Full text of Diaries of Henry Morgenthau, Jr. : Volume 850

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INDEX TO BOOK 850
Book

Page

850

140

-

Air Power League
Tax Exemption

Alien Property Custodian

German and Japanese property interests vested, etc. final papers signed by HMJr.

44

See Book 849, DD. 59 ff.

Appointments and Resignations
Group meeting 5/29/45

Internal Revenue discussed
b) Positions for Hankins discussed
Wagner letter recommending Harry Durning for reappointment as Collector of Customs, Port of New York 5/30/45
DIARY

Book 850

May 29-31, 1945

2

a) Qualification for Assistant Commissioner of

4 f.
306
305

a) HMJr acknowledgment 5/31/45

Army - transfers to
Caston momo to HNJr re 10 non transferred from White
House detail - 5/31/45

295

B149

Bowles, Chester

Tax Enforcement

Brady, Prof.

(of California)

122 ff.

Post-Nor Planning: Germany

Brand, R.H. (UK Trens. delegate)
France

303

142 ff.

policies
Byrd, Harry (Senator) - See Treasury Dept.,
- C - personnel
CED Committee for Economic Development)

89

Post-War Planning: Bretton Woods

Campbell, Riley
Internal Revenue, Bureau of

242

de Weldon, Felix

Financing Government

Book

Page

850

264

DuBois, Ben (Independent Bankern Association
Post-Ter Planning: Bretton Woods

(continued)
BOOK

PAGE

Durning, Harry

305 f.

Appointments and Resignations

China
Gold

Plane shipment versus ships

Carter letter 5/29/45 re arrangements
for shipping

HMJr. letter to Soong: $60 million ear-

marked for shipment 5/29/45
Textiles

Meeting 5/27/45 Barter versus lend-lease
discussed

850

F-

55

79

Finance Government

83

7th War Loan

Daryl Zanuck offers HMJ: all future assistance in
selling "enlightenment" to public: thinks it can
best be done through entertainment - 5/21/45
HNJr saka UNMO10 for list of requests for HiJr's
appearance on Tar Loan programs 5/30/45
a) List of cities requesting appearance

29 If 41

a) Brazilian and Mexican cotton procurement

b) 3rd quarter firm, 4th not quite

34

39

Meeting 5/29/45

a) Methods of payment by Chinese diacussed, ao cotton kept under Army
and not turned over to Soong

b) HMJr does not want to give letter

promising the cotton
Crowley nemo on textile program - 5/30/45
HMJr acknowledgment of General Carter's

letter of 5/21/45
a) Text of Certer's letter
HMJr. sends to White and Coe Patternon
letter of 5/23/45 to Crowley stating
need for US Army-supervised textiles
in China. Correspondence re:

Collier's Magazine
Post-Nar Planning: Bretton Woods

81

Kesterbo Columbia Broadcasting System acknowledges

HMJr's letter 5/24/45 of thanks - 5/30/45

52 "f
54

130 1

0

HMJ aska Gamble for scrapbook containing important
Government statements made since May 1 - helpful,
and harmful. to War Bonds 5/31/45
Lane report on special broadcast times scheduled for
June

5/31/45

139

155

231
232

Gamble momo 5/31/45 to HMJ suggesting that the

de Weldon statuette of Two Jine flag raising be
pubplicly presented to President

225 ff

138

See Book 848, D. 436.

219
220

112 f.

Foreign Funds Control

Treasury representatives abroad
Portuguese purchase of ships from Germany

HMJ: letter to Grew 5/31/45 giving story of Portuguess violation of agreement with United Nations to
pay 175 million escudos, purchase price, into blooked

131 f

account.

264

133

222 f.

HNJr requests that Portuguese be asked to move money

to blocked account or submit evidence of falsity
of charges.

a) Suggested dreft of note to Portuguese Government

224

France

Brand (UK Treasury representative) letter to HMJr detailing
plana for French exhibition of savings - 5/29/45
n) HMT1 Boknowledemment 5/31/45

3C4

303

Book Page

Book

Page

850

101 ff.

-LInternal Revenue Bureau of

o

Group meeting 5/29/45

Law Enforcement
850

Irey memo summarizing development of coordination between law enforcement agencies, 1934-1946

f.

Lend-Lense
General

3

a) Nunan refuses to make any more recouendstiona for
Assistant Commissioner to HMTr. who has turned down
Berkshire and Hankins
b) HMJr shocked at quality of work in New York; but
appropriations had been cut
Administrative set-up in Bureau discussed
Suggested Truman statement endorsing large increase in
staff of Bureau of Internal Revenue - sent to Charles
Roan by Fussell 5/29/45
a) HMJ: asks Funsell to prepare memo 5/29/45
Irey nee o 5/31/45 suggesting administrative changes:
a) HMJ: should talk to Tom Clark, incoming Attorney

5-16

Formulation of Crowley's budget discussed at group

o)

meeting 5/29/45: participation of State, Treasury
and White House in laying down post V-E Day policy
a) HMJr's place in Lend-Lease considered: should
he press Truman for official position?

99 f.
116

241 f.

b) Decision to "sit it out."

b) Complete functional and operating survey should
of Suggestions for enforcement "spark plug" man:
an ex-Federal prosecutor - perhaps Phelps of Kansas

UK (See Book 849, index.

Churchill gives Truman communication, contents unknown - Brand sends message to HMJr. Brand

City.

Administrative officer should be appointed.
e) Riley Campbell to be appointed assistant in Chief
Counsel's office Penal Division: good.
f) Reoruitment for tax drive: memo sent to C.S. Bell
5/26/45 with suggestions; 151 experienced investigators being dropped for lack of funds,
Irey memo to C.S. Bell 5/26/45: suggests that Special
Agents (londers in drive) be recruited from the present
9,000 Deputy Collectors. Suggestions re streamlining
character investigations, etc.
Chart of proposed organization of Bureau with Sherwood
as Assistant Commissioner instead of Graves 5/31/45
C.B.Bell memos to HMJr outlining program for recruitment

writes letter to HMJr. who decides to let it

d)

5/31/45 and 5/30/45

ride pending Truman's decision - group meeting

5/29/45

D

a) Acknowledged by HMJr 5/29/45

243 f.

1945.

230

60
59

Lustig case

Tax Enforcement

23, 190

261

296, 298 ff.

Irey, Elmer

Memorandum: story of law enforcement coordination, 1934-

45

a) Copy of Brand letter 5/28/45
Ben Smith letter to HMJr urging continuance of LendLease agreements - 5/25/45

101 ff.

M

Morgenthau, Henry. Jr.

List of guests representing Jewish agencies at dinner
on 5/31/45

234

March of Time

Tax Enforcement

Jewish relief agencies represented at HMJr dinner 5/31/45

115

234
-

0

57

121

5/30/45

be held.

46-A ff.
51

"Lend-Lease Policy After V-R Day' memo for Truman
State vexed at Treasury attitude. Coe tells HMJr

General.

46 ff.

Navy Department

Treasury request for loan of officers for Germany

Kesten, Paul W.
Financing, Government

See Post-Nur Planning: Germany

155

Nuit et Jour
Publicity

73

90 ff.

Book Page

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Page

P (continued)

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0

Post-War Planning (continued)
Germany (continued)

D

Brady Conference (continued)

011 industry

Revenue Revision

850

Portugal

promising (Caseday): but not a Marxist (Coe),
as State Department charges. White: Brady's
books show kinship of Nazion w1 th embryonic
fascism in US, fostered by big business
Decision not to press his appointment.
HMJ: memo for Truman (not sent 5/30/45. showing

266

lack of application of de-Namification policy;

222 f.

Foreign Funds Control

122 ff.

850

efforts
being devoted instead to getting Germany
going economically

127 f.

HMJr asks DuBois to follow through on chapters on
Junkers in "Germany" book - 5/30/45

Post-War Planning

Bretton foods

HMJ1 letter to Ben DuBois (Secretary of Independent
Bankers Associ ation) thanking him for Bretton
Woods support 5/29/45
a) DuBois congratulates Treasury on passage of

bill 5/26/45

161

Reparations

War Triels

81

Meno for Trunso (not sent) re devising procedure

which would bring criminals swiftly to justice,

82

instead of letting
them escape through technicalities
5/29/45
General

CKD report on "International Trade and Bretton

Woods
Proposals"
- 5/29/45.
Recommends policy
in
trade of
international
broadened
cooperation

67 ff.

in

order to secure full employment. Approves Bretton
Woods in principle, but recommends permitting Bank
to make long-term currency loans in order to avoid
freezing of Fund by maladjustments during transition
D

period

Bretton Woods absolutely necessary to the implementation of peace, Daryl Zanuck says: quotes Shotwell
on economic weakness of League of Nations letter
to HMJr 5/21/45

HMJx thanks Gervesi (Colliers) for article on Bretton
Woods: also Morris, managing editor
House Banking and Currency Committee report on

HMJr letters of introduction for DuBois, Treasury
representative
on Pauley a staff in Mosoow,
5/30/45,
to:
Ambassador Harriman

Stepanov
Trade)(Deputy People's Commissar of Foreign

89

Zverev (People's Commissar for Finance)

To Whom It May Concern

San Francisco Conference

131 f.

Stettinius
thanks HMJr
for 5/29/45
services of White - 5/21/45
a) Acknowledged
by HMJr

148

character of General Clay's staff 5/29/45

Knowlson (James s.) sent as Central Field Commissioner
in European
Theater
mission.
Letters
to:for Army-Navy Liquidation ComTheodore Ball (Paris Representative) 5/31/45

62 f.

Bernstein memo proposing meeting of State, Treasury,
War Justice, FEA, Alien Property Custodian 038

on investigation of internat ional asset position
of
Germany - 5/29/45. OK'd by HMJr, referred to
hite
Forrestal answers 5/29/45 HMJr letter of 5/18/45 requesting release or loan of 9 Navy men for SHAKF:
only 1 available
White-HMJr conversation 5/30/45 re appointment of
Bredy as Clay's economic adviser

Conference on Brady 5/30/45. Present: White, Coe,

Casaday, Klotz. Brady a militant liberal, uncom-

85
86

Surplus Property

Germany

HMJr memo for Truman (not sent) showing reactionary

153
154
156

112

US

participation in Bretton Woods - 5/30/45

152

Thomas
kcCabe, Army-Navy Liquidation Commission
5/29/45

a) McCabe
5/22/45 letter to HMJr introducing Knowlson

72

236

77 f.

William
5/31/45H Taylor (Treas. representative in Paris)
73 f.

Procurement Division

120
o

Bartelt memo for HMJr on procedures for accounting in
Procurement Division - 5/29/45
Publicity

Bart Viner, representative of Nuit et Jour, Paris news
weekly,torequests
Pussell
see him. interview with HMJ? 5/28/45

238

94 f.

90 ff.

Proposed
March of Time program on tax enforcement - see
Tax Enforcement
161 f., 183 f.
187 f.

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T (continued)

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D

Broadcast (text) of "Headline Edition" dramatizine enforcement program - given 5/29/45
Bowles asks HMS: for luncheon date to discuss black

Revenue Revision

011 industry income tax expense classification of

drilling (See Book 831, P. 308.1
Ticker statement saying Treasury approves Doughton

bill to legalize position of Treasury agents ruled
out by Florida court decision - 5/31/45
a) Blough says not true: Treasury does not wish
take Doughton position in future - 5/31/45

850

266

to
265

135 ff.
151

drive 5/30/45:

157

a) Nationwide radio report by HMJ1
b Statement by President at press conference
c) Utilize War Finance organization in molding public
opinion.

O'Connor asks EMT for suggestions on memorial.

proceding June meeting of committee - 5/23/45
a) HMJr reply 5/29/45

110 f.

Funds Control authori to further drive.

Pre-press conference 5/31/45: HMJr asks Fussell to
'phone nationwide commentators re black market publicits

Salazar (Portuguese dictator)
Foreign Funds Control

222 f.

Saturday Evening Post
Smith, Fred

233

Smith, Fred

HMJr conversat with re Diary material: to be sent
Smith with proviso of non-publication if HNJ does
not like tone of manuscript 5/31/45
a) Smith letter 5/31/45 to HMJr: Saturday Evening
Post editor not interested in "build-up of HEJR.
would prefer expose

Soong, T.V.
China

Press release re requirement for financial institutions to
file reports on unusual currency transactions - 5/31/45
a) Instructions to Financial Institutions - 5/21/45
b) HMJr writes presidents of FS banks to give out
statement urging bank cooperation 5/31/45
Fred Smith-INJr conversation 5/31/45: HMJr asks Smith
to give senior Republican Senstor and Congressnan
radio build-up and persuade them to endorse black
market

185 f.

drive

52 ff., 83,

possible

a) Biddle-HNJ conversation 5/31/45: Sam Clark can
come but McGohey 'a FOD on 2-day leave from Pacific

b) McGohey-HMJr conversati on 5/31/45: MoGohey to
send representative
Group meeting 5/31/45

184
259

187 f.

190
213

214 ff.

a) NY check canhing companies, through cash currency

transactions, developed General Desserts Corporation

262
263

which had 8750 thousand in unreported income

b) Feltus suggestion for publicity on employing
veterans in tax drive nemo 5/31/45
HMJr saka D.W. Bell to get out questionnaire on check
Irey memos on recruitment for tax drive
Bureau of Internal Revenue

Tax Enforcement

O'Connell-HMJ: conversations 5/29/45:

Lustig case - to be gotten in shape for Grand
Jury, Procedure discussed

183

in week instead of a year, normal time: US Attorney

cashing companies - 5/31/45

a) Streamlining NY legal process discussed - HMJr

181 f.

Biddle-HWJ conversation 5/31/45: HMr asks Biddle's
cooperation in teamwork to clean up the Lustig case
in NY and San Clark to meet with HMJr on 6/1/45 if

233

225

Stabilization Fund
Bill introduced by Representative Smith of Ohio terminating Stabilization Fund - White memo 5/31/45
a) Copy of bill

in Buremu of Internal Revenue should exclude new

ones.

e) Coe and Hoffman to think us ways to use Foreign

-S-

wants to push cases

115

d) "Knock down" idea that the existing 9,000 "leads"

Roosevelt Kemorial Committee

b)

850

market activities 5/30/45

a) HMJr reply 5/30/45
Pehle nono to HMT giving suggestions on tax enforcement

Roosevelt, Franklin D.

D

Tax Enforcement (continued)
Fussell memo 5/29/45 on proposed March of Time program

20 ff
23

198

245 f.
212

241, 243

Book Page

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Page

T (continued)
D

Tax Enforcement (continued)
HMJT appearance before Congressional Appropriations
Committees re enlarging forces and budget

HMJr asks O'Connell for draft of statement for House
Appropriations Committee - 5/30/45
Group meeting 5/31/45. Present: D.W. Bell, C.S. Bell,
Fussell O*Connell, Gaston, Feltus, Pohie Eden.
Proposed statement read and criticized Fussell,
as "managing editor, to have it ready by 4 p.m.;
to get OZ of Committee chairmen in evening
a) Draft or statement used in 11 G.M. meeting
b) Draft of statement with changes by HMJr
5/31/45.
Nunan DWY conversation 5/31/45: Nunan Droached subfeet to Connon chairman of House Committee, who
reacted favorably
HMJ: memo to O'Connell, Luxford, White, requesting

draft of Presidential letter for Spence on opening
debate 5/30/45

0

Tar Refugee Board
Cables

850 159

governmental Committee - 5/31/45

268 ff.

247-258

218

158

143
142

144 ff.

133

239

302

USSR

Purchase of gold from Russia by Chase Bank

(See Book 848, pp. 74. 224, 229.
D.W. Bell writes Aldrich approval of transaction
5/29/45

a) Aldrich letter requesting approval, giving
details 5/23/45

86

87 f.

137

McClelland report showing how progressive conquest
of continent narrowed 800 pe of WRB's work in

closing phases of war 57 30/45
a) Tables of expenditures la 11/1/44-4/30/45
with detailed account of rolief. rescue and
intelligence work.

162 ff.

ZZanuck, Daryl
Financing, Government

Truman, President Harry T.

HMJ memo re monthly salary check - 5/31/45

307 f.

HMJ sends McKim address of Earl Harrison, who he
suggests should work on post-war refugee problems

140

Treasury Representatives Abroad

White memo 5/30/45 listing countries with number of
representatives in each
White meno re sending Saxon to Scandinavian countries:
Glasser to go to London 88 a US delegate to UNBRA
conference 5/31/45

117 f.
119

General

5/30/45

Personnel Policies

4/2/45

850

193-211

Treasury Department

Senator Byrd Chairman Joint Committee on Reduction
of Federal Expenditures) asks HATT whether his
letters to Treasury employees re post-war employment probabilities represent policy of expanding
employment 5/28/45
al HMJr reply 5/30/45
b) Conies of letters to employees - 1/15/45,

relief operations 5/29/45

WRB cable authorizing termination of Filseth - 5/29/45
Winent report or Executive Committee meeting of Inter-

Tax Exemption

Air Power Lengue - trade association for air industry
publicity asks immediate tax exemption; will probably
get it O'Connell mamo 5/30/45

Johnson (Stockholm) cable re proposed Norwegian

112

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May 29, 1945

9:45 s.m.

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wasn't. The idea was just the same, and, well, he said
it was up to me to make some recommendation. Now, the

INTERNAL REVENUE

point is this. This fellow came over here, and I asked
him--I was prepared to accept him if he made a good
impression on me, but he didn't, and he thought he was

Present: Mr. D. W. Bell
Mr. Charles Bell

all right in the Bureau, and he first said yes. There

Mr. O'Connell

is a fellow who in 1943 was getting forty-six hundred
dollars in Accounts and Deposits, and he has had no
big. broad, general experience to make him in charge

Mr. Gaston

Mr. Pehle

Mrs. Klotz

all Collectors' offices, and in the room here I don't
think either you or the Commissioner were very wise in know
your recommendation of this fellow Hankins. I don't
whether Charlie Bell was in on this or not.

H.M. JR: What I want to say here I want to have

extra confidential. Mr. Nunan according to Joe,
didn't like this idea, and I didn't want to take Mr.

MR. O'CONNELL: I don't think so.

Hankins, so I undertook to see Mr. Nunan alone, and
he doesn't question my authority except to disapprove

MR. CHARLES BELL: I wrote you a little note on

anything that I want. That is my responsibility.

that and said I thought that he had qualifications for

the job provided you didn't wish to make the appointment

(Discussion off the record.)
C

MR. D.W.BELL: You were saying that he didn't question your authority.

of

yourself.
2

H.M.JR What does that mean?

MR. CHARLES BELL: I kind of felt you would want to
put your own man in there.

H.M.JR: He didn't question my authority except to
reject anybody I suggested, and he mentioned that I
turned down Berkshire, but he said--to use his own
But
language--that I graciously accepted Mr. Sherwood.
he said he wasn't going to make any more recommendations

H.M.JR: But he said he has the qualifications.
MR. CHARLES BELL: I think he has qualifications for

to me, so I said, *Nell, let me tell you a little story."
And that was that I was Conservation

the job.

and there
were
twoCommissioner were pretty
of New York, once
fellows
who
good with whom I did business, and one of them, Franklin
Roosevelt, WB S Governor of New York, and Jim Farley was
the other. If Jim recommended somebody and I didn't
like him, he would recommend somebody else, and he did

MR. O'CONNELL: I think he has, too. It depends
upon how you consider the job. He certainly has had the
experience of coming in contact with people. He knows
more about refund procedure and the regular operations
of the Bureau work than almost anyone In the Bureau.

it three and four times or until I found somebody that
was suitable. Those were two pretty good fellows to
learn from, weren't they? He said yes, they were, and
I said if you make A recommendation and it doesn't go
over the first time, you may want two or three more.

H.M.JR: I asked him whether he WAS part of the
that advised ne that refunds would be paid--that
should continue the way we did last summer, and he said
he was. the is one hundred percent wrong.
group

He said this is a little different, and I said it
0

MR. O'CONNELL: Sure, but he wasn't the only one.
Harold Graves was the spearhead of that operation.

we

PRECISION

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H.M.JR: That doesn't make it any better.

c

ROLL NO.

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C

MR. O'CONNELL: The only one in the Bureau that

personnel angle, and he wanted to go to McKellar and

didn't think it wise was Bill Sherwood.

have it put back in, and I leave it to Dan Bell, if that
wouldn't have been a bad thing to have done.

H.M.JR: I want to find somebody who doesn't think
everything in the Bureau is perfect.

MR. D.W. .BELL: Yes.

MR. CONNELL: I never thought that he did. It

H.M.JR: Well, anyway, what Iwent to ask is this:
Is there anybody around here who can find a spot for
Hankins to do the work that he wants him to do without
making him Assistant Commissioner? He says no. He says
he is under Self, and he has to pull him out from under

WAS Hankins and also Bill Sherwood that--

H.M.JR: Here is a very important thing, and all

of us--

that.

MR. O'CONNELL:It was Hankins and also Bill Sherwood

that reexamined the situation in the spring and recommended
that we change our refund procedure.

MR. CHARLES BELL: He is a much better man than

Self, but Self is a Commissioner, and Hankins is Assis-

H.M.JR: Well, anyway. I don't say the man is not all
right, but don't think he is my idea of what should

tant Commissioner.

in the Bureau, I think, is that the quality is constently
deteriorating. I think it is getting worse and worse.

missioner. a Civil Service job at a grade fifteen. What
is Self? Is he fourteen?

be

MR. D.W. BELL: Create a job as Assistant to the Com-

an Assistant Commissioner, and what is happening over

C

C

MR. CHARLES BELL: No. We got that in the Accounts
and Collections Department to fifteen. Make him Special
Assistant to the Commissioner and let him take some of

Now, when I saw these three Collectors of Internal
Revenue in New York I was shocked, and the only answer
got was that they can't do anything because they haven't
got the personnel, and he said--he started to tell me

this Collector's load off that job. That should not have
been carried down. That WILD only carried down there

he couldn't do this, and I said, "Didn't I say I could
get the personnel for you? He said, "Yes, and he

said be WAS turned down by the Bureau of the Budget and

because George Schoeneman W8 8 an expert on the Collector's

Office, and they let him go ead and advise the Collec.
tor's Office as a Special Assistant to Nunan, and hold

to

the Appropriation Committee, and he said he wanted
get more money. And he said Charlie Bell said be
shouldn' ask for more money because he'd only get cut, and

that vacancy open.

he

H.M.JR: What vacaney?

said, "If we got turned down, I took it for granted that
Charlie Beil would inform you of this, and said I have
no recollection that be did. I said, "Did anybody say

MR. CHARLES BELL: Assistant Commissioner, with the
thought that he wants a good man to do enforcement work.

I was informed?

H.M.JR: Where would you get the funds to pay him?

VR. CONNELL: Was that this last year?

MR. CHARLES BELL: He wouldn't have any problem on

MR. CHARLES HELL: The House cut ten million out of

that, Mr. Secretary. There are funds. We could get
through a classification of the job.

their appropriations because they couldn't justify this
C
C

H.M.JR: I am being a little inconsistent, but there

TRADE MARK

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c

And the other Assistant Commissioner would be a

is one thing to make the fellow an Assistant Commissioner
and there is another thing to create a job to do-- new
job to do the thing Mr. Nunan says he wants done. What
do you think of that?

policy man, over-all policy, and higher policy, it seems
to me.

MR. O' CONNELL: Be only had that job filled by two
people, both of whom were administrative nen, Harold Graves

MR. CHARLES BELL: I think it is a good answer to
the whole problem.

and George Schoeneman.

MR. O'CONNELL: That is about the same as what we

H.M.JR: May I just say again. I an groping. The
point I an getting at is I am groping for--1 think that
with one hundred twenty-five million dollars--is that

were thinking of. We were thinking of having two jobs,
one was to have a man to do the job George Shoeneman

did, and the other was the enforcement job, and most of
the people here, other than myself thought doing what
has been suggested, making him Assistant to the Commissioner-that's right--to do the administrative work and hold that
Assistant Commissioner's job for the man that the Secretary
is trying to find to head up enforcement.

what they have got there?

MR. D.W.BELL: I don't know. It is over one
hundred.

H.M.JR: That is close enough.

H.M.JR: I - not even sure of that. I as not even

sure that the Assists t Commissioner should be . man
who is really an Assistant Commissioner.

MR. CHARLES RELL: It will go to one hundred fifty.
MR. D.W.BELL: Next year it will be over that.

C

C

H.N.JR: I think there will be an Assistant Commissioner
who is an Assistant Commissioner and who is a Deputy to
him on over-oll things, and then put in two special
assistants to him, one on the enforcement and one on the

MRS. KLOTZ: That is right.
MR. CHARLES HELL: I would feel that way about it,
too.

administrative thing. Then try to get Congress, if you
people think properly of it, of making those fellows

H.M.JR: That is what is running through my mind.

Assistant Commissioners, to regularize them with some

title.

MR. CHARLES BELL: Get your enforcement man and call

him another Special Assistant.

MR. PEHLE: You may not want to make them political
jobs. You may be able to get better people.

MR. O'CONNELL: An Assistant Commissioner who is
really a second man.

MR. O'CONNELL: He means get them on . statutory
basis under the appropriation.

H.M.JR: Who does what the Under Secretary does.
MR. PEBLE: How many Assistants do you have?

MR. CHARLES PELL: That would normally follow.

MR. O'CONNELL: Two.

H.M. JR: I mean, make them statutory positions.

MR. D.W.BELL: Sherwood is one on the technical end.
He is essentially a tax man.

MR. PEHLE: What it the significance of giving them

C

a statutory position? I don't think you have to do that.

PRECISION

TRADE MARK

MICROSTATA

8

€

'

them Assistant Commissioners--Sherwood and Hankins--they

are all right in their positions, but not as Assistant

MR. CHARLES BELL: Clearance would have nothing to

Commissioners. I want an enforcement fellow, too.
you think I an thinking al ong the right lines?

do with it. They will accept it when it goes over on
the Hill,
and it wouldn't even have to be called to
their
attention.

MR. D.W.BELL: I think that certainly would strengthen
Nunan's office. There is no doubt about it.

H.K., I think there should be a top fellow over

there that has to do with enforcement. can see Nunan's

position. He is top fellow, and I would like to get

H.M.JR: And with one hundred twenty-five million
dollars going up to one hundred fifty million dollars,

Mr. Numen
Assistant
whoelse.
would be directly under him
and
would beanover
eberybody

there should be an Assistant Commissioner who is really
an assistant. Supposing you think along those lines.
Let as get this one thing straight which also is not
straight. I don't quite understand this enforcement
business with Gaston, and what's his name, Irey? What
is that setup?

MR. W. BELL: Eho would be Acting Commissioner
in the absence of the Commissioner.
MR. PEHLE: First Assistant.

MR. D.W.BELL: Refer to my namesake over there.

MR. O'CONNELL There would be one thing that might

C

be good to do on the basis of legislation. lie now have
two Assistant Commissioners, both of whom are in the
classified service paid from eight to

C

MR. CHARLES BELL: You brought Trey over here about

a year. isn't
the dollars two There any distinction nine thousand between

five years ago as Coordinator of Enforcement Activities,
and because the nature of the organization it has been

possible to take that law me are describing and build

in his own Bureau on doing a whole lot with it as between
Alcohol Tax and Intelligence. There are many separate
units, and Irey has worked along well for you on
number of special problems, special cases, and that

difficult to do whole lot with It. Nunan has trouble

under the law. I wonder if It wouldn't be

It up little in terms of salary even, because the sort

of fellow you are looking for would be hard enough to
get even at ten thousand dollars a year.

kind of thing, but I don't think the thing has functioned

H.M.JR: I don't think so. If you don't mind
differing with you, I don't think so. Did you ever my try
to get fellow to come in from private practice as

properly, the coordination scheme of things.

H.M.JR: Is Mr. Gaston responsible for that?

ment
in there.
Assistant
Comid issioner? He is willing to put an invest-

MR. CHARLES BELL: He is responsible for all law
enforcement under Secret Service, Narcotics, all of that,
Internal Revenue.

MR. O'CONNELL: That is the kind of people I
wouldn't be so anxious to get. We had a Fellow from
Chicago who WILD making forty thousand dollars a year
who would have taken that job, but I wouldn't want him.

MR. W. BELL: All the Intelligence units are under

Mr. Caston.

H.M.JR: May I throw this out to the floor? I want

c

Do

to throw this out. Come back tomorrow and talk to me
about it, but I an groping with something, and evidently
you people are in agreement with me that It is the way to
look instead of taking Civil Service fellows and making

posted

MR. CHARLES BELL: And we have kept him currently
on every move we have made. He has discussed It

with Joe, and he has had a report.
C

9

-9-

10

who is responsible directly to the General Counsel, but
here you have almost autonomous unit like Woolf's, and
he reports to the Commissioner of Internal Revenue, and
Berkshire. I don't know who reports to who. There is
no organization, but Trey is the person sitting over
here who is not responsible for their operations in
any sense that he exercises control, but he is & coordinator.
What the devil is a coordinator?

H.M.JR If you have somebody in charge of enforcement, you will have to change the thing over here, because
the authority for enforcement will have to look to the
Commissioner.

MR. CHARLES BELL: On strictly revenue matters.
H.M.JR: What does it leave?

In the Bureau under the Commissioner you need a

MR. CHARLES HELL: Secret Service, Narcotics, and

fellow with some zip to him to put . little steam into

Customs, and possibly Customs should be out of the picture
anyway, because the work is so associated with Customs
activity that it doesn't present a good enforcement
picture.

the operations of Woolf's organization, to build up an
organization, and in Miscellaneous Tax, and so forth--

someone to represent them and to represent the Commissioner,

just below the level of Commissioner.

H.M.JR: Why shouldn't Narcotics come under Internal

He'd fight for them with respect to appropriations,
and fight for personnel. He would be the one fellow that

Revenue?

MR. CHARLES BELL: It could be under State Department

c

or Internal Revenue if you wanted to do that.

H.M.JR: I don't think State. I think it should go

to Internal Revenue.

C

both the Commissioner and you could put your finger on,
and that is something we haven't had before. When you
start looking at who is responsible you get up to about
sixteen different people.
(Mr. Gaston enters conference.)

MR. D.W.HELL: That has a lot to do with Foreign
Governments. I have always questions the setup where
you have an Inteiligence Unit and a big operating Bureau
and that Bureau reports to an Assistant Secretary, and
on the side you have a coordinator who gets into all
these Bureaus under Mr. Gaston, and between the Chief
of that Bureau and Mr. Gaston. I have always questioned
that setup.

MR. CHARLES BELL: It has been 8 difficult position.

MR. PEHLE: It is legal in . sense where the lawyersI mean, in every department where the lawyers report to
the General Counsel.

MR. O'CONNELL: It is comparable. The only part-you have a legal section in each Bureau under a fellow

H.M.JR: Let me just say this. I have had quite a
talk with Commissioner Nunan on putting in a man by the
name of Hankins as Assistant Commissioner to supervise
the Bureau.
MR. GASTON: Yes.

H.M.JR: Mr. Hankins isn't my idea of a man who should
be an Assistant Commissioner, and in talking with the people
here--I want to keep this confidential--I have been thinking
out loud. Maybe a man like Hankins is all right to supervise the Bureau' 8--call him a Special Assistant, and then
this question comes un of Special Assistant in Charge of
Enforcement, which I believe you said you were for.
MR. GASTON: Yes, yes.

H.M.JR: And then the next thing 1 asked about was

TRADE MARK

MICROSTAT

MICROFILM

ROLL

12

- 12 c

he has no authority over those people in the Bureau.
He has no directing power.

what was the status of Irey, you see?

MR. D.W.BELL: What does Irey do, Herbert, as
Coordinator? what are his functions?

MR. GASTON: Yes.

H.M.JR: If we have . man over there, and I thought
inasmuch as we were discussing that and that affects you,

MR. GASTON: He holds meetings to discuss problems
and makes suggestions to people. I have asked the people
who were directly under me not to make important personnel assignments i thout discussing them with Irey.
I ask for his advice on a good many different things, and
they hold meetings to discuss mutual problems and do agree

I'd ask you to join us, because originally I was just
talking about Hankins in the Bureau.

Now, if we have a man in charge of enforcement over
there, just what would happen to Irey and his work?

on like policies with respect to classification and
handling specific cases, training, and various sorts of
things of that kind.

MR. GASTON: Well, it wouldn't have much effect on
Irey. He isn't undertaking command over the people in the
Bureau as this man would do. He is merely undertaking
to maintain contacts and coordination between all the
enforcement people of all the agencies. I don't think
his work would be greatly affected by a consolidated
command over your people over there.
C

MR. D.W.BELL: Would you say he is more in the nature
of an assistant to you on the enforcement angle?

MR. GASTON: lie is in part, but I wouldn't say he

was principally that, no. principal work is just what

e

the name implies without any power of direction over
these agencies. He tries to bring them together through
these meetings and through his suggestions on policies,
and perhaps correlating their work on cases, and so forth.

H.M. JR: Wouldn't Irey be--he couldn't call on those
people.

MR. GASTON: I don't see how that would affect his

power to call on those people. His relations with them

The Coordinator has never been equipped with any

would be the same as before.

authority over any agency except our personnel staff
which we caused to be set up directly under him.

MR. O' CONNELL: He doesn't have directive power.

MR. CHARLES BELL: Personnel investigations.

MR. GASTON: He has no command over Woolf or Berkshire

or Avis now. That possibility has been discussed at different times, but he has no authority over them.

MR. GASTON: The character investigations, and then
we had this for a time. We had the Surplus Property

Investigative staff under him. Well, it is now liquidating
work, but it is still under him, what is left of it.

H.M.JR: I'd like to raise the question of If we out

somebody there whether--I' like to reexamine this question
of Irey as coordinator, and whether that's something--he
has been there now for how many years--whether that's
worked out, whether we want to continue him of we have a
man in charge of enforcement in the Bureau.
MR. GASTON: I don't think it would affect that
problem at all. I don't know how it would effect it, because

H.N.JR: I raised the question thinking of what you

said about Internal Revenue with an Assistant to the Commissioner who would really be an assistant, and a special
Assistant who would help him in contacts in the Bureau, and
a Special Assistant on enforcement.
C

13

14

- 13 -

14

c
MR. GASTON: Yes.

If all the enforcement agencies in the Bureau
would be under this man, I raised the question that
I'd like to have it reexamined as to whether you
want Irey to have anything to do with those agencies.
MR. GASTON: You are raising the question whether

H.M. JR: And we'll see whether it is justifying
itself or not.
MR. GASTON: Yes. You mean whether Irey should be

kept on a full time job. Is that it? Or is it whether

you will drop the coordination. Is that it?
H.M.JR: Well, I don't know. Yes.

we should go on wi th the coordination?
H.M.JR: The whole thing.

MR. GASTON Well, I think YOU ought to have the
coordination in some form. of course, you can have a man
who acts as Chairman of the Coordination and of the
meetings, and have full time work on some other job

MR. D.W.BELL: Now, with this new setup in the
Bureau.

MR. GASTON: Yes. Well, as I say, I don't see how
the coordination work is affected in any substantial

but there is coordination work to be done, and I think
the coordination is a good thing, and I think it has
accomplished a great deal in our enforcement work. It
would be a mistake to drop it.
H.M.JR: Well, I'd like to discuss it with the

people here when we go into this. life will have another it.
meeting tomorrow, see? I am not too familiar with

C

Evidently Mr. Bell is, and O' Connell is, and I don't
know.

MR. O'CONNELL: Tell, I in generally familiar with
it.
H.M.JR: You are not, are you?

MR. D.W.BELL: No, I am not. I could never understand
Irey's function and the purpose of it.
MR. GASTON: Well, the purpose of It is very simple,
indeed.

MR. D.W.BELL: I could see the purpose of goordina-

but it doesn't seem to no it WB 5 8 full time job.

I tion, am probably wrong in that because I an not close enough

to it.

H.M.JH: Well, let's just have a fresh look at it.
c

degree by what you are proposing over in the Pureau.

C

H.H.JR: If you have an enforcement man over in the
Bureau, and he coordinates all enforcement activities
in the Bureau
MR. GASTON: Yes.

Birtand you run that as one outfit with Mr.
Jones in charge of enforcement, and they do this kind of
stuff I have been talking about in the last two, or couple
of days. I just want to know if you want somebody on the
outside coordinating what they are doing on the inside.
Mr. GASTON: Well, here is the situation. You have
now, dropping the Coast Guard which is not with us, Customs
Agency Service. You have two agencies in the Bureau of
Internal Revenue, Intelligence Unit and Alcohol Tax Unit.
You have Secret Service and Narcotics, and you have foreign
Funds Control to a limited extent. Now, what it amounts
to is that the two agencies in the Bureau become one in

effect, or to a certain extent. That would be the most
of the influence that would have on coordination. that
is, that the two agencies represented in the coordination

from the Bureau of Internal Revenue are under one direction
in the Bureau.

15
16
15

16

H.M.JR: Yes, but I don't know what they--as I
say, I have to be informed as to what Irey does coordinate.
I don't know. I mean, I haven't been close enough to it
for a couple of years.

H.M.JR: I would like to have a presentation to
me as though I was the Chairman of a Cosmittee on Budget

holding a hearing to justify that job with these people
as the members of the committee, see? Okey-doke.

MR. GASTON: Yes.

MH. GASTON: Do you want to set a day for a meeting?

H.M.JR I mean, I haven't seen any reports. I
haven't read them as to just what he does.

H.M.JR: Sometime tomorrow.
MR. GASTON: Yes.

MR. GASTON: Yes.

H.M.JR: I mean, what his meetings are, what he has

accomplished, and so forth. If you could get up a little
report--

MR. GASTON: Would you like to have a report on the
subject?

C

H.M.JR: Yes. I would like a report and I would
like to talk to Irey. I would like him to come in and

make a report, so to speak, to this group.

MR. GASTON: He could come in right now.

H.M.JR: I haven't the time right now. I want him
to come here as though it were a Budget hearing, and let
him make the same kind of an appearance before this group
as though this was a Budget group trying to justify his
appropriation. See what I mean, the sane presentation
he would give before a committee on the Hill, to the
Treasury's own budget group, huh?

MR. CHARLES BELL: Yes. One very important piece of

work Irey does is character investigation. It isn't
proper to locate that in any one Bureau. It is better to

have it separate.

MR. D.W.BELL: there does he get the money?
MR. CHARLES BELL: From Revenue, Procurement-from

all around.

c

May 29, 1945
10:48 A.M.
R Farm

Mr. Frank
J. Boyce:
HMJr:

-2-

17

C

standing over thirty some years over in

Yes, she has the name and all the information
As in matter of fact, I asked her to call then
the other day at Mrs. Klots' suggestion. She
wanted to know - Mrs. Klote vented to know
whether or not it would be all right to 000=
municate with them direct.

B:

the Mar Food.
Yeah,

B:

And he's the one that recommended him to 30.

HMJr:

I see.

B:

And that's all I can tell you about the follow.

HMJr:

B:

I knew that this ser over in the Ver Food his name is Joe White I know that he had a

Yes,

B:

HMJr:

lot of growers down there that he knew, 10

he put as in touch with this
grower.
who is
follow has
The
place of business over there, and he is n grower
.

so I don't know what could be wrong with him.

HMJr:
C

But, I nerro - do I buy it from the A & P. or
do I buy it from him?

B:

HMJr:
B:

Oh, no, no, you buy 11 from him.

B:

HMJr:

From him?

HWJr:

Yes.

B:

B:

HXJr:
B:

Then I'd better check up on him morelf. huh?

Yes, because you net I couldn't get anything
at all through the A & P.

HMJr:

Have ve got his name?

B:

Yes. Mrs. -- what's her name?

HKJr:

McHugh.

B:

McHugh.

B:

HMJr

As to which one it was?
Well, don't nex me.

B:

I mean - ve all knev who it use - that is, we all

HMJr:

Yeah, well.

suspected who it YES.

B:

Which 10 . better way of putting it, I guess.

106Jr:

But -- Mrs. Klots - I wes just . little worried,

Yeah, the has his hame and his address He's at
And they hav his name.

I, that no? No. I haven't seen that.
It's in the onder today.
No, I haven't seen it. I DOW the one that you where YOU were talking about some restaurant
in New York and, of course all of us follows
could immediately out our finger on that follow.

HMJr:

She has his name.

Timberville. Timberville, Virginia.

And I just - he overlooked $400,000 in income
tax for 144.

- of Longchamps.

B:

HMJr:

I broke, you know, myself, about this Machington
fellow down here. I mean I announced that we
stores down here that's breaking the OPA, and
we are after him, you see.

eat.

Yeah.

Yesh. Well, I just - I know you saw the story

and a fellow that selling to 175 butcher

I SABA just on the hunt to locate something to

HMJr:

18

FWJr:

and I just.

Well, I don't know any reason why you should be,
but,
of course,
I know
that
the same
as Me
are, to
doyou
whatare
in very
right.anxious I'd
have Mrs. Klots check the follow...
We will.

MICROSTAT

RECISION

MICROFILM

ROLL NO

-3-

May 29. 1945
12:00 A.M.

19

B:

...and make certain that he in allright. But

HMJrs

B:

HXJr:

B:

HKJ...

I mern't to any to you this morning, the
Commissioner was explaining to se how - he

HMJr:

I don't know any reason why he wouldn't be
He's
grower and he doesn't vant to work with
the Government

20

and he in trying to shorter the proceed of

law in New York by eight months by bypassing
the General Counsel It Office of Internal Revenue

Good.
DO much for that, If you're got
another Now,
minute.,

and the U.S

Sure thing.

Mr. Joseph

Our people were talking to our neighbor 40 there
Blodgett, who has 200 nores in tomatoon.

EMJr:

'Connell:

Yes.

O:

And

HOW
O:

The Department of Juntice here.

He said he explained 11 to you.

Well ve've been talking about it. We exolained
it to him 0.0 matter of fact. We've been
talking about 11 for A long time.
Well, whoer idea is that?
Oh, well. I don't know that you onn credit it
to anyone Ye've been talking about it for

several months. and we've arranged that in
streamlining our procedure that on these good
cases. instead of having them come into Washington and 5° through the Chief Counsel's office..

C

8

FKJr:

Yeeh.

Ve'1) operate on then in the field, and having
made a tentative arrangment with Sen Clars in
the Department of Justice..

O:

KMJP

Yeah.

That on on individual 0880 basis, we'll operate
on Just n summary report in here. San and indicated that 10 we can give them enough to show
that Vin vo not 0 case, that they' 11 consider

0:

letting our people in the field denl directly
with the United States Attorney's office.

RWJ

Well, now, who has to clear that?
wo'd
Yell. on an individual case basis when they turn
the summary report in here from the field,
examine it here in the Chief Counsel's office.

O:

HKJr:
0:
0

HMJr:

But I mean who OVAT in the Department of Justice?

Oh, that's San Clark, Assistant Attorney General.
He's the new Attorney General?

RECISION

TRADE MARK

MICROSTAT

MICROFILM

ROLL NO

22
21

HKJr:

0

They've got to have it 0888 in the field. They've
got to prepare their cases

0:

No. no, that's Sea Clark. Tom is the new

O:

Attorney General.

HWJr:

HMJr:
O:

HMJrs

Well, now, have you talked to him about thi of
I talked to Bour Clark about it.

HMJ

Well, he's indicated . willingness on n case
by case method to byones the Department of
Justice here, but he von't give UF a blank
check on it. He wants to and the cases.

O:

HMJr:

HWJ:

Well, how about the New York restaurant case?
01

Until the investigators have completed their
Job and made a report. we haven got anything
to take up with the Chief Counsel's office, or
the Department of Justice,

Well, would you TPE that and these two cases I
10WJr:

I see.

O:

You see?

a

mentioned yesterday?

Yes.

O:

HMJr:

And possibly with some others. Now, do you
handle that yourself, or does somebody do that

HMJr:

for your
0:

That would be handled in the Chief Counsel's
Office normally, through Phil Winchell.

O:

HMJr:

Well, tell Phil Winchell - give him a ring
will your

HNJP:

Yeah.

0:

0:

HMJr:

And say that I'd like to get about a half-dozen
different places started, sea?
0:

O:

HWr
O:

Right every, and like n report from them on it
tomorroy.

HMJr:

Yeah, well, now look - let's get this clear.
Yeah.

We can't bypass and we can't shortout -- we can't
start this shortcutting until they's completed
their investigation

I see.

When they have reached the completion of the

investigation then ve can take them right
through the Chief Counsel's office and take
them up with Justice....
Well, better just take this one here in the
District.
All right.
And 800 how long it will take to complete the
investigation.

Yeah.
O:

HKJy:

How about this case here in the District?
Well, I'd have to check because I don't know

the exact status of that. But that, as I understood it, was still in process of investigation.

ment on.
HMJr:

The restaurant one will be the first one.
The restaurant one. I understood from Joe, they
thought they would have ready in ten days.

0:

Well, that's the thing that ve would have to
take up with him. I'm sure that that is n case
very quite clearly effect that kind of arrange-

0:

Have you any that are finished, waiting?
No. Well, those that have been finished,
of course. are going through the Chief Counsel's
office and are being sent to the Department..

0:

Well, how for did you get?

Oh,

O:

0

HMJr:

All right. I'll do that right away.
Just that one.
Right.
Thank you.

E

24
May 29, 1945

12:52 M.

Mr. Joseob

Connell:

HMJr:

23

Mr. Secretary, on the Lustig case...

HMJr:

Well, you can tell then that I'm Very such

D:

Yeah, oh, sure.

HMJr

Yes.

I've just talked to Nunan about it, and I
also talked to Phil Winchell...

HMJr:

much as we can.

HMJ:

Well, it sounds dean good to no.

0:

Right. On this Washington case - the Wright

Yesh.

case.

..15 we were to take a man from our Penal

0:

Division, ask San Clark to pick a fellow
from the Tax Division in Justice and aleo
ask them to have noncone in the United
Stated Attorney's office move right in on
that case today or tomorrow to work with the
special agents, with the view to possibly
getting that 08.00 in shape to sake it to A
Grand Jury within the next week, or two at

HMJr:

O:
0

HKJr:

Sounds good.

Seems to de it would cut . lot of corners because 1: you let the investigators conolate
their investigation the lawyers are not to
find nome holes in it that will have to take
a lot longer.
Let's hear you talk in . language I understand

HMJr:

Good.

0:

But that's pretty good, that's within A week.

HKJr:

How about the Baltimore one?

The Baltimore case, I won't know until later in
the day. I don't know whether that's as for

0:

long or not.

HMJr:

And that ? 4 M Liquor once in Chicago.

0:

Well, I'11 make an inquiry about that, too.
The only one I really inquired about was the

(Laughe)
in allyou,
ILMtell
with
him,
and Well,
17 it Numan
ta here saye
able itwith

O:

Wright case.

them, Phil, to talk to San Ciarit about it this
afternoon with If view to taking that sort of
arrangement.

HHJr:

O:

Yesh. And tell his if be doesn't get anywhere
with San Clark, I vent to get in on it ayself.
Well, I know. At first I thought that n good
way to approach this problem generally was for
you to talk to the Attorney-General, the new

HMJrs

Well, try the P & X liquor.

0:

P & X liquor and the Spivak.

HMJr:

Right.

01

0. K.

HMJr:

But that sounds good.

O:

All right, we'11 go ahead. Thank you.

one.

HMJr:
O:

No.

But. unfortunately, he isn't the Attorney-General

until the first of July. so then...

Yeah.

The reports of investigation from the special
agente and the revenue agents will be in our
hands Saturday - not before then.

01

the most.

HMJr:

You know, I've been saying that there must be
some vay to shortout this thing.

Well, there undoubtedly 10, and ve'11 cut it as

0:

neked him 10 11 isake sense I

0:

interested, 8007

0

26

May 29, 1945
2:00 P. M.
25

0
HMJr:
Wt

HMJr:

Hello.

Operator:

Mr. White

HMJr:

Harry.

Mr. Harry

White:

HMJr:
W:

HMJrs

HMJr:

- the one to T. V.
Boong on gold to China. Hello?

I's listening sir.

HMJr:

Do you want those to go across your deak?

No. the nor that you (Laught) take care of
the better it is as for 5.0 I'm concerned.

Vi

HMJr:
W:

KWJr:

(Laughs)

VI

And If 1: is important, it deserves time.

HMJr:
V:

HMJr:

V:

HMJr:

W:

you got time to initial a letter?
I've got time to initial any letter that you
have the slightent doubt about. You send it back
.An5 I'll see that it gets my initial.
Wait a minute - BAY letter I've got to stem -

before I sign it I'd like you to initial it.

O. K.

HMJr:

If it in important enough for no to sign it then

W:

Well, that isn't always true, but I'll be glad to

I think

do that.

I'll see you n little later.
0. K. air, Hello?

10Wg:

Yes,

1:

We had a very successful meeting this morning
up at the informel meeting at the House Foreign
Affairs Committee. There were about eight
members there and V# spent a couple of hours.
Dean Acheson and I.

HMJr:

Tell me a little later.

Wi

0. K. Bye.

informed later because I get a 0007 of what Coe

turns out. Now : don't look at them currently,
but nonetime within A week or 80 following I
usually - read them over the weekend.
Well, now, this in an important letter. Have

No the girls have got it 80 that there are

O. K. if it in unimportant, I can initial it quickly

Well, how do I know that you know?

Well, I don't know. IC I haven't initialed it,
I haven't seen the letter. But I usually get

No more. O. K.

W:

Now

V:

No more.

only the important onea to sign.

Yes.

V:

Well, I mean there are . lot of routine letters
that you sign.

Hello,

While you were absent, and one thing and another,
I've had Coe's letters dome directly to me.

Or vice verse.

HKJr:

Eye.

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May 20, 1945
3:00 p.m.
TEXTILES TO CHINA

Present: Mr. D. W. Bell
Mr. White
Mr. Coe

Mr. Pehle
Mr. Friedman
Mr. Stevenson
Mr. Scheuer

Mr. Willsuer
Mr. Adler
Mr. Crowley

H.M.JK: May I interrupt you, if you don't mind?
I just want to make certain. They said that this cotton
is to be delivered to the head of the United States
Army Services and Supply. They would receive it, General
Cheeves.

MR. WILLAUER: That is now General Aurand.

That question has not been officially raised with us but
I know that General Olmstead, who was here, told me he
had worked out with Dr. Soong that that amount was going
to be handled directly by our own Aray.

Mr. Clayton

(Mr. Patterson and Colonel Denton enter the conference.)

Mr. Small

Mr. Turner
Mr. Gordon

Mr. Patterson
Colonel Denton

Hr. Farris
o

MR. WILLAUER: I assume there will be no difficulty
the Chinese' consent if that is requested by

the
a It'snew
in gettingwe
Army itdo
that way.
not procedure to
deliver things to the United States Army there. They
own

deliver
military
lend-lease
that to
way,
we
haveall
notheir
official
request
from anybody
do itthat but
way.

MR. WILLAUER: The forty-five million yards a quarter

or total of ninety million yards are justified on the
grounds they will be used for direct military purposes,

that is, to purchase food and equipment for troops. and
as a matter of leral interpretation of the Lend-Lease Act,
leaving policy aside for a moment, I don't think anybody
could question that amount would be lend-leasable.

MR. SCHEUER: Would it be acceptable to the Chinese?

MR. WILLAUER: We haven't any official word from then
but Dr. Soong has been pretty liberal on any terms we
wish to impose on them. Knowing him as well as I do, I
think be will say yes.
MR. CLAYTON: 1 think what he wants is to get the

(Mr. Turner, Mr. Small, and Mr. Gordon enter the

textiles into China.

Mr. WILLAUER: The United States Army has asked to

but I think we will want a letter from him, you see,
before me say we will do it that way.

conference.)

to on record officially in the letter from the Under

Secretary and in other places stating that the United
States Army wants to obtain fifteen million yards a
month which is ninety million yards during the six
months we are talking about which the Army proposes
to take and use to procure food and other supplies
for the Chinese Army. Therefore--

MR. WILLAUER: ne has consented to do it this way

MR. COE: Is It your point that some part of this

should be lend-lease, because we had thought that the

Chinese were willing to buy all of it?

30
29

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MR. WILLAUER: There are two end uses for the total

MR. WILLAUER: Just a minute. The Chinese have said

pool of textiles. The first end use is tc be manipulated

that they would like to have it all on lend-lease if they
could,but If they can't get it any other way, they will

by the United States Army to barter and supply United
States-Chinese troops with equipment.

pay cash, but they have asked us to do it on lend-lease
where we think it can be done and I have recommended to
Mr. Growley that the part which is ninety million yards,
If the United States Army wants to handle it directly

MR. CROWLEY: That, you think, will be ninety million
yards.

for direct war supplies to the Chinese, it is clearly a
lend-leasable thing from a legal point of view, and the

MR. WILLAUER: of the total pool that's supposed to
be ninety million yards. As Sidney points out, there's
another complication. We're not going to get ninety
million yards out of United States, and we can't do lendlease on the Brazilian thing. If it looks weak, we are
going to get fifty million out of ninety million out of

balance is clearly cash.

MR. SCHEVER: These off-shore purchases are entirely
different.

the United States, it will only be that fifty that will

MIL WILLAUER: That's right. The off-shore purchases
the Chinese have already said they are going to pay cash
and the USEC is doing it. Now, how that will work out in

be lend-leasable, but there will be a theoretical right
if there is ninety million,We can furnish it.

the ninety million, I haven't figured out yet. It depends
on how much they get out of off-shore and United States

0

funds.

MR. CROWLEY: If they use their own money, what

0

MR. SCHEDER: Be are vulnerable if we go and pay
extremely high prices over and above domestic ceilings
in foreign markets to supply on lend-lease.

right would we have to take their cotton and their
textiles and give it to our Agray to be used for barter?
MR. WILLAUER: We can't.

MR. CROWLEY: All the Army gets is the amount we have
lend-leased to them.

MR. WILLAUER: I an not suggesting that at all.
A question would come up, Sidney, if you got less
than ninety million out of the United States.

MR. WHITE: The question is whether, now, as I understand it, that the mere position of purchasing power to
buy cotton is in itself quite inadequate to obtain the
cotton, there are two other elements necessary. One is
to ship it and the other to buy it, even if you have the
money. Both of those latter two are done, as understand
it, entirely through the good offices of the United States
Government and therefore you can't exact quid pro quo on
any terms you think reasonable, and I was under the impression that that is what was being done, because in Mr.

MR. SCHEUER: well, this is very apparent from this.
MR. WILLAUER: To an extent you do.

MR. SCHEDER: You would get about twenty-five million

from the United States in the next quarter as I understand it.
MR. WILLAUER: That's right.

Patterson's letter here it specifically states they are

going to take it over for the Chinese Government. What they
are going to do is see that it is going to be used under such
conditions for the best interest of the Army, and that would
have to be ascertained. Those would be conditions which

H.M. JR: It still isn't clear in my mind.
0

31

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32
a

the Chinese Government would be willing to accept to
compensate you for the trouble you are going to in shipping
the goods and depriving somebody else of those goods. So,
It seems to me the question resolves itself to. as far as
discussions have gone, to the President, whether you want
to give them the stuff even though they say they are
willing to pay for it or whether you should--

MR. COE: It's difficult when you have a country
come in asking that some of their dollars--loaned dollars-asking in writing to use it for textiles, and you come
along
and say,
lend-lease
it to"No,
you.we want some lend-lease policy to
MR. WILLAUER: Well--

MR.
CHOWLEY:
Harry,ascouldn't give then the stuff
we are
going
to try to acquire.

H.M.JR: Could I make a suggestion? It seems to
me from listening to the conversation, as for as American
cotton cloth which originates in the United States, which
isn't much, it seems to me without consultation with other
people that you would have the right to lend-lease then
that If you wanted to have it delivered to the United
States Army. Now, then, the other question comes up
making avilable to them this cotton in South America,
and
would
like to suggest for that purpose they use
their Iown
money.

MM. WHITE: Acquire within the United States.
K CHOWLEY: we can give them under lend-lease the
amount we can acquire in the United States.
it.

His. WHITE: They said they are willing to pay for

a

MR. COE: They have said that in writing.

$

MR. PATTERSON: You can exact in a condition to all
deliveries in China no matter where they come from There

MR. CROWLEY: I think that's-MR. WILLAUER: That's what they are doing, sir.

is not the slightest doubt of the Chinese agreeing to it.

this is

Mr. Secretary.
MR. CROWLEY: That's what he is willing to recommend,

MR. WILLAURR You cut across the whole question of

lend-lease ability to Shina on this thing. You have got
here a clear military end use. and If you say that the
textiles that are going to to directly for the benefit

H.M.JR: But I would, before making it available, I
would insist that it be--even cotton from South America-States
Army.
be
delivered
to the Services and Supply Unit of the United

how about the
the troops are not lend-leasable,
uns and of

everything else? It's a very much bigger question than
these textiles. That is one of the reasons I am making

VR. CROWLEY: In order to tie it in and get the benefit
of the over-all--do you think you can do that?

you a

generally recommendation understood to the you,because Chinese have It's a a billion fact that dollars it

In this country, but there are other claims on it and I

MR. WILLAUER: I think so, to the extent the United
States Army is prepared to handle it. There's a too limit
on that ninety million yards, and there's more in this
allocation. If the United States Army is prepared to

am not so sure,Mr. Crowley, whether as a of policy
want to have piecement solution of matter the over-oll

question whether the Chinese are entitled to any lend=
lease, whether they have spent one billion dollars.
0

-6-

handle more and wants more, that is a separate question.

MR. CHORLEY: The rest of the countries didn't do that.

MR. CLAYTON: There's not much more than that in the
a

allocation, about one hundred and five, maybe, in the total.

33

34

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MR. WILLAUER: That's right, but there is some-MR. CLAYTON: Over a period of six months that would

MR. CROWLEY: I don't think that's quite as firm.
I'll have to call on Mr. Willauer. He manipulated around
that all morning with Jack Small, here.

be very little a month.
MR. PATTERSON: I an greatly gratified to see allocations

MR. PATTERSON: I wonder whether the Chinese aren't
taking a chance.

made in the third quarter for forty-five million yards. I
is being reorganized. It's a difficult situation, and they

MR. CROWLEY: That's not as secure as having it
come out of our own supply, Bob, but they think there
is a better than fair chance they can carry that.

rapid change for the better, and they are for the first
time conducting a real defensive. Those are not just

distribution?

guess you all know that the large part of the Chinese Army

have already made a very promising beginning--whole scale.
The fighting in China is, we believe, going to undergo a

MR. PATTERSON: Why not spread that over the whole

newspaper stories either, and the hopes of our Army people

over there are high on getting a real effective effort
against the Japanese in China. If they don't lick them,
we have got to. So that I mean, if the Chinese don't
lick the Japanese, the American forces mist do the job,
and so it's decidedly for the benefit of the United States
to see that Chinese operations are a success and it's
not without very fair prospect of success. For the first
time now in three and one-half years they are on the go.

0

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a

MR. CROWLEY: Take it out of military and all?

0

MR. PATTERSON: Well, there is quite an itemization
here. You have got the Chinese down here for only twentythree million yarda out of one hundred and twenty-six.
Way don't you add twenty-two to one hundred and twentysix and make them all take a chance on that thing?

MR. SMALL: The Brazilians are supplying lot
of other Latin American countries and other liberated

MR. CLAYTON: That's fine.

areas in Europe.

MR. PATTERSON: This will go a long way toward
MR. CROWLEY: I don't think--the Combined Board of
the WPB and FEA have worked days and days on this thing,

solving their logistics and supply problems, but we

think It imperative that control of it in China be

and this is the best they can do.

supervised by the Army people there to make sure that

all the textiles do go to the support of the Chinese
forces there rather than to some over-all thing that
would be a mere drop in the bucket for her and really
not be directed to the intended use. Only we haven't
done so well on--1 don't like to find fault with anything, but I wonder whether the allocation of the
twenty-two million yards from Brazilian and Mexican
production may not be a when, as, and if allocation,
and not as firm as the other allocations.

MR. CLAYTON: Has this Brazilian and Mexican stuff

been bought?

MR. SMALL: There are non down there now.

JR. CLAYTON: It hasn't actually been bought?
MR. CROWLEY: Some has been bought, hasn't it, Sidney?
MR. SCHEUER: No.

0

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35

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T

MR. PATTERSON: of course, it goes to the-benefit
of the Chinese troops, but--

MR. PATTERSON: That's a diversion. It was intended

for the French, wasn't it?

MR. CLAYTON: Certainly.

MR. SCHEUER: This doesn't involve the diversion.
This is free, over and above.

there.

MR. PATTERSON: It's not as contingent as I thought.

MR. CROWLEY: Would it be all right, then, with
everyone along the Secretary of the Treasury's side
that we will give them on lend-lease whatever we give,

MR. CLAYTON: It may be If it hadn't been borrowed.
You're not sure they can get it?

if it's ninety million or fifty, whitever it may be,

from our own resources, but what's acquired from Brazil
and Mexico whatever price they pay for it comes out of
the whole fund, and then We will try and tie it di 1 in,
the whole program, and allocate it to the Army for their

MR. SCHEUER: They have an understanding with the

Combined Board to supply these quantities.

MR. CLAYTON: But the mills down there are the ones
who have to supply it.

purposes?

MR. WHITE: Bob, this is assuming a slightly different

MR. SHCEUER: The Government has undertaken to do

that. Whether the Government can do what it has proposed
to do, you know better than I.
0

aspect than I thought. Is it your thought these textiles
will be used by the troops? Not that you will use it in

0

whatever way you see fit, although you expect some advantage
to accrue.

MR. CLAYTON: They have been working night and day,

and they have all kinds of commitments and orders. I
was wondering whether they are in a position to do it.

MR. PATTERSON: I think all they want the Army to do

The price is very influential down there. It in in most

there is to make sure that the Chinese use it for the
supply of their troops.

MR. SCHEUER: We are going down with the highest
prices for the Chinese.

use?

places, and certainly down there.

MR. WHITE: This cotton is to be allocated for troop
GENERAL DENTON: It's purely barter. There will be

MR. CLAYTON If they can get this total quantity,
Bob, the maximum, say, of one hundred five million for
six months--that's about seventeen and one-half million
a month. If you take seventeen and one-half--

no troop use except as money.
MR. PATTERSON: They are going to use it as money.

They will take it out of the country, as I see it, and
trade textiles for food.

MR. PATTERSON: That's right.

MR. WILLAUER: That's the Army plan.

MR. CLAYTON: I think it should all go to the Army
and the Army should have distribution of It.

MR. BELL: The Army was morely going to be in charge.

They weren't actually going to distribute it.

MR. CROWLEY: Leave a few.
C

a

MR. PATTERSON: But we would make sure it did go

37

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MR. PATTERSON: They can get supplies to the Army

13. WILLAUER: Do you want me to state the position?

by use of textiles.

MR. CHOWLEY: Yes, sir.

MR. CLAYTON: You can see it gets the widest and

MR. WILLAUER: It's proposed that of the total
allocation of about one hundred and five million yards

most profitable distribution.

of textiles that part will be procured in the United

MR. PATTERSON: For what we need.

States and part will be procured in South America,

Brazil and Mexico. It further proposed that such
part as is procured in the United States up to an
over-all celling of ninety million yards will be on
lend-lease. It's now estimated that that part which
will be procured in the United States will be approximately
fifty million yards. All balances which are procured out-

MR. CROWLEY: Is that all right?

H.M.JF Yes. Why don't you restate the thing so
we will be sure we all understand it.
MR. CROWLEY: Whitey, you go ahead and set the thing

side of the United States will be for Chinese cash to
be obtained from the Treasury.

up, how we are going to pay for it, so we get it all on
the record.

MR. CLAYTON: Yes, that's fine. I imagine also one

15. FELL: Their OTTE cash to be released.

of the first things to do is make contracts for it and

C

make sure you get it contracted for and bought. Allocations
and purchases, procurement, are two different things.

C

H.M.JR: It's their our cash.

MR. CROWLEY: We are trying to get one thing settled
here so we can get on and get out those contracts.

15c. WILLAUER: Released from the Treasury instead

of obtained. All to the method of control of these
textiles, it is proposed ze attempt to work out with the

MR. CLAYTON: Yes.

Chinese an agreement whereby all textiles, regardless
of where purchased, will be turned over to the United
States Army in China for the operation of supply
programs for Chinese troops and other United States
military needs in the themter.

H.M.JH: Just so--we have a request from Kung for

thirty-five million, is it?

MR. ADLER: Twenty-five million for the textiles.
H.M.JR: Twenty-five million of their own money, to
release that money to buy cotton goods, and what I was
answering him verbally WILS I wasn't going to give him

H.M.JR: All these would be turned over. What you
mean is that the APRIL will take possession at the mill
and will see that this stuff is transported and delivered.

another letter until he showed me he had the goods. If
he wants to use it for this purpose, I don't know what
that stuff costs a yard.

it. WILLAUER: The kay that sort of thing has been
handled in the past, Mr. Secretary, I think is applicable
here. What re could very simply do is not to bring the

MR. WILLAUER: We are figuring about thirty cents.
0

H.M.JR: Whatever he wants, if he has this, we will
release that much money to buy this, but I an not going
to give any more blanket letters.

15. CHORLEY: In tying your program.

E

Army into a problem of taking delivery now in Mexico and
that
sort of business,but consign these things to the Army
in China.

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H.M.JR: Is that all right?

MR. PATTERSON: You haven't come to the allocation.

MR. PATTERSON: Yes.

MR. SMALL: I pointed out, Mr. Secretary, and I
thought you didn't catch the point, that the firm
allocation being made here is for the third quarter.
This one hundred and five million we are talking about
for the second half-year includes firm allocation for
the third quarter plus our best guess what is going to
happen in the fourth quarter. The fourth quarter portion
is not yet firm and will not be firm until that other

MR. SCHEUER: You have two elements. would that

include the merchandise that is in India now, the yarn,

the cotton, and so forth. Will they also have the dis-

position of that, the Army?

MR. WILLAUER: I think that's an important point.
I an recently informed by one of If men just back that

allocation is made.

practically all of that Indian finished textile stock-

pile is either scross the Hump or in the pipeline across
the Hamp, and I think you are 8 little too late to set

H.M.JR What are you giving them on this firm
agreement?

anything up on that.

MR. SKALL: Twenty-three million domestic plus twentytwo million Mexican.

MR. CLAYTON: I don't imagine you could tie that in.
They bought that there themselves with their own money.
0

H.M.JR The rest has not yet been made?

MR. SCHEVER: That's clear. It's understood.
a

MR. SMALL: We haven't made it firm for anybody.

MR. WILLAUER: We understand some of it has already

been sold under their program.

MR. SMALL: I think so. So there is no mistake about

this thing, first, this is not an allocation of one hundred
and five or ten million in the second half of the year. It's
an allocation of forty-five million which includes domestic

plus your Combined Board's twenty-two million from Brazil
and Mexico in the third quarter. The twenty-three plus
twenty-two in the fourth quarter is an estimate of what
we think will be available.
MR. CROWLEY: That's right. That's all you could do.
MR. SMALL: I wonder if Mr. Morgenthau got that.
MR. PATTERSON: The third quarter is firm and the

fourth quarter is not so firm.

MR. SMALL: The fourth quarter is an estimate.
c

MR. CROWLEY: All you could do in any of those quarters--

H.M. JR: I think I understood that.
MR. SMALL: The other point is on the Army control of
this thing. General Olmstead said that out of the fifteen
million yards a month which they were asking for, ten million

were use

yards which for direct by the Army and enbarked along

their supply route. Five million yards are going to Chungking
for use in the mills around Chungking and then are to be
used by the Army for barter. I an not sure there is any
difference in the Aray handling them, but I want to point out
you should leave some flexibility in the Army's using it in
China.

GENERAL DENTON: I have some knowledge on that, Jack.

There is no difference. The ten million is to be used
geographically in the section the troops will be operating
on the sunply line direct to the troops and geographical area
where the fighting is and supply lines flow. The five million
is for us in barter, similarly, but with those who are not in
the geographical fighting area, and generally around Chungking.

41

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15

Mic. WHITE: There is no question you want to give
them this cotton on lend-lease. When they asked for the
gold there was a commitment. There is nd commitment on

this cotton. You still want to give it--

MR. WILLAUER: Unless you want to go into the whole
question of lend-lease to China.

a

May 29, 1945.
3:20 p.m.
LEND-LEASE, CHINA

Present: Mr. D. W. Bell
Mr. Pehle
Mr. Coe

Mr. White

Mrs. Klots

MR. WHITE: Why go into the whole question when they

are talking about paying for this cotton?

MR. CLAYTON: This would be military lend-lease,

wouldn't it, to supply the troops?

11k. PATTERSON: No, it's not. It has not been
handled that way at any rate. It's FEA's program.

C

MR. CLAYTON: Yes, but as a matter of fact, it is
really military lend-lease because the proceeds from
the goods should goto supply the Chinese troops.
MR. PATTERSON: That's true anyway of having it

on lend-lease, will.

10. CLAYTON: I wouldn't think so, Hob.

MR. PATTERSON: The only difference is this: I think
here that there is a closer control at destination and an
assurance that the benefit of these shipments will TO
to the Chinese military forces. It's not exactly like

the of have
weapone which they use themselves. I would say that on
disposition
acquisitions
that we
in this
countrylend-lease
that this one
was anFEA
program.

MR. SCHEVER: This sets up a new pattern in the

first place.

H.M.JR: All right, gentlemen. At your service.
MR. WHITE: Well, do you want to take up the question

of lend-lease policy on countries other than England? Is
that what you want?
H.M.JR: Yes.

MR. WHITE: Well, this is the document that the State
Department had expected you to sign and they modified it.
Do you want to carry the ball?
MR. COE: Yes.

(Mrs. Klotz enters the conference.)

H.M.JR: Just before you start, Harry. I wrote my
own letter to Stettinius. (Discussion off the record.
MR. COE: Before we begin that, Mr. Secretary, as you
requested, we cleared this executive order and programs
investigating the German and Japanese assets. There are
three of these copies to sign. We got Grew's and Markham's
signature and 1 wondered If We could get yours.
H.M.JR: Oh, you want to do business. I just wanted

to have some fun.

MR. PATTERSON: It could perfectly well be lend-leasable
rights.

MR. SCHEVER: China had a great credit extended to then
which was not the fact in many cases so they started on a
different presumption.

MR. COE: Since we have got all the others lined up
I thought we better get yours.

H.M.JR: All right.

42

41

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16

MR. WHITE: There is no question you want to give
then this cotton on lend-lease. When they asked for the
gold there was a commitment. There is no commitment on

this cotton. You still want to give it--

as far as lend-lease is concerned on extending lend-lease
on direct military material. There's no question about that.
The question is as to the wisdom of establishing, in view
of that credit, immediately at the jump-off, consumer goods
on the basis of lend-lease. That's the point you made.

MR. WILLAUER: Unless you want to go into the whole
question of lend-lease to China.

for the gold, despite the fact we felt it wouldn't achieve

MR. WHITE: In addition to the fact, when they asked

anything, they said that was something that was a ommitment
if
some
have
and
concession to
it.
abided
Now,
give them in the way of establishing a new pattern of
lend-lease goods to China, I should think that would be
& major consideration, and they are willing to pay out
money. It may be you won't give them lend-lease on a
lot of things. That should be considered independently
and not be made one parcel. There is a question of
giving them cotton goods.

10. WHITE: Why o into the whole question when they

we

are talking about paying for this cotton?

MR. CLAYTON: This would be military lend-lease,

wouldn't it, to supply the troops?
11k. PATTERSON: No, It's not. It has not been
handled that way at any rate. It's FEA's program.

a

MR. CLAYTON: Yes, but as a matter of fact, it is
really military lend-lease because the proceeds from
the goods should goto supply the Chinese troops.

view

MR. CROWLEY: In Hou of what we have done for the

rest of our allies, I would think we would be justified

0

MR. PATTERSON: That's true anyway of having it
on lend-lease, will.

in putting this amount that we have from our own resources
here through lend-lease.

MR. BELL: On the basis in the end that it is military.

here at an
MR. CLAYTON: I wouldn't think so, Hob.

MR. CROWLEY: Yes.

MR. PATTERSON: The only difference is this: I think

H.M.JR: What else is there?

that there is a closer control destination and

MR. CROWLEY: That's all have.

assurance that the benefit of these shipments will go

to the Chinese military forces. It's not exactly like

MR. WILLAUER: You did raise a question which I didn't

reapons which they use themselves. I would say that on
the disposition of lend-lease acquisitions that we have
in this country that this one was an FEA program.

answer yet to raw cotton which they are purchasing in
India for cash. The degree of control on that, as far as

the United States Government is concerned, is rather tenuous

in that we are not in on this deal in any shape or fashion.
But I think I was asked what we were doing on that. I
should think you would treat that like their own stockpile
and not monkey with it. Actually, that raw cotton is not
going to be given by our Army, but by the Chinese to be
put in their own mills.

15. SCHEUER: This sets up a new pattern in the

first place.

Mr. PATTERSON: It could perfectly well be lend-lessable
rights.

C

we

by

Mr. SCHEVER: China had a great credit extended to them
which was not the fact in many cases 80 they started on a
different presumption.

3

44
43
May 29, 1945.

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0

MR. COE: If you sign those three copies and keep

one for your files.

3:20 p.m.

(Secretary signs "Memorandum to the President,
concerning German and Japanese assets, dated May 30, 1945.)

LEND-LEASE, CHINA

Present: Mr. D. W. Bell

MR. PEHLE: Which comes first, Harry?

Mr. Pehle

MR. WHITE: Fun, always.

Mr. Coe

Mr. White

H.M.JR: We don't have much fun around here.

Mrs. Klots

MR. COE: When we read the papers it sounds as though
you're having fun.

H.M.JR: All right, gentlemen. At your service.

H.K.JR: You know that we suddenly found a way. They

MR. WHITE: Well, do you want to take up the question

wanted to try to do in three or four days--

of lend-lease policy on countries other than England? Is
that what you want?

MR. PEHLE: Important guy.

H.M.JR: Yes.

MR. D.W. BELL: Yes.

MR. WHITE: Well, this is the document that the State
Department had expected you to sign and they modified it.
Do you want to carry the ball?

H.M.JR: Yes. This fellow in Tashington. They are
going to move simultaneously, the Attorney General, the
General Counsel in Internal Revenue, plus the investigators
They are going to move together at one time and hope to
get indictment by Saturday. Joe said they're short-cutting
It eight months.

MR. COE: Yes.

(Mrs. Klots enters the conference.)

MR. PEHLE: That's wonderful.

H.M.JR: Just before you start, Harry. I wrote my
own letter to Stettinius. (Discussion off the record.

MR. WHITE: like is responsible for that? who is behind
it?

MR. COE: Before we begin that, Mr. Secretary, as you
requested, we cleared this executive order and programs
investigating the Gernan and Japanese assets. There are
three of these copies to sign. we got Grew's and Markham's
signature and 1 wondered If we could get yours.

H.M.. JR: Me.

MR. PEHLE: All the hell in the papers it must have been.
That was a good press. I read all of it fifteen minutes ago.
Very good press on tax drive. Very good. It's all good.
Just the right emphasis, I think.

H.M.JR Oh, you want to do business. I just wanted

to have some fun.

MR. COE: These you simply initial. (Secretary initials

MR. COE: Since we have got all the others lined up
I thought we better get yours.

H.M.JR: All right.

Memorandum to the Secretary from Frenk Coe and H. L. Hoffman
concerning disposition of German and Japanese property

0

interests in the United States, dated May 25, 1945, also,
"Program Relating to Vesting and Disposition of German and
Japanese assets Proposed Jointly By Alien Property Custodian,
and Secretary of the Treasury, dated May 30, 1945.)

46

45
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Q

MR. COE: Then there's a rumor around town, at the
instigation of some Congressman there's some meeting at
the White House scheduled to discuss Crowley's lend-lease
And that gets us into this second thing. State's of
this one and one-half page

H.M.JR: I thought we were having a conference here,
not writing lessons.

MR. D.W. HELL: Better read them. It may be a
resignation. You never can tell.

a what theywiththink
Congress,in
and a

MR. COE: This is going to Budget Bureau now.

budget. got recent program up conversations detailing statement accordance which press (attached) they release with say

which Clayton showed you on Sunday, and

cleared with the President on what the next period's

MR. D.W. BELL: These days on personnel matters they

was lend-lease program should be. They have been trying to

stick B sheet of paper in front of you with & place for
you to sign, and you have got to turn over the flaps if
you want to see what you're approving. I always approve
then blind. I'm afrald my resignation may be inside some day.

push it through so that Crowley could have this guidance
for his budget and appropriation matters.

H.M.JR: Well, I note--if I may interrupt--that
White made a very cogent remark the other day.

MR. COE: Well, on this general lend-lease one there

are two things we should tell you first. One is that on the

VR. WHITE: Cogent, or kosher?

matter you gave the President from Brand-- Brand rang up late
last night to inform us that Churchill had given some communication, the contents of which he didn't know, to the
President. He wanted you and Judge Vinson to know though.
C

H.M.JR: He has written me. A letter case today and I
just made up my mind I wouldn' do anything. I sent it

H.M.JR: Both--in which he said that he didn't see
why Crowley needed my approval. Why can't he go ahead
with his own damn budget?

O

MR. COE: They can, but they still want to get through
the White House a statement of policy to be followed now
that V-E Day has come, which is the logical thing.

back to one of you gentlemen so you would know the letter

came in from Brand. I said I was going to sit tight; I

wasn't going to call up the President and ask him, because
the President is in the process through McKim--he is going
to let me know whether he wants me to handle it or not.

MR. WHITE: Which takes the lead.

MR. D.W. BELL: Why should he need your approval, or

MR. WHITE: Moreover, it doesn't have that degree of
urgency the British are making out.

is it the President's?

MR. COE: Crowley's people are always running to ask
for copies. I said I knew something had been given you but
I wasn't handling it.

MR. D.W. BELL: He never has before, except the first
one. when he went up, you went up and testified on it.

H.M.JR: Vine.

H.M.JR: I don't see why he needs it.

H.M.JR: of what?

MR. D.W. RELL: Strictly speaking, I don't see why
should pass or the budget of Crowley any more than
you anybody else, but it's tied in with all this foreign

MR. COE: Of whatever it was that Brand gave you and
Judge Vinson.

financial field, and it would be a good thing if you know

MR. WHITE: I think he ought to get a copy.

MR. COE: We'll have it in here for you to give
Crowley at three o'clock.
H.M.JR: Sure.

about it.

0

46 A
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47
=6=

8
H.M.JR: I'm waiting for the President to tell me
whether he wants ae in on it. If he wants me to get in

H.M.JR: No. we raised the whole thing.

tells no.

MR. D.W. BELL: Yes.

on it I will, but I'd like to unit until the President

MR. WHITE: I thought it was only U.K.

MR. D.W. BELL: That's the better course.

MR. WHITE: If the President tells you--I think you
have this in mind, haven't you--you're in . position you
ought to get it in writing very clearly.

MR. D.W. BELL: of course, the other question goes into
a much broader aspect, the whole governmental setup.

But you did raise the British phase two, didn't you?
H.M.JR: Yes.

H.M.JR: From the President, absolutely. I'm not
going to take anything by word of mouth. I go a step

MR. WHITE: Precisely the same criteria and the same
interest prevails with respect to France, Belgium, and
Holland. Wouldn't you agree on that score? There's no
difference between theirs and the British arrangements.
The only difference--

further. I want it in writing and I want it made public.
MR. WHITE: That's right. It would be a headache

at best.

0

H.M.JR: Don't you see, I've learned this thing.
I'm not going to take it any more. I hold these meetings
for two months and at the end of it all these articles
come out. The French are starving and freezing, and
I'm the one who is holding this up, and this is wrong
and that is wrong, and Churchill gets on the floor in

MR. COE: Yes.
O

President Friday, see. and why not let me write a memorandum

Parliament and thanks Lord Keynes for the wonderful job

to the President: "My dear Mr. President: Mr. Crowley

he did, and I never get even a line. I'm not going to

has asked me to clear the following memorandum to you,

take it. I was willing to take it from Roosevelt

and I'd like to get guidance from you. Do you or don't you
want me to"-well, or something or other. "Just what part
do you want me to take in lend-lease?

because I was his friend, but I want a little more now.

MR. WHITE: If he wants you to do it, let it be a
clear Presidential directive. There's no need for secrecy

MR. PEHLE: won't you be pressing him for the job?

in the matter.

I would interpret it that way.

H.M.JR: I don't see why, and you never can do this
thing, because you're going to hurt Crowley's feelings.
Let the President make up his mind. It's like the
business about who is going to be head of the Advisory
Committee on Bretton Woods. Congress has said--at least
the Committee has said-I'm chairman. he're all in
agreement. Look-MR. WHITE: That only applies to the U.K. That's
the only question you raised with McKin. Now these others
relate to lend-lease on the other matters.

H.H.JR: The only question that may occur with the
Russians is political divisions. I'm now seeing the

H.M.JR: Why not set it out. Just take the position-MR. WHITE: I'd sit it out. Let somebody else bring
pressure. Let the State bring pressure or go ahead with
what they want to do without you, and I think the answer-MR. PEHLE: They only want you when they want your

help on something difficult.
a

MR. WHITE: Supposing the Secretary were to say it's
not clear to him under the new arrangements whether his

48
49
a

a

signature is required or whether the President wants him
to play that part.

MR. COE: Now there should be a lend-lease policy
post V-E Day. They have got a document on it and talking
with Crowley's people, and talking--

MR. COE: Suppose, except through us, it hasn't
arisen? Suppose we just any to State, under present
arrangements you go ahead with what you request from us.

H.M.JR: If the President tells me to go ahead,
continue with this committee,we one for England, and
the name thing would be true for the other countries.

MR. WHITE: But that the Secretary reserves the right
to raise this issue.
later.

MR. WHITE: There, If that's the way the directive

MR. COE: We may have to raise financial considerations

reads, if there's to be a directive, that should include

MR. WHITE: That's right.

H.M.JR: It's no longer a question of the budget. It's
a question of policy.

the other countries as well.

H.M.JR: What?

MR. COE: No.

MR. COE: Suppose we say to State, who have asked us

whether we agree or disagree with these policies before
they put them un to you formally--that's what they've
done--and suppose we say to State on that that we're

c

not prepared now to say who ether we agree or disagree.

If there's a need for speed, go ahead. We may have to reopen
the matter later on financial grounds.
H.M.JR: But they go in without any.

MR. WHITE: That leaves you free to reopen the question
on financial considerations, which you can determine, depending on what role the President would like you to play.

H.M.JR: You wouldn't say that to him?
MR. WHITE: I wouldn't say that.

H.M.JR: What do you think, Dan? Don't twist it around.
I've given--this is all In connection with Crowley appearing

before the House and Senate.

MR. COE: No, sir, no longer. It Was that. That was
the 0 tated reason for urgency.
H.M.JR: Now:
a

H.M.JR: I'd sit tight until we hear from the President.
What do you think, Dan?
a

MR. D.W. BELL: How long could this hang fire?
MR. WHITE: Indefinitely.
MR. D.W. BELL: Certainly.
MR. WHITE: They're going ahead.

MR. COE: They'11 probably push it to the White House.
MR. PEHLE: Anyhow--

MR. COR: In my judgment if we give them this answer,
Clayton is going to come over here or send a fornal document
to the Secretary- "Do you agree or disagree?* And the

Secretary, if he's of the same mind, will have to say the
same thing over again, and then 1 think they will push it
to the President saying that they haven't got anything.

MR. WHITE: No. If they send a formal document to
the Secretary, "Do you agree or disagree" then he takes
it and makes a decision. we examine the financial situation,
and he cones to a decision, whatever it is. If he agrees,
all right. If he disagrees, he says he disagrees, and

51

50
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and asks for a formal decision.

MR. D.W. BELL: Yes. Be may not put that in a formal
memorandum because you remember he said that,"I understand

that was an informal committee.

MR. DOE: He can put that up to the President and
ask im again. This is one more example of the same
thing. Do you want this handled this way?

H.M.JR: Well.

MR. WHITE: If he keeps coming back to the President

MR. D.W. BELL: "And it's my recommendation you continue on

within a few weeks on this, the President is going to get

that basis and wind up the British.

the impression he's being pressed for something and you

MR. WHITE: It Was wound up. The report to the President
wound up the ommittee and it should be reopened in a formal

want something.

MR. D.W. BELL: Isn't this a memorandum to the President
which he's supposed to approve or disapprove?

fashion.

H.M.JR: I'm going to insist on it.

MR. PEHLE: You could take his name off of there.
MR. D.W. BELL: You said that they would submit to you
formal document. Isn't this a formal document?

a

MR. DOE: It's not the final document.
O
C

MR. D.W. BELL: I see.

MR. D.W. BELL: That wasn't clear in his conversation
with you, 1 don't think.
H.M.JR: It was a result of a conversation between
Roosevelt and Churchill. It couldn' have been more informal,
but if he simply called no on the phone and said, Do you

want this thing. I'll say, If that
you the
don't
mind.I'll send
President should send
over

MR. COE: The only reason we're checking up is that
we know issues have been raised at the White House. Otherwise, we could go ahead with informal check with the Secretary.

MR. D.W. BELL: It might be that you would get a decision
on that phase 2 British problem very shortly. McKim talked
the other day as though he knew how the decision was going,
but he wanted to clear the air in the State Department.
Now if he could get that,and then have your meeting on that
British problem, and then say, "Well, don' we want to do
the same thing on other governments?

MR. WHITE: The person to tell that to is McKim. If
the word oones forward to handle it the same way I imagine

the Secretary has in mind clarifying that in some kind of
order. Then the question should be raised with McKin-these other problems are before you right now and how does
he want that handled?
H.M.JR: If McKim saya to no, "The President wants you

to continue on the lend-lease, I'll say, 'If he does, would
you please include these other countries?"

a

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0

suggested

memorandum

me, and as long as he wants me to do this, I'll ask to include
the other countries too.
MR. WHITE: Instead of doing that, you might say,
"After he does that, how does he want these handled?

H.M.JR: Well, the gist of this is, let's sit it out
a little longer.
MR. D.W. BELL: A fow days, until they put the heat on.
H.M.JR: May I take up one thing along these lines,
and that's this cotton for China, see? I saw Krug at the
whi to House last night, and he said Well, you've got it."
He said "I spoke to Garshall, At first he implied he had
spoken to Marshall, and when I asked him, he ovidently
had directly checked with Marshall, whether the Chinese
were doing a good job, and Marshall said, "Yes." He said
"Do you agree this is to go with the Army? He said "Yes."

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H.M.JR What Krug didn't know was who pays for this?

I said, "Where are you going to get it?" He said, "I
can't tell you exactly, but we're getting it. Most
likely it will come out of civilian supply. Now one

MR. COE: Well, we talked with the Army and the Army
understands that the Chinese pay for it. we checked today
with FEA and it's true that FEA had been proceeding on a
vague assumption that it was to be lend-leased. I tried
to get the Chinese man, but 1 think we'll have to take care
of that at the meeting. We have a request for the Chinese

of you men sound out the Chinese as to whether--

MR. COE: Yes. I talked to Clayton this morning
and gave him an extract of the kind of understanding
which we wanted, and told him that the only basis on
which We could possibly get this for them was on military
necessity, and that if it was on the basis of

to use out of their loan twenty-five million dollars for
textiles, and one of the other bits of business that I'd
like to get done, either now or after your three o'clock
meeting, is sign a letter to Kung hich we say it's
okay for in to use out of the loan twenty-five million
dollars for Chinese textiles. They also want to use
thirty-five million dollars for bank notes.
H.M.JR: You've got to wait before we sign this letter,

was of

have necessity, to have. this He said the that kind he would understanding we military would

get to T. V. Soong,

either in a wire or on the phone on it, and he seemed
to be very pleased about it. We also made it clear that

although the Army was going to set the terms and conditions
for this, It was our present understanding that the Army

did not want itself to engage in the active sale out there.
That seemed to be all right, or at any rate they know about
it.
0

MR. D.W. BELL: That's the Army keeping control of it?

because this thing here--I 'n dealing with 7. V. Soong.

MR. COE: We have checked. We got one nan who worked

for both Hsi-Tenou, and he told us that it was agreeable

0

and was understood among them. See, Soong kicks Kung so

far down now that in the family traditions apparently he's
being a little easier on him. That's our interpretation
of it.

MR. COE: That's the Army keeping control.
MR. D.W. BELL:

But not actually selling.

H.M.JR: Here's what 1 don't get. If he has this
twenty-five million dollars he can buy this cotton, and
he's going to say, paid for it. You can't tell no where
this cotton is roing.

MR. COE: Setting conditions under which it's to be
disposed of. The only rub on this is that we expect the
Chinese
on
them. to buy this and that's quite a condition to impose

MR. WHITE: He can't buy it, and it's not available,
and he can't ship it.

MR. WHITE: It isn't because of purchase price. That's
a small part. It's the availability of the goods and the
shipment.

MR. COE: We have told him--

H.M.JR: When we go in there--this isn't quite clear.

signed it and he can have cotton.

MR. COE: Six thousand tons, forty-eight million yards,
at the and of the quarter.

MR. WHITE: He can have cotton under these conditions,
because shipping is so scarce and cotton so scarce, it will
only be relieved on military need and actual necessity.

H.M.JR: Forty-eight million?
o

H.M.JR: Excuse me, I don't want a letter saying I

They say thereare going to be how many bales in a quarter?

MR. COE: Forty-five to forty-eight million.

o

55

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MR. PEHLE: The fellow who sells it to then gets a

H.M.JR: Harry, I learned the hard way.

tremendous commission.

MR. PEHLE: He can use money to buy cotton, but the

availability of cotton is another question. Sign the
letter on that basis.

he's-

MR. PEHLE: He made a fortune that way.

MR. D.W. BELL: You put the conditions in the letter?

MR. D.W. BELL: He gets a percentage of everything
that's sold over there.

H.M.JR: No, no.

MR. COE: No. We have just given the Chinese the

H.M.JR: the is Bill Hunt?

conditions in an informal memorandum.

(Discussion off the record.)

H.M.JR: You tell Dr. Kung when he can show no he can

buy the cotton I'll let hin have the money, see? I won't

MR. COE: We can't get the air space, Mr. Secretary.

cotton, then I'll--no more letters outstanding for me.

H.M.JR: Air space?

give him any letter. When he shows me where he can get the

Tough may.

MR. D.W. BELL: Frank, haven't we been going on the

c

assumption they're going to pay for this cotton in dollars.

0

MR. COE: For the gold. We can't get the air space
unless you ring either Marshall or Stimson.
H.M.JR: Tell Bob Hannegan, or somebody, this afternoon.

MR. COE: We have, the Army has, but FEA hasn't, and
we're straightening them out.

MR. COE: I think I want to say one more thing. Soong

thinks it is easy to get this over by plane for over the

MR. WHITE: This thirty-five million dollars for
currency is a racket. They paid twenty before. There's
part of another bank note, Coe, in which one of their
boys has an interest. lie tried to run it down before now.
Thirty-five million dollars is quite & sun.

Hump, but sending stuff out by air from here now, all
planes are roing for this specific thing, and we've come in
to this at the end of the time they--

18. WHITE: Frank, he'll be glad to have it go by ship,
and he'll supply the ships.

MR. D.W. BELL: It's the Wright Bank in Philadelphia.

H.M.JR: Kung said, "Give ne the gold and I'll move it."

MR. WHITE: That's one of them.

Let him move it.

H.M.JR: You've got to be careful on this one, because
first thing you know they will say, "We're very sorry.
We'd love to supply the Army with the currency, but we

MR. COE: We told the Chinese that.
IR. WHITE: The trouble is we made a decision--unless
you want to change an important decision--that we would
help on the shipping, because once it's out of our hands,
we have no control in the case.

haven't got any.

MR. WHITE: You can buy an awful lot of currency for

thirty-five million dollars.

0
0

MR. WHITE: I suspect so. This fellow, Bill Hunt,

--

57

56

SHORET

FOR THE PRESIDENT
a

-15-

a

Subject: Lend-Leases Policy After v-8 Day

MR. COE: We've got it scheduled for ships. We're

Press Releane No. 433 dated Day 14, 1945 of the Department of State

doing that.

presents general considerations and policies concerning the continuation
of lead-lease after Tea Day which have been approved in principle by you,
the Secretary of the Treasury and the Foreign Economic Administrator.
the recommend the following specific directives for carrying out these

H.M.JR: Let it go on the ships.

policies

1. the United Kingdom and Pritish commonwealth
The Phase 2 program dream up in our November 1944 disensions

with theirritish and Deminion representatives, with much adjustments

an supply considerations require should be carried out, subject to

review from time to time in the its of the understanding that

there will be proportional recovversion in both the United States
and United Kingdom.

2. U.S.S.
Policy directive approved by the President en May 11, 1945.

3. Under the 2(c) Agreement
0

(a) Telgium

will deliveries should be made of the schedule under the
April 3(c) Agreement in the amount of $325,200,000.
(b) The Netherlander

zull deliveries should be made of the schedule for Holland
under the April 3(a) Agreement in the amount of $242,000,000.

Recential civilian supplier for use in the N.E.I. would,

for by the Commander in Chief, U.S.
to forward on

when
pacific, shipment
lend-lease Tide program terms
untilArma
theapproved
and ofForces,
hostilities
in thestraight
Pacific.

should be reviewed from time to time in the light of the

understanding that the United States should receive such

reverse lend-lease aid as the N.M.I. is in a position to supply.

C

O

58

-(a) Drance:
Delivery should be made under both schedules in the

February 3(c) Agreement in a total of about $1,600,000,000
which would make the French schedules roughly conform, on

an over-all value basis, to the period covered in the
Belgian and Dutch agreements.

(d) Shift from Straight Lend-Lease to 3(a) Deferred Payment
Terms:

Types and quantities of Steat contained in the programs
for Belgium, Holland and France which have a direct relation
to the further prosecution of the war should be provided

under straight land-lease until you direct to the contrary.
In determining what items have a direct relation to the
prosecution of the war, appropriate weight should be given

to information provided by the military authorities. The

balance of the items remaining in the schedules should

promptly be placed upon the deferred payment terms specified
in the agreements, but procurement should be undertaken only

with respect to such items as can be delivered before
January 1, 1946 unless they are of a type urgently needed for
sustaining the divilian economy and delivery cannot be effected
before such date even though orders are promptly placed. Pending
the consideration by the Congress of other moans of financing
these urgent requirements, this policy would be presented to the
Congress for its approval.

4. Other European Countries
Scall straight land-lease programs should be continued for
Csechoslovakia only through fiscal year 1945 and thereafter shipments
should be made only on term of payment. Shipments to Metropolitan
Norway should be made only on terms of payment.
5. Fax Eastern Areas and Saudi Arabias

No change of policy is required. or course, should the
military campaign repult in the opening of access by sea to China,

the possibility of increased shipments will immediately arise.

Acting Secretary of State
0

Secretary of the Treasury
Enclosure - Department of State
Press Release No. 433

Foreign Economic Administrator

RECISION

MICROFILM

TRADE MARK

ROLL NO

59

MAY 29 1945

Dear Mr. Smiths

Thank you for your letter of May 25 in whi eh you
refer to the massage from Sir John Anderson and Mr. Oliver
Lyttleton. The massage has new been transmitted to - and
to Judge Vinson through Mr. Brand and are Henry Self and :

can assure you that the matter is receiving our careful consideration.

Allow - to express my appreciation for the understanding and cooperation you have shown is our dealings with

each other during your stay here as Minister Resident for

Supply. It is with real regret that 1 learn of your Lestnent departure and the severance of our relationship. Please
accept BY personal best wishes.
Sincerely yours,

(Signed) M. Morgenthave in

Mr. Then Smith,

Minister Resident in Tashington for Supply,
lex 680,

tenjania Franklin Station,
rashington, D.C.

LMC:bpg 5-29-45

3203

THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA

OFFICE or THE

BOX 680

CABINET MINISTER

BOUAMIN FRANKLIN STATION

RESIDENT de WASHINGTON

WASHINGTON D.C.

FOR SUPPLY

May 25th,1915.

Dear Rr. Secretary,

You will be receiving fros Vr.limni
and Gir Benry 2017 6 telegram Than air John Amicrion and

Mr. Oliver Orticitan to Julgo RIBS yourself.

I thought 1 should exigilain that I

worlIn ordinarily have associated green with Lts letter
to you but for Lim fact UNI I NO leaving Almost Inrediately
for ingland upon relingulement or NO office U.S. U.K. Vinister

Levident for Supply in Gisbington. This follow upion the
dissolution or the National Government in the 2.20

: should like to take this opportunity
of expressing to yea my personal regrete st having to sever

my imahington
and you would also
to to atress U.S. serious maxisto HIS within the inr

Cabinet view the Implementation or the N concluded

during the disquasions List FILL for LLA CIT supplies to the
Date

with kinseat repards.
Yours glocerely,

Benomina
cen

Winluter Healtient In for
The lion. Benz Margent/nu, Jr.,
Secretary of the Treasurer
Washington, D.C.

MICROFILM

ROLL NO.

61

HM Jr took this memorandum with him

when he went to see the President on

June 1st, but he didn't show it to him.

63

-23. Philip Gaethke is to be in charge of mining operations.

62

Gaethke was formerly connected with Anaconda Copper and was

manager of its smelters and mines in Upper Silesia before the
war.

MEMORANDUM

4. Philip P. Clover is to be in charge of handling oil

matters. 110 was formerly a representative of the Socony

May 29, 1945

Vacuum oil Company in Germany.

5. Peter Hoglund is to deal with industrial production

problems. Hoglund is on leave from General Motors and is
said to be AD expert on German production.

Liautenant-General Lucius D. Clay, as Deputy to General
Eisenhower, actively runs the American element of the Control
Council for Germany. General Clay's three principal advisers

6. Calvin B. Hoover is to be in charge of the Intelligence
Group on the Control Council and is also to be a special adviser
to General Draper. In 6 letter to the Editor of the jlow York
Times on October 9, 1944, Hoover wrote as follows:

on the Control Council staff are:

1. imbassador Robert D. Harphy who is in charge of the
Political Division.
2. Louis Douglas, whom General Clay describes "as =y
personal adviser on economical, financial, and governmental
matters". Douglas resigned as Dir ector of the Budget in 1934:
and for the following eight years he attacked the government's
fiscal policies. Since 1940. Douglas has been president of
the Mutual Life Insurance Company and since December 1944,
has been a director of the General Motors Corporation.

"The publication of Secretary Morgenthau's plan
for dealing with Germany has disturbed me deeply
such a Carthaginian peace would leave a legacy

of hate to poison international relations for
enorations to come the void in the economy of

he

Europe which would exist through the destruction

of all German industry is something which is difficult to contemplate.

Brigadier-General William Draper, who is the director
the Economics Division of the Control Council. General
Draper is a partner of the banking firm of Dillon Reed and
3.

7. Laird Bell is to be Chief Counsel of the Economic
Division. He is a well-known Chicago lawyer and in May 1944,
was elected the president of the Chicago Daily News, after

of

Company.

the death of Frank Knox.

One of the uen who helped General Draper in the selection
of personnel for the Economics Division was Colonel Graene
Howard, a vice-president of General Motors, who was in charge
of their overseas business and who was a leading representative of General Motors in Germany prior to the war. ioward is

Sunday's New York Times contained the announcement of key
personnel who have been appointed by General Clay and General The

Draper to the Economic Division of the Control Council.
appointments include the following:
R. J. Wysor is to be in charge of the metallurgical
1.
Wysor was president of the Republic Steel Corpora-

the author of & book in which he praises totalitarian practices, justifies German aggression and the Kunich policy of

appeasement, and blames Roosevelt for precipitating the war.

matters. tion from 1937 until a recent date,and prior thereto, he was

associated with the Bethlehen Steel, Jones and Laughlin Steel
Corporation and the Republic Steel Corporation.
2. Edward S. Zdunek is to supervise the engineering
section. Prior to the war, Mr. Zdunek was head of General
Motors at Antwerp.

)

ROLL NO

PRECISION

TRADE MARK

MEMORANDUM
3. Philip Gaethke is to be in charge of mining operation

May 29, 1945

Gaethke was formerly connected with Anaconda Copper and was

manager of its smelters and mines in Upper Silesia before the

war.

Lieutenant-General Lucius D. Clay, as Deputy to General
Eisenhower, actively runs the American element of the Control
Council for Germany. General Clay's three principal advisers
on the Control Council staff are:

4. Philip P. Clover is to be in charge of handling oil

matters. He was formerly a representative of the Socony
Vacuum 011 Company in Germany.

1. Ambasaador Robert D. Murphy who is in charge of the

5. Peter Hoglund is to deal with industrial production

Political Division.

2. Louis Douglas, whom General Clay describes "as my
personal adviser on economical, financial and governmental
matters' Douglas resigned as Dir ector of the Budget in 1934;
and for the following eight years he attacked the government's
fiscal policies. Since 1940, Douglas has been president of
the Mutual Life Insurance Company and since December 1944,
has been a director of the General Motors Corporation.

problems. Hoglund is on leave from General Motors and is
said to be an expert on German production.

6. Calvin B. Hoover is to be in charge of the Intelligence
Group on the Control Council and is also to be a special adviser

to General Draper. In letter to the Editor of the New York

he

3. Brigadier-General William Draper who is the director
the Economics Division of the Control Council. General
Draper is a partner of the banking firm of Dillon Reed and
of

Company.

Times on October 9, 1944, Hoover wrote as follows:

"The publication of Secretary Morgenthau's plan
for dealing with Germany has disturbed me deeply
such a Carthaginian peace would leave a legacy

of hate to poison international relations for
generations to come the void in the economy

of

Europe which would exist through the destruction

of all German industry is something which is diffi-

Sunday's New York Times contained the announcement of key
personnel who have been appointed by General Clay and General

Draper to the Economic Division of the Control Council. The
appointments include the following:

1. R. J. Wyoor is to be in charge of the netallurgical
matters. Wyoor was president of the Republic Steel Corporation from 1937 until a recent date,and prior thereto. he was
associated with the Bethlehem Steel, Jones and Laughlin Steel
Corporation and the Republic Steel Corporation.
2. Edward S. Zdunek is to supervise the engineering
section. Prior to the war, Mr. Zunek was head of General
Motors at Antwerp.

cult to contemplate.

7. Laird Bell is to be Chief Counsel of the Economic
Division. He is a well-known Chicago lawyer and in May 1944,
was
elected
the president
of the Chicago Daily News, after
the death
of Frank
Knox.
One of the man who helped General Draper in the selection
of personnel for the Economics Division was Colonel Graeme
Howard, a vice-president of General Motors, who was in charge
of their overseas business and who was a leading representstive of General Motors in Germany prior to the War. Howard is

the author of a book in which he praises totalitarian practices, justifies German aggression and the Munich policy of
appeasement, and blames Roosevelt for precipitating the war.

MICROFILM ROLL NO
5/29/45

Cretary decided not to take this memorandum
to the President.

68

-20

In the present war the Gernans have committed
unspeakable strocities which make the brutalities of
World war I seem like child's play. The facts are too
well known to be repeated here. The President and the
Congress, and other Allied leaders have repeatedly
proclaimed to the world that the fiasco of World aar I
sould not be repeated and that all German criminals would
be promptly seized and punished at the conclusion of this
war. At Moscow President Roosevelt, Prime Minister
Churchill and Premier Stalin pledged that we "will pursue

67

THE SECRETARY OF THE TREASURY
C

MEMORANDUM FOR THE PRESIDENT

the to the uttermost ends of the earth and will deliver
them to their accusers in order that justice may be done.

These solemn declarations also gave some hope and courage

Re: PUNISHMENT OF WAR CRIMINALS

I an fearful that unless we drastically change our
attitude toward the punishment of war criminals we will
have an even worse flasco than we had after the last
World war. If we do not quickly and without red tape
bring about the punishment of a substantial number of
these criminals EO will not only BOW discord among the
United Nations who have suffered at their hands, but
we may well be responsible before the bar of history
for helping contribute to future offenses against
international law and humanity.
At the end of World war I, an Allied Commission
prepared a complete list of offenses against law and
humanity perpetrated by the Germans and stated that it
constituted "the most striking list of crimes that has
ever been drawn up to the shale of those who committed

O

them. The Commission recommended a program for the

trial and punishment by the Allies of the individuals
responsible for such outrages. But the international

law experts (and unfortunately the American representstives on the Commission were the most outspoken

obstructionists) found technical objections to such
punishment. In addition, the Geruans said that the
whole idea was unfair, so the Allies turned the matter
over to the Germans to handle. Of the thousands of
Germans guilty of serious crimes, only twelve were
brought to trial. Six of these were convicted the

severest sentence was four years imorisonment. Two of
them subsequently managed to "escape" with the connivance
of the German authorities. And the criminals were free
to plan new and unheard of strocities for the next
war.

QUICTORS

to the pitiful German victims, some of shom today, half
dead and bearing the terrible scars of their inhumar
treatment, await anxiously the fulfillment of our promise.
Unfortunately, recent events have created a justified
and growing uneasiness among all peoples of the world that

o

our pledge will not be carried out. The notoriously
ineffective and dilatory tactics of the War Crimes
Commission; the reports of dealings with the "Flensburg"

admirais and generals; the genial conversations and
luncheons with Goering; the installation of such
notoriously guilty persons as Von Papen, Krupp, and
Schacht in comfortable chateaus and on the Isle of Capri

all of these facts and others give ample reason for the
feeling that the German criminals will escape again. But
reason for doubting that we really mean
thatprincipal
the Allies have
business the
is failed to produce a
simple and uncomplicated procedure for the prompt
punishment of war criminals which will be understood
by cossion new everywhere as a moans for doing essential
justice rather than a maze constructed by lawyers to
baffle laymen and to delay punishment of the guilty.

Some say that we will be condemned by history if we

not adhere to all the technicalities and complexities
of Anglo-American jurisprudence in the prosecution of
war criminals. But I think that such a course is more
likely to earn us the condemnation of history by letting
the German criminals go free again. The recent sedition
trial here in Washington furnishes . frightening preview

do

PRECISION

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MICROSTATA

MICROFILM

ROLL NO.

70

69

:

of what will undoubtedly happen if we attempt to transplant
our technical legal procedures to Germany. We cannot let
such a thing occur if we are to keep faith with the peaceloving peoples of the world and carry out our oft-proclaimed
intention of bringing the German criminals to justice
promptly.

I do not mean to suggest or imply that German war

criminals should not be given a fair trial by military

tribunals. The idea that war criminals should be brought

to trial rather than dealt with on & political basis has

considerable merit provided that the procedures which
are established are unencumbered by the technical delays
and defenses which even under our own system frequently

impede the execution of essential justice. simple and
expeditious trial Licht serve to desonstrate to the
world that we 88 civilized nations are able to bring
to justice in regular letal methods those who have

committed unspeakable crimes against humani and might,
accordingly, increase respect for ourselves and for law

and order. But if criminals known to the whole world
by their acts are permitted to delay punishment by
reliance on technical legal rules, we would earn the
ennity and disrespect of world opinion. The question,
therefore, is whether a procedure can be devised which
will afford the defendants some of the privileges
afforded to defendants under our normal criminal
procedures and which will not at the cane time impede
the punishment of those already convicted at the bar
of world opinion.

If we force these military tribunals to follow the

technical procedures and custome of an American court,
such as the Supreme Court of the United States, I greatly

fear that motorious criminals will be permitted to delay
or avoid punishment by reliance on technical legal rules.
And from what I have learned of the present plans of the

lawyers who have been appointed by this Government to

prosecute war criminals, I an convinced that we are

heading for a glorified "sedition" trial which is likely
to have disastrous consequences.

-4It seens to me that the following two basic principles
should govern our position in this matter:
(1) In accordance with the Nos oon statement on

atrocities of November, 1943, the Allied military

authorities should hand over, upon demand, all Germans
requested by any United Nation who are alleged to have
committed offensen against the nationals of such United
Nation. The only exception would be in the case of
major war criminals whose offenses have no particular
geographical location. The Germans turned over to any
United Nation would be tried and disposed of according
to the Laws and procedures of that nation.

(2) with respect to those criminals who are not so
turned over to any of the United Nations, the important

thing is that these people be tried by military tribunal

under the most simple and expeditious procedure that can
be devised. The respect which the people of the world

will have for international law is in direct proportion
to its ability to meet their needs. The one way of
assuring that the trial and punishment of war criminals
will produce & cynical public opinion, particularly

among those who have been risking their own lives to
destroy the forces which these war criminals set into
notion, would be to attempt to apply the same procedures
which we use in dealing with ordinary criminals.

PRECISION

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MICROSTATA

ROLL NO.

72

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
(1

DateMay 29,
1945
TO

FROM

/30/45

Secretary Morgenthau

Colonel Bernstein

with respect to our recent discussions on
the investigation of the international asset

71

position of Germany I recommend that you hold
a meeting attended by representatives of State,

Gave Mr. White copy of this memorandum

Treasury, Bar Justice, F.E.A., Alien Property
Custodian, and O.S.S. The following points are

and told him that the Secretary said he
would like to have Mr. White hold this

recommended for the agenda:

meeting, If White thinks this is all right.

1. Need for coordination between governmental agencies relative to such investigations.
0

2. Attachment to the Finance Division of
U. S. Group Control Council of personnel from
such governmental agencies to conduct an integrated investigation.
3. Need for development of a procedure
whereby the War Department distributes to interested agencies material developed in the field
by such investigations.

ROLL NO

73

THE SECRETARY OF THE NAVY
WASHINGTON

may 29.

The Honorable

The Secretary of the Treasury

by dear L. Secretary:
i is will acknowledge receipt of your letter of 10 May 1945
concerning the availability o: certain officer and enlisted
personnel for assi creent to the Finance Division of SHAEF.
I beg to advise that by virtue of their present assignment to
constant duty all but one of the Navy personnel so requested
are not now available. Lieutenant Lawrence C. Moore, se(s),
73838, now on duty in the European theater is available for
assignment to STARF, and he will be so ordered.

for the purpose of supplying up to date information for your
records the reminin men requested are DE igned as follows:

artin Lieut. S(I) 297761

0

has had training in the Japanere lan mage and

is not at Poor1 rbor.

906-89-29

AIRBY, John J. 57/c V-6

but aboard the U.S.S. WILKED BARRE
Ensign JV(S)

REMIS. Joseph
Duty aboard the U.S.S. SOUTH

Lt.(3-) SC(R)
The
Paul
:
with our the 1.0.0. SAVO ISLAND

Lt.(5 ) S(.)

362793

249105

335455

the U.S.b. MANILA WAY

2. ichard C.

but

Lt.(5) D

276029

oard the U.S.S. ACHEE

1st Lieut. USNC 038286
Robert
J.
standcuarters Soundron 35. Marine Aircraft Group 35.

tine Corpt Air Station, .1 Centro. California
are been trained or special cuties and is scheduled
or infinent ansi ment oversees to aviation activities

in the Pelic area.
0

PRECISION

MICROSTAT

MICROFILM

ROLL NO.

I appreciate the urgency of the request of the Tar Department
upon the Treasury De partment for assistance in furnishing
financial experts to assist SHAEF in its program, but I believe

you will agree that in its overall aspects the war effort-will

not be enhanced by movies who actively engaged in
the continuing war against Japan, from their present billets.
Sincerely yours,

Toustal

0

76

75
MAY 29 1945

MAY 29 1945

Dear Kr. Ball:

I as enclosing for your information a copy
of a letter received by ae from Mr. Thomas B.

Dear Mr. Ball:

McCabe, Army-Navy Liquidation Commissioner,

This letter will serve to introduce
to you Mr. James 3. Knowleon, who is to

Washington, D. C., together with copies of my

serve as Central Field Commissioner in the

reply and letters of introduction which have been
transmitted to Mr. Jases S. Knowlson, who is to

European Theater of Operations for the ArmyNavy Liquidation Commission.

serve as Central Field Commissioner in the

As I have already advised you, it will
be appreciated if you will give Mr. Knowlson

your full cooperation in the execution of
his task.

European Theater of Operations for the Army-Navy
Liquidation Commission.

It will be appreciated if you will give
Mr. Knowlson your full cooperation in the carrying

out of his difficult assignment.
Sincerely yours,

Sincerely yours,

(Signed) H. Morgenthau, Ja

Mr. Theodore Ball
U. 3. Treasury Representative
c/o American Embassy

Paris, France

(Signed) H. Mergenthau, Ja

Mr. Theodore Ball
U. 8. Treasury Representative
c/o American Embassy

Paris, France
Enclosures

JWP:1hh 5-24-45

JWP:1hh 5-24-45

77

MAY 29 1945

Dear Mr. NcCabe:

I have your letter of May 22 with regard
to the contemplated departure for Europe of
Mr. James B. Knowlson, who is to serve as Central
Field Commissioner in the European Theater of
Operations for the Army-Navy Liquidation Commission.

Pursuant to your request, I as enclosing

herewith letters introducing Mr. Knowlson to the
senior Treasury Representatives in London and

Paris. I as also enclosing letters which have
been written by se to our representatives.
Sincerely yours,
(Signed) H.

Thomas B. McCabe, Commissioner

Army-Navy Liquidation Commission
New Var Department Building
Washington 25. D. C.

Enclosures

JWP:1hh

5-24-45

PEDICTORY
BUY

AVE

OFFICE OF THE

ARMY-NAVY LIQUIDATION COMMISSIONER
NEW MAR DEPARTMENT BUILDING

- REPLY REFER NE

WASHINGTON 18. D.C.

22 May 1945

MDOLO:312.1

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

Dear Mr. Secretary:

Xr. James 8. Knowleon, Chairma of the Board of
Directors and President of Stevart- Marmer Corporation, has
kindly consented to leave his business and come with my

office in the capacity of Central Field Commissioner in the
Buropean Theater of Operations. He contemplates leaving
the United States for Europe around the first of June and

would like very much to obtain letters of introduction from
you to your senior representatives in London and Paris prior
to his departure.

I contemplate delegating to Kr. Knowleon full authority
for the disposal of Army-Jary purpluses in the European
Theater. He will also be expowered to net for and in my name

to the naxima extent possible. I should appreciate It If

you would pass this information along to your representatives
in London and Parts. Copies of your letters to them would

also be helpful, I fill sure.
With kindest regards,
Sincerely yours,

THOMAS 3.

Commissioner

MPRECISION

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MICROSTAT

MICROFILM

ROLL NO

AUTH Please
SECRET

INITIALS
DATE

Continued.

Lot No. 5 consisting of 43 kegs serially numbered CBO 491
through CBC 533 with a total weight of 10,291 pounds, displacing

The Honorable,

43 oubic feet, with a total value of $4,970,000.62. Each keg

The Secretary of the Treasury.

should be marked MENT-L-OFD-OFD 158 and this shipment is to be

delivered to the Port Transportation officer, Los Angeles Port

Dear Mr. Secretary

of Embarkation, Wilmington, California, on 10 June 1965.

Reference is made to your letter dated 16 May 1945 relative to

the shipment of gold to China,

This will confire arrangements made through this office for the
shipment of 700,000 ounces of gold contained is five lots which is
allocated for May shipment by water details of which have been
furnished by telephone to Mr. Lipenan's office.
Lot No. 1 consisting of 4h kegs arially numbered CBC 313

through CBC 356, with a total weight of 10,570 pounds, dis-

placing his cubic feet, with . total value of $5,058,223.24.
Each keg should be marked RENT-E-OFD-OFF 19 and this shipment

was to be delivered to the Port Transportation officer, New York

Port of Embarkation on 26 May 1945.

It is understood that the Treasury Department is making all
necessary arrangements to transport the gold to the ports of embarkation
to arrive on the dates indicated above with insurance effected by the
final consignee.

The Commanding General, India-Burna Theater will be advised by
War Department radio the number of the vessel on which the kegs were
loaded with request that arrangements be made for the acceptance and

delivery of the kegs to Mr. F. P. Ling, Manager, Bank of China, Calcutta,

India.

is agreed with Mr. Lipeman, vouchers will be forwarded to the
Treasury Department monthly to cover the ocean freight charges in
connection with this and subsequent shipments.

Lot No. 2 consisting of 4b kegs sorially numbered CBC 357

Sincerely yours,

through CBC 400, with . total weight of 10,307 pounds, displacing
44 cubio feet, with a total value of $4,973,002.16. Each keg

(Signed) A. H. CARTER

should be marked RENT-K-OFD-OFD 155 and this shipment is to be

delivered to the Port Transportation officer, Los Angeles Port

A. H. CARTER

of Embarkation, Wilmington, California, on 2 June 1945.

Major General, 050

Fiscal Director

Lot No. 3 consisting of 45 kegs serially numbered CBC 401

through CBC 445, with a total weight of 10.374 pounds, displacing

45 cubic feet, with a total value of $5,002,243.02. Each keg

should be marked BENT-K-OFD-OPD 156 and this shipment is to be

delivered to the Port Transportation officer, Los Angeles Port
of Embarkation, Wilmington, California, on 2 June 1965.

Lot No. 4 consisting of 45 kegs oorially numbered CBC 446

through CBC 490, with a total weight of 10,342 pounds, displacing

45 cubic feet, with a total value of 4,989,455.39. Each keg

should be marked RENT-L-OFD-OFD 157 and this shipment is to be

delivered to the Port Transportation officer, Los Angeles Port
of Embarkation, Wilmington, California, on 5 June 1965.

2

PPRECISION

TRADE MARK

MICROSTAT

-

MICROFILM

ROLL NO

**** **********

RICHARD

BEN DUBOIS

COUNSEL

THE INDEPENDENT BANKERS ASSOCIATION
OFFICE OF THE SECRETARY
EXECUTIVE COUNCIL

May 29, 1945

SAUK CENTRE MINN.

Dear Mr. DuBois:

May 26, 1945

I want to thank you personally and on behalf
of the Independent Bankers Association for the
splendid assistance you have given us on the

Bretton Woods legislation. You gave us real support
when we needed 11 most, and I know - can count on

Hon. Henry Morgenthau, Jr.

finally wan.

Treasury Department

Secretary of the Treasury

your continued assistance until this battle is

Washington, D. 0.

Your understanding of the House Committee

Dear Mr. Secretary:

action is quite right. The Committee did not

modify the Bretton Woods Agreements 11 arely

made certain assendments in the enabling legislation

which will not in any way cripple the Agreements.
Sincerely,

Ve are as happy as you are in the report of the House Banking and
Committee on the Bretton Woods Agreements. Ye understand that

$

Currency the Enabling Act was recommended by the smittee with the Agreements

practically as written.

Your very truly,
(Signed) H. Morgenthau, Ja

Secretary of the Treasury

Ben DuBois

Secretary

Mr. Ben DuBois
Secretary

The Independent Bankers Association
Sauk Centre, Minnesota
BD :A

AFL1000

82

83
@

May 29, 1945
MAY 29 1945
Dear Edit

I an glad to learn that Mr. White was of help at
Dear Dr. Soungs

the Conference. I fully appreciate shat a difficult task

with reference to - letter of Magr 16. 1945, I sish
to inform yea that U.S.460.152.342.45 have been transferred

from the credit is the - of the Government of the

you have had to keep things going so well and how hard

Republic of Chiss with the United States treasury. and
1,714,265.703 fine ourees of mM valued at U.S.899.999.999.98

you must have been working.

agent of the Government of the Republic of China' gold

service toward the end, I shall, of course, urge him to

have been commanded for *The Central Bank of China as fiscal
account, with the Federal Reports Bank of New York.

the following summerises the and of the gold:
Cost of 1,714,265.703 fine customer

of gold at 635 per cases.

If you feel that hrs White can be of any important
return. I know you realise how busy be is here and that

you wouldn't ask for him you bad real need of his
$99,999,999.58
150,000.00

1/4 percent headling change

Labor, immediation end

2,342.87

Insurance costs.

services.

Good Inc and congratelations on the excellent job
you are doing.
Sincerely,

$60,152,342.45

Total cost

(Signed) Jessy

1 wish to assure yes that - are naking every effort to
expedite the shipment of mid to didne is accestance with
the schedule shieh you proposed.

steamely yours,

(Signed) H. Morgenthau, Jn

The Recorpable

thank 1. Stettinium, Item
Secretary of State,
Dr. T. v. Sering,

Forcical Minister of the
Broubite of China,

2071 Moodland Drive,

Mathinction, D. C.
5/26/45

4/20/15

THE SECRETARY OF STATE

the

WASHINGTON

Fairmont Total
San Francisco

May 21, 1945

Dear LT. Secretary,

I ant to express to you my personal
Appreciation as well 40 that of the American
Delegation for the valuable services which
Mr. Harry White readered during the important

first period
Conference.

of our York in the San Francisco

I realize the sacrifice involved on your
part and that of your Department in loaning his

services to us during this period. Without his

fine aid we could not have made such spleniid

progress.

If further issues should arine which might
necessitate our calling upon Jr. White again, I
hope that it will be possible for you to arrange
to release his to U.S for a short period before

the close of the Conference.

With best wishes always,
Sincerely yours,

The Honorable

Eat

Henry Vorgenthau, Jr.,
Secretary of the Treasury

RECISION

MICROFILM

MICROSTAT

BOLL NO.

86

as

29 MAY 1945

Attention: Mr. Winthren W. Aldrigh
Dear Sires

Reference is nade to your letter of May 33, 1945 relative
to proposed purchase of gold from the State Beak of the
U.S.S.R.

In connection with the transaction outlined is your letter,
it should be noted that the price presently established for the

purchase of gold by section 43 of the Provisional Regulations
issued under the Gold Reserve Act of 1934 is 135 less 1/4 of
15 and less all sist charges.
Secretary Horgenthes has asked as to advise you that,

vill thout expressing an opinion as to the applicability of the
Johnson Act, the Treasury Department otherwise approves the

contemplated transaction. I trust you understand that this
approval should not be considered . forward commitment for

the purchase or gold as 11 is the policy of this Department
not to make such commitments,

Very truly yours,

a of Bell
Acting Secretary of the Treasury

The Chase National Tank of the City of New York
New Tork, New York

CRMoWeilliak 5/25/45

The Chasr National Bank
OF THE CITY OF NEW YORK

-

New Dork

WINTERS W ALTRICA

May 23, 1945

Henorable Henry Morgenthes, Jr.

fecretary of the Treamury

Teshington, D. C.

Dear irr. Vorgestian,

Our councel feel Unit It would be derimble for the Bank to
have the approval in writing of the Treasury Department concerning

the transaction of the Benk with the U.S.M.R. about witch I spoke to

you yesterday. This transaction, 1.5 outlined In the menorendum I

left with you, in ID follows:

The State Pank of the U.S.F.R. proposes to zell to
The Chare National Benk about 16,000,000 in gold, to be shipped
CD three different Russien veppels The Vindivostok, consigned
to The Chase Utional bank et San Francisco. These verseln
any ell be esroute at the BETHE time and therefore the total

outstanding risk involved my to $6,000,000. The gold would
be purclased at 34.65 put fire ounde f.c.b. Vladivostok,
freight prepaid to FLE Freseirco LD the insurance to be

provided by the State Ennit of the U.S.S.R. of Yoscow with
Sungien Concenier. (The insurance with first-class American
LEG Dritish Companies, suring and EAT risk, would cost about
would probably be considered prohibitive by the

Bussiane.)

The purchase price will be credited to the account of
the State Break with The Chare National Bank, value date of

receipt of L calle free the State Tanic that the gold has been

loaced in board ship at Flacivertoic for account of The Chare

National Ennic and that non-negotiable bills of Inding to the

order of The Chees National Bonic are being air miled to The
Claze National Deni in Sex York, one zet being carried by
the Captain of the vessel.

It would be OKA of the conditions of the purchare that

in the evect tint Tim Class National Pezic should not be able

to rell the gold upon arrivel to the United States Treasury
at 735 per ounce, or should the gold not he received within
HIS recise from the date of the elipment from Vladivortok, the
State Bank of the U.S.S.H. screen to repurclase the gold from

The Chape National Bank nt $35 per ounce pigable on demand

eximine either delivery of the gold or equint assignment of
the title to the shipping documents and insurance. The State

ibb. Henry Morgentheu, Jr.

1/-3/45

or

Parts of the U.S.S.E. connectees that the delivery of the gold

by the Captain will be SAGE F arrivel of the versel in I'm

Francisco to the represents Lives of The Clark Tenic

irrespective of the presentation of Ltw shipping documents.

Tix stole in to be subject to the approved
of the State Department LTD Lie United States Tressury.
Councel ICE ruled Shirt the jureieze of the cold under the
above conditions in not LE consincestion of the Johnson
Jet.

I sould appreciate it if you sould write DE Lint the trustaction above outlined seets with the approval of the United States
Treasury.

Very sincerely yours,

Chairman of Directors

-

-

Ehr Chase National Mank

CONFIDENTIAL

Not for Release before A.M. Newspapers
Tuesday. May 20. 1945
Jack

-

-

The Trustees of the Committee for Economic Development established

the Research Committee "to initiate studies into the principles of

business policy and of public policy which will foster the full

contribution by industry and commerce in the postwar period to the
INTERNATIONAL TRADE. FOREIGN INVESTMENT AND DOMESTIC EMPLOYMENT

including
BRETTON WOODS PROPOSALS

attainment of high and secure standards of living for people is all
walks of life through saximus employment and high productivity in
the domestic economy." (From CED By-Laws)

CED's Research Committee of businessmen assigns questions for study

to qualified scholars, largely drawn from leading universities
Under the by-laws "all research is to be thoroughly objective in
character and the approach is each instance is to be from the standpoint of the general welfare and not from that of any special political or economic group." (From CED By-Laws)

The monographs prepared by the scholars, after consultation with the
Research Committee are published as books by McGraw-Hill In most
cases, the Research Committee itself then issues a so-called Policy
Statement, based largely upon the monograph

A Statement 05 National Policy by the
RESEARCH COMMITTEE

of the
COMMITTEE FOR ECONOMIC DEVELOPMENT

285 Madison Ave., New York 17. N.Y.

(3030)

Neither the Policy Statement which follows, nor any other statement
by CED's Research Committee, can claim either indirectly or by inforence to represent the views of the 2800 local community CED's and

their 60,000 members. Up to the date of publication. they have not
participated in the background discussion between businessmen and

economists leading toward the development of the statements The

statements are offered to these committees and to all others interested, as an aid to clear understanding of the steps to be taken in
reaching and maintaining high level of productive employment and a

steadily rising standard of living.

MICROSTAT

MICROFILM

ROLL NO.

2.

I

TRADE MARK

America's Interest in Postwar Expansion of World Trade
One goal of American policy should be the increase of peaceful
trade among the peoples of the world. The peace and prosperity of all
nations after the war would be advanced by the reestablishment and iscreasing development of world trade. The interchange of goods. international travel, and communications between peoples can make for better

world understanding If the barriers to trade increase after the war as
they did before the war. each nation will have to look inward. primarily
to its own resources. and the higher and richer ways of life made

possible through world trade will be lost. The pressures to restrict
are strong. and vigorous effort to expand world trade is necessary to
overcose then.

The United States has & major interest is the expansion of world

conserce. We are a powerful industrial nation. We need vast quantities
of goods and services of many kinds. We have a large margin of officient, productiye capacity which can be put to work making things for
international trade. No can exchange these things with the people of
other countries who, thouselves. make other things available for tradeother things better or cheaper or different than we can or want to make.
A restrictive course by America toward foreign trade is contrary

to American interest. It will be followed by restriction abroad.
with these considerations is mind, we submit the following
principles, prerequisites. and policies which we believe fundamental to
a healthy and expanding world trade.

3.

5.

II

0

Five Basic Principles
1. All actions by any nation have consequences immediate or

remote. important or unimportant. for the security and welfare of every

0

of barter. Barter as the basis for trade among nations
restricts trade.

4. A substantial reduction is the restrictions to world trade.
Restrictions to world trade prevent free flow of goods.

other nation. Nevertheless, each nation should be free to develop its

services, and capital from where they are available to where

own way of life without interferences from other nations, so long as its

they are needed This obstruction prevents efficiency in

action does not threaten the authority of another nation within its own

the use of the world's human and material resources and is

domain or the ability of the people of another nation to work with the

an obstacle to the attainment of a higher living standard

resources that are their own.

Trade is a two-way street. In the end, exports must be paid

2. American policies should ats at the development of world
trade in such a way as to contribute most to the long-continued peace
and prosperity of the United States.

3. At the same time. these policies should also contribute to
the long-continued peace and prosperity of other nations.

for by imports, if they are to be paid for at all.
No must recognize severtheless, that government-estab-

limbed barriers are instruments of national policy. and in
special circumstances. at times, and for some countries,
they may meet a national need. They should be looked at as

4. Trade between nations should be developed so as to raise

tools which are more often used badly than well. Unfortu-

living standards through greater economy and efficiency is the use of

nately their effect has been often misunderatood by their

human and natural resources. The desirability of expanding world trade

advocates and what was intended as a protection for capi-

does not come from material wants alone; we include, in the content of a

tal, labor. and natural resources has resulted in shrinking

higher standard of living. breadth and diversity of cultural experience

markets. the discouragement of ingenuity and invention and

which give greater richness to human experience.

& lower standard of living. We must recognize that restric-

5. The main functions of our international trade should be

tive agreements entered into by private business organiza-

carried on. as far as the United States is concerned, through private

tions also hamper international trade, and that when they

competitive enterprise. and the international commercial policies of

exist they are necessarily matters of public concern.

the United States should be directed toward the strengthening of this
principle.

In some countries there will be an urgent need for some

time after the war to protect the dependability of ourrencies and currency relationships by the maintenance of
some exchange and import controls designed to ration scarce

4.
6.

III

foreign exchange as an aid to national development Such

Six

controls should be on a non-discriminatory basis. Exchange
A healthy and expanding world trade depends for its fullest
growth on six prerequisites:

1. An effective development of world security
Such security requires both international organization
for the preservation of peace and an attitude of mind among
the peoples of the world favorable to the continuance of

controls should not be employed to divert trade from natural
multilateral channels to members of exclusive currency

areas, nor to build up bilateral trade in a manner restrictive of the necessary and desirable expansion of world trade

as whole
5. A fifth prerequisite to a wholesome. expanding world trade
is a reasonably adequate solution of two basic problems that

peace.

2. The maintenance of high levels of productive employment in

the United States and in other nations.
Maintenance of high levels of employment within nations

will be urgently before us after the var.
a. What basis can be found for commercial relationships
between private enterprise and state-controlled monop-

is vital to the expansion of world trade When employment

olies (both as to their dealings with each other and

is high. imports are on a large scale and travel expendi-

with third parties) that will promote trade and commerce

tures are liberal. On the other hand, mass unemployment

to the economic advantage of all concerned and in the

within a nation not only reduces its trade directly but

spirit of fair dealing and good will?

puts it under great pressure to increase its barriers to
imports, to subsidize its exports, and to devalue its ourrency in an effort to export part of its unemployment to
other nations (It is commonly recognized by students of
international trade that one country can obtain a temporary
increase is employment at the expense of employment in other

countries by measures which interfere with trade.)
3. Dependable currencies and relationships between currencies
to facilitate trade among nations.
If currencies and the relationships between currencies
are not dependable world trade will approach the character

b. What program can be adopted for the financial and eco-

nomic rebabilitation of Western Europe with particular
reference to the position of Great Britain? How can a
balance of imports and exports be achieved? What financial aid should be extended and in what form? How
can temporary restrictive expedients, which may be
necessary. be kept from creating stubbors vested in-

terests that will obstruct progress to long-term trade
freedos?

The first problem (a above) arises because there

is a difference is the immediate motives activating as

7.

individual private enterprise and a state-controlled sonopoly. An individual private enterprise is conducted for

profit within the limits set by competition But a statecontrolled monopoly may be conducted for the political pur-

pose of the state as well as for economic gain: it can
subordinate or temporarily forego economic benefit for

political advantage As individual private enterprise has
no such alternative Principles of fair dealing must be
worked out if the highest interests of both private enterprise and state-controlled monopolies are to be achieved
The second problem (b. above) arises because of the de-

struction of production assets during the war, and because

of the distortions created in ownership of productive
assets, in markets, in population, and in overhanging
.

financial obligations as a consequence of the war. The
liquidation and readjustment must be worked out through

principles and methods that will provide a livable transition to an orderly and expanding world connerce The whole
of Western Europe is involved in this problem; but the

situation confronting Great Britain is particularly isportant. Great Britain in the course of the war has sacrificed
a large part of her foreign investments; her trade and
shipping have been disrupted and partly destroyed; her in-

dustry will have to be largely rebuilt: her housing problem
is formidable; and she oves enormous suss on short-term

account abroad. All of these pressing problems are complicated by the fact that she must import large amounts of food

8.

9.

and fax materials to meet her day to day needs. Her transi-

tional difficulties are grave. We consider the restoration
of British strength and prosperity vital to world recovery.
6. The progressive development of the legal rules which affect
commerce and travel between nations.

Just as we must have a dependable structure of currencies for an expanding world trade. so, too. we need greater

0

throughout the world is to develop and to maintain a high
level of employment, production. and consumption within its
own borders. In serving ourselves by attaining our own

prosperity, we serve all other countries as well. This
objective is largely within our own control as a nation and
warrants primary and urgent attention
We recognize that the level of employment in the United

certainty as to the rights and duties of persons and prop-

States is not primarily dependent on international trade.

erty engaging in international commerce. In so far as uni-

It would be possible to have practically everyone within our

versality and uniformity can be attained so such the

own borders employed even if we discontinued imports and

better: but certainty and impartiality are more important

exports absolutely. but it would cause a great readjustment

than uniformity

such inefficient production. and a lower standard of living
Those defending exports on the ground that they are indiaIV

Recommendations

Conforming to the five principles which have been discussed in

Part II, and with recognition of the six prerequisites for the fullest
development of world trade which have been discussed is Part III. we now
make the following eight recommendations:

1. Efforts should be intensified to draw up programs and to
make all possible preparations to attain and maintain in
the post-war period high-level productive employment in the

pensable to high employment misstate the case The big gain
from foreign trade arises from the exchange of goods and
services, in which we are more efficient producers. for
foreign goods and services in the production of which we

would be less efficient producers The larger the volume
of goods and services exchanged the greater are the bene-

fits which we get for our work-effort, and the higher the
standard of living which international trade makes

possible ..

United States These programs and preparations should be
made cooperatively by all agencies and members of the CORRU-

nity, public and private national and local
The greatest single contribution which the United
States can make to high levels of trade and employment

Footnote by Mr. John F. Fennelly:

=

will

argument
is an that
where increase
I cannot accept the assumption that the volume of foreign trade has

little or no direct bearing on the level of domestic employment. This
full employment either outgrowth exists, increased of the tautological foreign trade proposition cannot

employment. or else it carries implications which are not compatible
with C.E.D. objectives.

11.

10.

It is true that for a short period a not export balance

Footnote by Mr. John F. Fennelly: (cont'd)

0

Full employment is clearly possible without foreign trade in a totalitarian economy. It seens equally clear, however, that high levels

for the United States, financed by loans or gifts, might add

of employment can only be maintained is a system of private competi-

to employment and business activity at home. But loans, if

tive enterprise under conditions of a rising standard of living. From

this. it follows that foreign trade for a free society is intimately

they are truly loans, must some day be repaid. principal and

connected with the domestic employment problem To treat domestic
employment as something separate and apart is to open the door to a

interest, in goods and services: and gifts cannot go on for-

and totalitarianism

ever. The long-run justification for international trade-

set of national policies which lead is the direction of isolationism

and it is a sufficient one-is that it raises the standard

.. Footnote by Mr. Harry Scherman and Paul G. Hoffman:

Perhaps because it tried to be too brief, we think that this entire

of living and the richness of living because of the products

paragraph may add to. instead of dispel. misunderstanding about the
true relationship between international trade and high employment in

and services which have been exchanged.

the United States. It may be true, as stated, that our "level" of

2. The channels for postwar trade should be cleared by prompt

employment is not "primarily dependent" on our exchanges of goods

with other countries: since it would be possible to achieve high
employment with our existing tariffs. and even (theoretically) if we
dispensed with all imports and exports. The result of such hypo-

and final settlement of war debts and other obligations owed
10 the United States Government at the end of the war: they

thetical policy. as the paragraph indicates, would be a decided

lowering of our standard of living But everybody always. in thinking and talking about this matter, assumes and quite properly-that

are a source of uncertainty and a burden do international

our present standard of living shall be maintained and even raised.
And when this is assumed, importing on a large scale-as well as
exporting-are indispensable to high employment in the kind of
economy with its high standard of living that Americans now enjoy.

enterprise.

Clogging the channels of international trade with these

There is hardly & manufactured product we make-either of consumers

undefined obligations is contrary to the interest of the

or producers' goods-that does not greatly depend directly or isdirectly. upon some imported material for its quality. its market-

United States. No conceivable payments or recoveries could

ability in quantity. its lower price. and is many cases its very

existence. That is true, needless to say. of every highly industrialized economy Thus, the existing pattern of American producLion and with it our established occupational pattern-the products
our labor force and capital are daily engaged in turning out at preseat prices- to a very large degree determined by our exchanges of
goods with other countries, and particularly by the incoming side of
that trade. Obviously then, if that pattern of employment and pro-

offeet the losses in trade that would occur year after year
if they are not properly and promptly settled
To achieve this end, we recommend: ..

duction-with the resulting high standard of living-is to be kept

at a high level, trade with other countries in large volume is indispensable. The point usually overlooked-an not touched upon in
this paragraph because of its brevity-is that imports have far more

.. Footnote by Mr. William Benton, and Mr. Paul G. Hoffman:

of an influence on both the kind and amount of employment to have

than do our exports. Until this indispensability of imports in our

entire pattern of production is widely and sharply recognized, in

all

its detail, our international trade policies will continue to be

distorted-as they have been for decades-by the basic error that exports are beneficial to domestic employment and that imports somehow
lessen our total employment.

I do not take exception to these three proposals, if the fact is on-

phasized that they should form coherent foreign economic

policy, Our foreign policy must recognize that our bargaining power
in these areas as well as others. is an important tool which can be
used constructively for the world as a whole. and to help resolve
the many issues which vitally affect American interests

13.

12.

1) Repeal of the Johnson Act which forbida private loans to
the governmental of nations DOW is default

2) Prompt settlement of all foreign government debt to the

0

restrictive exchange practices subsidies. or restrictive

business Such a program should include:
1) The removal of war-time controls over foreign trade at
the earliest moment consistent with military necessity

United States Government arising from World War I and of

and the immediate economic after-effects of var. The

all not obligations to the United States arising under

large foreign balances held is the United States and the

Lend-Lense or otherwise for goods and services actually

unsettled conditions created by the war are likely to

used up in World War II. If the cancellation of any of

necessitate trade controls in the transition from the

these obligations is the most effective method of settle-

war economy to an orderly peace economy.

ment. they should be cancelled Such cancellation

2) The protective tariff of the United States should be

should be made only with the understanding that Article

lowered To this and:

VII of the Master Lend-Lease Agreements (expressing

1) The Reciprocal Trade Agreement Act should be renewed

the intent of the nations concerned to join in action

and strengthened by making the 50% limit to reduc-

autually agreed on to promote the betterment of world-

tions apply to the rates existing in 1945

wide economic relations) remains in force.

2) Negotiations under the Act should be pressed vigoroun-

3) Lend-Lease goods not used up in the var should be dis-

ly no as to bring about substantial rate reductions

posed of according to the recommendations contained is

We feel that a prompt reduction in the American tariff

the C.E.D. policy statement on "Postwar Employment and

barrier is of the utmost importance, as crucial evidence

the Liquidation of War Production." This statement re-

that the American people are prepared to take practical

commends that American surplus property disposed of

steps needed to heal a devastated world, attain high and

abroad should be disposed of in ways and on terms which

profitable employment. and erase the economic obstacles to

will aid the rehabilitation and reconstruction of the

political peace. There is need to undo the Hawley-Smoot Act

countries involved is the War.

of 1930 and to go such further progressively toward a freer

3. Reduce and eliminate when practicable artificial barriers

movement of trade. Nothing less than the extension of the

to world trade The United States should take the lead is

power under the Act to allow a negotiated reduction up to

its own interest in a program to bring about a great reduc-

50% from the 1945 rate in exchange for foreign concepations

tion is the artificial barriers to trade between nations.

will give sufficient latitude to allow further substantial

whether they take the form of tariffs import quotas.

reduction in this barrier to trade.

PRECISION TRADE MARK

MICROSTAT

MICROFILM

ROLL NO.

15.

14.

0. We regard international cartels as tending to monopoly

In the Research Committee there is sentiment for recon-

and the restraint of trade. We recommend that policies be

mendations that go further than the above some members

would favor a unilateral reduction of tariff rates. The advantage in the reciprocal treaty arrangement is that our reductions can serve as a lever for bringing about corresponding

reductions elsewhere, to our advantage and the world's We

strongly favor continuing to lodge the authority for negotiating reductions where it now lies, as the only way to
avoid objectionable past practices and to achieve results
We hope that Congress will act promptly in renewing and
strengthening the Reciprocal Trade Agreement Act, as aug-

gested, because further reductions in rate in the near

future will cause less dislocation than if made later Re-

0

adopted by the United States and by private agencies that

will eliminate monopolistic and restrictive cartel practices.
All cartels which are allowed should be under public sorutiny.
As with other measures tending toward the restraint of trade.
cartels are a means to an end: and because of the limitation

of competition intrinsic in the cartel method. the purposes
to be served should be public, not private purposes. .

..

The Research Committee of the C.E.D. has the cartel problem
under investigation and intends to make further recommenda-

tions at later date.
. Footnote by Mr. Ralph E. Flanders

ductions in the near future will be only one of many transi-

The word "cartel" covers all sorts of agreements. Before saying that
any cartels should be "allowed". it would seen wise to restrict the
possibility of allowance to a very small area.

tion problems. and would be by no means a large one against

It is ay strong belief that nose type of international commodity

the general background of all our problems. It will BEAD

which
have
to Black by in the the smaller wide variations countries
price agreement and production must
be up
be faced

found to take the

that in the transition period American industry will work

producing raw materials. whether mining or agricultural

toward a more productive pattern by stimulating the expan-

Fluotuations of a given amplitude in the world at large bear very
heavily on these smaller ray material countries, and for their protec-

sion of those industries is which American labor and manage-

tion. appropriate forms of international commodity agreements should

in

ment are most productive We shall receive more abundant-

be designed. If these agreements are directed specifically toward the
protection of these small countries, the purposes to be served will be
public, not private.

ly those goods and services from other countries which are

I can think of no other kinds of cartels which serve a public interest

superior to our own in quality. design and price.

described above.

Footnote by Mr. William Benton

If substantial rate reductions are not achieved fairly quickly through
reciprocal trade agreements, other and more direct means should be
considered:

a) As international conference for general tariff reduction:
b) Unilateral reduction on the part of the United States.

and would prefer to have nome other DADE applied to the agreements

.. Footnote by Mr. William Beston
In general, I subscribe to Mr. Flanders' comment. Many commodity
agreements however, have operated not only against the public inter-

est but against, the long-rus interest of the producers themselves.

and thus such agreements require both the closest sorutiny and public

regulation

regardless of reciprocal action.
If such seans do not achieve the desired reductions. then the United
States should consider the abandonment of the "most favored nation"

The monopolistic cartel practices of private corporations operating

policy to permit bilateral action-with particular esphasis on tariff

Even if their vaunted efficiencies prove more than temporary which
has not yet been demonstrated-auch concentration of power in private

reductions on trade with the British Empire and Latin America.

is international trade are inconsistent with the public interest.

The arguments against such practices transcend economic issues alone

hands violates the spirit of enterprise. and runs counter to the
traditions and spirit of a free people.

17.
15.

by proper agencies of inspection, regulation. and reporting.

d. The uses of subsidy including tariffe should be re0

examined from the point of view of broad public interest as

4. Place the international movement of capital publicor

stap toward formulation of national policy. Subsidies

private on an economic basis.

should only be used as a matter of public policy when they

1) The export of capital. whether debt or equity should

are the best way to serve a necessary public end. and even

not be stimulated as a device to reduce unemployment is the

then care should be exercised to see that they do not unduly

United States. Its purpose is to increase productivity

upset the commerce or culture of other countries

abroad and thereby to gain the autual benefits of expanded

Obviously, subsidies should never be given to private

trade with its consequences for a higher standard of living.

enterprise as a general bounty serely for the sake of is-

The United States should join with other nations not only

proving the profits of one private business as against other

to assist in the reconstruction of war-torn countries,

industries or segments of the population Export subsidies

but to increase progressively the productivity of all

should never be used by a creditor country as a means of

countries.

acquiring foreign business per so, or as a means of curtailing or eliminating foreign competition
However, subsidies have been and can be a proper instru-

sent of public policy to promote national security. to ease
transitional readjustments is trade relationships and to

to disclose to the public the true cost of such intervention.

0

2) We recommend that the Export-Import Bank be used and

118 lending power be strengthened if necessary. to safri out

and assist international financial transactions which are in
the interest of the United States, but which are either un-

establish and maintain within the borders of the United

suitable or impractical from the standpoint of private funds.

States skills, arts and techniques clearly beneficial to the

3) In order that loans BAY not be used when they are is

national interest which night disappear without public

fact gifts, and is order to speed world recovery and to

assistance. It is better that such subsidies should be open

advance our own interests in world trade. the United States

rather than hidden.

should contribute to the organizations which Congress BAX

Advantages to open as against hidden subsidies are that
open subsidies say be directed to a speci fic purpose for

which specific performance is required Grants of public
money for specific performance can and should be safeguarded

designate to help in the relief and rehabilitation of warterm and devastated countries

4) In 80 far as fessible, the movement of capital should be
carried on by private enterprise with the Government noting

to facilitate private capital movements. As is the past,

PRECISION

TRADE MARK

MICROFILM

ROLL NO

19.

18.

Specifically. The United States should continue to par-

0

the Government should is general be informed concerning con-

templated exports of long-term capital. and particularly if

ticipate in the International Labor Office: should join in
creating a permanent international commission on food and

they involve capital issues which are to be offered to the

agriculture; should participate in a conference on employ-

public, with the right to object for reasons of national

ment and trade policy: should join in creating permanent

policy.* Government should also seek to improve the legal

international organizations in the field of commercial

relations between United States investors and foreign peo-

policy and in the field of health; and should encourage the

plea and countries through clarifying the existing legal re-

development of an international body or bodies to aid in the

lations and by attempting to increase the stability of such

promotion of art. science, and technology communication

relations and their uniformity as between countries. If

and education

disagreements arise between American private investors and

Other constructive international commercial relation-

. foreign country where their funds have been placed, our

ships should be encouraged as a seans of participating in

Government should use its good offices to bring about an

the reconstruction of a prosperous and peaceful world

equitable understanding. A consistent, syspathetic policy
by our Government towards the private investment of our

The recommendations on the Bretton Woods proposals which

capital abroad. will inspire confidence. encourage the flow

follow have already been published, but since they were

of capital. and, by reducing the risks, improve the terms on

conceived as a part of this Statement. they are included for

which the transactions are made.

the sake of completeness of the document.

5. Cooperate with other countries through membership in offiResemmandations on Bretton Woods Proposals

cial international organizations For the purposes of this

The Committee for Economic Development as a group of business

report. we refer particularly to those organizations which

sen is deeply interested in the proposals made at Bretton Woods for the

operate in the field of international commerce.

establishment of an International Monetary Fund and of as International
Bank for Reconstruction and Development
Footnote by Mr. William Benton:

A related point is that loans should be destined for productive activity of the type which say assist the borrower is repayment. rather
than loans for war economy Public or private loans from the United
States should not support regimes where the trend is toward despotion
and not freedom

The efficient movement of International trade and capital will
be facilitated by orderly relations among the various currencies of the
0

world, and by the outlawing of the use of currencies and exchange de-

vices for purpose of international economic warfare. Also, an orderly

HPRECISION

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MICROFILM

ROLL NO.

21.

20.

Second, in so far as possible. loans should be truly loans: ourand adequate seans of providing needed capital for world reconstruction

reacy transactions should be currency transactions: and gifts should be

and development will hasten the restoration and growth of production and

gifts. Lack of clarity as between intent and method at this point will

trade with beneficial consequences for world prosperity and security

produce is the future. as it has produced in the past, misunderstand-

Accordingly. in the United States high levels of productivity

ing and bitterness between countries If a gift cannot be made as a

and of the standard of living will be more easily reached and more cer-

gift, it should not mask behind the facade of a loan.

tainly maintained (a) if the relation between currencies is orderly.

Third, in the making of loans. underwritings and guarantees.
and (b) if the financing of reconstruction and development is promptly
for reconstruction and development the amount and kind of the loan
and moundly arranged.

should be geared into the amount and kind of imports needed by the

The Research Committee, therefore. believes that it is necessary

borrowing country for the approved reconstruction and development pro-

to create international machinery in which the United States would par-

jects. Uneconomic international debt should not be created for the pur-

ticipate in order to obtain orderly international currency relations;

poses of relief or to bring about an internal expansion which night be

to reduce the dangers of economic warfare; to make loans, underwritings.

better produced by and within the borrowing country itself.
and guarantees in connection with reconstruction development, and currency stabilization; and to provide arrangements under which currency

and other financial problems affecting world stability and prosperity
can be freely and systematically discussed
Five Basic Principles

In attaining those objectives certain principles should be

0

Fourth. we must accept for BORR time ML condition of orderly

currency relationships within the framework of long-term self-interest
of ourselves and others. the continuance of methods of exchange control

that alter what otherwise would have been the free flow of trade and
investment. Although such methods are subject to abuse, they need

not be harmful in themselves. The problem is that, when they are inobserved

First, we want the greatest order possible in international our-

rency relationships without infringing the essential self-interest of
ABX country. We hope to gain the acceptance of long-term self-interest
over short-run expediency in the management of currency relationships

and to harmonize so far as possible, the interests of all. We wish to
eliminate caprice, unnecessary uncertainty, and hostile actions: we do

not wish to interfere with the just right of peoples to deal as may seen
to them proper with their own internal problems

voked, their use should be proper and not improper; and international

consultation and cooperation will help attain this and.
Fifth, creditor countries should behave like creditors. they
should adopt measures that will make it possible for a debtor willing to
pay his debts to do so. Debtor countries should behave like debtors.
they should adopt measures that make it easier for then to observe the

letter and spirit of their obligations.
The Bretton Woods Proposals cover two sets of machinery an in-

ternational bank and an international currency fund. This machinery is

PRECISION

MICROSTAT

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MICROFILM

ROLL

23.

22.

exchange to which their international accounts could be balanced in a
intended to provide the seans for making international loass and for

short-term stabilization of currencies. We believe that both these

0

freer exchange market.

The of the Fund require and deserve the protection

objectives are desirable, whether they are achieved through two organ-

to the clarity of their operation that would COME from clear authority

izations or through one.

to the Bank to make loans for stabilization purposes when they are
The International Bank for

Reconstruction and Development

We believe that the lending objective can be accomplished satisfactorily through the proposed International Bank for Reconstruction and

justified.
Otherwise, there will be pressure on the managers of the Fund to

permit transactions not consistent with the short-term stabilization
operations of a currency fund.
The International Monetary Fund

Development although we do recommend BORD extension of its powern.

The purposes of the Bank as stated do not seen to be sufficiently broad

to include loans expressly intended to serve the requirements of longcontinuing stabilization. We feel that the purposes should be so
broadened

The needed general stabilization loans which would assist in

orderly monetary relations might be of two sorts. There will probably
be a need for long-term loans of a type for which there is no provision
at present under either the Bank or the Monetary Fund. The Bank's

loans, as at present provided are to be for specific projects of recon-

The purposes of the Fund are more difficult to attain than those
of the Bank The Fund is intended primarily as an agency of long-oontinuing monetary management It is intended to give all member countries access to a common fund of currencies is order to meet the abort-

term fluctuations in their international position. The basic assumption
for the successful operation of such a Fund is that there should be a
tendency for international transactions to equalize apart from shortterm fluctuations

The principal criticism of the Fund is that. in the abnormal

struction or development; but there will probably be a number of coun-

conditions of the transition from war to peace. the expectation of an

tries that will need some more general form of loan assistance than

even-balanced position could not be realized. If serious unbalance de-

these specific projects imply-loans designed to provide for imports of

veloped, the Fund would become lop-sided that is, frozen with unwanted

a variety of goods and services in a general restoration of a country's

currencies. The result would be such the same as though the surplus

DOWNIE of production and trade. There may also be a need for short-term

countries had made loans to the deficit countries. In this way the

credits to assist is the maintenance of orderly relations in currency

Bretton Woods Proposals in their present form night lead to a frozen

transactions themselves. These short-term credits say be particularly

Fund, cause international misunderstanding. and thereby be more harmful

needed toward the end of the transition period, as nations proceed to

than helpful to the cause of international monetary cooperation.

relax their exchange controls and to find the equilibrium rates of

MPRECISION

TRADE MARK

MICROSTAT

MICROFILM

ROLL

25.

24.

This risk of failure to work during the transition has raised
the question whether the establishment of the Fund is urgent. The

urgent need will be for specific and general credits to be granted to
individual countries. rather than the need of general access to a common
stabilization fund. which will become more appropriate when exchange
controls are in process of removal.

But the Fund also provides for other important functions. It
provides for international consultation on currency and financial
matters as well as for ordinary clearing of currency balances. These
functions are both useful and important.
Agreement on acceptable exchange practices. which would tend to

0

This right of access gives the Fund its abort-term stabilizing
power. but it also leads those who have reservations about the Fund to

feel that the right might be abused, with or without intent. and that
the United States would be forced to take actions to unfreeze the Fund;
that the United States would be blamed by others for failure to take
what would be considered adequate action to protect the Fund; and that
we ourselves would misjudge the distortion of the Fund, coming from the
inescapable consequences of postwar readjustments, as evidence of bad

faith on the part of others.
To be sure, these dangers can be minimized if the managers of

the Fund have the courage and skill to invoke at the right time the pro-

tective provisions that are written into the Articles of the Fund. But

prevent capricious change in exchange rates and to eliminate the use of

there say be proper doubt as to whether the managers would be able, in

currency and exchange devices for purposes of economic warfare, consti-

fact. to exercise these powers, unleas their position is strengthened

tute a great advance in international cooperation But it is true that
these purposes could be served. if necessary. by the Bank. at least for

the time being. leaving for a later day decision on the establishment of
a separate currency Fund.

However, a significant feature that night disappear, if the COD-

The solution of this difficulty lies in giving to the Bank the
clear power to make loans for long-term and short-term stabilization
purposes at times when such loans are needed and appropriate

The managers of the Fund can then refer to the Bank those trans-

actions for which the Fund is not intended They can also require a

sultation and clearing functions now set up in the Fund should be as-

country to correct any seriously unbalanced currency position through

signed to the Bank. is the right of rester countries to exchange their

recourse to the Bank when such recourse is appropriate rather than by

own currency for that of other countries, within limits and without the

taking more drastic action. Thereby the Fund CAD be substantially pro-

approval of the of the Fund.

tected No believe that the danger of abuse of the Fund would largely

The existence of this right is valued by every country because

it dignifies its relation to the Fund and to others. because it facilitates currency transactions. and because it avoids the necessity of a
country going is debt to anybody as long as its purchase of a needed

currency is within the framework of a bona fide currency transaction

disappear if the purposes of the Bank were broadened to include, ex-

pressly. loans, intended to serve needs for long-continuing stabilization
We attach great weight to these considerations particularly
since the essential functions of the Fund, wherever located, require

26.

RESEARCH COMMITTEE

support of the Bank by powers not presently existing. We urge. there-

OF THE

fore, that the possibility of strengthening the Bank be re-examined by
the Government.

COMMITTEE FOR ECONOMIC DEVELOPMENT

RECOMMENDATIONS

6. We recommend the approval of the International Bank for ReconstrugRALPH E. FLANDERS, Chairman

tion and Development and also recommend that at an appropriate time.

President

which would not delay its approval. its powers be broadened to include

Federal Reserve Bank
Boston, Massachusetts

WILLIAM c. FOSTER

Vice President. Pressed and
Welded Steel Products Co., Inc.
Long Island City, New York

the extension of general long-term or short-term loans for stabilizaWILLIAM BENTON. Vice Chairman

Vice President

tion purposes.

The University of Chicago

PAUL c. HOFFMAN

President, Studebaker Corporation.
South Bend, Indiana

Chicago, Illinois

7. After the Bank is strengthened in this way. we feel that the san-

ERIC A. JOHNSTON

account of the Fund should be able to use the Fund strictly for ourCHESTER c. DAVIS. Vice Chairman
President
Federal Reserve Bank

rency transactions Accordingly, the dangers inherent in the Fund as

St. Louis, Missouri

it now stands would be submittentially reduced and we would recommend
that the Fund be approved.

c/o Chamber of Commerce of U.S.

Washington D. c.
ERNEST KANZLER

0

Chairman of the Board
GARDNER CONLES

We are well aware that the Bretton Woods proposals do not exist

President
Brown-Johnston Company

President and Publisher

Universal Credit Corporation
Detroit, Michigan

Des Moines Register & Tribune

in a political and diplomatic vacual. We know that there are consid-

Des Moines, Iowa

RAYMOND RUBICAM

444 Madison Avenue
New York, New York

erations outside the proposals proper. some of which are matters of
DONALD DAVID

public record, some of which say not be. These considerations must be
weighed by the Administration and by Congress against the risks that

Dean, Graduate School of

Business Administration
Harvard University
Cambridge. Massachusetts

are inherent is (a) approving both the Fund and the Bank as now proposed. (b) approving the Fund, and the Bank strengthened as we suggest

or (c) approving the Bank alone and assigning to it the currency stabilization function.

BEARDSLEY RUML

Treasurer

R. H. Macy and Co., Inc.
New York, New York

MR. JOHN FENNELLY

Partner

Glore. Forgan & Company

HARRY SCHERMAN

President

135 S. LaSalle Street

Book-of-the-Month Club

Chicago, Illinois

New York, New York

8. Unlean the Bank is strengthened or unless there are weighty poliMARION B. FOLSOM

R. GORDON WASSON

tical or diplomatic considerations. we would recommend that certain

Treasurer
Eastean Kodak Co.

Vice President

functions of the Fund be carried on by the Bank and that the establish-

Rochester, New York

New York, New York

ment of the Fund be postposed.

J. P. Morgan & Co. Inc.

M

ROLL NO

C.E.D. BOARD OF TRUSTEES

PAUL G. HOFFMAN Chair.
President

The Studebaker Corp.

South Bend, Indiana
WILLIAM BENTON Vice Chair

Vice President

The University of Chicago

Chicago, Illinois

RALPH E. FLANDERS

President
Federal Reserve Bank

Boston, Massachusetts
President

Curtis Publishing Co.
Philadelphia, Pa.
FRANCIS

Rochester, New York

The Tale & Towne Mfg. Co.
New York, New York

Vice President
The Con. Ins. Co. &

Fidelity & Casualty Co.
New York, New York

W. L. CLAYTON

Anderson Clayton & Co.
Houston Texas

President

Federal Reserve Bank

St. Louis, Missouri
MILTON S. EISENHOWER

President

Kansas City College

of Agriculture and
Applied Science.
Manhattan, Kansas

Exec. Vice President
Champion Paper & Fibre Co.

Canton. North Carolina

HARRY SCHERMAN

President

Book-of-the-Month Club
New York New York

President

President

Holland Engraving Co.
Kannaa City. Missouri

Charles A. Stevens & Co.

Chicago, Illinois
ROBERT GORDON SPROUL

President

The As Rolling will Co.
Middletown, Ohio

President

University of California
Berkeley. California

0

JOHN STUART

JAY c. HORMEL

President
Geo. A. Hormel Co.

Austin. Mispesota

Chairman of the Board
The Quaker Date Co.

Chicago, Illinois
WAYNE c. TAYLOR

REAGAN HOUSTON

Industrialist and Merchant
CHESTER c. DAVIS

Chester, Pennsylvania

ELMER T. STEVENS
LOU HOLLAND

CHARLES R. HOOK
FRANK A. CHRISTENSEN

President
Scott Paper Company

REUBEN B. ROBERTSON
WALTER D. FULLER

MARION B. FOLSOW Vice Chair. CLARENCE
Chairman of the Board
Treasurer
General Foods Corp
Eastman Kodak Co.
New York, Now York

. GIBSON CARET. Jr.
President

THOMAS B. McCABE

San Antonio. Texas
ERIC A. JOHNSTON

President
Brown-Johnston Co.

c/o Chamber of Com. of U.S.
Washington D.C.
HARRISON JONES

Chairman of the Board
The Coos-Cola Co

Atlanta, Georgia

President

Export-Import Bank of Wash
Washington D. c.
SIDNEY J. WEINBERG

Partner

Goldman Sachs & Co.
New York, New York
CHARLES E. WILSON

President

General Electric Co.
Schenectady New York

Executive Director
c. SCOTT FLETCHER

Treasurer
HENRY R. JOHNSTON

Secretary
ELIZABETH H. WALKER

Director of Information
ANTHONY HYDE

RECISION

MARK

MICROFILM

MICROSTAT

ROLL NO

TREASURY DEPARTMENT
8

32/6c

INTER OFFICE COMMUNICATION

DATE 5/29/45
TO

FROM

Secretary Morgenthau

E. B. Fussell

90

ORIGINAL TELEGRAM RETURNED TO FUSSELL

WITH MESSAGE THAT HE SHOULD SEE THE
MAN.

State Department says Nuit et Jour is a recently
organized weekly along the line of TIME. It may be the
"largest weekly news magazine in Paris" but it has been

in operation relatively short time and State doesn't
know its circulation or what line it is taking. They

have
State,

no record of Bart Winer. He is not accredited by

How would It be if I were to acknowledge the recuest
for you, invite Winer to drop in to see me (and possibly
some of Coe's group) the next time he is in Washington,
but tell him It's not convenient for you to arrange an
interview on that particular subject at this time?

91

R
Y

in. Fresents.

G

A

1945 MAY 28 PM 5 49

WU41 34 4 EXTRA
NEWYORK NY MAY 28 1945 514P
HENRY MORGENTHAU SECY OF TREASURY
T

TREASURY DEPT WASHDC

WOULD YOU GRANT ME INTERVIEW SOON AS POSSIBLE CONCERNING
A

S

YOUR OPINION ON FRENCH OCCUPATION OF SAAR AND RUHR? I

U

REPRESENT NUIT AET JOUR THE LARGEST WEEKLY NEWS MAGAZINE IN PARIS
BART WINER

1 EAST SR 57 STREET

544P

G
A

TRADE

MARK

MICROSTAT

94

TREASURYDEPARTMENT
FISCAL SERVICE

Washington

May 29, 1945
MEMORANDUM TO THE SECRETARY:

Re: Progress Report No. 3 on Procurement Accounting
May 30, 1945

In the survey we are making of the accounting in
Procurement at your direction, we find that one of the
principal reasons for the unentiafnctory condition is
due to certain bosic procedures being followed.

93

Ooned Bartelt and told him that under the
New procedure we could not give this
memorandum to the Secretary and if there
WES anything in it which he wanted the
Secretary to really know about he should
ask for an appointment to see him. Bartelt
asked that we keep the memo for the files.
0

Several meetings have been held with the Foreign
Economic Administration which have resulted in the following changes of procedure. They will assist not only in
bringing the accounting work up to date. but also in relieving the manpower shortage and in effecting economies.
1. Statements of reimbursable charges for
materials and services furnished foreign governments under the Lend-Lease Act will be prepared
on the basis of approved vouchers rather than on
the basis of materials transferred or placed on
board ship.

2. In the case of certain requisitions of

the United Kingdom for materials placed on board
ship after December 31, 1944, and in future aimilar

cases the ogean bill of lading will be used solely
to establish the on-board date with respect to the
transition period. Thereafter reports will be prepared BE indicated in (1) above.

3. Accounts of foreign governments relating
to requisitions issued prior to September 1, 1943,

under Appropriation 20-11X6800, Defense Aid Special
Fund, (which funds are derived from cash advanced

by certain countries) will be prepared on the basis of
net payments to vendora plus a flat percentage to
cover freight and accessorial expenses: in lieu of
the present method whereby all direct costs, namely,

material. freight, storage, handling, etc., are
included.

-2-

We are endeavoring to reach an agreement with the
Foreign Economic Administration on the following:

4. The surcharge for freight and accessorial
expenses will be calculated on the total amount of
net material
rather than on the net material
cost
for each cost,
requisition.
5. Certain sub-requisitions of the United

Kingdom which provide for deliveries to South
African Colonies, Northern Rhodesis, and Southern
Rhodesis, will be stated for the United Kingdom
only and not for the countries or colonies involved.
process.
A statement for the United Kingdom only is now in

through

0

95

MICROSTAT

NO. U.S. PAT. OFF

MICROFILM

ROLL NO

97

We are endeavoring to reach an agreement with the
Foreign Economic Administration on the following:
May 29, 1945

KEMORANDOM TO The SECRETARY:

he: Progress Report No. 3 on Procurement Accounting

In the survey we are making of the accounting in
Procurement at your direction, ve find that one of the
principal reasons for the unsatisfictory condition is
due to certain basic procedures being followed.
Several meetings have been held with the Foreign
Economic Administration, which have resulted in the following changes of procedure. They will assist also not only in re- in

bringing the accounting work up to date, but
lieving the sanpower shortage and in effecting economies.
1. Statements of reimbursable charges for
materials and services furnished foreign governsents under the Lend-Lease Act will be prepared
on the basis of approved vouchers rather than on
the basis of materials transferred or placed on
board ship.

2. In the casefor
of materials
certain requisitions
of
placed on board
31. 1944 and

the ship United after December Kingdom in future similar solely

cases, the ogean bill of lading will be used
to establish the on-board date with respect to the
transition period. Thereafter, reports will be prepared as indicated in (1) above.
3. Accounts of foreign governments relating
requisitions issued prior to September 1, 1943
to

under Appropriation 20-11X6800, Defense Aid Special

(which funds are derived from cash advanced

countries) will be prepared on of
to vendors plus a

Fund, net by certain payments flat percentage the basis to of

cover freight and accessorial expenses; in lieu
the present method whereby all direct costs, namely,

material, freight, storage, handling, etc., are
included.

4. The surcharge for freight and accesserial
expenses will be calculated on the total amount of
net
material cost, rather than on the net material
cost for each requisition.

5. Certain sub-requisitions of the United
Kingdom which provide for deliveries to South
African Colonies, Northern Rhodesis and Southern
Rhodesis, will be stated for the United Kingdom
only and not for the countries or colonies involved.
A statement for the United Kingdom only is now in
process.

(Signed) 4. 7. Bartals

RECISION

ROLL NO.

TRADE MARK MICROSTAT MICROFILM

TREASURY DEPARTMENT

0

19

INTER OFFICE COMMUNICATION

DATE 5/29/45

5-29-45
98

Hill called Mr. Passell on the telephone

TO

and told him this was O.K. and that be

Secretary Morgenthau

FROM E.B. Fussell

should take it across the street (mite House).
PUM

Herewith draft of suggested statement to be submitted

through Charles Ross, per your request of this morning.

0

100

Secretary Morgenthau has told me about the truly
shooking cases of tax evasion his men have discovered.
I as thoroughly in sympathy with his plan to enlarge the
Bureau of Internal Revenue forces to whatever extent is

required to insure full compliance with the law. It

will be good business for the Government, because every
dollar we spend in collection and enforcement will produce $20 or more in revenue. And much more important

is the matter of good morals. No are not fighting this

war to make millionaires, and certainly we are not going
to allow the black market operators or any other racketeers to be in a favored class, when the men in the armed
forces, and our citizens generally, are sacrificing so
heavily.

The American people understand that sacrifices are

necessary. They know the war is still far from being
over. The one thing that might break down their will
to keep on to complete victory would be a feeling that
a few were profiting from the sacrifices of the many.
We must see that there is no justification for any such
feeling, and that is just what we are going to do.

All

102

101

TREASURY DEPARTMENT
TREASURY ENFORCEMENT AGENCIES

o

appeared to require cooperation of other agencies of

WASHINGTON
CHEF COOPORATOR

29 May 1945

the Treasury, or other Federal, police, or foreign
investigative agencies. Mr. Graves WIS continued as
Chief Coordinator.

TO:

Secretary Morgenthau

FROM: Elmer Irey

(Through Mr. Gaston)

In September 1937 I was designated 88 Chief Coord-

instor, in addition to my duties as Chief of the
In August 1934 the Secretary directed that coordination
of various Treasury activities for the suppression and

Intelligence Unit.
In September 1939 the Secretary requested Mr. Gaston,

prevention of sauggling be undertaken by the Coast Guard.

Assistant Secretary, to take over the supervision of

This was brought about primarily because of the persistence

coordination activities, and the Chief Coordinator was

of a "Rum Row" for sauggling liquor off our shores follow-

directed to report to him.

ing the repeal of Prohibition. The object of coordination

In April 1942 I was relieved of responsibility as

as stated at that time was "to put an end to the illegal

Chief of the Intelligence Unit and directed to devote full

importation of intoxicating liquors and narcotics at the

time to the work of coordinating the activities of the

earliest possible date."

enforcement branches of the Treasury Department.

Mr. Harold N. Graves was designated as Chief Coord-

In May 1942 Mr. Gaston addressed the following memo-

inator. A coordination committee was set up in Washington

randun, approved by the Secretary, to no respecting duties

and district coordinating committees were established in

as Chief Coordinator:

In April 1936 the Secretary issued an instruction
extending the scope of the coordination system to include

all criminal investigations of whatever character for which
the Treasury Department is responsible which required or

"In the performance of your duties as Chief
Coordinator of the Treasury Law Enforcement Agencies,
it is requested that you make arrangements to be
kept informed of developments in important cases
within any and all of the agencies included in

your coordination activities; that you advise with
the heads of these agencies as to the administration
-

the field.

104

103
0

0

is the very close cooperation of the Bureau of Customs

o

of their organizations and with respect to
the personnel thereof: that you review and

and the Bureau of Narcotics which has resulted in many

approve or disapprove recommendations for

changes in administrative personnel of such
agencies, and that you perform such other

places in the complete pooling of their facilities and

duties in the interest of coordination as

mon in the working of cases. Such remarkable accomplish-

may in your judgment be necessary.

ments as the conviction of the Louis ("Lepke") Buchalter

"It is further desired that you discuss
with me from time to time such of these matters
as may be appropriate.

"Hurder, Inc." gang, and the more recent apprehension of

Under the system regular monthly meetings are held

illustrations of the result of these services working

the Joseph Toooo ("The Eye") syndicate are conspicuous

in the field districts of the supervisory offices.

jointly. Thousands of tons of marihumna were destroyed

Special meetings may be called as occasion arises.

by coordinated efforts of the agencies. The Yamanoto

Meetings at monthly or less frequent intervals are held

O

in Washington of the heads of the law enforcement units.

(Japanese apy) case was an example of combining the

resources of several agencies.

In addition, I confer almost daily with various heads of

In October 1942 in order to allow the Intelligence

enforcement agencies in Washington.

Unit to function more freely in tax cases, the respon-

In the way of law enforcement accomplishments, the

sibility for character investigations in the Treasury

abolition of "Rum Row" already cited is an example.

Department was placed on the Chief Coordinator and

Another was the pooling of investigative resources when

these investigations at the rate of fifteen to eighteen

Pearl Harbor was attacked, which enabled Foreign Funds

thousand a year, down to a present flow of about eight

Control to supervise enemy-owned property.

to ten thousand annually, are handled in the Chief

An outstanding situation in the way of coordination

Coordinator's office. This has required the detail
from the agencies of from 100 to 150 officers.
4

-3-

o

105

106

0

0

investigative work, the Chief Coordinator and the

One of the most recent "chores" assigned to the

Chief Coordinator was the investigation of irregularities

District Coordinators have served as a channel and

in the sale of war surplus property by the Procurement

clearing house for the securing, assignment, and

Division. This project was undertaken during November

supervision of this personnel.

A necessary function carried on in this office

1944 and involved the investigation of charges against

which the end of the war should terminate has been the

inquiries regarding firms doing business with that office

distribution among the enforcement agencies and others

in an irregular manner. This activity has resulted in

in the Treasury Department of the routine flow of

the removal of a number of employees under serious charges

Censorship intercepts and other types of information

and the presentation of several cases in court. It is

reports.

hoped that the surplus property work may be relinquished

o

A special program considered of great value has

by July 1. It has meant the employment of an average of

been an endeavor to establish uniform grades in the

thirty officers in cases, many of which are of a very

several agencies, so that law enforcement officers doing

difficult and involved type. This office is also making

work of equal difficulty will receive equal compensation.

a number of special inquiries for the Procurement Division,

Many other special projects considered of great

the War Finance Division, Foreign Funds Control, and other

value to the agencies have been pursued. Schools of

branches of the Treasury Department which do not have

instruction in investigating and in criminal law for

investigative facilities.

all of the agencies have been carried out under the

In general where special needs have arisen in one

direction of the Chief Coordinator. Since 1934, 125

of the agencies or in some other Treasury organization

schools have been held which approximately 4,500 officers

requiring an immediate employment of nan power in

have attended. The marksmanship training program is

-

0

employees of the Office of Surplus Property, as well as

PRECISION

TRADE MARK

MICROSTATE

MICROFIM

ROLL NO.

107

108

0

also in this office. Practically the entire law
enforcement personnel have had this instruction. The
Training Division has likewise furnished much service

to the various investigative agencies in the way of
formulating special courses of instruction peculiar to
the agencies. Plans have been prepared for an amplified
training program after the war.
Through the District Coordinators offices, campaigns
have been carried on to make the various agencies aware of

laboratory, photographic, and other technical facilities
possessed by some of them, 80 that all will have full use

0

agencies, highly unit and bureau conscious, into a
close-working Treasury team aware of one another and

of their various duties and responsibilities and ready,
to a very large degree, to cooperate to the fullest

extent. While this is difficult to measure in positive
terms, its advantages are perfectly obvious to all of
us who recall that before the advent of coordination,
many of the enforcement agencies seemed to be unaware

of one another, or if there was an awareness, it was

at times in the form of positive antagonism and distrust.

of such facilities. In this manner, one piece of equipment

R

may serve where otherwise it might have been necessary to

multiply it several times.
A committee has been formed to keep the agencies

abreast of such technical investigative developments and
devices as may be made available by the Armed Services

after the war.
A very necessary interest of coordination in the past
few months has been in presenting a unified front to prevent
the encroachment upon investigative work of the Treasury
Enforcement Agencies by outsiders.

I believe the greatest single accomplishment of
8

coordination has been the development of the several

fib-

110

ROOSEVELT NATIONAL MEMORIAL COMMITTEE

109

120 BROADWAY
NEW YORK N.Y

May 29, 1945

23 May 1945

Dear Henry

My dear "Doo":

It is contemplated that there will be .

In reply to your letter of May 23rd, I an

meeting of the Planning Committee of the Roosevelt
National Memorial Committee in Washington, D. C.

giving careful thought to the coming meeting

probably about the middle of June. You of course
will be given adequate notice of the exact time

of the Planning Committee of the Roosevelt

and place.

National Memorial Committee. I hope to have

will you therefore be good enough to
send to no. prior to June senth, your thoughts as
to the menter in which the late President Roosevelt

some suggestions to make at that time.

eight be most adequately semorialised?

Yours sincerely,
Sincerely yours,
(Signau) Heary

Brue Oconum
Temporary Chairman

The Honorable

Henry Morgenthau, Jr.

Secretary of the Treasury
Washington, D. c.

Mr. Basil O'Connor,
Temporary Chairman,

Roosevelt National Memorial Committee,
120 Broadway

New York 5, New York.

0

MICROFILM

MICROSTAT

RECISION

ROLL NO.

25

MAY 2 1945

Dear Mr. Zanueks

I was happy to receive your letter of May 21
in which you commented on the educational work which

the motion picture Industry can do. Your observation that educational material worked into an entertainment film is superior to a documentary film
seems to - to be very acute and we will, no doubt,
see this principle carried out by your studio.
Your consents on the Republican attitude
toward the Trade Agreements and Bretton Woods

bills interests ne very auch. I agree with you and
Dr. Shotwell completely that any effort to devise
methods of political cooperation will fail unless
we take appropriate action in the economic sphere.
I was very gratified to learn yesterday that the
House Committee on Banking and Currency had voted

23 to 3 in favor of the Fretton Woods bill. I
hope that this is a sign that questions of international cooperation will not be RACE partisan
issues.

I hope that we will meet soon again either

here or on the West Coast.

Sincerely,
(Signed) H. Morgenthaw Jr.

Mr. Barryl F. Sanuek,
Twentieth Century-Fox Film Corporation,

Beverly Hills, California.

RB:iej
5/25/45

.

PRECISION

U.S.PAT.OR

TRADE MARK

MICROFILM

ROLL NO.

113

1

I an looking forward to seeing you when I An next in Washington.
Please call no If you are coming out this Way.

0

Best always,

Twentieth Century Fox Film Corporation
STUDIOR

REVERLY CALIFORNIA

May 21, 1945
DARRYL ZANUCA

The Honorable Henry A. Morganthau, Jr.
Secretary of the Treasury
My dear Morgenthaus

Washington, D.C.

Many thanks for your very generous letter of VAT 18th. It was
both an honor and pleasure to work on the "All Star Bond

Rally* subject. My associates feel as do. It is a privilege
to be connected with any effort that will shorten the duration
of the ver.

I have long felt that in spite of the training film program

0

which we produced for the Signal Corps and in spite of the
pictures and Orientation

WILSON
- of the
motion
various of films Service
such that
as films
picture
and in industry spite

are not being used enough to enlighten the world through the
medium of entertainment.

The "All Star Bond Rally" film is . concrete example of how
frivolous, musical and comic ingredients can be combined and 00-

ordinated to sell useful "enlightenment" to the public. WILSON
fought Isolationism using drana, history and spectacle. The
"All Star Bond Rally' is effective because it tee carries
.

entertainment In my opinion . massage or a
documentary film is worse

message straightforward through bushel than worthless of entertain and

one grain of enlightenment dropped into
sent is worth fifty bushels of unadulterated propaganda.

Do not hesitate to call upon no any time in the future that you

think I can be of any assistance. an terribly worried that

the Trade and Bretton Woods

by
bloc. In
What
is Organisation
without
my good
humble
as layman,
one of the nain reasons for the failure of Treaty
conferences was that world economic problems were to
extent
or not
properly
and . great
peace
ignored
understood I talked
a Republican economic Agreements cooperation? United Bills the opinion Nations will Versailles be sabotaged .

recently with Dr. Shotwell and be places the true collapse of

the League on the fact that the economic provisions were diluted
and feeble.

RECISION

MICROFILM

MICROSTATA

TRADE MARK

ROLL NO

TREASURY DEPARTMENT

115

INTER OFFICE COMMUNICATION

DATE 5/29/45

TO

FROM

Secretary Morgenthau

E. B. Fussell

Charley Shaeffer and I saw the March of Time people
here this afternoon on your suggestion 8.8 to a dramatic
presentation of the tax evasion drive. They said they
5/30/45

were definitely interested. Decision will have to be

the

made by the New York office. They outlined a possible
6-minute presentation, starting with a brief announcement
by a narrator, followed by a series of short dramatic sequences, winding up with brief word from you to the
effect that the program has shown the sort of thing the
Treasury is up against and the determination of theTreas-

Phoned Mr. Fussell
he is and interested told him
thaton in the doing program
be
says

moretary

is,

If

he

Nunan

and

is

will
heres

willtake

be

glad

to

otherwise,
his

Commissioner

place.

ury to deal with it.

The March of Time people asked that we assemble some

0

interesting cases, suitable for dramatic presentation, which
Shaeffer's shop is doing.
The program goes on Thursday nights at 10:30. If
the Washington of fice gets the go-ahead signal from New York,
they would like to plan it two or three weeks from now, that

is, the middle or latter part of June.
This raises two questions:

1. will you be here during the period?
2. If you will be absent, who would speak
the final word in your place? Gaston?
Nunan? Irey?

This latter question was specifically asked by the
March of Time people here. I ducked it by saying I hoped
you would be able to make it, but they apparently want some
definite assurance and whether the program goes on might
hinge upon having either you or someone designated by you
to speak for the Treasury. They asked that this issue be
NOT taken up with you until they have approval from the
New York office, but I mention It for your information,
and also so that Charley and I may be able to be better
informed, when we talk to them again, as to the possibility
of your participation.

PRECISION

MICROFILM

MICROSTATA

ROLL NO

116

May 29, 1945

Mr. Fussell
Secretary Morgenthau

I saw Charlie Ross at the White House last night and
I asked him if he wouldn't get the President to say something
in his next press conference on our drive. Fix up something
for no to look at and then I would like you to walk it over
and give it to Charlie Ross yourself, and explain to him
just what we are doing. Since the President's press conforence is next Thursday, it will be particularly important
that he say just the right thing because I will be up on
the Hill asking for the money.
Fassell has given

118

INCOMING
TELEGRAM

DEPARTMENT
OF

STATE

DIVISION OF
CENTRAL SERVICES
TELEGRAPH SECTION

DIVISION OF

Stockholm

30-300

Distribution true
arrangement. (SECRET in

groups of prisoners.
The group has advanced a minimum program which will

117

CENTRAL SERVICES

reading only 186 8E Mocalab 3

-2- # 1953, May 29, 6 D.m., from Stockholm

40

Dated May 29, 1945

require approximately 100,000 kronor monthly to finance.

Rea'd 7:21 D.M.

This will supply appriximately 30,000 NO. of Essential

DC/L

Scoretary of State,

foods monthly as well as medicines and clothing. All

LIAISON

necessary arrangements have been made both as to

Washington.

procurement of supplies and as to shipment.
Local group has been advised of contribution of

1953, May 29, 6 P.M.
FOR VAR REPUGEE DOARD

$50,000 by Var Refugee Board for relief operations in

In response to RB 368 (Dept's 949, May 23, 11 a.m.)
HAVE discussed fully with local group representing

Norway (WRB 370, Dept's 973, May 25, 5 p.m.) and it
wishes to EXPRESS its deepent appreciation for this

Antricon labor relitf for Horuay their ideas 0.0 to
future relief program. Local group is extreally anxious to
continue Norwegian relief activities and are firmly convineed
of necessity of continuing operations from Butden in vicu
of advantageous supply factor 0.8 well O.B prompt delivery

facilities. They have advanced D five point program

dovering relitf and general assitance to the following
groups of the more severely distressed category.
(A). Norwegions returning from concentration campa
in Germany.

(B). Prisoners released from Orini.
(c). Prisoners released from other concentration
campa in Norway.

(D). Special relief program for residents of

0

Finarc.
(E). Support of widown and children of above
group#

generous support.

0
BB

JOHNSON

MICROSTATA

PRECISION

MICROFILM

ROLL NO

May 30. 1945
2:20 P. M.
COPT

COPY

119

120

HMJr:

Hello.

Operator:

I have Mr. White, and Mr. Pearson is with him.

Authorised terminate Filmeth unon completion final reports. Department

HKJr:

That's all right.

authorised pay Filseth lum mum for leave May 1. 1944, to date at rate

Operator:

Go sheed.

a) days n month, Return unspent VRP confidential funds through Charge

Mr. Harry

CABLE TO JOHNSON STOCKCOLN FOR OLSEN FROM WAR REPUBLIC BOARD

White:

National Bank, New York, payable David White, Administrative Officer, WRB,
HWJrt

Sell VKT equipment. Draft for this should be payable Secretary
Treasury care of no.
W:

MKJr:

THIS IS WHB STOCKHOLM CARLE No. 371

Hello.

Hello. I Just wanted to remind you about
Professor Brndy, whom I sooks to you about
n couple of days ago.
Yeah. Well, VO are ready to talk to you about
his not time you want, or would rather wo'd
out it in writing?
Just no lesve. Did you non the economists over
there with Will Olayton?
No. but I noted - you 868 what I 410 VILE I wanted
to get an objective view because I feel so differently that I asked Frank to read the three
books. and get his objective view. He read them
over the weekend, then I asked him to talk with
Mason. He and a long talk with him, and I'm not

VC

sure where we go from here.

HNJr:

10:45 B.M.
May 29. 1945

X:

HMW:

Miss Ripple (for the Sec'y), Cohn, Model, Hutchison. McCornack, O'Duyer,

V:

Files,

Well, any don't I see you and Coe.

Yeah, I think no. I's like 15.
If you'11 ask Fits for an appointment.

All right, I'll do that. Itwon' : take us but a
fax minutes.

HKJr

Give your visitor my regards.

V:

I'll do that.

HWJr:

Right.

W:

Thank you.

-3-

123

-2-

MR. COE: My conversation with Ed Masco

H.M.JR: That's what I want to hear.
MR. COE: I've skimmed through them. I think this
book of his on the Spirit and Structure of German Fascian
achieved more publicity than any of the earlier ones
which are more technical. I went through them again

in a cursory way, and I think it's absolutely clear

from them that this is a man with the following views:
He WAS interested in, and very decidedly opposed to,
the German Fascist system early, and approached it at
an economist, but admittedly dealing with very important

and explosive matters, and he went after it without kid
gloves. He was also concerned, and in his books he's
brought this out, that German Fascism in ideas and some

of its administrative features is closely related to

embryonic tendencies which are here among our business

groups, and he brought that out, sometimes in quite
vigorous language. He was concerned about some of the
things our businessmen said in the name period. Finally,
he was also, he has been for years, concerned about the
tendency of business to centralize and to take control
of governments and operate through governments, and one

of his books is an early study of nationalization.

MR. WHITE: I thought you were collecting books.
MR. COE: Now, I should say that a good deal of what
he wrote would have been agreeable to left-wing people,
some of it to Communists, at the time he WE S writing.
Some of it would have been opposed by then.

(Discussion off the record)

MR. COE: Well, to make it short, he's not a writer

who deals with what we as economists would take to be

Marxist matters. He doesn't write about the class
struggle, about surplus.
MR. WHITE: I'd like to make one comment. The thesis
which runs through most of his books is that the extreme
of monopoly capitalism which is big business, leads inevitably to Fascism. That's one of the theses.
H.M.JR: A dangerous thing.

MR. COE: I rang Mason up. I had 8 date with him,
but we decided to hold the conversation on the telephone.
I told him that I heard he had spoken to you and that as
for myself, I had been asked by Barry to read through
this and check up on this question of Brady being one
hundred percent Marxist, and I was unable to find

Marxist terminology or leading ideas. *Oh, he said,
"there's no doubt about it. He was a Marxist. "Well,"
I said, "what would you put down as evidence of his
being Marxist?" "well, he said, "he was in favor of
collectivism. He believed that the capitalist system
was doomed, and he believed in the economic interpre-

tation of history."

H.M. JR: Is that a rhyme?

MR. COE: Yes, it sort of rhymes together. "Well,"
I said, "where did he find this evidence of economic
interpretation of history?" He said, "He's making an
economic interpretation of Germany, and I said, "He's
an economist, and he's dealing with the economic system
in Germany in its bearings on the political, . and
said, "A man who made that sort of interpretation when
dealing with an economic subject need not necessarily
hold that view. " "Well, he said, "admittedly he need not,
but he WB.S certainly a thorough-going collectivist.
I said, "If you mean that he probably advocates for this
country an extension of powers by the Government, or did
advocate it, or believed that there was a long-run trend
in Germany operating, those were certainly views which

aren't restricted to Marxists. There are a lot of
people in the Government Who used to be called New

Dealers who were also loosely called collectivists.
He said, "Quite apart from that, he wasn't a good econo-

mist.

MR. WHITE: I interject. Mason took seven years to
write a book on the electric rise in Massachusetts
while he WBS in Cambridge. I won't characterize the book
beyond saying that two of his books aren't worth one of
these.

124

RECISION

MICROSTAT

MICROFILM

ROLL NO

125

-4H.M.JR: Let me sum up. Do any of you people feel
this is something I should make a real fight on?
MR. COE: No.

MR. WHITE: No, because we're going to get Brady
and hire him and stick him over as one of Bernstein's

assistants if we can work it, but it's an indication
merely that no matter how many fellows you recommend,

if he's not an Allan Sproul or John Williams,

they'11 find sixty-nine reasons why they're wrong.

H.M.JR: Now, I left it with will Clayton's Secretary that I want to speak to will Clayton if he ever
calls me back, but I've been waiting and I just wanted
to -- do we want to give any other name over there?

MR. WHITE: There are very few men who are competent and know Germany and have the right point of view
from our point of view. We don't care to recommend
them if they don't.

H.M.JR: All right.

L.PAT. ON MICROFILM ROLL NO
26

HM Jr took this memorandum with him

ien he saw the President on June 1st

he didn't show it to him.

128

-3In addition to the above mentioned reasons. the
22

May 30, 1945

following are additional causes for the unsatisfactory
situation with respect to de-Namification.
: à systematic and thorough "vetting . process is
not being applied on a sufficiently wide scale
to public and private agencies. In all too many
cases, de-Namification is only applied to the most
flagrant cases of Hazism, ignoring the more subtle
holders of Hazi prejudice and supporters of Nazism,
Especially in industry, slow progress is being
made in applying the de-Nazification program.

Wemorandum

How de-Namification program is being carried out.
b.

Although one of the principal objectives of military
is the complete obliteration of
government Sazism, information In Germany coming from the field indicates

Too much emphasis is being placed on "getting

things going" rather than on the application of
the de-Nazification program.

that

far less effort is being made to destroy Nazism than is
being devoted to getting Gernan production going again.
The main attention of General Clay, Mr. Douglas and
his key advisers during recent weeks has been devoted to
the establishment of two agencies called (1) Production
Control Agency; (2) Economic Control Agency, mhose purposes
are to get German industrial production going and to control

German agriculture, price control and rationing, etc.

Approximately 1,700 officers and 5.600 men are being earmarked for the production control agency, and several hundred officers and a large number of uen are being earmarked
for the economic control agency.

On the other hand, comparatively little thinking is
being done at the top level on what measures must actually
be taken to cappy out the paper program for the de-Mazification of Germany; and comparatively fow officers are devoting
their full time to the carrying out of the de-Namification
program.

Ambassador Murphy and his political division have been

charged with the responsibility for coordinating the Control
Council's policy of de-Numification. To date, the political

division done little work to discharge this function,
and it has has made no very significant effort to ascertain what

action has been taken in the field in carrying out the deNonification policy.
No central tabulation or evaluation of results of the
de-Namification program exist, either at G-5 SHAKF, or at
the U.S. Group Control Council. To the extent that information exists at the SHAKF or Control Council level, the
picture of de-Namification appears extremely spotty.

C. There is a lack of effective dissemination and
utilization of relevant intelligence data for
the benefit of the military personnel actually
carrying on the de-Nazification program.

d. There is an absence of effective coordination of
the de-Namification activities of the various
army units involved.

0. There is considerable confusion and variation
between areas as to what the actual de-Nazification policy is.

It is quite obvious that if the de-Nazification program
is to be at all effective, it must be applied with a determination, intelligence and coordination of effort that our-

rently does not exist, and under leadership that genuinely
believes in the necessity for obliterating Namism, regardless of the administrative inconvenience that may temporarily
result therefrom.

RECISION

TRADE MARK

MICROSTAT

REG. U.S. PAT. OFF

MICROFILM

ROLL NO

ADMENISTRATION

COPY

Washington

May 30, 1945

My dear Mr. Secretary

I an enclosing a merandum OEL the taxtile
program for China which in in accordance with our

conference yesterday. If this is acceptable kindly
let DO know and I will have it signed by the rest of
the members and sent to you for delivery to the
President.

Sincerely yours,
(8d gmed) Leo T. Crowley
Leo T. Growley

Administrator.

Honorable Heary Morgenthau, Jr.

Secretary of the Treasury,
Washington, D. C.

COPY

REPORT OF SPECIAL COMMITTEME ON THE CHINESE PROGRAM

A Special Committee, consisting of the undersigned, has arranged for a

satisfactory solution of the major problems presented by the three

point Chinese Anti-Inflation program.
1. GOLD

$189,224,000 of gold is to be shipped to Qhina.
2. TIATIVES

During the second half of 1945 105,000,000 to 110,000,000 yards 470

being made available to Qhi ne against a not requirement of 112,000,000.
The Chinese Government requested delivery of their entire not requirement during the balance of calendar 1945. Due to the three months
ahi pping time and the critical textile shortage, 11 WB.S imposal ble

to allocate taxtiles seen enough to deliver all of the requirement

in Chd na during calendar 1945. However, a schedule of third quarter
allocations and probable fourth quarter allocationa prepared by the
War P_oduction Board, the Combined Production & Resources Board and

the Inter-Agency Consistee to Co-ordinate Foreign Shipments, if achered

to, will make available the production facilities for the 105,000,000

to 110,000,000 yarda in the last half of 1945. Through regular channels

every possible step is being taken to deliver as much of this pro
duetd aspossible to China during the balance of calendar 1945.

Fira allocations from third quarter production are 23,000,000 yards

from U. S. Production and 22,000,000 yards from Maxiean and Branillan

production. Probable allocations for the fourth quarter from U.S.,

Branilian and Maxicon production should total between 60,000,000

to 65,000,000 yards, Giving a half yearly total of 105,000,000 to

110,000,000 yards,

90,000,000 yards of the requirement were jurtifi ad as direct military
needs to use for barter for food and supplies for Ord nese troops now
being trained and equipped under the U. B. Ang. The U. s. Army

Theater Coemander and the Government are arranging the
mechanics of distribution in the field. AB BOOD as the organisational
details have been settled, FIA will set up delivery procedures to
insure proper end use.

Due to the direct military end use of the 90,000,000 yarda of taxtiles,
all textiles up to this Amount which can be procured in the U. 3, will
be furnished under lend lease. This will be approximately ohe-half
of the 110,000,000 yards. The balance of the textiles to be procured

from Maxicon and Branillan purchases are to be paid for by the Qrd.neoo
Government in cash, The cash involved is to be released by the
Treasury Department out of Loan funds held by them for the Chicago
Government.

RECISION

TRADE MARK

MICROSTAT

REG. U.S. PAT. OWF

MICROFILM

ROLL NO

-2COPY

3. TRUCKS

4,000 trucks over and above the present allocation to China (15,000

trucks) are to be count shed YAMA result of Army cut backs,
A Land-Lease requisition is being filed by the chinese Government

with PRA, and the Aray is to have no responsibility for financing.
4. Further operations under the Anti-Inflation program will be carried
out through regular channels and procedures.

Secretary of the Treasury

Under Secretary of day

Assistant Secretary of State

(Signed) Leo T. Crowley
Foreign conomic Administrator

132

131

25

May 30, 1945

25

May 30, 1945

Dear Mr. Marries

Dear Mr. Corvest

Your article, *Bretter Woods or World War

III,' has impressed - very such. You have
taken a difficult subject and given it a treatment
which the average reader can group, That is .

significant contribution, for public understanding
of the subject is of first importance.

You have BY personal gratitude for a thetic and highly professional piece of work,

This is just a note to express my appre-

clation of the fine article on Bretton Foods

Colliers published this work, It is will written
and with the graphic illustrations is will help
asterially in the clarification of public opinion
on this important subject,

Colliers, as usual, has taken a forthright

position in the public Interest,
Sincerely yours,

with good wishes, I Sincerely yours,

(Signed) H. Morgenthau, Jr.

(Signed) H Momenthau, In

Mr. Joe Alax Marrie
Managing Miter
Colliers

250 Park

Mr. Frank Gervest
Colliere
250 Park Ivenue

New York, New York

New York, New York

KFregh
KFregh

133

file

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

0

Smy

DATE

30, LIMS

Secretary Morgenthes

TO

FROM

Dr. White

TREASURY DEPARTMENT
The Treasury personnel morkin, on monetary and Foreign

0

INTER OFFICE COMMUNICATION

Funds Control problems abroad are 06 follows: 44 Professional

(two are still here but will be leaving shortly) and 7
Secretarial. of the Professional, three are 03 detail from
the Navy anc one from the Cost Werd.

These persons are located is the following areasa
ProfessIonal

DATE

May 3

Secretary Morgenthan
Mr. Shaeffer

Secretarial

The attached is a transcript of HEADLINE EDITION

carried
at PM. nation-wide over the Blue Network last night

10

Germany
2
S

France

1
4

England
2

Italy

1
R

Belgium

1

Greece

1
2

Smitzerland

1
5

Philippines

1

Portugal

1

Detwark

1

Sept

1

0

1

Swedes

136

TAX DODGERS

0

(Wireless Bug)
Judge:

Grant:

Tonight in Washington the Treasury Department

announces a new plan to force war profiteers to pay
up an estimated billion dollars in unpaid taxes said
Secretary of the Treasury Henry Morgenthau, Jr.

Lawyer:

Voice: (filter)

The Treasury is about to ask Congress for 10,000
new employees With these employees, we intend to

Lawyer II:

it becomes

wartime price ceilings and profit laws. Says an

In the Prohibition era, when other means of justice
failed, the T-men -- investigators of the Treasury
used tax evasion charges to bring to justice such

Lawyer:

Woman

Your Honor!

Judge:

Yes?

Woman:

That many manufacturers. Black Market operators,

have concealed illegal income is well known. But the
OPA for example has been largely hanstrung. The time
limit for prosecution of OPA Price violations is only
one year. However, there is no time limit or prosecution for incone tax fraud. Tonight's announcement
points the way to a combined operation by our Government. There will be court cases such as this.
(echo)

A Black Market neat dealer in Washington has evaded
taxes amounting to $400,000.
(gavel)

-

bootleggers as the notorious A1 Capone. Today these
same methods will be used to bring to justice
Blacketeers and profiteers.

Grant:

A New York Restaurant chain has already offered

to pay up over $2,000,000.
(gavel)

Thus steps are being taken to implement and enforce

important Washington observer.

Voice TT:

Your Honor, this Eastern firm diverted sugar
obtained from making foodstuffs for the Navy into
making beverages. This firm hid the profits, a
million dollars in taxes in claimed.
(gavel)

bring in, in delinquent taxes. at least $1,000,000 000.
The WBY profiteering and Black Market situation is
appalling. The more I get into it, the more shocking

Grant:

Proceed with the case.
(gavel)

I'm an American housewife. All of us have had
trouble with Black Markets and wartine price chiselling.
will these tax evasion suits help us to get an even
chance at rationed goods?

Judges

Black Marketeers can't exist after they are jailed.

These are cases for fraud against the Government.

They will be brought to trial.
(heavy sock of gavel)

(gavel)
Lawyer:

Judge:

Your Honor. this insecticide manufacturer owes the
United States $240,000 in concealed taxes. Our
investigation uncovered undeclared profits in cash
in 288 bank accounts.
Proceed with the case.
(gavel)

Lawyer II: Your Honor. . Midwestern Steel manufacturer is
liable to additional taxes and penalties of nearly
$5,000,000. The Treasury will prosecute on criminal
charges.

(Wireless Bug

PRECISION

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MICROFILM

MICROSTATA

ROLL NO

138
137

May 30, 1945
MAY 30 1945

Mr. Gamble
Mr. Coyne

Secretary Morgenthau
My dear Mr. MeKim:

With reference to our conversation of yester
day, respecting the Committee to work on the War
Refugee program and my suggestion that you night

find that Mr. Earl G. Harrison well informed on
this subject, you are advised that Mr. Herrison,
whose present address is 2301 Packard Building,

Philadelphis, Pennsylvenie, receives official mail
addressed to him as American Delegate, Intergovernmental Conmittee on Refugees, State Depertment, Washington, D.C.
Sincerely,
(Signed H. Morgenthius, Jr.

Honorable Edward D. McKim,

Chief Administrative Assistant
to the President,
The White House.

CSB maggied
5-29-45

I wish you would give no a meno letting me know if
there have been any requests for my appearance since the
Seventh Mar Loan has started. If there have been any,

please let me have a list. In the future if there are any

requests, I would like to be advised.

139

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE May 31, 1945
TO:

Secretary Morgenthau

FROM

Ted Geable

In response to your memorandum, the following places
have requested your appearance during the past few weeks:
San Francisco

Buffalo
New York City

Philadelphia
Pittsburgh
Cleveland

0

Dallas

Nashville
Memphis

Chattanoogs

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

ok

DATE

MAY 30 1945

TO SECRETARY MORGENTHAU

FROM MR. O'CONNELL

Charles E. Wilson S&D me yesterday afternoon about
tax exemption for the Air Power League. He said he had talked
to the President in the morning about the League and that the
President had evidenced a good deal of interest in the undertaking.

This is B nonprofit organization recently incorporated here, having offices in New York. Mr. Wilson is president,
and Its Board includes nationally known industrial, publishing
and aviation names.

The League's primary objective is to develop public
comprehension of the importance to national security and to
preservation of world peace of United States air power. It
intends to encourage educational and scientific activities

in fields of importance to military aviation in the United

States. Its program includes building an air museum,
establishing scholarships, obtaining speakers, promoting
an annual Air Force Day", making awards for advancement of
aviation knowledge, and publishing a monthly magazine.

The Bureau has tentatively reached the conclusion

that the League will be exempt from tax as n scientific,
literary or educational organization and that contributions
to It will be deductible for tax purposes to the extent provided by law.

You say want-to let the President know that while
the organization will probably get an exemption ruling, you
want to reserve & final decision on the question until you
have had a chance to look into It further.
To combat misuse of the exemption statute, the
Bureau has recently adopted & "mait-and-see" policy under

which rulings generally will not be given to new organizations
until after twelve months of actual operation. This is not a

PRECISION

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MICROFILM

-2-

hard and fast test. Religious organizations of recognized
denominations, charitable organisations principally supported
by Federal or State funds or the general public, and educational organizations regularly maintaining & faculty and
student body will continue to receive advance rulings.
To some extent granting exemption to this League

at this time would out across that polley, but the purposes
of the League appear to be such that its operations will
probably qualify it for exemption. It may, therefore, well
be an exception to the general rule.

RECISION

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MICROFILM

MICROSTAT

142

MAY 30 1945

by dear Senator:

This is in response to your letter of May 28,
1945, concerning certain letters issued by me to
the employees of the Treasury Department.

These letters represent our best efforts
toward an objective appraisal of the personnel

situation in this Department. I do not feel that

which on
withofthe the
any sense represent a statement of policy

was my intention to set

Joint Federal they in is Committee Expenditures. Incompetible Reduction It objectives Non-essential of

forth as clearly as possible certain facts about

the Treasury Department's work, and some suggestion

as to the future development in the interest of
sustaining . high employee morale.

At the time the Treasury presents its annual
estimate to the Congress, adequate justifications

its of

requested, will be given
for program
and funds will
quiteand
naturally
the work
Department

do no more then is specifically authorised by the
appropriation bodies of the Congress.
Sincerely,
(Signed) H. Morgenthau, Jr.

Honorable Harry F. Byrd

United States Senate
Washington, D. C.

5-29-45

-

-

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

-

CREATED PURSUANT TO SEC. MT. OF THIS REVENUE

ACT OF -

Macy 28. 1945

r

MANTER

I
nurtie ---

Homeralls Heart Jr.
THE September of the Treasury

by December:
Zizzy nd 626 doples of 1410 of S corles of
lotiers Launed under 2011 signature RE of January 15.
1945 respectively.

: like so have your comment NO to
Mother UP not the the letters are statements of the

police bill to by your Department with reference

to the siring or In the post-HRY period.
It will be appreciated If your reply is
received by June 101a.
Forminally 7 NEW

Harry Ann

MICROSTAT MICROFILM

ROLL NO

12"

OF TORSTAND 03 no

His KTY 15. 1945

Follow Prydegeous

As NO enter soother year : Since to extend 72 less
wishes and to SSANK each of you Pat year VALUE matritusire to the

work of the Treasury It is for 122 to relate
our individual Jabe to the NET offain OF to fee) STUPP that 11 EPP

miking our Autribution 8 specify victory. Lost 16
EXPUR 2011 that the with - the Treasury Department is vitally
Important sout that the Job of KTVT/ employee of the Department Magna

N significant part In the total-sur offers.

Your splendid put coopermiles token FR of your centified
support during 1945. Particularly. : like to DATE your help in
these

1. Stay on the Job.

2. Do everything in your gover to mazerio VBT raterials.
3. Be G regular Blood Domor.

4. Bug We licens and Keep thru. This helps you adid year
If each of THE in the Treasury Department will make this his personni

ST during 1945. ine 062 end the sooner 8275 brink our fightire 100

hoze. I know I CAN on your continued help in 40 all-out VST
effort.
SincereLy,

(D) Henry Korgentheu, Jty

(This in the first of A anries of letters to be
isqued by the office. On thin
side you will find Itema of current Internat.)

the as American
Public Ltd 501. 2013 STATE 642 for MUST REPUBLIC LX N

sur for Texts U 1297 STATE 160 or POTAT
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COPY

THE FOCCEPART OF THE

Weshingten

April 2. 1945

Fellow Reployees

The vinalize of the HUT tim Our - COMPANY of HTT of

Thereanda of Avericana nere already their itses

more will film before our EYE concerned.

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TRADE
N

RECISIO

MICROSTAT

MICROFILM

PRECISION

TRADE MARK

MICROSTATA

MICROFILM

ROLL NO.

148
Union Calendar No. 171
House Report No. 629

THE Congress, 1st Session

PARTICIPATION OF THE UNITED STATES
IN THE INTERNATIONAL MONETARY FUND

AND THE INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT

REPORT
FROM THE

COMMITTEE ON BANKING AND CURRENCY
TO ACCOMPANY

H. R. 3314
A BILL TO PROVIDE FOR THE PARTICIPATION OF
THE UNITED STATES IN THE INTERNATIONAL

MONETARY FUND AND THE INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT

-

MAY OL INA-Committee to the Committee of the Whole House
at the State of the Union and ordered to be printed

UNITED STATES

GOVERNMENT PRINTING OFFICE

WARRINGTON -

CONTENTS
Page

1. General statement
Benton Woods Conference
Relation to the program for peace
Experience of the 1900's and 19007's

Peter of the United States

The fund and bank
Testimyrey before the committee

Criticism of the fund and bank
Alternatives U Brett - Woods
and mercations

11. TheOrigin
Woods
Conference
of United States percentis
Disessional preceding the Conference
United States delegati) in

Accident of the Condensee

⑉ Direction Woods and
theforstructure
of peace
basis
peace

Relations Rentity Organization

IV. The experience of the 1927's and the 1900's
Currency establishation in the 1920's
Currency warfare used by Germany
Bilateral clearing agreements

Effect on world trade and investment
V. Monetary jodicy of the United Status offer 1934
Number liabilitation agreements
The Tripartite Declaration

is

Multisteral securary

14

is

VL Threats to postwar
peace andproblem
security
reconscruetive

16
10

Postant currency blease
State postad of international transactions

17
is

Threat of enusemie bloom

18

VIL The Butter Woods program and domestic policy

19

Importance of foreign markets

20

Currency arrangement generaly for trade
Reconstruction will facilitate trade

21
21

VIII Analysis of the International Monetary Fund
Cooperation and education
State and underly exchange

Frontiers in exchange transactions
Searce correction

Help from the fund

Conditions for - of the fund
Assurance of responsible management

IX Analysis of the bank for menstruction and development
Principles of the bank
Guaranties of securities
Effect on investment policy

x The record Position on taken the Bretters by President Words Roomevell program and President Troman

Position takes by Becautary Hull and Becretary Stertinius
Statement by Benefits Morgenthes
Statement by Mr. Dear Achewon
Statement by Mr. it. D. White
Other Government testimony

11%

RECISION

ROLL NO.

REG. U.S. PAT.OFF

TRADE MARK

CONTENTS

79th Concerns

x.

REPORT

HOUSE OF REPRESENTATIVES

No. 629

Zet Session

The recent the the Coloner Bretter Woods

Page

favoring Woods
Testimon's - of Instruction banken groups
King

organizations

OF THE UNITED STATES IN THE INTERNATIONAL FOR BE
PARTICIPATION MONETARY FUND AND THE INTERNATIONAL BANK

XI Births Woods program

XII

CONSTRUCTION AND DEVELOPMENT

the fund and the test
results

Mar to 1943 Committed to the Committee of the Whole House on the State

debtore

of the Unice and undered to be printed

XIII.

program
gold

Shiend

XIV

the

Mr. SPENCE from the Committee on Banking and Currency
submitted the following

standard
bank

XV Analysis HIS to the Agreements

REPORT
(To accompany H IL 2314)

resecutive

director
International

Arts without
the delianauthorization

monetary and

Committee on Banking and Currency to whom of was the referred United

The R 3314) to provide for the participation

the bill (H the International Monetary Fund and the International the
States in Reconstruction and Development having considered recommend
Act

VEtran

Bank samp. for report favorably thereon without amendment and

that the bill do pass

actions

Stablishation

L GENERAL STATEMENT
of

fund

Changes

full hearings which this committee held on the Bretton International Woods
proposals The for an International
Fund extending and an over period
Development
and Monetary

Appendix

.

XVI
XVII

on

by

introduce

new

certain Bank of weeks, for the strengthening Reconstruction committee were based and on Rather clarifying 11. R than 2211. amendments report After H the R were close 2211 favorably of bill to the into the bearings House acted which

with amendments above it was referred decided to to could be incorporated The new by
the bill assendments was accordingly introduced and is the one here being reported
the committee number of witnesses have been beard and additional consideration material of

A been lants placed in the record of the hearing for witnesses the were agreed
has the committee and of the the Congress fund and bank Nearly are all essential to orderly inter-

that national the objectives monetary expressed and financial the view relations that some in changes the postwar should overwhelming period be made A

low witnesses articles of agreement for the fund and bank The of the Bretter
in weight the of the testimony set forth however in the was final for act of approval the United Nations

Woods Mondary severements and Financial as Conference dated July 22 1944

It WAS the general view of the witnesses, and it is the view of this

INTERNATIONAL MONETARY FUND AND BANK

3

INTERNATIONAL MONETARY FUND AND RANE

EXPERIENCE OF THE 1900's AND 1990's

committee, the bank that changes in the articles of agreement for the fund or

would would endanger the establishment of both institutions and

delay, if not destroy, the opportunity for international -

The Beetion Woods program for the International Monetary Fund is
the International Bank for Reconstruction and Development of the

tary and financial cooperation A number of competent witnesses

and the international currency and investment experience

beenincluded
changes
expinion, improve the legislation have
in the bring reported

serious values of many currencies some of which were completely
in the Even when most countries were able to stabilize their rates carstroyed. in the letter part of the 1920's many of them adopted This was

suggested not changes in the bill. or originally introduced which would
these impair the agreements for the fund and the bank and certain of

documents The articles of agreement of the fund and bank require deposit of

out the showing that the United States is in position to

obligations under the agreements The legislation here carry

posed will make is possible to file these documents The hill pro- mended this by the committee which is explained in detail hereinafter recome

behalf of report authorizes the President In accept membership

with the United States in the fund and the bank in accordance on
the to articles of agreement contains the provisions of Inv
very principles make such membership effective and establishes certain necesaffairs of these to guide institution this country's participation in the conduct of the

based on and 1930's Immediately following the last war there were
1920's monetary disceders in many countries with sharp fluctuations de

renears tended to overvalor or undervalue their currencies of

which inevitable consequence of milateral action and the absence an

an effective of international cooperation
When the depression came in the early 1930's one country after
forced of the gold standard and the international exchange

another which was restablished in the 1020's again broke down of
mechanism competitive currency depreciation and HOME devices
Countries resorted employed to the use of other discriminatory monetary as
them Germany, for of example, economic made warfare effective which use she of waged monetary years weapons before the

instruments her military conquests The result of these monetary investment. disorders
BRETTON WORK CONFERENCE

of The careful Bretton Woods Conference MBF preceded by more than 3 years
prepared a preparation memorandum In on postwar 1941 the monetary technical and staff financial of the Treasury

International recommending the establishment of an International Fund problems, and

. Bank In 1942 at the direction of President Roosevelt an
committee representing . number of Government departments

agencies was formed work on these proposals In 1913 and

began drastic in both world trade and international 1920's unwas level of international trade and investment in the had
The doubtedly low helped to make our own depression more severe and a

retarding effect upon our recovery after 1933
taken to assure international cooperation these
Unless practices steps are are likely to reappear after this was in even more

name extreme form (See pts IV and VI of this report.)
POLICY OF THE UNITED STATES

United proposal for a fund submitted to the finance ministers tentative of

Nations and bilateral discussions were held with the the

representatives of some 30 countries These discussions led technical
establishment publication in April 1944 of . joint statement of principles to the the

ment of an International Monetary Fund The joint on

provided sufficient basis for agreement on international state-

United tary cooperation to warrant the calling by President Roosevelt mone-

(See pt.
Nations
Monetary
II of this
report.)and Financial Conference in July of 1944. the
RELATION TO THE PROGRAM FOR PEACE

The the Bretton Woods program is an essential part of . larger

sound for establishment of an enduring prace Unless we program
economic foundation for prace, there is danger that the provide
arrangements break for maintaining the peace may not work well political

down entirely The importance of or may

tions the was recognized in the Dumbarton Oaks plan which rela.
countries retablishment of an Economic and Social Council provides for

can in recuring and communic and through which

than 10 years it has been the policy of the United of exchange States

For more international cooperation for the maintenance exchange
to promote and the elimination of restrictive and discriminatory stabilitystability Following the establishment of our bilateral exchange stabilization

practices the United States Treasury made provide
tion fund. with A number of countries Theat agreements exchange rates
agreements for financial assistance to countries in stabilizing problems their In 1936 our
Government and for consultation took the lead em in the formulation of the Tripartise the Declare- Nether-

Great Britain and France, to which Belgium, these

tion with and Switzerland suberquently adhered Although of order

lands, were valuable in maintaining anine degree could not, of

arrangements in international monetary relations, they basis of this

and stability adequately meet the growing crisis. On that the international

course, the Treasury came to the conclusion multilateral
experience problems can only be solved by means of truly

monetary such as are provided by the fund and bank

agreements Bretton a cods program - directly related to our and domestic assuring

The providing jobs for our workers in industry account

the tions fund conducive to the maintenance of peace The establishment social condi-

objective of markets for our farmers Although exports

Economic and bank are important to the proper functioning of the of
and Social Council (See pc. III of this report.)

fair a prices relatively and small part of the total market for our products and depres- they

for mean the difference between prosperity and
nevertheless sion for both can agriculture and industry. If we are to expand

REC$

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MIcRoSTA

TRADE MARK

ROLI NO

5

INTERNATIONAL MONETART FUND AND BANK

INTERNATIONAL MONETARY FUND AND BANK

4

CRITICIAN or THE FUND AND BANK

stabilize

the export demand for our products we must remove the

currency in restrictions which have been upon international

Little testimony was given before the committee the in opposition International to

trade the past and encourage an adequate flow of international

whole Only by working for an expension of world trade as : &
can we expect increase our own exports Before
countries can resume international trade their economics mod many be

essential Fee this reason the speeds inauguration of the bank
to a high level of American trade (See pts and VII of
this report.)

is

THE FUND AND

the bank the Fund. balk of The the criticless opposition of the directed fund were two general
Monetary types First, I was said that the controls fund will because not really the stabilize provisions of the

and will not abolish exchange rigid second was said that our safe subagreement
scription are the not fund will be lost because there are not sufficient
to

guards the the funds the resources committee believes that absolutely

BANK

Regarding the first critarism would be completely

national The International Monetary Fund is primarily means for inter
problems cooperation and collaboration on international monetary

other countries rates, even The fund
rigid
able exchange

provides general international our

15.

exchange

provideschanges
large measure

of rates

change stability. while permitting which inconclusive avoids spetitive exchange deprecurrent

teney the fund policies and practice Among the impo tast objectives of

time areexchange
the promotion
restrictioof exchange stability, the ultin are elimina

through an orderly this country cannot insist upon the immediate

on

warfar
and outlawing the current
internal ional transections
weapons

ciation removal by other countries will all be exchange restrictions the transition period

of

fund
currency

devices
and other discriminatory
exchange
practices The help
have
which
dollars
resources
billion
can

8.1

that

such

need

in

arreign

limited

traintain

stable

onlerly

and

theireconomies to the great changes caused by
transactions
Some
centrols
adjust
countries
until

use

ell The the safeguards on the use of its has the power which to are see necessary that the

will 2,750 exchanges billion dollars The United States subscription to the fund
The

have

for International Bank for Reconstruction and Development

the WAY committee is of the opinion that the fund agreement contains

purpose the promotion of round internal

in need of foreign capital for the loans countries

The anagement the fund accordance clearly with its purposes However,

fund researces are used in bill provides for further assurnewsre of caution the be used only for current star
ance as that the resources of the fund sensonal will cyclical and emergency

bank
The
by the was and for the reconstructiontheir
of industries restated
of

consist

will

chiefly

bilization
operations balance arising of out par ymenta (See pt XII of this report.)
fluctuations
the

of

-

investment
sound productive projects made throughOthers
guaranteeing
the usual
international
private loans for
channeds
the
will
make
bank
loans
out
of

and

ALTERNATIVES TO BRETTON WOODS

its

The bank will out funds raised by sale of its own
United
by countries have which capital the
amounting billion dollars subscribed

dollars (See pts VIII and IX of this State report.) subscribe 3,175 Million
course

the

committee's

the

of

mammined
. large number of witnesses extensive
hearings on H R 2211
program
opinion with
respect to the Beetton representing
The shades
included

without
close internal of the gold standard by substantial number of
constablishment

the

Another stion individual countries for the

mere Department and of other statives of the Treasury State and Com.

the committee
board the testin Governmentbankers
of agencies In addition
and
of

groups interested in agriculture labor. and other
international
resolutions
star

Beetton

of

also

had

wide

sections

all

pendents
On

the

Woods

program

support
of

from

country

the

from

whole

the

affairs More than 100 organizeapproval
The

press,

this

and

from
as

the

Bretton

Sheral

States
participation
in the fund the
indicated
witnesses

Woods

proposale

has
support
both
parties

have

come

from

and

inde

newspapers

testimons

bank
selmingly

the

stabilization exchange rates exchange key rates and exchange practice
committee multilateral that agreements in character and must include many countries if

they are to surved of the opinion that the alternatives presented by

The committee course of the hearings do not offer practices
the witness during the monetary policy after the war. (See pt. XIII

basis

of this report.)

AMENDMENT? AND REFERTATION
presented

In

by

witnesses

the

desirable

the

and

in

under the fund bilateral agreements of currencies with the view the

water
favor
of United

introduced
the hill as originally
of making

incorporated
this report.)

rilitation the of the gold standard by countries

would remove stabiliza
cannot agree that international currency it believes, moreover, that
countries most unlikely = in the near future for the multilater agreement

roper

representative

course of the hearings it was suggested by some either because
Intheatabilization
in needed

no international regarded matter for each country to deal all with by

itself or because the necessity for such mechanism The committee possible

TENTIMONY BEFORE THE COMMITTEE
In

that

witnesses

of

(See

pts

x

and

changes

XI of

the

In the
light of has the considered testimony the and possibility suggestions of amending the articles
committee

c

TRADE MARK

R
R

o

$

c

o

ROLL NO

T

I

M

F

Ec

7

INTERNATIONAL MONETART FUND AND BANK

January 1942 A resolution was American adopted republics by that in conference

6

of arrestment or accepting these with reservations as to the interpretation

calling

Conference

INTERNATIONAL MONETART FUND AND BANK

for the participa to consider of the the establishment of an International

certain

the

on

Fund

The committee believes that there is serious risk involved in pro-

Stabilization the Treasury staff continued In the its spring work of 1942.

posing amountments the present wording the articles agreement

the regarding the fund and bank then by

and that they should avoided An admissate amendment procedure

provided the articles of greement and chanzes specific charac

the

marandum was revised and expanded, Romevelt and The President

ter that appear advisable light experience can be made with

Secretary Morgentheu to President study the problems in consulta-

made for reservations to the propos interpretation of the articles

tion with the Department of State Federal Reserve stem, the Foreign
Board
of Administration
of the and other interest depenchnical
menta and
Economic

out great difficulty With regard to the proposals have been

the Treasury ontinue the Department of Commerce. the

agreement the mmitten after careful consideration has concluded
that the supposed danzere which they are directed not warrant

incurring the risk of other reservati the part the nations

agancies of the Government Accordingly was work on those

which have not yet passed upon the Bretton Woods agreements (See
pt. XIV of this report.)

Secretary
representingThenumber of agencies this committee
was not State an

RECOMMENDATION

Federal

the
exclusively proposals to technical advisers An that Assistant time Mr. W. 1. Clayton,
of

of

Assistant
opcasionally Secretary member of the Board of Governors officials met directly
and

The committee believes that any safeguards it addition to those in

the necessary for the protection of least interest have been

Reserve System, as well as other committee of Cabinet officers and to
with the technical from time to time with Secretary Morgenthan further

provided in the misser that will prove acceptable to
other and will avoid the be only for sew conference The

agencytheheads
work met the technical committee and to give it
of

committee therefore recommends 510 passage of the bill (See pix
XV and XVI of this report.)

had

policy.

instructions
matters the
worl of
thefund
technical
committee
In the spring
1943
for
was
submitted

progressed far that approval President Roosevelt

II. THE BRETTON Woose CONFERENCE

to Cabinet committee With the and the tentative propo

The articles of agreement for the International Monetary Fund and
the International Bank for Reconstruction and Development (which

and Secretary Hall Secretary Stabilization Mo Fund to the finance ministers the

for their technical advisers Secretary

are forth in full the appendix this report) Were propared by
Conference the United Nation called by

United Nations for study by committe of the House (including

Morgrathers before
three of the Sensito to explain to
three
and

which met at Bretton Woods N H.. from July to 22 1944 and were

published
this
principleswas
of thealso
proposal for an in the press
proposal
them committee) the fundamental

submitted to the governments of the participating countries for their
approval

Fund The sentative 1947 tentative proposal for Inter-

The Conference was the outgrowth of long period of consultation

About the same time in April the United Kingdom Treasury,

United Nations for the purpose finding practical month

finance ministers by of the United Nations
national Clearing
Union. prepared
submitted

of assuring monetary and ration after the
war. The articles of agreement for the fund and bank

to

was

represent

the

also

DESCRIBIONS PRECEDING THE CONFERENCE

harmonization of the views of the delegates countries

becensity these documents cannot embody all of the professional

followed period of extended bilateral countries in Wash. sent

MY one In brief they are designed estab-

There which lasted for about year, to which - an of or 4

practical basis for the of all the United Nations is

ington technical reps On asion, 1943. representatives of about
groupto exchange views on the procountries met together and in June

dealing with postwar monetary and financial problems

18 countries met as

ORDER OF UNITED STATES PROPOSATA

on

posed
these Fund were going on, work was in itten progress the by
WhileInternal
the
members of the Treasury staff and by the revised techn draft of proj for

The proposal for the fund and the bank give out of long period of

careful preparation In 1941. Secretary Morgenthem asked vestment

Treasury staff study the international the
and

problem
of international Dev was completed by
. Bank for Reconstruction and the Cabinet committee.

problems
that would
dealing
with fored after the war and to suggest practical
means
of

pared recommending the International Fund was prean International Bank. In December 1941 was agreed by the
State
and Treasury Depar that one the

of

thisbethat
for anofStabilization
presented
Ministere of Fund

of the American Republic WM to meet at Ric do Janeiro Affairs in

In

technical
committee and to before the interested
1943 Secretary Morgenths appeared them the guidOctober
and
and explained
committees ofSenate
the House
for an Internation Bank.
in principles of the tentativ proposal of President Roosevelt and SeereThe next
month this tentative with the approval proposal was submitted to the finance
Hull,
tary

INTERNATIONAL MONETART FUND AND
BANK
commission

four

had

8

INTERNATIONAL MONETARY FUND AND BANK
The
on
purpos
status. Each Conference on approved organization this
on
the bank. and one on other
and
policies, questions on operations,
committees

ministers Bilateral of the United National It was also published in the
experts discussions
on this proposal were hold with the technical press
of other countries

the

of

and management and on Secretary legal Morgenthau, the of the airman Conference

the

In

form United of States organization delegation, was Secretary elected president of the Treasury was elected the

Mr. Harry D. White, Assistant on the Fund and Lord Keynes, chairman of

country for the fund meantime with and bank extended were going discussions on with on interested the tentative groups proposals in this

problems
labor, and with representatives organizations of banking. Insurance agriculture
and

chairman of of the the United Commission Kingdom delegation, was elected
done,

which resulted in intervated in

chairman on the Bank

In revisions the proposals

the spring of 1944, long and careful study

of

in

course,

the

the The Commission detailed work of the Conference The was American delegation Fred M. all

commissions and in the sistions and the committees version, Judge was the
served on Director the of War Mobilization and Recort 1. Dean Acheson,

representatives joint statement of of various countries approved the publication the technical of
before

the
interested
Secretary Monetary Meeu Fund genthau principlesappeared
Prior to the the publication establishment
this
of joint an International statement .
and
the
House
Senate

including

of

State
Vinson leader of the American delegation
was the entry Commission leader of the American delega- the
of

. fund and bank Considerable them of the status of the proposale for
this
was issued on an International
Bank although also too been joint made in the

tion Assistan on Commission Secretary 11 The new of with the delegation the work of these comtook

congress local Senators representatives Wagner and(Illinois)
Tobey, and on important Congressment part Spence in the

ment on principles proposal it appeared there sufficient agree
the could participating prepared by . Conference which that definitive proposals

the 44 United National President therefore acceptable invited to

the
study
deliberations Welcott Semers of thedelegation
and Conference operated
Reed and the team of It the met delegation in Wash
States

does

The United number of times before the to Conference be worked to out. At the Cot-

International
Conference to consider to the an establishment Monetary
and FinancialMean

ington ments and to consider the problems met every day and on

tary In Fund, preparation and for the International Bank an

free two and three times day an as chairman of the

the United States delegation it important issue required

occasions consideration Secretary Morgenthesi, for every member
further delegation insisted that there must be opportunity every paster as all times
statement about meeting is was countries Were held expanded in Atlantic At this and meeting City attended the July principles by 1944 . of preliminary the joint of

a the number of countries were discussed alternative informally provisions It submitted by
of And the every delegation point important at - to express questions was agreed his was views and diseased agreed on unanimously in the fullest only possible after

way

the fund and bank to the Conference present for all its alternative decision proposals was agreed on for the at

the fullest discussion
ATTITUDE OF THE CONFERENCE

work of the Bretton Woods Conference was also prepared An agreda
STATES

of

opinion

and

DELECATION
In every conference there reconciled are benefit There to be differences can be no benefit United to States any

these different must be and bitter debate among the issues that

in the As was work expected of the Conference the United States delegation look . leading

and andorginistion
problems.
body
from Russin, prof longed China
France,
other country The
on United
States
those
yusian
England

weeked

Currency

by

In

on the Roosevelt Banking ranking included minority and four members of In the the House delegates and delegation Senate the chairmen Committees President part and

could delegation be took the lead in ironing out of some the Conference of was due to

ranking Weights minority and member of the House the chairman and the

fact. - considerable part the success minor differences without Con-

advisers
tofirstthe Measures in the with of the Conference noting
on Coinage
that
the
was

this them careful become the basis for of division and opposition within the

the

of

United

In

dies

this

Nations

The the nations in dealing with into Conference worked in a spirit of at complete Bretton cooperation Woods were and in

were problems
included
growing in the out of this in which Members with the
the
work
All

the

of

the

to

representatives
informed

the

of

press

members
them

Members

and

the

could

public

the

Conference

was

the

of

the

in

to

they

No

that
the

that

what

on

name
the

of

the

United

be

kept

harmony All the best mann for country real-

fully

proposal

of

from

was available
Conference

spokeamen Atlantic for City, the Conference the agreda to delegation discuss the NEW progress the press of the daily, work as

Conference be organized with three commissions, had Other on the fund, that one the

terested ternational in finding monetary effectiveness and of financial its own problems economic policies Every disorders depended and to ob-

ised that the removing the minetary the same time.

considerable extent upon world trade in the 1930's M with prostructions that stilled Bretter Woods WON concerned than the

every country represented AT American delegation no leas United
teeting its own interests, the of enlightened self-interest the

others
Nationfound In this the atmos basis for working together to their mutual advantage

11

INTERNATIONAL MONETARY FUND AND BANK

INTERNATIONAL MONETARY FUND AND BANK

10

Judge Vinson, the vice chairman of the American delegation, stated to
the committee that the work of the Conference was an inspiration to
all free people who believe that international problems can be solved
by the method of discussion and agreement
After extended consideration by the committees of the Conference,
by the commissions of the Conference and by the Conference meeting
in plenary session, the articles of agreement for the fund and bank were

embodied in . final set of the Conference and later submitted to all

increased stress that is being placed by many countries on the in
portance of the Economic and Social Council in the maintenance of
peace The establishment of the fund and bank, in which this country
would participate under this bill are important to the functioning the of

the Economic and Social Council In many respects, they are
very heart of the program for international economic cooperation
The rejection of the fund or the bank would make impossible any

further progress en cooperation; and as many

participating for their approval The bill now reported

witnesses testified failure to establish the fund and bank would humper

by this
committee
the
United
States provides for the acceptance of these agreements by

the efforts now being made by the United Nations to establish an
enduring prace structure Since the immediate and urgent deal problems with

of the postwar period APP likely to be economic, failure to
them through international cooperation will have important political

III. BEETTON Woone AND THE STRECTURE OF PEACE

or well on economic and social consequences

The Bretton Woods program for the International Monetary Fund
and the International Bank for Reconstruction and Development can

IV Tax EXPERIENCE or THE 1920's AND THE 1930's

for be best understood by considering it in relation to the complete plan
securing
praceful
worldinternational cooperation to establish a prosperous and

The Bretton Woods program for the International Monetary Fund

and the International Bank for Reconstruction and Devel

ECONOMIC BAKES FOR PEACE

ent of the experience of the 1920's and the 1930's and in based
on grows policies developed by this country to deal with international
monetary problems through international cooperation

There is widespeed recognition of the principle that the establish

ment of an enduring peace requires more than the setting of

political machinery for dealing with threstened up

CURRENCE IN THE 1989's

necessary
to providerelations
foundation peace The
continuous
through
and

transactions

international

manifested

spirit

The

these economic
relationsprace
is carried over to the politicalthatfieldinternational
That is
interest
why
of

to

is

the

in

relations

of

countries

all

and

that they do not become of conflict that endanger peace.

It is now accepted a exiom that peace is possible

only
if countries work together and prosper together
For
this
reason,
peace
equally
of

the

the

are

important to its political This view was expressed most as
emphatically by Secretary of State Stettinius in . speech to the
Chicago
Council
on ForeignHe
Relations
San
Francisco
Conference
said: prior to the convening of the

The the United Nations . pergram for error efforts of this the will able neither to Photos of the from world the
was

RELATION TO SECURITY ORGANIZATION
The plan for an International Security Organization drafted in
preliminary form at Dumbarton Oaks and now under consideration
at San Francisco taken cognizance of this important aspect of
The Dumberton Oaks plan provides for the establishment peace of

Economic and Social Council through which countries cet an
in establishing sound and social conditions that cooperate will

tribute to the all peoples and thereby facilitate the main- con-

tenspor of prace at the San Francisco Conference

the committee hearings were going on, have indicated the

After
and
- currencies
completely
with
many
currencies
disrupted
stabilized
the First World War there were serious monetary disorders,

destroyed As consider the serrifier. currencies were finally

some at the prewar parity others AT . new parity, and still 1929. others all

through the establishment of new monetary system By
major currencies were back on the gold standard This process of

stabilization was unilaterally each country determining

its policy for itself. some cance there were stabilization loans, and
in others there were informal discu among the heads of central
banks But the fact remains that each country regarded convert
stabilization as its own exclusive husiness and proceeded to establish
the parity of its currency without regard to the effect of its action on
other countries

As consequence of this method of dealing with international ourproblems some currencies that were stabilized with such great
rency differently seen proved to be overvalued while others were under alued

In countries with overvalued currencies, exchange rates were under
pressure The effect WAR to increase the difficulty of mainconstant taining expects and employment in these countries. In vein effort

the established value of these currencies, countries put
to maintain their domestic wages and prices induring depression at
pressure home and on reducing the demand in these countries for domestic and

import goods The depression in the countries with overvalued cur

rencies effected to some extend business conditions in all countries

As experience later the wvekpeek of . major currency is

of danger to all currencies
soarce When the great depression came. the whole pattern of exchange

rates became untenable The THE material countries like Argentina,

.

their

in

most

13
12

INTERNATIONAL MONETART FUND AND BANK

INTERNATIONAL MONETARY FUND AND BANK

the

rest

America

United
their

and

depreciate

was

1929

Empire
forced

all

gold.

off

the

In

and

stituting

1936

disester

cooperated
currencies
economic
currency

revalued

to

its

toward

reflection

of

of done through clearing agreements soon recognized the great authorities potentialiGerman Thedevice.
Name masters many
Germand cases, the German exchange
somecountries
from This
In

con-

gold

the

ties refused this permit Gera importers to accept to buy payment goods in German goods
unless these cases,
countries sicularly undertook in southeastern Europe,
the
of German staple
purchase
balk
other

With

marks

countries
countries

important
about

was

forced

used

the

through

goods

such

of

the

conquent,

German

of

the

all

pull

the
of

bilateral

were

basis

share

shrinking

clearing

disorder

excess

During

became

and

the

This

Berlin

through

through

Europe
occupied
exploit
amounting
balances

100

to

of

was

depression

the

to

country

billion There marks call be the doubt thatdesafter instruments Hitler came of to power Germany warfare

which

currencies

as

there

used

multiple

Addresstely in preparation
for the was on to Mocked come marks The heldthere
by American
and so
were thanmore
the
1938
until
began
which

num-

in

1931

in

free

holdings

their

marks

agreements

clearing
German
concerned
largely
were

other

funds

of

different

of

bered

discount

and

1932

1938

until

German

of

to

other

and

States

United

the

intention

deliberate

the

with

made

were

with

relations

little

resources

the

service

Germany
clearing

Hemisphere

senting

of

there

to

to

the

repayment
clearing
bilateral

with

than

more

in

of

When

15 or

on

expert

Europe

clearing

to

clearing

these

of

monetary

to country

their

out
dis-

currencies

and

intensify

the

to

currency

forced

willing
clearing
bilateral

in

Balkan

the

purchase
to

to

of

from

Germany

turn,

In

bilateral

prices

generous

lawports
the

prices
period

sive

the

apparently

at

Germany's

policy

this

to

being

years

period

for

for

agreements

into

In

Government

20

with Latin America

of

that

EFFECT ON WORLD TRAPE AND INVESTMENT

Germany

veloped
rates

little

is

suit

the

valued

countries

the

with
to

1914

Republics

And

exports could be used to pay foreign creditors.

1931

In

as

South

of

to

of

most

and

at

Britain

in

Great

of

Australia and Brazil were

this background of destructive currency of world tarties trade it fell by
world
wonder Against that between
1929even
and after 1932 considerable the
value indus
rial trade
And
value
dollar
percent

and

of

70

and
in

German

goods

German

goods

nearly had place month all secret countries below the the level of the 1920's more In

the remained 10 United States suffered relatively
in is world trade.
the
Our share total
world exports full by
country
other
1934
between

of

trans.

for
to

Throughout

Gertoo

to

offered

many

at

the

clearing
external

peace.

the

surplus

import
the

funds

their

due

nationals
the

proceeds

to

1920's
loans

soundiness
depression

made

were

ability

the

or

country

this

we

came

of

stopped

And

warplus
port
theret
became
Europe
some
pressure
added
put
an

to

social

of

the

instances,

had

to

the

invest

international

with

the

12

expluiting

competition

ternational

the

flight

to

on

this

currency

disorders
after

in

turn

recovery

were

began

factor

one

1933.
in

MICROSTAT

TRADE MARK

14

15

INTERNATIONAL MONETARY FUND AND BANK

INTERNATIONAL MONETART FUND AND BANK

There investment can be no doube that the failure to restore

recovery and in the 1930's delayed and international trade of
no

Use

such

of

this

In

world

countries

other

place. the aggressive adopt German restrictions currency of the For policy very these type forced reasons that the the cripartite bilateral their

prolonged The widespread use of the devices hampered of the process

were
factics,
madeThis country currency the warfare United
Kingdom, and
and internitied
other countries the depression which
their

arrangements
in
velaration deference and to designed the tripartite to eliminate declaration could not achieve

currency

objectives
MULTILATERAL AGREEMENT NECESSARY

MONETARS
Polary THE UNITED STATES AFTER 1934
country

con-

the

peace

practices

the

of

dangers

It

disorderly

character

problems

to

the

toward

succeed

stable

On the basis before of this the experience. war, that the mulsilateral internation Treasury arrangement had monetary come to Fund problems could and be

currency

international

are

clusion, could be even solved only if for a truly the International Mondary Development now

For

the
International
members
other
devised
The pro Bank for Reconstru
of
the and United National
sort interna offers
the
43

of

and

for

by

directed

the

and

elimination

maintenance

of

for

a

in

of

the

being . unique consideredThe
opport thataction
unity the United to secure Bretton Stat approval Woods has urged Conference
upon the indicates world that
such

policy

of

decade
United
the

Through

Nations

are

prepared

to

adop

its

United

Fund

THREATH TO PORT-W AN PEACE AND SECURITY were

1934

of

in

the

provide
agreements
dollars
after

of

rency

The world with VI. international cannot afford currency to should repeat and the the investment consequence estors that problems discriminatory would made in be the for

is

within

more
disastrous
many
take now
dealing 1920's and the 1930's than ever
If before since countries restrictive with and greater steps ingenuity
employee
in

to

be

practices

time

Treasury
that
and

name

made

The

attempt
immediate

CI

the

by

through

the

dis

the

of

controls

over

posi-

internal transactions They national will seem as forced feel mentis to of fled to direct enter their The into balance bilateral inevitable of political payments result will arrange- be s

trading
world
tion.
ments They
to secure system the help dominated they need. by governmental
United
1936

the

because

at

England

exchange
tion

monetary

This

used
by

An

with

dealt

many
war.
andunder the pressure problem of on necessity unilateral internations
organized cooperation and countries precerious may
basis,
all

the

by

Treasury

other

been

States

are

to that monetary of the United and condition Nations of Otherwise, the world economy deal after with the

provide

of

of

therefore,

also

other

number

accessary.
emblema
social

the

for

.

provide
specifically

efficiency

is

up

and

to

RECISION

POSTWAY RECONSTRUCTION PEOSLEM
without

further

French

parallel

magni-

in

destruction resulting transportation from this war is systems, have been reads bombed and bridges and

national

have side The been In many completely countries, destroyed equipment factories harbors and public Unexploded utilities

system
the

of

affirmed
While

national

quota

the

lister

be

Switzerland
helped

and

the

tripartite

of

place.

countries,

minesand public of works their fields productive have been While
stripped
In wrecked such conditions and disorgenizes persist ever the normal TAW materials product

Later,

perumed

many

lacking

off

from

the

Euro

for For years world trade has of Asia. In the case of and large foreign

inter-

steady

In

first

1930's
In

the

peath and international evertments incurred to carry on the WAT away In from the export
tion reduction cannot Continent DATE are and been from parts been have been fractically been lifted avidated cut England all countries has long
was
obligations
facilities and labor have Whatever international trade good
industries productiveproduction
to

TRADE MARK

o

MICROFILM

$

ROLL NO.

17

INTERNATIONAL MONETARY FUND AND BANK

INTERNATIONAL MONETARY FUND AND BANK

10

countries would prefer . solution along freer lines they If on during the war has been largely intended to contribute to the pro-

there them seem prepared to support such policy problems because of the fear

secution of the In of the greatest trading countries these

with the purpose of facili-

of that other policy The establishment ran deal with of the the fund and bank will offer post- - to

victory

cooperation
war lightened period. public opinion in the United National
for the the opportunity benefit a all

reconstructive the world economy will be difficult As

of

countries

many

to

They must be given the opportunity
means

secure

opening

countries
countries There is another danger
in It the reconstruction
essential
that
many
faced to free enterprise
and
agriculture
industry
that
their
problem
domestic

channels
restored

the

investment

trade

be

by

be

war-form

until
orderly
have been established
and the
movement
hamper
restrictions
wartime
that

the

capital

and

will

will

this

extent

Although
industry.

goods

of

policy

support

their

capital
can

done

be

by

countries
reasonable
investment

other

from
secured

be

on

that

be

entered

be

terms

the

over

made

the

to

part

the

resources

has

in

of

trol

The

What

war-

trade

the

underestimated

be

international

balance

the

of

state

of

inter-

in

payments

of

dangers

These

control.

are

available
extreordinary is many extension countries and
are freelywere
admitted
They As
program
only

important

problems, it is certain that nearly all countries would profer

of

of

large

They

arrangements

alternative

no

would accepted with international cooperation on monetary and the financial latter.

con-

The

that

control

Direct

investment

and

not

free
the

direct

the

must

period

the

of

and

1930's

scope
The

national
The

result
fare

could

of

be

countries
unfair

secure

politics

power

be

countries

other

for

Foreign

ways

to

And

utilize

peeded

con-

the

controls

other
than

is

The

expected

their

wartime
danger

some

of

be

in

of

exercise

to

this

difficult

tempted
to undervalue
their currencies in order to facilitate
Others the
their
may
restoration
position
tempted

mininum

the

In setting exchange rates after the war. some may be

and

find
capital

should
basis

the

in

POSTWAR

is

restore

it

fating

of

THERAT or ECONOMIC BLOCK

urge
the

for

from its economic aspects, direct restrol agreements of international would

make

countries

trade Apart and investment by the state through in bilateral world of communities
might
have unfortunate work together political Even if such bilateral arrangements were be

Some

recommend

of

with
system
that made must
in thesharp
friendliestconflict
spirit the countries
participating outside result
countries the agreement
into
brought
organize
such
there

main-

the

of

in

tenance

freely

of

country

to

to

Inevitably

which

adjust

would

their

controls

exchange
character

Moes

economic

use

international

trade

such

along

unable

were

that

Countries

lines

to

would

we

compelled

be

of

the

revert

or

seek

to

inter-

upon

depends

to

sound

The kind of world economic to system stable and orderly exchanges and 11
nations
country
this
to

productive
have

the

International
interest
createst

direct
balance

of

trade

But

they

We

The

maintaining
can

governed
such
have

of

people

world

interna-

which

than

rather
world

only

we

political
consideration
cooperation of other countries in matters of monetary and
secure
the

under

financial policy

to

the

conditions

is

control

the

of

in

are

tional
Some

investment

in

upon

depends

not

if

RECISION

are
in

can

MICROFILM

MICROSTATA

TRADE MARK

ROLL NO.

19

INTERNATIONAL MONETARY FUND AND BANK
ENTERNATIOOCAL MONETART FUND AND BANK

18

transport
new materials For example,
to makeand
require
the high- we speed imported specialty 40 depend
differ- steelson
industry
countries
than
more

VII THE BAKYTON Woose PROGRAM AND Domence POLICY

50

and the Internation Bank for struction and Development

policy after the war to provide john for workers in industrycan
fair prices and steady markets for farmers We
abroad
and

match power our factories and farms
market
on

the

of

war

The

metals

our

the

our

Conference

Woods

Bretter

refrigeral

typical

possible
trade

tion

hopes
secure

high

American

of

goods

exchange

for

the
the

was

1930's

Once

until

demand

the

countries

1930's

the

the

goods

of

was

from

1920

can

000,000
employment

expanded
1920's

Oar

can

trade

to

While

the

of

American standard of living

about

our

stion

and

and

rewamp-

the

Our

automobiles

living

of

and

to

arises

Without

imports
handicapped

participated

shown

has

when

which

seriously

supplies
domestic
manganese,
supplies
our

our

alumins

of

on &

and

supples

must

production

with

W.

home

nickel

for

We

rubber.
the

and

-

have in consuming and
Investing The 140,000,000 American people
be

for

interfere

to

home

bauxite

of

Canada

tin.

natural

for

There is general that primary objective of our
markets

our

Bolivia

must considered relation to extra domostic policies
find

of

from

The Bretters Woods program for the International Monetary Fund

in

would

1932,

level

be

invest-

foreign

del-

dollar

goods

Our
of

invest-

countries

at

air-

oral

nords

14

PRECISION

that

percent
of

balance
their
meet
of

essen

are

with

payments

per-

12

bear

stop

mouth

for

that
interns
ational

to

character

among

both

trade

countries

another
NECEMARY

FOR

TRADE

they

requirements
provide

of international trade and the resumption trading of entries inter-

our

on

Suchpolicy must
The expansion will be facilitated
the great
policy
stable
monetary
and

our

to

national

basic

variety
here

that

dollar

dollars

with

balanced

mind

in

have
burning

indicate

They

hops

will

These

the
of

our

that

of

adopt

international

orderly

and

of

ad-

small

exchange arrangements 1930's and shows clearly that the use of exchange trade

fruits,

experience preciation and of the discriminatory currencyretaliatory
practices monetures to secure that diminist

Further-

The

directed toward securing freedom in exchange transactions

inevitably

encourages

MARK

TRADE

c

R

o

MICROFILM

S

ROLL NO

21

INTERNATIONAL MONETARY FUND AND BANK

INTERNATIONAL MONETART FUND AND BANK

20

VIII. ANALYSIA or THE INTERNATIONAL MONETARY FUND

the volume of international trade and investment and distert the
patters
of international payments
Only
through
international
co-which
restrictive
such
operation
measures
aroid

Despite the technical nature of the problems with principles which the are Inter- quite

it

be

national Monetary Fund must deal four statements its essential First. the members

simple and can from international in monetary problems are an
establish
of the fund recognize
that
interility and must be dealt with through
fund
reeponsil

After the experience the 1930's it is quite
obvious
that orderly
well
national
prosperity
as

cannot

based

prewar

international

the

on

national
initial
the

Unless mose
raise

are

volume
level.
prewar

real

the

above

percent

to

the

the

countries

in

of

will

for

their

of

to

the

use

level

of

trade,
can

pass

and

freedom

from

the

postwar
exchange

period

of

except

cutthroat
international
dislocation
order,
stability,

the

and

will

exchange

fair

of

international

in

The

areas

ofof

Europe
Assess

Asia

and

trade

technical

order

great

explicitly
operation

state

assure

the

countries

all

fair

the

Canada

standards

and

Arras

facilitate

through

the

adjustment

task

difficult

conditions

fund

the

tablishment

-

One of the more stable important exchange functions rates. The of the fund agreement reased provides in

or

before

months

the

believe

fund

must

extres

on

suitable
during

in-

by

DAT

which

agreement

in

the

United

this

States

agricultural

BT

value
use

value

the

of

par

excessive

without
be
or

and

this

by

for

provide

that
the initialgold
par the value United of States each dollar.
will be based
on exchange If the
comeforceinto
fund
the
terms

and

position

to

be

orderly member's currency,

can

in

will

fund

may

fund's

countries

For

initial
between
fund

the

of

par

the

can-

engage

they

resource

the
occupied
determined
member
the
by

be

value
fund
in

confi-

the

dence

STABLE AND ORDERLY

of

and

is

of

preder

tive

.

the

domestic

rupted

be

recl

country

help

impaired

be

Cooperation

the

many

for

not

others

by

pracetime

to

from

will

position

economic
measures

their
fund

equally

they

The

these

principles

The member
countries will
find problems. the fund
exchange
views,
monetary
establish
will
fund
international
the
Morrover,
that
countries
programs
practical
seasure
will
that
arbitrary
practice
exchange

and

of

and

There
as

But

agreement provider means through which countries can
The collaborate in the solution of international convenaent monetary

on

certain

countries
with

England
living

fund

the

been

fundamental

the

way

in

have

AND

need,

they

trade

and

that

safeguards

the

in

important
reconstructed

foreign

all

The

elaborated

are

the

and

Similarly countries that not had the
opportunity
for economic
the
capital
rise

monetary

arrangement

exchange
for

are

These

promptly

United

help.

own

their

of

use

orderly

adequate
reserves

limited

given

be

the
to

under

are

restored

be

as

these

by

A of the essential features of the fund follows:

Until the world
has
been restored to economic health it will be
secure
adequate
of

abide

that

any

to

members

the

Third,

tive

standards

without

exports

agree.

fund

the

of

obtain

to

and

fund

the

with

the

countries

the

level

secure

thereafter

parities

these

change

not

will

the

the fund m with theafter
transition agreement. not to impose pretric
have
a

postwar

the

must

that

will

members

the

with

their

parities

of

be

trade
Year

Second

to

as

be

PRECISION

limited

exchange

country
In with the such stime. countries at centative
may under The such bill
fund parity
transaction
conditions
thisand remittee in such requires amounts the as the value dollar to remain
before

at its present gold content

$

o

I

R

c

o

R

F

TRADE MARK

ROLL NO

I

c

23

INTERNATIONAL MONETARY YUND AND BANK

INTERNATIONAL MONETARY FUND AND BANK

22

After initial
parities
have stable
been established
member countries their
currencies
range

maintain
below

changing the parity
of its currency
percent at will is made If any in change thetheparilymember
beaggregating
changes
10

above

parity

only
the

fund

and

only

for

the

minor

the
or

proposal
purpose

the

on

values
with

come

yond of currency fue the fund the resources
has expressed of the its fund. objection and if the may
difference
use
country
the
ineligible
continues
becomes
the
fund
be

to

member

the

provider
without

and

pelled between to withdraw from membership in the fund
FREEDOM IN EXCHANGE

of

the

total

the

general, exchange controls restrict and by channels
divert limiting international the amount
of
service
meet trade

In

and

the

made

only

does

into

investment
requirements

not

available

made

exchange

any

foreign

on

practices,

restriction

no

may

be

trans-

international
current
foreign
dividends
for

such

of

that

to

such

the

fund

the

and
imports
eliminate

for

pay

To
investments
principle

and

on

parity
which

period
initial

actions,

payments
authorized

and

moderate

are

the

to

together
of

percent
member
While

or

is

perfectly
spread

expected

free

allow

to

required

could

all

missent

controls

introduce

to

of

the

at

to

and
movements
small
prevent
controls

these

ence

efficient

for

this

banks

that

shown
that

similar

of

out

countries

like

in

cannot

be

country
interand
necessary,
Experi-

purpose

upon

rulied

detailed

can

parity

would
no

are

cases

capital

that

social

object

in

resources

large

with

States
United
capital
outward

the

like

and
England
paycontrol
capital
of

of

the

of

The

originating

instability

in

the
undelly
purpose
capital

sole

not

that

necessary

Their

used

be

not

may
delay

to

commitments

of

funds

of

own

of

they

transfer

course

member's

out

made

for

to

reasons

prevent

to

or

intended

the

in

interfere
banking
trade

large

for

ordinary
investment
capital

to

initial

member

require
resources

may

fund

To

in

in

control

to

menta

fund

But

approved

tend

would

fund

the

controls

minimite

to

controls

the

on

retain

the

them

payments

their
be

permitted

approval

most
exchange

to

the

of

relief

cover

could

and

whose

Countries

reconstruction
transipostwar
are

and

during

controls

the

soon

restrictions

such

transactions

current

fund.

fund

the
the

require
impose

the

to

provide

greater
could
in

The

fund

would
serious
by

adverse

of

country

authorize
other

use

balance

measures

of

Ob-

viously, payments when could a not country be finds that it cannot export enough to meet

be

country

fund

temporarily
promptly

are

they

as

review

without
current

such

and

flights

capital

their

4

PRECISION

MICROFILM

MICROSTAT

TRADE MARK

ROLL NO

25
24

INTERNATIONAL MONETARY FUND AND BANK

INTERNATIONAL MONSTART YOND AND BANK

its current
in

pay

to

In

of

use

both

the

employing

members of the fund

should
view

with

report

facts

scarce
other

entirely
and

The

would
its

the

meet

the

with
the

The

supply

its

became

apportion
relative needs

Although

the

are

fund's

important

dollar

urgent

After

fund

course

and

free

000

for

acquire

its

tain

fund

the

making

large

hesitate

main

000

000

silable
their

main-

used

can

increased

considerably

be

all

part

resources
idence

its

that
will

and

stable

also

will

these

them

give

$16,000/Many

group
$10,000

below

will

and

reserves

Even

were

are

they

und

than

gold

The
present
United
States

to

these

that

however,

assumed,

never

Congress

large,
met
about

are

amount

may

county

foreign

needs

postwar

By

members

borrow

made the

States

United

of

sales

of

scarce

the

permittee
concerned

the

in

without

made

may

se

will

this

Under

dollars

billion

depend

holdings

own

the of the the total subscription forchange
other approximate of the

excessive

or

currency
pertinent
exhaust

priste Of this motas amount, the United 6.050 States billion dollars The of sub- its

general

and
scarcity
the
member
currency

the

the

in

to

fund

the

without

dur

be

inadequate
and

causes

that

occur.

problem

the

the

correct

this

of

parities

of

imports by other
the

unlikely

But

First, the fund

balance

countries

of

to

will provide

the

favorable

large

its

tend

could

other

national to help members cintain would

billion and dollars and other country
entries will amount toholdi
25 percent whichever is less
each

scarcity
revision

the

&

would

could

.

minists

effect.

is

scription 10 percent gold for its gold and dollar of the United States will be 1.1

country

any

of

put

and

gold

in

The fund rencire will have subscribed resources by of 44 countries the exchange on the basis policies Service of of the 2,750

the

are

dollars

billion

8.8

fund be international permitted to payments limitobligations
the it must eitherincure
have help from the
menta
make
foreign
exchange
some
isstances
temporary
exchange
controls

If

free

CONDITIONS you USE OF THE FUND

be

limited

Lion Congress
When

currency
step

be

scarce,

curtail

to

no

country may purchase foreign without exchange special in action

of

countries
fund

the

agreement
scaree

currency

they

may

mand

may
no

for

rapidly

there

Under

scarce

the

deems

be

of

in

fund

the

with
and
currency
permit
the
scarcits
country

While

A member from the fund its own that
currency the fund's holding Subject
f currency
noted
gold.
terms
fund
member
each
depreciation
gives

necessary

limitations

to

must

curtail
the
removed
will

and

de-

the

but

it

more

United

On

net

XII

the

excess

change

reserves

stability

and

are

of

from

its

are

adjustment
change

force

control
are

have

avoiding

not

fund

rate

its

use

and

country
without

payments
expected
fund

balance

adjust
extreme

accept

fund

The

with
trade

other

the

prompt

depreciation
volume

side

adverse

an

its

in

fund

the

only

using

the

to

not

that

use

take

national

steps

to

account

the
fund.
country tinsing maladjustments in its the fund country may
rect
any
of

For

violation

of

sible

extent

same

country

balance

currency

its

fund's

100

for

quota
from

its

the

Exchange

fund

the

in

can
the

to

from

foreign

acriaire
amount

not

the

there

waives

not

relation

not

that

the

unless

side.

detailed

States

currency

local

for

change

fund

the
of

its

to

fund

right
this right for any abstantially
country the same
terminate
This
OWN

Use

corrective

give

fund

fund;

the

foreign

purchase

the

fund

the

limitations,

qualitative

respect

be

More

as

would

-

PRECISION

the

purposes

or

cor-

MRO

TRADE MARK

MICROFILM

U.S.PAT.OFF

ROLL NO.

27

INTERNATIONAL MONETART FUND AND BANK
INTERNATIONAL MONEYART FUND AND BANK

PRINCEPLES OF THE BANK

international

that

be suspended from using the fund's resources: and if the violation
persists it may be required withdraw fromfund, available
member
resources

The Bretton Woods Conference
problem recognized
and therefore, propose. the
international
Bank

investment

are

payments
accounts

an
to

their

Internal

an

fund

readily

charge

are

Private

with

their

fund.

the

while

directly

make

make

will

bank

the

by

that

that

of

fund

the

dollars

have

vised

bank

the

of

with

policies

the

the

through

done

be

the

this

and

responsil

to

the

The related to their quotas
creditor

of

the

they

the

of

countries,
directors,

agreement

in

debtor

if

creditor
creased

be

by

will

increased

from

out

or

issuing

our

its

by

the

the

after

that

will

must

the

be

project
to

that

capacity
guaranteed

located

projects

return

in

as

will

not

pos-

and

of

the
the

modern

means

Rest

Far

the

their

to

collected

by

the

percent

meet

to

liquidated

loans

or

special
basis

percent

15

would

more

be

IN

and
par-

restore

to

them

into

default
mark

to

issue
are

mulated

80

percent

gold

are

the
to

be

allars
To

give

the
of

to

ad

led

investors,

the

defaults,

of

country

any

even
if

undertaken

The

the

earnings

incomplete
by

losses

to

est

the

bank

surely
or

United

if

the

of

inter-

more

and

equal

of

favorable
as

the

On
out

The

reserve

of

until

securities

the

offer

becomes
held

market

similar

in

that

it

recognized

to

will

bank

the

The

Bretton

The

for

principal

IX

sible

or

use

the

assure

of

percent

contribute

within

Each

Loans

committ

.

that

reports

and

the

country

to

of

bank

the

guaranteed
project
of

de

might

raised

make

might

bank

the

guaranty

power

voting

the

prepared

the

funds

from
directly
capital

loan

the

with

even

terms

en

make

to

or

position

Special

development.

and

to

by

doct

will

in

mémbers

The

And

private for investment
market
sold
The designed encourage
private international
investors
approved
the
Where
securities

other

the

will

it

United

The

or

fund

the

for

by

the

sound

management

countries,

all

shared

Congress

Some doubt that in practice safeguards
fund's

the

international

the

of

in
or

without

the
in

this

Under
dollars
subscription
the

44

billion

3,175

be

will

such

by

subscribed

may

charge
levy

this

For

hesitate

will

bank

the

Joans

when

U

holdings

the

foreign

facilitate

Is

food's

of

war.

the

needed,

urgently

the

its

of

out

loans

the

after
on

will

worthloans

sale

the

through

funds

of

the

guarantee

will

Bank
the

ideal

make

to

of

the

of

projects

productive
perpared

and

If

use

and

simple

of

word

for

are

bank

the

principles

Development

The

its

if

be

for

an

adopt

they

in

fund's

The

is

26

is

P

one

accu-

may
fund

States

obligations
bank's
made
loans

or

MICROFILM

MICROSTATI

TRADE MARK

ROLL NO

MONETARY FUND AND BANK
28

INTERNATIONAL MONEYART FUND AND BANK

neveral

their

guaranteed
by bank.
the bank may not exceed the unimpaired capital and
reserves of the

that

EFFECT OX INTESTMENT POLICY

The bank can factor in placing
international
With
the inter
full

of

of

interest
places

bank

could

service

to

rates,

loans

berrowing

the
the

also

utilize

investment

for

legislation

to

local

In

on

Congress

message

to

in

defaults

fight

learned

16,

PROGRAM
and

tensive

his

At

es-

first

among
said.
Truman
deferent

for

the

endorsed

man

with

our

extime

with

conference

press

the

bank

and

trade

there

of

world

throughout

living

favors

he

fund

the

in

President

April

that

The

that

emphasic

and

clear

participation

In

resources

its

President

bank

the

n

country

prevent

it

investment

in

next

the

April

day,

Bretter

way.

all

Tru-

President

17.

oridation

Wood

stated
that

He

and

he

that he is for the fund and bank as Vice President to help PresiState

Com-

and

would have
done everything
the Bretton pos Woods proposals through the Senate
get
Roosevelt
dent

addi-

In

economists
POSITION

organizations
number

TAKEN

BY

STEPTINIUS

RECRETART

AND

HELL

RECRETART

of

RECISION

The Honorable Cordell Hull, when for currency Secretary of ilization State, strongly and in

accepted

the
the

to

of

Some

the

urged the adoption of the In proposals April 1944 at the time the joint statement Seere-

way

on the International

Monetary Fund was published, the former

tary State said

before

of

the

and

made

On

fund

Foreign

TRUMIN
bill

Mr

the

Bretton

After

the
of

discussing

currencies,

for

Relations
the

Secretary

the

Chicago,

in

approval
need

for

Stettinius

of

reconsaid:
possible

other

inter

which
which

TIRES

MICROFILM

REG. U.S.PAT.OFF

TRADE MARK

30

INTERNATIONAL MONETARY FUND AND BANK
INTERNATIONAL MONETARY FUND AND
fat

In

Secretary

Morgenthau,
president
of

the

that

Secretary

the

Mr.

currency

than

agree-

that

out
the

United

establishment

prompt

the

Woods
pointed

Acheson
warfere

that

suggestion

Bretton

the

the

of

fund and bank
BY MR 11. D. WHITE
The Assistant Secretary of the on Treasury both the Mr economic Herry D White,
character
detailed
their

He

on

fair-

degree

agree-

of

stated

"

Dretton

The

difficult

except

how

Bretton

affected

the

trate

and

became

the

restrictive

the

adversely
derline

desperate

it

the

world

000-

trade
every

It

the

to

TRADE

MICROFILM

MARK

32

BANK
erections

INTERNATIONAL MONETARY FUND AND BANK

Fred M Vineou, supported Director the Bretton of Warvice
Woods chairman
Mobilization legislation the America and in teath dele-

Bretton

Woods

Conference

is in

he

excellent

an

that

of

He

Conference

The

presented
Woods

Soviet

Union

charge
the

of

Bretton
from

trade
of

the

addition

Mr. Wayne c. Taylorbill.
supported

bank.

This

the

President
On

of

PRECISION

basis

and

currency

the Export
Bank
experience
extensive
of

his

35

INTERNATIONAL MONETART FUND AND BANK
INTERNATIONAL MONETART FUND AND BANK

TENTIMONT or BANKERS

in international banking Mr Taylor replied to the criticisms of the

witnesses in opposition to the Bretton Woods -

fund which have been made He stated

favor

bankers
While the represented principal
the American
Bankers Association of the fund the and
other
agreements
from
in

.

34

Chicago,

and

fund

the

mittee the bank heard Mr. testimony KBank
R. Brown chairman and of the delegate board
to of the directors Bretton of
support
the

First

Woods
bank
the

of

National
Conference
In

able

gave

testimony

fund.

the

for

of

in

stated

his

which

strewing

in-

of

very

pro-

interprinciples Policy
The the House on Postwar Economic
to

established

those

fund

the

should

Mr.

in

similar

that

stated

for

and

estab

be

transition

the

by

In

fact

proposals
lished In his promptly testimony. and not be until that after many the bankers Woods
period in of the
United
Brown

Mr

States

have

strongly
be

Bretton

the

supported
stated

of

reply

Bankers

Independent

In

the

the

fund

and

set

the

have
Association
Bankers
report admitted

.

Evidence

that

show

presented

bank

the

favorably

Independent
- the Bretter

approved
the

cost-

Bankers
Woods

Asso-

to

legisand

favor the reservations fund
earliest Congress possible to date and without crippling
of

the

general

This

Development

Bank

posed

the

The

in

peo-

committee

the by received the presidents . of 11 of the largest $3,000,000,000
banking institu-bankers
of
Philadelphia
the
tions

long

The

The

memorandum

submitted

by

for

effective

financial

milas
the
is

For

profit-

the

die-

serve
flow

industrial
world
WOOD#

number
groups
and

groups
include
banking
of

from

heard
the

Bretton

prace
the

representatives
Woods

of

a

GROUPS

committee

The

proposals
economic
agriculture
resolutions
and

proposals
record

have

been

large
These

civic,
state-

presented

principles

them

enough
war.

TRADE MARK

MICROFILM

M

ROLL NO

37

INTERNATIONAL MONETARY FUND AND BANK
36

INTERNATIONAL MONETART FUND AND BANK
at also
but when such cooperation States not total importants inedition modifies Bresson

TESTIMONY OF RESINEM GROUPH
lase

adoptive

from The Bretton Woods proposals have received widespread
business their and industry Innumerable busis groups have support
effect.
bank and complete approval
the proposals
for the fund and the
resolutions
to

National

the

of

Part

of

of

Mr.

statement

Johnston's
sension

of

National

the

the

1945,

of

for

Mr.

Research

the

by

Mr.

mittee,

Flanders

what

estatentially

M

promptly

them

president

Johnston

-

Council, from supporting Oscar the legislation
The received latement
Cotton vigorously
follows:
married

this

groups
covers The only small part of the feverableDevelopment
testimony of The business enalvsis
below
outstanding
the
Ralph
Mr.
Flanders
proposals
business
Boston
Bank
and
chairman
Federal
Reserve
the
Research
Develop
Committee
ment,

generally

risks

date

Council,

Cotton

that

which

had

Sundin
support

in

unand

council

the

been
the

Mention

of

the

from

reportednatives

Com.

said:

included

meet.
of

Congress

the

for

thank

later

the

action

and

power

is

our
a

The

helpful

sugges-

tion

that
The

implicit

the

support

from

which

National

Planning

in

The

of

busi-

has

also

statement

Woods

supported

favor
ably

leaders
affairs.

of

one

of

the

reads,
this

in

part,

as

Bank

can

Committee
P

of

reduced
The

gravent

suggestion

Economic

the

Development

been

director

of

Chicago

foreign

Chicago
supporting

which

rules

trade

expressed
also

He

spoke

some

represents

250

concerns
On

the

comm-

has

Industries

Overseas

International
legislation

Inc.

the

the

substantially

record

-

resolution

the

The
in

RE c I $

Trade

Council

Woods

proposals

emphasized

substanti.

part:
the
of

the

charge

best
failing

Almost the
all ofBretton
the of Woods
the country
have
been united
in their
propx
of economics
Harvard
Dr o. M. w Spragia
his critics long
experience professor as an adviser and consultant
upon
drew

University

MICROFILM

TRADE MARK

ROLL NO.

39

INTERNATIONAL MONETART FUND AND BANK

38

INTERNATIONAL MONETARY FUND AND BANK

to Bank the United States
Treasury the Federal
Reserve Board and
and
with
the

fund

that
were

firms
not

also

mid

committee is informed that subsequent American poll by the Economic Econo-

the

engaged

in

International

the

estab

miste The Committee aboved overing that 90 all percent members of of those the who replied favored

approval Association of the Bresson Woods proposals
VIEWS OF LABOR ORGANIZATIONS

which

The committee heard the
testimony
favorable of the to larger the Bretton labor organizations Woods prouniformly
was

testimony

The
favor
adop

Mr

William

testified that his
protected

Woods proposals

president

Green,

the

American

ration
Mr.

Green

Federation
adoption

Labor,

Bretton

the

of

the

said

coun-

and

committee

the

the

They

Congress

the

that

Woods

Brotton

pro-

state

Harris,

of

the

the

Murray.

the

heard

committee

Carry

behind
and

the

Congress

the
of

belief

in

his

of

private

emphasize
weakened

of

his

if

PRECISION

Interna-

the

Financial

committee
bank

should

MARK

MICROSTT

40
41

MONETARY FUND AND BANK
the

United

further

delay

and

MONETART FUND AND BANK

without

Russell Smith, legislative the Bretton Woods agree-

-

INTERNATIONAL the mendment committee In to his secretary approve statement of
the be said: National Farmers'
abundant
of

the

traditions

goods

free

the

offers
shoreby

expanded

an

Bank

International

for

you

the

certified

National

The

proposals
but

also

Grange,

National

the

differ-

agreements

the

dropping
committee

executive

in

Grange
fund.

the

fund

preserve

and

activities

stabilization

They

support

authorizing

the
of

labor
the

before

foreign

wholehearted
financial

Other

and

relief
with
be

e

already

or

articles

of

section

the

agreement
calling

the
to

that

further

and

of

for

change

connection

current

the

such

for

an

duration

of

restrict
are

fund's

emergency

needs

for

be

to

ex-

foreign

transactions

OF CIVIC ORGANIZATION
public

in

Representatives before of the number committee of organizations and offered interested statements in favor

and

thus

Bretton United Woods for World Organization
Their
sent statement the committee reads is .
American
bank
and
fund
the
statement supporting

part, follows:
The

authoris

for

with

the

kinds

to

TRADE

3

PRECISION

ROLL NO

PRECISION TRADE MARK MICROSTAT REG.U.S.PAT.OR MICROFILM

INTERNATIONAL MONETARY FUND AND BANK

INTERATIONSAL MONETART FUND AND BANK

Mr Russell Smith legislative secretary of the National Farmers'
Union urged the committee to approve the Bretton Woods agree

endorsed by the United States without further delay and without amendments
changes

Woods represents one of the sachet important commission on which

mente without amendment In his statement be said:

-

must tell built cooperation America - - - the and of power

Foods - Our Philip Murray

Farmers always have been the traditional
of

after

that -the5,000,000
- for American
- be found export
proposals
Bretton

the

for

way
this
for

the

**

6 again with the ( systiple

details

states

into

also

barter damping. import quotes, and restrictive exchange

Albert 8 Goss master of the National Grange also testified in

not require deal insight into the technical

support of the Bretton Woo proposals The National Grange

details

world

bated

the

Brether

was

the

world

fact

the bank but dropping the fund
After further however, the executive became
that would possible to and preserve the fund
for the of important stabilization activities They

-

into

swort
study

that

they

for and the provide which the

therefore adopted the following resolution authorizing support of the

the

of

profitably

shared

to

Bretton Woods proposals:

make

every

In addition, large number of local State, and National labor

Revolved That the Washington
office be authorized to support the creation of
Fund

unions have written to the committee to express their support of the
VIEWS OF FARM ORGANIZATION

from

Representatives of the major national farm organizations appeared

prosperity

Mr.

o

Neal

said

and

the

bank

and

to

and

fund

the

the

disting

futul

made
the

through

the

-

Mr. Goes said that if the fund's stabilization operations were con

Mr Edward A O'Neal, president of the American Farm Bureau
urged

-

adequate

that

trade We believe

before this commit tee and instified in fevor of the Bretton Woods
proposal The committee was impressed by their wholehearted
support of the program for international monetary and financial
Federation

the

-

provided

Bretten Woods proposals

peace

expande

work the abjectives a the agreements differ

world

-

providing

that the extary Fund start uper

both

Union through international cooperation - develop fair rules of the game

that

and

(irm

mesting

thereby

and What agreements many that the International Bank for

of education and research of the Brotherhood of Railroed Trainment
Mr Whitney said:
the

-

products

for

The committee beard testimony from Mr. B. A Whiteer, director

goods

the

-

that

rable

war

-

and

trades

41

in

40

part
then

-

fined to providing assistance to meet -period needs for foreign
exchange the suggestion of the Grange would be fully met Other
witnesses have suggested that the fund should not be used for relief

or reconstruction purposes, and that it should be concerned with
emergency

eyelical

needs

In the opinion of the committee, the articles of agreement already
provide for the 1184 of the fund resources in this way The committee

has, nevertheless inco orated in the bill section calling for such
our

interpretation from the fund. the varying duration of

cycles not possible or desirable to restrict the operatic
of the fund further that to state that the fund's resources are to be
used only for seasonal, cyclical, and emergency needs for foreign
change in connection with current transactions

ex-

VIEWS OF CIVIC ORGANIZATIONS

Representatives of number of organizations interested in public

affairs appeared before the and offered statements in favor
of

thus

the

Bretton

Woods

Americans United for World Organization sent the committee .
statement supporting the fund and bank Their statement reads in

part follows

Office this Yes with the kinds

The templation very great for many countries to - was as as as anthosis to

PRECISION

TRADE MARK

MICROFILM

MICROSTAT

ROLL NO.

INTERNATIONAL MONETART FUND
MONETARY
knowledge

42

0

Revil

six

Christian

United

The

for

the

Bretton

Woods

should

the

She
proposals
responsible

that

total

the

other

buriber

will

to

Voters

of

the

of

Women
bers

Woods

Section

mom
Miss Anna
Lord the
National interest
League of
committee
informed

Support
This brief does fully cover the wide
public. pubthe

support
of

walks

all
in

life More than 100 all large onganstations

lutions

have

with

concerned

and

Woods

Bretton

the

retires

of

The

program

urging favorable
action the light of this evidence the committee favor
that
in

The letter from the National CongressBretton
of

are

doubt

the

the

participation

organizational

for

Parents
find

XL SUPPORT or THE Passes

O

The Bretton Woods have had widesperad support from
the prese is interesting to note that this support has come from

the country of both parties and dependents,

Dr. Helen Dwight Reed, the American of
University

as

st

well

beard
were
The arguments presented by the press do not
differ substantially
that
vitnesses
from

those

given

the

by

the

to

Emphasis given the point that well as political

stability

The

internaFinally,

Bretten

to

the

Woods

agreements

the

statements
informed

sup

below.

proposals
for

world
States

expert

the
the

if

for

MICROSTATA

TRADE MARK

MICROFILM

REG.U.S.PAI.OR

ROLL NO.

INTERNATIONAL MONETART FUND AND BANK

INTERNATIONAL MONETARY

42

profess

United

The

League
the

Christian

representing

six

of

mem.
She

responsible
other

wide

the

fully

brief

This

pab-

Support

the
of

walks

all

and

Bretter

Woods

of

doubt

favor

that

participation
monetary
International
the

Helen Dwight

for

and

OF

THE

PRESS

from

Bretton

The

from

that

press

the

organizations

the

of

XI.

Dr.

the

this

of

Bretton

of

University
differ

The

from

those

Emphasis

given
given

the

the

substantially
were

heard

to

PRECISION

to

political

that

internaFinally,
this

The

participants

informed

Bretter

Woods

agreements
sup-

for

States

export

the

45

INTERNATIONAL MONKTABT FUND AND BANK
INTERNATIONAL MONETARY FUND AND BANK

44

Christian Science Monitor, Boston April 20, 1945
bank
keep the lines of the controversy
we should that
Woodsclear,
Breston
perposes
the

The Sun Baltimore, March 11, 1945

plan

of

0

Though these hearings may mero

from

erities

who

fund
Britain

now

needed

what

M
to

more plofable in the bilateral approach
Mone
world
keep

Words

Chicago Daily News, September 5, 1944

that

M

understy

the

interests

congenate

must

the

taken

be

American

with

Bretter

The

1945

bank

is a

It

the

Export

the

if

Rection

most

Chicago Sun March 13. 1945

of

think

world

of

Woods

These

1945

Birmingham (Ala.) Age Herald, February 14.

want

-

and
the

the

adopt

CD
Cincinnati Enquirer, July 1944:

been

has

the

One

Bismarck Dak.
The

industrial

and
the

the
by

believe,
the

parties
and

Boston Globe, February 1945

the

Bretton

their

the

Woods
the

Corpus Christi (Tex.) Caller, July 19, 1944:
e stabilization
nations who have not
12245

fund

help

their
By

PRECISION

TRADE

MARK

o

MICROFILM

S

ROLL NO

INTERNATIONAL MONETARY FUND AND BANK

INTERNATIONAL FUND

47

may be depended to & is the for

States

Journal, March 27. 1945

order

of

Des Moines (lown) Register, March 10 1945
and

Detroit News March

prevent

world,

to

46

O
which

beitle

but

New

The Ky March 11. 1945

light

League
will

York,

May

INTERNATIONAL MONETARY FUN AND BANK

48

However, unlean this Monetary Fund is supplemente with suitable tariff

ment and other polities in individual countries to romote equilibrium
balance of international payments, it will break do is as its crities have

predicted.

The International Monetary Fund should not be le nebed with any expecta
that it will end monetary or economic instability over ight or for Fall time
expectations exist, they will lead to disillusionme . d disappointment
other hand, if the fund is launched as a limited and rolative effort to subst
cooperative for ex parte action by individual countri in slipping their moox
and foreign trade policies, it could well prove . TEA . significant step LOVE
lasting solution of these problems

PM, New York, March 16, 1945:
It is not the fact of monetary power, but the use . be made of it. that

is

Bretton Woods foundation stone of peace and - rily. Its purpose

the money systems of the world to promote its elfare 11 is to repair
ravages of war. build up backward nations make customers for progre

nations and prevent the outbreak of economic ware chich will lead inevitab
the bloods carnage of new battlefields

Let us keep the basic fact in mind that without Section Woods Dund
Oaks will fall. The failure of either one will start is down the road to
will to 1
War III and the destruction of civilization The sole American
must be put behind them both They must not fail

New York Post, April 27, 1945
Never has the importance of congressional appear I of the Bretton Nations
Would

ahone through so vitally and cleanly than it has this United

ference- for virtually every delegation has at one TITLE in another during

last a days anxiously asked our representatives abou the chances for its pass
To the delegates of the 45 other countries gathered a this parley how

votes on our participation in the Bretton Woods ban and fund will be the

how it will act on United States participation in world peace and see

organization

Philadelphia Bulletin March 24, 1945
Popular and political objection to such plans often takes the view that Are
is being asked to make secrifies for the sobe benefit of carionsweakersaters

family of nations Surely the history of the depres - years in this counter
afforded convincing proof that financial chaos as social discontent affer
any considerable must mber of nations have hurtful rea inna in every country

globe, including the riches and most powerful

Bretton Woods treads the path of mutual aid for e benefit of all Its

as these local leaders in finance say. is to develop a were united and cooper

world. The bankers who take this broad view help country to put the

proposal on a high plane on which alone it can have proper consideration

set an example to others in their calling by siding the tyman the average
to realize that he is helped as his country helps the as of the world

Philadelphia Record, March 23. 1945:
We are gratified indeed to see 11 prominent Phil delphia bankers taking

eros

tional leadership in the fight for the Bretton is foods P agram for postwar
stability

In memorandum
to Congress,
the ourheads
of 11 of
wereasonable
city's bank
give
Woods
the
proposals,
promi
Bretton
judgmen

clare

"in

avoiding the major financial errors committed after last war. and seem
enough to be modified in the light of experience.

True, we do not believe Bretton Woods a perfer

Instrument

With

Philadelphia bankers, we expert it will be modifier in the light of expert
But having spent more than 200 billions to win 11 war. America can

$3,000,000,000 investment in peace.

Portland (Oreg.) Daily Journal March 23. 1945:
Both proposals are in their details hard for layn in to understand and
of the so-called experts display en fusion Both are jectively emential
Iring future trade exchange and international stabili . must be stear tv rehalf

tion from war. revival of enterprise, opportunity i the markets and ince

INTERNATIONAL MONETART FUND AND BANK
INTERNATIONAL MONETARY YUND AND BANK

46

united

the

Francisco

save

Journal March 27. 1945

many

Des
this

the

11

1145

in

accept

battle

peler

Words
text

May

1945:
and

March

1943
ligtt

all

...

INTERNATIONAL

INTERNATIONAL MONETARY FUND AND

makes

"

Use

MICROSTAT

MICROFILM

AGG. U.S.PAT. OFF

ROLL

51

INTERNATIONAL MONETART FUND AND BANK

MONETART

of

these

Monitary
committee

Intere

the

for

provided

groups,
Fund
commisant
the
used

fear

fund

the

the

proposed

they

cariones

2211

IL

The
the

other
that

no

agreement

of

principles,
That

these

fund

are

and

exchange
and

the

of

stated
would

in

defect

Bretton

Woods
have

These

credit

11

in

XII.

BANK

oppositive
⑉

almost

all

to

that
the

organization

requiring

in

the

record

Monetary
the

the

objec-

objected

at

TRADE MARK

is

MPRECISION

Inter-

the

witnesses

not

In

grin
some

novel

be

fund

reprebusiness

from

shows

12

commitments

that
The

has

countries
dollars

in

fact

the

States
United
about
made
aggregate
with
After
years

15

of

ND BANK

49

an international joining
bars against the juggling

It means the elimina-

.

ational stabilization fund
de Shylock." was testified

the layman it looks as if

permit the United
-. and
the
/ have

spectary Fund and Inter-

embedied in the Bretton
ing or delay.

.

an be no full employment
ingin of that trade depends

reign trade without world
stability while the bank's
ich alone they can rebuild
.

.

ill documentary but they will
ed by all under which each

Morgenthan now testifies
imin advance agreement in international Perhaps

.

- rderis perfectionism relationships among

. is Narie used to prepare
rrmination of the alarming
ocessary in trading among
relation to be sure worries

has been heretofore
idmwhat
throat-cutting
in
vegy of

all governments are deeply
meine must be kept stable

Thom bankers in opport
not provide

have because makesvery
does foredful
on

in of put the micronception, empliaria on and the

time all The fund i not

the fund in its provision of

streese Civing helpite some

- been - insider tal to the
term stabilization loans but
national currency problems
.

1 innovations in the fold of
rd currency stabiliting fund
increasing world trade and

been given formal O K. by
business firms sees the place
And it is interested enough

51

INTERNATSONAL MONETARY FUND AND BANK
INTEINATIONAL MONETARY FUND AND BANK

50

in the future of this world to be willing be overlook certain rules provided
that in the overlooking they lead to peace

0

of these witnesses expressed their agreement with the objectives of the

Springfield (Mane) Republican, March 23. 1943

Bretton Words proposals Their opposition was based upon . fear

In the month interverés before the Res Francisco Condomers - the Dum-

barten Oaks for went Congress will lare

that under the provisions of the agreements the resources of the fund
might be used without adequate safeguards and they proposed various

timely opportuni
and place
stamp
itsofon
financial
which in scareels
less to the
the the
stability
thethe
postwar
world
the security The opportunity should not the

attendments to the agreements and changes in H R 2211 The
committee believes that the necessary safeguards are provided in the

The wright of expert American obstionally favors the Decline Woods

waged. now that the failed this
On

for

unqualified

the

support

of

the

basis alone Congress may will the Election little to not drefted

in the sphere the Oak an almost

-

members of these groups, in opposition to the proposal for the International Monetary Fund
The committee is commitant of the earnest desire of the witnesses
the opposed the fund or bank to be beladul in their criticistos Many

The Washington (D. C.) Post, March 8, 1945

agreement In addition the language of the bill establishes other
For this INVOICE the the is of the opinion that DO

changes in the are necessary
The testimony of the opponents is reviewed briefly below

W

THE FUSD in COMPLEX

The International Monders Fund and Bank Bention
are

annt.

United

upon

One argument against the fund is that the articles of agreement of
fund

are

congdex

Admittedly the fund arreement states in great detail the principles

by

for

procedures and techniques for the operation of the fund That is

the

National

whelly to be basic setting up two world organ-

icestions with large resources and important powers In order to
safeguard those assets adequate and ensure proper use of those
considerable number of carefully drawn provision dealing

NO

expects of the fundal operal are essential

they

-

often and, the vential principles of the fund are

to

clear and simple They provide for international consultation on

international minratary for the maintenance of stable and

if

Winston Salem (N. C. Journal March 31. 1945

Congress in now debating HE the of

orderly arrangements, for the gradual elimination of exchange

the providing for

restrictions and that affect international trade, and
they provide help to who abide by these principles

" was dear from the testimony on the detailed provisional of the

of

the

Then

the

first

therefore

fund agree at that is was to have the pervision stated in

the

Beetham Woods isEnited
sun perfect
today
- remember that neither was
when
States

States

Reve

But just - the Constitution provided machinery for I Breaton

to strike an effective New for testing - - -

that the this for in pain the NE ratify the fratter Woods agree

- with the that this can le acceded later.

Some part of the press has of course opposed the Bretten Woods
In general the engimenta of opposing newspapers have
been of the same character as those heard be the committee. These
arguments are considered in part XII of the report
XII. ADSUMENTS AGAINST THE FUND AND THE BANK

Little tentimony WAS given before the committee in opposition to

the proposal for the bank One or two witnesses objected on the
ground that there was the meal for AD international organization to

encourage internation investment On the whole, elmost all the

favored the bank without qualification
The position to this legislation is apparently directed at the Inter-

national Monetary Fund Some of the opposition witnesses reprewented the American Bankers Asso ristier others

organizations Several economists appeared in opposition In general, the committee had little testimony ce exhibits. except from some

great detail in order to prov the necessary fequards that would

essure the proper operation of the fund In fact. the committee
heard DAY testimony that would indicate that there was any defect in
the technical provisions for the fund.
THE FUND IN NOVEL

Is has been stated that "the plan for the Mondary Fund introduces

. method of lending which is novel and contrary to accepted credit
In the view of the committee not much weight can be given to the

encument that the fund in novel Clearly there should be no objection to using new methods to deal with an unprecedented international

situation Even opponents of the fund admit that the economic and
menetary situation after this was in likely to be of character requiring
new measures and concerted action

The textimoner introduced in the receed shows that in fact the
fund's method of operation will not be novel The United States
Treasury through our own elebilization fund has made about 15

bilateral stabilization with 12 countries with aggregate
commitments of several hundred million dollars After 8 years of

53

INTERNATIONAL MONETART FUND AND BANK
INTERNATTONAL MONETART FUND AND BANK

52

the fund's objective of promoting exchange stability and maintaining
orderly

operation under these agreements, this country has not lost one dollar.

Ii appears that the International Monetary Fund would undertake

0

exchange operations in much the same WAY and with much the same

safeguards as the United States stabilization fund The only significant difference is that the fund would operate on multilateral rather
bilateral

on

with gold soon st its balance of payments and its reserve position

basis

permit If the repurchase is delayed unduly, the fund can im-

A good deal was made of the point that the fund makes credit

pose such charges as is deems appropriate to bring about prompt

available to members for stabilization purposes in manner centrary
to accepted credit principles

repurchase

If member country agrees not to impose exchange restrictions on

In the opinion of the committee this point was not sustained The

transa and not to allow . (epreciation of its currency is

fund will not of course. conduct its operations in the same way that

must be given assurance of assistance in periods of adversity provided
it abides by the principles of the fund 610 taken whatever measures are

bank makes loans to . local merchant The fund will will foreign
exchange in limited amounts, for member's currency to . country

count who
necessary to correct themitment
situation
Just asableInstitution
needs

that meeds such help to maintain stable exchange rates and freedom

on

country in good faith shides by the principles of the fund and meets
the Leads specified in the fund agreement, it reasonable to say that
the aid extended will be in second with the credit principles that should
govern stabilization operations
This point la further discussed below.
THE FUND PROVIDER AUTOMATIC CREDIT

The charge has been made in the testimony of certain witnesses
that the fund provides automatic credits for countries regardless of
their credit worthiness or the purposes for which the credits are to be

used It is said that the management of the fund will have no real

power over the use of the fund resources because each member has

an absolute right to credits up to the limit of its quota

The committee has been assured, both by the delegates participating in the Bretton Woods Conference and by bankers and experts in
finance who have studied the documents of the Con-

ference. that the fund's will have sample power to control the use of its resources and that there is no lified right to

credits from the fund There are both qualitative and quantitative
en the ability of country to purchase foreign exchange

from the fund with its currency In the words of . prominent

banker who testified before the the quotas are in the nature

of line of credit extended by bank to its customers the 1050 of which
is circum ribed by safeguards and subject to continual serutiny

Those who state that excess to the fund is an automatic right to

every member over) certain very impor safeguards found in

the fund agreem These may be as follows
(a) The fund would not begin exchange transactions with countries

until those countries are in position to keep exchange rates stable
without

excessive

use

of

the

be

of credit from his bank so long as he uses the credits extended to him
.

discriminations that may cause and spread depression Where

line

to

to

undertake

in exchange transactions Such help will give country time to take
the necessary corrective measures without resorting to restrictions and

arrangements

.

than

exchange

(d) All of the currency holdings of the fund are guaranteed against
depreciation in terms of gold. A country using the fund's resources
must use its own monet any reserves in equal amount if its monetary
reserv are in excess of is quote and it must represchase its currency

fund

(b) No country could purchase exchange from the fund except to
help it to make payments for imports and other current transactions,
The fund could not be used to finance flights of capital

(e) The executive directors of the fund could stop . country at

any time from purchasing exchange if in the opinion of the directors
the country was acting contrary to the purposes of the fund, including

in dance with certain perscribed purposes, so must nation be
asured that it can count on obtaining stabilization help in time of
need

THE FUND is PREMATURE

It has been said by some of the critics of the fund that to establish
the fund during the next year or so would be premature that is would
be better to wait several years until nations have attained . greater

degree of economic stability before attempting to stabilize foreign
exchange rates.

The committee believes that some of the most urgent problems in
the postwar transition period will be into tional monetary probleme

and that the prompt establishment of the fund is essential to their
solution

The immediate problem will be the establishment of the initial
pattern of exchange rates. Unless exchange rates of all countries are

determined in relation to each other and through consultation we may have . repetition of the exper recent that followe

the First World War There would be danger of overvaluation of
- currencies and undervaluation of others. and subsequent unilateral adjustment that might degenerate into competitive exchange

depreciation The fund necessary to provide means of establishinitial pattern of exchange rates, through consultation that
will be existed to the changed conditions after the war
During the transition period, countries will establish their postwar

exchange policies It is of the without importance to see that three
policies include the maintenance of stable and orderly exchange
arrangements and the elimination of assitiple currency practices and

other devices of currency warfare In some countries, is will be
necessary for time to continue wartime controls on exchange transactions There can be no objection to the temporary retention of such
controls provided the countries that use them accept DOW the obligvtion to remove these as 4000 as their internation payments can be

brought into equilibrium This is precisely what they do under the
fund.

The prompt restoration of international trade and investment after
the war requires the establishment of the fund Some countries will

TRADE MARK

o

MICROFILM

$

PRECISION

ROLL NO.

R

INTERNATIONAL MONETAN FUND AND BANK

55

INTERNATIONAL MONETART FUND AND

after the war the United States will be one of several countries
and doubtions the chief country that will have an expert surplus of

need help during the transition to meet temporary balance
that

soon

can

they

need

they

when

be

respect

compelled

feel

will

If

they
Otherwise
abandosed

payments

they

can

from

get

position

be

depends of factors none of which can
urately forecast. It upon the level of activity

here and abroad upon the teriff changes WY make, upon the

fair

to

and services But how large that will be and how long

0

fund

the

obligations
to

our tourist the level exchange rates that will

postpoint the establish of the fund is to risk the resumption

of currency warfare And if countries establish policies con-

finally and how much of the world's trade other leading

adjusted to such and it might become sponsible
abandon them later The period after the war the
transition the time when future exchange will take
final shape. The fund not that there policies are in

years Altogether, it is completely unwarranted that all

trary to the principles of the fund, their economies would become

countries will be able to regain, and finally how much short-term and
long term credit American are willing to extend during the postwar

countries wish to purchase as much dollars from the

they

the argument that the fund be controlled
by
fund
seems

accord with the principles for which the United States stands

from

the

entrary

policies

THE

This

The criticism has been made that the fund will be managed by its
debtors. because the United States alone does not have majority of

of

This criticism seems to imply that the fund in merely . financial
British

Neither

The is designed to deal with international current
subject

percent,

able

international

have

United

The

number

of

number

to

there

vote,

so

for

can

the

than

of

States
billion

1.1

fund.
subscribed
the

gold

members
with
dollars

currencies

bearing

value

every

fund and generally with its concurrence

The fund agreement provides that the value of rach member's
currency must be defined terms
of gold the United
States
vary dollarmore
rates
their
not

used

not

they

the

to

permit changes the par value of currency after consultation with

be

currencies

subscribed

result the stabilization of because of the provisions which

countries

the

all

The argument has been that the adoption of the fund will not

United

iss

other

day

may

Nor there any basis for the that United States dollars

will be the only currency which the fund will be led upon will
No CAT tell just long and by how muchfavorable
the United States
unfavorable
any

other

country

will

continue

an

to

only

then
by

previous

changes

whether

par

when
and

If

of

the

Changes

are valuable namely, their ability to purchase goods and services

balance of payments It is to be expected that for several years

by

to

the

world over are for the reason that other
countries

The

countries

NOT

.

of

all

of countries

be

doubt that the United States substantial voice in the
The

fund

the

the

determent against any compiracy aimed at any one country or group

director

the

Belgium

Finally the right withdraw from the fund will prove powerful

total

the

of

and

in all liability be for greater its would indicate

largest

the

voter

would

It should not be informed that the of the United States

subscriptions

position

were

fund

that

limited simply to the formal voting strength
The
power and over decisions
fund if directed the fund's resources will

based

Each

Union,

and few approve dissipation of

vote

even

and

fund's

the

to

Netherlands

the

and

combination

entirely

be

Soviet

percent

of

China, and France together 23 percent, the American republics 10permit

problems Is anPolicies
on the
maintenance of fair
on exchange rates, exchange
be

misused
States

the United Kingdom the rest the

that the United States putting up more than hall of the

the

United

that

to

institution whose sole is lend money and seeks to
fund

No

44

the votes

an

objectives

the

the

only

member

after

vajue
necessary

of

a

54

to

consultation

country

plus

than

percent of the original parily the member country only consult
with the fund making the change the par value its currency
If the sum of the proposed change plus all previous changes is more

all

10

PPRECISION

MICROSTAT)

TRADE MARK

RED.U.S.PAT.OFF

MICROFILM

ROLL

NO

57

INTERNATIONAL MONETART FUND AND BANK
INTERNATIONAL MONETARY FUND AND BANK

than 10 percent, the fund by majority of the member votes will

Since the fund is not designed to meet the enormous immediate
demand for foreign exchange on the part of war-devastated countries
demand
and since their gold and foreign exchange
existing resources are limited
on

0

either concur object to the proposed change

that

Stability and order rates does not mean absolute

their to be nationals expected for foreign exchange have to be intained by

some countries until they are otherwis able maintain an appropriate balance in their foreign exchange position For this reason,

rigidity No one pretends that the initial pattern of exchange rates

adopted when the and begins operations going be perfect that
appropriate rate will each case Clearls some changes The

the fund agreement prov idea that during the transition period member

will and should be made in an orderly manner
maintenance stability
and order in exchange
avoid
the

however,

changes
rates
does

with
trim may retain and adaptduring
seene of their
war exchange restrictions

changes mean

these

restrictions

such

of

Unless positive stops are taken to establish fair exchange practices,

control

chaotic

the
for

searce,

generally

permits

fund

the

When

current

on

becomes

which

under

other

only

There

under
the postwar period will inevitably be
character by unstable
practices
and

clear

soon

the

with full of their effects on other countries
rates

the

In

withdrawn

will

fund
that country will be able to settle
excessive of payments, in the
withoutits balance

become necessary. they are to be made only after consultation

change

the

operation
restrictions

been

have

that

when

and

the

HOTOR

of

56

currency
countries

to

agreement which provides for limited flexibility in exchange rates

restrict the obligations the insur the scarce currency There no

fund Except for years in the late 1920's
period.countries
interwar most

foreign exchange
are placed at their disposal quesbelow

must compared with thich could prevail in the absence
during

rates

the

other way by which they can meet their obligal unless This additional

week

widely

many

period

this

during

standard

gold

the

of

Exchange

Lion the opinion of this committee, these provisions regarding ex.
control provide the maximum practical seastance of freedom
change exchange transactions for current international trade herever

to week, hile other were fixed by means of rigid exchange
controls The stability offered by the fund will far greater than

whenever this possible No position to under

in

world has seen since 1914 and if will be for greater than we CAD

greater obligations on the removal exchange restrictions

sibly expect in the postwar world without international monetary

EFFECT OF A SCARCITY OF DOLLARS
THE FUND BANCTIONS EXCHANGE CONTROLS

Objection has been made to article VII of the fund agreement

that
when dollars become scarce. the fund may
permit members
imply
seems

Some witnesses have criticized the fund on the ground that it per-

to

mits the use of controls for certain purposes and under

limit

certain Is said that instead of exchange
committee

this

of

somehow to the fund will be scarrity and that will

not

for

a

In perfection In effect. the argument that if we cannot
abolish exchange we should not try to must
eliminate any.
ement

international

An

necessary

are

for

countries,

some

fund

the

will
The

prevent

to

systems fundamental purpose of the
fund
to eliminate
the
transactions
current
with

diminish

dollars

sale

States

There

The

fund

the

supply

the

of

sympathetic

which

invoiving
capital

flight

is

funds

for

permitte

country
larm
can

exports

of

prevented

to

rapital
On

restrict

the

This
the

other

the

on

committee

the
the

with

was

sale

of

testimony

cold
other

the

the

principle

longer

would

of

dollars

and

dollars
several
that

will

witbe

exports the United
nesses regarding the supply of from

Under
fund. soon
general agreement that such practices must eliminated
this

limi-

that

of

under

tations

would

chief

event

any

give

can only international trade ADM investment
agreement

not

would
countries
duration thandollars
in the light of each
existing
ther
United

accruing

exchang served by all countries that exchange on current trade and

and

the

creates

the

of

possible
articles

neither

and

the

in

do

in

the blocking of the income from loans and

notwithstanding

be

fund

servescarcity.
post pone When the fund authorizes
its members
comwould limit the
of
they
what
will
members
pelled

for on some time at least. if they are to maintain order in their currency
controls

done the sheetre of the fund
If scarcity of dollars develops

respon

experts

capital

countries the power do something which they could

efforts of ble for the of the scarcity
the contrary,
development
prevent
sometimes On

that

must not commit countries to more diries than they
controls
can fact carry out
Moreov waswitnesses
generalthatrecognized
exchange
who
financial

give

is

view

the

argument

an

This

dollars

of

it

controls, the fund will actually encourage
their
essentially
this

sale

the

trans

the

only

DAY

come available
the 1930's there has boots DO
brief
Except

States

to

in

time

WAY

except

to

the

of

the

dollar

the

1930's

perverse

the

scar-

ement

of

was

city the United States seeking from the and eco-

in

during the transition period restrictions on the transfer the proceeds of exports and other current payments can be maintained only
with the approval of the fund.

capital nomic disorders to that gripped the world Provided the United States

MICROFILM

MICROSTATA

TRADE MARK

ROLL NO.

59

INTERSATIONNAL MONETART FUND AND BANK
INTERNATIONAL MONETARY FUND AND BANK

reivate financial institutions et reasonable interest rates is is
ore unwise to make the losts If made in moderate

maintains reasonably high level of employment, and provided further

that there reasonable volume of foreign the supply of

productive purposes these loans the aggregate should prove .

sound and proditable By sharing risk of loss among

dollars likely to be ample to meet the needs of the world taken HA R

whole Temporary shortages of dollars and other currencies are

likely arise in certain count and will be the function of

the

fund help meet these needs The peo exchange

assistance by the fund to s lew will prevent them from preware of currency depreciation and exchange restrictions
the view of this that the seared currency provis
of the fund would not be harmful to the interests the United States
highly
Rather

they

are

frank

recognition

of

possible

although

not

cessent in the postwar period. and they provide an
orderly means of dealing with the scarcity of currency if that should

Bretton

Woods

proposals

suggested

HAVE ALL COUNTRIES APOPT THE GOLD STANDARD

This approach takes the position that the only workable international monetary standard the automatic gold standard and that

gold standard after the war unrealistic The fact is

Is the course of the hearings on H R 2211 several witorsors.
alternative to
the

to the whole world.

gold
calling
worldorfor
thisreturn
purpose
Thebythat
riesanother
will sooner
later
to the

XIII ALTERNATIVES TO THE BRETTON WooDs PROGRAM
by

possible that could not be made by private institutions by

themselves but that will nevertheless prove to be of general benefit

other systems lead inevitably to currency instability and
suggested that the United States might get the world back on

happen

were

large countries the bank will make studies loans

The

the opinion that these alternatives do not offer .

practical basis for intern monetary policy after the war

The most important of these alternatives are discussed in the follow.
ing paragraphs

that the United States perhaps thegoldonlystandard
major country existed
the world
in

prepared

that

and deflation with ements
of gold in out of the country.
fortuna
country

this

stability

interfere

need

with

domestic

the fact. however. that nearly every other
record

has

gold

the

gold

opposing
standard

other

countries

failure If should insist such program
an extremely
interwould
kind

wholly matter of country internal policies Any attempt
to
and
futile.
to

-

the

gold

based

ing agency needed According to this view, currency stabilization
countries

an

that

One alternative would be to reject both the fund and bank proposals
on the ground that no international stabilization arrasement or Sendother

the

the

standard would force upon them adjustments harmful to domestic
employment and that they would become subject to alternate infla-

LET EACH COUNTRY STABILITE BY THELF

help

maintain

to

late 1920's Most countries believe that rigid adherence the gold

ADT

policy

their

in any event could not counted shide by their
necessary

national difficult and agreement would probably be attainment at this time

loans will be made by private institutions

hility and order that can be accure from the gold standard without to

far

without

the

the

fund

the

bank

The rejects the view that international monetary cooperation and financial to other countries in stabilizing their
currencies either futile or wasteful Past expert indicates that

The fund dies advantages sta.

forcing its rigidit on countriesdefined
which are
cold
terms and unable
hearts

fixed

in general other nations are willing to abide by their

by large loance

In bwidering the view that private financial institutions will be

able handle all worthy should be borne mind
that the rapid of the torn areas of Europe and
Asia vita the peace and prosperity of the world. In many cases,
the credit standing of these countries immediately after the war will

not be sufficiently well established for such loans be attractive to

private lenders except excessively high and interest

All

buy
price

the

the

purpose

with

current

It HA mistake to assume that because . loan is not attractive to

of

any

member

settling

of

currency

the

every

be freely by exporters and foreign investors

The pressed by the fact that entirely too much

put on the name to be given the exchange
visions
have
country
this

people

the

called

form

theme

others

and

the

of

England have called them
the gold standard there is
on the meaning these exchange peoprovide

They

clear

stable

exchanges

terms

only

parily

what

after

name

It

rates Also many countries will need foreign capital for the develop-

ment of their capital which cannot always be obtained at
esonable interest reter from the usual private source

current

in

provided they can do without serious damage to their
Moreover, there nothing our past experience indicate that the
stabilization orations the fund will be unsuccessful

with

and

accept them.
gold

in

58

in

RECISION

Is

is

stability and order in exchange

rates

significant

that

they

provide

MICROFILM

MICROSTATI

MARK

ROLL NO.

MONET AT FUND AND BANK

INTERSATIONAL MONETART

60

in character National cannot agree give up exchange

controls and other restrictive devices unless all nations enter into an

Advertise of the key currency approach
stabilization

the

not to employ them Likewine, national cannot make

the

of

61

Agreements on exchange rates and exchange practices must be

KET CURRENCT

with regard to their exchange rates until similar com-

made other is a mistake to think that

way with an with one country and

get all other countries abscribe to the kind of exchar
policies that We have advocated No important nation would

by

lie

to enter into long period agreement with us for the freeing

of its exchanges and the stabilization exchange rate unless most

firmly
of

many

some

bilization
would

dollar

and

for

are

trade,

very

Only

not

small proportion the trade the entire represented

appear
trade between Great United States wouldexclusively
think

be

rate.

the

stability
currencies

exchange

to

terms

REJECT THE FUND AND AMEND THE BANK

currencies

the

of

not

sterling

other countries commit themselves to the same principles

freely

other

The

countries

al

are important to the extent that they effect international trade and

The alternative that has perhaps received the widest attention is
that the agreement for the fund be rejected and the agreement for the

bank be danged to permit to make stabilization loans and enter
into agreements with member regarding exchange policies It

by the preponents this alternativ that this way the bank could

perform the functions both the fund and the bank more efficiently
with onls half the capital
If the question were chether all the functions of the bankwould
and fund
still

were

In fact. if other currencies are permitted to fluctuate even the

stabil ization of the rate will more difficult
may become should noted that considerable

two

to

necessary

organias
of
in

might

be

gained

two

from

that

should
the

to the weakness of eterline Currency stabilization cannot be re-

garded

problem

special

the

as

the

United

States

Britain

Great

and

be

by

the

tion.

number currencies were depreciated before the sterling depreciation
of 1931 and that the underveluation of other currencies contributed
of

that

the

The

It is an international problem that can be deals with only through
cooperation

countries

among

highly

Under the -currency other currencies would be ex.

pected to attach themselves dollar or sterling and u pursue
United

exchange
States

them

for

United

the
or

have

divide

would

the

into

world

the

all

the

by

system

Such

would
It

based

problem

block

bilateralism

of

key

on

economic

with

and

develop

to

danerre

political

should

terret

will

be

the

of

the

starling

after

much

the

same

WAY

as

the

German

mark

was

the

stabilized

special

variety

rates

during

however,

The

under

and

the

work

its

involves

more

for

the

fund

and

than
the

bank If the fund under the proposal which has been

of

bilateral clearing and with rigid control of foreign
.

exchange

specialized

ted.

work of the bank than is ordinary

dollar

the 1930's Such stability little when trade carried
terms

for
so

very

the

in

the

separa

operations

world
gold

be

Bank

the

were

and

stifing

since

standard

Under

postwar

problem

currency
clearing

distinction

the

between

rates

who
key

of

These
few

trade

decades

cooperate

such

with

dealing

in

whether

and

that

based

fund

The

groups

in

the

.

TRADE

in

PRECISION

MICROFILM

MICROSTAT

TRADE MARK

ROLL NO.

INTERNATIONAL MONETARY FUND AND BANK

INTEREATIONAL MONETART FUND AND BANK

62

63

XIV. AMENDMENTS AND RESERVATION TO THE AGREEMENTS

made, we would automatically loss the basic agreement on exchange
policy which was drawn up of the Bretton Woods Conference
The

The committee has considered the possibility of amending the

following are some the dant provisions of the fund agreement
that would be dropped if the fund were not established
pattern
(a) The fund provides means See determining the initial
of exchange rates after the war If countries are Jeft to for their own
other

with

without

rates

exchange

an

articles of agreement or accepting them with reservations as to the

certain This problem has been

in the light of the testimony and the suggestions presented to the

.

appro-

Some the suggestions to improve the Bretton Woods proposals

priate pattern of exchange rates unattainable Some

are_not on the of any specific provisions of the

would be overvalued others without any

articles of agreement of the fund and bank. In some instances the

basis adjustment through Station Successful trade and

modifies sought can made adequately in the locislation that

financial relations in the future will depend measure

Congress enacte since they relate the manner which the United

upon action in setting rates after this war

States will participate in the operation of the institutions rather that

The fund idea for the stabilia exchange

the content of the articles The Committee for

rates and method for making changes in exchange rates

Economic has sugges that the bank's authority to

of other countries In this WAY. the fund establishes orderly exchange

make long term stabilization loans be clarifies Although the provisions the agreement itself are involved in this suggestion the

after sitation and with leration of the effects on the economy

arrangements and eliminates competitive exchange depreciation

committee believes satisfactory solution has been found without the

(e) Members of the fund agree not impose restrictions after the

necessity

transition period the making payments or the transfer such

Lions of the fund This solution will be discussed in the next

Some critics of the International Monetary Fund whose principal

spokenment

The to give the bank power to make stabilization Joans
possible

the

for

testified

that

the fund and bank operate for different the fund in

without

the field of monetary stabs the bank in the field of economic

bank

abilization

quite vident from the the Bretter Woods
that the vast of the United National firmly believe
that the mest desirable internati cooperation

the fund the out national stary prob-

It was fully ree also that the objective of the bank for
would

adequate

be

jeopard

ized

without an internation agreement on currency stabilization and
exchange
fund

that

it

would

require

another

international

rejected the basic structure of the Bretton Woods The

rejection of the fund NET test by this country would crush the
hopes of the VANT majority of peopl in other countries who want to

by free from the stifling effect of minstory

the

and separation of the two in their opera-

of

tions In the of the this been accomplished by

pervisions the bill

not

print

of

appear

ad

isable

in

light

the

CATE

difficulty The interests the United States moreover are fully

since CAT go into effect without our approval,

and

the

bill

requires

that

Congress

any

proposed

before this country accepts is
for

articles

the

fund

the

proper

commit

The

ten. after these has that the supposed

of the activities of the fund bank Clearly what needed the
retaining

new

too

dangers to which they are directed an not serious. accepted those

There nevertheless much that CAT be done to secure coordination
and

this

vided the articles of agreement Changes specific
nature
that
made
without
great

the

transactions

reguiring

do

ciples
have be examined
and to
thebegin
difficult
procedure
tistion would
and compromise
would have
all over
again of The

of

currency practices and complete government control of exchange

while

undoubtedly

would

countries

There have been several

world which intern trede and CAR be carried

bened

O

eles agreement for the fund and bank involve serious risk. If the
United States should propose endments to thewhole
agreements, other

dim indeed Moreove an adeque ent procedure pro-

conference

This would entail much delay there little reason to believe that
. satisfactory agreement could reached on schange policies if we

coordination

and

prospect reaching satisfactory second time would be

policy

fine difficulty with the proposal to amend the bank and abolish
the

nation,

The has conclud that the device of amending the arti-

as

witnesses

the

the

are

be up in the bank to loans stated

regarded as an adequate substitute for the fund Without
agreement on exchange standards stabilization loans would become
number

Bankers

have articles
of agreement The
that the fund not approved and that depart-

country

fact

same

part this report

and which in the past have often been directed against the exporte

In

The

calling

of

applies the of the legislation dealing with the currency

payments in long as the transactions arise out of current business
(i) The fund agreement provides for the elimination of other currency devices of economic warfare which interfere with international

to

PRECISION

would

open

the

way

for

resen

the

part

of

43 that not yet upon the Bretton Foods agreeWe that would be unwise for the United States to

pardine the establishment of the fund and the bank by attempting
formulate modifications in the articles of agreement by unilateral

the

TRADE MARK MICROSTAT/ MICROFILM

ROLL NO.

65

INTERNATIONAL MONETARY FUND AND BANK

INTERNATIONAL MONETART yest AND

64

individuals In this way effective cooperation between the two
institution can achieved at the highest level of responsibility

action Nor do we and any possibility of postwar monetary and finan-

cial cooperation if other national should follow such practices, thus
requiring reexamination of the whole problem anew

without destroying their independence or their separate organisation

It believed that many other countries will follow the example
of the United States and appoint one Governor to serve the two

institutions

XV. ANALYSIN OF THE BILL BY SECTIONS

The President by and with the advice and consent of the Senate

Because of its conviction that the fund and bank are reartial to

successful political as well as and that they will
play an important part the establishe just and lasting peace,

is also authorized appoint an director the fund and an

executive director of the bank Under H. R 2211 the executive

directors, once appointed would have selected and appointed their

with the of the President The
present
bill
subject
alternates

the committee has designed this legislation to give the American

appoint

the

the

representatives opportunity to make these institutions an out-

standing example of what can be by minded DA

director participate in the selection alternate is preserved by

the United States will be unified policy in its participation

having President appoint an alternate
among those persons
director
executive from

tions acting in concert The bill makes clear the whole world that
in the fund and bank. The Congress, the adm istration officials

to

be the Senate The of having the executive
the

by

him

to

The Governor and alternate will serve for years Executive

concerned and the American representative will be enabled under
the provisions of the bill. to work together in bringing about the kind

order
directors their alternates serve
for 2 years but executive
insed
their

of international monetary and financial
directed relations toward which the

that the fund and the bank may be able to function without inter-

by

has

the

Sections

sections

bill

The

13 and of the bill did appear in H it. 2211 Sections Land

times

ruption While the fund and the bank are being organized, the executive

be in character This distine.

the bill contain substantial modifications of the corresponding

articles

the

sections H R 2211

order

for

January

Section provides . short title "Bretton Woods Agreements Act."
ACCEPTANCE or MEMBERSHIP

1946,

but

at

all

the

date

some

to

the

fact

that

United States the fund and the bank This section effect constitutes ral the Congress of the articles of agreement formulated at the Bretter Woods Conference

AFFOINTMENT OF COVERNOR AND EXECUTIVE DELECTORS

sentatives the bank H R 221 introduced

view the fact that directors and their alternater
paid by the fund and the bank the bill provides that none of
these persons shall receive any salary or other compensation from the
United States for their services as Governor, executive director, or

NATIONAL ADVISORY COUNCIL
ON INTERNA AND
PROBLEMS

authorized the President and with the advice and consent of the

In addition to the need for harmony in the
formulation
followed
policies of policies
that

Senate to appoint one and one alternate for the ford and

to

it

mitter has amended this provisions requiring that the sche
bank person
Governor

as

provision has been inserted with respect the alternates of the
Governors, that there will be only one alternate
The committee believes that single individual representing the

operations of the fund and bank It equally important 10 co
onlinate the activities of those Government agencies making or perticipating in foreign loans or engaging in foreign financial exchange

United States as Governor both institutions will in better

position coordina the policies and practices
the fund and
the
specialized
tasks
their
The

great

the

difference

training that will be required for their and the difference
their methods of make essential that the fund and bank
organized and operated separately It only on basic questions
of policy that coordination is required and
by
theirthis cat be achieved MADE
ultimate

for

in

the

be

the

worked est by the officials for American activities that will affect and affected by

another Governor and another alternate for the bank The com-

bank

officials

these

will

alternate

Section 3 provides for the of United States repre-

serve

organization

the

full

to

before

accepting

countries

the and the bank. Since the United States entitled appoint
executive director, the isional status of the first executive
real signific fat os this country
is incorned
alternate
and
Governor

Section 2 authorizes the President to accept membership for the

named

voure

to

in

AMOUT TITLE

be

in

apps

are

office

hold

in

Woods

Bretton

are

of

RECISION

The elieves that these purposes can be accor
through enactment of section of the bill. which establishes Council
of the Secretary of the Treasury as Chairman,
Board
Chairman the Secretary

State

the

Secretary

the

of

the

Governors of the Federal Reserve System and the Chairman of

the Board of Trustees of the Export-Import Bank of Washington

RECISION

MICROFILM

MICROSTAT

TRADE MARK

ROLL NO.

INTERNATIONAL MONEYART FUND AND BANK

INTERNATIONAL MONETARY FUND AND BANK

These officials will be familiar with the objectives of the United States

Is order that the council may properly carry out its m consibilities
the representatives of the United States on the fund and the bank the
Import Bank and other affected agencies are required to provide the council with such information concerning their activities as

66

where the fund and the bank operate will therefore,

whether the latives of the United States

fund and bank exercise their authority in accordance with the
best interests of the United States

the council requires

The Council chief function will be to provide continuing contact
between the representatives the United States on the fund and the

ACTS NOT TO BE TAKEN WITHOUT AUTHORIZATION

bank and the officials the United States

The Congress It will the President

Section prohibits the making of fundamental changes in the fund

or bank or the participation of the United States these institu

general eliey directives the gualance of the United States repre-

sentatives the fund and the bank: advise and consult with the

tions undoes Congress approves such changes Except upon approval

President and the American on the major proble

by

Congress

will

prohibit

arising in the the fund and bank ordinate the

Changing the quota of the United State in the fund
Changing the par value of the United States dollar

the fund and bank the policies and operations of the Export Import*

Increasing the capital stock of the bank

the ntatives the United States

Increasing the of the United States to the bank

Bank and other agencies to the extent that they make or

Making loans to the fund or the bank by any agency of the United
States Government

participate in foreign loans or engage in foreign financial, exchange or
transactions and transmit, at least semiannually, reports
the

to

President

the

and

Accepting any amendment to either the fund or bank agree-

Congress

Under the general direction the President the Council will also

give
refuse of the United States
proposed the fund bank hen ral. consent

menta.

This last provision has the effect of wenting amendments to
the agreements without the approv. of Congress since United

State acceptance tial to the an

surreement but in exercising this power the Council will
limited

This limitation will not. of some the if any,

addition

the obtain the Council's approval
by

67

the

In

secessitated by sections 13 and 14 of the bill

before they vote in favor of waiver of the itions under which
member can purchase exchange from the fund. or before they vote
The

committee

the

has

possibility

that

the

Section 6 of the bill provides that when the United States is no-

experience

quested by the fund communicate the par value of the dollar, such

fund and the bank may reveal adjustments that
can

made

this

Nation's

with

other

and The Council therefore required

Earh report will cover and include: The extent to which the fund
and the bank have achieved the purposes for which they were estab-

lished the extent to which the and policies of the fund and
the bank have adhered to, or departed from, the general policy
directive formulated by the council, and the council recommends
the

extent

to

which

the

operations

and

to

or decreased to how the fund and the bank may

be made more effective: dations on any other necessary or
changes the articles of agreement the fund and the

bank or in this act: and an over all appraisal of the extent which

the operations and policies of the fund and the bank have served and

in the future may expected to rever the interests of the United
States and the world in promoting sound international economic
cooperation and furthering world security

that

15%

grains

of

municated will be the par value of the dollar for the of the
fund until changed in the manner provided in the articles of agree-

ment Under section of this bill no one on behalf of the United
States permitted to propose agree any change in the par valor

of the dollar unless expressly author Congress under the

articles of agreement the conset of the United States is required to
any change in the par value of the dollar
DEPOSITORIES

ndations

on whether the resources of the fund and the bank should be increased

other

Under the articles of agreement the fund the par value thus com-

of the fund and the bank have bern coordinated and the
therewith

not

pold nine-tenths fine which the wright of the gold dollar.

on

report on the ations and policies the fund and bank

therewith;

shall

par

countries

to to the President and the every years special

tions

DOLLAR

PAR

favor of declaration of the United States dollar scarce currency

Section directs the Federal Reserve banks to as detestitories

fiscal agents the fund and lank when do
such
will
curring
function
the Board of Governors of the Federal Reserve
out

directed

PAYMENT OF SUBSCRIPTIONS

Section sets forth the procedure to be followed in paying the
United States subscriptions to the fund and the bank The subscription of the United States to the fund is 750 billion dollars, and to

by

MICROFILM

INTERNATIONAL MONEYART FUND AND BANK

INTERNATIONAL MONETARY FUND AND BANK

68

time as called in edance with the articles of agreement.

fund has its intention of exchange transactions,
subscription

the

the

past

financing authorized by acts Congress relating to

the Corpor the Federal Farm Mortgage

or

million dollars CATH le called for the loans. and

the Federal Deposit Insurance Corporal the Home

least $254,000,000 of this amount all called in the first year of
the bank operations The balance of the United

Owners the United States Housing Authority, the

T Valley Authority and the Commod Credit Corporation

to the bank or 2,540 billion dollars be called when pended

NEY to reduce the cost to the United States of

meet suffered the bank the course of its time In

Both

view of the fact that the United States must when signs the

will

have

large

Federal Reserve banks and these

article of agreement of the bank that then prepared to carry out
all obligations under those articles the balance must be tradily

than

needed

operate

permit the United States to

available

-hear

Partly because the entire amount of 5,923 billion dollars must be

made available al once though needed at

these

on

all,
may not be used Sex and part
because the sympents which must made by are

fund

the

and

bank

will

the that would if the full
State

the

of the to the fund and bank were provided in the
The amount -bearing notes issued to the

stabil-

the

times

be make invest treated to expenditures The

bank

the

number

used

been

in 1932 and appropriate when money must

must be paid immediately payable only called by the bank from
Eighteen

has

This

the subscription to the the bank (except for 63 dollars. which
time.

69

authorized to raine the funds subscribed by the United States to the
bank in the same way. but payments to the bank will be made from

two
the bank, 3.175 billion dollars The total subscription to the
institution therefore 5,925 billion dollars
While the entire subscription to the fund must be paid when the

time

ROLL NO

of

MICROSTAT

TRADE MARK

,

PRECISION

fund and limited the subscription of the United
be

States

the

Gove

bank limited the subscription
the United States the bank NO paid in for the purpose of

States

United

of

the

investments

with

done

In

which

will

issued

such

to

$635,000,000

exceed

Section on provides that any money by the United States

billion

directs

amount

The

loans.

United States
Section

which

through the of the fund or the bank will

n)

into the general fund of the Treasury that it can be used only

with made by Congress

1934

States

AND FURNISHING INFORMATION

O

now
Act

with

the

Section of H.R 2211 authorized the President to collect informs-

tion requested by the fund in second with the articles of agree
ment

and

informa

for

the

guidance

the

Unite

States

in its capation in the fund and bank. The and penal-

the

applied were those contained in section (b) of the Trading

With the Enemy Act The committe has rewritten this section to
provide that the President may by order regulation, require

furnishing
information he enable the
United States to comply with requests of the fund for information

The information is collected only in such detail AS necessar

which
the

United

to comply with the requests of the fund and not to be furnished
the fund such manner as to disclose the affairs of any person. If

liquidated

States

money

for

there refusal furnish informal court order can be obtained

fund

the

stability
the

the

Treasury

and

appropria
by

Secretary

the

that

transfer

of

the

Treasury

to

issue
that

pay
the

by

the

not

covered
He

will

be

musishable

contempt

disclose ormation obtained under section 9. except in the course of

his official duties, or - such information for his personal benefit.
Violation of this provision will subject the guilty person to years

imprisoment, 85,000 fine, or both
-

Section
United

obedience

The committee has also adder provision making it unlawful for
any officer, employee adviser consultant of the Government to

and

RECISION

MICROSTATI

TRADE MARK

MICROFILM

REG. U.S.PAT.OR

ROLL NO

71

INTERNATIONAL MONETARY FUND AND BANK
INTERNATIONAL MONETARY FUND AND BANK

70

STATISIZIATION LOANS BY THE BANK

THE JOHNSON ACT

made This suggesSection 13 the carrying est suggestion originally

de

Section 10 suspends with respect to members of the fund and bank

the of many other
interested
of public opinion was that the

the operation the en-called
Johnson Act of April
1934 Under lend
security13. issues
purchase
or

the

act.

no

that

default

in

that

new

can

person

obligation

on

clear power to make long-term Itstabilization
view loans
the
is

the

to

of

is

Joshe

such

Government of the United States Neee the fund and bank are to

committee

private agencies. will be for mber countries

and banking facilities much as pos-

provides

needed

are

that

Bretton

drafted

with

the

Woods
Com

at

agrees

smittee

The

authority

such

and

bank

the

the

mittee for Economic Des however the belief that the

Section 10 provides the change necessary to enable

of the fund will better position to confine the use

the fund and bank to operate properly It susponds the Johnson

properly
should say
of fund's stabilization operation it can
loans

Act restrictions in respect to those countries which are members of

such

the fund and bank.

made the bank than the fund

The commiss has determined that amendment or reservation

JURINETICTION AND VENUE OF ACTION#

is because the articles agreement of the bank already

try any case which the fund or bank is party

that
bank
empower the bank to make
each
Joans and the result desired
can be
interpretation
official

achieved
construes

also the remova of cases from State court to . Federal

through
articles

an

agreement

the

requires

section

Accordingly.

the United States representatives to secure such an interpretation

court when the fund or the bank defendant
STATES IMMUNITIES AND PRIVILEGES

and the bank takes contrary position to propose and support an
amendment to the articles of agreement of the bank

Section 12 gives full force and effect in the United States its Ter-

and the mmittee believes that this will not be the

should become to this was

ritories and poster
to the of the articles
status
fund
upon

confer

that

bank

the

the

NO

the

I

Section 11 confers upon the district courts of the United States

President authorize and directed to accept such an amendment on
behalf of the United Males

certain

and

legal

as

They will have legal personality and the ability to contract,
and dispose of property and 10 sue in our courts

Section 14 is the result of the committee's reaction to

to

The fund will be immune from suit unders consente be

Fear
raised by some of the intern sted
groups
that have studied the fund
institutio
that

used will be which to having ISA property attached

as

all

of

monetary
evelical
member
ADV

of the fund and bank will be treated
of

fund

the

and

and

will

bank

the

The fund will be immune from
taxation
and each
salary
from
taxation
will

and

than
either

will

pro-

be

tected against taxation, but will have on special
and

its

provides

its

the

that

to the the recipients would be entitled

evileges and with respect to those assets that
bank had prior to distribution
alsoprovides
gives effect
to thatother
that
when
which

portion

of

the

fund

which

are

will

articles

not

expressed

the

believe

an

coment

will

to

to make the resources of the fund are to

the under the fund and that is so regarde
by other avoid any doubt on this point the bill
requires the United States latives to weare official inter-

tax

Section gives effect
to thatwindpertion ofaffairs
the bank
which
distribute
bank

been

the bill It the understanding of the committee that this

In

institution

also

has

Fear

of

used in with the neiples stated in section 14

immune
br

current

large

meet

The

or

emergency
for

with

balance

the

fluctuations
transactions

has

current
seasonal
payments
to

that the fund" resources will be used for relief or time or to

be

similar to that accorded to persons

official

limited

of

the

that

been

interference

name

with

ecope

und

archives of the fund and the bank will be
from

the

to

with
enforce

pretation from the fund if the erpertation should not in

secord with this understanding
the United
well otherfund
operation
proper States,
that
menifest
the

the

make

to

the

articles

of

agreement
required

are

the
In

and

support

appropriate

and

the

fund

the

of

to

propose

President

ixed and directed to accept such an amendment on the

73

INTERNATIONAL MONETART FUND AND BANK
72

INTERNATIONAL MONETART FUND AND BANK
determine

required

elability

for

are

and

United States By virtue of the reporting provisions of section of
the bill, Congress will be kept informed operations and policies
of the fund and will be in s position to take such action as it may

that

shall

expire

not

June
and

ended

deem appropriate in the event such policies and operations de
conform to the apirit of section 14 of the bill

"

United

XVL CONCLUSION
am

.

APRIL

secure starts cooperation is through the esta of the Interna-

of

tional Monetary Fund and the International Bank for

be

The committee believes that international monetary and financial

the

the

fund

into

the

States

United

of

within

shall

and Development If the Bretton Woods are not adopted

operation

of the

shall

operation essential if international trade and investment are to
be resumed after the was In its opinion the most practical way to

unless

1945

the

-

reconstruction in the der vestated countries will be long delayed and
there real danger that the currency warfare that preceded this was

melitical

will be resumed in even more extreme form Such development

such

to

for.

would be a constant threat to the peace and the world
We believe that this legislation will strengthen the fund and bank

and make the United States partirip in Less institutions more

effective These desirable objectives are accomplished by the bill
without opening the agreemants to attendments on FINITY icess and

both

partnership

this done in manner that should meet with the approval of the
other 43 nations represented at the Bretton Woods

g

pursuant

the

The committee that the bill be passed to authorize the

participation the United States the International Monetary Fund
both

the

of

and the International Bank for Revenstruction and Development

termational
septemb

XVIL CHANGEA IN EXISTING Law

In compliance with paragraph 2 of rule XIII of the Rules of the
House of Represents changes in existing law made by the bill

C

are shown follows (existing law proposed omitted enclosed
in black brackets new matter printed italies, existing law in

the the --

which no change is proposed is shown in roman)

- OF - ACT or ..

Sec. 10 (A) For the purpose of the of the dillar
amount

the

the

such

and

exchange

and

made

.

for

and

of

this

the

directed
United

the

under
any

the

The
any
the

More
this

of

2"

INTERNATIONAL MONETARY FUND AND BANK

APPENDIX

75

States

dollars

Section
net

Ha

ARTICLES OF AGREEMENT
INTERNATIONAL MONETARY FUND

any

The Governments whose behalf the present

may

trade
high

shall

within

arrange

-

the

O

the

Fund.

this

in

on

shall

be

specified
of

pro-

be

and

the

quotas

perment

xx

Article
other

nett-

-

review
the

four
Las

and

esconds
considere

undertakes
of

years

which

orderly

INTERNATIONAL MONETART FUND
INTERNATIONAL MONETARY

TRANSACTION

@

INTERNATIONAL MONETAI

point

of

above

other

MONETARY

MICROFILM

TRADE MARK

INTERNATIONAL MONETARY FUND AND

BANK

because

office

in

82

is

PRECISION

of

the

quotes;

all

by

the

P

2"

INTERNATIONAL MONETARY FUND AND BANK

,

INTERNATIONAL MONETARY FUND

hundred

XV.

PRECISION

TRADE

MICROFILM

MARK

ROLL

INTERNATIONAL MONETARY FUND AND BANK
86

87

INTERNATIONAL MONETARY FUND AND BANK

with
from

its

-

MPRECISION

TRADE MARK

MICROSTATA

MICROFILM

may

PRECISION

TRADE

MARK

PRECISION

TRADE

MONETART
Article

XII

director
ineligible

the

MICROFILM

D

ARTICLES OF AGREEMENT
INTERNATIONAL BANK FOR RECONSTRUUTION AND
DEVELOPMENT
The Governmental in whom behalf the present Agreement in signed
INTRODUCTION ARTICLE

The International Bank for and Development is established
the

=

ANTIFLE L Premium

The purposes of the Bank
bers
ing
of

under

-

-

the

productive

developed

of

guarantees
private

or

suppli
du
for

other

its

and

trade

and

inter

the

aging

standard
time

prop

ungrad

internati

(v)

-

members

in the

and

The Tani the purpose set forth above
ANTIOL 11 AND CAPETAL or THM BAKE
Farmer

the

of

Bank'shall be

those

membership

the

in

times
Bank

the

and

and

shall

Exepone

for only by
voting
Each

when the Bank drease advisable by a
power.

share

shall

of

to

living
interest

eets

is

MICROSTAT

of

TRADE MARK

of

PRECISION

the

shares

by

The

by the Bank
by

as

much

MICROFILM

ROLL NO

INTERNATIONAL MONETARY FUND AND BANK

MONETART FUND

fee

the

member
Bank

the

by

Bank

the

Bank

the

the

Bank

as to

special

loss

to

TRADE MARK

its

RECISION

MM

ROLL NO

99

INTERNATIONAL MONETARY FUND AND BANK

to

MICROSTAT

TRADE

101

INTERNATIONAL MONETARY FUND AND BANK

100

Asmiss ORGANIZATION AND

authority
Bank

given

the
by

organize

Bank

and

to
shall

Bank

of

that
and

having

the

Governors

power

to

PRECISION

and

there

TRADE

MARK

102

INTERNATIONAL MONETARY FUND

MICROFILM

106

104

the

Bank

Bank
to

Bank

MICROSTAT/

MICROFILM

107

106

INTERNATIONAL

an

to

MPRECISION

TRADE

MARK

108

100

INTERNATIONAL MONETARY FUND AND

INTERNATIONAL MONETART

Bank

Comptroller

to

Paname

Fleases

MICROSTAT

TRADE MARK

MICROFILM

REG.U.S.PAT.OFF

ROLL NO

INTERNATIONAL MONETART FUND AND BANK

110

Tensury

the

of

Ministry

Washington

Embassy
Danish

Minister

Faited

the

personal

his

in

UNITED DELECATES

MINORITY VIEWS OF HON FREDERICK C. SMITH
AND HON HOWARD H. BUFFETT

the

HENRY

Chairman

Vice

Chicago

Bank

Chairman

Mentor

-

Committee

-

The minority believes that the future of civilization depende upon
the maintenance the solvency of the United States and the stability

Banking

of the dollar Accordingly, we share with every thinking citizen the

Committee

Chairman
the

Committee

GENERAL STATEMENT

Reserve

Federal

the

W

on

foundations

coopers.

Banking

earnest

Banking

Lion and stable monetary conditions everywhere The achievement

sound

desire

of these purposes is the high road to the materation of peace and
liberty

Treasury

Committee

on

Banking

on

The question before the House is not the need for currency stability

and international conneration In world where the only place the

value of money often can be determined in in black markets resulting
the

from fiat currency can question the desperate need for stability

Delegation"

The question whether the Bretton Woods proposals will (1) promote

Atlanta

objective

the

of

of

.

of

monetary

and

cooperation

(2)

constitute

the has available means for achiev that purpose

The Bretton Woods propor are NO and complicated that
the attempt discuss them nde quately difficult not an impostask

middle,

During

the

breatings

various

experts

interpreted

the of ways More significant. however,

was the fact that substantial evidence was offered that the delegates
who ratified the plan were agreement on the meaning of many vital
classway which determine the operation of the so -called stabilization
Coinage

to

fund

Accordingly we urge the Members of the House to appraise this

proposal not by the stated objectives. but by whether or not this

diversely understood proposal state. the best appeoach
or even practical approach the achievement of monetary
stabilization

We believe the Members of Congress are realists We submit that

the plan's advocates should prove conclusively by authoritative

Legal

evidence that there has groups meeting the minds among
Bank

of

RECISION

Dates

the principals who these agreements Unless com-

patent evidence placed before the that the nations understand each other the medium operandi of the plan, truly intelligent

debate Rosy and glowing America oratory about the

benefits of this plan either futile or work still, misleading until
Congress competent testimons regarding the conceptions of
this proposal held by other nations

Certainly recent events should teach us that international agreementa, like individual contracts should represent clear and definite
understanding between the signatories Even at the outset, Bretton
Woods lacks this elemental virtue.

MICROFILM

MICROSTAT

TRADE MARK

ROLL

INTERNATIONAL MONETARY FUND AND

112

INTERXATDONAT MONKTART FUND AND BANK

Accordingly we believe the plan. with or without the committee

113

COMPOSITION or THE FUND

endments de Sective and neleable find guidance

in appraising the scheme from the analysis by

o

The "vapitalization" the International Monetary Fund and Bank

would roundly SIN The share of the United States

about thand this total or $6 000,000,000 About

of this would be raised by transaction

to authorized by the Secretary of the Treasury. am insidious

of This would be added to the problem debt.

stated

As

stable.

intern

genuine

dependable

vital

durable

national

unconditional perceq current in a stable
cannot

taxre

from

However
debusing

the

gold

CURRENCY

Down through the currency debasement has been universally

curative

possibly

most deadly form of state robhers has brought

These facts are basic to the consideration of the no-ralled Bretton

of the world unfold distress and suffering houger.

agreements

and to some historians left in its wake

The greatest and indeed, the only enduring contribution the
States

United
and

grand

make

an

that

general

very

her

own currency the doller the of her Govern
to

Great Britain and other no doubt beed financial

them

what

appropriate

aid

control

But

the

should

retain

undertake

Any

States
may

Redemption of Democracy, says
more than ment juke the managed currency and concentration exispe
degree

must

policy

Monetary

basic

The

United

any

over

Brettee Woods means managed currency

Bank

and

When the Constitutional Convention at Philadelphia was consider-

consist

ing the question of giving to the Congress power to "emit bills of

This world
function
there
would

the

to

-

scheme

It

of

the

have

have

The

past

dealing

that

are

and

performed

private

instead

destroy

true

what

is

would

the

colonista

had

suffered

if not struck out. would be alarming as the mark of the Beast in

Revelation And Mr John Langdom said had rather reject the
whole plan [Constitution] than retain the three words and emit
bills'.

Now, will the Congress of the United States proceed to make the
acourge of civilization, currency debasement, legal and respectable
easy of accomplishment, unlimited in amount, permanent, and world

Dundan

regulating

Thus

which

But the term "fundamental disequilibrium, is not defined in the

the advocates goal. they

by

from

member shall not prepose change in the par value of its estimate except

of

trade

managed

severely Mr. George Read "thought the words (to emit bills credit).

Article IV. section 5. of the fund agreement starts out by saying

scheme

monetary

to

wide
across

whether
boundary

Now, the only

in

credit,

is

tional

of

beset our troubled world Herman Haue thing in his work, The

maintainer in the postwar period and United States should give
full

debisement

result the the fruitsed the labor
will be the source of the most which

ment

other

gold

illn

But unless that to order
any help might receive from the remain palliative
Woods

the

and

to

currency and these help to tide over difficulty

cannot

from

dollar

of would be highly inflationary Does not

United

The

derived

consists of the so-called profit the Govern-

the

moties

lend

can

income

which

a government
States

would

The

peace.

is

RECISION

which

agreement Although number of witnesses before the committee
considered the term, nearly all of them admitted that they did not

know what meant few stated what they thought might mean
After making lecific provisions for member governm debase

their currencies 10 percent without the concer arrence of the fund and

by additional unspecified amounts with it. the provision in effect

concludes by saying that any member govern may delase its

currency by any amount so long AA it believes that to be necessary

MICROFILM

TRADE MARK

ROLL NO

INTERNATIODAL MONETART FUND AND BANK

114

ISTERNATIONAL MONETARY FUND AND BANK

to the proper functioning of its domestic social or political policies

GUOTAM OF THE FUND, ARTICLE ⑉

Is there any other reason for debasing . currency except an alleged
disordered condition of domestic social or political policies?

The aggregate of all quotes of the fund would be $8,800,000,000

Each member given "quota which shall be ogun

Lord Keynes in speech before the House Londs May 18, 1943

made

that

clear

very

each

would

country

the

have

Quotas

shares

scription'

debase

right

115

alone

based

not

are

oon

on

siderations but military and political well.

its currency any extent might desire The Bretton Woods Con

The quotas are in general divided into two categories, these of

ference press release No 51 July 21. 1944 implemented Keynes'
position and concluded by striking off this masterpiece of confused

debter

creditee

countries

creditor

To

country

without

without

elasticity

Prof. O.M.W Sprague, and of the very few informed

of

which

total

the

of

about

creditor

the

be

that

stability

currencies

give

inherent

or

not

intriesio

stability

The
States
furnish
would
would
represent

lendable

the

pay

witnesses for Beetion Woods frankly stated that be thought the fund
would

United
country

the

the fund to provide the greatest degree of exchange

stability

borrow

can

double talk

introduces

most

quota

thinking which more critical of the fund might call outright

percent
United

23

of

its

States

quota
dollars

in

Even
of

Marrior Ecoles, Chairman the Board Governorsed the Federal
who

been

has

one

advected

the

of

financing has
admitted that value currency
sound
dependent
the

currency Before the

Currency

United

the

total

the

deficit

would

States

fully

since

as

They

This

such

Committee

dollar

the

good

as

February 27. 1945 be said

as

Reserve,

to

that had true picture of the situation we might

Now

of the gold other countries would pay into the fund

they

an

them

Since this proposition holds for the dollar. it most apply to every
current

the

with

gold

purchase

the

credits

voted

her

some

Congress

by

The United would have percent of the voting power when

the fund started operating and considerably less when other members

think

what

credits

land

through

form For example, China's gold contribution could all be raised by

Professor Sprague stated further
Well

not included in the proposed set up BDY admitted to member

ship The borrow ing would be in overwhelming control of

certain that it does not remotely
suggest
In

system

the

fund

the

addition

and

of

currency

debasement

stability

real

individual

for

to

countries article provides for uniform debase
Russia
Britain
and the United the power to put this prov ision

ment

the

effect

into

But section of II R 3314 prohibits this from being done except
with

when

approval

we

This

of

PRECISION

reflect

upon

its

meaning

prohibition
Legalizing

currency

ominous
debase

ment, whether by or collectively, would be

tantamount legalizing welshing by ments on their international

as

well

as

national

debts

such

ments

would

inevitably lead to such repudiatio The of section
H. R 3314 would be recognition by Congress of the ner inevita
debta
bility of universal repudiation of and national

the

to

fund

valued rate This would naturally result in lowering the price of
dollars in terms of foreign currencies ex lowering the of our

goods foreigners

policies.

establish right for each one of the 43 other nations to draw upon the

resources the United States It could foreshadow rationing of
world trade

has been called a sdan for sharing our wealth with the rest of the
world but principally with Great Beitain
VERTING IN FOREIGN POWERS CONTROL OVER UNITED STATES FOREIGN

TRADE AND TARIFF POLICIES ARTICLE VII

This one of the most basic isions in the whole scheme It
deals with "searce currencies If dollars became scarce in the fund
any member government could step in and block exchange operations

dollars The fund would them ration dollars: that is American

exports

put 82 750 000 into the scheme and that this rassed

Does Congress wish do this?

What the fund would actually do, if it operated according to the
stated plan would be not stabilize currencies but by authoritarian
means pig some foreign exchange in terms the dollar an over-

Jendine

and

An fenture guota arrangement is that it would

supply

of

Congress

for

as

the
or

upon

more

then

export
dollars

by

its

-

Insoler
dollars

locist

industries

claimed
would

jobs

the
rise

Sooner

Then

Could

Congress

fund
refuse

be

avail-

the

slump

in

commo

all

to

MICROFILM

MICROSTATA

TRADE MARK

ROLL

117

INTERNATIONAL MONETART FUND

INTERNATIONAL MONETART FUND AND BANK

116

This whole arrangement in an interrel part of the terms of the

contract which the this scheme are asking

Manufacturers wage earners, farmers. and others would be desperate

States

United

Under those circumstances replenishing dollars in the fund could

important

powers

foreign

0

mandatory

some

But article VII has Like all the other basic

the this derived Keynes'
Clearing Union Mr Harry D. White, asistant
expert
that

the

Treasury,

the

of

and

which

"contains
provide

fund

the

invoke United States and force
"to releaseexports,
other
(United States
its

alone

This

back

effect

in

which

penalty

finance
makes

largely

before

admitted

of

United

the

,

Secretary

besides

.

and

of

or,

House

the

taken,

case scarce in the fund foreign countries
and they woulddollars
theintopower
the fund
goods,
Or.

barriers

tariff

and

and

United

both
the

But

demur.

States

fund

elect

tempo-

trade

Here

of

Lond
in

VII

article

of

Fund,

Bretton

the

United

rest

the
here

or

by

percent

of
12

states

to

which

abrogate

board

Nurkse,

Ragnan

Nations
favors

the

to

the

and
States
relative

United

same

Great

Debtor
Great

expected

be

disp

largely

Britain

Furthermore,

bloc

has

in

gaining

power

and

Authoritarian
monetary

expert
To

make

with

bilateral

many

foreign

in

to

well

from

two

have

the
quote

fund

the

in

The

States

of

rarily

the

country
vaid

entry

free

permit

that

of

program

United

the

to

fund

the

States.
your
into

help

services

or

to

if

PRECISION

capital

would

currency
require

"the machinery of for all transactions, even though

MICROFILM

ROLL NO.

119

INTERNATIONAL MONKEART FUND AND BANK
INTERNATIONAL MONETARY FUND AND BANK

118

creditor? Who know ing the facts is going to invest his money in any
foreign securities with such as arrangement as this?

general permission is given to all remittances in respect to current

Article IV section 2 effect repeals sections and 9 of the Gold

trade. Not only is this machinery necessary in the country desiring

Reserve Act of 1934 This takes from the President the power to buy

Only by the control of capital movements "at both
ends Lord Keynes maggesta that the United States should NO up
exchange control machinery similar to that of the British exchange
which "has now gone long way toward perfection

manipulate the price of gold The Congress cannot under the Con-

but in those not desiring well Unilateral action would be

and sell gold as any price and vesta in foreign country rice the power to

clear violation of the Constitution

Capital transfers may effected by exporting
gold,
movement
outwardcurrency
prevent

THE AMENDMENTS AND THE 80-CALLED AMENDMENTS

services

commodities

be

stitution delegate this power to foreign nations This to

of capital requires total control of all transactions what-

The New York Times of Max 25 1945 quotes Mr Spence chairman
of the House Committee on Banking and Currency as having said

soever, censorship of mails. telegrams telephone calls, cablegrams
Foreign travel must be restricted Personal wishing to travel abroad

that H. R 3314 - voted out by the committee "does not change A

alter sunctuation in the basic agreement
Brown of Georgia, ranking member ee the hyporration side. is
reported as saying in respect of the amendments that they were

must warched exports through licensing must be
required

Would the United States provide the burraueratic machinery that

would be 'at both ends' successfully prevent the import

dressing

tion of capital from Britain and other countries which might be able

to evade their guards? Would not the United States

14. the much advertised Wolcott amendment,
sponsise) by Melcheir Palyi:

be morally obliged to provide the those
army countries
of supervisors,
inspected
Britain
and
Great

une

for

benefit

the

policement

and

in particular? to de this what would which
become of themuch
bear

we

so

of

from

the

The statute legalize for an indefinite period control by gov-

comments of locking and rationing
of
arrange
currency
hatery

VHI

(art

restrictions

XIV

or

(art

payment

control

of

rates

(art

me.

2):

credits

millet

IV

the

the

other,

Mr. Leon former the Bank for International

Settlements referring to that would be required to
all

-

these

with

better
down,

Itricticas
made the statute XIV that these
se-called

time

tran

sition
period
that
and
provided
that
any
Prof
o
M.
w
Sprague
when long the transition period
live

in

may

Did we ever out of the period following the other war?

sterling in London and oting debts Great Britain

owes other to $12 000 1000 need not be paid

all Even debts recently incurred need not. under certain condibe

this amendment period which authorities
realin

effects of the Committee for Economic evlopment

to help the Treasury present some evidence industry

approval for this scheme resulted in the much- tooled am dment for
elabilizione loans in the bank The only thing one CAR be sure of

in

this is that at would wraken the bank
BRETTON

WOODS

BLACKS

DRIVE

PROPAGA

OUT

permanent

Under article VIII, section (a) it is provided that the blocked

tions

In passing point that the - of the word "cyclical"

interpret ranging from
40 months
to years, which is obviously
transactions
current

paid.

Under article VII section 1,3 (b), borrowin countries are automatically given the right after they had exhausted their quotas and

borrow from the fund to default their debta) Who
ever heard of creditor legalizing in advance the defaulting of his

Regardless of the merita or demerits of the Bretton Woods proposal,

the propaganda drive accompan ring is the fearful power

ultimate publicity
government to influence. through
control modern
econoqugroup
The

facilities

the

such
who

actions

power.

watched

this

close

instance
range

are

Those

terrifying
interested

future liberty in America should understand this state USA of the
instruments of public information

to

enforce

in

PRECISION TRADE MARK MICROSTAT MICROFILM ROLL NO.

INTERNATIONAL MONETART FUND AND BANK

120

Your attention is directed to am editorial prophecy of the New
York Herald Tribune March 4. 1945 We cut testify that the forecasts that editorial have been home out by events
that

of

MINORITY VIEWS OF HON. JESSIE SUMNER
.
1

part

additional

following

Treasury

reasons

tional

quite

section

bill

the

method

of

Government

the

that

powers

most

propaganda

Cunningly

which

using

of meetings were reported head with

Constitution

attempt

This political pressure other less-olivia tacties nere carried

behind the protection lengthy and carefully Maged hearings
We could write lengthy report detailing the propaganda
this
Instead,

this

MY

time

to

present

its

the

sides

farili-

government

people.

or

possis cannot be effective exposed Until those on boththeir
sidescase
question

opportunity
is

public

people,

the

than

more
the

bank

the

there

reason

was

up

except

Russia

know,that

into

fund
before

was

The

fund.

the

world

the

to

Charter.

Atlantic

to

not

present

activity through the world to make ourselve

both

publicity

fair

views

called
force

tributing American know apre will be used for aggres

This experience sobering evidence as that the props
legislation

communications

Is is now obvious that continue our present policy of con-

ganda

orderly

Together

a

Senate

would

they

and

constitutionally

two

bank

world

and

pro

sive guilty helping
build
up and Bretton
was which peoposal
the
fighting
certain
The

United
requires

strings

functioning
o SMITH

ROWARD H Berrer

United

that

have
the
to

to

States

the

right

attached

to

promote

to

con

with

creates

Woods

The

givingusually
andeclined
opposis
this plan these
to be able to discuss the proposals
themselves

the

of

had

it.

implement

to

cannot

entify

single

set

our

best,

the

all

by

the hearings the confess and
To

to

vast

such

contains
bound

Officials of imposing voter membership filed into
proporal

Association
enough

Bankers
Can

With technique and effectiveness reserviding . totalitarinto minNation
istry of propaganda through these influential evenues, the
been dreached with publicity for Berties Woods

these

national
Members

to

America

intricate

elastic

the

sens

were

American

the

radio religious leaders, and
others who play a part in influencing public opinion in

delegates

by

from
implied
might
ingrediente
important

.

Herald

signed

was

Federal

Govern

was

that

greatly

document

the

that

they

Except for . techniques fears of

gov-

the

insist

generals

the

world
monetary
States
United

The

Hill

this

.

the

I deeply regret having to disagree with the mijority of the commiller ecting the bill under consideration 11 R 3314 the Bretters
Woods agree with the minority it opponing the bill and submit

of

legislation
through

it

.

Currency

take

than

with

Woods

Russia
dollars
billion
with
dollars
billion
Yugonlavian
and
the
Polish

no

total

billion

half

and

dollars with real stinched billion dollars may seem
triffing

in

Americans in these days of war spending But used
Russian

impoverished European countries now the effective

world political machine, billion and half dollars could be - offee
tive any Army. What excuse could justify voting for this deadly
beomerang? Still, it in no wonder that all the Allied countries were indused to

sign the Bretton Woods agreement People everywhere today

121

are

MICROFILM

MICROSTATI

TRADE MARK

ROLL NO.

Still. Dr Anderson the noted bank economist has warned that

seeking ravenously things only American dollars buy The fund

should remember the English experience during that period Im
mediately after the war England adopted the trad onal. sound
government policies But Englan made the mistake of

scheme offers governments chance secure shares of dollars

return for their OWN any value they present
may
are

at

provision

of

the

fund.

Act

effect

in

reasons

the

foreign

to

Johnson

the

of

of

says

M

Act

under

why

you

.

the

is

.

which

States Pervade their cennust bonds
and
numation
abroad

and

in

This

the

Bretton

from

y

hole

factory

Woods

bill

effect

is

the

happen to the American dollar under the Bretton Woods plan

weakened dollar would be misfortune not only for American bond

to

holders

con-

of without lease restrictions and limitations

.

upon

throwing her strength behind the currencies of European countries
not adopte credit Forths policies in much the same way
the United States will be doing under the Brettee Woods proposal
The European currencies as they grow weaker dragged the British

currency down with them are warned that this what may

default your debts your credit good Come into the United

invest

but

also

for

the

the

The scheme, of course bonania not only to foreign
trickle

back

the

of

showed

States

the

and

troubles
testimony
countrire

the
the

other

the

operate

and

ask

excellent

the

that

money
United

that

agree

to

prevent
from

England

peoples also to either want to export on speculate
enough

seemed

fund
than

Bretton

American

that

123

INTERNATIONAL MONSTART FUND AND BANK

INTERNATIONAL MONETART FUND AND BANK

122

in

PPRECISION

refunct

Deal

New

Bretton

United

let

unless

States

he

manner

Why

should

they

cannot

afford

W

that

this

why

another

the

that

the

particularly

the

States

showed

rather

than

Kemmered
The

decide

money

the

many

into

of

to

money

Woods

.

foreign

the

forced

that

undefined

any

Bretton

out

phrase
States

way

the

If

back

using

privilege

the

the

there
pérotal

but
the

fund

United
decides

that

money
that

1910

1920

and

in

no

the

United

real

strings

inflationary

an

the

during

The

the

period

showing

World

and

States

immediately
foolishness

the

British

time

food

United

original

price

this

shortages

the

after
of

The

the

Bretton
pressure

French
loans

the

spent

American
much

not

Government

DeGaulle
United

French

policy
panir

as

made
But

Government

reform

after
was

States

the

forced

looted
to

Money
depreciate

flowing

from

thing

abroad
Poland

money
other

that

TRADE MARK

MICROSTAT

124

REG. U.S.PAT.OFF

MICROFILM

ROLL NO

INTERNATIONAL MONETART FUND AND BANK

Who is to rule this world monetary superstate called the fund? A
handful of men all but one of whom would own no loyalty whatever
United States and that man would be immunity from punishto United
Statesof the
Allmatter
the
more
of altering our

ment decisions, the in the with courts the exception of the majority quota important vote and

of depreciating our currency would be made by mere
with the American representative holding only one-fourth the voter
If the fund. constituted as it in decides to let foreign nations change

in

the values of their currencies all of them perhaps possing either hands

currency depreciation the United States would be forced to

refuse to depreciate, thereby letting the United States be cheated by

the debtor or join in the general depreciation and thereby
cheat our own Government bond holders In the Bretton Woods The

game all the cards are stacked against the creditor nation

principal creditor nation is the United States
Is is not surprising that the administration's systematic attempt to

line up pressure groups and national organization in campaign to
pressure the Breiton W Voods bill through Congress was effective
Nowadays most everybody seems willing to grapp stany straw labeled

"world peace and prosperity With few exceptions witnesses

favoring the Bretton Woods Gill had made little or no real study of
the agreements They relied bravily upon the assurance of administration officials that Bretton Woods is the way out of the world's
money troubles Therefore section important to point out frankly
that the inventors of the Bretton Words schette are disciples of the

inflationary unorthodox Keyneian "keep spending lending and
printing money philosophy of economics which has guided both
British and American government since 1933 Under it both British

was

and American business enterprise have survived only because it
hoped and believed that New Dealism would not last long

in

PRECISION

Now leading bankers economists and industrialista here and
England are crying out in print for the traditional thoroughly moral
"gold standard gos ernment fiscal policies which in the past have been

the basis of both British and American economic development

of

They say they do not want Bertion Woods mondary government what

any "funny money schettes They are only saying today

multitudes will be saying when the inevitable crack-up comes Those
who insist that backing this Bretton Woods scheme 'smart politics"
would do well to remember what happened to the Republican Party

after similar money policy used by our Federal Reserve

bank generated the 1927 boom, then procipitated the 1929 crash
The so-called compromise which withered some of the opposition

does little but show lack of confidence in the House and Senate
But surely this "gold brick scheme bristling with scrap iron likely to
come back at sain bullets, will never go all the way through Congress

A minority of the House and majority of the Senate successfully
resisted the seemingly irresistible administration pressure to pass the

"slave labor" manpower bill This bill far more dangerous to the
American people than the 'slave labor' bill. It probably the most

dangerous bill ever presented to Congress on in time for the United
JESSEE SUMMER
States to stop buying trouble

PRECISION

TRADE MARK

MICROSTAT

WWW.U.S.PAT.OFF

MICROFILM

ROLL NO.

150

149

May 30, 1945

My

May 30, 1945

dear Mr. Bowles:

My dear Mr. Bowles:

This is to acknowledge receipt of your
letter of May 30th.

This is to acknowledge receipt of your
letter of May 30th.

you
but
tain. bring
Mrs.uncerI will be delighted to have lunch with

be delighted to have lunch with

next week, but my uncerfrom the hospital next week, I know

you

tain.
I to bring Mrs.
any I will day hope Morgenthau and plans don't are back

any the I day hope next to week, my Morgenthau plans are back

from hospital next week, and I don't know

what day that will be. However, as soon as I
know I will get in touch with you.

what day that will be. However, as soon as I
know I will get in touch with you.
Sincerely yours,

Sincerely yours,
(Signed H. Margenthau, Ja

(Signed) H. Margenthau, Ja

Mr. Chester Bowles,

Mr. Chester Bowles,

Administrator
Office of Price Administration,

Administrator,

Office of Price Administration,

Washington 25, D.C.

Washington 25, D.C.

0

15

OFFICE OF PRICE ADMINISTRATION

151

WASHINGTON 25. D.C.

May 30, 1945

May 30, 1945

My dear Mr. Ambassador:

This will introduce to you
Josiah E. DuBois, Jr. Assistant to
the Secretary of the Treasury, who

is on assignment in Moscow as a member

The Monorable

of Ambassador Pauley's staff.

Henry Morganthes, Jr.,

Secretary of the Treasury

Mr. DuBois is one of my advisers and has my fullest confidence.
want you to feel free

Washington, D. c.
Dear Mr. Korgantheuz

on him for

I would like to discuss with you the problem

with

of black market activities and their relationship to

in concerned I connection feel to call any matters insofar assistance on as which I an

you that his advice may be helpful.

income tax reports.

Do you here . free luncheon date in the next

with sincere personal regards,

few days? I will be calling your office and perhaps

we can arrange to get together.

Sincerely yours,

With my best regards.
(Signed) H. Morgenthau, Jr.

Sincerely,

Chester Bowles

Honorable W. Averell Harrinan,

Administrator

American Ambassador,
Moscow, Russia.

I wes delighted do read 8 ym action geterday

8

2
2

RECISION

TRADE MARK

MICROSTATA

MICROFILM

ROLL NO.

154
May 30, 1945
May 30, 1945

My dear Mr. Everev:
My dear Mr. Stepanov:

I want to extend to you my
greetings and at the same time
Introduce to you Josiah E. DuBois,
Jr., who is on assignment as
member of the United States delegation of the Allied Reparations

I want to extend to you my
and at the

to the of

to you Josiah E.

who is on assignment

the Jr., greetings Introduce Treasury, Assistant same Secretary time DuBois

Commission.

as a member of the United States
delegation of the Allied Reparations

Mr. DuBois is one of my advisers and has my fullest confidence.

Commission.

Mr. DuBois is one of my advisers
and has my fullest confidence.

Sincerely yours,

With sincere personal regards
(Signed) H. Morgenthau, Ja

Sincerely yours,
(Signed) H. Morgenthau, Ja

Honorable A. G. Everey,
People's Commissar for Finance,

Honorable M. S. Stepanov
Deputy People's Commissar of

Moscow, Russia.

Foreign Trade

Moscow, Russia

B

156

155
May 30, 1945
COLUMBIA BROADCASTING SYSTEM INC
485 MADISON AVENUE NEW Your 22 N Y
2000

PAUL KESTEN

INSTITUTE ... -

To Whom It May Concern:

May 30, 1945

This will introduce Josiah R.
DuBois, Jr., Assistant to the Secretary of the Treasury, who is on assignment as a member of the United

States delegation of the Allied
Den Mr. Secretary:

Reparations Commission.

You have thanked us again for helping to sell
war bonds. No really should thank you for the

and any assistance that may be rendered

Mr. DuBois is one of my advisers
opportunity.

I recently BOX an analysis which indicated that
sheer

(Signed) H. Morgenthau, Ja

we and our advertisers

to give to the Seventh anything

support for penetration and War multiplicity, LOSD have exceeds been the able

in the past.

That reminda - of a comment which I heard from
many sources after our broadcast of Horman

Corwin's "On a Note of Triumph." Although there

was no direct appeal in it to listeners to buy
war bonds, any listeners have told no that it

was the strongest sales argument for bonds which
our medium has carried.

Posterten
Sincerely,

Non. Henry Morgenthau, Jr.

The Secretary of the Treasury
Washington, D. C.

0

to him will be appreciated.

Secretary of the Treasury.

157

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE May 30,

TO

Secretary Morgenthau

J. V. Pehle

III

1945

A few suggestions:

That you do a nationwide radio talk on tax evasion
reporting to the country what steps have been taken
and will be taken to deal with this serious problem
and asking for the public's support.
You might also want to ask the President to make
a statement at his next press conference about your
drive on tax evasions.
I should think the War Finance organizations should

be helpful in creating the right kind of public opinion
against tax evasion.

I think you ought to "knock down" this idea that

because the Bureau of Internal Revenue has 9,000 "leads"

no more ideas are worthwhile. Obviously, in the investigation of leads one must follow a selective process and
mark for immediate investigation the leads which are most
promising of producing real and sensational results. The
Bureau can not be allowed to take the position that it
isn't interested in receiving more leads until it has
investigated all of the 9.000 now on hand.
I also suggest that you might want to send a memorandus
to Doe and Hoffman asking that they use their imagination
to explore the ways in which the information and authority
of Foreign Funds Control could be used to further the
tax evasion drive.

Internet

158
159

May 30. 1945

Mr. O*Connell

May 30, 1945

Mr. O'Connell

Mr. Luxford
Mr. White

Secretary Morgenthau

Secretary Morgenthau

Spence told no yesterday that President
Congressman gave San Rayburn a letter to read when they started to have

Trusan on the Reciprocal Trade. He would like

the
to himself
a
theaddressed
debate in the
House. from the out

when
thatletter
thehe President
wrote
onPresident Chairman get Trade,
similar debate
opens letter Reciprocal
You might
the letter for me to Congressman Spence as will of

draft a and Currency on White House stationery and I
Banking the President to sign it Friday when I see him. 2:00
Be try sure to get and give this to as not later than Thursday at

when I do my mail. Letter in 5/14/95

Please let me have not later than Thursday morning,

a draft of the statement that I am to make on the Hill
before the Appropriations Committee. Finished

PRECISION

MICROFILM

MICROSTATA

ROLL NO.

161

160

May 30, 1945

May 30, 1945
Joe DuBois

Harry White

Secretary Morgenthau

Secretary Morgenthau

After you've shown that note I read out loud to youto
to Stettinius, I would appreciate your giving it back
me yourself so that I can destroy It. Thank you.

Distroyed

Don't leave town without talking to me about where
we stand with those last chapters on the Junkers and weaving
that into the Phase 2 of my statement on Germany. I don't

want to leave that hanging out in the air. Please talk to
no about it because after you leave I want to see that

somebody follows through it.smithed
on

MPRECISION

TRADE MARK

MICROFILM

MICROSTATA

ROLL NO.

TO:

Mr. Pehle

McClelland's last report.

MISS HODEJ

File "
COPY -

(2)

As regards relief and rescue operations in Germany

Bern, May 30th. 1945.
SECRET

Dear General O'Dwyer:

with reference to my letter of April 20 I an
pleased to be now able to forward for the Board'
infidential information and records two copies of
my accounts. They cover disbursement . from discretionary War Refugee Board funds made during the period
of November 1st. 1944 to April 30th. 1945 inclusive,
that is the second six months of Board activity
conducted from Switzerland.

The possibilities of usefully *placing* WRB
contributions unfortunately grew constantly smaller
as the military situation in Europe developed.
During the summer and fall of 1944 the major portion
of our Board financial assistance went into the
Balkana: principally Hungary, for the relief and,
insofar as possible rescue of the sorely persecuted

Jewish minority in that country But in the early
winter of this year Budapeat finally fell and the

Russian advance toward Bratislava, a city which had
previously also been the destination of several WRB

contributions, was well on its way. Our last grant 2nd.
for Budapest and Bratislava was made on December
1944 through the "Rechaluz." Thereafter aid for
Hungarian Jews was channeled to the many thousands
still located in Austria, particularly in the Vienna
area, where they had been deported by the Germans and
their Hungarian satellites during the sunner of 1944.
To be sure a further contribution for Balkan rescue
operations was made in February 1945 but it was to
cover work which had been carried out during the fall
of 1944 in passing fleeing Hungarian Jews over the
border into Rumania.

Early in 1945, therefore our War Refugee Board
efforts from Switzerland had to be refocused on those
areas where many victime of Axis persecution were still

located: Austria, Northern Italy Czechoalovaki at
least that section called the *Protectorate by the Nazis
and of course Germany itself the vast prison of hundreds
of thousands of men and women deported there ron almost
every European country.

financed from the Board office in Switzerland, special
medical parcel were purchased for the terrible women's
concentration camp at Ravensbrock, north of Berlin
during our second six months of activity - funds were
sent in clandestinely and what was more valuable than
funds, small highly prized, negotiable objects such as
cheap Swiss watches, pocket knives, razor blades and
holders, and the like, to help endangered persons to
continue to hide and perhaps to work their way down
toward the Swiss border. An intelligence service concerning conditions in the concentration camps, the
movement of detainees and the possibilities of distri-

buting parcele where they had the greatest chance of
reaching their intended benef iciaries, was developed
in collaboration with a German resistance organization.
Through the same group currency and objects were sent

in which permitted small number of political and
racial refugees to get across the border into Switzerland.

Throughout this second period, however, as the
Nazia were driven back week by week and intensified the

ruthleasness of their control and surveillance, it
became increasingly hard to literally resoue persons
by extrionting them from German occupied territory and
bring then to the neutral safety of Switzerland. The

situation in northern Italy in this respect was further

aggravated by the presence and activities of an indigenous "Fifth Column in the form of the Neo-Fascists and
their various police bands. As in the case of the
Darnand *Milice* in France they were often more vicious
than the as and the Oestapo.

Concerning WRB operations in this northern Italian
zone a financial contribution was made in January to
the *Women's Defense Groups" of the Milan Liberation
Committee to enable then to intensify their aid to
Jewish women and children in hiding and to help then
meet the ever increasing and tragic load of their own
imprisoned and fugitives. A few weeks before the sudden
surrender of the Germans in northern Italy a new relief
and rescue channel was opened up through the Valdensian

Church, that staunch, Protestant community settled in
the mountain valleys up against the Swies and French
borders. As did the Huguenots in the Haute Loire region
of France during the deportations of the summer of 1942,
so did the Valdensians in Italy shelter and protect many
a tracked and desperate refugee regardless of his race
or religion. Unfortunately hostilities censed or
rather one should say happily in northern Italy before
this WRB sponsored program could really get under way.

PRECISION

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MICROSTAT

MICROFILM

ROLL NO

)

165
164

(4)

STRICTLY CONFIDENTIAL

(3)

RECORD OF EXPENDITURES FROM W.R.B. DISCRETIONARY FUNDS

(

November 1st. 1944 through April 30th., 1945.
Bern, Switzerland.

During the first six months of the War Refugee
Board's life in Switzerland sone 733,935. 50 Swiss
france roughly $180,000 - were disbursed for rel 10f
and refugee operations. To this should be added the

cost of slightly over 50 tons of foodstuffs purchased

from the American Red Cross and used to make up our
first emergency parcels for the concentration campa
in Germany which amounted to 141, 747 Swiss france
or approximately $34,000. These packages were elivered
by the International Committee of the Red Cross during
the early fall of 1944, and all reached the campe

satisfactorily a) though they were not actually paid for
activity directed from our Swiss base a total of
394,679.35 Swiss france or about $97,000 were spent.
At the same time the distribution of the better part
until May 1945. During the second six months of

of the 300,000 Board parcela shipped to Sweden and
Switzerland -and representing considerable monetary

SECTION I.

December

259.20
147.60
106.50

February

126.00

November 1944

January 1945

Very sincerely yours,
/o/ Roswell D. McClelland
Roswell D. McClelland
Special Assistant to
the American Minister.

99.10

March

205.00

April

value - for deportees and civil detainees in Germancontrolled areas was supervised in collaboration with
the Division of Special Assistance of the International
Committee of the Red Cross from Switzerland.

Swiss france.

Entertainment and contacts.

Total

943.40

SECTION II.

Disbursements of a non-routine character
outside of regular administrative expenditurest telephones wires & postage (away
from Legation), taxis, special research &
information work, travel of agents inside

Switzerland, special translating, etc.

124.85
53.10

November 1944
December

War Refugee Board.

Washington 25, D. C.

January 1945

166.30
112.30

February
March

551.55*

April
Total
.

Brigadier General William O'Dayer
Executive Director

943.40

1,201.65

1,201.65

Included two fairly extensive trips of agents
inside Switzerland undertaken particularly
with a view to obtaining inf ornation from
incoming refugees about the situation on
the German side of the border both in Germany proper and in northern Italy.
TOTAL THIS PAGE

2,145.05

CRO

TRADE MARK

MICROSTAT

MICROFILM

ROLL NO

167

Swiss france

(6)
(5)

2,145.05

Amount carried over from preceding page

Special minor contributions to organisations
and individual for relief. rescue and intoll1

T. Della Ports Socialist

1

northern Italy

2

for Nov. 1944

Dec. 4/44

3

gence work.
Dec. 21/44

April 15/45

10

11

April 28/45

of "Freies Deutschland.
Contribution for Feb. 1945

M.H. Gana of *Dutch Jewish
Coordinating Committee,

1,500.00

2,000.00

2,000.00

Karl Burkhardt (Beremann)
of "Freies Deutschland.
Start of purchasing program.
Contribution for March 1945.. 5,000.00
Karl "Burkhardt" (Bergann)
of "Freies Deutschland.

5,000.00

M. H. Gana of *Dutch

Jewish Coordinating Con-

mittee. Geneva. Final
contribution to bring
card file up to date
Total

Karl "Burkhardt" (Bergmann)

of 'Freien Deutschland.
Contribution for Dec. 1944
(Receipt dated Jan. 3/45)

Karl *Burkhardt' (Bergmann)

Contribution for April 45

2,000.00

Dr. Polak-Daniels of the
"Dutch Jewish Coordinating
Committee, Geneva. for

special "deportec-intelli-

March 31/45

1,500.00

Ker) "Burkhardt" (Bergmann)

of "Freies Deutschland* in
Switzerland. Contribution

Receiving organization or
individual

Geneva

Delegate of Welfare Section
Milan Liberation Committee:

for investigation trip into

Dec. 1/44

March 5/45

9

Nov. 6/44

Receiving organization or
individual

8

Date Paid

No.

Date Paid
March 1/45

7

gence work.
Receipt

SECTION III. (continued)
Receipt

SECTION III.

17,645.05

Amount carried over from preceding page

Swiss france

3,000.00

17,000.00 17,000.00

TOTAL THIS PAGE

2,000.00

4

DETAILS CONCERNING EXPENDITURES IN SECTION III.

No receipt

obtained Jan. 12/45

Monsignor P. Bernardini,

Bruno Kiniger's trip to
northern Italy
Jan. 14/45
(Receipt
dated:

5

Feb. 1/45)
Jan. 15/45

The *minor* contributions
recorded in Section III of
numbers through 11) represent in

Papal Nuncio in Bern, for

Dr. Joeaph Weil of the
Union OSE Geneva. Purchase
of special medical supplies
for persons imprisoned in
northern Italy
Kerl "Burkhardt" (Berguann)
of *Freies Deutschland.
Contribution for Jan. 1945.

special exception,

2,500.00

the my accounts main, with (receipts one further grants relief to

organizations which had received WRB funds for and
rescue operations during the first six months of Board
activity in Switzerland and referred to in my previous
accounts.

Receipt No.
- Page
- November
6, 1944
500
franos5to
Tomaso Della
Ports,reflects
brother
of Gisella Della Porta, the woman who did our lisison work
with the *Women's Defense Groups' in northern Italy during
the summer of 1944. This money was to finance a special
investigation trip undertaken by Della Ports to obtain.

4,000.00

a payment of

2,000.00

15,500.00 15,500.00
TOTAL THIS PAGE

17,645.05

34,645.05

6

MPRECISION

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MICROSTATA

TRADE MARK

ROLL NO.

(8)

(7)

in then and the like.

insofar as possible, additional, precise information

concerning the camps and prisons which were used by the
Germans and Neo-Fascists in northern Italy as assembly

centers for deportation. I was particularly interested
in having details on the camp at Gries near Bolzano
which after the closing of the ill-famed camp at Fossoli
Carpi near Modena,
had
the
become
center
deportation
for
and
Jews
political prisoners.
From
here
arrestees

Kiniger was also furnished with letters of introduction by the Papal Nuncio to Cardinal Schuster of
Milan and one or two other important Churchmen in nor-

thern Italy, underlining the interest of the Vatican
in an effort of this sort.

di

were regularly sent to Mauthausen and other German con-

centration camps.

He

As fate would have it Della Ports never got through
but, as far 0.0 I could learn, was arrested in Turin (he
had taken the *French* route into Italy) by "Mutti
Brigade, one of the many Neo-Fascist "police" organisations. I am still attempting to secure information regarding his welfare He is the only "Board" agent we
have ever lost so I feel particularly badly about it.
The payment of 2,500 Swies france on January 12th.

to Monsignor Bernardini, the Papal Nuncio in Bern for
which I did not nok for a receipt concerns an attempt
initiated in the fall of 1944 when Sir Clifford Heathcoate-Smith of the Intergovernment al Committee on
Refugees of Rome was in Switzerland, to intimidate the
Neo-Fascist police and obtain concess ions for 10 not
the liberation of a certain number of racial and political
detainees in northern Italy. Monsignor Bernardini drew
our attention to a young Italian named Bruno Kiniger
(from the Trento region, hence the Austrian sound ing
name). who had served in Zfrich as an unofficial representative for commercial matters of the Neo-Fasciat
*Government. Some months earlier, Kiniger had dissociated himself from the Neo-Fascists and was anxious
to rehabilitate himself. As it happened he was a rela.
tive

of

Tullio

Tamburini

After some delay occasioned by one false start
during which the Swiss police picked him up trying to
cross the border illegally, Kiniger got through.
SAN both Tamburini and Buffarini, and the latter
promised to take the matter with General Montagna.
Kiniger learned, however, that virtually all of the
Jews arrested for deportation were concentrated in the
camp at Gries which was directly under the control of
the S.S. and inaccessible to even the Neo-Fascists.
It was nevertheless possible for Kiniger to obtain
one immediate if small, concession: the permission
to send into the prison of San Vittore in Milan, one

forner

head

of

the

Fasciet

police. Tamburini in turn was close to both Mussolini
and General Montagna, ohief of the Neo-Fascist police
and in a position to get at Buffarini, the "Minister of
the Interior of the Government of the Italian Socialist
Republic. According to rel table information Buffarini

was beginning to have qualme of conscience concerning his
personal future and accordingly might be open to intimi.
dation or threat of eventual treatment as war criminal.
We hoped that through Kiniger an effort could be made
to frighten Buffarini and thereby obtain more faverable
treatment for at least those prisoners in Neo-Fancist
hands. We also instructed Kiniger to bring back to
all the information he could collect concerning campa
prisons, the numbers, types and nationalities of detainees
un

of the worst in the whole of northern Italy, for
detainees, special medical and food parcels. Buffarini
agreed to facilitate the transportation of such parcels
from the Swiss border to Milan. We there: ore immediately
made up a shipment (soap, vitamins, insect powder,
condensed milk, chocolate sulfamilamide, vaseline, etc.)
which was satisfactorily dispatched on January 18th
This purchasing was done with the assistance and through
my good friend, Dr. Joseph Weill of the Union OSE.
Receipt No. 5. page 5. of January 14th for 4,000 france
reflects this purchase.

This practical aid remained about the only tangible
result of Kiniger's trip which might have had better
results 10 we could have been in touch with him a few
months earlier and sent him to northern Italy when a
larger number of arrestees were still in Neo-Fascist

hands.

The other Board grants recorded in this section
were either made to Karl "Burkhardt" Bergmann of the
"Freien Deutschland* (Receipts numbers 2,4,6,7,9,10)

committee in Switzerland or to Dr. or

M. H. Gane of the "Dutch Jewish coordinating Committee
in Geneva (Receipts numbers 3.8.11.1 Contributions

to both of these groups for relief rescue and related

operations were also reflected in my previous accounts.
The financial assistance given to Karl "Burkhardt"
of the "Freies Deutschland® was for three types of work:

PRECISION

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ROLL NO

(10)

170
(9)

1) maintenance in hiding of endangered racial and political refugees, particularly near the Swims border
2) the *passing" of such fugitive over into Switzerland
(a total of 14 persons actually were brought into Switzer-

(

land between December 1944 and April 1945: German,

Poles, 2 Russians, 2 Czeche and Hungerians) including
the cost of false papers and minor bribes, and 3) the
operation of an intelligence service concerning the concentration campa mainly Dachau, Oranienburg, Buchenwald

Our last contribution of 5,000 france to the
*Freies Deutschland on April 15th. 1945 was in the
nature of an emergency grant so that advantage might
be taken of situation in Germany as things began to
crack up. It served principally to pay out small
bribes to GARD guards and to smooth the way for the
*disappearance of detainees before the last minute
desperate excesses of the S.S. were carried out. It
is difficult to know how many persone were benefitted
by this since in the days between April 18th and
May 5th. all sorts of escapees from all kinds of

and Mauthausen. Point i) also involved the sending of
compact medico-food parcels of the type shipped to San
Vittore in Milan.

camps prisons and work groups streamed over the Swimm
border from south western Germany.

All three of these operations were financed not
so much in currency as in kind. From the beginning of

Jewish Coordinating Committee* in Geneva were less

1945 money as such had less and less value in Germany

On the other hand small, much sought after, easily
negotiable objects such as pocket knives, razor blades
and holders, cigarette lighters, cheap Swiss watches,
wallets aspirine tablets, small tubes of cold cream
in short hundreds of minor objects such as one can
buy in the normal *Five & Dine* store at home had
value far above that of money I have one case on record
of a young man who was fed and lodged in hiding by a
family in Larrach for two months for the price of a
cheap Swiss watch costing about 25 france? Second-hand
suitcases full of such peddler's trinkets snuggled over
the border (with the compliance of a sterling Swiss
enough
custome' guard) by the Freies Deutschland oddly
served to save the lives of . good many people.
The Intelligence service involved the collection
of inf ornation which would be of value to us here and
to the International Red Cross Division of Special
Assistance in the distribution of WRB and other parcels
in the concentration camps In this respect it was
very valuable to know, for instance what the attitude
A

of the present camp commander was toward such relief

action, who the reliable *honnes de confiance* for the
national groups in the camps were whether they enjoyed
not only the conf idence of their comrades but had been
able to work out a certain "modus vivendi* with the camp
as officials, who among the guards and internet blook
leaders could be counted on or could be bribed with
cigarettes or soap which as men were trying to *change
their colors, . whether items were removed from the
parcels prior to delivery, were detainees forced to sign
for packages they never received and a great many other
ann1 facts which played so important a role in the
satisfactory bringing of relief to these nen and women.

The smaller Board contributions to the Dutch

to finance rescue operations than to render possible

an intelligence service of a different aort During
the course of many months this organization had alowly
built up very complete card file covering in a manner
duplicated nowhere else practially all the Jewish
deportees from the Netherlands, both of Dutch and of

other nationalities. Their excellent efforts in this
direction, for personality reasons, were very little
or not at all financed by the Dutch Legation in Switzerland, but almost entirely with the private resources

of a young Dutch Jewish Journalist M. H. Gans who
pioneered this work. He was ably seconded by Dr. PolakDaniels who is now head medical officer of the Dutch
Government's repatriation team which hopes to be able
to go into Poland to search for and return Jewish
deportees from Holland. Gans's work of locating or
trying to locate deportees in the camps and work com-

panica of Germany and German occupied areas was done

with registered, "searcher" postcards sent out weekly
very large numbers, with prepaid answers. Out of an
average of twenty cards mailed about one answer WAS
received which often consisted of only the official
'stamp" of the Jewish Community in Upper Silesia or
southern Poland. The D.J.C.C. also engaged in the
sauggling of lists from Holland and Germany. Our WRE
contribution was of the greatest value to them to keep
this excellent work going.

in

(

PRECISION

MICROSTAT

TRADE MARK

ROLL X

172
(11)

34,645.05

Amount carried over from page (6)

Major expenditures and contributions to
for relial and reacue

and the Balkans. You will recall that during the first

six months of Board activity from Switzerland three
contributions of 100,000 france each were made to the

operations.

Hechaluz. This further financial assistance, of 60,000

Receiving organization or

No.

Date Paid

12

Dec. 2/44

fre on December 2, 1944 and of 50 000 fre. on February
1, 1945, constituted a continuation of Board support for
Hechaluz work in those areas where this organization was

individual

Pharmacie Nouvelle (Kupfer)

still able to render effective service. The first grant

Geneva for 250 special
double pharmaceutionl & re-

of 60,000 WAS split up as follows: 30,000 fro. to Budapest 10,000 frs. to Prague, 10,000 fre. to Bratislava,
and 10.000 fre. to Berlin. It was primarily used by
Nathan Schwalb's correapondents in these cities to maintain and protect young Jews in hiding. The contribution

storative parcels for the

women's concentration camp
at Ravenabrack Germany
13

14

16,634.30

for Berlin also served to finance the flight of six
young people 3 girls, 2 boys and 1 child to Switzerland
where they arrived on March 18th Permission for their
entry had already been obtained from the Swiss police.

Dec. 2/44 Heohaluz (Nathan Schwalb

Jan. 2/45

receipt signed by his assistant R. Fleischhaker) for
Germany and Balkan countries 60,000.00
American Jewish Joint Distri-

The WRB grant of 50,000 fre. made on February 1.
1945 helped Nathan Schwalt pay up *back resoue bills
As WILD the case with most of the payments made into
enemy territory they were done by clearing with private
parties. often however, several weeks if not months
elanged before word came back that the local funds had
been made available and the "donor" at the Swiss end of

bution Committee (Saly Mayer)

Paid to Commission Mixte of
the ICRC. Emergency food &

clothing purchases in Brati-

alava & Vienna for Hungarian
Jews in Austria
15

Jan. 17/45 R. Kanfredi of the Milan
Liberation Consitt for
relief notion by the "Women's
Defense Groups.

16

Feb. 1/45

Rumanian border area

17

May 14/45

200,000.00

the line requested reimbursement This was situation

of this sort where Rumanian Lei had been advanced for
resque operations in the Arad-Timisonre area where the
Hechalus had relay points. At then Jewish refugees from
Hungary being passed over into Humania were fed, sheltered,
hidden. given false papers and money and sent further
thanks to a certain degree of cooperation which had been

25,000.00

Hechalus (Nathan Schwalb) to

cover relief & rescue operntions carried on during the
fall of 1944 in the Hungro-

Pastor Guide Rivoir (Valdensian Church in northern Italy)
of Lugano to finance the upkeep
of fusitives being hidden by
this congregation
Total
TOTAL THIS PAGE

Receipts No's - Page (11), cover two grants

made to the Hechalus, the young workers' Zionist organisation which has consistently done such courageous and
effective rescue work among persecuted Jewry in Poland

SECTION IV.

Receipt

(12)

Swiss francs

"worked out* with the local authorities.

Receipt No. 14 - Page (11) - January 2, 1945.
This contribution of 200,000 france WAS made to Saly

50,000.00

Mayer of the "Joint" partly to lighten the very heavy
financial burden which the J.D.C. was and has always
carried, and partly to enable him to take advantage of
a special opportunity to buy food and clothing in Vienna
and Bratislava for distribution to Hungarian Jewish
deportees in Austria. Our grant was actually paid to

6,000.00

357,634.30 357,634.30
392,279.35

the *Commission Mixte* of the International Red Cross
as the enclosed receipt shows. This more acceptable
mode of payment however permitted Baly Mayer to use
other funds in Vienna and Bratislava. During January
and February of this year the Jews in the Vienna area

173

TRADE MARK

MICROFILM

MICROSTAT

ROLL NO

(14)

174

(13)

(there were some 7,000 of them, mainly Hungarians
deported from Hungary during June and July of 1944
plus a few hundred Poles) were under the control of
certain Ebner, the head of the Gestapo in Vienna.
Ebner was of Austrian origin and displayed a definite
willingness to cooperate in this question of assistance
for Jewish deportees. The situation there was further
improved by the presence of an active and capable ICRC
delegate, Dr. Tudious, who had established "cordial
relations with Ehner and whom the latter was quite

ready to allow to supervise the distribution of such
relief supplies. Ehner himself dug up the goods
which consisted of such priceless items ne shoes
suits and canned meat. We did not inquire too closely
into their origin. Their price was not exorbitant,
and even Dr. Lowenhers, the director of the relief
service of the Vienna Jewish Community who was still
on the job, ingly enough was allowed to have his

advisory any in the distribut ion. All in all, the
chance was too good to be missed even If somewhat

unorthodox.

Receipt No. 15 - Page (11) - January 17.

This was a further contribution to the excellent

relief

work being done in northern Italy by the *Women's
Defense Groups, to which the WRB had also made grants
during our first accounting period. This money was
spent in much the same manner: to pay for the shelter
and hiding of Jewish women and children and to give

sorely needed relief to the families of Italians im

prisoned, exe ted or deported by the Nazie and the
Noo-Fascists. It was also used to make up parcels
locally which were sent into the prisons in Milan
Turin, Genoa, Alessandria, Voghers and Breacia. It
was not used this time to finance the liberation of
patriots from the prisons since throughout the spring
of this year more arms were made available to the
partisans by the Allies and money could be more
economically used to buy food for families and pay
then small monthly allowances than in being spent to
purchase carbines cartidges or gasoline at very high
prices. I know, of course, that a certain percentage
of such funds were always used to smooth* the way for
parcels into prisone by bribing petty officials and
guards. The devaluation of the Italian Lire however
increased by such leaps and bounds that the price for

a person out of prison became almost unapproachable,
buying often going into several million Lire. We could, therefore

not finance work of that sort.

Receipt No. 17 Page (11) - May 14 1945.
describe toward the bottom of page (2) of my covering letter this last Board contribution went to Pastor
Guido Rivoir, a minister of the "Valdensian" Protestant
Church, located in Lugano. Pastor Rivoir's church has
a number of hardy little communities for the most part
in the high mountain valleys up against the French and
Swiss borders. They are imbued with that same spirit
which characterizes the Huguenot communities in France
today and have always given asylum to fugitives. In inItaly during Fascian and under the German occupation
did not relinquish this tradition, but rather
they
tensified their work in behalf of the persecuted.
Their particular stronghold is in the region between
Turin and the Franco-Italian border where they have
given shelter to a great many refugees trying to get
over into France. Our WRB grant purchased a million hunLire (at that time selling at 55 Swiss centimes a
dred! which were intended to finance the hiding of
refugees. At things turned out the war came happily to
gudden end in northern Italy than we had expected
a 80 more that very little of it could be used for the original
I received a note from Pastor Rivoir a few
purpose.
ago, however in which he explained what he had done
days
with the money. It reads as follows:
"I was in Italy for a few days (he writen this
under date of May 24th. and took the opportunity of
looking into the use which had been made of the funds
which the War Refugee Board generously placed at our
disposal to aid victims of Nazi-Fascism. This money
served in part to liberate persons from the prisons not
Milan. The greater part of it, however could
be used since thank God, the regine in northern
Italy collapsed. I therefore left this money to
consittee formed by Colonel Oustave Ribet, connander
of the partisan troups for the Lombard region and
including Mr. Georges Peyronel charged with the
epuration of the Milan police Questura, and Pastor
Tron (of the Valdensian Church) of the city of Milan
to be distributed to persons who had aided fugitives,
such persons generally being poor peasants who had lost,
all because of this aid given, having had their

As

of

homes burned by the Germans.

175

(

176

(15)

Swiss france
(16)

392,279.35

Amount carried over from page (11)

T.R.B. DISCRETIONARY FUNDS: AMOUNTS RECEIVED. NOVEMBER 1st.

SECTION V.

1944 THROUGH APRIL 30th. 1945.

Special advances to Herbert Katski,
Representative of the far Refugee Board,
for his current expenses.

19

April 5, 1945
.

18

Date Paid

8. 1945

400.00

Cash

1,000.00

.

.

20

Nov. 24, 1944

1,000.00

.

No.

Oct. 31. 1944
.

Receipt

SOURCE

DATE

30, 1945

Dec. 1st. 1944
Total

2,400.00

GRAND TOTAL EXPENDITURES NOV. 1st.

1944 THROUGH APRIL 30th. 1945

2,400.00

SWISS FRANCS

2,446.15

Cash in hand

375,861.08

Balance in bank
Received from WRB Washington as

per Dept. a wire No. 3923 WRB's
279, November 18, 1944. The
equivalent of 100,000 Dollars

428,816.47

Received from Gerhart Riegner
of World Jewish Congress in
reimbursement of + Swing frano

equivalent of 10,000 Dollar

WRB contribution to Czech Re-

sistance Movement made from WRS

394,679.35

funds on July 20, 1944 to Dr.
J. Kopecky: See page (5) of
previous accounting report).
Original plan had been to make a
contribution of 20,000 Dollars

in this affair, WRB giving ,

and the WJO the other: Czecha,
however, could only handle

EXPENDITURES MAY 1 THROUGH MAY 31, 1945
77.00

Contacts and entertainment

Taxis, telephone bill at Geneva
and photo copies

33.35

Cash advance to Herbert Kataki of
May 18, Receipt No. 21

1,000.00

Reimbursement to RDMcC of personal

6,000.00

advance to WRB cash of April 12

Dec. 2nd. 1944

(See my letter of May 2. 1945 to

could not be used. (See pages
5 & 12-13 of previous accounting
report).

141,474.28
TOTAL THIS PAGE

Total

148,584.63

GRAND TOTAL EXPENDITURES NOVEMBER 1st.

1944 THROUGH MAY 31st. 1945

21,325.00

Dutch Jews from Bergen-Belsen

Paid to American Red Cross, Geneva for
CHRISTINA foodstuffs: 54,756 kgs.
Board) Receipt No. 22

equivalent of 10,000 Dollars,
of which Riegner insisted on
paying approximately half.
Received from M. H. Gans of
"Dutch Jewish Coordinating
Connittee* of Geneva, sinde
WRB contribution of 50,000 frs.
made to this group on October
11. 1944 for reacue scheme of

148,584.63
543,263.98

50,000.00
878,448.70

178

(17)

Swiss france
878,448.70

Carried over from previous page

(18)

(

SOURCE

DATE

Jan. 5th. 1945

Received from WRB. Washington as

per Dept.' 4386 (from Allen to
Daymont, Disbursing officer at
Legation Bern) Dec. 29/44. and
Dept.' 4400, WRB's 348, Dec.
30/44. The equivalent of 175,000
Dollars

April 12, 1945

Jim Mann has just turned over to me an amount of
Swiss france 39,258.45 transferred from a small WRB
account which he had Teft in London. I have deposited
this sum to my U.S. Government Depositary Account with
the "Banque Populaire Suisse" in Bern.
As far as outstanding commitments are concerned

750,428.82

there are really only two. When the

Jewish refugees from Bergen-Belse and question Theresienstadt of the

Cash advance from personal funds
in order to make quick payment
GRAND TOTAL FUNDS RECEIVED

NOV. 1/44 THROUGH APRIL 30/45.

6,000.00

April 30th. 1945 (See page 15)

1,634,877.52

{

Bern, RDMoC U.S. Government Depositary

Account)

Total

25.000 france. I told him that I would be glad to

contribute from Board funds what more was necessary.
According to the latest estimate which Mr. Mayer
has submitted to ne this will probably amount to
about 20,000 france. I also agreed to defray cash
expenditures incurred by the Swiss authorities for the
train, sanitary & welfare personnel, food supplies,

and like. In all this

394,679.35
766.80

b) Cash in hand
o) Balance in bank (Banque Populaire Suisse,

including suitcases, toilet articles, clothing, shoes,

etc. Saly Mayer agreed generously to cover the cost
of such "departure expenditures to the extent of

BALANCE AS OF APRIL 30th. 1945

a) Total disbursed: Nov. lst. 1944 through

actually leaving Switzerland came up there was an inmediate request from then for a great many small items

1,239,431.37

side,
than 5,000 france. To be ought not on
the tosafe
amount
to therefore. more

30,000 france ought to amply cover any WRB expenses

contingent to the departure of these refugees.
You authorized me 0.0 well to pay Herbert Katzki's
return fare to the United States if and when this
became necessary. I should reserve about 5,000 france
to cover this.

1,634,877.52

Very sincerely yours,
/a/ Roswell D. McClelland
Roswell D. McClelland
Special Representative of the

BALANCE AS OF MAY 31st. 1945

a) Total disbursed: Nov. 1st. 1944 through
May 31st. 1945 (See page 15)

b) Cash in hand

War Refugee Board &

3,656.45
1,087,957.09

c) Balance in bank
Total

Special Assistant to the Minister.

543,263.98

1,634,877.52

Bern, June 2, 1945.

P.S. Please find attached the 22 receipts
referred to in the course of the previous
pages.

RDMoC.
(

PRECISION

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MICROSTAT

RSO.U.S.PAI.OR

DEPARTMENT

MICROFILM

INCOMING
TELEGRAM

OF

STATE

ROLL NO

180
DIVISION OF
CENTRAL SERVICES
TELEGRAPH SECTION

CORRECTION
CH-000

PLAIN

May 30, 1945

In cable from Chungking unnumbered May 25

text of central nows report insort sorial number 842.
DIVISION OF CENTRAL SERVICES
CSB

0

0

SPRON

-

TRADE MARK

-2181

May 31, 1945
10:25 a.m.

MR. HELL: Wait until after the banks close.
H.M.JR: Some of the people coast to coast. I mean
just handing out that doesn't get you anywhere, but if
you get one or two people - coast to coast hook-up
commentators --

PRE-PRESS

Present:

Mr. O'Connell

Mr. Fussell
Mr. Gaston

Kr. Shaeffer
Mr. Pehie

Mr. D.W. Bell
Mr. Feitus
Mrs. Klotz

H.M.JR: This is what I've done. I just spoke to
Fred Smith,and I told him -- you listen to this --

to see whether the Blue Network tomorrow night wouldn't
put Taber and Cannon on this black market tax business,
and McKellar and Hoover, the Republicans. I've talked to
Fred about it, see, and he likes the idea.
MR. GASTON: Bith gloves?

WR. HELL: Taber and Cannon ought to have gloves.

H.M.JR: Anyway, and Fussell, Shaeffer, this stuff
I'm doing today here - make an extra effort to contact
some of the redio commentators on national hook-ups, and
see if you can't get this to proceed, Fussell. I mean
some of the people that have got to go on the air today
by national hook-up I don't know who they are, but
call some of them up on the phone. See if you can get
then on the phone.

MR. SHAEFFER: I sent it around to all of them.
H.M.JR: That isn't enough. They get a thousand
handouts. It's a question of getting somebody on the
wire, Fusseil.
MR. FUSSELL: Yes.

H.M.JR: That goes coast to coast. One man goes

on at 1:30.

182

183

Office of
the Secretary

TREASURY DEPARTMENT

184
United States Treasury Department
May 21, 1945

Washington

Press Service
No. 46-37

FOR IMMEDIATE RELEASE,

Thursday, May 31, 1945.

Instructions to Financial Institutional in the United States

another important step in the Treasury Secretary Department's

As detect and eliminate tax evasion,
drive to announced today that instructions have been

Morgenthau the Treasury Department requiring all financial of unusual

issued by in the United States to file reports are

(1) Commencing with transactions occurring in the month of

institutions transactions. Included within this category

June, 1945, every financial institution in the United States

all currency of the financial Institutions, conduct of the

or withdrawal, or other payment or transfer, effected by, through,
or to such financial institution which involves United States

business, Reports are required of all banks, brokers,
ing and exchanges and check cashing institutions. Act of

currency in amounts or denominations which, in the judgment of
the financial institution exceed those commensurate with the
legitimate and customary conduct of the business, industry, or
a profession of the person or organization concerned. The fact that

currency instructions were issued under section 5(b) of the the Secretary

in denominations of $50 or higher, or involves $10,000 or currency more of

currency transaction "in amounts or denominations exceed those which,

in the judgment with the legitimate and customary or organizacommensurate industry, or profession of the person buildtion concerned". loan associations, securities and commodities The

1917 and other authority vested in various

October Treasury, 6, and are being transmitted to Banks. the

financial of the institutions by the Federal Reserve

0

Pursuant to Section 5(b) of the Act of October 6, 1917 (40 Stat.

415), as amended, and other authority vested in no by law, the follow.
ing instructions are prescribed:

shall file monthly reports on Form TCR-1 concerning each deposit

transaction involves 000 or more of United States

United States currency in any denominations shall be deened to

necessitate the filing of . report on Form TCR-1, unless in the
judgment of the financial institution the transaction is commen-

Morgenthau pointed out that the use of tax currency. evasion
Secretary attempt to conceal income, is . factor in many

surate with the legitimate and customary conduct of the business,
industry, or profession of the person or organization concerned.

"The Treasury will pursue unrelentingly its campaign to

(2) Reports on Form TCR-1 shall be filed in duplicate, on
or before the 15th day of the month following that in which the

cases in an now under investigation. The Secretary said:
stemp out tax evasion.

reported transactions occur, with the Federal Reserve Bank of the

district in which the reporting financial institution is located.

"I deplore deeply the fact that some people in the middle
of a war seek to defraud their government.
such frauds are not prevented, the net result will be
"If heavier burden upon the vast majority of our their
to throw a taxpayers, who make honest returns and pay needed

50,000, taxes in 000 full, with the knowledge that the money is to
sustain the war effort.
"No honest person needs to fear the results use of our

but the Treasury is determined to all

available investigation, personnel and all legitimate methods to deal with

the cheaters.

All information called for in such form shall be furnished.

(3) No financial institution shall effect any transaction
with respect to which & report is required unless the person or
organisation with whom such transaction is to be effected has
been satisfactorily identified.
(4) As used herein "payment or transfer shall include
exchange of currency and "financial institutions" shall mean
banks, trust companies, savings banks, private bankers, investment
bankers, building and loan associations, securities and commodities
brokers, and currency exchanges and other persons or organisations
engaged primarily in cashing checks and exchanging currency.

000

Secretary of the Treasury

May 31, 1945

185

10:19 A. X

186
HMJr:

Unless we have that, I don't want to send it
up.

Mr. Fred
Smith:

Fine. How are you?

HWJr:

Good.

No, no. You've got that. You've had that all

S:

the time.

HWJr
3:

What do you know?

HMJr:

Fred

5:

Now let me tell you what I said.

HNJr:

Yeah.

5:

What I anid was that we were going to have in

Yeah.

B:

HMJr:

little difficulty selling it the way I want to

I's beginning to send you up.

sell 10.

I can't hear you, Boss.

8:

HMJr:

HMJr:

I em beginning - I've got to SAVE my radio
voice.

S:

What did you any?

EMJra

Can you hear not

ought to be done.

Yesh. But I's anying that's what I min't going

8:

to do.

Can you hear = now
Temb, I can hear you nov.

S:

HMJr:

HMJr:

I am sending you up some of the stuff from my

5:

HMJ:
S:

HKJr:

But, I want n gentleman's understanding with

you, in view of what you said that you first
had to make it - I don't know how you out it
nort of cell me down before you built as UD.

5:

HMJr:

I didn't any that.
Yell, vords to the effect.
I at cn't either. But go on and I'll to beak and
tell you what I 01c say.
Well anyway, I want . gentleman's accrement with
you in I'm going to let you have this stuff, 11

I don't like it it doem' : see daylight.

Oh, sure.

That's right.

5:

But if I don't like the general tone of it, then
it's out.

-

HMJr:

All right. Just as long no ve understand each

other - 17 1: the VAY that I see it. I mean,
I'm not going to be pickyunish, I don't like this
sentence or that.

diary, see?

Oh, good.

S:

Yeah, but I vis worried that you were going to do
one of these, you know, first - well, you know
what I seen.

Just barely.

HMJr:

Yeah.

See? That's all. I'm going to do it the way it

S:

HMJr:

S:

All right.

5:

HMJr:
5:

HKJr:

O. K.

In that fair enough?

Sure. I expected you to do that anyway.
A11 right, but then I's going to give you some

good stuff. I's going to give you, for instance,
a letter from no to the President that has never
seen daylight.

5:

Oh, wonderful!

PRECISION

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MICROSTAT

MICROFM

ROLL NO

188

-3HMJr:
S:

HMJr:

S:

HMJr:

Yeah. That's what you are going up for, huh?

S:

Sent

HMJr:

Yesh.

So I'm going to help you and then in return

Yeah,

S:

that's all I'm saking.
Well, you'll get it. We're going to do 1:
right. and get it done.

HNJr:

Now this stuff on the Blue the other night at

HMJr:

HMJr:

S:

Good.

S:

T don't know whether you know that your organization at o'clock night before last had-some
program the t you had -

HMJr:

Called "Headlines",

"Headline Edition."

a swell idea.

HMJr:

HMJr:

5:

EMJr:

S:

night you could out FODE of the Congressment and

All right.

Yesh.

HM

That's is new program valve out out and it's good.

Yesh. Now I've got an 10-m, I'm going us on the
Hill tomorrow - In the morning - before the House
Appropriations...

Incidentally

The people who run that program, I'll put them
on it.

0:

10Wr:

It will be .

S:

Yeah.

Yeah.

And in the afternoon before the Senite. I the
morning it's Cannon, and in the afternoon it's
McKellar.

You get the two of them on and maybe they could
vine the blood off.
3:

Would you EQ on too for . minute?

Now I readered whether your organization here - I
don't know who the Republican is. the Jenior Republican in both the House and the Senate, ***

HMJr:

I don't think I'll be here.

Yech.

HMJ:

Yesh.

number,
go and
up tohtband

3:

Whether you couldn't get Cannon and his Republican
number After and then I maybe there XcKallar get them Regublican on the

vagon, and say mare we've got to go after these
blackmarket tax evaders, nee?

Oh. see.
Anyway it would be such better to let than have
the buildup.

S:

It could be recorded, you know.

HMJrs

Well, I'll help.

:

3:

Well, I'll be on that tomorrow and nayba tomorrow
Benetore on the program.

S:

HMJr:

Mant do you think?

I'll out somebody right on that. I think it is

S:

In that right? Well, I'll cheek uo on it.

8:

3:

See?

Yeah,

HMJr:

HMJr:

But in ve could kind of build up the fellows in
the House and the Senate, you know, a little bit,
they like the publicity.
Sure.

3:

7 o'clock on that blackmarket tax une good.

S:

Teah, but then I'm going up and I understand that
I'm going to get a very sympathetic hearing.

May 31, 1945
10:54 A. M.
190

189
HMJr:
5:

on, good, that's swell.

HMJr:

But you've been reading about

S:

Yeah.

HMW

Well, they could wipe the blood off on your
program.

Attorney Gen.
Biddle:

Henry, this is Francis.

HMJr:

How are you?

3:

You online ne?

HMJr:

Yes. Francis, I want n little help from you.

5:

That's good.

B:

HMJr:

Then McKellar and whoever the Republican is.

HMJr:

5:

Yeah.

HMJr:

See?

Yeah.

5:

HMJr:

I Fred.

Yes.

HMJr:

Ahmn.

Bt

HMJr:

Coune this stuff is ging like wildfire taughting

And you could follow up on the madio
night.

S:

Good.

HMJr:

Right?

in New York maybe in a week.

Oh, yes.

3:

HWJ

Do you suppose
9:

that would you like for an to do?

HOWE:

Well, I'd like to have -- If Sam Clark is the

Thank you.

0:

Thanks . 10%

HKJr:

Bye.
B:

St

KMJr:
3:

And you have your agreement.
Right.
0. K.

HWr
3:

HOTE:

S:

The McGohey--. And ay people tell = Sam Clark
1. out but be will be back tomorrow.

That's right.

All right.

HMJr:

And rather than have it take a year, I think If
our people and your people plus the New York
District Attorney could all it down, I think
ve might be able to clean un this one big case

3:

St

We are trying to move forward an a team on one
of these blackmarket tax-evasion cases in New
York.

Yesh. It's . good story.

S:

Hello,

fellow and also McGohey, whether they could be
at my office at quarter of nine tomorrow?

Well, I don't know about McGohey. I'd have to
cell and nex him, and 5rm, I think, doesn't get
back until about three o'clock.
Tomorrow

Yes, I think PO, I'd have to find out. I have

Thank you.

an appointment with San on another income tax

So long.

suppose 00.

matter. In this an income tax blackmarket, I

HMr:

Yeah.

192
191

HMJr:

Well, I'll find out. I just don't know, Henry.

B:

HMJr:

Well, I wonder if he couldn't come back. They
tell or that he in up at New Seven.

Well, I don't think -- I just don't know - I'll

B:

find out,and let you know.

Would you let no know- but, McGdhey, they tell
no, in the follow we need.
Well. be in the United States Attorner in New

B:

York.

HMJr:

That's right.
And.

B:

HWJr:

And Sea Clark.

I understand. You want to 800 them at quarter
to nine tomorrow if you can.

3:

HKJr:

If I can, yes.

3:

Yes. Very good. What was the name of the case?

HMJr:

It's the Longchamps Restaurant, Lustig.

Oh, yes. I think I know about that. What VILLE

B:

the purpose of the conference tomorrov?

EXJr:

The survose in that instead of writing until
ve are through investigating and then...
I vos wondering why you ware calling the conference personally.

B:

HMJr:

3:

HW

3:

Well, because I've taken . Lendership in this
thing, and I want to drive this thing through.
Normally, it would take about a year.
Well, it is perfectly proper : YOU just wondering
exactly what it was.
Well, I mean normally Joe O'Connell would do 11,
but I'm 80 interested that I thought if : could
explain and we could organize a team and not the
thing and maybe do it in a week instead of doing
normally what would take 6 year.

Yes. All right, Henry.

B:

Wint?

Right. Thank you.

HMJr:

Yes, but normally it would be a year.

B:

Very good, thank you.

HMJ:

Yee, bye.

194

193

May 31, 1945
11:05 s.m.

MR. O'CONNELL: Are you looking at me?
TAX EVASION
STATEMENT TO APPROPRIATIONS COMMITTEE
OF HOUSE AND SENATE

Present: Mr. D. W. Hell
Mr. C. S. Bell
Mr. Fussell

Mr. O'Connell
Mr. Gaston

Mr. Feltus
Mr. Pehle
Mr. Eden

H.M.JR: Well, you ought to have a good statement.
MR. O*CONNELL: We have a very good one.

H.M.JR: Who is this gentleman?
MR. O*CONNELL: Mr. Eden.

H.M.JR What do you do normally?

MR. EDEN: I'm a Special Agent for the Bureau of
Internal Revenue.

H.M.JR: Out of Washington working in Virginia, yes.
MR. O'CONNELL: Doing work Mr. Palmer was doing.

H.M.JR: Does he write this weekly report?
MR. O'CONNELL: I believe he is responsible for it.
H.M.JR: Do you know what's in it?
MR. EDEN: Yes, sir.
H.M.JH: I have been trying to find somebody who
knows what's in it.

H.M.JR: I'm looking all around the room.
MR. D.W. BELL: Are you looking at me?

H.M.JR: Where's Charlie Bell? All right.
(Discussion off the record.)
H.M.JR: What have you got?

MR. 0 CONNELL: I have a statement. I only have

one copy. If you would like, I will read it. It's a
statement Charlie wrote with another front and back I
put on and it does not take into account anything Mr.
Fussell might suggest, but if you want me to, and I

think it's the best way to proceed, I will read the
statement.

H.M.JR: The Chairman will have the witness read
It through once without comments.
MR. 0' CONNELL: That's fine.

(Quoting from "Draft of statement for Secretary
before House Appropriation Committee.
"Your Chairman, Mr. Cannon, was kind enough to afford

me this opportunity to discuss informally with your
Committee a situation which has been causing--

H.M.JR Excuse me. I just talked to the Attorney
General. Sam Clark is out and won't be back until three
tomorrow, so I said,"I would like to meet him in my office
at a quarter of nine tomorrow to organize a team. He

said, "well, want the United States District Attorney

here. Could I ask a question? Why are you doing this?"
I said, "Sure, because I happen to be interested. *Oh,
he said, 'I just wanted to know.' If he would have pushed me

a little further, I would have said, Biddle, why don't

you go out of office and be able to say Once I did some-

thing to help the Treasury?" But I didn't say that.

196

195

0

MR. D.W. BELL: He isn't out yet.

and a great increase in the number of taxpayers, as well
as a great increase in the rates of tax. Where before
the war we were collecting not more than four billion

MR. O*CONNELL: Not until the first of July.

payers, we are now collecting upwards of forty-five

MR. PEHLE: That's a silly situation. It's silly to

taxpayers. As the tax burden increases, there is more
and more pressure on individuals and corporations to
evade the tax, and it is to the problem of enforcement
of our tax laws that I wish to address myself.

leave a fellow in after you have asked him to resign.
H.M.JR: He's got four cases.

MR. O'CONNELL: Is there going to be a meeting
at a quarter of nine?

H.M.JR: I have asked them to get the United States

District Attorney. He said Clark couldn't be here until
three tomorrow afternoon. I said, Get him here tomorrow
morning at a quarter of nine.
MR. D.W. BELL: He's still working for Biddle.

H.M.JR: I didn't want to call him. I wanted to see

him. I'll get some help. I'll gethim here. I didn't
know you could do it. I didn't know 1 could do it.
We'll see.

MR. 0 CONNELL: As far as Biddle is concerned, I

wrote him off in terms of what we could do, I thought
we could through San Clark.

H.M.JR: I just couldn't do it.
Excuse me.

MR. O'CONNELL: (Reading) "Your Chairman, Mr. Cannon,

kind enough to afford me this opportunity to discuss
informally with your Committee & situation which has been
causing us in the Treasury increasing concern, and which
I am sure, will be of interest to you gentlemen, not only

was

in your capacity as members of the House Committee on

Appropriations, but as individual citizens and taxpayers.
"As you gentlemen all know, wartime needs for revenue
have resulted in & tremendous boradening of the tax base

dollars in taxes a year from four or five million tax-

Billion dollars a year from approximately fifty million

"We in the Treasury have been conscious of the
seriousness of our problem for some time, but I would

be less than frank If I did not admit that recent disclosures have persuaded me that our sights have been
too low.

"I fully recognize the patriotic and willing

response of our nation of taxpayers to the increased
demanda placed upon them for war finance. Reports
have increased sufficiently to show there has been
no general break-down of our tax laws. But in all
earnestness I am alarmed at the evidence of evasion
and concealment, especially by those who seek to grow
rich through war-swollen profits and illicit black
market operations in foodstuffs and short commodities.
To combat that situation, about two months ago I initiated
a special enforcement drive.
"Starting with a nucleus of a couple of hundred
special agents of our Intelligence Unit, men trained
to detect criminal tax evasion, we have presently
assigned to this special drive some sixteen hundred
Bureau of Internal Revenue employees, almost all of
then drafted from other work. And it is of the
results of the work of that group, and the implications
of what they have disclosed, that I wish to tell you.
"I have personally reviewed the weekly reports
made by the men in charge of the special squada working
in various sections of the country, and the situation
disclosed has left me aghast. The group has under active

197

-5H.M.JR: Don't use that.
investigation some thirty-six
hundred
casestime
indicating
and
at the same
over twice

have been up are

substantial that number tax of leads evasion, turned and awaiting

only available manpower to investigate them. In other
words, with over sixteen hundred people devoting their

full time to this work, our back-log of profitable leads

turned up in sixty days is more than double the amount
our people can handle.

"I would like to give you something of an insight
into what I have been learning in recent months. We

are finding 'pay dirt' in transactions involving food,
liquor, automobiles, furs, jewelry, gambling, and

cabarets, to mention a few. Many cases combine black
market operations with a criminal concealment of income.

MR. CONNELL: We will probably find something in
this week's report. You have used most of the good
ones in one way or another.
MR. EDEN: General Research would be a good one.
MR. O'CONNELL: We have some in there--we've got

that in there.

H.M.JR: What is it?
MR. EDEN: General Desserts is a produce that was
used by the packing companies.
MR. O'CONNELL: That's in here.

Many involve a criminal failure to report honestly
income earned in & legitimate fashion. Some of the
most striking cases--and I will give you the details-are what we refer to as 'currency' cases. By that we

H.M.JR: Look, please, let this gentleman go ahead
and tell me about General Desserts.

dealing with cash, usually big bills, in order better

MR. EDEN: General Desserts was a corporation in
New York. That was developed through the check cashing

mean cases in which the malefactor made a practice of

to conceal the nature and scope of his operations.

"If I were to attempt to relate to you all of the

details of the cases now pending, I would be here until
this Congress adjourns. But I know that you are interested
in specific cases and before coming over here today I
selected a few that are typical.

agencies, and it is my recollection over three quarters
of a million dollars have already been located as unreported income and that was the one sent over yesterday
for the press conference.
MR. O'CONNELL: It's here, later on.

H.M.JR: Well, I didn't use it--I haven't used it.

"You have no doubt already observed many of the

stories in the public press, one local case is that of

the wholesale meat dealer who, in addition to chiseling
on the national price policy through violations of OPA
regulations, was attempting to defraud his Government
of an estimate of four hundred thousand dollars in
income taxes for the year 1944 alone. We have over
seven hundred and fifty cases of this type ready for
investigation throughout the country."

H.M.JR: Iwouldn't use that. Use something fresh.
MR. O*CONNELL: All right.

MR. EDEN: The report is not in, sir, but it's being
typed.

H.M.JR In what way did they by-pass that law?
MR. EDEN: They took the checks and cashed them. They

put the money in a safe deposit box and within the last ten
days they have deposited in a banking account six thousand
odd dollars to pay taxes and penalties.

199

200

-8H.M.JR: Have they come and made a disclosure?

MR. EDEN: Only after an investigation was under way.

H.M.JR: We are not going to accept it. Why is that
not a good case instead of Washington?

MR. O'CONNELL: It is. I have gotten about six
or eight and the one he is referring to is in here.
H.M.JR: I wouldn't lead off with a case I have
already broken.

MR. O*CONNELL: You say you would lead off?

H.M.JR: I would not use a case I have already broken.
MR. GASTON: He said he wouldn't lead off with such
cases.

MR. O*CONNELL: General Deserts is a better case. (Reading)
"We have under investigation many cases involving evasion

of Federal Excise-Tax on furs. Typical is that of a New
York dealer who at no time prior to December 1944, filed
returns or paid tax on his fur transactions. The additional
taxes and penalties in this case aggregate fifty-one
thousand dollars."

This next paragraph I don't like.

us have

(Reading) "Representatives of such large and reputable
establishments as Ausseks, Gimbel Brothers and I. J. Fox

have recently complained to that their businesses
been materially damaged by illicit, non-taxed sales by
disreputable fur dealers. These legitimate dealers have
a real personal interest in having the tax evading merchant
apprehended.

in?

Mr. CONNELL: The names is what I have in mind.

We could refer to it without singling out two or three.
MR. PEHLE: Leave the names in and don't say they
complained but their business has been interfered with.

MR. O*CONNELL: I think it would be a little better
to generalize. I understood the general reports were
that large companies had lost twenty-five percent or

more of business by having people go to off the avenue
establishments. My point was we could get the same
thought without referring to three firms in New York.
MR. GASTON: I don't think anybody is going to
weep about their losing money.
MR. O'CONNELL: No, I know. I want--

(heading) "A scrap and junk dealer in Ohio was
found to have evaded his income taxes for the years 1940
and 1943. His case is now with the Justice Department
with a recommendation for criminal proceedings. In
the meantime, he has deposited one hundred and twenty-

eight thousand dollars with the Collector of Internal

Revenue at Columbus to cover additional taxes and

penalties.

"A retail merchant in Pennsylvania with substantial
income from mortgages, real estate, etc., was indicted
on March 2 for attempting to evade income taxes from
the years 1938 to 1940. Taxes, penalties and interest
in this case
will amount to about one hundred and eleven
thousand
dollars.
"In Boston a well established jewelry concern--"

H.M. This is no good. In the first place, they

MR. D.W. BELL: Cut out the names.

would question me. It's no good. I am sorry to interrupt
you but that isn't what I want. They will say, "Mr.
Morgenthau, don't you always have these?" I think the

MR. C.S. BELL: Cut out the names and leave the rest

thing handle
we have
got to drive home is there are so many me
can't
then.

PRECISION TRADE MARK

MICROSTAT

MICROFILM

ROLL NO

202

201

o

10

H.M.JR: Haisin companies.
MR. O'CONNELL: That was the point I thought me

started off with by pointing out there were sixteen
hundred people at work and In sixty days we have broken
twice the number of cases we can handle.

MR. D.W. BELL: Emphasize it a little more but
exphasize that you are not doing your other job. You
have taken these people off their other work so that
could be done. That's how you came to unearth these
cases. You took Revenue Agents and Special Agents

off work they did regularly.

MR. O'CONNELL: Almost all of the sixteen hundred
people are people taken off their regular work. We

stated that but didn't emphasize it.

H.M.JR: I wouldn't emphasize it too much.
MR. GASTON: we need to point out that this thing does
a great deal more than pays its own way. We are not asking
then to throw money down a rat hole.
H.M.JR: That isn't emphasized enough.

MR. CONNELL: Several of the points made are in
the statement. There are here admittedly about eight
or nine cases some of which are better than others and
I think we could probably make a better presentation
if we concentrated on four or five.

MR. O'CONNELL: Yes.

(Reading) "A shocking case is now under investigation
in California which indicates the concealment of between
ten and twelve million dollars of income through the use
of large currency taken as profit in transactions which

diverted grapes to wineries rather than selling the fruit

to the Armed Forces as required by the War Food Administration."

That's one in this week's report.
H.M.JR: I would like--there were three or four I
was going to use today and didn't use them. I like those.
He gave no half a dosen. I picked out three or four and
that was one of them.

MR. PERLE: Is that all you're going to give on

that case?

MR. O*CONNELL: That's all there is here. I didn't
write this.
MR. EDEN: The investigation is just getting under

way, sir.

MR. PEHLE: They have more in the press statement for
today. That's a good one.
MR. O*CONNELL: As a matter of fact, if we reduce
the number of cases, you can expand what you say with

H.M.JR: Yes.

respect to each, but this was written with a view--

MR. 0 CONNELL: There are eight or nine and If you--

MR. C.S. BELL: I didn't give the whole detail
of the raisin case. There mere other angles that were

H.M.JR: Skip then and go on.
MR. CONNELL: Well, we have the Boston jewelry
house, two hundred and fifty thousand dollars: the
Atlanta automobile dealer, one hundred thousand dollars:
the Chicago cabaret owner formerly associated with the
A1 Capone gang, half a million dollars in additional taxes;
and this California case,I think,might be worth reading.

eliminated

PRECISION

TRADE MARK

M
203

204

11

D

(

12

H.M.JR: I would rather have two or three good
cases in enough detail that you can understand it.
My complaint Is there is too little and too many.
MR. GASTON: I think you ought to cite some
types of cases that represent the modern current
style of evasion.

H.M.JR: That's right.
MR. GASTON: But I think the approach there-Joe's
lead is very good.

H.M.JR: The part I don't like is the way they did
the cases, just little snips of them.
MR. O'CONNELL: We can very readily change that.

We will expand on the California case. We have a paragraph on our old friend, Lustig. Do you want that in
there?

H.M.JR: No, you have enough.
that.

MR. D.W. BELL: They will probably ask you about
They probably san It in the papers.

MR. C.S. BELL: Excuse me. Joe, could we play up
the bandage case, the doctor? That has a lot of appeal

in it.

MR. O'CONNELL: That may not be too good.

H.M.JR: Has he been found guilty?
MR. O'CONNELL: Only by OPA. He has been convicted.
(Reading) "We have encountered alarming diversions of war

materials to civilian sales with resultant illicit profits.
Included in this group is a doctor in New York who manu- millions

factured surgical bandages and was thus able to buy

of yards of cotton textiles. Much of this material was
diverted to civilian channels at a sales price of thirty
to thirty-five percent--

H.M.JR: Axcuse me. That's all been played out in

the papers.

MR. GASTON: Yes.

H.M.JR: I would cut that out.
MR. FUSSELL: There are some new angles that have
not been in the papers.

H.M.JR: I would use cases that have not been in
the newspapers. The worst thing is to give a case

which they have read about.

MR. D.W. BELL: I would have these cases that
were in the papers because they read about them
and they will ask you about them.

H.M.JR: I expect Eden to be there with fifty cases,
if necessary. want to have as many cases as I can as
long
as the Committee is interested. You be prepared,
will you, please, Mr. Aden?
MR. EDEN: Yes, sir.

MR. CONNELL: The next paragraph relates to
the dessert company. (Reading) We found in "few York
a manufacturing concern getting a very liberal allowance
of sugar for the stated purpose of making jam and jelly
for the Navy and then diverting much of It into the

manufacture of soft drink syrup. The sales of this
ayrup were unreported. Approximately two million dollars
in additional taxes, interest and penalties will be forthcoming in this case, as well as criminal prosecution.
MR.
company?

GASTON: Is that the dassert case or the syrup

MR. KDEN: That's the preserves case.

205
206
C

13

$
14

MR. 0' CONNELL: I thought this was the dessert case.

"We feel that the time is rapidly approaching when
competent talent will be available from which we can
draw qualified personnel. Cut-backs in military production and the release of men from the armed forces
will be material factors in our recruiting program.

I thought that I had that.
MR. EDEN: That's not finished. It's a powerful
case. They have already picked up three quarters of
a million dollars of unreported sales.

"If It is possible for us to recruit the number

MR. O*CONNELL: The dessert case and this last case--

of people needed during 1946, I will have to come back
to your committees with a request for about twenty

that has not been reported here-- you have got a lot of
preserves that are needed for the Army. It's almost as
good as the California case.

million dollars in addition to the sixteen million

three hundred thousand dollars estimate now before
the House Appropriations Committee. The supplemental
request now pending did not contemplate this greatly
expanded law enforcement work, but I should like to

MR. GASTON: You need sugar to make preserves and

they sold it to soft drink manufacturers.

make it clear at this time that I have no intention
of continuing to request money for these or any other

MR. 0" CONNELL: That's the and of the cases.

positions in the Treasury Department beyond the period
of time required to perform the necessary work.

(Reading) "You will also be interested to know
that me are requiring banks and other financial institutions to report to us unusual currency transactions
handled by them. This has been and should continue to
be one of the most profitable sources of leads to tax
evasion, and we confidently expect these institutions

to cooperate with us for the good of all.
"I have endeavored to give you only the highlights
a deplorable situation. I want your support in this
in
drive to ferret out and bring to book those who have not
only profited from the bloody business of war but who
have also ignored their responsibilities as citizens.
"Specifically, I should like to have the approval

of Congress of our pending request for a supplemental
amounting to sixteen million three hundred

for the fiscal year your
appropriation thousand dollars 1946, and also rate the
authorization to me to expend at an accelerated
money available from our regular 1946 appropriation in
order to build the law enforcement staff necessary to
carry out this public protection program. With this
understanding we can go forward immediately with our
program to recruit the five thousand investigators we
so urgently need.

C

"I need not dwell on our Government's need for
revenue, nor upon the absolute necessity for our doing
everything within our power to see to it that the
burden of wartime taxes is borne by each and every

one of us according to his ability to ay--under the
law. I need not point out that respect for law is
based in major part upon the belief of the average
man that it operates evenly and fairly upon all who

are subject to it. A belief, even 11-founded, that

many of our people are able successfully to avoid their
obligation to pay taxes will breed disrespect for the
law and make for more widespread avoidance of it.
'If we do less than everything we can to enforce,
without fear or favor, the wartime tax laws of the
United States, we will not keep faith with the millions
of young men and women who bear the brunt of fighting

this war, nor with our people who willingly meet their
obligations, nor with our eighty-five million taxpayers."

H.M.JR: I think this is all right. Feltus has

a very good suggestion,about wanting to get the return-

I ing veterans in, and where you talk about the recruiting,
think we could put in a page of that, see?

207

208

- 16 -

15
C

MR. CONNELL: You mean getting then into the progran of recruits.

and war profiteer who have stuffed safe deposit boxes with
cash on which they have paid no tax.
"The veteran will know what should be done to those who

threaten the nation with inflation. The veteran knows what

H.M.JR: He's brought out something. I think it's
very good. This is something they are Interested in and
they know what it's about, and he's got something to give

to do to those who would cheat honest Americans today and
endanger America's future tomorrow. The veteran--particularly
the eighty-five pointer and the disabled--understands these
things and he understands that wars cost money. He has seen
& convoy burning fuel at sea. He has heard the expensive
roar of a thousand cannons. He understands that no sacrifice

you. Non, in order that I get this thing I am going to ask
Fussell --I don't know what his title would be--managing
editor--and give me, you, Fussell, a finished document.
Please?

in money could be as great as the loss of an arm, a leg, a life.

MR. FUSSELL: Yes.

Yes, we can use these men. They need jobs and we need

understanding minds and stout hearts. We're going to find
the chiselers and cheats and hold them up to public scorn.

H.M.JR: Take Feltus' suggestion, which is excellent,
about using returning veterans and that they understand what
this is and this is employment for them, and they are the

It will be American justice at its best to give the veteran
a chance to help in this job.

kind of give it to you.

"The veteran will get more than the Civil Service pre-

MR. FELTUS: May I suggest that that suggestion you
make be a separate press release on that veterans part of it?
H.M.JR Do you think so?
MR. FELTUS: Yes.

MR. O*CONNELL: I an not clear on what you mean. Do
you mean to head this recruit project up as a project, and
not give it too much emphasis.
MR. D.W. BELL: Say the time is coming when you can

bring in returning soldiers who will be available.
MR. FELTUS: This was written as a statement that

ference. He will get top priority. There are desk jobs for
the disabled and field jobs for the others.

0

You may not want to go that strong on the employment

end of it,but it has terrific public value in getting
acceptance for your whole program.

H.M.JR: Let me ask Charlie Bell who has got to
do the recruiting. How do you feel about it?
MR. C.S. BELL: We have already in the recruiting
plan that is coming up to you today provisions for
tapping all of these Army Discharge Centers on these

eighty-five point fellows, and If the Civil Service

the Secretary could make independently. It is not too

Commission will clear them for us. we propose having

lengthy.

Commission. They have to certify these boys as eligible

"No group is more entitled to run down the wartime tax
cheats than the men who risked their lives in battle. Veterans
discharged under the eighty-five point rule will be looking for
jobs. No can use them In our expanded tax fraud investigations.
These men who gave so much for their country will not have a
soft attitude toward those who took as much as they thought
they could get away with. These soldiers and sailors and
marines will have little sympathy for the greedy black marketeer

them, but this is the responsibility of the Civil Service
to us.

I think, Joe, our statement could be broadened a

little bit on the veteran angle, and I agree that this

would be a good release on its own but not made definitely
a part of this.

PRECISION

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210
209

-18-

-17(

MR. PEHLE: Put enough in there to lay the foundation
for it and then put this out as a separate release and
tie the Civil Service Commission into it. Say, *We
expect full cooperation from the Civil Service Commission."

but not as much. But keep in mind that subsequently
I will make an appeal and then I will go overboard on
that. Now, I would like to have this thing from you
before I go home this afternoon, see?
MR. FUSSELL: This afternoon?

MR. C.S. BELL: Yes, and they will give it to us,

but it's really their responsibility.
MR. O'CONNELL: I'm not sure I like it. If I

H.M.JR: Yes. We are getting out tonight an afternoon paper. You are used to working under pressure for

a paper. Have it by four o'clock.

understood it correctly, one of the things we have to
consider sometime is whether they are not going to
question our building up a Gestapo organization, and
there is an indication the kind of fellows we want
are soldiers because they will be very tough. Now,

MR. FUSSELL: Okay.

H.M.JR: You come in alone at four o'clock, will you?
MR. FUSSELL: Yes.

I think you can overplay that a little bit. The
investigator who is too tough is a liability and at

H.M.JR: I'll go over it with you.

some point we have got to worry.
H.M.JR: It always gets down that one man has to

decide. I like this idea. I would like to have it woven

make over when
in there. I don't want to make it so heavy, Fus, that
it weighs it down, but I think subsequently I should

an appeal possibly the air for men, and
I do, I will play that up heavily. How about that?

MR. D.W. BELL: I doubt If you can ask the Committee's
approval. You can ask for cooperation. They can't approve
a thing like this, but they can cooperate with you.
MR. O*CONNELL: What we are really doing is putting

them on notice, and it's hard to say It just that way.
MR. D.W. BELL: If they don't object.

MR. FELTUS: Well that's fine, but may I answer
that criticism of Joe's?
H.M.JR: Sure.

MR. FELTUS: I think you might be criticized for
Gestapo methods, but if you have soldiers, it would tend
to minimize that criticism.
MR. PEHLE: Wouldn't it meet his point by toning
that down?

MR. O*CONNELL: There's no doubt about that.

H.M.JR: I am not worried about that, but I want
to stress what he has more than it is stressed in there

MR. GASTON: will you have an estimate to put before
them?

MR. D.W. BELL: You won't have an estimate until next
fall.
MR. O'CONNELL: We are telling then there we are going
to overcommit our appropriation.
MR. PEHLE: We did that in Foreign Funds. You say,
"This is what 1 am going to do, and 1,am sure you people

will agree. That's all.

RECISION

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19

H.M.JR: I'll tell you what we'll do in order to
play safe. If I okay this this afternoon, Joe, you will

have to see the two Chairmen and suggest they get a chance
see

to read
I cone
to will
be by
theyfour-thirty,
like it
or
not.it before
I'll okay
it,upand
it whether
okayed
and you will have to show it to the two Chairmen before I
come up and let them read it before I come up there, so
we will be playing extra safe.

MR. PEHLE: They will like it, too.
H.M.JR: Show it to them for suggestions, and if
necessary, Joe--We have done this before--you will have
to go out to their homes to see them.
MR. O'CONNELL: I know.

H.M.JR: Catch them wherever they are.

PRECISION

MARK

MICROSTAT MICROFILM

ROLL NO

Maz 11 1945

12:00 A.M.

May 31. 1945
1:00 P. M.

212

213
D

HMJr:

Hello.

HMJr:

Hello.

Yes.

Atty Gen.
Biddle:

Hello, Henry, this is Francis.

HMJr:

Yes, Francis.

Mr. Dan

Bell:
HMJr:

3:

HMJry
B:

Dan, this is just . reminder to you - please today
to get out none kind of A questionnaire on box many
of these checking places there are

Sea Clark will be back early tomorrow morning, and
CBD come over but XcGohey will not be able to come

B:

until Monday.

Yep.

Will you do that?
Yes, air.

HWr

I thank you.

B:

Bye.

HXJr:

oh.

Hig son has just got back from some camp, and is
going cut to the Pacific and only has two days with

B:

Him.

HHJr:

I DOB.

But 11 you could fix it 20 Monday, I'll have them
over the first think Monday morning or If you prefer
I'll have San come over tomorrow

B:

HWJ:
B:

HMJ:

Let San cost over tomorrow 17 that's agreeable.
Very good.--quarter of nine?
Hello, Yes. Hello?
Yes,

B:

HWJ

The U. 3. Attorney wouldn't vant to send a representative?
Oh. I think I could have somebody sent un if you prefer

3:

that.

HKJr.
B:

3:

HMJ
B:

EWJ:

I mem 10 he could send somebody.

All right, I'll have him send one of his men up.
If no would do that,
Quarter of nise - in your office.
In ay office.
Very good.
Thank you #O much,

-2215

May 31, 1945
2:57 P. M.

214

Monday or no?

M:

HMJr:

HMJr:

Hello.

J. McGohey: Hello.
HMJr:

Henry Morgenthau, Jr.

M:

How do you to, Mr. Morgenthau.

HMJr:

How are you?

M:

HMJr:

come down but I CBD understand, I've got INC boys

Well, you can appreciate how I feel.

HMJr:

HMW

Well, nothing is more important than these boys.
I just wanted to have this word with you, and tell
you what I've got in mind, see? This social case
here in New York, and if we vent about 11 the normm my the time it got out of the Treasury and
Internal Revenue and over to you follows, it sight
be six to 12 months, 8907

But if he been's reached you, you get the information
from his first, see?
Yes.

Mr

HMJr:

HMJ:

And we had hoped that by sort of forming . team that
we could n11 go forward in the investigation and maybe
clean it up in . week.
Ahuh.

M:

HWJrt

Hello?
Yes.

M:

HMJr:

Mt

And the oublic neems to he 50 with interested that I
thought if we could kind of form . team of all the
interested parties. there 1: in chease of cleaning it
up in week.
Yes.

HWJr:

And that's what I had in mind.

H:

Yes. Well, nov do you want me to 0020 down.1

HMJr:

Well, I understood...

And then I was going to be to bold n.o to make . suggestion, and you own throw it out of the window if you
don't like it. I had heard one of your men very highly
spoken of down here, Commander Itale

Is that the vay you pronounce it?

No, I don't have anybody by that name.

Ki

HMr:

Irek.

M:

No.

Yes.

Mt

Oh, see.
Maybe be didn't get word to you, because we were
going to start - he's sending over San Clark at
quarter to nine tomorrow morning.
I see.

X:

I'm fine, thank you.
Xr. McGohey, I hoard from Mr. Biddle that you can't
in the service too.

H:

H:

I asked Mr. Biddle whether he wouldn't nex you whether
you couldn't have n representative here tomorrow. I
can't be here Monday.

HMJ:

Well, now, wait 0 minute - I'll send one.. (talks aside)
He's Assistant United States District Attorney - he

tries in lot of crees. It doesn't ring 8 bell?

X:

HHJr:
M:

No. There used to be n Sex Hysicks, who was in the

Anti-trust Division here.
Yesh. That's the follow.

oh, he hasn't been on the Staff for years.

HMJr:

Oh, have's he?

X:

No. He was in the Anti-trust Division here, at one time

HMJr:
M:

I think he wes in charge in New York.

Yeah, that's the fellow.
But he's off the staff for some time.

216

-4-

-

HMJr:

Oh, ie he is private practice?

M:

Yes.

0

HMJr:

Sam Rosennan.

Oh, yes.

HMJr:

He said he was #O able.

HMJr:
H:

Yes, he in...A very able follow.
But he is in private practice.
He's in private practice and has been for more thin .
year, I'm sure, and I think probably even longer than
that.

HMJr:

M:

HMJr:

But, I had never talked to you, and I wanted to let
you know that this was something that I'm spending a
lot of time on and I want your help.

Well, then I --- I tell you who mentioned him to zo,

M:

M:

HMJr:

M:

HMJ:

M1

Well, we'11 certainly give it all the attention We can.
And I know that you did everything you could in the
Chase Bank case.

Well, we had quite . time trying it, and we think we
almost anda it.

HKJr:

(Laughs)

H2

(Laughe)

HMJr:

Well, I'll be seeing you soon.

Well, 1: and when you get a requent from the Attorney
General send ne down the best man you onn, will you?

X:

Yes, yes, I'll do that.

KMJr:

Thank you.

And then I hope next week sometime maybe I can see you

Kt

Good by

HMJr:

Eye.

Fine, thank you., and I'm going to have somebody down
there in the morning.

myself.
Fine.

M:

HHJr:
M:

But I'm really going to try to do something with...
Well you have --- let as get this nox... you have no
repointment fixed now in your office for 9:15 tomorrow
morning?

HWJ:

No, 5:45.

Mr

oh, 8:45

HMJr:

At which San Clark will be present.

M:

Yee, I see.

H36Jr1

M:

HMJr:
M:

I naked Mr. Biddle - he told to about your son, and I said
*Well, of course, that van understandable, but would he
net you to send it reorementative here.
I see.

And he said he would.

Yes. Well, I haven't heard from his yet, but that any be
because I was out of my office.

217

May 31, 1945
4:32 P. M.

O
KMJr:

Hello.

Operator:

The Commissioner. Go ahend.

HKJr1

Commissioner?

Commissioner
Numan:

Yee, sir.

HMJr:

You going to be over here tomorrow at 0:492

N:

Yes, air.

HWJr:

218

I'= counting on you sort of the day timorrow.

That's right, then the go at 11:30. : had . pre-

N:

view up there today - : had to is us and see
Cannon on another matter.

HMr

Yeah.

So he bought it up and I ut it on pretty heavy

MI

today.

EXJr:

Good for you. Mox did he receive 1:7

N:

Yell, he enesed to be all right.

HMJr:

He didn't have . bloody nome?

N:

No. I zean he NET in . good humor.

HMJrt

He VBE in good humor.

N:

Yesh, but he encard to take to 1: all right.

HNJr:

Fine.

H:

I understand that we go un there at 11:30 and then
At 3:00 in the afternoon the Senate.

HMJr:

Fine. Thank you.

K:

I'll be there in the morning.

25,

31 MAY 1945

Dear General Garters

I - replying to your letter of May 23,

1945 regarding cotton textiles for China.
I an glad that through the active support
million
yards of the of War Gotton Department, textiles an has allocationnace
been of to
45 the
I

in with the view of

Chinese for the third quarter of this year.
War - Department complete that, agreement since these textiles the are

being obtained for the active prosecution of the

General Wedemeyer should be to

take whatever steps are necessary authorized to assure that

the textiles are applied strictly for the intended

purpose.

Thank you for your cooperation in this matter.
Sincerely yours,
(Signed H. Morgenthaw Ja.

Major General A. H. Carter,
Army Service Forces,
Fiscal Director,
Room 4s - hb8, Pentagon add
Nav Department,

Arlington, Virginia.

ISF:df 5/29/45

it AD JUATES ATMIT SERVICE FURGHS

office of the Fiscal Director
washington 25, D.C.

7
T

23 May 19k5

SP/LP 003 China

The Honorable

The Secretary of the Treasury

Dear Vr. Segretary

Following the moeting of 22 Mag in your office regarding mastros in
support of the Anti-Inflation Program in China, I hava looked further into

the rattor of ar Department responsibility for saking available additional

suplice of cotton taxtiles as A Doans of snooking the expensive rise in
prices of clothing and of procuring foodstaffs on & barter basis.
Wy inquiry ravuals that at no time has the United Statos Army in

China usad taxtiles or clothing an incentive goods in local procurement
of foxistuffs. Those rave either bean paid for by the Army in Chinese
National currency purchased from or advanced by the Chinese Government

against future Buttlement or have bean furnished in kind by the Chinese
to the United Statos Armed Forous and charged as reverse lend-Lease in
accordance with the terms under which, as you will recall, Dr. Eung aoadptod the BUS of $210,000,000 in settlement of Chinone alains up to
30 September 19lb.

I also find that in connection with Dr. Soung's conorandum of April
1945 to the Secretary of State us sissures for counteracting inflation
in China, the Aray was nt requested to furnish textiles to the Chinae
from its stocica nor to procers such through allocation of ar Department

funds for this purpose. shile streasing the importance of availability
of cotton cloth to exchange for Local foodstuffo and to break priors in

cirtain military aroas, Dr. Soong's namorandum nerely requests that "the
United States Government move up the priority for Chinese cotton require-

sents of 3,000 tona monthly in order to insure early delivery." More-

over, in concluding his manurandum Dr. Soong States that "it should be

emphasised that it is no part of our intention to anligit loans or credits."
As you are award, the Foreign Soonumia Administration has bean acting

for the Chinese Cove mant in the placing of cotton textile orders for the
Chinese in the United States, as well as in Brasil and Mexico, for which
payment is to be made by the Chinese. The urgent problem is the priority

RECISION

TRADE MARK

MICROSTAT

MICROFILM

ROLL NO

SPEE Continued

to be seconded such orders, and the expediting of their delivery to
Chian. Tats 1s A wetter to which both she Camending General of United
States AFTER Forces is the China Theiser not the YAT Descritions have

given serious consideration.

ilscerely THIS

A. de GUITES

lajor Canaral, 0.00

Fiscal Director

PRECISION

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NO. U.S.PAT. OFF

MICROFILM

ROLL NO.

223

25

31 MAY 1945

with respect to the transaction. In any event,
staunderstanding Government should be advised that the 175,000,000

the Portuguese be held in blocked account, free of any lien,
escudos subject to are the to disposition of the Allied Control Council for

Dear Mr. Grew

Dermany.

In May 1943 certain Portuguese shipping companies purchased

from the Germans five ships and smaller craft in consideration
for 175,000,000 escudos. During the negotiations for this purchase,
. representative of the British Government was informed that Dr.
Salasar had entered into . secret understanding with the German
Minister that, among other things, the escudos would be made avail-

We suggest, if you agree, that the substance of the proposed
annexed note be presented to the Portuguese Government.
Sincerely,

able to the German Heigh either through payment of free escudos

into the Portuguese Oarman clearing or by credits against the
escudes in the event that the Portuguese Government was required

to deposit then in blocked account. Open being so informed,
the representative of the British Government obtained solem
consitment for the United Nations from Dr. Salazar, as head of
the Portuguese Government, that the proceeds of the sale would

be placed in . blocked account, and that no credit would be extended

against this account and no clearing facilities would be afforded
to Germany either by way of loans or guarantees in consideration

of the disposal of the ships.

This Department has recently been informed (Telegram No. 1072,
May

Honorable Joseph C. Grew

Acting Secretary of State

16, from Lisbon) that the Portsguese Government deliberately

violated its fire commitment to pay into blocked account the of 175,000,000 escudos representing the purchase price paid for
Derman shipe by certain Portuguese shipping companies. This

but was into

sun five was
notsecret
blocked
paid the
Leso-Cerman
inserted clearing
account
under
clause
in the
sales agreement
without our knowledge by arrangement between Dr. Salasar and the

Enclosure

German Minister The direct effect of this deliberate violation

was to sake a contribution of 175,000,000 escudos to the German
war effort.

Since the effective implementation by the Portuguese Government

of any program for the control of Axis assets is now open to question,
it is of the highest importance to this Government that the Portuguese
Government be formally approached with respect to this matter. If
the Portagesse Government should deny the report, it should be requested to submit satisfactory evidence in order to avoid any future

5/30/45

MPRECISION

TRADE MARK

MICROSTAT

NO. U.S.PAT.OFF

MICROFILM

ROLL NO.

225

224

May 28, 1945

Mr. white
PROPOSED THAT OF NOTE TO as PRINTED TO THIS PORTUGUERE GOVERNMENT

Mr. Coe

Secretary Morgenthau
As the Government of Portugal is sware, on May 13, 1943 certain
shipping companies in Portugal purchased five shipe from the German

Government in consideration for 175,000,000 escudes. in connection
with this transaction the Portuguese Government made pledge to the
United Nations through representatives of the British Government that
the proceeds of the sale would be placed into . blooked account.

was made
come

Despite that the this payment pledge, 11 not has made into to . the blocked attention account of but my Government rather

in free essudes by payment tate the Luss-German clearing.

Since this is a matter of highest importance to my Government,
It has called upon - to request that the Portuguese Government

submit . full explanation with respect to the agreement for the

purchase of the aferementioned ships. If the information my Government has received is incorrect, you are requested to submit satisfactory

evidence to this effect in order to avoid any further
I have also been called upon by my Government to request the

Government of Portugal to deposit, or to continue to held. is blocked

account, free of any lien, 175,000,000 escudos subject to the disposition
of the Allied Control Authorities is Germany.

If with

I an sending you herewith a copy of a letter from
Robert
Fatterson.
agree 1
that
the suggestions
tained
in thisyou
letter,
suggest
you at once bring con-

this to the attention of Dr. Soong or his representative
in Washington, and try to get him to agree to this arrange-

ment. Unless Dr. Soong agrees to such an arrangement, I

think It 1a inadvisable to let the cotton E° to China in
view of the scarcity of this commodity.

PRECISION

MICROFILM

MICROSTAT

ROLL NO.

226

31 MAY 1945

Dear Mr. latterson:

I as glad to receive your letters of May 23
and May 28, 1945 regarding cotton textiles for
China.

It is 8 source of great satisfaction to ne

that because of the active support of the Bar
Department, China will receive substantial quanti-

ties of textiles during the second half of this
year. I an pleased that safeguards will be taken

to bring about the moat effective use and disposition
of these textiles for the prosecution of the war
against Japan. I wish to express ay personal thanks
to you for your active and complete cooperation in
this matter.

with regard to the question of the disposal of
salvage and scrap in China, I understand that this
matter is now under review by General Carter and

Mr. D. . Bell. I am sure that they will agree on
some proposal which will be satisfactory to both
the are and Treasury Departments.
Sincerely yours,

(Signed) H. St.
Honorable Robert P. Patterson,
Under Secretary of war,
ar Department,
Washington, D. C.

ISF:1r 6/1/45

WAR DEPARTMENT

OFFICE OF THE UNDER SECRETARY
WASHINGTON, D.C

May 23rd, 1945.

Honorable Henry Morgenthau, Jr.,

Department of the Treasury,
Washington, D. c.
Dear Henry:

I as attaching a copy of a letter I have
sent to Mr. Growley in support of the allocation of
cotton textiles to the Chinese.
Sincerely yours,

RLAPP
rppilm
end.

Robert P. Patterson,
Under Secretary of Mar.

May 23, 1945.

Honorable Leo T. Crowley, Administrator,
Foreign Economic doministration,
Washington, D. C.

Dear 4. Crowleys

The Tar Department strongly urges that an allocation of

45 all yards of notice united . will to the Chinese in the
thirs carter of this our.
This allocation to the Chinese will be of great value in
hestering use defeat of Japan and in seving the lives at our troops.
The Chinese aray is being reorganised, under direction of
our Aray and with our assistance, and in about to mount A largescale offensive against the Japanese in China. The first enjoygements

in this offensive have already taxen place, with promising results.
If the Chinese forces can be kept provided with supplies, there are
good prospects that the entire character of the war in China say be

changed. The question will be largely one of supplies.
A large part of the supplies for the Ghinase aray must
come from Chinese production. The ability of the Chinese to produce

is most precarious, due to the rapid inflation and to the dearth of

cotton textiles. It is the Judgeant of American officials in China,
as well as of all the agencies here which are informed as the Chinesa

situation, that the delivery of cotton textiles to the Chinese in

substantial questition will go TAT SOMATO giving them the ability
to produce Live avena wupplies for their troope.

It La of price Importance, Unrearo, from the visipoint
o. creating the Japanese, that the Chinese in provided with cotton
textiles in She requested Amount. The amount does not answer their
need, but 11 represents the limits, ve understand, that can be

to China in the appropriate by Use FULLED EVELLABLE.
I KINGS of as other export program for textiles that will contribute
AH ween CONGRES winning the war against the Japanese.

Sincerely yours,
(Signed) ROBERT P. PATTERSON

liatert P. Patterson,
Under Secretary of Mar.

17717 Lue

PRECISION

TRADE MARK

MICROSTAT NO. U.S. PAT. OFF MICROFILM

Assistant Secretary of the Treasury
Date

May 31,1945

To: Piles:

I discussed this with the
Secretary today and we agreed to

wit.
H.D.W.

Mr. White
Room 3438

ROLL NO

BC-5 1GM LIAN

THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA
Box 680
BOLIAMIN FRANKLIN STATION

WARNINGTON ADC

TELEPHONE EXECUTIVE 2020

May 28th, 1945.

Dear Mr. Secretary:

Since writine to you on May 25th we have

learnt that a telegran on the same subject nas
been addressed to the President by the Prime Minister.
Ee have not yet seen the text of the telegram but

we feel sure that you will wish to be informed that
this message has been sent as well as the message

from Sir John Anderson and Mr. Oliver Lyttelton.
Yours sincerely,

RALLAND
Henry Seef
The Honourable Henry Morgenthau, Jr.,

Secretary of the Treasury,
Washington, D. C.

231

May 31, 1945

Mr. Gamble

Secretary Morgenthau

I wish you, or 0 omebody in your organization, would go
through the statements - the important statements - which
have been made since the first of May out of Washington,
and let me know which you think have been helpful to
War Bonds and which have been harmful. I want that this
afternoon. You pick the people but pass on It yourself

and get It to - in a scrap book this afternoon. I my
want to use it with the President.

Book Submitted 5/31/45.

TRADE MARK

MICROFILM

MICROSTAT

ROLL NO

2"

232
UNITED STATES GOVERNMENT

Office Memorandum
.

PRECISION

TO

May 31, 1945

DATE

Mr. Gemble

Mr. Lane

FROM

SUBJECT

Here is the Intest report on special broadcast times:
Network
Show

Blue
KBS

Secretary--Labor

CBS

Secretary--Congressional Model

NFC

Blogan
033

Blue

Pocific Salute
1

MBS

Day

Time

10:30 ENT

3:30 LM
10:45 197
10:45 BWT

June 13
June 17
June 23
June 29

6:30

BAT

June 15

10:30

EXT

June 16

5:45

EAST

June 23

Goodn's Roundtecle

The hospital, labor, and Pacific solute program are half-hours;
all others are filtean minutes.

C

233

The Blue Network
BLUE NETWORK COMPANY INC
so ROCKSPELLER PLAZA TELEPHONE CIRCLE SPOO
NEW TORK

May 31, 1945

Mr. Henry Morgenthau, Jr.
Secretary of the Treasury
Main Treasury Building
Washington, D. c.
Dear loans

I - concerned because I seen to have made ayself so brilliantly unclear in our telephone conversation the other day.

that I said (or intended to any) *** that 1 was not particularly dis.
turbed with the Malter Einchell article techase it might serve to

work up none interest in what we are doing smong the people who run
magnaines in publishing houses.
I have had none correspondence with Bob Foon of the Post, who maid:

"You are obviously . great admirer of the Secretary, and accordingly,

I don't know how the article would turn out. The are not anxious to

print . build-up."
lob Foan is not . terribly Important guy in the long run on the Post
and certainly han no more than average Intelligence. To is not the
kind of . guy who would be Intrigued by the idea that there is . great
untold story about H.M., Jr.: he would be much more intrigued with A

new expose, factual or not. And I have no intention of giving 11 to

him. My interest In doing this is to get the story out, and : an

quite sure I will succeed in getting It done the any you and : want to
one It done.

I will be looking forward to the new material, and please rest easily.
How to Mrs. Morgettas? My family in in quite good shape, and it
looks as though the Smith kids will have . brother, or stater, or
something, about August.
Sincerely,

PS/BRY

AMIICA

THE
Fred faith

Letters MOICE more

were mailed by mistake in
McCabe's office.

men who had linner 234 h.h
with of time 5/31/45-

Committa

236

Victor Rissenfold
David Schon

N.Y.

George Minter

Baltime

great
Blauste
Richard
Frank

Chicago

"

31 MAY 19

Dear Mr. Ball:

This letter will serve to introduce

0

A J. Congress
malden Feeting.

to you Mr. James S. Knowlson, who is to

N.Y.

serve as Central Field Commissioner in the
European Theater of Operations for the ArmyNavy Liquidation Commission.

Schoo
Jane Samuel
hab Comittee

As I have already advised you, it will
be appreciated If you will give Mr. Knowlson

ant Defention Longer
Ben Greenberg

your full cooperation in the execution of
his task.
Sincerely yours,
(Signed) H. Morgenthau, Ja.

Mr. Theodore Ball
U. S. Treasury Representative
c/o American Embassy

Paris, France

JWP:1r 5/31/45

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office.

signs

kcal)

setters

238

salled

May 31, 1945

Dear Mr. Taylor:

This letter will serve to introduce
to you Mr. Janes S. Knowlson, who is to
serve as Central Field Commissioner in the
European Theater of Operations for the ArmyNavy Liquidation Commission.

As I have already advised you, It will
be appreciated If you will give Mr. Knowlson

your full cooperation in the execution of
his task.
Sincerely yours,
(Signed) H. Morgenthau, Jr.

Mr. William H. Taylor
U. S. Treasury Representative
c/o American Embassy
London, England

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239

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 31, 1945

Memorandum for the Secretary's Files

TO

FROM

Mr. White

I spoke to the Secretary today of our plans to send Saxon to
Dermark and then to Sweden to replace Olsen, who SUL to go to

Germany. The Secretary said he thought there was commitment to
have Saxon 's wife accoupant his to France and 10 so we ought to
stick by our commitment.

I also informed the Secretary that we proposed to let Glasser
go to Lonion, in response to the State Department's request, as a
member of the U. S. delegation to the UNREA Conference. The
Secretary approved.

BOLL NO

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Secretary Morgentham

240

I attach . neme from Mr. Iray

which I think has points of value.
No has other ideas which he plane to

submit later, as you will note.

wr
Mr. Oasten

242
24
TREASURY DEPARTMENT

officially to Mr. Harney and Mr. Lane of this office and
they think highly of him. He is a more aggressive and able
prosecuting officer than Milligan.

TREASURY ENFORCEMENT AGENCIES
WASHINGTON

31 May 1945

(4) A qualified administrative officer should be appointed as assistant or administrative assistant to the
TO:

FROM:

Secretary Morgenthau
Elmer Irey

Commissioner. The work of the Bureau has grown to such an

extent that the necessity for such an officer is imperative.

(Through Mr. Gaston)

(5) You mentioned Riley Campbell at a recent conference in your office. I have been informed that steps are
being taken to appoint Mr. Campbell the third of three
assistants to the Head of the Penal Division of the Chief
Counsel's office, in which division tax fraud cases are

The comments and suggestions in this memorandum relate

entirely to affairs within the Bureau of Internal Revenue,
gained from ay knowledge as Chief of the Intelligence Unit
and from contacts in coordination work.

reviewed. I feel that this is a very definite step for the

(1) In addition to the discussions of Department officials with officers of the Tax Division of the Department
of Justice, I think a personal talk by you with the incoming

better, and as Mr. Campbell becomes more closely connected

with the administration of this program in that office his
value will become more and more apparent.

Attorney General, Mr. Tom Clark, would be of very consider-

able value. Our experience with Mr. Clark, both in the
inr Fraud Division and the Criminal Division of the Departnent, has been very satisfactory and he has shown every
desire to cooperate.

(2) The heavy burden created by the huge increase in
the numbers of taxpayers and new and complicated legislation

has added greatly to the difficulties confronting the Bureau.
I suggest that a complete functional and operating survey at
this time would be a good thing.
(3) A person who has had experience as a Federal prose-

0

(6) In a memorandum of May 26, to Mr. Charles S.
Bell (copy attached), I made certain suggestions concerning recruitment and character investigating for the tax
drive. Yesterday I received from the Civil Service Commission a list of 151 names of experienced investigators
who are being dropped because of lack of appropriation.
This communication has also been forwarded to Mr. Bell.

I plan to submit to you within a day or two an additional memorandum outlining further suggestions I have
to make with respect to the Bureau of Internal Revenue

cutor would, it seems to no. be desirable for the position of
overall supervisor of revenue enforcement work, of ther in the
position of Assistant Commissioner or 88 a Special Assistant
to the Commissioner. One name that occurs to me is that of
Richard K. Phelps of Kansas City who WES assistant to case.
Mr. Milligan during the prosecution of the Pendergast
He is a good aan and I understand he is now in private
practice. He disagreed with Milligan in policy matters and
resigned. For that and other reasons, he may not be politically objectionable. Mr. Phelps is known personally and

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244

243
COP

Deputy Collectors' positions. Also it has occurred to ne
that, in view of the importance of this drive, a levy, say

C

May 26, 1945
TO:

Mr. Charles S. Bell

FROM:

Elmer Irey

I have the following suggestions to make with respect
to recruitment of personnel to engage in the current tax
drive:

There are 9,000 Deputy Collectors engaged in field
investigations. These men have all been Investigated and
through service have pretty generally demonstrated their

loyalty and ability. They would require no further character investigation. While I understand that some fow are
being withdrawn from these positions and transferred to the
Intelligence Unit as Special Agents, I believe that this
could be done to a greater extent. I think that it would be
best to make an effort to recruit the force of Special Agents
almost entirely from this group, inasmuch as the leadership
in the tax drive rests with the Special Agents, and it is in
that organization that the best available sen should be enployed. The newly appointed employees could be assigned to
the positions of Deputy Collector.
To some extent, transfers might also be made from the
positions of Revenue Agents of those who have shown aptitude
for criminal investigative work. The same conditions would
apply with respect to these employees.

In recruiting from outside for positions ther as
Deputy Collectors, Revenue Agents, or Special Agents, it is
thought that Army demobilization centers might well be visited,
examination made of the records of those being demobilized,
and effort made to secure as appointees those appearing to be

qualified. In addition, it is noted that the FBI has had a
substantial reduction in its appropriation, and it is pos-

sible that there may be some qualified mon in that organization who will be released. I feel also that emphasis might
be placed on the recruitment of women, especially for the

be all the
the roster of

of

Agencies 10% might to help placed complete on other Treasury those engaged Enforcement in the

tax drive It might also be well to consult with the Bureau

of the Budget for any Government agencies which are being
compelled to reduce forces and available material might possibly be secured there. Also, the Coast Guard has developed

a very efficient intelligence service; some of these nen
undoubtedly are available at this time and consideration might
be given to that group, as well as other intelligence groups
in the military services.
With respect to the character investigations of those

brought into the service from the outside, feel that it
would be sufficient to secure fingerprint reports on the
individuals and, if favorable that they be put on duty at
once. While, under present circumstances, it is difficult to
get such a report from the FBI within a short time, arrangements should be made with that organization to give 24 or 48
hour service on such fingerprint reports, so that there would
be no delay in putting the appointees to work. With respect
to special agents and revenue agents, a streamlined character
investigation should be made, cutting out all unimportant
inquiries, but this should be done only after the employees
have gone on duty.

With respect to Deputy Collector appointees, it would
probably be sufficient, in addition to the sworn application
fingerprint clearance and anti-subversive oath, for them to be
subjected to further character investigation by the Collector
by means of letter or telephone communication from the appointee's last two employers, or to his last employer only,

if his work there covered the most of his five years. In
doubtful cases the Collector could make direct request of
the District Coordinator or his assistant for immediate
further inquiry.

with respect to all employees appointed from the outside,
the names should be checked against the FHI records and the
Dies Committee records to determine whether there are any

allegations of subversi ve activities. This should be done, of
course, after the appointees have gone to work.

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TREASURY DEPARTMENT

Him

246

245

INTER OFFICE COMMUNICATION

DATEMay 31, 1945

The reterance will get more than the Civil Service

preference, Sie will get top priority. There are

desk Joba for the disabled and field jobs for the

others.
TO

FROM

The Secretary

landolph Feltus

This is the reminder you requested.
My suggestion is that you stress that in the employment of

the 10,000 additional tax evazion staff employee, veterans of this
war be given top priority. You might make D statement as follows:
No group is more entitled to run down the wartine
tax cheat La than the men who risked their lives in
battle, Veterans discharged under the 85 point

rule will be looking for jobs, We can use them
in our expanded tax fraud investigations These

This should be followed by A special recruiting campaign
mmong these min. If a few heroes can be picked up, each will
be good for a story.

Proper publicity on this will add to public acceptance of

the entire program. It is the old hero and villain theme.

A corollary publicity program can stress the value of this
program in the re-orienting or veterans, Opinions of leading

psychologists and psychiatrists can be sought and published,
The these here is These jobe, although temporary provide a

war routine peacetine

transition
busy untilprogram
from theintounder
jobe. Also
theythey
keep
non
reconversion
my and
can be employed on a permanent basis by industry.

non who gave no each for their country will not
have soft attitude toward thode who took as much
as they thought they could get away with. These

soldiers and pailers and marines will have little
sympathy for the greedy black marketeer and war

profiteer who have stuffed safe deposit boxes with
cash on which they have paid no tax.
The veteran will know what should be done to those

who threaten the nation with inflation, The veteran
known what to do to those who would cheat honest
Americans today and endanger America's future tomorrow.

The veteran - particularly, the 85 pointer and the
disabled - understands these things and he understands that were cost money. He has seen a convoy

burning fuel at sea. 1) has heard the expensive roar
of a thousand cannons,

line understands that no marrifice in money could be

an great as the loss of an am, a leg, # life.
Yes, - can use those sen. They need jobs and need understanding kinds and stout hearts, We're
roing to find the chiselers and chests and hold

them up to public seern. It will be American
justice at its best to give the veteran a chance

to help in this job.

Rt

RON

M

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248

changes made 247

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-3-

at 4:00
5/31/45

collecting upwards of 45

to the increased demands placed upon them for war

approximately of million taxpayers.

finance. The-reports of increased revenues show that

As the tax burden increases there is more and more

there has been no general breakdown of our TAX Itway

including by

pressure or the greedy and dishonest to evade their

But in all earnestness I am alarmed at the evidence

1

taxes, and it is to the problem of enforcement of our

of tee common evasion and concealment, especially by

kind

tax laws against that stripe of individual that I wish

those who seek to grow rich through war-swollen profits

to address myself.

and illicit black market operations in foodstuffs and
0

We in the Treasury have been conscious of the

short commodities. To combat that situation, about

seriousness of our problem for some time, but I would

two months ago I initiated what we will call, for want

be less than frank if I did not admit that recent dis-

of better term " special enforcement drive

closures have persuaded no that our sights have been
too low.

fully

I so type ST to fall to recognize the

Starting with B nucleus of a couple of hundred
special agents of our Intelligence Unit, men trained
to detect criminal tax evasion, we have presently

1

C

patriotic and willing response of our nation of taxpayers

assigned to this special drive some 1600 Bureau of

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250

249

0

-4-

(

up in 60 days is more than double the amount our people
Internal Revenue employees, almost all of them drafted

can handle

from other work. And it is of the results of the work

I would like to give you something of an insight
us

of that group, and the implications of what they have

into what I have been learning in recent months.

disclosed, that I wish to tell you.

are finding "pay dirt" in transactions involving food,

I have personally reviewed the weekly reports made

liquor, automobiles, furs, jewelry, gambling and cabarets,

by the nen in charge of the special squads working in

to mention a few. Many cases combine black-market opera-

various sections of the country, and the situation dis0

tions with a criminal concealment of incomex-- many in

shocked me profoum dlyx
closed has left me agheet. The group has under active

-

investigation some 3600 cases indicating substantial
than
tax evasion, and at

that

leads have been turned up and are awaiting only

available manpower to investigate them. In

We

7,000

volve & criminal failure to report honestly income which

SAA earned in legitimate fesion, Some of the most
striking cases -- and I will give you the details -- are
what we refer to as "currency" cases. By that we mean

other

morés, with over 1600 people devoting their full time

to this work, our back-log of leads turned

cases in which the malefactor made a practice of con-

ducting his dealings in cash, usually big bills, in order

just

MICROSTAT

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252

251
-6-

.

(

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better to conceal the nature and scope of his operations.
is also an income tax case. In one instance $60,000

If I were to attempt to relate in detail all of the
WB.5 deposited in a New York bank for transfer to a men me
cases now pending, I=Would here until this Congress

Southwestern state. of this total, fifty $1,000 bills
adjourns. But I know you are interested in specific
were identified by serial numbers as having been issued
cases and before coming over here today I selected a few.

An investigation now underway in California indicates
concealment of between $10 million and $12 million taxable
(

incose in raisin operations, in which food intended for
the armed forces was diverted to wineries. Because

military requirements for raisins are so heavy, the ar

at Richmond, the first indication of extensive operations

of the syndicate in Virginia. In another instance an
agent of this syndicate deposited in a bank the contents
R.

of a paper covered package which e called "lettuce"

The deposit, It developed later, consisted of nearly
$300,000 in $50 and $100 bills.

Food Administration requires that raisins be sold only to
In another case & collector for a liquor syndicate
the United States Government or under peralt. A price
traveled with a Gladstone bag completely filled with

ceiling of $185 a ton was placed on raisin grapes. No
ceiling, however, was set for culls and wastage, which
normally rung about 6 per cent of the crop, with mastage

large denomination bills. When he received another
payment of $12,000, his bag was so full that he had

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254
253

-16-

(

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(

Specifically, I should like to have the approval

you and
Iknow
I wonder
how the men who have been fighting in

of Congress of our pending request for a supplemental

Europe and those who are fighting in the Pacific will
man review
react to these things. The service TERM knows that

appropriation amounting to $16,300,000 for the fiscal
I want
year 1946X emply to addition to be sure you understand
the the a by which we program 4 meet our PATHS

I

great
war requires percent /

dollars

sacrifices from the man in the

I

as

field, and monty, from the people at home. And no

C

and

there

we

that from

is our intention to
expend At an accelerated
a

rate the money available from our regular 1946 appro-

group should be more helpful in running down tax cheats

pristion in order to build the law enforcement staff

than the men who risked their lives in battle. hope
drivers with wonders

necessary to carry out this public protection program.

we will be able to enlist many veterans discharged under

with this uncerstanding me can go forward immediately

the 85 point rule in our drive against tax evecters.

of tb our program to recruit the 5000 investigators we

I have endeavored to give you only the highlights

so urgently need.

in a deplorable situation. I want your support in this

justee
drive to ferret out and bring to bdble those who have not

a feel that the time is rapidly approaching when
competent talent will be available from which we can

only profited from the bloody business of WIT but who

have also ignored their responsibilities as citizens.

drew qualified personnel. Cut-backs in military proO

*

255
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within,

I as ear* you will appreciate that under existing conditions

duction and the release of men from the arned forces

every dollar speat is combatting tax evasion will bring monetary returns that
will repay the government many times over. I AN personally confident that If

will be material factors in our recruiting program.

- ca s meruit the force for which : SR asking - can collect . staimus of oa*
billion dollars which is now being avaded.

If It is possible for U.S to recruit the number of
people needed during 1946, I will have to come back to
your committees with . request for about $20,000,000

in addition to the $16,300,000 estimate now before the
House Appropriations Committee. The supplemental

0

0

request now pending did not contemplate this greatly
expanded law enforcement work, but I should like to

make it clear at this time that I have no intention
of continuing to request money for these or any other
positions in the Treasury Department beyond the period

of time required to perform the necessary work.

*

I need not dwell on our Government's need for revenue,
0

256

258

257
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(

-18-

nor upon the absolute necessity for our doing everything

within our power to see to It that the burden of wartine
taxes is borne by each and every one of us according to

pay

his ability to -- under the law. 1 need not
point out that respect for law is based in major part
upon the belief of the average man that It operates

evenly and fairly upon all no.o are subject to it. A

0
belief, even ill-founded, that many of our people are

able successfully to avoid their obligation to pay taxes
will breed disrespect for the law and make for more wide-

evasion
spread ovidence of it.
If we do less than everything me can to enforce,

without fear or favor, the wartime tax laws of the United
States, we will not keep faith with - people who

the millions of young men and women this

who bear the brunt of fighting who

war nor with our people

willingly meet their obligations, nor with our
85,000,000 bondholders x nor with the millions of our
young men and moman who been the brunt of fighting
is were

MICROFILM

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260
259

Official
Official
MAY 31, 1945
MAY 31, 1945
To Presidents, Federal Reserve Banks:
To Presidents, Federal Reserve Banks:
Boston, Mess.

New York, N. T.

Philadelphia, Ps.
Cleveland, Ohio
Richmond, Vs.

Atlanta, Gs.

Chicago, m.
it. Louis, Mo.
Minneapolis, Minn.
Kansas City, No.

Boston, Mess.

Chicago, m.

New York, N.Y.

at. Louis, Mo

Philadelphia, Ps.
Richmond, Va.

Minneapolis, Miam.
Laness City, No.
Dallas, Texas

Atlants, Gs.

San Francisco, Calif.

Cleveland, Ohio

Dallas, Texas

tan Francisco, Calif.

At my regular press conference at 10:30 this morning

At my regular press conference at 10:30 this morning
I an giving out copies of the statement wired you today,

I am giving out copies of the statement wired you today,

having to do with unusual currency transactions. I

having to do with unusual currency transactions. I

would appreciate it if you would also have a press

would appreciate it if you would also have a press

conference and give out a statement urging the banks in

conference and give out a statement urging the banks in

your district to cooperate wholeheartedly. Would you

your district to cooperate wholeheartedly. Would you

please send as any newspaper clippings pertaining to
this matter.

please send me any newspaper clippings pertaining to
this matter.

Henry Morgenthau, Jr.
Henry Morgenthau, Jr.

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261

Comm
organ

5/11/45.

-

NUNHN

Asst Comm
Sherwood

Asst Comm

Udcent

Bliss(III)Self.

for
Deporty Comm Dep Atcle
Comm
Days,Comm Dyplom D.Com Auch

Berkshire

(Gallahon

Acting)

Hankins

MICROFILM

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ROLL NO.

263

CONGRESS
lay SENSON

H. R. 3352

262
Assistant Secretary of the Treasury
Date

To:

IN THE HOUSE OF REPRESENTATIVES

May.31.1945.19

Secretary Morgenthau

MAT 19,1945

Mr. Serm of Ohio introduced the following bill: which was referred to the
Committee on Coinage Weights and Measures

Smith has introduced a bill
terminating bill has our been stabilisation referred to Pand. the and

A BILL

The Committee on Coinage, Weights

Nearures.

We are waiting until the House
the Bretton Woods bill before

To increase the reserves of Federal Reserve banks and to reduce

the Federal debt by utilization of gold certificates represent-

acts taking on up with you the question of re-

newal of the stabilization Pund.

ing the free gold in the stabilization fund to purchase a
corresponding amount of Government securities from the

H.D.N.

Mr. White
Room 343h

Federal Reserve banks.
1

RECISION

Be it enacted by the Senate and House of Representa-

2 tives of the United States of America in Congress assembled,
3 That for the purpose of increasing the reserves of the Federal

4 Reserve banks and to reduce correspondingly the Federal
5 debt. the Treasury shall utilize gold certificates, representing

6 all the free gold held in the stabilization fund provided for
7 in section 10 of the Gold Reserve Act of January 30, 1934

8 (Public, Numbered 87, Seventy-third Congress, H. R.

264

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

TO:

Finished

DATE May 31,1945

Secretary norgenthau
Ted R. Camble

Because of the enthusiastic response to the
Iwo Jime flag-raising symbol of the 7th War Loan, .
number of cities, including New York, made full-relief
reproductions of the 6 Marinea raising the flag. In
Times Square, for example, we have . statue 50 feet
high.

Because of the numerous uses that groups all over
the country wanted to make of this historic event, NO
secured, through the U. S. Karine Corps and the U. S.
Navy, the services of Felix de Weldon, who is . world
famous sculptor and has just finished an original
model -- one-quarter life size (40" long and 52th high) -for which the 3 survivors poaed. Mr. de Weldon, on behalf
of the Services he represents, and himself personally,
would like to offer, through you, this memorable piece
of work to the President of the United States.

It is not too large to be an attractive and
appropriate piece for the President's office. If the
President would like to accept it, then we would like
to have you net the time for the presentation.

MICROFILM

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266
MAY 31 194

TREASURY AGREES WITH DOUGHT ON BILL
TO ALLOW DEDUCTION OF OIL COSTS

1:29

(

TOL

5-32-45
MEMO

265

Mr. Blough says the ticker statement

is not correct. The Treasury report
approves the Doughton Bill as to past

WASHN -DJ- TREASURY DEPARTMENT TODAY IS
TRANSMITT NG TO CONGRESS A REPORT ON THE
DOUGHTON BILL CALLING FOR ENACTMENT INTO
LAW OF INTERNAL REVENUE REGULATIONS

GOVERNING DEDUCTIBILITY FOR TAX PURPOSES

OF INTANGIBLE OIL AND GAS DRILLING AND
DEVELOPMENT COSTS

THE TREASURY AGREES IN ITS REPORT

years, but opposes it as to future years,

THAT THE ENACTMENT OF THE REGULAT IONS WOULD
CORRECT THE PROBLEM CREATED BY THE CIRCUIT

and sticks to the position taken in 1962.

COURT OF NEW ORLEANS DECISION NVALIDA-

Mr. llourt said that the Treasury is
"Standing by its gunst and that is the
reason he didn't make . special point of

calling It to your attention.

TING TREASURY REGULATIONS WHICH PERMITTED

OL COMPANIES TO MAKE SUCH DEDUCTIONS THE
DOUGHTON BILL SIMPLY GIVES STATUTORY BACKING
TO THESE TREASURY REGULAT IONS

HOWEVER THE TREASURY IS SAID TO STICK
TO ITS VIEW THAT THE ORIGINAL LAW SHOULD
3E AMENDED IN SOME RESPECTS - THESE DETAILS
WILL BE MADE PUBLIC AFTER THE WAYS AND MEANS
COMMITTEE OF THE HOUSE TAKES UP THE MEASURE FOR
ACTION - COMMITTEE MEMBERS LOOK FOR FAVORABLE

From: Mr. FitaGerald

ACTION ON THE BILL WITHOUT PUBLIC HEARINGS
IN THE NEAR FUTURE
CHAIRMAN DOUGHTON INTRODUCED LATE LAST MONTH
THE RESOLUTION RESTORING REVENUE BUREAU
REGULATIONS COVERING DRILLING COSTS

REPRESENTATIVES OF THE OIL INDUSTRY
SAY THAT PASSAGE OF THE DOUGHTON MEASURE WILL

MEET THE OIL INDUSTRY-S PROBLEMS ARISING

FROM THE NEW ORLEANS DECISION IN THE F HE OIL
COMPANY CASE
-V-

MICROFILM

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RECISION

ROLL NO.

C

Bolls drap
office

meeting
I am here today to place before the Appropriations
Committees of Congress . request for additional funds to
perform the most important law enforcement job in the
country. In recent weeks I have personally reveiwed some
of the most outrageous cases of tax evasion developed in the

history of the Treasury Department. Every day brings
June 1, 1945

startling new disclosures and literally hundreds of fresh
267

leads. Since ay attention was directed to this deplorable

DRAFTS OF SECRETARY'S STATEMENT

situation about sixty days ago, we have developed over 10,000

ARE SEN. AND HOUSE APPNS. COMS.

hot leads and are actually working on 3,600 investigations.

ON ADDITIONAL APPNS. FOR LAW ENFORCEMENT
1

The have already referred eighteen asses to the Justice

WORK

Department with the recommendation for immediate prosecution.
We have been compelled to delay important regular functions

of the Bareau of Internal Revenue in order to divert 1,600
employees to the task of running down these bresen evaders
of the revenue statutes.
Cases are coming up from many sources. We have then

developing from currency transactions, large deals in food,
automobiles, liquor, furs, jewelry, gambling and cabarets.
To do this law enforcement job properly, I must recruit
5,000 additional investigators and about 6,000 technical

at

and
11am

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269

examples. You have no doubt alrendy observed many of the

office employees to do supporting work. By conservative

stories in the public press, one local case is that of the

estimate, based on the facts before us, this campaign will

wholesale meat dealer who, in addition to chiseling on the

net the Federal Treasury over $1,000,000,000 and blot out

national price policy through violations of OPA regulations,

war profiteering which is far more widespread and

was attempting to defroud his Government of an estimate

threatening to the national welfare than were the racketeers

of $400,000, in income taxes for the year 1944 alone. We

of prohibition days.

have over 750 cases of this type ready for investigation

To ne this problem has en importance beyond the protec-

throughout the country.

tion of the revenues. I think it important that the Congress

We have under investigation many 08805 involving the

and the American public be fully informed of the situation.

evenion of the Federal excise tax on furs. Typical is that

I need not remind you gentlemen that the housewives and

of . New York dealer who at no time prior to December 1944,

legitimate businessmen of the country have suffered greatly
(

MPRECISION

as a result of unscrupulous "black market operations.
These unconscionable sad illieit profits uncovered by tax

investigations have . direct relationship to the scarcity of
food products available for the vest majority of law abiding
citizens.

If I were to attempt to relate to you all of the deteils
of the cases now pending, I would be here until this Congress

edjourns. But I know that you are interested in specific
cases and before leaving the Treasury I selected . few that

are typical. I would like to give you the story on these

filed returns or paid tax on his fur transactions. The
additional taxes and penalties in this case aggregate $51,000.
Representatives of-such large and reputable establishments se Rusics, Gimblee ent J. Fox have recently
complained to us that their businesses have been materially
damaged by illicit, non-taxed sales by disreputable fur
dealers. These legitimate dealers have a real personal
interest in having the tax evading merchant apprehended.
A ecrap and junk dealer in Ohio was found to have
evaded his income taxes for the years 1940 and 1943. His

270

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272

onae is now with the Justice Department with . recommends-

Another fruitful source for lends to tax evaders has

tion for oriminal proceedings. In the menatine, he has

been found in investigations of the use of large denomina-

deposited $128,000 with the Collector of Internal Revenue at

tion bills.

Columbus to cover additional taxes and penalties.

After consulting the President, I worked out a plan for

A retail aerchant in Pennsylvenia with substantial

developing information on the use of lerge denomination

income from mortgages, real estate, etc., was indicted on

bills. Using the Federal Reserve Banks and other financial

March 2 for attempting to evade income taxes from the

institutions as reporting points, we are sure to develop

years 1938 to 1940. Taxes, penalties and interest in this

form It should be pointed
many hundreds of leads to 2tax am
evaders.

case will amount to about $111,000.

reportions

out that this registration of lerge bills is not designed to

In Boston . well established jewelry concern has

aurb the legitimete use of this type of currency,
the the but retirer

deposited $250,000 in payment of taxes end penalties
(

check is

to discourage chiselers, and rscksteers attempting to hide

covering heretofore unreported seles of items subject to the
,

Federal Excise Tax.

in Atlanta automobile deeler conveniently omitted
reporting income from extremely lerge transactions in used
motor vehicles which will ultimately result in the assessment

of over $100,000 in additional taxes so penalties.
An investigation of a Chienge onbaret operator who was

formerly associated with the A1 Capone gang will result in
the assessment of $500,000 in additional taxes and the
recommendation for criminal prosecution.

their ill-gotten gains through the use of large notes.
survey

Livery

A shocking asse is now under investigation in
California which indicates the concentment of between 10

and 12 million dollars of income through the use of large
currency taken as profit in transactions which diverted

grapes to wineries rather then selling the fruit to the Armed
Forces as required by the War Food Administration.
1 depositor in a Kentucky bank noted the nen ahead of

him in line deposit $17,000 in $1,000 and $500 dollar bills.
This observation led to the revelation that a man, whose

-6-

273

274
(

this ayrup were unreported. Approximately two millon dollars
apparent Income was about $10,000 . year, had just made a

single premium payment of $17,000 on 8 life insurance policy.
We now have under investigation more than 1400

coming in this case, as well as oriminal prosecution.
I have endesvored to give you only the highlights in a

"ourrency cases". Another outstanding one is that of the

deplorable situation. I went your support in this drive to

Longchnaps Restaurant Chain. This investigation will

ferret out and eliminate every bleak marketeer who has not

undoubtedly result in additional taxes running into hundreds
of thousands of dollars and perhaps criminal penalties as

well. Cases of this type are developing for none rapidly than
they ann be investigated by our present force.
To have encountered alarning diversions of wer materials

to domestic sales with resultant illieit profits. Included
in this group is a doctor in New York who manufactured

surgical bandages and was thus able to buy millions of yards

of cotton textiles. Mash of this material was diverted to

ANY

in additional taxes, interest and penalties will be forth-

domestic channels at a sales price of 30 to 35 per cent above

ceiling. This texpayer pleaded guilty to violations of the
Price Control Act and we still have . tax case against him.
life found in New York 5 manufacturing concern getting &

only profited from the bloody business of war but who has

also ignored his tax responsibility sad his citimenship
responsibilities.
Any of you who any be interested in details regarding
particular esses or concerning our operating methods should

feel at liberty to and upon my people for any further
information you deaire. Our General Counsel, Mr. O'Connell,
and the Commissioner of Internal Revenue, Mr. Nunan, are

thoroughly familier with every phase of this campaign.

Specifically, I should like to have the approval of
Congress of our pending request for a supplemental

appropriation amounting to $16,300,000 for the fiscal year
1946, and also your authorization to no to expend at en

very liberal allowance of sugar for the stated purpose of

nocelerated rate the money available from the 1946

making jea and jelly for the Nevy and then diverting much of

appropriation in order to build the law enforcement staff

it into the manufacture of soft drink syrup. The sales of

necessary to carry out this public protection program.

-8-

trust aced Aug

275

Draft of Statement for Secretary before at

We feel that the time is rapidly approaching when
competent telent will be available from which no onn drew

qualified personnel. Out-babk in military production end
the release of mon from the armed forces will be material
factors in our recruiting program.

If it is possible for us to recruit the number of

senate - Appropriations Committee

meeting

may 31

Sanater me Kellar

Your Chairman, was kind enough to
afford no this opportunity to discuss informally with
your Committee a situation which has been causing us

people needed during 1946, I will have to come back to your
committees with a request for about $20,000,000 in addition

in the Treasury increasing concern, and which, I am

to the $16,300,000 estimate non before the House Appropria-

sure, will be of interest to you gentlemen, not only

tions Committee. The supplemental request now pending did
not contemplete this greatly expended lan enforcement work

and I should like to make it clear et this time that I have

Sinate

as members of the Names Committee on Appropriations,

but as individual citizens and taxpayers.

no intention of continuing to request money for these or
any other positions in the Treasury Department beyond the

period of time required to perform the necessary work.

As you all know, wartime needs for revenue have
resulted in a tremendous broadening of the tax base

and a great increase in the number of taxpayers, as

well as a great increase in the rates of tax. there
before the war we were collecting not more than $4 billion
in taxes a year from 4 or 5 million taxpayers, we are now

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collecting upwards of 45 billion dollars a year from
approximately 50 million taxpayers.
As the tax burden increases there is more and more
pressure on the greedy and dishonest to evade their

taxes, and it is to the problem of enforcement of our

tax laws against that stripe of individual that I wish
to address myself.

We in the Treasury have been conscious of the

to the increased demands placed upon them for war

finance. The reports of increased revenues show that
there has been no general breakdown of our tax laws.

But in all earnestness I an alarmed at the evidence
of too common evasion and concealment, especially by

those who seek to grow rich through war-swollen profits

and illieit black market operations in foodstuffs and
short commodities. To combat that situation, about

seriousness of our problem for some time, but I would

two months ago I initiated what for want

be less than frank if I did not admit that recent dis-

of a hatter term, special enforcement drive

closures have persuaded me that our sights have been
too low.

I as not so agropic as to fail to recognize the
patriotic and willing response of our nation of taxpayers

tax

Starting with a nuoleus of a couple of hundred
special agents of our Intelligence Unit, man trained
to detect criminal tax evasion, we have presently
assigned to this special drive some 1600 Bureau of

279

280
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Internal Revenue employees, almost all of them drafted

up in 60 days is more than double the amount our people

from other work. And it is of the results of the work

can handle.

of that group, and the implications of what they have

I would like to give you something of an insight

wisks

We

disclosed, that I wish to tell you.
I have personally reviewed the weekly reports made

into what I have been learning in recent months.

are finding "pay dirt" in transactions involving food,

by the non in charge of the special squads working in

liquor, automobiles, furs, jewelry, gambling and cabarets,

various sections of the country, and the situation dis-

to mention a few. Many cases combine black-market opera-

shocked The greatly
closed has The group has under active

tions with a criminal concealment of income -- many in-

investigation some 3600 cases indicating substantial

volve a criminal failure to report honestly income which

tax evasion, and at the same time over twice that number

was earned in a legitimate fashion. Some of the most

of leads have been turned up and are awaiting only

striking cases -- and I will give you the details -- are

available manpower to investigate them. In other

what we refer to as "currency" cases. By that we mean

words, with over 1600 people devoting their full time

cases in which the malefactor made a practice of con-

to this work, our back-log of profitable leads turned

ducting his dealings in cash, in order

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better to conceal the nature and scope of his operations.

sold-at $15 to $45 per ton.

If I were to attempt to relate in detail all of the

The 1944 crop has now been largely marketed and

cases now pending, I would be here until this Congress

indications are that 40 per cent of the crop was sold

adjourns. But I know you are interested in specific

as "wastage" at prices ranging from $325 to $440 per

cases and before coming over here today I selected . few.

ton. So here - have the astounding situation of

An investigation now underway in California indicates

"wastage" selling for more than twice the price of the

concealment of between 810 million and 812 million taxable

product, because there is a ceiling on the product and

grapes
income in raisip operations, in which feed intended for

none on the waste. Our investigation thus far indicates

commiss
with lasing in
the armed forces was diverted to wineries. Because

a widespread conspiracy, involving the use of large
military requirements for raisins are so heavy, the War

amounts of currency and fictitious names. We already

Food Administration requires that raisins be sold only to

have between twenty and thirty cases involving individuals

the United States Government or under permit. A price

but we have thus far only scratched the surface. The

ceiling of $185 a ton was placed on raisin grapes. No
Treasury and the War Food Administration are cooperating

coiling, however, was set for culls and wastage, which
normally rung about 6 per cent of the crop, with wastage

closely in a thoroughgoing investigation of this entire
1

subject.

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283

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$2,000,000. There will also be a recommendation for
Another shooking case of diversion from war uses,
criminal prosecution.
accompanied by an attempt to cheat the Government of

its revenue, has been turned up in the New York district.
A preserving company got approximately 30 million pounds

of sugar for the avowed purpose of making jame and jellies

for the United States Navy. So far as we can learn, not
one pound of the sugar was used for these purposes. The
evidence indicates that most of the sugar was diverted to
beverage concerns. To conceal its sales the company
required payment to be made in cash in many cases and

in other cases cashed checks outside of the usual banking
channels. By these methods the company sought to con-

ceal sales of more than $1,200,000. with fraud penalties
and interest the Government expects to collect approximately

The Treasurer of a New York corporation selling
products to baking companies was discovered recently
to have been cashing, through check cashing agencies,
some substantial checks made out to his corporation,

instead of putting the checks through regular channels.
It was also discovered that the proceeds of these checks
were not being entered on the books of the corporation.
During the progress of the investigation, this man and

his attorney offered to make a full disclosure of these
omissions, stating that they would total over $300,000.
Treasury investigations continued, however, disclosing
tax evasions more than double the $300,000 figure. Last

286

285

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is also an income tax case. In one instance $60,000
week the corporation formally notified the Treasury that
the company had transferred more than $600,000 in cur-

was deposited in a New York bank for transfer to a

Southwestern state. of this total, fifty $1,000 bills
rency, which had been held in safe deposit vaults, to
a bank, the transfer being made by armored car. The

were identified by serial numbers as having been issued

at Richmond, the first indication of extensive operations
money has been put in a special account for the specific
purpose of paying any deficiency tax assessments which

may be levied against the corporation.
Operators in black market liquor have been particularly brazen in their use of currency of large denominations and in unusual amounts. Cash payments of

of the syndicate in Virginia. In another instance an
agent of this syndicate deposited in a bank the contents

referred to

of a paper covered package which he getted "lettuce".

The deposit, it developed later, consisted of nearly
$300,000 in $50 and $100 bills.

In another case a collector for a liquor syndicate
nearly $2,000,000 in "side money" -- that is, money
traveled with a Gladstone bag completely filled with
paid on the side, above the ceiling price which appeared
upon the books recording the transactions -- have been
traced by the Treasury in one black market case which

large denomination bills. When he received another
payment of $12,000, his bag was so full that he had

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net almost $5 million in taxes, interest and penalties -extreme difficulty in stuffing the additional money

plus prosecutions. Only last week a merchant in a

inside. Another collector, when temporarily confined

Pennsylvania town of less than 7,000 people was convicted,

to a hospital, carried on business from his bedside.

and the taxes and penalties that the Government will col-

When a nurse entered the room, after a visitor had

lect in this case will approximate $110,000. You

brought in bills which covered the bed as they were

gentlemen undoubtedly have read in the papers recently

being counted, she thought a robbery had taken place,

of the meat dealer whose undeclared income, on black

and started to call the police. It later developed

market sales in the Washington area, will approximate

that the bills spread on the bed for counting amounted

$400,000, and of the conviction of the Brooklyn physician

to $80,000. It was a robbery, but not exactly the

who diverted millions of yards of textiles, which he was

kind that the nurse imagined.

supposed to be using in producing surgical bandages for

There are literally all kinds of cases, large and

the Army and Navy, to the black market. We have an

income tax case against this doctor, too, and we are

small.

We have almost completed one case against a Mid-

wastern war contracting concern which is expected to

particularly interested in his investments in Florida
and Atlantic City and elsewhere.

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289

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I wonder how the mon who have been fighting in

But one statement, in the sordid mass of reports

Europe and those who are fighting in the Pacific will
that come in week by week, struck as with particular

react to these things. The service man knows that
force, because It is so symptomatic. One of the
war requires personal sacrifices from the man in the
largest automobile dealers in a Southern state, a man
field, and money from the people at home. And no
who has profited exceptionally through used car dealings
group should be more helpful in running down tax cheats
through the war years, was discovered to have omitted

than the men who risked their lives in battle. I hope
more than $100,000 from his tax returns and to have

we will be able to enlist many veterans discharged under

instituted an elaborate system of secret records. While
the 86 point rule in our drive against tax evaders.
this man was being examined, under oath, one of the agents

I have endeavored to give you only the highlights
asked what prompted him to begin his evasion.

in . deplorable situation. I want your support in this
And the answer speaks volumes as to the spirit per-

drive to forret out and bring to book those who have not
vading all too many people today. The man said:
only profited from the bloody business of war but who

"(It was) the desire to evade taxes; (we were)
have also ignored their responsibilities as citizens.
making such enormous profits; more than we had ever made

in our lives -- that is the truth."

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Specifically, I should like to have the approval
of Congress of our pending request for & supplemental

appropriation amounting to $16,300,000 for the fiscal
year 1946, and, in addition, to be sure you understand

that it is our intention to expend at an accelerated
rate the money available from our regular 1946 appro-

pristion in order to build the law enforcement staff
necessary to carry out this public protection program.
With this understanding we can go forward immediately

with our program to recruit the 5000 investigators we
so urgently need.

We feel that the time is rapidly approaching when
competent talent will be available from which we can

draw qualified personnel. Cut-backs in military pro-

292
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duction and the release of men from the arned forces

will be material factors in our recruiting program.

If it is possible for us to recruit the number of
people needed during 1946, I will have to come back to
your committees with a request for about $20,000,000

in addition to the $16,300,000 estimate now before the
House Appropriations Committee. The supplemental
request now pending did not contemplate this greatly
expanded law enforcement work, but I should like to

make it clear at this time that I have no intention
of continuing to request money for these or any other
positions in the Treasury Department beyond the period
of time required to perform the necessary work.
I need not dwell on our Government's need for revenue,

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293
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nor upon the absolute necessity for our doing everything

willingly meet their obligations, nor with our

within our power to see to it that the burden of wartine

85,000,000 bondholders, nor with the millions of our

taxes is borne by each and every one of us according to

young men and women who bear the brunt of fighting

his ability to bear it -- under the law. I need not

this war.

point out that respect for law is based in major part
upon the belief of the average man that it operates

evenly and fairly upon all who are subject to it. A
belief, even ill-founded, that many of our people are
able successfully to avoid their obligation to pay taxes
will breed disrespect for the law and make for more widespread evidence of it.
If we do less than everything we can to enforce,

without fear or favor, the wartine tax laws of the United
States, we will not keep faith with our people who

NO

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29

TREASURY DEPARTMENT

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE

May 31, 1945.

DATE 31 May 1945
TO

FROM

Secretary Morgenthau
Mr. Gaston

Secretary Morgenthau

FROM Charles S. Bell

If there was no shortage of personnel it would take the
We haven't yet heard from the Army what is to
become of eight out of the ten men who were transferred from the White House Detail except that one
man, Roger Williams, who is now 38, will be given

his release. A list of the men was given to

Colonel Walker of the General Staff last week and
we hope to hear from him within a day or two. It
is possible that the men will be assigned to Army
duties. The Chief tells me that when they were
sworn in to the Army they were told very definitely
that they could not be given any assurance that they
would remain on the White House Detail and were told

Treasury Department and the Civil Service Commission a minimum

of one year, under the normal procedure, to recruit five thousend agents, to say nothing of the six thousand additional
employees covered In Revenue's earlier estimate. Because of

your direct interest in this project and the need for an allout accelerated plan of recruitment entirely different from

any recruitment program heretofore undertaken by the Department,

I felt it incumbent upon as to underwrite this responsibility
and saddled it on this office.
This program contemplates the following:

further that If they were taken off the Detail the
Army could use them as it pleased. Mike Reilly is

1. A strong top committee consisting of an official of

equipment and has collected $1,950 as accrued leave.

2. An announcement to be gotten out immediately on a nation
wide scale by the Civil Service Commission through its

on the list, as his age is 34. He has turned in his

the Civil Service Commission, & top man at Revenue,
and a strong man from this office.

regional offices to the press, educational institutions,
Army discharge centers, commercial establishments, and
government bureaus.

3. Revenue to set up in each city recruitment committees of
its own men who will view applications and coordinate and
review with Civil Service Commission regional offices,
making possible appointments within twenty-four hours.

4. Character investigations to be out to fingerprinting
only for the present, subject to a streamline character
investigation subsequently.

5. Qualified personnel in Revenue to be available on
basis of promotion from within.

a

TO

296

INTER OFFICE COMMUNICATION

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6. Civil Service procedure to be revemped to contemplate
lowering age limits to 50, lowering qualifying requirements, providing for oral interviews as part of the
examination, twenty-four hour appointment service,
to recognize Treasury aen as civil Service representatives,
and for us to provide the Commission with personnel to do
this job as required.

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299

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE May 30, 1945

TO Secretary Morgenthau
FROM

Charles

Bell

Subject: RECRUITMENT CAMPAIGN FOR INTERNAL REVENUE

In accordance with your instructions there follows an
outline of the plan to be used in recruiting 11,000
additional employees, including .000 more Law Enforcement
Agents, for the Bureau of Internal Revenue.
POLICY DIRECTION

For purposes of policy direction there will be

established a Coordinating Committee of three people made

up of: (1) A representative of the Office of the
Secretary. (2) 1 representative of the Bureau of Internal
Revenue, and (3) A representative of the United States
Civil Service Commission.

This policy group shall have the responsibility for
deciding questions arising under the detailed program plans

set forth below. It shall be responsible for over-seeing

the entire project, adapting established plans to meet
specific problems and developing methods for overcoming
obstacles. The Committee shall be responsible for the
effective day-to-day limison between the Treasury Department,
the Bureau of Internal Revenue, the Civil Service Commission,

and all sources of applicants. It shell also be responsible
for the preparation of a weekly report to the Secretary

showing, by offices, and grades of employees, the progress
being made throughout the country on this campaign.
OPERATING METHODS

The Bureau of Internal Revenue has established

standards for all levels of jobs to be filled. These
standards, along with . statement of controlling Civil

Service Law and locations at which applications may be filed,

will be made a part of a general, nation-wide Civil Service
announcement to be distributed through Civil Service
Regional Offices to educational institutions, Veterans
facilities, Army discharge centers, commercial establishments and governmental activities. This blanket announce
ment will cover the range of positions available from CAF-5
to CAF-12, however, at the same time recruitment for lower
grade jobs will be carried on through all available avenues,
Prior to the issuance of . general Civil Service

announcement, the Bureau of Internal Revenue will establish

the following procedure by appropriate instruction to field
service officials:

(A) In cities where there is a Collector's Office,

. Revenue Agent's office and an Intelligence Unit headquarters office, a three man board composed of one
representative from each office shall be established to
screen all applications received, selecting for personal
interview those which on paper appear to justify further
inquiry.

(B) Insofer 8.5 practicable, two man boards shall be
employed in those cities having Collectors' offices and

Revenue Agents' offices.

(c) In cities where there is only a Collector's office
it shall be the filter point through which all applications

for positions above the Deputy Collector level may flow to
the nearest Revenue Agents organization, or Intelligence
Unit office, depending upon the nature of the position sought.

(D) Applicants selected for personal interviews will
be called in by the representative of the office primarily
interested.

Since

this

interview

represents

an

integral

of the examination process, it will be conducted jointly by
the Internal Revenue representative and the local Civil

Service representative wherever possible.

part

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301

In addition to participating with Treasury personnel
on the top policy committee, the Civil Service Commission
will be specifically
changes
in practice: requested to approve the following

(E) If the applicant is acceptable to the local Revenue
official and to Civil Service be may be appointed st once,
subject to character investigation" without prior clearance
from Washington except for higher grade positions.

LowerAgents).
maximum age limits (To 45 for Revenue Agents,
50 for(A)
Special

(F) In any areas where there may develop a surplus of
qualified applicants who indicate a willingness to leave the
locality for employment in another part of the country, the
applications, after interview, shell be forwarded to
Washington under cover of . standard referral memorandua,

(B) Lower the previously established requirements
for Special Agent, Intelligence Unit.

(c) Make the oral interview an integral part of the

CHARACTER INVESTIGATIONS

examination for Special Agent, and Zone Deputy Collector.

(D) Grant authority for Internal Revenue to receive
applications directly, select applicants who meet the Civil

To expedite placing recruits on the rolls without
exhaustive character investigations a procedure will be
worked out with the F.B.I. to supply a 24 to 48 hour service
on fingerprint examinations. This will be the only step
taken prior to appointment. With respect to Special Agents
and Revenue Agents, a streamlined character investigation
will be made, eliminating all unimportant inquiries, but
this will be done only after the employee ans gone on duty.

Service requirements, and secure immediate approval of

Civil Service Regional Director as applicants are selected.
(E) Provide as many field officers as possible throughout the country to work with the Joint Reviewing Committees
to be established by Internal Revenue.
(F) Designate Internal Revenue field officials to
serve as temporary Civil Service representatives to work
in tensas with Regional Civil Service representatives.

PROMOTION FROM WITHIN

Wherever feasible, preference will be given to qualified
applicants now occupying lower grade positions in the
Revenue Service. Experienced personnel will be transferred
and promoted from one branch of the service to another when
ever such action will not result in serious damage to the
organizational unit giving up the employee. It is hoped that
in this fashion the Bureau can achieve the highest possible
degree of utilization of employee skills.

The above plans have been developed by the Bureau of

Internal Revenue working in conjunction with this office.
will meet with the Civil Service Commission this week in an
effort
to secure their
out
participation
in it.approval of the program, and their allWe

CIVIL SERVICE PARTICIPATION

Concurred in:

Many of the procedural steps enumerated above are

contingent upon the willingness of the Civil Service
Commission to adapt existing procedures to the special
service requirements of this undertaking.

Commissioner of Internal Revenue

General Countel
Approved:
(

Secretary of the Treasury

303
May 31, 1945

May 31. 1945

KAMORANGAM TO THE PRESIDENT

There is transmitted herevith . check is the amount of
14,903. 15 for your salary as President of the United States
for the worth of May. computed as follows
Gross monthly salary

Less deduction OR account of withholding
tax for month of May 1945

$6,250.00

1,365.00
4,884.95

AGA adjustment due to excess withholding
tax deducted during month of April 1945.
Net salary for month of May 1945

18.30
$4,903.36

My dear Mr. Brand:

Thank you very much for the information con-

tained in your letter of May 9th. Mr. Theodore

Gamble, National Director of the War Finance
Division, has the French Exhibition in hand,
and you will be interested to know that we have
sent two non to France to find out just what
they want.

The above adjustment of $18.30 was brought about by the

Sincerely yours,

that your salary for the period April 13 to 30, 1945,
fact was computed before receipt of Form V-4, showing exemptions.

(Signed) H. Morgenthau, in

Future monthly salary payments will be in the set amount
of $4,864.95. the amount deducted for withhelding tax being
$1,365.00.

Mr. R. H. Brand,
United Kingdom Treasury Delegation,
Attachment

Box 680,

Benjamin Franklin Station,

Washington, D.C.

Copy to
UNITED KINGDOM TREASURY DELEGATION

5/4/45.

BOX 680
REN/AMIN

FRANKLIN STATION

305

304

25

31 May 1945

May 29, 1945.

Dear Mr. Secretary
You spoke to DE the other day about Kr. Pleven's

invitation to you to visit Paris in connection with . War Loan

Exhibition.

My dear Senator Wagner:
1 communicated with Lonion on this satter, and had

yesterday . cable from Sir Wilfrid Lady at the Treasury saying that

I write to acknowledge and thank you

Lord Kinderaley would be glad to go to Paris, provided that a con-

venient date could be arranged. 1 fear. however from news have
received to-day that this may be impossible. have had cables to
any that Ainderaley has had . bad heart attack, and is very seriously

for your letter of 30 May, in which you

ill. am hoping for the best. out in any case 1 should imagine

recommend the reappointment of Harry M.

such an effort.

Durning as Collector of Customs at the port

List it want be a good many weeks before be will be able to make

It way be of interest to you 11 - that according to

Sir Wilfrie Bady the Treasury in bonion are semiting new2 from

Paris as to the details of the deconstrution. It is understood

that it will probably take the form of an exaisition aboving methods

of New York. I shall be happy to see that
this matter Is given prompt attention.

of savings propaganda and of the organisation used during the war
and to be used in the tranal tional period, and also of demonstrations
of the value of savings during the war.

Sincerely,
(Signed H. Morgenthau, Ja

air Hilfrig sady adda that the National savings Committee

ready to co-operate fully, and that the Treasury strongly supports
the French proposal as . help in combating inflation. 1 should

is

suppose, therefore, that, 11 Lord Kingersley cannot go, someone will
be appointed to take his place.

If there is any further information that would be of use
to you 1 shall be very glad to get it.

The Honorable Robert F. Wagner

United States Senate

Tours sincerely,

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

HEO:da

Mr. Ireator

ROBERT P. WAGNER
NEW YORK

United States Denale
WASHINGTON D.C.

May 30, 1945.

Honorable Henry Morgenthau,
The Secretary of the +reasury,
Washington, D.C.

My dear Mr. Secretary:

It gives ne genuine pleasure to be rtily
recommend Harry A. Durning for reap ointment as Collector

of Custons, Port of New York, the post which he has so

satisfactorily filled since 1933. His present term of
office expires on July 31, 1945.
Kindest regards.
Sincerely yours,

Robint khagner

Robert F. Wagner.

INCOMING

DEPARTMENT
OF

RECEIVED

DIVISION TELEGRAM

STATE

DIVISION OF
CENTRAL SERVICES
TELEGRAPH SECTION

CENTRAL SERVICES

307
1945 JUN I AM 9 17
DD/L

LIAISON

-2- 5512, Thirty-first, from London
of Sponish Republican refugees in France as ICC has

PLAIN

EAS=1230

308

done in onse of German and Lustrion refugees in France.

London

Dated May 31, 1945

Rec'd 8:20 p.m.

Please instruct by telegram whether French proposol
should be accepted.
LIMINT

Scoretary of State,
RD

Unshington.

5512, Thirty-first
FOR DEPARTMENT GRB AND CARL BARRISON

Executive Committee of *ntergovernmental Committee

on Refugeen today at Twelfth neeting approved inter alia
proposals for operational expenditure in France, Belgium,
Stain and Fortugal. Letters from PONOFF and Embasay to
director IOC concerning voluntary contributions from member
governments to operational expenditure VERE brought to

attention of Executive Committee. Director will address
invitation to member governments to contribute pointing
out that the batter has been brought to the notice of the

coumittee. finutes of neeting will be airmailed. Next
meeting of Executive Committee will probably be called

for June 13 in view of request just received by director
from French Government that IOC should take over protection
of Spanish