Full text of Diaries of Henry Morgenthau, Jr. : Volume 641

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DIARY

Book 641

June 11 - 14, 1943

-AAgriculture
Commodity Prices: See Inflation
American Bankers' Association

Book Page

See Financing, Government: War Savings Bonds

(3rd War Loan Drive)

Appointments and Resignations

Buffington, George: Letter of resignation - 6/14/43
Burke, William: Collectorship of Customs, Boston -

641

FDR-Treasury memoranda - 6/14/43

Hobbs, Robert B.: Letter of resignation - 6/14/43
-B-

234

237
236

Buffington, George
See Appointments and Resignations

Burke, William

See Appointments and Resignations
Business Conditions

Haas memorandum on situation, week ending June 12, 1943 6/14/43

219

Byrd, Harry F. (Senator, Virginia)
See Financing, Government: Non-essential Expenditures,
Committee on (Government personnel reduction)

-CCommodity Credit Corporation

See Inflation

Correspondence

Mrs. Forbush's mail report - 6/11/43

46

-DDietz, Howard (Metro-Goldwyn-Maye

See Inflation

-FFinancing, Government

Non-essential Expenditures, Committee on: Government

personnel reduction - Treasury expression of opinion
on - 6/11/43

59

War Savings Bonds:

See Speeches by HMJr (Kingston, New York)
3rd War Loan Drive:

Publicity and plans cleared by Bell with Office
of War Information and American Bankers'

Association - 6/11/43
Gamble chart of War Finance Committee - 6/12/43..
Weekly progress report by Graves - 6/12/43
Food Prices
See Inflation

32

151
154

G-

Book Page

Government Personnel

See Financing, Government: Non-essential Expenditures,
Committee on

-HHobbs, Robert B.
See Appointments and Resignations

-IInflation
Retail food prices - chart covering 1939-1943 6/12/43

641

194

a) Conference; present: HMJr, Bell, White, Sullivan.
Haas, Blough, and O'Connell - 6/14/43
1) Feed restrictions discussed by Chester
Davis and HMJr

201

211

2) O'Connell preliminary memorandum - 6/15/43:
See Book 642, page 67

a) Chart: prices, 1939 to date, compared
with 1914-1918: Book 642. page 69
b) Wallace-HMJr conversation - 6/22/43: Book 644,
page 3

c) Kades memorandum - 6/22/43: Book 644, page 13

d) Agricultural commodity prices - survey of laws
and programs affecting: Paul memorandum 6/22/43: Book 644, page 20
e) FDR-HMJr conversation reported to Kades, Shere,
and Smith - 6/24/43: Book 644, page 291

f) Commodity Credit Corporation - extension of:

Paul memorandum - 6/24/43: Book 644, page 296
g) Kades memorandum: "Proposed method of purchasing

farm products at prices high enough to encourage
production and selling such products to consumers

without increasing retail prices' - 6/25/43:

Book 645, page 26

Dietz (Metro-Goldwyn-Mayer) asked to "kill" Edward Arnold
movie on inflation - 6/25/43: See Book 645, page 33
a) Mellett-HMJr conversation Book 645, page 287
Subsidies: Provisions in pending Commodity Credit
Corporation bill covered in O'Connell and Paul
memoranda - 6/29/43: Book 645, page 208
FDR-HMJr conversation concerning HMJr's memorandum

(see page 228) reported to Bell, Haas, Smith, O'Connell

and Kades - 6/30/43: See Book 645, page 223
1) Community level action recommended by HMJr
2) Treasury memorandum of December 18, 1942 to FDR

(see page 232) attached also
3) Kades memorandum (basis for above conference) 6/30/43: Book 645, page 234
4) Packers' profits mentioned by FDR are before
taxes: HMJr-Early conversation: Book 645,
pages 250 and 253

-KBook Page

Kades, Charles L.

See Inflation

Kingston, New York
See Speeches by HMJr

-LLend-Lease

U.S.S.R.: Purchases for cargo shipments - 6/14/43

641

243

United Kingdom:

Federal Reserve Bank of New York statement showing
dollar disbursements, week ending June 2, 1943 6/11/43

70

Aircraft despatched, week ending June 8, 1943 British Air Commission report - 6/14/43

246

-NNetherlands

See Post-war Planning: Currency Stabilization

Non-essential Expenditures, Committee on
See Financing, Government (Government personnel reduction)

-0 Office of War Information
See Financing, Government: War Savings Bonds

(3rd War Loan Drive)

-PPersonnel, Government

See Financing, Government: Non-essential Expenditures,
Committee on

Post-war Planning

Currency Stabilization: Netherlands
Memorandum giving views on proposals - 6/14/43

248

-RRevenue Revision

Revenue Bill of 1943:
See also Book 640

Tax Subsidy: Draft of proposed FDR message, sent to
Treasury by Gerhard Colm, discussed in Bell
memorandum - 6/12/43

174

-SSpeeches by HMJr

Kingston, New York: "T" flag award

Draft 1 - 6/11/43
a) Smith changes

b) Bell suggests a few changes

34

88,100,110
123

- S - (Continued)
Book

Page

641

137

Speeches by HMJr (Continued)

Kingston, New York: "T" flag award (Continued)

Final draft - 6/12/43

Reading copy - 6/12/43

150

a) Bad publicity from Albany covered in Smith
report - 6/15/43: See Book 642. page 58

Subsidies

See Inflation: Food Prices
-T--

Taxation
See Revenue Revision

-UU.S.S.R.
See Lend-Lease

-WWar Savings Bonds
See Financing, Government

1

June 11, 1943
11:59 A. M.
Daniel

Bell:

Hello.

HMJr:

Yes.

B:

Good morning.

HMJr:

Good afternoon.

B:

HMJr:
B:

(Laughs) Good afternoon. I wanted you to hear
Chic's report of the President's press conference
Yes.

and it's just now beginning to come over the

ticker, 80 I'11 let him tell you the story from

his notes.
HMJr:

All right.

B:

And then I'11 tell you about my talk with Hemingway.

HMJr:

All right.

Chic

Schwarz:

Good morning, Mr. Secretary.

HMJr:

Hello.

S:

The President said that he did not intend to ask for

compulsory savings when the question was asked, "Then

you do not intend to ask for compulsory savings?" He

said, "Certainly not. Then he said, "We were also
talking about the inflationary gap. It! a perfectly
clear that as far as we possibly can, we want to close
that gap, but not necessarily with compulsory savings.
I'm sorry if I gave that impression. # He said, "That
at the present time the public has been supporting the

HMJr:
S:

HMJr:

Bond Drive and making it a great success.
Chic, will you wait a minute?
Yes, sir.

You read it and I'11 repeat it word by word. What
did the President say?

-S:

HMJr:
S:

At the present time
Well, what was the question?
The first one?

HMJr:

Yeah. But start all over again.

S:

Oh. If you like I'11 read the - the whole thing. I
was trying to give you the high spots first.

HMJr:

S:

Well, I'11 - you read it sentence by sentence and the
boys here will take it down.
All right. Earl Godwin said, "There seems to be some
confusion

HMJr:

There seems to be some confusion. This is Earl Godwin.

S:

That's right. As to what you said

HMJr:

As to what you said.

S:

HMJr:
S:

HMJr:
S:

at your last conference
At your last conference.
and intended with regard
And intended with regard.
to compulsory savings.

HMJr:

To compulsory savings.

S:

Then he asked the question: "Do you intend

HMJr:

Do you intend

S:

HMJr:

to ask for compulsory savings?
to ask for compulsory savings?

S:

The President's answer

HMJr:

The President

S:

HMJr:

"I think you hit it on the head, Earl
!I think you hit it on the head, Earl

2

3

-3S:

I think there was some confusion

HMJr:

I think there was some confusion

S:

period. "I was talking about
I was talking about
the theory of taxation
the theory of taxation

HMJr:
S:

HMJr:
S:

period

HMJr:

period....."
It is perfectly clear
It is perfectly clear

S:

HMJr:

that the House itself
that the House itself

S:

HMJr:
S:

HMJr:

must initiate tax legislation.
must initiate tax legislation.

S:

Period.

HMJr:

Period.

S:

HMJr:

I was asked if
I

was asked

S:

compulsory savings

HMJr:

I was asked if compulsory savings

S:

may still be necessary

HMJr:
S:

HMJr:
S:

HMJr:

may still be necessary
to eliminate
to eliminate

the inflationary gap
the inflationary gap

4

4S:

HMJr:
S:

HMJr:

and I replied
and I replied
that it was possible.
that it was possible.

S:

period.

HMJr:

period.

S:

HMJr:
S:

HMJr:
S:

HMJr:
S:

HMJr:

Any kind of taxes are possible
Any kind of taxes are possible
we talked about a sales tax also
we talked about a sales tax also

It is also obvious
it Is also obvious
that I said
that I said
-

S:

HMJr:

taxes and compulsory savings

taxes and compulsory savings

S:

dash

HMJr:

dash

S:

taxes being many forms - dash

HMJr:

taxes being many forms

S:

HMJr:
S:

HMJr:
S:

HMJr:

could be used jointly.
could be used jointly.

Period. At the present time
At the present time
the public has been
the public has been

5

- -5 S:

supporting the Bond Drive

HMJr:

has been supporting the Bond Drive

S:

and making it a great success.

S:

and making it a great success.
Period. The last one was over-subscribed

HMJr:

The last one - (talks aside) Go ahead.

S:

( Talks aside: They're taking it down)

HMJr:

HMJr:
S:

HMJr:
S:

HMJr:

the last one was over-subscribed

by more than four or five billion
by more than four or five billion
period. As long as this is continued
As long as this is continued

S:

as Chairman George has expressed it

HMJr:

as Chairman George has expressed it

S:

there is no need for compulsory savings

HMJr:
S:

there is no need for compulsory savings
then (laughs) then here's the next question.

Whoopee!

HMJr:

What's that?

S:

Then here's the question.

HMJr:

Question.

S:

Then you do not intend to ask for compulsory savings?

HMJr:

Then you do not intend to ask for compulsory savings?

S:

The answer: "Certainly not."

HMJr:
S:

Answer: "Certainly not."
I was talking about the inflationary gap.

6

-6HMJr:

I was talking about the inflationary gap.

S:

Period.

HMJr:

Period.

S:

HMJr:
S:

HMJr:
S:

HMJr:

It is perfectly clear
It is perfectly clear
that as far as we possibly can
that as far as we possibly can
we want to close that gap
we want to close that gap

S:

not necessarily

HMJr:

it is not necessarily

S:

with compulsory savings.

HMJr:

with compulsory savings.

S:

Period.

HMJr:

Period.

S:

HMJr:

I - I am sorry if I gave that impression.
I am sorry if I gave that impression.

S:

Period.

HMJr:

Period.

S:

My notes showed

HMJr:

What's that?

S:

My notes

HMJr:

My notes

S:

showed

HMJr:

showed

S:

that it could be construed that way

-7 HMJr:

that it could be construed that way

S:

and on the other hand

HMJr:

and on the other hand

S:

it could be construed

HMJr:

it could be construed

S:

HMJr:

....88 I meant it.
....as I meant it.

S:

The next question:

HMJr:

Question:

S:

Your budget message, Mr. President

HMJr:
S:

Your budget message, Mr. President
asked for

HMJr:

asked for

S:

taxes

HMJr:

taxes

S:

and savings

HMJr:

and savings

S:

or both.

HMJr:

or both.

S:

HMJr:

What kind of legislation
What kind of legislation

S:

would you suggest for that?

HMJr:

would you suggest for that?

S:

The answer:

HMJr:

Answer:

7

8

-8S:

Various kinds.

HMJr:

Various kinds.

S:

HMJr:
S:

The question:
Question:

You couldn't have legislation for voluntary savings,
could you?

HMJr:

You couldn't have legislation for voluntary savings,
could you?

S:

The answer was:

HMJr:

Answer:

S:

HMJr:

"Perfectly possible."
"Perfectly possible."

S:

The ques - question:

HMJr:

Question:

S:

HMJr:

Will you comment on the reports.
"Will you comment on the report

S:

that it was suggested

HMJr:

that it was suggested

S:

at yesterday's meeting

HMJr:

at yesterday's meeting

S:

that withholding

HMJr:

that withholding

S:

might go as high as 40%?

HMJr:

might go as high as 40%?

S:

The answer: "No".

HMJr:

Answer: "No".

I

9

9S:

Question:

HMJr:

Question:

S:

HMJr:
S:

HMJr:
S:

HMJr:
S:

HMJr:
S:

HMJr:

How would you close that inflationary gap?
How would you enclos - how would close

that inflationary gap.
that inflationary gap?
The answer:
Answer:

"It is up to Congress
"It is up to Congress
I may send up a message
I may send up a message

S:

and the Treasury will have a dozen different ways

HMJr:

and the Treasury will have a dozen different ways

S:

available.

HMJr:
S:

HMJr:

available.
The next question:
Question:

S:

Would the amount

HMJr:

Would the amount

S:

raised

HMJr:

raised

S:

by voluntary savings

HMJr:
S:

HMJr:

by voluntary savings
have an effect
have an effect

- 10 S:

on your request

HMJr:

on your request

S:

to Congress?'

HMJr:

to Congress?"

S:

The answer is: "Yes".

HMJr:

Answer: "Yes".

S:

Question:

HMJr:

Question:

S:

HMJr:

"Would your estimate of $16 billion

"Would your estimate of $16 billion

for the inflationary gap
for the inflationary gap

S:

HMJr:

in January

S:

HMJr:

in January

S:

have gone up now?

HMJr:

have gone up now?

S:

HMJr:
S:

HMJr:

The answer:
Answer:

"It has widened a little bit
"It has widened a little bit
but it is threatened more
but it is threatened more

S:

HMJr:
S:

by some proposals

HMJr:

by some proposals

S:

for further inflation.
for further inflation.

HMJr:
S:

Dash

10

11

- 11 HMJr:

Dash

S:

for increases in wages

HMJr:

for increases in wages

S:

and farm prices

HMJr:

and - in farm prices?

S:

And

HMJr:

and farm prices.

S:

and farm prices.

HMJr:

Yeah.

S:

And the next question:

HMJr:

Question:

S:

" Then your sixteen billion dollar figure

HMJr:

What's that?

S:

then your sixteen billion dollar figure

HMJr:

then your sixteen dollar - billion dollar figure

8:

might go up?

HMJr:

might go up?

S:

The answer:

HMJr:

Answer:

S:

"That I don't know.

HMJr:

"That I don't know.

S:

HMJr:
S:

HMJr:

You will have to Wait a bit
You will have to wait a bit

a small portion of it
small portion of it

12

- 12 was closed the other day
was closed the other day

when I signed the nex tax bill."
when I signed the new tax bill."

That's about all of it.
How did you take this down?

Just in very rough notes.

Well, you'd better get it accurately.
We're - we're - we're going to check it all back.
Yeah.

But those are certainly the - the highspots, and

Well, I think he did a swell job.
He did - he did a very grand job. There was no question
of his intent, and he - he kept on - he kept on talking,
even when he could have cut it short if -- if he had had
a mind to.

HMJr:

HMJr:

Now is - is - is Sullivan there?
Yes, sir.
Well, I - I don't see - George and the boys here -- you
have them all sweating, taking it down, but three of them

are trying to take it down, but I - I - I'm very happy.

S:

HMJr:

S:

HMJr:

I am, too. (laughs) Dan says that we are, too, and we we feel that he

It seems to me, now, if we can get this letter over to

him, thus giving him further stuff, we'll be all right.
Uh huh. Dan would like to talk to you about the letter.
Now before he talks to me about the letter, let me talk
to Sullivan a minute.

13

- 13 S:

All right, sir. Just a minute.

John

Sullivan: Yes, Mr. Secretary.

HMJr:
S:

What happened when you saw Steve Early?

I went over there and he inquired what the Treasury was
80 jittery about.

HMJr:

Yeah.

S:

I said that we were re-organizing our bond sales stock;

that we had between three and four hundred thousand regular
volunteers in between campaigns; that we were just starting
to step up the payroll allotment thing; and this confusion
was wrecking the entire campaign.
HMJr:
S:

HMJr:
S:

HMJr:

That's right.
At that point, Steve indicated to me that he had always
been in favor of the voluntary.
That's right.
So he saw Earl Godwin go by outside his office
Yes.

he called Godwin in

S:

HMJr:
S:

Yeah.

When I arrived there Steve had the - the Tuesday
press conference notes before him.

HMJr:

Right.

S:

I gave him the question and answer.

HMJr:

Yes.

S:

He says that this checks with the last conference. And I
said, "It checks absolutely. If

HMJr:

Yeah,

S:

He called Godwin in. I gave Godwin the background on this

thing -- twenty-seven million people setting aside 9%

a week, and Godwin apparently hadn't had many of the figures.
(Cont'd. )

14

- 14 S:

(Cont'd:)
HMJr:

I'm planning on seeing him later in the day
and he's going to carry the message over the
radio to the people tonight.
Well, did you give him Fred Smith's question
and answer?

I did. Then both Godwin and Steve agreed that

S:

it was very unfortunate to have in at that

phrase that he would not recommend compulsory

savings until after the September drive.

HMJr:
S:

Yeah.

They felt, and I agreed with them, that the
question, if it were asked that way, the implication would be that he'd - he'd ask to

have compulsory slapped on after the September

HMJr:

drive and that would do just as much harm as
if they had announced it now.
Well, that was the weak-point of his statement.

S:

Well, anyway we took it out, and I agreed to it.

HMJr:

Good.

S:

I think Steve did a remarkably fine job and I'm
going to call him up and thank him and I think
I should convey your appreciation too.

HMJr:

Yeah, enthusiastically.

S:

Right.

HMJr:

Now I'm sorry - I'm not making a record of this

S:

Yes.

HMJr:

Are - are you in my office?

S:

Yes, sir.

HMJr:

Oh, we are making a record.

S:

You are.

HMJr:

Oh, wonderful. Now, well I - I

conversation, am IT

-

15

- 15 S:

There - there was a little conversation

about what was going on yesterday that I

HMJr:

can tell you about later.
Well, let's have it now.

S:

Well, it - it was just that there - there was

HMJr:

Who? Steve?

S:

Yeah.

HMJr:

Uh huh. I see. Well, you don't want to say it.

S:

No.

HMJr:

Was it in anyway

S:

No, it was - it was pretty indefinite.

HMJr:

I mean - nothing to my discredit.

S:

HMJr:

something that he - neither he nor I could
figure out.

No, oh, not at all. Quite the contrary.
Well, now all right then. Is - is Chauncey
around?

S:

Miss Chauncey isn't in the room. I can get her.

HMJr:

Well, get somebody to send for her and tell you
why.

S:

HMJr:
S:

HMJr:

(Talks aside: Get Chauncey) Yes, we're - we're
getting her now. Dan wants to talk to you.
Yeah.

Harry and Randolph -- Harry just had to leave,
but we've gone all over this letter and Dan'11

tell you about that.
We've written a completely different letter up

here.
S:

Well

HMJr:

Completely different.

16

- 16 S:

We unanimously agree that no letter should be
sent, and the President said we came through
with a 100% style this morning. We think to
ask him to read any letter now after he's done
what we want, would be quite unnecessary and

perhaps a mistake. It', 8 a good letter to have
on the shelf to use later on when we need it.
HMJr:
S:

Well, I'11 talk to our boys about it.
Yeah. Don't you want to talk with Dan? He's
right here. Hello?

HMJr:

Hello.

S:

Don't you want to talk with Dan?

HM"r:

What?

S:

Dan is right here.

HMJr:

But, John.

S:

Yes, sir.

HMJr:

Thanks for carrying the message to Garcia

S:

I was very glad to do it.
Early.

HMJr:
S:

HMJr:
S:

HMJr:

Well, Steve was perfectly swell.
He did a nice job. I'm very much indebted to him.

Well, he's the fellow that did job.
Well, Fred - I would - I never would have had the
idea if Fred Smith hadn't given it to me.

S:

Yeah. Well, it was a good one.

HMJr:

Yeah.

S:

It - it certainly clicked over there.

HMJr:

Fred's blushing.

S:

Right.

HMJr:

He doesn't know how.

17

- 17 -

(Laughs) I thought he should after that topic

S:

he mentioned yesterday for your speech tomorrow.

HMJr:

What?

I think he should blush after that topic he mentioned

S:

HMJr:

for your speech tomorrow.
I see.

S:

Okay. Here's - Mrs. McHugh just came in.

HMJr:

No. Now - well put Bell on.

S:

Daniel

Right.

Bell:

Hello.

HMJr:

Yes.

B:

Well, John told you our feeling about the letter. In

HMJr:

Well, I - I - I

B:

It might disturb them a little.

HMJr:

What did you say?

B:

I say it might disturb him, and he's got a letter of

view of what's happened - well - we think that the
letter better be held in abeyance.

yesterday to digest, and
HMJr:

( Talks aside) Wait a minute. (Talks aside)

B:

Let's put it on the shelf.

HMJr:

Just a moment.

B:

Yeah.

HMJr:

I've - there's a little pride of authorship around here.

B:

Oh, really.

HMJr:

(Talks aside)

- 18 -

18

How's that?

B:

I'm just trying to teach Smith a few manners.
(Laughs)

Hard, but he'll learn.
Well, he's up in the country, you know.
HMJr:

What?

B:

I said, "He's out in the country now. He can act

HMJr:

Yeah. All right. Well, now go ahead with what

B:

Well, now I've talked to Jim Rogers of O.W.I

HMJr:

Yes.

just how he is."

you've got.

and he said that he did not get any word from
Gaston, but he has considered over there in all of
his talks with everybody, the whole month of September.
HMJr:

I see.

B:

And as far as that's concerned you may consider it as

HMJr:

Yes.

B:

cleared.

I talked to Hemingway, and he's agreeable to the 7th.
He said he'd like to talk to one or two people and
call me back sometime today. But he said that he's

HMJr:

sorry that
Don't announce this thing now until I get to Washington.

B:

I think that's right.

HMJr:

What.

B:

I think that's right.

HMJr:

And Winthrop Aldrich is coming in three o'clock
Tuesday.

B:

Yep.

Down here?

19
-19-

B:

All right.

HMJr:

There's no sweat about this.

B:

That's right. There's no sweat.

HMJr:

My own feeling is I agree with you. I'll argue with
these boys a little bit. I think - I'm having lunch
with the President Tuesday

B:

HMJr:

B:

HMJr:

Yeah.

and Paul will know whether any memorandum goes

to him before that, see?
Yeah.

And I think the thing to do now is to wait and say, "Now
look, Mr. President, if and when this Byrnes-Harold
Smith crowd sees you, that this is the way we feel."
You see?

B:

HMJr:

Yeah.

But I think he went to town, and - and I've never I don't know when the President said, "I'm sorry,"
and corrected himself that way.

B:

That's right. No, I think he did a grand job and we'd
better thank him for it

HMJr:

As far as I'm

B:

.... and not irk him by

HMJr:

What?

B:

I think we'd better thank him for it and feel pleased

HMJr:

No.

B:

Well, I - we all agree with that.

HMJr:

Yeah.

B:

All right. That's all we have. If - you want Mrs.

and not irk him with another memorandum.

McHugh.
HMJr:

Who?

B:

Mrs. McHugh.

20

- 20 HMJr:

No I was going to dictate something. But one

thing that I do want to tell you while I'm in
a good humor

Bell:

Well, you're always in a good humor.

HMJr:

What?

B:

You're always in a good humor.

HMJr:

Aw. Thank you anyway. This fellow that helped

Robbins -- the administrator fellow -- what's his
name?

B:

Cake.

HMJr:

What?

B:

Cake.

HMJr:

Yeah. I thought you ought to let War Bonds - War

B:

Well, we've got people around us - they - they don't

HMJr:

Well

B:

I'll talk to Ted about it and we'll fix him up. He

Finance have him.
need him.

B:

can give him part of his time.
Well....
He's too big a man for an administrative job like

HMJr:

That'

HMJr:

B:

HMJr:
B:

HMJr:

that.

I think the second and third man is the better - is

more what Ted needs, than an account-keeping man.
Well

But, I've talked to Ted about it and I told him that

we'd work it out someway.
Okay.

B:

All right. You want - Hello?

HMJr:

Hello.

21

- 21 B:

You want Mrs. McHugh?

HMJr:

No, I don't need her, but just tell Paul that if

B:

All right. He said he would.

HMJr:

All right.

B:

Yeah. Wait a minute. (Talks aside) He said, "Nothing
will be going certainly until Monday, and to get it

he hears of any memorandum going to the President
to let me know.

released over the weekend."

HMJr:

Right.

B:

All right. Goodbye.

22

June 11, 1943
MEMORANDUM

TO:

Secretary Morgenthau

FROM:

Mr. Schwarz

SUBJECT: President's Press Conference, Friday, June 11,

1943 - 10:30 A.M.

SAVINGS--TAXES -- President Roosevelt said today

that he does not intend to ask Congress for a program
of compulsory savings. He said he was sorry if he
had given that impression at his last press conference, but that as long as the present method of voluntary purchases continues to be successful, he agrees
with Chairman George that there is no need for compulsory savings. The President said that he may send
a message to Congress urging the closing of the
inflationary gap and that the Treasury will have a
dozen different methods available for study. Asked
if the amount of money raised by voluntary sales
would have any effect on his request to Congress, the
President replied in the affirmative.
Earl Godwin opened the subject by saying that
there seems to be some confusion as to what the President said at his last conference and what he intended

in regard to compulsory savings. Earl asked if the

President intended to make a request of Congress for
such a system. The President said that he thought Earl

had hit it on the head, that he thought there had been
some confusion. In the last conference, the President
said, he was talking about the theory of taxation, that
it is perfectly clear that the House itself must initiate tax legislation. He had been asked if compulsory
savings may still be necessary to eliminate the inflationary gap and he had replied that it was possible.
Any kind of taxes are possible, the President said.
We also talked about a sales tax and it is possible
that Congress might pass one and it might be vetoed
and it could be passed over the veto. The President
said it was also obvious that he had said taxes and
compulsory savings--taxes being in many forms--could

be used jointly.

23

-At the present time the public has been supporting
the Bond Drive and making it a great success, oversubscribing the last drive by more than $4,000,000,000 or
$5,000,000,000. As long as this is continued, as
Chairman George has expressed it, there is no need for
compulsory savings.

Then you do not intend to ask for compulsory SEV-

ings? Certainly not, the President answered. He said
he had been talking in the last conference about the
inflationary gap, that it was perfectly clear that as
far as it possibly can, the administration wants to
close that gap. The President said that it did not
necessarily follow that compulsory savings should be
included, that he was sorry if he gave that impression,
that the conference notes showed that his statements

could be construed that way and on the other hand could
be construed as he was explaining them in more detail

this morning.
The President was reminded that his Budget Message

asked for taxes, savings, or both, and was asked what

kind of savings legislation he could request if not for
a compulsory system. Various kinds of legislation, the
President replied. But you couldn't legislate for a
voluntary program, could you? The President said it
was perfectly possible.

He refused to comment on reports that yesterday's
meeting called by Jimmy Byrnes had resulted in suggestions for withholding as much AS 40% of wages. The
President was asked how he would recommend the gap be
closed and said that is up to Congress, that he may
send up a message, that he hasn't yet decided to do

so, but if he does the Treasury will have a dozen
different ways of closing the gap available for the
committee. Asked if his January estimate of

$16,000,000,000 needed has now increased, the President

said the gap had widened a little bit and that it was

threatened more by some proposals for further inflation
such as increases in wages and farm prices. He said
that a small portion of the gap had been closed the
other day when he signed the "Pay-as-You-Go" tax bill.

24

-3ITALY -- The President opened his conference
with the announcement that Pantelleria had surrendered,

apparently without any great loss of life. He said
that white flags were flying because the Island did

not have enough water and recalled that the Italians
had done a great deal of boasting about the strength

of this Island and had described it as their Gibraltar.
Taking advantage of what he said was an opportune

time to say a word to the Italian people, the Presi-

dent said the United Nations have no intention other
than that Italy should be restored to nationhood and
take its place as a respected member of the family of
nations. When the Nazis and Fascists have been driven
out, he said, only then will the good judgment of the
Italian people become evident. He described the
present effects of the American and British campaigns
as perfectly logical results of the ruthless course
followed by Mussolini in forming a military alliance
with Germany and betraying his own people.
-000-

25

THE WHITE HOUSE
WASHINGTON

June 11, 1943

Dear Mr. Shaeffer:

Attached is a transcript of the President's press conference of today. I am giving
you this for the information of the Secretary of
the Treasury and with the definite understanding

that it will be considered otherwise confidential.
I ask this treatment to protect against the pos-

sibility of its publication, now or later, in
its present form.

of course the President's language is
known to the press, but newspaper reporters are

not permitted to use it except in the third person. And, no permission was given to quote the
President direct in this instance.
Very sincerely yours,

SALE
STEPHEN EARLY

Secretary to the President

Mr. Charles P. Shaeffer,
Public Relations,
Room 3882,

Treasury Department,
Washington, D. C.

26

Excerpt from the President's Press Conference #902 of June 11, 1943

MR. GODWIN: Mr. President, may I speak on a domestic

matter? There seems to be some confusion as to what you said or

intended in your last press conference about higher taxes and com-

pulsory savings, and I went to ask you do you intend to ask for compulsory savings, in view
THE PRESIDENT: (interjecting) No.

MR. GODWIN: (continuing) --- of the fact that we
have

THE PRESIDENT: (interposing) I think you have hit

it right on the head. I think there was some confusion about
what I said. I have -- I went over the actual notes of the conference. We were talking about -- primarily about the theory of taxation, and I made it perfectly clear that the Congress, of course --

the House itself -- initiates all tax legislation. And I was asked
if compulsory savings may still be necessary to eliminate this inflationary gap that we were talking about; and I replied that this was
possible. Of course, any kind of taxation is possible. We talked
about -- even about the -- about e sales tax; and I said I was utterly opposed to it. A sales tax is possible, of course, if the
Congress enacts a sales tax. They might have to pass it over my

veto, but it is always possible. There are lots of forms of taxation
that are possible.

Also, it is obvious -- I said that taxes, and compulsory
savings XMXMX -- taxes being of many forms -- could be used jointly.

that is perfectly true too. And T did not say that they would be
used jointly. life were talking about the theory of taxation.

27
2

The public has been supporting the Bond Drive with
remarkable and great success. The last one was over-subscribed --

oh, what? -- four or five billion dollers, and as long as that continues -- I -- I notice that Chairman George expressed himself as
feeling, after the Second War Loan, that compulsory savings will not
be necessary; which we hope they won't be. I never came out in favor
of compulsory savings. I am sorry if T gave anybody the wrong idea.
MR. GODWIN: You do not intend to ask for

THE PRESIDENT: (interposing) No, certainly not.

a. Mr. President, --(interposing) Mr. President,
2. (interposing) Mr. President, in connection with
his -- are you through, sir?
Q.

THE PRESIDENT: No. I have got something else down

Then we were talking also -- in the notes -- about this

gap, the inflationary gap. And of course, it is perfectly clear that
went as fast as we possibly can to close that gap. I certainly -are sorry if I gave any impression -- the actual notes of the thing
have been

could NE construed that way, but on the other hand they could have

been construed the way I have said it.

2. Well, Mr. President, in your Budget Message to the
Congress, you said that you wanted 16 billion dollars in additional
revenue legislation, through taxes, savings, or both. Now what kind
of legislation could there be, sir, on savings which would not be of
compulsory character?

28

3

THE PRESIDENT: Oh, I don't know. There are various

kinds that cen be -- I mean, don't --Q. (interposing) Would you legislate voluntarism?
THE PRESIDENT: What?

Q. You wouldn't legislate voluntarism?
THE PRESIDENT: Yes, you could. It is perfectly pos-

sible. Now, that sounds crazy, but it's perfectly possible.
2. Mr. President, in that connection, there are reports that it was suggested yesterday at this conference held by Mr.
Byrnes that they withhold as high 88 forty percent. Can you comment
on that at all?
THE PRESIDENT: No. Now we are getting into deep

water. (laughter)
Q. Mr. President, can you tell us if the plan has gone
far enough to tell how you are going to close that gap?
THE PRESIDENT: No. That is up to Congress. I may
send E Message on -- which probably won't go into very much detail

we don't generally do that, you know. We have always said that

the Treasury is available, and they will have dozens of different
ways of raising it. It is up to Congress to decide. We have -- we
have got to get that into their heads. Congress has to decide.
Congress has to decide. We ask the Treasury to do this, that and

the other thing, and they do it, and it works out pretty well.
MR. GODWIN: With a continuation of the voluntary

subscription -- voluntary bond buying -- millions of people buying
ore, won't the amount of money that is raised by the bonds have
some effect on your request to Congress ---

28

3

THE PRESIDENT: Oh, I don't know. There are various

kinds that cen be -- I mean, don't --Q. (interposing) would you legislate voluntarism?
THE PRESIDENT: What?

Q. You wouldn't legislate voluntarism?
THE PRESIDENT: Yes, you could. It is perfectly pos-

sible. Now, that sounds crazy, but it's perfectly possible.
2. Mr. President, in that connection, there are reports that it was suggested yesterday at this conference held by Mr.
Byrnes that they withhold as high 8.8 forty percent. Can you comment
on that at all?
THE PRESIDENT: No. Now we are getting into deep

water. (laughter)
Q. Mr. President, cen you tell US if the plan has gone
far enough to tell how you are going to close that gap?
THE PRESIDENT: No. That is up to Congress. I may
send E Message on -- which probably won't go into very much detail

we don't generally do that, you know. We have always said that

the Treasury is available, and they will have dozens of different
ways of raising it. It is up to Congress to decide. We have -- we
have got to get that into their heads. Congress has to decide.
Congress has to decide. We 88k the Tressury to do this, that and

the other thing, and they do it, and it works out pretty well.
MR. GODWIN: With E continuetion of the voluntary

subscription -- voluntary bond buying -- millions of people buying
ore, won't the amount of money that is raised by the bonds have
some effect on your request to Congress ---

28

3

THE PRESIDENT: Oh, I don't know. There are verious

kinds that can be -- I mean, don't --Q. (interposing) Would you legislate voluntarism?
THE PRESIDENT: What?

Q. You wouldn't legislate voluntarism?
THE PRESIDENT: Yes, you could. It is perfectly pos-

sible. Now, that sounds crazy, but it's perfectly possible.
2. Mr. President, in that connection, there are reports that it was suggested yesterday at this conference held by Mr.
Byrnes that they withhold as high as forty percent. Can you comment
on that at all?
THE PRESIDENT: No. Now we are getting into deep

water. (laughter)
Q. Mr. President, can you tell us if the plan has gone
far enough to tell how you are going to close that gap?
THE PRESIDENT: No. That is up to Congress. I may
send a Message on -- which probably won't go into very much detail
--

we don't generally do that, you know. We have always said that

the Treasury is available, and they will have dozens of different
ways of raising it. It is up to Congress to decide. We have -- we
have got to get that into their heads. Congress has to decide.
Congress has to decide. We ask the Treasury to do this, that and

the other thing, and they do it, and it works out pretty well.
NR. GODWIN: with a continuation of the voluntary

subscription -- voluntery bond buying -- millions of people buying
ore, won't the amount of money that is raised by the bonds have
some effect on your request to Congress ---

29

4

THE PRESIDENT: (interjecting) Yes.

MR. GODVIN: (continuing) --- as to plans? That is

so, isn't it?
THE PRESIDENT: Yes.

2. Mr. President, can you say whether the estimates

of the inflationary gap, which was fixed at 16 billion last January,
have gone up in view of mounting national income?

THE PRESIDENT: I think slightly, so far, but they are
threatening

e. (interposing) The gap is widening?
THE PRESIDENT: The gap is widening a little bit,
because of course the cost of living has gone up -- pay has gone up;
but some of these -- some of these proposals that have been made

for further inflation, both in wages and farm prices, would, of
course, increase that gap.

Q. Well, what I had in mind, sir, was you have stated
that it is your intention to close the gap. Could we assume from

that that the 16 billion dollars hope might go up a little in your
Message?

THE PRESIDENT: That I don't know. I wouldn't say

that yet. And, of course, a small portion of it was closed by that
bill the other day.

e. Mr. President, is it correct to interpret your
statement that -- as meaning that the main emphasis of your Message

will be the closing of the inflationary gap, that is, the necessity
'or deeling with that question?
THE PRESIDENT: In the first place, don't -- don't put

30
5

t as if I was sure of sending the Message. I don't t know yet.

2. (interjecting) Yes.
THE PRESIDENT: (continuing) But if I do, such a
Message will be not on closing the inflationary gap but the whole

proposition of inflation, not merely the Treasury end -- the effect
of inflation on the Treasury -- but also the effects of inflation
on everybody in this country -- purchasing power.
MR. GODWIN: Mr. President, you have a drive in Congress
which seems to be aimed at stopping subsidies and the borrowing of

money from the R.F.C. , e situation which seems to be counter to the

plans of the Administration -- it seems to be getting in their way.
Have you anything to say about that.
THE PRESIDENT: Well, didn't they have an expression

in England in the last War called "The Better 'Ole"?
MR. GO DWIN: Yes.

THE PRESIDENT: I woul d very much like to have somebody
say to me, ,

---

MR. GODWIN: (interjecting) Find a better 'ole?
THE PRESIDENT: (continuing) "I have found a better

'ole." And it's all -- all very well in life to adopt the attitude
that you don't like this, you don't like that, or you don' t like the
other thing. of course, the real answer is, what in blazes do you
like?

VOICES: Thank you, Mr. President.

31

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE June 11, 1943
TO

FROM

D. W. Bell

The Secretary (Via Fred Smith)

Please get a correct transcript of that part
of the President's press conference of this morning that
had to do with compulsory savings. When you get it, it
should be sent to the following people: The Presidents
of the Federal Reserve Banks; the members of the Federal

Reserve Board in Washington, and to every director of the
Federal Reserve Banks. It should also be turned

over to the War Savings group to be distributed to all
key people in the 48 states, including Washington, D.C.,

with instructions to get just as wide distribution as
possible.

6/19/23
carp

and

Easlip

32
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON

June 11, 1943.

MEMORANDUM FOR THE SECRETARY'S FILE:

I talked this morning with Jim Rogers of O.W.I. on the
matter of the Third War Loan drive. He said Herbert Gaston
had not talked to him yesterday. I told him we might want
September 7th to September 30th and he said he had always

considered that September would have to be kept available for
the Treasury on the Third War Loan drive and that we could
consider it cleared so far as his organization was concerned.

I telephoned this to the Secretary at about 11:30.
At 1:30 Rogers called back and said there was one thing
he wanted to make clear and that was that there was a manpower
program set for the entire month of September and the first week
of September, plus Labor Day, would be taken up with quite a

bit of publicity, particularly on the radio in the form of

speeches. He did not think this would in any way interfere -

possibly we could work in the War Bond drive into some of these
speeches, but that we should rely on September 7th for publicity
similar to that which we got the last time when the radio devoted
the entire first day to the Second War Loan drive.

As to this drive I also called Mr. Hemingway, President
of the American Bankers Association in St. Louis, and told him
of our plans and the reasons therefor. He said he was sorry
that they had to have a convention right in the middle of the
drive but it was something that neither he nor the Artister could
prevent and he saw no real reason why the Treasury could not use
the dates September 7th to 30th. He said he would, however,

like to talk to Harold Stonier and he would call us back this
afternoon.

I also gave this to the Secretary and he said he would
not announce the dates of the next War Loan until he returns
to Washington next Tuesday at which time he has a date with
Winthrop Aldrich, head of the Community War Fund.
FOR VICTORY

BUY
WAR
STAMPS

33

-2Mr. Hemingway called me back at 3:30 p.m. today to say that
they are in full agreement with the next war loan starting on

September 7. They hope in the publicity that nothing will be said
about the American Bankers' making the request that the drive be
postponed to the 20th because of their convention AS they do not
want to get in bad with any of the organizations working on local
community fund drives.

I told him we would look at it from that angle when we gave
out the publicity.

DWB

34

6/11/43

First draft of Kingston, N.Y., speech

dictated over the telephone.

35

Thank you, Mr. Mayor. I am here as you know to award the

Treasury "T" flag to your city of Kingston - a token of the
fact that every industrial and commerical firm in this city
has a Payroll Savings Plan. This achievement of Kingston

is gratifying because it tells us that if one city after
another wins our "T" flag, the nation is unified and strong
in its support of the war. When management and labor get

together, when the employees of every firm in an entire city
share their wages week in and week out with their government,

we have a demonstration of a real will to win. So, Mr. Mayor,
on behalf of the Treasury Department of the United States,

I present to you and to the city of Kingston, this Treasury
"T" flag.
(Applause)

Ladies and gentlemen: I am very glad to have this chance to
speak to you here in Kingston, not only because of your outstanding record in buying war bonds, not only because Kingston
has a war history that goes back to George Washington and the
days of the Revolution, but because my own home also is here
in the Hudson Valley, and I can talk to you as one neighbor to
another.

And I'm glad that what I say to you, as a neighbor, will
go over the air to people in other Kingstons, other cities
the country
like this, across/ -- because Kingston is both an industrial
community and a farming community, and what I have to say

touches both industrial workers and farmers -- all of us in
fact, no matter where we live.

36

-2Your working men and women, together with working people

in other cities of the nation today, are building war equipment
quantities,

for our armed forces in such vast and in such intricate perfection, that our enemies aren't the big brave supermen
they were. They were brave enough when they thought they

could beat us with our backs turned, but they aren't so boastful
today! And these fertile farms along our Hudson River are
raising food for our soldiers and sailors and marines, our
war workers, and our allies. You people of Kingston are
discharging momentous tasks, workers and farmers alike, of
equal importance.

Let me speak to you now of this other momentous task that

you are sharing so splendidly, and that
I share with you
colossal

--

the task of financing this virtually retirent world war

that we intend to make, also, the last! I have some news
for you of how we will pay the bill from now on.
Your magnificent response to the War Loan Drive has

shown that you are willing, even eager, to put up with real

sacrifice to pay the bill, no matter what it costs -- just so
long as we win. You are resolved that we must win. And
you have a right to know -- you must know, if we are all to
keep our eyes and our heads clear for the hard job that still

lies ahead of us -- what such a resolve calls for, in dollars
and cents, and how the dollars and cents are to be raised.

I'll begin with the rate at which our war spending has

37

-3 grown, and why it has grown. At the time of Pearl Harbor,
when we were shocked into a realization of what modern war
is by the treacherous murder of hundreds of American boys

by the Japanese -- at the time of Pearl Harbor when, mind
you, we were so far from expecting war that our entire air

force was only a fraction of the number of planes we're
producing now -- even then, we were pouring into war materials

64 million dollars a day. As we rallied from the shock of
Pearl Harbor, we threw the lever of our vast ****** American
of
machine in production into high gear. By July of last year
our war expenditure climbed to 152 million dollars a day.
At the end of last year we were spending 198 million a day.
And today the figure is 240 million.
Between sunrise this morning, and sunrise tomorrow

morning, your government will have spent nearly two dollars
for every man, woman and child in the UnitedsoStates.
Why? Because we have vowed to produce THE many bombing

planes that there will be traffic jams in the sky over Berlin.
(And there are, already. * One wave of planes sometimes has

to wait for another to go in.) General Arnold, commanding the
Army Air Forces, said flatly that he means to bomb Germany out

of the war, and Mr. Churchill says that, even if we can't,
it won't do any harm to try. And a four-motor bombing plane

just one -- costs nearly a half a million dollars

Because

we intend to drop a thousand, two thousand, three thousand

-4-

38

tons of block buster bombs on the Axis nations every night,
weather permitting! And a single two-thousand pound block
buster costs $400. Because, every time one battheship of
our Navy fires a broadside of sixteen inch shells at the

Japs, it costs $13,000 in other words, because we're
really getting into the war. Because, at last, the United
Nations are on the offensive! Where we want to be!
Well

To put us where we want to be, for the first half of
this year individual bond buyers will have invested 7 billion
dollars in War Bonds; a little over ten per cent of their
income. That doesn't include money coming from corporations,

banks. or other institutions. That's just the amount the
people themselves will have invested in winning this war.
Splendid as that achievement is, we can't stop now to pat
ourselves on the back. Not at this moment when we are about
to invade Europe! We have a big job ahead!

During the second half of this year -- from the first

of July until the end of the year -- it is going to be
necessary for you to invest, not another 7 billions, but
nearly 2 times that much! We will get many billion more
from corporations and other large buyers,

39

but we are calling on you to buy as individuals $18 billions
worth of bonds during the rest of this year.
In other words -- in addition to your taxes, you are
going to be asked to lend your Government twenty-five cents

out of every dollar you earn.

Now, that sounds like a lot, but I am sure we will be

able to swing it, if we all work together.
The first reason is that we have the will to do it.
During the second War Loan drive in April, we asked

people to buy $21 billions worth of bonds, and they bought
31 billions. We asked insurance companies, corporations

for 51 billions, and they invested nearly 10. We asked
for volunteers to take over the job of selling bonds to
their friends and neighbors, and ten out of every thousand
men. and women in the United States became voluntary bond
salesmen.

When the final score was in, we found that in the
Second War Loan Drive we had raised almost as much as

the total amount raised during all of the five bond
drives of World War I.
The second reason I am confident we will be able
to raise the money we need is that these figures, enormous

40

-2-

as they are, aren't really quite as bad as they sound.
For instance, when I say that our bond goal adds up

to twenty-five cents of every dollar you will earn after
July first, that doesn't mean that every family is going
to have to set aside, arbitrarily, twenty-five percent
of its income. It's precisely because we don't want it
to be too hard for anyone that we raise the money through

war bonds. We leave it to you, yourself, to decide how
many bonds you can afford to buy. Families with heavy
pre-war commitments, mortgages and insurance and so on,

may not be able to afford twenty-five percent. But
folks who are earning more than their usual amount of

money, will be able to invest more.
For instance, take two girls -- Ann and Nancy -working in a war plant. They both make $40.00 a week.

Ann just has herself to take care of. Nancy is supporting her mother and two little brothers. Ann, obviously,
can help finance the war to a far greater extent than
Nancy.

41

-3-

Many people are already putting larger percentages

of their incomes into bonds. In some cases where more
than one member of the family is working, or where the
head of the family has a war job at good pay, the percentage
of war bond buying, amounts to half - even more - of
the family income.
There are many women in war jobs, with husbands

also working, or in the armed forces, who are investing
100 percent of their pay in war bonds; every cent they
make! Those aren't isolated cases by any means. In

April I visited one war plant where they were putting
23% of the total payroll into bonds.

So it's clear that we have both the will to pay for
the war and the ability to pay for it. The only question
that remains is the question of method -- how we will go
about it.
Now, I myself believe ** taxes ought to be us ed to pay

for as large a share as possible. I think taxes ought
to cover something like half of our expenses, and they

are not covering that much now. But we can't raise much
more than half of the money through taxes, because, on

42

-4-

such a huge scale, we can't levy taxes with fairness.
That's why we must rely upon bond sales for the re-

maining amount. Bonds are flexible. They allow
for the obligations which you may have, which may be

entirely different from the obligations of your neighbor.
Now --

How are we going to go about the concrete job of

getting $18 billions from individuals in the next six
months? First of all, we are starting right now to
expand the payroll savings plan by at least 50 percent.
Every worker is being asked to figure out for himself
how much he can lay aside out of his current earnings for
war bonds.

Ten percent is no longer enough.

We are also planning on two new War Loan Drives,

one in September and one in December, to raise funds,

especially from individuals. We have already decided
that the September drive will open on September 7.

Our goal for sales to individuals in each of the
two drives will be at least $7 billions, or more than
twice our actual sales to individuals in the Second

War Loan Drive in April. Which will provide $14 billions

in these two months. The other $4 billions that it will

43

-5-

take to make up the $18 billions, we will get during
the four months in which there are no War Loan Drives -through payroll savings and other continuing bond sales.

This is no impossible job for the American people.
The money will be there. The total incomes received by

individuals will be so much greater than the sum total

of things available to buy, that money will be at hand
to buy $18 billions worth of bonds and still pay taxes,

life insurance, mortgage obligations, doctors' bills,
and so on.

As the Secretary of your Treasury, I can only tell you
what amount of money is needed, and lay the figures before

you clearly and honestly. The rest is up to you. In the
final analysis you must depend upon your own recognition

of your obligation in a free country. The very fact that
we are free to lend according to the dictates of our
conscience; that nobody is spying on us or tattling on us;
that no Nazi stormtrooper comes swaggering into our kitchen

to demand our money -- the very fact that we are free adds

the more weight to our responsibility to gowithout that

44

-6-

pretty dress, or that juicy steak, and instead buy
every last bond we can buy.

We know, now, what this war is going to cost.
We know how many planes and tanks and ships we'll

need. We know how many men we'll have to have in
our armies and how much equipment we'll have to provide

for them. And we know those things because our days

of guesswork are over. Now, Hitler and Hirohito and

the trembling, fat hulk the Italians us ed to call Il
Duce are doing the guessing. We know exactly what we

are going to do and how we are going to do it! From
now on, we are going to do the planning -- and the
attacking.

That's what these figures mean that I am giving
you. That's why, far from being bad news, or sad news,
they add up to good news.

It's going to be tough going; yes. It's going
to be tough going for all of us.
BUt it's tough going, too, for the boys out there.
Keep them in mind -- your brothers and sweethearts

and friends -- and I don't think there will be any doubt

45

-7-

in any of our minds about whether or not the American

people are ready and willing to pay for this War!
They give their lives. You lend your money.
Mr. Hitler and Mr. Hirohito and Mr. Mussolini
will have copies of what I have said here an hour
or so from now.

They will read how we finance a

War in America, a free country, and I hope they will
have bad dreams. I hope they will understand that

this is a blue print I have given you -- a blue print
for the American plan.

46

MEMORANDUM FOR THE SECRETARY.

June 11, 1943.

Mail Report

What threatened last week to be a summer slump

has been averted by an up-sweep in this week's mail.
Tax mail received here was very light, but a great
many letters on the subject were forwarded from the
White House, and in addition, many wrote us about
Bonds, Finance Committee, Foreign Funds, and general
Governmental policies.

Only 5 letters addressed to the Secretary opposed
forgiveness of taxes, and only 6 objected to the 20%

withholding tax. In contrast, White House mail in-

cluded 210 protests against the tax measures just enacted by Congress. There are a great many letters not
commenting one way or another, but asking the Secretary
how taxes can be paid and Bonds bought on budgets which
the writers enclose. Others ask how their incomes will
be affected by the withholding tax, or how to handle
Tax Anticipation Certificates which they now hold.
Letters approving a sales tax were pretty well balanced
by CIO-sponsored communications disapproving it and the

spending tax as well.

Altogether unfavorable was the reaction to the
suggestion that 25% of income should go into Bonds.
Individually itemized budgets were sent in with requests that the Secretary study them himself and let
the writers know how they could possibly buy Bonds
and pay taxes. Some writers suggested compulsory
deductions, graded according to income.
Replies to the telegrams concerning organization
of Bond selling agencies on a State basis, and to the
personal invitations to serve on the new committees

were cordially cooperative. Occasional letters

objected to the wordiness and cost of the telegraphed

messages.

47

-2Memorandum for the Secretary.

June 11, 1943.

Bonds submitted to the Secretary for redemption

broke all records, totaling 98. Probably the approach

of the second installment date on income taxes accounts

for this.

The fact that there were only 56 complaints on

nondelivery of Bonds through the War Department, even
though the mail as a whole was very heavy, may indicate

that conditions are improving in that regard.

Miscellaneous mail included anti-labor protests,

complaints about the new pennies, and demands for

economy in Government expenditures.

48

General Comments

L. M. Pierce, Brooklyn, N.Y. I am just one of the

average citizens who is somewhat worried as to how much

the United States Government is really going to allow

a citizen to live on during these trying times. The
solution seems to be that all salary checks be made

payable to the Government and the Government in turn

pay everybody on the Army rate, as otherwise it is go-

ing to develop into a real problem that will further
help to foster strikes of every description. We understand that next month 20% will be deducted from all pay
envelopes. Today's issue of the New York Herald indicates that you intend to demand a further 25% from pay
envelopes for War Bonds, and the New York Sun states
that Senator Wagner is going to demand a further 6%

for a Security Plan, that makes a total of 51%. How
many workers in War plants are going to sit contented
on that basis without demanding higher wages.

G. C. Gasber, Martins Ferry, Ohio. Enclosed is $20.00
Money Order for General Fund, U. S. Treasury. I have
been delinquent for some time, but am employed gain-

fully again. Best wishes for a speedy, successful conclusion of the war.

Henry J. Abrahams, Omaha, Neb. Enclosed herein, endorsed

to you, please find check in the amount of $12.50,

recently sent me. It seems to me that our recent victory
on Attu Island should be considered not only as a military victory, but also as an opportunity for civilians
to express their thanks for the bravery of our courageous soldiers. With that idea in mind, will you kindly
use the proceeds of the enclosed check to furnish more

ammunition to our soldiers, with a view toward assisting them further in their mst admirable purpose.
Wm. B. Joyce, Private Investments, N.Y.C. It is stated

that the Treasury is seeking complete and accurate
information about American assets in foreign countries,

49

-which we approve. We, however, point out that the
Treasury Department should take cognizance of a de-

plorable situation existing in that American citizens

have purchased bonds of foreign nations, which foreign
nations have assets in the United States, and such
foreign bonds have matured and the principal defaulted,
and the American investors are unable to get any information from the Treasury Department or from repre-

sentatives of the foreign nations, regarding what to

expect about payments, and what securities such American

investors in foreign nations' bonds have in this country
as far as the assets such foreign nations have in the
United States. Do you think that is quite the way to
treat American citizens who are struggling to pay their
taxes, and to buy War Bonds, and who have children in

the service of their country as we have?

Mrs. Georgia Wicks, Los Angeles, Calif. In circulating the new pennies it is just like flooding the country
with counterfeit dimes. They are being passed for
dimes everywhere. Unscrupulous people can pass many
each day on unsuspecting persons and make 9d on each

one. Several were given to me as dimes before I knew
they were in circulation. Couldn't you make them octagon or square so they wouldn't be just like dimes?
Imagine everybody in the United States having to take
time to examine each dime and penny that comes into
their possession each day to see which face happens to

be on it.

-3Favorable Comments on Bonds

I. L. Hillman, Certified Public Accountant, Brentwood,
Many large industrial firms in
Pittsburgh, Pa.
the Pittsburgh territory which have inaugurated Payroll
Deduction plans report that if employees do not receive
delivery of Bonds within seven to ten days after sufficient funds have been accumulated in their accounts
to pay for them, they threaten to cancel, and often do
cancel their subscriptions. Such employees give the
excuse that they prefer to buy Bonds for cash where
they can secure immediate deliveries. * * Accounting
systems for large industries are usually complex and
the accumulating of payroll information in one central
department from various plants throughout the country
for the purpose of issuing War Savings Bonds often

requires much longer than seven to ten days. It often

works a hardship on employers to attempt to make such

prompt deliveries. * * In spite of this, most indus-

tries throughout the country have been spending
tremendous sums in accounting for payroll deductions
and issuing Bonds to employees within the ten-day

period. # * * It is my recommendation that in the

forthcoming drive, the Treasury Department stress
that delivery of Bonds to employees under payroll

deduction plans will be considered very satisfactory
if made during the month following that in which the
Bonds are paid for. Such Bonds will bear interest as

of the first of the month in which paid for, so that

employees do not lose any income. Such Bonds have no

value either as cash or collateral for sixty days after
the effective interest date. Therefore, it would seem
that publicity along the lines above recommended would

not only be economical to employers, and indirectly to

the Federal Government, but would educate the employees

of what is reasonable to expect under present war conditions.

50

-4Unfavorable Comments on Bonds

Samuel H. Rozansky, Brooklyn, N.Y. On May 11, I paid
$18.75 for a $25.00 War Bond from the Airline Terminal
on the condition that I would receive same on May 15,
with a souvenir cancellation commemorating the Air

Mail Anniversary. As yet I have not received same.
I inquired at the Terminal, 80 East 42nd Street, and
they informed me that you have not sent them out yet.
Please be so kind as to let me know by return mail

why I have not received cancellation and my Bond at

this late date.

Doane Cook, North Sacramento, Calif. This is just a
line to let you know you can increase your Bond sales
a great deal in the Sacramento area if you will let

us know what is being done about the Bonds which were
deducted from our pay at McClellan and Mather Air
Fields. As far as any one here knows, the funds may
have been embezzled. We realize that you are making

every effort, but please let us know in the paper,

over the radio, or some other way. Every one wants
to know if it is safe to buy more Bonds.
Merle C. Martin, Attorney at Law, Hardin, Mont.
Recently I gladly contributed some of my time and

effort in the doing of what I then believed was a
small part of my duty as a patriotic citizen of the

United States of America, without any thought or hope
of any reward. # * # Yesterday in my Post Office box
found a large manila envelope 81" X 111" which
carried a Treasury Department franked address label
I

on which was my name and address. On opening this

envelope I found a piece of gray cardboard 8 X 11"
and a white envelope 71" X 101" of heavy paper. On
opening the white envelope I found another piece of
gray cardboard 71" X 101" and a white sheet, 7" X 101"

of Permanized Artesian Ledger" heavy bond paper on
which was beautifully printed a "CITATION"

I assume that a similar "Citation" was probably sent

51

52

-5to all the people who assisted in the Second War Loan
campaign of April, 1943. I am pleased that my small
contribution was appreciated, but, had I been consulted, I most assuredly should have advised applying

the cost of the production and distribution of these
"Citations" to the purchase of vitally necessary war
material or the payment of a portion of some other
Governmental expense. # * It seems to me that this
waste was in very poor taste and sets a very poor
The
example to the citizens of our country.

material and the printing and distribution of these

"Citations" alone probably cost as much as several
large bombers, or enough to provide necessary care for

a large number of men and women. * It is just

such

examples of waste that cause the ordinary citizen to
feel that perhaps he could realize more good from his

money if he spent it himself, instead of loaning it to
the Government to be squandered. My wife and I, as

well as other people I know, have invested heavily in
War Bonds, in proportion to our means, and feel that
we have a right to expect the elected and appointed
officers of our Government to use good judgment in the
way our money is spent and at least to practice the
same economy they urge upon us.

R. L. Brehmer, Brehmer Greenhouses, Circleville, Ohio.

Am in receipt of my certificate from the U. S. Treasury

War Finance Committee as well as your booklet, "The
Story of America's Greatest War Loan" Needless to

say, I appreciate the spirit of appreciation in which
these were tendered. * # # I feel that it should be

brought to your attention that the thought uppermost
in most peoples' minds was the very pertinent one, that
the majority of the purchasers of Bonds would feel more
patriotic and would purchase Bonds more frequently if

they felt that a larger proportion of their money
Seemingly
actually reached the front lines.

everywhere people congregate, the conversation ultimately gets around to the subject of Government waste.

Typical of such discussion is one participated in by

53

6-

myself. It was the meeting of the directors of a
local company distributing gasoline and fuel oil to

the farm folks of this community. Among those present
were two dirt farmers, the manager of the company, a

draft horse and feed operator, the president of a local
canning company (the former president and owner of this

canning company committed suicide because he became a

nervous wreck trying to comply with ever-changing
regulations of the canning business by the Government,
and this man had been president of the State Canners
and National Canners Association), a banker and myself,

a florist. During the meeting, the matter of trying
to hold employees for the distribution of fuel to keep
farm machinery operating, in competition with higher
paid defense work, was discussed. The manager said
that Curtis-Wright of Columbus had robbed him of two
long-time employees just recently, and stated that he

needed some painting done, and had employed a man who

worked on the night-shift at Curtis-Wright to do the
work for him. He asked this man how he could put in

eight hours at Curtis-Wright and still work six to eight

hours at painting, and the answer was, "If you ever

worked at Curtis-Wright, you would not need to ask such

a foolish question". It is a local by-word, "If you
are too lazy to work and too yellow to fight - get a

job at Curtis-Wright". Just to bringit right

home to you, it might surprise you to find stacks of

promotional literature, the purpose of which was supposed to be to tell bankers how to sell War Bonds,
laying around in the vaults of banks, or baled up in
their refuse paper balers. People do not need to be

high-pressured to buy Bonds, but unless some changes
are made down at Washington, it is going to be more

and more difficult to sell Bonds to folks who are convinced that the money they invest in Bonds is being

wasted in inefficient war industry, and in the printing

offices in Washington. We save every scrap of metal
and paper, gasoline, etc., and donate parts of our
advertising space for the promotion of War Bond sales,
but we are getting damned tired of seeing so much of
our money and efforts wasted by a profligate Government.

-7- Frank G. Pierce, Secretary, League of Iowa Municipalities, Marshalltown, Iowa. Our Marshall County

War Bond Committee had a meeting yesterday and most

of the members seemed to think that there are too
many different proposals in regard to Bond sales and
increased taxation coming out of Washington, and that
every time one of these statements is made, that it
makes it just so much harder to sell War Bonds.

If it is possible for you to do so, we wish you would

keep these different agencies at Washington from shoot-

ing off about the payroll allotment and when it is

time to make a statement, have some one in your own

Department make it officially, or better still, you

make it yourself. There are so many statements coming
out of Washington that the people are getting very
much stirred up wondering just what is going to happen,

and if this sentiment that they are going to wait

until they see what happens, before they buy War Bonds,

continues to grow, it is going to be pretty hard for
the local committees to sell their quotas. Hope you
will give this your attention and try and keep a lot

of boys down at Washington from talking about what they

do not know, and if they do make a talk, give all the
facts.

David C. Allison, Minneapolis, Minn. It was my

desire today to purchase a War Savings Bond, and I

presented myself to a Postal Substation at Nicollet

Avenue and 15th Street in Minneapolis at 10 minutes
to 1:00 p.m. I made my request known to the Postal

authority in charge, and was informed that it was impossible for me to procure a Bond at his station for
the reason that he had already completed his daily
"report". Now, Mr. Morgenthau, the community in which
I live has been designated as one in a district in
which there does not seem to be at the present time a

definite labor shortage. Further, practically all

Government offices and war plants in this district
were open on this day. Therefore, you can see why
I should be slightly curious as to the reason for a

54

-8Government official to hesitate or refuse to accept
money to be applied to the war effort just because
his "report" was completed for the day. I am sure

any comment ou may care to make in this regard will
be greatly appreciated, not only by myself but also by
my business and social associates as well.

W. B. Benson, N.Y.C. Your recent suggestion that the
"small" man should invest 25% of his income, after
taxes, in Bonds, causes me to wonder if you have ever
sat down with paper and pencil to see just how it would
be possible for an average white-collar worker (the
frozen-salaried, forgotten-man group), married, with
two children and earning an average salary of $2,600

a year, to exist - not live - under your plan. I have

set down a sample budget for such a man, being harshly

conservative. * # * You will notice there is no pro-

vision for paying debts, no provision for emergencies,
no vacation, no Christmas gifts, no amusements -- of
course no car, no new furniture or furnishings, no
cultural expenditures for books, music, etc. I'm sure
you would not care to live on such a budget, even if

it were possible. This idea, like many Impractical

generalities coming out of Washington today, needs to
be examined in the light of practical economics.

W. B. Bordelon, Agency Cashier, Bankers Life Company,

San Antonio, Tex. With reference to the proposal that
wage-earners invest at least 25% of their incomes in
War Bonds, which I would like very much to do, please
send me a formula whereby a man with an income of
$2,400 a year, having three dependents (wife and two

children) could accomplish what you propose. If you

have some plan whereby I could save $50.00 a month, and

maintain my present living standard, carry an adequate

amount of life insurance, I will be most grateful for

the information. Please do not overlook deductions for
income taxes in making your calculation.

55

56

-9Favorable Comments on Taxation

Mr. & Mrs. John G. Moore, N.Y.C. Despite the fact
that an unrealistic and unfair tax bill seems about
to be made law, in spite of the efforts of your Department and our President to have enacted a tax program

in keeping with the needs -- the demands -- of the
time, we wish to have our taxes for 1942, which we paid
in March, accepted as such -- payment of our 1942

income tax. We are not only willing but eager to pay
our 1943 tax in 1943. We do not consider this a gift
to the Treasury, but our debt which we must insist-upon paying. Since the amount is small -- $28.00
it is little more than a gesture, but we must prove
to ourselves that the letters we sent to our Congressmen and Representative Doughton, urging a stringent

and suitable tax, were not mere lip service. We had
laid aside approximately $100 for 1942 taxes, and were
unpleasantly surprised to learn we owed only $28. Now
it seems that would apply to our 1943 tax. Because we
know our security and the future of our small son lies,
not in the dollars we can keep from our Government now

not even alone in the Bonds we buy -- but in the security of our Democratic Government and a sound economy

for all, we cannot understand the forces in Congress
and throughout the country who either are not facing

the issue realistically, or who are consciously attempting to sabotage our nation's economy.

Marshall Beymer, The A-C-Devices Company, Chicago, Ill.

The other day I received an advice from the income tax

department that I owed the Government about twice what

I figured I did, and to send on a check, which I will

gladly (strange as it may seem), because I feel as if

the Government needs every dime it can collect to pay

for this war and leave our children's children free to

pay for THEIR OWN mistakes. I only wish, like millions

of others, that the President would kill off a couple
thousand of those crack-pot bureaus, such as NYA, and

other nitwit pinks socialistic playgames groups, and

use the money for more honest purposes, but I suppose

57

- 10 -

that is the only way for the Democratic Party to
guarantee re-election, as far as they can, by buying
the voting public. * * # There are many firms, including ourselves, who are advertising today and generally
spending excess funds in what the advertising man calls

sustaining advertising. Therefore, why not tax

advertising in the visible forms such as so much an

inch for newspaper space, so much more per inch for
magazine space, and so much a piece for circulars of

a size, and more for a larger size circular. That

certainly does not tax freedom of speech, which even
as much as the Democratic Party would like to muzzle
it, MUST NEVER BE ABRIDGED. * * * Don't bother to

answer -- just go do it.

William W. Orton, Worcester, Mass. I am writing you
for advice as what to do about my state income tax.
I filled out a form and sent it to Boston income tax
agency and I have not heard a thing. I was married
in 1942 and my wife didn't prove to be the lady she
was soppose to be, she keep me broke most the time,

and what little I spent would make a slight different.
I made about $1,400 dollars. I am not livin with her

now, I am getting devorce from her. I am working on
a Defence Job. I tryed to borrow money, I figured
I owed Uncle Sam around 80 dollars, and if I do,
I wish I may have time to pay, as you read how honest
I am, no exceptions, only a citizen.

58

- 11 Unfavorable Comment on Taxation

E. H. Spillane, Chairman, Legislative Committee, United
Electrical, Radio and Machine Workers of America,
Westinghouse Local 601, East Pittsburgh, Pa. #

What is the disturbing factor to our people is the

general talk and the Treasury Department's suggestion

about a "spending tax". We can readily see that there
is no difference between a sales tax and a "spending

tax". Our people, and all the people in our entire

area, are opposed unequivocally to any form of sales
tax, regardless of what fancy name may be tacked to it.

Our people are willing and eager to pay their fair

share of whatever taxes are necessary, but we insist
upon a tax program based on the ability to pay. A sales
tax is definitely unfair to the common people. We ask,
therefore, that you discontinue any suggestions for a
"spending tax", and recommend a fair tax program that

will enable the American citizens to at least give their
children enough to eat.

59

Printed report returned to Heffelfinger.

60

JUN 11 1943

My dear Mr. Chairman,

Receipt is acknowledged of your letter of June 4, 1943,
requesting an expression of my views on the tentative report on

Government personnel which you furnished on May 26, and which you
have been directed by the Committee to submit to Congress at an
early date.

I an in accord with the Committee's views that the trensudous
expansion in Federal personnel is a cause of serious concern, but

I - not in accord with the implications arising from the statement

(page 3) that only employees of the War and Navy Departments,
except clorical, administrative and fiscal employees, and employees
of the Panama Canal can be considered essential in our war activities.

We cannot lightly pass over the fact that there are a great

many agencies of the government engaged in essential work in support
of our armed forces. I have in mind the Maritime Commission and

its accomplishments in marshalling our shipbuilding industry to

its present unprecedented capacity, because without ships we cannot
transport and supply our troops in oombat areas. The Lend-Lease

Administration has played a great part in supplying our Allies,

thus enabling them to continue to oppose the enemy on many fronts.

From a personal standpoint, I take pride in the Treasury Department's part in our war responsibilities, especially in revenue
collection work, in the financing of the war, in foreign funds
control, in procurement lead-lease activities, and in the manufacture of the currency and ooin necessary to support our wartine

economy. All of these duties have increased enormously and are
just as essential as the duties performed by employees of the War
and Navy establishments. Numerous other agencies could be cited

which are likewise doing their part in bringing our full forces
into play against the enemy.

In fairness to these agencies and their employees, many of
whom are conscientiously working long hours under trying circum-

stances, I believe the Committee should give recognition to their
part in our war efforts.

61

-2I share the Committee's views (page 6) that agencies of the
Government, including new war agencies, should redouble their efforts
to reduce their employment. It should be borne in mind, however,
that many of the older agencies have had duties incident to the war
placed upon them, and furthermore have without question done a
better job in holding down their personnel requirements than some
of the newer agencies by reason of their more mature experience in
dealing with problems of personnel, with consequent better controls
over such matters. Also, they have lost the services of many of
their most valuable employees who have entered the armed forces.
This situation has undoubtedly had its effect upon efficiency of
operations and resulted in a tendency to require a greater member
of untrained persons or inexperienced employees to carry on essential
services. This has been our experience in the Treasury, and it is
reasonable to assume that other agencies have had the same experience.

with reference to the figures reported on page 6 and in the

table on page 87, which show a decrease in employment in the Department of Interior from 51,582 employees on July 1, 1939, to 41,739
employees on January 1, 1943, while over the same period the monthly
payroll increased from $6,899,767 to $7,056,664, it is understood
that the Secretary of Interior has furnished the Committee information accounting for these changes which no doubt should be included
in the report to clear up any possible incorrect inferences which
might be drawn from this part of the report.

As Secretary of the Treasury, I am in a position to appreciate

the personnel problems of the executive agencies because I meet
such problems in administering the Treasury Department, and as a
member of the Committee, I recognise our duty to strive for the
reduction of nonessential Federal expenditures. Improvement in
Governmental administrative management, including personnel, will

be a positive step in the direction of economy, but wartime administration (especially war on the scale in which we are now engaged)
accentuates our personnel problems and consequently makes improve-

ments more difficult to accomplish. We should nevertheless correct
or eliminate obvious unsatisfactory conditions wherever possible
and lay long-range plans for our postwar guidance in this field.

In the relatively short time available, and on account of my
prescupation with matters involved with our financing operations,
I have not been able to fully acquaint myself with or to analyse
the detailed information upon which the Committee's general oonolusions (page 16) and its recommendations (page 17) have been based.
However a rather hasty review of certain of your recommendations
(1 to 9, inclusive) suggests the following comments:

62

-3There appears to be no basis to support a general reduction in
personnel in all agencies alike as contemplated in Recommendation
No. 1. In some agencies the arbitrary reduction might be not
without impairment to the work loads in others a greater reduction

might be possible; in still others the arbitrary reduction might

seriously jeopardise the war effort to an extent that would render
negligible the savings sought.
Recommendation No. 3 suggests the establishment of a manpower

pool. This, in effect, has already been established by the Civil
Service Commission and is now in operation.

In Recommendation No. 4 it is proposed to restrict personnel

officers from recruiting, interviewing, investigating, and placing
personnel. At the present time personnel officers are not permitted
to perform these functions under rules laid down by the Civil Service
Commission in so far as they relate to the recruitment of personnel
from outside the Government.

Recommendation No. 5 proposing that a better quality of personnel be recruited by the Civil Service Commission is sound in theory
but has been proved impracticable because of the present manpower
shortage.

In the present emergency when the energies of the greater
percentage of Government personnel are being taxed to the utmost in

performing essential functions relating to the war effort, it is my
belief that it is not an opportune time to undertake drastic and
far-reaching changes in Government personnel administration.
Nevertheless, I am in sympathy with the Committee's objectives and

with the reservations herein outlined join in the Committee's report.

I will be glad if you will include these comments with the
Committee report.

Very truly yours,
(signed) H. Morgen!

Secretary of the Treasury.
Honorable Harry F. Byrd,
Chairman, Joint Committee on Reduction
of Nonessential Federal Expenditures,
Senate Office Building,
Washington, D. C.

WNT:em

6-8-43

Orig. file to Thompson

Photostatic " in Diary

By Messenger Beaur 105 6/11

Congress of the United States
JOINT COMMITTEE ON REDUCTION OF NONESSENTIAL
FEDERAL EXPENDITURES

CREATED PURSUANT TO SEC. 801. OF THE REVENUE
ACT OF

m 1941

June 4, 1943 d

The Honorable Henry Morgenthau, Jr.

The Secretary of the Treasury
My dear Mr. Secretary:

I have received your letter of May 29.

I greatly regret the delay in sending you the

two reports, one on the Home Owners' Loan Corporation

and one on the National Youth Administration. I
shall see that these reports are sent to you in
ample time in the future.

As you know, the recommendations in the report
just made on the NYA are the same as those made a
year ago, in which you concurred.

If you desire to dissent from any of the

detailed recommendations in the HOLC report, I

will certainly be glad to see that this is

properly reported to Congress and included in
the Congressional Record.

On May 26 a tentative report on government

personnel was sent you. I am directed by the
committee to submit this report to the Congress
sometime next week. I shall be glad to incorporate
in it any comment you desire to make.
With best wishes, I am

Faithfully yours,

Ham a Puna

Congress
of the United States
JOINT COMMITTEE ON REDUCTION OF NONESSENTIAL
FEDERAL EXPENDITURES

CREATED PURSUANT TO SEC. 601. OF THE REVENUE
ACT OF 1941

May 20, 1943 r

Honorable Henry Morgenthau, Jr.
The Secretary of the Treasury
Washington, D. C.

My dear Mr. Secretary:

Enclosed are two reports of the Joint
Committee on Reduction of Nonessential Federal
Expenditures, one on the Home Owners' Loan

Corporation and one on the National Youth Admin-

istration.
If you have any suggestions to make re-

garding either of these reports. I shall be very
much pleased to hear from you.

With best wishes, I am

Faithfully yours,

Aurry a Rin

65

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE

TO

Secretary Morgenthau

FROM

Randolph Paul

JUN11

We have previously reported to you certain

information with regard to the transfer of funds on

behalf of Madame Chiang Kai-Shek.

It now appears that during 1943 $867,000
has been transferred from funds of the Chinese Government to Ling Kai Kung, son of Dr. H. H. Kung, and to

Dr. F. C. Wu, representative of the Central Trust
Company of China and a member of Madame Chiang's

entourage. Some of these transfers were made directly through Madame Chiang and the others appear likely
to have been for her account.

We have now established that during the
month of May, Kung and Wu withdrew $675,000 of such
funds in cash. Other payments were made by check,

including the following:

Pennsylvania Railroad
Bear Mountain Inn
Palace Hotel, San Francisco

$21,281
2,722
1,945
8,111

Dr. Hollington Tong
In view of the extensive cash withdrawals

it would be most difficult to pursue these transactions
further at this point without an investigation which
would be likely to become known to the public.
The above information has not been transmitted
to anyone outside of the Treasury Department.

ARK

66

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE

TO

JUN11

Secretary Morgenthau

FROM Randolph Paul

I wanted you to know of the following new development in the Lazard Freres case.
On the morning of June 7th, Mr. Pierre DavidWeill came to the Treasury and talked to John Pehle and
two members of the staff. He presented a letter, a copy

of which is attached hereto. The letter indicates that

the $1,500,000 transmitted to Switzerland in 1940 was, in

fact, remitted to Lazard Freres, France. This fact had

hitherto been withheld from the Treasury Department. We

are inclined to believe that the primary reason for its

disclosure at this time was the action taken by Foreign
Funds Control a week or so ago in specially blocking
$1,500,000 of funds owned by Les Fils Dreyfus of
Switzerland (through whom the money had been remitted)

and advising Les Fils Dreyfus that their money would be
released when Treasury obtained the full story concerning

this transfer.

On Wednesday, June 9th, Frank Altschul came

down and talked to Pehle about his position in the mat-

ter. Altschul contended that he had not until very re-

cently known the true facts with respect to the transaction and the extent of Lazard Freres' participation
therein.

In view of this new development, the Lazard
Freres matter must necessarily be entirely recanvassed.
We are this week conducting new interrogatories of the

principal parties and hope to develop the real facts concerning this transfer.
We will keep you advised of any new developments.

ABT

68

2-

give us facilities which in other times would have been readily
available.

In the beginning of September 1940 my father was deprived

of his nationality and his properties in France were confiscated by

the Vichy Government. Parenthetically, I add that the same measures
were taken against Andre Meyer, who, as you know, had arrived in

this country in July 1940. At the time of which I speak it had al-

ready become evident that measures of exception would probably strike
us, and the rate of our depositors' withdrawals had been increasing

rapidly. We had always taken great pride in the firm's reputation
and credit and I found myself in a position where if I could count
on no help from our assets outside of France I could not see how my

firm could punctually fulfill its commitments. In the atmosphere

which was being created by Nazi propaganda, anything short of a
prompt fulfillment of our commitments, even though brought about by
oppressive measures and in spite of our complete solvency, would have
been turned into a financial scandal, which would have hurt not only
my father, Andre Meyer, and myself and their families and direct associates but would have been a further tragedy for the whole commu-

nities with which we were identified.

In my mind under these circumstances it was essential for
me to exert every conceivable effort to bring into unoccupied France

sufficient of our liquid resources outside of Europe to permit us to

discharge all our obligations on demand.

To this end, I communicated with Les Fils Dreyfus, Basle,
and impressed upon them the urgency of getting without delay funds
remitted to me in Chatel Guyon, in unoccupied France, where our
office had been established at the time of the French collapse. They
understood the situation perfectly and were, as you know, finally
successful in obtaining the necessary funds. These funds they remit-

ted to us and they reached us just in time to avert the great diffi-

culties which I had feared, and enabled me to pay out nearly all the
creditors of the firm.
I had known all along that there were funds on deposit in
Argentina on which in an emergency I could count. I thought that to

bring this money into France was an exceedingly natural and simple

operation. It was not until I reached New York in May 1942 that I
learned that some of this money had at that time already been transferred to New York and the balance was in process of such transfer.

There was brought into the United States from South America, as has
been stated, sums in excess of the amount remitted to Switzerland.

69

-3Through Les Fils Dreyfus, Basle, requests ultimately

reached New York to make the payments to Switzerland.

My partner, Andre Meyer, who had come over here with his wife

and children at the time of the armistice, felt deeply upset at the

thought that, as a consequence of his having left France for reasons

of personal security, he had left his responsibilities in France and
abandoned his firm and his lifelong friends. He felt that it was his

supreme duty to conduct himself in such a way that everything possible

might be done.

After having paid the bulk of our creditors and having
enough cash to pay the rest, and to continue to take care of our
small office staff, as was still necessary, we were able to withdraw

from the firm, because some previously unliquid assets had become
liquid before all withdrawals became impossible to Jews, about sixty

million francs, which were loaned to several friends in unoccupied
France, all French nationals, and in this manner prevented these funds
from being seized by the Vichy Government as belonging to non-Aryans.

The discharging of all these responsibilities was a burden which in
our long tradition we had undertaken quite naturally in order to

maintain the name in which, as I have already mentioned, we take

great pride. The record in this investigation, I am sure, has afforded
you convincing proof that to the same end, and particularly in one
dramatic instance, we have always conducted ourselves similarly in
the past.

The Vichy decrees and the German "ordonnances" have obliged

us to go out of the banking business in France. We believe and we
hope that the United States Treasury is sympathetic to our desire to
have our firm continue as an active banking firm in this country,
where it has been established in business for nearly a hundred years.

Andre Meyer and I regret that the telling of these additional facts has been so long postponed, but the burdens and diffi-

culties with which we have been beset must be our only excuse.
Sincerely yours,

(Signed) P. David Weill
Signed in the presence of the undersigned - June 7, 1943:
(Signed) John W. Pehle
Lawrence S. Lesser
Orvis A. Schmidt

70
TREASURY DEPARTMENT

OFFICE OF THE SHOREARY

June 11, 1943

CONFIDENTIAL

Received this date from the Federal Reserve

Bank of New York, for the confidential inform
tion of the Secretary of the Treasury, compila-

tion for the week ended June 2, 1943, showing
dollar disbursements out of the British Empire
and French accounts at the Federal Reserve Bank
of New York and the means by which these expenditures were financed.

youg

ma:6/11/43

C

71

0

P

FEDERAL RESERVE BANK
OF NEW YORK

June 10, 1943

CONFIDENTIAL

Dear Mr. Secretary:

Attention: Mr. H. D. White

I am enclosing our compilation for the week
ended June 2, 1943, showing dollar disbursements 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:kma: 6/11/43

CANADEAN AND AUSTRALIAN ACCOUNTS

DEBITS

CANADA (and Canadian Government)

OF

Transfers
Proceeds

to

323.0

December, 1940

477.2

Second year of war(b)

460.4

third year of war (c)

525.8

Transfers from Official
British A/C

A/C

Others
Debita

Credita

16.6

306.4

504.7

16.6

460.6

0.3

460.4
525.5

Total

707.4
462.0
566.3

For Own

Gold

Sales
412.7

A/C

For French

Sept. - Sept. 30
1 - Oct. 28

Oct, 29 Dec

2

Dec. Dec. 30

48.2

-

-

-

-

Decr. (-)
$ Pundric

20.9

38.7

32.4

181.7

534.8

20.9

110.7

41.0

246.2
198.6

3.4

123.9

88.5
360.0

7.7

1942

46.3
44.9
56.5

Other

Credits

A/C

46.3

53.6

44.9

56.5

51.5
80.8

13.2
16.6
14.4

18.2

13.9

2.9

-

-

-

-

-

-

-

-

52.5

3

35.1

3

31

28

2

Apr,
June

May 5
12
19

26

June

-

52.5

217.1

35.1

101.2

125.0

-

37.2

-

57.9

14.5

43.4

12.3

4.5

16.7
57.4

55.5

9.0

49.8

112,2

62.9
17.2

18.3

40.5

72.2
107.2

62.4
81.2

50.1

1.6

95.0

5.0

40.4

7.3

28.0

20.5

7.5

18.1

34.9
66.4

6.6

12.0

2.3

24.3

14.3
10.2

5.5

4.7

4.3

14.1

8.0

6.1

14.6
9.4
11.7

164.6

16.2

8.0

8.2

17.3

66.1

15.9

0.9

16.0

1.3
2.8

410
92.1

63.5
51.6
39.6

79.9

19.9

95.8

95.8

22.8
12.3

6.7

22.8

56.5

12.3

2.3

2.3

24.8
19.3

7.80m)

7.8

16.6(a)

of an

Your year of war (through June ,1943)

6.6

+

(I)

10.6

7.1

15.0
5.0

16.4

15.1

15.9

21.8

19.0

16.1

3.0

1.0

44.2

12.0
3.0

12.0

15.4

+

+

24.83
19.3 L
16.6(r).

6.2 million.
10.1 million
8.8 million,

Punde(d)

230.2

39.6

6.7

Other

Credits

4.9

57.6

56.5
6.6

Gold

Sales

6.1

29.0

-

Total
Credits

30.0

36.2

-

Debits

Net Incr.
(+) or
Dec. (-)

36.1

29.0

-

Other

A/C

of

27.3

36.2

bakly Expenditures

year of war
year of war

-

Official
British
3.9

+

lar

Total

REDITS
Proceeds

to

Debits

and Australian

31.2

1943

- Fab

Transfers

Net Incr.
(+) or

of

+

of an
period through

Total
Debita

DEBITS

+

PERIOD

Official
British

COMMONWEALTH BANK OF AUSTRALIA

CREDITS

18.2

-

-

9.9

14.6
9.4

0.3

0.8

11.7

2.4

17.3

1.1

16.0

6.7

6.7
19.3

29

20.1

20.1

1.

2.0

3-3

3.3

0.3

-

12.8
3.5

12.8

30
3al

-

-

18.1

19.3

2.1

-

3.8

-

0.1
0.4

17.0

8.8

-

0.8

+08
0.5

3.5

01

01

04.4

0.4

+

0.1
3.4

monthly breakdown soe tabulations prior to April 23 1941.
O 500 tabulations prior to October 1021
For monthly breakdown see tabulations prior to October 14, 1942.
Reflects changes in all dollar holdings payable on demand or maturing in one year.
Does not reflect transactions in short term U. S. securities,

Includes $7.1 million deposited by War Supplies, Ltd. and $9.3 million received
from N. Y. accounts of Canadian Chartered Banks.

1,793.2

605.6

BAT period through
December 1940

2,782.3

1,425.6

Second year of war (h) 2,203.0

1,792.2

and year of war (3)1,235.6

904,8

Dec.

Feb. - Mar

3

this 4-Har 31

3

REA 1-Apr 28
2

T

46.7

27.4

96.6

35,5

30.4

13.3

168.6
87.2

20,9

35.3
37.0
90.4

17.8

1,356.1

52,0

3.9

(c)
416,2

407.4
223.1

2,793.1
2,189.8

2,109.5
1,193.7

108.0
274.0

14.5
16.7

1,361.5

21.8

5.5

57.4

1,276.8

+125.9

19.0

81.6

0.5

20.5

19.3

12.0

60.6
45.5

5.5
8.0

78.2
43.9

+25.5
+10.8
- 12,9

8.0

50.9
105.8

+33.6

59.4

+ 29,1

1,335.8

-

61,1

57.5
83.7

17.1

51.9

125.0

22.7

58.9

37.7

31.7

120.8
64.4

-

-

Oct. 29 - Dec. 2
Dec. 3.= Dec. 30

37.1

Account

20.9

-

Oct. Oct. 28

56.1

tralian

1,828.2

(official)
6

Credits

Gold

20.9

1942

Sept BE Sept. 30

Total
Credits

Debits
1,166.7

3.4
7.7

12.9

-

16.3
74.3

-

or Decr (-)

22.4
20.7
16.1

-

-

-

-

-

-

-

-

-

-

-

67.4
103.4

15.0
5.0

An $ Funds

Total
Debite

(d)

Total
Credits

Net Incr. (+)
or Decr. (-)
in $ Funds

35,0

(e)

(e)

866,3(f)

1,095.3(f)

+299.0

561.1

10.8

878.3

+220.1

- 13.2

1,098.4

705.4

38.9
18.5

8.8

-30.1

4.4

- 14.1

10.1

0.4
0.3

0.2

+ 21.5

-

-109.7

-

15.1

72.3

50.4

19.0

84.4

13.0

1.0

16.8

11.0

12.0

12.8

40.2

30.5

25.1

15.0

9.8
7.3

(d)

9.7
0.3
0.1

0.3

-

-

-

-

-

-

-

-

-

&

-

-

First year of war (B)

Canadian
Account

Net Inar
Other

-

-

(a)

Other

Transfer
Securities Ehr Ausor

Sales of

-

tures

P

-

Debits

Official

-

Total

Expendi-

BANK OF FRANCE

CREDITS

Transfers to

PERIOD

Arr 29 June

BANK OF ENGLAND (BRITISH GOVERNMENT)

-

DEBITS
Gov't

ACCOUNTS

+

FRENCH

(In Millions of Dollars)

TEXX ENDED:

1.1

15.0

June 2

5.0

2.4

2.6

12.3(1)

-

Average Weekly Expenditures Since Outbreak of War

France (through June 19, 1940) 19.6 million
England (through June 19, 1940) $27.6 million
England (June 20, 1940 to March 12, 1941) $54.9 million
England (since March 12, 1941)
$22.7 million

-

3.0

30

9.3(1

-

-

33.5

4.1

-

5.0

5.2

-

3a.4

26

-

-

-

19

-

-

24.8

-

-

5.3

-

17.8

-

2.1

-

4.7
59.7

-

6.8
65.0
8.4

12

See attached sheet for footnotes.

(a) Includes payments for account of British Ministry of Supply Mission, 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 Montreal, which apparently represent the

proceeds of official British sales of American securities, including those effected through direct negotiatia, In addition

to the official selling, substantial liquidation of securities for private British account occurred, particularly during the

early months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuacy. According
to data supplied by the British Treasury and released by Secretary Morgenthau, total official and private British liquidation

of our securities through December, 1940 amounted to $334 million.

(c) Inclydes about $85 million received during October, 1939 from the accounts of British authorized banks with New York banks,
presumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October,
1939 apparently represent current acquisitions of proceeds of exports from the sterling area and other accruing dollar
receipts.

(d) Reflects net change in all dollar holdings payable on demand or maturing in one year.
(e) For breakdown by types of debits and credits see tabulations prior to March 10, 1943.

(f) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day.
(g) For monthly breakdown see tabulations prior to April 23, 1941.
(h) For monthly breakdown see tabulations prior to October 8, 1941.
(1) For monthly breakdown see tabulations prior to October 14, 1942.
(j) of which $6.3 million appears to represent current and accumulated dollar proceeds of sterling area services and merchandise exports.

75
KEM

This telegram must be
paraphrased before being

Chungking via N.R.
Dated June 11, 1943
Rec'd 3:35 p.m.

communicated to anyone

other than a Governmental
agency. (BR)

Secretary of State,
Washington.

896, June 11, 11 a.m.
FROM FOWLER FOR STONE BEW

A prominent businessman of Shanghai, C. H. Ho, left that city on
April 11 taking 53 days for journey to Chungking. His report on
Shanghai conditions at time of his departure follows:
One. Fapi was quoted at Chinese dollars 1.20 for CRB one dollar.
At one time CRB was worth over double the value of fapi and the drop
is due to complete lack of confidence in this Japanese sponsored currency.
Two. The only cotton mills operating are Japanese and Chinese and
these are on quota basis in so far as raw materials are concerned.
Japanese mills receive 70% and Chinese 30% of raw materials. Japanese

mills are operating 24 hours per day.
Some months ago

Three. (1) all motor busses were commandeered and have disappeared

from the streets. It was said that the busses were to be dismantled
by the Japanese authorities mainly for their metal content.

Four. He also reported that according to rumor the JuKong wharf
which is situated down river in the direction of Woosung was a big
Japanese goods concentration center and tons of material were down

there awaiting transportation elsewhere but held up owing to lack of

vessels.

Five. Many persons in Shanghai hope the Allied Air Force will come
one day to bomb objectives there. He felt this would add considerably
to their morale as many persons there feel they have been forgetten

by the rest of the world. He said he felt that it would be a good thing
to bomb Shanghai (?) (R) because of the dislocation of Japanese sponsored

industry that would result. power plant)
ATCHESON
MRM

Garbled groups serviced.
eh:copy
6-16-43

76

HEL

This telegram must be
paraphrosed before being

communicated to anyone

other than a Governmental
agency. (BR)

Chungking via N.R.
Dated June 11, 1943

REC'G 2:50 p.m., 13th

Secretary of State,
Washington.

901, June 11, 4 p.m. (SECTION ONE)
FROL ADLER FOR The SECRETARY OF THE TREASURY

TE 131. Economic conditions in occupied areas

Section one, Financial.
(1) On March 24 Japanese announced that no

new military yen will bE issued in Central and
South China 0.0 from April 1 and that military

yen will be gradually withdrawn at the rate of
CRB $100 Equally 18. All payments and receipts

of puppet national treasury and loans, remittances
and contracts will henceforth be made in CRB dollars.
This is one of the apparent concessions to the Manking
regime in the Economic sphere recently made by the
Japanese (SEE section two, one and two).
(2) On the other hand the Japanese have

announced that as from June 1 the military yen will
be the sole legal tender in Hong Kong and Hainan.

Military yen continues to exchange at one to one
with FRD dollars of North China.
(3) Currency

77

-2-, #901, June 11, 4 p.m., (SECTION ONE) fromvia
Chungking
N.R.

(3) Currency in circulation in North China
March 20 FRB dollars 1746 million. Deposits in
22 PEiping Chinese banks at the End of February
totalled $185,000,000 and loans$104,000,000.

(4) Fapi still 00 tinues to be held in Shanghai.
While official rate still CRB one dollar against
CIT two dollars, market rate about one to one and
has been as high as CN 80 cents against CRB one

dollar. Fapi in demand in Shanghai for purchases

in
bars
$48,400, notes 59-

of

China. rates at March

65, dollars 3.33 - In CRB depreciated and at one one fapi,

100 to and 56 - 58
CRB food Hong dollars; 3.53. 17.4 Shanghai in United Kong villages Exchanges against States gold Hong military and 6.70 Kong dollar from the (ten to migrants 7.00, yen beginning dollars ounce) FRE against dollars 100 $41,500 to have dollars of free to

against Hong Kong dollars. Exchange operations between Hong Kong and Shanghai have consequently been

active in spite of official Exchange controls and
restrictions against movements of various currencies
between different parts of occupied China.
(5) Japanese have opened up remittance businesses
in Indo-Chine

78

-3-, 901, June 11, 4 p.m., (SECTION ONE) from Chungking
via N.R.

in Indo-China, Thailand, Burma, Philippine Islands
and South Seas, permitting a maximum remittance of

50 yen per month to beneficiariss in occupied China.
Business is monopolized by Yokohama Specie and

Bank of Taiwan, EXCEPT in Indo-China where it is

handed by agent of Mitsui and Nitsubishi. This
chief business is conducting rice monopoly, rice
being purchased with money received from Chinese

for remittance to their families in Occupied China,
and remittances not being consummeted until rice
has been shipped and sold. Japanese in Occupied

China are prohibiting delivery of letters from Europe
and America and holding of United States dollars
and pound notes.

(6) Value and number of bills cleared by Shanghai

bill clearing house in 1942 20 to 50% less, respectively,
than in 1941. In the latter half of March five COMMERcial banks with total capital of CRB dollars 13,000,000
opened in Shanghai. Shanghai bank rates in March $5
and $28 per $1000 per month for deposits and loans no change on February.

(7) Nanking Ministry of Food issued CRB dollars
500,000 of food bonds in March to be sold by CRB.
Nanking

79

-1-, #901, June 11, 4 p.m., (SECTION ONE) from Chungking
via N.R.

Nanking Ministry of Finance has promulgated

regulations restricting bank loans in order to
check rising prices and speculation.
Section two. ECONOMIC

(1) Nanking Government recently reported to
have made an agreement with Japanese by which in

return for Japanese abolition of restrictions on

private trade in rice it will delivery 380,000
tons of rice per annum to Japanese armies in

Central China. Rice now moving more freely in
puppet areas and price has consequently fallen.
(2)

ATCHESON
WSB

80

LSH

This telegram must be

being

paraphrased communicated before to anyone

other than a Governmental
agency. (BR)

Chungking via N.R.

Dated June 11, 1943

Rec'd 2:35 p.m.

Secrotary of State,
Washington,

901, June 11, 4 p.m. (SECTION TWO )

Japanese Embassy in Nanking has issued a statement

to the effect that since Pacific war Japanese Army has
taken over more than 400 foreign and Chinese owned

factories but has now returned 24 and will return
remainder to puppet regime after negotiation.
Factories returned include 10 cotton spinning mills,
2 petroleum companies 2 chemical firms and an oil

refining factory, a tile kiln, an alcohol distillery,
an iron foundary, a match factory and an electrical
appliance factory. On the other hand:
(A) It is reported that Japanese have been moving
machinery from Shanghai to Singapore and other places

in south seas to facilitate manufacture of goods
previously imported from Shanghai and thereby
economize in shipping.

(B) In middle of March Japanese installed
Japanese advisors in municipal governments of a number

of loading cities in central and south China and will
eventually

81

-2- #901 June 11, 4 p.m. (SECTION TWO) from Chungking
via N.R.

eventually install them in all.
Three. Nanking regime established a centrol

trade organization in March in order to centralize
purchase and transport of material resources

of central China to facilitate trade between different
parts of occupied China and to coordinate trade and
industry.

Four. Up to end of 1942 Japanese had conscripted

over five million laborors in north China mainly
for service in Manchuria. According to data
published by puppet North China Labor Association
numbor consoriptod in 1937, 324,000 in 1938, 502,000

in 1939, 955,000 in 1940, 1,200,000 in 1941 1,000,000

and in 1942 1,611,000. In addition Japanese conscripted one half million men in Central and South
China last your many of whom were sent to south SOCS.

Five. Prices and rationing.
(A) Shanghai price of rice fell to CRB dollars
400 per picul in April. This fall due to one above
to trade agreements between "Manchukuo", North China

and Nanking, and to exodus of population from Shanghai
which has been estimated at not loss than 200,000.
Central nows

82

-3- #901 June 11, 4 p.m. (SECTION TWO)via
from
Chungking
N. R.

Central news for June 10 reports that Shanghai cotton

mills are nearing exhaustion. All Chinese textile
mills have been closed down and only 15 percent of

Japanose mills are still operating. Japanese have
long rigidly controlled Shanghai cotton production
allotting 65 percent of the available cotton yarn
to production for military purposos and of the remaining
35 percent for non-military production allotting
25 percent to Japanese and 10 percent to Chinesa factories

(B) Peiping. Food rations now only nine
catties, including corn and beans, per adult per
month. Food prices at end of April in open market
(per picul in FRB dollars, market value of which
is Chinese dollars 6.1); flour $280 corn flour $200,
rice 310, maizo 2,220, millet 210 to >220, bean cnko
$160

(c) Tientsin. Japanese drawing on their stocks
to meet food ration requirements. Their announcement
that they would import food from Manchuria and

Mongolia has not been fulfilled. Shortage of cotton
clothing as all soven S pinning mills in Tientsin
working on military orders.
(D) Canton. Reported that meat scarce and that
business confined

83

-4- #901 June 11, 4 p.m. (SECTION TWO) from Chungking
via N.R.

business confined largoly to speculation. At the
beginning of May rice 246 Chinese dollars per picul,
boof 32 Chinese dollars por catty, pork 45 Chinose

dollars per catty. Thus price of rico only one
sixth of price in Chungking, but these for boof
and pork double Chungking prices.

(E) Hong Kong. Though supplies from Indochina

and Thailand adequate, rice and flour rations
were reduced from 6 and 4 to 2 and 3 per person
per day on march 1st in order to hasten exodus of
population.

(F) Manchuria. Though food supplies ample, food

ration fixed at 14 ounces per day. Private trading
in food prohibited. Textiles are scarco and
expensive (sources: Bank of China and Shanghai
Commercial Bank Chungking.)
(END OF MESSAGE)

ATCHESON
RR

84

NOT TO BE RE-TRANSMITTED
COPY NO.

13

BRITISH MOST SECRET
U.S. SECRET

OPTEL NO. 190

Information received up to 7 a.m., 11th June, 1943.
1. NAVAL

MEDITERRANEAN. 6th/7th. A very small scale raid with the object
of destroying the RDF Station a t LAMPEDUSA was prevented by onomy mortar and

small arms fire. No Naval casualtics or damage. 2 soldiers missing.
PANTELLERIA. 8th. Shore batterics bombarded by 5 Cruisors and

8 Destroyers in conjunction with bombing by strategical airforce who dropped
460 tons bombs on Island.

2. AIR OPERATIONS

WESTERN FRONT. 10th. In fighter operations, enemy casualtics

were 4, 2, 7. We lost 2 Spitfires. 3 Armed Trawlers damaged off DUTCH Coast.
SARDINIA. 8th. 46 Lightnings (P.38) dropped 14 tons in attack
on SERVARIU (31 miles West-Southwost of CAGLIARI) and airfield at VILLACIDRO.

SICILY. 9th. Escorted Liberators (B.24) dropped 75 tons on
airfields at CATANIA and GERBINI, where a hangar was hit and a number of

aircraft on ground set on fire.

85

MEMORANDUM

June 11, 1943.
TO:

The Secretary

FROM:

Mr. Sullivan

JAS

Pursuant to an appointment made for me last night by Mr. Gaston,

I called on Steve Early. I brought with me the question and answer for
the President's press conference relating to compulsory savings and also
brought the editorial from the Washington Post this morning. This
editorial dealt with Justice Byrnes apparently superseding the Secretary
in charge of taxes, about which I talked to you over the phone this
morning.

Mr. Early greeted me with the inquiry, "What in the world is
the Treasury so jittery about?" I replied that the confusion over the
compulsory savings was wrecking the morale of our entire field force at
a time when we were just starting to step up our payroll allotment plan.

Mr. Early inquired how many volunteer workers we had and I told him
between 300,000 and 400,000.* Early said that he had always been for
voluntary savings and thought it would be a mistake to go into compulsory
savings. He added that the question and answer presented checked in
accordance with the President's previous press conference. He had a

transcript of that press conference on his desk.

I explained to him that unless this matter was straightened out
very soon it would have a devastating effect on our entire Bond program.
de then called in Earl Godwin and discussed the matter with him. Godwin
appeared to be in our corner and I gave them both a little fight talk
on the twenty-seven million people setting aside 9 per cent. I also
referred to the fact that this was the only real morale-building on the
home front, that it was the only thing that management and labor appeared
to agree on, that it was the only thing that all the people of America
had recognized as their opportunity to make this war a personal affair
for themselves.

Godwin and Early deleted part of the question so that there would
be no implication that the President might ask for compulsory savings
after the September drive. Godwin agreed to ask the question and then
asked if he could talk with me later about the Bond program so that he

could get the real story to the people on the air. I told him I would
be very glad to talk with him.
*I was referring to the volunteer workers between drives and exclusive
of additional workers during the War Loan Campaign.

86

-2 After Godwin left, Early inquired why the Treasury had been
hot and cold on voluntary savings. I told him that the Treasury was
very hot on voluntary savings.

I then thanked Mr. Early for his thoughtfulness in tipping me
off about the announcement that the tax bill had been signed. He said
that there was a "nigger in the woodpile", that there was something

going on that he hadn't yet been able to figure out. I told him that
I suspected the same thing but had not been able to solve the riddle.

87

Question: Mr. President, at your press conference last Tuesday you
indicated that both higher taxes and compulsory savings would be

necessary to close the inflationary gap, and you indicated that
you would ask Congress to do something about it. Do you intend
to ask Congress for a compulsory savings plan before the September

Bond Drive? It seems to me that if you did, there wouldn't be much
use to have a bond drive.

President: I didn't say that a compulsory savings plan was an immediate
necessity.

I was asked "if compulsory savings may still be necessary to

eliminate this inflationary gap," and I replied that this was
possible. I also said that taxes and compulsory savings might be

used jointly - I didn't say that they ncessarily would be used
jointly in the immediate future.
At the present time the public is supporting bond drives with
a great deal of enthusiasm. As long as they continue to do this,
I feel, as Chairman George expressed himself as feeling after
the Second War Loan, that compulsory savings will not be necessary.

If the public oversubscribes the Third War Loan as they did

the second, that will certainly put the need for compulsory savings

still further in the background.
However, if the war goes on long enough, and the inflationary
gap gets wider, and increased taxes along with the voluntary purchase

of bonds is not able to siphon off enough of the added money that is
going into people's pockets, then compulsory savings may become
necessary.

88

June 12, 1943
9:14 A. M.
Daniel

Bell:

Hello.

Operator:

Mr. Bell.
Yes.

B:

Operator:
Fred

Smith:
Daniel

Mr. Bell. There you are.
Hello,

Bell:

Good morning.

S:

Good morning. ( Talks aside: You want me... ) Wait

B:

Hello?

S:

Just a minute. We made some changes in the speech.

B:

S:

B:

S:

a minute. (Talks aside)

All right.
The rest isn't important, but this is - as we got

to the speech - this is important, and we want to
read it. You're making a record there, uh?

Yes.

These are some figures from Haas? "Between July

1st and the end of the year, the Government will
need approximately $52 billion. Present taxes and

other receipts will cover about $17 billion, leaving $35 billions in deficit. It is proposed that
we borrow in all about $41 billion in order to

build up the cash balance. Borrowing from nonbanking sources would cover $32 billion of this,
with $18 billions for individuals - from individuals
and $14 billions from insurance companies, corporations and other large investors. Borrowing from
banking sources would produce the remaining $9

billion. If

B:

Uh huh.

S:

All right.

3:

Yeah. Where does that go?

89

-2Oh, that - that - that goes in the middle of
the speech here. Just a minute and I can tell

S:

you where it goes.
You mean sunrise and sunset.

B:

It goes about on page 5. We haven't actually
put it in the speech yet, and the way it reads

S:

now - and Mr. Morgenthau hasn't read this yet,
either. Now I'11 read it to you. Now I've
got - I've got some more that goes in there too.
I see. Well, go ahead.

B:

I'11 place it first, then I'11 go back and

S:

finish that other sentence. On page 5 there,
where it saye that - that he wants you to invest
not another $7 billion, but far more, and then
something like this probably -- "To be exact, unless we are able to get more from taxes than will
result from the present schedule, we will have to
ask you to lend your Government, during the next
six months, about $18 billion or twenty-five cents
out of every dollar you earn....'
Uh huh.

S:

I want you to know how we arrived at that

"

B:

figure. Then we pick up the stuff I just gave

you.
B:

S:

Yeah.

Then we go on after that and say, "This is going
to be - (Wait a minute) this is going on the assumption that we will have a fourth War Loan in December
and with the result that we would go out of the end
of the year with a cash balance of about $15 billion.
A program of this description is necessary if we are
to confine ourselves to three War Loan Drives a year,
and that explains why we have to go out at the end
of the year with such a large working balance, in
order to carry us until the next War Loan Drive in

the Spring." Now that - that follows with that
other thing I just gave you.

B:

Yee. The Secretary wants that in - has he been over
that?

S:

eah. He's been over that. That - the - the -

everything that I gave you except this business
about taxes, he's been over.

90

3-

B:

I see.

S:

All right.

B:

I think the Secretary's getting out on a limb

S:

Yeah.

six months - seven months early

then why do we complicate a picture by talking about what our balance will be.

B:

B:

All right.
That's my first reaction to it.

S:

Wait a minute. (Talks aside) He said, "How about

B:

Well

S:

the first half of that, do you go along with that

S:

B:

"....all except this working balance business?"

Well, I may go along with that, but I just - my first
reaction to it is, why do we complicate a - a picture
by telling what our - our general fund balance is going to be and, two, why did the Secretary get out on
a limb about the Fourth War Loan seven months in advance?

S:

Yeah. All right. Just a minute. (Talks aside.)

HMJr

Dan?

B:

Yes, sir.

HMJr

What I've been doing here, to give you a little back-

ground, is this. The way the thing was written first,
they just popped $18 billion, see? Hello?

B:

They just what?

HMJr:

They just say we need $18 billion from individuals

B:

Yeah.

HMJr:

and didn't explain how they arrive at that figure.

So I called up George at 7:15 this morning and he
claimed he was awake

B:

(Laughs) Uh.

91

4HMJr:

and I got him to go to work to explain these -

give me these figures which we've just read to you.
Uh huh.

B:

HMJr:

Now I talked with Burgess twice this morning. I
wanted to get his reaction, and as a result of that
I've eliminated saying how much we expected to get
in September, because I don't want to pin myself

down, you see?
Yes.

B:

HMJr:

Supposing I - while we're going to try to get $7
billion in September, supposing we get six-and-ahalf, then everybody who is for compulsory sav ing -

'See, it's a failure, but we might perfectly well

pick up eight in December. Hello?
HMJr:

Yes, I'm listening.
So that would give me a little lee-way. Now

B:

In other words you're trying to explain when you

B:

HMJr:

expect to get the $18 billion.
Well, the $18 billion I'm proposing to get is on

B:

Yes. Well, my reaction to it was that, first, you

July 1st and December 31st.

were complicating it by talking about the balance, I
mean, you - you - you

HMJr:
B:

Well, how

there's 80 many figures in it and then the other

18....

HMJr:

Dan?

B:

Yeah.

HMJr:

I'm going to argue with you. How are you going to

explain that you' ve got to borrow - that your deficit

is $35 billion, isn't it? I haven't got the figures

with
B:

Well, that's what they gave it. Fifty-two billion

HMJr:

Yeah.

92

5-

expenditures. I don't know. I'll have to

check up on it.

B:

HMJr:

Let me use the - a round figure - $35 billion
Yeah.

B:

and that you're going to borrow forty-two

HMJr:
B:

Yes.

HMJr:

.... so you - you've got to explain that by saying

that you': re going to have a working balance on the

first of January of $15 billion. Now Lindow says
that - I - I just wanted to say we were going to
borrow $35 billion to make up the deficit. He said,
"We can't do that because we built up such a large
working balance on May 8th." And he said, "If we
only borrowed $35 billion to make up the deficit,
we - then we'd only show we were going to get $3
billion from the banks. " And he says that that's
incorrect.

B:

HMJr:

Uh huh.

So he said, "We'll be borrowing close to nine and unless we explain as we go out at the end of the year
with about a working balance of fifteen, the thing
just doesn't add up because we - the people' 11 say,
Why do you want to borrow $42 billion, if your de-

ficit is only thirty-five?

B:

Oh, I see.

HMJr:

What?

B:

HMJr:

Well, it may clear up when I read it. I haven't
read the speech yet. I just got it.
You - you - you - you see what I got?

B:

Yes. Well, it may - it may clear up.

HMJr:

What's that

B:

It may clear up when I read the - the whole thing and
see how it fits together and we get what Smith has
dictated.

-6HMJr:

93

Well, I - I can't say we're going to borrow forty-two
to make up a deficit of thirty-five, unless I explain

that what the - our cash balance is going to be, then
I say, "Our cash balance will be around fifteen on the

first of January in order to carry it through to the
next drive in the spring.

Well, you could simplify the whole thing by saying
nothing about the deficit and you' re going to need
about $40 billion between now and the end of the calen-

B:

der year.

HMJr:

Well, I - I - I'd like to argue with you. I
W

B:

HMJr:

think that if you just talk about a deficit and

don't explain both sides of the ledger; how much we're
going to spend; how much is tax receipts; and what the

difference is; I don t think it's - I - I - I just think

it's a short cut.

Well, if you're going to put in all the figures, I think

B:

you re right.

HMJr:

But the alternative - wait a minute - I'11 repeat this.

B:

Yes.

HMJr:

Albee is sitting here. He said we did that in the first

B:

In

HMJr:

Well, I mean in

(Talks aside) Hello?

place and he said it didn't explain enough.

B:

in the first draft.

HMJr:

I - well - you - I mean - if we just use the total

B:

HMJr:

borrowing figure
Uh huh.

it - it - it doesn't expl - it - when I'm talking

about the end, I say I'm giving a blueprint.

B:

I see.

HMJr:

An indelible

B:

Well

HMJr:

blueprint.

-7-

94

let us read the speech and see how it comes out.

B:

HMJr:

What?

Let us read the whole thing. We haven't been over it

B:

yet at all.

HMJr:

Well, this is the whole guts - I mean - we've changed
the - we're not going to have any reference to the

Japanese or the Italians - we've cut all that stuff
out.

B:

You have?

HMJr:

Yeah.

B:

Well, then we': re going over - we don t know just what
you've got before you then, do we?

HMJr:

Well

B:

Except what

HMJr:

Look - look. None of the speech is im - important, ex-

B:

HMJr:

cept this financing stuff.
I see.

And, if I can get that straight with you, I'm not - I
don't - I'm not worrying about the rest.

B:

Okay. Well, we'll get this on the record and see how

HMJr:

You - you see what I mean?

it fits.

B:

eah. The Tribune said that you did all this yesterday.

HMJr:

What?

B:

The Tribune said you did all this yesterday, so I don't
see much use in all of us (laughs) worrying.

HMJr:

How do you mean the Tribune said I did

B:

Why, they said you presented the flag yesterday at Kingston

HMJr:

and another one at - at a town across the river.
The Tribune said I did this yesterday.

95
-

B:

HMJr:
B:

HMJr:

B:

Two-thirty yesterday and four-thirty in the
afternoon at another place. (Laughs)
That's what they say.

(Laughs) So, I think we're - we're working kind

of behind time here.

Well, the Tribune's a little previous. I haven't
seen the papers.

Yeah.

HMJr:

Now look

B:

Yeah.

HMJr:

if - if you want to argue as to the figures or

question them, Haas is sitting in a hotel room at the

Nelson House in Poughkeepsie.
B:

All right.

HMJr:

That's where Haas and Lindow are.

B:

All right. Well, I - I don't think I want to argue

HMJr:

about them. I - they sound about right, and we can
change those to whatever they actually are, and
I - I thought you were going to argue with one - in
the speech I'm announcing September 7th.

B:

Oh, you are.

HMJr:

Yeah.

B:

I see. No, I - I'm - I just thought maybe as I
looked - as I started over it, that there were too

many figures and you'd get into complications by
talking about the general fund balance and - and all

HMJr:

B:

HMJr:

of that, but I - I can see your point.
I - I'm doing - after all, I want the people to take
a pencil and follow it
Uh huh.

in as much as it's more really for the newspapers

and it's more also for this - the other crowd in New
York. Here's to - I mean in - in Washington - here's
what - here's what the plan is - now you may be right,
(Cont'd.)

-HMJ
(Cont d. )

96

and maybe I'11 come back and simply say I've
got to borrow so much and not explain the

deficit and the taxes and all that. But, on
the other hand, if I don't show the revenue,
I'm only giving them half the picture.
Yeah.

B:

HMJr:

I ha.. - I wish you'd - are there other people

B:

Yes. Gaston, Sullivan, Gamble and Shaeffer and

HMJr:

Well, now let me just talk to Gamble 8 minute.

B:

All right. I want to talk to you again before

HMJr:

Why don't you tell Mrs. McHugh to type up the

present?
Mrs. McHugh.

you leave.

first part of this, or at least to get a girl

HMJr:

to type up the first part.
All right.
That'11 be sufficient. They can start that going.

B:

Here's Gamble.

HMJr:

Hello.

B:

Ted

Gamble:

Hello.

HMJr:

Ted.

G:

Yes, Mr. Secretary.

HMJr:

Now, of course, the thing that - that worries

me on this thing is, that this $18 billion figure

of Lindow's which is 75% of the peoples savings
G:

HMJr:

G:

HMJr:

Yeah.

it?

how - how confident are you that you can get

How confident are we that we can get the seven

billion that they want in E Bonds.
$18 billion.

- 10 G:

HMJr:

97

Well, the - the $18 billion 18
From now until the first of January
Yes.

G:

from individuals.

HMJr:
G:

Well, I think it's a - a big chore. What we're -

HMJr:

Yeah.

what - what that calls for, Mr. Secretary, 18 stepping
up from this April drive in September from $3 billion
three that we got from individuals
that's what we actually got from individuals

HMJr:

Yeah.

G:

....to seven billion.

HMJr:
G:

That's right.
Now that's quite & jump. I think we can step up,
but everybody has always been afraid that maybe

that called for stepping up a little too fast with

individuals, and I think we ought to be - have some
room to turn around in on that figure.
HMJr:

Well, that isn't very reassuring.

G:

Sir?

HMJr:

G:

I've been using this $18 billion. They tell me I used

it at Newark.

Yes, I - that's true. And the $18 billion figure,
of course, is - that's the figure we ought to - to
go after. That's the amount of money that there
is available, but that calls, even in the language
of Lindow and Haas, for a perfect job, and they

know that that' a pretty difficult - to - at this
stage of the game to come in with a 100% job.

HMJr:

Yeah.

G:

You know what - what an operation we had in April,

and it means doing a little better than twice as
well as that with individuals.

- 11 HMJr:

98

I know.
Sir?

HMJr:

It's two-and-a-half times
Yes, sir.

HMJr:

See?

Now there's a physical problem there. The - the -

G:

the people have the money, but there' 8 a - a problem

of distribution even of these securities. Because
when you talk about raising from three billion three
up to seven billion, with a large percentage of that $4 billion of that E Bonde, that 8 - you ve got that' 8 a job that will tax the facilities of the
banks to distribute the securities if you can sell
them.

HMJr:

Well, that's all the more reason that I'11 have to do
some hedging if you re so unsure of this.

Well, it isn't - you want me to tell you what we really

G:

think.

HMJr:

Yeah. But then

G:

And

HMJr:
G:

I'm going to hold you to it.

That's right. That's right. And I - I think that

that's - I think it's probably more than we can do, Mr.

Secretary.
HMJr:
G:

HMJr:
G:

HMJr

G:

HMJr:

More than you can do.

Yes, sir.
Yes. Over six months, not just September.
No, I'm talking about September now. The seven billion

I'm talking - I'm not going - I'm not going to isolate
September. I'm talking about July 1st to January.
Well, I think you have to use that figure in any event.
What?

G:

The $18 billion, when you talk about July to December.

HMJr:

From July 1st to January 1st?

G:

Yes, sir, I think you have to use that figure.

- 12 -

HMJr:
G:

99

Yeah, but what's the chances of getting it.
I think the chances of getting it are probably
not too good, of getting that amount of money.

HMJr:

I - I don't want to go out on the end of a limb on

G:

No. Well

HMJr:

I don't know who slipped me that $18 billion

G:

this thing.

figure at Newark.

Yes. Well, that was - that's the figure that has
come out of the Haas shop as the amount of money

that would represent a perfect job on individuals.
Then whether we'll - you re asking me to be very
frank now, whether we'll ever do a perfect job or
not, I don't know. We may do seventy-five or eighty

percent job.
HMJr:

G:

HMJr:
G:

I see. Yeah. Well, you fellows may as well stay

in my room because I'11 be calling you back again.

All right, sir. We'11 stay right here.
All right.
Goodbye.

100
June 12, 1943
10:06 A. M.

unless we are able to raise the tax rates
before the end of the year, and before the end
of the year to get more from taxes than - than
will result from present tax schedules, we ex#

HMJr:

pect that we may have to ask you to lend your

Government during the next six months about $18

billion." Now I'll repeat it 80 everybody can
get it. Is Sullivan there?
B:

Yes, sir.

HMJr:

You mean

B:

HMJr:
B:

HMJr:
B:

HMJr:
B:

HMJr:
B:

HMJr:

Talk into the phone, will you, we're having a little
difficulty hearing you.
What's that?

Talk directly into the phone, we're having a little
difficulty hearing you.
Is Harry there too?
Harry White. No.

Well, send for him, will you?

All right. All right.
I'11 - I'11 - can you hear me better?
Yes, that's better.
"To be exact, unless we are able to raise the tax
rates before the end of the year, and before the end
of the year to get more from taxes than will result

from the present tax schedules, we expect that we may
have to ask you to lend your Government during the
next six months about $18 billion." Now what I want
to ask the gang is; is that saying enough about taxes?

One of the alternatives was this: To be exact, unless
Now of
the
we are able to raise the tax rates before the end
the year, which I sincerely hope we will

trouble is this -- this -- the reason we've written
it this way, is that I hope that they'11 get another
tax bill, but there's no chance of getting the new
taxes effective before January 1st.

101

-2That's right.

B:

HMJr:

And what I don't want is - I - I - I frankly

don't want them retroactive and I know I can't
get them through retroactive, that is current

on this year, because your - both George and
Doughton told me I couldn't.
B:

HMJr:
B:

HMJr:

Well, that is what was going through my mind

when you read your first suggestion. After
I'11 read it once

you've got to have the $18 billion from a
practical standpoint, because you're not going to
get any taxes - new taxes this year
(Talks aside)
that would yield any money.

B:

HMJr:

Well, let - let me read this thing once more.

B:

All right.

HMJr:

And whether this is enough on taxes, and whether

they can say - throw it back at us in any way, see?

Is Bullivan listening?
B:

HMJr:

Yes.

"To be exact, unless we are able to raise the tax
rate before the end of the year, and before the
end of the year to get more from taxes than will
result from the present tax schedule, we expext

that we may have to ask you to lend your Government

during the next six months about $18 billion. Now
what's the matter with that figure as individuale?
B:

HMJr:
B:

Well, it sounds pretty good. The thing that's
running through my mind is, why shouldn't you acknowledge the practical situation and say, You realize that you can't get any more taxes this year,
or get a tax bill that will effect increased collections in the calender year.

Well, I'm afraid of that.
Herbert thinks that -- John thinks it's better
probably the way you've got it.

102

-3HMJr:

Is Herbert there too?

B:

Yeah. They - they think keep a little heat on.

HMJr:

What's that?

B:

They - they think that it's better the way you've

got it than the way I suggested. They say, "Keep

a little heat on.
HMJr:

Are they satisfied?

B:

They think it's better.

HMJr:

What?

B:

HMJr:

Yeah. We're not satisfied with you getting out on
a limb on $18 billion.
Well, I've got a sentence which I'm going to read

you now
B:

Yeah.

which follows here. Hello?

HMJr:
B:

Yes.

HMJr:

Right after this thing here, where I say, "We ex-

pect that we may have to ask you to lend your Government during the next six months about $18 billion.
Because the time to worry was when they slipped me
"

those $18 billion figure which I used at Newark. But
this - Hello?

HMJr:

Yes.

now this is what I propose: "We expect that

we may have to ask you to lend your Government dur-

ing the next six months about $18 billion. I want

to stop a minute to explain how we've arrived at
this $18 billion figure. This is the figure which
has been furnished to me by the Treasury statistician

and actuary, and this is a theoretical figure aiming
at a 100% perfection. Now it's the job of the Treasury's technicians to furnish me with such a figure,
and it's your job to try to reach as near 100% perfection as possible.
If

B:

103

-4-

B:

Ig that the end?

HMJr:

That's the end.

B:

HMJr:
B:

HMJr:
B:

(Laughs) I think it's trying to make some
excuse for the figure.

Well, it - I have to. I - I
Well

it's the truth.
what - what would you think of saying that
you ask them to buy - you told them you buy - you

bought $7 billion for the first half of the year

HMJr:
B:

Yeah.

but in the next six months we will have to ask
you to invest more than twice that amount. We will

get many billions and more from corporations and
other large buyers, but we are calling upon you to as individuals to buy more than twice the amount of

bonds that you bought during the first half of the
year.

HMJr:

Well, the trouble is, we've used this $18 billion
figure.

B:

HMJr:

B:

Well, you used it in a rather general sense in your
Newark thing I think that it's three months
before the second - the third campaign and it ought
to be a little closer if you re going to use it at
all. And it seems to me that you ought to make this
rather general. And

You don't think that this thing I just read you will
do it?

No. I think that's too much of an excuse for the
figure. And I think if we don' t make the $18 billion
why, I - well, I think when you go into the third
War Loan, if you don't get anything like half of the
$18 billion and then they re going to say, "Well, it's
a failure", and you're going to have a drive for enforced savings right after that. At least that's
what we've been talking here in the last hour. And
another place in the speech, I think you say some(Cont'd.)

104

-HMJr:

thing like $ 4 billion from the monthly totals,
which isn't any increase at all.
Well, that's out.

B:

That's out, huh?

HMJr:

I think 80.

B:

Yeah.

HMJr:

Let me - let me just read you this page which I've

B:

(Cont'd. )

got here, see?

B:

HMJr:

B:

All right.
Let me - let me read you this thing. I'11 just

repeat to Albee what you've said. (Talks aside)
More than twice the investments in the second half
of the year, as they made in the first half. We've
got a language here that we'll work out, but something along that line.

HMJr:

Hello?

B:

Yes.

HMJr:

He says it's a little late for me to be scared

B:

Well, I mean - that's kind of died now and that
saves you going into all these other figures that
Smith gave us awhile ago. And it also leads right
into the next paragraph, which, "In other words in
addition to your taxes, you re going to be asked
to lend your Government twenty-five - cents out of

every dollar you earn." That 8 all right. It

keeps it very general and doesn't state the specific
amount.

HMJr:
B:

HMJr:

Let - let - let me read you what we've got here now.

All right.
It reads like - now - "There's a job for these
Treasury technicians to furnish me with such a
figure and it's your job to try to be as near

a 100% as possible. I went you to know how we
(Cont'd.)

105

-6HMJr:

(Cont'd.)

arrived at that figure. Between July 1st and
the end of the year, the Government will need
approximately $52 billion. Present taxes and
other receipts will cover about $17 billion,
this leaves $13 billion in deficit. It 16
proposed to barrow in all about $41 billion
in order to build up the cash balance. Borrowing from non-banking sources will cover $13 billions
of this and perhaps as much as eighteen of the $32
billion coming from individuals. According to that
figure, this $18 billion will be fair, and saving
out of our $72 billion of national income during
the remainder of the year. According to our present plan we re asking you to spend practically
all of your savings in War Bonds in the next six
months, and this amount is about twenty-five cents
out of every dollar you earn. It is important
that we get this amount of money either in taxes
or bonds, not only to finance the war, but to
protect ourselves against inflation. Now if we're
going to get $32 billion from non-banking sources
that leaves - that leaves $9 billion to come from
banking sources, and it' our plan at the present
to make $9 billion from banks. You will also be
interested to know that in successive drives, we

have managed to get less and less from the banks
and more and more from non-banking sources, and

particularly from individuals. Now that sounds
like a lot, and it is a lot, however, we know the
money will be there and in order to get it we will
have to have a more efficient sales organization
than ever before. It means that we'll have to have
more volunteer workers, because we'll have to sell
bonds to about nearly every man, woman and child
in America. It means solicitation from house to
house; bench to bench in factories; desk to desk
in offices. I am sure we'll be able to swing
this tremendous job if we all work together and I
have good reason for having this confidence. First,
we proved that we will - that we have the will to do
it. During the second War Loan in April we asked
the people, the individual investors to buy two-anda-half billion dollars worth of bonds, and they

B:

HMJr:

bought three-and-a-quarter. We asked insurance companies - so forth and so on.
Yeah. Now that's all new?
What?

106
-

B:

That's all new.

HMJr:

The way I'm handling it.

B:

HMJr:

B:

Yeah.

And with the apology at the beginning that this
is a theoretical figure and how we arrived at it.

Well, I - I - that worries me a little, saying
that If these are figures of statisticians" and I I don't think we ought to do it. Yeah, that that.

HMJr:
B:

HMJr:

That's where we got it from.

Well, (Laughs) they're all of course highly
theoretical figures and
What

rough estimates and that's what you said before

B:

the drive, that these are - have to be very rough
estimates, but - yeah - but we'll have that copied
and take a look at it. But I think it's getting
close to the deadline
HMJr:

I know.

we would prefer to leave out SO many of the

B:

figures and keep it general at this stage of the
game.
HMJr:

Well, I don' t....

B:

But

HMJr:

I - I mean - I'd have to re-write this whole

business.
B:

I don t think so. I think we could make a few

changes and still make it general, and keep out a

lot of the figures. It would change very little

of the speech.
HMJr:

Well, 1t - the whole - the guts of the speech is
what I ve read to you just now.

107

- -8 B:

HMJr:

B:

HMJr:
B:

HMJr:
3:

It may be the guts, but it's three months before
the - you have to say it.

Yes, but I mean, if there're going to be any
changes it's in here.

Well, I think we'd eliminate practically all of
that.

You'd eliminate all of that?
Yeah. That's the way we feel
Well

and we haven't been over this last part. We

just got it. We haven't been over it very carefully,
but

HMJr:

Well, look, can you - can you tell somebody to get
busy typing that and let me talk to you a minute
about it?

B:

Yes. All right.

HMJr:

I'11 hold on.

B:

HMJr:
3:

HMJr:

B:

HMJr:

B:

They're - they're doing it. They're starting on
it right now.
They've got it going.
Yep.

Well, here - here's the thing, Dan. They've been
having me talk about the $18 billion. I talked
about getting 25% of the payroll
Yeah.

and it's gone out through the country and this

is really explaining it.
Well, I think you can still talk about the twenty-

five cents. That's a good paragraph in the speech.
And that should be your goal for which you're aiming. And - you may be right, but we just (laughs)
(Cont'd.)

108
-9-B:

Cont'd. )
HMJr:

B:

kind of have a feeling here that you shouldn't
get out on that limb at this stage of the game.
Well - well, unfortunately, I am out on that limb
since Newark.

Well, that's sort of past. And I think it isn't
being printed very much more.

HMJr:
B:

Well, I mean

And that was still a rather general statement, that
you hoped to get $18 billion, and we think if you
keep

HMJr:
B:

Yeah.

if you keep talking about it you're going to
have to break it down sooner or later and let's
do a little more figuring on it before you make

your principal speech for opening the campaign.
HMJr:
B:

Does everybody agree with you there?

Yes. Everybody has that feeling at this stage of
the game. We - as I say, we haven't been over the
speech in detail and we just got the re-write, but

we d like to go over it a little more, but they
have that feeling right now that it's - it's too
early to say these

HMJr:

Well, let - let me do this. While you're waiting

let Albee read into this machine from 1 to 4. Does

he have the way it reads now?
B:

HMJr:

All right.
I mean I've approved it from one through to four.
He can read this very

B:

All right. Fine.

HMJr:

What?

B:

Yes. That'11 be fine.

HMJr:

Let him do that.

B:

All right. (Talks aside: Smith is going to read
from one to four)

109

- 10 Fred

Smith:

This will cover from page 1 to 4 of the draft

B:

Speak a little louder, will you Smith, 80

that's been approved.

everybody can hear you?

- 11 -

110

Smith dictating pages 1 to 4
Thank you Mr. Mayor: I am here as you know to award

the Treasury T flag to your city of Kingston in token of the fact
that every industrial and commercial firm in this city has a payroll savings plan. This achievement of Kingston is significant.
As one city after another wins our T flag, it becomes apparent
that the nation is unified and strong in its support of the war.
When management and labor get together - when the employees of
every firm in an entire city share their wages by lending part
of them, week in and week out, to their government we have a
demonstration of a real will to win.
So, Mr. Mayor, on behalf of the Treasury Department of

the United States, I present to you and to the City of Kingston,

this Treasury T flag.

(The Secretary then turns and speaks to the public).
Ladies and Gentlemen: I am very glad to have this chance
to speak to you here in Kingston, not only because of your out-

standing record in buying war bonds and because Kingston has a war
history that goes back to George Washington and the days of the
Revolution, but because my own home also is in the Hudson Valley

and I can talk to you as one neighbor to another, and I am glad
that what I say to you as a neighbor will go over the air to
people in other cities like this across the country, because

Kingston is a typical American town. It is both an industrial

community and a farming community, and what I have to say touches

both industrial workers and farmers.

Working men and women here in Kingston together with

working people in other cities of the nation, are building war
equipment in such vast quantities and in intricate perfection

with the result that our enemies aren't the brave supermen they
once were. They were brave enough when they thought they could
beat us with our backs turned, but they aren't so boastful today.
And on these fertile fields along our Hudson River, farmers are

raising food for our soldiers and sailors and marines, our war
workers, and our Allies.

You people of Kingston are discharging momentous tasks,

workers and farmers alike - a task of equal importance. Let me
speak to you now of this other momentous task that you are sharing
so splendidly and that I share with you - the task of financing
this first, truly collossal war - this war that we intend to make
also the last.

- 12 I have some news for you of how we propose to pay the bill.
from now on. Your magnificent response to the War Loan Drive
has shown that you are willing, even eager, to put up with real
sacrifices. You are resolved that we must win. And you have a
right to know. You must know, if we are all to keep our eyes
and our heads clear for the hard job that still lies ahead of us,
what such a determination calls for in dollars and cents
and how the dollars and cents are to be raised.

Let's begin with our rate of spending in this war and how

and why it has grown. At the time of Pearl Harbor, when we were
shocked into a realization of what modern war really is by the

treacherous murder of hundreds of Americans by the Japanese - even

then we were pouring into war materials 64 million dollars a day.
Recovering from the shock of Pearl Harbor, we threw ****** the
level of our vast American machinery production into high gear,
and by July of last year our war expenditures climbed to 152
millions a day. By the end of 1942, we HK were spending 198

million dollars a day, and today the figure is 240 million.

Between sunrise this morning and sunrise tomorrow morning, this
war will have cost another $2.00 for every man, woman and child
in the United States.
Why? Because we have set out to produce so much equipment
that we will overpower the enemy wherever we meet him. So many

bombing planes, for example, that there will be traffic Jame in
the sky over Berlin - which I understand there area already. One
wave of planes sometimes has to wait for another to go in. General
Arnold, commanding the Army Air Forces, says flatly that he means
to bomb Germany out of the war, and Mr. Churchill says thatost

even if we can't it won't do any harm to try. That will ..... a

great deal of money. A four-motored bombing plane - just one -

costs nearly half a million dollars. You have read that we intend

to drop a thousand, two thousand, three thousand, tone of blookbuster bombs on the Axis bases in every raid, and a single two
thousand brock-buster costs $400, Every time one of our battleships

fires a broadside - sixteen inch guns- at the Japanese, it costs
$13 thousand. In other words, we are really getting into the war.

At last, the United Nations are on the offensive and that's where

we want to be.

Well, to put us where we want to be, individual bond buyers
in war bonds - a little over 10% of their income. That doesn't
include money coming from corporations, banks OF other institutions.
That's the amount that the people themselves this year have already

during the first half of this year have invested 7 billion dollars
invested towards winning this war.
Splendid as such an achievement is, we can't stop now and
pat ourselves on the back. Not at this moment certainly when we

are on the very brink of invading Europe. With this in mind,

112

- 13 let's take a look ahead.

During the Second half of this year, from the 1st of
July until the end of December, it is going to be necessary for
you to invest not another 7 billions but far more." That is the
and of the 4 pages which have been approved by the Secretary.

- 14 Daniel

Bell:

113

Yeah. I see. Well, that - that sounds pretty
good.

S:

Now this page you' re worried about is the guts

of it, and he's terribly distressed. He's terribly

disturbed. Everybody's been at him and everybody's

been
telling
him different things and he's going
around
in circles.
3:

(Laughs)

S:

And we've only got about another hour.

B:

Yeah. Well, that's what worries us.

S:

Yes.

B:

S:

3:

And what we were thinking of doing is going right
on from there and saying, "We will get many billions
more from corporations and other large buyers.

We said that in the first draft.
But we are calling you - well, that goes right on

from where you stop.
S:

B:

Yeah.

But We are calling on you as individuals to buy more
than twice as - the amounts of bonde that you bought

during the first half of this year.

S:

Well

B:

In other words, in addition to your taxes, you're

going to be asked to lend your Government twenty-five
as much as twenty-five cents out of every dollar.
S:

Yes. Now

B:

Uh?

S:

Well, we'11 probably

B:

Now that sounds like a lot, but I'm sure we'll be
able to do it, if we all work together, and you go
right on.

114

- 15 S:

Yeah.
Uh.

S:

See, the - the original speech was quite simple
and then people began saying, "Well, you've got

to give them some figures." So he - he's quite

right. He said, "Well, if we're going to give

them figures, we might as well give them the whole
thing.

B:

Yeah.

S:

To give them all the figures now would

3:

Yeah.

S:

He's got a plan. He says if he's going to present
a plan and he might as well present it in detail,
psychologically it's bad, because so far as radio
listeners are concerned, they won't get the figures
anyway, they just can' absorb them, but if we'll
sacrifice the radio audience just to get the damn
thing in print, it's all right. What I'd like to
do personally is put the simple thing on the air,
then at your leisure, in the next two or three daye,
give them the figures.

S:

B:

It's too late for that now.
Well, we feel here that it's - it would probably
be a little early to go into the full plans for the
next War Loan Drive, which is three months away

S:

3:

Yeah.

and that we should make some attempt here to

getting this organization to working and raising
this billion dollars a month that we ve been talking about to a billion-and-a-quarter or a billionand-a-half and reducing the figure that looks SO
large for each of the drives. More so, I hope that
from now on you fellows will let me do these drafts
a week or two weeks in advance. I can always

S:

3:

S:

(Laughs)

draw up the framework, then we can change it.

Well, that's right. That's what should be done.
Well, here's the Secretary and I think that if you'll
(Cont'd. )

- 16 S:

(Cont'd.)

115

tell him what you just told me, he's open to
suggestions.

HMJr:

Hello.

B:

Yes.

HMJr:

What you want to say, Dan?

B:

Well, the only thing I said is that I thought the
first four pages you read - that he read sounded

pretty good.
HMJr:
B:

Yeah.

Then we can go right on from there. "We will get

many billions more from corporations and other large
buyers, but we are calling upon you as individuals
to invest more than twice the amount of funds in War

Bonds than you did during the first half of the year.
In other words, in addition to your taxes, you're
going to be asked to lend your Government twenty-five
cents out of every dollar, or as much as twenty-five
cents out of every dollar." And then go right on with

maybe a few changes.
HMJr:
B:

HMJr:

Cut out all those figures?
Cut out all those figures.
Well, that's no blueprint.

B:

Not as detailed as you've got it, that's right.

HMJr:

Let me argue with you this way. Hello?
Yes.

Met me take that down - that sentence, and
B:

I can't hear you.

HMJr:

I'm not ready now to take it down. Hello?

B:

Yes.

HMJr:

After all, what I'm trying to do is tcthis
say$25
what
this
billion
program is going to be
in the hands of every editor in America.
figure ?

116

- 17 B:

Yes.

HMJr:

He's got it, see? Hello?

B:

Yes.

HMJr:

Now I'd say this is what we I re aiming for for the
next six months, but don't say how much we re want
to get for the third quarter and how much we want
to get for the 4th quarter, see?

B:

Yes.

HMJr:

And

B:

But by process of deductions they can get a rather
tremendous figure of $7 billions in each of the War

Loans
HMJr:

Well

for individuals.

B:

HMJr:
B:

HMJr:

Wait a minute. That is all right.
And if you don't get it in September, why, they
announce it immediately as a failure.
They don't know what the whole - in December - in

September and maybe
3:

There something wrong with our connection. I'm
trying to hold

HMJr:

Hello?

B:

Yes.

HMJr:

We've got all these wires, you see, pulled down on
the record and I can't shout because I've got to save
my voice. Hello?
Yes. I can hear you better now.

B:

HMJr:

Do you hear me any better now?

3:

Yes, sir, I do.

HMJr:

What?

117

- 18 3:

Yes, I do.

HMJr:

Better now?

B:

HMJr:
B:

HMJr:
B:

HMJr:

Better. Yes, air.
All right. I'11 talk this way, then I can' t
If - if you talk into the phone I think I can get

it. It's

What?

.if you talk right into the phone. I think it's

when you turn your head that we don't get it.
I'm not turning my head. I'm talking - can you hear
now?

B:

Yes, sir. I can hear.

HMJr:

I've got my hand cupped over the phone.

B:

Oh, I see.

HMJr:

The reason I'm arguing is this: If I did this, then

I'd give every state Chairman his quota. Now - Hello?
B:

HMJr:

I see.

and after all, nobody can say whether I'm right or

wrong, until December 31st.
B:

Well, they might say it at the end of September.

HMJr:

Well, how could they?

B:

Well, by figuring up what you got and saying it's im-

possible to get the balance between then and the end of
December.

HMJr:
B:

HMJr:

B:

But Dan, I used the $18 billion figure in Newark.
Yes, I appreciate that.
And that was the time, with Gaston and Gamble there,
they should have said something.

And I think

118

- 19 HMJr:
B:

Now

you've had very little publicity on that $18
billion. It's - you don t see it much anymore at

all now.
HMJr:
B:

You'd play it down?

Play it down by saying very little about it from here
on until you did give it a little more consideration,

at least until August when - just before the campaign.

HMJr:

Now just a minute. I'll let you dictate to Albee

how you would suggest my doing it. Just a moment.
Hello?

3:

HMJr:
B:

George

Yes.

I - I'11 let you speak to George Albee,
All right. ( (Talks aside) Have you got

Albee:

All right, just give it to me slowly.

B:

At the end of where you stop

A:

Yes.

during the second half of this year, from the

B:

first of July until the end of December, it is going
to be - (what is it?) it - to do the maximum best
A:

What do you mean?

to do our maximum best

B:

A:

B:

A:

B:

A:

Now wait a minute. During the second half of this
year from the first of July until the end of December
To do - that's dash - to do our maximum best, we should
invest more than twice that amount.
More than

Strike out
Yeah.

119

- 20 another $7 billion.

3:

Yeah.

A:

"We will get many billions more from corporations
and other large buyers

B:

(Repeats)

A:

are calling on you as individuals to buy
more but
thanwe
twice
"

B:

You just said that.

A:

the amount of bonds

B:

You just said it in the preceding figure.
Yeah, I know, but you're talking now as individuals.
It doesn't hurt to repeat it and maybe we can change

B:

it and not repeat it, but this is what We got hurriedly
bought the first six months of this year.

here - " To buy more than twice the amount of bonds you
Uh huh.

Then you go right on: "In other words, in addition to
your taxes, you re going to be asked to lend your Government as much as twenty-five cents out of every dollar you
earn. If

All that in detail. Save that page on just how he's
B:

going to get it and everything.
Yeah. Herbert Gaston says - suggests that instead of
"you" - say "The American people as individuals'

Uh huh.
"

3:

will be asked to lend their Government as much as
twenty-five cents.

A:

Well, we've no need to worry about

B:

Yeah,

A:

B:

It'e about that basic subject.
That's right. They suggest.

120

- 21 Should it or should it not be complicated, you fellows
may know, of course, you ve got plenty of time to do

A:

B:

it later.
Yes. We feel that if you're going to do it, it ought

to be done later after we think about it a little more

and changed it.
A:

There's an awfully good - he gave his reasons for wanting to do this, which is that the American people have
been saying, = Morgenthau doesn't know where he's going",
it would be damn good at this time to lay out a blueprint
which proves conclusively that he does know where he 8

going. Later he can be accused of failing, but so what.

B:

A:

Well

He doesn't - the Secretary says that would be December
and a hell of a lot of things could happen between now
and December. That S his point on it, and he' S very

strong on this blueprint. In that final phrase that

he's giving them a blueprint - I see the Secretary's
point very clearly and I - well, okay - I mean - we
have it now and I'11 read it off to him.
B:

ft

All right. And we'll work on it a little more and when
we get the - the transcript

A:

Yeah.

B:

.... of the figures you gave us.

A:

Okay.

B:

Now may I talk to the Secretary about one thing?

A:

Certainly.

HMJr: Hello.
B:

Yes.

HMJr: Go ahead.

I wanted to tell you about your message last night
sending out the President's press conference.
HMJr: Yes.
B:

3:

We went over and got it and Steve Early sent it over

with a letter

(21

- 22HMJr: Yeah.
B:

and says, "Attached is a transcript of the
President's S press conference of today. I am giving
you this for the information of the Secretary of the
Treasury and with the definite understanding that it
will be considered otherwise confidential. I ask this
treatment to protect againet the possibility of its
publication now or later in its present form. Of course,
the President's language is known to the press, but newspaper reporters are not permitted to use it, except in
the third person, and no permission is given to quote the

President direct in this instance. If It isn't in shape
to send out as such.

HMJr:

Well, let's forget it then.

B:

Either forget it, or send Chic's memorandum.

HMJr:

Forget it then.

B:

I'd inclined to not send it. We might get into difficulty.

HMJr:

Or worse. More worry.

B:

Yeah.

HMJr: Yeah.
B:

Now Gamble thinks that Smith didn't get that last quite

right. May I talk to him again.

HMJr:

What last?

3:

The last thing I read. Who was that, Smith or Albee?

HMJr:

Albee. All right.

B:

Well, let me talk to him again.

A:B:
A:

B:

(Talking aside: Where is that)

I'11 read it back to you.
Wait a minute until I find it. (Talks aside: Where is
it?) Okay.

122

- 23 "To do our maximum best, we should invest more than

A:

twice the amount - (talks aside) more than twice that

amount
B:

More than twice that amount. Yeah.

we will get many billions more from corporations
and other large buyers, but we are calling on you as
individuals - calling on the American people as individuals to buy more than twice the amount of bonds
they bought in the first six months of this year. If
Then continue. "In other words for more than - 8.5 much
8.8 twenty-five cente out of your every dollar.

"

A:

"

B:

Wait a minute now. (Talks aside) They say that they
think it would read better if you - if they left the
$7 billion in. "To do our maximum best we should invest not another $7 billion, but more than twice that
amount.

A:

B:

All right.
They think that that's a little better.

A:

Okay.

B:

Got it?

A:

Yeah.

B:

Thank you. Want me to call you back later - call you

back later?
A:

Okay.

B:

Goodbye.

#3

123

June 12, 1943
11:10 a.m.
H.M.JR:

Dan?

D.W.BELL:

Yes, sir.

H.M.JR:

Now, I've made those changes. I'm talking about twice

as much. We've cut out all the rest. I think the

time for the people who have gotten the cold feet was

before I used the eighteen billion - I used it in

Newark, I used twenty-five percent at New York, and
the investment bankers - that release announcing

Burgess, I've used it twice.

B:

H.M.JR:

Uh-huh.

And both Gaston and Gamble were there and I take it

they saw what I was saying - before I said it - I
don't know whether they did or not. But that was
the time to have gotten the cold feet.

B:

H.M.JR:

Yes.

But I am not going to go out on the limb of my own
organization that don't think that they can back me up.

B:

Well, maybe we were being - ah - cautious.

H.M.JR:

Well-

B:

H.M.JR:

But-.

As I say, I've - I've used it in Newark, I used it at

New York. Nobody cut anything there, but I've made all

the changes, and I'm not going to - they're typing it

and they re trying to get me a clean copy. And when

they do, if there - if there is a carbon copy, I don't
know - they'11 try to read it in to Schwarz. I'm not
going to worry about it. I've got enough worries now.

124

-2B:

H.M.JR:

Yeah. Well, that's - that's too bad it had to come
at this time.

Well, it's--

B:

Let me read you a little - a couple paragraphs.

H.M.JR:

No, Dan, I can't take anything more.

B:

Can't you?

H.M.JR:

The speech is written now.

B:

It's - well, we got a couple of changes - just minor -

that I could tell to Smith if you'd let me talk to him.

H.M.JR:
B:

What?

I could tell to Smith if you'd let me talk - a couple

of changes.
H.M.JR:
B:

H.M.JR:

B:

H.M.JR:

Oh, you are going to drive him nuts.
No, these are - these are changes that ought to be made.

We have an amateur stenographer upstairs. I got to
learn this speech some time.
Well, you're getting used to taking them on the stand.

Well, it's not very funny.

B:

I know it isn't.

H.M.JR:

I mean I have to do the fighting with the press and
everybody else, and then when I want to go make a

speech and talk about this thing - I better come out

for compulsory savings, if Gamble and that whole gang

are so weak-kneed. If you can't make it, why not

come out for compulsory savings. Look what I've been

through the last - since the third of May.

Well, we hope we can make it, but we don't want you

to get out on a limb at this time.

125

-3H.M.JR:

My God, I've - look, since the third of May, I've

had the fight with the Federal Reserve, I've won
that; I've had my fight with Byrnes and all the rest;
and now when I want to go out and say we can do the

thing, everybody steps out. I think it's terrible.

B:

Well, (laughs) I think we all have the same objective,

but we want to say it in a little different way and
not be so positive in it.

H.M.JR:

Well-

B:

And--

H.M.JR:
B:

H.M.JR:

I'll see where they-There are a couple of minor errors, we think, in the
thing that I ought to tell Smith about.
Now when - when is Gamble going out to the West

Coast - that he's fussing about his organization?

B:

H.M.JR:

(Talks aside to Gamble) Leaving Tuesday, aren't you,
Ted? They're leaving tonight - Gamble is and Gaston
is leaving tomorrow night.
Well
#

B:

They're on their way.

H.M.JR

I can't handle anything more, tell them. Hello--

B:

Yeah.

H.M.JR:

When does he get to the West Coast?

B:

(Talks aside to Gamble) Tuesday in Minneapolis--

H.M.JR:

Well, he can call --

B:

And Thursday in San Francisco.

H.M.JR:

What?

126

-4B:

H.M.JR:
B:

H.M.JR:
B:

Tuesday in Minneapolis.
When is he leaving Washington?
Tonight.
What time?

(Talks aside to Gamble - what time?)

five.

H.M.JR:

Well, put Ted on.

B:

All right.

Five twenty-

MR. GAMBLE: Hello.
H.M. JR:

I can't handle anything more now, Ted.

G:

Yes, sir.

H.M.JR:

Who is going to be in charge while you are gone?

G:

Well, Mr. Coyne and Mr. Graves will be here.

H.M.JR

All right. When you get - when will you be in

Minneapolis?
G:

We'll be in Minneapolis Tuesday morning.

H.M.JR:

Well, call me up from there.

G:

All right, sir.

H.M.JR:
G:

H.V.JR:

I just can't take anything more.
I understand.

I mean, it's just - it's impossible.
Well, on this eighteen billion dollars, Mr. Secretary,
we are all of the same mind on it, but we just don't

think that we ought to break it down and make such a

127

-5-

point of getting exactly seven billion dollars from
people in September.

H.M.JR:
G:

H.M.JR:

Well, don't let's argue about anything.
I understand.

I mean, after all, I did it in Newark - I did it in

New York. You didn't raise any objection.
G:

No, sir, and the way you did it there I think it was
very well, but when you start telling the whole
picture and emphasizing it, then I think we are inviting a possible trouble that you don't want to
invite.

H.M.JR:

G:

H.M.JR:
G:

H.M.JR:
G:

H.M.JR:
G:

H.M.JR:

Well, anyway, I'm - I'm disappointed, but I've made
the change, and I'm - I mean I'm not going to go out
all by myself.
Yes.

Now, you want - Bell wants to speak to Smith?
Yes.

All right, I'll get him.
All right, sir.
I'm not going to talk again.

All right, sir, I-I haven't even got the speech. Just a moment.

MR. SMITH: Hello.
MR. GAMBLE: Hello.
S:

Yeah.

G:

Fred?

128

-6S:

G:

Yeah.

Just a minute.

MR. BELL: Fred?
S:

Yes.

B:

I've got two minor changes.

S:

Yes.

It's on page 3 of - oh, maybe it's - no, it's on
page 7 of my draft.

Yeah.

But it begins the paragraph, "There are many women in
war jobs with husbands also working.
"

S:

Yes.

Have you got that?
S:

B:

S:

Now, wait a minute I'll find it. We have so many
changes here, I'm still here - I'm just looking.
Page 7 on the draft we got, but-We've switched it all around.

Yes. It's "Many people are already put ting larger
percentages of their income into bonds. In some
cases--

I haven't got it here, Bell, but tell me what it is.
Well, you've got the words, "There are many women in
war jobs with husbands also working
Yes.

... or in the armed forces

129

-7 Yes.

... who are investing a hundred percent of their pay
in war bonds. "
Yes.

"Or in the armed forces" seemed to us ought to come out.

B:

Well, it's a fact.
Well, I - is it a fact? I mean, you can't - about the
only person it could be would be an officer. If they

were sending a big allotment home it certainly
couldn't be an enlisted man.
S:

We ran into a couple of them down here from Oregon

that were just enlisted men, but I--

Well, then they're just capitalists in the Army.
Huh?

They're just capitalists in the Army. (Laughter)

S:

They're not doing it out of their pay. All right.
Well, we'll drop it out.
All right. I mean it's a point which you might be
picked up on.

Yeah, it's open.
These are suggestions.

It's open to question.
"We know" - over on page ten-Yes.

"We know now what this war is going to cost." "

130

8S:

Yes.

B:

We don't think we do.

S:

B.

S:

Well, I don't, either.
Huh?

I think that's right.

B:

Well, I don't - we think that ought to come out.

S:

Well-

B:

"Or, we know what it's going to cost this year."

S:

Well, that's - that's better.

B:

Yeah.

S:

It's going to cost--

B:

Yeah, we know - I'd say, "We know about what this war

is going to cost this year.

S:

B:

S:

All right, that's fine.
All right.
How about this - I'm a little afraid of what follows

here, too - do we know how many planes, tanks, and
ships we'll need?
B:

Well, you know how many men we'll have to have in our
Armies, and how much equipment we'll have to provide
for them. We know those things, because they're

daily goods. Well, I should think that they know

that more than they do the money cost, because you
don't know how many - how long the war is going to

last, as to cost.

S:

All right, let's put in an "about" in there that'll
take

131

-9Yes.

B:

Uh-huh.

S:

You know approximately how many men or something

B:

like that. Leave it - qualified a little.

Yes.

S:

Okay.

B:

All right.

S:

We had a couple of good paragraphs we thought might

B:

go in place of that other, but I guess you' re not
interested, huh?

Well, we've - we've said essentially - picked up

S:

essentially the paragraphs--

Huh?

B:

haven't picked them up as such, is because the

S:

surrounding paragraphs have been changed.
Uh-huh.

B:

S:

B:

=

Ah--

I might read you these and see what you think of
them.

S:

Huh?

B:

I might read you these if you've got a second.

S:

B:

Just fine. Now, we will have this thing ready very
shortly, and I would suggest that you wait, and I
will read it back to you and put it on a record. See?

All right.

132

- 10 S:

S:

That's good. And it - it's - it's not bad at all.
All right.
It's got all the eighteen billions and all the
twenty-five - cents - just used twice as much all

the way through.
I see.

And it cleans it up good.
Yes.

I think it's a better speech than it was before,
but - except for one slight addition which isn't
quite as - doesn't look as honest. You know - it
doesn't look as frank.

Yes.
S:

But if you will shoot crap for about ten minutes, why

I can read it all to you.
B:

All right.

S:

Okay?

B:

Fine.

S:

Thank you, Danny.

B:

Bye.

June 12, 1943.
11:46 a. m.

HMJr:

When Gamble comes in, let me know.

DWB:

All right.

HMJr:

I want him to hear particularly.

DWB:

All right.

HMJr:

And when I'm through talking, Fred Smith will read

DWB:

All right.

HMJr:

the final draft of the speech

DWB:

The emphasis on the final, huh?

HMJr:

133

into the machine,

Well I've only got to get my lunch, and drive 35
miles and be there at two o'clock.

DWB:

Well, you'd better go.

HMJr:

Well, I want to wait; I want to make a little speech.

DWB:

Now, uh

HMJr:

When Gamble gets there let me know.

"

DWB:

All right. He's coming in the room now.
Could I say one thing about the date of the Drive?

HMJr:

Yeah.

DWB:

After I told you yesterday about clearance with
the OWI, Jim Rogers called back late in the evening
and said that he just wanted to tell us about one

thing in the picture, he didn't think it would hurt

us any, but he said there is a Man-Power Commission
program on for that month dealing with the women,

and they were going to use the first week and possibly
start the next day. He thought we might be interferred
with a little on Labor Day, and there was some thought
here that you might want to change that to the 9th
to get over that -- any enthusiam built up that day.
Labor Day, speeches to stress that Program, and we

HMJr:

When is Labor Day?

-2DWB:

134

Labor Day is the 6th. We start the 7th. If you'd
start, say Wednesday, the 9th, you'd have some two
or three days for that to settle. Talks aside
(That 9th would be Wednesday, wouldn't it?) The

9th
8th would
would be
be Thursday.
all right. Wait a minute. That's right.
HMJr:

Hello.

DWB:

Yes.

HMJr:

I don't care.

DWB:

Well, Ted thinks with his experience in the Movie
business, it's pretty dead following a holiday -the next day, and that the 9th would be better.

HMJr:

All right. Ted wants the 9th?

DWB:

Yep.

HMJr:

It's the 9th.

DWB:

0. K. Now Ted's here, do you want to talk to him?

HMJr:
DWB:

Yeah. I'll talk to Ted, yeah.
All right. Just a moment.

Gamble:

Hello.

HMJr:

This is for the benefit of all of you.

Gamble:

Yes.

HMJr:

I just want to say, I appreciate what you've done

G:

Yes.

HMJr:

G:

HMJr:

It's a good speech. I'm a little disappointed, but
we'll all carry on -- the thing is settled --we're
one big family, we'll all pull together.
That's right.
And, uh it makes it tough on me, but I can take it,
and let's all go on and we've got to work like

Hell now to even make twice as much.
G:

$18 billion is still our goal, Mr. Secretary.

HMJr:

Okey doke.

135
-3G:

HMJr:

G:

HMJr:

G:

How's that?

AnditFred
than
was.Smith thinks it's even a better speech

Well, I think it is. I don't think you need to
emphasize, or go into to details about the $18
billion.
I think what you've said about it, has
been fine.
That's "water over the dam" The Mayor's waiting
here for me, and so forth and so on, and Smith's
going to read it into the speech, we'll make it
the 9th. You'd rather have the 9th?
Yes sir!

HMJr:

We'll make it the 9th.

G:

That's fine, and Smith should correct his speech to
say the 9th.

HMJr:

Oh Smith, he did that thirty seconds ago.

(Laughs.) He did it thirty seconds ago. All right.
All right, sir. I'll give you a little good news,

we had what we thought was a very good meeting in
Philadelphia yesterday, with both Pennsylvania and
Delaware. We settled Delaware.
HMJr:
G:

Yeah.

And it looks like we have Pennsylvania on the way to
a good solution.

HMJr:

All right.

G:

We won't know 'til Tuesday.

HMJr:

Well, I'll talk to you about your own little, uh

not little, but your organization problems in

Washington on Tuesday.
G:

HMJr:

I'll call you on Tuesday morning.

Yeah, and I'm satisfied. We'll go on.

G:

Fine.

HMJr:

I haven't even read today's papers, but they tell me

it's all right.

136
-4G:

HMJr:

It was very good.
What?

It was very good.
Good.

The President's statement in yesterday evening's

Star was very good, that is the report of his conference.

HMJr:

Fine.

G:

It was very good.

HMJr:

G:

HMJr:

Fred

Smith:
G:

S:

Well, now just a minute, and this is going to be the
fihal version.

All right, Sir.
Just a minute.

Hello. Hello.
Just a minute.

All right. The Secretary wants me to relay to you
that he has just told us that we have broken all
speed records. He has a whole hour with nothing

to do.
DWB:

F

Goodnight!

Except, well he ought to take nap.
DWB:
DWB:

(Laughs. )

Well, he' 11 have a nice long hour to drive thirtyfive miles.

Smith

That's right.

B:

All right.

S:

I understand that Albee read you down to the bottom

of page 4.

137

-

DWB:

S:

DWB:

S:

DWB:

S:

DWB:

S:

DWB:

Well, now, I'll see if we've got that.
Iitcan
all. very easily read it all, if you'd rather hear
Well
now, Fred, are you sending this over the wire,
for a check?
No. What do you mean? Oh, well I can.
As a check against what we released.

I'm going to give it to you here.
On the record?

Send it to, by a cop that's waiting out here, to
Callahan. Callahan can put in on the wire.
All right, because I think we ought to have a check,
don't you?

S:

Hmm?

DWB:

I think we ought to have a check.

S:

That's right. In the meantime, though, I think Chic
should go ahead

DWB:

S:

We will.

with this mechanic stuff, and then you can just
use it for a check.

DWB:

All right.

S:

O. K. Now, I'm beginning now.

DWB:

S:

All right. You begin at the beginning.
All right.
"Thank you, Mr. Mayor: I am here as you know to award

the Treasury T. flag to your city of Kingston in token
of the fact that every industrial and commercial firm in
this city has a payroll savings plan. This achievement
of Kingston is significant. As one city after another
wins our T flag, it becomes apparent that the nation
is unified and strong in its support of the war.

138
-6-

When management and labor get together - when the

employees of every firm in an entire city share
their wages by lending part of them, week in and

week out, to their government we have a demon-

stration of a real will to win.

So, Mr. Mayor, on behalf of the Treasury
Department of the United States, I present to you

and to the City of Kingston, this Treasury T flag.

(The Secretary then turns and speaks to the
public).
Ladies and Gentlemen: I am very glad to have
this change to speak to you here in Kingston, not
only because of your outstanding record in buying
war bonds and because Kingston has a war history
that goes back to George Washington and the days of
the Reveolution, but because my own home also is
in the Hudson Valley and I can talk to you as one

neighbor to another, and I am glad that what I say to
you as a neighbor will go over the air to people in
other cities like this across the country, because
Kingston is a typical American town. It is both an
industrial community and a farming community, and
what I have to say touches both industrial workers
and farmers.

Working men and women here in Kingston together

with working people in other cities of the nation,
are building war equipment in such vast quantities
and in intricate perfection with the result that our
enemies aren't the brave supermen they once were.
They were brave enough when they thought they could

beat us with our backs turned, but they aren't so

boastful today. And on these fertile fields along

our Hudson River, farmers are raising food for our
soldiers and sailors and marines, our war workers,
and our Allies.
You people of Kingston are discharging momentous

tasks, workers and farmers alike - a task of equal
importance. Let me speak to you now of this other
momentous task that you are sharing so splendidly

and that I share with you - the task of financing

this first, truly collossal war - this war that we
intend to make also the last.

-7-

139

I have some news for you of how we propose to

pay the bill from now on. Your magnificent response
to the War Loan Drive has shown that you are willing,
even eager, to put up with real sacrifices. You are
resolved that we must win. And you have a right to
know. You must know, if we are all to keep our
eyes and our heads clear for the hard job that still
lies ahead of us, what such a determination calls for
in dollars and cents and how the dollars and cents
are to be raised.

Let's begin with our rate of spending in this

war and how and why it has grown. At the time of
Pearl Harbor, when we were shocked into a realization
of what modern war really is by the treacherous

murder of hundreds of Americans by the Japanese - even

then we were pouring into war materials 64 million
dollars a day. Recovering from the shock of Pearl
Harbor, we threw the lever of our vast American
machinery production into high gear, and by July of
last year our war expenditures climbed to 152
millions a day. By the end of 1942, we were spending
198 million dollars a day, and today the figure is
240 million. Between sunrise this morning and
sunrise tomorrow morning, this war will have cost
another $2.00 for every man, woman and child in the
United States.

why? Because we have set out to produce so
much equipment that we will overpower the enemy whereever we meet him. So many bombing planes, for example,

that there will be traffic jams in the sky over

Berlin - which I understand there are already. One
wave of planes sometimes has to wait for another to go
in. General Arnold, commanding the Army Air Forces,
says flatly that he means to bomb Germany out of the
war, and Mr. Churchill says that even if we can't
it won't do any harm to try. That will cost a great
deal of money. A four-motored bombing plane - just
one- costs nearly half a million dollars. You have
read that we intend to drop a thousand, two thousand,
three thousand, tons of block-buster bombs on the
Axis bases in every raid, and a single two thousand
pound block-buster costs $400. Every time one of our
battleships fires a broadside of sixteen-inch shells
at the Japanese, it costs $13. thousand. In other
words, we are really getting into the war. At last,
the United Nations are on the offensive and that's
where we want to be.

140

-8Well, to put us where we want to be, individual
bond buyers during the first half of this year have

invested 7 billion dollars in war bonds-a little over
10% of their income. That doesn't include money coming from corporations, banks or other institutions.

That's the amount that the people themselves this
year have already invested towards winning this war.
Splendid as such an achievement is, we can't
stop now and pat ourselves on the back. Not at this
moment certainly, when we are on the very brink of
invading Europe. With this in mind, let us look ahead.
During the second half of this year, from the
first of July until the end of December, it is going
to be necessary for you to invest not another 7

billions but far more. To be exact, unless we are
able to raise the tax rates before the end of the
year, and before the end of the year get more taxes
than will result from the present tax schedules, we

expect that we may have to ask you to lend your government during the next six months about twice as

much as in the first half of the year.

According to the best available figures, the
money will be there in savings out of our 72 billions
in national income during the remainder of the year.
According to our present plans, we are asking you to
invest the greatest portion of your savings in war
bonds in the next six months.

It is important that we get this money either in
taxes or bonds, not only to finance the war but to
protect ourselves against inflation.
Now that sounds like a lot and it is a lot. However, we know the money will be there, but in order to
get it we will have to have a more efficient sales
organization than ever before. It means we will have

to have more volunteer workers because we will have to
sell bonds to nearly every man, woman and child in

America. It means solicitation from house to house,
from bench to bench in factories, and from desk to
desk in offices.

I am sure we will be able to swing this tremendous
job if we all work together, and I have good reason
for my confidence. First, we have proof that we have

the will to do it. During the second War Loan Drive

141
-9-

in April, we asked the people, the individual
investors,
to buy 2, billion dollars worth of bonds,
and they bought 32 billions. We asked insurance
companies and caporations for 5 billions, and they
invested nearly 10. We asked for volunteers to
take over the job of selling bonds to their friends
and neighbors, and more than a million men and women
in the United States became voluntary bond salesmen.

When the final score was in, we found that in
much as the total amount raised during all of the
five bond drives in World War I.
the Second War Loan Drive we had raised almost as

Another reason I am confident we will be able
to raise the money is that these figures, enormous
as they are, aren't really quite as bad as they
sound. For instance, when I say that our bond
goal is twice as much as in the first six months,
that doesn't mean that every family is going to
have to set aside arbitrarily twice as much. Under
the voluntary plan, we leave it to you yourself
to decide how many bonds you can afford to buy.
Families with heavy pre-wer commitments, mortgages
and insurance, and so on, may not always be able

to afford twice as much. But folks who are earning

more than their usual amount of money, will be able
to invest even more.
Many people with larger than usual wages are
already putting high percentages of their pay into
bonds. In some cases, where more than one member

of the family is working or where the head of the
family has a war job at good pay, the percentage of
war bond buying is running to half, even more, of

the family income. There are many women in war
jobs with husbands also working, who are investing
100% of their pay in war bonds, every cent they make.
Those aren't isolated cases by any means. In April
I visited one war plant where they were putting 23%

of the total payroll into bonds.

Now I should like to stop here and discuss with
you, for a moment, some facts about war finance as I
see them. I know that nobody likes high taxes, but

this is war, and I sincerely believe that taxes

142

- 10 -

ought to be used to pay for as large a share of the
war cost as possible. I think taxes ought to cover
something like half of our expenses. They're not

covering nearly that much now. On the other hand, we
can't raise much more than half the money through
taxes because on such a huge scale, we can't levy
taxes with fairness. And that's why we rely upon
upon bond sales for the remaining amount. Bonds are

flexible. They allow for the personal obligations

which you may have, which may beentirely different

from the obligations of your neighbor.
Now, let's talk for a moment about the concrete
job of raising twice as much money from individual
investors in the next six months. First, of all, we're
starting right now to expand the payroll savings
plan. We hope to make it produce month-in and monthout 50% more than at present. Every worker is being
asked to figure out for himself how much more than the
10% we have previously used as a goal, he can lay
aside out of his current earnings for war bonds.
Whether we will succeed in this depends squarely upon

Labor and Management working together to make the pay-

roll plan work at top efficiency in every plant in
the Nation. We are also planning on new war loan

drives, especially to raise money from individuals.
The next drive will start September 9. I am
announcing this for the first time today because it

is a part of the blueprint of the future. On
Drive, and it will aim at raising the largest amount
of money from individuals that any drive has raised
in the history of the world. Our goal for individuals
September 9th, we will launch the Third War Loan

in this September drive will be to get a substantial
part of the necessary money. In a subsequent drive,
and during the four months in which there are no
war loan drives, through payroll savings and other
I

continuing sales, we will aim to get the rest.
don't believe this is an impossible job for the
American people. The incomes received by all of us
will be so much greater than the sum total of all

the things that we can buy that money will be at hand
to purchase the necessary bonds and still pay taxes,
life insurance, mortgage obligations, doctors bills,
and to make all the rest of the necessary expenditures.
As Secretary of your Treasury, I can only tell
how much money is needed; I can only lay the figures
you before you frankly and honestly. The rest is up to you.

143

- 11 I must depend upon your own recognition of your

responsibilities. The very fact that you are
free to lend according to the dictates of your

conscience, that no stormtrooper comes swaggering
into your kitchen to demand your money - the very

fact that you are free adds the more weight to your
responsibility. We know now what this war is going
to cost this year. We know about how many planes
and tanks and ships e'll need. We know approximately how many men we will have in our armies
and how much equipment we 11have to provide for
them. We know those things because our days of
guesswork are over. We know exactly what we are

going to do and how we're going to do it. From
now on, we are going to do the planning -- and
the attacking. And I fervently hope that we can
continue to work out our financing plans together
and keep them on a voluntary basis. But, in the

final analysis, that is up to you - the American

DWB:

people." The end.
Is that the end?

S:

That's the end.

DWB:

I see.

S:

DWB:

What do you think?

I think it's good.

S:

Huh?

DWB:

Yeah.

S:

DWB:

Don't you think it is?
I think it's good.

S:

I think it's good, and I think it's safe.

DWB:

Huh?

S:

I think it's good, and I think it's safe.

DWB:

So do I.

S:

All right?

144
-12-

DWB:

Yeah. I'm very much better pleased than with the

S:

Much better pleased?

DWB:

other.

Yeah, and I'm, I'm - about going it over in detail -

I think it sounds fine. Wait until I get Herbert's
reaction.

DWB:

All right.
Herbert thinks it's fine. He would like to have seen

S:

Yeah.

you kept the 25% in - of the national income.

And woven that in as a goal.
S:

DWB:

Yeah.

But he thinks, possibly, it!s a little too late to

make changes, but he thinks"you kept the 25% in

as a goal, that it might have been more consistent.

S:

DWB:

S:

Well, he

But he thinks it's fine.
Well, I think that's right, but we discussed it here,
and the Secretary thought that if he left the $18
billion out, he ought to leave the 25% out.

DWB:

Yeah. I see. Well, I think it's a good speech.

S:

So do I.

All right. We'll get it right on the mimeograph.
All right. That's all fixed now, huh?
DWB:

0. K.

All right. Goodbye.
DWB:

Goodbye.

Final Draft 145
Smith diotating pages 1 to 4
Thank you Mr. Mayor: I am here as you know to award

the Treasury T flag to your city of Kingston in token of the fact
that every industrial and commercial firm in this city has a payroll savings plan. This achievement of Kingston is significant.
As one city after another wins our T flag, it becomes apparent
that the nation is unified and strong in its support of the war.
When management and labor get together - when the employees of
every firm in an entire city share their wages by lending part
of them, week in and week out, to their government we have a
demonstration of a real will to win.
So, Mr. Mayor, on behalf of the Treasury Department of
the United States, I present to you and to the City of Kingston,
this Treasury T flag.

(The Secretary then turns and speaks to the public).
Ladies and Gentlemen: I am very glad to have this chance
to speak to you here in Kingston, not only because of your out-

standing record in buying war bonds and because Kingston has a war
history that goes back to George Washington and the days of the
Revolution, but because my own home also is in the Hudson Valley
and I can talk to you as one neighbor to another, and I am glad

that what I say to you as a neighbor will go over the air to
people in other cities like this across the country, because
Kingston is a typical American town. It is both an industrial

community and a farming community, and what I have to say touches

both industrial workers and farmers.

Working men and women here in Kingston together with

working people in other cities of the nation, are building war
equipment in such vast quantities and in intricate perfection

with the result that our enemies aren't the brave supermen they
once were. They were brave enough when they thought they could
beat us with our backs turned, but they aren't so boastful today.
And on these fertile fields along our Hudson River, farmers are
raising food for our soldiers and sailors and marines, our war
workers, and our Allies.
You people of Kingston are discharging momentous tasks,

workers and farmers alike - a task of equal importance. Let me
speak to you now of this other momentous task that you are sharing
80 splendidly and that I share with you - the task of financing
this first, truly collossal war - this war that we intend to make
also the last.

2-

146

I have some news for you of how we propose to pay the bill.
from now on. Your magnificent response to the War Loan Drive

has shown that you are willing, even eager, to put up with real
sacrifices. You are resolved that we must win. And you have a
right to know. You must know, if we are all to keep our eyes
and our heads clear for the hard job that still lies ahead of us,
What such a determination calls for in dollars and cents
and how the dollars and cents are to be raised.

Let's begin with our rate of spending in this war and how

and why it has grown. At the time of Pearl Harbor, when we Were
shocked into a realization of what modern war really is by the
treacherous murder of hundreds of Americans by the Japanese - even
then we were pouring into war materials 64 million dollars a day.
Recovering from the shock of Pearl Harbor, we threw ****** the
level of our vast American machinery production into high gear,
and by July of last year our war expenditures climbed to 152
millions a day. By the end of 1942, we HX were spending 198

million dollars a day, and today the figure is 240 million.

Between sunrise this morning and sunrise tomorrow morning, this
war will have cost another $2.00 for every man, woman and child
in the United States.
Why? Because we have set out to produce 80 much equipment
that we will overpower the enemy wherever we meet him. So many

bombing planes, for example, that there will be traffic jama in
the sky over Berlin - which I understand there arek already. One
wave of planes sometimes has to wait for another to go in. General
Arnold, commanding the Army Air Forces, says flatly that he means
to bomb Germany out of the war, and Mr. Churchill says thatoot

even if we can' it won't do any harm to try. That will EXERS a
great deal of money. A four-motored bombing plane - just one costs nearly half a million dollars. You have read that we intend

to drop a thousand, two thousand, three thousand, tons of blockbuster bombs on the Axis bases in every raid, and a single two
thousand block-buster costs $400. Every time one of our battleships

fires a broadside of sixteen inch gun at the Japanese, it costs

$13 thousand. In other words, we are really getting into the war.
At last, the United Nations are on the offensive and that's where

We want to be.

Well, to put us where we want to be, individual bond buyers

during the first half of this year have invested 7 billion dollars
in war bonds - a little over 10% of their income. That doesn't

include money coming from corporations, banks of other institutions.
That's the amount that the people themselves this year have already
invested towards winning this war.
Splendid as such an achievement is, we can't stop now and

pat ourselves on the back. Not at this moment certainly when we

are on the very brink of invading Europe. With this in mind, let us

look ahead

147

-3During the second half of this year, from the first of
July until the end of December, it is going to be necessary for
you to invest not another 7 billions but far more. To be exact,

unless we are able to raise the tax rates before the end of
the year, and before the end of the year get more taxes than
will result from the present tax schedules, we expect that we

may have to ask you to lend your government during the next

six months about twice as much as in the fires half of the year.
According to the best available figures, the money will be
there in savings out of our a 72 billions in national income
during the remainder of the year. According to our present plans,
we are asking you to invest the greatest portion of your savings
in war bonds in the next six months.

It is important that we get this money either in taxes or
bonds, not only to in finance the war but to protect ourselves
against inflation.
Now that sounds like a lot and it is a lot. However, we know
the money will be there, but in order to get it we will have to
have a more efficient sales organization than ever before. It

means we will have to have more volunteer workers because we will
have to sell bonds to nearly every man, woman and child in America.
It means solicitation from house to house, and from bench to bench

in factories, and from desk to desk in offices.
I am sure we will be able to swing this tremendous job if we

all work together, and I have good reason for my confidence.

First, we have proof that we have the will to do it. During
the second War Loan drive in April, we asked the people, the individual
investors, to buy 2-1/2 billion dollars worth of bonds and they
bought 3-1/4 billions. We asked insurance companies corporations
for 5-1/2 billions, and they invested nearly 10. We asked for
volunteers to take over the job of selling bonds to their friends
and neighbors, and more than a million men and women in the United
States became voluntary bond salesmen.

When the final score was in, we found that in the Second

War Loan Drive we had raised almost as much as the total amount

raised during all of the five bond drives in World War I.
Another reason I am confident we will be able to raise the
money is that these figures, enormous as they are, aren't really

as For instance, when I say that our bond

the
first
sixas in months, that doesn't mean
quite goal is twice bad as as they
much
soun
that every family is going to have to set aside arbitrarily twice

and may

as much. Under the voluntary plan, we leave it to you yourself
to
decide can afford to

heavy pre-war how many commitments, bonds you mortgages insurance buy. Families and so with on,

not always be able to afford twice as much. But folks who are

148

-earning more than their usual amount of money, will be able to
invest even more.

Many people with larger than usual wages are already putting
high percentages of their pay into bonds. In some cases, where
more than one member of the family is working or where the head
of the family has a war job at good pay, the percentage of war
bond buying is running to half, even more, of the family income.
There are many women in war jobs with husbands also working, who
are investing 100% of their pay in war bonds, every cent they make.
Those aren't isolated cases by any means. In April I visited one
war plant where they were putting 23% of the total payroll into
X

bonds.

for a moment

Now I should like to stop here and discuss with you/some facts
about war finance as I see them. I know that nobody likes high
taxes, but this isewar, and I sincerely believe that taxes ought
to be used to pay fax as large a share of the war-cost as possible.
I think taxes ought to cover something like half our expenses.
They're not covering nearly that much now. On the other hand, we
can't raise much more than half the money through taxes because
on such a huge scale, we can't levy taxes with fairness. And that's
why we rely upon bonds sales for the remaining amount. Bonds are
flexible. They allow for the personal obligations which you may have,
which may be entirely different from the obligations of your neighbor.
Now, let's talk for a moment a bout the concrete job of raising twice
as much money from individual investors in the next six months.

First of all, we're starting right now to expand the payroll savings
than at present. Every worker is being asked to figure out for
plan. We hope to make it produce month-in and month-out 50% more

himself how much more than the 10%, we have previously used as a

goal, he can lay assde out of his current earnings for war bonds.

Whether we will succeed in this depends squarely upon Labor and
Management working together to make the payroll plan work at top

efficiency in every plant in the Nation. We are also planning on
new war loan drives, especially to raise money from individuals.
The next drive will start September 9. I am announcing this for

the first time today because it is a part of the blueprint of the
future. On September 9th we will launch the Third War Loan Drive,
and it will aim at raising the largest

149

5

amount of money from individuals that any drive has raised

in the history of the world. Our goal for individuals in this

September drive will be to get a substantial part of the
necessary money. In a subsequent drive, and during, the four
months in which there are no war loan drives, Kit payroll savings
and other continuing sales, we will aim to get the rest. I
don't believe this is an impossible job fur the American people.
The incomes received by all of us will be so much greater than
the sum total of all the things that we can buy that money will
be at hand to purchase the necessary bonds and still pay taxes,
life insurance, mortgage obligations, doctors bills, and to make
all the rest of the necessary expenditures.
As Secretary of your Treasury, I can only tell you how

much is needed; I can only lay the figures before

you frankly and honestly. The rest is up to you. I must depend
upon your own recognition of your responsibilities. The very
fact that you are free to lend according to the dictates of your

conscience, that no stormtrooper comes swaggering into your
kitchen to demand your money - the very fact that you are free adds
the more weight to your responsibility. We know now what this
war is going to cost this year. We know about how many planes and
tanks and ships we'll need. We know approximately how many men
we will have in our armies and how much equipment we'll have to
provide for them. We know those things because our days of guesswork are over. We know exactly what we are going to do and how we're
going to do it. From now on, we are going to do the planning -and the attacking. And I fervently hope that we can continue to
work out our financing plans together and keep them on a voluntary

basis. But, in the final analysis, that is up to you - the
American people.

6/12/43
O.

Reading copy of Secretary's speech
bc casion of presenting Treasury "T

award to the city of Kingston, N. Y.

150

151

Thank you, Mr. Meyor. I'm here, as you know, to
award the Treasury T Flag to your City of Kingston, in
token of the fact that every industrial and commercial firm
in this city has a Payroll Savings Plan. This achievement

of Kingston is significant. As one city after another wins
our IT' flag it becomes apparent that the nation is unified
and strong in its support of the war. When management and

labor get together, when the employes of every firm in an
entire city share their wages by lending part of them, week
in and week out, to their Government, we have a demonstration

of B real will to win.
So, Mr. Mayor, on behalf of the Treasury Department of

the United States, I present to you and to the City of Kingston this Treasury IT' Flag.
(RAUSE)

Ladies and Gentlemen:

I'm very lad to have this chance to speak to you
here in Kingston, not only because of your outstanding
record in buying War Bonds, and because Kingston has a war

history that goes back to George Washington and the days

of the Revolution, but because my own home also is in the
Hudson Valley and I can talk to you as one neighbor to
another.

152
-3-

And I'm glad that what I say to you as a neighbor will go

over the air to people in other cities like this across the
country -- because Kingston is a typical American town. It is
both an industrial community and a farming community, and what

I have to say touches both industrial workers and farmers -concerns

Working men and women here in Kingston, together with

working people in other cities of the nation, are building war
equipment in XXEX vast quantities, and in XMEX intricate per-

fection, with the result that our enemies aren't the brave
'super-men' they once were. They were brave enough when they

thought they could beat us with our backs turned, but they

aren't so boastful today! And on these fertile fields along
our Hudson River, farmers are raising food for our soldiers
and sailors and marines: our war workers and our allies.
You people of Kingston are discharging momentous tasks,

workers and farmers alike -- tasks of equal importance.
Let me speak to you know of this other momentous task that

you are sharing so splendidly, and that I share with you --

the task of financing this first truly colossal war -- this war
that we intend to make, also, the last! I have some news for
you of how we propose to pay the bill from now on.

153
-3-

Your magnificent response to the War Loan Drives has shown

that you are willing, even eager, to put up with real sacrifice. You are resolved that we must win. And you have a right
to know -- you must know, if we are all to keep our eyes and

our heads clear for the hard job that still lies ahead of us -what such a determination calls for, in dollars and cents, and
how the dollars and cents are to be raised.
Let's begin with our rate of spending in this war, and
how and why it has grown.

At the time of Pearl Harbor, when we were shocked into

a realization of what modern war really is by the treacherous
murder of hundreds of Americans by the Japanese -- even then,

we were pouring into war materials 64 million dollars a day.
Recovering from the shock of Pearl Harbor, we threw the lever
of our vast American machine of production into high gear.
And, by July of last year, our war expenditure climbed to 152
millions a day. By the end of 1942 we were spending 198

million a day. And today the figure is 240 million.
Between sunrise this morning, and sunrise tomorrow

morning, this war will have cost another two dollars for
every man, woman and child in the United States.
Why?

154
-4-

Because we have set out to produce so much equipment that
we will overpower the enemy wherever we meet him. So many

bombing planes, for example, that there will be traffic jams
in the sky over Berlin -- which I understand there are, already.
One wave of planes sometimes has to wait for another to go in.
General Arnold, commanding the Army Air Forces, says flatly
that he means to bomb Germany out of the war, and Mr. Churchill

says that, even if we can't, it won't do any harm to try. That
will cost a great deal of money. A four-motor bombing plane --

just one -- costs nearly half a million dollars. You have read
that we intend to drop a thousand, two thousand, three thousand

tons of block buster' bombs on the Axis nations in every raid -and a single two-thousand-pound block buster costs four hundred

dollars. Every time one of our battleships fires a broadside
of 16-inch guns at the Japanese, it costs thirteen thousand
dollars.

In other words, we're really
readdy getting into the war. At
last the United Nations are on the offensive. And that's where
we want to be!

Well -- to put us where we want to be, individual bond
buyers in the first half of this year have invested and are
inveeting 7 billion dollars in har Bonds; a little over 10%
of their income. That doesn't include money coming from cor-

porations, banks or other institutions. That's the amount that

-5-

the people themselves will already have invested this year
towards winning this war.

Splendid as such an achievement is, we can't stop now to

pat ourselves on the back. Not at this moment, certainly,
when we are on the very brink of invading Europe!

with this in mind, let's take a look ahead.
During the second half of this year -- from the first of
July until the end of December -- it is going to be necessary
for you to invest, not another 7 billions, but far more.
To be exact, unless we are able to raise the tax rate before
the end of the year, and before the end of the year get more
from taxes than will result from the present tax schedules,
we expect that we may have to ask you to lend your Government,

during the next six months, about twice as much as in the first
half of the year.
According to the best available figures, the money will be
there, as savings out of our 72 billions of national income
during the remainder of the year. According to our present
plans, we are asking you to invest the greatest portion of your
savings in war Bonds for the next six months. It is important
that we get this money, either in taxes or bonds, not only to
finance the war, but to protect ourselves against inflation.

Now that sounds like a lot, and it is a lot. However,
we know the money will be there. But in order to get it we

155

-6-

156

will have to have a more efficient sales organization than
ever before. It means we will have to have more volunteer
workers, because we will have to sell bonds to nearly every
man, woman and child in America. It means solicitation from
house to house, from bench to bench in factories, from desk
to desk in offices.

I am sure we will be able to swing this tremendous job
if we all work together, and I have good reasons for my
confidence.

First, we have proved that we have the will to do it.
During the Second War Loan Drive in April, we asked the

people -- the individual investors -- to buy 2 billion
dollars' worth of bonds, and they bought 3 billions. We
asked insurance companies and corporations for 5 billions,

and they invested nearly 10. We asked for volunteers to
take over the job of selling bonds to their friends and
neighbors, and more than a million men and women in the
United States became voluntary bond salesmen.

When the final score was in, we found that in the Second
War Loan Drive we had raised almost as much as the total amount

raised during all of the five bond drives of World War I.
Another reason I'm confident we will be able to raise the
money is that these figures, enormous as they are, aren't really
quite as bad as they sound.

For instance, when I say that our bond goal is twice as

157
-7-

much as in the first six months, that doesn't mean that every

family is going to have to set aside, arbitrarily, twice as
much. Under the Voluntary Plan we leave it to you, yourself,
to decide how many bonds you can afford to buy. Families with
heavy pre-war commitments in mortgages and insurance, and so on,
always
But folks who
may not be able to afford twice as much,

are earning more than their usual amount of money will be able
to invest even more.

Many people with larger-than-usual wages are already

putting high percentages of their pay into bonds. In some
cases where more than one member of the family is working, or

where the head of the family has a war job at good pay, the
percentage of War Bond buying is running to half -- even more -of the family income. There are many women in war jobs, with
husbands also working, who are investing 100% of their pay in
War Bonds: every cent they make! Those aren't isolated cases,

by any means. In April, I visited one war plant where they
were putting 23% of the total payroll into bonds.
Now I should like to stop here and discuss with you, for
a moment, some facts about war finance as I see them.

I know that nobody likes high taxes. But this is war,
and I sincerely believe that taxes ought to be used to pay for
as large a share of the war costs as possible. I think taxes
ought to cover something like half of our expenses. They're

158
-8-

not covering nearly that much now. On the other hand, we
can't raise much more than half of the money through taxes
because, on such a huge scale, we can't levy taxes with

fairness. And that's why we rely on bond sales for the
remaining amount. Bonds are flexible. They allow for the
personal obligations which you may have, which may be

entirely differentfrom the obligations of your neighbor.
Now, let's talk for a moment about the concrete job of
raising twice as much money from individual investors in
the next six months.

First of all, we're starting right now to expand the
Payroll Savings Plan. We hope to make it produce, month in
and month out, 50% more than at present. Every worker is
being asked to figure out for himself how much more than the
10% we have previously used as a goal he can lay aside, out

of his current earnings, for War Bonds. Whether we will
succeed in this depends squarely upon labor and management

working together to make the payroll plan work at top

efficiency in every plant in the nation.
We are also planning on new War Loan Drives, especially

to raise money from individuals. The next drive will start
September 9 th. I am announcing this for the first time today,

because it is a part of the blue print of the future. On
September th we will launch the Third War Loan Drive -- and

159
-9-

it will aim at raising the largest amount of money from
individuals that any drive has raised in the history of
the world.

Our goal for individuals in this September Drive will
be to get a substantial part of the necessary money. In a
subsequent drive, and during the four months in which there
are no Mar Loan Drives -- through payroll savings and other

continuing sales -- we will aim to get the rest.
I don't believe this is an impossible job for the American

most

people. The incomes received by of us will be so much
greater, than the sum total of all the things we can buy, that
money will be at hand to purchase the necessary bonds and still

pay taxes, life insurance, mortgage obligations, doctors' bills,
and to make all the rest of the necessary expenditures.
As the Secretary of your Treasury, I can only tell you how
much money is needed; I can only lay the figures before you

frankly and honestly. The rest is up to you. I must depend
upon your own recognition of your responsibility.
The very fact that you are free to lend according to the
dictates of your conscience; that no storm-trooper comes
swaggering into your kitchen to demand your money -- the

very fact that you are free adds the more weight to your
responsibility.

160
-10-

We know, now, what this war is going to cost this year.
ine know about how many planes and tanks and ships we'll need.
We know approximately how many men we'll have in our armies

and how much equipment we'll have to provide for them. We know

those things because our days of guess-work are over. he know

exactly what we're going to do, and how we're going to do it!
From now on, we're going to do the planning -- and the attacking.
And I fervently hope that we can continue to work out our
financing plans together, and keep them on a voluntary basis.

But in the final analysis, that is up to you, the American
people.

161
OFFICE OF

TREASURY DEPARTMENT
WASHINGTON
THE

SECRE
SECRETARY

June 12, 1943

My dear Mr. Secretary:

I am enclosing a working print of an
organization chart for Washington and for the
States. We have made these very general and
after you have studied them you may have sug-

gestions to make concerning the final form

that some of these positions as well as di-

visions of work will take. I felt a need of
something of this kind to take into the field
with us.

Sincerely yours,

Ted R. Gamble

Honorable Henry Morgenthau, Jr.

Secretary of the Treasury
Doctor's Hospital

FOR DEFENSE

BUY
STATES
SAVINGS

BOXDS

New York, New York

162

UNITED STATES TREASURY
WAR FINANCE COMMITTEE WASHINGTON, D.C.
June 9, 1943

SECRETARY

Under Secretary
Director
of Sales
ASSISTANT
ADMINISTRATIVE

ADVERTISING
ASSISTANT

ASSISTANT

Promotion
Planning
Board

ADMINISTRATION
Budgets

Division
Heads

Personnel -

ADVERTISING RADIO
PRESS 8 PROMOTION

O.W.

Press - Radio Advertising-Production

War

Advertising

Space

Retail-Motion pictures -

Vouchers Mail

Special events - Miscel

Messengers -

laneous-Creative writing

Council

ASSISTANT
OPERATIONS

BANKING 8

INVESTMENT DIVISION

INDUSTRIAL DIVISION

PAYROLL LABOR

Corporations -

Public employees-

Bank customer lists Special names -

Commercial and indus-

Broker's lists -

Agriculture - Schools Women Retailers

trial employees-

Self employed
Professions - Newspaper

Union and brotherhoods-

carrier boy activity

Government agencies Saving and loan -

Labor management

Miscellaneous institutions

committees

and associations -

COMMUNITY DIVISION

Fraternal, service and
other community organi-

zations Inter-racial and
foreign origin groups-

Z-360

163

STATE WAR FINANCE COMMITTEE
June 9, 1943

STATE
STATE

CHAIRMAN

COMMITTEE

VICE CHAIRMAN

Executive
Manager

ADVERTISING RADIO
PRESS 8 PROMOTION

ADMINISTRATION
Office

Press Radio -

Personnel -

Advertising Retail-

Budgets- - - Etc.-

Special events -

Speakers Theaters
Miscellaneous -

BANKING 8
INVESTMENT DIVISION
Corporations

Bank customer lists Special names -

Broker's lists Government agencies -

Saving and loan Miscellaneous institutions

and associations -

INDUSTRIAL DIVISION
PAYROLL

LABOR

Public employees
Commercial and indus-

trial employees-

COMMUNITY DIVISION

Agriculture Schools Women Retailers
Self employed
Professions - Newspaper

Union and brotherhoods-

carrier boy activity

Labor management
committees -

Fraternal, service and

other community organizations Inter-racial and
foreign origin groupsHouse to house convess-

Z-361

164

June 12, 1943

TO:

HAROLD N. GRAVES

SUBJECT: WEEKLY REPORT FROM WAR SAVINGS STAFF

FIELD DIVISION

Retail Section
The attached special sales promotion bulletin,
prepared by the National Retail Dry Goods Association,
was devoted to the 200 Savings Staff "Shangri-La" promotion.
(Attachment No. 1)

Attached is a clipping on the promotion the
Levine Bostone Store in LaPorte, Indiana, is giving to the
bridal War Stamp bouquet. (Attachment No. 2)

Instead of the customary birthday sale of
merchandise, Loveman's Inc. of Chattanooga, Tennessee,

will celebrate its 68th anniversary with a storewide sale
of War Bonds and Stamps - "the greatest bargain in America".

-2-

165

FIELD DIVISION (Continued)

Motion Pictures and Special Events Section
The April War Bond premiere of "Desert Victory",
at the Paramount Theatre, Portland, Oregon, resulted in the
sale of $1,800,000 in War Bonds.

War Bonds and Stamps for entry fees and bids for

seats at a bowling tournament in Fort Worth, Texas, resulted
in sales amounting to $263,282.25.
"Books and Authors for War Bonds", third experimental
rally in New Bedford, Massachusetts, May 27th, raised $2,041,599
in cash purchases of War Bonds. Nearly $4,000,000 has been

raised in all three such events to date, at Allentown, Pennsylvania,
New Britain, Connecticut, and New Bedford, Massachusetts.
The "Truth or Consequences" War Bond broadcast from

Glendale, California, on June 5th, resulted in the sale of
$2,058,088 worth of War Bonds, for a total of $187,271,082
during the 13 weeks coast-to-coast tour.
During the past week the Two-Man Jap Sub toured
Schenectady, Utica, Syracuse, Geneva, Rochester, Batavia,

Niagara Falls and Buffalo, New York. State results from Maryland,
New Jersey, New York and Rhode Island are attached. (Attachment No.3)

Ringling Brothers, Barnum and Bailey Circus will have

the first showing on June 16th of their new continental circus,
"Spangles", at Madison Square Garden given over entirely to War
Bond purchasers.

-3-

166

FIELD DIVISION (Continued)
Women's Section

Multilithed copies of "One Hundred Billion Dollars for
War", a new bulletin prepared for the War Savings Staff by the
Professor of Economics, Vassar College, will be distributed to the
heads of Economics Departments and to libraries in every college
and university in the country.
An issue of the "Campus Clip Sheet" has been prepared
for summer sessions and distributed.
The attached mimeographed booklet, "Five One Act Plays

for Radio and Stage on the Subject of War Savings", has been forwarded
to State Women Chairmen and State Administrators. (Attachment No. 4)
A new mimeographed pamphlet, "Do's and Do Not's for War
Savings Booth Volunteers", has been prepared for use by women
manning War Savings booths.

Payroll Savings Section

The companies on the attached list are reported as having
achieved the goal of 10% or more during the past week. (Attachment No.5)

The analysis of exposure to Payroll Savings through
May 29, 1943 is attached. (Attachment No. 6)
Education Section

Arrangements have been completed for the first national

Schools-at-War Exhibit, which is to be held in Indianapolis, June 24th
to July 4th, during the annual meeting of the National Education
Association.

-4167

FIELD DIVISION (Continued)

Education Section

Plans are being developed for a traveling exhibit of
a selected number of representative scrapbooks, with captions
giving the history and achievements of the Schools-at-War Program,

to be displayed by retail stores throughout the country.
Forty-three pursuit ships, eight heavy bombers, and eight
medium bombers have been purchased by schools in twenty-four states

as of May 31st. Southern California leads the nation with sixteen
planes purchased by the schools.
Field Memoranda

Recent memoranda sent to the Field include numbers 626,
627, 628 and 629. (Attachment No. 7)

Special Activities Section
Twenty-four all-Negro public schools in Chicago carried
on a War Bond and Stamp Campaign from April 12th to May 14th which

resulted in total sales of $263,132.83 - an average of more than
$10,000 per school.

June 15th will see the start of radio station WTAG's
"Bombers For Berlin and Tokio" seven-weeks War Bond Campaign. No

definite goal has been set as yet, but a tentative minimum of fifteen
heavy bombers has been agreed upon.
NATIONAL ORGANIZATIONS DIVISION

There is no report for the Division this week.

-5-

168

PRESS, RADIO AND ADVERTISING DIVISION

Advertising Section
Returns to date on the general magazine campaign show

101 magazines already signed up with a circulation of over 30,000,000.
During the week of May 31st we received 101 War Bond

mentions and 6 complete ads in 6 magazines. Attached is a list of
the sponsoring companies and magazines in which the advertisements
appeared. (Attachment No. 8)

In the June issues of the attached list of 9 monthly
magazines we received 133 War Bond ad mentions and 8 complete

War Bond ads, totalling 141. (Attachment No. 9)
The new business publication advertisement "The Executive
Who Stops To Think" has been distributed to 700 business
publications.

The 50,000 corner-sheet posters to be used in the white
blanking space of the twenty-four sheet billboard posters have now
been completely distributed and have received a wide response, both

from national advertisers and from outdoor plant operators. Over
100 replies have been received from members of the Outdoor Advertisi

Association of America assuring us of their cooperation. Attached
is a list of some of the national advertising companies who have
promised to aid in this promotion. (Attachment No. 10)

Attached is a poster with an acrostic motif titled
Bonds or Nazi Dominated Slavery" prepared by the General Motors

Corporation and used in their various plants. (Attachment No. 11)

--

168

PRESS, RADIO AND ADVERTISING DIVISION

Advertising Section
Returns to date on the general magazine campaign show

101 magazines already signed up with a circulation of over 30,000,000.
During the week of May 31st we received 101 War Bond

mentions and 6 complete ads in 6 magazines. Attached is a list of
the sponsoring companies and magazines in which the advertisements
appeared. (Attachment No. 8)

In the June issues of the attached list of 9 monthly
magazines we received 133 War Bond ad mentions and 8 complete

War Bond ads, totalling 141. (Attachment No. 9)
The new business publication advertisement "The Executive
who Stops To Think" has been distributed to 700 business
publications.

The 50,000 corner-sheet posters to be used in the white
blanking space of the twenty-four sheet billboard posters have now
been completely distributed and have received a wide response, both

from national advertisers and from outdoor plant operators. Over
100 replies have been received from members of the Outdoor Advertising

Association of America assuring us of their cooperation. Attached
is a list of some of the national advertising companies who have
promised to aid in this promotion. (Attachment No. 10)

Attached is a poster with an acrostic motif titled
Bonds or Nazi Dominated Slavery" prepared by the General Motors

Corporation and used in their various plants. (Attachment No. 11)

-6169

PRESS, RADIO AND ADVERTISING DIVISION

Advortising Section (Continued)

Attached are envelope stickers prepared by the Abbott

Laboratories in which several of the poster designs distributed
through the Treasury are reproduced. (Attachment No. 12)

Attached is a group of stickers prepared by the Artists
for Victory, Inc., approved by the National Poster and Stamp

Society. Many of the designs are illustrative of the War Bond
theme. (Attachment No. 13)

Attached are a number of examples of business calling
cards on which is embossed a War Bond mention. (Attachment No. 14)

Attached are photographs of painted bulletins prepared
by the Southern Pacific Railway urging that "War Bonds bought

now will buy train trips later.' " (Attachment No. 15)
Attached is a photograph of a painted bulletin erected
on the plant of the Case-Moody Bakery in Chicago. The sign is

located at a transfer station of the elevated lines, and has a very
large impression opportunity. (Attachment No. 16)
Radio Section

Secretary Morgenthau will broadcast over the NBC Network

Saturday, June 12th, 2:00 - 2:30 P.M., on "The Effect of Invasion
on War Financing". The program will emanate from Kingston, New York,

on the occasion of awarding the Treasury Flag to all local concerns

--

170

PRESS, RADIO AND ADVERTISING DIVISION

Radio Section (Continued)

having 90% in the Payroll Savings Plan. Music will be furnished
by the 369th Army Air Force Band from Stewart Field, N. Y.
The British Broadcasting Corporation program "Stars

and Stripes In Britain" will salute the special War Bond Rally
being held in Aberdeen, South Dakota, over the Mutual Broadcasting
System coast-to-coast network Sunday, June 13th, 7:30 - 8:00 P.M.

South Dakota service men stationed in Britain will be heard on
the broadcast.

A dramatic tribute to the U. S. Army engineers will be
heard on the "Saturday Night Bondwagon" Saturday, June 12th,

10:15 - 10:45 P.M. over the Mutual Broadcasting System network
when a distinguished cast enact "America's Burma Road". Bob Stanley
conducts the orchestra.
Teddy Powell and his orchestra will replace Tommy Dorsey

on the regular Treasury broadcast Friday, June 11th, over the
Blue Network 12:30 - 1:00 P.M. from the Roosevelt Hotel in
Washington, D. C.

Jack Benny signed off his last broadcast for the summer,
the day before Memorial Day, Sunday, May 30th, 7:00 - 7:30 P.M., over
the NBC Network, with a plea to buy War Bonds in memory of our dead

who have fought for us since 1776. (Attachment No. 17)

-8171

PRESS, RADIO AND ADVERTISING DIVISION

Radio Section (Continued)

Radio station WHBC, Canton, Ohio, sold three and

three-quarter million dollars in series "E" War Bonds through
a Bond Contest inaugurated last fall and ending May 25th. War
Bonds purchasers were granted votes for their favorite high
school student on the weekly War Bond Quiz broadcast conducted

each Tuesday during the school year. Winners received scholar-

ships to the university of their choice.
Alvin Austin, Executive Director of the National
Father's Day Committee, will describe some of the Committee's

activities in cooperation with the War Bond Drive over the
Mutual Broadcasting System network Monday, June 14th, 8:30 - 9:00 P.M.
The Murder Clinic" heard over the Mutual Broadcasting

System network Sundays 6:00 - 6:30 P.M. will deviate from the usual
mystery story on June 13th when a skit written around War Bonds
as a good investment will be presented.
Press Section

Attached is a tear sheet containing a poster reproduction
carried in the June issue of PARENTS MAGAZINE. (Attachment No. 18)

Slug lines are carried on practically every page of the
June issue of COSMOPOLITAN, which is attached. (Attachment No. 19)
The June issue of GLAMOUR carries a War Bond mention in

a feature story, "Their Ideal Girl", and also a mention at the end
of the story. (Attachment No. 20)

-9172

PRESS, RADIO AND ADVERTISING DIVISION

Press Section (Continued)

Attached are book jackets from Alfred Knopf, Inc.
containing War Bond mentions. (Attachment No. 21)
Attached is newspaper release number 339 concerning

purchases of Stamps and Bonds by school children. (Attachment No. 22)

OFFICE OF THE EXECUTIVE DIRECTOR

Promotional Research Section

Attached is the analysis of newspaper carrier sales as
of June 10,1943. (Attachment No. 23)

173
THE WHITE HOUSE
WASHINGTON

June 12, 1943.

MEMORANDUM FOR

THE SECRETARY OF THE TREASURY:

The Mobilization Director says that all
that he has done about the tax matter is to invite you,
Vinson and Smith to cooperate in preparing a draft of a

message which I told him I wanted in considering whether
I would send to the Congress a message on taxes, inflation
and subsidies. Each of the Department named have

responsibilities in connection with the subjects.
If I approve a tax program I would, of

course, expect you to present it to the Congress as my
program. Thereafter there would be no excuse for conflict-

ing views being presented by various officials. This unity

of support should help you in presenting the program.
When you return you and the Director
should get together and arrange to cooperate in this matter.
Do not let the newspapers disturb you.
F.D.R.

174
June 12, 1943

To the Secretary-

I am having the draft of the proposed Presidential Message on
taxes and subsidy payments which Gerhard Colm sent me this morning,

transmitted to you through the Secret Service in order that you may have

it on Monday, at which time it may be necessary for us here in the

Treasury to talk to you about it. Mr. Paul, Mr. White and Mr. Haas are
away today, Mr. Gaston is getting ready to leave tonight, and we were
all tied up most of the morning on your speech so those of us here have

not had much opportunity to go over this proposed message. I called
Ben Cohen as to the time and he said we had at least until Monday.
Personally I should not think that such a message would go out

until after your conference with the congressional representatives on
Tuesday, at which time you might get their reaction to a message from

the President at this time.
For convenient references in any telephone conversation we may have
on Monday, I have numbered the paragraphs. There are a few which I

should like to have you note particularly.
Paragraph Number 7 takes a defeatist attitude and certainly
should be rearranged.

In Paragraph Number 10 you will notice that they have used taxes
and current savings together, and in Paragraph 11 additional taxes and
savings are synonymous with revenue. Savings certainly are not revenue,
but borrowings.

In Paragraph 12 you will notice that they have stated that the
Executive Branch of the Government will do everything it can to help

the Congress in the difficult task of providing adequate "fiscal
legislation."

175

In Paragraph Number 13 it is suggested that the basic rate of

collection at the source should be substantially increased. I am not
sure whether this means the normal and surtax basic rates. Certainly
the rate of withholding should not be increased unless the basic rates
of taxation are increased, because millions of taxpayers are now paying

their taxes inalso
full under the 20 per cent withholding.
You will/note that in Paragraph 16 compulsory saving is brought
into the picture, and again in Paragraph 34.
You will also note that the whole tax and savings program calls

for twenty billion dollars on an annual basis.
I have not had time to figure it out, but the subsidy program looks

very costly to mo. If it costs half a billion dollars for each point
we roll back the cost of living, I should think it would become very
expensive.

We have received an answer from the President to your letter of

June tenth. I did not, however, want to make it a part of this
transmission.
D. W. B.

2.

176 3.
Par. 1.

I have signed the current tax payment bill. I have done so,
despite my objections to the forgiveness provisions of the bill, because

I deem current collection of individual income taxes essential to our
revenue system. Such a method of collection is imperative with rates

at needed levels. It will facilitate tax payments for millions of
small taxpayers now brought under our income tax laws, and will

prevent delinquencies. It will mean prompter collection of taxes on
higher 1943 incomes, and it will make the income tax a more responsive

instrument of inflation control.
Par. 2.

I must repeat that I wholly disapprove the forgiving of the bulk of
a year's tax liabilities to those in the higher income brackets who have
long been accustomed to the income tax system. The net estates of these
taxpayers will be thereby enhanoed, in a war year, through accretions
which in many cases are greater than they have enjoyed in any year since

the beginning of the last world war. I regard these forgiveness features
of the act as inequitable, and I hope that the Congress, taking second
thought, will do all in its power to remedy the situation by the amendment
and upward revision of the estate and gift taxes, by putting an end to
tax-exempt securities, and by closing up other tax loopholes.
Par. 3.

But adoption of a ourrent method of tax payment is not the end of
our problem.

177
Par. 4.

During the war our aggregate incomes have increased enormously,

but the aggregate amount of goods and services available for our oivilian
needs has been substantially reduced. After taking taxes and savings out
of our rising incomes, we shall have left much more money to spend for

goods and services than we shall have goods and services for civilian
use.

Par. 5.

We cannot stand idly by and fail to do what we can to close the
flood gates against the inflation which imminently threatens to overwhelm
us. To do this, we must impose on ourselves much higher taxes.
Par. 6.

Unless we adopt fiscal measures adequate to control this gap
between purchasing power and supplies available to be bought, the gap

will be bridged by higher prices, legal or illegal, or by further
accumulation of liquid assets ready to surge into the markets for

If

commodities or capital assets. All other controls--price ceilings,
rationing, wage stabilization--carmot withstand the consequent
inflationary pressure and our domestic security and maximum production

will be seriously impaired.
Par. 7.

We are all opposed to black markets. But until the billions of
dollars of excess purchasing power are absorbed by taxation or savings,

black markets will thrive and flourish, price oeilings will be evaded,
and wages will be forced upward. Effective stabilization, on the other
hand, assures people that they can buy an adequate minimum of supplies

on legitimate markets, and that the cost of the war is distributed in the
most equitable manner.

4.

178
Par. 8.

We cannot hope to meet the total costs of the war out of current

taxation. Though war necessitates that we all change our living habits,
there is a point beyond which we cannot go without retarding rather than
advancing the war effort.
Par. 9.

But we should aim at meeting at least one-half of the cost of the
war through taxation and enforced saving. Both England and Canada are

bearing in form of taxes and enforced savings about 50 per cent of

their war costs. We should be able to do at least as well. With our
present taxes we are paying about a third of our war costs. That is
not enough.
Par. 10.

Our failure to pay more of our war costs from taxes and current

savings is not only handicapping us in our fight against inflation, but

is storing up trouble for the future. It is unfair to our fighting men
to pass on to their shoulders too heavy a load. We at home must meet
our obligations.
Par. 11.

Our objective should be to secure additional taxes and savings

which in a full year of operation will yield an additional 20 billion
dollars in revenues. If before October first the Congress adopts a
20 billion dollar program so that by the end of the year we are obtaining
full collections under such a program, revenue receipts during the

fiscal year 1944 will still fall substantially short of the 16 billion
dollars objective stated in my budget message of January 6, 1943. Any

delay in the enactment of the proposed program will further increase this
deficiency.

5.

6.

Par. 12.

I know that the Congress has been in session for a long time

179

without recess. But our need for adequate fiscal legislation is such
that I must urge upon the Congress the necessity for such legislation
at an early date. The Executive Branch of the Government will do

everything it can to help the Congress in the difficult task.
Par. 13.

I wish to state at this time general principles constituting my
fiscal policy upon which I shall stand and which I hope may be, under
present circumstances, helpful to the Congress in working out a

war-time tax program. I suggest that the basic rate of collection at the
source should be substantially increased. To preserve the progressive
character of the individual income tax, I recommend a special and
steeply graduated tax on the higher incomes.
Par. 14.

I repeat my suggestion that the inequities of the tax cancellation
provisions of the current tax payment act be corrected as far as feasible
by appropriate amendment of the estate and gift tax laws. I also believe
that an increase in corporate taxes should be given serious consideration.
Par. 15.

I also recommend additional excise taxes on commodities which, under

war-time standards, may be regarded as luxuries; any tax further
encroaching on subsistence levels, however, would, in my opinion, be

wholly inconsistent with the policy of reducing the price of essentials
which I am recommending later in this message.

7.

Par. 16.

I believe that we should collect the greatest possible amount of a
20 billion dollar program by additional taxes, but if the Congress should
feel that this whole amount cannot be secured by additional taxes without
undue hardship, resort should be had to compulsory savings. In that case,
provision should be made for the release of savings during the war to
relieve genuine hardship.
Par. 17.

While an adequate tax and savings program is necessary to enable us

to keep the cost of living stable, we cannot have an adequate or fair tax
or savings program unless we keep our pledge to stabilize the cost of
living.
Par. 18.

In the Act of October 2, 1942, the Congress directed that prices,

wages and salaries, effecting the cost of living be stabilized as far
as practicable on the basis of the levels existing on September 15.
Since September 15, the worker's weekly pay aheok has risen primarily
because of lengthened hours and secondarily because of the correction

of inequities in the existing wage structure. But there are many workers
who have received no wage increases since September 15, and the cost of

living has continued to rise.
Par. 19.

The wage stabilization program is dependent on the stabilization

of the cost of living. This is expressly recognized in the Act of
October 2, 1942. The Little Steel Formula was based on the fact that

there had been a rise of approximately 15 per cent in the cost of living
between January 1941 and May 1942, for which rise workers could be

180

8.

Par. 19 (cont'd)

181

compensated by wage increases. The cost of living has now risen about
8 per cent above what it was in May 1942 and about 6 per cent above what
it was in September 1942.
Par. 20.

Labor organizations have requested a out in the cost of living to the
September or even May 1942 levels. They contend that stabilization of
wage rates has been more effective in recent months than stabilization
of prices.
Par. 21.

Whatever theoretical ohoices may conceivably be open to us,

practically we will have only two. We must roll back the cost of living

or we will be forced to allow wages to rise. If wages rise the cost of

living will not stand where it is; it will go up and the inflationary
spiral will gain strength.

Par. 22.

We have already recognized the necessity of rolling back the costs

of important items in the family food basket. Such reduction is
essential to hold the wage line.
Par. 23.

I do not think, however, that a roll back of all living costs or
wage incomes to the September level is practicable. We all must be

prepared in total war to accept a substantial out in our accustomed

standards of living. But we must out back a substantial part of the
rise in the cost of living since September 15, if we are going to hold the
wage line.

9.

Par. 24.

182

We must take positive steps to assure our people that adequate

supplies of essentials will be available in legitimate markets at prices

within their reach. Such action will help to hold the line and prevent
the beginning of another spiral.
Par. 25.

It should be possible to roll back the cost of living to some
extent by reducing profits and margins where they are excessive.

But to break the strong inflationary trend now operative, and to maintain

prices at a reduced level, it will be necessary to make a limited use of
subsisies in addition to a firm price and wage policy and an adequate
fiscal program. This was the only way Canada and England were able to

stop the rising price trend and to stabilize wages. I am deeply
convinced that this is the only practical way we can prevent the

inflationary spiral from getting beyond control.
Par. 26.

I am convinced that a limited and judicious use of consumers

subsisies is the cheapest practical course of action open to us. It will
take something less than a half billion dollars for each point we under-

take to roll back in the cost-of-living index.
Par. 27.

The only alternative to such action will be more costly to the
Treasury and to the people. If we default on our obligation to stabilize
be

the cost of living "so far as practical/on the basis of the levels which existed on September 15," as the Act of October 2 directed us to do, a

modification of the Little Steel Formula will, I believe, be unavoidable.
I am convinced that an increase in labor costs will add substantially more

10.

183

Par. 27 (cont'd)

to our war expenditures than the limited amount of subsisies necessary to
stabilize the cost of living and forestall wage demands.
Par. 28.

If only a 5 per cent overall increase in wages should ocour as a
consequence of our default, that added cost of labor alone would cause

an increase of not less than two and one-quarter per cent in the general
level of prices. That would increase our annual war costs approximately

two and one-quarter billion dollars. For we are spending 100 billions
per annum for war and every rise of one per cent in the prices Government
pays adds approximately one billion to the Government's war expenditures
assuming, of course, that soldier's pay and dependent allotments are

increased proportionately. A five per cent wage increase would, moreover,
increase the cost of living by at least two and one-quarter per cent and

would cost consumers at least two billion dollars a year. The limited
subsisies I have in mind to stabilize the cost of living do not even
approach these figures.
3

Par. 29.

And, what is more, if we would have taken the wage increase route

we would not have stabilized the cost of living even at this higher level.
Rising costs would continue to press against the price and wage levels

and these would be forced higher still. Rising wages would add to the
excess purchasing power, and an enlarged inflationary gap might make the

fiscal task of absorbing excess purchasing power by higher taxes and
enforced savings unmanageable. Those with small fixed incomes, widows

and old folks with small pensions, the white-collar and unorganized
workers, the soldiers' wives and children with small dependency allowances,
.

would be ground below the margin of fair subsistence

11.

Par. 30.

184

I need not tell the Congress the devastation which will be wrought,
far and wide, on the farmer, the worker and the business man, if the

fires of inflation ever get out of control.
Par. 31.

I have been speaking of the need of subsidies to stop and roll back
rising consumer's costs in order to avoid further wage increases which
would accelerate the inflationary spiral. We have for some time by
support programs and benefit payments provided inducements to get the

war crops we need. We shall have to continue to use support prices and
incentive payments to secure in requisite volume the needed war crops.

But if we want to avoid inflation we must see that these rising costs are
not passed on to the consumers. For if consumers' food prices are not rolled
back and maintained at the lower level, we shall not be able to hold the

wage line, and if the wage line is not held, the support prices and
incentive payments which we make to producers will be nullified by the

inflation of all prices and all costs.
Par. 32.

We must pay enough to producers to get the war production we need.

But we must get the necessities of life to consumers at prices low
enough to avoid inflation.
Par. 33.

Those in command of our war economy like those in command of our
armies must be endowed with adequate authority to meet emergency

situations as they arise. Subsidy programs will be undertaken only

with the approval of the Director of Economic Stabilization and he will
submit to the Congress quarterly reports on subsidies paid in support

of the stabilization program.

12.

185

Par. 34.

I appeal to the Congress, I appeal to the people to pull together

as a team to stabilize the cost of living. With the cost of living in
process of being stabilized on a firm foundation, we must proceed to mop
up and store up by tax action and enforced savings the excess purchasing
power in the market which constantly threatens to undermine that
foundation.
Par. 35.

Despite the loss of life and of treasure we can come out of this
war with our economy in working order. We will have plants and
technical knowledge and trained skill such as we have never before

possessed. We will be able to achieve a higher standard of living than

ever before if only we do not let our economy get out of gear, if only
we avoid the dangers of wartime inflation. We must avoid these dangers

if we are to play our part in the postwar reconstruction and to achieve
a lasting and durable peace. We must not throw away the fruits of
victory.

It has been suggested that the following be added at the bottom of

Paragraph 16 (p. 7 of this draft):
I recommend also a very substantial expansion and improvement

of our social security program. Our economy can afford higher contri-

butions for social insurance. It will help also to protect millions of
our workers in the postwar period.
June 11, 1943

186

TSD

SECRET SVC NY KETTL FFF

VA CLG HLD OK EOC
RDY WITH NY 1-2139
ANNNOUNCE AG PLS TSECRET SERVICE WA WILSON
SECRET SVC NY KETTL FFF

THIS IS THE MESSAGE TO THE DUKE ABOUT WHICH YOU INQUIRED EARLIER TODAY.

-43 YO ARE YOU READY TO TAKE IT
YES

THIS MESSAGE MUST BE DELIVERED TO DUKE THIS EVENING OR TOMMORROW MORNING.

JUNE 12 1943

186

TO THE SECRETARY-

I AM HAVING THE DRAFT OF THE PROPOSED PRESIDENTIAL MESSAGE ON
TAXES AND SUBSIDY PAYMENTS WHICH GERHARD COLM SENT ME THIS MORNING,

TRANSMITTED TO YOU THROUGH THE SECRET SERVICE IN ORDER THAT YOU MAY HAVE

IT BY XXX ON MONDAY, AT WHICH TIME IT MAY BE NECESSARY FOR US HERE IN
IN THE TREASURY TO TALK TO YOU ABOUT IT. MR. PAUL, MR. WHITE AND
MR. HAAS ARE AWAY TODAY, MR. GASTON IS GETTING READY TO LEAVE TONIGHT,
AND WE WERE ALL TIED UP MOST OF THE MORNING ON YOUR SPEECH SO THOSE OF
US HERE HAVE NOT HAD MUCH OPPORTUNIYXXX OPPORTUNITY TO GO OVER THIS
PROPOSED MESSAGE. I CALLED BEN COHEN AS TO THE TIME AND HE SAID WE HAD
AT LEAST UNTIL MONDAY.

PERSONALLY I SHOULD NOT THINK THAT SUCH A MESSAGE WOULD GO OUT
UNTIL AFTER YOUR CONFERENCE WITH THE CONGRESSIONAL REPRESENTATIVES ON

TUESDAY, AT WHICH TIME YOU MIGHT GET THEIR REACTION TO A MESSAGE FROM
THE PRESIDENT AT THIS TIME.
FOR CONVENIENT REFERENCES IN ANY TELEPHONE CONVERSATION WE MAY HAVE
ON MONDAY, I HAVE NUMBERED THE PARAGRAPHS. THERE ARE A FEW WHICH I
SHOULD LIKE TO HAVE YOU NOTE PARTICULARLY.

PARAGRAPH NUMBER 7 RXXX TAKES A DEFEATIST ATTITUDE AND CERTAINLY
SHOULD BE REARRANGED M

IN PARAGRAPH NUMBER 10 YOU WILL NOTICE THAT THEY HAVE USED TAXES
AND CURRENT SAVINGS TOGETHER, AND IN PARAGRAPH 11 ADDITIONAL TAXES AND
SAVINGS ARE SYNONYMOUS WITH REVENUE. SAIXXXSAIXXX SAVINGS CERTAINLY
ARE NOT REVENUE, BUT BORROWINGS.

IN PARAGRAP 12 YOU WILL NOTICE THAT THEY HAVE STATED THAT THE
EXECUTIVE BRANCH OF THE GOVERNMENT WILL DO EVERYTHING IT CAN TO HELP
THE CONGRESS IN THE DIFFICULT TASK OF PROVIDING ADEQUATE "FISCAL
LEGISLATION.'
IN PARAGRAPH NUMBER 13 IT IS SUGGESTED THAT THE BASIC RATE OF
COLLECTION AT THE SOURCE SHOULD BE SUBSTANTIALLY INCREASED M. I AM NOT
SURE WHETHER THIS MEANS THE NORMAL AND SURTAX BASIC RATES. CERTAINLY
THE RATE OF WITHHOLDING SHOULD NOT BE INCREASED UNLESS THE BASIC RATES
OF TAXATION ARE INCREASED, BECAUSE MILLIONS OF TAXPAYERS ARE NOW PAYING
THEIR TAXES IN FULL UNDER THE 20 PER CENT WITHHOLDING.
also

YOU WILL NOTE THAT IN PARAGRAPH 16 COMPULSOY CXXX COMPULSOY
COMPULSORY SAVING IS BROUGHT INTO THE PICTURE, AND AGAIN IN PARAGRAPH 34.
YOU WILL ALSO NOTE THAT THE WHOLE TAX AND SAVINGS PROGRAM CZLLS FOR
TWENTY BILLION DOLLARS ON AN ANNUAL BASIS.

I HAVE NOT HAD TIME TO FIGURE IT OUT, BUT THE SUBSIDY PROGRAM LOOKS
VERY COSTLY TO ME. IF IT COSTS HALF A BILLION DOLLARS FOR EACH POINT
WE ROLL BACK THE COST OF LIVING, I SHOULD THINK IT WOULD BECOME VERY
EXPENSIVE.

WE HAVE RECEIVED AN ANSWER FROM THE PRESIDENT TO YOUR LETTER OF

OF JUNE TENTH. I DID NOT, HOWEVER, WANT TO MAKE IT A PART OF THIS
TRANSMISSION.

DB

187
PAR. 1

2

I HAVE SIGNED THE CURRENT TAX PAYMENT BILL. I HAVE DONE so,
DESPITE MY OBJECTIONS TO THE FORGIVENESS PROVISIONS OF THE BILL, BECAUSE
I DEEM CURRENT COLLECTION OF INDIVIDUAL INCOME TAXES ESSENTIAL TO OUR
REVENUE SYSTEM. SUCH A METHOD OF COLLECTION IS IMPERATIVE WITH RATES
AT NEEDED LEVELS

IT WILL FACILITATE TAX PAYMENTS FOR MILLIONS OF
SMALL TAXPAYERS NOW BROUGHT UNDER OUR CXXX INCOME TAX LAWS, AND WILL
PREVENT DELINQUENCIES . IT WILL MEAN PROMPTER COLLECTION OF TAXES ON
HIGHER 1943 INCOMES, AND IT WILL MAKE THE INCOME TAX A MORE RESPONSIVE
INSTRUMENT OF INFLATION CONTROL.
PAE PAR. 2

I MUST REPEAT THAT I WHOLLY DISAPPROVE THE FORGIVING OF THE BULK OF
YEAR S TAX LIABILITIES TO THOSE IN THE HIGHER INCOME BRACKETS WHO HAVE
LONG BEEN ACCUSTOMED TO THE INCOME TAX SYSTEM. THE NET ESTATES OF THESE
TAXPAYERS WILL BE THEREBY ENHANCED, IN A WAR YEAR, THROUGH ACCRETIONS
WHICH IN MANY CASES ARE GREATER THAN THEY HAVE ENJOYED IN ANY YEAR SINCE
THE BEGINNING OF THE LAST WORLD WAR. I REGARD THESE FORGIVENESS FEATURES
OF THE ACT AS INEQUITABLE, AND I HOPE THAT THE CONGRESS, TAKING SECOND
THOUGHT, WILL DO ALL IN ITS POWER TO REMEDY THE SITUATION BY THE AMENDMENT AND UPWARD REVISION OF THE ESTATE AND GIFT TAXES, BY PUTTING AN
END TO TAX-EXEMPT SECURITIES, AND BY CLOSING UP OTHER TXXXX TAX LOOPHOLES
A

0-4

PAR. 3

BUT ADOPTION OF A CURRENT METHOD OF TAX PAYMENT IS NOT THE END OF
OUR PROBLEM.

PAR. 4

DURING THE WAR OUR AGGREGATE INCOMES HAVE INCREASED ENORMOUSLY,
BUT THE AGGREGATE AMOUNT OF GOODS AND SERVICES AVAILABLE FOR OUR CIVILIAN
NEEDS HAS BEEN SUBSTANTIALLY REDUCED. AFTER TAKING TAXES AND SAVINGS OUT
OF OUR RISING INCOMES, WE SHALL HAVE LEFT MUCH MORE MONEY TO SPEND FOR
GOODS AND SERVICES THAN WE SHALL HAVE GOODS AND SERVICES FOR CIVILIAN
USE.

PAR. 5

WE CAN NOT STAND IDLY BY AND FAIL TO DO WHAT WE CAN TO CLOSE THE
FLOOD GATES AGAINST THE INFLATION WHICH IMMINENTLY THREATENS TO OVERWHELM

US. TO DO THIS, WE MUST IMPOSE ON OURSELVES MUCH HIGHER AXXX TAXES.
PAR. $

UNLESS WE ADOPT FISCAL MEASURES ADEQUATE TO CONTROL THIS GAP
BETWEEN PURCHASING POWER AND SUPPLIES AVAILABLE TO BE BOUGHT, THE GAP

WILL BE BRIDGED BY HIGHER PRICES, LEGAL OR ILLEGAL, OR BY FURTHER
ACCURULATION OF LIQUID ASSETS READY TO SURGE INTO THE MARKETS FOR CONNO

CORMODITIES OR CAPITAL ASSETS. ALL OTHER CONTROLS - PRICE CEILINGS,
RATIONING, WAGE STABILIZATION - CAN NOT WITHSTAND THE CONSEQUENT
INFLATIONARY PRESSURE AND OUR DOMESTIC SECURITY XXX SECURITY AND MAXIMUM
PRODUCTION WILL PE SERIOUSLY

188

WE ARE ALL OPPOSED TO BLACK MARKETS. BUT UNTIL THE BILLIONS OF
DOLLARS OF EXCESS PURCHASING POWER ARE ABSORBED BY TAXATION OR SAVINGS,

BLACK MARKETS WILL THRIVE AND FLOURISH, PRICE CEILINGS WILL BE EVADED,
AND WAGES WILL BE FORCEDUXXX FORCED UPWARD. EFFECTIVE STABILIZATION,
THE OTHER HAND, ASSURES PEOPLE THAT THEY CAN BUY AN ADEQUATE MINIMUM
OF SUPPLIES ON LEGITIMATE MARKETS, AND THAT THE COST OF THE WAR IS
DISTRIBUTED IN THE MOST EQUITABLE MANNER.
ON

PAR to
WE CAN NOT HOPE TO MEET THE TOTAL COSTS OF THE WAR OUT OF CURRENT
TAXATION. THOUGH WAR NECESSITATES THAT WE ALL CHANGE OUR LIVING HABITS,
THERE IS A POINT BEYOND WHICH WE CANNOT GO WITHOUT RETARDING RATHER THAN
ADVANCING THE WAR EFFORT.
PAR. 9

BUT WE SHOULD AIM AT MEETING AT LEAST ONE-HALF OF THE COST OF THE
WAR THROUGH TAXATION AND ENFORCED SAVING. BOTH ENGLAND AND CANADA ARE
BEARING IN FORM OF TAXES AND ENFOCED *** ENFORCED SAVINGS AOXXX ABOUT
50 PER CENT OF THEIR WAR COSTS. WE SHOULD BE ABLE TO DO AT LEAST AS
WELL. WITH OUR PRESENT TAXES WE ARE PYXXXPAYING ABOUT A THIRD OF OUR
WAR COSTS. THAT IS NOT ENOUGH
PAR. 10

OUR FAILURE TO PT PAY MORE OF OUR WAR COSTS FROM TAXES AND CURRENT

SAVINGS IS NOT ONLY HANDICAPPING US IN OUR FIGHT AGAINST INFLATION, BUT

IS STORING UP TROUBLE FOR THE FUTURE. IT IS UNFAIR TO OUR FIGHTING MEN
TO PASS ON TO THEIR SHOULDERS TOO HEAVY A LOAD. WE AT HOME MUST MEET
OUR OBLIGATIONS.
PAR. 11

OUR OBJECTIVE SHOULD BE TO SECURE ADDITIONAL TAXES AND SAVINGSPL
XXX SAIXXX SAVINGS WHICH IN A FULL YEAR OF OPERATION WILL YIELD AN

ADDITIONAL 20 BILLION DOLLARS IN REVENUES. IF BEFORE OCTOBER FIRST THE
CONGRESS ADOPTS A 20 BILLION DOLLAR PROGRAM SO THAT BY THE END OF THE
YEAR WE ARE OBTAINING FULL COLLECTIONS UNDER SUCH A PROGRAM, REVENUE
RECEIPTS DURING THE FISCAL YEAR 1944 WILL STILL FALL SUBSTANTIALLY
SHORT OF THE 16 BILLION DOLLARS OBJECTIVE STATED IN MY BUDGET MESSAGE
OF JANUARY 6, 1943. ANY DELAY IN THE ENACTMENT OF THE PROPOSED POXXX
PROGRAM WILL FURTHER INCREASE THIS DEFICIENCY.
PAR. 12

I KNOW THAT THE CONGRESS HAS BEEN IN SESSION FOR ALONG TIME
WITHOUT RECESS. BUT OUR NEED FOR ADEQUATE FISCAL LEGISLATION IS SUCH
THAT I MUST URGE UPON THE CONGRESS THE NECESSITY FOR SUCH LEGISLATION
AT AN EARLY DAEXXX DAE DATE. THE EXECUTIVE BRANCH OF THE GOVERNMENT
WILL DO EVERYTHING IT CAN TO HELP THE CONGRESS IN THE DIFFICULT TASK.
PAR. 13

I WISH TO STATE AT THIS TIME GENERAL PIXXX PRINCIPLES CONSTITUTING
FISCAL POLICY UPON WHICH I SHALL STAND AND WHICH I HOPE MAY BE, UNDER
PRESENT CIRCUMSTANCES, HELPFUL TO THE CONGRESS IN WORKING OUT A WAR-58.
XXX WAR-TIME TAX PROGRAM. I SUGGEST THAT THE BASIC RATE OF COLLECTION
AT THE SOURCE SHOULD BE SUBSTANTIALLY INCREASED. TO PRESERVE THE
PROGRESSIVE CHARACTER OF THE INDIVIDUAL INCOME TAX, I RECOMMEND A
SPECIAL AND STEEPLY GRADUATED TAX ON THE HIGHER INCOMES.
MY

PAR. 14

189

I REPEAT MY SUGGESTION THAT THE INEQUITIES OF THE TAX CANCELLATION
PROVISIONS OF THE CURRENT TAX PYXXX PAYMENT ACT BE CORRECTED AS FAR AS
FEASIBLE BY APPROPRIATE AMENDMENT OF THE ESTATE AND GIFT TAX LAWS.
ALSO BELIEVE THAT AN INCREASE IN CORPORATE TAXES SHOULD BE GIVEN
I

SERIOUS CONSIDERATION.
PAR. 15

I ALSO RECOMMEND ADDITIONAL EXCISE TAXES ON COMMODITIES WHIH XXX
WHICH, UNDER WAR-TIME STANDARDS, MAY BE GXXX REGARDED AS LUXURIES
ANY TAX FURTHER ENCROACHING ON SUBSISTENCE LEVELS, HOWEVER, WOULD, IN
NY OPINION, BE WHOLLY INCONSISTENT WITH WITH THE POLICY OF REDUCING THE
PRICE OF ESSENTIALS WHICH I AM RECOMMENDING LATER IN THIS MESSAGE.
PAR. 15

I BELIEVE THAT WE SHOULD COLLECT THE GREATEST POSSIBLE AMOUNT OF A
20 BILLION DOLLAR PROGRAM BY ADDITIONAL TAXES, BUT IF THE CONGRESS SHOULD
FEEL THAT THIS WHOLE AMOUNT CAN NOT BE SECURED BY ADDITIONAL TAXES
WITHOUT UNDUE HARDSHIP RESORT SHOULD BE HAD TO COMPULSORY SAVINGS.
IN THAT CASE, PROVISION SHOULD BE MADE FOR THE RELEASE OF SAVINGS DURING
THE WAR TO RELIEVE GENUINE HARDSHIP.
PAR. 17

WHILE AN ADEQUATE TAX AND SAVINGS POXXX PROGRAM IS NECESSARY TO
ENABLE US TO KEEP THE COST OF LIVING STABLE, WE CANNOT HAVE AN ADEQUATE
OR FAIR TAX OR SA INGSXXX SAVINGS PROGRAM UNLESS WE KEEP OUR PLEDGETO

STABILIZE THE COST OF LIVING.
PAR. 18

IN THE ACT OF OCTOBER 2, 1942, THE CONGRESS DIRECTED THAT PRICES,
WAGES AND SALARIES, EFFECTING THE COST OF LIVING BE STABILIZED AS FAR
AS PRACTICALBLE ON THE BASIS OF THE LEVELS EXISTING ON SEPTEMBER 15.
SINCE SEPTEMBER 57771 SEPTEMBER 15, THE WORKER S WEEKLY PAY CHECK HAS
RISEN PRIMARILY BECAUSE OF LENGTHENED HOURS AND SECONDARILY BECAUSE OF

THE CORRECTION OF INEQUITIES IN THE EXISTING WAGESTRUCTURE. BUT THERE
ARE MANY WORKERS WHO HAVE RECEIVED NO WAGE INCREASES SINCE SEPTEMBER 15,

AND THE COST OFLIVING HAS CONTINUED TO RISE.
PAR. 10

THE WAGE STABILIZATION PROGRAM IS DEPENDENT ON THE STABILIZATION

OF THE COST OF LIVING. THIS IS EXPRESSLY RECOGNIZED IN THE ACT OF
OCTOBER 2, 1942. THE LITTLE STEEL FORMULA WAS BASED ON THE FACT THAT
THERE HAD BEEN A RISE OF APPROXIMATELY 15 PER CENT IN THE COST OF LIVING
BETWEEN AXXX JANUARY 1941 AND MAY 1942, FOR WHICH RISE WORKERS COULD BE
COMPENSATED BY WAGE INCREASES. THE COST OF LIVING HAS NOW RISEN ABOUT
PERCENT ABOVE WHAT IT WAS IN MAY 1942 AND ABOUT $ PERCENT ABOVE WHAT
IT WAS IN SEPTEMBER 1942.
PAR. 20

LABOR ORGANIZATIOS HAVE REQUESTED A CUT IN THE COST OF LIVING TO THE
SEPTEMBER OR EVEN MAY 1942 LEVELS. THEY CONTEND THAT STABILIZATION OF
WAGE RATES HAS BEEN MORE EFFECTIVE IN RECENT MONTHS THAN STABILIZATION
OF PRICES.

PAR. 21

190

WHATEVER THEORETICAL CHOICES MAY CONCEIVABLY BE OPEN TO US, PRACTICALLY WE WILL HAVEONLY XXX HAVE ONLY TWO. WE MUST ROLL BACK THE-COST OF

LIVING OR WE WILL BE FORCED TOFLIVING WILL NOT STAND WHERE IT ISE, IT WIN
INFLATIONARY SPIRAL WILL GAIN STRENGTH.

PAR. 22

HAVE ALREADY RECOGNIZED THE NECESSITY OF ROLLING BACK THE COSTS
OF LIVXXX IMPORTANT ITEMS IN THE FAMILY FOOD BASKET. SUCH REDUCTION IS
SSENTIAL TO HOLD THE WAGE LINE.
PAR. 23

I 30 NOT THINK, HOWEVER, THAT A ROLL PACK OF ALL LIVING COSTS OR
INCOMES TO THE SEPTEMPER LEVEL IS PRACTICABLE. VE ALL MUST BE
PREPARED IN TOTAL WAR TO ACCEPT A SUBSTANTIAL CUT IN OUR ACCUSTONED
STANDARDS OFLIVING. BUT WE MUST CUT BACK A SUBSTANTIAL PART OF THE
7842

IN THE COST OF LIVING SINEXXX SINCE SEPTEMBER 15, IF WE ARE GOING
THE WAGE LINE.

24

MUST TAKE POSITIVE STEPS TO ASSURE OUR PEOPLE THAT ADEQUATE
SUPPLIES OF ESSENTIALS WILL BE AVAILABLE IN LEGITIMATE MARKETS AT PRICES
TTHIN THEIR REACH. SUCH ACTION WILL HELP TO HOLD THE LINE AND PREVENT
BEGINNING OF ANOTHER SPIRAL.

IT SHOULD BE POSSIBLE TO ROLL BACK THE COST OF LIVING TO SOME
EXTENT BY REDUIXXX REDUCING PROFITS AND MARGINS WHERE THEY ARE EXCESSIVE
BREAK THE STRONG IMFLATIONARY TREND NOW OPERATIVE, AND TO MAINTAIN

PRIENXX PRICES AT A REDUCED LEVEL, IT WILL BE NECESSARY TO MAKE A LIMITED

USE F SUBSIDIES IN ADDITION TO A FIRM PRICE AND WAGE POLICY AND AN
ADEQUATE FISCAL PROGRAM. THIS WAS THE ONLY WAY CANADA AND ENGLAND WERE

TO STOP THE RISING PRIE XXX PRICE TREND AND TO STABILIZE WAGES.
DEEPLY CONVINCED THAT THIS IS THE ONLY PRACTICAL WAY WE CAN PREVENT
INFLATIONARY SPIRAL FROM GETTING BEYOND CONTROL.

I All CONVINCED THAT A LIMITED AND JUDICIOUS USE OF CONSUMERS
SUBSIDIES IS THE CHEAPEST PRACTICAL COURSE OF ACTION OPEN TO US. IT WILL
TAKE SOMETHING LESS THAN A HALF BILLION DOLLARS FOR EACH POINT WE UNDERTAXE TO ROLL BACK IN THE COST-OF-LIVING INDEX.
PAR. 27

THE ONLY ALTERNATIVE TO SUCH ACTION WILL BEMXXX BE MORE COSTLY TO
THE TREASURY AND TO THE PEOPLE. IF WE DEFAULT ON OUR OBLIGATION TO

STABILIZE THE COST OF LIVING "SO FAR AS PRACTICAL BE 0 N THE BASIS OF
I

THE LEVELS WHICH EXISTED ON SEPTEMBER 15", AS THE ACT OF OCTOBER 2
DIRECTED US TO DO A MODIFICATION OF THE LITTLE STEEL FORMULA WILL,

ELIEVE, BE UNAVOIDABLE. IAXXX I AM CONVINCED THAT AN INRXXX INCREASE
IN LABOR COSTS WILL ADD SUBSTANTIALLY MORE TO OUR WAR EXPENDITURES THAN
THE LIMITED AMOUNT OF SUBSIDIES NECESSARY TO STABILI ZE THE COST OF
LIVING AND FORESTALL WAGE DEMANDS.

PAR. 23

191

IF ONLY A 5 PERCENT OVERALL INCREASE IN WAGES SHOULD OCCUR AS A
CONSEQUENECE OF OUR DEFAULT, THAT ADDED COST OF LABRXXX LABOR ALONE
WOULD CAUSE AN INCREASE OF NOT LESS THATXXX THAN TWO AND ONE-QUARTER
PERCENT IN THE GENERAL LEVEL OF PRICES. THAT WOULD INCREASE OUR ANNUAL
WAR COSTS APPROXIMIXXX APPROXIMATELY TWO AND ONE-QUARTER BILLION DOLLAS.
FOR E ARE SPENDING 100 BILLIONS PER ANNUM FOR WAR AND EVERY RISE OF
ONE PERCENT IN THE PRICES GOVERNMENT PAYS ADDS APPROXIMATELY ONE BILLION
TO THE GOVERNMENT.S WAR EXPENDITURES JXXX ASSUMING, OF COURSE, THAT
SOLDIERS PAY AND DEPENDENT ALLOTMENTS ARE INCREASED PROPORTIONATELY
FIVE PERCENT WAGE INCREASE WOULD, MOREOVER, INCREASE THE COST OF LIVING
AT LEAST TWO AND ONE QUARTER PERCENT AND WOULD COST CONSUMERS AT LEST

A

BY

XXX LEAST TWO BILLION DOLLARS A YEAR. THE LIMITED SUBSIDIES I HAVE IN
MIND TO STABILIZE THE COST OF LIVING DO NOT EVEN APPROACH THESE FIGURES.

PAR 29
AND, WHAT IS MORE, IF WE WOULD HAVETXXX HAVE TAKEN THE WAGE INCREASE
ROUTE WE WOULD NOT HAVE STABILIZED THE COST OF LIVING EVEN AT THIS
HIGHER LEVEL. RISING COSTS WOULD CONTINUE TO PRESS AGAINST THE PRICE
AND WATXXX WAGE LEVELS AND THESE WOULD BE FORCED HIGHER STILL. RISING
WAGES WOULD ADD TO THE EXCESS PURCHASING POWER, AND AN ENLARGED
INFLATIONARY GAP MIGHT MAKE THE FISCAL TASK OF ABSORBING EXCESS PURCHASIG
POWER BY HIGHER TAXES AND ENFORCED SAVINGS UNMANAGEABLE. THOSE WITH
SMALL FIXED INCOMES, WIDOWS AND OLD FOLKS WITH SMALL PENSIONS, THE WHITECOLLAR AND UNORGANI ZED WORKERS, THE SOLDIERS WIVES AND CHILDRE N WITH
SMALL DEPENDENCY ALLOWANCES, WOULD BE GROUND BELOW THE MARGIN 0 F FAIR
SUESISTENEXXX SUBSISTENE XXX SUBSISTENCE.
PAR. 30

NEED NOT TELL THE CONGRESS THE DEVASTATION WHICH WILL BE WROUGHT,
FOR XXX FAR AND WIDE, ON THE FARMER, THE WORKER AND THE BUSINESS MAN,
I

IF THE FIRES OF INFLATION EVER GET OUT OF CONTROL.
PAR. 31

HAVE BEEN PXXX SPEAKING OF THE NEED OF SUBSIDIES TO STOP AND ROLL
BACK RISING CONSUMERS COSTS IN ORDER TO AVOID FURTHER WAGE INCREASES
WHICH WOULD ACCELERATE THE INFLATIONARY SPIRAL. WE HAVEFXXX HAVE FOR
SOME TIME BY SUPPORT PROGRAMS AND BENEFIT PAYMENTS PROVIDED INDUCEMENTS
TO GET THE WAR CROPS WE NEED. WE SHALL HAVE TO CONTINUE TO USE SUPPORT
PRICES AND INCENTIVE PAYMENTS TO SECURE IN REQUISITE VOLUME THE NEEDED
I

WAR CROPS. BUT IF WE WANT TO AVOID INFLATION WE MUST SEE THAT THESE
RISING COSTS ARE NOT PASSED ON TO THE CONSUMERS. FOR IF OXXX CONSUMERS
FOOD PRICES ARE NOT ROLLED BACK AND MAINTAINED AT THE LOWER LVXXX LEVEL,
WE SHALL NOT BE ABLE. TO HOLD THE WAGELINE., AND IF THE WAGE LINE IS NOT
HELD, THE SUPPORT PRICES ANDINCENTIVE PAYMENTS WHICH WE MAKE TO PRODUCERS

WILL BE NULLIFIED BY THE INFLATION OF ALL PRICES AND ALL COSTS.
PAR. 32

WE MUST PAY ENOUGH TO PRODUCERS TO GET THE WAR PORXXX PRODUCTION

WE NEED. BUT WE MUST GET THE NCXXX NECESSITIES OF LIFE TO CONSUMERS AT
PRICES LOW ENOUGH TO AVOID INFLATION.

PAR. 33
C

192

THOSE IN COMMAND OF OUR WAR ECONOMY LIKE THOSE IN COMMAND OF OUR
ARMIES MUST BE ENDOWED WITH ADEQUATE AUTHORITY TO MEET EMERGENYCXXX

EMERGENCY SITUATIONS AS THEY ARISE. SUBSIDY PROGRAMS WILL BE UNDERTAKEN
ONLY WITH THE APPROVAL OF THE DIRECTOR OF ECONOMIC STABILIZZTION AND HE
WILL SUBMIT TO THE CONGRESS QUARTERLY REPORTS ON SUBSIDIES PAID IN
SUPPORT OF THE STABILIZATION PROGRAM.
PAR. 34

I APPEAL TO THE CONGRESS, AXXX I APPEAL TO THE PEOPLE TO PULL
TOGETHER AS A TEAM TO STABILIZE THE COST OF LIVING. WITH THE COST OF
LIVING IN PROCESS OF BEING STABILIZED ON A FIRM FOUNDATION, WE MUST
PROCEED TO MOP UP AND STORE UP BY TAX ACTION AND ENFORCED SAVINGS THE
EXCESS PURCHASING POWER IN THE MARKET WHICH OXXX CONSTANTLY THREATENS
TO UNDERMINE THAT FOUNDATION.
PAR. 35

DESPITE THE LOSS OF LIFE AND OF TREASURE WE CAN COME OUT OF THIS
WAR WITH OUR ECONOMY IN WORKING ORDER. WE WILL HAVEPXXX PLANTS AND
TECHNICAL KNOWLEDGE AND TRAINED SKILL SUCH AS WE HAVE NEVER BEFORE

POSSESSED. WE WILL BE ABLE TO ACHIEVE A HIGHER STANDARD OF LIVING THAN
THAT EVER BEFORE IF ONLY WE DO NOT LET OUR ECONOMY GET OUT OF GEAR, IF ON
ONLY WE AVOID THE DANGERS OF WARTIME INFLATION. WE MUST AVOID THESE
DANGERS IF WE ARE TO PLAY OUR PART IN THE POSTWAR RECONSTRUCTION ANDTO
ACHIEVE A LASTING AND DURABLE PEACE. WE MUST NOT THROW AWAY THE FRUITS
OF VICTORY.

IT HAS BEEN SUGGESTED THAT THE FOLLOWING BE ADDED AT THE BOTTOM OF

PAGE 4 LAST PARAGRAPH OF PAGE 2 OF THIS DRATXX DRAFT.

OF

I RECOMMEND ALSO A VERY SUBSTANTIAL EXPANSION AND IMPROVEMENT
OUR SOCIAL SECURITY PROGRAM. OUR ECONOMY CAN AFFORD HIGHER

CONTRIBUTIONS FOR SOCIAL INSURANEXXX INSURANCE. IT WILL HEL HELP
THE FIGHT AGAINST INFLATION NOW, AND IT WILL HELP ALSO TO
IN
PROTECT MILLIONS OF OUR WORKERS IN THE POSTWAR PERIOD.

JUNE 11, 1943

RDX

193

SECRET SVC NY KETTL FFF
SECRET SERVICE WA WILSON

ARE YOU AREADY TO TAKE THE CORRECTIONS IN THE LONG TT NOW

YES CA

FIRST I AM SORRY THAT THERE ARE so MANY. AS YOU HAVE GUESSED
A NEW OPERATOR.

FIRST IN THE LETTER SIGNED BY D W B
PAR. : SHOULD NOT BE DOUBLE SPACED.

PAR. a : LINE 4 SHOULD REEX READ - IT ON MONDAY ETC.
PAR. 3 OF THE LETTER READS AS FOLLOWS - YOU WILL ALSO NOTE THAT IN
PARAGRAPH 16 COMPULSORY SAVING IS BROUGHT INTO THE PICTURE, AND AGAIN
III PARARXXX PAA PARAGRAPH 34.

YOU REQUESTED REPETITION OF PARAGRAPH 21. HERE THAT IS P

WATEVER THEORETICAL CHOICES MAY CONCEIVABLY DE OPEN TO US

PRACTICALLY WE WILL HAVE ONLY TWO. WE MUST ROLL BACK THE COST of LIVING
WILL BE FORCED TO ALLOW WAGES TO RISE. IF MAGES RISE THE COST OF

LIVING WILL NOT STAND WHERE IT IS; IT WILL GO UP AND THE INFLATIONARY

SPISAL WILL GAIN STRENGTH.

AFTER IS IN THE NEXT TO THE LAST LINE THEY USE A SEMI COLON, BUT

WE DO NOT HAVE IT.

FOR THE CORRECTIONS IN THE SPEECH.

193

YOU READY OR IS THERE SOME QUESTION ABOUT THE LETTER
NO QUESTIONS GO AHEAD WITH CORRECTIONS
PART :

LINE 4 LAST WORD IS RATES.

PAS. & LINE 3 BRIDGED BY

LINE 8 COM-O IS OUT

PAR. , LINE 3 BEARING IN FORM OF TAXES AND ENFORCED SAVINGS ABOUT

PAR. 10 LINE : OUR FAILURE TO PYXX PAY MORE ET C
PAR. 11 LINE : LAST WORD SHOULD BE OUT

PAR. 12 LINE 1 LAST THREE WORDS ARE
LINE 4 THE EXECUTIVE BRANCH

A LONG TIME

PAR 13 LINE 3 TAXE OUT WAR-58
PAR 14 LINE : LAST WORD IS CANCELLATION
PAR 15 LINE 4 WORD AFTER INCONSISTENT IS WITH
PAR 15 LINE 4 ONLY A COMMA SHOULD BE AFTER WORD HARDSHIP
PAR 18 LINE 4 SINCE SEPTEMBER 15

PAR 25 LINE $ LAST WORD IS WERE

KU LINE 7 WORD AFTER PRICE 15 TREND

PAR 27 LINE & NECESSAY NECESSARY TO STATE xxxxx
LINE 8 NECESSARY TO STABILIZE
PAR 28 LINE 5 THE FIGURE WRITEN OUT IS TWO AND ONE QUARTER BILLION
DOLLARS

PAR 28 LINE 9 TAKE THE WORD A AFTER INCREASED
TAKE OUT LAST WORD

.

LINE 11

is LEST"

PAR 29 LINE 5 WORD AFTER EXCESS IS PURCHASING

LINE 10 FIRST WORD IS SMALL

THE PARAGRAPH TO BE ADDED SHOULD BE AFTER PARAGRAPH 15
OK GA

PAR.27

PLEASE REPEAT QUOTATION CONTAINED IN THIS PARAGRAPH
GA

MOM PLS

*SO FAR AS PRACTICAL BE ON THE BASIS OF THE LEVELS WHICH EXISTED ON
SEPTEMBER 15,

IT DOES NOT SOUND JUST RIGHT, BUT THAT SEEMS TO BE IT.
OK END OR GA KETTL
WILSON END

194

6/12/13

RETAIL FOOD PRICES
August 1939=100
1939

1940

1941

1942

1943
PERCENT

PERCENT

145

145

140

140

135

135

130

130

125
125

120
120

115

115

110
110

105
105

100
100

95
95

1939

1940

1942

1941
Source: B.L.S.

Office of the Secretary of the Treasury
Division of Research and Statistics

1943

1944
P-263

195

COST OF LIVING
August 1939=100
1939

1940

1941

1942

PERCENT

1943
PERCENT

135

135

130

130

125

125

120

120

115

115

110

110

105

105

100

100

95
95

1939

1940

1942

1941

1943

1944

Source: B.L.S.
Office of the Secretary of the Treasury
Division of Research and Statistics

P-262

WHOLESALE FOOD PRICES
August 1939=100
1939

1940

1941

1942

1943

PERCENT

PERCENT
Ended

May 29

160

160

155

155

f

150

150

145

145

140

140

135

135

130

130

125

125

120
120

115
115

110
110

105
105

100
100

95
95

1939

1940

1942

1941
Source: B.L.S.

Office of the Secretary of the Treasury
Division of Research and Statistics

1943

1944
P - 264

197
03

NOT TO BE RETRANSMITTED

BRITISH MOST SECRET
SECRET

COPY NO. 13

345

OPTEL NO. 191

(1)

Information received up to 7 A.M. 12th June 1943.
Pantelleria

Assault Convoys carrying first British Infantry
Division left Sfax and Sousse during the night 10/11 and a
covering force of 4 Cruisers and 8 Destroyers sailed from Malta

to bombard. The first flight of Assault Craft was eight miles

off Pantelleria 10.30 A.M. 11th and by 1137 A.M. landing was
taking place as planned. Meanwhile White Flags were seen
ashore and a white Cross on the Aerodrome but this was too late

to stop a heavy Air Attack taking place. At 1219 P.M. a wireless
of water, Admiral Paress. By 1.30 P.M. G.O.C. First Division
message was received by Malta 'Beg to surrender through lack

had landed and bombing was stopped. Landing of Troops and

Stores continued. About 500 Prisoners captured including 9
Officers. Estimated 21000 persons on the island. There has
been no water or food in Pantelleria Town for 3 days.
(2)

AIR OPERATIONS

Western Front
11th. Ten Ventures bombed Zeebrugge Coke Ovens.

Fighters carried out Sweeps over Northern France. Enemy

casualties 3.0.1. ours 1 missing. Mosquitoes destroyed.ru

JU 88 and damaged 3 others and a Trawler in the Bay of Biscay.
Out of 252 U.S. Fortresses sent out, 169 bombed Wilhelmshaven
and 48 attacked other objectives in N.W. Germany dropping a

total of 484 tons. Results estimated "Fair to Good". Eight
Fortresses missing.
1:th/12th. 902 Aircraft despatched. Dusseldorf

783 (38 missing), Munster 72 (5 missing) Duisburg 3, Cologne
2, Leaflets 23 (one missing), Intruders 17, Anti Shipping two.
Preliminary reports indicate that the attacks on Dusseldorf

and Munster were very successful.

Pantelleria
On 9th and 10th 1737 tons were dropped on the

Island. Enemy casualties in the air 16.5.7. Ours nil.

198

NOT TO BE RE-TRANSMITTED

COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET

OPTEL NO. 194

Following is supplementary resume of operational events covering
the period 5th - 12th June, 1943.
1. NAVAL

GRAF ZEPPELIN may have begun trials in GDYNIA BAY.

MEDITERRANEAN. H.M. and Allied Submarines scored torpedo hits

on 3 large tankers, probably hit 7,000 ton merchantman, sank one 2,750 ton
ship and wrecked another of 1,250 tons. Extensive repairs to masonry in No. 5
dock MALTA have been carried out successfully. Main units of Italian Fleet
now disposed as follows:SPEZIA: 3 LITTORIO Battleships, one light Cruiser.
TARANTO: 2 CAVOUR Battleships, 2 light Cruisers.

GENOA: 2 light Cruisers.
In addition 39 Destroyers, 57 Torpedo Boats and about 70
Submarines are effective. Two 30,000 ton liners and possibly one Regolo
Cruisers are being converted to aircraft Carriers. Some M.T.B.'s escort
vessels and Barges which came down DANUBE are now operating in BLACK SEA

but low water has held up several medium sized ships at RATISBON.

Submarine Warfare. Week ending 9th, in all theatres 34 attacks
on U-boats of which 20 by aircraft. 5 promising attacks by aircraft, one by U.S.
Cutter. Operations by home-based aircraft of Coastal Command were hampered by
persistent rain, low cloud and sea fog over the Eastern ATLANTIC. In such poor

visibility only 3 U-boats were sighted but all were attacked (one with a new

weapon) with very promising results. ICELAND and GIBRALTAR based aircraft of
Coastal Command enjoyed better weather but so shy were U-boats of the surface

that only 9 were sighted and 5 attacked. In all 494 Sorties were flown, in-

volving 4,362 flying hours on Anti-submarine sweeps and Convoy escorts.
Concurrently with general increase in A/A armament of German Submarines a
limited number are reported converting A.A. escort U-boats and having replaced
present 80 m.m. gun by a quadruple 20 m.m. gun forward.

Shipping Casualties. During the week 5th to 11th, only 2 ships
sunk by Submarines, a British Ship off MOZAMBIQUE and U.S. Ship southeast of DURBAN. Belated reports were also received of the sinking of 2 British the
ships in the northwest approaches in April and May. The 2 U.S. Ships and
Panamanian tanker torpedoed in convoy off BRAZIL have all arrived in port and
the British ship, bombed and submerged in the River WEAR has been refloated.

were

Losses during May at 266,000 tons recorded to date, were considerably included below

the average. Submarines accounted for 245,000 tons of total which

9 Tankers aggregating 63,000 tons. Only one ship was sunk by Submarine 17th, in
the MEDITERRANEAN. No ship known sunk in North ATLANTIC since May

though about 40 U-Boats are estimated still operating there.
in

Trade. During the week 193 Ships in 5 Ocean convoys arrived
Waters without loss. Imports in convoy into United Kingdom week ending

5th: Home 1,837,000 tons including 628,000 oil. French 7,300 ton Tanker flying 15th
German flag passed through DARDANELLES 6th for CONSTANZA. From 1st total - loss, May

37 Enemy ships totalling 51,398 tons were sunk, captured or became
of these 31,635 tons in MEDITERRANEAN.
2. MILITARY
MEDITERRANEAN. Disposition Axis Forces:- ITALY, SICILY in and
SARDINIA. German. Reinforcements destined for TUNISIA have remained have been sent

ITALY and the Islands. Further reinforcements are believed to with 15
since fall of TUNISIA. Italian. 18 First Line Divisions (compared inon 1st January, 1943). BALKANS. German. Equivalent of of 14 9 Divisions, on 1st January,

cluding one G.A.F. Field Division, (compared with total 31 First Line

1943), tendency to r einforce GREECE and DODECANESE. Italian. has broken out,
Divisions (33 on 1st January, 1943) FAR EAST. BURMA. Monsoon to have 3 battalicns

patrol activity only. ARAKAN FRONT. Japanese now believed 3 Pattalions
on MAUNGDAW-BUTHIDAUNG line, 4 Battalions North of AKYAB ISLAND,
in AKYAB.

23. AIR OPERATIONS

WESTERN FRONT. Night. Except for one heavy attack on DUSSELDORF

bad weather restricted operations to small scale Sea-mining, Intruder, Antishi ping and Leaflet tasks. 47 Aircraft missing from 927 Sorties.
ITALY. Attacks on harbours NAPLES, SPEZIA and airfields.

SICILY. Airfields and Ferry Termini bombed.
PANTELLERIA. Very heavy bombing offensive prior to and in
support of our landing operations.

RUSSIA. Russian Air Force continued to give strong support to
their land forces in the KUBAN and indirectly helped their operations by
attacking German sea supply routes. A series of heavy raids on German airfields in LISICHANSK area and also on Railway Centres KIEV, ROSLAVL and UNECHA.

Chief German activity was by long-range bombers. Total of 500 Sorties against
KURSK probably aimed at Russian concentrations, GORKI raided on three successive
nights.

4. EXTRACTS FROM PHOTOGRAPHIC AND INTELLIGENCE REPORTS ON RESULTS OF ALLIED
AIR ATTACKS

HUPPERTAL. Fires were still raging at noon on day after attack
and were only brought under control with help of neighbouring brigades.
Efficiency of Civil Defences hampered by absence in country of the higher

officials. Besided usual extra rations over a million tins of fish rushed to

district.

DORTMUND. Water supply completely disorganised and canal

level considerably exceeds all previous records. Bursting of dams described
as greatest disaster in 100 years.
BORDEAUX. Later photographs confirm important damage to MATFORD
Aero-Engine Works, GOBAIN Chemical Works and main gare ST. LOUIS.
5. HOME SECURITY.

Estimate civilian casualties week ending 9th: Killed - 14,
Seriously wounded - 47.

AND
01 a Wd 91
30

301330

199

200

07

la

NOT TO BE RE-TRANSMITTED

PM

COPY NO.

13

BRITISH MOST SECRET

U.S. SECR

3

OPTIL NO.192

Information recoived up to 7 a.m. 13th June, 1943.
Occupation of PANTELLERIA by units of British First Infantry
Division is procooding satisfactorily. So far a bout 2,800 prisonors have boon
embarked and it is estimated that 12,000 more await evacuation. Betwoon 3rd
and 10th, 3,085 Sorties word flown against the island by Alliod aircraft and
3,516 tons of bombs dropped. The weight of the attack was then turned against
LAMPEDUSA. After a sca and air bombardmont lasting 24 hours, the island surron1.

dered on 12th evening and detachments of Coldstream Guards bogan occupation.

Garrison bolieved to have numbered about 3,000.
2. AIR OPERATIONS

WESTERN FRONT 11th/12th. DUSSELDORF. 1968 tons dropped in-

cluding 10 8,000-pound, 288 4,000-pound and 100 2,000-pound H.E. bombs in just
over one hour. Visibility good but somo haze and hoavy clouds of smoke later

on hindered observation of results. Marker bo bs woll placed resulting in
concentrated attack. Many fires with smoke to 17,000 foot and somo largo explo-

sions reported. Moderate ground defences appeared overwholmcd. Fighters activo
on route both ways.. MUNSTER. 172 tons dropped in 9 minutos. Heather cloudless

good visibility. Bombs well placod in contro of build-up arca, some scarchlights, very little A/A. Photographs 9 a.m. 12th show fires still burning and

considerable industrial damage including gas works and both passenger and goods

stations. 123 R.C.A.F., 61 R.A.A.F. and 16 New Zealand aircraft took part in
night's operations. 10 Canadian, 5 Australian and 1 Now Zealand missing.
12th. Escorted light, medium and fighter bombers attacked respectively a power
station at ROUEN, CAEN, and ABBEVILLE airfields. 12th/13th. Aircraft dospatched
BOCHUM - 500 (24 missing), Sea mining - 34, Intruders - 19. Proliminary reports
BOCHUM indicate successful attack. 36 onomy aircraft oporated against this
country of which 30 including 20 minelayers were in the Plymouth area and 6 over

KENT and EAST LONDON. Enomy casualtics by night fighters - 3, 0, 2.

ITALY. 10th/11th. Heavy bombers dropped 31 tons on REGGIO

airfield destroying a hangar.
SICILY. 11th. Escorted Spitfires bombed POZZALLO and on 12th
MARZAMEMI.

MEDITERRANEAN. 11th. Long rango fighters damaged 3 enomy
vossels off Wostorn GREECE.
3. HOME SECURITY

12th/13th. PLYMOUTH. Soveral fires but all soon under control.
Utility and transport services affected and a B.B.C. transmittor hit. A gas
holder and Coates' Distillery burned out.
LONDON. Somo damage and a few casualtics in Eastern suburbs.

201

June 14, 1943
5:10 p.m.
FOOD PRICES

Present: Mr. Bell

Mr. White

Mr. Sullivan

Mr. Haas

Mr. O'Connell
Mr. Blough

H.M.JR: I had a suggestion, but I think it will take

a lot of time to do this. Who is Acting Counsel when Paul
is not here, O'Connell?
MR. BELL: Joe O'Connell, I guess.

H.M.JR: The suggestion is this - it will take me

a couple of minutes to make a little speech - we started
in 1933 to build an economy in order to raise prices. We
did it year after year. George started in Farm Credit and
knows about it. We watched it build, and we superimposed
each of these laws, never taking away any of the things,

and we still have a lot of things left, all of which are
there to increase prices.

Now I am talking about food and things like that to

see if we can't attempt to draft a bill - I don't care if

the President throws it in the wastepaper basket - which
would completely disentangle all this legislation that

involves the cost of production. For instance, we still

have four hundreds on three-eighths. As far as I know they
still pay me to put some fertilizer around my trees.
(Mr. O'Connell entered the conference.)

H.M.JR: They still pay a fellow - I think we are still

limited on what we can grow.

202

-2-

I'd like to see all of this legislation put on the

table - all the legislation after '33 which had to do with
increased farm prices. The idea is to try to disentangle

all of this stuff, you see, and after you have disentangled
it - what do they call it, this one hundred and ten percent?
MR. BELL: Parity.

H.M.JR: All of these things - and every way the

President moves his hands are tied. How many are there there are about seventeen articles which you can't control

the cost of - the price of. You never could control lamb
and chicken. There are seventeen different articles there.

You always give me two different charts--

MR. HAAS: They are the ones that had no regulation

at all. The list is getting smaller and smaller.

H.M.JR: There are still some you can't regulate.
MR. HAAS: I think you can under present legislation.
They are going to look that up, but they haven't done it.

H.M.JR: You have to start with '33 - with the first
laws. You have to see which of them are still there. Why
can't, for instance, the President sell wheat? And there
are all the limitations on cotton - the RFC - this whole
business, you see.

Now,maybe it is all done, but I doubt it. And the
thing - then we get, "What the hell are you going to do
with it?" Let's say, just for arguement's sake, the

President can say to Congress, "Here is an anonymous bill.

I want these things struck off the books. This was put on
to raise prices. Now I want to increase production and
bring prices under control. In order to do this I have

to start new; I have to wipe this all off.' If he could
do that thing, you see, instead of his sending a bill to
roll back - I believe that he could simply say, "Well,
pork chops cost seventy-five cents a pound. Effective
fifty days from now they are going to cost fifty cents a

pound." He could just do it by getting that authority
from Congress.

203

-3 Every time he moves now he has these terrific barriers
to overcome because there is this old legislation on the
books. Whenever he moves now he is always running into

something else, something which stops him, and I'd like to
see this whole study made just as quickly as possible. Let's
say we can get an anonymous bill and wipe the slate clean.

"It has served its purpose. This is what I need to bring

the prices back to half way where they were in September '40,"

I don't know what point they want to go back to. They can't
do it now, and I don't think necessarily he needs two bil-

lion dollars to do it. He might need five - I don't know,

but the point is, every time he moves he puts another set
of legislation on the books and he doesn't wipe off what is

on there. I think you will find that there is an enormous

amount of stuff there.

Then if the President at all thought well of this

thing, instead of him just sending up cold his memorandum
to Congress as to other things which he does - we have

never paid any attention to the consumer in this country,

we just take it for granted he is on the stand - he sets

up a hold-the-line bill, and he knows everybody is going
to follow.
Each Senator is protecting the legislation which he

passed five years ago or nine years ago. Senator Bankhead

might say, "That is my legislation, I haventorsee that it
is protected." You put so much cotton in the warehouses,
and the warehouses in his district get the business.
But if the President went and took one month or two
months and said to OWI, Jimmy Byrnes, and everybody, "I

want a barrage like we had at Pantelleria for twenty days;
I want a barrage for sixty days on the consumer, and then
after sixty days I will suggest my recommendation" - but

just to send this thing up - another two billion dollars
on this house of straw - is crazy, I think.

MR. BELL: What you would like to do, I think, is
start all over, repeal some of these laws that are now on
the book, and if necessary, pay a subsidy to the farmer

because you are rolling back prices on corn, wheat, and

so forth. Instead of paying it through three ways, you

pay a subsidy on everything.

204

-4H.M.JR: Out of the one pocket you would pay a farmer
not to raise corn, and out of the other pocket you pay him

to raise it.

MR. BELL: I don't think it is quite that way. You

pay him so much for having a variety of crops and fertilizing
his land, but he could use that four hundred million dollars
for some other purpose.

H.M.JR: Now there is thirty-two or thirty-three

percent that comes out of Customs to the farmers. There
are a hundred odd different laws that have been passed. You
could put on the barrage for thirty days and do what Herbert

Hoover tried to do in the last war for the consumer.

MR. SULLIVAN: That's not what he tried to do; that's

what he did.

H.M.JR: Now the President will say sixty times sixty
every day. "Now I want this stuff off, and then I need so

much money to bring pork chops back to where they were -

half way back." Then do it in a clean-cut way, do it
through Jesse Jones, or this, or that. I think he has a
good chance of doing it.

This way every Senator is defending his pet legislation
that he got through in the last ten years.
MR. BELL: No doubt about that.

H.M.JR: But if you go on the whole thing, cut everything out, wipe the slate clean, and start all over again,
put the money where he needs to put it on whatever plan is
decided is the best plan - when you look at this chart of

using 1939 as one hundred and see what has happened to the

cost of living, it is just sickening. I showed it to

Judge Rosenman, and he wouldn't believe it. He said it was
the damnedest thing he had ever seen. He had no conception

that this thing was as bad as that.

MR. SULLIVAN: He doesn't do any shopping himself. (Laughter)

H.M.JR: I know I am repeating myself--

205

-5MR. SULLIVAN: I think it is going to be very

interesting anyway to just see how much underbrush there
is there.

H.M.JR: I'll tell you what I would like to do in
order to help you: I'd like - if it is agreeable to you to borrow Captain Kades to help on this thing.

MR. O'CONNELL: It will be agreeable to me.
MR. WHITE: Call him after you talk to Eddie Greenbaum.

H.M.JR: All right.
What do you people think, Dan? What do you think of

somebody taking inventory of all this legislation?

MR. BELL: I think it is very good. I don't think we
will get very far in taking these things off the books.
MR. SULLIVAN: I think they are integrated too much

with other things like labor laws, but it is going to be

helpful to see how much deadwood is lying around there.

H.M.JR: What do you think, Harry?
MR. WHITE: I agree with John, that it would be very

interesting to get a look at it. As you say, there probably
has been a picture of those rules. I think it should be
done, but I am a little bit dubious about your next step.
Let's suppose you could wipe out all that kind of legislation.
Some of it would result, I suppose, in an immediate decline
of prices on some commodities.

Your second thought was that the President should say

pork chops should be fifty cents. Are you suggesting that

the President pick a number of commodities - whatever they
were he would select them on the basis of their importance

to living - and fix the price for them?
H.M.JR: My thought is this: first let's take

inventory and see what we would have to do to get rid of
the underbrush. One group would be doing that - it is a
legal problem. If both groups would say, "We can't get

206

-6those laws wiped off the slate, what would be the most
intelligent law to get those prices down? Now you can't

move here, you can't move here, and you can't move here

(indicating). It is somewhat like when the President
tried to move sometime ago. His hands are tied.

Instead of saying it can't be done, let's be young
once more and say the things are off the books. Let's
see what can be done.

MR. WHITE: I agree with the first question.
(The Secretary held a telephone conversation with

Colonel Greenbaum.)

H.M.JR: Well, there certainly could be no harm in

trying this.

MR. O'CONNELL: Not at all. I don't know where we

would go from the first step, but-H.M.JR: We will start back to March 20, 1933, and
then go through. Everything was done to build up prices.
We've done a pretty good job. We've done everything to
build them up, but we haven't done anything to S top it.

You will find that most of the stuff is wonderful. I'd

like them to go on the assumption that there is 8 chance
of the President going to town on two fronts, one, to get

rid of those restrictions, and two, having gotten rid of
them this is what he would do if he could start all over.
MR. BLOUGH: I think it is very good. I would like
to suggest a further step, and that is this, it may have
already been done, the analysis of the increase in the cost

of food and the amount which represents the increases to
the producer, and the amount that represents leakages or
margins along the way - higher wages, margins of profit,
and so on - distribution costs - to see how much you would

reduce the total cost of food or the final cost of food if

you were able to make certain reductions at this earlier
stage.

In other words, if you wipe out these restrictions
and then start pushing down the prices at the producer's

207

7-

end, what result do you have at the consumer's end? Would
you have in between higher wages, higher distribution
costs, and so on?

H.M.JR: Don't forget the President's Little Steel
Formula, supposedly still in existence, his attempt, which
can't be more than a month or two old, to hold the line -

that is still in existence.

I know what I am doing sounds fantastic, but I think

it needs just some original thinking - if it doesn't sound
too conceited - to instead of saying we have started this

thing--

MR. BLOUGH: But it seems to me the thing to do is to

use it intelligently after you get it to see where it fits in.
H.M.JR: I agree with you. Let me say that the farmer I think you will find that when you get to parity prices
everything is over one hundred and ten percent.

MR. BLOUGH: The average price is one hundred fifteen.
H.M.JR: The Administration has hung around its neck

this parity business, but the parity thing is way, way
above. I mean, it is an albatross around its neck, and I

think this is an original fresh way to attack it, don't

you, Harry?

MR. WHITE: Your analogy is good. You have built a
stone wall in order to push up the floor on prices which

was a necessary thing to do in the last ten years. In

order to discover if that is what is holding the floor

up you have to remove those bricks and see what is holding

it. Then you are in a position to see whether you can
push it down or whether it can fall down. Nobody has
attempted to remove those bricks.

H.M.JR: Sometimes you use bricks. Sometimes you use
stone. Sometimes you use steel.

MR. WHITE: A variated base, it is true.

208

-8H.M.JR: You start with the farmer - maybe you will

come to the thing that the Farm Bureau has never agreed

on, cost of production to the farmer, the thing the Farm
Bureau has always fought.

MR. WHITE: I think we are apt to find that other

supports have come in in the meantime and are keeping

it above the level, namely, the fact that the supply is
short and the demand is great. You use that floor to
build it up. I don't know whether it supports it, but the
only way to find out is to find out.
I think when you get in - we need all this stuff for

when the war is over to keep these prices up.

MR. BELL: There will be all kinds of reasons maybe

that you shouldn't appeal it.

H.M.JR: My analogy is that you have to soften this
thing with a barrage.
I am having lunch with the President tomorrow. Could
you have half a dozen fantastic examples - take a third of

it - some of the things on the books like the third of

Customs receipts - what they are used for - give me half a
dozen fantastic examples.
MR. O'CONNELL: That will be possible.
MR. BELL: Surplus commodity.
MR. BLOUGH: We have a three-way criterion of one

hundred ten parity.
MR. WHITE: Suppose that were removed, George, would

it fall?

MR. HAAS: No. There is nothing resting on the floor
now. They are nearer what you would call a support price,

but I think it would be an interesting thing to find out,
because many of the devices you want to use - you are

completely tied up in a measure. You can't do this, you
can't do that.

209

-9MR. BELL: Why are hog prices going down, George?
MR. HAAS: The farmers held them back.

H.M.JR: There is a ceiling on the price of corn.
MR. BELL: Corn hasn't been planted yet in the west.
H.M.JR: Anybody who didn't have an animal on his

farm prior to June 1942 can't buy any more feed. Every
person around has a couple of chickens or a couple of
hogs, and you are attacking a couple million people.
MR. SULLIVAN: There are all kinds of people who

bought little pigs and put them out on a farm. That's just

plain darned nonsense.

H.M.JR: They got out regulations for every feed
dealer, and if you didn't have an animal on your place
prior to June 1, 1942, you can't buy any feed.

MR. WHITE: But the rationing is in proportion to the
animals you had, isn't it?
H.M.JR: If you had one chicken you can get feed for
one chicken. Supposing I have fifty chickens now and I had

one chicken then, I can't 2feed for my fifty chickens.
MR. BELL: How do you stimulate production under

that regulation.

H.M.JR: And there was no public announcement, no

explanation. Nobody understands it, but everybody is
angry.

MR. BLOUGH: Are they so short of feed?

MR. HAAS: They are very short of feed.

MR. WHITE: It is probably just a mistake.
H.M.JR: The man who called me up always handles feed

for the cooperative. He called me up and wanted to know

210

- 10 -

what he should do. I told him I didn't know.
MR.
of fowl
andWHITE:
animals.Maybe they want to stimulate the killing
MR. BLOUGH: This is going to be definitely hard on
Harold Smith if they are going to ration feed down there.
He just bought a farm in Virginia which has been a cattle

farm. He is making it into a sheep farm. They sold the
cattle off. He bought sheep this spring, and he also
bought some hogs. What are you going to do?

My brother has a farm that he is stocking up with
livestock in order to increase production. He didn't have
hogs in '42. Now he has hogs.

H.M.JR: Now if this is correct, Harold Smith can't

get any feed.

(The Secretary held a telephone conversation with
Chester Davis as follows:)

211

June 14, 1943
5:34 p. m.
Operator:

Chester Davis.

HMJr:

Hello. Chester.

Chester
Davis:

Hello, Henry.

HMJr:

This is Farmer Morgenthau calling you up.

D:

All right. This is Banker Davis. How are you?
(Laughs) Well, now listen, Banker.

HMJr:
D:

Yeah.

HMJr:

When you get through you may - this 1s what
happened to me up on the farm Saturday, see?

HMJr:

All - they were calling you about feed and
corn, weren't they?
As of June first 42.

D:

Yeah.

HMJr:

Do you know that one?

D:

Go ahead.

D:

HMJr:

Well, I - I - my farmer - my dairyman who works
for me is an agent for the Co-op in our state,
you see?

D:

Yeah.

HMJr:

And he said that the regulation came through

that unless you had so many hogs and 80 many

sheep on your farm as of June 1st, 42, any increase since then, or let's say you didn't have
any.- you had one pig and five chickens, you
can't buy any more feed for them. That they
are going to have a ration book for feed dealers.

D:

Well, that must be from the Co-op itself.

-

212

-2HMJr:
D:

HMJr:
D:

Nope. Was there any such thing from you?

Nope.
rationedThe Co-op did ration - the G.L.F. has
The G.L.F.? Yes.

The G.L.F. has rationed its supplies - in this
deliver. Ag I understand it, they have cut it

way - they have cut down their commitment to

HMJr:

D:

HMJr:

down 37%; that is, they are cutting it down to
63% of the previous quantity. There 18 no such
rationing program in effect or proposed here.
Well, you see they are spreading it all over
that it's the Federal Government.

I'11 bet they are, because, of course, there is
a milder - not even a mild panic on up there about
the feed situation.
Well, he called me up and said, "What should I do?"
and McConnell - is that his name?

D:

Jim McConnell, yeah.

HMJr:

.... told us to wire our senators and our congress-

men. So I said - the man's name who is its agent works - he's my - is Hoose - H-o-0-8-e. So I said,
"Well, Hoose, I can t advise you 'cause I don't
know. You'd better find out who was giving out
such an order." He said, "Well, there' 8 ration
books and they are going to tear out - it goes back
to June 1st, 142.

D:

Well, that would be something. But I'11 tell you
to call me up and tell me about it, will you?
I'11 do that tonight.

what you do. You tell Hoose to tell Jim McConnell
HMJr:
D:

HMJr:
D:

Yeah. Because Jim calls me on nearly everything

else. I'd think he'd call me about that.
I see. Well, there are no such
No.

- -3HMJr:

213

Well, I could go to whoever else sells feed or

my neighbor who has one pig could do it.
D:

If they've got feed, you can buy it. Now here's
our problem, of course. We are just trying desperately to get shipping facilities so we can move
Canadian grain down in there and we are also trying to break this impasse on corn which has been

preventing corn from flowing into the deficit areas.

You see, the farmers out there know corn is worth a
dollar-and-a-quarter maybe, feeding hogs, and even
though the price of hogs has gone off pretty nearly

$2.00 a hundred in the last sixty days, they still
are worth more than the ceiling price. And they've
had
a corn.
flood of late here and I think they're sitting
on the
HMJr:

Well, now, can I - let me switch - I was kidding a

Little bit - now let me talk officially, see?

D:

Yes, sir.

HMJr:

And I'11 tell you what we are planning to do here.

D:

And I think this ought to interest you.
Yeah.

HMJr:

And if you know anybody who has done it already, tell
us. I'm having my boys start with March 20th, 1933
and make a study of all the legislation which has been
put on the books to increase farm prices.

D:

Yeah.

HMJr:

With the idea that possibly after we get it, see how
one thing cuts across the other, the President might
ask for an omnibus bill to have it all wiped off and
then start fresh.

D:

Well, I don't think you ought to do it.

HMJr:

Why?

D:

HMJr:

Well, as a matter of fact, there are no restrictions
in effect on production at the present time, and - your what you're suffering from up there

Oh! I'm not talking about the farm. I'm talking -

here in the Treasury on the question of getting the roll
back on prices.

214

4D:

Yeah, but I mean how would repealing present

agricul tural legislation help you on that?

HMJr:

Well, we're going to do it and after we do it, if
you 11 sit down, we'll show it to you.

D:

HMJr:

Sure enough.

After all, it doesn't do any harm. Ag far as I
know there has been no such inventory taken.

D:

Yeah.

HMJr:

And
won' it's been a long time since I've seen it. I

D:

Oh, that will be fine. Just what is the "end point"?
Well the end point is this: they are trying to get

HMJr:

the President, as you most likely know, to send up
a message on "Roll back of prices.

D:

Yeah.

HMJr:

Well, every place he wants to move on prices, there

is some legislation which restricts him.

D:

Well, about the only legislation that restricts him
is in the Price Stabilization Act itself, Henry, where

it fixes certain parity points and after all, I think
the President ought to realize that we've got to deal
with food and not statistics.

HMJr:

Well, I don't know whether you've seen the message

D:

which they have drafted for him on "Roll back.
Well, I disapproved - I did see it and I disapproved
most heartily of the last part of it. I don't know
what you think about the first part.

HMJr:

Well, on the tax thing, of course, we disapproved.

D:

Yeah.

HMJr:

And I don't feel this is any time to send a message
up on taxes and I don't think that the country is
ready for a message from the President on roll back
of prices.

D:

Well

-5D:

HMJr:

215

I disapproved of that very heartily and I said
SO in a letter that has just gone over to Jimmy
a
little while ago.
I see. Well, we're together on both ends of this

message.
D:

HMJr:

Yeah.
I'm preaching against one end and you against
the other.

Yeah. I mean I don't think the country is ready for
a message from the President on either.

D:

HMJr:

I'm telling you that the indiscriminate talk and 80tion on roll back subsidies, etc., is just raising
hell with the agricultural field. Now I don't know

whether we want food or just statistics.
Well. We want food, and indiscriminate talk on
compulsory savings is rgising hell with the volunteer
plan.

D:

Well, I've talked about increased investment, but I
have not used the term compulsory saving.

HMJr:

D:

No, but I - well, you know the President did and then
he corrected himself.

Yeah. -

HMJr:

And he did it handsomely.

D:

Yeah.

HMJr:

D:

Well, what I'm in favor of, is, cut the dog's tail
off but don't do it by inches.
Well, I'11 tell you. Now that I've got you here, I'm
just going to say this. I'm going to put it negative -not what I'm in favor of -- I certainly am not in favor

of sitting down here with a nominal authority on food
and absolutely no actual authority at all.
HMJr:

I see.

D:

And it just isn't going to work.

HMJr:

Well, whenever

D:

There are too many fellows.

-6HMJr:
D:

HMJr:

216

Well, look

writing food policy and I hear about it when
I read
it in the paper.
Well, I'm going to ask our boys to do something and

when they have got it, if you' ve got the time I'd
like to sit down and show it to you.

D:

Yeah. I'd like to, but the things that look - the
price roll back isn't a case of ordering and it isn't

laws that are holding these prices up, but it's over
in your field there is just too damn much money in the

HMJr:
D:

people's pockets.
Yeah. Well

You repeal some of that for us and we'll hold the
prices.

HMJr:

Well, I think as far as the people investing their

money is concerned, I think they are doing handsomely.

D:

HMJr:

Well, but they are talking comparing England with the
United States on this subsidy thing
Yeah.

and when we've got money knocking around here and

D:

HMJr:
D:

people are out clamoring for food of kinds and qualities they never were able to buy before.
That's correct.
And the President is talking about having to raise

wages, you see, and - unless he rolls back, when as
a matter of fact, the average weekly pay envelope of
the factory worker, since last September down to date
has raised more than twice as much as the increase in

the cost of living.

HMJr:
D:

Yeah.

I think that its a mistake to keep putting those things
out on record. I hope he doesn't do it, myself.

HMJr:

Well, we're together.

D:

All right, Henry.

-7HMJr:

I'll be seeing you soon, I hope.

D:

'Bye.

HMJr:

Thank you.

217

218

- 11 (Mr. White left the conference.)
H.M.JR: That was a frank talk.
MR. SULLIVAN: I should say so.
MR. BLOUGH: Harry said to tell you he had a conference

in his office which he had to finish up.

MR. BELL: How much less does the Army pay for its

supplies - food and stuff - than we pay?
H.M.JR: Less?
less?

MR. O'CONNELL: What makes you think they pay any

MR. BELL: Oh, sure they do. They get pork and beef
and everything else a good deal cheaper than you do.
H.M.JR: Are you talking about the Army Quartermaster

or the fellow who lives in the Army?
MR. BELL: Quartermaster.

MR. BLOUGH: He doesn't pay black market prices for
anything.

MR. O'CONNELL: They pay wholesale prices.

H.M.JR: He (Davis) says he reads about the things
in the paper. That was the same thing Vinson said, "I am
sick and tired of being a member of the Stabilization
Committee and reading about it in the paper."
I think if we started going around town we could round
up quite a few friends.
MR. HAAS: There is one question of rolling prices
back and reducing, and there is another question of keeping

them there. Davis really has a point there; there really
is too much money.

H.M.JR: I read about it in a speech I almost made.
(Laughter)

219

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

CONFIDENTIAL

DATE June 14, 1943

Secretary 1 órgenthau

TO

FROM

Mr. Haar

Subject: The Business Situation,

Week ending June 12, 1943.
Summary

Crop prospects: Crop prospects on June 1 were the poorest

in three years, and little hope is given by the Department
of Agriculture that this year's production of food and

feed will attain last year's record levels. A substantial reduction in grain crops is indicated, the wheat

forecast showing a crop 26 percent smaller than last
year and 150 million bushels below the average for the

past five years. Although the declining prospects for
the grain crop may not affect production of livestock
this year, decreased production in 1944 is likely.
Price control: To maintain existing ceiling prices of

essential canned foods, subsidies to vegetable packers
in compensation for pending wage increases and higher
material costs were approved by the Director of Economic

Stabilization last week. Regulations are being drafted

to reduce prices on fresh vegetables, but this may merely

take advantage of the normal summer decline.

Commodity prices: Although the unfavorable June crop
report had a bullish effect on grain prices, hog orices
declined substantially last week on heavier marketings,
with the result that the BLS index of 28 basic commodities
held practically unchanged. The squeeze on meat packers'
margins has been alleviated by the decline in hog prices
during the past two months.
Employment and payrolls: Factory employment declined slightly

in April for the first time since January 1942. However,
factory payrolls moved ahead to a new high 40 percent

above last year's levels. Average weekly earnings of
factory workers also continued to rise, and in April were
21 percent above the April 1942 average.

Stock prices: Industrial and railroad stock prices declined
about 1 and 3 percent, respectively, last week on
diminished trading activity. The strength in stock prices
in recent months has been featured by the so-called "peace"
stocks, which now stand in the strongest relative position
since shortly before the invasion of Norway.

220

-2Crop prospects less favorable
Attention was focused on the nation's food supply
last week by the release of the Department of Agriculture's
June 1 crop report, which indicated that crop prospects at
this time are the poorest in three years. Little hope was
expressed that this year's production of food and feed
would attain last year's record levels, much less the
Government's goals of an increase of at least 5 percent.
The most that can be expected, the report stated, is a
total acreage nearly as large as that harvested last
season, assuming good weather until harvest time, but
yields per acre averaging as high as those secured last
year are no longer within reach. The decline in crop

prospects will accentuate the difficulties in controlling
food prices.

In the important midwestern area wet weather and

floods have retarded planting, with farm work reported
to be several weeks late in some sections. The floods,
which covered four million acres of crop land, have caused
serious damage to crops, although farmers may be able to
replant some of the same crops, providing there are no
further delays in planting and no early frosts occur.
On one-third of the flooded acreage different crops must
be planted. Wet weather has also hindered farm work in the
northeastern states. On the other hand, crop prospects in
the Great Plains area and the Southwest have been reduced

by drought conditions.

A substantial reduction in grain crops is indicated.
Total wheat production is now forecast at 731 million
bushels. This is 26 percent less than last year's crop,
partly because of reduced acreage, and is 150 million
bushels below the average for the past five years. Rye
production is forecast at 34 million bushels, 41 percent

below last year's crop and 12 percent less than the 1932-41
average. Oats and barley production are also estimated
considerably below last year, but are substantially above

the 1932-41 average. Although it is too early for the corn
forecast, the report said that the corn crop was off to an
abnormally late start, with probably 15 million acres
(15 percent of the 1943 goal) still to be planted. Good
growing weather will be needed to mature the late plantings
of corn ahead of frost.
On the basis of June 1 conditions, deciduous fruit
production may be 10 percent below 1942, but favorable

conditions for citrus fruits partly offset this decrease,
and total tonnage of all fruits probably will be only 5 percent

221

-3lower than last year. The peach crop was seriously

damaged by the spring freezes, and the 45-million-bushe1

crop forecast is 32 percent below last year's crop and
the lowest since 1932. A small pear crop is also in

prospect.

To temper the rather pessimistic crop report,

Food Administrator Davis issued a statement last week

predicting that the total food production, including
livestock, would probably match that of 1942 if at least

average weather prevails and labor and supplies are
adequate. Livestock production, which is up sharply

from last year, will tend to offset the smaller crop

production.

Feed shortage looms

The Department of Agriculture indicated last week
that the present level of livestock production cannot be
maintained, at least not beyond 1943, unless exceptionally
good yields of feed grains are obtained. Present large
stocks of grain are disappearing at a record rate, and it
is expected that reserve stocks will be reduced to, if
not below, safe working levels during the 1943-44 season.
Feed shortages are appearing in certain areas, but

this is largely the result of price and transportation
difficulties. Dairy and poultry farmers in New England
were reported last week to be faced with a critical feed
shortage. The recent heavy hog marketings in the Chicago
market have been ascribed in part to difficulties producers
are having in obtaining corn for feeding purposes.
To ease the feed situation, the 000 was granted
authority by Congress last week to sell an additional
50 million bushels of wheat for feed purposes at the

parity price of corn. During the present fiscal year
the CCC has already sold nearly 225 million bushels of
wheat for feed, most of it in the past six months.
Price control developments

Subsidies will be paid to vegetable packers, to enable
them

to meet proposed wage increases pending before the WLB

without raising civilian prices of essential canned foods,

according to a plan approved by Director of Economic
Stabilization Vinson last week. The subsidies will cover and
green peas, snap beans, sweet corn and canned tomatoes,
will be paid through the CCC purchase-and-resale program.

4-

Sales to Government agencies, however, will be made at

prices reflecting the increased costs of raw materials
and labor. For minor vegetables, which are not essential

cost-of-living items, higher ceiling prices will be

authorized to compensate for approved increases in raw

material costs and wage rates. This action in subsidizing
the 1943 vegetable pack will probably arouse opposition
from Congressional sources, which have been vigorously

criticizing the subsidy program.

OPA's subsidy rollback program for butter, meats,
and coffee continued to be the object of severe criticism
from the food industry and Congress last week, but there
were indications that OPA would be permitted to try out

this initial program. The rollback of 5 to 6 cents per
pound in retail butter prices was put into effect last
Thursday without any specific complaints.

Regulations are being drafted to reduce prices on
fresh vegetables, Mr. Richard Gilbert, economic adviser

of OPA, told the Senate Banking and Currency Committee.

No subsidy payments will be used in this reduction, which

is expected to lower the cost of living by one-half of one

percent. This action may represent, however, no more than
a seasonal reduction of fresh vegetable prices which would
occur in any event through heavier summer marketings.
Extending the use of industry advisory committees, the
OPA set up machinery last week for the formation of advisory
committees to cover all industries affected by OPA regulations.
This move was taken in response to criticism that many OPA
orders have been issued without prior consultation with the

affected industries. The Price Control Act requires that

advisory committees be set up on the request of an industry,
but many industries have not availed themselves of this
privilege.
Complete WFA food control urged

The threat to the original plans for 1943 agricultural

production resulting from adverse weather conditions and
floods, together with short labor and machinery supplies,

is increasing the agitation for a shift in price and

rationing authority to the War Food Administrator. A

committee of agricultural members of the House will seek
a conference with the President this week, Representative
Fulmer told the press last week, to discuss the necessity

222

-5of a coordinated Government plan to handle the food
problem. Support for such a move was also given by
Mr. Herbert Hoover as a means of increasing food production and preventing inflation. Moreover, the
Grocery Manufacturers of America expressed fear that

lack of coordination in the food program might lead
to a serious breakdown, and they urged the integration
of control over both food prices and supplies in the

hands of the War Food Administrator.

Commodity prices irregular

Although the unfavorable June crop report had a
bullish effect on grain prices, commodity prices on the
whole moved irregularly last week, and the BLS index of
28 basic commodities showed practically no change.
(See Chart 1.) Spot corn and barley prices were up

noticeably, while oats futures (not included in the index)
advanced to the highest level since 1920. A small increase was registered by wheat prices. Under a strong
demand wool top prices rose substantially.
The price of hogs, however, declined almost 2 per-

cent as a result of the heaviest marketings for this time
of year since the drought of 1934. During the past two

months hog prices have been falling and they are now within
30 cents of the Government support level of $13.75
announced early this year. The decline has alleviated
the squeeze on packers' margins, and it is now reported
that packers can sell pork products under OPA wholesale

price ceilings without incurring losses. (See Chart 2.)

Among the important factors which have tended to reduce
hog prices have been the restriction of demand through
rationing and the seasonal increase in hog marketings.
In the week ending June 5 the BLS all-commodity index

declined 0.1 point, after an almost continuous gradual rise
since April 24. The index now stands at 103.9, which is
38.5 percent above pre-war levels of August 1939. Reversing
a strong upward trend, prices of fresh fruits and vegetables
began to show a seasonal downturn, which was largely
responsible for the decline in the index.
Factory employment declines slightly but
payrolls continue rise
Factory employment declined slightly in April, thus
registering the first decrease since January 1942. Employment

223

-6in the transportation equipment group showed a further
sizeable increase, due to continued expansion in air-

craft and shipbuilding. However, with the exception of
the chemical industry, all other major groups declined

or showed only minor gains.

Despite the slight decrease in employment, factory
payrolls continued to climb and reached a new record high
in mid-April, 40 percent above last year's levels.
Considerably more striking, however, is the fact that
since April 1940, just before the defense program got
under way, factory payrolls have risen 192 percent. (See
Chart 3.) The continuing tendency of payrolls to move
ahead, in the face of a levelling off in employment and of

efforts to check the rise in hourly wage rates, probably
reflects to an increasing degree the effects of the longer

work week and overtime premiums. However, as is well
known, increases also continue to be made in basic wage
rates.

In reflection of these factors, average weekly

earnings of factory workers in April moved up to a new
high, 78 percent above the 1939 average. (Refer to

Chart 3.) Moreover, it should be noted that since midcent. This is of interest in view of the controversy over
the "Little Steel" formula, which aims to restrict increases
in basic wage rates to the 15 percent rise in living costs

May 1942 average weekly earnings have risen about 19 per-

which occurred between January 1941 and May 1942. Inasmuch

as living costs have continued to rise since May 1942,
organized labor contends that the limitations on hourly

wage rates under the formula is basically unfair. In these

contentions, sight is frequently lost of the fact that

average weekly earnings have continued to rise despite the

limitations of the "Little Steel" formula on basic wage

rates.

Steel operations decline

As a result of the recent coal strike, steel operations

last week were scheduled to decline to 97.5 percent of
capacity, thus touching the lowest level since the end of
January. (See Chart 4.) Moreover, the Iron Age reported of

a decline in the production rate to only 94.5 percent
capacity, with operations in the important Pittsburgh

district down to 88 percent. Although the blast furnaces in
recently shut down by lack of beehive coke were back

operation before the end of last week, it is estimated

224

225

-7that production of 50,000 to 60,000 tons of steel was
lost as a result of the most recent work stoppage in the
coal mines. In addition to a shortage of coke, shutdowns for repairs are also said to have contributed

recently to a sag in the operating rate.

Although steel ingot capacity was increased about
3 million tons from September 1941 to the beginning of
May 1943, the expansion program of the industry continues
to lag behind schedule. The new capacity was to have been
completed by the end of this month, but as of June 1 the
blast furnace and open hearth programs were reported to
be only 57 percent and 42 percent completed, respectively.
Somewhat slower progress was reported for coke oven
expansion, but the critical electric furnace program was
65 percent completed.

The steel industry's wartime expansion program 1s
expected under present plans to be virtually completed

by the end of this year, but in view of previous delays
it remains to be seen whether this can be achieved. In
the event the objective is reached, steel ingot capacity
on January 1, 1944 would total 97.4 million tons, or
nearly 9 million tons more than on January 1, 1942 shortly
after our entry into the war.
East Coast petroleum supplies near low
Despite the ban on pleasure driving and the heavy
tank car movement of petroleum products to the East Coast,

supplies available for civilians in the area in the week

ended June 5 dropped very slightly to 25.6 percent of
"normal". This is only 0.1 above the extreme low touched
in the week ended May 8. (See Chart 5.) As further
evidence of the tight situation in supplies, the Petroleum
Administrator last week indicated that East Coast residents
could not expect any larger oil supplies for home heating

next winter than last.

Among other developments, the present tight oil supply
situation in the East appears likely to increase pressure
for widening the jurisdiction of the Petroleum Administrator
at the expense of the OPA. Moreover, while the oil shortage
in the eastern states is primarily a transportation problem,
the Petroleum Administrator indicated last week that he was
asking the OPA to reconsider its refusal to grant a general

226

-8increase in crude oil prices. Proponents of a price
increase have contended that such action is necessary to
stimulate drilling, which is held to be inadequate to

keep up with the demands of the industry.

Stock prices slightly lower
After moving up to a new high in the first week
of the month, industrial stock prices declined about
1 percent last week on diminished trading activity.
Railroad stock prices showed greater weakness, declining
about 3 percent, due to the prospect of increased railroad
wage rates and to lack of buying interest in so-called

"war" stocks. In this connection it is of interest that

"war" stocks as a group have been unable to make any
headway since near the end of March, while "peace" stocks

have continued to forge ahead. (See Chart 6.) It will
be noted that "peace" stocks now stand in the strongest
relative position since shortly before the German
invasion of Norway.

MOVEMENT OF BASIC COMMODITY PRICES
1942

1943

PERCENT

PERCENT

August 1939-100

210

210

205

205

200

200

9 Uncontrolled Commodities

195

195

190

190

185

185

180

180

175

175

28 Commodities
170

170

165

165

160

4

160

19 Controlled Commodities
155

155

MAR

MAY

SEPT

JULY

JAN.

NOV.

1942

MAR

MAY

1943

PERCENTAGE CHANGE DEC. 6, 1941 TO JUNE 4, AND June II, 1943
PERCENT

PERCENT

19 Controlled

9 Uncontrolled

Commodities

Commodities

+60

+60

+50

+50

Florreed 64.6%

Carn 446X
+40

/ 388X

+40

Bertey 3777

Butter 333X
Lord 28 ax

+30

+30

Steers 2762
Shellee 12.3%

Wheat 2372

Leed HIL

Print Cloth zer

+20

Sugar 6.9%

Assis 230X
Cotton 217%

+20

Cottonesed 07 898
Woo Tope 5.0%

Zinc 3X
+10

0% Change

+10

Medes Salt.

Tin. Rubber

Coffee Copper
o

St Scrap dom
St Screpeep

o

Cocce ex
Tollow-4.1x
Burlop -4.28
-10
Dec. .
1941

-10
June

1943

June =
1943

Dec. 6

194

227

June 4

June "

1943

1943

"70 Controlled - . Uncestralied previous to June 26
Office of the Secretary of the Treasury

- of Penearch and -

P-244-48

Chart 1

-

HOG PRICES. VALUE OF PORK PRODUCTS, AND GROSS MARGINS
Weekly, January 1942 to date
1942
DOLLARS TTT

FLB.

APR.

TT

JUNE

TTTHITT

PCR

TITTT
AUG.

OCT.

1943
DEC.

TITUTITY TTT

FEB.

TTT

III

APR.

JUNE

TTDDL
PER

100 LBS.

100 LBS.

16

16

COMPOSITE WHOLESALE

VALUE OF Hogs PRODUCTS
15

15

14

14

WHOLESALE PRICE OF LIVE Hogs

**
13

13

12
12

11
11

10
10

GROSS
GROSS

MARGIN

MARGIN

(CENTS)

(CENTS)

100

GROSS MARGIN

100

0

0

-100
FEB.

APR.

JUNE

AUG.

OCT.

DCC.

FEB.

1942

LILL
N.

JUNE

100-

1943

WHOLESALE VALUE or ALL EDIBLE PRODUCTS IN 100 LB. OF LIVE HOGS.
GOOD CHOICE, 180-200 LBS.
Office of the Secretary of the Treasury
Division of Research and Statistics

SOURCE: U.S.D.A

P 246 - A

2

FACTORY EMPLOYMENT. PAYROLLS AND WAGES
1939 = 100, Unadjusted
1939

1940

1942

1941

1943

PERCENT

PERCENT
320
320
300

300
280
280
260
260

Payrolls
240

240
220
220

200
200
180
180

Employment
160
160

140
140

Average Weekly Earnings
of Factory Workers

120

120
100
100
80
80

M

1939

J

Office of the Secretary of the Treasury

Divided . - and -

1940

S

1941

1942

1943

C-488

Chart 4

STEEL INGOT PRODUCTION
PER

Per Cent of Capacity

CENT

43
'41

100
42

90

40
80

70

Amer
60

JAN

/ ands Inst
MAR

Office of the Secretary of the Treasury
Division of Research and States

MAY

JULY

SEPT

NOV

C-419

230

PETROLEUM PRODUCTS SUPPLY
Civilian Supply on East Coast as Percentage of "Normal." July 1942 to Date
1943

1942

PERCENT

PERCENT

60

60

55

55

50

50

45

45

40

40

35

35

30

30

25

25

20

20

15

JULY

AUG.

SEPT.

OCT.

NOV.

DEC

JAN

FEB.

MAR

1942

APR

15

MAY

JUNE

1943

"Normal Supply for corresponding month in year beginning July 1940
Office of the Secretary of the Treasury
- . Research and Medicales

C-474

2

COMPARISON OF PRICE MOVEMENTS
OF 20 "WAR" STOCKS AND 20 "PEACE" STOCKS*
August 1939-100
1940

1939

1941

1943

1942

PER

WEEKLY

-

CENT

A SOND

PER

CENT

Friday Quotations

160

160

140

140

120

120

Wor" Stocks
100

100

80
80

"Peace" Stocks
60
60

40
40

PER
PER

CENT

CENT

(Retio)

(Ratio)

Ratio of "War" Stocks
to "Peace" Stocks

200

-

180

-

-APRIL

180
fa.

--

Dr.

Jane

Sept. n

160

200

APRIL ,

----

Jane 22
UNIVERSITY

Bussia

160

=

agrees

-

140

DEPEAT

MAIL n

140

REVERSE

Team

-

120

JAY 29

120

100
len

have

-

80

80
F

J

S

D

1939

100

M

A

M

JJASONDJFMAMI9

J

Bussing

- 10

A

M

A

1942

1943

1940

"Stocks refected on basis of relative benefits from prolonged war ve early peace
Indiverse are weighted averages of price relatives

P-225-B-

A

233

JUN 1 4 1943

Dear George:

I have your letter tendering your resignation as
Assistant to the Secretary of the Treasury and it is
with regret that I accept it to become effective upon
the expiration of annual leave due you.
I am deeply grateful to you for the invaluable

contributions you have made to the Treasury Department

in its war financing efforts and for the personal

sacrifice that Mrs. Buffington and you made in coming
to Washington. The loyal and able assistance you have
given me has had an important part in the success of our
program to date.
It has been a pleasure to have had you as a member

of the Treasury Staff, and it is with a sense of
satisfaction that I may feel warranted in calling on
you from time to time as suggested in your letter.
Very sincerely yours,

Mr. George Buffington,

Office of the Secretary.

file
CSB:em:ie
6-9-43

to

Mr

C

234

0

P

Y

June 7, 1943

My dear Mr. Secretary:

With the completion of the war financing
activities to which I have been assigned as
your assistant, and in accordance with our
recent understanding, I hereby tender my resignation, to take effect at your convenience.
It has been a pleasure and a privilege
to work under your able leadership since
October 1941, and I hope you will not hesi-

tate to call on me at any time in the future
if I can be of service to you or the Treasury.
Sincerely yours,

(Signed) George Buffington

Honorable Henry Morgenthau, Jr.

Secretary of the Treasury.

235

JUN 14 1943

My dear Mr. Hobbes

It is with regret that I accept your resignation

from the position as Technical Assistant in the Office
of the Secretary to take effect upon the expiration

of accrued animal leave due you.

I appreciate the faithful and efficient service

you have rendered the Treasury Department in its war

financing efforts and your kind offer to again serve
the Department should the occasion arise.
My best wishes go with you.
Sincerely,

(Signed) H. Morgenthau, Jr.
7

Mr. Robert B. Hobbs,

Office of the Secretary.

file to Mr. Thompson
CSB:10

6-9-43

236

June 7, 1943

Dear Mr. Secretary:

In accordance with my recent conversation
with you, I hereby submit my resignation as
Technical Assistant in the Office of the Secretary,
War Finance Committee, to take effect at your
convenience.

It has been a privilege and a pleasure to

be associated with the Treasury Department in

its War Financing program and I trust that it
will be possible for me to serve you again at
some future time.

Sincerely yours,
(Signed) Robert B. Hobbs

The Honorable,

The Secretary of the Treasury.

237

JUN 14 1943

MEMORANDUM FOR THE PRESIDENT:

I have your memorandum of June 11th, asking

about the candidacy of William Burke for Collector
of Customs at Boston, where there is a vacancy.
Congressmen McCormack and Curley have been pressing

for the appointment of Burke, who is Democratic
State Chairman. No word on the matter has been received from Senator Walsh. However, at the request

of Chairman Walker, an investigation of Burke's
qualifications was begun on June 4th.

(Signed) H. Morgenthan, Jr.

Secretary of the Treasury

HEG:ds

Photo tile Disy

orig Simmons
direct
Messonory

6/14

THE WHITE HOUSE
WASHINGTON

June 11, 1943

MEMORANDUM FOR

THE SECRETARY OF THE TREASURY

How about Mr. William Burke

for Collector of Customs in Boston?

John McCormack he comes closer

to satisfying ell factions than
enybody else.
F. D. R.

239

TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR

WASHINGTON

June 14, 1943

SECRET
MEMORANDUM TO THE SECRETARY:

Supplementing report to you of June 7, 1943,
the purchases against the African Program from
June 7, 1943, to June 13, 1943, totaled $797,867.53

or a total of purchases for the program thus far
of $44,351,613.01.

Attached is report giving status of shipping
against these purchases.

When
A.J Walsh

Acting Director of Procurement

PORVICTORY

BUY

(37861)

SECRET
Commodity

SHIPPING REPORT AS OF JUNE 12; 1943
Tonnage

Shipped to Date
From U. S. A.

Tonnage

Under Load

At Port

Aluminum sulphate

Asbestos sheet packing

Tonnage

On Hand at Port
Waiting Vessels

2

19

Bone glue

Babbitt metal

Brick
Calcium carbide

20.5

37

63.82

91.33

2

62.23
53.85
129

40

505.14

940.43

384.79

733.04

30.27
1336.98

Cement

Cement, rubber
Chemicals

Coal cutters
Copper tubing
Corrugated boards
Clothing
Copper sulphate
Cotton thread
Cordage & twine
Drugs

Electrodes

Fullers earth

Gelatin
Glass, window
Glass, lamp chimneys
Glycerine
Horse shoes & nails
Hosiery
Jute bags

1105.7
47

383.35

71

12

21.5

18

90

2265.46
5697.7
69.25
235

6.5
9.4
.94

Envelopes

Files, steel

To Port

14.5

Boiler tubes

Books & booklets
Brass rods & sheets

Tonnage

En Route

15

218.8

109.58
34.4
189.5
47.5

16
22

10.5

30

29.5
20.5
9.6
15.56

26.5
12.5
.03

2

4.3

12.68
.4

15

72
1

23.6

1

76

21

24.3

17

12.75
168.99
26

356.19

29.91
5

428.55

48.39
20

555

16.72
.5

-2243

SECRET

Commodity

Tonnage

Shipped to Date
From U. S. A.

Light bulbs

Tonnage

Tonnage

On Hand at Port
Waiting Vessels

Under Load

At Port

3.26

15.1
10.2

Lithopone

Lumnite

Mach. finished book paper
Matches

Newsprint

Nipples, bottles, eye cups

Paper products
Paper bags
Paint pigments

Piece goods, textiles
Pig iron
Pig tin
Powdered milk

394.38
937.47
603.95
83.9
26.5

10,643.11

Tools

Tooth brushes
Tea

62.35
28

190.6
33.5
275.16

460.47
1

887.05

65

56

67.1

64

64

119

.27

4196.5

Shoes, boots & soling
Sulphur commercial flour
Tin plate
Tires, tubes & tape

263.18
11.42
13.2
2160.25

432

65

Refined sugar

Storage batteries & flashlights
Steel, pipe, bars, angles, wire

16.9

144.66

131

9

Raw sugar

Spare parts for autos,
tractors & harvesters

3.5

2

1545

Shoe tacks

To Port

30

Printers ink & supplies
Sheet copper, rods, cable

Tonnage

En Route

39.46
14.5
751.78
66.7

298.85
274.25

12

7.54
9

21.9
2033

113.75
1382

N

727.7
17.72

222.22
25.8

4538.24

1640.22

201.5
1435.2

2555

6.91

845

269.64
84.64

85

38.7

127.7
530.23
.75

171.75

361.54
641

242

SECRET

-3Tonnage

Shipped to Date
From U. S. A.

Commodity

Typewriter ribbons
Wire nails
Wire rope

X-Ray films
Blasting caps

Tonnage

Under Load

At Port

On Hand at Port
Waiting Vessels

Tonnage

En Route

To Port

.5

100.5
88.5

17

1

18

1.4

Transformers

Tonnage

Wire cloth

6

6.95
2.5

Padlocks

Hooks, eyes, buttons, needles
Electric motors
Spark plugs
Trucks

Ball Bearings

4.8
4.5
174.8

Spiegeleisen

6.5

17

4.5
5

45

120.5

1

.1

39.8
161

Belts

5.5
9.5
1.2
5.18

Oil, insulating

Grass hooks
Lamps

Totals

32,037.26

7,561.86

13,592.33

8,567.38

carbon copy delivered to: Major Gen. Burns
243

244

SECRET
JUN 14 1943

My dear Mr. President:
There is attached a report of Lend-Lease
purchases made by the Treasury Procurement

Division for the Soviet Government indicating

the availability of cargo for June.
Tonnage at the end of June will be 741,042,

an increase of 44,879 tons over May. This

increase is chiefly attributable to the accumulation of equipment under the special industry
program.

Yours sincerely,
(Signed) H. Morgenthau, Jr.

The President
The White House

HFRiley/kb
6-8-43

Its

mcary
mack phone

HJR

2

PRIORITY CARGOES
COMMODITY

STEEL BARS, SHEETS, STRIP
PLATES, SHAPES, ETC.
TOOL AND DEE STEEL
RAILROAD RAILS, WHEEL SETS
AND ACCESSORIES

SPECIFIED FOR
JUNE 1943

3,500
1,000

ZINC

ALUNISUM AND ITS PRODUCTS
FERRO ALLOTS

INDUSTRIAL & CONSTRUCTION
MACHINERY, MATERIALS,
ACCESSORIES & PARTS
AUTOMOTIVE EQUIPMENT
AND PARTS
TIRES & TURES
GRAPHITE - METAL ELECTRODES

PRODUCTION

204,129

25,385
6,872

226,014
6,389

281

84,768
82,979
120,757
2,111
78,926

517

400

2,000
3,000

450

325

19,226
2,500
3,212

500
662

517
74

4,503
11,833

600

31

656

87

35,500

70,261

35,167

69,928

225

225

4,000

2,048

2,498

546

300

668

31

399

799

5,690
2,563

5,690
3,362
941

2,828

884
137

2,965

101

553

654

6

6

36,762

36,762

RUBBER PRODUCTS

HAND & MACHINE TOOLS
BALL & ROLLER BEARINGS
PAPER & PAPER PRODUCTS
MISCELLANNOUS SUPPLIES
& EQUIPMENT
CLOTHING & TEXTILES

57

COAL

ROLLED LEAD

35

35

50,625*
NOTE:

8,074
3,978

BALANCE

4,311
11,759

CHEMICALS
KERCURY

ATAILABLE
STORAGE

84,487
74,905
116,779
2,111
60,100

WIRE PRODUCTS

PIPE AND TUBING
TIN PLATE
COPPER AND ITS PRODUCTS

SECRET

TERASURY DEPARTMENT - U.S.S.R.

636,376

155,291

*Priority Cargo represents only that tomage with assured shipping space as of today.
As is previous months substantial other cargo will be shipped.

741,043

246

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. 89 - Aircraft Despatched
- for week ended June 8, 1943.

The Honourable Henry Morgenthau, Jr.

Secretary of the Treasury

WASHINGTON, D. C.

June 14, 1943.

247

STATEMENT NO.89

MOST SECRET

Aircraft Despatched from the United States
Week Ended June 8th. 1943

TYPE

DESTINATION

ASSEMBLY

BY

BY

FLIGHT DELIVERED

POINT

SEA

AIR

FOR USE IN CANAD

CONSOLIDATED

Catalina IV
Liberator GR V

U.K.
U.K.

U.K.
U.K.

1

14

DOUGLAS

Dakota

India

India

New Zealand

Auckland

India

Bombay

W'Africa

Takoradi

U.K.

U.K.
Sydney

1

CURTISS

Kittyhawk

14

FAIRCHILD

Fairchild PT26
Fairchild PT26

8

3

LOCKHEED

Hudson III A
Ventura
Ventura

Australia

21
7

New ZealAND

Auckland

M.E.
M.E.
M.E.

M.E.

U.K.

U.K.

9

GLENN MARTIN

Baltimore III A
Baltimore IV
Marauder I

1

16

M.E.

M.E.

1

NORTH AMERICAN

Mitchell II
Harvard
Harvard

VULTEE

Vengeance

M.E.

Port Sudan

India

Bombay

Australia

Sydney

New Brunswick
New Brunswick

Penfield Ridge
Penfield Ridge

Trinidad

Trinidad

VEGA

Ventura GR V
Ventura
STINSON

Reliant I
British Air Commission
Movements Division
June 11, 1943.

3

6

3

4

Total 54

3

1

12

70

4

248

HUN 11 1943

Excellency:

This is in reply to your letter of June 9, 1943

indicating your desire for a conference with me on certain
monetary matters and enclosing a copy of your memorandum,

Reserve concerning the American and British Plans for Inter-

national stabilisation of Currencies.

I appreciate your interest in submitting your views on
the proposals for post-war monetary stabilisation and shall
be pleased to see you sometime during the week beginning

June 14. May I suggest that your secretary telephone my

office for an appointment at a time which will be ratually
most convenient?

Sincerely yours,
(Signed) H. Morgenthau, Jr.

Secretary of the Treasury.

His Excellency, J. van den Breek,
Minister of Finance,
Kingdom of the Netherlands,
1620 Belmont Street,
Washington, D. C.

Photo. file in Diary
Orig. File ret'd direct
to White's office.

SDS.bh 6-11-43

ECONOMIC. FINANCIAL
AND SHIPPING MISSION
OF THE KINGDOM OF
THE NETHERLANDS
WASHINGTON D. C.

June 9, 1943

TEENBERGHE

VICE-PRESIDENT
DR. C.H.C. HART

WASHINGTON D.
1620 BELMONT

TEL ADAMS 4301

The Honorable

Henry Morgenthau, Jr.

Secretary of the Treasury
Washington, D.C.

My dear Mr. Morgenthau:

I will be very pleased if you can give me an opportunity to discuss a few monetary matters during my
stay in your country. As I have to leave today for
Ottawa and will not be back before the beginning of

next week, I would suggest that you let me know what
day and what time during the next week you will be able
to receive me.
Enclosed are a few remarks concerning the American

and British plans for international stabilization of

currencies. In these remarks I have written a few
thoughts that occurred to me while reading the plans,
and I would like to discuss these remarks with you during the interview I hope you will grant me.
Very sincerely\yours,
J. van den Broek

Minister of Finance of the
Netherlands

JvB:hs

)

Remarks concerning the American and British Plans

for International Stabilisation of Currencies

Beth the Keynes and the American plans are attractive in the sense

that they aim at stabilisation of international rates of exchange, provention of the collapse of some monetary system, and restoring the

confidence in the respective currencies.
However, as has been pointed out in both proposals, the monetary

problems are closely linked up with economic problems. Therefore the

aim of the proposed plans is also to facilitate the restoration and
balanced growth of international trade. Economic measures of an international obaracter will have to be agreed upon if monetary stabilisation
is to be achieved. The proposals were clearly drawn up having this in
mind, and it is to be hoped that on broad lines certain trade agreements
will be reached in order to guarantee the success of the planned

stabilisation of foreign exchange. It may be stated here that the
United States has already taken steps in this direction by the act
regarding separate trade agreements. (See Mr. Hull's statement to the
House Ways and Means Committee of April 12, 1943.)

What dangers are threatening the smooth and unisterrupted working of

either the Keynes or the American plan, or a combination of both once
such a plan is accepted? They can only work if methods to deal with

disequilibria in balances of any country vis-a-vis the world either
credit or debit, which automatically will create the opposite balance for
the rest of the world will be acceptable to such country. By "acceptable

2.

to such country" I mean that the pressure exercised should not hurt

the real interests of a country, nor lead to an unwarranted lowering

of its standard of living. If one of the two, or both, were the case,
it would create general discontent and be felt as being unreasonable.
We therefore have to analyse the causes which may lead to disequilibria,

Although it is practically impossible to distinguish clearly between
current business and long term financing, it will be necessary and very
likely be possible to determine whether a disequilibrium in the balance

of a country is solely due to a one-way traffic of long term financing.
Such long term financing itself need not endanger an international
monetary system; equilibrium may be reestablished as soon as the long

term financing bears fruit. But both current business and long term
financing may cause disequilibria due to other factors which may endanger

the success of any international scheme. I would like to draw here
attention to three such possible causes.
1. Suppose member countries use their credits in an uneconomic way.

We have seen in the past that some countries have built up their economy

on lines automatically leading to bankruptcy or monetary chaos. I refer
to the economic system of Germany where the slogan "Guns before Butter"

was accepted as the government's policy backed by the general opinion of
the overwhelming majority of the population. In other words, Germany used

its international credit to build up an army, and we should not overlook,
the strongest army in the world, and Germany was prepared - and actually

did so - to sacrifice its material standard of life to achieve that purpose.

3.

It is true that in the first few years after the war the Axis
countries will have to accept all kinds of control measures forced
upon them by the United Nations and therefore we need not, for the

time being, worry very much about whether or not they intend to bring
their economy more into conformity with the economy of others. However,

we must realize that, as has already been stated in the Keynes plan,
also countries belonging to the United Nations will have to surrender

some of their liberty of action if the schemes are to work satisfactorily.
In my opinion this applies to both plans, the Keynes and the

American plan. We have to answer the question: "will it be possible

for nations to surrender their liberty of action to some extent, and,
if so, to what extent, and how can this be achieved?"
Let us suppose, for argument's sake, that a member of the union or

of the fund uses its purchasing power based upon the credit it can obtain,
in (at least in the opinion of member countries) an uneconomic way, for
instance on armaments or by importing such luxury goods as, according to
its trade balance, can hardly be looked upon as sound economic purchases.
By what power will the other member countries be enabled to prevent this,

and is it desirable or not to introduce into the monetary arrangement

itself certain clauses to provide for such possibilities, or is the
sanction of refusing further credits a sufficient guarantee? If other
more stringent clauses are introduced these undoubtedly will enter the

political field. If they are not provided for, will not the automatic
reaction of a country, not living up to expectations and having reached
the maximum of its credit, consist in abandoning its membership? Has not
the League of Nations given us a sad example in this respect?

4.

2. There is a second problem to which we have to give some thought

if we want to prevent the failure of an international monetary system.
The natural resources of various countries differ widely.
Lord Keynes in his speech at the meeting of Ministers of Finance on

February 26, 1943 stated that his particular plan takes its most

characteristic feature from the analogy of banking. I believe that this
is not only the most characteristic feature of the plan but also the
most attractive one. However, the system of banking in a country was
possible because in such country certain measures were always taken to

prevent the capital or the wealth of the country from being accumulated

in too few hands. I mean to Bay this: If an individual W&B not using
his available money he made it available to others who wanted credit.
Such others had to pay a certain interest on the money lent to them, but
there were certain provisions to prevent this process from continuing ad

infinitum in a one way traffic. This had the effect that there are always
a great number of creditors on one side and a great number of debtors on

the other side. The banks formed the links. Government's taxation prevented the system from getting tied up. Actually this worked out in such
a way that the wealthier inhabitant of a country had to part with some of

his wealth to the benefit of the less fortunate inhabitant. His wealth
was very often based upon his greater energy and on the greater quantity

of work he did to the benefit of the general welfare, but such was not

always the case. A man living on a part of the richest soil of a country
is bound to produce more than a man living on poor soil and, therefore,

measures to equalise to a certain extent this difference in the possibilities
for acquiring and collecting wealth were taken.

5.

No closed banking system could have worked in the long run without

these provisions. I am wondering what will be the future of an international banking system of a family of nations. will not the result
automatically be that with a more or less equal standard of living some
countries will, by necessity, become creditor and others debtor countries?

For a certain length of time I believe that by altering the rate of
exchange this difficulty can be overcome, but we cannot close our eyes

to the fact that the basic reason for the growing wealth of some countries
may be mainly due to differences in natural resources.
Let us take as an example the United States of America. In the past
the United States of America has, for a good many years, been a debtor

country. Other countries were investing money in the United States by
which the natural resources of America were developed. Now the picture

has changed completely. America is not only a creditor country, it is

also a country that owns practically all the extracted gold in the world.
It has been argued that the reason why America has all the gold is
obvious. The reason, people say, is that America is exporting goods but

prevents the import of goods by high tariff walls. Therefore the balance

is paid in gold. I don't think this is true. If there had been a
shortage of wheat or any other essential material for the economy of the
United States, the United States would not have preferred gold above

wheat or oil or anything else which might have been lacking. Materials
which the United States did not possess itself were always imported, like
rubber, tin and other raw materials.

7.

Summarising, it seems necessary that the Managing Board of a

Clearing Union or Stabilisation Fund have the means to prevent

uneconomic expenditure of credits. It must also have powers to investigate the reasons why certain countries become creditor and others

debtor countries and to propose measures for adjustment. For instance,
adjustment in the case of backward countries may be found in granting

long term credits on conditions not hampering but fostering the
development of such countries.

Last but not least, it must have the power to demand that member

countries take the necessary steps to guarantee internal financial

stability without which international currency stabilisation is
impossible.

J. VAN DEN BROEK

May 20th, 1943

PARAPHRASE OF TELEGRAM RECEIVED

FROM: American Embassy, Chunging, China.
DATE:

June 14, 1943, 9 a.m.

NO.:

915

This is message TF-132 for the Secretary of the Treasury only from
Mr. Adler.

With reference to my TF-128, dated June 9, 1943. I have learned
from sources considered reliable that OR June 12 T.V. Seeng received

a cable from the Generalissimo which instructed him not to give you
notice that Chima wants to extend the stabilization agreement of 1941.
The previous suspicion that Kung was acting under orders from the
Generalissimo when he raised the questions transmitted to you in the

telegram under reference is thus confirmed. Otherwise it would be

difficult to explain his obduracy or his uneasiness in face of the
unanimous opinion held by all of his financial advisers. Evidently
strong dissatisfaction with the 1941 agreement has recently been

expressed by the Generalissimo. It seems that he has the feeling that
he does not have to worry about possible Treasury reaction to China's
allowing the lapse of the 1941 agreement since China's external

position is 80 favorable.
ATCHESON

eh:copy
6-16-43

257

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NOT TO BE RE-TRANSMITTED
COPY NO.

13

BRITISH MOST SECRET
U.S. SECRET

OPTIL No. 193

Information received up to 7 a.m., 14th Junc, 1943.
1, NAVAL

LIMOSA ISLAND. Surrondered to a Landing Party from onc of H.M. Dosveyers on morning 13th,
AIR OPERATIONS

ESTERN FRONT. 12th/13th, BOCHUM. 1,507 tons dropped including 273
S

4400-pound H.E. bembs, Semo thin cloud prevented obscrvation of ground details,
but did not hido Marker Bombs which wcrc on the whele placed accurately. Bombing

concentrated in 2 arcas, one of them around moin Railway Station, Firea spread

over widc area, A largo factory soon totrocodv direct hit. Many explosions rcported. A/A moderate to intenso but diminishing. Several scarchlights operating
with Fighters, onc of which claimed destroyed.
13th. 113 Fertresscs dropped 252 tens at BREMEN, Results 'fair's
42 Fertrossos droppod 96 tens at KIEL, bombing reperted 'poor to fair'. 26 Bombors

missing. A total of 28 Bembers of the Tactical Air Ferco attacked ebjoctivos at
LILLE, FLUSHING and ABBEVILLE. Coastal Command Boaufighters attacked a convey off

Hook of HOLLAND. A 5,000 ten ship was hit by torpedo. A second ship was sunk and

a minoswooper and an oscort vossel wore sct on fire, A total of 44 squadrons of
Spitfires and Thunderbelts operated as cover er diversions. Encmy casualtics -

7, o, 6. Ours - 7 missing. In addition, Resquitecs destroyed a Fackcwulf 200 over
the BAY OF BISCAY and a Dernier Flying Boat off NORWAY. 3 Mosquitocs missing. Onc

F.W. 190 which cressed the KENT Ceast was destroyed by a Spitfire.

13th/14th. Aircraft despatched - SCD mining 30, (onc missing), BERLIN
6, DUSSELDORF 4, COLOGNE 3, anti-shipping 2, Intruders 14, Leaflets 8. Two onomy

aircraft crossed the KENT Coast, onc was shot down by a Kosquito. Later 25 enomy
aircraft oporated over LINCOLNSHIRE, 2 word shot down by night fighters.

SICILY. 12th. 80 cscorted heavy and medium bembers attacked 3 airfields.
LAMPEDUSA. 12th. 145 tons of bombs word dropped.

BURMA. 11th, 41 bembers and 68 fighters carried out offensive epora-

tiens against various widely suparated military objectives.
3. HOME SECURITY

12th/13th. PLYMOUTH, 15 persons reported killed,
13th/14th. 5 reported killed GRINSBY and 5 CLEETHORPES.