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Volume 488, January 24 – January 26, 1941
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DIARY Book 488 January 24 - 26, 1942 Regraded Unclassified - - 1 , Book Page Airplance Aircraft despatched - British Air Commission report - 1/26/42 488 135 Shipments to British Forces - Kamarck report - 1/26/42 137 - = - Brazil See Latin America British Purchasing Mission Federal Reserve Bank of New York statement showing dollar disbursements, week ending January 14, 1942.. 141 Business Conditions Hass memorandum on situation, week ending January 24, 1942 228 - C - Canada Dollar exchange problem discussed in letter from Clark (Deputy Minister of Finance) - 1/24/42 59 Cancellation of $1 billion of Great Britain's outstanding debt to Canada and continued aid up to $800 million per year without repayment obligation announced - 1/26/42 146 a) Prime Minister's speech announcing: See Book 489, page 208 China (Frese, Walter F. (Taylor, William H. Wives notified of present status - 1/24/42 54 Loan: Summary of conclusions and considerations - Coe memorandum - 1/24/42 61 Congressman Somers (New York) resolution setting up Committee to investigate benefits resulting to China from extension of United States credit, etc. : Correspondence between Treasury and Somera - 1/26/42 175 Currency, United States See United States - D - Defense Savings Bonds See Financing, Government Regraded Unclassified - 2 - Epstein, Henry (Solicitor General of New York) Book Page See Revenue Revision Exchange Market Resume's - 1/24/42, 1/26/42 488 76,272 - } - Financing, Government Defense Savings Bonds: Field Organization News Letter, No. 36 - 1/24/42 46 Unfilled orders at Federal Reserve Banks and Post Offices, January 12 to date - 1/24/42 47 Stock of Series E on hand, January 15 to date - 1/24/42 50 Great Lakes Steel Corporation plant, Boorse, Michigan, presented with Minute Man flag by HMJr - 1/25/42 91 Organization chart - 1/26/42 213 Morris, Dave H., Jr., authorized to designate issuing agents - 1/26/42 215 Comparative statement of sales during first 21 business days, November, December, and January 218 Taxation of Defense Savings Bonds - Vandenberg- HMJr correspondence: See Book 490, page 77 Foreign Funds Control Internal Revenue, Bureau of: Availability of information contained in TFR-300 reports for enforcement of tax claims - Foley asked for ruling - 1/24/42. 57 Pilot Reinsurance Company - Foley report - a 1/26/42 211 Frese, Walter F. See China - G - Great Lakes Steel Corporation See Financing, Government: Defense Savings Bonds " Speeches by H/Jr - I - Internal Revenue, Bureau of See Foreign Funds Control Iraq Exchange control measures recently adopted by Government and request of Exchange Control Committee for list of dollar holdings of residents of Iraq as reported on Treasury Form TFR-300 - 1/24/42 67 Regraded Unclassified - L - Book Page Latin America Brazil: Rio Conference: See also Book 483 Notes to date - Coe memorandum - 1/24/42 488 56 Stabilization Fund Resolution: Resume' of cables - 1/25/42 242 Minister of Finance Dr. Arthur de Sousa Costa to visit United States - 1/26/42 266 Lausche, Frank J. (Mayor of Cleveland) See Revenue Revision Lend-Lease Operating report for week ending January 24, 1942 52 British funds (additional): Best method of securing discussed by HMJr, Halifax, and Phillips - 1/26/42. 132 - M - Military Reports Reports from London transmitted by Halifax - 1/24/42, 1/26/42 77,274,277 War Department bulletin: Japanese warfare - notes on - 1/24/42 80 Coordinator of Information report: Germany - - interview with former American directors of General Motore plant at Opel - 1/26/42 280 - N - National Youth Administration Equipment on hand: Mrs. FDR suggests "using and not scrapping" - 1/26/42. 222 - P - Pilot Reinsurance Company See Foreign Funds Control - R - Revenue Revision Tax-exempt securities proposal in HMJr's speech before City Club, Cleveland, Ohio, January 24, 1942: Rouse tells of misunderstanding in New York City - 1/26/42 147 Henry Epstein-Treasury correspondence 150,151 a) Lehman--HMr conversation - 1/27/42: See Book 489, page 2 b) Lausche (Mayor of Cleveland) may be asked to organize support for Treasury proposal - 1/27/42: Book 489, page 22 c) Conference: present: HMJr. Kuhn, Sullivan, Foley, and Paul - 1/28/42: Book 489, page 272 1) Proposed wire to Epstein: Book 489, page 289 Regraded Unclassified - R - - (Continued) Revenue Revision (Continued) Book Page Tax-exempt securities proposal in HMJr's speech before City Club, Cleveland, Ohio, January 24, 1942 (Continued): Tax-exempt organizations discussed by HMJr, Paul, Foley, Kades, Graves - 1/28/42: Book 489, page 291 HMJr's former statement "for the future, I an opposed to making it retroactive" located by a newspaper man - 1/29/42: Book 490, page 74 New Hampshire Governor Blood opposes: Book 490, page 76 Taxation of Defense Savings Bonds: Vandenberg- HMJr correspondence - 1/29/42: Book 490, page 77 Letters following speech reviewed by Mrs. Forbush - 1/30/42: Book 490, page 203 Disney film discussed at 9:30 meeting - 1/26/42 488 115,119 a) HMJr congratulates Disney - 1/27/42: Book 489, page 56 b) HMJr suggests posters from - 1/28/42: Book 489, page 269 Joint Committee: Cooperation by Treasury until it becomes apparent there's no chance for agreement or progress recommended by Sullivan - 1/26/42 117 Ruml plan ("Pay As You Go"): Mrs. HMJr's comment - 1/26/42 162 Roosevelt, Franklin D. See Speeches by HMJr: President's Birthday Ball Ruml, Beardsley See Revenue Revision - S - Somers, Andrew L. (Congressman, New York) See China: Loan Speeches by HMJr City Club, Cleveland, Ohio: Draft 1 Reading copy - 1/24/42 19 a) Comment in City Club publication "The City".. 45 b) Tax-exempt securities proposal and Epstein opposition: See Revenue Revision c) HMJr thanked by City Club - 2/3/42: See Book 491, page 409 Great Lakes Steel Corporation plant, Ecorse, Michigan, presented with Minute Man flag by HMJr - - 1/25/42 91 President's Birthday Ball: Kuhn's pencilled notes. Back of 92 Drafts 181,186 Reading copy 191 a) Committee thanks HMJr: Book 489, page 89 Switzerland Difficulties of American Legation, Bern, in securing Swiss france for dollar drafts discussed in letter from American Legation - 1/24/42 70 - T- Taxation Book Page See Revenue Revision Taylor. William H. See China - U - Unemployment Relief Work Projects Administration report - 1/26/42, United States 488 224 Currency control outside of territory - Coe memorandum - 1/26/42 239 - W - Work Projects Administration See Unemployment Relief Regraded Unclassified ---- 1 January 24, 1942 The Secretary went over this draft with Mr. Kuhn at the Statler Hotel in Cleveland at 4 p.m. today. 2 It 1s a good and wholesome experience for any official from Washington to come here to Detroit to meet a great audience of automobile workers. We in Washington are much too accustomed to think that we sit at the very center of the war effort. For the past few weeks we have seen our Capital City become, in a sense, the capital of the world, the scene of wartime planning on a world-wide scale. The officials and admirals and generals of many countries are working together in Washington at this very moment, planning the military, naval, and economic strategy that will bring Japan and Germany to their knees. Regraded Unclassified - 2 - 3 Yet all our strategy, no matter how brilliant, cannot accomplish its decisive purpose until the materials of victory have rolled from America's assembly lines. All the individual daring and bravery of our men in uniform cannot win the war unless they are backed by the mass production of the implements of war. The real heart of the war effort 1s, therefore, not in Washington but right here in your workshops and factories. The big push begins here. The great offensive against the Axis is under way here in your State of Michigan, next door to you in Ohio and Pennsylvania, and wherever the skill and energy of working men and women are producing the weapons of victory. Regraded Unclassified 4 - 3 - You in this hall are in the front lines in this phase of the war, and I am genuinely proud to be here among you today. This is not the first time that I have been privileged to visit the Detroit industrial area in recent months. Some of you know that I had the pleasure of attending a meeting of shop stewards at Pontiac in November. I came back to Washington from that meeting heartened and invigorated as seldom before. In that one evening I heard more sound common sense and more realistic judgments than I had heard in many meetings, in Washington or elsewhere. Regraded Unclassified 5 - 4 - From that day I have been convinced that American labor has been ahead of all of us in its willingness to produce armaments to win the war, whatever the sacrifices, whatever the consequences. There is every reason for American labor to be out in the forefront in 1ts understanding of the war and in its response to wartime needs. For this 1s a people's war, to an extent never before known in any of the great struggles of human history. This war is a people's uprising against tyrants who are trying to push us back into the Dark Ages. It is being fought by the people and it can only be won by the people's efforts, by your efforts. Upon your skill, your sweat, your willingness to dedicate yourselves to war production, the ultimate outcome will very largely depend. Regraded UInclassified 6 - 5 - In the second place, this is a war against the enemies of the free labor movement in this and every other country. Nobody needs to stand before any group of labor men and women in this country to tell it what Fascism means. When the Blackshirts bullied their way to power in Italy twenty years ago, when others praised Mussolini for making the trains run on time, American labor instantly knew Fascism for what 1t was. When Hitler crushed the trade unions in Germany, you of American labor knew at once that he would crush yours 1f he ever had the chance. Regraded Unclassified - 6 - = Labor has never been dazzled by the military accomplishments of the dictators. Labor has never made the mistake of imagining that theirs was in any sense a "new order" or that their medieval tyrannies could supply us with any guideposts to our own future. Now, at last, the life-and-death struggle has come, just as the rank and file of labor foresaw that it would. As Hitler sa1d-- truthfully, for once:--"two worlds are in conflict; one of them must break asunder." We can tell him now that it 1s his world, not ours, which will break and die. Regraded Unclassified - 7 - 8 But there is E third and still more compelling reason why labor has an immeasurable stake in this war. Labor in this country and elsewhere looks to a better world, a freer and a more secure future. Everything that labor has fought for a hundred years to attain will be lost forever if the dictators should win. Everything that labor seeks, for its children and its children's children, 1s bound up with the success of the free countries in the present struggle. I think I can describe those aims in & very few words by telling you about a great picture in the Grand Central Station in New York. It 1s a unique picture because it happens to be the biggest photo-mural in the world; we of the Treasury put it there to help the sale of Defense Bonds and Stamps, and we Regraded Unclassified 9 - 8 - made it big enough to cover an entire wall of the Station concourse, so that everybody could Cee it. But what makes me so proud of it is not its size, but its message and its spirit. The first of its three huge photographs shows an American farmer and his land, and the caption under it says, "That we may defend the land we love." The second is a panel of children's faces, with the caption, "That these may face a future unafraid." And the last shows a worker looking up at a factory, and under it is the caption, "That we may build a better world." 10 - 9 - Those happen to bè the objectives of the Defense Savings effort, but they also happen to he objectives of American labor, and they are the greatest of the aims for which we are fighting this war. It may seem unfeeling of me even to mention Defense Bonds to an audience in which so many of you have temporarily lost your Jobs, suddenly and through no fault of your own, because of the change-over to war production in the automobile industry. I know what you in the Detroit area have been suffering in temporary unemployment, and I wish as fervently as you do for the day when your plants will be back in full production again, and when those of you who are walking the streets will be back at your benches again. Regraded Unclassified 11 - 10 - Certainly I would never ask or expect any of you who are in trouble to buy Defense Bonds or Stamps. The country does not ask it or expect it of those who must wait for weeks and sometimes months to start work again. We have a slogan at the Treasury: "Let's make every payday Bond Day." That does not apply to those who have no payday and no regular income. The Treasury will never ask anyone to buy Defense Bonds 1f it means taking food from his children or clothing and shelter from his family. The other day a Chicago advertising agency sent us an elaborate sales promotion plan based, frankly enough, upon (and these were its words) "the traditional dread among the American people of being held up to public ridicule and scorn." Regraded Unclassified 12 - 11 - The 1dea of this misguided plan was to label as a slacker everyone who did not buy a bond. We replied that we disapproved and did not countenance anything of the sort. We replied that we did not believe in the effectiveness of intimidating Americans, and that if any such tactics were proposed, we would avoid them like the plague. But for those who do receive regular pay, those who have good jobs at good wages, there is a greater need than ever to "make every payday Bond Day." You who are working in the Detroit area have just seen with your own eyes what a great economic dislocation can bring. Regraded Unclassified 13 - 12 - You have seen friends and neighbors hard at work one day and thrown onto their unemployment insurance the next, as part of the price of preparing this country's factories for war. You know that those who have built up a reserve of savings are better able to meet an unforeseen shock than those who have not guarded themselves against 1t. Isn't it better to be prepared in time? Isn't it better to safeguard your future by setting aside a part of your earnings now, every week and every payday? Your country needs the money, and you need the security that these double-purpose bonds will bring. 14 - 13 - I am often asked three questions about Defense Bonds which must, I am sure, be in your minds. The first is, "Can I get my money out if I need 1t?" The answer 18 yes--any time after sixty days from the date you bought your bond. The second 1s, "What happens if I lose my bond?" The answer 18 that we at the Treasury have a record of every bond and its owner; we can supply you with another if you identify yourself, and we will be glad to keep your bond for you at the Treasury if you wish us to keep it in the safe for you. The third question is, "Will I lose money on these bonds the way so many people lost on the Liberty Bonds?" The answer is that you can't lose. 15 - 14 - These bonds, unlike the old Liberty Bonds, are registered in your name. You cannot trade them on the market or offer them in payment of a debt. You will always get back at least one hundred cents on every dollar, and the longer you hold them, the more they will grow in value. Moreover, Defense Bonds not only help to pay for the guns and tanks and planes that will win the war, they also pay for labor, your labor. Every time you buy a $75 bond you pay for the services of a skilled worker for an entire week; every time you buy a Bond or even a Defense Stamp you are enabling the United States Government to pay you for your work, and you are hastening the day when Regraded Unclassified 16 - 15 - our fighting men will be able to carry the war to Tokyo and Berlin. About a month ago two of your brothers in the Dodge local came to see me in Washington, to discuss ways and means of hastening the conversion of their plants to war production. We accomplished something, partly because those two men had the initiative to come to my office, partly because of the fine cooperation of Mr. Patterson, the Undersecretary of War. But what I shall always remember about that meeting is the spirit that your representatives showed. I argued then, and I have said it for months to everyone who would listen, that the only way to arm this country in time was to order the 17 - 16 - complete and immediate stoppage of all automobile production, and the quickest possible conversion of the plants. Your representatives knew that that would mean immediate unemployment for great numbers of men; yet when I asked them how they felt about it they answered, without a moment's hesitation, "We can take it; we want it done." That was just a sample of the spirit we at the Treasury have found among American labor ever since we started the Defense Savings program. It is a sample of the spirit that the whole country has discovered in the weeks since Pearl Harbor. It 1s the spirit that is going to win the war. 18 - 17 - I said in Cleveland yesterday that the pioneers who settled this Middle Western country did not let danger or hardship frighten them. They regarded every danger as a challenge, every hardship as an adventure. That is the spirit with which you are meeting this crisis, the greatest that free men have ever undergone. You workers of Detroit are in the forefront of the fight, and you will see it through until the fight is won. 19 READING COPY SECRETARY MORGENTHAU'S ADDRESS Before the Forum of the City Club of Cleveland Statler Hotel Cleveland, Ohio, 1 p.m., E.S.T., Saturday,Jan,24,1942 30 I am very happy to be with you in Cleveland this afternoon, because this great city, far from any battle line, is one of the places where the outcome of this war and the future of this country 1s being decided. Here in the Cleveland area you have a great concentration of the forges and the assembly lines which are America's real front lines at this moment. Day and night your industrial wheels are turning, your hammers pounding, your fires burning, your workers toiling, to win the war. You in Cleveland are showing what our free people can do when they are aroused, and I take my hat off to you. Regraded Unclassified - 2 - - 21 You and all the others of our 130 million people have begun to speak in the only language that tyrants understand -- the language of tanks and planes, guns and ships, and men with the courage and conviction to carry that message all the way to Tokyo and Berlin. Pause What has happened, I wonder, to those who used to say that the pioneer spirit was dead? The pioneers who opened Ohio did not let danger or hardship daunt them; they regarded every danger as a challenge, every hardship an adventure. You in Cleveland have not lost that spirit. It 1s alive and strong, here in your State and in every State. - 3 - 22 Already we have answered the shock of Pearl Harbor by dedicating ourselves to the greatest job that ever confronted our country. We have shown that we can take marching orders by accepting and applauding the great task the President set for us the other day, the task of making such an overwhelming number of weapons that the Nazis and the Japanese will be utterly unable to match us. If any further proof of our determination were needed, let any of our enemies look at the magnificent response to the sale of Defense Bonds and Stamps in the past few weeks. The total has now passed three billion dollars, and the response in January has set new records in every direction. Regraded Unclassified - 4 - 23 . Whatever test may be given to us, we are going to surmount it. Whatever hardship may be in store for us, we are ready to take it and give it back to our enemies a hundredfold until victory 18 won. That was the pioneer way in the old Ohio days; that 1s the American way today. That 1s the way we shall keep faith with the pioneers and with the promise of a better world which they foresaw. We have only just begun to fight; we have only begun to learn what this war effort will involve. In the near future, for example, we shall face a new challenge of a kind which I think too few of us have planned for or even considered. - 5 - 24 That is the challenge of paying for the war. It will come first on March 16th, when fifteen million Americans will be called upon to pay income taxes for the waging and the winning of this war. It will come later in the payment of the vastly increased war taxes which we shall have to impose upon ourselves in the new financial year. I am confident that we shall meet those new requirements, and any requirements, without flinching. We know, as I have said before, that it's a million times cheaper to win a war than to lose one. - 6 - : 25 This 18 not the time for me to discuss the new tax program. The President has said we must have nine billion dollars in new revenue. We have no more right to fall short of that goal than we would have to fall short of the President's announced goal of sixty thousand planes and forty-five thousand tanks in 1942. It will produce hardship; of course it will. Since when have the American people been daunted by hardship? It is part of our American tradition to face the facts, however harsh the facts may be. You know, without my saying 80, that we cannot divert half of our national income to war production without "dislocating" our economy from its customary routine. - 7 - 26 You know, without my saying so, that we cannot spend forty billion dollars in this year 1942 without "disturbing" ordinary business and ordinary living. You know, too, that we cannot fight and win a life-and-death struggle, a war that encircles the whole planet, without discarding old habits, old fears, old notions of business-as-usual. We are, however, entitled to lay down just this one premise: that whatever hardship may be in store, we shall face it together; that it shall be distributed fairly and borne by all in their fair proportion, in accordance with their ability to carry it. - 8 - 27 And that brings me to the chief subject I should like to discuss this afternoon. This Administration has tried hard for years, and with a good deal of success, to remove tax injustices. Such injustices are of two kinds: those which permitted some to escape their fair share of tax payments, and those which bore down too harshly upon certain taxpayers. For eight years at the Treasury I have fought against the remaining vestiges of unfairness on the statute books, and in almost every one of those eight years Congress has closed some loopholes and enacted some remedial provisions. - 9 - 28 In the Revenue Act of 1937 there was a whole series of reforms which made it impossible, among other things, for anyone to escape taxation by incorporating his yacht or country estate, or by creating a personal holding company. These devices have now been outlawed. Since then the struggle to perfect the statutes has gone on without stopping. Pause Now that we are at war, the fight becomes more necessary than ever. The President has spoken again and again of the need of making our taxes not only effective but equitable as well. Only the other day, in his Budget message, he repeated that "a fair distribution of the war burden is necessary for national unity." - 10 - 29 War knows no avoidance. As the President said, "When our enemies challenged our country to stand up and fight they challenged each and every one of us." Every one of us has a direct stake in the outcome of this war, and each of us must, therefore, pay his fair share of the cost. Yet I am sorry to say that the present tax structure still falls short of the requirements of equity and the insistent needs of a nation at war. In spite of all our efforts of recent years our tax laws are still weakened by loopholes; it 18 still possible for a few thousand individuals to escape their fair share of the burden and to pass their share onto the shoulders of the rest of us. - 11 - 30 I asked our Treasury tax experts the other day to compute the total amount of revenue that had to be passed onto the shoulders of other taxpayers because of the existence of loopholes in the law. The answer was almost a billion dollars, about one-eighth of the entire receipts from income tax in the fiscal year that ends in June. How can the war efforts of our people reach their peak level until such a situation has been remedied? Can we be sure of getting the maximum response from everyone until everyone feels that the tax laws are as fair as it is humanly possible to make them? - 12 - 31 In wartime, when we are drafting young men to fight and risk their lives for their country, any special privilege for a few becomes inexcusable. So that you may know exactly what I have in mind, I should like to turn now to four specific examples of tax loopholes -- and I could name a great many more than four -- which have been allowed to remain on the statute books at the expense of the majority of our taxpayers. Tax-Exempt Securities The first is the continued existence of tax-exempt securities. At present, as you know, the interest from State and municipal bonds is exempt from Federal income tax. Regraded Inclassified - 13 - 32 This provision gives wealthy taxpayers a possible refuge, not from some income tax, but from all income taxes. No matter how much money may be needed for the war, no matter how high the tax rates may be for others, a taxpayer 1s not obliged to contribute anything in this hour of his country's peril, if only he can afford to lay his hands upon a sufficient amount of tax-exempt securities. The Federal Government last year took a first step toward remedying this situation by stopping the issuance of tax-exempt Federal securities. Regraded Unclassified - 14 - 33 Now that we are at war, now that the revenue needs of the Government have soared beyond all previous conceptions, it 18 high time, in my opinion, to tax the income of State and municipal securities -- not only the income from future issues, but also the income from those issues now outstanding. The existence of this loophole costs the Treasury, at present tax rates, about $200,000,000 a year. Regraded - 15 - 34 Community Property A second source of tax discrimination exists in the nine States having what is called the community property system. In a community-property State the law assumes that the income of the husband belongs equally to the husband and wife. Yet since the husband has full management and control of the whole income, he 1s, in practical effect, in no different position from a husband in a non-community-property State. Both of them have the management and control of the income and in both cases the income is devoted to the family purposes. - 16 - 35 In a community-property State a husband who earns a $10,000 salary is allowed to report only $5,000 of that salary as his income and his wife may report the other $5,000 as hers. The two of them together will pay a total tax of $965. In the thirty-nine other States, however, the husband who earns a $10,000 salary must report that salary as his income and must pay a tax of $1,305 on it. Thus the married citizens of nine out of forty-eight States are able to escape their fair share of the load at the expense of the married citizens in the rest of the country. - 17 - 36 The existence of this community-property tax privilege costs the Treasury, on the basis of existing rates, about $55,000,000 a year. Separate Returns for Husband and Wife The removal of this community-property privilege alone would.not, however, reach a still more widespread form of avoidance. I refer to the method of separating a husband's and wife's investment income -- as distinguished from the income they get from salary and wages -- in such a manner that two families having virtually the same economic position pay vastly different taxes. Under the present law, if a husband and wife both have investment income, each pays a tax on the separate income. - 18 - 37 Because the income-tax rates are progressive -- that is, because the higher the income the greater is the rate of tax -- a family in which both husband and wife have investment income pays less tax, in many instances, than a family having the same amount of income all of which is received either by the husband or the wife. Let us take the case of á married taxpayer in the upper brackets having a $100,000 income from securities. Under the present law he would pay a tax of $52,748. But if he gives half of those securities to his wife, he will pay a tax of $20,926 and his wife will pay a tax of the same amount. - 19 - 38 This couple, at the cost of a moderate gift tax, has thus secured a perpetual reduction of $10,896 in its income-tax liability under present rates. The loophole could be closed and the unfairness to the great mass of taxpayers removed by taxing the investment income of each married couple as a unit. The use of separate tax returns for the investment incomes of husband and wife costs the Treasury, on the basis of present rates, about $260,000,000 a year, in addition to the revenue that is lost because of the community-property tax privilege. - 20 - 39 Percentage Depletion The final loophole which I shall mention this afternoon is one against which the Treasury has struggled for years without avail. If you use a machine in your business and that machine can be expected to last for ten years, you are permitted to deduct each year for ten years one-tenth of the cost of that machine. Because you will probably have to buy a new machine at the end of ten years, this deduction is a fair and reasonable method of allowing you to recover your capital. Needless to say, you are not permitted to deduct more than the cost of the machine. - 21 - 40 But you may be surprised to learn that this 18 not true of mines and oil wells whose owners are permitted over the years to deduct far more than the amount of money which they have put into the property for the conduct of their business. The so-called percentage depletion provision of the income-tax law allows these companies, not simply to deduct a percentage of the cost of their wells and mines each year until the entire cost has been made good, but to deduct an arbitrary percentage of their income indefinitely. An oil company which may long ago have recovered tax free many times the cost of the wells which it 18 operating 1s still permitted a deduction of 27 1/2 per cent of the gross income from those very same wells. - 22 - 41 The allowance of percentage depletion costs the Treasury, on the basis of existing rates, at least $80,000,000 a year. I have pointed out the most glaring examples of these loopholes, but there are others, all of them unfair to the many for the advantage of the few, all of them dangerous to the unity we need to win this war. Perhaps the American public has been inclined to shrug its shoulders at the defects in our tax laws; yet they are not small matters, either morally or materially, nor are they matters beyond the control of the people themselves. - 23 - 42 It has been difficult until now to correct our tax laws because taxpayers have been too few and too indifferent. Until the great body of American taxpayers becomes thoroughly aroused to the injustices which have been left on the statute books year after year, we cannot expect to correct the laws. The remedy lies in your hands as taxpayers. We Americans can be proud of the unity that has been shown by all sections of our people since Pearl Harbor. But national unity 1s a precious thing. It will be subjected to many strains in the months and years of trial ahead. - 24 - 43 For this reason, with your help, I am going to fight for the speedy removal of any defects in the tax laws which may injure our national morale. We need nine billion dollars in additional revenue; I should like the very first billion of that amount to be obtained by closing the remaining loopholes. If this is accomplished it will be a contribution to the financing of the war, the morale of our people, and the victory of our cause. -000- 1-24-42 44 m enclosing pies of Tile about which appaired Inc (ty of k, it into an much 11 a weeks 1 Herry 45 THE CITY Volume XXVII WEDNESDAY, JANUARY 21, 1942 Number 21 Secretary Morgenthau Speaks to 1,000 Saturday Civie Meeting Will be Held at Statler PHE man who is responsible for pro- ouring the vast astronomical dollar figures necessary for this country's de- tensie and ultimate prosecution of to- day's Armaggedon will bei in Cleveland Saturday noon for one of the few public addresses he has made since be has be- come a national figure. He is Henry Morgenthau, Jr., secre- tary of the treasury - confidant of President Rooseyelt, dirt farmer and ene of the hardest working public offi- cluis this country has ever had. Naturally the subject of Mr. Morgen- thau's address will be "Taxes" More than 1,000 Greater Clevelanders, representing the cross section of the city, will fie present at Hotel Statler Satur- day QUOD to hear the Secretary of the Treasury. All members of civie organiza- (inne were invited to attend this city- Secretary Henry Morgenthan, If wide meeting by the City Club, original aponsora of the Morgenthau meeting. Rather is he regarded as a person who Mayor Frank J. Lausche will introduce is an indefatigable worker who is inter- the speaker and President Albert I. Corn- ested more in getting things organized sweet of the City Club will open the and getting things done, than talking meeting with brief remarks. about them. INDEPATIGABLE WORKER The job at hand is more important to Secretary Morgenthau is not known in him at any given time than anything Washington as a particularly "colorful" else. person whose utterances or actions He never has been known to seek per- "make news" in that teeming capital. (Continued on page 3) THE CITY CLUB PRESENTS The Honorable Henry Morgenthau, Jr. Secretary of the Treasury, who will discuss Taxation in War Time Hotel Statler Ball Room Tickets $1.10 danuary 24, 1942 Luncheon served beginning at 11:45 a.m. All Reservations should be picked up or paid for by 5:00 p.m. Friday Regraded Unclassified THE CITY THE CITY 1. THE CITY said: "Lord. reform Thy world, Impirate workly our Jane, July - August by with me." Secretary Morgenthau, Jr. it until 1934 - when he became BocTo- (Continued from page 2) tary of the treasury. THE CITY CLUB OF CLEVELAND 712 Venient Avenue See where Cityzon Art Car conal glory and his past achievements are In 1929 be Was named by Gov, Frank- Telephone, MAin com terbury Golf Club in going in for some only results of persistent work It to said lin D. Roosevelt of New York. chairman " providers marref, September 20, 1916, at Cloveland, Ohio, under for en all March 1, 1970. thing besides golf an usual. Last Sunday that be memor more than a Little bothered of the governur's Agricultural Advisory Pret. a part Ex-Prex Rumell (P.D. Editorial Writer) by the attention he gets in Washington. Commission and in 1931 he Item appoint- Albert 1. Provider Welsman spoke to the Sunday dinore & His rule of action has been to let other ed. Conservation Commissioner of the Legal 9. Selectory James K. Custom, Treasurer "Financing the War." That's surge & people have the praise if it will help to state having jurisdiction over state 11. Secretary tance from the 19th hule, get a piece of work done. lands and formis, state parks, Oah and DIRECTORS J. Bahn David H. The sen of a rich man, he was never- game and water power. In this position from 1. Commit V. Tissin Our ex-presidente seem to be the Die be directed the early stages of the state's 1 1. Curin Name Laur thelese brought up to earry his own Rech that are being picked for responsible WM million acre reforestation program. Best H. Drings responsibilities, make his own career. Cid Lumit H. Ealmer activities. Ex-Prex Nat (The Now Upon the Insuguration of President A.T. F. Harding Karl o Throyand Howard goos to Washington in the STUDIED ARCHITECTURE Roosevelt he was appointed chairman of Editorial Committee Milson Wodder, Chairman Censorship Office, and Ex-Prex WE He entered Cornell University to study the Federal Farm Board and Was com- Name Krichbaum (Metropolitan Parks) Stinchoomis have architecture, but gravitated into the missioned to reorganize and consolidate TT Mandell H. L. Tannembre our local Civilian Defense, A valute to study of agriculture. The original Intent government farm lending agencies. When Members 1.1- Kenn both. en architecture was to prepare him for the Farm Credit Administration Was Deat N. work in downtown New York real estate, created be was named head of that Believe It or Not Cityzen Jon. L. (Internal Revenue) owned, developed and operated by his agency. Last Saturday's Furum with Senator Heffernan down't like to remind you father, Henry Morgenthau (the 85-year- Mr. Morgenthau was elected under- Robert A. Taft the headliner was sume- that March 16th in coming, last he will old former ambassador to Turkey who secretary of (reasury on November 17, thing of sa event - and you know why, tell you that Groucho Marx has 9. book dues not like to be called Senior). 1933. and due to the illness of the late The Senator was in good form and the which may alleviate your suffering, The In 1913 Morgenthau Jr. bought M tract Secretary Woodin he Was named acting wullime also. With Secretary of the book in called "Many Happy Returns" of land in Dutchess County, New York, aperetary. When Mr. Wondin resigned Treasury, Henry Morgenthau. Jr., foi- and is described by Grouchn - "The Idem intent on making farming his life work. on January 1, 1934, Mr. Morgenthau lowing this week, We think that Chairman of Marx." Although he studied agriculture in col- www appointed secretary of the treasury. Wondell Fulsgraf is entitled la take a lege he did nút become thoroughly sold AN EARLY KISER low two bows. Cityzen M. J. Reigert thinks that - on " as a career until he spent is summer reding that the song "I wouldn't be 1 on a Texas ranch. recuperating from an His life on the farm made him an early Jap for all the les in China" isn't nice, illness. Thereafter be toured the country- riser and today in Washington he gets up When Chairman Andrew Pangrace ssw more foolish a the man who at a Friend's side in - Model T Ford looking for suit- at 6:30 Citywn George (Harry Payer Holmes ssime into the dining room last Thursday house, hissed a Japanese print able land lo develop. Because of this habit of early rising he This farm he bought is today - 1600- above likes to go to beil early. When be is moon he knew That sometime there would have to to a City Club Show. Great rejoicing in the dining room. acre money making proposition dealing at his Duchess County Farm the Secre- That's the only occasion Genrge gota a especially at the Sanhedrin Table, last mainly in fruits (apples, strawberries and tary is generally in bed by 9:30 p.m., Ln validit his latenta - one of our week. Cityxen l'mnk (Doc) Fugue, one resplierries) with entite ruising and milk often at 9. time acture - and we mean talenta. of the regulars, returned After a covero produce a secondary line. There are 100 The 50-year-old Secretary preform the Illness. head of Holateins and Jerseya on the companionship of bis family Do visitors, farm. 50 of the regular milkers. is a Voracious reader of newapapers and Cames a story that when Fix-Prom Paul Called to the attention of our tire the New York Times, published by his (Filitor of the P.D.) Bellamy Was handed the Maggering "I'addition" in a French rationer, Cityzen Norman (The Admit- Two YEARS IN TURKEY childhood friend, Arthur Hayn Sule- Before he settled down to forming berger, is one of his favorite dailles. Restaurant in an city, he re- able) Krichbaum is an ad in a San Diego mathed indio - "The Free French, newspaper: "Gentlemen would like to Morgenthau Jr. went with his father to Rosides newspapers the Secretary in H. meet attentive young blande with four Constantinople where he spent two years hum" devout reader of detective stories, in in- good tires" and was present during the dramatic tensely interested In the activities of the shelling of the Durdenelles in World Secret Service and the different other Here's one we'll sell cheap to Cityzon Recalled to our memory by this and War I. When he came back to this pulicing departments that come under Ex-Pres Mercellus (Diviy) DeVaughn, that: country he were into flie U. S. Navy, his department. Cityzen Howard Thurns of his firm HELP THE HELPLESS commissioned " lieutenant. In April, travels about the country NO much that 1916, be married the former Elinor Fat- Casual acquaintence do not all know "Help the Red Cross"- we dol it could be vaid that The other men in The that the Secretary have ETY excellent "Help End Cancer"-me and you. man. office have m time to fiddle while Burnx of humor and loves to kid and pun with "Send to Britain"-yes, sir, yes! When the war was over he settled immediate members of his family. Time "Tuberculosis"-well, I guess! down to his dirt farming, doing all the "Loal Welfare"- say No- marketing himself and supervising the When he was interviewed two weeks Cityzen R. P. l'hotographe while you farm. In 1922 be purchased the American after he took office he had this to say "Help the Bilnd"- away, check, go! wait) Hakemson says that the President "Fight the Nazis"- for (t) Agriculturial, one of the earliest American about his department: quated from & Chinma prayer when he "Help the Orphans"- here's my bitt farm paperi and he continued to publish (Continued nn page 4) THE CITY 4 Secretary Morgenthau, Jr. However, his representative in Cleve- land, the vice consul, added come more (Continued /nim page $1 explanations to the incident and bis let- "The Treasury is the point. of all ter is printed berewith: points, where the government and the Dear Mr. Lafferty: cilizens enme closest together. The I have received a communication from Treasury is going to be run in the inter- the Embassy in which they informed me est of every citizen and with faimese to that when the Prime Minister sent his all. letter of regrets that he Was unable to "The principle approach is that all are accept your kind invitation to speak in to he treated alike. Selfish wealth has Cleveland, be did not appreciate the fact been allowed to evade its obligations to that the Cleveland City Club was the the common welfare for the last time. organization which had sent him the recording of the song from last year's "All the skill of its clever lawyers is not Anvil Revue, "I am an Englishman." going to do it any good now. The special privilege class in this country is aholished, The Prime Minister has asked me to 80 far as the Treasury in concerned." let you know that he very much appre- ciated not only your kindness in sending This was not a political protiounce- him this record but also the sentiments ment - but a statement of M man's social which prompted the including of this autlook. song in Mr. Friebolin's Revue. I would His appearance here is a pleasure to be grateful if you convey to Mr. Frie- anticipate. bolln the thanks of Mr. Winston Churchill and bis good wishes to you all for 1942. With Deep Regret I also take this opportunity of extend- it was with regret that the Club an- ing similar greetings to you personally nounced about 10 days ago that Win- and to the Club generally. ston (V- for Victory) Churchill, pro- Yours sincerely, consul extraordinary. could not appear before the Chy Club. He had other press- (Signed) E. J. BISIKER, ing engagements. British Vier Consul. COMING! WILLIAM L. SHIRER Author of "Berlin Diary" EDWARD R. MURROW Chief of C. B.S. European Staff at the PUBLIC MUSIC HALL WEDNESDAY, FEBRUARY 1, at 8:30 p.m. Sponsored by Radio Station WGAR All Seate Reserved - 50 cents, 81.00, $1.50 Tickets on sale AL Bond Clothes, Wm. Taylor Sons, Korner & Woods, Public Hall Box Office Cityzens may obtain from J.J. Lafferty - FIELD ORGANIZATION News Letter E DEVENSE SAVINGS STAFF PREASURY DEPARTMENT, WASHINGTON, D. C. 15:48: 24, 1942 NUMBER 36 KEEP EM FIRING! DEFENSE SAVINGS BONDS NAVY DEFENSE SAVINGS CAMPAIGN OF WE One of a series of special posters prepared by the Navy Department in connection with its Defense Savings Campaign now underway throughout the entire organisation including shore establishments, naval yards and other civilian activities. Regraded Unclassified ,Neper Letter News Letter CAROLE LOMBARD HELPS SATIVE STATE LAUNCH WAR-TIME BOND DRIVE PEPORE MEETING DEATH IN PLANE CRASH INDIANA'S STATE-VIDE DEFENSE BOND RALLY on January 15 - the first of its kind in the country - use a great success. And much of the credit for its success properly belongs to that famous Hollywood star who two JAPAN (A/E later tragically net her death, Carole Locbard, who returned to her native state especially for this event and proved her mettle as 6. *Min- ute Man® by selling more than $2,000,000 worth of bonds. THROUGROUT THE APTER- NOON AND EVENING, at the State Capitol, in the lobby of the Claypool Hotel, at the Governor's Mansion and, after the big rally in the evening, at the Indiana Hoof Ballroom, Miss Lumbard BW HE GAVE nade patriotic appeals, DEFENSE EVERYYHING sold bonds, and rendered DONDS yearsan service to the De- Tense Savings Program. Four prominent Housiere who participated in the ceremonies on the laws of the MORE THAN 6000 attend- Indiana Capitol, which marked the rateing nd the state-wide rally at of the flag which flow from the Capitol Cadle Tabernacle. Repre- dome in Washington when war vas declared. -Hungerford in the Pittsburgh Post-Gazette sentatives from all of the From left to right: Governor Schricker, state's 118 city and county Carole Lombard, Will H. Haye and Mayor Defense Savings Committees Sullivan of Indianapolis. IN THIS ISSUE were present and some cities and counties includ- NAVY Has Bonu items. Fasse 1 ing Fort Wayne, Miss Lombard's home town, sent large delegations. CARELE LAMBARD Proves Mettle as Minute Man Before Untimely Death - Page 3 MUSIC, ENTERTAINMENT AND COLOR vere provided by the Indiana and VICTORY HOUSE in Los Angoles Scene of Many Special Events - 4 and Purdue University bands; the Culver Military Academy's drum and bugle IDARD OF TRADE Bond Drive Goen Over the Top Page 6 corps; military units from Fort Benjamin Harrison: American Legion color BOMILERS Goal of Baltimore 3tramp Campaign - Page ? guarde; e. large group of newsboy Defense Stamp anlasmen: and a Segro cherue directed by Floyd Jones. PRICE TREND Shows Need for Deferign Savings - Page 8 DONO PUSTARS from Providence, K. 1, and Atlanta, Ga. - Page 8 SPEAKERS included Will H. HAYE, Hocater president of the Motion ALL BANKS In Three More States Qualify or Insuring Agents - Page 9 Picture Producers and Distributors of America, who played an active part PUBLIC EMPLOYEES Burdll in Pay Noll Savings Plans - 10 and 11 in Indians's Liberty Loan drives of World Var I, BO head of the State "LABOR INVESTS FOR VICTORY" Campaign Launched - Page 12 Council of Defense: Governor Henry 7, Schricker: Carole Lombard; Burene Pulliam. Chairman of Indiana Defense Savings Committee: and Clarence A. FLAGS AWARDED For High Participation In Pay Roll Savings Plane - Page 23 Jackson, Director of Indiana Defense Council. FISLD ORGANIZATION NEWO - Pages 14 M 17 THE LADIES - Page 10 Carole Lombard's untimely death as she was returning by plane to RADIO Programs for Conting Week: "Pay" Roll of Honor" - 19 California came as . geouine loss to the Defense Savings Program. As PICTURES Page 20 Secretary Morgenthau wired her husband: *Ve at the Treasury feel that ve have lost 1. real friend and helper. She died in the service of her country. - 3 News Letter News Letter CALIFORNIA'S *VICTORY ROUSE* HUGE SUCCESS SOME OF THE SPECIAL EVENTS AT *VICTORY HOUSE BUY BUY ERE! RUGE SIGNS similar to the DRA pictured above hang over all of the entrances to the "Victory House" which 1s now concluding a highly successful run of about two months in Pershing Square in down- town Los Angeles, California. The Los Angeles "Victory House, (or *Defense Rouse" as it von originally designated) is a contribution to the Defense Savings Program of the Stand- Circus clown, alephant, Mahout and Stamp Albums bring smiles to Hopi ard 011 Company of Southern Call- ring master entertain crowd. Note Indians from Albuquarque, Rew Mexico, fornia. It will soon be moved to glass bank in elephant's trunk. who helped celebrate Santa To Rail- San Francisco and later to other rond Day. towns on the Pacific const. "VICTORY HOUSE" has been the center of 8. continuous program of ao- tertainment and special evente publicising the Defense Savings Program. Some of these events, illustrated in the pictures reproduced here, could be readily duplicated elsewhere. Advard 0. Arnold, pres- Paul Whiteman and Nile Remember Pearl Harbor! ident of the Screen Thor. Grunland, two of Billy Matthew, wounded Actors' Guild appeals the many celebrities at Pearl Harbor, appears Representatives of the What A Thrill] Maureen Elke' band accompanies for purchases of De- appearing at "Victory with Linda Darnell, 20th School Retirement Fund O'Hara, RKO star de- fense Bonds and Stamps. House." Century Fox Movie Star. with State Administra- lodge officers to "Vic- livers a stamp, pur- tor Howard Mills tory House" where & chased by e youthful (right) deliver check large block of Bonds 18 patriot and movie fan for A limit purchase purchased for the at "Victory House", organization. Many local Defense Savings Committees are now arranging for the of Defense Bonds. erection of "Defense" or "Victory" houses of their DVD. The Special Activities Section of the National Defense Savings Staff ie prepared to render assistance in connection with these exhibite. News Letter News Letter D, D. BOARD OF TRADE BOND DRIVE GOES OTHER THE TOP BALTIMORE BUYING BALTINORE-MADE BOMBERS SALE OF $1,326,000 WORTH of III- FERSE BONDS in less than three works: IN A FOUR-VEW CAMPAIGN beginning January 11, Baltimore citizens This VBE the accomplishment of the 100 under the leadership of the Baltimore Seve Post and Bunday American zan membership committee of the Washing- have undertaken to invest anough money in Defense Stamps and Bonds to ton Board of Trade which between Deces- purchase many of the famous bombers built in the Baltimore Plant of the ber 16 and January 6 called on the 4400 Glenn L. Martin Company. Originally, these papers (in COMPON with other numbers of this organization and earnest. Hearst papere throughout the country) had planned to solicit donations ly solicited their Defense Bond purchases. to a fund for the purchase of bombers but at the suggestion of the Treas- REMEMBER try, plane were changed and the campaign directed towards increasing yu- APPROPRIATE PUBLICITY marked the chases of Defense Stamps and Bonde. PEORI THAT MARBOR leunching of the campaign as the Dicture at the left indicates. Each of the THE PLAN OF THE CAMPAIGN follows the "Hagerstown petiern' sight regular tease, into which the member- (See Seve Letter for January 3): ship committee is subdivided, vos given its proportionate share of the 4400 In- Manders- Sevepaper carriers, advertising solicitors and other dividuals and firms which belong 40 the employees sponsor the sale each Monday for four consecue Board and confined its efforts to this live Mondays. group and such non-members or the Board Uncle Sam bids Godspeed to " the sembers of the team had the time Tuesdays. All women's organisations oponsor the sales on lbs frontieramen who typified to see. competitive basis between various clubs and fraternal the Defense Bond Drive, it groups. the left, Fred A. Saith, FOR THIS CAMPAIGN, Special Order president of the D. C., Board Forms were prepared in co-operation wish Wednesdays. School children, principale, teachere and parent- of Trade: at the right, the D. C. Bankers Association and the teacher groups take over. Thornton W. Over, chairman D. C, Building & Loan League. One of of the Board of Trade's De- fense Boad Campaign. these forms, when properly filled out, Thursdays. Public atility employees, plants, industries and constituted E draft on the bank or EAT- allied commercial companies sponsor the sales. ... linge éccount of the bond purchaser and gave All information needed to enable the Fridays. Merchante set up maler booths in stores, push sale of issuing agent to lesse Series = Bonds or stemps und sek customers to take change in stamps. 7 of the Seve Letter for December 20. to order 7 or G Honds. One of libese order forms vas illustrated on Page Daturdaye and Sundays, theatree " to 10wn and wind up the vesit of competition. THE success OF THE CAMPAIGN VAI celebrated on January 6 at a This 10 the pattern to be followed each seek for the four works. general meeting of the Board which VRA addressed by Daniel V, Bell, THE FIRST WEEK was enlivened by the appearance of the screen star, Under-Secretary of the Treasury: Dorothy Lamour, who devoted a day to appearances and brief addresses Marold S. Graves, Assistant to the fore many groups urging the purchase of Dafense Bonde through participa- Secretary of the Treasury: R. L. Llon in pay roll savings plans. Miss Lamour sold stamps and bonds al . Bust, Jr., Chairman of the Defense special department store booth, sade . radio broadcast from a. store window, Savings Committee for the District addressed the Kivania Club, spoke to workers of the Glenn L. Martin Coe- of Columbia and others, However, pany at the trailer village and dormitory just outside the company grounds, the dinner did not conclude the and addressed telephone employees at the offices of the Chesapeake and campaign. The Board of Trade has Potemac Telephone Company. not up a special Defense Bond Com- mittee which will, for the durs- Chairman Owen makes (L Limit sale. tien of the var, solicit bond pur- Edvard Balte orders $50,000 worth Following Mine Lamour's visit to Baltimore, State Administrator of Defense Bonde. Walter S. Ruth reported: chases from board members, "Her visit here should help wonderfully in producing . rapid acceleration of participation in the pay roll savings plan." - 6 - News Letter News Letter 92% OF ALL BANKS NOW QUALIFIED ISSUING AGENTS 140-YEAR PRICE TREND CHOWS NEWD FOR DEFENSE SAVINGS DELAWARE, IDAHO and COLORADO can claim the honor of being the 607+ WHOLESALE PRICES eath, eighth and ninth states in which all banks have qualified " ALL COMMODITIES YEARLY AVERAGE 10g agents for Series 1 Bonde. Delavare has 46 banks, Idaho 50, and I 1929-100 NO - Colorado 145. The first siz states is which banks qualified 100% ware: and DISTRICT OF COLUMBIA, NEVADA, OREGON, VIRGINIA, NIV YORK and SOUTH HN DAKOTA. INC 180 In many other states, all but 8. very few banks have qualified, and HO in the following, 97% or more are nov Issuing agents: ARKANSAS, GALI- HEO (20 FORNIA, MAINE, MICHIGAN, MINNESOTA, MISSISSIPPI, MONTANA, NEW HAMPSHIRE, STV JERSEY, WORTH DAKOTA. UTAH, WEST VIRGINIA and WYOMING. or IDO so A. total of 13,627 banks representing 93% of the 14,781 institutions 40 in this category eligible to qualify had done so as of December 31, 1941 18 according to the report compiled by the Treasury's Division of Research an and Statistics. 40 to 10 en MORTGAGES HOME TO BUT BONDS . - INC iño 430 IMO HEND IRIME - - - e TM . - the FRAD - MEDICAL - WILL - 1030 1940 raso ! - - - l'ant www.a - A veek after America's entry into World Var II, a customer of the Farmers' Bank & Trust Company in Wadesville, Indiana called on Bank of ( Cashier L P. Cos and said t This chart, published in the December issue of the Labor Information Bulletin of the U. 3. Bureau of Labor Statistics, shows how prices increase "I want to borrow all the money you will loan no. I of price inflation during the present war and to make it possible for work- during wars. The Defense Savings Program in designed to minimize this type want to purchase Defense Bonds and I want to leave the bonds as security for this debt." ors to "store up" current earnings during & period of relatively high and revert to lower, more normal levels. rising prices and to carry these earnings forward for spending when prices Mr. Cox pointed out that Defense Bonds are registered in the name of the purchaser, cannot be assigned and accordingly, cannot be used as collateral for a loan. "Then," said the patriot, "I vant to mortgage ay home Journal. for all you will loan 20 and invest 1% all in Defense Georgia Bonds. . If Ritler vine, then my home and everything Bulletin THIS WAR CANNOT BE WON REMEMBER of BY CONTAGE ALONE! Bankers else I have is lost. If we win, my home and family Providence, PEARL Assn., will be safe and I know I can pay this debt in small Rhode monthly payments." Island. Atlanta, Georgia. Needless to say, the loan was immediately approved and e sub- stantial sua advanced on e 35 interest basis. - From The Western Sun, of Hi. Vernon, Indians. Replace This Shail BONDS MAY DEFENSE BONDS AD STAMPS "Buy Defense Bonde as if your very life depended upon it. It does!" - From one of the series of Defense Bond Messages prepared for Devi- papers by the Press Section, Defense Savings Staff. 8 9 News Letter News Letter FUBLIO EMPLOTEES PUBLIC EMPLOYERS Mary Mure State, Dounty and City Dovernmente Announce Mort Cities Install Pay Rell Savings Plane (Consinued) Paz Rell Savings Plans FORTLAND, MAINE. The municipal employees credit union 16 sponsor= IOWA, MINNESOTA, NEW TORK and UTAH are mang the states which have 1% the pay roll sevings plan recently announced by City Treasurer recently made pay róll seringe plane available to state government John n. Gimartin. employees. SPBINGFIELD, MASSACHUSETTS, Plant for the pay rell savings program In MINNESOTA, bond allotments were developed here in co-dperation with officers of the local Chapter authorized by state employees will of State, City and town employees which has undertaken to promote the be turned over to the State Capi- plan. tol Credit Union which will serve as a custodian of the allotments FLIST and GRAND HAPIDS, MICHIGAN. while sure sufficient to purchase bonds are accusulating. GREAT FALLS, MONTAWA. City Treasurer Lage Ashten reporte virtually 100% participation in a plan in which the sicisum allotment is $6.25 . In NEW YORK, Governor Herbert month. Lehmann launched the plan by auth- orizing the State Comptroller, BAYONNE, PATTERSON, HUDSON COUNTY and the BOARD OF EDUCATION of Joseph V. O'Leary, to allocate 20% Jersey City, NEW JERSEY. These are some of the recent additions to she of his salary for the purchase of rapidly growing list of Sev Jersey cities and counties which have RD- bonds. counced plans. In Newark, Mayor Murphy has announced that allotments of city employees total $8,695 . month or approximately $7 per participat- Governor Harold E, Stasses looks Among the County end City the employee. over the supply of allotment auth- Governments which have recently y primation cards which are about to announced pay roll savings plans THE NEW YORK CITY BOUSING AUTHORITY and ONEIDA COUNTY, NEW YORK. be sent to the 6500 employees of are: the State of Minnesota, together WINCHESTER, VIRGINIA. Vinchester's City Manager 5. Lee Grant to- with a letter from the Governor BIEMINGHAM, ALABAMA. The ports that all employees in his office and LE the water, street and urging @ystematic investment in Do- Municipal Employees Association sever departments are participating. The League of Virginia Municipali- fense Bonds, and other employee groups have time through = special Defense Bood Committee headed by City Manager Ceth undertaken to conduct a bond drive, Burnlay of Charlottesville 14 arging all city governmente to install (a) and City Comptroller C₂ 1. in- roll envings plans. strong has been authorized by the City Council to administer - pay roll anvings plan. This Itst of State and local governmente having pay roll savings OHICAGO, ILLINOIS, ALL local governments in this 8708 - the City, plane supplements the list published in the Seve Letter of January 10. the Board of Education, Park District: Senitary District and Cook County These two lists provide ample precedente for all state and city govern- - employing a total of 56,000 have made pay roll sevings plane available, sents and it is hoped that public employees in countless juriadictions The Park District reporte 100% participation in Its plan. will soon be using pay roll savings plans to set an example which vill be both an inspiration and 5. challenge to other employee groups of all kinds LOUISVILLE, KENTUCKY. Mayur Vilson V, Wyats announcing the plan asíd: '&s 6. starter I have instructed Pinance Director Lindeay to de- duet 10% from ay pay check, Our goal la 100% participation by every why they cannot institute pay roll savings plans and these authorities Some governmental juriedictions any feel that there is some reason officer and employee in the City Eall and of outside agencies supported can develop "group agent* plans. However, pay roll savings plane will in by city taxes," Wherever possible. Of course e pay roll sevings plan does not eliminate the long run prove to be more satisfactory and these should be set up VICKSBUBG, MISSISSIPPI, All of the city's 150 employees have agreed to participate, that becoming the first group of employees in that city workers and periodically to follow up this CROYMER to Increase participa- the need for "key men" to make the initial solicitation of their fellow to enrell 100% in . pay roll savings plan. tion as conditions warrant. 10 11 News Letter News Letter LAROR AND INDUSTRY LABOR AND INDUSTRY A.P. of be Sets One Billion Dollars as 11a 1942 Goal Righ Enrollment in Paz Roll Savings Plane to Vin Special Flat Purchase of $1,000,000,000 worth of Defense Bonds by the 5,000,000 individual members of the American Federation of Labor and by Constit- Plans are DOW being made by the National Defense Savings Staff for uset member unione was pledged by President William Green in . statement the distribution of special flage or pennante to companies of more than 600 released to the press on January 19th. workers in which 90% or more of all employees are participating in . pay roll savings plan. Full details with reference to bow en employee group Participation in pay roll savings plane by individual members will can qualify for and obtain one of these Flage will be forthooming in the be . major way of realising this objective. "Ve urge every worker," maid near future. Mr. Green, "to agree to set naide part of his weekly earnings for the purchase of Defense Bonde.* In the meantime, some companies have developed their own Defense Savings flage to stimulate inter-departaantal competition. In the photo- The drive to sall Defense Bonde and to secure Defense Bond purchase graph at the right, a coveted 100% pledges will be climaxed by "Labor Invests For Victory Vook," scheduled bander is being awarded to the for February 23 to March 1. The week will be opened on the avening of Experimental Department of Vultee Washington's BirthBay, February 22, with a nation-wide radio broadcast Aircraft, Inc., the first "100% for in which Secretary Morgenthau and President Green will appeal jointly for Defense Savings* department in this for worker support. During the week, each of the 802 central labor unions encrmous concern, which in its in as many cities will hold mass meetings and rallies at which announce- Downey and San Diego California; ments will be made of results achieved by each local union in the Defense Wayne, Michigan and Nashville, Bond drive, in terms of cash purchases and pledges to purchase. These Tennessee plants, employs more than meetings will be patriotic rellise which will serve as an inspiration to 55,000. On January 15, mure than all of the communities in which they are held and to the nation as a whole. 70% of all company employees were mess participating in the Defense Bond Secretary Morgenthau commended the American Federation of Labor for purchase plan, U.S. setting this patriotic example to the nation. DEFENSE BONOS "Just no hundrede of members of the APL building trades unione Evansville Honor Holl callantly fought with the Marines et Guam," the Secretary eald, "no are millions of union zenbers now joining with other Ameri- An "Honor Holl* to include all can citizens and investing in Defense Bonds to the limit of local industrial firms and business First 100% Department at Vultee their financial ability.* houses in which every employee sub- Plant receives pennent. Jonne scribes to purchase bonde through a Touchstone (left), consulting ex- pay roll savings plan is to be --- pert, National Defense Savings Staff, "Pay Roll Savings* Preferred Tera for Allotment Plane tablished by the Vanderburgh County congratulates J. D. Stemple (holding Defense Savings Staff, Evansville, banner). of the Experimental Depart= Attention is called to the fact that "Pay Roll Savings" is the term Indiana, under the direction of ment. The others, left to right, which is to supplant or superseda the term "Pay Holl Allotment." Although Michael Schaeffer, arecutive chair- Byron I. Smith, local DSS worker and publications of the Defense Savings Staff which use the older term will man and Walter Drier, chairman of A. E. Balab and V. Gerald Tuttle, not be recalled, the new tarm will be used in all new material, the pay roll savings drive, A com- Vultee executives. sittee of more than 250 persons "Pay Roll Savings* le pure readily understood than "Pay Roll Allot- representing every line of business sent* and for other reasone too, is believed to be & more satisfactory In the county 14 now concluding a vera for Defense Bond purchase plans by which an employee arranges with comprehensive canvase to sell the pay roll savings plas to employers and his employer for the accumulation of an agreed-upon portion of his ragu- employees. lar pay towards the purchase of Defense Bonds, One of the first universities to establish . pay roll savings plan "Pay Boll Sarings* plans 62% to be distinguished from all other ⑉ the Massachusetts Institute of Technology, Cambridge, Massachusette. systematic serings plane and particularly from those which involve the There are some 2000 members of the Institute's staff. purchase of stamps, - la - 12 Regraded Unclassified News Letter News Letter FIELD ORGANIZATION 1111 FIELD ORGANIZATION INVE Sev State Leaders Appointed Parade Opene County Drive in South Dekota Governor Keen Johnson of Kentucky, Governor San H. Junes of Louisi- The Defense Sevings campaign in Pennington County, South Inkota USE ans and Governor Arthur H. James of Pennaylvania have this month accepted launched with a large meeting at the city auditorium in Rapid City, The the Honorary Chairmanship of the State Defense Savings Committees being sceting vse preceded by a. formed in their respective states. parade staged by officers and mes from nearby Fort Mende and representative Ohio State Committee Organises groups from all of the city's patriotic and var Organization of the Ohio State Defense Savings Committee van cob- service organizations. plated January 7, at . meeting in Columbus attended by the Honorary Chair- Governor Harlan J. Bush- man, Governor John W. Bricker and 85 other members of the state committee. field, Congressman Francis Coon, Deputy State Adminis- State Chairman Roy Moore, State Administrator John McSweeney, and trator Elser Rustad and Deputy Administrator and Executive Secretary Harold Bredlow reported on County Chairman Robert 1, the very considerable progress made up to that date in organizing the Ohio Driscoll were among the Defense Savings campaign and outlined plans for the impediate future. speakers. In conclusion, prior to the playing of the "It was cold outside (16 degrees below Dr. Peter Odegard, special consultant to Secretary Morgenthau, vas national anthem, Turner M. serol), but the rally inside VSI ge bet present from Washington to deliver a keynote address. Other speakers 10- Rudesill, past state command- as they come." - South Dakota State cluded Theodore Vegner, president of the Canton Federation of Labor and or of the American Legion, Administrator Charles A. Christopherson labor consultant on the Ohio Staff; H. V. Hoover, Canton industrialist; lei the audience in B pledge Program. and Mrs. Ray Fair of Akron, originator of Akron's school Defense Savings which began with William Tyler Page's famous "Ameri- can's Creed" and concluded: Milwaukee Committee Organizes "And to the end that this creed may become effective in these present troubled times and that my country and the principles First meeting of the Defense Sevings Committee for Milwaukes County for which it stands my be perpetuated, I pledge syself to buy and City vse held January 16 in the auditorium of the Gas Company. Lead- National Defense Bonds and Stampe to the best of by ability." era of the Defense Savings Program who addressed this meeting are shown at the left. Automatic Phonographs Continue to Serve The six patriotically decorated automatic phonographs which have been ROTO Cadate Use "Tas Day" Technique placed at the disposal of the Illinois Defense Savings Staff by the See- burg Corporation, manufacturers, continue to boost Stamp miss in . grati- to Sell Defense Stamps. fying way. Deputy Administrator John Gallaher reports that the machine et the City Hall sells several thousand dollars' worth of Stamps weekly. As one of the final features of the Defense Bond and Stamp week beld The machines, which are displayed and operated in various public places, in Sen Antonio, Texas from January are serviced by women members of the American Legion Auxiliary. 12 to 17 under the sponsorship of the Junior Chamber of Commerce, all Among the other cities where these machines either recently or cur- Speakers at Milwaukee's Organisa- ROTC cadete from the city's high rently are promoting bond and stamp sales under the general supervision tion Meeting. Left to right: State schools, in their attractive uni- of state Defense Savings Staffs are Detroit, Michigan: Kaneas City, Administrator Kuhl: County Chairman forms, devoted Saturday morning end Missouri; New York City, Sev York; Rochester, Sev Tork; Clevaland, Ohio: B. T. Franck; Mayor Zeidler and afternoon to selling Defense Stamps Washville, Tennessee; Dallas, Texas: and Milwaukee, Wisconsin. County Commissioner Timmerman. throughout the business section of the city, 11 - 14 News Letter News Letter FIBLD ORGANISATION TRVS FIELD ORDANIZATION FRYE Help Providence Sooat Sales Chicago Judges and Lewyers Sall Bonds - wound truck equipped with huge searchlights formarly used at Under the leadership of Keyer 9. Veinstein, young and aggressive Rolly wood wovie premiers recently was enlisted by the Rhode Island De- Ohicago attorney, judges if the Circuit, Superior and Municipal Courte fense Sevings Staff to boost boad and stamp males in Providence. When located in the Cook County Court Honee undertook to CRATERS the Court the truck vas in Providence, 11 House and the adjoining City Ball in behalf of Defense Bonde. Results was parked in front of the City Hall the sale of $414,950 worth of Bonds in three days! The judges know hav and became the center of # round of Le got results! entertainment (by members of the cast of the Ice Capades) and ed- with the success of this campaign, é committee of lawyers was form dreases by such notables as Mayor nil to casvace the 14 Loop office buildings largely tenanted by members Dennie J, Roberts, Lieutement of the legal profession. Governor Louis W, Cappelli, and Deputy State Administrator Henry a. Sullivan. To the crowds which Speakers Bureau Plans to Beach Byery Club gathered for these events, news- paper carrier boys sold stamps. In The Speakers Bureau of the King County Defense Savings Comilites. in the evening, the truck's powerful Seattle, Vashington, has undertaken to secure " spot* for a brief assuage searchlighte made the " for Vic- Defense Bonds on every program of every club or organization or gather- tory* aymbol in the sky, And on ing which brings together 15 or more persons. One girl 1.0 nov devoting "Y for Victory* 3A Mhode Island throughout the day the truck's her entire time to telephoning club offices and arranging these speaking sound emplifiers flooded downtown engagements. Providence with patriotic airs. The five Tonatmaters and Toestmistrees' Clube of Seattle have vol- "March of "Ime" Movie and Other Unusual Features Mark Denver Rally *) unteered their services, and on December 30, they held . joint dinner meeting at which more than 125 of their numbers received instructions & petriotic rally in behalf of Defense Savings was held in a Denver, end training to enable them to fulfill speaking aesignments obtained for Colorado high school auditorium on , recent Sunday efternoon. Music by then by the Ting County DSS Speakers Bureau. "Our County at Var"; eye witness accounts of the Pearl Harbor blits; Ad- two acts of professional vaudeville; A showing of the March of Time film, the Lowry Field (Army Air Corps training center) orchestra and quartette; Radio Managers and Biltors Contribute Helpful Ideas drosses on the pay roll savings plan by representatives of management, features of this successful gathering. Early E. W, Duncan, Commanding Officer at Lowry Field, were some of the labor, and the Defense Savings Staff: and as inspirational appeal by Col. State Administrator Saul Bane in reply to a letter addressed by his to Many constructive and helpful ideas were received by Washington's the editor of each daily and weekly newspaper and the manager of each radio station in the state. In this letter be thanked them for their CO+ operation and invited their suggestions. Be reports that their comments Band Compaign Dramatised with Pugilistic Terminology and suggestions have proved to be of genuine value to his and bis asson cistes. has set $1,370,000 " Its initial Defense Bond objective. This Le the The Duval County Defense Savings Committee in Jacksonville, Florida bolle approximate cost of the ten fighter planes which are the campaign's sym- Wilhie Moets with Indianapolis Commities goals. A series of radio "Bond Battles" are reising part of this amount. The first of these "battles" raised $235,740, (See News Letter Members of the Indianapolis Defense Savings Committee, holding one for January 3.) Newspaper publicity in connection with the second battle od included photographe of the loser, Elliot Butto, 10 & wheel chair, attend- from Wendell Ing Wilkie, who responded to an invitation extended by tale- of their regular Saturday meetings December 27, received 6. surprise visit by . nurse, making a sistement to the effect that he VAL recovering graph two weaks previously by general chairman Russell V, McDermott and rapidly turn from No first bout and would definitely be In shape for the re- committee member Homer 1. Capabert down engagement; and photographe of the vinner, Fuller Warren, chopping huge trees and doing road work in preparation for the second battle. News Letter News Letter TO !BI LADIES ON !!! AIR A Voman's Work Is Never Done: padio Programs for the Coming Week: In North Carolina, Mrs. John D. Robinson, who is on the State De- fense Savings Committee as the representative of vomen's organizations, Monder. January 26. "FOR AMERICA we SING.* Dr, Frank Black's Trchae- has her hands full of Defense Bond and Stamp business. For not only does 178 and Charus, 9:30-10:00 PM (EST), MBC Blue Network. Mrs. Robineon serve on this Treasury Committee, but she 10 also In charge Saturday, January 31. "AMERICA PREFERRED," Alfred Wallenstein's of Vomon's Activities in the State Council for Defense. In that capacity she directs 14 State vosen's committees, cas of which is set up to pro- Orchastra, with Doems Taylor, commentation, 6:00-8:30 PM (EST), Mutual note the sales of Defance Bonds and Stamps, At the same time, she is Network. U. 5. Chairman of Bonds and Stamps for the General Federation of Women's Clubs. In the latter position she has been responsible for setting in motion a Defense Savings Program that is currently reaching the majority of the 17,000 federated clubs. Ber idea has been to appoint a U. S. Bond and Stamp Chairman in each State, in each of the 500 G. F. V. C. Harr Badio Programs Sell Bonds districts, and eventually in each local club, To these chairmen, De- fesse Savings materials are sent with suggestions 66 to how they might In Indianapolis, the Railroadmen's Federal Savings & Loan Association, best be used, Kra. Hobinson VAR in Weshington last week to arrange 6 broadcasting over Radio Station WIRE, has demonstrated affectively the Defense Savings Program for the G. 7. V. C. Board Meeting to be held here potentialities of the radio a.e. an aid in the sale of Defense Bunds. This to January. Association began, on Monday evening December 8, a series of daily half- hour broadcasts devoted entirely to promoting bond sales, Listeners vere invited to telephone in and order either bonds or stamps. The names of 10 Dagrees Below Zero all purchasers were read over the air, and in the case of bond purchases, the amount of the purchase wer also given. The first 12 programs result- Sot even a temperature of 10 degrees below saro could keep 200 lead- ed. in sales of nearly $90,000 to 387 different persons. In addition, the are of local women's Defense Savings groups from their first meeting, held savings and loan association attributes many sales unde at its offices in Indianapolis. Practically every county directly to the radio program. The program is now being continued on a la the State vas represented in this seet- weekly basis, 106 which was lead by Mrs. Oscar A. Ahlgren, hand of the Women's Division of the Indi- In Montana, all major radio stations began on January 11 . sories of and Defense Savings Staff, Mrs. Ahlgren Sunday afternoon broadonste to promote the sale of Dafense Bonds. Arrange- is another active 0, 7. V. c. sember who mente have been sade by local Defense Savings Committees is co-operation is giving much of her time to the Defense with Boy Scoute and Service Clubs to fill immediately all orders for De- Savings Program, At present, she 1e Freei- fense Bonde telephoned in to the Radio Studios during the two-hour broad- dent of the Indians Federation of Vomen's cast period. Clubs. In Detroit, la . special one-hour broadcest on December 30, over Radio Station VXYL. more than $148,098 worth of Defense Bonds and Stemps Dances for Defense were sold. A Defense Savings Stamp booth was a feature of the "Honky Tonk dance givez Radio's "Pay Roll of Honor® Grows Rapidiz at the National Press Club in Washington, D. C. by three auxiliary Junior philan- Radio stations throughout the country are not only bromicasting Dew thropic groups Junior Hadassah, Junior fense Bond messages large numbers of radio employees are buying Defense Council, and the Jevish Consumptives' Bonde through pay roll savings plans. Already 138 stations have won Buth Steinar - one of the Relief Society, Faul Draper, nationally places on the Radio "Pay Boll of Hooor," published in Radio Daily. known dancer, and members of & local stage Defense Stamp mleagirls at the "Honky Tonk® dance La Station WELP in Chicago, one of the first to announce achievement of cast acted as salessen at the Stamp booth. Washington, D. C. 100% status, reports that its 40 employees have pledged themselves to in- rest at least $12,000 in Defense Bonds during 1942, - 16 Regraded Inclassified News Letter BOWLERS HIS SPECIALTY Pat Welsh, Detroit policeman is shown at the left with the plac- ard he designed in connection with his usual patriotic hobby. When MOF off duty. Patrolman Welsh goes from one bowling alley to another selling proprietors, league secretaries and individual bowlers on the idea of buying 8 twenty-five cent Defense Stamp each time they pay seventy- five cents for the privilege of bowling three games. Get a STRIKE today for UNCLE SAM with your SPARE quarters Buy DEFENSE STAMPS and roll 300 against the JARST ANOTHER BILLBOARD BOOSTS BONDS On SHARE IN AMERICA OFFICIAL BUSINESS WASHINGTON, D.C. D. C. BUY DEFENSE SAVINGS STAFF TREASURY DEPARTMENT EMPHIS COTTON CHANGE Milton X. Revill, Memphis and Shelby County Chairman, helps post another one of the Treasury promoted "boy and dog" bond posters. More than 1000 of these posters sponsored by hundreds of different local business institutions may now be seen through- are out the country. (The "assistant bill posters" are Mrs. V. L. McXee, i POTTAGE PAYMENT or Jr., and Miss Elisabeth Farnsworth.) HEAN THE ser SERVICE HISA - 20 - 47 Unfilled Orders for Savings Bonds at the Federal Reserve Banks and the Post Office Department January 12 to date (In thousands of pieces) : Unfilled : : Unfilled New orders Bonds Stock of : IBM : orders at : : orders at bonds : received manufactured deliveries : opening of : today : close of today on hand : this day : business : : business : Jan. 12 541 859 595 805 236 625 13 805 423 630 598 236 650 14 598 622 670 550 236 685 15 550 660 750 455 231 1,000 16 455 773 775 426 204 750 17 426 672 800 298 204 1,000 18 298 none-no mail none-closed 298 204 800 19 298 204 800 202 704 825 20 202 204 800 86 1,184 1,000 21 36 411 800 59 1,546 875 22 59 697 800 86 1,676 1,000 23 86 569 800 50 1,871 1,000 Office of the Secretary of the Treasury, January 24, 1942 Division of Research and Statistics. # Bonds in Washington vaults only. Regraded Unclassifie 48 CONFIDENTIAL UNITED STATES SAVINGS BONDS Comparative Statement of Sales During First Twenty Business Days of January 1942 and December and November 1941 (November 1-26, December 1-23, January 1-23) On Basis of Issue Price (Amounts in thousands of dollars) : : : Sales : : Amount of Increase : Percentage of Increase Item : : : : January : December : January : December January December November : = : : over : over : over : over : 1942 : 1941 : 1941 : December : November : December : November Series E - Post Offices $123,773 $ 69,593 $ 33,438 $ 54,180 $ 36,155 77.9% 108.15 Series X - Banks 372,680 140,397 62,919 232,283 77,478 165.4 123.1 Series I - Total 496,452 209,990 96,356 286,462 113,634 136.4 117.9 Series F - Banks 54,804 20,760 16,206 34,044 4,554 164.0 28.1 Series G - Banks 215,671 107,198 91,026 108,473 16,172 101.2 17.8 Total $766,928 $337,948 $203,589 $428,980 $134,359 126.9% 66.0% Office of the Secretary of the Treasury, Division of Research and Statistics. January 24, 1942. 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 Unclass 49 UNITED STATES SAVINGS BONDS CONFIDE Daily Sales - January, 1942 On Basis of Issue Price (In thousands of dollars) Post Office Bank Bond Sales All Bond Sales Date Bond Sales Series 3 Series X Series If Series G Total Series 3 Series 7 Series G Total January 1942 1 $ 3,982 $ 10,229 $ 1,964 $ 7,605 $ 19,798 $ 14,211 $ 1,964 $ 7,605 $ 23,780 2 4,802 10,736 2,056 7.779 20.571 15,538 2,056 7.779 25.373 3 4,457 9.557 1,278 5,453 16,289 14,015 1,278 5.453 20,747 5 9.684 26,724 3,240 13,704 43,668 36,408 3,240 13,704 53,352 6 6,711 7,659 1,341 6,778 15,778 14,369 1,341 6,778 22,489 7 6,748 21,267 3,692 18,832 43,790 28,015 3,692 18,832 50.539 8 7.509 21,297 3,821 12,871 37,989 28,806 3,821 12,871 45,498 9 5.746 12,359 1,798 4,765 18,923 18,105 1,798 4,765 24,669 10 4,398 16,031 1,858 6,355 24,244 20,429 1,858 6,355 28,641 12 10,187 37,483 3,830 14,353 55,666 47,670 3,830 14,353 65,853 13 7,902 15,059 2.507 11,944 29,510 22,961 2,507 11,944 37,412 14 4,706 19,939 3,701 14,293 37.933 24,645 3.701 14,293 42,639 15 6,444 16,597 2,243 13,283 32,123 23,041 2,243 13,283 38,567 16 5,721 26,239 4,319 14,078 44,637 31,960 4,319 14,078 50,358 17 4,830 6,933 759 3,008 10,700 11,763 759 3,008 15,530 19 8,835 39,000 3,946 16,599 59.545 47,835 3,946 16,599 68,380 20 5,155 10,549 2,285 10,551 23,385 15,703 2,285 10,551 28,539 21 4,886 19,375 3.538 15,566 38,479 24,261 3,538 15,566 43,365 22 5,161 22,257 3.973 9,850 36,080 27,418 3,973 9,850 41,241 23 5,908 23,392 2,652 8,004 34,048 29,300 2,652 8,004 39,956 Total $123,773 $372,680 # 54,804 $215,671 $643,155 $496,452 $ 54,804 $215,671 $766,928 Office of the Secretary of the Treasury, Division of Research and Statistics, January 24, 1942. 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 50 Stock of Series E Savings Bonds on Hand January 15, 1942 to date (In thousands of pieces) : Stock on hand : : Bonds Stock on hand IBM Sales : beginning : : manufactured close of deliveries this day : of day : : this day day this day Jan. 15 6,569 320 750 6,999 1,000 16 6,999 445 775 7,329 750 7,329 163 800 7,966 1,000 17 18 7,966 none-closed none-closed 7,966 800 19 7,966 665 800 8,101 825 20 8,101 218 800 8,683 1,000 21 8,683 337 800 9,146 875 22 9,146 381 800 9,565 1,000 23 9,565 377 800 9,988 1,000 Office of the Secretary of the Treasury, January 24, 1942 Division of Research and Statistics. Includes stock in hands of (1) Federal Reserve Banks and branches, (2) Post offices, (3) Federal Reserve Bank issuing agents, and (4) Treasury vaults in Washington. Regraded Unclass 61 Unitiled organ for mail - 2 for - who (in FORE office Repartment Jenuary 11 20 RASE (In United of CONFIDENTIAL : Unfilled : Rev orders T Bonds 1 Unfilled : stock of : IDX I orders st 1 received : manufactured : orders at : bonde : : close of deliveries : opening of : T today : on hand* : I business today : business this day I I : : Jan. 12 541 859 595 605 236 625 13 605 423 630 590 236 650 14 598 622 670 550 236 685 15 550 660 750 455 231 1,000 16 455 773 775 426 204 750 17 426 672 8/10 298 20% 1,000 18 298 sall none-closed 236 204 800 19 298 20% 400 202 70% 825 E 202 20' BOO 86 1,10% 1,000 21 86 411. 800 59 1,545 875 22 59 697 200 86 1,676 1,000 23 86 569 500 50 1,871 1,000 Office of the Secretary of the Treasury, January 24, 1942 Division of Research and statistics. . Bonds in Washington vaults only. Regraded Unclassified 52 TREASURY DEPARTMENT PROCUREMENT DIVISION OFFICE OF THE DIRECTOR WASHINGTON January 24, 1942 is ORANDIC TO THE SECRETARY There is submitted herewith the operating re- port of Lend-Lease purchases for the week ended January 24, 1942. The advance requisition was received for 1,058,500 tons of steel for delivery during the second quarter of 1942. Arrangements have been made for in-transit storage, also local storage, for supplies await- ing shipping instructions from the requisitioning country. Due to the shortage of vessels, efforts are being made to provide types of cargo immediatcly which will permit full utilization of space in the ships. your Clinton E. Mack Director of Procurement FORDEFENSE BUY UNITED STATES SAVINGS BONDS AND STAMPS us. Regraded Unclassified 53 OPERATING REPORT - LEND-LEASE PURCHASES WEEK ENDED JANUARY 24, 1942 TOTAL ALLOCATIONS $817,112,879.00 PURCHASES PREVIOUSLY REPORTED $409,117,623.49 PURCHASES THIS WEEK 32,746,031.08 TOTAL PURCHASES $441,863,654.57 REQUISITIONS IN PRO- CESS OF PURCHASE 33,122,856.00 REQUISITIONS IN PRO- CESS OF CLEARANCE BY WAR PRODUCTION BOARD 137,877,507.50 $612,864,018.07 UNOBLIGATED ALLO- CATIONS $204,248,860.93 54 VAN 1942 Dear Mrs. Preses The Treasury Department has been informed by the State Department that according to information received from Ambassador Gause at Changicing Americans in Hang Kong were unharmed and were being housed in the Heng Kong and Shanghai Bank Building. The Secretary of the Treasury was assured that the American Consul General in Hong Eeng would do everything in his power to assist Mr. Fress. Nagotiations with the Japanese Government through the intervention of the Swice authorities are proceeding to secure the exchange of Japanese official personnal in the United States for American official personnel in Japan and Japanese occupied territory. The State Department will make every effort to have Mr. Frace included in the American party If en exchange takes place. Very truly yours, Acting Secretary of the Treasury. Item. Walter P. Frees, Arlington Tillage Apartments, 2508 Columbia Pike, Arlington, Virginia. 157/eta 1/21/42 Ret. to Rm 214'6 Regraded Unclassified 55 JAN 22 1042 1076 Dear Mrs. Taylors The Treasury Department has been informed by the State Department that according to information received from Anhassedor Games at Chungling Americans in Hong Keng were whareed and were being housed in the liong Kong and Shanghei Bank Building. The Secretary of the Treasury was assured that the American Consul General in Heng Keng would de everything in his power to assist Mr. Taylor. Negotiations with the Japanese Government through the intervention of the Swine authorities are proceeding to secure the exchange of Japanese official personnel in the United States for American official personnel in Japan and Jayanese compled territory. The State Department will make every effort to have Mr. Taylor included in the American party if an exchange takes place. Very truly yours, (SIGNED) D. W. BELL Acting Secretary of the Treasury. Mrs. William H. Taylor, Receivelt Hotel, 2101 16th Street, N.W., Washington, D. c. ISP/efs 1/20/42 Ret. to Rm 2141/2 Regraded Unclassified 58 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE January 24, 1942 TO: Secretary Morgenthau FROM Mr. Doe subject: Notes on the Rio Conference 1. Yesterday, Jenuary 23, the Conference voted unanimously to recommend to the governments of the 21 Republice a rupture of diplomatic relations with the Axis. This wording was finally accepted by Argentina which had re- jected the previous wording that the Republics "cannot continue relations with the Axis". It WAS reported by radio today that Peru his broken off relations with the Axis. This leaves seven Republics still maintaining relations with the Axis: Argentina, Chile, Uruguay, Brazil, Bolivi- and Ecuador. Of these all but Argentine and Chile are expected to break off relations within St few days or weeke -- Uruguay possibly today. 2. The major economic projects now being considered at the Donference are the following: (a) Proposal for 8 Hemispheric Stabilization Fund. It was reported yesterday that March 15 and Washington have been named as the time and place for the Conference of American Finance Ministers to con- sider the establishment of this Fund. (b) Severance of commercial and financial relations with the Ax1s. (c) Development of transportation and distribution of strategic and other essential raw materials. (a) Meintenance of the internal economies of the American nations under wartime conditions. (e) Joint maintenance of shipping which would provide for use of available ships in the inter-American trade "in the best possible menner". Regraded Unclassified 57 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE JAN 24 1942 TO Mr. Foley FROM Mr. Pehle The question has been raised by Internal Revenue as to whether the information contained in TFR-300 Reports can be made available to it for the enforcement of tax claims. It 1a my understanding that it is not the practice of the British Government to use censorship material for non-war purposes such as tax collecting. However, in the letter signed by Mr. Gaston on January 19, 1942, to the Director of Censorship, one of the classes of censorship information in which the Treasury indicated its interest was as follows: "Internal Taxation - Any information which would indicate schemes or efforts to avoid or escape income, profits or other internal taxes of the United States, including taxes on alcoholic liquors." If American censorship material is to be used for tax collecting purposes, it would be logical to assume that the material from the TFR-300 Reports should also be available for such purposes. I suggest you raise the matter at a 9:30 meeting and obtain the Secretary's decision in order that the Foreign Funds Control may be guided accordingly in its relations with the Bureau of Internal Revenue. JAN 2 8 1942 Josene "m2 Regraded Unclassified Mrs. Klotz: 58 Photostat to Dr. White as per your instructions. R. McH Jan. 27th A OF SINANCE OF - DEPUTT MINISTER OTTAWA, January 24, 1942. PRIVATE AND CONFIDENTIAL Dear Mr. Morgenthaut I wish to thank you for your letter of January 14th and to express the appreciation of my Minister and myself in regard to the efforts which you have made and are making to solve our U.S. dollar exchange problem in order that we may be able to make the maximum contribution to the common war cause. Since returning from Washington I have done 5 good deal of work on our estimates and have revised certain of the items in the light of further information and consideration. We have not yet completed our investigations in regard to some of the other items and it will take at least two or three weeks before these studies can be completed. I had been considering whether I should wait until all these investigations were completed and we could give a completely revised forecast with some degree of assurence. However, in view of the time fector I have concluded that, on the whole, it is better for me to send to Mr. White the results of my present thinking on the subject. I know that he realizes how difficult it is to make these forecests, based AS they must be on so many factors of risk and uncertainty, and that he will accept them for what they are, tentstive estimates for our own working purposes subject to constant revision in the light of the developing situation. Incidentally, the results may be summar- Ized very briefly as follows: Totel Gold end U.S. Gain or Loss in Gold Dollars at End of and U.S. Dollars Period, (In Millions of (In Millions of U.S. Dollaro) U.S. Dollars) 201 1942 1st quarter +13 160 2nd " -41 69 3rd " -91 -49 4th " -118 -175 1943 1st " -126 (over) Regraded Unclassified The less favourable position indicated by the above table n.s compared with that which I discussed with Mr. White during the Christmas week 18 due to a number of factors. For instance, it takes into account an up-to-date revision of our estimated deliveries of merchant ships, the program for which was delayed for some months by the difficulty of securing an adequate tonnage of steel. I have also increased our entimated wer imports from the United States by an allowance for the price factor and also by taking into account an additional contract which I believe we are now placing in the United States for about $60 million of automotive equipment for war purposes. Finally, it seemed to me necessary, if we were not to be unduly optimistic, to take the more extreme of the entimates of loss in our receipts from United States tourist expenditures in Canada during the present year. In other words, I have estimated that these receipts will be approximately cut in two. On the other side of the picture, I have left unchanged the figures of probable deliveries of Hyde Park sales to the United States, 86 I have not yet been able to secure from our Supply officials any more up-to-date estimate than I had in late December. I know, however, that the process of negotiating new orders is going on fairly steadily between War Suppli a Limited and your various Service Departments and no doubt a considerable number of new orders will be given to us. For instance, I am advised that the order for Canadian scout cars which was held up for a time by Mr. Phillip Young's ruling has finally been accepted, Furthermore, I gather from odd bits of information given to me about new orders under negotiation that it is not improbable that in the general desire to secure the most effective pooling of the economic resources of the two countries to which the two Governments are now committed, and in the interest of getting the speediest possible deliveries from whatever source they may be available, the Military and Supply Agencies of the two Governmente may reach decisions in regard to the purchase of finished articles in Canada which may greatly improve the prospects of our exchange position. I suppose it will be better for all concerned if purely W&T supply considerations should accomplish this result automatically without requiring too great Inter- vention on the part of the Treasury. Before the revised estimate is presented to Mr. White it will probably be possible to take into account the -esult of some of these new favourable developments. Regraded Unclassified B0 B. I appreciate your taking the position that the exchange problem should not stand in the way of meximum wer production. I note also your assumption that the goods in question will be produced and used to the best advantage, whether the payment is in U.S. dollars or some other form. In 60 far 88 we are concerned, we will do our utmost to see that that assumption is sound, although I am bound to say that new war production projects must be planned a good many months in advance, and where, 89 is normal in our 0888, such projects involve a substantial United States content, it is difficult to overlook, and not be anxious about, the possibility that when the time comes we may not have the United States dollars with which to purchase that United States content. In this connection I know you will be interested in the statement in Thursday's Speech from the Throne to the effect that the Canadian Parliament will be asked "as an integral part of Canada's direct war effort, to approve a contribution to Britain of vest quantities of munitions, foodstuffs and supplies." On Monday next the Prime Minister will make his address in the Debate on the Speech from the Throne and during the course of this address will make a detailed ennouncement in regard tothis contribution and to the whole subject of our financial relations with Grest Britain. I am making arrangements to see that a copy of at least this part of Mr. King's address will be handed to you 68 soon as possible after it has been finalized, probably early Monday evening. Mr. Ilsley wishes me to express to you again the Government's appreciation of your sympsthetic interest in, and your understanding of, our exchange problem and the renewed expression of your willingness to have us raise with you at any time questions relating to our U.S. dollar position. Last year we lost $142 million of U.S. exchange, not to mention a substantial amount of other U.S. assets, but had it not been for the Hyde Park Agreement which you inspired, the situation which we would now be facing would be far more serious indeed. It is difficult for me to find words to express my own appreciation. with kindest regards, I em, Yours very sincerely, Non. Henry L. Morgenthau, Jr., Secretary of the Treesury, 116 WASHINGTON, D.C. Regraded Unclassified Treasury Department Division of Monetary Research 61 Date January 24, 1942 19 Secretary Morgenthau To: Mr. Coe From: These few pages regarding the proposed loan to China might be of some use to you. A considerably more extensive analysis is now being prepared by the Division. Regraded Unclassified TREASURY DEPARTMENT 62 INTER OFFICE COMMUNICATION DATE JAQUARY 24.1942 TO Secretary Morgenthau FROM Mr. Coe subject: Summary of conclusions and conciCerations on loan to China. :- Conclusions For political and military reasons it is suggested that the United States should grant Chine & loan of sporoximately the size requested by the Generulissino -- 500 million dollars. Probably the best form for the loan would be the extension of L special Lend-Lesse credit to China, on which they would draw whenever they could use the dollars. The Generalissimo's desire that there should be no conditions to the loan should be met only pertially. The Lend-Lesse credit would have to be for a number of specified uses. No other condi- tions would be imposed and the Chinese would have complete freedom to use the dollars in any or all of the specified ways. The uses which could probably be agreed upon would be for the peyment. directly in currency or indirectly through bond issues, of current military expenditures for goods and services; the pur- chase, directly or indirectly, of goods and services necessary for the welfare of the people; the ourchase of necessary imports; investment in necessary productive enterprises; to guarantee bond 1ssues designed to absorb Chinese currency which would otherwise circulate, and for the backing of currency. By careful definition of the uses BO that "unsconomical" uses were ruled out, it would probably result that these dollars would be drawn down gradually. 2. Political requirements and the size of the loan The President, the Generalissimo, State Department officials, - Currie end Mr. Fox have all stressed that the loan to China 1e to be made primarily for political purposes. Under present conditions, certicularly with the Japanese attempting to induce China to make peace, it 18 highly important thet all possible mesures be taken to keep Chine in the mar on the side of the United Nations. The present military situation 16 such that the Regraded Unclassified 63 - 2 - energy with which China continues the war 18 vital to us. The military assistance we oan give the Chinese may be long delayed. Therefore, if China holds out for 8 larger loan, it is desirable on political and military grounds that they receive what they ask for, or something approximating what they ask for, 3. Economic conditions in China. China 1e in the middle of a grave inflation. Since 1937, retail prioes in Chungking have risen 27 fold while during the same period the volume of currency outstanding has increased 7 fold. Outstanding currency will be doubled again in 1942. The total volume of goods in Free China is decreasing primarily due to decrease in imports, and the volume of hoarded goods 18 increasing. These economic conditions are the grestest threat to the Generalissimo's control. It. The economic uses to which a dollar loan oan be put Under present conditions, difficulties of transportation greatly ourtail the ability of China to import goods. Moreover, China can obtain under Lend-Lease the goods she needs from the United States and elsewhere. Therefore a dollar loan 18 not necessary for imports. A dollar loan could greatly help China in two ways: (a) to combat inflation by substituting financial hoarding for commodity hoarding, and (b) to increase the production of goods and the amount of welfare services in China. In addition, (c) some temporary psychological benefit would result from the announce- ment that China had acquired a large store of foreign exchange to be used for backing of her currency or other vague purposes. (a) If 8 dollar loan was used to reduce the hoarding of commodities in Ohina, it would make more goods available to the Government and people of China and would decrease or prevent increases in the outstanding Chinese currency, thus attacking inflation from both ends. Among the various mechanism for doing this are: (1) issuance of bonds in exchange for fapi, the bonds to be payable optionally or mandatorily in dollars, with or without guarantee of principal and interest by the United States Government; (2) issuance of bonds as above in exchange for goods and services; (3) shipment of United States currency to China and its distribution to Chinese nationals in exchange for goods and services; and (4) the shipment of gold to China and its distribution there to Chinese nationals in exchange for goods and services. 64 - 3 - There are many possible variants of these proposals, all of which could be of use in combating inflation. In the sending of United States currency to China there is the political problem of the probable opposition of the Chinese Government to anything that would seem to be depriving Ohina of her own monetary system, and, economically, the many problems raised by the introduction of a foreign currency alongside of 8 depreciating domestic currency. In addition, both in the 08.88 of shipping United States currency and gold, the problem of safe transportation might be difficult. It is not necessary that monthly payments be made to a given number of Chinese soldiers, in order to achieve the objective of paying out dollars currently while fighting 1s proceeding. Provision might be made for meeting a portion of the budget, either military or total, month by month; or, by agreement, dollar backed bonds could be issued only to meet ourrent military expend- itures -- in limited monthly quantities; or, by insistence that the bonds should be sold to individuals and without corresponding increases in bank credit, the Chinese would be forced to issue bonds - and to use up the money -- at a slow rate. (b) In addition to allowing the Chinese to use the Chinese currency proceeds from the bond issues or sale of United States currency for military purposes, it would be desirable to allow them to use these to finance increases in production and to improve welfare services. Although the Chinese could do these things by printing more paper money, these important ways of United States dollars can be 60 used. Among such projects would increasing the war effort are more likely to take place if be financing small industrialists at attractive rates of interest, financing of industrial cooperatives and land reclamation. Bome degree of American collaboration would be desirable in the kind of intervention. The Chinese Stabilization Board might be financing of such projects and the Chinese might agree to this linked to the loan in this way. to be "in back of" the Chinese currency will not decrease directly to (c) The fact that B. dollar account in New York 18 stated print expenditures money. But there would be temporarily a psychological the which the Government has to make or its need rary effect, effect on price rise. The immediate political effect might paper with decreased hoarding and speculation, and some tempo- be substantial. Regraded Unclassified 65 - 4 - 5. Sources of funds It is essumed that if the loan 1s anywhere near $500 million the Stabilization Fund will not be used. The resources of the Export-Import Bank are currently less than $200 million. Therefore, the alternative sources of funds would seem to be & Congressional suthorization for a loan or Lend-Lease. Since Congress is already in favor of Lend-Lease, it would Beem to be easiest to obtain the money from this source. In addition, the use of Lend-Lease would make it possible to eliminate rate of interest and much of the other financial perephernelia which 18 inappropriate in wartime. It would seem feasible to use Lend-Lease funds for the payment of military expenses in China, for strengthening the Chinese economic system with a consequent strengthening of the Chinese war effort, and for preventing the Chinese monetary system from collapsing. Regraded Unclassified ALE PLAIN 66 Bombay Dated January 24, 1942 Rec'd 12:18 D.M. Secretary of 3tate, Mahington. 49, Twenty-fourth. 3ilver dull and innctive with declining orices partly due wenkness gold market. 3tocks increased amount- ins bars 20,000 drily, offtnke 400, spot high seventy- one rupees six DiES, low sixty-four twelve, close seventy Eleven. Decision reserve bank to discontinus 3010 of sovertigns regainst gold announced seventeenth chused sharp price increase due misunderatanding bozorr operators of implocations this notice. As govereigns rose in price speculators bought gold heavily and anot price rose to forty-seven Eleven nt which level short selling began na operators realized that since it was no longer possible to buy sovereigns Against gold, price of latter must decline. Prices dropned nagisted by heavy arrivals from interior. local price of gold in future will depend upon supply and demand of metrl itself undisturbed by flucturtions in price of govertigns stocks. Totals 75,000 daily arrivels and offtcke 7500 soot "igh forty- seven Eleven, low forty-six two, close forty-seven. INFORM TREASURY. TC DONOVAN Regraded Unclassified 67 DEPARTMENT OF STATE WASHINGTON In reply refer te 50 8900.5151/12 January 24, 1942 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses copies of telegram No. 18, dated January 23, 1942, from the American Legation, Baghdad, Iraq, concerning exchange control measures recently adopted by the Government of Iraq and the request of the Exchange Control Committee for 8. list of dollar holdings of residents of Iraq as reported on Treasury Form TFR-SCO. The Secretary of State would appreciate the advice of the Secretary of the Treasury as to the reply to be made to the telegram under reference. Enclosure: From Legation, Baghdad, No. 18, January 23, 1942. Regraded Unclassified ALM 68 This telegram must be Baghdad paraphresed before being communicated to anyone Dated January 23, 1942 other than a Governmental agency. (BR) Rec'd 11:05 a.m. Secretary of State, Washington. 18, January 23, 10 a.m. Iraq Ministry of Finance in exercise of exchange con- trol has issued notice of January 21 requiring all persons resident in Iraq to surrender against dinar equivalent any holdings of United States dollars and Swiss france within period of 15 days. Holders are required to furnish declaration and prepare telegraphic instructions to effect delivery, and such cables will be despatched at expense of Exchange Control Committee. Licensed dealers in Iraq are Ottoman Bank, Eastern Bank, and Imperial Bank of Iran, which will pay dinar equivalent at rate of $4.03 and Swiss france 17.40. Exchange Control Committee has today made it clear to Legation that American residents of Iraq possessing dollar holdings are not (repeat not) affected but was unable for peculiar local reasons to specify this exception in the notice. Committee understands from NEW YORK TIMES of August 18 that United States Government initiated complete census of foreign property held in United States per Treasury form TFR-- 300 to be completed September 30. Committee requests that -2- 69 it be furnished by Treasury through this Legation a list of dollar holdings of residents of Iraq in order to administer exchange control here effectively. Legation would appreciate telegraphic reply whether Treasury can do this. State the cost of reply. KNABENSHUE RR Copy:bj:1-26-42 C 0 P 70 Y DEPARTMENT OF STATE WASHINGTON In reply refer to FF 840.51 Frozen Credits/5125 January 24, 1942 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits herewith a paraphrase of telegram no. 210 of January 21 from Bern, concerning the difficulties with which the American Legation in Bern is presented in securing Swiss francs for its dollar drafts. Enclosure: From Bern, no. 210, January 21, 1942. Copy:bj:1-28-42 C 0 70 P Y DEPARTMENT OF STATE WASHINGTON In reply refer to FF 840.51 Frozen Credits/5125 January 24, 1942 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits herewith a paraphrase of telegram no. 210 of January 21 from Bern, concerning the difficulties with which the American Legation in Bern is presented in securing Swiss francs for its dollar drafts. Enclosure: From Bern, no. 210, January 21, 1942. Copy:bj:1-28-42 Regraded Unclassified 71 PARAPHRASE OF TELEGRAM RECEIVED FROM: AMLEGATION, Bern TO : Sceretary of State, Washington DATED: January 21, 1942, midnight NUMBER: 210 Reference is made to Bern's 167. Swiss banks state they cennot be sure that they will be able to resell official drafts and Treasury checks, and as a result there have been serious difficulties in selling them. These banks now offer to purchase this paper at a discount only, the repurchase of such paper being refused by the Swise National Bank. The previous stable buying rate of 4.285 is now 4.145 without assurance that they will continue to maice pur- chases or that the rate will not 6° lower. A Legation representative informally consulted yesterday with the Director from Born of the National Bank and with the Foreign Office Economic and Financial Liaison Officer with a view to obtaining the assurance that at a. stated time sufficient funds in Swias francs would be rovided for Foreign Service establishments and their employees in Switzerland. Several previous conversations have been held on this matter. In a memorandum of the conference it is stated that the National Bank and the Foreign Office have not prohibited the purchase of drafts by commercial banks. It has mercly Regraded Unclassified 72 & been pointed out by the National Bank that although there would be no objection to their purchase of them and their fixing the exchange rate, the National Bank could not re- purchase them. If a buyer is found, the Foreign Office elaims we are free to offer and sell our drafts, and that its (omission) not required. The fact that the market for our drafts has almost vanished, the Swiss Government holds is not its fault. It also does not feel required to make any suggestions for betterment of our position. It was readily agreed that since commercial banks may suddenly find it impossible to continue purchasing our drafts regardless of the low price, such a position could not be satisfactory to us. The principal reason why the banks can continue to buy them at all, it was said, is because of the possibility of their being resold to emigrant Jews. Several possible ways out of this situation were seen by the National Bank Director. One. It was felt that the assent by other National Bank directors could be obtained to insure the purchase of dollars offered by us and Latin American nations if Treasury would agree to transfer either Swiss blocked dollars or gold to neutral countries' accounts as had recently been asked and rejected in the Portuguese case and undecided in the Spanish case. It was stated the Legation thought that providing Regraded Unclassified 73 -3- Swise france for maintaining representation of the United States in Switzerland should not be included with other problems in the financial relations between Switzerland and the United States, which was & separate and distinct question. It was indicated by the bank conferee that if the United States Government should buy badly needed com- modities, preferably metals, for shipment to Switzerland, aside from these for which navicerts already are obtainable, there would be a further possibility for furnishing francs. Since the Bank had offered to pay francs to us for gold delivered to it in Portugal or Bern, it would very likely do so, enabling us to pay the Swiss for expenses incurred in representation of interests. The representative of the Foreign Office stated that there could be no agreement by the Swiss Government to "diplomatic" clearing, and asking us only for such ship- ment of gold would take care of our eventual debit balance. The Foreign Office believes that with imposition of clearing, the United States and Switzerland are well able to pay their debts, and that such a "diplomatic" clearing, if established, would soon, to the distinct distaste of the Swiss, become general for all transactions between Switzer- land and the United States. It was indicated by the conferee of the National Bank that there was perhaps a Regraded Unclassified 74 false impression by our authorities that the bank wishes to liquidate or diminish its position with the United States, but if it might render it mobile again by adding to it and drawing from it for legitimate actions of no help to enemy countries, the Bank would welcome the oppor- tunity to hold that position. The Bank would willingly take a corresponding amount of dollars if Treasury would approve the three million dollar transfer to the Spanish blocked accounts. The local bank verbally informed the Legation on January 19 that it would purchase our draft for $42,500 on January 31 (operating expenses for February and salaries for January) although its resale to the National Bank was uncertain. This verbal assurance has now been conditioned upon whether or not the National Bank will buy the draft. Our bank will probably refuse ultimately. Thus a very un- certain material situation faces the consulates, which in the meantime has, of necessity, had to cash certain small drafts on private accounts at the reduced exchange rate. Following communication from Swiss National Bank received by Legation since above was drafted: "Swise francs 1,502145.92, which amount we hold at your disposal, has been transferred to us by the Federal Reserve Bank of New York through the Banco de Portugal, Lisbon". Apparently Regraded Unclassified -5- 75 this is the franc equivalent of $350,000 referred to in telegram no. 139 of January 17 from the Department. The Legation requests the Department's permission to use this Swiss franc account at the National Bank for personnel and administrative funds, as of January 31, until arrangements are permanently made, thereby escaping exchange loss which would result from forced draft sales at a discount, and in view of the uncertainty of the draft market would assure available funds. Copy:bj:1c:1/28/42 Regraded Unclassified TREASURY DEPARTMENT 76 INTER-OFFICE COMMUNICATION DATE January 24. 14% TO Secretary Morgenthau CONF ENTIAL FROM X. Dietrich Segistered sterling transactions of the reporting banks were as follows: Sold to commercial concerns 32,000 Purchased from commercial concerns £27,000 Upen market sterling was quoted at 4.03-3/4. and there were no reported transactions. In See York closing quotations for the foreign currencies listed below were as follows: Canadian dollar 11-5/8% discount Argentine peso (free) .2360 Brazilian milreis (free) .0516 Colombian peBo .5775 Mexican peso .2065 Uruguayan peso (free) .5250 Venezuelan bolivar .2675 Cuban peso Par There were no gold transactions consummated by us today. %0 new gold engagements were reported. A Regraded Unclassified 77 BRITISH EMBASSY, WASHINGTON, D.C. 24th January, 1942. PERSONAL AND SECRET Dear Mr. Secretary, I enclose herein for your personal and secret information 8. copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Halifex The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D.C. Regraded Unclassified 78 Copy No. ( BRITISH MOST SECRET (U.S. SECRET) UFTEL Hea zz Information received up to 7 a, 23rd January, 1942 1, (NVAL A twelve thousand ton outward bound tanker was terpedoed on 22nd six hundred miles east of CAPE RACE, 1. MILITARY LIBYA. 22nd, Three enemy columns, including tanks, made a recon- natesance in force about fifteen miles deep from their positions around AGHEIIA. Our forces are withdrawing but maintaining touch and harassing the enemy while our reserves are moving forward towards the fighting area, MALAYA. East, Our forces, after successfully ambushing the enemy, have withdrawn south of the river HERSING, Our artillery are harassing enemy movements, Centre, No further change. Nest, Heavy fighting continues and the position in confused, On the 21st eight hundred Australian and four hun- dred Indian troops who had been out off, rejoined from the BAKRI area, A British infantry trigade ccunter attacked BUKIT PAYONG to help this movement, By the 22nd the PUKIT PAYONG area was strongly held by the enemy and remainder of our troops in this area who were unable to force their way through, are making their way in by tracks leaving their wheel transport, BURMA. Beavy fighting continues at KAUKAREIK in the MOULMEIN area against the enemy in force. The evacuation of our forces from the MERGUI area 16 proceeding, A number of military personnel from TAVOY have arrived in the 29 area and all the R.A.F. ground party have reached LICULMEIN safely. RUSSIA. The Russian edvance southwards mest of RZEHV has made "irther progress. Russian attacks south-east of KHARKOV have gained ground, dattle change in the CRIMEA but a resumption of the German attack towards KBC probable, The ATR OPERATIONS RESTERN FRONT. 21st/22nd, BREWEN. toos ml 040 Immand five hundred inciridiaries, ETEN- Ferty-seven tons and the thousand too hundre: At BREZEN a four thousand pourd toat mrst near the reflaxy just P.m And another nour the Atlas Shipyards, Goven R.C.A.F. and two R.A.A.F. At:- look pert, One Canadian Hampden - among those 22nd, & Hudson obtained two like on a one thousand ton merchas Versel off the FRISIAN ISLANDS, Regraded Unclassified 79 - 2 - 22nd/23rd. Seventy-two aircraft sent out, 47 of them to LINSTER. Tuo are missing and one crashed on return. LIBYA. 21st, Tater logged landing grounds prevented operations ever the forward area, MALTA. 22nd, The air attacks took place, at HAL AR activerom: Hildings and a Hurricane on the ground were damaged. Our fightors probably destroyed three aircraft and damaged two more, Te lost one Hurricane. HALAYA. SINGAPORE ISLAND was attacked by about hundred aircraft on the 21st and by 54 bombers escorted by fighters on 22nd. The aerodromes were heavily bombed, five of our aircraft being destroyed on the ground and several others damaged. In air fighting our fighters destroyed nine aircraft, probably destroyed one and damaged four. Te lost ten fighters but four pilots little eafe. In addition A/A artillery claim nine aircraft destroyed, Regraded Unclassified RESTRICTED 80 RESTRICTED MILITARY INTELLIGENCE DIVISION INFORMATION BULLETIN WAR DEPARTMENT No. 7 Washington, January 24, 1942 MID 461 NOTICE The information contained in this series of bulletine will be restricted to items from official sources which are reason- ably confirmed. This document is being given an approved distribution, end no additional copies are available in the Hilitary Intelligence Division. For provisions governing its reproduction, see Let- ter CAG 350.05 (9-19-40) M-B-M. NOTES ON JAPANESE WARFARE CONTENTS Section I JAPANESE LANDING OPERATIONS 1. GENERAL 2, JAPANESE LANDING OPERATIONS IN THE PHILIPPINES Section II OTHER INFORMATION UPON JAPANESE FORCES 1. TACTICS 2. WEAPONS ILLUSTRATIONS (at end of text) Figure 1. Plan of Japanese Troouship (Landing Craft Carrior) Figure 2, Type "A" Japanese Landing Boat Figure 3. Type "B" Japenese Landing Boat Figure 4. Type "C" Jepenese Combination Picket and Command Boat Figure 5, Type "D" Jananese Landing Boet Figure 6. Type "E" Jenenese Landing Boat Figure 7. Type "p" Jepanese Landing Boat RESTRICTED RESTRICTED Regraded Unclassified RESTRICTED 81 Section I JAPANESE LANDING OFERATIONS 1. GENERAL. Landing operations have for some time been part of the pence-time tactical training of Japanese divisions. During the war with China, which started in July 1937, ample opportunity has been afforded various Japanese units to perfect the technique of this operation under service conditions, so that today it follows n pattern tried and tested by war, S. Technique of Effecting a Landing (1) Preparation. Landing beaches or shores are curefully rec- onneltered from the air or by means of secret agents or both. Troops assigned to effect landings are carefully drilled in advance. (2) Rondezvous Point for Troopships, landing-boat carriers, and navel-convoys estublish SEVOUS at e designated an- charage the night before the Innding If el suituble anchorage is not available, vessels arrive off the designated boach between nidnight and dawn. (3) Landing. Landings are untially mede just before dawn on e. dey when it is high tido just after Dentodo of rain or stormy weather are chosen when possible in to increase the element of surprire. l'en are trins "orred from to sports sau landing-oraft carriers just off the landite beach, The intend force usually comprises infan- try and some fiold petillery, engineers, and light tasks, nll of which are enbarked in londing craft. These graft make for the shore at full nosed, and if oll are in formation, they shut off their engines and drop stern enchors together when they are is short distance off the beach. For the remeinder of the distance the boats are essed in until they are grounded by of the hand brakes on the stem anchor cebles. Bonts normally ground et |\torvels of about 50 yerés. If the situation de- mands that boats immediately after trocys have disenbarked, stern anchors are weighed by hard or power and the boats mr.ke off nt top speed. Fotrol craft armed with pompons and machine guns give close support to the landing, and air support and naval support are provided if they are required. Onco a beachhead is secured, the bulk of the troops landed proceeds regidly inland. (4) Forces Used. Practically all Japanese landings in China have been made with B force of two divisions (40,000 men or less). These units were embarked with normal equipment, including E-ton tanks, 108-mm. field Nowitzers, and 75-mm. field guns. Serious opposition was assountered on only one occasion. In this CASP, though hasvy cesualties vere inflicted by monine-gun fire end by Innd nines, the landing force rained its bjoctime by nightfull, PUSTRICTED - 1 - Regraded Unclassified RESTRICTED ASSTRICTED 82 (5) Air and Noval Cooperation. The Japanese have had complete convered underwater body rose above the water, 85 wes judged free the oir and reval supprimely In ml thole lamling operations. Thus son bow encry in the original chotograph. The draft at Light load appaired communications have always benn anound and all lendings have had over- Lg be Lot over 2 foot. The craft was stesend Cross forward under the wholeing support Invo gen end air. De one occasion Japemers destroy- county. Tr. the drawing Le al.com a whield for n. mechine gun in the box. ors nachatou tile londing Corona by pm fire, which tonk the following format (r) Type "g" (rigure 7). This type, which in constructed of stor1 plates, is In two alover an feet overeall and 40 feet. (=) Preliminary bomberdment of undry positions at a range of about 1,300 yords. 0. Comments. The following footors were Instrumental in giving the Japaness the succese that they beve achieved in Inving operations: (b) "Dwitter" Pize on special grons. This vas achieved by putting extrome elevation on the ships' Elina and using a reduced (1) Complete security of see communications: charge. (a) Complete naval and Air superiority, thereby leasoning the b. Types of Sportal Shane and Landing Craft Employed difficulty of landing transport and artillery during the early shipping of operation; (1) Landing Craft Caprier (figues 1). This special-type of traunpect in similar 5.9 construction to n. wholing depot ship. Landing (3) Inefficiency of energy observation and security organiza- craft londed with full complements all non and autorial are olid into tioner the --- through dide betchme, (4) lock of real energy opposities it the bench, enabline trens- (2) Londing Ceart ports to be Brought close to shoret (a) Type "-" (Pigue z). Thin in n Inage open type with (s) Lack of enery ortillory. making a shallow beachheed cuffle A invoice on LM bent which Plaça forward on to the sand, canbling aiout protection for the mein Landings THE to to micoled off. The and the correcio uro usually pro- teached by Bullet-preef plating. Iwin knelo provide stability after (6) Care Veten us the Japanene to achieve surprise by aboosing grounding. This type or bent is undd by the main landing force. difficult Landing pices and poor weather conditions. (E) Type "8" (Pigure 3). This La is amill opun type, hold- 2. JAPACCES LANDING OPERATIONS 171 THE RUMPPIYE Ing from 60 to 00 used, Its stoud in l'euro B to LC môts. This type of bont 10 used by the initiel covering party. -han it is fully loaded, 4, live and lie Onimations The typical procedure in Insting op- Le TIME . Uraft of an Inchuse protting E' na to are NOT a siles of beach, A line of dectroyors forms gett DI with a Leavy crolser or buttleship (a) Type "C" (Piques 4). This 1a nn ermored motor launch about D ALLED be ná the litria of royers. Thre **** of pressporte used lostions. "or closs broyset work. and pointenance of commun- Stx a the and the Ap aircreft carrier stays the 1wo goodse of transports. Them about DO larges with e capalty NE 130 with with start for Aurs, each harge huing errond with (a) Type "0" (figure F). This type in used to supplament 2 or 2. Bml who An di to fire upon the boot. the irrge open Type "^" dosoribed above, It La word solely as KE foir beloting Dr. Boy nail also dolivie all'active firo, which in overaly knewy up to sisout 2,600 foot, observation, and purmit protection are provided by aircraft corriere and lending (a) Type "I" (ficure c). This type la rittod with an nie fields alroady notablished. stree For use In shaller Water or in creaks, smaller tributaries, and med-bried mater. Figure e is a draving hade from e photograph of one b. Tris. The V-front light tenk which is used ter the Japancae of these mirglene-propeller-driven bhuts, taking of one of two In Piros armor-pieroing ammunition from .50 coliber machine Mirrot Broup 5.) of DU laughos herded don 6 river. There boats are approximate* n. hits from 37-mm, guna are deflected by the sloping front of this tenk. ly feet If, longth, and not ever to l'eet about. About 18 feet of the RESTRICTED RESTRICTED - 3 - - 2 - RESTRICTED RESTRICTED 83 of the Philippines friendly to the energy have benn used is not 0. Firen Coloro Activities. The complete extent to which residents superior to those previously observed, according to reports of British Planing 1n of boate and lights, liarover, anown so mided the Japaneze known. officers who escaped from the island just before It use captured. POLIO their Imiting operations. 2. WRAPONS. Section II OTHER INFORMATION LTON JAPANESR FORCAS B.- Machine Guara, 1. TICTICS. (1) Among the wespons in use by the Jaganese in the Uslayan cas- paign, the following types of mechine gima are reported: di Thompsone Carena and found troops 18 being maintained by WOLDS of portnble 0. Alt-Oround Comp {cotions. Close llatson botworn Japanuse air type subsachine gun: a type "96" light machine (un) and a belt-fed DO- dium machine gun. The latter, mounted on a whooled carriage pulled by cheet radios. These radize, equipped with surphones, are carried on truck, La very similar to the British Vickers gun except that the Jap- riority, by commiting officers of companies. Air Fornes, with Fir :he arese meapon has a larger water jacket. positions and Tomir Information is then relayed to the observe the positions of the Allied front liner and treep Rupe- dis- (z) The BBW type "D6" light eachine gun is believed to have Word the in my instencer, are told When to move form reveral improvements over the Humbu Light Eachine Gun, Model 1922. and when to stop, The principal reasurements and characteristics of the type "05" gun are 65 follows: t. Infentry. The Japhnese infortry areas with granader and aquipment natio www.pone, Enera obtained creat mobility Ly leoving telind all outo- Leight- 19.18 lbs. not absolutely necessary, Their attacks unually are other at Length, over-ull- 42 inches. connolidate Company nomenders nave up their companies by agunds mede Calibor 6.5 m. (.256 inches.) the with novance security detechments prior to the attack, and Rifling 4 groovna, right twist. limile velocity 2400 feet per sec. (approx.) halten the Eng leve not taken strong security geasures, either Jepaces D. loar] Learitty, In may instances during the (hloyan Cyclle rate of fire 580 rounde per minute (approx) Dipod mount = positions. been column or while poving. the of lights at night While NUABRA noted by the Deltish. the have capitalized on eveh depense also have weak- b. &rtillery, It has been found that artillery vehicles in nove- name nions roads are 119aly to be ambushed. The feeling has from that using d. l'otor be Transportation, In Inlayn both the ritish and #elf-propelled howitzers would be the nost practical field artillery they are tend any woter invicios sporingly. for In the Icw, Improvese terrain weapon. and to become conclized on any Food that 1s not hard Easly surfaced, therefore become besy targets for enomy ottack. with colditro thair in Minga to travel for a number of days through trained e. Jungle Revements, The Impanese have equipmed and their clos. supplies efther in their packs or on reall transport jungle trails vehi- observed to n in group many. and Dome detachments of motor Japaness oppear have Γ. Parch Discipline. Cycle troops, of which the while in movement. Kalaya have II tendency to Sunch "In while transport helted as troops will as and of the Japanese troops who stormed Here battle Kong word Per AMOUNT 5. Jonandse Troops At Bang Kong. The taction, nfficiency, RESTRICTED RESTRICTED 4 - 5 - Regraded Inclassified ++ M 9 *PNA anot person number of swasi 16 THAN ? ARMER meroe o BOATA of - 6 25'10ml - - 9 BRIDGE LOWER BUR 4 MOTOR SAILING LAUHEN. SAILING CAUNCHERS A LAUNCHING OF MOTOR SAILINE LAUNCH ------------------------- BEARCHLIGHT - FINDING I aum NOTOR SAILING метдя below LAUNCHES SECTION number 4 # LOGAINS comme LAURNER 3 (IMISINARY) STADER main BERRICK TRUES FUR - ETC I i . матоя LAUMCH INVORANCE LOWERING 440 PLAN OF MAIN 00045 (MEN MAY RAISINE LAUMENING PLATFORM " QUICKLY DISEMBARKED V/A BANEPLANKI TO LAUNCHINE PLATFORM. MAY as JAPANESE TROOPSHIP once.) cowere AY MEANS 04 9AM . NEW TYPE - NOTED AT CHINWANSTAQ ABOUT SEPT 25. 1937 B LENGTH 260' (APPROX) 84 BEAM, UNKNOWN, DRAFT UNKNOWN. HOM INTELLIGENCE 05075 Figure 1, Regraded Unclassified ---- AIRCRAFT - 9 мутда soir Minu NUMBER del SMALL ANTI AIR: AIRCRAFT 6045 0 MAINER - ANTI-AIBLART 9 ARMED MAIN PERMIER MOTOR o BOATA 9 25.10m Mores LAUNER 9 SEARCHAIGHT SEARCHLIGHT BRIDGE ANTI-AIRCAAPT BUN LONDRING - MOTOR ANTI- AIRCRAFT aun(4) SAILING LAUNCH TERRER Minia SANIMME LAMITHER'S A LAUNCHING or MOTOR SAILING LAUNCH rees polier DIRECTION BEAREWLASHT CINDING POSITION 1 GUN MOTOR SAILING MINE METER SAFLANG LAUNCHES 5 SECTION THROUGH A-8 - LOOKING FORWARD (IMAGINARY) TRUSE FOR - MAIN DERRIER ETC don PLATFORM * MOTOR LAURCH MAIN DOORE (MER MAY INVERAULIC RAM ? FOR LOWERING AND as QUICKLY DISEMBARAED ARIZINE LAUNCHINE PLATFORM PLAN OF WA BANSPLANNS TO LAUNCHINE PLAYFORM. MAY DE OBCH) LOWERED BYMEANE de AVERSOL 10 RAM 7 JAPANESE TROOPSHIP NEW TYPE-NOTED - AT CHINWANGTAD ABOUT SEPT. 25. 1937 B LENGTH 260' (APPROX.) 84 BEAM, UNKNOWN, DRAFT UNKNOWN. FRIM INTELLIGENCE OFFICER U.S.A.T.C Mgure 1. Regraded Unclassified S5 BOW PLAN Ramp Bow Water line BROAD-SIDE Water line BOW TYPE "A" JAPANESE LANDING BOAT. Approx:- Overall 50' (Also some type boat- Overall- 67') Water line 41' Beam 13' Loaded mean droft-3'x3" Looded least freeboord-3' Powered with low-speed 2-cylinder gasoline engine. (A few Diesel engines used) Approx. speed: 10 knots. Estimated capacity: 110-120 men fully equipped. Figure 2, Regraded Unclassified 86 PLAN BROAD- SIDE Water line BOW TYPE "B" JAPANESE LANDING BOAT. Overoll- 20' to 40' Powered with gasoline engine. Construction similar to o steamer lifeboat. Only some are equipped with bullet-proof shield in bow. Some carry o light mochine gun in bow. Figure 3. Regraded Unclassified 87 MG or I pounder AA MG MG or I pounder - PLAN 00 BROAD - SIDE Approx Overall 40' Beam 13' Constructed of steel plate along fine lines One boat clocked of 15 Knots BOW Type "C" Japanese Combination Picket and Command Boat Figure 4. Regraded Unclassified 88 Tow Line PLAN Water Line BROAD-SIDE Water Line BOW TYPE "D" JAPANESE LANDING BOAT Approx: Overall 30' Beam 10' Constructed solely as o tow boat. Hos 0 wooden hull, similar to standard motor launch. Figure 5. Regraded Unclassified 89 PLAN BROADSIDE APPROXIMATE SCALE 643210 5 10 15 20 FEET BOW TYPE'E' "E" JAPANESE LANDING BOAT Figure 6. Regraded Unclassified 90 PLAN STERN & SIDE TYPE "F" JAPANESE LANDING BOAT. Overoll- Approx: 40' (Also o 30' boot, this same type, used) Beam- 12' Boat is constructed of steel plates. A metal shield is rigged in bow for protection. In this shield there is an operture for G machine gun. 40' boat clocked at 9 knots. Figure 7. Regraded Unclassified Mress by Henry Morgenthad, Jr., Secretary of the Treasury the Great Lakes Steel Corporation Plant, Ecorse, Michigan 91 unday, January 25, 1942 11:15 a.m. Radio Station WJR my friends: The United States of America is at war. Just what does that mean? It means that every last square inch of it is at WST. It means that every man, woman, and child in the United States is at war. The war is not something that affects only the Philippines, 7000 miles away, and the Atlantic seaboard, where the submarines of the enemy are taking their toll. It affects us all. It is the concern of every American, whether he is in Alaska or residing in the inland security of Illinois or Tennessee. Scores of those in this gathering have sons in our fighting forces. You workers are engaged in war production, and all of our lives are directly affected by the insurmountable fact of war, which is changing already the course of our day by day existence, no matter what our circumstances and no matter where we live. You workers here at this great plant have demonstrated that you realize it to be your duty to yourselves and to your country to enlist your dollars voluntarily, dedicating them to the winning of the war. After all, these dollars are merely the symbol of the sweat and effort and determination you expended in earning them. And when you enlist your dollars you enlist yourselves. The more dollars you devote to victory, the greater part you play in achieving the great objective. Regraded Unclassified --page two-- 92 This proves what can be accomplished by the complete cooperation of labor and management, working together harmoniously in 8 common cause. Thirty nationalities are represented here in this plant, but they are all Americans. The results speak for themselves. It is my great pleasure today to bring to you on behalf of the Treasury Department of your government, this flag, emblematic of the fact that more than ninety per cent of the 8,100 employees of this corporation, are payroll savings volunteers. This afternoon the Chrysler Tank Plant will be awarded B. similar decoration. It is my hope that every plant and every business house in the country will earn and proudly display such a flag in the near future. The flag will fly over this plant as long as 90 per cent or more of its workers continue to buy Defense Savings bonds by means of voluntary payroll savings. I am sure that it will fly until the victory is ours. And so, Mr. Fink I present to you, for your employees, this United States Treasury flag, emblazoned with the figure of the heroic Minute Man and the thirteen stars which bring to mind the pioneer states of our republic. My congratulations and grateful appreciation. Regraded Unclassified 2 Ant sthers had I Number , knum 1914 He 100 --- my / day " spoki 14 this prem - yum Bank in to 19:00 and Arie desins live - the m. A (col) day. The 4.1 years lets prime Aga 9.00 " mad for have leigh Than have 44 relevered MI a very its use my mar s diens MIL dein puil years the card mothing be - miny. are 7 and cail be unes Minem g. uens with dain N dissive fir from energ nis Out 7AR quens many years as gunias had promoted. N-M in offer and MR 4% you : That The parants his - meser has the 100 never untain charput a ready serve desappointed no and to wet Matain Armand dath vehir - the specint has # millions pm 15 and - A-F ying n uno Springs, use really 7A mino of 70 R ito their He das a let 2 / eije esinage into Am Through The Theough fight As 100 - 7 aifantè / in jump prepared experple /et sib. this guing JR, A puts himsiy for They cresis. his mig a. Atreet 7/c nord Miad a helparing hund, to overense of - can As created in 1.5. can does And yr 42. the m. spint can't boir That this 2 3/1 vina. 8 worm n spiret of 7 P special of aminia in something 4m commen ham. In opn been said rai And there is though miy 7R 100 there he con face is 4am Gon 2. on 2 1 7 Twis mith a. men- n. Dup or a camping trip #: live in +. Liven the Nights you or 1Pm the ware * in in I've bum Space *) et companys He their - 22. aðvagi Regraded Unclass 93 READING COPY OF SECRETARY MORGENTHAU'S ADDRESS BEFORE THE DEFENSE RALLY OF THE UNITED AUTOMOBILE WORKERS STATE FAIR COLISEUM, DETROIT, MICH. 4 pm, Sunday, Jan.25,1942 Regraded Unclassified 94 It is a good and wholesome experience for any official from Washington to come here to Detroit to meet a great audience of automobile workers. We in Washington are much too accustomed to think that we sit at the very center of the war effort. For the past few weeks we have seen our Capital City become; in a sense, the capital of the world, the scene of wartime planning on & world-wide scale. The officials and admirals and generals of many countries are working together in Washington at this very moment, planning the military, naval, and economic strategy that will bring Japan and Cermany to their knees. Regraded Unclassified 95 - 2 - no Yet all our strategy, not matter how brilliant, n cannot accomplish its decisive purpose until the materials of victory have rolled from Americas S assembly lines. All the individual daring and bravery of our men in uniform cannot win the war unless they are backed by the mass production of the implements of war. The real heart of the war effort 16, therefore, not in Washington but right here in your workshops and factories. The big push begins here. The great offensive against the Axis 1s under way here in your State of Michigan, next door to you in Ohio and Pennsylvania, and wherever the skill and energy or working men and women are producing the weapons of victory. Regraded Unclassified - 96 - 3 - You in this hall are in the front lines in this phase of the war, and I am genuinely proud to be here among you today. This is not the first time that I have been privileged to visit the Detroit industrial area in recent months. Some of you know that I had the pleasure of attending a meeting of shop stewards at Pontiac in November. I came back to Washington from that meeting heartened and invigorated as seldom before. In that one evening I heard more sound common sense than I had heard in many meetings, in Washington or elsewhere. 97 - 4 - From that day I have been convinced that American labor has been ahead of all of us in its willingness to produce armaments to win the war, whatever the sacrifices, whatever the consequences. There 18 every reason for the rank and file of American labor to be out in the forefront in its understanding of the war and in its response to wartime needs. In the first place, this is a people's war, to an extent never before known before in any of the great struggles of human history. This war 1s a people's uprising against tyrants who are trying to push us back into the Dark Ages. Regraded Unclassified 98 - 5 - It 18 being fought by the people and it can only be won by the people's efforts, by your efforts. Upon your skill, your sweat, your willingness to dedicate yourselves to war production, the ultimate outcome will very largely depend. In the second place, this is a war against the movement enemies of the free labor moment in this and every other country. Nobody needs to stand before any group of labor men and women in this country to tell it what Fascism means. When the Blackshirts bullied their way to power in Italy twenty years ago, when others praised Mussolini for making the trains run on time, American labor instantly knew Fascism for what it was. Regraded Unclassified 99 - 6 - When Hitler crushed Germany's trade unions, you of American labor knew at once that he would crush yours 1f he ever had the chance. Labor has never been dazzled by the military accomplishments of the dictators. Labor has never made the mistake of imagining that Fascism was in any sense a "new order" or that its medieval tyrannies could supply us with any guideposts to our own future. Now, at last, the life-and-death struggle has come, just as the rank and file of labor foresaw that it would. As Hitler said-- truthfully, for once !--"two worlds are in conflict; one of them must break asunder." We can tell him now that it 1s his world, not ours, which will break and die. Regraded Unclassified 100 - 7 - But there 1s a third and still more compelling reason why labor has an immeasurable stake in this war. Labor in this country and elsewhere looks to a better world, a freer and a more secure future. Everything that labor has fought for a hundred years to attain will be lost forever if the dictators should win. Everything that labor seeks, for its children and its children's children, is bound up with the success of the free countries in the present struggle. I think I can describe those aims in a very few words by telling you about a great picture in the Grand Central Station in New York. Regraded Unclassified 101 - 8 - It 18 a unique picture because it happens to be the biggest photo-mural in the world; we of the Treasury put it there to help the sale of Defense Bonds and Stamps, and we made it big enough to cover an entire wall of the Station concourse, 80 that everybody could see it. But what makes me so proud of it is not its size, but its message and its spirit. The first of its three huge photographs shows an American farmer and his land, and the caption under it says, "That we may defend the land we love." The second 1s a panel of children's faces, with the caption, "That these may face a future unafraid." 102 - 9 - And the last shows a worker looking up at a factory, and under it is the caption, "That we may build a better world." Those happen to be the objectives of the Defense Savings Bond campaign, but I also know that they are the objectives of American labor, and they are the greatest of the aims for which we are fighting this war. It may seem unfeeling of me even to mention Defense Savings Bonds to an audience in which so many of you have temporarily lost your jobs, suddenly and through no fault of your own, because of the change-over to war production in the automobile industry. Regraded Unclassified 103 - 10 - I know what you in the Detroit area have been suffering in temporary unemployment, and I wish as fervently as you do for the day when your plants will be back in full production again, and when those of you who are walking the streets will be back at your benches once more. Certainly I would never ask or expect any of you who are out of a job to buy Defense Bonds or Stamps. We have a slogan at the Treasury: "Let's make every payday Bond Day." That does not apply to those who have no payday and no regular income. The Treasury will never ask anyone to buy Defense Bonds if it means taking food from his children or clothing and shelter from his family. Regraded Unclassified 104 - 11 - The other day a Chicago advertising agency sent us an elaborate sales promotion plan based, frankly enough, (and these were its words) upon "the traditional dread among the American people of being held up to public ridicule and scorn." The 1dea of this misguided plan was to label as a slacker everyone who did not buy a bond. We replied that we disapproved and did not countenance anything of the sort. We replied that we did not believe in the effectiveness of intimidating Americans, and that if any such tactics were proposed, we would avoid them like the plague. Pause But for those who do receive regular pay, those who have good jobs at good wages, there 18 a greater need than ever to "make every payday Bond Day." Regraded Unclassified 105 - 12 - You who are working in the Detroit area have just seen with your own eyes what a great economic dislocation can bring. You have seen friends and neighbors hard at work one day and thrown onto their unemployment insurance the next, as part of the price of preparing this country's factories for war. You know that those who have built up a reserve of savings are better able to meet an unforeseen shock than those who have not guarded themselves against 1t. Isn't it better to be prepared- in time? Regraded Unclassified 106 - 13 - Isn't it better to safeguard your future by setting aside a part or your earnings now, every week and every payday? Your country needs the money, and you need the security that these double-purpose bonds will bring. I am often asked three questions about Defense Bonds which must, I am sure, be in your minds. The first 18, "Can I get my money out if I need 1t?" The answer is yes--any time after sixty days from the date you bought your bond. The second 1s, "What happens if I lose my bond?" The answer is that we at the Treasury have a record of every bond and its owner; we can supply you with another 1f you identify yourself, and we will be glad to keep your bond for you at the Treasury 1f you wish us to keep it in the safe for you. Regraded Unclassified 107 - 14 - The third question 1s, "Will I lose money on these bonds the way so many people lost on the Liberty Bonds?" The answer is that you can't lose. These bonds, unlike the old Liberty Bonds, are registered in your name. You cannot trade them on the market or offer them in payment of a debt. You will always get back from the Government your one hundred cents on every dollar, and the longer you hold them, the more they will grow in value. Moreover, Defense Bonds not only help to pay for the Euns and tanks and planes that will win the war; they also pay for labor, your labor. Regraded Unclassified 108 - 15 - Every time you buy a $75 bond you pay for the services of a skilled worker for an entire week; every time you buy a Bond or even a Defense Stamp you are enabling the United States Government to pay you for your work, and you are hastening the dey when our fighting men will be able to carry the war to Tokyo and Berlin. Pause About a month ago two of your brothers in the Dodge local, Mr. Rubin and Mr. Swetz, came to see me in Washington, to discuss ways and means of hastening the conversion of their plants to war production. Together we accomplished something, because those two men had the initiative to come to my office and also because of the fine cooperation of Mr. Patterson, the Undersecretary of War, Mr. Stettinius, the Lend-Lease Administrator, and Mr. E. T. Reller of the Chrysler Corporation. Regraded Unclassified 109 - 16 - But what I shall always remember about that meeting is the spirit that your representatives showed. I argued then, and I have said it for months to everyone who would listen, that the only way to arm this country in time was to order the complete and immediate stoppage of all automobile production, and the quickest possible conversion of the plants. Your representatives knew that that would mean immediate unemployment for great numbers of men; yet when I asked them how they felt about it, they answered, without a moment's hesitation, "We can take it; we want it done." Regraded Unclassified 110 - 17 - That was just a sample of the spirit I have found among American labor ever since we at the Treasury started the Defense Savings program. It is a sample of the spirit that the whole country has discovered in the weeks since Pearl Harbor. It 18 the spirit that is going to win the war. I said in Cleveland yesterday that the pioneers who settled this Middle Western country did not let danger or hardship frighten them. They regarded every danger as a challenge, every hardship as an adventure. That is the spirit with which you are meeting this crisis, the greatest that free men have ever undergone. 111 - 18 - You workers of Detroit are in the forefront of the fight, and I am confident that you will see it through until the fight 1s won. -000- 112 RESTRICTED 2657-320: 10. All A.I.D., V.D. 11:00 A.M., January 25, 1942. SITUATION REPOICE I, Pacific Theater. Phillepines: For several days the enemy bas been building us ar n. DISTATED Attack on our left. For this effort. fresh hostile Twode DATA brought in under the protection of naval units. Their air pepurations were heavy. In addition, night efforts At penstration vere dila alons the !ubic By coast in AD effort to outflank our artire The attack VAS launched yesterday. and under its pressure va forned to (Ire ground with aome loss. At this time, however, maral right flank forces launched a counterattnck with revalize success, supported by B. heavy concentration of 155-mm. fire. infantry found the enemy completely disorpanized in this area, loving hundreds of dend on the field 118 well na quantities of supplies and - The situation is nov simbilized, There Se до further in the Visaynna or in Mindanao. Hawa11: No further reports of stattle nutivity. The British have had nome success in atabi- Thing lins from Retu Pahat on the went to Marning on the sent, The Aparase min stfor Le in the wont, Jump Japanese preparations for of stack un Pangoon continue, with acuttored fighting in the Moulmein intriat, The reports that U.S. and British fighter pilote metroyed 11 nore every planes yesterday. including 7 twic-engined bonbers, Japanese activity in New Grines and New Britain continues, foording to perial recomminanance, Weet Const: No further reports. 11, Eaytern Thenter lighting continues on the eantern front in spite of the cold life le ao reported change in the mituation. (No situation may will 12 Insued the data) III. Neatern Thanker. Bo further reports have been received. IV. Middle Eautern Theater. Grounce Axis forces 876 moving large bodies of their troops from E) Achoila. A strong column 16 moving along the Aggheila- countal road. Sporadic fighting 1a reported in the grea. Nr. Axis Air Porces continue the attempted neutralization of In Tripolitonis and Cyrenicia, bath air forces continue actions assost supply routes and duabe. RESTRICTED Regraded Unclassified 113 January 26, 1942 9:45 a.m. GROUP MEETING Present: Mr. Blough Mr. Bell Mr. Southard Mr. Paul Mr. Viner Mr. Morris Mr. Thompson Mr. Sullivan Mr. Schwarz Mr. Buffington Mr. Graves Mr. Gaston Mr. Kuhn Mr. Foley Mr. Haas Mrs. Klotz H.M.JR: Herbert, what have you got? MR. GASTON: I don't believe I have anything. H.M.JR: Neither have I. Good. Ed? MR. FOLEY: I would like a chance to talk to you sometime this morning about the Alien Property Custodian stuff, a couple of companies. Leo Crowley had lunch with the President on Saturday. Regraded Unclassified 111 - 2 - H.M.JR: Yes. MR. FOLKY: And I haven't heard anything. I don't know what happened. H.M.JR: I see. Well, I haven't heard anything either. MR. FOLEY: Here is a memorandum for the diary. (Dated January 24, 1942, re Alien Property Custodianship.) H.M.JR: You tell them outside. MR. FOLEY: Then I think we ought to zet straight on the silver legislation, Mr. Secretary, if you have a few minutes today. H.M.JR: Well, you tell them outside, but we will just sit tight and wait until we hear from Leo, that is all. MR. FOLEY: All right. H.M.JR: When he is ready, he will phone me, What else? MR. FOLEY: That is all. MR. SULLIVAN: Chairman Vinson of the House Naval Affairs Committee called me the morning after the article appeared in the newspaper last week that you and I were going to work with him in preparing 8. profit limiting bill. I had not talked with him before. I didn't know whether you had or not. He called and wanted us to help him prepare such a bill. (Mr. Blough entered the conference.) H.M.JR: I have not talked to him. MR. SULLIVAN: And I said we would like to see the report, and he said he would send one down. It hasn't Regraded Unclassified 115 - 3 - yet gotten here, but it is & pretty voluminous affair, and I think we would have to put our men to work study- ing the report, but we can get into a great deal of difficulty between his Committee and House Ways and Means on that, and I just wanted you to know that we were trying to steer a course through that. I understand that the Warner Brothers have a private studio that they are willing to make available to us, and I would like to show that tax picture to House Ways and Means and anybody in the Senate Finance who wants to see it before it goes out to the public. (Mrs. Klotz entered the conference.) H.M.JR: It is all right. MR. SULLIVAN: There is an article on taxes in "Click" you might want to see. H.M.JR: You mean the Disney picture? MR. SULLIVAN: Yes. I think this article is pretty good, better than any they have had in the past. It goes on for four pages. I think it is pretty good. H.M.JR: All right. MR. SULLIVAN: I think Chick is responsible for that, and it is a good job. MR. SCHWARZ: Thank you. MR. SULLIVAN: Are we all going to see this Disney picture? H.M.JR: I haven't heard. I don't even know whether it is in town. MR. SULLIVAN: Yes. H.M.JR: Is it in town? Regraded Unclassified 116 - 4 - MR. BUFFINGTON: The picture. I have three prints with me. Disney will not be here until the first of next week. H.M.JR: How long does it take? MR. BUFFINGTON: Seven and a half minutes. H.M.JR: I don't know when the soldiers are in the studio. Well, sometime during the day. MR. SULLIVAN: That is fine. The reason I asked that is that there are five hundred of them already out, and I think the sooner we can get them going, the better. H.M.JR: Well, he (Buffington) is supposed to be in charge of that. MR. SULLIVAN: I know that. H.M.JR: And I suppose that is what he is doing. MR. BUFFINGTON: What is that, Mr. Secretary? MRS. KLOTZ: He can't hear you. H.M.JR: Sullivan says he hopes that these five hundred pictures will get out, and I said that is what your job is, 80 when we get to it, you can give us a report, but you can show them to the committee - well, you had better - only one person can handle the pub- licity. I don't know what you have done with the Press Club. I am not going to worry. The picture is the property of Buffington. MR. SULLIVAN: That is right, and the only reason I made the suggestion is, I know he is reluctant to let anybody see it until you have. H.M.JR: Oh! Well, I didn't even know it was in town. 117 - 5 - MR. SULLIVAN: All right. That is all. MR. PAUL: We had a conference Friday with Senator George and Mr. Doughton and made 8 progress report to them. They seemed very pleased and as a result of that they said if it were agreeable to you they would post- pone anything public for about three weeks and continue the working along the lines that we have been working on. H.M.JR: Well, don't you think that is an awfully long time? MR. PAUL: I don't think it is any too much, no. H.M.JR: You don't? MR. PAUL: I think it should be stopped if we should stop havingprogress or something of that sort, but for the moment I think we might work on that - with that schedule in mind. H.M.JR: It seems awfully long to me. What do you think, John? MR. SULLIVAN: I think that they are very anxious that every possible effort be made to get Stam in accord with the Treasury, and until it becomes apparent that he isn't going to give in, we will have to cooperate or we will continue to be accused by Doughton of not cooperating with the Committee. Randolph is entirely right. A great deal of progress has been made on many things. On the big issues, I don't think Stam is ever going to agree with us. I don't think he is going to agree with us on excess profits, but I think we jeopardize our position unless we do play along. Now, I think that Randolph has it correctly analyzed by saying that until it becomes apparent that we are not going to make any progress by cooperating, we should do it, and I likewise feel that the time that has been spent thus far has not been wasted and that the time we save on the other end is much greater than the time that has thus far been spent in conferences. 118 - 6 - Stam, you know, fell and sprained his ankle and was out for about a week, and that held it up. It hasn't been our end of the show that has held us up all this time. H.M.JR: Well. I will leave it with you two men. That is all I can do. MR. PAUL: I would like to - I am sure that is the right decision. I would like to see you about a couple of matters for & few minutes, but it doesn't have to be today. Tomorrow would be all right. H.M.JR: Would you mind telling them outside? MR. PAUL: All right. H.M.JR: Please. Anything else? MR. PAUL: No, that is all. MR. SULLIVAN: You remember last week you wanted us to come in again on exempt corporations? H.M.JR: Yes. MR. SULLIVAN: And I tried for a couple of days, and you were busy on your speech. We will be ready to discuss that with you whenever you say. H.M.JR: I have got one more speech tonight and then I am through. MR. SULLIVAN: I think that whatever we are going to do on this, Mr. Secretary, we had better do before we start on the tax bill because then we are not going to have much chance. H.M.JR: George, tell us about Hollywood. MR. BUFFINGTON: Five hundred prints were finished Saturday night, were shipped out of there. The schedule Regraded Unclassified 119 - 7 - originally called for the last five hundred to go out on the seventh, but they will go out either Thursday night of this week or Friday night of this week. There is a complete schedule worked out by the National Soreen Service who the Program Committee of the War Activities Committee has permitted to handle all releases. We will have weekly a list of the theaters where each print is. They will be shown in many theaters within five and a half weeks. The Disney Studio in California and their office in New York are handling the publicity, coordinating everything they do with Chick Schwarz. The first release probably will be Thursday of this week. H.M.JR: Why coordinating with Chick Schwarz? MR. BUFFINGTON: Well, I wanted to be sure that there is nothing that they do in the matters of pub- licity that might in any way interfere with the policy of the Treasury. H.M.JR: Then that has nothing to do with the distribution of the-- MR. BUFFINGTON: No, no, stories. H.M.JR: No, stories. They have been telling-- H.M.JR: That is good. What I would like to know, is the picture any good? MR. BUFFINGTON: I think it is fine. Peter Odegard saw it and Harold Graves saw it Saturday morning when I got in. H.M.JR: What do you think about it? MR. GRAVES: I like it very much. H.M.JR: Not enthusiastic about it? 120 - 8 - MR. GRAVES: No, I am. I think it is a fine picture. MR. BUFFINGTON: We have been given sixteen thousand boards by the Outdoor Advertising Association. In my absence, 8. poster was prepared which we wanted to use. We were told this morning that we can get the sixteen thousand posters-- H.M.JR: Now, the last I spoke - Bell called me up in Florida on that, and I said all of the posters were to go to Defense Bonds. MR. BUFFINGTON: These are in addition to the ones going to Defense Bonds and in no way interferes, as I understand it, with the boards they have allocated to the Defense Bonds. H.M.JR: Bell said Defense Bonds were working with the National Association and you were working with New England. MR. BUFFINGTON: No, the New England man came to see me as a representative of the Association, and he was in favor of having the boards used for taxes, and Mr. Fulton, the president, was in favor of having it used for Defense Savings and there developed a little altercation in the organization, and, as a result of that, Mr. Fulton came back, as I understand it, on Friday of last week and offered the sixteen thousand boards for taxes. H.M.JR: How many does that leave Defense Bonds? MR. BUFFINGTON: Thirty thousand, I understand. MR. GRAVES: Well, they are the same boards. MR. BUFFINGTON: Same boards they had before. H.M.JR: Well, you yourself told me you couldn't get the thing out in time, and I O.K.'d the thing once Regraded Unclassified 121 - 9 - with you present to let them go for Defense Bonds. MR. BUFFINGTON: Well-- MR. GRAVES: I think Mr. Buffington and I ought to get together on that. H.M.JR: I think you should. I don't think you should bring it up to me, George. George, you yourself told me you couldn't get the thing ready in time. MR. BUFFINGTON: No, I said that the Defense Savings group told us in Dan Bell's office that it wasn't possible to get the boards out in time. H.M.JR: You said you couldn't get the thing out 80 it would do any good, and they were ready to go, and you agreed to it here in this office with me. MR. BUFFINGTON: Well, I did at that time, but when they came back and said that we could have these sixteen thousand boards, and then-- H.M.JR: Well, is it part of the thirty thousand? MR. BUFFINGTON: No, it is not. It is in addition to that. H.M.JR: Well, you had better talk with Harold Graves. Will you? MR. BUFFINGTON: All right, sir. H.M.JR: You and Harold better get together, and in this matter, if you don't mind, whatever Harold decides will be final. And as to that sort of thing, you will have to clear that with Kuhn and Odegard. You have got to clear that with Kuhn and Odegard. Now, what else? MR. BUFFINGTON: That is all. H.M.JR: Have any fun out there? 122 - 10 - MR. BUFFINGTON: Well, I got in at eight-forty, and I was in the Studio until one 0' 'clock the next morning, and left Friday afternoon at four forty-five. Technicolor has done 8. marvelous job. This is the fastest time they have ever gotten - this is the biggest single job they have ever handled and the fastest time they have ever made in printing. H.M.JR: O.K. Ferdie? MR. KUHN: I have nothing except that the tax song was launched on the air last evening by Eddie Cantor, and I am told it was very, very good, and Chick got out a story on the song to the papers, and the Times printed the full text of the words this morning. MR. SCHWARZ: The Herald Tribune and the Times Herald also carried all of it. MR. KUHN: It is a question now of plugging. H.M.JR: Jake? MR. VINER: There are going to be hearings on 8. war risk insurance bill. The Treasury ought to have some interest in that. It ought at least to see that the bill is read here by somebody. It may be & big proposi- tion that concerns you very much. MR. FOLEY: I think Dan has been following it. MR. VINER: Has he? H.M.JR: He was to have been here this morning. He was to have had my estimates on my financing. I wonder if he is sick. Who would you suggest to do it? Regraded Unclassified 123 - 11 - MR. VINER: I think there ought to be a Treasury policy on it. (The Secretary held a telephone conversation with Mr. Bell). H.V.JR: Ask Fell who should do it, will you, Jake? He has been fussing with it. MR. VINER: It is not 8. minor thing. It may mean - it may affect very important interests in the Treasury. I would say that Harry White's section ought to work on It. (Mr. Pell entered the conference). H.M.JR: I hadn't forgotten. I thought you said this morning you -- MR. BELL: Well, I am not, but I just thought I would sleep a couple of hours. H.M.JR: Good for you. I approve. Well, before you leave, if you would - Viner raises the question of this war risk insurance, who is going to study it in the Treasury. Will you give it to somebody? MR. BELL: Well, I started out to study it, you recall, and Jesse announced with the approval of the White House that he had created a corporation, and he has since gone to Congress and gotten Congressional authority, and I believe he is increasing his borrowing capacity to two and a half billion dollars, part of which is for that. (Mr. Southard entered the conference). H.M.JR: Do you think we ought to do anything about it? MR. BELL: The only thing I think we can do is to just watch it and see what kind of a liability he puts Regraded Unclassified 124 - 12 - upon the Treasury. Apparently he has got White House approval. H.M.JR: Would you have somebody look it over? MR. BELL: Yes. H.M.JR: Who will you give it to? MR. BELL: I don't know. White has done some studying on it and furnished me several memoranda. It is probably between White and Haas. We will get together on it. H.M.JR: Well, leave me a memo on it, will you? MR. BELL: All right. MR. VINER: Is it going to be free insurance? MR. BELL: I think it is all free. H.M.JR: The President said not. MR. VINER: Well, the tax people ought to have a hand in it. MR. BELL: I have seen nothing on it so far as the charges are concerned. It is 8. Govermnent matter, and I understood the corporation would stand the whole bill. H.M.JR: Well anyway, pin it on somebody. MR. BELL: All right. H.M.JR: And at 8. quarter of eleven for that Disney picture, you are all invited. Anything else, Chick? Roy? George? MR. HAAS: Mr. Swope would like to change this daily table. You are receiving it in this form now, and he would like to change it this way. This shows the stock on hand in the Federal Reserve Banks and the Treasury. Regraded Unclassified 125 - 13 - H.M.JR: Well, I will take my old one and the one he gets, both. I like the way I have been getting it. MR. HAAS: O.K. H.M.JR: I want to see the day where there are no unfilled orders. MR. HAAS: Yes, that is why I wanted to check with you. Let me do it both ways. H.M.JR: Let me have both. What does that mean, sales? MR. HAAS: That means the sales - they sold thirty million dollars worth with that many pieces in the sales. We get the figures once a week, so we can give you that figure. H.M.JR: I will take it both ways. MR. HAAS: All right. H.M.JR: Harold? MR. GRAVES: Nothing. H.M.JR: I would like to ask you something personal, if you would stay behind a minute. MR. GRAVES: Yes, sir. MR. SCHWARZ: Mike McDermott called me just before the meeting. He hadn't been at Mr. Hull's press conference. He checked. He said he didn't say anything off the record along that line, but he talked with some of the boys over there and they said in his manner that some of them got the impression that he was treating it lightly, that he said it would have to be studied, and that it was out of his realm for the time being, it wasn't an immediate practical matter. He said there might be some basis, but that that statement was wrong. He checked it this morning. H.M.JR: Anything else? Regraded Unclassified 126 - 14 - MR. SCHWARZ: You might like to see the supplemental clippings on Cleveland. H.M.JR: Thank you. Were there any clippings on yesterday's speech? MR. SCHWARZ: Yes, there were some in the group I sent down earlier. H.M.JR: Either you (Southard) - I don't know - with White and Coe away I don't know how to get this information, but between you and Frank Dietrich, one or the other, will you get for me from the State Depart- ment all the exchanges of cables between Rio and the State Department? I would like it this morning. In regard to the Stabilization. I want a complete file. Now, whether Frank Districh gets those or how that is done, I don't know. MR. SOUTHARD: It would be a matter of being sure we have got 8. full set. What we have, we have organized. H.M.JR: You might even go over there. There may be some cables - I am suspicious that somebody shot 8. cable down there that we don't know about. I Am suspicious. I think if you got it you might go over, and I don't see why you just don't ask them for a set. Just say that I would like to have 8. set out of Mr. Hull's office of every cable that went, and was received, pertaining to Stabilization Fund. MR. SOUTHARD: All right. H.M.JR: And then the burden is on them to produce them all. MR. SCHWARZ: That is all. MR. MORRIS: Nothing. H.M.JR: How is your number of corporations? MR. MORRIS: The reports are as of each Saturday, and we don't get them until Tuesday night or they would be available to you Wednesday morning. Regraded Unclassified 127 - 15 - H.M.JR: What was the response to those twelve telegrams? MR. MORRIS: I have either nine or ten answers, of which two were this morning. Most of them are favorable. One raises a question about lack of bonds in the Atlanta district that I want to follow up on. Atlanta sent out a request to corporations to please go slow, because they were very short of bonds. H.M.JR: Now, that was the first week there were twelve and the second week there were about a hundred came in, weren't there? MR. MORRIS: There were twelve more, a total of 8. hundred and eighteen today. H.M.JR: I would like today a telegram to go out to the second lot, the hundred and twelve. MR. MORRIS: I asked for that information as of the close of last Saturday to be here tomorrow.morning. H.M.JR: But you only sent it to twelve. MR. MORRIS: But for the second batch, I will not have the data until tomorrow morning. H.M.JR: Oh. Well, then you can send it out tomorrow night. MR. MORRIS: And I had hoped - when I get that I would like to look at it because it may be I can do some on a sampling basis. I tried to make it somewhat personal instead of just an impersonal telegram, because I think the companies feel much better in getting something that ties in with the facts, rather than just a blanket one, H.M.JR: I don't want to be - I want to do it once more. MR. MORRIS: Yes, but maybe on a sampling basis. 128 - 16 - Do you want the whole hundred and twelve, or perhaps -- H.M.JR: No, sampling will be all right. MR. MORRIS: Sampling basis on that group. H.M.JR: That will be all right. Anything else? MR. MORRIS: Nothing. H.M.JR: Dan, you are just in this morning, aren't you? MR. BELL: Yes. I have got a number of things I would like to talk to you about. H.M.JR: Well, I was holding up the appointments. I will see you at eleven so that you can go back home. Dan is going to stay home the rest of the week, at my orders. We will come right upstairs from the movie. MR. BELL: O.K. I have a number of things I would like to talk to you about it. H.M.JR: All right. We will come right upstairs. MR. PAUL: Can we make those other appointments now? H.M.JR: No (laughter). I will tell you, what I am waiting for, I have got this speech at a quarter of eleven, which comes next. That is why I am holding everybody off. I want to do Dan, so he can go home. MR. PAUL: I thought it was Dan. H.M.JR: No, when I get this one more speech out - I have done three in three days, which is two too many. So we will get this out of the way, and we will get back Regraded Unclassified 129 - 17 - to normalcy again, as far as I can make it. MR. KUHN: Four in three days, Mr. Secretary. H.M.JR: That is right. One at the Great Lakes Steel. MR. THOMPSON: We are planning to substitute the word "victory" for "defense" in this Minute Man symbol. MR. GRAVES: That is only on the letterhead, Nor- man? MR. THOMPSON: Well, I thought if we do it on the letterhead, we should do it on checks and other things. H.M.JR: Who is behind this? MR. THOMPSON: Harold Graves' organization suggested it. MR. GRAVES: Our people have sent out mats to all newspapers with that change, instead of "For Defense" at the top, it is "For Victory". H.M.JR: Do you want to take that up with the MacLeish Committee? Do you think they would be interested? MR. KUHN: They are for it. I have been telling them that you don't have to change the name of the bonds. You can change the tone of the copy and do the same job. MR. GRAVES: We still continue, as you will note, further down on the copy, to talk about defense bonds, but at the top -- MR. MORRIS: Don't you think you are going to have to change the name of the bonds? MR. BELL: There should be & word "and" between bonds and stamps. That came to me Saturday, Mr. Regraded Unclassified 130 - 18 - Secretary, and I raised a question about it because you will recall, I think two or three weeks ago, some such matter was taken up with the President, and he said, "No victory on any posters because we haven't had any victory," and that is the reason I raised the question about it. H.M.JR: There is a poster committee too, which the President has created. MR. KUHN: I understood that he was simply opposed to changing the name of the bonds. MR. GRAVES: That is what I understood too. MR. KUHN: But in posters and in copy you can always speak of -- H.M.JR: Where is this poster committee? Lowell Mellett? MR. KUHN: It has had no meeting yet. MR. BELL: No, he was opposed to a victory program going to Congress because he said, "We haven't had any- thing but losses 80 far, so why emphasize victory?" H.M.JR: Well, I tell you what you do. To make the record, you see, I would take it up officially at this MacLeish Committee this afternoon. Will you? MR. KUHN: Right. H.M.JR: And then before it is in effect, I would like to have you take it up again with me, because I am not sure myself. MR. KUHN: They have issued an order, I believe, that all Government agencies with the word "defense" in their title should change it to "war." "Economic Warfare Board," and so on. 131 - 19 - H.M.JR: Who issued the order? MR. KUHN: I believe -- H.M.JR: Well, they are in direct contradiction of what the President said. Anyway, it won't do: any harm to take it up this afternoon with MacLeish, and then I may even ask you to clear it with Steve Early. Let's clear it with MacLeish and Steve Farly. I am not crazy about it. MR. BELL: I am not either. H.M.JR: So even if they say "Yes" I am not sure that I will. I may say "No". I am not crazy about it. MR. KUHN: I like it. I think it is perfectly all right without changing the title of the bonds. H.M.JR: But that isn't the point. I am not crazy about it. MR. KUHN: May I take this? H.M.JR: Yes. As I say, I would like you to go through the MacLeish Committee and through - and there is no use sending it over. You have got to walk it over to Steve Early, somebody, but I am not - and I am not sold on it myself. I am not sold on it myself. Is that all? 182 January 26, 1942 10:30 am Present: Lord Halifax, British Ambassador Sir Frederick Phillips Mrs. Klotz The Ambassador: You will remember that you talked to Phillips about the general financial condition. You suggested that it would be best for the Prime Minister to take the matter up with the President. HM Jr: Oh, no. It was not my suggestion, Phillips gave the two alternatives: (1) That the Chancellor of the Exchequer should take the matter up with me; and (2) That Churchill would take the matter up with the President. After giving me the two alternatives, I said that I thought it was 50 important that it would be best coming from Churchill to the President. The Ambassador: We put that up to London and we received on enswer that the Prime Minister was so deep in the day-to-dey jot of the war that they hesitated to ask him to take up the matter directly with the President, and I think he is reluctant to do it because he is not conversant to do it. They came back to the other alternative. They would be quite ready if the Chancel- lor could send you 8 formal message, and I have such 6 message and I can show it to you off the record or not. I have a third alternative plan if the second is not EC- reptable. I could see the President and put whatever I have to disadvantages and yet certain advantages. I want your judgment sar to him myself on instructions from London. I seo certain 83 to these two courses of action. HM Jr: Let me think out loud. I will be frank just as I always am. I want to look at it from your standpoint as to how NE can get the money. If the thing comes from the Chancellor of the Exchequer to me, and then I have to PO around to the Various departments and try to get this money, and I am willing to do It Just as I have in the past Regraded Unclassified 133 - 2 - Phillips: Stettinius got orders to put it in his new Lend-Lease Bill, and in the draft is 8. wide margin to cover these things. That draft is now going to the Budget. HM Jr: That's all the more roason why it should be given to the President. Lend-Lease is under him and 80 is the Budget. Then when you saw the President, he would send you to the Director of the Budget. If you didn't mind, you could then suggest that the President should send it to the Director of the Budget. This will help so that I would not have to battle with the dif- ferent departments, which I am willing to do, but I do not want it to become a personal issue that I am trying to do it. The Ambassador: The doubt that I have in my mind is that the President might say and think, "What is this fellow coming over to see me for? He never talked to me about money before. He doesn't know anything. I do not know anything. Why does he waste my time? Why doesn't he talk to Secretary Morgenthau about it?" HM Jr: You are right. Your reaction is absolutely right. If Churchill does not want to do it, let the Chancellor of the Exchequer send it to me personally, and I will do it the best I can for you. If, after a time, I fail there is always time to go to the President. Phillips: You do not want it put up through Winant? HM Jr: No. When I get this thing from the Chancellor, I will send a copy to the President, Hull, Stimson and Knox, and ask them for their suggestions. The Ambassador: Would it help or hinder if I said & word to Harry Hopkins? HM Jr: It would help. He is in the hospital now. Phillips: Well, we came here to get Mr. Morgenthau's decision. Regraded Unclassified 134 - 3 - HM Jr: No, this is your decision. The Ambassador: It is his informal judgment as a friend. I Regraded Unclassified 135 BRITISH air COMMISSION 1785 MASSACHUSETTS AVENUE WASHINGTON, D. C. TELEPHONE HOBART 9000 ABE QUOTE REFERENCE NO. With the compliments of British Air Commission, who enclose Statement No. 17 - Aircraft Despatched - for week ended January 20, 1942. The Hon. Henry Morgenthau, Jr. Secretary of the Treasury Washing ton, D. C. January 20, 1942 Regraded Unclassified 136 STATEMENT NO. 17 AIRCRAFT DESPATCHED FROM THE UNITED STATES DURING DISK INDED JANUARY 20, 1942 T DESTIVATION ASSELY POINT BY SEA BY AIR FLIGHT DELIVERED FOR USE I CANADA CASSIA Canada 54 T50 CURTIES Kittghuk Middle East Port Sudan 9 Kitazbenk Canada 5 DIGLA Bostoc III Russia Bagrah 4 EXP ARTIN Reltimore Middle East Port Sudan 3 LOCKHEED 1 Hußson III U.K. MOSTH AMERICAN 6 Harvard II Canada TOTALS 16 1 65 Printing Nr Condission Johuary 2:, 1942 Regraded Unclassified TREASURY DEPARTMENT 137 INTER OFFICE COMMUNICATION DATE January 26,1942 Secretary Morgenthau TO Mr. Kamarck FROM Subject: Shipment of Planes to British Forces 1. In the week ending January 20, e total of 52 planes of all types (22 combat planes, 60 trainers) were shipped to British forces. 2. The number of planes shipped to the British since January 1, 1941, has now passed the 5,000 mark. Light and medium bombers made up 33 percent of the total number, trainers, 31 percent, and pursuit planes 30 percent. The remaining 6 percent of the total was scattered among naval patrol bombers, heavy bombers, and army cooperation planes. Regraded Unclassified - 2 - Table A - Shipments by Area 138 Total shipped Total shipped Week Ending in 1942 since Jan.20,1942 to date Jan. 1, 1941 to the United Kingdom Light and medium bombers 1 1 1,125 Heavy bombers o 0 104 Naval patrol bombers 0 o 102 0 Pureuit 13 324 Army Cooperation 0 1. 35 0 0 24 Trainers Total to the United Kingdom 1 18 1,714 to the Middle East Light and medium bombers 3 29 359 Heavy bombers 0 0 5 Pursuit 9 84 932 Army Cooperation 0 0 0 0 8 Trainers 150 Total to the Middle East 12 121 1,446 To the British Pacific Forces Light and medium bombers O 0 95 Naval patrol bombers 0 0 27 Pursuit 0 O 168 Trainers O 0 105 Total to Pacific Forces 0 o 395 To the Forces in Russia Light and medium bombers 4 4 48 Pursuit 0 0 49 Total to Russian Forces 4 4 97 To the Canadian Forces Light and medium bombers 0 1 55 Naval patrol bombers 0 7 15 Pureuit 5 5 47 Trainers 60 103 1,277 Total to Canadian Forces 65 116 1,394 Totals Light and medium bombers 5 35 1,682 Heavy bombers 0 o 109 Savel patrol bombers 0 7 144 Pursuit 14 102 1,520 Army Cooperation 0 4 35 Trainers 60 111 1,556 Total R2 259 5,046 Regraded Unclassified - 3 - 139 Table B - Shipments by Types Total Shipped Total Shipped Week Ending in 1942 since Jan. 20,1942 to date Jan.1, 1941 Bell Airacobra o o 154 Boeing B-17 o 0 20 Boston III o o 39 Brewster Buffalo 0 0 168 Cessna T-50 54 74 622 Consolidated Catalina o 7 144 L.B.30 (B-24) 0 o 6 Liberator I (B-24A) o 0 19 Liberator II (B-24B) o o 64 Curtise Kittyhawk 14 89 471 Tomahawk o o 593 Douglas Boston I 0 0 1 Boston II o 0 81 Boston III 4 4 443 Fairchild 24 R-9 o 4 26 Glenn Martin Baltimore 3 29 97 Maryland O 0 150 Grumman Martlet II 0 o 41 Lockheed Hudson I 0 o 1 Hudson III 1 1 352 Hudson IV 0 o 70 Hudson V 0 1 398 North American Harvard II 6 37 934 Mustang O 13 93 Pitcairn Autogiro 0 o 5 Vought Sikorsky Chesapeake 0 0 50 Vultee Stinson-049 0 0 4 Grand Total - All Types 82 259 5,046 Regraded Unclassified Table C - Plane Shipments to the British by Weeks 140 Light and Naval Army Week medium Heavy patrol Coopera- Ended bombers bombers bombers Pursuit tion Trainers Total Weekly average of shipments in 1941 32 2 3 27 1 28 92 January 6, 1942 24 o 5 30 4 9 72 January 13, 1942 3 0 2 58 o 42 105 January 20, 1942 NO o 0 14 o 60 82 Total shipments since January 1, 1941 to date 1,682 109 144 1,520 35 1,556 5,046 Regraded Unclass For Miss Chauncey 141 THERABURY DEPARTMENT OFFICE OF THE SECRETARY January 26, 1942. CONFIDENTIAL Received this date from the Federal Reserve Bank of New York, for the confidential informa- tien of the Secretary of the Treasury, compilation for the week ended January 14, 1942, showing dollar disbursements out of the Dritish Empire and French accounts at the Federal Reserve Bank of New York, and the sease by which those expenditures were financed. R dm: 1/26/42 Regraded Unclassified C 0 For Miss Chauncey 142 ? I FEDERAL RESERVE BANK OF NEW YORK January 22, 1942 CONFIDENTIAL Dear Mr. Secretary: Attention: Mr. H. D. White I an enclosing our compilation for the week ended January 14. 1942, showing dollar disbursements out of the British Empire and French accounts at this bank and the means by which these expenditures were financed. Faithfully yours, (Signed) L. W. Knoke L. W. Knoke, Vice President. The Honorable Henry Morgentham, Jr. Secretary of the Treasury, Washington, D. C. Enclosure Copy: 1/26/42 Regraded Unclassified Metalls loss Diar Total Y for much I Two A/C Credite Sales A/C Credite 5 A/C Deliver of war 10/29/39 1/28/40)* 323.0 16.6 7'90E 504.7 412.7 20.9 38.7 32.4 +181.7 31.2 3,9 27-3 36.1 30.0 6.1 + 1.9 Var pariod through December, 1960 477.2 16.6 460,6 707.4 534.8 20,9 110,7 41,0 +230,2 57.9 14.5 43,4 62.4 90.) 12.3 + 6.5 Second your of war (6/29/40-8/27/42)= 660.6 - 460,4 462.0 246,2 3.4 123.9 88.5 + 1.6 72,2 16,7 55.5 81.2 62.9 18.3 + 9.0 Ave. 28 - Dot, 1 23,1 . 23.1 52.2 21,2 - - 31.0 + 29,1 10,7 0.5 10.2 2,8 2.1 0.7 - 7.9 1941 Oct, 2 Oct, 29 37.4 - 37.4 19.7 11.9 - - 7.8 - 17.7 B,2 5.5 2,7 8.0 5.9 2.1 + 0,2 324 9.0 2,6 + bes Oct, 30- Dec. 3 52.8 0.1 52,7 32.5 19.3 - - 13,2 - 20.3 10.3 6.9 11.6 Iss. 31 47.7 - 47.7 22.2 17.3 - ! 4.9 = 25.5 3.9 1.8 2,1 2.8 0.2 2.6 = 1.1 1962 EST ENGED: Dec. 24 14.7 E 14.7 5.5 4.5 - - 1.0 - 9.2 0.7 - 0.2 0.1 - 0.1 - 0.6 31 11.3 11.3 7.9 7.4 - - 0.5 - 3.4 1.8 1.8 - 1.6 - 1.6 - 0.2 - Jan. 2 7.0 - 7.0 1.4 0.1 - - 1,3 - 5.6 0.7 и 0.7 0.2 - 0.2 - 0.5 14 9.2 9,2 7.6 5.6 - - 2.0 - 1.8 2.1 - 2.1 0,6 - 0.60 - 1.5 - lekly Average of Total Debits Since Outbreak of War TOTAL January 14, 19/1 $ 7.7 willion - For monthly breakdown aso tabulations prior to April 23, 1941. - For monthly breakdown @@@ tabulations prior to October 8, 1941. Regraded Unclassified OF BRITISH AND FREEN ACCOUNTS (In Millions of Dollare) Vook Ended January 14. 1942 Streetly Confidential! (STRUMENT) BANK of FRANCE DEBITS CEEDITS Net Inc. DAVIS (+) or Gor's Total Expendi- Other Total Decurities Other Dear, (-) Total Expendi- Driver PERIOD Debite tures(s) Debita Credite Gold (Official)(b) Credita(e in Balance Debite tures (d) Debite Credition First year of war (8/29/39-8/28/40)* 1,793.2 605.6 1,187.61 828.2 1,356.1 52.0 420.1 + 35.0 866.3(e) 416.6(e) 449.7 1,095,3(e) 900.2 195.1(e) +229.0 Bar period through December. 1940 2,792.3 1,425.6 1,356,72,793.1 2,109.5 108.0 575.6 + 10,8 878.3 421.4 456.9 1,098.4 900,2 198,2 +220,1 Second year of war (8/29/40-8/27/21)** 2,203.0 1,792.2 410.82.189.8 1,193.7 274.0 722.1 - 13.2 38.9 4.8 34.1 8.8 - 8.8 - 30.1 1941 Aug. 28 - Oct. 1 140.9 105.9 35.0 176.2 20,1 2,0 154,1 * 35.3 0.3 - 0.3 0.5 - 0.5 - 0.2 109.0 77.3 31.7 150.9 0.8 - 150.1 + 41.9 0.3 - 0.3 a - 0,3 Oct. 2 - Oct. 29 Oct. 30 - Dec. 3 156.1 111.6 44.5 134.6 - 1.0 133.6 - 21,5 16.1 - 16.1 0.4 - 0.2 - 15.7 Dea. 1. Dac. 31 88.4 60.6 18.8 51.5 - - 51,5 - 36.9 0.8 - 0.8 0.4 - C-4 - 0.4 1942 EMINED: Dec. 24 19.7 14,2 4.5 6.2 e - 6.8 - 11.9 0,1 - 0,1 0.1 - 0,1 - 31 22,4 4.8 10.0 - - 18.0 - 4.4 0.5 - 0.5 0.2 - 0.2 0.3 Jan. 7 26.4 17.7 E.2 11.5 = - 11.5 - 14.9 0.1 - 0,1 0,1 0,1 14 30,2 22.9 2.3 24.8 - 0.5 24.3(f) - 5.4 - - . 0,1 - 0.2 +0.1 WHITY Expenditures Since Outbreak of Mar Transfers From British Purchasing Commission to (through June 19,1940) $19.6 ALL1100 Bank of Canada for French Account England (through June 19,1940) 27.6 million Book ended January 1,, 1942 - adllion Reglard (since June 19,1940) 41.3 million Cumulation from July 6, 1940 $ 162.7 million otfer monthly breakdown see tabulations prior to October 8, 1941. ofor monthly breakdown - tabulations prior to April 23, 1941. (See abtached sheet for other footnotes) Regraded Unclassified demission, 1/13/2019 alt Brittsh Supply Board, Ministry of proosodo & early months of the war, although ADVERSION the receipt of the probeeds of this Ack osimes - to the official celling, to data supplied by the British Treasury and released by Secretary Morgeatheu, total official and private Brittsh liquidation of our securities through December, 1940 amounted to 8334 million. (c) Includes about $85 million received during October, 1939 from the accounts of British authorised banks with New York banks, presumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October, dollar 1939 apparently represent the acquisition of proseeds of exports from the sterling area and other currently accruing receipts. (d) Includes payments for account of French Air Commission and French Purchasing Commission. (e) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day. (f) Includes $7.5 millions transferred from New York accounts of British Authorized banks and about over 55,000,000 presurably representing refunds of advances rade to American concerns by the British Purchasing Comission. Regraded Unclassified 146 Treasury Department Division of Monetary Research Date January 26, 1942 13 To: Secretary Morgenthau From: Mr. Southard Dr. Viner has suggested that you may be interested to know that Prime Minister Mackensie King will announce this afternoon in the Canadian Parliament that Canada will cancel $1 billion of Great Britain's cutstanding debt to Canada and will continue giving financial aid to Great Britain -- without any repayment obligation -- up to $800 million per year. Regraded Unclassified 147 January 26, 1942 11:20 a.m. HMJT: Hello. Robert Rouse: Good morning, sir, HWr: How are you? R: First rate. And you? HXJr: I'm all right. R: You got back from Cleveland. HWr: Yes. R: Right. HMJr: Now, I understand there's a misunderstanding on my speech in New York? R: Well, they are confused. They don't know whether your remarks were directed entirely at state and municipal bonds or whether in the background there might be some way of getting At the partially tax exempt and the tax exempt Treasury securities. AMor: Well, now R: Now, they don't stop to think that the question on state and municipals 1e one of the interpretation of that income tax amendment, and that in some opinion that it would only be a matter for legis- lation and that you have a contract - Treasury has a contract with its holders in respect to its own securities Phini That's right. R: which 1s the attitude that I've been taking when people have discussed it with me this morning, HXJr: That's right. Well, now, 18 there any way - any- thing that we can do down here? You've got B copy of my speech? R: No, I've sent out to the man who distributes them Regraded Unclassified 148 - 2 - here - Mr. Friend - and he hoped that he'd be able to get us one. So far it hasn't come in. l've had to rely only on the papers, and one man whom I know who heard you make the speech. HMJr: Well, now, have you got a - can't they - what I said on tax exempte is only two hundred words. They could read it over to somebody over the phone. R: Well, I'd like to have that; and I could have it dictated to my girl here. HMJr: Well, I can tell - what's his name - the bond man? R: Chick Schwarz? HMJr: No. What? R: Schwarz? HMJr: No. Hadley. I'll ring for Hadley, and who do you want him to read it to? R: Well, have him read it to the trading desk, and they'll have a girl take it down. HMJr: Have Hadley read it to the trading deek. R: Yeah, and they'll get a girl to transcribe it. HMJr: Yeah. It's only very short, and you can - I recognize the obligation. (Talks Aside) Hadley, read this part over to Harris on the phone and tell them to give it to Mr. Rouse. Do it right away. R: But my interpretation 16 satisfactory from your standpoint, and I can go ahead and talk that way to these people and have it passed around. HMJr: Give it to Harris, will you? (Talks aside) You can, I mean, this 1s something that we Regraded Unclassified 149 - 3 - feel that there's no contract - no contractual obligation or moral obligation as to the Federal Government as to state or municipal bonds which have been sold. R; Yeah. HMJr: We do feel that there's a moral obligation between the Federal Government and Federal bondholders. Hello. R: Yeah. HMJr: And I feel that way very strongly, and I have nothing in mind about taxing the income from outstanding Federal issues. R: The other thing that's bothering the market and has been for ten days in the same respect is the question of lowering the normal rate of normal tax and increasing the surtax as it affects the partially-exempt Governments. HMJr: Well, I haven't even - no one's discussed it with me. I don't know. So I can't treat that. I mean, I can't handle it because I have no - I haven't discussed it with anybody here. R: Well, the thing for us to do is to say to the dealers, and to the bankers with whom we talk, that your remarks were directed solely at state and municipal securities and not at Government securities. HMJr: That's right. That's right. R: And we'll have the text to work on. HMJr: Well, you ought to have it inside of five minutes. R: Fine. HMJr: All right. R: Right, sir. HMJr: Thank you. 1/26/82 150 A 2125 12 1 EXTRA P H NPT NEWYORK NY JAN 26 232P 1942 JAN 26 pm 4 28 100 T HON HEVEY MONGENTHAU JR R E TECRETARY OF THE TREASURY WASHDC A S (if SERAIN " THE STATES AND MUNICIPALITIES OF THIS NATION, U ACTIVE THERUGH THE CONFERENCE ON STATE DEFENSE, I HAVE R Y YOUR PROPOSAL TO TAX OUTSTANDING STATE AND T MICIPAL HONDS AS A FLAGRANT BREACH OF THE CONFIDENCE AND E coon FAITH HERETOFORE EXPRESSED BY THE ACTS OF CONGRESS, G OF THE SUPREME COURT, STATEMENTS OF THE PRESIDENT R A AND YOUR'ELF AS SECRETARY OF THE TREASURY. IN THE LIGHT OF P PART AMERICES, THE PLEDGED WORD OF LOCAL GOVERNMENTS, H AND THI APPUIESCENCE OF THE FEDERAL GOVERNMENT, A FEDERAL T ATTEMPT ID TAX OUTSTANDING ISSUES IS IN FLAT CONTRADICTION E A IF EVELY PRINCIPLE OF GOVERNMENTAL INTEGRITY FOR WHICH THE S U THE APE FIGHTING TODAY.WILL YOU DISCUSS YOUR "0 TAX OUTSTANDING BONDS WITH ME OVER A T PADIO PROGRAM E - TEIN CHAIRMAN CONFERENCE ON STATE E G R Regraded Unclassified 151 PROPOSED TIRE TO HENRY EPSTEIN I wish to acknowledge your telegram of January 26th. I am aware that your objective has always been to prevent Federal taxation of future issues of state and municipal securities, and I note that in this telegram you seek further to protect this, your real interest, by condemning the proposal to tax outstanding issues of state and municipal securities, I am familiar with the position you have so long maintained despite the fact that every Republican and Democretic administration for the past twenty years has sought to end reciprocal exemptions and despite the farther fact that within the past year both houses of Congress by over- whelming majority voted to prohibit exemption of future issues of Féderal securities. I believe that now when Democracy itself is being challenged, it is unthinkable that some members of our democratic society through investment in state and municipal securities should be allowed to escape their share of the national burden and transfer it to their less fortunate fellows. Such an undemocratic privilege was never contemplated by the founders of America, and the continuance of this especially privileged class at this time 16 unspeakable. State and minicipal officers, as the most intimate leaders of the people, are in a position to make a fine contribution to national morale and national unity by support= ing this proposal. Many of them are doing 30. I enpreciate that it requires courage to reverse one's position. I am disappointed that you lack that courage. Regraded Unclassified 152 PROPOSED WIRE TO HENRY EPSTEIN I wish to acknowledge your telegram of January 26th. I an avare that your objective has always been to prevent Federal taxation of future issues of state and municipal securities, aret I note that in this tolegram you seek further to protect this, your real interest, by condemming the proposal to tax outstanding issues of state and minicipal securities. I as familiar with the position you have so long maintained despite the fact that every Republican and Democratic administration Cor the past twenty years has sought to end reciprocal exemptions and despite the farther fact that within the past year both houses of Congress by over- whelming majority voted to prohibit exemption of future issues of Federal securities. I believe that now when Denocracy itself is being challenged, it is unthinkable that BOMO members of our democratic society through investment in state and municipal securities should be allowed to escape their share of the national burden and transfer it to their less fortunate fellows. Such an undemocratic privilege was never contemplated by the founders of America, and the continuance of this aspecially privileged class at this time 18 unspeakable. State and municipal officers, as the most intimate leaders of the people, are in a position to make - fine contribution to national morale and national unity by support- 1ng this proposal. Marry of them are doing BO. I appreciate that it requires courage to reverse one's position. I an disappointed that you lack that courage. Regraded Unclassified HOUSE OF REPRESENTATIVE53 RULES COMMITTEE Secretary Secretary of the Treasury Washington, D. C. A copy of the enclosed evidently has been sent to every House Member and Denator. H. S. Shaw, Clerk Regraded Unclassified 154 From: AUSTIN J. TOBIN, FOR RELEASE 111 Eighth Ave., New York City. CONFERENCE ON STATE DEFENSE III EIGHTH AVENUE NEW YORK CITY CONFERENCE COMMITTEE JOHN J. BENNETT, JR. LEWIS L. DELAFIELD, JR. Attorney General, New York Counsel, Triburough Bridge Authority, EARL WARREN New York City Parkway Authority, Jones Attorney General, California; President, Beach Parkway Authority National Association of Attorneys General JOSEPH X. COSTELLO General Manager, Delaware River Joint GREEK L. RICE Commission Attorney General, Mississippi FRANK C. FERGUSON HARRY McMULLAN Chairman, The Port of New York Authority Attorney General, N. Carolina CHARLES A. BEARDSLEY THOMAS J. HERBERT Attorney, Commissioners of the Port of Attorney General, Ohio Oakland DAVID WILENTZ HENRY F. LONG Attorney General, New Jersey Commissioner of Corporations and Tax- tion of the State of Massachusetts ABRAM P. STAPLES A. E. NEALE Attorney General, Virginia City Auditor, Springfield, Massachusetts; EWING T. KERR Executive Committee, Municipal Finance Attorney General, Wyoming Officers Association JAMES R. LAW WILLIAM C. WALSH Mayor, Madison, Wisconsin: Executive Attorney General, Maryland Committee, American Municipal Associ- I. H. VAN WINKLE ation Attorney General, Oregon DANA B. VAN DUSEN General Counsel, Metropolitan Utilities SMITH TROY District, Nebraska Attorney General, Washington PAUL V. BETTERS JAMES R. MORFORD Executive Secretary, United States Con- Attorney General, Delaware ference of Mayors OFFICERS Chairman Vice-Chairman HENRY EPSTEIN CHARLES J. McLAUGHLIN Solicitor General, New York State Tax Commissioner, Connecticut Secretary AUSTIN J. TOBIN Assistant General Counsel, The Port of New York Authority FOR BARDLAT. STATE DEVICIALS ATTACK JN GUISTATEM 20/28 Solicitor General Labols Nepuciazion "Shooking, Loord Ad Discriment" Regraded Unclassified 153 FOR TMC TOTAL RELEASE STATE OFFICIALS DENOUNCE MORGENTHAU'S ATTACK ON OUTSTANDING BO.DS Solicitor General Epstein Labels Repudiation "Shocking, Innoral and Dishonest" Henry Epstein, Solicitor General of the State of New York and Chairman of the Conference on State Defense, expressed shooked amazement today at the proposal of Secretary of the Treasury Morgenthau to levy a federal tax upon the income from outstanding state and municipal bonds which had been issued under the covenant that they were tax exempt. The Conference on State Defense, of which Mr. Epstein is the Chairman, is the organization through which the states and municipalities have presented their organized opposition to federal attempts to gain control of local financing. Treasury Drops liask Mr. Epstein said, "Secretary of the Treasury Morgenthau bes finally dropped the mask which has so far concealed the real ob- jective of the Treasury toward the outstanding sacurities of states and municipalities. These securities were sold by the states and oities on the solemn assurances of immunity and the states received for them a price, of which all local taxpayers in the country have been the beneficiaries, based upon those honest representations. "This statement," continued the Solicitor General, "coming as it does from the first fiscal officer of the United States Gov- argment, is not only shocking, but it probably will do more to des- troy the confidence of the people of this country in the promises not TPO # Faith of their own government then anything that I can (more) Regraded Unclassified 156 STATE OFFICIALS DENOUNCE MORGENTHAU (cont'd.) 2, recall to this time, Every state, every county, every city, town and hamlet, in this nation, has outstanding obligations. Every one of these has been issued with the full recognition of the Treasury Department and the federal government that they were immune from federal taxation." Treasury Assured Investors "Indeed, as recently as last March 14th the Treasury De- partment in an official press release assured the holders of state and municipal obligations that they had no 'reason to fear the impo- sition of taxes on obligations now outstanding.' This same Treasury statement also assured the holders of our local bonds that 'Secre- tary Morgenthau has consistently voiced opposition to proposals which would subject the interest on outstanding state and municipal securities to federal taxes.'" Every spokesman for the Treasury has repeatedly given these assurances and has indeed expressed their "indignation" at re- peated warnings by the Conference on State Defense that the taxation of outstanding municipal bonds was the Treasury's real objective. "In 1939," said Mr. Epstein, "Undersecretary John W.Hanes, speaking as the Treasury's representative before the Ways and Means Committee of the House, said 'that the Treasury did not even suggest that interest on outstanding issues be taxed.' And the report of the Special Senate Committee unanimously recognized the 'dire effects of taxing securities already outstanding.'" Repudiation Held "Immoral, Dishonest" Despite these representations of the Treasury Department, every holder of these securities, every insurance company, every bank, every pension and retirement system throughout the country is now faced with this brazen repudiation by the Treasury of the prom- ises and assurances which have been made by our states and cities (more) Regraded Unclassified 157 STATE OFFICIALS DENOUNCE MORGENTHAU (cont'd.) 3, in good faith and which have been recognized and honored down to the present moment by the Federal Government itself. Such a repudi- ation is immoral, dishonest and is in flat contradiction of every principle of governmental integrity for which the Democracies are fighting today. It cannot but tend to destroy the confidence of every investor in the good faith of our covernment's entire fiscal policy. "Further than this," concluded the Chairman of the Confer- ence on State Defense, "this repudiation may well impose a moral obligation on every community, state and county in the country to make good every penny that will have to be paid out in taxes on these obligations. They sold them at a higher price, which the public obtained because their local securities were represented as tax immune. The Secretary of the Treasury in his statement today has dealt national defense and national morale B. greater blow than any of the Axis powers, singly or together, have thus far been able to do." ###### Regraded Unclassified 158 JAN 26 1942 Dear Mr. Stam: This 18 in reply to your letter of January 16, 1942, respecting the submission to you of material prepared by the Sureau of Internal Revenue relating to the improvement of the operation of the income tax laws, the closing of income tax loopholes, and the removal of tax inequities. After careful consideration of the entire matter, I feel that the method of considering pro- posals for legislation discussed in my previous letter is the only practicable one which can be followed. As I there indicated, 10 have made it our practice to confer with you for the purpose of exchanging information and views prior to the presentation of material to the Committees of Congress. This practice is being fully followed in connection with proposals for revenue legis- lation in the current year. Regraded Unclassified 159 - 2 - This method of proceeding has enabled us to achieve an adecuate interchange of views respecting revenue legislation. At the name time, 1 believe that such n course is the only one that is in keep- ing with the responsibility of the Treasury Depart- sent in such matters. Sincerely yours, (Signed) E. Morgenthau. 38. Secretary of the Treasury. Mr. Colin F. Stam, Chief of Staff, Joint Committee on Internal Revenue Taxation, Washington, D. C. file to Stampson By Measurer 7 4:25 Photocas pile n.m.c. SSS:hdr 1-23-42 Regraded Unclassified COLIN F. STAM SOMITE Claim of STAFF BALTER F. BA., VICE CHAIRMAN A.D. CHESTERN ARET. CHILE - BYAEF - 4. WALEH, ALBAN W. MARILEY, ex. MINUT M. LAPOLLETTE, JR., wis, - CAPPER, KANN. SEGRETARY Congress of the United States JOINT COMMITTEE ON INTERNAL REVENUE TAXATION Washington January 16, 1942. penorable Henry Morgenthau, Jr., Secretary of the Treasury, whington, D. C. Dear Mr. Secretary: Further reference is made to your letter of January 12, 1942, relative to our request, pursuant to section 5011 of the In- ternal Revenue Code, for suggestions prepared by the Bureau of In- termal Revenue relating to the improvement of the operation of the income tax laws, the closing of income tax loopholes and the removal of tax inequities. I recall that when the Joint Committee on Internal Revenue ration was first organized, it was one of my functions, as an employee the Bureau of Internal Revenue, to collect suggestions from various sources in the Bureau of Internal Revenue, and even from the field, for improving the internal revenue laws. These suggestions, when compiled, sore made available to the Staff of the Joint Committee on Internal vanue Taxation as well as to the Staff of the Treasury Department. You suggestions were studied and joint discussions between the Staff of - Joint Committee and the Treasury were had for the purpose of decid- lag which suggestions should be presented to the various Congressional ittees. I believe the record will show that at no time has the " of this Committee attempted to embarrass the Treasury Department La conflict with those of the Treasury proper. The submission representing that the views of the Bureau of Internal Revenue might of dve information Congress. of a confidential character, which cannot be divulged sta- data to the As an agency of the Congress, we continually to the Staff of this Committee does not constitute a submission of Committees of Congress, except upon specific request, based upon authority and committee action. Regraded Unclassified le Henry Morgenthau, Jr., 2. January 16, 1942: I hope that you will not let Mr. Sullivan's fear of a man obstruct or interfere with this well-established practice has been carried on, except during the last three revenue acts, continuously since the creation of the Joint Committee on In- Revenue Taxation. It is, therefore, earnestly requested that consider the decision made in your letter of January 12, 1942, but the practice which has worked 30 satisfactorily in the past be restored. Respectfully yours, Colin F. Stam, Chief of Staff. Regraded Unclassified Ideal Reml my will, B.r 162 visa to be 100% rs. your January 26, 1942 of 900 specially the 3.14 874 PROPOSAL FOR INDIVIDUAL INCOME TAX Pay in 1942, tax on 1942 income, figured on basis of 1941 income, with end of year adjustment. sonitional veyment or refund 18 required by any discrepancy between 1942 income actualized and 1941 income which was basis of calculation. Waive all individual income tax on 1941 income. Restore solvency and eliminate fear. Hake practical the retirement of neoole who should retire or be retired. Keice practical the taking of lower compensation this year than fist, whether for Government service or business cost reduction. COST TO THE TREASURY Practically little loss of income in early years, the loss votile be distributed over the life of the present income tax paying generation as individuals die or retire. Therefore, little infle- tenger. Treasury has never considered taxes receivable B.M. an asset and therefore their elimination would not remove an asset of record. POLITICAL CONSIDERATION Some such step will have to be taken some day 68 the problem vill become progressively more acute. Might 8.8 well do it now, Regraded Unclassified - 2 - 163 Step would have wide support among vocal elements, therefore original source of suggestion should have careful consideration. The few large income taxpayers who are already on an accrual basis will have an unexpected windfall. Steps should be taken in advance to secure in some cases agreement to the application of this windfall to private educational and philanthropic purposes. Very useful since the Federal Government has no way of aiding those insti- tutions. This step would assist in obtaining acceptance for new, higher, and unaccustomed forms of taxation. 164 January 26, 1942 11:55 a.m. HMJr: Anybody that you say. You Just Secretary Hull: There's two, Just two. One from the Far East, and then Dr. Feis. HMJr: Well, who should he call up in the first instance? H: It would be all right to call - he can take hie choice. Whichever - which would you prefer, Hornbeck or Hamilton? HMJr: Anybody. Anybody that you say. H: Yeah. HMJr: Is - this man'e an economiet. H: How's that? HMJr: Thie man Southard's an H: Yes. That's the reason I want Feis to be present HMJr: Well..... H: 80 he could help to interpret and 60 on. HMJr: Well, you Just tell me who he should call, and he'll go over and see them. H: Tell him to call Feis and Hornbeck. HMJr: Feis and Hornbeck. H: And if Hornbeck's not in, Hamilton. HMJr: I'll do that. And I'll tell him that 8.6 soon a.e they have something or other, then I'd like to sit down with you. H: Yes. All right. Regraded Unclassified 165 - 2 - HMJr: I'd like to sit down with you then. H: All right, Henry. HMJr: Thank you. H: Good-bye. 166 January 26, 1942 12:00 Noon HMJr: Hello. Operator: I have Mr. Southard. He's in Mr. Bell's office. HMJr: All right. Operator: Go ahead. HMJr: Southard. Mr. Frank Southard: Yes, Mr. Secretary. HMJr: I just called up the Secretary of State and I told him Harry White was not here, that I wanted you to handle the Chinese matter for me. S: I see. HMJr: I asked him whom you should contact, and he said "Dr. Feis and Hornbeck." S: I see. HMJr: And if Hornbeck 18 not there - oh, what's the second man's name? S: Feis - oh, Hamilton. HMJr: Hamilton. Please drop everything that you're doing and concentrate on this, because I don't want them to think that we're dragging our feet. S: Yes. HMJr: And when you have gotten as far as you can with Feis and Hornbeck or Hamilton, then I want to go over and see Mr. Hull about it myself. S: During the day. HMJr: Not today, no. Regraded Unclassified 167 - 2 - S: All right. HMJr: You won't get together with them today, but I mean, I want you to see them today but you won't come to any understanding with them. S: I see. Do you want me to carry this on until Kr. Coe's return? That 10, ir..... HMJr: Well, I don't know when Coe comes back. S: Tomorrow morning, Mr. Secretary. HMJr: Well, you've started - you see it through now. 8: All right. HMJr: If you start it, you see it through. S: All right. HMJr: Now, see it through for me. S: Yes, I'll do that. HMJr: And then report to me on it in the morning. S: All right, I'll do that. HMJr: Thank you. S: Good-bye. Regraded Unclassified 168 January 26, 1942 12:02 p.m. HMJr: I think it would be good to take Bernstein, the attorney, with you. Mr. Frank Southard: All right, I'll do that. HMJr: Please. 8: Surely. 169 January 26, 1942 12:04 p.m. Operator: Operator. HMJr: Foley. Operator: Right. HMJr: Hello. Operator: Mr. Foley, Edward H. Foley: Yes, Mr. Secretary. HMJr: Ed, I'm sending Southard and Bernstein over to Bee Feis and - oh, whatever - Hornbeck, on this Chinese loan business, Bee; and you're to tell Bernstein to go along with Southard. F: oh, my Bernstein; not E. M.? MMJri What? Your Bernetein? F: It's my Bernstein. Harry's got 8 Bernstein, too, who works with Southard. I'll have Bernie go right over. HMJr: I mean Bernstein, the attorney. F: Right. HMJr: Now be sure that I get the right one, though, won't you? F: Okay. HMJr: Call up Southard and tell him - save me - call up Southard and tell him I meant Bernstein, your Bernstein. F : All right. HMJr: Will you? F: I'll do that. HMJr: And Crowley called me Saturday. I've had a call in, but he's out. Regraded Unclassified - 2 - 170 F: I see. HMJr: But now call up Southard and tell him it was your Bernstein. F: All right, I'll tell him. HMJr: Thank you. 171 THE WHITE HOUSE WASHINGTON January 26, 1942. MEMORANDUM FOR H.M.Jr. I still think that this can be worked out as soon as Fox gets here. If they don't want dollar notes, why don't We buy Chinese yuans and use them for paying for the equipment of Chinese troops in China itself. I would be wholly willing to go up to twenty or twenty-five million dollars a month on some such basis. F.D.R. 172 THE SECRETARY OF THE TREASURY WASHINGTON January 22, 1942 My dear Mr. President: I am forwarding the inclosed cor- respondence from Mr. T. V. Soong. Naturally, I am disappointed in the contents. What do you suggest as our next move? Sincerely yours, The President, The White House. Copies to: The Secretary of State The Secretary of War The Secretary of the Navy Regraded Unclassified 173 MINISTER FOR FOREIGN AFFAIRS REPUBLIC OF CHINA January 21, 1942 My dear Mr. Secretary, During your absence from Washington I received the enclosed message for you from the Generalissimo. Since Mr. Fox is due to arrive in Washington shortly, it occurs to me that you may like to have an opportunity of seeing him and hearing from him of the situation in China before you renew discussions with me. However I am at your disposal at any time, should you wish to see me earlier. Sincerely yours, T. V. Soong The Honorable The Secretary of the Treasury Washington, D. C. Regraded Unclassified CONFIDENTIAL X - - know was I - STATES are ( E and - 1- DATE THE Regraded Unclassified 174 CONFIDENTIAL The Generalissimo deeply appreciates Secretary Morgenthau's efforts which have materialized in a proposal that the 0, S. Government would undertake to pay for the maintenance of part of the Chinese army in U.S. Dollar notes. After careful consideration, however, he doubts whether this scheme is practicable. Payment of Chinese soldiers in U. S. currency would tend to create a cleavage between the army and the general economic structure in China which may actually hasten the collapse of the Chinese currency. Before Mr. Fox left Chungking the Ceneralissimo had e long discussion with him in which he pointed out 8. number of reasons why he considered the scheme difficult of application and which he asked Mr. Fox to convey to Secretary Morgenthau. The Generalissimo urgently requeste that cereful consideration be given to his original proposal that the United States grant to Chine a political loan of 500 million U.S. dollars, which would be the only means to prevent an impending economic collapse. This loan should be regarded in the light of an advance to an ally fighting against a common enemy, thus requiring no security or other pre-arranzed terms as to its use and as regards means of repayment. Regraded Unclassified 90: 175 1/27/42 Re: E. Res. 388 I spoke to Congressman Somers about this today at Mr. Foley's request and told him the Secretary did not want him to go ahead at this time. I also told him that I wanted to see him and give him the Secretary's reasons. He told me he was going to New York and would get in touch with ne next week. (initialed) LJB L. J. BERNARD Regraded Unclassified 1 6 1/27/42 Re: H. Res. 388 I spoke to Congressman Somera about this today at Mr. Foley's request and told him the Secretary did not want him to go ahead at this time. I also told him that I wanted to see ham and give him the Secretary's reasons. He told me he was going to New York and would get in touch with no next week. (initialed) LJB L. J. BERNARD Regraded Unclassified 177 THE UNDER SECRETARY OF THE TREASURY WASHINGTON January 26, 1942 to THE SECRETARY: Here is a letter dated January 22, 1942. from Congressman Somera addressed to Larry Bernard of the General Counsel's office, regarding his resolution which would get up A committee to investigate the benefits which have resulted to the Government of China from extensions of credit by this Government, and the possibility of devising further ways and means of increasing and stabilizing trade with China. I believe this is an attempt on the part of Mr. Somera to keep the Stabilization matters within his committee; that he hopes to do this through the means of this sub-committee and the passage of this resolution in the House. I wonder if you do not want to call him personally and ask him not to push this resolution on the ground that the Treasury just does not have the time to make the studies that would be required. Furthermore, I doubt if we can show any benefits to China through the extension of credits except to enable China to carry on the war. Somes wonts then early reply DWB To Stephens for Sixy 1-26-42- 2:55 p m. PORDEFENSE BUY STATES SWINGE ansag Regraded Unclassified COPY 178 HOUSE OF REPRESENTATIVES 1. S. Committee on Coinage, Weights and Measures Washington, D. C. January 22, 1942 Mr. Lawrence J. Bernard, Treasury Department, Weshington, D. C. My dear Mr. Bernard: Enclosed is the Resolution I referred to yesterday during our telephone conversation. I would appreciate it if you could get an informal opinion of the Department 85 to whether they would approve of it. Let me say, relative to the stabilization feature, that the word "investigate" would not imply any distasteful probing but 1a meant to be nothing more than a right to review so that we can recommend a policy of stabilization in the future. Such policy would be necessary if we are to promote trade between the two countries during the reconstruction period which must follow the termination of this war. With that realization, I am most hopeful that the Treasury will approve and offer its aid in delving into this problem. I would like the privilege of discussing it with whoever in the Department will pase on its merits. Sincerely yours, (s) Andrew L. Somers Andrew L. Somers. Regraded Unclassified 179 Tita CONGRESS 1ST SESSION H. RES. 388 IN THE HOUSE OF REPRESENTATIVES DECEMBER 12, 1941 Mr. SOMERS of New York submitted the following resolution; which was referred to the Committee on Rules RESOLUTION 1 Resolved, That there is hereby created a select committee 2 to be composed of three Members of the Honse of Represent- 3 ntives to be appointed by the Speaker, one of whom he shall 4 designate as chairman. Any vacancy occurring in the mem- 5 bership of the committee shall be filled in the same manner in 6 which the original appointment was made. 7 The committee is authorized and directed to investigate 8 (1) the benefits which have resulted. during the existing 9 national emergency, from extensions of credit made by the 10 Government of the United States, or any agency thereof, for 11 the purpose of aiding in the stabilization of China's currency, 12 (2) the possibility of devising further ways and means of Regraded Unclassified 2 1 increasing and stabilizing trade with China, and (3) the 2 transportation problems related to the foregoing matters, 3 The committee shall report to the House (or to the Clerk 4 of the House if the House is not in session) as soon as prac- 5 ticable during the present Congress the results of its investi- 6 gation, together with such recommendations as it deems 7 desirable. 8 For the purposes of such investigation the committee is 9 authorized to sit and act during the present Congress at such 10 times and places, whether or not the House is sitting, has re- 11 cessed, or has adjourned, to hold such hearings, to require the 12 attendance of such witnesses and the production of such books, 13 papers, and documents, and to take such testimony, as it 14 deems necessary. Subpenas shall be issued under the signa- 15 ture of the chairman of the committee or any member desig- 16 nated by him, and shall be served by any person designated 17 by such chairman or member. The chairman of the com- 18 mittee or any member thereof may administer naths to 19 witnesses. Regraded Unclas 180 January 26, 1942 12:56 p.m. HMJr: Hello. Operator: Mr. Crowley. Go shead. HMJr: Hello. Leo Crowley: Hello, how are you? I called you Saturday afternoon and they said you were out in Cleveland. HMJr: Cleveland and Detroit. C: Say, now sometime this afternoon or tomorrow, if you have a few minutes' time, if you'd give me a ring I'd like to talk with you. I had a long, long talk about that thing there HMJr: Yes. C: and there won't be anything done right away, but I think I ought to tell you all about our conversation. I'm sure it will be interesting to you. HMJr: I'd like to hear it. C: Well, any time now that you can, today or tomorrow, why you call me, and I'll come right over. HMJr: Well, why not let's set an appointment for tomorrow? C: Fine. HMJr: How'e ten o'clock? C; Fine, I'll be there. HMJr: Ten o'clock. C: Yeah. HMJr: Thank you. C: Good-bye. Regraded Unclassified DRAFT OF SECRETARY MORGENTHAU'S BROADCAST 181 FOR THE INFANTILE PARALYSIS CAMPAIGN, JANUARY 26, 1942. Tonight I should like to speak to you for a very few minutes, not as Secretary of the Treasury, but 8.8 en old friend and neighbor of Franklin Roosevelt. I am going to speak in A. personal way and with 8. personal theme, not to praise him, because he needs no praise, but for e different reason. ) I feel very deeply that it ill help our country to surmount the dangers and obstacles of this hour if all of us remember how Franklin Roosevelt conquered the obstacles that at one time shadowed his whole life. ( It is Almost thirty years now since Mrs. Morgenthau and I first became neighbors of the Roosevelts in the Budson Valley. It is more than twenty years since the President was stricken with infantile paralysis. The Regraded - 2 - 182 very first year that he went to Warm Springs, we went with him. It did not take us long to discover that he had brought B. new spirit to Warm Springs with him. Even in the very first winter at Warm Springs, we saw that the patients there had a certain cheerful optimism, a kindly and helpful relationship toward one another, an attitude toward life which subsequently came to be known as the "spirit of Warm Springs." In reality that was the spirit of Franklin Roosevelt. He blew the breath of life and courage into that place through the example he set, through the reserves of courage that he summoned. He had already made up his mind that he had "nothing to fear but fear itself." He never spoke to me then about the disease that struck him, nor has he spoken about it since. He was fighting his fight alone. He was determined to show that D-A Regraded Unclassified - 3 - 183 he could take it, with the same gay and grim spirit that the people of London showed when 8. different kind of scourge fell upon them. In later years when Franklin Roosevelt haú re-entered state politics in New York, we went on a number of campaign an inspiration 7. all of no trips together. That, too, was & rewarding experience. Be was always cheerful when others grumbled, he was always optimistic when others had their doubts. I remember cold autumn particularly one h day when he spoke 14 times from an open car, on & cold autumn day. This was the stricken man whom we had accompanied to Warm Springs only a few years before. He WAS winning his fight. He was waging his war with wither him. every ounce of energy end determination that he could summon. This determination to beat all hardships, to conquer is being day by day. all handicaps, can be created in these United States today. 0-A Regraded Unclassified - 4 184 Mr. Bitler, Mr. Mussolini, and Mr. Mikado, I want you to take B look at the spirit of Warm Springs, for that is the spirit of America today and it is something which you can never beat, no matter how long you try. Many times in those early days at Warm Springs the road ahead must have seemed dark and painful to Franklin Roosevelt, yet the word "impossible" had been struck out of his dictionary. Nothing was impossible to him, and he proved it. In the same way the road ahead of our country must seem dark at times. We as a nation have been struck E crippling blow while we were not looking. Our whole world has been stricken with the disease of conquest and tyrenny which we shall have to stamp out before we can live in poace and happiness again. But if anyone should ever have and wess being 0-A Regraded Unclassified - 5 - 185 his doubts, if anyone should suppose for one moment that Nemember think of the that the job is too big for us, let him look - the example / Hunt nv of Franklin Roosevelt, who has conquered the powers and then carry 1 evil singl handed. D-A 186 1/26 o As Draft "A" was being discussed and re- visions made, the pages were given to the typist to make this Draft "B". DRAFT OF SECRETARY MORGENTHAU'S BROADCAST 187 FOR THE INFANTILE PARALYSIS CAMPAIGN, JANUARY 26, 1942. Tonight I should like to speak to you for " very few minutes, not as Secretary of the Treasury, but 8.8 sn old friend and neighbor of Franklin Roosevelt. I feel very deeply that it will help our country to surmount the dangers and obstacles of this hour if nll of UE remember how Franklin Roosevelt conquered the obstacles that at one time shadowed his whole life. It is more than twenty years since the President MES stricken with infantile paralysis. The very first Mrs. Marger and I year that he went to Warm Springs, we went with him. It aid not take us long to discover that he had brought R new spirit to Warm Springs. Even in the very first inter, we saw that the patients there has 8 certain cheerful optimism, a kindly and helpful relationship Regraded Unclassified - 2 - 188 toward one another, en attitude toward life which subsequently came to be known 8.5 the "spirit of Warm Springs." In reality that was the spirit of Franklin Roosevelt. Fe blew the breath of life and courage into that place through the example he set, through the reserves of coure e that he summoned. He had already made up his mind that he had "nothing to fear but fear itself." Re never spoke to me then about the disease that struck him, nor has he spoken about it since. Re was fighting his fight alone. He was determined to show that he could take it, with the same min and 64J spirit that the people of London showed when R different kind of scourge fell upon them. In later years when Franklin Roosevelt had re-entered state politics in New York, we went on & number of campaign Regraded Unclassified - 3 - 189 trips together. Then, too, he was an inspiration to all of us. When others grumbled, he was always cheerful; when others had their doubts, he was always optimistic. I remember particularly one cold autumn day when he spoke 14 times from an open car. This was the stricken man whom we had accompanied to Warm Springs only a few years before. He was winning his fight. He was waging his war the with every ounce of energy and determination within him. This determination to beat all hardships, to conquer all handicaps, is being created in these United States Now, listen, day by day. Mr. Hitler, Mr. Mussolini, and Mr. Mikado; A I want you to take a look at the spirit of Warm Springs, for that is the spirit of America today and it is something which you can never beat, no matter how long you try. Many times in those early days at Warm Springs the road ahead must have seemed dark and painful to Franklin D-B - 4 - 190 Roosevelt, yet the word "impossible" had been struck out of his dictionary. Nothing was impossible to him, and he proved it. He is proving it today and every day. In the same way the road ahead of our country must seem dark at times. We as & nation have been struck a blow while we were not looking. Our whole world has been stricken with the disease of conquest and tyranny, a disease which we shall have to stamp out before we can live in peace and happiness and well-being again. But if anyone should ever have his doubts, if anyone should suppose for one moment that the job is too big for us, let him think of the example of Franklin Roosevelt, and then carry on. B 191 Reading Copy of Secretary Morgenthau's talk on behalf of "President's Birthday Celebration" under the auspices of the Infantile Paralysis Campaign, broadcast at 10:45 p.m., EST., January 26, 1942. Regraded Unclassified 192 Tonight I should like to speak to you for a very few minutes, not as Secretary of the Treasury, but as an old friend and neighbor of Franklin Roosevelt. I feel very deeply that it will help our country to surmount the dangers and obstacles of this hour If all of us remember how Franklin Roosevelt conquered the obstacles that at one time shadowed his whole life. It is more than twenty years since the President was stricken with infantile paralysis. Regraded Unclassified 193 - 2 - The very first year that he went to Warm Springs, Mrs. Morgenthau and I went with him. It did not take us long to discover that he had brought a new spirit to Warm Springs. Even in the very first winter, we saw that the patients there had a certain cheerful optimism, a kindly and helpful relationship toward one another, an attitude toward life which subsequently came to be known as the "spirit of Warm Springs." In reality that was the spirit of Franklin Roosevelt. He blew the breath of life and courage into that place through the example he set, through the reserves of courage that he summoned. Regraded Unclassified - 3 - 194 He had already made up his mind that he had "nothing to fear but fear itself." He never spoke to me then about the disease that struck him, nor has he spoken about it since. He was fighting his fight alone. He was determined to show that he could take 1t, with the same grim and gay spirit that the people of London showed when a different kind of scourge fell upon them. Pause In later years when Franklin Roosevelt had re-entered state politics in New York, we went on a number of campaign trips together. Then, too, he was an inspiration to all of us. Regraded Unclassified - 4 - 195 When others grumbled, he was always cheerful; when others had their doubts, he was always optimistic. I remember particularly one cold autumn day when he spoke 14 times from an open car. This was the stricken man whom we had accompanied to Warm Springs only a few years before. He was winning his fight. He was waging his war with every ounce of the energy and determination within him. This determination to beat all hardships, to conquer all handicaps, is being created in Pause these United States day. by day. Now, listen, Mr. Hitler, Mr. Mussolini, and Mr. Mikado! - 5 - 196 I want you to take a look at the spirit of Warm Springs, for that is the spirit of America today and it is something which you can never beat, no matter how long you try. Pause Many times in those early days at Warm Springs the road ahead must have seemed dark and painful to Franklin Roosevelt, yet the word "impossible" had been struck out of his dictionary. Nothing was impossible to him, and he proved it. He is proving it today and every day. - 6 - 197 In the same way the road ahead of our country must seem dark at times. We as a nation have been struck a blow while we were not looking. Our whole world has been stricken with the disease of conquest and tyranny, a disease which we shall have to stamp out before we can live in peace and happiness and well-being again. But if anyone should ever have his doubts, if anyone should suppose for one moment that the job is too big for us, let him think of the example of Franklin Roosevelt, and then carry on. -000- 198 GENERAL COUNSEL TREASURY DEPARTMENT E WASHINGTON January 26, 1942. TO: Secretary Morgenthau E. H. Foley, Jr. Treasury representatives, assisted by technical advisers from the Office of Scientific Research and Development, have been making a thorough investigation of Schering Corporation which is a $3,000,000 concern with 400 employees. Prior to 1937 Schering Corporation was a directly owned subsidiary of Schering A.G., one of the largest industrial enterprises in Germany, having approximately 30,000 employees. The American company is today controlled by the German concern through notical Swiss ownership. Schering Corporation is producing (in most instances is the sole source) pharmaceutical products which are indispensable in the treatment of our voldiers and the general public. The most important these products is one for the treatment of shock, shock resulting from severe burns and wounds. me use of this preparation is reported by Schering proration to have saved the lives of thousands of lish soldiers after Dunkirk. Regraded Unclassified 199 - 2 - The research work of Schering Corporation is conducted under the direction of Dr. Schwenk, who is 8. chemist of outstanding ability. Research is now under way which gives promise of resulting in discoveries of even greater importance to our war program and to our national health than the products at present being manufactured. The United States Government has a large group of scientists conduct- ing research along certain lines parallel to those being conducted by Dr. Schwenk and his staff. The successful conclusion of this work will be of the greatest importance to our air forces 88 it relates to preparations which increase the endurance of aviators. The technical advisers made available by the Office of Scientific Research and Develop- ment state that the experience and ability of Dr. Schwenk and the use of the laboratories of Schering Corporation are vitally needed in this work. At the present time the experience of Dr. Schwenk and of his staff and the facilities of Schering Regraded Unclassified 200 - 3 - Corporation are to a marked degree lost to the Government and to the Nation. The technical advisers state that the Government does not dare use Dr. Schwenk or the laboratories of the Corporation because of the German connections of the Corporation and the affiliations of certain of its German personnel. In addition, dominating patents held by the corporation, 80 long as they are in control of personnel of dubious loyalty, may stand in the way of essential developments in the medical field. In fact, the technical advisers even fear for the actual production of the products now being manufactured by Schering. It is considered imperative by them that questionable personnel be removed and a trusted scientist assigned to work closely with Dr. Schwenk in order to obtain the value of his essential knowledge needed in the production of items now produced by Schering. Until recently, when the Treasury Department took steps to stop the practice, Schering Corporation and other subsidiaries of Schering A.G. in South America, were used as tools to obtain dollar exchange to facilitate the operations of the Nazi regime. The Regraded Unclassified 201 - 4 - purported sale of Schering Corporation in 1937 to Swiss fronts for the Nazie was arranged in such a manner as to assure the continuance, until stopped by the Treasury Department, of the flow of dollar exchange to the Nazis. In addition, until stopped by the cooperative action of the Treasury Department and other government agencies, Schering Corporation was engaged in steps to assist in holding the pharma- ceutical market in South America for the German economy until the war was over, and in supplying dollar exchange through South America to the Nazis. During this period certain prominent personnel from Schering A.G. of Germany came to the United States to direct the activities of Schering Corporation. That personnel at present dominates the corporation. In order to protect the source of supply of the vital medical products made by Schering Corporation and to enable the United States Government to utilize this corporation and its expert personnel for the development of preparations vital to our war effort, the Treasury Department proposes that the following Regraded Unclassified 202 - 5 - persons be suspended from further activities in Schering Corporation: 1. Dr. Julius Weltzien - President; salary approximately $60,000 a year; former president of Schering A.G. of Germany; entered the United States in May 1938. 2. Mr. Martin Bernhardt - Head of legal and comptrolling departments; salary, $9,400 a year; former Vice-Chairman of Schering A.G. of Germany; entered the United States in March 1938. 3. Mr. Ernst Hammer - Manager of promotion; salary approximately $22,000 a year; formerly in the South American department of Schering A.G. of Germany; entered the United States in January 1932. 4. Mr. Hans Erdmann - In charge of engineering and maintenance departments; salary, $10,000 8. year; formerly designer of chemical equip- ment for Schering A.G. of Germany; entered United States in August 1929. Regraded Unclassified 203 - 6 - 5. Dr. Erich Putter - Director of biological laboratory; salary, $6,600 8. year; former- ly director of bacteriological research for Schering A.G. of Germany; entered United States in July 1938. 6. Dr. Gerhard A. Fleischer - Research chemist; salary, $4,300 a year; worked for Schering A.G. of Germany during vacations and came directly to United States through Schering A.G. after graduation in February 1937. 7. Miss Frida Friderici - Secretary to Dr. Schwenk, Director of Research; born in United States, but educated in Germany where her family is now living; reported to be of pro-Nazi tendencies; has in her custody all confidential scientific matters of the corporation. 8. Miss Henrietta Lange - Secretary to Dr. Weltzien; entered United States in 1923. If this action meets with your approval we will take the necessary steps to put it into effect. JAN Approved: 28 1942 Secretary of the Treasury Regraded Unclassified 204 P.S.S. NNM. TO B2 STATENDED FROM SCHERING CORPORATION Dr. Julius Weltzien. Dr. Weltzien was born in Germany in 1889. He sintem that his mother is Jewish. He was graduated with the degree of Doctor of Laws from the University * Procers in 1912. 30 began to work with Schering A.C. of Germany prior to the last war. During the last war he was E second lieutenant in the German Army. At the con- of the war he returned to Schering A.C. and brease vice-President of that concern in 1921. In 100 he became President. About 1937 Schering A.G. and its parent company, which was engaged in mining mi Maner enterprises, were merged and Dr. Weltzien décadé President of the combined concern. He is reported to have directed the establishment of agencies of Schering A.G. in practically every country in the world and is said to be an outstanding authority on foreign trade. Dr. Weltzien was a close friend of Strausser who, prior to 1933, was second in command of the Nazi Party. In 1883 Strausser broke with Hitler as a result of Strausser's attempt to form B. government in corroboration with the trade unions. Dr. Weltzien then gave him a job with Schering A.C. In 1934 Strausser was arrested, either in the offices of Schering A.G. or on his way nome, and was shot in the streets of Berlin. Dr. Weltzien THE also arrested, but was soon released. He is probably are of the very few associates of Strausser who is alive triday. Dr. Weltzien states that for several years Schering A.C. had to supply a set quota of foreign exabange to the German Government. By 1937 the vurces of its subsidiaries to supply the required - of foreign exchange were exhausted. Schering Regraded Unclassified 205 - 2 - A.G. was then directed by Goering's organization to sell the American subsidiary, but to arrange the terms of the sale so that approximately the same amount OI foreign exchange would be trans- ferred from the American company to Germany each year. Dr. Weltzien states that he discussed this with 8. friend who is an official of Ciba, Basle (pharmaceutical manufacturers), and the negotiations were then undertaken with the Swiss Bank and with Ciba. During the course of the negotiations, the suggested terms were submitted from time to time to Goering's department and were changed to meet that department's approval. Dr. Weltzien reports that he was asked by the Swiss Bank to take over the presidency of the American firm as they wanted someone they knew to be in charge. He states that he had been con- sidering leaving Germany for some time because of conditions there, and therefore he readily accepted the position. Although it is possible that Dr. Weltzien may not be 8. Nazi, he obviously believes sincerely in the supremacy of the German sconomy, and his loyalty and ties are basically with Germany- It is also inconceivable, in light of Dr. Weltzien's background, that he could have left Germany with the ease that he did without having first come to some understanding with the German Government. Undoubtedly his departure was consented to with the understanding that he would ensure that foreign exchange would continue to be transmitted to Germany and that his skill and experience would be utilized in maintaining German markets in case of war. It is to be noted in this connection that his mother and & brother and sister are still in Germany. Regraded Unclassified 206 - 3 - Martin Bernhardt. Bernhardt was born in Germany in 1886, and is at least part Jewish. He studied law at the University of Breslau, Germany. After he was discharged from the army in 1917, he went to work for the parent company of Schering A.G. of Germany and continued to work for that company for twenty years. He became Vice-Chairman of the company and was in charge of personnel. He arrived in the United States in 1938 at approximately the same time as Dr. Weltzien. It is reported by employees of the Schering Corpo- ration that on his arrival he immediately assumed a dominating role in Schering operations and be- came Dr. Weltzien's most trusted associate. It is reported that this led to conflict with Dr. Stragnell, who complained of Bernhardt's activities. Evidently, since that time Bernhardt has operated in a much quieter manner. Bernhardt is ostensibly in charge of the legal department, but it is doubt- ful that his services are of much value due to his lack of knowledge of law as practiced in the United States. It is felt that he came to the United States with the understanding that he would be one of the forces to continue the policies of Schering A.G. of Germany in the American concern and that essentially he is & watch-dog for the German company. Ernst Hammer. Hammer was born in Alsace Lorraine in 1903. !!e began to work for Schering A.G. in the Latin American department in 1925, and took an active part in the establishment of the South American Regraded Unclassified 207 - agencies of Schering A.G. In 1929 he was sent to Chile and in 1930 was transferred to Schering Corporation in the United States. He spent two years in the United States studying promotional work. His salary during this period was paid by Schering A.G. of Germany. In 1932 he re-entered the United States on an immigrant's visa and re- ceived his final papers in 1937. It is apparent that Mr. Hammer was sent here by the German company to ensure the continuance of its policies, and it is believed that his ties and loyalties are to Schering A.G. of Germany. He has B. brother, two aunts, and an uncle still in Germany. It is curious that Schering A.G. should send 8. man from Germany to conduct its promotional work, as a man to conduct such activities could easily have been obtained in the United States. Hammer attempts to explain this by stating that he underwent a course of training in the scientific aspect of Schering's products before going to Chile. This assertion has little or no value, as the products now being manufactured and marketed by Schering A.G. of Germany had not been developed at that time. In fact, at the time that he came to the United States, Schering Corporation of the United States was handling only minor pharma- ceutical products of a standard variety. Hans Erdmann. Erdmann was born in Germany in 1898. He worked for Schering A.G. of Germany from 1922 until 1929, designing chemical equipment. He came to this country in 1929, but did not join the Schering Corporation until 1934. He received his final citizenship papers in 1936. He is now in charge of the engineering and Regraded Unclassified 208 5 maintenance departments of Schering Corporation. At the present time, Erdmann has a mother and sister in Germany. He is A close associate of the Weltzien-Bernhardt clique. Dr. Erich Putter. Dr. Putter was born in Germany in 1892 and was graduated with the degree of M.D. in 1916. During the last war he was 8 lieutenant in the medical corps of the German Army- He was employed by Schering A.G. of Germany in 1924 as under-director in the bacteriological field, and was later made director. He states that fearing trouble because his ancestry is not entire- 1y "Aryan", he asked Dr. Stragnell and Dr. Weltzien for a job with Schering Corporation of the United States. He and his family came to this country in April 1938. His mother and a sister are still living in Germany. He is at the present time director of the biological laboratory of Schering Corporation, and is conducting research work in the bacterio- logical field. Dr. Putter is in a position to ascertain the nature of all developments in the Schering laboratories. It is felt that because of his long association with Schering A.G. of Germany and because of his German background, it would be exceedingly inadvisable to allow him to remain with the Schering Corporation if it is to engage in work of 8 secret and confidential nature. Dr. Gerhard A. Fleischer. Dr. Fleischer was born in Germany in 1911 and received his Ph.D. from a university in Danzig in 1936. Regraded Unclassified 209 - 6 - During his summer vacations he worked for Schering A.G. of Germany doing research work. He met Dr. Stragnell in 1936 and accepted a position with Schering Corporation in the United States, entering this country in February 1937. He has 8. sister in Berlin and a siater in the Dutch East Indies. His mother is deceased and he does not know where his father is. He is at the present time in charge of research work on protein hormones. The technical advisors made available by the Office of Scientific Research and Development feel that due to Dr. Fleischer's German background and former connection with Schering A.G., work of a confidential nature could not be turned over to the laboratories of Schering Corporation until he is removed. Miss Frida Friderici. Miss Friderici was born in 1908 in New York City. She returned to Germany in 1913 and re- entered the United States in 1930 on a United States passport. Her mother, two sisters, and numerous other relatives are now living in Germany. Her husband, Arthur Ziehm, was born in Germany, but is now a citizen of the United States. He was formerly B. motion picture distributor of domestic and foreign films. He distributed German films, but Miss Friderici states he discontinued this distribution either in 1936 or 1937. He served in the United States Army during the last war. Miss Friderici was employed by the Schering Corporation in May 1938 as secretary to Dr. Schwenk. In this capacity, she has custody of practically all Regraded Unclassified 210 . 7 - confidential scientific matters of the corporation. Miss Friderici's background is essentially German ly pro-Nazi in sympathies. and she is reported by other employees to be strong- Miss Henrietta Lange. Miss Lange was born in Germany in 1912. She came to the United States in 1922. In 1930 she returned to Germany for a visit and in 1933 she went to Germany for the purpose of relearning the German language. She applied for her first papers in April 1940. She has an uncle and aunt, and their children, still living in Germany. Miss Lange is a close associate of one Mahr, who is a skiing instructor. Mahr is of German birth, but has been 8 citizen of the United States for nine years. Several anonymous letters have been received accusing Miss Lange of Nazi activities. She states that these letters were probably written by a former suitor of hers who became extromely jealous when she shifted her affections to Mahr. Little reliance is placed on the statements in the anonymous letters, but it is believed that be- cause of her German background, her connection with the German skiing group, and her position as secretary to Dr. Weltzien, it is essential that her relations with the corporation be severed. Regraded Unclassified TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE JAN 26 1942 coversbry Morgenthau Foley The Pilot Reinsurance Company, of New York City, was transized in 1925, with capital provided by two German :-1.1.m rance companies and one Italian insurance company. The president and the vice president of the new company were recently naturalized citizens of German origins. The president, Mr. Carl Schreiner, W&S also a director of Munich Reinsurance Company, which furnished over one-half of the capital for the llew corporation, and ever since its organization the Pilot Reinsurance Company, under the comination of Mr. Schreiner, has been operated primarily in the German interest. The directors of the Munich Re- Insurance Company were active in the Nazi movement from its inception. They helped finance the party, and the chairman of the board, who is also 8. director of Pilot Reinsurance Company, took a leave of absence from his post to act as Hitler's Secretary of Commerce from 1933 until 1938. In 1939 and 1940 the shares of Pilot Reinsurance Company owned by the two German companies were transferred to various Dutch, Swiss and Swedish holding companies. Mr. Schreiner, a complete Nazi sympathizer and ardent supporter of Hitler, has been in Europe since April 1940. During his absence the company has been operated by the vice president, Mr. A. F. Sadler, as to whose loyalty there is very serious question. Apart from the officers, there are only five employees, all of whom have German back- grounds. Pilot Reinsurance Company has assets of about $3,500,000 and at present has only five reinsurance treaties outstanding. Since June 14, 1941, it has been operating under 15 and 30 day licenses. The board of directors re- guested a long term license and submitted a plan for Americanization" of the corporation, which in effect would ave enabled some of the directors to organize a new company Regraded Unclassified 212 - 2 - using German capital. With its antecedents and personnel it seemed desirable to compel Pilot Reinsurance Company to liquidate. Mr. Louis Pink, Superintendent of Insurance for the State of New York, was called upon :- an opinion on the importance of the company to the market. Mr. Pink in- formed us that, although there is & general shortage in reinsurance facilities and this company is a "good little company" which could be Americanized by putting one of his men in charge, he felt that whether the company "lives or dies will not have any substantial effect upon the condi- tions". After clearing the matter with Dean Acheson, Assistant Secretary of State, and Mr. Leo T. Crowley, the decision was reached to grant the Pilot Reinsurance Company only a liquidating license at the expiration of its current 15-day license. This is perfectly consistent with our treatment of the one large Italian insurance company and the two Italian banks. This liquidation will take place under the supervision of the New York Superintendent. 9.14.76 Approved: JAN 28 1942 Secretary of the Treasury. Regraded Unclassified 213 TREASURY department WASHINGTON January 26, 1942. MEMORANDUM FOR THE SECRETARY: In accordance with your request on Friday, I am handing you the attached chart showing the organization of the Defense Savings Staff. I am not completely satisfied with this chart, and it will need some revi- sion. It is however sufficiently accurate for practical purposes. My oculist says that the eye is much better, and he has discharged me except for an occasional check-up. GRAVES. Regraded Unclassified ORGANIZATION, DEFENSE SAVINGS STAFF THE SECRETARY OF THE TREASURY Henry Morgenthau, Jr. CONSULTANTS B. M. Edwards ASSISTANT TO THE SECRETARY P. H. Odegard T. R. Gamble Harold N. Groves G. F. Milton DEFENSE SAVINGS STAFF Executive Director - E.W. Sloan FIELD DIVISION EDUCATIONAL AND LABOR, AGRICULTURE AND INFORMATION DIVISION R.W. Sporks WOMEN'S DIVISION OTHER ORGANIZATIONS H.W. H. Powel O.S. Poland J.L. Houghteling PAYROLL ALLOTMENT RADIO, PRESS & PERIODICALS R. H. O'Malley SCHOOLS LABOR V.F. Callahan J. Clarke G. E. Hyatt NEWS-LETTER MOTION PICTURES R. M. Paige WOMEN'S ACTIVITIES AGRICULTURE H. Dietz H. Dallas G. K. Zimmerman ADMINISTRATION GENERAL PROMOTION L. M. Olney PUBLICATIONS MISCELLANEOUS S.D. Mohan R. Goyne H.W. Peters B. Fisher DIRECT MAIL NEGRO ACTIVITIES E.A. Bucklay STATE W. Pickens NOWINISTRATORS LAYOUT AND DISTRIBUTION LT - Regraded Inclassifie 218 January 26, 1942. Mr. Dave H. Morris, Jr., Assistant to the Secretary. Sir: Treasury Department Circular No. 657, dated April 15, 1941, as anended, prescribing regulations governing agencies for the issue of Defense Savings Bonds, Series E, provides: or + "The Secretary of the Treasury may, at any time, designate issuing agents other than those herounder designated, the employment of which shall be subject to qualification as herein provided, except as may be otherwise specifically authorized by the Secretary." e 9 You are hereby authorized, as Assistant to the Secretary, in my behalf to designate issuing agents for the sale of Defense Savings Bonds, Series E, under the above authority, and to instruct Federal Reserve Banks and their branches with respect there- to. Very truly yours, (signed) H. Morgenthau, In Secretary of the Treasury. crs/m Regraded Unclassified TREASURY DEPARTMENT 216 INTER OFFICE COMMUNICATION DATE January 26, 1942 TO Secretary Morgenthau FROM Dave H Morris, Jr. Subject: Digest of eight (8) replies to Night Letters sent Wednesday, January 21st, to first twelve (12) qualifying corporate Issuing Agents Swift & Company: They have requisitioned $7.78125 bonds, which is about one week's requirements, An increase is expected and the plan should work smoothly. Chicago-Great Western R.R. Company: Slowness is admitted in the requisitioning of bonds. They expect to requisition bonds shortly and favor the plan. Chicego-Indianapolis & Louisville Railway: The Payroll Allottment Plan has been in effect since July 15, 1941. About 700 of 2,200 employees are at present participating. Difficulties are not anticipated. The Cain-Sloan Company: They want to cooperate and are qualified as issuing agent, expecting to fill customers' requests for bonds, Cain- Sloan planned to pay for bonds and sell them to customers. As they understand rules, they do not permit this; they have not requisitioned bonds. They, however, expect to accommodate em- ployees through purchase from local bank or post office. You Huston Peanut Company: They understood from the Federal Reserve of Atlanta that et shortage of bonds exists and decided to wait for a sub- stential order to accumulate, before ordering any. Regraded Unclassified 217 N I I Chicago & Eastern Illinois Railroad: They understood from the Federal Reserve of chicago that C.E. & I. could act as issuing agent if the number of bonds were sufficient to warrant such designation. They then advised them that they would act as issuing agent when the number of bonds exceeded 75 per month. Their last requisition was several days ago. Twenty-two (22) bonds were ordered, but an increase is expected. Many employees buy bonds directly. If desired, they would be glad to start issuing bonds, regardless of the number and already have cer- tificate of qualification, etc. Chicago & North Western Railway Company: Pleased with being able to issue bonds as soon 8.8 payment is made, they feel that this definitely expedites she sale of the bonds. Louis Pizitz Drygoods Company: One hundred Per Cent (100%) of the employees are buying bonds, either for cash or through payroll deductions. Each week, they expect to requisition the number of bonds paid for by their employees. This eliminates carrying on hand a number of blank bonds. They would welcome any further suggestions. Conclusion: It does not seem that any follow-up need be made, except in the case of the Cain-Sloan, Tom Huston Peanut Com- pany and Chicago & Eastern Illinois Railroad, which I am following-up. furth Regraded Unclassified UNITED STATES SAVINGS BONDS Comparative Statement of Sales During First Twenty-one Business Days of January 1942 and December and November 1941 (November 1-27, December 1-24, January 1-24) On Basis of Issue Price (Amounts in thousands of dollars) : : 2 Sales Amount of Increase Percentage of Increase : : : Item : : : 1 January : December : January : December January December November : 1 : : over : over 1 over I over : 1942 : 1941 : 1941 I December : November : December If November Series x - Post Offices $128,428 $ 73,206 $ 35,014 $ 55,222 $ 38,192 75.10% 109.1% Series 1. Banks 388,500 153,483 65,947 235,017 87,536 153.1 132.7 Series 1- - Total 516,928 226,688 100,961 290,240 125,727 128.0 124.5 Series 1. Banks 57,043 22,389 17,160 34,654 5,229 154.8 30.5 Series G - - Banks 221,015 116,098 96,408 104,917 19,690 90.4 20.4 Total $794,986 $365,174 $214,529 $429,512 $150,645 117.7% 70.2% Office of the Secretary of the Treasury, Division of Research and Statistics. January 26, 1942. 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 Unclassifie UNITED STATES SAVINGS BONDS Daily Sales - January, 1942 On Basia of Issue Price (In thousands of dollars) Post Office Bank Bond Sales All Bond Sales Date Bond Sales Series I Series Ell Series I Series G Total Series E Sories 1 Series G Total January 1942 1 $ 3,982 $ 10,229 $ 1,964 $ 7,605 $ 19,798 $ 14,211 $ 1,964 $ 7,605 # 23.780 2 4,802 10,736 2,056 7.779 20,571 15,538 2,056 7.779 25,373 3 4,457 9,557 1,278 5,453 16,289 14,015 1,278 5,453 20,747 5 9,684 26,724 3,240 13,704 43,668 36,408 3,240 13,704 53,352 6 6,711 7,659 1,341 6,778 15.778 14,369 1,311 6,778 22,459 7 6,748 21,267 3,692 18,832 43.790 28,015 3,692 18,832 50,539 8 7,509 21,297 3,821 12,871 37.989 28,506 3,821 12,871 45,498 9 5.746 12,359 1,798 4,765 18,923 18,105 1,798 4,765 24,669 10 4,398 16,031 1,858 6,355 24,244 20,429 1,858 6,355 28,641 12 10,187 37.483 3,830 14,353 55,666 47,670 3,830 14,353 65,853 13 7.902 15,059 2.507 11,944 29,510 22,961 2,507 11,944 37,412 14 4,706 19,939 3.701 14,293 37.933 24.645 3,701 14,293 42,639 15 6,444 16,597 2,243 13,283 32,123 23,041 2,243 13,283 38,567 16 5,721 26,239 4,319 14,078 44,637 31,960 4,319 14,078 50,358 17 4,830 6,933 759 3,008 10,700 11,763 759 3,008 15,530 19 8,835 39,000 3,946 16,599 59.545 47,835 3,946 16,599 68,380 20 5,155 10,549 2,285 10,551 23,385 15,703 2,285 10,551 28,539 21 4,886 19,375 3,538 15,566 38,479 24,261 3,538 15,566 43,365 22 5,161 22,257 3.973 9.850 36,080 27,418 3,973 9,850 41,241 23 5,908 23.392 2,652 5,004 34,048 29,300 2,652 8,004 39,956 24 4.655 15,820 2.239 5.344 23,403 20,476 2,239 5,344 28,058 Total $128,428 $388,500 $ 57,043 $221,015 $666,558 $516,928 $ 57,043 $221,015 $794,986 Office of the Secretary of the Treasury, Division of Research and Statistics. January 26, 1942. Source: All figures are deposite with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Figures have been rounded to nearest thousand and vill not necessarily add to totals. Regraded Unclassified 220 Unfilled Orders for Sevings Bonds at the Federal Reserve Banke and the Post Office Department January 12 to date (In thousands of nieces) : Unfilled : : : Unfilled : : New orders Bonds orders at Stock of IBM : orders at : : : : : received manufactured : close of bonde deliveries opening of : : : : today on hand this day : business today : : : business : : Jan. 12 541 859 595 805 236 625 13 305 425 630 598 236 650 14 598 622 670 550 236 685 15 550 660 750 455 231 1,000 16 455 773 775 426 204 750 17 426 672 S00 298 204 1,000 18 298 none-no mail none-closed 298 204 500 19 298 204 800 202 704 825 20 202 204 800 86 1,184 1,000 21 86 411 800 59 1,546 875 22 59 697 800 86 1,676 1,000 23 86 569 800 50 1,871 1,000 24 50 727 800 28 1,922 1,000 Office of the Secretary of the Treasury, January 26, 1942 Division of Research and Statistics. Bonds in Washington vaults only. Regraded Unclassi Stock of Series E Savings Bonds on Hand 1/ January 15, 1942 to date (In thousands of pieces) : Stock on hand : : Bonds : Stock 0.1 hand : IBM Sales : beginning : : manufactured : close of : deliveries of day : this day : : this day : da: : this day Jan. 15 6,569 320 750 6,999 1,000 16 6,999 445 775 7,329 750 17 7,329 163 800 7,96 1,000 18 7,966 none-closed none-closed 7,96 800 19 7,966 665 800 8,101 825 20 8,101 218 800 8,683 1,000 21 8,683 337 800 9,145 875 22 9,146 381 800 9,565 1,000 23 9,565 377 800 9,988 1,000 24 9,988 263 800 10,52; 1,000 Office of the Secretary of the Treasury, January 26, 1942 Division of Research and Statistics. 1 Includes stock in hands of (1) Federal Reserve Banks and branches, (2) Post Offices, (3) Federal Reserve Bank issuing agents, and (4) Treasury vaults in W: shirgton. Regraded Uncl Fee THE WHITE HOUSE WASHINGTON January 26, 1942. Dear Henry: It seems to me this should be used in training youth for industry and not scrapped. Affectionately, III. Regraded Unclas 222 276 machine shops with 15,884 youth in training 286 sheet metal shops with 11,333 youth in training 234 welding shops with 7,030 youth in training 27 foundry shops with 705 youth in training 87 forge and blacksmith shops with 828 youth in training 85 radio shops with 2,667 youth in training 36 electrical shops with 884 youth in training 129 automotive maintenance and repair shops with 5,315 youth in training 12 aviation service shops with 798 youth in training 282 patternmaking, joinery and ship carpentry shons with 10,062 youth in training 61 industrial and heavy-duty sewing shops with 7,095 youth in training 420,000 NYA trained youth secured employment in industry during the calendar year 1941. On defense training projects the average training period is 3 months; on regular projects it is about 5 months. Turnover in defense training projects is, therefore, about 75,000 every 3 months. Regraded Unclassified TREASURY DEPARTMENT 224 INTER OFFICE COMMUNICATION DATE January 26,1942 TO Secretary Morgenthau FROM Mr. Haas MA Employment under the Work Projects Administration increased from 1,017,000 to 1,020,000 during the week ended January 13,1942. Attachments Regraded Unclassified 225 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Weekly United States Week ending Number of Workers 1941 (In thousands) June 4 1,442 June 11 1,423 June 18 1.410 June 25 1,368 July 2 1,172 July 9 1,030 July 16 1,016. July 23 1,025 July 30 1,036 August 6 1,041 August 13 1,042 August 20 1,043 August 27 1,045 September 3 1,043 September 10 1,037 September 17 1,035 September 24 1,033 October 1 1,032 October 8 1,037 October 15 1,040 October 22 1,044 October 29 1,047 November 5 1,050 November 12 1,056 November 18 1,058 November 25 1,060 December 2 1,063 December 9 1,060 December 16 1,055 December 23 1,046 December 30 1,041 January 6 1,017 January 13 1.020 Source: Work Projects Administration 226 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Monthly United States Number of Workers 1939 (In thousands) July 2,200 August 1,842 September 1,790 October 1,902 November 2,024 December 2,152 1940 January 2,266 February 2,324 March 2,288 April 2,092 May 1,926 June 1,665 July 1,701 August 1,691 September 1,704 October 1,779 November 1,821 December 1,878 1941 January 1,895 February 1,867 March 1,708 April 1,560 May 1,464 June 1,368 July 1,036 August 1,045 September 1,033 October 1,047 November 1,060 December 1,041 Source: Work Projects Administration Monthly figures are weekly figures for the latest week of the month. They include certified and noncertified workers. 227 WORK PROJECTS ADMINISTRATION thanber of Workers Employed United States Monthly W.P.A. Reployment weekly N.P.A. Employment 1937 1530 1936 1940 NJ 1940 1941 1942 MAR. MAY JULY SEPT. NOV. MAY JULY asset MILLIONS MILLIONS N/A MARA MILL IDWA or OF or WORKERS WORKERS MORREAL 2.7 2,7 W 2.6 1.3 2,6 2.5 2,5 as 2.4 2.8 2.8 Al 2.3 2.2 2.2 At 2,4 2.1 2.1 2.0 2,0 2.0 2.0 1.9 1.9 1.8 1.8 lye 1,6 1.7 1.7 1.0 la 1.5 1.3 14 1,4 1,4 1.) 1.3 di .8 la 1.2 IN 1.1 A 144 1.0 - .9 L o -8 N JAN, MARL MAY JULY SOFTA NOTE JAC, - MAY a JULY HPI. NOV. MARC (5)7 1938 (539 1940 1940 142 1940 1941 1542 sourcer will PROJECTS ADMINISTRATION - of - Treasury TREASURY DEPARTMENT 228 INTER OFFICE COMMUNICATION CONFIDENTIAL DATE January 26,1942 TO Secretary Morgenthau FROM Mr. Haep duoject: The Business Situation, Week ending January 24, 1942 Summary (1) The price control bill as revised in conference still retains inflationary potentialities. In addition to permitting prices of most agricultural products and of related manu- factured goods to rise to cellings above present levels, it requires the raising of ceiling levels based on parity 88 orices of goods bought by farmers increase. On the other hand, farm prices will not necessarily reach ceiling levels, since surply and demand influences will still be effective. The Department of Agriculture's program for expansion of produc- tion is likely to be a stabilizing factor. (2) Basic commodity prices ΓoHe moderately higher last week, with farm products leading the advance. Cotton advanced steadily during the week to new 12-year highs. Increased speculative activity was noticeable, stimulated by the high minimum ceilings in the price bill on cotton, wheat and corn. (3) The general price level continues to rise, The BLS all-commodity index in the week ended January 17 rose 0.6 to 95.6, the highest point since September 1929. Since our entrance into the war, the index has risen 3.7 percent. (4) Aa e result of the recent upsurge in consumer buying, the gain in department store sales over year-earlier levels widened to 45 percent in the week ended January 17 from 31 percent in the previous week. Stocking uo of woolens, number goods, sugar, and other types of merchandise expected to be in short sungly, has strongly contributed to the sales up- turn. (5) Freight carloadings have risen substantially since the first of the year, and have already reached levels not at- tained last year until early May. In order to speed up equipment construction, SPAB has approved a program to turn out 36,000 freight cars in the 3 months ending April 30. Regraded Unclassified 229 Price control bill raises prices further Rising prices for farm products in the last few days are largely attributable to the price control bill. The bill, as revised in conference, 1s still inflationary in nature, and 1s BO considered by traders in the commodity markets. Speculative activity has accordingly increased, and the volume of futures trading in the cotton and grain markets last week WB.B the highest since the week immediately after our entry into the war. The price bill 1s inflationary in several respects: (1) It permite prices of agricultural commodities to rise to ceilings which in most cases are above present market levels. (2) It forbids ceilings on manufactured goods, made in sub- stantial part from farm products, below the equivalent cellings for the latter. This would apparently eliminate the present ceilings on cotton textiles. (3) It requires a stepping up of ceiling levels based on parity, as prices increase for goods bought by farmers. Prices of goods bought will them- selves inevitably increase as B direct result of the bill, since 51 percent of the change in parity levels depends directly on changes in costs of Items produced on the farm or made from farm products: (a) food, a substantial part of which is home grown and valued at farm prices, (b) clothing, in which cotton and wool are predominant, and (c) feed, live- stock, and seed used in farm production. A notable instance of the inflationary effect of the price control bill 18 seen in the case of cotton, a product entering into a wide variety of industrial and defense uses, to will as having an important effect on the cost of living. The inclusion of the price average for the period 1919-1929 as one beiling basis raises the ceiling on cotton to 21,47 centa at the farm (32 percent above the 16.23 cente farm price in December). The 1919-1929 period includes the peak of the World War inflation, and in the case of cotton, it also includes the severe boll weevil years of 1921 to 1924, when cotton prices rose nearly to World War levels, The effect of the price bill on living costs --- 8 key factor in the inflation problem --- may be Judged from the fact that 44.4 percent of the BLS cost-of-living index is made up of food and clothing. Farm prices, of course, will not necessarily reach ceiling levels. Since supply and demand factors will still be effective, the Department of Agriculture's program for expanded production in 1942 is likely to have an important stabilizing influence. The present program for Government sales of cotton, whent, and corn will also tend to restrain price advances. Regraded Unclassified - 3 - 230 Price control bill provisions The conference price bill provides that the Secretary of Agriculture must approve any action taken with respect to agricultural commodities, and that no ceiling price may be established on any farm product below the highest of the prices determined on the following bases: (1) our The average market price on October 1 or December 15, (2) The average price during the period July 1, 1919 to June 30, 1929. (3) 110 percent of parity prices as determined by the Department of Agriculture. For commodities other than farm products, the standards for price ceilings are prices prevailing during the period from October 1 to October 15, 1941. The following table shows for each of a selected group of farm products the farm price on December 15, 1941, and the approximate minimum ceiling price. In the case of beef cattle, and rice, the farm price on December 15 was already higher than 110 percent of parity and higher than the 1919- 1929 average. Approximate Farm price minimum Ceiling as Commodity December 15, ceiling percent of 1941 price farm price Cotton, 1b. $0.1623 $0.2147 132 Wheat, bu. 1.022 1,400 137 Corn, bu. .669 1.016 152 Rice, (rough) bu. 1.439 1.439 100 Potatoes, bu. .827 1.245 151 Apples, bu. 1.09 1.52 139 Hogs, cwt, 10.21 11.44 112 Beef cattle, cwt. 9.38 9.38 100 Price rise further stimulated Announcements of heavy Government requirements of com- modities for war uses, together with official statements predicting further price advances, were additional bullish influences in the commodity markets last week. As & result, the BLS index of basic commodity prices advanced to a new peak for the war period, and the Dow-Jones futures index reached a new high since the index was first computed in October 1933. Regraded Unclassified 231 4 The BLS all-commodity index in the preceding week (ending January 17) advanced to 95.6, the highest point since September 1929. The rise was again due to broad price advances in farm products and foods. (See Chart 1.) The all-commodity index has risen 3.7 percent since our entrance into the war, 18.6 percent since a year ago, and 27.5 percent from the pre-war level of August 1939. The component index for-prices of farm products has risen 11,0 percent since our entrance into the war, 41.2 percent from the level of a year ago, and 65.2 percent since August 1939. Basic commodity index at new high The upward movement in basic commodity prices last week was confined almost entirely to domestic form products. (See Chart 2.) New peaks since the August 1940 low were reached by cotton, lard, corn, wheat, and flaxseed. Slight declines occurred in prices for rosin, barley, steers, and butter. Cotton prices advanced steadily last week to new highs since 1928. Under the operation of the flexible ceiling plan, prices for print cloth and yarns were raised to higher levels twice during the week. The rise in prices for raw cotton was stimulated in part by the large volume of cotton textile contracts being let by the Government for war goods. Another strengthening factor was the announce- ment that the entire quota of 300,000 bales of cotton which the CCC can sell in any one month we.e taken up shortly after the recently announced selling program became effective, while total applications amounted to 1,160,000 bales. Department store sales gain widens Although January usually 18 a dull month for retail trade, consumer buying this year has been stimulated by the rising price trend and fears of shortages in various types of merchandise. Merchants report that the latter factor has been especially prominent in recent buying, with consumers stocking up on woolen and rubber goods as well as sugar and other articles which are expected to be in short supply. According to one source, retailers claim that the big impetus to the fear buying in recent months has come from Washington announcements relating to materials shortages. Regraded Unclassified 232 The latest upsurge of consumer buying carried department store sales to 45 percent above year-earlier levels in the week ended January 17, as compared with a 31 percent gain in the previous week, (See Chart 3.) The widest advances were shown by the Philadelphia and Cleveland districts, with in- creases of 60 percent and 58 percent respectively over the corresponding period of 1941. Industrial production index still rising Industrial production during the first half of January, AS in the previous month, has shown a less than seasonal de- cline according to Federal Reserve Board comments. Add1- tional data relating to industrial production in December confirm an FRB adjusted index of 168 for that month and an average of 156 for the full year. The last mentioned figure compares with an average of only 123 in 1940. Reference to Chart 4 will disclose that the rise in pro- Suction last year was led by industries making transportation equipment (including aircraft and ships) and machinery. The smallest percentage gains occurred in the output of fuels and in metal mining. The hugh expansion in aircraft production and shipbuild- ing, which highlighted last year's outstanding advance in the transportation equipment group, will be extended further during the current year. Thus, despite the very heavy volume of contracts previously awarded, the Maritime Commission announced at the beginning of last week that con- tracts had been negotiated for the construction of 632 ad- ditional merchant vessels costing $1,100,000,000. Coinci- dent with the announcement, it was indicated that around $50,000 workers are expected to be employed in shipyards by the end of this year. Some appreciation of the magnitude of this expansion may be gathered from the fact that shipbuild- ing employment at the beginning of 1939 was less than 100,000. Steel plate production speeded Due to the very heavy demand from shipbuilding as well ALB other industries, further stens have been taken to speed un the production of steel plates. Thus the OPM recently requested plate producers to operate on a full 168 hour, 7 day week basis. Moreover, greater use of continuous strip mills is being sought for making plates, and steps are being taken to simplify orders. Regraded Unclassified 233 - 6 - Lack of steel plates has been an outstanding factor in the lag in freight car building during the past year. In order to step up production, SPAB earlier this month approved a program designed to enable producers to turn out 36,000 freight cars in the three months ending April 30. In doing BO, SPAB estimated that weekly freight carloadings would rise to the 1,000,000 car level by May. Although last fall's peak in carloadingswa only 923,000 cars, the above expectation may not be excessive in view of the recent loadings trend, (See Chart 5.) Freight carloadings have risen rapidly since the beginning of the year and by the week ended January 17 had reached 811,000 cars, a gain of 15 percent over the corresponding week of 1941. Last year carload- ings did not cross the 800,000 level until May, when the spring upturn in traffic was well under way. The Association of American Railroads last week placed an embargo on all traffic destined for inter-coastal steamship transportation, a move necessitated by Government action suspending normal inter- coastal shipping. Regraded Unclassified COMMODITY PRICES AND COST OF LIVING 1926-100 PER CENT PER CENT Monthly 100 100 96 96 92 92 88 88 Cost of Living, N.I.C.B. 84 84 80 80 76 76 889 Commodities, B.L.S. 72 1936 72 1937 1938 1939 1940 1941 1942 PER PER CENT Weekly CENT 104 104 100 100 96 96 889 Commodities, B.L.S: 92 92 88 88 84 84 80 80 76 76 72 72 68 68 28 Basic Commodities, B.L.S. 64 64 60 60 A 5 o N D J F M A M J J A 5 o N D J F M A M J J A 5 o N o 1940 1941 1942 234 Office of The Services el - - - el - - - Regraded Unclassifie Chart 1 Chart = 235 MOVEMENT OF BASIC COMMODITY PRICES AUGUST 1939-100 PER PER PER PER CENT Weekly Average CENT CENT Daily CENT 160 180 180 180 170 170 175 175 160 170 170 160 12 Foodetuffa 150 150 165 12 Foodstuffs 165 140 140 160 160 16 Row Industrial Moterials 130 155 130 155 16 Row Industrial 120 150 120 150 Materials 110 145 110 145 100 140 100 140 A 5 o N D F . is " 29 * is as 17 1 10 17 24 3. T 1 J A 5 o N D J F M A M J J NOV DEC. JAN FEB. 1940 1941 1942 1941 1942 Percentage Change for Individual Commodities. August 1940 Low to January 16. and to January 23, 1942 PER *Tallow 1774% PER 16 Raw Industrial Materials CENT 12 Foodstuffs CENT Cottonseed Onl 1598% -150 +150 Shallac 124/X Cocoa 125,7% +125 "Lard 1198X +125 Rosin 1120% Borley 1000% Cotton 1064X -100 Coffee 98.2% -100 Print Cloth 1291 Wheat 8622 Burlop 6543 "Mage BORX pHicles 590% +75 Flasseed 588% *75 Wool 50.0% lead 36.8% pZine 30.12 +50 Sugar 4332 -50 5/4 2/0% "Butter 321X Rubber 169% Corn 301% Copper MBC +25 Stears 250% -25 Steel Screp dom 87% *Tin 30% *Stee/ Scrap up 271 0 Jan 16 Jan 23 o Aug 1940 Jan Jan.23 aug 1940 Cow Low P-157-5-18 Chart 3 DEPARTMENT STORE SALES 236 1935 - '39 - 100, UNADJUSTED JAM. MAR. MAY JULY SEPT. NOV. PER PER CENT GENT Weekly 260 200 240 240 2.0 220 200 200 180 180 160 160 140 140 '41 120 120 '42 100 100 80 80 '40 60 où JULY SEPT. NOV. JAN. MAR. MAY the 4 le Secretary of the Travely C 390 Serve of - - Indo Regraded Unclassified FEDERAL RESERVE BOARD INDEX OF INDUSTRIAL PRODUCTION 1935-39=100 1939 1940 1941 1942 JFMAM J J A S o N D J F M A M J J A S o N D J F M A M J J A 5 C N D J F M A M J PERCENT PERCENT Seasonally Adjusted 165 165 160 160 155 155 150 150 (45 145 140 140 135 135 130 130 125 125 120 120 115 115 110 110 105 105 100 100 . 95 95 J F M A M J J A S o N D J F M A M J J A S o N D J. F M A M J J A S 0 N D J F M A M J 1939 1940 1941 1942 Selected Components 1940 and 1941 Compared with 1935-39 Average PER CENT Transportation Equipment 225 Machinery 200 from and Stee/ Nonferrous Metals 175 COMBINED INDEX Stone. Clay and Glass Textiles Meto/ Mining 150 Poper, etc. Chemicals Lumber, etc. -Fuels. monufactured 125 Manufactured Foods Printing and Publishing Crude Fuels Leather. etc. 100 75 1935-39 1940 1941 -100 237 Crurt 4 Dies if No Security of the - C-383-C-2 - é - - - Regraded Unclass FREIGHT CAR LOADINGS CARS THOUSANDS Total 900 42 800 41 '40 700 '39 600 500 Am. Ry. Aeen. 400 JAN. MAR. MAY JULY SEPT. NOV. 238 Office of the Secretary of the Tressury Division of Research and Statistics C-417 5 Regraded Unclassif TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE January 26, 1942 TO Secretary Morgenthau FROM Mr. Coe Eubject: The Control of U. 8. Currency outside of our Territory 1. AF you know, the British Government about & year after war WAR declared imposed an embargo on the import and export of pound sterling currency. Since then, pound sterling notes have exchangel abroad at black market retes involving heavy discounts (for example at present $2.00 to $3.00 per pound sterling in the United States). The question of whether the United States should adopt similar currency control measures 16 apperently rapidly coming to e head. 2. The Spanish Exchange Institute in December asked whether we would permit 81 ipment to the United States of American currency sequired by the Institute. The United States Ambassador in Madrid argues that it might be better to sllow this currency - supposedly innocently acquired -- to come to the United States then to risk it falling intr the hands of the Germans. In late December the Institute sharply dropped its buying rates for U. S. currency. The State Department in January informed our Ambessador in amarid that the question of currency control was heing discussed with the Treasury and that no arrangement oculi be made with Spain in the meantime. On January 22 the Exchange Institute in Spain informed our Ambassador that purchases of U. 3. currency would be discontinued within eight days. Brazilian Exchange authorities have urged the United Stews to adopt B currency control policy. 3. Monetary Research and Foreign Punis Control are examining various aspects of the problem of controlling dollar cur- rency now held outside of the United States, in anticipation of State Department requests for Treasury opinion on this matter. Among the elements of the problem may be mentioned the following: Regraded Unclassified 240 Division of Monetary - 2 - Research (a) Virtually a complete embargo on the export and import of our currency would prevent our enemies from getting the full value of their holdings of dollar currency when they sell them on neutral markets. (b) The principal difficulty of such an embargo lies in Latin America where many countries depend on dollar currency as an important or even major element in their monetary circulation, and in all of which the prestige of the dollar might be seriously affected if the negotiability of dollar currency 1s impaired. Also the armed forces frequently need to use sizable quantities of U. S. currency outside of the United States. (c) Actual use of dollar notes as an international cur- rency would, of course, be impossible if an embargo is put in force unless some special form of, say, Pan-American dollar could be devised for circulation in this hemisphere. The use of the dollar 8.8 an international money of account and its acceptability as a foreign exchange instrument should not be materially affected by a mere embargo on currency. 4. This memorandum is designed merely to bring you up to date on the status of the problem of currency embargo. Regraded Unclassified Treasury Department 241 Division of Monetary Research Date 3/3/12 19 To: Miss Chauncey From: Mrs. Tall For your files. Mr. White showed it to the Secretary at 5:15 pem. 1/26/42. Regraded Unclas Treasury Department Division of Monetary Research 242 Date January 26, 1942 19 To: Secretary Morgenthau From: Mr. Southard Attached 18 & file of incoming and outgoing cables relating to the Stabilization Fund Resolution intro- duced at 310. The State Department (Mr. Livesey) assures me that he has made 9. very cereful search of their cable files and that there are no cablee other than these which mention in any way the Stebilization Fund proposal. I have summarized these cables in chronological order for your convenience. Regraded Unclassified TREASURY DEPARTMENT 243 INTER-OFFICE COMMUNICATION DATE Jenuary 26, 1942 TO Secretary Morgenthau FROM Mr. Southard subject: Cables and telephone convernations from end to R1o relating to the Stabilization Fund Resolution I have been assured by Mr. Livesey in the State Department that no other cables than those listed below are in State Department files relating to the Stabilization Fund proposal: (1) Mr. White to you (No. 9, January 14, 1942). This cable contained substantially our original draft of the resolution (including the United Nations aspects) and asks for your approval and that of Berle, Ecolee and the President. (2) Mr. Welles to Messrs. Berle end Livesey. This cable requests Berle and Livesey to do what they can to expedite your reply to No. 9 above. (3) You to Mr. White (No. 9, January 15, 1942). This 1s your reply to incoming no. 9 above, stating that you do not want any resolution introduced at R1o because it will not be possible to have prior conversations with the United tions. (4) Mr. Welles to you (No. 19, January 17, 1942). This cable contains e briefer re-draft of the Stabilization Fund proposal but etill including reference to the United Nations. Mr. Welles aske your suproval, erguing that clearance with the British or other United Nations 18 unnecessary. (5) You to Mr. Welles (No. 24, January 17, 1942). You informed Kr. welles that you feel 11 essential to give Grest Britain and other United Nations B. chance to react to the proposition and possibly even to consult Congressional Committees end that therefore there should be no formal presentation at Rio. Regraded Unclassified 241 Division of Monetary - 2 - Research (6) You to Mr. White (by phone, January 17, 1942). I understand that you informed Mr. White that if the Resolution could be confined solely to the American Republica you would be willing to see it introduced. (7) Mr. Welles to you (No. 22, Jenuary 18, 1948). Mr. Welles forwarded to you the draft revised in accordance with your instructions BO as to eliminate all reference to the United Nations but explained that he hoped that the Conference would include representatives of other countries since there would be ample time to sound them out before the Conference meets. (8) You to Mr. Welles (No. 30, January 19, 1942). You approved the above draft provided the phrase "settlement of public and private international debts" is deleted from among the objectives of the proposed Stabiliza- tion Fund. (9) No. 53, January 26, 1942. This cable lists the resolutions thus far approved at R10, including No. 5 on the Stabilization Fund. It states that the resolution as introduced was in "substantially the same form cleared in Washington". 30 far as I can learn, the actual final text of the Stabilization Resolution 18 not available in Washington. Attachments Regraded Unclassified C o P Y 245 TRB GRAY Bio de Janeiro Dated January 14, 1942 Rec'd 10:35 p.m. Secretary of State, Washington. TRIPLE PRIORITY 9, January 14, 9 p.m., (SECTION TVO). "Resolution on the stabilization fund of the united end associated nations. Wheress, one. In the attainment of the economic objectives of the Atlantic Charter the more effective mobilization of foreign exchange resources is of indiscutable importance and such mobilization should be of assistance in the war of freedom and liberation which the united nations are conducting and for the defense of other free and sovereign nations associated with them: and Two. The united nations and other nations associated with them can cooperate in creating an organization to pro- mote stability in foreign exchange rates, encourage the international movement of productive cavital, fecilitate the reduction of artificial barriers to the free movement of goods, help correct the maldisrosition of gold, strengthen monetary eystems end facilitate the settlement of tublic and crivate international debts: Regraded Unclassified 246 -2- The third meeting of consultation of the Ministere of Foreign Affairs of the American Republics resolves: One. To recommend that the Governments of the American Republics participate with the Governments of the united nations in a special Conference of Ministers of Finance or their representatives, to be called for the purpose of considering the establishment of a stabilization fund of the united and associated nations: Two. To recommend that participation in the conference shall be open to all nations that subscribe to the objectives of the Atlantic Charter; Three. To recommend that the conference, in considering the establishment of such a fund, shall formulate the plan of organisation, powers and resources necessary to the proper functioning of the fund, shall determine the conditions requisite to participation in the fund, and shall propose principles to guide the fund in its operation; Four. To recommend that among the conditions requisite to participation in the fund there be included in the deliberations of the conference the following: cooperation in adopting harmonious policies looking toward the gradual adoption of free foreign exchanges with reasonable stability in foreign exchange rates, the removal of arbitrary and discriminatory restrictions on international trans- actions, and the maintenance of monetary policies that avoid serious inflation or deflation." (END OF MESSAGE). WELLES HTM Copy:bj:1-16-42 Regraded Unclassified 247 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embassy, Rio de Janeiro, Brazil DATE: January 14, 1942, 9 p.m. NO. : 9, Section One This message is in strict confidence from Mr. White for the Secretary of the Treasury. The wish was expressed by Mr. Welles to present a resolution, similar to the attached draft, on International stabilization, if you and anyone else you feel necessary approve the presentation of the resolution. It is my suggestion that if you desire the presenta- tion of the draft at this Conference you have Berle and perhaps Eccles approve it. Since there is some importance attached to this matter and the eventual calling of a conference of associated and united nations is implied, you may even want the draft or merely the idea approved by the President before you recommend it to be submitted here. The statement was made by Mr. Welles that the idea (was 1) of & stabilization fund for the period after the was has in general been approved by the President, but Welles did not indicate that the specific proposal was known to the President. The pertinent rules of the conference require unfortunately that resolutions must be submitted by Regraded Unclassified 248 -2- noon on January 16 (Friday). Since it was first necessary for me to discuss the idea in general terms with come of the financial representatives of the other American republice in order to ascertain the prospects of favourable reception at the present Conference I have not been able to send you this message sooner. For rather obvious reasons the general idea was enthusiastically received by those with whom I have discussed the matter. In view of the fact that the resolution only calls for participation in B. conference which would be called to consider the establishment of B. fund and in view of the very general terms in which the resolution is stated, the clear- ance of the phraseology of the draft should not take very long. It is of course possible that the President may consider some other time more appropriate for the initiation of the idea. That question has been discussed with Mr. Welles and be decided that it would be all right for the United States Government to submit it here if you approve the resolution. It is possible that you will feel that there is not time to clear the matter in B. way which would be satisfactory to you. If this is the case it is probably better that some other time be selected to advance a proposal for the establishment of a stabilization fund. In the opinion of Mr. Velles the submission of the resolution here would be very helpful but postponement is to be preferred to difficulties. A reply before Friday noon would be appreciated whatever your decision may be. Copy:bj:1c:1/15/42 WELLES Regraded Unclassified A 7. D. 219 PARAPHRASE OF TEINGRAM SENT TV: American Delegation, alo de Jansiro, Brazil DATE: January 15, 1942, 5 p.m. 10,1 9 Reference is made to telegram no. 9 sent by the Delegation at 9 on the 14th of Jenuary, 1942. This telegram la transmitting a massage from the Becretary of the Treasury to A. White. It is the feeling of the becretary or the Treasury that the suggestion of c Stabilization Fund of the United and Associated Nations should be discussed with others W.O belong to the United Nations W will 88 informally at Rio before you make 4 formal proposal. No arrangement of discussions within your deadline can be made here. Therefore, it is the feeling of the Secretary of the Treasury that a resolution for to Statilization Fund should not Du brought up at the Conference In Hie de Janeiro. MIL (PL) Regraded Unclassified PARAPHRASE OF TELEGRAY RECEIVED 250 FROM: ANDELGAT, H10 de Janeiro, Brasil, DATE: January 17, 1942, 10 n.m. NO.: 19. SECTION ONE. The following 10 confidential from Velles for the seretary of the Treasury. Reference 10 made to telegram No. 9. 5 p.m., dated the 15th of January, I appreciate fully that it 10 difficult to clear the resolution in a time no brief as van indicated in my earlier telegram. However, I have succeeded In having the deadline for the presentation of the resolution extended to Monday. Personally I de not feel that I clearance prior on this matter with the "ritish or any other Government 18 necessary. It would be most helpful, in view of developments at the conference, if the resolu- tion could be presented by the nited tates and I hope that you can find it possible to give your approval to it, Following 10 a redraft of the resolution on singler linest " (ALLER Regraded Unclassified 251 ALH Rio dE Janciro This telegram must bE paraphrased before bEing Dated January 17, 1942 communicated to anyone other than a Governmental Rec'd 10:15 name OF Ency (BR) Storetary of State, Washington. TRIPLE PRIORITY 19, January 17, 10 name (SECTION TWO) Resolution on the stabilization fund of the united and associated nations. WHEREAS: OnE. In the attainment of the Economic objectives of the Atlantic Charter a more Effective mobilization of foreign Exchange resources is of indisputable importance, and would bE of assistance in the struggle against oppression; Two. The nations which Are combined in a common effort to maintain their political and Economic independence can coopEratE in creating on organization to promote stability in foreign Exchange rates, Encourage the international movement of productive capital, facilitate the reduction of artificial and discriminatory barriers to the movement of goods, hElp correct the maldistribution of gold, strengthen montary systems, and facilitate the settlement of public and Regraded Unclassified 252 -2- #19, January 17, 10 c.em. (SECTION TWO) , from Rio de Janeiro public and private international debts and the main- tenance of monetary policies that avoid serious in- flation or deflation; Three. Participation by the American Republics in the common effort more Effectively to mobilize and USE their fortign Exchange resources would contribute to the realization of the Economic objectives SET forth at the first and sEcond meetings of the Ministers of Fortign Affairs of the American Republics at Panama and Habana. WELLES NPL Regraded Unclassified 253 KD Rio de Jansiro This telegram must be paraphrased before bring Dated January 17, 1942 communicated to anyone other than a Governmental Rec'd. 10:41 8. n. agency. (BR) Secretary of State, Washington. TRIPLE PRIORITY. 19, January 17, 10 E, I.le (SECTION THREE) The Third Meeting of Consultation of the Ministers of Foreign Affairs of the American Republics. RESOLVES: One. To recommend that the Governments of the united nations in a special conference of Ministers of Finance or their representatives to be called for the purpose of considering the establishment of a stabilization fund of the united and associated nations; Two. To recomend that participation in the conference shall bE open to all nations that sub- scribe to the objectives to the Atlantic Charter; Three. To recommend that the conference in considering the establishment of such a fund shall formulate the plan of organization, powers and resources 254 ⑉2⑉ #19, January 17, 10 a.m. (SECTION THREE), from Rio dE Jantiro. resources necessary to the proper functioning of the fund, and shall determine the conditions requisite to participation in the fund, and shall propost principles to guide the fund in its operation. (END OF MESSAGE). WELLES NPL C 0 255 P Y PARAPHRASE OF TELEGRAM SENT TO: American Delegation, Rio de Janeiro, Brazil DATE: January 17, 1942, 10 D.M. NO. : 24 This is a confidential message from Secretary Morgenthau for the Under Secretary of State Welles. Reference is made to telegrem no. 19 sent by the Delegation at 10 B.M. on the 17th of January, 1942. It is still my feeling that there should be no formal presentation at Bio of the idea of 5. stabilization fund. Since your telegram of the 15th of January, I have been considering the matter end more then ever before I believe this strongly. In order to sesure success, it may be desirable to discuss this question with the appropriate committees in Congress as well as to give Great Britain and other United Nations 9 chance to react to the proposition. HULL (AAB) Cory:bj:1-19-42 Regraded Unclassified 256 of TELEGRAX MACRIVED FROM: ANDELGAT, 110 de Janeiro, Trazil. DATE: January 18, 1947, 7 D.m. 10.1 2. EXCTION UNK. PROM THE UNDERSECNETARY or STATE CO THE OF THE TREASURY, in reply to the repartment's telegrae no, 84, Jenuary 17. 10 p.m. Amended 18 a new draft if the resolution which, 1 believe, any satisfactorily COVER the points mentioned in your unbles to me regarding the vorcing of the earlier draft. In this new draft you will note that no reference is we Go to nations other than the imerican agublics. here 10 nothing in the resolution committing the nited tates to - newting witch need necessarily include the Finance Vinisters of nations other than the American Republics although It 1ª to be haved that, when called, the recting referred to in the new craft would include representatives of other countries and sey be 40 interpreted by name, defore the calling of the conference there will of soures be munle time for rounding out other overnments and their partics attoc therein assured beforehand. I would sppreciate it if you could have your reply not any possible suggestions regarding further changes telephoned rather than cabled in view of the fact that Wonday noon R10 time (which 16 tvo hours earlier than inshington time) anuary 19 10 the absolute deadline. Forday morning hite oill stand by in his room at the Copeesbane valage to receive any telephone manages from (mokington. Regraded Unclassified 257 ID Rio de Jantiro This telegram must bE paraphrased before being Dated January 18, 1942 communicated to anyone other than a Governmental Rec'd. 10:50 P. n. agency. (BR) Secretary of State, Washington. TRIPLE PRIORITY 22, Jonuary 18, 7 P. n. (SECTION TWO) Resolution on the stabilization fund of the united and associated nations. Whereas One. A more Effective mobilization and utilization of foreign exchange resources would bE of assistance in the struggle against aggression and would contribute to the realization of the economic objectives SET forth at the first and second meetings of the Ministers of Foreign Affairs of the American Republics at Panama and Habana; and Two, The American Republics which are combined in a common effort to maintain their political and economic independence can cooperate in the creation of an organization to promote stability in foreign exchange rates, Encourage the international movement of productive capital, facilitate the reduction of artificial and discriminatory barriers to the movement of goods, Regraded Unclassified 258 -2- #22, January 18,7 p.m. (SECTION TW) from Rio de Jansiro, of goods, help correct the maldistribution of gold, strengthen monetary systems, and facilitate the settlement of public and private international debbs and the naintenanos of nonetary policies that avoid serious inflation and deflation: RESOLVES One. To recommend that the Governments of the American Republics participate in a special conference of Ministers of Finance or their representatives to bE called for the purpose of considering the Establish- ment of an international stabilization fund; Two. To recommend that the conference in con- sidering the establishment of such a fund shall formulate the plan of organization, powers and resources necessary to the proper functioning of the fund, and shall determine the conditions requisits to participation in the fund, and shall propose principles to guid the fund in its operation. (END OF MESSAGE) WELLES JRL D 259 T PARAPHRASE OF TELEGRAM SENT TO: American Delegation, 21e de Jametra DATE: Junuary 19, 1942, 2 p.m. NO. , 30 This wasege is 10 strict confidence from the Secretary of the Treasury for the Under Secretary of State. Reference Le sade to tolegram no. 22, sent by the Delegation at , 1. or the 18th of January, 1942. The new resolution with the tee shanges as follows le found untinfactory, is confirmation of a conversation on the telerhone with Mr. white: First. "Resolution on an international stabilization fund" is the very the title 10 to read. Tecond. "The settlement of public and private inter- national debts", a three in section 1v0, should be crossed out. It 10 hoped that the resolution will prove to be of assistance. The work of the Department of the Treasury makes " declrable that Mr. white come back to *Ashington as quickly -- possible and ant go os to Duesos stree, argestine. MULL (ARD) Regraded Unclassified PARAPHRASE OF TELEGRAM RECEIVED 260 FROM: American Delegation, R10 de Janeiro, Brasil. DATE: January 85, 1942, 2 p.m. NO.: 53. The consultative meeting, in addition to recommending the DeVerance of diplomatic relations with the Axis powers and which I have already reported, has already approv 1 A number of resolutions which embody practical and specific measures. The following resolutions are included: 1. Financial and commercial relations to be severed with Axis powers, (Terms practically the name as terms drafted in Washington). Although Argentina made R reservation applying the measures of control to all non-American terri- tories and Chile made a reservation of its sovereign rights they both supported the basie objectives of the resolution and the substance therein: 2. Strategic material production for supplying the continent's essential defense needs; 3. Frinciples and practices regarding priorities, allocations, and price controls entirely consistent with our own are approved; 4. Maritime and other communications supervision to be improved-- defense requirements emphasized. 5. A resolution concerning stabilization fund which is in practically the same form cleared in Washington, 5. Resolution supporting Inter-American Development Commission. 7. Resolution Regraded Unclassified -2- 261 7. Resolution which urges the Inter-American Bank's establishment at an eary date. 8. One resolution of major importance embodying all points previously agreed to in Washington on the control of subversive activities and other resolutions which are similar. (The resolution on subversive activi- ties 10 entirely satisfactory to Smith of Justice). 91 Japanese agression condemned in resolution and condemnation extended to the other Axis powers, The resolution which excludes Axis companies or Axis citizens from commercial and civil aviation has not been reported to the full committee, but the subcommittee has approved it. This applies also to the resolutions on the reorganization of the Inter-American Neutrality Com- mittee, post war problems, public health and red cross. The Telecommunications resolution has been approved in principle but the full committee has not yet been approved. At a session of the full committee togight (8 p.m.) it 18 probable that soproval will be given these latter resolutions. Please note that approval along the lines agreed upon prior to the delegation's departure have been given to many of the projects supported by the U.S. and that so far as the schedule here has permitted the remaining ones have progressed favorably. ELLES Regraded Unclassified DEPARTMENT OF STATE 262 FINANCIAL DIVISION January 26, 1942 State Department Telegrams to and from American Delegation at Rio Touching on Stabilization Fund Delegation's 9, January 14, 9 v.m. For the Treasury from White. Delegation's 10, January 14, FOR BERIE AND LIVESEY requesting endeavor to expedite reply from Secretary of the Treasury to Delegation's 9. Department's 3, January 15, 5 p.m. From Berle and Livesey reporting that Secretary of the Treasury is away but Treasury is endervoring to reach him. Department's 9, January 15, 5 p.m. For White from the Treasury. Delegation's 19, January 17, 10 E.M. From Welles for the Secretary of the Treasury. Department's 24, January 17, 10 3.4. For Welles from Secretary Lorgenthau. Delegation's 22, January 18, 7 For Secretary Morgenthau from Welles. Department's 30, January 19, 2 p.m. For elles from the Secretary of the Treasury. Delegation's 53, January 25, 2 p.m.-- E summary of resolutions already approved including item (five) & resolution concerning stabilization fund which is in practically the same form cleared in Washington. FD:FL:BMcB H Regraded Unclassified 263 Notes F. Dictrich MEV Rio de Jantiro This telegram must bE paraphrased before being Dated January 26, 1942 communicated to anyone other than a Governmental Rec'd 8:12 a.m. agency. (BR) Secretary of State, Washington. 56, January 26, 10 a.m. FOR THE SECRETARY OF THE TREASURY FROM WHITE Plans changed. Leaving Rio Saturday arriving Washington about Wednesday. WELLES WWC Regraded Unclassified 264 Jamary 26, 1942 Mr. Livery Mr. Southard Please send as urgent the following cable from Secretary Morgenthau to Mr. Harry D. White, in Rio. "Return to Washington as soon as possible." 7AS/efu 1/26/42 Regraded Unclassified 265 TELEGRAV SENT HRL GRAY January 26, 1942 11 p.m. ANDELGAT, RIO DE JANEIRO, (ERAZIL). URGENT 82 FROM SECRETARY MORGENTHAU TO MR. HARRY D. WHITE. QUOTE. Return to Washington RS scon PB possible. END QUOTE. HULL (FL) FD:FL:ME Regraded Unclassified 266 January se, 1962. Ky dear Mr. Secretary: I have year letter of January 23rd, which tells of the fortheening visit of the Brasilian Minister of Finance, Dr. Arthur de Began Conta, to this country. I shall be very glad to ... the Minister when he reacher here, and to divense matters of estual interest during the course of his stay is Vachington. Sincerely, (Signed) 1. Mergesthas, Jr. Nemerable Cordell Ball, Decretory of State, Vashington, D. 0. File nmc By strugs lar & 29-W hills yfire caps of many - GEF/dbe Regraded Unclassified 1 OFFICIAL COMMISSIONS - THE SECRETARY OF STATE - a c. 267 DEPARTMENT OF STATE WASHINGTON January 23. 1942 In reply refer to RA 033.3211/307 My dear Mr. Secretary: Ambassador Ceffery at R1o de Janeiro has reported confidentially that the Brazilian Minister of Finance, Dr. Arthur de Souze Costa, will probably be coming to Washington et an early date to discuss matters of general interest to his Department with the authorities of this Government. He will probably bring a letter from President Vargas to President Roosevelt. You will, of course, remember him from his visit to the United States in 1937. Sincerely yours, Grieshee The Honorable FORDEFENSE Henry Morgenthau, Jr., BUY Secretary of the Treasury. UNITED STATES SAVINGS BONDS Regraded Unclassified 268 BRITISH EMBASST, SAFE HAND WASHINGTON, I.C. R.T. 1031/AA/13/42 26th January, 1942 Dear 2, Dietrich, With reference to the decree published by the Govern- ment of Costa Rica under which German, Italian and Japanese subjects are compelled to file with the Co-Ordination Bureau EN sworn declaration of all their aggets, earnings, etc., our Charge d'Affaires in San Jose has been informed by the Minister of Finance that once the information demanded under this decree is in his possession, he will be In A better position to appraise Axis commercial and industrial interesta with a view to tightening his control over them. A month prior to the declaration of war by Costa Rice, enemy firms withdrew 1-1/2 million colones from the local banks and it is expected that the decree will reveal the whereabouts of this money. The Minister also stated that in the three local banks there were deposits on account of askinarks estimated at about one million colones and that be WRE considering taking appropriate steps for the acquisition of this sur for the benefit of the State. Yours sincerely, (34) 1. V. PALI L. Prank Dietrich, U.S. Treasury Department, Stabilization Office, Room 279, Toghington, D.C. EVP:OSE Copy:ec:1-27-42 Regraded Unclassified 269 (FT HILLS) Wk MANILA This telegram met bE paraphrased before being Dated January 26, 1942 communicated to anyone other than a Governmental Rec'd 1:13 a.m. agency. (BR) Stepetary of State Washington, 30, January 26, 10 a.m. For THE TREASURY DEPART .ent. 15 In addition to 10,205,151.13 concelled United States Treasury chEcks pare and held by the Treasurer of the Philippine Government mentioned in TAX telegram DECEMBER 28, I have accepted three boxes said to con- tain 7000 such checks sent here by Philippins Treasury without maile subsequent to BK/ departure from Manila. Audit by men under the command of W. À. Enos, Finance Department, United States Army nhows that the total is 327,496,596.86. This auditing has bein approved as satisfactory by the commonwealth. Lists slowing details regarding each cheoque will be mailtd as circumstanced permit. I recommend that total of $37,701,747.09 bE credited imadiately with subsiquent adjustments 12 nscessary When the lists use received. ECR SAYRE HT; Regraded Unclassified Treasury Department Division of Monetary Research 270 Date February 3, 142 TO: Secretary Morgenthau From: Mr. White You may be interested in the attached cable which refers to a loan of 300,000.000 rubles by the Russian Government to the Polish Government for the maintenance of the Polish army in Russia. It also mentions a similar agreement with the Czechoslovak Govern- mant. MR. WHITE Branch 2058 - 2141 Regraded Unclassified C D 271 P Y TRB GRAY (Mossow) Kuibyshev Dated January 26, 1942 Rec'd 6:19 D.M. Secretary of State, Washington. 73, January 26, noon. Embasey's 8, January 4. The local press of January 25 revorts the signature in Kulbyshev on January 22 of en agreement between the Soviet and Polish Governments in accordance with which the former extends to the latter 2 further loen of 300 million rubles, to be used for the maintenance on Soviet territory of the Folish eng. The press also reports the signing on the same date of of similar agreement between the Soviet and Crechoslovak Governments whereby 2 loan, uns ecified as to amount, is extended by the Soviet Government to the Crechoslovak Government for the mrintenance in the Soviet Union of Crechosloval: bricade. THURSTOX HEF Copy:bj:3-2-42 Regraded Unclassified 372 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE Jenuary 26. 1942 1 TO Secretary Morgenthau FROM Mr. Dietrich CONFIDENTIAL Partstared sterling transactions of the reporting banks were es follows: Sold to commercial concerns £103,000 Purchased from commercial concerns R 47,000 Open market sterling remained at 4,03-3/4, and there were no reported trans- actions. The Canadian dollar discount widened to 12% by noontime, returning to 11-3/45 during the afternoon. Yesteriay's final quotation was 11-5/85. The Post Office, which vas a buyer late last week, reportedly appeared in the market this afternoon and purchased 100,000 Canadian dollars. The Venezuelan bollver, which has been quoted at .2675 for several days, advanced to .2700 today. In New York, closing quotations for the foreign currencies listed below were ne follows: Argentine peso (free) 2362 Brazilian milreis (free) .0516 Colombian peso -5775 Mexican peso .2065 Uruguayan Deso (free) .5250 Cuban Deso Par There were no gold transactions consummated by us today. The State Department forwaried cables to us reporting the following shipment= of gold: 50,000 from Chile, shipped by the Central Bank of Chile to the Federal Reserve Bank of New York, disposition unknown 350,000 from England, shipped by the Vestminster Bank, London, to the Chase National Bank, New York, for sale to the liev York Assay Office $19,000 Total In London, spot and forward silver remained at 23-1/2d and 23-9/16d respectively rouivalent to 42.67# and 42.78$. Regraded Unclassified 273 -2- The Treasury's purchase price for foreign silver vas unchanged at 35#. Handy and Harman's settlement price for foreign silver was also unchanged at 35-1/8#. We made no purchases of silver today. confidential D Regraded Unclassified 274 BRITISH EMBASSY, WASHINGTON, D.C. January 26th, 1942 PERSONAL AND SECRET Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Halifax The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. Regraded Unclassified Copy No. BRITISH HOST SECRET (U.S. SECRET) OPTEL No. 30 Information received up to 7 a.m., 25th Junuary, 19/2. 1. NAVAL One of H.M. submarines torpedoed and sank an Itallan salvage vegenl off TUNISIA. 22nd. Two naval auxiliaries which more attacked by onemy airdreft off THTH SUMATRA shot dewn a four-engined aircraft, Between 19th and 24th following ships reported vunk or damaged by enemy submerines: A. Off U.S. Atlantic Const and in NENPOUNDLAND area, five ships totalling about 28,000 tons. B. Dff BURMA, A anll Panamanian ship and another unknown vessel, C. 340 ailes S.S.E. of HALIFAX, one medium sized British ship D, 300 miles West of CAPE ST. VINCENT, one medium sized Spanish ship. 2. MILITARY LIBYA. 22nd and 23rd, The enemy seized the opportunity to pumb along the AGHETTA to JEDABYA Road, which was lightly held and reached JEDABYA on the afternoon of the 22nd, and then moyed a column of about 30 tanks and 400 147. through ANTELAT towards SAUNNU. A second column of about 150 N.T. including AI- coured vehicles and guns followed up as far ae ANTELAT where it 50028 to have I'm mained, Air reported several hundred M.T. moving North-East on track JEDABYA to ANTEIAT on morning 23rd, Our arnoured and other forces were in touch with the ecomy throughout the 23rd and at least three engagements took place in the ANTELAT- CAUNNI Area where enemy tanks and artillery wore brought to battle by our columns, The situation ia still confused and no decisive results have been reported, Large number of fires seen amongst enemy H.T. on track JEDABYA - ANTELAT, FAR FAST. No further news of operations in BURAM or MAIAYA, NEW BRITAIN and NEW IRELAND. 24th, No communiontion with Australian military foroes at RABAUL and KAVIENG, Three enemy aircraft claimed brought down at each place between 21et and 22nd, RUSSD. North-Tiest of RESET the 67 Curther prior CTARS wortwards, Regraded Unclassified 376 - 2 - 3, AIR OPERATIONS TESTERN FRONT. Nothing of interest. MEDITERRANEAN. 23rd and 23/24. Our bombers including Naval aircraft attacked at intervals a southbound Italian convoy consisting of four large merchant vessels escorted by one battleship, three cruisers and sixteen destroyers which was first sighted 170 miles North=East of MISURATA. Reports are not yet definite but a merchant vessel of about 20,000 tons was torpedoed and stopped, a destroyer was torpedoed, & cruiser was hit with bombs and near misses with bombs were scored on the battleship and two merchant vessels, Two of our aircraft are missing. 25th, Six Swordfish again attacked this large vessel at 1,30 a.m. and claimed hits with two torpedoes, this confirmed by screening Blenheim, Later each sighted convoy approaching TRIPOLI (L) but no trace of the large ship. HALTA. 23rd/24th and 24th, A total of 82 aircraft attacked. Two or our Aircraft were destroyed on the ground and seven damaged. HAL FAR aerodrome was cratered. Our fighters probably destroyed one enemy aircraft and damaged four, BURMA. 24th. Seven enemy bombers, escorted by 55 fighters at= tacked two aerodromes near RANGOON. 17 of our fighters including two Hurricanes shot down all the bombers and six fighters, probably destroyed two fighters and damaged nine. All our aircraft returned safely. HALAYA. 23rd. 30 enemy aircraft attacked SINGAPORE ISLAND. Three of our sircraft were destroyed on the ground. Hurricanes shot down one enemy bomber and probably destroyed another. Regraded Unclassified 277 BRITISH EMBASSY, WASHINGTON, D.C. January 26th, 1942. Personal and Secret. Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Halifax The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. Regraded Unclassified 278 13 MOST SECRET (U.S. SECRET). STEL No. 29. Information received up to 7 A.M. 24th January. 1942. in SAVAL. Aircraft reconnaissance en 23rd showed the TIRPITZ at Trendheim. à small Norwegian vessel was torpedoed off Christmas Island on the 20th and has been abandoned. On 21st 6. medium sized Greek vessel was sunt by nine off Singapore. 2. MILITARY, Libya. By the evening of the 22nd enomy columns, estimated total strength about 8,000 mon and 90 tanks, were advancing North and North East from Jedabya. Our troops have taken up positions South East, East and North if the town. Malaya. Situation 4.30 P.M. 23rd. Right. No change. Dersing area still held. Centre. Cur forces were withdrawn South x Labis, where they were in contact with enemy including tanks, Left. Our forces the MAIS out, off have not yet. been able to extricate therselves. Pressure in the Fatu Pahat Area las increased. The Japaneze nuerda livision has been inentified = the That Front. About 400 Australians and many Initian troors returned from Poss Torce after very bitter fighting, Purma, Démolition of Mergui Aprodrance has been completed and ONE citimrawal continuos. More army personnel from Tayoy have arráved st Ye. East if Indrain our forces are withdrawing but are not being pressed. Russia. The Dussion converging payment terrarás 1A making progress both from the North and from the South East. AIR OFERATIONS, Destern Frent. 22nd. 1,000 ton enemy shit was Nt bign Hudron. 27rd/23rd. Thinster. 65 the Gove weather conditious. Large fires - started in the toin and bembs straduled the milling stition. 4 R.A.A.P. aircraft participated. Libya, 22nd. A Squadren of Blenheims inflicted leavy damage --- 1,00 scobers, accorted by fighters, destroying 3 enery aircraft and damagine 1. classly parked U.T. South East. <1 Asheila. Kittyhawks ingreed 3. dive :- littyharks are missing. 22nd/23rd. bellington dreved over 12 time bonds 60 Triptic (C) Narber. A naval vessel and ti probable A.&. whit 16th htt. Xita. exasing slight damage :- thing in the berter in - Walfar aerodrene. in 2251/23rd and 23rd. à nisl of B3 and aircraft strached aircraft very warre by the 11/11/25. Regraded Unclassified 279 - 2 - Burma. 23rd. Our bombers attacked a concentration of lorries near Mesod. Enemy aircraft attempting to attack an aerodrome near Rangoon were intercepted by Tomahawks of the American Volunteer Group and Buffaloes, 9 enemy fighters and 3 bombers were destroyed and 8 further 12 enemy aircraft were probably destroyed. Several more were damaged. The other bombers jettisoned their homber. %: lost = Nighters. Malaya. Singapore. 21st. Civilian air raid casualties reported 304 killed and 625 hospital cases. 22nd. Kluang aerodrome was raided but no damage caused. Pacific Zone. 20th. More than 100 Japanese bombers and fighters attacked Rabaul (New Britain) 21st. 60 aircraft attacked Kswiong (New Ireland) and 50 attacked Salamoa (New Guinea) and other objectives in that area. The arrival at Ferrol on 12th of an Ax's ship with a valuable 4. cargo from Japan probably represents a first attempt to tring urgently needed raw materials from the Far East to Germany. Regraded Unclassified TREASURY DEPARTMENT 280 INTER OFFICE COMMUNICATION DATE January 26,1942 TO Secretary Morgenthau Mr. Kemarek FROM Subject: Summary: D.C.I. Report, Interview with former American directors of General Motore' Onel plant in Germany. 1. Production The Germans have an acute rubber scarcity. Since 1938, the army has urged Opel to achieve B. production rate of 100 three-ton trucks per day. The capacity of the plant WAS large enough, but since it WAS never supplied sufficient tires and batteries, it could not produce more than around 80 B. day. Lack of natural rubber cannot be completely off- set by the use of the "Buna" synthetic rubber. Tires mede from "Buns" require 8 30 percent mixture of natural rubber. This 18 because "Buna" does not stick to the tire fabric. Tires are made 80 that 100 percent natural rubber 1g next to the fabric, whereas the treads are 100 percent "Bune". German lubricating oils are of good quality for ordi- nary use. However, they contain A high percentage of tar, shich gives very unsatisfactory results under extremely low temperatures. (Probably this 18 one of the German handi- caps on the Russian front.) Since August, 1939, no passenger care have been uro- duced. The passenger car plant was converted into making parte for bombers. Conversion began in August, 1939 and THE completed ten months later in June, 19/0- 2. Labor The Nazl Party has A complete organization for spread- ing propagands in the plants. The great majority of the workers show very little enthusissm for Nazi propegande. Initiative in this type of activity 1° entirely lecking on the Dart of the workers. The men sho* absolutely no anon- taneous push to schieve greater production. Regraded Unclassified 281 - 2 - In 1939, rather serious labor trouble was experienced in the German coal mines. It is understood that since then, the situation in the mines has never been entirely satisfactory. 3. General Bootlegging of food exists to some extent. In any case, the wealthy are able to fill in their diet with expensive, unrestricted foods, such as game, lobster, caviar, etc. This 1s not flagrant enough to have evoked any bad feeling. The widespread notion that the average German is B stolid, squareheaded individual with a one-track mind, is wrong. In reality, he is very impressionable and very changeable. For this reason, the Nazi propaganda machine has to work in high gear all the time. The deepest 1m- pression the Germane have received is that if they lose the war, they will experience indescribable chaos and suffering. Regraded Unclassified 282 COORDINATOR OF INFORMATION WASHINGTON, D.C. January 20, 1042 CONF IDENTIAL COORDINATOR OF INFORMATION The Monorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: T am enclosing herewith a memo- randum, "Interview with Former American Directors of the Opel werke, Germany", which I hone may be of service to you. Sincerely yours, Bax ta. James P. Parter, sa Deputy Coordinator Enclosure Regraded Unclassified 283 CONFIDENTIAL NOTE: The following facts will facilitate interpretation of some of the information supplied in Mr. Copelin's memo- randum of January 9, 1942. Before the war (BE now), Opel's entire production of trucks was concentrated at the Brandenburg plant. Opel's entire output of passenger cars (110,000 units annually) was produced at the Ruesselsheim plant, where about 17,000 workers were employed on this activity. It 18 these men that were laid off when passenger car production was stopped in August, 1939. The passenger car facilities and workers were subse- quently converted to the production of the air craft parts referred to on page 3 of Mr. Copelin's report. In addition, the plant at R manufactures parts for the trucks made at B, 86 it did before the war. Regraded Unclassified 284 CONFIDENTIAL Jenuary 9, 1942 Coordinator of Information Washington, D. C. Subject: Interview with former American Directors if the Opel Werke, Germany. Dear Sir: Reference is had to conversation with Mr. Chandlor Morse of your Office and to a letter of December 22, 1941 from Mr. Emile Despres regarding a proposed interview with Messrs. Osborne and Hoglund of General Motors Corporation. The undersigned spent 8 number of hours with Mr. (sborne on January 2, 1942. Mr. Hoglund and Mr. R. K. Evans. Vice President of General Motors Corporation, another former General Manager of the Opel Company, were asked from time to time to check information on which Mr. Osborne was not quite sure of his memory. The questionnaire attached to Mr. Despres' letter was used as a guide during the interview in order to cover as much of the ground, in which you are particularly interested, BS possible. This report of the interview will therefore follow very closely the questionnaire, Production 1. Current passenger car production at the Opel Plant 16 zero. It 18 estimated that approximately BO three-ton Biltz trucks are being produced daily at the Opel Plant at Branden- burg near Berlin. Monthly production is estimated at 2,000 units. These are all the military adaption of the standard Blitz Commercial Truck, approximate specifications being 166" wheelbase, 4x2 drive. wood cargo body with troop scate, 85 H.P., six cylinder gasoline engine. This truck is the Germen equivalent of the Ford and Chevrolet 1-1/2 ton truck in the U.S.A. The Brandenburg Plant has also been tooled to produce a four-wheel drive three-ton model for use BE a cross-country troop and cargo carrier. Production was to start on this Job in June, 1941. It is believed that possibly 250 per month of this model are currently being built. 1 Regraded Unclassified 285 CONFIDENTIAL Interview. Directors Upel Worke January 9, 1942 The complete manufacture of the above trucks 18 carried out at Brandenburg except for sheet metal, rear axle gears. and brake cylinders which are manufactured in the meln Opel Plant At Rucsselsheim-am-Main. The above production figures compare with pre-war produc- tion as follows: Passenger car production 10,000 units per month equals 110,000 per year, allowing for inventory time. Truck production, 1,750 per month equale 20,000 per year. Since the Munich meeting of September, 1938 all Opel truck pro- duction has been exclusively for the German Army except for small allotments for export. All spare parts for Opel passenger cars and Blitz trucks except ourrent production modele are produced in the Ruessel- sheim factory. According to latest reports this production 18 being maintained at approximately the pre-war rate which amount- ed to around 3,000,000 Reichsmarke monthly. This spare parts production requires the labor of 5,000 workment In connection with 01 el Blits truck production at Brenden- burg. 11 is interesting to note that since 1938 the Army procure- ment services have urged Opel to attain a production rate of 100 3-ton, 4x2 trucks per day. The fectory 18 canable of meeting this rate but has never been able to obtain sufficient tires and bat- teries through the allocating authorities to turn out the produc- tion which the Army desires. 2. The principal non-automotive Items manufactured in the Opel Plant at Ruesselsheim are the following: Reduction gears for reducing the propeller speed for the Mercedes Liquid Cooled Craft Engine. (It 18 understood that the U. 5. Air Corps 16 familiar with this engine and the reduction gear box. Semples are available at the Allison Motore Plent.) A separate plant was established at Ruesselsheim for the produc- tion of these reduction gears. Production started suproximately July, 1939. The plant now employes 250 to 300 men per shift. It 18 understood to be working on two 12-hour shifts. It is estimated that production 18 250 to 300 sete of gears per month, department in Detroit, where similar gears are being produced although in checking this figure with the Cadillec production for Allison, it would seem that production should be much higher, of probably 450 sets per month. Mr. Osborne's guess at output to the Mercedes engine is that they are manufacturing 1,000 1,200 enginee per month. 2 - Regraded Unclassified 286 CONFIDENTIAL Interview, Directors Orel Werke January 9, 1942 In connection with the above activity there 1 € of pose- ible interest the fact that the German Government asked the Opel Company to Turnish laboretory froilities for a University Profes- sor who WAE considered the top gear men in Germany, These facil- ities were provided but the professor had a skiing accident in which he badly frectured both lege and WAB inceracitated for over 8 year, EO Mr. O:borne's opinion 18 that little research nae been carried out. The production of the sircraft reduction gears wee carried on concurrently with production of passenger cars end trucks at the Opel Flents. Coincident with the opening of the campaign in Poland in August, 1939 passenger car production wae immediately stopped and 17,000 workers were laid off rending conversion of the Ruesselsheim Plant for the production of: B. Wiring hernessee b. Wing assemblies C. Tail surfaces d. Hydraulic landing geare e. Gasoline tenks all for the Junkers Model UB8 bombers. All of the 17,000 workers laid off had been resbsorbed by June, 1940. It is estimated that 100 units per month of the above assemblies were being turned out at thet time. The Opel Plant also has under consideration B pro- ject for the manufacture of Ordnance fuees but it 18 not known whether production has been started. 3. Mr. Osborne wes not prepared to hezard gueeses as to the output of the above items by other eutomotive plants except as regards total truck production which will be found in 8 later paragrerh. 4, Messre. Osborne and Hoglund estimate totel automotive registrations in Germany 85 of August, 1939 at 2,000,000 passen- ger cars, Of these a very small number were actually owned by the Army which in time of war expected to end effectively did requisi- tion privately owned cars for their use. Of these 2,000,000 passenger cars, it 1e estimated that 45% were in the smallest class with a cylinder displacement up to one liter. These are almost completely useless for military purposes. It 18 estimated that 30% were In the 1,5 liter class of which 1/2 might be con- sidered of some military vplue. Twenty per cent are believed to have been in the 2 to 2.5 liter class; in terms of body epace and performence, theee would sprrosch the American Ford and The Chevrolet. These were the most popular size with the Germen Army. remaining 5% are in the over 2.5 liter category end were used only ae Staff cars for the higher officers, etc. - 3 - Regraded Unclassified 287 CONFIDENTIAL Interview, Directors Orel Werke January 9, 1942 Messre. Osborne and Hoglund would not hazard a guess 88 to quantities of light trucks in Germany. Many of these were of the three-wheel variety and even the four-wheel delivery van typee were too light in construction to be of any militery value. They estimate total ownership of trucks three-ton this German rating corresponde to the American Ford, Chevrolet class) and over at 300,000 units as of August, 1939. Of these approx- imately 70,000 were owned by the Army. This figure is based on Opel Blitz sales to the Germen Army which were approximately 9,000 units per year for the four years preceding hostilities end represented 50% of Army purchases of trensport vehicles. Based on Germen industry figures, 3% of truck production was of the heavy duty type of 5 tone and over. These include the big diesel tractor-trailer combinations which were a femilier sight on the German roads and have since been an important link in the Germen Military supply system. It 18 estimated that there are a total of 20,000 of these tractor units. These Jobe are capable of carrying 8 to 10 tons on the tractor chaesis and at the time tow a load of 10 to 20 tone. The principal manufacturers of these diesel units were Mercedes, Henschel, M.A.N., and Krupp. According to Mr. Osborne, the Germen Army also used consider- able quantities of 6x6 (aix wheel, six wheel drive) heavy artillery tractors and "half-track" medium artillery tractors. He would not hazard 8 guess 86 to the quantities of these vehicles in the German Army. It 16 known, however, that both of these types have been very unestisfactory in service. As an illustration of this Mr. Osborne cited the invasion of Austria, where 80 many of these special V ehicles feiled between the German border end Vienna that a great mejority of the commercial trucks in Bavarie had to be requisitioned overnight and were sent into Austria to salvage the equipment which hed failed. On his way back to Berlin, Hitler paid a personal visit to the Opel Plant and personslly signed an order for 2,000 trucks BE a compliment to the Opel Works for the high performence of the commercial vehicles which had gotten the Army out of a bad spot. Messrs. Osborne, Hoglund, and Evans concurred that the max- 1mum output of trucks three ton and up in Germany ie 60,000 to 70,000 units year. Their estimate of peak annual pre-war car per production 18 243,000 units, This figure 18 based passenger on Opel's allocated share of total German industry output ae followe: Regraded Unclassified 288 CONFIDENTIAL Interview, Directors Opel Werke January 9, 1942 Opel production for German market 80,000 = 40% of total Total Germen market 200,000 Opel production for Export 30,000 Il 70% of total Total Export 43,000 Total German production 243,000 Since returning to the U.S.A., B year ago, the writer hae heard considerable discussion of the Stenderdization Program imposed on the German automotive industry by the government. This program does exist but the results effected up to August, 1939 were far less then is generally believed in this country. Like all matters affecting the German automotive industry the Standardization Program wes controlled by General Von Schell of the Verkersministerium (Transport Ministry) in conjunction with the Automobilwirtehaftsgrupre (Industry Council) composed of re- presentatives of the manufacturers. Much valuable work was accomplished in reducing the variety of componente end accessories; for instance in 1936 there were 31 types of engine oil pumps used on German care, whereas in 1939 there were only 5 or 6 standard types. However, the Germans were still far behind the U. S. Bureau of Standards and the S.A.E. in this connection. In BO fer 88 the standardization of vehicle types 18 con- cerned, the first year in which this was to be effective was 1940 but sctually nothing wes done because of the war and the conver- sion of automotive plents to strictly militery production. Although General Von Schell's powers on standardization were dictatorial, the approsch up to August, 1939 was very gradual and persuasive rather than by mendatory decree. For instance, General Von Schell ruled in 1937 that truck users would be allowed 8 reduction in the annual tax if they purchased vehicles conforming to certain basic specifications desired by by the Military Authorities. These specifications concerned loading height, angles of approach and departure, engine power, etc. In spite of the competitive advantages of building vehicles to meet these specifications, Messrs. Osborne end Hoglund point out that the three-ton Opel Blitz truck WeB the only vehicle built to take advantage of the reduced user's tex. Normally the annuel tax on a truck of this size would be 300 Reichsmarke, which W&B reduced to 170 Reichsmarks. 5. The information regarding airplane production, supplied - 5 - Regraded Unclassified 289 CONFIDENTIAL Interview, Directors Opel Werke January 9, 1942 by Mr. Osborne, 18 based on 8 confidential statement mede to him in June, 1940 by Dr. Hans Streck, Legationsret, of the German Foreign Office whom he believes to be in B. position to have auth- entic data. Dr. Streck's estimate of production at that time W8B 2,500 to 3,000 units per month of all types. The estimated 9V811- able planes WBB 50,000 to 70,000 unite, again of all types. The Opel directors were not normally in a position to have information on the output of Ordnance items (in Nezi Germany it WAS more comfortable not to know certain things) but Mr. Osborne cited several examplee to indicate the plentiful availability of anti-aircraft guns. One exemple WAE the protection of the Opel Plant for which he estimates that 300 to 400 gune were placed in the Ruesselsheim Weisbeden district. The emallest of these were 37 mm's with a certain proportion of larger guns up to 90 mm's. Mr. Oaborne 18 unfamiliar with the situation regarding eub- marines. He pointed out that in view of the difficulty of obtain- ing betteries for military trucks, there must be a very tight situation on the lead required for submerine batteries. With regard to petroleum inventory and output, Mr. Osborne cited 8 figure of 8,000,000 tone 88 being Germany's normal peace- time consumption. He understande that they planned a war-time consumption of 18,000,000 tone and that the production of synthetic petroleum products WBB 12,000,000 tone in 1940. Of course, B. strict rationing of petroleum products has been in effect in Germany since before the wer. However, it 1e interesting to note that according to Mr. Osborne the supply of diesel fuel hAE been more restricted than the supply of gasoline. It appears that all crude oils are not equally suitable for the quentitative production of diesel fuel end that the crude from Russion sources 1a consid- erably more satisfectory for diesel oil production than Roumanien crude. With regard to lubriceting oils the supply of these German FEET to be sufficient and the quality satisfactory under normal operating conditions. However, according to Mr. Osborne, these lubricante contain 8 high percentage of ter which gives very I unsatisfactory discussed with Mr. Osborne in some detail the apparent winter failure results under extremely low temperatures. of German It was distinctly his opinion that this WAS but not almost due Motor Transport on the Russian front under conditions. design or construction of the vehicles for extreme to entirely any fault to the of unsvailability of suitable lubricents low temperature operation. 6 Regraded Unclassified 290 CONFIDENTIAL Interview, Directors Onel Werke January 9, 1942 With regard to synthetic rubber products, Mr. Osborne could not recall offhand much of the data on this industry. He stated that shortly before the war he had prepared e complete report on the subject for General Motors and would attempt to find e copy of it which he would be happy to submit to Colonel Donovan. Generally speaking on this subject Mr. Osborne pointed out that the greatest difficulty in manufecturing tiree from synthetic rubber has been caused by the fact that eynthetic "Bune" rubber will not stick to the tire fabric. It 18 therefore necessary to immix approx- imately 30% natural rubber with the synthetic product. This is done in such 8 way that the part of the tire tread in contect with the fabric cesing is 100% natural rubber whereas the outer surface of the tire 16 100% eynthetic rubber. Apparently there has been great difficulty in securing the quantity of naturel rubber required to fully utilize the Germen synthetic rubber capacity. Mr. Osborne WeB given to understand by representatives of the Germen tire manufacturers that the "Buna" rubber program was two years behind schedule in 1940. The two principal producing plants for "Buna" will be found listed at the end of this report in the list of critical plants. Steel ingot production in the Reich 16 estimated by Mr. Osborne at 18,000,000 tone per year. Steel has been rationed to the automotive industry in Germany since 1937. The ellocations for domestic passenger car production were constantly decreased until they were entirely discontinued in August, 1939. Mr. Osborne believes that the production of steel in Germany 18 being carried on at full capacity. Prior to the war, Germany absorbed approximately 30% of the Swedish iron ore output. With 100% of this ore now available to Germany, there is no reason to believe there mey be 8 shortage of rew materials. As regards other metals, Mr. Osborne pointed out that suparently there wae no shortage of aluminum, magnesium, and mangenese. All of these metals are of course on en allocation basis but, for example, there hae been no pressure from authorities to substitute other metals for sluminum pistons in German cars and trucks. On the contrary, many automotive parts, such a8 wiring harnessee, coile, etc., which were formerly made of coprer are now being manufsc- tured of eluminum. Chromium, nickel, tin, and lead have all been under very strict allocation for a number of years and are very difficult to obtain with every effort being made to find substitute material. It 1E believed that the sup ly of coal from German and occu- pied French, Belgian, Czechoelovek, and Austrian mines is adequate although Germany has had to assure the supply of the Scandinavian countries, Itely, and Switzerland which were formerly supplied largely from England. There has been, every winter since the war, - 7 - Regraded Unclassified 291 CONFIDENTIAL Interview, Directors Onel Werke January 9, 1942 an acute shortage of coal for domestic heating but it 1e believed that this 16 caused by e lack of transportation facilities rether than by e lack of coal at the mines, In 1939 rether serious labor trouble wee experienced in the German coal mines end it is understood that this situation has never been satisfectory since Labor Supply 1. The complete Opel labor records are evailable in General Motore New York Offices. Mr. Oeborne has made a note to obtain complete data on this subject to submit to Colonel Donovan. Generally speaking, the employment at the Orel Blitz Truck Plant at Brandenburg increased from 1,500 to 3,000 and at the main Opel Plant at Rueseelsheim, form 19,000 to 23,000 between 1937 and 1940. The new hende were recruited principally form agriculture and other trades. High wages in the Orel Plants attracted workere from other industries end while theoreticslly it is not possible for 8 German worker to change his Job without permission from the authorities, Mr. Osborne states that in practice this has never been closely controlled. However, the lebor rates in the Opel Plants were relatively so attractive in 1940 that the Government Labor Officials reclassified many jobs and effected an overall reduction of earnings in the Plants. The new workers added to the force at the Orel Plant were trained by Opel. However, since the war there has been 8 notice- pble lowering of the quality of the workmen employed. This has been caused principally by a higher ratio of young and inexper- ienced workmen and by the necessity of employing poor physical specimene. Very few women workers were employed in the Opel Plant on automotive production. Since aircraft material has been in production, the number of women workers has been increased but does not amount to a sizeable proportion of the total. The only foreign workers employed by Opel are A group of 200 to 300 Crecks who were recruited by the Germen Labor Offices in Czeckoslovakia and placed in the Opel Blitz Truck Plant at Brandenburg. These men have proved to be satisfactory productive workers but considerable trouble was experienced because of friction between these Czecks and the German workers. Consequently it has been necessary to keep the Czecke all to- gether in certain departments end it has pleo been found necessary to erect barracks on the factory grounde to house them. German labor lew requires that manufacturers train 8 minimum ratio of apprentices to total employment. The opel Plant at - B - Regraded Unclassified 292 CONFIDENTIAL Interview, Directors Opel Werke January 9, 1942 Rueseelsheim maintains an apprentice school for 1,200 fourteen to eighteen year old boye. It has been rlanned to increase this number to 1,800 but the space 18 not available and this project has been deferred until after the war. The apprentice training period leets four yeare during which the suprentices are paid 30 Reichemarks per month. Mr. Osborne stated that Opel always has a long weiting list of boye who want to get into this school. Most of those accepted are sons of Opel workmen. Very comrlete facil- ities are evailable for the treining in R erecial school section of the plant. Practically every type of productive machine 18 operated in the school and in addition, the arprentices are given classroom work in euch subjects 86 srithmetic and mechanical drawing. The apprentices are never used to operate productive machinery in the plant proper but when added production is requir- ed in the plant, the apprentice mechine toole are occasionally up to turn out production iteme, 2. In 80 far BE Mesere. Osborne and Hoglund are sware there is no systematic plan for shifting men from the plant to the Army and back. On the contrery, eince the invesion of Poland through the invesion of France and down to the present, the movement has been all one way; that is, from the plant to the Army. There have been a proportion of cases where men were discharged from the Army and returned to the Plant. In these cases the plant 1s bound to restore the men to the job he occupied when called to duty. In 8. very few instances, men who had been discharged have been recelled 8 Becond time to the Army but theee were all special cases of Army interpreters end other specialized per- sonnel. 3. The organization of lebor in 8 Germen Plant 1E rather confusing because of the inter-relationship of Government and Party. There 18 en official Government labor organization under & Ministry of Labor which is responsible for the operation of employment buresus and the edministration of Germen labor lavs. There 18 also the Nazi Party Labor Organization, the "Arbeitsfront" to which all employees belong end the primary Job of which 16 the political education of the German workmen. Very frequently the Government and Party orgenizatione fuee because the Government labor official for 8 certain Plant or 8 certain district will slso be the Party labor representative for the same Plant or area. In the Opel Plant, the labor organization WP8 88 follows: The top labor man in the Plant ie the Betreibsfuhrer (Worke Leader). Normally in e German factory this post 1e occupied by the head of the company. Since the Opel Company WeB under American management, it wee necessary to have a Germen occupy be this job. The Betreibsfuhrer was chosen by the company but had to - 9 - Regraded Unclassified 293 CONFIDENTIAL Interview, Directors Opel Werke January 9, 1942 approved by the Nazi Party, specifically by the Gauleiter of the district. As a rule the Betreibsfuhrer would be 8 Party member although in the Opel Flent the tressurer of the Company WPB aprointed to this post and he was not a member of the Nazi Party. Under the Betreibsfuhrer 16 en elected group of employees known 86 the "Botroiberot" (Worke Council). In the Opel Plant at Ruesselsheim, this consisted of ten men. These men are nominated by the Betreibsfuhrer and elected by the employeee for a period of one year. No immediate choice of candidates 16 given to the employees; ten men are nominated and voted on; if one or more of them do not obtain P given pereentage of the total vote they are not elected and alternate condidates are nominated. The Betreibsret 18 presided over by 8 Betreibsobmen who 18 appointed by the Nazi Party. The company hae absolutely nothing whateoever to say about the choice of this functionary. Under the Betreiberat the Plant is organized into 'Celle', on 8 more or less departmental basis. In other words 8 or 10 tool makers in a separate department would have their own Cell, wheress 200 work- ers in another depertment would also have one Cell. Each of these Celle has 8 Cell Obman. If 8 workmen has any complaint, he goes to hie Cell Obman who takes the matter up with the Depart- mental Foreman or Supervisor. If they can't settle the matter, it 16 taken up at the weekly meeting of the Betreiberst (inci- dentally this meeting is held on company time and the company has no control of the time spent by Cell Obman on labor problems. In many instences it 16 necessary to engage an extra productive worker to teke the place of one who 1e elected to the Betreiberst or made a Cell Obman.) If the matter can still not be settled in the Betreiberst, it 18 taken up with the Betreibsfuhrer for settlement with the General Management of the company. If the Management does not settle it to the satisfaction of the worker, the matter 18 referred to the Nazi Kreisleiter (District Labor Leader), whose decision 1e practically finel although on certain major issues, appeal could be made to the Gauleiter and eventually to Party Headquarters in Berlin. of course in a German plant the types of complaints which the workers and management have to arbitrate are relatively restricted, inasmuch 8B no strikes are allowed under any condi- tions and no discussion of basic wage rates 16 allowed. Incentive the wages labor may authorities. (Consequently very few questions cennot be discussed but a ceiling 16 placed on these by be settled in the plant.) A majority of the labor representatives unable to state whether plant are any of those in the Opel Plant had formerly in the Nazi party members. Mr. Osborne was been Union officials. - 10 - Regraded Unclassified 294 CONFIDENTIAL Interview, Directors Opel Worke January 9, 1942 As can be seen from the above, the labor representatives are usually production workers or occesionally clerical employees who are chosen by their fellow workers. There are, however, 06r- tain individuals in the organization who are placed there by the Party organization whether the menagement likes It or not. These include the Betreibsobman referred to above and also members of the Gestapo And S. S. Corps and, if the plent has Any militery potentialities, 88 WSS the case with the Opel Plant, there 18 also an eyecutive called the Wehrwirtschsftefuhrer (War Economics Leader) who is in charge of Flant protection against sebotage, bombing, etc., end 18 also supposed to keep up to date 8. plen for most effective use of the clant in war times. This individ- ual need not keep the plant management up to date on his activi- ties and reports directly to General Thomas, the head of the War Economics Ministry (Wehrwirtscheftsministerium) in Berlin. As stated above, the labor organization in the Opel Plant had no rower to discuss basic wage rates which are fixed by the Government Labor Offices. The average basic rete in the Opel Plant in 1940 was 90 pfennigs per hour. Through incentive rates applied on productive labor, the average pay of the hourly wage group of the clent vas raised to 1.21 Reichsmarks per hour. Prior to August, 1939 basic rates hed been eomewhet higher -- Mr. Osborne could not oite the exact figure. At that time since Opel rates were out of line with retes for comparable tradee in the seme district the Government ordered reductions in both the baeic rete end the maximum incentive wage. The everage overall reduction was probably 10% elthough in some cases the reductions emounted to 88 much 88 50% because of reclassification of certain types of labor. For example, certain operations performed by women workere on which the rate had been 1.20 Reichemarks per hour were reclassified and 8 basic rate of 60 pfennigs per hour WAS established for these operations. Mr. Osborne pointed out that in Germany the differen- tial in wage rates for skilled end unstilled labor 18 consider- ably less then in this country. Prior to August, 1939 the Germen hourly wge-earner WPB required to work 197 houre per month (scrroximetely 45 hours B week), before receiving any overtime, These 197 hours of work could be required on any days including Sundays and holidays. At the beginning of the war in August, 1939, the work hours were changed to 10 hours per day, six drys per week; in other worde, B. 60 hour week which could also include Sunday and holiday work, Overtime retee were figured by the company for the 15 hours extra work per week. This overtime VP8 paid to the Government end not to the worker. In Auguet, 1940 the work week we again changed to 12 hours X 6 days or 72 hours per week, Out of thie the Government was raid the overtime for 15 hours end the worker the overtime for 12 hours. The overtime rate 18 1-1/2 times besio rete. - 11 - Regraded Unclassified 295 CONFIDENTIAL Interview, Directors Ope1 Werke Jonuary 9, 1942 Based on American standards, the clothing of the German employee 1s very poor and since 1939 has been severely rationed. Retioning 18 done on a point system under W: ich each person 16 given 100 points for 8 year's clothing néeds. Since one suit takes 60 points And since the remaining 40 pointe would secure only approximately one shirt, two or three paire of sooke end two suits of underwear it would seem obvioue thei :- below minimum requirements in order to enforce the uses of previously accumulated surrlies. The retioning system does not permit the purchase of any shoes -- e erecial permit 1s required for the purchase of shoes or even for resoling or other repaire. In Mr. Oeborne's opinion, the clothing rationing causes 88 much unhappines: 88 any restriction in Germany end 18 particularly hard on young women who are restricted to 8 very inadequate sur ly of silk stockings. lingerie, etc. This incidentally 16 confirmed by the writer's own observations. Since 1937 and 1938 a few paire of eilk stockings in the luggage of 8 visitor to Germany has been an incredible "open sesame" into the homes of even very wealthy people. After the invesion of the low countries and France the evidity with which the h1, heet renking Germen Army Officere and pary leaders cleaned out the shops of Am: terdem, Bruesele, and Paris bespeake volumee on their accumulated spretite for decent articles of clothing. These Germane were obviously flabeergested by the etock which existed in the occuried countries of articles which to the peorle of Pese countries seemed matter of course, AE examples; hosiery and lingerie and anything else made of eilk; all woolen articles; all articles containing rubber, such 86 women's girdlee, men's garters and suspenders, and the ordinary simple elastic used for children's clothing; end of course the sbundent supply of such things 88 razor bledes, needles, pnd probably most astonishing of all plenty of soap containing precious fet. As regards the food supply in Germany, Mesers. Osborne, Hoglund, end Evans concurred that it is sufficient to maintain the health and efficiency of the rorulation and the rationing causes little complaint. The writer believes that one of the principal reasons for BQ little complaint 18 the effio ient working of the retion system. In most countries where food rationing exists there are two great sources of trouble: One, widespread bootlegging; two, bad (istribution or an inadequate supply to afford each holder of 8 retion card the quentities to which he 1e entitled. The second trouble 1e the cause of the long lines of waiting people at the doors of food stores, In Germany, bootlegging does exist to some extent end certainly the wealthy people are able to fill in their diet with expensive unrestricted food such BE game, lobster, gaviar, etc. 12 1 I Regraded Unclassified 296 CONFIDENTIAL Interview, Directors Orel erke January 9, 1942 But this is not ufficiently videspread to d mage the morale of the population generally. As fer 86 the working class 18 concern- ed, they very seldom have any difficulty in obtaining the food stuffe to which their retioning card entitles them. It 16 con- sequently rere to EEE a line of people waiting in front of 6 Cerman food store. The principal food items which P German misses in his diet are milk, butter, cream, end all fets of which he gets practi- cally none. The egg ration 18 usually two egge per week, Except during the local Beasons there are no fresh fruits and practici- cally speaking, no citrus fruite at any time. The meat ration has consistently averaged about one bound (500 grame) per week. This 18 probably 30 to 50 per cent lees than the normal Germen meat consumption but has not been the cause of any particular complaint. Mr. Osborne estimates that 40% of the hourly wage workers in the Onel Flant (8,000 to 10,000 men) were in the heavy worker category end were given double retions. As for BE he can recall there were no heavier retion categories than this in the plant. While it 1e true that the average Germen accepts strict food rationing quite complacently in his own country, the Pretites of the Germans in the occu 1ed territories were "Kolossal". The writer lived with 8 German NAZ1 Party member in Paris from September through November, 1940; I obtained my food ration card through the French authorities And received the regular French ration (spproximately 25 to 30% less than the basic retion in Germeny). He obtained his direct from the Germen Authorities his retions were almost exectly 14 time 86 greet 88 mine. Obviously the Germen rations to Party vieitore to Paris were designed to allow them to spread some largess among their "conquered friends". But there WAS many a Germen stomach ache caused by tring to make up for years of short retions of mest, butter, eggs, etc. 5. There WBE not only an attempt to use the Opel Plant se a political unit but effectively, the plant was 8 political organization. Ae will have been seen under the earlier remarks on the labor organization in the Plant, every individual employee 16 under the direct influence of the Nezi Party Labor Organization. While osteneibly this organization (the Arbeitsfront) 18 engaged in protecting the welfare of the workers end employees, in actual practice their primary job 16 the political education of the German people. - 18 - Regraded Unclassified 297 CONFIDENTIAL Interview, Directore Onel Werke Jenuary 9, 1942 On an everage of once each month, e big political relly would be held in the plant attended by every-member of the plant rersonnel. In between these big rallies there would be innumerable small group meetings. There would also be fre- quent "schools" conducted by Nazi Party Labor Organizers for Undus ownervisore. These schools purported to be of B technical cheracter but sctually a great part of their tesching we strictly political. Ae an exemple, a number of the teschers essigned to the Opel Plant made statements deprecating its American ownership end prophesying somedey the German would "regain their birthright", In eddition to the schools held in the plant, picked individuale from among the plant foremen and superintendents were eent to Nazi Labor Schools outside where they were deeply inculcated with the Nazi philosophy. The plants were constently plastered with posters of the worst possible political tyre. Although thie wee en Americen owned plant, many of these posters which had to be put up were directly aimed at American Political figures, such as the President, various Senators, end others who made statements or speeches which did not meet with Razi approvel. The plent had attempted to publish a house organ similar to the publications of American Companies but this publication was subjected to the censorship and re-editing of the local Nazi Party offices and quickly degenerated into B, Party rether than B plant organ, Whenever Hitler, Goebbels, or Goering mede A speech of any importence whatsoever, production was stopped in the Plant end all members of the plant personnelhad to gather eround the loud speakers to listen to these speeches. In addition to the above ectivities there were plant chapters of various party organ- izations such B6 the "Hitler Jugend" (the Hitler Youth Organ- ization); the "N.S.K.K." (The National Socialist Drivers Corps). The Americans at the Opel Plent report that there was very ' 6 little enthusiesm among the great mejority of the plant personnel for these party activities end initiative in this connection was entirely lacking on the part of the workers. According to Messrs. Osborne and Hoglund there Wr9 certainly no spontaneous push from the men for greater production. Of course the minor Nazi Officials show some initiative which they hope will merk them in the eyes of their superiors. However, moet of this initiative WEB shown in devising ways to ingratiste themselves with the higher perty officials end was more frequently deterrent rather than etimulating to production. - 14 - Regraded Unclassified 298 CONFIDENTIAL Interview, Directors Orel Werke Jenuary 9, 1942 6. There were no sir reids of any militery importance in the Ruesselsheim Wiesbeden area up to March, 1941. Consequently the effects of air reide could not be observed in the Opel Plant However, Messre. Deborne and Hoglund agree fully with the writer that the Germane as a whole are considerably more susceptible to the effects of air raide than other Europeans. Mossra. Cobortie and Hoglund base their impression on the resotion of the Ruessel- sheim Opel clerical employees who commute from Frankfurt am Main. Although this city was not bombed to eny great extent air raid slarms were feirly frequent and the effect of loss of sleep seemed to be very marked on the limited number of people observed. The writer spent several nighte in Antwerp during which the R.A.F. bombed the Port severely end the effects on the Germene were noticeably greater than on the Belgiens. At this point it might be well to record some remarks made by Messrs. Osborne and Hoglund regarding the Germen temperment. There seems to be a widespread impression that the average German 18 a stolid, square-headed individual with 8 one-track mind. I believe that most people who have lived in Germany will agree that in reality the average German 16 very impressionsble and very changeable. These changes of viewpoint and sttitude are SO brusque and contradictory as to frequently estonish foreigners who have occasion to observe them. Certainly the German can blow hot end cold, optimistic and pessimistic more frequently and to a greater degree than any of the Latin or Anglosaxon peoples of Europe, and this undoubtedly accounts for some of the necessity for the ultra-intensive proreganda to which the Germen peorle are constantly subjected. Mr. Osborne feele that this question of German temperement should be a mejor condder- ption in directing proragande to the Germen people. He feels that the one idea which has been moet deeply impressed on them 18 that should they lose this war the consequences will be indescribable in chaos and suffering. At the proper time, he feels that use of B propagende theme to dissipate this fixed idea would be extremely fruitful in elienating consid- erable numbers of Germans from the wr effort, 7. No remarks 8. While the observations made above are essentially besed on the Opel Works BE B section of the Germen economy moet remarks apply generally to all industrial rlante of comrerable eize since the whole of German industry 18 organized by the seme Nazi eyetem. 16 1 1 Regraded Unclassified 299 CONFIDENTIAL Interview, Direcote LETTE Jenu ry 9, 1942 Technolopicel Factors 1. The Opel Works was not confronted with any major technological problems because of the cercity of certain mater- 1816. Automotive axle geers were changed from chrome nickel alloy to chrome mangonere allov. The new Fears were found to be equally setisfectory. As pointed out earlier in this report, copper electrical windings were replaced by eluminum windings with no lose of quality. Cutting toole and bearings were maintained at desired stand- ards of quelity. In the case of both passenger cere end trucks, there has been & constant degeneration of quality since 1937 in the qual- 1ty of trim material. This did not effect the functioning of the vehicle but particularly in export WP6 the source of much customer dissatiefsction with Germen vehicles. One thing that was very noticeable on German vehicles, exported efter the Munich conference of September, 1938, WBE the very bed inspection. In other words, the vehicles were full of minor defects in workmen- ship. Mr. Osborne attributes this to the transfer of the most cepable workers to military production and to the lose of some good inspector personnel to the Armed Forces. 2. Opel's experience in technological questions was certianly tyrical of German automotive industry and in general of German industry BE 8 whole. Government regueltion of industry is carried out through 8 eyetem of industry councils (Wirtscheftsgruppe) and the Cecisione worked out by these councils in conjunction with the proper Government authorities are mandatory on all members of the particular industry. 3. Approximately 5 per cent of German trucks were diesel powered. At peak production this would represent 3,000 to 3,500 trucks rer year. In addition, a great major'ty of Germen power driven agricultural m/ chines, building machinery and thousands of mell industrial installations were diesel powered. From en operating standpoint these diesel enginee were highly success- ful. However, BE pointed out in the discussion on petroleum products, the proportion of diesel fuel required in Germeny had reached 8 point where the most efficient uee could not be made of available supplies of crude oil. In other words in refining a ton of orude on the basis of requirements too much diesel of specific grades was required rnd not enough gasoline. Conse- quently, according to Messrs. Osborne and Hoglund, there has been 8 tendency to discourage further diesel production and - 16 - Regraded Unclassified 200 CONFIDENTIAL Interview, Director Opel Werke January 9, 1942 even some attempt to convert certain classes of existing diesele to injection type gesoline burning engines. Mr. Osborne was not able to advise Just how far this program has been pushed nor has he any information to substantiate reports which indi- cale despread conversion producer-gas. 4. Technically, gas burning motors have proved relatively successful ae developed in Europe. In Bo far 88 the writer knows the beet results obtained to date are approximately 80% of the engine efficiency of the gesoline operated engine. However, the system of operating 8 vehicle motor from gas compressed in tanks has not proven populer because of (a) shortage of equip- ment and materials for producing the tanks; (b) the bulk and weight of the tanks on the vehicle; (c) the trensportation and handling difficulties involved in returning empty tanks to a properly equipped generating station for refilling with new gas. The type of gas producing mechaniem known generally in Europe 6.8 B "Gazogene" which 1s mounted on the vehicle or on B. small trailer behind the vehicle and generates its own gas by burning a solid fuel such 86 charcoal, wood, or prepared bituminous coal, has been slightly more successful. The French and German Governments have both encouraged experimentation with this type of equipment. In neither country was there any appre- ciable production. Mr. Osborne and the writer estimate there were less than 1,000 gas-fuel operated vehicles in Germany. General Motors Assembly Plente in Denmark and Sweden have gone into the production of gas generating equipment for the conver- sion of both passenger care end trucks. General Motors Oversese Operations undoubtedly have a number of reports on this subject which might be of interest to your office. In general it is the understanding that this gas producing equipment has been more successful in these two countries then elsewhere because of the ready evsilability of eurplus wood for fuel. On the other hand, only the present abnormal economic conditions would justify the use of this equipment. The cost of the gae generating equipment for B Chevrolet truck in Sweden, for instance, 16 almos t 86 much ae the cost of the truck. Subsequently fuel cost 1s relatively cheap but it 1e understood that the maintenance of the gas- producing equipment 18 bothersome and costly and 86 previously stated the performance of the truck 16 reduced by 20 to 30 per cent. The above covers the subjects outlined in the questionnaire which you furnished me. In talking to Mesers. Osborne, Hoglund, and Evens occssionally some German Industrial Plant would be - 17 - Regraded Unclassified 301 CONFIDENTIAL Interview, Directors Opel Werke January 9, 1942 mentioned which they considered especially critical in the Germany economy, particularly from the standpoint of war produc- tion. These plants are listed hereunder for whatever interest they may have: Plant City Remarks Bergesche Stahl Remscheid Manufactures a large per- Industrie centage of the precision steel forginge for the German Automotive and aircraft industries. Bosch Nuremberg In BO far as Messrs. Osborne and Hoglund know, this plant manufactures all aviation spark pluge for Germany Mahlewerke (Electron- Bad Connetett Most important German metall) near Stuttgart manufacturer of aircreft and automotive pistons and sircraft radio cases. The Becker Foundry Leipzig (West) Most important manufactur- er in Germany of eluminum and magnesium castings for aircraft. V.K.F. (Vereinigete- Schweinfurt The German subsidiary of kuggelagerfabriken) the Swedish Ball Bearing Trust. Has practically a monopoly on precision ball bearings for air- craft and automotive work in Germany. Kruppwerke Essen Ordnance Heinkel Fluegzuegwerke According to Mr. Osborne Plant 1 Oranienburg the largest aircraft (30 miles out- factory in Germany. He side Berlin) has visited the plant personally as well 8.6 most of the other aircreft factories of Germany and states that this 18 in- comparably the biggest and most complete - 18 - Regraded Unclassified 302 CONFIDENTIAL Interview, Directors Opel Werke January 9, 1942 Plant City Remarks Plant 2 Rostock Smaller than the Oranien- Heat DUE VITAL to the German Air Force. Junkers Dessau Still one of the most 1m- portant German Aircraft factories. M.A.N. Augsburg Practically the sole pro- ducer of Diesel engines for submarines. Tevis G.m.b.H. Frankfurt am Former manufacturer of Main electrical refrigeratore and other appliances now the principal producer of meny vital aircraft parts. I.G. Farbenindustrie Near Frankfurt ( am Main (suburb) Germany's two principal Continental Tire Co. Hanover Buna Rubber producing (plants. Mesers. Osborne, Hoglund and Evans were of the opinion that each of the above plants produces such a large proportion of the total ourput of articles which they manufacture that the destruction of any one of these plante would be a most serious blow to the German war machine. If further information along this line 18 desired, Mr. Osborne suggested that Mr. Otto Mueller at present with Turnstedt Division of the General Motors Corporation at Trenton, New Jersey, knows more about the distribution of the manufacture of aircraft and automotive components in Germany than anyone in this country at the present time. Mr. Mueller 18 & naturalized American of German origin who served 88 an executive engineer at the Opel Werke for several years prior to August, 1939. His position was such that he had occasion to visit 8 great many German Plants and to be familiar with their productive capacity, processes, methods, etc. - 19 - Regraded Unclassified 303 CONFIDENTIAL Interview, Directors Opel Werke January 9, 1942 The uniter will he pleased to discuss any pheses of the above report or to make any further contacts in this connection which you may desire. Attached for your information is a copy of 8 report on the Utilization of civilian automotive maintenance facilities by the German Army which may be of some interest. Youre very truly, Philip W. Copelin Incl. Copy of report mb - 20 - Regraded Unclassified 204 CONFIDENTIAL January 9, 1942 SUBJECT: Report on Gorman Military Transport TO: Colonel Ruesel A, Osmun Office of The Quartermaster General 1. The Militery Attache Reports which you recently forwarded to me are returned herewith. There 18 nothing that 1 can add on the specific subjects of German Army Motor Transport Organiz- ation described in these reports. There 18, however one import- ant phase of Germen motor maintenance which 18 not mentioned and on which the following comments may be of interest. 2. Based on my observations in Germany and later in German occupied France and Belgium, I believe it can be said that B basic principle of German military maintenance operation is to utilize to the greatest possible extent the civilien facilities which are available. In Germany, prior to the invesion of the low countries, this WBE manifested BE far as motor transport is concerned by the extensive use of private garages, service stations, and factory service departments for the maintenance of army vehicles. In the occupied territories, the inveding armies were closely followed by "Kommissers" whose job was to organize the local automotive industry for the most effective utilization by the German Army. 3. These Kommissars are civilians attached to the automo- tive branch of the Ministry of Transport, (Verkehrs Ministerium) This Ministry is in direct control of the entire German automo- tive industry including its dealer organizations, independent garages, etc. The head of the Automotive Industry Branch is General Von Schell. While the organization is purely civilian, it is headed, like many other Gov ernment Departments in Germany, by an Army Officer who maintains his rank in the German Army. General Von Schell ie to all intente and purposes the dictator of the automotive industry with full power to decide what modele B given company may build, what quantities, at what prices they shall sell them, and any other pertinent question. Although not directly connected with the Army in any way, a very close lialson 18 maintained between General Von Schell's office and the Army General Staff regarding the utilization of the automotive industry in the service of the Army. When the German armies authority was immediately extended to these territories and his invaded the low countries and France, General Von Schell's staff took over the job of organizing the local automotive plants and other facilities. - 1 - Regraded Unclassified 305 CONFIDENTIAL Report on German Military Transport January 9, 1942 4. It was obvious that 8 thorough Job of intelligence and minute preparation had been done prior to the invasion. As an example, the Kommissar appointed by General Von Schell to take over all General Motore operations in the low countries and in France USE = former General Motors distributor for Germany who on one excuse or another had made frequent trips to General Motors Operations in Belgium and France over a period of years and was thoroughly familier with their activities and potential- ities. The Kommissar appointed to organize the Ford operations in the same countries was the German director of the Ford Plant in Cologne, Germany. Another example of pre-war preparation will be of interest; for several years prior to 1939, the appointment of distributors and dealers in other countries by German car and truck menufactur- ere was closely watched by the German Transport Ministry and Military Authorities. This was particularly true of the countries adjacent to Germany such ae Hungary, Bulgaria, Yugo- slavia, and the Scandinavian Countries. Factory managements were under constant pressure to eliminate Jewish dealers (the only commercially successful ones in several of these countries), to appoint firms of marked pro-German sympathies, to extend beyond all reasonable commercial requirements the service facilities in the Balkans, etc. Approximately 70% of German automotive exports were products of the Opel Werke, a General Motore subsi- diary. The distribution of Opel care and trucks outside of Germany was entirely controlled by General Motors Overseas Oper- ations, New York, through their various local assembly plants. This method of operation was a thorn in the sides of the German Authorities who were thus unable to exert the same pressure on the export Opel dealers that they exerted on the dealers for other German makes. Nevertheless. over B. period of years they were able to influence the development of the major bases for a very sound automotive maintenance organization throughout Hungary and the Balken Countries. Thie organization now undoubtedly is serving its purpose. 5. The German Kommisser took possession of the General Motors Plant in Antwerp, Belgium within 48 hours after the occupa- tion of that city. The plant was not requisitioned but placed under "protective custody" (Sicherstellung), under the authority of the German Military decree which authorizes the Commanding General in any area to appoint 8. Kommissar or "Custodian" of any business whenever he considers it necessary or desirable in the interest of the Reich. Once appointed the Kommissar has full - 2 - Regraded Unclassified 206 CONFIDENTIAL Report on German Military Transport Jenuary 9, 1942 authority to operate the business as he sees fit and ie., to quote the decree, "responsible only to the authority which appointed him". 6. Immediately upon occupation of the plant in Antwerp the Kommisser rehired approximately 800 of the 1,500 local workmen and employees, proceeded to clean up the plant, which had been somewhat eabotaged by the retreating Belgions and French, and to make a complete inventory of the materials on hand. Sales to oivilians were naturally stopped immediately throughout the occupied territories. Every automotive dealer was required to submit an inventory of vehicles and spare parts on hand. With the complete capitulation of the Belgian Army a few days later all army automotive equipment end spare parte stores were taken over A.G prizes of war. The Army Motor Maintenance Corps (H.K.P.) immediately returned all General Motors spare parts to the General Motors Plant, placing them under the custody of the Kommisser while Belgian Army vehicles were sorted out according to their make and state of repair and arrangements made for their reconditioning. 7. The method of handling this reconditioning 1e interesting. Through pre-war intelligence the best equipped garages and service stations throughout Belgium had been spotted and their potential capacity estimated. These shops were immediately occupied by the German Army. The Kommissar then entered the picture and made the following proposels to the ownere of each of these shops: 8. A contract could be signed employing the shop to work exclusively for the German Army b. The contract would be on a "coet plue" bests -- usually the owner would be required only to submit his payroll on which he was paid 110%. Any spare parts re- svailable in the inventory of the shop would be billed quired would be furnished by the German Army or if at list price less 25%. C. If the owner was agreeable he could remain in Officer would be placed in the shop for lieison between charge of his business -- a non-commissioned German the owner of the German Army personnel visiting the shop on business but otherwise there would be no the cooups- tion. The owner would be given full charge of management, - 3 Regraded Unclassified 207 CONFIDENTIAL Report on German Military Transport January 9, 1942 a If the owner of the shop would not accept this proposition, B Kommissar would be appointed to run his business and he would be out in the cold. 8. Obviously the owners of most businesses in the occupied territories accepted The German proposition inasmuch 98 it afforded them a livelihood for themselves and permitted them to give work to their employees. In a number of instances the owners of shope had fled the country in advence of the German Armies; in these cases either the responsible employee remaining was placed In charge of the business under the above conditions or a Kommissar was appointed to run the shop. 9. In talking to the Kommisser of the General Motors Assembly Plant in Belgium, he mentioned several times the figure of 85,000 vehicles as the number which the German Army found as prizes of war or requisitioned from the civilian population in Belgium and Holland. Between June and Sept ember, 1940 all of these vehicles in addition to thousands of German vehicles were run through these shops and put in first-class running order. Obviously these shops were not 100% efficient. In the first place the German Army 1e cluttered up with an extremely non- descript lot of vehicles -- in one big shop in Paris L personally counted 118 different makes of German Army vehicles in the shop at the same time. Obviously this diversity of makes and models created 8 very tough spare parte problem for one thing and secondly it gave the workers who were unsympathetle to the Germens 8 good excuse for stalling by saying their tools wouldn't fit certain cars or that they didn't understand the functioning of certain makes. However, by enforcing 8 rigid discipline and by impressing on management and workers alike that the price of detectable sabotage was being shot against the nearest wall very excellent results were obtained. 10. It should not be deduced from the above that the German Army did not come equipped with its own maintenance facilities. Maintenence comperable to the first and second echelons in the United States Army vere of course performed in the field and all indications were that they were very efficiently performed. However, their organization appeared to be set up on a baels whereby any vehicle which could not be promptly repaired in the field would be evacuated to one of the civilien shops mentioned above where it would be repaired and returned to a divisional or ermy pool. Regraded Unclassified 308 CONFIDENTIAL Report on German Militery Trensport Jenuary 9, 1942 11. There WP6 surprisingly little pressure for expediting vehicles through the shops except in the case of heavy duty trucks. I believe this WFB due to the fect that most civilian vehicles were prohibited on the road and there wee always P large surplus of passenger care end light trucks from which vehicles could be requisitioned when required, 12. Returning to the functions of the Kommisser in charge of General Motors Operations -- after en inventory had been accomplished, the Assembly Plant in Belgium was put in operation to build un approximately 2,100 Chevrolet trucke end some 800 or 900 passenger care for which the materials were on hand. These were 60ld to the Germen Army. The Plent wee then estab- lished BE central headquerters for spare parts for American care in the low countries and as e reconditioning plant for the British vehicles recuperated at Dunkirk. 13. It was estimated that after "cannibelizing" suffic- iently to supply parts for demeged vehicles, approximately 16,000 British Militery vehicles were recovered. Since there were no spare perts evailable on the continent for these British trucks end since the supply of spare parts for American vehicles wes obviously limited, it wes decided to establish a parts manu- fecturing center in the Antwerp General Motors Plant, Since, like ell assembly plents, this one had very little machine tool equipment, tools were requisitioned from various factories through- out Belgium and installed in the plant. 14. As previously stated the same Kommissar who WPS put in charge of General Motors Operations in Belgium was subsequently charged with General Motors Operations in France. The pattern of his activity in that country was very similar except that for verious ressons of convenience any unassembled material found in Paris was sent to the bigger plant in Antwerp and the Paris Plent turned into a repsir shop. 15. The General Motors Kommisear employed e Germen staff of approximately 25 people in Belgium end Frence, These were ell civiliane and consisted of spare perte experts, shop superintendents, end General Administrative Executives, This personnel was ell picked by the Kommisser from hie own German organization. This staff end the Kommissar were paid by the local General Motors Companies in which they worked. As I stated previously, the Kommissar wee assigned by General von Schell of the Ministry of Transport in Berlin and his actual -5- Regraded Unclassified 309 CONFIDENTIAL Report on German Military Transport January 9, 1942 local appointments were under the authority of the Commending Generals of the occuried territories. Obviously the liaison between the Kommisser and the local Milita Authorities was extremely close and to all arpeerances was very satisfactory. 16. It might US junged from the above that the eyetem of contractual meintenance was used by the Germen Army only In occuried territory. This is not the case. It may be of inter- est to note that the Kommisser in charge of General Motors orerations in the occupied territory was also contractor in Germany to the German Air Force for the repair and maintenance of military plenes. In this connection he had constructed and orerated two very large rerair shops. According to his state- ments which were corroborated by Luftwaffe Officers with whom I spoke, all planes which were damaged beyond quick rerair at Air Field shops were turned over to this orgenization. They dismounted the motors and returned these to the motor manufactur- ers for reconditioning and then completely reconditioned the fuselage, wings, undercerriages, etc. SUMMARY: 17. In the third end higher echelone of motor maintenence, the German Army employe evailable civilian fecilities and person- nel to the greatest possible extent. This system of contractual maintenance has given satisfactory results in Germany, in her satellite states, end even in the occupied territories. 18. I attach hereto P. cory of a further report on German economic conditions 98 related to the automotive industry pre- pered for the Coordinator of Information. Philip h. Copelin mb Incle. Milltery Attache Re: orte Report to Coordinator of Info. - 6 - Regraded Unclassified 310 RESTRICTED G-2/2557-220; No. 612 M.I.D., W.D. 11:00 A.M., January 26, 1942. SITUATION REPORT I. Pacific Theater. Philippines The situation in Luzon remains stabilized, with some activity in the Subic Bay area. On last Wednesday, enemy aircraft bombed shipping at Cebu, The this attack were imiced to one small ship. In ilindanao the situation remains unchanged. Hawaii; No further reports of enemy nctivity. Malaya: There seems to be no substantial change in the di tuation, The British line appears to be somewhat stabilized. Burma: No further reports of importance on land or air activity. Australusia: The situation in the Australian Mandates is confused, though Japanese action is believed to be continuing. Apparently the Japanese convoy in the Macassar Straits is still being subjected to successful at- tacks by Dutch and American air and naval units. West Coast: No further reports have been received, II. Eastern Theater. Russian pressure continues in the area southwest of Seliger Lakes. Both sides report hard fighting along the eastern front. III. Western Theater. On January 25 the R.A.F. carried out further raids on Brest. IV. Middle Eastern Theater, Ground: Fighting continues in the triangle Agedabia- Antelat-Saunnu, apparently without decisive result. Air: The R.A.F. attacked an Axis convoy in the Lediter- ranean with some success. Axis air continued to pound Malta. RESTRICTED Regraded Unclassified