Full text of Diaries of Henry Morgenthau, Jr. : Volume 605 : Part 2

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125

SECRET

TREASURY DEPARTMENT
PROCUREMENT DIVISION
WASHINGTON

OFFICE OF THE DIRECTOR

January 25, 1943

MEMORANDUM TO THE SECRETARY:

Supplementing my report to you of January

18, 1943, the purchases against the North African
Rehabilitation Program from January 18, 1943, to

January 24, 1943, totaled $442,021.87, or a total
of purchases for the program thus far of $9,966,626.36.

Attached is report giving status of shipping
against these purchases.
The Committee, headed by Governor Lehman,

and the Lend-Lease Administration have not as yet

finalized requisitions for that requirement. These
requisitions are now in a process of being prepared
jointly with the Committee, Lend-Lease Administration,
War Production Board, and Smaller War Plants Corpor-

ation. No purchases have as yet been made for this
program.

BUY

Director of Procurement

you Clifton E. Mack

SHIPPING REPORT AS OF JANUARY 23, 1943

923 Tons

New & used clothing
Cotton piece goods

1750 "

Under Load

At Port

Waiting Vessels

417 Tons

254 Tons

712

790
186

Shoes

On Hand At NYC

En Route

To Port

192 Tons

1129 "

Shipped To Date
From U. S. A.

Commodity

4196.5 "

1545 "

119.5 "
171.5 "
188.75 "

Powdered milk
Tea

Matches

Copper sulphate
Drugs

2488.5 Tons
1

Books & booklets
Nails
Lamp Chimneys

6.067 "

2 Tons
100

286.5 "

.045 "

Printers ink
Mach. finished book paper
Cordage & twine

Cotton thread

8.5 11

Newsprint

177.75
1611.5

Raw sugar

Refined sugar

37.25

.044 Tons

2. Tons
192.75 "
"

70
81

"
"

Lactose

1
1

Cotton hose

Nipples, nursing bottles &

Eye Cups

1000 Each

Phonograph records
Tooth brushes
Totals

11,456.612

3,637.544

1,474

.75

1,331.75

SECRET

127

January 25, 1943.

Dear Mr. Stettinius:

On behalf of the Secretary I am
acknowledging your letter of January
23, which transmitted for his personal
attention a confidential copy of the
report on the status of the Soviet Aid
Program as of December 31, 1942,

This will be brought to Mr. Morgenthau's
immediate attention as soon as he is
back at his desk.
Sincerely yours,

(Signed) H. S. Klotz
nmc

H. S. Klots,
Private Secretary.

Honorable E. R. Stettinius, Jr.,

Administrator, Office of Land-Lease
Administration
Five-Fifteen 22nd Street, N.W.,

Washington, D. C.

Returned to Stettinius at his request, 8/24/43

File in Diary
GEF/dbs

SECRET
OFFICE OF LEND-LEASE ADMINISTRATION

128

FIVE-FIFTEEN 22d STREET NW.
WASHINGTON, D.C.
E.R. Stettinius, Jr.

January 23, 1943

Administrator

The Honorable Henry Morgenthau

Secretary of the Treasury
Treasury Department
Washington, D. C.

Dear Mr. Secretary,

Attached hereto is your personal and

private copy of the report on the status of
the Soviet Aid Program, as of December 31,
1942.

Sincerely yours,

Attachment

They E. R. Stottingue

Page 129

Report on status of Soviet Aid Program
as of 12/31/42: Returned to Stettinius
at his request, 8/24/43

130

BRITISH AIR COMMISSION
1785 MASSACHUSETTS AVENUE

WASHINGTON, D. c.
TELEPHONE HOBART 9000
EASE QUOTE
VERENCE NO

With the compliments of British Air Commission
who enclose Statement No. 69 - Aircraft Despatched
- for week ended January 19, 1943.

The Honourable Henry Morgenthau, Jr.

Secretary of the Treasury
WASHINGTON, D. C.

January 25, 1943.

131

STATEMENT 80.69

MOST SECEST

Aircraft Despatched from the United States
Week Ended January 19th 1943.

TYPE

DESTINATION

ASSEMBLY
POINT

FLIGHT DELIVERED

SEA

AIR

FOR USE IN CANAD

CONSOLIDATED

Berwuda enroute
Canada enroute

U.K.

Liberator GR V

U.K.

Catalina 1B

BREWSTER
5

Bernuda

DOUGLAS
3

oston III A

CURTISS

Middle East

Port Sudan

Middle East

South Africa

Mitchell II

Bahamas

Nassau

Harvard
Harvard

South Africa
8' Rhodesia

Capetown
Purban

Harvard

India

Bombay

India

Bombay

Kittyhawk

GLENN MARTIN

Baltimore III A

LOCKHEED
4

Ventura

NORTH AMERICA
2

24
9

VULTEE

Vengeance

Total

Please note that 2 Waco Gliders reported in Statement No.6 week ended January 12 as being
flight delivered to U.K. were actually delivered to Canada.

itish Air Commission,
Movements Division,
January 23, 1943.

132

January 25. 1943

Dear Mr Vice President:

In the Secretary's absence, I
acknowledge receipt of your letter of
January 19, 1943, enclosing copy of
Order No. 5. signed by you, which
clarifies the functions with regard
to certain imported commodities together

with copies of your letters to Secretary
Jones and Secretary Hull.

Faithfully yours,
(Signed) D. W. BELL

Under Secretary of the Treasury

Honorable H. A. Wallace,
Chairman,

Board of Economic Warfare,
Washington, D. C.
DWB:NLE

1/27/43 Mailed from Mr. White's

office (IS)

HPW

Treasury Department

Division of Monetary Research133

O
To:

Date

Jan. 23, 1943 194

Mr. D. W. Bell

You may be interested in this
development of the controversy between
B.E.W. and Jones.

H.D.W.

(Please return to Miss Chauncey)
MR. WHITE

Branch 2058 - Room 214

BOARD OF ECONOMIC WARFARE
WASHINGTON, D. C.

Office of the Chairman

January 19, 1943

The Honorable

The Secretary of the Treasury
Dear Secretary Morgenthau:

Since I appeared on December 8 before the
Senate Banking and Currency Committee, Mr. Jeffers

has placed the administration of our foreign rubber

program in the hands of Rubber Reserve Company. As

Chairman of the Board of Economic Warfare, I have

today signed Order No. 5, which clarifies functions
with regard to other imported commodities. A copy
of this order is attached for your information
along with copies of letters which I have written
to Secretary Jones and Secretary Hull.
Sincerely yours,

Hawallace
H. A. Wallace
Enclosures

swhite134

135

ORDER NO. 5

Providing for Additional Delegations of

Authority and Prescribing Procedures and
Methods of Administration with Respect
to Imported Materials Contracts

Pursuant to the authority conferred by Executive Order No. 8839
of July 30, 1941, as amended, and Executive Order No. 9128 of April 13,
1942, and in order to avoid duplication of functions and personnel and
to increase efficiency of operations, the following procedures and
methods are prescribed with respect to the procurement and production
of imported commodities financed through the Defense Supplies Corporation,
the Metals Reserve Company, the U. S. Commercial Company and the Defense
Plant Corporation:

1. Effective February 25, 1943, and except as may thereafter be
expressly provided by the Chairman of the Board, the negotiation, preparation, supervision, and administration both in the United States and
abroad of all existing or future imported materials contracts (as defined
in the published Rules and Regulations of the Board of Economic Warfare,
effective April 20, 1942) financed by any of the above-named agencies,
including development, preclusive operations and related activities, but
not including the corporate execution of contracts, the disbursement of
funds, the necessary accounting with respect to such disbursements, or
the acceptance of delivery of commodities and materials, shall be carried
on by the Office of Imports of the Board of Economic Warfare and through
the foreign representatives of the Board assigned to such functions, under

the direction of the Assistant Director in charge of said Office, subject

to the general supervision and direction of the Chairman and Executive
Director of the Board. All negotiations abroad shall be conducted in
complete accordance with the provisions of the Clarification and Interpretation of Executive Order No. 9128 of April 13, 1942, in Respect of Certain
Functions of the Department of State and the Board of Economic Warfare,
issued by the President on May 20, 1942.
2. The above-named agencies shall continue to be responsible for
and conduct the corporate execution of imported materials contracts,
the disbursement of funds thereunder, the necessary accounting with
respect to such disbursements, and the acceptance of delivery of commodities and materials, pursuant to directives from the Board of Economic
Warfare, in accordance with the published Rules and Regulations of said
Board.

3. Effective February 25, 1943, all correspondence and communica-

tions relating to such negotiation, preparation, supervision or administration of imported materials contracts shall, except as may be thereafter
provided by the Chairman of the Board, be conducted by said Office of Imports or through said foreign representatives of the Board; and all such

136

-2-

correspondence and communications to and from persons or missions sent

abroad by the Board or any agency named in this Order shall be conducted

by said Office of Imports through the facilities of the Department of

State and the diplomatic missions, unless other means are a greed upon
with the Department of State, in complete accordance with the Clarification

and Interpretation of Executive Order No. 9128, of April 13, 1942, in
Respect of Certain Functions of the Department of State and the Board
of Economic Warfare, issued by the President on May 20, 1942.

4. On or before February 10, 1943, the Executive Director of the
Board, after consultation with the head of each of said agencies and the
Director of the Bureau of the Budget, shall submit to the Civil Service
Commission, pursuant to War Manpower Commission Directive No. 10, of-

fective September 27, 1942, entitled "Directive with Respect to the

Transfer and Release of Government Employees", a request for the transfer
to the Board of Economic Warfare of such of the employees of such a gencies

as are engaged, entirely or primarily, in the negotiation, preparation,
supervision or administration of imported materials contracts.

5. In order to avoid the possibility of delays or disruptions

in foreign procurement and development activities, the Office of Imports,
with the approval of the Chairman of the Hoard and the consent of the
agency concerned, shall be authorised to utilise, under its administrative direction, any of the employees of any of the a geneies named in
this Order whose requested transfer pursuant to Section 4 of this Order
has not been completed by February 25, 1943.

6. Nothing in this Order shall in any way modify or affect re-

lations or arrangements heretofore existing between the War Production

Board and the Board of Economic Warfare.

/o/

H. W. Wallace
Chairman

Dated: January 19, 1943

137

COPY
Board of Economic Warfare

January 19, 1943
The Honorable

The Secretary of Commerce

Dear Mr. Secretary:
The President's memorandum of December 22, 1942, addressed

to all departments and agencies, requested that immediate
steps be taken to eliminate any duplication or overlapping
of functions between the various Government agencies.

In the light of the President's request, I have reexamined
the operating relationship that exists between the staffs
of certain of the RFC subsidiaries and the Office of Imports
of the Board of Economic Warfare in the handling of the
Government's imports program, and have cone to the conclusion

that, notwithstanding the best of intentions of all parties
concerned, the present relations are not satisfactory, and

a basic simplification must be made in the procedures and
methods of operation.

The basic difficulty, as I see it, is that no clear-out
division has been adopted between the programming and

administration of our development and procurement projects

on the one hand, and the financing of such projects on the
other. Because of a failure to recognise this principle,
the attempts heretofore made to eliminate duplication of
effort, have been abortive. Early last fall an attempt was
made to solve the problem by giving the staff of the Board
primary responsibility for programs of an essentially develop-

mental character, leaving the more conventional procurement

projects under the primary jurisdiction of the financing

corporations. This arrangement broke down, not only because

of the difficulty of distinguishing in individual cases be-

tween development and procurement projects, but, even more
important, because even where the line was clear, the
arrangement involved a confusing division of staff and

responsibilities abroad. The effort made to meet this latter

difficulty in the case of Brasil, by unifying all field

personnel in a so-called "United States Purchasing Commission",

has broken down, since, without clear-out division of re-

138
2 - The Secretary of Commerce

sponsibility between the Washington offices, the merging of
the staffs has created an insoluble problem of dual responsi-

bility.

In order to meet this basic problem, I am today issuing Order
No. 5, copy of which is enclosed, which separates sharply the

responsibility of the Board's staff and the responsibilities

of the staffs of Defense Supplies Corporation, Metals Reserve
Corporation, Defense Plant Corporation, and the U. S. Commercial

Company. This Order follows the simple principle that, with
respect to all imports work the negotiation, contract preparetion, supervision and administration of contracts will be discharged
by employees of the Board, while corporate execution of contracts,
disbursement of funds, the necessary accounting with respect to
disbursements, and the acceptance of delivery of commodities and

materials, will be handled by the financing agencies. In some
instances, particularly in Brazil, where the Board has previously
transferred its own personnel to the staffs of the financing
agencies and recruited others to be placed on their payrolls,
it may be necessary to transfer to the Board's staff certain
of the financing agencies' employees now engaged in functions

for which the Board will hereafter have sole responsibility.
Provision is therefore made in the Order that the Executive
Director of the Board, after consultation with the heads of
the financing agencies and with the Director of the Budget,
shall request the civil Service Commission to make the appropriate
transfers.

I am confident that this step will serve to increase substantially the efficiency of the work of our Government
as it relates to the imports program, and will enable all
of us more effectively to discharge our respective responsibilities under Executive Order 9188.

Sincerely yours,

H. A. Wallace
Enclosure

135

NOT TO BE RE-TRANSMITTED
COPY NO.

U.S. SECRET

BRITISH MOST SECRET

OPTEL No. 28

Information received up to 7 A.M., 25th January, 1943.
1. NAVAL

A convoy bound for RUSSIA was unsuccessfully attacked yesterday by
4 torpedo sircraft, 2 of which vere shot down. On night 23rd/24th Norwegian manned
motor torpedo boats attacked objectives south of BERGEN. Damage was done to a
oyrites mine and cuays. A watch post was set on fire and a beached ship of 2,000
Lons torpedood. 3 prisoners were taken and n JU 88 shot down. One of H.M. Submarine
sank a 2,000 ton ship off DJERBA TUNISIA on 17th and another 2,000 ton ship west
of TRIPOLI (L) on 18th.
2. MILITARY

LIBYA. The enomy has retrested west of north and south line through
2AUTA. TR.POLI town not much destroyed but thorough destruction in harbour and
entrance Mocked.

TURISIA. The enery has been oushed back on the SILIANA-PONT DU FAHS

road to 3 point about 15 miles southwest of PONT DU FARS. The road leading south
over DJEBIL BARGOU has been cloared for n distance of 6 miles. The enemy advance
form the OUSSELTIA VALLEY har been driven back about 5 miles but they have captured
the high ground east of AIN RESTOUR. In attac's on DIEBEL-OUSSELAT the enemy is
be Lieved to have gained some initial successes.
3. AIR OPERATIONS

23rd/24th.

LORIENT. Nearly 300 tons of bombs dropped. Photographs which ingluded Fortress damage previous day show much destruction.
DUSSELOORF. 200 tone of bombs relonsed.

FRENCH BORTH AFRICA 21st/22nd. Bisleys successfully attacked transport nd communications in the TUNIS and PORT DU FAHS areas vaile Tellingtons bombed

BIZERTA airfield. 22nd. A total of 70 D.D. bombers nade 3 attacks on TUNIS sirfield and Alliad fighters attacked ground targets noar the battle area. At night
KAIROGAN and MEDERINE Landing Ground wore ettacked. 23rd. 35 U.S. Fortresses
attacked LIZERTA Harbour, one large ship was sunk and snother probably damagod.
U.S. Lightnings destroyed 25 vehicles on the GABES-BEN GARDANE Road. many ensual-

tins during all these operations 42, 10, 12. Allied 12 missing.

LIBIA. 22nd/23rd and 23rd. Attacks maintained on retreating enemy
A.T. betreen ZUARA and MEDERINE. MEDENINE and B.N GARDAN landing grounds and to
end in ZUARA Eroc word bombod.

MEDITEPRANEAN. 22nd. U.S. Marcuders with Lightning escort in

icilian Channel scored two hits on a ship which WILD left listing. 23rd. Aircraft
From MALTA, Wellington bombars, Wellington torpedo aircraft and Beaufort sank 14
000 ton ship north-northwest of USTICA ISLAND, damaged another or the same size

and also hit C destroyer. Three barges off Tunision Coast vero sunk.
SARDINIA. 21st. Wellingtons carried out attack at ELMMS airfield

reported highly successful.

140

January 26, 1943
TO THE SECRETARY:

Total subscriptions received to the

two billion dollar certificate offering
aggregate $6,400,000,000 of which $1,472,000,000

allotted in full, leaving allotment of fourteen
percent to commercial banks. Total allotment
will amount to about $2,160,000,000, of which
about six hundred million dollars is new money.
Debt limitation bills introduced in both House
and Senate yesterday. Hearings are set for
Friday morning in House and Saturday afternoon
in Senate.
BELL
(Initialed) D.W.B.

Via Coast guard

141

January 26, 1943

TO THE SECRETARY:

Colonel Bernstein is here with a
special confidential message for you from
General Smith re your visiting his area.
He would like to fly down to see you to

deliver this message. I suggest that he
come next weekend if that is convenient

to you and he can get transportation.

BELL

DWB:NLE

142

January 26, 1943.

Conference in Mr. D. W. Bell's Office
January 26, 1943
10:00 A.M.
Present:

Mr. D. W. Bell
Mr. Berle, State Department
Mr. Pasvolsky, State Department
Mr. H. D. White

Before Secretary Morgenthau left for Cuba he asked Mr. Bell to
ask to see Secretary Hull to ascertain Secretary Hull's opinion on
taking the next step with respect to the International Stabilization
Fund proposal.

Mr. Bell called Secretary Hull's office on Monday, January 18,
and Secretary Hull's office promised to let Mr. Bell know about the
appointment. Mr. Berle telephoned Mr. White on Monday, January 25,

to say that Secretary Hull had asked him to get in touch with the
Treasury in lieu of the meeting in Secretary Hull's office. Mr. White
asked Mr. Berle whether he was to speak for Secretary Hull at this
meeting and Mr. Berle said yes. The meeting was arranged for 10:00
on January 26 in Mr. Bell's office.
Mr. Bell began by saying that at Cabinet meeting sometime previously, he got the impression that there were a few things to be
cleared up with the British before going forward with the further
consideration of the proposal. Mr. Berle explained that what they
had agreed upon to do was to call a conference of the British,
Russians, Chinese and Americans at which meeting the American draft
would be submitted and discussions would take place.

Mr. White stated it was his understanding that when the matter
of a proposal for an International Stabilization Fund and Bank was
submitted to the President by Secretary Morgenthau that the President
had indicated he was interested and had asked Secretary Morgenthau
to take up the matter with Secretary Hull, Secretary Jones and the
Board of Economic Warfare and then speak to him after the Secretary
had talked with these people. Mr. White thought that before any
official conference was arranged that it would probably be necessary
for Secretary Morgenthau to see the President. Mr. White thought
that before doing that, more progress might be made by continuing

to handle it at an informal level and suggested that a letter, a

draft of which is appended, be sent out to various Governments. After
further informal discussions had taken place and we had a better idea
of the reactions of the technicians, of various Governments, Secretary
Morgenthau could then speak to the President and decision could be
made as to whether to go ahead with a mal'conference.

143

-2The letter was read and Mr. Pasvolsky thought that was the best way

to handle it and suggested the addition of a phrase in the letter
which was agreed upon. Mr. Berle thought that would be a better way
to proceed also but said he thought in view of the general situation,
it would be better to submit the draft proposal to the British,
Russians and Chinese, as already had been agreed upon, and to inform

the British that we propose to send copies to all the Governments
and to suggest to the British they might like to do the same with
their draft proposal; then allow about a week to elapse. We could
then go ahead and send the letter to the various United (and

Associated) Nations.

Mr. Bell said he would be troubled by sending the letter to
some of the United Nations and not to the others. It was agreed
that the draft proposal and the accompanying letter would go to all
the United and Associated Nations. It was also understood that the
State Department would go over the list of nations to make certain
that the list contained the appropriate governments.
Mr. White was to send a number of copies of the International
Stabilization Fund proposal to the State Department as soon as they
were mimeographed and Mr. Berle was to forward copies to the Russian,
Chinese and British Governments.
H. D. White

144

Dear Mr. Minister:
I am sending for your examination a preliminary memorandum and

a preliminary draft of a Proposal for an International Stabilization

Fund of the United and Associated Nations. These documents were pre-

pared by the technical staff of the United States Treasury in consultation with the technical experts of other departments of this Government.

These documents are sent to you not as an expression of the

official views of this Government but rather as an indication of the
views widely held by the technical experts of this Government. I

hope you will examine these documents and submit them for critical
study by the technical experts of your Ministry and your Government.
After you and your experts have had opportunity to consider these
documents, you may wish in the not too distant future to send one
or more of your technical experts to Washington to give me your pre-

liminary reaction to the draft proposal, and to discuss with our
technical experts the feasibility of international monetary co-

operation along the lines suggested in these documents or along any
other lines you may wish to suggest.

It seems to me that the draft proposal points the way to an
effective means of facilitating through cooperative action the
maintenance of international monetary stability and the restoration and balanced growth of international trade. It is my hope
that as a result of unofficial discussions involving no commitments, we may find a sufficient area of agreement to warrant proceeding on a more formal basis.
Sincerely yours,

Secretary of the Treasury.

145

January 26, 1943

Dear Dr. Clarkes

Mr. Plumptre has been kind enough to send me a copy of your
dispatch to him dated January 22, 1943, concerning the tentative
decision of Canada's U.S. dollar exchange reserve.

It appears, from your reply, that there is a misunderstanding
conserning the basis of our tentative views. It is true that one
of the factors taken into account is the relationship between

Canada's reserve and that of other countries. However, this was
of only minor importance. The major considerations were Canada's

total international financial situation since the outbreak of war
and the over-all policy of this Government in extending financial
assistance to our Allies.

The prime purpose of the policy of this Government in extending

financial assistance to the United Nations is the prosecution of the
nar. In view of Congressional directives and public consitments made
by the Administration, it would be most difficult to defend extension
of financial aid to the Allied Governments for the purpose of providing
for their post-war needs.
So far as concerns the second major consideration, we were
dubious about the feasibility of evaluating Canada's U.S. dollar

position without reference to changes in her over-all international
financial situation. Other factors influencing our decision were
(1) the fact that your suggested minimum figure is higher than the

U.S. dollar reserve held by Canada at the outbreak of war in September

1939, and (2) the lauk of any justifiable basis for special treatment of Canada's post-war needs.

There is to be another meeting tomorrow morning at which time

your views will be submitted. We shall, at that time, also examine
very carefully your suggestion for handling the net proceeds of
security sales.
Very truly yours,
(Signed) N.D. White
H. D. White,

Assistant to the Secretary.
Dr. W. C. Clarks,
Deputy Minister of Finance,
others, Canada.
TMK rr 1/26/43

146

January 22, 1943.
EX-234

IMMEDIATE

12.40 p.m.
CYPHER

Following for A.F.W. Plumptre from W.C. Clark,

Deputy Minister of Finance, begins:1. Please thank Dr. Harry White for the consideration
which he had given to the proposal set forth in my memorandum
of January 7th.

2. I am disappointed, of course, but I can see the
reasons which have led Dr. White and his committee to take

the position they have. As you point out, the chief
differences between his approach and our own lies in the fact
that we are concerned with the post-war position and the postwar relations between the two countries, while he and his

group seem to be worried over the possibility of public
criticism based primarily on possible comparisons between the
exchange reserve which I had suggested for Canada and that

which may be agreed upon in the case of certain other countries.

Of course I think such criticism would be more tenable if our
exchange reserves were being built up as a result of lend-lease
assistance by the United States to Canada as in the case of
the other countries with which comparisons would be made.

Actually, however, we think that we are giving the United

States dollar for dollar value in the delivery of war supplies
which can be secured here quickly and economically. Furthermore
in making comparisons between countries, regard should be

had to Canada's debtor position vis-a-vis the United States,

the peculiar vulnerability of her trade position and the other

147

EX-234

Page 2

considerations outlined in my memorandum.

3. I still believe that the principles and considerations
developed in my memorandum of January 7th were sound and

appropriate and that the size of the reserve which I suggested

therein was likely to be in the best interests of both countries.
I am not in a position to make any alternative suggestion which
would be sound on the basis of the principles that seem
relevant to us and of course I would not consider this a

matter for bargaining. You may therefore tell Dr. White that we
are prepared to leave ourselves in his hands if the Treasury
believes that they must settle the question primarily on the
basis of considerations relating to possible comparisons with
settlements reached for other countries. You might point out,
however, that while, as he says, the difference between the two
suggestions for the minimum figure is not as an absolute sum very

large, it represents nevertheless a substantial percentage and
would probably bring forward by eight or ten months the time
when drastic action would have to be taken to protect our reserves
if a drain upon them began in the immediate post-war period.

4. If the Treasury feel they must adhere to the minimum
figure suggested by Dr. White, I would make only this one suggestion. Under those circumstances would he agree that the United

States authorities would have no objection if we should wish to

pay off in the next year or two maturing or callable securities
payable

/in U.S. funds up to the amount, say, of the net proceeds of sales
of securities after the date of the new arrangement. This would

avoid a further impairment in our capital position vis-a-vis the
United States.

5. You should point out to Dr. White that of course there
was no suggestion in my original memorandum or in our discussion

that the provision in regard to security sales should be made
retroactive.
6. I have expressed our position frenkly but have no

148
EX-234

Page 3

objection to your showing this despatch to Dr. White. As we

are prepared to leave the question in his hands, I do not think
any further discussions are necessary but in view of our
Parliament Meeting next week, we would appreciate anything he can

do to expedite a decision. Ends.

RS:

Copy dsl, rl
1-29-43

149
OFFICE OF LEND-LEASE ADMINISTRATION
FIVE-FIFTEEN 22d STREET NW.
WASHINGTON D.C.
E. R. Stattinius, Jr.
Administrator

January 26, 1943

MEMORANDUM

To:

The Honorable Henry Morgenthau

From:

E. R. Stettinius, Jr.

Subject:

Executive Reports

Transmitted herewith, for your information, are copies of the Executive Reports
on lend-lease operations, as of December 31,
1942.

Attachments

0.0036 nobu-up

150

CONFIDENTIAL
Executive Report No.1

Office of Lend-Lease Administration
STATEMENT OF ALLOCATIONS, OBLIGATIONS AND EXPENDITURES

OF FUNDS APPROPRIATED TO THE PRESIDENT
Monthly Report as of Dec. 31. 1942
( Thousands of Dollars)

Appropriation Category
Ordnance and Ordnance Stores

Adjusted

Appropriations

Cumulative to December 31, 1942
Allocations
Obligations
Expenditures

$ 2,026,400

1,843,592

$ 1,621,939

2,770,877

2,708,009

2,596,740

1,545,734

911,608

791,034

662,366

453,853

2,416,668

2,209,024

1,737,321

975,892

367,016

361,777

328,255

156,841

Production Facilities

1,162,764

Agric. and Indust. Commodities

7,218,503

1,147,296
6,641,170

1,023,902
4,355,391

3,353,414

Servicing, Repair of Ships, etc.

531,470

514,680

331,079

274,537

Services and Expenses

971,694

445,140

216,078

166,016

20,000

16,413

13,951

13,620

$18,397,000

$16,678,135

$12,887,022

$8,602,506

Aircraft and Aero. Material
Tanks and Other Vehicles

Vessels and Other Watercraft
Misc. Military Equipment

Administrative Expenses
Total

Procuring Agency

Adjusted

Limitations

$ 921,520°

741,079

Cumulative to December 31, 1942

Allocations

Obligations

Expenditures

$ 6,817,727

$ 5,963,070

$ 5,506,952

3,659,401

Navy Department

3,238,169

3,163,226

2,278,106

1,060,650

Mar. Com. and War Shipping Admin.
Treasury Department

2,154,238

1,858,621

1,441,843

1,154,463

3,189,481

2,717,519

1,854,868

1,083,781

Department of Agriculture

2,982,100

2,961,199

1,793,252

1,632,578

15,285

14,500

12,001

11,633

$18,397,000

$16,678,135

$12,887,022

$8,602,506

War Department

Other

Total

Funds for freight and other necessary charges are not included in obligations.
"THIS DOCUMENT CONTAINS INFORMATION AFFECTING THE NATIONAL DEFENSE OF THE UNITED STATES

WITHIN THE MEANING OF THE ESPIONAGE ACT, U.S.C. 50 31 AND 32. THE TRANSMISSION OR THE
REVELATION OF ITS CONTENTS IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW."

151

CONFIDENTIAL
Executive Report No. 2

Office of Lend-Lease Administration

STATEMENT OF LEND-LEASE AID
Monthly Report as of Dec. 31, 1942
(Thousands of Dollars)
Cumulative to
Type of Aid

Month of

Dec. 31, 1942

Nov. 30, 1942

December

November

$6,547,679

$5,854,003

$693,676

$620,018

265,897

256,144

9,753

12,087

835,479

795,868

39,611

116,900

554,065

544,032

10,033

55,133

49,613

45,927

3,686

5,371

Total Services

$1,705,054

$1,641,971

$ 63,083

$189,491

Total Goods and Services

$8,252,733

$7,495,974

$756,759

$809,509

Goods Transferred

Servicing, Repair of Ships, etc.
Rental of Ships,

Ferrying of Aircraft, etc
Production Facilities in U. S.
Miscellaneous Expenses

Data on Goods Transferred include value of goods procured from lend-lease appropriations
to the President and to the Army and Navy.

N.B. This report excludes data on the value of Goods in Process. At August 31, 1942,
the amount from appropriations to the President was $1,360,195,000, comprised of the

items "Articles Awaiting Transfer or Use" and "Articles in Process of Manufacture." It
is not possible to determine the value of Goods in Process from appropriations to the

Army and Navy.

Cumulative to December 31, 1942
U.S.S.R.

$5,040,839

$126,260

$1,261,024

$119,556

$6,547,679

233,907

951

27,656

3,383

265,897

657,164

13,057

106,160

59,098

835,479

Total Goods and Services

956

33,942

1,090
-

Miscellaneous Expenses

Ferrying of Aircraft, etc.
Production Facilities in U. S.

13,625
-

Rental of Ships,

Servicing, Repair of Ships, etc.

Total

China

Goods Transferred

Other

Br. Empire

Type of Aid

554,065
49,613

$8,252,733

"THIS DOCUMENT CONTAINS INFORMATION AFFECTING THE NATIONAL DEFENSE OF THE UNITED STATES

WITHIN THE MEANING OF THE ESPIONAGE ACT, U.S.C. 50; 31 AND 32. THE TRANSMISSION OR THE
REVELATION OF ITS CONTENTS IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW."

152

CONFIDENTIAL
Executive Report No. 3

Office of Lend-Lease Administration

DETAIL OF ARTICLES TRANSFERRED
Monthly Report as of Dec. 31, 1942
( Thousands of Dollars )

Cumulative to Dec. 31, 1942 (000 omitted)
Br. Empire

China

$ 277,841

$ 14,661

$ 39,639

$ 41,867

$ 374,008

Ammunition and Components

499,460

19,491

148,288

14,783

682,022

Aircraft

539,493

35,212

310,005

14,031

898,741

Aircraft Engines, Parts, etc.

287,883

2,124

8,964

1,088

300,059

Combat Vehicles

315,698

922

210,305

8,790

535,715

Non-Combat Vehicles

183,053

25,453

139,136

6,664

354,306

Watercraft and Parts

375,147

447

15,549

6,651

397,794

Miscellaneous Manufactures

113,699

7,025

39,816

6,281

166,821

101,869

1,553

1,040,540

Ordnance (Excl. Ammunition)

(Textile, Leather, etc.)

Russia

Other

Total

Agric. Products (Foodstuffs)

937,118

Agric. Products (Excl. Food)

226,500

Machinery

216,161

3,603

62,001

183

281,948

Metals

383,063

8,975

113,909

617

506,564

Petroleum Products

315,289

3,237

14,806

All Other

370,434

5,110

56,224

17,043

448,811

$5,040,839

$126,260

$1,261,024

$119,556

$6,547,679

227,013

Total

513

333,337

"THIS DOCUMENT CONTAINS INFORMATION AFFECTING THE NATIONAL DEFENSE OF THE UNITED STATES

WITHIN THE MEANING OF THE ESPIONAGE ACT, U.S.C. 50; 31 AND 32. THE TRANSMISSION OR THE
REVELATION OF ITS CONTENTS IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW."

153

TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR

WASHINGTON

January 26, 1943

MEMORANDUM TO THE SECRETARY:

There is submitted herewith the operating report
of Lend-Lease purchases for the week ended January 23,
1943.

The increased shipping space continues to hold

firm. Some of the British seaport stocks of steel
are being diverted to American industry through the
medium of the Metals Reserve Corporation.

Director of Procurement

Speech Iten E. Mack

PORVICTORY

BUY
WAR

154

(7.2)

$430.8

(470.4)

$ 31.0

$ 32.2

(25.3)

(28.8)

(30.4)

$ 7.8

$ 27.3

Undistributed
Miscellaneous &

(3.7)

$3.6

$3.7

(3.5)

Expenses

Administrative

China

$58.4

Russia

$889.6

(58.4)

$41.3

(875.8)

$882.6

(41.3)

$41.2

(848.8)

$795.6

(1264.2)

$1224.4

(41.2)

$41.2

(781.6)

$748.1

(1216.9)

$1152.0

(2068.5)

$1972.2

(41.2)

$20.3

(736.1)

$156.6

(1126.8)

$ 661.7

(1932.9)

$ 846.4

(20.3)

(150.2)

LEND-LEASE

AS OF JANUARY 23, 1943

(In Millions of Dollars)

(653.5)
U. K.
$1353.2

(1316.2)

$1270.9

(831.2)
Total

$2735.7

TREASURY DEPARTMENT, PROCUREMENT DIVISION

(2724.5)

(2184.7)
$2227.0

$2092.2

STATEMENT OF ALLOCATIONS, OBLIGATIONS (PURCHASES) AND

foreign governments.
Note: Figures in parentheses are those shown on report of January 16, 1943.

tonnage that is either in storage, "in-transit" storage, or in the

port area for which actual receipts have not been received from the

Deliveries to foreign governments at U. S. Ports do not include the

DELIVERIES TO FOREIGN GOVERNMENTS AT U. S. PORTS

Ports#

(Purchases)
tions (Requisitions)
Purchase Authoriza-

Allocations

Requisitions Cleared

for Purchase

Obligations

Deliveries to Foreign

Governments at U. S.

155

January 26, 1943

AGENDA

FOR THE BOARD OF ECONOMIC WARFARE MEETING

TO BE HELD JANUARY 28. 1943 AT 10.00 A.Ma
IN THE OFFICE OF THE FICE PRESIDENT
IN THE CAPITOL

1. Discussion of reports on cork and bristles.
Copies attached - "Report on Cork" and

"Report on Bristles".

2. Oral report on progress by Committee on Gold
Mining in Colombia and Nicaragua.

Attached are the minutes of the meetings of the Board
of Economic Warfare which were held on November 27,
December 17, and December 31, 1942.

filed muster dates held.

COPY 3
156
ON 28 1916

BOARD OF ECONOMIC WARFARE

Office of Imports

Miscellaneous Commodities Division
OF

CORRECTO

REPORT ON
CORK

424838

CONFIDENTIAL

January 25, 1943

CONFIRMATION

157

CONTENTS

1. Summary

2. Uses

3. Controls
4. Source of Supply
5. Substitutes - Foreign and Domestic

6. Present Stocks in U. S.
7. Expectation for 1943 and 1944

8. Requirements of Friendly Nations
9. Purchasing for Government Stockpile

158

Summary

1. From an essential military standpoint stocks of cork now in this
country are sufficient for at least three years.
2.

Importation of cork should be definitely secondary to any strategic

materials available in Spain, Portugal or Northern Africa; in political
or preclusive purchasing negotiations cork may be utilized freely as a

bargaining tool.

3. Operations in acquiring stockpile should be carefully regulated to

avoid purchasing undesirable surplus stocks for non-essential needs
causing economic waste of manpower, equipment, port and transportation

facilities.

With the expected resumption of shipments from North Africa,
care must be taken to correlete the procurement program there
with the other North African problems. If, because of changes
in the war situation, shipments are substantially reduced or
eliminated from Spain, Portugal and North Africa, the stockpile
will take care of immediate needs, but a more intensive search for
substitute materials will have to be made.
CORK

Description:

Cork is the outer covering or bark of the cork oak tree. (Quercus Suber)
There are three commercial classifications:
1. Corkwood

2. Milling

3. Grinding

Uses

Corkwood is used principally in the manufacture of marine goods, such as

buoy rings, life preservers, floats, etc., and cork stoppers; milling cork

in the manufacture of gaskets, crown can liners: grinding cork in the manufacture of insulation board, linoleum, pipe covering.

Under normal conditions from 50 to 60 per cent of total cork consumption
goes into insulation, 15 per cent into crown CBD liners, 10 per cent into
gaskets, washers, specialties, and ? per cent into linoleum.

159
3
2

Substitutes - Foreign and Lomestic
Controls

In addition to many Foll established substitutes of donestic origin (such

Cork EAS one of the first imported materials to be placed under
control. The War Production Board control order is GPO M-8,
issued in May 1941, and amended several times since then. The original

as Rock Cork, hair felt, celotex, glass tool, sandust, etc.) for insulation

purposes there is also e bark "Pao Santo" available in Brezil which could
be used. Use of this material is not commercially sound because of high
price as compared to grinding cork and other equally good domestic substitutes. A fee small shipments were imported from Brazil for testing purposes
on a commercial soele but results indicates two not "superior to domestic
substitutes and under present shipping conditions increased production in
Bruzil is not warranted.

stockpile recommendation WAS issued in May 1941, and confirmed again
in September 1941. The present stockpile recommendation is 64,000

metric tons of cork and 6,000 metric tons of corkwood. It is expected
that . new stockmile directive *ill be issued shortly directly from
the Stockpile and Transportation Division of the Wer Production Board
to this Board, rather than the procedure heretofore, which has been for

Bark of the Louglas fir tree available in the United States in large quantities also has been tested recently but here again results to date indicate
that'us of it would be reatricted to manufacture of corkboard and utilization of it will nccessarily be governed by the price factor as compared
to other domestic substitutes.

the recommendation to go from the Cork and Ambestos Brench of the
War Production Board to Defense Supplies Corporation.

The allocation for consumption is currently based on approximately
65,000 tons monthly as compared to the 1941 consumption average of
11,000 tons monthly. With the exception of crown cap liners and cork
stoppers, the use of cork is restricted to defense orders having

Present Stocks in U. S.

rating of A-10 or better and to certain types of insulation.

Total physical stocks of cork and corkwood in this country 08 of
January 1, 1943 were approximately 109,000 short tons, of which industry

At the War Production Board-Cork Industry meeting on January 22, 1943, it
was indicated that a supply for more extended use of cork for certain

owned approximately 65,000 short tons and government 44,000 short tons.
The War Production Board has stated that these stocks are believed

construction purposes might be permitted. It was felt that such a
move was now in order, in view of the supply of cork already in this
country, plus the expectation that importations would continue to come
forward not only from Spain and Portugal but also from North Africa.

sufficient to meet anticipated non-substituteble military needs for at
lonat three years.
(<

Expectation for 1943 and 1944
Source of Supply

Imports for 1943 and 1944 will be limited only by the steamer space

Practically all of the world's supply of cork comes from 8 relatively small
area, principally Portugal, Spain and Northern Africa. Imports since 1939

available. Up to the present, operations in the cork stockpile
did not entail any great difficulties, 63 purchases could be made

are broken down as follows (in short tons)

in sufficient volume through regular trade channels in Spoin and
Portugel. Delivery WEB made on Spenish and Portuguese bosts for which

1939

1940

1941

1942 (Jan/June)

115,715
23,642
17,117

150,799

32,050

Morocco

3,361

1,965

9,656
1,637
7,493

546

Algeria

68,816
15,007
24,794
1,609
113,787

729

137

159,166

169,922

Portugal
Spain

All others

no more critical materials Defo evilable. Insamch CB these countries
need goods from the United States, it is logical to casume that they
will continue ships in service so long es political conditions permit.
To date, the Axis powers hrve not rigidly opposed exportation of cork.

699

2,825
1.138
37,458

Indications of the eveilability of cork is evidenced by the action of
Portugel in the negotictions on the trede treaty with the United Status
for the year beginning July 1, 1943. The Department of State entetively
suggested exports of 105,000 tons. Portugal's counter proposal ELS

Portugel is the principal cork producing country and accounts for approximately half of the total world output. Production in Portugal increased
steedily from about 80,000 tons in 1932 to 125,000 tons in 1940. Spain
normelly produces about one quarter of the total with most of the balance of

for 120,000 tons.

one quarter produced in Northern Africa.

While the freight apnov 1100 tion RUS originally set ct 165,000 'tone

with on A-3 rating, this is theoretical in tter only since conditions
do not indicate any possibility of using U. S. facilities in the noor

future, except in connection with the North African occupation. Unquestionebly, supplies in the producing countries will grently sicked
our needs for 1943 and 1944, but retur1 irrivola could be stopped
completely by n Axis invesion of the Iberica Peninsul or enforced
control of stermer movements or exports.

160

It is expected that as such as 30 metric tons may be available for
shipment from North Africa during 1943, which under the Combined Raw
Materials Board Decision 100 would be available to the United States.
In addition, it is expected, depending upon political and shipping
conditions, that Portugel will ship as such as 70,000 tons and that
shipments
from Spain will be such larger then the 5,000 tons shipped
in
1942.

JAN

1943

Requirements of Friendly Nations
BOARD OF ECONOMIC WARFARE

So long as shinments continue to the U. S. it is reasonable to assume

that they will also continue to other non-Axis countries. On this basis
export requirements from the United States will be mostly for finished
cork products and should not exceed a few thousand tons yearly. Inter-

Office of Imports
Miscellaneous Commodities Division

Departmental Foreign Requirements Committee reports of August 20, 1942,
estimates approximately 2,000 tons yearly for Canada and Latin American
Republics. However in the event all shipments from producing countries were
completely stopped and it was necessary to supply requi rements of all

friendly nations out of U. S. stocks, the quantity involved would be
possibly less then 16,000 tons yearly. This figure is based upon-IbFR

REPORT ON

report of November 1941 on 6 reduced rate of consumption base comparable
to that which would take place in the U. S. if necessary, namely about

BRISTLES

four to one, All of the countries involved have a certain amount of stock
on hand which is evidenced by continuous shipments from Portugal in 1941

and 1942. If they were faced with the fact of no further shipments of
cork the use of their stocks would be strictly limited to essential needs.

Consequently shipments out of the U. S. stocks would undoubtedly not be

necessary in any large quantity for at least a year.

In any real world supply "squeeze" so many substitutes could be utilized
-possibly slightly inferior and more expensive- that the essential export
requirements
above
figures. in actual quantities should prove to be emply covered by the

CONEIDENIIAL

Purchasing for Government Stockpile

Purchases for stockpile have been handled by Lefense Supplies Corporation
on the spot purchase theory. They accept offerings made to them by the
consuming importers as well 80 the jobbing importers. These purcusses are
made on
the6basis
of fee.
not foreign cost plus transportation charges to this
country
plus
service

January 25, 1943

Contracts have been placed for approximately 56,000 metric tons, of which
approximately 50,000 tons have clready arrived and the balance of 8,000 tons
are enroute. Defense Supplies Corporation has made seles of approximately
8,000 tons.
tons, leeving n not balance under their control of approxi sately
50,000

Most of the present stockpile is stored in very unfsvorable locations
and must be moved to other places in order to conform with wortine
regulations involving 0 neevy expense 88 well 08 loss of cork. In order
to force the movement of this stock directly into industry and the
storing of net importations in more fovorable Places, e change in method
of operation is being considered pursuent to which Defense Supplies
Corporation
would
be the sole importer. In this vcy the USG of the present
stockpile could
be enforced.

161

CONZENIS

1. Summary

2. Product
3. Uses

4. World Production
(a) China

(b) India

5. Supplies
(a) Stocks
(b) Imports
6. Re-exports
7. Requirements

8. Controls
9. Program
(a) Stockpile
(b) Problems

162
1

Summary

Hog bristles are essential for use in brushes and for wool-dabbing, a
process in the manufacture of 1001. Prior to 1942 over 90 per cent of
all imports were obtained from the Far East. Because of the difficulty
of transportation it has been necessary to attempt to open new sources
of supply in South America. For this purpose a representative of the
Board has been sent to South America to investigate the supply and
instruct the producers in the proper methods of pt eparation and packing.
The stockpile reconsendation is 2,500,000 pounds. Approximately
1,000,000 pounds have been purchased and approximately 208,000 pounds

are now in stockpile.

Negotiations are now being conducted for the acquisition of the entire
1943 requirements from China.
Product

Bristles are procured from the backs of swine raised in regions where
there are long and rigourous winters, causing the hair to grow long and
tough. They are chiefly valuable for paint brushes because of the flag
ends and spindle shape. The taper of the bristle gives a smooth flow

of paint while the flag ends hold large quantities of paint. Bristles
come in several colors; black, brown, white, or spotted. The lengths
vary from under two inches, generally called riflings, up to six inches
and over.

The quality of bristles varies with the country of origin. Bristles are
classified as to the degree of stiffness. The various production centers
are as follows:

Stiff Bristles

1. India

Half Stiff

1. Hankow

2. Russia
3. Chungking
4. Tunnan
2. Shanghai

3. Siberia
Soft Bristles

1. Tientsin
2. South America
3. Domestic

The South American bristle is of fair quality, but time far very poorly
dressed. The United States and Canadian types of bristles are inclined
to be soft with an extremo taper which makes them unsuitable for paint
brushes.

163

China

In 1939 China accounted for 75% of world production. Two-thirds of this
was exported and the remainder consumed within the country. Since that

Unes

time the proportion of exports has increased. The hog bristles available
to the United Nations at the present time are limited to the arcas around

The woolen industry has a use for hog bristles for which no effective
substitute has yet been found, although a dilution 01 50 percent horsehair can now be used satisfactorily by application of a method recently
invented. At the present rate of operations woolen mills will need for

Chungking and Kunning. Normal production in those arcas is estimated at
4,000,000 pounds but the latest estimates from the Embassy at Chungking
give thp 1943 crop as approximately 1,333,000 pounds with a carry-over
from last years crop of 1,000,000 pounds, of which approximately 667,000
pounds have already been sold to Russia.

Noble Combs 100,000 pounds of hog bristles 3&st to 4" in length annually.

However, the principal normal uses for bristles are for paint brushes,
toilet, and tooth brushes, and many types of industrial brushes.

India

The war uses are for paint brushes used by the Navy and Maritime Commission for the maintenance of maritime equipment, and by the Army for
the construction and maintenance of equipment and facilitics, The
nature of the surfaces of ships, which are exposed to all types of
weather, requires the application of paint by a brush rather than a spray.

Normal production is estimated at 700,000 to 750,000 pounds por annum,
of which 75/80% is exported to the United Kingdom. According to recont
estimates, production for 1942 was 800,000 pounds of which 45% was 3"

or longer in length. The first call for this supply is for the uso of

the Indian government whose requirements are now estimated at 650,000
pounds. Under present arrangements, the United Kingdom has a prior call

In 1941, the distribution of the use of bristles WILD as follows:
15%

U.S.S.R.

It is impossible to obtain accurate figures on production in the Soviot
Union. Total exports in 1938 were 914,909 pounds, but much of this
quantity was received from China in return for minitions of war. Exports
to the United States have been as follows:

1937

57,000

1940

187,000

1941

223,000

800,000

1935

Istle, a Mexican vegetable fiber, is being used for other than varnish
or paint brushes, but it is not as durable or as flexible.

2,000,000 pounds por annum

1930-1932

crease because substitutes are being developed for other uses. Plans
are also being made to use Nylon and flagged horsehair for brushes that
are used for flat work and touching up. A Nylon bristle has been developed made
whichfrom
is tapered
and brushes for painting the hulls of shipe are
being
those.

It is estimated that the proportion of use for paint brushos will in-

100%

10%

Industrial
All other types

on all other Indian bristlos. The latest reports show a surplus of
Indian bristles of about 100,000 pounds.

60%

Painters' brushes, including artists'
Toilet brushes, including shaving and tooth
Household

World Production

World production has been estimated for 1939 at about 9,800,000 pounds
which was increased to probable 10,500,000 pounds in 1941. Prior to

1914, the chief world supplier of bristles was Russia with China the
secondary source. Under the Soviot regine, the quality and quantity of
the Russian bristles declined, due to the scientific brooding of hoge
for moat. After the first World Ear, China rapidly becano the chief
source of hog bristlos, in 1940 supplying 94% of United States imports.
Bristles are
also produced in India, and to a small extent in Latin
American
countries.
different

to) mail 442 dative 2u 5100 od of
modified

Latin America

It is hoped to stimulate the gathering of hog bristles in Latin America,
but those bristles are of poor quality compared with Chinoso and Russian.
Exports from those countries to the United States for 1941 wore 7,000
pounds, but were increased to 83,000 pounds for tho-f irst half of 1941,
40 percent of which woru crudo bristles.

164
4

The Board has sent Mr. Cornelius Cronk to South America to investigate
the supply and instruct the producers in the proper methods of preparation and packing of bristles and horse hair which is a substitute for
bristles in certain uses and to a limited extent. He has been in Peru
and Argentina and is to RO to Uruguay, Brazil, Chile and Bouador He
distributes to the processors carefully worded illustrated-instructions
for the proper preparation of bristles. A Portuguese translation has
Jani
also been prepared for use in Brazil,

Controls

Bristles are on List 1 of War Production Board Order No. M-63. Imports from South America are covered by exceptions, the bristles going
directly into essential military and civilian use. Defenso Supplies
Corporation is the sole importer from China, India, and hussia. The
uses of bristles are controlled by Order L-51 last amended on November 30,
1942. The sale and use of bristles of 2" and longer are confined to
defense orders and an admixture of at least 45% of other materials

It is hoped to increase the South American supply to 500,000 pounds

(usually horschair or synthotic bristles) is required in any article

a year.

made from hog bristles.
Supplies

Eatsol

Ho specific price coilings have been set by the Office of Prico Administration but bristlon are included under the general maximum prico ceilings.

Stocks

The Var Production Board has estimated stocks on January 1, 1943 at
1,775,000 pounds, including the government stockpile of 218,000 pounds.

Program

Inports

Total imports for the first eleven months of 1942 were approximately
1,259,000 pounds, divided as follows:
China

471,000 pounds
<

550,000

U.S.S.R.

4,000 casus from Chungking

Iran

30,000

India

27,000

169,000

12,000

All other countries
Total

1,000

Latin America

nont of sizes of 3" and over to India through 0 contract with the
Chinoso National Air Corporation, the rominder boing hold in storago
until transportation TICLE available.

Those 5,000 casos word completely delivered in Chine in October. The
bristles of 3-1/2 inchos and over from Chungking and those of 3" and
over from Kunming, amounting to 212,000 pounds, have now boon dolivored
in India, 24,000 pounds having reached the United States, the romainder

Re-exports

boing in rail transit in India or afloat. Under non air prioritics,

which permit shipmont of 2-1/4 inch bristles, a further amount of
288,000 pounds is awaiting shipment by plano to India. This should be
ready and the shipments completed carly in February.

In 1940, 1,034,798 pounds were exported from the United States chiefly
to the United Kingdom. Exports for 1943 are limited to Canada and will

be about 126,000 pounds.

Requirements

Requirements
for 1943 are stated by the War Production Board to be as
follows:

Total

Kunning

Duo to the closing of the Burno Road, arrangements wore made for ship-

1,259,000 pounda

For military uses
For exports and essential
civilian use

Attompts word made 0.5 carly GB July 1942, to stimulate importations of
bristlos from South America and Russin. Early in 1942, a stockpile of
1,000,000 pounds was recommended, and subject to directivo from the
Board of Economic Warfare, purchases were node by the Defense Supplics
Corporation. Considerable amounts word obtained from stocks in this
country, and a purchase of 5,000 cases of 27 assortment VILLE nado on
May 29, 1942, to be imported from China, divided as follows:

1,765,000 pounds
J

476,000 .
2,241,000 pounds

An offer has boon received of an additional 5,000 00.008 (667,000 pounds)
from China. No proposed nogotiations for total 1943 requirements at a
price based on out-of-pocket cost to the Foo Shing Company, which is a
Chinoso government owned corporation. The New York agents of this Company, the Universal Trading Corporation, requested that the purchase
should be concluded of the 5,000 casos of ffored before consideration of
the proposed over-oll purchase, and offered to recommond to their
principals the acceptance of last years prices of $3.40 ox-murchouse
Chungking or $3.50 cx-warchouse Hinming, although this years offer had

boon at prices 20% abovo those of 1942. Ec are still awniting a reply
from China,

NOT TO BE RE-TRANSMITTED
6

COPY NO.

On May 19, 1942, arrangements word made with the British for the in-

BRITISH MOST SECRET

portation to this country of one-half of the bristles then on hand in
India, and for a continuing allocation of supplies from that country.
While our agreement with the British provides that the United Statca

U.S. SECRET

165

OPTEL No. 29

shall bc the solo purchaser in China and tho United Kingdom the solo

Information received up to 7 A.M., 26th January, 1943.

purchaser in India, all bristles are subject to allocation by the

C.R.M.B. The British share of Chincso bristlos will be botecon 20%
and 25% and the United States share of Indian bristles may run as high

COMBINED OPERATIONS

CB 50%

In the operation south of BERGEN during 23rd/24th the landing was
Stockpile

made by parties of United Kingdom Commandos with long range Fighter cover at SAGVAG

Total purchases against stockpile are 908,000 pounds. or this amount

on southwest corner of STORG ISLAND. Our casualties were one killed, 5 wounded.

318,000 pounds have been delivered in Not York and 30,000 pounds have
boon relonacd as unsuitable, leaving C not stockpilo of 286,000 pounds.
Of the 670,000 pounds not yot received in New York, all have boon do-

During operations on land 3 M.T.Bs. created a diversion on LIERVICK.
2. NAVAL

livered to the Defense Supplica Corporation at point of delivery in
China or India; 188,000 pounds are in transit and the rencinder are
awaiting shipment which is dolayed by lack of transportation facilities.

HOME WATERS.

21st. SCHARNHORST, PRINZ EUGEN and 5 destroyers seen

west of SKAW steering west. On sighting the aircraft enemy put about and were last
Problems

seen steering east. ADMIRAL SCHEER located in dry dock at PILHELMSHAVEN.

The chief problems are caused by the cutting off of the main sources
of supply. Shipping from Chine and India is very difficult, and
arrangements for air transport conflict with other vital commodition.
Substitutes are generally unsctisfnetory, and the stimulation of now
sources is complicatod by the fact that brooding of hoga is generally
for
mcat,
is not
good.and duo to onry maturity, the quality and length of bristles

MEDITERRANEAN One of H.M. Submarines sank a 6,000 ton escorted

ship on 16th and a 2,000 ton ship and escorting schooner on 19th, a trawler being
driven ashore at the same time.
3. MILITARY

TUNISIA. 25th/26th. 50 prisoners were captured by patrols in
Northern Senton

NOT TO BE RE-TRANSMITTED
COPY NO.

165

BRITISH MOST SECRET

On May 19, 1942, arrangements were made with the British for the in-

U.S. SECRET

portation to this country of one-half of the bristles then on hand in
India, and for a continuing cllocation of supplies from that country.
While our agreement with the British provides that the United States

OPTEL No. 29

shall be the sole purchaser in China and the United Kingdom the solo

Information received up to 7 A.M., 26th January, 1943.

purchaser in India, all bristles are subject to allocation by the

C.R.M.B. The British share of Chincac bristlos will be bottoon 20%
and 25% and the United States share of Indian bristles may run as high

1. COMBINED OPERATIONS

C.B. 50%

In the operation south of BERGEN during 23rd/24th the landing was
Stockpile

made by parties of United Kingdom Commandos with long range Fighter cover at SAGVAG

Total purchases against stockpile are 908,000 pounds. of this amount

on southwest corner of STORG ISLAND. Our casualties were one killed, 5 wounded.

318,000 pounds have boon delivered in Now York and 30,000 pounds have
boon released 0.8 unsuitable, leaving G not stockpilo of 200,000 pounds.
Of the 670,000 pounds not yet received in New York, all have boon do-

During operations on land 3 M.T.Bs. created a diversion on LIERVICK.
2. NAVAL

livered to the Defense Supplics Corporation at point of dolivery in
China or India: 183,000 pounds are in transit and the reminder are
awaiting shipment which is dolayed by lock of transportation facilities.

HOME WATERS. 21st. SCHARNHORST, PRINZ EUGEN and 5 destroyers seen

west of SKAW steering west. On sighting the aircraft enemy put about and were last
Problems

seen steering east. ADMIRAL SCHEER located in dry dock at PILHELMSHAVEN.

The chief problems are anused by the cutting off of the main sources
of supply. Shipping from Chine and India is very difficult, and
arrangements for air transport conflict with other vital commodition.
Substitutis are generally unsatisfactory, and the stimulation of new
sources is complicated by the fact that brooding of hogs is generally
for mcat, and duo to early maturity, the quality and longth of bristles
is not good.

MEDITERRANEAN. One of H.M. Submarines sank a 6,000 ton escorted

ship on 16th and a 2,000 ton ship and escorting schooner on 19th, a trawler being
driven ashore at the same time.
3. MILITARY

TUNISIA. 25th/26th. 50 prisoners were captured by patrols in
Northern Sector

was
it

Sumad

and

use
30

blueds

On May 19, 1942, arrangements were made with the British for the im-

portation to this country of one-half of the bristles then on hand in
India, and for a continuing allocation of supplies from that country.

While our agrooment with the British providos that the United States
shall be the solo purchascr in China and the United Kingdom the solo

purchasor in India, all bristles arc subject to allocation by the

C.R.M.B. The British share of Chinoso bristlos will be bottion 20%

and
25%
as
50%

and the Unitod Statos share of Indian bristles may run as high

Stockpile

Total purchases against stockpilc are 988,000 pounds. Of this amount
318,000 pounds have boon delivored in Not: York and 30,000 pounds have

been released as unsuitable, leaving a not stockpilo of 288,000 pounds.
Of the 670,000 pound's not yet received in New York, all have boon do-

livored to the Defense Supplies Corporation at point of delivery in
China or India; 188,000 pounds are in transit and the reminder are
awaiting shipment which is delayed by lock of transportation facilitics.
Problems

The chiof probloms are caused by the cutting off of the main sources

of supply. Shipping from China and India is very difficult, and
arrangements for air transport conflict with other vital commoditios.
Substitutes are generally unsatisfactory, and the stimulation of now
sources is complicated by the fact that brooding of hogs is generally
fornot
moat,
and due to oarly maturity, the quality and length of bristlos
is
good.

NOT TO BE RE-TRANSMITTED
COPY NO.

165

BRITISH MOST SECRET
J.S. SECRET

OPTEL No. 29

Information received up to 7 A.M., 26th January, 1943.
1. COMBINED OPERATIONS

In the operation south of BERGEN during 23rd/24th the landing was
made by parties of United Kingdom Commandos with long range Fighter cover at SAGVAG

on southwest corner of STORG ISLAND. Our casualties were one killed, 5 wounded.

During operations on land 3 M.T.Bs. created a diversion on LIERVICK.
2. NAVAL

HOME WATERS. 21st. SCHARNHORST, PRINZ EUGEN and 5 destroyers seen

rest of SKAR steering west. On sighting the aircraft enemy put about and were last
seen steering east. ADMIRAL SCHEER located in dry dock at WILHELMSHAVEN.
MEDITERRANEAN One of H.M. Submarines sank a 6,000 ton escorted

ship on 16th and a 2,000 ton ship and escorting schooner on 19th, a trawler being
driven ashore at the same time.
3. MILITARY

TUNISIA. 25th/26th. 50 prisoners were captured by patrols in
Northern Sector. In central TUNISIA Axis forward movement has been halted. French
withdrawal being covered by United States armoured units. On 24th United States
troops captured 80 prisoners during a raid on MAKNASSY (midway between GAFSA and SFAX)

RUSSIA. Don Sector - Germans are counter attacking strongly in area
between rivers DON and MANIMU. Fierce confused fighting is taking place. CAUCASUS

Sector - Heavy rain is hampering fighting. Russians are pressing advance down SALSKKRASNODAR railway.

4. AIR OPERATIONS

WESTERN FRONT. 25th. Flushing docks bombed in good visibility by

ascorted Bostons (one missing) Six enemy aircraft crossed south coast `causing

slight casualties at POOLE. 25th/26th. About 15 enemy aircraft, mostly minelaying,
operated in THAMES ESTUARY.

FRENCH NORTH AFRICA. 23rd/24th. Wellingtons attacked BIZERTA docks.

During 23rd and 24th 61 sorties made by Allied bombers on landing grounds near

MEDENINE. About 25 aircraft destroyed on ground. 24th. U.S. Fortresses (B.17)
bombed shipping at SOUSSE. One ship hit.

LIBYA. 24th. Allied fighters made 5 attacks on shipping at ZUARA ant
M.T. vehicles on coast road of which about 35 destroyed or damaged.
SICILY. 23rd/24th. Four U.S. Liberators bombed PALERMO Harbour.

166
U. S. COAST GUARD

original
went
to col Berms tem

Official Dispatch

Date

27 January 1943

Incoming Heading

27 522P

FROM

HENRY MORGENTHAU, JR

TO (FOR ACTION)

DANIEL BELL, TREASURY DEPT.

URGENT

TEXT

TELL COL. BERNSTEIN I WILL BE GLAD TO SEE HIM ANY TIME. CALL
TO HIS ATTENTION THE FACT THAT THE ARMY HAS A FLYING UNIT NEAR
HAVANA. HAVE INSTRUCTED McBRIDE, 3D SECRETARY AMERICAN EMBASSY,

TO ASSIST BERNSTEIN AT THIS END.

SECRET

630 PM 27 JAN 43

167

Hearings on Lend-Lease are still
Soing on in the House and have not started
in the Senate.

lit,st

168

January 27, 1943.

Dear Mr. Stettinius:

The Secretary is still away from

Washington, and I an therefore soknowledging your letter of January 26,
speaking of the hearings which will
be held before the House Foreign
Affairs Committee.

Just as soon as Mr. Morgenthau

is back at his desk, I shall be very
glad to bring your letter to his im-

mediate attention.

Sincerely yours,

(Signed) H. S. Klotz
nmc

H. S. Klots,
Private Secretary.

Honorable E. R. Stettinius, Jr.,

Administrator, Office of Lend-Lease
Administration,
Washington, D. C.

GEF/dbs

HOW

169

OFFICE OF LEND-LEASE ADMINISTRATION
FIVE-FIFTEEN 22d STREET NW.
WASHINGTON, D.C.
E.R. Stettinius. Jr.
Administrator

January 26, 1943.

Dear Henry:

We are expecting to go before the House Foreign
Affairs Committee towards the end of this week, asking

for legislation extending the Lend-Lease Act for one

year.

Because of your early interest in Lend-Lease and
the important part which you have played in determining
Lend-Lease policy, no hearing on the extension of the
Lend-Lease Act would be complete without your testimony.
If you are going to be in Washington while the hearings are

in progress, I should like to feel that I might call on

you to appear before the Committee if it becomes necessary.

If any questions arise in connection with the
preparation of your testimony, Mr. Oscar Cox, our General
Counsel, will be glad to discuss them with anyone you
may designate.

Sincerely yours,

E. R. Stettinius, Jr.

The Honorable

Henry Morgenthau, Jr.

Secretary of the Treasury,
FORDEFENSE

BUY
UNITED
STATES
SAVINGS

BONDS

MODE

Washington, D. C.

fill

170

January 27, 1943.

Dear Mr. Stettinius:

This will acknowledge your letter

of January 26, addressed to the

Secretary, in regard to requisitions
for Lend-Lease aid to French North

Africa. I am acknowledging it in his
absence and will see that It is immediately brought to the attention of
the proper officials in the Treasury
for their reading and action.
Sincerely yours,

(Signed) H. S. Klotz
nmc

H. S. Klots,
Private Secretary.

Honorable E. R. Stettinius, Jr.,

Administrator. Office of Lend-Lease
Administration

Five-Fifteen 22nd Street, N.W.,
Washington, D. C.

Del. by Dixon 9:35 1/28

Original file to Mack
Photo file in Diary
GEF/dbs

OFFICE OF LEND-LEASE ADMINISTRATION
FIVE-FIFTEEN 22d STREET NW.
WASHINGTON, D.C.

E. R. Stettinius, Jr.
Administrator

January 26, 1943.

My dear Mr. Secrotary:
Supplementing my letter of December 21, 1942,

I .ish to inform you that from now on requisitions for LendLense aid to French North Africa or for other liberated areas
whose detense any by the President be found vital to the deTense of the United States will be signed either by Senior
De uty Administrator Bernhard Knollenberg, by Deputy Admin-

strator Arthur B. Van Buskirk, or by myself.
We are making this change in order to have all

of our procedures with respect to liberated areas conform just
U.S closely as possible to those for the regular Lend-Lease
countrios.

Sincerely yours,

The Honorable

Johnstone

The Secretary of the Treasury
FOR DEFENSE

BUY
UNITED
STATES

Washington, D. C.

172
January 27, 1943

Meeting of Cabinet Group Subconmittee on

Dollar Position of United Nations
Mr. White's Office
January 27, 1943
10:30 A.M.

Present: Mr. Currie for the White House

Mr. Neff for the War Department
Mr. Coe for B.E.W.

Mr. Knollenberg for the Office of
Lend-Lease Administration

Mr. White, Miss Kistler and Miss Nielsen
for Treasury

The meeting opened with a discussion of Dr. Clarke's message of
January 22, 1943, concerning the $300-$350 million range decided upon
for Canada. Mr. Currie stated that he would support the recommendation

if the President asked his opinion. He said that this range should be

adequate, particularly as many of our purchases from Canada are for
munitions to be used by the United Kingdom and are made merely to keep

up Canada's dollar balances. In the reply to Dr. Clarke, Mr. Currie

suggested that emphasis should be placed on the policy of the Hyde Park
Arrangement and on the idea that a higher range might seem to other
countries to set a precedent. Mr. Currie also agreed that the problem
of proceeds from security sales should be treated on an ad hoc basis.
The committee was in general agreement on retaining the range of
$300-$350 million. The discussion centered on the treatment of proceeds
from sales of securities and what it would involve. Mr. Neff suggested
that if Canada sold many securities and redeemed all of her U.S.-held

obligations, our policy would be hard to defend. While the operation is
really one of exchanging one type of claim for another, this might not be
apparent to the layman. Mr. White and Mr. Knollenberg felt that the
operation would not be too difficult to justify as Canada would not be
adding to its cash balances or resources. Mr. Neff also raised the

question of what our policy should be in case the proceeds are accumulated
without being used for the redemption of securities.
The committee discussed in some detail the problem of which items

should be included in capital movements - whether securities only
according to the Canadian suggestion, all property transactions as suggested by Mr. Neff, or only bonds as suggested by Mr. Knollenberg. It
was decided that instead of telling the Canadian Government that security
proceeds would be treated on an ad hoc basis, we should say that we are
sympathetic to the Canadian position but that we would like further information on the magnitude of the operation and the type of securities
which would be involved.

173
Division of Monetary

-2-

Research

The meeting continued with a discussion of a cable from the
Chancellor of the Exchequer urging the desirability of prior consulta-

tion before a decision is made on a range for British U.S. dollar
balances. The committee felt that the reply already drafted was not
appropriate. Mr. Neff and Mr. Coe both felt that the request for

consultation would have to be answered and that the British should be
given a chance to express their views. They thought that dodging the
issue might be unfair to the British because it might keep them from

making plans. It was finally agreed that the British be told that we

would discuss the matter and that our reply should be that no new policy

had been initiated and that the ceiling is merely a guidepost in implementing our policy of financial assistance as a means of aiding the
conduct of the war. Our Government has no mandate to do more in order
to meet post-war needs.

Copies of tables on the British gold and dollar position to be
submitted to Congress were distributed. Mr. Knollenberg stated that

Lend-Lease does not need funds for several months and is merely asking

for an extension of the Act at this time.

A. L. Melsen

174

MESSAGE FROM THE CHANCELLOR OF THE EXCHEQUER TO MR. MORGENTHAU

DATED JANUARY 19TH, 1943.

Sir Frederick Phillips has told me of the proposal
that Lend-Lease might be restricted if our reserves should rise
above their present level. This raises a major issue, which should,
I suggest, be the subject of common discussion and the exploration

of the alternatives before any decision is taken. The position of
our reserves cannot be disassociated from the inescapable growth

of our overseas liabilities against which they are held. We, alone
of the United Nations, are incurring external indebtedness on a

vast and growing scale. It is essential for the successful
prosecution of the war that we should continue to do so, but our
ability to carry this burden depends on our possessing external

reserves as adequate as possible in relation to these liabilities.
We are under an obligation to provide dollar purchasing power for

the rest of the sterling area and the adequacy of our reserves
affects our eventual power to carry out this obligation and
therefore to cooperate effectively in policies designed to promote
the stability of international monetary relations and the expansion
of trade.

I know you fully agree with me on the principle of
prior consultation and agreement on matters of common interest as

important as this. I can assure you that I appreciate the immediate
troubles confronting you. Mine will not be less. We had hoped that

the fact of reciprocal aid being now on such a scale that it is as
high in proportion to our war expenditure and resources as the

175

-2Lend-Lease aid you give us is to yours would be a sufficient

reply to the critics of the present basis of Lend-Lease.
You have often come to my aid in difficult circumstances and on this matter I should hope we could find a
reasonable solution.

I am s ending Sir Frederick Phillips instructions
to hold himself at your disposal.

Washington, D.C.,
January 21, 1943.

CONFIDENTIAL

176

British Gold and Dollar Exchange Assets
as of December 31, 1942

Except where noted, these are British Treasury figures

(In millions of dollars)
1. Gold

The British Government reports that against this gold foreign
countries hold Sterling funds carrying specific rights of conver-

$ 688

sion into gold amounting to approximately $190 million.

(In addition, the British hold $105 million of gold borrowed from
Belgium. This gold is not included in the British assets since

it involves a definite gold liability of like amount.)
2. official dollar balances

The British Government reports that against these balances

243

are held U.S. registered sterling accounts, carrying the right of

conversion into dollars on demand and that these accounts on
November 30, 1942, the latest date available, amounted to $53
million.

3. U.S. Securities
Of these securities, the British estimate that only $80
million are readily marketable.

135

4. Private dollar balances
(This figure is taken from U.S. Treasury data. The Fritish state
that dollar balances in the hands of British banks acting as
authorized dealers in foreign exchange increased by $26 million

280

between January 31, 1942, when they were reduced to an extremely

low level owing to the stringency of the dollar position, and
December 31, 1942.)

5. Assets pledged against R.F.C. loan
U.S. securities
Direct investments

500

$205
295

6. Branches of British insurance companies
(The earnings of these companies are assigned to R.F.C. loan.)

200

7. Trusts in U.S. held for U.K. beneficiaries

290

(These trusts are established under United States law and hence
the assets may be unavailable to the Eritish Government. Together
with the direct investments pledged or to be pledged against the
R.F.C. loan, including bronches of British insurance companies
whose earnings are assigned to R.F.C. loan, and with Viscose and
Brown and Williamson, they account for the estimate of $900 million
submitted to Congress in January 1941. There are in addition some

small investments in U.S. enterprises which, because of their
size, the British regard LS virtually unsalable.)

Note: In connection with the foregoing data, the British state: "British
holdings of gold and United States dollars are not held specifically
against our liabilities in the United States, but constitute a
partial cover for obligations and responsibilities of great magnitude
and worldwide character. Gold currently acquired differs from our
original stocks in that it can be acquired only by further increasing
our overseas indebtedness. The growth of $432 million during 1942
in our gold and official dollar balances must be looked at against
the background of a deterioration of nearly 03 billion, or over six

times as great, in our net overseas capital position in all other
respects."

Treasury Lepartment, Division of Monotary Research

January 23, 1943

CONFIDENTIAL

Estimated Dollar Expenditures and Receipts of British
Empire, Excluding Canada and Newfoundland,

January 1, 1943 to March 31, 1943 1

(these are British Treasury estimates)

(In millions of dollars)
Dollar Expenditures

A. Payments to the United States by the United Kingdom:
1. On British Supply Missions commitments
#30
(including administrative expenses) - net

(In addition $113 will fall due after March 31,

1943 on B.S.M. commitments now outstanding,

payment of $84 million of which, however, is
doub tful.)

2. For shipping, interest, film remittances, etc.
3. For other goods and services, urgent or
ineligible for Lend-Lease

B. Payments to the United States by the rest of the
Sterling Area (principally Empire countries)
C. Payments to areas outside the United States re-

quiring gold or dollars

120

175
370

Total dollar requirements
Dollar Receipts

A. Receipts from the United States by the United Kingdom:
$20
1. From merchandise exports

2. From shipping and interest
3. From other items
B. Receipts from the United States by rest of
Sterling Area:
1. From merchandise exports

105

140

70
85

2. Other items
C. Dollar receipts from Areas outside U.
Total dollar receipts, excluding newly-mined

155
20

315

gold

Total dollar deficit of Sterling Area
(principally British Empire), January 1 to
March 31, 1943

Total dollar requirements

$370

178

-2Note:

In presenting these figures, the British Treasury made
the following statement with respect to the acquisition
of gold: "No close estimate of our probable purchases
of gold can be made even for the current quarter. The

output of gold in the Sterling Area is likely to decline
to an extent depending on the demand of manpower and on
the availability of mining plants and stores. If If production is maintained at the level prevailing in
September 1942, the gold output of the Sterling Area,
January through March 1943, will be $150 million.

January 13, 1943

Treasury Department, Division of
Monetary Research

1 These figures also include the dollar expenditures and
receipts of non-British members of the Sterling Area --

namely, Egypt, Anglo-Egyptian Sudan, Iraq, Belgian Congo
and Ruandi-Urundi, Iceland, the Faroe Islands, and

Fighting French territories in Africa and Oceania, Syria,
and Lebanon. The net dollar expenditures and receipts of
these areas are small.

179
STRICTLY CONFIDENTIAL

British-Gold and Dollar Assets on Selected Dates,
August 31, 1939 -- December 31. 1942

(except where noted the figures
are British Treasury data)

(In millions of dollars)

Gold

Aug. 31.

Dec. 31.

Aug. 31.

Dec. 31,

1939

1940

1941

1942

2,038

292

151

688

243

950

616

900

3,938

1,862

Official dollar balances
U.S. securities
Direct and miscellaneous investments

in U.S., including trusts for
Total

340*

785**

785

U.K. beneficiaries

372*

1,362

2,056

145

450

Deduct securities and direct
investments lodged against $390

million received by the British
-

on the R.F.C. loan

Total, adjusted for collateral

lodged against amount received
on R.F.C. loan

Private dollar balances
(This is taken from U.S. Treasury

3,938

1,862

1,217

1,606

545

305

310

280

data)

This figure includes the $205 million of securities pledged against the R.F.C.
loan.
..

This figure includes the $295 million of direct investments pledged against the
R.F.C. loan and the $200 million of branches of British insurance companies
whose earnings are assigned to the R.F.C. loan. Of the $500 million of securities
and direct investments covered by the pledge agreement, $50 million remain to be
deposited with the Reconstruction Finance Corporation. This will be done only
if and when the British Government takes up the remaining $35 million available
to it under the loan.
Treasury Department, Division of Monetary Research

January 13. 1943.

180

NOT TO BE RE-TRANSMITTED
COPY NO.

BRITISH LOST SECRET
U.S. SECRET

OPTEL No. 31

Information received up to 7 A.M., 27th January, 1943.
1. NAVAL

MEDITERRANEAN. Entrance to TRIPOLI Harbour is completely blocked.

It is hoped to clear 100 foot passage for ships of 24 feet draught by 8th February. One of H.M. Submarines torpedoed and probably sank a 8,500 ton ship on
23rd in the Strait of MESSINA.
2. MILITARY

LIBYA. By evening 26th our forward troops had reached points 4
miles west of ZAUIA and 50 miles south-southwest of ZUARA NALUT Road.

RUSSIA. Upper Don. Russians continue to attack on broad front
south of VORONEZH. STALINGRAD. German 6th Army reduced to approximately 12,000

men split into 2 isolated groups. Lower DON. Heavy fighting continues between
Rivers DON and MANMCH. Situation obscure.
3. AIR OPERATIONS

WESTERN FRONT. Engine sheds and railway at BRIDES bombed by 10

Venturas (B. 34). 18 Squadrons of Spitfires operated over enemy territory.

Enemy casualties 3, nil, one. Ours 4, nil, 1. 11 enemy aircraft crossed our
coast. 1 destroyed. Damage and casualties slight. 26th/27th. Aircraft were
despatched - LORIENT 156, 2 missing, some cloud and ground haze; Leaflets over
FRANCE 18; enemy shipping 33.
FRENCH NORTH AFRICA. On 25th adverse weather restricted operations.

LIBYA. 24th/25th and 25th. A total of 17 medium bombers and 36
Kittyhawks (P.40) bombed MEDENINE West Landing Ground. On 25th Kittyhawks (P.40)
made 2 bombing attacks on shipping at ZUARA.
BURMA. 25th. Shipping at RANGOON attacked by 9 U.S. Liberators

(3. 24). 16,000 ton ship hit. 25th/26th. HEHO (250 miles east of AKYAB) bombed
by 10 Wellingtons.

181
BOARD OF ECONOMIC WARFARE
OFFICE OF EXECUTIVE DIRECTOR
WASHINGTON D.C.

JAN 28 1943

The Honorable

The Secretary of the Treasury
Dear Mr. Secretary:

In the report entitled, "Report on Cork", dated January 25,
1943 which was discussed at the Board of Economic Warfare

meeting on January 28 there are two errors: Page 2, second

paragraph, second line - "65,000 tons" should read "6500 tons";

Page 4, first line - "30 metric tons" should read "30,000 metric
tons".

Will you please have your copy corrected accordingly.
Sincerely yours,

Nile
Persin
Executive Director

182

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE

January 28, 1943.
TO

Secretary Morgenthau

FROM Harold Mager Hm.

Intelligence Report 58 (1-15-43) contains matter that
should be of interest to you:(1) Taxes. Press Bureau Surveys and field reports suggest
that the proposed new taxes and compulsory savings
recommended by the President in his Budget Message

($16 billion) will be accepted by the public. Corre-

spondents report that people appear to have a good

understanding of the case for higher taxes. A selective poll made as early as last October reveals that
nearly half of the people were reconciled to the
necessity for higher taxes in 1943. (See pages 12
and 13.)

People are concerned about two things, however:
(a) that they may be asked to pay more taxes than

their fair share of the burden (especially pronounced
among white-collar, professional, and the small

business people whose income has declined or remained

fixed); (b) that pay-as-you-go be imposed as soon as
possible.

Intelligence Report 59 (1-22-43) reveals that pay-as-you-go

has become synonymous with the Ruml Plan for most people, and

that little patience has been shown toward the Treasury's

suggested substitutes or its objection that the plan fails to
place tax liabilities actually on a current basis. (See page 4-5.)

(2) Rationing. Reaction of the public to food rationing is

also extremely interesting. Americans accept without
reservation the need for comprehensive food rationing,
according to the studies made. The overwhelming majority
express the following sentiments: that the Government
plans to ration a large number of foods (83%); that such
rationing would be approved (79%); that rationing should
be instituted before shortages develop (77%); and that
food rationing to date has been handled very well (66%).
(See pages 6 to 11, Intelligence Report 58.)

183

-2The general satisfaction with rationing as a
device to distribute equitably goods in short supply
suggests interesting possibilities for controlling
inflationary influences by means other than fiscal
policy.

(3) Post-war planning. There is a growing popular interest--

and sympathy--in post-war planning. Vice President.
Wallace is now receiving a very favorable press, an
interesting reversal from a short time ago. His approach
to post-war problems is coming to be regarded as practical
and reasonable, except for the extreme isolationist
minority of the press. Most editorial comments agree
the time has now come for discussion of post-war problems.
They agree, in particular, with the Vice President's
view that the enemy must be disarmed physically and

psychologically. Some urge that the nature of the peace

be outlined in greater detail. (See Intelligence

Report 58, pages 16, 17 and 18.)

184

1.15.43

INTELLIGENCE REPORT 58

CONFIDENTIAL

OFFICE
WAR

COPY

INFORMATION

No.

Henry Morgenthau, Jr

CONTENTS

Page

EDITORIAL ATTITUDES

Message

The President's Radio Audience

Censorship
Gasoline

Optimism in the News

POPULAR REACTIONS

Reactions to the Ban on Pleasure Driving
Response to Plans for Food Rationing

DEVELOPING SITUATIONS

Taxes

Post-War Planning

X-8765

EDITORIAL ATTITUDES
MESSAGE

The President's message on the state of the Union drew the greatest editorial applause accorded him since his last appearance before Congress,
13 months ago, to announce that America was at war. The Kansas City Star

called it "masterful"; the Worcester Telegram said it was "inspiring":
the Philadelphia Record was content with no less an adjective than "mag-

nificent." With the exception of a few bitter-end opponents of the Administration, praise for the address was unanimous, unstinted and genuine.
It was the conciliatory tone of the message which evoked the greatest
admiration. Commentators recognized the outstretched hand and showed great

eagerness to grasp it: most of them felt that the new Congress now ought

to be willing to meet the President half way. The Richmond Times Dispatch

called it "an address to promote national unity. There was nothing in it
to ruffle the sensibilities of any group of Americans." Even William

A summary of Investigation and analysis
conducted for certain OWI officials, issued for OW1 and the interest of other

Randolph Hearst's New York Daily Mirror remarked that "No one could listen

members of the Government.

to, or read, the message without noting its dominant overtone of concili-

The period covered by this report is the

ation. The President held out the olive branch to Congress. His resarks

week of January 7 through January 13, except where otherwise specifically stated.

should go far toward establishing that working cooperation between the
legislative and executive branches of our American democracy which has
been lamentably lacking."

There was gratification, too, over the President's candor in acknowledging

past mistakes and over his recognition that criticism has its uses. The
I-8765

-1X-8765

Newark Star Ledger expressed a common reaction in commenting that "The

military censorship. From the beginning of the North African campaign, the

President welcomed criticism as a spur to our effort, rejecting only

such criticism as is malicious and likely to create doubts and fears. It
was a speech that holds out the promise of sincere and effective cooperation
between a strong-minded New Deal President and a resurgent, conservative

Congress." Editors were especially pleased by the warmth of Mr. Roosevelt's
tribute to American industry.

editors have been dissatisfied with the quantity and the reliability of
news from that sector. More recently they were disgruntled by the paucity

of detail in accounts of air battles in the southwest Pacific. Our losses
have been concealed, complained Fletcher Pratt, "behind the usual silly
censorship": the statement that they are negligible, he declared "can
mean anything at all, especially after what they told us about the Tokyo

Finally, there was relief that the President laid his primary emphasis upon

the winning of the war, without introducing, in detail, controversial proposals for the future. The Baltimore Sun said, in this connection: With
his assurance that victory in the war is our first goal and that victory in
the peace is second, President Roosevelt states the case as his countrymen

in general must wish it stated. Nothing can come before military victory,

either in time or in interest. It has priority in every sense,"

bombers."

But the liveliest concern over concealment was expressed in regard to the
war against submarines in the Atlantic. A recent statement by Admiral Stark
and an appraisal of the situation in the Christian Science Monitor appear
to have touched off the current demand for more facts. "Because of tight
naval censorship," said the Omaha World-Herald, "it is not possible to say
what our losses have been in the U-boat war. Admittedly, they have been

The President's recital of American accomplishments and his analysis of
United Nations prospects for the year was regarded as greatly heartening.
The prevailing tone in all comment on the message was one of exultation.

great. Hundreds of our vessels, loaded with precious cargoes, have been

sent to the bottom. That is the big unpublished news of the day. It is
causing grave concern to the officials in Washington, but the people are

not told about it, officially. They are allowed to go along blindly in
THE PRESIDENT'S RADIO AUDIENCE

the belief that our side is taking every trick."

President Roosevelt's message to Congress on the state of the Union was

Alarm over the submarine problem does not yet appear to be general or in-

heard, according to a survey conducted by C. E. Hooper, in 27.7 per cent of

tense, but the seriousness of the situation is beginning to be appreciated.

all American homes with radios. The adult listening audience was estimated

The St. Louis Post-Dispatch, for example, pointed out to its readers that,

to have been about 14,000,000.

"Even though we are building more tonnage than the U-boats are sinking, the

CENSORSHIP

alaughter of men, the loss of war materials and the sacrifice of vessels

A number of commentators during the past week renewed their complaints about

-2-

will go on while the Germans are building more U-boats than we are sinking."

-3I-8765

X-8765

ESHAU

In addition to demanding more information about ship losses, some common-

tators have begun to urge the adoption of revitalised methods for combatting
the submarine menace. In a criticism echoed by others, Walter Lippmann observed that, "Our conduct of the submarine war is the most backward and the

most primitive, the least inspiring and the most lethargic, the least

balt

from?

boop

methods of Fasciam and Nazism. We cannot afford to indulge in methods of

the Gestapo." Most commentators agreed, however, that it is the civilian's

duty to get along on as little gasoline and fuel oil as possible.
OPTIMISM IN THE NEWS

planned and the most unorganized campaign in our fighting." He called for
An analysis of major headlines in 20 metropolitan newspapers shows that

the establishment of a special corps within the Navy, commanded by a submarine admiral, with status comparable to that of the Marines. The growing
dissatisfaction with the Navy on this score may be a product of ignorance
stemming from inadequate information about the Navy's real accomplishments.

events in the principal war theaters are being reported to the American
people in overwhelmingly optimistic terms. The headlines, regardless of
the details narrated in the stories over which they appeared, chronicled
good news almost exclusively.
at

GASOLINE

polium

During the week of January 5 through January 11, the 20 newspapers examined

The ban on pleasure driving in eastern states was accepted by most of the

carried 144 headlines about the fighting on the Russian front. All but one

press somewhat wryly, but not uncheerfully. To newspapers hostile to the

of these headlines conveyed news of a gain for the Red army. Even the sin-

Administration, it furnished, of course, an occasion for acidulous recrimi-

gle exception could not be considered bad news; it was merely non-committal

nation based upon pious hindsight. Thus, the Washington Times-Herald and

the New York Daily News took the opportunity to observe: "We do not see...
how the bureaucrats can duck the charge that their lack of foresight was

In the same period, 81 headlines appeared about the fighting in Tunisia; 61
of these brought good tidings; only 12 recorded enemy successes, while the

remainder could be considered neither optimistic nor pessimistic.

chiefly what brought on these sufferings."

Out of & total of 66 headlines about the southwest Pacific, 57 told of
A great many commentators had misgivings about the implementation of OPA's

ruling. They were uncertain about the definition of the term "pleasure,"

American successes and only seven acknowledged losses inflicted on us

by the Japanese. 2012 crill HIM was as behaving

and even though sympathetic to the need for conserving gasoline, they balked
vehemently at an enforcement method which many referred to as "snooping."

The following table indicates how heavily headlines about the four major
battlefronts were weighted on the side of optimism. The imbalance has

he Scripps-Howard newspapers declared that "putting the finger of suspicion

prevailed over the past few weeks:

n a man or woman and then requiring hi: to clear himself smacks of police

-4-

-5X-8765
X-8765

"Good News"
99%

Tunisia

Non-Committal

New Guines

Solomons

was barely sufficient for "necessary" driving. A few people argued that

they were entitled to a certain minimum mileage for personal use, for

Russia

"Bad News"

Headlines

which they should not be accountable to anyone.

Despite these attitudes, the ban on pleasure driving was fairly well re-

POPULAR REACTIONS

ceived in the judgment of the OWI field men; perhaps people feared that
REACTION TO THE BAN ON PLEASURE DRIVING

even more severe measures would be taken. Resistance to the ban seemed

The ban on pleasure driving served to bolater the misconception that mile-

age rationing is simply a device for distributing equitably a limited supply of gasoline. The relation between mileage rationing and rubber conser-

vation is still not generally appreciated.

greatest in cities, like Pittsburgh, where gasoline was relatively plentiful.

The ban created a number of new problems. In New York, ration boards were

swamped with requests for definitions of "essential" driving. The use of

According to OWT field men, some people accepted the recent curtailment

taxicabs became, for many people, a moral issue. Here and there absentee-

of gasoline allowances as a temporary expedient to meet the gas and fuel

ism mounted, and many cities reported almost unmanageable transportation

oil shortage; they may grumble if they are still kept on short rations when
spring arrives,

jams. Surburban areas were particularly hard hit.
Many of the Bureau's correspondents have expressed the belief that Washing-

Before the imposition of the ban on pleasure driving, people displayed con-

siderable anxiety about additional restrictions, Rumors flourished. The
most common prophesied further gas sale suspensions and the abolishment of

"A" books. In Massachusetts, a fancy rumor went around that autos not registered now could not be registered in the spring, and that the Government

intended to take all tires from unregistered cars. Worcester reported the

ton made a mistake in depending solely on threats and compulsion to on-

force the driving ban. They believe that the ban represented an oppor-

tunity to give people A greater sense of participation in the war effort.
If the ban is extended nationally, they recommend that the coercive approach
be supplemented by informational efforts designed to secure voluntary
cooperation.
the

greatest last-minute registration rush in "its history.

RESPONSE TO PLANS FOR FOOD RATIONING

KEPER

In Boston, the field men reported, people became quite defensive about

Americans accept without reservation the need for comprehensive food ration-

their "A" books. They commonly took the position that their "A" ration

ing. This is the outstanding finding of a survey made by the Bureau shortly
after the new program was announced.

-6-

-7X-8765

X- 8765

All but a very low people were aware that the Government was going to ration
42% say we are shipping food and should do so
43% say we are not shipping food, but think we should do so
2g say we are shipping food, but shouldn't
5% say we are not shipping food, and are glad of it

food. And they approved of the idea:
IN THE NEXT 12 MONTHS, DO YOU THINK THE GOVERNMENT IS

8% don't know

PLANNING TO RATION ONLY A FEW FOODS, OR QUITE A LARGE
NUMBER OF FOODS?

Only few

People strongly favored a policy of launching rationing programs before

Large number

Don't know

shortages develop:

(Unless "Don't know") DO YOU APPROVE OR DIS-

DO YOU THINK WE OUGHT TO START NOW TO RATION ALL
FOODS IN WHICH SHORTAGES MAY DEVELOP, OR DO YOU

APPROVE OF THIS?

THINK WE OUGHT TO WAIT UNTIL THERE REALLY IS A

79%

Disapprove

SHORTAGE?

Don't know

Ration now

779

Wait

Don't know

There is at present little expressed dissatisfaction over the shipment of

Approve

food abroad. Three-fourths of the people knew that we are shipping food

Although & minority doubted the necessity for sugar rationing, on the whole

to our allies, and an even larger number - 90 per cent -- approved of our

people were well satisfied with the way food rationing has been handled:

doing so, even if it means further restrictions here:
DO YOU THINK IT WAS NECESSARY TO RATION SUGAR AND
COFFEE?

DO YOU HAPPEN TO KNOW WHETHER WE ARE SHIPPING ANY FOOD

Don't know

745

68%

Yes, sugar; not coffee
Yes, coffee; not sugar
No, neither

Yes, are shipping
No, are not

Yes, both

OVER TO HELP FEED ENGLAND AND RUSSIA?

DO YOU THINK WE OUGHT TO SEND FOOD TO ENGLAND AND

WOULD YOU SAY THAT so FAR FOOD RATIONING HAS BEEN

RUSSIA, EVEN IF IT MEANS RATIONING A LOT MORE FOOD3

HANDLED VERY WELL, ONLY FAIRLY WELL, OR POORLY?

OVER HERE?

66g

Fairly well

90%
5

Poorly

Don't know

Should not
Don't know

Very well

Should send food

There was considerable confidence, furthermore, that the comprehensive

The public was less aware of the fact that we are sending food to North

rationing program will work out satisfactorily:

Africa to help feed the civilian population. But 85 per cent of the samON THE WHOLE, DO YOU THINK THE FOOD RATIONING PROGRAM

ple believed that we should follow such a policy:

WILL WORK VSRY WELL, ONLY FAIRLY WELL, OR POORLY?

Very well

68%

Fairly well

Poorly

Don't know

-9X- 8765

I. 8765

One serious threat looms on the horison: the possibility that the advance
announcement may encourage hoarding. Wickard's and Davis' explanation of

DO YOU THINK THERE HAS BEEN MUCH CHISELING IN THE
RATIONING OF SUGAR AND COFFEE?

Yes, has been chiseling

why it was necessary to disclose the Government's plans was overwhelmingly

26%

No
59

Don't know

approved by those who said that they heard or read their talks. But this
The impulse to hoard may also be strengthened by the fear that eventually

included only 58 per cent of the public.

there won't be enough food to go around. One-fourth of the sample displayed deep anxiety about the food situation:

nouncement than approved of it. Previous interviewing has revealed a
widespread belief that advance announcements lead to hoarding. This sur-

vey revealed that three people in four fear that people will stock up in
advance this time, too.

DO YOU THINK THE FOOD SITUATION WILL BECOME so
SERIOUS THAT SOME PEOPLE WON'T BE ABLE TO GET ALL
THE FOOD THEY NEED?
Yes

26%

Don't know

Considering the sample as a whole, more disapproved of the advance an-

A special study made by the Bureau in Philadelphia, on the two days follow-

DO YOU APPROVE OR DISAPPROVE OF THEIR ANNOUNCING THIS A
MONTH AHEAD OF TIME?

ing the announcement of the new program, indicates that many housewives are

Approve

438

Disapprove
Don't know

hoarding canned goods. Although the buying rush was perhaps exaggerated by

the anti-Administration Philadelphia Inquirer, it seems equally clear that

it was minimized by the pro-Administration Record and by Leon Henderson in

IN THE NEXT MONTH, DC YOU THINK A LOT OF PEOPLE NILL
STOCK UP ON THE FOODS THEY EXPECT TO BE RATIONED?

his statement thanking the housewives of the city for their cooperation.

Yes, a lot will stock up 72%
No

Excessive buying was especially pronounced in the super-markets, where

Don't know
3

customers enjoyed the security of anonymity. Despite Elmer Davis' explicit

The fear that others will hoard may encourage people to do a little pre-

request, there was considerable evidence that people were shopping around

cautionary hoarding on their own account. Such an impulse might be bolstered

in a number of stores for hard-to-get commodities. Demand for baby foods

by the expectation that enforcement won't be strict enough to prevent

was conspicuously heavy. Only the stores in low-income areas seemed com-

"chiseling", once the program goes into effect. There is consequently

pletely untouched by the buying wave.

some danger in the fact that one person in four believes that there has
Although apprehension and fear of what others might be doing are leading

been a good deal of chiseling in connection with sugar and coffee rationing:

X-8765

X- 8765

some people to hoard, on the whole, Americans are facing food rationing in

constructive spirit:

$109,000,000,000 budget should be raised through taxes and compulsory SSY-

ings. Other editorials maintained that the proposed higher taxes made it
imperative for the Government to adopt a pay-as-you-go collection plan,

THAT SORT OF THINGS DO YOU THINK PEOPLE THEMSELVES
MIGHT DO TO HELP THE FOOD SITUATION?

Economize generally

wnion newspapers have been advocating in increasing numbers, and with mount-

36%

Actually produce foods
Refrain from hoarding
Purchase sparingly
Preserve and can food

Utilize substitutes

ing insistence, for some time. But, in general, commentators did not ques-

32
21

tion the broad outlines of the President's program. They took the position

that it constituted a challenge to Congress and to the Nation.

11
11

Plan meals better

Eat less

Previous Bureau surveys and field reports suggest that the proposed new taxes

and compulsory savings will be accepted by the public, too, with no more

Miscellaneous

Make the best of it
Comply with regulations

Buy cheaper food

than perfunctory grumbling. However, the increased levies will hit some

Not ascertainable

groups especially hard, and new measures may have to be taken to facilitate

tax collection.

The reasons for rationing, while they merit continued restatement, appear
to be fairly well understood. More informational emphasis seens needed,
however, on the Government's reasons for announcing its rationing plans in

advance. The need for everyone to accept his individual responsibility not
to hoard also requires stress. Finally, continued emphasis must be put on

Interviewing in October revealed that nearly half of the people were reconciled to the necessity for higher taxes in 1943:
DO YOU THINK PEOPLE'S TAXES NEXT YEAR SHOULD BE
HIGHER THAN THEY WERE THIS YEAR?

the fact that no over-all food shortage is in prospect, and that compliance

with rationing regulations is a contribution to the war effort.

Yes, higher

LLS
44

Don't know
company

DEVELOPING SITUATIONS

In another survey that same month, three people in four said that it had
been no hardship for then to pay taxes in the past year.

see
TAXES

classic

The correspondents of the Bureau of Intelligence report that people appear

The President's "total war" budget message was well received by the press.

to have a good understanding of the case for higher taxes. People do not

One or two newspapers argued that not quite as such as 50 per cent of a

question the need for an all-out effort to win the war, whatever the cost.

X-8765
X-8765

cause some to default or attempt to evade the payment of taxes. Several

There is little disposition to complain about the expensiveness of the con-

correspondents advocate an educational campaign urging the public to set

flict or to argue that the United States is spending more than her fair

aside money for taxes. The labor press is one recommended medium,

share. There is an overwhelming insistence, however, that the expenditure
be well-managed-to demand the utmost efficiency and economy on the part of

Some of this solicitude is expressed by people who plume themselves on their

the Government. Frequently this takes the form of protests against some

own providence, and must be attributed to disguised hostility toward workers.

non-war expenditures.
2

But labor editors and other people unmistakably friendly to workers also

While not protesting about prospective higher taxes, people are deeply con-

feel that individuals who have been living on a hand-to-mouth basis need to

cerned about the possibility that they may be asked to pay more than their

be instructed about how to meet taxes.

fair share of the burden. This feeling pervades all classes. But it is
There is widespread sentiment in favor of some sort of pay-as-you-go plan.

especially pronounced among white-collar, professional, and small business

Many correspondents have expressed their personal preference for such a plan,

people whose income has declined or remained fixed.

and have reported that the idea meets with favor among people in all eco-

Some of these people simply point out, without bitterness, that "higher taxes
on an increasing income are less difficult to meet than higher taxes on a

nonic groups.

A survey made by the Bureau last summer, before the imposition of the Victory

stable or even a decreasing income." But others are so frightened about
Tax, revealed that this type of withholding levy was overwhelmingly approved

their general economic position that they have an almost paranoiac con-

by workers. Only one respondent in ten voiced any objection to the tax. The

viction that any new taxes are certain to fall most heavily upon them,

questions, of course, dealt with a relatively small deduction, but it is

People in this mood are frequently bitter about the "waste and extrava-

significant that many workers spontaneously suggested that more or all of

gance" of the administration, and extremely hostile toward industrial work-

their income tax should be paid through deductions from earnings. From

ers, whose prosperity they exaggerate and resent.

their own point of view, they looked upon withholding at source as a COD-

Among people generally, there is considerable anxiety about how to accumu-

venient and relatively painless method of meeting tax payments. And they

late enough money to pay taxes, even at their present level. Many corre-

regarded it as a sensible and efficient way for the Government to collect

spondents express the fear that most wage earners are not making any pro-

taxes.

vision to meet their 1942 tax bills, They anticipate a pinch next March
which will drive some workers into the hands of the loan sharks and even
15

14 X-8765

Z-8765

abave 03 TO d asion

POST-YAP PLANNING

Editorial reaction to the two addresses was in even greater contrast. For

BJBCOVD#

Success on the battlefronts has made the future seen imminent and real.
AGT .sexes 701 venom ables

Editors have suddenly taken a lively interest in post-war problems.

tious comment. Those commentators who did not denounce him as an agent of
elder

totalitarianism tended to ridicule his ideas or, at best, to treat him as a

Interest manifested itself most dramatically in the reaction to Vice-PresiJame

some time after his Free World talk, Mr. Wallace was the butt of much face-

boa

dent Wallace's recent speech commemorating Woodrow Wilson's birthday. The

wall-intentioned, but impractical, dreamer.

madjo bra 87032bo

Vice President's press has improved astonishingly since his Free World adblood # no with need svad adid alaubivibal bill
dress of last May 8.
stock desir of work fubds

Mr. Wallace's address of December 28 was given prominent and complete coverto TOTAL at InsutJuse
age in all but four of 22 representative newspapers examined by the Bureau
eved

ajaebnogae

The bulk of the editorial comment about his more recent speech, however,

praised it and, for the most part, regarded it as a practical, reasoned approach to post-war problems. The prevailing judgment was expressed by an

editorial in the Christian Science Monitor: "Those who call his ideas Utopian, while themselves believing that the United States can once more in-

of Intelligence. The four exceptions were the Kansas City Star and the
eteon sobt adj Jada

Chicago Tribune, which carried the story but gave it little prominence, the

dulge in a selfish high-tariff isolationism without wrecking the peace, are
the real dreamers."

Philadelphia Record and the Richmond Times-Dispatch, which carried no story

in the editions available. All the other morning papers. examined ran the

Invective came, of course, from the extreme isolationist minority of the press.

story prominently on page 1, seven giving it banner headlines and six giv-

Such papers again labeled the Vice President's ideas as subversive to the

ing it the #1 position. Ten of the 22 newspapers printed the complete text

American way of life.

of the speech.

Marg Jieah OUTSOO
In addition, however, some commentators generally more sympathetic to the

The same 22 newspapers virtually ignored Mr. Wallace's speech of May 8 at

Administration expressed alarm over Mr. Wallace's suggestions that "Congress

hfuoda

the Free World Association dinner. Among them, all except PM XAJ buried its
your

wolv

should formally recognise the maintenance of full employment as a declared

discussion of post-war problems, headlining only that part of Juling the speech
10

national policy." And they were uneasy about his recomendation that we keep

bodjee

which mentioned a possible Japanese attack on Alaska. Only PM and the
box

prices in control and assure continuity in the flow of income. The San

alciance

Chicago Sun carried the complete text of this address; only D PM 08 and the

Francisco Chronicle said that "This program, in plain words, means the man-

Baltimore Sun treated it as the a story; and only six papers ran it on

power control, frozen jobs, frozen wages, frozen prices, rationing, the

page 1.

whole lockstep regimentation and regulation of private life WE accept as
teaporary necessity in war emergency, riveted permanently upon us in an
16
17

X-8765

anthill civilisation."
But this sort of misapprehension was rare. Most comments agreed that the
time had now come for discussion of post-war problems. They agreed, in
particular, with the Vice President's view that the enemy must be disarmed
physically and psychologically. And some of them urged that the nature of

the peace be outlined in greater detail.
Interestingly enough, however, there seems to be little eagerness to have

President Roosevelt present a blue print for the solution of post-war problems. On the contrary, the prevailing judgment appears to be that the President has been wise in holding himself somewhat aloof from the current dis-

cussion. Mr. Wallace's remarks were generally construed as a trial balloon
for the President's message to Congress. A number of commentators, notably
Walter Lippmann, commended the President for allowing proposals to be

broached by his aides, while avoiding specific commitment to any particular

plan on his own account. The prevailing judgment in the press, in short,
seems to be that post-war plans should be debated at this time - but not
yet determined.

- 18 X-8765

185

1-22-43

INTELLIGENCE REPORT 59

CONFIDENTIAL

OFFICE o F
WAR INFORMATION

BUREAU
INTELLIGENCE
COPY No. 7
Henry Morgenthau, Jr.

CONTENTS

Page

EDITORIAL ATTITUDES

Feud

Strike

Taxes

POPULAR REACTIONS

Responses to Radio Treatment of the War

Manpower Conversion

Ban on "Pleasure" Driving

I-9060

EDITORIAL ATTITUDES

FEUD

Editors are distinctly unhappy about affairs in North Africa. The whole
situation there is concealed, they charge, behind a frustrating censorship
which denies them essential facts.
Three events during the week brought their anxiety to a ferment - a story
by Geoffrey Parsons, Jr. in the New York Herald Tribune reporting grave differences between the United States and Britain; denials of these differences
by Brendan Bracken and Harold MacMillan; and the appointment of Marcel

Peyrouton as Governor General of Algeria.

Mr. Bracken's statement only partially dispelled a widespread feeling that
Britain has been working at cross purposes with the United States behind
the North African scenes. His pledge of cooperation was generally applauded.
The prevailing judgment is that any decisions made by General Eisenhower
ought to be backed to the limit by both Governments.
Some of the General's defenders suggested that he has been made the victim

A summary of Investigation and analysis
conducted for certain OW1 officials, issued for OW1 and the Interest of other

of factional wrangling. The Scripps-Howard papers described it in this way:
. because Eisenhower acted as a great military commander with a single eye

members of the Government.

to victory, instead of as a partisan politician - because he refused to

The period covered by this report Is the
week of January 14 through January 20, ex-

operate as a factional De Gaullist - they are now out to get him. 'They'

cept where otherwise specifically stated.

include the left wing of the De Gaullists, a British official group (though
not Churchill), and an American minority which has tried to smear Secretary
of State Hull for many months."
I-9060
I-9060

This is a judgment supported by a number of newspapers customarily hostile

to the Administration's foreign policy. The Chicago Tribune observed, for

one had prepared him for, his chief American adviser was the political agent,
Mr. Robert Murphy, who had misjudged the situation." Mr. Lippmann ended

example, that "North Africa has apparently become an arena in which COD-

his column with a sweeping indictment: "The time has come to cease sis-

flicting groups, working at cross purposes, are sabotaging General Eisen-

leading the American public by pretending that the political situation in

hower's hope of attaining a military decision. The implication is that,

North Africa, which is our entire responsibility, is muddled because of what

while trying to fight a war, he is compelled to look over his shoulder to

has been said about it and thought about it in London. That is just an un-

Washington and London to discover the political intentions of his superiors.

sportamanlike search for a scapegoat, and altogether unworthy of a great

people. The control of this situation is in Washington and nowhere else,

But some outstanding commentators of more liberal hue placed the blame for

and it is in Washington that the crucial decisions will have to be made,

North African political difficulties squarely upon our own Department of
State. "One cannot avoid the impression," said Dorothy Thompson, "that the

and the measures taken, to send to North Africa American political repre-

sentation of sufficient stature and caliber to cope with the problem."

State Department, or persons it it, have a personal feud with General De

Gaulle, dating from the St. Pierre-Miquelon affair The unrealistic policy

Most commentators seemed to have no objection, on principle, to diplomatic

of our State Department constitutes a monace to our war."

opportunism as a means for the achievement of praiseworthy ends. They have

a horror of naivete and an uneasy notion that rigid adherence to principles

It was the transfer of M. Peyrouton from Argentina to the North African

may be naive. But, apparently, they are beginning to wonder whether Ameri-

scene which evoked the greatest editorial ire. The Washington Post called

can expediency in North Africa was, after all, genuinely expedient.

this the "last straw" and declared, "North Africa today is in a highly explosive state. In no small measure the hopeless mismanagement by civilian

STRIKE

American officials on the spot, notably the American Minister, Robert D.

James C. Petrillo's appearance before a Senate committee and the wild-cat

Murphy, is responsible for it. The elevation of Peyrouton to a high place
in the administrative apparatus of that liberated region has all the dan-

strike in the anthracite coal fields, efforded opportunities, not ignored
by the press, for moralistic comments on the Administration's labor policies.

gerous potentialities of a lighted match in a powder barrel.
Mr. Petrillo's defense of his ban on musical recordings was generally cas-

Similarly, Walter Lippmann felt that the trouble steamed from the fact that,

tigated as illogical. Only under an Administration which deliberately helped

"When General Eisenhower was confronted with a political problem which no

promote union organisation, it was commonly pointed out, could such dictator-

X-9060
I-9060

The problem can be not, many of then said, only by an immediate shift to

ship by a Labor official be perpetrated.

some form of pay-as-you-go taxation. The Detroit Free Press observed, for

Most papers regarded the coal strike as a grave peril to eastern fuel re-

example, that "Congress" most pressing taxation task is to regard March 15

serves and to the war effort in general. Editorial wrath at the strikers

as the arrival date of an emergency. This means prompt enactment of the

was somewhat mitigated by the fact that one of the expressed reasons for

Ruml plan or a similar device."

their walk-out was the imposition of increased union dues by John L. Lewis,
While not condoning the strike, some papers argued that the workers had DO

In most comment, the Ruml plan has been uncritically represented as a pay-

as-you-go formula. Little patience has been shown toward the Treasury's

other avenue of protest against extortion by their own leaders.

suggested substitutes or to its objection that the plan fails to place tax
Most commentators saw in this situation further evidence of the evils of

liabilities actually on a current basis. The Ruml plan as a synonym for

"union dictatorship"; they agreed that it stemmed from Administration fa-

"pay-as-you-go" is now widely accepted as a magic device for rendering tax-

voritian toward labor and a failure to establish union responsibility,

ation convenient, if not positively agreeable.

Nearly all editorial comment demanded strong governmental action to break

the strike and applauded President Roosevelt's ultimatum to the strikers.

POPULAR REACTIONS

Even newspapers relatively sympathetic to labor considered the situation

intolerable. The Philadelphia Record warned the strikers of congressional

RESPONSES TO RADIO TREATMENT OF THE'WAR

reprisals against all organised labor and declared that, *Up to now, the

Fears that the American public is "fed up" with radio material about the

strike has been politely called a wild-oat walk-out. From now on it rates

war appear to be unfounded. Most people say that they are listening to the

as sabotage."

radio more than, or as much as, they did a year ago. Relatively few feel
that there is *too much" about the war on the air. These are some of the

TAXES

salient findings of a recent Bureau of Intelligence survey of public reactions to radio treatment of the war.

Editorial pressure for c pay-as-you-go tax plan, which has been mounting

steadily, achieved fresh fervor last week. Newspapers declared that the
The survey was made in Philadelphia, because a monitoring study was then

idea of March will present a crisis for which the average taxpayer is wholly
unprepared.

being conducted in that city by the Bureau to discover how such time was

devoted to war-related material on the air. This study revealed that about

times

-5I-9060

I-9060

one-fifth of all broadcast time was given over to the war. The Bureau
wished to discover, in addition, whether people felt they were hearing too

it appears that the public is reasonably well satisfied with present radio

such or too little about the war over the radio, A representative cross

emphasis on the war.

section was questioned, and a number of individuals were interviewed in-

While only 15 per cent of the sample felt that, in general, the radio put

tensively.

too much exphasis on the war, an additional 20 per cent felt that there was

Only a fourth of the people felt that they were listening to the radio less

too much of certain types of war material. Radio serial stories, news com-

than they did a year ago. Thirty-seven per cent felt that they were listen-

mentators and dramatizations about the war were the types of program to

ing about the same amount, and 35 per cent claimed to be listening more.

which objections were most frequently raised.

Furthermore, most of those who were listening more attributed their in-

Dissatisfaction with the amount of war news on the air may be expected to

creased interest to the war. In contrast, most of those who were listening

fluctuate with the degree of interest in the war at any particular time and

less were doing so, not because they were fed up with news or programs about

with other factors. Interest may have been unusually high in December be-

the war, but simply because they had less time.

cause of the North African campaign.

Direct questioning did reveal some feeling that there is too much on the air

Some differences appeared between the people who complained that the radio

about the war:

put too much stress, in general, upon the war and those who raised objec-

tions only to certain programs. People in the latter group were highly inso FAR AS YOUR OWN PERSONAL LISTENING IS CONCERNED.
IS THERE TOO MUCH ABOUT THE WAR, OR NOT ENOUGH ABOUT

country

THE WAR, IN RADIO PROGRAMS AND ANNOUNCEMENTS THESE

DAYS?

Too much about the war

About the right amount
Not enough

No opinion

www.othy
15%
62

made

self

11 duetles
12

It is to be noted, however, that almost as many said there was "not enough
on the air about the war as said that there was "too much." With these

terested in the war, but objected to the over-emphasis or kind of treatment
given the war in some types of program. The people dissatisNied in general
complained about the nerve-wracking or depressing effect of war material on

the radio and were irritated by the repetition of the news. They aboved
some tendency to want to escape the war. Their surfeit is not with war on

the radio, but with war talk generally.
As these facts suggest, there was a definite relation between the opinion

viewpoints just about balancing, and with almost two-thirds of the sample

that there is too much about the war on the radio and people's general

maintaining that just about the right amount of time is devoted to the war,

X-9060

orientation toward the war. The people who complained about the amount of

I-9060

An earlier survey conducted by the Bureau showed that most people say they

war material on the air were prone, far more than those who did notato be

out of sympathy with the war effort and to be dissatisfied with the my it

like radio war programs for one of two reasons: (1) because they are in-

formative, or (2) because they give listeners a sense of participation in

is being conducted. They were less likely to be active participants them-

the war - of being in on things." They like news commentators because

selves in home-front war activities.

"they help clarify the news" and #seen to have inside dope."
Interestingly enough, the people who held these attitudes were also more

prone than those more closely identified with the war to complain that there
is not enough on the radio about the war. Thus, any effort to placate some

An effort was made to discover whether people minded having regular broad-

casts interrupted for war announcements. Only five per cent objected to

this practice.

of those whose dissatisfaction is related to basic disaffection by cutting
down the amount of broadcast time devoted to the war would probably only

A question was also asked about radio treatment of the United Nations to

heighten the dissatisfaction of other members of the same group.

see if people were surfeited with the subject as a result of the six week
spot campaign which had just run its course. It was found that, on the OOD-

People's views about whether there is too much, too
little or the right amount of emphasis on the war over

trary, many people think that too little due has been given America's allies

the air waves does not reflect itself to any significant extent in their listening habits. The surfeited

on the air:

and the non-surfeited spend about the same amount of

time listening to the radio.

IS THERE TOO MUCH, OR NOT ENOUGH, ABOUT THE UNITED
NATIONS (OUR ALLIES) IN THE RADIO PROGRAMS AND AN-

There was some slight tendency for the surfeited group

to avoid programs dealing with the war. It is clear that
their dissatisfaction does not basically stem from the
amount of time they spend listening to war material on
the radio. If anything, those who expose themselves
least to such material complain most.

NOUNCEMENTS THESE DAYS?

Too much

About the right amount

Straight news broadcasts, despite the frequency of criticism by the our-

Not enough

No opinion

The people who protested that there was too much or too little about the

feited groups, were the most popular type of program about the war. News

war on the radio also tended to make the same complaints about the movies

commentators rated second in esteem. About three people in ten expressed

and newspapers. But the movies were criticised somewhat more frequently

a preference for serial stories and dramatisations of the war. A compare-

than the radio for devoting too such or too little attention to the war, and

tively well educated group of listeners, comprising about one-fifth of the

the press was criticised somewhat less frequently.

entire radio audience, were particularly attracted to speeches, forums and
round table discussions.
I-9060
X-9060

MANPOWER CONVERSION

A December pell of the American Institute of Public Opinion sheda further

light on the problems involved in recruiting eight million additional workare into war industry. Only about half of the man not already in war jobs
expressed a willingness to shift into war work:

informational task ahead. Fifty-five per cent of those aware of the short-

age were willing to shift into war work. In contrast, only 47 per cent of
those who didn't know whether there was a shortage or not, were willing

atea

to make a change.
WOULD ILL BE WILLING TO TAKE A JOB IN A WAR PRANT AT
YOUR PRESENT RATE OF PAY? (Men only)
Yes

Sixty per cent of the men who lived in defense areas, but only 53 per

cent of the remaining city dwellers, and only 33 per cent of the farmers,

49%

Yes, if

expressed a willingness to accept war work. Unquestionably these differ-

Don't know
5

ences, too, were largely a product of understanding of the manpower orisis,

The "Yes, if" group includes those who said they would be willing to accept

As the Bureau's October survey showed, people in areas with many war plants

work in war plants "if capable of handling the job"; "if the job is in the

are far better aware than people in other parts of the country of the exist-

immediate vicinity"; and "if able to stand it physically."

ing manpower shortage.

As is natural, there was A close relationship between willingness to shift

Yes responses might have been higher than they were if

the question had not specified, "at your present rate
of pay." Previous Bureau of Intelligence surveys have
shown that willingness to shift into war work is definitely
affected by satisfaction with present remuneration.

into war work and approval of compulsory manpower mobilisation. Fiftyeight per cent of those who favored giving the Government the right to tell
workers where to work and at what jobs were willing to accept war work

On the other hand, the responses are less encouraging

themselves at their present rate of pay. Only 36 per cent of those who

if it is remembered that there is a big difference between willingness to take a job in a war plant and an

opposed compulsory mobilisation were similarly willing to shift into war

active impulse to seek such a job. An October survey
conducted by the Bureau revealed that only 15 per cent
of those not employed in war industries, and only seven
per cent of those not then employed at all, had actually
applied for war jobs.

work,

BAN ON "PLEASURE" DRIVING

Economic position and age Jid not appear to affect the willingness of man

Up and down the eastern seaboard, motorists seen to be taking the ban on

to shift into war work. But awareness of the acute manpower shortage ex-

pleasure driving with reasonable good cheer. Reports from BOI field ob-

erted a considerable influence - indicating the importance of the

servers and from ONI's regional information offices agree that, in the
states hit by the new restriction, there is general acceptance and cooperation.

X-9060
11

Indeed the stringency of the OPA ruling on gasoline seems to have COD-

The situation in the Middle West was aggravated by some organised oppo-

vinced people in a number of localities that the gasoline shortage is

sition, especially by the Chicago Tribune, to the rationing program. In

real and serious. There have been some protests and a number of inquiries,

of course. But complaints are less frequent than they were before the ban,

Milwaukee, where OPA officials themselves were charged with failure to
cooperate, there has been some tendency to disregard OPA rules. The

and a healthy feeling has developed that now everybody is being treated

theft of 6,500 gasoline ration books in Chicago has led to fear of a

alike, at least in the eastern states.

large gas bootlegging ring in that city.
.
adidas

that

The inquiries centered, for the most part, around definition of the term

People in the Southwest, where gasoline rationing remains & serious prob-

"pleasure". There has been some concern over differing interpretations

lem, have been hearing a number of rusors as & result of the eastern ban

of this word by individual OPA offices, and some localised criticism of

on pleasure driving. There is now some fear that coupon values in the

special gas allowances,

Southwest will be cut to salve the feeling of those in the eastern shortage
area.

Regional information officers and BOI field man agreed that acceptance
and cooperation were high, even in the Boston area, where the Massachusetts
Public Works Commissioner, whose department faces heavy losses in gaso-

line taxes, complained that New England had been singled out for gasoline

restrictions. He described the motorist as "the prise sap of the century"
for paying automobile registration fees under the illusion that he would be

allowed to drive his car. In Philadelphia, & city with important suburban

A traffic survey conducted by the North Carolina Highway Department showed

that the volume of traffic in that state during December 1942 was 49 per
cent lower than during December 1941. On rural highways, there was a de-

crease of 67 per cent in traffic. But public conveyances are said to be
seriously overtaxed, while private care still on the road drive without
full loads.

communities, reaction to the prohibition was reported to be "remarkably
good."

The greatest irritation developed along the fringes of the restricted
areas. Field men say that the inclusion of Pittsburgh in the eastern gas
rationing area evoked considerable bitterness there. The check on motorists
while driving was vehemently resented. The OPA office in this city had
900 phone calls on this subject in one day.
13

12-

I-9060

.
X-9060

186
NO TO BE RETRANSMITTED

BRITISH MOST SECRET
U.S. SECRET

COPY NO.

OPTEL No. 32

Information received up to seven A.M. 28th

January, 1943.
1. MILITARY

LIBYA Our forward armoured troops were held up
by enemy rearguards in area seven miles west of Zaura where

there was very bad soft sand on both sides of the road.
Further south our patrols maintained contact with enemy
armoured cars and a. few tanks on the Zuara-Giado Road at a
point about 50 miles S.W. Zuara where approximately 30 Italian

Deserters surrendered.

TUNISIA During 25th and 26th Allied Forces have
gained some ground in the Ousseltia Valley where we have

consolidated our positions. On Northern Tunisia operations

have been confined to patrol and artillery activity,

RUSSIA West of Voronezh Germans have withdrawn

to a new defensive position which is being strongly attacked
by Russians. Germans have captured a number of localities
40 to 50 miles west south west of Voronezh. East of Rostov

fierce and confused fighting continues between Rivers Don and
Manich. In Caucasus Russians have made progress on Railway
West of Salsk and N.E. of Tuapse.
2. AIR OPERATIONS

WESTERN FRONT 26th/27th 182 tons of bombs were

dropped at Lorient resulting in scattered fires with some large
ones in Dock Area in centre of town. 27th 9 Mosquitos (one

missing one crashed) dropped seven tons of bombs on Diesel
Engine Works at Copenhagen. Fires were started in Test Shops.
A force of Fortresses (17) and Liberators (24) were despatched
to North West Germany. 53 Fortresses dropped 118 tons of H.E.

on Wilhemshaven. Results believed good. Three Aircraft

missing. One Locomotive destroyed and 10 damaged in France by

Typhoons, Mustangs (51) and Spitfires. 27th/28th Aircraft
were despatched. Dusseldorf 162 (6 missing) Sea Mining 54
(one missing one crashed) Anti-Shipping 4. Intruder, one.

The blind bombing attack on Dusseldorf considered successful.
FRENCH NORTH AFRICA 26th Hurricanes escorted by

Spitfires (two missing) bombed Jefna Railway Station. 8
Enemy Aircraft dive bombed Souk El Arba Airfield. Allied
casualties on ground two nil two. Enemy in Air nil two three.

ITALY 26th/27th Mosquitos damaged a Northbound
Tanker off South East Coast Italy and three engines on Railway
on the same Coast. Liberators (24) bombed Messina obtaining
hits near Ferry Terminus,

187

NOT TO BE RE-TRANSMITTED
COPY NO.

BRITISH MOST SECRET
U.S. SECRET

OPTEL No. 38

Following is supp amentary resume of operational events covering the
period 21st - 28th January, 1943.
1. NAVAL

MEDITERRANEAN. A convoy to BONE which arrived 22nd twice heavily at-

tacked by aircraft, 4 of which shot down. One ship damaged. 8 enemy ships reported
sunk by H.M. submarines and naval aircraft, also one U-boat and 2 escort ships.
Estimated some 17,000 tons of enemy shipping sunk or damaged by aircraft. No major

change in position of Italian heavy naval units. Volume of traffic to Tunisian

ports much lower in January than in 2 preceding months. Last week more traffic &
TUNIS and less to BIZERTA and SOUSSE.

RUSSIA. Of 6 submarines on passage from north-eastern SIBERIA and
PACIFIC to north RUSSIA via AMERICA one lost, three now at ROSYTH, one in ICELAND (c)
and one on passage to north RUSSIA. Russian Naval Commander-in-Chief Black Sea has
moved his headquarters north to TUAPSE. In SEA OF AZOV there is 100 for distance
of 7 miles from coast line and covering GULF OF TAGANROG. Considerable drift ice
in KERCH STRAIT.

SUBMARINE WARFARE. A number of enemy submarines of which there are some
95 in the ATLANTIC have been concentrated in the areas south of GREENLAND but have

not repeat not so far intercepted a convoy though one homeward bound convoy is still
in danger. This immunity may be in part due to heavy weather. Week ending 27th, 4
promising attacks on U-boats in MEDITERRANEAN.

SHIPPING CASUALTIES. During the week 23rd - 29th inclusive 6 ships reported torpedoed. One Swedish in the north-western approaches, 3 United States
ships southwest of the AZORES, one Belgian off ORAN and one United States in the
South PACIFIC which was last reported to be afloat and drifting. In addition, one
British ship was sunk and another damaged by aircraft in the western MEDITERRANEAN
and a sailing barge was blown up, probably by a mine in the THAMES ESTUARY. The
British ship reported last week torpedoed east of DEMERARA has arrived undamaged.
One Panamanian tanker is reported overdue at GIBRALTAR.

TRADE. Imports into United Kingdom in convoy during week ending 23rd 352,000 tons, including 125,000 oil.
2. MILITARY

LIBYA. The enemy has succeeded in withdrawing the bulk of his forces

to the area of the Tunisian frontier and is unlikely to make any determined effort

to halt our advance before MARETH LINE defences reached. Impetus of our further
advance largely dependent on possibilities of reopening TRIPOLI port on which good
progress being made. Petrol now being landed BOUERAT.
FRENCH NORTH AFRICA. Operations in OUSSELTIA area probably not repeat

not more than local importance. Net gain to enemy has been capture of some mountain
passes north of OUSSELTIA-KAIROUAN Road, thus increasing protection of TUNIS-GABES

Coastal supply route. Considerable United States forces now reached Central Tunisia
and assisting French.

RUSSIA. German Divisions. Further departures of divisions from FRANCE
to RUSSIA and also slight intake of divisions into FRANCE. Number in FRANCE and
LOW COUNTRIES now estimated at 34.
FAR EAST. BURMAK-ARAKAN. Position unchanged MAYU-RATHEDAUNG area where

Japanese may have up to 2 battalions forward of AKYAB. Enemy troop movements reported OPTEL No. 27. Probably part of plan to reinforce AKYAB area.

188

-23. AIR OPERATIONS
WESTERN FRONT.

Night. 768 bombers took part in night operations. 17 missing. 3
attacks Oil LORIENT by total of 389 aircraft. Object to damage town and port facilieles so as to slow up servicing and maintenance of U-boats based there. Bombing
was highly successful, particularly having regard to small area of target which is

less than that of Krupps works at ESSEN. Some dislocation may have been caused to
U-boat turn round but effect on the number operational at sea cannot yet be asso essed
2 attacks on DUSSELDORF by total 245 aircraft which dropped 617 tons of bombs. Believed that in spite unfavourable weather considerable damage caused.
Day. One daylight attack also on LORIENT by 35 United States Fortresses

which dropped 66 tons. 5 aircraft missing out of 90 operating. 53 Fortresses and
Liberators carried out first attack by United States forces on GERMANY by bombing
WILHELMSHAVEN. 118 tons dropped. 3 aircraft missing which was much smaller loss
than expected. Attack successful, new dry docks under construction and dock facilities round main entrance being hit.
FRENCH NORTH AFRICA. Heavy attacks maintained on enemy ports and commu-

nications. BIZERTA Harbour bombed heavily by day and night. Now considered that
whole of Axis Libyan air force is based in Southern TUNISIA.

LIBYA. Allied fighter bombers and light bombers operated on a large
scale and maintained constant pressure by day and night on retreating columns. Forward landing grounds occupied and utilised as our ground forces advanced. Offensive
patrols maintained over forward area. Our forces not repeat not seriously opposed
by enemy air attacks. German fighters which had probably sustained heavy losses
were employed in protection of their Panzer units.
RUSSIA. Little news from northern and central front but Russians have
somewhat intensified their effort in south against communications and supply bases.
4. EXTRACTS FROM PHOTOGRAPHIC AND INTELLIGENCE REPORTS ON RESULTS OF AIR ATTACKS
ON ENEMY TERRITORY IN EUROPE.

ESSEN. Photographs 17th show damage between 23rd December and 13th

January as follows: Serious damage in 2 of Krupps' Plants, also in Savmills and
Glassworks. Damage to residential and commercial property scattered over wide area

and mostly from high explosives.

DUISBURG. Photographs same day show severe industrial damage especially

to cable works and a steel works. 5 large warehouses in docks wrecked or burnt out.
5. HOME SECURITY

Estimated civilian casualties week ending 27th. Killed 120, seriously

wounded 191, including 87 and 142 in LONDON daylight raid 20th.

189

January 29, 1943

TO THE SECRETARY:

Bernstein leaving Washington this
afternoon and will arrive Havana approximately
eight o'clock Havana time Saturday morning,

January thirtieth. will contact Third Secretary
of Embassy and see you shortly thereafter.
BELL

NLE

190

Analysis of Exposure to Payroll Savings Plans
January 23, 1943

Classification

Number of

firms exposed to

payroll savings plans

Total

number of firms

in the country
(estimated)

Percent

of total
exposed

Number of

employees exposed to

payroll savings plans

Total

number of employees

in the country
(estimated)

Percent

of total
exposed

I. Business organisations
470

473

8,645,091

5,722

5,855

8,007,264

(3) Firms with 100 to 499 employees

25,755

29,151

5,806,055

(4) Subtotal - large firms

31,947

35,479

22,458,410

171,727

(6) Total Business organizations

139,780

(5) Firms with less than 100 employees

3,343,017
25,801,427

(2) Firms with 500 to 4,999 employees

32,700,000 1

(1) Firms with 5,000 employees or more

II. Governmental organizations

1,435,034

2,900,000

3,811,101

5,700,000

29,612,528

38,400,000 1

171,727

Treasury Department

Excludes agricultural employees, military personnel, employees on WPA or NYA or 000 projects,
proprietors, firm members, self-employed, casual workers and persons in domestic service.
Data not available.

(3) Total governmental organizations

III. Grand total

2,800,000 1/

(2) State and local governments

2,376,067

(1) Federal Government

January 29, 1943

.
Utah

Iowa

Total

Ohio.

Texas

Idaho

Maine

Alaska

Oregon
*Nevada

Kansas

Vermont

Wyoming

#Georgia
Indiana

Florida

Montana

Arisona

Oklahoma

Virginia
Nebraska

Maryland

Missouri

Illinois

New York

#Delaware

Kentucky

Railroads

Colorado

Wisconsin

Washingto

#Arkansas

Tennessee

Michigan.
Louisiana

*Minnesota

*New Mexico

New Jersey

Mississippi

Connecticut

South Dakota

Pennsylvania

Rhode Island

North Dakota

*West Virginia

New Hampshire

Massachusetts

South Carolina

North Carolina

State

Treasury Department

Northern California

Southern California

District of Columbia

29,151

399

680

282

360

519

1,014

166

341

311

2,717

325

1,921

4,267

554

170

1,181

14h

4dd

110

976

1,378

168 222

405

1,318

300

294

214

816

2,195

356

419

142

190

1,267

692

781

131

332

Total

with payroll

Alabama

25,755

370

220

502

350

742

435

159

297

307

303

1,782

2,333

491

4,001

1,000

149

139

737

107
4210

1,023

1,217

359

160

THE

290

178

739

2,121

393

177

220

582

137

1,146

732

101

savings plans

(estimated)

with payroll

of firms

(estimated)

258

Percent

Number

Firms employing 500 persons or more

100

97
93

100

97
76

100

Firms employing 100 - 499 persons

100

January 23, 1943

Date are for January 16, inasmuch as no January 23 report was received.

115

154

111

125

6,328

639

504

2333

935

200

143

287

336

iii

170

504

127

165

161

134

Total

(As reported by the War Savings Staff's State Administrators)

Firms Employing 100 Persons or More Participating in Payroll Savings Plans

6,192

109

111

154

626

486

138

916

199

287

328

111

151

499

126

158

133

of total

100

100
100

100

99
100

100

100
100

100

100
100

January 29, 1943

with payroll

number

of firms

number

of total

Percent

Number

192

MEMORANDUM FOR THE SECRETARY.

January 29, 1943.

Mail Report

Both in volume and in content, mail for this week

varied very little from that received last week. Taxes

continue to be the dominant subject, with interest
again centering on some sort of pay-as-you-go plan.
In a group of 50 letters urging adoption of such a plan,

one-fourth mention and support the Ruml idea. Among
these letters were endorsements from groups of Public
Accountants, and an Association of Credit Men. Fifteen
letters opposed the Ruml Plan, believing it unwise to
forgive a year's taxes.

The Victory Tax continues to be exceedingly un-

popular. Fifteen letters called attention to the great

number of persons who escape payment of the tax; 3 Labor

organizations protest collection of the tax on raises
granted prior to January 1 but not paid until afterwards

because of delay by the Government itself -- the War
Labor Board being slow in approving increases.

The Sales Tax was favored 2 to 1, and a tax on the
excess profits of individuals had occasional endorsement.
There were 7 protests on increased taxation from
white-collar taxpayers who have had no salary increases.
There were the usual questions and suggestions in regard

to the application of the tax bill.

Correspondence in regard to Bonds introduced no new

note. Suggestions repeated those of earlier weeks -smaller denominations, different maturity periods, need

for additional safe-keeping facilities, and possible

methods of stimulating sales.

193

-2Memorandum for the Secretary.

January 29, 1943.

Of the 10 persons who wrote of the necessity for
cashing Bonds to pay taxes, one or two considered this
a good means of meeting tax obligations and suggested

short-cuts in connection with the transaction. Forty-

eight Bonds were submitted for redemption -- 10 came
from Patchogue, Long Island, although 6 of these came
at one time from the same owner. There were 44 complaints
in regard to outstandingly bad delays, 32 of these coming
from War Department personnel.

In the general correspondence there were a number

of rather cynical comments upon the recent release of

$6,600,000 in Federal Reserve Notes.

Only 5 persons advanced plans for prepayment on post-

War delivery of durable goods.

The pros and cons of advertising were discussed by

a number of correspondents. A few believe that advertising should be almost completely banned; others wish it
taxed heavily; and still others protest any allowance for
advertising expense on income tax returns. A few letters
have defended the basic principle and pointed to the part
advertising has played in educating the public and forming
good buying habits.

Ten letters proposed national lotteries and a number

included clippings of editorials endorsing the idea.

State E Forduck

194
General Comments

Ben DuBois, Secretary, The Independent Bankers Association,
Sauk Centre, Minn. We understand that the Department

of Agriculture expects to loan a quarter of a billion

dollars to farmers through resurrected RACC. We also
understand that the RACC will work in conjunction with
the AAA to the confusion of other agencies within that
Department. The country banks of the Nation are able

and willing to finance all agriculture needs and why a

quarter of a billion dollars of Government money should
be used where it isn't needed and an old agency brought
to life to administrate it when that Department has more

financial agencies than it can intelligently now use

indicates confusion most confounded. Apparently the
Agriculture Department is bent on the elimination of
country banking at a time when much of the bankers' energies are devoted to the sale of Government Bonds, etc.*
*

Congressman John D. McWilliams, (Connecticut).
It would seem that Mr. Munz is being accorded treatment

in direct contradiction to our Democratic form of Government and to the country of his adoption. I have known

Mr. Munz personally ever since I can remember, and can
endorse wholeheartedly Mr. Hellyar's sentiments with

regard to him, that he is considered among the half
dozen most beloved persons in the City of Norwich. I cannot conceive of any American citizen being treated in such
despicable fashion at the hands of our Government officials,
and I feel so strongly and deeply for both Mr. and Mrs.

Munz that I am determined to do for these good people

what I would do for my very own family. It is my intention to leave no stone unturned until I solve this shameful mystery and ferret out the facts in the case.
(The following are comments from Mr. Hellyar's letter to
Congressman McWilliams.) # Mr. Munz is a Swiss by
*

birth and his father and grandfather were Swiss. He came
to the United States in 1889 and became an American citi-

zen at the very earliest permissible time, in 1894. Mrs.

Munz is a native-born United States citizen and has never
been outside the United States. Mr. Munz is now 76 years

195

-2During the more than
of age and Mrs. Munz 75.
forty years during which Mr. Munz has been connected

with our company, and during which he has held the

highest offices it had to fill, he has left the larger
part of his excess earnings, that is to say, his life's
savings, on account with the company. # The result
is that for many years, Mr. Munz has had on our books

very large credit balance. * Now that our affairs
service,

are blocked and Mr. Munz has retired from active
the Munzes desired to withdraw a large part of the funds
due to them. The company not only did not oppose this,

but welcomed the lightening of its responsibilities that
such a withdrawal would bring about. * * # Application
to do this immediately gave rise to a staggering amount
of investigation and questioning, including a request
that we trace all transactions in the Munz accounts back
to the beginning of the account or accounts. Since Mr.

Munz's account began about 1900, this would have involved

the tracing of thousands of transactions. Documents in
sworn form were required, photostats, copies of accounts,
contracts and agreements were asked for. Citizenship

papers had to be produced, and they were produced, yellow
with age, and dated in 1894. Mr. Munz was asked to appear

in New York for questioning. Stories were told and re-

told; affidavits were filed in duplicate, in triplicate.

The file became enormous. After two and one-half months
the application was denied without any explanation.
Appeal from denial was made and more papers were filed.
Assurance was given that everything appeared to be regular and that the license ought to be forthcoming after
Mr. Munz was told in New York that
the appeal.
since it might take some time to decide the issues, an
application for a much smaller amount would receive immediate consideration. Mr. Munz thereupon stated that
he was in immediate need of about $2,000 for his living
expenses and he proceeded to file a stop-gap request

for this amount. # # # The last questionnaire received
was a repetition of the requests for information which
had already been filed in voluminous written and oral
form, hence it was necessary to go all over the story
again. What was worse, the new questionnaire referred
only to the stop-gap request for $2,000, although Mr.
Munz's appeal to the Treasury asked for re-consideration
of both denied applications. In the meantime, Mr. Munz
has found it necessary to borrow money for his immediate

needs.

196

-3Wm. E. Zeuch, Director, School of Organized Education,

Fairhope, Alabama. Your reply, through Mr. Bell, to
my recent letter is received. This is an acknowledgment and not to prolong correspondence. I have a
distinct impression from Mr. Bell's letter and enclosure,
as well as from press stories about the two-thirds
billion greenbacks released, that the Treasury and
Federal Reserve System have knowingly and purposely

embarked upon a program of inflation. The twelve bil-

lion bond issue based upon expanded bank credits and
normally unused bank reserves permits no other inter-

pretation. Some of us had hoped that the Administration

would have the courage as well as the statesmanship to
finance this war from taxes and savings derived from the

stabilized values (prices) of current production. We

have bought Bonds on the basis of that hope. Now that
the Treasury and Federal Reserve System have launched

upon a program of financing the war by debauching our

currency, partially at least, we cannot be charged with
lack of patriotism if we no longer buy Bonds. And I cannot, with a clear conscience, advise others to buy Bonds
that represent dollars whose purchasing power decreases

as the Administration-inaugurated inflation develops.
R. C. Love, Sycamore, Va. Please find enclosed AAA

Parity check. I don't feel like taking money from the
United States Treasury like that in time of war. It is
a small contribution, but please accept it with my best
wishes. ($9.89)

H. W. Spencer, Louisville, Ky. I think you have
done a swell job in a most difficult time.

Congressman Wesley E. Disney, (Oklahoma), sends the

following letter he has received from Judge Tom Shaw
of the Municipal Court of Tulsa, Oklahoma: As you know,

we confiscate sizeable quantities of liquor every month

-4-

197

here in Tulsa, and under our State law we must destroy

this liquor. This is a great waste and when we add
this to the alcohol confiscated and destroyed all over
the country, it is enormous. It can be nothing less
than a crime during wartime to destroy this liquor
which could be converted to war purposes. Therefore, in
case you agree with me, I should like for you to do
whatever can be done to have some kind of an order, law

or edict invoked whereby all such contraband liquor could
be turned over to the United States Government for war
purposes.

Congressman Leonard W. Hall (New York), transmits letter

from a constituent, Charles H. Gillespie, Williston

Park, New York, and says in part: * # # Today, we are
cooperating and uniting our efforts as never before.

Essentially, cooperation means common aid, common help,
and I do not understand why the Federal Reserve Bank

could not pitch in, and also other U. S. Government
Agencies that could be of cooperation.
(The following comments are from the letter written by
Mr. Gillespie.) As you are probably aware, the decentralization program has placed a number of Government
Departments in New York. The result is that when the
paychecks are distributed, there are hundreds of additional Government employees endeavoring to cash their
checks at or about the same time. Sometimes the Post

Offices are able and willing to cash these checks, but
it can be readily understood that they frequently are not
in a position to handle the demands made upon them. This

means that many employees of the Federal Government have

paychecks which are worthless to them for several days.
Of course, some of the middle and higher salaried group

have checking accounts in the city are are able to dis-

pose of the checks through the usual banking cycles, but

except for this minority, the banks are of no assistance

whatsoever. "The Federal Reserve Bank" simply states

that, "This is a private institution; we do not cash
those checks". * # It is not a question of proper

identification as most of the Departments furnish identification certificates which bear the employee's certificate, position and signature.

-5-

198

William L. Standard, Counselor at Law, N.Y.C.
A problem to be dealt with affects the unwarranted withholding by Treasury Department officials of money earned
by merchant seamen as wages, and which they have in

their possession at the time they arrive in this country.

The manner in which the Federal Reserve Bank of New York

is administering its powers and duties, under the Foreign

Funds Control Regulations, unnecessarily works hardships
on persons not intended to be affected by those Regula-

tions. The purpose of these Regulations is to prevent
certain types of money from being brought into this country.

At no time were they intended to deprive merchant seamen
of their earned wages. (Gives example of seaman whose
wages for 6 months were taken by Customs and not yet re-

funded.) # # * This practice should be stopped in all

cases where, as here, the seaman is able to prove where
and how he received his money. * * # While $830 of his
money has been tied up, he was left with only $50 when
his funds were taken from him. Having spent that, he now

finds himself destitute. May I urge that you give such

instructions as will guarantee to seamen that their earned
wages will not be taken from them, wherever they can prove
the sources from which they received same.

Frank P. Fenton, Director of Organization, American
Federation of Labor, Washington, D. C. # * # Your service discharged Mr. Gregory J. Bardacke because an investigation showed that he was arrested several times

on strike activities, although never convicted. This

discharge was predicated upon an investigation made by

your Department. I was very much surprised to learn of
this because he was working jointly with my representatives

who have been appointed by your Department, and who also
have been appointed as voluntary workers of the American

Federation of Labor. I have known Mr. Bardacke for seven
or eight years and I have worked with him in many trade

union matters, such as strikes, etc., and I have always
found him to be capable, honest, and an efficient trade

union officer. I find it difficult to understand why he

was discharged because he was arrested several times in

trade union disputes. Surely the valiant history of trade

-6-

199

union struggle should mitigate any opinion about such

arrests. * I certainly hope that you will see the

advisability of reopening this case so that justice and

equity may be done to a man who has conscientiously
devoted his service to the trade union movement.

Albert S. Goss, Master, The National Grange, Washington,

D. C. For some time I have wanted to drop in to see
you and tell you what a swell job you are doing, but
I

have not had nerve enough to take your time or even

bother you with a letter. Now I have something definite
to present and make use of the opportunity to tell you

how much we all appreciate your work. # * # I believe
the Treasury would find a lot of installment buyers who
would welcome a bond which would be repayable, principal

and interest, in quarterly sums throughout the life of
the Bond. Such Bonds could run for 10, 15, or 20 years,
be issued in multiples of not less than $100 or $200,
bear a rate of interest, possibly as low as 11%, and be
repayable in equal quarterly installments throughout the
life of the Bond. The purchaser would then be able to

use his money to further the War effort and would then
have an instrument which would protect against any difficulties which might arise in connection with his mortgage.
I have personally known a dozen or more cases where

farmers have written to me for advice on this very point,

and I am sure there are a great many thousands of farmers
and home owners who would be glad to invest in a Bond of
this nature.

200
7Favorable Comments on Bonds

H. J. Stomberg, The Fox Rig & Lumber Co., Ardmore,

Oklahoma. We have your circular letter of January 14
relative to our offering encouragement to our employees
to continue the payroll allotment plan for purchase of

War Bonds, and disregard the increased income taxes and

Victory Tax. This we are attempting to do. In

fact, we received the first target flag in the State of

Oklahoma; our employees are continuing to buy War Bonds

on the same basis as heretofore. At the same time,
your letter has overlooked one very vital factor and

that is the increased cost of living. As employers, we
are perfectly willing to forego any profit in our
business during times of this kind, but in order for an
employee to live, pay Victory Tax, pay increased income
taxes, and buy War Bonds, it means that he must receive
enough salary to do so. We have been trying to increase

the salaries of our employees to the extent that they

would be able to do the above. However, we have been

unable to receive authority to do so and have found the
orders to be very complicated, the men in charge of
Government offices apparently unwilling to listen to
what we consider sound reasoning. # # We believe that
when an employer is willing to increase salaries to the
extent that it will enable his employees to pay these
different taxes, and in addition, buy War Bonds, he is

entitled to more consideration than we have been accorded.

A. A. Pinski, Plumbing and Heating, Great Falls, Mont.

It is my observation that employees and employers

alike are realizing more and more the necessity of sacri-

ficing and putting their country's needs before their

own. Also, as they accumulate a few War Bonds, the true
picture unfolds and they are surprised and delighted to

find that every dollar invested in War Bonds really is
an asset to their future welfare without any strings

attached, guarded against marauding of numberless induce-

ments to part them from their savings, and last, but not
least, their sense of obligation started them in a saving
habit of far greater magnitude than they ever dreamed
possible.

201

-8Ralph Sorrentino and William Capizzo, Brooklyn, N. Y.

My friend, Willi, and I, Ralph, feel that we are not

doing enough by going out to look for scrap only. We
will like to have your permission to sell defence stamps.

I think we are trustworthy of selling them. If you give

us permission please send them to the above address.
In case of an order of a Bond we will take their n ame and

address and send it to the nearest bank. We like to do
this because we are to young to join any of the arm forces
so at least we are doing our part by selling stamps. We
will send the money to you. So please give us your permission and we will be on our way.

202

-9Unfavorable Comments on Bonds

Mrs. D. J. Raymond, Route 2, EauClaire, Mich. (Letter
referred from the White House.) There is something
gnawing at the ropes of Victory, and I believe you
should know about it. The boys in the Armed Services
are urged to take out War Bonds. #
Most of the boys
don't mind, but they do worry when over five months
have passed and those Bonds aren't sent. Our boy is in
the Army and had a Bond a month taken out of his pay.
*

He wrote telling us to be expecting it; to put it away
for him and to let him know just as soon as they arrive.

Five months have passed and there isn't any trace of a
Bond. We have advised him to discontinue taking them.

To most of his inquiries he is told that's the way the

Government does things. * ** If the presses are so
overworked printing Bonds as I was led to believe when
I made an inquiry, maybe it would be a good idea to stop

civilian sales of Bonds until the soldiers get at least
their first one.
This is causing a great deal more

worry than you can believe, not only with ours, but

countless others. I am advised if I don't want to get

in trouble, to keep my mouth shut about things of this
kind. But being an American of several generations,
that isn't easy when you think something is causing as
much trouble as I believe this is.

William K. Paton, President, Farmers Bank of the State of
Delaware, Dover, Delaware. When we down the line have

the heat put on because it is believed we are not doing

our job, and when bureaucratic orders come out of Wash-

ington, it just burns us up a little bit to see situations

like this, minor though they may be. There is so much
of it in the various Departments that comes to my atten-

tion, that I could not refrain from taking a crack at

this one. (Encloses full-page ad showing records of
carrier-boy sales in various states. Delaware is omitted
in column between Connecticut and District of Columbia,

and the ad bears the following notation: "Since when
has Delaware ceased to be a State -- or is it further

203

- 10 inaccuracy in Government at Washington? For your information, it was the FIRST State in the Union!
Lieutenant R. C. Draper, U.S.N.R., Naval Operating Base,

Guantanamo Bay, Cuba. This is the third inquiry on the
subject of Defense Bonds, and to date no reply. I allot

$37.50 each month to purchase a $50.00 Bond, but to date
no Bonds have been delivered. Original allotment was

made at Quonset Point, R. I., in July, 1942. The address
to which the Bonds were to be sent -- Mrs. R. C. Draper,

Navesink River Road, Red Bank, New Jersey, U.S.A.

204

- 11 Favorable Comments on Taxation

Jerome Laadt, Sales Organization, Chicago, Ill.
TOO SUDDEN -- without any real serious consideration and ABSOLUTELY IN THE WRONG TIME - the Ruml Pay-As-You-

Go Plan has been announced, which is nothing new. The

Egyptians had it 3000 years ago. Hitler has had it

ever since 1931 when he began to build his war machine -a bayoneted Nazi stands at every cashier's pay window
and collects right then and there 40-50%, now supposed

to be 70% of the wage-earner's pay, as taxes. An old
story -- "Pay-as-you-go Plan" -- but a good one -- a very
good one.
(After suggesting plan for 1944.) Above
all, stop talking pay-as-you-go quick, if you don't want
to get into a muddle by being short millions of tax returns by March 15. Please realize that you are "doing
business" with people who are short-minded, they do not
understand what you talk about. They hear all kind of
conflicting reports over the radio and in newspapers --

this tax is on, this tax is off -- and so on, nothing

definite. The only thing they know and remember is that
they will not have to pay a tax for 1942 because of the

pay-as-you-go tax plan. Whether they pay or not means
nothing to them, they just know and remember that which
they hear over the radio, see on the screen and read in
newspapers -- that their 1942 tax may be cancelled.

Edward Grop, Jr., C.P.A., Boston, Mass. Sitting here in
my rather cool hotel room, I read the enclosed despatch

re Ruml. I know F.D.R. has given it his blessing
under certain delightfully indefinite conditions. I sup-

pose he says to himself, and rightly so, "This is Henry's
job, let him muss up his hair on this one". From a

strictly selfish point of view, I'm for it. # * What

would Congress say on some payday in 1944 if you had col-

lected all taxes due, and borrowed all you could, and
spent it, and there was no back-log for you to dig into

to get that payroll? But let me tell you, Henry, Mr.

Ruml and his eminent endorsers haven't said anything

205

- 12 about forgiving the 1942 debts their customers owe
them, provided said customers pay on the nose for what

they owe in 1943. Frankly, neither will I do it. #

Based upon the possibility that many will not be able
to pay their 1942 income taxes in 1943, especially the
little fellows, let us adopt the Ruml, or perhaps some
other pay-as-you-go plan for income taxes in 1943, but
don't forgive the 1942 income taxes as per Ruml. * # *
The real people in these United States don't want forgiveness, but they probably will appreciate paying on
1943 income, as we go, and if you'll let them pay 1942
same as they do a betterment assessment on their real
estate (seeing as how they have been in 1942 paying

back
and buying Bonds) they will feel fine
aboutbills,
it. * taxes,
**

206

- 13 Unfavorable Comments on Taxation

Jack Winocur, President, Atlantic District, American

Communications Association, C.I.O., N.Y.C. We have
written the Internal Revenue Department regarding the

unjust application of the 5% Victory Tax to seamen's
wages. Having received no reply from this bureau, I am
writing you in the hope that something will be done to
end the penalties and discrimination now being applied
to the men who risk their lives in delivering the goods

to our allies and armed forces. * Seamen receive

the bulk of their wages in one lump sum at the end of

their voyage. Voyages these days range anywhere from
one to eighteen months in length. The 5% being deducted

from the payoff at the end of the voyage is actually

collected on wages earned not only in 1943 but also in
1942, and in some cases, even in 1941.
John H. Bowles, Notary Public, Fort Bragg, N.C. Ten days
ago the undersigned made a formal request in writing to
the Collector of Internal Revenue at Greensboro, N.C.,

for a special ruling on the following: Are the expenses
incurred in travelling to and from work (Defense Jobs)

deductible from income tax where the distance is 50 miles
or more, roundtrip? The Collector at Greensboro, N.C.,

has not even replied to my inquiry. I am this date
asking Senator Bailey to get in touch with you in regard
to my inquiry.

W. Croft, Elmhurst, L. I., New York. In your pamphlet

entitled, "Your New Income Tax" you appeal to every one,

who is able, to pay their income tax in full. I am ready

to do so right now, my friends are ready to do so, and no
doubt thousands of others are eager to do likewise.
There is only one thing that prevents people from doing
so, and that is the uncertainty about what new rules may
be forthcoming from Washington, and the result is that
people are only going to pay one-quarter of their taxes
until they know exactly where they stand. Will you please
advise me what to do under the circumstances, and also the

public at large, otherwise, I think your appeal will be
in vain.

- 14 -

207

Dunlevy Milbank, N.Y.C. Your request that income taxes
be paid as early as possible is understandable. The
benefit to the Treasury Department is obvious, but the
disadvantages to the taxpayer are not so clear. The law
requires the filing of income tax returns on March 15,
and permits payment of income taxes in four installments,
but the regulations and practices of the Treasury Depart-

ment modify this in certain particulars. For example -the taxpayer cannot be sure, if in order to relieve the
burden upon the Treasury Department, he anticipates the

date for filing his return, that the statute of limitations will not thereby start to operate as of this earlier
date; he cannot be sure if he anticipates payment of his
first installment of taxes that interest on additional
assessments will not take this earlier date as the basis
for computation; but he can be sure if he makes payment

of any installment or installments in Tax Anticipation
Notes, that interest thereon will be accrued and credited
only to the first of the month in which he makes payment -not to the first of the month in which payment is due.
It seems to me that if in issuing another appeal for early
payment of income taxes, you will state that so far as the
Treasury Department is concerned, the taxpayer will not-in any particular be penalized for his considerateness
with such an assurance you will find the taxpayer will
cooperate.

Jan Williams, Drexel Hill, Pa. I am a sailor in the

Merchant Marine and have just returned from a 6 months'

trip abroad. You can imagine the surprise and disgust

of myself and my fellow workers when we were told that
this famous Victory Tax would apply to us from the

beginning of our trip, that is to say, from last July -and even including money spent abroad or on allotments
to our families. I would be pleased if you could explain
to me why we sailors are penalized in this fashion for

having spent months in a submarine-infested ocean and

having daily run the risk of losing our lives. Why is

it that those who had soft jobs ashore only pay the tax
from January 1? If you can give a satisfactory explana-

tion to this, you're a clever man.

208
- 15 - -

Copy of letter addressed to Frank Scofield, Collector
of Internal Revenue, Austin, Texas, by Edward H. Shirley
and Wife, Eagle Lake, Texas. Am paying this interest
under protest. When return was rendered last year, well

in advance of March 15, a serious but completely honest
mistake was made in computing the tax, and in the amount
sent in. As soon as the form was mailed, we discovered
the mistake and wrote in immediately, asking to be
allowed to correct it, and HOW TO PROCEED. The answer

over your signature was that in due time the matter would
be taken up. In November your adjuster, Mr. Horn, in a
most satisfactory and gentlemanly manner, went over it

with us and the additional tax was paid. Mr. Horn in-

formed us "an amended return" could have been filed.
Which definite suggestion would have been appreciated

at an earlier date. # * * We are loyal citizens, and are
glad to pay our income tax, but we would be happier if
fairer and more businesslike methods were used by the
representatives of our Government.

Lawrence J. Klauder, Certified Public Accountant, Philadelphia, Pa., Prentice-Hall, Incorporated, publishers of
the Federal Tax Service, states in a recent report that
"An appeal for early filing of tax returns on 1942 income

was made today to 35,000,000 Americans by Secretary

Morgenthau". If you made this appeal, as you are quoted
as having done, are you aware of the fact that in Phila-

delphia it is still impossible to obtain 1942 corporation

and fiduciary income tax blanks, and that individual tax
blanks have not yet been received in the mail by taxpayers?

Mrs. L. N. Wheelwright, Blowing Rock, N.C. # # * Millions
of families like my own, on small fixed incomes, are compelled to turn *their homes over to banks and insurance
companies who hold the mortgages because we cannot meet

the new taxation -- especially the Victory Tax -- and pay

the mortgage interest. We are going around these weeks
with stricken hearts because on January 23 our life
savings are wiped out by the Jefferson Standard Insurance
Company, for lack of $394, with which to meet the interest,

- 16 -

209

and $200.00 with which to meet the taxes (property tax)
plus $98.00, town tax -- a sum we have raised each year
for thirteen years by stinting to the bone because we
loved the place, and because it was home. We do our
own work, our own painting, planting, etc.: because we
stay at home and within these gates, the place is our
heaven on earth. Now we must lose it. We had nothing
to do with bringing War to America and can contribute

in no way to its prosecution, being too old, the little

ones too young. When we move on the 23rd, we must go

into a small brown shingle house, heated only by one

fireplace and a cooking stove, storing our furniture in
a barn. I was supposed to be comforted by the tax collector who mentioned that a part of the tax would be refunded later on, but that comes too late, we will have
lost everything long before that time. The sense of
frustration, of silent fury at the helplessness of such

people as ourselves makes matters even worse. To be able
to do nothing except sit and wait until 1944, when we can

cast two minor little votes against those responsible
for the state of affairs in America is almost physically
sickening.

Arthur E. Bateman, Cambridge, Mass. My letter of Dec. 23,
1942, asked for a simple statement as to whether or not
the benefits received from Accident and Health Insurance
should or should not be included in my Federal Income
Tax Return. On January 20, 1943, I received a two-page
(on different kinds of paper) typed reply which was more

or less a copy of printed instructions which indicated

that benefits should be excluded, although, "Section 23X",
the exception, was not explained satisfactorily.
Not receiving an answer to my letter of December 23, 1942,
and not receiving my Form with printed instructions, al-

though we read continually in the press of difficulties

in tax collecting, I visited the Boston Office of Internal
Revenue on January 15, 1943, and from a Counter Clerk
(I looked in vain for an "Information" sign) learned that
these benefits should be included in my return, but that
I could exclude premiums paid. As this did not seem
sensible, I called at the Cambridge branch and received
a contradictory statement; that is, the benefits should

- 17 -

210

be excluded, which was verified by the printed instructions received subsequently, and also by the typed
letter received 29 days after my letter of December 23,
1942. Possibly the Treasury Department is in a groove.
Raymond E. Guiel, Holyoke, Mass. I'm wrighting to know

what the consaquences be to a working man or woman who

cannot meet his income tax of 1942. Recently I red your

booklet called, Your New Income Tax, and I'm not sure

I can pay as much as it calls for. I'm 17 years of age

and I've worked hard for the money I've earned. Each
week 1/4 of my pay goes to taxation, bonds and insurences.

Besides all taxes on food, clothing, gas, oil, ect.

I have a brother 19 going in the army. There are 4
smaller than I, and Mom and Dad are not working. I have
at last two sisters who pay their board and so that leaves
only me to keep my family going. Mr. Morgenthau, I'd
really like to know what you would do, you in the place
of mine. # # * I'd be pleased to have you, Mr. Morgenthau,
to write me back personally to what can be done to aid me
through this painful year of income taxation. * # *

211

NOT TO BE RE-TRANSMITTED

BRITISH MOST SECRET

COPY NO.

U. S. SECRET
OPTEL No. 33

Information received up to 7 A.M., 29th January.

1943.

1. NAVAL

One of H.h. submittes sank a 500 ton armed ship
and two 250 ton schooners and damaged two other small ships
off Eastern Sunisia,
2. MILITARY

LIBYA, 27th, Leading elements of eighth armoured
brigade reachalSabratha which was unoccupied and advanced

another fifteen miles,
RUSSIA. The Russians have captured the railway

junction of Kastornaya fifty miles west of Voronazh. In the
North Caucasus they have advanced southwest and northeast of
Kropotkin.
3. AIR OPERATIONS

WESTERN FRONT. 27th/28th. DUSSELDORF, 127 Aircraft

dropped 47 tons of bombs in about equal proportion H.E. and

I.B. including five 8,000 pound and 93 4,000 pound. Complete
cloud en route and over objective large concentration of bombs
was dropped on and around the markers placed by Mosquitos,

Attack completed in about twenty-three minutes. Glow of many
fires seen on the clouds but success of attack cannot be

escertained at present. Searchlights ineffective. No enemy
fighters met.

23th, In France and Belgium our fighters destroys
one and camaged twelve Lonomotives, Two spitfires missing. One
JU 8S shot down by fighters off Essex.
MARCH NORTH AFRICA. 27th. Six U.S. Mitchells

bombed and hit two enemy destroyers, one was left on fire and

listing heavily six U. 3. Bostons bombed Mezzouna fifty-four
miles W.S.W. of SFAX with results believed satisfactory.

213
FEDERAL RESERVE OPERATIONS IN GOVERNMENT SECURITIES

Page

Marketable issues:

Special one-day certificates 2/1

Market purchases

Column 3 shows price changes is 32nds

Net increase

Market sales 1/
Direct purchases from Treasury
Maturities

for all securities except certificates

Net decrease

For certificates Column , above

yield changes in decimals,

STRICTLY CON

Last Week
Saturday

Index

Full Veek

Description

Tuesday

Monday

Jan. 25

+47.1

+211.6

-21.1

-6.4

-75.4

-62.9

-5.9

-37.5

-209.8

Marketable issues:
Market purchases
Market sales

Direct purchases free Treasury
Maturities

-$77.1

-6.5

+6.3

+99.4

+53.1

+66.2

+76.8

+48.1

-66.4

+351.9

-32.3

-72.8

-71.8

-87.2

-24.7

-349.2

<79.0

Special one-day certificates:
-116.7
5818.0

A
A

+44.9

-56.1

+36.0

*2.0

Saturday
Full Week

+6.4

-2.9

Friday

Thursday

1. Summary
+18.5

-77.3

Wednesday

Friday

Thursday

Jan. 18

Wednesday

Tuesday

Monday

This Week

operations in millions of
dollars as follows:

Column A shows Federal Reserve

-79.0

Net change

+39.07

+9.6

Total net increase (+) or decrease (-)

-75.5

-24.0

+39.0

Wednesday report of total portfolio

-5.6

-98.1

-10.4

+23.4

-76.3

5729.0

11. Taxable securities

+17.3

-4.5

-14.1

+30.1

+49.6

-61.5

-50.5

Bills all issues combined
+38.5

+29.3

-36.5

-#77.3
-4.5

+2.

-108.1

-.9

+29.3

+2.0

+164.8
-167.7

Market purchases
Market sales

-m77.
-80.2

Maturities

Total net increase (+) or decrease (-)
Certificates
5/85

02%

024
+7.0

+.02%

.024

DAY

.02%

7/8

+5.0
+1.0

+.8

+15.6

not
+5.04
+31.44.02%

+7.0

+80.0

+23.5

+54.0

49.7

+47.5

-16.6

+257.2

-30.0

-31.8

-47.5

-16.2

-157.6

-13.0

+63.4

-65.5

+22.2

+2.2

+31.3

+18.6

+11.0

-79.0

5-1 43

+17.0

8-1 43
12-1

7/8

-.02%
.02%

11-1 43

D-

.02%
.02%

+22.6

2-1

7/8

3/46
1/4

notes

3-15

+5.0

D-

9-15

12-15 45

1/4

3-15

-2.

-2.5

1-1/2

.02%

L018

.046

.02%

+6.2

.066

-5.5

-7.5

-4.5

-3.0

-1.0

-21.5

-7.5

-10.6

-2.2

-7.9

-2.0

-30.2

Treasure bonds
-1.5

-1.5

3-15

48-50

1-3/4

6-15

48-

6-15
+1
-2

-.5
+1

-1.0

-5.4
-.5

-1.0

-.5

-9.5

-1

49-51

12-15

49-51

3-15

50-52

12-15

51-55

2-1/2

3-15

52-54

2-1/4

6-15

52-55

-3.0

-2.0

-1.0

-14.7

-8.5

-1.0
-1.0

-3.5
-2.0

-2.0

-7.2

-32.2

-2.9
-6.0

-5.0
-1.5

-17.8

-6.0

-2.0

-17.8

-7.9

-.5

6-15 62-67
12-15 63-68
9-15 67-72

2-1/2

-2.0
-1

3-15 56-58

2-1/2
2-1/2
2-1/2

-1.6

49-51

9-15

-1.2

-.5

-.3

-2.0

Quaranteed securities

RFC 1-1/85 7-15

4-15 44

RFC 1

+1.5

the
+1

1-1/8 0 - 2-15 45

All taxable securities
Marketable issues:
+17.3

+7.0

+31.1

-21.7

-5.0

-68.0

+55.4

-1.1

+44.9

-5.9

45.5

+201.2

Market purchases

-17.5

-199.5

Market sales

+2.5

+97.0

+47.1

+66.2

+73.8

-18.5

+48.1

-51.0

-71.2

-62.7

+334.7

-70.7

-20.4

-294.5

Direct purchases from Treasury
-17.3

-77.3

Maturities

-79.0

Special one-day certificates:

-79.0

Net change
+2.0

-114.2

-6.0

+39.0

+6.0

Office of the Secretary of the Treasury Division of Research and Statistics.

-75.6

Total

net increase (+) or decrease (-)
Original figures revised.

-16.0

N6.0

-103.1

-4.1

Less than $50,000. 1/ Purchases and sales recorded as of day of transaction and not day of delivery. Transactions after 4 e'clock are included is the next day.
2/ Transactions are entered as of the day following that to which they apply. since data are not available until the following morning.

+1.5

+3.1

-04%

-066

014

12-15

-.04%

-.04

+1.2

0 - 3-15 45

1-1/4

-5.4

+69.8

.02%

Special one-day certificates
Treasury

+20.6

2-1 4

A-

7/8

+2.5

-15.5

+27.7

-18.8

214

FEDERAL RESERVE OPERATIONS IN GOVERNMENT SECURITIES
Column A above Federal Reserve

Market purchases 1/

operations in millions of
dollars as follows:

Column 3 above price changes is 32nds.

Market sales

Maturities

STRICTLY CONFIDENTIAL

Last Yeak

Jan. 25

1/4

3/4

12-15

44.54

105

2-3/4

9-15

45-47

106

2-1/2

12-15

3 107

I-3/4

3 104

1-1/8

6-15

46-49

10-15

47-52

12-15

113

-1

115

3-1/8

12-15

-1

+3.0

3 115

2-3/4

-1.0

3119

-.9

$ 120

2-1/4

12-15 51-53

3 121

-.5

+.1

-,5

-1.1

-1

-5

-5.0

-5.6

-3.5

-1.0
+1
+1

-1.2

-2.0

-3.2

4.1

-4.2

9-15 51-55

-14.9
-4.0

-2.1

-2

-4.4

-1.0

-3.2

B 122 2-1/4
S 123 2-7/8
B 124 2-3/4

-1

-1.2
-1.0

49-52

12-15 49-53
9-15 50-52
6-15 51-54

-.5

-7.3

-4.3

2-1/2

-.8

-1
+1

-2.0

-1.0

-.5

-.9

-1

+3-3

-2.0

+5.5

-2

2-1/2

-3

-1.0

+.1

48-51

116

-1

+3.9

+3.0

4.0

-6

12-15 48-50

114

+3.0

+1.0

9-15

-1

+1.0

3-15

117

-3.0

-1

46-48

4-1/L

2-3/4
2-1/2

+1.0

+.1

109

3111
112

..
+1.3

-1.0

3-45
6-15

3 110

-6

-3.0

43-47

4-15

-.9

-1

6-15

1-1/4

-1

-.9

3 103

-.b

-1

3-15

+2.8

-1

+1
+1

43-45
44-46

-1

boads

106

-1

6-15

C - 9-15 44

10-15

+1.0

3-1/4

-1.1

3-15

-,5

+1.3

-1

+1.0

-6

3-3/87

-1

+1.4

+.9

+.1

12-15 43

1-1/8

Treasury
+1.1

6-15

9-15

3 101
3 102

-2

N 101

notes

104
105

III. Tax-exempt securities

1-1/85

# 106

Full Week
30

29
27

Treasury

101
102
103

Saturday

Friday

Thursday

Wednesday

-2

Tuesday

Monday

Description

Full Veek

Intex

Saturday

Jan. 18

Friday

This Week

Thursday

Montaz

Wednesday

Tuesday

-1

B 125

2-3/4

1 226

2-3/4

6-15

53-55

6-15

54-56

3-15 55-60
56-59
9-15 56-59

6-15 58-63.

-2.5
-.8
-3.0
-.3

-4.6

-5

-1.9

-1

-1.5

-1.0

60-65

12-15

-5.1

-2.6

-1

harenteed securities
0 101

-1

+.5
+1.0

-1

+.1

106
103

+.6

G 102
6 104

+1.2

+.2

+.5

+.2

+.3

105

000 1/45 5-1
TPEA

5-15 44-19

FFMC

TTMC

1-1/4

+.1

+.3

+.2

3-15 44-64

44-52

HOLO
HOLC

+4.0

2-1

1-3/8

45-47

1-1/2

-1

All tax-exempt securities
+1.5

+1.4
-1.4

+1.5

+4.9

+1.0

-7.4

-1.5

-2.5

-.5

+1.6

+10.4

-10.3
+1.6

+.1

Market purchases
Market sales

Maturities

Total not increase (+) or decrease (-)

+2.4

+6.0

-9.4

-1.6

-9.1

-16.5

-4.3

-54.7

-8.0

-7.0

46.4

-9.1

-13.5

-4.3

-37.5

Original figures revised.

after 4 o'clock are included is the sext day.
Less than $50,000.

Office of the Secretary of the Treasury. Division Purchases of Research and sales and recorded Statistics. as of day of transaction and not day of delivery. Transactions

+17.2

+3.0

45.8

-13.8

215

January 30, 1943

Dear Ed:

In the absence of the Secretary

I acknowledge receipt of your letter

of January 27, 1943.

We did not have any suggested

changes to make in the statement
which you proposed to make before
the Foreign Affairs Committee of the

House, 80 we did not think it was
necessary to call Mr. Davidson as you
suggested.

Very truly yours,

S 1 DAN

Honorable E. R. Stettinius, Jr.,

Administrator,
Lend-Lease Administration,
515 - 22nd - Street, N. W.,
Washington, D. C.
DWB: NLE

216
C

OFFICE OF LEND-LEASE ADMINISTRATION

515 - 22nd Street N.W.,

Washington, D. C.

E. R. Stettinius, Jr.,
Administrator

January 27, 1943

My dear Mr. Secretary:

Attached is a preliminary draft of my testimony
to be used before the Foreign Affairs Committee of the
House in the next few days in connection with the exten-

sion of the Lend-Lease Act. It is likely our hearings

will commence Friday.

Owing to the time limitation, I wonder if you

will be good enough to have your secretary give your
comments to Mr. Alfred Davidson, REpublic 7500, Ext.
6813, as early Thursday as possible.
With appreciation of your assistance and our

best wishes.

Sincerely yours,

(Signed) E. R. STETTINIUS, JR.

E. R. Stettinius, Jr.
Honorable Henry Morgenthau, Jr.

The Secretary of the Treasury
Washington, D. C.

217

Statemont of E. R. Stettinius, Jr.

Land-Lease Administrator
Before the House Foreign Affairs Committee On
the Extension of the Lend-Lease Act

CONFIDENTIAL

The American people and the Congress considered the Lend-Lease Act

necessary in the spring of 1941 when we were not at war. I think there would
be few who would contend that Lend-Lease is not a vital military instrument
today.

That Act, passed by the Congress in a time of disaster, was an
affirmative expression by the American@people of their will to oppose the

Axis in its attempt to dominate the free peoples of the world. The years
preceding the debate on the Lend-Lease Act had been J. rs of retreat and
defeat. Germany had seized Austria and Czechoslovakia; Japan had overrun

Manchuria. Poland had fallen, and the Axis armies had blitzed their way
through Norway, Belgium and the Notherlands. The men of Vichy had met with

Hitler in the Compiegne Forest. The Luftwaffe was over Britain night and day.
There was no assurance in the sombre beginning of 1941 that Britain

could hold out alone. With Dunkerque Britain had lost the major part of her
equipment. We know now how pitifully small was her stock of weapons and

supplies -- so small in fact that the 500,000 antiquated Loe-Enfield rifles,
the

rounds of ammunition, and the

pieces of old

artillery sent by our Government out of its World War stocks were a major
contribution to the equipment of her army, and to the sustenance of hor

spirit in the dark days.
Airplanos, tanks and other munitions ordered by Britain a year
before had hardly begun to arrivo. But British and French orders had

stimulated our industries to take the first stops towards conversion to war.
Bombors, tanks and ships cannot be bought off the shelf. Wo had begun

218

-2the long, hard work of building and equipping plants, of designing, retooling

and testing. To turn industry from peace to war takes time. That time
was necessary -- necessary to the defense of the United Statos today.
Te and our allies are fighting now with the machines, the planes and weapons
ordered in the spring and summer of 1940.

Fortunately, the American people and the Congress were not willing
to give Britain up for lost. What would have happened had we done so?
Can anyone seriously believe that there could have been a Libyan or a
North African offensive in 1942 if Britain had been bonbed into submission?
Or would we have been fighting Hitler on the shores of Unino and New Jersey
and Florida?

The American people and the Congress determined in 1941 that the

support of Britain, in what Primu Minister Churchill called her finest
hour, was necessary to the defense of this country. Britain desperately
needed planes and tanks and guns, and she could not pay for then. Hor
dollar exchange had run low, and she could no longer place orders in this

country, which was then hor only source of additional war material.
The issue before the Congress in March 1941 was this Should
the American people stand by and say, no munitions unless the cash -

the non-existent cash - were put on the barrelhead?
That issue was mot in the most practical kind of way. Wo
would supply the tools of war and discuss the terms of settlement later.
no American people and the Congress of a domocratic country understood

ir danger and nut the Nazi challenge. Aid had to be rendered them. The
mocracies had had enough of too little and too late. Today we can be

thankful for that vision and that foresight.

219

-3The Axis had counted on our not helping our friends when their
till run empty. They had propegandized against us 00 much as the country
of the money-bags that they camo to believe that legend themsolves.
The Lond-Lonso Act was the answor of the American peoplo and the

Congress to both our friends and our onemies.

The Lond-Lease Act mount that the war for our life C.S a froo
people would be won. It moant that supply would go where it was needed,

with reference only to need, and net tc dollars. It meant that we could
really begin to arm, and to organize our economy and our people for war.

Within sixteen days after the passage of the Lond-Lense Act, the

Congress appropriated seven billion dollars to carry out its provisions.
Seon after this appropriation was passed, about $2,000,000,000

was allocated for the production of tircraft, over half a billion dollars
for new ship ways and nuw ship construction, and more than $1,700,000,000

was allocated for the construction of other nunitions lants and war
material.

Lend-Loase and the Pooling of Resources

In the your and a half since the passage of the Lund-Lonso Act
the world scone hns-changed unornously. In June 1941, Hitler's arnice
struck cost towards the Soviet Union. In December, Panrl Harbor WCLS

attacked by the Japanoso, and Hitler and Mussclini declared war against

U. The conflict which had started in Europa has spread to the cerners

C the earth. With the entry of the United Status into war, and with
Brithin, Rucein, Chinc and the United Status fieredly fighting : dofonsivo

220
-

and delaying action against Axis aggression, it bocume inperative for the
United Nations to combino C.B rapidly and as efficiently 28 possible their
resources and manpower.

Lond-Lonso has bocomu an ossential part of the co-ordinated

process of supplying our armod forces and those of our allies. The
systom for allocating Unitod Nations supplies to the different theatros
of war according to military need rests on lond-lonse and lend-loase in

reverse. The flow of war supplies from the factorios to the fighting
fronts proceeds without boing impeded by considurations of finance. Lund-

Loaso in fact fulfilled the Prosident's original plodge to rumove the
dollar sign from war supply. Lend-lease in reverso has romoved the
symbol of the pound sterling. To paraphrase the President, money cannot

take the place of munitions at the fighting fronts.
There is only ono war. What we acnd to fight in Russia or the
Middlo East, the bombors basod in Britain or Australia or India, the
tanks which have just fought across 1300 miles of dosort in ninety days,

these are part of our var offort. The guns, the food and the camps

wo receive all over the world as lond-losse in revers are a vital

221
-5-

factor in the supply of our troops. Mutual aid among the allios, on the
supply side as on the battlefields, is of the essence of our organization
for waging war--an organization of Nations united in complete determination
to destroy Axis power.

In the last war there was no real pooling of the resources of the

United States and its allies. The United States paid in dollars all the
necessary expenses for its army in France and England. In the year and

one-half that the United States was in the war total expenditures of
the United States in France exceeded two and a quarter billion dollars.

The situation in the present war is wholly different. Weapons,
food, industrial equipment for Russia, China, the United Kingdom and

the other allied countries are provided by the United States under
lend-lease. These countries in turn provide the armed forces of the
United States as reciprocal lond-lease aid with equipment, food, sholter,
and all necessary services.

Then I speak of the pooling of the resources of the United Nations
and when I refer to the battle of the world between the United Nations
and the Axis powers, I wish to emphasize the magnitude of our supply

problem. This map shows (specify countries, distances, etc.).
Total Lend-Lease Aid

The total amount of lend-lease aid, to the end of December, 1942,
$8,253,000,000. The volume has increased groatl. during the last

ar as 18 apparent from this chart (Chart No. I).

222

The value of goods transferred and services rendered undor lend-loase
for the three months ended December 31, 1942, totaled $2,482,000 as
compared with $690,000,000 for the three months ended December 1941,

or three and one-half times as much.

This chart (Chart No. II) shows the growth of our aid to each of
the major groups of countries during the period from September 1941
to November 1942.

223
-7-

Aid to Britain
As you will note, lond-lease aid in the beginning want almost

entirely to help win the battle of Britain, which WAS ut that timo
standing alono against the enomy. The flow of arms, food, and other

matorials to Britain hus sustained first a defonsivo operation and
now an increasingly powerful suries of offensive thrusts on the seas,

in the air, and on the many fronts of the war. One of the groatest
achievements of Land-Lonso has been the help wo have given in making

the British Islos an imprognable baso for offonsive operations and

ono of the great arsonals of domocracy. A largo part of the North
African campaign was launchod from Britain and so were the campaigns

in tho Middle Sust, Italian Africa, Syrin, Madagaso r; the forcus
for India, Iron, Iraq, and many other places started and were largoly
equipped from Britain, which remains one of the koy regions of tho war.
Britain provides the base for a United Nations off.naive--and
the pooling of United Nations resourcus is nowhere batter illustrated

than in Britain, Our troops in Britain have received as reciprocal
aid such worpons and munitions of war as Spitfires, 25 poundor guns,

and other artillery, small arms, granadas and minos. Barrocks, hostols,
transportation, cantoon supplies, blunkets, modical supplies have been

supplied, as Mn jor Spiegelburg will toll you in moro detail lator. In
spito of the sovoro shortages which oxist in the Unitod Kingdom, our

fighting forces have received largo quantities of British-grown food.
Battlo demago suffered by our fighting ships and our merchantment has

boon repaired in the United Kingdom is reciproon1 ci. A revolving

224
-8-

fund in sterling has been established for us in the United Kingdom to
enable us to take care of all shipping disbursements which must be made

there. The British have sent benzol and machine tools to the United
States and have supplies our fighting forces with invaluable technical
and scientific advice out of their longer experience vi th the war.
Aid to the Middle East and Fur East
The central portion of this chart shows the development of our

aid to the Middle East and Far East. This includes our aid to Egypt
and the armies fighting in the Libyan desert, of which I shall speak

briefly a little later.
Our aid to the Far East has gone largely to Australia and Now
Zenland and to China.

Wo are sending Australia urms for her troops L a machine tools

and raw materials for her rapidly-groving arsenal.

Australia is supplying to us, as reciprocal lead-leaso,
practically all of thu food consumod by our men in the South Paoifio
Ar IR, and is expanding hor food program so as to be ablo to supply

the Southwest Pacific Area as well. Our forces in Australia have also

received ormps, air fields, repair depots, a completo tire rebuilding
and maintenance plant, and numorous other itoms.

In New Zinland--normally R food exporting nation--such great

quantities of food have been supplied to our forces without cost to

us that aggs, milk and fruit are in short supply. and the oivilian
population is feeling the pinoh.

-9

225

China, of course, is a pivotal battle front in this global war.
We have not been able under lend-lease to supply all the aid that is
needed in China or that wo would have liked to have supplied. China's
heroic stand since 1937 against the full force of the Japanese Army,
Navy and Air Force has boon one of the bright chapters in the history

of the world. The difficulties of transport on the Burmo Road were
faced and improved. But Burna foll. Now, even greator efforts must
be exorted to got supplies into China. Supplies are being flown across
the highest mountains in the world under conditions that might soom

impossible. But they aro gotting through. Thoy are gotting through
in pitifully small amounts in terms of what China noods, but at an
accolorating rate. We will not--and we should not--stop until every
ingenuity and every offort is expended to got more aid to China.
Ehnt China has done undor reciprocal lend-lense is symbolic.

China paid dollars to purchase vital planes for the fumous Fighting
Tigors of the American Voluntear Group. Whon the American Volunteer

Group was to be abolishod, a Board of United S+atos Army officers rocommonded that the 46 planes and other aquipment of the Fighting Tigers

be taken over by the United States Air Forces and paid for in cash.
But Genoralissimo Chiang Kai-shok insisted upon turning over the planes

to the United States Air Forces without the payment of cash, as a
oken of China's foolings for what we had done for her people.

226
Aid to Russia

The top layer on the chart represents aid to the Soviet Union.
Soon after Russia came into the war a mission was sent to
confer with the Soviet Government, and on October 1, 1941, the United
States and Great Britain gave the Soviet Government a formal assurance
with regard to the weapons and supplies which would be furnished,

known as the Moscow Protocol. Under the terms of the Protocol, the
United States agreed to make available at United St. .es production
centers the goods to a vlaue of approximately $800,000,000. Aid in
shipping was promised but no specific assurance was given that the

Protocol items could all be delivered,
Two months after the signing of the Protocol the Japanese
attacked Pearl Harbor and Germany and Italy declared war upon us. In

spite of the heavy drain on United States production which immediately

resulted, the terms of the Protocol have been substantially met.
A second Protocol was entered into for the period from July 1,
1942, to June 30, 1943, and aid to the Soviet Union is now being extended

under this Protocol.
Since the inception of the Soyiet aid program in October 1941,
dollars

we have shipped to the Soviet Union slightly more than

of supplies, including food. The amount of these supplies sent to

the Soviet Union in relation to other areas of the . orld is perhaps
best shown by this chart (Chart No. V).
You will note that Russia has received 41.3% of the tactical
planes, and by that I mean military planes other than training planes,

227

which have been exported under lend-lease; 52.9% of the tanks; and

32.8% of the motor vehicles. In order to give you a better idea of
what this means in actual figures, I can tell you that WC had to the
end of November 1942 sent Russia 2670 planos--more than to any other

country-and we had sent her 3888 tanks--more than to all other countries combines.

Out of Britain's hard-pressed production, she had, to the end
of November, sent Russia 1,554 places and approximate y 2,500 tanks.

Russian food shipments in the past have no. been such a large

proportion of our total food exports, but Russian food shipments are

greatly on the increase. For the month of January, the tonnage of
food shipments to Russia is expected to amount to eight times that to

the United Kingdom. While this proportion is not expected to continuc, lend-lease food shipmonts to Russia may from now on exceed by

a considerable margin land-lease food shipments to all other parts of
the world combined.

No one can ever estimate how much the peoples of Russia have

helped us by holding back the Nazi forces and taking the offensive away
from them. Nor can anyone estimate the value to our national interests
of the superb fight which the Chinese have put up against the Japanese.

By the lives lost, the citics and homes destroyud and in the other
losses of war, Russia and China and Great Britain have made limitless

contributions to their cause, us well as to ours. There has not been

228

and there novor will be developed & standard of values by which we

can measure lives lost against airplanes or guns.
Egyptian Campaign

Britain, Russia and China are not the only fighting fronts
on which lend-lease has played an important part. The Egyptian
campaign was an excellent example of lond-lonse in action. During
the period from February to November, 1942, the United States exported
to Egypt over 1,000 planos, many hundreds of tanks, / 5,000 trucks and

hundreds of pieces of artillery. Hore again we ret , d the bonefit of
work donc over a year ago. Lend-lease funds and British funds were used

to construct the supply lines over which these weapons were sent.

Supply bases, docks, and naval facilities, air fields, and repair and
assembling shops in the Red Sea area and in Ecypt were built, rebuilt

or enlarged. Air ferry routus were est ..blished across Africa, and,
togother with the British and Fighting French, the United Status built

or improved air fields all the way from the Atlantic coast of Africa to
the Anglo-Egyptian Sudan and the Red Sea. Without these supply lines,
the Egyptian campaign could not have been undortaken.

North Africa - Military Front
The same consider tions governed in the preparations for battle

in North Africa. While there the American share in supply was larger,
the campaign represents a genuine pooling of our re pirces with those

of our allies. The military burden in the beginning was almost equally
shared by the British and ourselvos. Now, British, French and American

forces are fighting togother in a completely combined operation. The
equipment of every unit is both British and American, read land Touse

229

and lend-lease in reverse have a large part in the process of supply.
One hundred sixty-eight of the planes flown by American pilots in the

invasion of North Africa were Spitfires given to us by the British as
reciprocal lend-lease. One of our divisions was completely equipped

with British 25-pounder guns instead of United States 75's. Airfield
runways, bombs, ammunition, 600 ambulances, reconnaissance boats and

four 1000-bed field hospitals were among the equipment provided. During

the development of plans for the campaign the British installed supply
officers in United States Headquarters with instructions to supply whatever
the AmericanArmy needed and the British Navy furnished two-thirds of the
warships which convoyed the expedition.

North Arica -- Civilian Front
In total war the civilianfront cannot be divorced from military
operations. As the Nasis have found through bitter experience in
Russia, Greece and Yugoslavia, the civilian population can pla y a vital

part in winning the war. In our liberation of North Africa we recognized
that we had a portion of the French people who could, with assistance,

be made effective fighting partners in their own interest and in the interest
of the United Nations.

The object of our policy, the President said, is to see to it that
"no one will go hungry or without the other moans of livelihood in any
territory occupied by the United Nations, if it is humanly within our powers
to make the necessary supplies available to thom. Weapons will also be

suppliod to the people of those territories to hast in the defeat of the
Axis.

230

Since that time the British and ourselves have sent vitally

noeded civilian supplies forward to North Africa. North Africa is nomally
a surplus producer of foodstuffs, but the country has been ruthlessly
looted by the Germans. As a result, the people of North Africa are
experiencing extreme shortagos of food and clothing. Every report YO have

reiterates the urgent need for civilian supplies - a need which will last
until the noxt harvost, a t least, and perhaps beyond that time for somo
things.

It is a political and military necessity of the highest order that
starvation disappear in any country we reoccupy. Wo must make suro that

reoccupation by our forces will be accompaniod by a swift and wollplanned importation of food, seed, and essential supplies. We must 800

to it that popula tions delivered from Axis bandage are given a roal deliverance, f or they have boen told many times by our onemies that a
democracy moans freedom without broad. We must be ready, and we are

ready, to send tho essentials of life with our troops. Their job in
combat could be gravely complicated by revolt and pestilence behind the
lines.

This work of feeding is a responsibility of the entire group of
the United Nations. It should bo planned and carried out by the
United Nations working together, each contributing what it can in supplies,

ships and services. In the beginning a large part of the burden may well

fall upon us. But each of the United Nations will do what it is able, and

all will share the task. It should be noted that in North Africa the
British Government has so far made available more

231

supplies than T/C have to tido over the urgent and serious shortages
of the region.
French North Africa has always been an exporting country, and

it will become so again. The bulk of lend-Iense goods sont to North
Africa is being sold for cash and this cash is being used to acquire
such critical raw materials as manganese, cobalt and c.rk which, in
accordance with the allocation made by the Combined Ray Matorials Board,

North Africa will be ablo to supply to us. Once restored, North Africa
should also be in a position to supply food for our troops. In our own
and the Unitod Nations common interest we must nake this possible.
In close consultation with Governor Lohman, we are trying to
enlargo the inventorios of supplies we have on hand to moot the changing

pattorn of lond-lease noods in liberated areas, not only for North
Africa where the supply problem is relatively small, and will become
smaller, but for other arous as they are liberated. We have established

a Special Division of our office to work with the Governor's staff in
preparing these estimates so as to facilitate, strongthen and unify all
efforts in the field of forward purchasing. To a maximum extent wo are
trying to limit our purchasing to goods which are oqually usable for any
lond-lease area, for our own armod forces, or even for our civilian economy,
if urgent and unexpected noods should develop.

The supplies WU buy will not be locked up in warehouses. Such

practice would only result in their dutorioration. They will be used

232

for general lond-lease purposus, and replaced in stock, insofar as
VO can do so, to the end that an adoquate supply be on hand at all
times to must all needs.

This program is an indisponsable stop to facilitate the prosecution
of the var. As far ahead as VL can casily sec, WO must act with vigor
to supply medicinus, food, clothing and other noods for those whom the
Nazio and the Japanese have despoiled. As tho Provid t has said, "Success

in rostoring the countries we frou will be a powerful factor in shortening
the war, giving the liboratud peoples their chance to share in the victory".
Conclusion

If we look back over the part that Lund-Luasu has playod in the

war, and its relation to the United Nations battlo against the Axis powers,
WO realizo that a principle has been hanmored out in time of crisis. That

principlo is the principle of total cooperation among nations - cooperation

in the interest of each and for the bonefit of all. If the peace is to
be a lasting peaco -- and it must bo - it will be founded on cooperation,
and the blood and the suffering of this torriblo var will not have boon

in vain. Indood that is what this war is all about.

CONFIDENTIAL

CANADIAN LEGATION
WASHINGTON

January 30, 1943.

Dear Dr. White:
.

I enclose two copies of the most

recent monthly supplement to our quarterly
estimates of balances of payments. This
is the supplement covering the month of
December 1942.

Yours sincerely,

A.F.W. Plumptre

Dr. Harry White,

Assistant to the Secretary,
Treasury Department,
Washington, D.C.

NOTES ON RECONCILIATION OF ACTUAL R SULTS
WITH U. S. DOLLAR FORMCAST FOR THE FOURTH
UURPER OF 1942

The latest U. S. dollar forecast showed an estimated surplus
(or increase in U.S. reserves) of $16 Mm. for the fourth
quarter of 1942. The actual surglus was approximately 358
Mm. leaving a discrepancy of 042 M.m. to be explained. of
this amount, $21 Mm. was obtained in the for of a receipt
of gold from the United- Kingdom, purchased for Canadian dollars.
This was a new development which could not have beer forecast.
The refore, there remains a residual of 321 Mr. to be reconciled
with the forecast.

This discrepancy is the r : sult of a number of diverse factors
only some of which can be ascertained fron data resent1.

available. Subject to the qualification arising fro more
complete information to be obtaine later, the following
appear to be the principal factors.
1. Gold sales in excess of forecast
2. Miscellaneous current receipts in excess of
forecast

$3 M.m.
13

(Some part of this discrepancy may be

attributed to the substantial receipts

from Alaska Highway activities which
amounted to $12 Mm. in the quarter. A
refund of $1.4 Mm. was received by
Department of National Defense (Air)

which was not forecast).

3. War Supplies Limited's receipts in excess of
forecast
4. Dividends and profits received in excess of
forecast

(of which $1.7 Mm. was received from
Subsidiaries Holding Company, not forecast).

5. Reimbursement from the United Kingdom for

exports of metals to Russia, originally

passed through United Kingdom, account
Net surplus on commodity trade
in excess of
forecast

(it is impossible to be sure of this figure
or to determine whether the discrepancy lay
in forecasting exports or imports until
more data is available).

Total of factors bettering forecast
surplus

Capital receipts less than forecast

Miscellaneous current payments in excess of
forecast

Total factors detracting from

forecast surplus
Difference Reconciled

$27 Mm.
$1 Mm.
5

$21 Mm.

OFFICE OF THE

DEPUTY MINISTER

Ottawa, January 30, 1943.
Dear Dr. White,

Thanks very much for your letter of January

26th, which arrived only today. I am sorry that I apparently
misunderstood the basis of your tentative views in regard to
our U.3. dollar Exchange Reserve and placed too much emphasis
on the comparison with the reserves of other countries. I
note this latter point was only of minor importance in your
thinking, and that the major considerations were our total
international financial situation since the outbreak of war
and the over-all policy of your Government in extending
financial assistance to Allied Countries.
By the first point, I assume you refer to the
reduction in our indebtedness to the United Kingdom. As this
reduction has not been fully offset by increased indebtedness

to the United States or loss of U.S. assets, this is a valid
point. The second point I would regard as valid to the extent
that financial aid was rendered without quid pro quo. We have
always wanted to stand on our own feet without being an
additional burden to the people of the United States and have

been inclined to feel that our arrangements for the sale of

war supplies to you took a corresponding burden off your

economy. You may look at this differently, particularly if

you believe that some of the equipment and supplies you bought
from us, perhaps some of those you lease-lent to other countries, you would not otherwise have produced yourselves.
However, I did not intend to make any argument

at all. As I said in my dispatch to Mr. Plumptre, I appreciated

the considerations which you had to keep in mind, and we were
and are completely ready to accept any decision which the
Treasury may feel it necessary or appropriate to make.
I had an inquiry from Plumptre in regard to my
syggestion for handling the net proceeds of security sales.
have sent him a reply which doubtless he has already made
available to you.
Yours very truly,
arry D. White,

istant to the Secretary,
Treasury Department,

WASHINGTON, D.C.,

U.S.A.

Mobilarly

236
TREASURY DEPARTMENT

Office of the Secretary

January 30. 1943
CONFIDENTIAL

Received this date from the Federal Reserve

Bank of New York, for the confidential information of the Secretary of the Treasury, compilation
for the week ended January 20, 1943. aboving

dollar disbursements out of the British Repire

and French accounts at the Federal Reserve Bank
of New York and the means by which these expendi-

tures were financed.

/2nit.) E. m.r.

imc:1/30/43

237

FEDERAL RESERVE BANK
OF NEW YORK

January 29, 1943
CONFIDENTIAL

Dear Mr. Secretary:

Attention: Mr. H. D. White

I am enclosing our compilation for the week
ended January 20, 1943, showing dollar disbursement

out of the British Empire and French accounts at this
bank and the means by which these expenditures were
financed.

Faithfully yours,
/s/ L. W. Knoke
L. W. Knoke,

Vice President.
The Honorable Henry Morgenthau, Jr.,

Secretary of the Treasury,

Washington, D. c.
Enclosure

Copy:imc:1/30/43

BRITISH AND FRENCE ACCOUNTS

First year war

1.791.2

December 1940

2,792.3

1,425.6

CREDITS

PERIOD

ar period through

- year of wart
ST year of with

Debita

65.

2,203.0

1.792

1235.6

904.1

Other

Sales of
Securities

Debita

167.61
1,356.7
410.8
330,8

Total

Credits

Gold

1,356.1

52.0

2,793.1
2.189.8

2,109.5

108.0
274.0

1.193.7

$1,361.5

23.8

Oct.
- 28
Oet. 29 - Dec.

Dec. 3-Dec. X

Jan 6 1943
13
20

19.0

25.7
96.1
30.4

2014

19.3

35.5

61.1

13.3

17.1

51.9

6.9
45.4

4.5

2.4

3.2

42.2

9.9

9.3

7.2

2.1

2.3

AKEK KNOKD

Dea.30 1942

37.1

81.6
52.9
83.7

56.1

48.905

3.6

195.1101

10.8

878.3

421.4

456.9

1,098.4

900.2

4.8

34.1
18.5

8.8
4.4

198.2
8.8

- 30.1

4.4

- 14.1

10.1

0.4
0.3

9.7
0.3

0.2

0.3

0.1

- 13.2

83.7
51.9

- 12.9
+21.5

0.2

2.3
15.4(h)

10.8

tures (o)

38.9

10.1

9.9

Credits

7.3

35.5

- 2.0
-33.5

Transfers from British Purchasing Commission to

oFF monthly breakdown see tabulation prior to April 23, 1941
obFor monthly breakdown see tabulations prior to October 8, 1941.
seeFor monthly breakdown see tabulations prior to October 14, 1942.
(See attached sheet for other footnotes)

Other

900.2

+ 25.5

14.2

Debits

Sales

1.0953.0

81.1
57.5

of Gold

449.7

0.5
-

Total

Other

Net Incr.
(+) or
Dear. (-)
in $ Funds (d)

866.36 416.6(b)

18.5

Proceeds

C33.0

$125.9

45.3(d).15.401)

England (since June 19, 1940 32.6 million

575.6
722.1

Oov't
Expenti-

Punde(d)

1.334.2

14.2

write Bookly Expend tures Since Outbreak of War
(through June 19, 1940) 199.5 million
England (through June 19, 1940) 27.6 million

ZZA

CREDITS

Total
Debits

5.5

1042

Sent 3- Sept. 30

Other
Creditt(c)

(+) or
Decr. (-)

FRANCE

DEBITS

lot Iner.

Proceeds of

Gov's

Total

BANK

BANK OF ENCLAND (BRITISH GOVERNMENT

Bank of Canada for French Account
Week ended January 20. 1943
Cumulation from July 6, 1940

162.7

million
Million

Credits

+220.1

(a) Includes payments for account of British Purchasing Commission, British Air Ministry, British Supply Board, Ministry of
Supply Timber Control, and Ministry of Shipping.
(b) Estimated figures based on transfers from the New York Agency of the Bank of Montroll, which apparently represent the

prooseds of official British sales of American securi ties, including those effected through direct negotiation. In addition

to the official alling, substantial liquidation of securities for private British account occurred, particularly during the

early months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuracy. According
to data supplied by the British Treasury and released by Secretary Morgenthau, total official and private British liquidation
of our securities through December, 1940 amounted to $334 million,
(e)

Includes about $85 million received during October, 1939 from the accounts of British authorised banks with New York banks,
presumably reflecting the requisitioning of private dollar balances. Other large transfers fros such accounts since October,
1939 apparently represent the acquisition of proceeds of exports from the sterling area and other currently accruing dollar
receipts.

(d) Reflects changes in all dollar holdings payable on demand or maturing in one year.
(e) Includes payments for account of French Air Commission and French Purchasing Commission.

(f) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day.

(g) Reflects $40.0 transferred to official Canadian account here.
(h) Includes $ 6.2(million
deposited by British Ministry of Supply;
5.0 million transferred from Commonwealth Bank of Australia.

CANADIAN AND AUSTRALIAN ACCOUNTS

BANK

Proceeds

Total

Debite

PERIOD

A/C

Other
Debits

Total

Credits

Gold

Sales

Transfers

Transfers from Official
British A/C
For Own
A/C

For French
A/C

Other

Net Iner
(+) or
Decr. (-)

Credits

In $ Pand

First year of wars
for period through

323.0

16.6

306.4

504.7

412.7

20.9

38.7

32.4

December, 1940

477.2

16.6

460.6

707.4

534.8

20.9

110.7

41.0

second year of wares

H year of KIP

460.4

462.0

246.2

3.4

525.5

566.3

198.6

2.7

46.3

53.6

44.9

51.5

56.5

80.8

13.2
16.6
14.4

48.2

43.9

2.9

13.7

12.4

21.
5.4

21.2

40.0

5.4

48.9
18,6

13.20

15.2

45.11b

40.0

460.4
525.8

0.3

123.9
-

181.7
230.2

88.5
360.0

1.6
40.5

Total
Dabits

Oct. - Oct. 28

Oct. 29 Dec. 2
Dec. 3 - Dec. 30

ESK ENDED,

AC.

Non 6. 1943
13
20

weekly Average of Total Debita Since Outbreak of War
abston
through January 40. 19th
U.8.6
#For monthly breakdom DOG tabulations prior to April 23, 1941.
ooFor monthly breakdown BOO tabulations prior to October 8, 1941.
cooFor monthly breakdom see tabulations prior to October 14, 1942.

(a)Reflects changes in all dollar holdings payable on demand or turing in one year.
not reflect Treasury bill transactions.
(o) Includes 4.0 million deposited by or Supplies, Ltd.

40.4
34.9

7.3
6.6

66.4

24.3

41.0

4.3

A/C

Proceeds
of

Other

Total

Gold

Other

Debits

Credit

Sales

Credita

50.1

12.3

+ 4.5

55.5

81.2

112.2

18.3
95.0

+9.0

19.8

62.9
17.2

57.9
72.2

14.5

43.4

16.7

107.2

57.4

28.0

20.5
12.0

7.5

18.1

2.3

14.6

4.7
6.1

9.4

11.7

5.5

14.1

2.0
3.7
2.4

5.4

5.0

0.4

1.3

4.0

8.9

27.7

3.7

18.6

+13.2
32.9

2.0

4.9

62.4

36.1

8.0

n Fund

30.0

27.3

14,3
10.2

Net Inor.
(+) or
Decr. (-)

6.1

3.9

12.4

6.41a

Official
British

31.2

1942

Sept. 3 - Sept, 30

CREDITS

DEBITS

CREDITS

Transfers

Official
British

COMMON BANK OF AUSTRALIA (and Australian Government)

CANADA (and Canadian Government)

DEBITS

Confidential

Week Ended January 20. 1943

(In Millions of Dollars)

18.1

14.6

-5.0

-99

+0.3

-0.8

-2.4

2.3

-1.2

2.4

3.4

- 1.3

19.3

12.3

+9.9

0.5

- 4.9

241

BRITISH AIR COMMISSION
1785 MASSACHUSETTS AVENUE

WASHINGTON D. c.
TELEPHONE HOBART 9000
PLEASE QUOTE
REFERENCE NO

With the compliments of British Air Commission
who enclose Statement No. 70 - Aircraft Despatched
- for week ended January 26, 1943.

The Honourable Henry Morgenthau, Jr.

Secretary of the Treasury
WASHINGTON, D. C.

January 30, 1943.

242
MOST SECRET

STATEMENT NO.70

Aircraft Despatched from the United States
Heek Ended January 26th
TYPE

DESTINATION

ASSEMBLY
POINT

SEA

AIR

FLIGHT DELIVERED
FOR USE IN CANADA

BREWSTER

U.K.

U.K.*

Bermuda

BOEING

U.K.

Canada enroute

U.K.
U.K.

Canada enroute
Canada enroute
Bermuda enroute

Fortress II

CONSOLIDATED
1
4

Nassau

U.K.
Bahamas

Liberator III
Liberator GR V
Catalina 1 B
Catalina 1 B

GLENN MARTIN

Middle East

Baltimore

Canada

U.K.
U.K.

Canada enroute

U.K.

Miami enroute

Canada

U.K.

Canada enroute

Bahamas

Nassau

S' Africa
W' Africa

Capetown
Lagos

India

Bombay

India

Bombay

Baltimore III A

DOUGLAS
1

U.K.

4
4

Boston III A
Boston III A
Boston III A

FAIRCHILD

LOCKHEED

Hudson III A

Cornell PT26

NORTH AMERICA

Harvard
Harvard

Mitchell I

29
3

VULTEE

Vengeance

NORTHROP
9

Vengeance

Total

Movements Division

British Air Commission
January 30, 1943.

243

NOT TO BE RE-TRANSMITTED
BRITISH MOST SECRET
U.S. SECRET

COPY NO. 13

OPTEL No. 34

Information received up to seven A.M. 30th

January, 1943.
1. NAVAL

One of H.M. Mine Layers severely damaged by heavy

weather on 25th west of Bloody Foreland is now repeat now
presumed lost with all hands, One of H.M. Submarines sank a
Schooner off Capri on 20th. One of H.M. Corvettes was sunk by
a U-Boat North East of Bougie this morning.
2. MILITARY

LIBYA. By last night 28th our armoured cars had
advanced to points ten miles south east and south of Zuara.
Heavy shelling west of Mellita held up the advance of our
armoured elements. Further South Patrols of Fourth Light
Armoured Brigade reached points on the Zuara Road six miles
north and south of E1 Ouotia.
TUNISIA. Increased enemy activity is reported in

the Mateur Area.

RUSSIA.

The Russian advance north west and west

Voronezh continues. In the Northern Caucasus they have
occupied important Railway Junction of Kropotkin after

stubborn fighting.

3. AIR OPERATIONS

WESTERN FRONT 29th. Off the Norwegian Coast

R.A.A.F. and R.N.Z.A.F. Hampdens put six torpedoes into a

6,000 ton ship which was left sinking. Escorted Bostons
attacked the Railway Viaduct at Morlaix Brittany. No hits are
claimed but the Railway was damaged. In the days operations
enemy casualties 535 Ours 4 missing.
29th/30th 146 Aircraft despatched. Lorient 116 (4 missing)
Sea-Mining 17 (one missing) Leaflets 5 (one missing)
Intruders 8. There was heavy cloud over Lorient and all
Aircraft bombed on Navigational Figures.
FRENCH NORTH AFRICA. 28th. 60 escorted U.S.

Bombers effectively attacked the Docks and Railway Centre at

Sfax. In fighting enemy casualties 622 Allied one lost.

244

NOT TO BE RE-TRANSMITTED

COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET

OPTEL No. 35

Information received up to 7 A.M., 31st January, 1943.
1. NAVAL

Reference OPTEL No. 28. Thin convoy of 14 shipe has now
reached NORTH RUSSIA without loss.

2. MILITARY

LIBYA. 29th. Our troops advancing along the coast road were
hold up 5 miles east of ZUARA, where the enemy had taken up defensive

position. In the central sector our patrols have crossed the Tunisian
frontier, while further south one of our patrols found NALOUT held by
the enemy.

RUSSIA. Russians announce capture of TIKHORETSK and MAIKOP
on 30th.
3. AIR OPERATIONS

WESTERN FRONT. 30th. 6 Mosquitos were sent to BERLIN, 3

bombed the city at 11 A.M. and 2 at 4 P.M. 15 500 pound bombs were

dropped. 1 Mosquito is missing. 19 Wellingtons were sent to attack
objectives in Western GERMANY, 4 are missing. 3 Beaufighters, of which
2 are missing, when on patrol in the BAY OF BISCAY destroyed 2 Junkers 88.
30th/31st. 169 bombers despatched - HAMBURG 148, sea-mining

17, other objectives in GERMANY 4. 5 aircraft are missing.
MEDITERRANEAN. 29th. A Wellington torpedoed a north bound

ship of about 2,500 tons off CAPE RIZZUTO, CALABRIA. SICILY. 30th.
10 Spitfires bombed and hit a power station southwest of SYRACUSE.
FRENCH NORTH AFRICA. 29th. 22 United States Fortresses

bombed BIZERTA and hit 3 ships. 11 United States Marsuders attacked
TUNIS airfield, dropping bombs among parked aircraft.