The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
232 Joint Announcement of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System The Comptroller of the Currency, the Federal Deposit Insure and Corporation and the Board of Governors of the Federal Reserve System make the following statement of their examination and super- visory policies with special reference to investments in and lessa upon Government securities. 1. Banks will be encouraged to purchase and hold Government securities of the types that are designed for bank investment. Hold- ingo of any such securities will not be criticised. There will be no deterrents in examination OF supervisory policy to such investments. 2. Loans by banks repayable on a suitable short term or amortisation basis for the purpose of enabling customers to purchase or carry Government securities are desirable and will not be criticised. 3. Banks which utilise their reserves as far as possible in making such investments and loans should avail themselves of the privilege of borrowing from the Federal Reserve Banks when necessary to restore their reserve positions. They will not be criticised for such action. 4. The increased earnings from such investments in and lease on Government securities should be conserved for the amortisation of premiums if any on such investments, to provide for possible lesses in other assets, and generally to strengthen capital structures. 233 Leased Wire Service Board of Governors of the Federal Reserve System. November 11, 1942 To All Presidents of Reserve Banks: Referring to Secretary Morgenthau's telegram this afternoon authorizing the extension of Victory Fund organizations, the Board of Governors looks on this expansion as a vital factor in the war finance and the anti-inflation programs and asks that you give it our full support. It is suggested that, pending Congressional action on Treasury request for budget funds, the several Federal Reserve Banks make the necessary expenditures with the understanding that some or all of the outlays may not be reimbursed. (signed) Marriner S. Eccles Eccles 233 Leased Wire Service Board of Governors of the Federal Reserve System. November 11, 1942 To All Presidents of Reserve Banks: Referring to Secretary Morgenthau's telegram this afternoon authorizing the extension of Victory Fund organizations, the Board of Governors looks on this expansion as a vital factor in the war finance and the anti-inflation programs and asks that you give it our full support. It is suggested that, pending Congressional action on Treasury request for budget funds, the several Federal Reserve Banks make the necessary expenditures with the understanding that some or all of the outlays may not be reimbursed. (signed) Marriner S. Eccles Eccles 234 Sraft November 11, 1942 Draft of proposed telegram from Secretary to Chairmen, Victory Fund Committees Following discussion of Treasury cash requirements with Executive Managers on Monday and with Executive Committee of Federal Open Market Committee yesterday we have determined to go to public on November thirty for a large amount of funds. A general announcement to this effect will be given to the press tomorrow morning. Assume you have received general outline of program already from your Executive Manager. A large part of the burden of selling the required amount of securities must necessarily fall on the Victory Fund organization and accordingly that organi- zation must be greatly expanded. You are authorized to proceed immediately to expand Victory Fund organization on both volunteer and paid reimbursable basis at strategic points in your district. Treasury Dept. Final 235 Expenses of Loans November 11, 1942 To Presidents, Federal Reserve Banks: Boston, Mass. New York, N. Y. Philadelphia, Pa. Cleveland, Ohio Chicago, I11. St. Louis, Mo. Minneapolis, Minn. Richmond, Va. Kansas City, Mo. Dallas, Texas Atlanta, Ga. San Francisco, Calif. Following discussion of Treasury cash requirements with executive managers on Monday and with Executive Committee of Federal Open Market Committee yesterday, we have determined to conduct a widened campaign beginning November thirty for the enlistment of idle funds in the war effort. A general announcement to this effect will be given to the press tomorrow morning. Assume you have received general outline of program already from your executive manager. A large part of the burden of selling the required amount of securities must necessarily fall on the Victory Fund organisations and accordingly these must be greatly expanded. You are authorised to proceed immediately to enlarge your Victory Fund personnel on either volunteer or paid basis to whatever extent you feel necessary at strategic points in your district. We will make every effort to clear names submitted to us as promptly as possible. We will-wite you early tomorrow morning the press announcement. H. MORGENTHAU, Jr. Secretary of the Treasury DWB:NLE 236 November 11, 1942 5:16 p.m. HMJr: Grace Hello. Tully: Hello, Mr. Secretary. HMJr: In person. T: The President okay'd your suggestion about the HMJr: Yeah. T: Senator ...and said would you prepare a little line to him. HMJr: Oh. T: For him to send. HMJr: Oh, I should do it? T: Uh huh. HMJr: Well, that's easy. T: Uh huh. HMJr: Ah T: So if you send it over, he'll sign it and we'll send it along. HMJr: Tonight yet? T: Well, I don't know about tonight. HMJr: Oh. (Laughs) T: He's been working on mail. I don't know that he'11 be here too much longer. HMJr: T: HMJr: Well, I mean there's no such rush. No, but if you get it over tomorrow, we'll see that it's signed and sent out. Wonderful ! What a girl. 237 -2T: (Laughs) HMJr: Thank you. T: All right, sir. You're welcome. HMJr: Goodnight. T: Goodbye. 238 November 11, 1942 5:21 p.m. HMJr: I had Senator Prentise Brown in today and asked whether he wouldn't come with the Treasury to help me. Herbert Gaston: Yes. HMJr: I think I told you about it. G: Yes. HMJr: Then I asked Miss Tully to ask the President whether he would urge him to come, and I just got word from Miss Tully, the President said he would. G: Yes. HMJr: But we should please draft a letter. G: Yes. HMJr: for his signature. So will you be thinking about it and show me something in the forenoon in the morning? G: HMJr: Yes, a letter from the President to And I think that you could make it fairly glowing and also for - see, it's for the President - thank him for all he did, particularly on that last fight, you know. G: HMJr: G: Yes, yes. The President - you know how the Pres. - he doesn't want to miss - he'd miss him in Washington and he'd be of such use if he was here in the Treasury. This would be the President speaking, "Of course, I would expect you to help me from time to time," and 80 forth and so on. And that - and that you have asked the - and that you have asked the President to - to - to ask Brown if he wants to be with us. 239 -2HMJr: No, no, I'd make as though it was on the President's own itinitiative. As was the President's own initiative placing himifinitthe Treasury? G: No, no, no, just that - simply - well, you think it over. HMJr: G: Yes, I will think it over. But that's the only HMJr: Well, you can say "Henry Morg If - you could - "My dear Prentise: Henry Morgenthau has spoken to Yes. G: HMJr: " How would that be? HMJr: I think that's the way to do it. G: "Henry Morgenthau has spoken to" - or, "Henry has spoken to me about wanting you in HMJr: Yes. G: HMJr: If HMJr: the Treasury, and I want to let you know that it would be very pleasing to me, and I want to take this opportunity That's "....for thanking you for all you did...." Yup, that's it. and I want you here in Washington, and I want you across the street where I can use you from time to time," and so forth and 80 on. If G: G: wanting you in the Treasury." Yes, yes, I think so. G: HMJr: " me about. G: Yes. HMJr: How's that? -3G: That's fine. That's the letter. HMJr: Righto. G: I'll give you something in the morning. HMJr: Thank you. G: Goodbye. 240 241 November 11, 1942 5:31 p.m. HMJr: Ted Ted. Gamble: Yes, Mr. Secretary. HMJr: I am too tired to take on the War Savings Staff G: Yes. tonight. HMJr: So I'11 do it the first thing in the morning. G: Fine, Mr. Secretary. HMJr: And - I - I'll see you in the morning. G: Fine and dandy. HMJr: I'm too - too - too HMJr: Oh, I understand perfectly. .... too tired. G: Yeah, we're all with you, whichever direction G: you go. HMJr: Well, that's all I want. G: All right, sir. HMJr: Thank you. G: You bet. 242 November 11, 1942 5:36 p.m. HMJr: John L. publicity with everybody. Sullivan: Yes, I have. HMJr: Well, don't hold it up for me. S: HMJr: Well (laughs), wish to see it. it - it can wait a day if you Well, I - I'm S: You've got a lot on your mind and... HMJr: I got several things I want to talk to you about that Jimmy Byrnes talked to me about. S: HMJr: S: Is that 80? But - it - I don't want - don't hold this up for me. I'd shoot it. Well, it can't go until tomorrow anyway. Are you - you'll probably be just as badly tied up tomorrow. HMJr: S: HMJr: No, I'm - I think I can see you in the morning. Well, I thought you might like to see it before we let it go. Well, I'11 see you in the morning. S: Certainly. HMJr: Thank you. S: Yes, sir. 243 NOV 1 1 1942 MEMORANDUM FOR THE PRESIDENT (STRICTLY CONFIDENTIAL) FROM SECRETARY MORGHENTHAN I discussed with General Marshall the matter of placing agents engaged in Presidential protection in military status. No directed Colonel 0. L. Nelson to advise the Chief of the Secret Service conearning the methods by which it could be accomplished, and attached is a amorandum relating to the procedure which Colonel Nelson stated could be followed. IS specifies that all of the agents may be - in at once as privates and placed on permanent military forlough or each agent may be sworn in as a private and placed on permanent f lough a short time before it appears that he is to be industed into the Army. It also specifies that agents over 35 years old having military experience may be commissioned and immediately placed on permanent inactive status so that they may continue to function as Secret Service Agents. I feel it advisable to have all of the agents promptly placed in status which will assure their continuance in the detail and I will request that steps be taken to commission eligible agents and to swear in the remainder as privates in accordance with the proposal of Colonel Nelson. If you have in mind any modification of this procedure, will you please advise no? (Signed) H. Morgenthau, Jr. Delivered by Serret Service 11/12-3:15 P.M. / November 9, 1942. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston I attach a memorandum of Chief Wilson's conference with Colonel 0. L. Nelson," representing General Marshall. I suggest: (1) That in the case of members of the White House detail who apply for officers' commissions and are found eligible they be commissioned and placed immediately on inactive status enabling them to continue under Secret Service pay and orders. (2) That when any others receive notice of induction they be sworn in as privates and placed on permanent military furlough status. Mrs. 244 REFER TO FILE No 245 TREASURY DEPARTMENT WASHINGTON, D. FRICE OF THE CHIEF November 6, 1942 U.S. SECRET SERVICE MEMORANDUM RE CONFERENCE WITH COLONEL NELSON Colonel O. L. Nelson, representing General Marshall, advises that the subject which the Secretary discussed with General Marshall on Thursday may be handled as follows: If it appears that an Agent performing functions relating to Presidential protection is to be inducted by Selective Service we should notify Colonel Nelson about ten days previous to induction. He will arrange to have the Agent sworn in as a private at once and placed on permanent military furlough. His employment by Secret Service will not be interrupted and he will continue in our service and be paid by this Service. If we desire, they will swear in the entire group as privates, or as many as we designate, at one time and immediately give them permanent furloughs. If we wish, they will swear in the Agents, promote them to sergeants at once, detail them to Secret Service and they will be paid by the Army. This latter procedure would result in a financial loss for the Agent and is not advisable. If any Agents are 35 years old and have military experience, they could be given an officer's commission and placed in inactive status. They would not be called for active duty and would continue in the Secret Service receiving their salary as Secret Service Agents. Colonel Nelson stated that when this Department decides which one of the above methods should be adopted to telephone him and he will prepare a letter for us covering the procedure we should follow when we desire action to be taken. He also requested that when we notify the detail of the method we are to adopt that they also be directed to consider same as strictly confidential, as the War Department does not deem it advisable to have others informed that this method is being used. BUY UNITED STATES SEVINGS BONDS for 246 NOV 1 1 was Memorandum to General Watson, The White House. I have ordered an investigation of Mr. Walter Hughes, recommended by George M. Harrison of the railroad brotherhoods for Collector of Internal Revenue at Cineinnati and mentioned in the President's memorandum of November 9, which was attached to Dan Tobin's letter to you enclosing copies of letters from Harrison to Tobin and from Harrison to Ed Flynn. I am returning Tobin's letter and enclosures since you may desire to reply to Tobin. I have retained copies. (Signed) H. Morgenthau, Jr. Secretary of the Treasury. CONFIDENTIAL Del. by Mess. Simmons 3:35 11/11/42. (Gaston kept original FDR memo 11-11-42 * uss and copies of above toreferred letters) CC in Diary 247 November 11, 1942. MEMORANDUM TO: Mr. Thompson FROM: Mr. Gaston Mr. Walter Hughes, 1811 Van Zandt Road, North College Hill, Ohio, has been recommended for appoint- ment as Collector of Internal Revenue at Cincinnati, Ohio, to fill a VNacancy. wall you please cause the usual investigation to be made? Copy to: Mr. Sullivan Commissioner Helvering. 248 COPY The White House Washington November 9, 1942. MEMORANDUM FOR THE SECRETARY OF THE TREASURY What do you think? If Mr. Walter Hughes is a good man, I should like to do it. F. D. R. Enclosures. 249 COPY DANIEL J. TOBIN 222 East Michigan Street Indianapolis, Indiana. Monday November 2 1942 Maj. General Edwin M. Watson, Secretary to the President, The White House Washington, D.C. Dear General: You might lay the enclosed letter before the President and let him look it over. George Harrison did help me during the last campaign. He is getting a little bit sour on different things because he believes enough has not been done for the railroad men. Therefore, it would be well to have the President look into this request of his. I can understand that Ed Flynn is not very active in matters of this kind, but at least he should have acknowledged receipt of his letter. Sincerely yours, (Signed) Daniel J. Tobin DJT.GMC 250 1 COPY BROTHERHOOD OF RAILWAY AND STEAMSHIP CLERKS Washington, D.C. October 30, 1942, Mr. Dan J. Tobin International Brotherhood of Teamsters 222 East Michigan Street Indianapolis, Indiana. Dear Dan: I am enclosing copy of my letter to National Chairman Flynn urging appointment of a very good friend of mine, Mr. Walter Hughes, to the position of Internal Revenue Collector, Southern District of Ohio, located at Cincinnati. I have not thus far sought or received any personal consideration from the National Committee and now I want this appointment for my friend Mr. Hughes. I will appreciate your assistance to secure the appointment for him. Sincerely yours, (Signed) Geo. M. Harrison (KM) COPY 251 BROTHERHOOD OF RAILWAY AND STEAMSHIP CLERKS CINCINNATI, OHIO. GEO. M. HARRISON, GRAND PRESIDENT WASHINGTON, D.C., Hon. Edw. J. Flynn, Chairman, Democratic National Committee Mayflower Hotel, October 30, 1942. Washington, D.C. Dear Chairman Flynn: I have never asked the Democratic Party for any personal consideration, but now I want something. By way of introduction may I say that during the last three national campaigns I served as Vice Chairman, Labor Division, Democratic National Campaign Committee, and was delegate at large from State of Ohio to last National Convention. I have personally contributed to the Party and my organization has contributed services and money to the Party. Our Brotherhood is the largest railway union and represents over 250,000 railway and express clerical, office and freight house employees. The office of Collector of Internal Revenue, Southern District of Ohio, located at Cincinnati, is vacant and I want this appointment for Mr. Walter Hughes, 1811 Van Zandt Road, North College Hill, Ohio, who is thirty-seven years of age and is married. He is qualified to efficiently administer this office. His education consisted of four years high school and one year Cincinnati University. He is a Democrat and an active worker in the Party, being a member of Hamilton County Ohio Central Committee. He is a former member of City Council of North College Hill. He is state organizer Southern Ohio District Young Democrats Clubs, and member of State Executive Committee of that organization. He is now employed by Herchede Hall Clock Company, Cincinnati, Ohio, as foreman. I am informed Ohio National Committeeman Mr. Charles Sawyer is neutral regarding appointments to this vacancy. Mr. Hughes holds ondorsements from eight county chairman out of a total of thirteen in this revenue district. The other candidate for appointment is Mr. Thomas Gallagher, and he holds minority endorsements. I urge the appointment of Mr. Hughes to this office and solicit your assistance. Sincerely yours, (Signed) Geo. M. Harrison (KM) 252 BRITISH JOINT STAFF MISSION OFFICES OF THE COMBINED CHIEFS OF STAFF WASHINGTON AIR STAFF 11th November 1942. Dear Mr. Morgenthau, I acknowledge your letter of November 3rd containing the message which you wish transmitted to the Father of Sergeant Donald Huntley. I shall send your message at once to the Air Ministry to be passed on to Sergeant Huntley's family, who will of course most deeply appreciate your sympathy. I would add, too, that we of the Royal Air Force are grateful for your thoughtful act and share your feelings in regard to these young men who are now fighting side by side on so many fronts. Yours sincerely, the Eim D.C.S. EVILL Air Marshal The Honourable Henry Morgenthau, The Secretary of the Treasury, WASHINGTON, D.C. 253 November 11, 1942 2:30 p.m. FINANCING Present: Mr. Bell Mr. Haas Mr. Stewart Mr. Viner H.M.JR: I heard that you people had a particular kind of worry - peculiar to economists. (Laughter) MR. STEWART: You are connoisseuring worries these days, aren't you? MR. BELL: With just one, you are all right. MR. STEWART: Well, I have got them, coming out of yesterday. I thought there were a lot of things said and a lot of plans made, all of which fell due about Thursday noon, or something like that. My first worry is what sort of statement anybody can prepare from three agencies, the Federal Reserve, the FDIC, and the Comptroller, which will go as a joint state- ment to the bankers who are going to meet in Philadel- phia on Monday and Tuesday, giving them assurance that their position will not be impaired by anything they do on subscription to Government obligations. These are three agencies that have never been able to agree, and have all sorts of differences in viewpoint; where anything that is said, I think, has to be very carefully prepared and has to be reasonably specific if it is going to get a result. H.M.JR: We have agreed before on some of these bank examinations; you were in on some of it. 254 -2MR. BELL: That is right. MR. VINER: Oh, yes. H.M.JR: We got out a whole set of rules and regu- lations. I refuse to be deprecated that way. MR. VINER: Some progress was made in coordination as compared with what the situation was before. MR. STEWART: I know what it has been and know the difficulties you go through getting FDIC to say that the capital ratio does not matter - go ahead and subscribe. MR. BELL: I think it is a little optimistic to expect it at four-thirty this evening. H.M.JR: You do not need that tonight. MR. STEWART: You need it by Monday. H.M. JR: That is all right. MR. STEWART: No, I think, furthermore, if you expect to put any formula in without having, in advance, complete assurance about the reserve position which I do not think you have, it is dangerous, but I think they will begin to rely upon a formula rather than an adequate reserve. H.M.JR: Well, that is number one. MR. BELL: I think you have to explain that a little. The idea is that under this program the Federal would like to force these banks to borrow under this formula. Some of them will have to borrow if they carry it out, and through that borrowing process they will force that curve out of line. MR. STEWART: The way George puts it, I think, is right. Any formula which does not exclude excess reserves, carries with it the inevitability of borrowing from the reserve. 255 -3MR. BELL: In that connection, I just had time to read a statement somebody drew up on this FDIC and Comptroller of the Currency - it wasn't a joint statement, I think it was probably Sienkiewicz in Philadelphia, in which one paragraph said that the banks will, no doubt, during this program, have to borrow in order to meet the Treasury requirements. MR. STEWART: That is on my side. The other one is upon what basis one talks with the American Bankers this Committee that comes down. I can see several different bases. Again, if one is going to talk on the basis of a formula, I would be disturbed about it. If it is a matter of their taking the initiative to organize a sales campaign, giving them your blessing, that is all easy; but mixing a sales campaign with the rumor and gossip that will go around as to who is going to be assigned what quota, on what basis, would actually chill the thing rather than encourage it. H.M.JR: Let me just sum this thing up and see if I have this thing straight as to what we are trying to do in December. As I get it - we will leave out the bills - well, a billion two of bills, and the seveneighths certificates - are those things all sold? (See table entitled "Financing Program for November - December, copy attached.) MR. BELL: No, only five hundred million of the seven-eighths were sold on November 1. H.M.JR: But I mean the seven-eighths, that is not something that needs selling - that is easy? MR. BELL: That will sell itself. H.M. JR: How about one and three-quarters? MR. BELL: That is a banking, too, except that part which goes outside of the banking system. 256 -4H.M.JR: That would be the thing that the banks would have to do, and if we had no meeting with them al all, no campaign, we could still do those two things, couldn't we? MR. BELL: That is right; eighty or ninety percent of it would go to the banks. MR. VINER: And they would take them. MR. STEWART: Assuming an adequate reserve position. MR. BELL: The present reserve position would take it because there is two billion dollars on each of them. MR. STEWART: The present position will not continue, though. H.M.JR: I will come to that in a minute. Now, on the non-banking, this is-MR. BELL: One billion eight ought to go without anything. H.M.JR: You have got seven-eighths and one and three-quarters - five hundred million. MR. BELL: Under a drive. H.M.JR: Savings bonds, that is another story. The tax notes-- MR. BELL: One billion one without a drive, and two billion one with a drive. H.M.JR: And the two and a half percent tap. So it gets down to this: From the banking fraternity, new money, we need how much? MR. BELL: Five billion seven; five hundred of which you have already got; some of the bills we have already got. 257 -5H.M.JR: How much new money? MR. BELL: It is all new money beginning November 1. H.M.JR And the non-banking, you have three, nine? MR. BELL: And three, six, I think it is, making seven, six, if you get all that money outside of the banking system. H.M.JR: That is thirteen billion. How much could we get along with? MR. BELL: We could get along with eleven billion, or ten billion six hundred and seventy-five million, which allows us to go into January with a balance of about three billion dollars. H.M.JR: It does not say that here. MR. BELL: Yes, "Need $10,675M" and that will allow us to go into January with about a three billion dollar balance H.M.JR: That is a comfortable margin, if the whole thing did not go over and above the usual effort, because that is what was added by the drive - three billion six hundred and twenty-five. MR. BELL: No, two billion six hundred and twenty- five, because on your nine, six - a billion short - it allows it to fail and we still go out with two billion balance. H.M.JR: That is comfortable. I am talking here in the room; you fellows know Eccles just as well as I do - you may know him better, but I cannot start in this afternoon to try to sell him on the excess reserve thing. The afternoon is not long enough; I won't get anywhere, so it is useless. He has told me over and over again, and I dropped the remark here yesterday 258 6that I expect them to keep enough excess reserves, and any day that I say they are not enough, if I call them. up and say, "Buy some more," they will do it. I want to give Eccles the credit. I think he wants to see this thing a success. I am not so suspicious of him on the over-all as I am on some of the individual monetary hobbies which he has. Maybe I am wrong on this thing, but I have thought of this thing enough, now, to believe that we do not have to do very much better than we would normally do, through this procedure, and by watching this thing very closely, the thing would be open for three weeks. I know this is not normal - I want everything agreed to, and everything set beforehand. That is the way I like to do business, but you cannot do business that way with Eccles and his Board. If the thing does not go well, if there are not enough reserves, then we have to get them in here and order them. "Now listen, Marriner, I am not asking you, I am telling you, the way I had to do once before, and I am prepared to do that." Now he might come in and say, "Henry, that is not right; you should have it all set." But I do not think you can, and I do not see that I am taking a terrific gamble. Am I wrong? MR. STEWART: I think you are right for three o'clock this afternoon. H.M.JR: Well-- MR. STEWART: I would not go into five billion dollars new money from the banks on what I understand to be nothing more than some day calling up the Fed and saying we want more reserves; I would go into it with a carefully conceived plan, talked over from the two sides and agreed upon in operation, but I would not go into it this afternoon at three o'clock. H.M.JR: I do not expect to go into it with them, and I do not expect to settle it between now and this after- noon, what we are going to do with the State banking authorities. MR. STEWART: But the bankers - if they raise the question of working out a formula- 259 -7H.M.JR: That is something else. But the only decision I have got to make between now and ten-thirty tomorrow morning is whether I am going to try to do all of this in the month of December - raise two months' money in one month; that is all I have to do. And I have to raise how much, extra? MR. BELL: You mean to carry you through? H.M.JR: Yes. MR. BELL: About two billion six, I think, will carry you through the middle of February, at which time we will have exhausted our balances. I think they will try to keep the reserves above two billion, in view of our last conference. I had another talk, this morning, with Bob Rouse about the reserves, and I told him we were still worried about the reserves, and I hoped he would keep it in mind. He said he had in mind a rather extensive buying program in the next two weeks. He said he would have to do it whether he wanted to or not because the insurance companies are selling a lot of securities, getting ready for this tap issue. He said he was going to have to put reserves on the market. He said, "I am sure they will be well above what they are now. Whether they are enough above to satisfy you fellows, I do not know." MR. HAAS: You are going to get a currency drain at Christmas of six hundred million or more. H.M.JR: That is right. Another thing is, you could announce this program on November 30, and if you do not open any banking issue until, say, the 10th, you do not run up against this problem until after December 1st, sometime. They will have to go out then in order, as you say, to meet the currency problem, and at the same time supply reserves to put this issue across. Can you wait that long? MR. BELL: The money we will get in on this tap issue, I think, will carry our expenditures. It will come in rather heavily the first few days. I expect we would sell seven or eight hundred million dollars the first two or three days. 260 -8H.M.JR: They begin to draw interest from the day of issue - I mean, they lose on it? MR. BELL: Yes. MR. HAAS: On the immediate problem you have deal- ing with this group of bankers, if they want to send a letter out to the different banks, it seems to me there are two messages they want to give to the banks; one is to help in the drive - help to sell securities outside the banking system. If the letter was confined to that, and forget about the formula which relates to the banks buying securities, that would give you more time to consider - they could submit formulas, but to give more time-- H.M.JR: They are not going to help me much on selling outside the banks. MR. HAAS: I was trying to think out something to give you a delay on the formula. H.M.: JR: They are coming in as an industry and offering to police themselves. It seems to me the thing to do, Walter, is this. When they say this and this and the other thing about the reserves, I will say, "Now look, gentlemen, this is something I can settle in the final analysis, because I am sure Mr. Eccles will-- not say this to the Treasury," but that is the idea. But you would save me a lot of time if you would go to the Federal Reserve and thrash this out with Mr. Eccles and come to an agreement with him. MR. STEWART: No. H.M.JR: Why not? MR. STEWART: You do not want the bankers sitting down with the bankers deciding what the excess reserves will be MR. BELL: I am not sure they won't agree that his policy is right on excess reserves; even if they were 261 9- lower, it might be to their advantage, because you are probably going to force rates. MR. STEWART: I do not think the magnitude in people's minds - the conversation we had in George's office was that a conservative estimate runs something more than two billion dollars - somewhere between two and three billion dollars of securities that the Federal will have to buy. It cannot buy that much in the market; therefore some device has to be invented by which the Treasury gives securities direct - either direct loan or some portion of a bill issue. But it runs around two billion dollars in two months, and this is something so much bigger than anything that I have heard anybody talk about at the Federal Reserve or in the Treasury, except Murphy and George Haas and myself. I think it is a great big operation, and I would not touch five billion dollars of bank issue in the light of your last experience, without having that absolutely assured, and I would not do it on a day-to-day adjustment. MR. VINER: That, or reduction in reserve require- ments. MR. STEWART: Yes, I think it is a bigger factor than allowed for in any conversation I have been in on. You have got the regular increase in currency demand, plus a Christmas demand, plus an uncertain reserve know are to - position as created by the fact that you open these subscriptions outside first - and some banks won't quite whatdrain their customers going Twoanyway. do and plus steady from New York, a half this billion was about what they figured. MR. BELL: For what? MR. STEWART: Additional purchases by the Federal Reserve, if you want to maintain the position about where it is. MR. VINER: Through these operations? MR. STEWART: Which are so much bigger than anybody figured on. 262 - 10 - MR. BELL: We had a four billion dollar operation in October. MR. STEWART: Of Federal Reserve purchases? MR. BILL: No, a four billion dollar purchase in October in addition to all your bills - a billion two in bills since then, which is five billion two, plus your savings bonds, plus the half a billion on the certificate; and you only had two billion six of reserve when you went in. Now you are coming out at this end with two billion two reserves, and the posi- tion has been maintained over six weeks with note pur- chases in the market, some days a hundred and twenty million, other days less - some days minus, because they allowed their bills to run off - maturity dates. MR. STEWART: That is dealing with excess reserves in terms of what someone in New York thinks is the market requirement indicated by the prices at which bonds sell or by any adjustment of reserve positions. MR. BELL: Of course, I would like to see them be liberal with reserves until such time as rationing or spendings tax or something gets through to sort of lock up these funds. I do not know whether we ought to say to the Federal, at this time, "We want you to lower reserve requirements, or just keep pounding from time to time: "We still do not think there are enough reserves. H.M.JR: Well, now, you heard Goldenweiser make the statement that I should consider that I have a drawing account of five billion dollars. MR. STEWART: Sure, that is the Federal Reserve's present answer to not doing anything about reserves. They leave the responsibility and initiative with you to overdraw your account, as they call it, in order to create the reserves - but they don't have the Federal Reserve take any responsibility. 263 - 11 MR. BELL: That is what they want to do - have us overdrawn, and, personally; I am not in favor of overdrawing our account except for emergencies. The tax payment periods during financing periods, that is what we told Congress that five billion was for; we ought to stick with that and not let people get the idea we are borrowing from the central banks. MR. HAAS: It looks bad. MR. VINER: Rather than the overdraft, I would just throw bills in the market - enough to get you the funds you need, and then they will have to take them up. MR. BELL: That is what they will have to do on the seven-eighths percent certificate. They are going to have to take a large block of that. There is no doubt about that. MR. VINER: Of course you do not want them to take it in such a way that they reveal the full strain on the market as they take it. I think that is basically the issue. The question is whether the Federal Reserve they will help you to do the job you need to do, but help you in such a way that in every stage the market shows great strain and you are on edge; or they may anticipate, and make it easy, and that is really the issue. The mechanisms differ largely in the extent to which they are designed to make the process easy or to make it difficult, and I do think that the Treasury is perfectly justified in saying, "This is the operation we have to make, If and ask them, "To what extent are you going to facilitate it and just how? Just what will you do under varying circumstances? I would not suggest to them what they ought to do. H.M.JR: We went all through that. You have got to suggest it. We went all through that once before. MR. HAAS: This morning Walter and Jack and the rest of us worked out a sort of a system, but I do not 264 - 12 - know whether you want to discuss it now. It really ought to be a longer session than this. MR. STEWART: No, give a memo to Dan on it. MR. VINER: The procedure-- MR. HAAS: It is your original procedure. That is the Secretary's. MR. VINER: Is it? MR. HAAS: Yes. MR. VINER: The logic of it is that you decide what kind of borrowing you ought to make, and they decide what kind of Federal Reserve procedure they carry out in order to make that possible; but the thing is known in advance by both sides, and is mutually agreeable. MR. BELL: What do we do now? MR. STEWART: You double your bill issues under our plan. MR. BELL: I mean, we decide, now, what to do, and they decide what they do on the market end, and the only thing is, they do not satisfy us. MR. HAAS: You run your bills up sharply. MR. VINER: If they do not do it then, you run the bills up. MR. HAAS: It is a pari mutuel. Remember when you were discussing it? MR. BELL: Eccles is favorable to running the bills up. He thinks that is the way we will put in excess reserves. MR. STEWART: By running up - by changing from a half billion to a billion? 265 - 13 MR. BELL: Not the amount, but he has wanted to increase the volume of bills outstanding, right along. He has been very much in favor of that. H.M.JR: What do you think, Dan? Imean, if you are going to do this thing, you cannot make any announcement tomorrow morning. It means about a week's fight. MR. BELL: Yes, we cannot do it tonight if we are going to have this reserve fight. I do not see why you cannot have a two billion dollar financing on the basis of the present reserves, because the money you are going to get in on the tap issue is going to roll back into the banks about as fast as it comes in. MR. HAAS: But the point is, the drain on the reserve currency and other things drawing it down. That is what - the point is, in order to even maintain it at two you have to do a tremendous amount of purchasing. Does that have to hold up this whole thing? That is something that has to be met some way or other - mean, the bank's financing. Couldn't the drive go ahead without this commitment? Something has to be done on it to put the banking part of it over. I just wondered-MR. STEWART: That is not a decision I would want to make, as to whether you ought to hold up a program in the light of something that you have not agreed in advance with the Rederal Reserve on. I would not under- take to raise five billion dollars from the banks ith- out some better assurance than I now have about the reserve position being kept straight. It does not per- suade me that the present reserve position is satisfactory, or that you did, at an earlier time, raise four billion dollars on an adequate reserve. I am more impressed with the fact that the last time you tried it you did not get a very good reception, partly due to the reserve situation. MR. HAAS: I agree to all that. H.M.JR: I know George feels that way very strongly, but after all, if we had had a third day, we would have gone over. If we had been open Saturday - we were only short three hundred million. 266 - 14 MR. BELL: Yes, three hundred million. Would you feel the same way about a two billion dollar financing? MR. STEWART: Not if you take the short stuff - I mean, your seven-eighths. MR. BELL: The seven-eighths first, which gives the Fed an opportunity to pick up a lot of it, then in ten days the one and three-quarters percent bond; that is the way it is contemplated. It gives you ten days between and ten days before you do either. H.M.JR: I tell you what I will do. I will get Eccles, Bell, and myself alone this afternoon, after this meeting, and I will simply tell Eccles I am going to go into this thing. "We need more excess reserves. I am going to tell you, now, I am going to ask for them, and I expect you will carry out the policy - that you recognize that I am the boss, and that you give me what I want, and let's understand each other. MR. STEWART: Set yourself free from it 80 that Dan or somebody can follow it from then on. H.M.JR: Just you (Bell) and I will have him alone. MR. STEWART: That would make me feel better. Then I would still like to have George turn over to Dan some of the things worked out which would give you a kind of operating and administrative assurance. H.M.JR: Couldn't you men do this, I mean, I am just making a suggestion; couldn't you send for Goldenweiser, the three of you, and have him come over here and see whether you can't sell this thing to Goldenweiser? He seems like a fairly reasonable fellow, and say, "Have you looked at it from this standpoint?" MR. VINER: We can say that this has not yet been put over at the Treasury, too, that it is still on the staff level. 267 - 15 H.M.JR: Have him come over here and simply say, "What is the answer?" If he says that you are right, then say, "Well, will you please go back"-- How would that be? MR. VINER: Fine. MR. STEWART: Fine. H.M.JR: Then if we know that Goldenweiser is on our side - "After all, Marriner, your own staff sides with the Treasury"-- MR. VINER: Of course, he may not let himself get into that position. MR. STEWART: I think he will consider alternatives with us. H.M.JR: I think Goldenweiser does a certain amount of independent thinking. How would that be for this afternoon? MR. STEWART: That is all right. H.M. JR: Bell and I will have our talk alone. MR. STEWART: You can do it without going into methods or details but because you want to have an assurance for yourself. H.M.JR: I would like you three to stay and hear what the ABA has to say, so you get the feeling of it. MR. BELL: I do not know whether you got George's point. In writing this letter they had in mind, you know, for one thing, to tell the banks they had a duty to perform, to get the securities outside; and the second was that any residual would have to be taken up by them, and they would have to see that each issue went over; that would be their responsibility, too. And they were going to give them a formula on which to base their subscriptions to be sure to make each issue go over. George's 268 - 16 thought was to leave the second part of that - the formula - until such time as we need it in connection with the banking issue; then we can work out the formulas and study them. H.M.JR: Under this procedure we would have at least two weeks to work it out. MR. BELL: That is right. H.M.JR: Certainly I do not need it until the 30th of November. MR. BELL: Yes, to get out there by the 10th. H.M.JR: I mean, you have got a margin of two weeks, if I say, "Come back in a week with a formula," because the first issue you would sell would be a tap issue offered to the public. MR. BELL: I would have in mind opening them all at the same time, but not the one and three-quarters or the seven-eighths to the banks until sometime later. H.M.JR: That is what I mean. MR. BELL: You would open all at once? H.M.JR: Not the banking issues. MR. BELL: For the public. H.M.JR: Not for the banks. MR. BELL: For the banks, seven-eighths percent and the one and three-quarters. H.M.JR: I want you (Viner and Stewart) to see the release for the public before ten-thirty tomorrow before it goes out. 269 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE Nov. 11, 19 TO FROM Secretary Morgenthau Mr. Hoflich Subject: Shipment of Planes to British Forces 1. During the week ending November 3, 1942, 148 planes, including 104 combat planes, were sent to British forces from the United States. 2. Included in the week's shipments were 23 bombers and 24 fighters to the British Islee, and nine bombers, 33 fighters and 38 trainer planes to the Middle East. 3. Twelve Vultee Vengeance dive bombers went to India. This is the first shipment of combat planes to India since September 29. -2Table A - Shipments by Area Week Ending Total Shipped in 1942 lov.3.1942 to the United Kingdom Light and medium bombers Heavy bombers Naval patrol bombers Pursuit Army Cooperation Trainers Heavy bombers Naval patrol bombers Pursuit Army Cooperation Trainers since Jan. 1, 1941 15 692 153 1,853 4 93 24 1,053 195 o 119 0 Total to United Kingdom to the Middle East Light and medium bombers to date 270 Total Shipped 257 1,364 150 O 24 2,110 47 582 9 o 3,843 912 0 5 on o 6 6 33 737 O 64 64 38 304 446 Total to Middle East 80 1,585 1,693 3,018 to the Canadian Forces Light and medium bombers Heavy bombers Naval patrol bombers Pursuit Trainers 3 86 o 1 1 23 31 o Q 6 Total to Canadian Forces To the British Pacific Forces Light and medium bombers Naval patrol bombers Pursuit Trainers 254 30 72 697 1,938 2,296 837 9 145 245 o 0 27 o 200 363 o 12 117 o Total to Pacific Forces 752 357 0 to the British Indian Forces Light and medium bombers Pursuit Trainers 12 186 186 o 40 40 o 67 67 Total to Indian Forces 293 293 12 To the British West Indian Forces Army Cooperation Total to West Indian Forces 20 20 o 20 20 o Totals Light and medium bombers 1,691 3,450 4 154 122 57 2,060 3,424 0 203 234 1,080 2,592 39 Heavy bombers Naval patrol bombers Pursuit Army Cooperation Trainers Grand Total 44 148 263 259 5,310 10,222 -3271 Table B - Shipments by Types Week Ending Nov. 3,1942 Total Shipped in 1942 to date Total Shipped since Jan. 1, 1941 Light and Medium Bombers Boeing Boston III 15 0 Brewster Bermuda Douglas Boston I,II,III Lockheed Hudson A29A (AC-151) 8 46 538 7 591 1,561 o 1 1 Ventura I 12 12 331 331 o 57 57 0 288 356 o o 150 120 144 120 144 o Ventura Bomber on Martin Marauder B-26A Baltimore Maryland North American B-25 0 Northrop Vengeance o Vought-Sikorsky Chesapeake Vultee Vengeance 39 39 39 Z o o 50 12 52 52 Heavy Bombers Boeing B-17 Consolidated Liberator 4 49 69 0 105 194 4 122 259 o 315 Naval Patrol Bombers Consolidated Catalina PBY-5B Pursuit Bell Airacobra Brewster Buffalo Curtise Kittyhawk Tomahawk Grumman Martlett II Martlett IV Lockheed Lightning North American Mustang 469 168 o 0 1,320 938 33 544 0 O o 57 0 149 98 149 3 o 3 24 593 673 117 139 Army Cooperation Fairchild 24 R-9 Pitcairn Autogiro Vought-SiRorsky 082U Vultee Stinson 049 o 00 70 70 o 20 16 o Trainers Cesena-Crane I-A (AT-17) Stearman PT-27 Total 700 170 86 T-50 Fairchild PT-26 Cornell North American Harvard II 97 97 o 170 429 298 g 38 0 148 1,326 299 5,310 10,222 Table C - Plane Shipments to the British by Weeks Week Ended Light and medium bombers Naval Heavy bombers patrol bombers Army Pursuit Cooperation Trainers Total 29 97 Weekly average of shipments in 1941 35 Weekly average of shipments in first 6 months of 1942 36 4 77 42 66 17 39 o 32 0 July 7, 1942 July 14, 1942 July 21, 1942 July 28, 1942 August 4, 1942 August 11, 1942 August 18, 1942 August 25, 1942 September 1, 1942 September 8, 1942 September 15, 1942 September 22, 1942 September 29, 1942 October 6, 1942 October 13, 1942 October 20, 1942 October 27, 1942 November 3, 1942 Total shipments since Jan. 1, 1941 to date 1 1 59 60 25 2 11 8 9 27 3 1 55 1 o 3 18 3 117 17 o 30 24 o 1 141 81 4 83 o 2 2 o 6 46 4 27 38 8 6 70 8 19 o 11 109 171 101 3 93 3 7 20 O 11 26 o 26 88 81 17 28 167 6 61 33 o 31 o 13 11 o 57 o 4 139 6 58 2 2 36 20 35 30 1 2 9 o 106 10 56 o 47 4 39 17 81 11 1 29 o 35 27 39 3,450 of 2 13 o 1 6 13 6 4 4 57 o 263 259 3,424 2 234 242 153 148 125 170 36 20 72 55 44 108 148 2,592 10,222 Total planes totalsincludes up to that date.shipped in 1942 prior to March 17 which are not included in the weekly Table C Week Ended - Plane Shipments to the British by Weeks Light and medium bombers Naval Heavy bombers patrol bombers Army Cooperation Trainers Total Pursuit Weekly average of shipments in 1941 35 2 27 3 97 29 1 Weekly average of shipments in first 6 months of 1942 July 7, 1942 July 14, 1942 July 21, 1942 July 28, 1942 August 4, 1942 August 11, 1942 August 18, 1942 August 25, 1942 September 1, 1942 September 8, 1942 September 15, 1942 September 22, 1942 September 29, 1942 October 6, 1942 October 13, 1942 October 20, 1942 October 27, 1942 November 3. 1942 Total shipments since Jan. 1, 1941 to date 1 18 117 O 30 141 24 o 1 81 o 2 36 4 77 17 42 11 66 8 3 39 o 2 0 32 o 4 27 59 9 60 3 25 0 33 o 55 1 o 3 3 17 and 4 83 46 93 38 8 6 70 8 19 7 20 o 11 109 171 101 11 26 o 26 88 o 81 17 28 167 o 6 61 6 36 31 o 13 11 57 o 4 139 2 2 36 20 35 1 2 9 o 106 11 1 10 56 o 47 29 o 4 39 17 81 58 30 242 153 148 125 170 35 2 2 13 o 20 72 27 1 6 13 6 55 39 4 4 57 0 44 108 148 263 259 3,450 3,424 234 2,592 10,222 Total planes totalsincludes up to that date.shipped in 1942 prior to March 17 which are not included in the weekly 273 NOV 11 1942 Dear Mr. Stettimius: Your letter of November 3 to which was attached a copy of the final report as made by the Interdepartmental Valuation Committee has been received. I am in agreement with the conclusions as reached by the Committee and willing to accept the report. Very truly yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury Mr. K. R. Stettimius, Jr. Lond Lease Mainistration 516 - 22nd Street, I.I. Washington, D. C. Photo file in Diary Orig. file to Mack 11/12/42 OFFICE OF LEND-LEASE ADMINISTRATION FIVE-FIFTEEN 22₫ STREET NW. WASHINGTON D.C. November 3, 1942 Dear ar. Secretary: On may 13, ar. cCabe wrote you suggest- ing the appointment of an Interiejurtmental Committee on Valuation to study the problem of valuation of lend-lease goods, information, and services. You agreed to this and on June 9 appointed ar. Clifton E. Hack to work with the Committee. The Committee has completed deliberations and has concluded that we would be warranted in spending no effort to go into problems of valuation or revaluation st this time. Details of the Committee's deliberations are contained in the attached final report of the Committee. I am in agreement with the conclusions reached by the Committee, and would appreciate your advising ac whether the Treasury Department likewise is willing to accept the Committee's report. Yours very truly, E. R. Stettinius, Jr. The Honorable The Secretary of the Treasury, Washington, D. C. 275 FINAL REPORT INTERDEPARTMENTAL VALUATION COMMITTEE Office of Lend-Lease Administration October 29,1942 FINAL REPORT INTERDEPARTMENTAL VALUATION COMMITTEE General This Committee was set up, by the heads of the Agencies represented, for the purpose of considering problems of valua- tion and revaluation of goods, information and services given or received under the Lend-Lease Act. The Committee has held four meetings during September and October 1942. Division of the Subject In its deliberations the Committee found that it was necessary to divide the subject up according to the purpose which is intended to be served by valuation or revaluation. These purposes were found to be as follows: a) Reimbursement of appropriations, b) Post-war settlement of accounts, c) Judging the progress of the procurement program, d) Accurate budgeting of funds, e) Sale and lease of goods, etc. f) Reciprocal aid. Other than the case of items (e) and (f) the problem faced by the Committee was one of revaluation of existing figures rather than the problem of establishing values where none were formerly available. In discussing each of the above -2- subjects the Committee arrived at its conclusions by considering whether, in view of methods presently being followed, in view of the purposes to be served, and in view of the man power required, there was sufficient need for establishing new principles of valuation and for subsequently going through the procedure of revaluing the existing data in accordance with such new principles. Reimbursement of Appropriations In the early days of the Lend-Lease Act, the various Agencies were placed in the position of transferring goods from stock (under the so-called billion-three limitation). In transferring such stocks the Agencies were in effect transferring away their former appropriations, and they wanted reimbursement for this. There arose the question "How much is a proper reimbursement for these old stocks?" An effort to settle this brought about Presidential Regulation No. 1 (copy attached) which vested in the Executive Officer of the Division of Defense Aid Reports (predecessor of the Lend-Lease Adminis- trator) the power to determine the values of defense articles, services and information, after consultation with the representatives of the Treasury Department and the Bureau of the Budget. -3- The Committee is of the opinion that the conditions which gave rise to the discussions for need for reimbursement are no longer present. The very sizeable appropriations made recently to the Agencies have enabled them to replenish fully whatever stocks they may have transferred under the ao-called billion-three limitation. In consequence the Committee recommends that no action be taken to reimburse ap- propriations as a result of these transfers from stock, and concludes that there is accordingly no need for doing any valuation or revaluation of these stocks for this purpose. Valuation for Post-War Settlement of Accounts The Committee gave consideration to statements contained in the master agreements with the various United Nations, in the President's Report to Congress on Lend-Lease activities, and in other official pronouncements. From these and from its own discussions, the Committee concluded that the entire subject of post-war settlement is in an extremely nebulous state, and that it is not now known, nor is it likely to be known until after the war, what is the nature of the settlement which will be made. The Committee further feels that this nature of the settlement is the most vital fact necessary to a proper establishment of valuation principles for achieving the settlement. -4The Committee recommends in consequence that no action be taken at this time, nor for that matter for the duration of the war, on the problem of revaluation to establish postwar settlement of accounts. This, however, is on the assumption that good data be kept on what goods, information and services are being exchanged between the United States and the rest of the United Nations. Valuation for Judging the Progress of the Lend-Lease Program The fiscal reports issued by the various Agencies (and summarized by the Office of Lend-Lease Administration) are one of the important means for judging up the extent of Lend-Lease activity. The Committee considered whether the current valuation methods were such as to distort this picture of the progress of the Lend-Lease program. It is the opinion of the Committee that the present valuation methods are entirely adequate to serve as a basis for judging the progress of the Lend-Lease program. Valuation for Accurate Budgeting of Funds The valuation practices being followed directly influence the extent to which funds are requested by the Agencies, and the size and distribution of the subsequent obligations and expenditures. This has always been a problem in budgeting and is not a new problem arising from the War. The Committee found that -5there are differences among the various Agencies in their methods of spreading overhead and in other practices affecting these values. The Committee is of the opinion that, notwithstanding these differences, the valuation procedures presently being followed are good enough for the purpose of requesting and ,budgeting funds, and that the effort to work out a new set of principles and to do the associated revaluation would not be warranted for this purpose alone. Valuation for Sale. Lease. and Other Current Procurement Problems In some instances goods are imported from other govern- ments and are sold by the Procuring Agencies to firms in the United States to be used in war production. In such instances it is necessary to determine the value of the goods to estab- lish a sales price or a rental value. The Committee found that such instances are relatively rare, and that the existence of such cases does not present a general problem in valuation. The Committee recommends that such cases continue to be handled on a special basis as heretofore. -6 Valuation of Reciprocal Aid During the Committee's deliberations on this subject the Office of Lend-Lease Administration issued a memorandum on the subject, which memorandum had for some time been under discussion with various agencies of the United States Government. A copy of that memorandum is attached herewith and bears the approval of all interested agencies of the United States Government. Because the above memorandum covers the subject, it is unnecessary for the Committee to reach any conclusions on this subject. Conclusions of the Committee As noted above, the Committee found that none of the individual purposes which are served by the present principles and practices used in the valuation of goods, services, and information warrant action to change such principles or prac- tices. The Committee feels also that collectively, the purposes served do not warrant the undertaking at this time of the development of a new set of principles. The Committee -7accordingly recommends that this entire problem be laid on the table and no action taken unless some new and drastic set of conditions changes the facts sufficiently to warrant a reconsideration. J.M.Juranilk The Committee: Colonel E. M. Foster Captain E. C. Whitmore Lt. N. F. Pendleton Mr. Clifton E. Mack Mr. R. D. Vining Mr. C. G. Cornwell Mr. W. B. Robertson Mr. J. M. Juran (Chairman) -8Committee: Representing: Colonel E. M. Foster War Department War Department Navy Department Captain E. C. Whitmore Lt. N. F. Pendleton Mr. Clifton E. Mack Procurement Division, Treasury Department Bureau of the Budget Mr. R. D. Vining Mr. C. G. Cornwell War Shipping Administration Mr. W. B. Robertson Agricultural Marketing Administration Office of Lend-Lease Administration Mr. J. M. Juran Alternates, Visitors and Consultants Who Collaborated in the Study War Department Colonel W. C. Rutter Lt. V. Q. Harmon Navy Department Lt. W. J. Boeckel Lt. George Bolger War Shipping Administration Mr. William U. Kirsch Mr. J. B. Dixson Procurement Division. Treasury Department Mr. Thomas C. Stephens Agricultural Marketing Administration Mr. Leon Lundmark Office of Lend-Lease Administration Mr. L. N. Cutler Mr. A. E. Davidson Mr. R. Cameron REGULATION NO. 1 OF THE DIVISION OF DEFENSE AID REPORTS EVALUATION OF DEFENSE ARTICLES, DEFENSE SERVICES OR DEFENSE INFORMATION Pursuant to the Act of March 11, 1941, Executive Order No. 8751 issued by me on May 2, 1941, and the Military Order issued by me on May 6, 1941, I hereby prescribe the following rules and regulations for the valuation of defense articles, defense services and defense information transferred or received by the United States: 1. The Executive Officer of the Division of Defense Aid Reports, or his designee from that Division, after consultation with representatives of the Treasury Department and the Bureau of the Budget, shall determine the value of defense articles, defense services and defense information transferred or received by the United States. The Executive Officer is also empowered to obtain any information which he may deem necessary to a proper valuation from any department or agency of the Government. 2. Defense articles transferred or received by the United States under the Act of March 11, 1941, shall be valued by the Executive officer, subject to the procedure set forth in Section 1, by giving such consideration as he deems necessary and proper to the cost, age, character and condition of the defense articles, the degree of depreciation or obsolescence, the use or uses to which the articles are to be or can be put, and any other criteria which he deems relevant to the proper valuation of such defense articles. 3. Defense services rendered or received by the United States under the Act of March 11, 1941, shall be valued by the Executive offi- cer, subject to the procedure set forth in Section 1, by giving such consideration as he deems necessary and proper to the character, cost, and utility of such services and to any other criteria which he deems relevant to the proper valuation of such defense services. 4. Defense information transferred or received by the United States under the Act of March 11, 1941, shall be valued by the Execu- tive Officer, subject to the procedure set forth in Section 1, by giv- ing such consideration as he deems necessary and proper to the cost of developing such defense information, the use or uses to which the information is to be or can be put, and any plan, specification, design, prototype or other data conveyed in connection with or as a part of such information, and any other criteria which he deems relevant to the proper valuation of such defense information. FRANKLIN D. BOOSEVELT. THE WHITE HOUSE June 20, 1941 (F.R.Doc.41-4772: Filed July 5, 1941: 9:05 a.m.) Copy September 22, 1942 MEMORANDUM VALUATION OF RECIPROCAL LEND-LEASE AID Representatives of the Office of Lend-Lease Administra- tion have made a thorough investigation of the problems involved in valuing reciprocal lend-lease aid received from other United Nations and have discussed those problems both with the United States Army and British authorities in London and with representatives of the War Department in Washington. That in- vestigation and those discussions have disclosed the following facts: (1) Aid furnished under reciprocal lend-lease consists of a great variety of articles, materials, information and services. A substantial part of this aid is received in such form and under such circumstances as to render its valuation in monetary terms extremely difficult. (2) To require even approximate valuations of reciprocal aid to be made by the United States armed forces in the field would be impossible without serioualy interfering with their operations. -2(3) To assign values to items received as reciprocal aid at a central point in any lend-lease country would involve the employment of man-hours and equipment vitally needed in the actual conduct of the war. The Office of Lend-Lease Administration fully recognizes its responsibility to maintain records of reciprocal lend-lease transfers. However, this responsibility, to the extent possible, should be carried out so as to impose the least burden on the armed forces in the midst of war. On the basis of its investigation and in the light of the foregoing considerations, the Office of Lend-Lease Administra- tion has reached the following conclusions: (1) The Office of Lend-Lease Administration will not require the United States War or Navy Departments, the War Shipping Administration, or any other Government department or agency to place a dollar value on any articles, materials, information, or services made available under reciprocal lend-lease. (2) Where a country making available recipro- cal lend-lease aid advises the United States -3department or agency receiving such aid as to the value of the articles, materials, information or services so furnished, such department or agency receiving such aid should transmit such value to the Office of Lend-Lease Admin- istration. Where a country furnishing reciprocal (3) lend-lease aid deems it impracticable to submit a monetary value for articles, materials, information or services made available as reciprocal aid, the United States Government department or agency receiving such aid should ob- tain and transmit to the Office of Lend-Lease Administration information concerning such articles, materials, information or services in terms sufficiently descriptive to form the basis for an approximate judgment of value for any purpose for which such value may be required. George W. Ball:fhe 276 NOV 1 1 1942 My dear Mr. Stettinius: This refers to your letter of October 30, 1942, regarding the proposals that all Lend-Lease cargo moving to the United States ports be consigned to the War Shipping Administration (1) in order to facilitate the matching of available ships to available cargoes and (2) to be in a better position to compile accurate information as to quantities, destinations, and specifications of Lend-Lease cargoes en route to port. This proposal has my approval in principle, particularly in view of the fact that you intend to disturb existing procedures as little as possible and utilize existing personnel of the procurement agencies in their present positions to the fullest extent. I understand that representatives of the Treasury Department are already working with the representatives of the Office of Lend-Lease Administration, the War Shipping Administration and foreign gov- ernments to establish a mutually satisfactory oper- ating procedure. Sincerely yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury Mr. E. R. Stettinius, Jr. Office of Lend-Lease Administration Five-Fifteen 22nd Street N. W. Washington, D. C. Photo file in Diary JLL:C Orig. file to Mack OFFICE OF LEND-LEASE ADMINISTRATION FIVE-FIFTEEN 22d STREET NW. WASHINGTON, D.C. E R. Stettinius, Jr. Administrator Wetcoer 30, 1942 My dear ..r. Secretary: I an writin to you informed D: certain rec nt developments me snervie lead to 9 CARD 17 the 100.00 of cons! nin. Lend-Letso OCCS OT United States COLLS. is you show, 1 us 15W telt 100. time that the present consi nment noting s undertisfactory :or two reasons: (1) It nas ofer difficult to catch avelinble shi. S to availsolt current in ort or PERCY to OF caliec to ort; (2) it 185 beer. c.fricult to compile accurate information as to the quantities, cestinctions and specifications of LondLease cer oes or their WR to port .or purposes O: cetermining whether specific items should DO nivertea from their ori, inelly intended use, or ermitted to :0 lorward. The major reason :or he first cirticult has been that in JOSE cases one cons' nee E"S not been the agency which provided the ocean transportation. The major reason for the second cifficulty has been the multiplicity or consi nees at U. S. ports and individual variations among then in methods of record keeping. To remedy these weaknesses, it his been proposed by War Shipping Administration that the consi nee of all LendLease car_o moving to United States ports DE the Nar Shipping Administrator. The .ar Shipping Administrator would endeavor to use as his acents one experienced forwarding organizations already in existence. This proposed change would mean (a) that in all cases the agency celling goods forward to port would be the agency which operated the ships carrying these goods away from port, and (b) a single agency, and n United States Government agency, would be the consignee in all cases and assume the -2responsibility C: turnishing to all other U. S. Government agencies any required intornation ano statistics1 data 98 to quantities, estinations ANC S. ecifications 01 cargoes moved to (crt. This progosel meats with BY full a provel in principle And TPS 1120 ocen 4 reed to in rirci le by the War Department. Drins of LWO TO osec directives (one to be issued PJ TOTAL ,4r Shipping Administrator, the other to be issued oy to put this plan into operation are enclosed for me), AND intended consiceracion. The .rr Shipping Accinistration proposal does not in the least 22 te... 1⑉t2 NT in existing de storage sys- teas esteulizies 1 656 various recurement agencies. It is planned that SHOP recurement 8 enc. will move Lend-Lease oods from the Isctor. to GE ets O. rated DJ the rocurement ajencies unless F sherte_e in cepot STOCKS requires that the goods be movec directly to port. In some ceses, with the approval of the proper inlanc one ocean shipping authorities, the depots ma be estaolisred in or near the ports themselves. To the extent that it may be fessiole the procurement agencies, with the appreval of this office, are to obtain fore- casts of requirements of the foreign governments and are to endeavor to maintain in the depot supplies of common Lend-Lease items sufficient for appreximately chirty days' shipping re- qui rements, una the office of Lend-Lease Administration will from time GO time provide such funds " S may be necessary therelor. Mr. Douglas has R3:ed me to emphasize to you that he proposes to disturb existing procedures as little as possible and intenas to utilize the existing personnel of the procurement agencios in their present positions to the rullest extent. At an early dute it is nowed that representatives of War Shipping Audistracion, Lend-Lease and your office may get to ether IOP the purpose of ironing out the many knotty problems involved in the proposed program. As you will note, the present directives 9.00 only at Dasic general principles of consignment and ao not touch the many operating problems that remain to OE worked out by nutual study and conference with the verious procurement agencies. -2responsibility C2 termishing to all other U. S. Government agencies any required intornation ano statistics1 data 98 to quantities, cestimations AND s. recifications OI cargoes moved to crt. This proposel meats with my full a provel in prin- cigle and 9120 been 9 reed to in rirci.le by the War Department. sprits 01 LWO pro osec directives (one to be issued by ,9P Shipping Administrator, the other to be issued by to put unis plan into operation are enclosed for me), your intended consideration. the Inc ."r SM ,Ing Achinistration proposal uoes not in least 201 te... 1⑉t: ****** change in existing de ot storage systhe various precurement agencies. It is planned that each recurement 8 enc. will move Lend-Lease oods from the 19ctor. to ac ots OF crated DJ tue rocurement agencies unless R shortage in cepot STOCKS requires that the goods be tens movec directly to port. In some ceses, with the approval of the proper inland and ocean shipping authorities, the depots may be estaolisred in or near the ports themselves. To the extent tnst it may be l'essiole the procurement agencies, with the appreval OF this office, are to obtain forecasts of requi rements of Lne foreign governments and are to endeavor to maintein in the depot supplies of common Lend-Lease items sufficient for appreximately thirty days' shipping re- quirenence, end the Cifice of Lend-Lease Administration will from time GO tice provide such funds "S may be necessary therelor. Mr. Cougles has R3. ed me to emphasize to you that he proposes to cisturo existing procedures as little as possible and intenas to utilize the existing personnel of the procurement agencies in their present positions to the rullest extent. At AII early date it is noted that representatives of Ser Shipping Audistracion, Lend-Lease anc your office may get to etner for Line purpose of ironing out the many knotty problems involved in the proposed program. As you will note, the resent directives aim only at oasic general principles of consignment and go Let touch the many operating problems that remain to DE worked OUL by nutual study ANC conference with the verious procurement agencies. I would appreciate your reaction to the proposal at the earliest jossiole moment. but Sincerely yours, - The Honorable The Secretary of the Treasury Enclosures 2 Stettinius, Jr. November 3, 1942 Directive with respect to storage, forwarding and transportation of cargo intended for the government of any country whose defense han beon deemed by the President to bo vital to the defense of the United States, pursuant to the Act of March 11, 1941. To all departments, agencies, officers and persons of the United States Department of the Treasury, Department of Agriculture and the United States Maritine Commission engaged in the procurement, storage, forwarding or transportation of cargo intended for the government of any country whose defense has been deemed by the President to be vital to the defense of the United States pursuant to the Act of March 11, 1941 (which government is hereinafter referred to as a Lend-Lease government); By virtue of the authority vested in the President b the Act of March 11, 1941 (Public Law 11, 77th Congress), and delegated to me pursuant to Executive Order 8926, dated October 26, 1941, as amended, and in order to assure the most effective handling, storage nd forwarding to seaboard of Lend-Lease cargo and to further the successful prosecution of the war, it is hereby directed: 1. No department, agency, officer or person of the United States Department of the Treasury, Department of Agriculture and the United States Maritime Commission engaged in the procurement of Land-Lease cargo intended for a Lend-Lease government (which departments, agencies, officers and per- sons are hereinafter referred to as procurement agencies) shall forward or authorise forwarding such cargo to a part or point in the United States for export transportation therefrom by water (hereinafter referred to as forwarding to seaborad) except at the direction of the ar Shipping Administrathe. The routing of shipping documents in connection with such forwarding shall be pursuant to the instructions of the War Shipping Administrator. 2. All such cargo shall be forwarded pursuant to the directive of -2the War Shipping Administr.tor dated , 1942, and the procure- went agencies shall notify or cause to be notified the "ar Shipping Administrator and the representatives of the Land-Lease government concerned as Lend-Lease articles become available for such forwarding. If such Lond-Lease government desires that a Land-Lease article be forwarded to seabored, it shall communicate its request the efor to the ar-Shipping Administrator, who shall direct such forwarding to the extent shipping space is available. 3. The procurement agencies shall furnish all shipping Instruc- tions to their respective cont actors, an: shall prepare or cause to be prepared all inlano ship ing documents employad in connoction thorewith. 1. The procurement agencies shall establish inland depots to receive all Lend-lease car o made available b their contractors, and shall endeavor to forward such cargo to seatoard from such depots, except when in- sufficient depot stoke o considerations of officient transportation require forwarding to seabour direct from the contr ctor. the procurement agencies, in conjunction with the Director of the Office of Defense Transportation, shall arrange for such depots, and the Office of Lend-Lease Administration from time to tine will provide the necessary funds therefor. The Office of Land-Lease ddinistration shall obtain forecasts Q requirements from the foreign governments on the asia of which the procurement a encies shall endeavor to maint.in in such depots supplies os common" Lend-Lease items sufficient for approximatoly 30 Jays' shipping requirements. The Office of Lend-Lease administration will from time to tine provide the necessary funds therefor. No such cargo shall he forwarded to seaboard from such depots except at the Direction of the ar Shipping Administrator. -3- 5. Prior to the issuance of instructions to forward to seaboard, the procurement agencies shall notify the ar Shipping Administrator that the cargo is available for forwarding to seaboard immodiately. If advised that the cargo is to be so forwarded, and after obtaining the proper tranffic control release, the procurement agencies shall instruct the depot or the contractor accordingly, and shall imodiately cause the ar Shipping Administrator or his agent to be furnished with such information and documents as may be required. After cargoes have been consigned to the Bar Shipping Ad- ministrator, the ar Shipping Administrator, in conjunction with the Director of the Office of Defenso Transportation, shall provide for such storage as may from time to time be required while such cargoes are being called forward to seaboard, and the Office of Land-Lease Administration from time to time, whenever necessar, will provide the necessary funds therefor. honever oargo called forward to seaboard is placed in such storage, the kar Shipping Administrator shall proaptly notify the Lend-Lease Administrator, the LendLease government concerned, and the appropriate procurement agencies. 6. The procurement agencies shall comply with instructions issued by the Munitions assignments Scard, through its committees, in cases within its jurisdiction, or by the Lend-Lease Administrator in all other cases, with respect to the diversion of such cargo to SOMO other use. 7. It shall be the responsibility of each procurement agency to maintain or cause to be maintained appropriate records concerning all Lend- Lease cargo in dapots, or in transit to such depots, and, to the extent requested, to make the same available to the junitions Assignments board and the Lend-Lease Administrator. TITLE 46 - SHIPPING CHAPTER IV - WAR SHIPPING ADMINISTRATION PART 321 - FORWARDING AND TRANSPORTATION Directive No. Directive with Respect to Forwarding and Transportation of Waterborne Foreign Commerce of the United States all persons (including departments, agencies and officers of the To United States) engaged in the procurement, transportation or forwardof Lend-Lease cargo, or cargo procured, transported or forwarded ing for the government of any country whose defense has been deemed by President to be vital to the defense of the United States pur- the suant to the Act of March 11, 1941 (which government is hereinafter referred to as a Lend-Lease government): WHEREAS, the aar Shipping Administrator (hereinafter referred to as the Administrator) is charged with the responsibility of coordinating the functions and facilities of public and private agencies engaged in forwarding and similar servicing of waterborne export and import foreign commerce of the United States and controlling the operation and use of ocean shipping (other than troopships and other vessels excluded from the administrator's control under Section 2(a) of Executive Order No. 9054) for the successful prosecution of the war; and WHEREAS, in order effectively to discharge this responsibility it is necessary for the administrator to correlate, in conjunction with the Director, Office of Defense Transportation, the movement of cargoes to port with the movement of ships available for carriage from port, to assure efficient loading of ships, and to maintain adequate inventories and records; -2THEREFORE, by virtue o! the authority vested in me by the act of March 1, 1942 (Public Law 498, 77th Congress), by Executive Order 9054, dated February 7, 1942, as amended, and in accordance with the directive to be issued by the Lend-Lease administrator, it is hereby directed: Sec. 321.4 Scope of Directive. No person (including departments, agencies or officers of the United States) shall forward or authorize forwarding to a port or point in the United States for export transportation therefrom by water any Lend-Lease cargo or cargo procured or transported for a Lond-Lease government except at the direction of the administrator. Sec. 321.5 Consignment of Cargo. All such cargo so forwarded shall be consigned to the Administrator as principal. After such consignment, in the event that instructions for stoppage in transit or diversion to intermediate storage are given to the carrier or carriers, the Adminis- trator or his agent shall be immediately notified by the issuer of such instructions. Sec. 321.6 Information Required. with respect to such cargo, the following information, together with such other information as the dto ministrator may require, shallbe furnished to the Administrator or his agent as BOON as it is available: (a) The identifying serial number and date of issuance of the O.D.T. block permit and of the W.M.R. or other release, if any, authorising movement of the cargo; (b) Confirmation of mo vement, origin, date of shipment, route, mode of carriage, and identification of carrying unit or units to the port or point of export; 3- (c) Original and such copics of inland carrier's bill of lading and of shipping papers as the Administrator may direct. Sec. 321.7 Preparation of Documents. Mith respect to such cargo, the Administrator will prepare or cause to be prepared alldock receipts, ocean tills of lading. customs declarations, and other appropriate ocean shipping documents. Sec. 321.8 Records Maintained by Administrator. The Administrator will maintain or cause to be maintained, in such form as requested by the interested United States Government procuring a oncies, records concerning all such cargo called forward by him, consigned to him or his agent or forwarded by him or his agent, and allsuch cargo loaded on ocean carriers, and will make such information available to the procuring agencies concerned, the Munitions Assignment Board, and to the LendLease Administrator. Sec. 321.9 Compliance with Instructions issued by the Munitions Assignment Board and the Lond-Lease Administrator. Whenever such cargo is consigned to the Administrator, the Administrator will comply with all instructions issued by the Munitions Assignment Board through its committees, in cases within its jurisdiction, or by the Lend-Lease Ad- ministrator in all other cases, with respect to the diversion of such cargo to some other use. Sec. 321.10 Limitation on Responsivility of Administrator Nothing herein contained contemplates the assumption by the Administrator of re- sponsibility for or control over stockpile, assembly, or transit storage depots, or the forwarding thereto, before consignment to the Administrator. 4Sec. 321.11 Issuance of Supplements, Administrative Orders and Instructions. Supplements hereto and administrative orders and instructions hereunder may be issued from time to time. Sec. 321.12 Compliance, All departments, agencies, or officers of the United States are directed to issue appropriate instructions to assure compliance herewith and with supplements hereto and administrative orders and instructions issued hereunder. Sec. 321.13 Effective Date. This directive shall become effective on December 1, 1942. E. S. Land administrator War Shipping Administration October , 1942. Directives Nos. 1 and 3 were issued to the General Agents and Agents of vessels owned by or chartered to the "ar Shipping dministration and Directive No. 2 was issued to the Masters and officers of all vessels in the Merchant varine Service and were not published in the Federal Register. 1 287 NOT TO BE RE-TRANSMITTED COPY NO. 13 BRITISH MOST SECRET U.S. SECRET OPTEL No. 392 Information received up to 7 A.M., 11th November, 1942. 1. FRENCH NORTH AFRICA 10th. There WILE increased enomy air and U-boat activity in the MEDITERRANEAN, many attacks were made on U-boats, at loast 4 of which were promising ALGIERS. One of H.M. Trawlers Bank c U-boat north of ALGIERS. h British 2,000 ton collier was sunk in convoy by U-boat. On the 9th, French air by our fighters were 11, 2, 8. Our casualties nil. ORAN. FORT SANTON continued to cause considerable trouble early yantorday, but it is now reported that both the French Naval and Army Forces are surrondering, and the town was captured soon after midday, the harbour has been blocked. On the 9th French air casualties by United States fighters 3, nil, nil. United States casualties 3, nil, nil. Two pilots safe. MOROCCO. Armoured units are making headway in the North and South but strenuous resistance continues at CASABLANCA, where advancing troops vero hold up by artillery fire. Tanks have been landed at SAFI and 400 prisoners taken. Airfield at PORT LYAUTEY has been occupied. Two French destroyers which made is sortie were engaged and withdrew. Unloading of supplies and equipment slowed up by large number of boat casualties on beaches. 2. NAVAL 9th. Motor torpedo boats attacked 8 convoy at night off the Dutch Coast, obtaining one hit on a 5,000 ton tanker and possibly hitting two other ships. Our forces sustained no damage or casualties. At 6:30 A.M. on 10th one of H.M. Submarines claimed two hits on an enemy force of three cruisers and three destroyer off East SICILY. Naval aircraft also claimed two hits. On October 25th, in the STRAIT OF MALACCA A Dutch submarine claimed to have hit one 5,000 ton ship out of E convoy of four off PENANG. 3. AIR OPERATIONS WESTERN FRONT. 9th/10th. HAMBURG. Over 350 tons of bombs were dropped on the torn and the neighbourhood. Cloud made visual identification of the objective difficult. 10th. 1'5 Bostons oscorted by fighters bombed the docks at HAVRE. Two enemy aircraft were shot down off our coests. 10th/11th. 50 aircraft word sent sea mining. EGYPT. 9th. Light bombers and fighters successfully attacked enony mechanical transport in the SOLLUM area and destroyed or damaged many vehicles. Anomy fighter activity increased in the afternoon. At night onemy mechanical trais port was bombed between SOLLUM and BARDIA. SARDINIA. 9th/10th. Wellingtons bombed two airfields. Treasury Department Office of the Secretary Date Nov. 11, to: 8 1942 Secretary Morgenthau rom: Mr. Hoflich Subject: Of Possible Interest "Voice of the Chief" . You may be interested in the opended report of a "Voice of the nief" broadcast, which gives the Chief's" reactions to General iraud's escape and the new situaion in North Africa. VOICE OF THE CHIEF 289 GESTAPO LAXITY HELPED GIRAUD ESCAPE Gestapo stupidity and laxness are blamed for the escape of General Giraud by "The Voice of the Chief" (November 9). "The Chief" also mocks proponents of Hohenstauffen "geopolitik", and says the Bolshevike must be crushed first with the accent taken off the African arena "which for us, after all, has no other value than serving as a profiteer's heaven. "Now we have the whole abomination! After the Gestapo Admiral Canaris' report on enemy movements 48 hours declared later the Americans in North Africa. And a man that the Gestapo said was safe and sound in France suddenly shows up in North Africa. And this man, Giraud, lets out an appeal in North Africa that reveals the whole game the French swine have been playing from the Canaris had reported to headquarters about very beginning Giraud, but Himmler gave his grand assurances that there must be some mix-up because Giraud is under the reliable supervision of his best man in (Miramar) on the Riviera. "Yes, he was there once, good old Giraud. Himmler summoned his Sonderfuehrer (Swinger, Luedtke, and Volupka) and they were ordered to keep an eye on him 80 that he wouldn't disappear again 88 he did last year from Fort Koenigstein when he pulled an old stunt with a railroad ticket, second class, and disappeared into Switzerland right under the eyes of the (obscenity) Gestapo. But the reliable supervision of Herren (Swinger, Luedtke, and Volupka) these city czare amusing themselves in Cannes and Nice, and while they were carousing and whoring around, two Frenchmen packed General Giraud into an airplane and shipped him to North Africa. "The three Gestapo men didn't even have the nerve to report the disappearance of Giraud. They simply let history go on without them - but with Giraud in Africa. That's Gestapo work in its purest form! "Slugging little children, trying out soldiers' wives - that's what they're good at. But when they're supposed to take over some real responsibility, when it's a matter of watching a General then they're a flop, just as they've failed in every real task. "And the same bragging strategists who had the crust two days ago to minimize the report of Admiral Canaris as nothing more than an alarmist rumor, are trying to capitalize on the spectacle in North Africa. As if the war were lost, because a bunch of gum- chewing Americans are running aroundwho in North Africa and making our friends. as things were common cause with French General -2- 290 "Let them say what they want, the Himmlers and the Rommels who consider the Mediterranean of such eminent importance for their so-called (war-concept), that they still won't give up their Hohenstauffen plan. Let this geopolitical 'Kommune' of vest-pocket philosophers keep on as 1f North Africa alone meant everything. "For us who want to win this war and nothing more, for us the only thing that matters is the one thing that Halder and Rundstedt, all those men, have said who know something about running a war - our task is the destruction of Bolshevism. We or not, before we do anything else. "If the Mediterranean was 80 important for them, then they should have dealt with it before they started with Bolshevism, because the whole strategy of our military leadership consists of solving only one task at a time - in order not to let ourselves be (defeated) simultaneously. Our task can only be have started with it and we have to finish it, whether it fulfilled in the East and it is to continue the advance there instead of at the same time keeping an area open which for us, after all, has no other value than serving as a profiteer's heaven for the degenerate 'Kommune' clique (Federal Communications Commission, November 10, 1942) - 291 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE Nov.11, 1942 TO FROM Secretary Morgenthau Mr. Hoflich Subject: Summary of Intelligence Reports British convoy losses Two reports have been received of the torpedoing and probable sinking of 16 ships (10 British, 3 Greek, 2 Dutch, one U.S.) in a recent convoy enroute from America to England. (Cable No. 3106, Stockholm, November 4, 1942; U. K. Operations Report, November 9, 1942) Japanese troops in South Pacific Japanese troops in Middle Melanesia were estimated on October 27 to number from 53,000 to 70,000 - 18,000 to 20,000 on Guadalcanal, 10,000 at other points in the Solomons, and 25,000 to 40,000 in the Rabaul frea. Since then, during the night of November 2-3, Japanese reinforcements were landed east of Henderson Field on Guadalcanal. (o.s.s., "The War This Week", October 29 - November 5,1942) 292 THE UNDER SECRETARY OF THE TREASURY WASHINGTON November 12, 1942 TO THE SECRETARY: Chairman Eccles called at 7:00 p.m. yesterday to advise me, in compliance with your request made earlier in the day, that as far 2.8 the Board is concerned, it will stand committed on an informal basis to comply with any request from the Secretary that excess reserves be increased. The Board wanted to call to your attention that it is required by law to publicly state in its report to Congress, the reasons for the action that it takes in connection with reserves, and in view of this, if there is a disagreement between the Board and the Treasury on the request, it might have to state in its record that the action is being taken at the request of the Secretary of the Treasury. I told him that I appreciated the authority under which the Board was operating and that I was sure the Secretary of the Treasury would be willing to assume this responsibility. After all, this is war and some one has to assume it. DWB DRVICTORY BUY WAR BONDS 293 November 12, 1942 9:15 a.m. FINANCING Present: Mr. Bell Mr. Buffington Mr. Gamble Mr. Schwarz Mr. Kuhn Mr. Wanders Mrs. Klotz Mr. Odegard H.M.JR: I see you have changed this. (See attached statement) MR. KUHN: We have just changed a couple of words and also changed the order of it. Eccles heard it last night and said it was a fine statement. H.M.JR: I think we ought to fix a date and not leave any uncertainty. MR. KUHN: It adds precision to it. MR. WANDERS: I think the statement is excellent. H.M.JR: You decided to leave in "In addition to conducting a campaign on 'Tap' bonds," did you? MR. BELL: I think that ought to be in. That is the one bit of news in there. That is the one thing we all agree on, that the tap ought to be opened. MR. BUFFINGTON: I agree with that. H.M.JR: (Reading) "Such notes ease the taxpaying problems of the purchasers and at the same time assist a the current position of the Treasury." Isn't that little bit too - you wouldn't want to say assist cash 294 -2balances of the Treasury"? MR. BELL: That is true of tax notes - to keep money coming in every day. H.M.JR: Wouldn't "cash balance"-- -- MR. BUFFINGTON: I think you are right. Will the public understand that? They usually think of it in terms-- MR. BELL: "To help the cash position" - "To assist the cash position" - "To add to the Treasury cash." MR. KUHN: "Strengthen the cash position." If H.M.JR: No, "Add to." MRS. KLOTZ: "Increase." MR. KUHN: You add to the cash resources - to the cash balances. MR. BELL: You add to the current cash balance. H.M.JR: It doesn't have to be current. MR. BELL: It is current, because it comes in daily. H.M.JR: "Add to the current cash position." MR. BELL: "Balance" probably goes better with the "cash." H.M.JR: All right, "Current cash balance in the Treasury"- "Add to the current cash balance of the Treasury." "Since only a portion of the necessary funds will be raised through sales of Government securities to the 295 -3 public, it is the intention of the Treasury likewise to offer one or more series of open market securities for subscription by banks and others." I don't like the word "portion; it sounds as though it is a small portion. MR. KUHN: "Since not all of it--" H.M.JR: Would a "part". - "Since only a part of the necessary funds" - I don't like the word portion." MR. KUHN: If you want to meet your objection, "Not all of the necessary funds can be raised through sales of Government securities to the public." H.M.JR: That is all right. MR. KUHN: Or "Will be raised." H.M.JR: "Since all of the necessary funds through the sale of Government securities to the public"-- MR. BELL: "Since not all of the--' MR. WANDERS: I wondered about that word "public," because, after all, all your sales are to the public. "Since not all of the necessary funds are raised through sales of tax notes and war savings bonds, other securities will have to be offered," and so on. H.M.JR: Well, you get the idea. I don't care about the language. MR. KUHN: We will fix it. H.M.JR: I don't like the word "portion," but I think you might just as well be specific. You have time enough. MR. WANDERS: Sure. H.M.JR: You say "one or more" securities to the banks - then up there you can say "through the sale of 296 -4war savings bonds and tax notes," and so forth. You can't get it all. MR. BELL: "Securities to investors outside of the banks." H.M.JR: Why not simply say what Mr. . Wanders said, and list them? MR. WANDERS: After all, you are going to sell a lot of one and three-quarters to the public as well as to the banks. H.M.JR: You fellows figure it out. "In particular, the War Savings Staff will intensify its Payroll Savings drive in November and December, with the aim of raising the present figure of 23,000,000 workers now investing an average of eight per cent of their pay to a figure of at least 30,000,000 workers setting aside an average of at least ten per cent of their earnings every pay day. 11 Do you want to go out on the end of a limb on that? MR. GAMBLE: I think it is very good from our point of view. MR. KUHN: We have said so. H.M.JR: Have you publicly? MR. BELL: I did in my speech in New York. H.M.JR: How near are you going to come to it? MR. GAMBLE: We will be close to it; it is not a difficult job. We think we are going to make it. H.M.JR: I hate to make these statements and then "Why didn't you, Mr. Morgenthau?" MR. GAMBLE: We moved up four million people last month. With this drive we ought to be able to close the gap on the seven. 297 -6MR. BELL: Yes. H.M.JR: Now, two, I asked the Advertising Council down - who is on it? MR. KUHN: Miller McClintock. H.M.JR: He is what? MR. KUHN: He is the chairman of the Council. H.M.JR: Is he chairman? MR. GAMBLE: I think he is the executive secretary. Chester LaRoche is chairman. MR. BELL: He talked as though Thomas was the boy. H.M.JR: Why not say that I met with Miller McClintock and Mr. Thomas, Harold Thomas? MR. GAMBLE: As Treasury liaison, Advertising Council - that is correct. H.M.JR: Liaison between the Council and Treasury. You get me that, will you? Then, three - Mr. Kuhn, find out from Bathrick what R. H. Grant's title is. I think he is vice president in charge of sales of General Motors - form advisory council of national sales managers - names to be furnished later on. MR. BELL: You haven't got those names now? MR. KUHN: I have about five, but I don't know that that is the complete committee. I will ask him if he would like this announced today. H.M.JR: You have got an hour. MR. BELL: He said there were two more that Grant would get. 298 -5H.M.JR: "With the aim of raising," that is all right. WANDERS: There would not be a commitment; that MR. is why we put it in. H.M.JR: Do you think it is all right? MR. SCHWARZ: The Treasury has already made a commitment in Dan's speech. MR. BELL: I think it is more like what is in here, but we did say our goal was thirty million and ten percent. H.M.JR: That is all right. I like that. Now, Wanders, let me put down some of the additional things I am going to say, and you think of the things that you would like to know if you were in New York and did not know anything about this. What I thought I would say is this: I thought I would say in planning this thing that, one, the ABA has appointed a committee to work with us on the sale of Government securities, both through the Victory Fund and through the banks. Have you got that list? MR. BELL: I am getting it. We had the names, but we did not have their title or banks. H.M.JR: Should we get Stonier over here so he could have a little statement ready? MR. BELL: As long as you don't say anything more than that - I don't think I would go into details as to what they are going to do. H.M.JR: A, assist Victory Fund Committees, and, B, assist in sale to banks. MR. BELL: Government securities to banks. H.M.JR: Sale of Government securities to banks. Right? 299 -7H.M.JR: And, four, OWI will assist. Now, who have I overlooked? And last, but not least, the Federal Reserve Board - that is five. MR. BELL: They are always in the picture. H.M.JR: Five, Federal Reserve Board and twelve presidents, who are chairmen of the Victory Fund Committees. Then I will put Mr. Eccles - he is taking a great personal interest. Right? Now, who else? I can try to give the idea that this is a-- MR. WANDERS: It is a rounded program, taking in everybody. H.M. JR: Advertising Council, national sales managers, OWI, Federal Reserve Board, twelve presidents of the Federal, ABA - does that make a story? MR. WANDERS: Yes. H.M.JR: Get those names. Now, Chick, what else would you think the boys would want to know? MR. SCHWARZ: On the financing? H.M.JR: Yes. MR. SCHWARZ: I think they have got a story here. They will always ask for more, more figures and terms. MR. WANDERS: They will want to know whether you are going to do any advertising or whether you employed these people merely in an advisory capacity. H.M.JR: I have asked them to bring in a plan. 300 -8WANDERS: I am asking the questions - you askedMR. what they will want to know. H.M.JR: The answer is, "Mr. Jones, I don't know until the Advertising Council brings in a plan, but they are working on a plan now, and so is this council of sales managers. They will have something early next week. I will have to tell them that I have only decided the last twenty-four hours that I am going to go ahead with this. What else would they want? MR. BELL: They will want to know the amount. MR. KUHN: How much do you hope to raise, Mr. Secretary? H.M. JR: I am not ready yet to announce that. MR. KUHN: Is this going to be another drive with a parade and rallies and movie stars? H.M.JR: Gamble has a monopoly on that. (Laughter) MR. SCHWARZ: Are you clinging to the two percent interest rate? H.M.JR: No, we crossed that bridge on the last financing. Our policy has been set. MR. SCHWARZ: That is the story. MR. WANDERS: Are you going to use any pressure on the banks? H.M.JR: I will, if necessary. MR. WANDERS: Are you going to admit that? H.M.JR: Why not? MR. WANDERS: I don't see why not, because you will probably have to. 301 -9H.M.JR: Why not? Will that shock anybody? MR. WANDERS: No, I don't think so, but I would put it delicately, if I were you, in the sense that they will be instructed - or rather, the suggestion will be made to them more directly that excess reserves could be employed in accordance with Sproul's letter to the banks up in that District. H.M.JR: Maybe I had better say that I am sure it won't be necessary. MR. WANDERS: That would be wiser. MR. BELL: I would say you hope through this ABA Committee to get the cooperation of the banks. H.M.JR: Of course, they have not agreed on that. MR. BELL: Don't use the word "policing;" that really shocked them yesterday. H.M.JR: The president of that bank is good. He said, "Leave it to us; we will take care of the banks." The committee says, "My gawd, they are going to police us? Who suggested this?" He did suggest that, didn't he? MR. BELL: That is right, he suggested writing a formula, but when Ned Brown and the other fellows heard the word policing, 11 they went right through the ceiling. H.M.JR: I will say that I hope it won't be necessary. That leaves a little implication. MR. WANDERS: That is a good phrase. They will needle you on that, I am afraid. H.M.JR: Who? MR. WANDERS: The boys. Of course, they can read, too. 302 - 10 H.M.JR: Do you know what I told the bankers yesterday about doing their own policing? They were all grumbling and I said, "You might just as well call a spade a spade. Somebody is going to do it; and if you don't I will; so make up your minds who you want to do it. I said, "Somebody has got to tell the banks - these that are not taking their quota," and the Federal Reserve presidents will like that. MR. SCHWARZ: There is implied pressure in the phrase, "I hope it won't be necessary." H.M.JR: Everybody knows I did it last time. What else? MR. WANDERS: But would it be wise to admit it officially? H.M.JR: They asked me at my press conference if we had called up the banks and asked them to take additional subscriptions, and I said, "Yes." I told them we did. I am a very truthful person. MR. WANDERS: If I were in the press conference, I think I would ask you if you had any special plans for some of these western and southwestern banks that are obviously reluctant because they are used to higher interest rates. H.M.JR: There is a tough one, Bell - used to a higher rate. MR. WANDERS: They are accustomed to higher interest rates. H.M.JR: Like Jack Garland, used to sixteen percent. MR. BUFFINGTON: You told them they would like this two percent rate when they got used to it. MR. KUHN: Isn't that one of the purposes of the ABA committee, so you can reach westerners? 303 - 11 - H.M.JR: I will have to tell them - going back to my Farm Credit - I said that whether you live fifty miles from New York City or two thousand miles, you can borrow - farm mortgage, at the same interest rate. There is no reason why the southwest - they can borrow from the Federal Reserve Banks at the same rate. MR. WANDERS: It would be well if you got that in as sort of a tip down there. H.M.JR: The boys aren't as smart as that. Do you think Wanders could come to the press conference? MR. KUHN: I would not think so. MR. WANDERS: I am not able to stay. H.M.JR: No, I mean as a guest, not as a reporter. MR. KUHN: I wouldn't do that. I wouldn't have him come in as a reporter. H.M.JR: No, that would be a mistake. I don't think they are that smart. MR. SCHWARZ: They might be smart; they are lazy. H.M.JR: I don't know where the one begins and the other ends. (Laughter) MR. WANDERS: I would say that I hope to utilize the ABA mechanism, which is now being made available, in order to make the banks down there realize what the situation is and what their duties are. H.M.JR: I will do that. What else? MR. BELL: Are they going to ask you about F and G? (Laughter) 304 - 12 H.M.JR: You fellows can be excused, and Gamble, Bell, and I will stay and settle that thing right now. Get the thing back to me as soon as you can; then after press conference I would like to see you and Mr. Wanders again. (Mr. Kuhn, Mr. Schwarz, and Mr. Wanders left the conference.) MR. GAMBLE: There is one suggestion I would like to make to you that I got while sitting here. It strikes me that they are likely not to get the impression that this is a big drive, that they are likely to get the impression that you are doing all these things because you may be fearful that whatever your drive is going to amount to that it is not going to succeed. In other words, you have not laid enough stress on the fact that this is a big job. H.M.JR: They don't want me to. MR. GAMBLE: I don't mean as to money. H.M.JR: Not as to publicity, either. MR. GAMBLE : I mean, in this press conference impress on these people that this is an unprecedented job without any reference to the amount of money that you are going to raise - whether it is eight billion, ten billion, or fifteen billion. As to the size of the undertaking, you are not going to give the amount. H.M.JR: Simply say that this is the biggest job we have undertaken? MR. GAMBLE: It says, "expanded," but "expanded" is not descriptive enough of the size of the job. You tell them that you are forming all these committees, asking for all this help, and it would be unfortunate-H.M.JR: Use the word "unprecedented" instead of "expanded." 305 - 13 MR. GAMBLE: Yes, I think it would be unfortunate if we were doing all these things - if we were afraid of the drive - but rather because it is an unprecedented job. H.M.JR: I think he is right. MR. BELL: Is it unprecedented? I suppose it is. H.M.JR: Sure. They will ask if it is to be bigger than the six billion eight you had in October. The answer is "Yes." MR. GAMBLE: They get all the story, but they don't get the picture of what you are going to do, and they will start saying, What is this?" H.M.JR: You see, unprecedented - this is Hollywood, colossal, stupendous. (Laughter) MR. GAMBLE: I am the most conservative fellow. H.M.JR: You don't want me to use the word "colossal"? "Unprecedented," that'is all right. MR. BELL: It is unprecedented, because you are putting two months in one, but dividing it into two it wouldn't be as big as the October. MR. GAMBLE: It would be unfortunate if they got the impression you were building all these fences through fear of failure of doing this job because of the last program. MR. BELL: It is a real effort to sell securities outside of the banking system. MR. GAMBLE: You should get full credit for it; that is my point. (The Secretary held a telephone conversation with Mr. Kuhn and Mr. Wanders.) 306 - 14 - H.M.JR: I like this fellow; he thinks independently. I said that it would scare the pants off them, and he says, "Maybe it is a good idea. " MRS. KLOTZ: He is fresh in the Treasury yet. (Laughter) H.M.J JR: Do you know what I have in mind - there won't be enough to do, because we won't be doing this would be to send him out the way I used to send Gene Duffield to the field. Wherever there was trouble I would send him as a reporter just to sit down and say, "What is the matter here?" Remember when Duffield used to do that? I could use him on that very well. Is Graves in today? MR. GAMBLE: He was not in at nine today. H.M.JR: Any other suggestion? MR. GAMBLE: No, sir. that is all. H.M.JR: What I am trying to get over in the story is that we are having a well-rounded program, and we are going to go after this thing, and this is going to be a continued thing, this is not going to be just for once. MR. BELL: This is the beginning - beginning of the end. (Mr. Odegard entered the conference.) H.M.JR: Peter, it was suggested that when I got ready to make up my mind about this F and G you would like to sit in. I asked for Harold, but he is not here. Now, I have given this thing very careful thought, and unless there is some argument which I am not familiar with, I would like to announce at this ten-thirty press conference that effective December 31, the War Savings Staff will stop selling F and G bonds and the Victory 307 - 15 Fund Committee will pick up from there on. MR. BELL: December 31? H.M.JR: I meant November 20. MR. ODEGARD: Oh, could I make one suggestion, that before announcing this to the press would it be possible for us to make it known to our staff? I think it might be a rather - something of a shock to them again, throw them into a state of uncertainty if they read about this in the newspapers before they have any intimation of it from Washington. MR. GAMBLE: I don't think it should ever be announced to the press. I don't think it accomplishes anything. I think it only tends to confuse the public, the Treasury jumping here and jumping there. H.M.JR: The public won't be confused, only the people working-- MR. GAMBLE: And the people - there is nothing to be gained by it, in my opinion, to announce it to the press. I talked to Ferdie about that phase of it. I thought when we reached that point we could simply advise our people that it is going to be done, and advise the Victory Fund people that it has been done. H.M.JR: You can't keep it out of the press. MR. BELL: There really has not been much in the press about F and G. MR. ODEGARD: Would there be any objection to holding up - if it is going to be given to the press to holding up any formal announcement? I am really concerned about it, because the last time we had this same thing happen it was a very serious blow to our organization. Our quotas are made up. 308 - 16 - H.M.JR: I can answer you just like this - I don't have to announce it this morning. MR. ODEGARD: That would be fine. MR. GAMBLE: We are completely reconciled. H.M.JR: I mean, I can tell you right off the bat that I don't have to announce it at ten-thirty. MR. ODEGARD: That would be the first question. H.M.JR: I would not have to announce this thing as long as the orders go out that this thing is going to happen. You would stop that drive in New York so as not to muddy the waters there. MR. BELL: I think that is what is worrying everybody; they are going ahead with this drive. MR. GAMBLE: We are waiting for this word to call it off. H.M.JR: Let's say on this one that the telegrams go out; and as long as it is a dirty job, I am willing to sign it. I mean, that is up to Harold, but I am willing to sign the telegram. MR. GAMBLE: I think we ought to do a selling job on our people. They will be good sports about it and approach it in a positive way. H.M.JR: What you said last night gave me a grand feeling; "Whatever you decide, we are with you." That is what I like, because it is part of the Treasury family, and I have not arrived at this thing lightly. I am also conscious that you men - one of the best selling jobs was done by Thomas on why I should not do it-MR. ODEGARD: You saw Thomas yesterday? H.M.JR: He did one of the best jobs - why I should not do it. Now, you fellows can have - what is today, Thursday? You can have - is one day enough I mean, as to what should go out tonight? We won't say a 309 - 17 anything about it before Monday. MR. ODEGARD: That would be fine. MR. GAMBLE: I think we should study it very carefully for a number of reasons. H.M.JR: I want two things in the telegram. I. want, one, to let them go on, but no drives. I don't want these ten thousand men in New York to start. MR. GAMBLE: You see, we are relinquishing the responsibility for these bonds on December 1, which auto- matically calls it off. H.M.JR: It is like that. I want what was in that telegram that you showed me, plus a second paragraph. MR. GAMBLE: I understand. H.M.JR: I don't want the waters muddied. MR. GAMBLE: They will not be muddied; you need have no concern about that. We are just as much concerned about the right thing being done as anyone else. H.M.JR: If you will show me a telegram any time during the day, I think I ought to sign it and take it off. Harold, so it shows it is my decision. On. the other hand, he may not want to have it seem as though he were over-ruled. MR. GAMBLE: He may want to be the man to sell his own people. H.M.JR: It may look as though I am over-ruling Harold. If he signs it, it is immaterial to me, but I want to do it the way that leaves the best possible aftertaste. 310 - 18 MR. ODEGARD: Is there going to be any change in the nature of these securities? H.M.JR: Of the F and G? In the first place, I Savings," the over-print, off the F and G - that is promised Gamble that we would strike the words "War number one - so they wouldn't be selling a war savings bond. MR. BELL: It would be a savings bond, however. MR. ODEGARD: A registered security? MR. BELL: Yes. MR. ODEGARD: The F bond will continue-- H.M.JR: What we are studying - George Haas is studying this, and I asked him whether we should con- tinue selling it; and his answer to me was, "Let's see how this tap thing goes. If it goes very well, then we may drop them entirely. If MR. GAMBLE: Both of them? H.M.JR: Both of them. - MR. ODEGARD: I know almost nothing about this whole negotiation, Mr. Secretary, and I am inclined to think, just coming in cold - all I know is that there have been negotiations-- H.M.JR: Gamble and Kuhn - Kuhn sat in at every meeting on that thing. MR. ODEGARD: It is not their fault that I haven't heard, because I have been away a good deal. H.M.JR: Kuhn sat in at every single meeting I discussed it, and Gamble sat in at almost every meeting. But Kuhn was present at every meeting, and his job was to keep the War Savings Staff informed. So if you have not been informed, Peter, it is not my fault, because I have been scrupulously careful. 311 - 19 - a MR. ODEGARD: I realize that. I have been away good deal, too. I don't t want to open any discussion. Just offhand I do not feel good about it. H.M.JR: I did not expect that you would. I would. be disappointed if you did feel good. MR. ODEGARD: I talked with people in New York when I went up to the Academy of Political Science dinner. I was surrounded by some people, and the nature of their arguments was this, that the War Savings Staff is a magnificent selling organization and the War Savings Staff ought to have something really that it could sell; that it ought not to be limited to this kind of a registered bond, that we ought to have a bearer bond in the nature of the Liberty bond, which they could sell in unlimited amounts. They said, "You are ham-strung in selling these bonds, because if a fellow wants to get his money out of them he has to wait sixty days." If I gathered from that conversation that what a good many of these people want, and want very much - and I know nothing about the negotiations they want a security in which they can trade, they want a security in which they can make some money. That is a perfectly legitimate goal, a perfectly legitimate objective if it is explicit and understood. I think there are serious questions that have been bruited about, which I know nothing of directly, concerning compensation of security dealers for the sale of these securities. We have an organization of about three hundred thousand people, many of them the best people in the United States, giving their time, free, using their own tires, their own gasoline. They have never asked for any compensation. H.M.JR: But you have nine hundred people on the pay roll at the cost of a million dollars a month. MR. ODEGARD: Yes, that is true. We have got about nine hundred people on the pay roll, and by comparison 312 - 20 with any other operation in the Government, it is negligible. H.M.JR: But even - I mean, to give a true position, there are nine hundred people on the pay roll. MR. ODEGARD: That is right, but there are approximately three hundred thousand people. H.M.JR: Peter, if it will make you feel any better, go ahead. I have been on this thing now for four or five days; and believe me, Gamble, Kuhn, and Thomas have done a good job. MR. ODEGARD: I have no doubt that they have. I just came cold and discovered that this decision had been made, a decision which I think should have involved, as I have no doubt it has involved, consideration of the nature of the securities we are selling. It would be wise to kick the ceilings off a security. If you want to sell thirteen billion dollars worth of bonds through the War Savings Staff, I think we could give you assurance, Mr. Secretary, that we could sell them if you kicked the ceiling off these bonds and gave us a bearer bond to sell to the people of the country. The fact that the Victory Fund Committee will be able to sell these bonds will be unimpressive to me if they have a security which has an open market, a free market. But those are things that have bothered me. I assume they are resolved. H.M.JR: Here is the point, to be fair to me. I have taken during the last five days the greatest care I have ever taken on anything, to have War Savings Bonds informed on every step. Now, I can't go through the whole thing all over again. MR. ODEGARD: I won't ask you to. H.M.JR: I have torn myself inside out on this thing to do what is the best thing for the Treasury, 313 - 21 - I think. The fact that they have not informed you step by step - but my conscience was never clearer. I am sorry, because Kuhn was in at every single meeting at which this thing was discussed; and whenever it came up that it in any possible way affected the War Savings, Gamble was here. [.have seen more of Gamble in the last five days than in the last two months, which was pleasant for me. MR. ODEGARD: There is just one footnote. I gather in discussing this with people - just incidently, because I have been in on the discussions of it - that there is a tendency to think of the tremendous job of financing and I don't think anyone is more concerned about that than we are in the War Savings Staff - and to represent the position of the War Savings Staff as being rather, if not negligible, at least a very minor thing. Out of fifteen billion dollars of financing the War Savings Staff accounts for, at most, a billion and a half or a billion eight of that - it looks very small. I really don't think that that is a fair representation, and that is the representation that I know has been made, because it has been made to me by people who have been in touch with the Victory Fund people. I think that it is just going to be a shock to our people when our quotas, having been made up to include F and G bonds, are taken away, when for the first time since the organization has been established, we have been encouraged to sell F and G bonds. You see, we have never made any effort really, Dan, as you know, to sell F and G bonds. H.M.JR: Maybe if you had made the effort earlier I would not have to make this decision now. MR. ODEGARD: That may be. H.M.JR: They have been going since May 1, 1941. Don't forget, Peter - well, I don towant to-- 314 - 22 MR. ODEGARD: I am sorry. H.M.JR: I don't want to lower your - I mean, I think I got Gamble in a good frame of mind. I think I got Kuhn in a good frame of mine. They have got to do a job on you. I thought they were doing it hourly. MR. GAMBLE: I talked to Peter on the long-distance phone, but he has not been here. H.M.JR: Where have you been? MR. ODEGARD: I was with the Advertising Council yesterday and with Mr. Murray and Mr. Baker on our radio programs, and I met with some of the national advertisers who are trying to induce - to carry on this nation-wide advertising campaign in our behalf. I was in New York all day yesterday. H.M.JR: But weren't you here Monday or Tuesday? MR. ODEGARD: I was here Monday, but I went up to New York Tuesday noon. H.M.JR: Well, as I say to you, as one salesman to another, we will have to get these other fellows - you are very low. MR. ODEGARD: I am not very low. H.M.JR: He has seen his low and he is coming up again. I mean, Ted has seen his low mark and he has rebounded. (Laughter) MR. ODEGARD: I can't be low with the news in the papers these days. H.M.JR: As I say, if I got in an argument I might say things which would make you feel even worse, so I 315 - 23 - don't think - don't think that in any way that I deprecate what the War Savings Staff is doing. After all, they are doing the most difficult job of all, that is, the mass selling. They are doing the Woolworth job, which is the most difficult job, to get the ten cents, the quarters, and the dollars; and as far as I am concerned, I think we carry the bat on the publicity, on the morale end on this thing. We have been in the forefront now ever since we have started. I know that the President and Hopkins and Early and all over at the White House feel that we absolutely led the procession, which is something we may never get thanks for; but in our hearts we know that we have made a great contribution from the time - so for all of that which the people have assisted me in from the beginning, I am deeply grateful. I know we have made a contribution, and for a long time we were the only people. OCD went through that whole mess, and then came the mess with the Librarian - what is his name, MacLeish? After all, it is only a month ago that the Assistant Secretary of the Navy got up and said we were losing the war. So I mean, we have gone all through that, and ours has been a steady pressure to the good. You can't measure that in dollars. You can't measure that in quotas, and that has been a magnificent job. I expect you people to continue that steady pressure along those lines. Then we will come along with a heavier security, heavier in the sense of size, with another group, and I hope in that they will do as good a job as War Savings did. If I just measured this thing in dollars - I said right at the beginning that I weighed the thing sixty-six and two-thirds on propaganda and one-third on money. Do you remember that? And I still do; I have not changed. But now I have got to raise some money, and the question is, how can I raise it the quickest and the easiest, and I think - I may be wrong - I have been wrong before - that this decision I am making is the way to do it. 316 - 24 MR. ODEGARD: I think it is not only the quickest and easiest, but also the best way not to jeopardize the price structure any more than is necessary. H.M.JR: I mean, we have had a lot of people in on it. I think that that is the quickest and easiest way and also with the price structure as it is. Now, we used the word "unprecedented" and I kidded him - Hollywoodish, but it is all right. (Laughter) MR. ODEGARD: Colossal. H.M.JR: That is what we said, but he said "unprecedented." And it is unprecedented, just like this armada which they sent to North Africa, and there has never been anything like it in the whole history of the world. No Secretary ever tried to finance twentyfive nations. How many nations are there in the United Nations? MR. ODEGARD: About twenty-five. H.M.JR: About twenty-five. We keep adding here and there. So, Peter, please don't go away feeling that War Savings has not been a success. I say it has been a great success, measured by the yardstick I gave originally, two-thirds on propaganda and one-third on money, and I have no complaint. MR. BELL: Mr. Secretary, I think Peter has maybe heard my remark that I made to you when I was urging you to give consideration to this drive when he said that some statements have been made belittling the efforts of the War Savings Staff. I think I made the statement that you were spending a great deal of time and effort and money on twenty percent of your financing problem, and that I thought it was time that we were spending 317 - 25 more time and effort on our eighty percent, because if we didn't do as good a job on the eighty percent, then there was not any sense in doing anything on the twenty, because it wouldn't have any effect on the over-all picture. I didn't mean that to in any way belittle the efforts of the War Savings Staff. I am just as proud of what you (Odegard) have done as you are. I think you have done a grand job. MR. ODEGARD: Dan, I never heard you make that statement. MR. BELL: I made it, and I think it has gotten around. I, feel that way about it; but at the same time I don t think they ought to lessen the efforts of the War Savings Staff if this other goes and is a success. Your subsequent remarks about selling other types of securities and keeping this organization going brings up the further question that maybe sometime along the road you ought to merge them and just have one organization. H.M.JR: Don' t-- MR. BELL: I mean, it brings the question up. MR. ODEGARD: It does very definitely. MR. BELL: And two other points made about the F and G's - I have been very much impressed by Bathrick's and Thomas's arguments on the War Savings Staff, and the organization they have gotten together, and the enthusiasm; and your subsequent remarks that you would give consideration to eliminating F and G from the picture entirely. I would not at this time transfer permanently to the Victory Fund Committee the F and G's, if you have that in mind. I think it might look bad to announce now that you are going to transfer the sale of F and G's to the Victory Fund Committee and then on December 25 say that we are going to eliminate them. I think it looks as though both organizations have failed to sell F and G's. 318 - 26 H.M.JR: That is a good point. MR. BELL: If you could just say to these people, "Withhold your drive and do nothing with F and G while this other drive is on, maybe in two weeks we will have made a decision on the whole thing. Maybe you will want to raise series E to ten thousand to give them more latitude. H.M.JR: I will raise it. But the telegram has to go out, and I think if Harold decides he wants to send it, then a part of the telegram should be for me saying just what I said to Peter. MR. ODEGARD: I think that would help. H.M.JR: If Graves wants it, then there should be a separate statement. (Mr. Kuhn reentered the conference and handed a paper listing the members of the Sales Advisory Committee to the Secretary, copy attached.) H.M. JR: You know, they never asked me whether I liked this at all, but they just went ahead and did it. MR. KUHN: I hope to goodness there is nothing against any of those babies, the sales managers who are coming in. H.M.JR: I think we had better just say that I asked Mr. Grant to form a committee. MR. KUHN: I think it would be safer, because don't you want to check each one of these people? H.M.JR: Yes. Mr. Kittinger, vice president of Shell Oil - I don't know what he might be. I think we will have to wait. MR. KUHN: You could say that you are forming a committee representative of leading industries. 319 - 27 - H.M.JR: That is all right. What we said here was this, that I would not say anything on the record about F and G's. If they asked it off the record, I might say something, but that will give the War Savings Bond people all day to draft a telegram to go out and then give them at least headway over the week end. MR. KUHN: I think it would be too bad to do this thing to them abruptly, especially New York, Philadelphia, and Chicago. It ought to be done personally. H.M.JR: Well, I am giving them from now until Monday. MR. GAMBLE: In the light of Mr. Bell's statement, do you want to possibly say nothing about taking the sale of F and G's away? H.M.JR: No. With all due respect to Mr. Bell, I want this thing cleaned up; it has got to be. I can't stand this wrangling in the Treasury family any longer. No, I don't think you meant that, did you, Dan? MR. BELL: Yes, I meant that. I meant take it away for this drive, and I think we have to test this other organization. H.M.JR: You mean take it away as of November 30? MR. BELL: I would let this Victory Fund Commitee sell F and G's along with every other security they are going to sell, and I would call off this drive of the Savings Staff, and then maybe in ten days after that you will have made a decision on the whole thing, and then call them all together on January 1. H.M.JR: No, I am sorry I can't go with you on that. I want to do things - I want to stop the drives for the balance of this month. I mean, any extra drive. 320 - 28 MR. GAMBLE: This is F and G's now? H.M.JR: Only F and G's. I want to stop the drive just the way the telegram is written, plus as of the 30th I want to transfer the sale to the Victory Fund. MR. BELL: You want to say that Monday? H.M.JR: No, the telegrams are going out from War Savings headquarters today to the forty-eight State chairmen saying that. MR. BELL: I didn't know you were saying the second thing in the telegram. I just thought you were stopping the drive. H.M.JR: No, no, I want this thing clean-cut. MR. ODEGARD: I think it ought to be clear on that. H.M.JR: What we say publicly we will put aside until Monday. MR. ODEGARD: My thought was in line with what Dan / was saying, that the less publicity there was, general publicity, on this, the better. H.M.JR: There may not be any publicity. Let's see what happens when your telegram goes out. I don't have another press conference until Monday afternoon. I don't think George Buffington necessarily - I mean there won't be anything said to the Victory Fund Com- mittee between now and Monday. MR. GAMBLE: They have said that they didn't want any publicity on it. H.M.JR: Then this telegram only goes to your people. 321 - 29 - MR. KUHN: I don't think that is right. They do want an announcement. MR. GAMBLE: They went so far as to say that they were not even going to mention that they had F and G's for sale in the promotion of their material. I don't think we ought to stick the War Savings Staff down in the gutter and step on them just because of this movement. H.M.JR: There is no intention. MR. GAMBLE: No, I understand. H.M.JR: I think Odegard's coming in made a very good contribution, namely, you have all day to get out the telegram - it will go out sometime during the day - one from me - maybe one from Graves, too - then we will see the reaction. Now, talk to the other people. What I am trying to find out is - I don't think there is any need for publicity. MR. GAMBLE: That is right, and they don't, and the bonds don't. Let me give you a reason why the bonds shouldn't. This matter on the budget - you know, we have a budget that we are operating under which includes the sale of E, F, and G bonds. They get to writing stories in the paper about you splitting up this program and switching the sale of one bond to some other department of the Government or the Federal Reserve - we have a budget pending now before the Bureau. MR. ODEGARD: And we are having trouble with it. MR. GAMBLE: We are having difficulty with it, and we also have money left yet to spend in the next seven months that is supposed to be spent to promote the sale of these securities. H.M.JR: That is the best argument yet. 322 - 30 MR. KUHN: Mr. Bathrick is calling his whole group together for next Wednesday. H.M.JR: Not until Wednesday? MR. KUHN: No. 323 Secretary Morgenthan issued the following statement today: Borrowing by the Treasury to meet the rising costs of the war will be resumed on an expanded scale on November 30th. Victory Fund Committees, which have been active in promoting the sale of Treasury securities other than War Savings Bends, will be asked to conduct a widened campaign for the enlistment of idle funds in the war effort. The Committees already have done excellent work in behalf of Treasury financing and they will be given full authority to conduct a drive for further funds. In addition to conducting a campaign on "Tap" bonds, the Victory Fund Committees will be asked to promote purchases by corporate and other taxpayers of series A and C tax savings notes. Such notes ease the taxpaying problems of the purchasers and at the same time assist the current position of the Treasury. Since only a portion of the necessary funds will be raised through sales of Government securities to the public, it is the intention of the Treasury likewise to offer one or more series of open market securities for subscription by banks and others. Treasury issues already available, and those to be announced for limited periods within the next few weeks, 2. 324 will be suitable for every class and type of investor, from the largest commercial banks, corporations and insurance companies to the smallest individual investor or wage earner. The War Savings Staff will remain continually active in sales of War Savings Bonds. In particular, the War Savings Staff will intensify its Payroll Savings drive in November and December, with the aim of raising the present figure of 23,000,000 workers now investing an average of 8 per cent of their pay to a figure of at least 30,000,000 workers setting aside an average of at least 10 per cent of their earnings every pay day. War borrowing must be done to the greatest possible extent out of current income and savings of the people. This is the soundest means of financing the war deficit. 325 The following will serve with Mr. R. H. Grant of General Motors Corporation on the Sales Advisory Committee in connection with the December financing: John Sohumann, Jr., President of the General Motors Acceptance Corporation. Terry Kittinger, Vice President of Shell Oil Company. W. S. Howard, Vice President of R. H. Macy & Co. R. S. Wilson, Vice President of Goodyear Tire and Rubber Company, Inc. P. M. Bratten, General Sales Manager of the Frigidaire Division of General Motors. D. U. Bathrick, Vice President of Pontiac Division of General Motors. 326 November 12, 1942 9:43 a.m. HMJr: Hello. HMJr: Mr. Kuhn and Mr. Wanders. Hello. Operator: Go ahead. HMJr: Gentlemen. Operator: Ferdinand Kuhn: Yes. George Wanders: Yes, sir. HMJr: Ted Gamble has made a very good comment. He said he feels that after listening to this all, that this is just doing something, 80 we hope that this next one won't fail. K: Yeah. HMJr: And, therefore, he suggested instead of saying "on an expanded scale, if we use the word on an "unprecedented" scale - to show that this thing is bigger than anything that's ever been undertaken by the Treasury. W: That it would add zing to it? HMJr He thinks so and I agree with him - unprece- dented scale. I told him we didn't know whether we wanted to go Hollywood and say "colossal". K: (Laughs) I didn't.... W: (Laughs) K: I don't want to scare the pants off them by any such announcement when you don't mention figures. HMJr: Well, they'11 say to me, "Will it be bigger than the six billion eight in October?" and the answer is "Yes." 327 . -2K: Uh huh. HMJr: I don't think it will scare the pants off them. K: Uh huh. W: Well, maybe it would be good to scare the pants off them. HMJr: Well, I - I don't know about that, but I think that V: Uh huh. HMJr: See? W: Uh huh. HMJr: What do you think, Wanders? W: I think it's a good idea, Mr. Morgenthau. Gamble is right that - that nowhere through this publicity does it show that the thing we are taking on will be the biggest job ever undertaken by any Treasury in the world. HMJr: Let's do it. W: Uh huh. HMJr: Let's do it. K: We'll put that change in. HMJr: Right. W: Yeah. K: All right. 328 November 12, 1942 11:25 a.m. FINANCING Present: Mr. Bell Mr. Viner Mr. Stewart Mr. Haas Mr. Brown Mr. Potter Mr. Steele Mr. Wood Mr. Hemingway Mr. Wiggins Mr. Stonier MR. HEMINGWAY: Mr. Secretary, our committee has been in session and given careful thought to this subject, and in order that we might present our views in a concise way, and present to you our thoughts in the best possible way, we have made a written memorandum. With your permission I will read it, and I will give you a copy to follow as I read it. I will leave that with you. (Memorandum by Mr. Hemingway, dated November 12, 1942, handed to the Secretary.) This is a memorandum of a statement made to the Honorable Henry Morgenthau by W. L. Hemingway, President of the American Bankers Association, November 12, 1942, at Washington, D.C. "Mr. Hemingway stated that he had appointed a committee consisting of the gentlemen named below to consider what the American Bankers Association could do to cooperate with the Treasury in the distribution of Government securities. Acting upon the recommendation of this committee, Mr. Hemingway stated: "(1) That the American Bankers Association is in full accord with the view expressed by the Treasury on 329 -2numerous occasions that Government securities should be sold so far as possible outside of commercial banks. In addition to its support of the sale of War Savings Bonds, it will start immediately an intensive campaign to obtain an all-out effort on the part of its members in aiding the several Victory Fund Committees to distribute all Government issues offered in the future. "(2) That the American Bankers Association will use its best efforts to induce its members to invest their surplus funds, (which in the case of member banks are their excess reserves) in some types of Government securities. What maturities-- H.M.JR: Would you mind, just for the public, to say, "--induce its member banks"? MR. HEMINGWAY : We left the banks out because this is the American Bankers Association, and they are all banks - all members of banks. H.M.JR: All right. MR. HEMINGWAY: (Continuing) "What maturities are to be held by any individual bank should be determined by its management in the light of many factors, such as the character of assets, liability to deposit fluctua- tions, the probability of loan demands, and the ratio of capital accounts to total assets. While no general formula applicable to all banks can be worked out, they should recognize it to be their duty to invest their surplus funds in Government securities. "As to future Government issues for which banks are asked to subscribe, each bank should recognize its obli- gation, in common with all other banks of the country, to subscribe to those issues as offered, in some general relationship to the size of the bank. This will insure the success of such offerings. It should be realized that when a particular issue is one which is deemed unsuited as a permanent holding by any bank, it may properly dispose of such holdings in the market. 330 -3"The committee feels and believes that in the event the full use of excess reserves is not enough to absorb the offerings of the Treasury that member banks should not hesitate to borrow for the purpose of creating additional reserves. "The committee feels that at the present time a satisfactory quota for every bank cannot be worked out, but a campaign to emphasize the responsibility of all banks to subscribe should first be undertaken. Then follow the names of the members of this committee and we would like to have Mr. Strickland join us. He is due here at one-thirty, today, and we will add his name if he approves of this statement. H.M.JR: I take it, if I have any suggestions, I am free to make them, am I not? MR. HEMINGWAY: Yes, indeed. I would like to follow this for a moment with the verbal statement that if it is your wish that we do this, we would like to, first, send out a letter from the president of the association to its members, followed up by a booklet setting forth this thing in language that you would use to persuade people into a program. You have seen some of the booklets we have put out to our members. And then it would be our purpose to have a number of meetings over the country, generally, whereby we would carry this message by word-of-mouth, which after all, is the most effective way to do any selling campaign. We believe that we can get started on that very quickly. Our staff members who participate in this matter are here, and we would like to develop from you just how we should proceed. That is, whom we should contact in the Treasury on this sort of a thing, and who would have charge of representing you. H.M.JR: I think the person who would represent me would be Mr. Bell, on this, if that is agreeable. 331 -4MR. BELL: All right. H.M.JR: And then the suggestion I would like to make on advertising, so we have it all coordinated, there is this group that is known as the Advertising Council, which is working on all - practically all Government promotion. There is Miller McClintock who is the head of it, and they have asked a Mr. Harold Thomas, who is vice-chairman of the committee, to particularly devote his time to the Treasury; so they know every piece of promotional matter thatwe are getting out, and are working with us. What they do is, they have a whole group of advertising agents. They do this all free - they don't charge anything. Once I think they gave us nineteen different copy writers, who went to work to turn out some work. I mean, it is a "labor of love" with them. But just to keep the thing coordinated, if you would be willing-MR. HEMINGWAY: There is no objection to that, is there? We have already been in contact with that group. H.M.JR: Do you know McClintock? MR. HEMINGWAY: Yes. H.M.JR: He is a very excellent and high-class man. So that everything is in tune that goes out. MR. STONIER: Yes. H.M.JR: Do you know him? MR. STONIER: Yes. H.M. JR: That would help, and then with Bell-MR. HEMINGWAY: We will work that out, all right. H.M. JR: I am just throwing this out as a suggestion for somebody to help - you might use Delano. 332 -5MR. BELL: He might be a good man on the bank liaison. I would use Buffington as a man between the ABA and the Victory Fund Committees. H.M.JR: But I mean, if you needed-MR. BELL: I can use Delano, too, on this. H.M.JR: I don't know how busy he is. He has asked several times to help. Now, do you want an O.K. on this right away, or is this something-MR. HEMINGWAY: We are just filing with you a statement of what we think we can do, Mr. Secretary. H.M.JR: I mean, there are certain things in here - do you want me to raise them now? Supposing I-MR. HEMINGWAY: Yes. H.M.JR: Supposing I read this over once more. We will have to do our homework out loud, so if you people have anything - there was something here. I have nothing in paragraph one. Have you got anything? MR. BELL: No. MR. HEMINGWAY: Mr. Secretary, we did not intend to use this as a press release. We are not going to give that out to the press. H.M.JR: I still would like to look at it. I thought this was a press release. MR. HEMINGWAY: No, no. H.M.JR: There was one thing that would bother me for the press. Did you forget to ask Eccles? 333 6- MR. BELL: No, I asked him to come. H.M.JR: This thing on the top of Page 3 bothered me a little bit. I know why it is in there. "It should be realized that when a particular issue is one which is deemed unsuited as a permanent holding by any bank, it may properly dispose of such holdings in the market." MR. HEMINGWAY: I will ask Mr. Brown of our committee to answer that. H.M.JR: Do you feel that is necessary? Do you feel there is any restriction on you? MR. BROWN: I think that we covered, in the earlier part of the statement, that every bank ought to keep all its idle funds - we used the words "surplus funds" because we didn't like the connotation of "Idle" - but of surplus funds invested in some form of Government security. We wanted to keep all our money at work for the war effort, but if the Treasury should put out a ten-year bond for banks, as might be the case of our bank or a great many other banks, we felt that in order to make the issue a success we should subscribe to it. In our case on the two and a half percent issue, we felt the relation with the liability of our deposits, the rapid fluctuation, the ratio of our capital assets to our total assets, that we ought to have much shorter stuff. We think that we, or any other bank, ought to be in the position to sell that security in the market. Now the inference would be to the extent that we had any surplus funds that were not in use through loans or some other way, to further the war effort we would invest it in some other form of Governmental security. If it should later and this is aside from the picture - become necessary for the Treasury to assign definite quotas for securities to banks, with instructions that they had to take so much, it is unthinkable to me that any such securities would have a maturity of over a year. 334 -7That is what was done in the last war when certificates were put out. It is what is done in England and Canada. If it is very desirable that some banks should and could buy ten-year bonds or five-year bonds or six-year bonds in very much larger amounts than they have now got some country banks, particularly, whose deposits are relatively stable, who have not been affected by the vicinity of war camps or some other form of Governmental activity, should have higher coupon and longer bonds, but you have got to waive to the management of each bank, what type of security he is going to hold in his portfolio, subject to the general limitations that it should keep invested in some form of Government securities, right up to the hilt. H.M.JR: I just raise the-- MR. BROWN: I am sorry, but I think that Mr. Viner and Mr. Stewart and Danny will bear out, that when you stepped out of the room, that Marriner Eccles, yesterday, expressed that same point of view quite forcibly. H.M.JR: Eccles? Which way? MR. HAAS: Full utilization of excess reserves. MR. BROWN: Yes, but that you could not say that a bank had to take certain definite maturities which might not fit their book at all. H.M.JR: Well, it is one thing to write it to me, and another thing is the public statement. MR. BROWN: We have no idea of giving it to the public in that form. MR. VINER: I think that a bank has to have freedom arrange its portfolio - its various holdings to suit its needs, but I do think that, certainly, if this is to ever going to the public - and I don't see why it should not - the reference to maturities in that statement-- 335 -8MR. HEMINGWAY: Mr. Secretary, I would like to make this statement, now, that our committee felt that they ought not to mislead you in any way. We ought to put the facts before you as we believe them to be what we can do. We realized that that was one of the things that would immediately be brought up. We believe, for the present, that that is as far as we can go in the matter. MR. VINER: Would it be satisfactory to you if that sentence read, "It should be realized"-H.M.JR: Where is that? MR. VINER: At the top of Page 3. It reads: "It should be realized that when a particular issue is one which"- because of maturity - "is deemed unsuited as a permanent holding by any bank" - otherwise there is a suggestion that a Treasury security may be unsuitable for holding. MR. HEMINGWAY : We discussed that for about a half an hour last night, and we decided that it was best not to put that in because there might be some other factors that would enter into it. For example, a bank might be in a community where some plant was withdrawn, we will say, or something of that kind, where the deposits would go down, money would go out, and so forth; so they would feel free to dispose of their offerings promptly, although they would come in and help the underwriting. MR. VINER: Then that would not apply to a particular issue. MR. BELL: This might be a case where a bank has, say, a great many more securities than they want on a particular maturity date. We put another security right on top of that and said, "I got more in my portfolio than I ought to have of that particular maturity. I will take it to underwrite it, but I would like to get one back at six months or a year. 336 -9MR. VINER: That is still a maturity consideration. MR. HEMINGWAY: We thought that the management of the bank would insist, today, that the right should be left with them to determine whether or not this parti- cularly suited their portfolio. MR. VINER: I think it should be recommended that each particular bank should feel free to carry out its obligations of arranging the amount and the distribution of its holdings in accordance with its special needs. I do not like to see "deem unsuited". That wording, issued to the public, might mean that you were appraising the Government securities, rather than appraising their suitability for the bank in its special circumstance. MR. BROWN: When I drafted this first section, I had the words "because of maturity" in. Some of the others pointed out that you might take a bank with perfectly stable deposits in a rural community, with relatively high expenses; it might be offered, say, one year's certificates at seven-eighths. It just could not live on that rate, and there would be no reason why it should not have a bigger rate and a much longer maturity. In case of a big city bank, it is short maturity which is, generally speaking, wanted; and in the case of the country banks where their deposits are stable, it would be quite proper for them to be longer maturity and higher rates. And there was the feeling of the other members of the committee - correct me if they do not agree with me - to put in a limitation "because of maturity" would not take care of the case of the small country bank with stable deposits, which numerically compose a majority of the American Bankers Association - not the total deposits. It was for that reason that the words "because of maturity" were left out. MR. VINER: How about "does not fit the needs of the special position of the bank"? It is just the word "unsuited 337 - 10 MR. BROWN: Yes, that would be agreeable to me. MR. HEMINGWAY: The drafters of that statement are both here, Mr. Potter and Mr. Brown. MR. POTTER: Personally, I do not see any reason why we should not adopt your first suggestion, "deemed unsuited because of maturity." MR. VINER: Yes, but then you accept Mr. Brown's point that there may be banks who want a longer maturity because the security in question may be unsuitable to them because its interest rate is too low. MR. POTTER: That is all right, but as a matter of fact, the interest rates and the maturities are tied together. So far as I am personally concerned, I do not see any reason why we should not adopt your suggestion. MR. VINER: Except that I think this-H.M.JR: Now that you have adopted Viner's change in position-- (Laughter) MR. VINER: I won't let you do it. I think the ordinary reader will think that has in mind the t the maturity is too long. That would be the ordinary interpretation of it. MR. BELL: The other suggestion is broader. MR. BROWN: I think Mr. Viner's second suggestion is better. MR. STEELE: All right, if you have come around to our way of thinking, let's agree. (Laughter) MR. BROWN: So that when a particular issue does not meet the needs of banks as a permanent holding it may not-- 338 - 11 MR. BELL: "Does not fit the needs or special situation as a permanent holding"-- MR. VINER: That is right. MR. WOOD: Fit the needs of what? MR. VINER: A special situation. That latter will take care of a bank which is losing deposits. H.M.JR: Is that all right, Mr. Potter? MR. POTTER: Absolutely. MR. STEELE: Fitathe needs "of" special situations? MR. BELL: "Or" special situations. MR. POTTER: I think the main consideration is that we understand each other, Mr. Secretary. H.M.JR: I do. Words are not important. MR. HEMINGWAY: But we have in our committee, Mr. Secretary, a number of English scholars, and they wanted these words in there exactly right. (Laughter) H.M.JR: Let me see if my visiting economists have any other suggestions. MR. STEWART: Distinguishing between part one and part two - in part one I see no reason why it should not be made a public statement. I see some advantages in having it made a public statement. You are announcing a campaign; you have got a volunteer organization - the American Bankers. If it were added to that, either in your statement as chairman of the Victory Fund Committee, or in their own statement, the way in which they propose to be of specific help - if they mean to organize within the Federal Reserve districts, or what they mean to do - I think after a visit like this there is something to be said for a public statement being issued and 339 - 12 - confining it to this first volunteer statement. MR. BELL: Did you know that the Secretary gave out to the press this morning the fact that they are here and going to help? MR. STEWART: If this is a resolution, it is rather well phrased; either they, as a committee, or you, as Secretary, might get whatever advantage comes. MR. POTTER: Why shouldn't he take this statement and make any statement based on it that he likes? H.M.JR: If you don't mind, Mr. Potter, I have made mine. I think you will be perfectly satisfied with what I have said; I hope you will. If something is coming, it would be perfectly logical for the ABA to give out a formal statement. MR. HEMINGWAY : We will have to do that because they have been on our trail. MR, STONIER: Here is a statement, if I may read it, Mr. Secretary, we are thinking of giving out: "At a conference with the Secretary of the Treasury here, to- day, a committee of bankers discussed ways and means by which the nation's banks might further the effort of the Treasury to sell Government securities through such activities as those of the Victory Fund Committees in the various States. "The Committee felt that the country's best interests would be served if the greatest possible volume of Government securities could be sold to investors other than banks, and offered the services of the Association to that end. The group indicated that the banks will continue to press the sale of War Savings Bonds, and stated that in addition, the ABA will undertake a campaign designed to enlist the active support of all l'its members in the work of the Victory Fund Committees of the various States in their efforts to increase distribution of Government securities to the public." And then follows the names of those who were present. 340 - 13 - H.M.JR: It sounds good. The only thing is I don't think you give yourselves enough credit for the work you have already done with the War Savings Committees. think you are too modest. I mean, I know the great expense that the banks have been put to-- I MR. STONIER: Well, we were thinking that what they would be interested in was what we are doing here, now. H.M.JR: All right. It sounds O.K. to me. That would be going out-- MR. STEWART: That meets everything I had in mind. On part two, Mr. Secretary, I would like to regard that as entirely confidential to you; and I should say that at this stage it was preferable not to have it discussed among member banks that there had been a meeting with the Secretary, and that there had been a discussion which reached any conclusion. I would like to have it from both sides. Personally, I am in agreement with this statement, as you know. I think it is cautious, and I think it ought to be cautious, and my own personal view is that you cannot get a formula which will apply to all member banks, and it is not clear to me yet that it is necessary to adopt quotas for individual banks. But I think it is uncertain, looking ahead, what we may have to do before we are through with this. I think, therefore, that there is an advantage not only in treating this as a confidential report to the Secretary, but treating it as confidential anyway, because once this rumor comes out that they may be re- quired on some quota, their volunteer services will diminishquickly. I would take out the possibility of that chill by saying it is a report to you; if your staff is to work on it, they can report to you; it is quite possible that the staff might like to get in touch with some members of the committee again. 341 - 14 H.M.JR: As far as the Treasury is concerned, there will be no leaks here. MR. POTTER: We feel that this particular memorandum is a confidential memorandum between us and you. H.M.JR: It will be so considered. MR. POTTER: We had no intention of giving it to the press. H.M.JR: Good. MR. POTTER: The press is 80 alert - you never can tell how it gets things, but it is our intention to keep quiet about it. H.M.JR: If we are going to work together we have got to gain confidence; if you say something is confi- dential, it has to be confidential. MR. STONIER: That is our release to the press that I just read you. H.M.JR: If there is nothing else on that I have something which I think is important that I would like to raise. Now, beginning with Monday, we will decide - we will have to decide, which securities we are going to offer first, and I would like the benefit of the advice of all or part of this committee when we make this decision as to which one will come first and what the security will be. I do not know whether you gentlemen had envisaged that as part of your responsibility or not, but if you have not, I wish you would consider that. MR. HEMINGWAY: We had not, up to this time, Mr. I feel sure that the committee glad to render it can - give you Secretary. any assistance would would the want benefit be to of their judgment. I imagine that they retire and talk it over among themselves. 342 - 15 - H.M.JR: Talk it over. What I would like is to have somebody from the ABA, from this group, to be here Monday and Tuesday to sit with Bell and me as we make up our minds what we are going to do first. MR. BELL: Yes, and I would like them to go over it before that. H.M.JR: Then maybe they could do it today. I would like very much, also, to have them go over this proposed resolution that we are going to put before the State bankers. MR. POTTER: Before whom? MR. BELL: The State Bank Commissioners. H.M.JR: Do they come in on that? MR. BELL: They might like to know about it. H.M.JR: My attitude towards them is this is a committee in a confidential relationship. I am going to take you into my complete confidence. Now, today and tomorrow we have got to make up our minds. We are trying to get together the Federal Reserve, the FDIC, and the Comptroller's office to make a joint statement, and we will try to get a resolution through these State Banking Commissioners. I would like the benefit of the advice of you people. Take a look at it. Then Monday and Tuesday I have got to make up my mind what I am going to do first, beginning with November 30, and if possible I would like some of you men here. MR. BELL: I think we have a number of questions that-MR. VINER: On the examining, Mr. Secretary, I do not think that would be according to the protocol. I think the examining authorities should not first have released to the people they are going to examine, 343 - 16 - what they are going to decide upon. I think you might find the Comptroller getting in your hair on that. H.M.JR: He would have a hard job. (Laughter) Are you going ethical on me? Do you think he is right? MR. STEWART: It had not occurred to me. MR. BELL: We have got a number of questions on it, anyhow, before we pass on it. H.M.JR: I had better call up Chief Justice Stone and ask him to pass on the ethics of this thing. (Laughter) MR. STONIER: Is it the subject matter on the bond situation that you are going to present to these men in Philadelphia? MR. BELL: It is on the whole situation. We are trying to get coordination between the banking commissioners. MR. STONIER: We have a committee working wi th the various agencies here on matters, but that is on reports and forms, and so forth. What I was asking, to make it clear in our own minds, is just what the subject matter was - whether this is the group-- MR. BELL: I do not think you ought to have their curiosity raised. I think you ought to tell them one of the main questions is the ratio of capital to deposits. MR. HEMINGWAY : We have no committee on that. MR. POTTER: Mr. Secretary, you realize, I suppose, that we do not know what it is that you are going to offer. MR. BELL: That is the purpose of our meeting today, to tell them, I take it. 344 - 17 - H.M.JR: Couldn't you go into Mr. Bell's office and have a preliminary talk right on that, now? Then I will appoint a committee on ethics to see whether we should or should not. I never thought of that - maybe Viner is right. MR. VINER: They ought to know if you are going to do it. H.M.JR: I have told them we are going to do it, but I could, right now - we have got written down what we are thinking of. It is all here. MR. POTTER: Don't you think perhaps, Mr. Secretary, that you will have such a lot of advice about the selling of these bonds - these securities - that I would feel, perhaps, that this committee couldn't add very much and might muddy the waters. We are here to act after you tell us what - after we are told what the job is. I think it might befuddle us a little bit, and I don't think you would get an awful lot of help out of us that you won't get from men who are right on the job, like your Victory Fund Committees. Those men have really got to take the lead and be out in front. H.M.JR: Anyway, I wanted to at least tell you every- thing I have in my mind today. I have not worked enough with you to know just how far you fellows wanted to go, but from the little talk I had with Mr. Hemingway, I thought that if I was going to meet with this group, this would be the group of bankers that I met with, rather than having about a half a dozen groups. MR. HEMINGWAY: If that is your desire, I think we can shape this committee so that it would accomplish that, also, perhaps by adding one or two men to the committee. H.M. JR: Talk it over. It would be easier for me if it was going to be one group. Now, maybe Mr. Potter is right; maybe you people should be on the sales and promotion end. But it would be easier for me if - let's say a committee broadened by a couple of fellows to do 345 - 18 - the market, so at least when I meet with you, or talk with part of you or all of you, I want you to know what I am going to do in the Government bond market. I might be moving so fast I might overlook you, and talk with the wrong committee - I don't know. MR. HEMINGWAY: We will talk it over and give you our judgment on it. H.M.JR: But I certainly want to talk with some group of bankers on Monday and Tuesday, before I start in on this new bi-monthly campai gn. Couldn't you possibly go into Mr. Bell's office and continue this conversation? Let me say, for the first meeting we have had, I am very much pleased. I think it has been a good meeting and very helpful to me and very encouraging. 346 A MEMORANDUM OF A STATEMENT MADE TO THE HONORABLE HENRY MORGENTHAU BY MR. W. L. HEMINGWAY, PRESIDENT OF THE AMERICAN BANKERS ASSOCIATION, NOVEMBER 12, 1942, AT WASHINGTON, D. C. Mr. Hemingway stated that he had appointed a com- mittee consisting of the gentlemen named below to consider what the American Bankers Association could do to cooperate with the Treasury in the distribution of Government securities. Acting upon the recommendation of this committee, Mr. Hemingway stated: (1) That the American Bankers Association is in full accord with the view expressed by the Treasury on numerous occasions that Government securities should be sold so far as possible outside of commercial banks. In addition to its support of the sale of War Savings Bonds, it will start immediately an intensive campaign to obtain an all-out effort on the part of its members in aiding the several Victory Fund Committees to distribute all Government issues offered in the future. 347 -2- (2) That the America Bankers Association will use its best efforts to induce its members to invest their surplus funds, (which in the case of member banks are their excess reserves) in some types of Government securities. 'I What matur- ities are to be held by any individual bank should be determined by its management in the light of many factors, such as the character of assets, liability to deposit fluctuations, the probability of loan demands, and the ratio of capital accounts to total assets. While no general formula applicable to all banks can be worked out, they should recognize it to be their duty to invest their surplus funds in Government securities. As to future Government issues for which banks are asked to subscribe, each bank should recognize its obligation, in common with all other banks of the country, to subscribe to those issues as offered, in some general relationship to the size of the bank. This will insure the success of such 348 -3- - offerings. It should be realized that when a particular issue is one which is deemed unsuited as a permanent holding by any bank, it may properly dispose of such holdings in the market. The committee feels and believes that in the event the full use of excess reserves is not enough to absorb the offerings of the Treasury that member banks should not hesitate to borrow for the purpose of creating additional reserves. The committee feels that at the present time a satisfactory quota for every bank cannot be worked out, but a cam- paign to emphasize the responsibility of all banks to subscribe should first be undertaken. The members of the committee are: Edward E. Brown, President First National Bank, Chicago, Illinois William C. Potter, Chairman of the Executive Committee Guaranty Trust Company, New York, N.Y. Thomas M. Steele, President First National Bank and Trust Company, New Haven, Connecticut W. H. Wood, President American Trust Company, Charlotte, North Carolina W. L. Hemingway, President American Bankers Association and President Mercantile-Commerce Bank and Trust Company, St. Louis, Missouri -4- - A. L. M. Wiggins, Vice President American Bankers Association and President Bank of Hartsville, Hartsville, South Carolina Harold Stonier, Executive Manager American Bankers Association 22 East 40th Street, New York, N. Y. 349 350 Members of the Committees Mound a. Brown, President Pirst National Chicago, Illinois william e. Poster, of the Insecutive Centities - trust Googney, New York, N. L. Thouse M. stock. President First National Beak and trust Company, New Naven, Connections W. M. Need, President American trust Company, Charlette, North Carolina W. I Maning President American Bankoys Association and President Beak and threet Company. so. Louis, Miscount A. 200 M. Wagins, Vice President American Induse Association and President Bank of Marteville, Marteville, South Caroline Marald staples, Insection Manager American Benhare Association as Bast 40th Street, New York, E. Y. Member of Commisses but not present Robert a. Strickland, President trust Geograph of Georgia attents, Beorgia. 11-12-42 351 Secretary Morgenthau issued the following statement today: Borrowing by the Treasury to meet the rising costs of the war will be resumed on an expanded scale on November 30th. Victory Fund Committees, which have been active in promoting the sale of Treasury securities other than War Savings Bonds, will be asked to conduct a widened campaign for the enlistment of idle funds in the war effort. The Committees already have done excellent work in behalf of Treasury financing and they will be given full authority to conduct a drive for further funds. In addition to conducting a campaign on "Tap" bonds, the Victory Fund Committees will be asked to promote purchases by corporate and other taxpayers of series A and C tax savings notes. Such notes ease the taxpaying add to problems of the purchasers and at the same time assist cash balance n the current^ position of the Treasury. Since only a portion of the necessary funds will be raised through sales of Government securities to the public, it is the intention of the Treasury likewise to offer one or more series of open market securities for subscription by banks and others. Treasury issues already available, and those to be announced for limited periods within the next few weeks, 352 2. will be suitable for every class and type of investor, from the largest commercial banks, corporations and insurance companies to the smallest individual investor or wage earner. The War Savings Staff will remain continually active in sales of War Savings Bonds. In particular, the War Savings Staff will intensify its Payroll Savings drive in November and December, with the aim of raising the present figure of 23,000,000 workers now investing an average of 8 per cent of their pay to a figure of at least 30,000,000 workers setting aside an average of at least 10 per cent of their earnings every pay day. War borrowing must be done to the greatest possible extent out of current income and savings of the people. This is the soundest means of financing the war deficit. 353 TREASURY DEPARTMENT Washington Press Service FOR IMMEDIATE RELEASE, No. 34-6 Thursday, November 12, 1942. Secretary Morgenthau today issued the following statement: Borrowing by the Treasury to meet the rising costs of the war will be resumed on an unprecedented scale on November 30. Victory Fund Committees, which have been active in promoting the sale of Treasury securities other than War Savings Bonds, will be asked to conduct a widened campaign for the enlistment of idle funds in the war effort. The Committees already have done excellent work in behalf of Treasury financing and they will be given full authority to conduct a drive for further funds. In addition to conducting a campaign on "tap" bonds, the Victory Fund Committees will be asked to promote purchases by corporate and other taxpayers of series A and C tax savings notes. Such notes ease the taxpaying problems of the purchasers and at the same time add to the current cash balances of the Treasury. Since sales of "tap" issues, War Savings Bonds and Tax Savings Notes will not provide all of the necessary funds, it is the intention of the Treasury likewise to offer one or more series of open market securities for subscription by banks and others. Treasury issues already available, and those to be announced for limited periods within the next few weeks, will be suitable for every class and type of investor, from the largest commer- cial banks, corporations and insurance companies to the smallest individual investor or wage earner. The War Savings Staff will remain continually active in sales of War Savings Bonds. In particular, the War Savings Staff will intensify its Payroll Savings drive in November and December, with the aim of raising the present figure of 23,000,000 workers now investing an average of 8 per cent of their pay to a figure of at least 30,000,000 workers setting aside an average of at least 10 per cent of their earnings every pay day. War borrowing must be done to the greatest possible extent out of current income and savings of the people. This is the soundest means of financing the war deficit. -000- Copies to D.W Bellt FANDARD FORM No. 14 FROM APPROVED BY THE PRESIDENT MARCH 10. 1926 TELEGRAM confirmation 11/1>1,354 BUREAU CHG. APPROPRIATION EXPERSES OF LOANS OFFICIAL BUSINESS-GOVERNMENT RATES Nov. 12, 1942 10-1738 (To Attached List of State Administrators) Since our Kansas City Meeting, the Treasury has reviewed its entire financing program. This program involves the borrowing of unprecedented billions of dollars within the next few months. To raise this money in 80 far as possible outside the banking system the Victory Fund Committees are being expanded. These committees will have responsibility for promoting the sale of all Treasury securities with the exception of War Savings Bends. In view of the investment features of F and 0 Bonds coupled with the fact that they are a demand security finding an outlet largely in the financial markets, it is the Secretary's decision that the Treasury will no longer actively promote the sale of these two Bonds and that they shall, effective December 1, no longer be identified as War Bonds but shall be placed in the portfolio of Government issues offered (sometime-to-time) by the Victory Fund Committee. Effective December 1 the term War Savings Bonds will be restricted to Series E for which the War Savings Staff will have exclusive responsibility. You are therefore requested to cease any promotional activities involving Series F and G Bonds after November 30. This decision will in no my affect our plans for an intensive campaign on payroll satings and other E Bond promotir State war bond quotas will be revised in the light of this change. Harold N. Graves F.B. A. 11-17 H2 355 a. assit victing Fund & assit in sale to the of gn. Securite to BK 2. asked adv. annual miller me Clin tock Liacm between Canal + Treas. 3. asked mr. R.S. grant general motors to from advisory council of not. Sabe- mangers O.W. 1. will assist ( over) 356 Federal Reserve Brand and 12 Presidents who are charman of our Victing Fund am. Mr. Eceles is taking a great personal interest 11-12-12 357 Members of the Committee: Edward E. Brown, President First National Bank, Chicago, Illinois William C. Potter, Chairman of the Executive Committee Guaranty Trust Company, New York, N.Y. Thomas M. Steele, President First National Bank and Trust Company, New Haven, Connecticut W. H. Wood, President American Trust Company, Charlotte, North Carolina W. L. Hemingway, President American Bankers Association and President Mercantile-Commerce Bank and Trust Company, St. Louis, Missouri A. L. M. Wiggins, Vice President American Bankers Association and President Bank of Hartsville, Hartsville, South Carolina Harold Stonier, Executive Manager American Bankers Association 22 East 40th Street, New York, N. Y. Member of Committee but not present Robert S. Strickland, President Trust Company of Georgia Atlanta, Georgia. TREASURY DEPARTMENT 358 INTER OFFICE COMMUNICATION DATE TO FROM November 12, 1942 Secretary Morgenthau Ferdinand Kuhn, Jr. The Sales Advisory Council will have as its chairman: R. H. Grant, Vice President of General Motors. The members who have so far agreed to serve are the following: John Schuman, President of the General Motors Acceptance Corporation. Terry Kittinger, Vice President of Shell Oil. W. S. Howard, Vice President of R.H. Macy & Co. R. S. Wilson, Vice President of Goodyear Tire and Rubber Company, Inc. P. M. Bratten, General Sales Manager of the Frigidaire Division of General Motors. D. U. Bathrick, Vice President of Pontiac Division of General Motors. You asked for the exact titles of two men from the Advertising Council. They are: Miller McClintock, Executive Director of the Advertising Council. Harold Thomas, Vice Chairman of the Advertising Council. 359 November 12, 1942 12:55 p.m. HMJr: Harry White: I told Pehle to get in touch with you. He showed me a list of things that are being held up for North Africa. Yeah, he did, and I found out - I talked to Milo Perkins this morning. He told me that they thought they were going ahead and had some authority but that last night - or yesterday when Hull found out that they were going ahead, he had gone to the President and the thing is stopped and in the air now. HMJr: Well, that's what I told Pehle to tell W: Yeah, he you. Now look, wait a minute, will you? HMJr: Why not check through Customs and our own people? There may be stuff already bought and scheduled W: for Africa we're holding up that might go. Well, that's the sort of thing Pehle had. HMJr: Yeah. W: You mean - do you - things that we're holding up as Treasury? HMJr: W: Yeah. I'll find out. HMJr: I mean if they are scheduled for Morocco and that W: Well. HMJr: That's the purpose of my call. W: I'll find out if there's anything of that stuff, why the hell not let 'em go? character. Or either way I'11 let you know. HMJr: And advise me. 360 -2W: I'll do that. HMJr: Thank you. W: All right, sir. HMJr: Hello? W: Hello. HMJr: W: HMJr: W: Bring with you a copy of that memo tonight. What time tonight Eight-thirty. did you specify? Eight-thirty? HMJr: Use a Treasury car. W: Fine. Thank you. (Laughs) Copy to Mr. Bell. 361 November 12, 1942 4:00 p.m. Mr. Kuhn, Mr. Buffington, Mr. Bathrick, and Mrs. Klotz met with the Secretary. The Secretary inquired as to how much steam Mr. Bathrick, plus the Advertising Council, would be able to put behind this drive between now and Monday. Mr. Bathrick replied that everything which was being done for the moment he was doing because no one else was here, and he said he doubted that very much could be done between now and next Wednesday when the meeting will be held. Mr. Bathrick said all of the men are out of town and it will be impossible to get them here before that time, but that he would try to supply them with as much of the background as possible. Mr. Morgenthau then asked whether it wouldn't be possible for the Advertising Council to have something by Wednesday, and Mr. Kuhn said that he would call either Thomas or Guy Lemmon right away. The Secretary, on adjourning the meeting, told Mr. Kuhn he would like to have him do two things when he got back to his office: (1) Call up the Advertising Council and ask them to submit some plan or layout by next Tuesday - in the hopes that we would probably receive it by Wednesday; and (2) contact OWI and see what they can do for us. In regard to using the "direct by mail" method, HM Jr suggested that the best man for this would be Harry Sherman of the Book-of-the-Month Club. The men approved the Secretary's suggestion that after the plans and material are prepared, they should be sent to the 12 Federal Reserve Districts for their guidance and distribution. through the Victory Fund Committees. The Secretary also agreed to open the Wednesday meeting. 362 November 12, 1942 Dear Mrs. Reid: I am writing to ask whether you would lend me the services of Mr. George Wanders on a leave of absence basis, from now until the and of this year, to help me in connection with the war financing operations of the Treasury. I make this request to you not only because I have been impressed with Mr. Wanders' grasp of our Treasury problems, but also because he is so well equipped to assist me with the work I have in mind. The war financing program during these last weeks of the year will be gigantic, and I feel it will be a real service to the country to let us use Mr. Wanders' services. I shall appreciate very much whatever you can do to release him temporarily. Could you let me know as soon as possible? Sincerely, (Signed) H. Morgenthau, #: Mrs. Helen Rogers Reid, New York Herald-Tribune, 230 West 41st Street, New York, New York. FK/cgk Sent "Air Mail" by Mese. Simmons to B.F.Sta. 11/13/42 CC in Diary Copies to Thompson 362 November 12, 1942 Dear Mrs. Reid: I am writing to ask whether you would lend me the services of Mr. George Wanders on a leave of absence basis, from now until the end of this year, to help me in connection with the war financing operations of the Treasury. I make this request to you not only because I have been impressed with Mr. Wanders' grasp of our Treasury problems, but also because he is so well equipped to assist me with the work I have in mind. The war financing program during these last weeks of the year will be gigantic, and I feel it will be a real service to the country to let us use Mr. Wanders' services. I shall appreciate very much whatever you can do to release him temporarily. Could you let me know as soon as possible? Sincerely, (Signed) H. Morgenthau, #: Mrs. Helen Rogers Reid, New York Herald-Tribune, 230 West 41st Street, New York, New York. FK/egk Sent "Air Mail" by Mese. Simmons to B.F.Sta. 11/13/42 CC in Diary Copies to Thompson 363 November 12, 1942 3:56 p.m. HMJr: Hello. Operator: Judge Patterson is busy talking. I'm waiting for him. HMJr: Thank you. Operator: Right. 3:57 p.m. HMJr: Robert Hello. Patterson: Hello, Henry? HMJr: Bob? P: Yeah. HMJr: Harry White says you want to see me about Sweden? P: Yeah. (Laughs) Do you know much about it? HMJr: Not a damn thing. P: It comes up in the Board of Economic Warfare. HMJr: oh. P: Same old game. HMJr: Do you want to see me today? P: Yeah, I - could If HMJr: P: HMJr: Sure, always, it's a pleasure. I've got to go to New York pretty soon, but I could come right over now if you'd let me. You come over now and I'11 see you. P: Thank you. HMJr: When will that be? -2P: Ten minutes. HMJr: Ten minutes. P: Yeah. HMJr: Right. Thank you. P: Thank you. 364 365 November 12, 1942 4:50 p.m. FINANCING Present: Mr. Bell Mr. Stewart Mr. Haas Mr. Viner H.M.JR: Mr. Bell is against it. Starting left to right-- MR. STEWART: I am "agin" it. MR. HAAS: I am against it, at this time. MR. STEWART: Not knowing exactly what it is-H.M.JR: About going up before these State banking commissioners and giving them a-- MR. HAAS: That is what I thought you were talking about. H.M.JR: Are you "agin" it? MR. HAAS: I would be against it now. H.M.JR: Viner? MR. VINER: I am for it.- probably not now, but I think it will have to be done. The timing - probably this is not the time. H.M.JR: Come on, no "probably" or "maybe" - yes or no? MR. VINER: Well, I am for the statement to be made before very long. Dan said that he did not think it ought to be made just before an issue. I think there is 366 -2a lot in that, but then, I would be perfectly happy, now, I think, if it were made after the issue. H.M.JR: Will you see Mr. Bell, and will you tell me when there will be a time, for the next two years, when it won't be before an issue? MR. BELL: Well, I mean immediately before an issue. H.M.JR: It is two weeks before an issue. MR. BELL: No, we are discussing the issues that are coming out on November 30. Now, if we close these issues on December 20, then this might come out December 31, as a year-end statement, but I do not think it ought to be tied into the fiscal end, at this time. I may change. H.M.JR: "Alms for the love of Allah!" (Laughter) MR. BELL: I agree with Walter that we ought to give a little more consideration to it, when we have not got so many other things on our minds. H.M.J JR: I am in no condition to take on any fights. You don't think it will impede the success of this financing? MR. STEWART: Not of this financing. MR. VINER: Wait a minute. Did you get that question? H.M.JR: Impede the success of this financing? MR. BELL: I think that is right. MR. STEWART: There are two billion-dollar items of banking money of types which do not require this sort of move to make it successful. H.M.JR: O.K. That is that. Now, if we haven't worn you out, could you come down again next week around Tuesday? 367 -3MR. STEWART: I would be hesitant to, as a matter of fact, unless you feel - I would rather come the following week. H.M.JR: It is not necessary. MR. STEWART: All right, I will come Tuesday. H.M.JR: Let's leave it, if you don't mind, that you will send me a telegram the middle of the week. MR. STEWART: You will either hear from me Monday or I will be here Tuesday. H.M.JR: I thought you did not want to be here then. MR. STEWART: I mean, if there is no need for me the following week, and there is some this next week, I will undertake to come on Tuesday of next week. H.M.JR: All right. MR. STEWART: Let's leave it that if I do not wire you on Monday, I will be here Tuesday. H.M.JR: How about you? MR. VINER: I would like not to come next week for I have a program and also my boy is leaving for the Coast Guard next Wednesday or Thursday, and I want to be there to say goodbye. But the week after, if you want me-- H.M.JR: Why not say you will come the week after? MR. VINER: I will come, then; on Wednesday of the week after. H.M.JR: Do you teach Monday and Tuesday? MR. VINER: I teach Tuesday, and therefore there is no use being here Monday. 368 -4H.M.JR: The day you teach is Tuesday? MR. VINER: That is right. I teach; I have my office hours for my students; and I have committee meetings. Everything is on Tuesday, so if I leave on Tuesday I am really losing a whole week of my work, for which they are paying me. H.M.JR: Then a week from Wednesday. MR. VINER: A week from next Wednesday. V 369 Mr. Morgenthau, Sr. , phoned today to that the Secretary's sister, Ruth, had eard a broadcast saying HM,Jr was 11 and ot at the office. 370 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE TO FROM November 12, 1942. Secretary Morgenthau Mr. Sohwarz c None of the national or regional networks used the radio story reported to you yesterday afternoon from New York. After a careful of the Washington stations, I had Radio Reports, Inc., make a discreet canvass of fifteen stations in New York. They reported back that one small local station in New York had been broadcasting some gossip items supplied by Danton Walker of the New York Daily News. I had noticed in the morning that Walker was here for the day yesterday and contacted him yesterday evening and saw the correction he sent up to New York. 371 A TREASURY DEPARTMENT WASHINGTON SAVINGS STAFF November 12, 1941 TO: The Secretary of the Treasury FROM: James L. Houghteling I have not been able to identify Leonard Hanson who signed the attached telegram to the President of the United States, but I have learned the following facts about the subject matter thereof. There are three labor unions which have membership among the clorical employees of New York Stock Exchange member firms: 1. The American Federation of Office Employees (A.F.of L.). This organisation has recently had a labor dispute with the brokerage firm of J. S. Bache & Co., over which the War Labor Board has taken jurisdiction. Edward Flaherty, A.F.of L. organiser, states that this matter is moving satisfactorily and no trouble is foreseen. 2. The Bank and Brokerage Employees Union (C.I.O.). Lloyd Herbert, president, reports that this union is not at present involved in any labor disputes. 3. The Stock Exchange Floor Clerks Association. This is an independent union of from 400 to 500 members. It has no office or designated place of business. David Keefe is reported to be president. This organisation has recently been dissatisfied and has presented its grievances to the officers of the New York Stock Exchange. Emil Schram, President of the Stock Exchange, is out of New York until next Monday but his secretary reports that this matter is being handled in an orderly manner and that no controversy involving bitterness or trouble is expected. The A.F.Of L. and C.I.O. officials interviewed seemed less optimistic but did not think that this independent labor organisation could make very much trouble. Against this background it is my judgment that Mr. Hanson's telegram is the action of an individual crank. PORDEFENSE BUY UNITED STATES 372 Mr. Houghteling - The Secretary would like to have you let him know what this is about. Rec'd Norlo 4PM Klephaned theyork Mans m Na 373 THE WHITE HOUSE WASHINGTON November 9, 1942 MEMORANDUM FOR THE SECRETARY OF THE TREASURY For your information. F. D. R. Enclosure 374 The White house Washington WB2 130 NL NOV 3 7 50 AM 1942 NEWYORK NY NOV 2 1942 FRANKLIN D ROOSEVELT THE WHITE HOUSE YOU ARE COMMANDER IN CHIEF OF THE AMERICAN FORCES OF AMERICA IN THIS WAR LIKEWISE YOU ARE CHIEF TO PROTECT 80 MILLION INVESTORS OF STOCK AND BONDS ON THE STOCK EXCHANGE A CRASH OF THE MARKET IS COMING DUE TO THE STUBBORNNESS OF THE OFFICIALS TO RECOGNIZE THE EMPLOYEES UNION ON THEIR DEMAND FOR RECOGNITION OF THEIR UNION AND SENIORITY RIGHTS OF THE EMPLOYEES THE ONLY TWO THINGS THE UNION ASK OF THEM IF A STRIKE IS CALLED YOUR IMMEDIATE INTERVENTION AND TAKING OVER CONTROL 375 WB2/2 OF BUSINESS NECESSARY OR YOU ARE GOING TO SEE A RUNAWAY MARKET THAT WILL BE WORSE THAN THE CRASH OF 1929 WE FEEL THAT YOU DO NOT WANT SUCH A CRASH DURING OUR FIGHT FOR DEMOCRACY AND NEITHER WILL THE PEOPLE OF AMERICA LIKE IT LEONARD HANSON. date PRENTISS M. BROWN 376 STATE OF MICHIGAN United States Senate WASHINGTON D.C. November 12, 1942 Dear Mr. Secretary: I want you to know how much I appreciate your offer of yesterday. As I stated, I am taking a little time off for a rest and contemplation and will advise you on or about December 1. I feel that I must canvass my situation thorough- ly before making a final decision. Sincerely yours, Printer Mn rown Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. November 12, 1942 377 Draft of ltr for the President's signature, to The President by Secret Service Agent at 12:30 pm. 378 My dear Prentise: Henry Morgenthen, Jr., has spoken to me about his desire to have you take a post in the Treasury Department, where he needs you for inportant work. I hope you will accept the invitation of the Secretary of the Treasury. I also need you and I have no doubt that if you accept Secretary Morgenthan will be able to spare you on occasions so that I can have the benefit of your advice and assistance. I recall the grand work you have done during your years in the Senate in forwarding legislation that was urgently needed and especially your wise decisions and unflagging seal with respect to all measures connected with the efficient prosecution of the war. We shall continue to need you in Washington, and in the Treasury Department you will be well located for effective service. Sincerely, The Honorable Prentiss Brown, United States Senate. V 379 HAROLD K. HOCHSCHILD SIXTY-ONE BROADWAY NEW YORK November 12,1942 Honorable Henry Morgenthau, Secretary of the Treasury, Washington, D. C. Dear Henry: As I told you over the telephone this morning, I was enabled through your introduction to General Strong to complete yesterday all steps involved in the filing of my application for a commission in the Military Intelligence Service. It is now in the mill, and I can only hope for luck in overcoming obstacles, including age and eyesight. If I am not accepted now, there is a chance that I may be taken later on, so I shall not give up trying. This is the kind of thing that I've wanted to do from the start. The reasons were stated in my letter to you of June 22, 1940, eighteen months before we entered the war, as it was already then clear we would. My decision was really made then, and it was only the intervention of various things, particularly my marriage and the coming of the baby, that postponed my going ahead. When Mary and I be- came engaged I told her what I wanted to doin the war, and she has been very nice about it. So were you on Tuesday. Although I was thus obliged to decline the position you had in mind for me, the fact that you offered it to me is the greatest compliment I have ever had. Mr. Stewart told me of the high respect and warm affection in which you are held by the whole Treasury Department. Knowing you as I do, I was not surprised. It makes me feel all the more grateful and honored at your expression of confidence in me, and I shall never forget it. Sincerely, Harold 380 NOV 12 1942 Dear Mr. MacLeish This will asknowledge receipt of your letter of November 2, 1942, quoting from the Assistant Solicitor General's further opinion concerning certain income which has accreed from the endoment made by the Carnegie Corporation of New York for the Chair of Fine Arts in the Library of Congress. Despite the conclusions of the Assistant Selicitor General, my reading of the files in the Hegemen matter indicates that there was a defect in the terms of the gift as well as a defect in the statutory authority of the Board. The defect in the gin was cured in that case by obtaining Miss Negeman's approval and the defect in authority by obtaining necessary legislation. However that may be, I - agregable in the present case to the authorization proposed in your letter of September 19, 1942. Sincerely yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury. Hon. Archibald MaeLaish The Librarian of Congress and Secretary of the Library of Congress Trust Fund Board The Library of Congress Washington, D. C. File to Thompson Photo file in Diary NOT: 11-9-42 THE LIBRARIAN OF CONGRESS WASHINGTON November 2, 1942 Dear Mr. Secretary: I am referring to your letter of October 6, 1942 replying to my letter of September 19, 1942, concerning certain income which has accrued from the endowment made by the Carnegie Corporation of New York for the Chair of Fine Arts in the Library of Congress. I have asked the Assistant Solicitor General for his opinion on the point raised in my letter and I am now in receipt of the following reply: "It would be possible to go to Congress instead of to a court for authority to apply the excess income of the Carnegie Chair of Fine Arts fund to related objects. The donor's approval alone would not suffice. "The Hegeman matter, to which the Secretary of the Treasury refers, did involve 8 different question. The terms of the Hege- man gift permitted the Library's Trust Fund Board to make the contemplated disposition of funds; the Board, however, lacked statutory authority to make that disposition. The Attorney General did suggest that the Board obtain the donor's approval. He also said--and the Secretary seems to have overlooked this--that enabling legislation was necessary. "In the present case, the defect of authority is in the deed of gift, not in a statute. The usual procedure would be to invoke the judicial cy pres power of 8 court of equity. But the Congress has a 'prerogative' oy pres power, applicable to charitable trusts in the District of Columbia and the territories, similar to that exercised by the Crown in England. See Bogert on Trusts (2d ed.) p. 299; Mormon Church V. United States, 136 U.S. 1. This power has rarely been exercised; never, BO far as I can discover, in such a case as this. But I am sure that an act of Congress solving the problem for you would be valid. Moreover, if the donor and the trustees concurred, no one would have a sufficient interest to chal- lenge the statute in court. "If the Trust Fund Board prefers Congress to a court, I shall be glad to help draft the needed legislation." You will note that the Assistant Solicitor General holds that it will be possible to go to Congress instead of to the courts for authority aretary of the Treasury. -2- to make application of the excess income. In view of the position as the Assistant Solicitor General states it, would you now wish to approve the authorization contained in my letter of September 19, or do you feel that further discussion would be desirable, or that some alternative action should be taken? Faithfully yours, member Archibald MacLeish The Librarian of Congress The Honorable Henry Morgenthau The Secretary of the Treasury hairman, Library of Congress rust Fund Board shington, D. C. 383 THE UNDER SECRETARY OF STATE WASHINGTON November 12, 1942 PERSONAL AND CONFIDENTIAL Dear Henry: Mr. Schubart had been thought of as a possibility for appointment as a member of your auxiliary Foreign Service. It has been decided not to appoint him. Believe me Yours very sincerely, The Honorable Henry Morgenthau, Jr. Secretary of the Treasury. 384 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE NOV 12 1942 Secretary Morgenthau TO FROM Randolph Paul Some time ago we reported that Frank Altschul has a very small participation in the profits of Lazard Freres, New York, although he is the senior partner. In a discussion Pehle had with Lazard Freres representatives today he learned that Altschul has contributed all the American capital in the firm, which amounts to about one-third of the total capital, but that his guaranteed share in the profits amounts to only one percent. We understand that arrangements of this type are common in the investment banking field. You may also be interested in knowing about the following event which just occurred in connection with the Lazard Freres matter. Mr. Alfred Cook of the firm of Cook, Nathan, Lehman and Greenman, who is counsel for Lazard Freres, acts also as counsel for the New York Times. Last week a member of Cook's firm discussed several Lazard Freres problems with Paul Gewirtz, one of our junior men in Foreign Funds Control who has been working on the Lazard Freres problem. Yesterday Shaeffer of Chick Schwarz' office asked our administrative section for Gewirtz' personnel file, indicating that the New York Times had asked for the record of Gewirtz. Ferdie Kuhn, at our request, made discreet inquiries of the New York Times as to why they wanted this information and learned that the Times was going to turn it over to Mr. Cook who had asked that they obtain it for them. In other words, the New York Times requested personnel information from the Treasury, not for itself but for a lawyer in connection with a case which the lawyer was handling before the Treasury. me burbh her STRIOTLY CONFIDENTIAL TREASURY DEPARTMENT 385 INTER OFFICE COMMUNICATION DATE NOV 12 1942 TO Secretary Morgenthau FROM Randolph Paul You may be interested to know that Military Intelligence called Foreign Funds Control this morning to request urgently any information that we might have concerning the location of assets held by Marshal Petain or two persons in Morocco named Auguste Paul Nogeus and Thady El Glaoui. Military Intelligence stated that General Eisenhower had requested such information. Apparently General Eisenhower had been informed that Petain had an annuity with a Canadian insurance company and in 1940 had directed the resulting funds to be paid to J. P. Morgan and Company. In addition to making a thorough search of Foreign Funds Control records both in Washington and the New York Federal Reserve Bank, we requested the French American Banking Corporation and J. P. Morgan and Company to check their records for any information that they might have. A check was also made with the Office of Censorship, the British Embassy, and the Canadian Legation. No information was discovered indicating that any of these three men is holding any assets in the United States. We were able to discover, however, that Marshal Petain has an annuity policy with the British branch of the Confederation Life Association of Canada and that the annuity payments of E300 per year (minus taxes) are being paid into a blocke a sterling account held by Morgan Grenfell of England for account of Morgan and Cie. of Chatel-Guyon. Apparently Petain had, after the fall of France, made inquiries concerning the payment of his annuity, and the British Government, after some consideration of this matter and discussion in the House of Commons, had been prepared to transfer the funds to Petain under the British-French clearing agreement. Petain, however, preferred to accumulate blocked sterling balances. This information was promptly given to Military Intelligence. fee TREASURY DEPARTMENT 386 INTER OFFICE COMMUNICATION DATE November 12,194 Secretary Morgenthau FROM Randolph Paul This is to bring you up to date on developments since Monday the French situation insofar as Foreign Funds Control ison concerned. (1) The FBI sent all American employees of the French Line home on Monday and took all French employees into custody. After being detained for two days and questioned most of the French employees were released. The French ships in American waters have been taken into protective custody by the War Shipping Administration. Further action with respect to the French Line awaits clarification of this Government's relations with the French colonies and other important political decisions. (2) The French American Banking Corporation. This bank, which you will recall is one-half American owned and one- half French owned, is operating without difficulty under careful Treasury supervision. Treasury guards are on duty throughout the night to insure that no files are destroyed or removed from the premises. The two representatives of the Bank of Indo-China, who have office space on the premises of the French American Banking Corporation, have been barred therefrom and are being carefully investigated by the Foreign Funds Control in view of their questionable activities. (3) French diplomatic and consular accounts. The licenses over these accounts were all revoked before the opening of the banks on Monday morning. Similar action was taken with respect to the individual accounts of these officials. Certain of the licenses over the individual accounts may be reinstated in view of the pro-Allied actions of some of the former Vichy officials. (4) North Africa. No action has been taken to lift the freezing control with respect to North Africa in spite of the success of the American forces in the area. It is -2- 387 possible that the freezing controls can be used in such a situation to implement local exchange controls, particularly during a transition period. The Foreign Funds Control has gathered together information with respect to all the goods which the French had purchased in the United States under the North African arrangement, but which had not been shipped. This information had been furnished to the Board of Economic Warfare at its request in order that arrangements may be made for Africa. this Government to take over such goods and ship to North (5) Martinique. There has been no change in the situation, which is being watched closely. The Martinique arrangement under which approximately one million dollars in goods is shipped to Martinique each month can be terminated at a moments notice. The Foreign Funds Control also has an informal arrangement with the Navy Department so that no ships will leave for Martinique during this period without clearance with us. (6) Special instructions to United States missions in Latin America. In cooperation with the State Department there was drafted and dispatched to all of the United States missions in Latin America a circular telegram advising the missions in detail of the action which this Government had taken with respect to French funds, in- cluding the designation of all of France as enemy territory. For your confidential information the State Depart- ment refused to recommend to the other Latin American governments that they break relations with the Vichy Government. has 388 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE NOV 12 1942 Secretary Morgenthau Randolph Paul Should our relations with Spain deteriorate in view of developments initiated by the North African campaign, a serious situation would have to be met in Puerto Rico where there are large Spanish holdings and where much of the economic life is dominated by Spanish interests. As in the other possessions, the Foreign Funds Control problems in Puerto Rico have been handled under the direction of the Governor. However, we have not staffed a local office in Puerto Rico with personnel from Washington. From information available to us, it appears that Foreign Funds Control problems have not been well handled in Puerto Rico and the Governor's office is not equipped to handle the problems which will arise in the event of trouble with Spain. Accordingly, we are sending to Puerto Rico by the next plane Mr. James Saxon and Mr. Edward Rains. Saxon is a member of Mr. Pehle's staff who was in the Philippines, was evacuated with Sayre, and has since handled Foreign Funds Control problems both here in Washington and in Hawaii. Rains is an attorney who has been working on Foreign Funds Control problems and who recently went to Mexico in connection with the currency problem. We will probably send several additional men in the near future. This action has been cleared with Interior. for 389 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE NOV 12 1942 TO FROM Secretary Morgenthau Randolph Paul You may be interested in the following: We learned today from the British that the German Consul General in Liberia and his staff left Monrovia, Liberia, by air on November 5. They were due to arrive in Algiers today. The German Consul General was carrying over 1000 ounces of gold for which export licenses had been issued by the Liberian authorities in the name of local German firms in Liberia. This information has been furnished to Army Intelligence who are transmitting it to the North African front. Treasury Department 3 Division of Monetary Research DateNov. 17, 194219 To: Secretary Morgenthau You were right about the irth rate in England increasing. he appended memorandum shows that t was decreasing from 1938 through 941, but increasing slightly this ear. H.D.W. MR. WHITE Branch 2058 - Room 214 TREASURY DEPARTMENT 391 INTER OFFICE COMMUNICATION DATE November 12, 1942 Mr. White TO FROM Subject: Mr. Wood Birth and Death Rates in England and Wales At 1. From 1938 through 1941 the annual birth rate (number of live births per 1000 of population) declined from slightly more than 15 to slightly more than 14, or by about one birth per 1,000 of population. The actual number of live births decreased from 621 thousand in 1938 to 587 thousand in 1941. 2. During the first two quarters of 1942 the birth rate was higher, by a very small fraction, than in any corresponding period of the years 1938-1941. If similar improvement is realized during the last half of this year the 1942 birth rate will be somewhat higher than in any of the four preceding years. 3. The death rate (number of deaths per 1,000 of population) increased from 11.6 in 1938 to 14 in 1940, and then declined to about 13 in 1941. The rate for the first two quarters of 1942 was somewhat above the comparable rate for 1938 but was lower than the comparable rates for the years between 1938 and 1942. 4. In 1938 the actual number of deaths was 479 thousand, as compared with 582 thousand in 1940 and 535 thousand in 1941. 392 NOV 12 1942 My dear Mr. President: I am enclosing report on our exports to some selected countries for the period ending October 31, 1942. Faithfully, (Signed) H. Morgeather, Jr. Secretary of the Treasury. The President, The White House. Enclosure By Mess. Sturgis 5:05 11/12/42 File in Diary Extra copies direct to office White's HDW/grs New 11/18/FILE COPY SECRET 393 November 10, 1942 Exports to Russia, Free China and selected blocked countries as reported to the Treasury Department during the eleven-day period ending October 31, 1942 1. Exports to Russia Exports to Russia as reported during the eleven- day period ending October 31, 1942 amounted to $45,701,000 as compared with $55,083,000 during the previous ten-day period. Military equipment amounted to $18,417,000 or 40 percent of the total and included 12 light bombers, 45 fighter planes and 109 military tanks. (See Appendix c.) 2. Exports to Free China No exports to Free China were reported during the period under review. 3. Exports to selected blocked countries Experts to selected blocked countries are given in Appendix A. Most important were exports to Switzerland amounting to $2,724,000. ISF/grs 11/11/42 SECRET 394 APPENDEX A Semmary 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) 11-day U.S.S.R. Free China Brain Switzerland Sweden Portugal French North Africa 2/ 10-day Total Domestic Exports Total Demostic Exports Aug. 1, 1942 to Oct. 31. 1962 July 28, 1941 to July 31. 1942 Period ended Period ended Oat. 32. 1942 Oct. 20. 1942 $ 45,701 8 55,083 $ 365,855 $ 742,941 30 6,933 97,720 757 2,858 281 4,249 11,537 117 2,625 18,056 22 796 9,743 2,088 6,305 361 2 2,724 211 . - Treasury Department, Division of Monstary Research - November 10, 1942 V 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 Merecoo, Algeria and Tunisia. MVF/EFM/grs 11/10/42 ( SECRET APPENDIX B 395 Exports as from the U. s. to Free China and U.S.S.R. reported to the Treasury Department July 28, 1941 - October 31, 1942 (Thousands of Dollars) Exports to Free China -2 4 --10 -5 July 28,1942 1941 - Jan. 24, 1942 an. 26 - Jan. 31 32,758 $ U.S.A. . 98,902 6,938 4,889 4,853 - eb. eb. 10 1 Feb. Feb. 10 20 eb. 20 - Feb. 28 3 Bar. 1 - Mar. 10 ar. 10 - 9,608 13,315 26,174 26,119 32,509 2,921 2,879 8,058 28,556 42,435 51,698 66,906 50,958 28,652 2 ar. 20 1 Mar. Mar. 20 31 4,836 - 5,335 - Apr. 30 pr. pr. pr. 11 21 Apr. Apr. 20 2,827 296 - May Say 11 1 May May 10 20 1,872 -Say 21 - May 31 June 1 - June 10 Dine 11 - June 20 18,000 2,533 3,399 2,707 ne 21 - June 30 July 1 - July 10 26,180 12,764 53.799 49,919 1,664 7,900 uly 11 - July 20 July 21 - July 31 y ug. 1 - Aug. 10 ug. 11 - Aug. 20 ug. 21 - Aug. 31 4 ept. 1 - Sept.10 35,657 33,940 590 3,066 208 192 2,850 855 Sept.11 - Sept.20 Sept.21 -- Sept.30 et. et.111- Oct. 10 Oct. 20 ot. 21 - Oct. 32 4/ Exports to 11 902 1,885 30 35,669 14,970 23,325 112,492 24,339 44,434 30,947 14,564 55,083 45.701 TOTAL $ 107,256 $1,109,615 / / / These figures are in part taken from copies of shipping manifests. V Beginning with February 1, figures are given for 10-day period instead of week, except where otherwise indicated. 8-day period. 11-day period. Due to changes in reporting procedure by the Department of Commerce, this report is incomplete for the period indicated. neury Department, Division of Monetary Research November 9, 1942 SECRET 396 APPENDIX 0 Principal Exports from U.S. to U.S.S.N. as reported to the Treasury Department during the eleven-de powies ending October 31, 1048 Unit of Quantity Value Quantity TOTAL EXPORTS (Thousands of dollars) $ 46,702 Military Equipment (618,427) Ammunities 6,888 Aircraft Light bembers (S engine A-20) Fighters (2 engine P-40) No. No. 4,606 18 48 Military tanks Light tanks (M-S) Light tanks n.o.s. Medium banks Medium tanks n.o.s. Ordnance Combat Vehiclee Seous ears Light spaced care Ordnance combat vehicles n.o.s. Explesives 80 - certificate guas All other. No. No. No. No. 2,299 1 se 10 40 1,710 No. 806 109 #5 Lb. 7,254,860 No. NO. 2,400 460 1,284 SECRET 397 Appendix c (Sen's) Page of Quality - Food products. Industrial, agricultural & electrical aschinery & parts. Iyon and steel afgra. & cont-signe. Meter treaks, meteroycles and parts. Metals and manufactures a.e.a. Alumisus a a -- Cotton, weal a other Sextiles Leather and manufactures. Chemicals and related protects Petrolous protests Rubber and comfectures. Merchant veneuls All other. - - Treasury Department, License of Receipt MVF/EFN/grs 11/10/42 - -- (a 8 Value 6,247 6,000 3.539 3.49 2.997 2,473 1,439 1,048 706 my age 376 age November 10. 19th 398 NOV 12 1942 My dear Mr. Secretary: I as enclosing report on our exports to some selected countries for the period ending October 31, 1942. Sincerely yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury. The Honorable, The Secretary of State. Enclosure By Mess. Sturgie 5:05 11/12/42 File in Diary Extra copies direct to White's office HDW/grs 11/10/ FILE COPY SECEET 399 November 10, 1942 Exports to Nussia, Free China and selected blocked countries as reported to the Treasury Department during the eleven-day period ending October 31, 1942 1. Exports to Ruggia Exporte to Russia as reported during the elevenday period ending October 31, 1942 amounted to $45,701,000 as compared with $55,083,000 during the previous ten-day period. Military equipment totaled $18,417,000. (See Appendix 0.) 2. Exports to Free China No exports to Free China were reported during the period under review. 3. Exports to selected blooked countries Exports to selected blocked countries are given in Appendix A. Host important were exports to Switzerland amounting to $2,724,000. ISF/grs 11/11/42 SECRET 400 APPENDIX A Summary of United States Exports to Selected Countries as Reported to the Treasury Department from Report Declarations received During the Period Indicated V (In thousands of dollars) 1D-day Period ended Oat. 32. 1942 U.S.S.R. Free Chima Spain witserland Sweden Portugal French North Africa 2 10-day Period ended as 20. 1942 8 45,702 Aug. 1, 1942 to Oat. n. 1942 Total Democric Explora July 28, 1941 to July n. 1942 $ 55,083 $ 365,855 8 742,941 30 6,933 97,720 757 2,858 281 4,249 11,537 117 2,625 18,056 22 796 9,743 2,086 6,305 - 361 2 2,724 211 - Total Deneatic Reports - Treasury Department, Livision of Monstary Research November 10, 1942 1 Many of the expert declarations are received with a lag of several days or more. Therefore this completion does not accurately represent the actual shipment of a particular period. 2/ Includes Hereace, Algerie and Tunisia. MVF/EFM/gra 11/10/42 SECRET APPENDIX B 401 Exports from the U. s. to Free China and U.S.S.R. as reported to the Treasury Department July 28, 1941 - October 31, 1942 1/ (Thousands of Dollars) Exports to Exports to 32,758 8 98,902 6,938 9,608 13,315 Free China July 28, 1941 - Jan. 24, 1942 1942 an. 26 - Jan. 31 e eb. 1 - Feb. 10 eb. 10 - Feb. 20 eb. 20 - Feb. 28 ar. 1 - Mar. 10 4,889 4,853 2,921 2,879 3 lar. 10 - Mar. 20 lar. 20 - Mar. 31 8,058 2 pr. 1 - Apr. 10 4,836 5.335 pr. 11 - Apr. 20 pr. 21 - Apr. 30 May 1 - May 10 5 lay 11 - May 20 2,827 296 1,872 2,533 3,399 2,707 1,664 7,900 May 21 - May 31 June 1 - June 10 une 11 - June 20 ane 21 - June 30 July 1 - July 10 July 11 - July 20 July 21 - July 31 y 590 3,066 208 192 Aug. 1 - Aug. 10 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 1,885 Oct. 1 - Oct. 10 Oct. 11 - Oct. 20 Dot. 21 - Oct. 31 4 1 2 3 5 30 TOTAL $ 107,256 U.S.S.R. 26,174 28,119 32,509 28,556 42,435 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 45,701 $1,109,615 These figures are an part taken from copies of shipping manifests. Beginning with February 1, figures are given for 10-day period instead of week, except where otherwise indicated. 8-day period. 11-day period. Due to changes in reporting procedure by the Department of Commerce, this report is incomplete for the period indicated. essury Department, Division of Monetary Research MVR/EFM/grs 11/9/42 November 9, 1942 SECRET 402 Appendix c Principal Experts from U.S. to U.S.S.R. as reported to the Treasury Department during the eleven-day period ending October 31, 1949 (Thousands of Dollars) TOTAL EXPORTS $45,701 Principal Items: Military equipment Industrial machinery & parts Iron & steel wire, plates, bars, castings, forgings, etc. Motor trucks, motercycles & replacement parts 18,417 4,496 3,584 3,496 canned sausage 1,960 Dried egg products Aluminum & alumimum manufactures 1,688 1,884 1,478 Leather and manufactures 1,048 Canned pork 1,009 Electrical & agricultural machinery and apparatus Cotton, wool & other textile products Meat products n.e.b. Copper, wire, plates, & pipes Mersury and molybedenum ore Petroleum products Tallow and lard Rubber and manufactures Merchant vessels Chemical specialties & industrial chemicals Coal tax products Milk, cream and cheese Breas, brense, lead, nickel and sinc manufactures Relief supplies Cottonsood and CO TO oil 1,436 701 781 834 497 458 450 378 361 345 960 948 144 129 Treasury Department, Division of Monetary Research November 10, 1948 MVF-EFM-ef 11/10/42 NOT TO BE RE-TRANSHITTED 403 COPY NO. 13 BRITISH MOST SECRET U.S. SECRET OPTAL No. 393 FRENCH NORTH AFRICA. 10th One battalion of Gorman airborne troops arrived morning. A British infantry Brigade occupied BOUGIE early morning 11th without opposition. in TUNISIA OPTEL No. 394 EGYPT. 10th. During morning South African armoured cars patrolled SISI AZEIZTO CAMBUT and moved westwards towards TOBRUK; 7th Armoured Division crossed the frontier near MADDALENA. 2nd New Zealand Division continued advance along coast road with an armoured division in support: enemy resistance, which had ceased at SIDI BARRANI during the night was again met in BUQ BUQ and advance delayed until evening. OPTEL No. 395 Information received up to 7 A.M., 12th November, 1942. 1. FRENCH NORTH AFRICA 10th. In the morning Admiral Darlan at ALGIERS ordered all French Naval, Military and Air Forces in NORTH AFRICA including MOROCCO and TUNISIA, to stop fighting immodiately. Subsequently, however, Marshall Petain broadcast instructions counternanding this order. This caused confusion among French Commanders TUNIS. 10th. German aircraft at EL AQUINA airfield: 24 dive bomboro 23 M.E. 109's, and 40 JU 52 transports. At dusk nine Beaufighters attacked the German aircraft. 10 were set on fire and a further 16 were damaged, all on the ground. One Beaufighter is missing. BOUGIE. 11th. An unopposed SOE landing WSS made in the morning. At dusk heavy air attacks took place. One of H.M. Monitors and two transports were hit and set on fire. One of the transports feared total loss. ALGIERS. Unloading continues satisfactorily. A transport of 11,000 tons reported torpedoed 11th southeast of GIBRALTAR. ORAN. Harbour blocked, no ships can enter. One of H.M. transports sunk north of the Port - 425 survivors picked up. CASABLANCA. U.S. Forces converged on the town from UEDALA and SAFI and coordinated attack led to the capitulation of the French Army Forces in the cit" at 7 a.m. 11th. The harbour capacity is greatly reduced by sunken ships. A 7,000 ton U.S. ship was sunk and a U.S. destroyer damaged. GIBRALTAR. One of H.M. depot ships and destroyers were torpedoed night 11th/12th 180 miles west of GIBRALTAR. NAVAL Early 11th a Royal Indian Navy minesweeper which was built in AUSTRALIA engaged an enemy raider which attacked a Dutch tanker under her escort 600 miles southwest of cocos ISLANDS. The raider caught fire and is believed sunk but her supply ship escaped. The minesweeper was damaged but is proceeding. 3. AIR OPERATIONS WESTERN FRONT. 11th/12th. 40 aircraft laid SOB mines. EGYPT. 10th. 5 U.S. Liberators bombed shipping in BENGHAZI Harbour. 10th/11th. Halifaxes and Wellingtons bombed TOBRUK HARBOUR and closely packed M.T. on the TOBRUK-GAZALA Road. SARDINIA. 10th/11th. 7 Wollingtons attacked airfields near CAGLIARI. 4 enemy aircraft on the ground and an ammunition dump wore destroyed. CRETE. 10th. 6 U.S. Fortresses bombed shipping in HERAKLION HARBOUR. 404 NOT TO BE RE-TRANSMITTED COPY NO. 13 BRITISH MOST SECRET U.S. SECRET OPTEL No. 402 Following is supplementary resume of operational events covering the period November 5th - 12th, 1942. 1. FRENCH NORTH AFRICA A. NAVAL 22 large British warships, 54 dostroyers, 45 other warships, 12 large United States warships and 48 destroyers employed in these operations. British Naval forces operated inside MEDITERRANEAN and United States Naval forces off Moroccan Atlantic Coast. The 1st convoy left UNITED KINGDOM over a fortnight before landing took place. Fighter protection in initial states provided by carrier-borne aircraft. By midday 8th airfield ALGIERS area captured and aircraft sent to use them. Hostilities this area ceased a.m. same day. Ships entered harbour at dawn 9th November. Port facilities intact, authorities and shore labour proved very cooperative. ORAN more difficult, and entrance to harbour covered guns of fort. Airfields ceptured by United States troops by 3 p.m. 8th after attack by British naval aircraft and R.A.F. aircraft sont to take over. French ships made 2 sorties on 8th and 9th. 2 destroyers and one other French ship sunk or beached. Fort commanding harbour entrance bombarded by one of H.M. Battleships on 9th and 10th, and p.m. 10th United States troops entered the city. CASABLANCA. French ships, including cruisors, made sortio, one destroyer sunk and others damaged. By evening on 10th airfield at PORT LYAUTEY captured and aircraft sont to use it. By 8 n.m. 11th, French Military Forces at CASABLANCA capitulated. Harbour at ORAN blocked by French reopened by 12th. Clearance proceeding. Harbour at CASABLANCA much encumbered by wrecks of French ships including JEAN BART, 1 cruisor and 2 destroyers. Night 10th successful landings were made at BOUGIE. This port, however, has since been subjected to heavy air attack. Landing at BONE accomplished without opposition a.m. 12th. After first few days of operations considerable concentrations of U-boats both east and west of GIBRALTAR, and casualties to shipping occurred. B. MILITARY In ALGIERS area all initial landings were successful, including one by British Infantry Brigade group. French military resistance very slight and town surrendered 8th. City completely calm. In ORAN area initial landings were successful, but considerable opposition was encountered from naval units when assault forces got ashore, particularly in vicinity of town of ORAN from forts at MERS EL KEBIR and high ground west of the town. City entered midday 10th after concerted attack from 3 sides with air support from TAFAROUI airfield and naval fire on coast batteries. 39 United States troop-carrying aircraft with parachutists flew direct from United Kingdom to ORAN area. 30 arrived, the others are not yet accounted for. In FRENCH MOROCOO initial landings made at MEHDIA, 20 miles north of RABAT, FEDALA, 15 miles north of CASABLANCA, and SAFI, 140 miles further south, where considerable opposition was excountered. Both SAFI and MEHDIA occupied 9th and FEDALA 10th. An armoured column moved south from FEDALA towards CASABLANCA, which surrendered a.m. 11th. Conforce between Allied commanders and Darlan at ALGIERS 10th resulted latter ordering all French air, BOB and land forces in NORTH AFRICA to cease hostilities. Attitude of Frunch generally apathetic. Some 200 members of German and Italian Armistice Commissions caught in ALGIERS. German land forces in TUNISIA believed intended for airfield protection. French Army in NORTH AFRICA limited by armistice terms to approximately 120,000, of which about 50 per cent are Europeans. Army short of sodorn equipment and not in a position to offer sustained resistance against powerful well-armed force. C. AIR OPERATIONS Rapid success of operation due largely to surpriso of both French and Axis and rapidity with which aerodromes were soized and French air opposition eliminated. Effective attacks on aerodromos in SARDINIA and TUNISIA by aircraft operating from MALTA did much to hamper Axis counter action. German Air Forces at present in TUNISIA consist of dive-bambers, fighters and transport aircraft. Dive- bombers operated mainly against BOUGIE. 405 -22. NAVAL Cruisers HIPPER and KOLN in Northern NORWAY, TIRPITZ nt TRONDHEIM, SCHEER believed returned to BALTIC, SCHARNHORST and GNEISENAU, PRINZ EUGEN, NURNBERG, and GRAF ZEPPELIN seen at GDYNIA on 11th. Out of 12 ships independently routed, 4 have arrived NORTH RUSSIA, 2 believed sunk, 2 overdue, 3 returned ICELAND (c) and one bombed, but proceeding. German raider NEUMARK attacked at HAVRE by our aircraft has moved up Channel and may have passed through STRAIT OF DOVER. ITALIAN FLEET. 3 cruisors lately at NAVARINO have moved to Sicilian ports. There was appreciable increase in ITALY-LIBYA traffic during the wook. The Japanese are still superior in carrier-borne aircraft. Allied superiority in shore-based aircraft, however, remains very large and the rate of Jupanese wastage is increasing it. Important factor in the air situation is that the UNITED STATES airfield at ESPIRITU SANTO, NEW HEBRIDES, can be used by fully loaded Fortresses. SUBMARINE WARFARE. Week ending 11th. Quiet period except in Western "mediteRRANEAN, but German U-boats still presont in SOUTH INDIA OUEAN. 2 promising air attacks reported NORTH ATLAN'IC. Tonnage lost October reported to date 554,000, about 97% from U-boats. Includes 13 tankers aggregating 118,000 gross tons. Total o. 79 ships sunk by U-boat during October, of which 52 in NORTH ATLANTIC. Percentage of ships lost in ocean convoys curing month - 9% TRADE. 3 German binclo.do runners reported to have arrived BOSCAU ports recently and 4 believed to have sailed for JAPAN. Imports in convoy into UNITED KINGDOM wook ending 7th, 875,000 Lone, including 364,000 tono of oil. 3. MILITARY MIDDLE EAST. It is now known that after withstanding brunt of our attack, northern sector on 2nd and 3rd November, the two German rmoured and Italian Littorio Divisions had lost bulk of their tanks. 164th German Light Division was reduced to 25% of its strength and Italian Tronto Division practically wiped out. German 90th Light Division WILD possibly three parts intact. Our advance at this stage slow owing to mines and anti-tank guns. Enemy now believed received small roinforcuments of tanks, but no stand expected east of EL ACHEILA position. RUSSIA Position at STALINGRAD likely to become stalomato. For past work, Gorman confined themsolves mainly to local attacks. Russians have been counterattacking resolutely, and report signs of German exhaustion. FAR EAST. BURMA. Although some regrouping of Japanese along frontier possibly taking place, no indications of major offensive against INDIA being contem- plated. 4. AIR OPERATIONS WESTERN FRONT. 3 principal day operations were made by U.S. heavy bombors. ST. NAZAIRE docks attacked by 29 Fortresses from 7,500 to 10,000 foot and then by 11 Liberators. Total of 97 tons of bombs dropped. No fighter opposition, but A.A. was intense and accurate. BREST dooks and U-boat pons bombed, but weather bad, results unobserved. Fives-Lille Stool Works bombod accurately from high level momber Command carried out 3 main night operations. HAMBURG. Attack spoilt by weather. GENOA. Weight of both attacks moderate, but excellent weather and accurate marking by Pathfinders led to successful results. Normal number of antiU-boat and BISCAY patrols by coastal and bomber commands. 508 sea mines laid. MEDITERRANEAN. LIBYA. Our sorties under 4,000 against over 6,000 last week. Reduction probably due somewhat to squadrons moving. Quick and close followup by fighter equadrons especially noteworthy. Interesting incident in capture of EL DABA airfield and 200 prisoners by R.A.F. regiment. Retroating enomy M.T. continuously harrassed by day and night, several enemy aircraft, including transport Aircraft, destroyed on landing grounds. Enemy air activity light and spasmodic. MALTA. Aircraft based on the Island are taking effective part in North African operations by bombing Tunisian Axis-occupied airfields and shooting down troop-carrying aircraft on passage. Bombers have also attacked aerodromos in Southern SARDINIA. -3- 406 RUSSIA. Air activity in STALINGRAD area lessened. Initial German attacks NALCHIK area strongly supported by air, both sides claimed many air victims, and Russian air force clearly operating in force and successfully. NEW ZEALAND. The R.N.Z.A.F. now has a bomber reconnaissance squadron at ESPIRITU SANTO with some aircraft operating from GUADALCANAL and some Catalina aircraft also operating in INDIA. 5. EXTRACTS FROM PHOTOGRAPHIC ON ENEMY TERRITORY IN EUROPE. AND INTELLIGENCE REPORTS ON RESULTS OF AIR ATTACKS MILAN. Photographs 8th show damage, mainly by fire, scattered across the whole town. Buildings affected mostly were industrial, including some at Laproni Aircraft Works. Damage also to railway communications. LE CREUSOT. Photographs 9th give evidence of further damage through- out the works, reports confirm this and state that the day after attack, 2 trains of A.A. arrived in the neighbourhood. Repairs to roofs and buildings already in hand. ST. NAZAIRE. During attack on 9th, photographs indicated damage to following - large warehouses and buildings in docko, locomotive depot, shipyards, hydraulic machine shops, ship half submerged after direct hit, permanent way and rolling stock. 5. OPERATIONAL AIRCRAFT BATTLE CASUALTIES METROPOLITAN AREA British and Allied Enemy Dest. Bombers 47 Bombers Fighters 10 Fighters Miscellaneous Coastal 9 Army Co-operation Total Prob. Dest. Nil 2 19 2 24 30 Nil 2 Total 23 1 67 Damaged 1 In the Air 24 33 MIDDLE EAST (Including MALTA) British and Allied Enemy In the Air Bombers Fighters Total 3 crews and 9 pilots are safe. Dest. 12 Bombers 30 Fighters Miscellaneous Total 42 9 22 7 38 Prob. Dest. Damaged Nil 8 Nil 8 2 20 Nil 22 Note: No account is taken of enemy aircraft destroyed on the ground in any theater or of British Naval aircraft casualties. 6. HOME SECURITY Estimated civilian casualties week ending 6 a.m. 11th - killed 15, seriously wounded 12. TREASURY DEPARTMENT 407 INTER OFFICE COMMUNICATION DATENOV. 12,1942 TO Secretary Morgenthau FROM Mr. Hoflich Subject: North African Naval Situation (from British sources). Naval Losses According to British reports, the following losses have occurred in the past few days, in action at Algiers, Casa- blanca, Bizerte and Oran: A. Axis losses French - one battleship (35,000 ton Jean Bart) severely damaged, 8 destroyers sunk or damaged, one submarine sunk. German - One submarine sunk. Italian - One cruiser damaged. B. United Nations losses U. S. - One transport sunk. British - Two destroyers sunk, one destroyer damaged, one anti-aircraft ship damaged, one corvette sunk. (U. K. Operations Report, November 10, 1942) French Fleet The following French warships are believed to have been fully effective before the beginning of present operations in Northwest Africa: At Toulon: The 26,500-ton battleship Strasbourg, 4 cruisers, 20 destroyers, 4 submarines. At Dakar: The 35,000-ton battleship Richelieu, 4 cruisers, 2 destroyers, 7 submarines. -2408 French Fleet (continued) At Casablanca: One cruiser, 7 destroyers, 14 submarines. At Bizerte: Three destroyers, one submarine. At Algiers: Two submarines Total of above: 2 battleships 9 cruisers 32 destroyers 28 submarines (It has not been revealed how many of the French ships sunk and damaged were included in the above "fully effective" ships. Therefore, these figures cannot be used to make an accurate estimate of the total number of French naval vessels in good condition and the number captured by the Allies.) (U.K. Operations Report, October 29-November 5, 1942) 409 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE Nov.12,1942 TO FROM Secretary Morgenthau Mr. Hoflich Subject: Japanese and United States Pacific Naval Losses 1. U.S. Naval communiques dated November 2 - 12, 1942, reveal the following additional Japanese and U.S. naval losses in the Pacific: A. Japanese (1) Solomons. Sunk - 6 landing craft; probably sunk, 1 destroyer; damaged - 1 battleship, one aircraft carrier, 4 cruisers, 2 destroyers, 8 miscellaneous (unidentified) ships. (2) Aleutians. Damaged - 2 cargo ships. (3) Submarine action. 9unk - 5 cargo ships, 2 tankers; damaged - one aircraft carrier,one destroyer, one tanker. B. United States Sunk - one aircraft carrier previously Solomons. listed as badly damaged. Damaged - one auxiliary supply ship. 2. Losses announced in U.S. Naval communiques since Pearl Harbor total: A. Japanese: 189 vessels sunk, 42 probably sunk, 204 damaged. B. United States: 57 vessels lost, 13 damaged. -2410 Table I Total Japanese Vessels Sunk and Damaged to November 12, 1942 Combatant Vessels Probably Sunk Type Battleships Sunk o Damaged 0 Total 8 8 Aircraft carriers 16 6 1 9 Cruisers 13 Destroyers 32 Submarines 47 4 14 64 1/ 25 71 14 6 1 7 Tenders 1 8 2 5 Others 16 15 2 Total 116 24 74 33 214 Non-Combatant Vessels Fleet Tankers 13 Transports 27 Cargo and Supply 55 1 Miscellaneous 20 Total Total all types o 21 8 7 9 2 21 1 55 34 98 25 47 115 18 88 221 189 42 204 435 1/ Also several additional vessels -3Table II 411 American Naval Vessels Sunk and Damaged to November 12, 1942 Demolished to prevent Lost Type Battleships 1 Aircraft Carriers 4 Cruisers 4 Submarines Auxiliary Seaplane Tender 0 o 0 4 2 6 0 1 6 3 1 0 2 1 0 o Mine Craft 5 2 O Gunboats 3 1 0 Tankers 0 o 3 1 0 1 Target Ships Patrol boats 4 1 1 1 2 7 4 3 2 6 2 o 0 1 0 O 1 0 1 0 1 Supply Ship o 0 48 1 o Floating Drydock Total 4 0 1 0 Transports 22 3 1 Tuge Total 2 15 Submarine Tender Damaged 1 Destroyers Motor Torpedo Boats capture 1 9 1 13 70 -4Table III 412 Japanese and American Vessels Sunk and Damaged in the Solomon Islands (Aug. 7 - November 12) Japanese Losses Probably Sunk Type Sunk Damaged Total Battleships o o 4 4 Aircraft Carriers o o 6 6 Cruisers 1 O 7 3 Destroyers Submarines 1 o Tenders o o Tankers o 0 Transports 2 1 o o Cargo and Supply Miscellaneous 10 1/ Total 32 11 21 o 1 2 2 1 1 1 6 9 6 6 19 1/ O 21 31 1 29 111 86 4 American Losses Aircraft Carriers o 4. Cruisers Destroyers Patrol Boats 2 2 6 2 8 2 6 1 0 1 1 0 Tugs 1 Transports 5 1 4 1 1 Supply Ship Total o 18 1 Also several additional vessels. 6 24 -5- 413 Table IV Japanese Vessels Sunk and Damaged in the Aleutian Islands (June 15 - November 12, 1942) 1 Sunk Cruisers 1 Destroyers Submarines 3 13 6 6 1 9 4 1 0 16 2 2 o 1 14 9 o 2 2 7 29 No American Vessels have been reported lost or damaged in this area to date. 2, 6 1 2 Total 5 5 Minesweepers 1 Damaged 4 o Cargo and Supply Total Sunk o 6 Transports Miscellaneous Probably 1 Type Also several additional vessels. 52 414 NUMBER 57 SECRET OFFICE OF STRATEGIC SERVICES THE WAR THIS WEEK November 5-12,1942 Printed for the Board of Analysts Copy No. 6 The Security NOVEMBER 5-12, 1942 SECRET Office of Strategic Services THE WAR THIS WEEK Striking simultaneously at a series of strategic points in French North Africa, American forces this week entered the European theater in force. With British air and naval cooperation, the American troops overcame initial French resistance with finish and despatch and brought the campaign to a close in three days. With Morocco and Algeria in their possession, AngloAmerican units will obviously strike promptly at the next objective-Tunisia-and the third stage of the campaign may well be a collaborative effort with General Montgomery to liquidate the shrinking remnant of Marshal Rommel's Afrika Korps. The latter has been hurled back on the Libyan border and may soon be either surrounded there or harried across Cyrenaica. The dramatic seizure of the initiative by the Allies during the past two weeks marks the beginning of a new phase in the Hitler to war. Allied activities haveforced already occupy Vichy France and hastily to transfer air power to the Mediterranean, undertaking added military responsibilities in the west at a time when German lines are already widely extended in the east. With the recent reduction of Nazi pressure in Russia, the Soviet armies are now everywhere holding the enemy in check. German activities clearly reveal a deep preoccupation with the defense of the northern Mediterranean littoral. Whether they will themselves attempt shortly to regain the initiative is an open question. But some military observers are in1 SECRET SECRET clined to believe that the German military position is sufficiently tight to prohibit any large scale operation this winter. Allied Occupation of French Northwest Africa Striking to reopen the Mediterranean and gain control of North Africa as a base for future operations, American land, sea, and air forces made multiple landings at 3:00 a. m. on November 8. Initial landings met with little resistance, and subsequent discharge of assault convoys was accomplished despite strong opposition, offered principally by French naval forces and coastal artillery. Three days later, after immediate Allied objectives had been largely achieved, Admiral Darlan gave the order to French forces in North Africa to cease firing. The first Allied success occurred in the Mediterranean, where the landings were covered by British naval forces. In the Algiers region a direct assault on the port is reported to have failed, but a landing was made at Sidi Ferruch (see put into use by Allied aircraft. On November 10, Oran capitulated. The Moroccan landings in the vicinity of Casablanca met with more determined resistance, but all assault waves were landed. Serious naval opposition was offered, and in the resulting actions American naval forces either sank or seriously damaged all the French naval units in the area. These are believed to have included seven destroyers, a light cruiser, and the new French battleship, Jean Bart, now burned out in the port of Casablanca. Landings in the Casablanca area were at Safi to the south and Fedala and Mehedya to the north. Coastal batteries at Fedala and Casablanca were silenced, but resistance continued. The landing at Safi was accomplished in the face of bombing by Vichy aircraft. Columns from the MehedyaLyautey assault, including elements of General Patton's armored forces, were advancing on Casablanca when that city finally capitulated. Appendix II and map at back, on which the situation is necessarily incomplete). By the afternoon of November 8 The Battle for Tunis the airdromes of Blida and Maison Blanche south of Algiers had been taken, through the use of United States parachute troops. British fighter planes shortly began to operate from French North Africa, the first phase of the campaign comes to an end, and attention focusses on the Allied drive for Tunis these fields, and in the evening Algiers surrendered unconditionally. The harbor forts were occupied the following day, and Allied shipping entered the port. British First Army, American forces have now occupied Bougie, coastal city 110 miles east of Algiers, and Bône, Further west, three landings were apparently made in the Oran area. Coastal batteries on Arzew Heights were taken early in the morning, shortly afterwards tanks were landed. In naval engagements, two French destroyers were sunk and three damaged. By evening, columns advancing from east and west were converging on the city, and at least three airfields to the south of Oran had been captured and 2 With Darlan's order for the cessation of hostilities in and Tripoli. Reportedly reinforced by elements of the nearest large port to Tunisia. To meet this Allied threat the Axis has occupied the rest of France and Corsica, and has apparently concentrated air strength in the Sicily-Sardinia area. Military observers believed that a maximum of four or five Italian divisionsand probably less-might have been available in western Tripoli. Reports also indicate that about 200 enemy 3 SECRET aircraft have arrived in Tunisia with about 1,000 personnel, and that severalhundred German air-borne troo have landed at El Aouina airdrome near Tunis. A Briti raid on this field is reported to have set 19 planes afit Enemy infiltrations so far appear to be on altogeth too small a scale to do more than harass the Allied force and time is growing short for Hitler to move any mass Axis troops across the Mediterranean to the "defense" Tunis. The campaign to date has placed the Allies in control a thousand miles of strategic Atlantic and Mediterranea coastline. Dakar on the flank, if it does not voluntaril enter the Allied fold, remains an isolated fortress. In th Mediterranean, bases have been gained for coming operation aimed at clearing the Mediterranean and making Allie power felt all over southern Europe. British Drive in Egypt In the days immediately preceding the American landings to the west, British forces in Egypt turned an Axis retreat into a rout that allowed only reduced elements of the original German Afrika Korps to escape to the Libyan border, where they are now once again threatened with encirclement. A rough sketch of the advance is given on the accompany- ing map. On November 2, the British broke through the enemy's fixed positions and forced his withdrawal after three major tank battles. This initial victory was turned into a disaster for the Axis by the speed and power of the pursuit by British air, mobile, and armored units; and by the enemy's tactical errors and acute shortage of motor transport, air support, and armored equipment. The Details of the Campaign Fanning out from the gap, and breaking through in the south, the British encircled the mass of the Italian forces and some German elements which lacked the transport necessary 4 40 TOBRUK Principal Secondary Track MILE 32 SALT MARSH RESISTANCE BRITISH DRIVE AXIS CENTER OF RAILROAD ROAD Sea NORTH IN EGYPT DRAWN IN THE GEOGRAPHY DIVISION. 055 BRITISH DRIVE BUQBUO MATRUM EL RAHMAN EL ALAMEIN BIR EL GOBLA FUKA* DALAL E DADA 4-5 ATTERN EL FUAD EL BIR-SHEFERZE WESHKAS 25SIDE BARRANIQARET EL MILLIS BIR EL SHEGGA GIARABUSBARDIA 29 Sand Dunes SIWA SINO Odsis MAP NO.1262. NOVEMBER 19, 1942 RESTRICTED 29 NORTH LATITUSE AKROMA! SECRET for retreat. These divisions are now offering little serious resistance. Only the Afrika Korps, using all available trucks, escaped the Alamein battlefield. This force-the 15th and 21st Armored and 90th Light Divisions-successfully eluded British efforts at encirclement, withdrawing along the coastal road to the escarpment southwest of Fuka. Here a stand was made. Heavily attacked by British armor and threatened on the flank, the Axis was forced to resume its retreat. To avoid offering a concentrated target to Allied aircraft, the enemy apparently left the coastal road and went overland as far as Matruh. Then, after minor resistance at Matruh, the harassed troops resumed their retreat with a dash to positions in the Halfaya-Capuzzo-Solum region. The Germans will probably not be able to make any real stand in the latter area, although they have brought up part or all of the Italian division that had been garrisoning Tobruk. They now are believed to have few more than 20,000 men, and losses in tanks, guns, and planes have also been very severe. With British heavy units approaching the border, and the main force presumably advancing along the escarpment to envelop Halfaya Pass, the Germans may shortly strike out across the desert for Benghazi or El Agheila. Problems of communications and transport in this region have halted British drives before. But this time the ultimate fate of the Afrika Korps would appear to depend on whether decisions in Berlin and the battle for the Mediterranean make possible prompt reinforcement. The prestige value of this British success has been of the first importance-especially in its influence on the French defenders of Northwest Africa. The Occupation of Vichy France The occupation of Vichy France was Hitler's answer to the combined Anglo-American successes in Africa. Whether it 5 SECRET SECRET was true or not that Hitler, Ciano, and Laval had agreed at Munich on a program of complete occupation, the conscription of French workers for the Reich, and the handing over of the French fleet to the Nazis-in any event the Fuehrer apparently felt that Darlan's equivocal course had indicated the unreliability of Vichy's fighting forces. Under the pretext that the next Allied objectives were Corsica and the French Mediterranean coast, the forces of Field Marshal von Runstedt on Wednesday morning crossed the demarcation line at Chalons-sur-Saône and a few hours thereafter reached Lyons, Vichy, and Marseille. Italian troops have also entered long-coverted Nice, Chambéry, and Corsica. Hitler's statement specified that the new occupation was to be only temporary, and that Pétain's government would continue its functions and would be free to move to Versailles. The Marshal, however, protesting against the German action as a violation of the Armistice terms, showed no signs of com- plying with the Fuehrer's suggestion. Fighting French sources in Cairo announced a "confirmed report" that Pétain had left Vichy. The logical conclusion of the present crisis would appear to be the liquidation of the Vichy government except as a Gauleiter administration under Laval or Doriot, and the unification of all French resistance in a real government-inexile in Africa. The Vichy naval chiefs however, have as yet thrown their support to neither side. They have apparently not accepted General Eisenhower's invitation to join the Allied fleet at Gibraltar, and the German-controlled Vichy radio has answered London's appeal to French merchant marine officers to put in at Allied-controlled ports, by ordering them to make for Frenon harbors. As for the navy, the Vichy radio has similarly announced that in view of the fleet's determination to resist any attack, the Germans will not occupy Toulon. It would appear that the French navy is continuing its previous policy of strict neutrality. The French Fleet and the Mediterranean Naval Balance A decision by the French fleet would upset the Mediterranean naval balance, which may now be fairly even. Vichy's four battleships, seven heavy cruisers, and four light cruisers based at Toulon and Alexandria, would give an overwhelming numerical superiority to whichever side they chose to join. In cooperation with the Italian battle force of six battleships, three of them of the new Littorio class, based at Taranto, the French ships could endanger our newly-won positions in North Africa and cover the reinforcement of Tunis. Without French help, the Italian fleet would very likely take no action at the present time-reserving itself for the defense of Italy later on. In cooperation with the United Nations, however, the French fleet could probably permanently neutralize the Italian navy and perhaps even attack it in its own home waters. Already, scattered naval engagements between Axis and Allied forces have apparently begun. The British have reported the torpedoing of an Italian light cruiser, while the Germans claim damage to two carriers, two cruisers, and two destroyers off the Algerian coast. The Junior Partner of the Axis Whatever Hitler's Reich may think of the current developments in the Mediterranean, it is Italy which is most deeply affected. Italy's "destiny" is at stake. Up to now Italian Fascists have been accustomed to view in British successes in the Mediterranean simply as incidents the fortunes of war, which have not endangered the security 7 6 SECRET SECRET of the Italian peninsula. The present crisis, however, threatens to give Italy the first taste of a type of defeat which might undermine the whole Fascist regime, in the view of one close observer. Furthermore, the appearance of American forces in the Mediterranean is probably having an incalculable effect on Italian morale. About France, Germany, and Great Britain, Italians generally (and many Fascists) have had grave misgivings; but about our country there still persists the widespread conviction that the "side of the United States is the side that wins." American activities in "Italian" Mediterranean waters have doubtless revived in full force all the sentiments of respect and affection (and perhaps also fear) that Italians have felt toward the United States. And these activities have probably confirmed the doubts of certain Fascists who approved of the German alliance only so long as the United States stayed out of the war or at least away from the shores of Europe, our observer concludes. German Defensive Strategy Hitler's latest address, delivered in Munich on November 9, was evidently intended primarily to reassure party members of the wisdom of German strategy in Russia in the summer of 1942. The Fuehrer's remarks on this subject were equivalent to an admission that he had abandoned his strategy of shattering the Red Army in favor of a war on the economic resources of Soviet Russia. Furthermore, he made only one veiled reference to the collapse of Rommel's army in Egypt. And he devoted but a single sentence to the American occupation of North Africa, and concluded his remarks with the promise that he was preparing a "thorough and timely counterblow". At the present time, however, it appears that the Nazis will confine their counter-measures to the reinforcement of Tunis and Tripoli and the defense of the European continent. There is no doubt that the Axis knew of the American plan well in advance. For the previous few weeks German submarines had been steadily moving away from the Atlantic Coast of the United States toward Africa. Just prior to the American landings a concentration of 20 U-boats had gathered off Gibraltar. In other words, the surprise of the American operations (if there was a surprise) was tactical rather than strategic. Yet even with this knowledge, the Axis has restricted itself to the occupation of Vichy France. Reports of steady air reinforcement of Sicily and of special measures to keep the Hungarian railroads clear during the first half of November have given no specific indication of troop movements. American military observers believe that Axis quiescence up to the present, coupled with the strategic disadvantages attendant on almost any possible course of action, strongly suggest that the enemy will not attempt any large-scale retaliation. An invasion of Turkey would have no immediate bearing on the current Mediterranean campaign. It is, of course, possible that the Germans could crush the under-equipped Turkish Army in short order. In the opinion of a highlyplaced civilian observer recently returned from Turkey, however, the invaders could penetrate this winter only as far as Ankara before their progress would be blocked by snow, mountainous terrain, and determined resistance. Moreover, the British have recently sent considerable reinforcements to Iraq. In short, the Allies might have the whole winter in which to build up their position behind the Turks, whose well-drilled and spirited army would need only American equipment to make of it an effective fighting force. Severe logistic difficulties also discourage any operations through Spain. Even the reinforcement of Tunis and Tropoli would appear to be a hazardous undertaking. The American forces have 9 8 SECRET SECRET anticipated the Axis and are so strategically placed that a large-scale enemy landing would be a difficult venture (see Appendix I). Furthermore, even if an Axis army eventually succeeded in establishing itself in Tunis, it would face on two sides Allied armies whose supply problem had been immensely simplified by the control of the Western Mediterranean. Sicily as a Defensive Bastion If the Axis restricts itself to a strategy of defense, the reinforcement of Sicily would probably have first priority Additional German ground troops may join the one or two Nazi divisions now in Italy. Of greater importance, however, is the strengthening of Italy's operational air strength within its own borders, which until recently totaled no more than 300 planes. The success of the recent RAF daylight attack on Genoa has dramatically underlined this weakness. To send German reinforcements from the central part of the Reich or from the Eastern Front to Sicily should be a matter of a few days for bombers and a week for fighters- provided the weather over the Alps were good-but upon their arrival they would need repairs and maintenance. Aviation gasoline would probably have to come from Germany by rail. Additional ammunition, spare parts, and ground crews would also need to be brought overland before an enlarged Nazi air force could operate out of Sicily. In Sardinia, Sicily, and Pantelleria, German and Italian air strength is at present approximately 500 planes. Roughly three weeks would be needed to double that force. Air fields in Sicily appear to be adequate to accommodate a greatly enlarged force. There are 15 known airdromes and landing grounds, including three with runways and several others with perimeter and taxi tracks. The GAF has already operated out of airdromes at Catania, Gerbina, Marsala, 10 Sciacca, Syracuse, and Trapani. The development of the Sardinian airfields would probably take somewhat longer, since they have not yet been used by the Nazis. Pantelleria, however, may soon become troublesome for the United Na- tions. Although its airfield probably bases only fighter planes, all types of aircraft have refueled there. It lies less than 100 miles from the best Tunisian airfields at Tunis (El Aouina) and Bizerte (Sidi Ahned). The Russians Hold on all Fronts Should the Axis choose to reinforce Italy or to take the offensive elsewhere, it would probably draw the necessary divisions from the Eastern Front. Already the Nazis have greatly reduced their pressure in Russia, and the Red Army has been able to hold its ground at all threatened points. In Stalingrad, activity has dropped to small-scale attacks and counterattacks on both sides, while on the Black Sea littoral northeast of Tuapse the initiative has passed to the Russians. Before Ordzhonikidze, steady German ground and air assaults have failed to drive back the Soviet defenders, and the gateway to the Georgian Military Highway is still secure. Meantime, on the central front, colder and clearer weather has apparently brought a slight increase in military activity. The Russians have maintained their pressure against the German outpost at Rzhev, while the Nazis have bombed the Soviet concentration point of Ostashkov, between Rzhev and Staraya Russia. With German ground forces now on the defensive, Russian guerrillas have apparently begun their winter operations. Although German heavy artillery has shelled. the naval base at Kronstadt, there is still no sign of a forthcoming attack on Leningrad. With Axis attention focussed on the Mediterranean, a Leningrad offensive now appears extremely 11 SECRET SECRET unlikely. From now on, the Germans will probably direct their major efforts against Russian supply lines to Britain and America. Nazi air attacks on Murmansk and the Murmansk Railroad, and on the new Astrakhan-Kizlyar Railroad along thewinter Caspian, give some indication of enemy intentions for the months. Stalin Charts a Course As though in anticipation of events to come in Northwest Africa, Stalin's speech on the twenty-fifth anniversary of the Bolshevist Revolution was confident in tone and clear-sighted as to the future. In one sense, the speech was an explanation to the Soviet peoples of Russia's defeats last summer. Repeating the familiar Soviet argumentation on the Second Front, Stalin pointed out that "The Libyan front is diverting, in all, four German divisions and 11 Italian divisions", and that "instead of the 127 divisions in the first World War, we are now facing on our front no less than 240 divisions." Had there been a Second Front this year, the Russian leader asserted, "the Red Army would be somewhere near Pskov, Minsk, Zitomir, and Odessa." Yet the failure of the Nazis to carry out their alleged timetable was far more sig- nificant: "to be in Stalingrad July 25, 1942, in Saratov August 10, 1942, in Kuibyshev August 15, 1942, in Arzamas September 10, 1942, and in Baku September 25, 1942." Such a timetable, Stalin maintained, indicated that "the principal objective of the offensive" was not "to capture the oil districts of Groznyi and Baku" but "to outflank Moscow from the east, to cut it off from the Volga and our rear in the Urals, dissension existed within the "Anglo-Soviet-American coali- tion". Despite "differences in ideologies and social systems", Stalin proclaimed the unity of the coalition on the following program of action: "Abolition of racial exclusiveness, equality of nations and integrity of their territories, liberation of enslaved nations and restoration of their sovereign rights, the right of every nation to arrange its affairs as it wishes, economic aid to nations that have suffered and assistance to them in attaining their material welfare, restoration of democratic liberties, the destruction of the Hitlerite regime." An Effective Second Front? Four days after the first American landings in Northwest Africa, it was still difficult to gauge the Russian reaction to these events. Soviet newspapers published the African news in small print and refrained from comment, failing even to score the obvious point that it was Soviet resistance that had made the American attack possible, and that Russian coopera- tion would be an indispensable feature of a full-scale Allied offensive next spring. In his anniversary speech Stalin had stated quite flatly that the Russians eventually expected a second front "in Europe" as the Anglo-Saxon contribution to the alliance. And President Roosevelt has revealed that Soviet complaints about the lack of a second front were made in full knowledge of American intentions in Africa. On the other hand, a few weeks ago an authoritative Soviet spokesman declared that a new front in Africa would be "enough" for 1942, if it diverted and then to strike at Moscow". a significant number of Axis troops. Observers of the In more positive vein, the Russian leader expressed his confidence that his Allies would open a Second Front in Europe "sooner or later". And he scouted the assertion that Russian scene point out that the American landings are the type of commitment which the Russians have consistently demanded as an earnest of Anglo-American intentions to fight an all-out war. 13 12 SECRET SECRET The Finns Waver In Helsinki the Allied victories have apparently discouraged Finnish pro-Nazis, and brought out into the open much pro- United Nations sentiment, which had previously not dared to express itself. Already anti-Allied publicity is beginning to slacken. Furthermore, the Finns seem to have been unimpressed by Hitler's Munich address, which they regarded as the weakest of his utterances. increasing at an alarming rate. As occupying powers, England and France have borne the brunt of nationalist resentment in the Moslem countries. Furthermore, since previous British advances in Egypt and Libya have proved to be indecisive, the general attitude will probably be one of watchful waiting. Until United Nations successes are confirmed beyond further doubt, probably only those in official circles will voice their pro-British sentiments. On the other hand, the Arab has a strong respect for power Spanish and Portuguese Reaction The Spanish and Portuguese governments have given "satisfactory" replies to the American notes and privately expressed their appreciation of President Roosevelt's assurances. Although restrained, the official press has given wide publicity to the American assurances and has implied no criticism in its coverage of events in North Africa. The Spanish government is obviously apprehensive of Axis pressure, with German troops now all along the Pyrennees, but has made no moves to strengthen the forces defending its northern frontier. The presence of an Allied Army should, however, stiffen Franco's determination to remain neutral. Popular opinion in both countries has been "downright enthusiastic" in its response to the news. In Spanish Morocco officials have expressed relief that their zone is not involved. Quiet has prevailed, and there is no indication of any Spanish plan to try to annex part of French Morocco. Allied Success and the Peoples of the Near East successfully applied. And this visible triumph will give United Nations propaganda substantial support. At the same time, the Axis pose as the defender of Islam will become correspondingly difficult to maintain. In Turkey the Anglo-American victories will doubtless confirm the pro-Allied orientation of the Saracoglu Ministry. A German invasion at this time would find the Turks more determined than ever to defend their country in cooperation with the United Nations. Latin-American Repercussions The successful American offensive in Northwest Africa, following upon the Nazi defeats in Egypt and before Stalingrad, will probably be of inestimable value for the Allied cause in Latin America. Removing the threat of a Nazi attack against Brazil and enhancing the prospects of ultimate victory of the United Nations, it will particularly affect the international attitude of opportunistic and other vacillating elements. Thus in Chile it may shortly prove to be the decisive element in persuading the Ríos government to Although the news of the Allied victories in Africa will break relations with the Axis. In Argentina it should probably not evoke an immediate pro-Allied reaction among the Arab peoples of the Near East, it will serve to arrest the current of anti-British and anti-Allied feeling which has been strengthen General Justo's faction and further reduce 14 Castillo's support within the dominant National Democratic (Conservative) Party. 15 SECRET SECRET Elsewhere, as in Mexico (where President Avila Camacho On Guadaleanal, and in the Solomons as a whole, the situ- quickly broke off relations with Vichy), in Cuba (which ation has not changed significantly. After moving more followed suit), and in Peru (whose president congratulated Mr. Roosevelt), the North African campaign will undoubtedly solidify pro-United Nations sentiment and will soon rid the greater part of the hemisphere of the Vichy missions which have been serving as a part of the Axis espionage system. As for Martinique, French Guiana, and the other French possessions, the anti-Vichy sentiments of the great majority than two miles westward along the coast toward the main Japanese positions on the island, our troops were halted by enemy counter-attacks near Point Cruz. A similar expansion eastward, beyond Koli Point to the Metepona River, of inhabitants can be counted on in case occupation becomes late October. necessary. In the Aleutians, the enemy position remains precarious. Seven Japanese float planes were sighted in Holtz Bay, Attu Island, November 7-the greatest number of enemy planes Allied Pressure on the Pacific Fronts The Pacific fronts are relatively quiet, but persistent Allied pressure has improved our ground positions both at Guadal- encountered little resistance. Enemy warships still are active in the northern Solomons, and shipping is being maintained at a fairly high level, although under that of seen in this theater for some weeks. All seven were destroyed in situ two days later. canal and in New Guinea. In the latter theater, there has been heavy fighting at Oivi, where the Japanese had prepared for a stand after their hasty retreat across the Gap in the Owen Stanley Range. Oivi lies on a rugged spur of the Range, the last to be crossed before the Kokoda-Buna trail descends to the coastal plain. Thereafter, the only important natural obstruction is the Kumusi River, location of the much bombed Wairopi Bridge. On November 10, our forces succeeded not only in occupying Oivi, but in clearing enemy detachments from the Gorari sector, five miles to the east. American troops have been landed from air transports on the Buna side of the Range, and there is every indication that Chungking Links North Africa to Burma The United Nations' offensives in North Africa have been greeted by the Chinese as a heartening sign of rising Allied strength. The influential Chungking newspaper, Ta Kung Pao, hailing the American landings in North Africa, declares its belief that victories in the Mediterranean will have a beneficial effect on the political and military situation in India and thus make possible an Allied invasion of Burma. The Japanese, as if moved by a similar line of reasoning, have somewhat increased their concentrations near the Assam border. the Japanese may now be driven out of this base. The Japanese have responded to this threat by augmenting their meager air resources in New Guinea and, according to one report, by consolidating their defenses in the Lae-Salamaua area-scene of their initial landings in New Guinea. 16 Koreans in Chungking Strive for Harmony Quietly, and with little public notice, Korean nationalist parties have met together in Chungking in the first Korean all-party "Congress" since 1924. Technically, a meeting 17 SECRET SECRET of the Legislative Yuan of the "Korean Provisional Government," the convention actually includes 23 representatives of rival parties in addition to the 24 representatives of the Provisional Government Party. The meeting has been called in an effort to agree upon a united program for Korea. Military unity was achieved last May when the Korean Independence Army and the Volunteer Corps, representing the two major Korean factions, were united under the sponsor- ship of the Chinese Supreme Military Council. Despite the unhappy precedent of the 1924 "Congress," which ended in almost complete disharmony, the present convention hopes to achieve political unity. Ministry would probably prove far more responsive than its predecessor to the wishes of New Delhi. Cabinet Replacements in Denmark The change of ministry at Copenhagen on Monday was, on the surface, a tame and colorless replacement. Vilhelm Buhl, who had been Premier since the death of Stauning last spring, retired in favor of Eric Scavenius, Minister of Foreign Affairs since 1940. Eight members of the Buhl Ministry, apparently, were carried over into the Scavenius cabinet, four were dropped, and five new members were added. Not one of those dropped or added is a political figure of any magnitude. India: Barriers to a Compromise Two recent events in India have indicated once again the conflict of personalities and programs that still impedes a settlement. Mr. Jinnah, Moslem League leader and long advocate of a separate Moslem state, has jibed at the "kite flying going on in India and abroad" in the form of countless new schemes to break the Indian deadlock, and has expressed his regret that many of these schemes overlook the claims of the Moslems. Apparently, Mr. Jinnah fears that the rising pressure of public opinion in Britain and the United States may induce the London government to agree to a settlement that would not include a prior guarantee of Pakistan. In Bengal the ministerial crisis has culminated in the resignation of Mookerjee, Minister of Finance and Hindu Mahasabha leader (The War This Week, October 8-15, pp. 13-14). His withdrawal expresses the Mahasabha's profound dissatisfaction with the policy of repression pursued by the Central Government. Without Mahasabha support, Fazlul Huq's Coalition Ministry would no doubt collapse, and might well be replaced by a Moslem League administration. Such a 18 Yet in the new government's lack of color may lie the clue to its composition. Scavenius, the self-styled realist, who still thinks in terms of World War I, is at last the Cabinet head. Though not pro-Nazi-his aristocratic instincts forbid that-he is pro-German and collaborationist. Moreover, he has a distressing way on occasion of circumventing his colleagues and presenting them with a fait accompli which they may then not be able to refuse. Doubtless many of the members of the Buhl Cabinet have accepted him as premier to hold off outright German control for a while longer. But some of his new colleagues will surely be little surprised if they learn that, with or without their knowledge, Scavenius seeks to yield more to Berlin than they are prepared to do as responsible ministers. Observers feel, consequently, that Scavenius' rise will bring an added turn to Nazi pressure on Denmark. Already it is rumored that long-standing German demands for the relinquishing of the submarine fleet, tackling of the "communist" question, and providing of a larger labor supply have been renewed. Scavenius is unlikely to grant all that the Germans ask; but he can be expected to yield more than his predecessors have done. 19 SECRET SECRET APPENDIX I SHIPPING GAINS AND LOSSES IN THE MEDITERRANEAN Axis capacity to evacuate or to reinforce Marshal Rommel's forces will be limited by a shortage of African port facilities and not by any lack of shipping. Under the assumption that the Axis is able to acquire all Vichy merchant ships in the Mediterranean not caught in Algerian ports, the improvement in the Axis shipping position in the Mediterranean is shown below in Table 1. At the same time, the Allied invasion of North Africa has made notable additions to United Nations shipping tonnage. TABLE I.-Shipping Available to, and Required by, the Azis (Ships of 1,000 GRT and over) Non-tanker Vichy 1 Italy Total GRT Port Facilities How many such ports will be available to Rommel depends, of course, on the speed of the Afrika Korps' westward retreat, the closeness of British pursuit, and the eastward progress of American forces. Under the most favorable con- ditions for the Axis-effective use of all ports in Tripolitania, Cyrenaica, and Tunisia-only about 150,000 tons of shipping could be discharged per week. At this rate, it would take one and a half months for the Axis to build up (by sea) its African forces by the stipulated one panzer and four infantry divisions. The operation might be carried out in less time if the Axis were sufficiently equipped with small vessels and barges to enable them to use beaches for landing Tanker 821.00 144, 750,00 110,0 571,00 Nevertheless, lack of shipping would not prove a limiting factor in the reinforcement of Axis forces in Libya in the next few weeks. The principal limitations will probably be the difficulty of quickly mobilizing the necessary troops and supplies, and the capacity of those North African ports likely to be left in Axis hands in the near future. 254,000 operations. Total 965,000 860,000 1,825,000 Allied Shipping Gains of ,Tunisia Excludes all tonnage outside the Mediterrapean or in French North African ports, with the exception Assumes monthly losses of 60,000 GRT during September and October. Excludes war damage 200,000 GRT. normal repairs of 57,500 GRT, unsuitable vessels totalling 350,000 GRT. Even if none of the Vichy tonnage laid up in French or Tunisian ports (about 600,000 GRT) is immediately available for service, there would still remain about one million GRT of Italian and Vichy vessels free elsewhere in the Mediterranean. A large proportion of this tonnage could be diverted temporarily for either the reinforcement or the evacuation of Rommel's forces. Reinforcing Rommel If we assume that at least one completely equipped panzer division and four infantry divisions would be a minimum requirement to reinforce Rommel's depleted Korps, and that these forces are available for shipment to Libya, the Axis would need some 800,000 GRT to carry out the operation. This figure must be raised somewhat to take into account losses inflicted by Allied aircraft and naval units, which should rise considerably over the averages of previous months. During July and August, 1942, a time when Axis shipping losses were probably lower than in September and October, about 20 percent of the total southbound movement of 310,000 GRT to Tobruk, Bengazi, and Tripoli was sunk. Concentration of shipping routes and congestion in a smaller number of ports might increase this loss ratio to between 30 and 40 percent. If Rommel is forced to retreat beyond Benghazi, and if, at the same time, American forces are able to cut off the use of Tunisian ports, the capacity of ports available to Rommel would be reduced to about 50,000 tons per week. In this event, the time required to build up an effective African force might preclude the possibility of Axis resistance and necessitate evacuation of troops already there. of Apart from savings in shipping time by rerouting, Allied occupation of French North Africa has made the following shipping tonnage potentially available to the United Nations: TABLE II. Non-tanker Laid-up in North Africa (other than Tunisia) Trading with North Africa (average number in Algerian ports) Outside the Mediterranean Total GRT Total Tanker 110,000 29,000 139,000 30,000 372,000 47,000 30,000 419,000 512,000 76,000 588,000 It is probable that 200,000 GRT in port at the time of occupation is in Allied hands already. The remainder is cut off from Vichy and can be saved seized only will by for neutral or French colonial ports. The tonnage actually of depend running on the attitude of the crews manning vessels at sea, and on the plans Allies for vessels in French colonial ports. Sabotage may, of course, prevent immediate the use of the tonnage. On the other hand, some French ships in Vichy France may have been able and willing to flee to join the Allies. , Based on data complied in the Economics Division of the Office of Strategic Services 20 21 SECRET SECRET Saving by Suez More important than the possession of the seized Vichy tonnage may become the renewed use of the Mediterranean-Suez Canal route. Savings in tonnage, while not as spectacular as some press accounts would indicate, would nevertheless be considerable. For example, the same tonnage employed to carry 100,000 tons of cargo from Eastern Atlantic ports of the United States to the Persian Gulf would carry 130,000 tons via Suez. In other words, only 77 percent of the shipping necessary to carry the same quantity of cargo around the Cape of Good Hope would be required by the Suez route. Comparable figures for cargo moving from England to the Persian Gulf show even greater savings. Shipping required to carry 100,000 tons on this route can transport 146,000 tons by way of Suez. Or, for the same cargo, only 67 percent of the former tonnage would be needed. (3) The eastward-facing Tunisian Lowland. These three regions are separated from each other by mountain barriers and inhospitable and steep coasts, which make communication possible only by narrow passes. Coastal Plains The principal nerve centers of French North Africa are situated in plains at the coastal margins of these three regions. Whoever controls these coastal plains controls North Africa. Vulnerable to sea attack because of the inadequate French defenses, these nerve centers are, however, protected against land attack by mountain barriers. Consequently, if sea landings at all of these nerve centers are not feasible, then control of the few narrow valleys which connect the coastal plains with the hinterland would immediately become strategically vital. Communications APPENDIX II THE STRATEGIC GEOGRAPHY OF FRENCH NORTH AFRICA The Allied invasion of North Africa used the sea-the only practicable avenue for large scale military attack on that essentially isolated area. The upraised mass of land that constitutes French North Africa is separated from the Egyptian border to the east by a thousand miles of desert and steppe land, and from the French bases in the Sudan on the south by the Sahara Desert. Regional divisions within French North Africa also favor attack from the sea: the best land and climate, and the principal resources, population, centers, and communication lines are located close to the coast. (See map at back.) Strategically, the French North African sector can be divided into three relatively independent seaward-facing regions and a central plateau region surrounded by mountains The central plateau forms a giant elevated trough running east and west through Algeria 1,500 to 4,000 feet above sea-level, sometimes interrupted by mountain chains. Dry, with great alkaline basins, sparsely-settled, without a single all-weather road traversing its length east and west, the plateau is of negative significance in the strategy of the current campaign. Southward it opens by a series of moderately elevated passes through the southern Atlas Mountains into the still more inhospitable Sahara Desert. To the north, west, and east, passes lead through the mountains to the more important regions of French North Africa: (1) The westward-facing Moroccan Atlantic Region. (2) The northward-facing Tell Atlas Region, skirting the Maditerranean coast of Algeria and northern Tunisia. The only important west-east artery in North Africa consists of a standardgauge, single-track railroad line and a parallel highway from Casablanca to Tunis, about 1,350 miles. It is this route which any military force will have to follow to establish land connections between the vital constal plains. A secondary highwhich parallels this main artery from Oran to Tunis, is only of marginal way, because of its vulnerability to sea attack and to sabotage in the many where it winds its way by tunnels through the constal road of secondary importance runs to the near the line which separates the plateaus from the importance sections Another artery possible desert. south mountain is strictly of This the ranges. limited road, main from Agadir through Colomb-Béchar and Touggourt to Gabes, in its capacity to carry troops-it is in bad condition and transport is handicapped. Southern Flank The whole of North Africa is protected from the south by the Sahara desert Desert, is which probably furnishes a more adequate barrier than an ocean. The (French three routes: (1) Dakar to Agadir (1837 miles); (2) Gao Colomb-Béchar (1405 miles); (3) Zinder to Laghouat size would be able to cross this desert region against even The of water and the complete lack of supplies on would slow any column to such a degree that its chances of Without an the raid up on North Africa would be practically non-existent. which crossed Sudan) force defenses. of to by any only scarcity making (1980 miles). these limited effective routes No air surprise element of surprise, the attacking force would be unable to reach an area could furnish sufficient supplies for a continuation of the campaign. Tunisia is probably more vulnerable to sea attack than any other part is difficult of North to Tunisia low coastal plain, stretching from Bizerte to Gabes, of Africa. defend, and Its once a landing is made, the hinterland is easily penetrable by way 1 Based on memorands prepared in the African Section and the Geographic Division of the Office of Stra. tegle Services parallel valleys running east to west. strategically important part of Tunisia, however, is the northern of the capital, region. The of the population is concentrated in the neighborhood fertile 22 There Tunis most (population about 220,000), and in the Medjerda valley-an area and enjoying comparatively abundant rain. 23 SECRET SECRET In central towns and southern Tunisia, strategically important places include coastaldefenses of Sousse and Sfax, whose hinterland is an arid plateau with few the natural toward the west. The paved Italian strategic highway from the east gives access to Tunisia. Until the signing of the Armistice of 1940, this route of southern installation of new sidings or double track sections. Moreover, possible damage to power plants may interfere with transport on the electrified sections of the railroad in Morocco and Algeria. Adequate replacements of steam locomotives are not available. Highway transport will probably be limited to light trucks. Although the defended by the French Mareth line, which dominated the narrow coastal entry was main North African roads can be considered good, they would probably not stand between Gabès and Médenine, The Axis Armistice Commissions are, however, corridor Line. reported to have supervised the complete dismantlement of this African Maginot up under constant heavy trucking. Moreover, the winding course of these highways and the frequently steep grades make it difficult to maintain, even for Even at the present time, this corridor represents the main defense for southern Tunisia-to the north of it stretch only vast open plains, with line no defensible position which could not readily be outflanked passenger cars, a 30-mile-an-hour average. Supplies Such transport would require the importation of practically all the requisite trucks, which thereupon would require fuel and lubricants from outside the country. Spare parts, servicing facilities, as well as motor mechanics, would Any plan of campaign in North Africa must take into consideration not only the natural difficulties of occupation, but also the limited resources of the also have to be brought into the country, whose mountainous character and heat will undoubtedly mean much repair work. In sum, the occupation of North Africa will raise important future problems ations. This latter factor also bears on the usefulness of Algeria as a base for future oper- area. of supply. (1) Food: In general, only the five coastal plains of Casablanca, Oran, Algiers, Bone, and Tunis offer small or specialized surpluses of food for the occupying Climate troops. In Algeria, the interior and especially the Cheli Valley, are the main sources of the North African meat and wheat supply. The desert regions are deficient in everything except dates. This separation of types of agriculture results in regional interdependence and consequent reliance on transport. For this reason the main roads and railroads run northward, connecting the Algerian plateau and the coastal regions. (2) Water: Water presents a serious problem in all but the coastal regions. The installation of even one division in the high plateaus or in the desert would necessitate careful consideration of the availability of water, since, in many localities, the existing wells and small springs are capable of supporting only the present population. In some of the coastal regions water shortages may also occur during the summer months. Along the southern part of the PhilippevilleTouggourt route, however, artesian wells have an abundant flow. (3) Housing: Except in the large cities-and in these to a limited extent-the housing of even 10,000 men in one region would present a serious problem. In many areas the supply of sawn wood for the construction of temporary barracks is practically non-existent, and climatic conditions in all regions would make camp life for any considerable period of time very difficult and unpleasant. In existent. the interior, billeting facilities for American soldiers are again practically non- (4) Supply Routes: The railway system of North Africa is single-tracked except for short sections about Oran, Orleansville, Algiers, and Constantine. Its steep grades and sharp curves, its many tunnels and high bridges restrict its capacity. Its rolling stock is reported to have deteriorated greatly since the Armistice of 1940. Since that time the road has depended for nearly half of its coal supply on imports from France. To put this railroad in condition for any large scale transport of heavy equipment would require reconditioning of rolling stock and track, as well as the 24 (a) Rainfall.-The climate of French North Africa closely resembles that of California. Rainfall is concentrated in the cool season; the summer is dry. In the coastal areas, where United States troops are now establishing themselves, the rainy season has been under way for a month, and will continue well into May. Rainy spells and clear sunny weather alternate throughout the winter, with sunny days twice as numerous as rainy days. During and shortly after each rainstorm, the soil is muddy and sticky, impeding traffic except on surfaced roads. When the rainfall is particularly concentrated, or when snows melt rapidly in the spring, the streams which flow down from the mountains may become formidable torrents, and portions of the low-lying coastal plains may be seriously flooded by the swollen rivers. November is the rainiest month along both the Moroccan Atlantic and the Tunisian coasts. Along the north coast of Algeria, the peak of rainfall usually comes near midwinter, in December or January. (b) Visibility.-Along the Mediterranean coast of Algeria and Tunis, winter is nearly fog-free. Algiers has fog on less than two days per year on the average. Westward from Algiers fogginess increases, but even Oran expects less than one day of fog per month in the fall and winter. (c) eat.-Winter is far better than summer for intense physical exertion in French North Africa. The coastal temperature from the middle of November and to the end of March averages about 55° F., with a mean daily maximum of 65 minimum of 45°. Along the coast the temperature very seldom touches freezing, although a few miles inland frosts are frequent from December to March. the In the summer dry season, the average daily temperature along coast the dry is 70° or 75°, the inland plateau, around 80° or 90°. In addition, often around season is subject to visitations of the sirocco, a suffocating hot, dry and wind, Tunisia, accompanied by clouds and dust, blowing from the south into Algeria the plateaus, from the southeast into Morocco. The sirocco is most frequent on although even along the north coast it blows on about 20 days per year. 25 SECRET SECRET APPENDIX III SIGNIFICANCE TO GERMANY OF NORTH AFRICAN IMPORTS 1 Textiles Fertilizers European agriculture is now consuming phosphatic fertilizers at a rate of less than 50 percent of the pre-war level. Of the total quantity utilized in Axis Europe now (some 750,000 tons a year), about one-half came from North African For use in the year 1942-43, it has been estimated that Germany would have received about 5,000 tons of cotton and 10,000 tons of wool and animal hair from African trade across the Mediterranean. The bulk of these raw materials would have come from North Africa, although significant quantities of cotton from French West Africa formerly made their way to Germany via France, and have been included in the above figures. These quantities would have represented about 25 percent of the total German supplies of these fibers estimated to be available for the year 1942-43. Apparently, Germany has already received practically all of the 5,000 tons of cotton she expected from Africa for 1942-43. Of the 10,000 tons of wool and animal hair expected, some 6,000 tons have already been received. The loss of anticipated shipments for the year 1942-43, therefore, is approximately 4,000 tons of wool and animal hair. The deficiency in wool and animal hair will impinge directly upon military supplies of textiles, since it is to this use that practically all these fibers are devoted. Substitution will have to be made of less adequate synthetic materials. This will reduce supplies for civilians; but the reduction is not appreciable, since practically all civilian textiles were already being made from synthetic fibers. In subsequent years, however, the loss of all African shipments will definitely affect Germany's ability to carry on military efforts on the scale of 1941-42. Foodstuffs phosphate rock. It is unlikely that substitutes can be found. A further reduction in the rate of fertilizer application will ensue. Within the following years, this factor can be expected to have appreciable effects upon agricultural yields. Minerals In addition to phosphate rock, North Africa exported to Europe significant quantities of Moroccan cobalt before the war. Germany expected to obtain about 130 tons of cobalt (metal content) during the last year, or about 25 percent of her needs. What amount has actually reached Germany is not known. Potentially, however, Morocco's cobalt output, if stepped up to the pre-war level of 1938, could have satisfied all of Germany's requirements. As cobalt has double uses as either ferro-alloy (its properties are even more valuable than nickel) or as a catalyst in an & important synthetic gasoline process, the subtraction of the North African supply from the Axis economy may further inconvenience the production of cutting tools and synthetic gasoline. French North Africa produced considerable quantities of high-grade iron ore pre-war times, but little went to Germany. As for coal, North Africa has had in to operate at a deficit. Though production-which is centered on the MoroccanAlgerian border-has increased greatly since 1940, it is still far from sufficient will to meet transportation and power requirements. At least 500,000 metric tons probably have to be imported during the coming year to maintain the economy. A. Grains.-Germany expected to import about 200,000 tons of wheat from Africa via France during the current year. To date only about 80,000 tons are known to have been received. Corresponding expectations for barley were in the neighborhood of 100,000 tons. Some 30,000 tons are known to have been received. APPENDIX IV B. Meats.-Smal quantities of meats-about 8,000 tons-were expected from Africa for the current year. It is believed that 6,000 tons have already been received GENERAL HENRI HONORÉ GIRAUD C. Fats and Oils.-From Africa (including French West Africa) Germany was expecting to receive at least 60,000 tons of vegetable oils. Conceivably, as many as 100,000 tons could have been obtained. It is known that Germany has received only about 15,000 tons to date. D. Fruits and Vegetables. Africa was a very important source of these commodities for Germany. It was expected that she would receive some 300,000 tons of various kinds of fruits and vegetables for the year 1942-43. Only a small percentage (roughly 10 percent) of these has already arrived. The loss of North African sources will certainly affect the German food position adversely, particularly with respect to fats and oils, and fruits and vegetables. In both cases, the quantities involved represent appreciable percentages of total supplies available to Germany. Eisenhower has delegated to General Henri Honoré Giraud responsi- The General "for military and civil affairs in the French North Africa Area". and I under- bility General is quoted as saying of his French colleague: "He issued by stand American each other perfectly." The terms of a special communiqué organize the Eisenhower recognized that General Giraud's function is "to of Germany General French again to take up the fight", with a view to "the defeat communiqué adds: Army and the liberation of France and her empire". The and equipment and "The Italy United States has pledged itself to assist in providing arms for this new French Army." Giraud's Background which Giraud organizes will undoubtedly be a he force possesses to be reckoned The French with. army Giraud himself is an unusually distinguished soldier; I Based on a memorandum prepared in the Economics Division of the Office of Strategic Services, 26 1 Prepared in the Western European Section of the Office of Strategic Services. 27 SECRET an unparalleled throughout France.knowledge of French Africa: and he is dramatically popular General Giraud was educated as an infantry officer at St. Cyr. During the Great War, he fought in Champagne with great courage and distinction. In the recapture of the famous Malmaison Fort, he was left on the field for dead; but he survived as a prisoner in the hands of the Germans. At the outbreak of war in 1939, Giraud assumed command of the Eighth Army Corps. In May of 1940, he led his forces to the aid of Belgium. After advancing through Brabant as far as the Dutch border, he was called to the French right wing, to rally General Corap's army. He made his way to the front lines only to be surrounded and captured by the Germans. Between graduation from St. Cyr and the outbreak of the Great War, General Giraud saw much service in the French colonies. His activities were especially associated with Morocco, where he was known as one of Lyautey's "young men." After the Armistice of 1918, Giraud returned to Morocco, he played a prominent part in the suppression of the Riff revolt, and later succeeded Lyautey as commander of the French forces there. Escape From the Germans While Giraud was a prisoner during World War I, he made, it is said, five attempts to escape before being successful in rejoining his unit, In April of the present year, world-wide interest was aroused by the report that he had again escaped from the Germans. The Nazis resorted to various tactics in the effort to obtain his return to the fortress-town of Königstein, where he had been previously interned. Giraud, however, was successful in resisting attempts to secure his surrender. He is reported to have remained in retirement at his sister's home near Lyons, until he appeared in Algiers to assume his present responsibilities. In a moving letter to his children, which recently was confidentially circulated, General Giraud urged his sons and daughters, in the event of his death, to work untiringly for the liberation and reconstruction of France. "I forbid you," he wrote, "to resign yourselves to defeat. The method used does not matter. The goal alone is essential. Everything else must come after We should be ready at all moments to take advantage of the opportunities that will be offered us." 28 . s. GOVERNMENT PRINTING OFFICE 1948 EDITION FRENCH NORTHWEST PRIMARY ROAD SECONDARY ROAD O hand AFRICA RAILROAD (Standard Gauge) SHOTT (Temporary Lake) RAILROAD (Norrow Gouge) ALLIED ATTACK CAPTURED AIRFIELD SPAIN A T L ANTIC OCEAN N