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Diary Book 716 March 29-31, 1944 Book Page Argentina See Latin America c Canada United States Dollar Balances See also Book 710 Schedule covering agreed-upon program a) Discussion by HMJr and White - 3/29/44 b) HMJr's letter to Navy Crowley c) Reconstruction Finance Corp. d) e) Memorandum to FDR f) Ilsley-HMJr correspondence 1) Copy sent to State Department Correspondence Mrs. Forbush's mail report - 3/31/44 716 89 77 97 101 103 106 108 113 330 Csechoslovakia See War Refugee Board -DDeferments, Military Government Bond Dealers: Deferment discussed by HMJr. Daniel W. Bell, and Charles S. Bell - 3/30/44 225 -E-- Elliott, Harriet See Financing, Government: War Savings Bonds (5th War Loan Drive) -7Financing, Government War Savings Bonds See also Book 714 5th War Loan Drive Conference: present: HMJr. Eccles, Sproul, Bell, Haas, and Gamble - 3/29/44 a) Agenda for meeting b) Recommendations by Executive Committee of Open Market Committee c) Hase list of issues charted Timing discussed by BUT and Gamble - 3/30/44 BUr. Gamble. Bell. and Haas - 3/30/44 a) June 12 choses Elliett. Harriet and Gamble do not wish to release for srip so England - 3/31/44 34 33 59 62 227 245 290.297 - , - (Continued) Bank Page Financing, Government (Continued) War Savings Bonds (Continued) 5th War Loan Drive (Continued) Conference of Treasury group - 3/31/44 a) "Basket" re-discussed 1) Securities to be offered a) Press release on time and offering 716 291 291.324 303 304.325 -G Government Bond Dealers See Deferments, Military Greece See War Refugee Board -IIndia See War Refugee Board Italy Sale of assets in neutral countries (example: Lisbon Legation's tea) - proceeds therefrom to be used only with approval of Allied Control Commission: American Legation, Lisbon-Algiers-British Ministry of Economic Warfare-State-Treasury correspondence 3/29/44 156 -LLatin America Argentina: Luncheon conference; present: HMJr, Wallace, Luxford, and Jones (Marvin) - 3/29/44 65 a) General Perlinger's (Argentina's Minister of Interior) attack on United States and Ambassador Armour discussed b) Proposed memorandum to FDR (not sent) 254 Lend-Lease Weekly report - 3/29/44 U.S.S.R.: Report under First and Second Protocols and eight months of Third - 3/29/44 156 168 United Kingdom: Federal Reserve Bank of New York statement showing dollar disbursements, week ending March 22. 1944 - 3/31/44 343 -0Odegard. Peter H. Dr. Stanley King. Anherst College. thanked for cooperation - releasing - 3/29/44 151 Book Page Paul. Handolph 2. Senator George's letter upon Paul's learning Treasury - 3/29/44 Portugal See War Refugee Board Post-War Planning Currency Stabilisation: Conference: Hull asked to see Harry White so that time may be set - 3/31/44 Procurement Division Rockaway, New Jersey: Warehouse fire reported on by Smith - 3/30/44 Public Debt. Bureau of (Chicago, Illinois) Mrs. Doyle's report after visit - 3/29/44 716 152 309 237 154-A R- Revenue Revision Simplification of Tax Program See also Book 711 Reducing value of $500 dependent exemption by amount of dependent's income: House Ways and Means Committee meeting reported in Blough memorandum - 3/30/44 Rockaway, New Jersey See Procurement Division -SSaxon, James J. See War Refugee Board -T- Taxation See Revenue Revision Turkey See War Refugee Board - UU.S.S.R. See Lend-Lease United Kingdom See Lend-Lease War Refugee Board . -V- Virgin Islands See War Refugee Board 252,253 1 March 29, 1944 9:05 s.m. At the Secretary's request, Mr. Smith dictated the following resume of the discussion with Mr. John Hancock and Mr. Will Clayton to determine the disposition of the Surplus Property Disposal facilities of the Procurement Division. Treasury officials present: Mr. Gaston Mr. Sullivan Mr. Smith Mr. O'ConnellMr. Lynch, Mr. McConnell Mrs. Klotz The Secretary started off by saying that he had given a great deal of thought to the question of property disposal, and had come to the conclusion that, as Hancock originally believed, it ought to be under one head and all ought to be handled in one department. He said that in view of George's bill being introduced on Thursday, he thought this would be a good time to reconsider this whole situation and make a change to correspond with this bill if it is decided to make a change. Hancock pointed out that he had held the view in the beginning that everything should be under one head, but had eventually changed his mind. He had looked around Washington and tried to find which department of Government would be best suited to handle this job. He realized that it would be almost impossible to set up an operation from scratch to handle so elaborate a job as this is going to be. When the Secretary and McConnell asked for the disposal job, Hancock said he was very relieved, because he felt that the Treasury had an organization already set up and with at least some experience. He felt this experience would be valuable in this job. He said he didn't know how effective an organization Treasury Procurement was, or whether it was up to doing the job as it stood, but at least they had people and some experience that should be valuable and certain properties in the way of warehouses, and so forth, that could be used. 2 Clayton agreed with Hancock, and pointed out that his organization was simply a policy organization and was not handling any property disposal as such. He said there were five agencies involved in handling property disposal, and all of them were subject to his supervision. He said he didn't know which agency would take Procurement, if Treasury decided to let it go. Hancock then brought up the problems involved in getting out of the Procurement job. He asked the Secretary if he had made up his mind what he would say, and reminded him that all the reasons he had heard this morning added up to the fact that it was too big a job and the Secretary didn't want to tackle it. He said people would get the idea that it was a "hot potato," and the Secretary was letting loose of it. The Secretary pointed out that that was pretty much the situation. He said the fact of the matter was that he had fifty to sixty million bondholders, and for this reason he didn't think the Treasury was the best organization in the Government to take the criticism that was bound to come. Hancock pointed out that the Angel Gabriel could handle this job and would still be criticized. He said there would be endless criticism, some of it just, but twenty times as much of it unjust; but it would all be criticism. The Secretary then suggested to Hancock that if he were to go back to Lehman Brothers and was about to float a substantial issue, he would want to make sure that the Lehman Brothers' name was clean and above scandals and criticisms. He would want to make sure that Lehman Brothers wasn't being discussed all over the country for wasting money and being incompetent, and so forth. Hancock said that made some sense. The Secretary said that his mail, which was very heavy, was very quick to react to anything that went wrong with the Treasury. Any time the Treasury is accused of wasting money or is accused of anything of that sort, people are quick to write to him and to return their 3 -3 bonds for redemption. He wondered, under these circum- stances, if the Treasury could stand the criticism that would come with Procurement. Hancock then said that this particular criticism made some sense, and he was considerably affected by it. He said that if the Secretary were to go to the President with this criticism, he would probably get so mewhere with this idea. The President would listen, because he felt it was an important reason for not handling Procurement. Hancock, replying to the Secretary's question as to what he thought about this whole move, suggested that it was out of his jurisdiction, that this was an Executive Order and it was an Executive Order that had nothing to do with him. The Secretary, realizing that all the discussion up to this point had revolved around moving the property disposal project without the benefit of Procurement's people or properties, suggested that the entire operation might be moved to some other department. Clayton wanted to know what other department, and the Secretary pointed out that Commerce might handle it; to which Clayton had no reply, except to say that he didn't know what the reaction of Commerce would be to taking on this job. Hancock said that Procurement was traditionally the Treasury's, and for that reason he had given no thought to the possibility of moving it. Hancock then said that there would be no problem of getting takers for the Procurement Division. He said there would be half a dozen people who would reach for it, largely for prestige reasons. The Secretary pointed out that some people in the room believed that he should not give it up for that same reason. He asked again if there would be problems in getting rid of it, and both Clayton and Hancock assured him that if there weren't plenty of bidders, it would be the first time that ever happened in Washington. 4 The Secretary then asked about George's bill, and asked whether or not this contemplated move would be involved in any may in this bill or in the discussion about it. He wanted to know whether or not the introduction of this bill was forcing his hand one way or another. Hancock and Clayton agreed that this particular bill would probably not bring up the question as to who was handling what. The Secretary then said, "Then we have plenty of time. There is no need to decide this within the next few days?" Hancock said there was no reason that he could think of for deciding it in any given time. He said that he didn't think Congress would get around to doing anything very thorough for quite a while. He said Congress was promising him a lot of speed, and at the same time was taking a recess until April 12. The Secretary then asked Hancock and Clayton to keep the matter quiet and not discuss it with anybody unless he called them. He asked Hancock if he had told Baruch about it, and Hancock said he hadn't. He said he saw no reason to, and under normal circumstances wouldn't. The Secretary said he would think about it and decide whether or not to carry the thing any further. Hancock said that if anybody talked to Baruch, he wanted to do it; he didn't want anybody else to talk to Baruch. The Secretary said he would not talk to anybody, and that nobody else would be notified unless Clayton and Hancock were notified first. 5 March 29, 1944 9:30 s.s. DISPOSAL OF SURPLUS PROPERTY Present: Mr. Gaston Mr. Sullivan Mr. Smith Mr. O'Connell Mr. Lynch Mr. McConnell Mrs. Klotz H.M.JR: Does anybody have any ideas? MR. GASTON : I think we are stuck with it. MRS. KLOTZ: That is priceless! H.M.JR: You are getting very "Will Rogers," Herbert. MR. SULLIVAN: Anybody got any more ideas about how anxious Hancock and Clayton are to take it away from us - specifically you, Fred? MR. SMITH: I didn't have any idea. MR. SULLIVAN: You told me Thursday Clayton and Hancock are trying to get this away from us. MR. SMITH: I did not. I said they would in time if it went hay-wire. MR. SULLIVAN: You told me how they were trying to get it away from us. MR. O'CONNELL: I thought at the first part of the disc ssion that either intentionally or because they 6 hadn't thought of it - they apparently hadn't thought a transfer of this sort would involve a transfer of the organization, and so forth, because they kept talking about starting from scratch and building a new one. H.MJR: Yes, well, I put it that way to them, be- cause yesterday during the day you people convinced me that I should keep Procurement, but just give them the surplus. MR. O'CONNELL: Yes, but I thought you were think- ing in terms of the possibility of giving them surplus, including the surplus organization, because it is possible-- H.M.JR: I don't see how you could separate the two. I mean, I don't know what is surplus organization and what is Procurement organization. MR. SULLIVAN: It is all one organization. You can't separate the ordinary functions of Procurement and the sale of any kind of surplus without requiring a great duplication of personnel. It is all the same administrative staff except for the specialists; it is pretty much the same personnel all the way through. MR. GASTON: Well, it seems quite apparent that if there is to be a transfer, first their view is that you have got to have the Procurement organization - if there is to be a transfer, it has to be to some permanent organization of Government. I suppose Commerce is the only one. There you get into what Budget thinks. MR. O'CONNELL: Federal Works Agency, as I under- stand it, has been not only willing but anxious to take over the Procurement Division for a long time. You know we split the Procurement Division once before in connection with the organization plan and the Public Buildings part of Procurement went to the Federal Works Agency. 7 3I understood within the past fea months the Federal Works Agency, which, of course, is not a busy organize- tion these days, would be very happy to inherit all or part of the Procurement Division. MR. GASTON: That would be the other possibility. MR. O'CONNELL: But I think Hancock was probably thinking of them when he mentioned the fact there were a number of agencies that would be happy to get it. H.M.JR: I was surprised when he said, "Well, I will have to tell Mr. Baruch." Well, let's think it over somemore. At least I have learned this much, that it doesn't have to be settled between now and the time it goes on the Hill. MR. SULLIVAN: Who is going on the Hill tomorrow? MR. LYNCH: I think Hancock, himself, and representatives of six Procurement Agencies. MR. SULLIVAN: I say, who is going up there for Treasury tomorrow? MR. LYNCH: I don't know. I wanted to bring it up and get it settled today. H.M.JR: Who would have gone up, normally? MR. LYNCH: I think John and Bob would be the ones, the same people who have been going over to Joint Contract Termination Board. H.M.JR: Why not do whatever the normal thing is? MR. LYNCH: I would think that would be the thing to do. H.M.JR: You are still Executive Secretary to this group, aren't your 8 Mr. MeCONNELL: I should think Tom and John. Mil. LYNCH: Well, the three of us can arrange that. MR. O*CONNELL: The problem is the whole problem of contract termination; Bob and Tom and I were hoping to get together with the people here to have a discussion of views as to the bill, and at that time make an agreement as to who would go up. John and Tom, I should think, or Bob also - any two of them. MR. SULLIVAN: I think all three should go and Bob and Tom should handle the contract termination part. But then you come to the other point as to what we are going to do in the sale of surplus consumer goods. MR. GASTON: Does that come up? MR. LYNCH: I don't think that will come up specifically, John, because this bill covers so much. The points in controversy, where they haven't yet reached a definite agreement as between the Committee and Hancock's people with the agencies, do not involve property at all. The one point about property, as far as Scott Russell's position is concerned, is that he doesn't want to give too much attention to property at this time because it involves so many controversial questions. In other words, as he sees it, and as Senator George sees it, the only hope of getting legislation through quickly now is to avoid all controversial aspects about property, which means not who handles property or what the existing organization is, but what you are going to do about plants, about the aluminum plants and the steel plants and the pipelines, and the aircraft plants, and things like that. This bill doesn't deal with them specifically, and what they are going to recommend, what 1 assume George would say to the Senate is to say that this bill contains no provision respecting such important matters as that, 9 -5that they are appointing a head man to be in charge of property disposal who is to come back in sixty days or ninety days with his recommendations as to policy to be enacted by Congress. So the play is to avoid controversial questions as to property. MR. SULLIVAN: Well, then, the only testimony would be on contract termination, which you and Bob would handle. MR. LYNCH: Yes, and six specific provisions of the bill as to which there is a difference of opinion as between Russell and the Procurement. MR. SULLIVAN: All relating to contract termination. MR. O'CONNELL: That is right. MR. LYNCH: That is right. Such questions as what to do about subcontractors who are affected by insolvency of upper-tier contractors. H.M.JR: Is it understood, then, for tomorrow? MR. SULLIVAN: Yes, they are the ones who are going to testify. H.M.JR: Will you be present? MR. SULLIVAN: Yes, I will be glad to come up if I am out. H.M.JR: Will you be up there, too, McConnell? MR. McCONNELL: Yes, sir. H.M.JR: They let Republicans go up there, you know. MR. McCONNELL: I am not sure of that. 10 H.M.JK: Only before down. in. O*CONNELL: The Republicans are safer up there than anybody else. H.M.JR: Sure, I think you had better have one Republican up there, anyway. MR. LYNCH: On that point, Mr. Secretary, I would like to say now, because we are together here-H.M.JR: What about - Republicans? (Laughter) MR. LYNCH: That the ones who have been following such matters here, that we hope we can have a meeting about two o'clock today and make definite arrangements as to the hearing tomorrow. H.M.JR: Well, I don't have to be there, do I? MR. LYNCH: No. H.M.JR: Is it agreeable that we let Lynch sort of carry the ball to see that the right person is there? Is that right? MR. McCONNELL: That will be agreeable. H.M.JR: Is that all right with you? MR. SULLIVAN: Certainly. H.M.JR: It is your (Lynch's) job to see that the person gets his cue and is there on time. O.K.? MR. LYNCH: Yes, sir. H.M.JR: If they don't behave, let me know. Anything else? All right. 11. March 29. 1944 10:03 a.m. HMOre Hello. Edward Brown: Hello. HWJr: Morgenthau speaking. 3: Who? HMJr: Henry Morgenthau. B: Oh, how do you do, Mr. Morgenthau? HMJr: How are you? B: HMJr: Very well, thank you. Mr. Brown, I wonder if you could help me out. I -- you know, they're throwing a lot of this surplus war materials at us in Procurement. B: Yeah. HMJr: And we need a very outstanding merchandising man to head this thing up. You wouldn't know of anybody that's willing and patriotic enough to come down and take on this kind of a headache? B: I can't think of anybody off-hand. I don't suppose there's any possibility of getting Frank Folsom who was Chief Purchasing Agent of the Navy, who has now gone -- quit only a month or so ago to go with The Radio Corporation of America, but he was the Chief Merchandising -- the Manager and Vice President of the Montgomery Ward & Company. HMJr: I didn't get the name. B: Frank Folsom, F-o-1-s-o-m. HMJr: Yes. He's now... B: The War Production -- or with the predecessor of the War Production Board, whatever they called it, along with -- Knudsen was in charge of it and he had charge of all the buying of soft goods. HMJr: Is he very able? -2- 12 I think he's a very able man. HNJr: He 1s? B: He served with great sacrifice down there. Then he was Chief Purchasing Agent for the Navy.... HMJr: Yeah. ....and in the Navy Department and he left six B: weeks or two months ago to become Sales Manager and a Director and Vice President of The Radio Corporation of America. HMJr: B: HMJr: B: Yeah. He's a man who is known all over the country. He's extremely able. Is there anybody in the Marshall Field organization who is outstanding? Well, there's Houston McBain, the President -- he's the only man who would possibly qualify and -- but he's had no such -- he's general executive of the company, but he's had no such experience in merchandising as Folsom has. I suppose General Wood would be impossible politically. HMJr: Who? B: General Wood, Chairman of the Board of Sears & Roebuck. HMJr: General Wood. B: Yeah. HMJr: No, you can have him. B: Well, he's very able.... HMJr: I know. B: ....as a merchandiser, however. HMJr: I know, but -33: But I think he's impossible with his *America HMJr: First" and all the other Yeah. Well, you feel the way I do about that. B: Yeah. HMJr: How do you spell this Folsom? B: Folsom, F-0-1-6-0-m. HMJr: 13 Oh, yes. This -- is this man you mentioned in Marshall Field -- is he the fellow that reorganized it? B: No. HMJr: The man who reorganized it died, didn't he? B: The reorganizer died and made a miserable mess of HMJr: oh. B: It developed after his death. HMJr: Oh. B: He's dead, a guy -- a fellow named McKinzie. HMJr: Yeah. And -- but no -- but the present president B: No, McBain, M-c-B-a-i-n. HMJr: Oh, yes. B: A Scotchman. HMJr: And is he very able? B: He's very able and quite young. HMJr: Quite young? B: I'd say about forty-one or forty-two. HMJr: Yeah. it, too. is McBride, you say? 14 HMJr: Would you be willing for me - on my behalf to sort of sound him out? Whether he could get -uh -- even, well, any amount of time Just to get us started? B: Yes, I'd be willing to. I haven't much hope that HMJr: I mean, are you -- does your bank do his business? B: he'd do it because -- but I'11 be glad to sound him out and give you a ring, Mr. Secretary. Yes, he's a director of our bank. I know him very well, and Marshall Field does most of their business here. HMJr: B: HMJr: Well, he's forty-one? Somewhere in his early forties, I should say. Has he -- he hasn't been one of these fellows that has come to Washington and gotten his fingers burnt? B: No, he's never been in Washington. He's grown up primarily with -- through the financial side of Marshall Field and he ran their mills in South Carolina. HMJr: B: HMJr: Yeah. And then he became Executive Vice President and about a year ago, he became the President of Marshall Field & Company. Yeah. Well, sound him out and see whether he'd be at all interested to come down and just talk the thing over with me. B: Yeah. HMJr: See? B: HMJr: Yeah. All right, I'll do that and I'11 call you -call your secretary sometime during the day if he's in town. I think he is, but Well, you call me. Call me on District 2-6-2-6. 15 District HMJr: 2-6-2-6. 3: 2-6-2-6. HMJr: You just call me and I'll be waiting for you. 3: All right. Fine. HMJr: You can reverse the charges. B: No, don't worry about that. HMJr: All right. B: Thank you. HMJr: All right. 16 Marsh 20. 1964 10:23 Mar neighbor. James Forrestal: How are you, Henry? HMr I'm all right. How are you? F: Fine. HMJr: Jim, did you know Folsom very well when he was with you? F: Yeah. HMJr: Ah -- how able is he? F: Oh, I think he's a good man. He's a -- he's a man who -ah -- has a lot of tremendous energy in a -- .... HMJr: Yeah. F: .... on a particular problem. HMJr: Well, do you think he could help us at all on this procurement and surplus goods that you and the Army are going to throw at us? F: Oh, he'd be -- he'd be excellent, Henry. I - I doubt very much whether you could get him. You might. HMJr: F: Well He did -- of course he worked for us down here two years, and he's - he's a man of some means, but not -- you know, he hasn't got a great deal of substance. HMJr: F: But I moant to borrow him -- just to borrow him for awhile. Well, he'd -- you know, he's -- he's a very sensible fellow, and I -- he'd - I know he'd work well. He'd work -he's a man that you'd find easy to work with. Well, would you -- I don't gather, though, that you feel he's outstanding. Well, I wouldn't say he was -- well, I'd -- yes, I'd say be is. - I'd - the only reservation I have about him is that, at all - that he's bored with long meetings, and you know, the kind of detail you sometimes have to go through in government. 17 Well, I an too. And, of course, that's not unique. Yeah. I mean, he's not -- he's an impatient fellow. He wants to get the job -- to get on with it fast .... HMJr: Yeah. F: .... and that quality was of the -- was of great service to us here, and he was -- he was damn good. HMJr: F: HMJr: F: HMJr: Yeah. But he's -- he's extremely impatient and intolerant with -of people that want to talk a lot. Sounds good to me. (Laughs) Yeah. Well, I don't know whether I can -- but I just wanted -I haven' the faintest idea whether the RCA would loan him to me. F: Well, I don't think you'd get -- you'd -- I can't think, off-hand, of anybody better. If you couldn't get him, he could -- he also would be -- he knows people of that calibre pretty well. HMJr: F: HMJr: Yeah. There's another man named Stevens -- Jack Stevens in New York, who would be an extremely good man for you. Well, Jack Stevens is in that -- the cotton business, isn't he? That's right. Well, now, I know Bob Stevens. I guess it -- I guess it is Bob Stevens I'm thinking of. It's Bob Stevens -- Robert P. Stevens. Tosh, he -- there's two. There are DMD brothers. Tesh. 18 The - the one is on the - which one are you thinking about? The fellow on the Reserve Board. That's Rob - I think it - I think that's Bob, isn't it? I think you're right. What? There's another man in Chicago. A man in Montgomery Ward HMJr: F: Yeah. who Frank always spoke of very highly. I -- his name escapes me at the moment, but he was -- he was a fellow that -- I think he's the chief procurement man now for Montgomery. HMJr: The chief procurement man now? Do you know McBain of Marshall Fields? F: Oh, I used to know him slightly. FMJr: Ah -- have you got any opinion of him? F: I wouldn't have any one worthwhile. He's the man that got out of Marshall Field, isn't he? HMJr: No, he's the President now. He's the present man. He -- I - Folsom - I know mostly about him through Folsom. Folsom spoke very highly of him. HMJr: Was Folsom of Montgomery Ward? F: He had -- he was there, yes... HMJr: I .... and he had a disagreement with Avery. Oh, yeah. Well, anyway. or if you don't mind, the fact that I'm sort of checking up. would you keep that to yourself? Not . hit. I will. 19 Thank you. 411 right. 20 Name) 29. 1944 10:24 a.s. HNJrt Edward Brown: HMJr: B: Hello, Hello. Mr. Norgenthau, this is Ned Brown in the First National in Chicago. Yes, sir. I got hold of McBain and he said that he was pretty positive that he couldn't take the job; that he would go down and talk to you if you wanted to, but he said that James L. Palmer, their First Vice President is in Washington now. Our boys seem to think that -- wondered if Palmer could see you and get the story as to what the thing is and bring it back to him before he went down. Palmer is the man who, a number of years ago was, I think, in the University of Chicago, was brought into Fields by McKenzie. He's a very able man and really 18 the second man in Marshall Field & Company and happens to be in Washington. McBain thought that if he could talk with you or somebody in the office and get the idea what the job was about, it would save your time and possibly save HMJr: B: HMJr: B: His. Give McBain an idea of how long the job might last or something. What is Palmer doing here? Palmer is Vice President and he surveys -- what is he doing in Marshall Field's? HMJr: No, I mean is he here in the Government? B: No, he'e not -- at the present time he's not under the Government. He made a survey of O.P.A. for Brown. HMJr: Yes. B: I think he's -- he was loaned some months ago for some months to Budget -- I mean, he knows something about Washington, but he's back as second man in Marshall Field now in Chicago. I think you'd have a much better chance of getting him than getting McBain. He's about forty-five years old. 21 HMJr: Well... 3: He was down in Washington - as a matter of fact, HMJr: I see. the Government leases a tremendous amount of space in the Merchandise Mart. B: HMJr: And I think that Palmer thought Danny Bell was after it or something connected with the Merchandise Mart and the Government leases there. Well, Dan just came in. Let me ask him. Do you mind holding the wire a minute? B: No. HMJr: (Speaks aside) Ed, he saw Dan yesterday. B: Yeah. HMJr: Well, you wouldn't mind if I called McBain direct? B: I wouldn't at all. I mean, McBain will be -- said that he'd go down there if you want to see him. I mean -- but I think that he thought that HMJr: Yeah. B: You might call McBain. I just got him at Marshall HMJr: It's M-c-B-e-1-n? B: M-c-B-a-1-n. HMJr: B -- B B: Houston McBain. His first name is H-o-u-e-t-o-n HMJr: Houston? B: Yeah. HMJr: Well, I think I'11 call him and see what can do. B: Yeah. Field & Company so he's there. like the city in Texas. I'11 talk to Dan a minute. -3. HMJr: And see if I can get him at least to come down and see me. B: A man -- thinking it over in the few minutes you've talked to me -- with Butler Brothers, one of the largest wholesale houses here... HMJr: B: HMJr: Yes. .... his name's Donaldson. He's the Vice President, who formerly was Comptroller of Montgomery Ward. oh, yes. who is a very able executive. I mean you might B: consider him as a possibility, I think. HMJr: Donaldson? B: Yeah, of Butler Brothers. HMJr: Of Butler Brothers. Well, I'll think about that. B: Yeah. HMJr: Well, thank you very much. B: Not at all. HMJ B: Thank you. Good bye. 22 23 March 29, 1944 10.40 s.b. HMJr: Hello. Houston McBain: Hello. HMJr: Mr. McBain. M: Yes, this is Mr. McBain of Marshall Field & Company. HMJr: Henry Morgenthau, Jr. M. Yes, sir. HMJr: M: HMJr: I've just been talking with Ned Brown, who I think has been talking with you. Yes, I've talked to him twice on the phone this morning. Now, I don't know whether Mr. Palmer is here or not. He saw Dan Bell yesterday. M: Yes. HMJr: But, I know it's an awful nuisance to come to Washington and all that sort of thing, but if you wouldn't mind coming to be here Friday morning, I would appreciate it -so that we could take a look at each other. M: I see. Well, it just happens that Palmer is still there HMJr: Yes. M: .... and I've talked with him since I first talked with Ned Brown. HMJr: M: Yeah. I reached Palmer on the phone. He's now at the Statler, and I suggested that he get in touch with your office immediately, which he is now trying to do. HMJr: Well, I'd -- I.... M: Now .... Please. Ma .... it may be that I can come down: as far BE taking the job, it looks out. But since Palmer is there **** 24 Teah. **** at the moment. I would appreciate it very much if you could see him, and discuss all the facts with him give him all the facts. Well, I - I can do that, but you -- you say it would be out as far as you're concerned? It looks that way -- the way we're set up here now. Ah -- Mr it might be that Palmer, himself, could do it. I don't know. HMJr: Uh - huh. He's extremely capable. He worked with Harold Smith for -in Washington -- for three months a year ago. M: HMJr: M: Harold Smith? Yes, in the Bureau of the Budget -- we loaned him to Smith for three months. HMJr: Yes. M: Actually he knows his way around there much better than I do. He's the second man in this Corporation; he's a member of our Board of Directors. HMJr: M: HMJr: Yes. And since he's right there now, and available this morning, I thought if he got all the facts, then when he gets back here tomorrow morning, he and I could sit down and analyze it and see what we do next. Yes. Well, I'd like it, if you've got a couple of minutes, I just -- I could tell you right now, but I'll -- I will see Mr. Palmer, anyway. M. HMJr: M2 HWr Good. Because what I had in mind, if you were coming, I would like to see you Friday morning. Yes. And if you have any trouble on transportation, we'd be glad to get it for you. 25 Yes. The point is: this group of Baruch and Hancock and will Clayton are looking to Procurement to handle consumer surplus goods of the Army and Navy **** Yes. HMJr: .... and what I really want is somebody with outstanding merchandising experience who'd come in here and set this thing up for us. M. Yes. HMJr: Now that's the job that I have in mind. When you say "surplus goods of the Army and Navy", I assume that excludes food and munition. M. HMJr: That's right. M. Yes. HMJr: It is consumer goods. M: Consumer goods. HMJr: Yeah. And it -- the food, as I understand it, would go M: Yes. HMJr: to the War Food Administration, and shipping will go to shipping, and plants and so forth will go to RFC ..... but this other huge group would come to us, and is coming to us now in -- in, oh, ten or twelve million dollars a month M: HMJr: Yes. .... at the present rate. But we -- we're not set up to handle the volume that's going to come, and I - I'm looking for the best merchandising man in the country to come down here and help me set it up. I don't know how to do it, but I -- all I know is where to get a good man. Mr Har2 (Laughs) Well, that's very kind. I mean I wouldn't attempt to do it myself, but it's going to be . perfectly huge thing. and they seem to feel that 26 --(cont*d) - have the - through our warehouses and so forth and so on - that we have the skeleton organization. Yes. HMJr: But we haven't got the people who are big enough, or who have grown up in the business M: Yes. HMJr: .... and now I've heard about you, and -- I - I asked Mr. Brown whether you have been burned by Washington before, and they said you hadn't .... Mr (Laughs) HMJr: .... so you're fresh meat .... M: Oh, I see. HMJr: .... and -- but if you came, I mean, you'd have a complete free hand to go ahead and set it up on a business basis, and there'd be no politics in it. M: HMJr: M: Yeah. And, there'd be a straight business proposition to do this thing for your government. Well, I thought a lot of people in Washington didn't like business men, from what I gathered reading the press. HMJr2 Well, don't believe everything you read in the press, but I - : I'm looking for a business man with business experience, who'd bring in business associates, and do this on a straight business basis. M: Well, I'll be thinking about it, and I'd appreciate very much your seeing Mr. Palmer this morning. HMJr: All right. Supposing you tentatively get yourself a reservation so that you could be in here Friday? I'll do that, and I'll get in touch with you tomorrow as to whether it seens best or not. will you do that? Yes, I will, Mr. Secretary. 27 Thank you so much. Righto. Good-bye. 28 New 29. 1986 10:98 B.B. Randolph Paul: Hello. HNJr: Are you at home? P: Yeah. HMJr: Look, Randolph, you remember when Louis Weiss came down to see us? P: Yeah. HMJr: And they had plenty of P: I saw him a good many times after that, you know. HMJr: P: Good. Well, we helped him, didn't we? Yeah, I think we -- we helped him in two or three ways. We helped him in the first place by keeping him in close track of the situation. HMJr: Well. P: So he knew what was going on and I also talked with him on constitutional angles of the thing. HMJr: Yeah. P: We couldn't take an active place on the front HMJr: No. Well, let me explain what I've got, old man. P: Yeah. HMJr: line on it. I'm trying to get a Mr. Houston McBain, M-c-B-a-i-n, President of Marshall Field of Chicago ....to come down and help me out on this surplus property. Now, what I want to find out from you to Louis Weiss is -- is Marshall Field still the controlling interest. You see? P: Yeah. HMJr: I mean, does he control it? P: Yesh. 29 HMWr Now, if he is the principal stock holder, I'm like him to tell Houston McBein, "Go on down and help Morgenthau". P: Yeah. HMJr: See? P: Well, may I write down that name? M-c.... HMJr: M-c-B-a-1-n. P: Yeah. HMJr: His name is Houston like Houston, Texas. P: Yeah. HMJr: McBain. P: Yeah. HMJr: And he's the president of Marshall Field's. P: Yeah. HMJr: Now, I've talked to him and I've asked him whether he wouldn't come down Friday to see me. P: This coming Friday? HMJr: Yeah. P: That's tomorrow -- no, day after tomorrow. HMJr: Day after tomorrow. And -- but he said he's practically sure he can't do it, but if Marshall Field was the dominating stockholder and we could get word to him through Weiss that this is something that I would appreciate P: Yeah. HMJr: And if he will tell the other fellow, you know. P: Yeah. HNJr: Put a little heat on him. -3- 30 Yeah. Well, I can get in touch with Weine very -- assuming - I assume be's in his office. In fact, I got a letter from him a couple of days ago. HMJr: And just ask him. I mean, he may say, "No, young -80-called young Marshall Field is not the dominating stockholder," but on the other hand if he is, then tell him that this is to come down and help us put this thing on its feet so we can handle the surplus property. It's just an organization job. It isn't a permanent -- P: I mean, it isn't something that HMJr: Well, I'd say, "Put it on it's feet and stay here P: Yeah. All right, I'll get after Weiss. HMJr: Because -- will you do that? P: Yeah. Be glad to. HMJr: And it's something that if he's going to do it, I'd like him to do it today. long enough to get it going." P: Yeah. All right, I'll -- I'll put a call right HMJr: All right. P: I know Weiss on a pretty good basis. HMJr: Have you had your coffee? P: (Laughs) I've been way down M Street already. HMJr: What? P: I -- well, I went to bed at nine o'clock last HMJr: You're flattering yourself. (Laughs) P: Hell, I can't take more than ten hours sleep. HMJr: (Laughs) Okay. P: All right. HMJr: Bye. through and see if I can get Weiss. night so I was pretty good this morning. 31 March 29, 2944 MEMORANDUM FOR SECHETARY MORGENTHAU: From: Assistant Secretary Sullivan InS Mr. R. S. Stevens, Vice President and General Merchandise Manager of Montgomery Ward, is to be in Washington on April 4. Last week we made arrangements for him to be available to talk with us that afternoon. Others we had intended to call in this week included: Mr. Houlder Hudgins, formerly of Montgomery Ward and now with Sloane-Elabon Corporation, New York City. Mr. Jack Strauss, Macy's, New York City. Mr. Theodore Quinn, of the Maxon advertising agency who is the top man on the merchandising program for General Electric household appliances. F. W. Binzen, merchandise manager of The Penney Company. B. C. Heacock, Chairman of the Executive Committee of the Caterpillar Tractor Company. This represents the first group we intended to talk with. s/w new Volume of Transactions at the Procurement Division, Monthly, July 1943 to date (In millions of dollars) : : Month Purchases : Sales : $106 $4 August 120 3 September 172 1943-July October 75 November 125 December 82 1944-January 4 12 5 5 89 18 February 95 12 Total $864 $63 - Office of the Secretary of the Treasury, March 28, 1944. Division of Research and Statistics. 32 33 before mid AGENDA Re making % 1. Goal - 816 billion 2. Increase in maturing Certificates (a) May 1st - $2 billion (maturing $1,655 million) (b) August 1st - $1 billion (naturing $2,545 million) 3. Treasury bill program 4. Basket of securities 5. Date of Drive 6. Deferred payment for insurance companies, savings banks, pension funds, etc. 7. Time deposits of commercial banks. March 20, 1944. 34 March 29, 1944 11:00 a.s. FINANCING Present: Mr. Bell Mr. Gamble Mr. Haas Mr. Eccles Mr. Sproul MR. ECCLES: After we got Dan's memorandum on Monday, we spent practically all day yesterday discussing the memorandum and anything else that anyone wanted to bring up and discuss. And, of course, Goldenweiser and Piser have discussed the matter a good deal with the staff people for the last month off and on, and, also, they have talked back and forth with Bob Rouse so the staff people were fully advised. MR. BELL: There are a good many things that are being discussed that I didn't think necessarily had to be decided today, so I left those off the agenda. MR. ECCLES: That is correct. Now, here is a memorandum that we didn't have time to work off, particularly. (Distributes copies of "Recommendations by Executive Committee of Federal Open Market Committee to Secretary of the Treasury," attached.) H.M.JR: Do you want me to read it now? MR. ECCLES: That would be fine. H.M.JR: You got my message, why I had announced that sixteen billion, didn't you? MR. ECCLES: Yes, Ransom told me. well, I mean, it was perfectly all right. I hedn't seen the fourteen. 35 -2MR. BELL: It was all over the paper. MR. ECCLES: We agree with the sixteen, as a matter of fact. H.M.JR: You do? MR. ECCLES: Yes, we all agree that sixteen is the right figure; fourteen is too low. How would it be to read it--well, I don't know how you want it. H.M.JR: I have read the second paragraph. MR. ECCLES: How would it be to read it out loud? H.M.JR: There is nothing in there that I disagree with you on. MR. ECCLES: Wouldn't it be better before you either disagree or agree to go right through the whole thing? H.M.JR: Which way do you want me to do it? MR. ECCLES: I think that is better. Then you get the whole picture, you see. H.M.JR: All right. (Reads memorandum to himself.) Gamble really ought to be here, shouldn't he? I will see if I can get him over here. (Requests Mr. Gamble to attend conference.) May I say it is an excellent memorandum. If I could have had this a little earlier, it would have helped me. MR. ECCLES: Well, we finally got that off the mimeograph at ten-thirty this morning. H.M. JR: Then I couldn't-- 36 3- MR. SPROUL: As a result of our conversations all day yesterday, this was drawn up last night and this morning. MR. ECCLES: You see, we had Dan's here. We got this Monday and so met yesterday all morning and again in the afternoon, and this was the result of the discussion of just the Executive Committee. On the Executive Committee there is Hugh Leach, McKee, Draper, Allan, and I. Then we had some of the staff people. MR. BELL: You have my table there, Mr. Secretary, I mean, the table of balances. Number one is the goal, which is agreed on. Number two on page two of their statement they say they see no reason for doing any direct bank financing, and, therefore, recommend there be no offering of certificates or cash in connection with the May 1 refunding. That is the fourth column on that statement, where you have two billion dollars for May. That would increase the maturing certificates by two billion dollars, making it three billion six, and give us that much more cash. Now, they are recommending that be eliminated. The bankers did likewise, because they said it would draw funds from the corporations, and so forth, and take it out of the drive. They would like to leave that two billion dollar increase out at this time and leave a vacuum there so they could pick it up in the drive. H.M.JR: Now, wait a minute. You can't pick it up in the drive if the Federal Open Market Committee--I gather they want to eliminate certificates entirely. MR. ECCLES: Not in the drive. MR. BELL: No, no, they recommend the basket be the same, but they add the one and a quarter percent note. MR. ECCLES: We are talking about four at the bottom of page two. H.M.JR: Oh, I thought you were recommending the elinination. 37 MR. SPROUL: We have in the past, and we would like to get away from it, but we don't think you can in this drive. H.M.JH: Maybe it was because I was told that is what you were going to ask. (Laughter) MR. BELL: I think you may have been thrown off by the last sentence, "You may wish to consider the inclusion of the one and a quarter note." MR. ECCLES: None of us feel, with the volume to be raised, that the certificate should be left out of the It is such an important part, that I don't think you can change any time from now out. I think to get corporate funds a certificate is with you for the duration. drive. We feel that you have already established it now. MR. SPROUL: It might be possible, if the rate on bills were increased to where we think it ought to be and if a short note were--you could get rid of the cer- tificate. MR. ECCLES: Our idea in suggesting a rate--and I think a half of what we had in mind may be too low-- instead of figuring that the bill is merely an instrument for the Fed to take, we would like to see more bills in the banks and less certificates. Instead of the banks getting seven-eighths for certificates--there isn't any reason for it. The banking situation is such that I think that the banks with what bank financing that you may have to take, there is no reason why the banks shouldn't take a bill. We have a half-rate bill here, but I can't help but feel that five-eighths bill for a period of four months--get all the new money that we expect to get from the banks on bills. Your outstanding amount of bills is only thirteen billion. (Mr. Gamble entered the conference.) H.M.JR: I am sorry, Ted, I should have let you know earlier. You could take one of these statements and read it. George has one. 38 - MR. HELL: You see, with the two billion in May that would bring our balance down, going out of May into June with a drive approaching five billion nine instead of seven billion nine. MR. ECCLES: If you started the drive, though, on May 23, instead of June, your balance would increase. MR. BELL: Yes. MR. ECCLES: Your balance would not get that low. MR. BELL: But this statement is based on the assump- tion that the drive would start early, June or not until after June 1, so your balance would be down to around six billion dollars at the end of May. MR. ECCLES: On May 23 it wouldn't fall; it would more likely be eight billion dollars. H.M.JR: Let me get one thing at a time. What you are talking about is not adding two billion to the certificate that comes due on May 1. Is that right? MR. BELL: That is right. That is a billion, six hundred and fifty-five million maturing. With two billion you would have a maturity of three billion six next year. H.M.JR: But have the extra in the drive. a MR. BELL: At least leave that money there and not pick it up in the certificate before the drive. H.M.JR: But figure you are going to do it in the drive. MR. ECCLES: Except you wouldn't make a public offer- ing at all; you would make your non-bank offering in the drive only of sixteen billion, getting as much a s you can. MR. SPROUL: You would hope to get an additional amount in the drive from non-bank investors rather than getting it before the drive from banks. 39 H.M.JR: I should think from the drive standpoint that that is a good suggestion. MR. BELL: I think that is. H.M.JR: I would like Gamble to pass on that when he gets around to it. But I don't think we will have any difficulty on that; it is coming to me as a shock, and a pleasant one. MR. BELL: They leave the next one open, the August 1 increase. In that memorandum you show a billion increase in the same column for the August 1 maturity, and-- H.M.JR: As I say, it sounds all right. I am not making any commitment yet. Gamble, if you will just listen for one minute--the suggestion that Fed has made is that we don increase our certificates by two billion dollars, and just hold that with the hope that we get-that much additional in the drive. MR. GAMBLE: I think that is very good. H.M.JR: I am not saying yes or no, but it sounds all right. But I am a little conservative here; I don't like to be rushed by the Fed too much. MR. BELL: You notice there are eighteen billion dol- lars in that statement to get from the drive. H.M.JR: What is the next one? MR. HAAS: The next point is the Treasury is misquoted in the third paragraph. The Treasury forecasts that--I presume it is based on some of those memoranda. That wasn't a forecast--it is in the third paragraph, "exclusive of Federal agencies and trust funds, is forecast by the Treasury as 33.3 billion dollars for the calendar year 1944." That isn't a forecast. That thing assumed that you went 40 7 through the year on the same basis as the Fourth her Loan Drive. That is the may it would come out. Everybody in the Treasury, I am sure, hopes and is kind of inclined to believe it will be somewhat better. MR. BELL: It is just set out on a basis of past experience. H.M.JR: You have protected your honor. Now, let's go. MR. HAAS: That is the important part. H.M.JR: Says you! (Laughter) Having done that, do you mind-- MR. HAAS: Go on now; it is all right. MR. BELL: We have passed number one and number two. H.M.JR: George is so worried about his honor, which is in four, isn't it? MR. SPROUL: Four-F. (Laughter) H.M.JR: What about three? MR. BELL: Number three is raising the rate on Treasury bills, which we have discussed a good many times. Really I can't see any excuse for raising this bill rate from three-eighths to one-half when all it virtually is now is currency. H.M.JR: The only thing that would make me do it would be to get Wendell Willkie to come out. MR. SPROUL: Against it, or for it? H.M.JR: Well, I don't know. MR. ECCLES: I know we have discussed it a good deal. MR. BELL: I don't see how you can substitute Hills for certificates at the higher rate which they want and like. 41 8- MR. ECCLES: But if you don't put the certificate out, Dan, now I don t see any reason why the bank financing that they are going to do directly should be given seveneighths. It seems to me that we need more bills in the banks. Now, the banks have about six billion of bills. Now, of course, the three-eighths bill with the banks is, in effect, the reserve upon which they get interest, really. That is the way it is today, and they are not going to take these three-eighths bills as an investment. So far as the Fed taking bills is concerned, the three-eighths rate is certainly plenty, and it isn't an idea of getting any better return on what the Fed buys at all. We discussed that to see if we could find some way in which we could refund the Treasury, I mean, any different way, so it isn't an idea as far as we are concerned of getting any return; it is to get the bill more in line with the certificate, that is the certificate at seven-eighths for a year. A bill as a money market instrument should go much more to the banks than it does. H.M.JR: Which should go more to the banks? MR. ECCLES: The banks should get more bills; the banks should take more bills. MR. BELL: In place of certificates? MR. ECCLES: It wouldn't affect the reserve picture. We will have to buy whatever is necessary to give the reserves. H.M.JR: Are you worrying about the banks earning too much? MR. ECCLES: I think the money market banks don't need the seven-eighths today. It seems to me that a bill as a shorter piece of paper, that is, related to the certificate, would tend to put out a great many more bills than me now have out. The volume of certificates is growing very, very rapidly, and you have to make a roll-over of these certificates periodically. The bills 42 work automatically. It becomes an automatic operation, and instead of having outstanding thirteen billion of bills which you now have out, and the banks own about six billion of them, if during this year the banks and the Fed together would have to get, say, fifteen billion, I think the twenty-two billion that you figured for the banks and the Fed is too high, George. I would think that fifteen would be much nearer to what we might get by with. MR. BELL: You mean the banks and the Fed? MR. ECCLES: Yes. Certainly ten billion of that amount should be in bills, and the banks, instead of owning so many other securities, including certificates, should have at least five or six billion more of bills. They won't take the bills at three-eighths; they will run into the certificate, go into the market and buy certificates and bonds and other things. What I think we ought to try to do is to do more of the short financing on bills at a lower rate, of course, than certificates. I don't know whether the half is high enough; it may take a five-eighths to bear a relationship to the certificates, I don't know. H.M.JR: Could I interrupt you a minute? As near as I get your thinking--we have had this before, and you may be right--what you are worring about is that certificate rate of seven-eighths is too high. MR. ECCLES: I don't know that it is too high for certificates. MR. SPROUL: The three-eighths rate is too low in comparison with the seven-eighths rate for certificates. I think the seven-eighths rate for certificates is all right. H.M.JR: Let's drop the rate on certificates to three-quarters. MR. SPROUL: You have . pattern of rates now which is in pretty good alignment from seven-eighths out, but your 43 - 10 difficulty is with your pattern rates from seven-eighths to three-eighths. H.M.JR: But if you are going to squeeze it, why not save a little money? MR. SPROUL: We think you would save money by increas- ing the rate on bills and getting more of the financing into bills than by keeping it all in certificates. H.M.JR: How about dropping the rate to three-quarters? MR. ECCLES: I think it would be all right from the bank standpoint, but the difficulty with the certificate is, it isn't only a bank instrument; the certificate has become a corporation instrument, and the corporations are very heavy buyers. The three-quarters would be plenty for banks if you just relied upon the banks to take the certificate, but you use the certificate in the drive for the non-bank in- vestor. That is the difficulty, so what we are trying to do is to get a higher rate on bills and let the banks take the bills instead of the certificates. H.M.JR: But just because we don't see alike on the three-eighths, how about saying the banks can't buy the seven-eighths but we will give them a three-quarters? MR. ECCLES: Of course, the trouble is-MR. SPROUL: The corporations depend on the bank market being there if and when they want to get cash for the seven-eighths. H.M.JR: We have had this for about two years? MR. SPROUL: Yes, about two years. MR. BELL: Since May, 1942. H.M.JR: And we haven't seen eye to eye. I grant we have been lucky so far. Last time the discussion HBS that 44 - 11 you couldn't get more bills distributed, and we have been fairly successful, haven't we? MR. SPROUL: We have, but it is an indirect sale to the Fed. It is not a market distribution. H.M.JR: Doesn't it stick a little bit? MR. ECCLES: No. MR. BELL: Outstanding bills are going down because the Fed has to supply reserves to the market through Treasury bills. H.M.JR: Wouldn't it be just the same if the rate was one-half? MR. ECCLES: We would have to supply-- MR. SPROUL: If you increase the supply of bills, we probably would continue to get most of the bills, but we think more would stick in the banks than now stick there. MR. ECCLES: If you don't offer certificates--instead of making this offering of certificates that you talk of here to the banks, you won't moke any offering of certificates to the banks; you would increase the offering of bills instead of offering the certificates that you propose to offer, and the banks then would only get the bill. The certificate to the banks at all. just wouldn't be available directly Of course, the banks will go into the market and will buy bills, will bid them up to buy them as long as the certificate is as low as it is. They won't take the certificate at the present rate; they will go in and get the certificates indirectly. MR. BELL: They won't take the bills? MR. ECCLES: That is right. My point is, if you could get the bill rate so that the pattern between bills and 45 - 12 - certificates was more realistic and you wouldn't offer certificates, the only thing available then in the offering would be the bill. And we would expect, then, the additional market offerings to be bills instead of certificates. H.M.JR: Well, now, I go along with you. There is no argument here on the Treasury's part. Everything should be done to sell every dollar to the non-banking group. There is no argument about that. I like your suggestion that we don't increase the certificates by two billion dollars before the drive and try to sell that much more, and so forth. Now, the other thing, I would like to pass it for the minute. It is a difference which we have approached every three months. We still haven't been able to see it. I don't know how much you have tried to wear Bell down on this thing, but you are young fellows, and I am not saying yes or no; I would like to pass it for the minute, because it is the most difficult thing, and I don't know whether we can get together on it or not. MR. ECCLES: Henry, let me just say this, and then pass it. We won't bring the thing up now, except you have an interim period, you have a different situation than we have had, in which we have to increase the bills substantially. We have been talking about, likewise, increasing the certificates for the banks. It is in connection with that that we thought it appropriate to at least call to your attention here what seems to us a better way of handling this, which is not to make available at any time certificates from the banks or other issues, but do what we can by getting a better rate so that the banks will take the bills in a much larger amount than they have taken, and take less of the certificates, so that the amount of outstanding certificates that the Treasury has would not be so high, and the amount of bills they have out would be much higher. That is a situation, . different approach- it is . little different situation than you have had in the past. 46 - 18 - H.M.JR: I will give it careful consideration. MR. SPROUL: The net result would be that your financing would be done in the aggregate at a lower rate rather than a higher rate. MR. ECCLES: It wouldn't cost you more money. MR. BELL: If you shift from a certificate, of course, back to a half bill, you save money. There is no doubt about that. But it seems to me that we have sold three-eighths to the country, to the money market, and now to raise that rate gives a basis for all of this talk about the shortterm rate strengthening that we had last fall, and which we quieted, I think, very effectively. It starts all over again. MR. SPROUL: I think it no longer is a money rate; it is a Federal Reserve discount rate now, their threeeighths rate. MR. ECCLES: It isn't a money market rate at all. MR. SPROUL: It is just the way they borrow money from us at three-eighths, so I don't think, myself, an increase-- MR. ECCLES: If you raise to seven-eighths, that is another story. MR. BELL: They would be borrowing at a half if you stuck it up there. MR. SPROUL: I don't think that increase would have any effect on Government securities, except from-MR. HAAS: If you thought about this, Marriner, right now, you are beginning to hear these comments about your reaching the bottom of the barrel; things are getting tight. Then you raise the rate, and it is liable to affect the whole thing all the way out. 47 - 14 Now, you can have one opinions I can have one; and the Secretary and 11--everybody--but it is . speculative thing, and I think at this stage, why speculate? MR. ECCLES: You can keep the three-eighths bill rate for the purpose, and you can put out only the amount of bills that It will be necessary for Fed to take to give the necessary reserves. That is all you can do. But you can't put out more bills and make them stick at three- eighths. MR. HAAS: Some of them-- MR. ECCLES: I think they will stay right down a round your present six billion level. MR. BELL: Of course, Marriner, you can't put out seven-eighths and make them stick unless you provide reserves. MR. ECCLES: That is right, but you will just provide the reserves. What I am thinking of is, instead of the banks holding the number of certificates and notes, increasing their holding of certificates and notes to make up the slack, and that you don't get from non-banking investors, the banks would make up on a bill, rather than get the higher rate on these other securities. Speaking of money market banks, which is really the place where you get--I would like to see them have a lot more bills and less of the other paper to the extent that the bank money must be provided, and we can't get the banks to do that on the present differential of three-eighths, I mean, on the three-eighths bill, because the spread between three-eighths and seven-eighths is too great to get the banks--they will run into the market and buy up the other security, instead of holding the bill. That is the point that we had in mind. H.M.JR: Can we think about it? MR. ECCLES: Yes. 48 15 - H.M.JH: lion, number four, The recommend that the basket in the fifth drive be the same as in the fourth drive except for the substitution of 2 per cent fully marketable bonds for 2-1/4 percent bonds of restricted mar- ketability." We have been over that in great length, and we are in accord with you on that. MR. GAMBLE: Yes, sir. MR. BELL: Yes. H.M.JR: You said it was two percent. Where did you say it would fall? MR. BELL: In '52-'54, eight-ten years. MR. ECCLES: The last was eight-ten. It would be just the same. H.M.JR: Would that be all right with you people, June? MR. SPROUL: Yes. MR. BELL: I had an interesting suggestion yesterday. Dominic Rich suggested that you have a ten and a half or eleven-year, two, definite maturity rate and allow the restriction to be on. MR. SPROUL: With restrictions on? MR. BELL: For that ten years, which is a new sug- gestion. I don't know whether you could put out a definite maturity date of ten and a half or eleven years or not with the restrictions. What do you think, George? MR. HAAS: You can put it out, but I am skeptical as to what would happen. MR. BELL: It is a little off the line. MR. HAAS: Yes, and that is probably what he thought - attractive. 49 - 16 H.M.JH: I missed that. MR. BELL: Dominic Rich is a dealer in New York. He came in yesterday and suggested that we give consideration to a definite maturity rate rather than have a call date on the two and make it a little longer than the ten-year period, say, ten and a half to eleven years, that period over ten years being restricted to commercial banks. He said he thought it would go well and be popular because of its definite maturity date. At the same time within six months everybody knew they could get rid of them to the banks. H.M.JR: Is anybody interested? MR. SPROUL: I am interested, but I still think the two percent fully marketable would be better. it. MR. HAAS: This put a fixed maturity on it and lengthened MR. BELL: That is right. Now, there is another suggestion in that number four that we might want to consider, the inclusion of one and a quarter percent notes. I think that would be rather popular. What would you think of crowding another security? MR. GAMBLE: I don't think the basket is overcrowded. I think it would be fine to add it for this drive. MR. SPROUL: It was the principal question we had, whether the basket was overcrowded. But we were suf- ficiently interested to suggest it as something for your consideration. MR. GAMBLE: There has been an indication that there is a market for that. It has come from numerous sources, and with the rest of the basket set, I think there is no objection to adding that and experimenting with it. MR. ECCLES: Instead of just the seven-eighths that we have stuck to continuously, there is still a lot of cash 50 - 17 - that just doesn't go into bonds. The stuff sticks in the banks, If you could draw some of it out on this that doesn't go into the seven-eighths, you are that much ahead. MR. SPROUL: We thought that anything which would broaden the market for non-banking investors ought to have serious consideration. MR. BELL: I think that is worth thinking about. H.M.JR: Five, "Our opinion would be that the drive should begin on May 23 or 29 and should cover a period of three weeks; but on this point we believe that the recommendations of the sales organization should be decisive." That is largely a thing, Gamble, you and all these people will have to discuss. MR. SPROUL: We put in there that we thought the sales organization idea should be decisive on this. MR. GAMBLE: They realize how they have to expand in a number of directions this time. They were going to shorten the period of the drive. MR. BELL: They wanted more time to get the organization ready. H.M.JR: What they want is three weeks, and have it run over the Fourth of July so they get the July 1 money, get that dividend money. MR. BELL: The salesmen suggested June 14 or July 8. MR. GAMBLE: Yes, the banks recommended June 7 to July 4, and the sales organization recommended two dates. They were not unmindful of the attractiveness of the earlier spring date and the vacation period and all the problems that came in the summer. They recommended May 28 or June 14, but they recommended June 14 as their first choice, for the reasons that this extra task that they have-- 51 - 18 - MR. ECCLES: I should certainly think that if the sales organization preferred that, I wouldn't question it. H.M.JR: I think just as you do, that they should settle that, unless it is something you object to. MR. SPROUL: No. MR. ECCLES: There is this in connection with quotas that I would like to suggest: There has been, as you know, a tendency for States to get over their quota in total, but it was because the corporations and those other than individuals got much larger than their quota. It seems to me that instead of thinking of an over-all State quota, we thought-- know you give two quotas, but I would ignore the total. Say that you have two quotas and that is all, that there is an individual quota and the corporate quota, and that you are not over the top until you get both quotas-you might get one hundred and fifty percent of one and fall short on the other, but you still don't have your quota. Put the emphasis on your two quotas, and don't let them cover up their failure to get the individual. MR. GAMBLE: There was less of that this time. MR. ECCLES: It was an improvement, but there is a lot of these sales people in the States that in order to get over the hundred percent as a total they go to corporations and others and say, "Now, we will be over the top if you will do this, see. It is the easy way out, instead of going the hard way and getting it from the individuals. MR. SPROUL: You contemplate giving more emphasis to that next time than you did last time, which was more than you had before? MR. GAMBLE: That is right. H.M.JR: Could I make a suggestion, that if you people had fifteen or twenty minutes when you were over here, you could go to Bell's room OF some place and let Gamble give you an outline of where we stand from the salesamn's standpoint. Would that be agreeable to you people? Do you have the time? - 19 MR. ECCLES: Yes, we ought to be back there by one o'clock. H.M.JR: I think we could finish here by twelve. Then if you had the time, I would like Gamble to go over and outline his plans to you and then get your suggestions. I think they ought to know. Is that all right with you and Bell? MR. GAMBLE: It is perfectly all right. MR. BELL: Sure. Number six? H.M.JR: Well, we have heard the discussion. Do you want to take that point, or should Gamble, why we don't think it is good? MR. BELL: I take it that this is really a partial- payment scheme borrowed from banks, and not a partialpayment scheme put out by the Treasury. MR. ECCLES: The Treasury put it out. MR. BELL: Or advocated it. MR. ECCLES: They put it out on a specific plan, the forms and everything. It won't be just left up to banks' discretion. We didn't take time to spell it all out here, because it calls for not less than twenty percent down and twenty percent a month, which would mean that in four months the loan would be paid. Now, one of the reasons for that is that if people get committed, say, a man is induced to take five hundred dollars; he hasn't the oash, but he expects to get it, or somebody else has it coming in and he can be pressed to take five hundred dollars. Then when that comes in, he isn't around spending it for something else. He has himself committed to make those payments. Be has paid his twenty percent down, and he is then under pressure to meet the payments instead of spending his money. It has worked very successfully in Canada. It has been one of the big factors, they claim, in their successful drives in getting people under pressure to meet these payments. 53 - 20 H.M.JR: As long as you people only have until quarter of one, could we pass that up, and maybe Gamble and Bell could explain it? Could I leave that one there? They can handle that with you gentlemen, if that is agreeable. The next one goes down to a hundred dollars. We have been "agin" it all the time, but I will be open to argu- ment on that. It is getting hotter and hotter to sell. MR. SPROUL: Again, the general argument is to broaden the field wherever possible for non-bank investors. We think that is a field which hasn't been tapped. Those who don't want a registered security, who want a marketable bond, and want small denominations-- MR. GAMBLE: They voted against it, Mr. Secretary. H.M.JR: Again, may I pass that, and you as sales manager explain to them why, because I am weakening on it. MR. ECCLES: Every darn one of our Reserve Bank Presidents--there isn't a single one of them but said-Hugh Leach, for instance, this morning said that if you put out that bond and you put it in the bank where it can be sold over the counter, a hundred dollars in cash, a market bond--he said that without question in his district you could very substantially increase the sale to non-bank investors that would not come in and take a registered security. H.M.JR: I have been opposed to it, but I am weakening. MR. GAMBLE: We discussed it very thoroughly for two days. The point was brought up that If the Treasury was ever disposed to do it, it probably ought to be on order to the Treasury, not made available for the sales people to sell. MR. HAAS: I think it is the most important decision in the whole business. It is all we have left as the pattern of rates that distinguishes this war finance from the previous one. I think it is political dynamite. It gets back to the same old argument. 54 21 - H.M.JR: Suppose you just let them be sold over the bank counter. MR. GAMBLE: In this last drive there were seventysix thousand odd pieces sold only. You are talking about sixty-nine million nine hundred thousand sales in the E bond field. There is no indication--I am looking at it just from the point of view of demand on our securities. There is no indication that there is any great demand for securities. The arguments against it, from our point of view, far outweigh the argument for it. H.M.JR: I am going to duck it, because I am trying to get through at twelve. As I say, as far as I am concerned I have been opposed to it, but I am weakening. I am leaning a little bit your way on this thing. We have to get more of this non-banking money. MR. ECCLES: Every banker is for it, probably. MR. BELL: The bankers raised the question as to whether they should again bring the subject up. I told them it wasn't on the agenda, but they could feel free to bring up any subject they wanted to. They put it aside. I notice they didn't put it in the recommendation. MR. SPROUL: The bankers are a timid lot. MR. BELL: They were in favor of it. H.M. JR: Anyway, you people have another forty-five minutes after I leave. MR. BELL: The important decision is this raising the E from forty-five to fifty. MR. ECCLES: Of course, if you don't reduce the other to a hundred, then you shouldn't raise the G to five, but if you reduce the other, they have a marketable bond at a hundred. The G bond is a coupon bond. mean, it isn't a coupon; it is a registered bond. We figured out that the Treasury mails now about four million, dollar and a quarter checks . year, and the paper and the asnpower and everything - 22 being what it is, four million checks at a dollar and . quarter just doesn't seem realistic at all. Now, the - bond, of course, is a registered bond, but you don't pay the interest semi-annually. But on this other bond, four million checks at a dollar and a quarter each, when you think of the cost of making them out, mailing them, the cost of clearing them through the banking system, it just isn't realistic. MR. GAMBLE: I wouldn't be too much concerned about the elimination of the hundred dollar G bond, because I think the same situation there is true--but on the twenty- five dollar E, we sold forty-seven million of them for eight hundred and fifty million dollars. It is like going into Woolworths and telling them to give up their five and ten cent articles. MR. ECCLES: But you are assuming that a great many people would take two of the twenty-five dollar bonds in lieu of the fifty. MR. GAMBLE: I think it is true. We would not put out a twenty-five dollar bond if we had to do it over again. But having raised a fourth of our money through twenty-five dollar bonds, I think it is surcide. H.M.JR: I would fight and bleed for the twenty-five dollar bond, and I realize we are throwing a terrific burden on the Federal Reserve Banks with this stuff. tion. MR. SPROUL: The first burden is on your own organizaMR. GAMBLE: We have gone far enough in this drive, Mr. Sproul, to say, "Don't buy a twenty-five dollar bond if you can buy a hundred or two hundred dollar bond." We have been working on a plan; we have done nothing about it, but we have discussed allowing them an average dating on the higher bond in order to eliminate the twenty- five dolier bond. I think me can do that. I don t think we have been aggressive enough. 56 - 23 H.M.JH: That is the kind of thing, Ted, I would like you to explain to these gentlemen. Maybe they have changed their minds. If you don't mind, I would like to pass that. That doesn't mean, Marriner, that you and I can't talk again. I would like to talk again between now and Friday noon. Now this last thing--aren't we in agreement on that? MR. BELL: On the 7th? The bankers recommended that it be ten percent and have a limit of five hundred thousand. They also recommended the certificates of deposit. MR. ECCLES: Held by individuals. MR. BELL: Now, there is that question of certificates of deposit. We said originally, when we put this first into operation that certificates of deposit could be played around with corporate funds, and we excluded it just for that reason. But I think we have probably got to include certificates of deposit. Maybe we can confine it to those issued to individuals, because many banks in the West don't have pass books. MR. SPROUL: That was the word when we had our meeting with all the presidents, that in many of the districts the banks didn't use pass books. It was a savings deposit, and it could be confined to certificates of deposit to individuals. You needn't slop over into other certificates of deposit. H.M.JR: Didn't we say five hundred thousand? MR. BELL: The bankers recommended it. MR. ECCLES: Why five? You had two last time, ten percent. Now double it to four and twenty percent. MR. HAAS: This helps the little bank more than the other. 57 - 24 MR. SPROUL: That WES our idea. MR. BELL: I have no objection. MR. ECCLES: This was done for the little bank. H.M.JR: This would be all right with me. Well, there are some other things. As I say, if you will excuse me, I will be wanting to talk to you on the phone again. will you be in New York tomorrow? MR. SPROUL: Yes, I will. H.M.JR: I will be talking to you, too, if I may. MR. BELL: I would like to see the increase in Treasury bills start next month of four hundred million dollars of extra money, in the third column, for April. H.M.JR: Is there any disagreement on that? MR. ECCLES: That is all related to the whole bill decision. If you are going to do nothing with reference to trying to increase the market for bills for banks-and they are only considering bills as a means of furnishing additional reserves--then I can't see any objection to the hundred million of bills a week. MR. SPROUL: It is related to this whole bill question of rate and maturity as we put it up. It is also related, as I see it, to your need for funds and our general idea that you shouldn't go to the banks, that is, going to the banks until you need the funds. But as soon as you do, then under one scheme or the other you would go to the banks with the bills. H.M.JR: If we are not going to get the two billion dollars additional in certificates, I have certainly got to get my bills. MR. SPROUL: Then that is the time to start, when you want to get that money in. 58 - 25 - H.M.JR: I want to try to keep an eight or ten billion dollar balance. Non, I will be getting down to five or six. MR. HELL: It will be down to five if you eliminate the bills for April and May. But I think we are going to be squeezed in the fall. We will really have to go to the banks directly. MR. SPROUL: We say we will take a look at it after the drive, how much you have for non-bank investors. MR. ECCLES: I think the first of October is the time when you should go directly, but if you accepted our recommendation on bills, you would be raising it in July, August, and September. You would be stepping up the bills during that period. MR. BELL: If you accepted our recommendation, you would be doing the same thing. MR. ECCLES: Except to step them up enough to offset the direct offering of the banks. 59 March 29. 1944 BY EXECUTIVE COMMITTEE OF FEDERAL OPEN MARKET COMMITTEE TO SECRETARY OF THE TREASURY Before making specific recommendations on the points mentioned by Under Secretary Bell in his letter of March 27, we should like to state certain general principles that are fundamental to our recommendations. The main objectives of Treasury financing policy and of credit administration, of course, are still the borrowing of the maximum possible amount from nonbank investors while maintaining an interest rate structure with a maximum market borrowing rate of 2 1/2 per cent. There is no question of our ability to maintain the maximum borrowing rate of 2 1/2 per cent, but we are still measurably short of the goal of maximum borrowing from nonbank investors. It seems to us that the Treasury's current estimates of sales to nonbank investors are too conservative in view of both the performance of the Treasury sales organization during the past two years and the amount of funds that are shown to be available by all estimates of current savings. The net absorption of Government securities by nonbank investors, exclusive of Federal agencies and trust funds, is forecast by the Treasury as 33.3 billion dollars for the calendar year 1944. Since 1944 will include three drives and will begin and end with a drive, it seems likely that a larger amount of funds should be raised than in previous annual periods. In the year ending October 1943, which included three drives, nonbank investors absorbed 34.7 billion dollars of Government securities, and in the year ending February 1944, which also included three drives, nonbank investors absorbed about 36.4 billion. It should be possible in 1944, therefore, for the Treasury to sell 36 billion dollars net to nonbank investors, and with continued improvement in the sales program this amount could be further increased. It is recognized that the figures given above include sales in the first and second drives, when some idle funds that are no longer available were reached. On the other hand, the organization of the drives has improved, and there has been considerable repayment of private debt, which is releasing funds and increasing the number of potential investors. The reduced rate of increase in national income this year should mean that nonbank investors will have less need to accumulate bank balances than in the past. For those reasons, we believe that Treasury estimates of sales to nonbank investors in 194. are unduly low. Regardless of the amounts that may be taken by nonbank investors, however, it is our opinion that sales to banks should be considered as residual financing, to which the Treasury should have recourse only as a matter of last resort. There is no question of the ability and the willingness of the Reserve System to provide the reserve funds needed to assure the success of this residual financing whenever necessary. We believe, however, that direct bank financing should not be countenanced until even more vigorous efforts have been made to sell an increased amount of securities to nonbank investors and until the Treasury is in need of funds to 60 2 March 29, 1944 maintain its working balance at the minimum level that it considere advisable. In view of the figures submitted in the tabulation accompanying Under Secretary Bell's letter, it does not appear that the letter condition oun arise until after the fifth dirro and there is, therefore, time further to test present estimates of nonbank buying. In our opinion, the situation calls for (a) enlargement and strengthening of the sales organization, (b) changes in selling methods and security terms that will widen the nonbank market, and (c) increase in the bill rate. In selling securities to com- mercial banks further emphasis should be placed on bills rather than certificates and longer-term securities. Additional bills can be sold to banks, however, only if there is some increase in the rate. As wo have indicated before, we feel that the present rate on Treasury bills is out of line with the remainder of the pattern of rates and that an increase is justified in order to reestablish bills as a market instrument. With this background in mind, we should like to make the following recommendations on the points mentioned by Under Secretary Bell: 1. The goal for the fifth drive has been set at 16 billion dollars, and no comment is required. 2. For the reasons outlined above, we believe the Treasury should do no direct bank financing, at least until after the fifth drive. Therefore, we recommend that there be no offering of certificates for cash in connection with the May 1 refunding. Decision as to a cash offering in connection with the August 1 refunding should be deferred until after the fifth drive. 3. In our opinion and for the reasons outlined above, the rate on Treasury bills should be increased to 1/2 of one per cent and the maturity extended to four months. By this means, not only would a more tonable market rate be established but the outstanding amount of bills could be increased by 4 billion dollars as funds are needed without increasing the present weekly offering of bills. 4. We recommend that the basket in the fifth drive be the same as in the fourth drive except for the substitution of 2 per cent fully marketable bonds for 2 1/4 per cent bonds of restricted marketability. No can see no point in placing restrictions on the eligibility of 2 per cent bonds for bank purchase. In order that those bonds may not become a vehicle for renewed speculative purchases, however, we recommend that the Treasury forcefully renew its stand on speculative subscriptions, loans by banks to finance such subscriptions, and on subscriptions by dealers. The Treasury may wish also to consider the inclusion of 1 1/2 pur cent notes in the drive as an 61 March 29. 1944 funds from additional means of obtaining/nonbank investors who are not interested in the rate on certificates or in the form of Series C notes and who do not wish to invest in longer-term securities. 5. Our opinion would be that the drive should begin on May 23 or 29 and should cover a period of three weeks, but on this point we believe that the recommendations of the sales organization should be decisive. 6. We recommend that nonbank investors be permitted to purchase securities in the drive on a partial-payment plan. Such purchases by in- surance companies, savings banks, and pension funds, which will be in relatively large amounts, could be handled by the Treasury. Such purchases by other investors (minimum $500) could be handled by commercial banks on the basis that the maximum rate charged would not exceed the rate on the securities. We also recommend that the lowest denomination on marketable bonds placed at $100 in order to meet the needs of small investors who for one reason or another do not wish to place all of their funds in savings bonds. be As a corollary to this recommendation and in view of the manpower and paper shortage, we recommend that the lowest denomination on Series G bonds be increased to $500 and on Series E bonds to $50. 7. We recommend that each commercial bank be permitted to increase its holdings of otherwise ineligible bonds to the smaller of the following amounts: (1) $400,000 or (2) 20 per cent of its total of savings deposits and time certificates of deposit of individuals. The inclusion of individual certificates of deposit is recommended because in some areas of the country it is customary to 469 this type of instrument instead of savings pass books. The $100,000 limit on holdings of Series F and G savings bonds would, OF course, continue. - Attached to . list of prociled - given to the Secretary by Mr. Hase - 3/29/16. 63 List of Issues Charted Securities Outstanding at Beginning of Year: (1) 2-1/2% Bond, September 15. 1967-72 (sold before Pearl Harbor) (2) 2% Bond, September 15. 1951-53 (sold during Third War Loan) (3) 7/8% Certificate, December 1, 1944 (issued December 1, 1943) Securities Sold during Fourth War Loan: (4) 2-1/2% Bond, March 15, 1965-70 (5) 2-1/4% Bond, September 15, 1956-59 (6) 7/8% Certificate, February 1, 1945 Security Issued in Refunding Operation this Month: (7) 1-1/2% Note. September 15, 1948 64 Mr. Luxford. March 29. 1944 Secretary Morgenthau. Please read the story on the first page of the New York Times about General Perlinger's statement. See if you can get something out of the State Department on it and be sure to talk to me about it before lunch today. File 65 March 29, 1944 MEMORANDED FOR THE SECRETARY'S FILES Secretary Morgenthau discussed the Argentine situation at lunch today with Vice President Wallace, War Food Administrator Jones and me. The Secretary introduced the subject by informing Judge Jones of our keen interest in the Argentine situation and that he had invited Vice President Wallace to join up since he shared our interest. He said that today's story in the New York Times about Argentina underscored the urgency for prompt action and suggested that I review the article. I outlined the attack made on the U. S. and Ambassador Armour by General Perlinger, Argentine Minister of Interior; the fact that twenty-one of Argentina's thirty-three generals recently requested President Farrell and Colonel Peron to restore constitutional government and return Army officers to their barracks; and the announced lifting of Argentine press restrictions at the same time replacing these restrictions with a registration requirement for all newspaper men. A copy of the article is attached. I said that I had discussed this article with Messrs. Duggan and Bonsal of the State Department who confirmed its accuracy and that they agreed that General Perlinger, who is now a real rival to Colonel Peron for power, is even worse than Peron - if that is possible. I also referred to the acknowledged Fascist stripe of the present Argentine Government; the fact that Argentina was rapidly forging an anti-United States bloc in South America which already involved Bolivia, Chile and Paraguay and threatened to envelop Uruguay, Peru and Ecuador. Vice President Wallace interjected at this point that he was much more pessimistic; he felt that all of Latin America was going to turn Fascist unless we uprooted it promptly in Argentina. Judge Jones said he could see where Argentina was troublesome but as War Food Administrator he could not ignore the contribution we were getting from Argentina in the form of food. 66 2- Secretary Morganthau pointed out that Argentina's food contribution to the United Nations was puny in terms of the benefits Argentina was conferring upon the enemy. He told Vice President Wallace that he had obtained General Marshall's permission to reveal to him the contents of certain reports that the Army had made available to him regarding Argentina and suggested that I summarize the data. I then reviewed these reports, covering substantially the points outlined in the proposed memorandum for the President which was furnished to the Secretary on March 28 (copy attached). Judge Jones appeared to be shaken by these disclosures. Secretary Morgenthau emphasized the fact that Germany's collapse would very likely find Hitler, Franco and their fellow war criminals streaming into Fascist Argentina to escape Allied justice. Vice President Wallace felt that this was almost a certainty. He expressed the opinion, based on certain secret information, that we might all be astonished at the speed with which we would be confronted by a real military threat in Latin America if the Axis leaders moved in. Judge Jones said that these arguments should be addressed to the State Department and not to him since obviously these were political considerations and outside his field. Secretary Morgenthau promptly challenged this view pointing out that the State Department was hiding behind the excuse that the Combined Food Board said it was impossible to take action against Argentina because Argentine food was absolutely essential to the war effort. This, said the Secretary, meant that Judge Jones and the Combined Food Board were preventing the issue of economic sanctions against Argentina from ever being thrashed out on the political level. The Secretary went on to remind Judge Jones that it was his impression that at a previous conference the Judge had intimated that we could get along without Argentine food if we were willing to make the sacrifice here at home and it was really necessary. Vice President Wallace reminded Judge Jones that after all we were only discussing, at a maximum, a ten percent reduction in our domestic meat rations to provide substitute meat for the 67 British and that this would not harm the American diet in the slightest. The Judge did not deny any of these points but labored over the grain shortage here in the United States; how we had an excess of cattle and hogs over available feed supplies, and how he might be able to use the threat of importing Argentine corn to force the farmers to begin marketing their animals. Vice President Wallace told the Judge that he wanted to discuss some straight agricultural and food economics at this point. He said that the Judge knew as well as he did that right now we had altogether too much meat 'on the hoof"; that if we had a bad break on the weather this year, affecting our crops, we could not possibly feed all this livestock; that the only real way to get the farmer to sell this excess meat was by making the price of feed too dear to hold it; and that imposing economic sanctions on Argentina now would give the War Food Administration a beautiful opportunity to bring our meat supply down to manageable proportions - it was a blessing in disguise. The Judge was mentally squirming by this time and addressed himself to the timing of economic sanctions right at the time everyone knew we were getting ready for big military operations. Secretary Morgenthau stated that it occurred to him that perhaps the military demands for shipping might be so great this Spring that the military would be glad to temporarily suspend Allied shipping with Argentina in order to gain extra bottoms for military operations. He indicated that he might check into this aspect of the matter. Judge Jones said that he thought all along that State should have cracked down on Argentina when things just began to go bad and when we could have cleaned up the situation fairly simply; but why did we have to strike right at this moment - why not wait until we could do it with fewer complications. 68 Secretary Morgenthau said that he had been pressing State for a year and a half on this point and that he did not think it could stand much more "waiting". Judge Jones turned to Vice President Wallace and said Henry, do you really think we have to do it right now too? The Vice President said that it should be done now. The Judge said he wished it had been done before when it would have been easy. I reminded him of how it had been this fear of temporary inconvenience that had prompted the world to sit by and allow Japan to move into China; Italy into Ethiopia; Hitler into Austria - and Munich. I stressed that at each point there were those farsighted statesmen who said that we should clear up the dirty mess now but that each time the world found it somewhat inconvenient and hence World War II. I drew the analogy to Judge Jones' position on Argentina - that of waiting while every day that passes witnesses a further consolidation of the Fascist forces in Argentina and their steady spread to Argentina's neighbors. Secretary Morgenthau said that he was shocked to see us caviling over pulling in our protruding belt one little notch, being squeamish about imposing the slightest discomfort on our people for the sake of preserving our way of living, and at the same time our Russian ally had 25,000,000 men fighting Hitler and the British people too had demonstrated their willingness to make real sacrifices. The Vice President underlined these same sentiments, pointing out how little sacrifice we on the home front had been called upon to make and, in fact, how most of us were actually doing better during the war than we had before. Judge Jones then expressed his concern that the British might not join in the imposing of economic sanctions and that if they did not join us, we were powerless. The Secretary stated that he had been insisting that joint measures be taken but that if the British would not go along he, for one, still thought we should impose sanctions. The Judge inquired as to how this could possibly be effective against Argentina if the British continued to buy. The Secretary said that if the President gave him the job of seeing this thing through he would see to it that the British stopped shipping food from Argentina even if he had to blockade Argentine ports. 69 -5At this point the Judge gasped and turning to the Vice President said "Henry, would you go along on that too?" The Vice President agreed with Secretary Morgenthau's position without batting an eye. I pointed out to the Judge that in any event we were not called upon to cross this bridge at this time since the letter State had sent to the Combined Food Board on March 10, 1944 had requested the Board's views, assuming that joint U.S.-U.K. sanctions were imposed. I also emphasized that it was one thing for the Board to reply, "You will make our task more difficult by imposing sanctions, but, if this is politically necessary, we will get along - one way or another"; it was an altogether different thing for the Board to repeat its opinion of last January that it was impossible to get along without Argentine food supplies, since this latter position left no room for evaluating political considerations. Judge Jones said that he did not feel that he could make any commitments right then and there and that he wanted an opportunity to go over the matter with his associates before expressing a final view. The atmosphere at the luncheon was most cordial and I had the impression that Judge Jones was sincerely interested in getting our side of the picture, which was new to him. GOL 70 The New York Times. MAR 29 1944 jority of Argentines. He soda rerealed himself. however, as one of the most ardent nationalists and as the main spokesman for nation allam in the Argentine Cabinet. It was he who formulated the recent measures against United States OFFICIAL ANGER AT U. S. companies such as The Associated Press, The United Press, AllAmerica Cables and Pan American Cites Non-Recognition to Back Airways. These measures were taken by the Director General of Posts and Telegraphs, who is directly responsible to the Minister of the Interior. At the moment, General Part- Isolation-Minister Foresees Allies Turning on Russia inger's star appears in the Ascend- By Wireless to THE New Year TIMES MONTEVIDEO, Uruguay, March ant since the Ministry of the Interior has been growing in imper- months ago, Gen. Luis C. Partinger, charge of the Federal police and the Under-Secretariate of Infor- Argentina Minister of the Interior, predicted that all the present betligerents would soon unite to fight taken over cansorship of foreign films, which was formerly done by the Municipality of Buenoa Aires his first statement to the press since he took office five tance. It recently was put in mation and the Press and has Russia because the middle is the United States and Great miro Farrell and Col. Juan Peron, / of Wat, to restore consti- tutional government and return army officers now serving in Federal jobs to their barracks. Diario, quoting unidentified sources, said General Farrell and Colonal Perón had told the genlerals they fully agreed and that an answer would be given within a few days. PRESS RESTRAINT LIFTED Argentina Rescinda Decree CurbIng Freedom of Expression By ARNALDO CORTESI By Dable to Yes - York Terms BUENOB AIRLS, March 28The Argentine Government today rescinded a decree Nated Dec. 81. 1943, which placed many restrictions upon the local and foreign press. That decree was replaced by a "Journalists statute," which was published today and regulates There has been far greater severity in censoring United States films since this task has been performed Britain are so alarmed by the Ministry of the Interior. A Rival of Perón General Perlinger is believed to be a political and personal rival of viet military - that Mey are almost more anti-Hussian than anti-German. To this most amasing statement General Perlinger added that the war was not being fought for freedom and that whoever won would rule the world and, of course, try to dominate Argentina. From this he deduced that Argentina must remain completely aloot from the the War Minister Col. Juan D. regulations between newspapermen and their employers but does not enter into such political questions as what newspapers may or may Perón, and observers predict that a showdown between them cannot long be deferred A reorganisation not say. The new statute and the decree of Dec. 31, are similar in only one of the Cabinet is expected and respect: That both require all conflet The Interior Minister made ft clear that all his previous remarks were aimed principally at the United States, for he urged all Ar- gentines to look with anger at United States Ambassador Norman Armour. General Perlinger said he always so because Mr. Armour is Ambasandor "of a country that refuses to maintain relations with us. who are the masters of our home." He did not mention Mr. Armour by name, although he made it obvious whom he was re ferring to Made to Guide Press probably the best way of judging newspapernien to register. failing whether the Perlinger followers or which, they will not be allowed to the Perón clique triumphs will be whether General Perlinger-keepe exercise profession. Thetheir earlier decree. however, emhis post in the Government powered the Government to remove Argentine newspaper men who any journalist's name from a regisheard General Perlinger's remarks for such vaguely defined ofdescribed the interview as follows: ter fenses as "activities contrary to "Pellinger. who spoke with en- the general interest of the nation ergy and severity, referred to the The Journalists Statute states exArgentine International situation. plicitly that no name may be He affirmed that he was neither a struck from the register for "reaNazi no ra Fascist but an Argen- sons connected with the freedom time and said he was against all of the press or with journalists those foreigners who had the preof thought." sumption to say that Argentina freedom It would appear. therefore, that did not know where she was going within certain limits freedom of We do know.' he said." expression had been re-established General Perlinger was further The Journalists Statute estab. quoted as saying: "We know that this was is not lishes a thirty-six-hour working week with regular weekly and - fought for liberty but for yearly rest periods. It sets down other things which we must later minimum for each class of be prepared to accept. It is not newspaperwages employes with the propossible. therefore. that we should vision that the minimums will continue smiling at the Ambassa This outburst. which must be re dor of . certain country that re- automatically be increased by 5 garded as one of the most extraor- fuses tomasters maintain relations with cent every years All directorial posts holding three of our house must be dinary ever allowed himself by That not possible and I myself or naturalized Argentines responsible Minister of any the first to look with an angry for made foreign exception and try was made last night Argen that face the for held is time journalista It for but only to thinking Government Minister of the should do posts the as thing for Protest By Generals Reported of the the MONTEVIDEO March 28 The that Newspaper Diazio sale today twenty-one of generale General locally as Editi printed foreign languages Argentine for for- publi- Argentina 71 COPY SECRET MEMORANDUM FOR THE PRESIDENT On December 30, 1943 General Strong furnished me with a report on Argentina prepared by Military Intelligence. The following points in this memorandum are significant: 1. Unless steps are taken quickly to insulate Argentina and to counter her activities in neighboring countries, Argentina will be able to create a bloc favorable to her and antagonistic to the United States, consisting of all or some of the following countries: Uruguay, Paraguay, Bolivia, Chile, and Peru. (State Department officials share this fear and the present situation in Bolivia, Chile and Paraguay suggests that a bloc of this character is not a mere figment of the imagination). 2. There is strong evidence indicating that the Nazis at least partially control the present Argentine Government. By means of loans, bribes, and financial transactions, the Nazis have a hold on certain members of the G.O.U. (Colonel's clique). It is believed that in order to avoid exposure and remain in power, they follow Nazi orders. 3. Argentina allows pro-Axis propaganda to flow into this hemisphere and Argentina is the headquarters for such activities; at the same time Argentina subdues pro-Allied vehicles of propaganda. The report states: "This propaganda has been very effective in that it has kept several countries internally divided and has lessened their assistance to the United Nations." 4. Argentina is rendering positive economic aid to the German war effort by: (a) serving as a base of operations where smugglers engaged in clandestine pur chases of diamonds, platinum and materials vitally needed by the Nazis may 72 -2concentrate purchases made throughout Latin America and ship them to Spain and then to Germany. (b) The two largest government-controlled Argentine banks are openly aiding the Axis. (c) Fritz Mandl, former Austrian munitions manufacturer, is now in Argentina actively engaged in founding an Argentine munitions industry. He was able to remove $12,000,000 from Germany with the consent of the German Government. (a) Argentine ports serve as depots from which Spanish and other neutral ships carry war materials and couriers engaged in espionage activities to Axis Europe. at sea. 5. Indications exist of possible aid to Axis submarines 6. The extent to which Brazil will provide expeditionary forces for overseas duty is limited by her need for having adequate defenses against Argentina and an Argentine bloc. 7. Argentina is a tool being used by the Nazis to create a diversion in Latin Ameri which will cause the United States to divert its concentration from the main war effort. 8. Argentina is being used as a cache for the loot of leading Nazis and will be the haven for their persons when they lose the war and have to leave Europe. In a report transmitted to me on March 16, 1944, by General Marshall, it is stated that the Argentine Government is cooperating with the Spanish Falange in Argentina and that the activities of the Argentine Government in the other American Republics duplicates and reinforces the Falangist movement in attempting to create anti-United States sentiment and an antiUnited States bloc. Treasury investigations in the Foreign Funds field clearlr establish that every important German cartel has branches in Argentina and that these branches are presently being used by 73 3- the Nazis to finance and otherwise facilitate enemy operations in this hemisphere. Moreover there are strong reasons for assuming that these branches will serve as a nucleus for German post-war cartel arrangements in this hemisphere. I call these matters to your attention not only because they illustrate how our whole Good Neighbor policy and doctrine of hemispheric solidarity are crumbling before the pressure of a Fascist Argentina but, of more immediate importance, because they offer tangible proof of how Argentina is prolonging the war. I am fully conscious of the objections which have been raised to date by the Combined Boards to the proposal that the United States and United Kingdom jointly impose complete economic sanctions against Argentina and I can fully understand their desire to avoid further complications in their respective fields. Neither am I unmindful of the fact that probably an undisclosed factor in British reluctance to participate in any such program stems from their fear that it might affect adversely British investments in Argentina and might prejudice British post-war trade. The extent, if any, to which these considerations may be influencing the British attitude on the Combined Boards is, of course, an enigma. On the other hand, it is not as clear to me that the Combined Boards have been acquainted with the extent to which Argentina is harming our war effort. If this were explained to them; if it were made clear that we in the United States are prepared to accept some civilian sacrifices in bringing Argentina to terms; and if it were emphasized that once she is brought to terms we could again count on Argentina supplies and stockpiles, I am hopeful that we would obtain a more favorable report. AFL:nrd - 3/28/44 copied 3/30/44 74 March 29, 1944 2:42 p.m. Go ahead. Randolph Paul: This is Randolph. HMJr: Yes. P: I wanted to report to you that I talked with our friend in New York. HMJr: Yes. P: He thinks that that -- his client doesn't own any stock in that company but he's not sure; that there may be some possible pressures that he can put on him. HMJr: P: Yeah. And he's trying to get him and he's going to call me back, but so far he hasn't called me back. I talked to him, oh, within ten minutes after I talked with you. HMJr: Good. P: As soon as I hear from him I'll let you know. HMJr: Well, in the meantime, McBain sent us a telegram asking us to get reservations for him to be here Friday. P: Yeah. Well of course, I was very frank with him and maybe it's gotten back to McBain. I don't know. But anyway, I'll let you know. I've done everything I can until I hear from Weiss, but so much time has gone by, I thought I'd better let you know. I HMJr: I thank you. All right. 75 March 29, 1944 3:10 p.m. CANADA AND CHINA Present: Mr. White H.M.JR: The President sent me a copy of the cable It went on the 24th. which he sent to Mr. Churchill and it is as we wrote it. MR. WHITE: No comment on his? H.M.JR: I don't know whether that was in it or not. I have it right here. (Refers to attached suggested reply to Prime Minister Churchill from the President) I am scared to death. I don't know what to do with these things. MR. WHITE: It sounds identical. H.M.JR: What day was the 24th? That was last Friday. It went the day I sent it. MR. WHITE: Are you going to let State Department know that went, or will they know anyhow? H.M.JR: No, but I very much would like to have Stettinius know it. MR. WHITE: Stettinius? H.M.JH: Yes, he ought to know. MR. WHITE: He is in England? He has gone? H.N.JR: He has not. There is something funny about the whole business. 76 -2 I would let Mr. Hull know and say to please advise Mr. Stettinius and see that he gets . copy. MR. WHITE: Why don't I call Hull's secretary? H.M. JR: Yes. And I think a copy should go to Winant, somehow. The thing I am interested in, I want Winant to know that those things center here from now on. MR. WHITE: Why don't we just send a cable to him? H.M.JR: Yes, but I would like Winant and Stettinius to know. Will you take care of that? MR. WHITE: Yes, but you want the cable to Winant to go from you? H.M.JR: I don't care how it is done. Now, I asked to see the President, and I have only got another twelve hours, or so. When I go I want to give an answer to Madame Chiang. MR. WHITE: Now, this is what we have here, a suggested answer to Madame Chiang; there is a memorandum to you, and a suggested memorandum from you to the President. The memorandum to the President is a little long, and its length is justified only by the importance of the matter. (Shows drafts to the Secretary) he just got a cable five minutes ago which may call for a change. H.M.JR: Before I do this, is there a must on your list today? They said something about Canada. MR. WHITE: Yes, Canada is all wound up and all ready for signatures. H.M.Jk Let's hold the other, then. 77 -3MR. WHITE: Canada first? H.M.JR: Whatever is important. MR. WHITE: I think Canada is a must, and I think also, from what you said, that there is a must on the question of the Ontario Conference. H.M. JR: I have a man coming in at three-thirty which will take fifteen minutes. You can leave everything here and come back again. MR. WHITE: The Canadian thing is all wound up - all the documents. I want to show you first a document of the schedule which Clark initialed, and he insisted on my initialing it, and we sent it back. You can keep that aside for a moment. (Refers to Schedule covering agreed program referred to in letter from Hon. J.L. Ilsley, Canadian Minister of Finance, to Hon. Henry L. Morgenthau, Secretary of the U.S. Treasury, dated March 24, 1944, attached) H.M.JR: Do I want Vincenthere when I talk about China - from the State Department? MR. WHITE: I think you better make that decision after - I just talked with Vincent. Now, here is the letter to Hull giving him the whole story and keeping him informed. (Hands the Secretary cover letter to Secretary of State, enclosing correspondence with Mr. Ilsley, Canadian Minister of Finance) H.M.JR: Now what did you do about that question of the end of the road of Canada - I mean its terminal? How was that settled? MR. WHITE: Well, they took the part of that, and the nine million dollars on the highway; it is all lumped in. we also found seven million more dollars. The airports were going to cost seven million more dollars than they had informed us, so rather than put the question 78 -4- in quite that form, I thought they would hit the roof; so I got in touch with Clark and I asked him - would the Canadian Government rather pay seven million dollars or would they rather take over the contract. You see, neither had been mentioned. And, of course, they came back saying they couldn't possibly pay seven million more after they had taken this matter up, so they will take over the contract. Our Army preferred to fill the contract themselves. They didn't like the Canadians to do it. But the position I took was that that is going to cost us seven million dollars whether they like it or dislike it. We would rather have Canada do it. H.M.JR: I think when you go out of here at threethirty, we ought to send the same thing to the President that we send to Mr. Hull. MR. WHITE: This is what I have for the President. (Hands the Secretary Memorandum to the President on Canadian and U.S. Dollar Balances, which the Secretary initials) H.M. JR: I really ought to do this oftener, working this way, then the girls know what it is all about. MR. WHITE: Now, here are four letters, one to the Secretary of War, one to the Secretary of Navy, one to Mr. Crowley, and one to Mr. Jones, telling each what they must do, what we have agreed upon with respect to Canadian contracts. (The Secretary signs the abovementioned letters) H.M. JR: Those things that you gave me the other day for instance, the rules to go by when they invade these various countries - did you draw those up? MR. WHITE: Not the first one, we did the other three. H.M.JR: Who does that work? 79 -5- MR. WHITE: Several of us - the lawyers - Taylor. They had an original there at the C.A.C. which is very different; we rewrote it. That is the Civil Affairs Committee. But even the draft they made was based on one of our earlier drafts of the earlier countries. H.M.JR: I was going to compliment you on it. MR. WHITE: It is a gradual process, because each country makes the next one easier. But the first paper was written by President Number One, and he didn't even permit it to be jointly written, which is usually done, and he is sending it to Churchill, asking for their approval. It was done deliberately that way. H.M.JR: Any more on Canada? MR. WHITE: That is all on Canada. Now we have nothing furter. H.M.JR: Let's do China. MR. WHITE: I just got a cable. This has a new proposal. I can explain it quickly. H.M.JR: Who is this from? MR. WHITE: This is from Stillwell to Somervell. (Refers to attached paraphrase of message No. CFB 15326, 27 March 1944, Corrected Copy, to General Somervell from General Stillwell) H.M.JR: What is CN? 80 -6- MR. WHITE: That is Chinese dollars, yuan, I sup- pose. May I see it? Chinese dollars. I think there should be a dollar sign with a "C" before it. H.M.JR: You will have to explain this. MR. WHITE: I will see that you get a copy. The proposal which is being made is that the Chinese Government give them Chinese currency and that the Army merely advance them U.S. money as an advance. The rate at which the money will be advanced, they say, is anywhere from one hundred and twenty-five to two hundred. We have been asking for a hundred rate, but the advance will take one hundred and twenty-five to two hundred, they think. But the question will not be settled; that will be money which we put at their disposal. Sometime after the war there will be a question as to whether that settles it, or whether China is entitled to more money. It will also make possible that probably China will use it, saying that she is extending aid to America in her war effort; and how much aid she will figure it, will probably bear no relation to the advance. Now, I think that puts us in a good position, because I think we are in a better bargaining position later than we are now. H.M.JR: How much does that mean we would advance every three months? MR. WHITE: If they use five billion, and let's say they take the hundred-to-one rate, it would only be fifty million. H.M.JR: One hundred and fifty million for three months? MR. WHITE: One hundred and fifty for three months, yes. 81 -7 H.M.JR: That was a good guess on my part. I carry the fifty million a month in my mind. MR. WHITE: If they get a better rate, it will be less than that. I don't understand Chiang Kai-shek accepting that. If he wasn't too dumb he knew they would accept a fifty rate. H.M.JR: In the light of that, do you think the President should answer Madame Chiang? MR. WHITE: Maybe slightly different. This doesn't in any way settle the question. It settles the imme- diate need for currency for the air fields, and I think if you will read the memorandum from you to the Presi- dent - I could see why the matter is really important. We are cooking up quite a program - a real important program. H.M.JR: I don't think there is a chance of my going. Oh, Harry, My God! The President will never read it. (Refers to original draft of Memorandum to the President, attached) MR. WHITE: You can't get on top of that Chinese situation without reading it. We can boil it down, maybe, another page or so. H.M.JR: He will never read this. MR. WHITE: How much do you think he would read? H.M.JR: He won't read more than two pages. MR. WHITE: We will try. You see, there is a rather serious point there. H.MJR: Talk at me for a few minutes. What is there in there? I know the President. He never in the world would read that. MR. WHITE: The memorandum to you is much shorter. 82 -8 H.M.JR: Can I read that? MR. WHITE: Yes. (Secretary reads Memorandum from Mr. White, dated March 27, 1944, attached) That was written before we got this cable. The important thing to stress to the President, I think - that you have to do - is that the program which the Army has will unquestionably aggravate an already bad situation, and that he should be cognizant of what to expect, and he should also be prepared for the charges that the Chinese Government unquestionably will make, that we have caused the serious deterioration in their economy. Now, I think he has to know that, because I don't think the Army has explained it to him, and I think that you have to have that for your protection - that he has got to know. H.M.JR: Do you do that in this letter? MR. WHITE: To Madame Chiang Kai-shek? H.M.JR: Yes. MR. WHITE: I don't see how we can. H.M.JR: Can you say, "I hear from General Stillwell we are making progress"? MR. WHITE: Well, we do say we are making progress. Maybe that is enough. H.M.JR: Oh, yes. Well, Harry, you have got to take me some place, up on the farm or some place, where I have a couple of hours to thrash this thing out, because I am not ready yet to say I am willing to go to China. MR. WHITE: If you don't feel that the letter needs to be answered, and maybe it doesn't, then just wait. Negotiations are going on. 83 -9 H.M.JR: Couldn't he answer that letter without any reference to a mission? MR. WHITE: Oh, sure, sure. We can give him just a little more than a letter of acknowledgement, easily. We could easily say, "I understand from General Stillwell that progress is being made in the discussions. "I appreciate that an adjustment of that will not meet the larger problem, but we will take care of that later, or discuss that later," or something like that. H.M.JR: I think so, because I tell you, I know I have had a rule, which is a pretty good one, and that is that when it comes to doing business, Governmental business, I never want to get more than a hundred yards away from the white House. All these other trips that I have taken I was never on a mission. I mean, I want to let that sink in. MR. WHITE: Except this is a bigger job than I think anybody has ever attempted. H.M.JR: I have never gone on a foreign mission. I mean, I have gone abroad, but I went to get informa- tion. MR. WHITE: Well, I would need some time to talk to you about what needs to be done and what might be done. H.M.JR: All right. And when you do this thing during the last ten years you look over the record of anybody who has gone abroad for the President and had a lasting success. You give me one example. MR. WHITE: Well, obviously, I don't think you should go abroad, and I know you won't unless you had something-- 84 - 10 - H.M.JR: No, but you give me an example of somebody that the President sent abroad. You could say that Hull went to Moscow- MR. WHITE: Well, it isn't comparable. H.M.JR: Wait a minute. He went to Moscow and now look what they are doing to him. Well, I want you to think about it - have somebody who could go, accomplish something and have it stick. MR. WRITE: I will. This is a big job. I don't think it should be approached unless you have a program in your mind to do the job, and money in your pocket. H.M.JR: What I have in mind is this, possibly I am tired again. I am not going to let myself get down. I am planning to leave Friday. After I have had a day or two in the country, and if I can still stay, I may let you know. You may want to take in a couple of shows in New York and spend one day in the country with me. You like to go to New York and take in, a couple of shows. MR. WHITE: All right. H.M. JR: And then come up there, maybe, and we can walk around the place and talk this thing out. MR. WHITE: That can easily wait for that. Now, do you think you still need an answer to the letter? That can very easily be drafted, just an answer to the letter, which would satisfy requirements of an answer to the letter, and dodge the issues for the time being. It can easily be prepared if you feel that one has to be prepared. If it doesn't, you can drop the whole matter and leave the answer to that as an excuse to raise the issue later. 85 - 11 - H.M.JR: No, I think the President should give an answer dodging it. I would like you to get somebody started on that, on the theory I am going to see him in the next twenty-four hours, you see. MR. WHITE: Vincent told me that they seemed to feel certain that a letter has gone to the President from the Generalissimo or Madame - an important letter on the political developments. Do you know anything about it? H.M.JR: No. MR. WHITE: He didn't, either. He was just fishing for information. H.M.JR: My dear Harry, I always tell you these things. Now, if I can see Mr. Palmer - and after I have seen him - it will be about fifteen minutes. You leave your papers here. 86 MEMORANDUM TO THE PRESIDENT In pursuance of your memorandum of March 10 to the Secretary of State and Secretary of Treasury, there is attached a suggested cable to be sent to the Prime Minister in reply to his cables 613 and 614 of March 9. This suggested reply has been approved by Secretary Hull and Mr. Crowley. 87 To: Prime Minister Churchill From: The President 1. Thank you for your reply contained in your cables 613 and 614 of March 9. The points you raised have already been brought to my attention several times by Secretary Morgenthau and Secretary Hull. I am sorry if my message caused you anxiety. There is no dispute as to the understanding on the handling of questionable items under Lend-Lease which was reached between Mr. Crowley, Secretary Hull, Secretary Morgenthau and Lord Halifex, and to which I had given my prior approval. As Secretary Morgenthau stated at the meeting, this understanding did not deal with the dollar position question and did not preelude the possibility of our reopening that question in the future should the situation seem to call for it. I raised this dollar position question since it is a troublesome one of continuing concern with us here and doubt- less with you. I hope that we may be able together to find some reasonable solution to this problem before it becomes more tro blessme. 88 -22. In any further discussion of these matters the Treasury would be the normal center of such conversations. The agenda which Stettinius has of topics to be discussed in London does not include the question of British dollar balances. 3. The question to which you refer in paragraph 2 of 614 may be withdrewn, although the Congressmen concerned and the entire Foreign Affairs Committee are now alerted to the issue. You will be advised as soon as a definite decision is reached, and consulted fully before any information is proferred. SECRET SCHEDULE COVERING AGREED PROGRAM REFERRED TO IN LETTER FROM HON. J. L. ILSLEY. CANADIAN MINISTER OF FINANCE, TO ON HENRY L. HORGENTHAU. SECRETARY OF THE U.S. TREASURY. DATED MARCH 24 1944. JURES WHICH WILL REDUCE CANADA'S HOLDINGS OF U.S. DOLLAR BALANCES. 1. Estimated Amount (Millions of Dollars) Payment to F.E.A. for imports of war supplies under Canex Requisitions 38.8 Payment to Metals Reserve Company to recoup capital advances and price subsidies certain marginal metal mining properties in Canada under the terms of an agreement with War Supplies Limited made by that Company for development of 5. 3.2 Payment for costs incurred by U. S. Army in connection with construction of permanent improvements to following airfields in Canada: (a) Airfields on the Northwest Staging Route, landing strips along the Canol Pipe Line and other airfields, landing strips and permanent air route facilities constructed by U.S. in Northwest Canada (b) Airfields on the Crimson Route in Central Northeast Canada (c) Airfield at Mingan, Quebec Payment for costs incurred by U.S. Army for construction of that part of the telephone line from Edmonton to Fairbanks which is in Canadian territory Reimbursement for progress payments made by U.S. Navy for production of PB2B1 aircraft Payment in U.S. dollars for U.S. tanks purchased in the United Kingdom for use of the Canadian Army in Europe Further payment on account in respect of imports under Canpay requisitions 33.3 30.0 4.2 9.3 22.0 140.0 20.0 500.8 2. ES WHICH WILL REDUCE CANADA'S FUTURE RECEIPTS OF U.S. DOLLARS. Estimated Amount (Millions of Dollars) Amendment of U.S. Navy contract for PB2B1 aircraft so as to provide for assumption by Canada of financial responsibility to Boeing Aircraft of Canada Limited 41.0 Assumption by Canada of expenditure incurred on U.S. account for construction of permanent improvements to airfields in Canada and at Goose Bay, Labrador (including newly projected $6 million program and contracts not yet completed 1.4 on Northwest Staging Route) 42.1 Assumption by Canada of refining and distribution costs of gasoline used to meet British commitment in connection with Air Training Plan in Canada Elimination of Canadian participation in contracts for purchase of New Caledoniah nickel 15. (annu- ally) 2.5 (annu- ally) Contracts between War or Havy Department and War Supplies Limited terminated and/or cancelled after December 1. 1945, or to be terminated and/or cancelled. Undelivered value as estimated by Canadian Department of Munitions and Supply: W8L 72-722 6 pdr. APC BC W8L 72-450 fuel pumps 91.0 W8L 72-888 AS - 48 cable W8L 72-659 link spares WSL 72-157 propeller assemblies WSL 72-377 link trainers 20 - discs W8L 72-458 WSL 72-796 pump assemblies wobble pumps 72-821 WSL 740 & 743 Range finders (other WSL 72-240, than U.S. type) WSL 72-169 75 - shells H.E. WSL 72-812 40 an rounds WSL 72-391 powder propellant .503 ammunition WBL 72-216, 645, 217 & 265 WSL 72-284 Algerine minesweepers WSL 72-204 & 205 (old and new contracts) Cornell aircraft and spares WBL 72-265 & 921 (old and now contracts) Harvard aircraft and spares 191.6 whole HOW 91 March 29, 1944 MEMORANDUM FOR THE PRESIDENT In reply to your memorandum of March 16th forwarding letter of February 17th from Madame Chiang to yourself, I am attaching hereto suggested reply for your consideration. The principal reasons for the contents of the suggested reply are given herewith. 1. with regard to the matter of U. S. military expenditures in China, Madame Chiang has really raised teo questions. The first is whether China's economy can support as large a program of airfield development as is now contemplated and, secondly, the question of how many U. S. dollars the United States shall pay to aequire the necessary local currency to build these airfields. 2. It is my own feeling that 1f a collapse of China's economy takes place -- and it is not at all unlikely - it will be due fundamentally to such basic causes as the growing disintegration of the military and political power of the Central Government, the isolation of China from the outside world and the failure of the Central Government to undertake necessary internal reforms. China today is suffering from an acute shortage of goods, particularly capital goods needed to maintain production and distribution; rapidly rising prices; large and constant expension in note issue resulting from the use of the printing press as the principal means of financing the war; large scale hoarding of commodities; decline in production, and disruption of the already erude means of transportation. At present prices are rising even more rapidly than ever. Prices trebled during last year and in February, 1944, retail prices in the leading cities of Free China were about 300 times their 1937 level, 1.6. an increase of nearly 30,000 percent! It is because of this general situation that the airfield program, as now contemplated, will have serious on this already advanced stage of inflation a program economic repercussions, The Army plans to superimpose involving the exenditure of CH84 to 5 billion per month, concentrated in a few localities. At present expenditures of the Chungking Government in all areas total 92 -2about CN$7 to 8 billion per month, and about CH85 to 6 billion of the total is financed by note issue. Thus, in order to finance our military program in China, 11 will be necessary for the Chinese Government nearly to double note issue, thereby considerably increasing the already great inflationary pressure. Therefore, the continuation of large expenditures on the airfield development program for more than a few months will, of necessity, aggravate an already serious situation. It is not impossible that the situation may be so aggravated as to bring about a catastrophie runaway inflation. That the U. S. Army has to pay out these tremendous sume on the construction of a comparatively few airfields is in itself an index of the advanced stage of economic deterioration which China has reached. Furthermore, there is increasingly prevelant in Chungking Government circles a noticeable tendency to lay the responsibility for inflation on U. S. Army expenditures. The principal reasons for this attitude are probably that the Chinese officialdom wishes to strengthen the bargaining position of China vis-a-vis the United States, and to find a convenient alibi and scapegoat for a situation which the Chinese Government has handled badly. 3. The possible economic consequences of the airfield development program was discussed with General Somervell in conference at my office on March 20. 1944 on China, at which a State Department representative was also present. I was informed by General Somervell that, notwithstanding the possible dire effects on Ohina's economy of our airfield program, strategical requirements necessitated the carrying through of this program. The Army, by deciding to continue without reduction its contemplated program, is of course assuming a grave responsibility which can only be justified by important military considerations. I would like at this time to repeat what I have said before on numerous occasions - the amount of U. 8. dollars which we pay to acquire the local currency needed for this airfield program bears no relation to the inflationary impact of the expenditures of this local currency. Thus, the economic and financial situation in Ohina would not be helped by a U. B. dollar loan or by paying as exorbitant price in U. 8. dollars for the local currency required. 93 -3 As for the question of the amount of U. S. dollars to be paid out to obtain the local currency needed for our military program in China, no agreement has yet been reached on the price or on an exchange rate. There have, 4. however, been some significant developments since Madame Chiang wrote to you. The Chinese Government has been advancing us the necessary yuan for the airfield program. Thus, the Chinese agreed to advance 5 billion of yuan to meet United States Army expenditures in China during March. We, in turn, in accord with our understanding with the Chinese to advance $25 million per month to cover Army expenditures in China, have deposited $25 million to the account of the Chinese Government without prejudice to any future agreement on price or exchange rate for local currency. In addition, the Army has ar- ranged to ship $20 million in U. S. currency and to transport $5 million of the $20 million to Chungking to be used by the Chinese Government to help bring down the black market premium on U. S. dollars. The other $15 million will be held in India pending outcome of these experiment on the black market. Funds provided China under this arrangement will be part of the $25 million per month which we have agreed to put up. 5. Madame Chiang in her letter to you also raises the question of a loan. It is noted that Madame Chiang writes that Dr. Kung would be willing to come to the United States if there was tangible possibility of a loan. That the Chinese seen to have given up, at least for the present, the hope of getting a loan 18 suggested by the fact that the Generalissimo takes for granted that we will not invite Dr. Kung if it is necessary to promise a loan. Instead, as Madame Chiang goes on to say, the Generalissimo would appreciate your sending to China a representative empowered with full authority to consult with his Government on methods for solving of China's critical economic and financial problems. If such a mission is to be successful, the representative must have sufficient status to be able to speak frankly and authoritatively with the Generalissimo on what could be done to cope with Ohina's economic and financial problems. 6. General Somervell, in the conference at my office on March 20, 1944 on China, previously referred to, urged me to undertake this mission, on the ground that it was a matter of great importance to our war effort in the Far East. I am inclined to agree with him. Since the purpose would be to discuss financial and economic 94 - matters of considerable importance, I would be glad, if you so wished, to make the trip. If you think this idea a good one, I could plead inability to go until June OF July, giving us the advantage of postponing the discussions with the possibility that the situation there will, in the meantime, have so changed as to heighten the possibilities of a successful economic mission. 7. If you agree that I should go, I will be glad to discuss with you what I have in mind could be done to help Chim out of her present chaotic situation. If HDW/ISF/efs 3/29/44 95 March 27,1944 Secretary Morgenthau Mr. White Subject: Effect on China's economy of U. S. Army expenditures. 1. on March 11 eable was sent to Adler instructing him to send immediately his evaluation of the economic situation in China, with particular reference to the effects of our present and projected military activities. He was asked to comment especially on the relative importance of our military expenditures in bringing about the rapid rise in prices as compared with the other causes of inflation and the imminence of an economic collapse. 2. on March 25 a andle was received from Adler dated March 23, copy of which is attached hereto, replying to our eable. In general Adler takes the position that the economic situation in Ohina is very serious. In 1943 prices trebled, while in 1944 prices are rising even more rapidly. Production 18 declining and the Chungking Government continues to finance its excendi- tures largely by the use of the printing press. Adler points out that the basic eauses of China's economic difficulties are the growing disintegration of the military and political power of the Central Government, the isolation of China from the outside world and the failure of the Government to make necessary internal reforms. 3. with regard to the effect of the contemplated U. 3. Army program, he concludes that while the Chinese economy might be able to stand this extra strain -and he emphasizes the might -- he feels that 11 18 highly questionable whether we should incur the risk of imposing this strain on her unless the Army has over-riding strategic reasons for doing so. He recommends strongly that the Army should not make plans for further construction projects after June, 1944 which would entail the heavy expenditures which are contemplated for the first half of this year. At present projected expenditures for the three months, April to June, 1944, are CN912 billion and actually are more likely to exceed CH$15 billion. 4. Thus, Adler's eable bears out our feeling here that although China's economic difficulties are fundamentally 96 -2and chiefly caused by factors other than the United States Army military program, and that these would continue to grow even if our military program was sharely curtailed. The decision, however, to carry out our contemplated military program at this stage of economic deterioration will gravely accentuate China's economic difficulties and the Army, by insisting on continuing of thout reduction its contemplated program is. of course, assuming a grave responsibility which can be justified only by important military considerations. HDM/ISF/efe 3/29/44 97 25 MAR 29 1944 ity dear Mr. ecretary: This is in further reply to your letter of December 31, 1943 and to the letter of Acting Secretary Patterson dated January 25, 1944, regarding ar Department contracts and projects in Canada the financial responsibility for which could be taken over by the Canadian Government without hindrance to the war effort. Discussions with the Canadian Treasury have been completed and the Canadian Government has agreed to include the following measures which involve the Ber Department. 1. To pay for all construction of a permanent nature on U.S. airfield developments in Canada. These include airfield developments in the Northwest and along the Crimson Route as well as the airfield at Mingan. It involves reimbursements to the United States Government of an estimated $67.5 million - $33.3 million for the airfields in the Northwest, $30 million for the airfields on the Crimson Route and $4.2 million for the airfield at itingan. The Canadian Government has also agreed to assume the financial responsibility for any further expenditures which have been made but not yet paid for by this Government OF which are still to be made in connection with the construction of the airfield developments in the Northwest. Including the newly projected $6 million program and contracts not yet completed, these latter are estimated by the Canadian Government to total 542.1 million. It is expected that the discussions soon to take place between the State Department and the Canadian Government to finalize the figures of costs for the airfields in the Northwest will be extended to cover the airfields on the Crimson Route and at Mingan. 2. To accept full responsibility for the cost of construction of that part of the telephone line from Edmonton to Fairbanks which is in Canada. The Department of Transport is prepared to reimburse the ar Department for its expenditures of 89.3 million as soon as the appropriate accounts are received. 3. To make imediate payment for American tanks transferred by the British to the Canadian any for use in Europe. Dr. Clark reports that this would amount to about $140 million including freight costs. They desire to make an immediate payment of this amount leaving the final adjustment to be made upon presentation of the bills. 98 -2 4. To take over the uncompleted portion of the following ar Department contracts with for Supplies Limited Canadian-reported undelivered value as of Feb.29, 1944 SSL 72-722 - 6 pdr. APC BC ISL 72-888 - AS-48 cable WSL 72-659 - Link spares SL 72-450 - Fuel pumps SL 72-157 - Propeller assemblies WSL 72-377 - Link trainers (spares only $20,685,008.00 101,174.24 209,242.25 53,288.73 142,600.00 126,000.00 to ship) $21,317,313.22 The Department of Munitions and Supply are to discuss the trans- for of these contracts with the appropriate officials of the aar Department. r. Clark, Deputy Minister of Finance for Canada, reports that the Aircraft reduction Franch of the Department of Munitions and Supply requests that contract SL 72-157 be handled in such a way as to permit the contractor to retain the benefit of technical services now being provided by the U.S. Army Air Forces. The Department of Munitions and Supply further requests that cancellations of the above contracts with ar Supplies Limited be put into effect on a date which would give approximately one week's notice of the change-over, so that arrangements can be made with the manufacturers concerned to ship and bill to the proper accounts, and also to enable the Canadian liutual Aid Board to prepare and file the necessary requisitions to replace those which will be cancelled by War Supplies Limited. Dr. Clark informs us that the other lar Department contracts suggested by this Government as eligible for cancellation have been handled in the following anneri a. Contracts involving 20.5 million on basis of U.S. figures have been completed or transferred to the Canadian Government. These include: ISL 72-458 - 20mm discs SL 72-796 - Pump assemblies SL 72-821 - lobble pumps Various - Range finders (other than U.S. type) b. Contracts involving $14.4 million on basis of U.S. figures have been cancelled and action has been taken to stop production. These contracts include: SL 72-169 - 75mm shells only SL 72-812 - 40mm rounds HSL 72-391 - Propellant powder - .303 ammunition Various 99 3'C. Contracts involving 813 million on the basis of U.S. figures and with an undelivered value as of February 29, 1944 of $640 thousand according to Canadian figures, will be completed either in March or in April. The Department of Munitions and Supply people feel that the transfer of these contracts would require an amount of paper and administrative work out of all proportion to the fi ancial considerations in- volved and, accordingly, recommended that the request for their transfer be dropped. These contracts include: Canadian-reported undelivered value March 1944 $269,572.80 " 51,925 . SL 72-402 - 19 radio installation kits " ISL 72-491 - Range finder press- 27,730 . " WSL 72-810 - Wooden propellers " spares 25,000 (approx.) " . WSL 72-116 - Universal bomb racks LSL 72-501 - Chore horse generator . ings Feb. 29, 1944 209,105 " HSL 72-235 - 6-pdr. practice shot SL 72-28 - .55 ammunition To be Completed April 1944 33,445.21 23.458.73 $640,236.74 The suggestion that Canada reimburse us for the $5.6 million expended on the contruction of terminal facilities at Dawson Creek was not favorably received by the Canadian Government and at their request this item was dropped from the program. It is our understanding that the negotiations necessary to the carrying out of the program agreed upon will th the Canadian Treasury will be conducted between the appropriate Canadian Government agency and the appropriate U.S. Government agency, in the case of the above items the Far epartment. I assume that in each case the agency conducting the negotiations with the Canadian Government will clear the matter with all other agencies having an interest in it. In order to enable us to complete our records, I should appreciate being kept informed of the progress of negotiations with the Canadian Government and of being notified when the program, so far as concerns the ar Department, is completed. Very truly yours, / W. & Secretary of the Treasury. The Honorable, :rl 21/LL The Secretary of ar. 100 25 MAR 29 1944 My dear Mr. Secretary: This is in further reply to your letter of January 2, 1944 regarding Navy Department contracts and projects in Canada the financial responsibility for which could be taken over by the Canadian Government without hindrance to the war effort. Discussions with the Canadian Treasury have been completed and the Canadian Government has agreed, among other things, to assume the financial responsibility for the contracts for PB2B airplanes which the Navy Department has placed in Canada. The Aircraft Production Branch of the Canadian Department of Munitions and Supply is to discuss with the Navy Department the revision of these contracts so as to provide for (1) the reimbursement of the Navy Department for expenditures already made, estimated to amount to approximately $22 million, (2) the assumption by the Canadian Government of the responsibility for payments still due on these contracts, estimated by them to amount to about $41 million, and (3) the continuance by the Navy Department of various engineering and technical services wh ah are called for in the existing contracts and which are necessary to their completion. This last item includes the provision of equipment by the United States Government. Itis our understanding that the negotiations necessary to the carrying out of the program agreed upon wi th the Canadian Treasury will be conducted between the appropriate Canadian Government agency and the appropriate U.S. Government agency, in the case of the contracts for PE2B airplanes the Navy Department. I assume that in each case the agency conducting the negotiations with the Canadian Govern- ment will clear the matter with all other agencies having an interest in it. In order to enable us to complete our records, I should appreciate being kept informed of the progress of negotiations with the Canadian Government and of being notified when the program, so far as it concorns the Havy Department, is completed. Very truly yours, ( E. - Jr. Secretary of the Treasury. The Honorable, The Secretary of Navy. TMK:r1 3/23/44 101 25 MAR 29 1944 Dear Mr. Crowley: This is in further reply to your letter of December 30, 1943 regarding contracts and other arrangements between Foreign Economic Administration and Canada, the financial responsibility for which could be taken over by the Canadian Government without hindrance to the war effort. Discussions with the Canadian Treasury have been completed and the Canadian Government has agreed to include the following measures which are of interest to Foreign Economic Administration. A. To reimburse us for goods shipped to Canada on Canex account. These shipments are estimated by the Canadian Department of Munitions and Supplies to total 838.8 million. The Canadian Treasury would like to make an immediate payment of 038 million on account, leaving the remainder to be settled upon the final presentation of bills. B. To make an immediate payment of $20 million on account for Canpay shipments. Dr. Clerk, Deputy Minister of Finance for Canada, is uncertain of the exact amount still due. He now estimates it at $15-02 million instead of $47 million, the figure he had given us earlier. C. To pay for the refining and distribution costs of the gasoline used to meet the Fritish commitment in connection with the Empire Air Training Plan. Dr. Clark informs us that this is already being done. The annual cost is estimated at $15 million. So far as concerns the crude petroleum used to meet this count tment, the Canadians suggest that this is a matter which concerns the United Kingdom and accordingly should be discussed with the British. le told them that your agency would be the appropriate one to do so. The amount involved is 08timated to be 89 million annually. D. Elimination of Canadian participation in the contracts for the purchase of New Caledonia nickel. This is estimated by the Canadian Government to involve an annual loss of dollar exchange receipts to Canada of 12.5 million. E. To reimburse the Metals Reserve Company for the unliquidated portion of the $1,311 thousand of capital advances and for the estimated $1.9 million of subsidy payments made by the Metals Reserve Company under a master agreement with Far Supplies Limited for the operation of certain marginal mines in Canada and to assume all future capital obligations and operating aspects of the agreement covering these mines. 102 -2According to Dr. Clark, the negotiations providing for repayment of capital advances are now in process between Metals Reserve people and the Canadian Metals Control. It is expected that these die- cussions will be broadened to cover reimbursement for subsidy payments already made as well as the question of the possible cancella- tion of the contracts. So far as concerns the Falconbridge Nickel Contract, the Canadian Government prefers not to take it over and at their request this item was dropped from the program. It is our understanding that the negotiations necessary to the carrying out of the program agreed upon with the Canadian Treasury will be conducted between the appropriate Canadian Government agency and the appropria te U.S. Government agency, in the case of the first three items listed above, the Foreign Economic I assume that in each case the agency conducting the negotiations with the Canadian Government will clear the matter with all other agencies having an interest in it. I have written to Secretary Jones informing him of the outcome of our discussions with the Canadian Treasury. In order to enable us to complete our records, I should appreciate being kept informed of the progress of the negotiations and of being notified when the program, so far as it concerns Foreign Economic Administration, is completed. Very truly yours, signed) H. Morgenthew. Jr. ecretary of the Treasury. Mr. Leo T. Crowley, Administrator, Foreign Economic Administration, Room 414, National Press Building, 14th & F Streets, N.W., ashington, D.C. Tikirl 3/24/44 103 25 MAR 29 1944 ity dear Mr. Secretary: This is in further reply to your letter of January 13, 1944 in regard to contracts which the Reconstruction Finance Corporation and its subsidiaries have placed in Canada and which could be cancelled and transferred to the Canadian Government without hindrance to the war effort. Discussions with the Canadian Treasury have been completed and the Canadian Government has agreed to include the following two measures which are of interest to the Reconstruction Finance Corporation and its subsidiaries. A. Elimination of Canadian participation in the contracts for the purchase of New Caledonia nickel. This is estimated by the Canadian Government to involve an annual loss of dollar exchange receipts to anada of 2.5 million. B. Reimbursement of the Metals Reserve Company for the un- liquidated portion of the (1,311 thousand of capital advances and for the estimated $1.9 million of subsidy payments made by the Metals Reserve Company under a master agreement with War Supplies Limited for the operation of certain marginal mines in Canada and assumption of all future capital obligations and operating aspects of the agreement covering these mines. According to Dr. Clark, Reputy Minister of Finance for Canada, the negotiations providing for repayment of capital advances are now in process betw on the Metals Reserve Company and the Canadian Metals Control. It is expected that these discussions will be broadened to cover reimbursement for subsidy payments. Dr. Clark believes that the Canadian Metals Control will probably want to cancel the contracts covering the marginal mines. If they decide to do so, they will discuss the question with the Metals Reserve Company. I note your statement that all of your Canadian agreements were made on the recommencation of the War Production Board and that before any of them are actually terminated or transferred to the Canadian Government the matter should probably be cleared with that agency. I assume that in each case the agency conducting the negotiations with the Canadian Government will clear the matter with all other agencies having an interest in it. It is our understanding that these dis- cussions wi 1 be conducted between the appropriate Canadian Government 104 -2agency and the appropriate U.S. Government agency, in the case of the metals contract the Metals Reserve Company. I have written to Mr. Crowley informing him of the outcome of our discussions with the Canadian Treasury. In order to enable us to complete our records, I should appreciate kept informed of the progress of these negotiations and of being being notified when the program, so far as it concerns the Recorstruction Finance Corporation, is completed. Very truly yours, (Signed) H. Morganther, Jr. Secretary of the Treasury. Honorable Jesse Jones, seretary of Commerce, 811 Vermont Avenue, Room 1215, Washington, D.C. TNK:rl 2/23/44 105 SECRET Paraphrase of message No. CFB 15326, 27 March 1944, Corrected Copy, to General Somervell from General Stillwell. lie are now hopping that the Chinese may take a more realistic attitude on money matters, provided we can save their faces. The GMO is pressing Kung to effect agreement although mention of the phrase "exchange rate" sends the GMO into a tailspin. We would like to have permission to explore the possibilities of the following plan, the only one which has a chance of success at the present time. That the Chinese continue to advance CN to U.S. Army according to our needs and their ability. At the beginning of each three-month period, the U.S. to decide on a sum of U.S. dollars which will be advanced to the Chinese during the period. For the next threemonth period this sum to be figured between 100 and 200, probably between 125 and 165, U.S. requirements in CN to be kept secret, while the Chinese may publicize our "contribution" if they think wise for stabilisation purposes. The rate of exchange will not come into the transaction, and the decision on final benefit derived by the Chinese and U.S. respectively will be left to post war negotiation. We think that the "tri-monthly ration between the two contributions will become the de facto rate of final settlement, since post war stabilization of rate must certainly be at a much lower figure. To raise a portion of their contribution to U.S. in the least inflationary manner the Chinese to be urged to sell gold and U.S. dollars on joint account. This procedure is preferable to our sale on our own account since the sales will probably produce-only 20% of our requirement. We fully realize the disadvantage of post war negotiation on final rate, but think that the dangers are more imaginary than real. The proposal has tremendous face saving advantage for GMO. The Ambassador and Adler have seen this cable and indorse the scheme, and request copies of this telegram to be furnished State and Treasury Departments. No request no action be taken in Washington on our radio CFBX 15225, dated 24 March until initial steps in present negotiations are concluded. ######### YOURBOTT Ape es RAN to common SECRET 106 MAR 29 1944 MEMO ANDUM TO THE PRESIDENT On March 2, 1943, you approved the recommendation of an interdepartmental committee that appropriate action be taken to maintain Canada's gold and U.S. dollar balances at not less than about $800 million and not more than about 350 million. iscussions were immediately undertaken with the appropriste U.S. agencies and Canadian officials to implement this decision. In pursuance of the arrangement, $107 mil- lion of U.S. Government contracts in Canada were cancelled in September 1943. However, despite these cancellations Canadian dollar balances continued to rise and in December the question of taking additional measures to bring them into line with the above decision was opened with the anadian Treasury and appropriate U.S. Government agencies. As a result of these discussions, the Canadian Government has agreed to measures which will reduce her current gold and dollar holdings by about 300 million and her future dollar exchange receipts by about $190 million, as follows: 1. To assume all of the cost of the permanent air- field developments constructed by the U.S. Army in Canada. This will involve reimbursements to the U.S. Government of $67.5 million and the assumption of additional expenditures of $42.1 million. 2. To reimburse U.S. for goods received under "Canex" requisitions. These are estimated to amount to $38.8 million and represent goods lend-leased to the United Kingdom but made available to Canada for its own use in exchange for expenditures incurred by it in the United States for materials used in production on British account. 107 -23. To take over the Navy contract for PB2B aircraft which involves reimbursement to us of $22 million and assumption of future outlays of $41 million. 4. To terminate or assume War and Navy Depart- ment contracts for munitions with an undelivered value of $91 million. This will reduce Canada's future dollar exchange receipts by this amount. 5. To make an immediate payment of $160 million for goods purchased from S.--$140 million for tanks purchased in the United Kingdom for use of the Canadian Army in Europe and $20 million on account for goods imported from the United States under cash reimbursable lend-lease. 6. To assume the costs of other projects previously financed by U.S. and to eliminate Canadian participation in the purchase contracts for New Caledonia nickel. These involve reimbursements to U.S. of $12.5 million and an annual loss of dollar exchange to Canada of $17.5 million. Excluding the $126 million of dollar balances representing net proceeds from security sales to U.S., the above measures will reduce Canada's gold and dollar balances as of the end of February 1944 from $650 million to $350 million. The Canadian Government has undertaken to put these measures into effect as quickly as possible. When the program is completed the only outstanding U.S. Government con- tracts in Canada will be those continued or placed for other than financial considerations. In view of this fact and of the favorable outlook for Canada's dollar exchange position during the foreseeable future, it is agreed by the two Treasuries that there is no need to continue the arrangement under which their Governments undertook to take appropriate measures to maintain Canada's dollar balances within the limits of $300-$350 million. There are attached a copy of the schedule setting forth the agreed-upon program and a copy of the exchange of correspondence between myself and Mr. Ilsley, Minister of Finance for Canada. TMK:MAB:r1 8/29/44 (Signed) H. Morgan Jr. 108 25 MAR 29 1944 Dear Mr. Ilsley, Receipt is acknowledged of your letter of March 24, 1944, regarding Canada's holdings of United States dollar exchange. The views ex- pressed in your letter are in accordance with our understanding of the agreement we have reached. The atmosphere of cooperation and understanding in which these arrangements have been conducted is, for me, a source of genuine satisfaction. Sincerely, (Signed) Honorable J. L. Ilsley, Minister of Finance, Ottawa, Canada. TMK:r1 3/28/44 H. Morganthes, Jr. & CANADA OTTAWA, March 24, 1944. Hon. Henry L. Morgenthau, Secretary of the Treasury, WASHINGTON, D.C. Dear Mr. Morgenthau: During the last few weeks discussions between yourself and myself and our officials have been taking place on the subject of Canada's holdings of United States dollar exchange. Last year, in keeping with the principles and the spirit of the Hyde Park Declaration, we had reached an understanding to the effect that the United States would follow a program of procurement of war supplies such as to prevent our holdings of gold and U. S. dollar balances from falling below an agreed minimum and that Canada would take appropriate action if our holdings of these reserves tended to rise above an agreed maximum. Unanticipated developments during 1943 served to increase our available supply of U. S. exchange beyond expectation. We have therefore now agreed upon a program intended to reduce our balances to the agreed range and, in accordance with our recent conversations, we undertake to put this program into effect as quickly as practicable. Accordingly, in view of this agreement there is no further need for the continuance of last year's arrangement and Canada and the United States are mutually released from the obligations assumed under such arrangement. As applied to Canada this means that Caneda will be free to maintain, build up, or deal with its reserves as it sees fit. If the above is in accordance with your understanding of the agreement which has been 2. arrived at, I should be glad to have your confirmation. May I express my appreciation of the understanding of our position which you have always shown and of the spirit of co-operation and good-will which you have manifested in seeking to achieve the objectives of the Hyde Park Declaration and in the conduct of our recent negotiations. Yours sincerely, SECRET. CHEDULE COVERING AGREED PROGRAM REFERRED TO IN LETTER FROM HON. J. L. ILSLEY. CANADIAN MINISTER OF FINANCE, TO 6 HENRY L. HORGENTHAU. SECRETARY OF THE U.S. TREASURY. DATED MARCH 24 1944. RES WHICH WILL REDUCE CANADA'S HOLDINGS OF U.S. DOLLAR BALANCES. Estimated Amount (Millions of Dollars) Payment to F.E.A. for imports of war supplies under Canex Requisitions 38.8 Payment to Metals Reserve Company to recoup capital advances and price subsidies certain marginal metal mining properties in Canada under the terms of an agreement with made by that Company for development of War Supplies Limited 3.2 5. Payment for costs incurred by U. S. Army in connection with construction of permanent improvements to following airfields in Canada: (a) Airfields on the Northwest Staging Route, landing strips along the Canol Pipe Line and other airfields, landing strips and permanent air route facilities constructed by U.S. in Northwest Canada (b) Airfields on the Crimson Route in Central Northeast Canada (c) Airfield at Mingan, Quebec Payment for costs incurred by U.S. Army for construction of that part of the telephone line from Edmonton to Fairbanks which is in Canadian territory Reimbursement for progress payments made by U.S. Navy for production of PB2B1 aircraft Payment in U.S. dollars for U.S. tanks purchased in the United Kingdom for use of the Canadian Army in Europe Further payment on account in respect of imports under Canpay requisitions 53.3 30.0 4.2 9.3 22.0 140.0 20.0 500.8 but HDW 2. RES WHICH WILL REDUCE CANADA'S FUTURE RECEIPTS OF U.S. DOLLARS. Estimated Amount (Millions of Dollars) Amendment of U.S. Navy contract for PB2B1 aircraft so as to provide for assumption by Canada of financial responsibility to Boeing Aircraft of Canada Limited 41.0 Assumption by Canada of expenditure incurred on U.S. account for construction of permanent improvements to airfields in Canada and at Goose Bay, Labrador (including newly projected $6 million program and contracts not yet completed 1.4 on Northwest Staging Route) ฿ 4. Assumption by Canada of refining and distribution costs of gasoline used to meet British commitment in connection with Air Training Plan in Canada 15. (annu- ally) Elimination of Canadian participation in contracts for purchase of New Caledonian nickel S. 42.1 2.5 (annu- ally) Contracts between War or Navy Department and War Supplies Limited terminated and/or cancelled after December 1, 1943, or to be terminated and/or cancelled. Undelivered value as estimated by Canadian Department of Munitions and Supply: 91.0 WSL 72-722 6 pdr. APC BC WSL 72-888 AS - 48 cable W8L 72-659 link spares WSL 72-450 fuel pumps WSL 72-157 propeller assemblies WSL 72-377 link trainers WSL 72-458 20 - discs WSL 72-796 pump assemblies WSL 72-821 wobble pumps 72-240, 740 & 743 Range finders (other than U.S. type) WSL 72-169 75 mm shells H.E. WSL WSL 72-812 40 mm rounds WSL 72-391 powder propellant .303 ammunition WSL 72-216, 643, 217 & 265 WSL 72-284 Algerine minesweepers WSL 72-204 & 205 (old and new contracts) Cornell aircraft and spares WSL 72-265 & 921 (old and new contracts) Harvard aircraft and spares 191.6 HOW 113 25 MAR 29 1944 My dear Mr. Secretary: I am enclosing a copy of the correspondence between Mr. Ilsley, Canadian Minister of Finance, and myself, incorporating the agreement on Canada's dollar balances and a copy of the schedule listing the measures which the Canadian Government has greed to take to implement this agreement. Very truly yours, (Mgaa)) # Morganthes, Secretary of the Treasury. The Honorable, The Secretary of State. Enclosures MAB:rl 8/28/44 114 OTTAWA, March24 1944. Hon. Henry L. Morgenthau, Secretary of the Treasury, WASHINGTON, D.C. Dear Mr. Morgenthaus During the last few weeks discussions between yourself and myself and our officials have been taking place on the subject of Canada's holdings of United States dollar exchange. Last year, in keeping with the principles and the spirit of the Hyde Park Declaration, we had reached an understanding to the effect that the United States would follow a program of procurement of war supplies such as to prevent our holdings of gold and U. S. dollar balances from falling below an agreed minimum and that Canada would take appropriate action if our holdings of these reserves tended to rise above an agreed maximum. Unanticipated developments during 1943 served to increase our available supply of U. 8. exchange beyond expectation. We have therefore now agreed upon a program intended to reduce our balances to the agreed range and, in accordance with our recent conversations, we undertake to put this program into effect as quickly as practicable. Accordingly, in view of this agreement there is no further need for the continuance of last year's arrangement and Canada and the United States are autually released from the obligations assumed under such arrangement. As applied to Canada this means that Canada will be free to maintain, build up, or deal with its reserves as it sees fit. If the above is in accordance with your understanding of the agreement which has been 115 2. arrived at, I should be glad to have your confirmation. May I express my appreciation of the understanding of our position which you have always shown and of the spirit of co-operation and good-will which you have manifested in seeking to achieve the objectives of the Hyde Park Declaration and in the conduct of our recent negotiations. Yours sincerely, SECRET. 116 EDULE COVERING AGREED PROGRAM REFERRED TO IN LETTER FROM HON. J. Le ILSLEY. CANADIAN MINISTER OF FINANCE, TO HENRY L. |ORGENTHAU. SECRETARY OF THE U.S. TREASURY. DATED MARCH 24. 1944. JRES WHICH WILL REDUCE CANADA'S HOLDINGS OF U.S. DOLLAR BARANGES. Estimated Amount (Millions of Dollars) 1. Payment to F.E.A. for imports of war supplies under Canex Requisitions 58.8 2. Payment to Metals Reserve Company to recoup capital advances and price subsidies certain marginal metal mining properties in made by that Company for development of Canada under the terms of an agreement with War Supplies Limited 8.2 5. Payment for costs incurred by U. S. Army in connection with construction of permanent improvements to following airfields in Canada: (a) Airfields on the Northwest Staging Route, landing strips along the Canol Pipe Line and other airfields, landing strips and permanent air route facilities constructed by U.S. in 55.5 (b) Airfields on the Crimson Route in 30.0 Northwest Canada Central Northeast Canada (c) Airfield at Mingan, Quebec 4. Payment for costs incurred by U.S. Army for construction of that part of the telephone line from Edmonton to Fairbanks which is in Canadian territory 5. Reimbursement for progress payments made by U.S. Navy for production of PB2B1 aircraft Payment in U.S. dollars for U.S. tanks purchased in the United Kingdom for use of the Canadian Army in Europe 7. Further payment on account in respect of imports under Canpay requisitions 4.2 9.5 22.0 140.0 20.0 500.8 Web HDW 117 2. URES WHICH WILL REDUCE CANADA'S FUTURE RECEIPTS OF U.S. DOLLARS. Estimated Amount (Millions of Dollars) 1 Amendment of U.S. Navy contract for PB2B1 aircraft so as to provide for assumption by Canada of financial responsibility to Boeing Aircraft of Canada Limited 41.0 2. Assumption by Canada of expenditure incurred on U.S. account for construction of permanent improvements to airfields in Canada and at Goose Bay, Labrador (including newly projected $6 million program and contracts not yet completed on Northwest Staging Route) 5. Assumption by Canada of refining and distribution costs of gasoline used to meet British commitment in connection with Air Training Plan in Canada 4. Elimination of Canadian participation in contracts for purchase of New Caledonia nickel 42.1 15.0(annu- ally) 2.5 (annu- ally 5. Contracts between War or Navy Department and War Supplies Limited terminated and/or cancelled after December 1, 1943, or to be terminated and/or cancelled. Undelivered value as estimated by Canadian Department of Munitions and Supply: 72-722 6 pdr. APC BC fuel pumps WSL 72-450 72-157 72-377 72-458 72-796 72-821 WSL 72-240, WSL WSL 72-888 WSL 72-659 WSL WSL WSL WSL WSL WSL WSL 91.0 AS - 48 cable link spares propeller assemblies link trainers 20 mm discs pump assemblies wobble pumps 740 & 743 Range finders (other than U.S. type) 75 mm shells H.E. 72-169 72-812 40 mm rounds WSL 72-391 powder propellant .303 ammunition WSL 72-216, 645, 217 & 265 WSL 72-284 Algerine minesweepers WSL 72-204 & 205 and new contracts) spares WSL 72-265 & 921 new Cornelland (old (old aircraft contracts) and Harvard aircraft and spares 191.6 wrole HOW 118 March 29, 1944 4:19 p.m. HMJr: Grace I'm fine. I feel like the forgotten man. Tully: (Laughs) Why? HMJr: Well, twenty-four hours have gone and I figure there are only twenty-four hours left. T: (Laughs) About the appointment? HMJr: Yeah. T: Well, I don't know just at the moment when we HMJr: Have you tried? T: HMJr: can make it. Uh -- I saw the Boss earlier and he didn't know just then and I may see him again this afternoon. Yeah. White House Operator: Excuse me. Can I break in here just a minute? HMJr: Yes. T: Yes. Operator: Mr. Secretary, I have to break in for the President. Just a minute. 4:21 p.m. Grace Tully: Hello. Sorry, Mr. Secretary, but that was the HMJr: Well, it's all right. T: (Laughs) HMJr: That gave you a chance to ask him for me. T: Yeah. That will give me a chance. I'm going Boss. over now. -2HMJr: Oh, good. Yeah. HMJr: Good. So, I'll let you know just as soon as I have returned. HMJr: Yeah. All right, fine, sir. HMJr: I take it I've still got about twenty-four hours, haven't I? You might have that, or more. HMJr: Oh. Uh huh. HMJr: Oh. Well, anyway, do your best. T: Yes, sir, I will and I'11 let you know. HMJr: Thank you. Right. Uh huh. 119 From hm Hiffill 120 3/29/44 Actual Receipts and Expenditures for Fiscal Years 1938 to 1943 including for Place Years 1944 - 1945 V (In millions of dollars) General and Special Accounts Estimated 1943 1942 1941 1940 1939 1938 2,125 2,345 2,189 2,640 2,967 2,232 2,279 896 691 605 530 120 98 108 103 90 170 137 121 109 150 1945 1944 33,336 6,742 32,970 16,094 7,960 3,470 5,422 4,553 3,847 1,605 1,250 1,130 200 188 158 273 265 209 Receipts: Internal revenue Rel road unemployment insurance contributions Customs Miscellaneous receipts Total receipts 514 13 12 10 438 420 324 389 392 349 319 2,037 359 2,443 906 277 508 268 188 208 44,644 42,970 23,385 13,668 8,269 5,925 5,668 6,242 1,574 1,220 1,103 869 661 538 503 387 43,070 41,750 22,282 12,799 7,607 5,387 5,165 5,855 47,600 48,800 27,000 4,500 1,900 2,300 1,200 42,265 20,888 14,070 8,580 3,678 2,313 667 490 432 28,500 4,700 1,900 2,500 1,200 891 673 596 2,7% 929 99 44 1,105 132 2,011 696 1,201 519 1,800 3/2,800 1,863 1,084 88,200 5/ 88,500 72,109 26,011 6,301 1,657 1,206 1,029 3,750 2,650 1,808 1,260 1,111 1,041 941 926 651 896 1,168 1,233 945 1,571 1,242 867 545 545 573 799 836 805 758 717 125 222 447 1,136 1,654 2,065 2,827 1,885 8 Taxes upon carriers and their employees 7 Tax on employees of 8 or more 5 Employment taxes - Income tax Wiscellaneous internal revenue Social security taxes: Deduct: Net appropriation to Federal old-age and survivors insurance trust fund Net receipts 2/ to Expenditures: Mar activities: - - - - - 3 24 232 - - - Interest on the public debt - Sub-total - Other - Treasury Department - War Shipping Administration Agriculture Department 51 1 United States Mari time Commission - War Department Navy Department General (including revolving funds and transfers to trust accounts): Federal Works Agency Interior Department: Reclamation projects Other 59 76 69 91 86 96 79 65 85 89 86 111 108 111 134 100 18 30 42 40 47 Post Office Department (deficiency, etc.) 13 9 Agriculture Department Federal Security Agency - Railroad Retirement Board: Railroad Retirement Account (transfer to 215 141 124 17 14 14 15 162 189 201 191 219 213 193 199 26 77 111 127 51 39 41 42 1,799 411 121 8 146 Treasury Department 79 94 90 91 68 100 225 159 147 177 1% 168 10 - 250 30 623 572 555 197 177 107 103 93 87 75 73 457 629 357 353 340 317 260 293 6,004 4,801 4,262 5,125 5,299 6,300 6,560 5,284 97,954 95,951 78,179 32,397 12,711 8,998 8,707 7,239 54,884 5/54,201 55,897 19,598 5,103 3,611 3,542 1,384 1 Sub-total Total expenditures, excluding debt retiresent Excess of expenditures over receipts - 9 Other departments and establishments - - 500 758 553 Government employees' retirement funds U. S. share (transfer to trust accounts) - - - Other 290 - Veterans' Administration Adjusted service certificate fund (transfer to trust accounts) National service life insurance fund (transfor to trust accounts) 342 - Refunds of taxes and duties Other & - Tennessee Valley Authority 297 14 3 River and harbor work and flood control 107 275 1 trust accounts) Other 557 557 582 Note:- Classifications are on the basis of present location of activities and functions. Figures are rounded to mareat million and will not necessarily add to totals. a Excess of credits, deduct. Estimates on basis of 1945 Budget. Estimated receipts show the effect of the Revenue Act of 1943. Net receipts are $2,301 millions greater in 1945 and $564 millions greater in 1944 than Budget estimates. 3/ $ Includes anticipated supplemental appropriations of 8650 millions for 1945 and $600 millions for 1944. Includes anticipated supplemental appropriations of 845 millions for 1945 and $170 millions for 1944. For cash financing purposes the Treasury estimates for 1944 that war expendi tures will be about $1,800 millions less than Budget estimates, resulting in a corresponding reduction in the estimated deficit. 121 Summary of Expenditures of the Department of Agriculture for the Fiscal Years 1938-1943 and Estimates for 1944 and 1945. (In millions of dollars) Budget Estimates Actual 8/20 27 41 3 - - 8 6 7 9 - 10 - al7 100 - - - - 1 28 6 9 n 1 4 7 - 15 2 - - 54 - 22 24 27 a 57 - 28 v - 5 31 32 12 33 12 14 13 35 36 42 - 4 - 8 - 29 1 8 6 5 5 21 30 1 Loans - 41 6 3 40 15 - - 24 Farm Tenant Act Reduction in interest rates on mortgages Subscriptions to paid-in surplus Forest roads and trails Rural Electrification Administration: 60 55 - Crop loans, etc. Federal Farm Mortgage Corporation: Capital stock Reduction in interest rates on mortgages Federal land banks: Capital stock 28 - 1994 1939 a Banks for cooperatives - capital stock Federal intermediate credit banks - capital stock Production credit corporations - capital stock 1940 1941 a Farm Credit Administration 1942 1943 - 1944 2 1945 5 1 14 2 Other 4 1 3 2 3 3 r Food Administration: Agricultural Marketing Administration: 91 18 - 71 91 38 45 60 62 159 184 180 304 6 7 - 30 265 350 458 474 465 605 47 39 49 62 53 50 53 34 133 - 3 3 7 1 5 1 - 15 5 6 3 6 - 160 203 - 9 90 18 1 88 87 122 14 8 2 2 92 1 20 215 198 197 2 128 147 146 129 124 - - - - - - 5 - 896 651 1,168 945 1,233 - - - 896 1,168 - 651 1,233 2/ 315 1,260 867 1,242 1,571 - Total 94 - 5 Add back non-recurring credit 120 - 2 - 5 Sub-total 97 61 55 - Regular departmental expenditures Foreign war and refugee relies 91 72 6 15 - Other 23 - 478 Other: Administration of Sugar Act of 1937 Agricultural Adjustment Act of Aug. 24, 1935 Commodity Credit Corporation, restoration of capital impairment Federal Crop Insurance Acts Administrative expenses Subscriptions to capital stock Price Adjustment Act of 1938 and parity payments 77 53 126 - Surplus marketing Surplus commodi ty stamp program Farm Security Administration Soil Conservation and Domestic Allotment Act 4 ( 4 1,571 1,242 ( Excess of credits, deduct. Excludes certain functions transferred to War Food Administration. Represents payments into the Treasury of capital and surplus of certain agricultural corporations, of which $70 millions was resubscribed in 1942 and $99 millions was resubscribed in 1943. 867 122 122 Major Public Works Activities (In millions of dollars) Actual 1942 1941 # # , 1943 1940 # . 1944 : 1945 1939 # Budget Estimates 1938 general 16.9 164.5 3.7 3/ 77.1 2 126.6 .5 .1 .3 .4 13.1 18.5 191.0 17.9 23.4 15.1 27.7 98.8 248.7 21.8 .3 1.0 265.0 18.7 22.8 59.4 100.8 - 1.4 9.4 11.3 - - - 136.9 3.3 - - .9 .5 - Other - 7.0 .1 .4 - - Loans and grants to States, etc. Loans to railroads 174.1 14.8 223.4 - Revolving Funds 17.0 152.6 76.7 51.4 14.8 - Public Works Administration Administrative expenses Grants (Act of June 21, 1938) Loans (Act of June 21, 1938) 34.1 129.3 44.5 - Public Roads Administration 58.1 - Other 51.7 13.9 - Construction 33.8 26.6 12.2 44.5 2.7 - Public Buildings Administration: - Federal Works Agency: 299.0 882.4 1,284.6 1,477.5 2,161.5 1,421.3 2.6 68.6 91.4 96.4 79.3 65.4 72.3 85.6 55.2 190.5 218.5 198.6 201.2 193.0 187.8 212.9 161.6 6.0 10.2 9.1 3.5 7.0 3.0 10.1 8.6 11.7 20.7 9.7 1.9 11.2 6.0 1.3 1.2 1.3 1.5 1.1 1.3 39.1 40.8 42.0 6,0 6,6 9.3 2,429.4 3,165.1 2,233.9 - Work Projects Administration 423.6 581.1 887.5 1,566.2 2,030.3 139.5 120.6 130.0 96.3 114.4 15.5 34.1 4.7 4.5 12.0 1.4 5/ 507.5 607.6 297.0 42.0 50.0 762.8 822.8 358.6 42.0 276.6 Public Works (community facilities) Other (Public Buildings Administration) National Housing Agency Total, War Activities 85.7 Less than $100,000. Excess of credits, deduct. Includes $42.4 millions work performed for the Mar Department. Includes $49.0 millions work performed for the Bar Department. Includes $4.4 millions work performed for the War Department. Includes $127.9 supplemental appropriation pending in First Deficiency Act, 1944. Includes $7.5 supplemental appropriation pending in First Deficiency Act, 1944. Includes $30.0 supplemental appropriation pending in First Deficiency Act, 1944. - Public Roads Administration - Federal Works Agency: - War Activities - 4.0 - 2.7 3.4 6/ 44.6 8.1 - Total, General 127.0 - Veterana' Administration, hospital facilities, etc. 111.5 - Tennessee Valley Authorit 77.0 51.2 26.0 - Other - .6 - .6 - 10.9 - Administrative expenses, etc. Federal Public Housing Authority . - Federal Housing Administration: - National Housing Agency: - River and harbor work and flood control - Reclamation projects - Interior Department: . 123 123 Details of "Other Departments and Establishments* (In millions of dollars) Estimated 1945 1944 42 87 1943 1942 1941 1940 33 29 27 24 1939 1938 Commerce Department: 18 10 - - - - 6 8 4 - - - - 3 35 32 6 29 31 45 43 25 23 6 6 6 6 6 5 5 2 2 3 2 3 2 3 2 - - - - Civil Aeronautics Authori ty Reconstruction Finance Corporation: Disaster Loan Corporation - capital stock Other (payment of interest to Treasury under notes cancelled pursuant to Act of February 24, 1938) Other (Census Bureau and other departmental activities district of Columbia (U. S. share) Executive Office (White House office, Budget Bureau, etc.) Federal Emergency Relief Administration Judicial Establishment 1 2 & 14 12 12 12 11 1 6 9 Labor Department Legislative Establishment lational Housing Agency: Federal Housing Administration Federal Public Housing Authority 73 63 63 64 58 59 48 52 23 23 23 23 24 19 14 13 30 29 27 27 24 23 22 26 6 3 3 10 12 7 Justice Department 9 11 12 10 10 21 6 2 9 Federal Home Loan Banks: 1 1 1 - - - - 5 - - State Department 1 1 Panasa Canal, (operation, protective works, etc.) 2/ 2/ 1 Administrative expenses Capital stock 21 34 31 38 29 25 10 11 41 35 33 29 23 24 19 21 War Department - civil functions (cemeterial expenses, Alaska communication system, etc.) Miscellaneous independent offices and commissions: 3/ 3/ 2 4 3 3 12 11 38 27 8 9 70 70 64 60 74 57 31 Unclassified items 82 19 23 - - - - Other 3 - - - Employees' Compensation Commission General Accounting Office Interstate Connerce Commission National Advisory Committee for Aeronautics 3/ 1 Adjustment for certain disbursing officers' checks 1 - 5 - 629 - 1/ 457 357 353 Included under Department of Justice. 2/ Included accounts, increment on gold, etc. - Transactions in checking accounts of Governmental agencies". Included under under Trust "Nar activities". 3/ -1 -5 1 - Total other departments and establishments 170 340 - Expenditures from anticipated supplemental appropriations - 45 317 - - outstanding 260 293 WAR ACTIVITIES EXPENDITURES EXCLUDING RECONSTRUCTION FINANCE CORPORATION AND SUBSIDIARIES, ON THE BASIS OF CURRENT DAILY TREASURY STATEMENT CLASSIFICATIONS (In millions of dollars) National 667 Agriculture 936 Agency - By fiscal years: Fiscal year 1940 1/ Navy Maritime Treasury Commission War Shipping Administration Other Total - 99 - War Housing 1,711 - 8 14,070 2,313 8,580 Fiscal year 1943 42,265 20,888 Fiscal year 1944 - Budget estimate 48,790 Fiscal year 1945 - Budget estimate 47,597 45 3 Fiscal year 1942 3,678 696 297 2,011 608 27,000 2,300 500 28,500 2,500 50 24 519 51 - Fiscal year 1941 187 6,301 929 132 787 26,011 1,201 2,776 1,105 1,256 72,109 1,150 4,500 1,900 2,360 3/ 88,500 1,000 4,700 1,900 1,953 3/ 88,200 v vonths: Fiscal year 1942: 424 37 30 16 46 834 497 66 40 24 44 41 -6 9 Nov. 771 Dec. Jan., 1942 Feb. . Mar. Apr. 1,072 1,282 June Total fiscal year 1942 41 43 29 52 69 575 63 27 35 86 42 95 1,369 581 1,432 1,594 946 1,850 2,007 May 493 545 14,070 105 18 65 22 1,307 8,580 80 17 119 696 29 19 53 1,101 1,309 29 1,131 32 1,330 33 1,537 1,448 29 1,850 41 37 2,104 48 2,208 63 121 16 108 2,809 63 98 42 253 3,238 3,560 83 130 33 99 150 39 519 929 132 21 297 57 969 46 2 Oct. 17 - 5 7 26 - 746 Sept. 21 - 19 - 441 - 362 598 - 516 Aug. - July, 1941 59 3,829 85 787 26,011 4,498 Fiscal year 1943: July, 1942 Aug. Sept Oct. Nov. Dec. Jan. 1943 . Feb. Mar. 2,861 2,875 3,519 3,417 3,538 3,770 4,053 3,239 3,985 1,103 1,376 1,294 1,596 1,478 1,380 1,274 2,002 90 26 95 184 54 85 61 42 110 211 99 111 94 102 4,884 45 141 113 77 51 48 110 5,384 46 111 100 433 5,481 50 81 274 85 102 6,042 5,825 5,947 21 50 83 275 127 119 18 44 95 331 77 56 12 39 79 223 68 106 17 55 103 285 103 141 514 120 6,744 61 248 69 134 6,974 5,770 382 77 106 243 3,424 2,053 2,102 2,251 2,980 93 318 117 7,092 70 315 116 129 7,469 42,265 20,888 2,011 608 1,201 2,776 1,105 1,256 72,109 July, 1943 3,808 1,898 12 72 95 Aug. 319 105 4,219 180 122 2,037 1,909 1,955 68 118 6,432 361 119 129 239 50 114 366 7,232 130 176 109 54 100 294 148 120 2,134 332 44 111 402 6,952 6,989 216 130 2,050 2,082 2,757 45 39 108 164 7,541 356 140 114 42 125 308 153 117 184 38 127 332 182 107 6,718 7,138 7,518 Apr. 3,727 May 3,857 June Total fiscal year 1943 85 Fiscal year 1944: Sept. 4,036 4,142 Oct. Nov. Dec. Jan., 1944 Feb. Mar. 4,173 3,841 4,170 3,792 Apr. May June Total fiscal year 1944 Includes functions presently classified as "War Activities* Includes certain expendi tures of Federal Security Agency and Federal Works Agency, and expenditures of office for Emergency Management, Selective Service, Aid to China, etc. Includes supplemental items of $800 x for fiscal 2rd 1944 and $650 M for fiscal year 1945. From 1945 Budget. m Klatz 125 TREASURY DEPARTMENT WASHINGTON DWB March 29, 1944 MEMORANDUM ON MEETING OF THE JOINT COMMITTEE ON REDUCTION OF NONESSENTIAL FEDERAL EXPENDITURES A meeting was called for 11:15 A.M., March 29. 1944, in the Senate Appropriation Room in the Capitol. There were present: Senators: Byrd George Congressmen: Woodrum Cannon Committee Staff: Mr. Borda Mr. Moore One other Bureau of the Budget: Mr. Lawton. Taber Senator Byrd announced that the meeting was for the purpose of considering a proposed report on unexpended balances. He also announced that the preliminary draft had been changed so as to meet the objections of the Secretary of the Treasury and to incorporate the corrections which the Bureau of the Budget indicated were necessary. Senator Byrd also indicated that Congressman Taber had voiced some objection to the report. Congressman Taber said that while he had certain criticisms to direct to the report, they were not of major consequence but were from the standpoint of clarification. He stated that certain of the proposed recommendations were inappropriate because the matters which were the subject of the recommendations were already being performed by the Appropriations Committees. He objected to the second recommenda- tion relating to the return of unobligated balances to the Treasury at the end of each fiscal year and pointed out that it would involve a great deal of additional work because it would be necessary for the Congress to appropriate for thousands of audited claims allowed by the General Accounting Office. Congressman Taber suggested certain general changes which he thought should be incorporated in the report. He pointed out that the unobligated balances shown in the tables as of the end of January, 1944 were not significant because these balances were necessary to cover activities to the and of the fiscal year. He suggested that the tables be amended to show the estimated unobligated balances which will be on hand at the end of the fiscal FORDEFENSE year. BUY UNITED STATES BONDS Congressmen Cannon indicated that in his opinion the proposed report contained very serious and far-reaching indictments of the 126 -2activities of the House and Senate Appropriations Committees and pointed out certain statements which he had in mind. Senator Byrd agreed that the statements to which Congressman Cannon objected would be eliminated. Congressman Cannon also called attention to certain general statements in the proposed report and said in his opinion the statements should be clarified and more definite recommendations made rather than to suggest changes by general comments. Senator Byrd said that the report had not been prepared from the standpoint of intending it to be a reflection on the Appropriations Committees. There was a further general discussion that perhaps the best approach would be to have a complete revision of the report which could be presented to the members of the Committee for their further consideration. It was suggested that the report be confined more to factual details. Senator George suggested that it might be well to wait until the end of the fiscal year before filing a report on the subject of unex pended balances, at which time such report could reflect the factual situation as it would then exist. It was agreed that the suggestion of Senator George be adopted and the proposed report be postponed until after the end of the fiscal year. Congressmen Woodrum and Cannon left the meeting at 12:00 o'clock. There was a further general discussion between Senators Byrd and George and Congressman Taber with respect to a suggested program for the Committee's future activities. Congressman Taber indicated that some work should be done on the War Shipping Administration and Maritime Commission setup which he claimed to be very bad and pointed out that these agencies were overstaffed with high paid personnel which were doing practically nothing from day to day. Senator Byrd indicated that the Committee should give some con- sideration to the duplication and overlapping in labor activities. He pointed out that there were 26 separate agencies now working on functions relating to labor. The Committee adjourned at 12:15 P.M. not 127 Farm fele TREASURY DEPARTMENT WASHINGTON SCHEEN March 29, 1944 MEMORANDUM FOR THE SECRETARY: Re: Possibilities for reduction in governmental expenditures The January budget shows that for the current fiscal year ending June 30, 1944, total expenditures, excluding amounts neces- sary to retire the market obligations of government corporations, are estimated at $99.3 billion. It appears, however, that expen- ditures for this year will be approximately $2.5 billion less than such estimates, of which $1.9 billion is on account of regular war activities and $.5 billion on account of war activities of the Reconstruction Finance Corporation and its subsidiary corporations. Unless expenditures for war activities continue at their present rate the budget estimates of $99.8 billion for the fiscal year 1945 may also be too high. f Fiscal Year 1944 1945 (In Billions) Budget operations: General - War activities- $7.5 $9.8 88.5 88.2 Corporate operations: -2 General War activities- 3.5 1.8 Total $99.3 $99.8 PORDEFENSE BUY A general review of the estimates of expenditures for the UNITED STATES SOVINGS fiscal years 1944 and 1945, as shown in the 1945 Budget submitted BONDS 128 -2by the President in January, 1944, after consideration of subsequent developments, indicates that there are a number of major programs, excluding direct activities of the Army and Navy, where substantial savings in anticipated cash expenditures (as distinguished from more reductions in current appropriations) might be effected. Savings from these programs in any magnitude would require the adoption of major changes in policy. Even though immediate cuts are made in these programs they would not be reflected in reductions in expenditures much before the fiscal year 1945 (beginning July 1, 1944). These programs are as follows: Estimates, 1945 (In Millions) Reconstruction Finance Corporation Defense Plant Corporation Maritime Commission Administrator of Civil Aeronautics Federal Security Agency Office of Education (defense training)Rural Electrification AdministrationFarm Security Administration Farm Tenant loans - (Not stated) $4, 700.0 121.0 112.2 57.6 127.5 16.5 Agricultural programs Exportation and domestic consumption of agricultural commodities Federal Works program Public roads Community facilities (defense) Defense housing Total 71.8 162.8 140.0 119.8 $5,629.2 No examination of expenditures for the direct war activities of the Army and Navy, and the related lend-lease program, or the expenditures connected with subsidy operations, has been made for the purpose of this memorandum. -- 129 Reconstruction Finance Corporation R.F.C. Net expen- ditures for all purposes R.F.C. transactions for Defense Plant Corp. Advances (In Millions) Repayments Fiscal year 1941 $725 $141.8 $.7 1942 1,936 2,462 3,550 1,950 1,216.8 3,611.4 148.5 1,456.4 283 277 327.7 247.7 254.3 207.3 199.1 177.9 162.7 135.2 . 1944 (Estimated) 1945 Actual - July, 1943 If Sept. Oct. If Aug. 227 199 Nov. 249 Dec. 199 Jan., 1944 Feb. 197 201 Defense Plant Corporation (Not available) . # 1943 58.7 67.2 40.6 80.3 50.4 60.4 60.8 38.7 (In Millions) Commitments through February 29, 1944 Commitments withdrawn and cancelled $10,480 1,985 Net commitments Gross disbursements $ 8,495 Undisbursed commitments 6,682 $ 1,833 Comments It will be observed from the foregoing that the greater part of the net expenditures by the Reconstruction Finance Corporation have been accounted for by transactions in connection with the Defense Plant Corporation. Gross advances to the Defense Plant Corporation reached their peak during the period January - July, 1943, when then averaged $325 million per month. During the period December, 1943 February, 1944, they averaged $155 million per month. Total gross advances to February 29, 1944 amounted to $6,682 million. 130 In addition to the outlays through Defense Plant Corporation large expenditures for plant facilities have been made from appropriations of the War and Navy Departments and Maritime Commission. It would appear that the need for additional facilities at this stage of the war program could be reexamined with special reference to the discontinuance of all new construction and the ourtailment of pending projects wherever possible without jeopardising production of vital war material. i 131 -5- Maritime Commission (In Millions) Expenditures Fiscal year 1938 1942 $1.2 43.8 98.8 51.3 929.5 1943 3,193.0 Estimated - 1944 4,500.0 4,700.0 1939 1940 1941 1945 # # # . Actual - July - Sept. 1943 Oct. - Dec. 1943 Jan. 1944 Feb. 1944 1,046 1,053 308 331 Expenditures for ship construction are expected to reach $4,700 million in the fiscal year 1945. compared with Budget estimate of $4,500 million for the current year and comparable expendi- tures of $3,193 million in 1943. The Independent Offices Appropriation Bill for 1945, as passed the House, includes an appropriation of $6,766 million ($10 million less than the Budget request) for the Construction Fund and contract authorizations of $5,700 million, toward which $4,665 million is included in the amount appropriated. These funds will become immediately available upon passage of the appropriation bill and the contract authorization, according to the Budget, will be practically entirely obligated before June 30, 1944. This, of course, assumes final enactment considerably in advance of June 30. The bill has reached the stage of debate in the Senate. 132 -6Comments It will be noted that by the end of the present fiscal year the Maritime Commission will have spent since the beginning of the war about $8 billion for ship facilities and for the construction of ships. In addition, #4-3/4 billion are estimated to be spent in the next fiscal year. In view of the great reduction in the number of cargo ships lost as a result of enemy action, there may be some possibility of slowing down the 1945 ship construction program. The military and naval authorities probably contend that all ship construction facilities should be operated at full capacity because a large reserve of ships are needed to avoid any critical situation in the event the enemy should launch a successful campaign by sea or air in which large numbers of cargo ships may be destroyed. It would seem that substantial sums may be saved from this source without risk of adverse effect upon our military operations. A 10% reduction in projected expenditures, for example, would amount to $450 million. 133 -Administration of Civil Aeronautics (In Millions) Expenditures Fiscal year 1938 $10.1 18.4 25.3 52.9 127.1 222.9 1939 1940 . 1941 1942 1943 Estimates - 1944 272.0 126.2 1945 N The program of the Administration of Civil Aeronautics, as indicated by estimates of expenditures in the 1945 Budget, is as follows: Estimated Estimated Actual Actual 1943 1942 1944 1945 Establishment of air-navigation facilities Maintenance of air-navigation facilities Civilian pilot training (National defense) Development of landing areas for National defense Development of Civil landing areas Working fund from War & Navy for training courses All other Total $6.0 $14.0 $10.2 $7.9 23.0 21.0 22.1 15.1 9.5 45.3 50.5 29.0 75.0 140.0 112.4 67.9 5.0 .5 - 45.0 19.1 7.7 6.2 8.6 $126.2 $272.0 - - - 7.2 $222.9 $127.1 Comments (a) Landing areas It will be noted from the foregoing table that approximately $320 millions are scheduled as expenditures on account of "development 134 g- of landing areas for national defense" during the three-year period ending on June 30, 1944. In addition, $75 million are estimated to be spent for this purpose in 1945. One of the reasons for the establishment of the program for development of landing areas was to provide landing fields for use of airplanes for emergency defense purposes in the event of attack. The development of the war indicates that the probability of direct attack on the continental United States on any large scale by enemy forces is remote. In view of this situation, the need for the continuation of this program for military purposes would seem to be unnecessary. If the program is justified from the standpoint of benefit also to commercial aviation, it would seem that it could be postponed until after the termination of the war. (b) Pilot training The Budget indicates that the civilian pilot training program payable from direct appropriations to the Administration of Civil Aeronautics will be curtailed in 1945. This is because the authorization to make appropriation to Administrator of Civil Aeronautics expires in the fiscal year 1944. However, it will be noted that a large training program is carried on payable from funds transferred from the War and Navy Departments. It may be contemplated that this program will be continued in 1945 from funds to be transferred from War and Navy Departments. Since this program appears to be tied in closely with direct military operations, no attempt has been made to evaluate its necessity. 135 -9Federal Security Agency. Office of Education Expenditures (In millions) Office of National Youth Administration Education $26.8 27.7 27.8 88.8 141.2 162.5 130.7 Fiscal year 1938 1939 1940 " . 1941 # 1942 # 1 1943 . 1944 (Estimated) # " 1945 - - $51.2 78.1 94.6 136.4 129.5 58.5 - 1/112,2 . Includes $10 million under pending supplemental estimate. 1 A breakdown of estimated expenditures contained in the 1945 Budget, including supplemental estimate and actual expenditures for 1942 and 1943, is as follows: Estimated Estimated Actual Actual 1945 Further endowment of colleges of agriculture and the mechanic arts Promotion of vocational education (permanent appropriation) Other $2.5 1.2 3.9 2.6 2.6 2.6 .5 .4 -,2 .4 (1) (1) (1) 2.7 14.0 14.0 13.7 13.4 7.0 7.0 7.1 6.8 .5 .5 .5 .6 82.0 2.0 100.0 131.2 111.3 1.1 1.5 1.1 1.2 1,0 -$112.2 $130.7 $162.5 $141.2 Cooperative vocational rehabilitation education (In millions) $2.5 Loans to students (national defense) Colleges for agriculture and the mechanic arts (permanent appropriation) 2.6 Further development of vocational 1942 1943 $2.5 $2.5 - Miscellaneous items Vocational education: 1944 - National defense: Education and training, defense workers Visual aids for war training Salaries and expenses Total (1) Now included under "Office of Administrator". - 136 - 10 It can be seen that of the programs administered by the Office of Education, the one involving the greatest cost is that for education and training of defense workers. Expenditures for the fiscal years 1941 through 1943, under this program were as follows: 1941 1942 1943 $45.4 111.3 131.2 The training project is carried on through payments to states and other subdivisions and certain schools. A breakdown of Budget estimates for 1944 and 1945 is as follows: 1945 1944 (1) Vocational courses of less than college grade (courses supple- mentary to employment in occupations essential to the national defense, including certain pre-employment and refresher courses) 45.0 66.0 (2) Short courses of college grade (designed to meet the shortage of engineers, chemists, physicists, and production supervisors) 25.0 19.0 12.0 12.5 (3) Vocational courses in food production and conservation, etc. (Farm machinery repaid and farm labor training designed to give general pre-employment mechanical training and to assist in attaining food production goals) Comments The National Youth Administration reached its peak in expen- ditures in the fiscal year 1941, namely, $136 million. In the fiscal year 1942 that agency shifted its program to national defense training, its expenditures amounting to $130 million. In the meantime, the Office of Education increased its expenditures under the impetus of national defense training from $28 million in 1939 and 1940 to $141 million in 1942. - 11 - 137 On November 14, 1941, the Secretary of the Treasury sub- mitted to the Joint Committee on Reduction of Nonessential Federal Expenditures a number of economy suggestions, among which he included the following statement with respect to agencies engaged in vocational activities: "It would seem that the regular activities of the Civilian Conservation Corps and National Youth Administration must conflict with the more important defense program, and should be eliminated or drastically reduced. "It is suggested that all vocational training activities be consolidated in a new Bureau of Defense Training. Any overlapping functions or duplication of work could be eliminated and one comprehensive training program, integrated with the defense program, could be formulated and administered more economically than appears possible under the present organizations." Subsequently, the National Youth Administration was abolished in 1943, at which time the expenditures of the Office of Education reached their peak of $162 million, or an amount equivalent to its pre-war expenditures, plus the peak expenditures of the National Youth Administration. Estimated expenditures of the Office of Education are $102 million greater in 1944 and $85 million greater in 1945 than its pre-war program. These increases are on account of education and training of defense workers. It would appear that employment in war industries has about reached its maximum level. Under these circumstances a greater reduction in 1945 expenditures for this purpose than is anticipated in the 1945 Budget would seem possible. - 12 - 138 Rural Electrification Administration Expenditures General Budget R.F.C. Funds (In millions) $10.3 15.2 37.7 38.0 24.2 1938 # 1939 . 1940 . . 1941 . 1942 9.1 4.0 1943 . " " . $138.5 Estimated - 1944 3.6 - 1945 32.6 - $46.5 100.0 - Fiscal Year 1936 & 1937- 36.0 54.0 13.5 $250.0 10.5 25.0 If R.F.C. In addition to loans and expenditures authorized from appropriated funds under the budget, the R. F. C. has been authorized from time to time to advance moneys for making rural electrification loans, as follows: Fiscal Year 1943 Fiscal Year 1942 Fiscal Year 1941 Prior years- $10,000,000 - - 100,000,000 - 100,000,000 - 146,500,000 $356,500,000 Practically all expenditures of the Rural Electrification Administration through the fiscal year 1943 were for loans and the purchase of property in accordance with the Rural Electrification Act of May 20, 1936. It will be noted that up to June 30, 1943. about $138.5 million had been expended from appropriated funds. During this time collections returned to the Treasury amounted to $1,167,000 of which 139 - 13 $439,000 was on account of interest and $728,000 on account of principal. In addition to expenditures from appropriated funds $250.0 million were expended from R. F. C. funds, of which $18,400,000 has been repaid on principal, in addition to the payment of current interest due on the R. F. C. advances. Comments During the fiscal year 1943 and 1944 the Rural Electrification program was curtailed because of the limitation on the use of copper and other critical materials. There appears to be a substantial increase contemplated in expenditures for 1945. The fact that the Rural Electrification Administration has operated during the past two years with average expenditures of $15.0 million per year, while at the same time its collections have amounted to more than $15.0 million per year, would seem to indicate that its program could be further suspended until after the termination of the war. 140 - 14 Farm Security Administration FARM TENANT ACT Farm Security General R.F.C. Budget Expenditures (in millions) Fiscal year 1938 1939 If 1940 " " . " . 1941 . 1942 1943 Funds $180.1 183.6 158.5 62.2 78.8 61.6 $- $724.8 37.0 28.5 Farm Tenant General R.F.C. Funds Budget $- $3.1 - - 111.3 123.7 97.3 26.6 41.8 27.3 - - 6.1 29.4 51.3 4.3 27.1 $332.3 $109.2 $107.8 67.5 1.5 1.5 30.0 If If Estimates Fiscal year 1944 1945 1 97.5 15.0 . 1 The Department of Agriculture Appropriation Bill, 1945, as reported by the House Appropriation Committee on March 21, 1944, does not include any funds for the Farm Security Administration, since there is pending a bill to reorganize the agency. Comments It will be noted that in the six years ending June 30, 1943. the Farm Security Administration spent more than $1 billion, primarily for Rural Rehabilitation loans and grants, and during the same period about $200 million were spent for farm tenant loans. Expenditures for the current fiscal year are estimated at $105 million by the Farm Security Administration and $32 million for farm tenant loans. During the period 1938-1943 about $88 million was repaid to the Treasury on account of principal and interest on rural rehabilitation loans and about $186 million was repaid to the R.F.O. on the principal of its advances in addition to current interest payments. Similar receipts from farm tenant loans amounted to $1 million and $12 million, respectively. 141 - 15 In view of the general improvement in farm conditions and the income of farmers, it would appear that substantial our- tailment of these programs would be possible. It will be noted that the House Appropriation Committee has temporarily deferred reporting any 1945 appropriations for the Farm Security Administra- tion until the Congress acts upon a pending bill to reorganize that agency. 142 - 16 Food Distribution Administration Exportation and domestic consumption of agricultural commodities, Sec. 32, Act of August 24, 1935. Permanent Total Expenditures (in millions) Fiscal year 1937 1938 1939 1940 1941 1942 1943 1944 (Estimated) 1945 - $35.2 35.0 210.5 143.6 223.4 196.3 112.9 91.0 71.8 Appropriation, 30% of Customs $35.2 35.0 210.5 73.0 93.8 85.2 55.6 70.0 70.0 # # . . . N . . # Program authorized Sec. 32 of the Act of Aug. 24, 1935 (7 U.S.C. 612c), appropriates for each fiscal year an amount equal to 30 per centum of the gross receipts from duties collected under the customs laws during the period Jan. 1 to Dec. 31, both inclusive, preceding the beginning of each such fiscal year, to be used by the Secretary of Agriculture to (1) encourage the exportation of agricultural commodities and products thereof by the payment of benefits in connection with the exportation thereof or of indemnities for losses incurred in connection with such exportation or by payments to producers in connection with the production of that part of any agricultural commodity required for domestic consumption; (2) encourage the domestic consumption of such commodities or products by diverting them, by the payment of benefits or indemnities or by other means, from the normal channels of trade and commerce; and (3) reestablish farmers' purchasing power by making payments in connection with the normal production of any agricultural commodity for domestic consumption. 143 - 17 In addition to the permanent appropriation authorized under Sec. 32, the Congress has appropriated additional amounts for expenditure pursuant to Sec. 32. The activities under this expenditure caption, as indicated in the estimates of expenditures contained in the annual Budgets, are as follows: 1945 1944 1943 1942 1941 $49.2 $114.2 $83.5 Food stamp plan, redemption payments - - $10.0 $12.0 6.6 42.6 84.2 - 7.0 13.3 12.4 9.1 16.0 Purchase of agricultural commodi- ties for distribution through State welfare agenciesEncouragement of export of agricultural commodities program payments- Diversion of agricultural commodities to by products and new uses 13.3 13.6 13.2 50.0 3.3 50.0 3.8 15.3 Maintenance and operation of school milk and lunch programAdministration, etc. Other - - - - .1 6.6 1.0 20.2 $223.4 6.3 Cotton stamp plan, redemption payments Adjustments to expenditure figures- - - -4.8 +11.6 +15.2 3.5 +5.9 $71.8 $91.0 $112.9 $196.3 - 6.7 - +.4 Comments The House Appropriation Committee on March 21, 1944, in re- porting the 1945 Department of Agriculture Appropriation bill eliminated the $50 million authorization for the school milk and lunch program and also provided a direct appropriation of $40 million in lieu of diverting a like amount from the permanent annual appropriation to the soil conservation program. 144 - 18 The permanent annual appropriation of 30% of customs receipts estimated to be available for 1945 is $117 million. Ina smuch as the school milk and lunch program has been terminated by action of the House of Representatives, there are only about $25 million of regular expenditures scheduled in the 1945 Budget for payment from this source. It would appear that the balance of the permanent appro- priation could be placed in Budget reserves by direction of the President, thus about $90 million could be saved. 145 - 19 Public Roads (Highways, roads, streets, etc.) Expenditures (in millions) Public Roads Administration Fiscal Year Public Works Ad- Emergency Relief Act ministration Act Total 1932 $185 $- $- 1933 165 - - 193 255 - - 1935 307 - - 1936 231 414 1937 341 611 1938 223 515 1939 191 886 47 1,124 1940 165 568 51 784 1941 1942 174 168 460 248 - 416 1943- 218 - - 218 1944 (Estimated) 1945 (Estimated) 247 163 $185 165 255 307 645 - 952 - 738 - 659 25 - - - - 247 163 The program of the Public Roads Administration as shown by the 1945 Budget, is as follows: Public Roads Administration - Regular Federal-Aid Highway system 1945 1944 1943 $46.0 $43.3 $66.0 5.0 6.0 6.6 8.0 8.7 13.4 Federal-Aid secondary or feeder roads Elimination of grade crossings Mt. Vernon Memorial HighwayPublic-land highways Flight strips (National Defense) Strategic highways network (National Defense). Access roads (National Defense) Surveys and plans (National Defense) Inter-American Highway Working fund (defense aid) Other Total .1 - 1942 $107.1 16.0 26.0 - - .2 .3 .2 .8 $59.2 $58.4 $86.3 $150.0 $ - $ 5.4 20.0 58.0 5.0 11.5 4.4 4.7 $103.6 10.0 100.0 3.0 11.6 49.0 9.2 $188.2 $ 4.6 - 90.7 - 2.7 30.8 $ - 10.1 - - - 2.9 7.0 $131.7 $18.1 $162.8 $246.6 $218.0 $168.1 146 - 20 Comments It will be noted that while the regular program has been substantially curtailed from the pre-war (fiscal year 1942) level, expenditures for 1943 and 1944 have been higher than those for 1942 because of the roads being constructed for National defense purposes. Even the 1945 estimates about equal expenditures for 1942. The net curtailment in expenditures for highways, roads, streets, etc. since the beginning of the war, has been brought about through the discontinuance of the Work Projects Administration 147 - 21 War Housing and War Public Works (Community Facilities) Community War Housing (millions) Expenditures Fiscal year 1941 1942 1943 42.0 301.6 635.9 Facilities - 34.1 108.5 If Estimated Expenditures Fiscal year 1944 1945 539.6 1/ 119.8 130.0 1 140.0 . # 1 Reflects expenditures from supplemental appropriations amounting to $7.5 million for War Housing and $127.5 million for Community Facilities, as passed by the House. Total authorizations amount to $1,500 million for war housing, excluding temporary shelters, and $520 million for community facilities. Taking into account supplemental appropriations now pending, unappropriated authorizations are $142 million and $25 million, respectively. Comments War Housing The House Appropriations Committee, in considering the First Deficiency Appropriation Bill, 1944 (Reported March 7. 1944) pointed out that the total war housing program has approximated $6 billion, of which $4 billion has been through private sources and $2 billion by Government funds. The Committee stated that the programing and assignment of housing has passed the peak, this being borne out by the expenditure estimates shown above. The necessity remains of providing for shifting conditions in connection with manpower and production changes and the necessities arising in connec- tion with areas around military and naval stations. 148 - 22 The Budget does not include a request for new appropria- tions for the fiscal year 1945. Community Facilities These facilities consist of schools, child-care centers, hospitals, sewage systems, roads and streets, etc., necessary to prevent impairment of community operations where there has been a large influx of war workers. The program of construction projects is now on a diminishing scale while the necessity for maintenance and operation of projects is increasing. No new appropriations are requested in the Budget for the fiscal year 1945. TREASURY DEPARTMENT OFFICE OF THE UNDER SECRETARY To The 4% soldier deposit fund is only for enlisted men. The amount increased from $28,897,000 in July 1943 to $63,481,000 in March 1944. The number of accounts increased from 157,626 on July 1, 1943 to 266,818 on March 1, 944. These deposits carry restrictions as to withdrawal. They cannot be withdrawn except in emergency upon approval of commanding officer. Otherwise they must be left on deposit until separation from the service. 150 March 29, 1944 My dear Governor Stainback: I wish to take this opportunity to congretulate the people of Hawaii on the first anniversary of the organization of their "Work to Win" Committee. Reports have reached me which indicate that this Committee has been of great benefit in the War Finance Pro- gram. This work has been so ably carried on in Hawaii that all quotas assigned have been oversubscribed in good measure. I hope that the success which has attended your efforts will encourage a vigorous contin- uation of this great project. Sincerely yours, (Signed) H. Morganthes, Jr. The Honorable Ingram M. Stainback, Governor of Hawaii. RWC:EN:deb 151 March 29, 1944 Dear Dr. King: I have just learned that you are letting us have Peter Odegard to handle a very important assignment. When I discussed this with Peter, I volunteered to write you about it but he requested that I do nothing until after he had had an opportunity to talk to you. You know, of course, how much fine work he has done for us, and I feel that you and all your associates at the college can be proud of the contribution that he has made to our wartime financing program. The task that he is now undertaking is one that can only be done adequately by him, and we at the Treasury are most appreciative of your gracious willingness to help us in our work. I understand that we are to have him only until September 1st. With all good wishes, I am, Sincerely yours, (Signed) H. Morgentham, J1 Dr. Stanley King, President, Amheret College, Springfield, Massachusetts. Amherst TRG:hsh 152 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 29, 1944 Miss Chauncey FROM Kay Alger Mr. Paul thought the Secretary might like to read the letter from Senator George. Kay alger Attachment AGE CHAIRMAN ROBERT APOLLETTE m. wis 153 ARTHUR M. MICH. TEX CLARK JAMES DAVIS PA. HENRY CASOT LODGE m. JOHN DANAMER CONN MASS. United States Senate ROBERT TAFT. JOHN THOMAS. IDAND HUGH BUTLER. NEW COMMITTEE ON FINANCE SUSENS D. MILLION COLD March 27, 1944 CHRISTIN . KENNEDY CLERK Honorable Randolph Paul United States Treasury Washington, D. C. Dear Mr. Paul: I sincerely appreciate your letter of March 25. The kindness and courtesy you have shown me since your connection with the Treasury and your patience and willingness to work with the Committee have made our association most pleasant. On some questions of policy we have differed, but I question whether our differences have been so great upon the underlying and basic theory of taxation as disagreement over some particular recommendation might indicate. I have always regarded you as honorable and fair and I wish for you continued happiness and success. Sincerely yours, 154 san March 29, 1944 MEMORANDUM FOR THE SECRETARY From: Mr. Blough Subject: Taxes. to (For your information; no action required) 1. The Ways and Means Committee met from 2 p.m. 4 p.m. today. The Committee discussed methods of revising the dates for filing and of amending declar- ations of estimated income tax but reached no conclusions. 2. The Ways and Means Committee is to meet again at 10:30 tomorrow (Thursday) to resume the discussion of declarations and to consider the problem of treating the income of dependents. These are the two remaining undecided points in the simplification plans under consideration by the Committee. 3. On March 27 the House passed H. R. 3592, the so-called O'Hara Bill. This bill has the effect of restricting state taxation of a Federal employee to taxation by the state of "domicile." Thus an employee domiciled in Ohio, living in Maryland, and working in the District of Columbia could be taxed only by Ohio, which at the present time has no income tax. The Treasury reported in opposition to this bill. RB 154-A TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 29, 1944 TO Mr. Thompson FROM Mrs. Doyle Subject: Visit to the Bureau of the Public Debt, Chicago, Illinois, March 21 to 25. 1944. I. General Information A. Number of Employees: 7224 people in all, of which 6651 are women and 1084 are negroes B. Number of Buildings: 1. Merchandise Mart The main office of the Bureau of the Public Debt is on the 6th floor of the Merchandise Mart. The Bureau's activities are housed on 8 separate floors of the building. 2. Furniture Mart The Bureau of the Public Debt occupies space on 3 floors and will soon occupy space on the first floor. 3. Nash Building This building houses the printed material and mailing lists for the War Bond Drives. It is constructed with ramps and delivery trucks haul all material to each of the 3 floors by use of the ramps. At present about 300 people are employed there, but during War Bond Drives several hundred more are added. This building has no elevator and the steps are steep. A request for an elevator is in, I understand. C. Volume of Work: The volume of work is immense. The file is, according to Mr. Sloan, the largest in the world. 300,000,000 cards, flowing at the rate of 1,000,000 a day, was the record of 1943. The classification, sorting. filing, microfilming, of all records of War Bonds purchased. Series E, F. and G. the ledger books thereon the checking of War Savings Stamps, the disposal under constant official supervision of cancelled stamps and bonds, represent a flow of work that has to be seen to be believed. The Fourth War Bond Drive sales have not yet reached the Chicago office, but when they arrive. the work will be substantially increased. The Nash Building handled 95,000,000 pieces of literature durthe Third War Bond Drive, and continuously maintains the conprehensive ing sailing lists. Mr. Owner, the manager of the building. does . resariable job of organization. -2- 154 - B II. Administration The fact that the functions of the Public Debt are carried on in three separate buildings, considerably apart from each other, and on floors and parts of floors in broken sequence, make many problems of administra tion. A large force of guards is necessary to control entrance to the various offices. If everything could be housed in one building, many administrative problems would be solved. More space is badly needed in the Merchandise Mart and condemnation proceedings will doubtless obtain it. This will necessitate the moving of several tenants and they, naturally, will not like it. Other Government Departments, including the Interior Department, are housed in the Merchandise Mart. They have generous space for their rather limited activities and the condemnation proceedings may bring out that fact. Mr. Sloan is personally very active in visiting all the buildings. On my trip through with him I saw that he was thoroughly conversant with even minor details of administration. III. Working Conditions A. Light and Air Partitions in the roome of all the buildings have been torn out and work is done in huge rooms. Because these were display rooms there are large windows both on the exterior walls and on the corridor sides, The walls are all being painted a pale green. The executive office on each floor is in the back thus giving to the workers the maximum of light and air. The ceiling lights are numerous. The windows are opened 5 minutes at intervals for ventilation. This procedure unfortunately cannot be always followed in the Furniture Mart as the wind from the lake is too strong. There is very little air-conditioning. The program of making over these floors into effective working space has been a difficult one but the resulting work rooms are excellent. B. Facilities for Eating 1. Merchandise Mart This building has canteens on the 4th, 7th and 17th floors There are also located in the building 4 public cafeterias to which the Treasury employees may go. These canteens serve coffee, soft drinks, sandwiches and such. They have very limited space at present, but when the additional space is acquired on the 4th or 7th floors, tables will be put in and employees can have the opportunity to relax at meals. 2. Furniture Mart A cafeteria will be built in the additional space on the let floor. At present they have only canteen with tables. 3- 154 - C 3. Nash Building Hot food is brought into the building in trucks. There are several restaurants nearby so canteen facilities are not needed. C. Rooms for Women Employees There are an adequate number of lavatories for women employees. One woman is employed to make the rounds to see if they are clean and to watch for problems connected with smoking. The smoking is a real problem. No smoking is permitted anywhere in the three buildings because of the nature of the work: handling so many valuable records. Smoking is done, therefore, in the lavatories and there is a great amount of it. Mr. Sloan has a definite program planned to meet this problem. As he gets new space he plans to open up small recreation rooms for women smokers. This will not only provide relaxation but will curb the present practice where rest rooms are really smoking rooms. Until he can get such a program in operation he would like to have a couple of women guards who could police the rest rooms to curb careless smoking. D. Emergency Rooms and Nursing Service 1. Emergency Rooms are located in each building. The nurses are employed by the Bureau of the Public Debt. Nurses are on duty to cover all shifts. The rooms are good, and privacy for treatment is afforded through use of screens. There is no doctaF_Rint patients are sent to a Civil Service doctor, and in cases of emergency, to a doctor who has his office in the Furniture Mart. - 2. Nursery Program Miss Anderson, the chief nurse, is a progressive person. She has one visiting nurse who visits homes and advises the employee on any home condition that should be corrected. In one section a serious bed-bug situation was controlled by two measures. First, the room was fumigated by experts in that work, and second, after this fumigation each employee had to be examined before he or she could return to work. Each supervisor led the line of her employees. 4 or 5 were found to be carriers of the pests and these were instructed in proper procedure to get rid of them. Their homes were visited, and they were instructed in how to rid their homes of the pests. 154 - D E. Items under consideration by Mr. Sloan further to improve working conditions and relieve tension from monotonous work 1. Calisthenics once a day for 5 minutes in large work rooms when windows are open. 2. Trial use for 90 days of piped in music in the large work rooms 3. Radios in canteens. IV. Conference with Mr. Willard Scott, Chief of Personnel and the Employee Relations Section A. Recruitment and Placement Section 1. A Civil Service Commission employee works on the premises to process appointments. 2. The new employees are met at the train and taken to their living quarters. The Bureau of the Public Debt has several rooming houses and 5 hotel rooms are kept for Treasury recruits. 3. An "orientation course" of a day or a day and a half is given each employee by this Section. This includes: 1. Induction First Day 2. Lunch 3. History of the Treasury 4. Safety Film or War Effort Film 5. Blue Book entitled "Information for Employees" is given out. (Supply now exhausted. They would like a new edition) Also city maps and city recreational activities. Second Day 1. Review of preceding day including a quiz on the History of the Treasury. 2. Explanation of paydays, Credit Union, etc. 3. Request for suggestions on how the orientation course can be improved. 4. Placement by Mr. Chrissie, 4. After 60 days the new employee returns to the Recruitment Section. for advice or to make suggestions. B. In-Service Training 1. Classes on typing are given for 3 hours a day. These classes will shortly be reduced to 1 hour a day. 2. A special pamphlet has been prepared for employees of the Stub Files. A copy is attached. This was prepared to impress these file employees with the importance of their work. Although their work is motiotonous, it is of course very important. 3. Special Training Course on Letter Writing: Mr. Earle A. Buckley, a professional specialist on letter writing, comes StoChicago from Philadelphia during one week eachmonth. He gives a course in letter writing from Tuesday through Friday to 50 especially selected girls. 20H Mr. Sloan instituted this course because he thinks that the importance of good letters cannot be over-emphasized in the business of retaining all the customers for War Bonds. -5- 154 - E C. Employee Relations Section This is composed of an Acting Chief, Mrs. Rose, a Mrs. Fugitt, Mr. Landvoight and a Negro, Mrs. Grant. 1. All exit interviews are handled by the Employee Relations Section. 2. Mrs. Grant handles cases as they come to her, not just Negro cases. 3. They work closely with the nurses. 4. They have not yet been able to do much about the care of children of working mothers. D. Absenteeism A special committee of 3 section managers is working with Mr. Scott on the problems of absentees. The rate is about 12%. E. Personnel Conferences Mr. Scott holds regular staff conferences with the personnel people in each section. V. Special Activities I talked with Miss Epps, Administrative Assistant to Mr. Sloan. 1. Red Cross Miss Epps works with the Red Cross Unit of the Merchandise Mart. She sends to them Treasury employees who wish to do knitting, sewing, etc. She also arranges for blood donors. 2. Posters on Absenteeism Miss Epps is working with a young employee who formerly worked with Walt Disney in the hope of obtaining some good posters for display. 3. Miss Epps organized Christmas V-mail letters to all former employees who are now in the service. 400 were sent and the answers reflect the appreciation of the men in the service. VI. Special Situations 1. Union C. I. 0.) a. The present leader within the Bureau of the Public Debt is a colored man named Anglin. The officials feel he has poor judgment. Although no figures are given out, officials estimate the number in the Union to be 150. 8. Mr. Elkins, Chicago leader of the C. I. O. is, in the opinion of the officials, fair. He asked to have the C. I. 0. meetings within the building, but the request was refused on "Treasury policy". c. At present there are no unusual problems with the Union. -6- 154-F - 2. Negro Situation At the present time there is no problem. Mr. Sloan confers often with Negro leaders of his own personal acquaintance. VII. General Conclusion Throughout this report I have indicated the plans that Mr. Sloan discussed with me for the betterment of employees under his direction. He is aware of the problems and has progressive, well-thought out plans to meet them in every case. Mr. Sloan, in my opinion, has done a note-worthy job in the face of many difficulties since he arrived in Chicago in July, 1943. I am confident that with his ingenuity, drive and genuine interest in the well-being of all his fellow workers, he will carry to a successful conclusion the program he has planned. 154-Glub TREASURY DEPARTMENT FISCAL SERVICE CHICAGO. ILL OF THE PUBLIC DEBT CURRENCY CHICAGO BRANCH MERCHANDISE MART February, 1944 To Employees in Stub Assignment Subunit: Subject: Filing and Indexing The purpose of this manual is to explain briefly the principles of filing and indexing as applying to the particular filing and searching problems in our Stub Files. For the year 1943. we estimate there will be about 300 million cards (stubs) which must be arranged in strictly alphabetic order and maintained that way at all times for the convenience of those who must locate the records of any War Bond purchases. This is a big job. It is the largest card file in existence. No group of people has ever before had the tremendous responsibility of creating such an enormous file. or maintaining one representing such valuable data, involving the investments of nearly every family in the United States. With so many hundreds of people filing and searching in this file, we must all have the same rules to follow. The principles of filing must be the same in every part of the file. There must be no exceptions. It is your personal responsibility to go over this explanation carefully and understand each phase of filing and indexing thoroughly so that you can cooperate to the fullest extent of your ability to make our Stub File a perfect file. as well as the largest one in the world. Sincerely yours. HI Dean Assistant Manager Registration and Retirement Section called index guides. - - find any card without searching through a whole drawer and to file cards accurately in the least time. The special indexing designed for our Stub File has been made as simple as possible - it is easy to set up a Surname Guide to mark where the first card name is, and a red tab Back Guide to show where - cards or stubs into small groups, to make it easy to last card of that name is. Surname Guides for all common names are provided are ready to be filed. we shall typewrite head in the files and it is easy to understand, so stub for additional names later, and thus we shall have index guide for every name that needs indexing. assignment clerks should have little trouble in filing accurately and rapidly, and the searchers will be able to find stubs quickly. It is quite important that for every Surname there must be a red tab Back Guide, filed back last stub of that name. I A red-tabbed Back Guide Surname Guide I G Subdividing stubs by first names. Surnames which will eventually occupy one or two file drawers are provided with sets of 30-division made-to- order First Name index guides as illustrated on the opposite page. Some of the guides are merely first initials, some are for fullfirst names, and other are for the first two or three letters of first names. AS these guides are filed you will notice that the stubs are quite evenly subdivided. and reference to any common first name is quite rapid and easy. Indexing the Adams stubs. On pages 4 and 5 is a chart showing how large like Adams are indexed. Study that chart thorough and understand the purpose of each guide. if this you will discover that filing and finding will be quite easy. even when there are # more drawers of the same name. The same basic incipies of indexing apply sections of the file. regardless of whether # is divided by only 30 guides or as fully as - 30-division First Name Index William Abbe W Abbe T Abbe Abbe S Robert Abbe R Abbe P Abbe N Abbe Mary Abbe M Abbe LI Abbe L Abbe Jos Abbe John Abbe Abbe J Abbe I He Abbe H Abbe Ger Abbe G Abbe Abbe F Er Abbe El Abbe E Abbe D Abbe CI Abbe Charles Abbe c Abbe B Abbe An Abbe Abbe This is typical of indexing for a name which will occupy one or two file drawers when all stubs for the year are filed How the Adams Stubs Are Indexed Zi Zell Z X-Y Read chart from bottom Adams This page illustrates all Adams Adams Adams phases of indexing and is typical of all indexing of surnames which will occupy 100 file drawers when all the stubs for the year have been filed. John Will John Wa Adams Adams Read chart from bottom. S L John W D Adams Towns Towns Towns John William Adams, etc. John Walter Adams, John Ward Adams John W. Adams John A John Adams S Towns Beginning of John A. Adams L Towns FROM SALINA, SAN FRANCISCO. etc. FROM LANCASTER. LOS ANGELES. etc FROM DANVILLE, DENVER. etc. D Adams Towns John Adams, no middle initial Bart Adams Barbara J Barbara A Barbara Adams Adams Adams Av Adams Adams Anstin Adame End of Barbara Adams Barbara A. Adams Barbara Adams, no middle initial BEGINNING OF FULL FIRST NAMES SUCH AS BAB. etc. B. Adams, with no full first name Avery Adams, Avis Adams, etc. Watch Out For These Discrepancies THE FOLLOWING DISCREPANCIES MUST BE CLEARED BEFORE STUBS ARE NSERTED IN THE FILES: 1. REGISTRATION IN ANY FORM OTHER THAN IN THE NAME OF AN INDIVIDUAL. IN THE NAMES OF TWO PERSONS AS CO-OWNERS. IN 11. REGISTRATION IN THE NAMES OF TWO PERSONS WHERE ONLY ONE SURNAME IS GIVEN: FOR INSTANCE. MR. JOHN J. OR MRS. THE NAME OF AN INDIVIDUAL PAYABLE ON DEATH TO A SINGLE BENEFICIARY. OR IN THE NAME OF AN INDIVIDUAL PAYABLE ON DEATH TO THE TREASURER OF THE UNITED STATES. EMMA M. SMITH*. 12. REGISTRATION IN THE NAMES OF MORE THAN TWO PERSONS. OR REGISTRATION FROM WHICH IT IS IMPOSSIBLE TO DETERMINE 2. REGISTRATION IN WHICH ANYTHING OTHER THAN A NATURAL WHETHER THE NAMES OF MORE THAN TWO PERSONS WERE PERSON IS DESIGNATED AS BENEFICIARY OR CO-OWNER; FOR INTENDED. INSTANCE. "SAMUEL C. SMITH. PAYABLE ON DEATH TO PRINCETON UNIVERSITY". (EXCEPT THAT REGISTRATION IN THE FORM "A. 13. REGISTRATION IN THE NAMES OF TWO INDIVIDUALS WHERE THE INTEREST OF EITHER IS IN DOUBT: FOR INSTANCE. "MISS PAYABLE ON DEATH TO THE TREASURER OF THE UNITED STATES* EUNICE M. SMITH OR SURVIVOR, MISS EDNA M. JONES". OR IS SATISFACTORY). "MISS MARIA J. WRIGHT OR MRS. ALICE G. WRIGHT, IF SURVIVOR* OR "JOHN J. JONES OR MISS MARY M. JONES. 3. CITY OR STATE OMITTED FROM THE ADDRESS. (EXCEPT THAT THE BENEFICIARY". STATE "NEW YORK" MAY BE OMITTED IF THE CITY GIVEN IS "NEW YORK CITY"). 14. REGISTRATION OF SEVERAL BONDS IN SLIGHTLY DIFFERENT NAMES, OR WITH AN APPARENT MISSPELLING IN ONE NAME OR 4. (a) ADDRESS OF A SOLE OWNER. EITHER OR BOTH CO-OWNERS. A DIFFERENCE BETWEEN MIDDLE INITIALS, BUT WHERE, FROM OR BENEFICIARY GIVEN AS AN ENEMY COUNTRY (BULGARIA. THE NAME AND ADDRESS. IT APPEARS THAT THE BONDS MAY GERMANY, HUNGARY, ITALY. JAPAN. OR RUMANIA): BELONG TO THE SAME PERSON: FOR INSTANCE, *MISS ALYCE C. SMITH. 10 SECOND STREET. ATHENS. OHIO* AND "MISS (b) ADDRESS OF SOLE OWNER OR BOTH CO-OWNERS GIVEN AS OUTSIDE THE UNITED STATES. ITS TERRITORIES AND POSSESSIONS. OR THE CANAL ZONE (EXCEPT THAT AN "APO" ALICE D. SMITH, 10 SECOND STREET. ATHENS. OHIO". 15. REGISTRATION IN THE NAME OF A MARRIED WOMAN WHERE HER (ARMY POST OFFICE) ADDRESS IS ACCEPTABLE FOR MEMBERS OWN GIVEN NAME IS NOT USED: FOR INSTANCE. "MRS. JOHN OF THE ARMED FORCES OF THE UNITED STATES): J. SMITH* OR "MR. AND MRS. JOHN J. SMITH*. STUBS INSCRIBED. FOR EXAMPLE. "MR. JOHN H. SMITH OR MRS. JOHN (c) ADDRESS OF A SOLE OWNER OR OF BOTH CO-OWNERS GIVEN M. SMITH* FOR BONDS ISSUED BY THE WAR DEPARTMENT. THE AS THE PHILIPPINE ISLANDS. IF THE BONDS WERE ISSUED ON OR AFTER JUNE 17. 1943. NAVY DEPARTMENT. OR THE DIVISION OF LOANS AND CURRENCY SHOULD NOT BE QUESTIONED. 5. ISSUE DATE INCOMPLETE. INCORRECT. OMITTED. OR ALTERED. 6. DATING STAMP OMITTED, INCOMPLETE. ILLEGIBLE. OR OF MONTH 16. STUBS NOT MARKED AS HAVING BEEN FILMED. 17. DUMMY STUBS WITHOUT NOTATIONS THAT THEY ARE REPLACEMENTS FOR PAPER STUBS MUST BE EXTRACTED IN ORDER THAT THE EARLIER THAN THE ISSUE DATE. ORIGINALS MAY BE OBTAINED. (PINK STUBS. WHICH ARE 7. ERASURES OR ALTERATIONS IN THE INSCRIPTION. (A STRIKEOVER IN THE MIDDLE INITIAL IS NOT QUESTIONED.) CERTIFIED COPIES. SHOULD BE TREATED AS ORIGINAL STUBS.) 18. STUBS WHICH BEAR A MARGINAL NOTATION CORRECTING A NAME IN THE INSCRIPTION SHOULD BE FILED IN ACCORDANCE WITH 8. INSCRIPTION IN LEAD PENCIL. THE ORIGINAL INSCRIPTION. NOT IN ACCORDANCE WITH THE 9. DESIGNATION OF A PERSON AS "ATTORNEY" OR "AGENT" FOR ANOTHER, FOR INSTANCE. "MR. JOHN J. JONES. PAYABLE TO NAME IN THE MARGINAL NOTATION. UNLESS THE MARGINAL NOTATION STATES SPECIFICALLY THAT THE BOND IS INSCRIBED MR. HENRY SMITH. ATTORNEY-IN-FACT" OR "MR. JOHN J. JONES. AS STATED IN THE MARGINAL NOTATION. ALL DISCREPANCIES AGENT. (ATTORNEY) FOR MISS MAY SMITH BETWEEN MARGINAL NOTATIONS AND ORIGINAL INSCRIPTIONS SHOULD BE REFERRED TO YOUR GROUP SUPERVISOR. 10. STUBS IN THE NAME OF AN INDIVIDUAL FOLLOWED BY THE WORDS. "A MINOR (OR AN INCOMPETENT) UNDER LEGAL GUARDIANSHIP" 19. REGISTRATION IN CO-OWNERSHIP FORM WHERE THE CONJUNCTION WHEN THERE ARE OTHER STUBS FOR THE SAME PERSON WITHOUT "AND" APPEARS, UNLESS THE TOTAL AMOUNT REPRESENTED BY THESE WORDS. THE STUBS IS LESS THAN $100. DUES. ANS. QUES. ANS OUES. ANS QUES. ANS Albert W Albert S Albert N Albert L Albert J Albert G Albert F Albert E Albert A Adams Adams Adams Adams Adams Adams Adams Adams Adams Albert Adams Adams Al End of Albert Adams Albert J. Adams Albert A. Adams L Towns Albert Adams (no middle initial) FROM LANCASTER. PA. LOS ANGELES. etc. Beginning of Albert Adams, with no middle initial or middle name Agnes M Agnes A Agnes Ado Ade Add Ada Abr Ab A. M. Adams Adams Adams Adams Adams Adams Adams Adams Adams Adams Adams End of Agnes Adams Beginning of Agnes Adams Adolph, etc. Adele, Adelaide, Adeline, etc. Add. Adda, Addie. Addison, etc. End of Ada, Beginning of names such as Ada Adams Adaline, Adams, etc. Abraham Adams, Abram Adams Ab Adams, Abbie Adams, etc. End of FIRST INITIAL "A" Adams and beginning of Aaron Adams A. M. Adams to A. z. Adams A. Adams to A. L. Adams Read chart up Indexing is to assist those filing and searching. Keep your filing and Indexing as nearly perfect as possible. General Filing Rules All material should be ar ranged in alphabetic order. sequence of letters being maintained to the last letter. EXAMPLE: 5. Surnames joined by a hyphen shall be regarded as one word. EXAMPLE: ABBOT, Henry ABBOTT. Arthur John Higgins Smithfile John ABOTT. Alice John Higgins Smith ADAMS, Edward ADAMSON, Benjamin Au-Pah-Sho-Kah ALLAN, Frank Smith, John Higgins Aupahshokah 6. Indian Names. Indian names shall be filed as follows: ALLEN, F. Albert ALLERT, Elizabeth (a) When the name is composed of a given first name and an Indian last name, file under the first letter of the last or Indian part of name, even though the ANDREWS, Samuel ATWOOD, Catherine Indian name be composed of several words. Proper names should be filed by the surname first, then by the given name or initial. EXAMPLE: Rain in the Face, John EXAMPLE: Red Crow, Annie Marie Wolf Bear, Maggie BROWN, James BROWN, John BROWNLEE, John BROWNLEE, Katie BURTON, Lester BYERS, Anna (b) When the entire Indian name is descriptive, and it is impossible to tell the family name, file from the beginning. EXAMPLE: BYERS, Charles Nas Ta bega Rain in the face An initial should precede a name beginning with that letter. Reed that Bends Sitting Bull EXAMPLE: CARTER, H. CARTER, H. A. CARTER, H. J. CARTER, H. John CARTER, H. S. CARTER, H. Stanley (c) when the Indian name is composed of an Indian first name and a last name which is a common surname, file under the surname. (d) When the Indian name is broken by a comma, file from the beginning. CARTER, H. W. CARTER, H. William EXAMPLE: CARTER, Harry CARTER, Harry C. CARTER, Henry CARTER, Henry J. CARTER, Henry Jack CARTER, Henry John CARTER, Horace CARTER, Horace A. Bear Going up Hill, Sallie Quast Quah Me, Joseph Roubidoux Wa Ko the Quah, Josephine Masquat 7. (a) The alphabetic arrangement is to be followed for names beginning with MBC. This means that names beginning with the prefix "Mac" are to be filed in the letter "M". CARTER, Horace Albert CARTER, Hugh EXAMPLE: Given names or surnames spelled as two words are treated Maar as one word. This covers such prefixes as *La," "Le," "De." "ter," "Van," "Von," and *von der". Mabb EXAMPLE: Madden file as Depuyster Dibianco " Du Pont Dupont Le Blanc Leblanc Leroy " " " " " " " " " " Van der Au Von Allen ter Muelen " Le Roy L'Hommediu " (b) All surnames beginning with MC are to be filed separately from all other surnames beginning with "n". the "MC's" to follow all the other "M's". Vanderau (c) "M apostrophe* (M*) is to be considered as NE and filed accordingly. Vonallen EXAMPLE: Lhommedlu Termuelen 7 de Puyster Di Blanco MacBride M'Gregor file as McGregor General Filing Rules other abbreviated names or nicknames should be filed only as spelled. 8. The prefixes "NC" and apostrophe'. when used as part of given names, middle names, or names of cities are filed exactly as spelled. EXAMPLE: Ed EXAMPLE: JONES, Malcolm JONES, McArthur JONES, McBride JONES, McKinley JONES, Meredith JONES, M'Gregor Edw file as Ed " Edw " AI AI " " Chris Abe " " Bob Bob " " Abe WIII " Chr will Dick 9. when one name occurs with different addresses, alphabetic arrangement according to towns is maintained, the state being considered only when there is a duplication of town names. 11. Senior and Junior. "Jr." and "sr." shall be disregarded in all cases except when the names and addresses are identical; then "Jr." shall precede "Sr." EXAMPLE: when either "Junior" or *Senior* represents a given or a surname, it shall be filed as a name. John L. Brown, Adams, Mass. John L. Brown, Bridgeport, Conn. John L. Brown, Chicago, 111. EXAMPLE: George Junior John L. Brown, Springfield, 111. John L. Brown, Springfield, Ohio Frank, Senior Junior Walters Senior Walters Compound geographic names are considered as two words. EXAMPLE: John L. Smith, New Bedford John L. Smith, New London John L. Smith, New Troy John L. Smith, New York John L. Smith, Newark John L. Smith, Newberne John L. Smith, Newport John L. Smith, Newton Dick Miss and Mrs. "Miss" and "Mrs." shall be disregarded in all cases except when the names and addresses are iden- tical; then "Miss" shall precede "Mrs." EXAMPLE: Miss Blanche Hale, Harlan, Ind. Mrs. Blanche Hale, Harlan, Ind. 12. (a) Foreign names should be filed first by the last name, in alphabetic order. EXAMPLE: file as William " " Chas " " N. Y. " St or Ste John Joseph (b) Also follow this rule in filing religious names Charles Saint or Sainte when the secular name is not given. EXAMPLE: New York Heavenly Joy Father Bernard QUES. ANS. QUES. ANS QUES ANS QUES. ANS THIS BOOK IS THE PROPERTY OF SUPERV file as Joy, Heavenly " Jno Jos " Wm " EXAMPLE: file as Shek, Cheang Wing Fat, Chee Kee Mar, Cheen Kyung Shee, Chee Jung Fernandez, Hernandos " Cheang Wing Shek Chee Kee Fat Cheen Kyung Mar Chee Jung Shee Hernandos, Fernandez " 10. Abbreviations which can represent but one word are treated as though spelled in full. Bernard, Father - - STANDARD FORM NO. M 155 Office Memorandum. UNITED STATES GOVERNMENT DATE Mar 29, 1944 : TO Securting Henry Magerthan Ja : Osean Cox FROM SUBJECT: On second thought, I thank your first thought of not using a memo is a good one. Oral presentation with your force and knowledge - would doubtless be for better And a written presentation at this time might detreet. ose 156 MAR 29 1944 My dear Mr. Secretarys This will acknowledge your note of March 22, 1944 enclosing copies of communications dealing with the proposed sale of a stock of tea in the permension of the Italian Legation at Lisbon. The procedure established in these cables whereby Italian assets in neutral countries may be disposed of and proceeds used only with the approval of the Allied Control Commission is agreeable to this Department. Very truly yours, (Signed) H. Mergenthaw, Jr. Secretary of the Treasury The Honorable, The Secretary of State. T:Drl -3-27-14 DEPARTMENT OF STATE WASHINGTON March 22, 1944 reply The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses for the information of the Division of Monetary Research copies of several communications dealing with the proposed sale of a stock of tea in the possession of the Italian Legation at Lisbon. This matter has been the subject of discussion between Mr. Taylor of the Division of Monetary Research and an officer of the Department. Enclosures: 1. Paraphrase of telegram from Lisbon, February 4, 1944. 2. Copy of telegram from London, February 21, 1944. 3. Paraphrase of telegram to Algiers, March 4, 1944. 4. Paraphrase of telegram to Lisbon, March 4, 1944. PARAPHRASE OF TELFGRAM RECEIVED AMLEGATION, Lisbon. ROM: to: Secretary of State, Washington. DATED: February 4, 1944, 5:13 p.m. NUMBER: 332 The following telegram is sent to Washington and repeated to London as the Legation's 53. Approval has been requested by the Legation of Italy here of the following preposal which it has under consideration. The Legation has a stock of tea which it wishes to sell to approved buyers in Switzerland or Tangier. The funds derived from the sale would be used to buy blankets manufactured in this country, to be shipped to liberated Italian territory for relief purposes. Only a small part of the required quantity of blankets could be purchased on the basis of the esaudos which would be yielded at the best price offered thus far. The matter was considered by the Anglo-American Economic Committee yesterday which did not believe that the transaction in itself would interfere with our own purchase arrangements here. However, the Committee decided that Washington and London should be asked to de- eide the polley question of permitting the Italians to utilize -2- itilize the proceeds of the sale of Italian assets abroad for purchases for their own purposes. It would be appreciated if the Legation could be furnished the Department's views regarding this as- peet of the proposal. HORWES LA:JJR:eph PLAIN London Dated February 21, 1944 Rec'd 4:42 p.m. etary of state, Washington: 1444, Twenty-First. CONFIDENTIAL. FOR LIMITED DISTRIBUTION ONLY. FOR DEPARTMENT AND FEA The following stetement reprepente MEW'S views roing rale by Iteliene of apgeta they mey have abroad purchases for their own account reised by Liabon in ram 332 to Department, Februery 4: "The general position 1° that RO long as HMG US G continue to shere equally any necessary expenses The meintenance of Itelian intereate, Italian assets nly be aold with our conaent and the proceeds must ed ae we direct to the maintenence of uch interests buld otherwise heve to be mainteined pt our expense. I think covers the pale of the tep, AO long, of e, BF it 1F disponed of in accordance with the requirements 4, Twenty-First, from London. ents of the blockede. Ae regard the purchaee of blankete, I have no tion at present whether there blenket are to be led under the generel plan of relief in Italy. If then since in the absence of purchase with Italian you we should have jointly to foot the bill, I see no biection to the Italiana purchesing the blanketa", Embassy would appreciate expression of your viewe. WINANT PARAPHRASE OF TELEGRAM SENT FROM: Secretary of State, Washington TO: American Consul, Algiers DATED: March 4, 1944 NUMBER: 688 CONFIDENTIAL ATTENTION OF L'HEUREUX FOR GRADY. A request has been made by the Italian Legation at Lisbon for approval of the sale of the stock of tea in the possession of the Legation and for use of the proceeds to buy blankets manufactured in Portugal. It is their intention to send the blankets to Southern Italy for relief purposes. It is our understanding that there is also a quantity of blankets in possession of the Legation. The total number of blankets would probably not be large. Lisbon is being asked to furnish you information as to quantity and type and as to whether there have been proposed any shipping arrangements. Lisbon has been informed by us that disposition of Italian assets abroad can be made only with approval of the Control Commission and that the matter is being submitted to the Commission. We are also asking the Legation whether it appears possible to dispose of other goods which are being held by the Italian Legation. No objection -2- No objection is made by us to the sale of the tea nor to the use of the proceeds either for purchasing supplies, which we would otherwise have to furnish, or for the maintenance of the Italian Legation. It 1 s our understanding that similar views are held by the British. Since the Legation has initiated action looking toward the sale of the tea, we suggest that the Italian Government give appropriate instructions to the Italian Legation at Lisbon. STETTINIUS (Acting) PARAPHRASE OF TELEGRAM SENT Secretary of State, Washington TOT American Legation, Lisbon DATED: March 4, 1944 NUMBER: 689 CONFIDENTIAL No disposal may be made of Italian assets abroad without United Nations' consent as expressed by the Allied Control Commission with which the matter is being taken up. There is no objection on our part to the disposal to approved sources of the tea and other cargo under the Italian Government's control provided it is done with the Allied Control Commission's consent and the proceeds used only with its approval. London informs us that this is the British view also. The importance of observance of blockade requirements in disposal of tea is emphasized by the British. The use of the proceeds to maintain the Italian Legation Lisbon or to purchase goods which we would otherwise pply appear to be unobjectionable in general. We Egest that it might be desirable to handle both the rehase of blankets and the sale of tea through the erican and British Missions in Lisbon. Any shipment of goods to Italy would have to be Irried out in accordance with Allied Control Commission's Erectives. The view of the Commission will be given to you. -4: is requested that you inform us of the number pe of blankets which could be purchased and whether has been any discussion regarding shipping arrange- LL It is our impression that the Italians already base some blankets in Lisbon. It is also requested that you report whether it appears possible to dispose of other oargo which the Italians hold. Please repeat the foregoing to Algiera from L'Heureux for Grady. the foregoing message has been repeated to London as Department's cable No. 1662, referring to Embassy's wire of February 21, 1944, No. 1444. STETTINIUS (Acting) IT 166 VI VICTORY TREASURY DEPARTMENT BUY PROCUREMENT DIVISION WASHINGTON 25 March 29, 1944 MEMORANDUM TO THE SECRETARY: There is transmitted herewith the weekly report of Lend-Lease purchases. We have been requested by the Foreign Economic Administration to take over the Army Shoe Reconstruction Plant at Buford, Georgia, for the purpose of rebuilding 1,200,000 pairs of used Army shoes to be furnished to us by the Salvage Branch of the Quartermaster General. The War Department expects to relinquish operations between April 15 and April 30, and it is expected that the processing of 1,200,000 pairs of shoes will be completed by October 1944, and will cost from 1.50 to $1.80 a pair, exclusive of export packing or freight. We are now investigating the matter to determine the requirements for this operation. Army Ordnance has requested FEA to transfer the purchase of heavy machine tools to the Procurement Division, which will require a deletion from their budget, and an inclusion in the FEA budget. We are amending our 1945 budget, recently submitted, in accordance with this proposal. from Director of Procurement LEND-LEASE TREASURY DEPARTMENT, PROCUREMENT DIVISION STATEMENT OF ALLOCATIONS, OBLICATIONS (PURCHASES) AND DELIVERIES TO FOREIGN GOVERNMENTS AT U. S. PORTS AS OF MARCH 22, 1944 (In Millions of Dollars) Administrative Total U. K. Miscellaneous & Undistributed Russia China Expenses $1877.3 $113.9 $12.6 (1877.3) (113.9) $44.9 - $271.4 $403.5 Allocations $4698.0 (4696.9) $2290.7 (2289.7) Purchase Authoriza- $3636.0 $1883.2 $1436.5 tions (Requisitions) (3577.7) (1846.6) (1421.4) (44.7) - (265.0) Requisitions Cleared $3538.6 $1835.2 $1400.4 $44.6 - $258.4 for Purchase (3521.5) (1824.9) (1399.4) (44.5) Obligations $3416.8 $1807.9 $1372.7 $44.2 (3397.4) (1796.3) (Purchases) (1369.0) $558.9 Deliveries to Foreign $1794.8 $1181.5 Governments at U. S. (1764.8) (1170.0) (540.5) (44.1) $21.9 (21.8) (12.6) (403.4) (252.7) - $10.6 (10.5) - - $181.4 (177.5) $32.5 (32.5) Ports* *Deliveries to foreign governments at U. S. Ports do not include the tonnage that is either in storage, "in-transit" storage, or in the port area for which actual receipts have not been received from the foreign governments. Note: Figures in parentheses are those shown on report of March 15, 1944. 168 25 March 29, 1944. My dear General Weasons For the Secretary I as acknovledging the copy of the Seviet Aid Report as of February 29, 1944, which you were as good as to send him. Mr. Morgenthas much appreciates receiving those current reports, and has asked - to thank you for your courtesy in bringing them to his attention. Sincerely yours, (Signed) H. S. Klotz H. S. nots, Private Secretary. Major General G. N. Wessen. Director, Division for Series Supply. Foreign Economic Administration, Five-Fifteen and Street, N.W., "as ington 25, D. 0. GEF/dbs 169 FOREIGN ECONOMIC ADMINISTRATION DERMIXX FIVE-FIFTEEN 22d STREET NW. WASHINGTON 25, D.C. March 28, 1944 MEMORANDUM To: The Honorable Henry Morgenthau From: Maj. Gen. C. M. Wesson Director, Division for Soviet Supply Subject: Soviet Aid Report Attached herewith is your copy of the Soviet Aid Report as of February 29, 1944, which summarizes the amount of aid furnished to the U.S.S.R. during the First and Second Protocols and the first eight months of the Third Protocol. SECRET Copy No. IRA 170 STATUS OF THE SOVIET AID PROGRAM AS OF FEBRUARY 29, 1944 Prepared for the President's Soviet Protocol Committee Foreign Economic Administration March 25, 1944 SECRET PERFORMANCE DURING FEBRUARY 1944 Shipments to the Soviet Union from United States and Canadian ports fell to 375,300 long tons in February, the smallest quantity shipped in any month since July, 1943 but 95% of average monthly Protocol requiremonts. Shipments from July 1943 through February 1944 total 4,011,600 long tons, 132 of Protocol requirements for the period and 88% of requirements for the full Protocol year. Shipments during March are expected to total 375,000 long tons, bringing total shipments to 96% of the year's plan. Cargo shipped during February and the Third Protocol period is sum- Tarized as follows: July-February February Long Per Tons Cent Long Tons Per Cent U. S. SUPPLIES Trucks & Other Vehicles Metals Chemicals & Explosives Petroleum Products Industrial Equipment Food Other Total BRITISH & CANADIAN SUPPLIES TOTAL 38,800 51,000 21,600 33,300 25,900 123,500 32,900 10 347,000 93 332,3 300 6 11 16 8 399, 600 340, 700 10 33 1,271,500 32 14 410, 700 10 3,831,700 96 9 7 28,300 375,300 428,200 648,700 14 7 100 9 179,900 4,011,600 100 No losses were experienced in February. During February 6,706 trucks, 30 locomotives, and 286 flat cars were dispatched to the Soviet Union. Aircraft dispatched from North America in February totaled 461: 346 for U.S. Protocol Account and 115 for U.K. Account. Of the total number, were shipped by water to Murmansk, 163 by water to the Persian Gulf, 57 by air via the South Atlantic, and 236 from Fairbanks by the AlaskanSiberian ferry route. Foreign Economic Administration March 25, 1944 5-1100 5 NUMBER 3609 895 20 15 3559 10 FACTORY DELIVERIES BY ROUTE OCTOBER I, 1941 - FEBRUARY 29, 1944 5 AIRCRAFT DELIVERIES TO U.S.S.R. .. LOSSES IN % OF DEPARTURES PERCENT PERSIAN GULF. WATER SOUTH ATLANTIC FERRY NORTH RUSSIA, WATER ALSIB FERRY Foreign Economic Administration SECRET SHIPMENTS TO U.S.S.R. SHIPMENTS, ARRIVALS AND LOSSES 10 10 LOST 8 8 EN ROUTE 6 6 EXPORTED 4 4 2 2 ARRIVED o 0 Any Jul 1941 See OF 1943 1942 1944 THIRD PROTOCOL CLEARANCES FROM U.S. PORTS NUMBER OF SHIPS SAILING EACH MONTH 100 5 PROTOCOL RATE 80 60 2 40 ACTUAL 20 O 941 1942 1943 1944 1943 1944 SECRET EXPORTS AND AVAILABILITY OF SELECTED ITEMS CUMULATIVE SINCE OCTOBER I, 1941 Exported Lost Quantity made available of U.S. centers of production En Route Arrived PURSUIT PLANES BOMBERS 4,000 4,000 3,000 3,000 2,000 2,000 1,000 1,000 o o 1944 1943 ( 1942 1944 1943 1942 ANTIAIRCRAFT GUNS 37 8 40 mm MEDIUM TANKS 6,000 3,000 5,000 2,500 4,000 2,000 3,000 1,500 2,000 1,000 1,000 500 o o per 1942 1944 1943 1944 1943 I I 1942 TRUCKS JEEPS 250,000 50,000 200,000 40,000 150,000 30,000 100,000 20,000 50,000 10,000 o IP43 - 1943 1942 1944 I I 942 1944 SECRET EXPORTS AND AVAILABILITY OF SELECTED ITEMS CUMULATIVE SINCE OCTOBER I, 1941 Exported Lost Quantity made available of U.S. centers of production En Route Arrived ARMY BOOTS FIELD TELEPHONES 400 8 300 SNO, 6 OF 200 I 1942 1943 I o 1943 o 1942 1944 2 PEE 100 1944 ALUMINUM AND DURALUMINUM I STEEL AND STEEL PRODUCTS 150 2,000 Cattulative Feb.29,1944 IShort Tonal Total Production for U.S.S.R 1,898,270 Released for Redistribution 125 190,770 1,463,860 SNO 1,500 Exported USSR Balance Available for Export 243.440 SNOS 100 OF OF 75 1,000 50 500 25 SOVERAN: o o 1943 1942 1944 1943 1944 1 ( 942 FOODS CHEMICALS AND EXPLOSIVES 2,500 600 2,000 500 SNOS FORS 400 1,500 OF OF 300 1,000 200 500 100 o 0 Economic - 942 943 944 942 I 1943 1 1944 SECRET PROGRESS OF INDUSTRIAL PROJECTS FOR THE U.S.S.R. As of February 29, 1944 PETROLEUM REFINERY PROJECT This project was developed to replace Soviet facilities destroyed by the German Army. It was designed to produce aviation gas, motor gas, and lubricating oils. the entire project valued at $43,938,000, equipment valued at $43,219,000 has been made ready for shipment. Equipment valued at $39,564,000 has been exported. Most of the equipment remaining to complete the project consists of valves, instruments, spare parts and tank care which are expected to be shipped before summer. of Nineteen U.S. engineers are in the U.S.S.R. aiding in construction. Approval has been given for additions to supplement the facilities already supplied. This additional equipment, valued at $25,150,000 is now being engineered. POLIES PROGRAM Under the Second Protocol program 320,000 KW of stationary stoan generating equipment has been made available. This includes nine units with a total capacity of 40,500 KW furnished with the petroleum refinery project, two units totaling 11,000 KW furnished with the tire plant and 42 units totaling 1,630 this to be furnished with the Block Signal System. The remaining units of the Second Protocol program totaling 258,500 KW are rated from 250 KW to 35,000 KW and are for installation as power utility plants. Over 70 percent of this equipment has been exported. Diesel generating equipment totaling 162,000 KW and 59 industrial stean boilers have been made available for export. Power equipment approved under the Third Protocol has now been placed under contract. Designing and manufacturing are progressing on schedule. The program consists of generating equipment as follows: 32,000 KW 166,500 KW Mobile Diesel Generating Equip. stationary Steam Generating Equip. Mobile Steam Generating Equipment Stationary Diesel Generating Equip. Hydro-electric Equipment 217,000 KW 106,925 KW 68,150 KW Total 590,575 KW Thirty-two industrial steam boilers and transmission equipment valued at $5,000,000 are also being supplied. R.I. PLOCE SIGNAL SYSTEM This project is to permit autonatic signal operation of a portion of the U.S.S.R. railroad system. When installed it will increase the carrying capacity of existing rill facilities without increase of rolling stock. The system valued at $11,558,000 will provide signal and signal operating equipment for 3,000 Km of track. Equipment valued at $3,488,000 has been made ready for shiptent of which 381,000 has been exported. In addition 42 power plants of 40 KW each, all valued at $500,000, are being furnished to provide the necessary electricity to operate the system. Production of the power units has commenced. FOLLING MILLS An aluminum rolling mill to supply aluminum sheet for the U.S.S.R. aircraft industry is nearly complete. or the total valued at $6,377,000, equipment valued at $6,290,000 has been made ready for shipment and 25,018,000 has been exported. One 18" merchant mill, n blooming mill, rail and structural mill, R.R. tie plate and splice bar mill, and pipe fabricating mill, all estimated to cost $19,347,000 are now in production. A portion of the 18* merchant mill has been prepared for shipment but has not yet been exported. STEEL EXPANSION PROGRAM Production of equipment valued at $12,664,000 for expansion of U.S.S.R. steel produc- tion is now progressing. This equipment, all of which is to supplement existing facilities, is expected to increase Soviet production of carbon steel ingots by 2,500,000 tons a year. Equipment valued at $729,700 has left suppliers but none has been exported. 142,785 528,277 531,800 2,616,900 134,072 436,046 $72,624 531,800 488,165 51,783 0 Hydrogen and Catalyst Plants $404,737 0 Hydrogen Gas Plant $536,563 1,400,000 Exported 0 Voltol Plant (Pilot) Nitric Acid Plant Manufactured 0 Wall Board Plant Glass Bulb and Tubing Plant Cost 0 OTHER PLANTS PLANT this $9,000,000 project was designed to permit the production of a minimum of 1,000,000 military tires a year from U.S.S.R. supplies of synthetic rubber and natural rubber obtained from shrubs. utilize idle American equipment basic elements of the tire plant of the Ford Hotor Company have been acquired. Sex equipment necessary to complete the production cycle for large size military tires has been purchased. power plant to supply the necessary steam and electrical power is being supplied at a cost of $1,100,000. Tim production equipment valued at $8,500,000 has been made available by suppliers. Equipment valued at TIME To $6,000,000 has been exported. The COVER plant is in production and a mall portion has already left the United States. NIME 1 SECRET STATEMENT OF VESSELS SAILED TO U.S.S.R. As of February 29, 1944 Number of Vessels Sailing - - - - - - - - 32 - - 39 38 - - 22 46 38 - 58 36 46 44 2 - 3 - - 1 - - - - - - - 2 - - - - 1 - 1 - 1 - 2 - 8 - - - 67 67 52 - 123 2 - 4 - - - 7 4 1 - - 4 5 - - 7 - - 1,136 1 55 - - 1 58 1 2 1,378 627 55 1 25 55 2 83 1 27 19 8 79 - - 8 26 16 76 - 4 30 20** 77 89 1 8 39 - 5 32 21 2 2 25 294 - 1 8 5 20 3 61 - 62 - 76 27 - 77 20 - 67 50 - 69 10 - 57 38 - 54 57 3 54 24 - 45 1 6 6 9 62 - 54 63 - 55 16 1 37 44 7 34 24 6 - - 7 26 18 349 4 32 6 2 6 - 29 32 19 6 6 29 19 25 347 - 17 27 Dec 4 33 26 7 36 its Nov Total Oct. 1941 to Feb. 29, 1944 34 19 16 10 Feb 27 17 Oct 1944 Jan 34 9 - See 4 Aug 4 Jul - May Jun 13 35 19 15 - Apr 21 1 tar 46 31 12 16 28 23" Feb 32 78 - 12 12 Jan 43 4 11 16 3 for Dec 19 19 3 9 13 Oct 24 1 1 7 - Aug 1943 4 11 22 - Jul 12 25 - 11 14 13 by Month 3 Jun 10 15 Lost 1 - - 10 14 Sep 3 Apr May 5 31 62 in U.K. - Feb Feb. 29 - 13 Disch. - 20 Mar Far East Losses Cargo as of - 14 Jan Arctic Arrived Total 1 Nov Dec Soviet 1 Gulf 10 1941 Oct 1942 Persian Soviet - North Russis En Route For For For - For Date of Shiling Includes one tanker from U. K. for U. S. Protocol Account. Includes tag tankers from U. K. for U. S. Protocol Account. or the 1,378 sailings from October 1, 1941 to February 29, 1944, 652 were ande by American vessels, 462 by Soviet vessels, 238 by American vessels transferred to Soviet registry, 25 by British vessels and 1 by a Swedish vessel. In addition to the 1,378 sailings, there were 10: ships that loaded partial cargoes in the U.S. for the U.S.S.R. In addition to the 67 ships shown above as lost, several ships have been sunk on their return voyages. ACTUAL SHIPMENTS COMPARED WITH PROTOCOL SHIPPING OBJECTIVES July 1943 - February 1944 FIGURES IN LONG TONS Atlantic Protocol Objective Shipments Shipments in $ of Objective Pacific Route Route 1,428,600 1,607,100 1,764,700 2,246,900 157% 110% Total 3,035,700 4,011,600 132% Includes 7.000 tons of petroleum products from Abadar for U. S. Protocol account, the material seite replaced to U. K. from the 0. S. - SECRET STATEMENT OF CARGO SHIPPED TO U.S.S.R. As of February 29, 1944 (Thousands of Gross Long Tons ) For Soviet Arctic Partial Full Cargoes Feb. 29 Cargoes 48 17 65 41 14 58 55 71 63 Cargo On Hand or as of Losses Lost Month In U. K. 62 3 1941 3 - 25 214 163 46 - - 38 435 267 194 337 330 216 350 343 229 275 275 58 152 346 346 32 262 478 464 313 519 512 10 181 450 441 10 229 579 571 262 653 581 - 10 176 612 197 415 - 12 375 12 12 100 363 3,437 8,499 6,925 851 9 57 15 23 279 444 3 - - 4 - 6 1 - Petroleum products by rail ex Abadan for U. S. account, replacement to U. K. from U. S. DISTRIBUTION OF TONNAGE SHIPPED TO FEB. 29, 1944 BY REGISTRY OF SHIPS Other 295,000 tons 3.5% Soviet Ships 1,961,000 tons 23.1% U.S. Ships Transferred to Soviet Registry 1,752,000 tons 20.6% DATA ARE GROSS LONG TONS U.S. Ships 4,491,000 tons 52.8% 14 8 4 8 185 14 7 7 79* 16 15 - 149 14 - to 1 9 2,494 246 5 2,152 263 48 150 7 114 123 - Feb. 29, 1944 149 178 9 Feb Total Oct. 1941 210 342 8 4 202 258 129 17 13 7 - 222 - 1944 Jan 98 - 167 237 - 5 9 214 165 2 - Dec 1 194 - 187 145 178 244 65 7 66 Nov 229 106 55 114 22 - Oct 229 108 38 56 2 9 - 173 179 13 10 194 Sep 197 179 - 2 Aug 219 79 16 25 Jul 83 123 112 116 174 12 131 138 183 52 2 7 83 59 1 25 40 46 19 42 9 40 63 73 139 8 69 28 - 25 173 195 33 128 - 39 Feb 141 31 40 - 4 13 83 212 18 16 - 1 1 84 Jan May 15 - 79 55 Apr - 92 66 Mar - 1943 76 - 21 29 91 5 De 376 Nov 17 109 Dec 72 - 171 Oct 89 20 1 May Jun 26 - Apr - Mar 63 66 - Feb - Ja: 11 8 1942 3 10 50 by Diverted 7 Abadan Arrived Total 8 Soviet 7 Cargoes From 5 Cargoes En Route Far East For 9 North Russia Persian Gulf Partial Full 3 For For 444 SECRET AIRCRAFT DELIVERIES TO U.S.S.R. October 1, 1941 to February 29, 1944 Protocol requirements are considered filled upon delivery of aircraft from factories. from North America are: U.S. ports for water shipments, Fairlanks for flight-deliveries via the Alaskan-Siberian Ferry Route, Departure points Florida or adjacent fields for flight-deliveries via the South Atlantic. Planes shipped by water to North Russia are considered and Miami, arrival at Mursantk or Archangel. Planes shipped by water to the Persian Gulf are assembled at Abadan and with planes arriving delivered upon the South Atlantic Ferry Route are delivered at Abadan to U.S.S.R. pilots. Alaskan-Siberian Ferry route planes are delivered to over state Spriet pilots at Fairbanks. exception of 59 P-40 fighters shipped from U.S. ports in September, 1941 and arrived in North Russia in November and December 1941, use with schedule the includes all aircraft departed from the U.S. for direct delivery to the U.S.S.R. Aircraft shipped from the U.S. intended for USA United Kingdom but retransferred from the United Kingdom to the U.S.S.R. are not included. the is Lost in In North America Feb. 29, 1944 Delivered at North America In Canada In Canada Factories In U.S. In U.S. and Alaska Diverted After North Depart- Others ure Alaska Delivered Arrived N.A. to to USSR at at Destina. to America and En Route Lost Departed tion 2/29/44 Destina Destine- tion tion IL ROUTES 0 0 1,482 0 3,334 175 8,833 523 758 1,141 1,141 278 2,881 (16) 2,736 331 7,977 (16**7,789) 30 2 0 0 0 0 38 3 0 65 310 3,154 3,154 801 23 0 123(77)* L89 9,548 total 38 863 1 275 o 3,609 3,154 38 0 1,485 49 16 16 1 to North Russia ister to Persian Gulf Assembly at Abac . 895 0 Itlantic Ferry Route to Abedan 123(77)* 195 3,559 Forry Route U.S. PROTOCOL ACCOUNTS Parents Planes 25 0 5 1 5 3 5 3 3 0 0 o 0 251 124 124 3801 233 233 0 0 19 19 0 0 0 0 , (1)** 22 o 27 1 0 o 0 , 0 0 1 0 0 0 o 0 o 5 0 o 0 0 0 0 1 8 0 0 0 0 0 o 0 o 0 0 0 0 0 a o 0 0 10 o 0 0 30 Managed Trainers 0 4 0 0 22 0 1 5 Tersion Salf, water 22 251 380 0 o Limited Trainers Text Maria, water 11 30 0 o 30 0 o 4 0 0 Determination Planes D.S. forth Putsts, water 0 0 8 203 0 0 6(5)* 10 250 0 0 0 0 1-47 fisib 550 (8)** 2,272 2,323 23 1 0 o Cargo Planes 126 (8)** 558 o 8 1(e) o easy Pastors 1 Alsib (total) 1 364 0 21(16)* 31 128 0 437 251 634 126 5 0 0 o 0 o 0 Total Medium limbers 152 962 677 1 0 0 0 0 0 128 2,499 962 5 o o 5 South Atlantic 21(16)* 79 23 1 0 o 0 5 304 36 637 2,878 202 5 0 0 31(b) less 142 North Passis, water 55(40)* 73 39 0 0 0 0 o 0 0 0 637 2,671 Total Light Bonbers Telly Numbers 165 0 5 0 A-20 Fersian Gulf, water 34 0 3 165 735 0 0 1.20 North fusnia, water 16 16 962 0 0 0 0 0 767 20(d) 55(40)* (1)** 748 150 0 308 3,389 13 50 50 3 28 0 A-20 South itlantic 555 5 7 926 0 0 57(a) 1,102 (4)** 555 0 57 Light lumbers A-20 Alsit 878 596 20 0 0 12(8)* 234 641 555 11 48 48 878 22 0 0 3,653 0 Total Pursuit Planes 0 86 91 North Runain, water 0 45 248 0 Alsib 2-47 North Russia, water N-47 Persian quif, water 0 972 0 1-39 Sorth Bussia, water 7-39 Persiss Gulf, water 0 57 0 12(8)* 19 2 2-39 11mib (1)** 20 25 TOTACOL ACCOUNTS 30 0 0 0 0 0 0 43 103 536 103 1,940 (1)** 0 0 0 0 23 27 27 0 0 , 0 0 0 0 121 0 0 0 0 0 0 0 0 0 0 5 0 a 176 3 0 . 0 0 179 0 121 28 0 30 27 a ACCIDENT 28 $ 0 2,091 13 a 0 o 29(0)* 5 141 682 0 2,297 1,074 30 0 63 0 0 745 300 1,074 23 35 35 0 29(7)* 78 0 1,217 300 1,074 13 0 300 0 greenents) 0 N-47 81 602 0 722 48 1,149 1 1,149 No forts Numbia, water N-A Persian Gulf, water 0 50 0 N-A Alait (ments received at Student wasted est before delivery to pilots 4-2019 refused by at Fairtanks returned to Great Falls for edjustments 3-25's refused by at Fairbanks returned to Great Falls fur edjustments lenses corriting 4.5. Winsion locate strended in Sileria - was treasturred to the Seriet Government returned by at fairinnis realed out after return to M.S. You adjustments Note and 1302 P-30's - resorted or delivered a SAMP as studen 28 28 121 176 (1)** t EXPORTS AND AVAILIBILITY SECRET As of February 29. 1944 Sheet 1 led Protent July 1. 1943 offering October 1, 190 to February 29, 1944 small. to Feb. To Date Date Sade small. 2/29/44 1944 Arrived Reported . Protecal 1/1/45 Last 4 Item During Sade Inverted after smittag Expert Persons E. offered Candistin Performance 1st, - - led Protecute Reported February 1964 led is Par. IN 1944 . MILITARY ITEMS unreadable text For Featural Accounts 1,400 2,400 Paredit Please Light Posters Medium lusters leavy Scalers 1,706 1,200 1,498 147 m 850 300 Cargo Planes 3,643 1,309 2,472 1.49 198 or 150 250 1,131 2,297 2,091 179 1% 233 advanced Trainers 30 0 0 30 deservation Planes For V. 1. Protecal (Seder decigrocal Agreements) Pursuit Planes See Detailed Schedule , 0 0 , 0 0 0 10 10 0 List (Crewed) frainers 0 For Account Paradit Planes 0 150 0 1,147 1,200 , 1,800 Tasks uses Tanks 0 2,000 Tasks 1,334 1,280 1,680 1,640 1,222 43 2,960 2,839 2,117 yn 170 1,303 136 224 192 4,134 4,541 25 351 172 100 1,025 25 Cel. (Tank Destroyers) (fank Destroyers) Guna .45 Cal. 700 Launchers Mortars, - Pietels and Revolvers 4,000 6,000 334,420 133,483 3,000 3,000 11,950 8,000 trucks (1) ton) Tracks a ton) Trucks (5 ton & over) Task Transport ters (20 . 40 too) 5,412 4,642 334 9,290 10,416 1,950 50 preserthed Amountition is being supplied for all wespons furnished by the U. 8. is appertance with standards is furnished for waspose of Soviet manufacture. Trucks (with equipment and spare parts including tires) Gargo Reacon Carriers (3/4 son) 5,000 for U. Forces. Additional 1,220 100 7.304 78 (Tank Destropere) a. 3-7- 38,590 3,348 42,144 98,033 96,375 77,571 5,994 1,826 1,446 9,538 34,856 2,988 31,684 94,232 87,148 72,400 4.1% 704 1.41 4,442 6,706 78,692 3,128 4,864 17,240 82 a 194 222 Total Trucks 132,000 84,000 79,306 298 as 270 203,061 193,105 14 10,264 157,669 Other Vehicles , insured Seous Care 1,985 4,500 14,855 Jeeps a too (as) Amphibian Jeeps 24,000 ton) 16,000 1,763 224 1,082 595 1,458 2,899 2,372 1,425 14,232 39,987 36,580 28,995 1,050 1,785 1,652 579 168 1,378 1,436 621 Personnel Carrier ($ track) 600 Cargo Carriars (1) ton. track) Williary Tractors 28 400 12,000 8,000 4,381 2,400 1,600 1,622 Recovery Unite Repair Trucks 1,122 145 8,522 1,740 19,922 15,408 3,433 2.9% 1,422 281 103 tax 1,477 100 2,101 3,107 8,638 270 2,584 4,670 145 145 Dissel Englase for trulks 20,481 2,400 1,100 1.36 Equipment , - - under) 12,000 9,099 1,478 2,230 1,456 214 1,575 25 25 Direction 150 Parts ($1000) first (siles) 3,000 2,000 1,108 2,400 1,583 1,284 100,000 186,000 66,667 93,323 4,000 89,652 162,000 141,672 9,111 181,806 3,334 1,512 277,943 660,164 3,530 64,328 Penter 48,300 BUT 26,880 17,920 33,350 120,238 85,000 85,000 1,437 64,001 111,753 103,449 44,007 1,200 12,828 12,304 11.9% (Month) Explasives (some) 99,580 66,220 110,462 7,037 120,441 807 84,243 76,000 64,002 21,003 18,617 16,929 199,268 162,057 3,000 2,798 1,000 30.44 500 127,008 11,600 18,130 12,404 29,584 38,540 4,403 1,360 1,449 2,453 9,670 167 119 218,602 tary Item Flosts 14,254 158.77 Explosives (some) 12,700 14,173 100,000 45,000 Femaler 990,966 60,000 119,810 for Redice visa Dry Della 216,965 9,348 1,600 250 8,453 20,667 1,822 339,978 $1000 - - -- -- - offertage for partial before - - after SECRET Sheet Experied 1/1/0 1/29/44 Exported 49,679 1,543 SECRET Sheet 3 Davistim Exported During small. Made 1/1/0 Feb. swell. 1/29/44 1944 invined Exported imitian after Last . Offered 1961 a. 3rd Protecal Protecate October 1, July February 2944 Pab. Export Inc. 1944 MATERIALS (total 7.81 12,431 Buts, Riveta, 4,533 Leading Mate 8,533 296,397 Mails and Address, Date, Wheels kales sales and Car Wheel Tires Steel Car Sheels 11,848 Aales Gestric Locality sales 300 500,000 Total Steel (tone) 39,863 707,481 551,939 (1,182,855) 1,463,858 149,337 24,219 9,992 97,355 The following quantities released from U.S.S.R. export stocks for have been deducted from available. Notes July 1943- Oct.1941- Feb. 1944 Feb.29.144 Cold Finished Bars July Sheets Feb.198 Feb.1964 28.04 Cold Relled Strip 956 Steal Fire Airens Steel Billets Oct.1943 Des.1941 Pipe and Tables 20,464 (-) 15,000 40,197 1,152 17,396 58,269 190,769 Plates 32,955 Rope 30,866 Barted 3,305 Wire Pla Iron (tone) and Anthore (tone) 2,209 1.735k Bollere ($3000) 311 Ferrous Metals . Prode 1,669 ($1000) Total Released (tone) Staples 1,279 21 4.6% 4,113 4.113 1.117 1.40 1,683 1.5% 1,584 1,275 1,295 1,120 722,424 28,229 554.543 - 2,275 140 Petroleum Products from From F.X. for U.S. (Reclanement 360,000 240,000 4,566 323,738 8,930 18,023 87,9578 64,128 28,225 to From itedax for (Replacement to 80,000 14,241* 86,909* 86,909* Shipments (31,867) (31,897) 29,972g Diversion Chemicals (tone) 6,720 1,933 2,600 2,440 2,087 130,236 128,060 98,132 20,187 20,187 52,796 50,369 45,159 8,662 10,313 5,478 Tetresside Other Chemicals (term) Chloride Streets Sulgho Cyanida Persolida (Sona) Carbode Blacks Etays (set) held 9,948 413 29,769 4,503 SECRET Sheet 3 Protecal Detailer During small. let Protecate Started smill 1/29/14 as Bade 1/1/15 Feb. Date Date 2 196 4 Protecal Offerial is Participants Camilation Exported Arrived Exported After Lest Bests Permant- Export 1944 Islama . Jair 1943 fitners 29. 1944 Bade Ind Offered Pab IN 1944 MATERIALS (and (tea) (tena) (cont.) 2,306 Reta, Rivets, 1,386 265 8,133 8,533 Landing Nata fails Access. 185,329 12,431 7.99 4,533 8,113 6,914 403 322,425 38,765 Mounted Sate, Reals sales 260 GIT tales and Car Steel Tires 2,829 5,333 Steel Car Steels 5,993 sales Electric Locanitive sales following qualifies July noFeb.1944 released U.S.S.R. 79,863 expert for July 4 have 1,189,855 detected been 349,337 from - 27,555 available. July in Oct. 064.1941. Feb.1944 28.06 28,466 31,955 31,955 Steel Wire Steal Hire Rose 30,866 Berted 3,305 Fire Steples 2,279 Pie Iron (tons) Chaire and Anthore (tone) follows ($1000) 1.735k 4,422 Ferrous Metals Proda. 311 1,666 ($1000) Pipe Taking (-) 15,669 Plates 60,197 1,152 17,396 58,269 190,769 430 21 Billete 11,453,858 redistribution 22A Gold Rolled Strip 956 1,707,483 551,939 stocks Oet.1941Feb.29,144 Cold Fistated Isra Aireraft 333,334,298,996 free & The 222 n 500,000 Total Steel (total Notes 1,062 183 - 300 6,586 4.6% 1,117 2,467 1,5% - Total Released (test) 17,127 2,209 4,113 4.113 1,767 1,584 1,273 311 2,275 1,295 1,120 100 1,683 printee Products Free 5. From E.E. for I.S. Account to E.K. free U.S.) From Itedax for Account Replacement to British from U.S.) 360,000 140,000 120,000 80,000 4,566 321,738 721,414 554,543 8,930 18,023 28,229 26,219 14,241* 86,909* 86,909 56,9094 Stipperts free E.L. U.S.S.R. .. (31,667) for Diversion to U.K. Additional Allocation to U.S.S.R. 67,957 10,786 68,128 (31,867) 29,9718 Replacement Siveraine D.E. Chemicals (term) 4,480 2,440 2,027 1,868 534 1,933 2,000 109,843 9,529 107,914 130,236 128,060 98,132 20,187 45,159 7,680 20,187 40,320 26,880 25,275 3,360 2,240 1,792 2,153 638 20,187 20,187 20,187 26,523 52,706 50,366 4,131 4,764 8,462 7,846 10,313 9,948 3,146 11,416 6,720 4,480 6,720 4,480 11,1601 7,832 7,991 7,953 25,387 31,327 27,343 73,431 4,480 4,650 4,977 12,727 1,478 5,478 1.4% 1.4991 4,247 18,5001 KL) 0 6,720 29,760 199 4.503 207 100 358 to 201 1,327 1.4% 12,332 18,743 25,190 400 Tetresside 6,720 43,120 51,017 3,292 8,765 Other Chesticals (tens) Chloride Sitrate (-32111 4,9941 726 1,7941 3.394 Ameria Salphe Cysoida Aniline ou Perexide Black Dyes (tons) Acid Alcohol Carbide Lamp Blanks stays Anto (est) Dibuty) Philalete Glynel Amites saine Ethylane Chlorobatria Ethylane Formaldshyde Septhemis AND Formaldshyde Chlorate Nitrate affectage -- analiable - for -after SECRET Sheet Devilation small. Experted arrived 1/29/14 reterm 2,647 Chamicals 4,334 4,134 Chemicals (tens) Chestsels (tena) 3,124 4,992 238,781 215,040 RELEASED 8,963 TOME 12,000 50,114 state SECRET Sheet 6 3rd. Protecol Performance July 1, 1943 to October 1, 1943 to February 29, 1944 Avail. 27,578 Other Flour 81,923 81,921 400 1,065 995 5,160 528 21.77 23,138 7,657 157,289 437,117 681.70 13,939 28,708 114,105 112,000 74,667 182,725 22,020 182,725 353,676 353,674 12,364 59,130 149,867 26,517 26,327 265,739 26,517 16,443 224,8004 95,196 92,866 325,824 325,824 267,100 17,089 97,964 97,964 90,370 1,160 4,063 4,760 21,276 32,033 35,794 29,454 6,318 151,215 287,883 287,883 254,799 1.42 4,427 32,528 32,528 25,978 1,122 30,134 30,134 12,632 12,632 12,792 46,677 12,792 46,677 7,675 2,958 11,123 11,123 10,447 57,412 57,412 43,461 0 723 40,164 1,455 1,655 1,590 TOB 0 0 0 0 o 0 0 o 0 0 0 0 0 0 o 0 o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 165 26 0 21,922 1,089 as 0 Total Foodstuffs (tone) 1,810,144 0 Sends Bussian Bay Belief 1,204,872 165 1,285,884 128,250 1,285,884 2,606,250 606,250 $1,358 4,648 is 0 0 21,922 0 40,166 32,704 1 5,258 0 5,258 1,258 3,282 3,683 0 2,345 0 1,547 2.347 0 0 0 3,282 34 0 0 0 0 12,855 2,347 14 12,855 9,154 4,332 . 0 1,547 112 314 0 0 92 3,294 577 36 359 91 4,332 " 0 723 3,638 0 " 185 0 414 187 3,638 0 187 3,638 2,926 0 15 560 0 1,214 1,234 1,143 1,214 0 3,332 0 4,817 0 an 6,817 0 on 4,053 0 an 0 1,856 . 320 0 0 0 434 0 3,638 1,856 1,856 249 3,638 0 15 0 1,143 1,100 0 1,792 4,053 " 1,100 o 320 249 1,100 1,323 0 0 1,030 1,030 53 1,509 0 49 53 0 1,323 o 1,509 1,323 a 1,509 581 0 Total his-Protest Foods 1,178 322 111 o / Feed 6,396 0 120a Seels Land-Lease Other Foodstuffs 6,996 a Teaste was Vitalize 66 5,897 1,270 0 o face) Ruts free Turkey Other Pate 0 Spires #115 Timering Extracte 49 66 0 0 Coffee 0 Tea 581 0 110 Table Salt 1,178 0 103A Canned Fruits 1038 Canced Vegetables 1094 Freeh Fruits 1018 freeh Vegetables 1,270 7,467 11,200 27,954 0 0 as Song Stock 322 0 5,897 322 a 6.0% 322 111 0 6.0% 1,270 Soap 9,690 7,369 0 155,759 o 200,802 1,648 0 200,802 0 137,820 0 554 0 1,270 556 9 12,234 137,820 3,361 556 0 Concentrated Juices 3,365 181 295 0 1,713 0 15,327 405 619 2,942 0 18,564 0 18,564 0 14,843 105 0 5,994 1,224 0 6,722 95 0 6,722 2,951 0 6,453 0 5,739 0 6,239 o 5,099 5,099 6,239 196 453 4,082 0 3,845 3,845 172 3,288 2,623 3,288 487 1,296 282 4,576 983 983 5,111 4,394 0 983 5,428 6,520 0 300 181 118,000 5,824 26,409 29,914 0 2,941 2,140 896 34,867 1,882 0 29,698 600 628 2.140 286 454 0 151,215 750 23,406 0 2,250 735 0 31,033 28,843 21,829 0 203,665 24,332 35,796 2,951 177,000 - 227,755 14,843 Purees 1,020 24,332 6,451 1564 truss Vegetable Pastes 11,145 48,417 1,100 0 1128 Concentrated Cereals 1148 fried Soups 123 Cheese 309,583 51,312 8,050 0 and Jeans) 372,394 227,755 300 2 2044 Oriel Prults DOLN bried Engatables (Except Peas 539 12,112 4,068 26,409 PIII Oriel Eggs 637 108,070 108,070 12,112 29,698 5,824 fried Wilk Canned Wilk (Condessed & Evap.) 20,664 0 39,514 51,312 166,630 22,938 1,532 18,162 0 372,398 183,970 4.143 0 183,299 404 16,846 0 / 32 Seya Grite 16,040 0 22,938 6,861 3,148 o 183,970 7,560 72 104,789 o 93,354 289 236 0 0 0 4,844 7,560 302 0 93,254 146,651 14,842 499 0 146,651 1.604 18,249 0 1,604 76,877 914 39,514 Suya Flour 236 236 T 9,993 26,134 149,552 222,760 15,192 3,293 25,929 581 0 12) Oleomargarine 358,917 15,993 76,877 183,299 Shortening 428,528 15,993 1,604 205,334 IN Vegetable Gila 429,528 3,932 4.434 0 T 1.604 306,000 192,128 26,212 581 0 12,109 1,447 4,740 0 TO 14,842 0 3,442 0 4,997 92,869 0 95,196 192,128 140,517 215,184 39,200 Total See and Soap Stock 130 209,855 Fat Cuta Total Concentrates etc. 28,116 70,924 5,062 4,493 437,917 3.54 lard PILL 5,809 19,303 75,168 209,855 butter) 20 18,407 20,428 97,733 1078 Carter's forwed (85% second grade Total Vegetable Oils, etc. 364.23 18,807 20,428 375,836 not earned IF LOTA butter 444,718 18,807 14,849 4,886 pa lacked Wests Seusage Mest Preparations the tasket Meats 444,718 7,466 600 53,975 4,063 Other Animal Fats Oile Total Asteal Fate, Fat Cuta and 5,362 97,733 3,932 as 41,377 5,360 375,836 pill Canned Dehydrated Meats a 54,426 5,360 333,334 500,000 23 Cannel Meet as Camel Tuebonks Total Cannel Meet 56,826 2,208 0 a Sign from other Sources 1944. 0 Sugar from U.S. Mainland Feb. 29 leg . 0 Total thest. Careals, etc. 675 a Route 0 Other Seate Grain WILL Prode 112% Other Pintabed Careals . Prode 1018 trial Pass beans 200 5,809 28,116 27,576 206,926 35,830 206,926 7,466 2014 other Grains thest Flour as 12,304 2,208 Balance 0 as v. R. desiting Forward- 0 POCISTUFFS (tens) Road In After Export Lest 0 1944 Diverted invived Exported 0 2/29/44 0 Date Offering Made 1/1/0 Feb. To Date . Red During Avail to . Item Made offered Int Protecal las, - and 3rd Protessis Comulative Performance Exported February 29, 1944 M 303,446 loss are 2,000 the set might Petroleum Products and Foodstuff - available .. exported Includes for disersare through Perstan Carridar reported arrived is Persian Gulf parts 1943 discharged is T.L. considered as emiting formating state other data 1. not available is Bachington by agreement resultment for "Meet, Flow, Careals, etc. Impensed by 100,000 tess. with . corresponding reduction is *Super free Other foursee. by agreement Name Meet* - reduced - 2.17 tess for each - of despirated met chipped 1,000 long - of Concern all being furnished by B.E. - . transfer of - under Article v. B.S. - reduced - short - monthly February June. Deaft give to 171 Simitary by Publ 3/39/14. MEMORANDUM FOR THE PRESIDENT In the Executive Order creating the War Refugee Board you directed that the Board make appropriate recommendations to you to overcome any difficulties encountered in the rescue and relief of war refugees. Although the Board has already initiated many measures which, if fully implemented, may result in saving the lives of refugees, there is one basic obstacle which lies athwart all our efforts. This is the simple fact that the United Nations have not been prepared to supply even temporary havens of refuge for substantial numbers of the persecuted peoples of Europe, particularly the Jews. Why This Is The Main Obstacle The following brief summary will reveal why this constitutes the basic weakness in our whole program. (1) Our best chance of saving many people from death, parti- culorly after recent events in the Balkans, lies in an effort to convince the Hitlerite forces, and more particularly their functionaries and subordinates, that it is in their interest to spare the lives of these people. In this connection, the statement issued by you on March 24, which is being given the widest possible ublicity in German controlled territory, will of course be most helpful toward this end, especially if followed by concrete action. (2) And there is also an opportunity to actually bring some of these people out of enemy territory. The recent developments In the Balkans limit opportunities there, but there still remains possibility of stimulating the flow of refugees to Spain and SwItzerland. (3) It is essential to both of these avenues of approach, that we and our allies convince the world of our sincerity willingness to bear our share of the burden. Thus, great would be added to our threats, and other countries would ZOPE ready to cooperate in aiding the escape of refugees, It clear now by action that our doors are open to these The United Nations must not merely threaten our enemies to stop killing Jews; the United Nations must offer Jens themselves. Only in that my can the great moral Involved be made clear. -2Such a step would show the Germans clearly that our of punishment and promises of action are not mere words. is even possible that after such an announcement the Germans light be prepared to release or permit the escape of these recouted peoples. (5) And such a step would certainly cause the neutral countries to encourage the entry of more refugees into their territory since they would then know that they would not be required to keep all refugees until the war ends. Thus, one of the reasons why we are not meeting with any success in Spain is the fact that the Spaniards are not convinced that we will take the refugees off their hands. Although we have been stating for 8 long while that we are going to take the Jewish refugees In Spain to a small camp in North Africa, none have been moved there to date. This has been due primarily to the reluctant ettitude of the French. And the inarticulate major premise of the French attitude undoubtedly is the conviction that such refugees are to be dumped and left in French Africa and that neither the United States nor Great Britain will receive them. Proposed Solution John W. Pehle has strongly recommended that this Government act at once in this hunanitarian cause and announce to the world that we will provide temporary havens of refuge in this country for all oppressed peoples escaping from Hitler - these people to be placed In camps established in this country and to remain there until the termination of the war at which time they will be re- turned to their homelands. Nature and Benefits of Proposal (1) Under this proposal the refugees would be treated in effect as prisoners of war. They would be brought into the country outside the regular imnigration procedure just as civilian internees from Latin American countries have been brought here and placed in Internment camps. No violation or attempt to evade immigration laws would be Involved since the refugees would remain only until the termination of the war and would not come in under the quota system. There could be no objection on security grounds any more then in the case of prisoners of war. (2) The principal United Nations involved have already agreed each of them will receive after the war its nationals who fled for their lives and have been given asylum in other These nations have also agreed that it is a part of policy to assure such conditions in enemy and enemy countries as will permit the return thereto of all persons therefrom who have sought refuge elsewhere. This agree- concurred in by the United States, Great Britain, 173 -3Soviet Union, Luxembourg, Yugoslavia, Norway, The French littee, Greece, Belgium, Poland, Czechoslovakia, and the otherlands should serve to make clear to those concerned that such refugees as may be accepted in camps here will be returned to their homelands at the end of the war. (3) The humanitarian considerations which might be urged against the confinement of the refugees are answered by the simple fact that treating them as prisoners of war is better than letting than die. (4) The general idea has been discussed with a number of organizations, Jewish and non-Jewish, and they have all expressed Meir roval. Most of them feel that it is by far the biggest step the Board can take to accomplish the purposes for which it RBS established. (5) The necessity for unilateral action now by this Governart lies in the fact that we cannot expect others to do what we ourselves will not do, and if we are to act in time we must take the lead. (6) The practical effect of such a step by the United States might be tremendous. Our allies would without doubt follow our lead. That this country, which has always been a refuge for the fugitive from injustice, oppression and persecution, should take ship in this matter would be in keeping with our heritage and with our ideals of liberty and justice. (7) In the hearts and minds of all peoples under Nazi domination and throughout the world such action might well have an effect ver. much favorable to our whole war effort and to our reputation as 8 nation which has always carried the torch in great undertakings. (8) Even if no refugees were ever actually brought to these camps, the mere announcement of our readiness to receive them would remove the basic obstacle to our efforts to save them. In view of geographical and time factors, it is not likely that many clugees would actually come to the United States. The important is that we offer to receive them. Risks of Proposal following risks involved in this proposal must be weighed the humanitarian and other considerations mentioned above: The danger that such B program would result in . breakdown lgration laws. The point inco is that no matter what we 174 -4these people returning to their homes when the they will not want to return, and that an almost pressure will be created on Congress to change the such people to remain in this country. The danger that it would provoke unfavorable public would give anti-Semitic and other groups as well certain elements in Congress an opportunity to attack you the Board. Recommendation of the Board Secretary Hull, Secretary Morgenthau and Secretary Stimson carefully considered this proposal at the meeting of the Board on March 21. Although there was no disagreement as to the potential benefits of such a program, Secretary Stimson felt that the risks involved outweighed the benefits. It was decided that in view of the importance and urgency of this matter and the great responsibility involved in making a decision; it should be subbitted to you for your consideration. In your consideration of how this matter could be presented to the public, you may wish to examine the attached draft of a statement which might be issued by you. We would appreciate an early expression of your views. Secretary of State. Secretary of the Treasury. Secretary of War. 175 STATEMENT BY THE PRESIDENT As President of the United States, I have recently expressed the horror with which this nation views the systematic extermination of the Jews and other minorities by the Nasis. To the Hitlerites, their subordinates, functioneries and satellites, to the German people and to all other peoples under the Nazi yoke, I have made clear our determination to punish all participants in these acts of savagery. In the name of humanity I have called upon them to spare the lives of these innocent people. I have said that we shall find havens of refuge for these persecuted people and that we shall find the means to assure their maintenance and support until the tyrant is driven from their homelands. Let it now be proclaimed to the world that this great nation, which from its inception has been a refuge for the fugitive from injustice, oppression and persecution, is prepared to furnish temporary asylum for all pressed persons who escape from Hitler. Although all such people so brought into this country will in view of military necessities be required to remain in refugee centers during their stay here and subjected to the same security restrictions as prisoners of war, they will receive the humane treatment which our civilization provides, and here they will be safe. Upon the termination of the war they will be sent back to their homelands. With the cooperation of the other United Nations we determined to insure that refugees from death may live scain on their own soil. To this end those members of the ited Nations principally concerned have already pledged are Chemselves to insure that refugees who are given asylum other countries will be welcomed to their native lands After the FBP. Our action is not merely the performance of a humanitarian luty; It Is the final symbol of our triumph, under Divine over the forces of darkness that would have ensleved M EXECUTIVE OFFICE OF THE PRESIDENT WAR REFUGEE BOARD WASHINGTON 25, D.C. MAR 29 1944 My dear Mr. Secretary: I am forwarding to you herewith the proposed minutes of the third meeting of the War Refugee Board. The approval of these minutes will be on the agenda. for the fourth meeting of the Board. Very truly yours, W. Pehle Executive Director The Honorable The Secretary of the Treasury 176 177 Minutes of the Third Meeting of the War Refugee Board Held in the Office of the Secretary of State, 10:15 A.M., Tuesday, March 21, 1944. Present: Secretary Secretaryof ofthe State Hull (acted as Chairman) Treasury Morgenthau Secretary of War Stimson Assistant Secretary of War McCley Acting Executive Director, War Refugee Board, John W. Pehle. The Board took the following action: (1) The minutes of the second meeting of the Board, held on February 4, 1944, were approved. (2) The Acting Executive Director summarized the develop- ments since the last meeting, including the following: (a) Rescue activities through Turkey, especially the work of Ira Hirschmann, representative of the War Refugee Board in Ankara. Mr. Hirschmann has succeeded in evacuating children and some adults from Bulgaria through Turkey to Palestine and in obtaining Turkish Government's permission for the use of Turkish beat to evacuate refugees from Constanse to Istanbul. (b) Rescue activities through Spain, including the efforts of the War Refugee Board to remove from Spain the refugees now in Spain so that the Spanish Government will be more helpful in permitting refugees from France to enter Spain. Pehle reported that the Board had been unable to get any real measure of cooperation from Ambassador Hayes in Madrid and consideration was being given to the steps which could be taken to solve this problem. (a) The psychological warfare program, including cooperation of OWI, the warning to the satellite governments made through various neutral governments, and the proposed statement by the President. Secretary Hull indicated that the British Government has asked for two days in which to consider the statement. -2- 178 (d) Cooperation of Russia. The State Department has sent a strong cable to Harrison at the Board's request soliciting the assistance of the Soviet Government in the work of the Board. (e) Financing of the War Refugee Board's operations. It was made clear to the Board that no projects are being refused because of lack of finances and adequate financial assistance is available from private agencies. As recommended by the Acting Executive Director, the Board took the position that it was not necessary to ask Congress for an appropriation at this time, but that if, at a later date, private finances were not adequate an appropriation could be requested. The Board was advised that the sum of $100,000 in private funds was available to the Board for financing confidential activities and that the $1,000,000 obtained from the President's funds was largely being used for payment of the salaries and other administrative expenses of the Board. $200,000 of this amount is being made available to the Intergovernmental Committee as this Government's contribution to the Intergovernmental Committee's work. (3) Secretary Morgenthau reported that at the President's request he had had a conference with Myron Taylor, American Delegate to the Intergovernmental Committee, and had explained to Mr. Taylor the accomplishments of the War Refugee Board in the short time it has been in existence. Mr. Taylor has invited Sir Herbert Emerson and Patrick Malin to come to the United States to confer with the War Refugee Board concerning mutual problems. (4) The Executive Order establishing the War Refugee Board provides that the Board shall make frequent reports to the President. Pehle indicated that a report to the President was being prepared and that it would be circulated to the Board members for approval in the near future. (5) The Board then gave careful consideration to a recommendation by Pehle that temporary havens of refuge be provided in the United States for all oppressed peoples escaping from Hitler. Under this suggestion these people would be placed in camps established in this country and remain there until the termination of the war at which time they would be returned to their homelands. Pehle urged that 179 3 - the Board recommend to the President that he announce publicly that the United States was willing to take these people for the duration of the war in order to save their lives, and pointed out the many advantages inherent in such action. There was a general discussion of the proposal and it was agreed that the matter should be placed before the President. (6) The Board discussed naming Pehle as permanent Executive Director and Pehle's designation was agreed upon subject to the President's concurrence. (The Acting Executive Director was not present during the discussion of this item.)