it is. It's a - it's a typical sit-down strike on the part of some of these fellows that want a higher interest rate. HMJr: Yeah. E: And that's all - that's all there is to it. HMJr: Yeah. E: And A1 Williams just confirmed it to me a few minutes ago. HMJr: I see. E: And I asked Chester Davis about it, and Chester said, "Well," he said, "There's - I - I.." - he said there wasn't much enthusiasm, and - but he said, "I wouldn't - I couldn't say that there was any concerted effort," you see? HMJr: Yeah. E: But it - I think there's more of an undercurrent that's been put out by these dealers and these fellows have made up their mind, by gosh, that now the Treasury has to have all this money, they were going to start to - writin' the ticket. HMJr: Yeah. E: And they thought this was a good time. HMJr: Yeah. E: And I just think that the sooner we meet that issue, the better. HMJr: That's right. Okay, I'11 be talking to you a little later, Marriner. 119 - -5 E: All right. Goodbye. 120 October 9, 1942 5:54 p.m. HMJr: Hello, Operator: Mr. Sproul. HMJr: Hello. Allan Sproul: Hello, Mr. Secretary. HMJr: Does it look any better to you now? S: Well, it still looks close. HMJr: Yes. S: Very close. How's the - how're the figures for the country? HMJr: S: HMJr: S: HMJr: Well, at four o'clock - our figures are four o'clock figures - we only had a little over two billion. Well, we're now one billion three here. Yeah. Yeah. Well, that's - for New York that isn't nearly enough, is it? Well, I'd say we ought to have one billion seven fifty to be on the - on the job. Yeah. Well, evidently they didn't like it as well as we thought they did, eh? 8: No, it looks that way, more so out through the country than in the money centers. HMJr: Yeah. Ah S: You haven't any figures since four? HMJr: Well, what we call the four o'olock figures, they were just a little over two billion, and that' S: Because we need the latest figures we can get to determine just how much we have to do. 121 -2HMJr: S: HMJr: Well, I don't know when the five o' 'olock figures will be in, and when they are I'11 let you know, and I'm just staying here. Right. But - because it's - you can think of - the fact they say that we got it out late and all that, well, we've got it out late before, haven't we? It was no later than usual. S: HMJr: S: Well, it was - I think it was later than usual, as we didn't get the forms until six o'clock night before last Yeah, yeah. and that's later than usual, 80 it took some humping to get the stuff out in the mails that night. HMJr: I see. Okay. S: All right. HMJr: Goodbye. 122 October 9, 1942 6:01 p.m. HMJr: Hello. Operator: Mr. Kilby. HMJr: Kilby? Edwin Kilby: Yes, sir. HMJr: When will you have the five o' 'clock's. I'm all in except one. K: HMJr: Which one? K: That's Cleveland. HMJr: K: Well, bring it up, will you, please? All right, sir. Be right up. 123 October 9, 1942 6:14 p.m. HMJr: Hello. Operator: Mr. Sproul. HMJr: Hello, Allan? Allan Sproul: Yes, Mr. Secretary. HMJr: For the five o'clock on the bonds, it's about a billion three with Cleveland still to be heard from. Hellot S: The five o'olock? HMJr: Yeah. S: Two billion three? HMJr: No, no, just the bonds - one billion three. S: Oh, the bonds one billion three. HMJr: And the notes approximately a billion and a S: In both cases. HMJr: Yeah, because they - they'd be good - it comes S: That is, if you include Cleveland it would be quarter - a billion two hundred and fifteen million with Cleveland still to be heard from. to, we figured around - a little bit better than two and a half billion - two billion no, about two billion six. around two six. HMJr: S: Two six. Now let me ask your advice. Which do you think is the - the lesser of two evils: to ask the various presidents of the Fed Banks to call up the commercial banks or to have the Fed put in a subscription tonight and then try to get 'em to sell them tomorrow. Well, I think it depends on how much we're - we're going for. If we're going for a very large amount so we'd have to approach a lot of (cont.) -2S: (cont. ) 124 people, then I think we might as well put in the direct subscription. If we're going for only a small amount that we could get from relatively few people, then I think we could go to the banks. HMJr: Yeah. S: If - if your people could make any estimate of about how much they would expect to get after they get their six o'clock figure HMJr: Yeah. then we'd know about what we're shooting at. S: HMJr: S: Yeah. And then I think we could decide whether to do it by direct purchase or by trying to get the banks to do it. HMJr: Well, Dan's sitting here with me, and he saye he can't tell. He can't - it'd just be a guess. S: Well, it would be a guess within - we'd know within some HMJr: He says on the mail it might be a half a billion and it might be a billion. He - he wouldn't want to guess. S: I see. Well, we - we could get the six clock the - we could wait another hour. Get the six o' clock report HMJr: Yeah. S: and then decide which one we're going to do, I should say. HMJr: Dan says have you got - have you cleaned up what you have received? I mean, in your bank are they behind - I mean, are all the subscriptions been entered? S: HMJr: No, they're pretty much up to date here. They're pretty much up to date. 125 -3S: HMJr: Yeah, there are no big ones that are out. Well, what does, for instance, New York show on bonds? S: Well, we show seven twenty-seven on bonds HMJr: Yeah, well, I got you for six sixty-two. S: ....and five seventy-eight on notes. HMJr: Well, I got you five forty, you see, so there S: HMJr: S: isn't much more. No. Now on our mail we're in the same position Dan is. On our mail we could be - a wide range of what we get, between one hundred million, say, and and three hundred million. Yeah, yeah. Well, I tell you we'11 just have to wait until the - we get one more return. What? I think that's the thing to do, and then to decide which way we'll go after it. HMJr: Right. Thank you. S: All right. 126 October 9, 1942 6:17 p.a. HMJr: Hello. Operator: Ecoles. HMJr: Hello. Marriner Ecoles: Hello. HMJr: Marriner? E: Yes, Henry. HMJr: It's approximately two billion six for five o'clock. E: For five? HMJr: Yeah. E: Well, it's - it's going to come in considerably more before you - before you get through. That's from California yet at six - I'd - you see, you've got very little HMJr: Yeah. and you'll get some more, I think, out of E: Kansas City and Minneapolis, and, of course, New York is HMJr: Well, they're pretty well in. I've just been talking to them. E: Well, they're in unless we call then for some more. HMJr: Well, now I was just talking to Sproul which he thought was the lesser of two evils, to have the Fed put in a subscription tonight or to have them call up some of the banks. E: HMJr: That's right. So he just said that - "Well, it depends upon how much we need." -2E: HMJr: E: 127 Well, - well, I think that's right. If 1f - if itthat's isn't too much Yeah. I would say that Fed had - could put in a subscription, and then the mail tomorrow - there'11 be - a good deal of this stuff, you see, is in the mail. HMJr: E: HMJr: E: Yeah. These - there's all kinds of country banks just that always mail their subscriptions in. Yeah. So that it may well be that the mail tomorrow we can delete or reduce our subscriptions by the amount of the mail. HMJr: Yeah. E: See? HMJr: Well, you're disinclined to have them call up the banks tonight? E: HMJr: No, no, I wouldn't be disinclined at all, because I think that these banks might just as well know that that it's an underwriting job for the banks Yeah. that it's - it's a question if - do the banks E: want to do it or do they want Fed to do it. HMJr: Yeah. E: I think they might just as well face that issue because they re going to have it from now out. HMJr: Yeah, well, my own inclination is - I mean, I - I think that we'd better put a little pressure on the banks tonight. E: Well, I'd just as soon do it. I'd just as soon put it on the banks and let them - let them come through on their subscriptions. 128 -3HMJr: E: Yeah. That's what I've been doing outside of New York. I left Allan and the New York, but I've been dis- cussing it with - I've discussed - I've talked to every - everyone except Dallas and Atlanta, and they re so daan small anyway it doesn't amount to much. HMJr: Well, Allan said he'd like to see now until this the next lot come in, you see? I mean, what we have at six o'clock. E: HMJr: Yeah, I - I - I told Allan I'd call him again at seven. Yeah, well, I'm - well, then - let's and at Least E: HMJr: E: HMJr: but - but I'd like you to know how I feel. I think of the - that Let the banks put more in. Well, do both. I think we ought to get a subscription from you. E: Well, we're prepared. HMJr: Yeah. E: We've already got authority, and I've given it to Allan. HMJr: Yeah. E: See, we've passed it on to Allan for the Open Market Committee to subscribe any amount that's necessary. So that we're just waiting to see what's necessary, and we can subscribe any amount that's necessary. HMJr: Well, I think we'll have to -have to call on you for both. E: Well, it may be but it's - what we.... -4HMJr: 129 Yes. HMJr: I think we may want to subscribe, and then in the morning it may well be we - there'd be enough in the mail that we can take it out. Yeah, well, that would be a lucky break. E: Yeah. E: HMJr: But I think - what I'm thinking about is this, I think that some of the big banks will have to be called up tonight, and we'll have to get a subscription from you also. E: Yes. HMJr: Both. E: Well, I - I think so. There's - there's this thing about calling them at night. Some of then you can get it tonight. Some of them you can't. Now this is what I - in talking to A1 Williams in Philadelphia HMJr: E: HMJr: E: Yes. A1 says that - that in 1919 Yeah. in talking to the banks - some of the bankers up there, that what they did they put a subscription in the next morning just as though it were a mail subscription. HMJr: Yeah. E: Your mail subscriptions are coming in HMJr: Yeah. E: HMJr: and he said that he could talk to some of the banks in the morning that he might not be able to reach tonight Yeah. -5E: HMJr: E: 130 and get a subscription in in the morning and treat it as a mail subscription I see. and take out our subscription to the extent it was offset. You see? HMJr: Well, let's think about it between now and seven. E: So there's several ways of doing it. HMJr: Right. E: Okay. HMJr: Thank you. E: All right. Goodbye. 131 October 9, 1942 6:41 p.m. HMJr: I've been meaning to call you up for a long time in response to your note. Walter Stewart: Oh, yes. HMJr: But you asked me not to, so I didn't. S: Oh, yes. There was no reason for bothering about that, Henry. HMJr: S: HMJr: How - how have you been? Feeling all right. Thank you very much. You're not on a party wire, are you? S: No. HMJr: Well, are you where you can talk a minute? S: Yes, I'a quite free. HMJr: S: Walter, here's my dilemma which I thought - that I hoped I never would be in. We got out this two per cent bond - hello? Yes, I get it. HMJr: And the financial community wanted a two and a quarter S: Yeah. HMJr: ....even told everybody that was what they expected. S: Yeah. HMJr: Now it looks as though we're - we're not going to get all the subscriptions. S: Aha, that's too bad. HMJr: Now I got a choice of two evils. S: Yes. -2HMJr: S: HMJr: S: Ecoles has the presidents of the Federal Reserve Banks standing on hand all over the country Yes. ready to call up the bigger commercial banks and ask them to subscribe Yes. tonight HMJr: S: 132 Yes. or the Fed could put in a subscription for HMJr: whatever we need tonight S: Yes. which is not public - hello? HMJr: S: HMJr: S: HMJr: Yes, I get it. and then we could take a look at the mails tomorrow and see what comes in Uh huh. and they could always, tomorrow, still ask the banks to take a larger subscription. S: Right. HMJr: Now I just wanted your horseback opinion which S: HMJr: S: HMJr: S: you thought was the lesser of two evils. I'd say the - the second. The second? Yes, I think there is a real question as to whether, if you did the first Yes. well, if you did the second intending not to have any publicity at all 133 -3HMJr: Pardon? S: If you did the second HMJr: Yes. S: and it turned out that you had a margin they'd still have to take HMJr: Yes. S: ....I'd be inclined to make it public. HMJr: If... S: If you did the second and the - and the outside HMJr: Now.... subscriptions took care of it then you wouldn't have anything that wouldn't S: HMJr: S: be entirely satisfactory. Now you'll have to say that again, Walter. I don't get that. Well, as I get it there are - there are two parts. One, the banks are standing by and might now take everything that is not already HMJr: The commercial banks. S: Yeah. HMJr: Yeah. S: The Federal Reserves. HMJr: Yeah. S: Or you can wait until tomorrow. HMJr: Yeah. S: .... find what the mails carry HMJr: Yeah. -S: HMJr: S: 134 ....and still have the Fed do the same thing. That's right. In either of these cases, you're faced with the question as to whether you make public HMJr: Yeah. what the Fed does. S: HMJr: Yeah. S: You're no more committed in one case than you are HMJr: Yeah. S: HMJr: S: HMJr: S: HMJr: S: HMJr: S: in the other. That still leaves open that question. Yeah. My feeling would be that you probably would want to make it in some form Yeah. public. Well, I hadn't thought of that yet. I see. I thought perhaps that's what you were going - going on to. No, I hadn't crossed that bridge. Oh. Right. Are those - those are eligible for bank subscriptions? HMJr: Oh, yes. S: And the banks have not taken them? HMJr: Well, they haven't - we've only got in altogether up to five o'clock, two and a half billion. S: Uh huh. 135 -5HMJr: And, of course S: Well, Henry, if - if the Federal - if the Fed took HMJr: Yes. S: what was not subscribed it's quite possible for the banks to take those tomorrow, isn't it? HMJr: Oh, yes. S: Yeah, I mean outside the Fed? HMJr: Yes. What Williams in Philadelphia said they can do is, they can ask them to subscribe and they can enter them as mail subscriptions tomorrow. S: That's right. HMJr: Yeah. S: I - I think there's a distinct advantage in leaving the Fed out of this if possible. HMJr: You mean the calling up of the banks? S: Yeah. HMJr: Tonight? S: I do, yes. HMJr: of course, it's late and they get a call at this hour S: Oh, yes, it sounds sort of panicky. HMJr: What? S: It sounds sort of panicky to me. HMJr: It does? S: Oh, yeah. HMJr: Well, I.... -6S: 136 There's a distinct advantage in not doing that. I think there's also an advantage tomorrow, if the - 1f the Fed does intervene, to let the member banks take it so it never shows up in the Fed statement. HMJr: Let the member banks take 1 77 S: Yes, I mean as a - let's - thus give them encouragement. HMJr: Pardon me? S: Let the Fed call up some of the member banks and tell HMJr: Oh. Oh, yes. S: Yeah. HMJr: them to take it So it - you mean, let the - what I - well, I was call- ing them commercial banks. S: HMJr: S: HMJr: S: HMJr: That's right. You mean let the - let them sell it tomorrow? That's right. And they could do it with a few, and I don't suppose that would That's right. .... necessarily get out. S: No, that's right. HMJr: Because I don't know whether I was right or wrong, S: HMJr: but evidently I - this was (Laughs) Yes, that - that surprises me a little. Well, this was something - what the Federal Reserve Board wanted S: HMJr: Yeah. ....and the New York bank didn't want, and - and these experts I called in didn't want. 137 -7-- S: I see. HMJr: But they - they felt we should keep it down to two S: Yeah. and we've done it, and. HMJr: S: Yeah, who was for the two and a quarter? HMJr: Everybody outside of the Federal Reserve Board. S: I see, yes. (Laughs) Yeah. (Laughs) HMJr: Yeah. S: Yeah. HMJr: Yeah. S: Right. HMJr: But the trouble is when they bring a man like Sproul down, he doesn't stand up, you see? S: HMJr: S: HMJr: S: No, that's the trouble, that's the trouble. I mean, he's - he's still a clerk That's right, yeah. ..and Yeah. Henry, there - I think there's another thing that's worth examining now. HMJr: Yeah. S: That's that whole curve, you know. I've never been too hot. HMJr: S: Curve? That maturity curve. I think it ought to be reexamined in the light of this. HMJr: I don't know as I follow you. 138 8- S: The ourve that George has of the - money rate curve that S: Oh, yes. Oh, yes. Yeah. That's such a neat device HMJr: Yeah. S: that when anything goes wrong with it - I mean, and I don't know that - whether this means it has HMJr: gone wrong HMJr: Yeah. but it's always worth reexamining the formula S: HMJr: Yeah. S: ..when something doesn't quite fit. That's right. And I think that's worth a reexamining. HMJr: Yeah. Well, needless to say, this 18 just between S: HMJr: S: HMJr: S: HMJr: S: HMJr: S: HMJr: the two of us. Oh, yes, absolutely, Henry. But - because I Are you at home now? in No, I'm sitting in the Treasury. Right, right. No, I'm waiting for the next report. Right. Well Well, you gave me what - what I - I mean - what I mean - the kind - you answered my questions, and I think I'm going to follow your advice. S: Right. -9HMJr: S: HMJr: 139 But. Well, as you say, it's horseback. And, of course, there's - there's a chance that the mail subscription may be bigger than what they thought. S: HMJr: That's right. They - they handled the thing mechanically very badly. S: HMJr: S: Uh huh. They didn't get it out in time. Well, I think there's a lot of individual reason too for not getting the Fed as your first underwriter there. HMJr: S: Yeah. I'd rather not have the Fed Board in that position myself. HMJr: Well, you and me both. S: That' 8 right. (Laughs) I thought maybe. HMJr: But - I - what I want to do is - of course, II've - I've - after this experience I - I've got to reexamine the whole thing, but S: HMJr: That's right, Henry. ....but the way Congress feels, I don't know whether I - what I could get today. S: I know, I know, I know. HMJr: Yeah. S: Say, Henry? HMJr: Yes. S: So far as my coming down is concerned. - 10 HMJr: 140 Yes. don't hesitate to ask me.... S: HMJr: Yes. S: ....at the time when you think it's worthwhile. HMJr: Right. S: HMJr: S: But if possible give me a little advance notice. I'11 do that. Then what I would do, I'd come down to spend the better part of a week, you see? HMJr: I see. S: And that would ease up on the number of times I come and go. HMJr: Well, it's like - it's - I - I didn't need you this week - if that isn't - I didn't call you because I didn't - because I - I really didn't need you. S: No, that's all right, that's all right. HMJr: And I will talk to you when I do need you, then you can tell me how you feel. S: HMJr: That's fine, that's fine, Henry. It isn't - it isn't a question of the number of days, you know, it's - it's - I mean, this is if you came down and spent a week here, I couldn't get any more out of you S: HMJr: S: HMJr: S: That's right. (Laughs) than I have in the last five minutes. That's right. That's the trouble. That's right. 141 - 11 HMJr: So I mean - thank you. S: All right. Good luck. HMJr: Yes. S: Bye-bye. October 9, 1942 6:53 p.m. HMJr: Hello. Operator: Mr. Eccles. HMJr: Hello, Marriner? 142 Marriner Eccles: Yeah. HMJr: The six o' clock is about two billion seven. E: Total? HMJr: Total. Bond and - and notes. E: Well, I estimated it would be considerably more than that. On the basis of - the New York is a billion three without the mail. HMJr: Yeah. E: And on the basis of the way it's been running, the percentage HMJr: Yes. that if the - all the other - the rest of E: the country was all in, same relation HMJr: Yeah. E: ....it would be about three five. HMJr: Well, it's not there. Of course, they told us that the rest of the country wanted a two and a quarter, over - hellobut Dan and I have been talking it E: HMJr: Yeah. and we feel that to have the presidents of the banks call up the commercial banks at this hour sounds too panicky. E: Well, I don't think that I agree with you. I - they have banks left.already done some work before the HMJr: Yeah. -2- 143 E: But I think to go outside and call them up, unless HMJr: Yeah. E: HMJr: E: HMJr: E: there's been arrangements beforehand to call them up as a.... I think The only place that that could be done is New York. Now I talked to Allan - it was arranged Yeah. for Allan to - he'd left word with some of the presidents that he'd - that he'd get in touch with them later, you see, and it's left that way so they're expecting a call. HMJr: Well E: Now 80 far as the other banks are concerned, the HMJr: Well, he can call them in the morning and tell them E: to put a subscription in just as well. Yeah, that's right. Then he could put it in as a mail subscription today. HMJr: Sure. E: Yeah, he could do that. In fact, the other banks could do likewise. HMJr: I think there'd better be no calling up tonight. E: Well, there'd be none unless it's New York. I wouldn't HMJr: Well E: HMJr: E: I - as far as the rest of the country is concerned, they , re all - they've all - they're doing their Well calling or have done it already. 144 -3 HMJr: Well, I don't think they better do it in New York. They - he can do it in the morning. E: Well, that's - as a matter of fact, I don't have any concern about Fed putting in a subscription. It doesn't worry me. HMJr: Yeah. E: Here's the way I feel about it. If we had bought five hundred million beforehand, see? HMJr: Yes. E: Then they could have said, "Well, hell, we didn't subscribe because you didn't give us a chance, and the hell with it, if you're going to do that." Now we're in a position to have said, "We've given you fellows a chance. The thing's been offered to you. Fed has not subscribed, and you don't subscribe" - then we have every reason for us to put a direct subscription in because we've given them the ohance first. HMJr: Yes. E: Now I think it's very much better for us to do it now than to have done it beforehand. HMJr: Well, I - I'd hoped you wouldn't have had to do it either time. E: Well, that's right, but a volume of four billion dollars right on top of other offerings that have been made without more preparation than we've had - it's - it's a - it's a pretty big job. The Victory Fund Committees have had a chance to do HMJr: practically nothing That's right. E: and the banks outside of New York have had only about one day. HMJr: Yes. Now E: And it really is a hell of a big job to be done in one day. 145 E: Yeah. Now, look, what did you have in mind that the Fed will - how much they '11 put in? Well, I had HMJr: Have you E: I was going to talk it over with Allan, and HMJr: arrange for them to put in whatever was necessary. Now they ve got - we ve got plenty of authority to put in whatever it requires. HMJr: Well, do you want to know what my idea 1s? E: Yeah. HMJr: Well, we think you should take seven hundred and E: fifty million of each. A billion and a half. HMJr: Yeah. E: Well, let's see - and then we can delete whatever is necessary. HMJr: E: That's right. Yeah. Well, we'11 - we'11 take whatever is necessary on it. We can - in other words, you'd like it to go over. HMJr: Oh, yes. It's got to. E: No, but I mean over the amount substantially. HMJr: Oh, yes. Then we can talk tomorrow. E: HMJr: Yeah. Well, we can - we can put that in. I don't see any objection to it. I think Sproul would like it to not show it very much over. Well, let - let's have this - we can talk about that in the morning. E: Do you - do you think it's any particular advantage to show it over? -5- 146 HMJr: Well, we don't want to have just four billion. E: Oh, no. Well, I agree. You've got a lot of mail subscriptions coming in on that. HMJr: Yes. E: If you had four billion now plus your mail sub- scriptions, you're going to have - oh hell, you'll have come in in the morning three or four hundred million altogether, all over the country from banks and everywhere. You see, all you've got is your big stuff today. HMJr: Yeah. Well, now - but let's understand - I mean I don't want to hang up the phone until I have a commitment from you. E: Well, that's right. Let me talk to Allan, will you, and call you back? HMJr: How long will that be? E: Well, I can call you back in fifteen minutes, ten minutes. HMJr: Well, make it as soon as possible, will you? E: Yeah, yeah, I'll put a call in right now. HMJr: And then call me back. E: Okay. HMJr: And tell him that this isn't - that unless he wants to talk to me, I won't call him. I said I was going to call him around seven. HMJr: Yeah, okay, I'11 tell him. But there're two things, we here feel it's much better not to call up the banks tonight. E: Yeah. HMJr: See? E: Yeah. Well, I think - I think you're right. E: -6HMJr: Yeah. E: I think you're right on it. HMJr: Okay. E: All right. Goodbye. 147 148 October 9, 1942 7:08 p.m. HMJr: Hello. Operator: Chairman Eccles calling. HMJr: Right. Hello. Operator: Go ahead. HMJr: Hello. Marriner Eccles: Hello. HMJr: Go ahead, Marriner. E: That's okay. We'11 put in for seven hundred and HMJr: Good. E: HMJr: fifty million of each with the understanding that tomorrow after we can see what the whole story is Yes. that we can then reduce it by whatever amount E: seems to be advisable. Allan doesn't think it would be advisable to show too much of an over- subscription because there's been practically no padding. Everybody has expected to get what they wanted, and there has been no padding. HMJr: Yeah. E: So we might just as well give them nearly a full subscription. HMJr: And did he agree on not calling up the banks tonight? E: That's right. HMJr: Well, then E: Yeah, he says that he thought the amount was too much to bother about it, and that - that tomorrow that we can, if we want to - if we find that with the mail in and with the late subscriptions coming in, that it's - it's enough, then we could get the (cont.) 2- 149 (cont.) banks to put subscriptions in in the morning as of today. HMJr: Yeah. E: Same as you - same as if we - same as the mail subscription. HMJr: Now do you think that we can keep this thing E: fairly quiet for awhile? E: Well, I don't see any reason why we can't, because there's no public statement. HMJr: No. E: We would see that they don't know whether we've bought them in the market or what we've done. HMJr: Well, let's try and keep it quiet for awhile, eh? That's all - it's okay with me. We'll say nothing E: about it. There's no point in it. HMJr: Can you caution your boys over there? E: Yeah, I will. HMJr: All right. E: In fact, the boys don't - there's none of them - none of them know about it because, well, they ve HMJr: all gone home except Szymdyak. I see. E: And so that no one except Sproul, at the moment, and Szymczak and Morrill know about it. HMJr: Yes. E: And then I'11 tell - get - get them together in HMJr: E: the morning and tell them. Right. Okay. Now I'll get in touch with you in the morning. 150 -3 HMJr: I'11 be right here. E: All right. HMJr: Thank you. E: Goodbye. 151 October 9, 1942 Dear Sergeant Uhl: Before you leave Washington, I want you to know that the Treasury is greatly pleased with the work you have done for us. Your songs are the kind I feel the country needs, and I hope we shall soon hear the country singing them. Your help with Treasury radio programs and your cheerful cooperation with several divisions of the War Savings Staff have been appreciated. You will be missed. With good wishes to you and cordial regards in which Mrs. Morgenthau joins me, I am Very sincerely yours, (Signed) H. Morgenthau, Jr. Sergeant Richard Uhl % Professor Welch Room 110) Treasury Department Washington, D. C. PHOsjre Copy in Diary Copies to Thompson 152 October 9, 1942 Dear Corporal Adair: I want you to know that the work you have done for the Treasury has given me great satisfaction, and I believe it a valuable contribution to the war effort. Your songs seem to me to have the spirit needed in the country at this moment. I hope we shall soon hear the country singing them. The help you have given Treasury radio programs and your cheerful cooperation with several divisions of the War Savings Staff have been greatly appreciated. Mrs. Morgenthau joins me in all good wishes to you. Very sincerely yours, (Signed) H. Morgenthau, Jr. Corporal Tom Adair % Professor Welch Room 118 Treasury Department Washington, D. C. PHOsjre . Copy in Diary Copies to Thompson 153 Analysis of Exposure to Payroll Savings Plans October 3, 1942 Number exposed to payroll savings plans Total number in the country (estimated) Percent of total exposed Part A - Summary by Number of Organizations Exposed I. Business organizations (1) Firms with 5,000 employees or more (2) Firms with 500 to 4,999 employees (3) Firms with 100 to 499 employees 487 490 99 5,410 23,508 5,868 28,018 92 (4) Subtotal - large firms 29,405 34,376 86 (6) Total business organizations 146,506 # 117,101 . (5) Firms with less than 100 employees 84 II. Governmental organizations III. Grand total 146,506 Part B - Summary by Number of Employees Exposed I. Business organizations . 20,411,838 2,907,251 # (6) Total business organizations # . (5) Firms with less than 100 employees # (4) Subtotal - large firms 7,871,731 7,155,093 5,385,014 * (1) Firms with 5,000 employees or more (2) Firms with 500 to 4,999 employees (3) Firms with 100 to 499 employees 23,319,089 32,400,000 1 2,181,131 1,383,584 2,600,000 1 2,700,000 3,564,715 5,300,000 72 II. Governmental organisations (1) Federal Government (2) State and local governments (3) Total governmental organizations III. Grand total office of the Secretary of the Treasury, Division of Research and Statistics. 1 26,883,804 84 51 67 37,700,000 1, 71 October 9, 1942. Excludes agricultural employees, military personnel, employees on WPA or NYA or CCC projects, proprietors, firm members, self-employed, casual workers and persons in domestic service. Data not available. 154 Firms Employing 500 Persons or More Participating in Payroll Savings Plans (As reported by the War Savings Staff's State Administrators) Total Number of firms with payroll State Alabama Apr. 18 41 Arizona Arkansas Northern California Southern California Colorado 9 savings plans Sept. 26 number Oct. 3 of firms (estimated) Percent of total having payroll Apr. 18 savings plans Sept. 26 Oct. 3 65 65* 8* 49 78 78 14 14 14 6h 100 100 85 17* 16 17 20 80 85 122 138 138 175 70 79 79 121 146 146 146 83 100 100 81 25 31 31 31 100 100 114 145 146 163 70 89 90 15 18 18* 22 68 82 82 32 44 44+ 47 68 94 94 28 40 40 43 65 93 93 86 123 123 70 100 100 11 11 11 11 100 100 100 391 465 466 559 70 83 83 Indiana 88 138 139 165 53 84 84 Iowa 22 29 29# 43 51 67 67 Kansas 23 25 25 25 92 100 100 Kentucky 38 48 48 50 76 96 96 Louisiana 29 46 47 49 59 94 96 Maine 48 58 58* 61 79 95 95 107 79 98 100 District of Columbia Florida Georgia Idaho Illinois Maryland Massachusetts Michigan Minnesota Mississippi Missouri 84 105 107 237 265 313 282 313 338 70 93 93 283 283 94 99 100 79 81 81 81 98 100 100 33 33 79 100 100 129 142 73 91 91 75 100 100 85 93 93 100 100 100 26 4 3 183 142 5 Oregon Pennsylvania Rhode Island South Carolina 32 32 32 91 100 100 185 211 67 87 88 100 100 100 884 935 81 94 95 136 140 74 96 97 83 92 92 5 Oklahoma 27 4 4 29 5 879 759 135 103 North Dakota Ohio 25 4 5 North Carolina 4 25 23 New Mexico New York 129 4 Nevada New Hampshire New Jersey 33 103 Montana Nebraska 123* 0 0 o 0 412 458 459 498 31 51 51 51 629 88 95 76 84 73 90 90 85 99 99 61 76 99 98 98 84 5 100 100 100 90 56 84 88 114 55 93 93 73 91 5 63 Utah 79 76 106e 106 8 10 12 100 100 100 106 88 100 100 79 91 91 72 62 47 94 96 Vermont 12 12 Virginia ox 106 106 72 49 36 72 74 77 127 143 146 154 93 95 100 100 100 100 100 82 4 25 4 4 1 3 3 3 Alaska 3 Total 91 10 11 12 Railroads 96 55 606 Texas Wyoming 100 54 50 Wisconsin 100 98 599 Tennessee West Virginia 100 48 South Dakota Washington 61 87 551 5 Delaware 5 Connecticut 109 115 95 95 109 95 109 5,897 6,358 77 93 5,865 92 4,864 office of the Secretary of the Treasury, Division of Research and Statistics. Data are for September 26, inasmuch as no October 3 report was received. October 9, 1942. # 155 Firms Employing 100 to 499 Persons Participating in Payroll Savings Plans (As reported by the War Savings Staff's State Administrators) : State Alabama Arizona Arkansas Number of firms with payroll Total savings plans Apr. 18 Sept. 26 149 250 43 67 Percent of total having payroll number of firms (estimated) Oct. 3 250 67 55 savings plans Apr. 18 Sept. 26 Oct. 3 289 52 88 88 67 64 100 100 38 47 47 74 99 100 4h 55 Northern California Southern California 512 680 688 116 688 756 1,020 1,022 1,178 64 87 87 Colorado Connecticut 113 277 135 135 140 81 96 96 512 519 713 39 72 21 56 56# 87 24 64 Delaware District of Columbia 33 52 145 145* 192 27 76 76 Florida 147 204 206 206 71 99 100 Georgi 133 391 391 416 32 94 94 31 32 32 33 94 97 97 1,300 1,871 1,888 2,253 58 83 84 415 642 643 643 65 Idaho Illinois Indiana Iowa 204* 302 55 286 286 286 97 187 189 273 273 273 321 165 204 Kansas 276 Kentucky 136 179 Louisiana 99 100 68 68 100 100 68 69 SON 85 85 60 171 171 187 32 91 91 Maryland 177 287 303 405 44 71 75 Massachusetts Michigan Minnesota 639 1,032 1,041 1,532 42 67 68 962 439 1,030 67 92 93 440 85 99 99 82 82 Maine 689 947 376 439 59 80 80 97 61 Missouri 472 668 669 669 71 99 100 Montana Nebraska 40 49 49 49 82 100 100 103 120 123 132 78 91 93 19 27 52 70 70 61 95 96 49 99 100 83 98 98 48 84 85 Mississippi Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvani Rhode Island South Carolina South Dakota 19 14 89 138 139 145 463 949 953 953 33 39 39 40 2,060 3,580 3,630 4,257 282 450 459 551 51 82 83 100 100 73 14 19 19 19 74 1,126 1,553 1,567 2,142 53 73 166 211 294 29lg 84 8l 288 349 288 48 286 1,682 2,144 2,186 2,186 28 100 100 259 261 154 71 152 154 21 25 25 326 356 618 Utah 36 44 Vermont 59 Tennessee 199 Texas 361 618# 44 65 73 334 46 78 78 178 40 85 87 100 25 84 100 493 40 72 73 1,378 24 45 45 lah 82 100 100 81 89 90 66 73 396 425 66 92 93 67 100 100 69 Virginia 281 234 393 350 350 West Virginia 207 213 307 44 67 134 680 69 459 467 68 278 Ki 96 23 74 100 23 100 100 100 52 94 94 94 28,018 55 83 84 Washington Wisconsin Wyoming Alaska Railroads Total 22 17 2* 2 2 2 49 49 49 15,365 23,275 23,508 office of the Secretary of the Treasury, Division of Research and Statistics. . Data are for September 26, inasmuch as no October 3 report was received October 9, 1942. approx 10 15642 fitDR. NAHUM GOLDMAN was born in Russia in 1894. At the age of six his family migrated to Frankfort, Germany. He attended the Universities of Heidelberg, Marburg and Berlin, and graduated with a Doctorate in Law and Philosophy He lived in Berlin from 1915 to 1933, where he published Hebrew books and was political reviewer for Martin Buber's Der Jude. From 1933 to 1940 he lived in Geneva where he represented the World's Zionist Organisation and the World's Jewish Congress. Since June 1940 he has lived in New York devoting his time to the Zionist Organisation and the American Jewish Congress. He has to his credit several books and articles on Palestine, general Jewish topics, and general political and philosophical topics. 157 MEMORANDUM FOR THE SECRETARY. October 9, 1942. Mail Report Although Bonds continued to hold a slight lead among the subjects included in this week's correspondence, taxes regained much of the interest that was lost last week; and the mail in general was heavier than for the preceding two weeks. Throughout the let- ters on taxes, discontent with Congress for its tardi- ness in adopting a revenue bill was expressed repeatedly, both by individuals and by corporations. Several telegrams and letters, apparently part of a CIO-sponsored campaign, endorsed the President's seven-point program, and urged adoption of most of the tax measures proposed by the Treasury. Of the 20 letters relating to higher personal taxes, only 5 agreed that rates must be higher in the low in- come brackets, as well as in the upper ones. The Ruml Plan, along with a general withholding tax, drew the approval of 17 correspondents, with no word of direct opposition. The sale of tax stamps was suggested several times as a simple means of collecting taxes at the source. The gross income tax was opposed 4 to 1; the spending tax provoked little comment this week; and an excess profits tax on the income of individuals had but 4 proponents. Higher corporation taxes were favored by 3 and opposed by 3. Another writer argued that the proposed tax bill discriminates against corporations that operate on the basis of a calendar year, rather than of a fiscal year. Opinion was rather evenly divided as to whether or not tax-exempt securities should now be taxed. Hostility to increased Social Security taxes was unmis- takable. Of the 8 letters discussing the question, only 1 favored a higher rate. In suggesting sources of addi- tional revenue, correspondents listed as taxable such items as outdoor ads, bets collected at race tracks, pets, matches, caskets and burial lots, cooperative associations, Labor Unions, checks, and money hoarded by refugees in this country. 158 -2October 9, 1942. Memorandum for the Secretary. In regard to Bonds, many of the comments were constructive in nature, and nearly all of them were cordial. Adoption of some plan of compulsory savings was recommended by 12 persons, and there was no out- spoken opposition to such measure. Some 15 letters outlined plans whereby Bonds and Stamps could be used as Christmas gifts, and 6 others cited December 7 as auspicious for the sale of Bonds. Others suggested that Christmas Club Savings be paid in Stamps or Bonds, that annuity Bonds be issued, that insurance salesmen be employed to sell Bonds, that hoarders of gold be permitted, without penalty, to convert it into Bonds, and that Defense Stamps be sold with each admission to a place of amusement. The form letter, "A MESSAGE TO THE AMERICAN FARMER", and the pamphlet, "LONG MAY IT WAVE", occasion- ally provoked unfavorable reaction, sometimes to the expense involved in preparing the material, and some- times to the plea that farmers buy Bonds. Individual complaints as to delay in delivery of Bonds, bought under payroll deduction plans, number only 8, of which 3 came from members of the armed forces, and 5 from employees of private industry. A few others related to the period required for the redemption of Bonds, and the failure to receive interest when it was due. Toward the end of the week there were a few communications requesting that Christmas gifts mailed home by soldiers and sailors, who are stationed abroad, be admitted customs-free. The outcry for Governmental economy was un- usually strong, a great deal of it coming in unsigned communications; and warnings against inflation were contained in a dozen or more letters. At least 10 communications expressed antagonism toward the practices of Labor Unions. The number of letters protesting restrictions on commercial silver dropped to 10, most of them original- ly addressed to Congressmen, who referred the communica- tions to the Treasury for reply. G.E. Forbush by Kay Pearson 159 GENERAL COMMENTS Senator Hattie W. Caraway forwards a letter she has received from H. T. Purvis, President, Arkansas Retail Jewelers Association, commenting as follows: "The silver situation is becoming more critical as each day passes, and deserves your most careful and prompt con- sideration. With more silver than can possibly be used on hand, and to prohibit the releasing of it (except at ridiculous prices which no one can pay with processed merchandise at ceiling prices) seems very unfair to us. Think of the thousands of people, many of them untrained for any other type of work, that will be thrown out of employment, and of the many, many small businesses like my own, as well as the many manufacturers, that will be ruined. How are we going to pay taxes if we are put out of business? We know that winning the war is more important than anything else and you can count on the jewelry industry for 100% cooperation in this regard. Every type of manufacturer within the industry that can convert to war production has already done so - many of these 100%, not producing one dime's worth of civilian merchandise. Clock manufacturers are one example, and I could name others. We want silver and we want it now - next month may be too late! We are asking the same Uncle Sam not to hoard silver that is asking us not to hoard rubber, tin, aluminum, copper, etc. Rudolph Bruening, Elmhurst, Ill. I call your attention to a very serious defect in arranging and handling of the people paying and filing their income tax in Chicago. Early in January, 1942, people had to stand in line for a very long time in a stuffy, drafty, corridor -- a few fainted -- waiting for their turn to file. Attention was paid of these conditions to Mr. Carter Harrison, but no help. It was said, "Washington don't provide better accommodations". Now this should not be so again in 1943, and improvement must be made. * Charles W. Davis, Detroit, Mich. I am enclosing Disability Compensation Check for $50, endorsed, "Payable to the Treasurer of the U. S. for National Defense Purposes". I am pleased to return this check to be used for defense purposes, and will continue to do so whenever possible. 160 -2I am a clerk in the Julius Frankel, Bronx, N.Y. Division of Disbursement, New York Regional Office. Scattered about my office is about a ton of scrap metal that nearly every one trips over, and several more tons hidden under layers of dust, oil cloth covers, and behind locked storage-room doors. There are literally pailsful of outmoded and unused rubber stamps that are just hardening and rotting away. This condition, I am most certain, is iterated in the twenty disbursing offices throughout the country. If the total scrap collected does not equal at least fifty tons, I'll eat every ounce of it! * * # To sum up, I ask that you authorize all disbursing officers, and the like, permission to roundup and dispose of, immediately, scrap metal, outmoded rubber stamps, and obsolete equipment, electrical and otherwise. Nicholas S. DeJohn, Adjutant, American Legion, Lyons, N.Y. Through the sale for scrap of a captured German Cannon, we had received as a souvenir of the last War, which amounted to $17, a resolution was adopted by our Post in regular meeting assembled that this amount be donated to our Government to be used in any way your office deems necessary in the War effort. It is a rather small amount, but we contribute it willingly. G. C. Gasber, Martins Ferry, Ohio. Enclosed is Post Office Money Order for $10, same being for the Defense Fund of the Treasury Department. # I am 49 years of age, and have a wife and an 80 year old father to support. For the past year and a half, I have been engaged in travelling as an independent salesman. * Whenever I have made money above necessary expenses, I have sent in a Money Order to the Treasury Department. However, of late, due to gasoline rationing, I have been hard put to keep going and donate also. My work necessitates travelling, mostly in the Eastern States from Boston to Miami, and so we have no home. My wife travels with me, and so our automobile is the only home that we know, * Incidentally, I refused to puroutside of hotels. chase an S Ration Book that was offered me last week at the Sidney Garage at 69th and West End Avenue, by a man employed at said garage. However, I did go to the Rationing -3- 161 Board in New York the other day in order to make application for an increase in my gasoline allowance, and was turned away by the girl in the front office with the statement that it was useless for me to apply for additional gasoline, and so I walked out in disgust. I have an Oldsmobile Sedan, 1941 Model with five good U. S. Royal Master tires, which I purchased in August, 1941, and they are good for at least 30,000 miles yet. * * We cannot afford the expense of a home because of the travel required in my business. We carry four suitcases, a typewriter and a radio in the car, and it is impossible for us to cart this luggage on a train, and so my car is my all. I suppose I could enter into some kind of war work, but I am not skilled at any manual labor, and so I believe that I can do more toward helping win the war at my own vocation, and contributing what cash I am able to at various times when the money is available. However, if you are of the opinion that my work is unnecessary in times like these, and that it would be better that I did not use my car in my work, then I hereby offer my car to the Treasury Department to use as they see fit in order to help win the war. Also, I would wish that the Government would place me where I would be needed most. I am of German descent, three generations ago, my grandfather being born in Germany, but even he despised the German Rulers. My aim is to see them utterly crushed so they never will menace civilization again. Thank God that we have President Roosevelt as our great Leader in these troublesome times. I will appreciate your informing me of your decision by dropping me a line at the address listed below, same being the address of my son, who is a welder at the Wheeling Mold & Foundry Company in Wheeling, West Virginia. He is working on tanks. Carlin S. French, President, Station WTMV, East St. Louis, Ill. Enclosed please find check in the amount of $68.21, a contribution to the Treasury Department of the United States. Radio Station WTMV conducted an automobile license plate collection drive from January 7 to March 21, -4- of this current year. A total of 4 3/4 tons of license plates were collected and sold to scrap dealers. The attached check represents the amount of money received from the scrap dealers for the license plates collected. The listeners of WTMV voted that this money should be turned over to your Department for furthering Uncle Sam's war effort. The following letter from Mrs. Lee Hummel, Salem, New Jersey, was elicited by the Secretary's form letter, "A MESSAGE TO THE AMERICAN FARMER": This seems a par- ticularly silly way of wasting money, and I wish most respectfully to suggest that the cost of such advertising be applied to the War effort. I am not going to mention the taste which prompted such an effort. But the whole thing seems a very telling insult to the intelligence of the American Citizen. 162 -5- 163 FAVORABLE COMMENTS ON BONDS Mrs. Arthur J. Bowles, Philadelphia, Pa. This family has just heard the inspiring "Treasury Star Parade", with Mr. Edwin C. Hill telling of the "Newspaper Carrier Stamp" plan. We were especially thrilled be- cause Mr. Bowles is with the Evening Bulletin Home De- livery Service. Through his work, he knows first hand of the pride, enthusiasm, and interest of these boys in selling War Stamps. Through this plan, the newspaper carrier boys have sold over fifty million 10 War Stamps. Whipple Jacobs, President, Belden Manufacturing Company, Chicago, Ill. When the directors of this Company declared a dividend on August 3, they voted to make it available in either War Bonds or Stamps, or cash, at the option of the shareholders, and special forms were prepared to facilitate the ordering of the Bonds or Stamps. The plan was commented on favorably by the press, and a telegram signed by you stated that you hoped such a plan would be as widely adopted as the payroll allotment plan. I was very disappointed to read in the Chicago Journal of Commerce of October 2, under a date line from Washington, October 1, a statement attributed to you that "the Treasury is making no attempt to have corporations pay dividends on their capital stock in War Savings Bonds instead of in cash". The general comments I have had, not only from our shareholders, but many others, indicate an interest in such a plan. It does reach a group of income receivers not covered by the payroll allotment plan. It is less expensive to the issuing corporation than the payroll allotment plan, and has the same voluntary feature. * * * The average corporation director does not think in terms of these small shareholders, and if the plan is to become widespread, it will take the same type of selling campaign that was necessary to make the payroll allotment plan as widespread and as successful as it has been. This must come from the Treasury, and I feel sure that if a concerted effort was made by the War Savings Staff that a very substantial addition in the sale of War Bonds could be effected. Certainly it should not be dismissed without a reasonable trial. -6- 164 R. N. Lockart, Gloucester, N.J. Robert McFarland served newspapers over a route operated by myself for nearly a year. During that period he sold War Stamps and won the three awards given by the Phila- delphia Evening Bulletin for salesmanship. Three weeks ago he was stricken with appendicitis. When he was operated upon, they found that the appendix had burst. Peritonitis set in and his life was despaired of. Yesterday he was pronounced out of danger and when the doctor asked him what he wanted to do while convalescing, he answered, "Sell Defense Stamps". It has been arranged for him to do so while confined to the hospital. Would it be too much trouble to write him a note of commendation for his patriotism and zeal? 7- 165 UNFAVORABLE COMMENTS ON BONDS First Lieutenant Eli T. Conner, Camp Beauregard, La. Yesterday my wife, in response to urgent publicity to attend a movie star banquet, took my Milford, Pennsylvania, check for $750 to the Guaranty Bank and Trust Company of Alexandria, La. and before the Bond was delivered to her, she was "hi-jacked" out of 75g (1%), as a banking charge. Never before had any check charge been made to me therefor, and I had been careful to draw this particular check to the order of the "Treasurer of the United States", because I intended that there should be no clearing charge, and also intended that the money go directly to the Government. Apparently, in order to make sure of its right to profit upon my check, the bank required my wife to add to the check the words, "or bearer" For your information, Mrs. Conner had no alternative as to the place of the purchase of the Bond, having gone first to the Chamber of Commerce, whence she was directed to go to the Paramount Theatre, which in turn sent her to the Bank. William H. Westover, Attorney-at-Law, Yuma, Arizona. I have spoken to many citizens in our community and almost uniformly they have agreed that the voluntary program is unfair and should be abandoned and instead, a program adopted whereby every citizen is required to buy Bonds. Frankly, it will please me greatly to see the day come when the authorities in Washington are closer to the people than they are now, and know how the people feel. I am certain that as far as my community is concerned, that the great majority of the people would prefer to see War Bond buying going upon a com- pulsory basis than to take the chance of failure through a voluntary effort. -8- 166 FAVORABLE COMMENTS ON TAXATION Dr. Thomas D. Blair, Plainfield, N.J. You know and I know the anti-inflation bill will not stop inflation. The proper way to cure is to remove the cause of the trouble. The Administration has repeatedly stated the correct cause of inflation -- too much money in circulation for the amount of consumers' goods avail- able. The anti-inflation bill does not touch the cause. It merely deals with effects. Tax enough where the defense money is being paid, and impose a Sales Tax, and you will stop inflation. The general public understands this thing. There is too much politics in Washington. 9- 167 UNFAVORABLE COMMENTS ON TAXATION C. S. Boothby, Jahn & Ollier Engraving Company, Chicago, Ill. Of course, it was to be expected, but it is none- theless resented that you persist -- acting as a mouthpiece for the smear-dealers -- in trying to increase the tremendous tax burden of the so-called "Social Security" hoax as an underhanded method of grabbing millions through a payroll tax which your gang doesn't dare to face under that particular name. The trouble with this payroll tax is that a firm has to pay that tax whether it makes a million dollars or loses a million dollars, and just this morning I heard of three firms in our industry which have had liens placed on their plants because they were unable to carry this preposterous burden any longer. Considering the fact that this subterfuge has collected between three and four billion dollars MORE in unemployment taxes than has been needed or used, and millions and millions more than you have needed for the pension requirements, I would say to you that employees as well as employers throughout the country are now waking up. to the fact that under the guise of a philanthropic title, we both This subterfuge are being gouged most beautifully. has now become a definite menace to the country and unless some of you people in the Roosevelt die-nasty can learn to tell the truth occasionally, and face the public with honest statements of all taxes being collected and spent, I prophesy you are fast approaching a climax between the taxpayers and the tax-grabbers. A. L. Mason, Mason's Appliance Store, Tigard, Oregon. When 1942 rolls to an end, my small business, started in 1937, will also have to come to an end because I shall be out of merchandise. Last year it did about $25,000. I made net about $3,000. This year I shall probably net about $3,500. These are the only good ears I've had. They have been good in the sense that they have enabled me to pay back on money borrowed on my home and on my life insurance in times prior to 1937. Each year since 1937, I have hopefully plowed earnings - 10 - 168 back into the business, $1,250 for store remodelling, $750 for special tools, another $200 for store lightHowever, the contemplated ing, linoleum, etc. # # high rate of tax on 1942 income is going to put me, and thousands of others like me, back into the red. My point in writing this letter to you is to ask if there can't be given to us who are being forced out of business some form of exemption that will at least enable us to close our doors with our heads up. I think it's only good Government al policy to leave small or large businesses in such a position that they can quickly and easily resume their part in America's enterprises after the war. # Henry Greenfield, N.Y.C. When I bought the current $5 automobile stamp at the West 83rd Street Post Office, in June, 1942, I asked to be permitted to register the stamp as I had previously done with last year's stamp. I was told that this was not being done, and that my only protection was in filling in the blanks on the stamp and attaching it to my car. I marked the stamp heavily in ink, adding the license number across the face for added protection and shellacked the stamp to the windshield. My car is garaged with G. Gandolfo at 600 East 82nd Street, where there is a watchman 24 hours a day. The car is not locked while there, but I have been told it is adequately protected. # * Some time between September 27 and October 2, during which time the car was not taken out, the stamp disI have learned appeared from the windshield. that stolen stamps are on sale by boys at $1 up a piece along First Avenue in the vicinity of the gas stations from 90th Street North. Stamps are being taken from cars in large numbers. 169 DIPARBONS OFFICE or THE SPORTRANT October 9. 1942 Received this date from the Federal Reserve Bank of New Torn. for the confidential information of the Segretary of the Treasury. compiletion for the week ended September 30. 1942, showing dollar disbursements out of the British Repire and Treach accounts at the Federal Reserve Bank of New York and the means by which those expenditures were financed. (amt.) E).M.B. ime:10/10/42 170 FEDERAL RESERVE BANK of New York Fiscal Agent of the United States October 9, 1942 SIR: Attention: Mr. B. M. Bernstein Reference is made to our letter of July 14, 1937, as amended, which you authorised and requested us as fiscal agent of the United States to send to the Central Bank of China, Shanghai, outlining the terms and conditions under which we would supply the Republic of China with United States dollar exchange. As a result of this arrangement, we purchased a total of 165,000,000 yuan for $48,487,500.00 and the Central Bank of China pledged to us as fiscal agent of the United States out of its gold held by us under earmark, 1,395,381.168 fine ounces as security for the performance of its agreement. The value of this gold at $35 per fine ounce amounted to $48,838,340.89. Under the dates of February 16 and March 1, 1939, we advised you of the release and sale of gold pursuant to cable instructions received from the Central Bank of China and the repurchase by it of Chinese yuan all in accordance with the agreement hereinabove mentioned. On October 7, 1942, we received a cable from the Central Bank of China requesting that we sell part of the gold pledged to us to the value of $14,687,500.00 and advising us that they would repurchase 50,000,000 yuan being the equivalent thereof at $.29375 per yuan. In accordance with your telephone authorisation we, as fiscal agent of the United States, purchased on October 8, 1942, 420,723.601 fine ounces of such gold at the price of $35 less 1/4 of one percent per fine ounce debiting the account of the Secretary of the Treasury Special Account with the cost amounting to $14,688,512.69. This amount was credited to the account of the "Central Bank of China - Special Account" which was also debited with the sun of $14,687,500 for the repurchase of the 50,000,000 yuan originally acquired by us on December 30, 1937 at $.29375. A like amount was credited to the "Secretary of the Treasury - Special Account." A cable was despatched to the Central Bank of China advising it of our action and authorising it to debit the account designated "Federal Reserve Bank of New York as Fiscal Agent of the United States" on their books for the 50,000,000 yuan. Copies of the cables exchanged between the Central Bank of China and ourselves in connection with the above transactions are enclosed. 171 -2- We submit below a resume of the yuan purchased and resold and the gold pledged and released for sale under the agreement of July 14, 1937, as amended. IUAN Inan Date Purchased November 10, 1937 November 26, 1937 December 30, 1937 February 10, 1938 Rate Dollars 50,000,000 50,000,000 50,000,000 15,000,000 165,000,000 $.29375 .29375 .29375 .29500 $14,687,500.00 14,687,500.00 14,687,500.00 1.425.000.00 $48,487,500.00 50,000,000 50,000,000 50,000,000 150,000,000 .29375 .29375 .29375 $14,687,500.00 14,687,500.00 14.687.500.00 $44,062,500.00 Date Sold February 15, 1939 February 28, 1939 October 8, 1942 $ 6.625.000.00 15,000,000 Balance GOLD Value . $35 per Fine Ounces Pledged to us as fiscal agent of the United States out of gold held under earmark for the Central Bank of China as security for the performance of its agreement Less gold released and purchased by us on February 15, 1939 Less gold released and purchased by us on February 28, 1939 Less gold released and purchased by us on October 8, 1942 Balance 1.395.381.168 $48,838,340.89 420,880.600 14,730,821.00 420,814.406 14,728,504.24 420.723.601 14.725.326,01 1.262.418.607 $44,184,651.25 132,962,561 $6,653,689.64 Very truly yours, /a/ H. L. SANFORD, H. L. Sanford, Manager, Foreign Department. The Honorable, oc. the Treasury, Fine Ounce 172 COPY INCOMING CABLEGRAM October 13, 1942 Chungking, October 12,1942 Federal Reserve Bank of New York New York No. 25 Your cable No. 31 We confirm. Central Bank of China 173 COPY OUTGOING CABLEGRAM October 8,1942 Central Bank of China Chungking No. 31 Your No. 24 Have sold today 420,723.601 fine ounces of gold crediting your special account with net proceeds $14,688,512.69. Have debited your Special Account $14,687,500 representing repurchase by you of yuan 50,000,000 at 29 3/8 which we authorize you to debit to the account on your books of "Federal Bank of New York as fiscal agent of the United States". Details by mail Your cable refers to your and our "Gold Operation" accounts but we believe you intended to refer to the above mentioned accounts. Please confirm. Federal Reserve Bank of New York 174 COPY INCOMING CABLEGRAM OCTOBER 7,1942 Chungking, October 7, 1942. Federal Reserve Bank of New York New York No. 24 Referring to your letter July 14, 1937 we request that you sell for our account gold to the value of $14,687,500 being a part of the gold held by you as security for the performance of our agreement as set forth in your letter of July 14, 1937 and credit proceeds of our Gold Operation Account. Thereupon please debit our gold operation account $14,687,500 and sell to us yuan 50,000,000 being the equivalent thereof at 29 3/8 to the debit of the Gold Operation Account in our books in the name of "Federal Reserve Bank of New York as Fiscal Agent of the United States" which debit please authorize. Central Bank of China 175 OCT 9 - 1942 CONFIDENTIAL Major General George V. Strong, Senior Member, Joint Security Control, War Department, Washington, D. C. Dear General Strong: I have your letter of October 8, 1942, referring to Admiral Leahy's letter of October 2 to me regarding the Joint Security Control activities. This is to advise you that I expect of about two weeks. In the meantime, if it is necessary for you to get in touch with any one in the Treasury, I suggest to be away from Washington for a period that you contact Under Secretary Bell, who will be in charge in my absence. Very truly yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury DWB:NLE Bent By Massager 12:45- owB P.M.- SECRET76 WAR DEPARTMENT WAR DEPARTMENT GENERAL STAFF MILITARY INTELLIGENCE DIVISION as WASHINGTON By authority A. C. of S., G-2 Date 10/8/42 gap October 8, 1942. Thumper Dan, Bell The Honorable, The Secretary of the Treasury. Dear Mr. Secretary: By action of the JOINT U. S. CHIEFS OF STAFF, on August 26, 1942, a single agency, known as Joint Security Control, was organized for the purpose of regulating and coordinating the activities of certain governmental agencies with respect to special operations. The membership of Joint Security Control consists of the undersigned and Captain George C. Dyer, U.S.N. Inasmuch as pertinent parts of the directive (J.C.S. 79/4/D) has been previously furnished for your in- formation, the functions of Joint Security Control will not be repeated. In view of your letter of October 2 to Admiral Leahy, when Joint Security Control members have occasion to contact. the Treasury Department the arrangements will be made through your office. Sincerely Major yours, GEO. General, V. STRONG, U.S.A., Senior Member, Joint Security Control. PORVICTORY BUY BECEMED SECRET 177 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE FROM Secretary Morgenthau Mr. Paul OCT 9- 1942 In the course of the investigation of Swiss insurance compenies currently being made by the Foreign Funds Control certain Information has come to our attention, illustrating (1) the manner in which specific information with respect to ship movements and losses is disseminated in the normal course of business operations of insurance companies, and (2) the manner in which information regarding ship movements and losses during specified periods is collated so that it is readily available to the employees of 72 insurance companies in this country. We have prepared a memorandum, a copy of which is attached hereto and supported by relevant documents, showing how, in a single typical case, specific information regarding the movement and loss of a ship reached a steadily increasing group of people in this country and abroad. Despite the fact that this general problem is apparently receiving attention by the several government agencies most directly concerned, we feel it is worthwhile to bring to the attention of these agencies our memorandum which points up the problem in a very graphic way. We propose to send a copy of this memo- randum, with the supporting documents, to the following: The Attorney General The Secretary of the Navy The Secretary of War The Director, Board of Economic Warfare The Director of Censorship The Administrator, War Shipping Administration. 2- All of the above agencies are represented on the Inter-Departmental Security Service Committee, which is considering the general problem of safeguarding vital information from the enemy. If this action meets with your approval, will you please so indicate below? REP Approved: Attachments. 179 DISSEMINATION OF SHIPPING INFORMATION THROUGH CARGO INSURANCE AND REINSURANCE The following shows how, in a single typical case, specific information regarding the movement and loss of a ship reached a steadily increasing group of people in this country and abroad. A1though some of the documents referred to do not state the exact sailing date, a pattern is created from which probabilities can readily be calculated. May 24 (approx.) Goods shipped via Pennsylvania Railroad from New York City to New Orleans. At this point, employees of the shipper and a certain number of the employees of the Pennsylvania Railroad knew that the SS Sixaola would sail from New Orleans bound for Guatemala within a few days. May 27 Bill of lading issued by United Fruit Company in New Orleans. (Exhibit 1.) At this point, employees of the United Fruit Company, which owns and operates the ship, knew that the SS Sixaola would sail from New Orleans for Guatemala. May 30 SS Sixaola sailed from New Orleans. June 2 Copy of Certificate of Insurance sent to Switzerland General Insurance Company, Limited, New York. (Exhibit 3.) 180 -2June 2 Original Certificate of Insurance sent to the Banco de Londres y America del Sur, San Salvador (the collecting bank), accompanied by invoice, ocean bill5,of6.) lading and draft. (Exhibits 1, 4, The information sent to the bank includes the name of the ship and the number of the voyage. Had this shipment been sent on open credit instead of against draft, this information would have been sent directly to the consignee. June 4 Certificate of Insurance received by Switzerland General Insurance Company. (Exhibit 3.) At this point, certain employees of the insurer, in addition to the persons mentioned above, know that this ship sailed from New Orleans and is enroute to Guatemala. June 4 Line card prepared, stating all risks insured by Switzerland General Insurance Company on this ship. (Exhibit 7.) At this point, additional clerical sailing of this ship and its route. employees of the insurer know of the June 4 Insurance certificate entered in daily report. (Exhibit 8.) At this point, additional employees of the insurer know of the sailing of this ship and its route and also know 181 -3of any ships sailing concurrently and the respective cargoes and destinations of such ships. This would clearly indicate to such clerical employees the departure of a convoy. June 4 Original Certificate of Insurance, (approx.) invoice, ocean bill of lading and draft received by the collecting bank. This date is established approximately. A stamp placed on the documents by the collecting bank does not indicate date of receipt. (Exhibits 1, 4, 5, 6.) However, the documents were sent by airmail and in normal course would be received at this time. At this point, employees of the collecting bank and also, presumably, employees of the consignee, both located outside of this country, know that the SS Sixaola sailed from New Orleans for Guatemala. June 12 Ship sunk. June 14 Exchange premium bordereau sent by the insurer to the American Cargo War Risk Reinsurance Exchange. (Exhibit 9.) At this point, employees of the 72 insurance companies which are members of the Exchange and employees of all underwriting agents representing such companies know that the SS Sixaola sailed from New Orleans to Guatemala. They also know the cargo carried and 182 -4have identical information as to every other ship on the cargo of which insurance has been written within the preceding ten days. Exhibit 9 is not dated, but we have been informed by the manager of one of the insurance companies that these bordereaux are prepared and sent to the Exchange at least every ten days. This is a routine activity of the insurer. June 22 Steamship company notified the shipper, by mail of the loss of the ship. (Exhibit 2.) This exhibit states that the ship was sunk by an enemy submarine. Immediately thereafter, the shipper's insurance broker notified the bank in San Salvador to return the documents. (Exhibits 1, 4, 5, bear stamps indicating they were returned by the bank.) It is extremely probable that the bank also notified the consignee. At this point, the loss of the ship due to enemy action is known to employees of the company operat- ing the ship, employees of the shipper, employees of the shipper's insurance agent, and is sent by airmail to employees of the collecting bank and the consignee, both of which are located outside of the United States. 183 -5July 3 Loss Committee Bulletin issued by the American Cargo War Risk Reinsurance Exchange and sent to every member of the Exchange. (Exhibit 10.) This Bulletin indicates that the ships mentioned, whose nationalities are given, were lost. In this case, it indicates that the SS Sixaola; an American ship, was lost on the outward voyage. At this point, certain employees of all 72 insurance companies belong- ing to the Exchange know the SS Sixaola was lost. July 13 Loss Report sent by insurer to Exchange. (Exhibit 11.) This Report is in response to the Bulletin mentioned above and states all cargoes insured by the company on the SS Sixaola. July 16 Letter confirming loss of the ship sent by Exchange to insurer. (Exhibit 12.) This letter purports to state the date of the sinking, which is euphemistically designated as "the accident (It also gives the sailing date which is, however at variance with the date stated by the company operating the ship. In this memorandum we have disregarded the sailing date mentioned in this letter.) July 24 Claim of loss received by the insurer from the shipper's insurance broker enclosing documents obtained from the collecting bank in San Salvador. (Exhibit 13.) 184 -6August 12 Loss paid by the insurer and debit notes sent to the Exchange and to the shipper's agent, stating the date of loss and the fact that loss was caused by enemy action. (Exhibits 14, 15.) August 19 Loss bordereau received from Exchange. (Exhibit 16.) This bordereau is sent to all 72 members of the Exchange. It is in code, but the code is not a difficult one. It states flatly that the ship was sunk due to enemy action. At this point, certain employees additional information of the progress of the submarine campaign. In the Loss Committee Bulletins all ship losses have been reported. In this loss bordereau all losses are received in a single list, SO that these of every member of the Exchange have employees have ready access to in- formation indicating practically all losses of merchant shipping, includ- ing tonnage and cargo, due to enemy action, since the American Cargo War Risk Reinsurance Exchange writes 98 per cent of all cargo war risk insurance. Information as to the name of the ship, its tonnage, and cargo is generally not made available to the public. 185 EXHIBITS Exhibit 1 Exhibit 2 Bill of Lading. Exhibit 3 Exhibit 4 Exhibit 5 Exhibit 6 Exhibit 7 Certificate of Insurance. Sight Draft. Original Certificate of Insurance. Exhibit 8 Exhibit 9 Exhibit 10 Exhibit 11 Exhibit 12 Daily Report. Letter of United Fruit Company, dated June 22, 1942. Invoice. Line Card. Exchange Premium Bordereau No. A424. Loss Committee Bulletin No. 750. Loss Report. Confirmation from the Exchange re Loss of the SS SIXAOLA. Exhibit 13 Letter, July 24, 1942, from Clarence E. Cooper & Co., Inc., Brokers for Rojo. Exhibit 14 Exhibit 15 Exhibit 16 Payment of Rojo Loss Claim. Debit Note. Loss Bordereau No. 558. 186 EXHIBIT 1 UNITED FRUIT COMPANY FROM OVERPAGE S JE The 29. FOR - Shipper, Vessel, referred overpage as mentioned or described on this side (back) hereof are as follows ROJO-FABIAN & CO. INC. 362 BROADWAY NEW YORK CITY Shipper SIXAOLA VOY #7 Ventel Destination of the Goods 1942 expected to sail PTO. BARRICS IN TRANSIT TO SAN SALVADOR SHIPPER Consignee Order of Notify (If Consigned Whipper's Offset) SRES. ANTOULO P. HASBURN HNO. SAN SALVADOR EL SALV. Routing of any) AND Numbers MARES DESCRIPTION OF COODS SHIPPER 1 DESCRIPTION CW Quantities SHIPPER'S CLASS INTENTION PACKAGES SHIPPER Me STRAWNER RATE FAUGIC FREIGHT A-P H & 2123 DALE RAYON PIECE GOODS 1 ADUANA 11-2 306 139 4 19 37-1 TRAC SAN SALVA WAR VIA NEW VIA-PTOY 92 LEANS PREPA ARRIO 511 PAID MP RR PRO 5M 30548 CSZ No ade Consultado de 21 calvador, North dreams, dia Visto en di EGM 4318. an C. fraidacion serán Q11 ULT. CONSIGNEE derecho utuda. care ANTONIO P. HASBURN HNO. SAN SALVADOR EL SALVADOR S indicados serks arribs EL de Salvador, AQUACE sharechos Chand SALVADOR IN TRANSIT Total Steamship Freight, the individual Tax. Wharfage and Teenage Derrand pe M.K KI.G. Manifeat Fees, 27 6 $100.00 Consular Fees, Consular Invoice Stamp Tax, Certifying Bill of Lading Service Fee. Total U.S. Currency. Witness and Whereaf date, Dated M NEW ORLEANS the which UNITED being agent signed and Litter issued 12-88 P Bis THREE original Bills of accomplished 5/27/42 No. PREPAID has and five (3) UNITED FRUIT COMPANY. hereof Filler of of 3m Cards of Get copies. 188 EXHIBIT 2 189 UNITED FRUIT COMPANY - - - Present FREIGHT TRAFFIC DEPARTMENT d. M. aroos AGGISTANT PREIENT Team MANAGER A-12 A-19 & B. BOOTT General POSIGNT AGENT E. L MAIER STREET PASIGNT AGENT NEW ORLEANS LA. June 22, 1948 Rojo-Fabias & CO. Inc. 368 Broadway New York city, W. Y. Dear Sir: You are advised that a shipment of MARKS & NO. PKGS. A P 1 & HNO (R) Aduana Central San Salvador via New Orleans Via Pto. Barrios 1 Bale DESCRIPTION Rayon Piece EIGHT good Goods 2123 was manifested and on board the 99 Sixaola sailing from New Orloans on the 28th day of way, 1948. wo regret to advise you that the SS Sixcola on the 12th day of June was sunk by an enomy submarino. Very truly yours, Freight Agent 190 EXHIBIT 3 5575 CERTIFICATE OF INSURANCE To SWITZERLAND ER No. B152325 GENERAL INSURANCE COMPANY. LIMITED ZURICH " 3640 08 369 1.5 BERTSCHMANN & MALOY, Attorneys 64 BEAVER STREET, NEW YORK 19 2nd THIS IS TO CERTIFY, that on the day of June REINS. atte insured under Policy No. 10.385 made for ROJO-FABIAN & CO., INC) six hundred fifteen and no/100 On 69 33.21 June Sea/42 COPY 1 Dale Bayon Please Goods 1942 22th Valued at Sum Insured On Board Pennsy ivunia Railroad to For Orleans s/s New York At and from to to San It is understood and agreed that in case of loss Assured on sum LD to the order of which conveys the right of collecting any such loss as fully as if the property were covered by a special policy direct to the holder hereof, and free from any liability for unpaid premiums. This certificate is subject to all the terms of the open policy, provided. however, that the rights of a bona fide holder of this certificate for value shall not be prejudiced by any terms of the open policy which are in conflict with the terms of this certificate. Not valid unless countersigned by Bertishman raby. Countersigned Attendange MARKS AND NUMBERS A P H & Ene. R Aduana Central Sun Salvador Vis New Orleans Via Pto. Burries SPECIAL CLAUSES Free vessel barned This property also insured directly covers caused thrft, pilferage, strikers, locked-out damage, by breakage or or Insured destraction persons taking the of part property directly caused by persons acting maliciously: but the foregoing shall not be to include or cover any loss, damage or expense caused by or resulting from (a) delay. deterioration or loss of market or (b) bostilities, warling operations, divil war, Against all risks including man. CONDITIONS Received - streeded in labor disturbance or riots or civil commutions and destruction damage to the revolution rebellion or incorrection or civil strife arising therefore. f 2123 be separately 192 EXHIBIT 4 Pay to the *** the June 8, 1948 the New York, N. Y., PAY IRL IN NEW YORK FUNDS charge they of ANTONIO P. HASBUN & HNO. SAN SALVADOR, EL SALVADOR FIVE HUNDRED EIGHTY-ONE AND 82/100 AT SIGHT 581.82 Order of BANK OF LONDON AND SOUTH AMERICA To No. 3778 194 EXHIBIT 5 I CERTIFICATE OF INSURANCE SWITZERLAND 8. 615 " R152225 GENERAL INSURANCE COMPANY. LIMITED ZURICH BC26 BERTSCHMANN & MALOY, Attorneys 56 BEAVER STREET, NEW YORK ORIGINAL June 2nd/42 19 2nd THIS IS TO CERTIFY, that on the made for 10,385 insured under Policy No. June day of 19 42. this Company ROJO-FABIAN & CO., INC. Six hundred fifteen and no/100 Dollars. 1 Bale Rayon Piece Goods On Sum Insured Valued at On Board Pennsylvania Railroad to New Orleans S/S Sixaola-Uhite Fruit Co Pto. from New Urleans. to S/S At and from New York San Salvador -Salvador. to Ba It is understood and agreed that in case of loss the same is payable to the order of on surrender of this certificate, which conveys the right of collecting any such loss as fully as if the property were covered by a special policy direct to Assured the holder hereof, and free from any liability for unpaid premiums. This certificate is subject to all the terms of the open policy, provided. however, that the rights of a bona fide holder of this certificate for value shall not be prejudiced by any terms of the open policy which are in conflict with the terms of this certificate. Not valid unless countersi ned by Bertrahman Maloy Attorargs Countersigned MARKS AND NUMBERS These SPECIAL CLAUSES special override the stated at the bottom of this certificate whenever they are in conflict therewith A P H & Hoo. Free of particular average under 3% unless general or the vessel be stranded, sunk, burned, on fire or in collision, each bale, case or shipping package separately insured R This insurance also covers damage, theft, pilferage, breakage or destruction of the property insured directly caused by strikers, locked-out workmen, or persons taking part in labor disturbances or riots or civil commotions and destruction of or damage to the property directly caused by persons acting maliciously but the foregoing shall not be construed to include or cover any loss, damage or expense caused by or resulting from (a) delay. deterioration or loss of market, or (b) hostilities warlike operations, civil war, revolution, rebellion or insurrection, or civil stri Aduana Central San Salvador Via New Orleans Via Pto. Barrios PAID Against all risks includir war. # 2123 CONDITIONS thereof Warranted free from capture, seizure, arrest, restraint, detainment, confiscation, or nationalization, and the attempt thereat, whether time and whether also warranted free from boutilities warlike operations (whether there be a declaration of war or not). piracy, civil war. revolution, rebellion insurrection or civil any therefrom Warranted free of loss or damage caused by or resulting disorder. from strikes, Jockouts, labor disturbances, riots, civil commotions or the acts of or General Average taking and part Salvage any Charges occurrence payable according to Foreign Statement or per York-Antwerp Rules if in accordance with the Contract of Assured known of error in Held covered, at a premiumshallto be arranged, in case of deviation change of voyage thewarehouse description interest,vessel, board until of the given manufacturers' voyage. provided shippers' that the the policy) during the on transit until safely the deposited in con- the vessel named except that respect River Plate. the risks under this insurance shall any Shed (transit or otherwise). Store, Custom House, or upon the expiry of ten (10) days, subsequent to landing. craft. raft and/or lighter to and from the vessel Each craft, raft and/or lighter to be dremed a separate insurance. The Assured liability. agreement are not be prejudiced by the presence of the negligence clause and/ latent Bills of The of the resar betweencover the Assured Assurers hereby admitted risk of inland shore is and/or land, then that the inland railroad (unless stated thereon). and that this insurance covers only loss are. or while on railroad cars, and by are or flood (meaning rising navigable waters) when on dock, wharf, breakage (neither of which shall be treated as particular average within the meaning of my franchise in this certificate), collision with another vessel. the Claim and Settling Agents are only to intervene for the purpose of ancertaining the nature, cause, and extent of the for. the settlement of claims under this insurance, and that they cannot cited any legal proceedings, the Insurance Company Courts Law of the place where the respective policy was issued. It that this insurance gearge of the place where the respective policy was issued 196 o EXHIBIT 6 C 19 ROJO-FABIAN & CO., INC. MARK INVOICE NO. 362 BROADWAY P H & Hno. 1854 OUR ORDER NO. NEW YORK, N.Y. 7 de mayo de 1942 SOLD TO Bros, Antonio P. Hasban Hno, YOUR ORDER NO. 1559 RG-1373 REQ. NO. 2 San Salvador Aduana Central TERMS: Giro a la vista: San Salvador Via New Orleans VII Pto. BarrARPine NUMBER SHIPPED BY GROSS 2123 306 139K 306 136K n Salvador, S.A. Penn. R.R. to New Orleans United Fruit 88 Oo. to To. Barrios PRICE GENEROS CONSITUIDOS DE 90% O MAS DE SEDA ARTIFICIAL DE TEJIDO NO DENOMINADO 463-1-01-001 1-FARDO* 21 Piesas 11 Pieges 6 Piegas 888-1/2 Yds. 273-1/4 Yds. 203-1/4 Yds. .36 .45 .36 Empaque on fardo Planillas Consulares Notarisacion J cargo de la Gamara do Oomeroic Gastos do Cobransa. Preparation do Do cumentos Declaramos bajo juramento que los von- dedores de las me noanoias arriba relacionadas, que son ciertos las precios, pe sos y demas particularer que consignamos y que dichas meroancias son el producto del suelo de la industria do los Hatados Unidos. Aseguro contra todo riesgo inoluyendo guerra 8/9615 64... Seguro adicional also al tiempo do salir el baroo Flote deede New York a How Orloans Flote Mairitimo To tal ROJO-FABIAN & CO per TOTAL We certify that this is a true and exact copy of the original invoice. ROJO-PABIAN & CO.. Inc. per 0 $10.96 8.15 .50 .75 5.00 2.00 24.60 18.45 6.27 5.11 198 EXHIBIT 7 THIS STRAMER Sixada or. / 1325 is 23246 is 2323 15 2320 100868 558937 <</3 VOTASE AMOUNT 615 1, . C Oz Scan Salvador 885 " 455 may TX 4/2 . have - haseless X Sandrand him 0. I 290 480 wee. NS98 $100 053990 4200 /2/2 500 99% 200 EXHIBIT 8 Bordereau No. 227 DAILY REPORT OF RISKS TAKEN FOR "SWITZERLA GENERAL INSURANCE COMPANY MARINE LIMITED. - MALOY, - WAS/R 4530 6/3 ZURICH. 125381 #53/R EX AM 2645 JUNE 2380 65 07 63 RESTLAND APR LMO no on /5 8/h 152325 6/1 SIKACLA ATON PCC are A/R BS the (2120) PENN 22 as 3. 50 05 14 125 198924 mg/a PENNER NE ORLEANS PTO MARRIED CLEACLA 192325 6/2 SPECIAL 5572 227 JUNE ROHNER GEHRIG & CO 10508 5575 57 00 A/R 10044 1502 57 27 75 X 227 CO INC JUNE on SCHOE A/R THE PERFACE 9374 615 SCHOE 198306 6/9 PERM PR BIKACLA MA/A NET YORK if OPLEANS PARRIOR x N/K SCHOC 190527 6/0 PEW COROZAL 158900 PEHN GOROZAL 125 TMS/A NEW YORK TAMPA FLA TAMPA FLA BAN JUAN COTTON TOINE 17 TAMPA FLA SCHGE TON PCE and BAN JUM 57 SCHOE ORLEANS BOBOTA COL PONT IAC 1300 N/A INT U S BAN JUAN LIFLES PHOTOUNS 175 N/A SCHOO REG P/P 198-goa 6/0 RICHOLAB CUMED HEY VOHK MONTERREY PIPLES NAVANA CUBA CANTRIDGES X 125 00 550 50 10 9579 227 MAY al ROBBAT A3754 9500 227 JUNE BAVAGE ARMS.CORP 6c S/R 025 129 A/M 10044 ARP 57 25 PSS/A CX 105405 6/9 aur 00 97 7 COROZAL 39 00 125 SCHOO VBB/R EX 195470 6/L 5570 6. , FERNCL IFF 9377 1050 N/A ME/S EX 199479 6/5 5576 19 695 A/R no/n Cx NEW YORK TAMPA 5575 asc 5581 09 45 K-SE PMS/S 195467 6/2 THUNDERER NEW YORK BUENOS AIRES CARBONS ETC 5582 710 w/A SCHOO EX 5505 10 71 155460 BLUEF IELDS HABAN CUBA PLATE ETCH SALT s/ 227 MAY THE BENEFELDER CO INC 505 SCHOC was/s 149819 6/4 RAPEL 149217 6/6 VIRGINIAM RAILWAY 00 BANTIAGO VEIL INGS A/N 1504 900 MS/A ROANDEZ MCX100 19226 N 5408 RAYON YARK 149216 9600 6.00 V 145210 6/9 BORNOLT NEW YORE UNENOS AIRES VEIL IND A/R 5585 227 JUNE BIBER HEGNER & 00 INC a 035 9586 a 25 cas 5250 5507 09 6 14 SCHOO 1159 6/2 IMPERIAL YOUN HONEY O/P 10 125 10 09 SCHOC 07 PAJAMAR NEW YORK HAVA NA CUBA RAYON PCE GDS N/A mm 792 04 1A 700 10 57 58 20 DONA MONTEVIDEO 66.00 27 * 9651 5509 227 10471 9590 227 MAY Q STEEHGRAFE INC 14 155476 155477 JUNE . N°10 51 05 30 1 DUTY 155475 6/2 95 , PAS/A EX 5500 290 589 15 5/8 . ma/n 5591 9592 JUNE STEHL1 & CO 202 EXHIBIT 9 To A424 AMERICAN CARGO WAR RISK REINSURANCE EXCHANGE --- BERTSCHMANN a MALOY JUNE DATE 1.942 SAILING ON AND AFTER 6/1/41 RISK - MAILING FROM DATE COMMODITY TO GROSS AMOUNT CRITISH MATE PREMIUM SANTA TERESA 5551 P/P 5541 JUNE 1942 NEW ORBEANS CURACAO - I NEW YORK KLERKSOORP TVL COTTON NECKWEAR ETC PORT EVEROLADES HAYANA CUBA RAYON PCE GOS FLA E COAST CAR PERRY 26 00 570 7 50 43 35 . . 658 7 50 49 35 . - 2811 7 50 210 05 . . . 9656 7 50 274 20 . . . . 2050 7 50 $52.09 MAY 1942 . BUENOS AIRES . . . . . . . 5545 . 5547 RIO GALLE008 55.48 AIR EXPRESS 5550 . 5545 NEW YORK MIAMI EMINOLE 10 00 575 PANAMA CITY WRIST WATCHES MAY 1942 TAMPA VEGA ALTA NEEDLEPOINT YARM 5551 ALCOA PATHFINDER JUME 1942 NEW YORK CARACAS COTTON YARK 5552 BRAGELAN MAY 1942 INT VIA Y MONTEV 1000 LEATHER CLOTH 5559 IMPERIAL JUNE 1942 NEW YORK GUAYAQU IL COTTON FLANNEL POINT PITRE COMPRESSION RINGS 12500 51 25 537 4 00 21 48 6645 6 00 390 70 550 7 50 26 25 190 7.50 14 33 7 50 6 75 P/P 5555 TRONDANGER JUNE 1942 INT VIA Y RIO DE JANE IRO AUTO PARTS 1320 10 00 55% RIO GALLEGOB MAY 1942 BUENOB AIRES NEW YORK POPPY BEED 1106 7 50 5557 FERNCL IFF FORME URA ALUMINUM SULPHATE 90 12000 5 . . 132 00 02 93 . . . HUEMUL . NEW YORK QUITO ECUADOR PHARMACEUT ICALS 120 7 50 9 00 SANT IAGO ALARM CLOCKS 460 7 50 34.50 560 7 so 42 00 65 7 50 4 00 IMPERIAL JUNE 1942 . 5565 . 5562 6600 5 25 346 50 5964 . 5565 P/P 5566 AIR EXPRESS MIAMI CARACAS 5567 P/P HORRISTOWN PA VARYO LEIGESTER ENG TEXTILE MACH INE PART 70 10 00 7 00 5568 REG P/P NEW YORK BANTIAGO CHELD RIBBONS 42 a 00 5% 5570 JUNO NEW YORK PARAMARIBO TOILET PREPARATIONS 315 7 50 23 65 5575 SIXAOLA NEW ORLEASS PTO BARRIES RAYON PCE GDB 455 6 00 27 30 5574 . . . . 005 6 00 53 10 . . . 615 6 00 56 90 . . 290 6 00 17 40 SAN JUAN R 625 6 00 57 50 1050 6 00 63 00 . . . 5575 . . 5576 . . . 5577 COROZAL . TAMPA FLA 5578 . JUNE 1942 MDSE RAYON PCE GOB COTTON TWINE RAYON PCE GOB TOTAL 300 58387 25 PAID 650 000 POPAYAN VIA DESIVENTURA . 5550 57 50 25 5554 NEW ORLEANS REMARK 5 00 4 00 JUNE 1942 SPECIAL BINDER NO. J . 5544 10 00 50 TAX ALL way YORK 10 80 650 BAJAMAR 5545 100 . 5542 RAYON UNDERWEAR 6 5550 CONDITIONS AUG - 61842 34 75 - 2000 41 360 os 2520 36 5378 . . 204 EXHIBIT 10 - 205 AMERICAN CARGO LOSS COMMIT BULLETIN July 3, 1962 No 750 ITEM" (Ambet card OUTWARD Apportionment No.2- Our (American) OUTWARD Our File 1626 FLORI (Dut OUTWARD Aphortioment 3002- Our File $1596 1918 (Norwegian) IIWARD Element No, 7- Our File #1617 a becambers are requested to send in promptly LOSS reports advising their 1 nes by the above mentioned vessels. 206 EXHIBIT 11 207 x toss REPORT TO AMERICAN CARGO WAR RISK REINSURANCE EXCHANGE COMPANY BOR14 Fire & Marine Insurance as 4 Balan STEAMER s/s Sixcele FLAG period Date July us, IN SATLING DATE NATURE AND DATE OF LOSS Balletta #760 Item Bord No. No. Month Risk No. VOYAGE INSURED Amount Injured Loss Est. Tax State Reg. 1 1424 June 5673 2 4484 5874 a 4484 5575 A484 6576 4436 5024 4 5 New Orleans . Pfa Barries 6456. pass. 866. any. 628. 616. sec. 290. 460. 460. L.T. I PROVISIONAL No Peol Reben Youth No 208 C EXHIBIT 12 C AMERICAN CARGO WAR RISK REINSURANCE EXCHANGE ROOM 1000 . se JOHN STREET NEW YORK July 16th, 1942 CONFIDENTIAL Mr. ins. Schmitt World Fire and Marine Insurance Company 56 Be ver Street New York City Dear Sir: "SIXACLA" (Amer.) Our 1628 The Committee has confirmed that claims on cargo carried by this vessel can be dealt with on the basis of a total loss resulting from war perils. Very truly yours, LOSS CC.P.ITTEE, m&.7V udeusaul. L. K. Weidensau), Secretary MAYAEL Sailing Date May 31, 1942 Accident June 12th, 1942 PAID 210 EXHIBIT 13 COOPER or CO., be MARAN LANE NEW YORK July Deth 1948 Switzerland General Insurance Co. 56 Beaver Street New York, E. Y. Sentlement -Fabian & Co., Inc. RE: ... SIXAOLA PAID We enclose herewith doesnets in port of claim for total loss on shipments per S.S. "Sixeola", sunk by enery action / 18th. Elias Daboubt 1 Invoice, Letter free United Huft Co., Duplicate and original ins. cert, original B/L dated any 14. David Barruchil Invoice, Unpaid Draft, Lother from United From Co., original and Duplicate Ins. Cert. PB issues, original B/L Dated May 13, 1948. Antonio P. Hasbuns 1 Invoice, Unpaid Draft Letter from United Fruit Co., original and Duplicate Ins. Cert. original B/L dated May 27, 1948 Yours very truly, CLARENCE R. COOPER & co., Inc. JJM:J8 By one. now SA in 0.00 212 EXHIBIT 14 H August 12, 1942 American Cargo Ner Risk Reinsurance Exchange 99 John street New York, New York Gentlesens We enclose debit nota as undernated, covering War Risk Less paid by this company, applicable to our Reinseresce Contract with the American Cargo War Risk Reiner once Exchange. This clais has been supported by the customary documents or suitable indeanities for these which are missing and has been adjusted and settled according to usual serine to the conditions of theThe insurance. insurance practice. settlement conformsPin all U AID After approval by the Less Committee, please collect the proportion due from the subscribers of the Exchange and rew mit to ms the amount se collected. Very truly yours, WORLD FIRE & MARINE INSURANCE co. mim Bertselman & Maley, Agents. 4 debit notes $ 466. 290. $2,845. S/S Sizeola 214 EXHIBIT 15 New York, N. Y., - so 19M merines - See alate Reference To BERTSCHMANN & MALOY, Agents, Dr. 6 THE WORLD FIRS AND MARINE INSURANCE COMPANY 56 Beaver Street D4 May'st DATE - game POLICY NUMBER PREMIUM a/s simela - Nee Origna to Pte. Service Sailing May 31, 1048 Seak - to easay action Jane 10, 2048 one Sale Rapes Pleas 3 Amount of Insurance pas. Amount paid and due tree Exchange : goas, Bord. was - Bick 48875 Accured: majo-Police & co., Inc. PLEASE SEND REMITTANCES DIRECT TO BERTSCHMANN a MALOY. AGENTS 56 BEAVER STREET NEW YORK 215 216 EXHIBIT 16 73 LOSS BORDEREAU No. 558 i COMPANY AMERICAN CARGO WAR RISK REINSURANCE EXCHANGE 7 Bord LONDON ASSOC. FEDERAL INS. SEA INS. U. S. FIRE 00 LANE 1942 Company Risk No. VESSEL VOYABE 42/475 R-4 JUNE 1942 106098 P-6 JULY 1948 112559 P-6 JULY 1942 2112144 P-6 00 JUNE 1942 209210/11 P-6 DO 00 00 01/03 04/03 00 - - Amount Ped RA : 4,842 - Date NEST 19.1962 STATE DATE a NATURE OF LOSS SUNK DUE ENEW ACTION Pale 4,842.80 NO CAL IF. 15,500. NO N. Y. 00 700. NO N.Y. 00 6,650. NO WINE 4,160. NO N.Y. 00 6,874. NO TEXAS 00 4,160.00 6,874.00 3,950. NO 8 3,950.00 15,500.00 700.00 w 6,681.00 WESTCHESTER AUG. 1942 0001909 4-6 WESTERN JUNE 1942 0000972 P-6 ar. MUTCH JUNE 1942 5200-6600 E-6 01/04 2,580. NO N.V. a 2,500.00 NO. MERICA JUNE 1942 361519 R-3 Ex $-9 04/04 2,664. NO N.Y. DC 2,610,00 01/04 2,500. NO 403.21 689 Tog 00 JUNE 1942 AUS. 1942 21666 N-0 04/04 1,499. NO VA 00 N. Y.( so LA. JULY 1948) 00 r MUTUAL INS. 06/04 255. NO 04/04 42,794. NO kg 08/03 6,000. NO was. N. Y. NC N. Y. WORLD F&W NUG. 1942 7070 W-8 LONDON essa. NO. 1942 B-6 QUEEN INS. JULY 1942 121584/5 VAILUB WORLD F A N JUNE 1942 5404 K-9 01/03 110. FIREMEN'S FUND JULY 1942 VIRICUS S-7 01/05 40,500. JULY 1942 163049 S-7 01/05 460. 30 HOME INS. JULY 1942 53495 U-9 E INS. JULY 1942 CUNTINENTAL JUNE 1942 FEDERAL UG. 1942 DO ass FALL FIRE IND. 01/01 NC N. Y. NO N. Y. 869,992. M 7,404 M 00 a 6,800.00 PAID ONT. 00 00 3,060.00 NO 06/03 3,060. 6,400. 04/03 15,582. NO L-8 L-8 95. NC 166038 01/03 N. Y. N K-5 04/03 N. Y. 20166/4491 NO N. Y. M N. v. 30 N. v. x 16,304.00 41,195.00 a 1,861.00 01/03 L-8 01/03 119097/0 L-8 JULY 1942 118210 JULY 1942 JULY 1942 NO. 04/01 14,652. NO a 95.00 A 210.00 14,652.13 DC JULY 1942 04/08 16,304. FEDERAL E-7 M. w 116540. - E-7 04/08 41,135. JULY 1942 You K-T 01/03 4,922. M 21337 N. Y. 5893 K-3 01/09 1,650. N. JC N. v. K-7 01/03 2,703. NO a JUNE 1942 AR. WRIT NOTE: A check is fever of the American Corpo War Filed - be in the bonds of Albert William & Co. - - later 13,902.00 u 130812 JUNE 1942 6,400.00 00 2135015/6 AMERICAN INS. 460.00 N. v. N. v. N. v. M Y. 21615 L-8 JULY 1948 110.00 40,500.00 269,992.00 2,816.00 or auc. 1942 INS. 255.00 42,794.00. E-] CRICULTURE 1,099.00 1,650.00 2,511.63 The within Items have - approved by the Loss Committee for - days from - - eight dell will be - Rd folder 544/55/24. AURT WELCOX & co. Inc. By did MK e I LOSS BORDEREAU No. 550 NO. 1 COMPANY Last Good - Company VESSEL 2,200. M. v. a NO 00 600. NO N. Y. a K-7 2,012. NO N. Y. 2,012.00 K-7 a 3 79376 3394 L-5 DO 230. n. v. 130.00 MJ 1942 NO x L-5 70 120. NO x 520. NC N. v. N. v. NO NC HARTFURD FIRE JUNE 1942 20/00/1206 K-7 JUNE 1982 20904/36-39 NEWAR FIRE JULY 1942 an. MUTUAL JUNE 1942 104470 uc JUNE 1942 102864 L-5 x JUNE 1942 104364 L-5 101291 L-5 102051 LM mar 1942 - 1942 a 104365 L-5 104179 L-3 JUNE 1942 104177 L-5 JUNE 1942 104172 L-S 100981 Las JUNE 1942 JUNE 1942 2 x a us 1942 x x PHLENIX INS. 15066 L-5 x us 1942 15067 L-S 15068 FEXER way 1942 ME. 1942 121427 ETN IN Mail 1942 10619 is FIRE ASSLC. MW 1942 31118 as AUTUMOBILE JULY 1942 25058 a. MUTUS MJ 1942 326-325 an 1948 98760 x FEDERAL DC 220. NO N. v. N. v. x 220.00 220. NO a N. Y. a 80.00 M N.Y. a 290.00 M N. Y. x x 30 so. 290. 610. NO - 1942 100923 00 a 00 x DU L-S M-5 L-7 34/03 01/03 01/03 01/03 &-6 Q-6 235. so. 270. 480. 85. 12,402. 950. 170. 2,045 a 589. a 200. 280. - NOTE: A check in fever of the American Carpo War Risk Reinsurance Exchange must be in the hands of Albert William & Co. Inc. not later than - days from date otherwise eight draft will be - 220.00 DC 610.00 MICH. a x 1,815.00 ML N. x N.Y. Mr N.Y. NO N. Y. PAID NO N.Y. N.K. M N.°. N.Y. is No. NO N.Y. 90 la NC 52.00 270.00 A 480.00 x 85.00 12,402.00 950.00 x N. Y. was. N N.J. J N.Y. N.Y. x N 235.00 2 M. N 262.00 A DO DC DC 6-6 270.00 2,235.00 26a. MAY 1942 to x a x 90.00 330.00 N. V. NO L-S a NO 1,865. 15072 M. Y. 270. a L-5 130.00 DC JUNE 1942 15074 a M. V. N. - 1942 - 1948 N. Y. NO 2,235. L-5 a 350. DO 16072 120.00 520.00 a L-5 JUNE 1942 a 90. L-S ST. Prill FAM. 600.00 x 2160 9167 2,800.00 130. 104366 - 1942 SUNK DUE ENEW ACTION 00 JUNE 1942 PROV. KSH. JU 01/03 DC L-5 a 6 1,245.00 00 K-7 x Pale N. v. 10730213 30 Ped BA DATE & NATURE OF LOSS STATE NO JUNE 1942 PENER VOYABA ABULIS : 1,245. FEJER 00 -I - AMERICAN CARGO WAR RISK REINSURANCE EXCHANGE 170.00 2,045.00 - 589.00 $00.00 250.00 The within items have been approved by the Less Committee for ALMERT WILLOOX a CO. Ins. By M. K PRODUCER LOSS BORDÉREAU No. 550 AMERICAN CARGO WAR RISK REINSURANCE EXCHANGE P.O.E Date JOSE APPORTIONMINT NO. 7 Company Cash COMPANY - No. Bond FEDERAL a HARTFORD FIRE 30 AND ING. Amount 0-6 01/03 : 710. 1,370. & JULV1942 20166/4499 as 01/09 no. 20009/2661/6 01/09 3,730. MI 1942 06 77294 G-6 305. MAY 1942 01/03 Q-6 01/04 4,361. 08/04 No F-8 6,055. 2,473. M F-8 01/04 F-8 01/04 16,750. 997807 JUNE1942 110694 AUS.1942 214979 JUNE1942 937 ST.PHIL Fail JUNE1942 4405 FEDERAL - 1942 99558 - 1982 2631/1999 1,134.00 NO N. Y 04/01 5,275. NO N. 04/01 450. NO N. 2,850. NO N.Y. NC N.Y. N.Y. x NO N. Y. 00 NO x NO N.Y. N.Y. NC P.R. N.Y. 30 NC N. Y. x NO N.Y. a NO a MC unde. 56,800.00 17,200.00 3,240.00 N. Y. J 1,472.76 NO 2-6 DO JUNE1942 107732 100079 M-7 00 JUNEI948 JUNE1948 103070 M-7 30 AUB.1942 364471 D-6 x 0-6 DO 0-6 30 0-6 a 2-6 00 D-6 T-6 G-8 G-8 JULY1942 19357 as AUGH 942 752 Yes check 40.00 DO 27c. 0-6 107017 FORM N.Y. 00 JUNE1948 I NO 16,750.00 ID N. Y. a JIVI948 40. 2,473.00 in NO 00 UNIVERSILE ONT. 6,055.00 1,017. 111005 1160 NO DC 01/01 M-S JUNE1943 264301/2 N.Y. N.Y. (A N.Y. 114807 UG.1948 N.Y. NO JULY1948 1962 M 365.00 2,412.00 740. 00 FIREMOPE RAD NC 01/03 JANE1942 AUTOMOBILE 3,730.00 DC Pad 00 00 A N.Y. N.Y. ML 00 242050 ST. x N.Y. JULY1942 19355 N. V. 730.00 N NO 30 x N. Y 1,134. 106137 369990 1,070.00 NO 01/03 JUNE1942 MM. $ 710.00 is 01/03 FEDERAL NO. MERICA Paid P-4 JUNEI948) 111006 SUNK DUE CNEW ACTION N. Y. 105743/5 JUNE1942 DATE & MATURE OF LOSS STATE M JUNE1942 EAGLE ST.R ar. MURIAL Pedian 01/04 106590/9 AUTOMOBILE Insured 90655/8 JUNE1942 FUND Brides - 1942 SEA INS. FEDERAL INS. VOYAGE VESSEL Amount us 190. 01/03 325. 03/01 110,030. 04/01 60,038. 04/01 56,800. 04/01 17,200. 04/03 3,240. 04/03 1,472. 04/01 5,941 04/08 6,900. Z-O NU - NO NC 2-8 Card 85. 04/03 not Inter 740.00 1,087.50 870.00 PAID 5,275.00 450.00 30 250. 925. 30 x 2,850.00 250.00 DC 05.00 190.00 925.00 985.00 30 30 N.Y. N.Y. $10,050.30 68,036.00 5,941.00 DC 6,709.03 x The within Home have been approved by the Loss Committee for present ALMET WILLOOK & ca Inc. I By ( M K WHODBACE 217 LOSS BORDEREAU No. 950 APPORTIONMENT NO. 7 Email COMPANY Bord - Complete British Insured Peel RA 800. N. Y. NO DATE a NATURE OF LOSS - 01/04 9,000. 01/04 1,750. 20098/196 04/03 7,000. NU S-8 V-RIGUS 01/04 1,440. N. N-7 221.00 NO x 221. MICH. N-7 01/05 60.00 NO CLAN. x 60. N.Y. 00 7,400.00 5 x 600.00 480.00 no JULY1942 V.RILUS 7185 +7 NO 30 NO N.J. N.Y. JC 7,000.00 x 1,440.00 20 9,000.00 LC IN) ATL. MUTUM JUNEI 042 AUTOMOBILE 1942 834 JUNE1942 215 N-7 01/04 78410 01/05 7,400. NC N-7 600. NO 01/04 NC N. Y. x 480. N N. Y. x BRIT.4 FOR. JUNE1942 PROV. WSH, JULY1942 6853213 N-7 QUEEN INS. JUNEI 942 201039 N-7 x JUNEI 942 JULY1942 SEA INS. JUNE1942 WORLD FM JUNE1942 JUNE1942 DC 00 DO AMERICAN & FOR. 556714 00 106238 ou 5575 5576 on a a JUNE1942 5573 JUNE1942 5574 JULY1942 116546 F-7 30418 F-7 BRITISH a FOR. JULY 1942 PROV. WGH. MAY 1942 AND. 1942 00 567828 F-7 63812 103555 ST. PHIL JULY 1942 17843 x x 01/04 x 3 a F-7 JULY 1942 a DL 10316/17 LUNDUN - 01/05 a 1-8 F-2 360. 820.00 N. v. N.Y. M JULV1942) RUYAL INS. sout SUNK DUE ENEMY CTION 850. 111891 DO Paid 01/04 JULY1942 a Amount STATE -7 JULY1942 JUNE1942) Amount AUGUST is 1988 04/01 30 H-RTFURD FIRE VESSEL VOYAGE Dass 2-0 114836 FEDERAL AMERICAN CARGO WAR RISK REINSURANCE EXCHANGE : PHIE 4 1,750.00 960.00 N. N. Y. 30 1,425.00 N. Y. is 340.00 NC 615. NJ M. Y. x - NO N. Y. N. N. Y. N. N.Y. CALIF. DC 1,360.00 NO 8,950.00 1,425. 310. 290. 455. 615.00 290.00 PAID 455.00 -5.00 x 1,360. CALIF. 00 8,550. NO 00 N.Y. 00 275.00 275. NO 00 00 & 1,290. NO ILL. 1,290.00 KANDAS 00 52,000.00 52,000. NO 00 220.00 NO POWN. 00 220. 04/04 APPLICALE TO NO.7 AS ATTACHED 1 961.258.90 The within items have been approved by the Loss Committee for payment NOTE: A check is favor of the American Cargo War Risk Reinsurance Exchange must be is the hands of Albert Willoss & Co. Inc. not later than seven days from date. otherwise sight draft will be drawn ALBERT WILLOOX & CO. Inc. Security By (Seit) M K. WEDENSAUL 218 219 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE TO Secretary Morgenthau FROM Messrs. Paul and White 10/9/43- Re: Protection of Mexican Railroad Equipment Used in the United States. The Board of Economic Warfare is attempting to work out with Mexican authorities a procedure for permitting United States purchases of war materials in Mexico to be brought into the United States on Mexican freight cars. Today such purchases are brought to the Mexican border on Mexican freight cars and there unloaded and reloaded into United States freight cars. The volume of such shipping is large, and this impediment is both time consuming and wasteful of the nation's freight car capacity. Under the Board of Economic Warfare's proposed plan, Mexican freight cars could carry the supplies directly to their destination in the United States. However, one of the biggest stumbling blocks to the execution of this program is the fear that United States creditors of Mexican railroads will seize this opportunity to attach the Mexican freight cars. This appears to be a real possibility since there are huge blocks of defaulted Mexican railroad bonds being held in the United States. The Board of Economic Warfare has considered several "schemes" to protect against this attachment of Mexican freight cars but while some of them might be eventually sustained in the courts, still the freight cars in question might be immobilized indefinitely and defeat the whole program. Representatives of the Board of Economic Warfare have informally approached us on the question of whether we might not be able to give them some help under our 220 -2freezing techniques. We feel that we have adequate authority under section 5(b) of the Trading with the enemy Act, as amended, to cope with the problem, and, in fact, we have already successfully dealt with similar problems twice. In connection with the Japanese evacuation program on the West Coast, we invoked our freezing powers to protect the evacuees against unscrupulous creditors. We issued a special regulation which required such creditors to get a license before they could touch the evacuee's assets. Under General Ruling No. 10A issued August 12, 1942, we announced a moratorium on obligations of Philippine companies held in the United States. This ruling protected such companies against bondholders actions, foreclosure proceedings, attachments, etc., in all cases where the assets of the company were in the Philippines and default stemmed from the occupation of the Philippines by Japan. We feel that we can cope with the instant problem along the same lines and without freezing Mexican assets generally. We would simply declare all the freight cars in question to be "special blocked property" and prohibit any attempt to "tie up" the cars through court process unless the creditor got a license from us - which he would not get. We feel that the program would have popular approval and we would issue a press release which would afford the public a full understanding of the relation of this program to the nation's war effort. If you are in agreement in principal with this program, we will advise the Board of Economic Warfare that we are prepared to cooperate with them and the State Department in this matter. REP HOW 221 NOT TO BE RE-TRANSMITTED COPY NO. 13 BRITISH MOST SECRET U.S. SECRET OPTEL No. 349 Information received up to 7 A.M., 9th October, 1942. 1. NAVAL U-boats have started operations in the CAPETOWN area where six ships were reported sunk on 7th and 8th. 2. AIR OPERATIONS WESTERN FRONT. 8th. A Mosquito bombed a factory near SAARBRUCKEN A Beaufighter attacked and damaged an E-boat off the FRISIAN ISLANDS and other Beaufighters shot down g JU 88 off USHANT. 8th/9th. 57 aircraft were sent mine-laying off the Dutch - and French Atlantic Coasts. Two are missing. EGYPT. Kittyhawks made 11 bombing attacks on enemy M.T. and camps causing considerable damage. Beaufighters attacked tank landing craft off SIDI BARRANI and the sea plane base at BOMBA damaging 5 seaplanes. Two ME 109's were shot down. CRETE. 6th/7th. Wellingtons bombed MALEME aerodrome and set fire to 3 aircraft on the ground. 222 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE Oct.9,1942 TO FROM Secretary Morgenthau Mr. Hoflich Subject: Japanese and United States Pacific Naval Losses. I. U.S. Naval communiques dated October 3-8, 1942 reveal the following additional Japanese and U.S. Naval losses in the Pacific: A. Japanese: 1. Aleutians. Sunk - 3 cargo ships; probably sunk - one transport and one submarine; damaged - 2 trans- ports. 2. Solomons. Damaged - 5 cruisers, 2 destroyers, one seaplane tender, one transport, 4 cargo ships, and one unidentified vessel. B. United States: One submarine lost. II. Losses announced in U.S. Naval communiques since Pearl Harbor total: A. Japanese: 159 vessels sunk, 30 probably sunk, 129 damaged. B. United States: 46 vessels lost, 12 damaged. -2- 223 Table I Total Japanese Vessels Sunk and Damaged to Oct. 8, 1942 Combatant Vessels Probably Sunk Sunk Type Battleships 0 O Aircraft Carriers 6 Cruisers 11 Destroyers 26 Submarines 3 8 Others 1 13 Totals 4 2 16 63 5 11 29 * 43 15 49 1 1 Total 5 1 6 Tenders Damaged 7 14 7 5 14 29 79 158 Non-Combatant Vessels Fleet tankers 10 Transports 25 Cargo and supply 48 Miscellaneous 13 Totals TOTAL ALL TYPES 0 7 * 5 2 5 15 16 * 48 18 71 11 * 26 96 14 50 160 159 30 129 318 Also several additional vessels. 224 -3Table II American Naval Vessels Sunk and Damaged to Oct. 8, 1942 Lost Type Battleships Total 1 2 0 0 2 0 2 2 1 Damaged 0 1 Aircraft Carriers Cruisers Demolished to Prevent Capture 3 Destroyers Submarines 11 1 6 1 0 2 1 0 O 1 1 0 18 4 3 Motor Torpedo Boats Submarine Tender Aux. Seaplane Tender Mine Craft Gunboats 3 2 0 1 1 2 O 7 5 1 0 0 0 0 1 0 4 0 2 1 0 4 3 Tankers 3 3 Tugs Transports Target Ship Fleating Drydock Total 0 37 1 6 0 0 1 1 1 9 12 58 -4Table III 225 Japanese and American Vessens Sunk and Damaged in the Solomon Islands (August 7-Oct.8, 1942) Japanese Losses Sunk Type Battleships Aircraft Carriers Cruisers Destroyers Probably Sunk Damaged Total 0 0 1 1 O 0 2 2 0 0 1 1 12 . 12 7 5 Submarines 1 0 0 Tenders 0 0 2 Tankers 0 0 1 1 0 o 4 4 0 6 10 34 43 2 3 Transports Cargo and Supply 4* Miscellaneous Total 2 7 1 2 1 1 1 3 American Losses Cruisers 1 Destroyers 4 2 2 Transports 4 Total 7 Also several additional vessels. 5 1 5 12 -5226 Table IV Japanese Vessels Sunk and Damaged in the Aleutian * Islands (June 15 - October 8, 1942) Probably Sunk Type Cruisers 6 1 Submarines 0 1 Transports 2 Cargo and Supply Minesweepers Miscellaneous Total 4 2 1 16 Damaged Total 6 0 1 Destroyers Sunk 5 2 5 6 1 0 5 0 0 o 3 1 ** 24 9 6 9 9 2 2 43 No American vessels have been reported lost or damaged in this area to date. Also several additional vessels. 227 INTELLIGENCE REPORT 44 10.9.42 CONFIDENTIAL OFFICE WAR COPY Henry No. CONTENTS Page ATTENTION FOCUS 1 EDITORIAL ATTITUDES 1 Censorship Economic Problems 1 2 Progress of the War 3 POPULAR REACTIONS 5 Spirit 5 Pride 7 Views about the Army Aleutians 10 Salary Limitations 12 DEVELOPING SITUATIONS The War and Family Life Congress Rubber and Nationwide Gasoline Rationing Rumors in Wartime ENEMY PROPAGANDA Shift 11 14 14 16 18 20 21 21 ATTENTION FOCUS The war was presented to the American public this week in an extremely encouraging light. Resistance at Stalingrad and in the Caucasus, American initiative in the Aleutians, Australian advances in New Guinea and action in the Solomons were all optimistically reported. The only damper on the week's good cheer came through signs of controversy with Russia over the second front issue. At home, enactment of the anti-inflation bill, together with the President's swift action to implement it, occasioned dramatic headlines. Mr. Roosevelt's heartening report about the spirit of the American public was offset, to some extent, by a tendency in the press to portray his trip as a horrid instance of censorship. Even the World Series baseball games, by no means ignored in the stress of war developments, contributed to the hopeful atmosphere. EDITORIAL ATTITUDES CENSORSHIP The period covered by this report is the week of October I through October 7. oxcost where otherwise specifically stated Editorial reaction to the President's cross-country tour seemed to reflect an underlying antagonism on the part of the press toward Mr. Roosevelt. Many commentators grasped the secrecy surrounding the trip as a flail with which to flagellate themselves into a frenzy over censorship. Journalistic impatience with Government information policy is not new. But the excitement over this particular application of it seemed out of all vigor of the anti-inflation controls which he put into operation greatly with proportion to its real significance. Criticism of the censorship was wide- reassured the critica, a 16 sitt as paftai spread and generally along the lines enunciated in a front-page editorial of the Washington Post, academic There was almost universal praise, in addition, for the selection of Suprese Court Justice Byrnes as Director of the economic program. Most comments on "This newspaper feels a solemn obligation to protest a policy that is (1) the appointment reasoned that he possessed the tact, patience, fairness and unnecessary and inadvisable; (2) stimulating to malicious rumor and distrust, knowledge of Government procedure requisite for the job. Considerable and (3) a step that can easily lead to abuse endangering a fundamental satisfaction was expressed, besides, over the President's delegation to Mr. guarantee of our Bill of Rights." Byrnes of broad powers for the execution of his functions. A few newspapers defended the secrecy as necessary to safeguard the President. With action on the inflation front satisfactorily under way, the manpower pro- A larger number approved of the trip itself, reasoning that it would have beneficial effects on morale. blem is now emerging as the dominant concern of editorial analysts. There is a as to majority feeling that Government policy, or rather an absence of Government policy, is responsible for national confusion in this field; it is widely beEditorial ire was aggravated by the President's animadversions on the press when he returned. His dilution of the "tough" statements made recently by Administration spokesmen increased the irritation. A number of comments lieved that the conflict between the Army and the war industries has stymied decisive action in regard to manpower. An over-all manpower draft action appears to be generally favored. argued that Mr. Roosevelt could blame no one but himself if Washington lags behind the people of the United States in its thinking about the war. The shortage of labor on the farms of the nation is the particular aspect of the manpower problem which excited most attention during the past week. Dis- ECONOMIC PROBLEMS Newspapers in all parts of the country expressed strong dissatisfaction with the compromise anti-inflation measure which finally emerged from Congress. They viewed it as a partial victory for the farm bloc and feared it would not effectively check inflation. cussion of this subject is commonly based on an assumption that a farm labor shortage now actually exists. Many commentators blame the Administration for this assumed condition on the grounds that it has "pampered" labor to a point where high wages inevitably lure workers from rural areas to industrial centers. THE béen changing area and to tedear and PROGRESS OF THE MAR - 1102206 must To The discontent was markedly relieved, however, by the swift action which Interpretation of the events on the fighting fronts was tinged with an opti- President Roosevelt took to implement the legislative effort. The scope and miss which the commentators only partially concealed behind admonitions to the public against overconfidence. American action in the Aleutiana was The Pittsburgh Sun Telegram, for example, remarked that "Mr. Browder and Mr. hailed enthusiastically as the beginning of a full-fledged drive which would Willkie have added nothing to the second front discussion but dissension and oust the Japanese invaders. Air successes in the Solomons and the continued confusion." The Detroit News quipped: "More spectacular even than the leap land drive in New Quinea evoked a flurry of optimistic comment. Most observers from log cabin to White House is Brother Willkie's - from Commonwealth and took these events as indications that our strength has grown to such an ex- Southern to the Kremlin in four years." tent that we are now able to take the offensive at both ends of the Pacific. The Atlanta Constitution, for example, said, "We have started to come back. That is the one sign to which we can pin our faith in the future victory." Hitler's speech, followed by that of Goebbel's, stimulated considerable dis- Great respect for the Russian stand at Stalingrad, and equally great impatience with current democratic aid to the Soviet Union, continue to find expression in the press. The overwhelming view about a second front is that the question at issue is not its desirability, but its feasibility. cussion about Nasi power. The prevailing view was that the Hitler pronouncement showed unmistakable signs of strain and placed Germany definitely on the defensive. But this interpretation was generally accompanied by a warning against under-rating the enemy's strength. POPULAR REACTIONS SPIRIT There are abundant indications in public opinion to support President Roosevelt's recent observation that the One development of the week, Stalin's letter to a correspondent of the Associated Press, served as a sobering influence to news interpreters. They are distinctly uneasy about relations between the Soviet Union and the western members of the United Nations. The New York Times refer. to the Stalin statement as a demand for "payment on a promissory note" and contends some- people of the United States are well ahead of the Government in their thinking about the war. Americans show virtually no tendency to grouch at the hardships which the war has imposed upon them. On the contrary, an overwhelming majority of them would like to make greater contributions to the national effort than they have had an opportunity to make thus far. what impatiently that "nothing he can say can prod his allies more than they are prodded by their own vital interest to strike." Such complaints as have come from the people concerning economic restrictions have been confined almost entirely to the manner in which these restrictions There are indications that prodding from such a source will not sit well with have been imposed. Sometimes the necessity, the equity or the efficacy of commentators here. A number of them have already expressed annoyance over economic measures have been questioned. But only rarely have there been com- espousal of second front action by domestic Communists. Some now go so far plaints that the Government has asked too much of its citizens. as to lump together Communista and all other proponents of such a venture. Interviewing of a national sample conducted in late August and early Further evidence of the popular eagerness for full participation in the September indicates that people all over the country feel that the Govern- war effort is evidenced by the answers to another question asked of the ment has not made adequate demands upon them. Only a tiny minority of two same national cross section: "As the war goes on, will you be willing per cent said that they had been required to give up too much. The pre- to make more sacrifices, even though other people are not making as many vailing spirit among the American people is attested by a majority of 70 per cent, who asserted that not enough sacrifice has yet been asked of them. as you?" The responses, no doubt, were motivated, in part, by a desire to appear patriotic. It seems significant, nevertheless, that 94 per cent of There is, moreover, a general feeling that hardships have, in the main, been the American people expressed a willingness to accept even greater burdens distributed equitably. Most people think that they have made sacrifices than their fellow-citizens. about equal to those of their neighbors. But it is noteworthy that nearly a quarter of the whole public feel, not that they have had to sacrifice more PRIDE than their fellow-Americans, but that they have had to sacrifice less. The Americans, naturally enough, have a high regard for the importance of their questions offered to the national sample and the division of responses are country in the United Nations war effort. They are inclined to feel that shown in the chart below: their armed forces are superior to those of any other nation. And many of them think that the American industrial machine is the prime source of allied strength. Such sentiments undoubtedly reflect patriotism and a DO YOU THINK THE PEOPLE IN THIS COMMUNITY HAVE BEEN ASKED healthy national pride, but they seen to be tinged to some extent with TO MAKE TOO MANY SACRIFICES OR NOT ENOUGH? chauvinism and may indicate a failure to appreciate the contributions which Too About the many right amount know Not enough 22% 2% other members of the United Nations are making to the common cause. In Bon' 70% addition, they suggest rather more patriotism than realism. In September, the Bureau of Intelligence posed to a national sample several 65 questions about the merits of America's fighting forces as compared with SO FAR IN THE WAR, DO YOU FEEL THAT YOU PERSONALLY HAVE HAD TO MAKE MORE those of other countries. The questions and the distribution of answers SACRIFICES OR LESS SACRIFICES THAN OTHER PEOPLE IN THIS COMMUNITY? Don't More About the same are shown in the chart on the following page. know Less The only one of these questions in respect to which a majority failed to 9% 65% 235 -6- 35 give first place to the United States was about the Army. A plurality -7- acknowledged that the strongest Army among the countries mentioned belongs American armed forces is better, about the same or poorer than Germany's to Germany. But this recognition of Germany's military might is somewhat offset by the prevailing belief that America has smarter generals, better (Russia's)? Only 15 per cent admitted that the Germans' fighting ability equipment and superior fighting spirit. is greater than that of our own men, while no more than five per cent made a like acknowledgment respecting the Red army. Fifty-seven per cent said that our all-around fighting ability is greater than that of the Germans; QUALITY OF AMERICAN FIGHTING FORCES COMPARED WITH 65 per cent asserted that it is greater than the Russians'. OTHER COUNTRIES Which one of The concept of America as the arsenal of democracy appears to have taken a Russia these countries Germany would you say has... Do Know United States Enoland Japan the strongest very firm hold upon the imaginations of the American people. Half of then feel that this country is the major source of supplies for the United Nations. navy IS 31 27% 52% 11$ the strongest Eighteen per cent believe that virtually all of the allied war material is made n the U. S. A. Such estimates of America's share in the production job aray 14% 425 2% 315 IS 10% of the allied war effort may reflect an ignorance of the great productive the strongest air force efforts which are being made by other members of the United Nations. The IS 2% 13% 20% 51% 135 chart below shows the division of opinions expressed by the national sample the smartest generals interviewed in August. 5% 1% 19% 21 585 15% the best army equipment FROM WHAT YOU HAVE HEARD. WOULD YOU SAY THE UNITED STATES IS IS 20% 2% 65% 10% IS PRODUCING LESS THAN HALF OR MORE THAN HALF OF THE WAR the best MATERIAL USED BY THE ALLIES? fighting spirit 12% 5% 5% 6% 665 75 Less than half When this question is broached in somewhat different terms, the tendency to rate America's military strength as unchallengeable becomes even more apparent. In August, the Bureau of Intelligence asked, "From what you 125 More than half About half Don't 19% 515 18% (if more than half) Would you say the United States is producing practically all of it? Don' Know Yes No know or have heard, would you say the all-around fighting ability of the 18% 29% 45 things are now, do you think we are doing the right thing in sending our men VIEWS ABOUT THE ARMY overseas to fight?" The following results were obtained: The identification of the average American with the United States Army has been growing at a rapid pace. There are now 63 per cent of the people in Yes America who have members of their immediate families or relatives in the Don't know 8 5 arned forces. And 75 per cent of the public say that they have close friends in some branch of the service. 87% No Most Americans are also satisfied that the rank and file spirit in the United States Army is thoroughly healthy. The sample interviewed in September was Although most of the American public believe that the Army chooses its asked, "Have you heard of any cases of discontent among soldiers in the campa officers on a merit basis, there remains a considerable minority - nearly a here in the United Statest" Four-fifths answered negatively, while one-fifth quarter of the whole population -- which believes that Army commissions can gave an affirmative response. The one-fifth who had heard of discontant be obtained by "inside influence." The national sample interviewed by the among enlisted men were asked, "Do you think this discontent is serious enough Bureau in September was asked, "Do you think a person has to have pull or influence to become an officer in the American Army?" The answers were as to hurt the fighting spirit of our Army as a whole, or do you think it doesn't amount to much?" Only three per cent thought it was serious enough to hurt; 15 per cent said that it didn't amount to much and two per cent said that follows: they didn't know. Yes 23% No 70 Don't know 7 There is also a minority which feels dissatisfied about the training given to American troops. The same sample was asked, "Do you think the American soldiers are getting enough training before they go into battle?" ALEUTIANS Despite considerable clamor in the press over Japanese occupation of American territory in the Aleutian Islands, a surprisingly large proportion of the people interviewed by the Bureau of Intelligence in September did not know that the Japanese had established bases on these outposts west of Alanka, Opinion was divided as shown below. It is possible that some of those interviewed misunderstood the question Yes 67% No 18 Don't know 15 There is an overwhelming belief, however, that the Government is pursuing the and answered negatively on the assumption that it referred only to those Aleutian Islands close to the Alaskan mainland - rather than to the westernmost tip of the Aleutian chain. proper policy in sending our troops abroad. The question asked was, "As 11 10 Among those who were aware of the Japanese occupation, there was a prevail- ing belief that the invaders could not easily be ousted. When questioned in September shortly before the recent announcement of the joint Army-Navy drive to destroy the enemy's establishments at Attu, Agattu and Kiska, the sample divided about three to two over the question of whether eviction of the Japanese would be a hard or an easy job. The chart below shows the degree of public ignorance about conditions in the Aleutiana and the divi- the war?" More than four-fifths answered affirmatively. This does not mean, however, that the public favors the rigid freesing of individual earnings at their current levels. The following chart shows that, while there is extremely strong sentiment for the imposition of a ceiling at some unspecified point, a full half of the public feels that adjustments are necessary. sions of opinion as to the difficulty involved in recapturing these island bases. DO YOU THINK THERE SHOULD BE ANY LIMIT ON HOW HIGH WAGES AND SALARIES SHOULD GO DURING THE WAR? FROM WHAT YOU HAVE HEARD OR READ, HAVE THE JAPANESE SUCCEEDDon' ED IN OCCUPYING ANY OF THE ALEUTIAN ISLANDS - THAT IS, OUR Yes No know ISLANDS NEAR ALASKA? Yes, they have No. they haven't Don' know 82% 11% If "Yes") Do you think all wages and salaries should be kept where they are or do you think some should be allowed to go higher? 57% 23% 20% Some go Don't Keet where (If "Yes") Do you think we can drive them out fairly easily, or that it will be a pretty hard job to get them out of there? Some go higher they are Don' , Fairly easy 235 75 Hard job know 31% 3% 25% 45% love know 5% 75 The proposal twice advanced by the President that individual income from all sources be restricted to $25,000 has been largely ignored by daily news- papers. Editorial commentators, in general, have tended to treat it as a SALARY LIMITATIONS The President's imposition this week of a $25,000 ceiling on individual salaries has the support of an overwhelming popular belief that wages and salaries should be limited for the duration of the war. In August, the Bureau of Intelligence asked a national sample the question, *Do you think there should be any limit on how high wages and salaries should go during 12- political gesture too fantastic to merit serious consideration. The labor press, however, has taken the proposition very seriously indeed, regarding it as an important, integral part of the seven-point anti-inflation program. To labor commentators, the $25,000 ceiling constitutes a symbol of the Government's willingness to require sacrifices from wage payers, as well as from wage earners. 13 DEVELOPING SITUATIONS THE WAR AND FAMILY LIFE of the shift system, the members of the family who work may not even be home at the same time, so that all usual living arrangements become disorganised. Marital ties may be weakened by separation or the psychological repercussions Wartime conditions have an inevitable impact upon the of the wife's financial independence. everyday life of the American family. Case histories furnished the Bureau of Intelligence by social workers, psychiatrists and ministers show that the mobilization of millions of men into the armed forces and the transformation of the nation's economy to a war basis tend to disrupt the normal patterns of family association. Family disorganization, and the tensions and anxieties generated by war, have led to an increase in juvenile delinquency and a relaxation of moral standards. Families living near Army or Navy stations in particular have to reckon with the attraction men in uniform have for their adolescent daughters and for young women in general. Migration is one of the most powerful forces at work. Many families have followed service men to camp areas or moved to new localities to accept war work. These uprooted families face the task of establishing ties and a new pattern of life under extremely difficult conditions. Old residents of their new communities often regard them with suspicion or active hos- tility. As brought out in previous Intelligence Reports, housing conditions in most war centers are deplorable. Economic conditions may contribute to personal demoralization. Many people are making more money than they are accustoned to, and there is a growing shortage of goods for which their money may be spent. The "tomorrow-we-may" die" spirit bred by war tempts some of then to squander their surplus dollars on drinking, gambling and other personal indulgences. In some cases the fear of inflation provides & justification for careless spending. Many young people with large earnings are breaking away from parental control. Migrating families represent only a fraction of those whose lives have been transformed by the war. Many families have been disrupted by the absence of service men from their homes or the employment of women. The absence of the head of the family means the loss of an important integrative influence. As one Negro recently interviewed by the Bureau of Intelligence put it, "Those kids are not the same without the old man around in spite of how Economic conditions and fears sometimes operate in the opposite direction. The low pay of service men often poses serious problems for their families. The decreased buying power of those workers whose pay has not increased as rapidly as prices usually leads to scrimping and a sacrifice of many prised satisfactions. War prosperity is a mockery in certain areas where priorities have forced the shutdown of numerous civilian consumption industries. The good a mother they may have." widespread fear that the war will be followed by a deep depression everywhere Working women may not be able to give their children, their husbands or impairs morale. their homes as much attention as they would like. Because of the operation 15 14 By no means all of the effects of war are deleterious to family relation- of strain between the Executive and Legislative branches of the Government. ships. If increased earnings and the employment of women have created Some elements in and out of Congress have shown serious concern about it. problems in some cases, they have eased matters in others by bringing Several recent statements indicate the development of the situation, and family incomes to a more satisfactory level. In many instances, formerly imply real efforts to meet it. undisciplined youths have been sobered down and given a new sense of responsi- bility as a result of being in the armed services. In many - possibly in The speech of Senator Prentiss Brown of Michigan in the Senate on September 2L opened with the warning, most - cases, the prospect of war service strengthens family ties and gives new value to accustomed relationships. Many families have been absorbed more fully into community life as a result of their participation in civilian defense activities. in my judgment the Congress of the United States and the President are headed toward a bitter conflict." The thesis of his speech was indicated in the statement; ....I have felt that it was my duty and the duty of all of us who have had anything to do with the pending legis- The process of orientation to changed conditions and novel surroundings can lation to exert to the utmost our efforts to avoid the impending crisis." be eased in some measure by governmental assistance, particularly at the community level. Communities must accept responsibility for integrating Senator Tom Connally spoke on the same issue in another connection on newcomers into their war activities and their social and cultural life, October 1, when he warned the Senate against speeches on our relations with this integration is, indeed, of itself an essential war activity. Federal Vichy, or other topics legitimately within executive responsibility information efforts can usefully be directed toward promoting awareness of the need for simplicity and self-discipline in living habits and toward relieving unjustified anxieties about the future. (These findings summarise Report #29 of the Special Services Division, "Impact of the War on the American Family," available to authorised individuals upon request to the Bureau of Intelligence) CONGRESS Public aspersions upon Congress, as well as sharp editorial criticism, have been rather prevalent in recent months. In addition, there have been signs 16 I hope that Senators and Members of the other House will be content to allow the President and the Secretary State, who have vastly more information and more knowledge and more intimate contact than Members of the Congress can possibly have, to deal with this situation unhampered and untied by congressional or senatorial efforts to mold or shape their opinions or to direct their course. "So, Mr. President, realising that this is a field into which Congress cannot safely enter, in which the Senate cannot with any degree of wisdom or authority intervene, I trust that Senators and Members of the other House will be content to trust the President of the United States, who has daily information of the most intimate character with relation to all aspects of this matter. Amidst his other burdens, amidst the other pressing loads which bear him down, I hope that Senators and Representatives will not add to his burdens, and will not add to his vexations, and will not increase the harassment under which he suffers, by pressing here in the Senate or in the House of Representatives these delicate, or these dangerous, if I may use the term, references to foreign relations and to foreign nations." of the rubber and petroleum industries issued statements which were at variance with those of Government spokesmen and one another. Confusion was confounded by the frequent misinterpretations of these statements in Hostility between the President and Congress, accompanied by popular the press and the publicity given the pronouncements of an assorted group impatience with or distrust of legislative action, can have serious conse- of crackpots, each with his own panaces for the rubber crisis. quences for representative government. Anti-parliamentariam has been one The Baruch report undertook to terminate the confusion and controversy about of the familiar symptoms of democratic decay in other countries. Signs of the rubber situation, and was accepted with relief. It received widespread its development in the United States call for careful scrutiny and preventive action. publicity in various media and editorial approval even from many newspapers which had opposed nationwide gas rationing. It gave those people it reached a clearer realization of the seriousness of the rubber shortage. Following its RUBBER AND NATIONWIDE GASOL INE RATIONING issuance, people generally expressed a willingness to restrict their mileage Despite the good reception accorded the Baruch report, a formidable and their driving speed. At least in part as a result of the report, in informational job looms ahead to persuade Americans of the necessity for mid-September there was a greater awareness than there had been two months nationwide gas rationing. Surveys conducted by the Bureau of Intelligence earlier that gas rationing WILD the best way to save tires and that a nation- show that the number of people who see the need for such a measure increased wide rationing program was imperative. sharply between mid-July and mid-September. Nevertheless, as of the latter date, more than half of the people in areas which do not now have gasoline rationing were unwilling to admit that nationwide rationing is necessary. Even in areas which now have rationing, a substantial minority did not recognise the need for extending the program to the rest of the country. The fact that, in September, many people were still unwilling to accept rationing as & means of conserving the nation's meagre ubber-supply emphasizes the need for wider dissemination of the findings of the Baruch Committee. To combat the reluctance of people to make sacrifices they do not recognize as necessary, continued emphasis has to be put on the To a considerable extent these attitudes are a heritage of the confusion facts of America's rubber situation, and special efforts must be made to with which the facts about rubber have been presented to the American overcome the resistance to rationing in areas where gasoline is plentiful. public prior to the time of the Baruch report. In part because so many If such an informational program is not undertaken, compliance with the agencies were dealing with the rubber problem, even the statements of rationing program may be half-hearted, and & black market in gasoline, com- Government officials were often fragmentary and contradictory. Representatives parable to the bootleg traffic in liquor during the prohibition era, may 19 18 become a dangerous possibility. The danger of rumors lies, not, as popularly believed, in the information (These findings summarize a Special Intelligence Report, "Rubber and Nationwide Gasoline Rationing," issued October 5, and available to authorised individuals upon request to the Bureau of Intelligence.) which they may give to the enemy, but in the misinformation they disseminate among the American people. Official denials provide an inadequate means of combatting them. Such underlying psychological factors as tension and pre- judice cannot be removed through direct negation. Positive information, deRUMORS IN WARTINE signed to overcome the tension and prejudice, affords a more effective means Rumors develop out of situations in which information is inadequate to of minimizing rumor. satisfy public interest. People tend to invent and circulate explanations which reflect their individual emotional biases. Rumors may be classified, therefore, on the basis of their psychological (These findings summarize a Special Intelligence Report, "Rumors in Martine," issued September 30, and available to authorised individuals upon request to the Bureau of Intelligence.) motivation: Hostility rumors are those which give expression to prejudices and animosities. Anxiety rumors are those which reflect underlying uneasi- ENEMY PROPAGANDA SHIFT ness and fear. Escape rumors are those which tend to deny reality and The announced shift in German military operations from minimize problems on a wishful basis. the offensive to the defensive is being accompanied by In a nation at war, the conditions which promote rumor are intensified. sharp changes in Germany's propaganda approach to her own people, as well The focus of public interest is sharper and more homogeneous, while censor- as to neutral countries. ship clogs the formal channels of information. Wartine dislocations foster Nazi Home Front Propaganda frustrations and fears. Nasi leaders have taken a number of significant steps designed to distract Rumors have a contagious influence, spreading the emotional weaknesses they the attention of the German people from the fact that the war has not been reflect. Hostility rumors act to disrupt national unity, widening cleavages won this year as promised, and to keep them from being discouraged by the between elements of the population. Anxiety rumors promote defeatism and prospective shift to a strategy of consolidation and defense. dismay. Escape rumors encourage complacency. First: The Germans have been given bribes and have been promised more for For this reason, enemy propaganda gives impetus, if not inspiration, to the future. Bread and meat rations have been increased. Additional runor-mongering. Many current rumors are paralleled by Axis radio broadcasts. Christmas rations have been promised. Soldiers on furlough are to be 20 21 given food packages to be taken to their relatives. The Germans have been promised that they will be the first in Europe to eat, and the last to starve. Seconds The Germans have been given a version of the military situation (1) the alleged official threat of the United National to exterminate Germany, and (2) the threat, stressed by Hitler, that the Nasis will deal ruthlessly with "saboteurs of the German community." calculated to support their expectations of victory. Russia is represented The Nazia to Conquered and Neutral Europe as cut off from the greatest portion of its population, its industrial plant, Germany is also stepping up her efforts to persuade the conquered and neutral and its raw materials, all of which are now available to Germany. Russian countries of Europe that she is invulnerable, despite her shift to a strategy resistance, it is promised, will become less and less effective. The United of defense. One of the main goals of Nasi policy is to consolidate and States is portrayed as an impotent foe, despite its economic strength, because convert the whole of Europe into a German arsenal. Propaganda is used to it lacks experience in armament manufacture and because its soldiers have supplement diplomatic pressure. little taste for war. The first attempt at a second front is said to have failed, and Germans are assured that future attempts will meet a similar fate. Europe is invulnerable. British air raids are dismissed as not affecting the German military potential. Thirds A special effort is being made to prevent Germans from drawing parallels to 1918. The Germany of 1942, it is insisted, is utterly different from the Germany of 1918, because of the accomplishments of National Socialism. The Nasis maintain that it is England which is being blockaded this time, not Germany. Shortages in Germany are attributed, not to the Threats are freely employed. The Germans threaten to employ force if they encounter resistance or disloyalty, to withhold food if countries fail to collaborate. Goebbels proclaims that in the future victorious "New Europe" the "neutrals will need Europe more than Europe needs them." A recent Goebbels article in Das Reich attempts to bolster this pistolpoint propaganda with a more palatable type of appeal. The "New Europe," says Goebbels, is an inevitable historical development, which is threatened by England, Russia and the United States. All parts of Europe have common material, political and spiritual interests, he argues, and should join in blockade, but to poor harvests or transportation difficulties. Fears that the defense of the continent. The governments in exile and "misguided" Germany may be the inevitable loser in a war of attrition, as she was in leaders in neutral countries are portrayed as representatives of a replaced 1918, are counteracted by the new slogan, "Time works for Germany." The social class which does not understand the "New Europe" and is a tool of slogan is supported by statements stressing the tremendous raw material re- Europe's enemies. sources, manpower and industrial plant which Germany controls in Europe. The Nasis to the Unite States Fourth Two threats are used to discourage defeatism and disloyalty - 22 A logical final component of Germany's shift to the defensive would be an attempt to convince the United Nations of the desirability of a negotiated peace. The foundation for such a campaign has already been laid. But the military situation does not seen to permit Hitler to proceed with a fullfledged peace offensive at this time. Russian resistance at Stalingrad may be delaying a propaganda attack, as well as further military operations. Hitler cannot now say with any hope of being believed that Russia is sub- stantially defeated; that the whole weight of a Wehrnacht is available to defend the continent against invasion; or that Germany is now a satisfied, "have" power, and that therefore the only sound policy is to negotiate a peace with her. Radio Debunk, and, occasionally, official German commentators take this line, but these propaganda channels do not commit Nasi leaders to any particular position. Much as they would like to, these leaders probably dare not bid explicity for peace, because of the fear that their offer would accomplish nothing and would be interpreted throughout the world as a sign of weakness. Should Stalingrad fall, however, full-fledged peace offerings may be anticipated. There is need for domestic preparedness against them. 24