Volume 384, March 20 – March 31, 1941

DIARY Book 384 March 20 - - 31, 1941 Regraded Uclassified - A - Book Page Alliese Ingineering Company Hee Mar Conditions: Airplanes (Ingines) interies Bankers' Association Bibe Financing, Government Appointments and Resignations O'Denne. Bugens: Forrestal (Navy) wants O'Dunne transferred so that he may familiarise himself with Havy contracts and procedure in connection with Truman investigation of defense contracts - 3/20/41 384 34 - B - - Belgium See War Conditions: Foreign Funds Control Bolivia See Latin America Brasil See Latin America - C - Canada See Var Conditions Colombia See Latin America Costa Rica See Latin America - D - - Defense, National Air Corps situation now improved: Lovett (Special Assistant to Secretary of War) memorandum - 3/24/41 243 Defense Savings Bonds, United States See Financing, Government Donovan, William J. (Colonel) See War Conditions: Lend-Lease - 7 - J Financing, Government Defense Savings Bonds, United States: American Bankers' Association guarantees support of nation's banks - 3/20/41 7,141,252 Edwards' presentation of program in Louisville to be checked by Barth - 3/20/41 12 HNJr suggests to Graves that (1) on May 1st postmasters sell every Governor or Mayor either stamp or bond, and (2) Houghteling be associated with program - 3/24/41 257 Regraded Uclassified - 1- (Continued) Book Page Financing, Government (Continued) Tenders invited for $100 million 91-day Treasury bills to be issued on discount basis under competitive bidding; to be dated March 26, 1941, and to mature June 25, 1941 - 3/21/41 384 139 Tenders invited for $100 million 91-day Treasury bills to be issued on discount basis under competitive bidding: to be dated April 2, 1941, and to mature July 2, 1941 - 3/28/41 301 France See War Conditions - G - Gold See Latin America: Brasil Grain See War Conditions: Foreign Funds Control Greece See War Conditions: Airplanes Guatemala See Latin America Gulick, Lather See Revenue Revision - H - Honduras See Latin America - I - Italy See War Conditions: Shipping (sabotage) - J - Japan See War Conditions Johnson, Enoch ("Wucky") See Tax Evasion - L - Latin America Bolivia: Axis Influence: Kamarck memorandum - 3/25/41... 212 Brazil: Gold: United States selling Bank of Brazil $12 million of gold - proceeds of transfer from Yugoslav account - 3/20/41 26 Regraded Uclassified - L - (Continued) Book Page Latin America (Continued) Colombia: Axis Influence: Kamarck memorandum - 3/25/41.. 384 213 Costa Rica: Axis Influence: Kamarok memorandum - 3/27/41.. 291 Ecuador: Axis Influence: Kamarck memorandum - 3/24/41.. 186 Guatemala: Axis Influence: Kamarck memorandum - 3/26/41.. 236 Honduras: Axis Influence: Kamarck memorandum - 3/27/41.. 293 Mexico: Negotiations reported by State Department to be well along and Treasury asked whether exploration of possibilities of some monetary arrangements are now in order - 3/20/41 22 a) HMJr's letter to Welles agreeing to discussions "with special reference to stabilization and silver" - 3/20/41 75,76 Panama: Axis Influence: Kamarck memorandum - 3/27/41.... 294 Peru: Axis Influence: Kamarck memorandum - 3/25/41.... 215 - M - Mexico See Latin America - N - Norway See War Conditions: Foreign Funds Control Nova Scotia See War Conditions: Canada - 0 - O'Dunne, Eugene See Appointments and Resignations - P - Panama See Latin America Peru See Latin America Regraded Uclassified - R - - Book Page Revenue Revision Doughton assured by HMJr repeated stories that Treasury writes all tax bills do not originate in Treasury itself - 3/20/41 384 37 a) Sullivan tells HMJr of Doughton's disturbance 29 Gulick, Luther: Financing of project again discussed by HMJr, Sullivan, etc. 3/20/41 27 - S - - Shipping See War Conditions - T - Tax Evasion Johnson, Enoch ("Nucky") Atlantic City, New Jersey: Case discussed by Biddle and HMJr - 3/20/41 41 Tax Research, Division of Report of projects during March 1941 385 Training in Industry Programs Resume' of agencies sponsoring - Bell memorandum - 3/20/41 10 - U - - United Kingdom See War Conditions: Military Planning; Purchasing Mission (imports) - W - War Conditions Airplanes: Air Corps situation now improved: Lovett (Special Assistant to Secretary of War) memorandum - 3/24/41 243 Engines: Allison Engineering Company shipments - - 3/31/41 404,405 Greece: FDR approved transfer of thirty Grumman planes from British to Greece - 3/29/41 333 Shipments to United Kingdom, etc. - 3/24/41 282 Canada: Halifax, Nova Scotia: Vieit of certain officers to - papers concerning - 3/20/41 54 Regraded Uclassified - W - (Continued) Book Page War Conditions (Continued) Exchange market resume' - 3/20/41, etc 384 77,159,185,203. 217,258,289,304. 324,401 Export Control: Exports of petroleum products, scrap iron, and scrap steel from United States to Japan, Russia, Spain, and Great Britain, weeks ending March 22, 1941, and March 29, 1941 206,403 Foreign Funds Control: Grain purchases for distribution and consumption in Belgium for shipment to Norway, etc., discussed in Treasury letter to State Department - 3/21/41 162 France: Free French: British Government's agreements providing for credite necessary for financing war effort and financial relations and foreign exchange questions between British Empire and territories of French Empire which refused to accept armistice - American Embassy, London, report - 3/20/41 4,297 Gold: United States selling Bank of Brazil $12 million of gold - proceeds of transfer from Yugoslav account - 3/20/41 26 Japan: Deliberate intention to let assets in United States decline: gold shipments to United States being reduced - 3/21/41 150 Lend-Lease: Donovan (Colonel William J.) apparently taking over; HMJr praises highly to Treasury group - 3/20/41 24 Barth resume' of editoriale - 3/21/41 142,341 Appropriation bill passed by Senate, 67-9 - 3/24/41 207 a) FDR's signature delayed by poor flying weather - 3/26/41 238 b) Bill signed - 3/27/41 281 British needs for road building equipment, agricultural implements, etc: War Department suggests that Procurement Division handle - 3/25/41 210 a) General Counsel's office decides this is permissible - 3/28/41 313 b) Treasury's answer - 4/1/41: See Book 385, page 37 c) Copy of War Department memorandum on existing "deplorable situation" - 4/1/41: Book 385, page 49 Supply Division - operations of a) Young memorandum to Burns - 3/29/41 329 b) . # If Currie - 3/29/41 328 Regraded Uclassified - V - (Continued) Book Page War Conditions (Continued) Military Planning: War Department bulletins: "Account of operations between May 10 and armistice at Compiegne" - 3/20/41 284 79 Mustard Gast German intention to employ increasingly indicated - 3/21/41 136 German Air Force: British estimate of present strength and disposition in Middle Eastern theatres - 3/28/41 320 "New Types of German Armored Divisions" - 3/31/41 412 Report from London transmitted by Lothian - 3/31/41 406 Ordnance: Federal Loan Agency Administrator Jones agrees that War Department be not limited to various estimated costs ..... provided total cost of articles to be manufactured does not exceed total cost set forth in list provided 1/25/41 (3/19/41) 288 Purchasing Mission: British Financial Position: Cumberland Gap National Historical Park: Peacock asks for further information as to English syndicate owning land and promises cooperation - 3/26/41 296 Federal Reserve Bank of New York statement showing dollar disbursements, weeks ending March 12, 1941, and March 19, 1941 164,306 Imports in convoy into United Kingdom exceeded one million tons for the first time since the beginning of August, 1940; goal is 3.58 million tons per month - 3/22/41 173,174 Vesting order sales - 3/24/41 206 Insurance Companies: Valuation of fire, marine, and casualty - 3/25/41 219 Shipping: British Purchasing Commission reports on present handling of trans-Atlantic cargoes a) Coast Guard shown reports - 3/21/41 152 Sabotage on Italian ships discussed by HMJr (in Arizona) and Gaston - 3/31/41 364 a) FDR approves "taking of ships as recommended by Acting Secretary of Treasury with concurrence of State and Navy" 371 Wheat See War Conditions: Foreign Funds Control Regraded Uclassified 1 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE March 20, 1941 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL When Mr. Pinsent, Financial Counselor of the British Embassy, called at the Treasury at 11 o'clock yesterday forenoon he showed me in confidence a cablegram hich he had just received from London. It was to the effect that the British were planning to sell to us $125,000,000 of gold at a South African port. Part of this gold was in Durban and part in Capetown, but the port of embarkation was indicated as the same port at which an American cruiser called some weeks ago. (I asked fr. Pinsent to be sure that all of this gold was assembled there 80 that there would be no need to call at more than one port.) Furthermore, the message indicated $105,000,000 of the gold was "switched" and that $20,000,000 of it actually belonged 0 the British. (Pinsent explained to me that the $105,000,000 was being switched gainst Belgian gold borrowed in Canada.) The French will thus acquire earmarked itle to gold which the British borrowed from the Belgians in Canada. We shall thus e buying the total $125,000,000 of gold directly from the British. Shortly after Mr. Pinsent's visit I talked, at 12:10 p.m. yesterday. with dmiral Noyes. He had received from his man in London the same word to the effect hat the cargo would contain $125,000.000 of gold. His message from London also made ertain inquiry in regard to the fuel which is desired at the South African port. He 8 replying directly on this latter subject. I repeated to him the message which insent had given me, as above set forth, and told the Admiral that I had insisted o Pinsent that all of the cargo be assembled at the one port. Regraded Uclassified 2r British Embassy, Washington, D. C. March 20th, 1941. Dear Cochran, With reference to my letter of March 3rd regarding the basis of composition of the lists of securities believed to have fallen into enemy hands, I enclose a copy of the circular to banks and bankers of the 28th of June, 1940, to which I referred. Yours sincerely, (s) R. J. Stopford Mr. Merle Cochran, Room 279, U.S. Treasury Department, Washington, D. C. Duplicate to Mr. Pehle 3/24/41 3 NOTICE TO BANKS AND BANKERS The Treasury have given notice that it is proposed to compile a list of numbers of bearer securities which there is reason to believe may have fallen into enemy hands. The list is being compiled by the Securities Control Office, Bank of England, E.C. 2, and full particulars, including names and ad- dresses of beneficial owners, place of deposit, definitive num- bers and denominations of such securities, should be forwarded to the Principal of that Office without delay: (a) In the case of securities issued in the United Kingdom through the medium of the Commany's Secretary or paying Agent in this country, and (b) In the case of securities issued abroad through the medium of a Bank in the United Kingdom. Bankers in many cases may be aware of the numbers of the bonds or warrants from which coupons have previously been sent to them for collection by persons residing in territory now occupied by the enemy. If they have no reason to suppose that the relative securities were removed from that country before the enemy occupied it, full details of the relative securities should be advised. Purely domestic securities of enemy occupied territory or securities for which there is no market in the United Kingdom should, however, not be advised; neither should securities held on account of persons residing in enemy occupied territory which are physically held in the United Kingdom. Bank of England, 28th June, 1940. Copy:bj Regraded Uclassified 4 GMW PLAIN London Dated March 20, 1941 REc'd 2:15 p.m. Secretary of State, washington. 1099, Twentieth. FOR TREASURY FROM BUTTERWORTH. The following press release appeared in this morning's London newspapers describing the British Government's agreements just signed with the Council of DEfense of the French Empire: "The British Government has signed with General DE Gaulle and the Council of DEfense of the French Empire two important agreements, which are animated with the same spirit of friendly collaboration as the financial agreement concluded with the French Government at the beginning of the war. "The first agreement provides for the credits neces- sary for financing the war Effort of the Free French. "The second deals with the financial relations and foreign Exchange questions between the British Empire and the territories of the French Empire which refused to accept the armistice. "In particular, Regraded Uclassified 5 ⑉2⑉ 1099, Twentieth from London "In particular, it fixes the rate of Exchange between the French Colonial franc and the pound sterling at 176.625 which was the parity of the franc against the pound before the armistice. "Each colony of the Free French Empire can freely dispose of the foreign Exchange proceeds of its Exports and gold production, under the control of the Council of DEfEnsE of the French Empire, which if necessary may use the surplus Exchange resources of one colony in order to meet the deficit of another for the needs of the Free French forces as a whole and in the common CAUSE of the Allies. "The arrangement is complementary to the Economic agreements which have been signed recently or are about to bE signed and which SECURE for the produce of the Free French colonies the market which it has lacked ainoe the loss of the French metropolitan market. "It also gives these colonies SCCESS to the supply facilities which are available to the British Empire, thus Enabling them to devote all their Efforts to participation in the war, not only in a military but also in an Economic sphere." WINANT HTM Regraded Uclassified 6 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Press Service Thursday, March 20, 1941. No. 24-10 3/19,41 Secretary of the Treasury Morgenthau announced last night that the subscription books for the receipt of cash subscriptions to the current offering of $500,000,000, or thereabouts, of 2-1/2 percent Treasury Bonds of 1952-54 closed at the close of business Wednesday, March 19, except for the receipt of subscriptions for amounts up to and including $5,000 where the subscribers specify that delivery be made in registered bonds 90 days after the issue date. The sub- scription books will be closed for the receipt of subscriptions of that class at the close of business tonight, March 20. The subscription books for the Treasury Bonds of 1952-54 and for the Treasury Notes of Series D-1943 for the receipt of sub- scriptions in payment of which Treasury Notes of Series B-1941, maturing June 15, 1941, are tendered, will close at the close of business tonight, March 20. Subscriptions of any class addressed to a Federal Reserve Bank or Branch or to the Treasury Department and placed in the mail before 12 o'clock midnight of the respective closing days will be considered as having been entered before the close of the subscription books. Announcement of the amount of subscriptions and the basis of allotment will probably be made on Monday, March 24. -000- Regraded Uclassified MARCH 20,1941 7 MAR 20 1941 - HOUSTON ON DEFENSE FINANCING LOUISVILLE KY - A P - THE NATION-S 15 000 BANKS WILL SUPPORT FULLY THE GOVERNMENT-S PLANS FOR NATIONAL DEFENSE FINANCING P D HOUSTON PRESIDENT OF THE AMERICAN BANKERS ASSOCIATION SAID TODAY IN AN ADDRESS BEFORE AN A B A REGIONAL CONFERENCE HOUSTON SAID THE BANKS WERE PLACING THEIR SERVICES AT THE DISPOSAL OF THE TREASURY DEPARTMENT BY OFFERING AID IN MOBILIZING THE NATION-S FINANCIAL STRENGTH AND IN DISTRIBUTING THE TREASURY-S NEW DEFENSE SAVING SECURITIES -IN FINANCING A STUPENDOUS PROGRAM LIKE THIS -NATIONAL DEFENSE- THE GOVERNMENT MUST DO MORE THAN FIND DOLLARS- HE CONTINUED - -IT MUST FIND THEM IN SUCH A WAY AS TO SAFEGUARD THIS COUNTRY AGAINST X X X INFLATION - IT MUST DRAW UPON THE X X X ACCUMULATED SAVINGS OF THE PEOPLE AND SPREAD THE FINANCING XXX- IT MUST FIND THE DOLLARS IN SUCH A WAY THAT MILLIONS OF AMERICAN CITIZENS WILL HAVE A SENSE OF PARTICIPATING IN THE DEFENSE OF OUR COUNTRY- -0- 8 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE March 20, 1941 TO Secretary Morgenthau FROM W. R. Hadley Movement of High Grade Corporate Bonds The market for high grade issues in the immediate vicinity of the new 2 1/2% taxable 11-13 year Treasury bond experienced 8. con- siderable revision downward in price during the last two days to bring yields more in line with this 2.50% coupon rate. Although trading activity in such corporate issues was rather limited, as has been true in the past, yields were variously increased from 0.12 to 0.25% above those existing on the day before the Treasury offering. This change may be the forerunner of a general revision of high grade corporate rates upward, although there is some feeling that the scarci ty value of many of these issues may tend to keep prices relatively stable. Nevertheless, as of the close of business today yields on highest grade corporate issues in the 1951 - 1954 range averaged about 2.42% as compared with 2.26% on March 18th. The yield on the new Treasury 2 1/26 bond closed at 2,37% tonight. The following table indicates changes in price and yield of selected high grade corporates in the 1951 - 1954 area between March 18 and March 20. Regraded Uclassified HIGH GRADE CORPORATES 1951 - 1954 Maturities Total March 18 March 19 March 20 Yield Maturity Issue Coupon Bid Yield Bid Yield Bid Yield Chg. 1951 Beneficial Ind. Loan 2 1/4% 99 3/8 2.32 99 2.36 98 1/4 2.45 +0.13 1951 Liggett & Myers 5 126 1/2 2.15 126 1/2 2.15 123 2.40 +0.25 1952 Ches. & Ohio Serial 2 97 1/4 2.30 96 1/4 2:40 96 2.42 +0.12 1953 Standard 011 of N. J. 2 3/14 105 1/8 2.26 104 3/8 2.33 103 1/2 2.41 +0.15 1954 Shell Union 011 2 1/2 96 5/8 2.81 96 1/4 2.85 96 2.87 +0.06 9 Regraded Uclassified 10 THE UNDER SECRETARY OF THE TREASURY WASHINGTON March 20, 1941 TO THE SECRETARY: your memo f March 19th The following agencies are spending money to train men and women in industry. Some of the programs involve direct spending for training by Federal agencies, such as the National Youth Administration and certain projects sponsored by the Works Project Administration; other programs are indirect, such as the Civilian Conservation Corps which to some extent involves the training of workers; and other programs are carried out by grants to States, for expenditures through State Colleges, schools, etc. Estimates of Appropriations Appropriations for 1941 for 1942 Federal Security Agency Civilian Conservation Corps $279,994,900 $270,000,000 Expenditures for all purposes, including salaries, food, clothing, project supplies, etc. National Youth Administration Youth work and student aid programs 95,984,000 95,984,000 ( 22,500,000 Defense activities 30,535,375 100,000,000 Office of Education Promotion of vocational education Grants to States for annual pro- gram under Act of 2/23/17 7,000,000 7,000,000 Further development of vocational education Grants to States for annual pro- gram under Act of 6/8/36 13,150,000 13,500,000 Supplemental estimate submitted Feb. 18, 1941. Bureau of the Budget advises that supplemental 1942 estimates may amount to this figure. 11 - 2 - Estimates of Appropriations Appropriations for 1941 for 1942 Office of Education (Cont.) Vocational Education, Defense Workers Grants to States 15,000,000 ) - Educational and Training, ) Defense Workers ) Grants to States ....... 26,000,000 ) - Purchase of Equipment ) Grants to States 8,000,000 ) - Cost of short engineering course ) of college grade ) Grants to States 9,000,000 ) 100,000,000 Cost of instruction for out-of- ) school rural youth, etc. ) Grants to States 10,000,000 ) - Cost of instruction of National ) Youth Administration project ) employees ) Grants to States 7,500,000 ) - Social Security Board Selecting, testing and placement of defense workers 2,000,000 - Federal Works Agency Project Limitation Works Projects Administration Direct projects: Nation-wide project to train persons for manual occupations in industries engaged in pro- duction for national defense 27,603,020 29,000,000 Connecticut-to operate a pro- duction and training project to engage in the making of certain crafts 201,218 - Nation-wide project to furnish trainees and train needy persons in the manual occupation of avia- tion ground service men, etc. 1,429,690 - $555,898,203 615,484,000 Bureau of the Budget advises that supplemental 1942 estimates may amount to this figure. This assumes & similar allotment out of 1942 funds when made available. DWB Regraded Uclassified 12 March 20, 1941 Ferdinand Kuhn Secretary Morgenthau Please send Alen Barth down to Louisville right away 80 he can see what kind of a reception Marion Edwards gets when he presents our savings bond plan; also how good a public speaker he is and how he conducts himself generally. Regraded Uclassified 13 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 20, 1941. Secretary Morgenthau ROM Mr. Kuhn Mr. Barth is going to Louisville tonight with Mr. Gale Johnston. J.R. 14 March 20, 1941 2:30 p.m. GROUP MEETING Present: Mr. Graves Mr. Thompson Mr. Sullivan Mr. Young Mr. Pehle Mr. Gaston Mr. Kuhn Mr. Haas Mr. Foley Mr. Schwarz Mrs. Klotz Mr. Bell Mr. Cochran Mr. White H.M.Jr: This is good, once in awhile, to have a 2:30 meeting and see who is back from lunch. Thompson: The Undersecretary and Harry White and Cochran aren't back yet. H.M.Jr: You see them come in with their chins covered with soup. Norman, I didn't sign that order because I didn't have a chance to read it. I don't know what you are trying to put over on me. Regraded Uclassified 15 - 2 - Thompson: Just those two things. H.M.Jr: Well, will anything happen if I don't sign them? Thompson: Oh no. H.M.Jr: I think we had better wait, but I want to talk to you about that. What else? Thompson: That will be all right. H.M.Jr: What else? Thompson: I have three or four new allocations on this authorization thing. H.M.Jr: How much extra does this give him? Thompson: That is a full grade reallocation, thirty- two to thirty-eight. H.M.Jr: All right on that. Where do I sign this? Thompson: Right here. That is all I have. H.M.Jr: Harold, did that go over all right this morning? Graves: Just fine. (Mr. White entered the conference.) H.M.Jr: Very well indeed. (Laughter) White: Just missed the last spoonful. H.M.Jr: Or the last glassful. Perlmeter made a -- (Laughter) (Mr. Cochran entered the conference.) Regraded Uclassified 16 - 3 - H.M.Jr: I didn't do this on purpose, pulling every- body out of the two hour lunch club. I am sorry. Wait until - we will give Bell the razzberry. Thank Perlemeter for his suggestion, will you? Graves: Yes. H.M.Jr: What else? Graves: I have nothing. (Mr. Bell entered the conference.) H.M.Jr: Good afternoon, Mr. Bell. Bell: Good afternoon. White: He is chairman of the three hour lunch club. Bell: It was a good lunch, anyhow. (Laughter) Sullivan: The service is getting terrible in these restaurants. Bell: No service at all. H.M.Jr: All right, Harold? Graves: Yes. H.M.Jr: The real purpose of this meeting was, I wanted to know whether anybody in the 9:30 staff has a cellar that stays at fifty degrees temperature where I could store my wine. Has anybody got a piece of cellar in their house? Sullivan: How big a cellar do you need? Regraded Uclassified 17 - 4 - White: Do you keep an inventory? H.M.Jr: About the size of the washroom. Sullivan: I have got it. H.M.Jr: Have you really? Sullivan: Just about. I think. I have never measured it. H.M.Jr: No stove? Do you know what the temperature is? Sullivan: No, but it is in the southeastern corner of the cellar. (Laughter) I should think it would be cool down there. It is walled off. I can lock it and give you the key, and then they will never know who took that bottle. H.M.Jr: Well, we will just see, you know. Have you any idea what the temperature is? Sullivan: No. I will take it for you. H.M.Jr: Would you? Sullivan: Sure. H.M.Jr: This would be a good time to take it. Sullivan: What about the sun? H.M.Jr: Is it fairly deep in the ground? This is important. Sullivan: It is about eleven and a half feet. White: Can't you build one in there? Regraded Uclassified 18 - 5 - H.M.Jr: Take 8 look at it, will you, and if you think it is & good place - what are the walls, are they stone? Sullivan: Stone, and then this part is cut off. White: What is the matter with some of the vaults downstairs if they don't have gold in them any more? H.M.Jr: We have been all through those. We have explored the Treasury. Gaston: They are heated, aren't they? Bell: I don't think SO. H.M.Jr: Anybody else got any offers? Sullivan: You asked me if I think it would be 52 in the summer time? H.M.Jr: Yes. Would it go up to 60? Sullivan: I don't know. White: How are you going to take the temperature in the summer time, John? Bell: Turn on the heat. Sullivan: The way you do that, Harry, is wait until summer and then take it. H.M.Jr: Take a look at it, will you, and if it is all right, would you tell Mrs. Klotz and I will move my few wine cases up there. I had it at a place where the man said it was air conditioned, fifty degrees the year around, and the boy went up there and looked at it and it was hotter than my celler. My cellar has no place where I can keep it. Regraded Uclassified 19 - 6 - Sullivan: I will take a peek tonight. H.M.Jr: Thank you. Thompson: The sun shines in the windows in mine. H.M.Jr: All right. That is settled. Bell? Bell: Mr. Eccles called up and he said he had authority from his executive committee to spend fifty million. H.M.Jr: Wonderful. Bell: He could get another fifty million if you needed it. H.M.Jr: Wonderful. Bell: I think I ought to mention that both the Federal Reserve and the FDIC have somehow or other gotten onto the fact that we are going to circularize the banks and are asking for information concerning the holding of the securities. Eccles wants the Federal Reserve Banks to do that job in each district, and FDIC are not so sure they would like to do it, but they would like to help and either get the information from us or have us get it from them. George is inclined to go ahead on his program. H.M.Jr: Which way is George going? Bell: He is going to get it himself and process it here in the Treasury, but I thought they might mention it to you some time. H.M.Jr: How do you feel? 20 - 7 - Bell: Oh, I don't have much feeling on it. George, I think, has got a good point. This is some- thing new and he wants to experiment with it in different ways, the size of the banks, the size of the communities, and he probably could do a better job by experimenting here where he could look at it than having it done in the districts by a similar organization. H.M.Jr: I am for George doing it. Let George do it. Bell: O.K. H.M.Jr: Got anything else? Bell: I would like to have a minute if I could, some time. H.M.Jr: Sure. One other thing. This thing that - I didn't read it. This thing that Jerome Frank sent over, is that control of the finances, private finances. Bell: Somewhat along that line, yes. It is about the same thing as & capital issues committee. I didn't read the executive order. H.M.Jr: Is there an executive order? Bell: There is a draft of an executive order attached. H.M.Jr: What I was thinking was this. Don't you think we had better get a letter off to the President saying that before he signs anything like this we would like to have a talk with him? Bell: Oh, I didn't understand that it was sent to the President. I think he wanted your comment before it goes. Regraded Uclassified 21 - 8 - H.M.Jr: Well, I just wonder if he hasn't sent it to the President. Foley: He made a speech at the War College, and he developed financing for defense and this was about a year ago. Now, I think they have asked him to go further and make more concrete his suggestions and that is his memorandum and the document. Bell: Doesn't he say in the last paragraph -- H.M.Jr: Yes, memorandum for the President, control of capital funds. Bell: These are all drafts, I am sure. H.M.Jr: Well, the easiest thing is to find out. I will make you a little bet of five to one he sent it to the President. White: Well, he indicates in the letter that he isn't going to do anything until he hears from you. Foley: That is right. He said this to the War College. Bell: Well, we will get in touch with him anyhow. I thought we might take a look at it while you are away. H.M.Jr: He says, "proposed memorandum to the President." I still make a little bet it is gone. But gents, if it has gone to the President, send & block signal to the President not to do anything until he talks to us, will you, please? Bell: Yes, sir. Regraded Uclassified 22 - 9 - H.M.Jr: Harold, everything in order? You know, we had a funny situation this morning, Harry. Normally when the press boys ask me twice a week what we are doing with China, I always say to see the Undersecretary, but he was sitting here this morning so I couldn't say it, so I said, "See Harry White." White: Fine. I will fix it. (Laughter) H.M.Jr: Anything else? White: You got a letter from Welles last night which indicates that the negotiations with Mexico are much further along than we had thought, and they are asking whether the Treasury is prepared to explore the possi- bilities of some monetary arrangements, et cetera. I have drafted a letter which won't be -- H.M.Jr: I want to congratulate you and Mr. Foley on the successful seeds that you sowed on the beaches of Mexico and it comes back, you see, like manna from the sea, and here we are right on our way. White: It didn't take long. I think that we earned our transportation. H.M.Jr: I think 80. (Laughter) White: We have to collect from Mexico, though. We weren't sure whether we were working for the United States or Mexico. H.M.Jr: Well, you see now. You will keep Mr. Welles in order while I am gone? White: Well, the draft of the letter would indicate that you are prepared to explore it at the appropriate time. Regraded Uclassified 23 - 10 - H.M.Jr: That doesn't answer my question. Will you keep Mr. Welles in order? White: I will keep him just as much in order as anybody else has ever kept him. (Laughter) H.M.Jr: Including Mussolini. George? Haas: I have nothing. H.M.Jr: Philip, what you want to say, can you say it semi-publicly or does it have to be whispered in my ear? Young: Oh no, it can be quite public, I think. Last night you said you were considering the possibility of sending a letter to the Secretary of State with respect to this transfer of foreign purchasing. I wrote up 8. draft. I don't know whether you still want to send it or not. H.M.Jr: Well, as far as I am concerned, it is not necessary. It is a question of how you feel. Young: Well, certainly the State Department hasn't had any official notification, 80 far as I know, and all these fellows are going to turn up over there. H.M.Jr: Well then, after this meeting, if you and Foley and Cochran could get together, whenever the letter is ready, let me know. Now, in the room here, something has happe which couldn't happen, I don't think, any- where else but Washington. Maybe it could happen somewhere else, I don't know. But as of last night, certainly, in talking with Young and Cox, Hopkins left his work amongst Regraded Uclassified 24 - 11 - five or six people. That is about right, isn't it? Young: Yes, that is right. H.M.Jr: And that is the way Purvis said, who I saw at lunch, he understood it, and Purvis was just amazed when I told him that Colonel Donovan was taking over. So I got back to thinking, and so he said, "Well, all you must have done was to hypnotize him, because when I talked to him last night he had certainly no idea of taking over." So maybe I sold him instead of his selling me, but Purvis said Donovan had no idea last night he was to do all of this. Young: Well, I understood Donovan to say this morning he was just taking over on this Middle Eastern list which he had, not on the broader problem. H.M.Jr: I think he is taking over on the whole thing for Hopkins. Young: I didn't get that impression at all this morning. H.M.Jr: Didn't you? No? Well, we will see, anyway. You haven't heard from him further? Young: No, I haven't heard anything. H.M.Jr: Neither have I. Foley: Well, Oscar said he left everything with Burns. H.M.Jr: Well, certainly when Donovan left here, I gathered from him that the matter is entirely in his hands, and I called my people in and 25 - 12 - said to give him all the help they could. He is the first man I have talked to that I would be willing to really back. I saw what he did last summer. But what I said still holds true. Anything you can do to help him, because he certainly is - he has been for a week actually in the trenches up in Albania. He was down in Libya when they took that last town, whatever the last town was. He was with Wavell for over a week. He was with Eden in Cairo. He has been twice in England. He has been in Spain and he has been in Portugal. I think he knows more about the situation than any- body I have talked to by about a thousand per cent. And he is not discouraged. White: That is all good preparation for Washington. (Laughter) H.M.Jr: What do you mean, Harry? White: I mean, he ought to be at home in all the fighting that is going on. H.M.Jr: Well, he is a fighter, don't worry. Klotz: I don't know what I am laughing at. H.M.Jr: You are just laughing at Harry. Anyway, any help that anybody can give him in this group, I would appreciate it. But you (Young) are going to draft a letter. Young: I have one already drafted. H.M.Jr: Well, let these two gentlemen take a look at it, will you? Then when you are ready, I will let you know, Bell. You and I will look at it after they get it done. Regraded Uclassified 26 - 13 - Bell: O.K. H.M.Jr: Anything else? Young: No. Kuhn: Do you want to see Allen Barth's surveys with the clippings while you are away? H.M.Jr: Yes, please. Kuhn: Would you like them oftener than once a week? H.M.Jr: The clippings? Surveys? No, once a week. Kuhn: Right. H.M.Jr: You got my message? Kuhn: He is leaving tonight. H.M.Jr: I thought it might be worthwhile. Kuhn: It is a good idea. H.M.Jr: Anything else? Kuhn: That is all. Pehle: I have nothing. Cochran: We are selling the bank of Brazil twelve million dollars of gold. It is evidently the proceeds of that transfer from the Yugoslav account. H.M.Jr: And the gold will stay here? Cochran: The gold is staying here, earmarked with the Federal. Regraded Uclassified 27 - 14 - H.M.Jr: Anything else? Cochran: No, sir. Sullivan: Have you seen Dr. Gulick? H.M.Jr: Have I? No. Sullivan: He was due here Tuesday, and I telephoned New York and they said he was in Washington. He registered at the Hay Adams, but I haven't been able to reach him. Is it your under- standing that the Carnegie Corporation are going to carry the charges here on everything except Dr. Gulick? H.M.Jr: No, you were here -- Sullivan: That is right, and I don't recall that that was mentioned at all. The extent to which we were going to finance them. H.M.Jr: I never - well, every discussion I had with him, you were present. Sullivan: That is right, and there was no - there has been no understanding on that. H.M.Jr: No. Bell: I thought the understanding was that we would finance it so far as we could and somebody would finance the excess, either the - Gulick's organization or the Carnegie would help Gulick's organization. Sullivan: That was all right up to the point where they said they had three hundred twenty-five thousand dollars. Then I began to think that they were going to do it. Regraded Uclassified 28 - 15 - H.M.Jr: Somebody asked me to - my understanding was that we pay the $22.50, but where the man got more than that, either Gulick's organization or the Carnegie would make up the difference. Is that right? Bell: That is right. And then Carnegie would help Gulick's organization. They were not in the picture at all, so far as we were concerned. Sullivan: That is all right. I just wanted it under- stood. H.M.Jr: Well, if he doesn't show up, call up Randolph Burgess. Sullivan: Bruere. H.M.Jr: Yes. Sullivan: He is the fellow who knows about it. H.M.Jr: And ask him. Sullivan: I will. Mr. Doughton called up yesterday afternoon. He was very, very much agitated and I went up and he was terribly disturbed about all the newspaper stories reporting a high Treasury official had said this, that and the other thing. The Republican members of the House are riding him on it, and I haven't seen him so disturbed about anything since the Pearson and Allen story last summer. He was very anxious that you should make - give a statement saying that the Treasury had not discussed this with anybody. H.M.Jr: Discussed what? Sullivan: Taxes, new tax policies. Regraded Uclassified 29 - 16 - H.M.Jr: I said that. Henry Morgenthau, Jr. said we have no plan until after the first of April. There is no high Treasury official. Sullivan: No. I understand that, sir, but there have been a lot of stories for the last two weeks -- H.M.Jr: Has there been anything since Monday? Sullivan: Yes, the Tuesday papers have it. H.M.Jr: Well, my Monday press conference quoted me verbatim. There is no high Treasury - look at my press conference Monday, what I said. Sullivan: I understand that, but all of these fellows are writing stories which they attribute to the Treasury. H.M.Jr: I haven't seen any. Sullivan: There have been a lot of them. H.M.Jr: I haven't seen any. I would like to see one. I would like to see one that says high Treasury official that has been written this week. Schwarz: There was one Tuesday. Sullivan: There was the Tuesday morning paper. There was the Sunday - there were the Monday after- noon papers. Mr. Doughton called in Mr. Cooper, who doesn't get excited, and he reached in his pocket and pulled out a long, long story from the Sunday Star. H.M.Jr: No one has brought it to my attention. Sullivan: Well, that is why I am doing so now. Regraded Uclassified 29 - 16 - H.M.Jr: I said that. Henry Morgenthau, Jr. said we have no plan until after the first of April. There is no high Treasury official. Sullivan: No. I understand that, sir, but there have been a lot of stories for the last two weeks -- H.M.Jr: Has there been anything since Monday? Sullivan: Yes, the Tuesday papers have it. H.M.Jr: Well, my Monday press conference quoted me verbatim. There is no high Treasury - look at my press conference Monday, what I said. Sullivan: I understand that, but all of these fellows are writing stories which they attribute to the Treasury. H.M.Jr: I haven't seen any. Sullivan: There have been 8 lot of them. H.M.Jr: I haven't seen any. I would like to see one. I would like to see one that says high Treasury official that has been written this week. Schwarz: There was one Tuesday. Sullivan: There was the Tuesday morning paper. There was the Sunday - there were the Monday after- noon papers. Mr. Doughton called in Mr. Cooper, who doesn't get excited, and he reached in his pocket and pulled out a long, long story from the Sunday Star. H.M.Jr: No one has brought it to my attention. Sullivan: Well, that is why I am doing so now. Regraded Uclassified 30 - 17 - H.M.Jr: Well, I am not going to do anything about it, because I haven't - I talked on the record and my press conference is there and here I have got Schwarz and I have got Kuhn and no one has told me anything about it. I don't know what you are talking about. Sullivan: I am just trying to convey to you the very great excitement of Mr. Doughton, who -- H.M.Jr: But give me something to show me what he is excited about. I made an on the record statement after talking to him Monday morning in which I said that we had nothing, and I talked to Mr. Doughton. It is all there. If you had gone up there - if you had talked to me before you went up there, I could have shown you my statement. He read me his statement over the telephone. Sullivan: Yes, I knew about that. H.M.Jr: I don't know what you are - when you come in, show me something about what high Treasury officials said. What does he hang this thing on? Sullivan: There isn't anything that a high Treasury official has said, sir. It is these stories the newspapers are writing which they attribute to a high Treasury official. H.M.Jr: Show me the story. Show it to them. I can't be bothered with it. I can't be bothered with Doughton. Doughton has nothing to hang his hat on as long as I haven't seen the story, and here is my press section and if they are not disturbed, I am not going to be disturbed. Sullivan: All right. I am just reporting to you that he is very much so. Regraded Uclassified 31 - 18 - H.M.Jr: Then let him call me up, John. I don't know what it is all about. Sullivan: He called me because he thought you had left, and he asked me to tell you particularly that that is why he had called me. H.M.Jr: Did you take up my press conference Monday to show him that? Sullivan: No, I did not. H.M.Jr: Well, I would have taken it up. You had better get a copy of my press conference. Sullivan: I have it. H.M.Jr: Then why don't you take it up and show him? Sullivan: Because that doesn't answer his problem, sir. H.M.Jr: Let's skip it. Sullivan: It is all right with me. He is the fellow on whom we are relying. That is the reason I brought it up. H.M.Jr: I don't know what you do up there, but when I talked to him Monday morning he was sweet as sugar, and if I was sent for and had this, here it is, I would show him what I said. That is what I am trying to get over to you. Sullivan: I am writing him a letter and I am setting out what you said Monday, but that doesn't answer his objections. His objection is not what you said, his objection is that we are allowing to go uncontroverted, a lot of stories on a lot of tax things which he says is making a fool out of him before all the other members of Congress. That Regraded Uclassified 32 - 19 - is why all of his talk about being a rubber stamp, that we are not consulting him. He says story after story appears which is attributed to the Treasury, and the Treasury doesn't deny it. H.M.Jr: Well, Chick, would you please show me any stories? Have you seen any stories? Schwarz: There were one or two. H.M.Jr: Since his statement, since Monday? Schwarz: Only one Monday, which the boys said they wrote based on Monday's conference which they thought was to clear up the atmosphere, that there - that nothing was being discussed. They said a high Treasury official said no unorthodox methods, or something like that, which was a conclusion they drew from Monday's conference. I feel that it is -- H.M.Jr: Have you talked with Schwarz about it? Sullivan: Yes. I talked to him the minute I got back yesterday afternoon. I talked with Mr. Schwarz and Mr. Kuhn and Mr. Tarleau and Mr. Blough and Mr. Surrey. We prepared what we thought might be done this morning. Schwarz: The boys told me that Mr. Doughton objected to the rumors about post tax legislation and in the next ten minutes he was dropping rumors himself. H.M.Jr: Well, without seeing him, my own feeling is that I would forget it. Sullivan: All right, sir. H.M.Jr: What do you think, Ferdie? Regraded Uclassified 33 - 20 - Kuhn: I think there have been many stories, many, many stories since your press con- ference of Monday, making it clear that nothing was going to be done until after April 1. I think that idea has gotten across. I think that is more - should be more important to Doughton than one story on Tuesday morning in the other direction. I think the papers have been good on the tax thing this week. H.M.Jr: Do you think we ought to do anything more? Are you familiar with it? Kuhn: Yes. I think if John agrees, it might be worth sending the transcript of what you said on Monday, and also the remark you made this morning saying that we are going to rest on our oars until we get an invitation from Mr. Doughton to go up and discuss the thing with him. You said that on the record this morning. H.M.Jr: Can't do any harm. Send it up. Is that all you are going to do, is send it up? Sullivan: That is all, I think, that can be done now. I don't see anything else that can be done. Bell: Why can't John say in his letter -- Sullivan; I am going to talk to him and try to explain to him that we thought this was covered on Monday. If it were anybody but Mr. Doughton, I don't think we would be in this position. He feels it very keenly and the Republican members have been ribbing him unmercifully. I don't think there are very many other men up there who would have the same reaction to it at all. 34 - 21 - H.M.Jr: Well, I don't want to - well, the only thing I can think of is to send him verbatim what I said at Monday's conference and this press conference. Sullivan: I will do that. That is all I have, sir. H.M.Jr: I would keep away from him, John. That is all I can say. Sullivan: Yes, but he called me. Oh, you mean from now on? H.M.Jr: Well, I mean - I don't know why there is so much trouble. I never had any trouble with him. I don't - the trouble is - well, let's - anyway. Sullivan: He called me. I didn't go up to him. H.M.Jr: O.K. What is it, Ed? Foley: Here is the memorandum for the diary. Jim Forrestal wants one of our lawyers by the name of O'Dunne who has been working on the Associated Gas and Electric case. He thinks that in this investigation of the defense contracts which Truman is going to carry on, if Hugh Fulton, who is the assistant United States Attorney who handled the Hopson case up in New York was appointed counsel for Truman, that it would be well if he could have O'Dunne and have him familiar with the Navy contracts and pro- cedure and then have O'Dunne taken over to Fulton so that he could carry it out. I am willing to let him go. H.M.Jr: O.K. What else? Regraded Uclassified 35 - 22 - Foley: That is all. Gaston: Shall we wait until we get the Solicitor General? H.M.Jr: He called me. I tried him all morning and now they say he is in and I am going to call him. Gaston: You didn't want me to do anything about that Iowa thing, did you, about the Vice-President? I am inclined to just let it slide. George Brennan wanted you to know that he was in a receptive mood, and if there are any appoint- ments to the Federal Reserve Board passed around - George Brennan of the Farm Credit. If it should come to your attention. He wasn't asking you to do anything, but if it came to your attention he wanted you to know that he was in a receptive mood. H.M.Jr: Well, for those who I won't see again, I will try not to call you up; and I hope you all get a little vacation. I think the sun will be out. I say, you will be calling me instead of my calling you. If you would confer with Mr. Bell and Mrs. Klotz before you call, I would appreciate it. Gaston: If I get permission from Mr. Bell, you don't mind if I am out of town two or three days at a time? Bell: That is the purpose of this statement. H.M.Jr: I encourage each and all of you to get a little holiday. John, do you want to run down to Florida? 36 - 23 - Sullivan: I don't think I can, thank you very much, sir. She is coming home in two weeks from Saturday. H.M.Jr: It is a good time if you want to run down. Sullivan: Thank you, but it takes too long to get there. H.M.Jr: You might settle your public relations troubles. Schwarz: On a Florida beach? H.M.Jr: All right. Regraded Uclassified 37 March 20, 1941 3:06 p.m. H.M.Jr: Hello. Operator: Congressman Doughton. Bob Doughton: All right. H.M.Jr: Bob? D: That you, Henry? I thought you were away up in New York or New England or Canada or away down in Mexico or Florida somewhere. H.M.Jr: Well, I can't be everywhere at the same time, 80 I'm still in Washington. D: Well, you can come as near as anybody I know of. H.M.Jr: I'm leaving tonight. D: Well, I hope you have a wonderful trip. H.M.Jr: How are you feeling? D: Oh, about the same, Henry. Nothing to brag about and nothing to complain about. H.M.Jr: Got any worries? D: How's that? H.M.Jr: Are you worrying about anything? D: Well, no acute worries, no. I have plenty of chronic ones all the time. H.M.Jr: Good. Well, I just wanted to know before I left whether you still were hitting on all sixteen cylinders. D: Well, I talked with your right-hand man, John Sullivan, yesterday about these repeated stories in the press about the way you all are writing tax bills down there. He told you about it, didn't he? Regraded Uclassified 38 - 2 - H.M.Jr: Yeah. Well, you know it doesn't come from, down here. D: Well, I W&B sure of that. I've been sure of that all the time but they keep telling it does and it seems to me like - I don't know, I can't speak for you all down there, but if they kept quoting me and anybody on my committee of making a statement, I'd just call them down someway, pretty rough and hard. It 18 quite embarrassing to our folks, you know, although after I made my statement why that's dropped as far as I'm concerned. H.M.Jr: Well, there's nothing more you want us to do down here 18 there? D: How's that? H.M.Jr: Is there anything you'd like me to do? D: Well, didn't John tell you what I suggested? H.M.Jr: Well, we're sending you up - I did say something this morning at my press confer- ence, that we were doing nothing. D: Well, that's the thing to do now. That's what I suggested - - something of that kind - that these stories 80 far as the Treasury was concerned were entirely unreliable and without any ground. H.M.Jr: Well, if you don't mind my saying it, I wouldn't take them 80 seriously. D: Well, I don't, but my committee, you know, are both Democrate, of the majority and minority members and they keep muttering about it and seem to be embarrassed and worried about it and feel like that ...... H.M.Jr: Well, with your fine reputation you're above all of that. D: How's that? Regraded Uclassified 39 - 3 - H.M.Jr: With your fine reputation you are above all of that. D: Well, I thank you, but it's all right. Whatever of course you think about it. It's very unjust to us all for them to keep doing that but what's the best treat- ment, of course, that's a matter for you to determine. Whatever you do about it will entirely satisfactory to me. H.M.Jr: Well, John is sending you up a verbatim copy of what I said Monday and today at my press conference. D: How's that? H.M.Jr: John Sullivan 18 sending you up today a verbatim copy of what I said at my press conferences on Monday and today. D: Yes. Did John tell you about our little short conference - not conference, but conversation he and Jay and myself had about tax procedure? H.M.Jr: Yeah, he mentioned it. D: Yeah. I think when the President gets back - we had one conference you know - it would be mighty fine for us all to get - together again and get us started out and all as near headed in the same direction with the same objectives and the same thoughts as we can. H.M.Jr: Well, we'll do it under your leadership. D: How's that? H.M.Jr: We will do it under your leadership. D: Oh, no. Not my leadership. Leadership of you and the President, but we'll all work together. I'm not a leader; I don't lead in my committee; I try to work along with the boys, you know. Regraded 40 - 4 - H.M.Jr: Well, I'll take my leadership from you. D: Oh, thank you, Henry. You're entirely too gracious and entirely too kind, but I appreciate the compliment just the same. H.M.Jr: All right, Bob. D: Well, a good time to you. H.M.Jr: Thank you. D: Good-bye. 41 March 20, 1941 3:29 p.m. Francis Biddle: I'm leaving town tomorrow. H.M.Jr: Who 1s? B: Yeah. H.M.Jr: You are? B: Yeah. H.M.Jr: Well, who's going to be Attorney General? B: McGuire. H.M.Jr: Uh-oh. B: What have you got on your chest? H.M.Jr: Well, I've got this. I don't know whether you've ever heard of a man by the name of "Nucky" Johnson of Atlantic City. B: Why, "Bucky" Johnson is the famous graft mayor down there. H.M.Jr: No, Nucky. (Enoch). B: Nucky , yes. I know all about him, yes. H.M.Jr: Well, we're ready to go ahead and try to get the man indicted. B: Yeah. Fine. H.M.Jr: Now, what I'd like is before you go away, very much, because what we need is a judge from outside the state - we don't think any of the New Jersey judges will do - ..... B: I agree. H.M.Jr: And what we'd like is if you'd see Herbert Gaston and Ed Foley and Elmer Irey and give them fifteen minutes to tell the story, because we want ...... 42 - 2 - B: I know the story pretty well now. I was at Atlantic City not long ago and went over the story with our agent down there. H.M.Jr: Yeah. B: I'll be very glad to see them and they can come over this afternoon at 4:00 o'clock if they can. H.M.Jr: They'll be there. B: 4:00 o'clock. H.M.Jr: They'll be there at 4:00 o'clock. B: Henry, is there any talk of difficulty with getting our opinions down and all that? H.M.Jr: How do you mean? B: For the defense? Harry said something to me day before yesterday which made me think ..... H.M.Jr: Harry? B: Harry Hopkins - that our opinions weren't coming through with the type of zest that they wanted, but you know all of those fellows are awful kickers. H.M.Jr: I don't know that I follow you. B: Legal opinions from our office with respect to what you can do in the defense situation. H.M.Jr: This is Harry Hopkins? B: Harry Hopkins mentioned something about it. H.M.Jr: I don't know what he's talking about. B: I didn't either; he didn't specify, but you haven't heard anything of that kind. 43 - 3 - H.M.Jr: No. Bicholdo Right-o. H.M.Jr: But this thing I do. Now, one other think while I can. Bridelde Yeah. H.M.Jr: I'll ask Gaston to hand you this. I've got a letter - I'm just going to give it to you - from a man by the name of Ernest Bohn who runs the Cleveland Housing Administration, and he's interested in this new Federal judgeship in Cleveland. B: Yes. H.M.Jr: And he sent me this editorial that I'd like to hand you recommending Attorney Marc J. Grossman, and I'd just like to put it in your hands for whatever it is worth. B: Delighted. Will you send it over? H.M.Jr: I'll ask Gaston to give it to you. B: Fine. All right, Henry. H.M.Jr: And they'll be there at 4:00 o'clock. B: 4:00 o'clock. That's fine. H.M.Jr: Thank you 80 much. B: Good-bye. Regraded Uclassified 44 Copy given to Mr. Bell 3/20/41 ack'tas fled 3/29 sec uply dated 3/20 + Hyris material is veing hansfd further letter kaging 15 March 20, 1941 My dear Mr. Secretary: In my letter to the President dated March 12, 1941, copy of which I sent to you, I recommended that all foreign countries outside the lend-lease area desiring to pur- chase military supplies in this country sub- mit their needs to the Secretary of State. I have instructed Mr. Philip Young, the Treasury member of the President's Liaison Committee, to accept no new business from such countries beginning today. It is my under- standing that Mr. Young has already discussed this problem with Assistant Secretary of State Acheson in order that the transition with respect to both new and pending foreign pur- chasing operations may be consummated with as little difficulty as possible. I have been informed that purchasing opera- tions by Poland, Iceland, Greenland, Netherlands, Greece, China, British Empire, and Norway are interpreted to be within the lend-lease area and will be supervised by Mr. Harry Hopkins. The members of my office experienced in foreign pur- chasing operations will be delighted to assist representatives of your Department in connection with the foregoing. Sincerely, (Signed) I. Margenthen, Jr. The Honorable, The Secretary of State. PY:bj By Monsemer 515 Regraded Uclassified 46 March 20. 1941. Dear Nathan: I received and read your letter of March 12th, and vas very glad to 140 Mr. Isterik. After talking with him, I turned his over to several of w associates here in the Treasury who are now working with him to ⑉ what may be done. 10 vas a pleasure to do this. Ve are both 00 gind that you are getting better. and hope that the improvement steadily continues. I - leaving this evening for Tusson, and Nliner will join me there is a few days. with best wishes from 18 both, Sincerely, (Signed) Henry Mr. Nother Streets, Quarty Laire, Valballa, New York. CHF/des Regraded Uclassified 47 Kerch 20, 1941. Dear Nathan, I received and read your letter of March 12th, and vas very glad to see Mr. Istorik. After talking with him, I turned him over to several of my associates here in the Treasury who are now working with him to see what may be done. It vas a pleasure to do this. Ve are both 80 and that you are getting better. and hope that the improvement steadily continues. I - leaving this evening for Tusson, and Eliner will join - there in a few days. with best wishes from - both, Sincerely, (Signed) Henry Mr. Nathan Straus, Quarty Lake, Valhalla, New York. ony/des Regraded Uclassified 48 March 20, 1941. Dear Wathans I received and read your letter of March 12th, and was very glad to see Mr. Istorik. After talking with him, I turned him over to several of my associates here in the Treasury who are now vorking with his to see what my be done. It vas a pleasure to do this. Ve are both 80 gind that you are getting better. and hope that the improvement steadily continues. I - leaving this evening for Tusson, and Eliner will join no there in a few days. with best wishes from us both, Sincerely, (Signed) Henry Mr. Mathan Strans, Quarty Lake, Valhalla, New York. GEF/dbs Regraded Uclassified 49 DUARRY LAKE VALHALLA NEW YORK March 12, 1941. Dear Henry: The enclosed letter reached me this morning from my friend, Edward Norman. In case you do not know Mr. Norman, I may say he has given of himself, his time, and his means unstintingly for years in the interest of Palestine -- this despite certain grave differences of policy between him and the Zionist organization, from whom he holds completely aloof. I do not know Mr. Istorik, however, I have sufficient confidence in Mr. Norman's judgment to believe that if you can find time it might be well worth while to see Mr. Istorik as Mr. Norman suggests. I am working several hours a day up here at Quarry Lake and hope to be able to return to Washington and full time work within two or three weeks. I cannot tell you how much I was pleased and touched by Eli's several visits. Fondly, Nathan per H.S.S, Hon. Henry Morgenthau, Jr., 2211 Thirtieth Street, N. W., Washington, D. C. Enclosure. Regraded Uclassified 50 EDWARD A.NORMAN 00 BEAVER STREET NEW YORK,N.Y March 11, 1941 Mr. Nathen Straus Quarry Lake Valhalla, New York Dear Nathan: For several months I have been in touch with Mr. Leo Istorik, the London Director of the Anglo-Palestine Bank. He is here in connection with arranging some financial matters for the Bank that I consider to be soundly con- ceived and of great importance, not only to the Jewish cause, but also to the British. Mr. Montague Norman, Governor of the Bank of England, has cooperated with Mr. Istorik in formulating these plans, and it was at the suggestion of Mr. Norman that Mr. Istorik came here. Mr. Istorik has been working here in cooperation with the British Embassy, and I believe has made progress with his plans. Now Mr. Istorik tells me that he thinks the time has come when he ought to have a talk with the Secretary of the Treasury. He feels that it would be better if he were introduced to Mr. Morgenthau privately rather than through the Embassy, and for this reason he spoke to me, and that is why I am writing to you. I have known Mr. Istorik for a number of years, and have the highest regard for him, and am sure that what he is working at deserves encouragement. Incidentally, he is a brother-in-law of Isreel Sieff, of London, who is now here, and whom perhaps you know. I would be most appreciative of any help you might give in arranging an appointment for Mr. Istorik with Mr. Morgenthau. Mr. Istorik is now at the Shoreham Hotel in Washing- ton, and Mr. Morgenthau's office could reach him there, or word could be sent to him through me. With kindest regards and best wishes for your rapid and complete recovery, Cordially yours, El EAN FSW Regraded Uclassified 51 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 20, 1941. The Secretary OM Mr. Foley After the meeting in your office Bernstein spoke to Istorik for about an hour. Istorik had the following to say: (1) The Anglo-Palestine Bank wanted to increase its liquidity to the extent of about £1,000,000 because of the possibility of the withdrawal of its deposits if the British position in the Middle East was weakened. Istorik asked Montague Norman for help and Norman suggested that Istorik try borrowing money in the United States. (2) The Anglo-Palestine Bank wanted to sell increased shares in the Bank and also to sell certain of its non-liquid investments in Palestine. Istorik felt that there would be no market for such assets in the United States unless he tied in the Anglo-Palestine Bank's borrowing with borrowing by the Palestine Foundation Fund which had a branch in the United States and which branch received annual- ly donations in dollars and would use such dollars to repay the loan. Istorik also felt that he would have a better chance of raising the money in this country if the borrower Regraded Uclassified 52 - 2 - were to be an American institution. It is for these reasons that the loan to the Anglo-Palestine Bank is tied in together with the loan for the purposes of the Palestine Foundation Fund. (3) Istorik realizes that his proposition is not a business proposition in the ordinary sense, that the RFC or other United States Government agency would, in effect, be lending dollars to finance activities in Palestine of the Anglo-Palestine Bank and of the Palestine Foundation Fund, that there might be important and sound criticism if a United States Government agency were to engage in such 8. transaction, and that the British Government might use such a loan as a precedent to ask the United States Government to lend dollars against the stock and other sterling assets of other British banks. (4) Istorik would, of course, like to have some private American business or banking institution buy or otherwise dispose of the shares of the Anglo-Palestine Bank, but apparently he feels this is unlikely and he feels that it would definitely hurt the position of the Bank if he were to try to dispose of the Bank's shares and assets on a philanthropic basis and be refused. He wished that he Regraded Uclassified 53 - 3 - had had better entree in American banking institutions and with other Americans who could be of help to him in this matter. (5) Istorik did not seem at all surprised by the Treasury's reaction to his proposal. Ben Cohen had indicated to him that although the scheme was clever he didn't think the Government would support it. Istorik felt that his in- ability to raise the money in this country would help him with Montague Norman in that he could tell Norman of his effort to raise the money here and his failure to do so. Istorik felt that in view of the importance of the Anglo- Palestine Bank, the British Government and the Bank of England would have to lend the Bank help in & pinch. Istorik indicated that he might call on Bernstein again in the near future to discuss the problem and hoped that he might have some opportunity, when the Secretary re- turned from his vacation, to discuss Palestine problems with him. Istorik wanted the Secretary to know of Montague Norman's friendly and helpful attitude with respect to the Anglo- Palestine Bank. q.11. 54 March 20, 190. Captain Martin I. Netcalf, USE, Room 1704 Havy Department, Washington, D.C. Bear Captain Metcalfs At the request of Captain D. J. Callagham, Noval Aide to the President, I an returning to you certain - fidential papers which Captain Callaghan gave to Secretary Morganthau to read. Very truly yours, (Signed) Herbert B. Gantes Herbert 1. Certem Assistant Secretary of the Treasury. CC: Captain Callaghan, The White House. ations, dated February 19, 1941. from Captain Metcalf to The Chief of Naval Oper- Carbon of memo from P.R. Smith to Captain Netcalf, February 17, 1941, subject: Inspection Trip to Halifax. Observations by Chief of Naval Staff of Canada, Ottawa en sita- event of U.S. participation in war. ation regarding Naval control service in Ottawa area in the Pages from The Star Weekly, Toronto, February 15, 1941, containing article entitled "Mounties of the Sea Lanes." cc. Miss Channecy Regraded Uclassified THE WHITE HOUSE WASHINGTON inemo for fearitary Maryenthan- These are the papers about which spoke to you over the phone It you mine whin there to Crpx. neartin K. metery usn Room no4, roog Depx. when you are thing h with them Id appreciate it D Respy Caringha Op-388-0-ow CONFIDENTIAL February 19, 1941 From: Captain M, K. Metcalf, USN, (ret.) To: The Chief of Neval Operations Via: Official Channels Subject: Visit of certain officers to Halifax, Nova Scotia. 1. I have to report that the following officers visited Halifax, Nova Scotia, to study and observe the operations of the Naval Control System, routing and despatching of convoys, etc., from that point:- Cantain M. K. Metcalf, USN., Operations Officer, Naval Supply and Transportation Service Section of 3hip Movements Division. Commander W.E. Hall, USN., Assistant Operations Officer, Naval Supply and Transportation Service Section of Ship Movements Division. Lt. Comdr. P. R. Smith, USNR., Assistant Operations Officer, Naval Supply and Transportation Service Section of Ship Movements Division. Captain M. Milne, USN., Port Director, First Naval District. Captain 1. 0. Reinicke, USN., Port Director, Third Naval District. Captain J. B. will, USN., Port Director, Fifth Naval District. Captain E. M. Williams, USN., Port Director, Sixth Naval District. 2. The party remained in Halifax for two days and three nights, arriving at Halifax 10 February 1941. 3. Free rein was given all members of the party by the Royal Naval and Canadian Naval authorities. All publications pertaining to convoys were made available for study. The actual forming of & large convoy, together with routing and convoy Regraded Uclassified Op-388-0-ow CONDIDENTIAL instructions, WAS witnessed by all officers. All officers were present at A final convoy conference prior to convoy sailing. 4. The Naval Control System office at Halifax, under command of Commodore G. C. Jones, R.C.N., forms all convoye leaving Halifax, sets speed of convoy, inspects all ships of the convoy before salling, ascertains that all ships are properly loaded, etc., and on instructions from Ottawa, sete time of sailing and routes to be followed. 5. The sea and air defenses of the harbor, the escorting vessels, the sortie protection, the channel sweeping, etc., are under direct charge of Rear Admiral Bonham-Carter, R.N., and his staff. 5. All convoys are under the direct chamand of a Commander, R.N. Reserve, who 1a charged with the maneuvering of the convoy, zig zage to be used, etc. The excort vessel acts as protection only and 16 in charge of all vessels that may be used for escort duty. An interesting phase of those officers detailed as convoy commodores 18 the fact that all Commodores are retired Royal Naval Officers of the rank of Rear Admiral, or above, who voluntarily accept a commission as Commodore, R.N. Reserve. This list includes a former Commander-in-Chief, Mediterranean Fleet, a former Commander- in-Chief, Aslatic Station, a former Sea Lord of the Admiralty, and others; their staff consists of two Royal Navy signalmen only and they are usually quartered on the largest ship of the convoy and mece with the ship's officers. 7. Appended hereto 1a a more detailed report submitted by Lt. Comdr. P. R. Smith who was made historian for the trip. The various Port Directors who were with the party have been requested to submit to me, any questions or recommendations they may see fit to make and if from their reports any pertinent recommendations seem necessary, they will be forwarded under separate cover. M. K. RETCALF -2- Regraded Uclassified Op-388-02-ew February 17, 1941 Consi MEMORANDUM FOR CAPTAIN METCALF Subject: Inspection Trip to Halifax The party consisted of the following officers: Captain Martin K. Metoalf, USN, Washington; Captain F.G. Reinicke, USN, New York; Captain M. Milne, USN, Boston; Captain J. B.Will, USN, Norfolk; Cantain E. X, Williams, USN, Charleston, B.O.; Commander W. E. Hall, USN, Washington, and Lt. Comdr. P. R. Smith, USNR, Washington, 111 of whom arrived in Halifax at about 9:30 pm. Munday, February 10, 1941, where we were met by Captain C.M. Read, USN, United States Naval Attache, Ottawa, Canada. Captain Read escorted us to the Hallfax Naval Station he next morning, where we met Comdr. Richard H. Oland, R.C.N., he Naval Control Service Officer, and his assistant, Comdr. Banyard. we were then introduced to Commodore G. C. Jones, R.C.N., genior Canadian naval officer, C.O. Atlantic Coast, and in charge of all Canadian activities in Halifax. Comdr. Oland then arranged to form our party into two roupe and turned us over to Lt. Lambkin who outlined his duties if instructing masters of merchant vessele engaged in confoy duty etween Canadian and U.K. ports. H1s duties consisted mainly of heoking with each master as to whether or not he had the required apera, forms, etc., in his possession and whether he was familiar 1th instructions contained therein, each master signing a form 50 the effect that necessary papers, documents, etc. were on board is vessel and that he understood them; thence to Lt. Buntain who urther checked with each master as to physical characteristics r each vessel. Another officer, Lt. Stewart, had charge of up- eep and maintenance, and if e master reported trouble to vessel If machinery, Lt. Stewart would pass the information along to the ngineer officers who promptly went into the matter in order to ave the vessel ready to make her scheduled eailing date. Regraded Uclassified The next officer, Lt. Mitchell, had charge of convoy routing and gave the party R. very interesting outline of the general procedure followed. Briefly, a convoy of merchant vessels would leave Halifax and proceed to a rendezvous well off shore, (these vessels had been originally loaded at American ports as far south as Savannah), where they would meet a convoy of merchant ressels which had been sade up at Bermuda (these vessela had been Loaded, in most part, at American gulf ports, Caribbean porte and/ or ports in Northern South America, including the West Indies). the senvoys would combine and proceed on specified routes under essort to a rendezvous in European waters, where they would again receive orders 8.5 to what ports they would proceed to. At this point, the armed ocean escort vessels would pick up a westbound group of cargo vessela, most of them in ballast, and proceed to the American ports. Considerable exchange of messages and accurate timing had apparently enabled east and westbound convoys to arrive at rendezvous as per schedule. We were then turned over to Lt. Day who had charge of independent routing, that is, vessels that might become separated from a convoy and/or otherwise proceeding on their own. He out- lined the general procedure to be followed advising them of the latest reports of locations of submarines or raiders. The principle mentioned above are covered in the Naval Control Pamphlet, a copy of which is in this office. Rowever, there are some additional papers copies of which, I understand, Captain Read 1s going to send to you in due course. The general talke given by the various Canadian naval officers to our party were given to ue 88 If we were masters and/or agents of merchant vessels which were part of 8 convoy. The next officer we met was Lt. F. B. watt who has charge of the boarding parties which examine every ship eutering and leaving the port of Hallfax. This officer has & very interesting assignment and has a specially selected examining party of petty officers and enlisted men who board each vessel inward bound prior to their actually coming to anchor in their assigned berths. This is considered of primary importance to prevent a. veanel from being brought into the port, which might be the cause of a serious catastrophe. The entire vessel, deck, engine and steward's depart- ments, receives a most thorough physical examination. Such in- spection as 16 possible 1s made of the cargo and cargo holle and all papers pertaining to cargo are most theroughly examined. The seaworthy condition of the hull and machinery 18 most care- fully gone into to make certain that the vessel, AD & whole, is fitted for the trans-Atlantic passage and every precaution 18 taken ÷ Regraded Uclassified to prevent a possible breakdown of machinery, which would cause a vessel to drop out of convoy and be alone; or possibly slow up the whole convoy or damage another veosel, such as has occurred with disabled steering gear, etc. Stores, bunkers, etc. are also very carefully checked, BB well E.B the manner in which the vessel is stowed and whether or not everything is to the satisfaction of the master. There is another interesting procedure followed by the boarding parties who, incidentally, are purposely made up of persons who speak Norwegian, Swedish, Italian, Greek, and/or other languages, depending upon the nationality of the veasel which they are boarding - this is done in order that members of the boarding party any carry on a friendly interrogation and more or less get acquainted with crew members of the various vessele, and by BO doing they determine In a friendly manner the general crew morale aboard. Comdr. Olend and Lt. Watt have found that this procedure has been most beneficial, although in some cases it has been neo- essary to use strong-arm methods with both the officer personnel and the unlicensed personnel. This, however, la not usual and has not occurred very much lately and our party W&B, informed that very little trouble was found with the personnel on board the vessels. Probably a great deal to do with this is the fact that both merchant officere and men are receiving very large bonuses per trip for a safe passage aoross. The general attitude of the Canadian officers mentioned above 1s most pleasant; they are a very cheery, efficient lot and all enjoy their jobs and work like 8 large happy family. The senior officer, I understand, is Rear Admiral Bonham Carter, R.N., who is the commander of armed R.N. forces, that 1s, the ocean escort. Re, I understand, has a small yacht assigned to his for office quarters, etc. This vessel ties up at the Naval Station. The day prior to the departure of A convoy, all masters are required to report to the Naval Control Office to attend a. conference and receive their final instructions. This is after they have reported to their respective civilian agents and their vennels have been cleared in the usual manner through the customs and they are about to return to their vessels, having completed all shore duties in connection with their actual sailing. Our party was invited to attend this conference which was held in a large room and attended by some forty merchant captains. Comir. Oland had charge of the conference and gave the instructions. The conference VAN also attended by the commander of the senior armed escort vessel, who is 8. retired British naval captain re- turned to active duty; the escort vessel, in this case, being of Regraded Uclassified the 18,000 ton class of the Cunard-White Star Line, heavily armed with 6ª guns and anti-aircraft guns, together with + full working grew, but no cargo carried. In connection with this vessel, we were also informed that her cruising speed in between 16 and 18 knots and that n large part of her oargo space VAE filled with emply steel drums to ndd to her floatation in case of torpedo and/ or gun fire. The captain of this veasel WAC introduced to the conference and he very definitely stressed the fact of vessels maintaining the correct speed and position (approximately 9 knots for this class of convoy); also the seriousness of allowing any lights to show, particularly Just prior to daybreak. He Ball that he had a short time before been forced to run close along side & tanker which, for some reason or other, was displaying a large light aft that may have been seen several miles; in fact, to draw the attention of the vessel's crew, he opened fire with a machine gun. The gun, however, was not actually trained on the vessel and he informed the conference that he hoped there would be no repeti- tion of this action in the case of the present convoy. He stated that on several occasions he had been forced to run his veasel between the lanes of the convoy and therefore possibly cause damage to himself or others by collision, in order to give instructions to vessels that were not carrying out the orders. Another officer who gave instructions to the masters vas the Commodore of the convoy. Each convoy is in the charge of a naval officer who has the rank of commodore and who is stationed on the leading vessel of the convoy, which has good accommodations for this officer. The commodore gave very definite instructions to the masters as to how he desired the convoy to run, stating, however, that he did not deviate in any way from the instructions laid down in a book of instructions in the possession of each master. Also attending the conference were two Canadian Air Force officers, We were informed that each convoy had an air escort for about the first forty-eight hours out of Hallfax, se well AD an armed escort of smaller vessels, several of which were in the port. The meeting dismissed and Comdr. Dland specifically requested that all merchant captains return aboard their vessels promptly and remain on board all night, together with their crews, as the authorities could take no chances on any delay the next morning in case of fog or otherwise since each vessel must up anch and proceed at a designated time, each mater having received written instructions as to the time he was to proceed. In this connection the first vessel of the present convoy wee to ce: under way at 11:00 the following morning, the others followi- vals of several minutes, proceeding toward the orot- the entrance to the harbor. Regraded Uclassified Our party was taken to the headland overlooking the anchorage in the lower basin of the harbor, which contained about seventy freighters of many nations, some large, some smaller, as well AP peverel tankers. All vessale appeared to be loaded to the marks end standing by to proceed the next morning. In the inner harbor were several large passenger vessels, apparently standing by for R. troop movement; one bettleship which, I under- stand, vne the H.M.S. Royal Sovereign, also A large armed fast liner, both of which were camouflaged, black, gray, etc; the other troop vessele had black hulle and tan upper works. All cargo vessels of the convoy were mostly gray or black; all stack marks. painted out, AB well AR the majority of names. The British vessels had a gun aft and probably a machine gun or 60 around the bridge. Part of the party made an inspection of the Corvette Orillia, E vessel about 225 feet long, of large beam, drawing about 15 feet. Commander Captain Briggs; 6 officers and 50 men in the crew. The veasel's speed 18 16 knots, had been built nt Ontario, Canada, and WAE of gunboat type, equipped with one 4" gun forward, anti-aircreft gune and a pompoa gun, depth charges, two "Y" guns and two tracks for name over the stern; D large winch aft and two davite for mine sweeping equipment. This vessel 1s single screw, 4 cyl. triple expansion engine, 2600 IHP., recipmo- eating auxiliaries, 2 generators, end special equipment for de- gaussing; two 3-furnace single ended Scotch boilers (pressure 225), oil burners Howden system forced draft; separate fire rooms, separated from the engine room by B watertight bulkhead; fuel oil is carried in side tanks in the way of the boiler room. The vessel fresh water sunnly 10 limited And an evaporator And distiller fitted of about 25 ton conscity. The vessel has very rugged machinery throughout and all steam ocerated. The steering gear 1s aft, being the conventional two cyl. reciprocating engine operating a worm to a. geared cusdrant of very reliable tyne. This is controlled by a hydraulic telemotor eystem from the bilothouse. The crew accounodations in o two deck forecastle forward are very good - hangocks are used instead of bunks. The oaptain's and officers' ombine Ere very good. An oil burning galley is amid- ships, which requires that the food be carried to both officers and enlisted men, which, of course, could be improved upon. However, the general layout is quite good. A substantial windlass 18 fitted on the releed forecastle bead, and the large raised gun platform immediately abaft onme. The general construction of the vessel's machinery, rittings, etc. an-ears to be very good. They are lightly built but should be -5- Regraded Uclassified excellent sea boats and should stand us very well. I WAR in- formed that the full speed revolutions of the main engines are about 175 and the engines turning inward make the engine room not too liveable due to throwing 011, There in one magailne forward and one aft. This vessel is fitted with anti-submarine detectors "ASDIC", which apparatus is over the pilothouse on the upper bridge connected to a streamlined housing, containing sending and receiving microphones, which is about three feet deep and secured to the vessel's keel by tvo heavy tapbolts. This de- vice, they tell us, can be removed and hoisted on deck at sea, or vice versa. It seems, however, that it would be particularly subject to damage by ice. we were given a demonstration of its workings, the intent being to locate a submarine and to proceed to her position on bearings taken, In order that depth charges may be dropped. A well equipped school 18 maintained at the Navel Control Station with a duplicate set of the entire gear aboard this, in order that armed escort vessele may have special ASDIC operators. This equipment 1F claimed to have been quite efficient in the locating of submarines. Our party was given access to various publications, copies of which I believe will be forwarded to this office for future reference, and the Canadian officers were most courteous. Ye Joined them at lunch one day at the Officers Club and our party, in turn, invited them for dinner at the Nova Sootian Hotel the last night we were there. These officers were most cooperative in all respects and seemed very pleased that B. delegation of American naval officers had taken the trouble to come up to look over their activities. he 6 summery - the Halifax Neval Centrol Service officer personnel has a rather broad Job but they do not have any responsi- bility as to what kind of vessele are going to carry cargo, what eargoes are carried, etc. There 10 only & small number of vessele loaded in Halifax which work, of course, 10 done by the agents and the local stevedores. The primary job of the congrol service is to receive the veasels which are fully loaded, stored, prepared, manned, eto., and to see that everything is in order for the pro- posed trip; any discrepancies they will endeavor to correct. Ordinarily a vessel which has been loaded at n. sourthern port prior to arriving at the convoy port has been thoroughly taken care of by her agents, classification surveyors, etc., and has had a sea trip of some hundreds of milee and normally upon arrival 00 Halifax would be able to continue for the comparatively short trans- Atlantic passage, BO that the Halifax people only have to generally check up, and should a vessel for some reason have mechanical or Regraded Uclassified appr troubles and be absolutely unable to sail, she would be healed over to a lay-up anchorage, when worst comes to worst; bir crew could be relieved and her entire carge transferred to some empty vessel for shipment to U.K. The repair facilities at Halifax are very limited and the one shipyard there has one árydock about 520 feet long, which is working around the clook. Ao far as any suggestions of improving the routine carried out by their office, it would appear that they have done a very fine job and apparently overcome possible serious difficulties with convoy vessels' personnel by not having strikes or serious Union trouble. Usually a vessel would remain at anchor in the outer basin, which, incidentally, 10 A perfectly protected harbor from all sides, from four to seven days after arriving at Halifax. The only way that the officers and crew can go ashore would be by certified boats, which would be a long cold trip in the winter, and after they did get ashore, there is very little offering, there being no open bara permitted in Halifax. However, they seem to have practically no trouble in this respect - in our going around the town we saw no signs of any disorder, ao it would appear that the officers and crew of the convoy vessels remain on board, which 18 not always the easiest thing to arrange without some difficulty with the crew of the average merchant vessel (about forty men per ship of this type). It was noticed that the streets were well populated by men in Canadian Army and Navy uniform. The party left Halifax having spent two full daye, Captain Milne staying over the third day to make & trip to examine the protective gate at the entrance to the harbor, 8" well AS to see the convoy sail. I am attaching & copy of the article from the Toronto Star Weekly, dated February 15, 1940, which mentions Comir. Richard Oland, Naval Control Service Officer, and outlines activities at Halifax, together with La detail of the activities carriel by Lt. F. B.Watt who 16 in command or the boarding parties. It work of the NAVEL over three situation. T.R.B.ITH -7- Regraded Uclassified SECRET OBSERVATIONS BY CHIEF OF NAVAL STAFF OF CANADA, OTTAWA ON SITUATION REGARDING NAVAL CONTROL SERVICE IN OTTAWA AREA IN THE EVENT OF U.S. PARTICIPATION IN WAR. 1. The Naval Control Service now controlled from Ottawa consists of: (a) The Canadian and Newfoundland Naval Control Service Officers (8 main ports and reporting areas). (b) The Consular Shipping Advisers at 13 ports in the U.S.A. and 5 sub-ports administered by Consule under district Consular Shipping Advisers. 2. FUNCTIONS INVOLVED. Broadly, the control of the Naval Control Service amounts to the following: (a) The passing out of route instructions and orders, information of minefields and safe channels, etc., which enables N.C.S.O.'s and C.S.A.'s to route and instruct individual ships or convoys as required. NOTE - N.C.S.O.'s and C.S.A.'s on the East Coast are kept up to date with information which enables them to route ships direct to Newcastle (north about) Thames via Channel (this route is at present in abeyance), Iceland, Gibraltar, Sierra Leone, Capetown. N.C.S.O.'s and C.S.A.'s on West Coast can route ships to Japan, Hong Kong, Singapore direct and (via Torres Straits), Sydney, Hobart and New Zealand. (b) The passing of information regarding the movements of ships. This is broadly:- (1) From individual ports to London and Ottawa. Regraded Uclassified -2- CRET (II) From Ottawa to adjacent Intelligence Areas. (III) The warnings given to N.C.S.O.'s and C.S.A.'s of anticipated arrivals at their ports passed by Ottawa and in certain cases, direct from one- port to another. (o) The Administration of N.C.S.O.'s and C.S.A.'s In Canada, the N.C.S.O.'s are administered through the Naval Officer in Charge of their port. In the U.S.A., the C.S.A.'s are part of the Consul's staff and are administered by Ottawa. CONVOY ASSEMBLY Convoys are-at present assembled at Halifax, Sydney and Berwuda and practised staffs are stationed at these ports. In addition, the C.S.A.'s at New York end Norfolk have been given instruction in this work at Halifax and special Books of General Instructions and Summaries of Special Signale Affecting Convoy Assembly are kept up to date in Ottawa, ready for issue to any ports which may have to assemble convoys in future, Certain U.S.N. officers have also been given convoy instruction in Halifax and the U.S. Navy Department holds a copy of the Book of General Instructions mentioned above. INCEDIATE PROVISIONS. At any moment the existing organization could take control of U.S. merchant ships in the same assner in which Norwegian and Netherlands ships were included in the organization. The only steps necessary to do this would be: (a) Inform N.C.S.O.'s and C.S.A.'s. Regraded Uclassified SECRET -3- (b) Order U.S. Masters to call at British Consulates and Control Service Offices for route instructions. 5. CONVOYS. The order to take control of U.S. merchant ships having been given, U.S. ships could be directed to convoy assembly ports as desired. 6. In the event of a U.S. port being allocated to convey assembly, it is probable that the need for assembly at Berwuda would cease and the trained Bermuda staff would be available to assist in establishing the routine at the U.S. port in question. To PROBABLE SITUATION IN U.S.A. It is obvious that in the U.S.A., the U.S. Navy would desire to net up their own control service, but in the interests of smooth working during the transition, it is suggested that U.S. officers should first work through our existing offices and then as soon as convenient, the British staffs would transfer to the newly established U.S. Naval Control Office at the port to act as liaison officers and guneral assistants to the U.S. staffs for British ships. It is assumed that the U.S.N. would desire to open up more control ports in the U.S.A. than we have at present. In due course Ve should probably be able to apread out our existing staffs in order to have a liaison officer in all U.S. Control ports. ROUTE INFORMATION TO U.S.N. CONTROL PORTS. Under these circumstances the question would arise as to how the U.S.N. control ports were to be supplied with their routeing information, etc. Regraded Uclassified -4- SECRET This could be done eitheri (a) By the Admiralty through Ottawa, as at present, all such information being, of course, repeated, to Washington. or (b) By the Admiralty through Ottawa, thence to Washington for distribution. or (c) By the Admiralty through Washington, which would virtually mean the splitting of the existing Ottawa area into two parts, i.e. U.S.A. and Canada. 10. It is suggested that method (a) should certainly be used in the early stages of the system as it would make no real difference in the existing arrangement and this should be carried on until the U.S. ports were completely au, fait with the work. Orders regarding American waters, and waters controlled by U.S.N., would, of course, be passed out by Washington direct, being repeated to Ottawa (for the information of Canadian ports) and to Admiralty for the infor- mation of adjacent stations. 11. It is for consideration whether this method or method (b) should not be standardised since Ottawa is well used to interpreting Admiralty orders to U.S. ports. 12. Method (c) has the disadvantage that at times, two different interpretations might be placed on the same Admiralty order. In any case it would involve a very close and constant liaison being maintained between Ottawa and Washington. 13. SHIPPING MOVEMENTS. (The Vesca System) The U.S. authorities would naturally want full information regarding the movements of U.S. merchant ships. Regraded Uclassified RET This could be provided immediately and simply by a new and separate Vesca from all ports in the world con- tainly daily information of U.S. merchant ships and sent direct to Washington, thus providing a world-wide picture of U.S. merchant ships. This would be supplemented by an additional copy of the normal daily Vesca from U.S. ports being sent to Washington. Information of anticipated arrivals at U.S. ports, could, in the early stages, be supplied by Ottawa or by C.S.A.'s direct under the existing system. It would probably be desirable later to set up a Mercantile Movements Section in Washington and treat the U.S. ports as a separate "Intelligence Area" for Vesca signals. But if, or whilst, Ottawa were still the channel through which Route Instructions were passed, it would still be most desirable for a copy of U.S.A. ports' Vescas to be sent to Ottawa to enable routes to be checked as they are at present. ADMINISTRATION The administration of British Naval Control Liaison Officers in U.S. ports (ex C.S.A.'s) would either continue to be carried out by C.N.S., Ottaws, or by the Senior British Liaison Officer (if one were appointed) at Washington. SUMMARY It is convenient to summerize the suggested arrangements under two headings: (a) Early Stages - The situation to be assumed immediately the U.S. desired their Merchant Savy to participate. (b) Final Arrangements - To be gradually assumed as experience vas gained, staffs augmented, etc. Regraded Uclassified -6- SECRET These suggested arrangements are shown in the appended tabular statement. Regraded Uclassified SECRET EARLY STAGES FINAL ARRANGEMENTS. Routeing Ships and British Staffs under U.S.N. Staffe with Assembling Convoys U.S. auspices. British Liaison Officers. in U.S. Ports. Passing out route Admiralty Admiralty As in "Early Stages" instructions, mine- through through or fields, etc., to Ottawa or Ottawa to Admiralty through N.C.S. ports in thence Washington Washington and thence U.S.A. direct to thence to to ports. ports ports. Reporting Movements Additional Vesca from all of U.S. ships. ports giving movements of U.S. ships only and sent to Washington, Ports in U.S.A. to send ) (Ports in U.S.A. to send additional copy of daily) - (copy of Vesca to Wash- Vésca to Washington ) (ington and possibly (additional copy to Ottawa (for checking routeing. Movements into U.S. ) (Movements into U.S. Area ports sent out to ports ) - (to be passed to Washing- from Ottawa, repeated ) (ton by Area from which Washington. ) (ships are coming. Washing- (ton to inform porte (concerned. Administration of C.N.S. Canada C.N.S. Canada or Senior British C.S.A.'s Liaison Officer, Washing- in U.S.A. ton. Regraded Uclassified 72 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 20, 1941 TO Mr. White FROM Mr. Kamarck Subject: Weekly Report on Significant Military Developments 1. The British are now using 150 bombers a night consistently in raids against Germany with anoradic peak raids of 300. The Germans are using 250 bombers with sporadic peak raids of 400. The British have about doubled the number of bombers they are using against Germany compared to the number they used in September. The Germans, on the other hand, have only slightly increased the number of bombers used against England. 2, The British are still using only Gladiator fighters against the Italians in Albania. The Gladiators are outmoded, four-gun, biplane fighters with a top speed of 250 miles per hour. According to the results of the aerial fighting, however, the Gladiators are still good enough to dispute superiority of the air with the Italian air force. The Gladiators were the only planes available to the English in Egypt last summer. The victorious English Libyan army of the last few months, however, won its triumphs by using Hurricanes to win unchallenged command of the air. The fact that Gladiators are still the only planes mentioned a.e taking part in the Albanian fighting would indicate that any English supplies from Egypt recently transported to Greece are being held in reserve for use against the Germans, 3. There 18 not more than one German division (mainly motorized) in Tripoli. This would mean that not more than 15,000-20,000 Germans are in Tripoli. The Italians probably have 70,000 men here. Some German reinforcements were necessary to replace the vital motorized components lost by Graziani in the Libyan campaign and also to stiffen the Italian resistance. The dispatch to Tripoli of such more than the small number of German troops necessary for these purposes 10 not likely. Too large axis forces in Tripoli would overburden the tenuous line of communica- tions from Italy and would merely increase the vulnerability to English attack. Regraded Uclassified 73 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embassy, (Paris) Vichy DATE: March 20, 1941, 7 p.m. Rec'd 11:20 a.m., 21st. NO.: 325 The following is from Matthews for the Treasury. The Foreign Exchange Office has Just issued an instruction under which the maximum amount of foreign currency which banks in the unoccupied territory may sell to a foreigner proceeding abroad is reduced to the equivalent in value of 5000 francs; it formerly was 25,000 francs. This new regulation 18 intended primarily to conserve the foreign exchange holdings of the banks, but it is also designed to end abuses. On March 17 an arrete of the Finance Ministry became effective reducing the interest rates on short term government paper for the second time since the beginning of 1941. Hereafter instead of a 3.25 percent yield for two-year Treasury bonds, it will be 3 percent. There has been a reduction in the rate for one-year Treasury bills from 2.75 percent to 2.50 percent, and in the rate for six-months Treasury bills from 2.25 percent to 2 percent. Instead of 2 percent on 75 to 105 day bills, the rate will be 1.75 percent. The "easy money" conditions now prevailing in France have made this action possible. Increasing amounts are being invested by banks in short term issues of the government, fared with steadily rising deposits as a result of the considerable sums which the German army of occupation is paying cut, and a relative scarcity of commercial paper. Regraded Uclassified 74 - 2 - Yesterday morning the ban was lifted on transactions in variable revenue securities on the Paris bourse. However, stocks in French-owned companies which operate abroad will not be quoted for the time being. The stockholders' syndicate several days ago sent back to Paris the French securities which had been held in this area since June for the account of customers residing in the occupied zone. Several reliable banking sources-have told me that a bargain recently struck between Bouthillier and the Germans was responsible for the "reopening" of the Paris bourse. This action was at first opposed by the Finance Minister but favored by the Germans. It was in return for this action that the German authorities agreed to withdraw their opposition to the French proposal for registration of all stocks. Reference - - telegram of December 10, 11 a.m., no. 1311 from the Embassy. END MESSAGE. LEAHY. EA:LWN Regraded Uclassified 75 MAR 2 0 1941 My dear Mr. welles: Reference is made to your letter of March 18, 1941, calling attention to Nexican proposals of February 27, 1941, requesting the cooperation of this dovernment in commection with the sale of silver pro- dueed in Mexico and in the stabilization of the Mexican peso. It is noted that you wish to know whether the Treasury Department will be *11110g to discuss the possibilities of arrangements relating to the purchase or silver and of a stabilization operation. when the State Department considers the time appropriate during its negotiations with the Mexican Government, the Treasury Department wall be glad to undertake discussions with representatives of the Mexican Treasury for the purpose of exploring the metual monetary problems of the two governments with special reference to stabilisation and silver. Sincerely, (Signed) H. Morgenthau, and Secretary of the Treasury. Nonorable Summer welles, Acting Secretary of State. FAStesh surdette 3/20/41 File to Mr. Thempson Regraded Uclassified 76 COPY DEPARTMENT OF STATE Washington In reply refer to March 18, 1941. RA My dear Mr. Secretary: Reference is made to conversations between officers of the Treasury and of this Department with respect to the informal discussions now in progress with the Mexican Ambassador regarding a wide variety of problems. In the course of these conversations a copy of the Mexican proposals of February 17, 1941 has been made available to Mr. Harry White. Among other things, the Mexican proposals request the cooperation of this Government in connection with the sale of silver produced in Mexico and in the stabilization of the Mexican peso. These are subjects which, of course, fall within the province of the Treasury and regarding which negotiations would have to take place between your Department and financial representatives of the Mexican Government. It would be very helpful to the Department if in any further informal discussions which it carries on with the Mexican Government at this time it were in a position to state that you would be prepared, at the appropriate time, to discuss with representatives of the Mexican Government the possibili- ties of arrangements relating to the purchase of silver and of a stabilisation operation. I would appreciate an indication of your views in the circum- stances. Sincerely yours, (Signed) Summer Welles. Acting Secretary. The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. Regraded Uclassified 77 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION for sum DATE March 20, 1941. TO Secretary Morgenthau FROM Mr. Cochran CONFIDENTIAL Registered sterling transactions of the reporting banks were as follower Sold to commercial concerns £100,000 Purchased from commercial concerns £ 3,000 Most of the £100,000 purchased by commercial concerns is being used to pay for the importation of jute and liquor. Open market sterling remained at 4.03-1/2. Transactions of the reporting banks were as follows: Sold to commercial concerns £ 1,000 Purchased from commercial concerns € 3,000 In New York, the closing rates for the foreign currencies listed below were ae .ollows: Canadian dollar 14-15/16% discount Swies franc (commercial) .2322 Swedish krons .2384-1/2 Reichamark .4005 Lira .0505 Argentine peso (free) .2315 Brazilian milreis (free) .0505 Cuban peso 5-1/16% discount Mexican peso .2066 In Shanghai, the yuan was unchanged at 5-13/324. and sterling was also unchanged at 3.91-1/2. A few days ago, the Federal Reserve Bank of New York received en order from the Central Bank of Turkey to sell 5,000,000 French france at best. The Federal submitted an application to the Treasury for a license under Executive Order No. 8389 as amended, permitting the execution of this order. Pending the receipt of such 8. license, the Federal has made inquiries in the New York market, and has found that the banks are villing to purchase French france at rates ranging from .0218 to .0228. We sold $499,000 in gold to the Bank of Portugal, which was added to its earmarked account. No new gold engagements were reported. Regraded Uclassified 78 - 2 - In London, both spot and forward silver were again fixed at 23-1/2d, equivalent to 42.67#. Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44. The Treasury's purchase price for foreign silver was also unchanged at 35#. We made four purchases of silver totaling 301,000 ounces under the Silver Purchase Act. Of this amount, 251,000 ounces represented sales from inventory, and the remain- ing 50,000 ounces consisted of new production from foreign countries, for forward delivery. I.M.P. CONFIDENTIAL Regraded Uclassified 79 CONFIDENTIAL MILITARY INTELLIGENCE DIVISION SPECIAL BULLETIN WAR DEPARTMENT No. 32 Washington, March 20, 1941 G-2/2657-231 NOTICE The information contained in this series of bulletins will be restricted to items from official sources which are reasonably confirmed. This document is being given an approved distribution, and no additional copies are available in the Military In- telligence Division. For provisions governing its reproduc- tion see Letter TAG 350.05 M.I.D. (9-19-40) M-B-M. ACCOUNT OF OPERATIONS BETWEEN MAY 10 AND THE ARMISTICE AT COMPIEGNE SOURCE In November, 1940, the chief of the French Second Bureau, who corresponds to the American 0-2, rendered an account to the Vichy government on operations between May 10 and the armistice at Compiegne. This report, translated and considerably reworked, is presented here with an introduction prepared in the Military Intelligence Division. CONTENTS 1. INTRODUCTION 2. REPORT OF THE FRENCH G-2 a, General Foreword b. Opposing Forces C. Allied Plans of Operations d. Estimate of the Maneuvering Possibilities of the Enemy e. Allied Operations (1) From the Meuse to Dunkirk (2) The Somme and Champagne (3) The Withdrawal Maneuver f. The German Maneuver as Seen by the French g. Summary and Conclusions *** Two maps are attached. CONFIDENTIAL -1- Regraded Uclassified 80 CONFIDENTIAL ACCOUNT OF OPERATIONS BETWEEN MAY 10 AND THE ARMISTICE AT COMPIEGNE 1. INTRODUCTION. The French 0-2's account of operations, presented herewith, brings out these salient points: 3. The Germans obtained strategical surprise through the factors of rapidity and power. b. French GHQ knew before May 10 that the Allies were greatly inferior in combat strength to the Germans, but the full degree of inferiority was not recognized. C. Political as well as military factors were involved in the French decision to advance into Belgium. d. The Allied forces moved out from behind their prepared defenses without any intention of seeking a military decision, but with the sole purpose of extending their passive defense system over a part of Belgium. e. The general line which the Allies hoped to defend had not been fully organized in advance. f. French distribution of forces was extremely defective. The account states that on May 10 the number of divisions avail- able to the Allies on the Northeast Front was 104. There were 67 French infantry divisions, as well as 13 fortress divisions, three armored divisions, three light mechanized divisions, five light cavalry divisions, and three infantry divisions in GHQ reserve. In addition, the British had ten divisions available. The report adds, however, that initially only 46 divisions - two armored, three light mechanized, four light cavalry, 27 infantry, and ten British - met the enemy west of the Moselle. None of the totals includes the 22 Belgian and the nine Dutch divisions. Examination of the map indicates that CHQ controlled some 21 divisions, although this fact is not clear from the report. In the Maginot Line there were about 25 divisions in addition to fortress troops whose strength was probably equal to that of about nine divi- sions. From the distribution of troops, it appears that the French High Command did not expect the Germans to make their main effort where they did, but the French seem to have determined correctly the direction of the German main effort by May 11. The initial distribution of forces and the rapidity of the German movement were such that CONFIDENTIAL -2- Regraded Uclassified 81 CONFIDENTIAL little could be done in time. In particular, French armored and light mechanized units were widely dispersed over the front, and 75 per cent of the French tanks were not in armored formations. These tanks - 34 battalions - appear to have beon largely frittered away; no very strong tank mass could be constituted for the decisive action, although French GHQ seems to have recognized the need for such an armored mass, There is no indication that GHQ sought to facilitate rapid movement of its reserves to the decisive point. Orders for reinforce- ment of the hinge at Sedan stated that the four divisions of a first echelon were to arrive over a period of six days, while the six divi- sions of a second echelon were to arrive over a period of eight days, The extreme weakness of French aviation, particularly as re- gards bombers, is made clear in the report, but there is no indi- cation that GHQ fully recognized what repercussions this weakness would have upon the action of other arms or upon the operations as a whole. Complete details of French strength and frontage near Sedan are not available, although the report shows that the Second Army had five infantry divisions and some fortress troops to hold 70 kilometers while the Ninth Army had seven infantry divisions, in- cluding one fortress division, to hold a front which was 75 kilometers in width but which would expand to 90 kilometers when the army's left wing had pivoted to Namur. The German main effort struck the left of the Second Army and the right of the Ninth, just short of the pivot of the French-British advance into Belgium. Thus, the main bodies of French troops had not left their prepared defenses in the area where the effort was made. It appears that Gamelin insisted on the Breda maneuver - the movement into Holland - despite the objection of the commander of the Seventh Army. There is also an intimation that General Georges, Commander of the Northeast Front, opposed the movement, at least passively. The result of this plan was that the Seventh Army, origin- ally intended as a reserve behind the Allied left, was committed initially. Incidents such as this lend weight to reports that com- plicated command organization resulted in considerable friction. As a result of the nature of French dispositions, the Germans generally met the French in greatly superior force. They were able to strike locally with a powerful armored force at weak parts of the French position in terrain favorable for German tactics CONFIDENTIAL -3- Regraded Uclassified 82 CONFIDENTIAL but unfavorable for the French. French OHQ lacked means for inter- vening rapidly and effectively although the direction of the main effort was known. 2. REPORT OF THE FRENCH 0-2 a, General Foreword. On May 10, 1940, France had been on a war footing for more than eight months. The sudden attack which had been feared at the beginning of operations had not taken place because of the campaign in Poland. Mobilization and concentration had been effected without difficulty and without intervention by enemy bombing aviation. During the winter of 1939-1940, training for reservists, who constituted the major part of our effectives, was somewhat improved, and the program for equipping our units with armored, antitank, and antiaircraft materiel was in progress. Because of the fact that construction of this type of materiel had just been started, the few units which had any of it at all had only small amounts. During the same period, the Germans made considerable progress in training of effectives and in development of materiel. They increased their number of large units from about 140, which were probably set up upon mobilization to more than 190. They re- conditioned armored and motorized materiel which had been damaged in Poland, brought their large mechanized units up to strength, increased from six to ten the number of their armored divisions by providing tanks for the four light divisions already in existence. The spring, therefore, found us making great improvements, but it would be several months before we could come up to the mark. The German Army was greatly superior in both men and materiel. b. Opposing Forces. (1) The Allied Armies. (a) The High Command. From the beginning of the war until January, 1940, GHQ at La Ferte-Sous-Jouarre ensured execution of the orders of General Gamelin, Chief of Staff of National Defense and Conmander-in-Chief of the Land Forces, and of General Georges, Assistant to the Commander-in-Chief and Commander of the Northeast Theater of Operations. The Chief of the General Staff was at La Ferte with General Georges, CONFIDENTIAL Regraded Uclassified 83 CONFIDENTIAL On January 18, this organization was changed, with the following results: General Gamelin, Commander-in-Chief of the Land Forces, was stationed at Vincennes with his cabinet. He had GHQ at his dis- posal, but by order of the Chief of Staff, this headquarters was located in the region of Montry, 30 kilometers west of La Ferte. General Georges, redesignated Commander-in-Chief of the North- east Front had a headquarters entirely distinct from GHQ, but the Fourth Bureau, equivalent of the American 0-4, remained common to both head- quarters in order that supply and transport might be unified. (b) Inter-Allied Cooperation. In principle, the British Expeditionary Force was immediately under the Commander-in-Chief of the Land Forces, but Gamelin tacitly authorized Georges to settle directly with Lord Cort on means of carrying out the Gamelin decisions. This double subordination did not result in major inconvenience because of the fine spirit of cooper- ation shown by Lord Cort. He recognized the authority of General Georges from the beginning of the war, and even passed into Belgium under the orders of the general commanding the First Group of Armies. No agreement could be reached with the Belgian High Command, however, regarding organization of the command in case Franco-British forces should penetrate into Belgium at the request of the Belgian King. General Gamelin intended to settle the important question of organization of the Inter-Allied Command when the time came. (c) Ground Forces. Large Units. On May 10 the French Army had, in principle, the following forces in the different theaters of operations: ( 67 infantry divisions plus staffs and corps troops for 23 army corps; 13 fortress divisions plus staffs and corps ( troops for 5 army corps; Northeast Front 3 armored divisions; ( 1 cavalry corps composed of 3 light ( mechanized divisions; ( ( 5 light cavalry divisions and 4 cavalry ( brigades, CONFIDENTIAL Regraded Uclassified 84 CONFIDENTIAL ( 2 army corps composed of 7 divisions, Southeast Front ( including 1 colonial division; ( 3 divisions stationed in rear of the CHQ Reserve ( Northeast Front, but destined eventually ( to reinforce the Southeast Front; North Africa 3 army corps composed of 8 divisions; Near East 1 any corps composed of 3 divisions; Norway 3 light divisions. The 67 infantry divisions on the Northeast Front comprised 31 active divisions, of which seven were motorized; 20 divisions formed upon mobilization and constituting Series A, First Reserve; 16 divisions formed upon mobilization and constituting Series B, Second Reserve. A much greater reorganization than had been effected was contemplated for fortress troops. The five army corps on the North- east Front were not complete with respect to service troops; they included no organic corps elements, such as general reserve or corps artillery. Infantry fortress divisions, which had partially taken the place of fortified sectors, were also incomplete with respect to service troops. Thus, although there was a theoretical increase in the number of our large units as a result of these beginnings of reorganization, there was no increase in the actual power or value of our formations. The situation was serious for the colonial divisions. Their number had just been increased from six to eight. In each of six of these divisions, two regiments of seasoned white troops had been replaced by two regiments of colored troops, same of whom had only recently been levied, On May 10, three of the seven colonial divisions on the Northeast Front had not even completed the amalga- mation of their elements. Some of them, as one might have expected, gave a very poor account of themselves. Our armored divisions had been created very recently. Each consisted of only two battalions of B tanks - 70 tanks - and two battalions of light tanks - 90 tanks. Two of the divisions had had but a few weeks of training, and the third was just being com- pleted. At the beginning of the battle they suffered for lack of cohesion and combat practice, In addition to French troops, the Allied forces under the CONFIDENTIAL -6- Regraded Uclassified 85 CONFIDENTIAL Commander-in-Chief of the Northeast Front were three British army corps, consisting of ten infantry divisions, and a division from the Polish Army. The power of the British divisions, five of which were regular and five territorial, was about equal to that of a similar mim- ber of French divisions. They were fully equipped with modern materiel, but the training of troops and cadres, especially in the territorial divisions, was far from good. A British armored division was to arrive late in May at Pacy-sur-Eure, where it would complete its training. Its materiel was neither very abundant nor more than lightly armored. The Polish division was incomplete, and its training had not been finished, Belgium set up 20 infantry divisions, of which six were active, and two cavalry divisions. Materiel was incomplete and not sufficiently modern, while the training, morale, and value of large units was not uniform. Holland furnished eight infantry divisions and one light division, but these were not capable of offering long resistance to the German Army. French General Reserve, In the French general reserve there were 34 tank battalions in addition to the twelve which were used in the armored divisions. Among the 34 battalions were six employing Model F. T. tanks and one employing Model F. C. tanks, Both of these types were obsolete. Troops for Norway. There were three light divisions of a special type available for use in the Norwegian theater of operations on May 10. These had been rapidly organized while the reinforcement of armanent equipment - unfortunately too slow - was in progress, and while the High Command was endeavoring to increase the number of our large units, Formation of these units not only deprived us of two normal divisions and four companies of tanks, but involved changes within about ten divisions. Antitank Armament. When the invasion of the Low Countries began, each division was equipped with its battery of eight 47-m. guns, but the far greater requirements for 25-mm. guns had by no means been met. Antiaircraft Armament. In each of 22 divisions, specialized antiaircraft armament included three sections of 20-m. Oerlikon CONFIDENTIAL -7- Regraded Uclassified 86 CONFIDENTIAL machine guns, each section having 12 guns; in each of 13 divisions it included a battery of six 25-mm, antiaircraft guns. Other divi- sions had no antiaircraft armament on May 10, although ten additional batteries were emplaced on May 12, In the army echelon, 39 general reserve batteries, each having six 25-mm. antiaircraft guns, had been distributed among the armies. There were also 33 groups, or 99 batteries, of 75-mm. guns. Of this number, 19 groups, or 57 batteries, were equipped with World War motorized guns which possessed good ballistic qualities up to 5,000 meters, but whose transport materiel was worn out and sometimes incomplete. Finally, 163 Territorial antiaircraft defense batteries were emplaced in the zone of the armies on the Northeast Front. The majority of the guns in these batteries had old ballistic qualities, including a ceiling of 5,000 meters, and no transport materiel. (d) Aviation. On May 9, the forces available to air zones of operations, corresponding to army groups deployed on the front, were as follows: NORTHERN ZONE (lst Group of Armies) Air Forces for Reserve Cooperation Air Forces Reconnaissance 4 Groups 1 Group Observation 17 Groups 1 Group Pursuit 4 Groups 7 Groups Bombing 2 Day Bombing Groups 2 Night Bombing Groups 2 Assault Bambing Groups CONFIDENTIAL -8- Regraded Uclassified 87 CONFIDENTIAL EASTERN ZONE (2nd Group of Armies) Air Forces for Reserve Cooperation Air Forces Reconnaissance 3 Groups 1 Group Observation 15 Groups Pursuit 3 Groups 4 Groups Bombing 4 Night Bombing Groups SOUTHERN ZONE (3rd Group of Armies) Air Forces for Reserve Cooperation Air Forces Reconnaissance 1 Group Observation 4 Groups Pursuit 1 Group 1 Group Bombing 1 Group 1 Group The numbers of French planes available at the front on May 10 were as follows: 580 modern pursuit planes, 31 day bombing planes, 64 obsolete night bombing planes, and 300 modern reconnaissance planes. British air forces based in France on the same day comprised ten bombing squadrons of 160 planes, of which eight squadrons were equipped with obsoletè Battles and two squadrons were equipped with modern Blenheims; ten pursuit squadrons of 130 planes, CONFIDENTIAL $ Regraded Uclassified 88 CONFIDENTIAL and the observation aviation of the B.E.F. The 130 planes of the pursuit squadrons were reduced to 40 after May 20. Stationed in Great Britain were the Bomber Command and the Fighter Command, which served to reinforce units based in France or to execute missions for the benefit of the land forces from bases in England. (e) Defensive Organizations. The Maginot Line. In the principal line of resistance and rear areas of the Maginot Line, the winter and spring program of improving permanent fortifications called for installation of armor plate and special armament. This work was considerably handicapped by lengthy delays in manufacture. The program also contemplated the construction of works such as defiladed entries and supplementary premises, but these had not been started on May 10. Positions were reinforced by construction of concrete field works for the purpose of increasing the depth of the organizations and the density of arms under light concrete. Detailed programs for this work were made up by the armies upon a basis of technical recom- mendations made by the Inspector General of Engineers. There were plans for concrete blockhouses of all types, as well as for antitank obstacles, generally in the form of ditches. Troops in the intervals were to be protected by trenches, communication trenches, shelters, and other features of terrain organization, but since concrete work was given priority, none of these works had been completed by May 9. On the Saar Front the weakness of peacetime organization was remedied by construction of important casemates and by reinforce- ment of inundation areas. Slow production of armor plate also hampered this work, Outposts were discontinuous organizations consisting of wire entanglements in front of ground shelters along the line of con- tact and the line of resistance. Special efforts, including construc- tion of concrete blocks and antitank obstacles, were made in connection with outposts near Longwy and Steinseltz, region of Seltz, and along the Rott Line. The Meuse, the Ardennes, and the North Front. The program of the First Group of Armies was to reinforce light peacetime works by means of rather large blocks for protection against 210-mm. armament, while the program of the large units in line was to multiply the small works. CONFIDENTIAL -10- Regraded Uclassified 89 CONFIDENTIAL Although the winter program. was handicapped by bad weather, it was well on its way to completion. The works of the Givet Salient had not been improved, since priority had been given to work on the main line of resistance. The spring program contemplated reinforcement of this part of the front by civilian labor, but very little progress had actually been made. The Second Position. The second position was to include a continuous reserve line along the entire front, ork on this position, entrusted to the Fortified Zone Study Committee, had been started by civilian contractors in the following areas: Region of the Flanders Heights; La Capelle; the Signy-L'Abbaye-Omont-Stenay- Mangiennes-Spincourt Line, Zone of the Forest of Remilly, and the line running: Pond of Pischwald-Saar Union-Butten, On May 10 the work yards were in full owing, but few actual results had been seen, Belgian Works. Peacetime works included fortifications at Liege, Namur, and Antwerp; organization for defense of the Albert Canal; establishment of a zone of massive demolitions in the Belgian Ardennes, and the starting of an antitank obstacle on the edge of Gembloux, This obstacle was moved to the region of Perwez by the Belgians shortly before May 10. The Armies going into Belgium were to carry out a plan of demolitions to protect their defense on water lines - the Dyle, the Charleroi Canal, and the l'euse 1 and to hold up the enemy's advance in the passive zones, such as Semoy. The Dutch Lines of Defense. These lines, based upon water lines and inundations, were as follows: The covering line on the Yssel-Meuse cut, characterized by demolitions. The first line of resistance, including the Grebbe Posi- tion and the Peel Position, situated on both sides of the rivers along the Eem-Amersfort-La Grebbe-Grave- Mill-Deurne-Weert Line. The defensive organizations of the Peel, consisting of light works above ground, were the subject of contradictory estimates. Their right flank did not have liaison with the Belgian defenses, The "Holland" position, a redoubt encircled by the sea and the line of imundations extending Amsterdam-Utrecht- Gorinchem. CONFIDENTIAL -11- Regraded Uclassified 90 CONFIDENTIAL Some works and inundations in Zeeland to support the de- fense of the islands, Intermittent works between Peel and Zeeland, south of the rivers, (2) The German Armies as Seen by the French High Command, The total number of divisions set up by Germany upon mobili- cation was estimated at approximately 150, divided as follows: 56 active divisions, of which six were amored divisions, one was a light division, and one an SS division; 40 reserve divisions; 34 Landwehr divisions; 19 divisions made up of replacement units, After the outbreak of hostilities, there were three new series of divisions, nine in September, 19 in the period from November to January, and 15 in the spring of 1940. In addition, four light divisons had been convorted into armored divisions by addition of tank units. Thus on !lay 10, 1940, the Germans had available ten armored divisions of approximately 300 tanks each, and about 180 infantry divisions, of which flve were motorized. Undoubtedly these divisions differed somewhat as regards strength and equipment. Of the total Cerman strength, about 56 active divisions were shock units and about 50 other divisions seemed suitable for offensive operations, In short, Cerman troops available for offensive battle in the spring of 1940 exceeded, according to the estimates of the French High Command, 100 divisions. At the beginning of May, information collected by the French High Command indicated that the general distribution of German forces was as follows: 110 to 127 divisions on the Western Front; 27 to 36 divisions in Poland, Bohemia, and Austria; 15 to 23 divisions in Scandinavia and on the northern coast of Germany; CONFIDENTIAL -12- Regraded Uclassified 91 CONFIDENTIAL 12 to 22 divisions in the Reich, On the active front from the Moselle to the Rhine, however, only 13 second rate divisions were identified, and only five to six divisions held the Rhine front itself. All the German divisions suitable for offensive operations seemed to be available. The success of armored divisions in Poland had confirmed the conviction of the German High Command that mechanized formations would be called upon to bring about a lightning decision in the war, For this reason the aims of the Germans, as far as amored forces were concerned, seemed to be rapid reconditioning of materiel damaged in Poland; use of the Czech plants, Skoda and C.K.D., for the produc- tion of improved medium tanks; perfection of the heavy materiel, armed with 75-mm. or 105-mm. guns, which had been tested before the war; energetic training of greatly increased personnel, and conversion of light divisions into armored divisions. On May 1, the German Army probably had available 7,500 tanks of different models, These constituted ten armored divisions - about 40 battalions - and 25 to 30 [eneral reserve battalions which could be used as replacements for losses suffered by armored divisions, German combat aviation was estimated on May 10 at 1,500 pur- suit planes and 3,500 bombing planes. According to information gathered during the second fort- night of May, the German High Command used for the offensive west of the Moselle on May 10 an army of operations whose minimum strength was as follows: 34 army corps organic elements; 10 armored divisions; 107 infantry divisions, of which 43 were active and 64 were reserve; 45 of the latter had been initially in GHQ reserve. At the beginning of May, certain of these large units had still been in training at camps in the interior of the country at such places as Arys, Frankfort-on-Oder, Kustrin, Grafenwoehr, Bruck Leitha, Neuhamter, and Ohrdruf. CONFIDENTIAL -13- Regraded Uclassified 92 CONFIDENTIAL There were two German army groups, including 2 total of six armies and two groupments of armored and motorized forces. To this army of operations, the French High Command origin- ally opposed the following French forces: 2 armored divisions; 3 light mechanized divisions; 4 light cavalry divisions, and 37 infantry divisions, including the 10 British divisions, as well as: 20 Belgian infantry divisions; 2 Belgian cavalry divisions, and The Dutch Army. C, Allied Plans of Operations. (1) Intervention in Belgium and Holland. (a) General. Of all the hypotheses made by the French High Command with regard to a German attack in the northeast theater of operations, the one considered most likely, even in peacetime, was the hypothesis of an aggression against Belgium and Holland. The plan in force upon mobilization contemplated that our left flank armies would defend the position of resistance organized in French territory and marked by the bridgehead of Montmedy-Mezieres- Revin-Rocroi-Maubeuge-Bavai-Conde sur [scaut-Lille-Les Monts-Dunkirk. In case authority to penetrate into Belgium were given, the First Army was to straighten its left around the pivot of Conde and occupy the Middle Escaut in liaison with the Belgians defending the bridgehead of Ghent and the strong point of Antwerp. The High Command understood that this penetration into Belgium could be effected only upon the request of the Delgian government, either as a pre- ventive measure or after the frontier had been violated. CONFIDENTIAL -14- Regraded Uclassified 93 CONFIDENTIAL (b) Defense of the Frontiers. From the beginning of our operations in the Saar, the Commander-in-Chief of the Land Forces foresaw the eventuality that the nain body of the German forces would turn upon us. On September 26, 1939, the Commander of the Northeast Theater of Operations gave the following personal and secret instructions: On October 1 the First Group of Armies, withdrawn from the Southeast Front, would take over the front from Rochonvillers to the North Sea. On October 3 the British Expeditionary Force would go into line in the Lille Sector, The Seventh Army, a reserve unit on the left of the formation, would be introduced if the threat became more clearly defined. The defense of the frontier position of resistance was to be ensured in any case by the Second Army, the Ardennes Army Detachment, and the First Army of the B.E.F. If authority to penetrate into Belgium were given, the B.E.F. and the Seventh Army were to nove to the Middle Escaut and organize it defensively, In case of particularly favorable circumstances, cooperation of the French and Belgian Armies was to be sought on the position of the Albert Canal and on the House from Liege to Namur. On September 29 and 30, the Commander-in-Chief of the Land Forces emphasized the necessity of accepting combat only at fortified positions and the prohibition on penetrating deeply into Bolgium unless the Belgians re- quested our help. These orders are explained by the fact that the Belgian Government wished to maintain strict neutrality. In fact, two Belgian divisions were placed in the Ardennes and two others be- tween the Sambre and Escaut as covering forces to oppose France, (a) The Escaut Hypothesis. On October 24, 1939, the Commanding General of the North- east Theater of Operations defined conditions for intervention of Franco-British forces in Relgium. Instructions called primarily for occupation of the Middle Escaut and contemplated a thrust on the Antwerp-Namur line, The latter could be effected only if it were possible for us to arrive in time on a prepared position, or on one CONFIDENTIAL -15- Regraded Uclassified 94 CONFIDENTIAL which we should have time to organize. Assistance from the B.E.F. to the extent of two army corps of two divisions each was assured for the purpose of estab- lishing an organization in Belgium, for it was to the interest of both France and Great Britain to protect Flanders. The number of large units mobilized in the Belgian Army had been increased to 16 infantry divisions, and the army was clearly oriented to face north and east. The French military attache in Belgium reported that a spirit of neutrality prevailed, but that close collaboration with the Belgian Staff did not seem indispensable for carrying out the maneuver successfully, The alert of November 11, 1939, caused the entry into line of the French Seventh Army on the left of our formation. (d) The Holland Hypothesis. On November B, 1939, the French High Command became con- cerned about the possibility of an invasion of Holland as a prelude to a direct attack against Great Britain. In such an event the plan was to move to the mouth of the Escaut, occupy the Island of Walcheren and the Woensdrecht Salient, and, in Belgium, to reach the line Antwerp-Louvain-Wavre-Namur for the purpose of ensuring greater liberty of action for our rear and our left, Our action was to be subordinated to the wishes of the Belgian government, and this maneu- ver was to be carried out according to the plan contemplated in pre- vious instructions. (e) The Dyle Hypothesis. The intention to penetrate into Pelgium beyond the Escaut took shape after the alert of November 11, which foreshadowed a German attack in the near future. Meanwhile, the attitude of the Belgians towards us had changed. We knew that the Belgian Army included 18 divisions and that it had the intention of establishing a continuous obstacle from Wavre to Namur and extending towards the south the position Antwerp-Louvain-Wavre (Dyle). This would bar entry at Gembloux. On November 17 the Commander of the Northeast Theater of Operations defined the methods by which we were to occupy the posi- tion Antwerp-Namur. Pivoting around Revin, the left of the Franco- British formation would move toward the north, The Ninth Army, which had formerly constituted the army detachment of the Ardennes, CONFIDENTIAL -16- 95 CONFIDENTIAL would hold the Meuse above Namur; the First Army would bar entry to Gemblous; the B.E.F. would hold the line of the Dyle; the Belgian Army would connect the Dyle from Louvain with the fortified position of Antworp, and the Seventh Army, placed in reserve, would be ready to support the extreme left of the formation. In order to save time, the movement would take place directly from our frontier position without a stop on the Escaut. (f) The Albert Canal Hypothesis. On January 10, 1940, after studies ordered by the Commander- in-Chief of the Land forces had been completed and after recommenda- tions had been made by the First Group of Armies, the Commander-in- Chief of the Northeast Theater of Operations issued directives concern- ing eventual occupation of the Albert Canal. The idea was to reinforce progressively, prudently, and according to circumstances the occupation of the canal from the Dyle. (g) The Breda Maneuver. The Commander-in-Chief of the Land Forces insisted on March 12 that the Commander-in-Chief of the Northeast Front make a new study and reconsider the mission of the Seventh Army. This army was not only to occupy the Maritime Escaut, but it was also to debouch north of Antwerp for the purpose of securing the lower Escaut and ensuring liaison between the Belgians and the Dutch. (h) The New Dyle Hypothesis. In view of the Breda maneuver, a new draft of the Dyle hypothesis was made on March 20. The Dyle maneuver was considered most probable of realization, and the Breda maneuver would be carried out only if orders to penetrate into Holland were given, The general formation along the Meuse from Namur to Antwerp was not modified. The Seventh Army, previously in reserve on our left, was charged with debouching northeast of Antwerp in the direction of Breda, at the same time making sure of the Maritime Escaut. The cavalry, recently reorganized, was to protect the movement of the main bodies as follows: The 1st Light Mechanized Division would ensure protection of the Seventh Army in the direction of Tilburg; CONFIDENTIAL -17- Regraded Uclassified 96 CONFIDENTIAL The cavalry corps consisting of the 2nd and 3rd Mechanized Divisions would move in the general direc- tion Bavai and St. Trond, north of the Sambre-Meuse Ridge; The 1st and 4th Light Cavalry Divisions would move in the general direction of Dinant and Laroche, south of the Sambre-Meuse Ridge; The 2nd and 5th Light Cavalry Divisions, would move in the general direction of Carignan and Bastogne. They were in liaison, by way of Arlon, with the 3rd Light Cavalry Division operating in the Grand Duchy. In spite of the difficulties foreseen by the Commanding General of the Seventh Army in the execution of the Breda maneuver, the Commander-in-Chief persisted in his view that it was necessary to give a helping hand to the Dutch. This maneuver, defined in an instruction dated March 21, was to be used when the Germans attacked on May 10. (1) The New Escaut Hypothesis. Reconsideration of the Dyle hypothesis resulted in a revi- sion of the Escaut hypothesis. The purpose of this was to cover the possibility that German forces would precede us in Belgium and that we would not be able to move our formation in due time to the Louvain- Namur position. The problem involved new data. The B.E.F. had increased its strength from four to nine infantry divisions, and a new light mechanized division had been organized. A decision to occupy the mouth of the Escaut had been made, The general formation was not modified except that the B.E.F. was to occupy the entire Middle Escaut from Maulde to the bridgehead of Ghent and that the Seventh Army was to occupy the Maritime Escaut. North of the Sambre-Meuse Ridge, the three light mechanized divisions would be moved to a line from the Willebroek Canal to the canal from Brussels to Charleroi. South of the Sambre-Meuse Ridge, the 1st, 2nd, 4th and 5th Light Cavalry Divisions would be moved to the Sambre below Charleroi, to the Meuse, to a point above Namur, and to the line of the Semoy. (2) Intervention in Luxembourg. Intervention in Luxembourg offered the advantage of ensuring CONFIDENTIAL -18- Regraded Uclassified 97 CONFIDENTIAL better protection of the industrial region of Longwy, situated in front of our fortified position. In case the enemy should penetrate into the Grand Duchy, the Third Army was to be entrusted with the following missions: Its cavalry units - the 1st Light Cavalry, one brigade of Spahis, and one groupment of reserve cavalry - were to be pushed ahead as quickly as possible in the direc- tion of Luxembourg for the purpose of gaining contact with the enemy. They were to effect certain vital de- molitions in liaison with the cavalry elements of the Second Army. Outposts close to the frontier were to be occupied for the purpose of gaining contact as far forward as possible. Resistance was to be offered in advance positions, including Longwy, in order that possession of this region might be retained as long as possible. These missions immobilized permanently large cavalry units and caused troops taken from three divisions to enter the line at the advanced post of Longwy. The divisions occupied the position of resistance, and troops taken from them had a total strength equal to that of one division, (3) The Maginot Line. The purpose of the Maginot Line, as viewed before the war, was to permit covering forces to hold their ground in case of a sud- den attack, A short distance in front of the line of actual forti- fications there were advance posts, more or less fortified, which barred the approaches. After our offensive of September, 1939, the fortified posi- tion between the Rhine and Moselle afforded the advantage of a glacis as much as ten kilometers deep in certain places. The High Command decided to occupy the glacis, establish a system of outposts, and form a covering position for the purpose of permitting execution of works reinforcing the main position. These works were undertaken at first in intervals or in rear of works constructed in time of peace, but later the Commander-in-Chief of the Land Forces insisted upon increasing to the front the depth of the position. At certain selec- ted places, strong points were organized. These constituted the real advance posts of the position of resistance. CONFIDENTIAL -19- Regraded Uclassified 98 CONFIDENTIAL The defense of the Maginot Line between the Rhine and Moselle devolved upon the Second Group of Armies, which included the Third, Fourth and Fifth Armies. Aimed chiefly at the main lines of approach, the maneuver of this group tended to block any attack on the fortified position in national territory and to reestablish the integrity of this position wherever it might have been penetrated, The battle was conducted according to the following direc- tives: In advance of the fortified position - that is, in front of its outer edge - outposts formed a covering position whose garrison was organized in two echelons, one for contact and one for support. The strength of these two echelons was not to exceed 1/3 of the infan- try and 1/5 of the artillery of the divisions in line, The contact echelon, made up of small posts along the general line of the frontier and slightly in rear thereof, had a mission of surveillance. The support echelon, formed by centers of resistance, occupied an intermediate line marked by strong points of the terrain. Its normal role was to stop enemy incursions, and in case of attack, it was to have a temporary resistance mission. A withdrawal order could be given to it only by the army commander. The fortified position included a main line of resistance made up of fortifications, a checking line, and an antitank barrage in rear of the position. The battle was to be fought on the line of the fortifications. The fortified position was covered at certain points by outposts or strong points, When these could be closely connected with the position of resistance and given the benefit of its fire, their garrisons were assigned the mission of resisting without thought of retreat. After the period of movement of September, 1939, frontages allotted to large units in the field corresponded to those that would be used in a static defensive combat situation. Approximately 16 infantry divisions were in line between Longuyon and the Rhine. It had been estimated that if there was to be defensive combat on the fortified position, it would be necessary to reinforce fortified sectors with an average of two infantry divisions each, There were nine fortified sectors from Longwy to the Rhine. CONFIDENTIAL -20- Regraded Uclassified 99 CONFIDENTIAL Cambat frontages were not only maintained once the October threat had disappeared; they were even increased progressively to facilitate service in outposts and to speed up passage of our large units into a "seasoning" sector, A plan of relief for our large units contemplated a sojourn of about one month in a sector for each of them. Each frontage involved a strip of terrain more than ten kilometers deep and gave the formation the following aspect: Infantry divisions superposing fortress troops I that is, about two divisions per fortified sector - each had their three regi- ments abreast. In each regiment, the battalions were successive - one in the outposts, one on the position of resistance, and one in reserve or engaged in fortification work. This schematic formation was in reality far more flexible than it would seem because of the use of reconnaissance groups, groups of volunteers, battalions of machine gunners, units of pioneers, and the like. First echelon battalions, nevertheless, had large fronts to watch and hold, and they alone bore the brunt of winter operations. The High Command attached special importance to the main- tenance of our outposts in the density existing at the end of Decem- ber, 1939, and they maintained this density until April, 1940. At that time the withdrawal of several large units from the Lorraine front seemed advisable in view of the general situation. The Commander-in-Chief on the Northeast Front informed the Second Group of Armies that it was desirable to give a certain sta- bility to our first line formation and that, at the cost of strict economy, the armies supported by our fortified position would be deployed to ensure the freedom of action indispensable to our large maneuvering units. Approving the first phase of the withdrawal plan submitted by the Second Group of Armies, the Commander-in-Chief on the Northeast Front prescribed the withdrawal of two divisions and contemplated placing a third division in reserve as soon as a British division had been engaged in the sector of the Third Army. On April 15 the deployment of the large units in the zone of the Second Group of Armies, excluding fortress units, was as follows: In line: 22 infantry divisions, 20 of which were between Longuyon and the Rhine CONFIDENTIAL -21- Regraded Uclassified 100 CONFIDENTIAL In reserve: 6 infantry divisions Total: 28 infantry divisions On May 10 the withdrawals effected in execution of the or- ders of April 16, which corresponded to the first phase of the retreat plan of the Second Group of Armies, had modified this distribution as follows: In line: 18 infantry divisions, 17 of which, in- cluding the British 51st Division, were between Longuyon and the Rhine In reserve: 7 infantry divisions Total: 25 infantry divisions At the end of this first phase, the front was short three divisions, but the total number of large units available to the Commander-in-Chief had been increased by that number. The 7th and 14th Infantry Divisions had been placed in GHQ Reserve, zone of the Second Group of Armies, and the 36th Infantry Division had been practically replaced by the 51st British Infantry Division. In the same zone, the number of large units in GHQ Reserve ready to be moved to another destination had been increased from three to five. In a second phase, which had not started on May 10, three new divisions were to be taken from the Second Group of Armies and were also to be placed in CHQ Reserve. d. Estimate of the l'aneuvering Possibilities of the Enemy. The end of the campaign in Poland made available the greater part of the German forces. The question with the French was how and for what purpose they would be employed. The hypotheses to be considered were air offensive on the Northeast Front west of the Rhine; intervention in Southeastern Europe, or an attack through Switzerland, possibly in liaison with Italy. Of these eventualities, the last two were never confirmed by what was known of the formation of the enemy forces, and the first remained most probable. As a matter of fact, the German forces neces- sary for a Holland-Belgium-Luxembourg operation had been in assembly west of the Rhine since mid-November, During the winter, the main object of the French intelli- gence plan was to determine possible variations in the strength of CONFIDENTIAL -22- 101 CONFIDENTIAL these enemy forces, to keep an eye on their stations, and to watch especially for any closing of the formation toward the frontier which would increase the possibility of attack. Special attention was given to the situation of the armored divisions, basic elements of any offensive action. From the very beginning of 1940, the German High Command had available on the Western Front a mass of from 106 to 120 divisions. All the large armored and motorized units seemed to be assembled there. Further, a certain number of large units were either stationed or training in the interior of the Reich. Operations in Norway did not alter this situation to any great extent. The form of the German operation on the Northeast Front and the point where the main effort would be made had not been deter- mined, but it was known that a direct attack on the Maginot Line would demand the emplacement of materiel and personnel. No serious indications of such emplacement were observed. On the other hand, the following operations were always possible: (1) An attack on Belgium and Holland for the purpose of outflanking the Maginot Line from the north and conquering bases from which Great Britain could be attacked, (2) An operation in Holland alone, which might possibly furnish bases without Franco-British intervention. Although definite information as to the enemy plan of operations had not been obtained, an examination of the known for- mation of German forces on the Dutch-Belgian frontiers showed impor- tant concentrations between the Moselle and the Rhine at Wesel. There were approximately 50 divisions in first echelon. Serious alerts took place November 12 and January 15, but information regarding a German offensive on the Western Front be- came frequent and definite only after April 15, About May 3 the immediate threat to Belgium and Holland became more and more apparent, and on May 10 the German attack debouched from the North Sea to Luxembourg. e. Operations. From the French point of view, the battle which started May 10, when German forces invaded Holland, Belgium and Luxembourg CONFIDENTIAL -23- Regraded Uclassified 102 CONFIDENTIAL and which ended with the Armistice of June 25, may be divided into three distinct phases. The first, which lasted until the end of May, started with the forward movement of our formation on the Antwerp-Namur-Mezieres Front. This front was soon compromised by an enemy break-through in the direction of Mezieres and Calais which resulted in the separation and envelopment of our left wing, While most of the remainder of our forces in the north were, at the cost of their materiel, embarking at Dunkirk, we were able to constitute from Montmedy to the Channel a front resting on the cut of the Aisne prolonged by the Ailette and, insofar as possible, by the Somme from St, Simon to the sea, The second phase lasted from June 5 to June 11. It corre- sponds to the Battle of the Somme and Champagne, and, because of lack of means, our dispositions were overextended, There was no spirit of retreat, in spite of the fragmentation certain to occur in our armies should the front be disrupted. The third phase lasted up to the armistice and included the deep withdrawal maneuver imposed on our entire formation by German forces exploiting their successes. (1) From the Heuse to Dunkirk, (a) May 10. During the second part of the night of May 10, many bombing attacks were launched against the north and northeast of France, as well as against Holland. Extensive landings were effected at Dutch airdromes, most of them preceded and accompanied by release of parachutists and supported by activities of the Fifth Column. At dawn a large number of German troops crossed the German- Luxembourg frontier, and elements of apparently lesser strength pene- trated into Belgium. At 6:30 A. M. General Camelin telephoned to General Georges that the Belgians had requested our help, and orders were given for action on the Belgium-|!olland-Dyle maneuver hypothesis. As a result of the lessons of previous alerts, the First Group of Armies prescribed the application of measures codified in instructions issued to every echelon. Cavalry units penetrated immediately into Belgium to cover installation of main bodies on the selected position - Dyle-Namur, the Leuse at Dinant, and Mezieres. CONFIDENTIAL -24- Regraded Uclassified 103 CONFIDENTIAL In principle, the main bodies were to effect their movements by night in order to escape the activity of enemy aviation. Emplace- ment of their essential elements was not to be completed before May 13, but it was hoped that the time necessary for completion of these movements north of the Meuse would be ensured by resistance along the Albert Canal. South of the Meuse, however, the necessity of checking the German advance as far forward as possible in the direction of the Meuse at Dinant, which the main bodies could occupy in force in 48 hours, was obvious from the first day. It was for this reason that the Commanding General of the Northeast Front intervened to push the cavalry of the Ninth Army forward beyond the Meuse, (b) May 11-12 The unexpected collapse of resistance along the Albert Canal in the region of the Maastricht Canal on May 11 resulted in the High Command's prescribing that on May 12 the First Group of Armies order the cavalry corps to engage vigorously the enemy armored elements on the plateau of Tirlemont, With the same object in view the efforts of bombing aviation were directed against the German columns debouch- ing south of Maastricht. It became obvious as early as May 11 that the enemy was making a vigorous effort south of the Meuse. The cavalry of the Second Army was violently attacked by important armored elements and thrown back on the Semoy. On the same day, after having sent to the rear of the First Group of Armies the units which were to constitute its reserves, the High Command decided to direct an armored division of the general reserve and three infantry divisions towards the hinge of Sedan- Hezieres and the second position of Thierache, These movements started May 12, and the arrivals were to be echeloned from May 14 to May 17. Larger forces - one armored division and five infantry divisions - were to be moved in the same direction on May 13 and to be on the ground May 21, (c) May 13. The Seventh Army, subjected to bombing and tank operations in Holland organized the line connecting WUEST WEZEL and the Turnhout Canal, The British Army had its three infantry divisions in first echelon on the Dyle in Belgium. The cavalry corps, attacked in force, was obliged to with- draw at the end of the day in rear of the Perwez obstacle. The units CONFIDENTIAL -25- Regraded Uclassified 104 CONFIDENTIAL of the First Army, meanwhile, continued their movement into position. Further south the lieuse was crossed rapidly at Dinant by the first enemy elements on the morning of May 13, The Commander of the Ninth Army gave his attention to his left, where he was to attempt to reduce the bridgehead of Anhee - first with all the infantry and tank units he could muster, then with an armored division. During the afternoon, an attempt at infiltration was made in the region of Montherme, This was easily contained. The enemy, however, crossed the Meuse in force at Sedan, debouched from Flize and Nouzonville in the direction of Liart, and attacked in the rear all organizations of the Ninth Army occupying the first position. (d) May 14. There were now two necessities - first, to hold firmly the pivot of Sedan and keep the enemy from widening the breach and out- flanking our fortified system between the Argonne and the Meuse; second, to fill the breach between the Oise and the Bar Rivers by occupying the second position. The solidity of the pivot south of Sedan was maintained in spite of the fact that the left divisions of the Second Army gave way and the enemy continued his strenuous effort with varied intensity until the beginning of June. It had been hoped that the front on the second position could be united between the organizations of Rocroi and the Heights of Sedan, but it soon became apparent that the contemplated concen- tration as planned would be outdistanced by the enemy, It was necessary, therefore, to gain time, to remain on the south flank of the enemy advance, and to assemble the necessary means of bringing together the two parts of our formation. In the North the enemy gained contact on the entire front between Antwerp and Namur, and it became urgent to relieve the First Group of Armies of the mission of carrying out the maneuver on the Meuse and Aisne, as well as to place a new Army in the breach. For this purpose, the Second Army was placed under direct orders of the Commander-in-Chief of the Northeast Front as early as May 13, and on May 14 the army detachment commanded by General Touchon was given the mission of reestablishing the unity of the front between the First Group of Armies and the Second Army. CONFIDENTIAL -26- Regraded Uclassified 105 CONFIDENTIAL (e) May 15-16. To avoid the break-through which was looming, it was necessary to check the advance of armored units engaged in the region between the Mirson-Liart Railroad and the Aisne at Chateau-Porcien. This operation could be entrusted only to units of the same type. Efforts were made on the one hand to reassemble them on the left wing of the Ninth Army, consisting of the 1st and 2nd Armored Divisions, and on the other to form additional units of this type for the benefit of the Touchon army detachment. This detachment was de Gaulle group- ment, which was to later become the 4th Armored Division. This operation, contemplated for May 17, was to include a main operation in the direction of Marle and Signy l'Abbaye, and two secondary operations towards Nizy-le-Comte, Chaumont-Porcien, Vervins and Liart. It was aimed particularly at gaining control of road junctions of Hirson, Aubenton, Rumigny, Liart and Chateau-Porcien. Meanwhile, reserves were to continue to be brought up on the flanks of the breach, The organic large units of the Seventh Army - brought back from Holland - with the exception of the 60th and 68th Infantry Divisions, were directed toward the right of the First Army Group, which was located in the region of Cambrai and Roye. Reserves were brought up by rail as far as possible, although some came by motor transport. It was thus possible to prolong the partitioning on the Aisne at Rethel, and at one time there was a plan to reach the right of the Ninth Army by way of the Marshes of Pierrepont. (f) May 17. In Holland, the situation of the Seventh Army's forces in the Islands of Beveland and Walcheren became critical as a result of the vigorous advance of the Germans in Beveland. This island finally had to be evacuated, Further, it was contemplated that Walcheren would be abandoned when a landing of enemy elements was reported. The Belgian Army, which had retired to the entrenched position of Antwerp, was not attacked. During May 15 and 16 the First Army and the B.E.F. were withdrawing to the rear of the Charleroi Canal, very strongly pressed by the enemy. On several occasions the tanks of the cavalry corps were able to reestablish local situations. At the end of the night it appeared that offensive operations contemplated between the Sambre and Aisne could not give the desired results anticipated because the Ninth Army did not have the necessary CONFIDENTIAL -27- Regraded Uclassified 106 CONFIDENTIAL armored equipment. In fact, the 1st Armored Division had suffered considerably, and the 2nd Armored Division had the majority of its units placed on the bridges of the Oise and the Sambre Canal. During the day, while the Maubouge Salient and the line of blocks still seemed to hold, the line of resistance was overrun farther to the south, and General Girand was obliged to shift his defense to the Sambre and the Oise Canal between Berlaimont and Moy. On the Aisne, on the other hand, the de Gaulle groupment started from the region of Liesse and attacked at dawn. It advanced satisfactorily; its tanks reached Montcornet at about 12 o'clock and held without any great reaction on the part of the enemy. (g) May 18. in Holland, the Island of Walcheren was evacuated. In Belgium, the situation of the Belgians, the British, and the French First Army was fairly good, although the troops of the First Army were exhausted. The cavalry corps had helped considerably in breaking off the engagement and in the establishing of the First Group of Armies on the general line Alost-Ath-Mons-Maubeuge. It was to be regrouped on May 19 and moved to the right of the formation, Farther south, the enemy endeavored throughout the day to undermine the defense of Maubeuge and to cross the Sambre Canal, At the end of the day he had penetrated into the forest of Raismes. In the region of Le Cateau, his attempts towards Cambrai failed in front of the 1st Light Mechanized Division. On the Oise, taking advantage of the bridgehead secured towards Ribemont the previous evening and forcing the passages at Mont d'Origny, the enemy pushed forward in the direction of St, Quentin and Peronne, which he reached at the end of the day. He crossed the Somme at Peronne and at Pont-de-Brie, where passages guarded only by regional elements, The delays necessary for permitting arrival of large units capable of uniting the Ninth Army with the line of the Somme - delays which were increased by the action of enemy aviation on communications - killed the hope that we could stop the onrush of the armored divi- sions along a united front. The idea now was to canalize, to slow down this onrush, and to take measures to cope with the worst - that is - the outflanking of the Somme and the advance on Paris. Consequently the Sixth Army and the de Gualle groupment CONFIDENTIAL -28- Regraded Uclassified 107 CONFIDENTIAL were ordered at 10 o'clock to act on armored elements north of the Serre and to slow down their advance toward the Oise; the Seventh Army brought back from Belgium WSS ordered to join the right of the Ninth Army on the Oise from La Fere, and, if possible, from Ribemont; and the Second Army was ordered in the evening to prolong the obstrue- tions and barrages of the Somme. (h) May 19. In Belgium the withdrawal operations of Allied forces left personnel exhausted. At the end of the day the Belgians were on the Canal from Terneusen to Chent and on the Escaut from Ghent to Audenarde; the B.E.F. was on the Escaut from Audenarde to Amulde; the French First Army held on its left the strong point, Conde-Valenciennes, and on its right, in the region of Maubeuge, it endeavored to force the passage and reach the Escaut. The cavalry corps was being regrouped in the region of Douai and Arras. In the region of the Somme, the enemy reached Peronne and the southeast approaches to Doullens. The Seventh Army received the mission of organizing without delay the defense of Paris through the gap of the Oise. It established itself on both sides of the valley, its right on the Ailette, its center on the Oise at Chauny and the Crozat Canal, and its left on the Somme at Ham and Peroune. Farther to the East, the 4th Armored Division, formerly the de Gaulle groupment, attacked from Laon to the North in order to act against the flank of enemy columns. Having advanced successfully to the Serre, the division was stopped and subjected to heavy bombard- ment, By withdrawing on the heights of Laon, it was to protect the assembly on the Aisne at Berry-au-Bac and on the Ailette of arriving reinforcements, A solution to the painful question of uniting the two ends of our formation became more and more necessary. The First Group of Armies was urged to group on its right wing a force built around large armored units capable of opening a way toward the South, Be- fore the forces necessary for effecting a joining maneuver could be assembled, care had to be taken to avoid being outdistanced on the cut of the Somme, from which a mechanized maneuvering mass destined to envelop our formation could debouch, Information indicated that the enemy had limited his action to deployment on the Aisne and the Somme in a curtain of decreasing CONFIDENTIAL -29- Regraded Uclassified 108 DENTIAL density from east to west. This was destined to protect the opora- tions of his armored forces in the direction of northern porta. A covering force on the Somme at Peronne, at Amiens and ultimately at Abbeville could be expected to gain the time necessary for a later debouching toward the North, (i) May 20-22. Efforts were made to assemble on the Somme all elements which could be taken from the Second Group of Armies or from the interior, and to constitute on the extreme left a covering groupment based upon cavalry - either mechanized or horse elements - reinforced by British units stationed in the West and the British division pre- viously engaged in Lorraine. At the same time, the Third Group of Armies, charged with coordinating operations on the Somme and Aisne, received the special mission of reducing bridgeheads which the enemy had conquered south of the Somme from Peronne to Abbeville. Unfortunately the means pro- vided for this purpose permitted neither successful execution of this task nor capturing the necessary passages for an ultimate debouching in the direction of Bapaume and Albert. On the other hand, the efforts of the First Army Group and the B.E.F. to conquer the necessary exits for their maneuver toward the South were fruitless, and we had to abandon the hope of unifying our formation before the arrival of the main bodies of German divisions in second echelon on the Valenciemes-St. Quentin front, The pressure of the enemy was increasing around the units of the First Group of Armies, On May 22 the First Army held the Escaut while the Canal of St. Omer, Bethune, and La Bassee were defended only by miscellaneous elements, frequently weak ones, Farther to the West, enemy armored vehicles were at Noeux- les-Mines, south of Bethune. They were approaching St. Omer by the way of Montreuil and Lumbres and arriving south of Boulogne, where the 21st Infantry Division, having recently landed, was engaged at Neufchatel, Samer, and Desvres, (j) May 23-June 4. Up to May 25, the First Group of Armies still hoped that the operation contemplated towards the South and prescribed by General Weygand could be carried out. This operation was to be effected on May 26 by three infantry divisions attacking between the North Canal and Escaut in the direction of Marchiennes and Peronne and supported CONFIDENTIAL -30- Regraded Uclassified 109 CONFIDENTIAL to the west by two infantry divisions in the direction of Bapaume, The cavalry corpo was to connect the attack with troops forming of barrage at the Bassee Canal. Late on the day of May 25, however, the serious situation of the Belgian Army, which had been violently attacked in the region of Courtrai, became apparent. Two of the divisions which were to attack had to be recalled to the North, Under these conditions, the Commander of the First Group of Armies decided that the attack would not take place and that it was advisable to organize the withdrawal of forces as a whole with a view to occupying a wide bridgehead cover- ing Dunkirk by the Canal of the AA, the Lys, Ypres, Dixmude and Nieuport. On May 28 the Belgian Army capitulated. Pressed on their left as a result of this defection and de- prived on their right of the assistance of the B.E.F., which was with- drawing and embarking at Dunkirk, our forces in the North remained alone to face the enemy in heroic combats. Only part of them were able to embark; the last moved out under fire during the night of June 3-4. (2) The Somme and Champagne, It was obvious as early as May 26 that the situation was critical. Fifteen French divisions, three light mechanized divisions, and nine British divisions were about to disappear in the North. On the Aisne and the Somme a line of about 20 divisions was stretched from the Argonne to the sea, Facing us, a victorious enemy had employed only part of his troops, and he would soon be able to turn his main forces against us, (a) May 26-27. It was to be expected that after a short delay the German High Command would direct its efforts to the south, but no definite infor- mation as to where the enemy would make his new attack was yet avail- able. It might follow the shortest route to Paris - that is, through the Oise Valley - accompanied by an outflanking movement and followed by an exploitation south of the Somme, Amiens and Abbeville, as well as by a powerful action on the Laon-Soissons axis, Such operations however, would call for numerous preparations, and it did not seem possible that these could be made in the immediate future. An offensive seemed more probable between the Argonne and CONFIDENTIAL -31- Regraded Uclassified 110 CONFIDENTIAL Chiers and on the Misne at Attigny, where enemy pressure was re- lentless. Finally, the foreing of the Aisne between Berry-au-Bac and Attigny might occur shortly and open the way for deep exploitation by armored detachments across the plains of Champagne, Maintaining liaison with the fortified system of Montmedy and Longuyon, and well protected on the Aisne at Rethel and Berry-au- Bac, the French High Command devoted its efforts to organization of a strong defense of the Oise valley and endeavored to assemble its maximum forces gradually from the extrome left to the sea, The Commander-in-Chief of the theaters of operations as a whole notified the armies that the battle on which the fate of the country depended was to be fought on the occupied positions without any thought of retreat. It was obvious, however, that whatever respite might be given the High Command, there could not be an assembly of troops in sufficient numbers along the entire front, It was necessary therefore to make dispositions that would enable prolongment of struggle, With the idea of directing the efforts of all units towards the front, the Command took upon itself the organization of necessary security in rear areas, For this purpose, natural strong points and defensive lines dividing the future battlefield throughout its depth were to be occupied and organized by the large units in reserve as they arrived. In the intervals, or near zones which were unoccupied because of a shortage of means, groupments were to be built around armored units and given the mission of attacking the flank of the enemy exploitation detachments, The Forest of Compiegne was to be organized and prolonged beyond the Oise by the obstacles of the marshes of Clermont and the valley of the Therain in the region of Beauvais. At the extreme left, groupments based upon light mechanized divisions or armored divisions were to defend the cut of the Bethune River and both sides of Formerie Ridge. In rear, the obstacle of the Seine was to be organized from Meulan to the sea and prolonged by the valley of the Oise and the defensive position of Paris, while in the center, the Mountain of Rheims was protected to the east by the canal from the Aisne to the Marne. The Argonne, to the right, was strongly held throughout its depth, and from it a groupment including one armored division and CONFIDENTIAL -32- Regraded Uclassified 111 CONFIDENTIAL units of a light mechanized division would be ready to debouch from Grandpre towards the West. Between the Mountain of Rheims and the Argonne, the cuts of the Marne at Chalons and Vitry, the Ornain from Vitry to Revigny and the upper Misne were to be organized to complete closing of the plain of Champagne. On May 27 the enemy attacked without tanks our position between the Meuse and Chiers, particularly in the region of Inor. He was contained, but in the evening a straightening of the line enabled him to reach the northern edges of Inor and Olizy-sur-Chiers. (b) May 28. The staff of the Fourth Army was withdrawn from the Lorraine front and placed in reserve in the region of Troyes, while the Third Group of Armies was ordered to reduce enemy bridgeheads south of the Somme, (c) May 29. Although the battle was to be fought on the occupied positions and without thought of retreat, further instructions defined the maneuvers which the armies would have to effect in case the enemy should break through their formations. The purpose of the instructions was to facilitate the best use of strong elements which were being organized in the rear areas. If the enemy directed his efforts toward Paris and extended them more or less to the sea, the Third Group of Armies was to con- centrate its resistance on these lines of approach: Amiens-Paris, Laon-Paris, and Rethel-Chalons, It was to take advantage of natural defensive lines in its rear areas and hold on the line Aisne at Soissons-Oise at Compiegne-Creil-Clermont-Beauvais, This line could be extended if necessary to the Epte and the obstacle of the lower Seine. If the enemy directed his efforts between Montmedy and the Aisne at Rethel, the Second Group of Armies, holding the positions of Montmedy-Longuyon on the one hand, and the heights north of the Argonne on the other, was to use the compartment of the Aisne at Vouziers and the heights of the Meuse at Dun to bar the direction Sedan-Clermont-en-Argonne. If a deep break-through prevented execution of these measures, the Third Group of Armies, covering the capital, was to reestablish itself on the Paris position prolonged to the West by the Lower Seine CONFIDENTIAL -33- Regraded Uclassified 112 CONFIDENTIAL and to the East by the Marne. The maneuver of its right was to be covered on the line of the Vesle and the Marne Canal to the Aisne. The Second Group of Armies, tying its right and center to the forti- fied position, was to fall back on its left to the line Longuyon- Verdun-Ste. Menehould-Chalons, or, at the worst, on the Orne, Verdun, Ste. Menehould and Chalons. At the junction of the two army groups between the Argonne and the Mountain of Rheims, a groupment of forces was to be emplaced in such a manner as to form a barrage on the axis of the enemy's eventual effort. Laborers were sent to the rear areas of the armies with a view to preparing the maneuvering position which had been planned. (d) June 1-4. This period was marked by the preparation for the battle which was anticipated. Attempts were made to reduce the bridgeheads of the Samme, but the enemy, fully aware of their importance, had concentrated defense means and antitank weapons upon them, and our successes were limited. In addition to preparing new obstacles, we set up new divi- sions with training battalions, effectives who had recuperated from the battle of May 10, and brigades which had been destined for Norway and repatriated from England, Materiel - particularly anti- tank weapons - was not available in sufficient quantity to equip these new units. There was indication of an eventual threat on Paris by two wing operations, one along the coast and the other on the plains of Champagne against Rheims. In order to avoid charging the same authority with defend- ing in two directions, the Command was reorganized with a view to clearer definition of missions. The Third Group of Armies, comprising the Sixth, the Seventh, and the Tenth, was charged with defense of the front from the Mountain of Rheims to the nea and with barring the direction Amiens-Paris. The Fourth Group of Armies, entrusted to General Huntziger and comprising the Fourth and Second Armies, was to bar the direction Rethel, Chalons and Sedan, Bar-le-Duc. The Second Group of Armies continued to defend the fortified regions, (e) June 5. The enemy offensive was launched on June 5 from the Aisne CONFIDENTIAL -34- Regraded Uclassified 113 CONFIDENTIAL at Bourg et Comin to the sea against an organized but very much extended formation, especially on the extreme left. Stopped the first day at the debouches of Peronne, the enemy made an effort south of Amlens, where he succeeded in advanc- ing. On the extreme left, British contingents organized their defense on the Bresle, abandoning the passages of the lower Somme. East of the Oise, our line on the Ailette, which was too sparsely held, gave way and our defense had to be moved back on the Aisne, which was soon crossed. Under enemy pressure, the Sixth Army no longer could expect to reestablish the situation before reach- ing the line of the Marne at La Ferte. (f) June 9-11. The withdrawal in the direction of the Lower Seine was effected through successive use of delaying positions at the Bresle and Bethune Rivers, Clermont, and Beauvais, then through withdrawal on the position of Paris. Throughout this battle the Command endeavored to carry out the maneuver as planned. It tried to occupy the rear barriers - lower Seine, Marne, Ornain - with units recently reconstituted and hastily brought up. Elements of these units came from the Alps Front or from North Africa. A large part of the Tenth Army, driven back to the sea in the region of St. Valery-en-Caux, was lost insofar as any later maneuvering was concerned. (3) The Withdrawal Maneuver. (a) June 11-12. The enemy succeeded in crossing the lower Seine on June 11, although the center of the Third Group of Armies - the Army of Paris and the Seventh Army - held its own on the position of Paris, The Tenth Army, which had lost the greater part of its forces in the rear of the Bethune River, risked being separated from the remainder of our forces. The center of the Sixth Army, on the Marne at Chateau Thierry, was broken, while the enemy, penetrating deeply into Champagne, broke up the Fourth Army and compromised the retreat of the right of the Sixth Army. It then became obvious that the problem was no longer one CONFIDENTIAL -35- Regraded Uclassified 114 CONFIDENTIAL of a military character. In spite of all, however, the struggle had to be continued. There were two alternatives - either to remain united on our fortified position insofar as possible and have our forma- tion fall back on the pivot Longuyon-Argonne, or to abandon the fortified position and endeavor to retreat with our entire force, covering the heart of the country as long as possible. The first alternative afforded us the advantage of re- taining a formation supported by fortifications. It abandoned to the enemy, however, practically all our national territory and left to the army only the prospect of capitulation in the East or partial refuge in Swiss territory. The second alternative, difficult to execute, could lead only to the division of our formation, but it permitted covering the heart of the country for a longer period. It gave hope of prevent- ing capitulation of the main bodies of our remaining forces. This solution was adopted, and necessary instructions were given to the groups of armies on June 12. The Second Group of Armies had been notified on June 11, The withdrawal was to end on the left at the Orne River and at the hills of Alencon and the Perche; in the center and to the right on the shortest and most economical front constituted by the Loire River from Tours to Briare, the Horvan Hills, the Cote d'Or and the Jura in the region of Champagnole and of the Rousses. An intermediary stage, however, was necessary. It consisted of a regrouping of the center and right on the Orleans Canal, the Loing, the Seine, the Aube, the Harne at Vitry, the Moselle at Toul, Epinal, and Belfort. During this maneuver - executed for the most part by troops who were exhausted, who had suffered heavy losses in effectives and in naterial, and who were under the pressure of aggressive motorized units - it became imperative that we act quickly. That is why all available motor transport was distributed among the armies. We must also maintain the unity of the formation to avoid its being split and encircled, While it appeared that the center - the Army of Paris, the Seventh Army, and the left of the Sixth Army - well consolidated could carry on without serious fissures, the same was not true of the left and the right. To the left, the divergent axis of withdrawal given to the Tenth Army for extra-military reasons - consitution of the redoubt of Brittany - did away with the hope of maintaining unity with our Loire Front if the enemy should push forward in the direction of Saumur or CONFIDENTIAL -36- Regraded Uclassified 115 CONFIDENTIAL Angers, The Command endeavored, however, to maintain in the inter- val between the Tenth Army and the Army of Paris units capable of delaying such separation. These units were light mechanized divisions and armored divisions, To the right everything depended upon the rapidity with which the Second Group of Armies could break off, shift to its left the necessary forces for its protection, and thus parry the deep exploitation started by the enemy in the direction of the southeast. (b) June 13. The High Command urged the Second Group of Armies to hasten execution of its withdrawal - particularly that of its left in the Argonne - and prescribed organization of antitank obstacles and of a barrage position throughout the depth of the withdrawal zone, especially between the Loire and Jura, where the situation was the most threatening. (c) June 14-15. While the Tenth Army was withdrawing on the Orne and on Alencon, a rapid penetration was being made by enemy armored forces which had broken through our Champagne formation. Moving through the partitioned section of the Ornain and Meldancon, which was weakly held by elements of the Third Army, they reached Gray, Vesoul, and the Doubs River and then moved towards the Balfort Gap and the Vosges. (d) June 18. The Second Group of Armies was outdistanced while hastily constituting covering forces on its extreme left. Strongly attacked on the Sarre during its withdrawal and exposed to an attack debouching from the Rhine in Upper Alsace, it formed a square, under the orders of the Commanding General of the Third Army, in rear of the Moselle at Toul, Frouard, the canal of the Marne to the Rhine between Nancy and Sarrebourg, the crests of the Vosges, the Upper Moselle, and the Meuse at Neufchateau, This ended June 22 in the triangle Portieux, Donon, and Corcieux. A fraction of the Eighth Army grouped around Belfort endeavored to force a passage north of the Doubs in the region of Baume-les-Dames. On June 18 it obtained permission to take refuge in Switzerland if necessary, CONFIDENTIAL -37- Regraded Uclassified 116 CONFIDENTIAL While the partition and encirclement of our right was taking place, the Tenth Army on our left was submerged by the sudden thrusts of armored forces on Cherbourg and on Brest. In the center, in spite of strong enemy pressure to the East, the Third Group of Armies withdrew in order on the Seine and the Loire. It was soon obvious, however, that the retreat would have to be continued toward the Massif Central - thanks to the assistance of successive valleys of the Cher, the Indre, the Creuse, and the Vienne - in order that a double threat might be escaped. This threat was constituted as follows: To the West, from the forcing of the Loire at Saumur and Angers, in spite of the splendid conduct of elements hastily grouped on the left bank of the river and of the delaying action of the cavalry corps; To the East, from the deep thrust towards the Morvan, and shortly afterwards towards the Haute Loire and Allier; this thrust was made by large motorized and armored units which had broken through the formation of the Sixth Army south of the Marne at Chateau Thierry and which had encountered only the remains of units and regional elements hastily engaged to defend river crossings. The Command was endeavoring to delay encirclement. To the West it prepared and took advantage of cuts of the Charente and the Dordogne Rivers. To the East it ordered the Commanding General of the Fourth Group of Armies, who had under him the Commanding General of the Fourth Army, to bar the approaches of the Massif Central to enemy forces debouching west of the Allier River in the general direction of the southwest. Heanwhile the Commanding General of the Second Group of Armies, having the Second Army at his disposal, covered the north flank of the Army of the Alps and took over the defensive sector of the Rhone. He also barred the Rhone routes which led through the high valleys of the Loire and the Allier to the rear areas of the Massif Central and of the Army of the Alps. The Army of the Alps, attacked by Italy on its normal front, was obliged to guard its flank on the Lower Isere and to cover progressively its rear areas on the east bank of the Rhone. The splendid resistance of our troops, whose outpost fortifications held thoir ground, denied the enemy the crossing of the Isere at Voreppe and enabled the Army of the Alps to come out of the struggle intact. CONFIDENTIAL -36- Regraded Uclassified 117 CONFIDENTIAL At the time hostilities were about to cease, the High Command issued its last instructions, The withdrawal of the Third Group of the Armies on the Dordogne, whose passages were held and whose course was marked by demolitions below Bergerac, was to be covered on the left - on both sides of the Garonne - by the strong points of resistance of La Baise and the Lower Lot, and on the right by the delaying action of the Second Group of Armies covering the approaches of the Ridge of Naurouze between the last spurs of the Massif Central and the sea, Conclusion of the armistice on June 25 ended this hopeless maneuver, carried out with remnants of units whose movements were made painfully on roads congested by refugees. f. The German Maneuver as Seen by the French. It was obvious from the outset of 1940 that the formation of the German forces was definitely planned with a view to offensive operations on the Western Front, Their total strength had been increased to 150 divisions and later to 190 divisions, of which ten were armored divisions. The center of these forces was particularly oriented toward Luxembourg, Belgium and Southern Holland, Practically all the large units of the regular army - that is infantry divisions, armored divi- sions, and motorized divisions - and a large number of the divisions set up upon mobilization were assembled in the region situated north of the Hoselle and on both sides of the Rhine above Mainz. Some were perfecting their instruction and completing their training, while others held the Siegfried Line north of the Moselle and improved their defensive organizations. The contact front, facing our positions, was held only by divisions constituted upon mobilization. Cermany was thus preparing for a powerful mass of attack capable of speedy intervention in Luxembourg, Belgium, or Holland. As early as April, many signs of preparation for a German attack north of the Moselle were noted - particularly the following: (1) Construction of bridges or landings on the Moselle and the Rhine. (2) Movement and assembly of armored forces in the region between the Moselle and the Lower Rhine, (3) Closing-in of the German formation west of the Rhine toward its western frontiers. CONFIDENTIAL -39- Regraded Uclassified 118 CONFIDENTIAL (4) Distribution of maps of Luxembourg and Belgium to the troops. (5) Increase in the number and size of the depots for materiel and ammunition west of the Rhine. (6) Improvement of roads leading to the western frontiers. (7) Interruption or reduction of passenger and freight traffic on the Reich's railways. (8) Withdrawal of German funds in Holland. (9) Reinforcement of antiaircraft measures in large German towns. These signs became more clearly defined and supplemented in the beginning of May. Proparation of many crossings over the Oure, the Sure, and the Moselle above Trier were particularly noted. News from Luxembourg, Belgium, and Holland proved the state of anxiety pre- vailing in these countries as a result of the ever-increasing German mass, The German offensive was about to take place. It was actually launched on the morning of May 10, Information gathered on May 11 indicated that "wing elements directed on Luxembourg and Holland were to constitute secondary masses only," and, as a matter of fact, it was confirmed on May 12, 13 and 14 that the center of gravity of the German attack was south of the Meuse in the direction of Bouillon. Sedan seemed to be most seriously threatened. The crossing of the Meuse by the Germans on May 15 brought up a new problem. Was the German mass planning to move South to take the Maginot Line in rear, or was it planning to advance straight to the West in order to effect separation of the Group of Armies of the North from the main forces of the French Armies? On May 16, all reports indicated that a bold exploitation was being made by the German armored forces in the direction Sedan and Guise. A German document, found during the night May 16-17, showed the march direction of the divisions of the Von Kleist Group - the 1st, 2nd, 6th, 8th, and 10th armored divisions and the 2nd, 13th and 29th motorized infantry divisions - and stated that all German armored divisions were to advance straight to the west. Any remain- ing doubt as to the axis of the effort of the German masses which had crossed the Meuse was thus dispelled. CONFIDENTIAL -40- Regraded Uclassified 119 CONFIDENTIAL Laon, St. Quentin, Cambrai, Arras, Amiens, and Abbeville were successively reached by the advancing German mass of the Von Kleist group, while the protection of this movement was insured from the south by motorized divisions, which were relieved by infantry divisions as they advanced, The German effort was oriented more and more toward the northwest, and on May 20 definite information indicated that the German armored mass, having effected the separation of the northern forces from the main bodies of the French armies, was turning towards the north in the general direction Boulogno and Calais, in order to annihilate the Allied forces in the north. The first phase of the German maneuver ended in front of Dunkirk. It was obvious on May 26 that the armored divisions had been withdrawn from the north and reassembled in the region of Montreuil and St. Omer and that motorized infantry divisions fighting on the Somme had been rolieved. Thus a new mass was being constituted immediately after operations in Flanders, On the other hand, definite signs of the preparation of an offensive began to appear June 1 on the northern bank of the Aisne from Pontavert to Vouziers; the contact was closing in on the Moselle and Rhine front, and assembly of materiel and effectives was noted in front of the Rhine. It was obvious that the enemy was preparing to launch powerful offensives from the sea to Switzerland within a short time, Movements and assemblies of large armored units were located north of the Somme and east of Hirson. They indicated that the enemy effort would be made, on the one hand, on the Somme and, on the other, in Champagne. A very violent offensive was launched June 5 from Abbeville to the junction of the Ailette Canal with the Aisne. Two mechanized masses, identified near Amiens and Peronne, shook the French front south of these two regions. Along the front of attack, approximately forty infantry divisions were either advancing in rear of the mechanized masses or endeavoring to break through the French Front. Information soon indicated that the armored mass which had been debouching from the region of Amiens towards the south was now turning towards the southwest, then towards the west in order to encircle our troops retreating from the lower Somme toward the CONFIDENTIAL -17- Regraded Uclassified 120 CONFIDENTIAL lower Seine. The mechanized mass operating south of Peronne seemed to have the mission of reaching the region of Montdidier by way of the right bank of the Oise, with the west of Paris as its objective. East of the Oise enemy attacks, at first repulsed, later succeeded in reaching the plateaus north of the Aisne, and then in crossing the river itself. East of the confluence of the Aisne and the Ailette Canal, the many signs of an early attack, which had been reported June 1, became confirmed. On the morning of June 9, the enemy attacked on a front extending to the Meuse. General Ouderian's armored mass, identified since June 2 in the region of Hirson, was engaged June 10 on the Champagne Front. Its action, obviously oriented to the southeast, was designed to bring about, by an outflanking movement to the east, the fall of the Hountain of Rheims. Then it was to carry out to the south, by way of Chalons and Chaumont, an outflanking movement of our Lorraine and Alsace forces, At the same time many signs of preparation for an attack were disclosed on the Lorraine and Alsace fronts, particu- larly in the regions of Huningue and Neuf-Brisach, An attempt to cross the Rhine appeared to be imminent on June 13. Estimates of German forces now available indicated that the German High Command had about 20 divisions in the Black Forest. Further, about 30 divisions were available for the battle or for movement in a new direction. Thus approximately 50 new divisions could be engaged against the French armies, which for some time had put all available forces in line. On the morning of June 14, the First German Army attacked on the Lorraine front, and the following day the Seventh Army crossed the Rhine above Neuf-Brisach. Fronts were being disrupted on all sides; German advances were increasing and tending to encircle our forces in the west and in the east; the Atlantic Coast was quickly occupied, and in the rear the three and a half divisions of our Army of the Alps engaged 29 Italian divisions. The armistice was signed before a German Army whose forces were impaired by exhaustion and losses but whose men were exalted by victory and still capable of powerful and prolonged efforts. E. Summary and Conclusions. This study is not intended as a historical document giving CONFIDENTIAL -42- Regraded Uclassified 121 CONFIDENTIAL a complete and accurate picture of operations. Too little time has elapsed since the armistice, and insufficient testimony has been given. This work constitutes merely a guide for more exhaustive studies; it may, however, warrant certain conclusions as to the reasons for German victory, On May 10 the Allied armies included 104 divisions on the Northeast Front. Of this number, 29 were immobilized because they were fortress divisions or because they were second line divisions made up of old classes. Thus there remained 75 divisions capable of participating in active operations. Ten of these were British. Against these large units, the German Army could put into line 190 divisions, of which 140 were capable of participating in active operations. Numerical inferiority was still greater insofar as tanks and aviation were concerned. After losses in personnel and materiel suffered in the north, there remained on June 4, the eve of the second German offen- sive, over 43 Infantry divisions, three armored divisions and three cavalry divisions from Longuyon to the sea, The mechanized equipment of these units was greatly reduced. On the same date, the German Army had reconstituted its ten Panzer divisions, and the enemy could choose its zones of attack, To support our fortified position and to oppose a possible attack through Switzerland, there remained but 17 fortress divisions and divisions made up of old classes, These figures show that the superiority of the Germans in effectives, mechanized units, and aviation was unquestionable and that it constituted one of the principal military causes of our defeat. However, each time the French could oppose equal means, they held their own and proved their valor as well as the effective- ness of their materiel, unfortunately insufficient in numbers, A number of examples will give proof of this assertion. First of all, in the open, when the Cermans used neither tanks nor aviation, they encountered great difficulties. (1) In the Argonne - first between May 15 and 20 and later about May 22 - three or four French divisions held their ground successfully against approximately eight or ten German divi- sions, The losses of the enemy were very heavy and his gains were limited during this period to a few kilometers of terrain. (2) On the Chemin des Dames, two French divisions held COMFIDENTIAL -43- Regraded Uclassified 122 CONFIDENTIAL for two days, beginning June 5, against five Cerman divisiono operat- ing without tanks but supported by a strong aviation. (3) Farther to the east, the Fourth Army, in spite of its feeble means - six infantry divisions, two of which were light divisions of two regiments each, 1 armored division, and one light mechanized division, very much reduced and including but 150 tanks - checked for 48 hours on June 9 - 10 an adversary who employed exceptionally strong forces. His strength included 12 infantry divisions, four Panzer divisions, and two motorized infantry divisions. In addition, he had absolute mastery of the air. Second, modern French materiel had good qualities which were recognized even by the Germansthemselves, (1) The reconnaissance regiment of the 3rd Light Mechanized Division left the region of Cambrai May 10. At the end of the day it had reached the Albert Canal after a journey of more than 200 kilometers, It went into action the same evening. (2) The combat brigade of this same division - that is, the tanks and artillery - left the region of Cambrai May 10 for the position Wavre-Namur which constituted its first objective, This stretch of 150 kilometers was covered without incident; the material arrived in perfect condition and the different elements of the brigade fought each of the following days against the German Panzer divisions, (3) It was ascertained that tonnage being equal, French armored tanks always proved superior to German materiel; the enemy's very heavy losses in light and medium tanks have confirmed this. On June 6 a French second lieutenant of artillery saw one of our B. tanks immobilized because the tank commander was wounded. The officer entered the tank, found out how to operate the 75-mm, gun, started the vehicle, and came back shortly afterwards, having destroyed three German tanks, In the region of Montcornet, Aspirant X, whose tank had been stopped by a breakdown, remained at his post and succeeded in putting out of commission eight German tanks and numerous cars be- fore he was obliged to destroy his own tank and abandon it. In the 1st Armored Division on the evening of May 14 a battalion of heavy tanks went into position at approximately 8 P.M. The next day at 8 A.M. it was attacked by enemy tanks four times CONFIDENTIAL ⑉44- Regraded Uclassified 123 CONFIDENTIAL as numerous. The German tanks, however, were immediately blocked by the first of our tanks and were obliged to turn back. At n o'clock a new enemy attack, supported by a violent aviation bombing and by heavy artillery, was no more successful than the first, Finally the tank battalion had to withdraw, but only when threatened with encirclement, (4) Means for increasing the mobility of the 47-mm, guns were still being tested at the end of May, but when circumstances made it necessary to use these guns as antitank weapons, they were mounted on cross-country tractors and protected with light armor. As a rule, batteries of these "tank chasseurs" could not be organized in time to render the services expected of them, but it is interesting to report the results obtained by one of them in a few days of campaign, Formed on May 30 at Versailles, the battery commanded by Second Lieutenant B. went into action on June 5 in the region of Molliens-Vidame. The same evening it opened fire at 2,000 meters against enemy tanks, Two tanks were destroyed by the first shells fired by two of the guns of the battery, and two other tanks were put out of commission shortly afterwards. The next day this battery went into action in the same region - the region of the Abbeville Road - to check the attack of about 50 tanks, several of which were as heavy as 30 tons. It carried out its mission with complete success, destroyed ten enemy tanks, and suffered no losses itself. On June 7 toward Campaux, where Second Lieutenant B. 18 battery had been ordered to withdraw, five German tanks were destroyed. (5) Batteries of 75-m. guns were used for direct fire against tanks, In the region of Aumale, the 1st Battalion of the 72nd Artillery Regiment, firing at short range, put 30 Cerman tanks out of commission, One of the three batteries destroyed 19 tanks, (6) Fortifications of the Maginot Line brilliantly resisted the enemy. The Chappy Farm was subjected on June 21 to a violent four-hour preparation of heavy artillery fire which did not harm any of its weapons, The two-battalion infantry attack which followed the bombardment failed completely, and the enemy suffered such losses that in the afternoon he had to ask for a suspension of arms in order to remove his dead and wounded. The Maginot Line fulfilled its mission completely until June 27, two days after the armistice, when it ceased firing upon receipt of orders from the French High Command, All the works CONFIDENTIAL -45- Regraded Uclassified 124 CONFIDENTIAL were intact when the fortifications were turned over to the German military authorities. The French Army suffered a defeat which it would be un- gracious not to admit, but at Rethondes, at the time of the signing of the armistice convention, Chancellor Hitler said "The French Army fought valiantly." This was an unquestionable tribute paid by the adversary himself. CONFIDENTIAL -46- Regraded Uclassified 125 W Ricy Minutes Scale II 1,500,000 (12) all Emit MEUSE tives CONDON deld MES Surren - adedacheal Antwers Indian Mallions 1 Phenici - Calling Mentrol Devi \ 28/min ripress Brown Lucher Dige 1 a Hgf - Rouber COM (linal B Problems Doos, Charles a Valega Arrabi Cambra - I Mati wail 50° from mine St. Quentin - MEDICA Services Add Kaulen Lac. Last Havin Beauvais ARE Kuuen - - Care - I American Ban Reims MAY Morter Meto and - - Se providerm SEINE 6am RECU Chalone RET - CHARIS Nangi Lega VersaiDe 1 - 1 A - Melun - 0 1 - Chargies TM i Alençon Truye - 1 Chaumon(en Feature - 44" Le Manth Jouine - - fun Austrité R Hante - - ⑈ - Children ) pun Number DOORS ( Solbthurny --- Toun I Besinom LOME OF I Love ! I 1 \ - I w - i 1 number Endown - I S ( CREVILE Memi 18407 - Date Portien $ Gard I - you Hganner Segare Annells 46" Tesm live - YOU - 126 4a5Div. 12 Dr 30 & 34 Div. 1DC 7°Armée 3DI Visa 301 actives (2md) 1DI série A 2DI striet B.E.F. 1DLC D.I.W.) 5 DI 18 Armee 1 DC 24 & 26 Dtv. Div. 3DI actives 1 DI serie A 22 2 DLM 9 Armee 1DIW 2 DI actives (1mot.) #11 2 DI série A 13-01 série B - 101 fortercase 12 LOT BELGHOU &Dtc 3 DIM Bde Spahis 201 active I DCR IDjusérie 2DI sária 2DLc 3s Armee 13 Div. Trouper DI ectives 5 Di Série A 3 DI strie B 2'LOT 2 3. DIW BELGIQUE 1DI 1 DLC 1 Bét de Caralinia 2 DI activer Trauper des - 51 Armee ADI 1 of intos PARIS 3 DI aérie A 4 DI actives 1 DI aérie D 5 DI série A 2 DI actives 1DI 2 Di série B Treupers ans LEGEND fortifide 1 DI forterchen Balgen Forces British Forces French Forces IDI !! SHE Reserve German Forces Units is process et change 101.Pm Franch - Boundaries DC LOT SUISSE Dentiry Division 89 Armée 5 Div. DO - Armiraz Division DI active Pegular Division 3 DI DIM Motorized internity Division RESERVE 3 Di actives 01 PO. 1 I Division 4 DI advise B Die série & di Reserve infentry Division G.Q.G. 2 DI forterease DI Drw advis Reserve Division POUR ALPES 1 Ber - Spehia infantry Division DLC Call Certify Division BLM Light Medicalized Division 3DI 100 ONQ - 5 Dripade Let Groupmant - Motorized ... Die the 127 RESTRICTED 0-2/2657-220 M.I.D., W.D. No. 344 March 20, 1941 12:00 M. SITUATION REPORT I. Western Theater of War. Air: German. Last night the German Air Force attacked the dock area and the East End of London with a force estimated at 400-500 bombers. It was the most severe raid on England of 1941. Severe damage is indicated, much of it from numerous fires. British. Last night the R.A.F. operated normally against Germany, the main effort being directed against Cologne. II. Balkan Theater of War. Ground: Albania. The Greeks report the repulse of Italian attacks in the central and northern sectors. Bulgaria. No change. Air: No reports of activity. III. Mediterranean and African Theaters of War. Ground: Eritrea. The British report the capture of important positions south of Cheren and the repulse with serious losses of Italian counterattacks. Air. The R.A.F. supported the attack on Cheren in con- siderable force and also raided widely in Ethiopia and Libya. Note: This military situation report is issued by the Military In- telligence Division, General Staff. In view of the occasional in- clusion of political information and of opinion it is classified as Restricted. RESTRICTED Regraded Uclassified CONFIDENTIAL 128 of Code I a I a = at 0.17, Hork so, 1041. Louise, filed 15:30, Hurch no, 1941. 1. British air activities over the Continum. a. Day of March 19. Redds used curried ost against Common merchand chipping. the results of these wedde - not reported. D. Hight of March 18-19. R.A.F. operations - as follows: (1) - and Dateh sirttelds, including I - attached. w Imp Brittic planse) (a) Petrolem storage facilities at - I 8 I B attented (5) Willstmsheven was attached w w nation (b) Eich was attended w 100 hospy bonbers. 6. Hight of March 17-18. Irom - attached w a feeso of planse. I I a di a I I 2 I 1 1 % I e I a vasa of few hours' duration. - five or too stambee a formation of approximately six - planse was - the city. 2a the 1 patrito I 3 I I I I I to I I I I I 1 i = 4 s 1 b I n the const lines of Seven, 20ml and Burdellt. Only elight - resulted from these attachs. Other small groups of - planne - - in over Britdsh vaters and in igatrole over the Dever Streets. CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 129 $ $ 1 1 If I R I 1 = s 1 - $ I I s I I 1 - Against is Beffelk onl the Milimis - - - and Ball - 100 the used on Hall resulted in a - - of commition and curious - to private proporties. Reyal Air Name might fighters 2 into a I 1 a I I a I n I 3. Aircraft lesses. a. Brittsh 2 1 o I $ - Hight of March 18-20 - 1 beater I - = I 19-89 1 a n a I shall 1 no - Brittich night fightore. my of March 20 . t and a damaged. Hight of March 17-18 - 5 night fighters - Britten benbers. 4. Activities of the Regul Alr Thereo in means themboro www as fellows: - Aste - boots at Barasao, Albenta, - torgodook w British street and so to probable that - others - also me with toryoteen; as Italian erateur ab Valum, Alberta, - not w - Brittich acrial torgeto; a - night of March 16-17-lange Stree vere started at Tripoli, / I 1 I I I 1 0 5. During the receas Italian effensive to Alberta Italian commities envented to at Least 15,000 one - then 3,000 Italian subtors I I I -2- CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 130 6. A Comman Forts-Walf Lang - benter operating about also miles west of Blackood Bay e the weet - of Irelent attached. too British troviers. - wes - sal the other - damaged. I Distribution: Secretary of Mar State Department I % Asst. Secretary of Var thief of Staff Ver Plans Division Office of March Intelligence Air Corpo 6-3 + CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 131 Persphance of Date Rediegrom Reserved at the Ver Department at 10:08, Hireh n, 1941. London, filed 14:00, shreh m, 1941. 1. a. Daylight of Storch so. - norchast shipping along the const of Holland - the target of British benking rate and the estr Larient was also attached. These rates was appareably not sussessful. 3. Hight of March 19-40. A total of 39 Brittish havey bechare - over the the attacked oil installations is Bobberinn end 36 attached Colegue. the British estatein that the attacks vere associatul. 2. a. Hight of March no-m. the under of Comman planse - England was much loss than during recemb nights. Sentimed raids vero corried out in all parte of conthern Magland but the principal notions - against Lendon and Plymouth. the entent of the damages done has not yet boon determined. b. Daylight of March 20. Caly a fee - planse - active and most of them were engaged a recomminesse and patrol nicotems. 4. Hight of March 19-20. in aggregate of 300 - please vare plotted - Ingland. - of those planse vere native - South Value and Cheltomhen but the Lange majority of them, aso planes, curried out - attacks as Imion's East M et the areas. Major fires - started at 16 potate and 1600 fire - wire in operation throughout the s I I 1 plants Insurance 1 properties and six - installations were severely damaged. Approximately 700 civilians had to be evacuated permanently from the areas affected. - over the casualties that resulted from these attacks were relatively too visa CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 132 constituted in the Light of the severity of the relds. I a I & I 1 I I - 4. Activities of the Reyal Adv Turee in Middle Bestern Venbers ware as follows: in Alberta, the ettr of Topolant - bonked w Brittish planse, in Libya, British bembers attacked the city of State, the cirficid at Tenat (Thod Esceem) and the herber of Tripoli; in other Middle Instem eactors planes of the Reyal Air Ferce varo used in support of land forem. 5. The British Mar Office believes that the nagotistions between Tegeslavia ml Gounnay will reach a erisis an March R$ w sh. According w information in the pessension of the Var Office Tegaslavia wes informed w Turkey a March 19 that Testary would w willing to consider - abteck an Greese w Commany as a - for ver provided that Teguslavia we villing to de the - 6. Fifters 105m - and fifteen - - are being placed abourd 6 ship in a part in systa which has already born Lended with a Large quantity of military equipment. these military supplies are destined for the Country Islands. T+ At a point in the about 100 miles off the Likyum coast at Tripeli - troop transporte with fall Leads - and w British terpodeca. 8. lhat fereas in Balgaria are receiving large qualities of equipment designed for use is tropical completen. 9. there is M increasing - a the part of the British laboring classes at other siviliens who - born busied w the Summas and whose homes in inion and other Heitish eities have been destroyed that the Reyal Ate Force ond the British - retaliste with - froguent and - asture attacks a Berlin and other matropoliten centers to Germany. + CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 133 a the morning of n obsentes appeared. in the Love newspapers which my be the beginning of a engaiga state at the - results. I Distribution: Secretary of Mar State Department I s Asst. Necretary of the Chief of Staff Ver Plans Division office of Navel Intelligence Air Cargo + CONFIDENTIAL Regraded Uclassified SECRET By authority A. C. of S., G-2 Date MAR 22 1941, BDH Initials ) Paraphrase of Code Rediegram Reserved at the Mar Department 134 at 10:08, March n, 2942. London, filed 14:20, Murch n, 1941. It was reported in our daily confidential cablegram of March 21 that there is a growing domand a the part of the British laboring classes for more severe and frequent raids a German metropolitan emters in retalistion for the heavy German raids a British civilism populations. Neverer the Reyal Air Force is unable to carry out raids an German sities equal in intensity to those engaged in w the Germano on British centers of poyulation because of the feet there is - average of only about 350 trained British - that can be used in such beating and the unber of British benbardment planes svailable with units is in the neighborhood of from age to 500. SCARLON Distribution: Secretary of Mar State Department Secretary of Treasury Chief of Staff Mar Plans Division Office of Neval Intelligence Air Corge SECRET Regraded Uclassified 135 CONFIDENTIAL of Code Received at the Ver Department as 21:41, Hards si, 1941. Berlin, filed 17:16, March n, 1941. 1. n is believed that Generage to giving first primity to the attack as England. Nevertholess, as is above in the attached - of battle, there has born - increase in the - forces is the east. the reason for this insuress 10 met - 2. the distribution a Hurch - to believed to be as follows: West Hollond, Delgium, Frause 16 1 as South 20 12 Foland 2 Southenst Bulgaria I 40 I Total 250 I Distributions Coursbary of Mar State Department I of I I r the thist staff Plans Division Office of Navel Intelligence CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 136 Puraphrase of Code Rediogrum I a a = at 21.156, Hereb no, 1941. Visity, filed 21:10, Name n, 1941. I I I des 1 s i I In the Calais and Boulegne districts, according to efficial courses, there are important stores of you shells and a under of committies vare caused w this - - a quality of shalls aboved - Boulless we exploied w R.A.F. bush. I Distribution: Secretary of War State Department Secretary of Treasury Asst. Secretary of Map thief of Staff Ver Plans Division Office of Navel Intelligence CONFIDENTIAL Regraded Uclassified 137 RESTRICTED 0-2/2657-220 M.I.D., W.D. No. 345 March 21, 1941 12:00 M. SITUATION REPORT I. Western Theater of War. Air: German. Minor daylight activity on the 20th. Last night the Luftwaffe was over England apparently in less force than the preceding night and attacks were somewhat dispersed. However a heavy attack was made on Plymouth. British. No operations over Germany last night. The German submarine base at Lorient was bombed. II. Balkan Theater of War. Ground: Bulgaria. No change. Albania. Only artillery activity reported. Air: No reports of operations. III. Mediterranean and African Theaters of War. Ground: Eritrea. The British announce they are steadily making headway toward Cheren in spite of heavy Italian counter-attacks. Abyssinia (Ethiopia). The Italians are making a stand at Marda Pass in the vicinity of Giggiga which is the gateway to Harrar and the Addis Ababa-Jibuti railroad. British Somaliland. British troops are reported to have occupied Hargeisa, about 95 miles southwest of Berbera, March 20. Air: The British report strong support of the Cheren attack. Note: This military situation report is issued by the Military in- In- telligence Division, General Staff. In view of the occasional as clusion of political information RESTRICTED and of opinion it is classified Restricted. Regraded Uclassified 138 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE March 21, 1941 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL At 11:00 this forenoon Mr. Playfair of the British Treasury Mis sion called on by appointment. He let me know that Sir Frederick Phillips had gone to Ottawa ne for a few days. He will also spend some time at Montreal on a League of Nations Committee meeting. Playfair had received a cable from London to the effect that much of the gold which it is contemplating to sell to us is at Durban, and that it vas a six days' haul from there to the port where our cargo carrier is to arrive. Vould it be possible, therefore, for the vessel to proceed on to Durban as a second port of call? Playfair was also instructed to inquire as to whether we could confirm the date of arrival. I told Playfair that I had very definitely let Pinsent know, in accordance with our understanding with our Navy. that all of the cargo should be assembled at the one port of embarkation which we have discussed. In Playfair's presence, I telephoned Admiral Noyes who confirmed this understanding and strongly insisted that the Navy would not desire to send the vessel up the east coast to Durban. I asked Playfair, therefore, to let his people definitely and finally know that there must be only the one port of call and that the Navy's information is that the vessel may be expected to arrive there on March 29. 16.ml. Regraded Uclassified 139 TREASURY DEPARTMENT FOR RELEASE, MORNING PAPERS Friday, March 21, 1941. The Secretary of the Treesury, by this public notice, invites tenders for $100,000,000, or thereabouts, of 91-day Treasury bills, to be issued on B. discount basis under competi- tive bidding, The bills of this series will be dated March 26, 1941, and will mature June 25, 1941, when the face emount will be payable without interest. They will be issued in besrer form only, end in denominations of $1,000, $5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity value). Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o'clock P. m., Eastern Standard time, Monday, Merch 24, 1941. Tenders will not be received at the Treasury Department, Washington. Each tender must be for en even multiple of $1,000, and the price offered must be expressed on the basis of 100, with not more than three decimals, e, 8., 99.925. Frections may not be used. It 13 urged that tenders be made on the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Branches on application therefor. Tenders will be received without deposit from incorporated banks and trust compenies and from responsible und recognized denlers in investment securities. Tenders from others must be accompanied by payment of 10 percent of the face emount of Treasury bills applied for, unless the tenders are accompenied by an express guaranty of payment by on incorporated bank or trust company. 24-12 Regraded Uclassified 140 - 2 - Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Brenches, following which public ennouncement will be made by the Secretary of the Treasury of the amount and price range of accepted bids. Those submitting tenders will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in part, end his action in any such respect shall be final. Payment of accepted tenders at the prices offered must be mode or completed at the Federal Reserve Bank in cash or other immediately available funde on Morch 26, 1941. The income derived from Tressury bills, whether interest or goin from the sale or other disposition of the bills, shall not have any exemption, as such, and loss from the sale or other disposition of Treasury bills shall not have any special treat- ment, as such, under Federal tax Acts now or hererfter enacted. The bills shall be subject to estate, inheritence, gift, or other excise taxes, whether Federal or State, but shall be exempt from all texation now or hererfter imposed on the principal or interest thereof by any State, or any of the possessions of the United State: or by any local texing authority. For purposes of texation the amount of discount et which Treasury bills are original ly sold by the United States shell be considered to be interest. Treasury Department Circular No. 418, as amended, end this notice, prescribe the terms of the Treasury bills and govern the conditions of their issue. Copies of the circular may be obtained from any Federal Reserve Bank or Branch. Regraded Uclassified MARCH 21, 1941 BANKERS AID DEFENSE BOND MARKETING DR W RANDOLPH BURGESS PRESIDENT OF NEW YORK STATE BANKERS ASSOCIATION ADVISED SECRETARY OF TREASURY MORGENTHAU TODAY THAT MEMBERS OF THE ASSOCIATION STAND READY TO GIVE MAR 21 1941 -ALL OUT- AID IN THE MARKETING OF NATIONAL DEFENSE BONDS -0- 142 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 21, 1941. Secretary Morgenthau TO Alan Barth FROM LEND-LEASE AFTERMATH: FIRST REACTIONS OPTIMISM Enactment of the Lend-Lease law has been generally appraised in editorials as a momentous national decision. Regardless of misgivings as to the consequences, the very making of the decision has evoked a patent sense of relief and a noteworthy resurgence of self-confidence. Defeatism, perhaps the offspring of doubt, has been spontaneously displaced by an enlivening sense of national purpose and direction. The President gave impetus to this sense of direction by putting the law into operation instantly and by his prompt request for an appropriation of seven billion dollars. His radio speech of Saturday evening gave it dramatic expression. The ensuing edi- torial comment was overwhelming in applause -- much of it with & "Damn-the-torpedoes" tone which bespoke the general eagerness for action. Direction, for the moment at least, seemed more important to the commentators than destination. Regraded Uclassified 143 - 2 - The President boldly articulated popular hopes which for weeks had been submerged in apathy, uncertainty and even despair. He proclaimed that Democracy will win. And in the sudden ebulli- ence which he engendered, the editorial writers have busily bol- stered yearning with reason. They found cause for cheer in the foreign reactions to the President's address. The disparagement of the President's promises by Axis spokesmen was interpreted as a kind of whistling in the dark, betokening essential weakness. The enthusiasm of the British reception was assumed to be the basis for heightened morale. Even viewing the battlefronts, the editorial writers have at last been able to find causes for rejoicing. They hail the more ferocious British air raids over Germany. They take heart from the landing of British troops in Greece and predict that Turkey and Yugoslavia will stiffen their resistance to Axis pressure. Quite suddenly the aura of invincibility which it has been fashion- able to spread about Hitler has been dissipated. So, also, has the curious inferiority complex that Democracy cannot match Dictatorship in productive efficiency. The President's words, in a sense, flexed the industrial muscles of America and caused the editorial writers to rub their eyes in wonderment. They believe at last, not only that this nation possesses mighty Regraded Uclassified 144 - 3 - resources, but that under forceful leadership it will mobilize them and make them effective. What was labeled wishful thinking has become conviction. The United States has been transformed by the events of the past fortnight from an immovable object into an irresistable force. NATIONAL UNITY The bulk of the opposition to the Lend-Lease bill has, for the moment, accepted the decision on the issue and is prepared to move along, at least temporarily, with the majority with more or less good cheer. Notable among the last-minute converts are the Scripps-Howard papers and even, in some measure, the Paul Block, Hearst and Patterson chains. Only a handful of intemperate bitter- enders follow the lead of The Chicago Tribune in an insistence that the Lend-Lease law will produce the downfall of Democracy. A strong semblance of national unity has been achieved in the sense that there now exists a higher degree of united public opinion than at any time since the inception of the war. But a militant minority is still working in opposition to the national purpose. It is not likely to be overscrupulous in its efforts to undermine popular confidence in the President's leadership. LEND-LEASE COSTS There was neither amazement nor dismay in editorial reaction to the seven billion dollar appropriation request. Many Regraded Uclassified 145 4 commentators, indeed, assumed that this initial sum would consti- tute but a small portion of the total reckoning. Yet few of them conjured up the bugbears of inflation and financial collapse with which they were wont to greet past proposals of deficit financing for peacetime purposes. BRITISH ASSETS The confusion of editorial thinking has seldom been better revealed than in the reaction to the British sale of the American Viscose Corporation. Newspapers which had been clamoring for the liquidation of British holdings in this country were suddenly sobered by a concrete instance of what they demanded. The disposal of this direct investment was widely applauded as evidence of Britain's willingness to go all-out in her own de- fense. It provided an answer to the querulous critics who have insisted that America was being swindled into paying for Britain's war. At the same time, however, it aroused fears for the financial future of the British and strengthened the sentiment for dealing with them generously. A number of editorials advance the thought that a wholly impoverished Britain is not likely to be a substantial customer for American goods when the war is over and may, indeed, become, through the necessity to barter, 8. dangerous competitor. Regraded Uclassified 146 - 5 - Paradoxically, the Treasury Department, but 8. short while ago accused of pampering the British and conniving to ease their financial problems, is now cast in the role of tight-fisted banker. The press and public are learning to be gentle. - Regraded Uclassified ) 147 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 21, 1941. Secretary Morgenthau TO Herbert Merillat FROM TAXING FOR DEFENSE: PRESS OPINION Recent editorial comment on taxes has emphasized that the burdens of income taxpayers are relatively light now and will be- come much heavier in the near future. The newspapers, through news articles and editorials, have impressed upon their readers that taxes will increase greatly in the next year. Widely pub- licized comparisons of British, Canadian and American taxes have helped to show American taxpayers that they are relatively lightly hit at present. Stories of voluntary contributions for defense purposes by persons not liable for income tax have been given wide publicity and have been generally interpreted as showing that the public is willing to accept greater tax burdens in the cause of defense. There has not yet been much expression of opinion as to what form additional taxation ought to take, but there has been plenty of speculation as to what form it will take. Many papers have featured reports based on "advance information" to the effect that responsible Congressional and Administration leaders favor raising Regraded Uclassified 148 - 2 - the additional revenue by increases in present taxes rather than by imposing untried taxes. Increases in the individual normal income tax rate and corporation income tax rates, further reduction of personal exemptions, and the widening of individual surtaxes have been reported as Treasury proposals. It is a bit early to tell whether newspaper speculation based on "inside information" will be cut down by Chairman Doughton's statement deploring the airing of tax suggestions in the press before they have been sub- mitted to the Ways and Means Committee, or by your statement that the Treasury has not yet discussed tax recommendations with the Committee. The proposal that two-thirds of the cost of the defense pro- gram should be paid by current taxation has been approved by news- papers commenting on it. It is generally agreed that it is desir- able to place the defense program on a pay-as-you-go basis as far as possible. There has been a scattering of comment from anti-Administration papers calling for drastic reduction of "non-defense" expenditures. At present comment on the President's public works proposal has not been canvassed. That proposal will likely focus attention on the question of government spending for other than direct military purposes. Regraded Uclassified 149 - 3 - GALLUP POLL The Gallup Poll announced on March 16th indicates that the general public is badly misinformed as to the amount of income tax paid by persons in various brackets. Apparently the incidence of the surtax is not at all grasped. According to the Poll, a typical cross-section of people think that persons with an income of $100,000 now pay combined Federal and New York income taxes of about $5,000 and that they ought to pay about $10,000. Actually, the present Federal tax alone, on an income of $100,000, amounts to about $40,000. These figures will likely be cited by opponents to increased income taxation of large incomes. PORT OF NEW YORK AUTHORITY BONDS The editorial columns have been surprisingly silent on the recent assessment of deficiencies against holders of Port Authority bonds. The Wall Street Journal confirms that municipal bond traders and holders of tax-exempt bonds are taking the Treasury move calmly, attributing it to Treasury assurances that no attempt will be made to tax interest on outstanding obligations. The expected squawk from the mayors has not yet come. Regraded Uclassified 150 Treasury Department Division of Monetary Research Date April 3, 19 41 To: Secretary Morgenthau Apparently Japan is deliberately letting her assets in the United States decline, and as part of the policy she is reducing her gold shipments to the United States. MR. WHITE Branch 2058 - Room 210 151 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 21, 1941 Mr. White TO FROM Mr. Taylor Subject: Japanese Gold Movements and Dollar Balances in the United States, January to March 1941. 1. Japanese gold shipments to the United States have fallen markedly 80 far this year in comparison to former years, as the following figures show: Millions of Dollars 1939 1940 1941 Jan. 37.8 37.7 6.1 Feb. 5.4 4.9 nil Mar. 11.4 5.8 nil (to date) Total 54.6 48.4 6.1 Silver shipments to March 12th totaled only $1.2 million, less than half that for the same period in 1940 but about the same as in 1939. 2. At the same time Japanese dollar balances in the United States have been allowed to fall. No figures are available for 1939, but those for 1940 and 1941 show: Millions of Dollars 1940 1941 Jan. (1st week) 165 110 Feb. (lst week) 153 109 Mar. (lst week) 161 103 Whereas in 1940 Japan deemed it desirable to keep the balance up to about $160 million, in 1941 she was content to allow the balance to fall as low as $103 million. 3. It is quite likely that the explanation of these circumstances is Japan's reluctance to ship gold to the United States in order to augment her dollar balances as long as the threat exists that the United States may freeze Japanese funds. If this is the reason we may expect that Japan's dollar balances will be allowed to fall even more noticeably in the future. Regraded Uclassified 152 S.COAST OFFICE GUARD 21 March 1941. Memorandum for - Assistant Secretary Gaston CONFIDENTIAL The attached correspondence is herewith returned as requested; its contents having been noted with interest. annument R. R. WAESCHE Rear Admiral, U.S. Coast Guard, Commandant. miss Bhamcy 153 CONFIDENTIAL March 20, 1941. REC'D U. m. COMOTS OFFICE MEMORANDUM MAR 20 1941 TO: Admiral Waesche FROM: Mr. Gaston Please return the attached papers for the Secretary's files when you have read them. Mr. Enclosures: (1) Letter from Arthur B. Purvis to Secretary Morgenthau, dated March 18, 1941. (2) Memorandum on handling of transatlantic cargoes. Regraded Uclassified 154 THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA Box 680 TELEPHONE: REPUBLIC 7860 BENJAMIN FRANKLIN STATION WASHINGTON. D. C. March 18, 1941. Dear Mr. Secretary: You asked me on Saturday to let you have an interim statement prior to Sir Arthur Salter's arrival to take care of the Merchant shipping situation on the possibilities of - (a) more scientific loading of our merchant ships, and (b) arranging for individual ships to load at one instead of several ports. You also mentioned the possibility of assembling convoys outside American ports. I inclose a memorandum on the first two points as our shipping people in New York see it at this time. Items 7-c and 7-d contain the answers to the specific points raised. It may interest you to know that the actual aver- age loading days for different types of cargoes - 2 days for sulphur or phosphate 5 # " grain 8/9 11 " liners, including both discharging and loading 10/12 II 11 steel or steel and scrap 14 " If scrap The Honourable Yours and sincerely, Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Regraded Uclassified 155 Handling of Transatlantic Cargoes 1. The British Ministry of Shipping has in the U.S. a Representative with a staff of practical shipping men having under constant review all Allied tonnage dispatched from U.S. ports. 2. U.S. shipping lines and agents are employed to load and dispatch ships and the Ministry keeps in touch with the line or agent to see that all means such as overtime work are employed to enable each ship to connect with the first possible convoy. 3. Loading time has varied from two days for sulphur and phosphate to fourteen for scrap. The overall average, in- cluding normal repairs but excluding major repairs and crew troubles, is about twelve days. 4. Delays due to crew troubles have not affected British shipping. Difficulties with Norwegian and Dutch vessels have disappeared. There are still some troubles with Belgian and Greek crews which would be helped either by amendments to exist- ing laws or strict enforcement of others. 5. Major repairs are being carried out to an increasing extent on this side of the Atlantic to relieve congestion and eliminate danger on the other side. 6. Constant pressure is maintained for the purpose of bringing into war service more Norwegian tonnage and Dutch tonnage not essential to trade with Netherlands overseas possessions. 7. Steps as follows are being taken to conserve tonnage: (a) Transfer of ships from the Pacific to the Atlantic and bringing Pacific coast cargoes across by rail. (b) Chartering of American and other tonnage to bring cargoes from distant points to the nearest avail- able trans-shipment port. In furtherance of this, Austalian wheat is brought to Baltimore and oil from the Carribean to Baltimore, Philadelphia and New York. It is hoped that a modification of the Neutrality Act may permit the use of Halifax as another point of trans-shipment. (c) Every effort is made to use the full capacity of ships. The only unscientific loading of which we are aware has resulted from our urgent demand for steel which has necessitated the loading of many ships Regraded Uclassified 156 2. with full cargoes of steel with resulting wastage in cubic capacity. This could be overcome with an increase in available ships. (d) The majority of our ships load at only one port. Of those that load at more than one some are steel and scrap ships and other liners bringing cargoes inwards to more than one port. Assistance in assembling convoys in U.S. waters would be very helpful and if escorts are available much time would be saved if we could have, as in the last war, fast and slow convoys from the U.S. Convoy arrangements for vessels loading at eastern Canadian points would still have to be provided either separately or by making contact at sea with convoys from the U.S. The whole question of convoys is handled by the British Admiralty as distinct from the Ministry of Shipping and we would appreciate an epportunity of arrang- ing discussions with a view to improving the situation. March 18, 1941 Regraded Uclassified 157 Handling of Transatlentic Cargose 1. The British Ministry of Shipping has in the U.S. & Representative with a staff of practical shipping men having under constant review all Allied tonnage dispatched from U.S. ports. 2. U.S. shipping lines and agents are employed to load and dispatch ships and the Ministry keeps in touch with the line or agent to see that all means such as overtime work are employed to enable each ship to connect with the first possible convoy. 3. Loading time has varied from two days for sulphur and phosphate to fourteen for scrap. The overall average, in- cluding normal repairs but excluding major repairs and crew troubles, is about twelve days, 4. Delays due to crew troubles have not affected British shipping. Difficulties with Norwegian and Dutch vessels have disappeared. There are still some troubles with Belgian and Oreek crews which would be helped either by amendments to exist- ing laws or strict enforcement of others. 5. Major repa I are being carried out to an increasing extent on this side of the Atlantic to relieve congestion and eliminate danger on the other side. 6. Constant pressure is maintained for the purpose of bringing into war service more Norwegian tonnage and Dutch tonnage not essential to trade with Netherlands overseas possessions. 7. Steps as follows are being taken to conserve tonnage: (a) Transfer of ships from the Pacific tó the Atlantic and bringing Pacific coast cargoes across by rail. (b) Chartering of American and other tonnage to bring cargoes from distant points to the nearest avail- able trans-shipment port. In furtherance of this, Austalian wheat is brought to Baltimore and oil from the Carribean to Baltimore, Philadelphia and New York, It is hoped that & modification of the Neutrality Act may permit the use of Halifax as another point of trans-shipment. (c) Every effort is made to use the full capacity of ships. The only unscientific loading of which we are aware has resulted from our urgent demand for steel which has necessitated the loading of many ships Regraded Uclassified 158 2. with full cargoes of steel with reculting wastage in cubic capacity. This could be overcome with an increase in available ships. (d) The majority of our ships load at only one port. Of those that load at more than one some are steel and scrap ships and other liners bringing cargoes inwards to more than one port. Assistance in assembling convoys in U.S. waters would be very helpful and if escorts are available much time would be saved if we could have, as in the last war, fast and slow convoys from the U.S. Convey arrangements for vessels loading at eastern Canadian points would still have to be provided either separately or by making contact at sea with convoys from the U.S. The whole question of convoys is handled by the British Admiralty as distinct from the Ministry of Shipping and we would appreciate an opportunity of arrang- ing discussions with a view to improving the situation. March 18, 1941 Regraded Uclassified 159 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 21, 1941 TO Secretary Morgenthau CONFIDENTIAL FROM Mr. Cochran Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns £157,000 Purchased from commercial concerns £ 63,000 of the £157,000 sold to commercial concerns, £99,000 is being used to pay for the importation of chicle. The Federal Reserve Bank of New York sold £15,000 in registered sterling to the American Express Co. In the open market, sterling was first quoted at 4.03-3/4, or 1/4# higher than yesterday's close. It remained at that rate throughout the day. Transactions of the reporting banks were as follows: Sold to commercial concerns -0- Purchased from commercial concerns £3,000 The Cuban peso, which improved from a discount of 6-1/2% to 4-15/16% in the week ended March 19,has since displayed an easier tendency. It was quoted at 5-1/8% today. In New York, the closing rates for the foreign currencies listed below were as follows: Canadian dollar 15% discount Swise franc (commercial) .2322 Swedish krona .2384-1/2 Reichamark .4005 Lira .0505 Argentine peso (free) .2315 Brazilian milreis (free) .0505 Mexican peso .2066 In Shanghai, the yuan was again quoted at 5-13/324, and sterling remained at 3.91-1/2. Ve sold $11,970,000 in gold to the Bank of Brasil, which was added to its ear- marked account. No new gold engagements were reported today. Regraded Uclassified 160 2 - In London, both spot and forward silver were fixed at 03-7/16d, representing a decline of 1/16d in each case. The U. S. equivalent of this price is 43.56$. Handy and Harman's settlement price for foreign silver vas unchanged at 34-3/4#. The Treasury's purchase price for foreign silver vas also unchanged at 35#. Ve made one purchase of silver amounting to 75,000 ounces under the Silver Purchase Act. This consisted of new production from foreign countries, for forward delivery. The Bureau of Foreign and Domestic Commerce reported on March 20 a shipment of $430,000 worth of foreign silver coin, sent by the Guaranty Trust Co., New York, to the Netherlands Indies Government, Batavia, Java. Including this shipment, a total of $695,000 worth of silver coin has been shipped to the Javanese Government under its order to purchase $2,100,000 in silver for conversion into coin. pm. CONFIDENTIAL Regraded Uclassified 161 ROYAL GREEK LEGATION WASHINGTON SA March 21, 1941. My dear Mr. Secretary: I thank you for your letter of March nineteenth. I also wish to express my warmest appreciation for the kind interest you took in matters concerning my Government in these crucial days and to thank you for your valuable cooperation and good will. Sincerely yours, Chramantynly C. Diamantopoulos, Minister of Greece. Mr. Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D.C. Regraded Uclassified 162- For Miss Chauncey MAR 2 1 1941 MY dear Mr. Secretary: on December 31, 1940 you transfited to this Department a copy of Mr. Herbert Recver's letter to you dated December 20, 1940, with reference to & proposal involving the purchase of supplies of when's in the Baltie States with from Relgiam funds, for distribution and consumption within Belgium. Also transmitted with such letter the a secreta prepared is the State Department commiting upon much proposal. No further werd was received by this Department from E. Neever with respect to the proposal. However, a sourchat similar autter has DOV boen raised with this Department. There is enclosed herenith a copy of a letter dated March 140 1941, from Korwagian Relief, Inc. requesting the transfer of $500,000 to the Stockholm Instille Bank, Stockholm, Owedom, much funds to be used for the purchase of grds from Rucris for shipment to Kereay. this Department has not base adviced whether such grain muld consist of supplies to be obtained free the Baltie States w w the care in the progosal advented W Mr. Hoover. the previous license to which Norwegian Relief, Inc. refers in its letter VAS issued by this Department following the receipt of Under Secretary Welles' letter of December 4, 1940. There is also pending before this Department another application, n. MY 103767, covering a payment of $50,000 our of froson Franch Government funds in the United States to the Intricem Priends Service Committee. Originally N were advised that such funds were to be used for the purchase of milk is Seiteerland to be distributed to French children. This Department has now been advised w the American Priends Service Committee that if such funds are mis available to 1t, part of such funds will be used to purchase is Portugal for shipment to France sugar, other feedataffs, blankots and clothing. Regraded Uclassified 163 these transastions are being referred to you Sie view of the important foreign pelicy considerations which are involved therein. This Department is net propared to approve 1 trans- actions unless and until requested to de 00 be you. Very truly yours, (Bigned) D. 1. BELL Acting Secretary of the Treasury. the Nonerable, The Secretary of State. LECHNICYT OFFICE Ot THE 12 OI MA SS ЯАМ ING BECEINED Inclosure 10 THE BLTongb 3/18/41 Regraded Uclassified for Channcey 164 March 21, 1941 CONFIDENTIAL Dear Mr. Knoke: Permit as to acknowledge, in behalf of the Secretary, the receipt of your letter of March 20, 1941, with which you transmitted your compilation for the week ended March 12, 1941. showing dollar disbursemento out of the British Espire and French accounts at the Federal Reserve Bank of New York and the mean by which such expenditures were financed. Faithfully years, B. Marlo Oeshran Technical Accistant to the Secretary L. U. Kasho, Require, Visa President, Federal Reserve Bank of New York, How York, Bev York. EMC:dm:3.21.41 Regraded Uclassified For Miss Chauncey 165 FEDERAL RESERVE BANK OF NEW YORK March 20, 1941. CONFIDENTIAL Dear Mr. Secretary: Attention: Mr. H. Merle Cochran I am enclosing herewith our compilation for the week ended March 12, 1941, showing dollar disbursements out of the British Empire and French accounts at this bank and the means by which these expenditures were financed. Faithfully When yours, L. W. Knoke, Vice President. Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. JUNE THE Enclosure St WI a 5', YA 11 52 Regraded Uclassified Strictly 166 ANALYSTS OF BRITISH AND FRENCH ACCOUNTS Week Ended March 12, 1941. Confidential (In Millions of Dollars) BANK OF ENCLAND (BRITISH GOVERNMENT) BANK OF PRANCE DEBITS CREDITS DEBITS CREDITS Proceeds of Net Inor. Net Inor. Gov't Sales of (+) or Gov't Proceeda (+) or Total Expendi- Other Total Securities, Other. Dear. (-) Total Expendi- Other Total of Gold Other Deor. (-) PERIOD Debits turse(a) Debits Credits Gold Dffictal)(b) Credita(s) in Balance Debita tures (a) Tobits Credite Sales Cradits in Balance 1939 Auto 31 Sept. 27 94.3 3.6 90.7 207.8 185.4 I 22.4 +113.5 19.4 6.0 13.4 11.3 - 11.3 - 8.1 Sept.28 Nov. 1 106.7 5.8 100.9 142.0 3,2 - 138.8 + 35,3 88.6 I 76.2 35.0 41.2 - 12.4 61.8 105.4 Sore 2- 29 191.7 8.9 182.8 105.8 57.8 - 48.0 - 85.9 78.6 1 82.9 55.1 27.8 + 4.3 Nov. 30 - Jan- 3 97.7 8.7 89.0 75.2 50.6 - 24.6 - 22,5 86.8 28.1 58.7 109.2 93.9 15,3 + 22.4 1940 Joss 4 31 54.8 16.8 38.0 43.4 20.6 - 22.8 - 11.4 51.5 31.5 30.0 55.9 50.1 5.8 - 5.6 Pob. 1 - 28 124.2 15.4 108.8 108.3 56.7 , 51.6 - 15.9 72.7 32.8 39.9 71,5 54.8 16.7 - 1,2 Feb. 29 ADI- 3 115.5 14.5 101.0 94.0 60.9 14.0 19.1 - 21.5 99.6 55.9 63.7 105.0 75.4 89.6 + 5.4 Apr. 4- May 1 113.4 26.1 87.3 86.4 46.8 20.0 19.6 - 87.0 84.8 29.4 55.4 78.7 60.7 18.0 - 6.1 May - 29 100.9 25.6 77.3 126.2 93.2 12.0 21.0 + 25.3 1014 57.0 44.4 145.4 186.2 19.2 + 44.0 Day 30 - July 3 283.2 145.3 137.9 319.3 301.3 3.0 15.0 * 36.1 E6.7(e) 187.3(e) 29.4 345.1(a) 335.6 9.5(a) +188.4 July 5 - 31 249.7 156.7 93.0 225.0 212.2 2.0 10.8 - 24.7 7.3 5.3 1.0 3.2 3.0 0.2 - 4.1 1. 28 261.1 180.2 80.9 294.8 267.4 1.0 26.4 + 33.7 B.9 0.5 8.4 10.9 10.4 0.5 + 2.0 First your of was 1,793.2 605.6 1,187.6 1,828.2 1,356.1 58.0 420.1 * 35.0 866.3 416.6 449.7 1095.3 900.2 195.1 +229.0 huge 29 - Oct. 2 316.8 244.3 72.5 308.9 271.5 6.0 31.4 - 7.9 8.6 1.4 4,2 1.3 - 1.3 - 7.3 Ogt. 3 - 30 196.7 167.8 28.9 198.5 160.5 6.0 32.0 + 1.8 0,5 0.3 0.2 0.5 - 0.5 - Oct. 51 - Nov. 27 241.0 201.1 39.9 259.5 210.0 18.0 31.5 + 18.5 0.8 0.1 0.7 0.7 - 0.7 - 0.1 Nov. 28 Doc. 32 234.6 206.8 27.8 198,0 111.4 26.0 60.6 - 36.8 8.1 - 2.1 0.6 - 0.6 - 1.5 - variod through Doe. 2,782.3 1,425.6 1356.7 2,793.1 2,109,5 108.0 575.6 # 10.6 878.3 421.4 456.9 1,088.4 900.2 198.2 +220.1 Julie - 197.4 162.7 34.7 259.9 176.2 52-0 31.7 4 62.5 17 - 1.7 0.5 - U.S. - LI Jen. 30 Zob. 26 164.6 137.8 26.8 101.4 26.6 26.0 48.8 - 63.2 0.2 - 0.2 0.2 - 0.2 . Febs 27 Apr. 2 WEEK ENDED: Fab. 19 40.7 38.2 2.5 19.6 - 6.0 13.6 - 21.1 0.1 - 0.1 0,1 - 0.1 . 25 40.0 27.0 13.0 44.5 26.6 40 139 + 45 - # - - - - # Murch 5 56.7 49.0 7.7 50.1 248 19.0 6.3 - 6.6 - - - - - - - 12 44.6(f) 41.6 3.0 92.0(f) 76.8(f) 12.0 6.6(g) + 50.8 - - - 0.3 - 0.3 + +0.2 Average Weekly Expenditures Since Outbreak or War Transfers from British Purchasing Commission to (See footnotes on reverse side) France (through June 19) $19.6 million Bank of Canada for French Account through Fune 19) 27.6 million Venk ended March 12 a 10,1 million England Lebrar Dane 10 54.9 million Custolation from July 6 $144.9 million Regraded Uclassified Strictly ANALYSIS OF CANADIAN AND AUSTRALIAN ACCOUNTS Week Ended March 12, 1941. Confidential (In Millions of Dollars) BANK OF CANADA COMMONWEALTH BANK OF AUSTRALIA DEBITS CREDITS DEBITS CREDITS Transfers Transfers to Proceeds Transfers from Official Net Incr. to Proceeds Net Incr. Total Official Other Total of British A/C Other (+) or Total Official Other Total of Other (+) or Debits British Debita Credita Gold For Own For French Credits Decn (-) Debite British Debite Credito Gold Credita Deer. (-) PERIOD A/C Sales A/C A/C in Balance A/C Sales in Balance 1939 Ang. 31 - Sept. 27 17.5 0.6 16.9 21,8 15.1 0,8 - 5,9 + 4.3 - - , , 1 - - Sept.28 Nov. 1 9.6 0.5 9.3 16.7 7.3 2.1 - 7.3 + 7.1 - - - # , , - NOT, 2- 29 9.9 0.7 9.2 14.4 15.3 # - 1.1 + 4.5 - - - 1.9 1.9 - - 1.9 NOT. 30 - Jan. 5 30.0 - 30.0 22.8 13.3 3.0 - 6.5 - 7.2 2,5 - 2,5 5.8 5.8 - + 3.5 1940 Jane 4 31 23.5 - 23.5 25.7 21.1 - - 4.6 + 2.2 5.2 0.3 4,9 3.3 3.0 0,3 - 1.9 Feb, 1- BB 23.1 I 23.1 17.0 16.1 - # 0.9 - 6.1 3.3 0.1 3.2 2.4 2.2 0.2 - 0.9 Feb. 29 - Apr. a 42.3 - 42.3 29.5 29.3 - - 0.2 - 12.8 3.0 0.3 2.7 2.2 1.6 0.6 - 0,8 Apr. 4 - May 1 38,2 - 23.2 42.9 24.8 15.0 - 3.1 + 4.7 2.3 - 2.3 2.0 1.8 0.2 - 0.5 May 2- 29 37.9 15.0 37.9 50,2 50.0 - - 0.2 + 12.3 1,2 0,2 1.0 2.6 1.7 0,9 + 1.4 May 50 - July 5 44.1 - 44.1 72.5 72,2 0,3 + 28,4 2,3 - 2.3 5,9 4.4 1.5 + 3.6 - - July 1- 31 28,2 - 28.2 117.6 96,3 - 19.2 2.1 + 89,4 4.6 - 4.6 5.0 4.2 0.8 + 0.4 AlliBa 1- 28 18.7 - 18.7 73,6 53.9 - 19.5 0.2 + 54,9 6.8 3.0 3.8 5.0 3.4 1.6 - 1.8 Pirst year of war 323.0 16.6 306.4 504.7 412.7 20.9 38,7 32.4 +181.7 31.2 3.9 27.3 I'96 30.0 6.1 - 4,9 Auga 29 Date 2 44.3 - 44.3 43.9 16.4 - 27.3 0.2 - 0.4 8.7 2,5 6.2 8.0 6.7 1.3 - 0,7 Oct, 3 - 30 25.7 - 26.7 28,6 14.0 14.3 0.3 + 1,9 10.1 7.5 2,6 7,9 6.5 1.4 - 2.2 - Oat, SI- None 27 35,2 - 35.2 69.6 49.2 - 16.7 3.7 + 34.4 3,1 0,6 2,5 5,6 2.1 1.5 - 0,5 Nov. 28 - Dec. 31 48,0 - 48,0 60,6 42.5 - 13.7 4.4 + 12.6 4.8 I 4.8 6.8 4.8 2.0 - 2.0 through Dec. 477.2 16.6 460.6 707.4 534.8 20.9 110.7 41.0 +230,2 57.9 14.5 43.4 62.4 50.1 12.3 - 4.5 Jane 2 - 29 35,7 - 33.7 33,9 16.9 If 15.0 2.0 + 0,2 4,8 I 4.8 6.8 5.1 1.7 + 2.0 Jan. 30 - Pobs 26 341 - 31.1 24.3 143 - 6.8 3.2 - 6.8 500 11 3.3 3.2 0,6 2.6 - 1.8 Febs 27 - ADT. 2 WEEK DIGD: 7%b, 19 12.9 - 12.9 4,5 3.7 - 0.2 0.6 - 8.4 0.2 - 0.2 0.3 - 03 + 0,1 26 1-9 - 1.9 3.0 2.6 - - 0.4 - 49 1.2 - L2 0.2 - 0.2 - 100 Mar, 5 13.6 - 13.6 1.1 4.3 - 2.3 1.1 - 59 1,8 0.8 1.0 6.6 6.4 0.2 +48 + 12 B.5 - 8.5 14.4 26 - 10.1 1.7 + 5.9 2.0 - 2.0 0.6 0,2 0.4 - 1.4 Newkly Average of Total Debite Since Outbrook of War Through March 12, 1941 $7.1 million (a) Supply Includes Timber payments for account of British Purchasing Commission, British Air Ministry, British Supply Board, Ministry of Control, and Ministry of Shipping, (b) proceeds Extimated of figures official based on transfers from the New York Agency of the Bank of Montreal, which early monther of the selling, substantial liquidation of socurities for private British account negotiation. In addition Sex the official British sales of American securities, including those effected- through- direct apparently represent the to date supplied by vo, the British although the receipt of the proceeds at this Bank cannot be identified occurred, with particularly during the AT our securities through December Treasury 1940 amounted and released to $334 by million. Secretary Morgenthau, total official and private any accuracy. British liquidation According (e) apparently reprosent requisitioning the of private dollar balances, Other large transfers frue such accounts during since banks, presumably reflecting Inbludes about the $60 million received during October from the accounts of Britinh authorized banks with New York acquisition or proceeds of exports from the sterling area and other currently accruing dollar recent receipts. months (d) Includes payments for apcount of French Air Commission and French Purchasing Commission. (e) Adjusted to eliminate the effect of $20 million paid out OD June 26 and returned the following day. (f) Includes adjustment of $3,4 million to allow for "overnight" item (to be deducted next work). (g) Includes about 12.5 million received from accounto of British authorized banks with Now York bank. THE TECHNIGA TO 11 IN 1PQ Be RECEIVED DEPARTMENT Regraded Uclassified 168 CABLE FOR TEN VIA HAVAL CONDITIONS CLEAR March 22, 1941 BY DIRECTION or THE SEGURTARY I AM GIVING YOU THE RESULTS OF OUR RECEIVE FINANCING. CASH OVED=SHBSCRIBED APPROXIMATELY TVELVE TIMES AND EXCHANGES APPROXIMATELY NINETY-FIVE PERCENT OF TOTAL OUTSTANDING TURNED IN FOR THE my SECURITIES. THIS IS AN EXCELLENT SHOVING. BELL (Signed) D. W. BELL Regraded Uclassified 169 Sunday morning. 3- -23-41 Dear Mr. Secretary, The April issue of Fortune, just arrived, contains 8. tribute to you which is so good that I thought you'd like to read it, even on vacation. It appears in an article on "The State of Defense" which discusses, among other things, the new four-man Cabinet committee on Lease-Lend policy. After saving that Mr. Hull is old and worrisome, and unlikely to last, the article comes to you, as follows: There is also the Secretary of the Treasury, of whose fiscal follies many unkind things have been said. But during the educational ere of the old Defense Commission, Mr. Morgenthau had the unadvertised job of handling all orders placed here by the British Purchasing Commission. It WAS 8. job about which he knew nothing, in the same sense that Lord Beaverbrook knew nothing about airplanes: and he WAS a quiet but decided success. More than any individual, he can take bows for forcing early expension on the machine-tool and aircraft engine fronts. One day he called the machine-tool people in and asked them how things were going. Their ressurances seemed to please him: but since he hed another appointment, he asked them to step into the next room. His other appointment was with the engine people, who admitted that they were way behind on their deliveries. 'Why?' he asked. 'Because we can't get deliveries on machine tools we ordered months ago,' they replied. 'But the machine-tool Regraded Uclassified 170 people have assured me that their deliveries are right on schedule,' came back the Secretary. "They are not end we can prove it,' shouted the engine people, pulling out formidable lists of machinery serial numbers end dates. By this time Mr. Morgenthau was ready to talk to the machine-tool men some more, which he did in front of their customers. "Mr. Morgenthau, without setting up as an aircraft expert, has repeatedly reminded our aircraft and engine makers of the British point of view. By this February the British combet experience had led to a marked lack of British interest in the best American air@cooled engines. The British also admitted that Packard's new Rolls-Royce plant, which will not be in production for about six months, is of interest to them chiefly because of the ease with which it can be retooled for a later model. As tactfully as beggars can, the British are praising our plants but trying to get us to use their designs for the product. "Therein lies the importance of Mr Morgenthau's place on the new policy board. He provides continuity. Up to now he has been able to get customer courtesy for the British in Hartford, Paterson and points west. Undertthe lend-lease bill, their only claim to consid- eration will be combat experience. The Cabinet policy committee will have to sit in judgment over the representations of the British and the claims and prejudices of our aircraft industry, whose planes have Regraded Uclassified 171 not yet been subjected so thoroughly to the acid test of WAr. On that bench Mr. Morgenthau is best sui ted to represent the British cause. " Greetings to you an : 7. K, Regraded Uclassified 172 THE ECONOMIES March 22, 1941 Dollars, American and Canadian The fact that the passage of the Aid for Democracy Act (ne Lease and Lend) has not absolved the British Treasury from the necessity of increasing its mipply of dollars by every poesible means has been emphatically under- lined by the news that the holding of shares in the American Viscose Corpora- tion, owned by Courtaulds, Ltd., has been sold on behalf of the Treasury to at American syndicate who are to make & public issue of the shares. American Viscose is one of the earliest and most successful examples of direct British enterprise in American industry and, however good the monetary bargain, there will be a great deal of sympathy with Courtaulde over the loss of their child. It is, indeed, & sad event, though not one that 18 to be regretted, since it comes at a most appropriate hour to demonstrate that Great Britain is still ready for sacrifices of any kind to provide the sinews of war, There are already signs that the Lease and Lend programme is to be interpreted broadly - large transfers of cotton and tobacco are apparently on the agenda- but the shortage of dollars is as acute as ever. The appearance in the estimates of British dollar needs which have been published recently in the United States of substantial sume paid to Canada has naturally given rise to some discussion in this country. As was remarked in The Economist last week, "it is somewhat anomalous that a neutral should be providing munitions free of cash payment while gold or American dollars are still being paid to a belligerent." But it would be wrong to read into this anomaly, as is being done in some quarters, a suggestion that there is any hoarding of gold by Canada or any lack of financial co-operation at Ottawa. The gold or American dollars paid to Canada by the United Kingdom are needed to settle Cenada's own adverse balance with the United States, B. balance swollen by importe of raw materials and machinery for the rapidly growing Canadian armament programme, If Canada could obtain these commodities on lease-and-lend terms, the necessity would, of course, disappear. But the difficulties that have to be surmounted do not include any lack of cooperation on Canada's part, and it 1g a pity that the publication of partial statistics should have given rige to a falee impression. Regraded Uclassified 173 The goal is 3.58 million tons per month. 174 TELEGRAM FROM LONDON MARCH 22nd, 1941. 1. Naval. Last week the first occasion since the beginning of August 1940 on which importe in convoy into the United Kingdom exceeded one million tons. 2. During the week ending March 19th 822 ships con- voyed and ten lost in convoy. 3. Two enemy battle cruisers and a destroyer reported by aircraft 130 miles West South West from Brest p.m. March 21st steering East. The weather has impeded further search. 4. Royal Air Force. March 21st. Nine medium bombers attacked enemy shipping off the Dutch and Belgian coasts; a direct hit reported on the stern of 5,000 ton tanker. 5. Night of March 21st-22nd. Eighty aircraft sent out - 66 to Lorient, 6 to Ostend - seven on mine-laying and one to drop leaflets over Brittany. Two not yet reported back. 6. German Air Force. Little activity. 7. Night of March 21st-22nd. About 170 employed chiefly against Plymouth. 8. Home Security. Plymouth. Night of March 20th-21st. Casualties estimated at 95 killed and 300 wounded. Night of March 21st-22nd. Many thousands of incendiary bombs dropped in addition to H.E's. Fires more serious than on the previous night, and direct water supply failed. Owing to dislocation of telephone service during previous night and to the movement of the report centre, details 80 far are incomplete but only slight damage to dockyard and Naval establishmente reported. The municipal buildings, the G.P.O. and an area around the Guildhall reported burned. Regraded Uclassified 175 LS PLAIN LONDON Dated March 22, 1941 Rec'd 8:50 a.m. Secretary of State, Washington, 1128, Twenty-second. / FOR TREASURY FROM BUTTERWORTH. Since I leave from Bristol by plane on March 25 I have as during previous temporary absences turned over the financial work to Ferris who is ably assisted by Mrs. Egerton, WINANT ALC Regraded Uclassified 176 GRAY (Peris) Vichy Dated March 22, 1941 REC'd 10:25 P. m. Secretary of State, Washington 333 March 22, 5 P. m. FOR THE TREASURY FROM MATTHEWS Today's Journal Official publishes the text of a furthe: convention between the Bank of France and the Finance Ministry increasing the provisional advances to bE made to the Government to defray the "main costs of the German army of occupation" from 85 billion francs to 100 billion. LEAHY KLP Regraded Uclassified 177 PARAPHRASE OF TELEGRAM To: Secretary of State, Washington, D. C. From: Embassy at Berlin. Dated: March 23, 1939, 11 a.m. Rec'd: March 23, 1939, 8:45 a.m. No. : 193. Reference Department's telegram no. 59, 7 p.m. of March 21. Under foreign exchange law, the second executory decree of March 16, 1939 embodies the regulations under reference. The de- cree stipulates that residents of Germany shall offer their foreign securities for sale to the Reichsbank not later than April 15, 1939, which securities shall be sold and transferred to the Reichsbank on request. There already existed this obligation. This decree involves a new census of foreign securities held by residents on March 18 (effective date) -- Consulate General's report of October 13, 1937, No. 906. Americans having permits for the free disposition of foreign holdings have been told by German authorities in answer to inquiry that their permits are not affected by this decree. Copy:bj:5-13-41 Regraded Uclassified 178- - OFFICIAL COMMUNICA none TO THE SECRETARY of STATE - B. c. DEPARTMENT OF STATE WASHINGTON In reply refer to EA 811.24 Raw Materials/1551 March 22, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits the following, with reference to purchase of Indochinese rubber by the United States and funds of the Bank of Indochina arising from the sale of rubber: 1. Telegram no. 425, March 18, from the American Embassy, Tokyo. 2. Paraphrase of telegram no. 42, March 16, from the American Consul, Hanoi. 3. Paraphrase of telegram no. 39, March 18, from the American Consul, Saigon. Enclosures: See above list. 10 THE TECHNICYT Y22121 VHL OLVIDE 30 14E BUT MVS St V/I a 21 160VEOSA DEGISTMENT BECEIVED or Regraded Uclassified 179 TELEGRAM COPY Tokyo via Shanghai & N.R. March 18, 1941 (Rec'd 7:05 a.m., 19th) Secretary of State, Washington. 425, March 18, 7 p.m. Special despatch Vichy today's ASAHI attacks Britain, United States for obstructionist tactics designed create rift between France, Japan following Indochina mediation settlement. American shipment foodstuffs to France said to be motivated not by humanitarian considerations but by prospects procuring from Indochina large supplies raw materials particularly rubber, to be paid French credits frozen United States. This called indirect pressure Japan revealing American desire secure Indochina rubber and cooperation Britain block new order. Concluded French-Japanese relations cannot escape being affected by American-French relations, Sent Department via Shanghai. GREW RAXM a 21 Regraded Uclassified 180 paraphrase OF TELEGRAM RECEIVED FROM: American Consul, Hamei. DATE: March 16, 1941, 11 .... NO.: 42. Reference is made to your 6 of Harch 18, noon. First. I am informed by the Acting Director of the Economic section that data concerning the amounts of tin, rubber, antimony and tungeton that can be exported have been communicated to the French dovernment and, in adds- tion, the French dovernment 10 being hept advised by the French delegation at Tokyo of the amounts of sush products that are being requested by the Japanese Covernment. The Acting Director of the Economic Section understood that the difference between Japanese needs and the total amounts available for export would be available for purchase by our Government. But he added that present indications are that all of the tungsten and antimeny production of Indo- china, half of Indochina's tin production, and 25,000 out of about 66,000 tons of rubber are being taken w the Japanese. Second, The objection of the assistent ACBIDE Director to the former method of payment for purchases of rubber 10 the period of time which clapses between shipment and pay- ment; be said that the so percent payment after the dood- ments are as received is usually a matter of weeks and that a matter of months is involved in the 10 persent pay- ment after arrival/inspection and of the rubber. The same objection Regraded Uclassified 181 + objection was reised by the Importor General of the Bank of Indoshina, who added that the amount left is the *special account" is so disinished that he cannot was for such a long period for credits that can be expended freely. with reference to this matter and to Consul's tolegram of the 12th, inst., I all inclined to think that any objections to the method of payment hitherts used would be offect w the release of a part of the preseeds from earlier rubber - tracts to take care of the pressing needs of the Bank of Indochine. Third. The possible effect of the alleged Japanese proposal and the French acceptance that the French Gevern- ment will not make with regard to Indechina any agreement OF alliance with a third country that would contemplate cooperation of a political, economic or military nature which the Japanese deverment is apposed to, was discussed by m with both the Acting Director of the Economic section and the Inspector General of the Bank of Indochine, both of whom admitted there vas a possibility that Japan sight - sider commercial transactions such as the sale of rubber LECHNICYT 10 THE cas fulling within the meaning of the above French accept- DELICE ance although they stated that such commercial transastions Bil MVS St should WI 0 21 not be 80 considered. Please refer to paragraph two of "Consul's no. 11 of February 1. 8 p.m. telegram has been sent to Cavite to be repeated to Chungking, Hong Keng, Pelying and the Department. EAINSG REED RAIFL Regraded Uclassified 182 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Consulate, Saigon. DATE: March 18, 1941, 4 p.m. NO.: 39. A source reputed to be reliable has informed me confidentially that the Japanese merchant ship La Plata Maru which is at present at Saigon is taking on a cargo of four thousand tons of rubber which this source be- lieves is to be shipped via Dairen to Europe. According to this source, the rubber has already been paid for in U.S. dollars. Union Commerciale Indochinoise et Africa, Inc., is the local exporter. FLOOD EA:MSG Regraded Uclassified 182 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Consulate, Saigon. DATE: March 18, 1941, 4 p.m. NO.: 39. A source reputed to be reliable has informed me confidentially that the Japanese merchant ship La Plata Maru which is at present at Saigon is taking on a cargo of four thousand tons of rubber which this source be- lieves is to be shipped via Dairen to Europe. According to this source, the rubber has already been paid for in U.S. dollars. Union Commerciale Indochinoise et Africa, Inc., is the local exporter. FLOOD EA:MSG ENTIME It 021 Regraded Uclassified 183 Delivered to Treasury by Mr. Nicholson SHANGHAI March 22 1941 Information received from Hongkong on good authority that Japanese will attack Yunnan and Kweichow provinces in big drive upon Matsuckas return to Japan Stop Japanese have just landed three hundred bombers Tonkin Province of Indo China with intention of making strong attack on Burma Road within two weeks Stop Bombers will be accompanied by about the same number of pursuit and auxiliary planes 10 THE RECEIVIVA ДЕОНИКУГ OLLICE Bf: nve st bill 5 $e chicopy BECEIVED Regraded Uclassified 184 Delivered to Treasury by Mr. Nicholson Radiogram from Shanghai, March 22, 1941. Cyril Rogers now in Lisbon awaiting plans for the United States LEOHWICYT 10 THE BECHELVMA DERICE 00 TMC BRIME S# an is 25 chicopy BECEMED Regraded Uclassified 185 TREASURY DEPARTMENT you was INTER OFFICE COMMUNICATION DATE March 22, 1941 TO Secretary Morgenthau FROM Mr. Cochran CONFIDENTIAL Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns £16,000 Purchased from commercial concerns -0- Open market sterling remained at 4.03-3/4. Transactions of the reporting banks were as follows: Sold to commercial concerns -0- Purchased from commercial concerns £2,000 In New York, the closing rates for the foreign currencies listed below were as follows: Canadian dollar 15% discount Swiss franc (commercial) .2322 Swedish krona .2384-1/2 Reichsmark .4005 Lira .0505 Argentine peso (free) .2315 Brazilian milreis (free) .0505 Mexican peso .2066 Cuban peso 5% discount In Shanghai, the yuan declined 3/32# in terms of our currency to 5-5/164. Sterling was 1/24 higher at 3.92. There were no gold transactions consummated by us today. No new gold engagements were reported. B.M.R. Regraded Uclassified 186 TREASURY DEPARTMENT Regraded Uclassified INTER OFFICE COMMUNICATION DATE March 24, 1941 TO Mr. White FROM Mr. Kamarok Subject: Axis influence in Ecuador (Based on information supplied by the Office of the Coordinator of Commercial and Cultural Relations Between the American Republics) Summary Aris influence in Ecuador while important is not overly dangerous at present. A persistent campaign of propaganda is, however, steadily being carried on. 1. There are 3,500 Germans in Ecuador, the majority located in or near Quito, the capital. Over half of these have arrived in Ecundor in the last two years. The Nasis are well organized and maintain a close check on the other Germans through pressure on relatives in Germany. The German refugees in the country are thoroughly intimidated and are forced to contribute to Easi funds. The two most active Nasi leaders in the country were said to be Walter Giese who was employed in the German Legation and L. E. Bruckmann who is German consul in Guayaquil and is the representative of the Vick Chemical Company of the United States and of the Bayer Company (presumably of Germany). Giese was expelled from Ecuador in December, 1940, for Gestapo activities. (N.Y. Times) There is a German school which is used for purposes of Nasi indoctrination, Transocean, the German nows service, gives free neve to any paper that will use it. Transocean also sends daily bullstins to all important officials and important business men. The local German air line, Sedta, gives free passage to important officials, business men. and school children. 2. The Italians in Ecundor number less than a thousand. Most of them have been in the country for years and are mostly scall shopksepers. There is little Fascist Party activity. The leader of the Italian Fascists is a Colonel Slaviero who remained in Ecuador after the Italian military mission of several years ago returned to Italy. 187 - 2 - Division of Monetary Research 3. There are only a few Japanese in Ecuador. Most of them are connected with a Japanese oil company which has a concession in the country. 4. The Ecuadoreans, on the whole, are not pro-Nasi. There are, however, a number of important natives who are in favor of the aris powers. The largest newspaper in the country, El Universo (20,000 daily circulation) is pro-aris but not violently 80. El Debate, a small paper (600 daily circulation) is strongly pro-Franco and pro-Nasi. This latter paper is the organ of the Conservative Party (Catholic Church party) which is in a minority in the government. All papers in Ecuador will publish any article if paid for it though sometimes the source will be given. In general, the Ecuadoreans are not worried about the danger from fifth column activities and have not taken any effective steps to cope with such a danger. Regraded Uclassified 188 RESTRICTED 0-2/2657-220 M.I.D., W.D. No. 346 March 22, 1941 12:00 M. SITUATION REPORT I. Western Theater of War. Air: German. The attack on Plymouth was renewed last night in considerable force. The cumulative effect of this attack has evidently been great. The Germans claim to have sunk 31,000 tons of shipping on the 21st. British. The only offensive activity known was another attack on the Lorient on the night of the 21st-22d. Popu- lar demand is rising in England for reprisal bombings on German cities. II. Balkan Theater of War. Ground: Bulgaria. No change. Albania. Restricted artillery and patrol activities. Air: Normal support operations. III. Mediterranean and African Theaters of War. Ground: Libya. The British have captured Jarabub, an oasis in eastern Libya, which was garrisoned by about 800 Italian troops. Eritrea. At Cheren the British report unsuccess- ful counterattacks by the Italians. Air: Considerable British air activity in southern Ethiopia. Note:: This military situation report is issued by the Military In- telligence Division, General Staff. In view of the occasional in- clusion of political information and of opinion it is classified as Restricted. RESTRICTED Regraded Uclassified CONFIDENTIAL 189 - of Sale Indiagram Reserved of the - as sm, New may 13100, 1 10th. if 11 I 1. h 1 si 8 I d 1 I I - I 1 the 1 I d I I and I I I and mehice - attache to Genetal Communit planse. Hits - - w a I I J 1 I 1 I I 1 b. Hight of March 89-01. Sentiswed raddo - ando w Ime planse as the part of Breat, and cirficide in Britteing and to Bourget with heavier attache reported w be states planse an constal eitles to compled territory. the U-boat bace et Revient - again attached w n benders. I a. a. Hight of March 21-20. Figmouth wes bented again while sentered please attached Bortshire, Bernet. the - of damage inc as yet not been reported. D. Deylight March n. - vaide - Limited to constered flights along the coset and at - with star action against Commols, Borfolk and Massin. No cortons destruction resulted. c. Hight of March 20-21. A total of . aircraft have boen Payment $ I 2 Injury I I I I a I 8 1 1 s I I I # r 3 I a 1 = I Pignesta wie again miljested to incomitory booking but details of my additory I I 5 CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 190 = Aircraft the Mo listately reports that - Britten plano fulled be - 45 the might of - m-m. 4. Activity 1 Hear Zerum and nb Account to Between the Britten the capacially active on Hords a. Bmbing attache - also against Diredome in Ethiggte. in the thember patrols were astive. 5. I and 1 I r I I I I 1 d dates r I 6. the two states battleships (26,000 bone) - and use observed w Brittish ship-based please at 18:30 March 20, proceeding in a morthorly direction at so basts as hour 600 atles - w Cage Finisterve. Failure of deglight grovented further action - down- tion. 7. It was reported that the fees Grand - opened during the night of March 19-20. - Distribution: Secretary of Mr state Department I I r Acet. Securitary of Ver thief of Staff Ver Plane Division Office of Navel Intelligence Air Corps 0-3 CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 191 Puraphoness of date Rediegram 1 Reseived s to m 1 as 21.125, March 13, 1941. Relgrate, filed March 25, 1941. the Fagoslav Overnuent has reached an irreveesble decision to sign the past. It is true that feeling against the gevernment is runing high but there is not mush chance of dangurees outbreaks, state the young - of the nation have been mobilized. Several General Staff officers have made these statements to as. I Distribution: Scaretary of Mar State Department Secretary of Treasury Acct. Secretary of Mar Mr Plans Division Office of Navel Intelligence CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 192 of Cole Indiagram I a 10 at THIS, Horsh n 1001. - filed 12:35, w, 1941. 1. a. Buylight of March 22. - Ania account ship was net - fire as a result of a me w Brittsh planos that curried out attents a a I 1 I a I I ml Belgium. I 1 to 1 payments in I drogged. - the north of Transe and - Britainy at lass Brittsh planse I I I I s 1 a 1 I - eddition a U-beat baco at the burber of we the tanget w a - British raid. 2. I I I I 1 1 s 18 d attache a tangets to the Inclue, Commail, and Maschumhire regiens. the I I I I a I I 1 8 b. Buylight of March 22. Only a mall number of Garman planse il I estáro I I other 1 a I 18 I BE I curried ont redes an merchand chipping along the each omst. is yes there - been - reports of serious damage to British installations. e. Right of March 21-20. a total of ATO Comman planse - mot in the raid a Flymonth. At the present time there is no official indication of the number of cusualties or the extent of the damages but 16 is believed that a missur of individuals - billed. CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 193 3. a. Brittsh. Share are m reports of Birthdate advents Serves. I I s to 1 $ s z I any 1 - ernabed after studing a beliem backgo online. 4. Bustish sir activity in the Mállo Beterm thesters - es' followes in the Mheyica thember Brittich planse congerated with Incl fures, cerried out recommaiseme and patrol stasteme and to attache an a under of targets - Bireform, to who Silver thenker a consentration of - mater transport vehicles - abtacked w British to the vistally of State: to the theeter British plaase attacked Itemitem positions - mom. 5. - ate serivity in the Middle Instem thember - as follows: - Number - Shite - attacked w a formation of - - benbere without - w Britdsh installations; British Serves in the vistally of Agestits in lybin - targeto for for Ants saids. I Bistributions Secretary of - State Department Secretary of - Acet. Necretary of Mr Uniot w Medt Mar Plane Division Office of Horal Retelligence Ats Corgo 6-5 + CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 194 Pursphrase of date Rediegram Received et the - as - March 25, 1941. Seria, filed 15, 1941. For the lest three weeks there has born a stealy stress of truchs, materials, and motorized troups through Sefia. What I ⑉ yesterday, I should estimate ⑉ do of different calibres; 15 large celibre - enti-aireraft artillery, 200 ensured - 15 fast light - probably task chasers, and with - of about 75 m. and having traction from 18 whools mis of hard rubber) 900 neteraycles with side - which - earry three soldiers aptees; a.a. mehine - to each team trashs. I Distribution: Secretary of Ver State Department Invoice st Acct. Bearetary of Mar Shief of Staff Yes Plans Division Office of Novel Intelligence CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 195 Persphrase of Code Ballogram Received at the Mr Department 1 w 1 $ 1941. London, filed March sh, 1941. 1. British Air Activity - the Contract. a. Daylight March 89. Dear the islends off the Fristen canst and off the const of occupied France, Asis shipping was the - of British Air Force with - mail ship claimed his. b. Be sir activities wire reported night of March 22-23. 2. terms Alp Activity over Greek Britain. a. Right of March 25-24. Senttered Gorman planse raided airfields in last Anglia and a É 1 i I Public I petales 3 I along the consta and continued flights of too planes our Empskire, Scotland, Valon, Beases, Hour, Tertshire, Deros ml lesse. British elais $ destroyed and 2 damaged without loss to their - planse. c. The Loss of life in Indon in the booking of Harels 19 was 461 killed, and at Flymouth an the nights of March so and si nare them 150 with 230 badly vounted. la the latter place 5000 are without shalter. A pier was baily damaged and the tom hall and the past office destroyed. The Reyal Dosk Tards were not eartonaly injured. 5. British Air Activity in the Middle Bastern Thester. a. Daylight March 25. R.A.F. booking in Britree and Ethisyta emtered about Euron, Gender and Amare. Hour Diretom s railway train was attacked ni destroyed. the British claimed the destruction of five Italian planse. 4. Arte Air Activity in the Middle Besters Theaver. CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 196 1 the I i Interts a 8 I I r Multa - berbed twice w have flying planne, the first cometen w to Justices bombers accompanted - the - - of fighters, and again w 30 Jushare with so courts. 20 the first abtoak Britten claimed who destruction of - and - to 2 w and to the - 9 destroyed w fightere and s w catillery fire. Details of - to port - lecking. b. Deglight March m. the attacks - mie w Italian please on a British airfield at Parmaythin, Greese, first with 18 and again with 18 planse. Italian Leases ww reported as - destroyed and - damaged. there - no British planse lost. the - - the Brittich cirfield as crote, was tree Italian please. 1 si and I I - I I I w a occert of 15 fightere - observed - the to the 1 vehicle 2-5, 1 a Inc. I deserve. I I 5. In the Germa notion against Malta March m, se planes - exployed. or 8 British fightere which five was shob im to - Comma lest. 6. the strength of the Dulgarian - a the frentiers so w follows: Terkish Frenhier s di I Great Frentier e infontry divistens Sugnaturien Frenkier 1 actorized, s infentry divisions T. Barly in the seening of March m, - Aste susillary mile, tentatively 16:a4:fied - the - (goos - observed w miles - of Freetom. the bettleships - and - ($6,000 - have + CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 197 1 I 1 a. 2a. the resk beginning - the Dvitish By conserted. ⑉ vessels of which ton - sunh. Merchandise ingerted commins be - them - million teas. - Distribution: Secretary of Mr Asst. Scaretary of Mr thist of Staff State Department Secretary of treasury the Plane Division Office of Neval Intelligence Air Cargo 6-3 -3- CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 198 Paraphrase of Gode Radiogram Received at the Mar Department at 18:09, March 24, 1941. Home, filed March 24, 1941. The Germans are still moving troops to Haples by rail. It a is now said that there are five German divisions in North Africa, less some losses on the way. The Germans intend operations to start in fifteen days or theresbouts, and think the force they now have in Africa is sufficient. FINE Distribution: Secretary of War State Department Secretary of Treasury Asst. Secretary of War Chief of Staff War Plans Division Office of Naval Intelligence CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 199 Reselved at the - Depart at 18:09, March 24, 2041 name, filed March 24, 1941. A trusteenthy antree asserts that Commy has - sented to wit with the Italians have tried - more Alberdan offensive, to be attempted within the much few days. Traveling secretly, Musselini reached Rose yesterday. Arrangements have been unde for him to go back to Albania during the present week, it is stated. To my wind there is no chance at all of - in m Italian effensive new. The nevale of the troops, especially the merale of these in Albenta, is too low. I Distributions Secretary of Mar State Department Secretary of Treasury Asst. Secretary of Har Chief of Staff War Flans Division Office of Naval Intelligance CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 200 Puraphoneo of Solo Rediogram s I 1 n at 21,41, March sh, 1942. Antern, filed March sh, 1941. 1. Following Garge movemento are being unde by the Therish I Corps to Smakels and vicinity. II Corps to a place not definitely leasted along Bea of Human. Cargo A I 2 !!!! j VI Garge to Issit from Expect. 2. The estimates of mobiliantion given in m reports as submitted in writing, have been high. the total - on active service after envollment of the present classes is completed, will be embere mar 800,000. This is the largest number that Turbey one equip. kas and a hair million to the estimate of total Twich mayour made w the Turtish General Staff. 5. From tructertly informate there are reports of the arrival is Greese of too Britten divisions, part of a there division, - amoret brigate. These are assempanied w 150 Environmen. 4. Please note Cablegram Bos. 74 end 78 from the Moberry. I (2-2 Note: Inteny Cables Res. no and 78 have net yes boon reserved.) Distribution: Secretary of Mar State Department Secretary of Treasury Asst. Secretary of Mar Chief of Staff Mr Plans Division Office of Havel Intelligence CONFIDENTIAL Regraded Uclassified 201 RESTRICTED 0-2/2657-220 M.I.D., W.D. No. 347 March 24, 1941. 12:00 M. SITUATION REPORT I. Western Theater of War. Air: German. Harassing activity over England. Numerous attacks on shipping. British. Minor offensive activity until last night when normal attacks were made over western Germany. Berlin, Hanover, and Kiel, in particular, were raided. II. Balkan Theater of War. Ground: Bulgaria. No change. Albania. Local actions. III. Mediterranean and African Theaters of War. Ground: Abyssinia (Ethiopia). Neghelli, an important town and road center in the south, has been captured by the British. Marda Pass, west of Jigjiga, is reported captured by the British. Eritrea. Heavy fighting in the Cheren area. Libya: According to an Italian communique German mechanized forces have gone into action on the eastern edges of the Sirte Desert in Libya. There is a slight trend toward an increase in the intensity of Axis operations in this area. (Note: The town of Sirte is about 340 miles by road from Bengasi.) Air: Axis. Malta was heavily bombed. British: Relatively strong support is being given the attack on Cheren, with Italian air reaction almost non-existent, Diredawa, railhead for Harrar is being systematically bombed. Note: This military situation report is issued by the Military In- telligence Division, General Staff, In view of the occasional in- clusion of political information and of opinion it is classified as Restricted RESTRICTED Regraded Uclassified 202 24 March, 1941. From: Spagent. Hongkong, China. To: Mr. Nicholson. Message from Mr. Campbell. The Chase Bank on behalf of the Central Bank in September, 1938, placed in the SS. COOLIDGE seven and a half million ounces silver amounting at that time to two million one half U. S. dollars, which silver was to be sold to the United States Treasury. The Japanese objected to this exportation and the silver was removed from the ship and placed in the vaults of the Chase Bank, where it still is. In view of the serious situation in Shanghai, the Central Bank fears the silver will fall into the hands of the Japanese and desire to know if the Treasury will buy this silver. Further, even though the Treasury buys the silver, the Central Bank believes the Japanese would still not permit its exportation. Under the latter condition, could the Treasury appoint the Chase Bank as custodian in Shanghail Hsi submits this for con- sideration before taking it up with H. H. Kung. Please reply to Hsi who is now in Hongkong. a Regraded Uclassified 203 / TREASURY DEPARTMENT Regraded Uclass INTER-OFFICE COMMUNICATION for DATE March 24, 1941 Secretary Morgenthau TO CONFIDENTIAL FROM Mr. Cochran Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns £38,000 Purchased from commercial concerns £33,000 Open market sterling remained at 4.03-3/4. Transactions of the reporting banks were as follows: Sold to commercial concerns & 2,000 Purchased from commercial concerns....£ 2,000 In New York, the closing rates for the foreign currencies listed below were as follows: Canadian dollar 15% discount Sviss franc (commercial) .2322 Swedish krona .2385 Reichsmark .4005 Lira .0505 Argentine peso (free) .2320 Brasilian milreis (free) .0505 Cuban peso 5% discount Mexican peso .2066 In Shanghai, the yuan in terms of our currency declined another 3/32# to 5-7/324. the lowest quotation in over five months. We understand that the Foreign Funds Control has authorized the Federal Reserve Bank of New York to issue a license to the Chase National Bank permitting the latter to sell 2,000,000 French france on behalf of the Central Bank of Turkey. There were no gold transactions consumnated by us today. The Federal Reserve Bank of New York reported that the Bank of Canada shipped $3,573,000 in Gold from Canada to the Federal for account of the Government of Canada, for sale to the New York Assay Office. The State Department forwarded a cable to us stating that the Chase Bank, Hongkong, shipped $628,000 in gold from Hongkong to the Chase National Bank, San Francisco, for sale to the U. 3. Mint. 204 -2- According to cable advice from Bombay, gold was quoted at the equivalent of $35.16 at the end of last week, representing a decline of 28# from the previous week's closing level. Silver in Bombay was priced at the equivalent of 44.76#, off 5/16#. In London, both spot and forward silver were fixed at 23-1/2d, representing $ gain of 1/16d in each case. The dollar equivalent of this price is 42.67₫. Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44. the Treasury's purchase price for foreign silver was also unchanged at 35d. No made two purchases of silver totaling 100,000 ounces under the Silver Purchase Act, both of which consisted of new production from foreign countries, for forward delivery. 7ml CONFIDENTIAL Regraded Uclassified 205 EXPORTS or PETROLEUM PRODUCTS, SCRAP IRON AND SCRAP STEEL FROM THE UNITED STATES TO JAPAN, RUSSIA, SPAIN, AND GREAT BRITAIN AS SHOWN BY DEPARTURE PERMITS GRANTED Week ended March 22, 1941 : JAPAN : RUSSIA = SPAIN : : GREAT BRITAIN : : : FFROLXUM PRODUCTS Fuel and Gas 011 (including Diesel 011) - 80,000 Bble. - 51,799 Bbls. Crude - Blended or California High Octane Crude* 146,000 Bble. -- - -- All Other Crude 63.759 Bbls. : -- -- Gasoline - Gasoline A** - - -- 109,426 Bbls. Gasoline B* 37,050 Bbls. - - 90,000 Bbls. All Other Gasoline -- - - - ubricating 011 - Aviation Lubricating 011*** -- -- -- 3,483 Bbls. All Other Lubricating 011 29,589 Bbls. - - 314 Bbls. fetraethyl Lead*** -- - - -- "Boosters", such as Iso- Octane, Iso-Hexane, or Iso-Pentane - - - -- SCRAP IRON AND SCRAP STEEL Number 1 Heavy Melting Scrap - - - 800 Tone All Other Scrap - - - 1,210 Tons Mfice of the Secretary of the Treasury, Division of Research and Statistics. March 24, 1941. surce: Office of Merchant Ship Control, Treasury Department. Any material from which by commercial distillation there can be separated more than 3 percent of aviation motor fuel, hydrocarbon or hydrocarbon # sixture - President's regulations of July 26, 1940. Aviation Gasoline. As defined in the President's regulations of July 26, 1940. Regraded Uclassified 206 For #105 Chauncey TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE March 24, 1941 Secretary Morgenthau TO FROM Mr. Cochran STRICTLY CONFIDENTIAL Official sales of British-owned dollar securities under the vesting order effective February 19, 1940: No. of Shares $ Proceeds of Nominal Value $ Proceeds of Sold Shares Sold of Bonds Sold Bonds Sold March 17 150,079 3,822,740 15,000 13,506 18 30,146 1,132,842 911,625 935.664 19 51,997 1,847,841 172,700 167,502 20 53,625 3,133,325 189,400 135,278 21 35,508 1,196,122 2,701,000 2,928,386 22 1,176 47,607 Nil Nil 322,531 11,180,477 3,989,725 4,180,336 Sales from 2/22/40 to 15/41 6,289,309-1/2 200,137,177 21,982,925 21,096,064 TOTAL 2/22/40 TO 3/22/41 6,611,840-1/2 211,317,654 25,972,650 25,276,400 Miss Kelly reported sales of non-vested securities for the week ending March 15 totaled $1,000,000. 76.m.3. Regraded Uclassified 207 THE SENATE TODAY IN RECORD TIME COMPLETED CONGRESSIONAL ACTION ON THE $7,000,000,000 WAR-AID APPROPRIATION TO PROVIDE GREAT BRITAIN AND PERHAPS OTHER AXIS FOES WITH LARGE QUANTITIES OF WARPLANES, ships, TANKS, GUNS AND FOOD 3/24--R214P ADD LEND LEASE BILL PASSED, SENATE THE VOTE WAS 67 TO 9. INEXBIKEXXE NO AMENDMENTS WERE OFFERED. 3/24--R219P THE BRITISH AID BILL WAS DISPATCHED TO MIAMI ON A REGULAR EASTERN AIRLINES PLANE ARRIVING THERE AT 10:45 P.M. POSTAL INSPECTOR LOUIS de WHITE WAS IN PERSONAL CHARGE OF THE MEASURE. HE WILL TURN IT OVER TO A NAVAL OR COAST GUARD PLANE AT MIAMI WHICH WILL DELIVER IT TO THE PRESIDENT ABOARD THE YACHT POTOMAC OFF THE FLORIDA COAST. 3/25--W0419P