Volume 468, December 3 – December 4, 1941

DIARY Book 468 December 3 and 4, 1941 Regraded Unclassified - B - - Book Page Blind Persons Seeing-Eye Dog Legislation: Report to Mrs. FDR - 12/3/41 468 99 Buck, Clarence F. - Chicago, Illinois See Knox, Frank (Secretary of Navy) Calumet National Bank - C - See Knox, Frank (Secretary of Navy) Casablanca See War Conditions: Gold China See War Conditions - D - - Dakar See War Conditions: Gold Defense Savings Bonds See Financing, Government Director General of Railroads See Railroad Administration Dogs, Seeing-Eye See Blind Persons - P - Far East See War Conditions Financing, Government December Financing: Conference; present: HMJr, Hadley, Bell, Morris, Rouse, Haas, and Murphy - - 12/3/41 4,34 a) Suggestions 21 b) Sproul-HMJr conversation 8 c) Eccles-HMJr conversation 16 d) Tompkins-HMJr conversation 27 e) McIntyre-HMJr conversation concerning opening. 32 f) Calendar of direct and guaranteed bonds and notes 52 g) Jones-HMJr conversation 60 h) Preliminary announcement concerning basis of subscriptions 62 1) Announcement of offering - 12/4/41 217 J) Federal Reserve Banks' report - 12/5/41: See Book 469, page 2 k) Subscription figures and bases of allotment - 12/8/41: Book 470, page 79 1) Final subscription and allotment figures - 12/16/41: Book 473, page 272 Regraded Unclassified - 7 - (Continued) Book Page Financing, Government (Continued) Work Projects Administration: Cut in operating funds for Treasury accounting procedure - HMJr discusses economies in letter to FDR - 12/4/41 468 281 Defense Savings Bonds: Trade unione - sales through: FDR memorandum - 12/4/41 305 France See War Conditions: Gold - G - General Aniline and Film Company See War Conditions: Foreign Funds Control Germany See War Conditions Gold See War Conditions: Gold; Thailand Gugler, Eric See Sub-Treasury Building - - New York City - J - Japan See War Conditions - K - Knox, Frank (Secretary of Navy) Buck, Clarence F. - Chicago, Illinois - receiver for Calumet National Bank: Knox asks HMJr to investigate suit planned by Comptroller of Currency - 12/3/41 89 - M - Mack, John See War Conditions: Foreign Funds Control (General Aniline and Film Company) Maritime Commission, United States Contract authorizations, obligations, and disbursements for ships and facilities from inception of Commission (October 26, 1936) to October 31, 1941 - 12/3/41 83 (See also Book 469, page 101 - 12/5/41) Morocco See War Conditions: Gold Regraded Unclassifie - R - Book Page Railroad Administration Secretary of Treasury, 8.8 successor to Director General of Railroads, discusses funds still on hand and final liquidation in letter to FDR - 12/4/41. 468 283 Revenue Revision Tax studies (preparatory) and conferences - status of: Sullivan report - - 12/4/41 289 Military and naval training camps and stations - tax on admissions to entertainments: Letter to Majority Leader McCormack - 12/4/41 292 - S - Seeing-Eye Dogs See Blind Persons Sheean, Vincent See War Conditions: Military Reports Social Security Extension of coverage and Treasury attitude toward funds discussed in Green-HMJr correspondence - 12/3/41 102 Sub-Treasury Building - New York City Correspondence concerning preservation between Eric Gugler, Mrs. FDR, and HMJr - 12/3/41 91 - T - Taxation See Revenue Revision Thailand See War Conditions - U - - Ukrainians See War Conditions: Military Reports - W - War Conditions Airplanes: Employment in Aviation Manufacturing Industry . - Haas report - 12/4/41 311 China: "Observations of Vincent Sheean on his trip to Far East" - Coordinator of Information report - 12/4/41 359 Regraded Unclassified - W - (Continued) Book Page War Conditions (Continued) Exchange market resume' - 12/3-4/41 468 211,349 Export Control: Exports to Russia, China, Burma, Hong Kong, Japan, France, and other blocked countries, week ending November 22, 1941 - White report.. 128 Far East: "Observations of Vincent Sheean on his trip to Far East" - Coordinator of Information report - 12/4/41 359 Foreign Funds Control: General Aniline and Film Company: Biddle-HMJr conversation: John Mack recently made president and 1s represented by Homer Cummings - 12/3/41 66 a) Mack-HMJr conference - 12/4/41 257 1) Biddle-HMJr conversation 260 Wollner, O'Connell, etc., sent to plants by Treasury - - 12/11/41: See Book 471, page 225 Germany: 011 production summarized - 12/3/41 136 "The Problem of German Occupation of Northwest Africa - Objectives and Costs"- Coordinator of Information report - 12/3/41 141 a) Copy to FDR - 12/6/41: Book 469, page 267 Gold: $250 million worth shipped from Dakar to Casablanca - Treasury questions British Embassy concerning and reports transaction to FDR - 12/4/41 322 a) Revised figures - 12/9/41: Book 471, page 330 Japan: Bank of Japan: Closing of agency in New York City reported to FDR by HMJr - 12/3/41 125 Firms doing business with firms in Latin America - report from Canadian Legation, Washington - 12/3/41 190 Military Reports: "The Problem of German Occupation of Northwest Africa - Objectives and Costs" - Coordinator of Information report - 12/3/41 141 Reports from London transmitted by Halifax - 12/3-4/41 213,351,357 "Observations of Vincent Sheean on his trip to Far East" - Coordinator of Information report - 12/4/41 359 "Political Tendencies of American Ukrainians" - Coordinator of Information report - 12/4/41 368 "The War This Week" - November 27-December 4, 1941 - Coordinator of Information report 385 Purchasing Mission: Federal Reserve Bank of New York statement showing dollar disbursements, week ending November 26, 1941 - 12/4/41 328 - V - (Continued) Book Page War Conditions (Continued) Thailand: Purchase of gold and possible extension of credit discussed in Cochran memorandum - 12/3/41..... 468 201,252 (See also Book 469, page 138 - 12/5/41) Assets frozen - 12/9/41: Book 470, pages 278 and 279 Work Projects Administration See Financing, Government 1 December 3, 1941 9:15 a.m. HMJr: Hello. Operator: Mr. Gaston. HMJr: Herbert? Herbert Gaston: Yes. HMJr: Good morning. Where are you? Hello. G: Yes. HMJr: Where are you talking from Herbert? G: From the Governor Clinton Hotel. HMJr: Yeah. Herbert, remember the conversation we had after staff on Monday? G: Yes. HMJr: That particular agent - did he do what I instructed him to do? G: Yes. I got it yesterday afternoon, and gave it - since I was coming up here, I gave it to Ed Foley to hand to you. HMJr: No, that isn't what I mean. The agent who I wanted to report to a certain gentleman. G: Well, he hasn't reported to him, no. I thought we would send & copy of his report to the man. He 18 out in Chicago. HMJr: When 1s he going to see this certain gentleman? G: When 18 he going to see him? HMJr: Yeah. G: Why, I didn't instruct him to see him. I thought we would deliver 8. copy of this report to him. HMJr: Well, 18 this report written by you or by the agent? Regraded Unclassified 2 - 2 - G: It's written by him. HMJr: By the agent. G: Yes. He was in Chicago, and Harry got him on the phone. He wrote the report, and it came in yesterday. HMJr: But it hasn't been given to this man yet. G: It has not, no. HMJr: Well, that's unfortunate. G: Would you like me to see that man? HMJr: No, I'm going to talk to him myself on the phone. G: Uh huh. This agent is in Chicago. HMJr: Yeah. Well..... Have you read the New York Times today? G: I have, yes. HMJr: Yeah. All right, Herbert, I'll - the report is in the hands of Foley? G: It 18, yes. HMJr: Okay. All right. G: All right. HMJr: I've got to get it into this man's hands. I had hoped it was in his hands, but I'll tell - I'll see that it gets to him today. G: Right. You don't want me to do anything? HMJr: Well, I don't 800 - what can you do? G: I don't think there's anything, unless you wanted me to see somebody here. HMJr: No, I - it's this report I want to get into this man's hands. Regraded Unclassified - 3 - 3 G: Yes. HMJr: And I'll make the arrangements. G: Yes. Well, Foley has it. HMJr: All right. G: All right. HMJr: Thank you. Regraded Unclassified 4 December 3, 1941 10:45 a.m. RE FINANCING Present: Mr. Hadley Mr. Bell Mr. Morris Mr. Rouse Mr. Haas Mr. Murphy H.M.Jr: Now listen, let's go to town on this thing. We have been fooling around long enough. Where is Rouse? Bell: He went out to telephone to New York to get the reactions. I can get him in 8 minute. (Mr. Hadley entered the conference). H.M.Jr: Each fellow take 8. piece of paper and write down with his initials what he recommends on this financing, will you please? Is anybody missing that I usually use on this? Bell: Rouse is the only one out, and he will be here in a minute. H.M.Jr: Let me see. One fellow says eight hundred million of the '67 - '72's with a fifty cent premium. There is no harm in giving the name, is there? Bell: No. Regraded Unclassified 5 - 2 - H.M.Jr: That is Mr. Bell. Beil: I think I would rather see it at par, but I wouldn't kick at fifty cents premium. H.M.Jr: Then Mr. Morris says reopen the two and a halfs at a hundred and a half. George has open '67 - '72 at 8 hundred and B half for the seven fifty. And then Mr. Murphy, seven fifty, for a '65 - '75. He likes something new. Hadley wants a billion of the two and B. halfs, '70 - '75. Now, on the twos Bell wants '51 - '53, Morris wants '52 - '54, Hadley wants '52 - '54, Haas wants '51 - '56, and Murphy wants '51 - '56. Bell: I didn't know where they fell. I just meant in that area. I hadn't seen any price charts. Morris: Yes, I said 'about'. I hadn't had time to dope that out. Bell: But that area is what we mean. Morris: As a matter of fact, that '51 - *56 was in George's memorandum, and I think it is a pretty good idea. Haas: Just a little -- H.M.Jr: I personally lean toward a billion of the long. Bell: Do you? H.M.Jr: And I will tell you why. I think on the refunding we will have to go somewhere on 6 - 3 - a two, and if we got out a twelve now, we might want to reopen the two in January for the refunding. Had you thought of that? Bell: Yes. That is one reason you ought to put on the five-year call period. H.M.Jr: That would be all right. Hadley: I agree with that, if you are willing to reopen, make it five years. H.M.Jr: That would be all right. Haas: Then I think I would like Henry's longer call on the billion. H.M.Jr: But I was thinking of a billion dollars, reopen this one, half a billion of the two, and then reopen the two, possibly in January. Murphy: Reopen both of them in January. H.M.Jr: No, I would say if we had & billion dollars now, I would say that issue is closed. Bell: Well, I was hitting at the billion. H.M.Jr: If you did 8. billion would you want a fifty cent premium. Rell: : Nine hundred fifty million. H.M.Jr: Would you want a fifty-cent premium? Bell: Well, the fifty-cent premium doesn't worry me. I would like to see it go off. I think you have got that much more cushion out there, and it is very important. H.M.Jr: Would you put on the fi fty cents? Regraded Unclassified 7 - 4 - Bell: I would prefer to see it not on there. I wouldn't argue about it. H.M.Jr: But I mean how about you, Dave, if I say a billion? Do you still want to sell at a hundred and a half? Morris: I would hesitate a little bit, but I would like to say something. (The Secretary held a telephone conversation with Mr. Sproul as follows): 8 December 3, 1941 10:56 a.m. HMJr: Hello. Allan Sproul: Good morning, Mr. Secretary. HMJr: Good morning. How are you? 8: Fine. HMJr: Allan, we're down now that we've got to do business, see? 8: Yeah. HMJr: And I wondered after cogitating over the night, whether you were ready to make & recommendation to me. S: Well, I have cogitated and I'm still of the opinion that a billion of two and a half as close to this outstanding issue as you could put it and five hundred million of fifty-two fifty-four would be the best ticket. HMJr: Well, you and I are practically together. What I was thinking of was this. A billion dollars, and I'm willing to reopen the other one. Then if I do, telling the people though that just after we did this, it would be close. 8: Uh huh. HMJr: Now, some of the people here in the Treasury think if we do the billion - well, I mean, some of them think we ought to charge a hundred and a half. S: My recommendation would be to do it at par. HMJr: It would be. S: Yeah. HMJr: I see. Regraded Unclassified 9 - 2 - S: If you think that the issue - my guess is that the issue will settle down around a hundred and one to a hundred and one and a quarter or some- where around there; and I think that would make a better offering than to put the half on. HMJr: The boys hear you on the loudspeaker. They say you think of a new issue. I'm talking about reopening the old. S: That's right. HMJr: You still stick by that? S: Yeah. HMJr: It will settle down to a hundred and one? B: It will settle down to a hundred and one to & hundred and one and a half, yes. HMJr: Well, I think you're a little more conservative than some of us, but that's all right. Bell just wet his pants. S: (Laughs) HMJr: Well, I'll have to get him diapers, then. S: (Laughs) HMJr: (Laughs) Well, anyway - these side remarks have completely upset the meeting. S: (Laughs) HMJr: Now, where were we? S: Well, we were wondering whether the reopened issue should be at par and a half or at par. HMJr: Yeah. Well, let me just go to the other a minute. We can come back. S: Yeah. HMJr: If we do the five hundred million, what do you recommend on that? Regraded Unclassified - 3 - 10 S: Well, my recommendation there would be fifty- two, fifty-four. HMJr: Fifty-two, fifty-four. Well, let me just..... S: Two per cent. HMJr: Yeah. Just let me give you this thought. I'd like to keep that issue in mind and possibly using it again in January. 8: Uh huh. HMJr: Now, if you did that, couldn't you spread it a little bit? Make it a little bit longer call? 8: Well, you mean..... HMJr: Make it fifty-two, fifty-five or fifty - Bell says fifty-one, fifty-six. 8: Yes, I - if you're going to use in January with that refunding, I'd rather bring the call date up a year or make it, say, fifty-one, fifty-five. HMJr: Fifty-one, fifty-five. 8: Yeah. HMJr: You wouldn't give me fifty-six? S: Well, I think that at these rates, the market tends to look at the maturity date rather than the call date and if you get it out to fifty- six, it might be a little thin, but I HMJr: Well, four years is plenty. 8: Four years is plenty for a call date. HMJr: Well, don't you think we ought to have it in mind for January? S: Yes, I do. A five hundred million issue and with a billion or more of refunding to be done in January, I think it would be well to have it there 80 you might reopen it; and on that basis I'd like to bring the call date down a year to fifty-one. - 4 - 11 HMJr: And make it fifty-one, fifty-five. S: Yeah. HMJr: Well, I don't think - - I found Chicago muoh more bullish than New York; and I find the insurance companies generally are just as keen to buy now as they were last time. 8: Yeah. Their ability to buy may be BL little slack, but their kemness to buy is just as great. HMJr: That's right. Now 8: Chicago doesn't think we're going to pot in New York this time? HMJr: Going to do what? S: The last time Chicago seemed to think New York was going to go into a tailspin and be HMJr: No. Nobody said anything about that. 8: Good. HMJr: But I mean the Chicago people just - I mean, they're not 80 sensitive to the foreign news. 8: I see. HMJr: And one - George Harrison - for instance, said if there was a declaration of war or breaking off relations between Japan and United States tomorrow, his inclination will be to increase his subscription. S: Well, that sort of reaction makes sense to me in that we've been living in this kind of a world for two years now, and you can't base your operations on what happens or tomorrow. Any- thing may blow up at any time. HMJr: The only thing that bothers me, heretofore I've always given the market one day's sort of notice Regraded Unclassified 12 - 5 - on what we were going to do, and then see it settle down. I'm not doing that this time. We're saying it'll be a long bond and a medium bond. S: Well, your sin would be to go for a billion and 8. half in bonds. HMJr: Yeah. S: I don't think you need to give them a day on this. There were two alternatives in the market mind - one all a long bond and one a long and a medium - and they're getting one of them and the one they prefer, and I think that's all they need. HMJr: I see. Well, Bell tells me he wants for the Government to invest seventy-five million? (Talks aside) Oh, well, no. But supposing I want a billion and a half for the public, how much do you want? What? We might put our own selves down for another fifty. 8: For your account? HMJr: Yes. S: Well, that would be all right, too. HMJr: That doesn't make any difference. 8: No, I don't think that makes any difference. HMJr: What? S: I think that's perfectly all right. HMJr: Now, I tell you, could I - oh, the other thing - I haven't talked to - Bob Rouse hasn't come back - have you seen those regulations? S: No, he was just talking to me when you called. HMJr: Oh, damn. Oh, I very much want your advice on those. Could he - - should he go somewhere and Regraded Unclassified - 6 - 13 finish talking to you? S: Yes, can he do that? HMJr: Yeah. 8: All right, that'll be fine. HMJr: Then if you don't mind I'll entertain myself by talking to the Chairman while he's talking to you. S: Well, you'll be good for quite awhile. HMJr: Just a moment, Bell's pointing. Just a moment I'll have you switched over to Bell's phone. S: Thank you. HMJr: Just a moment. Operator: Operator. HMJr: Will you switch Mr. Sproul to Mr. Rouse, who's in Mr. Bell's room? Operator: Right. HMJr: Thank you. 14 - 5 - (Mr. Rouse left the conference). H.M.Jr: You wouldn't make it December? Hadley: My basis on December for a four-year call would probably be up around one point. H.M.Jr: That is not enough. Hadley: I think I am 8 little pessimistic on that issue, mainly because of the length of the call date. H.M.Jr: Have you talked with Piser at all? Hadley: His figures are about the same as mine on this. H.M.Jr: Have you talked with anybody in New York? Hadley: Yes. Of course, they haven't considered the longer call. H.M.Jr: Go to work on it, because I have got to move. Will you? Talk with Piser. Who have you talked with, Miller? Hadley: Harris and Miller, both. H.M.Jr: Well, move, will you? And then as soon as you have it, come on back. (Mr. Hadley left the conference). Morris: If you split the issue and then you have & million naught seven five for your refundings, you get 8. total for that issue of eight twenty-five, which isn't a bad size for that issue. Also, I think there may be some advantages, this may be a good time or not, if you are going to reopen issues, to get them Regraded Unclassified 15 - 6 - used to taking a small premium, and not expecting everything flat. It gives you a little better flexibility on prices. It is not important. (The Secretary held 8. telephone conversation with Mr. Eccles as follows): December 3, 1941 16 11:07 a.m. Marriner Eccles: Hello. HMJr: Marriner. E: Yes, Henry. HMJr: We're getting towards the point where I've got to make up my mind, and this is the way I feel. We'd like to reopen the last long two and 8 half, and offer the public a billion of that. E: Well, that's fine. That was our feeling about it. We felt very strongly that to put another long issue out 80 near to that as it would be necessary to do it would be unnecessary and possibly only confusing. HMJr: And then five hundred million issue of, say, fifty-one, fifty-five. E: Fifty-one. What date in fifty-one? HMJr: Well, I Just told Hadley to go out and talk with Piser and work it out as to the date, see? E: Do you HMJr: I don't know as E: How much do you want to give them on HMJr: Oh, a. point and 8. half. E: Point and a half, huh. It figured yesterday fifty-two - even December '52 figured about a point and an eighth. Of course, these fellows differ sometimes a little. HMJr: Well E: But I would imagine if it's going to be fifty- one, it would be possibly - the last would be December '51, likely, wouldn't it? Regraded Unclassified - 2 - 17 HMJr: Well, I don't know. I just told them to talk to - somebody he talks to in New York - I don't know - and Harrison, I guess, and that's all. He talked to Piser to see if the three of them could get together. E: Uh huh. HMJr: If that's what we decided to do. E: Uh huh. You wouldn't object to going to fifty- two if it was - if the pricing was - gave them too much? HMJr: No. The point 18, I want four years, and I'll tell you why I'd like that instead of five. I'd keep that issue in mind, possibly to re- open it in January on our refunding. E: Yeah. For the billion dollars guarantees. HMJr: Yeah. And therefore, I'd like a little more call, you know? E: Uh huh. Yeah, that would be a good one to open. HMJr: You see? E: What - did you discuss with Dan at all the method of allotment that..... HMJr: Yeah, we've come to a decision here, but he hasn't been able to leave the room. I've had him right here on the carpet. E: Oh, yeah. HMJr: And the minute he gets ready I want him to see you. E: Yeah. We talked about it yesterday a little while, but about various means of cutting down this padding and HMJr: Well, at least we're together here, and..... Regraded Inclassified - 3 - 18 is Well HMJr: He'll present it to you. E: Well, I'm sure that your decisions- the con- clusions that you've come to - are pretty much in line with the ones we came to yesterday with the exception that we felt that it wasn't necessary to put out two issues, but we didn't feel it very strongly; and if it was necessary - that is if it was felt to be desirable on the part of the Treasury, and then we were pretty strong for opening up the existing issue and for putting out the five hundred ten-year issue. So I think we - I'm sure our people will be all pretty well pleased with the decision. HMJr: Now let me ask you this. There are some people here think we ought to get a fifty cent premium on the long one. E: I wouldn't put a premium on. HMJr: You wouldn't. E: No, I wouldn't do it, because it isn't - it Just isn't enough; and personally, I don't think that we ought to expect to finance at cheaper than we financed on the last issue. If we can hold a long two and a half, it seems to me that that's going to be pretty good; and to put & premium on, is equivalent to putting it out for a longer period. HMJr: Yeah. E: And it means driving - - it means, in effect, trying to get a little more favorable financing than the Treasury got on the last issue. HMJr: Yeah. E: And with all the financing that 1s to be done, I think it's a good thing to have & two and a half point leeway. HMJr: Yeah. Regraded Unclassified 19 - 4 - E: Because if the market should break down, you've got two and a half points to go before the - anybody loses any money; and it's our feeling that the market, of course, if it should break, it should be supported and not be permitted to go through par, that the country has got to be made to realize the Treasury is going to finance on not more than a two and & half basis. HMJr: Yeah. is That's the way we feel about it; 80 it's & good thing, I think, it leaves them some leeway. HMJr: Well, I'll tell you what we'll do. While the boys are figuring out whether it should be fifty- one, fifty-five or fifty-two, fifty-four and where it should fall, I'll ask Bell to go to his office and talk to you about these regulations. E: Yeah. HMJr: And if you prefer - well, anyway, I'll have him go into his office and talk to you and see whether we can clear that. Then after the boys get to- gether, I'll give you another ring. E: Fine. HMJr: How's that? E: That's fine. HMJr: Is that all right? E: That's fine. HMJr: Thank you. E: All right. 20 - 7 - H.M.Jr: As long as Sproul and Eccles both say "No" on the fifty cents, Dave -- Morris: Well, I agree with you for a billion. I think there is a difference. That extra thing does it. H.M.Jr: Yes. Well, I will tell you what I would like you to do, Dan. Just as soon as you are - there are two things. Let these three men work on the pricing of this, whether it is '51 - '55 or '52 - '54, and get that clear. When you have got that and when you have got Eccles cleared on these other regulations, give me a ring, and I will see you. You can leave your stuff here, if you want to. Will you give me a ring? Bell: Yes. H.M.Jr: I will clear it with Jones and I am waiting to hear from you. Bell: You are satisfied with this? H.M.Jr: Yes. Bell: We will give this to the press immediately and wire to the banks, 80 they can send it out. They ought to get it before this announcement. sprone 21 1.000. 500 52-54 & June 15- 9-2-13-2 51-55 101.10-15 Regraded Unclassified (Jime 52-54 500- - 2%9 22 1000 - 2½% 29-34yo (1970-75) MADH. 23 750 million 2½ 9-15/51-56 750 miller 21/2 12/15/65.75 HZ mushy fen 67-72-2½ 24 at 1001/2 for 750 2% 51-56 for 750 Mass topen 67-72 at for #800 At 25 (50F frem. would do nofarm) no Gork Dnv ap 75A At 2% 51-53 600 1.400 old 10% 140 Goes. Inv. 75 $ 1.615 A DWB 26 reopen 21/2 - 67/72 @1001/2 for 750m new 2 - about 52/54 for 750 Am DAMONI Regraded Unclassified December 3, 1941 27 11:16 a.m. HMJr: Hello. B. A. Tompkins: Hello. Mr. Tompkins. HMJr: I'm calling up, as I really felt sorry we didn't have a chance to talk to each other yesterday. T: Yes, I understood. HMJr: And I wanted to ask you myself this morning just how you felt about this issue. T: Well, I was going to say to you - as I told Danny - I think you can open up your two and a half HMJr: Yes. T: safely. HMJr: Yes. T: I think you should put in a medium two per cent issue. HMJr: Yes. T: With the weather as uncertain as it 1s, I think that would be a measure of safety. HMJr: I see. T: I think that the - while the long-term market perhaps hasn't the zip in it that it had in October, the undertone is still good. HMJr: Yes. Well T: How do you feel about it? HMJr: Well, you and I don't feel very different. T: And I think that in view of the picture, that Regraded Unclassified - 2 - 28 it would be well to go right ahead with it instead of delaying it. HMJr: I think you're right, too. My son Bob was sorry he didn't have a chance to meet you, because he enjoyed your hospitality. T: I left & message for you about his. HMJr: I didn't get it. T: Well, I guess Dan was too busy. HMJr: Yes. T: There's no dividends in this, but they're not bad things to hear. HMJr: Yes. T: I happened to have a group of five ensigns dining at my house one night who had just come down from that school. HMJr: Oh, yes. T: And they asked me if I knew Bob, and I said that I hadn't and they said that he was the most respected man in that unit. HMJr: Ie that right? Well..... T: I know that isn't a hard thing for a father to hear. HMJr: No, that's very nice. T: He must be B. great lad, and I do want to see him some time. HMJr: Well, he asked me when he heard that you were coming. He said, "Daddy, where's Mr. Tompkins?" And I said, "Well, there was a confusion and he's gone baok to New York." But he did want to meet you. T: Well, I hope we'll do it. Tommy will get hold - 3 - 29 of his some time, and we'll get together. HMJr: Well, next time there'll be no confusion. #: All right, sir. HMJr: All right. T: Good-bye. HMJr: Good-bye. 30 December 3, 1941 11:25 a.m. General Watson: Yes. HMJr: This is the story that I get. I understand that Senator Thomas approached the White House on his own. W: That's right. HMJr: It was not our suggestion. W: That's right. HMJr: And he wants to take two personal friends with him. W: Well, that's all right. You mean in Treasury? HMJr: No, of his own friends. W: Yeah. HMJr: And then we have to send two people out to assist in the opening of this, you see? And we thought as long as the Army's plane was going and they were taking a Senator and two of his friends, we could send two of ours; but it's unimportant if W: All right. We can do it as long as they're giving it to the Senator. HMJr: Yeah. W: It's okay. He is Chairman of the subcommittee of the Appropriation on Military Affairs HMJr: Yeah. W: .....and that justifies - you see, the thing that's important 1s the trip. HMJr: Sure. W: And we're going to send as long as they can hold Regraded Unclassified 31 - 2 - two or three more. There's no reason why they shouldn't take them, provided they take their chances on meeting death and 80 forth. HMJr: Well, you take that every day. W: Yeah. They can't take that and hold me responsible for that. HMJr: No. W: No. HMJr: No. Well, what else? W: And that's all that I had come over here yet. HMJr: Well, I'm ready to talk to him now any time. W: All right. All right. HMJr: Thank you. 32 December 3, 1941 11:30 a.m. HMJr: Hello. Henry speaking. Mr. McIntyre: Yes, Henry. Ready to shoot? HMJr: Yes, sir. Mo: Let her go. HMJr: All right. Mo: It's a good time. HMJr: It is. No: When do you close it? HMJr: Well, we open it tomorrow morning. Mo: Yeah. HMJr: And close it tomorrow night. Mo: That's good. HMJr: It'll be a billion dollars of the same two and a half issue that we offered a month ago..... Mo: Yes. HMJr: .....and half a billion of two per cent. Me: Half & billion of two per cent. How long? HMJr: We're figuring on it. It'll be somewhere around '51-'54. That's from ten to thirteen years. Mo: Yes. Yes. HMJr: Ten to thirteen years. I mean, it's a question..... Mo: Yes. How much is the long-term issue? HMJr: It's twenty..... Me: Twenty-five, thirty? - 2 - 33 HMJr: It's twenty-six, thirty-one. Mo: Good. That's fine. HMJr: Twenty-six, thirty-one. Mo: That's all right. HMJr: And it will be over there within the hour. But you think tomorrow is as good a chance as any? Mo: I think you may just get under the wire. HMJr: Wonderful. Mo: Yeah. HMJr: Thank you 80 much. Mo: All right. Good-bye. 34 December 3, 1941 11:50 a.m. RE FINANCING Present: Mr. Rouse Mr. Bell Mr. Murphy Mr. Haas Mr. Morris Mr. Hadley Mrs. Klotz H.M.Jr: Well now, how does Sproul feel about this -- Rouse: I went over it with him, and he felt it was all right. It was a good thing, and it would not hurt the market. He was sorry that we didn't have a little more time on it, for the final consideration and so on, but after I had discussed it with him, he felt it would be better to go ahead with it now, rather than wait for the next time, and he thought it would not interfere with a successful issue. In general, I think his ideas about it are pretty much the same as both Randy and George Harrison expressed, that this thing over a period of time is going to solve itself, and that the evils were not as great as is sometimes feared. H.M.Jr: Now, are you people together as to what the Regraded Unclassified 35 - 2 - five hundred million issue should be? Bell: Treasury and New York say that a '51 - '55, June 15, '51 - '55, is nine and & half - thirteen and a half years. H.M.Jr: Nine and a half -- Bell: And thirteen and a half. Will sell at a pre- mium of about one point ten to one point fifteen thirty-seconds. H.M.Jr: Not a hundred and one? Bell: A hundred and one ten -- H.M.Jr: You didn't say a hundred and one. 11: No, I said a premium of one point ten. A hundred and one ten to a hundred and one and fifteen thirty-seconds. Piser feels it will be richer than that, with the probability of a hundred and one twenty. H.M.Jr: He has never been right yet, has he? Bell: He is on the right side if he is right. Now, if you want to move it up to December 15, 1951, I think they feel it will give you one point premium instead of the ten or fifteen extra thirty-seconds. H.M.Jr: You mean that makes it what, ten years and thirteen years? Bell: That makes it ten and fourteen. H.M.Jr: That makes it a flat what? Hadley: One point. Bell: About a point. Regraded Unclassified 36 - 3 - H.M.Jr: What do you think, Rouse? Rouse: It would be all right. The only consideration that leads to the desirability of the higher premium is the possibility of reopening in January, adding a billion to it, in which you would want for the billion perhaps 8 little more cushion. H.M.Jr: For the reopening? Bell: The refunding in January. Rouse: So that I think I tend back to the nine and & half - thirteen and a half. Though I like the idea of the ten to fourteen better. Bell: Now, as to '51, there is a June, September, and December - - there is quite a large sum that may be called in each of those places. There is a billion and two that actually matures in March, but you have got several call periods in that area - beyond that area, which you can call, all of these maturities or issues separately and I don't think they would interfere with each other. H.M.Jr: Of course you could reopen something else. It is just a question of five hundred million of twos at -- Bell: You mean at that time? H.M.Jr: Yes. Bell: Oh, yes, you could reopen -- Rouse: Well, of course this thing too may go a little better because of the small size of it. Regraded Unclassified 37 - 4 - H.M.Jr: Didn't that one yesterday go very well? Rouse: That New York State issue? H.M.Jr: Yes. Bell: One forty-four. Rouse: Well, it is tax exempt one to four years, and the competition is keen. Bell: One forty-four is the average rate. H.M.Jr: It would be keen for this five hundred. Rouse: Oh, yes, this meets a different market. This is a bank market, and they are keen for it. H.M.Jr: I think that the best policy always is to price the thing as of today, not what we are going to do in January. How the heck are we going to know where we are in January? If you were doing it just to sell five hundred million, what would you do, Bob? Rouse: I would do the ten - fourteen. H.M.Jr: That would be December? Rouse: Yes. Bell: That is one point. Do you think that that -- Rouse: That is the one eighty-five, isn't it? Bell: Do you think that premium will throw the subscriptions to the other side, to the long bond, because of the higher premium? Rouse: Yes, I think it will throw the corporate and 38 - 5 - individual subscriptions, and I think the banks will be in there fully, and the insur- ance companies partially, on the two per cent bonds. Bell: It might have a tendency then to decrease the subscriptions on the five hundred million, increase the subscriptions on the billion? Hadley: That is about a one eighty-eight rate. isn't it? H.M.Jr: Well, supposing we did throw them in to the long. What is the matter with that? Bell: It is no harm. It would just cut down the percentage of allotment. H.M.Jr: Well, let me find out what they are thinking in New York. Incidentally, I cleared this with the President. He has guaranteed me tomorrow. Bell: He is here today, so now we can send a letter over. H.M.Jr: Oh, yes, he is in his office. It is a funny thing, Marvin McIntyre called up and said - they said Marvin McIntyre wanted to speak, and I have got orders that nobody can use that phone but the President. It was Marvin McIntyre, 80 they threw him on to this phone, and then the next thing I knew, the President was on, on this wire. Bell: Well, I suppose the reason they did that was because Marvin was calling first. Klotz: They couldn't tell who it was. H.M.Jr: But when it was Marvin McIntyre, she wouldn't put him on that phone, because I won't let 39 - 6 - anybody else use it. (The Secretary held a telephone conversation with Mr. Sproul as follows): 40 December 3, 1941 11:55 a.m. HMJr: Hello. Allan Sproul: Hello. HMJr: Allan. 8: Yes. HMJr: You're on the loudspeaker. Now, I've got a clearance from the President to go ahead for tomorrow. 8: Fine. HMJr: So he ought to know what's going on. B: Yes. HMJr: And it's just a question whether we make this two per cent thing December or June of nine and a half, thirteen and a half, or ten, fourteen. S: Nine and a half, thirteen and a half or ten, fourteen. HMJr: Yeah. 8: It doesn't seem to me it makes a great deal of difference. HMJr: Well, you've got to have an opinion. 8: (Laughs) Well, I would make it ten, fourteen myself. HMJr: You would? B: Yeah. I'd make it December. HMJr: The boys figure that's about one point in it. 8: I think that's enough on that five hundred million issue. HMJr: They'll be hungry for it, won't they? - 2 - 41 8: I think that's been the strongest section of the market, and it's right down the alley of the banks and ought to go well. HMJr: Well, I'll talk to Marriner and see what he thinks. And one other thing, do you think if we're going to go ahead with this, don't you think it would be a good thing if I told the press we're going to go ahead with the financing tomorrow? S: I distinotly do, yes. HMJr: I thought so. 8: Your statement about the weather was interpreted correctly and I think it would be a good thing now to tell them the weather is all right as far as the financing is concerned. HMJr: I was going to say the weather is static, but that doesn't - I don't mean that - I mean stationary. B: No. (Laughs) HMJr: That's what I mean. B: Yeah. HMJr: The weather's stationary for the moment. S: Yeah. HMJr: I think just as soon as I clear it with Marriner, I think I will give something out. S: I think it would be a good idea. HMJr: Right. All right. Unless Marriner has some other ideas. And now as for that - those new rules and regulations, okay? 8: Yes. I talked that over thoroughly with Bob Rouse, and I think it's okay. HMJr: Thank you. - 3. - 42 8: All right, sir. HMJr: Wait a minute, Bell's saying something. (talks aside) What? oh, Marriner is okay on the regulations. 8: He 1s. HMJr: Bell looks a little weak. I didn't know what happened to him. S: (Laughs) They've probably had a long con- versation. HMJr: Yeah, that's what happened. 8: (Laughs) HMJr: All right. B: All right. HMJr: Okay. 8: Good-bye. 43 - 7 - H.M.Jr: I had a nice talk, just so that you (Rouse) know. I called up Tommy Tompkins and had a nice talk with him. I think he had it coming to him. But I still say I was unnecessarily disturbed, but that wasn't his fault. It was a combination. I shouldn't let things disturb me, that is the answer. Bell: Mr. Secretary, we would like to put on these two issues & five thousand dollar preferred allotment, stick to the five this time. You suggested ten. I think I would stick to five. H.M.Jr: What were they last time? Bell: Five. Two, we did. H.M.Jr: Five? Are you going back to five? Bell: No, it was originally five. H.M.Jr: But last time there wasn't any preferred. Haas: Since the F and G's have been out. H.M.Jr: What do you want to do that for? Bell: You suggested the other day you wanted ten. H.M.Jr: I made a lot of suggestions. You didn't take them all seriously? Bell: Yes, I did that one, because I have always favored it, but I thought it was a mistake for this time. (The Secretary held a telephone conversation with Mr. Eccles as follows): 44 December 3, 1941 12:00 Noon. HMJr: Hello. Operator: Chairman Eccles. HMJr: Hello. Marriner. Marriner Eccles: Yes, Henry. HMJr: Now I've cleared this thing for tomorrow with the President. E: Fine. HMJr: He's given me an all clear weather signal, 80 we're ready to go ahead. Now, I under- stand that Dan's talked to you about the new rules and regulations. E: Yes, he read them over the phone. HMJr: They're all right? E: Yes, they're pretty much in line with what we discussed yesterday. As I told him, they're fine as far as they go, that I would go farther than he's gone, but they're - certainly could have no objection whatever to any of the pro- visions and they're all in the right direction; and he said that after all, they were the result of a compromise and it's about as far as he felt they could go this time. And I said, "Well, of course, we certainly could have no objections to the modifications you've made, because we're all very strong for them, except we'd go farther." HMJr: Now, did you know that the president - or the head - of one of the biggest banks in Atlanta came in and told us that the four banks down there agreed that they would make loane to customers to buy Government securities and put up the Government securities as collateral? And that's the way that they were operating down there. E: Well, I didn't know that specifically. I did Regraded Unclassified - 2 - 45 know that in Atlanta from what Ronald Ransom has told me - that for years they're a bunch of speculators down there, and every time they get a chance to get a rake- off, they get it. HMJr: No, this - some man said that there's an agreement amongst the four banks and they make loans to their customers to buy Governments with Governments as collateral. I think it's outrageous. E: Well, now, this memorandum of Dan's - I mean this new regulation - calle specific attention to that provision, 80 that it seems to me that if those banks don't cooperate, why we can do something about it. HMJr: Well, I'm going to send a Treasury man down there just to observe this time. E: I think it's - I think it might be all right. HMJr: But evidently they're - they haven't been playing the game, Marriner, down there. E: Well, what - I think we're partly at fault, because with the twelve banks and the branches throughout the system, there has been no uni- formity. HMJr: That's right. E: And I think that that's been one of the faulte. HMJr: Yeah. E: Now with this memorandum as 8. basis, we can tighten up from now on a basis of uniformity, and this will give us the basis of experience. HMJr: That's right. E: Outside of Atlanta - well, there's Atlanta and Richmond, in particular - we're bad. 46 - 3 - HMJr: Yeah. E: And I think this is all in the right direction myself. HMJr: Okay. Now, one other thing. On the two per cent. E: Yeah. HMJr: There's the question of whether we make it December or June. In other words, nine and a half, thirteen and a half, or ten-year, fourteen-year. E: I would go December. I think you've got plenty of - plenty on it for December. That's ten years. HMJr: Ten-fifty-two, yeah. E: Ten-fifty-two. I think nine and a half is too short. You're giving a premium that you don't need to give, I think, on that type of bond. HMJr: All right. E: Don't you agree on that? HMJr: Yeah. Well, we'll make it ten-fourteen. E: Yeah, I wouldn't go nine. Who wants nine and a half? HMJr: oh, we've got a couple of conservative fellows here at the Treasury, you know. E: In fact, that sounds like the bankers. HMJr: Well, we talk to bankers. E: (Laughs) Yeah, well, nine and a half sounds more like the bankers than the Treasury. HMJr: We don't associate with them, but we talk to them. (Laughs) - 4 - 47 E: (Laughs) I see. Well, ten certainly looks better to me. HMJr: All right. E: Fine. HMJr: All right. E: All right. Good-bye. 48 - 8 - H.M.Jr: There is quite & difference. Now, what I would do is, I would have Chick Schwarz announce that it is a billion dollars, and we are reopening the old issue, and that five hundred million would be offered of the new issue, and that there will be some new regulations coming along. Bell: They will be out this afternoon. Let's see, you are going to announce now that you are going to reopen and five hundred million of - you are not going to say that is an intermediate -- H.M.Jr: I am going to say the whole thing. Bell: Rate and everything? H.M.Jr: Sure, I want the whole thing out. It is too tight. We will get the whole thing out and give the fellows 8 chance. Rouse: You didn't decide on that five thousand. H.M.Jr: No, I want to get the thing out. Wouldn't you? Or would you just tell them we are going to go ahead? Rouse: I think I would first tell them you are going to go ahead tomorrow, and then after the close of the market, tell them this, unless you want to get the effect in the '67 - '72's today. H.M.Jr: No. We have never done that. Bell: We have never given out anything except the amount when we split one billion of a long bond and five hundred million as an intermed- iate. H.M.Jr: O.K. Rouse: That is fine. 49 - 9 - H.M.Jr: Now, what about your five thousand dollars? Bell: Well, I think there is a real need for us to go back to that five thousand dollar allotment. I think you have got a lot of small banks that refuse to subscribe because of the limitation on their capital. H.M.Jr: Why not make it ten, if you are going to make it anything? The five thousand didn't bring in twenty-five million dollars. Bell: Thirty-nine million on the last, and we had ninety days before they could get their securi- ties, and statistics show that when the ninety days were up, only about half of them asked for coupon bonds. They showed about the same per- centage as the first one on which we got twenty- one million. Rouse: You don't announce a hundred per cent of them as preferred allotments. If you get too much, you can make it partial. Bell: Fifty or sixty, yes. H.M.Jr: What is the argument against the Baby Bond thing? Rouse: The argument is that there are & number of individuals, for example- - of course banks can't subscribe to Baby Bonds, small banks, but on the individuals, there are a number of people who would like to buy marketable Government securities because they don't know when they will have to borrow against them. H.M.Jr: Oh, banks can't take the others? Bell: Can't take any savings bonds at all. H.M.Jr: Anybody don't want to see five thousand dollars? Regraded Unclassified 50 - 10 - Morris: I am in favor of five. I just question ten, but not strongly. Hadley: I would go along with ten. Haas: Five is all right with me, and I wouldn't worry about ten. Murphy: Ten is O.K. with me. Bell: I vote for five for this issue; maybe ten on the next one. H.M.Jr: It is all right with me. Bell: What? H.M.Jr: Five. Bell: O.K. Murphy: Is that ninety days? Morris: Oh yes, definitely. Bell: One reason I would like to have it ninety days is because it falls in March, and I hope that we won't have a financing in March. I wouldn't want it to fall on the day when we have a financing. H.M.Jr: Now what else do you want, Dan? Bell: That is all I have. I am all set. H.M.Jr: The Government bond market is up two thirty-seconds. Bell: That reflects the conference yesterday. Maybe this long bond will go up instead of down. H.M.Jr: Now when do you want me to sign? Regraded Unclassified - 11 - 51 Bell: It will take some little time to get ready. What I would like to do is get this memorandum on the subscriptions out right away and then I would like to send a preliminary telegram to the banks, giving them just a little more than you are giving to the press, so that they can get that ready to go in the first mail. H.M.Jr: I can sign for you at two o'clock. Do you want me before that? Bell: No, I am sure we won't be ready. Maybe a little later than two, even. H.M.Jr: Thank you very much, Bob. You have been very helpful. Rouse: Thank you, sir. 52 Calendar of Direct and Guaranteed Bonds and Notes November 3, 1941 (In millions of dollars) Callable issues Fixed maturities First callable Date Description Final maturities Direct Guaran- teed Direct Guaran- tead Direct Guaran- teed 1941-Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. 1942-Jan.15 RFC 7/8% 310 Jan,15 FFMC 3% (1942-47) 236 Feb. Mar. 1 FFMC 2-3/46 (1942-47) 103 Mar.15 Note 1-3/46 426 Apr. May June July 1 RFC 1% 276 July 1 HOLO 2-1/4% (1942-44) 875 Aug. Sept.15 Note 26 342 Oct.15 RFC 7/8% 320(T) Nov. Dec.15 Note 1-3/4% 232 Total 1,000 906 1,214 1943-Jan. Feb, Mar,15 Note 3/4% 66(T) Apr, May 1 000 3/4% 289 June15 Note 1-1/8% 629 June15 Bond 3-3/8% (1943-47) 454 July15 RFC 1-1/8% 324(T) Aug. Sept.15 Note 1% 279 Oct.15 Bond 3-1/4% (1943-45) 1,401 Nov. Dec.15 Note 1-1/8% 421 Total 1,395 613 1,855 1944-Jan. Feb. 1 USHA 1-3/8% 114 Mar.15 Note 1% 515 Mar.15 FFMC 3-1/46 (1944-64) Apr.15 Bond 3-1/4% (1944-46) 95 1,519 Apr.15 RFC 1% 571(T) May 1 HOLC 3/2 (1944-52) 779 May 15 FFMO 3% (1944-49) June15 Note 3/4% 835 416 July 1 HOLO 2-1/45 (1942-44) 875 Aug. Sept.15 Note 1% 283 Sept.15 Note 3/4% 635(T) Oct, Nov. Dec.15 Bond 4% (1944-54) 1,037 Total 1,849 685 2,556 1,709 675 Excludes special issues, issues redeemable at option of holder, Postal Savings bonds, FHA debentures, and issues for which an exchange offer has been made and accepted by the bulk of the holders, Unclassified Calendar of Direct and Guaranteed Bonds 53 and Notes November 3, 1941 (In millions of dollars) Callable issues Fixed maturities Date Description First callable Final maturities Direct Guaran- teed Direct Guaran- teed Direct Guaran- teed 1945-Jan. Feb.15 000 1-1/8% 412(T) Mar.15 Note 3/4% 718 Apr. May June 1 HOLO 1-1/2% (1945-47) 755 July Aug. Sept.15 Bond 2-3/46 (1945-47) 1,214 Oct.15 Bond 3-1/4% (1943-45) 1,401 Nov. Deo.15 Bond 2-1/2% 541 Dec.15 Note 3/4% 531(T) Total 1,790 412 1,214 755 1,401 1946-Jan. 1 Conversion 3% 16 Feb, Mar.15 Note 1% 503(T) Mar.15 Bond 3-3/4% (1946-56) 489 Apr.15 Bond 3-1/4% (1944-46) 1,519 May June15 Bond 3% (1946-48) 1,036 June15 Bond 3-1/8% (1946-49) 819 July Aug. Sept. Oct. Nov, Dec. Total 519 2,344 1,519 1947-Jan. 1 Conversion 3% 13 Jan.15 FFMC 3% (1942-47) 236 Feb. Mar. 1 FFMC 2-3/4% (1942-47) 103 Apr. May June 1 HOLO 1-1/2% (1945-47) 755 June15 Bond 3-3/8% (1943-47) 454 July Aug. Bept.15 Bond 2-3/46 (1945-47) 1,214 Oct,15 Bond 4-1/4% (1947-52) 759 Nov. Dec.15 Bond 2% 701 Total 714 759 1,668 1,094 1948-Jan. Feb. Mar,15 Bond 2% (1948-50) 1,115(T) Mar.15 Bond 2-3/46 (1948-51) 1,223 Apr. May June15 Bond 3% (1946-48) 1,036 July Aug, Sept.15 Bond 2-1/2% 451 Oct. Nov. Dec.15 Bond 2% (1948-50) 571 Total 451 2,909 1,036 Excludes special issues, issues redeemable at option of holder, Postal Bavings bonda, FHA debentures, and issues for which an exchange offer has been made and accepted by the bulk of the holders. Regraded Unclassified 54 Calendar of Direct and Guaranteed Bonds and Notes 1 November 3, 1941 (In millions of dollars) Callable issues Fixed maturities Description First callable Date Final unturities Direct Guaran- teed Direct Guaran- teed Direct Guaran- teed 1949-Jan. Feb. Mar. Apr. May 15 FFHC 3% (1944-49) 835 June15 Bond 3-1/8% (1946-49) 819 July Aug. Sept. Oct. Nov. Dec.15 Bond 3-1/8% (1949-52) 491 Dec.15 Bond 2-1/2% (1949-53) 1,786 Total 2,277 819 635 1950-Jan. Feb. Mar.15 Bond 2% (1948-50) 1,115(T) Apr. May June July Aug. Sept.15 Bond 2-1/2% (1950-52) 1,186 Oct. Nov. Dec.15 Bond 2% (1948-50) 571 Total 1,186 1,686 1951-Jan. Feb. Mar.15 Bond 2-3/4% (1948-51) 1,223 Apr. May June15 Bond 2-3/4% (1951-54) 1,627 July Aug. Sept.15 Bond 3% (1951-55) 755 Oct. Nov. Dec.15 Bond 2-1/4% (1951-53) 1,118 Total 3,500 1,223 1952-Jan. Feb. Mar.15 Bond 2-1/2% (1952-54) 1,024(T) Apr. May 1 HOLC 3% (1944-52) 779 June July Aug. Sept.15 Bond 2-1/26 (1950-52) 1,186 Oct.15 Bond 4-1/46 (1947-52) 759 Nov, Dec.15 Bond 3-1/8% (1949-52) 491 Total 1,024 2,436 779 1 Excludes special issues, issues redeemable at option of holder, Postal Savings bonds, FHA debentures, and issues for which an exchange offer has been made and accepted by the bulk of the holders. ssified 55 Calendar of Direct and Guaranteed Bonds and Notes 1 November 3, 1941 (In millions of dollars) Callable issues Fixed maturities Date Description First callable Final maturities Direct Guaran- teed Direct Guaran- teed Direct Guaran- teed 1953-Jan. Feb, Mar. Apr. May June15 Bond 2% (1953-55) 725 July AUg. Sept. Oct. Nov. Dec.15 Bond 2-1/24 (1949-53) 1,786 Dec.15 Bond 2-1/4% (1951-53) 1,118 Total 725 2,904 1954-Jan. Feb. Mar.15 Bond 2-1/2% (1952-54) 1,024(T) Apr. May June15 Bond 2-3/46 (1951-54) 1,627 June15 Bond 2-1/4% (1954-56) 681 July Aug. Sept. Oct, Nov. Dec.15 Bond 4% (1944-54) 1,037 Total 681 3,688 1955-Jan. Feb, Mar.15 Bond 2-7/8% (1955-60) 2,611 Apr. May June15 Bond 2% (1953-55) 725 July Aug. Sept.15 Bond 3% (1951-55) 755 Oct, Nov, Dec. Total 2,611 1,480 1956-Jan. Feb. Mar.15 Bond 3-3/4% (1946-56) 489 Mar.15 Bond 2-1/2% (1956-58) 1,449(T) Apr. May June15 Bond 2-1/4% (1954-56) 681 July Aug. Sept.15 Bond 2-3/4% (1956-59) 982 Oct, Nov. Dec. Total 2,431 1,170 Excludes special issues, issues redeemable at option of holder, Postal Savings bonde, FHA debentures, and issues for which an exchange offer has been made and accepted by the bulk of the holders. Regraded Uncl ssified 56 Calendar of Direct and Quaranteed Bonds and Notes 1/ November 3, 1941 (In millions of dollars) Callable issues Fixed maturities Date Description First callable Final saturities Direct Guaran- teed Direct Guaran- teed Direct Guaran- teed 1957-Jan. Feb. Mar. Apr. May June July Aug, Sept. Oct. Nov, Dec. Total 1958-Jan. Feb. Mar.15 Bond 2-1/2% (1956-58) 1,449(T) Apr. May June15 Bond 2-3/46 (1958-63) 919 July Aug. Sept. Oct. Nov. Dec. Total 919 1,449 1959-Jan. Feb. Mar, Apr. May June July Aug. Sept.15 Bond 2-3/4% (1956-59) 982 Oot, Nov. Deo, Total 982 1960-Jan. Feb. Mar.15 Bond 2-7/8% (1955-60) 2,611 Apr. May June July Aug. Sept. Oct. Nov, Dec.15 Bond 2-3/4% (1960-65) 1,485 Total 1,485 2,611 Excludes special issues, issues redeemable at option of holder, Postal Savings bonds, FHA debentures, and issues for which an exchange offer has been made and accepted by the bulk of the holders. Regraded Unclassified 57 Calendar of Direct and Guaranteed Bonds and Notes November 3, 1941 (In millions of dollars) Callable issues Fixed maturities Date Description First callable Final maturities Direct Guaran- teed Direct Guaran- Direct Guaran- teed teed 1961-Jan. Feb. Mar. Apr. May June 1 Panama 3% 50 July Aug. Sept. Oct. Nov. Dec. Total 50 1962-Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total 1963-Jan. Feb. Mar. Apr. May June15 Bond 2-3/4% (1958-63) 919 July Aug. Sept. Oct. Nov. Dec. Total 919 1964-Jan. Feb. Mar.15 FFMC 3-1/4% (1944-64) Apr. 95 May June July Aug. Sept. Oct. Nov. Dec. Total 95 1 Excludes special issues, issues redeemable at option of holder, Postal Savings bonds, FHA debentures, and issues for which an exchange offer has been made and accepted by the bulk of the holders. Regraded Unclassified 58 Calendar of Direct and Guaranteed Bonds and Notes November 3, 1941 (In millions of dollars) Callable issues Fixed maturities Description First callable Date Final naturities Direct Guaran- teed Direct Guaran- teed Direct Guaran- teed 1965-Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.15 Bond 2-3/4% (1960-65) 1,485 Total 1,485 1966-Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total 1967-Jan. Feb. Mar. Apr. May June July Aug. Sept.15 Bond 2-1/2% (1967-72) 1,590(T) Oct. Nov. Dec. Total 1,590 1972-Sept.15 Bond 2-1/2% (1967-72) 1,590(T) Excludes special issues, issues redeemable at option of holder, Postal Savings bonds, FHA debentures, and issues for which an exchange offer has been made and accepted by the bulk of the holders. Regraded Unclassified 59 December 3, 1941 12:05 p.m. HMJr: Hello. Colonel Donovan: Henry. HMJr: Yes. D: I'm sorry I can't be there at lunch. HMJr: I am, too. D: but Jim Baxter will talk very openly and freely HMJr: Good. D: and - have you been getting some of my little stories? HMJr: Yes, I have. D: That will be a steady flow, Henry. HMJr: Fine. D: And if there's any particular thing that we can do, I'll let you know. HMJr: Will you do that? D: Yeah. HMJr: All right. D: Now, I was glad to have Gaston over yesterday. We explained the whole thing to him. HMJr: Good. D: All right. HMJr: Thank you. D: All right, Henry. De 60 December 3, 1941 12:07 p.m. HMJr: Hello. Operator: Secretary Jones is at the Capitol. HMJr: Well, leave word I called him. Operator: Right. HMJr: Leave word I called. Operator: Right. December 3, 1941 12:10 p.m. HMJr: Hello. Jesse Jones: Hello, Henry. HMJr: Jesse, we're about ready to blow. J: Yeah. HMJr: We're going to reopen that last two and a half per cent issue for a billion dollars. J: Uh huh. HMJr: And then sell a new two per cent ten-fourteen year. J: Ten-fourteen. HMJr: Yeah. J: I think you've hit on the right - that's about the way you were talking yesterday, wasn't it? HMJr: Yeah. Sound all right to you? 61 - 2 - J: I think it sounds all right. HMJr: Well..... J: And I believe we're going to like it. HMJr: The President gave me a clearance for tomorrow. J: Uh huh. HMJr: So that' ..... J: Well, I'm whole-heartedly for it. HMJr: Thank you, Jesse. J: Okay. Thanks. TREASURY DEPARTMENT Washington 62 FOR IMMEDIATE RELEASE, Press Service Wednesday, December 3, 1941. No. 28-71 In advance of the cash offering of Treasury securities to be announced tomorrow, the Treasury today announced the basie on which subscriptions will be entertained from the various classes of subscribers who will participate in that offering. The primary purpose is, 80 far as possible, to meet the legitimate investment requirements of the public, and to accomplish that purpose sub- scriotions will be grouped broadly into four classes, as follows: Banks and trust companies for their own account-- not to exceed 50 per cent of capital and surplus. Mutual savings and cooperative banks, Federal Savings and Loan Associations, trust accounts and investment corporations, pension funds, insurance companies, and similar institutions and funds -- not to exceed ten per cent of total resources, Corporations organized for profit, and dealers and brokers -- not to exceed 50 per cent of net worth, Individuals -- not to exceed 50 per cent of net worth or 100 per cent of cash deposited with subscription. (Note: No preferred allotment will be made on such full-paid subscriptions. ) Notwithstanding the general limitations outlined above, the Federal Reserve Banks are authorized and instructed to continue to examine applications for cash offerings of securities issued by the Treasury, and to report to the Secretary of the Treasury any which, in their judgment, require special treatment, or which appear to be excessive from the standooint of the resources or investment practices of the subscribers, or for other reasons, with recommendation as to the acceptance, reduction or rejection of any such applications, which recommendations will be promptly acted upon by the Secretary. The cooperation of banking institutions, and of the sub- scribing public generally, is earnestly solicited 50 that subscrip- tions forwarded to the Federal Reserve Banks and the Treasury will in each instance be for amounts not in excess of the limitation set forth above. Attention 16 again invited to the requirement that subscribers agree not to sell or otherwise dispose of their Regraded Unclassified 63 -2- subscriptions, or of the securities which may be allotted thereon, prior to the closing of the subscription books, It is also requested that banks and others refrain from making any unsecured loans, or loans collateralized in whole or in part by the securities subscribed for, to cover the initial deposits which are required to be paid when subscriptions are entered, -o0o- 64 December 3, 1941 1:40 p.m. HMJr: Hello. Mr. O'Dwyer: Hello, Mr. Morgenthau. HMJr: How are you? 0: Splendid, thanks. HMJr: Mr. O'Dwyer 0: Yeah. HMJr: The reason I'm calling you 18 this. Monday of this week it was brought to my attention that our Narcotic Agent, Albert E. Aman. 0: Yes. HMJr: You know of him? 0: Yes, very well. HMJr: He had some information which he got from two men which you gave him permission to talk to. 0: That's right. HMJr: Now, I asked him to give me a written report which has just been handed to me this morning and I think it's - it may be of interest to you. And Aman is in Chicago, and he's leaving there tonight and will arrive in New York tomorrow and hand it to you personally. O: That's lovely. HMJr: Now, if there's anything else that we here can do, call on me personally. 0: Yes. Well, that's swell. Thanks a lot, Mr. Morgenthau. HMJr: Now, this has certain income tax angles, and we will pursue those through our Internal Revenue agente. Regraded Unclassified - 2 - 65 0: Yes. HMJr: But there are other things in there which are of interest to you and don't come under the Treasury. 0: I 800. HMJr: But..... 0: Well, thank you very much, sir; and when will I have the pleasure of meeting you? HMJr: Well, any time - I very rarely get to New York. 0: You're rarely in town, aren't you. HMJr: Practically never; but if I do, or you should happen to come to Washington, why I'd be delighted to see you. 0: Thank you very much. HMJr: Good-bye. O: I will take advantage of that invitation when I come down. HMJr: Do that, will you? 0: Yes, sir. HMJr: But I think you'll be interested in what Aman has. 0: All right. Thank you very much. HMJr: Okay. O: Good-bye. 00 - Mr. Foley STRICTLY CONFIDENTIAL 66 December 3. 1941 2:26 p.m. HMJr: Hello. Francis Biddle: Henry, this is Francis. HMJr: Good morning. B: How are you today? HMJr: Okay. B: Henry, I have two matters - one personal and the other business. I'm afraid Kathryn and I won't be able to make your party in New York. HMJr: Oh, I'm sorry. B: I'm terribly sorry. Shall I write your secretary about it? HMJr: No, no, I' B: Shall I send the tickets back? HMJr: If you don't mind. B: I'll send them over tomorrow morning if that's time. HMJr: That's time enough. B: Now, the other thing, Henry. John Mack is coming over to Bee you. HMJr: Yes. B: Then also, I thought I'd say a word about that situation. HMJr: I wish you would. I know nothing about it. B: John Mack has recently been made president of General Aniline. 67 - 2 - HMJr: Yes. B: He's represented by Homer Cummings. HMJr: Yes. B: The majority of the stock . practically all of the stock - is owned by & Swise company, called a Commie Company HMJr: Yes. B: who undoubtedly could vote in any group they wanted. HMJr: Yes. B: This situation involves a - really a fight for control, and it is a stockholder's bill, asking under the Delaware laws, for a special election brought by the Commie group, which, in turn, 1s controlled undoubtedly from Germany..... HMJr: Yes. B: .....and has been pending for some time. HMJr: Yes. B: I think on the whole, we've looked at it pretty carefully, that the present board which has been changed..... HMJr: Yes. B: and the association of both Mack and Cummings with the board, gives us much more confidence than the other groups, who are Raskob, DuPont, and Al Smith. HMJr: Yes. B: of course, what they're trying to do is to get the DuPont's control over this competitor company and divide up the boodle pending the war. HMJr: Yeah. 68 - 3 - B: Now, it's a very simple matter, but apparently there's been a good deal of backing and filling. They want us to try to get the case postponed again for three months. HMJr: Yeah. B: For several reasons. Mainly because we can get a better picture of it. HMJr: Yeah. B: I approve that. I think the Inter-Departmental Committee, who naturally don't like to take responsibility for some of these things without going to us, are a little shy about 1t; although Frank Shea gotten into the position where he agrees. HMJr: Yeah. B: You'll want, of course, to talk to Ed about it afterwards. HMJr: Right. B: I think Ed 1s & little instinctively against it. HMJr: Yeah. B: But literally, all I think need be done is to go down to court and say that this involves & serious situation and we are already on record in a criminal proceeding under the Anti-Trust Act in which we state that it is our belief and we expect to prove that the Chemmie Company is controlled and owned by General Aniline under a geographical trust distribution agreement. Therefore, we've said that already. We repeat that, and we talk a little bit about national defense and the emergency situation. I haven't the slightest doubt that the court will respond as they have already once done, BO I think it should be done. HMJr: Well, I know nothing about it. I'll listen to - 4 - 69 Mack. I'll make no commitment one way or the other. B: That's right. And then talk to Ed. HMJr: And then talk to Ed. B: Give me a ring when you've decided. HMJr: I'll very definitely give you a ring before I decide. B: Oh, incidentally, Mack's been over to 800 the President, I think, about it; and I think he was put in the company with the President's approval. HMJr: I see. B: Which would indicate that the boss would like us to play along; and if you want to speak to him, that would be all right, but I hardly think it's necessary. HMJr: Well, before I make up my mind, I'll talk to you again. B: Thank you, Henry. HMJr: Thank you. TREASURY DEPARTMENT 70 INTER-OFFICE COMMUNICATION DATE December 3. 1941 TO Secretary Norgenthau Mr. Dochren FROM STRICTLY CONFIDENTIAL At LL D.Z. this afternoon Secretary Morgenthau received Sir Frederick Phillips, at 8210 latter's request. Mrs. Klotz and Mousre. White and Cochran were present. Sir Frederick stated that he desired to regort to the Secretary on progress being ande on "take outs" from old contracts. While it had resulted from the recent meeting perticipated in by Messre. Phillips, McCloy, Greenbaum, Wilson end others that there vere no funds available to the Army to relieve the British from any of the contracts which have been under discussion, Mr. Stettinius seemed willing to ivo such relief out of the second Lend-Lease appropriation, provided free funds can de found in this allotment. Phillips nade the point that $1,000,000,000 of this seconá appropriation has been cet anide for Russia, but that study is now being made DE to whether the desired relief can be obtained from the remaining funds, In to the Secretary's inquiry. Sir Frederick stated that Colonel Greenbaum had been mite helpful. The Secretary had stressed to Colonel Greenbaum, on the latter's visit to the Treasury, the importence which he attached to this matter. The Secre- tary terms to be loept currently informed of developments. Phillips then recalled to the Secretary that the British authorities had given the definite ruling when refugees from the British Isles came out to Canada and United States that foreign exchange could not be remitted to these countries to take CAFE of such refugees, principally women and small children. Principally as a recult of experience with Canade, it has ДОМ developed that strict adherence to this rule cannot be maintained. The British calculate that something like £250,000 per year vill he required for remittances to women and children now in the United States. lince this would bean an additional drain on British dollar exchange resources, Sir Frederick desired to consult the Secretary before giving his assent to the arrange- cent. The Secretary saia that he gladly and heartily agreed thereto. Incidentelly, be asked Phillips sometime to bring him to date on the recent arrangement consumsted with the British Treasury authorities by the American Embassy in London with respect to dividends for American movie interests. Sir Frederick then mentioned the question of payments to Russia. The Secretary told Pullips that this question had been brought up, particularly in Sir Frederick's abovene, on one or more occasions, but in a matter of "treding", rather than in the Direct fashion which has always characterized dealings between Sir Frederick and the Secretary. The latter hoped that 02 this, as on all matters, Sir Frederick would tell the Secretary directly what he wanted, and A frank regly would be forthcoming, 20111191 stated that the first voint was with respect to supplies which the British bad obtained from the United States against actual payment in United States dollars lefore Lond-Lease N20 operative. When such articles have now been transferred by the British to the Sussians, does the United States Treasury agree to the British collecting dollars DE gold from the Russiane therefor] At the second point. Regraded 71 - 2 - Phillips referred to certain Boston bombers which had been acquired by the British and which are now to be released by the British to fulfill the American commitment to the Russians under the Moscow protocol. Should the British expect payment in dollars or in kind? To these two questions the Secretary replied that he would like to have a written memorandum from Sir Frederick. He would then give an early answer. 16.m.P. 16 m. P. Regraded Unclassified TREASURY DEPARTMENT 72 INTER-OFFICE COMMUNICATION DATE December 3. 1941 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL Confirming the information which I gave you orally at 4:15 this evening, word was today received from the Soviet Embassy that the SS DONBASS was arriving in San Francisco today, and that an amount of $6,000,000 of gold would be deposited at the Mint in San Francisco to our credit. From the SS TRANSBALT, arriving at San Francisco on December 6, a similar amount of $6,000,000 in gold will be deposited, leaving still due from Russia under the $30,000,000 advance, a balance of $13,326,000. nml C o P Y 73 EMBASSY OF THE UNION OF SOVIET SOCIALIST REPUBLICS WASHINGTON, D. c. December 3. 1941 My dear Mr. Secretary: On or about December 6, 1941 there will be deposited at the United States Mint, San Francisco, an amount of gold for the account of the Secretary of the Treasury of the United States by order of the Government of the Union of Soviet Socialist Republics. This gold will arrive on the S.S. Transbalt and is to be applied against the amount of gold sold under the agreement of October 10, 1941. Very truly yours, (Signed) A. Gromyko A. Gromyko Charge d'Affaires The Honorable The Secretary of the Treasury Washington Copy:ec 12-5-41 74 ? Y San Francisco, California December 3, 1941 Mr. D. 1. Doll Washington, B. c. I have been advised that there will be 96 cases of Russian gold at an estimated value of $6,600,000 delivered to this mist today. Will we handle 11 the came as other Bussian deposite? Naggerty Superintendent Regraded Unclassified 75 Regraded Unclas I IN DEC 3 1941 Deportationment, United States Mail, has Transisco, Culifornia. 9a or atout Doember 3. 1941 m will receive gold valued at approximately $6,000,000 for the account of the Secretary of the Treasury w order of the Government of the Valon of Seviet Socialist Reyablics. Upon receipt of this gold you are hereby anthorised and instructed to melt and determine 198 value. After determination of the value you are further authorized and instructed to purchase the sald at the fist grice of 035 per fine trey - without mitrating the 1/4 of 1 posearch handling durge, to the the deposit certificate cocordingly and to drew your dosk for the not value of the pla (Loss the well sint changes) to the order of the Federal Receive 1st of Sen for associal of the Federal Incerve Boalt of Sev York for credit to the "Seasurary of the treasury, Special Account. Please instruct the Federal Receive M of San Transinco to transfer this I w telegraph to the Federal Incorre Bask of lov Tools for credit to the *foretary of the Treasury, Special Account. # Places have the Federal Receive Bank of is Frencisco Instade is the telegram to the Federal Receive Bask of See Test the outfurn of the under of fine canses, the total dollar value, the - of the regular 1/4 of 1 persont handling durp, and the mint changes which have been delaried, M will M the - of the ship 00 with the 6014 vos transported, and the date w its arrival. Please propers too copies of Eine Term was in the and - insurting is the propared agases at the feet of the report the total value of the 6014, the melting charge, the handling durge, the total datge, and the not value of the gold, with the handling and other charges delacted, bet without other notations on the form. Please formal these forms to the Secretary of the frequery, Attention: I. Merio fechren, treasury Department, Vashington, 3.8. You vill observe from the instructions that - are not to debet the 2/4 of 15 handling charge. (8) mg) Acting Secretary of the Preasury. FD:1ma.12/3/41 I 76 HERASST # - UNION or SOVIET SOCIALIST INFUELIOS WASHINGTON,D.C. Recember s, 1941 My dear Mr. Secretary: On or about December S, 1941 there will be do- posited at the United States Mint, San Francisco, gold valued at approximately $6,000,000.00 for the account of the Secretary of the Treasury of the Waited States w order of the Government of the Union of Seviet Socialist Reyublies. This gold arrived on the S.S. Dephase and is to be applied against the amount of gold sold under the agreement of October 10, 1941. Very truly years, (s) A. Gromyke A. Greeyice Charge d'Affaires The Nonerable The Secretary of the Treasury Washington Copy:bj:19-3-41 Regraded Unclassified 77 Computation of tax liability on 1940 income under present law National Steel Corporation Return filed on an unconsolidated basis, for the calendar year. The income method is used in computing the excess profits tax. Computation of excess profits tax 1. Net income $13,508,570 2, Adjustments in arriving at excess profits net inc. - 1,029,699 3. Excess profits credit and specific exemption 11,818,791 4. Adjusted excess profite 660,080 5. Excess profits tax 350,048 6. Balance of net income, after E.P.T., subject to normal tax and surtax 13,158,522 7. Normal tax 3,158,045 8. Surtax 920,847 9. Total income and excess profits taxes 4,428,940 10. Total income & excess profits taxes as a percent of net income 32.8% Invested capital credit Amount of invested capital 128,780,993 5,000,000 at 8% 400,000 123,780,993 at 7% 8,664,670 Total credit 9,064,670 Average earnings credit 11,813,791 Regraded Unclassified COMPUTATION OF TAX LIABILITY ON 1940 INCOME UNDER PRESENT LAW NATIONAL STEEL CORP. Income Method Net Income $13.5mil. Adjusted Excess Profits $0.7 mil. E. P. Credit $11.8 mil. Normal Tax Net Income $13.2 mil. I. Computation of Excess Profits Tax 100% 100% 80% 80% 60% 60% Adjustments E.P. Credit$11.8 -$/.0 40% 40% E.P. Tax #0.4 20% 20% 0 0 o 2 4 6 8 10 12 13.5 MILLIONS OF DOLLARS Net Income II. Computation of Income Tax and Balance after Tax 100% 100% 80% 80% E.P. Tax 60% Balance after Tax $0,4 60% #9.1 40% 40% Surtax109 20% 20% Normal Tax #3.2 o 0 0 2 4 6 6 10 12 135 MILLIONS OF DOLLARS Net Income Regraded Unclassified Office at the Secretary of the Trave 79 Computation of tax liability on 1940 income under present law Lockheed Aircraft Corporation Return filed on an unconsolidated basis, for the calendar year. The income (growth) method is used in computing the excess profits tax. Computation of excess profits tax 1. Net income $5,149,409 2, Adjustments in arriving at excess profits net income - 3. Excess profits credit and specific exemption 3,535,306 4. Adjusted excess profits 1,614,103 5. Excess profits tax 922,462 6. Balance of net income, after E.P.T., subject to normal tax and surtex 4,226,947 7. Normal tax 1,014,467 8. Surtax 295,636 9. Total income and excess profits taxes 2,232,565 10. Total income & excess profits taxes as a percent of net income 43.4% Invested capital credit Amount of invested capital 26,963,853 5,000,000 at B% 400,000 21,963,853 at 7% 1,537,470 Total credit 1,937,470 Average earnings credit 3,530,306 Unclassified COMPUTATION OF TAX LIABILITY 12/3/41 ON 1940 INCOME UNDER PRESENT LAW LOCKHEED AIRCRAFT CORP. Income (Growth) Method Net Income $5.1 mil. Adjusted Excess Profits $1.6mil. E.P. Credit $3.5mil. Normal Tax Net Income $4.2 mil. I. Computation of Excess Profits Tax 100% 100% 80% 80% 60% 60% E.P. Credit $3.5 40% 40% E.P. Tax $0.9 20% 20% 0 0 0 2 3 4 5.1 MILLIONS OF DOLLARS Net Income II. Computation of Income Tax and Balance after Tax 100% 100% 80% 80% Balance after Tax $2.9 60% 60% E.P. Tax #0.9 40% 40% Surtax #0.3 20% 20% Normal Tax $1.0 0 0 0 2 3 4 5.1 MILLIONS OF DOLLARS Net Income Regraded Unclassified S1 CONFIDENTIAL UNITED STATES SAVINGS BONDS Comparative Statement of Sales During First Two Business Days of December, November, and October, 1941 (October 1-2, November 1-3, December 1-2) On Basis of Issue Price (Amounts in thousands of dollars) : : Amount of Increase : Sales : Percentage of Increase : or Decrease (-) : or Decrease (-) Item : : : : December : November : December : November : December : November : October : over : over : over : over : : : : November : October : November : October Series 1. Poat Offices $ 4,205 $ 4,394 $ 3.320 -$ 189 $1,074 - 4.3% 32.3% Series 1- Banks 6,496 5,171 5,815 1,325 - 644 25.6 - 11.1 Series 1- Total 10,701 9,565 9,134 1,136 431 11.9 4.7 Series 1- Banks 1,956 2,009 2,153 - 53 - 144 - 2.6 - 6.7 Series G - Banks 12,970 13,292 12,596 - 322 696 - 2.4 5.5 Total $25,627 $24,866 $23,883 $ 761 $ 983 3.1% 4.1% Office of the Secretary of the Treasury, Division of Research and Statistics. December 3. 1941, Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States Savings Bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. Regraded Unclas 82 CONFIDE UNITED STATES SAVINGS BONDS Daily Sales. December 1941 On Basis of Issue Price (In thousands of dollars) Post Office Bank Bond Sales All Bond Sales Date. Bond Sales Series I Series E Series , Series G Total Series I Series I Series G Total December 1941 1 $ 2,976 $ 3,904 $ 1,333 $ 7,220 $ 12,458 $ 6,880 $ 1,333 $ 7,220 $ 15,434 2 1,229 2,592 623 5.750 8,964 3,821 623 5,750 10,193 Total $ 4,205 $ 6,496 $ 1,956 $ 12,970 $ 21,422 $ 10,701 $ 1,956 $ 12,970 $ 25,627 Office of the Secretary of the Treasury, Division of Research and Statistics. December 3. 1941. Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States Savings Bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. Regraded Uncl 83 DEC 3 1941 I I 1 k 1 a Inter of I 1941, E. 10, BE enclosing three tables presenting certain information on the states of appropriations requested is my letter of November 20. Your comparation is this matter to I the tables usely - with the information I destred, and we - - developing a durt covering the figures. is - - 10 has Doen completed, I shall ont you a É (Signed) 1. Morgenthan, IN 1 I I i I I United Hales Commission, Washington, D.G. By Messenger Stant Whives 12/2/41 n.m.e. Photosta file Original 50 Has office UNITED STATES MARITIME COMMISSION WASHINGTON less OF THE CHAIRMAN November 28, 1941 The Honorable The Secretary of the Treasury Washington, D. C. Attention: Mr. George o. Haas Director of Research and Statistics Wy dear Mr. Secretary: Further reference is nade to your letter of November 10 and your request for information for each appropriation act and contract authorization acts approved since January 1, 1940, and defense aid allocations providing for construction by the Commission of vessele and equipment for national defense. In response to the above, the following statements have been prepared and are attached hereto: a. Contract Authorizations for Shipa and Facilities b. Obligations for Ships and Facilities (Cumulative) C. Disbursements for Ships and Facilities (Cumulative) All of the above from incontion of the Commission (October 26, 1936) to oeriod ending October 31, 1941. Mr. Lindow of your department has collaborated with this agency in the preparation of the foregoing. Sincerely yours, Shand E. S. Land Chairman Enclosures Regraded Unclassified UNITED STATES MARITILE COMMISSION CHLIGATIONS FUN SUIPS AND FACILITIES (CAMULATIVE) LOSTION 20 OCTOBER 31, 2941 Long Range Program Emergency Ship Pragram Defense A1d Program Two Shipa Facilities Total War and Navy Total - All Programs Ships Facilities Total Ships Fecilities Total His (Millions) (Willions) Millions) (Millions) Departments; (Millions) Shipa Facilities Total (Killions) (Millions) (Millions) Ships (Millions) (Millions) (Millions) 200. 31, 1937 15.8 (Millions) 15.8 15.6 15.8 31, 1938 26.3 26.3 26.3 26.3 he 30, 1938 26.3 26.3 26.3 26.3 St, 50, 1938 76.5 76.5 76.5 76.5 Dec. 31, 1938 92.6 98.6 92.6 92.6 mayon 31, 1939 135.7 135.7 135.7 136.9 - 30, 1959 161.1 161.1 161.1 161.1 Zept. 30, 1939 231.1 231.1 231.1 231.1 Das. 31, 1939 330.3 330.3 330.3 330.3 Murch 31, 1940 343.5 343.5 343.5 343.5 June 30, 1940 362.8 368.8 362.8 362.8 dept. 30, 1940 436.1 426.1 12.2 438.3 438.3 Dec. 81, 1940 434.7 434.9 12.8 446.9 446.9 Jan. 81, 1941 450.1 450.1 12.2 470.3 470.3 200. so, 1941 480.3 480.3 35.4 33.4 12.2 493.5 33.4 525.9 Earah 31, 1941 479.0 479.8 210. 35.0 345.0 184.8 12.4 197.2 33.0 1,007.6 47.4 1,055.0 MH1 so, 1941 518.9 518.9 310. 36.8 346.8 164.6 42.8 227.6 33.0 1,046.7 79.6 1,186.3 To 31, 1941 722.1 722.1 310. 38.9 348.9 477.0 43.8 520.8 33.0 1,642.1 BS.7 1,624.8 Time 30, 1941 722.2 732.8 310. 38.9 348.9 477.0 47.6 524.6 33.0 1,542.8 86.5 1,828.7 ser A 1941 782.7 728.7 310. 40.7 350.7 489.7 50.0 539.7 33.0 1,555.4 90.7 1,645.1 51 1941 1,039.9 82.6 1,062.5 358.0 0.8 392.8 494.5 50.0 544.5 30.4 1,919.8 113.4 2,033.2 1941 1,158.5 24.9 1,183.4 343.6 46.6 390.4 581.5 50.0 571.5 33.2 8,057.0 121.5 2,178.5 1941 1,394.8 25. 1,309.8 340, 47.3 387.3 497.1 53.2 550.3 36.4 2,186.3 185.5 2,283.8 egraded Unclassified UNITED STATES MARITIME COMMISSION DISBURSEMENTS FOR SHIPS AND FACILITIES (CUMULATIVE) INCEPTION TO OCTOBER 31, 1941 Long Range Program Emergency Ship Program Defense Aid Program NEW Ships Facilities Total Mar and Navy Ships Facilities Total Ships Total - All Program Facilities Total (Millions) (Millions) Departments: (Millions) (Willions) (Millions) Ships Facilities (Millions) (Millions) (Millions) Tyts (Milliona) Ships (Millins) (Millions) (MITHE Dec. 39 1997 $ .7 .7 (Millions) 1,6 1.6 -7 Mar. 31, 1938 -3 1.6 1,6 June 30 1938 1,6 1.6 1938 3.6 1.6 Sept. 30, 3.6 1,6 6.8 3.6 Dec. 3, 1938 8.8 3.6 8,8 Xar. 11, 1939 17.5 17.5 8,8 17.5 June 30, 1939 35.0 35.0 17.5 35.0 Sept. 30, 1939 54.5 54.5 35.0 54.5 Dec, 31, 1999 81.8 81.8 54.5 81.8 Mar, 31, 1940 108.6 108.6 81.8 108.6 June 30, 1940 139.4 139.4 108.6 139.4 Sept. 30, 1940 172.1 172.1 139.4 172.1 210.6 172.1 Dec. 30, 1940 210.6 210.6 210.6 Jan, II, 1941 223.4 223.4 223.4 Pab, 28, 1941 232.2 223.4 232.2 232.2 232.2 Mar. 31, 1941 246.9 246.9 .2 .2 .1 .1 246.9 .3 247.2 Apr. 30, 1941 259.4 259.4 .2 1,1 1.3 .1 1.7 1.8 -3 260.0 2.8 262.8 May 31, 1941 270.0 270.0 3.6 3.0 6.6 2.0 2.4 4.4 -7 276.3 5.4 281,7 June 30, 1941 281.1 281,1 4.6 8.4 13.0 2,6 6.0 8.6 1.2 289.5 14.4 303.9 July 31, 1941 293.7 293.7 8.8 12.2 81.0 4+6 7.6 12.2 1,0 308.1 19,8 327.9 Aug. II, 1941 306.2 306.2 12.7 18. 30.7 7.4 13.3 20.7 1,6 327.9 31.3 359.2 Sept. 30, 1941 320.5 320.5 19.4 24.8 44.2 11.5 19. 30.5 2.4 353.8 43.8 397.6 Oct. 34, 1941 330.4 1.1 331.5 28.9 31.3 60.2 17.9 25.4 43.3 3-4 380.6 57.8 7'8EY Regraded Unclassifi UNITED STATES MARITIME COMMISSION CONTRACT AUTHORIZATIONS FOR SHIPS AND FACILITIES INCEPTION TO OCTOBER 31, 1941 War and Loss Bance Program Ship Program Sary before Authority Shine Facilities Total Shipe Facilities Departments Total Total - ALL Program Sale (Millions) (Millions) the (Millions) (Millions) (Millions) (Millions) Total Shipm Stize Facilities Total (Millions) (Millions) (Millions) (Willions) Mattion Act, 1937 Aug. B. 1937 # 215 215 215 215 ristion Act, 1940 March 15, 1937 230 230 230 230 Holder Act, 1940 June 19.0 50 R 50 50 Pablic 1941 65 65 65 $ Mation Act, 1941 Aprill 1941 180 180 180 180 MR, 1942 Sungress, Let Secsion) Aug. i 1941 1,246.7 50 1,296.7 50 50 1,246.7 100 1,346.7 INC. 54 Statute 377 (Emargency Fund for Dec. a 1940 +5 - a ,5 Signature t President, War (Allotment to U.S.M.C.) 1942 July si 1942 36 36 36 36 - Feb. 5, 1941 310 310 310 310 I March 1941 illocation #7 April 14, 1941 100 50 550 205-19 - Oct. 11, 1941 500 50 550 285 :5 5 - Sept. 26, 1941 5 5 22.5 22.5 272 - Sept. 13, 1941 22.5 22,5 8.2 8.2 8.2 8.2 Aug. 5. 1941) Blips 4/50/32 - 67 Dtat. 437 13.2 13.2 13.2 welking Fund establisheds sportation c. Systel 6925902 # 9,200,000.00 Ang. di 1941) 2941 - Approp. (State 54-967) 6/31/32 - 47 Stat. 417 weidag Fund established? 800,000.00 U.S.K. Systel 690/15900 $ 10,000,000.00 March (0,1941) 1 Construction & Mathinery (Stat. 54-882) ) you 6/30/32 . 47 State 417 ) whipes 23.2 23.2 23.2 1 Bundag fund established, M I.S. Marilize Commission I 8,750,000.00 March 10,1941) 5,980,000.00 May 7,1941) 276,937.50 June д. 1941) - 15,006,937.50 I I - # 1,906.7 50 2,036.7 346.5 50 396.5 530.7 55 585.7 36.4 2,909.7 15 = - - assified Il 88 DEC 3 1941 Dear Henry: I wonder if I can't start a little real competition between the Army and the Navy! On November 5th I wrote to you and to the Secretary of the Navy asking for certain information. Copy of the letter is attached. On November 13th the Army Air Corps supplied us with information concerning its activities. On November 27th the Ravy came through in full. When may I expect the Army to do as well by Be as the Navy? Yours sincerely, (Signed) Henry Honorable Henry L. Stimson, Secretary of War. By Steen 400 n.m.c. Regraded Unclassified 89 DEC 3 1943 Ky dear Prank: Since receiving your letter of November 20th, I have assertained that legal setion has been instituted by the Comptroller of the Currency in the Circuit Court of Cook County, Illinois, against Mr. Clarense F. Buck and two surety companies which bonded him as receiver of the Calu- met National Bank of Chicago. The suit was filed for the purpose of recovering losses which were sustained by the receivership as . result of alleged negligence on the part of Mr. Buck in conducting the affairs of the receiver- ship. I find that a very thorough investigation was made prior to the institution of the suit and that extreme care was taken by the Comptroller's Office to ascertain and sift all the available evidence before concluding to sook recovery from Mr. Buck or nis sureties. In May of 1939, after Mr. Buck and his counsel, former Senator Otis F. Ilenn, had been afforded an opper- tunity to present to the Comptroller's Office arguments end reasons why recovery should not be sought as against Mr. Buck, a letter was written to Mr. Buok by the Comp- troller's Office stating that under the circumstances it had occoluded that the facts should be submitted to 4 court of record of competent jurisdiction, in order that there wight be a judicial determination of his 11a- bility or lack of liability for the losses sustained. The Comptroller's Office is convinced that there is no alternative action which would be in complete accord with its duties and obligations with reference to the administration of the affaire of the insolvent Calumat National Bank for the benefit of the depositors and creditors thereof, Sincerely yours, (Signed) 1. Norgesthas, In. Secretary of the Treasury Honorable Prank Knox, The Secretary of the Havy, Washington, D. C. By Memember JLR/COVIDE 12/1/41 nme Regraded Unclassified THE SECRETARY OF THE NAVY WASHINGTON the 12/2/+1, November 28, 1941 My dear Henry: One of my oldtime friends in Illinois in Mr. Clarence Buck, of Monnouth, filinois. Re is A former member of the State Senate and formerly one of the best of our Republican leaders In the state. I don't think there 1a any man in the state of Illinois who enjoys a higher rep- utation. Sometime ACO, he was urged by the then Comptroller of the Treasury to take the receivership of the Calumet National Bank which he did. This involved him in some very sizemble real estate operations closing out some property which the bank acquired during the depression. Mr. Buck has been in to see me to tell me of A threatened suit against him which he in very insistent is coupletely unjustified. Among other things. he told me the matter had been presented by those seeking to prosecute the matter, to Judge Holly end on four separate occasions, Judge Holly, who in the Federal Judge in Chicago, dismissed the case and, despite this failure in the Federal Courts, Buck tells as the case is now being pursued in the state courts. He has no fear of its success and I think he 1e warranted in feeling no, However, he eays it ie going to impose A very high cost on him to develop it and he naked me if I would not urge you to have some independent person investigate the matter and get at the actual facts. I feel sure that If the facts are brought out by some impartial investigator. the Comptroller will order the case dropped. Certainly Buck 1a the kind of an American citigen for whom I am very glad to go to the front, I like him and admire him and have complete confidence in his integrity. If there 1a anything you can do to investigate this matter, I would appreciate it very greatly. Yours sincerely, Bonorable Henry Morgenthau, Jr. The Secretary of the Treasury Washington, D. C. Regraded Unclassified 91 December 3, 1941. Dear Mr. Gugler: I have your letter of November 28th, and the copies of correspendence exchanged between Mrs. Receivels and you. Of course I would have been glad to ⑉ you and Mr. NeAseay if there had been anything I sould de in the matter about which you vrote. Reverer, as I have written Mrs. Receevelt, the Treasury no lenger has juris- diction over the Dab-freasury Building is Nov York, that responsibility having been transferred to the Public Buildings Administration of the Federal Vorks Agency. I have suggested to Rrs. Receevelt that she may wish to take up the matter with that Agency, and I as return- ing to you the copies of the letters you sent, is case you wish to forward them yearself to the effice of the Public Buildings Administration. With cordial regards, Sincerely, (81gned) B. Morganthau, 10. Mr. Erie Ougler, 101 Park Avenue, New York, New York. m Reclesures. GEF/She Regraded Unclassified ERIC-GUGLER IOI-PARK-AVE 92 NEW-YORK November 28th, 1941 Honorable Henry Morgentham Secretary of The Treasury Washington, D. C. Dear Mr. Secretary: I - enclosing s. letter from Mrs. Roosevelt, along with copies of the notes to her, to which the letter refere. Might it be possible for you to fit in a brief word with Mr. McAneny and myself in Washington at BOEN hour in the near future convenient to you? To could ourselves best come at any hour on Wednesday, Thursday or Friday of next week, though, of course, at any other time that you may suggest. I do hope that you can manage it, and I an, Very Eue truly yours, to Encls EG/HF Regraded Unclassified 93 C o P Y The White House Washington November 26, 1941 Dear Eric: I gave your letter and the enclosure on Federal Hall to the President. He is all for it and is giving it to Henry Morgenthau. He suggests that you get in touch with Henry. Sincerely, /3/ Eleanor Roosevelt Regraded Unclassified 94 ERIC GUGLER COPY 101 Park Ave New York November 14th, 1941 Visa Malvina Thompson The White House Washington, D. C. Dear Walvinal I am enclosing a letter to Mrs. Roosevelt. I realize how busy she is, nevertheless, I do want to see her - it has been altogether too long. The essence of the matter is this - that Federal Hall, the Sub-Treasury Building, is the birthplace of so many of the great accomplishments that established our government - among them, the Bill of Rights. December 15th, 1941, marks the 150th anniversary of the ratification of the Bill of Rights. There is to be a ceremony there on the anniversary. We should 90 much have liked to have had the President to be here on this sacred spot rather than in Washington on that day, but he will be addressing both Houses of Congress, so we may have the Chief Justice of the Supreme Court here for an address to take place at the same moment. We would like the President to take this occasion to say that this building shall from now on become a national monument and be given over as a memorial shrine for the public forever. In fact, what would delight me would be if ne would indicate to someone that the partitions and desks that now clutter up the big room could be moved out by the 15th of December so the people could walk through the building and get the benefit of the fine lignified shrinelike look that it even now has. Mr. McAneny has fathered the idea of preserving the building and putting it into shape. He has collected pennies, as well as spent from his OWN money, and we here in New York who care about our heritage are very grateful to him. think the President would undoubtedly be delighted to do all of this without any question, except that it might not occur to him or come to his notice. My guess is that he would be more than pleased. I wish you would read the attached letter to Mrs. Roosevelt and let me know what you think I ought to do next. with kindest regards, Sincerely, (Signed) &ric Regraded Unclassified COPY Eric Gugler 95 101 Park Ave. New York November 14th, 1941 Mrs. Franklin D. Roosevelt The White House Washington, D. 0. Dear Mrs. Roosevelt: The Sub-Treasury Building, in New York, is going to be restored and become a museum in memory of George Washington, and of the great events which took place on that eite. It was the site of the old Federal Hall, first American Capitol under the Constitution; the Stamp Act Congress met there, also the Provincial Assembly and the Congress of the Confederation; the Northwest Ordinance was adop- ted there; on the site, in 1789. Washington was inaugurated, and the Congress, the Cabinet, and the Supreme Court were organized; and Congrees adopted the Bill of Rights there. December 15th, 1941. is the 150th anniversary of the ratifica- tion of the Bill of Rights. As you know, in front of the building is one of the greatest and most distinguished portrait statues in America and the interior of the building is handsome. It has been used by the Custom Authorities until lately and the central circular domical room is still all cluttered up with bank screens, counters, etc., and it has been almost impossible to 000 or appreciate how fine it really is. It should be re- spectfully restored. Mr. George McAneny has been trying to collect funds and to develop public interest in this very worthy project. Washington's sturdy character so closely associated with New York is to be handsomely and properly emphasized here. It should be val- uable for the education of young Americans. We are all trying to help Mr. McAnany in his fine efforts. It is not only our duty as a public service, but it is our pleasure to help. Some time ago I made a model for Mr. McAneny of the existing entrance hall, which is 60 elegant and fine architecturally, that in addition to the historic nature of the site, everyone would agree that it would make a very fitting and proper - and quite sacred - setting for B. most important American Washington Memorial, not to be compared in architectural importance with the Washington Monument, but a most worthy counterpart. Now I would love to show this model to Mr. Roosevelt and get him to arrange for the authorization of enough money to at least put the building back into good con- dition, but realise, of course, how important the President's time is and how urgent are the matters that lie before him. But I also realize that some times a "change is a rest"; that it might be a diversion to him, that he might think it was enter- taining to have Mr. McAneny and me bring the model either to Washington or to Hyde Park for him to look at for A few minutes, but you are the only one to say whether this would be a pleasant and good idea, or whether you should give me an idea of who would be the right one to turn to to help us. I feel that in times of stress like this the memorialisation of Washington's sturdy first Government, is especially timely and appropriate when are clearer and character and staunch courage, and of those other outstanding figures who made our minde more adjusted to the understanding of the trials and troubles eyes of the nation's great men. 16/27 Sincerely, (Signed) Eric Regraded Unclassified 96 December 1, 1941 Dear Eleanort The Treasury no longer has jurisdiction over the Sub-Tressury Building in New York, that responsibility having been transferred to the Public Buildings Administration of the Federal Works Agency. Perhaps you will wish to send to that Agency the enclosed letter you sent to no with your note of November 27th. Affectionately, (Signed) Heary Mrs. Franklin D. Receevelt, The White House. WNT:aja By Secret Service 5:31 n.m.e. Regraded Unclassified THE WHITE HOUSE 97 WASHINGTON November 27, 1941. Dear Henry: I showed this to the President a and he said to send it to you. He is all for it. Affectionately, Top KRIC-GUGLER FOR-PARK AVE NEW YORK November 14th, 1941, Mrs. Franklin D. Roomevelt The WELTS House Fashington, D. C. Dear Urs. Roomevelti The Sub-Treasury Building, In Now York, 1. going to be reatored and become a in memory of George Tashington, and of the Teat events which took place on that eite. It Fas the site or the old Federal Hall, first American Capitol under the Constitution: the Stamp Act Congress met there, also the Provincial Assembly and the Congress of the Confederation; the Northwest Ordinance was adop- ted there: on the site, in 1789, Washington was inaugurated, and the Congress, the Cabinet, and the Supreme Court were organized; and Congress adopted the Bill of Righte t are. December 13th, 1941, is the 150th enniversary of the ratifica- tion of the Bill of Rights. Às you know, in front of the building is one of the greatest and most distingulahed portrait statues in America and the interior of the building 18 handsome. It has been used by the Customs Authorities until lately and the central circular domical room is still all clattered up with bank screens, counters, etc., and It has been almost impossible to are or appreciate how fine it really 18, It should be re- spectfully restored. Mr. George McAnemy has been trying to collect funds and to develop public interest in this very worthy project. Washington's sturdy character 80 closely associated with New York is to be handwomely and properly emphasized here. It should be val- mable for the education of young Americans. We are all trying to help Mr. McAnony in his fine efforts. It 16 not only our duty GE E public service, but it is our pleasure to holp. Some time ago I made 3 model for Kr. McAneny of the existing entrance hall, which is 60 elegant and fine architacturally, that in addition to the historic nature of the site, everyone would agree that it would make B. very fitting and proper - and quite sacred - setting for a most important American Washington Memorial, not to be compared in architectural importance with the Washington Momument, but a. mont worthy counterpart. Now 1 would love to show this model to Mr. Riosovelt and get him to arrange for the authorization of enough money to at least put the building back into good con- dition, but realize, of course, how important the President's time in and how urgent are the matters that Iie before him. But I also realize that some times . "change is a rest"; that It might be a diversion to him, that he might think it was enter- taining to have Mr. McAneny and me bring the model either to Washington or to Hyde Park for him to look at for a ten minutes, but you are the only one to sey whather this would be a pleasant end good 1dea, or whether you should give an an idea of who would be the right one to turn to to help us. I feel that la times of strees like this the memorialisation of Weshington's sturdy character and staunch courage, and of those other outstanding figures who made our first Government, is empecially timely and appropriate when eyes are clearer and minds more adjusted to the understanding of the triale and troubles of the nation's great Ma. Sincerely, n/a Bue Regraded Unclassified 99 DEC 3 1941 Dear Eleanor: You will be gratified, I know, to learn that the legislation to permit seeing-eye dogs to enter public buildings with their blind masters, which was brought to your attention last July by Rerbert F. Geisler, the blind lawyer from Chicago, has passed both houses of Congress and is now ready for the President's signature. Senator Maloney and Congressman Lanham were in active charge of the measure. I an delighted that the Treasury Department was able to contribute to the success of this worth while undertaking. Affectionately, (Signed) Eenry Mrs. Franklin D. Roosevelt, The White House. LJB: EHF/mp 12/2/41 File to Thompson By Messenger (Secret Service) 4:35 ce- Mrs Morgenthan n.m.c. Regraded Unclassified Treasury Departmen 100 Division of Monetary Research Date 12/3/41 19 To: Miss Chauncey Mrs. Morgenthau may be interested in this. MR. WHITE Branch 2058 - Room 214 Regraded Un TREASURY department 101 INTER OFFICE COMMUNICATION DATE December 3, 1941 TO Mr. White FROM Mr. Hoflich Subject: British Women's War Work and the Alleged Deterrent Effect of the Present Income Tax. A recent article in the London Banker contains the statement that the point has been reached "at which high rates of taxation exert a deterrent on individual output. A particularly flagrant case is the joint assessment of married couples, which removes all incentive for married women to take up jobs in industry at normal wages when any addition to the combined income is subject to taxa- tion at 10s. in the pound. Even though one of our most urgent needs is to attract the greatest possible number of women into industry, this object is entirely defeated by the tax system, and any proposal for separate assessment would certainly be resisted by the Treasury on the ground that we could not 'afford' the result- ing loss of revenue. For the sake of minimizing the budget deficit, in other words, war production must be kept down below its potential maximum, even though the only rational reason for collecting revenue at all is to pay for the war." (The Banker, London, Nov., 1941, pp. 96-97.) Regraded Unclassified 102 December 3, 1941. My dear Mr. Green: 1 read your letter of November 5th with such interest. Unfor- tunstely, it vas mislaid and I as sorry, therefore, that Ky reply is late in reaching you. Please accept 47 apologies for I an very glad of the opportunity to min clear the views of the Treasury on the specific question you raise. The Treasury has, of course, esver regarded the Social Security Program as . source of revenue for the Federal Government, nor have ve ever contemplated raising the taxes collected under that program unless the increase were needed to help finance the benefits under that program. I - glad to say that I personally as in agreement with your view that both the old-age and survivors' insurance and unemployment compensation programs should be extended in coverage, and that the creation of a complete Federal system of unemployment compensation is proferable to the Federal-State system of unemploy- ment compensation BOV in force. Proposale concerning social security and unemployment compensa- tion properly originate, of course, with the Social Security Board and are shaped to fit social needs and not the immediate fiscal program. Nonetheless, the effect upon the fiscal program of any substantial change in the Social Security Program must be considered by the Treasury. Fortunately, from a fiscal point of view, the air- cusstances at present are timely for the extension of the Social Security Program along the lises outlined in your letter. We are DOV in a period of rising prices, of approaching searcity of labor, and of rapid absorption of idle capacity in many vital industries. At such 8 time, the net vithdrawal of purchasing power consequent upon an expansion of the Social Security Program during the initial period, is as aid in combating the danger of inflation. I hope ve may have your continued comments and suggestions. Sincerely, (Signed) 1. Norganthan, is, Mr. William Oreen, President, American Federation of Labor, A. 1. of L. Building. Veshington, D. c. cc-mow fries sile Regraded Unclassified 103 DRAFT OF SUGGESTED REPLY My dear Mr. Green: In reply to your letter of November 5, 1941, I am glad of the opportunity to make clear the views of the Treasury on the specific question you raise. The Treasury has, of course, never regarded the Social Security Program as a source of revenue for the Federal Government, nor have we ever contemplated raising the taxes collected under that program unless the increase were needed to help finance the benefits under that program. I am glad to say that I personally am in agreement with your view that both the old-age and survivors' insurance and unemployment compensation programs should be extended in coverage, and that the creation of a complete Federal system of unemployment compensation is preferable to the Federal-State system of unemploy- ment compensation now in force. Proposals concerning social security and unemployment compensa- tion properly originate, of course, with the Social Security Board and are shaped to fit social needs and not the immediate fiscal program. Nonetheless, the effect upon the fiscal program of any substantial change in the Social Security Program must be considered by the Treasury. Fortunately, from a fiscal point of view, the cir- cumstances at present are timely for the extension of the Social Security Program along the lines outlined in your letter. We are now in a period of rising prices, of approaching scarcity of labor, and of racid absorption of idle capacity in many vital industries. At such a time, the net withdrawal of purchasing power consequent upon an expansion of the Social Security Program during the initial period, is an aid in combating the danger of inflation. 1 hope we may have your continued comments and suggestions. Sincerely yours, Secretary of the Treasury. Vr. Milliam Green, President, American Federation of Labor, L.V. of L. Building, Reshington, D. C. Regraded Unclassified Ir A TREASURY DEPARTMENT 104 INTER OFFICE COMMUNICATION DATE November 12, 1941 TO Secretary Morgenthau FROM Mr. Barnard not used I spent some time on Armistice Day speculating as to what kind of reply might be made to William Green. I don't know your jou plans on this or whether you have assigned it to someone, but if not, perhaps the attached draft would serve as a start. CMB Regraded Unclassified THE SECRETARY OF THE TREASURY 105 WASHINGTON only for November 12, 1941 Mr> William Green, President pulimian curriduation imerican Federation of Labor Washington, D. C. My dear Mr. Green: In reply to your letter of November 5, 1941, I am glad of the opportunity to state the views of the Treasury on the specific questions you raise; also on the broader matters involved that are of great concern to all of us. The Treasury has as yet formulated no definite recommenda- tions to Congress on new taxes, I have urged prompt action in view of the danger of inflation and the great deficit which will occur if additional revenues are not quickly obtained. The Treasury has, of course, given study to & number of possible measures and it is clear, I think, that several different tax plans and adjustments will be necessary to meet the needs, Some will be required for revenue purposes and to secure an equitable distribution of tax burdens, but are not such as will control inflationary tendencies immediately. Others are desirable as soon as possible not only for revenue but especially to guard against inflation. Among the latter possibilities are certain proposals con- cerning social security and unemployment compensation. Proposals concerning these matters properly originate with the Social Security Board and would naturally be determined by social security considerations, and not by the current revenue needs of the government or by regard for the problems of inflation. Thus no proposals on Social Security legislation have been or would be made by the Treasury as a means of taxation for general Treasury purposes. I agree with you that it would be undesirable to impose social security and unemployment compensation taxes except on their merits as insurance premiums. In fact, the Treasury position is quite the reverse of that implied in your letter. It is compelled, for the reasons I shall set forth later, to scrutinize critically every proposal calling for payments by the people and for expenditures for non-defense purposes, from the standpoints both of their effect upon the Regraded Unclassified -2- 106 capacity of the people to pay for defense and of their effect upon prices. Certain possible changes in social security legislation involving increased social security taxes can be endorsed by the Treasury because they would for several years be anti-inflationary in effect. Among these are some which you desire, They would result in more income than outgo during this period, although this would not decrease the government's deficit and would limit the ability of the government to obtain true current revenues by other taxes. Other social security proposals which are justified on broad social grounds could not be endorsed by the Treasury at this time because they would add to the heavy tax burdens of the people without helping finance the government and without anti- inflationary advantage. This includes one which you also desire. Our views on this matter as well as on the more general ques- tion of savings to which you refer, can best be understood by taking account of the truly gigantic financial burden which our defense program involves. I am sure that you are aware of this, but we ourselves find it necessary constantly to keep it before us in its simplest outlines in order that we shall not become confused in thinking about the specific problems and the practical complexities of the situation. In the calendar year 1942 we estimate that the expenditures of the Federal Government will be about $37 billions, of which more than $30 billions will be for defense. These total expenditures amount to about $280 for every man, woman and child in the United States. The income of the people may be for the same period about $100 billions or about $765 for every man, woman and child. Thus, nearly 40% of the income of the people must go to the government either in the form of taxes or savings, leaving only about $485 per individual for expenditures on consumption, for local and state government services, and for such other savings as will be necessary. It is hardly possible to consider these figures without realizing that they mean not nominal but real and substantial sacrifices by all the people. Soldiers and sailors, shot and shall, and armaments, are now the prime necessity of this nation and are basic to the welfare of its people; but the people cannot eat shot and shell or wear armaments, nor can those who produce these things be also producing at the same time what we do consume. Roughly, two-thirds of our people must, therefore, carry the load of providing for their own needs and for the other third which is engaged in defense; and the needs of defense materials will restrict the capacity evan of this two-thirds to produce as much as they otherwise could. Regraded Unclassified 107 -3- The should not feel sorry for curselves because of this. We shall still live better than our grendfathers and great-grandfathers. But we should only injure ourselves and restrict our ability to meet these conditions if we did not recognize that they are serious and that they impose upon us heavy duties of conservation and economy. They mean that the two-thirds who must supply them- selves and the other third with civilian goods must tighten their belts, and that the third which is engaged in defense work in all conscience must do the same. What does this situation mean in the language of finance? How shall our defense and civilian production be paid for? The $1.00 billions of national income for the most part will, of course, be paid in money or its equivalent; but this is only nominal payment, the first stage of real payment. Money is only good for what it will buy. For the great mass of our people it will only buy just two kinds of things - goods that can be used and consumed now, and promises and expectations of money in the future that can buy goods that can be used and consumed then. How much can be bought now and how good are the promises? What can be bought now is limited probably to only 60-odd billions of dollars worth. If all of the balance, some $30-odd billions were covered by increasing the public debt, how good the promises would be would depend upon how much debt there will be. Already the debt is $54 billions and the present authorization by Congress is for $65 billions. This about equals the total pro- duction of civilian consumers' goods for a whole year. Morsover, it mist be borne in mind that though debt for the country's protection is necessary, it doss not provide the kind of things to any great extent, directly useful in future civilian production or consumption. Such a debt can only mean that We shall tax ourselves later to pay ourselves later. That is why the people will regard an excessive debt as mere make-believe promises to pay; and it is why the debt should be kept within reasonable bounds by the maximum of practicable taxation. Any other policy means deluding ourselves as to the real value of the money we receive today, I - strongly in favor of having the public debt owned by the working people of this country, and have urged it in the efforts to have people buy Savings Bonds. Heretofore, the bulk of the savings have come from individuals receiving the middle and upper incomes, and from corporations. The present income, estate and gift, and profits taxes already have substantially reduced the capacity of such individuals and of corporations to save in the future. Moreover, these taxes will have to be further substantially.increased. We shall, therefore, need inescapably the savings of all the people; and cannot supply the consumers' goods which would be demanded if these savings are not made by all the people. Regraded Unclassified 108 But WS must remember that such savings will be good only if current taxation is high enough to make the debt reasonable in relation to the wealth of the country and the future capacity of the country to pay the taxes which will make the debt good. Not only the savings of the people whether voluntary or compulsory or through savings banks and insurance companies, but also the Social Security Reserves which are invested in the public debt, all would be endangered and lost if we foolishly declined to tax curselves heavily now in the false idea that We can have our cake in the future and still eat now more than we can bake. In all of this we must have full regard for post-defense conditions. When defense is over we shall want the maximm purchas- ing power in the hands of the people and as little tax burden Aa any be. We shall then need also as much saving by individuals as we can secure to restore the full capital equipment of the country, which may be considerably impaired and cannot expand normally under present circumstances, These are all conditions essential to future security of unemployment, and the supply of consumers' goods, and are desired greatly by the people. Our ability to attain these conditions depends on our present unity, forbearance and foresight and on maintaining the credit of the government. Next to defense, to preserve that credit is the first obligation and the first interest of all the people. Surely, to bring up and educate our children with care and expense and sacrifice but in such a way as to burden them with debt and taxes and the disorganisation consequent on a bad public credit, is not justice to them, nor good sense for ourselves. Finally, it may be said that the essiest thing to do and the hardest to bear in its consequences is to let either purchasing power excessive for our present civilian production or excessive government deficits lead to substantial inflation. That easy course means pay in bad dollars, constantly rising prices, and impairment of our savings and reserves; and would leave the govern- ment and the people in the worst of circumstances to accomplish the restoral of peace-time production and real prosperity and con- timed progress in our national welfare. To avoid these disasters, perhaps greater than the loss of a fleet or of an army, is only initially and technically a. problem of the Treasury or of Congress. It is the problem of the whole people of the United States of America and that of organized labor at least as much as that of other groups. And it is a problem which only the people can solve by their understanding, self-restraint, strict economy, and willingness to follow the leadership devoted to the protection of their interests, Regraded Unclassified -5- 109 I hope we may have your continued comments and suggestions and your cooperation in helping to make clear to the people just what it is that we are trying to accomplish in proposing the sacrifices the defense effort calls for. Sincerely yours, Secretary of the Treasury 110 FEDERATION AMERICAN FEDERATION OF LABOR OF Copy member Exemitive - AMERICAN - - - Mount 4. F. of L. - Washington, n. c. LABOR - L Time Tradital a 11/10/11 No., Date - Month a. K. W., Washington, n. a - 1. A. Bestre, Main Via - 4. - - -- Allet Pare, live Emi, R.T. - & F. of 4 Mide., - D.C. TUN Minore Water Twis W. D. IN Ans, Now Yes, N. T. - Yamer Bad, Perti - Joann a. You, View President. has n. - PACTS - Feint 4m., Femal, La danies, Cell. -- General's this - City, - PM The Problem c. N. Twelth Yes Problems, - E. - - a. R. V., B. c. - Pink New Twit. a T. as Time Prailed, Day, W. Lame, has Salver Deta' Ma., It. - Arma, M. T. presis Yes Problems, Dans 3, two, in I all 2 I I 0157ANCE TELEPHONE NATIONAL 1870-1-2-3-1 - But Milliam a. Ind. I I all 4 I Yes W. c. - CABLE ADDRESS AFEL all Bond, - M. Washington, D.B. November 5, 1941 The Fonorable Benry Morgenthau, Secretary of the Tressury, Washington, D.C. Dear Secretary Morgenthau: The American Federation of Labor hae been an active soonsor of the Social Security Act, urging its enactment in 1935 end proposing far-reaching amendments to broaden its coverage, 1m- orove its benefit structure, and ite financing in the years since It WAR passed. We have a grave concern that it should be regarded solely as a program for the protection of working men and women and their families against hazards socially created or beyond their individual control which cut off their incomes. We consider the investment of the social security reserves in Federal bonds a wise provision of the law but we would protest vigorously the deliberate conversion of the social security system into primarily a source of revenue for the Federal Government by raising the taxes collected unless such increase were needed to finance new benefits under the orogram. Knowing your own interest in the welfare of working people, I want to give you the American Federation of Labor's view- Doint on social security and the defense program. I am sure you will give fair consideration to these matters before formulating a new tax proposal to send to Congress. Both the old age and survivors' insurance and unemployment comnensation programs are too limited in coverage. There is no valid reason for the continued exclusion from protection of millions of persons, farm and domestic workers, employees of religious, educational and charitable institutions and of various government units, which have no equivalent protective programs, and of small- income self-employed persons. To bring these persons under the Act Regraded Unclassified 111 Honorable Henry Morgenthau -2- November 5, 1941 would tremendously increase its value, would create a more effective bulwark against depression later, and would add to the reserve funds now available for Federal borrowing without changing the relation between individual taxes paid and benefits expected, The Social Security Act is deficient in its failure to provide any protection against loss of income during illness and disability, temporary and permanent, and its failure to make any payments toward medical and hospital costs which often pauperize workers' families, We cannot have security of wage income unless the hazards of ill health are provided against. To spread the cost of payments for permanent and temporary disability and for medical and hospital care over millions of insured persons and by small pay- ments over long periods of time will avoid the overwhelming burden of expense illness or accident places on some families suddenly. It 18 reasonable that workers should share this cost. We believe an increase in the payroll tax paid by employees would be justified to the extent necessary to add these additional protections to the social insurance program. The Federal-State system of unemployment compeneation 1m- mobilizes unnecessarily large reserves in order to make 51 separate systems safe. The benefits payable under the several state laws are uneven in amount and almost all inadequate for their purpose, We urge the creation of a complete Federal system decentralized in administration but with adequate Federal benefit standards and financed from 8 single pooled fund into which would be paid all social security contributions, We are convinced that the safety of the system could be materially increased and post-defense unemployment more effectively compensated for and reduced if the unemployment com- pensation and employment services were made Federal programs, Insofar ae these changes in the Act would increase the reserves available for Treasury borrowing, we believe the Treasury has a legitimate interest in them. In all cases the fundamental purpose of social security would be preserved, the additional taxes coming from new beneficiaries and from payments for additional forms of protection. We are convinced, however, that to raise payroll taxes on any other basis would be unjustified and would endanger the whole social security program by destroying confidence in the in- tegrity of its purpose and the safety of its funds. Payroll taxes are regressive in effect and can be justified only when they are collected to pay specific benefits to wage earners and their families greater than they could provide for themselves with that money. If the payroll tax on present contributors under the Social Security Act were to be increased out of proportion to increased security for those insured, it would be an unfair general tax, levied on only part of the population. 112 Honorable Henry Morgenthau -3- November 5, 1941 If it 18 the intention of the Treasury to ask Congress for legislation which would reduce consumers' purchasing power now, the American Federation of Labor submits that this should be in the form of a proposal for a supplementary system of dismissal wage or of required savings 80 designed that every worker would be guaranteed the return of his own contributions at some future date. When the defense emergency is over, unemployment will increase. If contri- butions were returned at that time they would transfer purchasing power, helping curb inflation now and deflation later. This should be definitely an emergency measure, separate from the Social Security Act, though using its collection and record keeping system if convenient. The funds should go not into the general reserve for social security, but into a separate trust fund from which each contributor would, at the close of the emergency or in specified individual emergencies, draw out at least his own contributions with interest. The fund could be increased, with advantage, of course, if contributions were made also by employers. If the social security tax is raised merely to provide extra funds for the Treasury, workers will suffer a disproportionate share of taxation. A savings system will permit the sale of govern- ment bonds now and will build up individual reserves to be used by families when the nation faces depression. The Social Security Act should be amended to increase coverage and benefits, but all amend- ments to that Act must be made to contribute to its purpose, not to subordinate its social function to that of raising money to be used by the government for unrelated purposes. Sincerely yours, Witheen President American Federation of Labor IMcC 113 December 3, 1941 My dear Mr. Hoover: I have received and read with interest your confidential letters dated November 27th, two dated November 28th, and another dated November 29th. Yours sincerely, (Signed) 1. Morgenthau, Jr. kr. J. Edgar Hoover, Federal Bureau of Investigation, Department of Justice, Washington, D. C. Regraded Unclassified 114 12/2/41 Photostatic copies to: 1. Mr. Foley 2. Mr. Pehle JOHN EDGAR HOOVER 115 DIRECTOR Federal Bureau of Imestigation Nutted States Department of Justice Washington, D. C. November 27, 1941 PERSONAL AND CONFIDENTIAL BY SPECIAL MESSENGER The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: As of possible interest to you, information has been received from a reliable confidential source that Commander F. Tostain, Acting Chief of Staff, Martinique, reported on March 27, 1941, that it had been found almost impossible to obtain an export license for a collective order for 19,407 metal sheets, placed for the account of various Guadeloupe traders by one Mr. Monroux, Pointe a Pitre. This order was sent to the Newport Rolling Mill, Ken- tucky, and on December 1, 1940, a credit of $15,069.47 was opened by the Banque de la Guadeloupe in favor of the French American Banking Corporation. Delivery was to be made in January and February, 1941. For the purpose of effecting this, the Director, Minis- try of Finance, Financial Attache to the French Embassy in the United States, was requested by Commander Tostain to contact the Division of Control with a view to obtaining an export license for these goods as soon as possible. Sincerely yours, J. is 2400m 116 12/2/41 Photostatic copies sent to: 1. Mr. Foley 2. Mr. Pehle JOHN EDGAR HOOVER DIRECTOR 117 Federal Burren of Importigation United States Department of Justice Washington, B. C. November 28, 1941 PERSONAL AND CONFIDENTIAL BY SPECIAL MESSENGER The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: As of possible interest to you, information has been received from a confidential, reliable source that the Argentine Embassy, Washington, D. C., advised on September 5, 1941, that they are now engaged in negotiations with a view to unfreezing the credits of the S.A.I.C.Y.F., an Argentine Firm. They are also producing negotiations with a view to having the Banque Francaise Et Italienne removed from the Black List. Sincerely, J. E. Hoover 12/2/41 118 Photostatic copies sent to: 1. Mr. Foley 2. Mr. Pehle JOHN EDGAR HOOVER DIRECTOR 119 Federal Bureau of Investigation United States Department of Justice Washington, D. C. November 28, 1941 PERSONAL AND CONFIDENTIAL BY SPECIAL MESSENGER The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: As of possible interest to you, information has been received from a reliable confidential source that the French Commercial Attache, New York, in March, 1941, advised that the extracts in the enclosed memo- randum were addressed to M. Robert Midy, the Pro- fessional Group of Manufacturers of Pharmaceutical Products, Vichy. Sincerely yours, J. 2. Hoover Enclosure 120 MEDORAKOW Revember 28, 1941 1. "The Commercial Situation "French products with sales of any importance in the United States are not numerous, and nost of them are now manufactured there. The rest, whose individual sales are small but the aggregate of which 10 fairly considerable, are beginning to be scarce. Representatives and wholesalers endeavour to obtain then from other representatives in the Americas, and do not always succeed, The result in many cases, is a very appreciable increase in the price to the public, which in its turn causes a reduction in sales. "American specialities are on the whole such cheaper than their imported French equivalents, and moreover goods of French origin, especially if bearing an address in the occupied sone, are today re- garded with some suspicion on the grounds that they may have fallen into enemy hands. Further, the Jewish sections of the medical pro- fession and of the population in general (and they are many) feel resentment at the messures of race discrimination taken by the Vichy Government." 2. "The Financial Situation "French funds are blocked and I think it improbable that licences would be granted at the present time for the employment of Unes funds outside the U. 3, (e.g. to supply other markets in the Americas with raw asterials or finished goods or, still less, to pay for organisation and publicity in these markets). "This blocking of funds which has M its origin the aim of pre- venting appropriation by a third Power and which is therefore in the interests of the French themselves, may be turned to their disadvantage if political events should lead to the seisure of these funds." 3. Trade Marks "On this matter it is well to remember what happened to the German trade marks which in 1917 were seised and sold for the profit of the American government. One cannot guarantee that developments in the political situation will not cause 6. similar danger to French trade marks. As a safeguard against this the following cossures might be envisaged: (a) The ceseion of the trade marks for & small sum to an 100 dividual or to an merican company, or Regraded Unclassified 121 Memorandum Page 2. (b) The granting of # 99 years' license for their exploitation to an individual or to an American company, in return for e. small interest on the turnover. "This latter solution would parhaps be the one most in harmony with the French internal laws and with the armistics conventions. "Moreover, one or other of these solutions might prove to be & protection against another danger which is foressen here (but to what degree it 18 real I do not know), vis., the possibility of the French being compelled to cade their trade marks to a foreign 'occupying' Power. "Both the ceasion of the trade marks and the granting of a license would necessitate the granting of powers of attorney to a person resident in America, the most suitable text for this, in the opinion of an American ad- viser, being that used in the warrant sent by M. L'Hopitalier to M. Sterling. "These powers could be profitably extended to all the countries of the American continent, in case seasures similar to those envisaged here should be taken in any of these States However they should not, in my opinion, be utilized unless absolutely necessary for the transfers could not fail to provoke complications," 4. "Trade Marks in Canada The trade marks in Canada of French laboratories situated in the occupied sone have passed into the hands of the Sequestrator - the Secretary of State, Ottawa - and are subject to the regulations governing Trading with the Enemy (1939). It would thus be justifiable to cede these trade marks to an American citizen in order to ensure their protection." It was further stated: (a) "M. Alfredo Herbruger Jr. & Co., Apartado Postal No. 210, Quatemala City, wish to know whether Dienol and Gaiarwine are manufactured on the American continent, in order that they may purchase stocks. (b) MV. E. Fongera & Co., Inc., 75 Varick Street, New York City, wish to receive particulars of the processes by which Temar Indien (Darasse) and Specifique Lancelot (Lancelot) are manufactured, in order to supply their market. (c) The Anglo-Prench Laboratories, 75 Varick Street, New York City, have commenced the local manufacture of Corbiers products, but would be glad to receive any practical details of the preparation of these products in order to check their method of marufacture." Regraded Unclassified 122 12/2/41 Photostatic copies to: 1. Mr. Foley 2. Mr. Pehle Regraded Unclassified JOHN EDGAR HOOVER DIRECTOR 123 Federal Bureau of Impostigation n United States Department of Justice Washington, D. C. November 29, 1941 vi, AND COMPINENTIAL BY PECIAL SSRNGER "it nonor>lile "1 ecret my of the Treasury Hington, D. C. Ity near If Secretary: No of possible interent to you, inform tion has been re- nelve from roli bie confidential ource trut on April 25, 1941, lelouio, Trench Hinister et Boyota, Colombis, commented -5 Tollo to the infetry of Foreign fruire, Vichy, concerning the 1 French commercir] credits in Colombir and French D.- with in 2540 and 19/1: "dda resolution, in fuct, does not alter the position d' IN merch commercial credits coming under the first e: tenory. I live informed your Excellency since July, 1940, the Colombien Control Office nes systematically refused to Authorize the t.p. nis of these credits to France, even to the unoccusied =mo, on the restext that the remittences would run the risk of not I'ly uning their rightful owners. Ve note that this official 9b sure simily, somewhat Inte in the 157, confirms the arbitrary inn of the Colombian Exchange Control Office. "It is none the less certain that the total Amount of The commercial credits in Colombi are virtually fromen, whether BY - result of the more torium regulation of resolution 100, or by the terms of resolution 101, of February and March, respectively. Ithough, for the ressons given in my letter of Feb- FIX 1, I so not possess the exact figuros corresponding to the Program credits which come under resolution 101, I think that the Mount of the sene must undoubtedly be considerable - some 5 or 6 million francs. Regraded Unclassif 124 The Secretary of the Treasury Page 2. "In fact France has supplied Colombian importers, during the list quarter of 1940 and the first quarter of 1941, with large quantities of the type of goods that are classified in the 1st cotegory - raw material and commodities. Among these are looms for weeving, silk and wool yern, tyres, wines and liqueurs, books, and particularly pharmaceutical products. "To these credits the sum of 722,766 francs for fertilizer supplied by the Soc. Commerciale Des Potasses D'Alsace, Mulhouse, at present in Montlucon, must be added, the payment of which in trans- fer-ble currency is equally gravely compromised. "Since the Colombian Exchange Control refuses to authorize the transfer of remittances to France unless they are given proof that these will reach the banks or creditors concerned safely, would it not be possible to obtain an official testimony to this effect from the French authorities ? "At the moment, when it seems that our book træde with Colombia is likely to be resumed, it is to be feared the French editors will not be prepared to carry out further orders while the matter of their credits, payable in transferable currency but at present blocked in Stabilisation Funds, remains unsettled. The same question arises for our future deliveries of other goods and phar- mocentical specialities." Sincerely yours, J Ee. 2400ml Regraded Unclassifi TREASURY DEPARTMENT 125 INTER-OFFICE COMMUNICATION DATE December 3. 1941 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL Mr. Cameron telephoned from the Federal Reserve Bank at New York at 5:45 this evening to let me know that Mr. Kitadai, representative of the Bank of Japan in New York, had told Mr. Cameron today that, under instructions from Japan, he is closing tomorrow or next day the agency of the Bank of Japan in New York. Mr. Xitadai will leave New York on December 10 and will probably sail from A west const port on December 16 for Japan. 2ml Dictated this at 7.05 PM. to who Come Run co not tis when Florined 112 there with suffir all Regraded Unclassified 126 DEC 3 1941 My dear Mr. President: I an enclosing report on our exports to some selected countries during the week ending November 22, 1941. Faithfully, (Signed) 1. Jr. Secretary of the Treasury The President, The White House. Enclosures Delivered by Sever Service 435 cc. Which office 12/2/41 n.m.c. Bes 1. Sicya office 127 DEC 3 1948, By dear m. Secretary: I as emelesing copy of report on our experts to semo selected countries during the week enting November 22, 1941. Sincerely yours, (Stemed) E. Norgenthan, Jr. Secretary of the treasury the Nenerable the Secretary of State, Washington, D. c. Enclesures By Messenger Steen 4 80 cc. w hith office Res to Sicy's office 129 November 28, 1941 Exports to Russia, China, Burna, Hong Kong, Japan, France and other blooked countries, as reported to the Treasury Department during week ending November 22, 1941. 1. Exports to Russia Exports to Russia " reported to the Treasury during the reek ending November 22, 1941 amounted to upproximately $3,600,000 for a total of $52,409,000 since July 28, 1941. Motor trucks and chassis week under review. (See Appendix C.) constituted more than one-third of the total exports during the 2. Exports to China, Burma and Nong Kong Exports to Free China were valued at about $1,200,000 of which aircraft parts and motor trucks and chassis were the principal items. (See Appendix D.) Exports to Occupied China vore higher than for any single week since October 11, 1941, amounting to over $470,000. (See Appendix E.) Exports to Burne totalled over $1,000,000 and motor trucks nd chassie and metallie eartridges accounted for about 85% of the total. A large persontage of these exports are probably destined for Free China. (See Appendix F.) Exports to Hong Kong amounted to $600,000. (See Appendix G.) 3. Exports to Japan Exports to Japan ware negligible during the work under review. Japan, however, might be the ultimate destination of China). nome of the exports to Occupied Chima and Bong Kong (vis Occupied 4, Exports to France November 22, 1941. No exports to France very reported during the week ending 5. Exports to other blocked countries Exports to other blocked countries are given is Appendix A. STRiSTEY CORPIDENTIAL Regraded Unclassified 129 SUNDARY or UNITED STATES DOMESTIC EXPORTS TO SELECTED COUNTRIES AS REPORTED TO THE THEASURY FROM EXPORT DECLARATIONS known DURING THE PERIOD INDICATED w July = to Inventor 22, 1941 (In thresands of dellars) July x to Week ended Week ended Total we Departie America U. 8. 8. Re 845,809 82,677 $3,582 $ 52,061 Occupded China 9,784 155 466 10,403 Pree China 17,883 2,891 1,200 21,962 Japan 1,870 - s 1,870 hrs 2/ 4,245 w 1,0ml 5,354 France w 6 - - 6 Jesupied France 2 - - 2 Tree Prance + - - of Spain 1,733 482 1 2,226 Britzerland 3,565 920 133 4,600 Broden 6,892 2,478 130 9,502 French Indochina 309 2 - 305 Treasury Department, Division of Monetory Research November 26, 1041 V Many of the expert declarations are reseived with a lag of asveral days or me. Therefore this compilation does not securately represent the actual shipments of a perticular week. the lenger the period severed, the closer will these figures - to Department of Commerce revised figures. 2/ or this total $1,864 thousand we reported from July 28 to August 23, inclusive, and shipped prior to freesing orders. Descrite expert to from August 23 through week enting Invonber 0,mmmied to 85,905. material listed here, consigned to is destined for Proo China. From September 11, 1941 to date - It is procured that a Lego persentage of Creapded and Free France separated thereafter. Includes both compled and Tree France through week ending October 40 1941. Lass than $500. m/ate 11/26/42 STRICTLY CONFIDENTIAL Regraded Unclassified APPENDIX B Exports from the U.S. to China, Burne, Hong Kong, Japan, and U.S.B.R. at 130 reported to the Treasury Department, July 28, 1941 - November 22, 1941 (Thousends of Dollars) y Exports to Chima Total To Japanese To Chinese Exports Exports Exports Exports controlled controlled to to to to ports ports Burna 3/ Hong Keng Japan U.S.B.R. July 28 - Aug. 2 937 542 395 654 Aug. as - Aug. 2 2,794 2,794 1,657 4,523 - lug. 11 - mg. 16 983 1,278 159 969 309 322 Ang. 18 - Ang. 83 235 $ 1,352 1,350 2 234 6 Aug. 25 - Aug, 30 736 735 1 2,735 742 - Sept. 2 - Sept. 6 097 1,023 693 204 634 - Sept. 6 - Sept.13 3,038 4,280 757 2,281 456 - Sept.15 - Bept.20 3,978 156 5,217 3,822 389 - Sept.22 - Sept.27 462 352 110 449 752 810 - Sept.29 - Ost. 4 1,305 80 2,333 1,225 684 297 - Cet. 6 - Det. 11 5,864 552 5,312 1,157 1,233 - Det. 13 - Oct. 18 272 6,845 267 5 35 504 - Dat. 20 - Oct. 25 668 1,924 399 269 403 1,243 - cet. 27 - Nov. 1 5,210 438 4.772 5,623 58 624 - 4,454 Nev. 3 - Nov. E 1,836 164 1,672 342 283 Nov. 10 - Nov. 15 5 4,552 3,009 158 2,851 88 303 - Nov. 17 - Nov, 22 2,677 1,701 473 1,228 1,021 600 - 3,581 Total 35,337 10,879 24,458 4,237 10,304 1,869 52,409 y These figures are in part taken from copies of shipping manifests. y Figures for exports to Free China during these weeks include exports to Rangoon which are presened to be destined for Free China. V It is presumed that a large eroontage of exports to Burse are destined for Free Ohima. Treasury Department, Division of Nonetary Research December 2, Regraded Unclassifie CONFIRENT 131 APPENDIX o Principal Exports from U.S. to U.S.S.R. as reported to the Treasury Department during the week ending November 22, 1941 (Thousends of Dollars) TOTAL EXPORTS 8 3,581 Principal Items: Motor trucks and chassis 1,382 Military tanks and parts 432 Landplanes, powered 299 Refined copper 274 Gasoline 154 Brass and bronze plates and sheets 171 Non-rotating welding sets 121 Lathes 109 Auto replacement parts 108 Men's boots and choes 72 STRICTLY CONFIDENTIAL Treasury Department, Division of Monetary Research November 29,1941 Regraded Unclassified 132 APPENDIX D Principal Experts from u.s. w Free China, as reported w the Treasury Department during the week ending Revember ne, 1941 (Thousents of Rellars) TOTAL EXPORTS TO FREE CHINA $1,225 Principal Items: Aircraft parts, n.e.e. Motor trucks and checate Biosel engines Steel bare Road machinery and parts Insulated copper wire tim plate and taggers tis fives and tubes understand Aircraft engines Well and refining machinery STRICTLY CONFIDENTIAL 1941 133 APPENDIX E Principal Exports from v.s. to Cooupied China as reported to the Treasury Department during the week ending November 22, 1941 TOTAL EXPORTS TO OCCUPIED CHINA s 473 Principal Items: wheat flour 44 Hope 35 Medicinal preparations N Printing paper 28 Leather 16 Milk 26 Other paper and paper preducts 25 Auto replacement parts 23 STRICTLY CONFIDENTIAL Treasury Department, Division of Monetary Research Becomber 2,1941 134 APPENDIX 7 Principal Experts from U.S. to Burne as reported to the Treasury Department during week ending November 22, 1941 (Thousends of Dellars) TOTAL EXPORTS 0 1,021 Principal Items: Motor trucks and chassis 655 Metallic eartridges 202 Steel sheets 38 Lubriesting oils 28 Well and refining machinery 14 Tim plate and taggers tin 14 Metallie containers 11 Tires and tubes 10 STRICTLY CONFIDENTIAL reasury Department, Division of Monotary Research December 2, 1941 135 APPENDIX e Principal Exports from U.S. to Zong Keng as reported to the treasury Department during the week ending November 22, 1941 (Thousands of Dollars) TOTAL EXPORTS . 600 Principal Items: Artificial leather, braces, garters, belts and suspenders 212 Tires and inner tubes 38 Medicinal and pharmaseutical preparations 32 Metor trucks n Printing paper 19 Miscellaneous office supplies 18 Ginseng 17 Copper manufactures 13 Chemical specialties 13 Automobile parts for replacement 11 Commodities exported for relief OF charity 11 Milk and cream 11 Fruits and preparations 10 STRICTLY CONFIDENTIAL Treasury Department, bivision or Benetary Research December 2, 1941 ISF/efe 12/2/41 Unclassified TREASURY DEPARTMENT 136 INTER OFFICE COMMUNICATION DATE December 3, 1941 TO Secretary Morgenthau FROM Mr. Kamarck Subject: Summary, British Estimate of Axis 011 Production 1. Up to July 1. 1941, German oil reserves of 5,000,000 - 5,500,000 tone did not have to be touched. Consumption needs being Just met by production, importe and captures. 2. From July 1, 1941 to November 1, consumption was 30 percent or 400,000 tona a month in excess of production. During this period, stocks therefore were depleted by 1,600,000 tons. Since 1,400,000 tons of the oil reserves are always immobilized in process and in transit, net available reserves on November 1 amounted to 2,000,000 - 2,500,000 tons (not quite two months con- sumption). 3. It is believed that the axis can meet the excess consumption by military or further civil saving, by in- creased alcohol and synthetic oil production, and by exploitation of the Russian Polish oil fields. 4. The two Caucasus oil fields south of Rostov produce 5,000,000 tons B year. If destroyed, the Germans are not likely to obtain more than 600,000 tons of oil in the first six months. Regraded Unclassified 137 COORDINATOR OF INFORMATION WASHINGTON, D.C. November 30, 1941 Honorable Henry Morgenthau The Secretary of the Treasury Washington, D. C. Dear Henry: Attached is a British estimate on the enemy oil position contained in a re- port now under preparation by British experts. Sincerely, Bill William J. Donovan Regraded Unclassified During period September 1st, 1939 to 138 July lst, 1941, consumption in Axis Europe believed almost exactly equal to intake, including produc- tion, imports and loot. Therefore, Axis Europe stocks on July lst, 1941 believed equal to Greater Germany stocks on September 1st, 1939, or between five million tons and five million, five hundred thousand tons. Estimated about one million, four hundred thousand tons always immobilized in process and in transit. Estimated current production totalled eighteen million, two hundred thousand tons and consumption twenty-five million tons, offset during twenty-two months period by capture of six million, eight hundred thousand tons. Estimated production four months July- October four million, six hundred thousand tons, consumption six million, two hundred thousand tons. 139 Therefore, estimated stocks November 1st, three million, four hundred thousand to three million, nine hundred thousand tons, of which two million to two million, five hundred thousand tons available. Excess consumption of four hundred thou- sand tons monthly might be met by:- (a) Army saving estimated possible if static front in Russia at three hundred thousand tons, or two hundred thousand tons if in fact front active. (b) Increased use of alcohol producer produce or other alternatives, increased synthetic pro- duction, exploitation of Russian Poland fields, curtailment of local consumption, etc. say two hundred thousand tons. Caucasus oil fields if not destroyed would of course solve problem. First objective Maikop and Groany fields estimated current production Regraded Unclassified. 140 five million tons annually. If fields destroyed unlikely obtain more than six hundred thousand tons in first six months of occupation. If re- fineries destroyed use would be deferred until transport available to Europe. 141 SECRET Copy 22 The Problem of GERMAN OCCUPATION OF NORTHWEST AFRICA OBJECTIVES AND COSTS December 3, 1941 Coordinator of Information Deeradad 142 The dismissal of Weygand and the suspension of the Economic Accord between the United States and North Africa have necessitated slight revi- sions in the original memorandum of November 12, 1941. The most important changes apply to Part I, B: Economic Objectives (reconsideration of the importance of cobalt, molybdenum, and olive oil) and Part IV: Timing. Regraded Unclassified 143 SECRET - 1 - The Problem of GERMAN OCCUPATION OF NORTINEST AFRICA OBJECTIVES AND COSTS Summary and Conclusion I. Objectives The positivo military advantages to Germany of occupying Northwest Africa are considerable: first, in connection with the Mediterranean campaign; second, with respect to the South Atlantic counter-blockade; third, and less urgently, with respect to long run exploitation of areas bordering on the South Atlantic. Equally, if not more important, would be the negative advantuge of donying access to an important European flank and Mediterranean rear position. Economically the advantages of occupation are at bost slight in the short run, problematical in the long run, It should be noted, however, that ever small incre- Dents to the present flow of North African cobalt and nolybrienum are likely to be significant in terms of the present status of German mineral supply. Increases in the supply of olive oil would have less importance in the short run, since such increases would be offset by a probable de- crease of peanut oil shipments from Dakar owing to Allied action in that region. Moreover, occupation would have the inportent negative advantage to Germany of preserving o considerable leak In the Allied blockade. Politically, occupation would remove the last remaining important bergaining levers of France and Spain. There would be, for them, no real alternatives to full colleboration. Further, occupation might be the basis for significant strengthening of the morale of Italy. Negatively, occuywition you'r serve to insulate the politically vulnorable peoples of Southern Europe from Allod influenco. II. Costs Military advice in to the effect that an action by Germany against Northwest Africa would telto the form of a pincor movement through Spain and Tunisia. It is most un- likely that the Germans will uove through Spain without Spanish collaboration or nequieseence. The force mobilized by the Gormans would be of 2 size capable of overcoming SECRE14 - ii - full French resistance in Northwest Africa, whether or not that resistance is, in fact, expected. On these assumptions it is calculated that occupation would require roughly from nine to fourteen divisions and sufficient planes to achieve air superiority. The transport, landing, and subsequent supply of the required force, against the air and naval resistance available to the British and French in this theater would be a difficult but not insurmountable problem for Germany; this assumes Spanish collaboration or acqui- escence and the maintenance of the existing supply facil- ities from Italian and Greek ports across the central Mediterranean. The net political and economic costs of a campaign against Northwest Africa will vary considerably, depending upon the decision taken by Vichy with respect to collabo- ration. Other costs would include the loss of entrepôt supplies through Spain, Portugal, and the Canaries; the probable necessity of economic and territorial compensation to Spain and Spanish Morocco; the burden of occupying French Morocco, Tunis, and Algoria; and the cost of furnishing the goods not supplied by the country, In addition, Germany must reckon with possible A1- lied occupation of the Azores and Cape Verde Islands; prob- able strengthening effect on American morale and unity, called by German bases at Casablanca anl in the Contries, III. Final Conclusion The military and political advantages of occupying Northwest Africa seem to outweigh the probable and viven the maximum costs to Germany. IV. Timing The timing of 6 German move into Northwest Africa is dependent largely on the success 01' failure of the pro- J=N6 British offensive in Libya. The need of Tunisian ports, ns supply basus for the Axis forces in Libya, might procip- 11,00 German military action, if those ports are not yielded Voluntarily. A decisive British victory would ondanger the potential control of the Gormans over all of Northwest Africa. 1. British failure in the projent camputin would make the Northwest African situation 1:35 urgent to th Germens; but 1c is unlikely that they will brack off the chein of actions betwn with the dismissel of Weygend until at least key strutogic points in Northwest Africa have boun occujded by Girman troops. Regraded Unclassified 145 SECRET TABLE OF CONTENTS Page I. Objectives 1-6 A. Military Objectives 1 B. Economic Objectives 3 C. Political Objectives 4 Conclusion 5 II. Costs 7-14 A. Military Costs 1. Troops and Equipment 7 2. Transport and Supply 9 Conclusion (Military) 10 B. Probable Political and Economic Costs 1. France 10 (a) Vichy 10 (b) French North Africa 12 (c) The French Navy 12 Conclusion (French) 12 2. Spain 13 Conclusion (Spanish) 14 3. French Morocco 14 Conclusion (Political and Economic) 15 C. Disadvantages based upon Allied Reaction 15 III. Final Conclusion 15 IV. Timing 15-18 Appendix on West Africa 19-22 List of Supporting Studies 23 Regraded Unclassified 146 SECRET - 1 - The Problem of GERMAN OCCUPATION OF NORTHWEST AFRICA OBJECTIVES AND COSTS I. Objectives A. Military Objectives Occupation by Germany of Northwest Africa relates to four sections of the present war: the campaign against Britain in the Mediter- ranean; the campaign against Russia in the east; the counter-blockade against British shipping in the South Atlantic; the campaign for commer- cial and perhaps military power in the Western hemisphere and in West, Southwest, and South Africa. 1. Occupation of Northwest Africa would further the German campaign in the Mediterrancan: (a) by providing a secondary defense position in case of a British victory in Libya; (b) by opening important new supply forts for Axis troops in Libya; (c) by completely closing the Mediterranean as a supply route to the British armies of the Middle East; (d) by neutralizing Gibraltar as a naval base and opening the Western Mediterranean to Axis commercial shipping; (e) by closing an exposed SECRET 147 . - 2 - rear position and eliminating the possibility of an Allied pincer movement in North Africa. 2. The Russian campaign affects German North- west African strategy in two ways: (a) No voluntary move against Northwest Africa can be made if, during the coming months, the demands of the Russian War make the mobiliza- tion of a sufficient German striking force impossible; (b) If the Russian war is ex- pected to continue on a large scale into 1942, it would be to the German advantage to deny the Northwest African coast to the Allies, as a potential base for attack on Southern Europe. 3. Occupation of Northwest Africa would furthor the counter-blockade in the South Atlantic: (a) by providing submarine bases at Casa- blanca and elsewhere on the coast; (b) by providing abundant facilities for land-based air attack on shipping; (c) by providing control of the Canaries, as a base within protective range of shore-based aircraft. 4. Occupation of Northwest Africa would be the first and perhaps decisive stop in the long run Gorman geopolitical program for attaining commercial and political hogemony in Latin 148 SECRET - 3 - America, West, Southwest, and South Africa. B. Economic Objectives Pursuant to the terms of the Armistice Agree- ment, the strategic resources of Northwest Africa are now virtually under German control. Subse- quent negotiation and maneuver have given Germany more direct control, especially with respect to olive oil, wheat, phosphates, molybdenum, cobalt, manganese, and the negligible native petroleum output. At the present time Northwest Africa is the decisive source of continental supply for olive oil, phosphates, and cobalt--all extremely scarce, Molybdenum and manganese resources are of considerable importance. The flow of North= west African goods after occupation, as opposed to the present flow, will be determined by the following considerations: 1. The acquisition of any stock of cobalt, mo- lyhdenum, and other minerals which might have been denied to Germany by French polit- ical resistance. 2. The extent to which Germany will invest manufactured goods to regenerate the com- mercial, transport, agricultural, and mining facilities of North Africa. 3. The extent to which increased shipping 149 SECRET - 4 facilities will be made available to the Northwest African-South European routes. 4. The extent to which technicians and capital will be invested to discover and exploit suspected new mineral resources, 5. The extent to which present leaks (hoarding, non-European exports, black bourse operations, etc.) will be stopped. Negatively, occupation would forestall the loss of very considerable agricultural and mineral supplies now flowing from Northwest Africa to the European continent. This loss would presumably follow upon a possible Allied occupation. C. Political Objectives. Successful occupation by Germany of North- west Africa would achieve the following political objectives, favorable to the Axis effort: 1. The belief in ultimate Axis victory would be spread further throughout the Moslem world. 2. An end to the quasi-independent French state in Northwest Africa would remove an important residual French hope and bargaining lever; moreover, all of southern Europe would be forced into greater dependence on Germany, and, in the long run, probably into greater collaboration with Germany. 150 SECRET 5 3. The elimination of the possibility of Allied occupation of Northwest Africa would forestall a potentially serious inroad on the morale of the New Order; for Allied occupation would create serious difficulties for Germany within France, Spain, and Portugal; and might cause a complete collapse of the Fascist regime within Italy. 4. The possible gift of Tunisia to Italy would significantly strengthen Italian morale. 5. German occupation of Northwest Africa would seriously affect the disposition of Latin America; through the full incorporation of Spain and Portugal in the New Order; through German occupation of African ports and air bases; through the acceptance of a strategic set-back by the Allies, CONCLUSIONS: The positive military advantages to Germany of occupying Northwest Africa are very con- siderable: first, in connection with the Mediterranean campaign; second, with respect to the South Atlantic counter=blockade; third, and less urgently, with respect to long run exploitation of areas bordering on the South Atlantic. Equally, if not more important, would be the negative advantage of denying access to an important European flank and Mediterranean rear position. Economically the advantages of occupation are at best slight in the short run, problematical in the long run. The maximum increment to 151 SECRET - 6 - occupied Europe of Northwest African supplies cannot be regarded as a significant factor in the German decision. Occupation would, however, have the important negative advantage of preserving a considerable leak in the Allied blockade, Politically, the occupation would narrow the alternatives to full collaboration which are now available to France, Italy, Spain, and Portugal; in addition, occupation might be the basis for a significant strengthening of the morale of Italy. SECRET 7 152 II. Costs The disadvantages of and obstacles to a German occupation of Northwest Africa are grouped as follows: (a) military costs; (b) probable political and economic costs; (c) disadvantages based on Allied roaction. A. Military Costs 1. Troops and Equipment Estimates of Gorman force required to occupy Northwest Africa vary with the degree of resistance assumed. The maximum opposing force is the following: (a) Spain - 500,000 to 550,000 troops (of which 194,000 have beon reported in Morocco and 55,000 in the Canaries). 6 cruisers, 18 destroyers, 5 submarines 400 first line planes (b) Portugal - 50,000 troops 3 cruisers, 10 destroyers, 3 submarines 150 planes (c) France - 86,000 troops in unoccupied France 80,000 in North Africa 2 battloships, 1 aircraft carrier, 11 cruisers, 25 flotilla leaders, 28 destroyers, 55 submarines (also damaged Richeliou, Dunkerque, partially complete Joan Bart) in European and Northwest African waters. 312 planes in unoccupied France 371 planes in North Africa. - 8 153 There is, in addition, the British naval, land, and air force based on Gibraltar and Malta. Under no circumstance foresecable can it be assumed that the full force of this array will be thrown against a German attack. The Spanish and Portuguese metropolitan forces are, by most observers, expected to be passive. The Spanish colonial force, under the most likely conditions, must be counted a minor net addition to the German strength. Most estimates assume full, but in- effective, resistance by the British force at Gibraltar; full or partial resistance by the French force in Northwest Africa. Even if such resistance does not occur, it seems likely that the Germans will mobilize a force of occupation fully capable of dealing with it. On this basis it is calculated that the occupa- tion of Northwest Africa will require nine to fourteen divisions with a balanced air force suf- ficient to achieve air superiority, operating from Italian, Libyan, Spanish, and later, Spanish-Moroccan bases. This campaign, according to military advice, will take the form of a pincer movement through Spain and Tunisia with the troops and planes about equally divided between the two arms of the SECRET 154 - 9 - pincer. 1 A British ostimate on the length of timo this operation would take calculates that about nine weeks would suffice, This assumos, however, full French resistance in Northwest Africa. 2. Transport and Supply. The problem of transport and supply consti- tutes a difficult but not insurmountable problem to the Germans. (a) Assuming full French resistance in Tunisia, it is calculated by the British that a month would be required to scize Tunisian ports, land, and concentrate five divisions. Ade- quate shipping and European ports of om- barkation are available for this operation. (b) Assuming Spanish acquiescence in Europe and Africa, it is calculated by the British that fully six weeks would be required to move five divisions from the Spanish-French frontier to consolidated positions in Spanish Morocco. Motor-road, railway, tanker, and ship transport facilities, though neither first class nor 1 In case of Spanish resistance a British estimate states that fourteen German divisions would be required for the Spanish pincer. SECRET - 10 - 155 2 abundant, are available for this operation. CONCLUSION (Military): Assuming Spanish collaboration and full resistance by the French in North Africa, the occupation would require from nine to fourtoon divisions, and sufficient planes to achieve air superiority. Assuming Spanish collaboration or acquioscence, and the mainten- ance of existing supply facilities in the Central Mediterranean, the transport and land- ing of the required force against the naval and air resistance available to the British and the North African French in this theater, and the subsequent supply of that force would be a difficult but not insurmountable problem for Germany. B. Probable Political and Economic Costs. 1. France If German diplomacy were to securo the full collaboration of Vichy and the North- west African administration, the cost of occupation would consist merely of the diversion of the occupying force. Occupa- tion would be almost immediately undertaken under these circumstances. (a) Vichy If Vichy refused to collaborate or submit politically to a German occupa- tion of Northwest Africa, total occupation 2 It is universally assumed that Gibraltar would be by-passed in the occupation of Northwest Africa and rendered useless as a naval base by artillery and air attack. The reduction of Gibraltar as a stronghold would be a longthy and costly undertaking, to be launched by the Germans and Spanish at a later date, if at all. 156 SECRET - 11 - of France would probably follow. This would create the following difficultios for Germany: (1) An enlarged occupation force and onlarged administrative respon- sibilities, over an increasingly restloss population. (2) The failure of the New Order in France would be domonstrated to occupied Europe. (3) French North and West Africa and the French navy might be free to pursue an independent policy. To forestall this situation the Germans could bargain powerfully with: (a) n peace offer (b) the French prisoners now hold by Germany (c) the political aspirations of Vichy collaborationists (d) an offer of increased supply of food and of manufactured goods necessary for a higher standard of living (e) further reduction of occupation costs. Granted the strength of those bargain- ing powers Petain and the anti-collab- orationists might accept the consequences 157 SECRET 12 - of refusal if they knew that the Allios woro propered to sond a ducisivo forco to Northwost Africa; and if they know that tho French navy would oithor assist tho Allios, or at loast not collaborate with Germany. (b) Frunch North Africa The renoval of Weygand has reduced sharply the possibility of a unifiod, organized resistance to the Gormans in North Africa. The only condition under which some of the North African forces might now rosist is a docisivo Allied victory, In this case many Frenchnon might profer to fight. with the British rather than with the Germans. (c) The Fronch Navy It sooms unlikely that the present Fronch Naval Command would order collab- oration with the British. The major condition under which it would order collaboration with Gormany is the cer- tainty of ultimate Gorman victory. CONCLUSION (Fronch): If the Germans induce the French to collaborate, the political and economic costs will be nogligible, If the Gerrians connot induco the French to SECRET 158 - 13 - collaborate, the costs would be those listed above under the difficulties of full occupation of metropolitan France. 2, Spain It may be assumed that Spain and Portugal will submit to, if not collaborate with, a German operation against Northwest Africa, 3 There are, nevertheless, the following ir- reducible costs to Germany of passage through Spain: (a) Loss of Spain and Portugal as financial agents and entrepots in Atlantic trade; (b) Loss of petroleum products now stated to be flowing to the Canaries for use of German submarines; (c) Loss of Lisbon as an observation and espionage center; (d) Necessity to occupy and police minimal territory along the supply line and on the west flank (Portugal); (e) Indirect loss consequent to shutting off Spain's current imports chiefly 3 There are reports at present that the Franco regime may even invite German occupation, in order to avoid alleged impending disorders over the Spanish food shortage. 159 SECRET - 14 - from Latin Amorica and Britain. 4 If Germany should occupy Spanish Morocco, the loss of current imports would have oven more severe economic consequences than in metropolitan Spain. CONCLUSIONS (Spanish): All available evidence points to Spanish collaboration or acquiescence in a German move against Northwest Africa. There are, nevertheless, the considerable costs to Germany listed above, And although these aro considerable, they cannot be re- garded as costs sufficient to deter a Gor- man drive, 3. French Morocco, Assuming German victory in French North- west Africa cortain minor costs would follow: (a) the management of a widely disporsed population; (b) the necessity for importing all nanu- factured supplies and pctroloum products for the occupying force; (c) the nocossity of kooping in repair North African economy, partially revived lately by imports from America, 4 To shut off those imports would worson an alroady dos- perate situation in Spain. In order to proserve the form of Falangist Now Order the Gormans would probably offer some combination of food and notably oil supplies as well as promises of territory. The alternative would probably be the disintegration of the present Spanish regime, with damaging reporcussions in Europe and South America, 160 SECRET - 15 - CONCLUSIONS (Political and Economic): Tho not political and oconomic costs consequent to at campaign against Northwest Africa are those dependent upon Vichy's decision; the loss of entrepot supplies through Spain, Portugal, and the Canaries; the probable necessity of economic and territorial componsation to Spain and Spanish Morocco; the burden of occupy- ing French Morocco, Tunis, and Algoria; and the cost of furnishing the goods not supplied by the country. C. Disadvantages Based upon Allied Reaction 1. Possible Allied occupation of the Azores and Cape Verde Islands, 2. Probable strongthening effect on Amorican morale, unity, and action caused by Gorman bases at Casablance and in the Conaries. III. Final Conclusion, The military and political advantagos of occupying Northwest Africa far outwoigh the probable and oven the maximum costs, IV. Timing. The timing of c. Gorman move into Northwest Africa is dopendont largely on the success or failure of the present British offensive in Libya. The need of Tunisian ports, as supply bases for the Axis forces in Libya, might precipitate German military action, if these ports are not yielded voluntarily. A docisivo British victory would on- danger the potential control of the Germans over all of Northwest Africa, A British failure in the present campaign would make the Northwest African situation loss urgent to 161 SECRET - 16 - the Gormens; but it is unlikely that they will broak off the chain of actions bogun with the dismissal of Weygand until at loast key strategic points, in Northwest Africa, have been occupied by German troops. A, The following strategic factors argue that German Action against Northwest Africa may como in the near future. 1. The inadoquacios of the Libyan ports to supply the Axis forces sufficiontly for a lengthy campaign. This inadequacy, caused to a large degree by recent Allied air and sea actions, might nocessitate the occupation of Tunisian ports, with or without French permission, 2. A decisive British victory would endanger the actual and potential control of the Gormans over all of Northwest Africa, and consequently force the Germans to undertake a campaign which they had hoped to postpone at the present time, 3. The possibility of a winter lull in tho campaign in Russia would pormit the liboration of the necessary German forces. 4, The increased productivity of war industries in the United States and tho increased naval activity in the North Atlantic have the offect of lightening the patrol duties of the British 162 SECRET - 17 - navy, increasing the voluno of American delivorios to Britain, and possibly reloasing British tonnago. This may incroase German fear of the Allies an- ticipating the Gorman occupation of Northwost Africa. B. The following strategic factors argue that German action against Northwest Africa may be dolayed. 1. Gorman commitments in Russia, the Middle East, and Libya: According to military advice present dovelopments in these thoatros indicate that the Germans will probably be reluctant to open a now military front. At the same tino it should be noted that tho permission to establish Gorman consulates in koy cities of Northwost Africa, and the ousting of Woygand might be interproted CS the beginning of a diplomatic offensive which may rosult in Germany's froodom to use Bizorta, Oren, and Casablanca as air and submarine bases, 2, Political crisos in France and Spain night be precipitated by a German occupation of North- wost Africa, Vichy's psychological and oconomic collaboration with Gormany is based on the hope of a partnorship in the now Europoan Order, The chances of realizing those hopos would bc danaged 163 SECRET - 18 - by the probable German promise of French colonial territory to both Italy and Spain. Such a division of the French Empire might seriously curtail France's present industrial contribution to the Nazi war machine. A German occupation of Spain might hurt Spanish pride and the promised German rewards would probably fall short of Spanish ambitions. 3. is failure of the British campaign in Libya would remove all Allied threats to Northwest Africa in the immediate future and might postpone full German military occupation. 164 - 19 - SECRET APPENDIX Wost Africa Full collaboration of the French with the Gormans would extend Gorman occupation automatically from North to West Africa and necessitate no further discussion, Scrious difficulties for the Germans, however, would be created by the resistance of the West African command to full collaboration. Assuming this resistance the conquest of Dakar might bo attempted 1f the Gormans should have the French fleet at their disposal. Barring this possibility, how- ever, it soons most likoly that the extonsion of Gorman control to Wost Africa would not follow immediately upon the conquest of French North Africa. The factors indicating the postponoment of a German West African campaign are more substantial than those which argue for innediate action. A. Factors arguing for the postponement of a Gornan West African campaign. 1. The operation against Dakar would be extremely difficult. Dakar at the prosent time is considered impregnable by sea to anything less than a major naval and military expedition. Its defenses con- sist of more than 50,000 troops and 100 planes (of late frequently reenforced by shiploads of nen and modern equipment), powerful coastal bat- teries, the guns of the stationary Richelieu and an efficient naval force of two cruisers, four flotilln leaders, one destroyer and twelve sub- mrines. Only the cooperation of the Vichy fleet 165 SECRET - 20 - with the Gormns night disorganizo these defenses sufficiontly to nako a comparatively easy conquest possible. Barring this possibility, the Germans would be forced to take the land-air route from Marrakesh to Dakar, a distance of about 1740 miles, Most of this route consists of a track through the Western Sahara, rough, hot, and short of water. Before troops and materials could pass over it in any quantity, supply durips would have to be estab- lished and considerable road improvement carried out. The same considerations apply to the estab- lishment of air bases. 2. German control of the Moroccan ports and the Canaries would suffice for the time being seriously to jeopardize British-bound shipping on the north- south lane. At the present time British convoys assemble at or near Freetown and proceed north through the eastern reaches of the Atlantic. To interrupt this traffic the Germans would have available in Morocco the excellent harbors of Casablanca (nc- commodation for a naval force of three battle- ships, a squadron of cruisers, and two flotillas of destroyers; 10,000 feet of quayage for 23-fect- draught vessols, modern equipment) and Tangior (not so well dovoloped, but better protected from south- wost winds and swells) as woll as the eight minor harbors of Agadir, Mogador, Safi, Fodala, Rabat, Wadi Sebout, Larache, and Árcila, of which Agadir has the greatost possibilities, if developed fur- thor, as c potential submarine base. These ports, however, lic somewhat to the northeast of the optimum zone of submarine operations. Consequently, the Gormans would probably occupy the two good ports of the Canary Islands, Las Palmas and Santa Cruz, about 630 miles southwest of Casablanen. Using these bases, the now Gorman submarines with an operating range of 8000 to 10,000 miles, supplo- mented by observation planes and surface raidors, could quite easily make the present British supply route untenable. An expensive diversion of shipping to the West and from there to the North Atlantic route would be the minimum cost inflicted upon the British. 166 SECRET - 21 - 3. Dakar's use as a submarine and air base would depend upon the ability of the Germans to supply it. This supply would be extremely difficult without the cooperation of the French fleet or the execution of a vast road building program. 4. An Allied occupation of Dakar, on the other hand, would constitute no danger of Allied operations against the German position in North Africa. 5. In case the Germans should need Dakar for an extension of the battle of the Atlantic, their possession of Northwest Africa would give them a geographical advantage over any other power. B. Factors arguing for the imminence of a German West African campaign. 1. West African peanut oil is important to the continental economy. A German occupation of Dakar would provide a better protected sea route from Dakar to Casablanca and also prevent the possible loss of this source of supply to the Allies. 2, The Germans desire additional well protected air, submarine, and raider bases, not only to interfere with the British use of Bathurst and Freetown as convoy and naval bases but also to serve as a constant threat to Latin America. Regraded Unclassified 167 SECRET - 22 - 3. The Germans might choose to move at once in order to avoid a costlier future campaign in case Allied forces should reenforce the French West African garrison. 4. The Germans desire to deny the Allies the chance to acquire another good naval and convoy base on the bulge of Africa. These latter factors, serious as they are, do not seem great enough to force the Germans to undertake an immediate attack on Dakar. The Germans can well afford to leave the problem unsolved until they are ready to extend the area of their hegemony over Africa and South America. 168 SECRET - 23 - Supporting Studies 1. North African Chronology since the Fall of France. 2. German "Eurafrican" Objectives as Developed in Geopolitical Theory. 3. The Problem of Vichy. 4. The German Political and Economic Problems in Iberia. 5. Germany's Economic Stake in French North and West Africa: 6. The Military Problems of a German Conquest of Northwest Africa. ICO Desember 3. 1941 Mr. Livessy Mr. Cochres will you kindly sent the following cablegram: 'American Intessy, Londen. For Casaday from Secretary of the Treasury. In snever to Embassy's 5158. please communicate to the proper authoritice the following paragraphs: 'The figure of 22 persent is the second sentence of the fourth paragraph of the State Department's 4670 is at variance with the figure of 25 percent given by the United States Chamber of Commerce, due to material differences is the figures used for both United States tax collections and United States national income. The United States tax figure are based upon (1) a release w the Director of the Dureen of the budget, October 5. 1941 and (2) "State fax Collections: 1940° published by the Paren of the Census, page 29. Copies of these are being seat by air punch. In these sources Federal tax collections for fiscal year 1942 (including social security taxes but excluding missellaneous receipts) are estimated at $12,659 million; State and local taxes for 1940, the latest year available, are astimated at $9,275 million, making total tax collections of $21,834 million. This figure is 22 persent et national Income outl- mied at $100 billion. The Chamber of Commerce of the United States used $22.5 billion for United States tax collections and $90 billion for the mational in- come astimate, time arriving at 19s figure of 25 persent. Total Federal tax collections for the salendar year 1942 are 02- pected to be $16 billies before transfers to social security recerves.' 3mg Regraded Unclassified 170 TELEGRAM SENT ALH PLAIN December 3, 1941 AMENBASSY, LONDON, (ENGIAND). 5648, Third FOR CASADAY FROM SECRETARY OF THE TREASURY. CUOTE In answer to Embresy's 5158, please communicate to the proper authorities the follow- inj paragraphs: The figure of 22 percent in the second sentence of the fourth paragraph of the State Department's 1570 is at variance with the figure of 25 percent given by the United States Chamber of Commerct, due to material differences in the figures used for both United States tax collections and United States national Income. The United States tax figures are based upon (1) a release by the Director of the Tureau of the Budget, October 5, 1941 and (2) State Tax Collection 1940' published by the Sureau of the Census, page 29. Copits of these STE being sent by air nouch. In these sources Federal tax collections for fiscal year 1042 (including social security taxes but excluding miscellaneous receipts) Regraded Unclassified 171 -2- #5648, December 3, to London miscellansous receipts) are Estimated at $12,659 million;Stote and local taxes for 1940, the latest year available, are estimated at $9,175 million, making total tax collections of $21,834 million. This figure is 22 percent of national income ES- timated at $100 billion. The Chamber of Commerce of the United States used 222.5 billion for United States tax collec- tions and 390 billion for the national income ES- timate, thus arriving at its figure of 25 percent. Total Federal tax collections for the calendar year 1912 are EXPECTED to bE ,16 billion before trans- fers to social security reserves. END QUOTE !HULL (FL) FD:FL:ME Regraded Unclassified C 0 172 P Y DEPARTMENT OF STATE WASHINGTON December 3, 1941 In reply refer to 3D The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses copies of the paraphrase of telegrem No. 5817, dated December 2, 1941, from the American Embassy, London, England, transmitting B. measage for Secretary Morgenthau from Ambassador Winant. Telegram No. 5817 refere to the Department's telegram No. 5402, dated November 24, 1941, which was transmitted to the Secretary of the Treasury in this Department's letter of November 26, 1941, also telegram No. 5169, dated November 13, 1941, which was transmitted to the Secretary of the Treasury in this Department's letter of November 14, 1941. Enclosure: From Embassy, London, No. 5817, dated December 2, 1941. Copy:bj:12-4-41 Regraded Unclassified 173 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embassy, London, England. DATE: December 2, 1941, 10 p.m. NO. I 5817. THE FOLLOWING IS FROM AMBASSADOR WINANT FOR SECRETARY MORGENTHAU. Your message concerning contact with the Select Committee on national expenditure, which was forwarded on the 24th of November from Washington, has been dis- cussed with - by Mr. Lauren 1. Casaday. In ay opinion a direct approach to the Committee in order to get the information you desire would be a political mistake. However, the information in question and the other material you requested can be procured and are being prepared for you. Published reports of the Committee have already been forwarded to Washington under cover of various reporte and despatches. However, you will receive a complete set by the carliest pouch. In response to the Department's telegram No. 5169, dated November 13, 1941, regarding the excess profits tax the Embassy is also taking stops to elicit further opinions. There is no one among my co-workers here with whom I enjoy working more than Mr. Casaday. I hope the reports sub- mitted by Casaday have been satisfactory. I appreciate your kind letter of the 18th of November and the copy of the address you gave at Worcester. WINANT Copy:bj:12-4-41 174 December 3 1941 Mr. Livessy Mr. Cashram will you kistly send the following collegram: "American Chungking. Free Treasury for your Information. Felloving asserge to being cabled to Fox: 'Entional City and Chase Basks have releed with Treasury Depart- mest the question as to the castedy of Chinese currency notes end as to the risks assumed by the effices of those banks is - mostion with each eastedy. Ve have advised the banks that three are natiers which met be worlped out with the Phabilisation Deard. Ve are airmailing copice of this corrospondence but pass ⑉ for your early consideration the suggestion of the backs that the Chinces surrency notes be destroyed. You my vish be take w with the uppro- printe Chinese authorities the matter of destruction of the currency notes. # . nor EMC: da: 12/3/41 Regraded Unclassified 175 December 3. 1941 Mr. Livesey Er. Cochren will you kindly seal the fellowing cablegram: "American Mabasay, Chungking. For Fox from Treasury. Reference your 424 of October 20 your report on the effect on the Shanghai market of United States banknotes emggled into China from the continental United States is approciated. You are advised that this problem will exations to receive the consideration of the Treasury Department." 10ml HMC: dm: 12/3/41 Regraded Unclassified 176 December 3. 1941 Mr. Mveeay Mr. Section will you kistly seal the following coblegram "Amerison Changking. From Treasury. Reference your 432 of Berember 6. This request for information to be submitted to the Shinese comission for the centrol of foreign exchange was use your to the - of the - yours embedied in the general impt w the Treasury Repartment 46 Nevember 12. In view of the - program 10 10 believed that the Stubilisation Board of Okina will sequire information conserning transactions in which Ohina is interested. Please advice he pmH of this cable." HMC: dm: 12/3/41 Regraded Unclassified 177 3. 1941 M. Liventy Mr. desires will m Madly amd the fellowing callagram "Antrica General, Manghad. From treasury to new information. Following meange is being cabled to Test 150 have licensed Chase National Bank Ber Terk to pay Indische Recempte Reterts assess) - Boak Shought $1,800,000 is cover of Chase Bank Shoughail credite towned poter to Serveher 18, 1941 covering chigarate from dem to this me to yeg I 1 I $ I I I I I is cover of Chase Bank Shanghai credite lease your to Nursher 18, 1941 cerering chipments from Inits to Manghai. Chase National Bank has been civised informally that you are being adviced of the Seepsing and further that w license seeeky peruite the financial transaction and is m way affects the responsibilities of the chase Bank Renglal as a appointed beak to the Stabilization Beard of as. # nml Mic:dm:12/3/41 178 I I 2 Mr. Mverey Mr. fathres wall yes kindly met the following schlogram "American General, Shoughai. Reference your 1692 of Sevember 15 you are añviced that the term 'fully effected' is paragraph (1)(0)(222) of General License Be. 95 more payment is United States dollars. Such paymento and have been fully effected prior to November 12, 1942, and as Revember 12, 1941, the consigner of the chipment met have had as further - or other things of value owing to Me is consultion with such chiparate. Sinilar restrictions eggly to oblyments from to the - tinental United States via Smile est concelar invoice should met to certified w you covering noth shipmente unisse the terms and coals- tiess of General License Be. 98 are fully complied with. Above message is also being cabled directly to Yes. Lix HMC: da: 12/3/41 179 December 3. 1941 Mr. Livesey Mr. Geshram will you kindly come the following cablegram "American General, Shoughai. Trom Treasury for your information. Following used is being cabled to Yes. 'National City and Chase Banks have reised with Treasury Depart- seal the question as to the eastedy of Chince currency notes ml as to the risks accured w the Shoughas offices of these besine is - section with rush eastedy. the have adviced the bests that those are matters vision met be veried out with the Stabilization Deard. We are airmailing copies of this correspondence but pass a for your early consideration the suggestion of the banks that the thises currency motos be destroyed. Yes my vish to tabe up with the aggre- priate Chinese authorities the matter of destruction of the currency notes. . am HMC: dm: 12/3/41 Regraded Unclassified 180 Becomber 3. 1941 Er. Livesty Mr. frohren will m kindly mil the following coblegram "Amrina Genral, Shanghai. From Treasury. Reference your 1713, Revember 16. You are adviced that in these cases share an importer has Maited States dollars a deposit with a appointed bank the approved. of the Stabilization Doord of Order is required before - sypointed bask my netify 6 decessio bank that the transaction satisfice the serm el conditions of General Meanso No. 58. You will hear free us further as your other impiry. Foregoing is also being cabled to Noz. mp HMO: da: 12/3/41 181 December 3. 1941 Mr. Liverty Mr. Cookram will you kindly send the following cablegram: "American General, Hong Kong. For For from Treasury. Reference is made to your 475 of November 6, 5 p.m., in which the request of the Stabilization Board of China use expressed that Banque Belge your l'Etrenger net be designated M - appointed bask. The Belgion Ambassolar to the United States has nov protested ea behalf of Banque Belge your l'Etranger the exication x that bank as as appointed bank. Consideration is being given to the desire- bility of advising the Belgion Ambassador that, since the Bengue Belge your l'Stranger use not included in the list of backs 70000- maded for designation as appointed banks by the Stabilization Beard of Gim, it was not included in the list of appointed banks and to further mggest to the Belgian Anbasseder that Image Belge pour l'Itrenger chould present its request for designation as a appointed bank to the Stabilisation Board of Orders for consideration by that Board. Your coments a this procedure will be approciated." Jewl EMO: da: 12/3/41 Regraded Unclassified 182 I I a Mr. Livesey m. form I a Printed 1 TTE I E Graval, Ins. If for Inc free Treasury. to have licensed Chase Mathemal but the Term to my I I I I 1 I I $1,500,000 to - of - Bask Registed credito Scound your to Sevember 12, 1948 covering shipments from from to China and to m I I I I 2 I 1 I I I 2 1 I % I I I I I % s się currering oblyments from falls 9a Regal. - Sational - has been atriced informally that you are belog cértent w - and further that - license norely permits - financial transaction and in m up affects the responsibilities of the - - Shoughai as a appointed bank w the Stabilisation Decire of frim. Pereguing to also belog estized to American General, Renghal." Jul 12/3/41 183 December 3, 1941 Mr. Livesey Mr. Ceckres will you kindly cond the following cablegrams "American General, None Kong. For For from Treasury for your information. Following message 10 being sabled to American Consul, Shanghait 'Reference your 1698 of November 15 you are advised that the term "fully effected" is paragraph (2)(4)(112) of General License No. 58 sease payment is United States dollars. Such payments must have boom fully effected prior to Sevember 12, 1941, and on November 12, 1941, the consigner of the shipment met have had no further - OF other things of value eving to his is commention with cuch chipments. Similar restrictions apply to chipments from Shanghai to the ors- tisental United States via Meails me consuler invoices should not be certified by you covering each chipments unless the terms and condi- tions of General License So. 58 are fully complied with.' # Jul HMC:dm:12/3/41 Regraded Unclassified 184 Doctober 3. 1942 Mr. Livery Mr. Cookrea vill you kindly and the following cablegram General, Hong Keng. For Fes from Treasury. National City and Chase Basics have reised with Treasury Department the question as to the oustedy of Chinese currency motor and as to the risks und W the effices of these benks is commention with such eastedy. Ve have adviced the bestre that those are matters which met be veried out with the Stabilisation Beard. We are airmailing copice of this correspendence but gase 48 for your carly consideration the suggestion of the besits that the Chinese currency notes w destroyed. Yes my wish w take - with the appropriate Chinese authorities the miter of destruction of the currency actes. Foregoing is also being cabled to American Geneal, and to American Embassy, Chungking." pml HMC:dm:12/3/41 Regraded Unclassified 185 Becomber 3. 1941 k. Liversy R. will you kisdly mi the following cablegram "American General, they I For For from freasury for your information. Fellowing strongs is being cabled to American General, Resist: 'Reference your 1723. Berember 18. Tenasse advised that is them cases where an importer has United States dellare - depesit with a appointed bask the approval of the Stabilization Burd of this to required before an appointed back my natify a deposite bet that the treasmetion entialise the - ml conditions of General Meanso No. 58. Tea will hear from us further 48 your other impiry.' 6 MP BMC:dm:12/3/41 Regraded Unclassified 186 EJ PLAIN Hong Kong via N. R. Dated December 3, 1941 Rec'd 12:58 p.m. Secretary of State, Washington. 526, DECEMBER 3. REference Hong Kong's telegrams 476, 477 and 478 of November 7 quoting messages for Treasury from Fox and Cochran and confirmed by despatch 1046 November 7 and Enclosures reporting action by Hong Kong Government to control unduly large operations in Chinese currency in this colony. Local authori- ties now report that their action has been Effective in greatly reducing so-called aslack market oper- ations. Meanwhile the trading license has been sus- pended of the Hong Kong gold and silver exchange which apparently was doing big business in Chinese currency notes and Government instructed it to settle outstanding transactions at Hong Kong dollars one hundred fifty five to Chinese national dollars one thousand. Chinese Vice Minister of Finance visited here recently Regraded Unclassified 187 -2-#526, DECEMBER 3, from Hong Kong via N. R. recently as result of which Chinese Ministry of Finance as Stabilization Board of China establishing a joint office in Hong Kong to deal in cooperation with the British authorities with the problem of Chinese currency deposits now frozen in the colony. Sent to the Department, repeated to Chungking, Peiping and Shanghai. SOUTHARD DD C 0 188 P Y DEPARTMENT OF STATE WASHINGTON In reply refer to FD 894.515/96 December 3, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses a copy of despatch No. 97, dated November 21, 1941, from the American Legation, San Jose, Costa Rica, concerning shipments of gold from Japan to Costa Rica. Enclosure: From Legation, San Jose, Despatch No. 97, dated November 21, 1941. Regraded Unclassified 189 San Jose, Costa Rica, November 21, 1941. No. 0097 Subject: Shipments of Gold from Japan to Costa Rica. The Honorable The Secretary of State, Washington. Sir: I have the honor to refer to the Department's circular telegram of November 14, 1941 directing this office to re- port any recent and all future shipments of gold to Costa Rica from Japan and to report in this connection that a representative of this office has been advised by Mr. T. Harrington, Auditor of the Banco de Costa Rica, and also by the Banco Nacional de Costa Rica, the official bank of the country, that no shipments of gold from Japan have been re- ceived here at any recent time. Should any such shipments be received in the future, which appears unlikely, they will be at once reported as directed. Respectfully yours, Leslie E. Reed, 851.51 American Consul General. HGM/fp Original and three copies to the Department. Copy:bj:12-3-41 Regraded Unclassified C 0 190 P Y CANADIAN LEGATION WASHINGTON December 3, 1941 Dear Mr. Dietrich, I am enclosing in duplicate a list of Japanese firms doing business with firms in Latin America. I also enclose copies of correspondence dealing with an exchange of Japanese cotton against scrap iron from Ecuador. Yours sincerely, /s/ R. M. Macdonnell, R. M. Macdonnell, Secretary. Frank Dietrich, Esq., Room 279, Treasury Department, Washington, D. C. Copy:vw:12-10-41 191 LIST 03 JAPANESE FIRMS TRADING WITH FIRMS IN LATIN AMERICA PIRMS LISTED TRADING WITH: COSTOS TRADING 00., Osake. KLIMESCH, GUILLEHNO, statutory, British W.T.L. No. t Statutory, British W.T.L. on the Canadian List of Specified No. 6. Canadian Liet of Persons Rev. No. b Specified Persons 17 and with 2. SOLARI Y HNOS, LIMA, PERU ROSTA TRADING CO., OSAKA. Francisco Fonseca, statuvory, British V.T.L. No. b Lima, Peru, Canadign List of Specified Persons 17. SATTURI SHOTEN, YOKORAMA. Fernandez Pita Federico, Statutory, British W.T.L. No. 6 Buenos Aires, Argentine. CIALDA CIA. ANON., GUAYAQUIL, ECUADOR, Ramon Espin Cordova, Statutory, British W.T.L. No. 6, Guayaquil, Ecuador. ( Canadian List of Specified Persons 17. Cordova is trading with U.S.A. Proclaimed List. Yagi & Co., Osaka, Japan HATSUNAGA BOEXI X.X. KOBE. Moises, Statutory, British V.T.L. No. 6, Lajhan, Canadian List of Specified Persons 16 Panama. ROGRANN & HERMANN, HAVANA, CUBA T. Fujiye & Co., Japan Slack List, British W.T.L. No. 6 Fujiye is trading with U.S.A. Proclaimed List. Cassorla & Goluboff, Santiago (Chile?) and with Miguel Gorab 2. Santiago, (Chiler) GUTIERREZ, J. C. may be associated with the Gutierres, J. C. is mentioned in GOTTERREZ, SANCHEZ, LIMA, PERU, who in on the letter referring to Luis Guillermo Black List, British W.T.L. No. 6 Ostalaza, S.A. Lime. Peru and Beniya Co. (Japan7) Taruke Shoten, Osaka. À. M. Sauwma British M.E.W. "G" List No. 3 Paramaribo, Dutch Guiana; Jeruselmi Hnos, Montevideo, Uruguay: Marcos Nahoum, Montevideo, Uruguay; Moises D. Sacca E. Hijos, Buenos Aires, Argentina. ITSUI BUSSAN Z.K. JAPAN Melaned & Capuano, British M.E.V. "G" List No. 3 Montevideo, Uruguay Regraded Unclassified 192 - 2 - FIRMS LISTED TRADING WITH: ASAI TAKEGORA SHOTEN, NOGOYA, JAPAN L. A. Espinoza, S. A. British M.E.W. "G" List No. 3 Arequipa, Peru. JULIO SANTOS & CO., CIUDAD TRUJILLO, Tamaru & Co. DOMINICAN REPUBLIC Japan. British M.E.W. "G" List No. 3 193 THE YOKOHAMA SPECIE BANK, LIMITED In Reply NEW YORK AGENCY Address Attention 120 Broadway Cable Address Import Department. NEW YORK. SHOKIN-NEW YORK. October 20, 1941 The Yokohama Specie Bank, Limited, Osaka, Japan. Re: Your B/B 159 - $2,070. - on Ramon Espin Cordova, Guayaquil, by Yagi & Co. Gentlemen: Please refer to your cable of September 17th regarding the above draft and our reply of September 18th wherein we advised you that the bill of lading had been received by us and that we were applying for & license to forward it to you. We wish to advise you that 106 tons of scrap iron were duly shipped on the S.S. "Kiyokawa Maru", which sailed from Guayaquil, Ecuador, to Japan on July 23rd. We also enclose a. certificate issued by Mr. Tadao Sato, Guayaquil, Ecuador, correspondent of the Commercial Osaka Museum, stating that the weight of the shipment is 109 metric tons. How- ever, Messrs. Cialda Compania informed the collecting bank that the exact weight of the shipment should be fixed at the arrival of the steamer in Japan. The total weight of the shipments consider- ing the former effected on the S.S. "Kiyokawa Maru" should be 135 metric tons and the drawers must pay U.S. $13. - for each additional ton. In the event that the shipments total more than 135 metric tons please arrange to reimburse Cialda & Compania at the rate of $13. - per ton. Expenses of $12.45 were incurred by the Banco de Descuento. In our license for permission to return the original bill of exchange, together with the bills of lading for the shipment of scrap iron, we have included authority to debit you for this expense. As soon as the outcome of our license application is known, we will inform you accordingly. Very truly yours, THE YOKOHAMA SPECIE BANK, Limited. 194 Permission to return to our Osaka Branch the original bill of exchange on their B/B No. 159 for $2,070. - drawn by Yagi & Company, Ltd. on Ramon Espin Cordova, Guayaquil, Ecuador, to- gether with a complete set of bills of lading indicating a. ship- ment of 106,000 kilos scrap iron, which was shipped from Guayaquil, Ecuador, to Osska, Japan, on the S.S. "Hiyokawa Maru" of the "K" Line, dated the 23rd of July, Guayaquil. The draft in question, which covered an original ship- ment of 25 bales of cotton piece goods shipped from Osaka to Guayaquil on March 26th, 1941, was originally drawn on Mr. Cordova but he refused to pay for the same. On December 13, 1940 our Osaica Branch instructed us by cable to deliver 8 and 17 bales to Cialda Compania, Guayaquil, against bills of lading covering not less than 50 metric tons and 100 metric tons of scrap iron, re- spectively. We in turn instructed our correspondents, the Banco de Descuento, Guayaquil, accordingly. On February 4th, 1941, the Banco de Descuento informed us that they had released to Cialda 8 bales of merchandise against bills of lading covering a shipment of 50 tons of scrap iron shipped on the S.S. "Goyo Maru", which sailed on February lat for Osaka. The bills of lading for this shipment, when received by us, were forwarded to Japan. On July 2nd our Osaka Branch advised us by cable that their instructions of Dec. 13 were amended BO that the remaining 17 bales of merchandise were to be delivered against "Kiyokawa Maru" bill of lading covering 106 metric tons of scrap iron. Upon receipt of our branch's instructions we in turn advised our correspondents accordingly. The bills of lading for the shipment of scrap iron have now been received by us. We also desire permission to instruct the Chase National Bank to debit our blocked account for the sum of $12.45 covering expenses of the Banco de Descuento and to place this sum to the credit of the account of the Banco de Descuento maintained at Chase National Bank. Copy: VV: 12-10-41 195 3. 1941 Mr. Liversy Mr. Cechren will you please send the following message: "American legation, Guaraquil, Denador. From Treasury. with reforence to united application of Compain de Cervesas Nacionales, has Penas, Guayaguil, Remader, dated November 6. 1941, which has been assigned the under Quayaquil 1 and which is the subject of dospatch no. 2234 from quite, dated November 7. 1941, approval is authorised provided applicant gives proper a to you that they will net enter late further transactions with Chadvisk, Herrera & Do., Ltda., of Santings, Chile, or other Preslaimed List nationale, without license." (Indled H. M. C. Regraded Unclassified C 0 P 196 Y DEPARTMENT OF STATE WASHINGTON In reply refer to FD 894.515/97 December 3, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses copies of despatch no. 206, dated November 25, 1941, from the American Legation, Managua, D. N., Nicaragua, concerning gold shipments from Japan. Enclosure: From Legation, Managua, no. 206, November 25, 1941. Regraded Unclassified