The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
NOT TO BE RE-TRANSMITTED BRITISH MOST SECRET U.S. SECRET 169 COPY NO. 13 OPTEL No. 384 Information received up to 7 A.M. 7th November 1942. 1. NAVAL A number of enemy ships were sighted yesterday by our aircraft off the north coast of Spain and were attacked. One was seen to be damaged. 2. MILITARY 5th EGYPT. / Our forward troops were in contact all day with the enemy rear guard on the Fuka escarpment. Some of our armour is now operating west of the remnants of the 15th and 21st Panzer divisions in this area, The clearance of the whole of the El Alamein battle field by part of our infantry is proceeding while others are well forward in pursuit. MADAGASCAR. 5th. Hostilitics ceased at 2 P.M. and an Armistice was signed shortly after midnight. 3. AIR OPERATIONS WESTERN FRONT. 6th. Bombers attacked Wilhelmshaven Osnabruck, Emden, Caen Aerodrome and other objectivos releasing 33 tons of bombs. Three Venturas (Lockhood-built light bomber) are missing. Spitfires domolished the gas works at Bergen on Zoom. 6th/7th. 141 aircraft were sent out - Genoa 72 Lancasters sea mining 65. Leaflets Paris area. Preliminary reports state visibility good 4. at Genoa, bombing concentrated and successful. Many large fires started. Two aircraft missing one crashed. Three aircraft missing and one crashed from sea-mining. EGYPT. 5th. Escorted light and fighter bombers continued attacks against retreating enemy M.T. in the Fuka and Maaten Bagush areas. Enemy casualtics 6..1..3, ours 4..nil..nil. MEDITERRANEAN. 6th. 50 HE bombers and 40 ME. 110's were sighted 130 miles south of Crete on a southerly course. 170 NOT TO BE RE-TRANSMITTED COPY NO. 13 BRITISH MOST SECRET U.S. SECRET OPIEL No. 385 FRENCH NORTH AFRICA. Operations began early 8th November to occupy FRENCH MOROCCO and ALGERIA in order to provide a base for an advance on TUNISIA by Combined British and United States Forces. Landings are taking place at ALGIERS and ORAN covered by strong British Naval Forces and at CASABLANCA by United States Navel Forces. Landings at ALGIERS reported at ALGIERS reported as being successful but no reports so far received from ORAN and CASABLANCA. Early 7th a United States 7,000 ton transport was torpedoed 120 miles north west of ALGIERS and is in danger of sinking. Evening 7th one of H.M. Destroyers damaged by air attack off ALGIERS. ********* OPTEL No. 386 1. NAVAL 2 ships independently routed from ICELAND (c) have arrived in NORTH RUSSIA. Attacks on Shipping. During the 3 days 4th - 6th November, 20 ships were reported to have been torpedoed. 10 more ships were torpedoed in the homebound convoy northeast of NEWFOUNDLAND which makes a total of 16 ships (10 British, 1 U.S., 3 Greek and 2 Dutch), 1 U.S. Ship off West Coast of AFRICA which is still afloat, 2 British ships south of CAPE OF GOOD HOPE, 6 ships (2 British, 2 Norwegian, 1 U.S. and 1 Panamanian) in & convoy northwest of TRINIDAD and 1 Soviet ship E.N.E. of BEAR ISLAND. A Norwegian tanker, which was reported torpedoed in homebound convoy in Northwestern Approaches, has arrived in Port. A U.S. ship WALL sunk by mine off NEW HEBRIDES. One British ship was reported overdue. 2. MILITARY EGYPT. Throughout the 5th/6th and 6th the pursuit of the enomy continued. An attempt to hold up our advance on the FUKA Escarpment led to a vigorous attack which drove the remnants of the Panzer Army still further west. Some of our Armoured Forces after carrying out a wide flanking movement to the South had established themselves on the general line of the Escarpment south of MATRUH by the evening of the 6th. Our reconnaissance units were then West of MATRUH. Owing to the speed of our advance accurate details are not yet available. Up to midnight 6th prisoners exceeded 20,000; other captures - 350 tanks, 400 guns and thousands of M.T. 3. AIR OPERATIONS WESTERN FRONT. 6th/7th. GENOA. 109 tons of bombs were dropped, weather cloudy en route but clear over objective. Heavy and light A.A. although somewhat increased largely ineffective. Further reports confirm attack very successful. 7th. 34 U.S. bombers, escorted by 12 Squadrons of Spitfires attacked the docks and submarine pens at BREST. Visibility poor, results unobserved except one ship appeared to be on fire. Mosquitos attacked shipping in the GIRONDE where a ship was hit and other bombers attacked railways and minor objectives. NORTHERN FRANCE. The Low Countries and GERMANY. Several locomotives were destroyed or damaged. Enemy casualties 6, 7, 7. Ours 5, nil, nil. 7th/8th. 11 aircraft were sent out - GENOA 175 heavy, sea mining 36. 6 are missing, 2 crashed r.d 1 came down in the sea. Weather at GENOA perfect. Town and docks clearly seen, TITE reported fires greater and more concentrated than on provious raids. A.A. assed when first bombs were dropped. EGYPT. 5th/6th. Our sircraft continuously attacked M.T. and troops reseating along the Constal road. 6th. In soite of bad weather attacks wer. made The Losely packed M.T. west of MATROH. U.S. bombers attacked BENCHAZI and TOBRUK hours, a 6,000 ton tanker was destroyed and a 5,000 ton ship set on fire. 171 November 9, 1942 9:35 a.m. GROUP Present: Mr. Bell Mr. Gamble Mr. Kuhn Mr. Buffington Mr. Odegard Mr. Sullivan Mr. Thompson Mr. White Mr. Gaston Mr. Paul Mr. Haas Mrs. Klotz H.M.JR: One of the things - I don't know how many of you this affects - between now and Thursday I have got to make up my mind whether we are going to have a drive on Treasury securities, and I am in the process now of making up my mind. I wish, Ted, that you could put on a sheet of paper for me and get it to me as fast as possible what you people have scheduled. I mean, I hear every time, another drive, but I don't know what you have got. MR. GAMBLE: All right,sir. H.M.JR: So have it, and I think I will see you myself. I mean, I just don't know what you have got scheduled, but if we are going to do this one - we are planning to start about the 23rd - and please look up your literature, because somebody told me you had effort on F and G. We afternoon. you know - said saw it - saw literature talked somebody about on an it all-out yesterday they the them Anyway, circular. I together don't if have any announcements or anything, get so I can see them, because we want to have everything 172 -2dovetailed. We don't want it disproportionate, because we are out to raise thirteen billion dollars, and we don't want some one thing to be .sproportioned. I mean what publicity programs and everything else that you have got. MR. GAMBLE: I can give you this within the hour. H.M.JR: You tell Stephens when you are ready, will you please? MR. GAMBLE: All right, sir. H.M.JR: But if we go into this thing, we just can't fail on it. The other thing that is bothering me - I have to do these things semi-publicly, but I can't help it - James F. Byrnes writes me November 5th, "Our next Board meeting will be November 13 at eleven a.m. We shall discuss ways and means of controlling excessive purchasing power. In preparation for this meeting, I shall be grateful if you could have a memorandum pre- pared setting forth your suggestions in this regard. The memorandum would be circulated among the Board members in advance of the meeting as a basis of our discussion." Is that the memo? MR. BELL: That can certainly form the basis of some part of this discussion, and that is in the mill. I understood that when Harry came back he went over it and has had some suggestions to make, and I think he has been together with the boys. MR. WHITE: Yes. MR. BELL: I don't know whether Paul has read the final draft or not. MR. PAUL: Didn't that go over there? MR. BELL: No, it was changed after you left. Only a draft went over to Byrnes, and I think he has left it-- 173 -3MR. PAUL: He talked with Cohen about it. H.M.JR: Did he go over it? MR. BELL: I sent over a draft. He wanted something to read over a week-end. H.M.JR: Is that the draft you gave me? MR. GASTON: The first letter, you mean? MR. BELL: That is right, the first letter on forced savings. MR. PAUL: Forced lending and spendings tax. MR. BELL: Expenditure rationing, I think it was entitled. That is the one that is in the mill. H.M.JR: Is that the one that went over there? MR. BELL: No. It was a draft previous to that. I told him it was tentative, I would so consider, but I would like you to see it and sign it before it went over, and White and Paul, before it went. It has been cleared with everybody, including Stewart and Viner, up to the point that Harry and Randolph have got the final drafts. MR. GASTON: Dan, I think that would need to be supplemented with something more direct and specific about taxation. MR. PAUL: So do I, and I base that partly on what I have heard the last couple of days. MR. BELL: There is another memorandum in the mill which he asked for at the first meeting. He said that he wanted to know from every Department what they had done and what they had under consideration to carry out or what they had done to control inflation, and what they had under consideration to effectuate the 174 -4policies set out in the Executive order. He would like to have that in memorandum form. We also have that in draft, but it is not in as good shape as this one. H.M.JR: Well, now look, gentlemen, there are too many loose ends around here. MR. BELL: There isn't such a loose end on this one. MR. WHITE: That particular memorandum is not loose; that will be completed today unless somebody else wants to make some changes. It is a good memorandum. MR. GASTON: Except for the tax end, Harry, I don't think that this is fully covered. MR. WHITE: There is no specific proposal, and there doesn't pretend to be in this particular memorandum. What you are going to do-- MR. PAUL: That is a reply to his earlier letter. MR. BELL: I think the tax thing ought to come into the second thing, what you have under consideration. MR. PAUL: We can do that. H.M.JR: Well, who is carrying the ball or this? MR. BELL: I have been carrying the ball on these particular memoranda. H.M.JR: Because you were acting while I was gone? MR. BELL: That is right. H.M.JR: am back? But who is going to carry it now that I MR. WHITE: I think you have got to get on top of it for at least this next meeting, because there are a lot of problems that I don't think you could pass on-- 175 -5H.M.JR: No, but he is asking here for a memorandum setting forth our suggestions in this regard excessive purchasing power. Now, when will it be ready for me? That is the point. MR. BELL: I think the second memorandum can be the basis for a reply to this question. That has to be improved. MR. PAUL: I haven't seen that one. Has it the specific tax proposals in it? MR. GASTON: No, it has to be revised. I agree with Dan that that second memorandum can be what we want, but I think it needs to be completely revised, and we need to throw the axe into a tax program. MR. WHITE: I think it has to be discussed at some length with you some time. H.M.JR: I am ready. Is the memorandum? I'am ready; is the memorandum ready? MR. GASTON: Not if we are going to make the full outline of the tax program that I think we should. MR. PAUL: Not a definite tax program - to put on paper - until we have discussed the tax program with four or five other agencies. I started last night with a long discussion with Ben Cohen, and I have been calling Leon Henderson. I want to get together with him tonight. I don't think we ought to stick our neck out until we find out definitely what is in the minds of all these other people. H.M.JR: If you remember, over a month ago before I left I asked to have prepared a radio speech for the President on the next tax program, and I said, "Clear it with all agencies, anybody in town that is interested." Do you remember? 176 -6MR. PAUL: Yes, and they have been working on that, but unfortunately most of these key people have had a vacation and the work has been somewhat suspended in the sense that the key people could not pass on it. Roy has been away. H.M.JR: Well, you said you spent all night last evening with-MR. PAUL: Ben Cohen. H.M.JR: What has he got in his mind? MR. PAUL: Well, he is very tepid on increased income taxes. I was trying to sell him that. He is for a spendings tax in a somewhat different form, and he is for a very high compulsory savings. He was saying that Byrnes is very loathe to have very much additional income tax. H.M.JR: What is he for, compulsory savings? MR. PAUL: Ben is for that, and he also is for a spendings tax in a different form, but he does not feel that we should increase it much, if any - increase the income tax. H.M.JR: Let's come back to this particular let- ter. Are we ready to have me deliver a paper on the control of excess purchasing power? MR. PAUL: Sure, but that is easy, but not a paper specifically giving a definite tax program. H.M.JR: Wouldn't that necessarily have to include that? MR. PAUL: No. MR. BELL: Couldn't you say-H.M.JR: One second-- 177 -7 MR. PAUL: There are all kinds of degrees and specific treatment that you can have. You can go so far as to state your problem and state the main categories of answer to it, but I think it would be very foolish at this time to stick your neck out and say that there should be just 80 much income tax, just so much compulsory savings, and just so much expendi ture tax. The first thing, if we do that we will be taking a position that does not line up with another position, and we will be all at cross purposes; and anything we have to do on the next tax bill must be in full agree- ment with every other agency, a solid front. H.M.JR: Go ahead, Bell. MR. BELL: I was wondering if we could put out an over-all amount, eight, nine, or ten billion dollars, whatever it is, and say that this should be raised, increase the income taxes, expenditure taxes. MR. PAUL: We have got to talk about what the amount should be. I am for a good deal bigger amount than that. I think we have to have fifteen to twenty billion dollars. H.M.JR: But let's be very frank. I come back here, and you fellows haven't talked this thing over amongst yourselves, and I have to do all the work. Nothing has been done while I have been gone. MR. PAUL: I object to that. I have been work- able ing quite steadily on that, but I have not been to confer with a lot of people who have been on vacation. I have a memorandum on it if you want it, but I wouldn't use it. We have a memorandum lining up nineteen billion dollars, just where it should come from. H.M.JR: But in the room here, Randolph, who in the Treasury itself - you haven't gotten together with the people. 178 -8MR. PAUL: Well, I haven't gotten together with Harry White. He has been away. Roy Blough has been away. H.M.JR: Have you been together with Gaston? MR. PAUL: Yes. H.M.JR: With Bell? MR. PAUL: I have not talked with Dan. We have been talking about the other thing. MR. GASTON: I think that second memorandum on the role of the Treasury in the economic stabilization, with some slight modifications in discussion with the Secretary, will be what the Secretary will want for this meeting. MR. WHITE: I wonder. The first memorandum, Mr. Secretary, which was prepared - I don't know if you have had a chance to read it or not - there is a draft there, which probably is not complete. H.M.JR: That is not the one that went over? MR. BELL: That is a later draft, an improved draft, but it has not been changed in substance. MR. WHITE: I think that is an excellent statement of the Treasury's general position. BELL: A lot of work went into it, I want you to MR. know. I never worked so hard on anything in my life as I did on that. MR. WHITE: As I say, I think that is an excellent statement of the Treasury's position on its general recommendations. Now, in answer ta the question about what specific recommendations the Treasury wishes to make, that does not purport to be a specific recommendation; and maybe you could 179 -9use the second memorandum as a basis for that. But in order for it to be completed there would have to be substantial discussion here to agree on what that is to be. MR. PAUL: There ought to be discussion with a lot of other agencies. H.M.JR: Paul, to come back, you say you object. Do you think that this is the answer that I can send over? MR. PAUL: No, not to this last letter that came in November fifth. This is in answer to his previous letter, and we worked for days on it. We must have had ten meetings on that letter. Then he sends another letter of November five asking for specific suggestions, no doubt following his reading of that. Now, that requires a considerable amount of discussion among ourselves. I have a memorandum giving exactly the answer, if you want to take it, but I don't want to stick our respective necks out on that memorandum yet. It requires a great deal more discussion. We have a complication in the political problem which has arisen, and it has become very acute in the last few days on account of Doughton's interview with the Journal of Commerce. I think that was the one about questioning whether he was going to consult the Treasury this year. It is an awfully complicated problem. It is a mixture of economic and political considerations that requires all possible discussion on our part. 180 - 10 H.M.JR: The question is whether he is going to consult us at all. MR. PAUL: That is what Doughton indicated as far as he dared to go in this exclusive interview given to the Journal of Commerce. Of course, that follows up. I have reports from other sources that they are going to try to brush us off and invite us up to testify along with a lot of other people. They are not going to take recommendations in the usual sense. H.M.JR: Well, the result of this discussion is it still leaves me completely muddy and befuddled, but I tell you what I will do. I will start in on this thing this morning and see if we can make any headway, and if we cannot make any headway, then I will have to ask Byrnes for a two-week's extension. MR. PAUL: I do not think we need to ask him for an extension. We can get up something that is sufficiently specific for Thursday, but that should not be a definitive settlement of the problem, Thursday. H.M.JR: What I am trying to get at - I am trying to plan a thirteen billion dollar financing, whether we should go ahead between now and Thursday - I just haven't got the time to spend between now and Thursday wrangling here in the Treasury, trying to get you fellows together. It is always that way. L MR. BELL: I think that they can get together here the Treasury, Mr. Secretary, on a memorandum, but I think there are a good many matters of policy which you have got to decide before they can write that memorandum. in It is the kind of, taxes - how far you want to go, and the amount. H.M.JR: Well, let's meet at eleven, anyway. MR. WHITE: At this eleven o'clock meeting, Mr. Secretary, are you going to take up this general statement, or do you prefer to confine yourself to what 181 - 11 specific proposals you propose to make? There are two separate problems. H.M.JR: I will take up this statement first, and I want to take up this letter - this letter of November 5 - and I want to take up the question of how I am going - how the Treasury is going to work opposite Byrnes. I mean, it takes a lot of time and a lot of thought, and somebody has got to be the wheel horse. I do not want Bell to be the wheel horse because I want Bell to concentrate on this financing. MR. BELL: It is going to be a tremendous burden for you, Mr. Secretary, but you are going to have to spend a lot of time on the Byrnes' problems in order to be able to discuss these matters. H.M.JR: But it would be very much easier for me if the Treasury people will get together first; at least have it clear in their minds, themselves. MR. BELL: That was the purpose of the memorandum you have before you. let' H.M.JR: Yes, but this memorandum - well, don't MR. BELL: You can only do one thing at a time. You have got three or four things in the mill for Byrnes and this is about complete; the second is in process. You have got the subsidy matter which is a part of this letter, and we said we would cover that later, and you have got this letter. They are all in the mill. It is just humanly impossible to do them all in one day; they are too technical - too complicated. H.M.JR: Can you sit in at eleven? MR. BELL: I want to go to this meeting. I suppose I can hear a general discussion in an hour and then come up for a few minutes. Let George carry it on from there. 182 - 12 H.M.JR: George who? MR. BELL: Carry on the Executive Manager meeting. H.M.JR: You see, there is the thing - you ought to be down there. MR. BELL: That is right. Why don't you leave me out of this eleven o'clock meeting? Herbert has been in on all my meetings and he knows what we have gone through and what we have done here. H.M.JR: Who else? MR. BELL: George's people and some of Harry's people were in on it. Randolph was away last week, but Bernstein, and Oscar Gass, and Lindow, and Murphy were in on all of the meetings I had on the two memoranda, and Herbert. MR. GASTON: Ecker-Racz, wasn't he? MR. BELL: And Friedman was. H.M.JR: Anyway, get them lined up. Don't get too many. I cannot work with too many. MR. WHITE: I don't think you need any but your own staff for going over this. H.M.JR: Then White and Haas and Paul and Gaston, supposing you come in. If you want to drop in to get the flavor of it, do so. MR. BELL: If I can get this thing started, I may drop in. MR. WHITE: And out of this discussion may crop some of your discussion on some of the specific points which will give us a little lead to start with, so then we all can attempt to work out and come to some agreement to present to you on a more specific program. 183 - 13 - But I think there has to be some preliminary discussion with you even on that score before we can work very fruitfully on some of those other matters, in addi- tion to this particular one, but it may well grow out of the discussion of that particular statement that you have before you. MR. GASTON: There are a couple of things - one is our relations to this group over here, and then there is our relations to Congress. And then there are the specific things that we want to propose. There are three major things. MR. PAUL: That is a good summary of the problem. H.M.JR: O.K. We will hit it at eleven o'clock. Has anybody got anything? I have five minutes left. MR. PAUL: We were working last night. We blocked the accounts of the French diplomatic officers and the official accounts - the individual accounts; we cleared it with the State. We also declared Unoccupied France enemy territory for the purpose of the communications. We moved in Saturday night on the French line and put supervisors on the job both in New Orleans and New York. We put a man in on the French-American bank. The first two things were cleared with Acheson about eleven-thirty last night. H.M.JR: Would you make a note for me? I would like to know how they let that two hundred and twenty thousand dollars worth of food go into Germany, which was never cleared here - that obligation which I agreed to pay for on Friday over Mr. Hull's letter. MR. PAUL: We have a draft letter being sent in to you now, replying to Hull on that matter. H.M.JR: Do you cover - I mean, how that got through? MR. PAUL: One we paid for after - two hundred and twenty. 184 - 14 H.M.JR: Has that money gone? MR. PAUL: Has it gone? H.M.JR: Will it be caught in this freezing, now, the two hundred and twenty? MR. PAUL: No, we are instructed to pay that to the Red Cross. They have already paid it out. H.M.JR: Yes, but the point I am getting at, how could they go ahead and do that without somebody's approval? MR. PAUL: I will check that. H.M.JR: I thought they had the approval under working arrangement - I do not know. MR. PAUL: I think they did, but it was amusing last night. When I called Acheson about quarter of twelve, he said, "Is this radio business official?" He raised a demurter about doing this. If there is anybody in the world that ought to know that, it was Dean Acheson, so he had to call up the State Department, then they called up Vichy. I waited until they called me back. H.M.JR: What time was that? MR. PAUL: That was about twelve-fifteen. H.M.JR: They could call Vichy and back in that time? MR. PAUL: Yes. H.M.JR: You mean they called up Vichy and back in fifteen minutes? MR. PAUL: He said they were on the wire. I do not know whether they had just started the call, but he wanted to wait until it was completed before he cleared it. The amusing thing was that at eleven-thirty or so last night he did not know what was going on. I should think they would have a bunch of problems over in the State at this time. 185 - 15 H.M.JR: Well, Mr. Hull had a press conference and explained his attitude towards Vichy, France - what made this attack possible. (Laughter) MR. BELL: There is one transaction that will have to go through which I cleared informally over the telephone, and that is that franc transaction with the War Department. H.M.JR: Will it? MR. BELL: It will have to go through if the francs are delivered - well, it has to go through anyhow, because they won't deliver the francs until they know that the credit is made in New York. I had to give the assurance to the Federal Reserve that they were authorized to go ahead. H.M.JR: But it is the delivery-MR. BELL: That is right. The Bank of France will get credit for the ninety thousand dollars additional. MR. PAUL: You understand why we blocked the accounts at nine o'clock this morning - by three o'clock this after- noon there wouldn't have been any money left. H.M.JR: There wouldn't be? MR. PAUL: There wouldn't be if you didn't have them blocked at nine o'clock this morning. H.M.JR: No, no, I compliment you on what you did. Is Pehle in on all that? MR. PAUL: Luxford and Pehle and myself. H.M.JR: Luxford - that is a new name. MR. PAUL: He is sort of taking Bernstein's place. MR. BELL: He is a good man. H.M.JR: Bring him in some time. 186 - 16 - That is good work. It is the first time it has ever happened that I wasn't called up and had to do it myself. MR. PAUL: You know what you said Saturday; I couldn't have called you up at twelve last night. H.M.JR: That is all right. No, I mean, I told Paul, on things like this, I mean, you cannot make decisions like should we or shouldn't we go ahead with the thirteen billion dollar program, with certain groups using "Time" as a mouthpiece shooting at me, and if I decided to go ahead with it - it just cannot be a failure, it has got to go, and the decision is terrific; and these things with Byrnes, and these other matters, and things which are operational, like what you have just done. I am delighted that you go ahead and do it, and if you make a mistake, I am more than willing to share it. MR. PAUL: I do not have any doubt about that. H.M.JR: No, no, but you fellows - I mean, tell me afterwards, but go ahead and do it. I mean, I cannot any more do all these things - the decisions are so I mean, just to show you that I was not loafing, I had Miss Chauncey yesterday morning to do my mail - I cleared all mail yesterday morning - and then yesterI had Bell and Eccles day afternoon myafter and fellow, Haas, fellow, and then that I had a General and this Dean, secretary of the Joint Chiefs of Staff, who came out to the house; so I mean, I had a fairly active day. I am delighted, Randolph; that is the kind of thing that I like. I like to know about it afterwards. MR. PAUL: We have got a memorandum that will be in now, this morning, that was written last night. H.M.JR: George, you go on down to your meeting and when you get ready for me, let me know. MR. BUFFINGTON: O.K. It will probably be after lunch. (Mr. Buffington left the conference.) 187 - 17 MR. THOMPSON: I would like to get your approval on putting out an order for working Wednesday, Armistice Day. Most of the departments are going to work that day. H.M.JR: Armistice Day - that is all right. Any- thing else like that? Does anybody want anything else? MR. WHITE: There are a couple of points on China that really need some decisions. H.M.JR: What are they? What would happen if I told you to make up your own mind? MR. WHITE: I will clear with Dan and everybody else. I do not think that the decision is so important that you need to, but we need somebody's agreement on it. H.M.JR: You do it and then tell me about it afterwards. MR. SULLIVAN: I might say-- H.M.JR: And incidentally, look around, Mrs. Klotz, and White; I want a copy of Madame Chiang Kai-shek's diary on the kidnapping of her husband. I promised it to somebody. MR. WHITE: It is downstairs. H.M.JR: There is one? MR. WHITE: I borrowed it and returned it to you. You mean that incident that was published - special print? H.M.JR: Yes. MR. WHITE: It should be in your library. H.M.JR: Where? Downstairs? I promised it to Lady Halifax. 188 - 18 MRS. KLOTZ: Where? H.M.JR: Evidently he means in the dining room. MR. WHITE: Yes. H.M.JR: If you can lay your hands on it, pick it up. It goes to Lady Halifax. MR. WHITE: General Meyers' letter - did you have a chance to look at it or send it over? H.M.JR: Yes, I read it. What should I do, Harry? It is an accounting problem, isn't it? MR. WHITE: Yes, it is little more than an accounting problem. If you will let me have it back - let me talk with some of them in the Treasury and we will make a recommendation to you. H.M.JR: It is a letter to General Meyers, war Department, Mrs. Klotz. MR. WHITE: You know about it - the motion pictures - they gave forty-two million dollars. H.M.JR: No, I didn't know it. MR. WHITE: It has been announced; we received a cable to that effect. There are some other things that can wait. H.M.JR: Now I think, Ted, it would be useful if you send one of your men as an observer down to sit with the Victory Fund Committee, and you know what is - we are fast - I won't have time to tell you fellows we do, but if you have a down and this unfolds - it is not - will know, and if it is something you days there, moving you everything very as thing the fellow next posted do three like, then holler. But I just cannot keep you every minute, so I would send somebody downstairs and let them sit there as observer. Then you know what has happened. 189 - 19 - MR. GAMBLE: All right, sir. H.M.JR: Don't you think so, Peter? MR. ODEGARD: I most assuredly do. MR. KUHN: I spent an hour and a half with John Davenport on those lovely articles in "Time". Any time you are interested I will tell you about it. H.M.JR: If you and Herbert will stay behind, I am interested right now. 190 November 9, 1942. 10:34 a.m. HMJr: Hello. Operator: Mr. Davis. HMJr: Hello. Operator: Go ahead. HMJr: Elmer Hello. Davis: Hello. HMJr: Morgenthau. D: Yes. HMJr: D: HMJr: How are you? Oh, pretty fair. Good. Look, Davis, I am in the throes of trying to make up my mind between now and Thursday whether we should have a real drive to raise somewhere around ten to thirteen billion dollars. In other words, try to do in two or three weeks a three months' job. D: HMJr: Yeah. Now if we're going to go ahead and do that, I'd like to get full support from your organization and then have a sort of a right of way ahead of well, anything other than what has to do with the war. D: Uh huh. HMJr: Because - I mean, I want to take it up with the Advertising Council, McClintock, and all down the rest, to to give us all the help they can to get out beat the bushes and get every dollar we can of the private citizens rather than the banks. D: Yeah. 191 -2HMJr: Now who besides yourself can help me and let me know, if we do go ahead with this, that I can have the backing of your organization? Well, I think it would have to be Mike Cowles and D: HMJr: D: HMJr: Jimmy Allen who would handle the thing. I see. And, obviously, if it's decided to go ahead, we'll do the best we can for you. Well, don't you think that they might come in and see me? Yes, I'll see whichever one would be most intimately concerned with it, and if he can make an D: appointment with you. HMJr: Well, the main thing to say is if we're going to go ahead with this, we just want the right of way over any - so that if we say to McClintock, "Now we want this and that and help and 80 forth," that he'11 know that this comes ahead of some other advertising campaign. D: Uh huh. HMJr: Because once I get into it, I just can't fail. D: Yes. HMJr: D: HMJr: D: HMJr: D: HMJr: It's got to be a success. You've got to put it over, certainly. Yeah, and it's - it's the biggest thing that's ever been undertaken. Ten billion before Christmas, is that it? Thirteen billion before Christmas. Thirteen billion before Christmas. And then we'll be out of the way and stay out of the way until the first of February, you see? 192 -3D: Yeah. All right, I'11 talk to either Cowles or Allen, whichever one's going to handle it, and ask him to call you up and make an appointment just as soon as he can and you can, obviously. HMJr: D: HMJr: And he'll be able to - he's - they've got enough authority to Oh, yes, yes I'd like. either one of them. D: HMJr: I'd like to see them today. D: Today. HMJr: Yeah. D: All right, I'11 talk to Cowles at once, and either he or Allen will arrange an appointment. HMJr: D: HMJr: And - well, I can tell him tentatively, one or the other, three o'clock, if that's Three o'clock. if that's all right. I know who Cowles is - I know - but I don't know who Allen 18. D: Well, Allen is Cowles' assistant and in charge of the whole Domestic Branch. HMJr: D: I see. And I'11 have one or the other of them call you and see about getting over there at three o'clock if that be possible for them, and if not, at such other time as you can this afternoon. HMJr: Thank you so much. D: Right. 193 November 9, 1942 10:47 a.m. Randolph Paul: HMJr: P: ....it covers that that I just sent in to you. Well, I've - well, what - well, you've got this gold in Martinique in mind? Yeah, but we don't know what to do about Martinique. We were discussing that yesterday. HMJr: Well P: Ah HMJr: P: HMJr: who'd you give the memo to? I sent it in and I gave it to my secretary a few minutes ago. Well, tell her to give it to Stephens 80 that I get it. I've got Sumner Welles for lunch. I could talk to him about it. P: All right. HMJr: Please. 194 November 9, 1942 10:48 a.m. Miller McClintock: Yes, Mr. Secretary. HMJr: Can you hear me? M: I can very well, thank you. HMJr: I'm on the Federal Reserve wire to New York. M: It's not too good. Yes, I can hear you very clearly, sir. HMJr: Now I want to take a couple of minutes to M: Yes. HMJr: tell you what I had in mind. This is naturally pretty confidential, but I have to make up my mind between now and Thursday whether we re going to have a real drive to - to try to raise thirteen billion dollars between now and Christmas. M: HMJr: Yes, sir. Now if we're going to do it, I'm going to need the help of the Advertising Council and the Advertising Fraternity the way I never have before. M: HMJr: M: That's right, sir. And you'll be interested that as Sales Counsel I asked Mr. Grant of General Motors Yes, sir. and for this week he's loaned me Mr. - HMJr: your friend, Mr. Bathrick M: A very fine man. and he's getting four or five other people HMJr: together M: Yes. -2to work with us on the sales end. HMJr: M: Yes, sir. HMJr: Now I've also talked with O.W.I. - Davis, and M: the green light over everything else. Yee, sir. HMJr: told him that if we're going to do this I want And he's sending either Cowles or Allen over to see me. But I wanted you to be thinking about it so that you wouldn't come down cold. M: I'm - I'm very happy to have that privilege HMJr: But M: HMJr: M: 195 and you may be certain that we will throw our weight behind you as we never have before. Because - well, you see, if we're going to start we' re going to start on the - about the twentythird Yes, sir. HMJr: .... M: Well, happily, we are now very well organized. which doesn't give us much time. As you know, we have a permanent staff on the Treasury's projects HMJr: Yes. and so we're entirely ready to go to work M: for you. HMJr: Now the thought - one of the suggestions that was made was this, that instead of these various I mean, companies who are advertising each day - how they make guns or this or that for the Government, they might during this time switch over and show - well, the thing's got to be paid for. M: I believe they'11 do that gladly. 196 -3- HMJr: You see? You - you might like to know, Mr. Secretary, that M: HMJr: Yes. Mr. Harold Thomas M: HMJr: Yes. who is the head of our Treasury group, as you M: know HMJr: Yes. is in Washington today. M: HMJr: M: No, I didn't know that. Mr. Peter Odegard knows about it. In fact, there is to be a dinner meeting tonight, at which your staff people and some of the staff people of O.W.I. are to meet to discuss some of the budgetary and other policy problems, and I would suggest that you might like to talk to Mr. Thomas today, because he will be in a position to act very quickly for you. HMJr: M: He - he would be? Yes, air. Mr. Odegard will know where he can be reached, I am sure. HMJr: Harold Thomas. M: Mr. Harold Thomas. HMJr: What is his business? M: Mr. Thomas is the head of the Centaur Company. HMJr: Centaur. M: A - a drug company. HMJr: Oh, yes. 197 -4You recall the whole arrangement M: HMJr: Oh, yes. M: that it was that company that provided the funds for the permanent staff. HMJr: Well, now - but you think I could save time by talk- M: I do think you could, because I would have to refer it to him immediately anyway. ing to him? HMJr: I see. M: And - and he 18 the man who has control of that whole operation, and if you talk to him today, I'm sure that he would be available there. Then we could have a whole day saved. HMJr: Well, I - I'11 do that. Well that - that's good then that I called. Now when am I going to see you? M: When would you like to see me, Mr. Secretary? HMJr: Well, I understood that you're not coming in until Wednesday? M: No, I'11 be down on Wednesday morning - or I will be down actually about six o'clock tomorrow evening. I have to speak in Philadelphia tomorrow. HMJr: Well, how about ten o'clock Wednesday? M: Ten o'clock Wednesday would be very convenient, sir. HMJr: K: And by that - and then I'11 tell Harold Thomas to be in here too, eh? If he can be there, it will be wonderful. But if you would talk to him today, sir, why, I'm - I'm sure that you would save time thereby. HMJr: Right. Well, now - and you be - and will you be thinking about it, and I'11 have him work - thinking about it. -5- M: I will HMJr: Well M: HMJr: M: HMJr: M: HMJr: M: 198 and thank you. It will be a privilege to have a bigger job to do. And you think - 18 there any other Government campaign in the way now? No, not a one, sir. I mean, there's - there's nothing that's coming right off? Not a one, sir. Well, that's grand. Nothing that could in any way conflict. HMJr: Thank you. M: Yes, Mr. Secretary. HMJr: Thank you. M: Goodbye, sir. HMJr: All right. 199 November 9, 1942 10:55 a.m. FINANCING Present: Mr. Kuhn Mr. Odegard Mr. Gamble H.M.JR: I just talked to McClintock and told him what I had in mind, that I wanted the help of his Advertising Council. He told me that Harold Thomas was in town, meeting with you people tonight and some OWI people. MR. ODEGARD: That is right. H.M.JR: He said that if I could get a hold of Harold Thomas I could save a day by telling him what I want. I don't know what you people are talking to him about. MR. ODEGARD: He is down for a meeting with OWI tonight. MR. KUHN: He is trying to educate them on a lot of aspects about-H.M.JR: He tells me that there is no Government advertising program scheduled so that there is nothing in the way of what I want to do. How can I get hold of Harold Thomas? MR. ODEGARD: I can reach him. When do you want him? H.M.JR: That is what I want to see. I have this economic group at eleven-fifteen. I will make it three-thirty. MR. KUHN: Fine. 200 -2H.M.JR: Kuhn, you sit here with them and then you can liaison these other fellows. I mean, you have got to service War Bonds and the Victory Fund and the others and keep them posted. You service them. MR. KUHN: On what happens in here and what they are doing. H.M.JR: Well, I mean, you just have to service them, you see. (Mr. Gamble entered the conference.) H.M.JR: I called up McClintock and told him that between now and Thursday I was going to make up my mind and I wanted the help of the Advertising Council. He said that I would save a day if I got hold of Harold Thomas, who was coming to town. I have asked him to come in at three-thirty. Kuhn will be here and he can service you fellows and the Victory Fund Com- mittee and tell them what we do. He says there is no Government advertising program scheduled between now and Christmas, so we are all right. I told him what I had in mind, couldn't a lot of these companies who are advertising about how they are making guns and this and that for the Government turn their advertising around into how it has to be paid for? He says, Why not, I think we can do it." Now, in this thing, the thirteen billion figure, we will tie everything in together. I mean, it will be all synchronized, but each thing will have to take its place. I mean, the two hundred fifty dollar pro- gram will have to be relatively important to one that might raise ten times that much. I talked, myself, with Elmer Davis and tentatively, again, so that you keep it - either Cowlesor Allen, or both, are coming at three, and Elmer Davis saw no reason why we couldn't have it right away. So, of course, you can't do anything with magazines, but you could with newspapers. 201 -3MR. KUHN: I wanted to say something about Harold Thomas before he came in here, Mr. Secretary. That man has been perfectly swell in all our dealings with the Advertising Council. He has been the most helpful person. He came to Kansas City and stayed through the whole three days, listening. He has become a man that we turn to when we are in trouble, and he has got some of our friend Eddie's qualities in that respect. You can go to him and get a sincere opinion, a frank opinion, and he is very good. Do you agree with me, Peter? MR. ODEGARD: Yes, I do. MR. KUHN: I think that when he comes in, if you could kind of pat him on the back for the help he has already given, it would be nice. MR. ODEGARD: As a matter of fact, though, you see, the newspaper advertising, as Ted will tell you, when you get this memorandum on the pay-roll savings drive which is scheduled to begin the middle of this month, we have planned and approved already a good deal of newspaper advertising. We have made arrangements with the Newspaper Advertising Executives Association, and they have a special committee to facilitate the insertion of these ads in newspapers all over the United States. So I assume that what Mr. Davis meant when he said there was no Government advertising was that there was nothing, no campaign under way which would conflict. H.M.JR: No, he didn't say that. McClintock said there was no campaign that he knew of. MR. GAMBLE: The War Savings Staff is your only competitor so far as we know. H.M.JR: I am sales manager; we will take care of that. (Laughter) After all, if I am going to raise thirteen billion dollars, then everybody has got to get together and play ball; everything has to be proportional. 202 -4MR. ODEGARD: That is thirteen billion up to the first of the year? H.M.JR: That is right, and then the thought is if we do that then we will lay off anything other than war bonds - we wouldn't do anything then until after the first of February. MR. ODEGARD: This doesn't mean, does it, Mr. Secretary, that this pay-roll savings drive is not to go ahead? H.M.JR: I don't know. I don't see why we should stop anything. MR. ODEGARD: I don't know, either. H.M.JR: It is just a question of each one fitting. I don't see why anything should be stopped. But we have got to get in this thing, to get the message to the people who have the big money, that we want their money. That is the point. But if you have got this I will send it to Kuhn. Let him have it in his inside memo, give it to Kuhn; then when I get a minute again pocket. As I say, he will be my liaison between you fellows. MR. ODEGARD: You want Mr. Thomas at three-thirty? H.M.JR: Yes. Offhand I would say that I don't see why anything should stop. I think we want more of everything. But I have got to do something quite new in trying to get these people interested in these new kinds of securities. MR. KUHN: You want that memo to go to the Victory Fund people? H.M.JR: Which? MR. KUHN: The one that you are getting from Ted. 203 -5H.M.JR: MR. KUHN: Yes, sure. Before you see it? H.M.JR: I don't care. The main thing is to let me see it. 204 November 9, 1942 11:15 a.m. ECONOMIC STABILIZATION Present: Mr. Paul Mr. White Mr. Haas Mr. Gaston Mrs. Klotz H.M.JR: I have read this thing very hastily. (Referring to Draft Number 7, addressed to Mr. Byrnes, dated October 24, 1942.) This simply, it seems to me, is a very good exposition of four different methods without going into it. Now, what I thought I would do while you people were here is that I would call up either Jimmy Byrnes or Ben Cohen and ask them what they really want Friday would this be enough or do they want more. MR. PAUL: I am sure they want more. MR. GASTON: This new document that they have been working on, of which they have a preliminary draft - in fact, there have been several drafts made - is "The Role of the Treasury Department in Economic Stabilization. I think that is a good deal nearer to what they would want. MR. PAUL: So do I. That is a good deal more definite as to what we need to do, but it is not definite in the sense of so much money. MR. GASTON: It states what we have done in the past. MR. WHITE: I am inclined to believe that what they want is on page seven, not a history of what we have done. I mean, they may want it. 205 -2MR. GASTON: They asked us in a letter for what we have done and what the Treasury can do to contribute to economic stabilization, and that is included in this later document. It tells what we have done through taxation and what we have done through financing to control inflation, and then there is a second section which tells of what the Treasury could do, and again with taxation and then going into financing. H.M.JR: Where is that document? MR. GASTON: George has a copy here. Harry has a copy. H.M.JR: Everybody but Henry has got one. (Laughter) MR. WHITE: I have a copy; it is a carbon copy. (Memorandum dated October 31, 1942, handed to the Secretary, numbered draft 8.) H.M.JR: I have never seen this. MR. GASTON: No, it is not in final form. We have been working on it for two weeks. MR. PAUL: The tax program is set fort on page eight, insofar as we have definiteness. Let me tell you this. Last night Ben Cohen showed me a copy of his individual memorandum on what we ought to do in the tax field, and I asked him to give it to me. He said he would have to make a copy and he would send it over this morning. That was his only copy. know his ideas pretty well now, and I know that what I Byrnes wants is some defining, not only of how much we should get, but how we should get what we should get, because Byrnes is going to be very timid on the exten- sion of the income tax. That is why I told Ben, and he was quite surprised about the distinction between our income tax and the Canadian tax. (Chart handed to the Secretary.) It says, "Senate bill" there. Day 206 -3H.M.JR: I have seen this thing. MR. PAUL: Ben was entirely unaware of that. He thought we had pushed our income taxes up as high as they could go, particularly politically. He is for a spendings tax, but he wants the spendings tax not like ours - not the mechanics, not enforceable like ours, but rather a spendings tax where everybody registers and gets coupons, and the more he buys the more he has to pay for his coupons. MR. GASTON: That is the thing that has been widely - the Kalecki plan - he has got that because he has read it in the newspapers and magazines. MR. PAUL: His was a little different because Byrnes was not only a plan which provided for an exemption, but one which also provided for graduated rates. Therefore, it was much more like our spendings tax. His was more like a sales tax. MR. GASTON: This idea has been batted around a great deal. We discussed it down stairs at considerable length, this idea of giving a book of minimum subsistence coupons free and then selling other coupon books at progressively higher rates. MR. PAUL: Ben is strongly inclined towards that. MR. GASTON: The supervision looks good, so he has fallen for it. MR. PAUL: I am telling this merely because I imagine that Ben has been talking with Byrnes, and this is the way we are going to find Byrnes when we talk with him. H.M.JR: Well, I have done business with Cohen before. He is not an easy man to convince. MR. PAUL: I agree with you. I worked on him a little last night. 207 -4H.M.JR: This is what I think I am going to do: In order to save myself on this thing, somebody has got to carry this ball. I mean one person. We will all work together, and I expect to give this thing a lot of time myself, but I am going to ask White to sort of be my economic advisor on this thing so that it heads up in one person, and we will all work together. But some one person has to carry it for me. I can't do it. I am going to hold him responsible for all these memoranda and see that he services all you people and everything else. But as soon as I get hold of Byrnes, I am going to ask him if White can't go over there and sit down with Ben and find out what they want for Friday. I mean, let's do one thing at a time. If it is a tax program that they want, that is one thing; if it is a history of what the Treasury has done, that is another thing. And if they wondered what we can do in the future, that is another thing, but I can't do it myself. I haven't got the time. How much of a staff has Ben got? MR. PAUL: Very small. He has got Pritchard over there. H.M.JR: Who is Pritchard? MR. WHITE: A very nice fellow. H.M.JR: Where does he come from? What part of the Government? MR. WHITE: He was with the WPB on Labor. Prior to that I don t know where he was, but he is a very nice fellow. MR. PAUL: Russell is also over there as sort of assistant attorney. MR. HAAS: Isn't Stark over there, too? H.M.JR: Who is Stark? 208 -5MR. HAAS: He used to be here - Bud Stark. He was over there with Goldenweiser in the Federal Reserve as assistant director, but the other day he came over and was talking to Dan, and Dan said he was working for Byrnes. MR. GASTON: He had George's shop before George came in here - Research and Statistics, and Investment Counselor up in Boston. H.M.JR: He is the fellow I eased out. What was his wife's name? MR. HAAS: No, that was a different one. H.M.JR: Stark was the fellow when I first came here, and he is now over there? MR. HAAS: He was with Goldenweiser as assistant director, and evidently he is being loaned. MR. PAUL: There is a story connected with that. MR. GASTON: What was this investment house he was connected with up in Boston? MR. HAAS: Loomis-Sayles & Company. MR. PAUL: I told Cohen we ought to do a lot more getting together. I sent him a number of papers this morning that I thought he ought to be reading to bring himself up to date. H.M.JR: Is he at all like Rosenman? If you give him these things he reads them very carefully. MR. PAUL: Yes, he does. MR. WHITE: He is very careful. I shouldn't think we would have any trouble cooperating wholly with them, finding out exactly what he wants and what the situation is. 209 -6H.M.JR: Would you mind if I just glanced at this a minute? (Memorandum read by the Secretary.) What does the victory tax do, Randolph? MR. PAUL: It raises net a billion nine, and it imposes a gross tax of five percent - a gross income tax of five percent. H.M. JR: You mean that if your income is ten thousand you pay five hundred dollars? MR. PAUL: No, you pay five hundred dollars or you take a credit which reduces the tax to three hundred if you are married, and three and three- quarters percent or three seventy-five if you are unmarried. So the real tax for a married person with no dependents is three percent, and not five. It is collected at the source. The reason why it is reduced from five to three is because you apply against the tax the amount paid on debts and life insurance premiums. MR. GASTON: This is an exemption of six hundred and twenty-four dollars a year, isn't it? MR. PAUL: Yes, twelve dollars a week. It is a terrible tax. H.M.JR: I think that all this stuff is very good, but I still think it gets down to - before I dig into it - finding out what they want first. MR. PAUL: I agree with you, but there are a lot of things - this is an attempt to be as definite as we could without getting so definite that we took a position from which we had to retreat. I think there is apt to be confusion in the sense that when you talk about a spendings tax you may be talking in large part about compulsory savings or lending. I think we have to change this if we are going to use-- 210 -7MR. GASTON: If we are going to lay down a definite program-- MR. PAUL: I don't think we should lay down a definite program yet. I think we should have a lot of conversation. H.M.JR: With a lot of people. MR. PAUL: That is why I started with Cohen last night. I have tried to get in touch with Leon for tonight. MR. GASTON: A question of tactics involved here is whether we are going to lay the whole thing before the advisory group and that group decide on the tax program, or just consult them and carry them along and then rely on getting approval in higher quarters for the taxation program and financing program that we want to adopt. H.M.JR: Of course, you were there the night the President organized the thing. MR. GASTON: Yes. H.M.JR: They were not in any sense over the Treasury on fiscal and tax matters, but I take this viewpoint, that if we could get this group to be with us so that the thing would be one - I am not so worried about my authority as I am about getting something accomplished. MR. GASTON: I think that is entirely right. MR. PAUL: In fact, I would put it even more strongly - if you don't get that group with you, and if you don't have a solid administration front, they are just going to brush us off this year. 211 -8H.M.JR: Who is "they"? MR. PAUL: Congress - Doughton, and George. MR. GASTON: There has been every indication in the letters they have sent over here that they expect to discuss the whole tax and financing program over there. I think they should. I think it is a necessary part of the picture. H.M.JR: That is all right. I say that is all to the good, but it is a question of which comes first. That is the thing. MR. PAUL: As Herbert said this morning, there are three problems, our relationship with Byrnes, our relationship with Congress, and the amount to be raised and its distribution. MR. GASTON: Further than that it is the financing program in addition, and the taxation. M.JR: Well, evidently I am going to have to sit here and wait for Byrnes. There isn't much use of all of us waiting. As soon as I get him, I think, Harry, it might be wise - what I am going to ask is whether we can't talk with Ben or with him, and send you and Paul over there together, possibly, if it is going to be taxes. See, Harry? MR. WHITE: I think it would be very wise. H.M.JR: And have a preliminary run, if possible, today. MR. PAUL: We could do it right after lunch. H.M.JR: And find out what he wants. Supposing I try to get an appointment and tell him just what I have in mind, and see what he has in mind, and just as soon as I hear, I will let you fellows know. What do you think, Herbert? 212 -9MR. GASTON: I think that is very good. MR. HAAS: I think that is good. H.M.JR: Where does this thing come from, "The Role of the Treasury Department in Economic Stabilization" - where is the original on this? MR. HAAS: Dan Bell has it. H.M.JR: Would you mind-MR. PAUL: On that memorandum, would you look at item five? H.M.JR: Martinique? MR. PAUL: That is one part of Martinique; then there is Martinique gold that you asked me about. Of course, that is not our problem. (Miss Edelin entered the conference.) MISS EDELIN: This is a book I fixed up for you. The only one I haven't here is this one, and this is draft eight. (File on Economic Stabilization handed to the Secretary.) H.M.JR: We are looking for the original of the memorandum. You are ahead - and this was fixed up for me? MISS EDELIN: Yes, Mr. Bell wanted you to have a duplicate book. H.M.JR: Do you have the original of this? MISS EDELIN: No, I can get you one. H.M.JR: No, no, this is perfect; this is wonderful. I guess he forgot about giving it to me. MISS EDELIN: I think he thought Miss Chauncey would show it to you or else he hadn't had a chance. (Miss Edelin left the conference.) 213 - 10 (Mrs. Klotz re-entered the conference.) H.M.JR: She had the whole thing prepared for me, but they forgot to give it to me. Bell had the whole thing all ready. That is marvelous. Well, it is here. I will lend-lease it to anybody who wants to see it. MRS. KLOTZ: I think that is his copy. H.M.JR: She said not. She said he had it prepared for me. I wondered-MRS. KLOTZ: Because he wanted our duplicates. MR. PAUL: He may have been holding back. H.M.JR: She said it was prepared for me. MRS. KLOTZ: A smart girl. (Laughter) MR. PAUL: There are two problems; the Martinique one is the gold problem which is primarily a problem of State and the Military, and then we have the licensing problem, which is printed in item five, there. We have not revoked the licenses to make purchases - of the French Government to make purchases to Martinique. That is something we have to do in cooperation with the State Department. That has not been done. We only treated the things yesterday that were most immediate. H.M.JR: You put somebody in MR. PAUL: Yes. H.M.JR: Are there any other French houses in New York? MR. PAUL: I do not think so. We put somebody in the French Bank - the French-American Bank, by special cooperation with Clafflin - particularly on account of those two Indo China bank officials whom we suspected. H.M.JR: All right. I will read that. Now, gentlemen, this is a mass of stuff. Do you want to glance at this, Harry? 214 - 11 - MR. WHITE: I think I have copies of most of them. MR. GASTON: The report on the meetings themselves, he has there, too, hasn't he? H.M.JR: Why don't you take a look and see if your record is complete? Make a note that at eleven-forty I loaned this to Mr. White, will you, please? (File on Economic Stabilization handed to Mr. White.) H.M.JR: These men were very badly trained in London. When I wanted any such thing as privacy, there was one room I could lock, with one door, but that was all, but they pounded on that when they wanted me - particularly this Lieutenant Colonel Brewster. When he wanted something he wanted it badly - fast. Well, there we are. Just as soon as I hear, I will give you a ring. October 24, 1942 DRAFT 7 215 My dear Mr. Byrness We in the Treasury have been investigating a great variety of measures intended to accomplish the objective mentioned in your letter of October 9, 1942, to control inflation through the restriction of civilian spending. We have been particularly interested in measures which combine effective inflation control with a substantial contribution to the financing of the ware We welcome the opportunity to give you some of our thoughts on these questions. We shall be glad to submit more extended studies at your request, and also to discuss them with you at your convenience. Such discussions should be helpful to cooperation in the related fields of economic stabilisation and fiscal policy. We have come to the conclusion, in the course of our own investigations, that an effective and equitable solution of the problem of inflation will require measures more fundamental than any yet adopted. We are convinced that wage and price oailings alone cannot control inflation. Our estimates indicate that, at present price levels, next year will see a surplus of purchasing power of about $40 billion over and above the supply of consumers' goods available during the year. It seens certain that unless all of this excess of $40 billion of purchasing power is withdrewn, or is withheld from spending, price ceilings will be broken through on a broad front, causing empty shelves, large-scale black markets, widespread evasion and dealer faverition, and illegitimate profite. In such a situation, distribution of the necessities of life will be inequitable and wasteful, and compulstion to buy the means of living will be reduced to a time-consuming and disorderly serable. Severe hardships will be suffered, especially by families in the low income groups. -- 216 We find that on the basis of the most optimistic estimate possible, not more than $70 billion, at present prices, of consumers' goods and services will be available for purchase in the calendar year 1943. Income received by consumers in the same period will be about $125 billion. Not more than $15 billion of this consumer income will be taken away by Federal, State and local taxes paid directly by individuals, including the new Federal taxes levied in the revenue act just passed. Therefore individuals will have left, to spend or to save, about $110 billion. If we are to prevent irresistible pressure of excess demand for an insufficient supply of goods, consumers must be induced - through additional taxation or otherwise - to refrien from spending some $40 billion, or $4 out of every $11 of the income they have remaining after present taxes. It is true that voluntary savings are now being made at an unprecedented rate. It has been estimated that individual savings during the second quarter of this calendar year were at the annual rate of $24 billion, which was approximately double the rate for the same quarter of the preceding year. This acceleration of savings is far greater than can be accounted for by the large increase in individual incomes. It is without doubt due in part to inability to buy automobiles and certain other durable consumer goods and to the promulgation of the general maximum price regulation. It has undoubtedly also been strongly influenced by the campaign for saving carried on in connect tion with the sale of war savings bonds, of which more than $7 billion have been purchased by individuals so far in the present calendar year. It is doubtful, however, that this rate of voluntary saving can be substantially 217 -3increased or even maintained during the coming calendar year in the face of substantially increased taxes and somewhat higher living costs, unless strong incentives are provided by some new governmental action. This governmental action must immobilise an additional $16 billion of consumer income in 1943 over and above the current rate of saving, if we are to reduce consumer spendings to the value of supplies available at present prices. Moreover, after 1943, the level of supplies will shrink still more, involving a drastic reduction in our standard of living during the further course of the war. We must distribute this reduction in such a way as to protect a basic minimum standard necessary to maintain health and efficiency. To induce consumers to make gross savings of $40 billion out of their next year's incomes is not sufficient. These consumer savings must be not, issa, after account has been taken of the fact that some people have eaten into their savings. If some individuals next year consume their capital to the extent of $10 billion, other individuals will have to save $50 billion to give us net individual saving, for the economy as a whole, of $40 billion. We have outstanding about $13 billions of United States Savings Bonds, all of which could be presented for redemption in a short period. Individuals hold billions of dollars of other securities, which they might sell to other individuals, to business firms, and to banks. Individuals hold billions of dollars of bank deposits and currency in excess of any previous year's If holdings. Billions of dollars could be borrowed on insurance policies. price stability is to be maintained, we must see to it that these capital assets are not used to increase consumption expenditures to a level in excess of the available supply of goods at present prices. It will do us -- 218 no good merely to shift from a voluntary to an enforced status savings already being made, nor will it do us any good to require lending to the government that will come out of accumulated savings represented by liquid assets in the hands of individuals. If, with taxation on the basis provided by existing law, we fail to add at least $40 billion to our accumulated individual savings next year, prices will rise - in an open or a concealed way. There are many reasons why our first recourse should be to additional taxation. The total tax liabilities of individuals to the Federal, State and local governments on the basis of present law will be about 12 percent of their aggregate individual incomes and less than a third of the increase in indi- vidual incomes in three years. In the light of these figures it would seem the very opposite of fiscal prudence to permit the public debt to accumulate at the rate it will accumulate in the absence of substantial tax additions. The advantages of withdrawing as much excess purchasing power as possible through taxation are the followings (a) Each dollar of taxes avoids the accumulation of a dollar of public debt. Therefore increased taxation reduces the interest burden and gives the Government greater fiscal freedom to meet whatever conditions may arise in the post war period. (b) Taxation minimises the necessity for extensive and adminis tratively costly war-time controls on what people may do with money that remains in their possession. (c) Taxation reduces the danger of postwar inflation as a result of the spending of war-time accumulations by individuals. -- 219 Notwithstanding the advantages of taxation, it would be highly unrealistic to contemplate revenue taxation along traditional lines on the scale requisite to absorb enough purchasing power to bring the level of spending down to the level of goods available for purchase at current prices. Even a doubling of the present $15 billion of personal taxes would not suffice, for the level of voluntary savings would certainly not remain at $24 billion if anything like $15 billion of new personal taxes were enacted. In fact, it is likely that any effort to do the whole job by absorbing purchasing power through taxation along traditional lines would involve the levying of new personal taxes well in excess of $20 billion and reliance on voluntary personal savings of considerably less than this figure. The tax method may however be usefully employed not only to absorb excess purchasing power and to gain sub- stantial additional revenue, but also to induce saving on the scale neces sary to close the inflationary gap. Specific commodity rationing and price control already help to enlarge the volume of individual saving, but they alone are insufficient. To extend specific rationing sufficiently to cover the bulk of consumer spending would be costly and irksome although extensive specific rationing may have to be adopted eventually. Therefore, we believe that other measures should be considered in order to limit spending to the necessary extent. We have particularly examined four general measures, any of which could contribute substantially to price stability and to an equitable distribution of scarce supplies. Each would also give substantial direct or indirect assistance to financing the war. These four measures are Compulsory Lending, Compulsory Saving, Expenditure Rationing, and Expenditure Taxation. Two of these types of control are mentioned explicitly in your letter of October 9. ⑉6⑉ 220 We have chosen to discuss the other two at the same time because they are such closely related methods of dealing with the same question. 1. Compulsory Lending Compulsory lending is the legal obligation to land to the Government an amount equal to a specified fraction of income, expenditure or some other base. Compulsory lending may have exemptions and graduation. It may therefore be quite progressive in its incidence. It would contribute to the control of inflation in the same general way as taxation, namely, by withdrawing money from the hands of consumers. If individuals had to lend some of their funds to the Government-and if they did not normally save anything, if they did not have capital, and if they could not obtain credit-they would be compelled to reduce their spending by an amount corresponding to their lending. In general it is the lowest income groups who save little, have for assets and little credit; therefore a dollar withdrawn by compulsory lending from a man in the lowest income groups might cause almost a dollar's reduction in spending. At the top of the income scale, a dollar withdrawn in compulsory lending might cause no reduction at all in spendings the compulsory lending obligation would be net out of saving out of current income which would have been done anyway or out of accumulated assets. The effect for most individuals would lie some where between these two extremes, so that for them part of the funds lent would come out of a reduction of consumption and part out of the accumulated savings or out of new savings which they would have made in any case. To insure that individuals who have control over corporations did not avoid their liabilities for compulsory lending at nominal or sero rates of interest by keeping their money as undistributed profits rather than distributing it as dividends, it might be necessary to require compulsory lending by corporations as well as by individuals. 221 -7The following advantages are claimed for compulsory lendings (a) It would permit a greater restriction of the consumption of the lower income groups than would be tolerable if this restriction were effected by outright taxation; (b) It would make larger levies on all income groups politically acceptable; (c) It would not reduce the incentive for individuals to undertake harder and longer work for additional pay as much as would additional taxes of corresponding amount; (d) It would create a reserve of individual purchasing power for the post-mar period; (e) It would provide a means of raising money to finance Governa ment expenditures with no war-time obligation to redeem or to pay interest, However, any given amount of compulsory lending would be less effective in reducing spending than the same amount of taxes. Because the amount turned over to the Government would be a loan to be returned after the war, there would be less inducement to save in other forms, and individuals with accumulated assets would be more willing to sell assets or borrow on them to meet the lending requirement than to meet a tax obligation, Persons who were already saving as much as the current lending obligation or who had a large amount of accumulated wealth might find no need to reduce their spending at all, Therefore any compulsory lending schedule would in practice be less progressive in its incidence on consumption than it would appear to be on paper. The dollar yield of any system of compulsory lending would be such greater than the dollar value of the reduction in consumption which it would accomplish. -- 222 These considerations suggest that, if use is made of compulsory lending at all, it should be recognised that its anti-inflationary effect will be largely restricted to the lower income levels and supplementary devices would have to be adopted to restrict adequately spending in the higher levels of income. 2. Commulsory Saving In the forms in which it has been publicly discussed, there would be permitted, as offsets against compulsory lending to the Government, various forms of voluntary saving such as the payment of insurance premiums, the repayment of debt, and the voluntary purchase of war bonds. Such offsets are steps in the direction of converting compulsory lending into compulsory saving. By compulsory saving is meant a legal requirement that every family or single individual save a specified fraction of income. Compulsory saving differs from compulsory lending. Compulsory saving necessarily contributes to the control of inflation, compulsory lending need not. An individual night lend to the Government and yet not save, simply by lending out of previously accumulated assets. An individual might save and yet lend nothing to the Government. What is primarily significant for inflation control is the reduction in spending. In principle, compulsory saving could provide a completely effective solution to the inflation problem. The total amount allotted for expenditures on consumers goods by all individuals and families could be fixed at the level of available supplies by requiring that the difference between total income and total available supplies be saved in one form or another. 223 - A progressive system of compulsory saving would have exemptions and graduation, just as would a progressive system of compulsory lending. For instance, a married person with no dependents might not be required to make any saving at all out of the first $1,000 of income. Out of the next $500 of income be might be required to save 20 percent, out of the next $500, 30 percent, and so on to a point where the spending of further increments of income for consumer goods and services would be prohibited. If it were desired to make allowances for extraordinary expenses of various kinds, such expenses could be treated as credits against compulsory saving liabilities. Credits might be allowed also for personal taxes, rents, medical expenses, tuition and all forms of saving. For instance, a single individual receiving income at the rate of $2,500 during a given year might be required to save $1,500 for that year. If be had to pay $450 in personal taxes, $400 for rent, $50 for medical expenses, and $100 for insurance premiums, these items would account for $1,000 of his compulsory saving requirement, leaving $500 that he would have to plan to save in other forms - war bonds, cash, bank deposits, etc. It should be noted that the saving requirement would be for the same year as that in which be received the income and would not represent an amount he would be required to turn over to the Government in a subsequent year. This plan would solve one of the difficulties of simple compulsory lending plans, that is, the substitution by individuals of the new compulsory saving for voluntary saving which they would otherwise have made. It would also make it impossible for individuals to show fictitious "saving" merely through changing the form of previously accumulated capital. This plan would fix total individual savings it would be irrelevant whether the individual 224 - 10 saved in one form or another, so long as he did not divert into current consumption funds he was required to save. The Government might borrow his funds directly, indirectly, or not at all (if be hoarded them). In any case, his dollars would not be on the market for goods. The Government sight spend an amount equal to his saving without fear that its expenditures would exercise any inflationary pressure. Compulsory saving would simplify the problem of raising funds for financing the war since individuals who were compelled to save would probably invest a large part of their saving in war bonds. To secure the fiscal advantages of compulsory lending discussed above, it could be required that a stated proportion of amounts saved be lent to the Govern ment for the period of the war - perhaps at sero interest. If such a compulsory lending requirement were added to compulsory saving, the requirement could be implemented through collection at the source. It is absolutely crucial to this plan that a complete report be secured of the net change in any individual's capital position during the period in which be was obligated to save. In calculating the residual savings requirement of any individual, any purchase of assets or any savings credits would have to be offeet against sales of assets, declines in deposits, etc. Only in this way could the compulsory saving plan be protected against being vitiated by the use of existing balances and credit. Compulsory saving involves serious administrative difficulties. To help individuals keep their saving up to the level required by the law, it would probably be necessary to have quarterly returns. Whether an individual had complied with his compulsory saving requirement could not, however, be 225 - 11 finally determined until the end of the period to which the requirement related, since neither his income nor his savings would be known accurately until then. An individual might unwittingly spend more than his allotment because of unanticipated fluctuations in income or expenditure needs, and in any case he could not know that he had complied with the saving requirement until after the event. The required amount of saving could be insured by issuing licenses to purchase to all consumers only to the extent of the expenditures to which they were entitled; in this case compulsory saving would become Expenditure Rationing. Alternatively consumers might be required to pay a regular schedule of penalties for spendings above their exempt minimum; in this case compulsory saving would become a type of Expenditure Taxation. Further alternative sanctions for excess spending are criminal penalties, fines adjusted to the individual circumstances, or punitive compulsory lending requirements. None of these last three sanctions could be administered without considerable costs and hardships. 3. Expenditure Rationing Expenditure Rationing is the limitation of total consumer expenditures by fixing the maximum amount that every family or single individual is allowed to spend on rationed goods. In principle, rationed goods should include all consumers' goods that have any current cost in labor, materials, or facilities. The following classes of consumption goods and services, however, might well be excluded from Expenditure Rationing, each for separate reasons: rents, tuition, medical care, and possibly several other classes. Under expenditure rationing consumers goods other than these could be bought only with one's ration 226 - 12 allowance, but the consumer would be free to spend his ration allowance on any comodities or services that he pleased. Furthermore, no limitation would be imposed on the use of income in non-consumption transactions, such as making gifts, paying taxes, paying insurance, buying real estate or securities, or saving in other ways. Business expenditures would, of course, be excluded from expenditure rationing. Under expenditure rationing, the total amount allowed to be spent on rationed goods for the whole economy during any period would be met at a level equal to the estimated value of the supply of rationed goods to be available during that period. In making this computation, supplies would be valued at the price level which it was desired to maintain. Changes in the total expenditure ration would be made as the expected supply position changed. Since total purchasing power would be fixed at a level equal to the value of supplies available for purchase, average prices would remain relatively stable. Expenditure rationing would yield no revenue directly. However, by limiting consumers' expenditures, it would force them to save in one form or another. Therefore, individuals would be likely to buy larger amounts of Government securities directly or to place their savings with institutions who could in turn buy larger amounts of Government securities. In any event, the Government would be free to borrow from individuals or banks an amount equal to individual saving without fear that such borrow ing would be inflationary. 227 - 13 The impact of any expenditure rationing program upon the various income groups would depend upon the bases adopted for allocating expenditures. If variations of income as well as sise of family were factors in determining the permissible amount of expending allowed each individual, there would be inequality in permissible expenditures as between income groups, However, the expenditure rationing system could greatly reduce the inequalities in spending that prevail now. For example, a family of four with an income of $1,500 might be allowed to spend the entire $1,500 while a family with an income of $50,000 might be permitted to spend no more than (say) $10,000. It would be easier to reduce inequalities by limiting spending directly than by limiting it through taking away a part of income. On the other hand, remaining inequalities might be resented more deeply, because of their having direct government sanction. Expenditure rationing would attack the problem of excessive consumer purchasing power directly, and would determine the ration allowance from an item (current income) that is in most cases readily ascertainable. For both of these reasons, the distribution of expenditure among individuals or income classes would be subject to more effective control than under a program of taxation or compulsory lending. It would still be necessary to have specific rationing for some basic necessities that were disproportionately scarce. However, in the measure that people with large incomes would be able to spend less on scarce commodities under expenditure rationing, the need for specific rationing would be reduced. The administrative costs and the inconveniences of specific rationing would be kept at a minimum. 228 - 15 For consumers, such a system would have an internal self-endorsing element, since the exaggeration of income would lead to additional tax liabilities, while the under-statement of income would diminish the sise of the ration allowance. The above description of expenditure rationing touches only on its most salient features. We have gone into expenditure rationing in the Treasuryin great detail and shall be glad to give you a more extended study of this subject, should you be interested in exploring it further. 40 Expenditure Taxation Expenditure taxation has already been the subject of some public discussion in connection with the recent proposal for a spendings tax submitted by the Treasury to the Senate Finance Committee during consideration of the Revenue Act of 1942. We are not concerned in this letter with the details of that proposal but rather with the general question of the way in which a progressive spendings tax would bring about the limitation of consumer expenditure necessary to avoid inflation. The spendings tax would be a tax on consumption rather than on income. It would provide for exemptions and for graduated rates. It would impose a penalty on all spending above the minimum subsistence level, a penalty that would become increasingly severe and even prohibitive as spending increased. Through graduation, it would be made to bear primarily on comforts and luxuries rather than on necessities. For example, under a spendings tax a married person with no dependents might be allowed an exemption of $1,000 a year. If he spent less than $1,000 on goods and services he would pay no tax. A 10 percent tax might be levied on the first $500 of consumption expenditure in excess of $1,000, a 20 percent tax on the next $500 and successively steeper taxes on additional 229 - 14 An effective rationing system would require the use of a license to purchase, in coupon or other form. It might be possible to solve this problem without the use of both money and a coupon in every purchase. Such & solution has been explored in the Treasury, and we should be pleased to discuss it with you if you wish to go further into the administration of Expenditure Rationing. The distribution of ration coupons or allowances could be integrated very closely with the present system of payment of incomest (a) Persons employed for wages or salaries would file statements with their employers showing their marital and dependency status. On the basis of these returns, the employers would distribute to them the correct amount of ration allowances; (b) Persons receiving income other than wages or salaries would report the amount of their income as well as their marital and dependency status to a bank, post office, or local ration ing board. The institution to which this information was reported would be authorised to provide individuals with ration allowances in accordance with the expenditure rationing schedule; (c) Persons with irregular incomes, seasonal incomes, or living by depleting capital, would require special consideration in the determination of their ration allowances. A partial check on the accuracy of ration allowances would be obtained by requiring individuals to reconcile the income declared for the purpose of obtaining ration allowances with the income declared for income tax purposes. 230 - 16 . increments of spending. The tax might ultimately reach rates of 100 percent or more. This would mean that an individual spending large sums on lumries might be required to pay the Government as much as $1.00 or more for every additional dollar he spent on consumers' goods. All forms of savings would be exempt from the spendings tax. The more important non-taxable uses of income would be as savings for the purchase of war bonds and other capital assets, repayment of debt, life insurance premiums, as gifts and contributions, and as tax payments. In addition, it might be desirable to exempt from the spendings tax certain special types of expenditure, such as tuition fees, extraordinary expenses for medical care and perhaps rent and other items. The spendings tax would reduce spending on consumers' goods and services in two ways: first, the amount paid in tax would be withdrawn from income and could not be used to purchase goods and services; second, by penalising spending the tax would provide a powerful incentive to save rather than to spend. Although the savings induced by the spendings tax would not necessarily be paid over to the Treasury, they nonetheless would be removed from the spending stream and be added to the pool of savings available, directly or indirectly, for financing the war. A sufficiently severe spendings tax could reduce total consumer expenditures by any desired amount, and at the same time contribute to a more equitable distribution of the scarce supply of consumers' goods than would prevail without the tax. The exemption provision would enable persons with small incomes to obtain basic subsistence needs free of tax, while the steeply graduated tax rates would operate to bring about a greater proportionate reduction in spending by those persons whose large expenditures 231 - 17 would subject them to the higher penalty rates. Individuals would be given a reward for saving in a way which is not possible with a conventional income tax. By reducing their spending individuals and familes would reduce their tax liability and thereby increase the funds available to them for expenditure without penalty after the war or when economic conditions become such as to permit abandonment of the tax. In addition to controlling the total volume of expenditure and its distribution among individuals the spendings tax would provide some revenue to the Treasury to finance the war end, by reducing expenditures for consumption, it would undoubtedly increase the voluntary purchase of war bonds. It would also encourage the repayment of debt and other forms of savings, since these too would be free of tax. The successful administration of a spendings tax would not require that individuals keep a detailed record of all their expenditures. All that would be necessary in addition to the information already required for the income tax would be information to determine changes in capital position of the same kind as would be needed under compulsory saving. The total taxable expendi- tures of an individual are equivalent to his net income, minus or plus the net change in his assets during the year. His taxable spendings could be determined, therefore, from his net income and from the assets be held at the begin- ning of the year and the assets he held at the end of the year. The final determination of liability under the spendings tax would be made when the income tax return for the corresponding year was filed. A combined form could be used for the two taxes. However, collection of the tax would not have to be delayed until the tax liability was finally determined. Two methods could be useds 232 18 - (1) The first bracket of the spendings tax could be collected at the source from all income paid in the form of wages and salaries, bond interest and dividends. Collection at source based on income instead of spending would involve no great hardship. The only persons who pay too much would be those who save part of their income and hence do not need for current consumption-although they may need for outstanding savings commitments--the -- extra amount withheld. Final adjustment of tax liability would be made with the filing of the return after the close of the year. (2) Individuals with expenditures subject to tax rates above the first bracket would be required at short intervals, say quaterly, to pay a tentative tax based on the approximate amount of their spending. A final adjustment of their tax liability would be made with the filing of a return after the close of the year. This statement of the spendings tax is intended to be only a general exposition of its principal features. To bring out more fully its affect in restricting expenditure on consumption at every income level, it would be necessary to present a longer memorandum including a C etailed schedule of tax rates, their probable field, and their effect in inducing savings. We shall be glad to present such a study at a later time should you be interested in going into the possibilities of the spendings tax in greater detail. - 19 - 233 Each of the four general types of control over consumers' expenditures that are discussed above has some merit, but their merit is by no means equal. Compulsory lending might be the easiest to enact and administer, but it is uncertain in its effects on expenditure and dubious in its incidence. Any plan which makes possible substantial Treasury borrowing at zero interest, even for a few years, has a strong argument in its favor. Compulsory saving could in principle be both effective and equitable, but it has great adminis- trative difficulties. Expenditure rationing could be effective, equitable, and administratively practical but (a) it would involve considerable administrative costs and (b) though it is capable of controlling expenditures and diminishing inequalities of consumption in a precise way, it might arouse considerable opposition by giving precisely defined inequality a legal sanc- tion. Expenditure taxation is less certain in its results than expenditure rationing, but (a) it is easier to administer, (b) it yields some direct tax revenue, and (c) it permits greater freedom of choice to the individual both as to savings and spending. For these reasons it is the Treasury's position that expenditure taxation should be first on the agenda for immediate consideration. In September, the Treasury urged that a spendings tax be enacted. This does not mean that the Treasury regards the choice from among the methods discussed above as a dosed issue, nor does the Treasury feel that we must necessarily adopt one of them to the complete exclusion of the others. Indeed, the spendings tax proposal submitted by the Treasury to the Senate Finance Committee also incorporated compulsory lending at zero interest. The Treasury 234 - 20 has also given considerable study to expenditure rationing and submitted a memorandum embodying the results of its studies to the President through Judge Rosenman on July 30, 1942. We would be glad to discuss these questions with you further at your convenience, and a more extended analysis of each of the alternatives may be considered at that time. we are restricing this letter to the discussion of the control of consumer expenditures. We shall submist our views on the use of subsidies at a later time. DRAFT VIII 10:31:42 235 MEMORANDUM The Role of the Treasury Department in Economic Stabilization In response to your request at the meeting of the Economic Stabilization Board on October 16, 1942, I am submitting this statement of what the Treasury Department has done in the stabilization program and of the further measures to which it is giving consideration. During the course of the present war, our Government has sought economic stabilization through the use of two general types of measures: first, fiscal measures to keep income off the market for consumers' goods and, second, measures to fix prices and wages directly and to ration specific commodities. It is of course with regard to the first type of measure that the Treasury has its major responsibility. Soon after the initiation of the defense program of the fiscal year 1941, it became clear that the United States would need during the present war much more drastic fiscal (as well as other) measures for withdrawing income and inducing savings than ever before in our national history. In the past 18 months much has been done; but much more remains to be done. The Treasury has been urging and will continue to urge the enactment of taxes substantially higher than those provided by present law. The Treasury has pushed and will continue to push a program to stimulate voluntary saving. Taxes withdraw income; savings take income off the market. Both reduce the pressure of purchasing power on the price structure. However, the Treasury believes that the necessary withdrawal of income or inducement of savings cannot be accomplished entirely by further action -- 236 along traditional fiscal lines. In the calendar year 1943 consumer incomes will be about $125 billion before personal taxes and $110 billion after such taxes. Supplies of consumer goods available for purchase will not exceed .70 billion at present prices. The disparity between incomes and available supplies must be expected to become greater during the further course of the war. To prevent this disparity from producing a serious inflation we need to supplement the traditional types of taxes and savings campaigns by new measures to withdraw income through taxes and to induce or compel saving. The fiscal program to date Taxation Since the beginning of the armament program the Treasury has constantly pressed for increased taxes. In the fiscal year 1940, total Federal tax collections were approximately $5.5 billion. Under the 1942 Revenue Act, total collections for a full year of operation at the 1942 level of income would be nearly 25 billion, or more than four times as much as in the fiscal year 1940. Some of this increase is attributable to the higher level of national income. The greater part, however, is attributable to changes and additions which have been made in the tax structure. The principal new taxes are the excess profits tax in the Second Revenue Act of 1940 and the Victory tax in the Revenue Act of 1942. Taxes have been increased on corporate and individual incomes, on estates and gifts, and on commodities subject to excises. The number of persons subject to the income tax has been greatly increased. Exemptions under the individual income tax have been lowered three times. In 1940 four million taxpayers paid tax on their 1939 incomes. 237 -Under the Revenue Act of 1942 approximately 43 million taxpayers will pay the Victory tax, of whom some 27 million will also pay the regular income tax. The income tax now reaches all net incomes in excess of $500 for single persons, $1,200 for married couples, and an additional #350 for each dependent. The Victory tax is levied on gross incomes in excess of $624 per income recipient. The Revenue Act of 1942 increases tax revenues by approximately the amount initially requested by the Treasury Department on March 3, 1942. Since that time, however, increases in expected Federal expenditures and the growing seriousness of the inflation problem led the Treasury to revise upward its revenue requests on two different occasions, once on May 6 and again on September 3, 1942. These revisions raised the total amount of additional revenue requested from 87.6 billion to 15 billion including post-war refunds. The Revenue Act therefore increases receipts by only about half the amount finally recommended by the Treasury. While the full estimated annual yield under the Revenue Act of 1942 is $25 billion, actual tax collections under this Act during the fiscal year 1943 will be approximately 521 billion. Large as this amount is, compared to tax receipts in earlier years it is only about one-fourth of expected expenditures of $85 billion. As a war revenue act, the Revenue Act of 1942 has the following major shortcomings: 1. It provides an inadequate amount of revenue. 2. It fails to include any substantial direct penalty on spendings or inducement to additional savings. 238 -3. It fails to provide collection at source under the individual income tax. It does provide for collection at source of the 5 percent Victory tax but only from wages and salaries. 4. It fails to eliminate a number of special privileges and loopholes such as the tax exemption of interest on state and local securities, the special treatment of married persons in community property estates and of married couples with separate incomes, and the special depletion allowances for oil wells and mines. Borrowing The Government is now borrowing by far the larger part of the funds which it is spending. How these funds are borrowed has an important influence on inflationary pressure. The Treasury borrowing program has two major antiinflationary objectives: 1. To encourage additional saving. Additional saving that reduces consumer demand lessens inflationary pressure on prices and releases resources for Government use. For this reason, when defense expenditures began to grow rapidly in 1941, the Treasury began a campaign to increase individual saving. This campaign was intensified after the outbreak of the war. 2. To encourage the holding of savings in the form of Government securities rather than in the form of deposits and currency. Consumers are less likely to use past savings for current expendi- tures if they are invested in government bonds than if they are hold in the form of deposits and currency. The Treasury has offered 239 -5 a variety of securities particularly suitable to individuals and to savings institutions and not available to commercial banks. The Treasury's War Savings program has the dual objective of encouraging additional saving by individuals and their investment in war bonds. This program has contributed to the record-breaking volume of savings during the current year. Both in absolute amount and as a percentage of income, savings are higher than ever before. The bond selling program has particularly emphasized Series E bonds. These bonds are intended primarily for persons of small and moderate means and have the attractive yield of 2.9 percent per annum if held to maturity. The Treasury War Savings Staff has obtained the voluntary assistance of a very large number of people in helping to push the campaign for new savings and investment in Series E bonds. A special effort has been made to sell Series E bonds by means of the payroll savings plan, which is an arrangement whereby employers are authorized by their employees to make regular deductions from pay envelopes for the pur- chase of these bonds. Already more than 20 million workers are setting aside an average of 8 percent of their pay every payday for War bonds. So far during the present calendar year, sales of Series E bonds have aggregated A about $4.5 billion, and the monthly rate is expected to continue to rise. very large part of these purchases is coming out of additional savings, as shown by the steady growth in the proportion of receipts derived from the sale of 25 and $50 bonds -- from 17 percent of total sales in August 1941 to 50 percent in August of this year. 240 -Purchases of Series E bonds by any one individual are limited to $3,750 issue price per year in view of the high interest rate paid. The savings bond program offers two other series, Series F and G, yielding a somewhat lower interest return with annual purchases by any one investor limited to 100,000 issue price. Sales of Series F and G bonds have aggregated about 2.5 billion so far this calendar year, making a total of $7 billion of sales of the three series of war savings bonds this year. Commercial banks are prohibited from purchasing any of these bonds. The tax savings note, issued as part of a campaign to induce taxpayers to set up reserves for future taxes, has also contributed to the holding of savings in the form of Government securities. Tax savings notes are now outstanding in the amount of more than $4 billion, and substantial increases in the amount outstanding are being shown each month. The Treasury has also offered long-term bonds not eligible for purchase by commercial banks. In selling these and other securities directly to investors, the Treasury has received aid from volunteer local sales organisations, known as Victory Fund Committees. The borrowing program described above is designed to finance requirements as much as possible by borrowing directly from investors other than commercial banks. Borrowing from commercial banks has more serious in- flationary possibilities than borrowing directly from other investors, although it must be recognized that borrowing from commercial banks is not inflationary to the extent that it is offset by a reduction in the other assets of the banks or by the accumulation of real savings in the form of bank deposits. Borrowing from banks is being confined to securities of not 241 -7 longer than 10 years maturity in order to keep the banks as liquid as possible and to keep government interest payments to a minimum. In the fiscal year ending June 30, 1942, the deficit was financed approximately 30 percent by savings bonds, 20 percent by tax notes, 10 percent by Government trust funds, 10 percent by marketable securities sold to insurance companies, and 30 percent by marketable securities sold to other classes of investors, largely commercial banks. with the growth in war spending since the end of the fiscal year, the proportion of borrowing from commercial banks has increased substantially, notwithstanding the fact that the Treasury has intensified its efforts to increase its borrowing from outside the banks. A great deal more remains to be done, but it is doubtful whether much can be achieved without recourse to more drastic means of control involving direct restrictions of consumer spending. The fiscal program It is clear that our current measures for the control of inflation are inadequate in the light of the economic prospects for the coming year. In the calendar year 1943 consumer incomes will be about $125 billion before personal taxes and $110 billion after such taxes. Supplies of consumer goods available for purchases will not exceed $70 billion at present prices. The disparity between incomes and available supplies must be expected to become from greater during the further course of the war. To prevent this disparity producing a serious inflation we need to supplement the traditional types is of taxes and savings campaigns by new and drastic measures. The Treasury prepared to make further recommendations in the field of taxation and borrowing along the following lines: 242 -Taxation 1. Substantial increase in taxation, primarily in two areas: (a) Extension of the individual net income tax. This tax is and should remain the primary instrument for tapping the incomes of individuals. It is the fairest tax we have yet developed. (b) Enactment of a graduated tax on consumers spendings. This tax is an excellent supplement to the individual income tax in time of war. By exempting savings, it permits extension of taxation beyond the point to which the individual income tax can be pushed without undue hardship on persons with substantial fixed commitments to pay insurance premiums, repay debt, or make other forms of regular savings. Whereas the income tax reduces inflationary pressure solely by taking peoples money away, the spendings tax re- duces inflationary pressure also by inducing additional saving. 2. The elimination of special privileges and loopholes. The closing of these loopholes will yield a substantial amount of revenue. Even more important, however, it will eliminate the anomaly of continuing special tax privileges to favored groups while asking the great bulk of people to bear the burden of heavy wartime taxation. 3. The placing of the individual income tax on a substantially current basis by collecting the larger part of the tax at source. Under present methods of collection taxes on this year's income are not payable until next year. This means that changes in tax rates and changes in national income 243 - affect tax collections only after a considerable lag, and that the implementation of a decision to fight inflation through increases in taxes is not effective for a long time. Current collection will eliminate this lag, and will hasten the adjustment of the taxpayer's spending to his tax liability. It will serve the convenience of the taxpayer by collecting the tax in small installments as income is received, and by providing safeguards against the accumulation of tax liabilities that he will not be able to meet. It will increase revenue by reducing less through default and by reducing the possibility of evasion through non-reporting and understatement. Borrowing The Treasury intends to push its War Savings program, particularly through the extension of the payroll savings plan. The goal is to increase the number of persons covered in this program from the present 20 million workers to 30 million by the end of this calendar year, and, at the same time, to increase the average deductions under the program from the present 8 per- cent of payrolls to 10 percent. During 1943, we hope to surpass these figures considerably. The rapid increase in Government expenditures requires a fundamental change in the character of borrowing policy. The Treasury believes that much more drastic measures than heretofore taken will be necessary to insure an adequate volume of savings and to increase the amount of financing done outside of commercial banks. The extension of specific rationing and further price controls will contribute somewhat to the necessary increase in saving. However, to assure the effectiveness of control measures, excess spending power must be prevented from coming on the market for consumer goods. 244 - 10 As stated above, the spendings tax is particularly designed to restrict spending and to induce the necessary amount of individual saving. If sufficiently severe spendings or other taxes are not enacted, it will be necessary to resort to Compulsory Lending, Compulsory Saving or Expenditure Rationing. Measures of these types are discussed in our reply of to your letter of October 9, 1942. INDIVIDUAL INCOME TAX UNITED STATES. UNITED KINGDOM AND CANADA Effective Rates for Married Person without Dependents PER PER CENT CENT Post-far credit - taken = really, 90 90 (1) United States: to the extent of life preside payments, not repartments debt - not per- chasse of war bonds: (2) Canada te the extent of life mate and eice contributions: 80 payments 80 repay- United Kingdom (3)Date Kingdom United States Present Low 70 70 Including N. y State Present Law 60 60 50 50 Canada 40 40 Present Low 30 30 FOR U.K., CANADA AND U.S. SENATE BILL U.S. Senate Bill 20 20 Post-War Including N. Y. State Credit Gross Liability 10 Net Liability 10 0 0 .6 2 4 6 10 20 40 60 100 200 400 600 1000 2000 4000 NET INCOME IN THOUSANDS OF DOLLARS B-351-1 INDIVIDUAL INCOME TAX Effective Rates for Married Person without Dependents 1918 and Selected Taxable Years PER PER CENT CENT 90 90 Post-War Credit Gross Liability 80 80 Net Liability 1940 70 70 1936-39 1941 60 60 1984-35 U.S. Senate Bill 50 50 40 40 30 30 1930-3/20 20 1929 1918 10 10 0 0 .6 2 4 6 10 20 40 60 100 200 400 NET INCOME IN THOUSANDS OF DOLLARS 600 1000 2000 4000 247 November 9, 1942 11:38 a.m. HMJr: Hello. Gardner Cowles: Hello, Mr. Morgenthau? HMJr: Speaking. C: This 18 Gardner Cowles at O.W.I. HMJr: Right. C: Elmer Davis just talked with me about your call HMJr: Yes. C: Now I'd be delighted to come over and talk with to him. you the latter part of the afternoon, if you have any time free. HMJr: C: I suggested three. Is that all right with you? I - it would be a little more convenient for me if we could make it later than that, or are you tied up? HMJr: C: I got a kind of a tough afternoon. You couldn't All right, I'11 shift mine around. I'11 be in your office at three o'clock. HMJr: Now you know what it's about? C: Yes. HMJr: So if there are any other programs scheduled, why, you'd know about them. C: Yes, sir, I will. I'11 bring along all the information. HMJr: Thank you so much. C: Thank you. 24 Dr. White and Mr. Paul read this. 249 November 9, 1942 12:10 p.m. HMJr: Hello. Operator: Mr. Byrnes. HMJr: Hello. Justice James Byrnes: Hello. HMJr: Henry talking. B: Hello, Henry. How are you? HMJr: Fine. Jimmy, I think we could help each other a little bit if you would enlighten me. I've had a note from you about - that you want us to prepare something for next Friday, and - hello? Yes. B: HMJr: And then several things, of course, happened while I was gone. Now, would you care to see, or would you have - like to have Ben Cohen see Randolph Paul and Harry White, who could - and 80 they could get a little bit in mind what you B: want first, you see. I'm a little confused. I'11 - I'11 talk to them, because the - I - what HMJr: Yes. I - here's what I had in mind. B: The members of the - while you were away HMJr: Yeah. B: some members of that Board said they would like to discuss the fiscal situation generally in - in as we're - insofar as it affected this price control HMJr: Yeah. and we had this - in this last meeting B: HMJr: Yeah. 250 -2I purposely avoided it because I - I wanted to wait until you got back. B: HMJr: B: HMJr: That was very nice. I told those - I told one of the labor representatives, it was Murray, I think Yeah. who talked about it, that I didn't think it B: was wise to do that. I talked to Dan Bell, who gave me a memorandum of what you had been - your crowd-had been thinking about HMJr: B: Right. and it was a very good memorandum, but I - I just kept it, and I told those fellows we'd discuss it this week. I don't know that they could do much, except as long as they're interested in it, that it wouldn't do any harm if you did prepare a statement as to your thoughts HMJr: Yeah. along the line of taxing, compulsory saving, B: spending - just what Dan gave me in that memoran- dum. HMJr: Well, now B: The several - the several proposals HMJr: Yeah. B: ....80 when they let them appreciate what the magnitude of the task is in - it would - it wouldn't - you wouldn't have to bind yourself down to any proposition. HMJr: Well, I have that memo here before me, and I - I didn't know whether that's what you wanted, and then I got this other letter which said "should of discuss ways and means of controlling excess purchasing power." 251 -3B: Well, that's the only way - that's the whole argument that these fellows had at the Board, that they only - what they're - what they're working - the way they think about it, you know, is they were going after Henderson really, that his - his rationing and other schemes wouldn't be as essential or wouldn't be as extensive if the purchasing power could be controlled HMJr: Yeah. that's the language of this Order here - B: if it could be controlled by additional taxation or spending taxes or anything of that kind. That' HMJr: Well, could - could you see Paul and White some- B: Any time. HMJr: Well, you fix the time this afternoon, and B: Well, you tell them to come over at three o'clock. HMJr: Three o'clock? B: Yeah. HMJr: And B: Say, three-thirty. HMJr: Three-thirty? B: Right. HMJr: And I'm going to have - use White quite largely on this where it isn't taxes. Do you know Harry time this after I'11 White? B: No, I've met him, but I think that HMJr: Well - well, Ben Cohen knows him. 252 -4B: HMJr: B: HMJr: Iaround - I know well. Hedamned and I have been fussing herePaul about these Yes. . salary business, and he - he and John Sullivan Yes. we've - we've been regular conferees. (Laughs) B: HMJr: Good. Well.... B: Nice fellows too. HMJr: B: HMJr: Well, they enjoy working with you. They're damn nice fellows. Well, I'll have the two of them over there at three- thirty. B: Fine. HMJr: Thank you 80 much. B: All right. Goodbye. See you Wednesday. HMJr: That's right. 253 November 9, 1942 3:40 p.m. FINANCING Present: Mr. Bell Mr. Buffington Mr. Gamble Mr. Kuhn Mrs. Klotz H.M.JR: I hear that you sat in at this meeting yourself this morning. MR. GAMBLE: That is right, yes, sir. H.M.JR: What about this F and G business? MR. GAMBLE: Well, I recommended to Mr. Bell that they call off our F and G canvass in December. In the State of New York we would have some difficulties, but outside of New York we would call off the F and G canvass - for the rest of the country. H.M.JR: What is your thought - you listened this morning - about whether we should start on the 23rd or whether we should start on the 1st? Of course, Thanksgiving is the 26th. MR. BELL: They brought that in and want to start after the holiday rather than before it. H.M.JR: Couldn't we sell one of these straight bank issues before that? MR. BELL: Yes, we could, but I think that probably would-be bad. If you could announce it beforehand that you are going to have a drive-- 254 -2H.M.JR: Then it would be all right? MR. BELL: Then it would be all right, and I think you could run an overdraft for that. We just got through discussing the quota, and there is a question about giving to the public the complete requirements for December, January, and possibly February, and letting them know the magnitude of the problem, and then saying that we are going out for a drive to get as much money as we can outside of the banking system. What we don't get outside of the banking system, we will have to get through a banking issue, such as Treasury bills and certificates of indebtedness. H.M.JR: I wish you would make a note that I might want to borrow during this drive this fellow George Wanders. MR. KUHN: He is very good. H.M.JR: Get him down here as a financial writer. MR. KUHN: He is very good - the best financial writer. H.M.JR: Ask if we couldn't borrow him from now until the first. MR. KUHN: He won't t be writing as good pieces in the Tribune while we have him. MR. BELL: He has done very well on the Tribune. H.M.JR: But we need somebody - I mean, do that, because I will have to have somebody to do this writing for these financial papers. You might find out. I would do it on the basis of borrowing. MR. KUHN: I will call up. H.M.JR: Call Wanders direct and then ask him. If necessary I will write a letter to the publisher. But I have had him on my mind. Do you think he is the best? 255 -3MR. KUHN: He is outstanding. H.M.JR: If we had a man like that in the shop, we isn'tcould he? very well use somebody, but he is first-class, MR. KUHN: His writing is first-class. I don't know anything about him otherwise. H.M.JR: I still don't know what to say to those fellows. I am free; it isn't that I am stalling or that I haven't got the time. I am free from now until four o'clock, but I don't know what to say. MR. BELL: You can say to them, "I understand you went over our problem of how much money we need and that you have agreed on certain things, that there should be a drive, that you think we can have a drive, and there are certain questions which you raise such as the F and G savings bonds and whether or not it can be put off to December 1st. We will be glad to con- sider that in the next two days." H.M.JR: Look, if I go down, it will be to make a good impression. If I go down, I will be fussing because I have got a press conference at four o'clock. I will be free at four forty-five. What time are these boys taking the train? MR. BUFFINGTON: Five-thirty and five forty-five. H.M.JR: I think I had better go down now. MR. BUFFINGTON: I am sure you will have no question about it. I think it would be fine. H.M.JR: What floor are they on? MR. BUFFINGTON: Right here in two eighteen. MR. BELL: They are in my old office. 256 -4MR. BUFFINGTON: Ten minutes would be fine. MR. KUHN: I think if you outlined, as you did to those three men sitting here before, the kind of operation that this has got to be, the rifle shooting, the use of shoe leather - that was another thing, you made it perfectly plain to these three OWI people what kind of drive this was going to be. H.M.JR: They responded nicely, didn't they? MR. KUHN: Very well. They are good people. Cowles and Dyke were excellent, and Lewis didn't even come into the picture. H.M.JR: He has got forty programs. He says, "You ought to be able to help yourself out of your own Treasury program." " O.K., when are you going to decide? Well, we don't have to decide. MR. BUFFINGTON: No. H.M.JR: Was Marriner there? MR. BUFFINGTON: He certainly has been there like-- H.M.JR: Is he still there? MR. BELL: He is arguing for his quota. H.M.JR: You mean he is still there? MR. BUFFINGTON: He has been there since eleven o'clock this morning and at it all the time. MR. BELL: I told them that these figures we gave them were confidential, that everything we were discussing was confidential, and no decision had been made. I said that all we wanted was to get their views on these 257 -5various questions, and you would try to make a decision before Thursday; and if you did make a decision before Thursday, we could give them as much of the information Thursday night as possible so they could start on the program, expanding their organization, and so forth. H.M.JR: Dan, if we decide Thursday, that is the 12th, that gives them until the 23rd; that is a week and a half. Of course, we will know these answers when a fellow like this man Thomas - is that his name whether we can get some of these people to give us the paid space. MR. BELL: They raised a question there about advertising, too. H.M.JR: You take, for instance, these weekly magazines - if you can get into those in time-MR. KUHN: These people told us before that there was no difficulty about getting advertising into "Life," "Time," "News Week," and so on. H.M.JR: We skip the Luce papers. MR. KUHN: The Saturday Evening Post we cannot get into. H.M.JR: We skip the Luce papers. MR. KUHN: You can get into Gardner Cowles' paper, but that isn't a class paper. MR. BELL: Don't we want these papers that are. daily and weekly, read throughout the country? MR. KUHN: Those are the papers. There is no problem about that. H.M.JR: We will keep out the Luce papers and let the advertising manager of Luce's come in and call on me for the page. He will 258 THE UNDER SECRETARY OF THE TREASURY WASHINGTON MEETING WITH THE EXECUTIVE MANAGERS OF THE VICTORY FUND COM ITTEES ON MONDAY MORNING, NOVEMBER 9, 1942 1. It seemed to be the concensus of the group that the Secretary proceed with the drive as contemplated. The group feels that they will do a reasonably good job but they could do a much better job if they had had more time to prepare. They asked whether or not it would be possible to postpone the drive, say until December 1. They also asked the question of whether the War Savings Staff drive on F and G bonds can be postponed as there will be conflicting and overlapping interests in these two groups. It would be much better from their standpoint if the War Savings Staff could concentrate on Series E bonds and particularly pay roll savings plans during the month of December. They feel that they would do a much better job if F and G bonds were concentrated in the Victory Fund Committees rather than in the two organizations. 2. They feel that they can expand their organizations considerably by November 24th, but they probably will not be able to expand them as far as they would like to to put on a really big and concentrated drive for the Secretary. They have agreed to send the Treasury a report by Thursday morning as to the kind of organization that can be made and the cities involved. It is contemplated that if we announce Thursday that there will be a drive, we can send instructions to the Executive Managers on Thursday evening. 3. BUY As to publicity, it is felt that a radio talk by the President and the Secretary of the Treasury would be very helpful. They also feel that they should be furnished some information which they can use in their instructions for local publicity purposes. They thought it would be very helpful if we could have paid advertising of all the issues on sale and it was thought this might help get better publicity out of those papers which received the paid advertising. DWB 259 November 9, 1942 5:18 p.m. Operator: Go ahead. Randolph Paul: Hello. HMJr: Randolph? P: Yeah. HMJr: How did it go? P: Oh, very nicely. We left it that - that we'd get over a copy of that long letter which - which has to be in a couple of minor respects revised. We'd get sufficient number of copies of that over either late tomorrow or Wednesday morning 80 that it could be sent out to the members and furnish the basis for the discussion Friday morning HMJr: P: Yes. and the general policy was - the general idea was that he'd try to draw out the ideas of everybody at the Friday meeting. HMJr: Yeah. P: Then we had some discussion of - of the income tax, sales tax. He doesn't think there ought to be any new income taxes. He thinks there ought to be an attack on a 80-called second front, meaning compulsory saving and the spendings tax. HMJr: I see. P: It's obvious he - and it's also obvious that he, at the present moment at least, doesn't mind a sales tax as much as we do. HMJr: P: I see. He said that he wanted to get together with us at length, because although he seems to quite appreciate the fact that we - that all his other work is going for nothing unless he does something on this front. 260 2- HMJr: P: Good. Was he all right? He was very pleasant. I'm - but I think we've got to do a lot of selling to him, and he also it was a valuable conference in the fact that whatever else may happen we know that-we'll have to put much less emphasis on the income tax than we had perhaps intended. HMJr: How long were you with him? P: Oh, about half an hour. HMJr: Ithere? see. Does he keep you waiting when you go over P: No, no, he's always very prompt. HMJr: I see. P: I've been over there quite a number of times. HMJr: Good. P: I - I have a - rather, I was trying to see you today. HMJr: Yeah. P: It seems to me it's quite important that - it's it's an attempt of the State Department to frame the record on you, I think, in connection with the freezing, and 80 on, and we've got this reply to Hull and I - I - I don't know whether it's necessary to talk with you about it, but Pehle and I Argentine Foreign Funds situation and ad hoc would be glad to do it. I think the letter ought HMJr: P: to go pretty soon. Well, could - would - couldn't it go tomorrow? Yeah, but I - I just sent it in to you with a note I that we might have to talk with you about it. don't know whether we do or not. I think the letter speaks pretty well for itself. HMJr: Where is the letter? -3- 261 It's on its way in to you. I was going to P: bring it in. HMJr: Oh. P: I tried to get hold of you, and I couldn't. HMJr: Well, you were away when - you were - when I was P: Oh, I see. I didn't know that. HMJr: Incidentally, I got your man into my press con- P: You got who into the press HMJr: Luxford. P: Oh, yeah. HMJr: He did a good job. P: HMJr: P: HMJr: P: free, you were over across the street. ference because I understood you were out. Yeah, well, I was just back, as a matter of fact. I didn't know that. Well - he's a good man. Well, I'll look at the letter and we'll see. If you want to talk with us, I think both Pehle and I should talk with you about it. I don't really, sir, I think you'll find when you read it that HMJr: Yes. you won't want to talk with us. P: HMJr: All right. They're trying to frame me? What's P: Oh, they're trying to build up a record. They the idea? come back with a lot of suggestions that we've made to them HMJr: Yes. 262 -4sometime ago, and then they propose a certain P: type of ad hoc freezing that - directed to particu- lar accounts which doesn't have sufficient safeguards to make it worth anything, and so a good deal of time was spent on this letter that - a five, sixpage letter answering Hull. HMJr: Yes, I know. Well, I'm going home now. How are you otherwise? Oh, fine. I've got a - if you're going home I think P: I'11 shoot over to the hospital and see my brother. He's had a heart attack and HMJr: P: HMJr: P: HMJr: P: HMJr: P: HMJr: P: HMJr: P: Oh, I'm sorry. I'11 take the chance to run over there. Yeah, I'm going home. This letter to go over to - to Byrnes, I'll see it before it goes. Well, if you want to but the changes are going to be practically - very minor, you know. Well, then let it go. Well, I think we might as well let it go. Yeah, mustn't it go over my signature? Oh, well, that's right. We'll have to get you to sign it. Yeah. Well, we could - what we're going to do is to mimeograph it. That's all right. So we'll just go ahead and mimeograph it with your signature, and the original can be taken care of in due course. HMJr: Okay. P: All right. HMJr: Thank you. 263 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE TO FROM Secretary Morgenthau November 9, 1942 Ferdinand Kuhn, Jr. The O.W.I. is immediately undertaking a telegraphic poll on this question: "Do you think the Government should pay the banks 2%, 27%, or more, for the money the banks lend to the Government during the war?". The O.W.I. hopes to have an answer by the end of this week, but warns us that there probably will be a very large proportion of "don't know" answers. F.K. 264 November 9, 1942 Dear Frank: I am having a photostat made of Commander Eubenk's letter and am send- ing it to Henry Stimson suggesting that I wish the Army could do as well. Yours sincerely, (Signed) Henry Honorable Frank Knox, Secretary of the Navy. File in Diary 265 October 26. 1943. My dear Ms. Secretary This is to 100 you - that the report on the Havy Payroll Savings Fina Ins meaned the Secretary's Book, and to tell you that is will be - of the first Shings salled to Me attention whom he returns. Sincerely yours, K. s. Niets, Private Secretary. Renorable Freak - Secretary of the Mary. Washington, D. . IP/dbs 26 OFFICE OF THE SECRETARY OF THE NAVY Memo for Sec. of meas. Here is something to make you ful good on your return from abroad Frank 267 ADDRESS REPLY TO THE SECRETARY OF THE NAVY AND REFER TO INITIALS AND No. NAVY DEPARTMENT OWSB:L12-2(5) GAE:md WASHINGTON October 20, 1942 Coordinator for War Savings Bonds From: To: Secretary of the Navy Subject: War Savings Bonds, report on operations for first year. The sale of War Savings Bonds to Naval personnel 1. was inaugurated on October 1, 1941. Under the direction of a Coordinator for War Savings Bonds, Supply Corps officers were designated as Issuing Agents and assigned to twenty-eight major shore activities. The first three months of operation were devoted principally to details of organization. In January, 1942, the Navy Payroll Savings Plan became effective and, in the six months following, more than $27,000,000 of War Bonds were sold to employees of the Navy in Naval Districts and Yards. On June 30, the campaign to enroll 2. over 90% of all civilian employees for at least 10% of the total payroll was well under way and bonds are now being purchased at a rate in excess of $125,000,000 per year. As soon as the "90-10" objective is attained the campaign will be extended to naval personnel, afloat and ashore. 3. At the outset of the Navy's War Savings Bond Campaign it was predicted sales for the first year would be $40,000,000. Actual sales for the first year, ending September 30, were $61,000,000, or over 50% in excess of the estimate. A report in detail will be submitted after the close of the calendar year. 4. G. A. EUBANK VICTORY BUY 268 November 9, 1942 Dear Henry: I am enclosing herewith, a photostat of a memorandum, forwarded to me by Frank Knox, from Commander Eubank. What can the Army report for itself in regard to the sale of War Savings Bonds? Yours sincerely, (Signed) Henry Honorable Henry L. Stimson, Secretary of War. Sent by Mess. Givens 4:27 11/10 File in Diary 269 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE 11/9/42 TO Mr. Odegard FROM Mr. Lane Following is the status of our large city newspaper promotion: the following firms have agreed to put up approximately $250,000 each for this purpose General Electric Aluminum Company of America International Business Machines In the case of Aluminum Co., their commitment is contingent upon our obtaining five other sponsors by this Wednesday. Companies also approached who turned down the idea are Ford Chrysler Burroughs Adding Machine Companies who have been approached and who have yet to make a decision are - American Tel. & Tel. Metropolitan Life Insurance Co. United States Rubber General Motors In addition in the next few days we propose to contact the following United States Steel Socony Vacuum du Pont General Foods. As you know, this plan was evolved as part of the Payroll Savings promotion drive because we falt our coverage was very weak in the case of big city newspapers. Consequently we drew up this plan, which, if half-may successful, will give us the most intensive campaign in the history of newspaper advertising. The amounts of money involved came about this way: we made up a sample media schedule which embodied 120 newspapers in the 50 largest cities. The total cost of a full-page in each one of these papers would be approximately $106,000. We were 270 Memo to Mr. Odegard -2- November 9, 1942 careful to tell each advertiser, however, that this list is intended to show the sort of coverage we have in mind - leaving each advertiser free to make up his own specific list. As for schedule dates, we are handling this on a first come, first served basis. General Electric has requested that their first insertion be in the evening papers of November 16 and in the morning papers of November 17, with their second insertion around December 1st. Aluminum Company plans their first insertion for November 18 evening papers and November 19 mornings papers, with their second insertion also around December 1st, I.B.M. has told us that they do not care - that they are willing to take whatever dates are open when the rest of the crowd comes in. 271 Some weeks ago a letter was sent to national adver- tisers and agencies, telling them of the intensification of the War Bond drive and inviting their support of the War Bond campaign in their own product and institutional advertising. The following are excerpte from some of their replies. "You can count on our continuing this cooperation George W. Hill, President The American Tobacco Company "Wherever we use printed advertising we shall incor- porate ... the sincere effort to stimulate the sale of War Bonds" R. G. Rettig The Anacin Company "We will continue to support the War Bond campaign whenever we can," J. E. Weber, Advertising Director Armour and Company "We are cooperating in every respect." Harry M. Mansa, President The Bayer Company, Inc. "This we shall certainly do - wherever physically possible." Milton H. Biow The Biow Company, Inc. "We hope to get under way soon with anambititous pro- gran of cooperation. Lee H. Bristol, Vice President Bristol-Myers Company "I have asked our advertising people to include in all future advertisements a War Bond message." T. V. Hartnett, President Brown & Williamson Tobacco Co. 272 "Please besurred that we are only too willing to 00operate with the Treasury Department's program for War Bonds publicity." T. C. Butcher, Advertising Mgr. Colgate-Palmolive-Peet Company "You may be assured that we will continue to feature the War Bond Minute Man and we will cooperate to the best of our ability." Wa. F. Mueller, Advertising Mgr. Corn Products Sales Company "As further ads sponsored by General Electric promoting the sale of War Bonds (and they all will) are published, we will be glad to forward them to your attention. F. Chandler General Electric "We shall be more than glad to cooperate with you in this program." F. T. Tucker, Director of Advertising B. F. Goodrich Company "It is our expectation to continue to promote the sale of War Bonds in such ways as we believe possible." W. R. Huber, Mgr. of Advertising Gulf oil Corporation "I have instructed our advertising department to use the Minute Man insignia wherever they can." H. F. Johnson, Jr., President S. C. Johnson & Son, Inc. "We shall be glad to cooperate with you in the promotion of War Bonds." W. D. Carmichael, Vice President Liggett & Meyers Tobacco Company 273 "You will note that the back page of this insert is devoted entirely to War Bonds." Pitt F. Cari, Jr., Vice Pres. New York Telephone Company "We shall be very glad to cooperate wherever possible," R. M. Gray Standard oil Co. of New Jersey "As you know, we have contributed considerable ad- vertising time and space to the Bond drive, and will continue to do so." S. M. Birch, Advertising Manager The Texas Company "We appreciate your suggestions very much indeed." H. L. Webster, Advertising Manager Wm. Wrigley Jr. Company "In accordance with a request from Vincent F. Callanan, I am sending you several proofs ..." Roy S. Durstine, Roy S. Durstine, Inc. "We are attaching herewith proofs of current advertisements prepared for Philoe." Albert E. Langley Sayre M. Ransdell Assoc., Inc. "We are routing your suggestions to our various plan men and copy writers. We are glad to cooperate in every way." H. M. Dancer, President Blackett-Sample-Hummert "We are sending you two proofs of a forthcoming Cadillac magasine advertisement incorporating a message on War Bonds and Stamps." Hovey Hagerman MacManus, John & Adams, Inc. 274 "Here is a $10,000 ad to further the sale of War Savings Bonds on the back page of every Detroit Telephone Directory." Lawrence J. Michelson Simons-Michelson Co. "Thank you for your nice letter ... I assure that we will continue to make mention of War Savings Bonds and Stamps in national advertising wherever it is possible to do so." G. A. Phillips, Advertising Manager Cluett, Peabody & Co., Inc. "We appreciate your cordial note ... We are glad to 00operate." James L. Madden, Third Vice President Metropolitan Life Insurance Company "We have asked our brand groups to seek chances to slip in Minute Man logos or a sentance advertising War Bonds." H. M. Clark, Advertising Manager Lever Brothers Company "It is our intention to promote the sale of War Bonds and Stamps throughout the war." Wesley I. Nunn, Advertising Manager Standard oil Company of Indiana "We are sending proofs of these advertisements." V. C. Havens, Advertising Director Oldsmobile "It is a pleasure and privilege to cooperate with the United States Treasury Department." V. D. Beatty, Advertising Manager Swift & Company "We are prepared to cooperate in every way." Robert L. Lund, Vice President Lambert Pharmacal Company 275 "WE are very happy to give you our utmost cooperation." F. S. Cannan Sun oil Company "As proof of our cooperation we are attaching herewith thirteen facimile advertisements c. P. Fasken, Chevrolet "We are deeply appreciative under separate cover we are sending a few ads." T.H. Young, Advertising Director United States Rubber "You may rest assured that it is our intention to in- clude mention of War Bonds in our radio and magasine advertising." Karl I. Silvey The Studebaker Corporation "We are referring your letter to our advertising agency, who will be glad to cooperate." M. V. Cowen The Great Atlantic & Pacific Tea Co. 0 DRIVE TO MARK ALHARBORATTACK film theatre in the country. Prey ceeding the celebration, audiences will observe "a moment of atient prayer, in remembrance of the Pearl Harbor dead, and then three Theatres to Launch New Campaign on Dec. 7 commemorate the first anniary of the attack on Pearl Har16,000 motion picture theatres ... ughout the country will par- compate in an intensive drive to sell Bonds and Stamps in the the of Dec. 7. it was announced Metarday by the Theatres Division the motion picture industry's Activities Committee. "Avenge 7-On to Victory". is the gan for the drive which will be de with the cooperation of the c. asury Department War Savings the War Bond drive in Sepber the motion picture industry 0 itcipated and rolled up bond Totaling $838,250,000 réprepg a gain of 8.2 per cent over quota set by the Treasury De- ment. new drive will be launched ially on the night of Dec. 7 patriotic celebration will a place on the stage of every cheers will be given for the armed forces in their march On to Via. tory': according to the official program. or the 16,000 theasres pledged to cooperate in the drive, 4,600 have previously been designated by the Treasury Department as om- cial hand-issuing agents. In the other theatres pledges will be taken for the purchase of bonds and stamps will be sold. The new campaign "is in line with industry policy to put on frequent special activities to promote the sale of bonds and stamps." 6 277 0 11-9-42 from 1. TOP THAT 10% BY NEW YEAR'S - - Nov. 15 - Dec. 31 magamble a. 150,000 FIRMS BEING CANVASSED b. GROUP APPROACH C. INDUSTRY DRIVES d. LOCAL LABOR-MANAGEMENT DRIVES e. RAILROAD DRIVE f. CITY & COMMUNITY-WIDE DRIVES 2. WOMEN AT WAR WEEK - Nov. 22 - 28 (See Detailed Campaign) 3. RETAIL PROGRAM Nov. 22-28 - - Women-At-War-Week Dec. 7 - Inventory Day Dec. 20-25 - Promote "The Present With a Future" Xmas Program January Clearance - "They'll Buy You Out of Stamps". = 4. CURRENT SPECIAL ACTIVITIES a. JAP SUBMARINE TOUR b. TWELVE PERSONALITY APPEARANCES - WOMEN-AT-WAR WEEK C. DISTRIBUTION FILM "BONDS AT WAR" d. MINUTE MEN AND MINUTE WOMEN NEWSREEL COVERAGE 278 -2- 5. AGRICULTURE A carefully worked out plan to reach the farmers will be in full force and effect during the November 15 December 31, period. Literature and instructions have already gone forth to our State Administrators, Field Representatives and volunteers. 6. SCHOOLS AT WAR PROGRAM - The Schools at War Program is currently being promoted in every S chool in the country. 279 WAR SAVINGS ACTIVITIES November 15 - December 31 280 WAR SAVINGS ACTIVITIES November 15 - December 31 PAYROLL SAVINGS "TOP THAT 10% BY NEW YEARS" DRIVE At Kansas City the following steps of procedure for Payroll Savings were given to all State Administrators and Payroll Savings Chairmen: 1. 150,000 FIRMS BEING CANVASSED - Over 150,000 registered firms will be solicited to install 10% drives between November 15 and December 31. (This figure includes 35,000 firms with over 100 employees. 2. GROUP APPROACH - They shall be approached by calling groups of firms together rather than one at a time. 3. INDUSTRY DRIVES - Industry nation-wide drives will be stimulated in large industries such as steel, trucking, etc. A number of these drives have already been started. 4. UNIONS - The unions are being contacted to insure cooperation and teamwork with management through the entire field. Special literature has been prepared for some 35,000 firms and international and local unions. 5. LOCAL LABOR-MANAGEMENT MEETINGS - Meetings are being held in all States and counties of labor and management to insure full support right down the line. -2- 281 6. RAILROADS - All railroads are being encouraged to start a 10% drive during this period. 7. CITY DRIVES - City-wide Payroll Savings drives to include all firms within a specific area will be inaugurated. A number of such drives are already in progress, notably Hartford and Bridgeport, Connecticut. Many others have been planned during the November 15December 31 period. 8. CONSTRUCTION - A special developed plan to attack the con- struction field on the 10% basis is in progress. Our Field Representa- tives are now visiting their respective States and installing this plan. There are 270,000 volunteers enlisted to assist the State Administrators in this operation. 9. INSTRUCTION FILM - The War Savings Staff has developed a special instruction film entitled "Top That 10% By New Years" to assist State Administrators and County Chairmen in presenting the "How to Put on 10% Drives". These films are already in the hands of.975 distributors throughout the country and are already in use in the various States. 10. STATE DRIVES - Several States have planned simultaneous drives within the State during the first week of December. 11. REPORTING SYSTEM - Special reporting system for every firm that reaches the 10% goal and congratulatory messages, wires and letters, have already been prepared. -3- 282 12. SCOREBOARDS - Scoreboards have been developed for each State Administrator and each county. 13. FOLLOW-UP MATERIAL - A series of printed follow-up material are on the press. This material goes to the State Administrators to stimu- late their interest from week to week. 14. TRADE ASSOCIATION - All the leading trade associations have been contacted and their support enlisted in the "Top That 10% by New Years" drive. 283 WAR SAVINGS ACTIVITIES November 15 - December 31 MISCELLANEOUS 1. AGRICULTURE - A carefully worked out plan to reach the farmers will be in full force and effect during the November 15-December 31 period. Literature and instructions have already gone forth to our State Administrators, Field Representatives and volunteers. 2. SCHOOLS AT WAR PROGRAM - The Schools at War Program is being promoted in every school in the country. 3. PROFESSIONAL GROUPS - Leading professional associations have been contacted and special plans are underway to have 10% drives put on among the doctors, lawyers, accountants and other professional groups simultaneously with the Payroll Savings operation so as to get the full effect of the impact of all publicity - radio, press releases during the November 15-December 31 period. 4. INTERDEPARTMENTAL COMMITTEE - Special emphasis is being made by the Interdepartmental Committee to tie their activities into those of the War Savings Staff during this period. 284 WOMEN AT WAR WEEK PROMOTION (Nov. 15 - Nov. 28) RADIO I. TREASURY STAR PARADE Three recordings specifically designed for use during Women At War Week, November 22 to November 28 are entitled (a) "Claudia", with a special message from Mrs. Morgenthau. (b) "A Letter To Hitler", starring Helen Hayes (c) "Everybody Has To Win This War", with a special message from Mrs. Roosevelt. II. Forty special one-minute transcribed announcements have been recorded for use by all radio stations. III. Twenty specially written live announcements have been released to home economics directors accompanied by a letter from Mrs. Morgenthau. IV. Ten specially written live announcements for farm programs have been released to Farm Program Directors. They also have been sent to the Department of Agriculture for inclusion on their five times daily farm report broadcasts. V. The Women At War Week radio kit has been mailed to State Administrators, State Chairmen, local Women's Division Representatives and radio stations. This kit includes: interviews for civic leaders, radio speeches, a radio roundtable and announcements for localization. VI. A Office of War Information Fact Sheet on Women At War Week has been released to all sponsors and agencies who have War Bond allocation assigned to them between November 22 and 28. VII. Saturday Night Bond Wagon broadcast for November 21, based on Women Ar War Week. VIII. A half hour coast-to-coast CBS broadcast November 22 from 7 to 7:30 P.M., ENT, will launch Women At War Week. IX. A half-hour coast-to-coast MBS broadcast from 3:30 - 4 P.M. EWT from Philadelphia for Women At War Week. Other Treasury Department network programs to promote Women At War Week: Nov. 21 - "Salute To The States" - MBS - 12:45 - 1:15 P.M. Nov. 22 - "Horace Heidt" - Blue - 1 - 2 P.M. Nov. 23 - "Little Jack Little - Blue - 11:15 - 12 NOON Nov. 24 Nov. 25 Nov. 26 Nov. 27 - " . X. -2- Nov. 25 - "Guy Lombardo" - Red - 11 - 11:30 P.M. Nov. 27 - - Blue - 12 M - 12,30 A.M. 285 286 PRESS I. A Press Clip Book released to 10,000 daily and weekly newspapers, State Administrators, State Chairmen, regional and state women directors and in bulk to State Adminstrators in sufficient number for redistribution to all county chairmen. It includes: (a) Articles by: I wrobe FW Mrs. Roosevelt Mrs. Morgenthau all share Miss Elliott Helen Hayes Kate Smith Oveta Culp Hobby (WAACS) Mildred McAfee (WAVES) Pearl Buck Mrs. Dwight Davis Nannie Burroughs Mrs. John Bulkeley Judge Florence Allen Regional War Savings Staff Women Directors. OWR oh for there 10 (b) Four special Women At War Week cartoons drawn by Helen Hokinson. (c) Approximately 15 special Women At War Week pictures for general use which will be sent to the newspapers in mat form. (d) Pictures of Women At War Week features such as the arm band and the three posters. These also will be sent to newspapers in mat form. (e) Feature stories for general use regarding Women at War Week. (f) Special features to be localized in various sections. (g) Three Victor Keppler Women At War Week photographs which will be released in mat form. (h) Suggestions for securing maximum publicity. These suggestions will be included in the press books which are sent to State Administrators, County Chairmen, etc. They will not be included in the press books sent directly to newspapers. II. A quarter page plate release has been sent to 9,000 weekly newspapers. III. Three special Victor Keppler Women At War Week photographs to be released to each of the wire services, for opening of Women At War Week, November 22. IV. A general news story to be released to wire services for opening of Women At War Week, November 22. 287 RETAILERS' ACTIVITIES the following are plans that are set by retailers in cooperation with the War Savings Staff for the period November 22-28 Women-At-Nar-Neek Retailers are to celebrate these special days: Monday., 23rd - Minute Women Assembly Day. Tuesday 24th - Housewives for Victory Day Wednesday 25th Women Var Workers and Service Mothers' Day Thursday, 26th- Thanksgiving Friday., 27th - Farm Women for Victory Day or alternate Children for Victory Day. Saturday, 28th- American Family Day December 7 Inventory Day "Make Your Own Declaration Of War" Day Can Crowd Your Store With Var Bond and Stamp Purchasers. 1. Get Out The Bands! 2. Fly the United Nations Flags! 3. Display Enlarged Photos of the Pearl Harbor Attack! 4. Get Up The "Make Your Own De- claration of War" Poster throughout the Store. 5. Broadcast the "Declaration of Var 6. Turn on Radios in every Department During the Broadcast or Pipe It in Through Iour Public Address System. 7. Have Customers Repeat the Pledge of Allegiance in Unison with the Announcer. 8. Hand Every Oustomer-Inmediatelyan Order Form for a Bond Purchaseand Sign 'Es up! Christmas Promote "The Present With a Future "this Christmas. Make War Stamp Decorated Christmas Trees. 288 RETAILERS' ACTIVITIES (Cont.) Display the Christmas Poster. Provide Special Gift Wrappings Christmas for Bonds as Christmas Gifts. Gift Envelopes for Bonds. Redecorate your Bond Booths for Christmas. Give Santa Claus a "Minute Man' Partner this year. Feature War Stamps in your Imas Tree Ornament Department. Feature Boutonnieres and Corsages in Every Gift Department. January Clearance "They'11 Buy You Out of Stamps". January Stamp Album Clearance Month. "A half-filled Album is like a halfequipped soldier." Fill Your Mar Stamp Album and Get A War Bond Today! And be sure to use: (1) Newspaper advertising (2) Publicity (3) Radio Advertising (4) Stunts (5) Stamp Booths (6) Window Displays (7) Store Decoration (8) Sales Training (9) And More Sales Training (10) And For Employees -1- PAYROLL SAVINGS DRIVE PROMOTION 289 November 15 - January 1. RADIO I. The following Treasury Department sponsored programs will promote the "Top That Ten Per Cent By New Years' campaign between November 15th and December 31st. (The Women At far Week programs from November 22 to 28 are not included in the following): A. 18 TREASURY STAR PARADE programs,released to 820 stations. B. 7 SATURDAY NIGHT BOND WAGON broadcasts. C. 7 TOMMY DORSEY programs on the Blue Network. D. 5 GUY LOMBARDO programs on the Red Network. E. 29 LITTLE JACK LITTLE broadcasts on the Blue Network. F. 7 HORACE HEIDT broadcasts on the Blue Network. G. 7 SALUTE TO THE STATES" programs on the Mutual Broadcasting System. H. 5 NEW TREASURY HOUR broadcasts on the Blue Network. I. 24 TREASURY SONG PARADE programs released to all stations. II. EVERY EVERY PAY DAY A. Victor recordings with Barry Wood have been released to all radio stations, and to approximately 16,000 dealers for commercial sale beginning November 13th. B. offering recording to approximately 375,000 juke box owners for use beginning November 13th. C. Approximately 1,250 complete orchestrations have been mailed to all band leaders of networks and local radio stations. D. 25,000 copies of sheet music being sent to schools, clubs, vocalists, etc. E. Full page ad contributed by Wurlitzer promoting EVERYBODY, EVERY PAY DAY will be carried on the back cover of "BILLBOARD" November 7th issue (see attachment.) -2- 290 III. NETWORK PROGRAMS A. Secretary Morgenthau has agreed to release a statement and has been invited to broadcast on the opening day of the campaign. B. The Army and Navy have both agreed to include "Top That Ten Percent by New Year's" copy in all of their own network programs between November 15 and December 31, except those otherwise allecated by the Office of War Information. They will include such programs 8.6 Meet Your Navy", "The First Line", "The Army Hour", etc. The Army has also agreed to include "Top That Ten Percent" copy in some six hundred (600) locally broadcast Army Camp programs. They will send our copy to all of their Public Relations Offices throughout the country. C. The OWI, NBC, CBS AND MBS, in addition to the Army and Navy, have all agreed to use Army-Navy-War Bond announcements between the halves and quarters of the Army-Navy football game, November 28, except on those stations along the eastern seaboard, which will carry Esso commercials. Standard Oil Company of New Jersey is sponsoring this three network broadcast but since their market is only the eastern seaboard they could not utilize the commercial cut-in time throughout the rest of the country and therefore offered it to the Treasury for War Bond announcements. No, in turn offered cooperation with the Army and Navy to use their copy in addition to our own "Top That Ten Percent" copy on these spots. It is impossible at this time to ascertain how many stations will be concerned in this coverage but it is estimated some three hundred will probably carry the combined Army-Navy Bond messages. D. News commentators will be contacted before November 15th with material for their programs. E. Special dance band copy is being released to all network band leaders along with the EVERYBODY EVERY PAY DAY orchestrations on November 6th. IV. LOCAL STATIONS A. Forty (40) VOICES OF THE PEOPLE and dramatized announcements have been prepared and approved for period from November 15 through November 30. Copy for November 29 through December 8 has been approved and will be recorded on Monday. December a to December 31 copy now in preparation. -3- 291 B. Eight special announcements for use by all radio stations on opening day of 10% campaign have been released. D. Twenty (20a women's announcements for use from November 29 to December 31 to be released to Home Economics Directors. E. Special dance band copy has been released to local station orchestras along with the orchestration of EVERYBODY EVERY PAYDAY on November 6th. F. Special farm announcements have been released to Department of Agriculture and farm program directors for use November 15 to December 31. V. LOCAL STATIONS AND STATE AND COUNTY CHAIRMEN A. Special Radio Kit, containing the following, will be sent to all local stations,State and County Administrators: (a) Governor's Proclamation (b) Mayor's Proclamation (o) Opening day radio speech for Governors (d) Opening day radio speech for Mayors (e) Series of 10 minute talks for clubs (f) Special announcements having blank spaces for name and telephone number of local Payroll Savings Chairman, asking listeners to call him for further information on Payroll Savings. (g) Special announcements for business management (h) Special announcements for labor representatives (1) Interviews for city officials and civic leaders (j) Suggested congratulatory letter for State Administrators to send to companies for use on locally sponsored radio programs. VI. SPECIAL SPOTS BY COMMERCIAL SPONSORS A. Esso News, Bulova Watch Company, B-C Headache Powders, RCA, and Pall Mall Cigarettes have agreed to give the Treasury Department 10% Campaign a total of approximately 17,100 spot announcements on stations throughout the country, during the first two weeks, November 15 - December 1. -292 ADVERTISING I. GENERAL MAGAZINES - "This Week" and "American Weekly" have been added to the list of magazines which are carrying our Christmas insertion. This, while stressing the givt theme, does bear on Payroll Savings. Total circulation will be about 40,000,000. II. - NEWSPAPERS - A. Today we have in production a complete pertfolie of ads, etc. prepared by The Advertising Council. This will go out this week to all newspapers on our list, and will be distributed in addition by Western Newspaper Union, the Meyer-Both Service and Metro service. B. - General Electric, Aluminum Company of America and I.B.M. have agreed to contribute a total of $750,000 for paid ads in large city newspapers. Other companies may follow suit. III. - BUSINESS PAPERS - Special Payroll Savings ad has gone out, and will appear in approximately 550 business papers. IV. - BILLBOARDS - A. A "Top 10%" 24 sheet has gone out and will appear in approximately 16,000 panels. B. Special imprint strips will be carried on approximately 30,000 additional panels. V. POSTERS - A revise of the 10% flag poster has been completed and an additional Payrell Savings poster has been approved by the Poster Committee and is now in production. VI. CAR CARDS - Through the national efforts of Transportation Advertising Service we have secured approximately 30,000 car cards for the Payroll Savings Drive. VII. HITCH-HIKES - In response to a letter written to all 10% firms and to national advertisers, hundreds of firms have assured us that they will carry the Payroll Savings theme in their own advertising. VIII. ENVELOPE STUFFERS - Five million of these are in pro- duction. In a ddition to being distributed through our Field Staff, we wrote to all 17 operating telephone companies in the United States asking them to send it out in their December 1st bills. Replies would indicate that approximately 4,000,000 will be distributed in this fashion. -5- MAGAZINES - EDITORIAL COPY (Not Advertising) 1. 2. Readers Digest gives us the back cover of the January issue, -- which will go on the newsstands December 20. The magazine PIC has promised us the two column center page editorial space mid-December. 3. The magazine LOOK is planning a special December 15 feature consisting of a series of statements by the wives and widows of ex-Presidents of the United States. 4. Walter Davenport plans to do a COLLIER'S story. 5. Saturday Evening Post doing special story. 6. An article and a small box have been planted with MADEMOISELLE. The article is general War Bond stuff, women's angle. The box is directly tied in with the Payroll Savings Drive. 7. A special Payroll Savings box has been planted with COSMOPOLITAN. 293 294 PRESS SECTION 1. Statement by the Secretary. This is in the first Payroll Savings clip sheet (mailed Monday, November 9th, to 1700 daily and 9000 weekly news- papers). 2. New drawing of 10% insignia, and editorial ears, fillers, etc. Three New Year's designs are carried in the above-mentioned clip sheet and have been sent out in mat form to 1700 daily and 9000 weekly newspapers. 3. Publicity Kit. (Suggested speeches for officials, releases for newspapers, ideas for localising campaign. etc.) Was mailed Saturday, November 7th, to all County Chairman and State Administrators. 4. First clip sheet mailed Monday, November 9th, to 1700 daily and 9000 weekly newspapers. 5. Four page broadside for local publicity directors. This was condensed and mailed to all County Chairmen and State Administrators as part of publicity kit (No. 3). 6. Exclusive pictures for AP, UP and INS. Victor Keppler has taken the pictures and these are now in production. 7. Western Newspaper Union has contacted the weekly newspapers for us. 8. Payrell Savings material for 1,000 foreign language and 225 Negro papers is being put in the mail this week. 9. Letters to foreign language lodges and letters to Negro lodges are now in preparation. 10. Special articles and fillers for 998 religious publications are to be mailed November 13th. 11. Second, third and fourth clip sheets will be mailed November 28, December 5, and December 12. 12, Articles on labor management cooperation have been completed and are to be included in the clip sheets described above. COMPANY PUBLICATIONS A complete set of promotional material for the campaign. including cartoons, suggested features, and an article on the 10% by New Year's theme accompanied by a letter to all industrial editors covering the basic points of the Payroll Savings Plan was mailed over the week-end to 2500 industrial publications. 295 BUSINESS PUBLICATIONS 1. An article urging all business firms of 100 employees or over to become issuing agents is being mailed Wednesday, November 11th, to 850 business publications. 2. A Payrell Savings ad - "Ten Per Cent Drives Swebl Treasury Honor Roll - has been mailed to 850 business publications. 3. Suggested editorial will be mailed Wednesday, November 11th, to 850 business publications. 296 MOTION PICTURES AND SPECIAL EVENTS 1. 2. The Jap Submarine will tour California and Arizona. Assistance will be given the Women's Division in obtaining talent for "Women at War" week. 3. We are distributing the now picture "Bonds at War". 4. Minute Men newsreel subjects will be released through the five newsreels during this time. 5. We are working with the War Activities Committee of the motion picture industry enlisting their cooperation for "Women's War Week" for December 7th and making plans for the month of January. 297 November 9, 1942 Dear Mr. Bacher: The Treasury Star Parade book has given me a great deal of pleasure. The scripts are so good that they deserved being put into book form, and I am delighted that you have had the initiative and enthusiasm to do the editing job. You have been more than generous in your acknowledgments to me, although the credit right- fully belongs to you and to Bill Murray, and to all those who had a direct part in the making of the program. As I wrote in the introduction, I am genuinely proud to think that the Treasury prompted this wonderful series. Thank you for a fine piece of editing, and also for the inscription on the copy which you so kindly sent me. I congratulate you most heartily on the work that you have done. Sincerely, (Signed) H. Morgenthau, Jr. Mr. William A. Bacher, c/o William Morris Agency, 1270 Sixth Avenue, New York, N. Y. CC in Diary FK/cgk Copies to Thompson 298 November 9, 1942 My dear Mr. Douglas: Mrs. Roosevelt sent me a memorandum from you, dated May 16, in regard to a number of people, such as Allen Grover, Cornelius Du Bois and Wm. B. Lewis. Frankly, I don't know what it's all about, but I am sure you do and if you would let me know or drop in to see me, maybe we can do something about it even though the memorandum is months old. Yours sincerely, (Signed) H. Morgenthau, Jr. Mr. Melvyn Douglas, Office of Civilian Defense Room 919, Dupont Circle Building, Washington, D. C. 299 THE WHITE HOUSE WASHINGTON October 19, 1942 Mrs. Morgenthau return. To give to the Secretary on his E.R. 300 THE WHITE HOUSE WASHINGTON May 20, 1942. MEMORANDUM FOR MRS. ROOSEVELT: I suggest you speak to Henry Morgenthau about this. F.D.R. 301 May 16, 1942 TO: Miss Malvina Thompson FROM: Melvyn Douglas The following list indicates the type of background of some of the people in key positions: Vice President, Time, Inc. Research Director, Time, Inc. Wm. B. Lewis Vice President CBS, previously advertising copy writer (In charge of operations) Ass't to Vice President, NBC, Douglas Meservy Previously Account Executive various Allen Grover Cornelius Du Bois ad agencies Vaughn Flannery Clyde Vandeburg Alvin Josephy Vice President, Young & Rubicam Previously N. W. Ayer Publicity Director Packard Motor Co. Mutual Broadcasting. The following is the personnel of the Art Council set up by Vaughn Flannery to buy poster art illustrations, etc.: Chester LaRoche Head of Advertising Council Vice President, Young and Rubicam Garrit Lydecker Ernest Button Fred A. Zaghi Young & Rubicam Young & Rubicam Young & Rubicam It is my understanding that Young and Rubicam wrote much of the copy for the American First crowd. The Art Council works very closely with the Art Directors Guild in New York, which is a tightly closed organization composed of big shot advertising agency illustrators who have little use for anyone outside their ranks, and judging from the tenor of remarks at the poster meeting which I attended the other day, there exists on the part of the graphics coordinators an ill-concealed contempt for people in general. The summation of their advice to those of us who came to listen to the government poster policy was to the effect that everything must be reduced to the lowest possible common denominator. I am also enclosing an OFF Radio Schedule. You will note the way in which the government message is being sandwiched in between Wheatena ads and Carter's Little Liver Pills. I have grave doubts of this procedure. O. F.F 302 Rades Schedule 346-M PURPOSE OF THIS FOLIO On the four following pages appear all of the network sponsored and sustaining shows on which Government messages will be delivered during the week April 27 through May 3. Each network's shows are on a separate page. Next to the name of each show appears the specific Government message which will be carried on that show. We are sending this folder to all local stations carrying network programs in order that you will know what type of Government message those programs will be delivering during this week. (A new folder will be issued to you every week.) SUGGESTED PROCEDURE Turn to the page listing the programs on the network with which you are affiliated. Note the times of network programs each day which are scheduled to carry Government messages. Set this schedule alongside your own schedule for these same days and space Government messages on your own programs so as to provide an even distribution of messages throughout the day and to avoid an undue repetition of the same message. IMPORTANT NOTE Do not conclude that the types of message being delivered on the Allocation Plan necessarily indicate the types of message you are to deliver locally. This is not the case. The Radio War Guide is the chart you should refer to for the relative importance of the various types of message, We are sending you this network data only to guide you in SPACING your messages, 346-M 303 MESSAGES ASSIGNED ON NETWORK ALLOCATION PLAN BLUE NETWORK (All times are EWT) MONDAY APRIL 27 8:15 on 10:45 am 3:00 pm 5:45 pm 8:00 pm 10:00 pm TUESDAY APRIL 28 7:00 pm 9:00 pm WEDNESDAY APRIL 29 11:00 am 4:00 pm 8:00 pm 9:30 pm THURSDAY APRIL 30 11:45 am 6:45 pn 7:15 pm PROGRAM MESSAGE Pagos of Melody Chaplain Jim Automobilo Pooling Sustaining Fill Socrot City I Love a Mystory Sustaining Fill Easy Aces Salvage War Bonds Automobile Pooling War Bonds Salvago Automobilo Pooling Jury Trials War Bonds Second Husband War Bonds Salvago Street Singer Quiz Kids Calloway Quiz Automobile Pooling War Bonds Just Plain Bill Automobile Pooling Lowell Thomas Mr. Koene War Bonds Salvage Broakfast Club Automobile Pooling FRIDAY MAY 1 9:45 am 11:15 on 8:00 pm 10:00 pm Amanda of Honoynoon Hill Sustaining Fill Elsc Maxwoll War Bonds Automobilo Pooling War Bonds SATURDAY MAY 2 2:00 pm 8:00 pn 9:30 pm Sustaining Fill Groon Hornot Rochoster Orch. Automobilo Pooling Salvage Autonobilo Pooling SUNDAY MAY 3 10:00 am 4:30 pr 5:00 pm 8:30 pn Musical Millwhool Behind the Miko Moylan Sistors Innor Sanctun-Thosc Good Old Days 9:45 pm Sustaining Fill Salvage Automobile Pooling War Bonds Salvage Autonobile Pooling 346-M MESSAGES ASSIGNED ON NETWORK ALLOCATION PLAN COLUMBIA BROADCASTING SYSTEM (All timee are EWT) MONDAY APRIL 27 PROGRAM 11:15 cm 12:30 pm 3:30 pm Helon Trent 7:30 pn TUESDAY APRIL 28 10:30 am 1:00 pm 3:00 pm 6:30 pm 8:00 pr 10:00 pm MESSAGE Sustaining Fill Automobile Pooling Blondic Sustaining Fill War Bonds Salvage Salvage Stepmother War Bonds Life Can Be Beautiful Automobile Pooling David Horum Sustaining Fill Salvago Salvago War Bonds Sustaining Fill Automobile Pooling Big Sister Salvago Missing Heirs WEDNESDAY APRIL 29 12:15 pn 5:45 pr Scattergood Baines 6:15 pn Hodda Hoppor Ranson Shorman War Bonds Salvage Our Gol Sunday Vic and Sodo Sing Along War Bonds 10:15 pn First Lino Automobile Pooling FRIDAY MAY 1 9:15 am American School 11:30 on Bright Horizon War Bonds Salvago 9:30 pm Autonobilo Pooling THURSDAY APRIL 30 12:45 pri 1:30 pm 4:45 pm 7:30 pr 2:15 pr 5:30 pr 6:45 pm 7:30 pm 10:00 pm Maudic's Diary Automobile Pooling Salvago War Bonds Joyce Jordan Automobile Pooling The World Today Automobile Pooling Sustaining Fill Salvage How'n I Doing Glonn Miller War Bonds Salvage 9:30 on Garden Gate Automobile Pooling 1:00 pm Buffalo Presents Salvage SATURDAY MAY 2 4:00 pr Mondowbrook Cnty Club War Bonds 6:00 pm Frazior Hunt 8:30 pr Hobby Lobby SUNDAY MAY 3 2:00 pr 8:30 pri Sustaining Fill Crime Doctor War Bonds Salvage Automobile Pooling Automobile Pooling 304 305 346-M MESSAGES ASSIGNED ON NETWORK ALLOCATION PLAN MUTUAL BROADCASTING SYSTEM (All times are EWT) MONDAY APRIL 27 PROGRAM MESSAGE 10:30 pm Music That Endures Automobile Pooling Marine Band Captain Midnight War Bonds Selvago Singing Strings I'll Find My Way Boy, Girl & Bend Salvago War Bonds Salvage Jack Armstrong Salvage War Bonds Salvage TUESDAY APRIL 28 12:30 pm 5:45 pm WEDNESDAY APRIL 29 10:30 on 1:15 pn 8:30 pri THURSDAY APRIL 30 5:30 pn 7:30 pr 10:00 pm Confidentially Yours Raynond Gran Swing FRIDAY MAY 1 10:45 on 2:30 pn Cheer Up Gang Salvage War Bonds Army Band War Bonds Salvago Phila. Orchestro SATURDAY MAY 2 11:30 on 2:30 pm Art Jarrott 6:00 pn Anchore Aweigh 9:30 pr Spotlight Bands War Bonds 1:15 pm Sustaining Fill 2:30 pn 5:00 pn 7:30 pn Fort Dix Salvage War Bonds America Singing Nobody's Children Automobile Pooling Salvago Automobile Pooling SUNDAY MAY 3 346-M 306 MESSAGES ASSIGNED ON NETWCFK ALLOCATION PLAN NATIONAL BROADCASTING COMPANY (All timos are E.W.T.) MONDAY APRIL 27 PROGRAM MESSAGE 10:00 on Bose Johnson Words & Music War Bonds Salvago 12:15 pm 2:00 pr Light of the World 4:00 pm Backstage Wifo Music by Shrodnik Firestono Salvage War Bonds Do You Romonber David Harum War Bonds Salvage Music for Everybody Automobilo Pooling 6:00 pr 8:30 pr Automobilo Pooling Automobilo Pooling TUESDAY APRIL 28 8:30 on 11:45 on 1:30 po 2:30 IN 7:30 pn 7:45 pn Guiding Light Burns and Allon H. V Keltonborn War Bonds Salvage Salvago Happy Jack War Bonds WEDNESDAY APRIL 29 9:00 on 10:45 on 2:45 pn 4:45 pn 7:30 pn 8:30 pri Mary Marlin Automobilo Pooling Hynns of All Churchos Salvago Young Widdor Brown War Bonds Caribboon Nights Autonobile Pooling Dog House War Bonds THURSDAY APRIL 30 9:15 an 11:15 on 2:15 pm 6:00 pri 8:30 pri Hank Lawson Vic and Sodo A.Grimm's Daughter Indiana Indigo Aldrich Family Autonobile Pooling Salvago War Bonds War Bonds Automobilo Pooling FRIDAY MAY 1 12:30 pri 4:15 pm 6:00 in 7:00 pn 9:00 pn 10:30 pn Doop River Boys Stella Dallao Strictly From Dixic Frod Wering Waltz Tino War Bonds War Bonds War Bonds Salvage War Bonds Night of (date) Autonobile Pooling Dick Liebert Salvago War Bonds SATURDAY MAY 2 8:30 on 10:30 on 12:30 pn Wife Saver Ilm Chase 3:30 pn Corpus Capers War Bonds Salvago War Bonds Bill Stern Automobilo Pooling Charlos Courbon Rhapsody cf Rockies War Bonds 4:45 pn 8:00 pn 10:00 pn Air Youth of America Abie's Irish Rose Autonobilo Pooling SUNDAY MAY 3 8:00 am 11:00 an Autonobile Pooling 307 346-M NATIONAL BROADCASTING COMPANY, (Continued) SUNDAY MAY 3 12:30 pr 5:30 pr 7:00 pu 9:00 pn 10:00 pri Eumo Otero Sustaining Fill Jack Bonny Morry Go Round Hour of Charm War Bonds Salvage War Bondo Salvago Automobile Pooling 30 RETURN TO MRS. ROOSEVELT (THE PRESIDENT HAS SEEN) May 19, 1942 30 FOR THE PRESIDENT 5-19-42 c 0 310 P Y About six of our member schools have asked no, should I see you, to see if there is any way by means of which certain fatal policies of Germany during World Debaole No. 1 can be brought with their significance before some of our Army heads. About August, in 1924, I was 'oyoling around the Rhine country and met the assistant to the head of a German private school in Heidelberg. He told me how German youth had been almost, if not quite, inouribly ruined by the almost complete drafting of almost all mon from the teaching and leadership, and care, of German youth in schools. They went completely wild, he said, in everything from mannors to morals That may have been one of the contributing causes behind some of the worst manifestations in present-day Germany. And now we are doing the same thing. Wherever I go it is the same story - the essential teachers are being taken from our schools in ghastly numbers, from our best independent schools - our Exeters, Andovers, Pomfrets and so on, to the great mass of our public schools. Who can take their place? Incompetent and semi-invalid men, inexperienced women and worse. We need good men in the armed forces of course - and I am filled with regret that I can not go again! But there is no need to committee a kind of national suicide Perhaps even these men can be taken into the army, and sent back on National Service to their duties in the schools While we must not let ourselves be overwhelmed by the Present, we must not allow ourselves to degrade our Future. Germany may be very helpful in showing us many things that it is well to avoid Hoping to have the pleasure of seeing you again, I am, Yours truly, /o/ Mrs. Franklin D. Roosevelt Washington, D. C. COPIED AS WRITTEN HY Charles K. Taylor Citizenship & Public Service Training Vocational Research Bureau Carmel, New York maend'er Stephens: Nov. 9. 1942. 31 The attached table really doesn't reflect all the se? D. which have been made during this month for this reb. Recently we asked all issuing agents, thru the Federal Reserve banks, to report all their sales, not previously reported, on the final day of the month 80 the books could be closed at the endof the month. A good many of these issuing agents haven't made another report yet this month, but reports should be coming in within the next week and by the time you receive next week's report of sales most of them will have reported and we will have a truer picture of the sales. (The issuing agents aren't required to report to the Fed. banks daily, but report once a week or so.) E. Kailey uk 312 Sales of United States savings bonds November 1 through November 7. 1942 CONFIDENTIAL Compared with sales quota for same period (At issue price in millions of dollars) : 3 7 30 121.1 141.9 159.4 188.5 212.6 226.4 77.2 1.1 6.7 6.9 7.8 16.7 2.6 : 27 28 80.7 93.2% .3 .8 14.7 31.4 34.0 $ 25.2 31.4 Daily quota 124.6% 108.3 to date $ 5.5 $ 5.5 4.9 10.4 28.3 46.0 84.5 96.4 17.9 17.7 38.5 11.9 43.6 50.1 59.2 68.2 75.8 78.6 date quota 82.2 112.1 102.8% 86.0 164.7 192.0 218.6 256.7 288.4 305.0 262.4 276.0 293.8 324.4 350.7 365.9 87.5 90.6 98.3 106.9 114.9 118.1 349.9 366.6 392.1 431.3 465.6 484.0 406.5 421.8 441.9 476.8 507.9 541.0 129.8 134.3 146.1 160.0 174.0 189.0 536.3 556.1 588.0 636.8 681.9 730.0 595.0 205.0 800.0 ffice of the Secretary of the Treasury, Division of Research and Statistics. Actual sales figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Figures have been rounded and will not necessarily add to totals. as S of to : 25 26 $ 57.0 $ : as $ of Sales : Nov. 1 : Nov. 1 : to date : 23 24 $ .3 to date Quota 1 21 date Actual sales Total : 19 20 : 18 9.3 20.5 31.3 53.1 62.3 to Nov. 1 : to date : : : 17 : 16 : 13 14 $ 5.2 I 12 quota : 11 date Daily : 10 as % of Nov. 1 Quota, : Sales : : 9 9.3 to date to Actual sales : 5 6 11.2 10.8 21.8 : 4 Nov. 1 Sales : 4.1 date Quota, : : $ 5.2 Jov. 2 to : Daily Nov. 1 Series F and G : Date Series E : Actual sales November 9. 1942. CONFIDENTIAL 313 UNITED STATES SAVINGS BONDS - SERIES E Comparison of November sales to date with sales during the same number of business days in October and September 1942 (At issue price in thousands of dollars) October September : : : : : : : sales November : daily Cumulative sales by business days : : : Date November November as percent of October : vember 1942 2 3 4 5 6 $ 5,164 $ 5,164 $ 32,412 $ 11,634 4,108 9,272 64,438 26,381 14.4 11,188 20,460 82,038 44,687 24.9 10,849 31,309 119,278 62,491 26.2 21,767 53,076 129,977 81,657 40.8 9,250 62,326 150,912 131,057 41.3 7 fice of the Secretary of the Treasury, Division of Research and Statistics. 15.9% November 9. 1942. urce: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. CONFIDENTIAL 314 UNITED STATES SAVINGS BONDS - SERIES F AND G COMBINED Comparison of November sales to date with sales during the same number of business days in October and September 1942 (At issue price in thousands of dollars) : November October September : : sales Cumulative sales by business days : Date : November daily November as percent of October : vember 1942 2 $ 303 $27,514 $ 7,528 812 1,115 39,844 17,339 2.8 6,731 7,846 45,870 26,735 17.1 6,874 14,720 63,974 37,414 23.0 16,705 31,425 67,978 48,127 46.2 2,605 34,030 75,575 66,678 45.0 303 3 4 5 $ 6 7 fice of the Secretary of the Treasury, Division of Research and Statistics. 1.1% November 9. 1942. aree: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. CONFIDENTIAL 315 UNITED STATES SAVINGS BONDS - TOTAL Comparison of November sales to date with sales during the same number of business days in October and September 1942 (At issue price in thousands of dollars) October September : : : : : : sales November : daily Cumulative sales by business days : November : . : Date November as percent of October : vember 1942 2 3 4 5 6 $ 5,467 $ 5,467 $ 59.926 $ 19,162 4,920 10,387 104,282 43,720 10.0 17,919 28,306 127,909 71,422 22.1 17,723 46,029 183,252 99,904 25.1 38,472 84,501 197,955 129,784 42.7 11,855 96,356 226,487 197,734 42.5 7 fice of the Secretary of the Treasury, Division of Research and Statistics. 9.1% November 9. 1942. urce: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds, Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. 316 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE November 9, 1942 Secretary Morgenthau FROM Mr. Thompson Selective Service and Civil Service have recommended to the departments that draft boards be furnished with the names of 3-A (married men with dependents) employees occupying positions on the approved key lists, following which the draft boards presumably would place such mon in class 3-B (married non with dependents and key position occupation). The order of call under the draft then would be 1-A, 3-A, 3-B. Thus, the effect of the proposed men occupying key positions.action would be to delay the call of married I think it would be appropriate to advise the draft boards as recommended. Mr. Paul has recommended that such action be taken with respectapply to lawyers in his department. organization, but any such action, of course, should to the whole Am 317 GENERAL COUNSEL TREASURY DEPARTMENT WASHINGTON Secretary of the Treasury General Counsel As you are aware, the Legal Division, as well as the other offices in the Department, submitted a list of key positions in accordance with the War Manpower Commission Directive No. XI of September 24, 1942, 7 Fed. Reg. 7649. Those key positions were cer- tified to the Civil Service Commission as positions directly concerned with the war effort or essential supporting activities, the adequate performance of the duties of which requires special skills or abilities and long training or experience. The list of persons furnished from the Legal Division was approved by the Chairman of the War Manpower Commission. In view of the regulations of the Selective Service Administration with respect to classification (particularly 622.31-1), it is clear that the fact that a man, who is classified as 3A, occupies one of such 318 -2- certified key positions is a fact which his local board would necessarily have to consider in determining whether such a registrant should be reclassified as 3B. Very recently, the Selective Service Administrator has instructed the state selective service administrations to have the local draft boards immediately review the 3A registrations to determine which should be reclassified as 3B. Accordingly, I call your attention to section 626.1 (b) of the Selective Service Regulations, which provides: "Each classified registrant shall, within 10 days after it occurs, and any other person should, within 10 days after knowledge thereof, report to the local board in writing any fact that might result in such registrant being placed in a different classification. It is my opinion that those persons on my staff who are classified as 3A and who are aware that the positions which they occupy are certified key positions are man- datorily required to notify their local boards thereof. Failure so to do subjects then to severe criminal penalties of fine and imprisonment. 319 -3- It is, therefore, my view that the Legal Division should comply with the expressed desire of the Selective Service Administration, as set forth in the above-quoted regulation, and should immediately notify the various local boards of those persons in the Legal Division who are classified as 3A and who occupy certified key posi- tions. The notification would not, of course, be a request for deferment, but merely a statement of the fact that the registrant occupies a certified key position. Such procedure would be in accordance with the suggestion made to this Division by Mr. Barnett, Chairman, Committee on Occupational Deferment, Civil Service Commission. If you have no objections to the procedure outlined above, will you indicate your approval below. General Sounsel. Approved: use The Seneting termtheme today to are Henry with Morgenthau, - Thank you Jr. - to matter our and the Secretary of the Treasury. for ws. applying it the whole Different 11/11/42 for TO: The Secretary Jack Gibba has written me asking for help in finding a job. J am wondering if we couldn't use him here to good advantage. He has been acting COIDyou missioner since Sept. 15, when is Osborne took leave to go with D Donovan's outfit. part mas FROM: MR. GASTON TO: miss Chaun any 11/9/42 0857 On presentation Hmg. advised that Gaston take this my personally 1145 mr. Isaston said he had cleared this with Hng. I.Q. From: Mr. Fitzgerald THE WHITE HOUSE WASHINGTON November 9, 1942 on THE SECRETARY OF THE TREASURY The President line ado tcd your suggestion with resnect to the valver by Charles IL Tompkins of certrin four reyaile to him under his contracts For the construction of the new East Wing of The White Touse. General .lening ho:d been requested to take whatever steps are necessary to modify the con- tracts in order to effectuate this waiver and has been asked to clear with you before final action is taken. Aec. 322 THE WHITE HOUSE WASHINGTON November 5, 1942 MEMORANDUM FOR THE SECRETARY OF THE TREASURY: This is the letter about which T have just smoken to you on the telephone. The President has indicated his approval of the pronosed action, provided it in approved by the Treasury Department, and that he has the authority to do so. with the return of Mr. Tomokins' letter, will you not be rood enough to let General Watson have the draft of an appro- printe reply, if, in the opinion of the Department, the ACTION should be approved by the President. R.J. RUDOLPH FORSTER Executive Clerk TELEPHONES TOMPKING, Pace. DISTRICT soc C.E. CHAS. H. TOMPKINS CO. CONSTRUCTING ENGINEERS BO7 SIXTEENTH STREET N.W. WASHINGTON November 3, 1942 My dear General: I received your note telling me that the President will lay the cornerstone of the new East Wing of the White House on Thursday, November fifth, at two P.M. and that he hopes very much that my assistants, Mr. L. E. Berkey and Mr. William B. Clemmer, and I can be present. We will, of course, consider it an honor and a privilege to be present and I will appreciate your conveying to the President our acceptance of his invitation. In connection with the part that my organization has had in all of the work performed at the White House since last December, I have thought from the first that with our country at war I would prefer to feel that on this job, which should contribute to the safety and welfare of our President, we were performing the work without fee or profit. The occasion of the laying of the cornerstone has crystalized that idea. I will, therefore, appreciate your conveying to the President my desire to waive the fixed fees that our two contracts call for in amount of $42,500 plus other possible fees not yet determined for additional work which we have performed including that in the White House proper. With the President's indication of his approval of this action, I will take steps to have effected this change in our contract with the Federal Works Agency. Very sincerely yours, has Major General Edwin M. Watson, Secretary to the President, The White House. 323 324 NOV 6 - 1942 MEMORANDEM FOR GENERAL WATSON Attached is a suggested reply to Mr. Tompkins who has expressed a desire to waive his contract fees in connection with the new East Wing of The White House. I see no reason why salver of the fees should not be accepted. The matter of modifying the con- tracts in order to give effect to the waiver has been informally cleared with the Director of Public Buildings and the General Counsel of the Federal Works Administration, and there should be no difficulty in this respect. (Signed) H. Morgenthau, Jr. NOT: 11-5-42 325 Mr. Charles H. Tompkins Chas. H. Tompkins Co. 907 Sixteenth Street N. W. Washington, D. C. Dear Mr. Tompkins: General Watson has advised 100 of the desire express- ed in your letter of November 3, 1942, to waive, for patriotic reasons, the fees called for in your contracts for the new East Wing of The White House in the amount of $42,500 plus other possible fees not yet determined. I want you to know that this patriotic desire on your part is deeply appreciated. Please accept my very sincere thanks. The Federal Works Administrator has been directed to work out with you whatever details may be necessary to effectuate the waiver. Very sincerely yours, NOT: 11-5-42 326 Dear General Flonings The President has requested me to forward to you the enclosed copies of correspondence with Mr. Charles H. Tompkins with reference to a waiver of certain fees called for in the con- tracts for the new last Wing of The white House. will you please take whatever steps are necessary to modify the contracts in order to give effect to the waiver. It might be well to clear the proposed changes in the contracts with the Secretary of the Treasury before they are finally made. Very sincerely, Edwin M. Watson Secretary to the President Brigadier General Philip B. Fleming Federal Works Administrator Washington, D. C. NOT: 11-5-42 11/9/42 327 The material, photostats of which are ached, were returned to Mr. Forrestal ay with just a slip "From Secretary genthau". 328 October 13, 1942 My dear Mr. Forrestal: In the absence of the Secretary, I am acknowledging receipt of your memorandum to him, dated October 11th, and attached correspondence relating to the Newburgh project. I shall bring this material to Mr. Morgenthau's attention just as soon as he returns to the office. Yours sincerely, (Signed) H. S. Klotz H. S. Klots, Private Secretary. Honorable James F. Forrestal, under Secretary of the Navy, Navy Department, Washington, D. C. NAVY DEPARTMENT OFFICE OF THE UNDER SECRETARY Date 11 OCT 1942 The Under Secretary To: The Secretary of the Navy The Under Secretary of War The Assistant Recretary of the Navy The Assistant Secretary of the Navy for Air Barker, Dr. J.W Seleber, Mr. D. Sandy, W. H. P., Rear Admiral - Mr. C.F F heretadt, Mr. alsom, Mr. F Hagrieb, J. E., Capt Harry States ilessel, Mr. H. 8 time F. J., Vice Admiral (webe, R., Rear Admiral Ket E. J., Admiral Lovette, L. P., Captain McCain, J. S., Rear Admiral Koreell, B., Rear Admiral Irerfelt, F.D., LA. Comdr.. U.S.N. KOOD 6 ?well, Mr. J.W lobinson, 8. M., Vice Admiral geresson, Mr. A icense, L. Comdr. U.S.N. R Writer Train H. C., Rear Admiral I'm Kearen, A. H., Rear Admiral Foodson, W. B., Rear Admiral Foodward, C. H., Rear Admiral W.B., Rear Admiral M nonguithan For Information For comment or recommendation For preparation of reply Far appropriate action Please send me data for reply Please see me in regard to this Please return File H. Misc. 10326 BUREAU OF YARDS AND DOCKS MEMORANDUM FROM CHIEF OF BUREAU 10 October 1942 o MR. FORRESTAL. Subject: Ltr. from Captain W. H. Smith, New York City, dated 9 October - attached. This is re Mr. Cullen's complaint about favoring Republicans. Please return. S ORDER SECRETARY HP B. Moreell UNDER IN REPLY ADDRESS SCORETARY HAS TEL. MURRAY HILL .7836 SUPERINTENDING CIVIL ENGINEER AND REFER TO NO NAVY DEPARTMENT BUREAU OF YARDS AND DOCKS OFFICE OF SUPERINTENDING CIVIL ENGINEER ROOM 2801 - 420 LEXINGTON AVENUE. NEW YORK, N.Y. October 9, 1942. Dear Chief: I have investigated carefully the politi- cal situation at the Chicago Bridge & Iron Company's project for floating dry docks at Newburgh, N.Y., and feel absolutely satisfied that the company has not allowed the local political situation to influ- ence employment on this project but that on the contrary a special effort has been made to avoid any complications of this nature. The company itself appears to be complete- ly disinterested and practically all its key personnel has been imported from other localities. The Office Manager, the Employment Manager, the Chief of the Guards, and the Superintendent are all nonresidents. Congressman Fish visited the yard shortly after my previous visit to Newburgh to investigate Cullen's complaint that the Republicans were controlling employment but it was emphatically stated that he made no effort to secure favorable considera- tion for his followers and limited his inquiry only to the question of the extent to which residents of Newburgh were being considered for employment. He has written two or three letters requesting favorable consideration for specific individuals, - such applicants have been handled through the usual employ- ment routine and accepted or rejected solely on merit. Cullen has likewise requested consideration and of certain individuals in whom he was interested, standard they have likewise been passed through the was employment procedure. One employment olerk #2. October 9, 1942. discharged shortly after the start of the project because he showed a tendency toward partiality based more on personal friendship and good fellowship than on political considerations. The action taken by the Resident Officer-in-Charge and by the contractors on communications from Congressman Fish or from other political leaders was reviewed in detail and appears to me to have been eminently correct in all respects. Bill Sincerely, W.H. SMITH. Admiral B. Moreell (CEC) USN, Bureau of Yards and Docks, Navy Department, Washington, D.C. 333 Murray James E NOV 9 1942 My dear Senator: Further reference is nade to year letter of October 2. 19th, requesting detailed Information on the relationship between the Present Department and the problems of small business erected by the ver. for use by your committee in commetion with your study of these probleme. 10 would - to se that within the provinon of the functions of this Department there are the matters effecting small business which are likely to be of interest to your committee. these matters are (1) the problems of small business as they relate to the foreulation of recommendations for tax policy or to the administration of the revenue nets, sad (2) the problems of small business as they relate to the formulation and administration of precurrement policies. The firet of these matters -- the problems of small basiseas as they relate be the formulation of recommendations for tax policy or to the distristration of the revenue sets - was the subject of a letter sent to yes on October 16. 1942. by Mr. Handsliph Famil. Beneral Counsel of the Treasury Department. the seased matter mentioned above - the problems of small business as they reisto to the formulation and state tration of presurement policies - has been the subject of considerable attention in the Treasury. Some time age I directed the Treasury's Procurement Division to "spread the business" as mash as possible to help the var effort. is order to effectmate the policy set forth. the Division created a special section on January 24, 1942. handed w a special assistant to the Director of Presurement. No irea- elad fessula of business spreading has been established, but all transnations are handled by procurement officers who are thoroughly familiar with the broad policy that has been set down. id noted 11-12-42.m 334 This policy. your committee will undoubtedly receil, was subsequently officeed by the Var Production Board in its Directive Member 2 termed March 3. 1942, covering the placing of sumply contracts. The relevant portion of that directive to underlined is the quotation that is set forth below (b) (1) In placing much contracts, particular regard shall be paid to the following considerations: (1) Primary emphasis shall be upon securing delivery is the time required by the was program. ((11) is 00 for AM 10 will effectuate the policy set forth in (1) above. such contracts shall be pleased to as to conserve, for the more difficult MAY production problems, the facilities of concerns best able, by Person or engineering. managerial, and physical recources, to hamdle them. recordingly, contracts for standard OF other items which involve relatively stanle production problems shall be placed with concerns, anrually the emaller ones, which are less able to bundle the sers difficult war production problems." There are a grant senary specific examples of awards is keep- inc with the apread-the-business volicy which could be otted to your committeet but I shall confine the Illustrations to a few instances which are typical. The first example which I have is mind concerns the purchase of office desire and files. The estracts for 110.000 cooks, simplified andels of which were designed by the precurement Division to conserve anterials one to serve for the duration of the war. have been let during the past 6 months. The contracts have been spread so that at small have been enabled to participate is the order. Marian the - period contracts have been let for 68,000 wooden file eshimets. These orders have been spread ever 11 manufacturers, none of when were included is the strups that were availed the dest contracts. The situation with respect to the sequieition of noter vehicles, the purchase of which has been handled by Treasury Precurement since Deasher 30. 1961, for all the insective Departments and individual establishments of the Government, except the Far Department, Newy Department not Mariline Commission, is also a case in point. Presurement officers have been instituted to make every attempt to place the contracts for the meter vehicles 335 -3that are purchased with automobile dealers in the very localities in which the vehicles are to be used. The business is thus spread around and falls primarily to small business firms. Procurement problems vary, of course, from item to item. On a number of occasions, on various items to be procured, large requirements have been divided equally at uniform contract prices among all the sources of supply, both large and small, whose offering met the purchase specifications. Other awards of unequal quantities have been made after considering productive capacities of the various suppliers. Sometimes awards have been made on a sone basis in order to obtain production from within certain terri- torial limits. In carrying out the procurement activities outlined above, the Procurement Division has relied primarily on Executive Orders of the President and Directives of the Chairman of the War Pro- duction Board for authority and guidance. It appears to me that these have been of sufficient scope and flexibility to enable the Procurement Division to take account wherever possible of the problems of small business. Very truly yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury Honorable James E. Murray, United States Senate, Washington, D. C. They SGT:APLT/1rv 10/29/42 I Tummer) / carbon 4.0 Cullen (from Tighton Office) % refer to Proc. 7 11/20/48 336 United States Senate Special Committee to Study Problems of American Small Business 40197 Oct. 2, 1942. Hon. Henry Morgenthau, Jr., Secretary of Treasury, Wasington, D.C. ity dear Mr. Morgenthau, The Special Committee on Small Business of the United States Senate is currently engaged in an extensive series of hearings on the small business problems created by the war, as well as those that will eventually arise in the post-war period. One of the purposes of these hearings is to determine how to avoid the infliction of undue or unnecessary hardships on smaller concerns. Another purpose is to provide constructive legislation that will guide Government agencies in their activities with regard to smaller concerns. In order to achieve these purposes, the Committee needs detailed information on the relationship between your agency and the small business problem. This is especially necessary in view of the fact that this Committee has been receiving continuous and unabated complaints that small business does not have adequate representation in the administrative agencies and that many of these agencies, through lack of understanding or arbitrary action, seem to overlook the fact that the future of free enterprise in America is based upon the maintenance of small business enterprise. We have received even stronger complaints that some Federal agencies fail to realize that the resources, man-power and brain-power of small enterprise is essential to the effective prosecution of the war. To provide the Committee with essential information and to help offset any unfounded criticisms leveled at the various agencies of the Government, we should therefore appreciate your sending the Committee within the next two weeks a full statement covering the following points: 1. What is your conception of your agency's responsibilities with regard to the problems of small enterprises during the war and in the post war period. 2. What special studies has your agency undertaken, or is planning to under take, on the problems of small business? 337 -2- - 3. Has any special division, section or unit been established in your agency to handle the problems of small business? If so, what are its achieve- If ments to date and what are its future plans? not, is your agency contemplating the establishment of any special bet-up to handle the problems of small business? 4. Do you regard new legislation or new delegation of executive power as necessary to the improvement or extension of your agency's activities with regard to small business? This Committee realizes the desire of the various agencies to cooperate with us and with small business in general. Only by working together harmoniously will we be able fully to meet our responsibilities for mobilizing our resources for the war and protecting our American system from any disastrous consequences of the war. Sincerely yours, Chairman. TREASURY DEPARTMENT 338 INTER OFFICE COMMUNICATION DATE NOV 9-1942 TO Secretary Morgenthau FROM Randolph Paul You will be interested in seeing the retraction by TIME of their erroneous account of the Treasury's proposal for collection of income tax at source which account was published in their issue of September 14, 1942. REG Attachment 339 TIME, November 2, 1942 Less Trouble Sirs: The tax story entitled "Double Trouble. published in TIME. Sept. 14. contained seriour misstatements regarding the Treasury's source. proposal for the collection of income tax at Your'statement that the Bureau of Internal Revenue will require 50,000 additional business machines to administer collection-at-source is incorrect. Commissioner Helvering estimates that the Bureau would require less than 3,000 machines The figure of 50,000 business machines included not only the estimated govern- mental requirements but also a liberal estimate of the machines which industry would require, based on what business men said they would need. You say "The Government doesn't worry about what private employers will do. The truth is that before its plan for collection-atsource was finally formulated, the Treasury made an exhaustive survey by personal interview of more than 450 employers whose pay. rolls included almost 2) million employes. Only a negligible number expressed any seri- ous concern about the problems that would be raised by the introduction of collection-at- source. Moreover, the Treasury put forth its revised plan only after it had the assurances of WPB that the machines necessary to both Government and business would be available Collection-at-source is of vital importance to many millions of taxpayers. I hope your misstatements will be corrected by a forth- right retraction in the earliest possible issue of TIME RANDOLPH E. PAUL General Counsel Treasury Department Washington, D.C. To the Treasury's Randolph Evern- ghim Paul, TIME'S thanks for a correction of a misstatement originating in faulty press reporting.-ED. TREASURY DEPARTMENT INTER OFFICE COMMUNICATION 340 CONFIDENTIAL DATE November 9, 1942 Secretary Morgenthau TO Mr. Haas FROM Subject: The Business Situation, Week/ending November 7, 1942. Summary (1) National income payments in September rose to a record high annual rate of $116.2 billions as compared with $115.3 billions (revised) in the previous month and $92.1 billions in the calendar year 1941. In the first 9 months of 1942, payments for salaries and wages were 25 percent higher than in the corresponding period of 1941. (2) Cash farm income from marketings showed a slightly greater than seasonal gain in September, and total income (including Government payments) ran 32 percent above September 1941. During the first 9 months of 1942, cash income from farm marketings totaled $10.1 billions, or 36 percent more than in the same period a year ago. In addition Government payments rose to $511 millions from $391 millions in the earlier period. (3) Department store sales continue to run well above year-earlier levels, although the gain narrowed to 14 percent in the week ended October 31 from 18 percent in the previous week. The FRB seasonally-adjusted index of department store sales for October rose to 129 from 123 in the previous month. An unusually early start in Christmas shopping this year has been a contributing factor in the recent strong sales showing. (4) Prices for agricultural commodities, particularly cotton and grains, strengthened last week, and the BLS index of 28 basic commodities rose to a new war-time high. The rise in prices was apparently due in part to a bullish interpretation of the election returns, which indicated a strengthening of farm bloc influence. (5) A substantial further rise in living costs is indi- cated by an increase of 2.4 percent in the BLS retail food price index in October. (6) Industrial stock prices in London last week rose to a new high for the entire war period under the influence of favorable war news from North Africa. Toward the end of the week industrial stock prices at New York also advanced and reached the highest level since last November. -2- 341 National income payments at new peak National income payments rose more than seasonally in September and attained a record annual rate of $116.2 billions, as compared with $115.3 billions (revised) in the previous month. (See Chart 1.) Income payments in September were 11 percent higher than in August, but the bulk of the rise was due to normal seasonal expansion in farm marketings and interest and dividend payments. The annual rate of $116.2 billions attained in September contrasts sharply with $92.1 billions in 1941 and only $70.9 in 1939. In the first 9 months of 1942, all kinds of income payments to individuals increased except interest and dividends. The most notable gain occurred in payments of salaries and wages, which were 25 percent larger than in the corresponding period of 1941. The increased importance of salaries and wages since the war started is evidenced by the fact that salaries and wages comprised 70 percent of total income payments in the first 9 months of 1942, as compared with only 65 percent in the same period in 1939. On the other hand, interest and dividend payments dropped from 12 percent of the total in 1939 to 8 percent in 1942. In connection with the extended rise in payments of salaries and wages, it has been pointed out that the recent controls imposed by the Director of Economic Stabilization will slow down, but by no means halt further gains. The stabilization regulations are aimed primarily at basic wage and salary rates. However, an OPA study 18 reported to have found that only 26 per cent of the rise in salary and wage payments during the period from January 1941 to May 1942 was due to higher basic wage and salary rates. In contrast, higher employment accounted for 33 percent of the rise, while longer hours worked and the shifting to higher paid brackets accounted for 22 percent and 19 percent, respectively. The further gain in national income payments in September was partially offset by another moderate rise in living costs. However, living costs rose less rapidly than income 80 that the estimated purchasing power of income payments during the month also rose to new record high levels. (Refer to Chart 1.) Farm income rose more than seasonally in September Largely in reflection of greater than usual expansion in income from cotton, tobacco and wheat, cash farm income (including Government payments) showed a slightly greater than seasonal rise in September and ran 32 percent above year-earlier 342 3- levels. (See Chart 2.) Due to delays in marketing, the in- come from the wheat crop reached a peak in September this year instead of a month or two earlier. Cotton also has been moving later than usual, but income from this source expanded sharply as a result of the larger crop and higher prices. During the first 9 months of 1942, cash income from farm marketings totaled over $10.1 billions, or 36 percent above the same period in 1941. All groups of farm products participated in the rise, with the widest gain occurring in income from meat animals, which climbed 51 percent. Government payments totalling $511 millions compare with $391 millions in the same period of the previous year. The upswing in farm income during September was accompanied by a greater than seasonal rise in rural sales of general merchandise. After falling 6 percent below 1941 levels in August, sales spurted sharply in September and rose 17 percent above the corresponding month of last year. (Refer to Chart 2.) During October, sales of Sears, Roebuck and Company rose above year-earlier levels for the first time since last April. However, the company attributed the slight gain of 2 percent to the fact that October this year had 5 Saturdays as compared with 4 last year. Montgomery Ward and Company sales in October ran 12 percent above the 1941 level, as compared with a gain of only 3 percent in September. Department store sales rose in October Department store sales rose moderately in the week ended October 31, although the gain over the corresponding week in 1941 narrowed to 14 percent from 18 percent in the previous week. (See Chart 3.) Total sales volume for October reached the highest monthly total since last December, and the FRB adjusted index of department store sales rose to 129 from 123 in the previous month. The adjusted index, however, was still 1 point below August and 9 points below the record peak reached to last January. In addition to scare buying of items expected be in short supply, retail trade also has been stimulated in recent weeks by an unusually early start in Christmas shopping. The deadline already has been passed for the shipment of Christmas packages overseas to men in the armed forces, and stores are now stressing early buying of other gifts to conserve delivery services. Consequently, the usual Christmas buying this year undoubtedly will extend over a longer period than in the past. 343 Commodity prices renew rise Recent sagging trends in staple commodity markets were replaced by strong upturns last week as the elections were bullishly interpreted for agricultural prices, owing to indicated strengthening of farm bloc influence. Both the Dow-Jones commodity futures index and Moody's index of spot prices rose noticeably above their closing levels of the previous week. (See Chart 4.) Prices of agricultural commodities last week advanced sharply, carrying the BLS index of 28 basic commodities to a new wartime high. (See Chart 5.) The index of 9 unoontrolled commodities moved up to its previous peak of October 2, the date of passage of the second price control act. Substantial advances occurred in cotton prices, which were the highest since mid-July. In spite of the large crop, a considerable portion of the crop 18 low grade. Grain prices advanced strongly, particularly for corn. Prices for steers prices on the better grades have risen to wide premiums, as rose for the fifth consecutive week, and since September 18 have increased 12 percent. Of the commodities subject to control, prices for wool tops and cottonseed oil rose slightly. In the last week of October the BLS wholesale price index of nearly 900 commodities stood unchanged from a week earlier. Retail food prices gain 2.4 percent The BLS index of retail food prices rose to 129.6 in October (1935-1939=100) from 126.6 in the previous month, a gain of 2.4 percent. This forecasts another substantial rise in the BLS cost-of-living index when it is computed later in the month. The Conference Board cost-of-living index for October shows a gain of 0.9 percent, with food prices up 2.5 per- cent. If the BLS index rises by the same percentage, it will indicate the largest monthly increase in living costs since last March. New Congressional combination may effect changes in price control Election results were interpreted by commodity markets as a portent of additional strength for the farm bloc, which may encourage an attempt by Congress to force changes in price- control policies. Press comment indicates the possibility that 344 -5measures may be taken to prevent the Administration from continuing its practice of deducting farm benefit payments may be taken by the reporting out of the Senate Committee on Agriculture of two resolutions recently introduced by Senators Reed and Gillette, These resolutions would authorize an investigation of the administration of the laws relating to maximum prices for agricultural commodities and from parity prices in fixing price ceilings. Such action CCC operations, and denouncing the payment deductions as a violation of the act of October 2. Butter shortage threatened At the beginning of the seasonal four-month period of lowest milk production, a shortage of butter and other dairy products is indicated. Milk production, while substantially greater than in 1941, is declining more than seasonally, and is not sufficient to provide for sharply increasing lendlease, military, and civilian requirements. (See Chart 6, upper section.) Factory butter production in 1942 through September was 5.7 percent less than in the first nine months of 1941. Cold storage holdings have been running less than a year ago since July 1, and as of October 1 were 39 percent below the holdings a year earlier. (See Chart 6, lower section.) Storage holdings of cheese, although much larger than last year, declined in August and September. Suggestions being offered for alleviating the situation include the following: a. Increased retail prices for fluid milk and other dairy products to cover higher costs of production and distribution. -b. The "freezing" of labor on farms. - C. Encouragement of greater milk production on small farms, which are less affected by migration of hired labor than large enterprises. d. A reduction in the butter-fat content of ice cream, fluid cream, and possibly milk. e. Consumer rationing of butter, cheese, and evaporated milk. Stock prices higher in London and New York Stimulated by the favorable war news from North Africa, industrial stock prices in London rose to a new high for the entire war period during the past week. (See Chart 7.) At the end of the week prices on the average stood about 21 percent higher than on the eve of the outbreak of war in Europe. 345 -6After moving up to a new high for the year shortly before mid-October, industrial stock prices in New York en- countered difficulty in making further progress until near the end of last week. At that time a further show of strength carried the Dow-Jones industrial stock average up to a new high since last November. (Refer to Chart 7.) Although the decline in industrial stock prices which followed our entry into the war has now been retraced, prices are still 13 percent below the level prevailing just before the outbreak of war in Europe, in contrast with the 21 percent gain in London prices previously mentioned. Trading volume on the New York Stock Exchange increased last week, although it was still somewhat below the levels attained in the early part of October. Last month's transactions of nearly 16 million shares constituted a new high for the year. Nevertheless, the volume of stock trading on the Exchange in the first 10 months of this year was the lowest for that period in 29 years. Record steel output in October Steel ingot output of 7,585,000 net tons in October was the highest on record, exceeding the previous peak reached last March by nearly 200,000 tons. Operations for the month reached 100.1 percent of capacity. This was only the second time in the recent history of the steel industry that the monthly operating rate has risen above 100 percent of capacity. The previous occasion occurred in May 1929 when operations reached 101.7 percent of capacity. The tonnage produced at that time, however, was 21 percent less than last month due to the smaller capacity of the industry existing at that time. After reaching a peak of 101.1 percent of capacity in the last week of October, steel operations last week fell back to 99.6 percent, due in part to the necessity of making repairs in the Pittsburgh district. Operations during the current week are continuing at 99.6 percent of capacity. NATIONAL INCOME AND ITS EQUIVALENT PURCHASING POWER 1939 1940 -1942 1941 DOLLARS DOLLARS Billions Billions Monthly 115 115 110 110 105 105 National Income 100 100 95 95 90 90 85 85 Purchasing Power of National Income 80 80 75 75 70 70 A S 1939 1940 1941 1942 * Based on cost of living Indez of B.L.S. Aug 1939-100 Office of the Secretary of the Treasury Division of Research and Statistics C-415-A FARM INCOME AND RURAL SALES OF GENERAL MERCHANDISE DEC NOV OCT SEPT AUG JULY JUNE MAY APR MAR FEB JAN DOLLARS MILLIONS DOLLARS MILLIONS Form Income 1600 Incl Rental and Benefit Payments 1600 1400 1400 1200 1200 1941 1000 1000 1940 1942 800 800 1939 600 600 400 400 200 200 0 FEB. JAN JULY JUNE MAY APR MAR. 0 NOV OCT SEPT. AUG DEC PERCENT PERCENT Rural Sales of 275 General Merchandise 275 1929-31-100 Unodj. 250 250 225 225 200 200 1941 175 175 1942 150 150 1940 125 1939 125 100 100 75 75 JAN FEB MAR APR "Dept of Commerce order I/-I MAY JUNE JULY AUG SEPT of a . - I - rereal - OCT NOV DEC 347 C-273-C Office of the Secretary of the Treasury Chart 2 Chart 3 348 DEPARTMENT STORE SALES 1935 - '39 - 100, Unadjusted JAM FEB MAR APR MAY JUNE JULY AUG SEPT. OCT. NOV. PERCENT DEC PERCENT Weekly 260 260 240 240 220 220 200 200 180 180 160 160 1942 1941 140 140 120 120 ICO 100 1940 80 80 so 60 JAN. FEB. Office of the Secretary of the Treasury Clean of Research and Statistics MAR. APR MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. C-390-A COMMODITY PRICE INDEXES IN U.S. Bookly MILY) 1924 - 26-100 JONES) (DOB-JONES) M 234 of the Transary MOVEMENT OF BASIC COMMODITY PRICES 1942 1941 PERCENT PERCENT August 1939-100 190 190 185 185 9 Uncontrolled Commodities 180 180 175 175 170 170 28 Commodities 165 165 160 160 19 Controlled Commodities 155 155 150 150 145 145 140 140 SEPT. NOV JAN MAR JULY MAY 1941 SEPT. NOV. 1942 PERCENTAGE CHANGE DEC. 6. 1941 TO OCT. 30 AND NOV. 6. 1942 PERCENT PERCENT 19 Controlled +45 9 Uncontrolled Commodities +45 Commodities Yoge 43.0x +40 +40 +35 +35 Butter 324x +30 alard 288% +30 Steare 24 SY +25 +25 Roan 21.31 +20 +20 +15 Shelloc 12.33 Lead ILIX +15 Cotton HB Print Cloth TOX +10 Sugar 4.9% Corn 112% +10 Cottonesed Oil 5.0% Zinc ** 5 0% Change Wheet 5.78 +5 Hides. Salk. Tin. Rubber Coffee Copper o o St Screp.dom St Screp.exp Cocoo ax Tollow-4/X 5 -5 Burlep-dax Wool Tops-4.2x 10 Dec 6 Oct.30 Nov 6 1941 1942 1942 * Office of the Secretary of the Treasury Drugges - - Statistics -10 Dec 6 1941 Oct 30 Nov 6 1942 1942 20 Controlled and a Uncontrolled previous to June 26 350 P-244-18 Chart 5 Chart 6 351 MILK PRODUCTION AND BUTTER STOCKS Pounds Pounds Billions Billions Total Form Milk Production 12 12 1942 II 11 1941 10 10 1940 9 9 8 8 7 7 JAN FEB MAR. APR MAY JULY JUNE AUG SEPT OCT NOV DEC Pounds Pounds Millions Millions Creamery Butter Cold Storage Holdings 200 200 1942 1941 150 150 100 100 1940 - 50 50 O 0 JAN ( FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC Source US Dept of Agriculture Office of the Secretary of the Treasury Devision of Research and Matteries C-445 INDUSTRIAL STOCK PRICES IN U.S. AND U.K. AUGUST 1936 - 100 Weekly JAN. FEB. THE PER MAR. THE 941 - APR MAY THE CENT JUNE JULY (AVERAGE OF DAILY) AUG. TTT SEPT. OCT. NOV. DEC. JAN. FEB. 1942 MAR. APR. MAY 100 JUNE JULY AUG. TT SEPT. THE OCT. THE NOV. UNITED PER CENT 100 95 95 90 90 85 U.S. 30 INDUSTRIAL as STOCKS (DOW-JONES) 80 80 75 75 70 70 65 65 60 U.K. 56 INDUSTRIAL STOCKS 60 55 55 50 50 45 40 we III LE 11 JAN. FCB. MAR. APR. MAY +++ JUNE 111 JULY 1941 AUR. SEPT. OCT. NOV. 45 ... LL DCC. JAN. LL FEB. MAR. APR. MAY 1942 LL JUNE JULY AUG. SEPT. OCT. 40 NOV. Office of the Secretary of the Treasury Division . Research and Statistics FO 156 BUREAU OF CAMPAIGNS OFFICE OF WAR INFORMATION Lest with the secretary by mi Co.353 our on LIST OF GOVERNMENT CAMPAIGNS AND PROGRAMS OF INFORMATION of 11-9-42 (As of October 28, 1942) *Indicates long range campaign which can be used in slowdeveloping media, such as movies, magazine articles, etc. A. TRANSPORTATION 1. Voluntary Tire Conservation# Develope the 5 points outlined by Mr. Jeffers (WPB) 2. Idle Tire Purchase Plan Buying every tire over 5 (OPA) 3. National Mileage Rationing* Campaign on gasoline rationing (OPA) 4. Bus and Rail Travel* Reducing train and bus travel (ODT) 5. Consumer Deliveries Reducing store deliveries by carrying our packages (ODT) 6. U. S. Truck Conservation Program* Increasing mileage of America's trucks (ODT) B. SALVAGE 7. Scrap Metal* Salvaging old iron, steel, lead, etc. (WPB) 8. Rubber* Salvaging all old rubber articles (WPB) 9. Rage* Salvaging rags, burlap bage, rope (WPB) 10. Fats and greases* Saving household fats and greases (WPB) 11. Tin Cane* How to prepare tin cans - in limited communities (WPB) 8-0377-BU-COS-WP 2010 c. TREASURY 12. War Bonds and Stamps* U. 8. Treasury D. ANTI-INFLATION takes 13. Consumer Campaigns* Explaining price control to public (OPA) 14. Trade Campaign# Explaining price control to trade (OPA) 15. Hoarding* Campaign to prevent hoarding (OPA) E. RATIONING 16. Overall Education on Rationing* (OPA) 17. Fuel 011 Campaign for rationed areas (OPA) 18. Gasoline Nation-wide campaign, Eastern states (OPA) 19. Foods Covers sugar, coffee (OPA) 20. Share the Meat# (Food Requirements Committee) Voluntary campaign limiting meat to 22 lbs. weekly. (on F. CONSERVATION 21. Household Equipment* Maintaining electric appliances, etc. (OPA) 22. Foods Using left-overs, saving fats, etc. (OPA) 23. Clothing* Making clothes go further (OPA) 24. Home Maintenance Repairs around the home (OPA) -2. efail (asn) 8-0377-BU-COS-WP -3354 G. MANPOWER 25. Local Campaigns* Special kit to be prepared for shortage centers (WMC) 26. National Campaign, Step 1* Urging people to plan ahead for war job (WMC) 27. National Campaign, Step 2* Campaign to specialized groups (WMC) 28. National Campaign, Step 3* Campaign to broad groups, women, etc. (WMC) H. NUTRITION 29. National Nutrition Program* (D.H.&W.) 30. Health* (D.H.&W.) I. SECURITY OF WAR INFORMATION 31. Campaign to safeguard military information (OWI) 32. Campaign to reduce rumors. J. OFFICE OF CIVILIAN DEFENSE 33. Civilian Defense Corps* (OCD) 34. Civilian Service Corps* (OCD) 35. Victory Homes* (OCD) K. RECRUITING 36. Army Special Services* 37. Army Air Force* 38. Navy* 39. Coast Guard# -38-0377-BU-COS-WP 4. K. RECRUITING (Cont'd.) 40. Marines 41. Merchant Marines* 42. Nurses* 43. Nurses Aidee* L. CONSERVATION, SUBSTITUTION, SIMPLIFICATION 44. Conservation and Substitution of Critical Materials* (WPB) 45. Simplifying types, styles, colore of Manufactured Items* (WPB) M. TYPEWRITER PROCUREMENT 46. Purchasing 600,000 Typewriters (WPB) N. REDISTRIBUTION OF MATERIALS 47. Moving idle, frozen, or excess inventories (WPB) O. INVENTORY CONTROLS 48. Campaign on Control of Inventory of Consumers' Goods (WPB) P. HOUSEHOLD GAS 49. Conserving Manufactured and Natural Gas (WPB) (Supplement to National Fuel Conservation Program) (WPB). Q. FOOD FOR FREEDOM 50. Victory Food Specials* Promotion of surplus or perishable crope (D. of Ag.) 8-0377-BU-COS-WP^ -5- 355 e. FOOD FOR FREEDOM (Cont'd.) 51. Harvest Festival Increased Farm Production (D. of Ag.) 52. Early Marketing of Hoge (D. of Ag.) 53. Fighting Forest Fires* (D. of Ag.) 54. Wood for Fuel Campaign (D. of Ag.) 55. Production of Foods, Fibers and Forest Products* (D. of Ag.). R. WAR PRODUCTION DRIVES The War Production Drive*, started in February, now has operating Labor-Management Committees in 1600 war plants through- out the country, and is progressing satisfactorily under the coordination of Mr. Clyde Vandeburg, OWI. In addition to this, there are several other production drives covering: 1. fabricated materials; 2. basic raw materials; 3. specialized industries. The first two are continuing campaigns under the jurisdiction of Mr. Vandeburg, and are divided 8.8 follows: 1. Finished materials, production and fabricating of: A. Tanks* B. Planes* C. Guns* D. Ships* E. Mechanized Equipment* 2. Basic raw materials such as: A. Steel* B. Lumber* C. Aluminum* D. Petroleum* -58-0377-BU-COS-WP -6. E. Coal# F. Vanadium* G. Copper* H. Lead# I. Zinc# J. Tin* The campaigns directed at specialized industries operate under a Special Committee made up of representatives of OWI, Labor, Maritime, Management and The Chairman of the Committee is in OWI. These campaigns covert 1. Airplane Industry - material supplies, fabricating and sub-contracting. 2. Shipyards* morale campaign. 3. Army Ordnance Plants* No morale campaign. S. MORALK 56. The Issues - What We are Fighting York (OWI) 57. Nature of the Enemy# (OWI) 58. The United Nations* As a Special Campaign, The United Nations will be featured for three weeks in a pageant at Rockefeller Plaza, starting in January. 59. Work and Production 60. Sacrifice# tea 61. The Fighting Forces* .68-0377-BU-COB-WP 356 NOV 9 - 1942 My dear Mr. Ambassador: In connection with your recent inquiries concerning final settlement for the Spanish silver purchased by the United States in 1938, I beg to advise you that the melting and assaying of such silver have been completed and that the various charges have been determined as follows: Cost value on assay Less: Advance payments $13,990,800.00 Cartage charges Litigation costs and counsel fees 72,728.57 Assay Office charges $15,149,136.38 274,409.02 7,480.25 Balance $14,345,417.84 A 803,718.54 Very truly yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury. His Excellency Juan F. de Gardenas Ambassador of Spain. File to Mr. Thompson CC in Diary By Mess. Sturgis 2:33 11/9/42 FH:ns 10/21/42 Nov. 9, 1942 357 helles told HM Jr today he thinks this will go through now. 358 PARAPHRASE OF TELEGRAM FROM: American Minister, Lisbon TO: Secretary of State, Washington DATED: October 29, 1942 FROM SECRETARY MORGENTHAU FOR THE PRESIDENT. You may be interested to know that this morning I talked with Salazar and I believe that the rapid and successful conclusion of the supply purchase negotiations with the Portuguese is very much in our national interest. Some 10,000 tons of ammonium sulphate and a like quantity of iron and steel products are the only things standing in the way at present. We have, up until now, offered 25,000 tons of iron and steel products and 20,000 tons of ammonium sulphate. Taking into account the moderate amounts concerned and the broader considerations involved, my feeling is that a commitment should be made forthwith on behalf of the combined raw materials board. 359 NOV 9 - 1942 - My dear Mr. President: I - enclosing report on our exports to some selected countries for the period ending October 20, 1942. Faithfully, (Signed) H. Morgenthau, Jr. Secretary of the Treasury. The President, The White House. Enclosure By Mess. Sturgis 2:33 11/9/42 File in Diary Extra copies to White's office Ht HOW HDW:rl 10/31/42 FILE COPY 360 October 31, 1942 Exports to Russia, Free China and selected blocked countries as reported to the Treasury Department during the ten-day period ending October 20, 1942. 1. Experts to Russia Exports to Russia as reported during the ten-day period ending October 20, 1942 amounted to $55,083,000 as compared with 814,564,000 during the previous ten- day period. Among the military equipment exported were. 74 tanks, 25 light bembers and 68 fighter planes. 2. Exports to Free China Exports to Free China as reported during the period under review amounted to only $30,000 of which all was military equipment. 3. Exports to selected blocked countries Exports to selected blocked countries are given in Appendix A. Most important were exports to Switzerland and Sweden amounting to $281,000 and $117,000, respectively. ISF:r1 10/31/42 SECRET 361 APPENDEX A Semary of United States Exports to Selected Countries as Reported to the Treasury Department from Export Declarations received During the Period Indicated V (In thousands of dollars) 10-day 10-day Period ended Ost. 20. 1942 U.S.S.R. Portugal French North Africa 2/ Aug. 1, 1942 to Ost. 20. 1942 July 31,1942 $ 14,564 $320,154 $742,941 30 1,885 6,933 97,720 396 2,858 1,525 11,537 2,625 18,056 585 9,743 2,068 6,305 in Sweden Period ended Oct. 10g 1942 Total Dennetic Reports July 26, 1941 $ 55,083 Free China Suitzerland Total Demostic Maparte 2 282 117 3/ 237 3/ 22 - 2 - October 30, 1942 Treasury Department, Division of Monetary Research 1/ Many of the expert doclarations are received with a lag of several days or more. Therefore this compilation does not securately represent the actual shipment of a particular period. 2 Includes Marcaso, Algeria and Tumisia. 3/ Less them $500 ( MVF/gra 10/30/42 SECRET 362 APPENDIX B Exports from the U. s. to Free Chima and U.S.S.R. as reported to the Treasury Department July 28, 1941 - October 20, 1942 1 (Thousands of Dollars) Exports to Free China July 28, 1941 - Jan. 24, 1942 1942 Jan. 26 - Jan. 31 Feb. 1 - Feb. 10 2 Feb. 10 - Feb. 20 Feb. 20 - Feb. 28 3 Mar. 1 - Mar. 10 Mar. 10 - Mar. 20 Mar. 20 - Mar. 31 4 Exporte to U.S.A.R. 8 32,758 $ 98,902 6,938 4,889 4,853 2,921 2,879 8,058 9,608 13,315 26,174 28,119 32,509 42,445 2 Apr. 1 - Apr. 10 4,836 5,335 Apr. 11 - Apr. 20 Apr. 21 - Apr. 30 2,827 May 1 - May 10 5/ 296 May 11 - May 20 y 21 - May 31 June 1 - June 10 1,872 2,533 3,399 July 1 - July 10 1,664 7,900 June 11 - June 20 June 21 - June 30 2,707 July 11 - July 20 July 21 - July 31 4 Aug. 1 - Aug. 10 590 279 3,066 208 192 Aug. 11 - Aug. 20 Aug. 21 - Aug. 31 4 Sept. 1 - Sept.10 Sept.11 - Sept.20 Sept.21 - Sept.30 2,850 855 11 902 Oct. 1 - Oct. 10 1,885 Oct. 11 - Oct. 20 30 TOTAL # 107,256 66,906 50.958 28,652 18,000 26,180 12,764 53.799 49,919 35,657 33,940 35,669 14,970 23,325 112,492 24,339 44,434 30,947 14,564 55,083 $1,063,915 1/ These figures are in part taken from eopies of shipping manifests. 2 Beginning with February 1, figures are given for 10-day period instead of week, except where otherwise indicated. 3 8-day period. 4 11-day period. 5/ Due to changes in reporting procedure by the Department of Commerce, this report is incomplete for the period indicated. Treasury Department, Division of Monetary Research IST/grs 10/30/42 October 30, 1942 SECRET 363 APPENDIX c Principal Exports from U.S. to U.S.S.R. as reported to the Treasury Department during the ten-day period ending October 20, 1942. Unit of Quantit by Value (Thousands Quantity of Dollars) $ 55,083 TOTAL EXPORTS Principal Items: Aircraft Light bombers (2-engine A-20) Fighters (1-engine P-39, P-40) Ammunition .30 caliber balls .30 caliber tracers .30 caliber armor .30 caliber incendiary .45 caliber balls .50 caliber balls .50 caliber tracers .50 caliber armor piercing .50 caliber explosive .50 caliber incondiary 81 INS. mortar shells 81 mm. chemical shells 37 mm. tank and anti-tank armor piercing shells 37 mm. tank and anti-tank armor piercing shot 37 mm. tank and anti-tank high explosive shells 25 No. No. 68 Round Round Round Round Round Round Round Round Round Round No. No. 21,422,300 5,951,500 4,731,460 2,204,600 12,998,000 No. 10,000 No. 146,950 No. No. No. 84,506 75 - gun armor piercing shot 75 - gun, high explosive shells 37 - gun, high explosive shells Round 270,000 1,803,900 3,347,250 600,000 1,665,490 7,056 7,056 65,019 63,220 18,000 90 mm. anti-aircraft gun, high No. explosive shells 20 mm. Hispano Swiss gun, tracers Round 37 mm. aircraft gun, armor piercingRound shells 37 mm. aircraft gun, high exRound plosive shells Round 30,000 Round 240,800 20 - Oerlikon gun, tracers 20 - Oerliken gun, high ezplosive shells Motor trucks, auto replacement parts, motorcycles 8,468 6,812 3,600 17,309 17,400 - 5,656 SECRET APPENDIX 0 (Cen't) 364 Page 2 Unit of Quanti by Quantity Value (Thousands of Dollars) Military tanks Light $ No. No. No. No. Medium (M-4) Medium (M-4 A-2) Medium n.e.s. 12 22 5,259 20 20 Iron and steel manufactures and semimanufactures - Meat products 1b. 4,686 - 10,309,060 3,349 Brass, bronse, nickel, sino, copper manufactures and semimanufactures - Aircraft parts and accessories - Explosives No. No. No. No. Armored ears, light Armored cars, medium Ordnance combat vehicles,n.e.s. 3,066 - - Ordnance Combat vehicles Scout ears 3,226 - 1,749 - 801 1,467 51 20 2 Electrical and industrial machinery and apparatus 1,301 Leather and manufactures 942 - 145 caliber sub-machine guns (Thompson) No. Relief supplies - 90 mm. anti aircraft guns No. 20 - Oerlikon an ti aircraft guns No. ( 7,846 785 663 - 8 571 70 519 Parts and accessories for tarks - - 493 Cotton and wool manufactures - - 476 Petroleum and product to - - 476 Aluminum and aluminum alloys 1b. 2,390,751 457 SECRET 365 APPENDIX c (Con't) Page 3 Value Unit of Quantity Ordnance combat vehicles parts and accessories Dried egg products Rubber and manufactures - Quanti by (Thousands of Dollars) - $ 1b. - 397,257 - 397 397 387 Links and belts for small arms ammunition No. 15,151,000 293 Parts and accessories for automatic arms - - 275 .30 caliber aircraft machine guns No. 202 66 Infantry support guns No. 60 36 Military equippage n.e.a. - - Treasury Department, Division of Monetary Research EFM:NVF: or 7 Oct. 30, 1942 366 NOV 9 - 1942 My dear Mr. Secretary: I - enclosing report on our exports to some selected countries for the period ending October 20, 1912. Sincerely yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury. The Honorable, The Secretary of State. Enclosure By Mess. Sturgis 2:33 11/9/42 File in Diary Extra copies to White's office 2st 250W HDWard 10/31/42 FILE COPY 367 October 31, 1942 Exports to Russia, Free China and selected blocked countries as reported to the Treasury Department during the ten-day peri od ending October 20, 1942. 1. Exports to Russia Exports to Russia as reported during the ten-day period ending October 20, 1942 amounted to 355,083,000 as compared with $14,564,000 during the previous tenday period. Military equipment accounted for $32,602,000 of the total. (See Appendix c.) 2. Exports to Free China Exports to Free China as reported during the period under review amounted to only $30,000 of which all was military equipment. 3. Exports to a elected blooked countries Exports to selected blocked countries are given in Appendix A. Most important were exports to Switserland and Sweden mounting to $281,000 and $117,000, respectively. ISFirl 10/31/42 SECRET 368 APPENDIX A Summary of United States Exports to Selected Countries as Reported to the Treasury Department from Export Declarations received During the Period Indicated 1/ (In thousands of dollars) 10-day U.S.S.R. Period ended Oct. 20, 1942 Oct. 10. 1942 July 28, 1941 to July 31. 1962 s 14,564 $320,154 $742,941 30 1,885 6,933 97,720 396 2,858 1,525 11,537 2,625 18,056 585 9,743 2,088 6,305 Spain 2 Switserland 281 Sweden 117 French North Africa 2/ Aug. 1, 1942 to Oct. 20, 1942 Total Domestic Exports $ 55,083 - China Portugal 10-day Period ended Total Domestic Exports 3/ 237 3/ 22 - 2 - Treasury Department, Division of Monetary Research October 30, 1942 1/ Many of the export declarations are received with a lag of several days or more. Therefore this compilation does not accurately represent the actual shipment of a particular period. 2 Includes Merecco, Algeria and Tunisia. 3/ Less than $500 MVF/grs 10/30/42 SECRET 369 APPENDIX B Exports from the U. s. to Free Chisa and U.S.S.R. as reported to the Treasury Department July 28, 1941 - October 10, 1942 1/ (Thousands of Dollars) Exports to Exports to $ 32,758 . 98,902 6,938 4,889 4,853 9,608 13,315 26,174 28,119 32,509 28,556 42,435 Free China July 28, 1941 - Jan. 24, 1942 U.S.S.A. 1942 Jan. 26 - Jan. 31 Feb. 1 - Feb. 10 2 Feb. 10 - Feb. 20 Feb. 20 - Feb. 28 3 2,921 Mar. 1 - Mar. 10 2,879 8,058 Apr. 1 - Apr. 10 4,836 5,335 Mar. 10 - Mar. 20 Mar. 20 - Mar. 31 4 2 Apr. 11 - Apr. 20 Apr. 21 - Apr. 30 30 8 107,256 $1,063,915 2,827 May 1 - May 10 5 y 11 - May 20 4 21 - May 31 296 June 1 - June 10 1,872 2,533 3,399 July 1 - July 10 1,664 7,900 June 11 - June 20 June 21 - June 30 2,707 July 11 - July 20 July 21 - July 31 Aug. 1 - Aug. 10 590 3,066 208 192 Aug. 11 - Aug. 20 Aug. 21 - Aug. 31 Sept. 1 - Sept.10 Sept.11 - Sept.20 Sept.21 - Sept.30 2,850 855 11 902 Oct. 1 - Oct. 10 1,885 Oct. 11 - Oct. 20 TOTAL 51,698 66,906 50,958 28,652 18,000 26,180 12,764 53,799 49,919 35,657 33,940 35,669 14,970 23,325 112,492 24,339 44,434 30,947 14,564 55,083 1/ These figures are in part taken from eopies of shipping manifests. 2 Beginning with February 1, figures are given for 10-day period instead of week, except where otherwise indicated. 3 8-day period. 4 11-day period. 5/ Due to changes in reporting procedure by the Department of Commerce, this report is incomplete for the period indicated. reasury Department, Division of Monetary Research ISF/grs 10/30/42 October 30, 1942 SECRET Appendix c 370 Principal Experts from U.S. to U.S.S.R. as reported to the Treasury Department during the ten-day period ending October 20, 1942 (Thousands of dollars) TOTAL EXPORTS Principal Items: Military equipment Motor trucks, auto replacement parts, motorcycles Iron and steel plates, bars, pipes, reds, etc. Brass and bronse, sheets, plates, etc. Canned sausage Canned pork Leather and manufactures $55,083 32,602 5,656 4,686 2,340 1,665 1,286 942 Electrical machinery and apparatus Copper plates, wire Relief supplies 801 673 665 Industrial machinery and parts 500 476 457 398 397 Petroleum products Aluminum and aluminum alloys Meat products, n.e.b. Dried ess products Rubber and manufactures Cotton manufactures Nickel, chrome wire, and sine Wool manufactures Railway ears, axles, rails 587 550 215 126 119 Molybedenum are and concentrates Beans, except seed Industrial chemicals Hand tools and parts Treasury of Monetary Research EFM:MVF:r1 10/30/42 60 Oct. 30, 1942. SECRET 371 Appendix D Principal Exports from U.S. to Free China as reported to the Treasury Department during the ten-day period ending October 20, 1942 (Thousands of dollars) TOTAL EXPORTS $ 30 Principal Items: Military equipment Treasury Department, Division of Nonetary Research EFMsMVF:r1 10/30/42 30 Oct. 30, 1942. 372 NOV 9 - 1942 My dear Mr. President: In accordance with your memorandum of October 2nd, there is attached the report of items purchased by the Treasury Procurement Division which will be available for the Soviet Government during November. Due to the limited available shipping the recent indications are that the tonnage on hand at the end of November will be approximately 434,000 tons. Yours sincerely, (Signed) H. Morgenthau. ,1. The President The White House CEM:ERG File in Diary By SSA 5:39 11/9/42 (Stamped Strictly Conf.) my TREASURY DEPARTMENT - 4444 MATERIALS AVAILABLE FROM STORAGE AND PRODUCTION DURING MONTH or NOVEMBER 1048 (SHORT TOM DESIGNATIONS) AVAILABLE PRIORITY CARBORS SPECIFIED FOR NOV. COMMODITY STEEL BADS SENERS, STRIP, PLATES SHAPES AND MISC. SHELL STEEL TOOL AND DIE STEEL RAILBOAD RAILS AND ACCESSORIES RAYLROAD WEEKL SETS BARNED WIRE CABLE (OTHER TEAM COPPER) WIRE PRODUCTS PIPE AND TUBING TIN PLATE COFFEE AND COFFEE PRODUCTS SHIPMENT FORM . . . . . IS TRANSITY TO STORAGE PRODUCTION BALANCE 18,836 7,656 2,779 29,029 56,818 1,890 22,344 6,188 48 STB 10,238 38,378 1,082 68,462 23,398 1,441 38,348 5,660 15,566 6,000 1,886 50,480 11,550 STORAGE . 29 . . 38,766 89,388 4,662 2,236 . . . 6,562 21,252 2,772 10,686 . SINC ALUMINAM INSURED AND seases NICERS AND NICKEL PRODUCTS PERROCHBONIUM PERBOSILICON NAMESIGN CODCES CERMICALS MESOURY INDUSTRIAL AND CONSTRUCTION MACHINEES, ACCESSORIES AND PARTS AUTOMOTIVE EQUIPMENT AND PARTS - 126 . . . 186 588 . . . . or . . . . 6TR 2,506 5,208 29,386 5,238 4,838 $,500 3,800 29 2,506 50,528 181,986 12,666 17,686 8,500 8,686 300 see 473 TOO 1,000 1,990 330 380 30 10 1,187 1,566 100 190 1,808 3,896 1,888 6,388 42 as 106 232 e CO TINUED - PAGE 2 AVAILABLE PRIORITY CARGOES 314 SPECIFIED FOR NOV. CONSODITY TIRES AND TUBES OIL FIRLD MACEINERY FIRE FIGHTING EQUIPMENT GRAPHITE - DETAL ELECTROLES LEATHER AND LEATHER PRODUCTS FURNITURE AND OFFICE EQUIPMENT CLOTHING AND TEXTILES SELIPMENT NONE IN TRANSIT STORAGE TO STORAGE 2,962 3,696 . 168 . 966 BALL AND ROLLER BEARINGS PAPER AND PAPER PRODUCTS NISC. SUPPLIES AND EQUIPMENT (GAS MASKS, DETONATION CORD, ETC.) AIRCRAFT INSTRUMENTS MEDICAL SUPPLIES & EQUIPMENT GREASES AND PARAFFIE 7,445 10 10 5,013 3,879 7 . . 168 . 185 121 17 121 86 . HAND AND MACHINE TOOLS 767 7 . PHOTOGRAPHIC EQUIPMENT BALANCE . RUBBER PRODUCTS PLASTICS RADIO EQUIPMENT PRECISION INSTRUMENTS PRODUCTION 84 173 5 10 10 . 1 1 . . 86 38 429 . 345 see 389 544 1,068 86 . 506 . 126 . 220 84 . 48 42 . 247,380 262 1,187 1,428 100,620 97,302 454,301 CRITICAL LIST HAS NOT BEEN RECEIVED. BOREVER, WE HAVE BEEN INFORMED THAT 20,000 TOES OF GENERAL CARGO WILL BE AUTHORIZED FOR NOVEMBER. 375 TREASURY DEPARTMENT Washington Press Service No. 33-98 FOR IMMEDIATE RELEASE, Monday, November 9, 1942. Secretary Morgenthau today announced that all of France within continental Europe was declared to be "enemy territory" under the restrictions against trade and communication with the enemy, Under previous regulations "occupied" Prance was "enemy territory" but "unoccupied" France was not so designated. Today's action accords "unoccupied" France within Europe the same status as "occupied" France and the restrictions under the Trading with the Enemy Act now ap- ply equally to both. The Secretary's action was taken by the amendment of the definition of "enemy territory" appearing in General Ruling No. 11 issued under the freezing regulations and the Trading with the Enemy Act. -000- 376 In reply please refer to: 26358 NOV 9-1942 My dear Mr. Secretary: Reference is made to your letter of November 6, 1942 (SD), and to our letter of October 13. 1942, concerning applications for licenses filed by the French American Banking Corporation to debit the account of the French Government to pay a total of $2,200,000 to the American Red Cross to be used for the purchase of canned meat to be shipped to the International Red Cross Committee in Geneva for distribution to French prisoners of var. You are advised that on November 6, 1942, by direction of the President, the Treasury Department authorized the issuance of a license to the French American Banking Corporation to debit the account of the French Government and pay to the American Red Cross $220,000, which amount, according to your letter under reference, represented funds due to the American Red Cross arising out of the shipment of 248 tons of neat previously effected. You are further advised that, by direction of the President, this Department withheld action on the remainder of the applications referred to in your letter. Sincerely yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury The Honorable, The Secretary of State. MLHoffman:mgb:eps 11/8/42 File direct to Mr. Paul Photo file in Diary By Mess. Sturgis 2:33 11/9/42 DEPARTMENT OF STATE WASHINGTON In reply refer to November 6, 1942 SD dear Mr. Secretary I refer to Mr. Paul's letter of October 13, 1942 in regard to two applications for license filed by the French American Banking Corporation to debit the account of the French Government to pay a total of $2, 200,000 to the American Red Cross to be used for the purchase of canned meat to be shipped to the International Red Cross Committee in Geneva for distribution to French prisoners of war. This matter has been accorded renewed consideration and the Department is of the opinion that for political reasons shipments of meat for French prisoners of war should be permitted to pass through the blockade for distribution by the International Red Cross Committee in amounts not to exceed 500 tons per month. The American Red Cross has informed the Department that it has already shipped 248 tons of meat at a cost of $220,000, for which reimbursement has not been made, and that the estimated cost of purchasing and shipping 1,500 tons of meat (500 tons each for the months of October, November, and December) is $1,310,000. It would, therefore, be appreciated if $1,530,000 of the total of $2,200,000 requested in the above-mentioned applications filed by the French American Banking Cor- poration would be released to the American Red Cross in order that they might be reimbursed for expenditures already made and that they might proceed with the purchase and shipment of meat on & regular monthly basis. I may add that even though the American Red Cross has requested an advance of funds for use in connection with the purchase and shipment of this meat, they have assured the Department that in the event of a change in policy the meat shipments can be halted on very short notice. Sincerely yours /s/ Cordell Hull The Honorable Henry Morgenthau, Jr. Secretary of the Treasury. TREASURY DEPARTMENT 378 INTER OFFICE COMMUNICATION DATE NOV 9- - 1942 TO FROM Secretary Morgenthau Randolph Paul In view of our invasion of French North Africa, we have recanvassed our control over French assets. As you know, such assets have been frozen since the fall of France on June 17, 1940, and our existing problems are those arising under outstanding licenses. By now, the French business enterprises operating in the United States have been carefully checked and the ones still operating on the whole do not present serious problems. We will, however, of course carefully survey the activities of all of such French business enterprises. The following action was taken over the week end: ( ( (1) The French Line. During the night of November 7 - 8, a supervisor and guards were installed in the offices of the French Line in New York City. The cooperation of the Coast Guard was secured to guard the French Line pier. The supervisor and guards will remain on the premises pending a decision as to what action is to be taken with reference to the French Line. On Sunday, November 8, a supervisor was dispatched by plane to the French Line branch office in New Orleans. On Sunday we advised the Navy Department as to the action which we had taken with reference to the French Line and called to their attention the presence of French Line boats in American waters and the need for adequate guarding of these vessels. (2) The French American Banking Corporation. This bank is half owned by French banking interests. The remaining interest is owned by the Guaranty Trust Company and the First National Bank of Boston. Its president is a Frenchman and it has been handling the bulk of the Vichy accounts in the United States. During the night of November 7 - 8 Mr. Kimball of the Federal Reserve Bank of New York, acting under our instructions, located Mr. Claflin, the top American officer of the bank, who immediately came to the bank premises. Mr. Claflin and a Treasury man remained on the premises during the night. Arrangements were made so that during non-banking hours no person may be admitted to such premises without a written pass from Mr. Claflin 379 -2 which will not be issued without Treasury approval. During banking hours a supervisor will be on the premises and will be consulted with regard to all unusual or dubious transactions. Mr. Claflin has been given instructions that the two officials of the Bank of Indochina who had office space in the Bank are not to be admitted to the premises without a license from the Treasury Department. These Indochina Bank officials, Mr. Morin and Mr. Soliva, are known to be Vichy agents. (3) French Diplomatic and Consular Accounts. Instructions were prepared on Sunday, November 8, revoking all the licenses over the diplomatic and consular accounts of the French Government, as well as the licenses over the individual accounts of French diplomatic and consular personnel in the United States. These instructions were cleared with State on Sunday, and arrangements were made for all the banks to be notified before the opening of business on Monday, November 9. (4) North African Arrangement. The licenses under which the French Government could pay out substantial sums for purchases of goods for ultimate shipment to North Africa were suspended on Sunday, November 8. (5) Martinique. There are licenses outstanding which permit the French Government to make certain purchases for shipment of goods to Martinique. These licenses have not been revoked, but we are watching the situation closely and consulting with State with respect thereto. (6) French Banks Outside the United States. Instructions have been issued revoking licenses over the accounts of two French banks with offices in Argentina, Ecuador, and Turkey. The American banks holding the accounts of such French banks are being advised that we will consider reinstating such licenses upon receiving a favorable recommendation from the local American Embassy. (7) Designation of Unoccupied France as Enemy Territory. We have prepared and issued an amendment to General Ruling No. 11 so as to designate unoccupied, as well as occupied, France as enemy territory for the purpose of regulating communications with such area. The issuance of this document was cleared with Dean Acheson at 11:45 p.m. Sunday night. 380 -3(8) Special Instructions to the Federal Reserve Banks. Special instructions have been sent to the Federal Reserve Banks directing them to withhold action pending further instructions on applications involving transactions with France or French North Africa. (9) Special Telegram to United States Missions in Latin America. We have drafted and transmitted to State a proposed circular telegram to our missions in Latin America advising them that this Government is taking steps to deprive the Vichy Government and its agents in this country of access to the dollar funds held in the name of that government or its agencies and directing our missions to make immediate representations to the governments to which they are accredited asking that parallel action be taken. (10) Lazard Freres. Arrangements have been made for the installation at the opening of business on Monday morning of a supervisor in the New York banking house of Lazard Freres, which is currently being investigated by the Foreign Funds Control. REF TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE TO Secretary Morgenthau FROM Randolph Paul November 9, 1942 Re: Martinique Gold A substantial amount of French gold estimated to amount to about 350 tons has been held at Martinique since the fall of France on June 17, 1940. It has never been actually verified that the gold still remains at Martinique although representatives of this Government have examined the boxes said to contain this gold. The action to be taken with respect to the gold at this time as well as with respect to the French naval vessels at Martinique is a military and diplomatic matter intimately connected with this Government position with respect to the French Colonies in this hemisphere. Art 381 382 NOV 9 - 1942 Dear Mr. Wellows This is in reply to your letter of November 2, 1942, in regard to cooperation with a subconsittee of the Inter-American Financial and Economic Advisory Committee which is designated to carry on the study of problems, projects, and recommendations preparatory to the calling of an Inter-American Technical Economic Conference. The Treasury Department will be glad to cooperate in this undertaking, and I - designating Mr. John S. delivers to consult with the subcommittee with reference to assembling information and material needed in its preliminary work. Sincerely yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury. Menorable Summer Telles, Under Secretary of State. File to Thompson Photo file in Diary By Mess. Sturgis 2:33 11/9/42 J3dBingb 11/7/42 STATE WASHINGTON DEPARTMENT OF STATE WASHINGTON In reply refer to TA November 2. 1942 My dear Mr. Secretary: At the Third Meeting of the Ministers of Foreign Affairs of the American Republics, held at Rio de Janeiro in January 1942, a resolution (XXV) W&B adopted providing for the calling of an Inter-American Technical Economic Conference and entrusting the Inter-American Financial and Economic Advisory Committee with the necessary preparatory work for such a conference, including study of projects presented by the Governments of the American republics and the formulation of specific recomi.endations for submission to the Governments. The Financial and Economic Advisory Committee subsequently appointed a subcommittee, on which this Government 18 represented, to deal with this subject. In order that the work of the subcommittee might be directed in R specific and practical manner, a minute W&S adopted at a meeting held on October 23, 1942 to request each Government to submit December 31 "a statement showing in as precise a manner 88 possible the economic problems affecting each country in the fields of trade, finance and production, the manner in which such problems have developed or are developing during the course of the present war, the extent to which such or related probleme are expected to continue into the post-war period, and the measures being taken or projected by each country either alone or in cooperation with -other countries, toward the solution of such problems. Pending the receipt of such statements, it was agreed that the members of the subcommittee would assemble such The Honorable DRVICTORY BUY Henry Morgenthau, Jr., Secretary of the Treasury. -2- such information 88 was immediately available on the foregoing inary work.subject, as a basis for proceeding with prelimI am therefore asking the heads of various agencies interested in the subject of current and post-war economic problems affecting the American republica to cooperate in this important undertaking. At this time, the object 1s to assemble available information as to work in progress or in prospect which will be pertinent to the work of the subcommittee. I have requested Mr. Harry C. Hawkins, Chief of the Division of Commercial Policy and Agreements, to represent the Department of State and I would appreciate it if you would let me know 88 soon 88 possible the name of the officer of the Treasury Department whom you may designate for purposes of consultation on this subject. Your cooperation in this important matter will be greatly appreciated. Sincerely yours, Under Secretary 385 BRITISH AIR COMMISSION 1785 MASSACHUSETTS AVENUE WASHINGTON, D. C. TELEPHONE HOBART 9000 PLEASE QUOTE REFERENCE NO With the compliments of British Air Commission who enclose Statement No. 58 - Aircraft Despatched - for week ended November 3, 1942. The Honourable Henry *orgenthau, Jr. Secretary of the Treasury WASHINGTON, D. C. November 9, 1942. 386 MOST SECRET STATEMENT NO. 58. AIRCRAFT DESPATCHED FROM THE UNITED STATES WEEK ENDED NOVEMBER 3RD 1912. ASSEMBLY TYPE DESTINATION POINT BY BY SEA AIR FLIGHT DEL'D FOR USE IN CAN. CONSOLIDATED Catalina IB U.K. Canada en route U.K. Canada en route U.K. Canada en route 4 BOEING Fortress II 4 DOUGLAS Boston IIIA Curtiss Kittyhawks Middle East West Africa Port Sudan Takoradi 8 18 15 BREWSTER U.K. U.K. Canada Canada Canada Canada Bermuda 7 FAIRCHILD Cornell PT 26 6 LOCKHEED Hudson VI Ventura Hudson VI Hudson VI South Africa Middle East West Africa NORTH AMERICA U.K. Mustang South Africa Harvard II VULTEE India Vengeance 3 South Africa 5 Middle East 1 Freetown U.K. 3 24 Capetown 38 Bombay 12 114 TOTAL British Air Commission, 7th November, 1942. 25 9 387 NOT TO BE RE-TRANSMITTED BRITISH MOST SECRET COPY NO. 13 U.S. SECREI OPTEL No. 387 FRENCH NORTH AFRICA. 8th. Allied landings were successfully carried out in the ALGIERS, ORAN and CASABLANCA area. There was only slight military oppo- sition. At ALGIERS the direct assault on the harbour failed but the boom was breached by two of H.M. Destroyers, both of which were damaged. The airfield of MAISON BLANCHE is in our hands, and to the west of the town we have established a considerable foothold extending south to the airfield at BLIDA. By noon 35 Spitfires and 17 Hurricanes left GIBRALTAR to land on the airfield. The French ceased hostilities at 2000 hours unconditionally. Our forces were to occupy the city from that time and the harbour forts at dawn 9th. A U-boat was probably damaged by air- craft northwest of the port. At ORAN, navol opposition in the early stages neces- sitated one of H.M. Cruisers sinking a Vichy ALCYON Class Destroyer, and one of H.M. Destroyers sinking the escort vessel LA SURPRISE. Two of H.M. Cutters wore reported on fire inside the harbour and are believed lost. One of H.M. Destroyers wan damaged by shellfire. Airfields at LA SENIA (2 miles South of ORAN) and TAFAROUI were occupied by United States troops and during the afternoon 24 Spitfires left GIBRALTAR to land at the latter. In the CASABLANCA area successful assaults were made at PORT LYAUTEY and FEDALA to the North and SAFI to the South. At CASABLANCA, coastal batteries opened fire but were silenced. French ships from the port attack the United States Naval Forces. One Vichy destroyer was sunk and the remninder of their ships returned damaged. There WELS no damage to United States ships. At SAFT the port was captured in the face of considerable Coastal Artillery fire. OPTEL No. 388 1. NAVAL Information received up to 7 A.M., 9th November, 1942. One of H.M. Submarines torpedoed and damaged an Italian six inch cruiser yesterday off North West SICILY. 2. MILITARY EGYPT. During 6th/7th light rain greatly hampered movement off the main rond. On the 7th enemy rearguards in position near MATRUH Station were attacked by our forward troops but held out until dark. During the day further large numbers of prisoners were rounded up. 8th MATRUH was captured and our advance continued. Un- loading of petrol from tank landing craft had already started on beaches East of the town. Our forward troops are now in contact "ith enemy rearguards about 30 miles South East of SIDI BARRANI. 3. AIR OPERATIONS WESTERN FRONT. 7th/8th. Amended casualties, 5 missing not 6. GENOA 116 tons H.E. including 16 4,000 1b. bombs and 121 tons incondiaries released besides flares. Flaree were dropped punctually and accurately. Objective easily identified although smoke screen operating in docks area. 18 exceptionally large fires besides several small ones centre of town and docks well ablaze. Ansaldo works attacked and it. Photographs during attack indicate highly successful operation. 8th. 41 U.S lambers escorted by 27 Squadrons of Spitfires attacked steel works at LILLE and BEEVILLE airfield. R.A.F. Bombers attacked shipping at BORDEAUX. Enomy casualtion provisional) 11, 15, 20. Allied 9, nil, nil. 8th/9th. 100 aircraft sent out: sea- G nuning, 74 leaflets FRANCE 26. 4 missing from mining. EGYPT. 7th. Bad weather hindered operations. Enomy casualties 11, Mil, 2, including 5 transport aircraft and 3 dive bombers destroyed. Alliod 3, nil, til. 7th/8th. Our bombers scored many hits on closely packed M.T. in the HALFAYA area, about 30 fires some of them from petrol were started. 388 NOT TO BE RE-TRANSMITTED COPY NO. 13 BRITISH MOST SECRET U.S. SECRET OPTEL No. 391 EGYPT. 9th. Ground drying up. South African armoured cars operated west of Frontier. At 3 P.M. One United Kingdom armoured brigade with United Kingdom lorried Infantry Brigade in support were approaching frontier in MADDALENA Area. Enemy roarguard was still in SIDI BARRANI Area with two New Zealand Divisions in touch. Our Fighter aircraft had moved up to airfields south of SIDI BARRANI. .