Volume 480, December 30 – December 31, 1941

DIARY Book 480 December 30 and 31, 1941 Regraded Unclassified - A - Book Page Airplanes Production picture (present) discussed by Lovett and HMJr - 12/30/41 480 36 Alien Property Custodian Olson (Governor of California) wires HMJr concerning set-up 12/30/41 107 Byrnes 'phones HMJr concerning appointment of Crowley - 12/31/41 192,194 a) Foley told of conversation - 12/31/41 196 Byrnes asks Foley's opinion of Order "vesting In designated officers certain powers and authority with respect to property in which there 10 A. foreign interest" - 12/31/41 202 a) Byrnes telle HMJr of conversation with Hopkins - 12/31/41 211 b) Foley memorandum on conference with Byrnes - 12/31/41 212 - 3 - Berlin, Irving "I Paid My Income Tax Today" - RMJr thanks Borlin for song - 12/30/41 82 (See also Book 482, page 285 - 1/6/42) British Purchasing Mission Vesting order sales - 12/31/41 270,271, 272,273 - C - China surma Road: Leland Stowe's story of conditions there discussed at 9:30 meeting - - 12/31/41 170 Crowley, Leo See Alien Property Custodian - D - Defense, National Transfer of functions and consolidation of agencies: Budget asks Treasury canvass - 12/31/41 264 Defense Savings Bonds See Financing, Government - 5 - Exchange Market Resumes - 12/30-31/41 164,305 Exports To Russia, China, surms, dong Kone, Japan, France, and other blocked countries, wear ending December 20, 1341. 142,27E Regraded Unclassified - , - Financing, Government Book Page Great Britain--U,S,S.R.: Cancellation of indebtedness to United States arising from first World War covered in draft of bill went to FDR - 12/31/41 480 Defense Savings Bonde: 285 Series 1 - E - Supply in the Field: Hass memorandum - 12/30-31/41 Voluntary Payroll Allotment Plan: Letter to 103,250 12/31/41 Secretary of Navy and Secretary of War concerning - 235,241 - G - Great Britain See Financing, Government - H - Henderson, Leon See Office of Price Administration and Civilian Supply I 1 I "I Paid My Income Tax Today" See Berlin, Irving: Revenue Revision - 1- - Land-Lease Allocations and obligations through December 29, 1941.. 268 Libraries - Joint Committee on Importations Licensing of importations from Germany and German- dominated countries discussed in Foley-Pehle memorandum - 12/30/41 88 - M - Military Reports Reports from London transmitted by Halifax - 12/30-31/41 156,307 Coordinator of Information reports: The Burnese and the War - 12/31/41 313 The German Military and Economic Position - Summary and Conclusion - 12/31/41 315 "The War This Week" - 12/24-31/41 316 German Morale, Winter 1941-1942 317 Kamarck summaries - 12/30/41, 12/31/41 168-A,378 Minister of Supply See Supply, Minister of Regraded Unclassified - 0 - Book Page Office of Price Administration and Civilian Supply Henderson's request to see Income tax returns discussed by 9:30 group - 12/31/41 480 173 Olson, Culbert L. (Governor of California) See Alien Property Custodian - P - Procurement Division Tires: Lubin asks HMJr concerning arrangement whereby Procurement would contact dealers direct rather than do business with factories - 12/30/41 69 a) HMJr-Mack conversation 72 b) HMJr tells 9:30 group of conversation with Lubin - 12/31/41 172 - R - Research and Statistics, Division of Report on projects for September 1941 109 Revenue Revision "I Paid My Income Tax Today" - HMJr thanks Berlin for song - 12/30/41 82 (See also Book 482, page 285 - 1/6/42) - S - Stowe, Leland See China: Burma Road Strauss, Alfred B. $25,000 contributed toward "War Chest for Offense" - 12/30/41 231 Supply, Minister of Cox tells HMJr Byrnes and Monnet both endorse him (HMJr) - 12/30/41 1 a) Byrnes-HMr conversation - 12/31/41 201 Switzerland Privilege asked of transfer of part of gold now on deposit in New York - 12/30/41 156 - T - Taxation See Revenue Revision Tires See Procurement Division - U- - U.S.S.R. See Financing, Government Regraded Unclassified 1 December 30, 1941 Oscar Cox called up last night and said that he had talked to Judge Jimmy Byrnes in the morning (that was where he was instead of coming to my nine o'clock meeting yester- day morning), and he is entirely sold on 8. Minister of Supply and that I am the only person who can do it. He had lunch with Jean Monnet, who had been 8. strong advocate of giving more power to the Army and Navy, and at the end of an hour yesterday Monnet was enthusiastic for a Minister of Supply and for me to do it. Cox said that the thing which was 80 amazing to him was that it took B full year to appreciate what I did prior to the 15th of March. He has not as yet run into anybody who is not for me for the job. Regraded Unclassified 1 December 30, 1941 Oscar Cox called up last night and said that he had talked to Judge Jimmy Byrnes in the morning (that was where he was instead of coming to my nine o'clock meeting yester- day morning), and he is entirely sold on 8 Minister of Supply and that I am the only person who can do it. He had lunch with Jean Monnet, who had been a strong advocate of giving more power to the Army and Navy, and at the end of an hour yesterday Monnet was enthusiastic for 8. Minister of Supply and for me to do it. Cox said that the thing which W&S so amazing to him was that it took 8. full year to appreciate what I did prior to the 15th of March. He has not as yet run into anybody who is not for me for the job. Regraded Unclassified 2 December 30, 1941 H.M.JR: Senator Walter George called me in answer to my telephone call of yesterday. He was very friendly. I told him the whole story, how I had expected to hear from Senator Walsh two Fridays are before Cabinet, that he finally called me and said he couldn't give me an answer until he talked to Martin Dies and Landis and his conduct of the Bridges trial, and I said it seemed to me that it wasn't un to Senator Walsh to criticize Landis, who was sitting as 8 judge. It wasn't his personal opinion. Then he was to let me know last Tuesday, and he didn't and I said, "I may have done someting very foolish, but I did it." I said, "I want you to know about it. Senator Walsh told me that the Democrats in Massachusetts would be opposed to Landis," and that I had gotten in touch with Mayor Tobin and Mr. Daugherty, Commander of the American Legion for Massa- chusetts, and John McCormack. They all were for Landis, and the had all promised to speak to Walsh, as & result of which walsh is very angry at ne. I said I had been in touch with Senator Barkley and that he said he didn't know whether the position of Undersecretary was subject to the usual rules of the Senate or personal privilege. George surgested there was some question about it. Barkley talked to him, but he said he was under the impression the last time that ne talked to Walsh, that Walsh was oine to go along, and he was surprised to hear that he wasn't. So I said, "Well, Walter, 1 would like to nut myself in your hands and Alben Barkley's hands and if you say I can PO ahead, the two of you say I can "O ahead, I will PO ahead, and if you say I should dron it, I will drop it, but I 8.00 going to put myself in your hands and in Barkley's hands. So he said, "Well, I will ret in touch with Barkley and Telsh and call you back this afternoon." If Barkle: and Scorge SAY to 10, "No 70"-- MAS. KLOTZ: Then there is nothing you can do. Regraded Unclassified B December 30, 1941 9:12 a.m. HMJr: I'm sorry to have bothered you, but I'm seeing the President this morning at ten-thirty. Robert Nathan: Well, then. I'd better arrange to come over right away HMJr: And I wondered if you had that bomber thing. N: Yes. I'll come over right away with it. HMJr: Well, if you get here by ten o'clock, it would be time enough. N: Fine. All right, I'll be in your office by ten, sir. HMJr: Thank you. N: All right. Good-bye. Unclassified 4 December 30, 1941 9:15 a.m. PRESIDENT'S BUDGET MESSAGE Present: Mr. Blough Mr. Haas Mr. Knollenberg Mr. Bell Mr. Paul Mr. White Mr. Tarleau Mr. Sullivan Mrs. Klotz H.M.JR: Mr. Bell has got some information as of last night which will throw some light on the matter (Paul). Well, we have got a new slogan in the Wall Street Journal, "Win the War Taxes." MR. PAUL: And it is the Wall Street Journal, too. H.M.JR: I like it. I think it is 8. swell slogan, "Win the War Taxes." Did you see the headlines in this morning's Wash- ington Herald on those few little remarks I made yester- day? MR. PAUL: I read an account of it. H.M.JR: The point of Bell's story is that the President's victory program is not ready, so it is not going to be included in the budget. Your fifty-six Regraded Unclassified 5 - 2 - billion-- MR. PAUL: Oh, I see what you mean. H.M.JR: It is a much lower figure. (Mr. Bell and Mr. Knollenberg entered the con- ference.) (The Secretary, Mrs. Klotz, and the reporter left the conference temporarily after a telephone call to the Secretary from Senator George.) MR. BELL: On the 1943 budget the expenditures are estimated at forty-three billion five. That does not include the victory program which will go up within the next thirty days. This victory program, as I understand it will amount to somewhere around thirty million and they expect to spend out of that victory program ap- proximately ten billion dollars in 1943, which will make your expenditures for that year, as far as they can see them now, around fifty-five billion dollars. Your receipts are estimated, exclusive of Social Security taxes, at sixteen billion four. That leaves you a deficit on the basis of the budget of twenty-nine bil- lion, and if you add the expenditures-- MR. PAUL: That compares with the forty we had before. MR. BELL: That is right, but the forty included the victory program. If you add ten billion out of the victory program, it gives you around thirty-nine billion dollars. MR. PAUL: So we are not so very different. MR. BELL: Not so very different, no. MR. WHITE: Is that two billion RFC money that you spoke of? MR. BELL: No, one million in 1943 of RFC money Regraded Unclassified 6 - 3 - makes thirty billion dollars that we will have to borrow in 1943 exclusive of the victory program. Adding the victory program, it will be just forty billion dollars and that is exclusive of new taxes. H.M.JR: Do it now once more for me, Dan. MR. BELL: From the beginning? H.M.JR: Yes. MR. BELL: The 1942 budget, expenditures are now estimated at twenty-nine billion five hundred million. Receipts are eleven billion nine. It gives you a deficit of seventeen billion six. The RFC is estimated at two billion. H.M.JR: Which way? MR. BELL: Expenditures. That gives you nineteen billion six that you have to borrow in 1942. Your deficit to date is running & little over seven billion, so you have still got to borrow eleven or twelve billion between now and the end of the year. H.M.JR: Oh, this is for the rest of the year? MR. BELL: Well, this is the whole year. What your deficit is up to date is about - well, I would say eight billion, including RFC, so that you will have to borrow about another eleven billion in the next six months. H.M.JR: Well, when you and I went out on the end of a limb on eighteen billion exclusive of RFC which we didn't have in mind, we weren't so far off. MR. BELL: Well, that was national defense. That was nineteen billion dollars in expenditures. H.M.JR: No, deficit. Well, anyway, we won't confuse it now. Regraded Unclassified 7 - 4 - MR. BELL: That is the '42 picture. Half of it is gone. The 1943 budget, total expenditures exclusive of the victory program, forty-five billion five hundred million. Receipts, sixteen billion four. H.M.JR: Just a minute. This forty-five, five is expenditures, what? MR. BELL: Yes, sir. Receipts, excluding Social Security, sixteen billion four. That gives you & deficit of the twenty-nine billion one. The RFC net expenditures are about a billion, so that gives you total borrowing of about thirty billion dollars, thirty billion point one for 1943, Now, the victory program will go up within the next thirty days and there will be approximately thirty billion dollars, of which we will spend ten in 1943. H.M.JR: Well, now, let's just stop there A. minute. You and I have gone through a lot of these budget things with the President. Didn't he once leave out WPA and do it later to make the picture look better? MR. BELL: Yes, and I think that is what is going to happen here. H.M.JR: But, Dan, just check me. MR. BELL: Yes, he did that on a number of occasions. H.M.JR: Well, if he says to us, "What is the picture? Do you want to go beyond that? Don't you think it is un to the Budget Director?" We can say, "Of course, Mr. President, we don't know what your victory program is." (Mr. Haas entered the conference.) MR. BELL: Oh, I don't think we need to discuss any of these figures. I think the President has had them before him and he knows the victory program and Regraded Unclassified 7 - 4 - :R. BELL: That is the '42 picture. Half of it is gone. The 1943 budget, total expenditures exclusive of the victory program, forty-five billion five hundred million. Receipts, sixteen billion four. H.M.JR: Just a minute. This forty-five, five is expenditures, what? MR. BELL: Yes, sir. Receipts, excluding Social Security, sixteen billion four. That gives you A deficit of the twenty-nine billion one. The RFC net expenditures are about a billion, so that gives you total borrowing of about thirty billion dollars, thirty billion point one for 1943, Now, the victory program will go up within the next thirty days and there will be approximately thirty billion dollars, of which we will spend ten in 1943. H.M.JR: Well, now, let's just stop there R minute. You and I have gone through n. lot of these budget things with the President. Didn't he once leave out WPA and do it later to make the picture look better? MR. BELL: Yes, and I think that is what is going to happen here. H.M.JR: But, Dan, just check me, MR. BELL: Yes, he did that on a number of occasions. H.M.JR: Well, if he says to us, "What is the picture? Do you want to go beyond that? Don't you think it is up to the Budget Director?" We can say, "Of course, Mr. President, we don't know what your victory program is." (Mr. llsas entered the conference.) MR. BELL: Oh, I don't think we need to discuss any of these figures. I think the President has had them before him and he knows the victory program and Regraded Unclassified 8 - 5 - knows It isn't going in the budget. H.M.JR: Well, look, I just want to stop at this point a minute if you don't mind. Have you put enything in for new taxes? MR. BELL: No, sir, there is nothing in there. H.M.JR: Well, we would start right there. I am going to do a little kidding myself, too. I am going to take a leaf from Roosevelt. The reason I am going to do it is this, gentlemen: If we stop at thirty billion dollars and then the President - and fix a tax program to take care of that, and then the Presi- dent sends up twenty, thirty, or forty billion dollars on top of it, then we come along with another tax bill. MR. PAUL: That is right. H.M.JR: I mean, I am going to take a leaf out of - I didn't know this. How could I know this? MR. PAUL: In other words, our tax program is based on these figures. H.M.JR: All right? MR. KNOLLENBERG: All right. H.M.JR: And that lets me kind of slide around on your side. Then in February, when he comes along with twenty, thirty, or forty billion, well, my God, how should I know? That is terrible. I need another ten billion taxes. The idea is this, George and Harry, these gents, these extreme left wingests, taxers, you see, these lovers of great business, can give me a little two by four tax bill, see. It was so small it just shocked me. I had to go to bed. I couldn't take it. All they could possibly scrape up was another five billion dollars. MR. SULLIVAN: No. Regraded Unclassified 9 - 6 - MR. PAUL: No, that isn't quite right. H.M.JR: Exclusive of-- MR. SULLIVAN: No, no, exclusive of Social Security, seven and a half. H.M.JR: Now, wait a minute, you have got to do it all over again. Individual income taxes, one, O.K.; estate, two hundred, O.K.; the corporate taxes, three. That is three-- MR. PAUL: That is a range figure, two to three. H.M.JR: I am taking the highest to give you the benefit. Four billion two. The most on the whole thing was five hundred million. MR. PAUL: I think that is too small. MR. SULLIVAN: I think it is too big. MR. KNOLLENBERG: I think it is about right. H.M.JR: Well, addanother two hundred fifty million to split the difference. It is still not five billion. MR. SULLIVAN: You have got Social Security of two billion there. H.M.JR: The statement I made was, exclusive of Social Security, it is a scant five billion dollars. MR. SULLIVAN: That is right, and I say you take out your Social Security and you can get your two billion dollars in taxes. H.M.JR: And the two hundred million estate and gifts you don't get until a year or two afterward, so I said & scant five billion. MR. PAUL: It might 70 bigger, though. I think Regraded Unclassified 10 - 7 - we can get up loopholes, but I can't get the boys to go up on me. think we might be able to get that one billion top up, but I haven't had time to check it through a rate schedule. H.M.JR: Now, what I want, Dan, what this is, you see, is a scant five billion. Now, with the thirty billion dollars, you, as my chief fiscal officer here, what is your reaction? MR. PAUL: Before Dan speaks, can I use my adjective on that program? You called it scant. Yesterday I called it anemic. (Laughter) H.M.JR: All right. MR. BELL: Well, if you get - is this five billion dollars in 1943 or is it just an annual program? MR. SULLIVAN: No, '43. MR. BELL: Five billion dollars in 1943? MR. SULLIVAN: At the annual rate of that. MR. BLOUGH: It won't give you five in '43. MR. BELL: It will not? MR. SULLIVAN: About two thirds of that. MR. PAUL: That will partly depend on what part of it we make withholding. MR. SULLIVAN: That would give you less than forty- five percent of your program in taxes and if you add the victory program, it is even going below forty. H.M.JR: Well, let's forget the victory program, because I am saying, in the room, there is a victory program, and then we come along with another tax bill. MR. BELL: I think it is enough if you are going Regraded Unclassified 11 - 8 - after another program, after the victory program. MR. PAUL: I called Jack Viner last night after I left you to get his views, and he was tentatively - he said just like Dan says, "We will have to have another bill later in the year." MR. BELL: Well, the basis of forty billion dollars, I don't think it is enough. H.M.JR: Forty billion? MR. BELL: Yes, but on the basis of this deficit, I would say it is enough. H.M.JR: Well, let's just talk this deficit, because I take it this is what is going to be referred to in the budget message, a deficit of thirty billion. If we get another five, does that lower your deficit to twenty-five? MR. BELL: I understand you won't get five. Twenty-nine billion and take off five, and it would give you twenty-four billion dollars. That is still a sizeable borrowing program, two billion dollars a month. H.M.JR: Are you satisfied with that? MR. BELL: I would rather talk about the whole program. H.M.JR: But you can't, Dan. MR. BELL: I am not satisfied with the five billion dollar program. H.M.JR: But you can't. MR. BELL: For this picture that is facing us. H.M.JR: Look, we have got to do a little kidding Regraded Unclassified 12 - 9 - here and when the other thing goes up we will make 8 reservation. What do you call it before the court? MR. PAUL: An exception? H.M.JR: An exception. MR. SULLIVAN: When is this going up, sir? H.M.JR: Well, if you had asked me yesterday afternoon, as a betting man you could have collected a lot of money from me, because I would have given you odds of three to one it was in the message. I am simply astonished it isn't, and I think the country is going to be. What is the use of everybody fooling around? If the President of the United States doesn't know what his victory program is - that thing - I will tell you what the date was. I was told by Stimson. He had orders to have it ready either September 8 or September 11, with the orders that he had from the President. Either September 8 or September 11 of this year. MR. BELL: It was published a month ago. H.M.JR: September 8 or September 11. MR. SULLIVAN: Do you think it will be going up there before the first of February? MR. BELL: Yes, I do. H.M.JR: Your guess now is as good as anybody's, John. MR. SULLIVAN: I don't think it would be wise for us to come in and get caught ten days later with this other thing. H.M.JR: Well, it might not be wise, but it might be necessary. MR. BELL: Well, I don't know-- Regraded Unclassified 13 - 10 - MR SULLIVAN: I think We ought to take every step to avoid that, sir. MR. WHITE: Though you may technically go on this basis, I think Congress and the public have a right to expect that you are not wholly blind 8.8 to what is in the wind. Therefore, with respect to what you say, you must know there is 8 very large program coming. You don't know what it is going to be, but you know it is going to be large. So it is all right if you like to come forth with this kind of a program pro- viding your exception is clearly stated that this pro- gram is based upon present deficit expenditures, that if there is going to be any-- H.M.JR: Don't counsel, Harry. I can't take it today. MR. BELL: I am not so sure, Mr. Secretary, that the program is not yet going in the Budget, but last night they thought that it could not be gotten ready, but I should think that the President would say some- thing in his message about a supplemental coming along for victory. H.M.JR: This makes us look awfully foolish. Don't use victory over there. He hates it. The victory pro- gram is how much? MR. BELL: Thirty-three million dollars that has been submitted. H.M.JR: Let's say thirty billion just for argu- ment. Then we come along and say after the thirtieth that we want another five billion in taxes. MR. BELL: Well, let's put it this way, Mr. Secretary. This budget shows an increase of sixteen billion dollars over the '42 and you are asking for five billion dollars in taxes to cover that additional expenditure which is only one third. Now, if the victory program is going to add to your budget only Unclassified 14 - 11 - ten billion dollars for '43, I don't think you can ask for half of that increase. H.M.JR: But that is your estimate, Dan, of what they are going to spend. MR. BELL: Well, that is the budget estimate, it isn't mine. Now, on that basis, I don't think the five billion is enough. MR. PAUL: Of course, where we are going to be driven beyond the five billion, we may as well realis- tically recognize. There are only two places. One is sales taxation and the other is a terrific wallop on the low income groups. MR. KNOLLENBERG: I don't think that is wholly accurate, Randolph, because-- MR. PAUL: I don't see where else-- MR. KNOLLENBERG: We could very much more wallop the corporations than we are proposing to do. MR. PAUL: Thre billion? MR. KNOLLENBERG: We can. I mean, the money is there. There may be reasons of policy why Congress won't do it, but-- MR. PAUL: I would like to get all we can. If we can wallop them, let's do it now. MR. KNOLLENBERG: If we adopt the English system, we obviously could get at least another billion. H.M.JR: And also on the individuals. MR. KNOLLENBERG: And also the individuals and our own brackets. There are a tremendous amount of funds indicated by the British taxes. Somehow they are collecting them there. There are those two responsibilities. 15 - 12 - MR. PAUL: Of course if we did what the papers said this morning, which might be a good thing-- H.M.JR: What is that? MR. PAUL: Put 8. ceiling of twenty thousand on all-- MR. KNOLLENBERG: The British didn't do that. H.M.JR: I don't think we are ready for that yet. MR. BELL: That is what Walsh suggested the other day, twenty or twenty-five thousand dollars would be the top income and everything else would be taken. H.M.JR: Harry, where are you on this question of the amount of taxes necessary? MR. WHITE: Well, I think that this five billion is all right as you stated it with the thirty, because I don't think that the public are psychologically ready for trimming where it is really going to hurt. This five billion won't really hurt. What will really hurt is when you begin trimming the fat on the middle and lowincome brackets and on the corporations by trying to squeeze an extra three or four billion out, and anything of that character must be set into a psychological setting which can be built up only by recognition of the magnitude of the victory program, 80 that I think that if the victory program is going to come out before your tax plan, then you can't go much forward. If it is not, then you can get it ready because you know what is happening, but I think the publicity has to know what is in the offing in the way of expenditure. MR. HAAS: I would say this: If you are not going to have more than five, I wouldn't mention it in the budget. I am inclined to agree with Harry that until the victory program dimensions are out, you can't really fix the amount of taxes necessary. Another Regraded Unclassified 16 - 13 - thing, from the point of view of inflation, I am beginning to feel that the most important weapon we are going to have is rationing anyway, that you can't levy taxes in adequate volume, and, if you did, it would be very inequitable and disturb our whole economic structure too radically. MR. BELL: There is this possibility, of showing it in the Budget. H.M.JR: Can you hold your thought 8 minute? MR. BELL: Yes. H.M.JR: Because I have got the answer. Can you hold yours a minute? MR. BELL: Yes. H.M.JR: If the President in the budget message says there is going to be a victory program coming, then in the same sentence he should say, "If there is, we will also, of course, have to have additional taxes." If he says nothing about the victory program, then I am not going to ask him to say anything about taxes. MR. SULLIVAN: You mean about amount? H.M.JR: No. If the President of the United States says, "Now, I am just telling Congress that within a month or two I am going to send up a victory program," and of course accompanied with it will be a request for additional taxes, but if he says nothing, then I shouldn't ask him to say anything. MR. SULLIVAN: Well, when you say additional, you mean beyond that that is already contemplated to be started on January 15? H.M.JR: Oh, yes, sure. If what we do here is this - the way you people feel - if he says to me this morning, "Well, what is your figure, Henry, stop Regraded Unclassified 17 - 14 - sparring, what is your figure?" "Well, my figure is five billion dollars net, exclusive of Social Security, Mr. President, on the present program." MR. SULLIVAN: Does that contemplate an additional two billion in Social Security? H.M.JR: Sure. MR. SULLIVAN: All right. MR. BELL: Now, supposing he asks you what is it, including the victory program? H.M.JR: Well, then-- MR. PAUL: What is the victory program? H.M.JR: Yes. MR. BELL: He says the victory program contem- plates ten billion dollars of additional expenditures for '43. H.M.JR: On that, Dan, I think I would say, "Well, Mr. President, I haven't had those figures. Give me twenty-four hours and I will give you an answer. I haven't had them. I need twenty-four hours." MR. PAUL: Well, we may as well approach this around the other end now if you are going to have that additional program. If you think you need a certain amount in relation to your borrowing program, then we have to get it. H.M.JR: Well, I would want to stall twenty-four hours to come back, but I am being politic, and I am going on the assumption that this is the line he is going to take from what Dan found out last night, and then if he wants to temporarily withhold the information Regraded Unclassified 18 - 15 - from the public, we can do the same, that is all, MR. SULLIVAN: I think if this victory program is going into effect, and you are forced with the necessity of raising a larger part out of taxes, you have to rexamine your position on Social Security, because every dime you get out of that outs down your possible take on taxes. H.M.JR: You started to say something, Dan. MR. BELL: Well, they often have done this. As a matter of fact, they have had an item in the budget every year called supplemental items, and those supple- mental items have been explained in a general way. It just says, "These are additional expenditures that we contemplate during the year will be made out of supple- mental appropriations submitted." Now, they may put in the budget B. ten billion dollar expenditure item on the supplementals and then just say in the budget messa "e that this represents the expenditures out of the victory program which will be submitted later, so that your expenditure item would be in the budget but no detail of the victory program. They could do that. Then you would be faced with the necessity of putting your taxes on the basis of fifty-five billion expendi- tures. MR. WHITE: There is another possible alternative. I wonder whether it has any merit. Supposing you take the position with the President that you know and he knows there will be large expenditures, and your tax program will fit the picture as soon 28 he vives it to you. It is only a question of a few weeks or a month's delay, and say, "As soon as you tell me what you are going to spend, we will give you a tax program." Then they would come out simultaneously to the public. H.M.JR: He won't do that. The President wants 8 balanced figure. The shock to the oublic - if they not a gross figure of forty-five billion and receipts of sixteen, deficit of twenty-nine and no tax program, Regraded Unclassified 19 - 16 - it would be terrific. He should give it attention. He should have had his victory program ready. I can't understand why he hasn't. It is going to be a shock. One shock won't hurt them half as much as two will. I mean, if they give them all the information at one time. MR. SULLIVAN: I think that is right, Mr. Secre- tary, and I think we will be put in a very unfortunate position if we have to go in twice. We will appear to be stupid. We will appear to be completely out of touch with what is going on around the town, and I would much prefer even to wait a week or two to do it at once. H.M.JR: But you can't do it. He will want to put a figure in. MR. SULLIVAN: No, I am talking about when we go up. If on January 15 they are not ready, I think it would be very much better-- H.M.JR: That is something else, but certainly I am not going to go over and say to the President, "I understand from so-and-so who has told me that so- and-so said that you are thinking of a victory program of thirty billion dollars additional. Therefore, I want ten billion taxes to finance it." You don't know. His victory program may be fifty billion by the time Churchill gets back. MR. BELL: It probably will be by the time June 30 rolls around. MR. PAUL: If we lose Manila? MR. BELL: Yes. H.M.JR: I mean, Churchill and Beaverbrook are going to stay here, my guess is, until they get a decent victory program. MR. WHITE: They have already fallen down on this Regraded Unclassified 20 - 17 - deficit for this fiscal year. They will never reach that deficit. In order to reach that deficit we just figured out they would have to reach a. rate of monthly expenditure by May of three and three-quarters billion dollars. In other words, they will have to more than double the monthly rate of expenditures in four months, because they haven't even reached two yet. That means that there will be even a greater deficit in subsequent years or the production program is going to be very much less than anybody hopes for. MR. HAAS: The British are financing about forty percent in revenue, and they have got their prices stabilized now. MR. WHITE: From the point of view of prices, of course, the Social Security tax is equal to & tax. From the point of view of financing, the United States can appropriately finance a much smaller part of its war expenditures than any other country - can stand a much smaller proportion. (The Secretary held a telephone conversation with Mr. Charles Shaeffer as follows:) RIC shoelfers required 12/30 Unclassified 21 December 30, 1941 9:55 a.m. Charles P. Shaeffer: Hello. Shaeffer. HMJr: Shaeffer, this is the Secretary speaking. 8: Yes. HMJr: Have you got & pencil? S: Yes, sir. HMJr: I want to ask you to do something for me, then tell me whether you're equipped to do it promptly. S: Yes, sir. HMJr: I'd like to know what OPM, the Bureau of the Budget, and the Treasury have said at any time since the first of January, publicly, on what the deficit would be for this year. S: Yes, sir. HMJr: Hello. 8: Yes, sir. HMJr: That's number one. S: Yes, sir. HMJr: Or anybody - well, I mean, just look through. It's just the Treasury, OPM, and the Bureau of the Budget. S: Yes, sir. HMJr: And then also, please go back to July first, '40, and Bee what Mr. Knudsen has said that he would do about the so-called "500 bomber per month" program. S: Yes, sir. HMJr: I mean on performance - what public statements he's made about performance and delivery and so forth. Regraded Unclassified 22 - 2 - S: Yes. HMJr: Now, are you equipped to do that? S: Yes, sir. HMJr: You are? S: Yes, sir. HMJr: And do you need any help? S: I believe unfamiliar people would be a hindrance rather than a help, Mr. Secretary. HMJr: Miss Diamond, of the Library, might help you. S: Yes, sir. HMJr: Our Miss Diamond. S: Uh huh. Yes. All right, sir. HMJr: I'd like it by tomorrow if possible. S: I'll do my best, sir. HMJr: Thank you. S: Right. Regraded Unclassified 23 - 18 - H.M.JR: I think we are all right. We have had a conference with the Director of the Budget. We are in complete accord with him. MR. PAUL: Our program lines up-- MR. BLOUGH: He suggests ten. H.M.JR: Is that what he suggests? MR. BLOUGH: Eight, really. Eight plus Social Security. MR. PAUL: I have got his way, Mr. Secretary. H.M.JR: Here I wrote to the President on December 24, and I have asked Harold Smith to go over this draft with me, and I am sure that he and I can get together. Then I sent a letter to Harold Smith, and we haven't heard from Harold Smith. He has been up in New York. MR. PAUL: There is his against ours, and you see-- H.M.JR: He is just up in New York. MR. PAUL: And the difference is, he isn't quite as hard on corporations. He is 8. little higher on the individuals, but his real difference is this value added tax. H.M.JR: If I take this, where does that leave you? MR. PAUL: That is all right. H.M.JR: Well, did he have the victory program in mind when he talked about ten? MR. PAUL: That, I don't know. It is not entirely clear to me, I must be honest enough to confess, just what the term means. MR. WHITE: It is a program that is supposed to bring Regraded Unclassified 24 - 19 - us victory, a program of expanded production. MR. PAUL: Beyond anything contemplated? MR. WHITE: Beyond anything-- H.M.JR: From now on, as far B.S taxes, I am taking my slogan from the Wall Street Journal, "Win the War Taxes. It is good enough for me. No, John, this isn't the easiest thing for you to conduct in the front line trenches of the Hill, but-- MR. SULLIVAN: What isn't? H.M.JR: To do it the way I am suggesting. MR. SULLIVAN: Two bites? H.M.JR: Yes. But I am ready for one bite, and I would like to do it in one bite, but I can't do it in one biteif the President is going to take two. MR. SULLIVAN: Frankly, Mr. Secretary, I am think- ing more of the country than the Hill. I mean, they, too, have gotten letters out of the blue sky up there, and they can understand the position we are in, but the country never will. MR. BLOUGH: Is it going to be at all embarrassing-- H.M.JR: Supposing I went over there and was silly enough to pound the desk and say to the President, "You have got to make up your mind what your victory program is today"? MR. SULLIVAN: I will beat you to the door if you do. H.M.JR: He would either laugh or get angry, so I am trying to deal with realities, so fortunately Dan's people over in the Budget there can tell him what is going on so that he knew last night. Otherwise Regraded Unclassified 25 - 20 - I would have gone in there, and we would have tortured ourselves for the last forty-five minutes where would we get the additional taxes. MR. BELL: I think this program will be discussed at this conference. I think it will come out before we are. through. H.M.JR: I understand that the President was supposed to have left the whole morning open for this. MR. WHITE: Mr. Secretary, I know you will like that slogan, but do you really think that taxes can win the war? MR. SULLIVAN: I think Harry has got something there and in this exerpt for the budget message, that the American people are prepared to produce what is needed, whether it is guns or money, that "or" ought to be "and." H.M.JR: Do you prefer an all out tax program? MR. WHITE: That is better because you can win the war with expenditures. You can't win the war with taxes. You can ruin the war and help lose it with taxes. You might help win it. I mean, you are putting the emphasis on the very thing that you haven't been placing it on all this time, which is production expenditure. H.M.JR: I didn't write it. That is the Wall Street Journal. MR. WHITE: That is probably why it is no good. H.M.JR: Our appointment is ten forty-five. Well, I think we are all right, don't you? MR. BELL: Yes. H.M.JR: Do you think, Dan, that I should call up Regraded Unclassified 26 - 21 - Harold Smith and say, "I haven't heard from you. Where are we? We are going to argue this all out in front of the President"? or should I just sit? My letter was very explicit. I don't think. MR. BELL: I wouldn't be inclined to call him up, H.M.JR: That is my inclination. MR. PAUL: I have been over the whole budget draft with those people, and I know just where the disagree- ment is. It is only at one point. H.M.JR: And that point is-- MR. PAUL: It is the value added tax. H.M.JR: What is a value added tax? MR. PAUL: I don't know. Roy can tell you. MR. SULLIVAN: It is a type of sales tax. H.M.JR: Roy, can you tell me? MR. BELL: Sugar coated, is it? MR. BLOUGH: It is a type of sales tax in which you put the tax, instead of putting it on one sale at the final sale of the goods, you put it in pieces on different producers, each producer paying on the amount he adds to the product. The fellow who starts with the ten dollar raw material-- H.M.JR: Give me an example. Start with a pair of socks. MR. BLOUGH: To start with 2 pair of socks, the fellow who produces the yarn may pay a dollar for his raw material and sell his product for two dollars. He will have added 8. dollar of value to it, and the fellow - Regraded Unclassified 27 - 22 - I will give you the simple first and then add 8. few complications. The fellow takes the yarn at two dollars and he sells it at three fifty after he has died it or knitted it. He has added 8. dollar and a half of value. So as you go along each person buys the raw material furnished him by the previous fellow, and he sells it at a higher price, and the difference is the value added by him. Now, in this particular proposal, in order to offset the effects of the Social Security payroll tax, those are deducted. They propose an eight percent tax on this value added. H.M.JR: Starting where? MR. BLOUGH: Starting at the first dollar. H.M.JR: And every time you add & dollar or what- ever it is, you pay eight percent? MR. BLOUGH: That is right. If a fellow buys it at a hundred dollars and sells it at a hundred and fifty dollars, he pays four dollars in tax, eight percent of the difference between a hundred and a hundred and fifty, except that he can deduct his Social Security payroll taxes from it. MR. KNOLLENBERG: From the tax or from the amount of added value? MR. BLOUGH: From the added value. MR. PAUL: I have got a letter from OPA in which they are practically blue in the face in opposition to this, saying it will be very inflationary and will raise the cost of living seven percent. MR. SULLIVAN: It is the worst kind of a sales tax you could have. H.M.JR: Didn't I send you in & letter from the Regraded Unclassified 28 - 23 - Vice President and an answer when I sent him this last program? MR. PAUL: I sent in an answer, drafted it. H.M.JR: But I wonder whether we could quote him? MR. PAUL: Well, I returned the letter to you. H.M.JR: Then it is here. But I mean, you keep using that as a Bible. MR. WHITE: If it is from the Vice President, it should be the Koran. H.M.JR: That isn't what they use up in Tibet, is it? MR. WHITE: Not in Tibet, no. H.M.JR: I just wondered - here is a suggestion. "Might it also be possible to work out a scheme whereby half the amount by which the net income of 1942 exceeds the net income of '41 would have to be invested in com- pulsory savings which could not be drawn up - IT well, that isn't very different from what we had from Barnard. O.K., gents, if you come back here at ten-thirty, Mr. Bell and Mr. Sullivan and Mr. Paul, we will go over. Regraded Unclassified 29 December 30, 1941. TO: Secretary Morgenthau FROM: Charles Shaeffer The enclosed is what We have been able to assemble on definite subjects attributed to various persons and agencies. The complete data is being held for your convenience. Regraded Unclassified 30 TREASURY OFFICIALS ON DEMICIT January 29, 1941 Secretary Morgenthau, on several occasions, told the House Ways and Means Committee, then discussing the Public Debt Act of 1941, that the combined deficits for the fiscal years 1941 and 1942 WO la be $15 billion. February 12, 1941 Secretary Morgenthau told the subcommittee of the Senate Finance Committee, then considering the Public Debt Act of 1941, that estimated expenditure programs then would result in combined deficits of $15,400,000,000 for the fiscal years 1941 and 1942. April 17, 1941 (At a press conference) Secretary Morgenthau stated he would have to borrow $6,300,000,000 in the next fiscal year. April 24, 1941 Secretary Morgenthau told the House Ways and Means Com- mittee, then considering the Revenue A-vision of 1941, that, assuming $3,500,000,000 of new taxes were raised, the deficit for the fiscal year 1942 would still be "approximately" $6,300,000,000." This statement was repeated several times during the hearing. Later on in the hearing, Assistant Secretary Sullivan repeated this statement several times. Regraded Unclassified -2- May 7, 1941 Under Secretary Bell told the National Association of Mutual Savings Banks at Philadelphia that, even with additional taxes of $3,500,000,000, "We will still have a deficit of $7,200,000,000." October 23, 1941 Assistant Secretary Sullivan, addressing the Associated Industries of Massachusetts in Boston, cited estimates indica- ting a deficit of $12,583,000,000 for the fiscal year 1942. Regraded Unclassified 31 BUDGET BUREAU ON DEFICIT Budget Message of January 8 The President estimated that the net deficit for the new fiscal year would be $9,210,000,000, and that for the current fiscal year, ending June 30, 1941, it was estimated at $6,200,000,000. These deficits were foreseen despite the prospect that Treasury income for the next fiscal year probably will exceed any figure on record. First Revision - May 31, 1941 A $3,557,000,000 increase in the Nation's budgetary deficit was predicted by Director Smith above the January estimate of $9,210,000,000, bringing the total to $12,767,000,000. This increase, he said, was the likely result of the stepping up of the defense program since the regular annual estimate was made. The total of appropriations, authorizations and recommenda- tions for defense amounted to $26,500,000,000 as of January 3rd, he said. Since that time, a lend-lease a propriation of $7,000,000,000 has been added, and the program for the production of planes, ships and other vital defense materials greatly ex- panded. The defense program (appropriations, authorizations and recommendations) as of this date is 843,000,000,000, or $14,500,000,000 greater than the amount on which the January estimates were based. Regraded Unclassified 32 -2- Second Revision - October 4, 1941 With defense expenditures for the current fiscal year expected to reach $18,000,000,000, Director Smith forecast a 1942 Federal outlay of $24,681,000,000, or $7,000,000,000 more than the figures submitted to Congress in January. As the result of these revised estimates, the gross deficit, including debt-retirement charges, for the 1942 fiscal year was estimated at $12,683,000,000, compared with a deficit of $5,167,000,000 for the fiscal period ended June 30, 1941. Regraded Unclassified 33 OPM ON DEFICIT December 30, 1941. I am unable to find any published data concerning the public deficit attributed to OPM. However, I am in poss- ession of an office memorandum prepared by Barrow Lyons, a research statistician of that agency, dated June 7, 1941, addressed to Bob Horton, Public Relations Director, on the subject of "Government Financing through 1942." I am, of course, unable to judge the propriety of this memorandum, but it takes sharp variance with Treasury figures. The lead of this memorandum is quoted below: "A preliminary estimate of the Federal deficit for the fiscal year 1942, if the defense effort were to take rull advantage of the funds Congress has provided, places the amount very close to $22,500,000,000. A preliminary estimate for the calendar year 1942 places the deficit for the year at close to $29,300,000,000. The estimates do not allow for any marked change in prices of defense materials, and do include an esti- mate of greatly increased taxation. It is likely that the deficit would be considerably greater than these estimates, if inflation were to take place, or if the estimated taxes could not be raised. "No estimates approaching these magnitudes have come to my attention nor have I seen any proposals to raise such huge amounts by the sale of Government securities." Regraded Unclassified 34 KNUDSEN ON BOMBER PRODUCTION September 11, 1940 Mr. Knudsen announced that airplanes would reach a peak production of 3,000 planes per month in July, 1942. At the times of these remarks, Mr. Knudsen said that of planes destined for American service 60% were combat planes, including bombers. May 21, 1941 (At a press conference) Mr. Knudsen reported that new contracts would be signed with Ford Motor Company and several airplane firms to step up the output of 4-motor bombers from 100 to 500 a month. In addition, Mr. Knudsen declared at the same conference the output of twin-engine bombers, then approximately 200 a month, would also be increased considerably, but he gave no figures to indicate how great this new program would be. The new plan of 500 heavy bombers a month would include planes to be assembled at Government-built plants at Tulsa, Oklahoma and Fort Worth, Texas, which are expected to be in production by early fall of 1942. September 22, 1941 (In Chicago before businessmen and civic leaders at the Union League Club,) Mr. Knudsen said there are now 79,000 planes of all types on order. In December, 1940, they were being turned out at the rate of 500 a month, he said. At that time he estimated pro- duction in December, 1941, would be 1,800 a month, and by the middle of 1942 the rate would be 3,000 B month -- 36,000 a year and nearing President Roosevelt's goal of 50,000 planes B year. Regraded Unclassified 35 -2- December 11, 1941 (At a press conference) Mr. Knudsen urged a production goal of 1,000 4-engine bombers per month as an essential point in the Victory program. He withheld, as essential military information, any estimate as to when this goal might be reached. 36 December 30, 1941 10:36 a.m. HMJr: How are you? Robert Lovett: I'm fine, thank you, sir. HMJr: Look, before I go out on the end of a 11mb, I wondered if the statement that I'm going to make, if you'd care to tell me whether it's correct, you see. L: Yes, sir. HMJr: I have some statistics which were furnished me by OPM; and for May 5, 1941, they call it the E- E. Program, down through to date, there's no change in their forecast on the four-engine bomber. L: From May 5 to date? HMJr: Yes. L: No, I don't think that's correct. HMJr: Well L: Do they mean the forecast of production or HMJr: Well, this shows on May 5, under the 8- 8 E. L: Yes, HVJr: it shows that you go un to 500 - you reach the 500 in June, 143. ;; Yes. HMJr: And on October 27, '41, it shows you reach 502. L: Yes. ThJr: Two more, in May - in June, 143. 1: Yes. Well, I think that's incorrect. HXJr: It's incorrect. Regraded Unclassified 37 - 2 - L: Yes, because the sights have been reised, of course, from the 500 ceiling to double that HWr: Yeah. L: and we are getting - for example, in 1942 - let's take Boeing, for example - they promised ue 45 in January - promised us 35 in December, and we're getting fifty something - and 45 in January, and we're getting 75. HMJr: Well, my L: So that we will get more - we will get the 500 a month rate esrlier than the first of July, 1112 - 143, I mean. HMJr: Well, how much earlier? L: Well, it's pretty hard to say: but I should think it would be 6 matter of several months. HMJr: Several months. L: Yes. HMJr: Well, that's - all I've got is this - I have the thing which OPM furnished me. The last one I got 16 their B-G., which 19 dated October 27. L: Yes. HVJr: I have nothing other then that. L: Well, we don't use those, Mr. Secretery. We have the Materiel Division estimates, which 1E scheduled into the critical items HMJr: Well L: that show production related to shorteges. HMJr: Well, let me ask you this. I'm not talking about whether it's two months earlier or three months earlier. Have there been any contracts let other than these? L: Any contracts Regraded Unclassified 38 - 3 - PhJr: What other - for four-engine Dombers other then what I have from CPM. L: No, the fourth Eupolamental includes contracts to raise it to A thousand a month. HMJr: But those haven't been let. L: Those have not been let. WHJr: Well, then 1: Tary have not been let - in fact, they have not yet been RD roved by the Bureau of the Buaget. They've been there since the 23rd or 24th of Vovember. BHJr: Well, then, 1.00 I make the statement to the President that since the fifth of May there's been no con- tracts let for four-engine bombers, that statement's correct. L: There have been no funds eveilable for four-engine bombers for Air Coros. I think there's been some Lend-Lease funds provided in his möst recent socro- riation; but I know of no contract signed which extended to the thousand 2 month, which was only recently requested. And 18 this statement also correct, that with the exception of Ford, that there's no automobile commany that has P contract for four-engine bombers? L: No, sir, HAJP: Tost's not correct? L; No, sir. linet 1 £ the correct statement? 25 Yell, if you ceen by humbers, you mean air frances. MJr: Yes. 1: That's correct, except that Chrysler and others are meking the - you're talking about four-engine? Regraded Unclassified 39 - 4 - 4Mr: Yes. L: There's some sub-contracting work there, but there are three automobile companies making the engines. HMJr: Yeah, that I understand. 1: But it's rather meaningless to say that there's none in the four-engine sicture. HKJr: But the fact remains that this thing would show that on May 5th, the plens were for 500 four- engine bombers a month. To date, there's been nothing done since May 5th to increase that by letting any acditional contracts. L: Yes. The funds were not available on May 5th, you understand. HMJr: Well, and you say L: I mean, the plan wesn't approved until May 5th. The funds were obtained, I think, June 30th or something like that HMJr: Yes. L: from the soprooriation. HMJr: And now you say that L: I'm not sure that 7 I mean, if you make your state- ment that way, I don't think it's accurate. "Wr: Well, it's accurate enough. I mean, for this - all I'm going on is the various schedules which OPM gave me. You've given me my answer, and that is the additional 500 bombers 18 what you want, but It has not yet cleared the Budget. L: That's right. HMJr: Shat? L: That's right. And the only contracting done WAB done within the limits of the acprocriations which Regraded Unclassified 40 5 # I were made available on the 30th of June. HMJr: Now, one more question. Thank you for your patience with me. L: Not a bit, sir. HMJr: One more question. When would you - if you get by the Budget, et cetera, et cetera Hello. L: Yes. HMJr: I just WB 8 interrupted. When you - I mean - when would it be reasonable to expect that we'd reach a thousand bombers a month - four-engine bombers? L: I should think toward the end of '43- 4MJr: Toward the end. L: Yes. HMJr: November, December. L: Probably - let's say December, to be conservative. HMJr: Okay. I'm very much obliged. 1: Now, that, of course, 16 based on the present scheduling. With our new plants, we're going in for 933 million dollars worth of additional facilities HMJr: Uh huh. 1: I would expect that we would pass that figure some months earlier. I'm unable to guess when. HMJr: I see. Well, thank you. I may call back again, but that takes care of me for the time being. L: All right, fine. That's based, you understand, on the facilities which are likewise in this request for additional appropriation. Regraded Unclassified - 6 - 41 HMJr: I understand. L: All right, sir. Fine. HMJr: Thank you. L: Good-bye. Regraded Unclassified STRICTLY CONFIDENTIAL 42 December 30, 1941. MEMORANDUM FOR THE SECRETARY'S FILES Conference in Secretary Morgenthäu's Office December 30, 1941 3:15 P. M. Present: Secretary Morgenthau Mr. Murray, C.I.O. Mr. Pressmen, C.I.O. Vr. Reuther, C.I.O. Mr. White Mr. Murray stated that he had hoped to get in touch with the Secretary earlier but he had been tied up for a long while at a conference with Madam Secretary Perkins. Mr. Murray stated he had heard what Secretary Morgenthau had been able to do for the boys from the Dodge plant that came down from Detroit, and he thought it was a swell job. Mr. Murrey said that the situation which the automobile in- dustry has been left in by the OPM was little short of criminal. He said be presumed that the Secretary was familiar with the situa- tion in the Automobile industry and with the fact that it would be practically "blacked out" during the coming months. Re said that Labor was willing and eager to make whatever sacrifices were neces- sary for the defense effort but that Labor should have some parti- cipation in the planning. Mr. Murray further stated that at 2 time when all the effort should be directed toward increased production, it Was most infor- tunate thet pert of their energies should have to be diverted to protect labor against attacks against their basic rights. He said he was much disturbed by the letest developments in which the Army was going to undertake to work with and through the leaders of local units in the Union, passing right over the regional and national offices. He said he had proposed several times in the past that they operate with the aid of union groups but that his ideas had always been scoffed at. Now that the situation was so critical, they were going to adopt some of the ideas, but do it in such a way as to virtually threaten labor unity and independence, He said the next thing the Army would do would be to tell the workers what they could and could not do, and where they could or could not go, and what wages they could get. He thought it was terrible for the Administration 50 move in that direction. Regraded Unclassified 43 - 2 - He then said he thought the Secretary would be interested in some date Mr. Ruether had to present and some comments on the forth- coming conference in Washington. Mr. Ruether reminded the Secretary of his talk with him of a year ago about his proposed plan and the support the Secretary had given him. He said, RE the Secretary probably knew, he got nowhere at all with the OPM. Re said a conference was scheduled to take place on Monday in which the automobile industry unions had been asked to participate. The Union men intended to go to that meeting and either get some action on their proposals, or on some program, or they were going yo "blow the lid off". Ruether than submitted some data of the unemployment situation in the automobile industry and related some eriscdes indicating how little the automobile in- dustry was sharing in the defense effort. The Secretary thought it might be very helpful to their cause and to defense production 85 a whole if preparatory to their going into the meeting the Automobile Workers' Union took 2 full page ad in the local papers here for a courle of days and bring their story before the people. Someone suggested it be an open letter to the President, but the Secretary thought it would be much better to make it an open letter to Mr. OPM. Messra. Murray, Pressman and Reuther all thought it was an ex- cellent idea and said they would take it up with Detroit at once. Regraded Unclassified 44 dues. 12/30/41. UAW-CIO CONVERSION & REEMPLOYMENT PROGRAM Tuesday? biren be me Thursday By Phil Nurray and Reuther Submitted by: - UAW-CIO DEFENSE EMPLOYMENT COMMITTEE R. J. Thomas INTERNATIONAL PRESIDENT George F. Addes INTERNATIONAL SECRETARY TREASURER DEFENSE EMPLOYMENT COORDINATOR R. T. Frankensteen W. P. Reuther R. E. Reisinger Regraded Unclassified UAW-CIO CONVERSION & REEMPLOYMENT PROGRAM 45 300,000 auto workers throughout the country are facing the prospect of total unemployment by the end of January. These workers, together with their families and their communities, will be among the first to feel the sharp impact of transition to B. war economy which our nation is now carrying through. Auto workers recognize the need for this ourtailment of production of automobiles as a thing essential to the common cause of victory for Democracy. They realize the primacy or the nation's interest in the fight against axis domination of the world. As workers they recognize diotatorship as the greatest menace to their lives, liberties and hopes. At this time of our country's need the first task of all Americans is to do everything within their power to secure the imme- diste conversion of auto plants to the production of tanks, planes, guns, shells and other necessities of war. Auto workers call for an immediate end to the situation in which B. large section of American industrial power is standing idle while hundreds of thousands of skilled workers are facing 8. long period of unemployment. The first concern, therefore, of automobile workers in the present emergency 18 to secure the earliest and complete utilization of their skille and the tremendous equipment of the automobile industry in the creation of that full stream of armaments which will guarantee viotory to this country and its allies. To seoure this purpose, the UAW-CIO submite the following program: 1) ne call upon the President of the United States to establish in the immediate future B. central body to coordinate and regulate policies of all procurement agencies of the armed forces. Only by such a measure can genuine planning and organization, essential to full production, be implemented. It will be the duty of such B. centralized body to advance delivery dates on present arms contracts. It will, by placing contracts to the limit of productive capacities, guarantee that selfish corporate interests do not hold out essential equipment from the service of the victory program. If the productive power of such an industry 6.8 the automobile industry 1s to be called upon, an agency of this kind is imperative; for experience has shown that the initiative of manufecturers in this industry is not sufficient for an all- out effort. The continued refusal of certain major companies Regraded Unclassified 48 of this industry to prepare for wer work 18 8. crime against the nation, which must no longer be tolerated. Auto workers will support any move by the United States Government to end this situation. We call for this coordinated proourement agency empowered to place contracts upon the basis of standerd oosts wherever they may be fulfilled, and to demand full performance in the name of national safety. In addition, such a procurement agency alone can be the instru- mentelity for effective sub-contracting on military orders. It can write provisions for sub-contracting into every contract let out to El major manufacturer. That B. fact finding Committee of technical experts be appointed to examine and determine what parte in Army and Navy Ordnance (including aircraft motors) could be manufactured with greater limite of tolerance than now demanded in order that many parts would be more amendable to mass production methods. Many of the limits placed on war material now being manufactured are the same as when this material was in experimental stages. 2) Further, we call upon the President of the United States to establish a national industry council representing lebor, govern- ment and management as outlined by President Philip Murray of the CIO. In each of the primary defense industries 8 similar council should be empowered to work out basic policy for the full utilization of productive power and for the successful conclusion of the victory program. Establishing basio policy for, end operating through such B procurement agency as has been dosoribed, these industry councils will unleash the giant forces of American industrial power. 3) We call upon the Supplies, Priorities and Allocation Board to meet at once with the representatives of the UAW. Such a conference should lay the ground-work for establishing jointly with industry specific plans for the full conversion or the auto industry to military production. 41 lie call upon the Congress or the United States, in the interest of preserving civilian morale, in the interest of avoiding die- ruption to the established inbor force of the automobile industry, to take the following steps: Regraded Unclassified 47 (a) To appropriate additional funds for the purpose of supplementing present unemployment compensation payments. Such supplementary payments will be used to insure income to workers displaced through con- version unemployment during the waiting periods, to eliminate the disparity between present benefit pay- ment levels and & living wage level, and to continue payments following established expiration dates. (b) To appropriate the necessary sume for the payment of automobile workers 8.8 they undergo training for arms production jobs which will be available in the months to come. (a) To establish control of wholesale and retail prices without freezing of wage rates. WE CALL UPON THE OFFICE OF PRODUCTION MANAGEMENT: (a) To adopt the UAW-CIO Tool Procurement Program offered herewith. (b) To take immediate ateps for the convening of B joint conference between its representatives and the repre- sentatives of labor and management in the machine tool industry. Such a conference should be devoted to expanding the production of the machine tool industry. (c) To work out arrangements for the transfer, at govern- ment expense, of displaced auto workers whose services may be immediately needed elsewhere in the expanding program of military production. PROGRAM FOR IMMEDIATE USE OF IDLE MACHINES IN CLOSED AUTO PLANTS The first line of attack for a short term program is to put into immediate use for war production all available machines now lying idle in the auto plants due to ourtailment of production. Even at the present time there are standing idle in many auto- mobile plents machines such as Gear Cutters, Milling Machines, all types of lathes and screw machines suitable for making shells, and small parts for all types of war material. All these machines are ready for immediate war work with & minimum of conversion tooling. - 3 - Regraded Unclassified 48 At the present time there is B. terrific bottle-neck in the machine tool industry. Many of the machines for which the machine tool builders have orders and which will take many months to build are now lying idle in the automobile plants. A program should be developed whereby either the work that was to be done on the machines now on order would be done on these idle machines thereby giving additional work to workers in the automobile industry or that the Government should temporarily requisition these machines for use in other areas. We recommend that the government immediately release short term defense contracts which call for little tooling, 8.9 for shells, standard parts, etc. We recommend immediate release of both light and heavy truok jobs, for which Congress has already appropriated money. Where tires are lacking, trucks can be stored until rubber is available. We ask that the government push this job through now. nopway26-010 Regraded Unclassified 49 UAW-CIO TOOL PROCUREMENT PLAN December 29, 1941 Prepared under the direction George F. Addes INTERNATIONAL SECRETARY TREASURER DEFENSE EMPLOYMENT COORDINATOR UAW - CIO Do 50 The UAW-CIO Tool Procurement Plan offered herewith, while primarily planned for the rapid conversion of the Automobile Plants to the war effort, is adaptable on 8 broader scale to the entire nation and on B. narrower scale to other industries and other areas. TOOLING FACILITIES OF THE AUTOMOBILE INDUSTRY In the Detroit area there are upwards of 800 tool and die joobing shops and upwards of 50 so-called "captive" shope with tool menufscturing facilities. These range in size from "alley" Jobbing shops with 5 or o machines employing from 8 to 10 skilled man, to the large Joobing shops with 100 or more machines employing upwards of 400 men. Among the captive shops are many small specialized plants with small tool and die manufacturing departments. They do not have complete tooling fecilities. Their work require tools made on certain types of machines, such 88 lathes. They employ from 30 to 60 skilled men. Then, there is the larger plant such 88 Ford with several thousands of machines employing some 4,500 skilled workers and B number or apprentices with varying degrees of skill. STATEMENT OF THE PROBLEM Our recent survey shows that these facilities are being utilized but 46.3% of the time available, based on 8 168-hour week. Preaking this figure down to two types of machines which have a high degree of utilization in the war program, Lathes and Boring Mills, we find: In Job Shops In Captive Shops Lethes iile 52% of the time Lathes idle 53.4 of the time Boring Mills idle 35.3% of the time Boring Mills idle 40.7% of the time Most job shops in the Detroit area are at present working two 10-hour shifts per day, (since the making of the survey) 7 days per week. Day shifts are operating with 8 full complement of men, while most afternoon shifts are operating at 1/3 of rull capacity. By adding another shift, these facilities could be utilized an additional 4 hours per day or 28 hours per week, and by bringing all shifts up to rull man-power, Regraded Unclassified 51 from 30% to 40% additional use of facilition would be obsained. Most of the captive shops would permit of even greater [xpansion by the utilizing of the die manufacturing divisions of these plants and expanding them to their man-power limits. During recent years these plants have contracted most of their new work out to the jobbing whops, maintaining in their own plants more "skeleton" crews for maintenance and repair work. The largest Die Shop in the world 18 the Fisher Body, Plant NO. 23 located in Detroit. It employs at its peak of production 6,000 Diemakers. Today, there are less than 2,000 skilled men working in the plant, and these men are working on jobs which could be placed on a. pro- luction basis. The Die Shop in Brigge Manufacturing Company, Vernor Plant, employs 2,500 men at its peak of production. Today, less than 250 mon are employed at that plant on all shifts. The Die Shop in the Dodge Main Plant employs 900 men at its peak of production. Today, less than 250 men are employed on all shifts. We could oite many more instances, but these indicate the problem. As mentioned above, the toolroom in these captive shope are operating with skeleton shifts for maintenance and repair and could, therefore, be greatly expanded. Expansion of man-power and use of fecilities is but a part of the solution of the problem. Allocation of the work to be done to shops which are capable of doing it accurately and rapidly is another consideration. Under the present "hit or miss" method of allooating tool work, many of our shops with equipment and personnel that would permit them to contract for close limit precision work, are loaded to capacity with "rough" work requiring little preoision, while other plants capable of doing this rough work are lying idle because their facilities forbid contracting for precision work now available. A tool manufacturer might have the type of job in his shop that would over-tax his machining facilities. This machine work could be re-allocated among other smaller shops having the facilities to do the work, Large volumes of machine work could be done in many of the captive shops without interfering with work they are new doing. They have lathes, milling machines, shapers, planers, etc., in maintenance departments, machine repair departments and electrical departments that could be utilized. Also, when production cesses because of ourtailment, - & - Regraded Unclassified 52 screw machines, lathes and milling machines on production work could be used for some type of tool work. THE UAW-CIO TOOL PROCUREMENT PLAN 11 Allocation of Production jobs to the automobile industry by 1 proper governmental agency. (a) Allocate apecific jobs to prime contractors. (b) Designate the urgency with which jobs are required. 2) Prime contractors plan entire tooling program for the job and submit blue-prints and requisitions for tools to 8. Central Tool Procurement Agency. 3) Central Tool Procurement Agency to allooate specific jobs to specific shops based upon the facilities of the shop to do the work, and distribute the work out over 8. sufficient number of shops to insure early delivery. (a) Central Tool Procurement Agency to have authority to place jobs in any shop or plant (Job shop or captive). s) Central Tool Procurement Agency to maintain 8. "follow-up" department whose function shall be to search out "bottle-neoks" and assist in eliminating them. 5) A committee composed of equal representation of Management, and Union and one representative of Government would formulate policy for the Central Tool Procurement Agency - adjust problems where possible and act as liason agents for their respective principals. 6) Abolition of the present priorities system insofar as it relates to the shops and plants under the jurisdiction of the Central Tool Procurement Agency. (a) The Central Tool Procurement Agency, based on information given by the U. S. Government agencies, would assign 8. number to a job, based on the urgency with which it was required by the government. Thus, for example: "If tools for an anti-aircraft gun were allocated and government agencies had determined that it was required in advance of any other job under the jurisdiction of the Central Tool Procurement Agency then that tooling - 3 - Regraded Unclassified 53 Job would receive 6. No. 1 rating from the Agency and all tool shops would be required to give that job right of way through their shops. This would not mean the osssation of work on other jobs unless such work on other jobs interfered with the work on No. 1 job, The next most urgent job would be numbered 2, next 3, etc." The progress of all jobs through the shops would depend on their rating by the Central Tool Procurement Agency. This plan for utilization of facilities and priority of jobs in the shops is not new, but it is on B. broader basis than ever before attempted by the automobile industry. Its success would depend upon rigid enforcement of its policies and rules. DEVELOPMENT OF SUB-CONTRACTING The successful functioning of this Tool Procurement Plan will not materially aid our country's war efforts if the principle of Sub-contracting is not developed to ite fullest extent on production work. In the Chrysler Tank Arsenal in the City of Detroit, the machining divisions are working three shifte & day, 7 days & week to furnish material to an assembly division that only works one shift per day. If the Chrysler Corporation had sub-contracted more of their tank job, they could be assembling tanks three shifts per day. If an "Hawaiian week-end" should strike Seattle, Washington, and certain California towns at the same time (say, as we are sitting here) it would be 8 long, long time before the army would again have a source of supply of "Flying Fortresses", admittedly the best of the long range bombers in the world. It is our contention that the Boeing job should be given 00 the automobile industry, tooled in its tremendous tooling facilities and sub-contracted among the hundrede of plants in the industry. We believe this could be done along with contracts for guns, gun carriages, shells, etc., which involves over 90% machine work in their construction and would not interfere with bomber construction. During the past 18 months there have been 8. large number of so-called educational orders placed with various manufacturing concerns in order that they might solve production and tooling problems on war work. We believe that all war work should be removed from the competitive field and that there be no hoarding of these tooling and production techniques Reveloped at government expense or otherwise. - Regraded Unclassified RESULTS IF PLAN IS ADOPTED 54 We believe that if this program is adopted, providing as it does for the utilization of all the tooling facilities of the auto- mobile industry as a single unit - allocation of jobs to 8.8 many shops 88 1e practicable - and 8. simple direct priorities system enforeing the one job at a time plan, 88 advocated herewith, it will result in the tooling and conversion program being completed in at least one half the time. This will result in production and assembly lines turning out 8 greater volume of production and at an earlier time than BO far anticipated and releasing to our men in service vast quantities of war material 80 vital to the defense of our democracy. This will also result in the re-employment of unemployed automobile workers and return them to defense usefulness. We reiterate, the time for telking is past. The time for ACTION is here. This comprehensive plan for the development of the automobile industry as B. single unit for the war effort is the best that has been offered up to this time. It is logical, sound and workable. We believe that action should be taken on it this week in order to harness the man power of 300,000 auto workers to the war program in as short a time 88 possible. ***** **** + * * uopwa#26-cio Regraded Unclassified 55 December 30, 1941 4:20 p.m. RE PRESIDENT'S BUDGET MESSAGE Present: Mr. Bell Mr. Sullivan Mr. Paul H.M.JR: Did you do anything on that? MR. BELL: That order? H.M.JR: Yes. MR. BELL: I tried to get Jesse Jones and Wickard, and they are both tied up in conferences. They will call back in 8 few minutes. H.M.JR: Look, gentlemen, you will have to have a little charity with me. I can't tell you much more. It isn't that I am withholding it. It is not 8. withhold- ing tax. My answer is, as far as the budget message is concerned, the annual message, or any other kind of message, I just won't put my mind on anything today or tomorrow because I am just tired. You had better go on up, see, and you (Paul) will get two days, one day of holiday and one day in the dentist's chair. MR. PAUL: No, I will get more than that. I will only be in the dentist's chair about fifteen mínutes. H.M.JR: Then come back Friday and I hope by that time-- Regraded Unclassified 56 - 2 - MR. PAUL: We can very well use this time because we are scraping bottom now. We have organized a search for revenue and it is going to require a considerable amount of ingenuity to find that seven billion. I think we can do it, but we will be in a better position to tell you something by Friday. H.M.JR: Well, thank you for the hope, faith, and charity. And then I think if you (Bell) would give the Director of the Budget a ring tomorrow, and then I think I will just - I haven't looked at anything today. I haven't done a thing. MR. BELL: Are you going to try to be away over the weekend? H.M.JR: I just got this notice, and I haven't seen that all day, but we are expected at the White House tomorrow night. MR. BELL: Tomorrow night? H.M.JR: So let me catch my breath, and I will come up for air tomorrow morning and we will all have a talk except you (Paul). But I won't talk taxes until Friday. MR. PAUL: Suits me. Regraded Unclassified 57 December 30, 1941 4:70 p.m. M.Jr: Hello. Begil D'Connor: Yes. HMJr: Hello. Doc? 21 Hello. MJr: Is this Doc? : Hello. * Jr: Doc 0'Connor? 0: Hello, Henry, how are you? HMJr: I'm okay. 0: Happy New Year to you. BWr: Many of them. Go shead. Hello. 0: Hello. HMJr: Hello. 9: Are you feeling pretty good? MaJr: Why, what do you want? C: Well, I want to have a conversation with you, and I don't want you to get cross about it. X.Jr: (Laughs) Go ahead. I never got cross at you, :: I don't know if anything can be done about it, Henry, but here's the situation. MMr: Yeah. C: Ano it may sound anfully oin-heeded what I'm Eving to 887 to you Yeah. a but, of course, we do have this Birthday Regraded Unclassified 58 - 2 - celebration coming on the thirtieth. HMJr: Yes. 0: And I think it's important. It's not only important in its own field, but I think it's important that it go over better than ever before. HMJr: Yeah. 0: I don't mean by that eight or ten times better, as evidenced that the people of this country are really personally behind the ball. HMJr: Yeah. O: Now, naturally we're confronted with a lot of difficulties. We've got good old Norman out wanting fifty million, driving in the same period; and we've got your fellows out doing the same thing, which I certainly am not going to suggest should be stopped. HMJr: All we want is fifty billion. 0: The real problems I'm running into with you, and I'm trying to take them up with you as graciously as possible, is this. In the first place, generally speaking, I'm informed - don't hold me too rigidly to my statements - you've usurped all the spot time on the radio, of which we usually got a great amount in the month of January. HMJr: No, No, no. Somebody's kidding you. Some- body's kidding you. 0: Well, I've got a memo here in front of me which is the base for my information. HMJr: Yeah. O: Now then the other thing 18 that HMJr: Well, look, to show you how that 18 - when the Red Cross drive was along - - I mean, they threw 59 - 3 - a lot of those announcements in, and I hear all kind of announcemente for different drives on the air all the time. 0: Yeah. Well, now the only other specific thing - there are others - that I want to take up with you is, that I understand that you've got a pledge drive coming on on January tenth; and, of course, our real drive starts on January twelfth. HMJr: Yeah. 0: Now, I don't know 88 I can tell the Government to go out of business while I'm in the field. HMJr: I don't think you can, Doc. I don't think you should. 0: No, of course not. But do you suppose it would do any good if a couple of my men went down and talked with your men that's handling this? HMJr: Sure. We'd be delighted to see them. Sure. 0: It would prevent any of my men giving me & sob story that there ien't any basis in, you see? HMJr: No, nobody's more interested than I am in this polio work. 0: Well, you got the letter I wrote you last night, didn't you? HMJr: No, I didn't get it. C: Well, I sent you one last night, which, of course, is really amusing. HMJr: Well, unless it's air mail special 0: And I said in that letter that I certainly didn't have to defend you on your attitude towards polio. HMJr: No. O: Well, Henry, who's the man down there that they should see? Regraded Unclassified 60 - 4 - HMJr: Well, let me Just think a minute. 0: Yeah. HMJr: Let them come and see 8 man by the name of Harold Graves. G-r-a-v-e-s. 0: Good. Is he an old Treasury man? HMJr: That's right. 0: Good man. HMJr: Yes, he is. 0: Harold Graves. HMJr: Yeah. 0: Well, now, I'll have - I tell you who'll come down. It'll be Tom Wrigley. HMJr: Tom who? 0: Wrigley. HMJr: Wrigley? Wrigley's gum? 0: Yeah - the same kind of a name. HMJr: Yeah. 0: And tell Graves that they'll wire him for an appointment. HMJr: Okay. O: Fine. HMJr: They'll get 8 sympathetic hearing, but don't let anybody kid you. 0: I don't like to, Henry; and that's why I'm calling you. HMJr: Fair enough. 0: And you're not cross? Regraded Unclassified 61 - 5 - HMJr: Not what? 0: You heard me. HMJr: Cross? 0: Yeah. HMJr: Why? I'm delighted you called me. 0: Well, you've got a real problem there and I don't want to be in a position of HMJr: Oh, Doc, you've never called me unless it's something important. O: I don't want to be pin-headed on the thing. Of course, I am very anxious that this go over better than ever before. Now, as I said, I don't mean by that twice as good or three times as good, but better than ever before HMJr: Well O: 80 that we can say, "Now you see" - to these other fellows - "Now, you Bee what the country thinks of this fellow." And I suppose you have the same interest, I know that. HMJr: Well, within the realms of the fact that we're at war 0: That's right. HMJr: and we'll do everything that we can to be helpful. O: Okay, boy. HMJr: Thank you. 0: Thanks a lot. 62 December 30, 1941 5:13 p.m. HMJr: Hello. Mr. E. T. Taylor: Hello, Mr. Morgenthau. HMJr: Hello, Mr. Taylor. T: Lord Beaverbrook said that you might like to see me some time. HMJr: That's right. T: Well, you name the time: and I'll suit your con- venience. HMJr: Well, Mr. Taylor, we've got one more day of the year. T: That's right. (Laughs) HMJr: And it's kind of a tough day tomorrow. T: Yes, I know. HMJr: I will get in touch with you - it sounds silly - next year. T: Well, that's fine; and I'll just hold myself in readiness. HMJr: Will you do that? T: Yes. HMJr: And I wish you a very happy and victorious New Year. T: The same to you. HMJr: And I'm looking forward to seeing you. T: Thank you 80 much. Good-bye. Regraded Unclassified 63 December 30, 1941 Mr. Keller of Chrysler came in to see me this after- noon, and told me that he had gotten an order for 73,000 trucks and that he is all set. He said that he wanted to tell me that he had accomplished what he had been trying to do since September 17th. Keller said, "I hope you won't mind this but 8. number of people are saying, 'I see you have the Secretary of the Treasury working for you'." I told him that I didn't mind if he didn't. He said, "We never could have gotten it without you." He said that he would announce it in Detroit today. Then he gave me an estimate of how many Bofors guns he could make. He said that he could make 750 by August, and he said if they would actually give him the order he could double that. I then called Philip Murray and told him about the 73,000 truck order and he was delighted. I tried to get Miss Tully but she wasn't in so I dictated it to her assistant and asked her to please give it to Miss Tully to give it to the President. ###### Regraded Unclassified Mr. Keller gave these to HM Jr when he 64 Dme in on December 30th. codge Twek Plant 10.838 1/2 Ton 65 4XX amilitary 7.16 got in Hodge until april 15th Truck assembly 63,000 trucks . given mmay tool of on new 3/4 Tm Eme in fn Partmetim on april 15th reach 700 a day by Ind tapin s to get this ader since Deft 17th Regraded Unclassified Keller 66 ) Martin B.26- - Oct. 1940 ] Center section final drawmy Ymes day 0 67 December 30, 1941 5:21 0. m. HMJr: Hello. Philio Murray: Hello, Mr. Secretary, HMr: Mr. Murray. Mt Yes. HKJr: I thought you'd like to Date it on to these two men who came down from Detroit. %: Uh huh. 4Jr: Hello. 25 Yes. 9VJr: Mr. Keller just left here. Yes, HMJr: And he said in two days he succesded in getting what he's been trying to get since September 17th. Well. HXJr: He got an order for 73,000 trucks for Dodge. K: Uh huh. And that'll put the plant back to work now, will 1t? 4MJr: He says it will keep it going for awhile, and by April 15th he'll be on & schedule of 700 a day he thinks Uh huh. 4VJr: or thereabouts. Well. Uh huh. Well, that's mighty fine. Hadri He seid that he's been trying to get it since September 17th, and he seld that by my reising such hell he got it in two days. 21 Well, that's remarkable, Mr. Secretary. Mighty fine for you. Congratulations. Very fine. Regraded Unclassified 68 - 2 - HMJr: He's going to announce it in Detroit tomorrow. 4: Bolendid. ENJr: He'e going to announce it. :- That's very fine. PAJr: But it just shows what can be done if a fellow gets A little tough. +. That's = right. Certainly, it does. EAJr: what? : It certainly does, Mr. Secretary. Wr: I thought you'd like to pess it along. la Very fine. I certainly will. Thanks for calling. Good-night. ...: Good-night. Regraded Unclassified 69 December 30, 1941 5:23 c.m. SXJr: Hello. deretor: Dr. Lubin. Go shead. MJr: Hello. Dr. Issoor Labin: Hello. Mr. Secretary. MaJr: Yes, Lub. 1: Some of Leon's boys were talking to me today about this tire business, and the fact that there'll be something like 30,000 of them being forced out onto the street. Cadr: Yeah. L: Now, in talking to some of your people from Pro- curement, one of the men said that he thought you'd be favorable to some arrangement whereby Procurement would turn over to these dealers the job of providing tires for the verious agencies supplied by Procurement, rather than the present system whereby the factories do it. directly. They asked me whether I could talk to you, and, 1f you weren't too busy, whether you could see one or two of Leon's people about it. -MJr: Oh, God no. Look L: Now, who should they see? Mr: I mean, I just cen't - they CED Bee Clif Mack. What I'll do is, I'll call up Clif Mack, see? # Yesh. 11,Jr: And tell him that you've 60t something and that ha'll hear from you direct? 1: Yeah. How's that? :: I can call him - yeah, I'll do that. Thet'll be all right. Regraded Unclassified 70 - 2 EXCE: You give me Just a minute's headway L: Yesh. HVJr: and if he's there - 1f he's not, I'll leave word to expect a call from you, and I'll tell him to cooperate with you on this clan. How's that? L: Swell. Thet'll be wonderful. "Jr; I Tean - nov, let me see if I understand it. What 18 it you want? 1: You see, the wey - now, all tires secured by Govern- ment agencies now through Procurement are under contract between Procurement and the manufacturer. Inat's right. 1: Now, the 1dea would be that instead of doing it that way, that you use these small deplers iD: on. as your supply outlet, thus keeping them in business - otherwise, they're thrown right out on the street, you see? Jr: Well, that's difficult, Lub, because I've got a hard and fixed rule, no middlemen. Well, that's the trouble, and thet's why I wented to telk to you. Jr; No, I don't - I'll let you talk to Clif lack, but I don't think - Gnc, we've fought this out with the Srittsh from hell to high vater. But - take Clif on first, but I - we've just out cut all middlemen. Well, I mean, from the point of view of cublic interest, this is 60176 to De 8 tough one. Well, this ien't - but I've cot my responsibility to Congress to buy these tires as oneas as dossible. Yeah. Regraded Unclassified 71 - 3 - sur: I really don't - you can talk to 011f, and I'll tell him; but I don't think I CAN 6° Along with you on that. L: Well, what we'll do 1s talk it out; and if Clif sees some VF7 around it, we'll come back to you about it. Jr: But I've get a hard and fixed rule on that. Why hell, we've done this - we're kicking about the English. That's what the English are doing, and distributing the American food through the middle- man and when we raised hell about it are Harry Hookins raised hell, they said, "Why, ye're sub- sidizing the middlemen to the tune of A hundred million dollars now." IT Vall The Herry Hopkins and I have been All through that 15 England on the distribution of food, End Flso on the cuestion of their using the middleman. That we've stopped. ii Year. ENTI But you talk to Cllf. in I'll do that. SWr: I understand 1t, but I'm afraid I'm agin you N They. in All plant. ii A11 right, sir. Regraded Unclassified 72 December 30, 1941 5:28 p.m. Dr. Lubin called up just now. Re said there are EDIDE becole over at Leon Henderson's office who've got the idea that we should distribute the Govern- ment tiree that we buy through the middleman, in order to keep him in business. Clifton Tack: I see. So I said that I had a hard and fast rule that we did business with the factories direct and no middlemen. Thet's SO. Date: And I said that I WAE absolutely coposed to it, out they could talk to you. Very good. So - but I Just wanted to tell you that I have them no encours, ement - in fact, told them that I was absolutely ovnosed to it, and how the hell was I E01ng to justify before Congress that we use the middlemen because Leon Henderson doesn't give them any tires. Well, that's FO. We have contracts, you know, with all of the tire manufacturers. A.Jr: I know. Yow, what they want to do 18 to get in on thet; and I can't increase our cost by 25 or EQ DAY dent profit to the middlemen. Well, that's exactly it. That's exectly the point. No. And I'll be Elnd to see him - will I get in touch with him? Jr: No, they're going to cell you: but I wanted to let you know that I told him I'm speplutely 0000083 to it. Well, very good. Regraded Unclassified 73 - 2 - Endr: So don't let anybody tell you anything else. Fine. 96: Are we going to be sble to get the tires for the Government care? I think so. They had the thought over there that any Government agency that wants tires should get them through these local rationing boords. Yes. And I tolo them, rather we told them, that was Ade: Oh, no. that wes ridiculous, because E on, Leon Henderson's on the soot, and I'm not going to let him use us. Oh, no. Jr: We'll e° ahead with our usual Government purchasing procedure. That's exactly it; and when 49 get these figures together, then we'll offer this as one thing. Here are the all-over requirements. Jr: Yeah. And get clearance on the one lot. INC Yes. okay. Then, of course, we're rsking each of the Government ageucies they've 62% to Justify what they want: we're not going to 61ve them just what they ask for. Yell, I'm not going to Jull Leon's dhestnuts out of the fire. Yes. Yes. Well, that would be not, = know. All right. Very 5020. Regraded Unclassified 74 - 3 - HMJr: Thank you. M: Yes, sir. Regraded Unclassified TREASURY DEPARTMENT 75 PROCUREMENT DIVISION PICE or THE DIRECTOR WASHINGTON December 30, 1941 MEMORANDUM TO THE SECRETARY: The attached draft is the proposed order which we will have mimeographed and ready for distribution to- day. The language of the order will permit determina- tions both as to purchase policy, which is contained in Executive Order 6166, and OPM authority with relation to availability and should provide a workable control. Consolidated purchases will be effected in furni- ture January 1. Information as to total requirements for automotive equipment, also tires and tubes, is now being obtained and we will start surveys on heavy equipment, also selected items of electrical equipment, likewise chemicals, within the new few days. The attached order is satisfactory to Mr. Mac- Keachie. If you approve it will be released today. Clifton E. Mack, Director of Procurement Regraded Unclassified signed by 76 Vyr to mer, mach, 12/30/41- December 29, 1941 D T/E HEADS F ALL DEPARTMENTS AND INDEPENDENT establishments; In order to coordinate the procurement of items of supply of a commercial nature and avoid competition between Government agencies securing their requirements for supplies, material and equipment that ere becoming increasingly !ifficult to obtain, the following policy has been established in conjunction with the Division of Purchases, Office of Production Management pursuant to the provisions of Executive Order No. 6166, dated June 10, 1933, and the Regulations Governing the Operation of the Branch of Supply, Procurement Division, Treasury Depart- cent, approved by the President April 12, 1935. 1. All Government agencies shall furnish forecasts of needs for the balance of the fiscal year for selected major items to be designated. 2. Purchases of such major items of supply will be consolidated Hither in the Procurement Division or in one or more executive depart- cente, due consideration being given to any statutes authorizing E specific agency to procure the particular commodity and the availability 75 Inecial Secility for the purchase of the commodity, such consolidation X 30 effected AS conditions surrounding these items warrant. 3. The procurement of such requirements will be coordinated with 110 Division of Purchases, Office of Production Management, BO that there Regraded Unclassified 7? - 2 - my be adopted the best means to provide Government agencies with to eir essential needs of the designated articles in the light of the availability of such articles. Mass CLIFTON Z. MACK, Director of Procurement. APPROVED: H. Morgenthau, Jr. Secretary of the Treasury. Initialled by WNT HNG LB Regraded Unclassified 78 TREASURY DEPARTMENT THE ADMINISTRATIVE ASSISTANT TO THE SECRETARY WASHINGTON December 30, 1941 Dear Mr. Secretary: My associates and I genuinely appre- ciate the nice expressions in your letter of December 29, 1941. We all join with you in the definite hope that the coming year, which will be a tough one, may nevertheless be a victorious one. Sincerely yours, The Honorable, The Secretary of the Treasury. Regraded Unclassified 79 THE COMMANDANT OF THE UNITED STATES COAST GUARD WASHINGTON 30 December 1941. My dear Mr. Secretary: I appreciate more than you will know your kind and thoughtful note of 29 December 1941, extending New Year's greetings to the Coast Guard. May I again say it is an inspira- tion to work under your leadership, and on behalf of our every officer, man, and civilian employee, I reciprocate your good wishes for better days to come. Faithfully yours, annual Hon. Henry Morgenthau, Jr., The Secretary of the Treasury, Washington, D.C. Regraded Unclassified 80 ASSISTANT SECRETARY OF THE TREASURY WASHINGTON December 30, 1941. Dear Mr. Secretary: For those in my office as well as myself I write to thank you for your kind note of December 29. Our hope for the new year is that we may merit your continued confidence and with it go our most sincere wishes for your personal happiness and for a year of victory. Sincerely yours, The Honorable The Secretary of the Treasury. Regraded Unclassified 81 OF WASHTINGTON. D.C. ENGRAVING No PRINTING OF THE December 30, 1941. Dear Mr. Secretary: On behalf of the entire personnel of this bureau I extend thanks and appreciation for your message of December 29. The employees of the Bureau of Engraving and Printing will solve any issue that lies ahead. A copy of your letter and my reply will be on all bulletin boards this afternoon. Sincerely yours, Amail A. W. Hall Director The Honorable, The Secretary of the Treasury. EFENSE BUY One stars SMINIA Regraded Unclassified 82 December 30, 1941 Dear Mr. Berlin: The more I think about your new song, the more I wonder how you ever managed to do the job 80 well. It wasn't en easy assignment to make people sing about taxes, but you have done it beautifully, and you have also hit the nail on the head as far as Treasury policy is con- cerned. I know that the song will do the country a great deal of good. We are in your debt again, not only for the song itself, but for your unfailing willingness to help. I appreciate your contribution more than I can say. I am looking forward now to hearing the record which you are having made. In the meantime, here are By very best wishes to you for 1942. Sincerely, 7.Herry Ur. Irving Berlin, 799 Seventh Avenue, New York, 5. Y. FK/hkb 12/30/41 AIR MAIL SPECIAL DELIVERY Copies a n.m.c Regraded Unclassified December 26, 1941 83 I PAID MY INCOME TAX TODAY Words and Music By: IRVING BERLIN VERSE I SAID TO LY UNCLE SAM "OLD MAN TAXES HERE I AL" AND ICE -- WAS GLAD TO SEE ME LONER BRACKETS THAT'S YY SPEED MR. SMALL FRY YES INDEED BUT GEE -- I'V FROUD AS CAN BE. CHORUS I PAID MY INCOME TAX TODAY I'M UNLY ONE OF MILLIONS MORE WHOSE INCOME NEVER WAS TAXED BEFORE A TAX I'M VERY GLAD TO PAY I'll SQUARED UP WITH THE U. S. A. YOU SEE THOSE BOMBERS IN THE SKY ROCKEFELLER HELPED TO BUILD THEM, so DID I I PAID MY INCOME TAX TODAY. 2nd CHORUS I FAID MY INCOME TAX TODAY if THOUSAND PLAKES TO BOMB BERLIN THEY'LL ALL BE PAID FOR AND I CHIPPED IN THAT CERT'NLY MAKES ME FEEL OKAY TEL THOUSAND MORE AND THAT AIN'T HAY 15 MUST PAY FOR THIS WAR SOMEHOW MICLE SAL WAS WORRIED BUT HE ISN'T NOW I PAID MY INCOME TAX TODAY. 3ml CHORUS I PAID in INCOME TAX TODAY I NEVER CARED WHAT CONGRESS SPENT are 30) I'LL WATCH OVER EV'RY CENT EXAMINE EV'RY BILL THEY PAY "ESY'LL HAVE TO LET ME HAVE by SAY I RECTE THE TREASURY TO GO LOW CARRYUL 1F. HENRY JUNIOR THAT'S MY DOUGH I PAID BY INCOME TAX TODAY. Regraded Unclassified 84 85 Mr. Kuhn's memo on the Westinghouse ENT Advertisement and Mr. Robertson. ON DATE 10 Secretary Morgenthau December 30, 1941 FROM Ferdinand Kuhn, Jr. This advertisement was written by Mr. Robertson himself, as it is an excerpt from a speech that he made in 1939. I am told that he writes his own speeches, and believes in the value of ringing statements of this kind. Robertson himself came up from humble beginnings in up-State New York. He sold aluminum house-to-house, was then a schoolteacher, and came to the Chairmanship of Westinghouse from the practice of law. He is said to fancy himself as 8. rail-splitter, which he isn't, but I am told that he approaches it. He is 8 big man, about 6' 3", about fifty-eight years old, and has always taken an intense interest in the advertising department of Westinghouse. I can get more information about him, including copies of some of his speeches, when Mr. Mahan gets back to Washington from New York tomorrow. FK- Regraded Unclassified 86 This is an excerpt from 80 address delivered before the Cincinnati Chamber of Commerce on March 3, 1939, and now emphatically repeated. would like to see all of us now I rededicate ourselves to our coun- try's cause and say, with Adams, Franklin, Jefferson, and the others who founded it: "We mutually pledge to each other our Lives, our For- tunes, and our sacred Honor"- - and from this time henceforth we are not business men, consumers, capi- talists, or employees, but Citizens. A.W. ROBERTSON . Cheirman of the Board, Westinghouse Electric & Manufocturing Company Westinghouse Regraded Unclassified 87 December 31, 1941 MEMORANDUM FOR THE secretary's FILES Conference in Kr. White's Office December 30, 1941 12:00 Noon Present: Mr. White Mr. Zoltowski, Polish Embassy Mr. Ullmann Mr. %oltowski called to pay his respects. He said that he is the Polish Commissioner for Lend-Lease, that he has no official business at this time, and that he may call on the Treasury later to ask its help in financing Polish dollar expenditures. Regraded Unclassified 88 decretary Korgenthau DEC 30 1941 eshre. Foley and reble The Joint Committee on Importations of the irrar. Associations of America Leve requested us to license 1/10 importation of certain scientific and research periodicals [rom Jermany and uerman-doninated countries during the year The committee has urped that files of learned and scientific journals in American libraries be kept complete in order to maintain research facilities for defense industries. It is estimated that the absolute minimum cost for necessary periodicals is $250,000. The Cerman publishers lie indicated to the Committee that all subscri tions must ⑇ and for in advance and in free dollars. The Joint Committee on Importations represents to Lerican Titrary Association, the association of College and Reference ibraries, the Association of Law !ibraries, leg issuciation of Research Ibraries, the Dedical fibrary Association, the Music Library Association and the :pecial TOPACT Association (industrial firms, banks, insurance etc.). representative of the Foreign sunds Control recently cot in touch with VP. rehibald Incleish, and T. noteish referred him to Dr. futher evens, executive Sterarian, for discussion of this problem. The views of .1. -VADS DAY be sot forth LS follows: -- such of the litersture which it is proposed Lo i- ort will make important direct or indirect contribution to our war effort. (r. ..Vens cited the following two examples. (2) articles allearing in (erman publications os cir raid precections and civilian defense have been photostated and given to the fffice for (Ivillen Regraded Unclassified 89 2 (2) All articic appearing in & German publication relative to the construction of tanks has been out into the hands of American companies engaged in tank production. -. Ciready many litraries and comittees are compleining that their research men are unable to rocure the ecessar, publications. .r. Ivans mentioned in apticular resident Consent of SERVAPO, who is of the National Research Committee. Γ. stans said the Mibrary of Con ress 10.кой severably upon the proposal of the Joint Committee A Importations and said he would have no hesitation at all in recommencin roval of their request. The e artient of state has also indicated Its Potal for the PO used importations. If yes LLDOO, DU with invittee. to license the specriptions approved by the Joint (Signed) J. W. Pohis (Rigned) B.B. Foley, Jr. D.K. Hmr 12-20-41 Regraded Unclassified so December 30, 1941. The Honorable The Attorney General. My dear Mr. Attorney General: For Secretary Morgenthau I desire to acknowledge receipt of your letter of December 29, with which was enclosed a copy of a confidential directive issued by the President on December 23, 1941, centering in the Federal Bureau of Investigation the responsibility for intelligence work within the Western Hemisphere. Very truly yours, Herbert E. Gaston Assistant Secretary of the Treasury. Copy to Secretary's Files, together with original incoming letter and copy of directive of the President. Sently Special messanger 9:20am 12-31-41 HEG/mah Regraded Unclassified OF MARK & JUSTICE 91 Office of the Attorney General Mashington. I.C. N * December 29, 1941 CONFIDENTIAL The Honorable The Secretary of the Treasury My dear Mr. Secretary: By direction of the President I enclose for your information a copy of a confidential directive issued by him on December 23, 1941, centering in the Federal Bureen of Investigation the responsibility for intelligence work within the Western Hemisphere. Sincerely yours, transion will Attorney General Regraded Unclassified & CONVIDENTIAL DIRECTIVE ISSUED ON DECEMBER 23, 1941, BY THE PRESIDENT TO THE HEADS OF THE GOVERNMENT DEPARTMENTS AND AGENCIES CONCERNED: In accordance with previous instructions the Federal Bureau of Investination has not up a Special Intelligence Service covering the Western Headsphere, with Agents in Mexico, Central America, South America, the Caribbean, and Canada. Closs contact and liaison have been satablished with the Intelligenes officials of these countries. In order to have all responsibility emtered in the Federal Bureau of Investigation in this field, I hereby approve this arrengement and request the heads of all Dovernment Departments and Agencies concerned to clear directly with the Federal Bureau of Investigation in connection with my intelligence work within the sphare indicated. The Director of the Federal Bureau of Investigation is authorised and instructed to convene meetings of the chiefe of the various Intelligence Services operating in the Western Headsphere end to maintain liaison with Intelligence Agencies operating in the Western Headsphere. (Signed) Franklin D. Receivelt Regraded Unclassified THE WHITE HOUSE WASHINGTON December 30, 1941 Respectfully referred to the Secretary of the Treasury. By direction of the President: M. H. MCINTYRE Secretary to the President Regraded Unclassified Marin THE WHITE HOUSE WASHINGTON December 29, 1941 MEMORANDUM FOR MR. EICHER: I have your memorandum of December 17, 1941, giving me the Security and Exchange Commission's current thoughts on the desirability of a Capital Funds Committee. As you know, this matter has come up at various times during the past year or so - the last time being in April 1941, when Henry Morgenthau, Jr., following a talk with Jerome Frank, discussed it with no. In view of this, I am asking him to go into the matter again and give me a recommendation. In the meantime, I suggest you get in touch with him. (Initialed) "F. D. R." Regraded Unclassified 12/17/41 10 : The President FROM : Edward C. Eicher, Chairman Securities and Exchange Commission Here is a subject we believe vital to Defense which I had no opportunity to discuss with you yesterday. I would like, before I leave, to give my colleagues a green light from you. We are armed to the teeth for the job! SECURITIES AND EXCHANGE COMMISSION WASHINGTON OMIRMAN the Y "16th, December DEC RECEIVED Clp, WHITE 24 HOUSE ORANDUM FOR THE PRESIDENT AM "41 Capital Funds Control The too hasty conclusion that we do not need capital funds control at this time because there is no shortage of capital seens dangerously erronsous, It disregards the vast problem of conservation of industrial assets for war and post-war purposes. A simple but striking example of the tendency of corporations to dissipate the increased earnings resulting from defense activities 1a found in the alarming number of increased dividends and extra dividends that have been declared this year-end, Such dividend dis- tributions are inflationary in character and must inevitably dilute the funds available for investment in defense. A portion, of course, 1s absorbed in taxes, and another portion is used to purchase Defense Bonds; but the bulk unquestionably goes into peacetime consumers goode, If these dividends were retained by the corporations, they could either be invested in necessary additional defense plant and production, or they would be easily available for large-scale lavestment in Defense Bonds. With the latter type of investment corporations would have a comfortable cushion of cash reserves has used when they are most needed for the protection of the Ineas and the security holders, Regraded Unclassified Other examples of the need for powers to prevent the diversion of corporate resources from the defense requirements can be given. Because of its vast experience in corporate affairs, this is & job which could be done by the Securities and Exchange Commission such better than by any other agency. It would be simply an extension of our work under many sections of the Holding Company Act. It could and should be done either in cooperation with the Treasury or other appropriate Defense agency, such as the Economic Defense Board, in order that it be integrated with the entire Defense effort. Known Edward C. Eicher Eciton Chairman Regraded Unclassified 98 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Prees Service Tuesday, December 30, 1941. No. 29-33 12/29/41 The Secretary of the Treasury announced last evening that the tenders for $150,000,000, or thereabouts, of 76-day Treasury bills, to be dated December 31, 1941, and to mature March 17, 1942, which were offered on December 26, were opened at the Federal Reserve Banks on December 29. The details of this issue are as follows: Total applied for - $317,107,000 Total accepted - 150,004,000 Range of accepted bids: (Excepting two tenders totaling $80,000) High - 99.961 Equivalent II rate approximately 0.185 percent Low - 99.927 If II 0.346 If Average Price - 99.935 Il " (I 0.310 " (65 percent of the amount bid for at the low price was accepted) -000- Regraded Unclassified UNITED STATES SAVINGS 30NDS Comparative Statement of Sales During Last Twenty-three Business Days of December, November and October 1941 (October 6-31, November 1-29, December 2-29) On Basis of Issue Price (Amounts in thousands of dollars) : : Sales Amount of Increase : Percentage of Increase : : or Decrease (-) : or Decrease (-) Item : : : : December : November : December : November : December : November : October : over : over : over : over : : : : November : October : November : October Series E - Post Offices $ 92,178 $ 37.997 $ 34,894 $ 54,181 $ 3,103 142.6% 8.9% Series E - Banks 210,172 71,478 70,441 138,694 1,037 194.0 1.5 Series X - Total 302,350 109,475 105,335 192,875 4,140 175.2 3.9 Series T - Banks 28,182 18,978 19,133 9,204 - 155 48.5 - 0.8 Series G - Banks 132,562 105,035 99,548 27.527 5,487 26.2 5-5 Total $463,093 $233,487 $224,016 $229,606 $ 9,471 98.3% 4.2% Office of the Secretary of the Treasury, Division of Research and Statistics. December 30, 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 totale. Regraded Unclassified UNITED STATES SATINGS SWIS Daily Belos - December 1041 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 Fee Series G Total Series E 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 N 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 6,1447 726 7.530 14,703 1.77 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 2,775 6,726 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 5,320 11 1,909 4,763 719 3,423 8,905 6,672 719 3,423 10,514 12 2,773 5,012 658 3,768 9,437 7.785 558 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 8,663 17 4,164 9,750 1,130 6,327 17,257 13,914 1,150 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 34,165 2,490 8,067 44,742 23 4,393 10,642 1,972 6,831 19,445 15,035 1,972 6,531 23,838 24 3,613 13,085 1,629 8,900 23,613 16,698 1,629 8,900 27,226 26 9,593 29,934 3.536 10,076 43,547 39,527 3,536 10,076 53,140 27 3.503 6,412 530 3,255 10,197 9,915 530 3,255 13,700 29 8,652 24,247 3,060 10,353 37,661 33,100 3,050 10,353 46,513 Total $ 95,154 $214,076 $ 29,515 $139,782 $383.374 $309,230 $ 29,515 $139,782 $478,527 Office of the Secretary of the Treasury, Division of Research and Statistics. December 30. 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 end will not necessarily ndd to totals. Regraded Unclassified UNITED STATES SAVINGS BUNTS Commarative Statement of Sales During First Twenty-three Business Days of December, November and October, 1941 (October 1-27, November 1-29, December 1-27) On Basis of Issue Price (Amounts in thousands of dollars) : : Amount of Increase : Sales Percentage of Increase : : or Decrease (-) : or Decrease (-) Item : : : : December : November : December : November : December : November : October : over : over : over : over : ++ : : November : October : November : October Series E - Post Offices $ 86,301 $ 37,997 $ 36,429 $ 48,304 $ 1,568 127.1% 4.3% Series E - Banks 189,829 71,478 69,616 118,351 1,862 165.6 2.7 Series E - Total 276,130 109,475 106,046 166,655 3,429 152.2 3.2 Series F - Banks 26,455 18,978 19.650 7.477 - 672 39.4 - 3.4 Series G - Banks 129,429 105,035 104,902 24,394 133 23.2 0.1 Total $432,014 $233,487 $230,598 $198,527 $ 2,889 85.05 1.3% Office of the Secretary of the Treasury, Division of Research and Statistics, December 29, 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 Sums SATINGS DONDS Dally Sales - December 1041 On Basis of Issue Price (In thousands of dollars) Foet Office Bond Sales Bank Bond Sales All Bond Sales Date Series E Series E Series First Series G Total Series E Series Pr 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 5 1,510 2,734 570 5,289 8,893 4,244 870 5,289 10,403 26 2,411 4,036 726 7.530 12,292 6,447 726 7,530 14,703 and 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 1,823 3.877 601 4,996 9,475 5.706 601 4,996 11,304 10 1,651 3,566 491 2,612 6,568 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 18,854 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 11,590 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 23 4.393 10,642 1,972 6,831 19,445 15,035 1,972 6,831 23,838 24 3,613 13,085 1,629 8,900 23,613 16,698 1,629 8,900 27.226 26 9.593 29,934 3.536 10,076 43,547 39,527 3.536 10,076 53,140 27 3,503 6,412 530 3,255 10,197 9,915 530 3,255 13,700 Total $ 86,301 $189,829 $ 26,455 $129,429 $345,713 $276,130 $ 26,455 $129,429 $432,014 Office of the Secretary of the Treasury, Division of Research and Statistics. December 29. 1941. Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Bote: Figures have been rounded to nearest thousand and will not necessarily, add to totals. Regraded Unclassified 103 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE December 30, 1941 TO Secretary Morgenthau FROM Mr. Haas M. Subject: Supply of Series E Savings Bonds in the Field 1, At the close of business last night, December 29, there were soproximately 4-1/2 million Dieces of Series E savings bonás in the field. A very large proportion of these bonds wes in the nands of selling agents but a considerable number were in the mail in transit. Most of the bonds in transit last night will nave been delivered by the close of business today. 2. The stock of 825, $50, and 8100 denominations of govings bonás in the field is equivalent to about one month's supply, it appears from the latest data available, and the stock of $500 and $1,000 denominations 1s eouiv- elent to about a three months' supply. Data on the supply of bonds in the field are shown for the period since December 1 in the attached chart. It should be noted, in connection with using this chart, that a month's supply of bonds in the field 18 not sufficient to prevent local shortages from occurring. It takes a very large number of Donce to keep all agents stocked up and in the same geo- graphic area agents with a ravid turnover of their stock =y run short of bonds at a time when agents with no turn- over may have plenty of stock on hand. 3. After it we.s brought out in a meeting in your office yesterday that there are local shortages of some denominations of savings bonds, we asked each Federal Reserve Bank to wire us daily the number of bonds requisitioned from theu by agents that was in excess of the banks' supply on hand ready for shipment. We ssked the Post Office Department's central office for the same information. The telegrame received this morning indicated that last night local shorteges of bonds amounted to 927,000 nieces. A summary of the information telegraphed ancears In table I attached. Regraded Unclassified 101 Secretary Morgenthau - 2 4. The shortage of bonus reported in the tele- rams will be taken care of by the bonus in transit last night between Washington and the Federal Reserve Sanks blus four days' production of bonds in excess of sales. The Bureau 01 Engraving and Printing is now dellverin 375,000 bonds a day seven days a week. These Wellveries, it appears from latest reports, are about 200,000 pieces & dey in excess of current sales. 5. The Bureau of Engraving and Printing advises us that they expect to continue production at the rate DI 376,000 a day for a week or two after which production will rise to 475,000 pieces a day. These production :loures, it mignt be noted, compare with a. production of 130,000 oleces of savings bonus on December 1. The number of pieces of savings bonns produced since December 1 9000005 by days in Table 2 attached. D. In order to safeguard against local snortages, Ine field stock or savings conds snoula be increased, ES you have indicated previously, to the ecuivolent of three months' sales. Attachmente Regraded Unclassified Zalle Apelits' requests for saving Londs unrilled at the close of Dusiness, December 25, 1941 (In thousanus) : Denomination : : #25 : ..... 450 : .... : $100 -- -- : : 500 : : $1,000 ---- Total Federal Reserve Banks Boston 43 21 21 3 1 89 New York lo 31 25 3 I 75 Philauelphia - - 2 I I 2 Cleveland I 9 11 2 I 22 Richmond 11 5 or 1 I 25 Atlanta 1 - - - 1 - Chicago 92 51 49 7 - 199 St. Louis 4 9 12 - 1 18 Minnespolis - 2 I - I 2 Kansas City 27 17 15 FY 2 64 Dollas 8 4. - - I 12 105 San Francisco 11 8 I I - 19 Post offices 200 200 - - - 400 Total 412 357 136 19 3 927 Office 01 the Secretary 01 the Treasury, Division OI Research ONL Statistics. Regraded Unclassified Number or pieces produced wecember 1, 1941 to inte (In thousands) Denomination Total Day 625 $100 ell 450 $500 $1,000 denominations December 1 75 10 25 10 10 130 2 75 10 25 10 10 130 3 60 10 40 10 10 130 4 50 10 50 10 10 130 5 50 10 50 + I 110 6 - - - - - - 7 - - - - - - 8 50 10 50 - - 110 9 15 10 50 - I 75 10 30 30 50 - - 110 11 40 20 50 5 5 120 12 80 I 50 - 30 160 13 121 - 10 15 15 161 14 44 1 70 50 I 164 15 80 I I 80 - 160 16 28 - 120 1 45 193 17 92 - # I 155 247 18 92 - - I I 92 - 19 120 - - - I 120 20 150 50 I - I 200 21 175 75 10 - - 260 22 160 75 25 I - 260 23 180 85 35 - - 300 24 220 so 25 I - 325 25 225 80 35 I 1 340 26 180 50 40 - I 270 27 240 I 50 10 10 310 28 200 80 SS 55 10 10 355 108 29 205 95 10 10 375 30 31 Office of the Secretary of the Treesury, Division of Research and Statistics. December 29, 1941 Regraded Unclassified Treasury Department 107 TELEGRAPH OFFICE 405 GS 61 NL SC SACRAMENTO CALIF DEC 29 1941 MONORABLE HENRY MORGENTHAU JR 1941 DEC 30 AM 8 39 SECRETARY OF THE TRE/SURY WASHN DC I WOULD GREATLY APPRECIATE INFORMATION FROM YOU AS TO SELECTION OF ALIEN PROPERTY CUSTODIAN FOR CALIFORNIA AND PERSONNEL FOR HANDLING THIS WORK. I HAVE IN MIND AS SUITABLE APPOINTEES MEN OF OUTSTANDING ABILITY AND CHARACTER, WHOM I SHOULD LIKE TO RECOMMEND. I AWAIT YOUR ADVICE REGARDING THE CONTEMPLATED ORGANIZATION OF ALIEN PROPERTY OUSTODIANSHIP BEFORE SUBMITTING SUCH NAMES FOR MOUR CONSIDERATION. REGARDS CULBERT L OLSON GOVERNOR OF CALIFORNIA 754AM DEC30 Regraded Unclassified 108 Freesing Control Honorable Culbert L. Olson Governor of California December 30, 1941 Sacramento, California 12:45 noon RE YOURTEL THE PRESIDENT HAS NOT ISSUED ANY EXECUTIVE ORDER SINCE THE OUTBREAK OF WAR DEALING ITH THE CUSTODIANSHIP OF ALIEN PROPERTY stop WE ARE CONTINUING TO ACT UNDER OUTSTANDING FREEZING CONTROL ORDERS SECRETARY 05 THE TREASURY. 900 th. EHF:BB/ 12/30/41 Regraded Unclassified TREASURY DEPARTMENT 109 INTER OFFICE COMMUNICATION DATE December 30, 1941 TO Mr. Thompson FROM Mr. Haso In further response to your request of December 26, 1939, there 16 submitted herewith for the Division of Research and Statistics a memorandum listing, with brief descriptions, the studies or projects completed or under way, and the names of persons working on each, for the month of September 1941. Regraded Unclassified 120 DIVISION OF RESEARCH AND STATISTICS Report of Studies or Projects Completed or Under Way, and the Names of Persons Working on Each, for the month of September 1941 For convenience of reference, the studies listed are grouped under general subject heads. The names shown for persons working on each project include only those who participated fairly directly, as explained in the introductory note to the corresponding recort submitted on December 28, 1939. No attempt has been made to cover also persons whose responsibility in ench particular case was mainly in planning, supervising, or consulting. Financial Analysis I. Projects or studies completed 1. Two reviews of current developments in the high-grade securities markets were prepared, and memoranda were transmitted to the Secretary on September 5 and 17. - J. Haas, Mr. Murphy, Mr. Foy, Mr. Matlock, Mr. Robbins, Kr. Barnett, Mr. Rosen These reviews contained, in addition to analysis of the current situation, the following special studies: (m) Major swings of Government, municipal, and high-grade corporate bonds since the out- break of the war (Review of September 5, pages 4-5). - Mr. Foy (b) Relative expansion of bank deposits in selected countries, 1939-41 (Review of September 5. pages 5-7). - Mr. Matlock (e) Maturity preferences of various classes of inventors in Government securities (Review of September 17, pages 3-5). - Mr. Robbins Regraded Unclassified 11: 2 2. A maturity calendar for esch issue of direct and guaranteed bonds and notes of the United States was prepared, showing by year, month, and day, with cal- endar year totals, the amounts outstanding, clas- sified by fixed maturity 168ues and by callable 18- sues, according to the maturity, first, and final callable dates. The calendar was prepared as of September 2, and was transmitted to the Secretary on September 30. - Mias Lagos 3- Yield rates on Treasury bonds and notes and on securities guaranteed by the United States, were calculated daily. All yields were computed on the basis of over-the-counter closing quotations. These were summarized each day in & table showing for each issue the closing bid and asked quotations and yielde to call and maturity dates on that day, the changes in pricesand yields from the preceding day, and the price range since the date on which first traded, and also for the year 1941 to date. A chart for each issue was kept up to date showing daily price and yield figures together with comparative monthly data since 1934, since the date of issue, or since the date first traded. Prices and yields of Treasury conds, notes, and bills, pre-war bonds, securities guaranteed by the United States, and securities of Federal agencies not guaranteed, will be presented in a revision of the publication now entitled "Market Prices and Yields of Outstanding Bonds, Notes, and Bills of the United States", described in this report under "Publications". In addition, yields were computed daily on five high-grade corporate se- curities and two British Government issues. - Mr. Moody, Miss McCoy, Mr. Kroll 4. At the request of the Secretary, arrangements have been made to secure periodically from the British Empire purchasing missions certain information re- garding purchases in the United States by the British Empire. Various reports and tables are pre- pared from this information, and all are transmitted according to instructions by the Secretary. - Mr. Haas, Mr. Lindow, Kr. Wagner, Xr. March, Mr. Mayo. Kr. Marcus Regraded Unclassified 1.2 (a) Weekly statements are received covering the itemized purchases by British Empire Govern- ments through the various missions, and the itemized purchases made by these Governments with the knowledge of the missions but not through their facilities, Similar statements are received showing, by itemized contracts, deliveries made with respect to orders placed by the United Kingdom through the missions. The details with respect to orders and de- liveries are classified by some twenty-five com- modity groups designed especially for the pur- pose. These data are reviewed and edited in the Divi- sion each week and B report 18 then prepared summarizing in dollar volume the information on orders and deliveries, by commodity groups. This report consists of eight statements: the first three summarize orders placed by the individual governments of the British Empire for the current week and the totals to date; the next three statements summarize total orders of the British Empire on an historical basie; and the last two statements present data on deliveries with respect to orders placed by the United Kingdom through the British missions. These weekly commodity statements were prepared, and were transmitted on September 6, 12, 19, 26, 27, and 30. (b) The Division also receives each week the data required to prepare statements giving the de- tails concerning the physical volume of airplane and airplane engine orders in the United States by the British Empire. The material for these statements 18 contained in B. group of work sheets prepared by the British Purchasing Commission, but it 1s necessary for the Division to consoli- date and coordinate the information contained in the Commission's statements. The finished tables show, by company and by type of plane or engine, the following information: (1) summary of orders, deliveries, and exports; (2) history of orders; (3) history of deliveries; (4) history of exports; Regraded Unclassified 112 (5) scheduled deliveries of unfilled orders; (6) options: scheduled deliveries; (7) spare parts: orders, deliveries, unfilled orders, and options; and (5) secondhand units: orders, de- liveries, and scheduled deliveries of unfilled orders. These aircraft reports were prepared, and were transmitted on September 6, 12, 19, 26, and 27. (=) A series of six tables has been developed to show each week the disposition of airframes and air- plane engines inspected in the United States by the British purchasing missions, and the status of airframes and airplane engines on hand in the United States. Separate tables for airframes and airplane engines show, by company and by model: (1) the disposition of unite inspected; (2) the status of these units; and (3) the physical loca- tion of the units awaiting export. These tables were prepared, and Were transmitted on September 2, 3, 15, 22, and 30. (d) Reports are prepared each week showing commitments by the British Empire Governments for capital ex- penditures in the United States and for extraor- dinary charges designed to expedite deliveries. The data for these statements are provided by the British Purchasing Commission but the tables actually are prepared in the Division. Tables showing capital commitments were prepared, and were transmitted on September 6, 12, 19, 26, and 27. (e) A group of seven analytical tables on British Empire orders of iron and steel 16 prepared monthly. Four of these cover commercial iron and steel, excluding ferro-alloys and drop forgings, and are classified by product. One table covers ferro-alloys and silicon metals, and also is classified by product. The last two tables cover drop forgings and are classified by manufacturer. Statements showing British Empire orders of iron and steel as of July 31, were pre- pared, and were transmitted on September 8. Regraded Unclassified 114 - 5 - (f) Arrangemente have been made to receive informa- tion on aphysical volume basis for the orders, deliveries, and dates of scheduled deliveries on unfilled orders, with respect to several other important commodities. For each of these com- modities the following tables are being prepared: (1) current delivery status of orders; (2) history of orders; (3) hietory of deliveries; and (4) sched- uled deliveries of unfilled orders. The data In these tables are broken down by particular products, particular models in each case, and particular manufacturers. Statements covering various commodity groups were prepared, and were transmitted as follows: Explosives and propellants, on September 2 Ships, small boats, and marine engines, on September 2. Ordnance, on September 2 and 22 Small arms ammunition, on September 2 and 22 Motor vehicles, on September 6 Nonferrous metale, on September 6 and 30 Shells and bombs, on September 19 Airplane propellers, on September 26 and 27 Chemicals, on September 26 and 27 Sub-machine guns, revolvers, and rifles, on September 26 and 27 In addition tables are being prepared on the following commodity groups: Small arms (fully automatic) Tanks and tank equipment (e) Certain financial information concerning the orders placed in the United States by the British Empire 18 presented in a monthly report. This report consists of three tables, showing by commodity groups a summary of the status of payments on dol- lar orders placed; the history of payments made; and a forecast of future paymente on unpaid commit- ments. The report WAB prepared, and was transmitted on September 19, Regraded Unclassified 115 6 (h) Arrangements have been made with the Citadel Werchandising Company, Ltd., a Canadian Govern- ment corporation, to receive regular reports showing orders placed for machine tools in the United States, and deliveries on these orders. From this information the Division prepares & report consisting of three tables showing the current status of orders; the history of orders; and the history of deliveries. A report as of August 31, 18 being prepared. 5. At the request of the Secretary, arrangements have been made to secure periodically certain information regard- ing purchases in the United States by the Netherlands Purchasing Commission, and by Lindeteves, Inc. - kr. Haas, Mr. Lindow, Mr. Wagner, Mr. March, Mr. Mayo, Mr. Marcus Statements are received covering the itemised purchases by the Netherlands Purchasing Commission in the United States, and the volume of deliveries made thereon. Similar statements are received concerning the activ- itios of Lindeteves, Inc., a large private commercial organization operating in the Dutch East Indies. The details with respect to orders and deliveries for these purchasing agencies are classified by the same twenty- five commodity groups used for reporting orders placed in the United States by the British Empire. These data are reviewed and edited in the Division. Reports are then prepared for each of these agencies summarizing the information on orders and deliveries, classified by commodity groups. These reports con- sist of three statements: the first shows the history of orders placed; the second shows the history of de- liveries made on these orders; and the third shows the current delivery status of orders. These com- modity statements covering orders of the Netherlands Purchasing Commission were prepared, and were trans- mitted on September 6, 12, 27, and 30. Similar state- ments for Lindeteves, Inc., were prepared, and were transmitted on September 6, and 27. Both groups were transmitted according to instructions oy the Secretary. Regraded Unclassified 118 7 D. At the request of Under Secretary Bell, various memoranda and charts were prepared for use in the Friday discussion group meeting fortnightly to con- sider matters of general interest in connection with defense financing. - Mr. Haas, Mr. Daggit The material prepared during the month included the following, presented on September 12; Analyses were made of recent movements of commodity prices illustrated by three wall charte. Comparisons were shown in the first chart of price indexes for all commodities and for foods in the period 1939-41 and the period 1914-16, on the basis that July 1914=100 in the World War period, and August 1939=100 in the current period. The second chart, on the basis that 1926=100, showed the monthly movement of the NICB cost-of-living index compared with the BLS index of 889 commodities from 1935 through September 6, 1941. On the same chart were shown the weekly movement of the BLS index of 889 commodities and the BLS index of 28 basic commodities from August 1939 to mid-September 1941. The third chart showed, on the basis that August 1939=100, the weekly average movement of the index of 11 imported commodities and of the index of 17 domestic commodities from August 1940 to September 1941, and their daily average movement from May 24 through September 6. On the same chart were shown also for each of the 28 com- modities, the percentage price changes from the August 1940 low to August 13 and to September 10, 1941. 7. In response to a request by the Secretary on January 21, that measures be taken to obtain information to assist in carrying through the defense financing program, ar- rangements were made to obtain the necessary detailed statistics on the holdings of each issue of the public debt and of guaranteed securities by the various classes of holders. - Mr. Haas, Mr. Tickton, Mrs. Wolkind, Mr. D. J. Leahy, Mr. Blitman, Mrs. Barnes, Mr. Alter, Mr. Robbins Regraded Unclassified 112 A summary was prepared of the data received 88 of July 31, consisting of brief explanatory text and six tables for publication in the Bulletin of the Treasury Department for September. The information as of August 31 received in response to our letter of August 29, from 7,000 banks and In- surance companies was coded, tabulated, and analyzed. A comprehensive analysis was prepared, consisting of 100 tables, showing this information, classified by type of institution, by issue, by geographic area, by call classes, and by tax-exemption provisions. New letters were sent out to the banks and insurance companies on September 29, requesting comparable data 88 of September 30. Special tabulations were prepared and were transmitted to the Federal Reserve Banks of New York and Philadelphia, covering ownership of securities issued or guaranteed by the United States, as of July 31, 1941. 5. At the request of the Secretary, arrangements have been made to prepare current statistical reports on the sales of United States Defense savings bonds, series E, F, and G, and Defense Postal savings stamps, on the basis of reports by the Treasurer of the United States, the Federal Reserve Banks, and the Post Office Department. The reports prepared during September were transmitted according to instructions by Mr. Graves. - Mr. Haas, Mr. Reagh, Mr. Brown, Mr. Tickton, Mr. Kroll, Mr. D.J. Leahy (a) Daily tables were prepared, showing the dollar volume, on the basis of the issue price, of sales of savings bonds, series E, F, ano G, by Post Offices and by banks, with totals. The first table, prepared on September 2, presented these data for each business day of August, with totala for the month. The next table, prepared on September 3, showed these data for September 2, with totals. Succeeding tables showed the data for each additional business day of September, with cumulative totals. The table prepared on September 30 covered the period from September 2 through September 29. Regraded Unclassified - 9 - (b) Daily tables were prepared, containing a com- parative statement of sales in September, in August, and in July, for each of the three B6+ ries of bonds, by Post Offices and by banks. The dollar volume of sales was shown on the basis of the issue price, together with the absolute and percentage changes in September from August, and in August from July. The table prepared on September 2 showed these data for the full months of August, July, and June. The first table show- ing the comparison for September, August, and July, prepared on September 3, showed the data for the first business day of each month, with totals. Succeeding tables showed the data for each addi- tional business day, with cumulative totals. The table prepared on September 30 covered the first 24 business days of the month, representing the periods of July 1-29, August 1-28, and September 1-29. (c) A table was prepared on September 2, showing sales of savings bonds, series E, F, and G, by Post Offices and by banks, in dollar volume, on the basis or the 1ssue price, in May, in June, in July, and in August, with totals. (d) A table was prepared on September 16, showing sales of savings bonas, series E, F, and G, in dollar volume, on the basis of the issue price, in May, in June, in July, and in August, with totals. (e) A table was prepared on September 16, showing sales of savings bonds, series E, in August, in dollar volume, on the basis of the issue price, by States, and by type of sales agent, with totals. (5) A table was prepared on September 16, showing sales of savings bonds, series E, in dollar volume, on the basis of the 18sue price, by States, in May, in June, in July, and in August, with totals. (g) A report consisting of 150 pages, wae completed on September 30, showing sales of savings bonds, series E, for the month of August, in dollar volume, on the basie of the Issue price, by Federal Reserve districts, by States, by cities, and by counties, all classified by sales agents and de- nominations. Regraded Unclassified - 10 - 119 (h) A table was prepared on September 8, showing the estimated total value and number of units of Defense savings stamps, classified by denomina- tions, sold in the month of May, in June, in July, and in August, with totals. (1) A memorandum W&B prepared on September 26, showing the estimated total number of purchasers of ear- ings bonds, series E, F, and G, the estimated number of purchasers of series E bonds, and the estimated volume of sales of savings bonds, E, F, and G, with total, from May 1 through September 24. (5) At the request of the Secretary on September 12, A chart was prepared showing monthly sales of United States savings bonds, including Defense savings bonds, from March 1935, the date of their inception, through August 1941. Copies of the chart were transmitted to Mr. Schwarz for release. 9. A proposed improvement in the procedure for reporting sales of Defense savings bonds and a method of prepar- ing statistics showing direct sales by geographic areas were discussed with the fiscal officer of each of the Federal Reserve Banks. - Mr. Reagh, Mr. Tickton 10. At the request of Mr. Graves, a proposed reply was prepared, for signature of the Under Secretary, to 8. letter dated September 8 from Mr. L. P. Bethea, Assistant Secretary of the Board of Governors of the Federal Reserve System, transmitting a letter dated September 5, from Mr. Robert G. Rouse, Vice President of the Federal Reserve Bank of New York, requesting cer- tain data in respect to sales of savings bonds. In connection with this reply dated September 23, a memoran- dum was prepared dated September 12, summarizing the status of each statistical item requested by Mr. Rouse. - Mr. Brown 11, Two proposals of the RFC that the Secretary request that corporation to purchase stock in two banks were examined. - Mr. Barnett, Mr. Rosen Regraded Unclassified 130 - 11 - 12. A table was prepared, and was transmitted to the Secretary on September 10, summarizing sales during August of Treasury notes, Tax Series A and Tax Series B, in par amounts, by individuelsand by corporations. - Vr. Tickton 13. A table was prepared, and was transmitted to the Secretary on September 10, showing sales during August of Treasury notes, Tax Series A and Tax Series B, in par amounts, classified by denomination. - T. Tickton 14, At the request of the Secretary on September 29, a memorandum was prepared, and was transmitted to him on September 30 on a "Proposal for Offering 10- and 15-year Treasury Securities on Each Quarterly Date". - Er. Haas, Xr. Murphy 15+ At the request of Mr. Heffelfinger on September 12, a memorandum was prepared on his memorandum dated Sentember 10, 1941, with respect to Indian Trust Funds, ano was transmitted to Mr. Heffelfinger on September 26. Xr. Sandelin 16. At the recuest of Hr. Kades on September 8, a table ano a chart were prepared showing & comparison of the spread in yield between corporate and municipal bonds with the Federal income tax, 1900-1941, Copies were transmitted to Mr. Kaues on September 30, for his use In connection with a speech before the National Tax Association. - Miss Lagos 17. At the request of Assistant Secretary Gaston on August 29, swemorandum was prepared for the Secretary on "Excess Reserves, Credit Controls, and Treasury Financing". The sevorandum was transmitted to the Secretary on September 2. - Nr. Maas, Mr. Murchy, Mr. Foy, Mr. Barnett Io, A streamlined version was prepared of the memorandum listed in the item immediately above, and was entitled "Relative Merit of General And Selective Credit Controls in the Present Situation". - Mr. Murphy, Mr. Foy, RT. Hosen Regraded Unclassified - 12 - 121 19. At the request of the Secretary on September 4, there was prepared and transmitted to him on September 5, a "Dizest of Policy Letters on Federal Reserve Discount hates during the War and Immediate Postwar Period". - Mr. Murphy, Mr. Foy, Mr. Sandelin 20, At the request of the Secretary, meetings were attended which were held by representatives of the Treasury De- partment and the Board of Governors of the Federal Re- serve System for the purpose of discussing general and selective credit controls. Various memoranda, reports, and the minutes were prepared for use in connection with the meetings, which were held in the Office of Under Secretary Bell on September 5, 8, 10, 11, 20, and 22, and on the last date a meeting Was neld also at the Office of the Board of Governors. - Mr. Haas, Mr. Murphy, Mr. Lindow, Kr. Villard (n) Notes were prepared on a meeting held in the Treasury Department on September 19, attended by members of the staff of the Board of Governors of the Federal Reserve System, Office of Production Management, Office of Price Administration, and the Treasury Department, to discuss the question of extending the priorities system as a means of control to augment selective credit controls. (b) A report was prepared on the regulation of capital expenditures and capital issues by the minority member of the Subcommittee on the regulation of capital expenditures and canital issues. (2) Assistance was given in preparing a proposed statement for the press relative to the increase in reserve requirements. (a) Assistance WAB given in preparing the report of the Subcommittee appointed at the meeting on September 19 to consider the question of extend- ing the priorities system BB a means of augmenting selective credit controls. Regraded Unclassified 122 - 13 - 21. At the request of Under Secretary Bell on September 26, 9 meeting at the Office of the Board of Governors of the Federal Reserve System Was attended, and a memorandum was prepared entitled, "Report on Installment Credit, Friday, September 26, 1941", which was transmitted to the Under Secretary on September 30. - Mr. Murphy 22, At the request of the Secretary EL special field trip was made to investigate a complaint registered by Ars. Eva Cohen on the impossibility of adequately financing small business. A report was submitted to the Secretary on September 25, and to the Board of Governora of the Federal Reserve System on September 29. - Kr. Haas, Mr. Foy 23- In connection with the sale of Defense savings bonds, reviews are being made of various announcements and interviews for use in radio programs, and manuscripts being prepared by the Defense Savings Staff. - Mr. Villard 24. At the request of Mr. Kuhn on September 9, a review was made of galley proofs of & booklet on "Total Defense", prepared by the Defense Savings Staff for use in the schools, The proofs were revised and were returned to Mr. Kuhn on September 16. - Mr. Villard, Mr. Matlock, Mrs. Wolkind 5. At the request of Mr. Kuhn on September 15, a memorandum was prepared containing suggestions for Secretary Norgenthau's Speech to the American Bankers Association, and was transmitted to Mr. Kuhn on September 16. - Mr. Murohy 26. At the request of the Secretary on September 30, assist- ande was given Mr. Kuhn on that date in connection with the probosed speech to be given by the Secretary before the Annual Convention of the American Bankers Association in Chicago on October 2, - Mr. Murphy II. Projects or studies under way 1. A study 18 being made of the relative interest costs of short- and long-term borrowing. - Mr. Foy, Xr. Barnett, Mr. Rosen Regraded Unclassified 123 - 14 - 2. A study 1e being made of the available sources of funds for Treasury financing. - Mr. Villard 3. A memorandum is being prepared on a negotiable "tap" security. - Mr. Sandelin, Mr. Murphy -. A study 18 being made of the probable excess reserves in 1941-42. - Mr. Barnett 5. Tables are being prepared which will present various data on new Treasury notes and bonde and on guaranteed new issues. - Mr. Conrad, Mr. Rosen 0. A memorandum 18 being prepared on the advantages and uisadvantages of increasing the short-term debt. - Xr. Foy 7. A revision 18 being made 88 of June 30, 1941, of the estimates of the ultimate increase in interest costs which would result from removal of the tax-exemution privilege from all public securities. - Mr. Conrad 5. & memorandum is being prepared recommending legisla- tion terminating miscellaneous types of tax exemption analagous to the exemption of interest on Federal securities, but unaffected by the Public Debt Act of 1941. - Mr. Foy -, A study 18 being made of war-financing measures in belli gerent countries in the present war. - Mr. Matlock 10. A comparison 18 being made of the British Fiscal Program 1941-42 with the Keynes plan proposed in "How to Pay for the War", by Nr. J. M. Keynes. - nr. Matlock 11, At the request of Under Secretary Bell on October 14, 1940, a memorandum 16 being prepared on a memorandum submitted by Mr. John Evans, President of the First National Bank of Denver, Colorado, in reference to inited States Government bonde now owned by the Federal meserve System and its member banks, and suggestions concerning a. refunding and change in form which would appear to be in interest of the Treasury Department, the Federal Reserve System, the member banks, the Vadoral Deposit Insurance Corporation, and the nublic whose money 1e deposited in member banks. - a. Murphy Regraded Unclassified 121 15 I I 12. In response to a request by Under Secretary Bell on January 27, comments are being prepared on B. memorandum by Mr. George Eddy to Mr. White, in regard to a plan of Xr. N. E. Peterson, entitled, "A Means of Financing the Defense Program". - Mr. Murohy 13. At the request of Under Secretary Bell on February 5, an analysis 18 being made of his plan for investing savings banks' and insurance companies' funds in special 2 percent Treasury certificates. - Mr. Tickton 14. At the request of Under Secretary Bell on February 11, a memorandum 18 being prepared to the Secretary regard- ing a letter from Mrs. Sylvia F. Porter, New York Post, dated January 22, suggesting a plan for the distribu- tion of United States Government securities. - Mr. Haas, Xr. Murphy 15. At the request of Under Secretary Bell on April 21, a memorandum 18 being prepared on Mr. Salant's memo- randum on "Limitation on Purchases of Defense Savings Bonds". - Mr. Murphy 18. At the request of Under Secretary Bell on September 12, a memorandum 18 being prepared on "Considerations In- volved in Reducing the Interest Rate on the 2 Percent Special Obligations". - Mr. Haas, Mr. Lindow, Mr. Foy, Mr. Rosen 17. A table 18 being prepared for Professors Viner and Stewart, showing prices and yields of selected obliga- tions of the United States. - Mr. Foy, Mr. Rosen 18. Sixteen tables are being prepared showing yields on hypothetical securities under various combinations of coupon rates, maturities, and premiums. - Mr. Kroll 19, AT the request of Under Secretary Bell on September 24, cooperation 18 being given the Division of Tax Research and the Office of Prese Relations in the preparation of a proposed statement to be released for the purpose of publicizing tax anticipation notes. - Mr. Brown Regraded Unclassified 125 - 16 - 20. At the request of Mr. South Trimble, Clerk of the House of Representatives, in 8 letter dated September 17, certain statistical information on banks is being prepared. A part of the information was transmitted to Mr. Trimble in a letter signed by Under Secretary Bell on September 29. - Mr. Conrad 21. At the request of the office of the General Counsel on August 14, a reply 18 being prepared to a letter from the Senate Committee on Banking and Currency, requesting the opinion of the Secretary on S. 1797, the Farm Credit Act of 1941. - Mr. Foy 22, At the request of Under Secretary Bell replies are being prepared to certain questions asked by the Wagner Committee preparatory to its investigation of banking and monetary conditions pursuant to Senate Resolution 125. - Mr. Haas, Mr. Murphy, Mr. Foy 23. At the request of Under Secretary Bell on May 24, cooperation is being given Mr. Bartelt and Mr. Blough in preparing replies to the list of questions accompany- ing B letter from Senator Tydings of May 5. The replies are for use by the Senate Committee created to find ways and means of automatically balancing the Federal Budget in times of peace. - Mr. Murphy, Mr. Foy Revenue Estimates I. Projects or studies completed 1, The regular monthly statement was prepared, showing the latest revised estimates of receipts, by months and by principal sources of revenue, for the period September 1941-June 1942. The statement was trans- mitted to the Bureau of Accounts. - Mr. Delcher 2. The regular monthly summary comparison was prepared showing estimated receipts and actual receipts in August 1941 on the daily Treasury statement basis. - Mr. Delcher 3. The regular monthly detailed comparison was prepared showing estimated and actual receipts in August 1941, based on the collections classification. - Mr. Deloher Regraded Unclassified 126 - 17 - 4: At the request of the Bureau of the Budget on September 29, estimates for the fiscal year 1942 were revised, and preliminary and tentative esti- mates of the revenue were prepared for the fiscal year 1943. The estimates were transmitted on September 30. - Mr. Haas, Mr. O'Donnell, Mr. Daggit, Kr. Leahy, Mr. Chevraux, Mr. Bronfenbrenner, Mr. Butters, Mr. Smith, Mr. Colclough, Miss Spiegel, X188 Hagedorn 5. At the request of Mr. McCandless on September 5, estimates were prepared of the population of Alaska and of the insular possessions of the United States 5.8 of June 30, 1941. The estimates were transmitted In a memorandum to Mr. McCandless on September 13. - Mr. Bronfenbrenner o. In connection with the hearings on H. R. 5417, the evenue Bill of 1941, a number of revenue estimates, listed below, were prepared for use of Assistant Secretary Sullivan. - Mr. O'Donnell, Mr. Leahey, Xr. Bronfenbrenner, Mr. Butters, Mr. T. L. Smith (a) Estimates were prepared, at income levels fore- cast for the calendar year 1941, of the calendar year 1941 income tax liabilities under the present law, and of the increased or decreased income tax liabilities by items under B. full year's effect of the income tax provisions of H. R. 5417, as approved by the Senate Finance Committee on September 2. The estimates were shown in 6 table transmitted to Assistant Secretary Sullivan on September 2. (0) Estimates were prepared, and were transmitted in a table to Assistant Secretary Sullivan on September 2, comparing for corporations and the total income tax, the yield under H. R. 5417, and the yields at four surtax rates, and their increase or decrease over the yields under 8. R. 5417. Regraded Unclassified - 18 - 12? (0) Estimates were prepared of the total surtax rate required to yield the same income tax revenue as H. R. 5417, as approved by the Senate Finance Committee on September 2, if the normal tax and surtax were computed first and used 88 a deduction in the computation of the excess-profits tax, all other provisions of H. H. 5417 remaining unchanged. The estimates were transmitted in B memorandum, with table to Assistant Secretary Sullivan on September 2, (d) An estimate was prepared, and was transmitted to Mr. Stam on September 10, a6 requested by Assistant Secretary Sullivan, of the effects on individual income tax liabilities of reducing personal exemptions to $1,500 for married persons and heads of families, and to 8750 for single persons, not heads of families. Increases in tax liabilities were shown for individuals taxable under H. R. 5417, as passed by the House of Representatives, and for individuals made tax- able by the Senate amendments, together with incomes in the numbers of newly-filed and newly- taxable returns. (e) A comparison of the estimated full-year revenue effect of H. R. 5417 as passed by the House of Representatives on August 4, and by the Senate on September 5, was prepared, and Was shown in & taole containing a detailed classification under income, capital stock, estate, and gift taxes, excise taxes, and miscellaneous taxes, with totals, Estimates for corporation and individual income taxes and the gift tax were based on income levels forecast for the calendar year 1941; all other estimates were based on income levels forecast for the fiscal year 1942. The figures in the table were transmitted orally to the Senate Finance Committee on September 11, in accordance with instructions by Assistant Secretary Sullivan. (f) A comparison of the estimated full-year revenue effect of H. R. 5417 as agreed upon in Conference September 11, was prepared, and W&B shown in a mimeographed table containing a detailed classi- fication under income, capital stock, estate, and Regraded Unclassified 128 - 19 - gift taxes, excise taxes, and miscellaneous taxes, with totals. Estimates for corporation and in- dividual income taxes and the gift tax were based on income levels forecast for the calendar year 1941; all other estimates were based on income levels forecast for the fiscal year 1942. Copies of this table were transmitted on September 12, by instruction of Assistant Secretary Sullivan, to Senator George, Representative Doughton, Representative Cooper, and Mr. Stam, (g) An estimate was prepared, of the increase in revenue in the fiscal year 1942 from the Revenue Bill of 1941, and by instruction from Assistant Secretary Bullivan, was transmitted orally on September 5, to Mr. Rapp, Minority Clerk of the Committee on Ways and Means. 7. A review has been completed of the tax revisions made by the Revenue Act of 1941, in order to prepare studies for the next revenue estimate. Changes in rates have been analyzed, testimony given before the House and Senate Committees has been studied, and the remits were incorporated in the September revenue estimate. - Mr. Colclough, Miss Spiegel, Miss Hagedorn 8, Studies were completed of the following projects for revising and improving methods of estimating revenues from the taxes listed below: - Mr. Daggit, Miss Spiegel (a) Automobile parts and accessories (b) Radio sete (c) Large cigars (a) Lubricating oil (e) Firearms and shells (f) Wines, domestic and imported (g) Fermented malt liquore (h) Electrical energy (1) Small cigarettes (I) Tires and inner tubes Regraded Unclassified - 20 - 129 (k) Telephone and telegraph, etc. (1) Admissions im) Distilled spirits, domestic and imported 4. New studies were completed for estimating revenues from the following newly-imposed taxes listed below: - Mr. Daggit, Mr. Chevraux, Mr. Colclough, Miss Spiegel, 186 Hagedorn (a) Phonographs, instruments phonograph records, and musical (b) Rubber articles (0) Transportation of persons (0) Matches (e) Electric, gas and oil appliances (f) Electric light bulbs (g) Electric signe (h) Refrigerators, refrigerating apparatus and air- conditioners (1) Washing machines (J) Business and store machines (k) Photographic apparatus (1) Optical equipment (m) Luggage (n) Sporting goods (a) Telephone bills (n) Use of motor vehicles and boats (b) Coin-operated amusement and gaming devices Regraded Unclassified 130 - 21 - (r) Bowling alleys. and billiard and pool tables (s) Articles made of fur (I) Jewelry (u) Toilet preparations II. Projects or studies under way 1. AT the request of the Division of Tax Research on July 12, 1940, an estimate 18 being made of the addi- tional revenue which would be derived if mutual insur- ance companies other than life insurance companies taxable under Section 207 of the Internal Revenue Code were made taxable in the same manner B.S stock insurance companies other than life insurance companies taxable under Section 204, and at the same time the exemption under Section 101 (11) were restricted to local mutual companies of the assessment type. - Mr. Leahey E. Purther progress was made on the following projects for revising and improving methods of estimating revenues from the taxes listed below: - Mr. Daggit, Misa Sniegel (m) Passenger automobiles and motorcycles (b) Automobile trucks Economic Conditions Related to Fiscal and Revenue Matters 1. Projects or studies completed 1. semoranda on the business and price situation Were prepared, and were transmitted to the Secretary on September 2, 9. 16, 22, and 29. - Mr. Haas, Mr. Daggit, AP. Chevraux 2. Monthly or weekly reports are received from 25 indi- vidual companies, in response to the Secretary's re- cuests, giving confidential data on new orders and sales. The date in these reports are tabulated and charted our- rently for the Secretary's information, and are also vombined into an index of new orders, which accompanies the weekly memorandum on the business situation. - disc Washabaugh Regraded Unclassified 131 - 22 - 3- Wemoranda on employment under the Work Projects Ad- ministration were prepared on September 8, 16, 22, and 29. - Mise Hagedorn 4. At the request of the Secretary, 8. table 16 prepared each week summarizing exporte of petroleum products, scrao iron, and scrap steel, from the United States to Janan, the U.S.S.R., Spain, and Great Britain, es indicated by departure permits reported daily by the Office of Merchant Ship Control. The tables were prepared for the weeks ending September 6, 13, 20, and 27. On September 8, 15, 22, and 29, the original and 13 photostats were transmitted to Assistant Secretary Gaston. - Mr. Tickton, Mr. D. J. Leahy 5. At the request of the Secretary four special tables were prepared, and were transmitted to him on September 17, showing exports of petroleum products to Japan, the U.S.S.R., Spain, and Great Britain by four-week periods from January 4, to September 13, 1941, and for similar periode in 1940 80 far as available. - Mr. Lindow 6. Compilations were made of daily cuotations on selected commodities, and daily and weekly figures on selected business indexes, foreign and domestic security trans- actions, security prices, exchange rates, as well as other data for the Secretary's chart book. - Mr. Chevraux 7. At the request of the Secretary on September 17, a con- pilation was made of daily, weekly, and monthly figures on cotton, wheat, flour, and bread prices, which will be kent un to date for his use in connection with the Mr. Colclough charts. listed in item 8 of this section. - Mr. Daggit, 5. At the request of the Secretary, the following charts were furnished him on September 17, showing cotton, wheat, flour, and bread prices, which will be keot up to date daily: - Mr. Daggit, Miss Hagedorn, Mr. Colclough (a) BLS prices of wheat flour and Wheat feeds (bran and middlings) at Minneapolis, weekly, September 1940 to date. 163 Cotton prices: Market price (average, 10 spet markets) and our estimated farm price, weekly Regraded Unclassified 132 - 23 - from August 1940 to date and daily from August 1941 to date, compared with the Department of Agriculture monthly farm price and parity price. (0) Wheat prices: Market price (average of Number 2 red winter at Chicago, Number 1 dark northern at Minneapolis, and Number 2 hard winter at Kansas City), weekly from August 1940 and daily from August 1941 to date, compared with the De- partment of Agriculture monthly farm price and parity price. (d) BLS retail prices of bread and wheat flour in 51 cities, monthly from August 1940 to date. 9. At the request of the Secretary, a memorandum with three tables and & chart, was prepared, and Was trans- mitted to him on September 26, showing employment in the aviation manufacturing industry as of July 31. - Mr. Lindow, Mr. Wagner 10. At the request of the Secretary, & memorandum, with table, was prepared, and was transmitted to him on September 25, comparing total non-agricultural and total direct defense employment. - Mr. Lindow 11. At the request of Mr. Leon Henderson on July 19, copies of ten charts on commodity prices and the cost of living were transmitted to him. The monthly movements of the NICB cost-of-living index compared with the BLS index of 889 commodities were shown from 1935 to date. On the same chart were shown the weekly movements of the BLS index of 889 commodities compared with the BLS index of 28 basic commodities from August 1939 to date. Both comparisons were on the basis that 1926=100. Five charts, as of August 23 and 30, and as of September 6, 13, and 20 were transmitted on September 3, 8, 16, 23, and 30, respectively. Five other charts showed weekly and daily movements of the indexes of 11 basic imported commodities and 17 basic domestic commodities from April 1940 to date, on the basis that August 1939=100. On the same charts were shown percentages for each of the 28 commodities from the August 1940 low. Successive charte showed the changes to August 22 and 29, to August 29 and September 5, to September 5 and 12, to September 12 and 19, and to Sectember 19 and 26. These charts were transmitted also on September 3, 8, 16, 23, and 30, respectively. Regraded Unclassified 133 - 24 - 12. At the request of the Secretary on September 2, in- formation was prepared with regard to the wheat sur- plus in Canada, import duties and quotas on Canadian wheat, and feed shipments into New England, and was transmitted to him on September 3. - Mr. Daggit, Mas Hagedorn 13. At the request of the Secretary on September 12, a memorandum was prepared on the use of farm surpluses for inflation control within the framework of the Administration's agricultural policy. The memorandum WAS prepared in cooperation with Mr. Cairns, and was transmitted to the Secretary on September 12. - Kr. Haas, Mr. Daggit 14. At the request of the Secretary on September 16, a memorandum was prepared on the amount of cotton owned by the Government, and WBS transmitted to him on September 16. - Mr. Daggit 15. AS the request of the Secretary on September 27, a digest of the Brookings Institution report on Effects of the Defense Program on Prices, Wages and Profite", was prepared, and a memorandum was transmitted to him on September 30. - Mr. Daggit lo. At the request of the Secretary, data were furnished on September 4 and September 5 in connection with the secretary's speech of September 9, at Boston, - Mr. Daggit 17. At the request of the Secretary on August 6, assistance was given in preparing the statement nace by the Secretary before the House Committee on Banking and Currency on the Price Control Bill, H. R. 5479, on September 24. - Mr. Haas, Mr. Murphy, Mr. Daggit, Rise Michener, Kiss Hagedorn 18, Basic data have been assembled, for use in revenue estimating, on the retail and wholesale selling prices of commodities on which taxes are imposed, in order to determine the percentage which the tax represents of the actual price. - Miss Spiegel, Mr. Colclough, Mise Hagedorn Regraded Unclassified 134 - 25 - 19. For use in revenue estimating, & study was completed to be used as a basie for forecasting salaries and wages of the Department of Commerce series on B. quarterly basis, the July 1941 revision, from the Department of Labor index of factory payrolls, the Rr. Colclough January 1941 revision. - Mr. Daggit, Miss Spiegel, 20. For use in revenue estimating, a. revision has been completed of our method of forecasting the BLS index of factory payrolls on the basis of the revision of January 1941. - Mr. Daggit, Mise Spiegel 21, A forecast was made of the following basic business series for calendar years 1941 and 1942 and fiscal years 1942 and 1943, for use in estimating Federal revenues: FRB index of industrial production (September 1941 revision); BLS index of wholesale prices; BLS index of factory payrolls (January 1941 revision); our index of the value of industrial pro- duction; Standard Statistics index of 420 stock prices; Department of Commerce series on salaries and wages (July 1941 revision); FRB series on bank debits outside New York City; and New York Times series on volume of stock transfers. - Mr. Daggit, Miss Spiegel, Rr. Colclough, Miss Hagedorn 22, At the request of the Secretary on September 3, a memo- randum, with chart, was transmitted to him on September 4, comparing newspaper advertising in World war I and in the present war. The chart showed the Printers Ink index of newspaper lineage, on the basie that the monthly average, 1935-39=100, compared with industrial production indexes, from 1914 to date. - Daggit, Mr. Colclough, Miss Hagedorn 23. On September 26, a memorandum was forwarded to the Secretary asking if he would like to see the weekly report by Dr. Lubin on the "Economic Picture". - (r. Hase 24. A memorandum was prepared, and was transmitted to the Secretary on September 29, attaching a report received from Dr. Lubin on the "Economic Picture", - Mr. Hass Regraded Unclassified 135 - 26 - 25. A study of the wlume of installment buying and don- sumer credit has been discontinued, because the new Index published by the Department of Commerce ade- quately serves the purpose of the study. - Mr. Daggit II. Projects or studies under way 1. With respect to the "Index of consumer expenditures, in dollar value", progress has been made in developing individual series, in determining their suitability for inclusion and the necessary adjustments. These series have been classified in two broad groups: durable goods and non-durable goods. The purpose of the index 18 to cover as large as possible a proportion or the purchases of ultimate consumers. This project 18 temporarily in abeyance. - Mr. Colclough E. A project in process 1e designed to develop an index or industrial production that will indicate week by week the approximate level of the FRB index. It will include & larger number of weekly series than are in- cluded in any current business indices, with weightinge and seasonal adjustments approximating those in the FRB index. This project 1s temporarily in abeyance.- Mr. Dag it, Mr. Smith 3. An analysis is being made of the State distribution of United States Defense savings bonds series E, during July, in relation to payrolls, and to national income, by States. - Mr. Haas, Mr. Daggit, Mr. Colclough 4- A letter was received on September 28 from Mr. Leon E. Truesdell, Bureau of the Census, requesting comments on proposed table forms showing data obtainable from proposed labor force tabulations on wages, salaries, hours, and related subjects. A review is being made of the forms. - Mr. Murphy, Mr. O'Donnell, Mr. Daggit, Mr. Villard 5. At the request of Under Secretary Bell on September 25, a review 18 being made of the testimony by the Secretary on the Price Control B111, H. R. 5479, before the House Banking and Currency Committee on September 24. - r. Murphy, Mr. Foy Regraded Unclassified - 27 - 136 Actuarial Problems I. Projects or studies completed :- In response to a letter of August 14, from the office of the General Counsel, transmitting a copy of S. 1800, a bill to amend further the Civil Service Retirement Act, as amended, for a voluntary report 1f desired, a memorandum was forwarded to Mr. Bernard on September 9, stating that the Division did not wish to make such a report. - Mr. Reagh 2. 6 review of a report by the Bureau of Accounts at the request of the Chairman of the Senate Finance Committee, on 3. 1775, a bill to extend the benefits of Federal old-age and survivors insurance to certain State employees, WAS made in response to a request by Mr. Heffelfinger, September 17, and was transmitted to the Under Secretary on September 25. - Mr. Reagh II. Projects or studies under way 1. The Board of Actuaries of the Civil Service Retirement and Disability Fund 18 laying out detailed plans for tabulating and processing data for use in preparing the regular five-year valuation of the Civil Service Retirement Fund for the purpose of determining the liabilities of the Government under the Civil Service Retirement law. Under the law, such a valuation must be unepared as of July 1, 1940. Valuation plans are in orocess of preparation. - Mr. Reagh, Mr. Brown 2, The Foreign Service Retirement Law, as approved April 24, 1939, Bection 26(m), provides that the "Treasury Depart- sent shall prepare the estimates of the annual appropria- tions required to be made to the Foreign Service Retire- nent and Disability Fund and shall make actuarial valua- tion at intervals of five years, or oftener if deemed necessary by the Secretary of the Treasury". The State Department has requested an estimate of the acorooriation required for the fiscal year 1943. An outline of the data required for making an actuarial valuation has been sub- sitted to the State Department. The data are now in process of preparation. - Mr. Reach, Mr. Brown, Mr. Kroll Regraded Unclassified 137 - 28 - 3. At the request of Mr. A. R. Pilkerton, Auditor of the District of Columbia, actuarial valuations are being made of the Policemen's and Firemen's Pension Fund, and Teachers' Retirement Fund of the District of Columbia. These valuations will be made by the Treasury Department in accordance with the 1942 District of Columbia Appropriations Act, approved July 1, 1941. An outline of the information required for the valua- tions was submitted to Mr. Pilkerton in 8. letter dated September 13. - Mr. Reagh, Mr. Brown 4. At the request of Under Secretary Bell on July 10, a memorandum is being prepared in regard to the 1941 legislative program of the Social Security Board. - Mr. Reagh 5. A memorandum was received under date of September 29, from the office of the General Counsel, transmitting 8. copy of H. R. 5568, & bill for the relief of certain widows of Foreign Service officers, for a voluntary report if desired. - Mr. Reagh D. A communioation was received under date of September 30, from the office of the General Counsel, transmitting a copy of 8. 1932, a bill to amend the Social Security Act to provide for general pensions, and suggesting that the Division might wish to cooperate with the Bureau of Accounts in any action concerning the bill. - Mr. Reagh Other Projects or Studies 1. At the request of the Legal Division on July 1, in re- sponse to a request from Senator Elbert D. Thomas, in a letter of June 27, a report 18 being prepared on S. 1666, a bill to coordinate Federal reporting services, to eliminate duplication and reduce the cost of such services, and to minimize the burdens of furnishing re- ports and information to governmental agencies. Memoranda requesting comments on the bill were prepared for signature of the Administrative Assistant to the Secretary, and were forwarded to the various bureaus and divisions of the Department on July 16. Replies have been received and a report 18 in preparation. - Miss Michener Regraded Unclassified 29 I I 138 3. Publications (a) For the September issue of the Treasury Bulletin data were prepared on average yields of long- term Treasury bonde and high-grade corporate bonds. - Mr. Rosen All the material submitted for the September issue was reviewed and edited. Revisions are being considered for future issues. I Mr. Lindow, Mr. Lynch (b) For the publication Market Prices and Yields of Outstanding Bonds, Notes, and Bills of the United States, computations were made and copy W&B pre- pared for the issue covering the month of August. This publication shows by securities the coupon rates, maturities, interest payment dates, and amounts outstanding; and for each day of the month, together with a monthly average, closing market quotations (accrued interest to be added), and yields. A revision 18 being made in this statement. Be- ginning with the issue for September all prices will be on the over-the-counter basis and in addi- tion to the categories hitherto included, there will be added securities guaranteed by the United States and securities of Federal agencies not guaranteed. - Mr. Reagh, Mr. Brown, Mr. Lindow, Mr. Moody, Miss McCoy (o) Manuscript for the Annual Report of the Secretary of the Treasury for the fiscal year 1941 16 being given an editorial review 8.8 received. The usual handling of the material is going forward. - Miss Westerman, Mr. Ticston (d) At the request of Assistant Secretary Gaston on July 17, an article is being prepared on the opera- tions of the Treasury Department during the year 1941 to be incorporated in the 1942 Americana Annual, - Mr. Barnett Regraded Unclassified 139 30 , I (e) At the request of Mr. Collie on September 17, data are being prepared on holdings of United States Government securities for Moody's Manual of Investments (Government securities). - Mr. Conrad 4. Correspondence Replies were prepared to letters received on subjects relating to the work of the Division, and letters drafted elsewhere and submitted to the Division for Miss Ziegler, and other members of the staff in that purpose were reviewed. - Mias Michener, Mr. Lindow, appropriate fields of work. During September 291 letters were received in the Div1- sion and 272 were handled 8.8 required. 5. Charts Charts are prepared and continually brought up to date for use in memoranda and in chart books on special sub- jects, and corresponding photographic, photostatic, and multilith work 18 carried on. This 18 done in the Graphic Section under the supervision of Mr. Banyas. A. statistical report on the work of the Graphic Section for the month of September 1s attached. Regraded Unclassified 140 Work completed in the Graphic Section, Division of Research and Statistics, during September 1941 Type of work For Division For of R & S Others Total shio: New charter Total charte completed 26 8 34 Bond book charts completed 1 - 1 Charte brought up to date: 3 bond chart books brought up Lo date 27 (times) - 27 (times) All other charts brought up to date 726 31 757 iscellaneous: Total jobs 16 10 26 torraphics Photographs: Total jobs 60 27 87 Number of- Negatives 138 27 165 Contact prints 167 805 972 Enlargements 50 32 62 Photostats: Total jobs 146 19 164 Number of- Letternize copies 876 1,195 2,071 All other copies 5,633 353 5,986 dtilith: Total jobs 16 4 20 umber of- Zinc plates 122 13 136 iscellaneous: Total jobs 17 12 29 10-7-41 LB:wt:jtp Regraded Unclassified Statistical Report on rt Completed by the Graphic Section, Division of Research and Statistics, by months, beginning July 1941. Type of work : July : Aug. 1 Sept. : Oct. I Nov. : Dec. : Total : : 1 1 1 1 I A. Graphic: New charts completed 34 43 34 Charte brought up to date 721 727 757 Bond book charts completed 2 58 1 Bond books brought up to date 26(times) 26 (t) 27(times) Miscellaneous 27 31 26 B. Photographic: Photographs: Total Jobs 91 59 87 Number of- Negatives 193 173 165 Contact prints 254 654 972 Enlargements 141 335 82 Photostats: Total jobs 169 202 164 Number of- Lettersize copies 2,802 1,287 2,071 All other copies 7,519 5,276 5,986 Multilith: Total Jobs 22 22 20 Number of- Line plates 153 166 135 141 Miscellaneous: Total Jobs 34 37 29 LB:wlt B-1-41 9-18-41 Regraded Unclassified TREASURY DEPARTMENT 142 INTER OFFICE COMMUNICATION paraDeoember 30,1941 TO Secretary Morgenthau FROM Mr. White Subject: Exports to Russia, China, Burma, Hong Kong, Japan, France and other blocked countries, as reported to December 20, 1941. the Treasury Department during the week ending 1. Exports to Russia Exports to Russia as reported to the Treasury during the *eek ending December 20, 1941 amounted to about $4,500,000. The principal items were motor trucks and chassie and military tanks and parts. (See Appendix C). 2. Exports to China, Burma and Hong Kong. Exports to Free China were valued at approximately $111,000 ( & compared with over $2,000,000 during the previous week. The principal item was machineand heavy ordnance gune, carriages end parte. (See Appendix D.) Exports to Occupied China amounted to $12,000. (See Appendix E.) Exports to Burma totalled only $8,000. (See Appendix F.) No exports to Hong Kong were reported during the week under review. 5. Exports to Japan. No exports to Japan were reported during the week under review. Exports to France No exports to France were reported during the week ending December 20, 1941. 5% Exports to other blocked countries Exports to other blocked countries are given in Appendix A. Regraded Unclassified 143 SUMMARY OF UNITED STATES DOMESTIC EXPORTS TO SELECTED COUNTRIES AS REPORTED TO THE TREASURY DEPARTMENT FROM EXPORT DECLARATIONS RECEIVED DURING THE PERIOD INDICATED July 28 to December 20, 1941 (In thousands of dollars) July 28 to Week ended Week ended Total Dec, 6 December 13 December 20 Domestic Exports R. $58,106 $12,040 $ 4,580 $74,726 Occupted China 10,584 678 12 11,274 free China 25,885 2,337 111 28,333 JROBI 1,870 - - 1,870 Surma 6,780 18 B 6,806 France 6 - I 6 compied France 2 - 2 Free France 04 - - -4 Spain 2,216 1 112 2,329 Switzerland 4,856 161 42 5,059 Sweden 10,380 17 703 11,100 French Indochina 377 17 10 404 "reasury Department, Division of Monetary Research December 23, 1941. Many of the export declarations are received with a lag of several days or more. Therefore this compilation does not accurately represent the actual shipment of a particular week. The longer the period covered, the closer will these figures come to Department of Commerce revised figures. 1/ or this total $1,864 thousand was reported from July 28 to August 23, inclusive, and shipped prior to freezing orders. Somestic exports from August 23 through week ending Dec. 6, amounted to $6,106. 1/ From September 11, 1941 to date - It is presumed that a large percentage of mate- rial listed here, consigned to Burma, is destined for Free China. Includes both occupied and Free France through week ending October 4, 1941. Occu- pied and Free France separated thereafter. less than $500. Regraded Unclassified APPENDIX B 144 Exports from the U.S. to China, Burma, Hong Kong, Japan and U.S.S.R. as reported to the Treasury Department, July 28, 1941 - December 20, 1941 (Thousands of Dollars) Exports to China Total To Japanese To Chinese Exports Exports Exports controlled Exports controlled to to to to ports ports Burma 3/ Hong Kong Japan U.S.S.R. July 28 - Aug. 2 937 542 395 Aug. 4 - Aug. 9 654 2,794 1,657 2,794 4,523 - Aug. 11 - Aug. 16 983 159 1,278 551 969 309 Aug. 18 - Aug. 23 235 42 1,352 986 1,350 2 234 Aug. 25 - Aug. 30 6 736 735 2,735 1 742 Sept. 2 - Sept. 6 - 897 693 204 1,023 Sept. 6 - Sept.13 634 - 3,038 2 757 4,280 2,281 456 - Sept.15 - Sept.20 3,978 2 156 2 5,217 3,822 Sept.22 - Sept.27 389 - 462 752 352 110 449 810 - Sept.29 - Oct. 4 1,305 80 2,333 1,225 684 Oct. 6 - Oct. 11 297 - 5,864 552 323 5,312 1,157 1,233 - Oct. 13 - Oct. 18 272 267 6,845 5 35 584 - Oct. 20 - Oct. 25 668 399 269 1,924 403 Oct. 27 - Nov. 1 1,243 - 5,210 438 4,772 5,623 58 624 - Nov. 3 - Nov. 8 1,836 164 4,484 1,672 342 Nov.10 - Nov. 15 283 3,009 158 5 4,552 2,851 88 303 - Nov.17 - Nov. 22 1,701 473 2,677 1,228 1,021 600 - Nov.24 - Nov. 29 3,359 120 3,581 3,239 1,364 Dec. 1 - Dec. 6 1,325 - 852 61 2,436 791 64 - - Dec. OM - Dec. 13 3,025 688 3,609 2,337 18 I Dec.15 - Dec. 20 - 123 12 12,040 111 OK. - I 4,580 Total 42,696 11,760 30,936 5,691 11,629 1,869 75,074 1/ These figures are in part taken from copies of shipping manifests. 2/ Figures for exports to Free China during these weeks include exports to Rangoon which are presumed to be destined for Free China. 3/ It 18 presumed that 8. large percentage of exports to Burme are destined for Free China. Treasury Department, Division of Monetary Research December 29. 1941 Regraded Unclassified 145 APPENDIX C Principal Exports from U.S. to U.S.S.R. as reported to the Treasury Department during the week ending December 20, 1941 (Thousands of Dollars) TOTAL EXPORTS $ 4,580 Principal Items: Motor trucks and chaesis 1,849 Military tanks and parte 920 Refined copper 244 Aluminum plates, sheets, bars, strips and rods 130 Stamping or shearing machine 109 Sole leather 92 Coated wire, n.e.s. 89 Metallic containers (drume) 86 Telephone instruments 79 Machine and heavy ordnance guns and carriages 75 Barbed wire 73 Treasury Department, Division of Monetary Research December 29,1941 Regraded Unclassified 146 APPENDIX D Principal Exports from U.S. to Free China as reported to the Treasury Department during the week ending December 20, 1941 (Thousands of Dollars) TOTAL EXPORTS TO FREE CHINA $ 111 Principal Items: Machine and heavy ordnance guns, carriages and parts 107 Insulated copper wire 3 Treasury Department, Division of Monetary Research December 30,1941 147 APPENDIX E Principal Exports from U. S. to Occupied China as reported to the Treasury Department during the week ending December 20, 1941 (Thousands of Dollars) TOTAL EXPORTS TO OCCUPIED CHINA $ 12 Principal Items: Radio apparatus 4 Relief supplies - biologics NW 3 Pencils and pens 1 Treasury Department, Division of Monetary Research December 30,1941 Regraded Unclassified 148 APPENDIX F Principal Exports from U.S. to Burma a.8 reported to the Treasury Department during the week ending December 20, 1941 (Thousands of Dollars) TOTAL EXPORTS $ 8 Principal Items: Newsprint paper 6 Treasury Department, Division of Monetary Research December 30,1941 Regraded Unclassified 149 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION m DATE January 1, 1942. TO Secretary Mor enthau FROM 3. D. White Subject: Digest of Appended Cable Received Last Night from Ambassador Gauss 1. Dr. Soong called on me yesterday afternoon at Gis request. He said that the Finance Minister, E. H. Kung, was 111 with typhoid. He stated there would be a message from his Government to this Oovernment asking for economic assistance, but that the request was in terms prooably too vague to merit immediate serious consideration. He ex- pected that in B. few days he would have more de- tails and would bring them at once to the Tressury. 2. That same afternoon, the appended cable was received. Following is 8 summary of it. a. General Chieng, in an interview with Ambessador Gauss on December 30, appealed to the United States for financial help in order to prevent further deterioration in China's economy. This, he said, would do much toward strengthening morale and silenc- ing the critical and doubtful elements. Morale in Free China has been affected by the early Japanese successes and by the way the Japanese have exploited them for purposes of propaganda. b. The proposed loan is for $1 billion, of which he has asked the British Government to provide one-half. It would be used partially to support a domestic bond issue intended to curb inflation. C. The British Ambassador nas been approached for the loan from Great Britain and has referred the matter to his Government. Regraded Unclassified 150 PARAPHHASE OF TELEGRAM RECEIVED FROM: American Embassy, Chungking, China DATE: December 30, 1941, e o.m. your 548 Today I called on General Chiang at his request. After briefly reviewing recent measures for olitical and military collaboration with the United States and Great Britain, he essed on to the economic situation in substantially the following terms: While there 18 no lack of confidence on the art of intelligent Chinese that the anit-Axis Powers will be victorious in the end, there 18 such lack of confidence mong the uninformed masses, the sceptice, and the BB80- ciates of the Chinese traitors. Morale has been affected by the early Jennnese successes and by the way the Jacanese have exploited them for urposes of Topagenda. $ ecific mention wes made of the radio acces1 for Asistic solidarity against westerners which VOB recently made to Chiang by the Prime Minister of Thailand. China can contribute fighting man pover to the common cause but the United States and Great Britain must give Ohina financial helo in order to prevent further deterioration in economic fundamentals, lose of confidence in the Chinese currency, etc. Such helo would do much to ord stren th ning morale and Regraded Unclassified 151 -2- and to silence the critical and doubtful elements. The redit he wants 18 about one billion United States dollars, of which he has through the British Ambaesador asked the British Government to provide about one-half or one hundred million pounds, expecting America to provide the rest or about five hundred million dollars. Chiang asked that in transmitting his request to my Government I should emphasize the importance such sid at this time would have to Chinese morale in overcoming Japenese propaganda and because of the needed support it yould give to the economic structure of China. He pointed out that the present currency issue exceeds thirteen billion paper dollars and that the 1942 budget shows a deficit of at lesst nine billion Chinese dollars, and said that the proposed loan would be used artially to support B domestic bond issue intended to curb inflation. I replied that of course I would feithfully and immediately report his request and his discussion to my Government which I WAS confident would be disposed to consider with symeathy any reasonable proposals to A1d China in resisting Japan. However, I suggested that to assist consideration of his request and in approaching Congrese for legislation necessary to authorize participa- tion by the United States in a credit or loan to China, 8 carefully prevared outline of the neede of the situation on the Regraded Unclassified 152 -3- on the basis of the studies and recommendations of the financial advisers and experts of the Chinese Government should be submitted together with an outline of the measures contemplated to be undertaken to meet the situation includ- ing the measures which Ohine will take to help herself. I explained that what I was suggesting was not an outline of the terms of any proposed loan but an outline of the needs of the situation and of the definite measures which should be taken to meet these needs. Chiang said that experts and advisers were working out plane for the use of the proposed credit or loan but that he desired me in the meanwhile to make the proposal to my Government. The proposals for application of the loan could be put forward when the loan 18 assured. I learned from the British Ambassador that he was a prosched for a loan of one hundred million ounde from Great Britain and has referred the matter to his Government. He equally lacked any specific proposale ae to how the loan, if granted, would be applied to the difficulties of the sconomic situation of China: Chiang had said that he considered it an urgent necessity that he should be enabled to demonstrete to the Chinese people and armies that the British Government had sufficient faith in victory to give quick and (?) aid to China. I em telegraphing comment. GAUSS Regraded Unclassified Treasury Department 153 Division of Monetary Research Date December 30, 1941 Secretary Morgenthau To: Mr. Kamarck From: The attached article might be of interest. It describes how the Russians have ingeniously developed new anti-tank weapons to offset the Nazi tank superiority. The anti-tank plane, in parti- cular, has been very successful. Regraded Unclassified 154 SOVIET AIRFORCE AND INFANTRY LEARN TO STOP TANKS (Source: Soviet Embassy, Information Bulletin, December 24,1941) The Soviet aircraft designer Ilyushin has devised R soecial new anti-tank plane, protected by stout armor which only heavy anti-aircraft shells can pierce. It 1s Very light and maneuv- erable, flies handily at heights under 500 feet -- so that it is safe from enemy pursuit planes which cannot fly BO low -- and 18 armed with 8 cannon whose shells pierce any tank armor. The pilot can take absolutely scourate alm. Instead of dropping sombs at rendom on 3 concentration of machines, he aims at each machine senerately. llyushin's invention does not stand alone. Another means of combating tanks 1e the small box packed with mines, weighing several nounds, with A handle for carrying it from place to clace. It looks like A box of chonograph records. These boxes are placed on roads in checker arrangement. When they explode benenth the weight of e tank, they damage at least the cater- oillar track. To avoid this danger the Germans used to send special recuts behind their motorcyclists. Sometimes they drove centive Red Army men or non-combetants ahead of their tank columns. Now Red Army men have devised A new way to use the "Avitcasee," AB the boxes loaded with mines are called. A. small, camourlaged trench for three or four men 18 due beside the road. The boxes are placed on the other side, A wire 18 attached to the handles and extended to the first trench, covered with earth and snow where it crosses the road, Motorcyclists or scouts seldom notice the wire -- they can't dig 40 the entire road to find it. When the tenks annear the men in the trench pull the wire, bringing the boxes to the sindle of the road. A tank usually runs at such high speed and Its visibility 1s 80 bad that there is hardly a chance that the boxes will be noticed, If they are, it is too late. The men in the trench are safe from the helted tank's fire, and If the tankmen climb out they are shot down. In such cases the Red Army men's burpose is not only to destroy 88 many tanks Ag but to bar the road with blown-up tenks FO others JANNOT DRSS. Regraded Unclassified 0 0 P 155 I department 03 STATE WASHINGTON December 30, 1941 In reply refer to 23 840.51 Frozen Credits/4847 The secretary of State presents bis compliments to the Honorable the Secretary of tue Treasury and transmits herewith a copy of telegram no, 2179 of December 23, 1941 from Rio de Janeiro, quoting 8. telegram from the Jonsul General et Sao Peulo, concerning the operation of Germen banks there under new restrictions. Enclosure: From 310 de Janeiro, December 23. 1941. Depy:1c:1/3/42 Regraded Unclassified AP Rio de Janeiro Dated December 23, 1941 Rec'd 9:35 p.m. Secretary of State, Washington. 2179, December 23. 10 p.m. Following telegram has been received from the Consul General at Sao Paulo. "December 23. 2 p.m. Reliable information indicates both German banks in Sao Paulo operating under severe restrictions. No deposits being made for fear funds will be blocked. Every transaction over two hundred milreis carefully scrutinized before approval granted." CAFFERY XDA Copy:1c:1/3/42 Regraded Unclassified C 0 P Y 156 DEPARTMENT OF STATE WASHINGTON In reply refer to FF 840.51 Frozen Credits/4594 December 30, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and trans- mits herewith for his information a copy of despatch no. 1938, dated November 12, 1941, from the Legation at Bern, concerning the desire of the Swiss National Bank to transfer to Switzerland some of its gold on denosit in New York. Enclosure: From Legation at Bern, no. 1938, November 12, 1941, with enclosures. Regraded Unclassified 157 Bern, November 12, 1941 No. 1938 Subject: Desire of Swies National Bank to transfer to Switzerland some of its gold on deposit in New York. CONFIDENTIAL The Sonorable The Secretary of State, Washington. Sir: I have the honor to refer to the Legation's telegram No. 229 of October 15, 9 C.M., 1941, concerning the desire of the Swies National Benk to transfer to Switzerland some of its gold now on deposit in Now York, and to transmit herewith in that connection a copy of a letter dated November 7 addressed to the Legation by the Consulate General at Zurich. Respectfully yours, Leland Harrison. Enclosures: From American Consulate Gen- eral, Surion, November 7, 1941, with enclosures. File No. 851.6 7723/mk Original end six conies to the Department Com for Division of Commercial Affairs Copy to American Consulate General, Zurich A true cory of the $15000 original. (ak) Regraded Unclassified COPY 158 File No. 851.6 AMERICAN CONSULATE GENERAL Zurich, Switzerland, November 7, 1941. Confidential The Honorable Leland Harrison, American Minister, Bern. Dear Mr. Harrison: I had 8. call this morning from Dr. G. Bechmann, President of the Board of Directors of the Swiss National Benk, and during the course of our conversation he referred to the difficult position of the National Bank as a result of the blocking of e large part of the reserves of the tanks, amounting to 1,3 billion Swise francs now on deposit with the United States Federal Reserve Bank. He referred to the gentleman's agreement between the National Bank and the Swiee banks with which you are familiar, and he stated that the chief difficulty et present was that the United States was refusing to release funds to pay for purchases of necessary food imports. He referred particularly to purchases of food- stuffs in Portugal which had to be paid for in escudos. Since the National Bank did not have sufficient escudo exchange, attempts were made successively to purchase them with dollars end, subsequently when this failed, with gold on deposit in New York. This application was likewise refused. The Portuguese Government thereupon, seeing the difficulty in disposing of dollar exchange, refused to accept dollar currency in payment. After con- siderable negotiations with the Portuguese Government, it finally receded from this oosition and agreed to accept dollars in New York. In other words, there was to be A transfer of funds belonging to the Swiss National Bank to the Portuguese National Bank on the books of the Federal Reserve Bank. To the great disappointment of the Swies, the United States Govern- ment refused its approvel to this transaction. Dr. Bachmann stated that he was in the dark as to the reason for the refusal, since it was necessary to pay for much needed foodstuffs for Switzerland purchased in South America, such as whest, rye, coffee, etc. When asked concerning the amount of the foreign exchange required by the National Bank to pay for the merchandise in Portugal, Dr. Bechmann stated that this was very small, amounting only to $10,000. He mointed out, however, that this could be regarded only as 8 test transaction to determine the procedure to follow in the other cases. He stated that at that time 24 days had already elansed since the application was filed end that no decision had been yet rendered on it. The representations of the Swiss Minister in Washington, end of Mr. Gentier, the special representative of the Swine Mational Bank in New York had 30 far been without result. It Was significant, however, that the Regraded Unclassified 159 -2- surgestion about the transfer of funds to cover the Portuguese trans- action emeneted from the United States Treasury Department, indicating that the Treasury was in sympathy with the Swiss application, at least in crinciple, Dr. Bachmann referred to the fact that the Swiss Government had under convideration the sending of a special mission to the United States to Riscuns financial matters growing out of the blocking of Swise funds there. I informed him that I had heard rumors to the effect that Dr. Rans Sulzer was being considered for this mission. He stated, confidentially, that there was some difficulty in the wey of sending such a mission be- cause of the natural reluctance of the Swiss Minister in Washington to have this matter taken out of his hands. A visitor referred to the difficulty of the National Bank in making in Its annual balance sheet and the dilemme facing it 85 to how to show Its large reserves in the United States, over which it now has no control. These reserves, strictly speaking, were a part of the gold coverage of the Swise currency, and in the circumstances Swise gold notes could not DV mid on demand as the present currency system provides. It is partic- ularly embarrassing to Dr. Bachmenn inasmuch as the sending of the large reserves to the United States was carried out largely on his recommendation, end he T23 looked upon by many 28 being responsible for the move. Às you are probably aware, there is some agitation et present for the revalorization of the Swies franc emanating from Mr. Duttweiler and 15 friends of the "Landesring der Unschangisen" (Inderendent Party). Discussions of this project taken from the "Frankfurter Zeitung" of Inventer 6, 1941, and from the "Pinanz-Revue" of Zurich of Movember 5, 1941, are enclosed, in translation, 88 of nossible interest to the Degation MIL the Department. Sincerely yours. JAMES B. STUART American Consul General -colomures: From the Preniciurter Seitung, November 6, :nd from the Finans- levue, November 5, 1941, toth in translation. Regraded Unclassified (From "FRANKFURTER ZEITUNO", November 6, 1941) 160 RUMORS 07 SWISS REVALORIZATION PLANS For the nest few days there have been rumors of Swiss revelorisation -lens. The reason for this is presumably the ever decreasing purchasing Dowerd surplus, idle capital, end the increased cost of imported foreign goods, and this led to the suggestion being mede by varioud sides that the Swize franc be revalorized. The chief spokesmen 1s the creator of "Migros" und the "Hotel Plan", Duttweiler; his importance doubtless gave more weight to the revalorization debate. The main argument represents the theory that C 10 to 15 rercent revelorization of the Swiss franc would not only recuse import prices and increase export values, but would also neutralise the fear of & further depreciation of the franc and the resulting flight of capital, and that finally prices could be controlled without Government interference, discount rates could be consolidated, and the purchasing nower would be increased. It is surprising that such suggestions, obviously caused by the distorted inner and outer economic conditions, could be unde in all seriousness. Just as it is still to be debeted whether or not the then scemingly inevitable 30% depreciation of the Swins franc in 1936 was of any real value to Swise economy, so now the argument that a further turrender on the question of currency stability would destroy all faith In tast currency, must not be overlooked. A one-time reduction in the rrice of colà and, correspondingly, of other values, would, so long as other actual motive powers continue in full force, not put en end to the tangible investment psychosis, but would only force it down & little. The equally active Swiss porty advocating free money goes much further than Duttweiler, in that they would like to see currency menipulation made 2. permanent feature of sconomic activity. Outtweiler's argument that D revelorisation of the Swige franc would, N one blow, correspondingly improve the foreign belance of trade, seems to be quite wrong. He has completely overlooked the fact that there is no longer any free exchange of currency on the world perkets now, 60 that An alteration in exchange rates would actually be impeded by already existing clearing and transfer agreements. It can be definitely assumed that responsible Swiss circles are not ectually consideriar S revelorization policy. The National Bank, for instance, hee every possibility of In- creating, at its own discretion, the value of the Swins franc 28 compered eith the American dollar. All that it need co, and thanks to the American policy of freering currencies it would have every richt to do so, would be to declare the official dollar exchange rate to be Swins france 4,31; it could easily do this, as there are no other dollar rurchasers. Actually, however, the Swiss franc would not profit thereby either in Switzerlend or abroad, for A8 100g as those currencies which, in the noar future, will continue to Cominate Switzerland's foreign trade, are not also revalorized. desponatble circles admit, however, that 12 it reflects on the 8wise TOWAS, the real reason lies in the inadequete official price control eyetem, the taxation policy, and the present Form of nerket control. be coming increased war profit texation, end the further drgining of the may minit through loans to finance the mobilization and war costs. mey, 11 do Lange, be another ster towards reducing the prement 13 made the currenc problem. Regraded Unclassified (From "FIRANE REVUE". November 5, 1941) 101 HANDS CITY E CUMMARY EXPENDENTS The constantly accending trend in prices which is not fully re- Tosted in the official cost of living index, is causing greet enxisty in large circles of the nonulation, and at the same time, there exists - natural desire to eliminate or at least check this trend which is entelly detrimental to our economic and social life. Government authorities AÃO -oliticians ore making efforts to discover means to arrest this rise in the cost of living, and it is to be hoped that these efforts will soon meet vita süccess. Still more clarming is the fact, however, that suggestions are E.C- vincec from certain quarters, which phnear very alluring on the surface; replication promises quick results, but they have one little feult, i.e., their realisation is impossible, and thus their sole nurpose superently 19 to corve mulitical agitation end, instead of 9aming enxiety of the nonu- Locion, is Art to incite it still more, it are referring especially to the proposed experiment to actually revelue the Swins franc unward which, for some time, has been advocated by E personality known for his initiative. As a matter of fact, it would abroar that someone has again discovered the secret of "the *06 of Columbus". The whole thing is very simple: the Swiss franc is supreciated; prices of imported oods are automatically reduced; export -rices increase; domestic -rices remain stable; fear of F currency inflotion and the alloged soaring of prices cease; and bite whole ifficult problem of prices has found B entisfactory solution. "On hearine it thus explained, it sounds cretty good", one is net to 90 ofCarrd, and there sunears to be no doubt that the proposition by its similicity and clarity will find ride-stroad emproval. As P matter of fact, is it at =11 fessible to appreciate the Swice franc at Present? Three recommending this measure correctly noint out that the tregent higher cost of living is to a large extent e. consequence of the recistion of the Driss franc in 1935 - which we has -ernictently onrosed - vacae 61s- satrous effects are now becoming fully anverent. This fact 1728 recently strenned in E locture in Basel by Jacobson, the Sredish -conomist and sconnuie adviser of the "Benk of International Clearing", who, AS editor D/ the Insual report of the Institute proved himself to be on outstending excert in international economic metters. Official statistics Indicate that the cost of livin has risen 30 percent nince the brginning of the age, merees our depreciation resulted in a 40 rercent groreciation of foreign currencies still based on the gold stendard. This detreciation, according to the statements of the prorenamed, has contributed to en grest entent in causing higher prices insuruch F6 the exchange value of the mise on its old gold volue, at resent corinates creatically entire currency and price systems on the Continect, by reason of the Vitical Tower which Germany has rained. Regraded Unclassified 162 In view of this remark, the difficulties of en appreciation of the Swige franc become at once evident, since it would only be Dossible under free trade and money traffic, which, however, is a thing of the past. Our commerce with foreign countries is at present largely carried on through the cleering system, under which prices are often determined Ivna by economic than by political factors, Considering the dependency of our requirements for foodstuffe and raw matorials on foreign countries. the latter are at all times in e. position effectively to dotermine prices, end it would appear highly naive to assume that, for instance Germany and Italy, to mention only two countries with which a large portion of our foreign trade is transacted, would immediately agree, after en autonomous appreciation of our franc, to accent smaller quantities of Swine goods then heretofore in payment of the goda tant they dolivered. Furthermore, it nust be anticipated that these countries would simply reise the prices of coal, iron, foodstuffs, etc. As a matter of fact, the proposition is doomed by the hard, but undeniable fact that Switzerlend is dependent on imports, and can only export if the necessary raw materials are obtained from foreign countries. Under present circumstances Switzerland is not at all in a position to mursue an autonomous economic policy beyond its frontiers, or is it possible to believe that, for instance, one of the few countries still nursuing free commerce, as the United States, would pay more dollars for Spine france simply because we nullified our depreciation wholly or partly Mirouch E stroke of the pen? That would, of course, be rossible if a strong demand for Swiss francs prevailed in those countries, which, how- over, is not the case. The world today requires foreign exchange less then goods, and no currency experiments will be able to supply ua with sore and cheaper coods in a time of growing scarcity of merchandise, up- less we are in e. position to provide those supplying countries either with the goods or dollars which they need. Another unfortunate circumstance is the fact that we have huge dollar credits blocked, which can only be used for commercial nurcoses, so that the United States would hardly accent 10 supreciation of the Swies franc without teking counter neasures which might result in greater difficulties for realizing these Wollar credits. To 2. slight extent we have norsover already proceeded with the nro- nosed appreciation, inasmuch 88 the National Bank has, as E result of heavier dollar agles, gradually lowered the dollar rate from 4.46 france in Mey 1940, to 4.31 francs in November 1941, which corresponds to en appre- ciation of the Swiss franc of 3.41 percent, which and Decome depreciated to = higher degree. Such slicht differences in the rate were only vossible not El time when the Swiss dollar credits could be freely disposed of, which, as Is known, is impossible under the American messures of blocking funds, and incidents.11y also with regard to free currencies which are beged on the dollar. or countries with which there existr no clearing zystem, awab TO Portumi, Sweden and the Argentines. Regraded Unclassified -3- 162 If, therefore, it is impossible to reduce the -rice of imported mutobandise through an appreciation of our currency, then the results in the country will be of little importance. Perhaps certein psychologi- el effects night develop which, however, should not be overeatimated. The aemane for coods would possibly be reduced, although it is still devendent on the purchasing power and rationing, so that the appreciation, are ER any defletionary measure - and R.B such it should be designated - midit produce economic dissovantoges. Purthermore, efter e while, the instors which \eretofore have determined the price formation, i.e., shortage of rew materials and goods, would again tend to increase prices, especially if the currency experiment should have only a limited duration né be abolished at the end of the war. BE are therefore of the orinion that we should engage in no further eriments with our currency. If we recommence any currency menimulations, the confidence in the Swiss frenc, which suffered alreedy alightly through the develuation of 1936, is bound to disappear entirely and then a rush to invest in goods would certeinly develop and have just the obvosite re- bults BB those aimed at. Therefore, hands off such dengerous experiments, which would cause enormous losses in the gold end dollar reserves of the Wational 30nk, which mould fall on the tax mayers, after e. covetous and stort-sichted policy of the note issuing bank would have absorbed and Istributed the currency stabilization fund. One must bear the consequences of one's mistakes. The consequences of the Devreciation which enlightened neonle had predicted, cannot De 055- set alm Iv av telder counter measures. We must non resion ourselves and reglize list on correctation of the Swice frenc would total failure. 2:10 clan of ambitious politicians who advocate it micht be furthered, but our economic life would only be threatened in nen disturbences and convil- sione, which in the present troublesome times must under all circumstances de proided. Regraded Unclassified TREASURY DEPARTMENT 164 INTER OFFICE COMMUNICATION DATE December 30, 1941 TO acciptary Morgenthau FROM ietricn weistered sterling transactions of CONFIDENTIAL the reporting bane were as follows; Sold to commercial concerns 259,000 Purchased from commercial concerne £17,000 market sterling held steady st 4.03-3/4, and there were no reported :rrasactions. In fairly light trading, the Canadian dollar discount continued to widen. n деу current low of 14-5/8% WES reached at the close, which compares with 14-1/84 Lest night, оде of the Jew York bands reported that it we a seller of Canadian collars presenting life insurance premia collected by Canadian affiliates of certain American insurance companies, Sive argentine free peso moved off 5 points to close at .2350. It is re- ported that there are orders in the market to sell at least 300,000 esos, voich are not yet been executed. Attempts to sell this emount may lead to a further tellne in the rate, owing to the market's thinkess. Zue Venesuelan boliver, which declined 10 points yesterday, fell snother Scints today. closing at .2650. In - York, clocing quotations for the foreign currencies listed belon in EE follows: Brazilian milreis (free) .0010 Colombian peso -5775 Mexican peso .2065 Urugueyan 2880 (free) .5310 Cuban peso 1/0,0 premium ++ +.- ford bank reported that its anila office was now quoting nominal 2 11,6 selling rates of $.4902 and 8.5000, respectively, for the Poillipine 110. 36fore December 8, the prevailing levels were 4.4309 buying and 6,4981 Willing. due Jank of England's official rates for the peso were lowered today the Squivalent of 4.4908-1/2 ouying aná $.4961-1/2 selling. LE sold $19,950,000 in Bold to the Swies crtional gans, which WBB Ráced to de recount. All of the gold used in this transaction VI.E purchased by -1::00 to General Fund. In order to increase the stabilization yund's gold 3140 surchased $7,400,000 in gold from the General Fund. lies 6014 engagements were reported. Regraded Unclassified 165 - 2 - Is London, spot and forward silver were unchanged at 23-1/2d and 23-9/16d, respectively. The U. S. equivalente were 42.67$ and 42.78$. The Treasury's purchase price for foreign silver was unchanged at 35#. Handy and Harman's settlement price for foreign silver was also unchanged at 35-1/64. We made no purchases of silver today. A confidential Regraded Unclassified 18€ BRITISH EMBASSY WASHINGTON, D.C. 30th December, 1041, 2 TRBOUAL 420 secret Dear UP. Secretary, I enclose herein for your personal sal secret information B. copy of the Istest report received from London or. the military situation. Believe no, Dear "r. Secretary, Very sincerely yours, Hahfax Tile honourable Senry Norgentheu, Jr., United States Treasury, Weshington, J.O. Regraded Unclassified 167 Copy No. 14 BRITISH LICST SECRET (U.S. SECRET) CPISL No 56 Information received up to ? a.m., 29th December, 1941. (2) MAVAL Light forces and two infantry assault ships returned yesterday after a successful operation on the Nerwogian Coast. Military batteries were de- moliched and industrial plants destroyed, Ninety-six prisoners were taken and leavy casualties were inflicted on the enemy. Five merchant vessele, two armed trawlers and B. tug were destroyed or sunk, Naval casualties ware light and aray carunlties included two officers and fifteen other ranks killed which were not pay considering the sovere opposition in street fighting. A Dutch submarine with 5. Japanese destroyer on the 24th near KUCHING. (c) MILITARI LIBYA. Evening 27th, Air reports indicate that the enemy in the TEDABYA area is obtaining supplies and potrol by 108, Latest reports indicate that our armoured forces are well round the enemy's Southern Flank with patrols " for Test as MERSA BREGA, Six enemy tanks were destroyed near J/DABYA on the maing of the 27th, Motorised troops were In contact with the onemy's North- Broken flank some fifteen miles from JEDABYA while elemente sees to have ventured considerably further into the enemy's position and are reported to have shelled transport three alles North of the town, Air observation report identification difficult owing to our columns being Intermixed with the enemy, MALAYA. PERAK. Our troops have withdrawn to positions abcut invity alles South of IPCH, BURNA. An attempt to dislodge the enemy from BOKPYIN on the 27V Failed. To suffered come carualties but details are not yet known This place 13 a the Coast between VICTORIA POINT and MERGUI, there are no roads to it but the Le & mall landing ground. A small concentration of troops in Siamere wilform rilk several lorries la reliably reported on the Siamene border in the area of to Upper reaches of the MEXONG River. (III) ate OPERATIONS TESTERN FRONT. 27th, Beaufighters and Blenhoins (including I. R.C.A.F.) protecting naval units operating off the Norwegian Coant drove off all they aircraft and destroyed two Garman fighters three bombers and damaged throe aircraft. Three of our aircraft are missing. 27th/23the DUSSEIDORE. 400 of R.E. and 11,000 incendiaries were dropped. Many large fires were started Regraded Unclassified 168 - 2 - to the torm and near the railway centres, At BOULOGNE and BREST 33 tons, Burs wre seen in the docks area, 16 R.C.A.F., 23 R.A.A.F. and 14 R.N.Z.A.P. aircraft took part in these operations. 28th. Two merchant Vessels of about 5,000 tons are attacked by R.C.A.F. Hudsons off the Dutoh Coast, One was hit amidships and the other was thought to be hit, 28th/29th. 222 aircraft were sent out - WILHEIM SHAVEN 86, HULS 81, EMDEN 40. Intruder Operations 10. Visibility was good and results are believed to have been effective. Seven medium bombers are missing. About seventeen enemy aircraft were operating, most of which are suspected of БОД Fining in the THANES ESTUARY. MEDITERRANEAN. LIBYA. 27th, Four squadrons of Blenheims suc- cessfully attacked enemy positions in the BARDIA area, Tomahanks destroyed three vehicles and damaged about fifty others between JEDABYA and EL AGHETIA. Two Temahanks are missing. Enemy fighter activity in the battle area nas very slight. 27th/28th. Naval aircraft laid mines off TRIPOLI (L) and cleven Wellingtons at= tacked shipping in the harbour, 25 enemy aircraft made raids on 27th. 27th/28th and 28th. No important damage resulted. One bomber was shot down by Hurricanes. FAR EAST. MALAYA. 27th/28th. Six Blenheims attacked SUNGEI FATANI aerodrom. At least seven fighters were destroyed and five fighters and three bombers damaged on the ground. 28th, Three enemy airoraft attacked PORT SWETTENHAM, One was shot down by Kua and another probably destroyed. (TV) &IRCRAFT CASUALTIES IN OPERATIONS OVER AND FROM TIDE BRITISH ISLES German 27th, Five destroyed, three demaged. British 27th. Three Missing 27th/28th, Seven missing Total Ten. Regraded Unclassified 168 a TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE December 30,1941 Secretary Morgenthau TO FROM Mr. Kamarek subject: Summary of Military Reports Use of American Planes In Russia As of December 27, the Russians state that 35 out of 22° P-40's are completely out of commission. The rest are inspeting, out without generators. Russian officials decline to give our Militery Attache information on the air routes used to deliver American planes from Sagra, Iraq to Russie. They state that the agreement in Washington WAS that the planes would be delivered to them ot Beare and, therefore, it 18 not necessary to furnish information on the route the nlenes follow after that. (The Russians are consistently following the policy of giving only the information that it is absolutely necessary to know, only to those whom it 18 absolutely necessary to inform, and not R.C. lote more. Their interpretation of what 1e absolutely necessary 1ª also R very rigid one. In view of the surprise tary provided the German Army, it is difficult to argue that trey are wrong. Our ermy, however, feels strongly that It is not getting enough information.) (Kutbyshev, U.S.S.R., D.S. Willtary Attache, December 28, 1991) In Libya four Flying Fortresses (B-170) reached the Middle Test on November 1, 1941. Since then, three high nititude deylight Livelons were performed. Each time 11 1/4 tons of bombs were hour, carried and the average flying sneed 988 around 200 miles per Cm November 8, two planes were sent to bomb Bengneti, (sta) listance of 1,240 miles, On the way nome, one nlane Regraded Unclassified - 2- 2 168-8 made is forced landing 200 miles From its base, due to lack of fuel. The plane wes destroyed, but the crew WSB unhurt. The ICEP WHA attributed to errors by the service crew and vilot. On November 14, one plane was sent to bomb Eenghazi, e distance of 720 miles. On November 19, one plane was sent to bomb Derne, A distonde of 860 miles. Since then, no missions have been performed because of excessive oil consumption by the two inner engines. The plane= nove been grounded, while attempte are being made to discover the cause. Among the other difficulties which developed are the following: The bomb doors failed to close when opened. Cause 18 unknown. There WAB e loss of engine power caused by exheust mani- vold leekage. (Cairo, U.S. Military Attache, December 27, 1941) Use of American Tanks in Libya because the mechenical performance of the American tanke ared in Libya has been relatively 80 satisfactory, and be- cause of the comperatively small distances P8 yet covered, no large-scale overhauls of the tanks have been required, 08 yet. (Calro, U.S. Military Attache, December 29, 1911) Russo-Termen War Cur Military Attache in Russia renorts that Russian "uge of armored motor sleds, at lesst experimentally, 1e probable" (This le an understatement, in view of the feet stat the Russians used such sleds in the Russo-Finnish Wer with considerable success) (Kutbyshev, U.S.S.R., U.S. Military Attache, December 28, 1941) Regraded Unclassified 168.0 - 3 - NEWS ITEMS OF POSSIBLE INTEREST Libyan Campaign The R.A.F. officially announced that the Axis air forces in Libya lost 476 planes from the start of the Libyan offensive to December 23. The British lost 195 planee in the same period. The main reasons for the greater Axis losses were: the Royal Air Force had the initiative, Axis air activity was hampered by shortage of fuel (due to naval and air attacks on the supply lines), advencing British troops were able to centure disabled enemy planes before they could be repaired. (The loss of 476 planes 18 over two-thirds of the total Axis air force of 600-700 in Libya.) Argentina Lieutenent-Colonel Edmundo Sustaiti and Mejor Bernardo Menendez have been appointed to new Air force posts in the Argentine Army, the War Office announced on December 27. (These two officers were active partici- pente in the pro-Axis plot of September 23 and were arrested at that time. Sustaiti WAS the commander of the aviation school at Cordoba, which was the center of the plot.) Regraded Unclassified 169 December 31, 1941 9:30 a.m. GROUP MEETING Present: Mr. Haas Mr. Graves Mr. Gaston Mr. Morris Mr. Kuhn Mr. Foley Mr. Blough Mr. Bell Mr. Thompson Mr. Sullivan Mr. White Mrs. Klotz H.L.JR: Well, have I seen you, Harry, since Keller nas here? Well, I don't know how many of you know I have been working on this, to get these orders for these people. Mr. Keller came in last night at five o'clock and told me that in two days he had succeeded in getting an order for seventy-three thousand trucks, and he had been at it since the seventeenth of September and had been unsuccessful, and he went home last night with in order of seventy-three thousand trucks for the Dodre plant. M. WHITE: Are those the military trucks? D.M.JR: Ten thousand eight hundred and thirty- eight are half ton four by four military trucks which will fill the gan in the Dodre assembly plant until April 15. Sixty-three thousand are new three-quarter Regraded Unclassified 170 - 2 - ton trucks which will be in production by April 15 to reach a production of seven hundred a day by the fifteenth of June, and they have given them extra money to tool up for the Russian thing. That is what they call the low silhouette truck. He said, "I hope you won't mind, but everywhere I went in the War Department they kind of winked at me and said, 'I see you have got the Secretary of the Treasury working as your agent helping to get orders. I said, "I don't ind if you don't." He says, "I don't. I have got seventy million dollars out of it." Two days. And the other thin which I checked, it is the artin B-26 which he was asked to make the central section of the main body for and it was only on Christmas Day that he got the final drawings. He was originally asked to meet Knudsen on the first of October of 1940 in New York and they planned the thing then, and he got the final drawings on Christmas Day, 1941. MR. WHITE: Fifteen months. H.M.JR: Mr. Gaston? MR. GASTON: I suppose you noticed Leland Stowe's article last night on the Burma Road? H.M.JR: No. MR. GASTON: It would be worth your while to read 11. B.M.JR: All right. MR. WHITE: I started some other inquiries about it, so after you read it we will try to get another check up on that. It is quite 8 story. P. GASTON: This fellow is an absolutely reliable Yellow, I think. JR: The one that had about their running Insuries over the thing? Regraded Unclassified 171 - 8 - MR. GASTON: Yes, all kinds of graft. Nothing _oves without payment of graft, and they shunt mili- tary supplies aside in order to run private cars and wines and so on in. MR. WHITE: There in certainly 0 good deal of truth in it. Whether it is wholly as bad as that I don't know. (Discussion off the record.) MR. WHITE: It would be bringing coals to New Castle. H.M.JR: Harry, that is very unpatriotic. MR. WHITE: This is south of the Chinese border, "r. Secretary. It is in Burma, controlled by the Rnglish. (Laughter) MR. GASTON: I haven't anything. MR. FOLEY: Nothing. H.M.JR: John L., of New Hampshire? MR. SULLIVAN: We have had a long conference with representatives of the War Department. You remember you wrote to Stimson when he told you he wouldn't have time to sit down and talk over that Panamerican Airways contract, in which the War Department agreed to indemnify Panamerican that? against increases in taxes. Do you recall H.M.JR: Yes, I recall it. MR. SULLIVAN: Well, anyway, we fought it out and in the course of the conference they admitted to us that Panamericsh Airways was holding a gun to their head, and they Were doing it because they had to, and we refused to do it. E.V.JR: I remember that. Regraded Unclassified 172 - 3 - MR. SULLIVAN: And finally new language has been worked out for the contract with the War Department and Panamorican Airways which Mr. Foley and Mr. Kades and I think is satisfactory, and we would like to go ahead with that. H.M.JR: O.K. MR. SULLIVAN: And I have a memorandum of that conference which I think you probably would like. H.M.JR: Put it in my file, will you please. MR. SULLIVAN: Yes, sir. You had some correspondence with Leon Henderson about his request to microfilm a very large number of returns in the Bureau. H.M.JR: Yes. MR. SULLIVAN: He was allowed to get some of them. de wants all of them. There has been prepared an Executive Order which would enable him to ret those. H.M.JR: Muts, says I. MR. SULLIVAN: Well, I didn't know anything about the previous transaction, but going over it, I think we are [oing to be in a difficult position if we are re- fusing him any information that is helpful to him. H.M.JR: Well, when he needs it. I am not going to have the income taxes of all the corporations of America floating around in Leon lienderson's office. Now, let me tell you the absolutely asinine request he made of me last night through Lubin. Lubin calls me up, would I see a couple of men from Henderson's office because they want the Government tires that we buy at factory prices to clear through local dealers, and let them make the commission because the poor dealers, tire dealers, are going to starve on account of action that Henderson took, and I told Lubin I wouldn't think Regraded Unclassified 173 - 4 - of doing it, and I repeated it last night. I was there at Wickard's house with Wayne Coy and Oscar Cox, and they said it would be perfectly ridiculous. Then the next request he makes was, would I distribute the Government tires through his local committees, and I refused to do that. I said it is perfectly proper when we get a lump sum of how many tires we need for Leon Henderson or somebody in Washington to say, "You want a million tires for the Government. You can only have B. half million." That is within their province. But for me to do the other thing, to pick his coals out of the fire - and they all agreed with me last night. He has got to give me - if he, for instance, needs to know how much for par- ticular reasons some corporation's or some industry's profit, I will consider it, but I will not give him a blank check. MR. FOLEY: Well, Mr. Secretary, I don't think you have got the whole story. H.M.JR: I am not going to do it. MR. FOLEY: He is not asking for the returns and that isn't what this order does. He did ask for the returns and we told him he couldn't have them unless he could give us a good reason. H.M.JR: That is right. MR. FOLEY: Now, he came back, and he did give us a good reason. H.M.JR: What is it? MR. FOLEY: And we are suggesting through this order that we give him merely the information that we take off on these cards, and it isn't the return. H.M.JR: But let him specify the industry. If he wants the tire industry, as he needs an industry, let him specify. Regraded Unclassified 174 - 5 - XR. SULLIVAN: Mr. Secretary, we don't have them classified by industries over there. H.M.JR: We don't, but he does. He takes one Industry at a time. 1R. SULLIVAN: But that means we have to 20 pick- Ing out returns all over the place and that would be expensive. H.M.JR: I an sorry, I am not going to give him a blank check. I won't do it. If he is interested in the price of cigarettes and wants the cigarette industry, tobacco industry, I am willing to give him that. If he wants the tire industry, I will give him the tires. I am not going to have the thing floating around. I won't do it, that is all. He has got to say,"I am about to study - I have got to know what the tobacco people make, so I can fix the price on cigarettes. I have got to know what they are doing so I can fix the price on remade tires or cotton goods." O.K. Then let him give us the list of concerns and the will pick them out. MR. SULLIVAN: He doesn't have that list, you see. H.M.JR: Well, they told A story last night, Oscar Cox did, about a hundred and eighty thousand tires to China. They challenged that. Oscar said, "I have rot seven people and they wanted - Menderson's organization wanted us to do all the work for them, about how many tires - the whole business, and he has got a thousand people over in his office and I have got seven. I told him why should I try to justify it on 8 basis of whether & hundred and eighty thousand tires for China is fair or isn't fair?" He wants everybody to do his work. I won't do it. 14. SULLIVAN: We have been offered-- A.M.JH: I mean, the stuff by industries - if he Regraded Unclassified 175 doesn't know it, what are the thousand or two thousand or three thousand people he has got over there doing? MR. BLOUGH: There is 8. register of American listed corporations from which 8 lot of this informa- tlon can be taken. H.M.JR: You (Sullivan) have got to take somebody. Well, look, you can quote me, I won't do it, see. That is all. MR. SULLIVAN: We have been offered the cover of Liberty magazine for March 11 for Disney to do some of the characters on the income tax business, and they called this morning. They have got a dead line of eleven-thirty and they wanted to know which of the three circulars that have been distributed, "Know Your Taxes," "How to File Your Income Tax, and the "Tax Saving Plan," we would like to have reproduced. They may be willing to reproduce all three of them in that issue, but I would like to talk with Ferdie and Harold Graves, and then call them up and tell them. H.M.JR: O.K. MR. SULLIVAN: And also tell them that we will be glad to have the cover on that magazine. H.M.JR: Fine. Well, the President shot the works. I was so overtired last night I couldn't tell Bell and you and the rest of them what he said. MR. SULLIVAN: We read it. H.M.JR: And as far as I am concerned, I don't have to go up and hear his annual message. You know, it was terribly funny. He said to Harold Smith, "Now get busy." And Harold Smith kept saying, "Well, Mr. President, I don't know what you want. I don't know what you want." Well, he has got it now. MR. BELL: There it is. Regraded Unclassified 176 - 7 - H.M.JR: Harold Smith was in an awful spot yester- day because he didn't know the first thing, you see, having been away for three days. VR. BELL: Did he want Harold to write the "State of the Union" message for us? H.M.JR: No, but this whole question about pro- duction, and he gave him Stimson's memorandum that just came in on the victory program and Beaverbrook's memo- randum which just came in and that kind of stuff, you see. MR. SULLIVAN: Were you asked to prepare certain parte of the message? H.M.JR: No, but Smith is going to consult with me. MR. SULLIVAN: Well, the reason I inquired is, when he came out, you remember you stayed in for a while. He says, "Now you fellows have got to go to work." I said, "llow so?" He said, "Well, the President asked the Secretary to prepare drafts." H.M.JR: Well, Bell has been trying to get him. MR. BELL: Yes, I tried to get him. H.M.JR: And when you talk to him ask Smith mether he would like to come over and have lunch with us on Friday at one o'clock. II. BELL: On Friday? H.M.JR: Yes. LR. SULLIVAN: Are they going to out that figure on taxes in the message? H.M.JR: Yes. Regraded Unclassified 176 - 7 - H.M.JR: Harold Smith was in an awful spot yester- day because he didn't know the first thing, you see, having been away for three days. VR. BELL: Did he want Harold to write the "State of the Union" message for us? H.M.JR: No, but this whole question about pro- duction, and he gave him Stimson's memorandum that just came in on the victory program and Beaverbrook's memo- rendum which just came in and that kind of stuff, you see. MR. SULLIVAN: Were you asked to prepare certain parts of the message? H.M.JR: No, but Smith is going to consult with me. MR. SULLIVAN: Well, the reason I inquired is, when he came out, you remember you stayed in for A while. He says, "Now you fellows have got to go to work." I said, "How so?" He said, "Well, the President asked the Secretary to prepare drafts." H.M.JR: Well, Bell has been trying to get him. MR. BELL: Yes, I tried to get him. H.M.JR: And when you talk to him ask Smith Whether he would like to come over and have lunch with us on Friday at one o'clock. R. BELL: On Friday? H.M.JR: Yes. MR. SULLIVAN: Are they roing to put that figure on taxes in the message? H.M.JR: Yes. Regraded Unclassified 177 - 8 - MR. SULLIVAN: Do you think I ought to talk with them up there? H.M.JR: No, no. MR. SULLIVAN: I don't think 50 either. I am just asking. H.M.JR: No. This came last night by air mail, Ed. I know you can't do it, but let Mrs. Lehman know what we can do. She wants to send nine hundred dollars to Paris. Can we send any money to Paris? MR. FOLEY: It all depends on whether it is a citizen or not. H.M.JR: The application is attached there, and if you have any questions, call up Mrs. Lehman direct, yourself. MR. FOLEY: All right. H.M.JR: But I don't think you can send more than B. hundred dollars. MR. FOLEY: That is right, a hundred dollars and twenty-five dollars for each dependent. If it is not a citizen, that is. If it is a citizen, five hundred dollars. H.M.JR: Well, clear it with her. O.K.? MR. MORRIS: Nothing. H.M.JR: Harold? MR. GRAVES: Nothing. H.M.JR: You don't know. llere are my follow-ups. Regraded Unclassified 178 - 9 - Incidentally, George, I read your memorandum very carefully, and I am glad you are going into the field. I have also dictated you a memo that whatever you give me you should give Bell, Graves, Broughton, and Hall, you see. MR. HAAS: Oh! H.M.JR: Because Hall kind of tells me, "I am just in the dark. I don't know." Well, we will turn a little light on. MR. HAAS: Yes, those reports turned considerable light on it. H.M.JR: Yes. Harold, I won't embarrass you publicly. I will hand you this follow-up. MR. SULLIVAN: Not much! (Laughter) H.M.JR: Well, I feel very mellow today. Anything else? MRS. KLOTZ: There is another in there. H.M.JR: Oh, wait a minute, while you are on your feet, Harold. Here is another. MR. GRAVES: Would you like me to tell you now about this? H.M.JR: Oh, I would love it. I would just faint with delight. MR. GRAVES: About the motion picture theater thing, there is a committee of the industry that has been organized with headquarters at New York and this proposition has been laid before that committee. Many feel that they are already doing this. We think that the wise way to function will be through that committee Regraded Unclassified 179 - 10 - of the motion picture industry. E.N.JR: Will you give me an answer next year? MR. GRAVES: I will, next year. On the Gallup thing, we have prepared the questions, A series of question on this - no, this particular thing has already gone, this question of whether they want war savings bonds or Defense Savings Bonds. That was sent to Gallup right after you asked me to do it, and I suspect we will have some result from that very shortly. What was the other thing? MR. KURN: There was also a proposition of asking Callup or someone in the field to do a survey about the payroll allotment and the questions will be turned over Tuesday to Elmer Roper who does these things for MacLeish, and it will be done as a Government project through the VacLeish organization. They say they can do it quickly and effectively. H.V.JR: Fine. . KUIIN: Without charge. H.N.JP: O.K. Harold, while I have got you here face to face, how about my desire to have a couple of people sitting at : table outside of the windows of the post offices? LR. GRAVES: You asked me over the phone night before last. I told you that would have to be done, as matters stand, by sending Treasury personnel, volunteer people not being trustworthy with the issuance of bonds. You asked we to see that that was done in 8 branch near the Mavy Yard. H.D.JR: Yes. LR. HAVES: Well, there is B branch neur the - Regraded Unclassified 180 - 11 - eight blocks from the Navy Yard, but there is no lobby that would permit the installation of any such facility. There is a contract station in the Navy Yard, and we are studying that with a view to seeing whether it would be feasible to put such a booth in that contract station. We are met with the refusal, as before, on the part of the Post Office people, to do this. It will be neces- sary, once we have a plan prepared, for us to get in touch with the Postmaster General. H.M.JR: I will call him up. When will you be ready? Does that come under you or come under outlets? MR. GRAVES: It comes under outlets. It is a matter that really should be handled in Dan's office because it is a matter of taking personnel from the organization and putting them out in these places. H.M.JR: Would you (Bell) be ready if the Post- master General could see you this afternoon to talk about it? MR. BELL: I don't think SO. I would like to know what this experiment we carried on here in Washington the last two or three months has shown. MR. CRAVES: Well, that experiment Was carried on at a number of department stores and at the Willard Hotel and that was done for the purpose of testing out the sale of tax savings certificates, although bonds and stamps were also sold at the same booth. H.M.JR: Listen, boys, I can't take it. I want in 8 - in one or two post offices in Washington, if they have got to be Treasury paid personnel in the first instance, all right, but then we can swear people in and get volunteers all over the country if it works. Who is going to go and see Frank Walker for me? I will make an appointment. MR. BELL: I will see him, but let me see my schedule, will you please? Regraded Unclassified 181 - 12 - H.M.JR: Can I make an appointment for you Friday morning? MR. BELL: Yes. H.M.JR: Does that give you 8. breathing spell? MR. BELL: Sure. H.M.JR: O.K.? MR. BELL: You don't have to bother with it. I can make the appointment. H.M.JR: No, I want to talk to him. I want to remind him it is his suggestion. MR. GRAVES: On this point of the Navy Yard-- H.M.JR: In the post office building right down here, Frank Walker's building. MR.BELL: All right. But in the Navy Yard's we have got now & duplication, and they are having much difficulty in getting the statistics. H.M.JR: Dan, if we sell enough, then work out a way that we can enroll volunteers to do this thing and bond them. It is a swell volunteer job. MR. BELL: And bond them? H.M.JR: Sure, whatever is necessary. MR. GRAVES: I don't think that would be a matter of any-- MR. THOMPSON: In the Treasury Post Office there is a window just for them. H.M.JR: Well, I want a desk right out in front. Regraded Unclassified 182 - 13 - MR. GRAVES: I don't think that will prove any- thing because it is just going to divert business from the windows to that desk which you would get anyway. H.M.JR: Well, this one time you are going to have to humor the old man. I want to try it in a couple of post offices, right out in front, the same idea that you went to your banks when you took your vice president and stuck him out in front instead of the private offices. How long ago did you do that in the banks? MR. MORRIS: Some haven't come to it yet. H.M.TR: Some have, though. MR. BELL: They are going back now. (Laughter) MR. FOLEY: They always had him stuck out, Mr. Secretary. H.M.JR: Well, I know some banks where the presi- dent sits right out in front. MRS. KLOTZ: He is not afraid. MR. MORRIS: Well, we have always sat out in front, but you say the banks. Some of them haven't done that yet. H.M.JR: Well, I want to try it-- MRS. KLOTZ: There is a reason. H.M.JR: and I an asking to try it, please, and talk to the Postmaster, will you, Dan? MR. BELL: O.K. H.M.JR: I am very weak these days, and I can't argue. MRS. KLOTZ: You can have anything you want this morning, Mr. Secretary. It is very novel. Regraded Unclassified 183 - 14 - MR. SULLIVAN: No New Year's resolutions, now. H.M.JR: Don't worry. I am just weak. I can't argue. MR. BELL: I would like to mention the Investment Bankers Association want to be designated as agent and the president has just taken office and he is very cooperative, and he wants to-- H.M.JR: I am for it. MR. BELL: He wants to live down some of the past. H.M.JR: I am for it. MR. BELL: If we just hold it to the main organi- zation, it is all right, but I think they have got about ten thousand branches. H.M.JR: Well, wait until George Buffington gets back. MR. KUHN: I have a message for you from George Buffington who was on the phone from Chicago. He is seeing Vanderpool, and Vanderpool will be coming to Washington next week. George will be here next week. H.M.JR: For 8. trial? MR. KUHN: Well, to talk about it. He is not sure that he can make the change, but George likes him very much. He is much impressed. H.M.JR: Anything else? MR. KUHN: I would like very much to talk to you again about going on the air, very soon. I mean, it ought to be in the first week in January. H.M.JR: Well, I am in this. mellow mood. It is your privilege to talk to me about it every day. Also Regraded Unclassified 184 - 15 - you can write a speech if you want to and put in some of those good phrases of mine. MR. GASTON: Did you get my memorandum on Vander- pool? H.M.JR: Yes. MR. GASTON: I think it is a great mistake. They are doing good work for the Administration. It is a great mistake to put him in the Government service. (The Secretary held a telephone conversation with Judge Byrnes.) MR. KUHN: Mr. Secretary, only this about the talk. There is one spot on Tuesday night, and I will be delighted to write the speech. H.M.JR: Next Tuesday? MR. KUHN: Next Tuesday night. H.M.JR: I couldn't mentally get myself in shape. MR. KUHN: It is only ten or fifteen minutes. H.M.JR: Well, you have all got my New Year's invitation for lunch today? You are all going to have lunch with me, I hope. At least you are all invited. MR. GASTON: Thank you. H.M.JR: It will be the last luncheon of the year together at one o'clock. If I am sober at that time, talk to me again, Ferdie. MR. GASTON: Before lunch. (Laughter) H.M.JR: Harry, that Russian protocol thing? MR. WHITE: We worked on it yesterday and we will finish it up this morning, Cliff Mack and I. We are Regraded Unclassified 185 - 16 - trying to get something good. H.M.JR: You didn't say anything about Bell at the time, so I am not saying anything. MR. KUHN: He won't be here next week. H.M.JR: How are you feeling? MR. BLOUGH: Much better, thank you. H.M.JR: Under this order which Bell and I are going to get out to keep the Treasury open tomorrow, we find there are six other departments open as & demonstration tomorrow. to the country that Washington works. You stay home MR. BLOUGH: Thank you. I will be very vlad to. MR. BELL: He has got a number of people, too, that have worked very hard. H.M.JR: The President's thought was that we are asking the people to work in the machine shops and munitions plants, and it is up to Washington to show they also can work on New Year's Day. But if anybody particularly like Blough or somebody isn't feeling well, then I think it would be a good thing to order them home tomorrow. MR. HAAS: I have cot some new data on the Maritime chart and the aircraft chart. H.M.JR: I will get around to it. MR. HAAS: Do you want to take a look at it? H.M.JR: Hand it to me now. MR. HAAS: And, Mr. Secretary, you suggested about two o'elock for these sales figures and also at the same time send in the supply figures on Savings Bonds? Regraded Unclassified 186 - 17 - H.M.JR: What is that? MR. HAAS: You suggested about two o'clock that the sales figures could come in from my shop and also the supplies picture. The supply picture would be impossible because of the steel reports to get in by that time. We could probably get it in by three o'clock. Would that be all right? H.M.JR: No, when they are together, give them to Stephens, mark them urgent and tell him to bring them in to me. Harry? MR. WHITE: You asked on November 26 that we get from England the information on the procedure and ac- tivities of the British Select Committee on national expenditure. Forty-two reports have come in by pouch. We them. can either turn them over to you or we are digesting H.M.JR: On economy? MR. WHITE: On economy. H.M.JR: Turn it over to Bell and he will give it to Bill Heffelfinger. MR. BELL: That is right. MR. WHITE: Right. H.M.JR: And Heffelfinger will give it to Mr. "X." MR. WHITE: The gold which is at Martinique, the Consul has written about it. He is only allowed to count the cases. If we have any responsibility in it whatsoever, We feel we ought to do more than that, because lead. the cases may be empty or they may be full of H.M.JR: You want to stick your finger in, do you? Regraded Unclassified 187 - 18 - MR. WHITE: Yes, practically - virtually - figura- tively speaking. (Laughter) If the Treasury has any responsibility. If we haven't, we don't care. H.M.JR: It has, it has. Well, you and Bell get together. Bell may think you should only put your thumb in, I don't know, but you and Bell handle it. (Mr. Bell made motions of thumbing a ride.) (Laughter) MR. WHITE: I was talking about gold, Danny. I don't know whether you understood me or not. (Laughter) We asked the Mexican Government, Treasury, for all their data on their exchange operations, stabilization. They are going to give us all their confidential data if we hold it very confidential. They have not yet ratified that arrangement, you may know. There are 8 number of departments here who - defense depart- ments who are able to hire non-citizens. It is be- coming increasingly difficult for us to get very com- petent men and we think we are going to lose some more men. We have lost quite a few, H.M.JR: What do you want now? MR. WHITE: There are two men, one British and one Canadian, very excellent economists that we would like to take on. There is no question about their - as consultants. The defense agencies do it, Mr. Secre- tary. H.M.JR: If you can clear with Norman it is all right with me. They are our associates. MR. WHITE: Well, Norman will just pass the buck and say whether it is all right with you. H.M.JR: I say it is all right, if you can do it legally. MR. WHITE: Yes. If we can do it legally, it is all right. MR. THOMPSON: They would have to be citizens. Regraded Unclassified 188 - 19 - MR. WHITE: They don't have to be citizens, Mr. is it all right? Secretary. I am sorry to disagree. If it is legal, H.M.JR: If my General Counsel will pass on it, get 8 written opinion, Norman? it is all right. «Is that all right with you, if you MR. THOMPSON: Yes, it is perfect. H.M.JR: If my General Counsel-- MR. WHITE: Fine. If it is illegal, we certainly wouldn't want to do it, and I don't think they would let us. (Laughter) Ecuador has just renewed its appli- cation on the Stabilization Fund. They have sent a lot of material in. We will go over it again. We have & man down in Ecuador. We have extended his stay to six months, which is up to the end of January. He is 8. very good man, and I want him back. Ecuador says he is very important to them, and they want him to stay some more. The State Department would like to satisfy Ecusdor. If it is all right with you, unless they insist, I would like to have him back. H.M.JR: Is it between you and the State Depart- ment? MR. WHITE: Yes. H.M.JR: I am with the State Department, as usual. I will tell you what, flip a coin, Harry. MR. WHITE: I have got a double-headed coin. MR. BELL: Harry, I thought we were going to send him to some other country after January. MR. WHITE: We were before the war started, to Bolivia, but under the circumstances-- H.M.JR: Harry, you decide and take full responsibility Regraded Unclassified 189 - 20 - vis-a-vis the State Department. MR. WHITE: All right, I will do that. H.M.JR: I hope you are through. (Laughter) MR. WHITE: How can I go on after that? I happen to be through. H.M.JR: That is all, Harry? MR. WHITE: I am through. H.M.JR: Thank you. MR. BELL: This is the vote on the Library of Congress thing. We have already agreed to it. H.M.JR: All right. MR. BELL: Here is Mr. Straus of New York who donated twenty-five thousand dollars to the Government. I thought you might like to sign the letter. H.M.JR: Straus? MR. BELL: Yes, he is the German in 1915 who came over here and has since become a citizen. He doesn't want any publicity or doesn't want his name to be mentioned. H.M.JR: I would prepare a letter and send a copy of that to Mr. Roosevelt. MR. BELL: Yes. H.M.JR: Have you got the Russian and English war debt thing for me? MR. BELL: I will have it at ten o'clock tomorrow. MR. THOMPSON: In view of the fact that Chief Deasy 190 - 21 - will not be with us full time, I am trying to get an engineer officer and the chief of engineers has this retired brigadier general. H.M.JR: Wonderful, fine. MR. THOMPSON: Here is the uniform for the messenger girls. H.M.JR: Now, that is important. MR. BELL: It looks important from this side. (Laughter) MR. SULLIVAN: Is that the uniform for the new windows? hostesses at the desks outside of the post office MR. BELL: Then I am in favor of it. Before that, I wasn't. MR. MORRIS: Do you get the same quality inside the uniform. MR. HAAS: The filler, you mean. (Laughter) MRS. KLOTZ: That is cute. H.M.JR: Yes. I asked them to draw one for me and the Treasury seal up on their caps and on their arms. MR. THOMPSON: Yes. MR. WHITE: They ought to have some gold and silver braid. H.M.JR: And a pocket. MRS. KLOTZ: They have two pockets below. H.M.JR: That is all right. Regraded Unclassified 191 - 22 - MR. HAAS: Air raid wardens, I guess. H.M.JR: That is fine. MR. THOMPSON: I think they look very chic. H.M.JR: All right. Class is adjourned. I will see you all at one o'clock. 192 December 31, 1941 10:05 a.m. Operator: Go ahead. HMJr: Hello. Justice Byrnes: Hello. Henry? HMJr: Yes. B: This 18 Jim Byrnes. HMJr: Good morning. I still haven't recovered from listening to that thousand dollar radio of yours. B: (Laughs) Twenty dollars. That's the way it's gone up in price on account of the war. Let me ask you HMJr: Yeah. B: .....are you busy right now? HMJr: I'm never busy when you call. B: Well, I'm wondering this. I want to talk to you and see if you and I can't save the boss some headaches on this alien property custodian. HMJr: All right. B: Have you got the newspaper fellows hanging outside your office if I came by there? HMJr: No. B: Well, could I see you there and I can be there in about seven minutes. HMJr: In seven minutes. B: Yes. HMJr: No, I tell you what we'll do. Do you know East Executive Avenue? We're on one side - the Treasury is - you see? 193 - 2 - Yes. And entrance. you come in at East Executive on the south South entrance. All right. Jr: And - it's all blocked, but I'll have a Secret Service man there to meet you to bring you in. All right. Fine, %r. Secretary. And let him come un my private elevator. All right. I'll be there in from five to seven minutes. Ckay. Regraded Unclassified 194 December 31, 1941 H.S.JR.: I said to Jimmy Byrnes, "Jimmy, how can É nen who is getting fifty to seventy-five thousand dollars as Chairman of Standard Gas and Electric, and who is the personal front and representative here for Victor Emanuel, be Alien Property Custodian?" He thought & minute and he said, "Well, I will tell you something, Henry. The President was ready to make Leo Crowley Chairman of the National Democratic Committee. He, being an Irish Catholic and coming from Wisconsin, would have been fine, but I told the Presi- dent he couldn't do it for that reason and objected, and that was why Leo Crowley didn't become Chairman of the National Democratic Committee." So I said, "Well, if you did that, as you say, for political reasons, how about for ethical reasons, that this man can't be this thing?" So he said, "You are right, but who is going to tell him that?" So I said, "I think you should. You know the President Lon't. Or Francis Biddle. lie said, "Well, You know Francis Biddle won't do it." So I sent for Haas. I remembered that when I went to visit the Lycoming plant I had had E whole study made of Victor Emanuel's organization. I showed it to him and I said, "On the right hand he has got Associated Gas and Electric and on the left hand he has got this New York Shipbuilding and Vultee and now Consolidated Air- craft with between five and seven hundred million dollars worth of war contracts,' and I said, "lie is smart enough to are Leo Crowley, Chairman of the FDIC, as his front in Washington.' Then I said, "Francis Biddle said this to me: "You know, I not only went Leo Crowley to be Alien Pro- porty Custodian, but I want him to look efter political appointments for me in the Department of Justice, and Jimmie Byrnes said, "Do you mean to say that he said Regraded Unclassified - 2 - 195 that to you?" I said, "So help me God." lie said, "That is the most outrageous thing I ever heard. I said, "If you want to run this thing in a nice, clean manner and have the man at the same time handle the politics, it won't be any better than A. Mitchell Palmer during the last world war." So he said, "Are you sure that Biddle said that?" I said, "Yes, Biddle said that." So he says, "Well, he certainly ought to give it up. So I said, "Well, if you make this a necessity on Crowley's part he will resign from the Alien Property Custodianship and then you can give the thing to the Treasury." I said, "I am putting all my cards on the table. I said, You will come to that anyway." lie said, "I think you are right." The last thing he said before he left was, "Well, I am going to bring it to the President's attention. He said, "I agree with you, it is a very bad situation because the Presi- dent had promised him the job." I said, "Well, you make those conditions and maybe Leo Crowley will decide he would rather work for Victor Emanuel than be the Alien Property Custodian. And that is why I think we have rot a very cood chance that it will stay here, and I told him, "Our boys can run this thing and they will run it well and there will be no trouble or scandal of any kind." He said, "I agree with you.' Regraded Unclassified 196 December 31, 1941 12:00 n. ALIEN PROPERTY CUSTODIANSHIP Present: Mr. Foley Mrs. Klotz H.M.JR: T think you are going to be pleased and I hope so. It took about an hour. Justice Byrnes came down here and he says this is the first person he has called on since he has been up in the Court. He gave me this talk about the President asked him to do this thing, and he wants to save the President a lot of headaches. He doesn't want to have to have a meeting over at the President's so he could decide whether the Treasury gets it and 30 forth and 80 on. The President made a suggestion that Leo Crowley be given this responsibility and that he be given an assistant from the State Department and an assistant from Treasury to help him administrate it, but he would get the whole works, as I understood it. He said that was out of the question and that his own feeling WAS that it should go to one place or the other. He said that Leo Crowley has said flat-footedly that he would not come to the Treasury, which he didn't tell you or me. MR. FOLEY: No. Well, I thought he would be reluctant to come here because of the situation. H.M.JR: Furthermore, that the trouble with the President is that the President has made Crowley this offer, promised it to him. Therefore, he feels as 8 compromise that he would like to recommend to the President that all of the work of the Foreign Funds stay in the Treasury, that Crowley be set up in the Department of Regraded Unclassified 197 - 2 - Justice as Alien Property Custodian to run these busi- nesses. If and when he needs any money, which we have frozen on the particular business, he will have to sign a certificate, which I said would have to come through requesting that all or part of the money of that business be released to him so that he could run that business because otherwise if they didn't do it that way Crowley could say he made a. failure of the business because the Treasury wouldn't rive him the noney. So I said, on second thought, both you and Acheson and Crowley, that to have a divided responsibility wasn't wise and that we here felt very, very strongly that we could do the best job. We have done it and there hasn't been a single complaint from the Hill, and Jimmie said, "That is right. I haven't heard any complaint from the Hill." He said, "There has been no complaint." He said, "I would hear it if there were any. I said, "This is the place to do it, and I feel that very strongly, but rather than to have a row with the President or make it more difficult for him, if that is what you are going to decide, all right." So the last thing he said was, "Well, I am going to make my recommendations to the President that it should be in one place and if he won't accept it, then I am going to do it." He said, "I feel, Jimmie Byrnes, that it should be in the Treasury." Well, isn't that the best that you could hope For? I mean, lacking his simply vettin- it, the whole thing? VP. FOLEY: Yes, I think 30, H.M.JR: Would you do anything different than I have doney 101. FOLEY: No, I don't suppose 30, no. H.E.JR: Be quite frank. ID: FOLEY: Well, I think that is all we can do. Regraded Unclassified 188 - 3 - It is a practical matter. H.M.JR: That is what you told me, Ed. You said you didn't want this committee of you and Acheson and Crowley to do it. MR. FOLEY: I think that is right, yes. H.M.JR: You told me you didn't want that committee lan any more. MR. FOLEY: Yes, that is right, and that never would work. That would just put all the headaches in the committee. H.M.JR: Well, this would leave Foreign Funds with the Treasury and they (the committee) would decide when they want to take over the businesses, which I told him I thought was all wrong. He said the President didn't understand the thing. "Well," Jimmie said, "I have tried to explain it to him, but the trouble is the President has made a promise to Crowley." lie also said the President wouldn't touch it while Churchill was here. He couldn't have been nicer. lie said, "I would like to see it here in the Treasury, but you see this fellow Crowley, he tells you, 'I won't come to the Treasury." MR. FOLEY: Well, I can understand that. H.M.JR: And I told him, "I don't want another Jeff Conner situation,' and he said, "You shouldn't have it,' well, that is it. MR. FOLEY: C.E. H. JR: Do you think it is so bad? 10% FOLEY: Well, I think we lost it. S.M.J.: Do you think so? Regraded Unclassified 199 4 MR. FOLEY: Yes. H.M.JR: I am not so sure. There was talk of taking the whole thing out and setting up an inde- pendent agency. I don't think we have lost it. Let's he practical. The President of the United States publicly offers Leo Crowley Alien Property Custodian- ship. What might have happened to it is, he might have taken the whole Pehle organization over there with him. MR. FOLEY: Well, I don't think they would go. I mean, John wouldn't go. H.M.JR: No, but I meant the whole - all the money, MRS. KLOTZ: Well, supposing they nut it here in the Treasury and Leo Crowley refuses to come? Then what? H.M.JR: Well, Byrnes will be tickled to death. MRS. KLOTZ: That is it. It may come out that way. H.M.JR: May, yes, Oh, it may? Yes, it may. MR. FOLEY: I mean, the difficultyis that when you put one phase of the property in one department and the rest of the properties in another department because money, securities, businesses, they are all property in which foreigners have an interest, you are getting the thing so inter-related and so tied up together, it is hard to break it off and it all ought to be in one place or the other. H.M.JR: I agree and that is what he is goin? to recommend, but he says as a compromise, would I 70 elong, end there was only one answer. V. FOLEY: Yes, I think as a practical matter-- II.M.JR: Suppose I said no, I wouldn't? Then he would say, "Well, do you mean to say you are going to Regraded Unclassified 200 - 5 - take the President's time to see all these people and you are not going to let me, a Justice of the Supreme Court, settle this thing?" That was his attitude, and he is right. But the President hasn't told him yet, you see. He has been unable to get any answer from the President. MR. FOLEY: I see. H.M.JR: Other than this thing which - about Leo and the two assistants. But he is convinced it should be in one place, and he things it should be here, and he said, "We have done a swell job here and it should be here. Don't take it too hard. The battle isn't lost.' MR. FOLEY: O.K. I called up Mrs. Lehman's secretary, and I told her we could do this under our general license and for her to get in touch with Kimball at the bank in New York, and we are calling Kimball and telling him she will be down. H.M.JR: You prepare an answer for me. Regraded Unclassified 201 December 31, 1941 When Jimmy Byrnes called this morning, he got on this question of Minster of Supply, and I said, "The President ought to have one man who raises the crops like Wickard, and one man who raises the money like myself, but I think he is going to have a committee do the supply thing." Byrnes said, "Henry, this will never work. The President must give it to one man. I Regraded Unclassified 201 December 31, 1941 When Jimmy Byrnes called this morning, he got on this question of Minster of Supply, and I said, "The President ought to have one man who raises the crops like Wickard, and one man who raises the money like myself, but I think be is going to have 8. committee do the supply thing." Byrnes said, "Henry, this will never work. The President must give it to one man." Regraded Unclassified TO: 202 Mr. Klotz 12/31'41 4 p.m. The original copy sent to the Secretary along with this letter I am taking with me to hand to Mr. Justice Byrnes - as he suggested. The attached original for your files is an exact copy of the Order sent to the Secretary. Ed Foley diamy MR. FOLEY 203 Supreme Court of the United States Mashington.D.C. December 31, 1941 Dear Henry: In case the President should decide not to place All property in the Treasury, but resort to a compromise along the lines I discussed with you this morning, 1 want Ed Foley's opinion of the attached Order. I know Ed does not approve the policy, but I want to know what objection he would have to the language as carrying out the policy WE discussed. Ask Ed, after reading, to come to 586 ne or telephone me, returning the Order. sincerely yours Janes Trate F. BYRNCE. 3 Byrnes Hon. Henry Morgenthua, Jr., Treasury Department, Regraded Unclassified 203 Supreme Court of the United States Mashington. D.C. December 31, 1941 Dear Henry: In case the President should decide not to place all property in the Treasury, but resort to a compromise along the lines I discussed with you this morning, I want Ed Foley's opinion of the attached Order. I know Ed does not approve the policy, but I want to know what objection he would have to the Ianguage as carrying out the policy we discussed. Ask Ed, after reading, to come to see me or telephone me, returning the Order. sincerely yours Janes Thates F. BYRNES. 3 Byrnes Hon. Henry Morgenthua, Jr., Tressury Department, Regraded Unclassified 204 12/31'41 EXECUTIVE ORDER vesting IN DESIGNATED OFFICERS CERTAIN POWERS AND AUTHORITY WITH RESPECT TO PROPERTY IN "HICH TEME IS & FOREIGN INTEREST By virtue of end pursuant to the authority vested in no 12 President of the United States and particularly by the "Truding with the Enemy Act," approved October 6, 1917 (40 Stat. 4111, 32 emended, and the "First Wer Powers Act, 1941," proved Dickmber 13, 1941, it is hereby ordered P.B follows: Section 1. Vesting and Administration of Enemy Property. (=) Except 08 provided in Executive Order No. 3389 of April 10, 1947, is heretofore end herein smended, all the powers vested in me by the rovisions of the Trading with the Enemy Act, as amended, and of Title III of the First War Powers Act, 1941, in 50 for DE they to enemy property or property owned or controlled by any national or ni tiongle of any enemy country, are hereby delegated to the Director of Enemy Property, to be exercised by him under the reservision of the Attorney General through the Division of Enemy Property of the Department of Justice. (b) Any enemy property shall vest in the Director it visa lime or times and upon such terms and conditions to he my |TO- mile brauent to rules and regulations issued by the Attorney Courl 1th the aprovel of the Prevident. The Director shrll take 11 necessary steps to secure title to and possession of or control the Luch apperty and shall hold, use, administer, liquidate, sell for 1se decl with such property in the interest of and fee the of the United Sta tes in accordance with rules and regulations 10st - the 11/mmy General. Regraded Unclassified 203 Section 2. Supervision of Cert in Business Enter rises, If the Director determines, after investis tion, that any business entergrise is subject to the influence of an enemy or of 4 national of 5th enemy country, he may appoint E supervisor for such business enterprise end such supervisor shull, subject to the direction and control 02 the Director, regulate end supervise the business and 20 In of such business enterprise to the extent necessary to Tel regulato, restrain, eliminate or control such influence 01 to aid in the successful prosecution of the her. Section 3. Amendment to Executive Order No. 5389, as ( ) Executive Order No. 8389, as -mended, is further which by addring -1 the end of Section 3 thereof no.. section :- ding LE follows: 3(a) All overs vested In me by Section 3(a) of the "Trading Fith the Enemy /ct", sa emended, are hereby delegated to the Secretary of the Tressury. (b) Executive Order No. 9339, 02 amended, is further and by excepting from its provisions: (1) enetry property, and tr no clinna rel ting thereto, vhenever such proporty shall, ur- - to the provisions hereof, have vested in the Director, (c) my roperty or business enterprise, and trans ctions rel ting thereto, upon certification of the Attorney Gener. 1 to the secret ry or the Transury that t cll or part of the stock thereof or other Interest therein has vested in the Director bi that the exercise ⑆ to conferred under said Executive Order No. eyes, RS 16 no longer necessary with respect reto; and (3) the and property of business enterprises for Vrich, - 47 hinday the Pirector the supervisor. Regraded Unclassified 208 Section 4. Investigations, Records and Reports. The Director is authorized, to the extent necessary in his judgment to enable him to carry out effectively the provisions of this Order and under such rules and regulations 8.5 the Attorney General may prescribe, to make investigations, to require any person to keep records and furnish information under oath at any time or times, in the form of reports or otherwise, and to require the production of and, if necessary to the national security or defense, to seize books of account, records, contracts, letters, memoranda or other papers. The Director shall have access to all reports and other information which have been obtained by any agency of the Government mulating to ny national, or to any pro erty which may be owned by any national, or to any business enterprise which may be subject to the influence of an enemy or of a national of an enemy country, THE WHITE HOUSE Regraded Unclassified 207 December 31, 1941 2:30 0.0. Justice - Hello. Henry? TAJPI Yes. à: Jim syrnes. Henry talking. in This 1= Mr. Justice, Jemes F. Byrnes. (Loughs) Yeah, I know. B: OH, : dion't think you not my voice. Let ne tell you what I reng you for. : I know your voice. in You don't mind - you didn't mind my telling Harry Hopkins about this Standard thing? TW# Standard? 3: Yeah, gas. "Wr: 10. All right, good. I was talking to him and I told him that if he got 8 chance tonight, that I thought he ought to call the chief's attention to this thing with the thought that he ought to 83% him to cut loose from one or the other. We Yes, And We: bat die Harry think? B: Well, he agreed. He sold, "I think that's about right." He said, "It looks to me like he wouldn't want to do that. No: Yeah. and I told him then that when the Président has a Regraded Unclassified 208 - 2 - moment's leisure, and he could - he might do it better than either you or me. HWr: Did Harry think that that was unressonable? ét No. I told him that you were very reasonable about it - about the whole thing - he knows all about it. H/Jr: He does? 3: Yeah, Hopkins does. H/Jr: But you told him that I was willing to go along. 8: I told him that if the chief wanted to go through, that you had agreed on what we thought would be the best way if he had to divide it, that you thought that it ought to - because of the records in the Treasury - that it ought to stay in the Treasury, but that if he wanted to compromise about for peace in the femily, that you were entirely reasonable and would agree to the proposal that I had made as about the best thing to compromise on. HWJr: That's right. 2: But nevertheless, that you called attention to this fact in that I thought too that it was a matter of importance and that in all of the things he had on him he may have overlooked it, and to make sure that he had given thought to it and to the position that Eldile would be in HMJr: That's right. B, 50 that it wouldn't be eaid that he had Just overlooked 1t. HMJr: That's right. B: And that pute it up to him, and I think that Hopkins has the best chance to do it. HMJr: Fine. B: Yow, I sent to you awhile ago by messenger HWJr: I got it. Regraded Unclassified 209 - 3 - in and I thought that you'd ask Ed HKJr: It's already in Foley's hands. B: Oh, all right. It got there quicker than I thought. And if you'd eek Ed to send it back to me ressonably - - now, that's Justice. That's why I want Ed Foley - I got after Biddle saying that if this should happen to be done, I want something in my possession repre- senting your views as to the way it was carried out. HMJr: Oh, Justice drew that? in Right. That's what I wanted to tell Foley when he came to see me, end therefore I went Foley to 60 over it - I changed in there one word to have the Attorney General make the request. HWr: Yeah. B: Because he wanted - he had the custodian. HMJr: Yeah. 3: But that's Biddle. HMJr: Yeah. Bt And therefore I want Foley to look over the language. So far as I could see in reading it, it 1s a com- pliance with the request that I made of him. HXJr: Fine. B: But nevertheless, Ed can look at it from his angle: and then if he'd tell me about it, I can stick it in the desk, and if the chief wants to see it, we can give it to him. HVJr: How soon do you want to see Ed? 9: Well, I was hoping that If Hookins could talk to the President about the thing tonight, that he might take it uo before Churchill 60t back. HMJr: Well, then you'd like to see Ed today yet? B: Yeah, I'd love to. Regraded Unclassified 210 - 4 - HXJr: I'll tell him that. a Yeah. He may have - if he isn't on other things, ask him to look at it, because it won't - he's looked at 80 many of them, I know, he can HNJr: I'll tell him to look at it and B: If he has any viewe, to come down here and tell me what they are and we'll see If we can get to- gether. HKJr: Yeah. 2: If it's done, I would like to tell the President that regardless of different views on policy, that you and Biddle do not want to have him holding 8 trial about it and that this, whatever it 18, would represent the views of the procedure by which the compromise policy could be effective. HWJr: Would it be convenient if I have Ed un there, say, by four o'clock? B: Fine. HMJr: I'll tell him to be at your office at four. B: Fine. H/Jr: Thank you 80 much. 5: Good-bye. Regraded Unclassified 211 December 31, 1941 3:40 p.m. Hello. Justice eype=31 Yes. adr: Jimmie. Yes, Foley and Pehle are here with this copy of a draft from Justice, you see? 3: Yes. MMr: There's no justice in that draft. that does it 607 SWr: Well, it eives them complete control; and Foley will come up, but I just didn't want him to take the entire brunt, you see. And he'll point out to you where it's absolutely That's all right. EWN It doesn't do what you and I were talking about. H. Tell him to come up here. Birth But I dien't want to leave the brunt on him. 110. I'll be glad to go over it with him to see just exactly what it does to. SWr: But from our standooint, there's no Justice in that order. .ell, you tell him to come out here and I'll see want criticisms he has and then see if I cen't fix it to accord with what you and I talked about. well, if you can do that, I'll be satisfied. All right. All right. Good-bye. Thank you. Regraded Unclassified TREASURY DEPARTMENT 212 INTER OFFICE COMMUNICATION DATE December 31, 1941 10 Secretary Morgenthau 100M E. H. Foley, Jr. I had a one-hour conference with Mr. Justice Byrnes relative to the alien property order which he submitted to you today. Pehle and Bernstein were with me. I described to Byrnes the compromise agreed to at the luncheon conference and said that our draft of the Order faithfully carried out that agreement. I told Byrnes that the Order which Justice drafted and which Byrnes sent to you today represented no compromise at all, but gave to Justice the full control over practically all property which is now frozen. In particular I pointed out: (1) The vesting provision was not limited to enemy business enterprises in the United States but covered any enemy property, including bank balances, sold, securities, etc. of any enemy or invaded country or their nationals. (2) The Order also gave the Alien Property Custodian authority to supervise any blocked business enterprise whenever he deemed it appropriate. At first Byrnes said that it was not intended under the order to give Justice the power to deal with the gold or dollar balances of foreign governments, banks, stc. As We discussed the matter, Byrnes concluded that the order was no compromise, and was intended to give Justice and Crowley the full power to deal with all of the blocked property when they were ready to do so, and that when they were ready to deal with the property the Treasury was to have nothing whatever to do with it, Regraded Unclassified 213 - 2 - With respect to our compromise proposal, Justice Byrnes stated that he thought the Committee idea was unworkable and that one man should be tagged with the responsibility. Byrnes quoted Biddle and Crowley as saying that they would have nothing to do with the alien property if the committee idea prevailed. Justice Byrnes seemed to indicate that he would not submit either our compromise order or Justice's order to the President, but would simply tell the President that the responsibility for dealing with all the property should be in one place and it would be for the President to decide between Justice and the Treasury. E.1.7h Regraded Unclassified