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73
July 13, 1943
9:39 a.m.
Lord
Halifax: Hello.
HMJr:
Good morning.
H:
Good morning. How are you?
HMJr:
I'm all right, thank you.
H:
And how is your wife?
HMJr:
Not SO well today, I'm sorry to say.
H:
Uh huh.
HMJr:
She's had a little set back.
H:
Uh huh. But nothing to worry about?
HMJr:
I don't know. I'll know more a little later - after
H:
oh!
HMJr:
.... but I'm afraid it's a recurrence of what she has
the doctor's been there
been having.
H:
Oh, dear. I'm sorry.
HMJr:
Yes.
H:
You were un there, I suppose, yesterday were you?
HMJr:
I got back late last night.
H:
Uh huh. Were you calling me or was I calling you?
HMJr:
H:
HMJr:
H:
I had called you last night.
This is in answer to your call.
Oh, I see. Well, what I called you up about was two
things. One, to tell you that I'm going away tonight
and I haven't had an answer to that thing you spoke to
me about. I put it to London
Yeah.
and I asked Kingsley to let me have an answer but
I haven't had one yet. If I do get one today, I'll let
you know.
-HMJr:
Yes.
H:
But, if I don't Ronnie Campbell should be back in two
or three day's time
HMJr:
Oh!
H:
and 'till he comes back our affairs will be handled
by Michiel Wright.
HMJr:
I see.
H:
I don't know whether you know him.
HMJr:
No. I know Campbell but I don't know Wright.
H:
He's the head of the Chancery
HMJr:
Oh, yes.
H:
HMJr:
H:
74
was in Cairo
Oh, yes.
for three years. Just - but I hope Ronnie will be
back in a day or two - it just depends on the Clipper.
HMJr:
I'm very anxious if possible to get this thing straight-
H:
Yes, I know.
HMJr:
I'm under considerable pressure on it.
H:
Yes. Well, Waley has come to take Phillips' place
ened out, on the buying of raw materials.
from the Treasury.
HMJr:
H:
HMJr:
I see. Is that permanent?
No. Not permanent but I think they'11 give Phillips
a bit of a holiday
I see.
after he gets through with his talks in London.
H:
HMJr:
H:
Yeah.
and I would guess, therefore, that Waley will be
here for another month.
-3HMJr:
Is he here now?
H:
He' 8 here now. He's pretty high up.
HMJr:
Yes, I know who he is
H:
You know who he is.
and I've met him.
HMJr:
H:
HMJr:
75
Yeah. So if you want anything you can always get hold
of him to come and talk to you.
Well, it wouldn't be much use putting any pressure on
him, would it?
H:
Not much. I did talk to him about it a bit last night.
HMJr:
Uh huh.
H:
And he sees, of course, all the financial difficulties.
HMJr:
Uh huh.
H:
But I told him that there was more to it than that
HMJr:
Yeah.
H:
A bit, and that I thought it was quite significant
that so many of our good friends who had been helping
us in the past all felt the difficulty of it and so
if you care to ask him to come around and have a talk
wi th you
HMJr:
Yeah.
by all means do so.
H:
HMJr:
Well, I - I'd be delighted to see him but I think it
will have to be settled most likely by your people in
England.
H:
Oh, they'11 - of course - this fellow couldn't - he
couldn'
HMJr:
H:
No.
he couldn't give any policy - I mean - it's beyond he could just talk and tell you what he imagined would
be the difficulties and 80 on.
-4HMJr:
Well
H:
However, those you know without him telling you.
HMJr:
76
Do you mind - I didn't quite understand when you said
that so many of your good friends understood the
difficulty - do you mean good friends on this side or
H:
I mean good friends on this side
HMJr:
I see.
like - I had in mind you and Ed Stettinius and so
H:
on.
HMJr:
I see.
H:
Well, there he is if you want him.
HMJr:
All right.
H:
And the other thing was - I was seeing him and Sir Cecil
Kisch
HMJr:
H:
Yeah.
last night. They were talking to me about the -
about the approaches they are making, I think, to your
department through Harry White
HMJr:
Yes.
on the matter of Indian Silver
H:
HMJr:
Yes.
or rather silver for India.
H:
HMJr:
Yes.
H:
And I wrote a note last night which I was told was the
right thing to do to tell Mr. Hull that these fellows
were talking with your department and if there is anything that you can do to help that matter - I don't
HMJr:
H:
know the merits and demerits of it in detail - I'll be
grateful for it.
Well, I'm having great difficulty on that with some of
the Senators.
Yes, I know.
-5HMJr:
And I - if I'm going to do it - uh - I'm going to have
H:
Yes.
HMJr:
H:
HMJr:
H:
HMJr:
17
to take considerable personal risk
because Senator McCarran is con- is absolutely
opposed to it
Uh huh.
....and, frankly, I was hoping to hear from England
about this lend lease in reverse.
Yes, in order to offset one with the other.
Well, I'm not a very good diplomat; I suppose that's the
answer.
H:
Yeah, but I know - it helps.
HMJr:
It does.
H:
Yes.
HMJr:
And particularly as this silver for India is so difficult
and it's - I - I'm going to have to take it entirely
myself.
H:
Yes.
HMJr:
As I will the other if your people don't help me out on
your balances.
H:
Huh.
HMJr:
I mean they're both back
H;
A whole year.
HMJr:
Yes, both of them.
H:
Yes. Well, I would - if you - could you have time and
HMJr:
feel like it - uh - have a talk with Whaley.
You - Lord Halifax, you know what the alternative is if your government can't see their way clear to buying
the raw materials?
H:
To letting you have the raw materials?
HMJr:
Yes - no, you know what the alternative is?
-6-
H:
Yeah.
HMJr:
I mean, the alternative is - we'll just have to begin
78
to somehow or other cut down your balances, you see?
Yes, our credit is - they might do that - they might
prepare to do that - perhaps, by repaying part of the part of the Indian thing.
H:
HMJr:
Indian?
H:
Indian debt.
HMJr:
To us?
H:
I mean, we are becoming indebted to India.
HMJr:
H:
HMJr:
H:
Yeah, but that wouldn't help - that wouldn't help
your dollar balance a bit
Well, but I think it would, wouldn't it?
I don't think so.
I thought that that was an alternative plan.
HMJr:
No.
H:
But I don't profess to know about it. I've been into
HMJr:
The time is getting short SO you might, if you thought
it
well of it, send a cable of our conversation to Kingsley
Wood
H:
HMJr:
Uh huh.
and tell him that - that this is - as far as
Treasuries go it's a fairly critical matter.
H:
Uh huh. All right, you mean the balances?
HMJr:
Yes.
H:
And of the difficulties that you anticipate over the
silver?
HMJr:
Well, we're on it. I just - a letter came in - I've
got it this morning - it was forwarded to me by Senator
79
-7HMJr:
(Cont'd) Thomas of Oklahoma from Senator McCarran flatly
opposing this thing.
Yeah. Oh.
H:
HMJr:
I couldn't convince them that this is for the Indian
Government and not for the English Government.
H:
Yeah.
HMJr:
So I have that in my lap.
H:
(Laughs)
HMJr:
But a little cooperation and I think I could work
it out.
Uh huh.
H:
HMJr:
H:
HMJr:
H:
HMJr:
H:
HMJr:
H:
HMJr:
Just a little help from you and I think I could work
it out.
Uh huh. It might be that if Kingsley Wood couldn't
go the whole way to do what you want on that, he might
be able to help you a bit and make it easier that way.
Well, there are some alternatives and I'm sure he's
aware of them
Yes.
but I think it's up to him to be - to make some
To be as cooperative as he can.
That's right.
And he certainly owes it to you, I hope he knows, a lot.
Well, he always has been and I'm sure if he realizes
that I'm laying considerable stress on this, that he
will find a way out. He always has.
H:
(Laughs) Well, I'll send him a telegram this morning.
HMJr:
Thank you so much.
H:
All right.
HMJr:
H:
Bye.
Good bye.
80
- 14 -
H.M.JR: Too tough?
MR. WHITE: I think you have to be tough to get
results.
H.M.JR: Nobody else will get it out of him.
MR. WHITE: His suggestion of paying it to India in
the light of what - Dan and I had a talk this morning -
selling twenty-five million dollars' worth of gold in
India without asking us, in order to get rubles.
H.M.JR: Well, I mean I am not going to tell them.
They could pay off the four hundred million to the RFC.
MR. WHITE: That is no change in their assets.
H.M.JR: Bring the dollar balances down.
MR. WHITE: They can do it a lot of ways, shifting it
from one pocket to the other.
H.M.JR: But it would come back into the Treasury.
MR. BELL: If we wanted to be generous, we could.
That gives them four hundred million dollars of securities.
H.M.JR: I don't mind that, but it is four hundred mil-
lion dollars back in the Treasury.
MR. WHITE: Well, there is no decision being made SO
there will be ample time to discuss it, but they put that
up to us once before they turned that down.
H.M.JR: You yourself brought this to me.
MR. WHITE: I said they brought it to you.
H.M.JR: But Harry, look, this is all window dressing.
The other alternative is one that I don't know that I
would take, and that is tell them that they can buy less
here.
81
- 15 -
MR. WHITE: There are three possibilities.
H.M.JR: I mean, that is the final alternative.
MR. WHITE: There is one other which would be better
than either of the latter two you spoke of, that is,
setting up a general kitty for general expenses. However, there is no decision being made on it.
H.M.JR: Well, I moved out pretty far just now.
MR. WHITE: But I mean about this four hundred
million on the release of the securities.
.M.JR: But he got it. What did he say, that that
is offsetting one against the other?
MR. BELL: Something like that.
MR. WHITE: He got it. Now, his talk about Waley,
that is just so much dust in his eyes. In the first
place, Waley could make no decision at all. He is under
Phillips. Phillips said he couldn't. They have discussed this at great length in London. Phillips has
gone back. All he wants you to listen to Waley for is
to represent their side as to why they can't do it.
H.M.JR: Are you sure Waley is under Phillips? Are
you sure of that?
MR. WHITE: You question it. I always was sure.
I will make sure. Maybe not.
H.M.JR: You check it. I am not sure.
Well, I am all right on this, just as long as some-
body in the Administration doesn't cut the ground out
from under me.
MR. WHITE: That has all been taken care of ahead
of time.
82
- 16 -
H.M.JR: Well, it wasn't until I did it at Cabinet,
and I said very frankly at Cabinet - I said, "I am
bringing it up at Cabinet because they are going all
over town" - and I said, "Mr. President, I just want to
make sure I have got the backing of everybody here at
this table, starting with the President.
And for once Hull spoke up - the President looked
at Hull and Hull said, "I know all about this; this is
all right.
"
MR. WHITE: That was the understanding, that each
committee member would shoot clear with his chief.
H.M.JR: Hull for once spoke up and said he knew
all about it. You could have knocked me over with a
feather.
I expected him to say, "That is something that
Summer Welles is handling - that man, Sumner Welles" -
(Laughter) That is the way he talks about him.
Gee, Dan, can you imagine my sitting here referring
to "that man, Bell, over there"? (Laughter)
MR. BILL: No, I can't imagine that.
MR. SULLIVAN: What did you call Johnny?
H.M.JR: Johnny?
MR. SULLIVAN: Hanes.
H.M.JR: I never called him that. No, I never did.
When it gets to that point, we part. I never did, no.
83
- 17 -
Well, we have had our Lord Halifax; now we can go
back to beef. (Laughter)
Chuck looks as though he had a bright idea. It is
about time, Chuck. (Laughter) Personally, it is the
first time you have been around here that you have been
doing a little stalling.
CAPT. KADES: Harry has got me at a disadvantage
because I don't know how to handle silver, but I think
it is probably simpler than with butter; for example,
even though they gave notice a month or six weeks in
advance they were going to roll back butter and subsidise the middleman, they had to take a hundred million
pounds of butter off the hands of wholesalers and distributors that were caught with that butter on their shelves.
The food distribution system is a lot more complicated, and there are a lot more layers of distributors,
I think, probably, than there are in the case of silver,
but OPA has complete power to raise or lower prices.
What they are trying to do is to simply hold the line
with the exception of a few commodities.
Now, those commodities that they are rolling back
the price on are either meat and butter, where they have
to pay a subsidy because of the squeeze of the middleman,
or things like cabbage which have gone up five times
above parity.
H.M.JR: How about cantaloupe at thirty-five cents
apiece? I bought one for my wife the other night.
MR. WHITE: You can roll that back without any
trouble. (Laughter)
CAPT. KADES: Some things they are not going to
roll back because they don't care whether people are
going to throw their money away.
H.M.JR: I am sore because I have ten acres of cabbage
and they have to pick on me. (Laughter)
84
July 13, 1943
9:59 a.m.
Operator:
Go ahead.
HMJr:
Hello.
Herbert
Feis:
Harry?
HMJr:
Hello, Herbert.
F:
Oh, this is Henry?
HMJr:
Yeah.
F:
I was trying to get Harry White. I am sorry to
disturb you.
HMJr:
F:
HMJr:
Well, I'm not half as busy as he is.
Oh, I see. It's about Martinique.
How about - He's - he'll call you up and - will
Martinique keep for fifteen minutes?
F:
HMJr:
The trouble is I am supposed to be in Ickes' office
now. I'm going to be locked up all morning, Henry.
I'11 send him out to talk
F:
Would you?
HMJr:
Yeah. (Aside: He wants to talk to you.)
(Pause)
Operator:
HMJr:
Yes, sir.
Mr. White went outside and when I'm - I want to talk
to you in a minute.
(Pause)
Operator:
HMJr:
Operator:
Yes, sir.
Mr. Feis said he didn't want me, he wanted Harry White.
Well, he asked for either you or Mr. White. Mr. White's
office said he was with you. Then he said he'd take
either you or Mr. White.
HMJr:
Well, okay.
84
July 13, 1943
9:59 a.m.
Operator: Go ahead.
HMJr:
Hello.
Herbert
Feis:
Harry?
HMJr:
Hello, Herbert.
F:
Oh, this is Henry?
HMJr:
Yeah.
F:
I was trying to get Harry White. I am sorry to
disturb you.
HMJr:
F:
HMJr:
F:
Well, I'm not half as busy as he is.
Oh, I see. It's about Martinique.
How about - He's - he'll call you up and - will
Martinique keep for fifteen minutes?
The trouble is I am supposed to be in Ickes' office
now. I'm going to be locked up all morning, Henry.
HMJr:
I'll send him out to talk
F:
Would you?
HMJr:
Yeah. (Aside: He wants to talk to you.)
(Pause)
Operator:
HMJr:
Yes, sir.
Mr. White went outside and when I'm - I want to talk
to you in a minute.
(Pause)
Operator: Yes, sir.
HMJr:
Mr. Feis said he didn't want me, he wanted Harry White.
Operator:
Well, he asked for either you or Mr. White. Mr. White's
office said he was with you. Then he said he'd take
either you or Mr. White.
HMJr:
Well, okay.
85
- 18 -
(The Secretary held a telephone conversation with
Mr. Feis. )
H.M.JR: All right, we will skip it.
Did you find out where that story came from yesterday?
CAPT. KADES: No, sir, but I think it came out of the
War Foods Administration. Bledsoe used to be with the
Department of Agriculture, and Ezekiel was away, so it
probably didn't come out of Agriculture itself, but out
of War Foods. It didn't come out of the white House or
OWM. However, I learned that your letter did get to OWM.
H.M.JR: Which is that?
CAPT. KADES: Byrnes' office.
H.M.JR: Did it?
CAPT. KADES: Yes. It came, apparently, via the
White House.
H.M.JR: My letter is public property now?
CAPT. KADES: I do not think it is public property
but it has been made known to Justice Byrnes.
H.M.JR: And what is his reaction?
CAPT. KADES: I understand it was favorable.
H.M.JR: While you were gone - I think you were gone -
I wrote this letter to the President advocating that he
try buying, perhaps outright, you see - taking the loss
at once and then--
MR. BELL: I saw that.
H.M.JR: I couldn't remember--
86
- 19 -
MR. BELL: It was week before last.
H.M.JR: Well, that is that.
Where is Paul? I thought he was going to be here
this week.
MR. O'CONNELL: He is going to be in tomorrow.
H.M.JR: Tomorrow?
MR. O'CONNELL: He may be in today, but I haven't
talked with him since Saturday.
H.M.JR: I wish you would tell him I am quite disturbed
with this Vinson business, and before he sees Vinson I want
to talk with him.
MR. O'CONNELL: I talked with him on the phone after
you talked with me before. When I see him I will talk
with him in more detail.
H.M.JR: Before he sees Vinson I want to have a talk.
Then I would like to talk it over with these people and
get their reaction. I want to get that straight; it
bothers me a lot.
fl
Now, have you got anything, George?
MR. HAAS: No.
H.M.JR: Fred?
MR. SMITH: All I have are the letters you asked
about yesterday from the Hill - the War Finance. We have
heard from Walter George and Sam Rayburn, and Ralph Bard,
and James Forrestal, Francis Biddle, and Doughton, and
Robert Wagner--
H.M.JR: All favorable?
MR. SMITH: Oh, yes.
and Cordell Hull. Some
87
- 20 -
of them go into detail about all the things they are going
to do with it, and Harold Ickes sent you a carbon copy of
the same letter in case you wanted to pass it around.
H.M.JR: Didn't we also mail it to all members of
Congress?
MR. SMITH: No, you mailed it to members of the
Cabinet and signed the letters personally - and to the
Vice President, and signed it personally - to Rayburn,
McCormack, Martin, George, Steagall, Doughton, and Wagner.
All those you signed personally.
Then you sent letters to members of the Finance
Committee, members of the House Ways and Means Committee,
heads of the independent agencies - we haven't heard from
many of those - the House Banking and Currency, and the
Senate Banking and Currency Committee.
Then we had this mailing a couple of days ago to the
Assistant Secretaries of War and Navy.
H.M.JR: Is there a third letter going out to War
Finance?
MR. SMITH: Not yet; it is coming up now.
H.M.JR: But they are all good?
MR. SMITH: They are all good.
H.M.JR: While we are on it, I think you (Sullivan)
ought to see the letter which I sent to Admiral King about
the Navy.
MR. SULLIVAN: I would like to see that, sir.
H.M.JR: It is a good letter. It is very interesting.
MR. SMITH: We are getting a story out today on those
figures, by the way. That has all been cleared with the
Navy.
88
- 21 H.M.JR: Fine.
You?
MR. O'CONNELL: Nothing.
H.M.JR: Mr. McConnell will be down?
MR. O'CONNELL: Yes, he is coming down Thursday at
ten. I talked to him on the phone. We sent him a letter.
The letter - it is on your desk, or will be so that you
may sign it. There is no urgency about that, because he
has already seen the telegram.
H.M.JR: Is Paul going to come to work tomorrow or
today? I thought he was going to work this week.
MR. O'CONNELL: He will be in today. His vacation
officially ends today, as I understand it.
H.M.JR: The only thing I am worrying about is Vinson.
MR. O'CONNELL: I had spoken to him on the phone, as I
said, but I will speak to him again and tell him that you
want to speak to him again.
H.M.JR: Who is housing you - have you got one of your
rooms?
CAPT. KADES: I have a better office than a general
could hope for. (Laughter)
H.M.JR: You have that suite? Are both the rooms
empty?
CAPT. KADES: I have taken one room. There is another
room that is empty.
H.M.JR: As I pour this on you, you undoubtedly will
want an assistant or two so we will keep that suite for
you - those two rooms. You may want to get somebody out
89
- 22 -
of the Navy. You never know. (Laughter) We will keep
those. As I pour this on you, you may need help.
MR. WHITE: On Martinique - do you want to hear it?
H.M.JR: Yes.
MR. WHITE: They have made an arrangement - supposed
to be secret - somebody asked that it be secret - but they
think that a Treasury man ought to be there by Friday morning, and they will get everything ready. I have some
further detailed instructions about that.
Now, after you select the man to go, there are two
questions, one the books that you spoke to Hull about, and
the other the gold. The question of the gold is practically
settled. There will be an inventory made at which an
American will be present, and the American will be the man
you send down.
H.M.JR: That is the best service we ever got, but I
think we got it - do you think Hull gets the credit for that?
MR. WHITE: Well, you took it up with Hull. I think
if you hadn't you wouldn't have gotten this service. That
is the answer.
With respect to the books he said he would have to
proceed very cautiously and feel his way and not raise
that question at once, and there are some other instructions.
H.M.JR: Who goes?
MR. WHITE: I think we ought to send a pretty good man.
I think if you will give us an opportunity to talk it over
with Pehle and O'Connell we can submit someone for your
consideration.
H.M.JR: Would somebody go out of Delano's office on
a thing like this?
90
- 23 MR. WHITE: I should think this would be a Foreign
Funds man. He would have to check into the gold and use
his good sense.
MR. BELL: Would you want a Mint man on the gold?
MR. WHITE: We can't send two, that is the trouble,
and the more important thing is going through the books unless he decides after he gets there that you can send
a separate man. But apparently it is only one so far.
H.M.JR: What about this - the Assistant General
Counsel who is in charge of that?
MR. O'CONNELL: Luxford.
MR. WHITE: I think it would be desirable to send
somebody good, either Luxford or somebody else in Foreign
Funds.
MR. O'CONNELL: We have a number of good men. Joe
DuBois or Luxford - we have a lot of good ones.
H.M.JR: What do you think, Dan?
MR. BELL: I don't know the problem. If you are going
to check gold, I don't think they know anything about checking gold. If Foreign Funds, I think Luxford is the best man.
H.M.JR: The problem is this. Somebody in J. P. Morgan's
says that down at the Bank of Martinique is where what's-his
name's money is.
MR. SULLIVAN: Laval.
H.M.JR: That is what we are after.
MR. WHITE: It may be that you will have to have somebody that also has some familiarity with going through books,
and possibly if he knows French it would be highly desirable.
So we don't know who is available.
91
- 24 -
H.M.JR: Whose responsibility is it to select the
person?
MR. WHITE: I should think if anybody's it would be
Paul's, but I think that John Pehle, Joe O'Connell, and
myself would want to get together and make a recommendation
to you.
MR. O'CONNELL: It isn't a job for a lawyer. It might
happen to be one, but what he needs is a "savvy" about going
into a bank and going through the books.
H.M.JR: It is Foreign Funds, isn't it?
MR. O'CONNELL: Surely.
it?
H.M.JR: Well, technically it is under Mr. Paul, isn't
MR. O'CONNELL: It is under Mr. Paul, that is right.
H.M.JR: And Paul - in my discussion with Paul about
the relationship of you (O'Connell) to me, one of the
things he said he wanted to keep in touch with was Foreign
Funds. So if that is what he wants, you had better talk
to him about this.
MR. O'CONNELL: All right, sir, I will.
H.M.JR: All right. You might let both Bell and me
know who you recommend 80 that Bell and I can pass on it,
will you please? You can tell us together - simultaneously.
I may flip Bell to see whether he or I go, although
Martinique would be a little bit hot. (Laughter)
MR. BELL: I have no hankering to go down there.
H.M.JR: All right, I guess that is about all.
92
July 13, 1943
10:50 a.m.
FINANCING
Present: Mr. Bell
Mr. Haas
Mr. Murphy
Mr. Lindow
Mr. Tickton
MR. BELL: What would you like to have, the figures
or just what you ought to talk about in this meeting?
H.M.JR: What we are to talk about.
MR. BELL: I think possibly we ought to do about as
we have in the past, give them the figures first, and then
I think we ought to talk about what we are going to do
with Treasury bills in the next issue, a question of whether
we go up another hundred million.
H.M.JR: We are up to a billion now.
71 MR. BELL: Up to a billion dollars, yes, sir.
well.
H.M.JR: I read by the papers they are not going so
MR. BELL: Last week we got a billion one seventy-five
million dollars in bids - total bids for a billion-dollar
issue. Last night they were up to a billion three seventyfive.
I called Allan after that last bid. He said that he
was watching it and he thought next week they would have
more in, and there was a reason for last week being low,
because of the financing.
H.M. JR: Is Allan back?
93
-2-
weeks.
MR. BELL: No, Allan just went away Friday for two
H.M.JR: Neither Sproul or Rouse were there last week.
MR. BELL: Rouse was away last week from Monday on.
I think-Allan
went
Thursday night or Friday morning.
He
will be away
foraway
two weeks.
H.M.JR: He has been away--
MR. BELL: He was sick. He is taking another vacation;
I think he is taking a two-week vacation.
I think we probably ought to talk about the maturity
of August 1, a billion six hundred million; then what we
will do with Treasury bonds, called for payment October 15 that is the three-and-a-quarter percent bond - then the
goal, total, and the basket. I think that is about all we
need to talk to the Federal about.
Now, I have some tentative recommendations. I would
like to see the Treasury bills run along for a billion
dollars a week for a while, and then in the drive period,
when excess reserves will be created as a result of the
payment into the war loan account, offer additional Treasury
bills, possibly two hundred million dollars additional a
week so the banks can go into those. That will give you
a billion of extra money in September.
H.M.JR: Say that again, will you please?
MR. BELL: Let the bills run along for a billion dollars
a week until the drive period in September; then jump them
to a billion two, because the banks will be getting excess
reserves during the drive period as a result of the transfer
from individual accounts over to the war loan account.
That releases the required reserves and they go into
excess reserves. That will give us a billion dollars of
extra money.
94
-Then I would like to make the certificate maturing
on August 1 a two-and-a-half-billion-dolla: - issue instead
of a billion-six issue. That will give you another billion dollars. You will issue two billion six. It will
give you another billion dollars of new money there so
you can go into September with three billion - a little
over three billion dollars - and that would last you until
the 15th, when your new money would come in on the drive.
Then have a banking issue in November of whatever we
want - two and a half billion dollars I have got. You may
want more because you might want a little more balance going
out of December.
On the drive - I have it down as fifteen billion.
Haas and his boys, I think, have been talking about sixteen
billion, because they have got it figured out percentagewise,
going up from the last drive; and doing it that way it comes
out sixteen billion, seven billion for individuals, which
is an increase in your percentage, and two and a half bil-
lion for insurance companies and mutual savings banks.
MR. LINDOW: And six and a half billion from corporations.
MR. BELL: All of this, except the insurance companies
and savings banks, represents an increase in percentage.
MR. TICKTON: That is right.
H.M.JR: Now look, I don't want to be rushed this week.
I don't know whether I am going to be able to decide this
week, because I am going to have to soak this in. So don't
let these fellows say that it has to be settled this week.
I may not be able to settle it this week, because I am
starting from scratch now, and I have to take it in through
my pores.
I personally don't see why if we had this thing today is the 13th - if we were able to announce it on the
23rd--
MR. BELL: That is a good deal earlier than we
announced it before, but the rush here is to get the manual,
95
-4the booklets, and the literature all out into the hands
of the salesmen. You have to do a better job this time
than you did before.
H.M.JR: Granted. Let's aim for the 23rd. I want
to talk to people. I want to soak this thing up. I
would rather take - my heavens, we have never - I don't
know - you can make a mistake at this level, and I don't
want to make a mistake.
MR. BELL: Well, you have got rather a strange market,
and the rate curb is certainly out of line from your fixed
curb. We were talking some about it last night. I think
we all feel that we would like to see you issue a rather
detailed statement on the drive and the type of securities
that are to go in the basket, leaving the maturity dates
out for a while so as to let that have its effect on the
market - the amount of the goal and the types of the
securities - and let the market react to that. Then fix
maturity dates. To fix them now you will probably fix
them out of line.
H.M.JR: That isn't going to please them.
MR. BELL: I just talked to Bob Rouse, and it will
please him.
H.M.JR: Is he coming down this morning?
MR. BELL: Yes. He is over at the Federal. He said
that that was his idea; he didn't think you ought to
announce the maturity dates until you found out how the
market reacted to this total.
H.M.JR: I just want to say that I don't want to be
rushed. I don't want to make a mistake. I just can't ifsaid?
I can get this thing out by the 23rd - is that what I
MR. BELL: Yes, the 23rd.
96
-5H.M.JR: I mean, I am not going to hold back, but
I don't want the people in the Treasury themselves - I
have too much this week to soak it up.
MR. BELL: We were thinking you shouldn't do it before
Friday. If you wanted to get out a statement over the week
end for Friday, giving the total goal, then the basket, the
type of security only-H.M. JR: No, you will have to give me-MR. BELL: Then say Tuesday or Wednesday of next
week you will give the maturity dates.
H.M.JR: The earliest would be Friday, a week.
MR. BELL: That is going to disappoint your advertising
people.
H.M.JR: I can't help it.
MR. BELL: And them only, plus the field people.
H.M.JR: I am not going to be under pressure. I mean,
I can't - we have to be right.
MR. BELL: That is true.
H.M.JR: And if you saw my calendar for this week - I
just haven't got time to soak it up.
97
July 13, 1943
11:05 a.m.
FINANCING
Present: Mr. Bell
Mr. Haas
Mr. Murphy
Mr. Lindow
Mr. Tickton
Mr. Eccles
Mr. Ransom
Mr. Rouse
Mr. Paddock
Mr. Goldenweiser
Mr. Piser
Mr. McKee
H.M.JR: We will let Mr. Bell be teacher, as usual for me, anyway.
MR. BELL: Some of these figures that I have in here
are just tentative because the recommendations which are
involved haven't been approved at all.
2
This contemplates increasing the August maturity
of certificates from a billion six to two billion six;
and it contemplates letting the Treasury bills run along
a billion dollars a week, then in September increasing them
while the drive is on from a billion to a billion two a
week.
Then the drive figure that I have is fifteen billion
dollars with two and a half as a minimum bank financing
in October or possibly the first of November, then in-
creasing the certificate maturing on November 1 to two and
a
half. That would give you another half a billion dollars.
And then the next drive financing I have would be January.
The first drive financing of fifteen billion might want
to be changed in amount, and the next drive financing might
want to be advanced from January to December.
98
-2On that basis it looks as though we will go into
August with about six billion dollars and we will go
into September ni th three billion three hundred million,
and we go out of September, after the drive, with fourteen billion five hundred million; go out of October
with ten billion; go out of November with five billion
four hundred million; and out of December, if we have the
drive in January, with two billion dollars. If we wanted
to increase that balance we, of course, could increase
the bank financing in October of two and a half billion
as I have contemplated.
That takes us up to the end of the calendar year.
I thought this morning that probably the first thing
we should talk about is what are we going to do with
Treasury bills. Next week is the first maturity of a
billion dollars, or the first maturity of nine hundred
million, and we are issuing a billion; so our new money
drops from two hundred million a week to a hundred million
a week, beginning the 21st.
The question is whether we should raise those
Treasury bills a hundred million as we have been doing
in the past several months when we complete the cycle.
MR. ECCLES: Dan, what we undertook to do was to
answer the questions that you raised in the wire that
you sent out - all of that - and to give the general back-
ground for what we consider quite a problem - the maintain-
ing of the pattern of rates.
It is rather a comprehensive over-all program which
does advise against increasing the bills, but--
MR. BELL: I thought we would come to that as part
of the program, yes, in the basket and the goal.
MR. ECCLES: Well, we feel that it would be a mistake
to increase the bills at all, because at the present time
the market is taking none. The Fed hasgotten all the bills
that you have offered. We have taken--
99
-3-
H.M.JR: That is not healthy.
MR. ECCLES: That is right, but the last two billion
of bills that you have offered, we got every one of them.
The market has taken nothing.
MR. BELL: You mean--
MR. ECCLES: Every dollar of increase since the May
financing - since the April financing - we have got.
H.M.JR: That is far from healthy.
MR. ECCLES: I have got some stuff on that when you
get to it.
H.M.JR: Did you realize that?
all ofMR.
it. BELL: Yes, I knew they were getting practically
MR. ROUSE: It is coming very heavily in the last
three weeks.
MR. ECCLES: As a matter of fact, we are getting
more than you are offering. You see, taking it clear
from the time of excess reserves in May, at the period
of excess reserves in May, there we didn't get as much
as was being offered, but within the last thirty days we
have been getting much more than is being offered - not
only getting the two hundred million of new, but we are
getting a lot on balance.
H.M.JR: Isn't there an explanation for that?
MR. ECCLES: Yes.
MR. McKEE: We are a little modest about pulling it
out of our pocket, though. (Laughter)
100
-4-
MR. ECCLES: We have a memorandum covering this
picture that we would like to present.
MR. BELL: Not one of those "I told you so's"?
(Laughter)
MR. McKEE: We just don't want you to throw it in
the waste basket. (Laughter)
MR. BELL: How about increasing the bills later on?
MR. ECCLES: We feel that - I wouldn't make a commit-
ment on that now. I rather think that it would be in-
advisable, Dan. It would depend on the market situation,
for this reason, that the excess reserves that will
develop during the drive because of the War Loan Deposit
account can be well taken care of by the banks buying
back on the option agreement the large amount that they
are selling and will continue to sell.
H.M.JR: On the auction?
MR. ECCLES: Option.
MR. BELL: Do you have enough of those option accounts?
MR. ECCLES: Yes. We will possibly have five billion
by the time of the drive in the option account.
MR. ROUSE: I have here a paragraph - it will take
about one minute to read - that I think will give the
picture on the bill thing. Between December 30 and June
30 the outstanding volume of Treasury bills increased
five billion two hundred and thirty-seven million. Nearly
three-fifths of the bills, two billion nine hundred and
ninety-two, were taken by the Federal Reserve.
H.M.JR: How much?
MR. ROUSE: Two billion nine hundred and ninety-two,
practically three billion dollars.
101
-5-
The balance, two and a quarter billion, was taken by
banks and other investors, virtually all by reserve city
and country banks. Other investors than banks absorbed
only eighty-two million during the period from December
31 to April 30.
They are the latest figures I have.
Investors other than banks have shown little interest
over this period.
MR. ECCLES: Less than a hundred million out of over
five billion. That is nothing.
MR. ROUSE: I haven't the figures for May and June.
MR. BELL: Your recommendation is we continue a
billion dollars of bills for the time being?
MR. ECCLES: We have another recommendation on that.
We advise not to increase short-term paper.
H.M.JR: Why don't we do it this way - I mean, why
not, if Dan is - are you through with this phase?
MR. BELL: I think so.
H.M.JR: I haven't had a chance to go over this with
the boys, so you will have to be a little patient with me.
Do you want to tell them our suggestion? Evidently they
have a memorandum, and I would like to get it all in one
picture at one time. Don't you want to give them your
suggestion?
MR. BELL: I did in going over the figures. I said
this was included in my figures.
H.M.JR: Don't you want to go through what you have
tentatively on the basket and then let them read theirs?
MR. BELL: If you want to do that.
102
-6-
H.M.JR: I will do it any way you say. I would like
to hear what they have in one piece.
MR. BELL: Any way.
H.M. JR: Give it to them, then they come in with
theirs.
MR. BELL: On the basket we still feel that there
ought to be a seven-eighths percent certificate in it
because we feel that there are a lot of people that are
not going into the savings notes.
We know we have to roll it over in a year, but we
hate to have somebody say, "We don't want your savings
notes, and we don't want your other notes or bonds.
You haven't got anything we want to put our money in." "
That might be true of a lot of corporations which
I think would rather have the certificates that mature
within a year than have the tax notes which they have to
redeem at the Treasury. There is some question as to
whether there ought to be a two percent bond, and the
pricing of that is a little difficult.
But I feel there ought to be a two percent bond, and
a two and a half percent bond, plus the E, F, and G
Savings Bonds. That makes a rather big basket, but I
think it can be split up in the sales manual in such a
way that when a person is approaching individuals he
will only have to look at one section, and when approach-
ing a different type of investor, another section.
MR. RAN SOM: What was your fourth item, Dan?
MR. BELL: E, F, and G Savings Bonds.
MR. RANSOM: The seven-eighths percent certificate,
the two, the two and a half--
MR. BELL: The E, F, and G Savings Bonds, and the
savings notes.
103
-7We have a question on pricing the two percent bond.
The present market would indicate you might have to go
out over the ten years. For that reason we thought that
you ought to give out a rather comprehensive statement
on the total amount of the goal and the basket, the type
of securities - but not the maturity dates - and wait to
see what reaction you get from the market and then fix
the maturity dates after you get that reaction. It may
be three or four days - possibly a week.
That about covers the basket end.
There are other questions such as the amount
of the goal and the quotas.
H.M.JR: It would be just as good to hear the
Federal Reserve Board's memorandum at this time.
sive.
MR. ECCLES: It is a little long. It is comprehen-
What we would like to do, Henry, is - I don't think
we can discuss all of the aspects of it today and digest
it. I would like, if agreeable to you, to discuss it
with your staff people - some aspects of this. We have
discussed it with no one over here at all. This is our
own and I would like--
MR. McKEE: I might say, too, that this is more or
less the Board's idea and not the Open Market Committee's
because they didn't see it until this morning.
H.M.JR: We start even. I would like to aim, if it
is agreeable to you people, for the twenty-third. I would
like to get this thing settled on or before the twentythird of this month. Is that rushing you too much?
MR. ECCLES: It wouldn't rush us if you settled it
tomorrow.
H.M.JR: I think, if we could aim, say, for a week from
Friday, that would give everybody plenty of time.
104
-8MR ECCLES: I would think that with all that is
gone by now, that that ought - it ought to give us a
chance to at least talk out with you, as fully as you
want to talk it out with us, any aspect of our suggestions here.
H.M.JR: I would like very much if we could - I
mean to have a complete meeting of minds. I want to say
this before I read this thing. I want to talk it out
fully, and we have now got people fairly important in
their communities who are the heads of these State organi-
zations - I would like to try to satisfy them if it is
possible. I think it will add to the success of the
drive if the various people, starting with the Board and
from there on down, whom we look to for assistance - if
we can get as near as possible a meeting of the minds.
MR. McKEE: Before you read that, Marriner, may I
make a short statement?
Mr. Secretary, we still believe that we want to
work with you on this pattern of rates which we all
talked about before and have tried to maintain.
I personally - and I don't know whether the rest the rest can speak for themselves - I think there are so
many changes that have come in since we started on our
pattern of rates - such as the legislation that freed
reserve requirements from the War Loan Deposit account,
and the acceleration of the many participants in the War
Loan Deposit account, and then your system of financing
at periods - large financing - gives us problems that we
didn't have when we started in with this pattern of rates.
The acceleration - if you go back mentally to this
time a year ago, there was a demand for short-term
paper. There wasn't enough of it.
We have given it to the market pretty fast in large
quantities. I think we have gone too fast on the shortterm paper.
105
-9H.M.JR: May I interrupt you a minute? You know
how slow I was - how I had to be pushed to increasing
the bills? You remember that?
MR. McKEE: The results of our portfolio will indicate - if you look at that last sheet - will show you
that you have gone too fast in your short-term paper and
not fast enough with investment paper.
Therefore, our portfolio has run out; the market
has taken all of our two percent bonds and given us all
the short-term paper. I just wanted to--
H.M.JR: Well, all I can say is, I am starting with
a completely open mind.
MR: McKEE: That is the situation now.
H.M.JR: And I think that certainly - there aren't
two sides - it is just one side on this front - that we
will get together.
MR. McKEE: That is right.
H.M.JR: We give a little - after all, I don't know
what is right--
MR. McKEE: To maintain the patterns, we are out of
soap.
H.M.JR: Well, is this pattern holy?
MR. McKEE: I beg your pardon?
H.M.JR: I'don't see why there should be something
holy about this thing.
MR. McKEE: Absolutely not - and we don't--
H.M.JR: To go back a little bit on history before
I read this thing - you remember the Fed of New York - I
think I am right by pinning them on this - if I am not,
Rouse can speak up - pushed me awfully hard on that
106
- 10 -
three-eighths rate. They wanted to go up to a half.
You fellows kept after me and after me.
MR. ECCLES: I was as much a part of it as New York.
I don't want them to take all the credit or the onus,
whichever it is.
H.M.JR: I think we have all got to recognize here
we are doing business with New York banks, with practically no excess reserves, and we thought that reserves
used to be terribly important. Now we recognize they
can do business without any reserves. The picture changes
and I think we have to adjust ourselves.
MR. ECCLES: I would suggest if we read this, then
we have a basis for this discussion.
MR. McKEE: I just wanted you to have what our problems
are to work with you.
H.M.JR: All right, sir.
(Suggested Treasury Financing Program of the Federal
Reserve Board, dated July 13, 1943, read by Mr. Eccles.
Copy attached.)
MR. ECCLES: (Reading) "Background for recommenda-
tions. Herewith there are submitted recommendations for
a Treasury financing program. These recommendations have
been made with reference to the System's commitment to
maintain the existing pattern of rates. As is pointed
out below, this pattern can no longer be maintained, unless
the spread of rates is somewhat reduced and the proportion
of short-term issues to longer issues in the offerings
is also reduced. The proposed program would, we believe,
accomplish the desired purpose.
"Since the end of April, the Federal Reserve System
has increased its holdings of Treasury bills by 2.0 billion
dollars; in other words, it has absorbed the total increase
in outstanding bills during the period. Holdings of certificates have increased by 100 million dollars.
107
- 11 -
In other words, that indicates the market for certificates isa fairly
wellmillion.
saturated because we bought on
balance
hundred
"On the other hand, there has been a substantial de-
mand for bonds and a moderate demand for notes. Since
the end of April, the System's holdings of bonds have
declined by 560 million dollars and of notes by 230
million. This development is probably a reflection of
(1) a growing confidence in the maintenance of approxi-
mately the present level of the market, resulting in a
shift by investors to higher rate issues, (2) an exten-
sion of maturities by commercial banks because of a need
for larger earnings, particularly by the smaller banks,
and (3) the relatively large increase in the outstanding
amount of bills and certificates. Changes in the System's
holdings since the first of the year are shown in the
attached chart."
The total has gone to nearly seven and a half
billion, but it is all in bills. The other stuff has
gone down. So we got four billion of the bills and it
will go up, likely, to six between now and the financing.
H.M.JR: Don't get much earnings out of that.
MR. ECCLES: The earnings isn't a problem. What
you sell to the market - we buy it all back, plus.
(Continuing) "Sales of bonds and notes by the System
and additional sales by Treasury accounts have not been
sufficient to meet the demand. At the same time the
System holds no more of the longer taxable 2 per cent
bonds or of other issues that have been in the largest
demand."
That creates the problem of how to price these two's,
because we can't hold the market - can't hold the pattern because we have nothing to hold it with.
"This development makes it increasingly difficult,
if not impossible, to maintain the present pattern of
rates without a change in the financing program.
108
- 12 -
"Before the pattern of rates was established, the
interest of the System and of the Treasury was solely
in keeping the market orderly and not in influencing
long-term movements. At present, however, when yields
on all groups of taxable issues are to be maintained
within narrow limits, it is becoming more and more
apparent that the supply of new issues made available to
the market by the Treasury must be adjusted to the de-
mand. Such an adjustment can no longer be brought about
by changes in yields alone and the System has great
difficulty in living up to its commitment, particularly
in certain areas of the market.
"Recommendations. 1. The basket should include:
A. Series E savings bonds. b. Series C Treasury savings
notes, with the 30-day notice eliminated but with the 6month provision retained."
Now they can't be cashable within six months, and
must give thirty days' notice. We say eliminate that,
keeping the six-months provision.
"c. 2 1/2 per cent Treasury bonds of December 1964-
69. d. 2 per cent Treasury bonds.
We think on the maturity of those bonds it will have
to be at least eight to ten years. We think that might
be all right if other things were done - got to stretch
it out from seven to nine, anyway.
H.M.JR: May I interrupt you? You said that the Open
Market Committee hadn't - has Rouse been in on this?
MR. ECCLES: Rouse went all over this this morning.
H.M.JR: Was he in the-MR. ECCLES: And Mr. Paddock.
MR. PADDOCK: We have been over it.
109
- 13 -
H.M.JR: Was Rouse in the making of it or not?
MR. ROUSE: I saw it after it was set up.
H.M.JR: He didn't have anything to do with the
making?
MR. McKEE: Strictly the Board - the selfish Board
over there. (Laughter)
H.M.JR: All right, I just wanted to know.
MR. ECCLES: I don't think, though, that the im-
pression ought to be given that Bob and Paddock are in
disagreement, because if they are they didn't indicate
it this morning.
MR. ROUSE: I indicated this morning, particularly
on these three paragraphs which have been read, the
problem of the pattern of the rates has gotten beyond
our control from the standpoint of the Manager of the
Open Market account. We haven't the material to do it
with.
MR. ECCLES: (Continuing) "It is suggested that the
sale of Series F and G savings bonds should be discon-
tinued immediately. If this is not done, these issues
should be included in the drive and discontinued after the
drive. No certificates are suggested for the basket,
because (1) for the present, increases in the amount of
short-term securities outstanding should be small,
I should say they shouldn't be anything except on
this refunding. You want to increase them - when is it,
the 19th, your maturity? Short-term securities should not
be increased except upon that occasion.
"(2) a refunding problem arises after only a year,
and (3) ar additional supply should be made available in
connection with the issue dated August 1, involving an
increase of a billion dollars. If short-term securities
are issued in the drive, it is suggested that they should
be 1 1/2 per cent notes of December 1947 or March 1948
110
- 14 -
instead of certificates, but the inclusion of any shortterm securities would increase the difficulty of selling
Series C Treasury savings notes" - especially if it was
certificates or one and a quarter notes.
"If the basket is limited to the four issues mentioned, the selling problem would be considerably simpli-
fied.
"2. Prevention of bank purchases during drive. Banks
will want to purchase securities because of temporarily
increasing excess reserves during the drive as a result
of the shift of deposits to war loan accounts and of
their need and desire for greater income. Means of preventing this development should include:
"a. In view of changed conditions, with the
extremely heavy needs of the Government and the decrease
in free bank reserves, the spread in yields between short
and long maturities should be reduced, and the Treasury
should increase the relative proportion of bonds and
notes outstanding. The maturity on new issues of 2 per
cent bonds should be extended to 8-10 years, and if that
proves to be inadequate to 9-11 or 10-12 years. In addition, the number of new issues should be simplified and
restricted because of the impossibility of maintaining
a pattern on too many issues. New 9-month bills should
be issued in a total amount of not exceeding a billion
dollars a week to replace the present bills and certificates, with subscriptions for $100.00 or less allotted in
full at 3/4 of 1 per cent and the remainder allotted on a
bid basis. Outstanding certificates should be refunded
into this issue. The amount of the new 9-month bills out-
standing should not exceed the present amount of bills and
certificates unless repurchase option could be established
on the new 9-month issue. Other Treasury issues should
then be restricted to 1 1/2 per cent notes and 2 and 2 1/2
per cent bonds. Investors desiring to round out their
portfolios could purchase intervening issues in the market,
and it would not be necessary to maintain rates on those
issues within narrow limits.
111
- 15 -
I say this is one way of keeping the banks out.
You would - instead of reaching out and buying two percent
bonds and other stuff, we think that a bill of this sort
would go a long way toward - well, it sort of telescopes
your rate structure. It is increasing the short rate
by eliminating the ninety-day paper and putting the two
together in one piece of paper, and it simplifies the
financing. On the up-side you lengthen your long-term
paper out, and it makes the job of maintaining this
pattern, I think, possible.
"b. Prohibit quotations on and trading in the 2
per cent bonds included in the drive for at least 30
days and preferably for 60 days after the close of the
drive, by which time excess reserves will be less plentiful.
"
That would take it to November first that they
couldn't trade in these two percents, and that keeps the
dealers and other speculators from buying them because
they could sell them to the banks at the profit like they
did on the last issue of bills.
We figure that 60 days would even be better because
the banks would be under less pressure in 60 days, a good
deal, than 30, and in 60 days you could give them a
piece of bank financing because the Treasury's balance
would be down to where you may need some money.
c. The Treasury should request banks not to buy
the new issues during the nonbank drive and should announce
that future financing available to banks will be provided
by interim financing which will be open to banks only and
that bank subscriptions will be limited so that total
subscriptions will not greatly exceed allotments. This
provision would curb speculative subscriptions sold to
banks at premiums and would clarify in the public mind
the separation of the financing. It would also be helpful to announce that the first bank financing after the
drive will be in 2 per cent bonds.
112
- 16 -
"d. The Federal Reserve should issue a circular to
commercial banks saying that excess reserves will increase during the drive, giving the reason for the increase, explaining that it will be only temporary, and
suggesting that the increase be invested in bills by
subscribing for new issues, repurchasing bills held in
the option account, or purchasing bills in the market.
"3. Offer exchange of August 1 certificates into
new one-year certificates and raise a billion dollars
11
of new money exclusively from banks.
We didn't feel strongly on that.
"As an alternative, the maturing issue might be paid
off in cash, with the Treasury selling 2.5 billion dollars
of new certificates to banks and the public. The cash
down payment should be raised from 2 per cent to 10 per
cent. Full allotments should be continued at $100,000
and should be accompanied by payment in full.
"4. Offer exchange in October of 1943-45 bonds into
the 2 and 2 1/2 per cent bonds sold in the drive. Only
the 2 per cent bonds would be available to commercial
banks, with the trading restrictions referred to above."
I think the banks have about six hundred million
of that?
MR. PISER: Something like that.
MR. ECCLES: (Continuing) "Insurance companies and
savings banks should be permitted to subscribe from the
beginning of the drive. These institutions have been
anxious to invest accumulating funds for some time, and
a further postponement would be unfair to them. The
question of large subscriptions at the beginning of the
drive should be handled in the following manner:
"a. A separate quota should be established for
individuals only and should be given the principal pub-
licity.
113
- 17 -
"b. A separate quota would be established for
financial institutions and corporations.
"6. Inaugurate instalment plan on the 2 1/2s. Subscriptions and periodic payments under the plan would be
made to the Treasury. The plan would contemplate perhaps 4 or 5 monthly instalments of equal amount except
for the last instalment, which would include an additional
amount representing accrued interest on previously unpaid
fr
balances.
H.M.JR: I can say this, that it is an excellent
memorandum. I don't know whether--
MR. ECCLES: We have done a lot of work on it. We
spent nearly all of last week - I spent a good many hours
with the staff, and then we met with the Board altogether
six or eight hours and again this morning for an hour
discussing every aspect.
H.M.JR: What I would like to do is to take your
suggestion, because every sentence is full of meat, and
I think that at the convenience of the Board, the Open
Market Committee, and Mr. Bell and our staff - I think
that they ought to spend several days - and I want to
study it myself. And then I think that very early next
week we ought to sit down and spend enough time to get
a meeting of the minds. That is what I think.
MR. BELL: I wonder if Bob shouldn't come down Monday
and have some preliminaries.
MR. McKEE: Before you crystallize your thinking,
I think, Mr. Secretary, I would like personally to explain to your staff what our problems are going to be
as I see them in the future - to help our work with you.
H.M.JR: I will hold Wednesday for you people. That
will give me Tuesday to work with my own group and wednesday with you people. Let's make it Wednesday at ten
o'clock.
114
- 18 -
MR. BELL: Then Bob can come down Tuesday morning.
MR. ROUSE: I can have some discussion with Allan
by phone and possibly by letter.
H.M.JR: If you could get hold of Viner or Stewart,
I think it would be nice to have them come down Monday
and spend most of the week with us.
I think Burgess ought to spend a couple of days down
here and somebody from Chicago from the war Finance
Committee. Those are our two big centers. Certainly
Burgess and somebody from the war Finance Committee in
Chicago - would it be all right with you to have Hap Young
down here next week?
MR. ECCLES: We would be glad to have Hap Young.
H.M.JR: Because Chicago is so important to us.
MR. ECCLES: And Hap Young, of course, is so close
to everything over there and so fully informed. As far
as we are concerned we would be delighted to have Young
here.
H.M.JR: Could"you have him here from Monday on?
MR. ECCLES: Yes.
MR. McKEE: Of course, the Secretary understands
then that it is beyond the Executive Committee of the
Open Market Committee.
H.M.JR: I understand.
MR. ECCLES: As I understand this, anyway, what these
meetings - what you have done is invited representatives
of the Federal Reserve System. I know at several times
you have said to bring over who I want, and I have said,
"Well, we will use the Executive Committee if that is all
right with you." I mean, that is the way it has - so if
Mr. Young is in here, he is part of the System.
115
- 19 -
H.M.JR: I just feel you can't - New York and Chicago,
after all, from our standpoint have got to get the bulk
of the money, and it would be helpful to us if Young could
be here Monday and stay here until this thing is settled.
MR. ECCLES: Of course, Allan would have been in on
this except he is away taking a little vacation, which
he certainly needs. we just didn't have a chance to discuss it.
H.M.JR: Well, he is ably represented by this fellow
(Rouse).
MR. McKEE: Wednesday at ten?
H.M.JR: Wednesday at ten.
MR. ECCLES: If Allan can be here Wednesday - if it
is possible, I would certainly like to have him here.
MR. McKEE: Would it be convenient to delay it a day?
H.M.JR: I am afraid it is a little bit too late. I
would like to get it settled next week if possible.
MR. ROUSE: I will have a chance to talk with him.
H.M.JR: If Walter Stewart isn't up to coming down
here, then I think that this week - soon - Haas or Murphy
or both should go up and see him and spend a day with him.
MR. BELL: All right.
MR. RANSOM: Let me ask one question, Dan. Did you
set a time for a meeting with your staff and us? It has
a bearing on our own schedule if it is convenient to you
to do it now.
MR. BELL: I can do it either Thursday or Friday.
MR. ECCLES: We will buy your lunch on Thursday.
(Laughter)
No. 16
STRICTLY CONFIDENTIAL
116
July 13, 1943
TREASURY FINANCING PROGRAM
Background for recommendations
Herewith there are submitted recommendations for a Treasury financing
program. These recommendations have been made with reference to the System's
commitment to maintain the existing pattern of rates. As is pointed out below,
this pattern can no longer be maintained, unless the spread of rates is somewhat reduced and the proportion of short-term issues to longer issues in the
offerings is also reduced. The proposed program would, we believe, accomplish
the desired purpose.
Since the end of April, the Federal Reserve System has increased its
holdings of Treasury bills by 2.0 billion dollars; in other words, it has absorbed the total increase in outstanding bills during the period. Holdings of
certificates have increased by 100 million dollars. On the other hand, there
has been a substantial demand for bonds and a moderate demand for notes. Since
the end of April, the System's holdings of bonds have declined by 560 million
dollars and of notes by 230 million. This development is probably a reflection
of (1) a growing confidence in the maintenance of approximately the present
level of the market, resulting in a shift by investors to higher rate issues,
(2) an extension of maturities by commercial banks because of a need for larger
earnings, particularly by the smaller banks, and (3) the relatively large
increase in the outstanding amount of bills and certificates. Changes in the
System's holdings since the first of the year are shown in the attached chart.
Sales of bonds and notos by the System and additional sales by
Treasury accounts have not been sufficient to meet the demand. At the same
time the System holds no more of the longer taxable 2 per cent bonds or of
other issues that have been in the largest demand./ This development makes
it increasingly difficult, if not impossible, to maintain the present pattern
of rates without a change in the financing program.
Before the pattern of rates was established, the interest of the
Systom and of the Treasury was solely in keeping the market orderly and not all
in influencing long-term movements. At present, however, when yields on
groups of taxable issues are to be maintained within narrow limits, it is
becoming more and more apparent that the supply of now issues made available
to the market by the Treasury must bo adjusted to the domand. Such an adjustmont can no longer be brought about by changes in yields alone and the System
has great difficulty in living up to its commitment, particularly in certain
areas of the market.
Recommendations
1, The basket should includo:
a. Series E savings bonds.
b. Serios C Treasury savings notes, with the 30-day notice
eliminated but with the 6-month provision retained.)
C.
2 1/2 por cent Treasury bonds of December 1964-69.
d. 2 por cont Treasury bonds.
No. 16
STRICTLY CONFIDENTIAL
2
117
July 13, 1943
It is suggested that the sale of Series F and G savings
bonds should be discontinued immediately. If this is
not done, these issues should be included in the drive
and discontinued after the drive. No certificates are
suggosted for the basket, because (1) for the present,
increases in the amount of short-term securities outstanding should be small," (2) a refunding problem arises
after only a year, and (3) an additional supply should be
made available in connection with the issue dated August
1, involving an increase of a billion dollars. If shortterm securities are issued in the drive, it is suggested
that they should be 1 1/2 por cent notos of Decomber 1947
or March 1948 instoad of certificates, but the inclusion
of any short-torm securition would increase the difficulty of selling Serios C Treasury savings notes... If
the basket is limited to the four issues montioned, the
selling problom would bo considerably simplified.
2. Prevention of bank purchasos during drive. Banks will want to purchase
securitics because of tomporarily increasing excess reserves during
the drive as a result of the shift of deposits to war loan accounts
and of their nood and dosiro for greater income. Moans of proventing
this development should includo:
a. In viow of changed conditions, with the extremoly heavy needs
of the Government and the decrease in free bank reserves, the
spread in yields botwcon short and long maturities should be
reduced and the Treasury should increase the relative proportion of bonds and notes outstanding. The maturity on now
issues of 2 per cent bonds should bc extended to 8-10 years,
and if that proves to be inadequato to 9-11 or 10-12 years.
In addition, the number of new issues should be simplified
and restricted because of the impossibility of maintaining
a pattern on too many issues. New 9-month bills should be
issued in a total amount of not exceeding a billion dollars
a woek to replace the present bills and certificatos, with
subscriptions for $100,000 or less allotted in full at 3/4
of 1 por cont and the remainder allotted on a bid basis.
Outstanding certificates should be refunded into this issue.
The amount of the now 9-month bills outstanding should not
exceed the present amount of bills and certificates unloss
a domand develops. A buying rate of 3/4 of 1 per cent with
repurchase option could be established on the now 9-month
issue. Other Treasury issues should then be restricted
to 1/2 per cont notes and 2 and 2 1/2 per cent bonds.
Investors desiring to round out their portfolios could
purchase intervening issues in the market, and it would
not be necessary to maintain rates on those issues within
narrow limits.
b. Prohibit quotations on and trading in the 2 por cent bonds
included in the drive for at least 30 days and preferably
for 60 days after the close of the drive, by which timo
excess reserves will be less plentiful.
118
STRICTLY CONFIDENTIAL
C.
-- 3 --
No. 16
July 13, 1943
The Treasury should request banks not to buy the now issues
during the nonbank drive and should announce that future
financing available to banks will be provided by intorim
financing which will bo open to banks only and that bank
subscriptions will bc limited so that total subscriptions
will not greatly excood allotmonts. This provision would
curb speculativo subscriptions sold to banks at promiums
and would clarify in the public mind the separation of
the financing. It would also bc helpful to announce that
the first bank financing after the drive will be in 2
pur cunt bonds.
d. The Federal Reserve should issue a circular to commercial banks
saying that excess reserves will increase during the drive,
giving the reason for the increase, explaining that it will
be only temporary, and suggesting that the increase be invested in bills by subscribing for now issues, repurchasing
bills hold'in the option account, or purchasing bills in
the market.
3. Offer exchange of August 1 certificates into now one-year certificates
and raise C billion dollars of now money exclusively from banks. As
an alternative, the maturing issue might be paid off in cash, with
the Treasury selling 2.5 billion dollars of now certificates to banks
and the public. The cash down payment should be raisod from 2 por
cont to 10 por cont. Full allotments should be continued at $100,000
and should bc accompanied by payment in full.
4. Offer exchange in October of 1943-45 bonds into the 2 and 2 1/2 por
cont bonds sold in the drive. Only the 2 por cont bonds would be
available to commorcial banks, with the trading restrictions referred
to above.
5. Insurance companios and savings banks should be permitted to subscribe
from the beginning of the drive. Those institutions have boon anxious
to invost accumulating funds for some time, and a further postponoment would bo unfair to them. The question of largo subscriptions
at the beginning of the drive should be handled in the following
manner:
a. A separate quota should be established for individuals only
and should be given the principal publicity.
b. is separate quota would bc established for financial institutions
and corporations.
6. Inaugurate instalment plan on the 2 1/2s. Subscriptions and poriodic
payments under the plan would be made to the Treasury. The plan would
contomplate perhaps 4 or 5 monthly instalments of equal amount except
for the last instalment, which would include an additional amount
representing accrued interest on previously unpaid balances.
119
HOLDINGS OF U.S. GOVERNMENT SECURITIES
BY FEDERAL RESERVE BANKS
END OF MONTH
LLIONS OF DOLLARS
BILLIONS OF DOLLARS
10
0
9
8
6
TOTAL
5
4
BILLS
3
BONDS
2
CERTIFICATES
I
NOTES
o
D
N
0
1943
S
M
D
A
M
F
J
A
1942
7
The Seentary 120
7/14/4,
TREASURY BILLS
Amount offered
Bids tendered
Accepted at fixed rate
July 14
July 7
June 30
June 23
$1,000 M
$1,000 M
$1,000 M
$1,000 M
1,345
1,175
1,306
1,375
69
40
58
72
Low rate
.293%
.352%
.352%
.352%
High rate
.376
.376
.376
.376
Average rate
.374
.375
.374
.374
Amount in New York
$542 M
$662 M
$589 M
$557 M
Amount in Chicago
96
146
140
134
Amount in San Francisco
62
57
89
90
300
135
182
219
.
Amount in balance of country
AWB
July 13, 1943
121
July 13, 1943.
12:17 p.m.
Operator:
HMJr:
General
Go ahead.
Hello.
Deane:
Mr. Secretary.
HMJr:
Hello, General, how are you?
D:
HMJr:
Fine thank you, sir. General Marshall just called me
and he said that he had told you that I would come
over and give you the Chief of Staff organization
Right.
and I'll be very pleased to do it any time that is
D:
convenient for you
HMJr:
D:
HMJr:
Uh
except this afternoon because I have the joint
Chiefs of Staff meeting. (Laughs) Any day except today.
Well, now let me just look a minute - I'm kind of - uh four o clock Wednesday?
D:
That will be fine.
HMJr:
Four o'clock Wednesday.
D:
Four o'clock Wednesday.
HMJr:
D:
I'll look forward to seeing you.
Thank you, sir. Good bye.
122
Memorandum of a Meeting
in Secretary Morgenthau's Office
July 13, 1943
Present: Secretary Morgenthau
Mr. White
Mr. J. van den Broek, Minister of Finance, Netherlands
Mr. Crena de Longh, Financial Adviser
The meeting had been arranged at the Finance Minister's request.
The Minister was ten minutes late. He began by stating his approval
of the International Stabilization Fund and expanded somewhat on the
idea that the economic situation within the country was at least as
important as external stability.
He then took up the question of a loan from the United States.
He stated that his government would like to be able to borrow funds
from the United States, for the purpose of buying for future delivery,
materials other than foodstuffs which Holland would need to rebuild
her country. He stated that they would like a loan similar to that
made by the R.F.C. loan to the British; namely, the loan to be made
against the collateral which the Dutch Government would leave with
the R.F.C. The collateral would be the American security holdings
of the Dutch private citizens which would be vested with the Dutch
Government. The Minister stated that he had already been to see
Mr. Jones and the State Department.
Secretary Morgenthau stated that we hadn't received this request
and would want a chance to study it. Mr. White said that they had
made informal inquiries on the general proposition of a loan but that
we had not received anything official as yet. The Minister said that
he had left a memorandum with the State Department making his specific
request and that he would send us a copy.
Secretary Morgenthau said that when we received the memorandum
we would study it although, the Secretary added, the loan to the
British was for war materials whereas the loan which the Dutch were
requesting dealt with post-war needs which was quite a different
matter.
After the meeting adjourned the Minister told Mr. White in the
outer office that the amount which they had requested was $300 million
and that Jones said that he was quite ready to make the loan available
on the collateral the Minister had in mind.
123
July 13, 1943
3:20 p.m.
TAXES
Present: Mr. Bell
Mr. Paul
Mr. Smith
Mr. Thompson
Mr. Sullivan
Captain Kades
Judge Opper
Mr. Surrey
Mr. Cann
Mr. Mooney
H.M.JR: Now, gentlemen, the reason I have asked
all of you to come in here was this: I haven't paid any
attention to this thing, because I took it for granted
that the thing was working. But this morning from the
information I got about how it was going to work in
September it disturbed me very much, because when those
things don't work you can't say, "Well, it is Congress'
fault," If and so forth, and so on. It always comes back the Treasury, or Morgenthau, or Roosevelt. We have too
much of that in the field now - too much stuff - and you
can't just say it is Congress or it is Beardsley Ruml,
or somebody like that. It all comes back. It is just
adding vinegar to an open wound.
I wondered whether somebody around here couldn't
think of some way of bending the law to make this thing
more palatable; and if you people had a good plan, I had
this much to contribute, I would be willing over my name
to write a letter or telegram to every member of the
Ways and Means and every member of the Finance Committee
saying, "Now look, gentlemen, this is the way we would
do it if we adhere to the letter of the law, and this is
the way we can do it if we attempt to do it on a matter
of reason," " you see, if we had a good suggestion. "I
124
2-
would appreciate it if you would telegraph me back, letting
me know whether I can have your sympathetic support, because
this is a matter which is going to unduly irritate the pub-
lic" - provided we had some loophole, you see.
So the first thing to do is to find some way of doing
that it won't take a man like Sullivan and two or three
this thing (indicating Form 1040ES, copy attached) in a way
experts an hour and thirty-two minutes to do his, because
if it takes him an hour and thirty-two minutes with expert
advice, the rest of us won't get it done the rest of the
year.
Now, I don't care how far it has gone in the works.
Don't tell me it is in the Bureau of Engraving and Printing
and the forms are all done and all of that business, see,
because this is, I think, the worst thing, as far as the
public is concerned, that has hit me in a long time.
What I am looking for is some bright idea, some way
of splitting this up so they don't get the whole impact
on the 15th of September.
MR. PAUL: I would like to say a couple of things
there. Maybe you had them in mind; maybe you didn't,
I
don't know. We haven't talked about it. I appreciate
that it is the Treasury's responsibility now, but I do
want you to understand that this basic provision which is
the cause of these declarations is in the bill, and it is
a completely non-partisan thing. It was in all the bills
over which we had the controversy. It is nothing special
to any one view in this recent controversy.
The second thing is that it is absolutely necessary
to accompany withholding on salaries with a provision for
these quarterly estimates, because if you don't, you are
discriminating against thirty million people in favor of
ten. At least that will be their views. So our dilemma
has not been so clear-cut as some people may imagine. We
have had to avoid discrimination.
Once we got withholding, we had to have this other
provision.
125
-3Now, on the other thing - what you just said - it
seems to me there is nothing to argue about. There isn't
any question, the law gives us a great deal of latitude,
and we can interpret the law on a reasonable basis. That
is the way we should, anyway. We shouldn't be little about
it. We should give a liberal interpretation in the direction of simplicity.
H.M.JR: "A matter of reason" is 8 recognized term.
That is a correct term in a court of law, isn't it?
MR. PAUL: You are quite right. The courts use that
term, and I don't think we have to make any - consult the
Ways and Means Committee in a matter of this kind.
H.M.JR: I just raised that as a matter of good public
relations. If we were flying in the face - after all,
here I have a clean-cut law from the President to lend
silver to India, but I go up before the Committee to con-
sult with then. Everybody likes it but Pat McCarran. I
mean, I don't have to go up there, but it has paid me
dividends to do it.
If there is some way - I would much rather have them
say, "Well, what the hell does Morgenthau annoy us for
when we are on vacation, " than to have them say, "Morgenthau
pulled a fast one. This isn't what Paul said he was going
to do, or the Commissioner, when he was up there."
MR. PAUL: If we were adopting the stricter construction
your reasoning would be quite right, but since our trend
is toward a liberal reasonable construction, we are not
going to have any trouble on it. The simpler we can make
it, the better they will like it.
H.M.JR: I am a babe in the woods on this; I haven't
looked at it. Does anybody who has been working on this
thing since this morning have 8 suggestion whereby we can
make this thing more palatable to the public? The Judge
has something?
JUDGE OPPER: The four of us who have been working the
last hour or two, that is, Smith, Surrey, Chuck Kades, and
126
-myself, have come to a tentative agreement as to something
that is worth further exploration.
H.M.JR: Please.
JUDGE OPPER: And that is to try to work out an
alternative, leaving this without suggesting that there
aren't improvements that could be made in the language,
and so on, and I think Smith has some very good changes,
but they would be more a matter of detail, leaving this
as one alternative for a taxpayer who wants to compute
his tax right down to the last penny. That would be
principally a high-bracket taxpayer to whom all these
little things would make a big difference. Prepare an
alternative with tables attached which would give the
wage earner, people within, let's say, brackets from
twenty-seven hundred up to, let's say, seventy-five -
hundred.
H.M.JR: A wage earner - it doesn't take care of me.
JUDGE OPPER: I know, but you have people you can go
to. That was the assumption that we were making, that if
a fellow's income is high enough it won't be so bad for
him to go to a tax consultant if necessary.
MR. PAUL: You wouldn't want to get into their hands
any more than you have to. (Laughter)
JUDGE OPPER: I have to think of our tax bar. If they
went out of business, we would go out of business. (Laughter)
H.M.JR: You are one of the fellows who wiped them
out - didn't we used to use the expression "rubbed them
out"? (Laughter)
JUDGE OPPER: Anyway, it seemed as though there was
a chance, and Surrey hasn't committed himself, finally,
that it would be practicable, but he thinks it is worth
looking into, a chance to take this short thing here,
expand that a little bit, just a few more lines on it,
put some tables on the back to which 8 fellow could turn
127
-5to to get his own case, and get from that the things he
has to fill in here.
H.M.JR: Something like what we do now, a simplified
tax form?
JUDGE OPPER: That is right, with the understanding
that he uses this only at his option. If he prefers this
form, he can use it, but if he uses this simple form and it would generally err in favor of the Treasury - it
might make him pay a few dollars more, but he still will
be able to make up whatever he has lost when he files his
regular return in March, because at that time he will get
a credit for the exact amounts. This is only an estimate
anyway.
MR. BELL: He will have to go all through this in
March?
JUDGE OPPER: Of course, when you file an income tax
return you do all kinds of computing, and people always
have. I haven't attempted to think about changing that.
That is what you are going to do next March, as I understand
it, in any event.
H.M.JR: Get me by September 15, and then we can
worry about March.
JUDGE OPPER: That is what this is designed to do,
to give people an alternative. Of course, if they choose
this (indicating the long form) voluntarily-H.M.JR: That is the way it is now, before I called
you in?
JUDGE OPPER: No, sir. The way it is now, in order
to get these figures you have either got to go through
this or you have got to, as Mooney suggests, do the same
thing on your own hook some other way.
MR. BELL: All of this is just for the taxpayer's
convenience.
128
-6H.M. JR: But your suggestion is a simplified form
for people up to what bracket?
JUDGE OPPER: My rough guess was seventy-five. Now,
there may be some question about just where you would
want to peak that.
H.M.JR: Who wants to argue before the Judge that
this isn't a good plan?
MR. SULLIVAN: I would like to see it worked out.
MR. PAUL: I would like to say this-MR. SULLIVAN: I would like to see it worked out
before I passed judgment on it.
JUDGE OPPER: I think we all would feel that way.
MR. PAUL: This thing - this simple looking thing -
we have got to keep this as simple as possible, because
this is practically a copy of what we gave to the Congressional
Committees as indicating the simplicity of the scheme, so
we have got to do something in the direction of what Opper
has just suggested. (Indicating Internal Revenue Form
1040ES.) Otherwise they will accuse us of--
H.M.JR: Yes, but if I hadn't gotten excited this
morning and hadn't called these people in, nothing would
have happened.
MR. PAUL: Surrey and I have been talking about this.
H.M.JR: But nothing would have happened.
MR. PAUL: I don't know, I still think something
would have happened.
H.M.JR: If I hadn't gotten in on it?
MR. BELL: Were these work sheets given to the
Commi ttee?
129
-7H.M.JR: Would anything have happened if I hadn't
gotten excited?
MR. SULLIVAN: I don't know. I understand Surrey
and Blough both had a man working with Mr. Mooney on this.
MR. MOONEY : That is right.
MR. SURREY: The situation would be this--
H.M.JR: I am not going to let you get in on this,
seriously. Wasn't it just to go to the printer?
MR. CANN: It is at the printer's now.
H.M.JR: So I have to pull it back.
MR. PAUL: We were working on it in an advisory way.
I haven't any power or jurisdiction there once the bill is
passed.
MR. SURREY: Randolph, maybe this will clear it up.
What Clarence is suggesting essentially is a system of
tables to make this special form - this thing - easier
to work with without going to the instructions.
MR. MOONEY: What point are you going to develop?
What will it work down to?
MR. SURREY: I am trying to make Clarence's suggestion
clear to you to tie up the two.
MR. CANN: I am wondering whether you are going to
work down to tax liability before credits.
MR. SURREY: What Clarence was suggesting was to
really simplify the first line on this return, "Estimated
Income and Victory Tax for 1943," by giving him a tax
table, which we had thought of originally. All he would
have to know is estimate his net income, and then his income
tax would be computed from a form - a table, and his victory
tax computed in a table. That is largely the most important
thing on this short return here.
130
-8The rest is estimated tax withheld at the source,
and possibly we can have a table for that.
(The Secretary left the conference.)
MR. SULLIVAN: Average up the post-war credit.
MR. SURREY: Yes, you have to.
JUDGE OPPER: It seems to me that there is an alter-
native there. I don't want to pass that without putting
in a caveat there.
MR. MOONEY: May I make this point - is it Clarence's
idea that you could still keep this form which has to be
filed with the collector as simple as it is now, and that
this other simplified table would go out to the taxpayer,
who is the wage earner, similar to this work sheet, which
will have on it the brackets and computation of tax, that
he can keep himself after he has made his computation, and
it will contain a copy of that as well, which will be
maintained by him. So what he will still be filing with
the collector will be the simplified return? Is that your
idea?
JUDGE OPPER: It could easily be that. I had thought
in terms of two different forms, this one (indicating
Form 1540ES) exactly the way it is with the little thing
to it, and another one entirely different with this a
little bit expanded and the tables on the back. But it
could be done your way as easy.
MR. SURREY: You could accomplish the whole thing by
slipping a table in and saying, If you use this form, you
can use this table.
When the thing first came out and the table was thought
of, it was thought by Roy and the Bureau and me not to be
sufficiently helpful - to make it even more complicated. You
know, you would have to have a table, and you had all of
this stuff. That may have been a wrong decision, a decision
which could be remedied by supplying a table to the taxpayer.
131
- -9 -
As a matter of fact, Roy and I had more than thought
that that would be handled by publicity. We thought that
publicity was *going to develop. If you want to do it by
table form in here, which is along your line-MR. SULLIVAN: You thought what publicity was going
to develop?
MR. SURREY: The most important publicity about it is
this, that most people don't have to use it. Of the forty
million who get it, only fourteen million have to send it
back to us.
MR. SULLIVAN: I thought the Bureau estimate was
higher than that.
MR. CANN: Fourteen million, that is right.
JUDGE OPPER: That is still a lot of people.
MR. SURREY: For that reason, it was our thought that
the table, in a sense, would not really make it simpler.
But it may well be that the table would make it simpler,
and we could certainly go ahead and try to develop a table
and give it to them as an alternative to the precise com-
putation.
JUDGE OPPER: If you did that, wouldn't you want at
least to show on this short form underneath each line
where they could go to the table to get the figure if
they wanted it?
MR. SURREY: You would have to coordinate the two.
JUDGE OPPER: It seems to me it ought to be on the
front of the form.
MR. MOONEY: You would have to have two forms, one
for the fellow that had seven thousand dollars or less
and another for the fellow that makes more than that.
MR. CANN: It means, too, that you have to mail all
forty million of both forms, because we don't know who is
going to use which.
132
- 10 JUDGE OPPER: Unless, of course, you did something
about mailing just this and saying they could get the
other from the collector's office. That is a matter of
mechanics.
MR. SURREY: When you said I possibly might disagree -
I didn't disagree that it might be worth exploring.
JUDGE OPPER: I said that we had all agreed on that.
MR. SURREY: I might indicate to Randolph why certain
judgments and policy decisions were made. They were based
primarily on the type of people who would have to ultimately
fill this out, and they were all in about the three-thousanddollar bracket and would have to fill out the long form,
anyway, on March 15, 1944.
MR. CANN: As a matter of fact, as far as criticism
of this form is concerned, is it chiefly directed at this
(indicating "Instructions for Declaration of Estimated
Income and Victory Tax by Individuals"), these things
here having to do with the statute? We have to acquaint
the taxpayers with them. Of that, there is no doubt. So,
does the fundamental criticism go to this taxpayers' work
sheet, which is to all intents and purposes the first page
of what would be your tax return?
JUDGE OPPER: Bear in mind that I am not the one who
created the criticism. I understood that the criticism
was directed toward that, and my own feeling was that if
there were any place where you would run into trouble, it
would be on the second page, the part where you have to
compute all those victory tax deductions and all those
things, because the first page is comparatively simple.
MR. CANN: In other words, you would say it would be
directed to the computation of estimated credits and
payments?
JUDGE OPPER: There and up on the right-hand column
above that, too.
(The Secretary reentered the conference.)
133
- 11 JUDGE OPPER: I don't say that you can avoid it.
Don't misunderstand me. If a fellow wants to make those
deductions, you have to give him a chance to do it, because
the law gives him that liberty.
MR. CANN: I want to be sure that the Secretary understands that the first page - we directed it as an approach.
We wanted to tell the people what this was about. We endeavored to do that through the purpose of the declaration.
Then we had to tell them who must make the declaration.
H.M.JR: All right, I will let you run through your
stuff.
MR. CANN: That is page one, Mr. Secretary.
Now, page four consists of what we call specific
instructions, dealing with certain statutory provisions
with which we must acquaint the taxpayer. We have to tell
them that.
H.M.JR: Now listen, old man, look - do you mind my
being a little frank?
MR. CANN: No, indeed.
H.M.JR: Take a fellow who is working eight or ten
hours in a plant, six days a week, and making three or four
thousand dollars the way a lot of them are, and he comes
home and finds that gawd-damned thing.
MR. PAUL: Of course, he is not the fellow who has to
fill it out.
H.M.JR: Who is going to fill it out?
MR. PAUL: The war worker who gets a salary is not
going to work it out. He is part of the thirty million
who are not going to fill it out. This is mostly retailers
and lawyers.
MR. SULLIVAN: There will be a lot of war workers, too.
134
- 12 H.M.JR: Take the woman who has one or two employees
in a hair-dressing parlor - does she have to do it?
MR. PAUL: The hair-dressing manager would usually
have to do it, because she is like a retailer. She is
not - she doesn't get a salary.
MR. BELL: She isn't subject to the withholding.
MR. SULLIVAN: Anybody getting sixty dollars a week
would have to do it.
H.M.JR: What I would like to get at is this: We
can serve notice some way - kind of serve a blanket summons
on the people of the United States, and nobody is going to
read it. But the idea that you are going to fill this in -
every little shopkeeper is going to get one. What I would
do is this, knowing nothing about it, but knowing a little
bit after ten years about administration - I would tell
them that if they want the thing they can go down to the
collector's office and get it, but, "Here is the form that
you can use and get away with it. "
MR. SULLIVAN: I don't think there is a line, Mr.
Secretary, that isn't necessary to acquaint the taxpayer
with his rights under this law. I don't think there is
anything we can give them that will excuse us from giving
them everything that is here.
H.M.JR: Listen, do you give every person in the
United States a copy of the Constitution of the United
States? Those are his rights. You don't give every baby
born in the United States a copy of the Constitution.
MR. SULLIVAN: Mr. Secretary, if the law says that a
man's taxes will amount to a hundred and fifty dollars, we
can't give him a form which will tell him that it is two
hundred dollars.
H.M.JR: I am not saying that. If you can do this
thing in a simplified form and say, "If you want to know
the details, what the background is, go down and see the
135
- 13 -
collector, and he will furnish it," nobody is going to
go d own there. In other words, I don't think you have
to serve a summons on everybody in the United States with
this thing.
MR. SULLIVAN: You are not serving a summons.
H.M.JR: That is what it amounts to.
MR. SULLIVAN: I beg your pardon, you are furnishing
him with the form on which he can compute with accuracy
what he is obliged to do under the law, and that is the
job of the Bureau and the Treasury.
H.M.JR: What about the simplified form?
MR. SULLIVAN: I am not at all sure that something
can't be worked out so that he can have it as an alterna-
tive, but you will in the simplified form - he uses that
as a matter of option.
H.M.JR: Let me ask the Judge this: Can't you,
instead of giving them an alternative - can't you give
them the simplified form in the first instance and then
say, "If you want additional information either write
the Treasury or go down and see the collector, or go to
the post office, making that an alternative, but having
the simplified the first approach, the first impact? That
is what I am worrying about. The first impact is the
simplified form, and not as a second. Then if he wants to
get it, all right.
JUDGE OPPER: It isn't just a matter of information,
Mr. Secretary, as John suggests. If you use a form with
tables you are going to make the fellow pay probably more
than he really has to pay, and there may be some question
as to whether you should give him that as the only shot
in the first place.
H.M. JR: But we make the adjustment ith him on the
15th of March, don't we?
136
- 14 JUDGE OPPER: That is right.
MR. BELL: He is entitled to a twenty-percent error.
MR. PAUL: That is important, that remark you just
made. This is all provisional; he gets it all corrected.
You take nothing away from him.
H.M.JR: I am going to stick by my guns. You send
this man the simplified form as the first impact, and
then simply say to him very clearly, maybe in a letter
from the Commissioner, "Now, this simplified form is being
used to assist you, but it may mean that you may advance
to your Government more money at this time than is absolutely
necessary. Of course, you can get this adjustment on the
15th of March; but if you are not satisfied with this thing,
there are full details. And I would say, "There are one
hundred and fifty" - whatever there are - "details that are
available which we will be very glad to send you if you
will just drop us a post card.
JUDGE OPPER: If you would add one thing to that, I
would certainly agree with it, and that is, "This form is
useful only to people with salaries up to such and such
a figure" - not salaries, but income - "therefore, if your
net income is more than that, then you must go to the
collector's office and get form X in any event, whether you
want to or not.' If you could say that and make it stick,
I should think it would work.
H.M.JR: That is all right. But what I am worrying
about, and I don't care what anybody tells me - the thing
that I am worrying about is the first impact. This country
is sick and tired and sore and mad about all these gawddamned blanks that come out of Washington. I go home and
I get it all the time. I don want to add fuel to the
fire if there is any possible way to avoid it.
MR. SULLIVAN: I think we are all in complete accord
with you on that, Mr. Secretary.
H.M.JR: All you have to do is just go home and sit
in the corner grocery store or in the middle of the street
and listen to the people cuss out Washington.
137
- 15 MR. MOONEY: That is true, and I don't think there is
anyone who appreciates that more than the Bureau of Internal
Revenue. And that is why in preparation of this form we
have sweat blood over there trying to condense and simplify
a highly complex statute. That is why in this work sheet,
as Mr. Sullivan has said, anyone making an estimate of
his income, what tax he will have to pay, realizes if he
makes an understatement that outside that margin of error
of twenty percent a severe penalty is imposed, also for
not filing this declaration on time, and also a penalty
for not paying the amount due on time. Our attempt has
been to give the taxpayer a service, give him this sheet
that he can use as his work sheet.
If he doesn't use this, he has to utilize pieces of
paper. It is true he has to speculate and drag down things
from the air, but there is a statement which will refresh
his memory as to the items of income so he won't overlook
them. Furthermore, he can pick that out every quarter,
and under this law he has a right to check whether he is
underestimating his income. It was intended to be sent
to him as a guide.
H.M.JR: It is all very pretty; it is all very nice;
it is all very legal; it is all very regular. But what
I am saying is , let's do it the irregular way, and let's
send out as the first thing to the public and to the school
teachers of this country, and everybody else - get OCD and
everybody else to help us - the simplified form. I don't
know - it is seventy-five hundred - I would go as far as I
could. I would make it ten thousand if possible.
JUDGE OPPER: The size of the table is what is involved.
H.M.JR: If you could get up to ten thousand, I would
make it ten thousand, and I wouldn't talk about the penalty.
I am perfectly willing to say in the first thing that we
are going to - anybody who convinces us that he is making
an honest effort to do this thing and he makes a mistake,
we are not going to bother him.
138
- 16 MR. PAUL: We have already said that to the committees.
We have got to say that now.
H.M.JR: All right. That is the importance of having
you here. One thing is you make the representation, you
representing me, and I representing the President - you
tell them something. Then these fellows carry this thing
out, but it all comes back to me eventually. I get the
letters upstairs; they come to me.
MR. CANN: Randolph, as a matter of statutory authority,
where do you think we are on some result the statute doesn't
provide for?
MR. PAUL: What do you mean by some result?
MR. CANN: I mean a tax consequence that is different
from what the statute provides.
MR. PAUL: I don't think that states the issue.
MR. CANN: As I understand it--
H.M.JR: I haven't made any dent on you at all.
MR. CANN: I didn't say that, Mr. Secretary.
H.M.JR: I haven't - what you are trying to do is
to find out how you can carry out the letter of the law.
Now, what I--
MR. CANN: No. No, Mr. Secretary, what I want to
find out for is to be sure you aren't going to be criticized
if we don't.
H.M.JR: By whom?
MR. CANN: By the public, by people who file the
returns if they have to pay more tax than they owe.
MR. PAUL: This is not a payment; it is only an
advance. In other words, you think - I haven't the
slightest question about the legality of almost any con-
struction of this statute in the direction of its simplicity.
139
- 17 -
MR. CANN: That is all right.
H.M.JR: Now look, would you mind stating what you
think I am trying to get at?
MR. CANN: As I understand it, you are proceeding
on the assumption that this being only a pre-payment they
wouldn't be subject to any criticism.
H.M.JR: Will, or will not?
MR. CANN: Will not, if they overpay, inasmuch as on
March 15 the entire matter of underpayment or overpayment
will be taken care of.
H.M.JR: But there is something much more than that.
May I try to drive it home? What I am trying to do here
is to keep us from getting - irritating the public.
MR. CANN: Mr. Secretary, I appreciate that. We
have spent weeks - Mr. Graves, Mr. Mooney, Mr. Shoeneman,
and ourselves - all that crowd for that purpose. We work
to the same end as you do.
H.M.JR: But you don't mind my saying that I am not
at all satisfied with the end that you came out on?
MR. CANN: I understand.
H.M.JR: My gawd, I am sitting here burning myself
up trying to help you. I could just say, "O.K., it is
Internal Revenue. I am sorry, but I never do that.
What I am trying to do is to make - find some way to get
us off the hot spot. And I think we got an idea.
MR. CANN: I am in favor of exploring the idea. I
think we all are.
H.M.JR: How fast can you move?
MR. CANN: We can move right away. We can get started
on exploring the idea.
140
- 18 -
I would like to ask your view on this, Mr. Secretary.
That is, as I understand it, this is to be, if it works
out, an alternative form. Now, I am not forgetting your
first remark, that you didn't want me to tell you about
the printing troubles, but here is how this thing works
out, Mr. Secretary: You remember when I came over and
talked to you a month or so ago you told me, "Well, so
long as Congress passes the law by 8 certain date we have
got to agree that we will a dminister it."
I said, "O.K.," so we let out-H.M.JR: You have to refresh my memory.
MR. CANN: You remember I came in with Mr. Surrey
at the time the bill was pending and we were apprehensive
as to whether we were going to have time-
H.M.JR: I will take your word.
MR. CANN: So we let our printing contracts, not only
including the declaration which you have already seen, but
also the contracts for this particular job because of the
printing difficulties which do exist with respect to
paper and everything else. The raw paper was all ordered
and measured.
Now, we worked last night late in order to get our
final proof to the Printing Office so that our contracts
for printing would not be cancelled, because they said
to us, "If they are cancelled, you are in bad shape.
"
H.M.JR: Who has our printing contract?
MR. CANN: The Government Printing Office sublet them
over the whole country; they are not done here.
Now, in view of that, I would like, if possible, unless
there are serious differences as to this form, to be able
to continue the printing of that so that this additional
printing job can be done, rather than to have to put both
jobs over.
141
- 19 -
H.M.JR: I can't answer you on that. The point I
would like to again drive home is that I don't want the
simplified form as the alternative.
MR. CANN: I understand.
MR. MOONEY: Isn't that a point, Mr. Secretary?
Couldn't this printing go on for this form under this
theory, that we send out an alternative form first - the
simplified form first - then the taxpayers whose income is
above seventy-five hundred, we will say-H.M.JR: Or ten thousand.
MR. MOONEY: Or ten thousand. Say that if they need
this form they can get it from the collector, and we have
the job already done. It is there, but it will be released
only secondary.
MR. CANN: And we, of course, would cut the quantity
of this down.
H.M.JR: That is as of this moment, four minutes of
four, what I would say makes horse sense.
MR. PAUL: I would like to add a suggestion, that in
trying to work out a solution we don't worry too much about
legalities, because the income tax is full of cases where
the Treasury has done perfectly illegal things like the
consolidated return regulations in 1917, the Treasury's
interpretation of Section 210 of that Act, and various
things like that.
MR. SURREY: I would agree with you, but not anything
illegal.
MR. PAUL: I don't think there is, but I want to
emphasize the point that we want to go as far as we can
irrespective of--
H.M.JR: And the other thing - supposing we get to a
point and Fred Smith says, "Now, from the standpoint of
the public this is swell"--
142
- 20 -
MR. SMITH: It "ain't" ever going to happen in this
tax, but that is all right. (Laughter)
H.M.JR: But as between the two things, this is better.
Then these people worry, that is the point. If we have to
do something which is contrary to the Treasury's position,
then I am ready to write a letter or telegraph the members
of the two committees explaining what we have done.
MR. PAUL: For the moment I am opposed to that.
MR. CANN: I don't think that will be necessary.
MR. SULLIVAN: I agree with Randolph.
H.M.JR: Remember, I say here I sit and if we get to
this point - if it is a question either way, I am ready to
write a telegram to the members of the committee.
MR. SULLIVAN: We are not to that point.
H.M.JR: You may come back and beg me to do it. (Laughter)
MR. SULLIVAN: That is right.
MR. MOONEY : How many men have we got in the armed
services today?
H.M.JR: About seven, my guess.
MR. MOONEY: Every one of those men is supposed to
file this declaration return on September 15 under the law.
Is it possible to extend the time they can file that to
December 15?
H.M.JR: Well, that is - I would certainly - do they
have to do it again on December 15?
MR. MOONEY: No, they make an amended declaration
then if they want to.
H.M.JR: I would give them, certainly, all of that time.
143
- 21 MR. MOONEY: We are going to run into a lot of
administrative difficulties, particularly with the men
who are overseas.
H.M.JR: Well, that is another question. Imagine
what a fellow is going to do who is sitting in a trench
in Sicily when he gets a letter from me and one of these
blanks. You can imagine what he is going to do with that
piece of paper. (Laughter)
MR. PAUL: He won't get the specific amount under
the circumstances, but all of those people are covered
by a specific provision.
MR. MOONEY : Wait until the Secretary's maid gets
one of these things to fill out. (Laughter)
H.M.JR: You know what she is going to do.
MR. SMITH: There isn't any way you can postpone
the victory tax until March, is there?
MR. PAUL: We tried to do that this year.
MR. SMITH: If you get rid of that, you at least
only have one tax form to fill out.
MR. PAUL: We advocated that--
H.M.JR: How about what Fred is talking about?
MR. PAUL: How about eliminating it here?
H.M.JR: Leaving it to the 15th of March?
MR. SURREY: You would really be doing the taxpayer
a hardship. The whole point of the current payment is
that by the end of the year he will have paid his income
tax. You would be going contrary to that in d leaving him
a sum to pay next March.
MR. SULLIVAN: The point Fred is making, Mr. Secretary,
is that your net income for income tax purposes is not the
same amount as your net income for victory tax purposes.
144
- 22 There are certain deductions you have for income tax
purposes that you don't have for victory tax purposes.
So you are computing two taxes on different bases and
with different deductions.
MR. SMITH: You have one deduction on one tax, and
another deduction right beside it that is based on an
entirely different philosophy.
MR. PAUL: We have said that to the committee.
H.M.JR: Just stop and think, what I am asking all
of you - let's be a little objective on this. Does he
have to do it on the 15th of March?
MR. SMITH: He would have to do it on the 15th of
March, anyway, but I am going back to what you said, to
relieve the impact on December 15 and cross the other
bridges when you get to them.
If you didn't have to do the victory tax, it would
be cut down fifty percent - which he has been told doesn't
exist any more, and that it has been absorbed somehow or
other. On September 15 he finds, like hell it has been
absorbed.
MR. MOONEY: No one has told him that, I don't think.
MR. SULLIVAN: Neither the Bureau nor the Treasury
has ever said that it is absorbed, but ninety-nine out of
one hundred think so.
H.M.JR: I did.
Now listen, Judge, what do you think? Do you think
we could postpone this victory tax to the 15th of March?
MR. MOONEY: I think for the purpose of any simplified
form you want to work out, bear in mind that it is an
estimate; it can be merged in the schedules. On this
theory the final analysis is nothing more than an additional
five-percent rate with a six hundred and twenty-four dollar
145
- 23 -
exemption thrown in. It is true it won't be - it will
indicate going to schedules that make the taxpayer pay
a greater proportion, but that is not doing him any harm.
He is merely on a more current basis. It will automatically
work out on March 15 when he makes his actual computation.
To get your simplicity and your brevity you have to
cut your corners; you have to give him an over-all picture
which is just an estimate and tell him it is just an
estimate. It isn't going to do him any harm.
H.M.JR: Does he have to figure the two separately
in the simplified form?
MR. MOONEY: No, it can be merged in and say, "Estimated
income.
MR. SULLIVAN: Mooney is the author of that simplified
form. (Indicating Form 1040A)
H.M.JR: Couldn't you go across the way to the chart
room - good air and good ventilation - and just stay at
this thing as long as the Judge can stand it and you can
stand it. Maybe in another hour you could have the thing
settled.
JUDGE OPPER: I don't know how long I can keep on
going, but it seems to me it has gotten beyond the point
where you can do anything but work on details.
MR. CANN: I was going to suggest that we go back
to our shop and ask Stan and Captain Kades if they can
come. We will go on over there and get two or three of
our boys and go to work.
MR. SULLIVAN: This is for the technicians now, Mr.
Secretary.
H.M.JR: Are you satisfied as far as we have gone?
(The Secretary left the conference temporarily.)
H.M.JR: What did you all decide?
146
- 24 MR. SULLIVAN: I just wanted to say this, Mr. Secretary,
that let's not start waving the flags and figure that this
is all done, because in formulating these tables we may
run into some things that are going to be pretty bad, but
I just want to put a little word of caution here.
MR. BELL: The tables have to be in favor of the
Treasury as far as making the payment is concerned.
JUDGE OPPER: I think that is true.
H.M.JR: Could we have another meeting tomorrow?
MR. CANN: I would suggest maybe three-thirty in
the afternoon, or four o'clock, because it is going to
be quite a job getting the preliminaries out of the way.
H.M.JR: I can do it at three-thirty tomorrow.
147
JIII 10 1943
Sumon
Form 1040ES
U
UNITED STATES
/TREASURY DEPARTMENT
INTERNAL REVENUE SERVICE
Declaration of Estimated Income and Victory Tax by Individuals
FOR CALENDAR YEAR 1943
1943, and ending
or fiscal year beginning
, 1944
(See accompanying INSTRUCTIONS)
1. Estimated Income and Victory Tax for 1943
(Cashier's Stamp)
$
(Enter (a) the tax liability computed on estimated 1943 income (see line 43 of Work Sheet). or (8) the
tax shown on the 1942 Income Tax return (see Instruction on page 3), WHICHEVER
IS
GREATER.)
2. Estimated tax withheld at source. (See line 47 of Work Sheet)
$
3. ESTIMATED TAX after credits for withholding (item 1 minus item 2)
4. Total payments to collector. (See line 50 of Work Sheet)
$
5. Balance of estimated tax (item 3 minus item 4)
$
6. Amount paid with this declaration. (See instructions on reverse side)
I/we declare. under the penalties of perjury, that this declaration
has been examined by me/us. and to the best of my/our knowledge
Social Security Number. if any
and belief is correct. and complete declarat tion. made in good
Revenue
PRINT NAME AND ADDRESS PLAINLY
faith, for the taxable true, year stated. pursuant to the Internal
Code and the regulations issued under authority thereof.
(Name) (Use given names of both husband and wife, il this is . joint declaration)
(Signature of taxpayer or agent)
(Street and number, or rural route)
(Date)
(State)
(City town)
(OVER)
DOC
(If this is joint declaration (not made by agent) it must be signed by both husband and wife)
17-1
A. TIME AND PLACE FOR FILING AND PAYMENT.A taxpayer required to file this declaration must file it on or
established an income tax fiscal year beginning in 1943 on
or before July 1, 1943, he must file this declaration on or
before September 15, 1943, with the collector in whose district he expects to file his income tax return for 1943, and
must pay at the same time at least one-half of the balance
of the estimated tax for 1943 (item 5 on Declaration), unless
he is a farmer (see B, below) or has established an income
tax
fiscal year beginning after January 1, 1943 (see C,
below).
many equal installments as there are quarters in the remainder
of hisisfiscal
the declaration
filed. year, including the quarter in which
B. FARMERS-If at least 80 percent of the taxpayer's
estimated gross income is derived from farming, he must
D. TAXPAYER BECOMING LIABLE AFTER FIRST
FILING DATE.II on the prescribed filing date the tax-
file this declaration on or before December 15, 1943, and must
pay at the same time the entire balance of the estimated tax
(item 5 on the face of this form).
C. FISCAL YEAR TAXPAYER-If a taxpayer has
before September 15, 1943. If he has established an income
tax fiscal year beginning after July 1, 1943, he must file this
declaration on or before the fifteenth day of the third month
of such fiscal year. In either event he must pay the tax in as
payer's estimated gross income and marital status are such
that he is not required to file a declaration, but subsequent
changes make him liable for filing, he must file a declaration
on or before the fifteenth day of the last month of the quarter
in which he first becomes liable for filing.
16-00000-1
GPO
148
943
Page 1
INSTRUCTIONS FOR DECLARATION OF ESTIMATED INCOME AND VICTORY TAX BY INDIVIDUALS
(FORM 1040ES)
PURPOSE OF DECLARATION
The purpose of the declaration is to make the individual income taxpayer whose tax is not fully collected at the source
wages are not over the lowest surtax bracket. Examine the
groups described below under 'Who Must Make a Declara.
current on his tax payments for the year 1943. Withholding
of tax at source does not make every one current in his tax
payments. In the first place, it applies only to certain wages
come within one of those groups.
dividends, rents. and business profits. In the second place,
the rate of withholding approximates only the net Victory Tax.
the normal Income Tax. and the surtax at the lowest bracket
rate. . Therefore, in order to place all taxpayers on an equal
cur this penalty. If your estimate in your original declaration
or as revised in an amended declaration for a later quarter
equals at least so percent of your actual tax. there will be no
Victory}Tax payments, the Act provides a second method.
you may amend your declaration is the 15th day of the last
and salaries and not to other forms of income, such as interest,
footing from the standpoint of being current in their Income and
Under.this method the taxpayer will file a Declaration of Estimated Tax for the year and pay that estimated tax either in a
lump sum or in installments, just as he has in the past. But
there will be this difference-he will be paying during this
year. his tax on this year's income.
Most taxpayers will not have to file declarations because
their income consists of wages subject to withholding and these
tion. You are not required to file a declaration unless you
A penalty is provided for substantial underestimate of the
tax. However, no one who makes a careful estimate need in-
penalty. You may, if you find it necessary. amend your declaration as often as once in each quarter. The last date on which
month of your taxable year.
For taxpayers on a calendar year basis, there will be due
on March 15. 1944, the regular Income tax return (Form 1040 or
1040A) for the calendar year 1943. Also on March 15, 1944.
there will be due the declaration (Form 1040ES) for the calendar year 1944.
WHO MUST MAKE A DECLARATION
A declaration must be made by (a) every citizen of the
United States." whether residing at home or abroad. (b) every
individual residing in the United States though not citizen
thereof, and (c) every nonresident alien, a resident of Canada
or Mexico, whose wages are subject to withholding under the
Current,Tax Payment Act of 1943. if he comes within any of
scribed for the making of the declaration. if he had for
the taxable year 1942 or reasonably expects to have for
the taxable year 1943.
(a) gross income from wages subject to withholding which.
when added to gross income from such wages of his spouse.
exceeds $3,500; or
date prescribed for the making of the declaration
(b) gross income other than from wages subject to withholding which. when added to gross income other than from such
wages of his spouse. exceeds $100. and also his gross income
from all sources exceeds $624 for 1943 or the aggregate gross
income from all sources of both spouses amounts to $1,200 or
taxable year 1943.
more for either 1942 or 1943.
withholding: or
required to file an Income Tax return for the taxable
year 1942 and whose wages subject to withholding for
the following groups:
(1) Single or married but not living with spouse at the
(whether or not head of a family.) if he had for the taxable year)1942. or reasonably expects to have for the
(a) gross income of more than $2,700 from wages subject to
(b) gross income of more than $100 from sources other than
wages subject to withholding. and also gross income of $500 or
more from all sources.
(2) Married and living with spouse at the date pre-
(3) Individuals. regardless of marital status. who were
the taxable year 1943 are reasonably expected to be less
than such wages for the taxable year 1942.
GENERAL INSTRUCTIONS
A. FILING OF DECLARATION WHERE INCOME IS
NOT SUBJECT TO WITHHOLDING-Eve though the
individual receives compensation for personal services. he may
not be subject to withholding. and may therefore have to file
a declaration. Thus, military pay and compensation received
for agricultural labor or for domestic service or for services
performed as a minister of the gospel is not subject to withholding. In addition, dividends interest, rents, royalties and
the like. gains from the sale or exchange of property, and
income derived from the carrying on of trade or business or
profession by the taxpayer are gross income not subject to the
tax withheld at the source wages,
B. JOINT DECLARATION. May b filed by husband and
wife only if they are (1) both citizens or residents of the United
States and (2) living together when the declaration is filed.
Vjoint declaration is permissible even though one has no gross
income In a joint declaration the aggregate income. deduetions, credits, and tax are computed as though husband and
one person. The liability with respect to the estimated
tax
is
joint
and
several
The filing of joint declaration does not preclude the filing of
separate return< for the taxable year and, in such case, the
estimated tax for such year may be treated as the estimated
tax of either the husband or the wife. or may be divided be
tween them. . Similarly, in such case. the personal exemption
may be taken by either husband or wife or divided between
them' any proportion
revision
Amendment
AMENDED DECLARATION
of declaration (to be marked Amended") may be myde
or
and filed (a) for the calendar year 1913 on or before December
15. 1913, and (b) for a fiscal year on or before the 15th day
of the last month of any quarter of such fiscal year subsequent
to that in which the original declaration or last amended
declaration was filed. Such amended declaration must be
filed with the collector of internal revenue with whom the
original declaration was filed.
D. PENALTIES. The following malities and impassed for
of Edimated the
make and file a
case (1) of Failure a failure to Fils to Declaration required declaration aided of
estimated tax within the time preveribed there shall be
to the tax an amount equal to 10 parent of the tax.
(2) Failure to Pay Installment of Estimated Tax.-In the
of the failure to pay an installment of the estimated tax
ease within the time preveribed there shall be add to the tax for
$2.50 or 21, percent of the tax. whichever is the greater.
each installment with respect to which such failure 00011
Substantial direstimate of Estimated Tax.-In the
case (3) of individuals other than farm JTA. if 80 parent of totar +1
(determine: without regard to the credits for tax withh on
tax-free covenant bonds and for Income and Vistory Tax by
withheld wares) exceeds the estimate tax (increase I
such credits). on and in the cas of farmers if 6316 parent exeaci of the the
tax (determined without regard to such eradits) be added
estimated tax (increase by such eredit+). there shall
an amount exual to such excess percent the
of to the amount be which the tax so determined exceads
timated tax so increased whichever is the lesser.
Penalties provided for the willful failure to make a return
(4) for willfully making a false return are likewise applicable to
declarations.
1943
11
TAXPAYER'S WORK SHEET
(Do not file with Collector)
Your tax liability on the declaration is based on your estimated 1943 tax, or your actual 1942 tax,
WHICHEVER IS THE GREATER.
The schedules on pages 2 and 3 are furnished for the convenience of the taxpayer if he desires to use them
in estimating the tax on his 1943 income. In general, the items on the Work Sheet relating to Income Tax
are the same as on the Income Tax return. Form 1040. Information with respect to these items may be obtained from Form 1040 Instructions. Information relating to the Victory Tax appears on page 4 of these
instructions.
COMPUTATION OF ESTIMATED INCOME TAX NET INCOME AND VICTORY TAX NET INCOME
Column I
Column
Estimated Income Tax
Estimated Victory Tax
Net Income
Net Income
Deduct ible
Amount
$
$
1. Salaries and other compensation for personal services
Expenses
$
ESTIMATED INCOME
Line No.
$
2. Dividends
3. Interest on corporation bonds, bank deposits, notes, etc
4. Interest on Government obligations, etc.:
(a) Subject to surtax only
$
Less amortizable bond premium
(b) Subject to normal tax, surtax and Victory Tax
5. Rents and royalties
6. Annuities
7. (a) Net gain (or loss) from sale or exchange of capital assets
(b) Net gain (or loss) from sale or exchange of property other than capital assets
8. Net profit (or loss) from business or profession
9. Income (or loss) from partnerships; fiduciary income: and other income
Total estimated income in lines I to 9
10.
$
$
ESTIMATED DEDUCTIONS
11. Interest. (See Instruction 21 (d).)
12. Taxes. (See Instruction 21 (d).)
13. Losses from fire, storm, shipwreck, or other casualty, or from theft
$
$
14. Contributions
15. Amortizable bond premium. (Do not include amount deducted in line 4 (a) above)
16. Medical, dental, etc., expenses
17. Tenant-stockholder's proportionate share of interest and taxes
18. Other deductions authorized by law
Total estimated deductions in lines 11 to 18
19.
$
20. Estimated Income Tax net income (line 10. col. 1, minus line 19. col. 1)
21. Estimated Victory Tax net income (line 10. col. 2. minus line 19. col. 2)
$
JUL
SURTAX TABLE
the
Form
Work
Sheet
except
surlez
the 1943 tax by that return of will contain applicable)
surtax
possible the 1943 or 1943. whichever maller, percent the the tax 1942
1943 in smaller: and ets
which
the
the
income
of
the
base
year
by
more
than
10-00000- 1
$20,000.
149
TAYPAYER'S WORK SHEET-Continued
Page 3
(Do not file with collector)
COMPUTATION OF ESTIMATED INCOME AND VICTORY TAX
23. Less: Personal exemption
33. Estimated Victory Tax net income (line 21.
$
22. Estimated Income Tax net income (line 20. col. 1).
34. Less: Specific exemption (see
$
35. Estimated income subject to Victory Tax
36. Estimated Victory Tax (5% of line 35)
$
26. Less: Line (a) page 2
37. Less: Estimated post-war credit currently used
$
38. Estimated net Victory Tax
39. Total estimated Income Tax in line 32
$
40. Total of line 38 and line 39
$
29. Normal tax % of line 28)
$
28. Balance subject to normal tax
$
Earned income credit
41. Less: Estimated Income Tax paid at source on
30. Surtax on line 25 (see Surtax Table on page 2)
tax-free covenant
bond interest
$
$
31. Total (line 29 plus line 30)
Estimated credit for
42.
32. Total estimated Income Tax (enter line 31. or
foreign taxes
alternative tax in case of an excess of net long-
term capital gain over net short-term capital
43. Estimated Income and Victory Tax for 1943
$
loss. whichever is the lesser)
$
27.
$
25. Balance (surtax net income)
$
Credit for dependents
24.
COMPUTATION OF ESTIMATED WITHHOLDINGS AND PAYMENTS FOR 1943. (See Instructions 44 to 50)
$
48. Payments on account of 1942 Income Tax liability
Payments of estimated tax made with prior declara-
$
49.
tions on Form 1040ES. if any
45.
50. Total payments to collector. (Enter as item 4 on
$
44. Estimated Victory Tax withheld on wages. (See Instruction 44).
Estimated Income Tax withheld on wages. (See Instruction 45)
If. in the declaration, the 1942 tax is entered in item
declaration)
46.
enter the estimated Income Tax paid at source during 1943 on tax-free covenant bond interest (not applicable if computation made on basis of Form 1040A)
47. Total estimated tax withheld at source. (Enter as
$
item on declaration)
tax for 1943, may recompute his tax for 1942 by excluding from
INCOME TAX FOR 1942
If your 1942 tax exceeds your estimated 1943 tax, enter as
item 1 on the declaration such 1943 tax. In general, this will
be the amount reported on your return of Income Tax for the
taxable year 1942
If however, a credit for tax withheld at source on tax-free
covenant bond interest, or a credit with respect to taxes with-
held under section 143 in the case of a nonresident alien required
his total income for such year the amount of his earned net
income. The reduced tax for 1942 will then be entered on the
declaration only if in excess of the estimated tax for 1943.
Joint Return.- If a joint return is made either for the taxable
year 1942 or for the taxable year 1943, the taxes of the husband
and wife for the taxable year for which a joint return is not
made shall be aggregated for the purpose of determining the
to make a declaration, is involved in either 1942 or 1943, and
before the allowance of such credit the estimated tax for 1943
exceeds the tax for 1942, the 1943 estimated tax should be
increase to be considered as part of the 1943 tax.
Armed Forces.- taxpayer in the armed forces of the United
States or of any of the other United Nations during any part
of 1942 or 1943, whom for 1942 is in excess of his estimated
declarations for 1943, the excess of 1942 over 1943 may be
entered as item 1.
than the aggregate of the estimated taxes shown on the separate
divided in the separate declarations as the spouses may choose.
UNITED STATES
Form 1040ES
S. TREASURY DEPA ARTMENT
INTERNAL REVENUE SERVICE
Declaration of Estimated Income and Victory Tax by Individuals
FOR CALENDAR YEAR, 1943
or fiscal year beginning
1943, and ending
, 1944
(See accompanying INSTRUCTIONS)
$
THIS COPY OF DECLA-
1. Estimated Income and Victory Tax for 1943 Sheet)
(Enter (a)tax
theshown
tax liability
estimated 1943 income (see line 43 of Work Sheet).
on the 1942 Income Tax return (see Instruction on page 3). WHICHEVER
RATION AND WORK
GREATER.)
SHEET TO BE RE-
IS
2. Estimated tax withheld at source (see line 47 of Work Sheet)
TAINED BY TAX-
$
3. ESTIMATED TAX after credits for withholding (item minus item 2)
PAYER
4. Total payments to collector (see line 50 of Work Sheet)
$
5. Balance of estimated tax (item 3 minus item 4)
$
6. Amount paid with this declaration
best
good
I/we declare, under the penalties
of the and
perjury, that my/our
this declaration
knowledge
made
by
to
in
has
Social Security No. if any
and belief correct. year stated, and pursuant to the Revenue
PRINT NAME AND ADDRESS PLAINLY
faith. Code and for the the regulations taxable issued under authority thereof.
(Date)
(Name) (Use given names of both husband and wife, if this is joint declaration)
(Signature of taxpayer agent)
(Street and number. as rural reute)
both
be
(City town)
(State)
(If
-00000-1
signed
husband
and
wife)
be
.
U.
If husband and wife filed a joint return for 1942 but file
separate declarations for 1943. and the 1942 tax is greater
this
F-14
Page 4
SPECIFIC INSTRUCTIONS
(Numbered to correspond with line numbers on Work Sheet)
20. ESTIMATED INCOME TAX NET INCOME. For the
purpose of determining the estimated Income Tax net income
the applicable Instructions for Form 1040 (1942) may be used.
It will be necessary, however, to take into consideration addi-
tional instructions relating to the following specific items
affecting the computation of the estimated Income Tax for the
taxable year 1943:
. (a) Additional Allowance for Military and Naval Person.
L-Compensation not exceeding $1,500, received by a
member of the military or naval forces of the United States for
active service in such forces during the present war. or by a
citizen or resident of the United States who is a member of the
military or naval forces of the other United Nations for active
service in such forces during the present war, is excluded from
gross income and is exempt from tax:
(b) Nonbusiness Debts.-I a debt, other than a debt
evidenced by a corporate security with interest coupons or in
registered form and other than a debt the loss from the worthlessness of which is incurred in the trade or business, becomes
totally wort bless within the taxable year, the loss resulting
therefrom shall be considered a loss from the sale or exchange,
during the taxable year, of a capital asset held for not more
than 6 months Any such item should be reflected in line 7 (a)
of the Work Sheet:
(c) Capital Less Carry-Over.-A net capital loss as defined
in section 117 (a) (11) for a taxable year beginning in 1942 may
be carried over to the taxable year 1943 and treated as a shortterm capital loss; and
(d) A United States citizen will not. for 1943. be exempt
from tax on his earned income from sources without the U nited
States unless he shall have been a bona fide resident of a to reign
at any time during the period from September 1 to December
31, 1942. exceeds the amount of indebtedness outstanding at
the end of December 31, 1943: and
(c) The amount by which the purchase price of United
States Savings Bonds, Series E, F. and G, owned on the last
day of the current year exceeds the purchase price of such
bonds owned on the last day of the preceding taxable year.
If a Savings Bond is registered in the names of two persons as
co-owners, each shall be entitled to the credit to the extent of
one-half of the purchase price thereof, except that if the entire
purchase price is contributed by one co-owner, he may, if he
so elects at the time of filing his first return under the Victory
Tax subsequent to the purchase of the bond, be considered to
be the sole owner, in which case be shall be entitled to a credit
to the full extent of the purchase price and no credit shall be
allowed to the other co-owner. No credit is allowable for
bonds acquired by gift, or inheritance, or otherwise than by
purchase shall not be included
The total credit allowable to any taxpayer under (a), (b)
and (c) shall not exceed (1) the aggregate amount or (2) the
aggregate percentage of his Victory Tax (whichever
following items includible in gross income or allowable as de-
ductions in computing the estimated Income Tax net income
are not applicable for the purpose of determining Victory
Tax net income:
of a family), or
dependent
or
Married person not living
with husband or wife
(not the head of a family).
Married person living with
husband or wife, but filing a separate return.
(2) 25% of the Victory Tax plus
2% for each dependent,
whichever is the smaller.
(1) $500 plus $100 for each
dependent
or
(2) 40% of the Victory Tax plus
2% for each dependent
whichever is the smaller.
Married couple living to- (1) $1,000 plus $100 for each
gether and filing a joint
return, or
dependent
or
Head of a family.
(a) Interest on obligations of the United States and instrumentalities of the United States allowable as a credit against
(2) 40% of the Victory Tax plus
2% for each dependent
(excluding, in the case of a
head of a family, the de-
net income
pendent qualifying the tax-
(b) Net gain (or loss) from the sale or exchange of capital
payer as such)
assets to the extent provided in section 117:
(e) Amounts received as compensation for injury or sickness
which are included in gross income by reason of the exception
contained in section 22 (b) (5) (relating to such compensation
attributable to deductions for medical expenses allowed in
any prior taxable year)
(d) Interest on indebtedness and taxes not incurred in carrying on any trade or business or in the production or collection
of income or for the management conservation, or maintenance of property held for the production of income
(e) Losses not incurred in trade or business;
(S) Charitable and other contributions other than those
allowable under section 120 (relating to unlimited deduction
for charitable and other contributions);
(g) Amortization of bond premium;
(h) Medical, dental, etc., expenses; and
(i) Cooperative apartment tenant-stockholder's proportion-
34. SPECIFIC EXEMPTION FROM VICTORY TAX.
Every individual taxpayer is entitled to an exemption of $624
regardless of marital status. An exemption of $1,248 is allowed
a husband and wife filing a joint return unless the Victory
the Tax total net one
incomeisofless
spousethan
$624,in
which case
exemption of both spouses is limited to $624 plus the
Victory Tax net income of such spouse
37. ESTIMATED POST-WAR CREDIT CURRENTLY
USED There is allowed as a credit against the Victory Tax:
F (a) Premiums paid by the taxpayer during a taxable year
beginning after December 31, 1942 on life insurance in force
on September 1. 1942, upon his own life or upon the life of
A his spouse,
of his dependents;
For
the or upon the life of any
1942
(A)
amount
of
the
amount
whichever is the smaller
41. ESTIMATED INCOME TAX PAID AT SOURCE.-
A nonresident alien required to make a declaration should also
enter on line 41 the amount of all credits with respect to taxes
withheld under section 143. A citizen or resident of the
United States who computes his estimated tax for 1943 on the
basis of Form 1040A (1942) is not entitled to a credit for the
amount of Income Tax paid at the source during 1943 on
tax-free covenant bond interest.
42. ESTIMATED CREDIT FOR FOREIGN TAXES.-
Such credit shall be determined without regard to subsections
(a), (b), and (e) of section 6 of the Current Tax Payment Act
of 1943
44. ESTIMATED VICTORY TAX WITHHELD ON
WAGES. Enter the estimated amount of Victory Tax/with
held on wages for the first half of 1943 at 5 percent
ate share of interest and taxes,
smallest
the
Single person (not the head (1) $500 plus $100 for each
country during the entire year 1943.
- 21. ESTIMATED VICTORY TAX NET INCOME. The
is
smaller) in the applicable case below.
by
45. ESTIMATED INCOME TAX WITHHELD ON
WAGES. -Enter the amount of estimated Income Tax withheld on wages for the last half of 1943, at 20 percent.
46. CREDIT FOR INCOME TAX PAID AT SOURCE.There should be no entry in this line unless the 1942 tax has
been entered as item on the declaration Also, a nonresident
alien required to make a declaration should enter the amount
of all of the credits allowable with respect to taxes withheld
under section 143.
48. PAYMENTS ON ACCOUNT OF 1942 INCOME TAX
LIABILITY.- all payments (other than interest and
penalties) made to the collector of internal revenue in the year
1943 on account of the Income Tax shown on
Income Tax for the year liability any payment your
return 1942. If on
account of the tax for 1942 is made pursuant to a joint return,
which
outstanding
the divided tax of either treated the husband payment or the on wife account or may of the be
between them in any proportion.
of
150 L
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE JUL 13 1943
Secretary Morgenthau
FROM
Mr. O'Connell
In connection with our recent discussion on the Lazard
case, I thought you might want to know a bit more about
Lesser's background and equipment for handling criminal
enforcement work.
Lesser graduated with honors from Harvard in 1931. During
the summer of 1930 he had been a law clerk with Coudert Brothers.
His first job after graduating was as legal assistant in the
Seabury investigation of Tammany graft. After that investigation, he was associated with others in representing a group of
members of the Motion Picture Operators Union and was successful
in forcing its officers to disgorge misappropriated funds and
paved the way for a successful prosecution in this connection.
Thereafter, Lesser went with the firm of House, Holthusen
and McCloskey and for a year and a half had diversified corporation and litigation experience. In August 1934 he resigned
from this firm to accept an appointment as Special Deputy
Assistant District Attorney in New York in connection with
the investigation of mortgage guaranty companies. He was
acting chief of this work for some time and actively engaged
in the prosecution of these mortgage frauds.
When the mortgage fraud investigation was completed in 1937,
Lesser went with the SEC. He was placed in charge of litigation
arising under the Public Utility Holding Company Act. One of
his more important investigations involved the relationships
between J. P. Morgan & Co. and the United Corporation and
number of other related companies.
a
While with the Treasury, Lesser has been very successful in
his investigative and enforcement work. He did a particularly
good job in the recent investigation of the Swiss Banks.
you
151
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
July 13, 1943
Mr. O'Connell
I think you should read the attached letter
from Mr. McConnell and the accompanying memorandum,
addressed to his fellow Directors, in which
McConnell sets forth some of the reasons for his
resignation. The memorandum does not discuss the
make-up of the new Board, but only his disagreement
with Mr. Crowley with respect to the future
operation of General Aniline.
I had not heard, until McConnell told me, that
they now intend continuing the company as Government-
owned after the emergency. A couple of months ago
Mr. Crowley issued a statement from which I gathered
that he intended disposing of the stock to the
public after the emergency.
you
Attachment
L
152
GENERAL ANILINE & FILM CORPORATION
230 PARK AVENUE
NEW YORK
TELEPHONE
MURRAY HILL 4-1300
July 13, 1943
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Dear Mr. Secretary:
You delegated to me the responsibility of
managing the business of General Aniline & Film
Corporation in March of 1942. I have performed
this mission to the best of my ability and today
have been relieved of that duty.
I believe it is my personal responsibility
to report to you the circumstances of my retirement which is set Sorth in the enclosed memorandum
of July 9 to my co-directors Dr. Wilson, Mr. Moffett
and Dr. Williams.
I am also attaching the mid-year report of
General Aniline & Film Corporation which will be
published tomorrow.
Very truly yours,
R.E. MYom
R. E. McConnell
President.
a
10
153
July 9, 1943
MORANDUM
TO: Dr. Wilson
Mr. Moffett
Dr. Williams
FROM: R. E. McConnell
The following is my understanding of the new policy adopted as
regards General Aniline & Film Corporation and my reaction to it:
Mr. Crowley wrote me a letter on July 6 stating his gratitude
for the services I had rendered as chief executive of the General
Aniline & Film Corporation from the time I undertook this task at
the request of the Secretary of the Treasury. I hasten to point
out that any measure of success which may have been attained is in
consequence of the abilities of the men who have been brought into
this company as officers and staff of this organization, and to the
wholehearted cooperation of the older employees. These men have
performed a valuable service to this country and the record they
have made speaks for itself.
Since Mr. Markham's visit of yesterday, I have given considerable thought to the new policy which it is proposed to adopt for
this company's operations and which the new Board selected by Mr.
Crowley will be expected to carry out. As I understand it, the new
policy is predicated upon permanent Government ownership of General
Aniline & Film Corporation, with a view to utilizing the company as
a spearhead in Latin America and other foreign countries to further
other objectives than those purely commercial, particularly the
Government's political or good neighbor policy.
Further that it is planned at some future time that the
governments of Latin American countries and possibly other foreign
countries will be invited by our Government to participate in the
ownership and direction of this highly complicated and technical
business of making dyes, photographic products and other organic
chemicals. I can not conceive that such a venture would have the
remotest chance of success.
While I am entirely sympathetic to the strategic objectives
behind the policy, I feel that I would be doing less than my duty
if I did not register the serious objections I find to the proposed
method of approach through avowed and permanent Government co-ownership.
Mr. Markham asked me if I believed in permanent Government owner
ship in business. As you know, I personally am opposed in principle
to Government ownership in business because of the reduced efficiency need
high cost, general confusion and various other reasons which I
not enumerate in this memorandum. There are of course a certain
limited number of war time exceptions which are justified only during
the emergency. I told Mr. Markham I was a firm believer in the
principle of private industry honestly conducted.
When Mr. Markham handed me Mr. Crowley's letter of July 6
-2To:
154
July 9, 1943
Dr. Wilson
Mr. Moffett
Dr. Williams
stating he had now found an executive who has the background, train-
ing and experience to take over the responsibilities of operating
head of this company and that he is going to take the liberty of suggesting his name to the new Board of Directors, I, of course,
acquiesced. That, however, is not the salient point here. The point
which gives me the gravest concern is that with avowed and permanent
Government co-ownership, the effort to attain the objectives indicated
would, in my opinion, be unsuccessful and would result in great detriment to the valuable public property represented by General Aniline
& Film Corporation, and that such a venture would be actually harmful
to the strategic objectives indicated.
One handicap in proceeding as an avowed government operation
would be that all the company's commercial dealings would undoubtedly
be subject to political scrutiny, causing delays incident to the red
tape of our Government and also in the foreign countries involved
and placing the company at a great disadvantage from the standpoint
of securing prompt decisions and efficient operation. The highly
technical, highly competitive and complicated nature of this business
is not understood by the average layman.
I would earnestly recommend that rather than undertake the
operation Mr. Crowley has in mind with the company avowedly represent-
ing the U. S. Government, either permanently or for a long period of
time, it be undertaken with the company in its present status, possibly
along the lines of Mr. Crowley's already published statement to the
effect that at the termination of the emergency the company will be
sold and the Government will step out. I feel that this would
definitely encourage private enterprise here and abroad to have commercial dealings with the company and allay, to a considerable extent,
their reluctance to deal with an enterprise which would always be
subject to possible changes in domestic or foreign policies.
effectively This approach, through while the company permitting for the the period Government of the to emergency, operate would
be much less apt to hamper the Government's making the commercial
contacts and dealings vital to the success of the undertaking.
I assume this policy must be accompanied by some form of Government subsidy to satisfy the rights of the minority American stock- bonds
holders of General Aniline and to take up the $16,750,000 in the
outstanding and in many other ways to provide substitutes for
usual incentives of private industry.
For the reasons noted above, Mr. Crowley is quite correct in in
his assumption, as expressed to me by Mr. Markham, that mind I cannot under
all sincerity approve the method of approach he has in
the new policy,and Mr. Crowley's decision to accept my resignation
as the operating head of this company is entirely order.
155
To:
Dr. Wilson
Mr. Moffett
Dr. Williams
-3-
July 9, 1943
Mr. Crowley asked whether or not I desire to continue as a
director or as an officer for such convenient period as may be desired
after the meeting next week. My personal desire is simply and solely
to render the best service in my power to my Government in this war
emergency in any capacity that I am best fitted, but in view of my
convictions as expressed above, he may not wish to continue me in
any official capacity here. However, I will be very happy to discuss it with him if he so desires.
R. E. McCONNELL
156
GENERAL ANILINE & FILM CORPORATION
230 PARK AVENUE
NEW YORK
July 12, 1943
To the Stockholders:
Consolidated income accounts of General Aniline & Film Corporation for the three
months' periods ended June 30, and March 31, of 1943 and 1942, are reported as follows:
Three Months Ended
Three Months Ended
March 31st
June 30th
(in thousands of dollars)
Net Sales
Cost of Sales and Expenses
Net Profit from Operations
$10,124
$12,841
$10,890
11,738
7,716
9,780
8,288
$ 3,909
$ 2,408
$ 3,061
$ 2,602
$ 3,985
$ 2,393
$ 3,055
$ 2,627
250
247
250
247
$ 3,735
$ 2,146
$ 2,805
$ 2,380
407
123
$ 3,735
$ 2,553
$ 2,928
$ 2,380
2,552
1,452
2,011
1,500
$ 1,183
$ 1,101
$ 917
$ 880
$ 464
$ 489
$ 448
$ 483
$1.62
$1.50
$1.25
$1.20
Debenture Discount and Expense in 1943
-
Profit on Sale of Securities
Provision for Federal Income and Excess Profits
Net Profit (See Note 1)
Depreciation deducted in computing Net Profit
Net Profit per share of Class A Stock
25
(6)
(15)
76
Interest on Debentures including Amortization of
Taxes-Estimated
(in thousands of dollars)
$15,647
Net of Other Income or Charges
Net Profit before Taxes
1942
1943
1942
1943
Net Profit per share of Class B Stock
.150
.162
-
.125
.120
NOTES:
1. The increase in profits before taxes (1943 over 1942) has not resulted in a proportional increase in net
profit after taxes because of adjustments in taxes due to allowable losses and profit on securities.
2.
The foregoing statement is subject to year-end adjustments and review by independent public
accountants and is partly estimated for the second quarter of 1943.
3. Profits for 1943 and for the second quarter of 1942 on Government contracts and sub-contracts are to
subject to possible adjustment through renegotiation by the Government. It is not possible
determine the effect of such renegotiation at this time.
4. For comparison purposes, earnings for 1942 have been restated to conform to 1943 accounting classifications.
5. The provision for taxes in 1943 is based on the 1942 Revenue Act. Provision for taxes in 1942. 1942 as
originally computed has been adjusted to reflect liability incurred under the Revenue Act of
ROBERT E. McCONNELL, President
157
July 13, 1943
Dear Mr. McConnell:
I have just learned that you are resigning your
positions as President and Chairman of the Board of
General Aniline and Film Corporation, after having
served in those capacities since March 16 of last year.
Mindful of the fact that at my insistence you took
on the job of running the affairs of this important
German-dominated industrial enterprise when the Govern-
ment seised it, I could not let the occasion pass without
indicating to you my appreciation for the yeoman service
you performed.
I realised full well that the task of operating
that company successfully, stripped as it had been of
much of Its executive personnel when you entered the
picture, would not be an easy one. Furthermore, it was
essential that the company be reorganised in such fashion
that it would make the maximum contribution to the war
effort. Your problem was complicated by the necessity
of making very substantial changes in the personnel you
inherited, in order that the national security might not
be endangered by a continuance of potentially disloyal,
and thus dangerous, individuals in responsible positions
with the company.
It has been with a feeling of pride that I have
followed the activities of the company under your
guidance, not only during the period when you were
responsible to me as Secretary of the Treasury and were
operating under the general instructions I gave you at
the time of your selection, but since then. The results
you have achieved have amply justified the confidence that
was reposed in you, and both you and I, but particularly
Copy to Mr. Thompson,
Memo and Copy in Diary.
158
Mr. McConnell,
2.
you, may look back upon your period of service with a
Certainly it
great deal of personal gratification.
was a difficult job done extraordinarily well.
I should like very much to have you come in to
see me at your earliest convenience.
Sincerely yours,
(Signed) M. Margonthes, Jr.
Secretary of the Treasury
Hon. Robert E. McConnell
Room 1548
230 Park Avenue
New York, N.Y.
JJO'C.Jr/Lsw
7-12-48
159
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
Secretary Morgenthau
July 10, 1943
FROM Mr. O'Connell
Bob McConnell called me today and told me that
he has resigned as President and Chairman of the
Board of General Aniline and Film Corporation. The
annual meeting of stockholders (already adjourned
twice) will be held next Tuesday, at which time a
new Board of Directors, fifteen in number, will be
elected. McConnell did not give me the names of
the new members, but indicated that the complexion
of the Board does not, so far as he is concerned,
differ materially from that of the one we heard about
several months ago.
In addition to the proposed change in the make-up
of the Board, I gathered McConnell has been somewhat
at odds with the Alien Property Custodian with respect
to some matters of general policy in the operation of
the Company. He referred specifically to what I understood to be a plan of disposing of one-half of the
stock of General Aniline to several South American
interests (apparently governments). This proposal is
still somewhat tentative, but in any event l'CConnell
has been very strongly opposed to it.
Attached is a form of letter which you may wish
to send to Mr. McConnell. You will note that in
addition to giving him a few bouquets the letter
suggests that you would like to see him.
Attachment
Doer
160
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 13, 1943
Secretary Morgenthau
TO
Mr. White
FROM
Subject: British Treasury Personnel.
Sir Frederick Phillips is now a Joint Second Secretary of
the British Treasury. A Joint Second Secretary, of which there
are at least three at the present time, is exceeded in rank only
by the Chancellor of the Exchequer--Sir Kingsley Wood--and by
the Permanent Secretary and Head of H.M. Civil Service--Sir
Richard V. N. Hopkins.
Phillips has received two promotions since he first came to
the United States in 1940. At that time he was still an Under
Secretary, a position to which he had been appointed in 1932.
By June of 1941, he was a Joint Third Secretary in charge of
finance and today he holds the position of Joint Second Secretary.
S. D. Waley was appointed an Under Secretary in 1939. He is
in charge of the overseas Finance and Economic Policy Divisions
and, as such, would appear to be responsible to Phillips. (There
does not seem to be any Joint Third Secretaries at the present
moment).
T. K. Bewley, as a Principal Assistant Secretary, was one rank
lower than Waley and had charge of three sections under him. They
are: America, British Empire, Far East; Economic Policy; and
Exchange Control.
A. T. K. Grant, who is now here working wi th Phillips, was
listed in 1941 as a Principal (2 ranks lower than Bewley). He
was listed as working on exchange control in Bewley's section
under Waley.
E. W. Playfair is also in Waley's section. He was in the
United States with Phillips in 1941 and is described in the
Organization Chart for that time as an officer on special duty.
J. M. Keyne s is a special advisor. He is listed as a member
of the Chancellor's Consultative Council.
Lord Catto has the title of Financial Advisor to the
Chancellor of the Exchequer.
Treasury Department
161
Division of Monetary Research
Dec. 11, 1943
Date
19
To: Miss Chauncey
For your files. Mr. White dis-
.
cussed this matter with the Secretary
orally (date unknown). He kept the memo
because the matter wasn't closed.
L. Shanahan
MR. WHITE
Branch 2058 - Room 214
162
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 13, 1943
TO
FROM
Secretary Morgenthau
Mr. White
Subject: Repayment of R.F.C. Loan by the British.
Sir Frederick Phillips in January inquired what our attitude
would be toward the repayment by the British Government of the
loan received from the R.F.C. in July 1941.
As of the close of February, the British owed a balance of
$360 million to the R.F.C. on the loan. A summary is given below:
Total amount paid to the British Government
by the R.F.C. on the loan
$390 million
Deduct the amount of principal repaid by the
British Government through February 1943
30 11
Balance due from the British Government to
the R.F.C. as of the close of February
1943
$360 "
Collateral behind the loan consists of U.S. securities and
direct investments in the United States, the value of which the
R.F.C. estimates is substantially in excess of the amount of the
loan.
On March 2, 1943, we placed the question of repayment before
the Interdepartmental Committee on the Dollar Position of the
United Nations. We invited a representative of the R.F.C.
Mr. Mulligan who handles the loan attended the meeting. He later
reported that he had discussed the question with Secretary Jones
and that Secretary Jones had no objection to the repayment of the
loan.
The Subcommittee, consisting of representatives of B.E.W.,
Lend-Lease, State, War and Treasury, was unanimously opposed to
the repayment of the loan, at least during the immediate future.
The Committee felt that repayment would almost certainly have
unfavorable political consequences. Lend-Lease particularly
was greatly concerned about the attitude of Congress toward the
British and the probable adverse repercussions of repayment on
their requests for an extension of the Lend-Lease Act and for
funds to carry them through fiscal year 1944.
163
Division of Monetary
-2-
Research
The Subcommittee members were also unanimous in their
opinion that if repayment were made by the British the dollars
used for this purpose would have to be counted by this Government as part of Britain's available cash reserve.
On March 20, , 1943 we recommended that if you approve the
recommendation of the Subcommittee be submitted to the Cabinet
Group upon the return of the Vice President to the United States.
This has never been done, however.
SEC
R E
164
JUL 13 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 avail-
ability of cargo for July.
The inventory of materials in storage as of
July 1st was 569,070 tens or 67,806 tone less than
the June 1st inventory. Production scheduled for
July also shows a decrease of 64,647 tons as compared with June.
Yours sincerely,
(Signed) H. Morgenthau, Jr.
The President
The White House
HFRiley/kb
7-10-48
By Messenger Sturgis 4:00 p.m.
Copy to General J. H. Burns
Complete file in Diary.
TREASURY DEPARTMENT - L.S.S.R.
MATERIALS ATAILABLE FROM STORAGE AND PRODUCTION DURING JULY. 1943
PRIORITY CAROGES
TO PORT AREAS
STORAGE
COMMONITY
AGRICULPURAS MACHINERY
AND IMPLEXENTS
AUTOMOTIVA EQUIPMENT
AND PARTS
CERMINALS
99
940
17,472
5,968
632
PRODUCTS
1
3,554
3,500
7
1,604
195
195
1,877
9,136
58
1,877
86,379
4,418
29
20
861
244
1,205
183,129
34,044
186,173
14
14
196
ST6
772
460
154
176
164
330
330
800
47,283
4,363
EQUIPMENT
IMMUSERIAL MACHINERY
AND EQUIPMENT
LEAD AND LEAD ALLOTS
MEDICAL SUPPLIES
NICKEL AND NICKEL
TOTAL AYAILANTE
SPECIFIED TO
DATE FOR JULY
1,039
18,083
7,886
CONSTRUCTION MAGHIMERY
GRAPHIES PRODUCTS
3,260
7
GLOTHING AND TRITILES
GOPPER IN VARIOUS FORMS
TERRO-ALLOTS
FORMITURE AND OFFICE
JULY
1
274
MARINOS
BRASS AND DRASS
PRODUCTION
JULY 1. 1943
35
3,800
500
500°
38
NON-FEEROUS METALS.
OTHER
PAPER AND PAPER PRODUCTS
PEASTICS
2,471
6,190
2,688
6,190
991
- NO. 2
PRIORITY GARSORS
TO PORT ARBAS
STORAGE
COMMODATION
RUBBER
STEEL, ALLOT & SPECIAL
STEEL, CARBON
STEEL, PIPE AND TUBING
STEEL, RAILS
TIE PLATE
JULY 1. 1043
6,818
176,395
76,701
83,879
17,801
1,029
SING
TOTAL
.
569,070
PRODUCTION
DURING JULY
TOTAL AVAILABLE
SPROIFIND TO
DATA FOR TOY
1,500
2,686
5,210
1,540
17,801
1.120
18,094
181,794
88,908
90,570
17,801
1,029
1.120
90,644
689,714
38,136
11,376
5,399
12,207
7,001
1.120
In addition, all available tamage applieable to the 011 Refinery Program is classed as priority
earge for prompt shipment to parte.
16
NOT TO BE RE-TRANSMITTED
COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET
OPTEL NO. 230.
Information received up to 7 a.m., 13th July, 1943.
1. NAVAL
One of H.M. Submarines sank two ships East of CORSICA on
the 11th.
2. AIR OPERATIONS
WESTERN FRONT. 12th. Fighters attacked Transport targets
in Northern FRANCE, damaging 10 locomotives, several barges and a minesweeper
and destroying one German Bomber. Two Fighters missing.
12th/13th. Aircraft despatched: TURIN - 295, Seamining - 22,
Leaflets - 19, Intruders - 18. No reports yet from TURIN operation but remaining
Bombers returned safely. About 20 enemy aircraft operated over East coast and
5 over KENT, one destroyed by a Mosquito. H.E. Bombs on GRINSBY and CLEETHORPES
caused considerable damage to property. Fatal casualties so far reported:
GRIMSBY - 15, CLEETHORPES - 12.
SICILY AND SOUTHWEST ITALY. 10th. Liberators dropped 63
tons on CATANIA Railway centre. During a sweep over WESTERN SICILY, 46 Lightnings
destroyed 10 enemy aircraft and damaged 9. One Lightning missing.
11th. 910 Fighter Sorties flown in co-operation with our
landing. During these operations about 150 enemy aircraft were met. Enemy
casualties: 26, 4, 14. Allied - 6 missing. Heavy bombers dropped 100 tons
on airfields at VIBO VALENTIA and REGGIO.
168
July 14, 1943
8:50 a.m.
FINANCING
Present: Mr. Bell
Mr. Haas
Mr. Murphy
Mr. Tickton
Mr. Lindow
H.M.JR: I want to talk about this question of
rates. It seems to me that that is the thing that is
the big thing in the minds of the Fed. I wonder if
somebody wants to give me the argument on why we should
lower the rates rather than extend the yearage.
I mean, instead of going out, say, ten-twelve, maybe
eight-nine at one and three-quarters. Is there anything
holy about not changing the pattern of rates?
You always give me a memorandum to work on and I
haven't got one.
MR. BELL: You had quite a book.
H.M.JR: Excuse me?
MR. BELL: It is ten days or two weeks old.
MR. HAAS: We would write the same way now as we
did then.
H.M.JR: What is it?
MR. HAAS: It is all in a black book.
H.M. JR: I don't have any recollection. Anyway, you
don't need the book now, do you?
Go ahead.
169
-2
MR. HAAS: No, sir.
I think the problem is this and the difficulty is
this, that the Federal Reserve has taken upon themselves I mean, taking them at their own word - to maintain
what they call a pattern of rates.
What they say is they have taken a commitment to
maintain a pattern of rates and their concept of this
pattern of rates is a curb which is rather rigid.
I don't think that you ever insisted that they
maintain a rigid pattern of rates. You remember when
you first spoke about it you said you were willing to
have it fluctuate up and down.
H.M.JR: At the time I was interested, it didn't go
up.
MR. HAAS: That is right, and your interest in this
so-called pattern of rates was that the war would be
financed at a reasonable rate of interest. But there is
quite a little education going around that the market
talks about a pattern of rates and the last Federal
Reserve bulletin had a paragraph in it describing rather
specifically, the so-called pattern of rates, and the inference that it would be maintained rigidly. We talked
it over with Dan and they agreed to cut that out.
But now if you want to maintain that rigid pattern
of rates, then you are going to get into trouble and
that is the trouble we are in today.
The problem will solve itself if you let the two's,
for example, move up a little bit. But to maintain the
two's - I mean this rigid pattern of rates - they are
just pushing out from the bills - they are pushing over
into this new security, a nine-month bill at threequarters. And the net result of that is it is changing
the posted rate. They are arguing to change it from
three-eighths to a half. This proposal essentially
changes it from three-eighths to three-quarters, so it is
really a substitution.
170
-3H.M.JR: I mean, is a three-months at three-eighths
the equivalent of a nine-months at three-quarters?
MR. HAAS: No, but who will hold a three-eighths
at all over three-quarters if you have a posted rate?
You are substituting three-quarters for three-eighths.
H.M.JR: Which is cheaper for the Treasury?
MR. HAAS: The three-eighths.
H.M.JR: Is it?
MR. BELL: It is three-eighths for a year, not three
months. It is on a basis of three-eighths for a year.
MR. MURPHY: And posted rate - it is one-day money,
then, for the person that holds the bill.
H.M.JR: The thing that I want explained is this after all, the Federal Reserve with seven billion dollars'
worth of securities is not a disinterested party.
MR. HAAS: Their interest is-H.M.JR: But what is it to them? I mean, you are
asking the biggest holder - it would be just as though
the Army was going to let a contract and they say "Who
is the biggest contractor we have? General Motors.
If
So they ask their advice about what price to put on,
they are so big. Why are they so interested? How do
they profit by holding the rates where they are?
(Mrs. McHugh entered and handed the Secretary
Mr. Haas' memorandum on financing, dated June 10, 1943.)
H.M.JR: June 10?
MR. HAAS: I brought that up on the farm. It
covers all the financing from that date right on through
the drive.
(Mrs. McHugh left the conference.)
171
-4MR. BELL: I don't think the Federal is looking at
this matter from the standpoint of earnings in their
portfolio. I think there has been quite a bit of talk
around about changing this rate pattern a little, and
there has been a sort of a lack of interest in the last
month in Treasury bills.
I don't know, maybe the Federal is partly responsible
because certainly they talk a lot. But 1 was asked this
morning by a National City Bank man if there was going
to be a one percent certificate, because they had heard
around that the rate was going to change from the seven-
eighths to a one percent certificate. I said I hadn't
heard anything about it. I didn't see why we should put
out one percent when we could put out a seven-eighths.
I think they have argued that there ought to be a
squeezing a little here of this short-term rate. You
go from three-eighths to two percent in ten years; you
go from ten years to twenty-one years for a half percent.
And they claim that that ought to be - that the rate
between short-term and long-term ought to be squeezed
up a little, and they ought to get away from this shortterm three-eighths percent; that it would be better from
the banking system and better control. I don't know
how they would control it better, but better for con-
trolling credit.
H.M.JR: One thing I agree on with them is that we
should sell a higher proportion of long-term issues.
MR. HAAS: That is all a part of the - I would say
this is a very intricate and difficult situation, but
it is all a part - if they are allowed to make this
move, then it seems to me they have got to go towards
higher rates. It is difficult to get out. It is
funny - the reaction of different people. When Shields
heard this he almost blew up. Off hand, you would think
this would help, but New York City- - he says all the interbank deposits - a great portion of them - will move right
out because with a three-quarters rate the people in the
country will buy that security and the New York bank money
market will be destroyed or practically eliminated.
172
-5-
H.M.JR: May I interrupt you? I think that before
I see whatever bankers are coming at eleven tomorrow there are some coming, aren't there?
MR. BELL: Mr. Hemingway invited the whole committee.
Tomorrow Smith and Charlie Spencer, outside of the
committee, will be here. Harrison, Edwards, and Burgess
couldn't come.
H.M.JR: What about Potter?
MR. BELL: Potter is on the full committee. The
whole committee has been invited.
H.M.JR: What I would do is just as soon as they get
here I would let them talk to these boys and let them
give it to them pro and con before they get in to see me.
MR. BELL: They ought to read this memorandum.
H.M.JR: But we ought to have one also, answering.
We don't have to do Mr. Baruch today; he is sick. So
that is postponed a week. He wanted to come tomorrow but
I thought with this thing on I would just as soon have it
a week from today. They phoned last night that he wasn't
feeling well and wanted to postpone it, so I postponed
it a week.
I like to look ahead. Supposing we go ahead with the
Fed and get out a ten or twelve-year two - that is what
they are talking about, isn't it? Then what do we do the
next time, you see?
MR. HAAS: That problem isn't so bad. The only
thing about the ten or twelve-year two is, do you want you made a statement of policy with regard to investment
of banks, that you wouldn't sell anything over ten years.
I think that was a good policy. I would stay rigidly
by that. I think postwar and now - at first you got
some reaction, but all of it has been favorable since,
even among bankers. I don't think you ought to change
that.
173
6-
MR BELL: I think it is a little unfortunate that
it has gotten around throughout the country that this
pattern of rates is rigid, but you can't help it. When
we went into it we said that it had disadvantages, but
we had to take that chance.
H.M.JR: Look at the hammering I got when I forced
that two on them.
MR. BELL: That two is one of the best bonds, now.
H.M.JR: Is it?
MR. HAAS:
and the two and a quarter - remember
the fight? They forgot all about that.
MR. BEL L: I think it is unfortunate that this
market has moved up and this new line has more or less
been established. That is one reason I wanted to get
away from two percent bonds and give the banks the idea
they had to take some other coupon securities. But I
don't think we ought to change this pattern of rates
very much. We should extend this two percent bond six
months, or something like that, but not go to ten or
twelve years on a two percent bond.
H.M.JR: Look, Dan, supposing we were a commercial
business and we were able to get a little bit more for
our product; we have to adjust ourselves to the supply
and demand. Now, the market has gotten better and we
don't follow it, which I think is abnormal.
MR. HAAS: One of the reasons this market is acting
as it is - if you are sure that the two percent market
will stay rigid and you won't lose any money on it, then
the tendency is for you, instead of buying three-eighths
or seven-eighths, is to move out there and say, "Why, That a
two percent is just as safe as a three-eighths."
is what the market is doing. It is moving out.
MR. BELL: Sure, they can take a chance.
174
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MR. HAAS: And they think there is not much chance
because everybody is talking pattern of rates. We told
the Fed. I told that to Sproul - "Don't be talking that." "
But they do.
H.M.JR: On the other hand, what you say is good if
they have confidence in the thing.
MR. LINDOW: But the short end of the market is
destroyed by that. Everybody loses interest in the three-
eighth bills - that is, if this follows through.
H.M.JR: I don't care.
MR. LINDOW: Then you go out to the certificate
and then you lose the - the natural consequence is to
lose interest in the certificate and move on to a longer
security, and the function of the various terms, and the
different rates in relation to those maturities is lost.
It gets so that all securities have the same term in the
eyes of the market.
H.M.JR: What do you mean "term"?
MR. LINDOW: The man says he is just as willing to
buy a two percent bond for a six-months investment as he
is to buy a six-months investment because he feels
perfectly confident that he won't have any possibility
of a capital loss involved.
H.M.JR: That is good. What Lindow says makes me
go the Federal Reserve way. (Laughter)
(The Secretary left the conference temporarily.)
H.M.JR: I have got a tricky suggestion which I want
you to think about. These boys - it kind of looks to me they have kind of gone on a sit-down strike on the bills.
The bills are the best instrument for the banks, you
know - everybody says so. My gawd, they sold it to me
hard enough.
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MR. BELL: They are, at the present time, but
certificates would be just as good if you eliminated them
and put them on the same basis.
H.M.JR: Let me give you a little suggestion. You
have got a billion six coming due-MR. BELL: August 1.
H.M.JR: You are going to refund - pay them off in
cash. Right?
MR. BELL: Yes.
H.M.JR: All right, let's go another way. All right,
they say we have got to lengthen them out; don't let's
give them another certificate. Let's give them, maybe,
a note.
MR. HAAS: The certificate market is still very good.
H.M.JR: True, but if the certificates and the bills-MR. HAAS: Warren's suggestion is to forget about the
two's altogether. what they are worrying about, and-H.M.JR: But don't push this other thing aside.
MR. HAAS: I am not. I was bringing it right back
to your point, that we would do the thing for a period,
now, on certificates and notes. That is where I was
bringing it back.
H.M.JR: Certificates-MR. HAAS:
and notes. Forget about the two per-
cent bond. Let it adjust itself. Let it go on so that
the people know there is no rigidity.
H.M.JR: Let what go?
176
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MR. HAAS: The two percent area which is causing
trouble. Just let it ride. It will go up and it will
come down. It takes away the concept of this rigidity
which is giving all this trouble.
H.M.JR: What I was thinking of, supposing, instead
of a two billion six of certificates, we got out a
straight bank issue.
MR. BELL: Notes, you mean?
H.M.JR: Well, notes - yes, maybe.
MR. MURPHY: You mean an issue offered only to banks?
H.M.JR: Yes. I am just thinking. We are going to
go all around the lot, you know.
MR. BELL: You could do that and it would work very
well. The banks would like it because of the little
higher rate. But, on the other hand, the certificates
are good and we have got four issues of those out now.
H.M.JR: How much each?
MR. BELL: They run from a billion and a half to two
billion - no, one is two and a half and we want to get
them all on the basis of about two and a half billion,
plus your drive certificates. The one in April is five
billion two and the one in December is three billion eight.
H.M.JR: You wouldn't have a certificate in the
September drive if you did it in August, would you?
MR. BELL: I would like to see a certificate - either
a certificate or a short note - in the September drive.
H.M.JR: You come along with two billion six in
August; you don't want another one in September.
MR. MURPHY: The ones you put out in August would go
principally to banks.
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H.M.JR: You don't know.
MR. BELL: The banks hold the billion six, now. In
September in your drive you are going to have a lot of
people going around to corporations to get them to invest
in drive securities. They will say, "We don't want a
two percent bond or a long note. We want a short certificate." That is where your corporate money ought to go.
Eccles doesn't want a certificate. He wants one and
a half percent note, wasn't it?
MR. MURPHY: That is correct.
MR. BELL: Corporations want something they can get
out of.
H.M.JR: Not when they can get a C Tax Note.
MR. BELL: They don't like that either.
MR. TICKTON: They bought nearly two billion dollars
of certificates in the April drive because they liked it.
H.M.JR: How can you have both a certificate in
August and one in September?
MR. MURPHY: They will be in different markets.
MR. TICKTON: In September you have a canvass job
where they go to each corporation and ask them to invest,
and corporations will take the money out of their free
funds and therefore want something short like certificates.
We didn't have many corporations coming in between times
on any of these certificates, but in April we got a couple
of billions.from the very corporations that didn't come
in in previous months.
H.M.JR: Well, now, you are co unting on a billion
dollars extra money by increasing your bills. Now, that
is out. You said you would increase it to a billion two.
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MR. BELL: In September. We don't have to cross
that bridge yet.
H.M.JR: The chances are that is out.
MR. BELL: Then all you have to do is increase your
banking financing in October.
H.M.JR: You are all right if you take two billion
six in August - you are all right to September?
in.
MR. BELL: I am all right up until new money comes
H.M.JR: You are? How comfortable a margin?
MR. BELL: Go into September with three billion
three hundred million - a little over three billion dollars.
H.M.JR: How much did they fall short in war expendi-
tures in the fiscal year ending July 1?
MR. LINDOW: About two billion dollars.
H.M.JR: And how are they running now, Dan?
MR. BELL: They are running a little low right at the
moment - under the June figures. But then, that might
be just the new money getting started and a little slow.
H.M.JR: Now, Tickton, at Cabinet they mentioned
the fact that the English have been cancelling some
contracts.
MR. TICKTON: The English have been?
H.M.JR: Yes. I wish you would find out.
MR. BELL: Harry White ought to know. We cancelled
some contracts - shipping contracts - which they were
worried about.
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H.M.JR: This came unexpectedly and I gather they
hadn't
do it. told anybody in advance that they were going to
MR. BELL: Typical.
H.M.JR: The talk ran that the first thing they knew
they had some cancellations of contracts and nobody knew
anything about it. Hopkins was looking into it, but you
might inquire. Nelson's office would know. You have
got contracts over there.
MR TICKTON: It came from Nelson's office?
H.M.JR: No, somebody just mentioned it at Cabinet.
I don't know who. But he would know, wouldn't he?
MR. TICKTON: That doesn't always follow but we will
find out.
H.M.JR: General Somervell's office would know,
wouldn't they?
MR. BELL: Lend Lease ought to know.
H.M. JR: Yes, that is right.
MR. BELL: I should think Harry would have had notice
of that if they are cancelling those dollar contracts.
H.M.JR: Ask Lend Lease, they would know.
The thing still isn't clear to me. I can see from
listening to you fellows the advantages of getting this
thing so stable that they think that a ten-year bond is
just as safe to them as a one-year certificate, and therefore they are going out. I don't know why that isn't a
healthy thing.
MR. LINDOW: I would like to make some comments
on that.
180
- 13 -
One of the principal causes for the difference in
rates between, say, three-eighths for three-months money
and two percent for ten-year money is the fact that the
three-months money, the man knows that he has practically
no chance of any loss of his capital.
H.M.JR: On which one?
MR. LINDOW: On the three-months money - short-term
money. In the case of the ten-year bond, he doesn't
know but what interest rates will change materially before the course of that bond is run, so he charges a
higher rate to you. That is what it amounts to. He
charges you a higher rate because he has some risk involved on that account. And that fluctuation may be
fairly severe if you have a substantial increase in
interest rates somewhere along the line.
Now, this is an advantage to you because you get you can borrow for short-term periods at very low rates.
The only time you have to go up into two percent or two
and a half is when you have a longer term security and
people take the extra risk.
Now, it seems to me you lose all of the advantages
of that if people get so confident in the stability of
the market that they say there really isn't any extra
risk in a two percent bond.
H.M.JR: I get all the what?
MR. LINDOW: You lose the advantages of this situa-
tion if they get so confident in the stability of the
market that they are just as willing to take a two percent bond as the three-eighths. The whole risk point all of the risk disappears.
H.M.JR: Oh, boy. What you are saying is, scare them,
and then they are going to buy short-term stuff. I was
brought up myself, and my associates were brought up, to
do everything so they would buy long-term stuff.
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MR. LINDOW: Not scare them - this is a perfectly
natural thing in the market. If there is uncertainty
it has to be paid for. It isn't a question of scaring.
MR BELL: You are just paying a little higher rate
for that ten-year risk.
H.M.JR: My gawd, with the President of the United
States saying to me - and I don't know how many other
people - don't ever breathe this - "Well, if inflation
keeps up I don't know whether I am going to buy my grand-
children any more bonds. Of course, he was kind of
kidding, but trying to scare me. I told him he had
better not scare the public.
So this question of stability - before I throw it
overboard I am going to think about it very carefully.
Now let me just, as a little ray of sunshine on the
price horizon - there is just a little falling off on
prices.
MR. HAAS: A rollback.
H.M.JR: A little bit. Now, what is the Treasury's
program for September? Just give it to me. I am going
to put down "Treasury" and "Fed." What are your recommen-
dations?
MR. BELL: We discussed this and I don't know whether
there was unanimity on this or not. I said that a seven-
eighths percent--
H.M.JR: You have been associating too long with
Henry Murphy. That is a long word. (Laughter)
MR. BELL: The seven-eighths percent certificate-H.M.JR: This is the Treasury?
MR. BELL: This is mine. I think these fellows agree.
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H.M.JR: How much?
MR. BELL: I just put it in the basket, not how much.
MR. LINDOW: We figured on three and a half billion
from the seven-eighths percent certificate.
H.M.JR: This is very tentative. Does the red want
any certificates?
MR. BELL: They want a one and a half percent note.
H.M. JR: So the Fed wants nothing there.
MR. BELL: We don't want a note. We haven't a note
in the picture. The Fed wants a note - four or four and
a half at one and a half percent.
H.M.JR: It would be for-MR. BELL: Four to four and a half years.
H.M.JR: How many billions?
MR. BELL: They didn't give the figure.
H.M.JR: Would it be fair to say three and a half?
MR. LINDOW: I don't think you could make that much.
MR. TICKTON: Maybe one and a half or two.
MR. BELL: Two percent bond. I would make it eight-
ten years.
H.M.JR: This is Treasury now?
MR. BELL: Yes.
MR. LINDOW: We didn't have a two percent bond in
our recommendations because we were turning--
183
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H.M.JR: Let me put this down first. How many
billions?
MR. BELL: I didn't have any amount.
H.M.JR: How much? I have got to get it down.
MR. LINDOW: We sold about three billion dollars
outside of the banks in April. I suppose you could
put down--
MR. TICKTON: Probably less because your insurance
companies picked up a lot on switches.
H.M.JR: How much?
MR. LINDOW: Two and a half.
H.M.JR: I have to do your homework. (Laughter)
Two percent, eight-ten years - what do you want?
MR. LINDOW: We wanted to leave out any marketable
issue in that area because of the leakage to banks. Our
program would have covered tax notes and the two and a
half percent bonds.
H.M.JR: Instead of the two percent bond, what do
you fellows want?
MR. BELL: They don't want anything in that area.
MR. LINDOW: Nothing in that area.
H.M.JR: What does the Fed want?
MR. BELL: The Fed wants a two percent bond. They
would put it out about ten-eleven.
H.M.JR: Fed, ten-eleven - and how many billions?
MR. BELL: About the same amount.
184
- 17 H.M.JR: Two and a half billion?
MR. BELL: Same amount.
H.M.JR: What comes next?
MR. BELL: Two and a half percent bond.
H.M.JR: That is us?
MR. BELL: Yes.
MR. LINDOW: Two billion dollars.
H.M.JR: How long?
MR. BELL: March '65-'70.
H.M.JR: How many years?
MR. BELL: That is twenty-two--twenty-seven.
MR. LINDOW: Four billion dollars, Mr. Secretary.
H.M.JR: What does the Fed want?
MR. BELL: The same thing only '64-'69.
H.M.JR: Twenty-two--twenty-seven. Now, I have got
ten billion dollars for us.
MR. TICKTON: E, F, and G Bonds also.
H.M.JR: E Bonds?
MR. LINDOW: Our figure is four point three billions.
MR. BELL: That is a challenge. The Fed wants
the same thing - F and G-MR. LINDOW: One point four billions for F and G
together.
185
- 18 -
H.M.JR: And the other is the same?
MR. BELL: Fed said either eliminate it now or
eliminate it right after the drive. Then savings notes
and the Fed wants those.
MR. LINDOW: Three billion.
H.M.JR: What are those - C Notes?
MR. BELL: The tax notes we changed to Treasury C.
That is the last one.
H.M.JR: How much does that total.
MR. LINDOW: Our total was sixteen billion.
H.M.JR: Does this total sixteen billion?
MR. TICKTON: That will be about eighteen billion.
H.M.JR: We won't get those E Bonds.
MR. BELL: That is what is worrying Ted. He is
worried about the seven billion dollar individual quota.
It looks as if it would--
H.M.JR: It would look nice to drop out the F and
G after we have been talking about it.
MR. BELL: I am in favor of dropping it out on the
15th of October if you are going to drop it out.
The too
MR. HAAS: We didn't have the two in. wi thout it,
Mr. Secretary, x that/sixteen * but if you decided to put
a two in, then we would readjust our estimates.
H.M.JR: You had better put the two in and readjust
it on the E. (Laughter)
MR. TICKTON: That is a good point.
186
- 19 -
MR. MURPHY: And readjust the seven.
MR. BELL: Ted would like to have a quota, if they
are going to have one, of five and a half billion dollars
for individuals.
H.M.JR: We have talked seven; we have to stick to
seven.
MR. LINDOW: You would never be able to explain it
to the press, Mr. Secretary.
H.M.JR: I am not going to try to.
MR. BELL: You have to have a conference on this
quota business. It is a very touchy thing.
H.M.JR: You start it. The last time I didn't have
to get in on it at all. Will you start it?
MR. BELL: I have already started it, but I think
we have to give it some real consideration because you
see you have got your percentages going up on Wes' chart -
what is it - sixty-five percent of the savings this
period? And you have to have seven billion in order to
get sixty-five percent.
MR. LINDOW: We made sixty percent in the first four
months. You can't go backwards.
H.M.JR: My gawd, you have got to go up. I spoke
to Byrnes. He said he had my charts right on the top
of his desk when I was over there. In other words, he
is serving notice - "I am going to hold you to it.
MR. BELL: If you don't make it by two or three
hundred million, it is a failure.
MR. HAAS: They will make it. What is worrying me
about this whole thing is not the same; it is how the
organization is coming. I was thinking, Mr. Secretary,
why don't you have a chart in your Chart room of the
187
- 20 -
United States and say this area you colored is an organization - house-to-house organization here completed until you get the United States covered, or mostly
covered.
H.M.JR: You mean as to promises?
look.
MR. HAAS: No, you have somebody go out and take a
MR. BELL: Completed organizations. Now, in New
Jersey - I think probably New Jersey is probably the only
one that is really completed. They have every county
organized down through the grass roots.
H.M.JR: I think that is a good idea. I would start
such a chart.
MR. TICKTON: I have readjusted these estimates.
Take E Bonds down to three billion. This is in the realm
of not what we would like, but what we might have a chance
to get. And the difference between the Treasury estimate
and the Fed estimate would be that we would put three
billions - I think we would confidently expect three
billions in the seven-eighths percent certificate and
two billions in the one and a half or one and a quarter
percent note.
In other words, a difference of maybe a billion
dollars on the prospect of our ultimate sales to corporations because the note is less attractive to the type of
funds that corporations have. We might adjust those
roughly, or more finally, say, between now and next time.
H.M.JR: What I want you to do when you start work-
ing with the Fed - which you haven't done - if this is
your Bible, then run this, and then have a column for
them and keep adjusting it as we get together. We have
to know.
MR. BELL: You also have to make this goal sixteen
billion in order to keep your percentages on the up grade.
188
- 21 -
I wanted to make the goal fifteen billion. It is two
billion above what you got last time outside the
banking system. But in order to show a percentage increase, you have to make it a sixteen billion dollar
goal.
Now, there is some phoney stuff in that sixteen
billion in your insurance companies and mutual savings.
There will be a lot of switching from what they hold
now, throwing that into the market and then they will
take new securities. I don't know - you might ignore
the switches to the extent of a billion dollars and call
it a fifteen billion dollar goal with a billion and a
half from new money.
H.M.JR: What are they going to sell?
MR. BELL: They will sell some short-term securities
in the market. The banks will buy them. Then they will
get the cash and subscribe to our new issue.
MR. TICKTON: They sold a lot of securities in the
two percent area - the mutual savings banks did.
MR. BELL: Prudential alone sold six hundred million.
H.M.JR: Well, I want to run a column like this as
we go along. You can say - on the side, keep a score;
we are together on that and apart on that. Then it gets
down to where I can see - I can see just from talking
with you fellows that you have to do a lot of work amongst
yourselves yet.
MR. BELL: That is right.
H.M.JR: We have certainly got to do better every
way than we did in the last drive.
MR. BELL: And how!
189
- 22 -
H.M.JR: I think if we run a chart and show who is
organized and who isn't - put the heat on the boys - the
more the better. I may want to get some of these sharpshooters down like this young fellow I always have come
down - some of these Government bond dealers. It may
not do any harm.
MR. BELL: You mean to talk about this?
H.M.JR: Yes.
MR. BELL: I think they would like it. They haven't
been down for a long time.
H.M.JR: There is too much - the outside influence the outside advice is too much the same.
MR. HAAS: I would be surprised if all the outside
would agree with the Fed memo. I think you would get a
great opposition from some bankers.
H.M.JR: Well, now, I want Jake Viner down, and I
would like to get Walter Stewart's advice.
MR. BELL: I haven't heard from Walter, but I heard
from Jake. He will be here. I sent Walter's telegram
to his home. He may not have been home. He ought to get
it this morning.
H.M.JR: We can't throw out the F and G during this
drive. We would be sunk.
MR. HAAS: It is involving another problem. One
reason we are suggesting - the main reason we are suggest-
ing to leave it in is that if you throw it out these
people that want a hundred dollar denomination bond are
going to say - well, now, here is a man who has bought his
limit in E bonds, you must have something other than a
five hundred dollar denomination bond to fulfill that man's
needs. Maybe he has only three hundred dollars more to
invest, but with the G Bond and the F Bond, you have a
bond there, and I think you will probably have that fight
on your hands again in this campaign - low denomination.
189
- 22 H.M.JR: I think if we run a chart and show who is
organized and who isn't - put the heat on the boys - the
more the better. I may want to get some of these sharpshooters down like this young fellow I always have come
down - some of these Government bond dealers. It may
not do any harm.
MR. BELL: You mean to talk about this?
H.M.JR: Yes.
MR. BELL: I think they would like it. They haven't
been down for a long time.
H.M.JR: There is too much - the outside influence -
the outside advice is too much the same.
MR. HAAS: I would be surprised if all the outside
would agree with the Fed memo. I think you would get a
great opposition from some bankers.
H.M.JR: Well, now, I want Jake Viner down, and I
would like to get Walter Stewart's advice.
MR. BELL: I haven't heard from Walter, but I heard
from Jake. He will be here. I sent Walter's telegram
to his home. He may not have been home. He ought to get
it this morning.
H.M.JR: We can't throw out the F and G during this
drive. We would be sunk.
MR. HAAS: It is involving another problem. One
reason we are suggesting - the main reason we are suggest-
ing to leave it in is that if you throw it out these
people that want a hundred dollar denomination bond are
going to say - well, now, here is a man who has bought his
limit in E bonds, you must have something other than a
five hundred dollar denomination bond to fulfill that man's
needs. Maybe he has only three hundred dollars more to
invest, but with the G Bond and the F Bond, you have a
bond there, and I think you will probably have that fight
on your hands again in this campaign - low denomination.
190
- 23 -
MR. BELL: If you are going to eliminate F and G,
I would announce it around September 1 that it is going
to be eliminated October 1, and then you get some force
behind it in the drive. People will come into it to
buy because it is going to be eliminated.
MR. TICKTON: Of course, that billion and a half we
have got as the goal for it is a good tough goal. You
won't go very far in excess even if you do announce that.
H.M.JR: One suggestion to throw out if they keep
up this argument about wanting to get corporate funds,
we have the names of the five hundred corporations who
employ five thousand or more people, and it wouldn't
be very difficult to send them out a telegram.
MR. BELL: Bob Rouse has already talked to some in
New York. He says they want a certificate.
MR. LINDOW: We know what they bought in April.
Corporations bought a total of five billion dollars.
These are mostly the business corporations. They took
two billion dollars in certificates and a billion and a
half dollars in the Series C savings notes. That is
three and a half billions out of the total.
H.M.JR: What does the Fed want to sell them?
MR. LINDOW: A note, and I just don't think it is
suitable. If you were a member of the board of directors
of a corporation you wouldn't want to tie your hands for
three years.
H.M.JR: I am just throwing out the suggestion.
MR. BELL: They would like to have the corporations
buy the Series C tax notes.
H.M. JR: Yes, but it is very nice - I have been all
through this so often - for the Federal Reserve Board to
sit over in their aircooled palace and decide what the
corporations buy. Damn it, the corporations do what they
want; that is what they should.
191
- 24 -
MR. HAAS: They say it needs more sales pressure on
the C notes.
H.M.JR: I still say - if they argue we can't sell
it, I would send out five hundred telegrams and ask them
which they would prefer.
MR. BELL: What would you think of sending out a
telegram to the Federal Reserve presidents and ask them to
discuss it with the corporations?
H.M.JR: No, and I tell you why. I think we are
going right up against a phoney there, Dan. These bank
presidents - they call up Eccles and ask should they or
shouldn't they answer our telegram and they get together
in collusion and two or three of them send us the same
kind of telegram.
MR. HAAS: Except the Minneapolis fellow didn't
answer it at all. He said, "See the Open Market Committee."
H.M. JR:. I don't think we can rely on those fellows
entirely. I would be willing to do it, possibly, but do
it independently. Desides-MR. BELL: I wouldn't do both.
#
H.M.JR: I don't think we can rely on those fellows
entirely any more. I am sorry to say that, Dan, but I
think the way those Fed presidents have been acting this is just amongst ourselves - I am not sore - we are
going along beautifully and we have a swell organization
I mean State - but I don't see any harm in sending out
five hundred telegrams and they wouldn't all have to be
big corporations, either.
MR. TICKTON: I was going to suggest we might ask
the largest subscribers in April rather than taking the
five hundred largest corporations, a number of whom are
really strapped for cash because of the large investment
in work in process.
-
192
- 25 -
MR. MURPHY: The question is really entirely between
the certificate and the one and a half percent note, is it
not? The Series C tax note will be - savings note - will
be available in any case, and for the corporations that
like that type of instrument, they will have it. The
question is for the corporations that prefer the anonymity,
should they be offered the certificate, or should they be
offered the one and a half percent note?
It seems to me that is where the difference of opinion
lies, between the Federal and ourselves, and that all the
advantages, both from the standpoint of the Treasury and
from the standpoint of the corporation, lie in the seveneighths percent note. There will be a greater sales resis-
tance to the one and a half percent, and when we have sold
it we have sold them an instrument which is both more disadvantageous to us and more disadvantageous to them than
the certificate.
MR. TICKTON: We could ask the corporations that
bought the certificates - there can't be such a very long
list - there won't be more than a couple of hundred that
bought really substantial amounts of that certificate in
April - and see whether they would prefer the certificate
to a note when it comes to investing their accumulated
funds in September.
MR. MURPHY: That is the crucial point. But the
Series C note will be there, anyway, for those who pre-
fer it, and there are those that do.
H.M.JR: Well--
MR. LINDOW: I was going to say, there was quite a
change in April as against the December drive in the
popularity of the certificate as compared to the Series C
note. In April we sold corporations about twice as much
altogether as we did in December. The amount of Series C
notes went up only from about a billion one to a billion
five, whereas the amount of certificates sold them went
up from something like eight hundred million to two billion.
192
- 25 -
MR. MURPHY: The question is really entirely between
the certificate and the one and a half percent note, is it
not? The Series C tax note will be - savings note - will
be available in any case, and for the corporations that
like that type of instrument, they will have it. The
question is for the corporations that prefer the anonymity,
should they be offered the certificate, or should they be
offered the one and a half percent note?
It seems to me that is where the difference of opinion
lies, between the Federal and ourselves, and that all the
advantages, both from the standpoint of the Treasury and
from the standpoint of the corporation, lie in the seveneighths percent note. There will be a greater sales resistance to the one and a half percent, and when we have sold
it we have sold them an instrument which is both more disadvantageous to us and more disadvantageous to them than
the certificate.
MR. TICKTON: We could ask the corporations that
bought the certificates - there can't be such a very long
list - there won't be more than a couple of hundred that
bought really substantial amounts of that certificate in
April - and see whether they would prefer the certificate
to a note when it comes to investing their accumulated
funds in September.
MR. MURPHY: That is the crucial point. But the
Series C note will be there, anyway, for those who pre-
fer it, and there are those that do.
H.M.JR: Well--
MR. LINDOW: I was going to say, there was quite a
change in April as against the December drive in the
popularity of the certificate as compared to the Series C
note. In April we sold corporations about twice as much
altogether as we did in December. The amount of Series C
notes went up only from about a billion one to a billion
five, whereas the amount of certificates sold them went
up from something like eight hundred million to two billion.
193
- 26 -
They went up about two and a half times, whereas the
Series C note only went up by maybe thirty percent.
Now, we would just be fighting that popularity of the
certificate on the part of the corporations.
H.M.JR: Well, I still say, if we are going to do
some testing - I just think - what happened when some
telegram went out? You told me about it. Before they
answered they called up, and so forth-MR. BELL: Apparently they had their presidents'
meeting here. They brought up the question of giving
advice on financing - the presidents giving advice themselves on financing when it was the Open Market's
responsibility to maintain the credit in the market, and
they knew more about the subject and therefore they should
be the ones to advise the Treasury, although there was
no objection to the presidents getting the advice of the
bankers and others in the district and submitting that
to the Treasury as the consensus of the views in that
district.
H.M.JR: I still say, Dan-MR. BELL: That is what we have always more or less
expected. I would rather have that than have the
presidents' personal views.
H.M.JR: When the bank presidents know this memoran-
dum is in existence and go out and try to find out whether
the corporations would rather have the certificates or
notes, we are asking them to give advice against their
own advice.
MR. BELL: We would ask them to give the consensus
of views of the corporations in their district, not their
own advice.
H.M.JR: Would you object very much if I went direct
to the corporations?
194
- 27 -
MR. BELL: No, I wouldn't object at all. I think
that is a little bit more expensive and we have been
criticized for sending telegrams.
H.M.JR: On a sixteen billion dollar thing?
MR. BELL: Of course, they don't look at that. We
have been criticized for telegraphing so much to people
in the States. You have gotten several rather nasty
letters.
MR. TICKTON: Out of that particular group-MR. MURPHY: I doubt if you get any come-backs if
the list were selected from those who subscribed to a
certain number of certificates.
H.M.JR: It would be only those that had no money
that were sore - that had no working capital.
MR. BELL: There would be others that want to
criticize the New Deal.
H.M.JR: We haven't time to send them airmail letters.
MR. BELL: We got some criticism in the Second War
Loan - the Federal Reserve Bank sending out these certificates of appreciation for the services of volunteer workers.
Two or three people wrote in from Texas and said it looked
as though they could spend the taxpayers' money for something else.
H.M.JR: The way I say thank you is - people say I
am the only Department in Washington that ever says thank
you.
MR. BELL: I said so, and wrote letters to that effect.
H.M.JR: This is a good meeting. If I may say so, you
boys have a lot of work to do.
MR. BELL: We agree.
195
Memorandum of a Meeting in the Secretary's Office
July 14, 1943, at 11:00 A.M.
Present:
Secretary Morgenthau
Mr. White
Dr. P. W. Kuo and
Mr. Hsi Te-Mou, of China.
Dr. Kuo stated that they were hoping that a decision had been made
with respect to Finance Minister Kung's request for $200 million in gold.
Secretary Morgenthau replied that we had considered the matter and that
the answer was that we would let the Chinese Government purchase the gold
out of the remainder of the $500 million. Mr. White indicated that we had
not as yet received a formal request from the Chinese Government which
would satisfy the Legal Division. The Secretary stated that naturally
before any definitive official decision was given that that request would
have to be received and that Mr. White would explain to Dr. Kuo and
Mr. Hsi what was needed.
Secretary Morgenthau, in response to a question by Mr. Hsi, said
he thought that the gold might be transferred to the Chinese account at
once but when Mr. White pointed out that the Chinese would use it only
slowly and that it might be preferable to transfer it as they needed it
so as to avoid the necessity of borrowing the full $200 million from the
market, the Secretary at once agreed that it would be preferable to transfer the gold to the Chinese account as they needed it rather than all at
once. Dr. Kuo and Mr. Hsi thanked the Secretary and Dr. Kuo invited
the Secretary to some dinner in New York but Secretary Morgenthau
graciously declined.
The Secretary said that if they would adjourn to Mr. White's office
that Mr. White would discuss further details with them.
Mr. White explained to Dr. Kuo and Mr. Hsi that it would be necessary
to make a formal specific request from the Chinese Government since we had
not received one, and that we had sent a cable to Adler asking him to
inform Mr. Kung of the Secretary's decision and of the necessity for
getting a formal request. Mr. White also pointed out that the additional
cost to the American Treasury at this time of transferring $200 million
before the Chinese Government had to use it would be an unnecessary ex-
pense, and that it would be much better from our point of view if the
money was transferred to purchase the gold as they needed it. It was
also agreed that the $20 million that they had previously obtained to sell
gold would be used first. Dr. Hsi asked whether some arrangement could
not be made whereby the gold could be transferred to India here and
shipped from India in order to save shipping costs and time. Mr. White
196
-replied that he was dubious of the willingness of India to undertake a
transaction of that magnitude, but if they wished he would make inquiry
of the British Treasury officials. They requested that Mr. White do so
and he replied that he would let them know after he had spoken to the
British Treasury representatives about the matter.
H. D. White
197
Transmitted July 16, 1943
No. 911
SECRET
July 14, 1943
To:
Adler, Chungking, China.
From: Secretary of the Treasury.
Please transmit the following message to Dr. Kung:
1. The Treasury has considered the proposal of the Government
of China to purchase $200 million of gold from the U. S. Treasury
out of the $500 million financial aid, which gold will be sent to
China for sale to the public as a means of helping to check
inflation.
2. We presume that the costs, difficulties and dangers inherent
in the use of gold as a means of checking the present inflation in
China have been fully taken into consideration.
3. Since the Government of China deems that the sale of gold
to the public will aid its war effort by helping to achieve greater
monetary stability, the Treasury is prepared in principle to agree
to its proposal. It will be necessary, of course, for the Treasury
to have a formal request from you before any definitive decision
and action can be taken.
ISF/efs 7/12/43
198
July 14, 1943.
11:26 a.m.
HMJr:
has got a suggestion and as long as she 1 s
thinking about these things I'd like to do it.
Fred
Smith:
Good.
HMJr:
She said, "Why can't we get some of the songs of
Oklahoma on - records made to play in connection
with the sale of War Bonds because they are so
popular.
S:
HMJr:
S:
HMJr:
Yeah.
And I think it's a good idea.
Yeah.
What we might even do is to do a fifteen minute song
record of condensed - of Oklahoma, using their own
artists.
S:
HMJr:
S:
Uh huh.
That's been done before, you know.
Yeah, we might just see if we can't get Oklahoma
on the air. It would be very popular for a bond
program.
HMJr:
Well, the only trouble - you do it once and then it
dies if you haven't made a record. You could do it -
anyway, if you could get them to do - we've done these
other ones - the condensed versions
S:
That's right.
HMJr:
You see?
S:
Yeah.
HMJr:
And then they could make a record.
S:
Yeah.
HMJr:
I surpose they take it up throught this - Welch - Roy
Welch.
S:
Yeah.
HMJr:
Well, will you
-2-
S:
HMJr:
I'll follow it through.
That's 1 t. And tell him I'd like a report on it.
S:
Okay.
HMJr:
If you please.
S:
All right.
139
L
July 14, 1943
200
12:07 p.m.
John L.
Sullivan:
They all here.
agreed that they have tables that will be
workable
HMJr:
Yeah.
S:
They re bringing them over. I'm getting everybody
who was in the group yesterday in here at 12:30.
HMJr:
Yeah.
S:
It occurred to me that if we are all in accord on
HMJr:
Yeah.
these tables
rather than bothering you at 3:30
S:
HMJr:
S:
HMJr:
S:
Yeah.
we should continue the work to adapt those tables
to a form
Yeah.
and that would save them time and get the job
out quicker and I think there'd be very little to
HMJr:
S:
HMJr:
S:
discuss with you that wasn't of a technical nature
which probably wouldn't interest you.
Well, let them come in at 3:30 any way, John.
All right, sir. Just as you say.
I'd like to see them. I'd like to see them at 3:30.
All right.
HMJr:
Please.
S:
I think you did a swell job yesterday.
HMJr:
Uh - thank you. I'm afraid I was a little bit rough.
S:
No - no - that's all right. They took it.
HMJr:
But I had to go over the thing three times before I
could make 8 dent on Norman Cann, but I talked with
the Commissioner last night.
-2-
S:
201
Good.
HMJr:
And he WAS entirely satisfied about my taking McNamara.
S:
Well, I'm very glad you called him. Aren't you?
HMJr:
Yeah. And
S:
Yes.
HMJr:
I appreciate your thought - and, he was worried and had
a call in on this - these - the very same thing that I
was working on. He said it was impossible, and he had
a call in for Cann to tell him. Did they ever send him
a copy of the forms?
S:
HMJr:
Yes.
The Commissioner said it was just impossible and we've
got to do something. So when he heard I was working on
it he was very pleased.
S:
You see, I didn't get this form until Monday afternoon
HMJr:
Yeah.
S:
and I honestly think that this would have hurt
worse than Leon Henderson.
HMJr:
Well, that's what I tried to drive home into the
Bureau yesterday.
S:
Yeah. Well, I - I'm in complete accord
HMJr:
I had to use a sledge hammer.
S:
Well, you used it very effectively.
HMJr:
Good. That's what counts.
S:
You bet.
HMJr:
Thank you.
S:
You did a swell job.
HMJr:
S:
Thank you.
Thank you.
202
July 14, 1943.
At 6:30 Tuesday night I got Commissioner Guy Helvering
out at Salina, Kansas, and told him I'd like to have McNamara
and he's perfectly willing. He said he'd call up Norman.
Cann in the morning and tell him so. Then he said that he was
disturbed by this long instructions which were coming out for
the taxpayers on September 15th. I told him that was funny
because I'd been working on it yesterday myself. He said,
"Well, we've I got to get a simplified form." And I told him
about the two meetings we had yesterday and he was delighted
and he said he would call Norman Cann this morning.
OPTIONAL
FORM 1040 A
CALENDAR YEAR03
UNITED STATES
REASURY DEPARTMENT
REVENUE SERVICE
1942
INDIVIDUAL INCOME TAX RETURN
Do not write in these spaces
THIS RETURN MAY BE FILED INSTEAD OF FORM 1040 BY CITIZENS
Serial
(OR RESIDENT ALIENS) REPORTING ON THE CASH BASIS IF
No.
GROSS INCOME IS NOT MORE THAN $3,000 AND IS ONLY
Amount
FROM SALARY, WAGES, DIVIDENDS, INTEREST,
Paid, $
AND ANNUITIES
(Cashier's Stamp)
PRINT NAME AND HOME OR RESIDENTIAL ADDRESS PLAINLY BELOW
(Name) (Use given names of both husband and wife, if this is joint return)
(Street and number, or rural route)
(Post office)
(County)
(State)
Social Security
number, any
Occupation
Name and address of employer
Cash-Check-M.O
(If you had more than one and
employer,
attach statement showing name and address
amount received from each)
DEPENDENTS ON JULY 1, 1942
persons (other than husband or wife) deriving their chief support from you if they are under 18 years of age or if they are
mentally or physically incapable of self-support
IF 18 TEARS OF AGE OR OVER GIVE REASON FOR LISTING
RELATIONSHIP
NAME OF DEPENDENT
GROSS INCOME LESS ALLOWANCE FOR DEPENDENTS
$
Salary, wages, and compensation for personal services
Dividends, interest, and annuities
Total
$
Less: $385 for each dependent
(If you are the head of family (see definition under item 6 on other side) only because of dependent(s) listed above. $385 for each
listed dependent except one.)
$
INCOME SUBJECT TO TAX
TAX
$
Tax on item 5 (from Column A, B, or C of table on other side)
I/we declare, under the penalties of perjury, that this return has been examined by me/us, and, to the best of my/our knowl-
dge and belief, is a true, correct, and complete return, made in good faith, for the taxable year stated, pursuant to the Internal
Revenue Code and regulations issued under authority thereof; and that I/we had no income from sources other than stated hereon.
1943.
(Signature)
(Date)
(Signature)
(If this return includes gross income of both husband and wife, by both)
Filing requirement.-An Income tax return must be filed by single
persons having gross income (Item 3 above) of $500 or more and
on this form unless each elects to use this form.
married persons having . gross Income either separately or combined
1040
Allowance for dependents of $385Where
for each
the
used,
Form dependent
States officer
is
is applicable when this form is used.
$350.
Military and neral personnel-Membere of the military or navel
allowance for each dependent is
forces December of should
the 31. United
1942 below
the grade
of commissioned
not include
in gross
Income
the first $250on
If
single ch on such date, or the first $300 If married or head of . family
date received as compensation for active service
on
Returns of Ausband and /c.-Husband and wife may use this
form
their
return if they were living together on July 1. 1942. and
combined gross income for the CA lender year is not more than
A
if
000
for
Joint
as
separate
return may be on this form If the gross income
the calender year of the one filing the return is not more than
Amended returna- If qualified taxpayer elects to use this form,
amended return may not be made on Form 1040.
Filing of returns and payment
of tax- for Revenue
The district returnyour
must on or be before filed
Internal
with
March
Collector
the
15,
of
tax
The
1943.
March
commencing
made
payment
by
15,
check
may
1943.
or
be
Pay
money
paid
tax.
equal
in
if
$1,200 more.
except that in the case of . husband and wife living together at
$3,000, any time during the calendar year separate returns may not be made
order,
any,
make
Installments
quarterly
to
the
Collector
payable
to
and
if
"Collector
of Internal Revenue.'
16-31231-1
INDICATE YOUR STATUS ON JULY 1, 1942, BY PLACING CHECK MARK () IN THE APPLICABLE BLOCK
BELOW
1. Single (and not head of family) on July I, 1942
4. Married and living with husband or wife on July
1942, and spouse had no gross income for the entire
year
2. Married and not living with husband or wife (and not
head of family) on July I, 1942
5. Married and living with husband or wife on July 1,
IF YOU CHECKED No. 1 OR No. 2 ABOVE, FIND YOUR TAX
1942, and this return includes gross income of both
husband and wife for the entire year
IN COLUMN A
6. Head of family (a single person or married person not
living with husband or wife who exercises family
control and supports closely connected dependent
relative(s) in one household) on July 1. 1942
(State number of such dependent relatives
3. Married and living with husband or wife on July 1,
1942, but each filing separate returns on this form
)
IF YOU CHECKED No. 4, 5, OR 6 ABOVE, FIND YOUR TAX
IF YOU CHECKED No. 3 ABOVE, FIND YOUR TAX IN COLUMN B
(item so other side) is
COLUMN
Your tax is
8525
550
575
575
600
625
600
625
650
650
675
700
675
700
725
28
725
750
775
750
33
14
775
37
18
800
41
22
825
850
875
46
27
50
31
54
900
925
59
40
63
44
1
4
7
0
0
0
o
20
3
6
0
0
0
o
67
o
9
o
0
35
0
0
0
48
71
52
76
57
1,000
80
1,025
1,050
84
65
1,050
1,075
1,075
89
70
1,100
93
1,100
1,125
1,150
1,125
1,150
1,175
1,175
1,200
1,225
1,200
0
0
0
97
78
102
106
83
o
91
96
0
100
1,425
1,450
1,475
But not over
81,875
1,400
1,425
1,450
1,475
1,500
1,550
1,525
1,550
1,575
1,575
1,600
1,625
1,600
1,625
1,650
1,650
1,675
1,675
1,700
1,725
1,525
1,700
1,725
1,750
1,775
1,800
1,825
1,850
1,875
1,900
1,925
1,750
COLUMN
A
B
COLUMN
C
IF
Income subject to tax
COLUMN COLUMN COLUMN
(item on other side)
Your tax is
Your tax is
Your tax is
Over
But not over
8141
8122
810
145
126
14
82,175
2,200
149
130
17
2,225
82,200
2.225
2,250
2,250
2.275
2,300
2,275
2,300
2,325
2.325
2,350
2,375
2,350
2,375
2,400
2,425
2,450
2,425
2,450
2,475
2,475
2,500
2,525
2,500
2,525
2,550
2,550
2,575
2,600
2,575
2,600
2,625
154
135
21
158
162
139
143
25
29
167
148
34
171
152
88
175
156
42
180
184
161
165
169
51
188
193
197
201
1,800
206
210
214
1,825
1,850
1,875
218
223
227
1,900
1,925
1,950
1,775
COLUMN
47
55
174
60
178
182
64
187
78
191
77
195
81
68
2,400
A
B
Tour tax Your
8283
8264
288
292
269
155
273
159
8150
296
277
16
301
282
168
305
286
179
309
314
318
290
17
295
299
IN
322
327
303
189
308
194
331
312
198
335
316
202
340
321
207
344
325
211
348
329
215
353
357
334
220
338
224
199
85
2,625
2,650
361
342
228
204
90
2,675
366
347
233
208
94
2,650
2,675
2,700
371
351
237
212
217
221
241
236
240
103
230
234
231
98
107
2.725
376
355
2,750
381
359
245
2,775
386
364
250
2,800
2.825
2,850
391
369
254
2,800
2,825
396
374
258
401
379
263
2,875
2,900
2,925
2,950
2,975
3,000
2,700
2.725
2,750
1,950
1,975
1,975
2,000
2,000
2,025
244
249
253
2,025
2,050
2,075
2,050
2,075
2,100
257
262
266
238
243
124
129
247
133
2,850
2,875
2,900
2,100
2,125
2,150
2,125
270
275
279
251
2,150
2,175
256
260
137
142
146
2,925
2,950
2,975
225
111
116
120
2,775
406
384
267
411
389
271
416
394
276
421
399
280
426
404
284
431
409
289
7
117
4
136
113
0
109
1
104
128
0
123
132
0
0
110
115
119
87
1,275
1,350
0
74
1,300
1,325
o
o
1,250
61
0
1,225
0
1,375
1,400
1,500
o
24
975
1,825
0
15
1,000
1,025
1,250
1,275
1,300
0
950
975
950
11
Over
81,350
80
0
875
900
925
80
0
850
80
Your tax
0
Your
80
800
IF
Income subject to tax
(item on other side) is
525
550
825
COLUMN
c
B
0
But not over
Over
A
1
COLUMN
c
IF
Income subject to tax
IN COLUMN C
The income to be reported in this return is gross income (not including income which is wholly exempt from income tax)
without any deductions. The taxes in the above table make allowance for personal exemption, earned income credit,
deductions aggregating 6 percent of gross income.
OFFICE
16-31231-1
and
JUL 10 1943
Photo
59630
204
Form 1040ES
UNITED STATES
U. R. TREASURY DEPARTMENT
INTERNAL REVENUE SERVICE
Declaration of Estimated Income and Victory Tax by Individuals
FOR CALENDAR YEAR 1943
or fiscal year beginning
1943, and ending
. 1944
(See accompanying INSTRUCTIONS)
1. Estimated Income and Victory Tax for 1943
(Cashier's Stamp)
$
(Enter (a) the tax liability computed on estimated 1943 income (see line 43 of Work Sheet) or (b) the
tax shown on the 1942 Income Tax return (see Instruction on page 3). WHICHEVER IS
2. Estimated tax withheld at source. (See line 47 of Work Sheet)
3. ESTIMATED TAX after credits for withholding (item minus item 2)
4. Total payments to collector. (See line 50 of Work Sheet)
5. Balance of estimated tax (item 3 minus item 4)
$
6. Amount paid with this declaration (See instructions on reverse side)
$
case
GREATER
$
reaction
I/we declare. under the penalties of perjury, that this declaration
and belief is true, correct. and complete declaration, made in good
faith, for the taxable year stated. pursuant to the Internal Revenue
Social Security Number, if any
has been examined by me/us. and to the best of my/our knowledge
PRINT NAME AND ADDRESS PLAINLY
Code and the regulations issued under authority thereof.
(Name) (Use given names of both husband and wife if this is joint declaration)
(Street and number. - rural reade)
(City town)
(Signature of taxpayer or agent)
(Date)
(State)
(OVER)
DOC
(If this is a joint declaration (net made by agent) . must be signed by both husband and wife)
below).
the declaration is filed.
16-00000-1
GPO
C. FISCAL YEAR TAXPAYER-If a taxpayer has
in which he first becomes liable for filing.
on or before the fifteenth day of the last month of the quarter
(item 5 on the face of this form).
changes make him liable for filing, he must file a declaration
pay at the same time the entire balance of the estimated tax
that he is not required to file a declaration, but subsequent
file this declaration on or before December 15, 1943, and must
payer's estimated gross income and marital status are such
estimated gross income is derived from farming. he must
FILING DATE-II on the prescribed filing date the tax-
B. FARMERS-If at least 80 percent of the taxpayer's
D. TAXPAYER BECOMING LIABLE AFTER FIRST
tax fiscal year beginning after January 1, 1943 (see C.
mainder of his fiscal year, including the quarter in which
he is a farmer (see B, below) or has established an income
many equal installments as there are quarters in the re-
of the estimated tax for 1943 (item 5 on Declaration), unless
of such fiscal year. In either event he must pay the tax in as
must pay at the same time at least one-half of the balance
declaration on or before the fifteenth day of the third month
trict he expects to file his income tax return for 1943, and
tax fiscal year beginning after July 1, 1943, he must file this
before September 15, 1943, with the collector in whose dis-
before September 15, 1943. If he has established an income
A taxpayer required to file this declaration must file it on or
or before July 1, 1943, he must file this declaration on or
established an income tax fiscal year beginning in 1943 on
A. TIME AND PLACE FOR FILING AND PAYMENT.-
205
SPECIFIC INSTRUCTIONS
Page 4
(Numbered to correspond with line numbers on Work Sheet)
20. ESTIMATED INCOME TAX NET INCOME.For the
purpose of determining the estimated Income Tax net income
the applicable Instructions for Form 1040 (1942) may be used,
It will be necessary, however, to take into consideration addi-
tional instructions relating to the following specific items
affecting the computation of the estimated Income Tax for the
taxable year 1943:
(a) Additional Allowance for Military and Naval Person.
nel.-Compensation, not exceeding $1,500, received by a
member of the military or naval forces of the United States for
active service in such forces during the present war, or by a
citizen or resident of the United States who is a member of the
military or naval forces of the other United Nations for active
service in such forces during the present war, is excluded from
gross income and is exempt from tax:
(b) Nonbusiness Debts.- a debt, other than a debt
evidenced by a corporate security with interest coupons or in
registered form and other than a debt the loss from the worth-
at any time during the period from September 1 to December
31, 1942, exceeds the amount of indebtedness outstanding at
the end of December 31, 1943; and
(c) The amount by which the purchase price of United
States Savings Bonds, Series E, F. and G, owned on the last
current year exceeds the
bonds
dayonof
purchase
price
of such
owned
thethe
last day
of the preceding
taxable
year.
If a Savings Bond is registered in the names of two persons as
co-owners, each shall be entitled to the credit to the extent of
one-half of the purchase price thereof. except that if the entire
purchase price is contributed by one co-owner, he may, if he
so elects at the time of filing his first return under the Victory
Tax subsequent to the purchase of the bond, be considered to
be the sole owner, in which case he shall be entitled to a credit
to the full extent of the purchase price and no credit shall be
allowed to the other co-owner. No credit is allowable for
bonds acquired by gift, or inheritance, or otherwise than by
purchase, shall-notheincluded
totally worthless within the taxable year, the loss resulting
therefrom shall be considered a loss from the sale or exchange,
The total credit allowable to any taxpayer under (a), (b)
and (c) shall not exceed (1) the aggregate amount or (2) the
aggregate percentage of his Victory Tax (whichever is the
during the taxable year, of a capital asset held for not more
than 6 months Any such item should be reflected in line 7 (a)
of the Work Sheet:
Single person (not the head (1) $500 plus $100 for each
dependent
of a family), or
lessness of which is incurred in the trade or business, becomes
smaller) in the applicable case below.
(c) Capital Loss Carry-Over.-A net capital loss as defined
in section 117 (a) (11) for a taxable year beginning in 1942 may (Married
person not
living (2) 25%2%
of for
theeach
Victory
Tax plus
dependent,
with husband
or wife
be carried over to the taxable year 1943 and treated as a shortterm capital loss; and
(d) A United States citizen will not, for 1943, be exempt
from tax on his earned income from sources without the United
States unless he shall have been a bona fide resident of a foreign
country during the entire year 1943.
. 21. ESTIMATED VICTORY TAX NET INCOME.-The
following items includible in gross income or allowable as deduetions in computing the estimated Income Tax net income
are not applicable for the purpose of determining Victory
Tax net income:
(not the head of a family)
Married person living with
husband or wife, but filing a separate return.
Married couple living together and filing a joint
(1) $1,000 plus $100 for each
Head of a family.
(2) 40% of the Victory Tax plus
return, or
dependent
or
2% for each dependent
(excluding, in the case of a
head of a family, the dependent qualifying the taxpayer as such)
(b) Net gain (or loss) from the sale or exchange of capital
attributable to deductions for medical expenses allowed in
any prior taxable year)
(d) Interest on indebtedness and taxes not incurred in car-
or
(2) 40% of the Victory Tax plus
2% for each dependent,
net income
which are included in gross income by reason of the exception
contained in section 22 (b) (5) (relating to such compensation
dependent
whichever is the smaller
(a) Interest on obligations of the United States and instrumentalities of the United States allowable as a credit against
assets to the extent provided in section 117;
(e) Amounts received as compensation for injury or sickness
whichever is the smaller
(1) $500 plus $100 for each
whichever is the smaller
41. ESTIMATED INCOME TAX PAID AT SOURCE.A nonresident alien required to make a declaration should also
enter on line 41 the amount of all credits with respect to taxes
withheld under section 143. A citizen or resident of the
United States who computes his estimated tax for 1943 on the
basis of Form 1040A (1942) is not entitled to a credit for the
rying on any trade or business or in the production or collection
amount of Income Tax paid at the source during 1943 on
ance of property held for the production of income
Such credit shall be determined without regard to subsections
of income or for the management, conservation, or mainten(e) Losses not incurred in trade or business;
(S) Charitable and other contributions other than those
allowable under section 120 (relating to unlimited deduction
for charitable and other contributions);
(g) Amortization of bond premium;
(h) Medical, dental, etc., expenses; and
(i) Cooperative apartment tenant-stockholder's proportionate share of interest and taxes.
34. SPECIFIC EXEMPTION FROM VICTORY TAX.
tax-free covenant bond interest,
42. ESTIMATED CREDIT FOR FOREIGN TAXES.
(a). (b), and (e) of section 6 of the Current Tax Payment Act
of 1943.
44. ESTIMATED VICTORY TAX WITHHELD ON
WAGES.-Enter the estimated amount of Victory Tax withheld on wages for the first half of 1943 at 5 percent
45. ESTIMATED INCOME TAX WITHHELD ON
WAGES.-Enter the amount of estimated Income Tax with.
held on wages for the last half of 1943, at 20 percent
46. CREDIT FOR INCOME TAX PAID AT SOURCE.-
Every individual taxpayer is entitled to an exemption of $624
regardless of marital status, An exemption of $1,248 allowed
There should be no entry in this line unless the 1942 tax has
been entered as item on the declaration. Also, a nonresident
Tax net income of one spouse is less than $624, in which case
of all of the credits allowable with respect to taxes withheld
a husband and wife filing a joint return unless the Victory
alien required to make a declaration should enter the amount
the total exemption of both spouses is limited to $624 plus the
under section 143.
Victory Tax net income of such spouse.
37. ESTIMATED POST-W/ CREDIT CURRENTLY
USED. There is allowed as a credit against the Victory Tax:
. (a) Premiums paid by the taxpayer during a taxable year
beginning after December 31. 1942 on life insurance. in force
on September 1. 1942, upon his own life. or upon the life of
his spouse, or upon the life of any of his dependents;
A (b) For the calendar year 1943 the amount by which the
smallest amount of indebtedness of the taxpayer outstanding
48. PAYMENTS ON ACCOUNT OF 1942 INCOME TAX
LIABILITY Enter all payments (other than interest and
penalties) made to the collector of internal revenue in the year
1943 on account of the Income Tax liability shown on your
Income Tax return for the year 1942. If any payment on
account of the tax for 1912 is made pursuant to a joint return.
the payment may be treated as a payment on account of the
estimated tax of either the husband or the wife or may beof
divided between them in any proportion.
TAYPAYER'S WORK SHEET-Continued
(Do not file with collector)
Page 3
COMPUTATION OF ESTIMATED INCOME AND VICTORY TAX
22. Estimated Income Tax net income (line 20, col. 1).
$
33. Estimated Victory Tax net income (line 21, col. 2)
$
24.
$
23. Less: Personal exemption
34. Less: Specific exemption
Credit for dependents
35. Estimated income subject to Victory Tax
$
25. Balance (surtax net income)
$
36. Estimated Victory Tax (5% of line 35)
$
27.
$
26. Less: Line (a). page 2
37. Less: Estimated post-war credit currently used
Earned income credit
38. Estimated net Victory Tax
$
29. Normal tax (6% of line 28)
$
28. Balance subject to normal tax
39. Total estimated Income Tax in line 32
40. Total of line 38 and line 39
$
$
30. Surtax on line 25 (see Surtax Table on page 2)
41. Less: Estimated Income Tax paid at source on
tax-free covenant
bond interest
$
32. Total estimated Income Tax (enter line 31, or
$
31. Total (line 29 plus line 30)
Estimated credit for
42.
alternative tax in case of an excess of net long-
foreign taxes
term capital gain over net short-term capital
$
43. Estimated Income and Victory Tax for 1943
$
loss, whichever is the lesser)
COMPUTATION OF ESTIMATED WITHHOLDINGS AND PAYMENTS FOR 1943. (See Instructions 44 to 50)
44. Estimated Victory Tax withheld on wages. (See Instruction 44)
$
$
48. Payments on account of 1942 Income Tax liability
45. Estimated Income Tax withheld on wages. (See Instruction 45)
49. Payments of estimated tax made with prior declarations on Form 1040ES, if any
46. If. in the declaration, the 1942 tax is entered in item
50. Total payments to collector. (Enter as item 4 on
1, enter the estimated Income Tax paid at source dur-
declaration)
ing 1943 on tax-free covenant bond interest (not ap-
$
plicable if computation made on basis of Form 1040A)
47. Total estimated tax withheld at source. (Enter as
item on declaration)
$
INCOME TAX FOR 1942
If your 1942 tax exceeds your estimated 1943 tax, enter as
item 1 on the declaration such 1948 tax. In general, this will
be
the amount
reported on your return of Income Tax for the
taxable
year 1942
If. however. a credit for tax withheld at source on tax-free
covenant bond interest or a credit with respect to taxes with-
held under section 143 in the case of a nonresident alien required
to make a declaration is involved in either 1942 or 1943, and
before the allowance of such credit the estimated tax for 1943
exceeds
tax1.for 1942, the 1943 estimated tax should be
entered asthe
item
Armed Forces. -A taxpayer in the armed forces of the United
tax for 1943, may recompute his tax for 1942 by excluding from
his total income for such year the amount of his earned net
income. The reduced tax for 1942 will then be entered on the
declaration only if in excess of the estimated tax for 1943.
Joint Return.-I a joint return is made either for the taxable
year 1942 or for the taxable year 1943, the taxes of the husband
and wife for the taxable year for which a joint return is not
made shall be aggregated for the purpose of determining the
increase to be considered as a part of the 1943 tax.
If husband and wife filed & joint return for 1942 but file
separate declarations for 1943, and the 1942 tax is greater
than the aggregate of the estimated taxes shown on the separate
States or of any of the other United Nations during any part
declarations for 1943, the excess of 1942 over 1943 may be
Form 1040ES
divided in the separate declarations as the spouses may choose.
U. TREASURY PARTMENT
UNITED STATES
INTERNAL REVENUE SERVICE
of 1942 or 1943, whose tax for 1942 is in excess of his estimated
Declaration of Estimated Income and Victory Tax by Individuals
FOR CALENDAR YEAR, 1943
or fiscal year beginning
1943, and ending
(See accompanying INSTRUCTIONS)
1. Estimated Income and Victory Tax for 1943 Wark Sheet)
, 1944
$
(Enter (e) the tax liability uted on estimated 1943 income (see line 43 of Work Sheet)
GREATER.) tax shown on the 1942 Income Tax return (see Instruction on page 3). WHICHEVER IS
THIS COPY OF DECLA-
RATION AND WORK
2 Estimated tax withheld at source (see line 47 of Work Sheet)
SHEET TO BE RE$
3. ESTIMATED TAX after credits for withholding (item 1 minus item 2)
4. Total payments to collector (see line 50 of Work Sheet)
TAINED BY TAX-
5. Balance of estimated tax (item 3 minus item 4)
6. Amount paid with this declaration
PAYER
$
$
Social Security No., if any
I/we declare, under the penalties of perjury, that this declaration
PRINT NAME AND ADDRESS PLAINLY
has examined by me/us, and to the best of my/our knowledge
and belief true, correct and complete declaration made in good
faith. for the taxable year stated pursuant to the Internal Revenue
(Name) (Use given names of both husband and wife, if this is joint declaration)
Code and the regulations issued under authority thereof.
(Street and number, or rural reute)
(Signature of taxpayer or agent)
(City town)
10-00000-1
(Date)
(State)
(If this is joint declaration (not made by agent) a must be signed by both husband and wife)
F-14
206
Page 1
INSTRUCTIONS FOR DECLARATION OF ESTIMATED INCOME AND VICTORY TAX BY INDIVIDUALS
(FORM 1040ES)
PURPOSE OF DECLARATION
The purpose of the declaration is to make the individual income taxpayer whose tax is not fully collected at the source
current on his tax payments for the year 1943. Withholding
of tax at source does not make every one current in his tax
payments. In the first place, it applies only to certain wages
and salaries and not to other forms of income. such as interest,
dividends. rents, and business profits. In the second place,
the rate of withholding approximates only the net Victory Tax.
the normal Income Tax. and the surtax at the lowest bracket
rate. Therefore, in order to place all taxpayers on an equal
footing from the standpoint of being current in their Income and
Victory>Tax payments, the Act provides a second method.
Under this method the taxpayer will file a Declaration of Estimated Tax for the year and pay that estimated tax either in a
lump sum or in installments, just as he has in the past. But
there will be this difference-he will be paying during this
year_his tax on this year's income
Most taxpayers will not have to file declarations because
their income consists of wages subject to withholding and these
wages are not over the lowest surtax bracket. Examine the
groups described below under Who Must Make a Declara.
tion. You are not required to file a declaration unless you
come within one of those groups.
A penalty is provided for substantial underestimate of the
tax. However, no one who makes a careful estimate need in.
cur this penalty. If your estimate in your original declaration
or as revised in an amended declaration for a later quarter
equals at least 80 percent of your actual tax. there will be no
penalty. You may, if you find it necessary amend your declar.
ation as often as once in each quarter. The last date on which
you may amend your declaration is the 15th day of the last
month of your taxable year.
For taxpayers on a calendar year basis, there will be due
on March 15, 1944. the regular income tax return (Form 1040or.
1040A) for the calendar year 1943. Also on March 15, 1944.
there will be due the declaration (Form 1040ES) for the calen.
dar year 1944.
WHO MUST MAKE A DECLARATION
A declaration must be made by (a) every citizen of the
United States. whether residing at home or abroad. (b) every
dividual/residing in the United States though not citizen
thereof. and (c) every nonresident alien, a resident of Canada
or Mexico, whose wages are subject to withholding under the
Current Tax Payment Act of 1943, if he comes within any of
the following groups:
(1) Single or married but not living with spouse at the
date prescribed for the making of the declaration
(whether or not head of a family.) if he had for the taxable year21942. or reasonably expects to have for the
taxable year 1943.
(a) gross income of more than $2,700 from wages subject to
withholding: or
(b) gross income of more than $100 from sources other than
wages subject to withholding. and also gross income of $500 or
more from all sources.
(2) Married and living with spouse at the date pre-
scribed for the making of the declaration, if he had for
the taxable year 1942 or reasonably expects to have for
the taxable year 1943,
(a) gross income from wages subject to withholding which,
when added to gross income from such wages of his spouse
exceeds $3,500; or
(b) gross income other than from wages subject to withhold-
ing which, when added to gross income other than from such
wages of his spouse, exceeds $100, and also his gross income
from all sources exceeds $624 for 1943 or the aggregate gross
income from all sources of both spouses amounts to $1,200 or
more for either 1942 or 1943.
(3) Individuals. regardless of marital status. who were
required to file an Income Tax return for the taxable
year 1942 and whose wages subject to withholding for
the taxable year 1943 are reasonably expected to be less
than such wages for the taxable year 1942.
GENERAL INSTRUCTIONS
A. FILING OF DECLARATION WHERE INCOME IS
NOT SUBJECT TO WITHHOLDING-Ev though the
15. 1943, and (b) for a fiscal year on or before the 15th day
of the last month of any quarter of such fiscal year subsequent
not be subject to withholding. and may therefore have to file
a declaration Thus, military pay and compensation received
to that in which the original declaration or last amended
declaration was filed. Such amended declaration must be
filed with the collector of internal revenue with whom the
profession by the taxpayer are gross income not subject to the
D. PENALTIES. The following penslities ard imposed for
(1) Failure to File Declaration of Estimated Taz.- In the
case of a failure to make and file a required declaration of
estimated tax within the time prescribed, there shall be added
to the tax an amount equal to 10 percent of the tax.
individual receives compensation for personal services, he may
for agricultural labor or for domestic service or for services
performed as a minister of the gospel is not subject to withholding. In addition, dividends interest. rents, royalties and
the like gains from the sale or exchange of property, and
income derived from the carrying on of a trade or business or
is has
tax withheld at the source on wages.
B. JOINT DECLARATION.-M ba filed by husband and
wife only if they are (1) both citizens or residents of the United
original declaration was filed
(2) Failure to Pay Installment of Estimated Tax.- the
case of the failure to pay an installment of the estimated tax
within the time prescribed there shall be added to the tax
States and (2) living together when the declaration is filed.
Ajjoint declaration permissible even though one no gross
income In a joint declaration the aggregate income, deductions, credits, and tax are computed as though husband and
wife were one person. The liability with respect to the esti-
$2.50 or 21/2 percent of the tax. whichever is the greator, for
each installment with respect to which such failure occurs
separate returns for the taxable year and, in such case, the
estimated tax for such year may be treated as the estimated
tax of either the husband or the wife, or may be divided be-
such credits) and in the case of farmers, if 65% parent of the
may be taken by either husband or wife or divided between
of the amount by which the tax so determined exceads the
mated tax is joint and several
The filing of a joint declaration does not preclude the filing of
tween them. . Similarly, in such case, the personal exemption
them in any proportion
of
C. AMENDED DECLARATION. Amendment or revision
declaration (to be marked Amended") may be made
and filed (a) for the calendar year 1943 on or before December
(3) Substantial Underestimate of Estimated Tar In the
case of individuals other than farmora if 80 percent of the tax
(determine: without rezard to the credits for tax withh on
tax-free covenant bands and for Income and Victory Tax
withheld on wages) exceed the estimated tax (increase by
tax (determined without regard to such eredits) excerts the
estimated tax (increased by such credits), there shall be added
to the tax an amount equal to such excess. or equal to 6 percent
estimated tax so increased whichever is the lesser.
(4) Penalties provided for the willful failure to make a return
or for willfully making a false return are likewise applicable to
declarations.
206-A
TAXPAYER'S WORK SHEET
(Do not file with Collector)
Your tax liability on the declaration is based on your estimated 1943 tax, or your actual 1942 tax,
WHICHEVER IS THE GREATER
The schedules on pages 2 and 3 are furnished for the convenience of the taxpayer if he desires to use them
in estimating the tax on his 1943 income. In general, the items on the Work Sheet relating to Income Tax
are the same as on the Income Tax return, Form 1040. Information with respect to these items may be obtained from Form 1040 Instructions. Information relating to the Victory Tax appears on page 4 of these
instructions.
COMPUTATION OF ESTIMATED INCOME TAX NET INCOME AND VICTORY TAX NET INCOME*
Column
Column 2
.
Estimated Income Tax
Estimated Victory Tea
Net Income
Deductible
Amount
$
$
$
1. Salaries and other compensation for personal services
Expenses
$
ESTIMATED INCOME
Line No.
Net Income
2. Dividends
3. Interest on corporation bonds, bank deposits, notes, etc
4. Interest on Government obligations, etc.:
(a) Subject to surtax only
$
Less amortizable bond premium
(b) Subject to normal tax, surtax and Victory Tax
5. Rents and royalties
6. Annuities
7. (a) Net gain (or loss) from sale or exchange of capital assets
(b) Net gain (or loss) from sale or exchange of property other than capital assets
8. Net profit (or loss) from business or profession
9. Income (or loss) from partnerships; fiduciary income: and other income
Total estimated income in lines I to 9
100000
$
$
10.
ESTIMATED DEDUCTIONS
$
11. Interest. (See Instruction 21 (d).)
12. Taxes. (See Instruction 21 (d).)
13. Losses from fire, storm, shipwreck. or other casualty, or from theft
$
x
14. Contributions
x
15. Amortizable bond premium. (Do not include amount deducted in line 4 (a) above)
X
x
17. Tenant-stockholder's proportionate share of interest and taxes
18. Other deductions authorized by law
$16,000
over
ever
$20
excess
Over
$44,000
000.
Over
$50,000
$10,000.
Over
$12,000.
Over
Over
$70,000
Over
$90,000
4,000.
over
1,000.
over
8,000.
but not over $22 .000
but
not
eyes
$20,000.
$26,000
$6,940.
$
over
000
22,000.
plus
but
not
over
not
over
$26,000.
ever
over
Over $32,000 but not over $38.00
Over
not
$
but
Over
$2,000.
over
be
If the surior net income in
Over $26,000 but not over $32,000
not
not
x
The be:
13%
not
but
xx
SURTAX TABLE
Over 000 but not over $4 000
but
MANA
$
$
20. Estimated Income Tax net income (line 10. col. I. minus line 19, col. 1)
21. Estimated Victory Tax net income (line 10. col. 2, minus line 19. col. 2)
If the extra net income fat
Xx
x
Total estimated deductions in lines 11 to 18
Net over 82 000
xx
x
16. Medical, dental, etc., expenses
19.
xx
over
$50.00C.
$60,000.
over
Over
000
Over $150,000
Over $200,000
but
not
over
but
not
over
but
not
over
but
not
but
not
$32,000
$38,000
$44,000
over
excess
excess
10,000.
over
$80,000.
$90,000.
$100,000.
$150,000.
of
excess
over
where
(for
$200.0
applicable)
which The and
Formrequired
1040, for 1943.there
will conform substantially
except that
returntaxthe will tax percent
contain for 1942 two of additional 1943 which items ever use smaller;
and (2)
the
1943
the the
increase
dreferationwith this Work
The Sheet
than
$20,000
more
to
the
1943
CN
tax
here
the
the
in
(1)
surtax
net
inco
me
for
1942
or
1943,
by
hichever
is
in
increase
be
26
maller.
the
income
of
the
base
year
by
16-00000 I
207
July 14, 1943
3:30 p.m.
TAXES
Present:
Mr. Bell
Mr. Sullivan
Mr. Thompson
Captain Kades
Mr. Smith
Judge Opper
Mr. Surrey
Mr. Cann
Mr. Mooney
Mr. Atkeson
H.M.JR: I talked with Commissioner Helvering last
night. He said he was going to talk to Norman Cann this
morning, and he evidently had just gotten a copy of these
regulations and was just as disturbed as I was.
He said, "They just can't go out.' If I don't know
what he told you, but that is what he told me, anyway.
MR. CANN: He said, Mr. Secretary, that they were
complicated. Of course, even before he went away he had
tentatively seen some of them.
H.M.JR: He was pleased that we were doing something
about it.
Did he clear McNamara?
MR. CANN: Yes, sir, that is all taken care of.
MR. THOMPSON: He is over there now.
H.M.JR: Good.
Now, where is Paul?
MR. SURREY: He is tied up with this other conference.
H.M.JR: All right. Now, are you the spokesman here?
208
-2JUDGE OPPER: I don't think so, sir.
H.M.JR: Who is the spokesman?
MR. SULLIVAN: There are different ways of doing
this, Mr. Secretary. This morning Doctor Atkeson came
over and met with Mr. Thompson and Captain Kades and Mr.
Surrey and Fred and myself. There was a table drawn up on
one basis and then we discussed the possibility of a table
on an alternative basis.
I am very sure that everybody agrees that all of the
technical work is far from complete, but I think Norman
could describe both of those plans to you, and then you
could make up your mind whether or not you think we are
on the right track.
H.M.JR: All right.
MR. CANN: The f irst plan we had, Mr. Secretary,
worked from net income and the use of a table wherein
both the income and victory tax would be computed on that
net income. That was the table that Doctor Atkeson came
over with this morning and went over with these gentlemen
that Mr. Sullivan referred to.
Mr. Sullivan - and I guess some of the other folks suggested that it would be better to start with gross
income, more or less following more closely our simplified
form theory in that we would use an estimated figure to
take care of deductions such as interest, taxes, and contributions.
So we really stand right at the moment of working on
this last table so it is just a question really of deciding
whether we proceed from net income or from gross income.
From the viewpoint of the Bureau we can develop a table
either way, and we don't think there is a great deal of
difference one way or the other. We are willing, if it is
the consensus of opinion, to start from the gross income.
H.M.JR: From the standpoint of the impact on the
public, which is the better one to use?
209
-3MR. SULLIVAN: Our objection to the net income, Mr.
Secretary, is that there are so many people who have
filed an income tax return once, or haven't filed at all,
and net income as used in this form means the gross income
after certain statutory deductions have been taken.
I think the ordinary shipworker - if you ask him
what his net income was he would tell you it is what he
got less what it costs him to live. So it seemed to me
that that table started out assuming that laborers understood what we meant by net income, and I don't think that
they do.
H.M.JR: You didn't answer my question. Are you for
the net or the gross?
MR. SULLIVAN: I am for the gross if we can work it
out simply. I think we can.
MR. CANN: What we would like to do in that connection,
Mr. Secretary, however, is not to put the net or gross
income, as the case may be, on the form, but to use that in
our instructions and start with the estimated tax. We
think it would be batter, and, for that matter, it keeps
the form smaller and simpler.
H.M.JR: What do you think?
JUDGE OPPER: I haven't had a chance to look at this
in detail, Mr. Secretary.
MR. SULLIVAN: Now you are talking about what is
filed, Norman?
MR. CANN: Yes, the declaration.
MR. SULLIVAN: Those are two different things.
H.M.J JR: Well look, gentlemen, if I do nothing else
I want to impress upon you again - I want to add one thing -
210
4-
I have got to raise sixteen billion dollars in three weeks,
beginning with September 9, and during that time I don't
want the Treasury to do anything which will take the people's
minds off subscribing to this Third War Loan. And this
thing comes right in the middle, so for heaven's sake, make
it as easy as possible so that will give us time to get
by that period.
Then we have another four or five months to educate
these people. Congress will be here, and maybe we will
get something in January to ease this picture. Maybe we
can show them, when they come back, about this victory
tax and get a chance to get that thing changed, get it
consolidated into the thing, you see.
But please remember my Third War Loan Drive for six-
teen billion dollars starting September 9. I want just
as little confusion from the Treasury as possible during
that period. I can't do this work, but I can keep telling
you what I want.
MR. SMITH: If this big table works out that they are
working on now, it will be fine, because all a guy has to
know is how much he is getting.
H.M.JR: Would you be satisfied with that?
MR. SMITH: Yes. He has to make just one small com-
putation. I think it can be written in such a way that
it looks very simple.
H.M.JR: Bell?
MR. BELL: It worries me a little to think that you
can put it on a gross income basis. I think it might
simplify it for September, but it doesn't simplify it for
the following periods.
H.M.JR: Let's put off the day of reckoning as long
as possible.
MR. BELL: How can you estimate what a man's interest
is on his house?
211
-MR. SULLIVAN: Dan, we do it exactly as we did in
the simplified form. We took the average deductions in
each bracket and put them in there.
Now remember, Dan, this isn't the form he has to
use. There is an alternate form that figures it exactly.
MR. BELL: That is the reason I wondered if it wouldn't
be better just to say that this is your net income less
your exemptions, if you fall in a certain bracket; and this
is your tax. If you want to take a credit for other things
like interest and items of that kind, then you use the
more complicated form.
MR. SURREY: This would give you an average amount of
deductions that would result generally in overpayment of
tax for people who had homes. That overpayment is not
necessarily bad, because people are going to owe more money
on March 15 due to the fact that the Congress only forgave
seventy-five percent of the tax, and that twenty-five
percent is not collected currently during the year.
MR. BELL: Let them take credit for the overpayment.
MR. SURREY: That would really be charged against
the additional amount they owe in March if they didn't
get a hundred percent forgiveness. Since you are doing
them a favor if you make the table higher than their
actual tax should be-MR. CANN: This was a very substantial sample, wasn't
it, Tom?
MR. ATKESON: Yes.
MR. CANN: We think that part of it is O.K.
MR. BELL: I should think you would have a lot of
adjustments to make.
MR. CANN: We may have a lot of refunds, but that
isn't worrying us. That is one of those intangible things.
212
-6
Right at the moment we are not letting that sway us.
MR. BELL: If you can take credit on your March
tax, that will satisfy it.
MR. CANN: It won't save us the book work.
do.
MR. BELL: It is probably the simplest thing you can
H.M.JR: Kades?
CAPT.KADES: If you hit the - I think it is perfectly
all right to overpay the tax, because if you hit it right
on the nose on March 15, you are going to - most taxpayers
are going to wake up and find that they owe twenty-five
percent more than they thought they owed.
MR. SULLIVAN: Twelve and a half percent.
CAPT. KADES: Yes. I don't see any disadvantage to
erring on the side of their making some overpayment. It
won't be much of an overpayment, anyway.
H.M.JR: But as somebody said, we are doing it for
the convenience of the taxpayer.
CAPT. KADES: That is right.
MR. BELL: The overpayment is for the convenience
of the taxpayer?
H.M.JR: Take the simple form - if he doesn't want
to do it, he doesn't have to.
MR. CANN: As a matter of fact, the taxpayer doesn't
have to take either of these instructions. He can take
the form himself if he so desires - he can take his 1942
tax return and his instructions, make his estimate of his
credits and compute it without regard to either of these
instructions if he so wants to do it. That means that he
is going to do a lot of paper and pencil work, but he can
do that, and some of them, Mr. Secretary, are going to do
that.
213
-7 H.M.JR: Well now, how soon, John, do you think they
are going to have this thing so it can go to the field?
mean?
MR. SULLIVAN: So that it can go to the printer, you
H.M.JR: Yes.
MR. SULLIVAN: I should think tomorrow afternoon or
Friday afternoon.
MR. CANN: Mr. Secretary, if you tell us that we have
got to complete - everybody concerned - consideration of
this thing so I can send the proof over to the printer
tomorrow night, we in the Bureau will do our darnedest,
because the printer has told me a very sad story, which
you don't want to hear. He is going to see me, and I may
call for help from Mr. Sullivan here.
H.M.JR: No, Norman Thompson is the man to help you.
MR. SULLIVAN: I did pretty well on this last one,
boss. (Laughter)
H.M.JR: O.K. Then don't go to Norman; he has enough
troubles. I didn't know you had contacts there.
MR. SULLIVAN: Oh, yes, we were in trouble on a lot
of things, and they were perfectly swell, weren't they,
Norman? They did everything they could.
MR. CANN: We can't complain of any lack of cooperation.
They have just got a tremendous job.
MR. SULLIVAN: This withholding instruction for employers was as good and big a job as they have ever done.
H.M.JR: All right. It suits me to get it out of
here Thursday night, but I am all tied up tomorrow morning.
If you want to see me, you would have to see me right after
lunch tomorrow.
214
-8MR. CANN: I don't see why, if the gross income is
agreeable to him (the Secretary)-MR. SULLIVAN: He might want to-H.M.JR: There are enough people in the room who can
pass on this without showing it to me. I want to be sure
from the public relations angle that Fred Smith is satisfied.
MR. SULLIVAN: What I was going to suggest is that
we meet in my room at two tomorrow; and then call you,
and if you wanted to see it, first rate. Would that time
be agreeable to you?
MR. CANN: It is entirely satisfactory to us. We may
not have it in as good shape, but at least in such shape
that we can change it and get it in such shape as we can go
and get approval.
H.M.JR: I want to be sure from Fred Smith's stand-
point. After we get it to the printers, I want to have
submitted to me what you are going to do to educate the
people on this thing. I want a publicity program.
MR. CANN: We do, too, Mr. Secretary. Of course, I
would like to say that in that connection, as far as is
possible, I would feel lots better if our publicity goes
out under the Treasury signature than any other, because
I think the tax-paying public will have a little more
faith in that.
H.M.JR: I think it should. What we are trying to
do is to tie all publicity here under one head. That head
is not Smith, but Smith advises me personally on public
relations, you see. Whether our man Jack Louis can handle
all this, I don't know.
JUDGE OPPER: Mr. Secretary, I feel, assuming now
that this thing is practically settled, that there is one
thing that ought to be brought out in the open just so
there is no possibility that we didn't think about it. It
215
-9seems to me there is a possibility that a fellow by
under-estimating his income and using this form will get
down to below the twenty-percent level.
I am satisfied that the Treasury won't get to first
base prosecuting him, and I am satisfied that the sensible
thing to do is to say that that fellow acted in good faith,
and nothing happens to him. But I am also assuming that
there are always snipers and that somebody will come along
and say, "Congress passed the law this way. It said there
would be a penalty when a fellow under-estimated his taxes
by twenty percent. The Treasury has come on and is breaking
the law, and it is responsible for making a nation of lawbreakers by issuing this form."
The only reason I raised the point is, I think something can be done about it.
H.M.JR: What can be done?
JUDGE OPPER: I suggest two things, one a statement
on the form itself which cautions people that they must
make their estimate of income as accurately as possible
because of the twenty-percent penalty. That, of course,
is something that is in the fellow's own head. He can
make any guess he wants to. The form isn't going to
affect that.
The other thing is to perhaps take advantage of your
suggestion of yesterday and advise the members of the
Committee of what you propose to do.
H.M.JR: Well, I would like them to consider both of
those things as they go along.
MR. CANN: On the first point, Clarence, yesterday
it was more or less agreed that we didn't want to, in
the simple form, include any reference to penalties.
Now, in the first form and accompanying instructions
there are specific directions.
JUDGE OPPER: I am talking about the simple form.
What I mean by reference is a very simple reference, one
216
- 10 -
that is couched in very simple language that isn't going
to confuse anybody. As a matter of fact, Chuck and I
prepared a draft, not with the idea of that being the
one that would be used, but just to see what it would
look like if you had something like that.
CAPT. KADES: Why don't you read it?
JUDGE OPPER: It is only four lines.
H.M.JR: Go ahead.
JUDGE OPPER: I ought to say as a preface that I
assume you are going to start by filling in your estimate
of income. I understand that Norman doesn't like that
idea, but I have to go on assuming that. "The amount
you fill in on line number one is your best guess of
your total income for the year 1943. While it is only
an estimate"--
H.M.JR: Do you mind if I change the words "best
guess" to "estimate"?
JUDGE OPPER: I thought "guess" was a more homely
word. I was deferring to Fred Smith.
"While it is only an estimate, you should be careful
to figure it as accurately as you can, because the law
provides a penalty for understating the tax by more than
twenty percent.
MR. BELL: Why not say, "In order to avoid penalty"?
JUDGE OPPER: All right. But it seems to me, then,
that is number one warning that people aren't being--
H.M.JR: If they think it is all right-MR. SULLIVAN: It has to be on this in one form or
another. It is on here in one form.
H.M.JR: That is a very simple form. If that is the
Smith influence on the Judge, it is very good. (Laughter)
MR. MOONEY: Also change "tax" to "income."
217
- 11 MR. CANN: Then you don't need to put the income
on the declaration.
MR. MOONEY: Change the word "tax" to "income," and
you are all right.
JUDGE OPPER: You mean in the first part? That is a
matter of detail. I think, myself, it is better to have
it "income" on it. That would be my vote.
MR. SULLIVAN: Aren't we getting into a field now
that we ought to be working on ourselves and not wasting
the Secretary's time on?
H.M.JR: Can you see these boys through tomorrow?
JUDGE OPPER: I will try very hard to get down for a
few minutes tomorrow.
MR. SULLIVAN: Why can't we get on this right away?
MR. CANN: I think we can decide the majority - as a
matter of fact, if we don't decide them this afternoon, we
can't get the proof out. Because of the technical work we
have to decide these technical questions now.
H.M.JR: All right.
2184
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
July 14, 1943.
MEMORANDUM TO THE SECRETARY:
You asked me today to furnish you a memorandum on the amount
of income taxes we were supposed to get in June as compared with
our estimate for that month.
We estimated that we would get a total of $4,364 million in
income taxes during the month of June. We actually received
$3,803 million, or $561 million less then our estimates. During
the first twelve days of July we estimate that we have received
approximately $300 million in income taxes in excess of the normal
monthly receipts, so that we have received approximately threefifths of 'the amount we failed to get in June.
In this connection I thought you might be interested in the
total budgetary picture for the fiscal year 1943 which ended
last June 30.
The budget estimated that we would receive total revenue of
$23,476 million and we actually received $22,282 million, or
$1,194 million less than the estimates. The budget estimated
that we would receive $17,571 million in income taxes and we
actually received $16,094 million, or $1,477 million less than the
estimates. Mr. Haas says the failure to receive this $1,477 million
in the fiscal year 1943ath due largely to the discussion of the Ruml
Plan, which caused a great many people to pay their taxes quarterly
instead of in full as heretofore. He still insists that the liability
for the full account of the year is there.
The budget estimated that we would spend during the fiscal year
1943 A total of $80,432 million, whereas the actual expenditures were
$78,179 million, or $2,253 million less than the estimates, which
more than offset the falling off in anticipated revenue.
Included in the budget expenditures was an estimate of $74 billion
for account of all war activities, whereas we actually spent $72,109
million or $1,891 million less than the estimates.
PORVICTORY
BUY
WAR
BONDS
STAMPS
awB
219
July 14, 1943.
My dear Mr. Carters
I have received your personal communication of July 7 together
with copy of the letter written to you on April 15 by your son, Amon Jr.,
who is a prisoner of war in Germany. I observe that despite his present
predicament, he is concerned about the payment of his income tax.
Your advice to him not to worry about his income tax at this time
was entirely proper in all respects. Public Law 490 of the 77th Congress
approved March 7, 1942, provides that no Federal income tax return of,
or payment of any Federal income tax by, any individual in the military
or naval forces of the United States serving on sea duty or outside the
continental United States at the time any such return or payment would
otherwise become due, shall become due until the 15th day of the Srd
month following the month in which he returns to the States. I am
unable to determine from your letter, or from his, whether there are
any assessed income taxes outstanding against him, or whether he is
merely concerned about the filing of his return and paying his taxes
for 1942. If there are assessed taxes outstanding against him on the
books of the Collector of Internal Revenue, the latter should be
advised of Amon Jr.'s status so that the account may be properly noted
to insure against any unnecessary 8 llection activity by the Collector.
If, on the other hand, Amon Jr.'s concern is confined to the filing of
his return for 1942, there is no need, under the terms of the Law above
referred to, for him to worry about this. It can be taken care of when
he gets home.
Amon Jr.'s letter provided very interesting reading and naturally
I am very happy to know that he is alive and well. The loss of weight
is understandable under the circumstances. I earnestly hope that it
will not be long before he can be back home with you.
Sincerely,
(Signed) M. Mergenthau, Jr.
Secretary.
Mr. Amon G. Carter,
Fort Worth, Texas.
JUL 14 1949
Winning 7-14-43 7-14-43
m
220
FORT WORTH STAR-TELEGRAM
SUNDAY
EVENING
MORNING
FORT WORTH,TEXAS
AMONG.CARTER,PRESIDENT
RECEIVED
July 7, 1943.
S m pay
then
JUL 13 1943
www.
a
CANK
Assistant
PERSONAL
Honorable Henry Morgenthau, Jr.,
Secretary U. S. Treasury,
axC-cal
INTERNAL REVENUE BUREAU
Washington, D. C.
JUL 13 1943
office of Depart Commissioner
Accounts and Collections Wall
Dear Mr. Secretary:
A friend of mine in Tort Worth,
Leo Potishman, President of the Transit Grain and
Commission Company, recently sent out a unique little
paper weight. I am not sure whether he received
permission from you to distribute gold in this manner
or not; however, as you are the custodian of all
the metal of this kind in this country, I thought it
would be appropriate to send you one of the paper
weights. The coins used therein are guaranteed not
to turn after they get their natural color.
Enclosed you will find a photostatic copy of a letter I received from my son, Amon
Jr., who is a Prisoner of War in Germany. You will
note he made inquiry as to how he could pay his income tax. In my reply I told him I was encountering
some difficulty in being able to figure that out for
myself. It did strike me as unique with all of his
other troubles and receiving only two meals a day,
having lost forty pounds in three months internment,
that he should be interested in wanting to know how to
pay his income tax. I've told him not to worry that he
could take care of it when he gets home and that in
the meantime I was trying to contribute a sufficient
amount to help absorb the small amount he would owe.
With best wishes, I am
RECEIVED
Sincerely,
SPEO CORRES CONT.
JUL 13 1943
BUR IN' nov
AGC.KD
NO
30719
Flbrees
221
(T. D. 5149)
TITLE 26 - INTERNAL REVENUE
CHAPTER I
SUBCHAPTER A - PART 19
INCOME TAX
Regulations 103 amended to conform to Public Law 490
(77th Congress). postponing due dates for income tax
returns and payment of income taxes in case of certain
individuals in the military or naval forces of the
United States and certain civilian employees of the
United States.
TREASURY DEPARTMENT
Office of Commissioner of Internal Revenue,
Washington, D. C.
TO COLLECTORS OF INTERNAL REVENUE
AND OTHERS CONCERNED:
In order to conform Regulations 103 Part 19, Title 26, Code of Federal
Regulations, 1940 Sup to Public Law 490 (77th Congress), approved March 7, 1942,
such regulations are amended as follows:
Paragraph 1. Section 19.53-1 is amended by adding at the end thereof the
following sentence:
"For provisions relating to the time for filing income tax returns in
the case of certain individuals in the military or naval forces of the
United States who are serving on sea duty or outside the continental
United States, and in the case of certain civilian employees of the
United States who are prisoners of war or otherwise detained by any
foreign government with which the United States is at war, see section
19.56-1(b)."
Par. 2. The first sentence of section 19.53-4 is amended to read as follows:
"The due date is the date on or before which a return is required to
be filed in accordance with the provisions of the Internal Revenue
Code, or, in the case of certain individuals, in accordance with the
provisions of Public Law 490 (77th Congress), approved March 7, 1942
(see section 19.56-1(b)). or the last day of the period covered by an
extension of time granted by the Commissioner or a collector."
Par. 3. Immediately preceding section 19.56-1, the following is inserted:
PUBLIC LAW 490 (77th CONGRESS), APPROVED MARCH 7, 1942.
That for the purpose of this Act (a) the term "person" means (1) commissioned officer, warrant
officer, enlisted person (including persons selected under the
(over)
222
(T. D. 5149)
(2. D. 5149)
Selective Training and Service Act, as amended) member of the Army or
Navy Nurse Corps (female), wherever serving: (2) commissioned officer
of the Coast and Geodetic Survey or the Public Health Service: and (3)
civilian officers and employees of departments, during such time as
they may be assigned for duty outside the continental limits of the
United States or in Alaska:
(d) the term "department
means any executive department,
independent establishment, or agency (including corporations) in the
executive branch of the Federal Government.
(3) the fifteenth day of the third month following
the month in which an executor, administrator, or conservator of the estate of the taxpayer is appointed.
Such due date is prescribed subject to the power of the Commissioner of
Internal Revenue to extend the time for filing such return or paying such
tax, as in other cases, and to assess and collect the tax as provided in
sections 146, 273, and 274 of the Internal Revenue Code in cases in which
such assessment or collection is jeopardized and in cases of bankruptcy
or receivership. For the purpose of this section, the term "continental
United States means the States and the District of Columbia, and the
terms "individual" or "member" of the military or naval forces of the
United States means any person in the Army of the United States, the
United States Navy, the Marine Corps, the Army or Navy Nurse Corps (female),
the Coast Guard, the Coast and Geodetic Survey, or the Public Health
SEC. 13. Notwithstanding any other provision of law, in the case
of any taxable year beginning after December 31, 1940, no Federal
income-tax return of, or payment of any Federal income tax by-
(a) any individual in the military or naval forces of
Service.
SEC. 14. The provisions of this Act, applicable to persons in the
hands of an anemy, shall apply to any person beloaguered or besieged by
enemy forces,
the United States, or
(b) any civilian officer or employée of any department
who, at the time any such return or payment would otherwise become due,
is a prisoner of war or is otherwise detained by any foreign government
with which the United States is at var, or
(c) any individual in the military or naval forces of
the United States serving on sea duty or outside the continental United States at the time any such return or payment
would otherwise become due,
shall become due until one of the following dates, whichever is the
earliest:
(1) the fifteenth day of the third month following
the month in which he ceases ('except by reason of death
or incompetency) to be a prisoner of var, or to be detained by any foreign government with which the United
States is at war, or to be a member of the military or
naval forces of the United States serving on sea duty
or outside the continental United States, as the case may
be, unless prior to the expiration of such fifteenth day
he a prisoner of war, or is detained
government withis
which
the United
at war,
foreign
States
by ofisany
or
a memberisofagain
the military or
naval forces
the
United States serving on sea duty or outside the conti-
nental United States:
(2) the fifteenth day of the third month following
the month in which the present war with Germany, Italy,
and Japan is terminated, as proclaimed by the President:
or
Par. 4. Section 19.56-1 is amended by inserting immediately preceding the
first sentence "(a) In general. and by inserting at the end of such section the
following now paragraph (b):
"(b) Certain individuals in military or naval forces of United
States and certain civilian employees of United States. This paragraph
(b) applies only to returns and payment of tax for taxable years beginning after December 31, 1940. For the purposes of this paragraph
(b), the terms defined in Public Law 490 (77th Congress), approved
March 7, 1942, shall have the meanings 80 assigned to them.
"Under the provisions of sections 13 and 14 of Public Law 490, the
due date for any income tax return and for any payment (including any
installment payment) of income tax is postponed in the case of any in-
dividual in the military or naval forces of the United States who, at
the time the return or payment would otherwise become due, is serving
on sen duty or outside the continental United States. The new due date,
in the case of any such postponement, is the 15th day of the third month
following the month in which the individual ceases (except by reason of
death or incompetency to be a member of the military or naval forces of
the United States serving on sea duty or outside the continental United
States, unless prior to the expiration of such 15th day he is a prisoner
of war of, or is detained by, any foreign government with which the
United States is at war, or is beleaguered or besieged by enemy forces,
or is again a member of the military or naval forces serving on 808 duty
or outside the continental United States.
"Under the provisions of sections 13 and 14 of Public Law 490, the
due date for any income tax return and for any payment (including any
installment payment) of income tax is also postponed in the case of any
individual in the military or naval forces of the United States of any
(over)
223
(1. D. 5149)
(T. D. 5149)
continental United States for duty, and does not again serve outside the
continental United States before May 16, 1943. The last three installments
on A's income tax for 1941 all become due on May 15, 1943, that is, on the
15th day of the third month following the month in which he ceased to serve
outside the continental United States."
civilian officer or employee of any executive department, independent
establishment, or agency (including corporations) in the executive
branch of the Federal Government who, at the time the return or payment
would otherwise become due, 15 a prisoner of war of, or is otherwise
detained by. any foreign government with which the United States is at
war, or is beleaguered or besieged by enemy forces. The new due date,
in the case of any such postponement, is the 15th day of the third month
following the month in which the individual ceases (except by reason of
death or incompetency) to be such a prisoner, or to be so detained, beleaguered, or besieged, unless prior to the expiration of such 15th day
he is a member of the military or naval forces of the United States
serving on sea duty or outside the continental United States, or is again
such a prisoner, or so detained, beleaguered, or besieged.
Par 5. Section 19.217-1 is amended by inserting after the first sentence
thereof the following sentence:
the case United
"For provisions relating to the time for filing income tax returns in
of certain individuals in the military or naval forces of the
United States and certain civilian employees of the States, 500
section 19.56-1(b).
Par. 6. Section 19.218-1 is amended by adding at the end thereof the
"The now due date, if it has not previously occurred pursuant to
the preceding provisions of this paragraph (b), is the earlier of the
two following dates:
following sentence:
"For provisions relating to the time for payment of the tax in the case
of certain individuals in the military or naval forces of the United
"(1) the 15th day of the third month following the month
in which an executor, administrator, or conservator of the
estate of the taxpayer is appointed; or
States and certain civilian employees of the United States, see section
19.56-1(b).
ed.
(This Treasury decision is issued under the authority contained in sections
62 and 3791 of the Internal Envenue Code (53 Stat. 32, 467, 26 U.S.C., 1940
62, 3791) and sections 1, 13, and 14 of Public Law 490 (77th Congress), approved
((2) the 15th day of the third month fellowing the month
in which the present war with Germany, Italy and Japan is
terminated, as proclaimed by the President.
March 7, 1942.)
*See sections 19.53-1 to 19.53-4, inclusive, for provisions relating
to the time when an income tax return would otherwise (that is, but for
sections 13 and 14 of Public Law 490), become due.
GUY T. HELVERING,
Commissioner of Internal Revenue.
"In case the due date for paying the tax (as distinguished from the
due date of an installment of the tax) is postponed under the provisions
of Public Last 490, the tax may, at the option of the taxpayer, be paid
in accordance with the provisions of section 56(b) of the Internal Revenue
Code in four equal installments instead of in a single payment. In such
case the first installment is to be paid on or before the new due date
prescribed by the provisions of Public Law 490, the second installment on
or before the 15th day of the third month, the third installment on or
before the 15th day of the sixth month, and the fourth installment on or
before the 15th day of the ninth month, after such new due date.
Approved: May 11, 1942.
JOHN L. SULLIVAN,
Acting Secretary of the Treasury.
(Filed with the Division of the Federal
Register, May 12, 1942, 11:36 a.m.)
"In case the due date for paying an installment of the tax (other
than the first installment) is postponed under the provisions of Public
Law 490, the due date of each such installment so postponed is the single
date prescribed by such provisions. The preceding sentence may be
illustrated by the following example:
"Example: A, a member of the United States Army, is within the
continental United States when his income tax return and tax for the
calendar year 1941 become due. and he files his return and pays the
first installment of the tax on or before the due date. A serves on
duty outside the continental United States on the dates (June 15,
September 15, and December 15, 1942) when the remaining three install=
monte normally are payable. In February 1943 he returns to the
)
form
Dear Folks;
April 15, 1943
m
224
Have been in hospital 9 days with jauntis but am
feeling better. Please thank Ben Keith for pecans, Beatrice
for her box which I got Feb. 10th, Katrine and Carl for theirs
and Mary Habel, 22 Miami Road, Pontiac, for money belt. British
and Australian officers all want to visit States 80 send me some
railroad maps, information, & rates, especially a lot about
Texas and Ft. Worth, N. Y., Louisiana, Calif., and West. Also
see if you can send me air mattress in clothing parcel with
pajamas, shorts, socks, green gaberdine army shirt, Lieut. bars
and artillery insignia, also my hats if they are sent home from
Africa. Need pocketbook too. In food line can use meats, mixed
fruits, chili, vegetables, powdered eggs, crackers, catsup,
spreads, strawberry Jam, peanut butter, powdered milk, sausage
and cheese. I hate to ask for so much but we need it because
of our diet. When you write use etamped envelop and typewriter
because they are censored quicker. We can receive all letters
and packages you can send. Send one box of cigars a week, Robert
Burns, Travis Club, Roitan, El Trellis, just rotate them each
week. If anyone writes about me give them my address and tell
them to write me although I won't be able to write them often.
Also have them send me their enapshot. Send me all your pictures
plus air photo of house. Don't worry because I am fine although
life behind wire isnt too much fun. I did my best in Africa and
after 9 days behind German lines the Arabs caught me and stripped
225
-me of everything. Maybe you can collect the insurance on my
cameras which Arabs stole. Give Ruth, Katrine & Carl, Beatrice
my love. Also Mabel, Stanley, Bill and everyone. Write and tell
me all the news often. Find out how I pay my income tax. Can't
tell you how much I miss you, and home. Try and write about
every day although I can't. Send me newspaper clippings if
possible. All my love,
Amon Jr.
226
april 15,1943
Dear telhs, Have basin hospital 9 days with jounter but am
fully letter Phone thank Bankintt please, Beatis fortunber which 2 got
Fit 10th later adk their + man Habel 22 Miami Road Ponties for
Kriegsgefangenenpost
PAR ANTOOL
TAXE PERSUE
CENSE
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S
MIT Lut POST
-405 RM
EXAMINED
many but British + Australian officers all want to visit State send
And some viland maps, information, rates, especially lot about Jefas and
It. word n.y have Calif, + West also see if you can send me air
By 592 8
mattres in lithing parel with pajamas, shortes soche, grangeletive
MR.+ MRS. AMON CARTER
anyshirt, hist has artillary insignia alonemy hate it they as sent
:
Emplangsort: STAR TELEGRAM
Straße: FORT WORTH,
Kreis: TEXAS
Light
Land: U.S.A.
Gebührenfreil
Landaste.1 (Provise www.)
Z/V *
5651
autunz pun A
If the NOWH 17
home from efficient need parkathook too. In food line comme meate,
ad fruits, chili vegetables, produced eggs, mater, cotomp speeds,
standing form, present butter, produced milk, saurage + cheese elete
trackford but we need it because of our diet When you
write use stamped envelop and typewriter because they are censored
with W, can share all letter and packages you can send
find one box of cigar a week, Robert Burns, Fravis Club, Portan, Wellie
just rotate them each week. If amone writer about me give them
my address and tell them to write me although d won't leable t
write them ptem. Also have them send me their mopolet send
me all your pictures plus air photo of house. Don't worry because
Iam fine though life behind wine isn't tor much fun
Only last - africa and after 9 days behind German
lines the lake caught me + striped me of everything Mayle you
can collect the insurance on my cameras which aroba stole.
Gave Rath Nature Card Bestur my love. aler malel, study, Birly
integrate Write and tell me all the news often. Find out how I
pay 7 income tax Can't tell you how much & miss you,
, home Try and write about way day although I can't
Send ml discharge chipping of possible. all my lovey
amon Jr.
227
July 14, 1943
My dear Mr. President:
I think you might be interested
in correspondence between Admiral King
and myself.
I am tremendously pleased with
the cooperative attitude that Admiral
King has taken in regard to War Bonds.
Yours sincerely,
(Signed) H. Morgenthan, Jr.
The President,
The White House.
By Messenger Simmons 3 p.m.
Photo of Adm. King' S ltr. and
copies of Secy' S ltrs. in Diary.
228
JUL 9 1943
Dear Admiral King:
Following our conversation of yesterday, I have had Mr.
E. F. Bartelt, Commissioner of Accounts, discuss with Rear
Admiral W. J. Carter, Assistant to the Paymaster General of
the Navy, the procedure for handling War Bond allotments by
officers and enlisted men of the Navy.
Mr. Bartelt tells me that there was recently installed
under the direction of Admiral Young, Paymaster General, a
simplified procedure for handling bond alletments of Navy per-
sonnel, similar in principle to that followed by the Army in
handling bond alletments of its commissioned and enlisted per-
sonnel in active service at home and abroad. In fact, I understand that the streamlined Army procedure although involving
the use of different type of equipment was patterned largely
along the lines of that worked out by Admiral Young for the
Navy.
Briefly, the procedure involves simply the filling out by
the officer or enlisted man of a bend-alletment authorisation,
and the deduction by the disbursing officer of the amount from
the allotter's pay. The alletment form is usually filled out
at an induction center, at the time the allotment is made for
insurance, dependents, etc.
229
-
The disbursing officer deducts the bond allotment from the
man's pay along with the deductions for insurance, dependents, and
any other allotments which he desires to white. Except for this
there is no paper work by the officers or men attached to the task
forces. They do not issue or handle the bonds.
Admiral Young has set up a Field Branch of the Bureau of Supplies
and Accounts at Cleveland Ohio, where all Navy alletments are handled,
including those for the purchase of War bonds. The allotment authori-
sation filled out by the officer or enlisted man is sent to the
Cleveland office where the necessary bond issuance records are main-
tained. From this point the procedure is more or less automatic and
does not involve the task forces in any way.
The bond is inscribed as requested in the man's alletment au-
thorisation, 1.0., (1) in the name of the alletter only, (2) in the
name of the allotter and a co-owner, or (3) in the name of the
allotter and a beneficiary, payable on death of the allotter.
Bonds are not delivered to a ship or point outside the United
States. They are, however, delivered to any address within the con-
tinental limits of the United States. When requested by the allotter,
they will be delivered in care of a designated person, bank, or other
institution, or they may be sent to the Federal Reserve Bank of
Cleveland for dustody and safekeeping for the owner.
The procedure as explained by Admiral Carter appears to have
all the advantages of simplicity which we discussed. In fact, the
procedure appears to be identical in principle with the one I
230
-suggested, the only difference being that the alletments are handled
through Admiral Young's office at Cleveland, instead of by the
Secretary of the Treasury. It is also to be noted that the procedure is similar in principle to that followed by the Army in
handling the bond allotments of soldiers at Tunisia and elsewhere.
Admiral Carter indicated that the participation of Navy commissioned and enlisted personnel in the bond program is coming
along very nicely. Allotments in force increased from 50,000 on
March 31; to 80,000 on May 31, to 107,000 on June 30, and to
277,000 on July 7. The dollar value of the allotments are now about
$6,900,000, which is at an average of almost $25 a month, and the
indications are that the number and amount of alletments will increase
considerably from month to month. I understand that 129,000 men are
buying a bond every month; that 148,000 are buying a bond every three
months; and that this fine record has been achieved on a purely
voluntary basis without undue exertion of any kind, Incidentally,
these figures are exclusive of 35,000 active accounts of the Marine
Corps and 25,000 of the Coast Guard.
Sincerely,
(Signed) E. Margasteen, Jr.
Secretary of the Treasury.
Admiral Ernest J. King,
Commander in Chief,
United States Fleet,
Washington, D. C.
EFB/gwm
7/9/43
UNITED STATES FLEET
FILE
HEADQUARTERS OF THE COMMANDER IN CHIEF
NAVY DEPARTMENT, WASHINGTON, D.C.
July 12, 1943,
Henry Morgenthau, Jr.,
eeretary of the Treasury,
Treasury Department,
ashington, D. C.
Dear Mr. Secretary:
I have received your letter of July 9 relative to the procedure for handling Yar Bond allotments by officers and enlisted men
of the Navy.
I am this date recommending to the Secretary of the Navy
that he promulgate to all ships and stations a letter clarifying the
procedure for the purchase of War Bonds by those officers and men sts-
tioned outside the continental limits of the United States. This proposed letter directs that adequate facilities be made available to
assure all officers and enlisted personnel the opportunity of register-
ing alletments for the purchase of War Bonds. Competitive campaigns,
or ratings, or high pressure selling campaigns are not, however, to be
conducted for the reason that this would not be appropriate to the work
the operating forces are required to do.
Ships and stations are advised that issuing agencies have
been established at bases outside the United States for the cash sale
of bonds, and that other agencies with trained War Bond Sales Officers
in
will be established upon the recommendation of the Fleet Commanders
Chief concerned. Naval agencies are not to be established at those
stations where naval personnel are adequately served by Army organizations.
The proposed letter, as drafted for the Secretary of the Navy
will best meet the requirements of Naval, Marine and Coast Guard per-
sonnel in the war areas without being detrimental to their actual conbat effort.
Your help and interest are such appreciated.
Sincerely yours,
Ething
Admiral, U S. Navy.
232
THE WHITE HOUSE
WASHINGTON
July 14, 1943
My dear Mr. Secretary:
The President has signed the desig-
nation of Mr. E. F. Bartelt as Chairman of the
Interdepartmental Committee for the Voluntary
Pay roll Savings Plan for the Purchase of War
Savings Bonds, created by Executive Order No.
9135, dated April 16, 1942, submitted with
your letter of July thirteenth.
The designation is herewith returned.
Very sincerely yours,
WHM Intyre
M. H. MCINTYRE
Secretary to the President
The Honorable
The Secretary of the Treasury,
Washing ton, D. C.
Enclosure
233
THE WHITE HOUSE
WASHINGTON
July 14, 1943
Dear Mr. Bartelt:
You are hereby designated Chairman of the Interdepartmental Committee for the Voluntary Pay Roll Savings
Plan for the Purchase of War Savings Bonds, created by
Executive Order No. 9135, dated April 16, 1942. You will
succeed Rear Admiral Charles Conard, USN, who has been
detached from duty as Chairman of the Interdepartmental
Committee and ordered to report to the Senior Member of the
Compensation Board, Navy Department, for duty.
Sincerely,
Mr. E. F. Bartelt,
Commissioner of Accounts,
Treasury Department,
Washington, D. C.
234
JUL 13 1943
My dear Mr. President:
As you know, Hear Admiral Charles Conard has been
serving as Chairman of the Interdepartmental Committee for
the Voluntary Pay Roll Savings Plan for the Purchase of War
Savings Bonds. The Secretary of the Navy has relieved
Admiral Conard of this assignment and ordered him to report
to the Senior Member of the Compensation Board, Navy De-
partment, for duty.
Mr. E. F. Bartelt, Commissioner of Accounts,
Treasury Department, has been serving as Vice-Chairman
of the Interdepartmental Committee, and I recommend that
he be designated as Chairman. I on enclosing s letter of
designation for Mr. Bartelt for your signature if you approve.
Faithfully yours,
(Signed) H. Morgenthau, Jr.
By Messenger Sturgis 4 p.m.
Copies to Mr. Thomoson.
The President
The White House
WNT:fw
7/12/43
Copy of ltr. and enclosure in Diary.
235
Dear Mr. Bartelt:
You are hereby designated Chairman of the Interdepartmental Committee for the Voluntary Pay Roll Savings
Plan for the Purchase of War Savings Bonds, created by
Executive Order No. 9135, dated April 16, 1942. You will
succeed Rear Admiral Charles Conard, USN, who has been
detached from duty as Chairman of the Interdepartmental
Committee and ordered to report to the Senior Member of the
Compensation Board, Navy Department, for duty.
Sincerely,
Mr. E. F. Bartelt,
Commissioner of Accounts,
Treasury Department,
Washington, D. C.
WNT/fw
7/12/43
236
7/14/43
Dan Bell.
The Secretary.
I wish you would call up the Under Secretary of the
Treasury of Canada and ask him if he could mail down to us
any war posters that were used in their last drive where
they had the slogan which I understand was "Back the Attack
with War Bonds". If they have any posters using that slogan,
I wish he would send them down to us as promptly as possible.
Tell him that I'd like to see them personally. will you do
that this morning,
please. Sintain saw there porters-
Per Miss iddlin
237
July 14, 1943
Dear Handolph:
I was greatly interested in reading your
press release outlining your program for the
future. It certainly looks like a sound and
thorough job, and I an pleased that you are
getting along so well.
I noticed an editorial in this morning's
Times consending you on your able leadership,
with which I heartily agree.
I think you are off to a fine start, and
I hope you will continue to keep me informed
of developments.
Sincerely,
(Signed) M. Mergeathan, Jr.
Mr. W. Randolph Burgesa,
Mar Finance Committee,
1270 Sixth Avenue,
New York 20, New York.
FS:gr
7-14-43
238
hazol
Hon. Henry Morgenthau
You may be interested in looking through
this.
W.
July 12, 1943
AND Randolph Burgess
United States Treasury Department
Tar Finance Committee for New York State
1270 Sixth Avenue
New York City
239
FOR RELEASE TUESDAY MORNING
JULY 13, 1943
Circle 6- 3100
FRAMEWORK OF NEW YORK STATE WAR FINANCE COMMITTEE
ANNOUNCED BY BURGESS
Completion of the geographical framework for the biggest sales campaign
in New York's history, designed te place War Bonds in the hands of 8,000,000
to 10,000,000 residents of the state during the Third War Loan drive in
September, was announced yesterday by W. Randolph Burgess, Chairman of the
War Finance Committee for New York State. An army of 500,000 War Bond salesmen
is being recruited for the task between now and the opening of the drive,
September 9.
The September drive will be directed primarily to individuals. There are
already five million individual buyers of War Bonds in New York State through
payrell savings plan and otherwise. The aim of the Third War Loan drive will
be not only to enlist several million additional buyers but to attempt to double
the size of the average purchase, Mr. Burgess said.
"For every fighting mon there should be ten bond buyers here at home",
Mr. Burgess said, With ten million men in the armed forees, many of them even
at this moment engaging the enomy, almost every man, woman and child in civil-
ian life should be a systometic and regular buyer of for Bonds. There are few
people in the country who can not afford to buy some bonds.
"The organizational framework for the Third War Loan drive will reach down
into every town and hamlet in the state," Mr. Burgess said.
The State of New York has been divided into ten districts, five of them
grouped into an Upstate Region and five into 5 Downstate Region. Edward H.
Letchworth, Buffalo attorney, has been appointed by Mr. Burgess as Chairman of
the Upstate Region, a position he hold in the former far Savings Staff organization. Lewis E. Pierson, former Chairman of the Irving Trust Company, hrs been
named Dewnstate Chairman. He occupied the same position with the far Savings
Staff.
-The Upstate Region under Mr. Lotchworth will include the 48 Northern and
Yestern counties. The Downstate Region will comprise Dutchess, Ulster, Sullivan,
Orange, Putnem, Rockland, Westchester, Nassau, Suffolk and the five counties
composing the boroughs of the City of New York.
Both the Upstate and Downstate Chairman will report directly to Nevil Ford,
Executive Manager of the War Finance Committoe for Now York Stato.
Mrs. Edward H. Cumpston of Rochester and Mies Dorothy Wakerloy of Albany,
have been appointed Vice Chairmen for the Upstato Region to supervise and coor-
dinate women's activities. Thousands of women workers are expected to be on-
listed in the coming drive.
Mrs. Courtlandt D. Barnes has been eppointed Vico Chairman with similar
duties for the Downstate Region.
In each district a completo county organization has been sot up. The work
will bo divided into functional divisions including Banking and Investment,
Psyroll Savings, Commorce end Industry, and Community. While the county
organizations in Now York City will develop plans and sales methods for the use
of their aress, the principle of local autonomy will prevail and each area will
be free adapt the program to its own particular requirements, Mr. Burgess said.
Although the beginning of the drive is still nearly two months distant,
the Chairman explained, the organization will begin making G speciel can vass dur-
ing July with the object of increasing payroll savings bond buying, especially
in industrion where weekly wages have boon substentially increased since the war
bogan.
Emphasizing the nood of united effort to assure the drive's success,
Mr. Burgess said "As fur 0.8 the sale of War Bonds is concerned there will be no
distinction betwoon the sales force and the potential buyers. In other
words, the volunteer bond salcsmen will also be bond buyers end we hope that
everyone in the State will commission himself as ST volunteer salesman in this
(moro)
240
-3-
241
huge undertaking, which not only is a task of patriotism and thrift but also
highly important as a check against inflation. The more dollars that are put
into Yar Bonds the fewer dollars there will be jangling in our pockets and
potentially competing for a dwindling supply of civilian goods.
"For New York State to do its share in this program, calls for a united
effort surpassing anything the people of this state have ever attempted. It
calls for thorough organization of every community so that all will be reached.
To got to all of Now York's population of 14,000,000 we will noed an army of
bond salosmon twice as big as that used in the April drive -- 500,000 at least."
District Chairman as announced by Mr. Burgess and the counties which
their districts embrace, follow:
No. 1 - Dextor P. Rumsey, President, Erio County Savings Bank. Eric,
Niagara, Cattaraugus, Orloans, Allogany , Chautauqua, Wyoming, Genesee.
No. 2 - Raymond N. Ball, President, Lincoln Alliance Bank. Monroe,
Livingston, Wayne, Yates, Sonoca, Ontario.
No. 3 - Thomas A. Wilson, President, Marino Midland Trust Co. Broomo,
Chomung, Chenango, Cortland, Dolaware, Schuyler, Stouben, Tioga, Tompkins.
No. 4 - A. B. Merrill, President, First Trust and Deposit Co. of Syracuse.
Onondaga, Jefferson, Oneida, St. Lawrence, Horkimor, Oswego, Lewis, Madison,
Cayuga.
No. 5 - H. J. Kneip, President, Commorcial National Bank and Trust Co. of
Albeny. Albany, Schenoctady, Montgomory, Rensselaer, Fulton, Saratoga,
Franklin, Warren, Essex, Groone, Washington, Clinton, Hamilton, Otsego,
Schoharie, Columbia.
No. 6 - Richmond F. Moyor, President Mid-Hudson oil and Trucking Co.
Dutchess, Ulster, Sullivan, Orango, Putnam, Rockland.
No. 7 - Androw Wilson, Jr., President, County Trust Co. of White Plains.
Westchester.
( more )
242
-No. 8 - Nevil Ford, Vice-President, First Boston Corporation. Lfr. Ford
is also Executive-Manager of the War Finance Committee state organization.
Bronx, New York, Richmond.
No. 9 - Honorary Chairman, Edwin P. Maynard, Chairman of the Board of
Trustees, Brooklyn Trust Company. Chairman, Clifford E. Paige, President,
Brooklyn Union Gas Co. Kings.
No. 10 - Charles D. Hilles, Director, Employer's Liability Assurance,
Ltd. Queens, Nassau, Suffolk.
"The aim of all of us in this drive" Mr. Burgess said, "is to sell
more War Bonds to more residents of this state. We all should buy bonds
not only for oursolves but also for our wives and our children. This is
to everybody's own self-interest and in the interost of our country. The
war isn't won yet and our job is to put as much tearwork into this Third
War Loan drive as our soldiers are demonstrating on the battlefronts of
the world."
No. 629
7/10/43
7/14/47
243
Fred Smith - Room 290
Treasury Department - Office of the
Secretary
War Finance Committee
HOLD FOR ARRIVAL OF
Mr. Ted R. Gamble
Waldorf-Astoria Hotel
New York, New York
will you please relay the following message to the members of the Entertainment
Industry.
"I wish I were able to pay you as rich a tribute as you deserve - you people of
the entertainment industry. What you have done, and what you are doing for your
country in this war is representative of the finest type of patriotism.
As a citisen, I know what you are doing in our camps, and abroad, and in our
cities through your Canteens and Service Groups. As a citisen, I am proud of you.
As Secretary of the Treasury, I am more than proud, for I have come to depend
upon you.
When the first Bond program started, you did not wait to be called into
action. YOU volunteered, you offered the Treasury your every talent and facility;
almost before the announcement of the first Bond campaign had covered the country,
you had taken off your coats, rolled up your sleeves, and asked for a job to do.
And you did it.
Since that time, you have never let up in the energetic pursuit of your duty
to your country.
You have given us the magic of your theaters and movie houses. Through your
huge radio audiences, you have opened the door to nearly every home throughout
the length and breadth of the nation. Songwriters, authors, scriptwriters,
singers, actors - hundreds of you have made Bond selling the most important thing
in your lives for the duration.
244
-2 -
It is impossible for me to estimate the value of the help we are getting and,
I hope, will continue to get from all you people in the entertainment industry.
No other single group is so close to the heart of the American people. No other
group can better sell the need for sacrifice.
In view of the huge job that lies ahead, let me now call upon you -
/ to give us more help than ever before. It is a lot to
ask, but we are asking a lot of everyone. We are asking the American people for
more than twice as much money in the last six months of this year as they invested
in War Bonds during the first six months. We are counting upon the American
people to give us this money, because they know it is necessary. They know our
forces are fighting on a dosen fronts all through the world, and have now invaded
the lands of our enemies, and accordingly our need for equipment and the machinery
of war rises day by day. The Home Front must continue to supply men, money and
spirit.
The first rule of total war is that everyone does whatever he can do best,
and the entertainment industry knows what it oan do best, The people of this
industry know that they can do more, as individuals, to raise money and to build
spirit than almost any other single group anywhere.
I sincerely hope you will recognize that, and will say, "We have done our bit,
now you will see our best."
Henry Morgenthau, Jr.
Secretary of the Treasury
oth
245
July 14, 1943
My dear Mr. Secretary
The Third War Loan Drive, beginning September 9th,
will aim at raising the largest amount of money from
individuals that any drive has raised in the history of
the world.
In view of the large number of American citizens
employed by our Allies in this country, it has occurred
to me that it would be very fruitful if we should stimulate
their interest in the sale of War Savings Bonde during
this drive. With this thought in mind, I am enclosing
herewith a draft of letter which I have in mind addressing
to the head of each embassy, legation, or foreign mission.
I would be glad to know if you know of any objection to
the sending of such a letter from the viewpoint of the
Department of State.
Very truly yours,
(Signed) M. Mergeathau, Jr.
Secretary of the Treasury
Honorable Cordell Hull,
Secretary of State,
Washington, D. C.
Enclosure
Copy of ltr. and enclosure
in Diary.
to Mr. Thompson
EFB:hbw 7/13/43
copy
Fer Memes 9,115/43
246
My dear Lord Halifax:
In our Third War Loan Drive, which commences on
September 9. an effort will be made to procure from
individuals a substantial part of the funds needed during the next six months in the financing of the war.
It has occurred to me that it would greatly etime
late interest in this drive if American citizens working
for embassies, legations, and foreign missions in this
country would actively participate in the program. With
this thought in view, I am wondering whether you would
be willing to designate an American citizen on your
staff to stimulate the sale of war bonds to fellow
Americans who may be employed by your Government in this
country. Should you feel kindly toward this suggestion,
I would appreciate it if you would furnish to me the
name of the person whom you would designate for the
purpose.
Sincerely yours,
Secretary of the Treasury
His Excellency
The Right Honorable
Viscount Halifax, K.G.,
Ambassador Extraordinary
and Plenipotentiary
Washington
EFB:hbw 7/13/43
247
JUL 14 1943
My dear Young:
The Third War Loan Drive, beginning September 9. 1943. will
aim at raising the largest amount of money from individuals that
any drive has Faised in the history of the world.
Between July first and the end of the calendar year, we will
spend about 35 billions of dollars more than we will take in.
It is costing $240 millions a day to equip our armed forces and
take care of other necessary var expenditures. This is nearly
$100 million a day more than we were spending last year at this
time.
In the September drive we want to get from individuals &
substantial part of the money necessary to carry on the war.
Selling the huge amount in bonds called for in our new program
will require a more determined effort than we have ever exerted
before. We will have to sell bonds to nearly every man, woman.
and child in America.
We will have to promote the sale of bonds 24 hours a day
and solicit - and follow up these solicitations - from house to
house, from bench to bench in factories, and from desk to desk
in offices. We need the cooperation of all the people every-
where, for to do the job ahead we must not only extend the payroll savings plan, but we must sell more extra bonds every pay
day to more people.
During the last six months of this calendar year we must sell
more than twice as such in bonds to individuals as we did in the
first of the year. Asking for twice as much money from individuals may look as though NO are setting an impossible task, but
it is possible. The earnings of individuals during the last half
of the year will be about $72 billions and the available savings
from these earnings of individuals will be about $23 billions.
We are going after the greater portion of these savings because
it is necessary for us to get this money either through bonds or
taxes, not only to finance the war, but to protect ourselves
against inflationary spending.
Copy of ltr. and
enclosures in Diary.
Copy to Mr. Thompson
248
-2One of the main channels for selling bonds to salaried
employees and wage earners is through the pay-roll savings
system. At the present time 27,000,000 employees in Government
and industry are purchasing $420 millions of War Savings Bonds
& month through the pay-roll savings plan. Our new objective
is to increase this to $600 millions a month.
Civilian employees of the Federal Government are now invest
ing approximately $35 millions a month through the pay-roll savings
system. This is about 8.3% of gross pay rolls and should be sub-
stantially increased.
The purpose of this letter is to ask if you would be good
enough to consider the installation of the Pay-roll Savings Plan
in the Government of the District ofIT you would do this and the
Treasury could release a statement by you to that effect in the
near future it would undoubtedly add great impetus to the Third
War Loan Drive. In this connection, I am enclosing for your convenient reference a copy of a letter recently addressed to me by
the President saying that "the Pay-roll Savings Plan is the great
est single factor we now have in protecting ourselves against
inflationary spending." In an earlier letter the President said
that "The wholehearted support of the voluntary system of payroll savings by employees of the Federal Government will have
a
most stimulating effect on our soldiers, sailors, and marines,
AS well as the millions of war workers in private industry: while
our indifference seriously affects the support of those who look
to us for guidance." The President then added that "It would
please me very much if the employees of the Federal Government
should lead the way in the development of the systematic method
of sustained savings through the pay-roll allotment plan."
I hope you will give this matter your personal consideration.
The Treasury would be glad to assist you in every way possible in
the inauguration of the system in your organization.
Sincerely yours,
(Signed) M. Mergenthau, Jr.
Secretary of the Treasury
Honorable John Russell Young
President of the Board of Commissioners,
District Government,
Washington, D. C.
EFB: jmc
249
JUL 14 1943
My dear Mr. Giogengack:
The Third Var Loan Drive, beginning September 9. 1943. will
aim at raising the largest amount of money from individuals that
any drive has raised in the history of the world.
Between July first and the end of the calendar year we will
spend about 35 billions of dollars more than we will take in.
It is costing $240 millions a day to equip our armed forces and
take care of other necessary war expenditures. This is nearly
$100 million a day more than we were spending last year at this
time.
In the September drive we want to get fres individuals a
substantial part of the money necessary to carry on the var.
Selling the huge amount in bonds called for in our new program
will require a more determined effort than we have ever exerted
before. We will have to sell bonds to nearly every man. woman.
and child in America.
No will have to promote the sale of bonds 24 hours a day
and solicit - and follow up these solicitations - from house to
house, from bench to bench in factories. and from desk to desk
in offices. We need the cooperation of all the people every-
where, for to do the job ahead we must not only extend the payroll savings plan. but we must sell more extra bonds every pay
day to more people.
During the last six months of this calendar year, we must sell
more than twice as much in bonds to individuals as we did in the
first half of the year. Asking for twice as much money from individuals may look as though we are setting an impossible task. but
it is possible. The earnings of individuals during the last half
of the year will be about $72 billions and the available savings
from these earnings of individuals will be about $23 billions.
We are going after the greatest portion of these savings because
it is necessary for us to get this money either through bonds or
taxes, not only to finance the war. but to protect ourselves
against inflationary spending.
to Mr. Thompson
copy
250
-2One of the main channels for selling bonds to salaried
employees and wage earners is through the pay-roll savings
system. At the present time 27,000,000 employees in Government
and industry are purchasing $420 millions of War Savings Bonds
a month through the pay-roll savings plan. Our new objective
is to increase this to $600 millions a month.
Civilian employees of the Federal Government are now investing approximately $35 millions a month through the pay-roll savings
system. This is about 8.3% of gross pay rolls and should be substantially increased.
The purpose of this letter is to ask if you would be good
enough to consider the installation of the Pay-roll Savings Plan
in the Government Printing Office. If you would do this and the
Treasury could release a statement by you to that effect in the
near future it would undoubtedly add great impetue to the Third
War Loan Drive. In this connection, I am enclosing for your convenient reference a copy of a letter recently addresses to me by
the President saying that "the Pay-roll Savings Plan is the greatest single factor we now have in protecting ourselves against
inflationary spending." In an earlier letter the President said
that "The wholehearted support of the voluntary system of payroll savings by employees of the Federal Government will have A
most stimulating effect on our soldiers, sailors, and marines,
as well as the millions of var workers in private Industry: while
our indifference seriously affects the support of those who look
to us for guidance. The President then added that "It would
please me very such if the employees of the Federal Fovernment
should lead the way in the development of the systematic method
of sustained savings through the pay-roll allotment plan.'
I hope you will give this matter your personal consideration.
The Treasury would be glad to assist you in every way possible
in the inauguration of the system in your organization.
Sincerely yours,
Secretary of the Treasury
Honorable A. 3. Giegengack
Public Printer
Government Printing Office
Washington, D. C.
EFB:gg 7/8/43
THE WHITE HOUSE
WASHINGTON
February 26, 1943
Dear Mr. Bartelt:
My attention has been called to the fact that a
number of the executive departments and establishments are
lazging in their support of the Government's pay-roll savings
plan for the purchase of War Savings Bonds.
It seems hardly necessary to dwell upon the importance attached to active leadership which must be assumed
by those who have been placed in charge of the program in
the various agencies pursuant to my executive order of
April 16, 1942.
The wholehearted support of the voluntary system
of pay-roll savings by employees of the Federal Government
will have A most stimulating effect on our soldiers, sailors,
and marines, as well as the millions of war workers in private
industry: while our indifference seriously affects the support of those who look to us for guidance.
It would please me very much if the employees of
the Federal Government should lead the way in the development
of the systematic method of sustained savings through the
pay-roll allotment plan.-
Sincerely,
Mr. E. F. Bartelt,
Vice Chairman,
Interdepartmental War
Savings Bond Committee,
Washington, D. C.
THE WHITE HOUSE
WASHINGTON
June 24, 1943.
Ky dear Mr. Secretary:
Through you, as Secretary of the Treasury, I want to congratulate
the American people on the way in which they have supported the volun-
tar payroll savings plan.
I AM proud of the fact that 27,000,000 patriotic Americans are
regularly investing more than $420,000,000 a month to help pay the
cost of the war. And since all of this money comes from wages and
saleries -- nearly 90 percent from people carning less than $5,000,
and the bulk of it from those working in war plants -- I do not hesitate to say that the payroll savings plan is the greatest single
fector we now have in protecting ourselves against inflationary
spending.
This is a great record, both from the standpoint of curbing
inflation and from the standpoint of financing the WAR. However,
I heartily endorse your present drive to improve that record, and
I agree it must be improved if we Are to keep pace with the
increasing demands of the war.
I therefore join you in calling upon the American people -- and
upon labor and management particularly - to do still more. Additional people should be convinced of the necessity of participating.
Everyone now on the payroll savings plan should materially increase
the Amount of bonds he is buying. We originally asked for 10 percent,
but now we need considerably more.
I hope every American on A payroll will figure out for himself
the extent to which he can curtail his spending, and will put every
dollar of additional saving thus made into the payroll savings plan.
Sincerely yours,
Finahlon
The Honorable,
The Secretary of the Treasury.
253
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 4,1943
Secretary Morgenthau
TO
Mr. Haas
FROM
Subject:
The Third War Loan
Summary
1. The first section of this memorandum out-
lines a suggested financing program designed to
yield $16.2 billions in a nonbanking drive conducted
between September 9 and October 2, of which $7 bil-
lions would come from individuals. This financing
program plus the interim financing program set forth
in our memorandum entitled "A Suggested Program for
Market Financing Prior to the September Drive" would
provide a volume of funds sufficient to carry the
Treasury until December. They would acquire for investment in Government securities a volume of funds
from individuals which would represent 65 percent of
the amount of their new savings accumulating between
May 1 and September 30 (in place of the 60 percent
which was 80 invested between January 1 and April 30),
as set forth in our memorandum entitled "Financing
Requirements and Sources of Funds for This Summer
and the Third War Loan".
2. A number of technical and policy matters
which require some attention during your consideration of the September financing program are discussed in the second section of this memorandum.
--
254
I. General Outline of the Program
The financing program set forth below is designed
to raise $16.2 billions of new money between September 9
and October 2. These funds plus (1) the amounts of new
money provided according to our memorandum entitled "A
Suggested Program for Market Financing Prior to the
September Drive" and (2) the amounts derived from savings
bonds and Treasury savings notes sold after the September
drive should be sufficient -- if bill and certificate
maturities are rolled over -- to provide the Treasury with
a comfortable working balance until December.
Financing Program - Third War Loan Drive
Amount
Period and Offering
(In billions
of dollars)
A. September 9 to October 2
1. Individuals:
4.0
(a) E bonds
(b) F and G bonds
.8
(c) 2 percent bonds
.8
1.0
notes
(e) (d) 2-1/2 Treasury percent savings bonds
(f) Subtotal
.4
7.0
B. September 27 to October 2
1. Insurance companies and mutual
savings banks:
(a) 2 percent bonde
certificates
(b) (c) 7/8 2-1/2 percent percent bonds
(a) Subtotal
2. "Other" corporations:
(a) F and G bonds
(b) 2 percent bonds
(c) 2-1/2 percent bonds
.6
1.7
.2
2.5
.2
1.1
.7
3.0
1.7
(d) (e) 7/8 Treasury percent savings certificates notes'
(f) Subtotal
C. Total program - Third War Loan
*
6.7
16.2
It is proposed to count all receipts from Treasury savings between
notes and savings bonds deposited with the Treasury
September 1 and October 9 as part of the drive.
-3In the financing program set forth above it is suggested that the entire $16.2 billions of new money raised
by the Third War Loan come from a nonbanking drive, and
that about $7 billions of this amount be obtained directly
from individuals. E bonds at $4 billions would provide
the major share of the individual money. Bank borrowing
would be divorced entirely from the drive.
In order to accomplish a war loan drive of the foregoing magnitude and composition it will be necessary, it
appears at this time, to change the mechanics of the
operation from those employed heretofore so as to place
the entire emphasis of the loan squarely on "individual
money". It is suggested in this connection that the
individual part of the loan be set off by itself to be
handled as separately from the other parts of the loan
as possible -- separately as to (a) the type of approach
(b) the timing, and (c) the particular securities offered.
(a)
The type of approach
(1) The individual part of the Third War Loan will,
it appears, have to involve an intensified selling cam-
paign that will dwarf all previous efforts to sell
Government securities to individuals. The amount that
will have to be raised is huge when considered from the
point of view of subscriptions by the average man, but
the figures are disarming in their simplicity. The
difficulty of the accomplishment of the job is illustrated
by the following example:
Assume that all persons who buy any of
the issues other than E bonds have taken
their share of the loan -- $3 billions as
shown in the table above. Then every one of
the 60 million remaining Americans who will
earn an income during the month of September
(including the members of the armed forces)
will, on the average, have to put up about
$70 cash during that month for E bonds if
the goal is to be reached. If the market
cannot be expanded to beyond, say 40 million
persons because of the impossibility of obtaining extended amounts from most of the
persons with incomes of $1,000 a year or
255
256
-4less (including most of the members of the
armed forces), then the average requirement
for each of the 40 million persons will be
about $100 cash during the period of the
drive.
A drive that will reach tens of millions of persons
and will obtain from them funds in the magnitudes set
forth above will have to be a drive that is really big.
It will have to be a campaign which will involve houseto-house canvesses in every one of the nation's counties;
bench-to-bench canvasses in every one of the nation's
factories; and desk-to-desk canvasses at every one
of the nation's offices. Many people will have to be
canvassed three or four times and urged to subscribe
three or four times.
It is likely that a drive such as this will have
to involve sales pressure such as has not been used
heretofore in a war bond campaign. Security sales to
individuals in volumes as large as those contemplated
can be accomplished only on the basis of a series of
dramatic appeals to patriotism. Accordingly, every
person must be urged to subscribe until it really hurts
his spending power -- a level of subscription which would
be far above the level a person would ordinarily consider
as being representative of his ability to buy war bonds.
A drive such as has been described will, in all
likelineba, require public approval by the Treasury and
the Federal Reserve of local activities encouraging
individuals to withdraw large portions of their bank
accounts for investment in E bonds. The need for a
policy approving bank deposit withdrawals has become
more and more evident as the war financing program has
progressed, and it should be formulated completely
before the start of the Third War Loan, inasmuch as
the success of the drive may well depend upon it.
Some bankers question whether they can
afford the drain on their deposits which
will result from a vigorous program of
sales of Government securities to their
depositors, but their leaders, as repre-
sented by the members of the Economic
Policy Commission of the American Bankers
Association, are in favor of a depositwithdrawal-for-Government-security-invest
ment policy. In the Commission's report
on the "$100 Billions Budget, and The Banks",
257
-5- a copy of which was sent you some months ago
by Mr. Randolph Burgess, bankers were advised
to look upon such deposit withdrawals with
complacency. The report explained, you will
recall, that "as the deposits go out through
customer subscriptions for bonds or through
Government withdrawals, there is reasonable
certainty that over a period they will return,
though usually under different ownership".
(2) The corporation part of the Third War Loan will
involve a different type of approach from the foregoing
and might well be handled as a custom-made "Special
names" job. The patriotic appeal might be used, but
the investment approach would probably be adequate.
It is important, however, that every corporation that
might be a candidate for a subscription to the Third
War Loan be listed before the campaign starts and be
assigned by name to a particular drive solicitor".
This would eliminate duplicate solicitation, and would
provide an economy of effort. These representatives
should, moreover, be matched to the corporations in a
manner which would achieve the most effective use of
sales personnel.
The job of preparing lists of corporations and dis-
tributing the names among salesmen is considerable, but
it sounds larger than it really is. There are, it is
likely, less than 100,00 corporations whose names would
appear on lists of likely candidates for subscriptions
to the issues offered in the Third War Loan, and a considerable proportion of the names could be obtained
from past records of subscriptions and from other sources.
(b) Timing
The Third War Loan will involve some new angles
with respect to timing if the operation is divided as
set forth above, because the two parts of the operation
will not be similar to each other. The corporation
part will be one that can be accomplished within a
relatively short period of time - a week would probably be sufficient -- for there should be no obstacle
to obtaining corporation subscriptions promptly. The
situation was well illustrated in April when 60 percent
of the money obtained from nonbanking corporations was
received during the first week of the drive, notwith-
standing the fact that there was an interest advantage
to postponing the purchase of tax notes to the month end.
-6--
The individual part of the Third War Loan will, on
the other hand, require three or four weeks to complete
if the extensive canvasses that are suggested are to be
accomplished. With this in mind, it is suggested that
the individual drive start on Thursday, September 9, and
extend to Saturday, October 2, with accounting permitted
until Saturday October 9, to take in all the savings
bonds sold during the drive. Books for the corporation
offering might be opened on Monday September 27, it is
suggested, and close on Saturday, October 2. Advertising
could be coordinated so that it would introduce the cor-
poration part of the drive at the same time that it
served to spur the wind-up of the drive for individual
subscriptions.
Timing in the foregoing manner would make it possible to conduct the individual campaign unclouded for
three weeks by a coincident appeal to corporation investors. The public would thereby be spared the confusion that results when large figures are announced
in a combined campaign as early subscriptions from
insurance companies and other corporations roll in.
(c) The particular securities offered.
In a campaign directed toward extensive purchases of
Government securities by individual investors it would be
desirable to offer as many securities as is necessary to
cover the market. In the Third War Loan drive it is suggested that individuals be offered:
1. E, F, and G savings bonds for the
smaller purchasers;
2. Series C savings notes for the large
investor who wishes a short-term security;
3. An intermediate bond -- say a 2 percent
issue -- for medium termed investment, and
4. A 2-1/2 percent bond for the individual
investor who desires a long-term instrument.
These issues would satisfy the requirements of most
individual investors. Two of them -- the E bonds and
2-1/2 percent issue -- accounted for 60 percent of the
individual money in April.
258
-would be adequately provided for by an
offer Corporations
of:
1. 7/8 percent certificates,
2. Series C savings notes,
3. F and G bonds,
4. 2 percent bonds, and
5. 2-1/2 percent bonds.
Bills are removed from the basket. it is noted and,
if used at all, would be considered outside of the drive.
II. Technical and Policy Matters Which
Will Require Some Attention
There are a number of important technical and policy
matters which will require some attention during your consideration of the September financing. They are discussed
briefly in the following paragraphs.
(1) Certificates in the basket. A 7/8 percent certificate is suggested for the basket in order to attract the
funds arising from current corporate accumulations -- funds
accumulating in depreciation reserves which cannot be reinvested in new equipment, arising from accounts receivable
repayments and going into tax reserves. These accumulations
are short-termed in nature and it cannot be expected that
corporations will wish to keep them invested beyond the
duration of the war. Many corporations consider a three or
four year note too long for these funds and accordingly,
such a security is unlikely to attract as large a proportion
of the funds available as a one year certificate. Moreover,
even if corporations were persuaded to purchase such a
security, the Treasury would have gained no real advantage
from their action. Instead a future market problem would
have been insured should corporations wish to liquidate the
bulk of the issue at some period prior to its maturity because of the termination of the war. With respect to
Series C notes, they too do not seem to be a wholly satisfactory security for all corporate accumulations. Many
corporations prefer the certificate type of instrument and
their wishes on this account might well be respected. In
April, it is recalled, the certificates outsold Series C
notes by nearly $1 billions.
(2) Leakage to commercial banks. Eliminating commer-
cial banks from participation in the Third War Loan will give
rise to a technical problem with respect to the issue of
2 percent bonds and certificates -- how to prevent banks from
setting out to acquire the issues by entering subscriptions
259
-8-
260
indirectly through dealers and brokers or other intermediaries. This matter could be controlled, it is suggested, by eliminating dealers and brokers from the
drive as far as the certificate and 2 percent issues are
concerned -- they could, however, enter subscriptions
for the 2-1/2 percent bonds. with respect to other investors who might act as intermediaries, it is suggested
that the matter be controlled by Federal Reserve policing,
operating under a public announcement by the Secretary
that the certificates and 2 percent bonds issued during
the drive were intended only for nonbanking investors and
that one or both of the issues would be offered to banks
after the drive closed.
(3) Details of the 2-1/2's. The 2-1/2 percent bond
sugvested for inclusion in the basket might be a December
1964-69 or a March 1965-70. The issue should bear the same
conditions, including restrictions as the ownership, as the
2-1/2 percent bond issued in April, and should be dated
September 15 so that interest calculations during the first
dating would, of course, mean that subscriptions for all
2-1/2's sold during the corporation part of the drive would
have to be tendered at par and accrued interest. Some corporations might, of course, prefer that the issue be dated
September 30 and offered for subscription at par, but it is
expected that no considerable objection to the suggested
dating is likely to arise on this account. The September 15
dating would permit sales of this issue to individuals to be
definitely tied down during the early part of the drive.
(4) 2-1/2's to refund the 1943-45 bonds. The 2-1/2
week of the drive might be eliminated. The September 15
percent bond offered in the drive would be made available to
refund such portion of the 3-1/4 percent bonds of 1943-45
called for payment on October 15, as were tendered for ex-
change as discussed in our memorandum on "A Suggested Program
for Market Financing Prior to the September Drive." The
amount of 2-1/2 percent bonds for which subscriptions were
SO entered would, be excluded from the figures on the drive.
(5) Free ride on the 2-1/2 percent bonds. The separate
timing of the individual part and the corporation part of the
Third War Loan 80 that corporation subscriptions will be held
off for about three weeks may give rise to a minor "free ride"
problem. Some individuals and dealers and brokers might buy
the 2-1/2 percent bond for the purpose of transferring the
securities obtained immediately at a slight profit to insur-
ance companies and other corporations whose investment funds
would be waiting in the market. A deferment-in-trading-whilethe-books-are-open request may serve to reduce the volume of
such transactions. With respect to large subscriptions, moreover, the Treasury could further control the problem by delaying delivery on subscriptions specifying large denomination
-9
pieces -- say, pieces of $100,000 or over -- until the
books of the corporation portion of the Third War Loan
had been opened.
(6) E bond ownership. It is suggested that con-
sideration be given again to opening E bonds to all
investors other than commercial banks as of September 1,
1943. No change in the limitation on the amount available for purchase from the present $3,750 issue price
would be made. This proposal is in line with the objective of making the E bond the "poor man's" security, and
of selling only E bonds to investors of this class until
the limit of purchases has been reached. Many clubs,
associations, unions, church organizations, women's groups,
political organizations, benefit societies, and fraternal,
foreign and racial groups, as well as many corporations
which are the personal businesses of small merchants, salesmen, and vendors have funds which can well be placed in
E bonds. Many of the social and political groups are actively promoting E bonds, and their efforts are likely to be
enlisted in the September drive. The availability of E bonds
for purchase by their own organizations may do much to gain
enthusiasm among salesmen taken from these groups.
(7) E bond promotion. The amount set forth as the
E bond goal in September -- 4 billions -- is more than
2-1/2 times the amount of such bonds sold during the Second
War Loan. This proposed volume of sales can be accomplished
only by concentrating the selling effort on $100 bonds for
the average man in place of #25 bonds. It would be poor
sales psychology and an obvious lack of economy in sales
promotion and advertising effort to build a campaignothat
needs to raise $4 billions around a denomination bringing
as little as $18.75 from each piece sold.
(8) E bond delivery. Assuming that substantial progress is made in raising the number of $100 and higher denomination E bonds sold, the Third War Loan may still
involve the issuance of as many as twice the number of
pieces sold during the April drive. Accordingly, the Treasury should be prepared for the issuance of more than 60
million separate bonds in the 3 or 4 weeks of the drive.
This is no small order and it will be made no easier by the
fact that door-to-door campaigns depend for their success
on rapid delivery of bonds -- certainly delivery no later It is
than 48 hours after the application has been made.
likely that the operation will have to be still further
decentralized, and in large cities may have to be carried
down as far as to local neighborhoods. This extension of
the issuing operation may involve some liberalization in
the procedures now being followed.
261
262
- 10 (9) F and G bonds. We are withdrawing for the
moment our recommendation that F and G bonds be dis-
continued and are, you will have noted, proposing that
they be included in the drive. We make this new recommendation because we feel that the proponente of a smalldenomination coupon bond would use the withdrawal of F
and
bonds as a signal to intensify their demands for
such G
denominations.
It is noted in this connection, there are a great
many persons who have $5,000 to $10,000 idle cash avail-
able, but whose income is less than $5,000 a year. Storein their accounts receivable are in this class; so are
many members of the armed forces who have liquidated their
businesses and disposed of their personal property or
farms; and many war workers who have moved to new communities and are living in trailers or furnished rooms and
hold in the bank the funds derived from the sale of their
homes and furniture. These people are not equipped to
face the market risk involved in the purchase of negotiable securities. The Third War Loan will, however, make
an effort to obtain their funds for investment in
Government obligations -- if withdrawal of bank balances
is advocated. A security available in small denominations
keepers who have suffered inventory declines or reductions
beyond the E bond limit appears to be necessary, therefore, inasmuch as advocates of a low-denomination coupon
bond will submit these people as examples of the market
that ie not covered by a $500 minimum denomination negotiable bond.
(10) Federal agencies and trust funds. The program
for the Third War Loan drive, set forth in this memorandum,
excludes any amounts that might be obtained in September
from subscriptions by Federal agencies and trust funds.
263
7/14/43
Captain Kades.
The Secretary.
All of these people who live at hotels or eat at lunch
rooms are getting away with murder and I don't see why they
shouldn't have to give up points, more particularly for meat.
I remember during World War I when I WAB in Paris if you wanted
bread when you went to a restaurant or hotel you had to give up
points before you could get bread and it would be interesting
if you could find out from O.P.A. how much beef, pork and lamb
18 eaten, in other words are consumed at hotels and restaurants
and the posibilities of putting those on points if it would
help the shortage situation greatly. It seems to me that they
have left a great big wide gap in the dam which ought to be
stopped up. I'd appreciate it 1f you would look into this
promptly and let me know.
264
JUL 19 1943
Secretary Morgenthau
Captain Kades
1. You have asked how much beef, pork, and lamb is
eaten at hotels and restaurants. It has been roughly estimated at OPA that about 13% of the existing total civilian
supply of meat is consumed at restaurants and by institutional and industrial users. In other words, about 171,000,000
pounds of meat (carcass basis) out of a total of 1,273,000,000
pounds (carcass basis), is eaten at meals served at hotels,
restaurants, cafeterias, hospitals, and other institutions.
2. You have also asked about the possibilities of putting restaurants on a point ration system 80 far as beef,
pork, and lamb are concerned. There seem to be four main
reasons why this has not been done, as follows:
a. There is a definite recreational value
inherent in eating out during wartime. If meat
were rationed in restaurants, it would be less
desirable to eat out and this form of recreation
would be discouraged.
b. Many administrative difficulties are
involved, such as weighing portions of meat
served and requiring fractional points.
C. The meat situation is not sufficiently
critical to warrant point rationing in restaurants.
d. Communal feeding, such as takes place in
hotels, restaurants, and cafeterias, is the least
wasteful method of utilizing food supplies because
the waste per person served is less than at meals
served at home.
3. OPA regulations restrict the amount of meat
and other rationed foods which may be obtained by any
265
-2institutional user. A base has been established for each
institutional user for rationed foods based upon the amount
of such food used and the total number of persons served
during December 1942.
In addition, no wholesaler, hotel supply house, or other
similar selling institution is allowed to sell fabricated meat
cuts exceeding in volume 70% of the total volume by weight of
all kinds of meat sold from September 15, 1942 through December 15, 1942. Hotel supply houses which customarily select,
age, bone, and fabricate primal cuts into roasts, steaks, and
stews, may, however, charge 20% more than the zone price for
these services.
In the case of lamb and mutton, fabricated outs are not
available to retailers.
4. Any solution of the problem of eliminating the dis-
crimination between those who eat at hotels and those who eat
at home tends to become very complicated as an administrative
matter and might well encourage black market operations on
the part of expensive hotels and restaurants which would seek
to keep their well-to-do clientele satisfied.
It is difficult to suggest a substitute for OPA's policy
of allowing restaurants to serve rationed food without requir-
ing coupons. The principal objection to this policy is that
it tends to favor higher income groups. This criticism would
lone considerable force if industrial canteens and communal
feeding centers were subsidized, as in England, because this
would bring eating out within the means of practically every
income group.
As a possible alternative, it is suggested that the
amount of choice cuts of meat available in hotels and restaurants could be reduced by imposing price ceilings on the
meals served. This would probably result in limiting the
number of courses, the size of the portion, and the quality
of the meat.
CLK:rgs
7/19/43
266
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 14, 1943
TO
Secretary Morgenthau
FROM Captain Kades
A cable from Casaday in London states on the basis of
a personal interview with Arthur Goodhart that he is chairman of a local price regulation committee but has no place
in the food distribution system in England. Such a committee deals entirely with non-food price problems and is
under the jurisdiction of the Board of Trade.
The Ministry of Food has exclusive control over food
distribution and food price control. There is no one plan
for either the purchase or distribution of meat and other
food stuffs. The schemes for the purchase and distribution
of various food items differ widely from commodity to commodity. In general, however, the British use area or
regional or local offices in allocating supplies.
For points rationed foods, allocation is determined by
the backward flow of points to wholesalers and area head-
quarters of the Ministry of Food. This is done through the
coupon banking system. The demand for a given locality
tends to become stable and roughly predictable. On the
basis of wholesalers' reports, the Ministry of Food is able
either (a) to allocate supplies to meet the demand, or (b)
to manipulate the points values to increase or decrease
demand to conform to some extent to the supply situation.
For commodities on the fixed ration, allocation is
almost automatic. The demand in a given locality is known
in advance. The problem is to get a predetermined supply
to the point where the known demand will exactly absorb it.
So far as meat control is concerned, the Ministry of
Food is the sole purchaser and distributor of all meat in
the United Kingdom. Meat is distributed on the basis of the
actual number of individuals registered with retail butchers
in each local area and not on any broad regional or county
267
-basis. The prices of livestock are manipulated by the
Ministry of Food in order to encourage an orderly market.
Losses involved in livestock transactions are either made
up in other branches of the trading activities of the
Ministry of Food or accepted as trading losses.
Casaday states that British experience strongly indi-
cates that no conceivable number of enforcement officers
can prevent widespread violations of the control system
which is loosely conceived and which does not have the
sympathetic support of the trade and the consumers. He
states that the Government must depend to a considerable
extent on associations of producers and traders and perhaps even encourage a tendency to monopoly (in form at
least) in order to simplify the production and distribution system.
"Most individuals familiar with Britain's food program
with whom I have talked here," If says Casaday, "are agreed
that a certain amount of what might be called an 'appease-
ment' or 'collaborationist attitude toward 'big business
in the food trades is essential to developing a 'tight,
manageable and efficient' control, but it is emphasized
that the ultimate authority must rest with the Government
II
and that this power must sometimes be used ruthlessly.
Another interesting point made in Casaday's cable is
that commentators in England believe that the best results
can be obtained if a single agency assumes responsibility
for all aspects of food control, from production through
distribution and pricing to the rationing of final consumption.
lik.k.
4-14-43268
10.10am
TO:
0 min chauneey
In your information
The Secretary
initiated the original
of attached "Nm f"
for mr. O'Conner
this morning.
nsw
From: MR. O'CONNELL
269
JUL I s
Secretary Morgenthau
Randolph Paul and H. D. White
We recommend that Theodore H. Ball be assigned
to the Martinique job.
Mr. Ball is 39 years old. For sany years prior
to his association with the Treasury he was employed by
the French American Banking Corporation in New York. He
has a reading and speaking knowledge of French. He has
been with the Treasury Department for approximately a year
and a half and is fully acquainted with Treasury operations.
He is presently in charge of the field investigative work
for Foreign Funds Control.
If you are in agreement, please indicate below.
(Mr. Bell and Mr. White concur).
Approved:
RRShwartz:rg 7-13-43
270
no
la
NOT TO BE RE-TRANSLITTED
COPY NO. 13
15
Jul
RITISM OST CRIT
SECRET
OPTIL NO. 231.
Information received up to 7 a.m., 14th July, 1943.
1. NAVAL
On the 12th, one of H.I. Destroyers sank a U-Boat off DILLYS,
ALGERIA, and took 34 prisoners. On 13th, two of H.B.,Destroyers sank the
Italian Subuarine NEREIDE off CATANIA and took 34 prisoners. During these
2 days, 5 other promising attacks on U-Boats were made in various localitics.
2. AIR OPERATIONS
SESTERN FRONT. 12th/13th. TURIN. Bad weather with cloud
and icing en route gave way to good visibility over the objective. 256
Lancasters dropped 734 tons of boubs including 199 4,000 pound H.E. and 276
tons of incendiaries in about 40 minutes. The attack was well concentrated
and a large number of fires developed rapidly merging into one large cass
with smoke to 10,000 feet. Defences moderate and inaccurate, search lights
ineffective. 13 Lancasters missing and one crashed. One eneay Fighter
destroyed near DIJON. Return route via WESTERN FRANCE and BAY OF BISCAY,
making 1,975 mile flight.
13th/14th. Aircraft despatched: AACHEN - 381 (20 missing),
COLOGNE - 2, Leaflets - 8 (1 missing), Intruders - 46. At AACHEN, BlindBombing technique was employed. Preliminary reports indicate fair concentration.
28 Enemy aircraft crossed the East Coast, the anjority operating over HULL.
9 Persons so far reported killed. 2 Enemy aircraft were destroyed b. Fighters
over this country and a third over its base.
SICILY AND SOUTH .TST ITALY. 11th/12th. 26 tons dropped at
RIGGIO. 144 Dakotas (c.47 Transport) sent to drop parachutists net intense
A/A fire. 6 returned without dropping their troops and 23 are missing.
12th. 728 Spitfire Sortics were flown over SICILIAN beaches. 36 Kittyhawks
attacked gun positions on the SYRACUST-AUGUSTA Road. 74 Liberators drop cd
122 tons at railway centres and Ferry Slips at REGGIO and SAN GIOVANNI. Enemy
casualties - 22, 10, 21; Allied - 11 missing.