Volume 477, December 23 – December 24, 1941

DIARY Book 477 December 23 and 24, 1941 Regraded Unclassified book Page Algiere See Gold Appointments and Resignations Procurement Division: Branston (George D.) suggested by Buffington AS linison man between Secretary's Office and Procurement; Brown (E.E.) also consulted as to suggestions - 12/23/41 477 97,260 Vanderpoel, Robert P. (Financial Writer, Chicago American): HMJr suggests Treasury employment - 12/24/41 316 a) Buffington's endorsement: See Book 482, page 156 - 1/5/42 Austria Coudennove-Kalergi, Count R. V.: Petition for recognition "as not annexed to Germany but merely German-occupied territory" - 18/23/41 155 - 3 - Branston, George D. See Appointments and Resignations: Procurement Division Brown, 3, 2. See Appointments and Rest/mations: Procurement Division - C - China Financial Situation: liemeyer suggestions - 12/23/41 146 Coudenhove-Kalergi, Count R. N. See Austria - D - Defense, National Commitments for Industrial Facilities for Defense Production through September 30, 1941: Chart - 12/24/41 303 a) Copy to FDR 302 State sales and use taxes of expenditures for defense purposes: Congressman Cochran (Missouri)--HMJr correspondence - 12/24/41 307 Defense Savings Bonde See Financing, Government - & - exchance Market Resumes - 12/23-24/41 178,360 exports Exports to Russia, China, surma, Hong Kong, Japan, France, and other blocked countries, week ending December 13, 1941 - White report 131 Revication of license control for aircraft, etc. - Office of Export Control order - 12/24/41 342 Regraded Unclassified - 1 - Book Page Financing, Government Defense Savings Bonds: Gallup Poll discussed by HKJr and Graves - 12/23/41 477 90 a) See Book 480, page 255 Estimated number of units of Series à savings bonds required to produce (a) $750 million per month, (b) $450 million per month - Heas memorandum - 12/24/41 320 United States Savings Bonds, Series E, Type A - reports of December 24 and December 25, 1941 323 Summary of sales of Defense Savings Bonds, Series S - $ - 12/24/41 325 - G - Gold Algiers to Marssille shipments reported by American Congul General, Algiere - 12/23/41 163 - Я - Hemp Fiber, Manila See Philippine Islands - L - Lend-Leame Commitments for Industrial Facilities for Defense Production through September 30, 1941: Chart - 12/24/41 303 a) Copy to FDR 302 - M - Manila Hemp Fiber See Philippine Islands Marseille See Gold Military Reports Reports from London transmitted by Campbell - 12/23/41 179,182 War Department bulletins: German Armored Assault Artillery - 12/23/41 187 Activities of the Fifth Column - 12/24/41 373 "The War This Week" - 12/18-24/41 - Coordinator of Information report - 12/24/41 362 Kamarck summary - 12/24/41 363 Excerpts of Possible Interest from Military Journals - Kamarck report - 12/24/41 366 Regraded Unclassified - P - Book Page Philippine Islands Manila Hemp Fiber (same as marihuana): Shortage of and solution for United States discussed in Gaston memorandum - 12/23/41 477 109,111 Procurement Division See Appointments and Resignations - R - - Revenue Revision State sales and use taxes of expenditures for defense purposes: Congressman Cochran (Missouri)--HMJr correspondence - 12/24/41 307 - S - Shipping Coordination as proposed by Navy for safeguarding shipping in territorial waters of United States: Proposed draft of instructions for Customs Collectors and Agents sent to Navy for comment - 12/24/41 339 = - T - Taxation See Revenue Revision Tyler, Royall HMJr sends thanks for letters and memoranda and asks continuance . - 12/23/41 175 - V - - Vanderpoel, Robert P. (Financial Writer, Chicago American) See Appointments and Resignations 1 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Press Service Tuesday, December 23, 1941. No. 29-23 12/22/41 The Secretary of the Treasury announced last evening that the tenders for $150,000,000, or thereabouts, of 82-day Treasury bills, to be dated December 24, 1941, and to mature March 16, 1942, which were offered on December 19, were opened at the Federal Reserve Banks on December 22, The details of this issue are as follows: Total applied for - $352,938,000 Total accepted - 150,174,000 Range of accepted bids: (Excepting two tenders totaling $220,000) High - 99.966 Equivalent rate approximately 0.149 percent Low - 99.927 If " If 0.320 M Average Price - 99.933 " If If 0,295 If (74 percent of the amount bid for at the low price was accepted) -000- Regraded Unclassified 2 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Press Service Tuesday, December 23, 1941. No. 29-22 Secretary of the Treasury Morgenthau announced today that definitives of the 2-1/2 percent Treasury Bonds of 1967-72, in coupon form, will be ready for delivery on and after January 19, 1942, against the surrender of full-paid interim certificates issued October 20, and December 15, 1941, in lieu of such bonds. Exchanges will be governed by the pro- visions of Treasury Department Circular No. 675, dated December 15, 1941, and will be conducted through the Federal Reserve Banks and Branches, and the Treasury Department, Washington, Special arrangements may be made between incorporated banks and trust companies and the Federal Reserve Banks for the exchange of interim certificates for definitive bonds for their own account and for account of their customers, and individuals who hold interim certificates are advised to consult their own bank with respect to the exchange. The official circular is attached, -oOo- Regraded Unclassified 3 Tille 11-Maney and Finances Treasure Chapter 11-Fiscal Service Subchapter B-BUREAU OF THE PUBLIC DERT PART 110-REGULATIONS GOVERNING EXCHANGES OF INTERIM CERTIFICATES OF 255% TREASURY BONDS OF 1967-12 FOR DEFINITIVE COUPON BONDS 1941 TREASURY DEPARTMENT, Department Circular Na 673 OFFICE OF THE SECRETARY, Final Service Nurveu of the Public Debt Washington, December 15, 1041- To Holders of full-paid interim certificates of 2½ percent Treasury Bonds of 1967-72, banks and trust companies incorporated in the United States under Federal or State law, and any others concerned: Soc: 310.0 Scope of regulations-The provisions of this circular are hereby prescribed as the regulations to govern the exchange of full-paid interim certificates, issued pursuant to Treasury De- partment Circulars No. 368, Revised, dated October 15, 1941 (6 FR 5289), No. 670, dated October 9, 1941 (6 FR 5150), and No. 672, dated December 4, 1941 (6 FR 6257). for definitive 2½ per- cent Treasury Bonds of 1967-72, dated October 20, 1941, in bearer form with coupons covering intorest to maturity attached (which may hereinafter be referred to as definitive coupon bonds, definitive bonds, or definitives)." See. 310.1 Official agrneico.-The official agencies for the exchange hereunder of interim certifi- cates for delinitive coupon bonds are the Federal Reserve Banks and their Branches, and the Trens- ary Department. Division of Loans and Currency, Washington, D.C. Sec. 310,2 Exchanges at official agencies.-Exchanges may be effected beginning January 19, 1912. Interim certificates to be exchanged must be presented and surrendered to an official agency, at the risk and expense of the holders, and, unless delivered in person, should be forwarded by reg- istered mail or prepaid express. Each delivery of interim certificates must be accompanied by appropriate written advice transmitting the certificates and giving instructions for the delivery of the delinitives issued in exchange (see appropriate form appended to this circular). Exchanges will be made on a like par amount basis, and unless other instructions are given in the advice, defin- itives of the highest possible denominations will be delivered. No charge for the exchange will be made by the United States, and deliveries of definitives will be made within the United States, its ter- ritories and possessions at the expense and risk of the United States, No deliveries elsewhere will be made, nor will delivery of definitives be made other than to the party presenting the interim certificates. IMPORTANT: SEE THE NEXT FOLLOWING SECTION FOR SPECIAL ARRANGEMENTS FOR PRESENTATION OF INTERIM CERTIFICATES TO FEDERAL RESERVE BANKS BY BANKS AND TRUST COMPANIES. Sec. 310.3 Special arrangements for banks and trust companies.-It is expected that incorpo- rated banks and trust companies within the United States, generally will offer their services to their customers in offecting exchanges of intorim certificates for definitive bonds without expense to the holders, and, accordingly, any holders of interim certificates who avail themselves of any such offer should, of course, present and surrender their interim certificates through such institutions. Any such bank or trust company may arrange with the Federal Reserve Bank of its district for the trans- portation of interim certificates to the Federal Reserve Bank by registered mail at the expense and risk of the United States. Full information concerning such arrangements will be furnished by Federal Reserve Banks to incorporated banks and trust companies upon application. The interim certificates forwarded by incorporated banks and trust companies to the Federal Reserve Banks for exchange pursuant to such arrangements must be clearly stamped on the face, in indel- The regulations presented in Dils grob to full-poid interim pertificates the lesue of which TM invident to Ure less of 14 % Treas w// Bonds uf 1967-72 pursuant to the authority at the Semnd Liberty Hand Ast. MP amuled. 10-25-22-1 Regraded Unclassified 4 : TREASURY DEPARTMENT If THE for ible Ink. with A legend reading as follows: "Presented for exchange for definitive coupon bonds by Form F0 1931 til All such interim certificates so stamped stall FORM OF ADVICE TO ACCOMPANY FULL-PAID INTERIM CERTIFICATES OF 212% TREASURY BONDS OF - of at e - 1967-72 PRESENTED FOR EXCHANGE FOR DEFINITIVE COUPON BONDS Unnerforth be deemed nonnegotimble and will be necepted by the Foderal Reserve Bank only who presented for exchange by OF for account of the bank or trust company named thereon, Such as- rangements may not be made with the Treasury Department, nor may they be made by Indivis. (Indicate wile IIF institutions everpt as herein provided. Deliveries of dellaitive bonds issued upon such which) exchanges will be made to the incorporated bank or thist company presenting the interim certificates To FEDERAL RESERVE BANK OF Tur eschange, and will be made at the expanse and risk of the United States. Incorporated banks TREASURY DEPARTMENT. Division of Loans and Currency, Washington, D.C. not trust companies, in effecting exchanges pursuant to this paragraph, act as agents of the holdery of the interim certificates and not as agents of the United States, and the United States will not be Pursuant to the provisione of Treasury Department Circular No. 675, dated December 15, 1041, responsible for the receipt or custody of the interin certificates or for the custody or delivery of the the undersigned presents and surrenders herewith full-paid interim certificates of the 24% Treasury definitive Dends by the buils or trust companies. The provisions of this section may be extended Bonds of 1907-72 (as listed below), and requests their exchange for a like face amount of delinitive la private banks doing a noighized lanking business and approved by the Federal Reserve Bank ensipors bonds (in the denominations indicated), to be delivered to the undersigned at the address of (hy distriet in which located. given. See, SIOLL Authority of Federal Rémerve Bouka-Federal Reserve Banks, as fiscal agents of the United States, and their branches are authorized to perform all necessary acts within the purs Interim certificates berewith Definitive bonds to be issued Denomination View of this circular, and to earry ont such instructions in connection therewith as may, from Number of Serial numbers of certificates* Face amount Number of Fact amount Lune to time, be given by the Secretary of the Trensury. proces pieces See. 210.5 Sveretary of the Treasury reserves the right at any time or $50 $ $ from time Lo time to amend, exploiment, or withdraw any or all of the provisions of this circular, $100 D. W. Bell, Acting Secretary of the Treasury. $500 $1,000 $5,000 $10,000 $100,000 Total amounts (must agree) MH $ II apose is ant ample for Insure. back of form er experise ⑉ be send. Signature Name (Elease pricier type) Address (Please printer troll Dated 1942. . - - (Filed with the Division of the Enderal Register, December 23, 1941) Regraded Unclassified 5 December 23, 1941 11:03 e.m. Harold Graves: again HMJr: Yes. G: and I concluded that I ought to find some other method of reaching Dougherty with this very delicate thing than by telephone. HMJr: Yes. G: Dan and I both agreed that we're ant to be listened to. HMJr: Listened to? 6: Yes. HMJr: Where? 0: Well, he knows of instances where telephone HMJr: What's that? G: I say Dan knows of instances where telephone con- versations have been overheard HMJr: Oh. G: and I have with me here now, Mr. Coyne HMJr: Yes. G: whom perhaps you remember at Chicago HMJr: Yes. G: who has been working with Mr. Dougherty in Massachusetts and knows him intimately, and I WAB planning to have Mr. Coyne go to Boeton tonight. He was going anyway tomorrow. HMJr: Good. G: And explain this thing face to face to Dougherty HMJr: Good. Regraded Unclassified 6 - 2 - G: .....to save that risk, if that's satisfactory to you. HMJr: Yes. And how about seeing other people up there? G: Well, he can do that. I think Lew Dougherty. I'll explain the whole thing fully to Mr. Coyne. HMJr: How about what's-his-name, Poland? G: Poland is out of town. I'm going to reach him, too, in the same way. HMJr: Good. That's all right. G: It seemed to me to be a very much safer way to do it. HMJr: That's all right. Well, then - - that's good. Now, look, at eleven-thirty I would like to see you, and Kuhn, and Vincent Callahan about future radio programs. G: Yes. Very good, we'll be in there. HMJr: See? G: Yes, sir. HMJr: Odegard's not in town. G: No. HMJr: What? G: No, he's not here. HMJr: Well, the three of you at eleven-thirty. G: Yes, sir; we'll be there. HMJr: Thanks. G: Yes, sir. Good-bye. 7 December 23, 1941 11:27 a.m. HMJr: Hello. Operator: Ronald Ransom. HMJr: Hello. Ronald Ransom: Hello. HMJr: Ronald. R: Yes. HMJr: Henry Morgenthau. R: Yes, Henry. HMJr: Ronald, you remember yesterday - or the day - yesterday I called you up and said we'd like to have you cooperate with us in preparing a Budget message for the President? R: Yes. HMJr: And I asked to have Goldenweiser sent over? R: Yes. He went over and reported to me later in the day that he had attended a conference. HMJr: Well, let me ask you a question. Does Dr. Hanson work for the Federal Reserve Board? R: Yes. He's on a part time basis. We had to let him keep on his job at Harvard, but he's here every Wednesday and Thursday. Whether that will be true this week, being Christmas week, I don't know, but I can find out. HMJr: Well, did you know..... R: He is not scheduled to be here until January the fifth, but he could come back if you have reason to want him. HMJr: Did you know that on the eighteenth Hanson called a meeting to consider the policy of 8 - 2 - the coming Budget message? R: No, I did not. HMJr: Well, he did. R: He held it on the eighteenth of this month? HMJr: Yes, sir. R: For what day, do you happen to know? HMJr: Well, it was on the eighteenth. R: Oh, he had a meeting on the eighteenth? HMJr: Yeah. R: Do you know who attended? HMJr: Well, here. The Vice President sends me the following letter. R: Yes. HMJr: "Enclosed is a memorandum sent me by Ezekiel which has some suggestions you might want to turn over to your tax people." R: Yes. HMJr: And enclosed is e memo. R: Yes. HMJr: "Yesterday" - this was written on December 19th - "Dr. Hanson of the Federal Reserve Staff, called a meeting to consider the tax policy and the coming Budget message in relation to inflation prospects. Economists from the Budget Bureau, OPM and OPA were also present, amonget others." R: Yes. HMJr: Then it goes ahead with a whole program. R:- My God. HMJr: Now that doesn't look like cooperation..... R: No. 9 - 3 - HMJr: between the Fed and ourselves. R: I know nothing whatever about it - what you tell me 18 entirely new - whether it was some- thing that Hanson was just doing on his own or whether it was done with the knowledge of anyone over here, I can't say; but I will cer- tainly find out and let you know. HMJr: Would you let me know personally; because it's quite upsetting to me. I'm trying BO hard to have good feeling and good cooperation between the Fed and ourselves. R: Yes. HMJr: And then to have the Vice President send some- thing like this to me, it just makes me sick. R: Well, I can't understand it at all; and I had word yesterday afternoon from Marriner's secre- tary that your secretary told her you were quite anxious for Marriner to know that you had asked for the use of some of Goldenweiser's time. HMJr: That's right. R: I was calling him on another matter and told him that, and he said he was delighted to know that you wanted to use Goldenweiser and delighted that he was available and to thank you for letting him know. So I can't say - he never mentioned the Hanson thing to me, BO I can't believe it was something he knew of. HMJr: Yes. R: Hanson is - the work he's doing for us is wholly related to some studies in the long-distance range, economically speaking, of the post-war world. HMJr: Well, look, this has no more to do with that than the weather outside. There are definite recommendations on - here was Paul all yesterday afternoon and all evening R: Yes. HMJr: working with Goldenweiser there..... 10 - 4 - R: Yes. HMJr: ..... trying to get everything in Washington to help us to help the President. R: Yes. HMJr: And here was another meeting held last week on the same subject, called by a representative of the Federal Reserve Board, and we're kept in the darkness on it. R: Let's say by a staff member of the Board. Don't let's say a representative, because I will under- write in the dark the idea that he wasn't representing us in doing that. HMJr: Well R: He wasn't representing me. HMJr: Well, it makes both you and me look a little foolish. R: I think it does. I'll share that foolish feeling with you; but I'll find out about it and let you know. HMJr: And I'd like very much to know who was there. R: I will let you know both at once, just as soon as I can get that information. HMJr: Just who was there. R: Yes. HMJr: Will you do that? R: All right. HMJr: But I'm trying awfully hard in these days to keep good feeling all around. R: Why, that's essential. It's absolutely necessary, and I'll say you've been doing your part one hundred per cent. 11 - 5 - HMJr: Thank you Bo much. R: And I'll call you back as soon as I can get this information. HMJr: Thank you 80 much. 12 December 23, 1941 11:40 a.m. HMJr: Hello. Operator: Mayor Tobin. HMJr: Hello. Operator: Go ahead. HMJr: Hello. Mayor Tobin: Hello. Mr. Secretary? HMJr: Henry Morgenthau speaking. T: Yes. HMJr: How are you? T: I couldn't talk to you last night. I W&8 right in a public place, in the Boston Post, on the first floor. HMJr: Oh. T: And there were a great many people around. HMJr: I get you. T: I don't know whether you know the real story behind that feeling, and the President isn't involved in any way. HMJr: Oh. T: It's a question of - I think the Senator thinks that Jim - you know who I mean..... HMJr: I know. T: induced, Henry, his candidate in opposition for the Senate, to run. HMJr: Oh, yes. T: And that he didn't help - the senior Senator 13 N I I feels that he didn't get any help from Jim at all, but in fact was harmed. HMJr: Well, I've - Walsh has told me that. T: Yes. HMJr: But that oughtn't to preclude my being able to get a man T: No. Well, he's going to be in Clinton today. HMJr: Yes. T: He - I don't think he'e home AB yet. HMJr: Yes. T: And he alwaye comes in town, 80 I'll call him this afternoon HMJr: Fine. T: and find out when he's coming to Boston, because he usually finds an excuse to get in town, if only for a haircut, and I'll try and see him then. HMJr: Will you do that? T: I'll definitely do it. HMJr: Because this 18 - after all, we are at war. T: Yes. HMJr: And I should think they could let bygones be bygones. T: How long since you've talked to him, Mr. Secretary? HM~r: I talked to him Friday. T: Friday. HMJr: And he said he wanted until Tuesday, but he keeps putting me off and putting me off. Regraded Unclassified 14 - 3 - T: Did he appear to be adamant? HMJr: No. T: He didn't. HMJr: He did not. He was very nice with me. T: Well, you know, Dave 18 a nice man. HMJr: He was very nice with me, but he wouldn't - I mean, very sweet with me and said he appreciated it and everything else, but he wouldn't say yes. He was - I'd say he was gentle with me. T: Yes. HMJr: But I couldn't get anything out of him. T: Well, I'll make it my business between now or on Christmas day - sometime today, tomorrow, or Christmas day - to talk with him. HMJr: Would you do that? T: Yes. HMJr: It would be a nice Christmas present for me. T: All right, then; I'll do my best. HMJr: Is there any person up there that has any par- ticular influence with him? T: Well, Clif Coffrey would have, but he passed away. HMJr: Yes. T: Then the other man, Frank Plumerfoot T good Lord.- past away two weeks ago. HMJr: Yes. T: Judge Connolley of Brighton probably would be the one man he might listen to. HMJr: Who? 15 - 4 - T: Judge Connolley of Brighton. HMJr: Wait a minute. T: Judge Connolley. HMJr: C-o-n..... T: C-o-n-n-o-1-1-e-y. HMJr: of Brighton. ?: Yes. He was an old - he'e a District Court Judge who was appointed by the Senstor when he was Governor about twenty-five or twenty- eight years ago. HMJr: And he might. T: Well, he'd listen to him. The one man who was his most intimate and closest friend was Frank , but he passed away two weeks ago. HMr: And there are no newspaper T: Well, I tell you HMJr: Go ahead. T: Mr. Doyle - but he's a Republican HMJr: Yes. T: of Leomineter HMJr: Yee. T: he's very high in the DuPont organization HMJr: Yes. T: is 8 very intimate friend of his. HMJr: Hr. Doyle. T: Yes, of Leominster, Massachusetts. Regraded Unclassified 16 - 5 - HMJr: of what, Massachusetts? T: Leominster. HMJr: How do you spell that? T: L-e-o-m-1-n-s-t-e-r. HMJr: L-e-o-n..... T: L-e-o-m. HMJr: Yes. T: .....1-n..... HMJr: Yes. T: .....s-t-e-r. Now, Mr. Doyle 18 a very wealthy man - a millionaire many times over. HMJr: Yes. T: Joe Casey licked him for Congress four years ago, HMJr: Yeah. T: But Joe would be able to probably give you some angles on Mr. Doyle. HMJr: Joe T: But then if you put too many people on the Senator, he might hunch his back up. HMJr: I see. T: But Mr. Doyle, if you got him right, could help. HMJr: Yes, I see. T: But he 18 a Republican. HMJr: I Bee. T: But very friendly with DuPont people, because he sold - there's some of his big holdings in that section - to the DuPonts. 17 - 6 - HMJr: I see. Okay. If you get anything, let me know. T: I'll certainly do that. HMJr: Ever 80 much obliged. T: Fine. HMJr: Thank you. 18 Massachusetts men who might have influence with Senator Walsh in connection with Mr. Landis' ap- pointment. / 23141. - - Judge Ju Brighton Connolly District Court Judge mr. Doyle. w Leoninester of blupout Co. mass. 19 December 23, 1941 11:55 a.m. RE DEFENSE SAVINGS BONDS Present: Mr. Graves Mr. Kuhn Mr. Callahan Mrs. Klotz H.M.JR: I am sorry to have kept you all waiting but I am sure you have had plenty to talk about. MR. KUHN: We were in our offices. H.M.JR: Sit down. I want to say something on an entirely different thing. I would like you (Graves) to stay behind afterward. Harold Graves said last night that he thought we were going to start another Treasury Hour. MR. CALLAHAN: That is right. H.M.JR: Well, now, if we do it and before we sign up anybody, I want to know about it, but if we are going to to into another Treasury Hour I want the set-up entirely different, see. I want an entirely different kind of people. I have talked about it, but I have waited now until we get on the new hour, you see. I don't know whether you can get & man like "The Man Who Came to Dinner, what is his name? MR. KUHN: Woolcott. H.M.JR: Alexander Woolcott, to be master of ceremonies, but at least I would like to make the effort, you see. MR. KUHN: Permanent master of ceremonies? H.M.JR: Permanent master of ceremonies, and then I Regraded Unclassified 20 - 2 - would like you to start with that, you see, and then if we can get him I want a different type of people to advise us on the music. We have gone along now and we have pretty well exhausted the kind of thing, you see, and if we are going to do this thing, the man that I would like to advise us on this thing is the man from the Juillard School. What is his name? MRS. KLOTZ: Damrosch? Stravinsky? H.M.JR: From the Juillard School. MR. KUHN : What kind of program would this be, Mr. Secretary? H.M.JR: It is going to be the kind of program I will map out. I mean, I am going to have these two men come down to talk to them and give them my ideas just the way I gave Disney my ideas. I think the thing calls for & different type of program. What is that man's name? MRS. KLOTZ: I know who you mean. H.M.JR: Well, he is at the Juillard School and if I can't have the kind of program I want, I don't want it, you see. If you can get me this first man, Woollcott, and this other man to come down and talk with me and let me talk this thing out with them, and if I can't get those kind of people, then I don't want any program at all, see. The other thing has served its purpose and it has been very useful but I want a new chapter and a new deal on our Treasury Hour. I want to raise the tone of it. MRS. KLOTZ: The plane. H.M.JR: I want to raise it and if I can't have it the way I want it - I am not going to spend a lot of time, but I sat here with Disney in two sessions and he and I sparked and he got the thing and I understand he liked what I said and I got over my stuff and then I could forget it. Now, he is the man who leads the Chautauqua orchestra. Regraded Unclassified 21 - 3 - MR. KUHN: Chautauqua? H.M.JR: Yes, New York. And he goes back - during the last World War he had the bandmaster's school in Paris. MR. KUHN: I don't know who that is. MRS. KLOTZ: It sounds something like Stravinsky, but it isn't. H.M.JR: Well, we have correspondence with him. MRS. KLOTZ: Yes. H.M.JR: He is the man I wrote to. MR. KUHN: Oh, Stoessel. H.M.JR: Stoessel, Albert Stoessel. But I would like, if we are going to do this, to sit down with two of those people and if you can't get those, I will make other suggestions. I want to sit opposite them and I want to exchange ideas, but if I can't get the kind of program that I feel that I want, then I don't want any program. MR. KUHN: Well, we have been talking this morning in terms of 8. complete new deal. Vince and I have been talking about it. H.M.JR: But Ferdie, I can't have the resistance that I always get on this thing, you see. I mean, I want to talk opposite these people and I haven't got enough energy or time to try to break down the resistance in the Treasury against what I feel is inside of me. I mean, if I try to give my ideas to somebody else to give them to Disney, I never would get anywhere. Now, Disney and I went to town and he liked it and he is doing things. So I would like to do it this way. It may be a complete flop, but at least I will be responsible. MR. CALLAHAN: It can't flop with the right people. H.M.JR: Well, you can't flop with people like this. Regraded Unclassified 22 - 4 - I mean, real Americans, and at the top of their professions. You can't flop with people like this. I can't be relying on - I don't want to criticize, but what we have had is fine and Dietz is tired out and so forth and so on. I want something fresh. So the minute you know that we are going to have a program, if you would let me know. MR. CALLAHAN: All right, sir. H.M.JR: See, then I would like to sit down with them. Do you see anything wrong with that? MR. GRAVES: Not B. thing wrong with it. H.M.JR: Do you see anything wrong with that, Ferdie? MR. KUHN: I don't. I think the whole thing calls for & complete shakeup, particularly of the people who have been producing it in New York. MRS. KLOTZ: The criticisms that we get - that I have gotten, they don't even want to listen to the thing. MR. KUHN: Well, the thing has been bad for the last two or three weeks. MRS. KLOTZ: More than that. MR. KUHN: The people who have been running it need to be shifted and somebody ne eds to be put in charge up there so that we are not worried about it. MR. CALLAHAN: We have been unhappy about it. H.M.JR: Well, anyway, what is done is done. There is no use - with my new policy, I am not going to take my time to discuss water over the dam. I can't pull it back up. You can't make water run up hill. It is over. But I would like you (Callahan) personally to immediately get on first to Woollcott, and if Woollcott would come, then I would like him to come down here and talk about it. I don't want to wait until we get - Woollcott will be the more difficult of the two to get, you see, and then if we can, I want to get hold of Stoessel too. Regraded Unclassified 23 - 5 - MR. CALLAHAN: I am sure you can count on Woollcott, depending upon his health. I am sure you can get him if his health will permit it. MR. KUHN: You don't know what other calls have been made on him. MR. CALLAHAN: I don't know of any. I haven't heard of any. We had him on one program and he was very good. H.M.JR: He was wonderful. He did the Irving Berlin thing. It was one of the top things. Would you start that for me? MR. CALLAHAN: Sure. H.M.JR: Well, that is all that I wanted to say. Now, what should I tell the Director of the Budget? MR. KUHN: I talked to Jake Viner again this morning about it and Jake Viner, having seen the original invitation which called for defense financing, said that unless you wanted to make a rousing talk about the war to cancel it. H.M.JR: Just - well, I will have to call him up and say something. I will call him up and tell him something. MR. KUHN: The only alternative we have is what Herbert Gaston was thinking of yesterday, but in view of what is going on this week, I don't see how you can,- H.M.JR: No, I don't either. MR. KUHN: -ao you? H.M.Jr: Thank you very much. Regraded Unclassified 24 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE December 23, 1941 TO Mrs. Klotz FROM Mr. Callahan M Would you please tell the Secretary that the program AMERICA PREFERRED, broadcast over the Mutual Broadcasting System, is being changed after the first of the year. The last program on Thursday night will be January 1st. Thereafter the programs will be heard over the Mutual Broadcasting System on Saturday nights from 8:00 to 8:30 PM Washington time, beginning January 10th. VAC Regraded Unclassified UNITED STATES SAVINGS BONDS Comparative Statement of Sales During First Nineteen Business Days of December, November and October 1941 (October 1-22, November 1-25, December 1-22) On Basis of Issue Price (Amounts in thousands of dollars) : : Amount of increase : Percentage of Increase Sales : : or Decrease (-) : or Decrease (-) Item : : : : December : November : December : November : December : November : October : over : over : over : over : : : : November : October : November : October Series 1- - Post Offices $ 65,200 $ 31,885 $ 30,004 $ 33,315 $ 1,881 104.5% 6.3% Series 1- - Banks 129,756 59,182 56,848 70,574 2,334 119.2 4.1 Series I - - Total 194,955 91,066 86,852 103,889 4,214 114.1 4.9 Series F - Banks 18,788 15,237 15,971 3,551 - 734 23.3 - 4.6 Series G - Banks 100,367 86,395 87,663 13,972 I 1,268 16.2 - 1.4 Total $314,110 $192,699 $190,487 $121,411 $ 2,212 63.0% 1.2% Office of the Secretary of the Treasury, Division of Research and Statistics. December 23, 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 Unclassified UNITED STATES SAVINGS BONDS Daily Sales - December 1941 On Basis of Issue Price (In thousands of dollars) Post Office Bond Sales Bank Bond Sales All Bond Sales Date Series E Series E Series ? Series G Total Series El Series F 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 3 1,510 2.734 870 5,289 8,893 4,244 870 5,289 10,403 4 2,411 4,036 726 7,530 12,292 6,447 726 7,530 14,703 5 2,015 4,805 1,152 12,357 18,314 6,820 1,152 12,357 20,329 6 1,001 2,293 656 2,776 5,725 3,294 656 2.776 6,726 8 3,282 4,764 1,011 3,810 9,585 8,046 1,011 3,810 12,866 9 1,828 3,877 601 4,996 9,475 5,706 601 4,996 11,304 10 1,651 3.566 491 2,612 6,668 5,217 491 2,612 8,320 11 1,909 4,763 719 3,423 8,905 6,672 719 3,423 10,814 12 2.773 5,012 658 3,768 9,437 7,785 658 3.768 12,211 13 2,767 5,030 584 2,120 7.734 7,798 584 2,120 10,501 15 7,185 11,679 1,022 4,462 17,162 18,864 1,022 4,462 24,347 16 2,113 3,956 893 1,901 6,750 6,069 893 1,901 8,863 17 4,164 9,750 1,180 6,327 17,257 13,914 1,180 6,327 21,421 18 5,382 11,630 1,337 6,826 19,793 17,012 1,337 6,826 25,175 19 5,995 10,205 1,172 5,214 16,591 16,201 1,172 5,214 22,586 20 4,091 11,890 1,270 5,921 19,081 15,981 1,270 5,921 23,172 22 10,916 23,269 2,490 8,067 33,826 34,185 2,490 8,067 44.742 Total $ 65,200 $129,756 $ 18,788 $100,367 $248,911 $194,955 $ 18,788 $100,367 $314,110 Office of the Secretary of the Treasury, Division of Research and Statistics. December 23, 1941. Source: All figures are deposite 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. 26 Regraded Unclassifie U. S. SAVINGS BONDS, SERIES E, TYPE 1 STOCK ACCOUNT OF LOANS AND CURRENCY VAULT Report of December 23, 1941 Total $25 $50 $100 $500 $1,000 Pieces On hand c.o.b. December 22 14,713 4,262 10,996 7,676 61,203 98,850 Received from Bureau December 23 180,000 85,000 35,000 300,000 Total 194,713 89,262 45.996 7,676 61,203 398,850 Shipments December 23 181,268 85,700 41,425 260 5,243 313,896 On hand c.o.b. December 23 13,445 3,562 4,571 7,416 55,960 84,954 Estimated deliveries to be received from Bureau of Engraving and Printing: Wednesday, December 24 220,000 80,000 25,000 325,000 Thursday, December 25 225,000 80,000 35,000 340,000 Frday, December 26. 150,000 50,000 40,000 240,000 NOTE: The bureau advises that the aggregate number of pieces for all denominations to be delivered each day will not be less than the figures shown but that there may be variations as between denominations. Regraded Unclassified REQUISITION ACCOUNT OF ISSUING AGENTS Report of December 23, 1941 Total $25 $50 $100 $500 $1,000 Bieces Due on requisitions c.o.b. Dec. 22 Federal Reserve Banks 257,000 299,000 367,000 87,000 61,000 1,071,000 P. 0. Department 466,000 263,000 240,000 20,000 20,000 1,009,000 Others Total 723,000 562,000 607,000 107,000 81,000 2,080,000 Requisitions received Dec. 23 Federal Reserve Banks 203,468 193,600 100,825 35,220 35,228 568,341 P. O. Department Others 3,800 1,100 600 40 15 5.555 Total 207,268 194,700 101,425 35,260 35,243 573,896 Totale Federal Reserve Banks 460,468 492,600 467,825 122,220 96,228 1,639,341 P. 0. Department 466,000 263,000 240,000 20,000 20,000 1,009,000 Others 3,800 1,100 600 40 15 5,555 Total 930,268 756,700 708,425 142,260 116,243 2,653,896 Shipments Dec. 23 Federal Reserve Banks 97,468 54,600 30,825 220 228 183,341 P. 0. Department 80,000 30,000 10,000 5,000 125,000 Others, 3,800 1,100 600 40 15 5,555 Total 181,268 85,700 41,425 260 5,243 313,896 Due on requisitions c.o.b. Dec. 23 Federal Reserve Banks, 363,000 438,000 437,000 122,000 96,000 1,456,000 P. O. Department 386,000 233,000 230,000 20,000 15,000 884,000 Others Total 749,000 671,000 667,000 142,000 111,000 2,340,000 2 Regraded Unclassified U. S. SAVINGS BONDS, SERIES 3, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF BOSTON Report of December 23, 1941. $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 15,000 5,000 20,000 .... .... 40,000 Requisitions received December 23 20,000 20,000 20,000 .... .... 60,000 Total 35,000 25,000 40,000 .... .... 100,000 Shipments December 23 10,000 5,000 5,000 .... .... 20,000 Due on requisitions c.o.b. December 23 25,000 20,000 35,000 .... .... 80,000 29 Regraded Unclassified U.S. SAVINGS BONDS, SERIES 3, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF NEW YORK Report of December 23, 1941 $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 39,000 40,000 95,000 30,000 20,000 224,000 Requisitions received December 23 100,000 100,000 25,000 25,000 25,000 275,000 Total 139,000 140,000 120,000 55,000 45,000 499,000 Shipments December 23 20,000 10,000 10,000 ...... ***** 40,000 Due on requisitions c.o.b. December 23 119,000 130,000 110,000 55,000 45,000 459,000 30 Regraded Unclassif 31 U. S. SAVINGS BONDS, SERIES E, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF PHILADELPHIA Report of December 23, 1941 $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 48,000 42,000 65,000 36,000 40,000 231,000 Requisitions received December 23 ..... ...... ...... ...... ..... ...... Total 48,000 42,000 65,000 36,000 40,000 231,000 Shipments December 23 5,000 5,000 5,000 ...... ..... 15,000 Due on requisitions c.o.b. December 23 43,000 37,000 60,000 36,000 40,000 216,000 31 Regraded Unclassif 32 U. S. SAVINGS BONDS, SERIES 3, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF CLEVELAND Report of December 23, 1941 $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 42,000 31,000 20,000 10,000 .... 103,000 Requisitions received December 23 .... .... .... .... .... ....... Total 42,000 31,000 20,000 10,000 .... 103,000 Shipments December 23 15,000 5,000 ...... .... .... 20,000 Due on requisitions c.o.b. December 23 27,000 26,000 20,000 10,000 .... 83,000 32 Regraded Unclassif 33 U.S. SAVINGS BONDS, SERIES B, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF RICHMOND Report of December 23, 1941 $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 4,000 14,000 12,000 --- -- 30,000 Requisitions received Decem her 23 468 600 825 220 228 2,341 Total 4,468 14,600 12,825 220 228 32,341 Shipments December 23 4,468 5,600 825 220 228 11,341 Due on requisitions c.o.b. December 23 ..... 9,000 12,000 1 I 21,000 33 Regraded Unclas U.S. SAVINGS BONDS, SERIES E, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF ATLANTA Report of December 23, 1941 $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 10,000 6,000 3,000 -- I 19,000 Requisitions received December 23 i ----- ----- --- --- ------ Total 10,000 6,000 3,000 I --- 19,000 Shipments December 23 5,000 ----- ----- ! ! 5,000 Due on requisitions c.o.b. December 23 5,000 6,000 3,000 - I 14,000 Regraded Unclassified 35 U. S. SAVINGS BONDS, SERIES 1, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF ATLANTA, NEW ORLEANS BRANCH Report of December 23, 1941 $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 8,000 4,000 1 -- I 12,000 Requisitions received December 23 I --- --- ! --- I Total 8,000 4,000 --- --- 1 12,000 Shipments December 23 2,000 1,000 --- ---- --- 3,000 Due on requisitions c.o.b. December 23 6,000 3,000 --- - - 9,000 35 5 Regraded Unclassi U. S. SAVINGS BONDS, SERIES E, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF CHICAGO Report of December 23, 1941 $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 5,000 30,000 50,000 85,000 Requisitions received December 23 50,000 50,000 50,000 10,000 10,000 170,000 Total 55,000 80,000 100,000 10,000 10,000 255,000 Shipments December 23 5,000 5,000 5,000 ------ 15,000 Due on requisitions c.o.b. December 23 50,000 75,000 95,000 10,000 10,000 240,000 3 Regraded Unclassified 37 U. S. SAVINGS BONDS, SERIES 3, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF ST. LOUIS Report of December 23, 1941 $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 8,000 20,000 11,000 2,500 41,500 Requisitions received December 23 8,000 8,000 5,000 ----- 21,000 Total 16,000 28,000 16,000 2,500 ----- 62,500 Shipments December 23 5,000 3,000 ------ ---- ----- 8,000 Due on requisitions c.o.b. December 23 11,000 25,000 16,000 2,500 ----- 54,500 37 w Regraded Unclassified U. S. SAVINGS BONDS, SERIES E, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF MINNEAPOLIS Report of December 23, 1941 $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 5,000 10,000 5,000 I - 20,000 Requisitions received December 23 25,000 15,000 ----- ---- --- 40,000 Total 30,000 25,000 5,000 ---- ---- 60,000 Shipments December 23 5,000 3,000 - ---- - 8,000 Due on requisitions c.o.b. December 23 25,000 22,000 5,000 ---- ---- 52,000 38 Regraded Unclassif 39 U. S. SAVINGS BONDS, SERIES E, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF KANSAS CITY Report of December 23, 1941 $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 7,000 10,000 11,000 2,000 - 30,000 Requisitions received December 23 ---- ----- ---- Total 7,000 10,000 11,000 2,000 ---- 30,000 Shipments December 23 5,000 5,000 ------ ----- ---- 10,000 Due on requisitions c.o.b. December 23 2,000 5,000 11,000 2,000 ---- 20,000 39 Regraded Unclassified U. S. SAVINGS BONDS, SERIES 3, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF DALLAS Report of December 23, 1941 $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 21,000 22,000 20,000 1,500 1,000 65,500 Requisitions received December 23 ----- ----- ----- ---- ----- I Total 21,000 22,000 20,000 1,500 1,000 65,500 Shipments December 23 6,000 2,000 ----- --- ------ 8,000 Due on requisitions c.o.b. December 23 15,000 20,000 20,000 1,500 1,000 57,500 40 Regraded Unclassif U.S. SAVINGS BONDS, SERIES E, TYPE A REQUISITION ACCOUNT OF THE FEDERAL RESERVE BANK OF SAN FRANCISCO Report of December 23, 1941 $25 $50 $100 $500 $1,000 Total Pieces Due on requisitions c.o.b. December 22 45,000 65,000 55,000 5,000 - 170,000 Requisitions received December 23 ---- ---- ---- --- ---- ------- Total 45,000 65,000 55,000 5,000 ---- 170,000 Shipments December 23 10,000 5,000 5,000 ----- --- 20,000 Due on requisitions c.o.b. December 23 35,000 60,000 50,000 5,000 ---- 150,000 41 Regraded Unclassified 42 December 23, 1941 1:01 p.m. Ronald Ransom: I have more information than I had when you called me last. HMJr: Yes. R: And I think, perhaps, enough to clear up the subject if you can give me just 8 few minutes. HMJr: Surely. R: In the first place, Hanson's connection with us, 88 I told you, 1s rather detached in the sense that he's only here ordinarily two days a week and not always that. HMJr: Yes. R: His assignment ie to study, in a quite academic way, the long-range problem of what will be the post-war economic conditions as they may concern our own field of operations. H/Jr: Yes. in He has made one of two reports to the Board from time to time, which frankly I must admit I haven't had time to read 80 I can't tell you what's in them. HMJr: Yeah. R: I got some of his boys in, and finding they didn't know the whole story, I called Hanson in Cambridge and asked him exactly what happened on the eighteenth. HMJr: Yes. R: He says that since he has been here he has had any number of meetings with various groups around town that he thought might be helpful to him in his own thinking, and that all of them heretofore ned been quite informal and he thought this one WBE, HMJr: Yeah, 7t That the primary purpose of this meeting was to Regraded Unclassified 43 - 2 - discuss some question of inflation in which he was interested, but it developed towards the end of this rather brief meeting into a discussion of some tax aspects of the problem of inflation. HMJr: Yes. R: Present at that meeting were Gerhard Colm, of the Budget Bureau HMJr: Yes. R: Mordecai Ezekiel, of Agriculture HMJr: Yes. R: Walter Salant, of OPA HMJr: Yeah. R: Victor Perlo of OPA HMJr: Yeah. R: of our own group, Hanson. Martin Krost 1s one of our staff men HMJr: Yeah. R: Richard Musgrave - M-u-s-g-r-a-v-e.... HMJr: Yeah. R: and a boy named Perloff - P-e-r-l-o-f-f. HMJr: Yes. R: In the process of that meeting, someone suggested that they seemed to be in general agreement on some question about the sales tax, and one of them - not one of our own boys, but one of the others - suggested that they reduce their - what seemed to be their conclusions - to writing. HMJr: Yes. R: That did result in this memorandum, a copy of which I have obtained since talking to you, and which I have read. 44 - 3 - HMJr: Yes. R: It seems that someone then said, "Well, we think the Vice President would be interested in seeing this." And in that way, Hanson thought - he is quite academic and quite detached from the realities of Washington - he thought that sounded like a pretty good idea, BO it was passed on to Henry Wallace. HMJr: Aside from the fact that the Board of Directors of the Federal Reserve might like to see it R: (Laughs) Well, none of us - they all tell me that no copy was given to any member of our force; and as far as that situation is concerned, I have the same reason for feeling slightly left out, except that I - - and I might also say for your information, that Goldenweiser wasn't given a copy, wasn't invited to the meeting, and knew nothing about it except what I have since told him, which was just preceding this call to you. HMJr: Well, it couldn't happen anywhere else except in Washington. R: It couldn't possibly. Now, Hanson said that he thinks he made & mistake first in not inviting some Treasury man, secondly in letting their conclusions, which were most informal, be reduced to writing; third, if they were to be reduced to writing, not seeing that they went directly to you if they had any value for you. HMJr: Yeah. R: I would say first he made a mis take in having the meeting; secondly, I don't think the memorandum was important enough to burden any member of the Board or you or the Vice President with it. It's a seminar approach to a very real, practical, and largely political question. As you say, it couldn't happen anywhere that I know of except Washington. HMJr: Well, Ronald, thanks very much. It's sort of - it's kind of hard, you know, these daye, to keep every- body buttoned up, on all these things. Regraded Unclassified 45 - 4 - R: Well, it's extremely hard. I'll say this, I have Hanson's promise that when he gets back here he will talk to me about what ought to be his approach to his exploratory explorations, and that he will try to take advantage of what he 18 pleasant enough to say may be "my greater experience with the complexities of Government". HMJr: (Laughs) I see. R: I can assure him of one thing, that if he has ideas on a subject which is the primary concern of some other agency of the Government, it would be well in the first instance to let the Board see it; and then if it has any value in the opinion of the Board, see that it goes direct to the gentleman most interested in it. HMJr: That's right. R: So to that extent I can assure you, but I hope that this particular thing won't occur again. HMJr: Thank you. R: That satisfy you? HMJr: Entirely. R: All right. HMJr: Thank you. 46 December 23, 1941 2:25 p.m. RE PRESIDENT'S BUDGET MESSAGE Present: Mr. Viner Mr. Paul Mr. Haas Mr. Morris Mr. White Mr. Bell H.M.JR: O.K. I talked to Ronald Ransom and I got the list of people that were at that meeting. I never heard of half of them. Have you heard about this thing? I will wait until they bring it in. They called a meeting on the eighteenth to discuss how to do the taxing and everything else. OPA and OPM and Budget were there. They discussed the various things and they wrote a written report which the Vice-President was kind enough to send to me. MR. PAUL: Let me give that back to you. I have had it copied. H.M.JR: So I called up Ronald Ransom and he said, "I never heard of it." Neither did Goldenweiser. They never knew the meeting was called. MR. PAUL: Do you have a list of who was there? H.M.JR: Yes, I will have it in a few minutes. You hire these fellows and when you get them over here you won't have so much trouble. It is that German over in Budget, Colm. Hire them and you won't have so much trouble. MR. PAUL: Has everybody got copies of this? MR. MORRIS: I have got a copy of what you did last Regraded Unclassified 47 - 2 - night. Has it been changed again? MR. PAUL: I will give it to you in its place. H.M.JR: Is that the Christmas spirit? All right. MR. PAUL: Now let me explain -- H.M.JR: You have got from now until three o'clock, when we have an air raid alarm. MR. VINER: You will have to wet Morris down a little. He is still a little too buoyant. MR. WHITE: Air raid alarm? H.M.JR: Three o'clock. Didn't you get your notice? MR. BELL: He hasn't cleaned out his basket since Monday. H.M.JR: Haven't you got one of these? MR. WHITE: I saw what to do in case of an air raid alarm but I didn't know it said we were going to have one. H.M.JR: I just got an advance notice. MR. BELL: The Secretary is supposed to tell you. MR. WHITE: I see. MR. PAUL: Let me explain that the first page on this is intended to be in only if similar material is not contained in the previous pages of the budget message, which we haven't seen. It is 8. sort of baloney line of talk which we think ought to be somewhere. MR. VINER: It ought to be somewhere. MR. PAUL: The real part begins under the title, "Financing the War," on the second page. Do you want me to read that? H.M.JR: Well, supposing I read it. Laybe I can soak Regraded Unclassified 48 - 3 - it in better. MR. PAUL: May I suggest, Mr. Secretary, that you stop reading when you come to page 6. H.M.JR: All right. Listen, gents, that first page is swell and let's leave it in. I would like to have that come from Treasury. That is good. It is no baloney. It is good. MR. VINER: It is good, but it belongs in the first page. H.M.JR: Well, let's give it to them. MR. BELL: It may be a repetition, that is Randolph's point. They may have it in there already. H.M.JR: They won't do it as well. I agree one hundred percent with four, but I would like to see it worded & little bit differently, that "undue profits during war times must be recaptured." I don't like the word "recaptured." I mean, the principle, yes, but I don't like the word "recaptured." MR. PAUL: Well, it is just that word? H.M.JR: It is just the word "recaptured." MR. BELL: Something like "taxed away"? MR. PAUL: I didn't like "taxed away." MR. BELL: It has been changed two or three times, if I remember. H.M.JR: I think that is swell. MR. HAAS: These figures on the bonds are in now and it is good news. H.M.JR: For God's sake, forty-four million in one day! Regraded Unclassified 49 - 4 - MR. BELL: One day. All bonds? MR. HAAS: Thirty-four in the "E." MR. WHITE: That includes Knox's. H.M.JR: Would you? MR. BELL: The total this month is what? H.M.JR: Total this month is three hundred fourteen million. Would you? Later on I want my production figures. I will get that afterward. MR. BELL: Yes, that will come in. You won't have production figures on the bonds today. H.M.JR: Well, they know what they are going to do today and tomorrow. Any considerable rise in the level of price would greatly increase the deficit, because the cost is going up; is that it? MR. PAUL: Yes. MR. HAAS: Faster than the receipts. H.M.JR: This is a short and snappy thing giving them all the bad news right in the beginning. This is about one thousand percent better than the first one. MR. PAUL: Well, it ought to be better. We have worked enough on it. H.M.JR: Well, it shows it. This stuff is good and snappy. Have we talked about taxes for revenue? MR. PAUL: Yes. H.M.JR: Unmitigated, the fellow on the street doesn't know what that means. It is a two dollar - well, it is a dollar seventy-five cent word. On page four I would leave out the word "minimum." "Above the subsistence level." I Regraded Unclassified 50 - 5 - think when you begin to qualify subsistence level that is shaping it kind of fine, isn't it? MR. WHITE: They can barely keep alive at anything less than that. H.M.JR: Subsistence level is barely keeping alive, isn't it? Now, there is a paragraph simply putting a hell of & big mouthful in to it, that loophole paragraph. I would love to give this speech. I hope the President doesn't. I would love to give it, but it would have more power out of his mouth. Again, I don't mind this word "recaptured" 80 much here as I do where it is just one sentence. This gives & little more explanation but just the one thing, it is a little sketchy. I don't mind it here, but I do where it is just one sentence. That is stated beautifully. Now, do you want me to go slowly from here on? MR. PAUL: No, just this next page and then we ought to explain some. H.M.JR: Shall I read it and then you will explain it? MR. PAUL: Read through six. Six is all right. H.M.JR: How will sound taxation facilitate the production of war weapons? How is sound taxation going to facilitate the production of war weapons? MR. WHITE: Because it takes away money from persons who would spend it on consumers goods and therefore leaves available unused capacity and if it is unused, they more quickly can put it into use. MR. BELL: It takes away the competition. H.M.JR: Now wait a minute, there is one thing you fellows have left that leaves me out on the end of a limb. You can say taxes can aid in this by cutting non-essential civilian spending. Aren't you going to say anything at all 51 -6 - about non-defense spending in Government? MR. PAUL: We haven't said a word about that. H.M.JR: Well, that would come under Bell. What are you going to have me do, sign half the Byrd report? MR. BELL: Well, this is a budget message. MR. VINER: This is the taxation and then we have borrowing, and there must be - a large part of the budget message must deal with spending, but that has not been submitted to you. H.M.JR: Well, Mr. Bell, please make a note that I want to certainly say something about cutting of non-defense expenditures of Government, even though I haven't been asked to do it. I wasn't asked to do this in the first place. This was just an accident. MR. WHITE: Well, just a note. Say it is presumed that in the discussion of expenditures there would be some paragraphs or sentences dealing with it. H.M.JR: Will you please write something for me, Bell? Are you going to remember? MR. BELL: Yes, I have got it down here, but I can't write anything to go in the budget message. We can just ask Smith. MR. VINER: You can send him a note that we take it for granted here in the Treasury that somewhere in the budget message there will be -- H.M.JR: Excuse me. I got a memorandum from the President. I am returning the memorandum to the President and saying, "My dear Mr. President: In answer to your memorandum I am sending you herewith my suggestions for your budget message. I am sending copies to the Director of the Budget." MR. BELL: Then do you want to say something in that 52 - 7 - letter about while we do not have the first eight pages we presume that is on spending? H.M.JR: He is not interested. I would just have one page, suggestions for expenditures. MR. WHITE: Are you going to specify that or merely that there is somewhere in the expenditures -- H.M.JR: No, I would just put in one page. "In discussing the expenditures I sincerely hope that you will say something about curtailing non-defense expenditures in Government." MR. WHITE: But you are not going to specify? H.M.JR: No. MR. VINER: I would say,"I take it for granted that you will." H.M.JR: No, he doesn't like that. MR. WHITE: If you take it for granted that he will, why mention it? H.M.JR: Just one page the way I said it, will you, Dan? MR. BELL: Yes. H.M.JR: And this will go from me to the President with a copy to the Director of the Budget and in the thing I will say I have asked - well, I will write the thing. I am also going to say that I called up the Budget directly and that we expect to have conferences with them on the thing. MR. WHITE: So he will know you are going forward without any word from him. MR. PAUL: I talked to Smith this morning. He called back. I told you I tried to get him to run over his budget Regraded Unclassified 53 - 8 - message and get an exchange of ideas and he finally called me back and I said we didn't know whether we would have any drafts ready, but that I had a meeting today and as soon as it was over I would call and he said to take it up with Jones and Colm and somebody else, Loeffler. He said those were the men that work on them. MR. VINER: Ray Loeffler? MR. PAUL: I don't know him. H.M.JR: I will tell you who was there and those names sound familiar. I will tell you in a minute. MR. PAUL: He said those were the three men that did the work for him on that. H.M.JR: All right. Now, do you come next, Bell? MR. PAUL: Dan steps in here at this point. MR. BELL: The next subject is "Borrowing." When we talked to you the other day we thought something ought to go in this message about enforced savings, tying it in to taxation and that is the way we wrote this section. When we got down into the larger group, discussing it, Mr. Gilbert objected to it rather strenuously and I think that Viner and White agreed with him. H.M.JR: Gilbert is Henderson's man? MR. BELL: Yes. He took the position that the institution of priorities and rationing would make plenty of money available to finance this - we had that section in here and when I went down to the larger group Mr. Gilbert. objected rather strenuously and said it just wasn't necessary to have enforced savings, and he thought it would be rather unfortunate to do it because by the institution of priorities and the scheme that they have over there, rationing and so forth, that there will not be anything on which these corporations and individuals can spend their money; 80 that there will be plenty of money to finance this war through regular means, and we won't have to go to enforced savings. Regraded Unclassified - 9 - 54 MR. PAUL: Except perhaps as you pointed out, enforced savings in the lower brackets from an entirely different standpoint, not the financing standpoint, but from the standpoint of equity in taxation, but not to raise the money. H.M.JR: Well, for an entirely different reason - I haven't read the thing yet - I would much rather not say anything about enforced savings at this time. MR. PAUL: Of course, he thinks it would be a mistake, but on the other hand if a lot of people - if you don't explain Gilbert's point, somehow people will be alarmed at the situation. H.M.JR: Well, let me read this thing. I have got an entirely different reason. I don't want to say anything about enforced savings. I mean, I am not against it. I want to see hell, forty-four million dollars. Give me a chance on the volunteer thing. Give this thing & chance. Automobile Workers of America send me B. telegram: "The son of one of our workers was killed in Honolulu and our seven hundred thousand workers pledge you fifty million dollars to buy a battleship." Give these boys a chance. Let them get mad. Let's see what they can do and they will give me fifty million dollars. I want to give these boys a chance. MR. BELL: Fifty million dollars is a long ways from fifty billion. H.M.JR: Dan, give it - listen, Dan - Dan, there isn't a person in this room here who would guess that we would sell thirty-four million dollars of E bonds in one day, which is just one third of our total sales for November. MR. PAUL: But there is another point -- H.M.JR: One day -- MR. PAUL: Mr. Secretary, this budget message will be Regraded Unclassified - 10 - 55 sometime early in January, and the real question is whether, if we don't say anything about Gilbert's point, the public will become 80 alarmed that we will have a serious situation. MR. WHITE: Well, the Secretary doesn't object to that point. In fact, he is in favor of that. H.M.JR: I don't understand that. If we can produce -- MR. VINER: The difficulty will not be on the financing side. It will be to achieve our production plan. H.M.JR: Then why not say so? This doesn't say it. MR. BELL: We would like to change that first paragraph. We didn't know if you would like the approach to it because we had something different and we didn't know Jake had rewritten this. H.M.JR: Before I read this, may I please compliment Paul and his assistants? This is a swell document. MR. PAUL: Well, it was everybody. My contribution fades into a small part. H.M.JR: But may I just say I am delighted. You are not, Jake? 56 - 11 - MR. VINER: I was denying what he just said. H.M.JR: But anyway, this first part, as far as I am concerned, I would be ready to send it over now after we fixed up a word or two. MR. PAUL: We will fix up those words you indicated. H.M.JR: "What we do not finance by taxes must be borrowed. The sums to be borrowed are great, but if we can produce the goods we can finance payment for them without inflation. "If this result is to be accomplished, however, borrowing should, to the maximum degree, come from sav- ings out of current incomes and from contraction of private investment in facilities for production of civilian goods. In this war period we should tighten our belts, reduce our expenditures, postpone our demands for goods until later, and make our funds available to the Govern- ment. By this means we shall encourage war production and reduce the threat of inflation, while improving our personal finances through thrift. "To achieve an all-out production program it will be necessary to curtail drastically by allocations and other physical controls, new investment in non-defense plant and equipment and to defer replacements in these lines. The existing curtailment of production of consumer's goods--durables and semi-durables--will have to be ex- tended. These measures will out non-defense spending by billions of dollars. The effect of this curtailment of spending will be to add greatly to the funds in the hands of individuals and corporations. These funds, lacking other investment outlets, will be available for invest- ment in Government securities." MR. BELL: That is Gilbert's paragraph. H.M.JR: I see. "There is no need for our borrowing to be at a high Regraded Unclassified 57 - 12 - rate. The total amount available for borrowing will be no greater at a high rate than at & low one. It is determined only by our willingness to curtail civilian expenditures.' High rate of what? MR. HAAS: Jake caught that too. MR. BELL: High rate of interest. H.M.JR: "Our longest bond issue, sold in the week prior to the attack on Pearl Harbor, pays 21 percent. Except for securities especially designed for small savings, like our present Series E savings bonds, we do not intend to pay a higher rate on any security issued during this war. Danny, you can't get me to send it over. I won't do it. MR. BELL: Won't do it? H.M.JR: No, sir. MR. WHITE: He said you wouldn't, but we said we would try it. H.M.JR: Well, give Dan the credit. That is what I like about him. He always stands up and says what he thinks. MR. VINER: I promised not to say a word on this paragraph. H.M.JR: Are you for the paragraph or against it? You can say yes or no. MR. BELL: I didn't hear that promise. MR. HAAS: He told me. 58 - 13 - MR. WHITE: You mean you are on the fence? MR. VINER: No, I am not on the fence, but I had used up my argument. H.M.JR: Which way? Are you for or against it? MR. WHITE: He hasn't made up his mind yet. MR. VINER: I wouldn't say that now. H.M.JR: You would not say that now? That is exactly what I say. MR. VINER: It is a terrible commitment. It is a terrible responsibility. H.M.JR: That is just what I say. I couldn't say it now. I never tied my hands or made a forecast, and I wasn't going to do it. MR. BELL: I think you are in a different position than you have ever been. MR. HAAS: You are in a place where you practically have to. H.M.JR: Danny, old boy, I am not going to say it. MR. BELL: You have already made a commitment, I take it, to hold the '67-'72 to par. MR. VINER: Not in writing. MR. BELL: Well, - and how about the savings bond holders that you got two and a half or two ninety-one? Whatever you go above there you are going to get them in here. H.M.JR: Danny, old boy, I love you, but I won't say that. MR. VINER: I would leave the second from the last 59 - 14 - paragraph in. MR. WHITE: What would youleave in? MR. VINER: Second from the last paragraph. H.M.JR: Would you gentlemen mind listening to me for one moment? I don't think that that thing is polished up enough or that you have had as much time on this as you had on the first. Is that right, Dan? MR. BELL: Well, we have had a lot of time on it. We haven't had the benefit of the advice of the group, and this has been rewritten. H.M.JR: If you don't mind. MR. BELL: We rewrote it too. H.M.JR: I don't want to say the second and third and last paragraphs. I don't want to say paragraphs two and three on page two. MR. HAAS: Yes, if you are going to take any out, I would take both of them out. MR. BELL: It seems to me the second paragraph on the next page is a duplication of the last paragraph. I get the feeling in reading this thing that there is a certain amount of repetition in here that appears in the other part. MR. HAAS: A little, yes, particularly the second paragraph. MR. WHITE: I shouldn't think 80. MR. BELL: Yes, there is. MR. WHITE: There is a definite thought here. It may not be as clearly expressed as it should be, but it is an important thought to express. 60 - 15 - MR. BELL: We have talked about inflation a lot in the previous pages. Now We bring it in again. MR. VINER: I would like to mention the Defense Savings Bonds somewhere in the message. H.M.JR: I would too. MR. WHITE: You what? MR. HAAS: They were mentioned, Jack. H.M.JR: You know, Dr. Viner, you and I on this - I asked that they be put in. There will be an air raid warning. You people have all got to go on the floor below. We will meet here again. (The meeting was temporarily recessed.) H.M.JR: While we are waiting for the lost sheep, the people who were there were Gerhardt Colm, Mordecai Ezekiel, Walter Salant, of OPA, Victor Perlo, of OPA, Hansen, Martin Krost, Richard Musgrave. MR. HAAS: Krost is Federal Reserve Board. H.M.JR: And Perloff. MR. PAUL: You see, Dick Gilbert wasn't there, and Goldenweiser wasn't there. MR. BELL: I don't know any of them. MR. PAUL: I don't know any of them except Hansen. H.M.JR: Now, Dan, I think we ought to get hold of something for tomorrow morning for Mr. Roosevelt. When do you think you could do something on the borrowing part again. (Mr. White entered the conference.) Regraded Unclassified - 16 - 61 H.M.JR: Hello, Harry. MR. WHITE: I had to make sure that the flock was all right. H.M.JR: All right. Harry, I just read the names of the people who were there at this meeting. Gerhardt Colm, Mordecai Ezekiel, Walter Salant. MR. WHITE: Salant. MR. BELL: Gilbert's assistant? MR. WHITE: Yes. MR. MORRIS: He used to be with Currie, didn't he? MR. WHITE: That is his brother. H.M.JR: How do you spell Salant? MR. WHITE: S-a-l-a-n-t. He used to work in the Treasury. MR. HAAS: Yes, he used to work for us. H.M.JR: Victor Perlo. MR. WHITE: Who? H.M.JR: Hansen, Martin Krost. MR. PAUL: Oh, that is K-r-o-s-t. H.M.JR: Richard Musgrave and Perloff. Now, when can we meet again on the borrowing power? MR. BEEL: Tomorrow morning the first thing. H.M.JR: Now, take this letter to the President and you can give it to Mr. Bell and Mr. Paul and they can Regraded Unclassified 62 - 17 - sort of - I haven't got the President's memo to me. MR. BELL: Mrs. Klotz has got it. (The Secretary held a telephone conversation with Harold Smith as follows:) 63 December 23, 1941 3:27 p.m. HMJr: Harold. Harold Smith: Yes. HMJr: Henry Morgenthau. 3: Yes. HMJr: Now, Harold, we've spent some more time on this proposed talk - this is Harold Smith, isn't it? S: Yeah. HMJr: And, much as I hate to do it, I'm going to ask you to let me off. S: All right. You've given it careful consideration. I'm sorry: it's going to be a jolt to the program, but I'm going to bow to your wiehes in this matter. HMJr: Well, I've Just - we've really tried awfully hard here; and I hate to do it - I know it's not & very sporting thing to do, but these are unusual times. S: Thet's right. That's right. HMJr: And I wish I'd have been smarter when you asked me, but I wasn't smart enough. S: Well, I wish I'd have been smarter, too; but I still think that it was a good thing at the time, and I'm just sorry we've seemed to have gotten into this little Jam over it. HMJr: Yes. S: Now, I talked to Emmerich since I talked to you HMJr: Yes. B: about 1t, and I think we both appreciate the situation and we felt that if you, after reviewing it again, felt that you should pull out of it, that we ought not, under the circumstances, try to press you on it in any way, and recognize the Regraded Unclassified 64 - 2 - difficulty and see if we can't make some adjust- ment. Now, I wonder if your people will see that that radio time 18 called off. HMJr: I'll tell them. 5: That ought to be done right away. HMJr: I'll tell them. S: Yes. Well, I'm awfully - I feel sorry, too MJr: Well, I WAS S: for having gotten you into this; but I didn't foresee the difficulty, and I think with our being in the war and 80 on, why people will understand. MJr: Well, I'm ewfully sorry - and you appreciate the spirit. S: That's right. That's right. HMr: Well, as long 88 you understand that, that's all right. S: Yeah. HMJr: Thank you. S: All right. You call off the radio time. HMJr: I'll tell the boys to do it now. in Thank you. HMJr: Thank you. Regraded Unclassified 65 - 18 - MR. PAUL: I think it was helpful to get that other idea out of his mind. H.M.JR: Yes. Well, now, when do you people want to see me again? MR. WHITE: Have you decided to exclude or include this borrowing? H.M.JR: The borrowing? MR. BELL: We are just going to include one or two paragraphs and leave out the last two paragraphs and we will probably blend two and three. H.M.JR: I started to write a letter to the Presi- dent. I haven't got the memorandum. "My dear Mr. President: "On receipt of the enclosed memorandum from you, which I am returning herewith, I immediately got in touch with Harold Smith and he furnished us with a draft of 8. part of your budget message. "All of us in the Treasury have put our heads together and have consulted with Mr. Goldenweiser of the Federal Reserve Staff, Mr. Richard Gilbert of Mr. Leon Henderson's staff, and Mr. Lauchlin Currie of your own office. I hope you will like what I am sending you. "In view of the tremendous importance of this budget message, I would appreciate very much having an opportunity to go over your message with you personally. "I have asked Harold Smith whether he wouldn't sit down with me personally and go over this draft with me, and I am sure that he and I can get together. Yours sincerely." 66 - 19 - "My dear Harold: "I am sending you herewith a copy of my letter to the President and the material that I sent him along with it. I am holding myself in readiness to meet with you. Yours sincerely." I think before noon tomorrow it ought to go. MR. PAUL: Well, I will have the first part smoothed up and ready this afternoon. I will tell you what I will do, then. I will send the final one in to you, Mr. Bell, and you can put it together. H.M.JR: And I think that Leon ought to see the thing. He is very much interested. MR. PAUL: Do you want me to-- H.M.JR: I wish you would contact him, yes. MR. BELL: Leon should certainly see that para- graph that Gilbert drafted because it is his responsi- bility. MR. WHITE: If he is to see it then it ought to be indicated that Mr. Leon Henderson has seen this and approved. MR. BELL: Well, we don't have to say that now, do we? H.M.JR: Well, would you, Paul, get in touch with me on this thing? MR. PAUL: Yes. H.M.JR: And why not say we will meet at ten-fifteen tomorrow on this thing and ask Leon whether he wouldn't Regraded Unclassified 67 - 20 - like to come here but let him have & draft before. MR. PAUL: Yes. I will take a draft over to him. H.M.JR: And, Dan, I would ask the fellow from Atlanta to be here at ten-fifteen. MR. BELL: Ransom? H.M.JR: Yes, and let him have a draft of it. MR. PAUL: Do you want Ransom or do you want some- body-- H.M.JR: No, I want Ransom. MR. BELL: He is Vice Chairman. MR. PAUL: I know that. MR. BELL: Who are you thinking of, Goldanweiser? MR. PAUL: Yes. MR. BELL: Of course, he has been over. Of course, there is no harm in having him. MR. PAUL: I think Ransom may not know much about it. H.M.JR: Tell him to bring Goldenweiser, but I want Ronald Ransom and Goldenweiser, and then Leon Henderson and let him bring Gilbert. MR. PAUL: Tomorrow morning at ten-fifteen? H.M.JR: Yes. You (Bell) take care of the Fed. MR. BELL: You want Currie? 68 - 21 - H.M.JR: Yes, you take care of the Fed and Lauch Currie and you take care of Gilbert and Henderson. MR. PAUL: All right. H.M.JR: Harry, do you think we ought to have any- body else? MR. WHITE: You arehaving the Budget? H.M.JR: No, we will send this over to the Budget and in my letter to the Director of the Budget say, I am holding myself in readiness to meet with him. MR. WHITE: Just one other suggestion. Milo Perkins' outfit is doing a lot of work. Now, whether you want to take this opportunity - I am sure he would be delighted, and I am sure he would approve. H.M.JR: Well, in view of the Vice President's letter to me, why not show this tonight to Milo Perkins and then let him come here tomorrow morning. MR. WHITE: I think it would be a nice gesture. H.M.JR: Fine. MR. BELL: I wonder if you shouldn't say in your letter or at least suggest that you stand ready to see Smith at any time but Mr. Paul and some of his men might want to have & preliminary discussion. MR. PAUL: My plan with Smith as per arrangements made this morning was to see these three people this afternoon, not to show them anything but to run over their draft. H.M.JR: Well, Randolph, in my conversation - that is all right, but in my conversation with the Director of the Budget, when I called him up, I said, "I want to sit down with you myself when our draft is ready." He said, "Fine." And I want to stick to that, you see. Regraded Unclassified 69 - 22 - MR. PAUL: That is all right, but I thought we ought to register a good deal of cooperation and that is why I was trying to put in-- H.M.JR: In advance. Swell. MR. BELL: I think it will save you & lot of time because there will be a good deal of dickering here for the first couple of hours. MR. PAUL: I can pretty well determine where we are apart. H.M.JR: That is all right. Anything that you can do in advance would be appreciated by me. MR. BELL: Well, this can go ahead and then Paul can call him up tomorrow. H.M.JR: I would like after this ten-fifteen meet- ing tomorrow to have this thing go over to the Presi- dent so he gets it tomorrow and then a copy to the Director of the Budget and 8. letter from me saying when- ever he is ready, I am, to sit down with him, and that still is possible. MR. BELL: And that doesn't bind Randolph and his-- H.M.JR: And Harry will see Milo Perkins and let him have a chance tonight to look at it. MR. WHITE: He will want to show it to the Vice President. H.M.JR: And ask him in view of my letter to the Vice President - I am sending it up there, and I would like the suggestions from the Vice President. How is that? And you will invite Milo tomorrow? MR. WHITE: Tomorrow. H.M.JR: That is good. 70 - 23 - You see, I have been around this town so long, the more people you ask the better feeling you make, and you get some good ideas. MR. WHITE: And also there is nobody to object to it after it is in. MR. BELL: The less opposition you have at the end. (Mr. Viner entered the conference.) H.M.JR: Hello, Jake. MR. VINER: I just guessed at this. H.M.JR: Now, listen, did one of the trained nurses have to treat you? MR. VINER: Yes, a pretty one. H.M.JR: You haven't missed a thing. MR. PAUL: You have still got your eyes open. H.M.JR: Well, the point is, we are going to have a meeting tomorrow morning at ten-fifteen. And, Viner, any time that you have got left between now and your train time, if you could assist Bell. I am very much pleased. This has been the least wear and tear on me that I have had in a long time. O.K., gentlemen. Regraded Unclassified 71 ONLY COPY IN SECRETARY'S OFFICE 2nd Draft 72 Victory in this war will demand expenditures on a scale for which there is no precedent in our history. Victory will call for sacrifice--real and stern sacrif- fice-on the part of every American, irrespective of occupation or income. If we are to furnish the weapons to the men who are doing the fighting, we shall have to exert every possible ounce of energy, and we shall have to mobilize every possible dollar of our income. The material resources we need for victory will be supplied, whether gune or dollars. The task is huge, but it is within our powers. Until this Job 1a done, we will not talk of burdens - of tax burdens or debt burdens. Instead, we will talk of opportunity--the opportunity to have a real part in the fight to preserve our freedom. This is the spirit in which the American people will want us to approach the problem of financing the war. Regraded Unclassified 73 FINANCING THE WAR Let no state briefly the basic objectives which I think should guide us in the formulation of a fiscal program for the war. 1. The revenue of the Government must be greatly increased to meet war expenditures. The maximum possible portion of the war cost must be met from taxa- tion. 2. Inflation must be curbed. 3. The financial sacrifice must be equitably distributed. 4. Undue profits during warVine must be recaptured. 5. More flexibility should be introduced into our fiscal measures during the emergency. 6. Our fiscal policy must be directed toward the achievement of maximum war production. TAXES 1. The Need for Additional Taxes In the past 18 months this Nation, while building up its defenses, laid the foundation for & mighty structure of arms production. 74 - 2 - In the fiscal year 1941 defense expenditures amounted to $6.3 billion. We expect to spend upon our war efforts $22 billion in the fiscal year 1942 and $50 billion in the fiscal year 1943. In the fiscal year 1941 Federal net receipts were $7.6 billion. These are expected to be $11.9 billion in the fiscal year 1942 and, if there are no changes in our tax structure, $16.5 billion in the fiscal year 1943. Thus it is estimated that the net deficit will be $16 billion for the current fiscal year, and, if no new taxes are enacted, $40 billion for the fiscal year 1943. In these estimates allowance is made for only & moderate rise in prices. Any considerable rise in the level of prices would greatly increase the deficit. The disparity between estimated revenue and estimated expenditure 1s far too great for a sound fiscal program. We must have additional taxes. 2. The Menace of Inflation Additional taxes are needed to combat inflation. As we approach full utilization of our productive resource any considerable rise in prices is an unmitigated evil. It 18 a source of grave social injustice. It Regraded Unclassified 75 - 3 - undermines morale and impedes war production. The hardships of inflation strike at random without con- sideration of equity or ability. Once it has acquired momentum, inflation 18 extremely difficult to control, and it will leave a heritage of pest-war difficulties that will haunt us for decades. Every consideration of national welfare calls for its prevention. The way to prevent inflation is to prevent people from engaging in the futile effort to buy more goods than can be produced. This requires a comprehensive and integrated program of anti-inflationary measures, in which increased taxes and increased savings are essential parts. Another part of such a program might be expansion of the social security system, which at a later date I intend to recommend for other and more basic reasons. Price control, allocations and rationing are other parts of such an integrated program. All these controls are interrelated. The devices of price control, allocation, and rationing will be more effective if taxes and savings are increased. Similarly, the effectiveness of the fiscal devices in preventing inflation will be greater if price control and physical Regraded Unclassified 76 - 4 - controls over the quantity of goods available for sale are used. 3. Equitable Distribution of Taxes With far heavier taxes the need for equity in the tax system becomes more urgent. In this war it will be necessary to tax more heavily all sections of the population who are above the minimum subsistence level. All others will have to make sacri- fices. But the fact that large additional taxes have to be imposed should not lead us to forsake the principle of taxing according to ability to pay. I have frequently pointed out that there are numerous loopholes in the present tax structure which ought to be closed. Because some taxpayers use these to avoid taxes, the other taxpayers must pay more than they should. We can no longer tolerate these loopholes. Our tax laws contain a number of unintentional technical inequities--unfair discriminations between different persons who are substantially alike and should be treated equally. These technical inequities are always objectionable, but now when taxes are being increased, it is urgent that the Government should, to the greatest extent possible, provide relief from them. 77 - 5 - 4. Prevention of Undue Profits It is not necessary to allow unreasonable profite in order to seoure maximum production with economical business management. Under conditions of & wartime economy, the country cannot tolerate unduly high profits for business concerns. Wherever these occur, they should be recaptured. 5. Flexibility in the Tax System The rate of war expenditure, the size of the national income, the course of prices, and the extent and effectiveness of allocations and other controls are not subject to accurate estimate far in advance. It is therefore impossible to determine now precisely how much additional taxes should be collected during the next 18 months. This is true even though there can be no dispute that the needs will be great. It is, accordingly, important that the Congress realize the tentative character of all estimates here presented, and that it give consideration to the desirability of intro- ducing into its tax legislation provisions which will make possible quick adjustments in the timing of tax collections or in tax rates during the period when rapid changes in the fiscal and economic situation are likely to occur. 78 - 6 - 6. Relation of Production and Victory In wartime when the life of the Nation is at stake the sound fiscal policies are those which will help win the war. Sound war taxation not only must contribute to defraying the cost of veagons, but it should facilitate their production in every possible way. In a war economy, labor, raw materials, and facili- ties must be shifted from the production of civilian articles to the production of weapons and war supplies. Taxes can aid in speeding these shifts by cutting non- essential civilian spending. The differing effects of various taxes, not only upon the demand for goods but also upon the production process itself, should be care- fully considered when tax legislation 1s drafted. 79 BORROWING What we do not finance by taxes must be borrowed. The sums to be borrowed are great, but if we can produce the goods we can finance payment for them without inflation. If this result is to be accomplished, however, borrowing should, to the maximum degree, come from sav- ings out of current incomes and from contraction of private investment in facilities for production of civilian goods. In this war period we should tighten our belts, reduce our expenditures, postpone our demands for goods until later, and make our funds available to the Government. By this means we shall encourage war production and reduce the threat of inflation, while improving our personal finances through thrift. To achieve an all-out production program it will be necessary to curtail drastically by allocations and other physical controls, new investment in non-defense phant and equipment and to defer replacements in these lines. The existing curtailment of production of consumers' goods--durables and semi-durables=will1 have to be extended. These measures will out non-defense spending by billions of dollars. The effect of this curtailment Regraded Unclassified 80 Borrowing - 2 of spending will be to add greatly to the funds in the hands of individuals and corporations. These funds, lacking other investment outlets, will be available for investment in Government securities. There is no need for our borrowing to be at a high rate. The total amount available for borrowing will be no greater at a high rate than at a low one. It is determined only by our willingness to curtail civilian expenditures. Our longest bond issue, sold in the week prior to the attack on Pearl Harbor, pays 21 percent. Except for securities especially designed for small savings, like our present Series I savings bonds, we do not intend to pay a higher rate on any security issued during this war. Regraded Unclassified 81 COPY OFFICE OF THE VICE PRESIDENT Washington December 10, 1941 The Honorable The Secretary of the Treasury Dear Henry: Enclosed is & menorandum sent me by Esekiel which has in it some suggestions you might want to turn over to your tax people. Sincerely yours, (Sgd) E. A. Wallace E. : Tallace Inclosure Regraded Unclassified 82 COPT December 19, 1941 To: The Secretary From: Mordecai Ezckiel Subject: Tax Policy and the Budget Message Yesterday Dr. liansen of the Federal Reserve Board staff called a meeting to consider tax policy and the coming budget message in relation to inflation prospects. Sconomists from the Budget Bureau, OPM, and OPA were also present, among others. & review of the existing situation led to agreement that: (1) The price increase had slowed down markedly since September, reflecting increased supplies and 6. cessation of stocking-up. (2) Future increases in defense employment will be partially offset by priority unemployment, leaving only olight net gain in consumer buying power. (3) Quantities of food, clothing, and services available for domestic consumers can contimue to expand throughout our war effort. At the sale time, defense expenditures themselves will provide food, clothing, and shelter for a rising propo tion of the population. (4) Reduction or elimination of consumers' durables will not divert an equal amount of buying power to food and other perishables (a) because these durables are usually bought on installment credit and with the cessation of their sale the credit will contract, and (b) because durables are bought largely by middle- and upper-income Toups which already buy about as much food as they need. These facts led to a conclusion that consumer buying power is not likely to rise very much faster than the quantity of 00.2- modities and services available for sale to consumers for quite a period ahead. Regraded Unclassified 83 2-Secretary-December COPY 19, 1941 In view of these facts, it was the general consensus of the group that: (1) Inflationary pressures toward a continuing upward price movement wore less marked LOW then had second likely several months ago, and the danger of sharp price increases over the next & to 9 months wes smoh less than had been feared earlier. (2) 4 general federal sales tax was not needed, and might be very harmful. (8) An additional flat increase in income taxes, such as through the 15% salary withholding tax proposed by the Treasury, was not needed now and ni ht not be needed for some time shoad. (4) The now budget will show s. staggering deficit. It is therefore desirable to provide further revenues. The now taxes, though, should be of a type aimed to raise revenues rather than to further restrict consumption. Taxes for revenue purposes might include further taxes on war profits, inheritances, or progressive income taxes, rather than flat sules or income taxes which reduce low-income expenditures for food and clothing. Two suggestions for possible tax policy in the budget message were discussed: (a) Passage now of authority for a flat income-wi thholding tax (say up to 15% on net income in excess of present exemptions), together with authority to set up immediately the administrat- ivo apparatus and the current reporting system, but with the new taxes not to because effective until they were found needed, Then the President would ask Congress for a concurrent resolution putting the tax into effect at as high & rate (within the maximm authorized) as the current conditions indicated were needed. (b) Provision for a tax on not value added in manufacturing and merchandising, minus credit for labor expenditures. By Regraded Unclassified 84 COPY 3-Secretary-December 19, 1941 taxing the funds retained by businesses after paying material and labor costs, this would approximate a tax on profits, while stating it in a form similar to that of a sales tax. This appraisal indicates that your policy of increasing form production as rapidly as possible has been an important factor In checking the inflationary tendency, and points to the desirability of continuing the policy of doing everything necessary to insure a continued expansion of food production. Regraded Unclassified 85 December 23, 1941 4:00 p.m. Fiorello LaGuardia: Hello, Henry. HMJr: How are you, Fiorello? L: Pretty good. HMJr: Fiorello, the reason I'm calling you 19 to make a recuest; but before making the request I want to explain to you why I'm doing it. Under the law, Secret Service is under me L: Yeah. HMJr: and Secret Service is responsible for the life of the President L: Right. HMJr: which makes me responsible. L: Right. HMJr: Now, I've taken a great interest in the pre- cautions in the District of Columbia to protect the President's life. L: Right. H/Jr: And it wes I who asked for a test on the air - whatever you call it L: The sirens? HMJr: the sirens - on Sunday. L: Yes. HMJr: And it was a complete flop. I: That's right. Here too, and in every other big city. HMJr: Now 1: It's the acoustics. Regraded Unclassified 86 - 2 - HMJr: Well, I wondered in view of the fact that it is the President, that from some place in United States the District couldn't be loaned sirens which would make sufficient sound that we could have in case of necessity; and then when they get the money, these things could be given back again. L: Why, I don't think that any exist. We're experi- menting today, Henry, in Aberdeen..... HMJr: Yes. L: with aerial bombs, because that we can shoot up 400 feet and the sound comes right down. HMJr: Yes. L: If that is a success, I can let you know tomorrow, and we'll have the contents of the bomb analyzed if we can get the material. It would be fine for Washington. I doubt very much whether they will let us use it for the entire country because each bomb takes a pound of powdered aluminum. HMJr: Yeah, but Fiorello, that'll be weeks or months. Aren't there any sirens in the whole United States? L: No. None available. HMJr: No sirens? L: Not that will do you any good. The orders are pouring in, but I don't think any that are doing any good. Now, we ordered, I think, 20 or 30, and we got 5; and if they're any good, you're darned right, I'll let you have them; but they're not hot at all. HMJr: Well, I mean - but you don't know anywhere in the United States there are any sirens that are any good? L: That's right. There are no sirens anywhere in the United States that are any good. You'd need hundreds of them to do the same thing that London has done, and London has no high buildings. Regraded Unclassified 87 - 3 - HMJr: Well L: But I think this, that you could get a supply of these bombs and that would be all right for the time being for Washington if the experiment today is successful. HMJr: Well, that'll take - but that would take weeks, wouldn't it? L: No, it would take three or four days to buy the stuff and have your bombs for you. HMJr: Well, would you let me know? L: I'll let you know tomorrow. HMJr: Wonderful. L: I'll let you know tomorrow; and, of course, for Washington, D. C., a few pounds of aluminum powder won't make any difference. HMJr: No. L: But for the entire country, it's something that after I get the contents and the quantities, I'll have to take up with Priorities. HMJr: Yeah. L: And I'll let you know tomorrow, Henry. HMJr: Thank you. L: Thank you. 88 Oted. Electric Co 8700 So. State St. Chicago Bullard Co San Francisco their local agent is W.L Smith Nm Burch Colorado Bldg nashing tou not'l r467 an Raid 1 89 WAR DEPARTMENT OFFICE OF THE CHIEF OF STAFF WASHINGTON December 23, 1941, MEMORANDUM FOR MR. MORGENTHAU: The War Department does not have any air raid sirens in stock. We have recently bought 24 which are being loaded today for shipment to one of the overseas possessions but we do not keep a reserve supply as they are not needed by us. We do not have any trouble getting sirens immediately when wanted. I am notifying the Washington Air Raid people where they can be obtained. That W.B.S. 612 not are 8750 checks of @ about nate no-1- Regraded Unclassified 90 December 23, 1941 4:03 c.m. EMJr: I'd like to know who it is that contacts the man uo at Princeton on the Gallup Poll or who's connected with the Gallup Poll. Is it you or Peter Odegard? Harold Creves: Peter Odegard has been doing it, but we can do it. As a matter of fact, I think some of the others of us - I'm not sure who - have been doing it. Jr: Well, I tell you what I wish you'd tell him to do. Yes. Phin: If they could make a quick test for me Yes, -MJr: with the people Yes. %Jr: which name do they prefer - "Defense Savings Bonde" or "War Sevings Bonds". 3: Defense Savings Bonds or War Savings Bonde. Very good, sir. "Jr: The present name 1 = Defense Savings Bonds, it? 3: That's right. Well, I'd like to know which - just let them mare a quick test - I'd like an answer within a week. G: Yes. We can get it, I'm sure. Flr: Whether it's "Defense Savings Bonds" or "War Bavings Bonds". S: We can get it, I'm sure. EXJr: Don't you think that's a good idea? Regraded Unclassified 91 - 2 - G: Yes, I do. HMJr: Would you do it still today? G: Yes, we can do it, I think, today. HMJr: And tell them I'd like to have 0: I think Harford Powel has engineered the last poll that we had from Gallup, and I think he can do it again. BMJr: Well, I'm looking to you; and I would like to have - today 10 Tuesday. G: Yes. HMJr: .....and If I could have an answer by the thirty- first. 5 By December thirty-one. HMJr: Yeah. G: Yes, sir. You sent me - If that's All of that subject. HMJr: That's all of that, but I mean some - several people have brought that thing up, and I'd like to know what the people think of it. G: Yes. Yes. You sent me a letter from HAD Young, President of the Federal Reserve Bank in Chicago..... HMJr: Yes. G: and he suggeste that we should qualify large corporations 88 issuing agents HMJr: Yes. G: ..... for bonds. HMJr: Yes. G: That comes in Dan's department, and I have talked with Dan about it. HMJr: Yes. - 3 - 92 G: I take it that you would like that to be done. HMJr: Very much. G: Very well; I'll talk again with Dan about it. HMJr: Well, Dan is sunk just now. G: Well, I'll out across lote and talk with his people about it then. HMJr: Would you? He's just sunk, but clear it with him and G: Yes, sure. H&Jr: .....he'11 come up for air about noon tomorrow. 0: (Laughe) Yeah. All right, I'll do it. HXZp: de's working on this Budget message, but I would like to do it. I don't Bee why we shouldn't do 1t. 3r I don't either. HXJr: Well, it's like going out on the train - this Pullman conductor said to me how much trouble he had and couldn't we make the paymaster for the Pullman Company at the Washington end our - an agent. G: Yes. That's the kind of thing that can be done. 10/Jr: Well, I think we ought to do it and do it quick and extensively. O; Yes. HMJr: You BAW the figures. G: Yes, I did. HMJr: They're wonderful. G: of course, there's P. lot of accumulation in there and there's 8 lot of Christmas buying. HMJr: I know. Regraded Unclassified 93 - 4 - G: It isn't all war fervor that accounts for that large figure. HMJr: But it still looks good. G: It still looks very good. HMJr: Am I not right that for November we sold only about a hundred million of E Bonds? G: Just a second. HKJr: Just look it up - see how good my memory 1e. G: I have it right here. HMJr: For November. G: For November our E Bond sales were one hundred nine million. HMJr: Well, that's close enough for an old man. 5 Yes, sir. Our largest month was in July. HMJr: I know. G: The figure was one forty-five. We're already way over our largest month. HNJr: Well, I made the statement that in one day we sold one third as many as we did in the whole of November. G: That's right. HMJr: And in - then, let me see - and our sales for the E Bonds were - where is that? Our sales, total E was thirty-four million G: That's right. HMJr: .....which is just one third of a hundred and nine. G: Of course, that isn't exactly correct. That's deposits at the Treasury here. It doesn't 94 - 5 - necessarily represent sales on any given day. HMJr: But that's what comes in here. G: That's right. HMJr: But for all practical purposes, my statement was a fact. G: Absolutely right. HMJr: I didn't make it to the press, but that's all right, isn't 1t? G: That is all right. HMJr: I still feel happy although you're trying to play it down. G: (Laughs) Well, I didn't try to play it down; I just wanted you to understand what the compo- sition of that figure was. HMJr: Well, we're going to do two things. We're going to get the Gallup organization to make a survey G: Yes. HMJr: and we're going to make Just as many of these corporations - what do you call them? G: Issuing agents. HMJr: Just as fast as possible. G: That's right. Very good, sir. I thought I should speak to you about that, because you told me you wanted 24-hour service on it. HMJr: Well, if I get it right after lunch tomorrow; because I can't - but I would like to clear it G: With Dan. HMJr: Well, right after lunch tomorrow. G: Yeah. Very good. I'll get it right away. 95 - 6 - HMJr: We'll make it 30-hour service. G: Yes, sir. HMJr: Make it 30 hours. G: Yes, sir. # HMJr: Thank you. G: You're welcome. TREASURY DEPARTMENT 96 INTER OFFICE COMMUNICATION DATE December 23, 1941. Secretary Morgenthau TO FROM George Buffington You asked me Sunday evening if I knew of a man whom I presume you intended using for liaison purposes between this office and Procurement. The best available man I know of 18 George D. Branston. He has had, I believe, exactly the experience you require. I suspect he voted for Wilkie. So far as I know, he has not had any connection with America First activities and is in full accord with the Administration's foreign policy. I have had a telephone conversation with him, not knowing how far you wanted me to go. If you care to have me talk with him further, I will be glad to have him come to see me when I am in Chicago. I know 8 number of people with the business qualifications you require but I am not certain of their political attitude. G.B. Regraded Unclassified 97 December 23, 1941 4:18 D.T. Wr: Hello. -r. 2. E. Brown: Hello, Mr. Morgentheu, this is E. E. Brown of the First, Chicago. President of the First of Chicago? 9! Yes. Wr: How are you? e: I'm well, thank you. enjet Mr. Brown, I want to ask e little help from you. I wondered, emongst your accuaintances, if you knew any business man who might come down and help me, particularly with our Procurement work in the Treasury. We huy all the non-military goods under Lend-Lease, plus a lot of the things for the Government. It runs well over - oh, between fifty and & hundred million dollars 8 month. And what I'm looking for 19 somebody who's experienced in manufacturing and purchasing - somebody, if it's cossible, who might be called a New Dealer in a sense that - well, if I could find somebody who had voted for Mr. Rooeevelt, in '40, that would anewer all the questions. But the reason I - it 1sn't that I want to be political, it's just that I want the ten to be in the right frame of mind. Yeah. So I figured, well, if he voted for Roosevelt in 140, then I don't have to ask any questions. But that 1F not a sine que non. I was looking more for somebody - I wouldn't want to pick somebody out of & munitions factory, because he's most likely doing an important job there; but there must be lote of important people whose businesses aren't in munitions and who would be glad to come town end help. Well, what type of goods is it? Regraded Unclassified 98 - 2 - HMJr: Well, we buy - for instance, we buy all the steel for England. We buy all the copper. We buy all the automobiles for the whole Government. We're in the market just now for B hundred and fifty thousand wooden desks. We buy everything for the Red Cross other than food. We buy all the medicines for them. We do a pretty good general line of merchandising. We buy everything, practically, except gune and planes. B: Well, it 1sn't primarily, however, purchases of soft goods. I was thinking of Frank Foldon who was down awhile with Nelson, as you know. HMJr: Of Eastman? B: What? HMJr: Of Eastman Kodak? B: No, Foldon he was the Chief Purchasing Agent of Montgomery Ward. HMJr: Oh. B: He's now head of a chain department store here named Goldblatts'. HMJr: Well, I've heard of him. I didn't know he was with Nelson. B: When he was down, Don Neleon put him in charge of buying all soft goods and Don was buying the hard woode - hard goods. HMJr: Well B: He's not a New Dealer, and he didn't get along very well with some of the labor people. He came back here - he was down there at great sacrifice - and was down again at Nelson's requestin the last three or four weeks, and I heard he was back again today. HMJr: Well, you Bee, if he didn't get along with the labor people, he wouldn't be of any use to me. Regraded Unclassified 99 - 3 - B: Uh huh. HMJr: The reason I'm appealing to you, I didn't know that you came out for Roosevelt in '40. B: I did. HMJr: You did? They told me when I was in Chicago that you did, publicly, and I never knew that. B: Well, I voted for Roosevelt the first time; and the second time I thought the greatest misfortune that could overtake the country would be Mr. Landon's election. The second greatest election would be Mr. Roosevelt's election by such a majority as to feel that he had a mission HMJr: Yes. B: 80 I voted for Landon: but if I'd have thought that Landon would have the slightest chance, I'd have voted for Roosevelt. HMJr: Yeah. B: In '40 I voted for Roosevelt. HMJr: That's what they told me, so that's why I'm appealing to you. B: Well, let me think HMJr: Think about it, but I mean, unless a man can get along with labor, it's no use. B: Well HMJr: I'm asking you a very difficult thing. B: It isn't an easy job, because most of our business- men were opposed to Mr. Roosevelt in '40, and most of them have a pretty difficult time to restrain their feelings towards Lewis and a good many other labor leaders. HMJr: Well, I know; and as I say, it's B: Also - but I'll try and give you a ring tomorrow. Regraded Unclassified 100 - 4 - HMJr: You see, it's not only that. What I had formerly, we have three things here. We've got Procurement, then we have the Bureau of Engraving, which is one of the biggest printing plants in the world. B: Yeah. HMJr: Then we've got the Bureau of the Mint, which manufactures the hard money. B: Yeah. HMJr: Now, it's all three of those things that I really would like somebody to come down and - because the man who used to do that for me - Harold Graves - 18 now doing Defense Savings Bonds and he can't do that any more. B: Yeah. HMJr: That's my trouble, 80 I'm trying to recruit new help 80 that we all won't crack under the strain. B: Yeah. Well, let me HMJr: What I really want is either - well, I mean, this is what I meant. A young, vigoroue fellow who hasn't yet got a national reputation, but has got the ability; or some man who's retired, but still has enough vigor to put his shoulder to the wheel. B: Well, I think I know people who could do it, but whether they'd have voted for Roosevelt in '40 or not HMJr: Well, I'm just saying that because B: or what their labor attitude would be or whether they'd do it. There's a man HMJr: I know. B: virtually running Marshall Field and Company today - Hughston McBain - could do it. HMJr: Hughston B: McBain his last name 18. Regraded Unclassified 101 - 5 - HMJr: That isn't this business expert from New York, 18 it? B: Oh, no. HMJr: No. B: This fellow's been all his life in HMJr: Well, now, they've got manufactured B: He's about forty-two. He's run the mills. He's straightened them out, and they've got very large manufacturing units. HMJr: Well, I know they have mills. I know B: At the present time, he has the title of Executive Vice President, but he's the most important man in Marshall Field's. HMJr: Well, that's the kind of person that I need. B: He's about forty-one or forty-two. He's a hard worker and full of vigor and a straight shooter. HMJr: Well, that's the kind of person B: What his relations with labor would be, and whether he voted for Mr. Roosevelt or not, I don't know. He ran the USO campaign in Chicago. HMJr: Uh huh. How was he on the - help for England? B: Oh, he'd be all right with that. He's Scotch, I think, either by birth or his family came from Scotland. HMJr: So he's all right on that? B: He's all right on that. HMJr: Well, don't misunderstand me. I don't say that the man had to vote for Roosevelt. B: Yeah. HMJr: But I'm simply saying that if he did..... B: It would be easier. 102 - 6 - HMJr: .....it would be a damned sight easier. B: Yeah. HMJr: That's all. B: Well, I'll try and give you a ring, Mr. Secretary, tomorrow. I'd like to do a little thinking on this HMJr: Will you do that? B: .....and check some of my names. HMJr: I'd appreciate that. B: All right. HMJr: Ever 80 much obliged. B: Good-bye. Thank you. HMJr: Thank you. 103 UEC 40 1941 My dear Mr. Price: In reply to your letter of December 20th, I am designating Mr. Herbert &. Gaston, Assistant Secretary, as the Treasury Department representa- tive on the Censorship Operating Board. Sincerely yours, 1. Morgenthan, 12. Secretary of the Treasury. Mr. Byron Price, Director of Censorship, Post Office Department Building, Washington, D. C. Sestor took this regists meeting MNT:aja " 20 Thompson n.mc Regraded Unclassified 104 DEC 23 1941 Dear Mr. Gaston: You are hereby designated as Treasury Department representative on the Censorship Operating Board. This Board is set up under the provisions of the Executive Order of December 19, 1941, establishing the Office of Censorship, of which Mr. Byron Price is Director. It is provided in the Executive Order that the Censor- ship Operating Board shall, under the supervision of the Director, perform such duties with respect to opera- tions as the Director shall determine. Sincerely yours, (Signed) 1. Morgenthan, Inc Secretary of the Treasury. Honorable Herbert B. Gaston, Assistant Secretary of the Treasury. cc. Thompson WiTsaja nmc Regraded Unclassified OFFICE OF CENSORSHIP Room 4406 Post Office Department Building WASHINGTON December 20, 1941 The Honorable The Secretary of the Treasury. My dear Mr. Secretary: The Executive Order establishing the Office of Censor- ship on December 19, 1941, contains the following provision: "The Director of Censorship shull establish a Censorship Operating Board, which shall consist of representatives of such departments and agencies of the Government as the Director shall specify. Each representative shall be desig- nated by the head of the department or agency which he represents. The Censorship Operating Board shall, under the supervision of the Director, perform such duties with respect to operations as the Director shall determine". For obvious reasons, the Treasury Department should be represented on the Censorship Operating Board. Since it is desirable to have this Board organized without delay, we would appreciate it deeply, if you would advise me at your earliest convenience of your choice of a representative from your Department. Very truly yours, on him BYRON PRICE Director of Censorship. BP:ID Regraded Unclassified 106 DEC 23 - Dear Bill: This is in response to your letter of December 18, asking If It would be possible to designate Harry Anslinger, Commissioner of Narcotice, as consultant to your office, but with the under- standing that his work for you would not encroach upon his duties in the Treasury. herbert Gaston had already spoken to me about this, after song conversations with Analinger. I have no objection at all to this arrange- ment and hope that Mr. Analinger may be able to give you real help. Sincerely, (Higmed) s. in Secretary of the Treasury. Monorable William J. Donovan, Coordinator of Information, Washington, D.C. HEC/mah 12-20-41 By Mountain Tile terhomper nanc. Regraded Unclassified 107 ASSISTANT SECRETARY OF THE TREASURY December 20, 1941. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston I have discussed this with Harry Anslinger and he agrees to it, that is, that he will work in an advisory capacity, giving only such time as he can spare from his Nar- cotics duties. ya Regraded Unclassified 108 COORDINATOR OF INFORMATION WASHINGTON, D.C. December 18, 1941 Dear Henry: Would it be possible and convenient to designate Mr. Harry Anslinger, your Commissioner of Narcotics, as Consultant to this office? His highly specialized knowledge and wide experience would be of very great help to us. The matter, of course, would be arranged so as not to encroach on his duties in the Bureau of Narcotics. I'd be very grateful if you would take this under serious consideration and let me know what you think of it. With best personal regards, Very sincerely yours, Bill Tonnan The Honorable The Secretary of the Treasury Treasury Department Washington, D. C. Regraded Unclassified Treasury Department 109 Division of Monetary Research Date December 23. 19 41 To: Secretary Morgenthau From: Mr. H. D. White I presume that the appended notation was intended for Harry Anslinger but was sent to me through an error. I telephoned Mr. Anslinger and learned that he had gone ahead with the matter and I asked him to send me a memo indicating what he had done. The memo is appended. Unless I hear to the contrary from you, I presume Mr. Anslinger will have the responsibility of following through the matter. 110 ASSISTANT SECRETARY OF THE TREASURY December 20, 1941. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston The Philippine situation creates the prospect of a serious shortage of manila hemp fiber for cordage use in the Navy. Agriculture is planning to plant three to four hundred thousand acres in Wisconsin, Minnesota and Illinois, these states having been selected on advice of Harry Anslinger. Manila hemp is the same thing as marihuana. A group in Louisville cornered the available supply of good seed in this country immediately after the Japanese attack. I suggested to Harry that he advise Agriculture to use Navy powers of requisition to get this seed and to treat the crowd rough if they try any funny business. A threat of publicity ought to be enough, but I think we have legal powers to get the stuff. J Regraded Unclassified 111 December 23, 1941. Non. Kerbert 1. Gaston, Assistant Secretary of the Treasury. E. J. Analinger, Commissioner of Nareotion. Referring to our telephone conversation regard- ing the requirements of the Havy Department for hosp to be produced is this country free homp seed, be- cause hostilities in the Pacific have shut off imports of badly needed homp for the Havy, I have to inform you that I communicated your anggestions to the Department of Agrieulture to requisition the seed which 1 # boimg held at Louisville, Kentucky, by two individuals, J. 1. Graves, a banker. and one Perry Glass. These sen had "cornered" the market on hosp seed the day after the attack on Pearl Harber. As there may be some delay is setting the whools is motion, I had our agests contact every farmer who grow marikuana for read purposes and Instruct the registrant to held all seed, which had not been delivered, over though 11 had been sold, for the Savy Department. This sppeal vas made on a patrictic basis. I as informed that Graves has already approached the Kentucky-Illinois Newy Corporation at Frankfort with & proposition to sell homp need at $18.00 a pound, which is $3.00 over the current price. I think that we shall be able to take care of both Graves and Glass is due corres. Vo are cooperating with the Department of Agriculture in obtaining seed from Chile, and have mot vires on So all seed houses to hold homp seed medhaa 981 been starilized. 1481 2% 030 In notalvid diseased visionoM HJanshinger Regraded Unclassified 112 DEC 23 ISSI LORANDUM FOR THE PRESIDENT The High Commissioner to the Philippines has cabled me that it is imperative that he receive im- mediately adequate authority and funds to deal with enemy property in the Philippines. A copy of such cable is attached. Sayre states that the property of interned enemy aliens must be guarded and military personnel cannot be spared. In some cases the Government must move in and operate enemy properties whose continued production is essential for defense purposes. Much enemy property must be seized or requisitioned for military, naval and civilian emergency uses. Records must be kept. Military, naval and civilian adminis- tration measures dealing with enemy property require coordinating. Funds for meeting these activities must be provided. As you know, the High Commissioner has been handling freezing control for me in the Philippines for the past twenty months and I have always delegated broad powers to him so that he could exercise his own judgment in dealing with Philippine matters. Since July of this year I have provided him with B. staff of experts to help him deal with the Japanese situation under freezing control. He has been doing 8 good job. Under Title III of the First War Powers Act, 1941, which you approved December 18, 1941, you are granted complete powers over foreign property and can deal with enemy property on any basis consistent with our war effort. I strongly recommend that the High Commissioner be notified at once that he may meet the Regraded Unclassified 113 - 2 - present emergency by exercising any or all of the powers conferred upon you by such legislation. At the same time I will notify him that he can draw on our freezing control appropriation for any funds he needs to carry out this program. Attached to this memorandum is a draft of a proposed cable from me to the High Commissioner covering this matter. If you approve I will have the cable despatched at once. I do not think this matter can be delayed pending the issuance of an Executive order relating to enemy property in this country. (Signed) H. Margenthan, Jr. I approve the foregoing action. THE WHITE HOUSE, December , 1941. but BB. Jul. EHF This has been cleared over the phone with Biddle Burlew, me Clay K ashesm per EHF JA - 12-23-41. AFL: BB/ma - 12/22/41 Regraded Unclassified 114 COPY Manila, December 19 - 7 22 P. Foley, Treasury Department Washington, D. C. Your telegram December eleventh re enemy property inadequate to meet problems here arising from fact this is theatre active military operations and in view present possible blockage many hundreds of enemy aliens and others ave been interned and separated from their properties. No military person- nel can be spared to guard such properties. Much enemy property must be requisitioned for military, naval and civilian emergency uses. Military, naval and civilian emergency administration needs must be coordinated on such problems and records kept of all such requisitioning. Authority necessary to engage personnel and incur other expenditures for custody and supervisory work. Please specify from what fund salaries and necessary expenses are to be paid. Desirable to continue operation some enemy-owned industries such as textiles, dairy and poultry farms end the like in cooperation with Commonwealth Government, its agencies and o thers. Highly desirable that specific authority be given to enter into any sort of agreement with Commonwealth Government or thers for custodial and supervisory work including arrangements for continuing operations under our supervision. Power of sale without publication of enemy property should extend beyond perishables and include any enemy property where such sale is deemed necessary because of surge of war or for other military or administrative reasons. Special authorization should be given for continued operation extensive Japanese hemp plantations in Davao for defense purposes. In final analysis all arrangements must be subordinated to military neces- sities and therefore subject to the military directive of the Commanding General. Any or all of these properties may at any time be actually in & zone of real combat, and therefore subject to capture and recapture. Foregoing suggestions relate to immediate emergency needs here. I should appreciate your advising me what plans are in contemplation with regard to permanent administration of enemy property and particularly with respect to Philippines. Please furnish copies of this radio to Interior, State, War and other interested departments. (No signature was on this cable) Regraded Unclassified 115 Proposed Text of Cable to Sayre from COPY Secretary of the Treasury. Re your telegram of December 19, 1941 on enemy property: On December 18, 1941 the President approved the First War Powers Act, 1941 (Public No. 354, 77th Congress). Sections 301 and 302 of Title III of such Act read 8.5 follows: /Here take in text of Sections 301 and 302 of attached Act7 You will note that these sections amend section 5(b) of the Trading with the enemy Act of October 6, 1917, AB amended, pursuant to which freezing control has been ad- ministered. With the approval of the President, and for the purpose of dealing with the Philippine situation, all of the powers and authority conferred upon the President under the above-quoted provisions of law are hereby delegated to you in 60 far 8.8 the Philippines are concerned. In addition, I am allocating $100,000 from the appropriation entitled "2020120, Salaries and Expenses, Foreign Exchange Control, 1942" to cover your initial expenses in carrying out this program. Please forward to me at once an estimate of the amount of funds (by month) that you feel you will need during the next three months. Regraded Unclassified 116 - 2 - It will of course be necessary for you, in cooperation with the military and Commonwealth Government authorities, to formulate & program for dealing with this emergency situation. We will be glad to cooperate with you and offer advice and suggestions on any points you may care to raise but we do not want you to feel that you must wait for instructions from Washington. You will be advised from time to time as plans are developed for dealing with enemy property. The powers conferred by the statute are very broad. Congress expects that complete records will be established and maintained with respect to property seized or otherwise received in your custody. Please be guided accordingly. You are authorized to take any steps you deem appropriate to make public the authority herein conferred on you. BB:nrd 12/22/41 Regraded Unclassified 117 [Punue LAW 354-77rm CONGRESS] [CHAPTER 593-18T SESSION] [H. R. 6233) AN ACT To expedite the prosecution of the war effort. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, TITLE 1-COORDINATION OF EXECUTIVE BUREAUS IN THE INTEREST OF THE MORE EFFICIENT CONCEN- TRATION OF THE GOVERNMENT Section 1. That for the national security and defense, for the sue- restul prosecution of the war, for the support and maintenance of the Army and Navy, for the better utilization of resources and indus- tries, and for the more effective exercise and more efficient adminis- Inition by the President of his powers as Commander in Chief of the Army and Nayy, the President is hereby authorized to make such redistribution of functions among executive agencies as he may deem necessary, including any functions, duties, and powers hitherto by law conferred upon any executive department, commission, bureau, agency, governmental corporation, office, or officer, in such manner as in his jodgment shall seem best fitted to carry out the purposes of this title, and to this end is authorized to make such regulations and to issue such orders as be may deem necessary, which regulations and orders shall be in writing and shall be published in accordance with the Federal Register Act of 1985: Provided, That the termina- tion of this title shall not affect any act done or any right or obliga- tion accruing or accrued pursuant to this title and during the time that this title is in force: Provided further, That the authority by this title granted shall be exercised only in matters relating to the conduct of the present war: Provided further, That no redistribution of functions shall provide for the transfer, consolidation, or abolition of the while or any part of the General Accounting Office or of all or any part of its functions, Sre. 2. That in carrying out the purposes of this title the President is authorized to utilize, coordinate, or consolidate any executive or administrative commissions, bureaus, agencies, governmental corpora- tions, offices, or officers now existing by law, to transfer any duties or powers from one existing department, commission, bureau, agency, governmental corporation, office, or officer to another, to transfer the personnel thereof or any part of it either by detail or assignment, together with the whole or any part of the records and public prop- erty belonging thereto. Sen 8. That for the purpose of earrying out the provisions of this title, any moneys heretofore and hereafter appropriated for the use Regraded Unclassified 2 a Law (709) LAW and of any executive department, commission, bureau, agency, govern- "(A) investigate, regulate, OF prohibic, any transactions in mental corporation, office, or officer shall be expended only for the foreign exchange, transfers of credit or payments between, by, purposes for which it was appropriated under the direction of such through, or to any banking institution, and the importing, export- other agency 68 may be directed by the President hereunder to par- ing, hoarding, melting, or earmarking of gold or silver coin or form and execute said functions, except to the extent hereafter bullion, currency or securities, and authorized by the Congress in appropriation Aote or otherwise. "(B) investigate, regulate, direct and compel, nullify, void, Seo. 1. That should the President, in redistributing the functions prevent or prohibit, any acquisition holding, withholding, use, among the executive agencies as provided in this title, conclude that transfer, withdrawal, transportation, importation or exportation any bureau should be abolished and it or their duties and functions of, or dealing in, or exercising any right, power, or privilege with conferred upon some other department or bureau or eliminated respect to, or transactions involving, any property in which any entirely, he shall report his conclusions to Congress with such recom- foreign country or a national thereof has any interest, mendations B8 he may deem proper. by any person, or with respect to any property, subject to the juris- SEC. 5. That all laws or parts of laws conflicting with the provisions diction of the United States; and any property or interest of any of this title are to the extent of such conflict suspended while this foreign country or national thereof shall vest, when, ne, and upon title is in force. the terms, directed by the President, in such agency or person as Upon the termination of this title all executive or administrative may be designated from time to time by the President, and upon such agencies, governmental corporations, departments, commissions, terms and conditions ns the President may prescribe such interest bureaus, offices, or officers shall exercise the same functions, duties, or property shall be held, used, administered, liquidated, sold, or and powers as heretofore or as hereafter by law may be provided, otherwise dealt with in the interest of and for the benefit of the United any authorization of the President under this title to the contrary States, and such designated agency or person may perform any and all acts incident to the accomplishment or furtherance of these pur- notwithstanding. рожи: and the President shall, in the manner hereinabove provided, TITLE II-CONTRACTS require any person to keep n full record of, and to furnish under oath, in the form of reports or otherwise, complete information relative Sec. 201. The President may authorize any department or agency to any net or transaction referred to in this subdivision either before, of the Government exercising functions in connection with the prose- during, or after the completion thereof, or relative to any interest cution of the war effort, in accordance with regulations prescribed by in foreign property, or relative to any property in which any foreign the President for the protection of the interests of the Government, country or any national thereof has or has had any interest, or as may to enter into contracts and into amendments or modifications of con- be otherwise necessary to enforce the provisions of this subdivision, tracts heretofore or hereafter made and to make advance, progress and in any case in which a report could be required, the President may, and other payments thereon, without regard to the provisions of law in the manner hereinabove provided, require the production, or if relating to the making, performance, amendment, or modification of necessary to the national security or defense, the seizure, of any books contracts whenever he deems such action would facilitate the prosecu- of account, records, contracts, letters, memoranda, or other papers, in tion of the war: Provided, That nothing herein shall be construed to the custody or control of such person; and the President may, in the authorize the use of the cost-plus-a-percentage-of-cost system of manuer hereinabove provided, take other and further measures not contracting: Provided further, That nothing herein shall be construed Inconsistent herewith for the enforcement of this subdivision. to authorize any contracts in violation of existing law relating to "(8) Any payment, conveyance, transfer, assignment, or delivery limitation of profits: Provided further, That all acts under the of property or interest therein, made to or for the account of the authority of this section shall be made # matter of public record under United States, or as otherwise directed, pursuant to this subdivision regulations prescribed by the President and when decmed by him not or any rule, regulation, instruction, or direction issued herennder to be incompatible with the public interest, shall to the extent thereof be a full acquittance and discharge for all purposes of the obligation of the person making the same; and TITLE III-TRADING WITH THE ENEMY no person shall be held liable in any court for or in respect to anything done or omitted in good faith in connection with the admin- Smc. 301. The first sentence of subdivision (b) of section 3 of the istration of, or in pursuance of and in reliance on, this subdivision, Trading With the Enemy Act of October 6, 1917 (40 Stat. 411), as or any rule, regulation, instruction, or direction issued hereunder. amended, is hereby amended to read as follows: "(3) As used in this subdivision the term United States' means "(1) During the time of war or during any other period of national the United States and any place subject to the jurisdiction thereof, emergency declared by the President, the President may, through any including the Philippine Islands, and the several courts of first agency that he may designate, or otherwise, and under such rules instance of the Commonwealth of the Philippine Islands shall have and regulations as he may prescribe, by means of instructions, licenses, jurisdiction in all cases, civil or criminal, arising under this subdivision OF otherwise- in the Philippine Islands and concurrent jurisdiction with the district courta of the United States of all cases, civil or criminal, arising upon Regraded Unclassified 4 (For, Law WI the high sens: Provided, however, That the foregoing shall not be construed as 1L limitation upon the power of the President, which is hereby conferred, to prescribe from time to time, definitions. not inconsistent with the purposes of this subdivision, for any OF all of the terms used in this subdivision." Sec. 302. All acts, actions, regulations, rules, orders, and proclama- tions heretofore taken, promulgated, made, or issued by, or pursuant to the direction of, the President or the Secretary of the Treasury under the Trading With the Enemy Act of October 6, 1917 (40 Stat. 411), as amended, which would have been authorized if the provisions of this Act and the amendments made by it had been in effect, are hereby approved, ratified, and confirmed. Sec. 803, Whenever, during the present war, the President slinft deem that the public safety demands it, he may cause to be consored under such rules and regulations as he may from time to time estab- lish, communications by mail, cable, radio, or other means of truns- mission passing between the United Status and any foreign country he may from time to time specify, or which may be carried by any vessel OF other means of transportation touching of any port, place, or Territory of the United States and bound to or from any foreign country. Any person who willfully evades or attempts to evade the submission of any such communication to such censorship or willfully 11600 or attempts to tise any code or other device for the purpose of concealing from such censorship the intended meaning of such com- munication shall, upon conviction, be fined not more than $10,000, or, if is natural person, imprisoned for not more than ten years, or both: ond the officer, director, or agent of any corporation who knowingly participates in such violation shall be punished by Il like fine, imprison- ment, OF both, and any property, funds, securities, papers, or other articles or documents, OF any vessel, together with her tackle, apparel, furniture, and equipment, concerned in such violation shall be forfeited to the United States. TITLE IV-TIME LIMIT AND SHORT TITLE SEC. 401. Titles I and II of this Act shall remain in force during the continuance of the present war and for six months after the termina- Lion of the war. or until such earlier time as the Congress by concurrent resolution or the President may designate. Sec. 402, This Act may be cited ne the "First War Powers Act, 1041". Approved, December 18, 1941. 118 THE SECRETARY OF THE TREASURY WASHINGTON DEC 1941 SUCRANDUM FOR THE PRESIDENT The High Commissioner to the Philippines has cabled me that it is imperative that he receive im- cediately adequate authority and funds to deal with obany property in the Philippines. A copy of such cable Ee attached. Sayre states that the property of interned anemy aliens must be guarded and military personnel tannot be spared. In some cases the Government must nove in and operate enemy properties whose continued production is essential for defense purposes. Much enemy property must be seized or requisitioned for alitary, naval and civilian emergency uses. Records must be kept. Military, naval and civilian administra- :Ion measures dealing with enemy property require coordinating. Funds for meeting these activities must be provided. As you know, the High Commissioner has been andting freezing control for me in the Philippines for the past twenty months and I have always delegated Tead powers to him so that he could exercise his own Agment in dealing with Philippine matters. Since of this year I have provided him with a staff of srts to help him deal with the Japanese situation freezing control. He has been doing 8 good job. Under Title III of the First War Powers Act, is, which you approved December 18,1941, you are inted complete powers over foreign property and can with enemy property on any basis consistent with WAY effort. I strongly recommend that the High unissioner be notified at once that he may meet the Regraded Unclassified 119 - 2 - present emergency by exercising any or all of the powers conferred upon you by such legislation. At the same time I will notify him that he can draw on our freezing control appropriation for any funds he needs to carry out this program. Attached to this memorandum is a draft of a proposed cable from me to the High Commissioner covering this matter. If you approve I will have the cable despatched at once. I do not think this matter can be delayed pending the issuance of an Executive order relating to enemy property in this country. I approve the foregoing action. THE WHITE HOUSE, December 23, 1941. Regraded Unclassified 120 COPY Manila, December 19 - 7 22 P. Foley, Treasury Department Washington, D.C. Your telegram December eleventh re enemy property inadequate to meet problems here arising from fact this is theatre active military operations and in view present possible blockage many hundreds of enemy aliens and others have been interned and separated from their properties. No military personnel can be spared to guard such properties. Much enemy property must be requisitioned for military, naval and civilian emergency uses. Military, naval and civilian emergency administration needs must be coordinated on such problems and records kept of all such requisitioning. Authority necessary to engage personnel and incur other expenditures for custody and supervisory work. Please specify from what fund salaries and necessary expenses are to be paid. Desirable to continue operation some enemy- owned industries such as textiles, dairy and pouitry farms and the like in cooperation with Commonwealth Government, its agencies and others. Highly desirable that specific authority be given to enter into any sort of agreement with Commonwealth Government or others for custodial and super- visory work including arrangements for continuing operations under our supervision. Power of sale without publication of enemy property should extend beyond perishables and include any enemy property where such sale is deemed necessary because of surge of war or for other military or administrative reasons. Special authorization should be given for continued operation extensive Japanese hemp plantations in Davao for defense purposes. In final necessities and therefore subject to the military directive analysis all arrangements must be subordinated to military of the Commanding General. Any or all of these properties a at any time be actually in B. zone of real combat, and Correfore subject to capture and recapture. Foregoing gestions relate to immediate emergency needs here. hould appreciate your advising me what plans are in many property and particularly with respect to Philippines. War templation with regard to permanent administration of wase furnish copies of this radio to Interior, State, other interested departments. (No signature was on this cable) Regraded Unclassified 121 Proposed Text of Cable to Sayre from Secretary of the Treasury. Re your telegram of December 19, 1941 on enemy property, On December 18, 1941 the President approved the First War Powers Act, 1941 (Public No. 354, 77th Congress). Sections 301 and 302 of Title III of such Act read as follows: /Here take in text of Sections 301 and 302 of attached Act] You will note that these sections amend section 5(b) of the Trading with the enemy Act of October 6, 1917, as amended, pursuant to which freezing control has been administered. With the approval of the President, and for the purpose of dealing with the Philippine situation, all of the powers and authority conferred upon the President under the above-quoted provisions of law are hereby delegated to you in so far as the Philippines are concerned. In addition, I am allocating $100,000 from the appropriation entitled "2020120, Salaries and Expenses, Foreign Exchange Control, 1942" to cover your initial expenses in carrying out this program. Please forward to me at once an estimate of the amount of funds (by month) that you feel you will need during the next three months. Regraded Unclassified 122 - 2 - It will of course be necessary for you, in cooperation with the military and Commonwealth Government authorities, to formulate a program for dealing with this emergency situation. No will be glad to cooperate with you and offer advice and suggestions on any points you may care to raise but we do not want you to feel that you must wait for instructions from Washington. You will be advised from time to time as plans are developed for dealing with enemy property. The powers conferred by the statute are very broad. Congress expects that complete records will be established and maintained with respect to property seized or otherwise received in your custody. Please be guided accordingly. You are authorized to take any steps you deem appropriate to make public the authority herein conferred on you. Regraded Unclassified 123 111-TRADING WITH THE ENEMY He First sentence of mbdividos (b) of section 5 of the the Enemy Act of October fi, 1017 (40 Stat. 411), as amended to read 04 follows: the Unit of war or during any other period of national great by the President, the President may, through any may designate, ne otherwise, and under such rules de be may prescribe, by means of instructions, licenses, investigate, regulate, or prohibit, any transactions in entration, transfers of crudit or payments between, by, to any banking institution, sent the inquerting, export- aving. melting, OF earmarking of gold ur silver coin or money or serurities, and regulate, direct and compel, multify, void, of probitot, any arquisition bulding. withholding, Dem, 10F, transportation, importation or exportation maling in. - overying any right, power, or privilege with 10 myslving, any property 115 which any community OF A national thereof hase any intervet, of with respect to any property. miliject to the juris. IN United States: and any property or interest of any monthly in national thereof shall vist, when, me, and upon directed by the President, in such agency or person as completed from time to time by the President, and upon such combitive ne flae President may presente such interest its -full le Importated, sold, or - ab acthe interest of and for the Insurfit of the United designated agreed or persons may perform any and olsol to the 14" furtherance of them THE do Diseasent -hall, in the manut foreinable provided, person (un lavge il full record of and ju fucush under tivin rejeats HE information relative " referred too in this sublivision eirlar before, after the completion thereof, un relative In any interest OF refunce to out property THE which any foreign and national thereof total or bus had aux interest, TE as may to enfore the providone of thie subdivision, THE un which or supert could for reguired the President may, under provided require the production, or it - da calimal security OFF defenin, He within, of any briefes comb. contracts, Mine. memoranda, of other papers, in underal of with persons and the President may. in the instructions provided, take other and further measures not NO Der the enforcement of this subdivision. 100 payment. transfer, assignment. or delivery OF interest made to or for No. account of the - III as otherwise directed, premant to this sublivision onli- regilation, Instruction, if direction intered hereander No. valid Harmed In a full ampitiative and docharge for of the uliligation of the provide making the name: and -hall - ledd liable in any COULT for or in respect to color or outted in good faith DE commection with The admin- AT di 10 publication of and in reliative on. the subdivision, of regulation instruction, of directions result hereunder. As and In the the ferm "Fuited States' THEARS (-) State and any place In the jurisdiction thereof, the Philippine Islands, ainl (liv several courts of first of No of the Philippine Island- shall have Total us fllower, into or comminal. arising moler thie subdivision 1-Jand- and maintent jurisdiction with the detriet Her I'mited States of all cases, civil or criminal, artsing upsin - Mensited. however, That the foregoing shall not be - a upon this power of the President, which je in provide Trau time to time, definitions, not with Na purposes of this subdivision, for any of all of and (to the All actions, regulations, niles, orders, and proclama- Caken. promulisated. made, or issued by. are pursuant institute of, the President or Her Secretary of The Treasury Trading With the Enemy Ant of October 6, 1917 (40 Stat. which wonld have leeu authorized if the provisions def and the amendments made by it had laen 10 effect, are and confirmed - Wherever, during the present war, the President shall cont the public ofily detiment- if, lie may sure to Tax evisured la rules and regulations in la may from time to time estable by mail, cable, notio, or other means of trans- between Nar Corred States and any foreign country from time in Come specify, of which may for carried by any Prom of murbing of any part. place, of the United States and Email in IIF from any Devign Any person who willfully evades III attempts to evade the of any communication to such evisor-hip of willfully discription for que my for the purpose of from mile the internated meaning of -inde vom- the dall. consiction, le find ind nume than $10,000, or, important for HOF name them Ten years, OF both: dine Inc. OF agent of any corporation who knowingly Violation shall in punished he a like fine, imprivon- and any property, funds, socities, papers, OF other vill no seal, Ingrilure with bet Tax klo, appared, Regraded Unclassified 124 0 P DIOGRAM SENT DECEMBER 24, 1941. deb MOLE, MANILA. December 24 No. 725. Following from Treasury: Re your telegram of December 19, 1941 on enemy property; On December 18, 1941 the President approved the First BAT Powers Act, 1941 (Public No. 354, 77th Congress). Sections 301 and 302 of Title III of each Act real BB follows: TITLE III -- TR.DING ITH THE N.MY Cottion 301. The first sentence of subdivision (b) of section 5 of the Trading Rith the Enemy Act of October 6, 1917 (40 Stat. 411), 12 monded, 1s hereby emended to read as follows: "(1) During the time of war or during any other period of notional surgency declared by the President, the President may, through any agency that he may designate, or otherwise, and under such rules and regulations as he may prescribe, by means of instructions, licenses, or other/ise- "(A) investigute, regulate, or prohibit, any transactions in foreign exchunge, transfers of credit or payments between, by, through, or to any banking institution, ená the importing, export- ing, hoarding, melting, or surmerking of gold or silver coin or bullion, currency or securities, and "(B) investigate, regulate, direct nd compel, nullify, void, prevent or prohibit, any acquisition holding, withholding, use, transfer, withdrowel, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which by or with respect to any property, subj et to the juris- my foreign country or = national thereof has any interget, liction ny person, of the United States: and any proporty or interent of any foreign country directed by the President, in such agency or person 88 may be derignated or national thereof shall vest, when, SE, und upon the terms, from the time President may prescribe such inter nt or property shall be the hald, to time by the President, and upen such terms and conditions to liquidated, sold, or otherwise dealt with in used, interest administered, of and for the benefit of the United States, and such nocom- designated olishment gency or person or furtherance of these purposes; and the President to keep n. full may perform any and all acts incident to the shall, record in complete tris or the relative subdivision menner of, information end to hereinabove to any either furnish interest relative before, provided, under in to country foreign oath, durings any require act in or property, or the or any after eny transaction form national person the or of relative reports completion thereof referred or to ARE otherwise, thereof, my to or in has property in which any or NS foreign may be otherwise nucessary to enforce be the De provisions uired, had any interest, and in any cere in which IL report could uire the pro- of this subdivision, the manner b roinzbove provided, te the the duction, President or if may, necessary in to the national security or defense, seizure, Regraded Unclassified 125 - 2 of any books of account, records, contracts, letters, memorands, or other papers, in the custody or control of such person; and the Prog- ident any, in the manner hereinabove provided, take other and further measures not inconsistent herewith for the enforcement of this subdivision. "(2) Any payment, conveyance, transfer, assignment, or delivery of property or interest therein, made to or for the account of the United States, or as otherwise directed, pursuant to this subdivision or any rule, regulation, instruction, or direction issued hereunder shall to the extent thereof be a full acquittence and discharge for all purposes of the obligation of the person making the same; and no person shall be held liable in any court for or in respect to anything done OF omitted in good faith in connection with the administration of, or in pursuance of and in reliance on, this subdivision, or any ruls, regulation, instruction, or direction issued hereunder. "(3) As used in this subdivision the term 'United States' means the United States and any place subject to the jurisdiction thereof, including the Philippine Islands, and the several courts of first instance of the Commonwealth of the Philippine Islands shall have jurisdiction in all cases, civil or criminal, arising under this subdivision in the Philippine Islands and concurrent jurisdiction with the district courts of the United States of all cases, civil or oriminal, arising upon the high Beast Provided, however, That the foregoing shall not be construed as a limitation upon the power of the President, which is hereby conferred, to prescribe from time to time, definitions, not inconsistent with the purposes of this subdivision, for any or all of the terms used in this subdivision." Section 302. All nots, actions, regulations, rules, orders, and proclamations heretofore taken, promulgated, made, or issued by, or Treasury under the Trading With the Enemy Act of October 6, 1917 (40 Stat. pursuant to the direction of, the President or the Secretary of the 411), as amended, which would have been authorised if the provisions of this Act and the amendments made by it had been in effect, are hereby You will note that these sections amend section 5(b) of the Trading with approved, ratified, and confirmed. the enemy Act of October 6, 1917, as amended, pursuant to which freesing con- trol has been administered. With the approval of the President, and for the purpose of dealing with the President under the above-quoted provisions of law are hereby delegat d to you the Philippine situation, all of the powers and authority conferred upon in so far the Philippines are concerned. In addition, as I am allocating $100,000.00 from the appropriation entitled "2020120, Salaries and Expenses, Foreign Exchange Control, 1942" to cover your once an estimate expenses of the enount of funds (by month) that you feel you will need initial in carrying out this program. Please forward to se at during the next three months. and Commonwealth course Government authorities, to formulate B. program for dealing end It will of be necessary for you, in cooperation with the military with this emergency situation. No will be glad to cooperate with you Regraded Unclassified 126 offer advice and suggestions on any points you may care to raise but we do not want you to feel that you must wait for instructions from Washington. You will be advised from time to time as plans are developed for dealing with enemy property. The powers conferred by the statute are very broad. Congress expects that complete records will be established and maintained with respect to property seized or otherwise received in your custody. Please be guided accordingly. You are authorized to take any steps you deem appropriate to make public the authority herein conferred on you. H. Morgenthau, Jr., Secretary of the Treasury, SWOPE. Regraded Unclassified TO: . 127 Miss Channey Mr. July carried to Secretary but did not initial- - 12-23-41. Orig and only which was copy of schedule referred to was transmitted with attached letter to Vice President MR. FOLEY TREASURY DEPARTMENT 128 INTER OFFICE COMMUNICATION DATE December 23, 1941. Secretary Morgenthau OM Mr. Foley There is attached hereto the first part of a schedule of materials held for foreign nationals in the United States. This information has been derived from reports we have received on Form TFR-300, and the attached schedule represents approximately one-third of the total list we are compiling, and which will be completed shortly. Some of the material referred to in such schedule is, of course, non-strategic and in other instances the material is already being devoted to war purposes. However, the schedule should provide valuable leads to appreciable stores of strategic materials which can be devoted to more pressing war needs. You may wish to turn the attached and subsequent lists over to the Vice President as Chairman of the Supplies Priorities Allocation Board with the suggestion that the appropriate officials of SPAB get in touch with this Department in order that arrangements may be made for this material to be directed into defense uses. A letter of transmittal is attached. Some of the significant items in the attached schedule have been checked in red pencil. Regraded Unclassified 129 DEC 23 1941 tear Cr. Vice Presidents 15 Choirman of the Supplies Priori- ties Allocation Board I thought you aight mant to have the attached schedule of materials held for foreign not onals in the Wited Inton. This information has been taken from the ceasus reports of all foreign-owned coporty which have been filed with the Treasury Department. The attached material represents only about one-third of the total as we have not as yet completed our examl- nation of all the reports. ...nould your people be interested in any of the materials I suggest that they dontact Jr. John Pehle, of the Foreign Funds Control livision, who will furnish any additional information that is needed In order to rate Licen available for defense USES. Sincerely yours, The Flee President (Signed) b) In United States Senate. inclosure. 119:33/mp 12/23/41 Orig. * exe. and from S.C. office at 5:30 pm. - 12-23-41. Regraded Unclassified 130 DEC 23 1941 xy dear Mr. President: I an enclosing report on our exports to some selected countries during the wook ending December 13, 1941. Faithfully, (Signed) 5. Morgenthaw, are Secretary of the Treasury The President, The white House. Enclosure Delivered by Lever 12:50 Service nmc HDWjmoh 12/19/41 Ret to diese office Regraded Unclassified 131 December 19, 1941 Exports to Ruesie, Chine, Burne, Hong Long, Japan, France and other blooked countries, RE reported to the Treasury Department during the work ending December 13, 1941 1. Excorts to Runsia Exports to Russia on reported to the Treasury during the week ending December 13, 1941 amounted to more than $12,000,000, the largest total for any single week since July 28. The principal items vare landelones, militery tanks and motor trucks. (See 3.) 2. starts to Calna, Purms and Hong Kong to Free Ohina were valued at approximately 12, 340,000 NR nonnared 1th 2791,000 during the previous week. Cartrioges, PARKINGT 0.00, some cars and automobile parts for replacement were the whin items. (See Appendix D.) Exports to Occuried China amounted to herrly 1700,000, the largest figure for any single weak during the not months. (See Appendix 3.) Amorts 10 surea totalled only $18,000. (See Appendix 7.) No exports to Hong Kong were reported during the week under review. 3. to Japan No exports to Japan were reported during the nees under review. 4. exports to France No exports to France vere reported suring the most ending December 13, 1941. 5. Exports to other blooked countries imorte to other blooked countries are given in Appendix A. STRICTLY CONFIDENTIAL Regraded Unclassified 132 SUMMARY OF UNITED STATES DONESTIC REPORTS TO SKLMOTED COUNTRIES AS REPORTED TO THE TREASURY DEPARTMENT FROM EXPORT DECLARATIONS RECEIVED DURING THE PERIOD INDICATED w July as to December 13, 1941. (In thousands of dellars) July 28 $ Wook ended Week ended Total Note 29 December December 13 Demestic Experte J. 5. S. E. $54,497 & 3,609 $12,040 070,146 Desupied Chima 10,523 61 678 11,262 Tree China 25,201 791 2,337 28,329 Japan 1,870 at s - 1,870 herea 2/ 6,716 E If 6,798 Transe w 6 - - 6 "soupied France 2 - - 2 Free Trance 14 - - 1 Spain 2,216 - 1 2,217 Switzerland 4,619 237 161 5,017 Sweden 10,192 100 17 10,397 French Indochina 353 a 17 394 Treasury Department, Division of Monetary Research December 17, 1941 1/ Many of the export declarations are received with a 20g of several days or 2479, Therefore this compliation does not securately represent the actual shipment of a particular work. The lenger the period covered, the closer will these figures one to Department of Commiss revised figures. 2/ or this total $1,064 thousand UM reported from July 26 to August 23, inclusive, and shipped prior to freeging orders. Consatic exports from August 23 through week enting November 29, amounted to 16,053. 2/ Trem September 11, 1941 to date - It is presented that a large percentage of mate- rial listed here, consigned to Burne, is destined for Free China. w includes both occupied and Type 7yance through week ending October 4, 1941. Ocou- pled and Type France separated thereafter. s/ Cose than 8500. STRICTLY CONFIDENTIAL afficer 12/17/41 Regraded Unclassified APPENDIX B 133 Exports from the U.S. to China, hrm, Bong Kong, Japan and U.S.S.R. " reported to the Treasury Department, July 28, 1941 - December 6, 1941 (Thousands of Dollars) 1/ Exports to China Total To Japanese To Chinese Exports Exports Exports Exports controlled controlled to to to to ports ports Burna 3/ Mong Keng Japan U.S.S.R. July 26 - Aug. 2 937 395 6gh lag. a - Aug. 9 1,657 4,523 2,794 2,794 - 963 159 11 - Ang. 16 1,278 969 309 235 42 18 - Aug. 23 1,352 1,350 2 ov 25 - Ang. 30 736 2,735 735 1 - - Sept. 6 1,023 ow 897 693 204 634 - 4,200 - Sept.13 3,038 752 2,281 - Sept.20 3,978 zu 456 - 5,217 Sept.15 156 3,822 389 - 752 $.22 - Dept.27 462 352 110 the are - 1.29 - Oct. $ 2,333 1,305 80 1,225 684 297 - 6 - Oct. 11 5,864 552 5,312 1,157 1,233 - Oct. 13 - Oct. 18 272 267 5 35 - 1,924 20 - Oct. 25 668 399 269 403 1,243 - 5,623 27 - Nov. 1 5,210 438 4,772 58 624 - Nov. 3 - Nov. 8 1,836 164 1,672 342 283 5 10 - Nov. 15 3,009 158 2,851 88 303 - 2,677 Bov. 17 - Nov. 22 1,701 473 1,228 STRICTLY CONFIDENTIAL 1,021 600 - Nov. 24 - Nov. 29 3,501 3,359 120 3,239 1,364 1,325 - Dos. 2,436 1 - Deo. 6 852 61 791 64 - - 3,609 Des. 8 - Dec. 13 3,025 688 2,337 18 - - 12,040 Total 42,573 11,748 30,825 5,683 11,629 1,869 70,494 V These figures are in part taken from copies of shipping menifests. w Pigures for exports to Pree China during these weeks include exports to Rengoon which are present to be destined for Free China. V It 's presened that a large percentage of e orts to Burne are destined for Free Regraded Unclassified 134 APPENDIX G Principal Exports from U.S. to U.S.S.R. as reported to the Treasury Department during the week ending December 13, 1941 (Thousands of Dollars) TOTAL EXPORTS s 12,040 Principal Items: Landplanes, powered 4,829 Military tanks and parts 1,843 Motor trucks (1 to 11 teas) 1,122 Metor trucks (1) to st tons) 790 Aviation gaseline 621 Boots and shoes 268 Explosive shells and projectiles 250 Sele leather 243 Other sireraft engine parts and accessories 232 Hard winter wheat 192 Coated wire of iron or steel 156 Aluminum plates, sheets, bars, strips and rods 143 Barbed wire 136 Motor trucks (under 1 ton) 134 Metallie cartridges 132 Anti-knook compounds 104 Engine lathes 95 Freasury Department, Division of Monstary Research December 18,1941 STRICTLY CONFIDENTIAL Regraded Unclassified 135 APPENDIX D Principal Exports from U.S. to Free Ohina as reported to the Treasury Department during the week ending December 13, 1941 (Thousands of Dollars) TOTAL EXPORTS TO FREE CHINA 8 2,337 Principal Items: Cartridges 606 Passenger care 278 Secut cars 254 Automobile parts for replacement 211 Cotton sheeting 152 Gotton blankets 139 Motorcycles 136 Steel bullet jacket cups 92 Treasury Department, Division of Monetary Research December 18,1941 STRICTLY CONFIDENTIAL Regraded Unclassified 136 APPENDIX = Principal Exports free U.S. to Compled Ohina as reported to the Treasury Department during the week ending December 13, 1941 (Thousands of Rellars) TOTAL EXPORTS TO OCCUPIED CHINA s 685 Principal Items: Vitamines and vitasterels, n.e.s. Leather and tanned skine Barbitual Other medicinal and pharmaseutical preparations Fruits and preparations Other industrial chemicals DEPARTMENTS 33 85 Wheat flour 22 20 Dried whole and skimmed silk 20 Dicarbonate of coda 17 Toilet preparations 17 Bottle and container elesures 16 Other coal-tar products 15 Treasury Department, Division of Mometary Research December 18,1941 STRICTLY CONFIDENTIAL Regraded Unclassified 137 APPENDIX , Principal Exports from U. s. to Burne as reported to the Treasury Department during the week ending December 13, 1941 (Thousands of Dollars) TOTAL EXPORTS $ 18 Principal Items: Wire naile 7 Galvanized wire 2 Household and personal effects 2 Auto replacement parts 2 Pharmaseutical preparations 1 Tires and tubes 1 Treasury Department, Division of Monetary Research December 19,1941 STRICTLY CONFIDENTIAL Regraded Unclassified 138 COORDINATOR OF INFORMATION WASHINGTON, D.C. December 23, 1941 The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: Thank you very much for sending me the report on our exports to some selected countries during the first week of this month. Sincerely, William J. Donovan Regraded Unclassified 139 FEDERATION OF BRITISH INDUSTRIES 21, TOTHILL STREET, FBI LONDON, S.W.I. anyas - CHARTER 23rd December, 1941. FERSONAL. cenry Morgenthau, Esq. Jnr. Secretary of the Treasury, Tashington, ,3,4. Dear her largesthan I have just received your kind note of the 18th November. 1 am glad indeed to know that ian Bay's "The Battle of Flanders" reached you safely. and that you looked forward to reading it. ( 1 not write to you after your letter of 1 did not want to bother you unduly 80 the 3rd September reached me. May I tell you now that 1 treasure it as quite the most beautiful letter which 1 have either received, D.- read, in all my life. it touched me very deeply and 1 thank you for it from my heart. 1 hat been in the habit of sending odd ablications to Arthur Purvis from time to time. Having heard 90 much of you from him, and after Regraded Unclassified 140 goeiving your letter the thought came to me bat perhaps you might care for them: - so sent one or two and shall send other really steresting ones as and when they appear. une day 1 do hope it may be my good ortune to meet you. yours succerely Wair Regraded Unclassified 141 WILLARD hotel, Washington, D.C., December 23, 1941. Dear Mr. Secretary, I referred to the United Kingdom Treasury the Question you put in your letter of the 5th of December, and an instructed to say that they regret that they do not feel able to sgree that the figures submitted to you weekly of our svailable gold and dollars should be given to the Federal Reserve System. Yours sincerely, 7 Phillips : Honourable Henry Morgenthau, Jr. Secretary of the Treasury, Washington, D.C. Regraded Unclassified 0 142 ? Y DEPARTMENT OF STATE WASHINGTON December 23, 1941 In reply refer to ID The Secretary of State presents his complimente to the Honorable the Secretary of the Tressury and encloses copies of the parsphrase of telegrem 210. 319. dated December 22, 1941, to the American Embassy, Chungking, China, concerning transmission to the Chairman of the Stabilization Board of China tested cable addressed by the Federal Reserve Bank of New York to the Stabilization Board of China. Enclosure: To Embasy, Chungsing, No. 319, December 22, 1941. Copy:vw:1-2-42 Regraded Unclassified 143 P Y PARAPHRASE OF TELEGRAM SENT TO: American Embassy, Chungking, China. DATE: December 22, 1941, 5 p.m. 20.: 319. Reference is made to the Embassy's telegram No. 498, dated the 10th of December, 4th paragraph: Pursuant to request of the Federal Reserve Bank of New York as fiscal agent of the U.S., please transmit to the Chairman of the Stabilization Board of China the following tested cable addressed to the Board, Chungking, China: "Aumber 33 First Paragraph. The 20th of December 1941 is the date of this message. 207 is the new permanent number which because effective the 20th of December. Please transmit by cable through American Embassy, Chungking, China, confirmation of your understanding. Second Paragraph. Please refer to your telegram No. 2 from Hong Zong, and our telegrem NO. 1 to Chungking, and let us know via cable the place of the Board's operations both for messages which we may send and instructions which may be given to us. Also advise by cable the new address for mail- ing. (Test 289)" HULL (FL) Copy:vw:1-2-42 Regraded Unclassified 144 December 23, 1941. Telephone Conversation Between Vr. Knoke of the Federal Reserve Board and Mr. White December 23, 1941 - 5:15 p.m. = knoke: "You probably know that the Central Bank of China has re- quested that we suggest a man as an advisor -- what they call an expert in the general field of policy as well as matters of currency and foreign exchange. I am reading from a letter the Chinese Ambassador wrote to Eccles in reply to our request that he find out what was involved. "11 received e telegram irom Dr. Rung E.S Tollows: We de- sire the services of an expert in the fields of central banking policy as well as matters of foreign exchange. The length of service will be for one year in Chunglding - will travel - salary $1500 U. S. dollars plus traveling expenses, plus residence expense." Rr. Knoke went on to say that he did not think that sending a man out to Chungking was "very realistic in prevailing circumstances. I am very doubt, ful whether we could prevail upon anybody at the present moment to go to Chungking for a year. It seems to me that the wer has definitely changed the situation." Dr. White agreed that the situation night be such now that the Chinese may have changed their minds, but sug- gested that he would make inquiries of the Chinese Govern- ment and let Mr. Knoke know. Mr. Knoke thought that it would be desirable for Mr. White to contact the Chinese again to see if they still wanted E man. 4. Knoker "It seems to us unless the Treasury feels strongly or: that point, we would strongly suggest that this matter be held in abeyance. That would be my own reaction. Ity personal opinion 1a that it would be very difficult." *Knoke said he wanted to raise the second point. be said that Mr. Geutier was in to see him on December 22 and he went on to say: "He virns to us because we have been their correstondent for 20 years. "It is not within our scope, nor is it our intention to comment upon or make suggestions es to administration policy, nor would we have considered recommending any- thing that runs counter to the New Deal program. I Regraded Unclassified 145 Division of Monetary - 2 - Research talked the matter over with Mr. Sproul. From the technical viewpoint we would like to say this - I would like to repeat what we said before to Mr. Cochran some months ago. 'We find it difficult to see how Germany or the Axis powers would be helped if these transactions were approved, since the gold remains under control here. The gold as well as the funds remains under control." Mr. White said that the Treasury was always glad to have Mr. Knoke's views and that he would be glad to submit his views at the next meeting of the Foreign Funds Committee. Mr. White told Mr. Knoke that the Swiss had been told that the question was going to be raised again for consideration at the next meeting. 146 Treasury Department Division of Monetary Research Date Dec. 23, 194119 To: Secretary Morgenthau I think you will be interested in glancing at the outline of Niemeyer's suggestions for China. We are preparing here a memorandum on each one of the suggestions and will be prepared to take them up with you when the recommendations are presented to us directly for comment or action. Item (e) is of particular interest to the Treasury. H.D.W. MR. WHITE Branch 2058 - Room 214} 147 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE December 23, 1°41 TO life White FROM Mr. Friedman Bubject: Telegram from American Ambassador, Chungline, reporting suggestions from Sir Otto Niemeyer regarding Chinese financial situation. 1. prepared by Sir Otto Niemeyer recommended urgent consideration be given by China to problems caused by blocking of approaches to China I'm abroad. China should consider (o) taking an inventory of essential war materials in China; making arrangements to ration these materials and, if necessary, to pronihit their private use and examining into practical neens of supplying deficiencies; (E) centralizing absolute control of transport priorities from 3urma; (c) organizing and encouraging production of domestic handwork of articles of daily use; (d) controlling by a joint banking cormittee the granting of credits by private banks end the rates of interest paid by such banks on deposits and advances; (e) taking immediate steps to assure as much foreign support as it is practical to use for the issue for subscription by the Chinese public of an internal loan; (f) taking immediate steps for distribution in large cities of some of rice collected as taxation at prices somewhat Lower than those at present officially established. 2. According to the British Ambassador, Sir Otto has found it impossible to interest the Minister of Finance, who is now ill, in facing these and related problems. J. The British Ambassador suggested that the situation might be presented to the Generalissimo by himself and by Ambassador Gauss. Ambassador Cause counter subjested that Sir Otto make his suggestions directly to the Generalissimo. British Ambassedor appeared to be disposed to accopt his suggestion. Regraded Unclassified C 0 148 P Y DEPARTMENT OF STATE WASHINGTON December 22, 1941 In reply refer to FD The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses copies of the paraphrase of telegram No. 515, dated December 21, 1941, from the American Embassy, Chungking, China, reporting suggestions from the head of the British Economic Mission to China regarding the Chinese financial situation. Enclosure: From Embassy, Chungking, No. 515, December 21, 1941. Copy:1c:12/23/41 C 0 P 149 Y PARAPHRASE 03 PRIEGRAM RECEIVED BUR: American Embresy, Chungking. China. ATS: December 21, 1941, 9 a.m. 20.: 515. This morning I vas handed by the British Ambassador 8 cony of a memorandum prepared by Sir Otto Miemeyer, Chief of the British Economic Mission to China. The memorandum recommendes that in view of the serious situation with which Caina 1° faced because of the outbren of war in the Pacific, imediste urgent consideration should be given by China to the problems caused by the blocking of sporoaches to China from abrond which will probably result in China receiving little if any imports from abroad for six months or more. This vill affect the budget of China but will much more videly effect the general economy of China. The memorandus recommended that China consider: 1. Taking an inventory of essential war materials in China, such as arsenal supplies, essential metale and chemicals, ordinary gasoline, high octane gasoline, ban: notes, and paper for making bank notes, making arrangements to ration these materials and, if necessary, to prohibit their private use, and examining into practical means of supplying deficiencies; 2. Centralizing absolute control of transport priorities from Surve: 3. Organizing and encouraging production by domestic handwork of articles of daily use; 4. Controlling by B. joint banking committee the granting of credits by private vanice and the Regraded Unclassified 150 -2- rates of interest paid by such banks on deposits and advances; 5. Taking immediate steps to assure as much foreign support as it is practical to use for the issue for subscription by the Chinese public of an internal loan which will reduce inflation pro tanto; and, (6) in view of what is reported to be satisfactory progress of collecting rice as taxation in kind, taking immediate steps for distribution in large cities of some of this rice at prices somewhat lower than those at present officially established, and to give wide publicity to this fact. According to the British Ambassador, Sir Otto has found it impossible to interest the Minister of Finance (who frequently of late has been ill and is now 111) in facing these and related problems. The Ambassador suggested that the situation might be represented to General Chiang by himself and me. I made the counter suggestion that Sir Otto, as & financial expert and economist of high reputation on an economic mission here by invitation from Chiang to the British Government, under the circumstances should make his recommendations directly to Chiang in outline in simple terms and should stress the need for considering and acting on them. This, I suggested, would be a more effective approach than for the two Ambassadors, acting without instructions from their Governments, to make representations on problems which are principally Chinese Regraded Unclassified 151 -3- internal problems. The British Ambassador appeared to be disposed to accept my suggestions as to the lines on which he should advise. Niemeyer outlined the present situation in China to Vincent on lines which I am reporting by separate message. GAUSS Copy:1c:12/23/41 152 100 23 1944 Dentlement Attention: D, J. Experes Reference is made to your letter of December 16, 1941, relative to the arrangement for the perpose of emplying the Republic of China with United Mates dollar exchange. You are hereby anthorized and requested, as fiscal agent of the United States, to send the following sable to the Central Pank of Ohines *Tish reference to your cable number 20 requesting a further extension of the arrangement between us for perpose of supplying Republic of China with dollar eschange the Secretary of the Treasury has authorized us as fiscal agent of the United States to modify further paragraph 6 of our letter of July 14, 1937. as notified, by deleting December 31. 1941' wherever ench words and figures Appear is much paragraph as nodified and inserving is liem thereaf 'June 30. 1942'. Please confirm year agreement to wash modification of the arrangement.' Tery truly yours, (Signed) 1. It. Secretary of the Treasury. Federal Reserve Bank of lieu lark, 33 street, See Terk, New Tork, Ins Dutuch FDihmd 12/19/41 3MC Regraded Unclassified 153 DEC 23 1945, Contlement Attention: D. George Informate is nate to your letter of December 18, 1941. relative to the arrungment for the purpose of supplying the Republic of China with United States dellar exchange. Ten are hereby authorized and requested, as fineal agent of the United states, to - the following cable to the Central lask Chinas with reference to your cable - a requesting a further oxtension of the astengement between us for purpose of suplying Republic of this with dollar eschange the Secretary of the Treasury the authorized us as fisml agest of the Valted States to milly further paragraph 6 of our letter of day 14, 1937. as millied, W deleting 31, 1941° deceaver not were and figures appear is - paragraph as notified and insurting is lie theresf - 30, 1948'. Please confirm your agreement to information a r 1 Very truly yours, (81gmod) 1. Worgenthaw. 197 I = a Federal Reserve Bank of lies York, 33 liberty Street, Bee Topic, New 1wk. file & D which FDilud 12/19/41 nmc Regraded Unclassified 154 FRANK KNOX WILLIAM s. KNUDSEN HENRY L STIMSON SIGNATURY of THE HAVY SIONEY HILLMAN DIRECTOR GENERAL I % I ASSOCIATE DIRECTOR GENERAL OFFICE OF PRODUCTION MANAGEMENT OFFICE OF THE DIRECTOR GENERAL WASHINGTON, D.C. December 23, 1941 The Honerable Henry Morgenthau, Jr. Secretary of the Treasury My dear Mr. Secretary: Thanks very much for your letter of December 22 and I have transmitted the informa- tion to my representative in New York. I an hopeful that arrangements will be completed this week. Sincerely, William S. Knudsen my personal Kanks for action 5 Regraded Unclassified 155 DEC 23 1941 by dear Count Coudsmhove-Zalorgis I - very much interested in your letter of Deasater 5, 1941, relating to the de facto recognition by the United States of Austric as not surexed to Jermany but surely Carran-occupied territory. n is especially heartening, at this time, to find that so distinguished & Group of Austrians wish to disassociate themselves from Ournary, her assitions and her misdeeds. You are assre, of course, that the substantial question involved falls embusively within the juris- dietion of the State Department. I as confident that your proposal will receive careful consideration from that Department. Sincerely, (Signed) a. Sergenthaus in Sucretary of the treatury, Count R.N. Condenhove-Kalergi, President of the Pansuropsan Indon, lieu Tark Iniversity, have York, Lew Lora. name DGESS 12/18/41 2nd w Hompson Regraded Unclassified iso) PALISADE AVENUE HEW YORK CITY December 5, 1941 Bis Rr. here Morgenthau, Scoretary of Treasury, Treasury Department, Washington D.C. my dear Bacretary, I enclose you the copy of a petition to your Government con- corning the matter I discussed with you recently. I forwarded the original of it to the President and a copy to the Secretary of State. As I do not know if this petition ever reaches the desk of the President, I should be extremely obliged to you if you could in- form him of this initiative for the repeal of the American de facto- recognition of the Anschluss in 1938. Such a repeal would have no practical difficulties, after you never have recognized the Anschluss de jure, and after your consuls have recently been withdrawn from the Austrian territory. If the U.S.A. would act in this sense, Austria would be placed on the same international level as the territory of Danzig, that also has DO Government in Exile and still is not being considered as B. part of Germany, but only as an occupied territory. Such a clarification of the status of Austria as occupled and not annected territory would be B. first step toward 8. future organization of Europe, breaking for ever with the conception of Pangamamy and repairing all crimes committed by Hitler's invasions. Place further importance of this petition lies in the fact, that 14. unites for the first time the names of almost all leading repear Entives of Austria in the U.S.A.: politicians, scholars and ats belonging to very different parties, from the brother of ke Otto to a member of the executive board of the Social- Designation party in exile. his document can therefore be considered as the first practical Ion of unity within Austrian opinion since the Anschluse, and of animous desire of all Austrian patriots. should be extremely obliged to you if it could draw the Regraded Unclassified presi tention beration. on this matter and give us your moral support for Very sincerely yours, Rochard N Conden have Kalers R.N. Coudenhove-Kalergi TREASURY DEPARTMENT LO 6 IN 6 3301461 THEASURY office to SECRETARY Regraded Unclassified To the Government of the United States of America: for all Austriens who are anxious to recover the lost independence of their unhappy country, we thank you for hav- iss generously accepted the principle of the Atlentic Charter, wishing "to see sovereign rights and self government restored to those who have been foroibly deprived of them." Austria, after her heroic resistance of more than five years, has been foreibly deprived, not only of her sovereign rights and self government, but even of her name. This annexa- Won has been preceded by military invasion, accompanied by 9. USTD of terrorism and followed by a forged plebiscite. We appeal to you to take a first step toward the re- ration of this international crime, by the repeal of any recognition of Austrian Annexation, Au transforming the international status of Austria from that - German province into that of an occupied country. RN Condenhove- Kelengi Count R.N. Coudenhove-Kalergi, Ph.D. President of the Paneuropean Union. New York University, N. Y. aber 4, 1941 Regraded Unclassified Signatories: getural induke felix et Austria m.p. Archduke felix is the third son of la- peror Charles and Amprose Zita of Ano- tria-Hungary. shard Bear-Sefmann m.p. Dr. Richard Neer-Hofmann, poet and dra- matio author. Dr. Otto Benes, former oustedien of the is Benes n.). Albertina Museum, is now sustedian of the rogs Art Mussea at Harvard Universi- ty, Cambridge, Nass. Hugo Burghanaer WAS the director and ⑈ Burghauser m.p. conductor of the famous Philharnenie Concerts in Vienna. ,J.Froundlich m.p. Dr, Jacques Froundlich is a muster of the executive board of the Asstries Bocial-Demoeratio party in exile; be was a nember of the Austrian Supreme Court and President of the Austrien Labor Bank. as Smeet Fried m.p. Dr.Hans Brasst Tried is Research AB- societe of the New School for Sceiel Research and lecturer at Columbia University, New York. >bort Meine m.p. Baron Robert you Heine-Geldern, former Professor of the Vienna University, now at the American Mussum of Natural History, New York City. letrich von Hildebrand m.p. DT, Dietrich you Hildsbrand, former Professor at the Vienna University, now Professor at Fordban University, New York, rich Hale m.p. JT. Erioh Huls, former Professor at the Cologne University, now Professor at the New School for Social Research, New York. ito Kellix m.p. Dr.Otto Emllir, Chairman of the "Aus- trian Longue". 7.7rass Klein m.p. Franz Xlein is aditor of the "Feice of Austria" New York Regraded Unclassified ⑉2⑉ .S.Lichthles Grnest Harvey Lichtblau, former professor at the High chool for Architecture in Vienna, now Professor at the American School of Design, New York. to 0180 Load, a.). Dr.Otto Loows, former Professor at the University of Oras, was rewarded with the Nobel-irize and 1a now refeasor at New York University, New York, of. 1.Mail N.D. Dr.Hermann Mark. former !rofessor at the Vienna University, is now Professor at N.Y. the Polytechnical Institute of Brooklyn, po m.p. Dr.2gon former Se- cretary of the League of Nations, is now Professor at the American University, washington D.C. is Reland n.). Ida Roland (Counteas Coudenhove-Zalergi) was tragedian at the National (Surg) Theatre in Vienna. alm N. Oesterreicher m.p. Reverend Father Johannes K. Desterreicher. former Professor at the University of Vienna, is now Professor at Fordham Uni- versity, N.Y. Illiem 8. Bohlam m.p. Dr. "illiam former editor of the "weltbühne", is the author of "This second war of Independence". :Setwig Nohleiffer m.p. r.Hedwig Behleiffer, is librarian et the Harvard University Library, Cambridge, Mass. ishard Schooller m.p. pr.Richard Schweller. former Minister and head of the Aconomic Department of the Foreign Office in Vienns, ie now chairman of the "Austrian Council" New York. ulter you Schusebniga m.p. alter von chusehning, former Austrian Consul in R10 de Janeiro. - value E.D. Bruno alter, former conductor at the National Opera in Vienna, is now conduct- ing at the Netropolitan Opera, New York. - cortes m.p. Dr.Franz erfel, poet end novelist. Regraded Unclassified -3- matures' Signatories: 1,Gruenebas N.7. Dr. Gustave von Gruenebaum, former Profes- sor at the Oriental Department of the Vien- na University, now Professor at the American Institute for Iranian Art and Archasology, New York. TE Bittmer m.p. Dr. Georg Bittner, former aditor of the "8 Uhr Blatt" in Vienna. di rischer N.). Dr. Paul Fischer, Instructor at the Uni- versity of Maine, Oreno,Maine. Reoul Auernheimer m.p. Dr,Reoul Auernheimer, author and play- writer, 1e chairman of the Austrian Group of the PEN-Club. lix m.p. Dr.Felix Kaufmann, is Professor at the New School for Social Research, New York. Stephan Possony m.p. Dr. Stephan Fossony, political author, is teaching at the Institute for Advanced Studies, Princeton, N.J. thur Lenhoff m.p. Professor Arthur Lenhoff, former Professor at the Vienna University, now Professor at the University Buffalo, N.Y. ilio de Hofmannsthel m.p. Dr.Emil von Hofmannsthal, Vice-President of the Austrian Branch of the International Law Association. - A.Michels, Ph.D. m.p. Father Thomas A.Miohela. 0.8.B., former Professor at the Salmburg University, now at Saint Michaels College, Vermont. I Brand m.p. Dr. Max Brand, Composer and lecturer. Richard 8 thr m.p. Dr. Hichard Stohr, Professor at the Vienna Conservatory, is now at Michaels 001- lege, Vermont. rì Heigl a.p. Dr.Karl weigl, former Professor at the New Vienne Conservatory of Music, is now at the Julius Hartt Musical Foundation, Conn. ná Traus n.). René Kraus, former editor of the "Neues Wiener Journal", is euthor of the books "Winston Churchill" and "Mon around Churchill", Regraded Unclassified 162 Treasury Department TELEGRAPH OFFICE 1013 VA 23 EIL HR NEWYORK NY DEC 3 1941 122p IDEANT TENRY MORGENTHAU 1941 DEC 23 PM 2 39 WASHDC LEVE SIVE CHURCHILL A COPY OF MY LAST MEMORANOUM AS I TRY TO SEE 118 TO EXPLAIN DETAILS. SINCEREST CHRISTMAS WISHES AND THANKS RICHARD COUDENHOVE KALERGI 34PM Regraded Unclassified 163 PARAPHRASE or TELEORAM RECEIVED Friend American Consulete General, Algiers, Algeria December 23, 1941, 6 D.m. - 669 This telogram contains a messure from Mr. Murphy. Reports have been received from an official source which is Delieved to be reliable that a sulpment of three tone of gold from Algiers to Marseille will be sent by plane on the 24th of December and that another eight tons re to be shipped in the same way on the 26th of December according to schedule. This telegram was also sent to Tangier, Lorocco. COIZ Regraded Unclassified C 164 0 P Y DEPARTMENT OF STATE WASHINGTON In reply refer to 37 640.51 From: Credits/4709 December 27, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmite herewith a copy of telegram no. 323 of December 17, 1941 from Caracas, quoting a decree in translation which ap- yeared in the December 16 issue of the official garette, concerning provisions taken by Venesuela to control funds, credit and rights belonging to or in which the govern- nento or nationals of states at war with en American nation may have an interest for the purpose of avoiding demages resulting therefrom. Enclosure: From Caracas, December 17, 1941. Copy:0j:12-26-41 Regraded Unclassified 165 Caracas Dated December 17, 1941 Rec'd. 10:37 D.E. Secretary of State, Weshington. RUSH. 313. Seventeenth. Official gazette December 16 contains following decree (translation) "Issias Medina A President of the United States of Veneruela in order bect to carry gut the purposes sought by the prohibitions end restrictions established in the decree of December 11, 1941, and for the purpose of avoiding damages resulting from operations concerned with funds credit and rights belonging to, or in which the governments or nationals of states at ver with an American nation any have an interest, undertaken in the name persons enterprises or intermediery companies, or vhose nurvoses or result be to conceal or remove them in any manner from the effects of the said decree: in the use of attribute 23 of Article 100 of the National Constitution in con- formity with Article 35 and in anglying numeral one of Article 15 of the said constitution and in accordance with the sivice of the Ministers in Council: decrees: Article 1. The restriction of the evercise of individual guarantees provided for in numerale two, eight end nine of Article Regraded Unclassified 166 + 32 of the National Constitution established in Article one of the decree of December 11, 1941, is hereby extended in the terms and for the effects of the present decree. Article 2. The Federal Executive shall subject to measures of intervention inspection and control the course of operations of all persons firms enterprises and businesses of whatever nationality, provided in its judgement, the activities of these persons enter- prises or entities might be operated injuriously in respect to national or continental security or economy or might occasion on evasion of the purposes of the decree of December 11, 1941. Article 3. The following shall be specified by virtue of orders of the Federal Executive: a (the person enterprises or entities subject to the application of the measures provided for in the present decree;) the necessary measures for, inspecting the course and operations of those persons enterprises or entities 80 that their activities may not be exercised in detriment of continental or national security or economy; (determination of the time when application or the measures should cease by reason of the absence of necessity to continue them;) the authorities or official organizations to which the carrying out the said measures shall be delegated. Article 4. Among the measures stated may also be included the prohibition to withdraw funds, move or transfer benking or savings accounts, to withdraw articles on deposit or securities submitted as collateral or for custody. These measures may be applied to the persons firms enterprises or entities of any nationality who the Federal Executive may consider included in the provisions of the present decree. Regraded Unclassified 167 -3- Article 5. The Ministers of Interior Relations of Foreign Relations and of Hacienda are specially charged with the execution of the present decree." The decree is signed by the President of the Republic and countersigned by the Ministers of the Executive. CORRIGAN KLP Copy:bj:12-26-41 Regraded Unclassified 168 DEPARTMENT OF STATE COPY WASHINGTON In reply refer to December 23, 1941 77 840.51 Frozen Credits/4791 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits herewith paraphrases of certain telegrams with reference to the Department's circular telegram of December 15, 1941 to all diplomatic and consular establishments in the American republics. The paraphrases are as follows: Number From Date 303 Managua 12/18/41 421 San Jose 12/16/41 431 San Jose 12/17/41 125 San Salvador 12/17/41 --- Sao Paulo 12/18/41 The Secretary of State also transmits herewith a copy of a telegram with reference to the Department's circular telegram of December 15, 1941, which is as follows: Number From Date 128 Tegucigalpa 12/17/41 Enclosures: As stated. COPY:lap-12/24/41 Regraded Unclassified 169 COPY PARAPHRASE OF TELEGRAM RECEIVED FROM: AMLEGATION, Managua TO: Secretary of State, Washington DATED: December 18, 1941, noon NUMBER: 303 Circular telegram of December 15, 10 p.m. is referred to. As the Nicaraguan Government has adopted certain effective and extensive measures meeting the objective summarized and which in fact extend further than certain points in the Department's circular, the attention of the Nicaraguan Government to that cir- cular telegram is not recommended. Further instructions requested before taking any action. COPY:lap-12/24/41 Regraded Unclassified 170 C 0 P Y PARAPHRASE OF TELEGRAM RECEIVED FROM: AMLEGATION, San Jose TO: Secretary of State, Washington DATED: December 16, 1941, 8 p.m. NUMBER: 421 Reference the Department's circular telegram of December 15. A note revealing the steps which the United States has taken against activities of Italians, Germans and Japanese in the United States was delivered to the Foreign Office today. In view of the danger that the enemy may learn of our special suggestions, it was felt unwise to approach the Minister for Foreign Affairs either by written com- munication or verbally regarding the measures we would wish them to adopt. It is proposed to confer with the President and the Minister of Public Security upon this question. copy:kma:12/24/41 Regraded Unclassified C 171 0 P Y PARAPHRASE OF TELEGRAM RECEIVED FROM: AMLEGATION, San Jose 20: Secretary of State, Washington DATED: December 17, 1941, 2 p.m. NUMBER: 431 Circular telegram of December 15 from Department. The Military Attache and myself were received this morning by the President and the Minister of Public Security to consider the five measures which the United States has expressed a desire to see adopted. Measures numbers two to five inclusive, they said, have already been adopted and measure number one was being placed in force immediately so that all trans- actions in business, finance or trade between Italy, Germany or Japan would be prevented. Copy:ec 12-24-41 Regraded Unclassified 0 172 0 P Y PARAPHRASE OF TELEGRAM RECEIVED FROM: AMLEGATION, San Salvador TO: Secretary of State, Washington DATED: December 17, 1941, 3 p.m. NUMBER: 125 Department's circular telegram of December 15. The Government of El Salvador has adopted all measures recommended except those measures pertaining to busi- nesses of enemy nationals which are still under con- sideration. Copy: ec 12-24-41 Regraded Unclassified C o 174 P Y ML Tegucigalpa Undated Rec'd December 17, 1941 9:47 p.m. Secretary of State, Washington. 128 Honduran Congress has today approved two decrees freezing all assets of Germans, Japanese and Italians. Government agents will supervise continued operations of such nationals. Comment and copies of decrees by air mail. ERWIN WWC Copy:1c:12/24/41 175 December 23. 1941 Mr. Livesey Mr. Dictrich will you please send the attached message w cable to the American Minister to Svitserland at Berne, Switserland. FD:lap-12/23/41 Regraded Unclassified 176 Typed 4105 p.m. December 23, 1961 for U.S. MINISTER TO SWITZERLAND, BERME, SWITZERLAND From SECRETARY OF THE TREASURY "will you please thank Mr. Reyall fyler for the letters and memorands which be has sent to m. They have been useful and enlightening and I want him to know that I have approciated reseiving them and hope be will centimes to send them." fut HDN HIM/efe 12/23/41 Regraded Unclassified 177 PARAPHRASE OF TELEGRAM SENT TO: American Legation, Bern, Switzerland. DATE: December 23, 1941, 7 p.m. NO.: 380 The following is from the Secretary of the Treasury for the Minister. Please thank Mr. Royall Tyler for sending 20 the letters and memoranda. I want him to know that I have appreciated getting them. I hope that he will keep on sending them because they have been enlightening as well AR useful. HULL (FL) Regraded Unclassified 178 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION - DATE December 23, 1941 Secretary Morgenthau TO FROM Xr. Dietrich CONFIDENTIAL Registered sterling transactions of the reporting banks were B.B. follows: Sola to commercial concerns -37,000 Purchased from commercial concerns 15,000 ?pen worket sterling was quoted at 4.03-3/- The only reported trans- action consisted OI $2,000 DOLA to A commercial concern. Tan Janadian doller, after reaching a current low of 13-7/6, closed at 12-3/- unchanged from last night. The Argentine free peso moved off another 10 points to close at .2350. In Tew York, closing quotations for the foreign currencies listed below were 62 follows: Brazilian milrcis (free) .0516 Colombian peso .5775 Mexican 0080 .2065 Uruguayan peso (free) .5310 Venezuelan peso (free) .2700 Cuban peso Par The Federal Reserve Bank of New York sold 250,000 Argentine Desos in Yew York et the rate of .2350. by order and for account of the Bank of Sweden. This make & total of 1,250,000 Argentine pesos which the Federal has cold for the Swedish bank since December 15. There were no nurchases or sales of gold Stected by us with foreign countries today. In order to increase the Stabilization Fund's gold balance, we purchased in gola from the General Fund, through the New York Assay Office. % new gold angagnments were reported. In London, spot and forward silver were unchanged at 25-1/26 and 23-9/16a, The J. 5, squivalents were 42,67* and 42.76/. The Treasury's purchase price for foreign silver WGG unchanged at 35% Sandy and Harsen's settlement price for foreign silver wes also unchanged at 35-2/201. We cade no purchases of silver today. DA Regraded Unclassified 179 BRITISH EMBASSY WASHINGTON, D.C. December 23rd, 1941. personal and Secret, Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, (For the Ambassador) R.I. Campbell The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. Regraded Unclassified 180 Copy No. 14 BRITISH LOST SECRET (U.S. SECRET) THE No. 15 Information received up to 7 4, 22nd December, 1941. (I) NAVAL An Auxiliary Aircraft Cerrier escorting a homeward Gibraltar BONNOT WED sunk by U-boat yesterday 500 miles That of CAPE FINISTERRE, come ships of the convoy have also been torpedoed, Aircraft from the Auxiliary Aircraft carrier yesterday morning sighted a U-boat with a hole in her side transferring non to another U=boat. The aircraft shot 3 men, One of H.M. submarines tor- pedoed a large tanker entering SUDA BAY on the 11th and another of H.M. submarines In un attack on 2 North bound merchant ships in the Gulf of TARANTO on the 13th obtained 3 hits on one and 1 on the other, HOND KONG. 20th, Botor Torpodo Bonts sank 4 enomy landing craft between KONLOON and the Island, our loanes were two llotor Terpedo Boate sunk and 1 damaged. An Oiler, two boom defence vessels and an auxiliary patrol vessel were scuttled as they were unable to steam. On the 21st, a medium sised Greak cargo vasuel WEO damaged by mine off the East Coast and beached and a Not= wegian vossel of about 5,000 tons pas torpedoed. (II) MILITARY LIBYA. The pursuit of the enemy continues, but our columns have been hindered by sand storms and havey rain in the coastal area our patrols have reached CYRENE and APOLLONIA. In the centre our columns are attacking 5 nilos Nest of 3L KARBUBA, where much abandoned material was found. Further South, by the morning of the 21st we had reached 11SUS and are working forward to regain contact with the enemy. There are indications that the enemy is making a stand to cover the evacuation of aquipment from BENORAZI. MATAYA. The withdrawal of our forces decided upon owing to Lone of aerodromes, from the Northern part of KELANTAN has beon completed. Thilk of stores and equipment has been inthdrawn. On the 21st, onemy |Tessure on GRIX road increased, one Battalion out off during the eight 19th to 20th rought ito pay out with about 30 casualties, Impanese miffored heavily. (nr) AIR OPERATIONS 20th to 21st, & Indoon attacked the oil depot ST. MAZAIRE And started fires, Bad weather prevented bombing operations, About 20 reality atr- craft were suspected sea mining off the Cant Const. Regraded Unclassified 181 - 2 - LIBYA. 19th. Fighters inflicted heavy casualties on transport and lorry borns troops South of JEDABYA. 19th to 20th, The enemy heavily raided TOBRUK, no damage was reported. 20th, Blenhaims bombed BARCE aerodrome, and others with fighter escort, were intercepted by German fighters near BARCE and forced to jettison their bombs. Three German fighters were destroyed and one probably destroyed, four Blenheims and five Tomahawks are missing. LALTA. 2lst. Bombers escorted by fighters attacked the Island causing slight damage to barracks and 5 fatal casualties, One enemy fighter was destroyed, one probably destroyed and one damaged, Two Hurricanes were lost. MATAYA. 21st. KUALA LUMPUR aerodrome was attacked by 13 Japanese dive bombers with fighter escort. Our fighters destroyed one bomber and another was probably destroyed by anti-aircraft fire, Our losses - one fighter, pilot safe. Reported that Japanese bombers when attacked by fighters or anti-aircraft fire immediately broke formation in disorder. Regraded Unclassified 182 BRITISH EMBASSY WASHINGTON, D.C. 23rd December, 1941, PERSONAL AND SECRET Dear Mr. Secretary, I enclose herein for your personal and secret information copies of the latest reports received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, R.J. Campbell For the Ambassador. The Monourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. Regraded Unclassified 183 Copy No. 13 BRITISH MOST SECTIET (U.S. SECRET) 1 A Information recoived up to 7 n,e,, 20th December, 1941. (1) HAVAL Aircraft oatapulted from à ship escorting 8 homeward convoy destroyed 2 Focks Thilf aircraft and damaged a third East of the AZCRES yesterday. Dne of H.M. submarines attacked two large Northbound merchant ships escorted by 2 destroyers in the Gulf of TARANTO on the 13th and obtained one hit with tarpedo, A mall British merchant vessel in homeward convoy was torpedoed early on the 19th 400 miles Rest of CAPE ST. VINCENT and 10 reported sinking. A 9,500 ton tanker in coestal convoy and carrying petrol was oot on fire and abendoned off Northwest WALES yesterday evening. (II) MILITARY LIBYA. The pursuit of the onemy continues, By the evening of the 18th 4th Indian Division had captured DERNA aerodrome but the enemy were still in possession of the town and its defences which were reported strong, Our armoured forces were about 12 miles southwest of MEXILI with a detachment 15 miles further west, MEXILI was still occupied by the enemy. During the morning of the 19th our troops occupied both DERNA and MEXILI and the pursuit of the retreating enemy mosty wurds along the roads DERNA-BARCE and MEKILI-SL ABIAR was continued. So far the energy retreat has been rapid and comparatively little opposition has been not, The number of prisoners has therefore not been great although much 167, has been captured. There are signs of considerable enemy discrganimation, In the frontier area South African forces contimue the investment of enemy positions at BARDIA and near HALFAYA. The defences of BARDIA are reported to be exceedingly strong, our artillery 1a causing considerable damage. HALATA. A further withdrewal of our forces in the northwest was arried out without interference and they are now on 18. line 15 miles north of [PO) and are reorganizing. The bombing attack on the railway mentioned yesterday cause no damage. The civil and military evacuation of PENANG was successful, Three chips have reached PORT SWETTENHAM and SINDAPORE, Coast defence guns, petrol stores, the power house and aerodrome were destroyed. Total air raid camunities In PENANG are ostimated at 600 killed. MISSIA. The Runnians claim to have occupied RUZA, the German withdrawal 1a continuing on the whole front from SALININ to RULA. Regraded Unclassified 184 - 2 - (III) ATR OFERATIONS 19th. A Purricane shot down 2 German bombers into the sea, 19th/20th, Bombing operations cancelled, LIBYA. 18th, Our bomber and fighter aircraft kept up a heavy attack on about 2,000 H.T. withdrawing westwards from MEXILI, Many vehicles were destroyed. Marylands hit at least four JU 52's dispersed on BENINA aerodrome, 18th/19th. 42 Wellingtons eperated against bengrazi, nome nines were laid and hits were scored on the moles and on N.T. near the tom, A/A fire at BYNGRASI had greatly decreased. 3 Wellingtons laid nines inside TRIPOLI Barbour while 3 others bombed the town, CENTRAL 18th/19th. Naval aircraft scored hits with torpodoes on two merchant vessels of about 8,000 tone in a south bound con- voy north of HOMS. SARATIAK. 19th. Dutch Glen Martins attnoked enemy vessels off the northeast coast claiming one hit and one near miss on a Jayanese cruiser and a hit and two near misses on another large ship. They also claim one onemy air- craft shot down. One Glen Martin was loat, (IV) ENEMY ACTIVITY MALTA. 18th/19th, 7 aircraft bombed LUQA aerodrome. One Velling- ton on the ground was destroyed and others were damged, SARAWAK. 19th. Enemy aircraft continuously attacked PONTIANAK in WEST BORNEO causing considerable damage to the town, KUCHING aerodrome vas bombed by 15 enemy airoraft, Aircraft carvalties in operations over and from the British Ialee - German, two destroyed. Regraded Unclassified Copy No. 13 185 BRITISH HOST SECIOST (U.S. SECRET) OPTEL (Unmmbered) Information received up to 7 s, 21st December, 1941. (I) NAVAL 20th Noon. Air reconnaissance showed PRINCE EUGEN in dry dook at BREST. (II) MILITARY LIBYA. 20th, At 10.30 4,24 general situation use that the con- tinued pressure of our forward columns was keeping the enemy on the run, The enjority of the remaining German Forces appear to be in the SOLUK area, while the remnants of the Italian Divisions are still North East of BEIGHAZI and such dis- organized. Our mobile columns which have reached EL KARRUBA are directed one on REGIMA and BENGHAZI and the other on MSUS and SCELEIDINA. Reports so far received indicate that twelve enemy tanks were destroyed on the 19th, eight new Italian tanks were abandoned at MEKILI. Reconnaissance of TRIPOLI (I) on 19th showed that two supply ships of about six thousand and five thousand tona had arrived, A third ship of similar size was approaching the part under escort. It has now been reported that our Patrols with parachute troops dropped early in the operations, succeeded in destroying 22 enemy aircraft together with bomb and petrol stores on a landing ground thirty miles Tiest of STRTE, MALAYA. On the morning of the 21st enemy reached the (7) river at MABANG. There WELB no contact Neat of this place. Our troops are holding the line of the KURAU River and Southern end of CHENDERCH LAKE, In an action hear LENDGONG GRIK road on the 19th, 60 enery dead were counted, our cecualties were mall, Nothing to report from KELANTAN, KUANTAN and JOHCRE areas. A small do- tachment of British troops from MIRI arrived at SINGAPORE on 21st. HONG KOIG- The Intest report at 6.00 palle local time 19th itated that the enemy had over run the North Test corner of the Island. RUSSIA. The Russians are maintaining heavy pressure on the 1.05COW front. Particularly in the area North Test of TUIA, The Germans are 001- tinuing their attack on SEVASTOPOL, (III) AIR OPERATIONS 20th. One Hudson bombed A cargo vessel of 3,000 tona off the Norwegian coast, the ship appeared to be hit. Regraded Unclassified 186 - 2 - LIBYA. 19th, Light bombers and fighters attacked onemy M.T. columne retreating Westwards from the MEKILI and DERNA areas, Attacks on a large column East of EL KARRUBA were very effective. Heavy damage was done to M.T. on the BARCE=TOCRA and BENGHAZI-CHEMINES roads, Two aerodromes were bombod, During the operations 3 German fighters were shot down, our losses were two Marylands and one Beaufighter. MALTA. Blenbeime bambed SOURA railway station and hit 5 goods shed and destroyed rolling stock. 40 aircraft were found destroyed on the aaro- droms at DERNA. (IV) ENEMY ACTIVITY 20th to 21st. 48 aircraft were operating, 30 of which were probably see mining in the THAMES Estuary. MALTA. 19th, 13 enemy fighters and bombers approached the Island and on the 20th 40 enemy aircraft carried out two attacks, only slight damage was caused, One German bomber was destroyed, two Italian fighters probably destroyed and three German bombers damaged, three Hurricanse are missing. Bombs dropped on 19th/20th had little effect, SARAWAK. 19th. The raid on KUCHING aerodrome was from a high level and caused only slight damage, the town was bombed and machine gunned, 28 civilians were killed and a petrol store destroyed, (v) G.A.F. It is considered that the Germans will make every effort to with= draw their force in CYRENAICA, of over 200 aircraft, to bases in TRIPOLITANIA. This may, however, be impossible owing to the present inadequate ground facilities and part of the foroe may have to withdrew to the AEGEAN area or to SICILY. (VI) JAPANESE AIR FORCE There are at present about 400 aircraft in Southern INDO-CHINA of Southern STAM, The average scale of effort against MALAYA during the first four days of the Japanese attack was about one hundred and twenty aircraft per V. Regraded Unclassified 187 MILITARY INTELLIGENCE DIVISION INFORMATION BULLETIN WAR DEPARTMENT No. 2 Washington, December 23, 1941 MID 461 NOTICE The information contained in this series of bulletins will be restricted to items from official sources which are reasonably confirmed. This document is being given an approved distribution, and no additional copies are available in the Military Intelli- genee Division. For provisions governing its reproduction. see Letter TAG 350.05 (9-19-40) M-B-M. GERMAN ARMORED ASSAULT ARTILLERY SOURCE This bulletin is based upon the report of an American official observer in Berlin. The translated article, which deals with the employment of a battery of armored assuult artillery of the "Groater Germany" Infantry Regiment on the French-Luxemburg border, originally appeared in Die Woohe, a German weekly magazine. Intended propagandistic effects should not be overlooked. CONTENTS 1. TRANSLATION 2. COMBENTS OF OFFICIAL OBSERVER Regraded Unclassified NEUFCHATEAU V i est. Medard Bois de e, a Bouillon Sedan Nerbeumont r Suxy Mellier 0 R S Neuhabich SEDAN a iver y mi Villers o i s R N e To Luxemburg ETALLE 0 5 10 15 Miles 188 Regraded Unclassified Figure 1. Area around Etalle and Neufchateau. 189 GERMAN ARMORED ASSAULT ARTILLERY 1. TRANSLATION "A motorized platoon, with 2 antitank guns attached, con- stituted the leading element of our advance guard as we marched west from Vance, which is 20 miles west of Luxemburg, to Etalle (figure 1). As the vehicles approached Etalle on May 10, they encountered hostile armored scout cars, and during the ensuing engagement a re- port was received at regimental headquarters that Villers was 0000- pied by French cavalry. The 2d Battalion was accordingly ordered to attack Villers immediately. For 3 hours they advanced toward the village, meeting increasing resistance, and were finally stopped at the eastern edge by strong hostile fire. "Meanwhile the 1st Battalion, with the armored assault Artil- lery battery attachod, had arrived et Neuhabich, where the battalion commander ordered B. rifle company to make contact with the 2d Battal- ion. Advancing slowly south from Neuhabich, the rifle company fin- ally reached Villers, where it also met heavy resistance. The company commander, after considering the situation, sont the following oral message to the rear: 'Assault battory to the front!! "Tho 3d Platoon of the armored assault artillery battery dashed forward to engage in its first fight. The clatoon commander, in his command vehicle, was followed by Assault Guns No. 5 and No. 6. The platoon encountored no resistance until it arrived at the center of town, where it received heavy machine-gun fire. Two rounds from each of the assault guns silenced the machine guns, "Assault Gun No. 6 went into action, firing at the near-by buildings. One shell exploded in & courtyard among some French cav- elry horses. The animals which wore uninjured galloped away, fright- ened by the explosion. "Assault Gun No. 5 swung into position in the churchyard to silence hostile machine guns which were firing from two windows in a large building close by. The platoon commander ordered the gun commander to fire on this target, and two rounds from the assoult gun served to silence them. "Finally, the enemy evacuated the main street and the center of the town, but machine-gun resistance was renewed at the western edge of the village. Momentarily, it WRS thought that the assault guna should be sent shead again. But the riflemen and the partially armored antitank-wenpons on self-propelled mounts were able to reduce this resistance unassisted. "The 2d Battalion remained in Villers during the night. Field kitchens were moved up, the men were fed, and medical personnel cared for the wounded. The 3d Platoon of the assoult battery obtained somo 1 Regraded Unclassified 190 rest just in rear of the front line, the men sleeping in their vehi- clés, The next morning, at 5 the advance guord and the 3d Platoon of the assault battory moved out toward Mellier, "The armored assault guns soon reached B destroyed bridge across a tributary of the Semois River, The pioncers, although hard qt work, had not yet completed their task hore; but the guns managed to ford the river. The regimental commander, in order to get up to the front, took a seat in an assault battery munitions vehicle. "After fording the streem, the assault guns came to a barri- ende of tree trunks which obstructed the road lending up n. slope in one of the southern spurs of the Ardennes Forest. The driver of Asscult Gun No. 5, however, stepped on his accolerator, deshed against the obstacle, and opened the way. So far, no enery had boen encoun- tared. "The infantry wha in the lead as the advance guard moved through Mellier into a beschwood forest boyond that town. Resistance WILE encountured at 10:30 a.m. nt " clearing in the woods. The 1st Battalion, upon emerging into the cloaring, was fired upon from the direction of Suxy. The leading company deployed promptly and, sup- ported by an antitank platoon, began to advance, finally being check- ed at the stream just west of the town. The regimental and battulion commanders, accompanied by certain members of their staffs, observed the action from high ground cast of Suxy. Intense activity provailed at the command posts. Heavy veepons were ordored up; tasks were ns- signed, end positions designated. "As the heavy infentry weapons and armored assoult guns were heard approsching from the rear, the battelion commander, in a quick docision, signalled his advancing reserve company to turn off and attack in the new direction. "Five minutes after the hoevy weapons arrived, they opened fire. In the nonstime, the armored assoult artillery battery contin- und to the front to assist the leading rifle companies. The rifleman slowly worked their way chead, pressing hard against thn enery. driv- ing him off of the high ground to the right front. Finally, one of the assault guns meved up on to this communding torrain and quickly fired 11 rounds at 0. rango of 800 yards into a battery of onemy horse artillory going into action. The assault gun itself, however, was thon taken under fire by n. French antitenk bettery. "In the moshtino, the Gorman artillery opened firo and the bettalion began to advance across the Vierre River. As usual, all the bridges had been destroyed and all the trucks had to be loft be- hind, although the water WILS no obstacle for the infantry and the armored sssault artillory. "After crossing the river, the advance was chacked again by resistance coming principally from n fortified house which stood along the route of advance. Assnult Gun No. 5 went into action against - 2 - Regraded Unclassified 191 this house. The first round hit the lower left window; the second entered the attic window, the third went over the house but exploded among some retreating Frenchmen. "By 5:30 p.m. all resistance in this vicinity had been over- come. The French reconnaissance battalion, which had attempted. to stop the regiment, was completely destroyed. "The advance continued, but the next 10 miles could be covered only by foot, for the trucks could not be moved across the rivor, The day's objective, however, was reached at 9 p.m. "The performance of the armored assault artillery battery, in its initial engagements at Villers and Suxy, completely won the con- fidence of the infantrymen. In addition to giving support to the foot soldier in battle, this self-propelled artillery was also utilized in carrying light machine guns and mortars and in towing ammunition carts. "On the next morning, May 12, the rogiment moved through St. Medard and Herbeumont. "On the following day, Kay 13, the regiment left Bolgian soil, marching through Bouillon into the Bois de Sedan, and on the next morning it forced 6. crossing over the Meuse at Sedan, thereby clear- ing the road to the north for the oncoming panser division." 3. CONTENTS OF OFFICIAL OBSERVER 8. The personnel of the "Creater Germany" Infantry Regiment is especially selected. Initially, the bulk of mon of this organization came from the Berlin guard regiment. The regiment is motorized and belongs to an S.S. division. b. The author indicates that in this particular engagement this assault artillery fulfilled the mission for which it was intended. Conversations with German military personnel and the context of other articles published in German military periodicals confirm the conclu- sion that this assault artillery gave important and timely assistance to the leading infantry elements on many occasions during the opera- tions on the Testern Front in the spring of 1940. C. Since this weapon is completely armored, it conforms to the commonly accepted definition of a. tank. According to published ac- counts, this weapon, during combat, moved forward from cover to cover, keeping generally abreast of the regimental reserve. When the advance of the leading foot elements was checked by resistance beyond the capabilities of the infentry weapons immediately at hand, the armored assault artillery was ordered forward along with other heavy infantry weapons and sometimes the regimental infantry reserve. When going into action, armored assault artillery vehicles sought suitable cov- ered positions in the front line, from which they delivured direct fire upon observed targets. It is not believed that they ever pre- coded and cleared the way for the foot olements. Consequently, these 3 Regraded Unclassified 192 weapons, as employed, are not comparable to accompanying tanks. d. It is probable that if the defending French forces had been liberally equipped with antitank mines and antitank weapons, they could have neutralized the efforts of the German armored assault artillery. 6. The action east of Suxy is in accordance with the German prin- ciple that attacking infantry seeks primarily to seize commanding terrain, not only for observation and the employment of infantry weap- ons, but also for the advantageous use of artillery. f. It is noted that in the attack east of Suxy, the commander of the 1st Battalion saved time by merely signalling to the commander of his reserve company to turn off his route of advance and attack in a new direction. Details of the action contemplated for this company could be furnished later by the battalion commander or his representa+ tive. - 4 - 193 RESTRICTED G-2/2657-220, No. 578 MID., W.D. 11:00 A.M., December 23, 1941 SITUATION REPORT I. Pacific Theater. Philippines: Heavy fighting yesterday north and south of Damortis. Enemy air very active, with several places bombed. U. S. troops holding well. The fighting continues at Davao, Mindanao, but the situation remains obscure. Hawaii: No enemy operations are re- ported in Hawaiian waters. Hong Kong: British resistance continues, Malaya: Active patrolling, but no heavy fighting. Borneo: No further reports have been received. West Coast: Submarine attacks on U. S. shipping continue, but damage slight. II. Eastern Theater. Ground: Stubborn fighting with no changes indicated is reported by both the German High Command and the Soviet Bureau of Information, No situation map for the German-Russian Front will be issued today. Air: The German communique this morning claimed that German airmen damaged a Soviet warship off the Crimean base of Sevastopol. III. Western Theater. Air: According to the Press, the British bombers last night attacked the submarine base at Wilhelmashaven, all bombers returning without damage. IV. Middle Eastern Theater. Ground: Axis retreat from northern Cyrenaica towards Bengasi continues. Bulk of Axis forces now near and south of Bengasi in coastal area. British forces are intervening between Bengasi Axis forces and Tripoli bases. Air: R.A.F. continues bombing of harbors and Axis troops. Parachute troops and ground patrols cooperated to destroy airplanes, field storage, and bombs on an airfield near Sirte. The German communique announces that Nazi air raids on the British base of Malta continue with "telling effects". RESTRICTED 194 December 24, 1941 9:30 a.m. GROUP MEETING Present: Mr. Bell Mr. Morris Mr. Graves Mr. Kuhn Mr. Thompson Mr. Gaston Mr. Foley Mr. Haas Mr. White Mr. Paul Mr. Blough Mrs. Klotz H.M.JR: We are kind of exclusive this morning. You know, if they have any more coordinating committees and they want any more Treasury people to go on coordinating committees, I will never see any of you. (Laughter) Lowell Mellett. "Within a few days there will be a meeting of representative Government agencies who are using films in any way and which plan to make use of motion pictures during the war." Well, who is that? MR. GRAVES: Using films? H.M.JR: Using motion picture films during the war. MR. KUIIN: Is this Lowell Mellett's organization that wants to see them? H.M.JR: Well, the President has appointed him. MR. KUHN: Oh. Because posters are also going to be Regraded Unclassified 195 - 2 - in here. They want to clear all Government posters from now on. H.M.JR: Well, between Harold Graves and Ferdinand Auhn -- MR. GRAVES: That is right. MR. KUHN: I will be glad to attend to it. MR. GRAVES: I would be glad if he would. (Laughter) MR. KUHN: That is what I thought. H.M.JR: I am glad that Harold Graves is glad. MRS. KLOTZ: Is that making them, Mr. Morgenthau? MR. GASTON: Yes, producing Government films. It is a general supervision over all Government films being produced. H.M.JR: Well, I am glad that Harold Graves is glad that Ferdinand Kuhn is glad to do it; and Norman, fix up & letter along those lines. What else have we got of importance? MRS. KLOTZ: That is all I have this morning. H.M.JR: That was B. good air raid practice. MR. THOMPSON: I hope the drill today will be as good. The Bureau is holding one at two o'clock. Had you planned to go down? H.M.JR: I had not. MR. THOMPSON: They have got it all arranged. I have put a Mrs. Wentworth, one of our uniformed guard ladies - she is a cultured lady, a college graduate, and - I have put her at the front door. H.M.JR: What is that song, "I am a High Class Lady"? What is that song? Regraded Unclassified 196 - 3 - MR. GASTON: "My gal is a high class lady. She is dark, but not too shady. Dressed like a peacock, just as gay; she is not colored, she was born that way. "My gal is 8. high class lady. She is dark, but not too shady. Feathered like a peacock, just as gay; she is not colored, she was born that way. "No coon can come between us, and on the line no one can outshine, that high born gal of mine." H.M.JR: That is what I was groping for. (Laughter) We will put Herbert Gaston in charge of Treasury Hour. MR. THOMPSON: This lady is physically equal to the job, too. (Laughter) H.M.JR: This is getting worser and worser. MRS. KLOTZ: He has got a nice mind. H.M.JR: Well, we all heartily approve. Please don't all rush out of the office at the same time to look her over. MR. THOMPSON: She has nice - she is all right on the job. H.M.JR: I hope that the one lady that Summer Welles is taking on this trip with the nine men has the same qualifications. (Facetiously) MR. WHITE: Speaking of air raids, Mr. Secretary, if I remember correctly, if there is an air raid actually, it is liable to last & half hour or an hour or more. Is there any feasibility in having each person bring B. ohair out with them? I mean, to stand around like that is -- MR. BELL; You can sit on the floor. MR. WHITE: Very debilitating. H.M.JR: Will you take it up with my Chief Air Raid Warden, Regraded Unclassified 197 - 4 - Norman Thompson? MR. THOMPSON: We plan to have benches along the walls for that purpose. H.M.JR: If you want to see what a hard hitting division you are, you can supply each person with & cushion. MR. WHITE: That is an idea. Many people carry -- (Laughter) MR. MORRIS: What about tin helmets for falling plaster? H.M.JR: Try again. MR. WHITE: Harold and I should worry. MR. GRAVES: Especially me. MR. THOMPSON: The guard who was at the door yesterday when you made your visit is a very fine man. He is not well educated. H.M.JR: No. Four years of grammar school. Now, I ask you. I went down with Mrs. Klotz yesterday to watch the people coming in at the door and I asked what this man's education was, and this is the man who receives all the people. This comes under you, Gaston, Secret Service. MR. GASTON: This door or the front door? H.M.JR: The 15th Street door. I mean, this is the man, and I said what - he had four years of grammar school. MR. THOMPSON: We have a fine receptionist. H.M.JR: I know, but that is the man - when you walk into the Treasury that is the fellow that receives you. Not too good, what? MR. GASTON: Is there anything particular about him? H.M.JR: Well, he is rough. I got the impression without Regraded Unclassified 198 - 5 - knowing - I didn't think that he was a high class, cultivated lady. (Laughter) I mean, the man is rough. That is your first impression of the Treasury, not too good. Well anyway, he - I mean, he is a perfectly good guard but not as number one receptionist. MR. WHITE: It should be the prettiest girl in the Treasury. H.M.JR: We don't want to attract people in those times. MR. WHITE: I see. MR. THOMPSON: I am getting & report for you on the cost of shatterproof glass, but it looks as though it would be prohibitive. The tentative figure I have, it would be about six hundred thousand dollars just for the Treasury Building and the Bureau of Printing and Engraving Buildings alone, and also there is no available supply of glass for the purpose. They say it would take two years to make the installation. Chief Deasy thinks that the answer is to put cloth over the windows. II.M.JR: All right. Anything else? Mt. THOMPSON: That is all. H.M.JR: Dan? MR. BELL: We bought about six million eight yesterday of two and a halfs late in the afternoon and we are going to take half of them, I assume. Would you like to put some market securities in the Old Age Trust Fund? They are now putting special issues there of two and three eighths under the law. You also have permission to go out in the market if you want to. As a matter of fact, it is really the other way. You should buy on the market unless you make a decision it is not to the best advantage. H.M.JR: Well, I would like a recommendation from you and Haas-- MR. BELL: Well, I have got to do this one this morning. Now, maybe I could get-- Regraded Unclassified 200 - 7 - H.M.JR: I see. MR. BELL: We probably have some accumulated cash in that fund because we don't invest except every quarter. H.M.JR: Well, if you gentlemen look it over, if it is all right, I would like you to look into it. MR. BELL: I think we probably ought to do the same thing on this fifty million dollars that we reserved in the last issue of investment. The only thing I have invested there has been two or three hundred thousand dollars of dividend funds. H.M.JR: Do you have to do that today? MR. BELL: No, we have thirty days on that. H.M.JR: I would like to go over that personally, with 8. recommendation from the three of you. MR. BELL: You might want to discuss that also with the Board. We haven't had a meeting since last -- H.M.JR: What, Dan? MR. BELL: There is a Board of Trustees on that, on the old age. H.M.JR: Well, clear it first, will you? MR. BELL: O.K. You sent Harold Graves a memorandum that you wanted twenty-four hour service on authorizing corporations to act as agents. H.M.JR: Well, I told him that you wouldn't come up for water until about noon today. MR. BELL: Well, I would like to give it a little further consideration. H.M.JR: Oh, Dan -- MR. BELL: I have got to consult somebody besides Regraded Unclassified 201 - 8 - Chicago because Chicago goes off half cocked once in a while. H.M.JR: They are good. Young is good. Why don't you let these institutions -- MR. BELL: I have been in favor of letting some of them come in all the time but I would like to write the regulations maybe a little differently after I have considered it. H.M.JR: Well, how long are you going to take? MR. BELL: Well, I will do it today. H.M.JR: Well, I will be reasonable. Can you give it to me by Friday morning? MR. BELL: Oh, I will give it to you tonight. H.M.JR: I may not be here. I mean, I will be here until 4:30. MR. BELL: There has been prepared a telegram for my signature to the Federal Reserve Banks and if you are in favor of it we can let it go as soon as I consult with these few people. It has only been - well, I don't know how much attention Harold has given to it, but only two of my people have been on it. H.M.JR: Well, I will give you until Friday noon. MR. BELL: O.K. That is plenty of time. H.M.JR: I will give you until Friday noon. Just as long as I think that any responsible financial agency, whether it is a department store or the Pullman Company or any financial responsible place should be permitted to issue these things. MR. BELL: Of course you realize when you start out on this you are going to get the ones that are not financially responsible and it is very difficult to pick them. H.M.DR: I would make the Federal Reserve Bank responsible. Regraded Unclassified - 9 - 202 MR. BELL: Well, I am wondering if we can't do it a little differently. H.M.JR: Well, Dan, I want to make it - you could always get back - every time I go on a trip it does me good. The Pullman conductor comes in. Have I told you the story? MR. BELL: No. H.M.JR: And on December 8 he wanted to buy ten bonds. He went to his bank here in Washington and the fellow was too busy, and he has to go up to some post office, and he finally got it. He says, "Mr. Morgen- thau, why can't I go to the disbursing office of the Pullman Company and let them sell these bonds when I want to buy them?" I don't know why the Pullman Company isn't responsible. MR. BELL: Well, the Pullman Company is responsible and there are a good many of them that are not responsible and don't care. MR. GRAVES: Dan, don't you think that is met pretty largely by the pre payment requirement there? MR. BELL: If you require them, I don't know how many you will get on a prepayment requirement. MR. GRAVES: That makes a very conservative program. H.M.JR: Is that the suggestion? MR. GRAVES: That is the Young suggestion. H.M.JR: I didn't even know that. If that is it, what have you got to lose? Are you going to make them pay in advance? MR. BELL: Yes, make them pay in advance. H.M.JR: You have got nothing to lose, Dan. MR. BELL: Well, we may not have anything to lose, but I don't like to sign a telegram to the Federal Reserve Regraded Unclassified 203 - 10 - Banks without more consideration than has been given to this. H.M.JR: Friday noon. MR. BELL: That is my point. H.M.JR: Friday noon. MR. BELL: All right, that is all I want. H.M.JR: That certainly isn't rushing you. I told them not to refer it to you until noon. MR. BELL: I think it might require a revision of the regulations. H.M.JR: Listen, Dan, Friday noon, is that-- MR. BELL: That is not rushing me. H.M.JR: Is that rushing you? MR. BELL: No, sir. H.M.JR: You won't be rushed? MR. BELL: No, I have got two days. H.M.JR: O.K. MR. BELL: We have here your letter to the Presi- dent and Harold Smith. Mr. Paul and I have been over it. I don't know whether anybody else has or not. H.M.JR: Do you mind, after the ten-fifteen meeting my own people will stay behind and we will go over the letter then. MR. BELL: You will not bring this up? H.M.JR: I will not bring this up. 204 - 11 - MR. BELL: That is all I had. H.M.JR: My own people stay behind. MR. WHITE: Dr. Soong called up to say that they have got China - the Chinese Government has got two hundred million yuan of freshly printed notes in the bonded ware- house at Manila, and he is afraid it might fall in the hands of the enemy. We discussed it a little over the phone, and he agreed that it would be desirable to de- stroy them at once since then it would involve only the printing costs and so on which he is ready to undertake. If it is clear to the Legal Division that we have the authority to go ahead and whoever else is in on it, if it is O.K. here, is it all right with you that we give instructions under the proper conditions to have it destroyed? H.M.JR: Sure. MR. WHITE: Mr. Perkins said he was very sorry he would be unable to attend this morning. He had & previous engagement. H.M.JR: I saw him last night at dinner. MR. WHITE: He wondered whether Mr. Bean who follows that stuff for Mr. Wallace more closely, and he does, could be present. H.M.JR: Have you already asked him? MR. WHITE: No, I haven't. H.M.JR: Oh, I don't want to get down - - do you think so? MR. WHITE: Well, as a representative of the Vice President, not personally. He is a good man, and he has been the one who has been following it for - he even knows more about it than Milo Perkins. Either himself or Regraded Unclassified 205 - 12 - Ezekiel, whichever-- H.M.JR: I don't want Ezekiel. MR. WHITE: Well, Louis Bean is the one he mentioned. H.M.JR: All right, let Louis come. MR. WHITE: I notice there is a good deal in this no- tation from Ezekiel to Secretary Wallace as of the con- clusions of that meeting that I think you would be in agreement with. Is it all right to say something of that character, that our thinking has been along similar lines except for one or two points? H.M.JR: Yes. You had better go phone Louis Bean. The meeting is at ten-fifteen. MR. WHITE: I have nothing else. If I can phone him, I will go on. H.M.JR: Will you phone him? MR. WHITE: Yes. H.M.JR: George? MR. HAAS: I have a few things that can hold over, Mr. Secretary, in connection with some of those jobs. H.M.JR: Well, put yourself down on the list. MR. HAAS: All right. H.M.JR: Harold? MR. GRAVES: You asked me to give you a date when the mural could be put in the station. H.M.JR: Yes, sir. MR. GRAVES: My people say if we had perfect luck 206 - 13 - on this thing we might get it there by the first of February. It is a hard job, however, and you just can't put a deadline on an art job because we might get some- thing that is not satisfactory and have to do it over again. They worked, I believe, about five months on the mural for the Grand Central. It is not a thing that can be duplicated because of the varying - the different dimensionsand shape of the concourse. It will have to be a new thing. H.M.JR: I see. Are they going ahead with it, Harold? MR. GRAVES: Oh, yes. H.M.JR: Which other stations are they going to do? MR. GRAVES: Some of those that you suggested are not feasible at all. For instance, you included New Orleans. New Orleans has a little ramshackled-- H.M.JR: I raised it. I said I didn't know. MR.GRAVES: Yes, I know. San Francisco you mentioned also. It is the same thing. There is no sufficient dimensions in any station there. Peter thinks that Chicago is feasible, although we don't have anything like the height that you have in Grand Central. St. Louis is not feasible. Kansas City, which you did not mention, would be, I think-- H.M.JR: Good. MR. GRAVES: A good-- 207 - 14 - MR. GASTON: How about the airports? We have got airport. some very good airports. New Orleans has a very fine H.M.JR: There are not enough people there, Herbert. MR. GRAVES: No, you don't get the traffic. MR. GASTON: Here we have a great number of specta- tors out there in addition to the travel. H.M.JR: Well, if you see the figures that some of these railroad stations - the people are simply amazing. MR. KUHN: I believe the Kansas City one is the best architecturally for purposes of showing a mural of any station that they were talking about. H.M.JR: Well, Kansas City - which station in Boston? You said Boston. MR. GRAVES: No, I didn't speak of Boston. H.M.JR: Peter did. Which one in Chicago? MR. GRAVES: The one that you came in, the Penn- sylvania, the Union Station. MR. FOLEY: Union, that is the biggest. MR. GRAVES: The only one there that-- H.M.JR: Then we would go from Washington, Chicago, Kansas City - what else? MR. FOLEY: Cincinnati? MR. GRAVES: Ed just mentioned Cincinnati. I hadn't thought of that and don't recollect the height of their concourse. MR. KUHN: Kansas City is 8. circular hall. 208 - 15 - MR. FOLEY: Their station has been built within the last ten years. H.M.JR: How about Minneapolis. MR. HAAS: St. Paul has got one. MR. KUHN: St. Paul is good. H.M.JR: Well, will you push on that, Harold, please. MR. GRAVES: Yes. MR. PAUL: Omaha might be one. MR. KUHN: Cincinnati has its own mural around a circular hall, 8. painted mural. MR. GRAVES: It is all mural. MR. KUHN: Yes, it is all mural, the whole wall. H.M.JR: Anything else, Harold? MR. GRAVES: I have nothing. H.M.JR: Ferdie? MR. KUHN: I have nothing, sir. H.M.JR: Roy? MR. MORRIS: No. MR. PAUL: All I have to say is that Mr. Henderson can't be at the ten-fifteen meeting, but Mr. - he is sending Mr. Gilbert and he has some - I talked to Leon a little while ago and he said he had some very interesting information to give. H.M.JR: Good. Regraded Unclassified 209 - 16. - MR. FOLEY: Congressman Cochran wrote you a letter about legislation that he wants to immunize defense contracts by legislation. He is very much exorcized about the thing. If you will sign this letter, we will send it back. Randolph has been over it. John hasn't seen it. MR. GASTON: Here is a Naval Intelligence report from the Naval Attache at Havana given rating B, reliable. An informant reported that on the ninth of December, Second Secretary Reymunde, Spanish Embassy,commented that Spain would declare war on the Democracies prior to January. H.M.JR: Who is that? MR. GASTON: This is a Naval Intelligence report. They quote an informant as saying that Second Secretary of the Spanish Embassy in Havana said that Spain would declare war. H.M.JR: That comes from J. Edgar Hoover? MR. GASTON: No, it is Naval Intelligence. It comes through the Naval Attache. You probably noticed the reports of heavy German troop movements today through France. H.M.JR: They keep repeating that the same ships were sunk over and over and you can't tell. Something on the radio this morning said we had sunk three destroyers. MR. GASTON: Mr. Houghteling passed on to me an invitation from a group in New York, a labor-progressive group for me to speak to them on January 24. Gardner Jackson is interested in it. He is going to see me this morning, and I presume it is about that. I think it is called The League for Democratic and Political Action. It is progressive and labor groups. H.M.JR: Just check it. That is a former communistic organization. Regraded Unclassified 210 - 17 - MR. GASTON: They tell me not. H.M.JR: Check it. MR. GASTON: Yes, I will talk to Pat about it. H.M.JR: No, talk to J. Edgar Hoover. Just check if that isn't a former communistic organization. MR. GASTON: Houghteling says not. Fred A. Kirkway is quite prominent in it. H.M.JR: I still say check it. MR. GASTON: Right. H.M.JR: Incidentally, I don't know how many of you take the New Republic, but I do. Last week it was just packed with good stuff. I think it is by far the most interesting magazine of opinion that comes to my house. I mean T. R. V.'s article, Arthur Krock, Max Werner. I think it is the best by far. I bring it to your atten- tion, The New Republic. It is just packed full of good stuff. It is so much better than anything else. Don't you agree, Ferdie? MR. KUHN: Oh, yes. Head and shoulders above any- thing else. H.M.JR: And The Nation, Fred A. Kirkway's Nation, just isn't worth reading. MR. GASTON: I have here a letter to the Secretary of the Navy submitting for their approval some instruc- tions that we propose to send to Customs collectors and agents by liason with Navy officers in the ports. We are merely asking their opinion as to whether those are suitable instructions. H.M.JR: This is all right for me to sign? MR. GASTON: Yes, sir. 211 - 18 - H.M.JR: All right. Paul and Bell, will you line up the Treasury people that are coming in and staying with us at ten-fifteen? MR. BELL: Yes. I guess they all know, don't they?