Volume 490, January 29 – January 31, 1942

DIARY Book 490 January 29 - 31, 1942 Regraded Unclassified - à - Book Page Airplanes Aircraft despatched - British Air Commission report - 1/30/42 490 243 Aldrich, Winthrop W. See Financing, Government Alten Property Cuetodian FDR asks HAJr to discuss with him - 1/29/42 62 American Bosch Corporation See Batt, William - b - Batt, William FDR-HaJr conversation concerning possible connection with American Bosch Corporation discussed with Foley - 1/29/42 63 Memorandum for FDR - 1/30/42 181 British Purchasing Mission Federal Reserve Pank of Rew York statement showing dollar disbursements, week ending January 21, 1942. 98 Butler, J. Homer See Customs, Bureau of - o - China Loan: State Department wants action; Bull and HMJr to confer - 1/29/42 2,4 Litvinoff-HMJr conversation - 1/29/42 5 Treasury staff conferences - 1/29/42. 8,28 a) Letters to FDR and Hull 38,40,46 State-Treasury conference - 1/30/42 149 Conference at White House - FDR, HMJr, Hull, and Jesse Jones - described to Viner, White, and 153 Foley by HVJr - 1/30/42 158 a) Berle-HMJr conversation b) Jones calls for appointment with HMT - 175 1/30/42 1) Actual conference - 1/31/42 272 c) Soong explains conference with FDR and how question of loan came up - 1/31/42 266 Joint Resolution of assistance to China as drawn up by Treasury group - 1/30/42 169,277 a) Letters to Speaker and Vice President 279,287 b) Copies of Resolution okayed by FDR to 282 State, War, Navy, etc 290 c) Hull's letter to FDR 291 4) Knox's letter to FDH 293 e) Stimson's letter to FOR 1) FDR's letters to Speaker and Vice President transmitting Joint Resolution - 1/31/42 297 300,302 B) Jones' revision of Resolution 300 n) Soong rends Résolution Presidential Kenenge (draft) ne BEAWN un bg State 170 Department - 1/30/42 Regraded Unclassified - 0 - - (Continued) Book Page Correspondence Mrs. Forbush's resume - 1/30/42 490 189,203 Customs, Bureau of Butler, J. Homer: Further consideration of case by HMJr and Gaston - - 1/29/42 66 Dutiable articles for use in connection with British ships being refitted in United States yards: Admission in bond discussed in State-Treasury correspondence - 1/31/42 317 - D - - Defense Savings Bonds See Financing, Government Democratic Party George Washington Dinner on February 23 at $100 a plate in Washington and $50 a plate in New York discussed by HMJr and Gaston - 1/29/42 71 - È - Exchange Market Resume's - 1/29-30/42 111,253 Exports To Russia, China, Burma, Hong Kong, Japan, France, and other blocked countries, week ending January 17, 1942. 372 - F - Federal Reserve Building See Joint War Staff Financing, Government Aldrich, Winthrop W.: Proposal for United States Annuity Bonds and Haas review of proposal - - 1/30/42.. 221,224 Defense Savings Bonds: Payroll Savings Plan: Firms employing 100 to 499 persons now participating - 1/29/42 83 Existence of plan in industrial plants receiving the Navy "g" flag - 1/31/42 331 Operation of plan in large companies during December 1941 - 1/31/42 336 Unfilled Orders, January 15 to date - 1/30/42 237 Progress report by Graves - 1/30/42 240-A Navy thanked by HMJr for participation - 1/31/42 324 Field Organization News Letter, No. 37 - 1/31/42 343 Railway Labor Executives Association thanked for 327 participation - 1/31/42 McAdoo, Eleanor Wilson: Mrs. FDR told of her appointment in California - 349 Thanks 1/31/42 HMJr for appointment - 2/2/42: See Book 491, page 210 Mrs. FDR thanks HMJr - 2/7/42: Book 493, page 231 Regraded Unclassified - 1- - (Continued) Book Page Fuels, Solid Ickes sent report on use of solid fuels by Treasury Department 1/31/42 490 359,363 - G - Germany Postage stamps - strict Government control of purchase and export - 1/30/42 245 Great Britain British Tax Reserve Certificates - White memorandum - 1/31/42 365 - H - Hanes, John W. See Town Hall - I - Inflation Price Control Act of 1942: FDR's statement on signing - 1/30/42. 187 - J - Joint War Staff Availability of Federal Reserve and Public Health buildings discussed by Hopkins and HMJr - 1/31/42 268 - L - Latin America Freezing measures in certain countries on West Coast - 1/31/42 386 Lend-Lease Purchases, week ending January 31, 1942 - Mack 366 report - M - McAdoo, Eleanor Wilson See Financing, Government: Defense Savings Bonds Regraded Unclassified - M - (Continued) Book Page Military Reports Reports from London transmitted by Halifax and Campbell - 1/29/42, 1/31/42 490 113,403 Kamarck summaries - 1/29/42 116,406 Coordinator of Information reports from London - 1/29/42 119 "The War This Week" January 22-29, 1942 - Coordinator of Information report 126 Morgenthau, Henry. Sr. Prediction of war made in 1930 sent to HMJr by Nathan Strauss - 1/30/42 185 Morocco Tangier Zone: Exchange situation discussed in cable from American Legation - 1/29/42 103 - N - Navy Department See Financing, Government: Defense Savings Bonds - P - Philippine Islands Financial Status: Treasury asks for additional information in connection with consideration of further credits - 1/30/42 255 Pioneer Import Corporation Foley memorandum on indictment of Werner von Clemm - 1/31/42 315 Price Control Act of 1942 See Inflation Public Health Building See Joint War Staff - R - - Railway Labor Executives Association See Financing, Government: Defense Savings Bonds Revenue Revision British Tax Reserve Certificates - White memorandum - 365 1/31/42 - S - Solid Fuels See Fuels, Solid Speeches by HMJr Defense Savings Bonds: Navy thanked by HMJr for 324 participation - 1/31/42 Regraded Unclassified - T - Book Page Tangier Zone See Morocco Town Hall Obvious plan to arrange debate between Treasury representatives and John W. Hanes discussed at 9:30 meeting - 1/30/42 490 132 - V - Von Clemm, Werner See Pioneer Import Corporation - W - War Staff, Joint See Joint War Staff January 20, 1942 PRESENT: Xr. White Mrs. Klotz H.V.JR.: At nine o'clock this morning I called on the Secretary of War and General Marshall. I asked Gen- eral Marshall how he felt about the military situation in China. He went over the situation, going back to the mis- take the English made in Rangoon and so forth and SO on. What I didn't know, it seems that they are sending out 8. General Stillwell to be Chief of Staff under General Chiang Kai-shek. These negotiations have been conducted here between the War Department and T. V. Soong and they are very much pleased to think that Chiang Kai-shek is willing to have an entire American staff to run his army. Marshall says that the matter out there is critical because, 1, the Japanese have been very active in India and, 2, they have been very active in China. If either Rangoon or Singapore falls it will just add that much more fuel to the fire and help the Japanese in their prop- aganda to work with the Chinese that the yellow races should stick together and that the white races are being defeated. Marshall regarded the situation seriously. Then Stimson talked and he said that he thought the situation was serious and that at any price we should keep them going. Stimson evidently hasn't read or couldn't find the letter which I sent him, & copy of the letter I sent the President, but he has been inquiring about the matter and he very frankly said that he thought that I had made 8. great mistake when I offered to pay for the Chinese troops. lie had been misinformed. Re thought we were going to pay the troops directly instead of givin the money to Chiang kai-shek. So I said I had only done this after carefully clearing it with the President and with Churchill and also with T. V. Soong. Regraded Unclassified He said, "Well, you can't trust T. V. Soong," and he said, "Anyway, in my experience with Orientals, if you say something to them as a proposal they will always say yes and never tell you no, but they will get word to you in some roundabout way which often makes you think that they have double-crossed you, but they just can't say no to you." I asked him whether he thought I should let the State Department handle this thing because my heart wasn't in it and because this was a straight political matter, and he said yes. But on second thought, I am not going to give it up so easily, especially because the President has asked me to do it and I would have to 80 and tell the President I didn't think that I could do it, something which I have never done before. Certainly from Marshall's standpoint, General Mar- shall and Stimson, they think that the matter is important. The last thing that Stimson said to me was, "Now, don't let the thing fall down on account of any difference be- tween you and the State Department, and I said, "Well, quite the contrary, I can sit by and do nothing because I have a letter from the President telling me to wait until Mr. Fox returns and I have a letter from T. V. Soong, telling me to wait," but I said, "I am pushing the matter. He said, "Please do, and whatever the cost is, I would do it." Now, Harry, at 11:15 I am going to sit down with you on this Chinese thing, so from now until then please de- vote your thinking entirely to this, you see, and the thing which isn't clear in my mind is what Ambassador Gauss has said as to the Chinese situation, because I haven't had time to read those things. MR. WHITE: I have a little something to add, If you want it. H.V.JR.: Go shead. MR. WHITE: Last evening Hornbeck telephoned to say that Mr. Hull thought it was very important that some Regraded Unclassified - 3 - 3 general announcement be given of a loan arrangement, although the details need not be specified. They can be made public later. I told Mr. Hornbeck that it was my understanding, and I thought it was your understanding, that the matter was to await Mr. Fox's return. Mr. Hornbeck said that probably was true until Mr. Hull learned that Mr. Fox was going to be 80 delayed as to postpone the matter too far and that it was his understanding definitely that Mr. Hull does not want to await Mr. Fox's return, so I had a note to you about it and saying that I was going to have a meeting this morning at 10:00 o'clock of the Treasury staff, unless you had a contrary opinion, because I would like to submit to you whatever your own staff makes as a recommendation. H.M.JR.: That is all right. 11:15. Regraded Unclassified January 29, 1942 HM Jr called Secretary Hull today and the following is HM Jr's end of the conversation: "I an sorry that you are not well. "Hornbeck called up Harry White last night, and your people seem to want something on this Chinese loan. I really did not want to do anything about it until I had 8 chance to talk to you. You remember I spoke to you about it on Monday and said at that time that after the boys got together I wanted to see you. "Would tomorrow morning be time enough? What time do you think you could see me at your office? I will come to your office then at 10:30. "This is a political matter and not a financial one, and that is why I do not want to move on it without con- ferring with you. I would like to do in this matter what you think should be done." (Secretary Hull said he did not know the technical details but he would be glad to see me at 10:30 tomorrow morning.) Regraded Unclassified 5 January 29, 1942 PRESENT: Mr. White Mrs. Klotz H.M.JR.: Ambassador Litvinoff called at my request and I said that we had been approached by the Chinese for e loan and I felt that what the Chinese did in the future was as much of interest to them as it was to us. He said Et is of more interest to them than it is to us. I told him that they had asked for a billion dollar loan, half from the English and half from us, and the English said they would go up to fifty million dollars but couldn't go any further. I told him what I had offered to 20 about the soldiers and he said, "Nave they a million troops under arms?" I said, "Mell, I believe so." He said he didn't know anything himself but lie would get off a wire right away. He said, "I question whether the Japanese would make any peace with the Chinese now because they are drunk with victory, Il and he said, "If Singapore falls we are firmly convinced He said, "We believe that the Japanese will synchronize with the Germans and will attack us in about two months' time. That is what we expect." He said, "Once we begin to fight the Japanese, that ought to greatly encourage the Chinese." He gave me the distinct feeling that he questioned that the Chinese would stop fighting at this time. I said that I personally wasn't SO worried because after all, the Chinese had gone through this for four years and now that they S&P that we were in this thing I just didn't see how they could quit at this time. lie kept repeating over and over again, "Well, this is nothing but blackmail, and I said, "Yes, and at a time when we have our back to the wall in the Pacific, anû I don't like it." That is that. But it is interest- ing, what? Regraded Unclassified - 2 - 6 MR. WHITE: He agreed with the opposition. H.M.JR.: Yes, but it is interesting that he is convinced that they will be attacked in two months and are ready for it. Oh yes, he said, "Can't you drag these negotiations out as long as possible?" I said, "Well, that is what we are trying to do by making the payments on a monthly basis." He said, "Yes, that is the way to do it." He said, "Well, what can they use it for? What can they use it for? They can't get any more material up the Burma Road." I said, "I have been all over that with T. V. Soong and I pointed out to them several weeks ago that we had committed five hundred sixty million in Lend-Lease, which is more than we are committed to you. They have got fifty million dollars of Stabilization credit that they haven't used a dollar of, and I said, "T. V. Soong explains it that the Generalissimo wants & billion dollars in reserve to use when he sees fit." He said, "They can't use it. How can they get it in there?" I said, "I agree, and that is what is bothering me." Then I said, "How are things going with you up on the White Sea?" He said Archangel is open, but he said, "We are not getting any material," and he said, "We have had three ships this month, plus nine carried over from last month," and he said, "When I go to the Maritime Commission they say, 'We will let you have the ships, but you have no tanks and planes to put on the ships.' And I go to the Army and they say, 'What is the use of giving you any tanks or planes, because you have no ships?'" He said, "The net result is, we get no ships." I said, "Well, we have got a lot of stuff in storage for you, waiting." He said, "I know, but we can't get the tanks and the planes and I am just shoved from one department to another." He said, I am seeing Stettinius about it this afternoon." He then asked me whether I wouldn't come and have lunch with him sometime and I said well, very frankly I didn't like to go out to lunch but if he would ask me 7 - 3 - for a family supper some evening I would be glad to do that. At least I am getting & little information. MR. WHITE: Yes, but I think you have no choice. I think you have to separate -- H.M.JR.: I have, Harry, but I mean I am doing my own thinking on the thing. MR. WHITE: I think as a Cabinet member you can object. As Secretary of the Treasury, you have to go right along a hundred percent. H.M.JR.: It is just the other way around. As a Cabinet member I have got to go along. As Secretary of the Treasury, I can protest. But don't let's quibble. January 29, 1942 11:25 a.m. AID TO CHINA Present: Mr. White Mr. Southard Mr. Viner Mr. Bernstein Mr. E. M. Bernstein Mr. Friedman Mr. Coe 11.M.JR: My God, are these fellows all experts? MR. WHITE: Yes, sir, very good ones, too. Best there are. H.M.JR: Best available? MR. WHITE: I think I was right the first time. indition H.M.JR: On this cable from Gauss of the seventeenth which was forwarded to me on the twenty-first, is there anything in from Gauss since then. MR. WHITE: That is the last one I have had ref- erence to. Has there been anything since then? MR. FRIEDMAN: No. H.M.JR: There is nothing since then? MR. WHITE: Nothing since. H.M.JR: Then the whole business is based on that? Regraded Unclassified - 2 - MR. WHITE: Oh, no, sir, there are prior cables-- H.M.JR: But this is the most recent? MR. WHITE: The next previous important one, the only one of previous importance from Gauss, is on December 31. H.M.JR: What? MR. WHITE: December 31. I have a copy here, but I haven't B. full copy. There have been numerous other means of communication which are not represented by cables from Gauss to us that I imagine the State Depart- ment has received. H.M.JR: Here I pick up a draft of a statement by the President on the loan to China. Who did that? MR. WHITE: It was prepared here during my absence, several drafts. One was a release of the statement in the event that one was to have been made at that time. MR. COE: That is right. That is when you (Secre- tary) were seeing the President. MR. WHITE: Yes. I don't know who worked on it. MR. SOUTHARD: Coe and Friedman. MR. WHITE: Coe and Friedman. H.M.JR: Where is the Gauss cable? MR. WHITE: It is dated December 31, 1941. I have A copy here, but it is a poor one. H.M.JR: I can't read those copies. Here, I have got it. December 21. MR. WHITE: Thirty-first. Regraded Unclassified 10 - 3 - H.M.JR: Twenty-first, I have got it. Number five fifteen? MR. WHITE: Number five forty-nine. H.M.JR: Supposing I read this one? MR. WHITE: Well, that goes back still further. Here is a little better copy. MR. FRIEDMAN: That is a complete file up to the last date of all cables. H.M.JR: Let me see your file. Have you got a cable there? I will tell you what I would like one of your boys to do, Harry, just as fast as possible. I would like a little time-table prepared for my book, you see, such- and-such a day, Ambassador Gauss sent cable urgning this or Sir Otto Niemeyer did this, and then - I mean, just a little time-table that I could refer to, you see. MR. WHITE: I know just what you want. When Secretary Hull - the State Department made inquiry and so forth. H.M.JR: But very much digested. This thing here, everything that I have got is in here, and I wonder if this last thing is in here from - yes. MR. WHITE: Phillips? That is there. H.M.JR: That is in there, too. But they are waiting for an answer from me? MR. WHITE: They are. H.M.JR: I have got an appointment with Mr. Hull at ten-thirty tomorrow morning. His people said at first he couldn't see me and all of that. He is sick and can't see anybody. 11 - 4 - MR. WHITE: Does he know the subject? H.M.JR: Oh, yes. Then he said the matter is a political one and he doesn't know the details, and I said, "That is why I want to see you, because it is a political one and not 8. banking proposition. I would like to do whatever you want." I mean, it is political. It is nothing that - nothing financial. The President's letter isn't here. MR. WHITE: Which? H.M.JR: The President's letter. MR. SOUTHARD: The last note to you? H.M.JR: Yes. Yes, this is January 26. You see, he comes back again to the payment of the troops, the President. Now, Mr. Hull has never seen that thing from the President, and I think that I ought to send it over to his house today and simply say: "My dear Cordell, the President returned to me the correspondence between T. V. Soong and myself of January 21 and attached thereto a memorandum, a photostat of which you will find enclosed herewith. "On receipt of this memorandum of the twenty-sixth from the President, I sent the following letter to Dr. Soong, copy of which I enclose herewith." So that makes my record straight, you see. MR. WHITE: And Soong's answer. I think there is 8. letter from Soong, isn't there? H.M.JR: No. He has had that. I sent Hull a copy of Soong's letter, you see. I think that is com- plete. You can go over it, but the point that I make, Hull doesn't know that I have had an answer from the President. He doesn't know what is in it. Too, he doesn't know that I subsequently wrote Soong. Now, 12 - 5 - that could be written, checking it with my stuff here, and then it could go up to his apartment this afternoon. MR. WHITE: Do you want his record to be complete? H.M.JR: What? MR. WHITE: Do you want Hull's record to be com- plete? H.M.JR: Yes. MR. WHITE: We will add some sentence to that effect, that we think this completes his record. H.M.JR: Of my-- MR. WHITE: Yes, because Mr. Hornbeck told me that Mr. Hull did not know about the proposal of the payment of currency. They heard it, I think, from Hornbeck. H.M.JR: From Hornbeck? MR. WHITE: That is what Hornbeck told me. H.M.JR: Well, that is what Hornbeck was here for. MR. COE: You instructed him to pass it on. MR. WHITE: That was not the impression I got on the phone. You were listening, Southard. MR. SOUTHARD: Hornbeck said that Mr. Hull's only knowledge of it was through him, Hornbeck. H.M.JR: Well, there was no other way he could get it. Hornbeck was here, and I called up Mr. Hull as I remember it, somebody check my memory, and said, "Who do you want over here," and he sent Hornbeck over here. MR. WHITE: That is right. I remember that. 13 - 6 - H.M.JR: And then I particularly told Hornbeck to tell Mr. Hull. I don't know what you are going to do with these old men. I go over to see Mr. Stimson this morning. I sent him a copy of my correspondence with the President, and he said, "I never saw it." I said, "How do I get something to you so that you will read it?" I sent him a copy of my letter to the Presi- dent, and he said, "Well, I have no memory of it. Maybe I read it, but I can't remember it." MR. WHITE: All right. H.M.JR: That is why I want my - you see, I wrote the President on receipt of the letter from Chiang Kai- shek. I sent B. copy to State, War, and Navy. Now the President comes back to me and says - writes to me, and then I write to Soong. So I think this time when you send this thing, I want Mr. - say to Mr. Hull, "I want your record complete," and I can put on Hull's letter outside, copy to the Secretary of War and Navy, and then that makes their record complete, too. Mr. Stimson is very much interested, and he was very helpful this morning. But that ought to go out right after lunch. MR. WHITE: All right. H.M.JR: Jake, what do you think I ought to do?- MR. VINER: Well, I think we discussed it this morning, and Harry - - we all agree absolutely, so I think Harry ought to tell you. H.M.JR: All right. MR. WHITE: Well, it can be stated very briefly. H.M.JR: Talk louder, Harry. MR. WHITE: It can be stated very briefly. H.M.JR: I mean, I am not used to this Southern - 7 - 14 Portuguese accent. MR. WHITE: All right, I will bellow. (Laughter) H.M.JR: I mean, you are back in Washington, you know, where we fight. In Washington. MR. WHITE: Right. The only difference is, you mean you fight in the open here. We are in agreement with you, I think, completely, that the question of whether financial assistance shall be given, how much shall be given, and the timing, is one in which the Treasury is in no position to determine in view of the fact that the financial assistance has been requested both by the President and by the State Department as wholly 8 political matter, and therefore the decision on the question of assistance is one that lies outside the purview of the Treasury. That if financial assis- tance is to be given, there are three methods by which it may be given. One, through Lend-Lease, which would require some Congressional action in the alteration of the Lend-Lease Bill as at present contemplated; two, through an out-right Congressional special act; three, through the Stabilization Fund. We think that all three methods ought to be explained to the President, Secretary Hull, and the Congressional leaders, and the selection of the methods should be left to them, after having made it perfectly clear that if it is to be done through the Stabilization Fund that it is a character quite different than previous stabilization funds inas- much as the risk of return is so great as to make it virtually in the nature of a gift. The advantage of giving it through the Stabilization Fund, as it appears to us, are several. One, it could be done with the least legislative difficulty. After the conference, the Committee approval which you may seek, et cetera, is given; two, it would avoid the question of discussion as to interest rate and repayment, et cetera, because the arrangement could be made in - different from prior arrangements. No rate would be selected, either as to purchase or repurchase, nor time, so that there would be no-- 15 - 8 - MR. VINER: No interest rate. MR. WHITE: ... no interest rate and no rate of repurchase. Thirdly, financially and from the point of view of the Treasury, you probably would have 8. greater chance of getting something back in the future if you had yuan. They will be probably worth something; and, forthly, it does mean that during the post war re- construction period and subsequent to that, you may be able to do more with China and through China by having those yuan which you own than might be the case if it were an outright grant or loan. The disadvantage of course is that it is of a character quite other than you have hitherto contemplated, but the President may not wish the matter to be explored in the open 88 it would have to be if it were a Congressional act or 8. Lend-Lease act. He may feel that this is a very desirable way out for him, but we all agree and feel sure that you would feel so too, that you would under- take it only if the record is definitely clear that the arrangement is undertaken for political purposes. H.M.JR: Were you through? MR. WHITE: The third, as to what conditions and what other methods shall be employed in the actual use of the fund is something that can be determined only after a decision is made as to which one of those three methods is to be used. H.M.JR: Well, now, let me see if I can state the way I feel. I have had quite a lot of time to think about this thing. From the attitude of the President, Mr. Hull, and Mr. Stimson, who all think - and General Marshall - - that it is necessary, I am naturally willing to be guided by their opinion as to the military neces- sity. It isn't political, it is military. Or political, or both. It is both military and political. They think so. I don't feel it is as urgent as they do, but that is neither here nor there. Therefore, I think if you gentlemen could, 80 that I could have it by four clock, prepare a memorandum that I could present to Mr. Hull on the following lines, simply say: "My dear Mr. Hull, - 9 - 16 I would like to give you a memorandum which -"if there is anything - - he has written me so many I think he wrote me a definite letter where he asked for-- MR. WHITE: Definite letter. H.M.JR: I think we ought to answer that letter tomorrow, you see. Monday didn't he say he wanted three hundred million dollars? MR. WHITE: It was before Monday. H.M.JR: It only arrived here Monday. That was the thing that descended on me Monday. It was that letter. MR. WHITE: That letter was in response to a meet- ing which we had had and which they had asked for this loan, and I said that before We bring it to the Secretary's attention for decision that he would want a letter from Secretary Hull stating it. H.M.JR: No, this is a second letter. This is a letter - this is a second letter. I have had two letters. MR. BERNSTEIN: The second one you are referring to, Mr. Secretary, was a short letter from Mr. Hull enclosing a memorandum that Mr. Berle and Mr. Feis wrote, but that simply sent the Berle memorandum to you. MR. WHITE: He said for your information. MR. BERNSTEIN: It was the first letter that Mr. Hull wrote in which he mentioned the recommendation. MR. WHITE: I have it here. It is answering your note to hand of yesterday relative to the proposed Chinese loan proposition, "I herewith enclose for whatever it may be worth to you and your associates some memoranda on the subject prepared by some of my associates here. C. H." And the memorandum is one apparently prepared by Regraded Unclassified 17 - 10 - Berle. It has Berle's initials, but presumably from the State Department, in which they recommend a loan of five hundred million dollars and in which they hope that there shall be no special conditions and indicate the purposes - the general objectives of the loan. H.M.JR: Five hundred million? MR. WHITE: They recommend five hundred million. The Secretary of State had said three hundred million. They feel, according to Hornbeck, they are not in agreement with the Secretary on that matter. They feel it should be five hundred, but they feel that we ought to give what they have asked for. H.M.JR: Who thinks that? MR. WHITE: According to Hornbeck, everybody but Secretary Hull. They said Secretary Hull just picked the figure three hundred from the air on the usual basis that if they asked for five they will take three. MR. SOUTHARD: They say that Mr. Hull's official position still is as in the letter of January 10. MR. WHITE: Which asks for three. MR. SOUTHARD: Three hundred million. MR. WHITE: I have that here. H.M.JR: I can't find this thing here. Incidentally, have I sent this Eden memorandum around? MR. WHITE: No, you have not. H.M.JR: Well, that ought to be sent to Hull. MR. WHITE: That is right. H.M.JR: I think I sent it to the President. We will see when Chauncey gets in here. I think I did. 18 - II - MR. WHITE: Well, that should go to everyone to whom the previous letter went. (Miss Chauncey entered the conference.) H.M.JR: Come on, Miss Chauncey. I am waiting here. Sit down. Miss Chauncey, did I send the Presi- dent a memorandum from Mr. Eden? VISS CHAUNCEY: No, sir. That came in yesterday. H.M.JR: I have not? KISS CHAUNCEY: You sent photostats to Dr. White and Mr. Bell. H.M.JR: Well, then let's send a copy to the President and a copy - a letter to the President and on the outside of the President's letter say copy to State, War, and Navy, see. Now, where is the letter that came in Monday from lar. Hull? I mean, I can't find it. The dates don't seem to be consecutive at all. The one from Mr. Hull to me. (Filed January 24, 1942.) MR. AHITE: It is on the twenty-fourth. H.M.JR: I can't find it. MISS CHAUNCEY: It isn't 8. letter. It is this little memo of transmittal with Mr. Hull's initials. Regraded Unclassified 19 - 12 - H.M.JR: Sit down, Miss Chauncey. Let's put it this way. I think we have had all of these papers, and they are quite obviously over there at the State Department trying to build up a written record, and when I go back over there tomorrow, I want a written record, and I want to be able to say to Mr. Hull, "In answer to your letter of the - If the first one, in which he asked for three hundred, in answer to the second memorandum which I got - let's say it is on the twenty-fourth. MR. SOUTHARD: Twenty-sixth. H.M.JR: "We in the Treasury and also in view of the written request from the President and also I have consulted with Mr. Stimson and General Marshall, we are prepared to go forward with these financial arrange- ments." MR. WHITE: Do you want to mention that you-- H.M.JR: Wait a minute. MR. WHITE: ... talked with Stimson? H.M.JR: Wait 8. minute. "However, inasmuch as this is largely a political and military matter, I would like you to advise me - N no, it isn't necessary. He has told me. MR. WHITE: He has told you very clearly. H.M.JR: Then my answer is, "I am ready to pro- ceed, you see. MR. BERNSTEIN: Harry, did you mention to the Secretary Berle's call yesterday? 20 - 13 - H.M.JR: Wait a minute. Then the answer would be, "I am ready to proceed." Now, would you say in that thing how? MR. WHITE: I would say, "There is appended a memorandum which indicates the three possible methods of procedure that might--" H.M.JR: That is right. "Pending here is three possible ways," and I would say further, "Lend-Lease, direct appropriation from Congress, or the Stabilization Fund." Then I would like to say, In the use of the Stabilization fund, I would like to point out that we can not use it without getting Congressional action on account of--" MR. VINER: Leaders. MR. WHITE: Committee. H.M.JR: ... support similar to the one where you assisted me. You remember you assisted me. Similar to the one where you assisted me. "I also would like to point out that this is not the purpose for which the Stabilization Fund was created, and I hope that you will consider it last," see. I want to put that in. This will be the last one. MR. VINER: I would say, "Can be brought only with difficulty within the compass of the proposal." You mustn't say in the record that it is not the purpose. H.M.JR: I accept that advice and suggestion, but I would like to get over so that we think this is the last. Now, my purpose in calling on you today is to ask Regraded Unclassified 21 - 14 - you to advise me how you would like me to proceed from this point. In other words, throwing it back into his lap. "I am back here, I have got these letters, I have con- sulted with you and the President and so forth and so on--" MR. VINER: And say you will move at once on receipt of their advice. H.M.JR: "We are ready to proceed at once. We are ready to move - proceed upon receipt of your advice. Would you put in that we have also consulted with Stimson and Marshall? MR. WHITE: I don't think so, Mr. Secretary, I don't quite see that that would-- MR. VINER: That would mean that you had checked up on the State Department. H.M.JR: All right. But what I am trying to get. I have never had them build up such a written record on me. Now, I think we ought to - and they are very obviously - they are Pearl Harbor conscious. MR. MITE: We will do the same. H.M.JR: So we will ão the same, and we will come Regraded Unclassified 22 - 15 - back and I am there saying I am ready to go ahead just as soon as you tell me, and so forth and so on, but it certainly should be done; certainly one, two three, four, five, six, seven people ought to be able to get me a memorandum. Now, Bernie, what is burning you up? MR. BERNSTEIN: Nothing is burning me up, I just wanted as part of the record, they always have an oral record. Aside from the meeting we had at State the other day, Berle called yesterday morning. H.M.JR: Well, can I have that at four o'clock, gentlemen? MR. WHETEY Yes, you: may. H.M.JR: Do you need this book to work from? MR. WHITE: No, I think we have everything there. If necessary, we will get it. H.M.JR: Good. MR. WHITE: There is one point. As I read Secre- tary Hull's letter, it appears to me that he very definitely asks in amounts up to three hundred million, and therefore we shouldn't mention any amount, because we certainly oughtn't to go higher than anything he recommends, despite the comments of the State Depart- ment, so that let them state both the amount, timing, and so forth. 23 - 16 - H.M.JR: That is right, but we are ready to go ahead. Throwing it back in his lap. I am here, the purpose of my call is that there are three ways to do this thing, pointing out that we would like to do the Stabilization Fund route the least - at least, I would, but I am here to proceed at once. What? MR. WHITE: Would you want to set forth the pros and cons of each method or leave that out? H.M.JR: Oh, I would leave it out. It will save you people - you all think the Stabilization Fund is the easiest way, and I don't want to do it that way. Don't forget there is another way which you should mention. The President said he is willing to finance it out of his own war chest. MR. VINER: Yes, but he didn't have in mind five hundred million. MR. WHITE: Well, we don't know the amount. H.M.JR: But that is another way. The President said, "I am willing, as Commander-in-Chief, to finance it out of the war chest. MR. WHITE: Well, I think that should be mentioned, and let him turn it down. H.M.JR: Out of his war chest. I think it is two hundred million dollars. MR. VINER: That would be -- H.M.JR: But Jake, on the basis of twenty-five dollars - twenty-five million dollars a month, that would go quite a long ways. MR. VINER: You can't tie the State Department's hands on a monthly basis. H.M.JR: You certainly can't overlook the fact that the President did say he was willing to do it out of his own funds. 24 - 17 - MR. WHITE: That is a decision they can make, Jack, that it doesn't suit their purpose, but as far as the Secretary is concerned, he outlines these possibilities. MR. VINER: But you don't want to indicate that we are pulling them down to these lower dimensions. H.M.JR: But how do you know the President can't get more funds? MR. VINER: But the State Department hasn't put their views before the President. The State Department has protested that it has been handled that way. H.M.JR: Which way? MR. VINER: That the State Department did not get the chance to present their views. H.M.JR: Well, whose fault was that? Whose fault was it? Mr. Hull is vocal. He can still walk. He can go across the street just the way I can. MR. VINER: Well, you moved fast. H.M.JR: Well, I thought they said I didn't move fast enough. MR. VINER: You moved fast on seeing the President, and Hornbeck protested. MR. WHITE: Well, I think that is true. None the less, it is also true that since you are taking this position in the letter that you are doing this as a political measure. You are listing all the reasons and you are merely asking which way is more suitable to them. H.M.JR: Jake, you could take some out of the Presi- dent's fund, and some out of the Stabilization, and some out of some other. 25 - 18 - MR. VINER: You could say in part, because I don't want the record to show that you were pulling back or holding back. H.M.JR: We will say in part from the President's funds. MR. VINER: You want to make it all cooperative, and not with your acting as 8 brake in any way. H.M.JR: What does he answer me on the 24th? MR. WHITE: The note in which I think you sent him a - you informed him of the answer you got from Chiang Kai-shek. H.M.JR: I see. Now, somebody is going to write that letter. There are two letters that have to be written. You are writing one, Miss Chauncey. MISS CHAUNCEY: To the President. H.M.JR: Copy to State, War, and Navy, and the one to go up to Mr. Hull's house, and your (White's) people are to write another one just to State on the stuff that I got from the President, and also the stuff that I got - my answer to T.V. Soong. MR. WHITE: That is right. H.M.JR: And that is to go - 8 copy of that is to go War and Navy. MR. WHITE: Then there is a third letter which you were to send today with reference to your meeting tomorrow morning accompanying the memorandum and a -- MR. VINER: A chronological outline of the record. H.M.JR: If I could have that all at four o'clock. We will do it all then. There is no use doing it more than once. And if anybody has any bright ideas, Regraded Unclassified 26 - 19 - independently, bring them in. Are you satisfied, gentlemen, to follow it this way? MR. WHITE: I think that is right. MR. SOUTHARD: That leaves the timing up to the Secretary of State. H.M.JR: Which it should be. MR. SOUTHARD: Yes. MR. WHITE: The timing and the amount should be left with State. There is one thing that occurs to me. You are leaving the President out of this completely, which in view of the President's instructions to you, may or may not be all right. I am not quite certain. H.M.JR: How do you mean? MR. WHITE: Well, the President asked you to do something. H.M.JR: Well, I am -- MR. WHITE: You are just turning this right back on the State Department. H.M.JR: No, I am going to the State Department to see Mr. Hull to work it out with him. The President doesn't know about all this written record between us. MR. SOUTHARD: The President's memorandum said when Fox arrived you could proceed on this. Would it be possible for you to hand a four line note back to the President saying that due to the delay of Fox, you were getting together with the Secretary of State immediately on this? H.M.JR: Take this to the President when I send him this thing. Say, "My dear Mr. President: I am sending Regraded Unclassified 27 - 20 - you enclosed herewith a copy of a memorandum left to me" - "given to me by" - well, "from the Pritish Treasury." Paragraph. "I tried to see Cordell Hull today. Unfortunately he is home sick. In regard to the Chinese question" - "Chinese matter" - "and I have had B number of" - what did I say? MISS CHAUNCEY: "I tried to see Cordell Hull today in regard to the Chinese matter, but unfortunately he is home sick." H.M.JR: What did I say? Excuse me, again. MISS CHAUNCEY: "I tried to see Cordell Hull today in regard to the Chinese matter, but unfortunately he is home sick." H.M.JR: Yes. "Members of the State Department staff have been pressing members of my staff that we should not wait until the return of Mr. Fox, who has been delayed in transit." MR. VINER: "Has been seriously delayed." H.M.JR: "Seriously delayed. In view of this, I have arranged to see Cordell Hull tomorrow at his office" - "arranged to see Cordell Hull tomorrow, and hope to work out with his assi tance a plan for China." MR. WHITE: I don't quite like saying that they are pressing us and therefore you are responding. Could we say, which is true -- H.M.JR: Well, write the letter out and let these fellows fix it up, and they can bring that in. How is that? But that makes it clear, why I am going over there. Why not simply leave that out and simply say, "in view of the delay of Fox" -- MR. VINER: We are moving ahead. You are moving ahead with Hull. Regraded Unclassified 29 January 29, 1942 4:15 p.m. AID TO CHINA Present: Mr. White Mr. Bernstein Mr. Viner Mr. Coe Mr. Friedman Mr. Southard H.M.JR: I am sorry, gentlemen, but Mr. Roosevelt called and I had to take care of him. MR. VINER: It was a godsend for us. H.M.JR: Good. Fifty-five percent of the firms employing five hundred or more people now have payroll deduction plans and from a hundred to five hundred, twenty-two percent. Not bad. MR. WHITE: Does that mean everybody in the country, or just that the companies make it available? H.M.JR: No, that is the number of employees that are on the Social Security list. I mean, that is the way we count them. I mean, if we say 21 company has nine hundred employees, that means nine hundred are under Social Security. MR. WAITE: And that they are subscribing to-- MR. VINER: No, no, it is voluntary. MR. WHITE: Then there is no indication from that how many of the employees are taking advantage of the proposal? Regraded Unclassified 29 - 2 - MR. VINER: He has other data, I think, on that. MR. WHITE: Oh! H.M.JR: But I meant of the employees - he has the whole breakdown. We won't bother with it now. MR. WHITE: We will first do the letter that you wished to send to the President. H.M.JR: We got less? We had seven people this morning. Did a couple of them get sick? MR. WHITE: Just one - I had other things that had to be done. H.M.JR: You had other work to do? MR. WHITE: I didn't know you would miss him. (Laughter) He is a very good man, but-- H.M.JR: He almost said, "Other work which is more important," and then he caught himself. MR. WHITE: Well, I think it is more important for him. H.M.JR: You see he goes down to Rio with Sumner Welles and what it does for him. MR. VINER: He is not really telling you the truth. MR. WHITE: Am I not? MR. VINER: No. MR. WHITE: I don't know who you meant. MR. SOUTHARD: E. M. Bernstein. MR. VINER: Oh, I see. MR. WHITE: You notice I didn't deny that I wasn't - 3 - 30 telling the truth because it does happen. H.M.JR: Is there anything else to the President? MR. WHITE: Not to the President. The next is the letter to Cordell Hull with the enclosures. H.M.JR: Now, you are not sending anything to State, War, and Navy on this? MR. WHITE: Yes, these photostats. H.M.JR: Oh, but not my letter - I see. MR. WHITE: No, those are just form letters. H.M.JR: That is all right. MR. WHITE: And the next is the letter to Hull which I gather that you want to take with you. H.M.JR: And isn't there one to Stimson here? MR. SOUTHARD: You signed only one, Mr. Secretary. There are two there together. H.M.JR: Now, does that complete that? MR. WHITE: That completes that. The only question in our minds was whether you necessarily wanted to tell either Stimson or Knox or Hull or Welles who were getting copies. H.M.JR: No. MR. WHITE: It is not on there. H.M.JR: Did he say that? MR. WHITE: By indirection and through somebody. H.M.JR: He didn't say that. Regraded Unclassified 31 - 4 - MR. WHITE: Yes, that is - Hornbeck reported to us when he thought we ought to go forward with it now, and I answered by saying that it was my understanding that he was to wait until Mr. Fox had returned. H.M.JR: Well, do you mind? Have you got a pencil there? Because I would like to put it this way. "I am in complete accord with what - with what Mr. Hornbeck reports to me as the view of your Department." Now, that gives him a chance to say, "That isn't my view." MR. WHITE: That is better. H.M.JR: Because this isn't accurate. "I am in complete accord with what Mr. Hornbeck reports to my Department." They didn't talk to me, "As being the view of the State Department," you see. MR. WHITE: That would be strictly accurate. H.M.JR: I want it strictly accurate, because the reason I say that is when they brought up the stuff - well, just take this thing of Mr. Hull saying he didn't know when we told Hornbeck to let him know. What? MR. WHITE: He only knew through Hornbeck. H.M.JR: Well, take the other example, that when they tried to clear this thing with Hull about this resolution and Hull says, "Well, no one has ever told me about this before." Well, let's keep it - I don't have to give you - I can give you a thousand examples. Let's keep it strictly accurate. It is Hornbeck-- MR. WHITE: I think it sounds a little pedantic because, after all, I suppose Hornbeck has the right to speak for the Secretary, but in this occasion it may be all right. H.M.JR: We are trying to make a record. Hull has never said this. Regraded Unclassified 32 - 5 - MR. WHITE: All right. H.M.JR: Do you mind? MR. WHITE: Not at all. H.M.JR: Thank you. I want to be pedantic. "My only scale of preference"? MR. WHITE: "My own preference," I think is better. We can word that differently. "My own feeling is," or"my own belief, or "my opinion, or "I should prefer, of the alternatives." I should leastprefer of the alternatives. H.M.JR: Well, Something. I don't like this "my own scale." My own preference would be to rank the Stabilization Fund last, because of the special char- acter of the proposed financial aid. I will lay it out, and you fellows can just change it & little bit, something like that. I think that last paragraph is a little gratuitous. MR. SOUTHARD: It suggests a mode of -- H.M.JR: I think it is a little gratuitous. MR. WHITE: It has the value, although as you read it over I don't quite like the way it is stated, but it does have the value of indicating for the record again that you feel that the selection as among those choices should be made in collaboration with or by Congressional leaders and the President. The earlier part of the letter almost seems to suggest that you are going to take his advice as to the procedures, and I don't really think that that is what you are going to do, because you certainly - if he says the Stabilization Fund you will certainly raise it with the President and with the Congressional leaders, so that I think something is necessary, though as you read it I don't think it is quite the way it should be there. MR. VINER: I think if you send it tomorrow before 33 - 6 - you go, that paragraph is all right. He has got something to think over, that is all. MR. BERNSTEIN: I think it also has the merit - he may feel that if you suggest only those things which require Congressional legislation, that there will be such a long delay as to defeat the whole purpose, and you come along with the suggestion that legislation or Congressional approval will not necessarily involve delay, MR. VINER: I think that last paragraph should go in, and therefore I think you should send the letter to him today. H.M.JR: I will send it tonight to his house. MR. VINER: And let him have 8. chance to know what you are going to tell him tomorrow, to think it over. H.M.JR: I think if it went up to his house tonight it would be all right. MR. WHITE: I think it is better than coming in with a letter, myself. H.M.JR: I think so. That would be dated today. That gives -- MR. SOUTHARD: We could rewrite that one sentence and mention the meeting for tomorrow. MR. WHITE: It can easily be adapted and it is a little bit unusual, isn't it, Mr. Secretary, for you to come with a letter for him to read? H.M.JR: Yes, but you don't say anything about - "I am looking forward to seeing you tomorrow. MR. VINER: You could say, "I arranged for a confer- ence. MR. SOUTHARD: On the first page. 34 - 7 - MR. VINER: Have you got a copy of it there? H.M.JR: "Have requested a conference with you tomorrow." If I am gone, Harry, let one of your boys bring it up for signature and wait. MR. WHITE: We will take care of it. H.M.JR: And wait and then they can take it right on over to Mr. Hull. It would have to be at the house before seven. MR. WHITE: We can do this inside of fifteen minutes. H.M.JR: Sez you. Well, if you can, I may still be here. MR. WHITE: Well, if you are here you will sign it, and if you are not, it will be sent to your house and the man will wait and after your signature, bring it to Secretary Hull's house. H.M.JR: That is right. MR. WHITE: There is one other item. Oh yes, at what point do you want to inform the British in these discussions? I think you said, and Hull requested in his letter, that they keep currently informed. H.M.JR: Well, I certainly wouldn't - there is this letter that has gone to the President and this letter that has gone to Hull. I think sometime after the meeting tomorrow. MR. WHITE: After the meeting tomorrow you will let them know what you have decided to let them know? H.M.JR: Yes, but when I go into that meeting tomorrow I want my time-table. MR. WHITE: We have a preliminary draft here. Regraded Unclassified - 8 - 35 H.M.JR: Fix it up and give it to me tomorrow morning when I come down. MR. WHITE: That is all. Here is a cable that was just handed to me that bears on this subject. I think you might want to read it. H.M.JR: Please. MR. WHITE: I have only a carbon. H.M.JR: Read it out loud, then. MR. WHITE: Some of it bears and some doesn't. This is dated the 25th from Chungking from Gauss. H.M.JR: When is it dated? MR. WHITE: The 25th of January. H.M.JR: That is wonderful, and we get it today, the 29th. MR. WHITE: "The formation of a committee in Chung- king to coordinate allied approach to financial and econ- omic problems in China, particularly with respect to the utility of any foreign credits that may be granted to China, has been suggested by the Pritish Embassy. The British Embassy suggests that the Allied Economic Council, the committee" -- I never heard that name, so that must be a new phrase. ".:.. comprise two Chinese, two British, two Americans, and possibly one Dutch, one Australian member. One of the British and one of the Americans to be from the Embassy staffs. The Chairman and the Secretary to be Chinese. The Embassy says that Mr. A.A. Kung, Minister 36 - 9 - of Finance, knows of the suggestion and has indicated he approves it. Also that the Minister of Finance desires that the Council should be established without reference to proposed credits, that is, that the Council be charged with making economic studies and recommendations." H.M.JR: Who suggested it? MR. WHITE: This is apparently -- it is the British Embassy, but this is what Niemeyer has been suggesting for four months. That is what he went over for. ".... the Council be charged with making economic studies and recommendations, but that when the credits are granted, the Council also interest itself in problems connected with their effective utilization. The British Ambassador is prepared to approve the scheme. Provided such a body is given scope and authority ready to accomplish something, I can see its utility, however, as a result of seeing at first hand how inclined the Chinese authorities are toward side-tracking foreign economic advisors and disregarding their advice, I am sceptical of the practical benefit to be derived from organizing an Economic Council which may find itself either in the position of being politely ignored or simply rubber stamping what the Chinese want done. I could approve the establishment of & Council of capable men who are competent to study and make decisions on the serious economic problems in China, and to supervise the discussion of remedial measures, provided it were given definite authority under a loan or credit agreement, but I do not think that the Chinese would be prepared to agree to the handling of Chinese internal problems by such foreign participation." H.M.JR: That can wait until Fox can get back. MR. WHITE: Yes. They would like to have it tied to this arrangement. Dr. Fox will be in Washington in 8 few days and it might be advantageòus to discuss the matter with him. Regraded Unclassified 37 - 10 - MR. VINER: Did you tell him about the cable to Fox? MR. WHITE: It is Jack's idea we send a cable to Fox asking us to give us -- MR. VINER: Asking him. MR. WHITE: Asking him to give us a resume of what the Generalissimo told him, which need not hinder things. MR. VINER: It may give us an inside dope. 38 AN 29 1942 R doar Mr. President: I a sending you herewith - copy of & letter from the British Treasury on the (uss- tice of a. further loan to China. To were informat, you will rember, that the Generalissimo was sending Mr. 4. X. Fox to Washington to present the Generalissimo's views a this loan. Fe have just learned that Mr. Fox has been held up en route because of lack of transportation and my net arrive for som time. Us are, therefore, going forward at once with the Chinese loan diseussion. I tried to 900 Cordell Hall today but unfortunately be is has sick. I have arrenged & conference with his temorrow and I hope se vill have a proposal to report to you imediately thereafter. Faithfully, (Signed) 1. Forgesther, Jr. The President, The White House. Delivered by Secier Service 4:35 Ralph s Orcutt nmc Copies ta In white office HDW:dmh 1-29-42, Regraded Unclassified 39 909 Willard Hotel, Washington, D.C., January 27, 1942. Dear Mr. Secretary, CHINA Mr. Eden has now telegraphed that he and the Chancellor of the Exchequer have considered with every sympathy General Chieng Kai-shek's recent request for financial assistance. They propose to inform him that His Majesty's Government have decided to make available to Chinn under a lend-lease arrangement all munitions and military equipment that it is possible for them to supply. In particular this proposal would apply to stores which are- being supplied to Chinese forces now operating in Burma. Before communicating this proposal to General Chiang Kai-shek His Majesty's Government wish to make sure that it will fit in with any proposal which the United States Government have in mind. As regards a further financial loan, His Majesty's Government are ready to go forward with the scheme for a loan of L10 millions and $50 millions worked out by Sir Otto Niemeyer and Mr. Arthur Young if the United States Government are ready to take parallel action. But they do not feel able to offer a very large "psychological" sterling loan. Such a sterling loan would not be of actual help in present circumstances. After the war it would represent money available to China for the purchase either of goods or of gold and dollars and we should be deliberately adding to future difficulties in securing the equilibrium of our post-war balance of payments. The United States Government is in a position to take an independent decision, should they wish not only to take part in the Niemeyer-Young scheme, but also to offer further dollar loans. His Majesty's Government are merely stating their own position. Yours sincerely, J Phillips The Honourable Henry Morgenthau Jr., Secretary of the Treasury, Washington, D.C. Regraded Unclassified we 19 1942 My dear Cordell, The President returned to BD the letter which I received from T. V. Boand, dated January 21, 1942, and attached thereto a memorandum, a photostat of which you will find enclosed herewith. Upen receipt of this memorandum from the President, I wrote & letter to Dr. Soong, a copy of which I an also enclosing. There is also enclosed . photostat of a letter which I received January 27, 1942, from Mr Predarick Phillips stating the British position on the Chinese request. I believe that with these enclosures you now have a complete file of my correspondence on the China loan proposal. Sincerely, (Signed) E. Morgenthan, Jr, Secretary of the Treasury the Delivered 4 his homely The Denerable The secretary of tale Secret Service 7'35') nmc Capies a Dr. w hite fine inclasures Retto Secys Office n riem 1/19/42. Regraded Unclassified If COPY 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. Regraded Unclassified COPY 42 January 27, 1942 Dear Dr. Soong: I have received your letter of January 21, 1942, sending to me a message from the Generalissimo. I am glad to follow your suggestion that I wait until Mr. Fox arrives in Washington before renewing discussions with you. I want to assure you, in the meantime, that the Generalissimo's request is very much in my mind. Sincerely yours, (signed) H. Morgenthau, Jr. Secretary of the Treasury. Dr. T. V. Soong, Minister of Foreign Affairs, Republic of China, Chinese Embassy, Washington, D.C. Regraded Unclassified 43 909 Willard Hotel, Washington, D.C., January 27, 1942. Dear Mr. Secretary, CHINA Mr. Eden has now telegraphed that he and the Chancellor of the Exchequer have considered with every sympathy General Chiang Kmi-shek's recent request for financial assistance. They propose to inform him that Ilis Majesty's Government have decided to naice available to China under a lend-lease arrangement all munitions and militor eq loment that it is possible for then to supply. In particular this proposal would apply to stores which are being supplied to Chinese forces now operating in Burma, Before communicating this proposal to General Chiang Kai-shek His Majesty's Government wish to make sure that it will fit in with any proposal which the United States Government have in mind. As regards a further financial loan, Ilis Majesty's Government are ready to go forward with the scheme for : loan of 610 millions and $50 millions worked out by Sir Otto Nieneyer and Mr. Arthur Young if the United States Government are ready to take parallel action. But they do not feel able to offer a very large "psychological" sterling loan. Such a sterling loan would not be of actual help in present circumstances. After the war it would represent money available to China for the purchase either of goods or of gold and dollars and we should be deliberately adding to future difficulties in securing the equilibrium of our post-war balance of payments. The United States Government is in a position to take an independent decision, should they wish not only to take part in the Niemeyer-Young scheme, but lso to offer further dollar loans. His Majesty's Government are merely stating their own position. Yours sincerely, Hhillips The Honourable Henry Morgenthau Jr., Secretary of the Treasury, Washington, D.C. Regraded Unclassified 1/31/42 44 Secretary Morgenthau handed Secretary Jones a copy of this letter at their con- ference this morning. Treasury Department 1-29 Division of Monetary Research 45 Date 1/30/42 19 To: Miss Chauncey Mr. E. M. Bernstein took the original of this letter to the Secy's home last evening (about 6:15 p.m.). Secretary Morgenthau signed it and Mr. Bernstein delivered it to Secy. Hull at the Wardman Park Hotel. L. Shanahan MR. WHITE Branch 2058 - Room 214 letter 76 JAN 1942 aty dear Cordalls 1 - in complete accord with the view of the Blate Department as reported to my Department by Mr. Fornbeek that we should go forward with considers- tion of the Chinese lean without waiting for D. Fox to arrive here with the Generalissies's nassage. Your letter of Jenuary 10, 1942, and the State Department meserandes of January 23, 1942, as well as the discussions which have been held between the offi- cials of the two departments, inform me that the deci- sive considerations in the granting of financial assistance to China at this time are political and military. On this basis, I as prepared to 5 aboad at case, and at the conference which I have arrenged with you for tomorrow, " can discuss the next aleys to be taken. I as subsitting for your consideration, the following procedures for raising the funds to and the Genevalissimo's requests a. Congressional authorization 10 make a loan) b. in appropriation of funds under Lend-Lesse. 1 believe this would require legislation; .. The Itabilization Funds d. The President's Var Chest (Perhape available for part of the necessary funds.) Sach of these sources has, of course, adventages and disadvantages which you may want to consider at our meting. 1/29/42 (6,15 p.m.) Mr. E. M. Bernstein took original of this letter to the Secretary's home for signature. It was signed and Mr. Sernstein delivered it to Secretary Hull at Wardman Park Hotel. Regraded Unclassified 47 - 2 - As among these possible sources of funds the Stabilisation Red is this instance - to me to be the least desirable, because of the special character of the propesed financial sid. Should it be decided to use the Stabilisation Pund for this purpose, it will be necessary to obtain the approvel of the Congressional Committees in the same manner as you and I obtained it in December, 1940, in competion with the $50 million Chinese Stabilization arrangement. You may wish to consider the desirability of the President and curselves meeting promptly with the Con- gressional leaders to advise them of the problem and to discuss the alternative methods of financial assistance. with their clearance, it would be possible for the President to make an immediate announcement that be and the Congressional leaders are prepared, subject to the accessary Congressional action, to grant China the finan- eial sesistance requested by Chieng-Kai-Shek. The de- taile could be worked out later. Sincerely, /s/ Henry Secretary of the Treasury. The Honorable, The Secretary of State. HDW:BB:JV:dmb 1-29-62. Regraded Unclassified 48 January 29, 1942 by dear Frank: I am sending you, enclosed herewith, a copy of a memorandum from the British 11/07/42 Treasury in regard to assistance to China. Yours sincerely, (Signed) Henry Lion. Frank Knox, Secretary of the Navy. By Messenger Veach 5:00 Jilin.m.c Regraded Unclassified 49 January 29, 1942 12:18 p.m. Edward Foley: Smathers came in this morning, and I had 8. little talk with him and I showed him the letter and the evidence, and he said he didn't see how we could sell the company to Gallowher under those circum- stances. HMJr: Good. F: Then he shook hands, and he went out; BO if it's agreeable with you, I'll put out the release and HMJr: Go ahead. F: and send out the telegrams. HMJr: Go ahead. F: Okay. HMJr: Thank you. Regraded Unclassified 50 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Press Service Thursday, January 29, 1942. No. 30-3 The Treasury Department today suspended Dr. Julius Weltzien, $60, 000-a-year president of Schering Corporation, Bloomfield, N. J., manufacturers of anti-shock vaccines, hormones, sulfa compounds and other pharmaceutical products essential to the war effort. Seven others were also suspended from further activity as members of Schering's staff. Three of the seven were: Ernst Hammer, promotion manager, salary $22,000, formerly in the South American department of Schering A. G., Berlin, and at one time ite representative in South America. Hans Erdmann, director of engineering and maintenance departments, salary $10,000, formerly a designer of chemical equipment for Schering A. G., Berlin. Martin Bernhardt, head of the Schering legal department and comptroller of the corporation, salary $9, 400, a former vice- chairman of Schering A. G., Berlin. The suspension bara the eight individuals from the Schering premises, blocks their personal accounts, and all employees are forbidden to communicate with them without Treasury consent, The Treasury Department believes that today's action smashes completely a long-range German scheme to control an important segment of the pharmaceutical market in the western hemisphere, and enables the United States to take full advantage of the vital research now under way in the Schering laboratories at Bloomfield. Dr. Weltzien as late as 1938 held one of the most important positions in German industry as president of Schering A. G., Berlin, the second largest pharmaceutical corporation in Germany and the control board of Schering's subsidiaries concentrated in South America and other parts of the world. Ag early as 1933. Schering A. G., Berlin, undertook a long- range scheme to maintain its world-wide economic position. The Treasury charged that, 80 a part of this scheme, Hermann Goering in 1937 ordered the sale of Schering's subsidiaries in the western hemisphere to Swiss interests. Dr. Weltzien, who personally directed the expansion of the German Schering interests in South America and other parts of the world, transferred his offices from Berlin to this country in 1938 when he assumed the presidency of the Bloomfield plant. Regraded Unclassified 51 -2- Prior to Dr. Weltzien's entry into the United States, other key personnel from the Schering staff in Berlin had been sent into this country and assigned to important tasks in the Bloomfield Schering Corporation. Hammer, Bernhardt and Erdmann were brought here as a part of this plan, Treasury officials said. At the outbreak of the European war the network of western hemisphere Schering corporations, then headed by the Schering Corporation at Bloomfield, drew closer together in the effort to hold markets for Schering A. G., of Berlin, until the end of the war. In addition the entire network was used as a tool to raise foreign exchange for the Nazi regime. The Nazi scheme showed promise of succeeding until the Treasury Department blocked all German nationals under the President's freezing order in June of 1941. The Treasury blocked Schering funds on June 14, 1941, and installed supervisory representatives in the plant shortly after the attack on Pearl Harbor. Production of Schering's vital pharmaceutical products has continued since June under Treasury control. Heretofore the United States government has been unwilling to exchange pharmaceutical secrets with Schering Corporation in order to further development of vital drugs because it felt that important scientific discoveries might be made known to German agents and benefit the Axis. With the German elements removed, cooperative experiments will be made possible and the full benefit of Schering's important pharmaceutical research will be made available to the United Nations. -000- TREASURY DEPARTMENT 52 AM INTER-OFFICE COMMUNICATION DATE January 29, 1942 TO Secretary Morgenthau FROM E. H. Foley, Jr. Attached is a memorandum from John Pehle giving information in regard to Charles Belknap and Samuel Richard Fuller, Jr., the individuals mentioned by you the other morning when we were discussing personnel for General Aniline and Film. Hrig Attachment Regraded Unclassified TREASURY DEPARTMENT 133 INTER OFFICE COMMUNICATION DATE TO Mr. Polay January 28, 1942. FROM Mr. Pehle Mr. Charles Belknap, about whom you inquired, was born in OAKLAND, Maryland, on September 6, 1880. He attended St. Paul's Preparatory School, Concord, New Hampshire, from 1897 to 1899, and later the United States Naval Academy, from which he was graduated in 1903, commissioned A,3 en ensign. On October 5. 1918 he married Miss Helen M. Reckwood of Indianapolis, Indiana, and the following year resigned from the Navy with the renk of commander. Mr. Belknap was president of the General Steamship Company, Sen Francisco, from 1919 to 1921, then vice-president and later president of the Merrimack Chemical Company, 3/stac. Massachusetts, with which he was associated from 1921 to 1935. The Merrimack Chemical Company was absorbed by the Monsanto Chemical Company in 1930 and Kr. Belknap made Executive Vice-President of the latter, which position be still occupies. Mr. Belknap is a. member of the Executive Compittee of Monsanto Chemical Company and one of its directors. In addition he is Director of the Boatmen's National Bank, St. Louis; Chairman of the Board of the St. Louis Chamber of Commerce: Vice-President of the Manufacturing Chemists' Ascociation, and Vice-President and Director of Ohemists' Alliance. He 10 an expert chemist. His income is in excess of $30,000 a year, and he enintains two bank accounts in St. Louis - one th the Boatmen's National Bank and the other with the First National Bank, where his balance is reported to be substantial. Be 10 E Republican and an Episcopalian. According to Mr. Clark, of the St. Louis Federal Recerve Bank. who furnished this information, he is regorded in that city as thoroughly reliable and dependable in every yoy. Mr. Olark sald "Xr. Belknap in the highest type of cisisen". Be 18 8 member of B number of exclusive St. Louis, New York, end Boston clubs. There is nothing in our files DD Mr. Belknap other than his con- nection with Monsanto Chemical as Executive Vice-President. Konsanto Chemical Company was organized at St. Louis, Mismouri, in 1901. In 1918 the Company expanded substantially in the coal tax derivatives field by purchast ng the Chemical Acid Company. Two years Later Monsanto Chemical Company ecquired a substantial interest in on English aniline due company, and in 1929 moved into the field of plastics, There are no indications of any enemy control in the Comuany nor 16 it blocked. It enjoy E very high financial standing. Mr. Samiel Bichard Fuller, Jr., was born la Corning. New YOTE, February 19, 1879. Fe attended DeVaux School, Singars Fells, from 1890 to 1896, end Trinity College from 1896 to 1898. On November 1, 1905 he married Miss Lillian Alice Buesell. They have four ehildren. Regraded Unclassified 54 - 2 - Mr. Fuller was president of the Stafford Company, Readville, Massachusetts, from 1919 to 1921, then chairman of the board and treasurer of the Canadian Commercial Cotton Mills, Ltd., Sherbrook, Canada, from 1921 to 1929. "Who's Who" lists Mr. Fuller from 1929 as president of the American Glansstoff Corporation (now the North American Rayon Corporation) and American Bemberg Corporation, both of New York City. He served as & commander in the United States Naval Reserve Force during the first world war end in June 1935 was appointed Special Administrative Assistant to the Alaska Rural Rehabilitation Corporation, Matanuska, Alaska. According to Mr. Shaeffer of the Press Relations Bureau, Mr. Fuller was a labor relations adviser to the O.P.M. and & member of the Plant Site Board, but he has no con- nection with the Government now. Mr. Fuller vas interviewed on September 3. 1941, in connection with B. May investigation of Jacques Hoffman, rephew of A. Hoffman, head of the Zurich firm of Д. Eoffman and Cie. According to the report, Jacques Hoffman arrived in New York in April 1941 with in- structions from his uncle's firm in Zurich to confer with officials of the American Bamberg Corporation and the North American Rayon Corporation, to learn as much as possible concerning their organization, production, market outlook, transfer of dividends, capital transactions, etc. The report states that Fuller "declared his organizations had absolutely refused to enter into any discussion of the subjects raised. Fuller stated that he had figuratively thrown Hoffman out of his offices as he strongly suspected the latter to be a German agent or spy." Regraded Unclassified 55 January 29, 1942 My dear Ar. Warren: Thank you for your letter of January 28 and the contract information in regard to General Aniline and Film Corporation. Your cooperation is much appreciated. Sincerely yours, (21gned) 1. Morgenthaw, ... Secretary of the Treasury Hon. Lindsay C. Warren Comptroller General of the United States Washington, D. C. Fila n.m.e EHF:s 1-28-42 Regraded Unclassified 56 COMPTROLLER GENERAL OF THE UNITED STATES WASHINGTON January 28, 1942. B-23059 The Nonorable The Secretary of the Treasury. by dear in Morgenthau, There has been received letter of the Actin- Secretary or the Treasury, dated January 10, 1942, as follows: "Secretary Morgenthau sent the attached memorandum in regard to General Aniline and ilm Corporation to the President last evening. "This morning no directed no to send B. 2025 to you and the other interested departments and a encies of the Government having contracts or dealings with ti-18 company, with the surgestion that steps be taken to eliginate situations of the character described in the remorandum." There is attached horeto a list of contracts of varieve povernmental arencies with the Teneral Aciline and ilm Corpora- tion and its subsidiaries which LTS on ilv in this cofige. of tae list of contracts have ceen commissed to too curret ,6rvice Division of the Treasury bejariment, ederal ureau 01 investitution, Army Intelligence, and Cavy Intelli once This office will cooperate vita Date interested encies In connection with tas gatter. Sincerely yours, comptroller oters] of the nited states anclosure Regraded Unclassified 57 Record of contracts on file with General Accounting Office. Von Reister, F. W. -- Berlin, Germany. Contract Feriod Nod-725 10-11-35 to 6 mos. Use of airship terminal facilities. (Deutsche Zepplin Reiderei 0.m.b.H. Luftshiffbau Zepplin G.mbH. Von Meister, P. W. lew York, N. Y. 10:-35829 4-20-34 to 0-1-34 Parts for Maybach engine. /on Leister, F. W. (General Agent) ew York, N. Y. 140s-51570 5-10-34 to c wks. Filters, Pistons. Maycach Motor Co. usalid Corporation - New York - New York City Als-20662- 1-15-40 to c-30-40 Ammonia Machine service USDA-7161. (Company owned by Ceneral Aniline & Film Corp.) Ozalid Corp. SE-246 6-27-40 to 3-1-41 Film, dark brown, 120 rolls. Czalid Corp. SE-254 c-20-40 to Indef. Purchase of 35 non. photographic film printer & developer. Ozalid Corp. Tps-32002 12-12-39 to 12-31-40 Photographic supplies & equipment. Czalid Corp. Tps-37055 1-1-41 to 18-31-41 Photographic equipment and supplies. Czalid Corp. BR-wpa-c2 12-20-35 to Immed. Positive photo print paper. General Aniline & Film Corporation AD(1)-395 4-9-40 to 30 days 71lm renowed for one year. General Aniline X /ilm Corp. A1s-23525 10-17-40 to Indef. servicing Ammonia Developing Machine USDA #561-41 General Aniline /ilm Corp. - (Czalid Prod. Div.) Ala-25775-- 9-19-41 to 6-30-42 Servicing Ammonia Machine USDA 1409-42 Regraded Unclassified 58 -2- Seneral Aniline & Film Corp. - Agfa Ansco Div. - Einghampton, :.. Y. Jc-3205 5-0-21 to 0-30-42 Air cilm in rolls. General Aniline film Sorp. - Afts Anico Liv. - C. in SCI 9-20-40 to 0-30-41 Barking 10 non- double perforated nerative. General Aniline b :11m Corp. - Agfa Anaco Div. - !inghampton, 1. Y. J-17370 4-5-41 to indef. - mioro film J-17414 4-30-41 to indef. - micro film J-16/17 9-50-L1 to 45 days - Pur. :icro film J1c-0926 1-25-40 to 10 days - Photo supplies J=17400 9-12-41 to indef. - 'icro Film Jeneral Anilibe D. Film Corp. - wash. D. C. New-74 6-0-40 to 6-30-42 servicing and materials for processing and titling motion picture films. optical printing. NAW-1159 7-19-41 to 0-30-42 duplicating film, making prints, etc. K0s-69650 11-13-39 to 90 days. Film. General Aniline & Film Corp. 110s-77692 10-12-40 to 120 days films 110#-86691 6-30-41 to 45 days - purchase of film. General Aniline & Film Corp. - Agfa Ansco Div. 11408-79026 6-15-39 to 15 days motion picture film. N140s-79029 6-15-39 to 15 days Electrocardiograph paper. N140a-79393 7-20-39 to indef. Film, photographic N140a-83059 6-29-40 to 6-30-1,1 Pur. of paper. General Aniline & Film Corp. - mashington, D. N140a-83223 7-1-40 to 6-30-41 cut film. N1408-03200 7-1-40 to 6-30-41 motion picture negative. M156a-15139 5-15-39 to 6-30-40 Photo material :-196-a-17847 1-14-40 to 5-13-41 purchase film. N-156a-19751 5-21-41 to 0-30-42 pur. photographic matorials. N-156a-21113 8-21-41 to 12-11-41 Photographic chemicals. N-1508-21510 9-19-40 to 11-18-41 Pur. photographic equipment. Regraded Unclassified - 59 N-156s-21670 9-29 to 10-20-41 photo matorial N204s-19670 10-9-40 to 30 days pur. photo equipment. 11204s-20637 8-4-41 to 21 days photo paper. SAph=5627 4-11-40 to 6-30-41 pur. bromide paper. SAph-9776 4-1-41 to 6-30-41 for processing 35mm film. SAph-10161 3-25-41 to 6-30-42 bromide paper. SE-247 6-27-40 to 6-30-41 roll film. SE-315 9-10-41 to 6-30-42 film-photograph DA-Tps-411 7-11-41 to 30 days Purchase film DA-TPS-1706 10-9-41 to 60 days Aerial film Tps-21275 1-3-38 to 12-31-38 films, etc. Tps-21287 1-29-38 to 12-31-38 Photo equip. Tps-21497 2-1-38 to indef. Chemicals. Tps-23431 5-20-38 to 12-31-38 films. Tps-27430 1-17-39 to 1-31-40 sch. of supplies Tps-32865 12-12-38 to 12-31-40 photo supplies Tps-33464 1-24-40 to 1-31-41 Acids, chemicals, drugs, etc. Tps-34431 4-22-40 to 1-31-41 Acids, etc. Tps-37048 1-1-41 to 12-31-41 photographic equipment and supplies Tps-38685 2-1-41 to 1-31-42 pur. moids, chemicals. Tps-39664 4-2-41 to 12-31-41 pur. films Tps-42703 10-14-41 to indef. Pur. Whiteprinting machine. Tps-43510 12-15-41 to 12-31-42 photographic equip. & Supplies. ER-T2lps-91372 4-5-40 to 12-31-40 films. TRR-2108 11-26-41 to 15 days acetic acid. VAp-13633 2-24-39 to 3-31-40 Electrocardograph accessories. VAp-16967 3-18-41 to 3-31-41 paper, bromide 60 $ SW-292 4-23-41 to indef. Pur. Dry developing machine 4535ac-19103 7-14-41 to 12-31-41 pur. papers, cloth and film. 535ac-19855 7-17-41 to 12-31-41 pur. photographic film. 4535ac22931 11-24-41 to two weeks pur. holder out, film. W-101 ord 821 4-10-41 to 9-30-41 paper. W-101 ord-913 0-24-41 to 12-31-41 pur. paper. 4-450-no-94 8-15-40 to indef. Pur. of hypo rice crystals etc. .,-535-ac-13416 10-5-39 to 30 days Camera 4-535-40-13788 11-30-39 to indef. Camera #-535-ao-14442 4-8-40 to indef. merger contract filed in special file as paper 71136. W-535-ac-15584 8-20-40 to 45 days pur. of motion picture developer. W-535-ac-15858 9-10-40 to indef. pur. of holder. W-535-ac-17027 10-14-40 to indef. pur. of acid hardening solution powder. W-535-ac-17405 12-18-40 to indef. pur. of cloth. #-535-ac-17738 1-18-41 to 3 days. pur. film and paper. W-535-ac-17765 2-11-41 to indef. pur. photographic film and paper. W-535-ac-18750 4-4-41 to 5-5-41 pur. printing machine. W-535-ac-19054 4-29-41 to indef. pur. film chemicals. W-535-ac-22041 10-9-41 to 12-31-41 developer, powders. 11 W-535-ac-22469 10-30-41 to 30 days. pur. film. W-436-eng-7176 6-20-40 acetic acid, boric acid, etc. W-436-ang-7576 7- 8-41 to 15 days acetic acid, borax, etc. W-978-ang-2429 5-29-41 to 30 days pur. developer, Paralith W-101 ord-980 7-7-41 to 12-31-41 pur. paper. Regraded Unclassified -5- 61 W-226-ord-80 4-30-40 to indef. pur. of film. W-952-ord-2871 11-8-39 to 10 days X-Ray film. W-953-ord-1890 5-13-41 to 8-13-41 dry developing machine. NSW-305 5-15-41 to indef. machine printing. 62 THE WHITE HOUSE WASHINGTON January 29, 1942. MEMORANDUM FOR THE SECRETARY OF THE TREASURY Some time when you are talking to the President, will you bring up the question of Alien Property Custodian? Mace Grace Tully Jully Regraded Unclassified 63 January 29, 1942 4 p.m. RE WILLIAM PATT Present: Mr. Foley Mrs. Klotz H.M.JR: Sit down, Ed. The President of the United States - take it easy. This is O.K. (laughter). This is ell right. The President of the United States just called me up and wanted to talk to me when I was alone and said that John McCormack had teen in to see him and said that there was a reporter from either the Roston 7lobe - who said that they had the story that William Batt was - not only a director of the American Bosch, but was a trustee for the stock for the Swedish company which controlled American Hosch, and that this Swedish company in turn was controlled by German interests, and that furthermore, Ratt was receiving his salary from the Swedish company. I said it was my impression that this was not correct, and that Mr. Batt was all right, in the clear. The President said, "Well, get me up R memorandum on this thing and have it in 8. form that I can show it to John McCormack, and that he in turn, if he wants to, can show it to this newspaper man. Now, what are the facts? MR. FOLEY: Well, Murnane is the trustee of the stock. Batt is a director of American Eosch. I don't think he has very much stock in "merican Bosch. I will have Regraded Unclassified 64 - 2 - to check that. He is the President of S.K.F. H.M.JR: But as to his salary. MR. FOLEY: I think his salary is paid by S.K.F. and not by anybody else. I think we will have to get the return to be able to tell that. H.M.JR: You don't want to ask Batt point-blank? MR. FOLEY: Sure, I will be glad to. I don't know how far you want to go. I will go and see Batt, if you want me to, and tell him the facts. H.M.JR: No. What I would do is this. Tell him that the question has been raised. Do what you can on his returns, you see. MR. FOLEY: Let's find out what we can first. H.M.JR: Because I promised this to the President tomorrow. MR. FOLEY: Sure. H.M.JR: So you had better get hold of Irey and wherever the returns are. His company is in Pennsylvania. MR. FOLEY: Yes, it is in Pennsylvania. H.M.JR: I promised this to the President by tomorrow. MR. FOLEY: All right. H.M.JR: I would like to have it so I can give it to him at Cabinet. MR. FOLEY: Yes. H.M.JR: I would like to see it before. MR. FOLEY: All right. Regraded Unclassified 65 - 3 - H.M.JR: If they could get the returns down. Didn't you tell me that Batt came over to see you? MR. FOLEY: Yes, but not about Bosch, about his own company, S.K.F. H.M.JR: Well, I think what I would do is this. I would draw up two memoranda, one, Batt's connection with American Bosch, and two, Batt's connection with S.K.F. and who owns each, you see, MR. FOLEY: Yes. H.M.JR: So that the President knows, you see. MR. FOLEY: Well, why don't we prepare an over- all memorandum for the President and attach 8. memorandum that he can give to McCormack on the American Bosch angle of it, in so far as it relates to Bill Batt? H.M.JR: All right. But I mean over-all on Batt. MR. FOLEY: Over-all on Batt for the President's information, and one that he can give to McCormack that only deals with that and American Bosch. H.M.JR: That is right, but I want that by noon tomorrow. MR. FOLEY: All right. H.M.JR: And our friend Leo Crowley, is the President interested? Was it worth-while-ry talking to the President about American Bosch before I went in to him? And am I going to talk to him about the other thing? When are you going to be ready? MR. FOLEY: Well, we are not ready yet. H.M.JR: Did you find anything good in that book? MR. FOLEY: We have read five books, Mr. Secretary. I sent you another note on that, and there is nothing that we can use. Regraded Unclassified 66 January 29, 1942 4:33 p.m. HMJr: Hello. Herbert Gaston: Hello. HMJr: Herbert. G: Yes. HMJr: I've read that thing about Butler. G: Yes. HMJr: I don't see anything in there to make me change my mind. G: Well, I don't think - I don't see how that verdict can be changed. That 18, we do not want that man in the service. Now, the only thing that possibly could be considered would be reinstating him and then letting him resign; but I don't see that gets him anywhere or gets us anywhere. That's the difficulty. I don't see it. HMJr: What? G: I don't see - even if we were to consider reinstating him and then letting him resign, I don't think that would help his record or our record. HMJr: Well, no one has mentioned the fact that we still have that question about his Chinese servant, you know. G: No. HMJr: Who he said he would dismiss and didn't, Herbert. G: What? No that question hasn't been raised. HMJr: Well, but you and - what? G: That hasn't been raised at all. HMJr: That's still on his record, isn't it? Regraded Unclassified 67 - 2 - G: Yes, that's still on his record. HMJr: Now, the other thing 18, in reading Gorman's testimony, I think he went unnecessarily far in what he told Butler. I mean, I don't see why - is it Gorman or O'Gorman? G: Gorman. HMJr: What? G: Gorman. HMJr: I mean, why he thinks that Butler 18 such a wonder- ful fellow. G: Well, I think all he told Butler is that he had nothing against hie honesty. HMJr: Well, he said that he brought him back. Then officially, "I've never learned of anything which reflected upon his honesty." Well, that may be true, but how about his morals? G: Yeah. HMJr: What? G: Yeah. HMJr: What? G: Well..... HMJr: Well, anyway I don't - knowing the man's record and everything, unless you say to me that you feel strongly about it. G: Well, I do not feel strongly about it. My original notion, as you know, was the same as Johnson's, to let the man resign. But there is B. legal obstacle to that, as was pointed out to me later. HMJr: What 18 that? G: Well, I understand the Civil Service Commission objects strongly to permitting & man to resign Regraded Unclassified 68 - 3 - when you have cause for his dismissal. They demand that it be on the records. HMJr: I didn't know that. G: Yeah, so Thompson telle me. But in the result of his separation from the service, I heartily concur we cannot have that man back in the service. HMJr: But if you'd have known about the Civil Service thing, would you have signed the thing in the first place? The first recommendation, by letting him resign? G: No, I wouldn't; but if there was an ironclad law on that that you're not allowed to do it, I would have been disposed to do the - oh, be ultra-lenient if there was an opportunity, but. HMJr: of course, where the man's testimony doesn't ring true - let's say he didn't know about the Bermuda embargo, see? G: Yes. HMJr: Well, then, why did he put his name on the baggage? For what reason did he put it on there? G: Well..... HMJr: What? He lent his name. G: Yeah. HMJr: And the prestige of his position G: Yeah. HMJr: to hide something. G: Yes. HMJr: What? G: Yes. The man 1s a fool. HMJr: What's that? Regraded Unclassified - 4 - 69 G: I say the man 1s a fool. HMJr: Well, I don't know - I know he's a fool, but whether he's a knave, is something else. G: Yeah. HMJr: But I mean, this thing - well, I Just didn't know. G: Yeah. HMJr: Well, he knew enough to lend his name and his diplomatic passport to cover up something. G: Yes. HMJr: What? G: Yes. Oh, yes. HMJr: And my position is - leaving everything else out - here's a Customs Agent, who lent his name and his position and his diplomatic passport to protect a man who wanted to smuggle something in. G: Yes. HMJr: What? G: Well, it wasn't smuggling into the United States. He lent his name for him to evade - for the ack- nowledged purpose of evading British examination at Bermuda. He knew that. HMJr: Well, now wait a minute. Let's say that. But what we don't know, Herbert, 1s that supposing he hadn't been caught in Bermuda, would his name still have stayed on the baggage when he entered the port of New York. Now that we don't know. G: That we do not know. We have only to take his word for it. HMJr: That's all. G: That's right. Regraded Unclassified 70 - 5 - HMJr: But I mean, let's say that he had passed Bermuda successfully, would his name still have been on or not, and that's a matter of surmise. G: Yes. HMJr: But I think as a matter of discipline and a matter of example towards all these other people - now particularly that you tell me this latter thing about his Civil Service position G: Well, Thompson told me that. I suppose the thing 18 still being done of letting them resign under a cloud, but HMJr: Well, I think we've done too much of that, per- sonally. G: Yeah. HMJr: But I'm going to send it back to you. G: All right. HMJr: And I'm satisfied to let it stand. I think it G: I don't know any alternative to doing that. HMJr: All right, Herbert. G: Right. HMJr: Thank you. Regraded Unclassified store 71 January 29, 1942. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston The luncheon given by Ed Flynn today was attended by officers of the National Committee and about a dozen invited guests from the Departments, including Jerry Land, Larry Fly, Madam Perkins and Paul McNutt. The purpose was to announce George Washington (not Jackson) dinners on the evening of Monday, February 23, when the President is to give & fireside chat. The President will not address the Washington dinner but will be heard by radio. The price here at the Mayflower and the Willard will be $100 per plate, that is to say those who contribute $100 to the Committee funds for this year's campaign will get invitations. They hope to have 2,600 diners at $100 each at the two hotels. A $50 dinner will be held in New York and dinners at varying prices through- out the country. The purpose obviously of inviting depart- mental representatives in to today's luncheon was to offer them the privilege of helping to sell tickets. The im- portance of continuing Democratic control of the House was stressed and also the importance of electing this fall Senators who may be expected to support the President's policy in a peace settlement. The Committee owes between $600,000 and $700,000 and is hard put to get funds for current operations. Charlie Michelson's staff is reduced to him alone. There was little discussion other than by representa- tives of the Committee, but Reynolds, the Treasurer, and Madam Perkins both raised the question whether it wouldn't be possible to have lower priced tickets in Washington or to permit tickets to be bought by groups on 8. lottery basis. I walked back with Larry Fly, who is genuinely dis- turbed about the difficulty of asking for contributions on Regraded Unclassified 72 - 2 - & $100 basis this year. Charlie Michelson called me up this afternoon to ask if we would not like to put on a Defense Savings display for the New York dinner, which will be at the Commodore. I told him I thought we would and would let him know. wr TREASURY DEPARTMENT 73 INTER OFFICE COMMUNICATION DATE January 29, 1942. TO Secretary Morgenthau FROM George Buffington I have talked with John Sullivan and the Commissioner's office about having Internal Revenue field men approach moving picture theatre people about the Dieney film. I will give you our joint views at your convenience. I have been in almost daily touch with the Commissioner's office about the things we are doing to get people to pay their income taxes. The Commissioner has been 111 for the last two weeks but we have kept Mr. Cann informed on all subjects during this interval. I am sure Commissioner Helvering and his staff are fully aware of everything we have done to date or contemplate doing in the future. G.D. Regraded Unclassified 24 January 29, 1942. MEMORANDUM TO: SECRETARY MORGENTHAU FROM: Mr. Schwarz The Treasury correspondents have been digging through their file of press conference transcripts looking for comment on tax-exempts and have come upon this refer- ence on January 2, 1941, in reply to Nick Gregory's state- ment that he had been in New York on vacation and some people there were apprehensive about outstanding issues: "I made that clear. I think I made it clear a number of times, that all of my recommendations were for future, that I was opposed to making it retroactive. I have said it before and I say it now." 1 have shown them that there is no previous refer- cnce in the conference to State and local issues, although LnGuardia's attitude is mentioned. Most of the boys are satisfied but Art Hermann of INS may mention it. Dick Rendell of the Chicago Times plans to attend the conference on orders from his editor to ask about Я statement in the Chicago Herald-American, a Hearst paper, quoting you as saying that every dollar paid in for Defense Stamps in Chicago and its suburbs until February 21 would be earmarked for the special bomber fund which the Herald- American was sponsoring. The Defense Savings Staff found that the paper in one edition had enthusiastically stretched your message to Mr. Hearst telling him you were glad his papers were urging their readers to help buy bombers through purchase of Defense Stamps. The incorrect statement was killed after the first edition Saturday night, when our Chicago committee called attention to it. The Times is purticipating actively in the carrier boy program and apparently felt slighted, although the Defense Savings people say that all the Chicago papers were invited to use the bomber theme in nushing the sale of Stamps there. Regraded Unclassified 1/29/42 , 75 opies sent to Sullivan, Paul and Kuhn today. T 76 E L E G R A P PM 2 E3 H WZ95 75 T R CONCORD NHAMP JAN 29 1942 146P E A HENRY MORGENTHAU JR S U SECY TREASURY R I AM OPPOSED TO THE PROPOSAL TO TAX BONDS OF STATES AND 8 THEIR MUNICIPALITIES, BELIEVING THAT IT WOULD WORK TO THEIR T E DETRIMENT IN NECESSARY PUBLIC FINANCING. IT DOES NOT SEEM L E TO ME THAT THE AMOUNT OF MONEY INVOLVED JUSTIFIES THE G R DAMAGE WHICH MAY BE DONE OUR STATES AND MUNICIPALITIES; A WHICH OF COURSE ARE THE BACKBONE OF THE UNITEDSTATES. P H ANYTHING WHICH TENDS TO DAMAGE THEM WILL EVENTUALLY WORK T A HARDSHIP TO THE NATION AS A WHOLE ROBERT 0 BLOOD GOVERNOR OF NEWHAMPSHIRE. 5 226P. U R Y Regraded Unclassified January z, 1942 My dear Senator: I have your letter of January 26, 1942, enclosing a letter which you received from a friend of yours in Saples, Maine, 01- recting attention to €. rumor that the increment en defense bonds leaned at discount will be subject to such high rates of Inz that investors will be left with no more than their original investment. If I vers anovering this Inquiry, I would state very eg- photically that the rusior 11 completely without foundation. The only condition under which investors could be left with no more than their original investment would be the imposition of a. flat 100 percent tax on income from investments, without reference to the size of total tacone and to family and other obligations. No such proposal has ever come to my attention and, needless to BAY, has never entered our minds. apparently we have not sue- needed in conveying to all of the public the feet that the Public nebt Act of 1941. which removed all privileges of tax exemption from future issues of Federal obligations. did not segregate this particular category of income for additional texation: that it involves only taxing Income from Government bonds in the same wonner as income obtained from other sources. Moreover, AS you are sware, the tax treatment of non-intorest dearing bonds issued 98 M discount basis has been liberalised very recently. Prior to the Revenue 108 of 1941. taxpayers reporting on a cash basis were required to include the entire increment in their gross !ncome then redemetion of the bords. Under the Revenue Act of 1941, texpayers were extended the privilege of electing to report income from each securities 18 it scarues so that the rates of income tax on the annual increments are the some as those gm- orally applied to other sources of income. Sincerely yours, (Figned) D. Jr. Secretary of the Treasury Tonorable Arthur M. Vendenberg, United States Senate, Vashington, D. C. BY can winne Regraded Unclassified PITTMAN, INV., CHAMMAN HIRAM W. JOHNSON, CALIF. ARTHUR CAPPER, KANS, - M. LAPILLETTE, JR., wis. TEL. ARTHUR H. VANDENBERG, MICH, UTAH WALLACE H. WHITE, JR., MAINE HENDING SHIPSTEAD, MINIM. United States Senate MONT. GERALD P. NYE, N. BAK. MAIN MA. COMMITTEE ON FOREIGN RELATIONS a. L d GAN, RUBARO A. TRINWITH, CLEAN JAMES A. WHITE, ASST. CLERK January 26, 1942. re Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. My dear Mr. Secretary: I enclose herewith a self-explanatory letter from a friend of mine in Naples, Maine. This would indicate to me that the agitation for taxing U. S. Government bonds may interfere with the sale of defense bonds and defense stamps. Of course under no circumstances would any tax program go to the magnitude of wiping out the entire increment as suggested by the enclosed question. But if you had to answer the enclosed question, what would you say? With warm personal regards and best wishes, Cordially and faithfully, Enc. Regraded Unclassified THE MANOR 79 AND LAKE SHORE BUNGALOWS NAPLES, MAINE On Reservelt Highway - Revie jou Phone 6-19-3 January 23rd 1942 Men. Arthur E. Vandenberg Washington D.C. Monorable Arthur; Pardon my asking you for a very few mom- into of your very valuable time - but there 18 a matter about which I would appreciate an expression from you. In this locality there is a falling off in the sale of Defense Bonds and Stamps due to the fact that there is a persistent rumor in effect that the Bonds will be taxed to such an extent that the $18., invested will not bring the 25, RS advertised - but will return the $18., only. If you can in any way furnish me with an opinion or data or something to offer - I believe I can combat the present movement of non-buying. Some have told me that they have heard the mentioned rumor over the radio but I per- sonally have not heard it - and I cannot find out over which station or stations this information has been spread. -- Can you help me in any way?? l'indest good wishes and know that I am as elways your admirer and staunch friend, Regraded Unclassified 80 INTERNATIONAL BUSINESS MACHINES CORPORATION 500 MADISON AVENUE NEW YORK OFFICE OF THE PRESIDENT January 29, 1942 The Honorable Fenry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. Dear Mr. Secretary: It was very gratifying to receive your letter expressing your satisfaction and appreciation of what our organization has been able to accomplish on deliveries of card assem- blies. I want to assure you that any pressure that comes from you or any members of your department will always be welcome, because our desire always is to give you as near- Iy 100% perfect service as is humanly possible. We all appreciate your personal interest in this matter, and in return everyone in our organization 1a taking a personal interest not only in this particular problem, but in all of the tasks which you are handling in behalf of our country, which mean BO much to all of us. Sincerely yours Premident TJW:wda Regraded Unclassified TREASURY DEPARTMENT 81 INTER OFFICE COMMUNICATION DATE January 29, 1942 TO Secretary Morgenthau FROM Dave H. Morris, Jr. Subject: Armour & Company Telegram The following telegram, (dated January 29th), from Armour & Company may be of interest to you: "THANK YOU FOR YOUR WIRE. WE ARE FINDING THAT AS AN ISSU- ING AGENT IT IS MUCH MORE CONVENIENT TO HANDLE THE DELIVERY OF BONDS TO EMPLOYEES. THE PLAN IS WORKING WELL AND YOU VILL FIND OUR ORDERS WILL BE INCREASING FROM WEEK TO WEEK. ARMOUR DEFENSE BOND CAMPAIGN WILL START IN A VIGOROUS WAY ABOUT FEBRUARY NINTH AND WE EXPECT THAT PRACTICALLY EVERY ARMOUR EMPLOYEE, SOMETHING OVER SIXTY THOUSAND, WILL BE ENROLLED. If ARMOUR AND COMPANY, HARVEY G. ELLERD, VICE PRESIDENT DAMJ Regraded Unclassified TREASURY DEPARTMENT INTER OFFICE COMMUNICATION M 82 DATE January 29, 1942. TO Secretary Morgenthau FROM Gene Sloan Frank Isbey has an appointment with Richard H. Grant of General Motors, who is in Detroit to-day. Grant will be here in Washington to-morrow, Friday, January 30, at his office in the Hill Building, 839 17th Street. I have just talked with Mr. Graves, who will be here and see Grant himself at that time. Isbey will also see to-day, Joe Fields, Vice Presi- dent, and Harry Moock, one of the head salesmen of Chrysler. Also, he has an appointment at Ford, to go into exactly how they zone the country, etc. He promises a report to us on Saturday, which will doubtless cover the ground. Firms Employing 100 to 499 Persons Participating in Payroll Savings Plans, January 24, 1942 83 (As reported by the Defense Savings Staff's State Administratore) : Number of firms : Total : Percent of total State : with payroll : number : having payroll : savings plans : of firms : savings plans JRW.10 Jan.20 stare 17 57 285 20 15 20 58 18014 - 34 22 29 142 16 20 ilfornia 055 910 1,660 55 25 Lorgão in 83 198 42 nagoticut 100 188 622 16 30 lewore D o 84 1 , trict of Columbia 14 152 9 pica 68 139 49 Tris 68 589 IC 12 1: 22 50 34 44 Thris TO 162 2,252 7 n 76 586 I 13 - 9 271 3 214 25% 258 100 enturest 75 75 312 X 24 culsiano 0 384 1 1 3 24 198 2 12 38 50 405 & 12 52 333 1,523 3 22 337 179 1,022 13 18 Innesota 1/1 265 399 45 66 reissivel 30 35 143 of 24 210 664 I 32 115POR = 25 39 64 27 123 22 evale 14 24 33 58 New Hempshire 24 145 17 Jersey 171 223 869 29 26 Nexico 12 19 35 74 54 New York 505 922 4,239 12 22 insta Caroline - - 60 479 L 16 North Dekota 5 29 24 17 01:10 o 203 1,739 12 - Dilahoma 23 03 345 18 Oregon =1 21 317 7 Imaylvants 723 713 2,032 35 Rice Island 40 63 224 28 South Carolina 13 24 174 7 14 South Dakota 1 7 19 37 Tennessee 0 2 448 * I Texas 24 89 1,375 5 7 Utah 13 18 111 12 16 Vermont 10 38 63 F 60 Virginia 3% 70 338 21 Washington 71 76 406 17 19 West Virginia o 13 272 I 5 Wisconsin C 55 680 I 8 Wyoming I It 12 - 33 Reilronds , o - - - Total 55 = 26,953 3 22 Office of the Secretary of the Treasury, Division of Research and Statistics. January 23, 1542 - Less than 1 mercent Regraded Unclassified Firms Employing 500 Persons or More Participating Here in Payroll Savings Plans, January 24, 1942 84 (As reported by the Defense Savings Staff's State Administrators) : Number of firms : Total : Percent of total State : with payroll : number : having payroll : savings plans : of firms : savings plans Jan.10 Jan.10 9 23 76 abama 12 30 izona 15 17 17 88 100 kansas ov 15 18 33 83 lifornia 237 275 361 66 76 blorado 22 22 32 69 69 onnecticut 97 125 185 52 68 elaware 2 2 28 7 7 strict of Columbia 12 21 52 23 40 Lrida 18 22 66 27 33 eorgia 35 39 143 24 27 Haho 8 8 10 80 80 llinois 277 319 634 44 50 ndiana 41 41 180 23 23 9 10 owa 53 17 19 ansas 16 30 30 53 100 entucky 19 27 70 27 39 ouisiana O 0 85 - - laine 42 45 45 93 100 laryland 40 77 154 26 50 assachusetts 41 199 370 11 54 Michigan 305 305 333 92 92 linnesota 87 96 105 83 91 asissippi 12 12 28 43 43 issouri - 122 122 - 100 fontana 4 4 5 80 80 lebraska 28 28 41 68 68 levada 3 3 3 100 100 ew Hampshire 17 26 27 65 96 lew Jersey 185 197 .238 78 83 ew Mexico 5 5 5 100 100 ew York 435 607 1,350 32 45 orth Carolina 49 71 168 29 42 orth Dakota - 1 1 1 100 hio 285 322 557 51 58 klahoma 22 31 62 35 50 regon 51 51 51 100 100 hnsylvania 336 348 625 54 56 chode Island 58 61 90 64 68 South Carolina 27 32 96 28 33 South Dakota 3 3 3 100 100 Tennessee 4 4 106 4 4 Texas 36 43 187 19 23 Utah 8 9 14 57 64 Vermont 10 12 13 77 92 Virginia 41 65 95 43 68 Washington 44 47 86 51 55 West Virginia 2 21 67 3 31 Wisconsin 84 94 137 61 69 1 1 - 100 Wyoming 1 Railroads 105 105 105 100 100 Total 3,192 4,043 7.330 44 55 Office of the Secretary of the Treasury, January 29, 1942 Division of Research and Statistics. Regraded Unclassified 85 Analysis of Participation in Payroll Savings Plans January 24, 1942 Number Total Percent participating number of total in payroll in the partici- savings plans country pating Part À - Summary by Number of Organizations Participating Business organizations (1) Railroads 105 105 100 (2) Other firms with 500 employees or more 3,938 7,217 55 (3) Firms with 100 to 499 employees 5,933 26,902 22 (4) Subtotal - large firms 9,976 34,224 29 (5) Firms with less than 100 employees 6,434 (6) Total business organizations 16,410 . - Governmental organizations Grand total 16,410 # Part B - Summary by Number of Employees Covered Business organizations (1) Railroads 1,433,046 # * (2) Other firms with 500 employees or more 11,347,140 # (3) Firms with 100 to 499 employees 1,393,277 (4) Subtotal -- large firms 14,173,463 - (5) Firms with less than 100 employees 216,083 - (6) Total business organizations 14,389,546 30,200,000 48 Governmental organizations (1) Federal Government - 1,600,000 4 (2) State and loosl governments 569,866 2,700,000 21 (3) Total governmental organizations, 569,866 4,300,000 I. Grand total 14,959,412 34,500,000 43 fice of the Secretary of the Treasury, Division of Research and Statistics. January 30, 1942 Excludes agricultural employees, military personnel, employees on WPA or NYA or COC projects, proprietors, firm members, self-employed, casual workers and persons in domestic service. Data not available. Regraded Unclassified Unfilled Orders for Savings Bonds nt the Federal Reserve Banks and the Post Office Department January 15 to date (In thousands of pieces) : Unfilled : : Unfilled : New orders Bonds Stock of IBM : orders at : : orders at : received manufactured bonds deliveries opening of : : close of today today on hand this day : business : : business Jan. 15 550 660 750 455 231 1,000 16 455 773 775 426 204 755 17 426 672 800 298 204 1,000 18 298 none-no mail none-closed 298 204 600 19 298 204 800 202 704 095 202 204 800 86 1,184 20 1.000 21 86 411 800 59 1,546 475 22 59 697 800 86 1,676 1,0% 23 86 569 800 50 1,871 1,000 24 50 727 800 26 1,922 1,000 25 28 none-no mail none-closed 28 1,922 26 28 490 1,000 7 2,011 7,000 27 7 434 1,000 1/ 7 2,177 28 7 474 1,000 6 2,102 7,000 Office of the Secretary of the Treasury, January 29. 1942 Division of Research and Statistics. Bonds in Washington vaults only. 1 Includes 400 thousand pieces manufactured for inventory in the field. 2 Includes 600 thousand pieces manufactured for inventory in the field. Regraded Unclassified CONFIDENTIAL Stock of Series E Savings Bonds on Hand 1/ January 15, 1942 to date (In thousands of pieces) : Stock on hand : : Bonds Stock on hand IBM : beginning : Sales : manufactured close of deliveries : of day : this day : this day day 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 7,966 1,000 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 24 9,988 263 800 10,525 1,000 25 10,525 none-closed none-closed 10,525 - 26 10,525 487 1,000 11,038 2,000 27 11,038 186 1,000 11,852 - 28 11,852 251 1,000 12,601 2,000 Office of the Secretary of the Treasury, January 29, 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 Unclassit UNITED STATES SAVINGS BUNDS Comparative Statement of Sales During Last Twenty-three Business Days of January 1942 and December and November 1941 (November 1-29, December 2-29, January 2-28) On Basis of Issue Price (Amounts in thousands of dollars) : : : Sales Amount of Increase : Percentage of Increase : = : : : : January : December : January : December Item January December November : 1942 : 1941 : : over : over : over : over 1941 : : : : December : November : December : November Series E - Post Offices $141,826 $ 92,178 $ 37,997 $ 49,648 $ 54,181 53.9% 142.6% Series E - Banks 448,167 210,172 71,478 237,995 138,694 113.2 194.0 Series E - Total 589.993 302,350 109,475 287,643 192,875 95.1 176.2 Series For - Banks 66,326 28,182 18,978 38,144 9,204 135.3 48.5 Series G - Banks 272,687 132,562 105,035 140,125 27,527 105.7 26.2 Total $929,006 $463,093 $233,487 $465,913 $229,606 100.6% 98.3% Office of the Secretary of the Treasury, Division of Research and Statistics. January 29, 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 necesserily add to totals. Regraded Unclassified UNITED STATES SAVINGS BONDS 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 I Series I Series 7 Series G Total Series I Series I Series G Total January 1942 1 $ 3,982 $ 10,229 $ 1,964 $ 7.605 $ 19,798 $ 14,211 $ 1,964 $ 7,605 * 23,760 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 6,775 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 12,571 45,498 9 5,746 12,359 1,798 4,765 16,923 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 2,255 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 5,004 39,956 24 4,655 15,820 2,239 5.344 23,403 20,476 2,239 5.344 28,058 26 7,095 39,997 5,022 17,516 62,535 47,093 5,022 17,516 69,630 27 4,967 11,504 3.569 23,125 38,199 16,471 3,569 23,125 43,165 28 5,318 18,394 2,656 18,636 39,686 23,712 2,656 18,636 45,004 Total $145,808 $458,396 * 68,290 $280,292 $806,977 $604,204 $ 68,290 $280,292 $952,786 Office of the Secretary of the Treasury, Division of Research and Statistics. January 29, 1942. Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Figures have been rounded to nearest thousand and will not necessarily add to totals. Regraded Unclassified - UNITED STATES SAVINGS BOND SALES Series E 1942 and Series D 1941 JANUARY FEBRUARY MARCH APRIL " is 25 is 22 8 15 22 29 5 is 9. 26 DOLLARS DOLLARS Millions DAILY Millions 60 60 55 55 50 50 45 45 40 40 35 35 Series E 1942 30 30 25 25 20 20 Series D 1941 15 15 10 10 5 5 a 0 - " 6 25 I # 15 R$ I 8 15 12 29 $ 12 13 26 JANUARY FEBRUARY MARCH APRIL - of - The - Regraded Unclassified - 91 Unfilled Orders for Sevince Bonds N the Federal Reserve Banks And the Post Office Desmittent January 12 to date (In thousands of nieces) : Unfilled : : Unfilled New orders Bonde : : : orders at Stock of IBM : orders at : received manufactured opening of : : close of bonds deliveries : : business today today : business on hand : this day Jan. 12 541 859 595 805 236 625 13 805 423 630 598 236 650 14 598 622 570 550 236 685 15 550 660 750 455 231 1,000 16 455 773 775 426 204 750 17 426 672 800 296 204 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 86 411 800 59 1,546 875 22 59 697 300 86 1,676 1,000 23 86 569 800 50 1,871 1,000 24 50 727 800 28 1,922 1,000 25 28 none-no mail none-closed 28 1,922 - 26 28 490 1,000 7 2,011 2,000 27 7 434 1,200 7 2,177 - Office of the Secretary of the Treasury, January 28, 1942 Division of Research and Statistics. * Bonds in Washington vaults only. Includes 400 thousand pieces manufactured for inventory in the field. Regraded Unclassified 92 Stock of Series E Savings Bonds on Hand 1/ January 15, 1942 to date (In thousands of pieces) : Stock on hand : : Bonds : Stock on hand : IBM Sales : beginning : : manufactured : close of : deliveries : of day this day : : this day : day : 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 7,966 1,000 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 24 9,988 263 800 10,525 1,000 25 10,525 none-closed none-closed 10,525 - 26 10,525 487 1,000 11,038 2,000 27 11,038 186 1,000 11,852 - Office of the Secretary of the Treasury, January 28, 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 Washington. UNITED STATES SAVINGS BONDS Comparative Statement of Sales During First Twenty-three Business Days of January 1942 and December and Sovember 1941 (November 1-29, December 1-27, January 1-27) On Basis of Issue Price (Amounts in thousands of dollars) : : : Sales Amount of Increase : : Percentage of Increase : Item : : : November : January December January : December : January 1 December : 1942 : 1941 : 1941 1 over : over : over : over I : : : December : November : December 1 November Series E - Post Offices $140,490 $ 86,301 $ 37.997 6 54,189 $ 48,304 62.8% 127.1% Series E - Banks 440,001 189,529 71,478 250,172 118,351 131.8 165.6 Series E - Total 580,492 276,130 109,475 304,362 166,655 110.2 152,2 Series 7 - Banks 65,634 26,455 18,978 39,179 7.477 145.1 39.4 Series G - Banke 261,655 129,429 105,035 132,226 24,394 102,2 23,2 Total $907,781 $432,014 $233,487 $475,767 $198,527 110,1% 85.0% Office of the Secretary of the Treasury. Division of Research and Statistics. January 28, 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 Daily Sales - January, 1942 On Basis of Issue Price (In thousands of dollars) Post Office Bank Bond Sales All Bond Sales Bond Sales Date Series 1 Series 1 Series I Series G Total Series I Series I Series 6 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 23,641 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 24 4,655 15,820 2,239 5.344 23,403 20,476 2,239 5.344 28,058 26 7,095 39,997 5,022 17,516 62,535 47,093 5,022 17,516 69,630 27 4,967 11,504 3,569 23,125 38,199 16,471 3,569 23,125 43,165 Total $140,490 $440,001 $ 65,634 $261,655 $767,291 $580,492 $ 65,634 $261,655 $907.781 Office of the Secretary of the Treasury, Division of Research end Statistics. January 28, 1942. Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Figures have been remaded to nearest thousand and will not necessarily add. to totals. D. n. Bell January 29, 1942 Harry White Secretary Morgenthau In this problem of what they call "Lend Lease in Keverse", there are two things which come to my mind that I would like the two of you to think about and talk to ne about: 1. How are we handling the sterling situation in the various sterling areas? I know about the dollars that we are supplying the American troops with but I don't know anything about the question of supplying them with sterling. 2. Then Mr. McCloy, Assistant Secretary of War, asked we to think about how we should buy and pay for the things they were buying in Australia, I wonder through whom they are going to buy them, and I wonder if we shouldn't have the same provision as me apparently are wing to have for the purchases under Lend-Lease; namely, that the Army and Navy buy the military purchases and the Treasury buy the non-military purchases. Regraded Unclassified TREASURY DEPARTMENT 96 INTER OFFICE COMMUNICATION Ht DATE JAN 29 1942 TO Secretary Morgenthau FROM Messrs. Foley and Pehle This is a report on the cable you have received from the refugee organizations in Shanghai, a copy of which is attached. Mr. Bell called Norman Davis of the Red Cross who said that when war broke out with Japan the Red Cross had approxi- mately 1,000 tons of wheat at Shanghai which it was distributing to 3500 Americans and 20,000 refugees. Another ship was on the water when the war began but has not been heard from since. The Red Cross suggested that possibly the JDC might remit through the State Department. Pehle discussed this matter with M. A. Leavitt of the JDC, which before the outbreak of war remitted approximately $30,000 a month to Shanghai for the support of 20,000 refugees. The JDC has heard that there is a possibility that it can obtain local currency in Shanghai against the payment of $90,000 to an 8.8 yet unnamed American in this country. The JDC secured the permission of Navy Censorship to cable Shanghai via South America to ascertain the name and address of this American. Mr. Leavitt has indicated that when they receive a reply from Shanghai he will communicate with us further. It is our recommendation that no reply be made at this time to the cable from Shanghai. Regraded Unclassified Treasury Department of - Mr. Peble 97 TELEGRAPH OFFICE 1/50/46- IN JV 67 SHANGHAI 242PM JAN 22 1942 DLT MORGENTHAU line, 1- " 8 0 TREASURY DEPT WASHINGTON TWENTY THOUSAND JEWISH REFUGEES FROM CENTRAL EASTERN EUROPE FACING HUNGER DEATH ALREADY NO FUNDS FOR BREAD LOCAL JEWISH COMMUNITIES NOW PENNILESS IMPLORE GRANT JOINT RELIEF ASSOCIATION PERMISSION REMIT FUNDS VIA SWITZERLAND OTHER NEUTRAL COUNTRIES PROHISITION REMITTANCES WILL BE INHUMAN SIMILAR SENTENCING DEATH CHILDREN WOMEN ESCAPED FROM EUROPE. TOPAS CHAIRMAN SHANGHAI JEWISH ASKENAZI COMMUNI ASSN COMMUNAL AS°N OF jewish REFUGEES SEPHARDIN COMUNAL ASSN, 840AM Regraded Unclassified C 0 P 98 se Chauncey Y FEDERAL RESERVE BANK OF NEW YORK January 29, 1942 CONFIDENTIAL Deer Mr. Secretary: Attention Mr. H. D. White I am enclosing our compilation for the week ended January 21, 1942, showing dollar disbursements out of the British Empire and French accounts et this bank and the means by which these expenditures were financed. Faithfully yours, (s) L.W. Knoke L.W. Knoke Vice President The Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Enclosure Cory:bj:1-31-42 Regraded Unclassified 1. 14348 DEBIT CRED Gav's of (+) or Gov's Proceeds (*) or Total Other Total Other Dear.(-) Total. Expendi- Other Total of Gold Other Dear, (-) Debite turer(s) Debits Credits Gold (0fficial)(b) (e) Creditate in Bulance Debite tures (d) Debite Credits Sales Credite in Balance 1,793.2 605.6 1,167.61 ,828.2 1,356.1 52.0 420.1 + 35.0 866.3(p) 416.6(e) 449.7 1,095.3(e) 900.2 195.1(e) +229.0 1,425.6 1,356,7 2,793.1 2,109.5 108.0 575.6 + 10.8 E'8LB 421.4 456.9 1,098.4 900.2 198,2 +220,1 1,203.0 1,792.2 410.8 2,189.8 1,193.7 274.0 722.1 - 13.2 38.9 4.8 34.1 8.8 - 8.8 - 30.1 140.9 105.9 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 + 1.9 0.3 - 0.3 0.3 - 0.3 156.1 111.6 44.5 134.6 - 1,0 133.6 - 21,5 16.1 - 16.1 0.4 - 0.4 -15.7 88.1 60.6 18.8 51.5 - - 51.5 - 36.9 0.8 - 0.8 8.4 - 0.6 - 0.4 - 31 22.4 17.6 4.8 18.0 - - 18.0 - help 0.5 - 0.5 0.2 - 0.2 -0.3 2 26.4 17.7 8.7 11.5 - - 11.5 - 14.9 0.1 . 0.1 0.1 - 0.1 - 30.2 22.9 7-3 26.8 0.5 24.3 - 5.4 , - 0.1 - 1 L 0.1 + 0.1 26.6 16.5 7-6 10.2 - - 10.2 - 14.2 - I - 0.1 - 21 0.1 + 0.1 E AT E archasing Commission to of Denada for French Account Beek unded January 21, 1942 - million Cumlation from july 6, 1940 162.7 million Regraded Unclassified (a) Includes payments for éccount of British Purchasing Commission) Brith Air Ministry, British Supply Board, it Supply fisher Centrol, and Ministry of Shipping. (b) Setimated figures based on transfers from the New York Agency of the Bank of Monteral, which apparently represent the proceeds of official British sales of American securities, including those effected through direct negotistion, In addition to the official selling, substantial liquidation of securities for private British account occurred, particularly during the early months of the was, although the receipt of the proceeds at this Bank cannot be identified with any accuracy. According to data supplied by the British Treasury and released by Secretary Morgenthau, total official and private British liquidation of our securities through December, 1940 amounted to 8334 million, (c) Includes about 885 million received during October, 1939 from the accounts of British authorized banks with lier York banks, presumbly reflecting the requisitioning of private dollar balances, Other large transfers from such accounts since October, 1939 apparently represent the acquisition of proceeds of exports from the sterling ares and other currently secruing dollar receipts. (d) Includes payments for account of French Air Commission and French Purchasing Commission. (a) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day, Total British Total Gold Tur 0m Debiter 1/0 false 11 the 33.0 16.6 306.6 504.7 412.7 20.9 36.7 418.7 12 30 87.3 5.1 22 J + LA 477.2 16.6 40.6 707.4 536.4 20.9 110.7 41.0 +00.2 na 16.5 OA 62.4 a 12.3 + 4.9 - 460 $ 462.0 246.2 16 123.9 86.5 + 16 na 16.7 99.5 0.2 as 18.1 + 9.0 23.1 - 23,1 52.2 21.2 - - no + 29.1 10.7 0.5 10.2 2,0 2.1 0.7 - 249 Oct, Oct, 29 37.4 - 37.6 19.7 11.9 - - 7,8 -17.7 8,2 5.5 2.7 8,0 3.9 2.1 * 0,2 Oct. 3 52.8 0.2 52.7 32,5 19.3 - - 13.2 =20.3 10.3 6.9 3.6 11.6 9.0 2.0 4F 1.3 di 42.2 [ ALL 22.2 17.3 . . 4.9 - N.S. 3.9 1.8 2.1 2.0 0.2 2.6 - 1.1 1942 DESD: Dec. 31 11.5 - 11,3 7.9 7.4 - - 0.5 - 3,4 1,8 1.8 - 1.6 - 1.6 - 0.2 Jan. , 7.0 - 7.0 1.4 0.1 Il E 1.3 - 5.6 0.7 - 0.7 0.2 - 0.2 - 0.5 14 9.2 - 1.2 7.4 5.4 - - 2.0 - 1.8 8.1 - 2.1 0,6 - 0.6 - 1.5 21 12.0 - 12-0 1.5 6.1 E . 1.4 - 4.5 1.2 Il 1.2 1.6 - 1.6(a) +0.4 of Total Debite Since Outbreak of the January 21, 1941 I 7.7 sillion . For monthly breakdown ⑉ tabulations prior to April 23, 1961. - For monthly broakdown ase tabulations prior to October a, 1942. (a) Insludes $1,000,000 credited to Australion account for credit of U. s. Savy. Regraded Unclassified COPY 102 TELEGRAM SENT NEW PLAIN January 29, 1942 AMERICAN legation, bern, (SWITZERLAND). 258, twenty-ninth. AMERICAN INTERESTS - FAR EAST. Department's 185, twenty-second. Please delete name James J. Saxon. HULL (FvdA) SD:WY:MEH Copy:ec:2-2-42 Regraded Unclassified C 0 103 P I DEPARTMENT OF STATE WASHINGTON January 29, 1942 In reply refer to FD 881.51/89 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses a copy of strictly confidential despatch No. 556, dated January 14, 1942, from the American Legation, Tangier, Morocco, soncerning the exchange situation in the Tangier Zone. Enclosure: From Legation, Tangier, Despatch No. 556, dated January 14, 1942. LEGATION OF THE 104 UNITED STATES OF AMERICA Tangier, January 14, 1942 No. 556 STRICTLY CONFIDENTIAL Subject: Exchange Situation in the Tangier Zone. The Honorable The Secretary of State, Washington, D.C. Sir: I have the honor to refer to the exchange and monetary situation in the Tangier Zone with particular reference to the fall in the ex- change value of the franc in Tangier and to the efforts of the Spanish authorities to promote the circulation of the peseta and to give an account of & conversation which I had today with Monsieur de LARGENTAYE, Inspector of Finance and Financial Attache to the French Embassy in Spain, who is on a visit to Morocco making a study of the exchange situation. M. de Largentaye stated that the French Government in Vichy and even more so the French Protectorate authorities in Rabat were very much concerned regarding the situation of the frane in Tangier. He stated serious consideration was being given to the withdrawal of the Moroccan franc by the French Protectorate authorities from Tangier where, 8.8 the Department is aware, it has a free circulation along with the peseta. He stated that he had come to Morocco to study the situation and to make recommendations and that he expected to see the Spanish authorities in Tetuan and also those in Madrid before proceeding to Regraded Unclassified -2- 105 Vichy where the question would be decided. He stated that unless some accord could be reached with the Spanish for revalorizing and stabilizing the frane (he mentioned in this connection a rate of 250 francs to 100 pesetas as B rate which in his opinion was a normal one as compared with the present rate of 405 francs to 100 pesetas), he thought the French Government would probably take the decision of withdrawing the French Moroccan franc from circulation in Tangier. He expressed the view that the fall of the frane in September and October in Tangier had been due to a flight of capital from French Morocco following the introduction of anti-Jewish legislation. He added that this was not a situation which the French authorities were in a position at the present time to correct and accordingly he had come to study what practical measures might be available. He said that of course many persons in Tangier had attributed the fall to the action of the Spenish authorities in endeavoring to compel payment of customs duties in pesetas and in endeavoring to insist upon payment of fiscal charges and of many commercial transactions in pesetas but he thought this had been an effect of the fall in the franc rather than the cause of it. I observed that this was also our opinion and mentioned that I and the Consulate General in Casablanca had so reported to the Department. M. de Largentaye asked me what our attitude and that of the British had been and whether the British had considered the action of the Spanish authorities in violation of the Anglo-Spanish agreement of February 26, 1941, concerning Tangier. I stated that in view of the small number of American merchants in Tangier the question of payment of Regraded Unclassified 106 customs duties in resetas had not been of particular importance to us and that I had viewed the problem as one which the Spanish authorities had been forced to make out of practical necessity following the fall of the franc. I cited to M. De Largentaye the fact that the International Administration in 1937 had suspended the provision of Article 27 of the Tangier Statute making the peseta legal tender following the decline in the exchange value of the peseta at the time of the Spanish Civil War. I stated that I had advised the Department against making any representa- tions against the Spanish action in compelling payment of customs duties in pesetas owing to the belief that the measure had been adopted by the Spanish ss at temporary expedient out of practical necessity and I mention that the subsequent evidence had borne me out. I mentioned that the British had brought suit in the Mixed Court and had obtained B. decision of that tribunal according to which the action of the customs was found illegal and there had thereafter been a relaxation of the rule. I added that so far as I knew the British authorities had made no formal representations in view of the fact that they believed as we did that the situation would be cleared up without such necessity. M. de Largentaye asked me if I knew what the British attitude was with regard to the Tangier Zone and what our own view was, as he stated that he thought the French Government would naturally be influenced by any decisions that might have been taken or which were likely to be taken with regard to the status of Tangier. I replied that I did not know of any decision which the British had taken with respect to the definitive status of Tangier but that so far as I knew they continued to be interested in the maintenance of the status quo here at the present time. I added Regraded Unclassified 107 that 80 far as the Department was concerned I knew that we also were very much interested in the maintenance of the special character of Tangier although of course this was a very small problem at the present time in the light of the general world situation. I added that I could of course malce no statement as to what might happen in the future with reference to Tangier. I stated that personally I thought it would be a mistake for the French to withdraw the French franc from Tangier as it would inevitably carry with it certain political implications. It was true, I stated, that as M. de Largentaye had stated the status of the franc in Tangier was a matter of embarassment to the French Portectorate so long as it fluctuated violently and fell to a point where it had unfortunate re- percussions on the economy of the French Protectorate as well as French prestige but I thought that he should take into account the consideration that the withdrawal of the franc from circulation by the French might be interpreted as an act of the part of France of disinteresting itself in Tangier. He observed that that was true but he thought that economic motives might outweigh all other considerations. M. da Largentaye informed me that in June, 1941, the French had concluded with the Spanish Government a financial agreement whereby the French agreed to make available to the Spaniah in Tangier for payments the sum of 2,500,000 francs monthly but for some reason the Spanish had only availed themselves of one such monthly transfer and that in September, 1941. The agreement had expired at the end of 1941. My visitor asked me if in my opinion shipments from the United States to Tangier were likely to decrease in the future. He observed in that connection that according to information he had been able to obtain Regraded Unclassified -5- 108 from local financial sources about $25,000.00 was offered monthly on the Tangier market against which local merchants had had to fine some $100,000. to $125,000. monthly for the purchase of goods from the United States. He thought that it might make some difference if it were to be expected that our supplies to Tangier were likely to diminish. He said he realized of course that withdrawal of the French franc from Tangier would constitute a very severe hardship to the American and British colonies as the consequence would be that the Spanish would probably incorporate Tangier financially into the Spanish Zone with the result that the peseta would no longer be available at the free exchange rate of 23.50 but rather at the official rate of 12.50. I stated that I thought that the war and its difficulties would un- doubtedly result in a considerable diminution in the export of goods from the United States to Tangier and Spanish Morocco. M. de Largentaye stated that so far as he could observe there was rather looser control by the British over the destination of goods coming into Tangier and the Spanish Zone than there was for example in Spain or Portugal. He concluded that the British were inclined to close their eyes to the export of goods from Tangier to the Spanish Zone and to the French Protectorate. I stated that there was certainly no disposition on the part of the British or Americans to disregard the export from Tangier of goods from the United States or Great Britain to destinations other than Morocco. M. de Largentaye stated that there was e. further consideration in the matter of monetary control in Tangier which was disturbing to the French Protectorate. This was a matter which he could not speak of officially but which he had no objection to mentioning personally and that was the possible misuse of the Tangier free exchange market for france by the Regraded Unclassified -6- 109 Germans. In this connection he pointed out that there was nothing to prevent the Germans from transferring large quantities of franca from the hundreds of millions available to them in France to the French Protectorate by the opening up of & credit in the name of the German Armistice Commission with the State Bank of Morosco. Such Moroccan france may be withdrawn by the Germans and brought up by diplomatic bag by the German Armistice Commission to Tangier and here converted into such foreign currency as might be available locally. I asked him if he had any specific information which might lead him to believe the Germans had engaged in such transactions and he said that there was rea- son to believe that there had been some transfer to Switzerland which might well have been for German account. M. de Largentaye stated that he was seeing the Spanish authorities in the next day or two and was quite anxious to know what the attitude of the British might be with regard to Tangier. I informed him that Mr. Yenkin, British Minister Counsellor, whom he knows personally, was arriving in Tangier on January 16 and that if he desired I would raise the question with my British colleague as to whether Mr. Yenkin might be disposed to receive M. de Largentaye before the latter's departure on January 17. M. de Largentaye stated that he was very desirous of seeing Mr. Yenkin. He added that he had instructions that he might meet with British diplomatic officers to discuss "service questions". He continued by saying that he would be very glad to meet with the British Consul General in Tangier also if the British Consul General eared to see him and I stated that I would endeavor to ascertain and BO inform him. M. de Largentaye stated that it was very important for him to come to a conclusion very shortly on the subject of his discussion with 16 as -7- 110 as he was proceeding to Madrid on January 17 and would go from thence to Vichy where he thought an early decision would be taken by the French Government. He expected to have conversations in the next day or two with Spanish officials in Tetuen whom he expected to find much more receptive in their attitude and more "liberal" than the exchange authorities in Madrid. Respectfully yours, J. Rives Childs Charge d'Affaires ad interim In quintuplicate to the Department Copy to American Embassy, MADRID VICHY 851.5 JRC/tsh Copy:bj:1-30-42 Regraded Unclassified TREASURY DEPARTMENT 111 INTER-OFFICE COMMUNICATION DATE January 29, 1941 TO Secretary Morgenthau CONFIDENTIAL FROM s. lietrich Begistered sterling transactions of the reporting banks were 8.6 follows: Sold to commercial concerns 31,000 Purchased from commercial concerns 16,000 Open market sterling T38 quoted at 4-03-3/4, with no reported transactions. In Sew York, closing quototions for the foreign currencies listed below were ae follows: Canadian dollar 11-7/8% discount Argentine peso (free) .2360 Brazilian milreis (free) .0516 Colombian peso -5775 Mexican peso .2065 Uruguayan peso (free) .5250 Venezuelan bolivar .2710 Ouban peso 1/16% premium e purchased $1,125,000 in gold from the earmarked account of the Bank of exico. The Banco do Frasil, as fiscal agent of the Brazilian Government, today repurchased 100,000,000 milreis (valued at $5,000,000) of the 160,000 mil- reis (value, $8,000,000) which the Stabilization Fund had bought from Brazil last November 5 under the July 1937 Stabilization Agreement with that country. Accompanying the payment of $5,000,000 to the Fund out of Brazil's dollar account at the new York Federal Reserve Bank, about $5,016,600 worth of the gold held as collateral by the Federal WRS returned to Brasil's earmarked account. The Stabilization Fund still holds 60,000,000 milreis, valued at $3,000,000 and collateralized by $3,072,500 in gold. to new gold engagements were reported. In London, spot and forward silver remained at 23-1/21 and 23-9/16d respect- ively, equivalent to 42.67 and 42.78% The Treasury's purchase price for foreign silver WSS unchanged at 35¢. andy and Harman's settlement price for foreign ailver was Also wichanged at 35-1/87. Ve made no purchases of silver today. Regraded Unclassified 112 -2- The report of January 21, received from the Federal Reserve Bank of New York, giving foreign exchange positions of banks and bankers in its district, revealed that the total position of all countries was short the equivalent of $3,436,000, a decrease of $809,000 in the short position since January 14. Net changes were as follows: Short Position Short Position Change in Country January 14 January 21 Short Position* England** $ 24,000 (Long) $ 788,000 (Long) - $764,000 Europe 2,473,000 2,452,000 - 21,000 Canada 661,000 (Long) 685,000 (Long) - 24,000 Latin America 14,000 24,000 + 10,000 Japan 161,000 160,000 - 1,000 Other Asia 2,305,000 2,289,000 - 16,000 All Others 23,000 (Long) 16,000 (Long) + 7,000 Total $4,245,000 $3,436,000 - $809,000 . Plus sign (+) indicates increase in short position, or decrease in long position. Minus sign (-) indicates decrease in short position, or increase in long position. **Combined position in registered and open market sterling. CONFIDENTIAL A 113 BRITISH EMBASSY WASHINGTON, D.C. PERSONAL AND SECRET January 29th, 1942 Dear Mr. Secretary, I enclose herein for your personal end secret information 8 copy of the latest report received from London on the military situation. Believe me, Dear Kr. Secretary, Very sincerely yours, Halifax The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D.C. Regraded Unclassified 111 Copy No. BRITISH I 08! SECRET (U.S. SECRET) OFTEL No. 34 Information received up to 7 - 28th January, 1942. 1, NAVAL Night 22nd/23rd, In the MACASSAR :.TRAITS the U.S. 8/11 STURGEON obtained one hit on a Cruiser or Aircraft Carrier and the Dutah S/U K.18 sank a Destroyer and hit a Cruiser, During 24th and 25th Dutch aircraft hit three Crudsers, a Destroyer and four Transports, two of which sank, Night 26th/27th. H.M. Destroyers engaged an enemy Cruiser and three Destroyers off ENDAU. One enerry Destroyer was sunk and one damaged, 009 British Destroyer sank, U.S. and Australian A/S units have mink one Large and probably one small U-bout off DARWIN, On 17th a medium efzed Norwagian tanker outmard bound in convoy was torpedood and sunk off CAPE EACE, on 22nd a small Greek Steamer was torpedoed 260 miles from CAPE RACE On 24th a medium sized British Tanker was torpodeed off CAPS HANTERAS, the after part being munk, 2. MILITARY LIBYA. The latent reports received only ccVer the period up to the afternoon of the 26th when our troops were disposed to cover BENGHAZI and to block the enemy's further advance north and northeast of usus, Mobile column and patrols are carrying out offensive operations against the enemy's lines of communication, MALAXA. East: Dur forces are in contact with the enemy north of JEMALUANG, Centre: Our /orces have made a slight vithirawal and heavy fighting continues. West: Heavy fighting on the coast road south of RATU PAHAT continues but the position 1a confused, Some parties of 15th Indian Infantry Brigade reached vicinity of BENUT but it 10 resorted that 2,000 were on beach Cour miles acuth east of DISCANANG. 3. AIR OPERATIONS TSTAN FRONT. 26th/27th. HANOVER - 38 tens; 1DEN - 43 tons; BREST - 39 tons, During these operations five ...C.M.P. and eight R.M.A.F. aircraft took part without casualties. 2714/28th, SI aircraft send out, BREST - 35; BOTLOGNE - 10; shipping off GRANBLIZS - 6. No casualties, LIPYA. Throughout 26th our fighters attacked M.7. and tacks moving between ANTELAT, SAUND and ISUS, Heavy damage was Inflicted entimated at a minimum of 120 vehicles destroyed or damaged and 200 troops killed and Regraded Unclassified 115 - 2 - mounded, Traffic on ANTELAT-LESUS Track, heavy in the morning had practically ceased in the afternoon and many vehicles had been abandoned. Only two eneary aircraft, one of which was destroyed, were seen, We had no casualties, SICILY. Night 26th/27th, Wellington bombers dropped seven tons of bembe on CATANIA and four tone on COMISO, Hangars and runsays straddled at both aerodrcmes, MALTA. 26th/27th, Enemy aircraft approached the island on several cosasions but for aircraft crossed the coist, 27th. Twenty air- craft dropped bombs damaging buildings and dockyard aschinery in the grand harbour. There were no casualties, MALAYA. 25th/26th. 19 bombers with 23 fighters as escart attacked an enemy naval force north east of ENDAU. Hits are reported on a Cruiser and two Merchant Vessels of 8,000 and 9,000 tons respectively. Two further foroes of bombers and fighters more despatched to continue the attack but no details have yet been received, Enemy troops on ENDAU-MERSING road were bombed and a large stores dump was hit. Fierce opposition was encoun- tered from a large number of enemy fighters, thirteen of our aircraft are missing and two more creshed. Enemy casualties were eleven destroyed, two probably destroyed and three damaged by our aircraft, also another destroyed by 4.4. fire. 26th, 27 enemy aircraft bombed TENGAH aerodrome rendering it unserviceable and continually attacked our forward troops and commications. 27th, 65 enemy aircraft attacked KALLANG and SELETAR, seven of our aircraft were destroyed on the ground and thirteen damaged, Hangars and other buildings were hit. NETHERLANDS EAST INDIES. Many enemy attacks on shipping off west coast of SUMATRA and raide in varying force at scattered points in the Eastern Archipelago are reported. 4. There 1a further corroboration of the recent reports that throughout the last fortnight of December forty trains of 35 oil tank care each, passed daily through BASIE from GERMANY to ITALY, this representing the movement of no less than 300,000 tons of oil from GERMANY to ITALY in two weeks, Regraded Unclassified TREASURY DEPARTMENT 116 INTER OFFICE COMMUNICATION DATE January 29,1942 TO Secretary Morgenthau Mr. Kemarok FROM Subject: Summary of Military Reports For East Another British convoy of troops arrived at Singapore on Jenuary 24. (This makes the third in the leet month). Dur army believes that the British and Japanese forces are approaching equality in strength. The Japanese still have air superiority in Malaya. The British have landed plane reinforcements, however, and have At least one equedron of Hurricanes now in action. In the air battles, the British have inflicted somewhat more loss than they have suffered. The number of sirfields available to the British 16 limited and this has enabled the Jepanese to cause considerable damage to British planes on the ground. AR yet, no large American forces have reached the For East. A few driblets of sirulanes have been thrown into the setion, however. The fortunes of the war are still on the side of the Japanese. They still have ample forces and the shipping and freedom of the seas, necessary to transport these forces to the various fronts. While the Japanese planes have proved to be quite good, it is in the sir that the turn in the war will come first. The small air strength of the Japanese is 8 weakness which 18 already beginning to manifest itself. (U.K. Operations Recorts, January 15-22,27: M.I.D. Information, January 29, 1942) Aulso-German Front The Russian pressure All along the Russo-German front 18 making it increasingly difficult for the Germens to regain the initiative on land. The Germans etill are not Regraded Unclassified 117 able to withdraw and refit enough divisions for fresh operations, to enable them to exercise the strategical initiative once again. The Russians are maintaining their superiority in the Air. The size of the handicap which the weather 1s to the Germane may be inferred from the fact that the British state that German air sctivity is mainly on the southern front, from Kharkov to the Crimea. Whenever weather permits the German sir force to operate, the Russians interrupt it by frequent attacks on the sir- dromes used by their fighters end dive bombers. The British estimate that the Germans are now weing 1,500 planes on the Russian front, compared with over 2,500 during the first weeks of their Russian campaign. (U.K. Operations Report, January 15-22, 1942) Battle of the Atlantic On January 25, serial reconnaissance showed both German battle cruisers at Brest out of the dry-dock. (Theee two 26,000 ton ships may be ready for sea duty Again. The 35,000 battleshio, Tirpitz, 1s at Trondheim, Norway. All three major units of the German navy are thus At porte on the open Atlantic.) (U.K. Operations Report, January 26, 1942) The main concentration of German submarines is on the North American coast, from Newfoundland to Virginia. Smaller groups are working in northwest approaches to England, near the Azores, and off the northern coest of Russia, off Murmansk. (U.K. Operations Report, January 15-22, 1942) German Army The British estimate that the Germans have 23 divisione in France and 11 or 12 in the Balkans. A year ngo, the Germans had at least 50 divisions In France.) (U.K. Operations Report, January 15-22, 1942) Regraded Unclassified 118 - 3 - Shipment of 011 to Italy The movements of oil from Germany to Italy via the St. Gotthard in Switzerland, which started on December 12, were still continuing on January 18. Three or four trains of tank cars, representing about 1,800 tons of 011, were going through daily. Some of the tank wagons contained gasoline. (At this rate, Italy would be receiving 84,000 tons of oil per month from Germany. The British, some time 880, estimated that the Italians need, 88 a minimum, 100,000 tons a month. The significant factor in these shipments is that the oil 1s coming from Germany, whereas it would seem that Romania would be the logical source. This might indicate serious transport troubles in Hungary and Yugoslavia.) (U.K. Operations Report, January 27, 1942) Regraded Unclassified 119 January 29, 1942 Dear Bill: Thank you for your letter of Jan- vary 27th, transmitting reports received from your London office. I was verymmuch interested in reading them. Yours sincerely, (Signed) Henry Col. William J. Donovan, Coordinator of Information, Washington, D. C. Jilinmic Regraded Unclassified 120 COORDINATOR OF INFORMATION WASHINGTON, D.C. January 27, 1942 Dear Henry: The attached reports have just come to me from our London office. I thought you might DE interested in seeing these. Sincerely, Bill William J. Donovan Honorable Henry Morgenthau The Secretary of the Treasury Washington, D. C. Regraded Unclassified COORDINATOR OF INFORMATION 121 Summary of Home Public Opinion British Secret Ministry of Information There has been a slight decrease in public confidence, and satisfaction over Russian progress is overshadowed by anxiety over the Far East. There is some disappointment over the stalemate in Libya and increased extended enxiety in Far East, Pessimism over Singapore continues and is in- tensified. There is criticism of lack of foresight. There is enthusiasm over Russian successes, but some sections of the middle classes are uneasy over the possible extension of Russian post-war influence detailed for internal changes. Some fear Rommel out-maneuvered the allies in Libya, and are concerned lest the battle be prolonged indefinitely. The question "Where is the U. S. Fleet?" is widespread. Some revival of "All talk and no do" criticism. Admiration of MacArthur's stand demonstrating American ability and willingness to fight. General feeling that "when America really gets going she will pull the chestnuts out of the fire." Very little interest in Pan American Conference. There is some hope that the Americans may undertake in Fire what the British are reluctant to carry out. There are hopes and expectations of the replacement of incompetents instead of mere reshuffling in the Cabinet. The public is sympathetic with Australian demands for an Empire Cabinet. General feeling is that radical changes in the conduct Regraded Unclassified 122 of the war are necessary to achieve victory. There is criticism of the apparent failure of the non- stop bombing offensive against Germany. There is continued criticism of radio and press, with a tendency to minimize Far East defeats. 123 The following are excerpts from The Ministry of Economic Warfare's Weekly propaganda digest, which have just come to us from the London Office. Reports show that typhus is reaching epidemic proportions in the east. All ordinary travelling between Germany and occupied states has been sus- pended. Officials and soldiers who must travel must undergo a period of quarantine. Schools closed in the Ukraine. Disease has already penetrated into Germany as far as Frankfurt-on-Main but there is no sign yet of the epidemic in the German army because of careful precautions. The Roumanians are suffer- ing seriously. Special steps have been taken in Lithuania. Reichsarbeitsblatt puts the figures of foreign workers in Germany at the end of September at 2,139,000 including 472,000 women. A special effort is now under way to recruit foreign women workers, especially Rolish, Flemish, Bulgarian and French. Italy and France signed an agreement late in December whereby the French will open a credit account in favor of Italy while Italy renounces claims on infantry and artilery weapons, motor vehicles and other supplies of French troops who fought Italians. 124 -2- The Swedish press reports a complete prohibition of alcoholic beverages in Germany effective from January lst. Production in 1942 is restrictable to industrial alcohol. These steps are explicable be- cause of the lack of potatoes, the increased need of alcohol for making Buna, and the stringency of the oil situation causing a need for substitute feuls. Supplies of barley and malt to German brewers have been cut further. Expected rationing or reduction of the alcoholic content of beer is necessary. In Munich, cafes are to limit quantities sold to one large glass per serson, remain open only two hours daily. TREASURY DEPARTMENT 125 INTER OFFICE COMMUNICATION DATE 2/2/42 TO Secretary Morgenthau FROM Vincent F. Callahan The Donald Duck motion picture about income taxes started in big Broadway theatres Wednesday and Thursday of last week. Paul Munroe yesterday (Sunday) contacted managers of Radio Music Hall, Roxy, Capitol, Paramount, Loew's State, Palace, Criterion, Broadway, and Strand, all of which theatres are running the picture. Here are various quotations from these managers: "Patrons comment all very favorable. Excellent reel. People like very much. Gets good laughs. Terrific reel. Gives people brand new slant. Generous applause. Couldn't imagine how it could have been done any better. Liked very much." There were no unfavorable comments. Mr. Munroe personally saw the picture and was very enthusiastic about it. He said that everyone around him in the theatre seemed to enjoy the picture and there was a general spirit of laughter through- out the showing of the film. Vincent 7. Collaho 16 COORDINATOR OF INFORMATION THE WAR THIS WEEK January 22-29, 1942 a STATE Printed for the Board of Analysts Copy No. 3 Suretary of the Incoury Regraded Unclassified JANUARY 22-29, 1942 SECRET Coordinator of Information THE WAR THIS WEEK January 22-29, 1942 Despite the declining momentum of the drive on Singapore and the savage counterthrust of the Dutch and American forces in the Battle of Macassar Strait, the wide-ranging Japanese offensive continues to press relentlessly outward toward its objectives. Burma and Singapore stand in grave danger, and observers refuse to predict where the enemy can be stopped in the Netherlands Indies. Simultaneously Gen- eral Rommel has delivered a counterstroke in Cyrenaica and may soon force British withdrawal from Benghazi. On the eastern front, it is true, the Germans have fallen back rapidly in the region of the Valdai Hills, but even here Russian suc- cesses to date must be interpreted as infiltration in an area lightly held. A decisive action, if there is to be one, still lies in the future. Economic Significance of the Widening Japanese Offensive In the Far East Japan is advancing along a great are from Moulmein in Burma, through Jahore, Southern Borneo and the Celebes, to the island of New Britain, east of New Guinea. Within this are lie the rice, rubber, tin, iron, oil, and chrome of French Indo-China, Thailand, the Philippines, and much of Malaya. By completing the conquest of the Netherlands Indies and Malaya and by taking Burma-that is, by extending her 1 Regraded Unclassified SECRET SECRET lines to the next great are-Japan would satisfy her needs for There it is in a position to defend the northern route from petroleum, bauxite, lead, and tungsten. She would receive Thailand into Burma. British approval for the movement also important quantities of nickel, antimony, phosphates, of Chinese troops into Burma over the direct and practicable zine, and cotton. If New Caledonia, which lies within the route offered by the Burma Road was finally given, it is indi- greater are, were taken, Japanese deficiencies in nickel, phos- eated, only on January 25, phates, and cobalt would be eliminated, and these supplies The fall of Rangoon and the closing of the Burma route would at the same time be denied to the United Nations. would not necessarily bring Chinese resistance to an end. In her struggle with Japan, China has depended primarily The Threat to Burma on her own resources. The volume of military supplies From a strategic point of view, the immediate Japanese reaching the Chinese by the Burma route has been too small objective is to seize successively the bases from which the to be of major military importance. Total traffic over the Allies can prosecute the war and to use these bases to extend road has only recently attained a figure of 17,500 tons as month. their own area of control. At the same time the Japanese On the other hand, the possible psychological repereussions aim to isolate their pristine enemy, the Chinese, by seizing Burma and closing China's primary supply route. in China, if Japan takes Burma, should not be minimized. Chinese resistance may be more significantly affected in the In pursuance of this latter object, they are driving, with Thai aid, on Moulmein, whence the railroad leads to Ran- near future by political, rather than by purely military factors. Chinese morale and the continuation of the Chinese goon. The British ground forces are light, but have been war effort will take on added importance if Japan gets into resisting stubbornly at Kawareik, east of Moulmein, where the Indian Ocean and the Bay of Bengal, for in that case the Japs have debouched from the mountainous junglé, admirably suited for infiltration, into the open paddy lands. China may again become the only effective base of resistance Previously the Japanese had taken Tavoy, which occupies B. to Japan. strategie position to the south, and facilitates attacks on shipping proceeding into the Gulf of Martaban, at the head The Threat to India of which lies Rangoon. The Japanese push in Burma projects a threat in still Quite contrary to press reports that Chinese troops have another direction. Air raids on Calcutta and possibly been streaming into Burma to defend the country against Madras early in February or even sooner are expected by the Japanese and Thai invaders, confidential advices up to the commanding general in Calcutta and by leading in- January 25 indicate that only two divisions had been given dustrialists there, according to & report from a completely permission by the British to enter Burma, and that of this trustworthy source in New Delhi. Most of the economic force only one regiment had thus far arrived. This regiment had entered the Shan States overland by a difficult and cir- activity of castern India would probably be paralyzed at ouitous route and taken up a position north of Thailand. once, the latter continues, by the flight of railway, port and industrial workers at the time of the first raid-a situation 2 3 SECRET SECRET which has already been produced in Rangoon. Such & Threat to Madagascar? movement would suspend the availability to forces over- The close interrelation of the European and Asiatic theaters seas, both to the east and the west, of strategic cargoes and munitions from this area. of war and the danger that they will eventually converge were This vulnerable east coast of India includes the most given fresh emphasis by a recent and confidential statement of highly industrialized section of the country. In Calcutta General Smuts, South African premier, who expressed the are situated most of the cotton mills of Bengal, and that same fear that the Axis might seize bases in the French Island of province is the center of the Indian paper industry. Here, Madagascar, from which the Indian Ocean routes could be and in the adjoining province of Bihar, ninety-four per cent attacked. If Singapore should be neutralized, the General of India's pig iron production and ninety-eight per cent of its continued, the Capetown route to the Far East would become steel output are found. The Tata steel plant, largest in the of vital importance for areas previously supplied from west British Empire, is in Bihar within 150 miles of Calcutta. coast ports in the United States. It should also be noted Likewise concentrated in the provinces of Bengal and Bihar that Madagascar is a significant source of graphite and mica is eighty-four per cent of the coal production of India. And for the United States. to the south, Madras is second only to Bombay in textiles. In fact it may be said that Bombay, on the west coast, is the Retirement on Singapore only highly industrialized area not immediately vulnerable On the Malayan front the British Imperial forces have lost to Japanese pressure. Batu Pahat, Kluang, and Mersing, the three principal points on the defense line described in last week's analysis, and in the west they have been driven to a point with in forty miles The Factor of Indian Morale of Singapore. There appears to be only one further defense line short of the Strait of Johore-a rugged range of hills The same source also raises the all-important nationalist north of the Strait, on the left flank, and smaller isolated issue in India and declares that a Japanese occupation of hills to the east, supported by a lateral highway. Early Rangoon and the fall or isolation of Singapore would greatly British retirement to this line is probably to be anticipated. accelerate the tension and anti-British feeling in Madras and The proximity of Sumatra to the Malay Peninsula and the Bengal, which are expected to increase rapidly in any event. current heavy air attacks on the island suggest the possi- It has been pointed out once again by a close observer of bility of landing operations there, which might mean the the Indian scene that the morale of the country will be jeopardised by unsatisfied nationalist ambitions unless the virtual isolation of Singapore. nationalists can be persuaded that their own ambitions will be advanced by the success of the Allied cause. As to whether The Drive on the Netherlands Indies British promises will be realized in concrete form in the post- In the Netherlands Indies the Japanese have already pene- war world, there is considerable skepticism. trated the first line of Dutch air defenses, extending from Sambas in northwest Borneo to Hollandia on the northern 4 5 SECRET SECRET shore of New Guinea. With the string of bases now occupied out. Fighter-escorted bombers based at these points in in Borneo and the Celebes, the Japanese flank three passages sufficient numbers could drive shipping out of the Strait and leading through the second line of Dutch air defenses to force our Pacific traffic to the Far East to take the long way Java-the South China Sea, the Strait of Macassar and the around southern Australia, adding some eight to ten days to Sea of Moluces. During recent Japanese operations in the the journey. The loss of the Torres Strait route would be a Strait of Macassar & devastating attack was made by Ameri- bitter blow. Our aid to China would suffer; our chances for can and Dutch forces with resulting heavy Japanese losses, ready reinforcement of the Allied command based in Java particularly of transports. This engagement continues. would be impeded; and the opportunities for supplying Despite these reverses, however, the Japanese succeeded Russia via the Pacific would be still further narrowed. in occupying the important oil center of Balik Papan on the east coast of Borneo. They have also had the key Dutch fortress on Ambon Island under frequent and heavy aerial The Strength of Japanese Forces bombardment. From Macassar in the Celebes and from In general it may be said that the Japanese forces in south- bases in southeast Borneo, which are now under fire, the last east Asia have not been notably large and that they have been line of Dutch air and naval defenses through Batavia and thinly spread. The Japanese successes reflect the fact that Surabaya could be brought under air attack, and the con- the forces of their enemies have been even more thinly quest of strategic Java undertaken. spread. Of the seventy-two seasoned divisions in the Japa- nese army (18,000 men each), it is believed that only eighteen (plus some special units) are now operating in southeastern Threat to Australia Asia. Seven are in Thailand (plus one and a half tank regi- For the first time in their history, the Australians are ments), five in Malaya (plus one tank regiment), one in Sara- fighting an alien invader. At Rabaul, the Japanese have wak and Borneo, and one in the Davao area. Finally, in the landed with ten thousand troops, according to the Australian Philippines, General MacArthur, in a stand which the Presi- Government, and the Japs have claimed a successful landing dent has called "magnificent," is holding no fewer than five at Kavieng, New Ireland. Several points in northeast New divisions, an independent brigade, and half & tank regiment. Guinea also are reported to be under attack. Tokyo radio The importance of this feat for the hard-pressed forces of the has indicated that its all-out offensive will embrace not only Allies elsewhere in Malaysia needs no comment. the East Indies but Australia and Indía as well, and high Australian officials have made repeated appeals for aid. Counter-Thrust in Cyrenaica The present objective of the Japanese, however is believed With the ironic regularity of the pendulum, the war in by leading military observers to be somewhat less than the Libya now seems once more ready to swing into the east. conquest of Australia itself. The attack on Rabaul and New Just as the British line of communication was reaching its Guinea was planned primarily in order to cut the important maximum extension, the demands of the Far Eastern conflict Allied supply route through the Torres Strait, they point made a diversion of effort to that area inevitable. Simul- 6 7 SECRET SECRET taneously, General Rommel was being notably reinforced in men and matériel. At least one large convoy and several neutral and to maintain the status quo in the western Medi- smaller ones reached Tripoli. Earlier claims placed the terranean. Organ and his entourage are said to be increas- destruction of Axis convoys in the Mediterranean as high as ingly friendly to both British and Americans. two-thirds of all tonnage. The British now admit that 75 In epite of this apparent détente in Nazi relations with per cent of Axis shipments are reaching their destination. France and Spain, there continue to be indications from Rommel's counter thrust from El-Agheila succeeded first various sources that disquieting developments have been in taking Agedabia, and a second stroke had placed Axis in the making for some time. Specific point is given to this forces on Wednesday sixteen miles southeast of Benghazi, general evidence by & report from a high source that a which is in obvious danger of early capture. If Axis forces meeting of Hitler and Pétain is forecast for the end of this take it, they will repossess a valuable air base for the pro- month and that the results of secret negotiations between tection of convoys from Italy. France and Germany will then be announced. Under these Rommel's intentions cannot now be accurately forecast. new arrangements the Nazis would restrict the occupation But the reported character of the German preparations of French territory to strategic points and release a further in southern Italy and Sicily and the apparent extent of batch of German prisoners. In return, France would permit the reinforcement of Rommel to date strongly suggest 8 the use of its African colonies for Axis military operations. major and continuing effort to dislodge the British in western Cyrenaica and drive them back on Egypt. The Axis posi- The Russian Infiltration in the Valdai Hills. tion in the Mediterranean may have been further strength- The eastern front has again this week witnessed one of ened by recent British naval losses which now include the those spectacular thrusts which delight the speculative news been admitted by the British Admiralty. battleship Barham, whose sinking on November 25 has just analyst. Superficially the Soviets appear to have driven a significant salient through the Valdai Hills and to have placed the German left flank in & position of dramatic danger. Détente in the West? These gains are, however, more apparent than real. The explanation of this sudden advance in the Valdai area Nazi successes in Libya should logically render the Ger- lies in the nature of the operations there. Here solid lines North Africa, at the same time that Nazi reverses in Russia mans less interested in the occupation of French and Spanish never existed, and the two armies moved in small detach- should stiffen French resistance. The meagre evidence avail- ments and patrols, confining themselves to air reconnaissance ed able that supports this general postulate. From Tunis it is over large areas. The Germans appear simply to have stopped here while waiting for Leningrad and Moscow to fall. plies in officials are beginning to oppose the shipment of report- When winter came, they grouped their troops in islands of French bottoms to Tripolitania by way of Tunisia. sup- resistance for winter shelter. Last week the Russians pene- ed Orgaz and other highly placed Spanish functionaries trated the gaps left open, while the Germans executed a to have said that the Spanish are determined are to remain report- careful withdrawal. The small number of casualties reported indicates that the latter offered little resistance. 8 9 SECRET SECRET The accompanying map, moreover, shows that the Valdai Hills had earlier proved no serious obstacle to the Germans. No Russian Victory to Date. After the capture of Smolensk, the Nazis were held up for In summary, the accompanying map illustrating the Rus- most of September and early October by operations connected sian counter offensive reveals that, since the original German with the reduction of Bryansk, Vyazma, and Orel-opera- defeat before Moscow, Russian gains have been comparatively tions that occasionally necessitated an actual withdrawal unimportant. Exceptions are the present advance in the from previously held positions. The Valdai region, however, north and the creation of the salient in the area where the succumbed easily, as did most of the open area between Bryansk-Vyazma railroad was cut. These two towns and Vyasma and the Moscow defensive zone. North and West Orel are once again the stumbling blocks to 8 further advance. of Kalinin there was little change after the middle of Novem- This essentially conservative view of the Russian front is ber, when the Germans were concentrating on their final that of highly placed American military observers. It is to attempt to capture Moscow, be contrasted with the British view which is in general de- cidedly more sanguine. Indeed the British Military Mission The Future of the Russian Offensive in Moseow is reported to be very optimistic, and one of their From their newly created salient in the Valdai Hills, the number feels that the destruction of the Nazi armies is very Russians have two alternatives. They may either strike possible and that 8 spring offensive is beyond the means of north to relieve Leningrad, or south toward Smolensk, or in the Germans. both directions at once, provided always that they have Elsewhere on the eastern front no significant changes have adequate transport and man power. Against either of these been made. The Russians have resumed the attack south- attacks units, the Germans could probably send mobile reserve cast of Kharkov but have gained little or no ground. The striking initial successes in the Crimea have had no sequel, The Russian claim that they have cut the Leningrad- and in the eastern part of the peninsula the Soviets are actually Vitebsk railroad is premature. The Germans still have falling back in places. lateral rail communication in the rear of their fighting forces. Nor is there any indication that the Germans have revealed their inexperience on the defensive, as one military authority Continuing German Difficulties has suggested. The withdrawal here, as opposed to that of Despite the somewhat limited character of Russian the British in Malaya, has not been executed in close contact successes to date, it would be unwise to pass in silence the with the enemy, and even the Russians have not claimed that continuing difficulties of the Germans. A high military The German losses in men and matériel have been heavy. source notes that in recent weeks on the Moscow front the Smolensk Only & smashing Russian success in the Rzhev-Vyasma- trap at Mozhaisk, for example, somehow failed very to close. German air force does not appear to have been able seriously to interfere with the Russian supply system or to protect German area could be interpreted as a real disruption of the effectively its own retreating columns. defensive strategy. The Nazis have been unable to withdraw more than a few divisions for rest and refitting in Germany, notes the same to 11 SECRET SECHET source, and the armored divisions have as a whole been in action for six months without 8 respite. Another division Toward the Nasi New Order in Europe has just left France for Russia, bringing the total to nine in The march of the German soldier has been accompanied all. It is also reported that fifteen troop trains a day are pari passu by the more subtle Nazi economic conquest of moving currently from Buda-Pest to Bucharest. Three the Continent. "By & process that must be called the most German units were also recently moved from Greece to the gigantic theft in the history of modern capitalism, Germany Russian Front. has today an all but complete mastery of the business life of Europe," declares a report being prepared for the Coordi- Repercussions on the German Economic Front nator of Information on the present status of the German New Repercussions of the Russian campaign have also been felt Order in Europe. The Nazis have seized all the govern- in German industry where it is believed that the withdrawal ment property of the conquered countries. German interests of manpower to the eastern front during the past six months are supreme in banking and insurance; in coal, iron, and has reduced total German industrial production. The steel; in the machine and machine-tool industries; in light replacements-largely women, foreign workers, and prisoners metals; in textiles; in electrical applicances; in chemicals and -have probably been inadequate to fill the gap. A report oil; and in transportation. from Bern notes that hours of labor, which were generally German business interests have been greatly enriched by again. reduced to nine a day last summer, have been lengthened this process, the report continues, and conservative business groups throughout Europe find themselves more and more Despite these difficulties German production figures remain dependent upon Hitler. In this way the New Order has impressive. All observers agree that the Nazis have recently won 8 menacing measure of success. Financial interests are made efforts to increase aircraft-plant capacity. Current so completely dependent upon the Nazi regime that in case aircraft production by Germany is estimated at 1,720-2,000 of a German defeat they look forward to chaos. planes a month by a British source, and at 2,200-3,015 by an American source. To these we may add an Italian produc- tion of 350 planes a month (American source: 450), a French The New Order in the East output of 200-250 (no American estimate), and & Japanese Quite apart from the Nasi absorption of continental busi- production of 350 (American source: 500). ness, the New Order has other facets as well. The Nazis The Germans are probably turning out submarines at the have promised "a living wall of German men" in the East, rate of 18 to 20 per month-a total of 250 being under con- and 600,000 German "colonists" have been poured into the tion twelve in Japan, and five in France. Axis artillery produo- struction at any one time. Fifty more are building in Italy, annexed areas of Poland. Poles have been systematically squeezed out of their occupations to make room for the con- (exclusive of Japan) is estimated by the British querors. Property has been seized wholesale, it is reported, antitank guns, 575 & month; antiaircraft guns (light and as follows: Field guns (75 mm. and higher), 700 & month; source and these seizures have not been limited to property of the Jews or the government. Of 65,000 independent establish- heavy), 430 a month. ments of craftsmen which formerly existed in the Wartheland 12 18 SECRET (of which some 4,700 were German-owned), there remain only 34,000, and 10,000 of these are in German hands. In Upper Silesia the story is the same, but the tempo is slower. The Nazis apologize for the slowness of the process, but promise that it will be thorough. In the Czechish "Protectorate," between Moravia and Austria, on & belt of land more than thirty miles wide, all Czech peasants have been removed and replaced by Germans from the east, Compromise at Rio The closing days of the Rio Conference resulted in a compro- mise rather than in a complete diplomatic victory for the United States. Its most important achievement was, of course, the recommendation that every American republic sever relations with the Axis. Incidental to this were the agreements to coordinate production facilities and to eliminate trade barriers for the duration of the war. And a settlement of the long-standing boundary dispute between Peru and Ecuador seems to be in sight. The original proposal for & mandatory rupture with the Axis, supported by the United States, Uruguay, Brazil, and the Caribbean countries, failed by only & narrow margin. At one point Ruíz Guiñazú, the Argentine foreign minister, appeared ready to sign such an agreement. But & last- minute telephone call from Acting President Castillo, express- ing the characteristic stand of the conservative and "national- ist" Argentine government, induced Guiñazú to stiffen his attitude. The resulting compromise resolution was much closer to the original Argentine position than it was to that of the United States. So far, however, every American republic except Chile and Argentina has broken off relations with the Axis. The next few days will reveal to what extent these two intend to carry out the recommendation of the Rio Conference. 14 U.S. GOVERNMENT PRINTING OFFICE: 1942 THE GERMAN ADVANCE IN CENTRAL RUSSIA THE RUSSIAN COUNTER OFFENSIVE 14 34 as se 34 an N ARALIS MALINO www a Deitrar Ration 2 die Desires 17 Ryber " I 16 MOSCOW Obdissions MOSCOW Disease MOZANISM AZMA YAZMA - - 3 Vehicle ene Bargather security M Stare :- Arter 14 Agree delivere 5 BRYANDA Dates BRYANSA % and 1. MIL OREL = 4 2 ELETE) Statement " M Security Sere AURSH Sera - 14 34 in = = 34 38 aug 10. ⑉ (2) 130 SEPT 10,76 4d (4) - ISI E (2) (i) FROM OND trives IN REC NOVI, DECIGN or DEEPEST PENETRATION JAK 26,42 DEC 3,41 GREATEST GERMAN ADVANCE DOUBLE TRACK RAILROADS NUV 22, 4d FRONT LINES SHOWN IN GREEN SINGLE TRACK HAILROADS ELECTRIFIED RAILROADE COUBLE TRACA RAILROADS SINGLE TRACK KAILROADS ELECTRIFIED RAILROADS 29 180 RICES If 20 194 MILES COMPILED AND DRAWN is CARTOGRAPHIC 34. BIV, C.O.). MAP 90 - Funished 127 RESTRICTED 1-2/2657-220: No. 615 M.I.D., W.D. 11:00 A.H., January 29, 1942 SITUATION REPORT I. Pacific Theater. Philippines: Our artillery yesterday broke up headlong hostile infantry attacks on both our right and left flanks. The enemy suffered heavy losses. There was limited air activity against which our anti- aircraft functioned effectively. No change in Visayans or Mindanao. Hawaii: An enemy submarine torpedoed and sank a small American ship 30 miles north of the Island of Hawaii. 29 lives were lost. Malaya: Japan- ese have reached 8 general line from 40 to 50 miles north of Singapore. According to the press, the British are preparing fields of fire on the north shore of 3ingapore Island, Burmat There is no change in the ground situation as the Japanese continue operations for an attack on Culmein. A Japanese air attack on Rangoon on the 28th was driven off with neavy losses to the enemy. Sumatra: The west Sumatra coast town, Emma Haven, suffered another Japanese air raid on January 28. Australasia: There is no material chani in the situation. The enemy continues his air attacks on Islands north of Australia. II. Eastern Theater. Ground: Fighting continues along the Eastern front. On the Central front the Cermans claim successful counterattacks, (No situation map will be issued this date.) Air: The Russian High Command claims that 30 German planes were destroyed over the eastern front on January 28, with the loso of only 8 Russian planes. III. Western Theater. On the 28th, the RAF carried out further heavy attacks on stjectives in "estern Germany and the Lowlands. IV. iddle Eastern Theater. Ground: Press reports indicate that Axis forces have shifted Meir main effort north and east of Msua to a northwest drive on Benghazi. & strong force is moving northward along the coastal strip south of Menghati and another strong force, striking northwest out of usus, has thached a position 16 mileo east of Benghazi. Air: On the 28th, the RAF carried out a heavy bombing attack on the Italian base at Tripoli. Its attacks on advancing Axis forces and supply lines continue. Aria air forces are active against British ground forces and are continuing their day and night bombing of Malta, RESTRICTED Regraded Unclassified 128 TREASURY DEPARTMENT FOR RELEASE, MORNING NEWSPAPERS, Washington Friday, January 30, 1942. The Secretary of the Treasury, by this public notice, invites tenders for $150,000,000. or thereabouts, of 91-day Treasury bills, to be issued on a discount basis under competitive bidding, The bille of this series will be dated February 4, 1942, and will nature May 6, 1942, when the face amount will be payable without interest, They will be issued in bearer form only, and in tenominations of $1,000, $5,000, $10,000, $100,000, $500,000. and $1,000,000 (maturity value). Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o'clock P. m., Eastern Standard time, Monday, February 2, 1942. Tenders will not be received at the Treasury Department, Washington. Each tender must be for an even multiple of $1,000, and the price offered must be expressed on the basis of 100, with not more than three decimals, e. g., 99,925. Fractions may not be used. It is urged that tenders be made on the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Branches on application therefor. Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of 10 percent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company. Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which public announcement will be made by the Secretary of the Treasury of the amount and price range of accepted bids. Those submitting tendero will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Payment of accepted tenders at the prices offered must be made or completed at the Federal Reserve Bank in cash or other immediately available funds on February 4, 1942. 30-1 Regraded Unclassified 129 -2- The income derived from Treasury bills, whether interest or gain from the sale or other disposition of the bills, shall not have any exemption, as such, and less from the sale or other dis- position of Treasury bills shall not have any special treatment, as such, under Federal tax Acts now or hereafter enacted. The bills shall be subject to estate, inheritance, gift, or other exoise taxes, whether Federal or State, but shall be exempt from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions of the United States, or by any local taxing authority, For purposes of taxation the amount of discount at which Treasury bills are originally sold by the United States shall be considered to be interest. Under Sections 42 and 117 (a) (1) of the Internal Revenue Code, as amended by Section 115 of the Revenue Act of 1941, the Amount of discount at which bills issued hereunder are sold shall not be considered to accrue until such bills shall be sold, redeemed or otherwise disposed of, and such bills are excluded from consideration as capital assets. Accordingly, the owner of Treasury bills (other than life insurance companies) issued hereunder need include in his Income tax return only the difference between the price paid for such bills, whether on original issue or on subsequent purchase, and the amount actually received either upon sale or redemption at maturity during the taxable year for which the return is made, as ordinary gain or loss, Treasury Department Circular No. 418, &6 amended, and this notice, prescribe the terms of the Treasury bille and govern the conditions of their issue. Copies of the circular may be obtained from any Federal Reserve Bank or Branch. -000- Regraded Unclassified 130 January 31, 1942 9:11 a.m. Operator: Go ahead. Ronald Ransom: This is Ronald Ransom. HMJr: Hello, Ronald. A: How are you today? HXJ:: Okay. R: Mrs. Raneom and I are having the Presidents of the Federal Reserve Banks up for cocktails Monday afternoon, between six and seven. HMJr: Yes. R: And she will call Mrs. Morgenthau and ask her. I Just hoped that you, too, could drop by. HMJr: I'll try. R: Yes. They're here on one of their regular meetings, and I thought it would be very interesting to them to have a chance to say hello to you. HMJr: I'll try my best, Ronald. It's very kind of you to think of me. R: Yes, And I thought I'd aek Preston Delano and his wife, also HMJr: Well, that will be very nice. R: and try to maintain some of these contacts. 4MJr: Righto. FL: Thanks, And Mrs. Ransom will call Mrs. Morgenthau during the day. HMJr: Are you asking Bell? R: Yes. RMJr: Good. R: Yes. Okay. Good-bye. HMJe: Good-bye. Regraded Unclassified 131 January 30, 1942 9:30 a.m. GROUP MEETING Present: Mr. Morris Mr. Buffington Mr. Odegard Mr. Sullivan Mr. Paul Mr. Graves Mr. Kuhn Mr. Thompson Mr. Gaston Kr. Haas Mr. Schwarz Mr. Blough Mr. White Mr. Foley Mr. Viner Mrs. Klotz H.M.Jr: Have you anything? MR. GASTON: Nothing except I mentioned in there they would like 8 Defense Sevings exhibit in New York on February 23, Washington's Birthday. I assume that will be all right. Harold will take care of it. That is all. MR. FOLEY: I have nothine. I would like to stay behind a minute, if I may, about that question you asked me last night. H.M.JR: All right. MP., MORRIS: I have a memo quoting a nice wire here from Armours, who are an issuing agent (dated January 29). They are having A big campaign on February 9. Regraded Unclassified 132 - 2 - H.M.JR: You sort of hesitated about sending these telegrams out, but I think that is good. MR. MORRIS: It was more when I thought of the other things I had to do. H.M.JR: That is all right. What else? MR. MORRIS: That is all. MR. SULLIVAN: We called off that Town Hall speak- ing date on February 12. You recall that the original invitation was to talk war financing, and you suggested I get it changed to taxes. H.M.JR: I am listening. MR. SULLIVAN: I called, and the woman with whom I had first spoken wasn't there, and I talked with her assistant, and I said I thought I might be able to arrange to get up there if we could talk about taxes. She said, "Well, I think the program is broad enough. I think we can do that. And that is certainly what Mr. Hanes had in mind when he agreed to take the other side.' And I said, "What other side?" She said, "Well, the other side of the Treasury's six percent plan." (Laughter) I said, "Well, thank you very much. I will see what I can do and I will let you know.' So then I talked with Herb and Ferdie and Randolph and Tommy and Roy and George Buffington, and we agreed that this was a plant if there ever was one and that I wasn't supposed to know it was to be on the six percent at all, and it was an experience like Randolph had when he debated there and they changed the topic five minutes before the program started. About fifteen minutes after that conversation, I called her back and asked her if she had done anything toward rearranging it, and she said, no, she hadn't, and I said, "That is fine, because something has just happened, and I will be tied up all that week." MR. PAUL: Since that, they have been trying to call me up. (Laughter) Regraded Unclassified 133 - 3 - H.M.JR: What else. MR. SULLIVAN: Senator LaFollette is putting your Cleveland speech in the Congressional Record. I have a thank-you note for the Governor of Rhode Island. H.M.JR: Last night - where is Chick - at eleven- thirty over WJSV, they had a discussion on taxes, both sides. It was very good. MR. SCHWARZ: Would you like to get it? H.M.JR: No. MR. PAUL: I would like to see it. H.M.JR: It is the kind of thing that I hope that this committee that I appointed will do. For instance, they had what I said, what Eccles has said. Congressman from Oklahoma said so and so about the sales taxes. MR. KUHN: Monroney. MR. FOLEY: Purely irrelevant. (Laughter) H.M.JR: And so forth and so on. So I think it is the kind of thing - it really was fairly impartial, but it showed - because it is a crazy hour to put the thing on. The voice was very familiar, but I couldn't recognize it. MR. SULLIVAN: Wednesday afternoon we had quite a meeting on this committee that you have just referred to, and everybody seemed to feel that if this job is done right, it is just going to be a full time job, and we wondered about getting Knollie down to see if he would be willing to take it over. The only objec- tion to Knollie was that he thought he could probably set up the machinery and get going on this one, but we seem to think there should be a more or less permanent organization that could go after other things other than just tax exemption. Regraded Unclassified 134 - 4 - H.M.JR: Well, we have got two Disney organizations - three going now. MR. SULLIVAN: Well, this is a little something more than just publicity, I think. Anyway, I think the concensus of the group was that if you approved, I would try to get Knollie down. H.M.JR: That is all right, as long as something is done fast to get it out of the study stage. MR. SULLIVAN: I will phone him this morning, then. On the auto use stamps, we have run into a peculiar problem. H.M.JR: What did you do, run out of spit. (Laughter) MR. SULLIVAN: No. Many of the enforcement cars of not only the Federal Government but state and municipal governments should have these stamps on if they are not to be disclosed. I mean, a Secret Service car or a plain clothes policeman's car in New York City, so we are getting out an order giving these stamps to those agencies. MR. FOLEY: I ran out on mine. I put it up three times, and three times it fell off, so they put it in the pocket of the car. MR. VINER: Transferable. MR. FOLEY: It is the cheapest job, I think, the Treasury has ever done. It is perfectly awful. MR. SULLIVAN: I will answer that one afterward. MR. WHITE: We will pass that. H.M.JR: Because you need three hours? MR. SULLIVAN: No, I don't need three hours. Regraded Unclassified 135 - 5 - H.M.JR: What else. MR. SULLIVAN: The Commissioner is getting out B. mimeograph to handle such situations as Detroit where they are having the conversion to military production, and the people are out of work saying that they will have to try to collect the tax where they can, but where this particular situation exists, the Collectors of Internal Revenue are assured that where reasonable forbearance is extended to the collection of Federal tax liabilities, the Collector will back him up. I mean, it is about as far as we can go, I think, in telling them to go easy. H.M.JR: He will have to postpone them. MR. SULLIVAN: That is right. H.M.JR: Well, I don't know. Hold that one up. Has that gone out? MR. SULLIVAN: No. H.M.JR: I want to talk about that. Last year they kept postponing and postponing and postponing. I want to talk about that. MR. SULLIVAN: All right. You have & letter from William Green asking you to support his request that Social Security taxes be taken up as & part of the tax program. Now, I think that you more or less agreed with Doughton and George that the tax program should come first. Randolph says he thinks they made the statement and you didn't disagree with them, but I think they believe that you feel that way. H.M.JR: I think the answer to William Green is very simple. It is up to the Committee what comes first. MR. SULLIVAN: He puts it another way, "May I ask your support of our request that the Social Security tax increases be considered at the same time.' And Regraded Unclassified 136 - 6 - I think that we just have to tell him that we are already have had discussions-- H.M.JR: I won't be able to answer that today. I have got to talk about it. MR. SULLIVAN: All right. There is a Columbia Radio Broadcasting System broadcast at one forty-five on Saturday. They wanted me to talk on that on sales taxes. H.M.JR: All right. They mentioned you last night on the sales taxes. MR. SULLIVAN: Beg your pardon? H.M.JR: This man reviewed what you said on the sales tax. He picked up everything anybody had said and did it very intelligently. MR. SULLIVAN: You recall sometime ago Leon Hender- son asked for some income tax data, and you thought we shouldn't give it to him. We have had several con- versations with them, and they think that if they get just the transfer cards, that will answer their problem. I think they have a very good case in saying that they really have got to have those. H.M.JR: What are the transfer cards? MR. SULLIVAN: It contains the basic information that is gathered from the returns, but the detailed information on the returns, of course, isn't disclosed here. H.M.JR: I think that would be all right. MR. SULLIVAN: All right, sir, then I will get that ready. H.M.JR: What else? MR. SULLIVAN: That is all except-- H.M.JR: Go ahead. Regraded Unclassified 137 - 7 - MR. SULLIVAN: Lausche and some other things I would like to see you about today. H.M.JR: Well, see how we get along. Did you speak to Lausche? MR. SULLIVAN: Yes, I talked with him yesterday morning, and he said, "I am in complete accord with the principle, and the reason I wasn't able to call you yesterday is because we have got a seventeen and a half million dollar deal on the sale of municipal railroads here, and I have got to discuss this with my cabinet, but I am sure I can call you back this afternoon. He didn't do it. H.M.JR: How many times have you talked to him? MR. SULLIVAN: Yesterday? Once. H.M.JR: Altogether. MR. SULLIVAN: Three times. H.M.JR: Did you tell him about your call to Tobin? MR. SULLIVAN: No, he hadn't heard about it. It was the railroad deal that was holding him up. H.M.JR: Well, anyway, we will see how we get along. MR. SULLIVAN: All right. H.M.JR: I have sent for Elmer Irey, and I am directing him to act under me, directly responsible to me, on this New York alcohol case. I want a complete investigation on that starting with Berkshire right straight down through the line. I am just telling you in here. Regraded Unclassified 138 - 8 - MR. GASTON: Yes. H.M.JR: I am going to have the investigation made directly under me. I can't understand it. MR. SULLIVAN: They have been working on this for two years. H.M.JR: Well, I can't understand it, but I want to start with Berkshire and go right straight down. MR. GASTON: It is our own men, of course, that have made that investigation. H.M.JR: I know, but on a thing like that, there are so many people involved, it seems impossible that somebody somewhere, some supervisor, up and down the line wouldn't know about it. MR. SULLIVAN: The assistant supervisor was in on it. H.M.JR: Well, then, his boss. Somebody has fallen down on his job, and I want to know who that is. MR. PAUL: Nothing this morning. MR. BUFFINGTON: Yesterday I had a call from Mr. Fulton, president of the Outdoor Advertising Associa- tion, assuring us that the sixteen thousand boards will be posted on or before February 15, which will give us a full month of showing. Might I have a few minutes to discuss that Har- ford Powel letter and some of this other publicity? 139 - 9 - H.M.JR: Possibly, but I have got to start right after this meeting with the Secretary of State at ten thirty on this Chinese question. We will see how long that lasts. I don't know. We will see. I will be in tomorrow morning. MR. BUFFINGTON: All right. H.M.JR: If anybody doesn't catch me today, I will be in tomorrow morning. MR. BUFFINGTON: That is all. MR. BLOUGH: Nothing this morning. H.M.JR: Are you going to have something for me today, Jake? MR. VINER: Yes. I prefer it this afternoon. H.M.JR: Well, either this - are you going to be here tomorrow?. MR. VINER: Surely. I am here every day (laughter). What a question. H.M.JR: If I don't get it this afternoon -- MR. VINER: Sundays, too. H.M.JR: If I don't get it this afternoon, I will get it tomorrow. Are you here tomorrow, Peter? MR. ODEGARD: I will be here tomorrow morning. H.M.JR: George? MR. HAAS: Here is that table we have ready for you. H.M.JR: This is the number of firms? I see. That is a jump-off date, is it? Harold, this affects you particularly. On January 10 five hundred persona 140 - 10 - and over, number of firms, three thousand one hundred ninety-two, and one week later, four thousand forty- three. It went from forty-four to fifty-five per cent. And a hundred to five hundred went from thirteen to twenty-two per cent. Have you seen this? MR. GRAVES: Yes, George showed it to me. H.M.JR: So that is beginning to come. I want to study that. MR. HAAS: Then I made one on - I thought we had better put down all the information we had. Here is the total number of firms. There are the two tables you have got there, the nine thousand. These are under a hundred, you see. It makes sixteen thousand altogether. Down here the employees of the firms particularly, and it doesn't mean that all those employees participate, but they are members of these firms, so the exposed number of employees is fifteen million out of thirty- four. H.M.JR: I see. MR. HAAS: Mr. Swope thinks this could be discontinued. It is in good shape, you know, on Procurement. H.M.JR: Let it go. Is much of your staff working on statistics for the English? MR. HAAS: No, that is all over. H.M.JR: Are you working on statistics for anybody else outside the Treasury? MR. HAAS: No, sir. H.M.JR: Anything else, George? MR. HAAS: That is all. H.M.JR: Chick? Regraded Unclassified 141 - 11 - MR. SCHWARZ: Nothing. H.M.JR: Harry? MR. WHITE: Phillips was here, but what he had to say can wait until you are ready to take up the British situation, unless it is going to be too long delayed. He is concerned about getting an answer from the Presi- dent on that seven hundred million dollars -- H.M.JR: If he gets it in a month, he is lucky. MR. WHITE: .... because if the answer is one way or the other, he wants to take some action on the new proposed legislation of the Lend-Lease bill which is going to exclude the possibility of taking care of that amount under Lend-Lease as presently written. H.M.JR: There was 8. beautiful leak on this meeting in my office with Stettinius and what happened - and yesterday Perlmeter, when I said, "Well, somebody outside must have helped you," Perlmeter said "No, it was somebody right in the Treasury who gave me all the information." That means somebody in the Treasury told Perlmeter what went on when Stettinius was here, and what they came to see about, because he had the whole thing. You were on an airplane, so you weren't here. MR. WHITE: I didn't even see him. I will find out in my division. H.M.JR: Somebody saw Perlmeter and talked. MR. WHITE: Did persons in my division know about it? Who was here on it? H.M.JR: Southard. MR. WHITE: I will ask. I would be extremely surprised if anybody would do it, but I will inquire. H.M.JR: I am not accusing anybody, but Perlmeter made the flat statement he got the information from the Treasury. 142 - 12 - MR. SCHWARZ: A Treasury official, he said. H.M.JR: Treasury official. I am not accusing anybody, but I am just passing it along for what it is worth. What else, Harry? MR. WHITE: Well, I will re-raise that question whenever you are ready to take it up. H.M.JR: Let's get the Chinese thing out of the way first. MR. WHITE: The other things can all wait. H.M.JR: Where is my Chinese time-table? MR. WHITE: I have it here. MR. VINER: Harry, what about war risk? H.M.JR: Well, I am not going to -- MR. WHITE: We wanted to clear that with Bell first. He will be in at ten o'clock. H.M.JR: I am not going to do that before I go to the State Department. Right after this meeting I want to go over that time-table with you. Is that it? MR. WHITE: Yes. H.M.JR: Harold, how are things up in New York? MR. GRAVES: Very good. I think maybe you would like me some time to tell you in detail about them. H.M.JR: Are they better? MR. GRAVES: Very good. H.M.JR: Harold, give me twenty-four hour service on this thing, will you please? That means I want an answer tomorrow. 143 - 13 - MR. GRAVES: I can answer this now. H.M.JR: No. Really? MR. GRAVES: There are forty-five such companies that have been awarded this "E" by the Navy. I wasn't here yesterday. I haven't gotten the list of those companies yet. H.M.JR: Get the list and check off those -- MR. GRAVES: Yes. H.M.JR: When will I get it? Tomorrow, maybe? MR. GRAVES: I will have that tomorrow, yes. At your convenience I will tell you about New York. It is very good. H.M.JR: All right. Ferdie? MR. KUHN: The Canadian Minister asked some time ago whether you would speak on the radio to help them in their Victory Loan campaign, beginning in March. They now say that they would be willing to have it on a record so that it could be made during February any time at your convenience, and I think it is a swell opportunity. H.M.JR: Why should I talk for the Canadians? MR. KUHN: Well, they have asked it, and I think that it is - it gives you a chance to say some things that you wouldn't get a chance to say otherwise. H.M.JR: It doesn't appeal to me. MR. KUHN: Not at all? H.M.JR: No. Why should I go to Canada or Angland and talk to them about raising money? MR. WHITE: I don't think you should. 144 - 14 - H.M.JR: What? VD. WHITE: T don't think you should. Does any- tody else think he should? MR. SULLIVAN: Well, hon would we like it if Sir Prederick Phillips talked on it here? MII. KUHN: I don't think that is quite the same. MR. BULLIVAN: T don't know, the Canadians are pretty touchy. If they have asked for it themselves I think they have made a mistake in asking for it. VR. KUHN: They have asked for it, and they have heard the Secr tary on the air. The radio is inter- changeable between the two countries and they know about our Fond campaign, just as .e know about theirs. H.O.JR: I will lend them Donald Duck. " WLITE: Think they will be able to tell the difference? (Laughter). MR. SUILIVAN: Rack to South America for !arry (leughter). 15% KHEN: Secretary Knox admires your showmanship but thinks it is e bad idea to have movie people down in the Nevy Yard. He doesn't went to have them. lie would much prefer to have it here, SO they are not going La have inview at all. Couldn't they put it in a little spot? %. KUHN: They said they would have to shut down the pork are so on, and he made all kinds of difficulties about it. E.V.JR: All right, Mr. KUHN: It is their show. Regraded Unclassified 145 - 15 - H.M.JR: It is their show. MR. KUHN: So we will have it here. H.M.JR: That is all right. MR. KUHN: I have a letter that can be signed. H.M.JR: Do you suppose I can have that tomorrow, what I am going to say next Monday? MR. KUHN: Yes, I will do it. It is only 8 minute and a half. H.M.JR: Could I have it tomorrow? MR. KUHN: Sure. That letter has been approved by Harold Graves. We have already sent them telegrams on that. H.M.JR: Why do I send this? MR. KUHN: Because we have sent telegrams to various papers. H.M.JR: Well, do you know about Chick's complaint from the Chicago Sun about Hearst? MR. KUHN: No. H.M.JR: Well, show this to Chick because the Chicago Sun -- MR. SCHWARZ: Chicago Times. H.M.JR: They sent a man in here and claimed that Hearst was not playing the game. I will sign it, but check with Chick. MR. SCHWARZ: That was my call the other night. H.M.JR: This is particularly the Chicago American. I was just going to say, next time couldn't they put Marion Davies and me? 146 - 16 - MR. KUHN: I had a talk with the Disney people yesterday afternoon and they said that your idea is coming along wonderfully, and that the best of the whole series is the business men, worked up better than any others. The one in which they have the most material ready is the child. That is, they have sketches of the children. They are very steamed up about it, and wanted you to know about it. H.M.JR: You didn't let me know about Monday. MR. KUHN: Oh, I thought I had. H.M.JR: Is the answer "Yes"? MR. KUHN: Yes, sir. H.M.JR: You know a bout Monday night? MR. GRAVES: Yes. I was going to say that I talked to Mr. Disney and told him about this poster thing. He will have the things that you asked for Monday night. H.M.JR: And MacLeish and Lowell Mellett will be there. MRS. KLOTZ: Did they accept? H.M.JR: Well, I sat next to MacLeish last night. He said, "Sure". If you don't hear from Mrs. MacLeish I think they will be here. MRS. KLOTZ: Well, I will cahl her. H.M.JR: She doesn't get up until noon. MRS. KLOTZ: Well, whenever you call she is at the Red Cross or in bed. H.M.JR: I think I would call up Mr. MacLeish's office. MRS. KLOTZ: I have. Regraded Unclassified 147 - 17 - H.M.JR: She never gets up until noon. MRS. KLOTZ: Wonderful. I am for Mrs. MacLeish. H.M.JR: I think she is more of a singer. MRS. KLOTZ: So am I. MR. KUHN: I have nothing more. MR. FOLEY: You would do anything to stay in bed until noon. MR. THOMPSON: I think Ferdie will probably want to tell you about this stamp. MR. KUHN: I took that up with them as you asked and they all approved it. They saw no reason why that shouldn't be done. That isn't the same as calling them Victory Bonds. H.M.JR: Peter, are you on that? MR. ODEGARD: We suggested that 8. long time ago (laughter). H.M.JR: You and Roosevelt dreamed it, did you? MR. ODEGARD: Mr. Secretary, right after Pearl Harbor, when all these thingsbegan to pour in, Ferdie and I talked about this, and we suggested this change on the copy then, because most of these criticisms were directed at the nature of the copy, rather than the bond. Most of the people that made the criticisms wouldn't know what the bond says on it, anyway. H.M.JR: O.K. But put in the word "and". MR. THOMPSON: Yes. H.M.JR: All right. What else? MR. THOMPSON: Here is a memorandum for your files of yesterday's meeting. I have indicated there that the 148 - 18 - next meeting will be Wednesday. Fitzgerald thought it was Tuesday. H.M.JR: I didn't tell- Fitz anything. When you go out, tell him. MR. THOMPSON: That is all. 149 January 30, 1942. FOR THE FILES Meeting in Secretary Hull's Office January 30, 19/2 10:30 A. 30. Present: Secretary Inill Secretary Worgenthau Dr. Viner Mr. White Leter Joined Ey: Nr. Berle Mr. Fornbeck M. Hamilton Mr. Feis How Tre meeting had been arranged by Secretary Morgentrau over the telephone the revicus day. Secretary Hall began by a trief resume of the For Eastern military scere. Secretary Hull said that 25 iar back 58 last Spring he had voirted out to the Army and Navy officials that in the event of hosti- Lices with Jaran, that Jaran and Germery between them mi nt likely take over the South Sea Area and North Africa, and thereb create very dif- dear problems for the United States in the Atlantic. de saio that LIE Alamy and Navy officials, however, nid not think it likely at that time that Janan would be able to conquer the numerous bases in that of the Pncific. Secretary Hull went on to say that for many months "rior to the outbreak of hostilities with Janan, he had been strongly urged by General Marshall and by the heads of the Army and Navy (and by the President)? to do everything in dis oorer to prevent outbreak of hoste- lities with Jaran because the Army and Navy were not adequately precered. He neid that the situation in the Far Best was critical end he gopeared to be rather pessimistic es to developments there in the near future. He also stated that Russia was very displeased with the British, so much DC that il was necessary for Eden to 60 there and attempt to placate them. Time Russians were also disappointed at what the Russions clai ed to le a small amount of aid they were getting from the United States. He said that Pussia was not. to he srusted and there is no telling what would happen if with increasing Jananese victories China felt she could not look to Britain and the United States for substantial helt. Regraded Unclassified 150 - 2 - He asked Secretary Morgenthau whether he (Secretary Rull) should have some of his staff in during the ensuing discussion of possible aid to China. Secretary Morgenthau replied that anybody Secretary Hull wished to have in would be all right with him. Secretary Hull thereupon sent for the above-named from the State Department. Secretary Hull recounted the proposed methods of aid to China which Secretary Morgenthau had outlined in his letter of the previous day. He then asked his own staff to comment on what they thought would be the resction in China if Singapore fell. Hornbeck replied that he thought the effect would be bad; that the Japanese would make most of the boast that they had been able to demolish the strongest of British bases. The Japanese would say that the Chinese would do well to come to terms and join them in the general struggle against domination by the white race, that mimerous groups within China would likewise attempt to press the Generalissimo to make terms with Japan since all avenues of supply to China will have been closed. Vr. Hamilton likewise felt that the loss of Singapore would have a bad effect on Chinese morale. Secretary Hull said that he assumed there was agreement that under the circumstances financial aid to China was urgent. Secretary Morgenthau replied that he had set forth his position clearly in the letter to Secretary Hull of the previous day. Secretary Hull asked for opinions as to which of the several methods suggested by the Treasury would be the best medium for giving help. He said he himself was not interested in the method. Re said that should be the Tressury's business. He was solely interested in seeing that China did get aid in the present critical situation. Mr. Hornbeck stated that he thought the ideal method of helping would be 8. Congressional statute providing for an extension of finan- cial aid to China. He said that might, however, cause undue delay. He was not certain that legislation was the most practical method of approaching the problem. He stated that be did not think the matter was BO urgent or acute that a matter of days were critical, but that if it were to take several weeks for Congress to pass such legislation, it would be too late. If legislation could be passed in a few days he favored legislation. Regraded Unclassified 151 - 3 - Mr. Hornbeck went on to say that he thought that the sum should be $500 million instead of the $300 million which Secretary Hull had indicated in his letter to Secretary Morgenthau. Mr. Hornbeck thought that a reduction in the portion which the United States was prepared to give to $300 million would be too great e reduction from the sum which Chiang-Kai-Shek was asking. He felt Chiang-Kai-Shek should be given what he asked for, namely $500 million from the United States. Secretary Morgenthau agreed with Hornbeck, as did the others, and it was therefore decided that the sum which they would recommend would be $500 million. Secretary Hull stated that he appreciated Secretary Morgenthau's reluctance to use the stabilization fund for such purposes. Mr. Berle stated that be likewise felt Secretary Morgenthau was correct in giv- ing last preference to use of the stabilization fund in this particular instance since, Mr. Berle went on to say, the use of stabilization for that purpose seemed to be clearly outside the purpose for which the fund had been created. Secretary Hull said he presumed the matter was up to the President, and said that in line with Secretary Morgenthau's suggestion in the letter, that Secretary Hull and Secretary Morgenthau see the President on the matter. Secretary Morgenthau suggested that Secretary Hull and himself might stay behind the Cabinet meeting for a few minutes and get the President's decision on the matter. Then action in the form of an announcement could be made the following morning. Secretary Hull agreed, and it was decided that in the meantime a draft of a message and a bill should be prepared to show the President that afternoon in the event he agreed that was the way to handle the matter. Secretary Hull stated that he would like to have the Treasury Department handle it and State Department would be glad to collaborate. The meeting was about to be adjourned when Secretary Morgenthau told Secretary Hull that there was another thing he would like to talk about with reference to British Lend-Leese. Hornbeck and Hamilton left. Secretary Morgenthau explained that he had been talking with the Army and Lend-Lease officials, who had spoken to him with respect to the operation of Lend-Lease, They had stated that shipping was the important problem and that it was essential to conserve as much shipping space as possible for essential war supplies; that, therefore, any supplies utilized by American troops that could be purchased locally should be 80 purchased. Such purchases raised the question as to how they should be paid for. It was felt that possibly such purchases should be financed through a "reverse" lend-lease procedure. Secretary Morgenthau said he did not know how much was being done in the State Department on that subject, but he would like to have the State Department cooperate with the Treasury in working on the problem. Secretary Rull said he would be glad to have his staff do so. Mr. Feis said that Dean Acheson was handling British Lend-Lease problems. Dean Acheson was called into the room. Re said be would be gled to collaborate with the Treasury Department working on the problem. Regraded Unclassified TREASURY DEPARTMENT 152 INTER OFFICE COMMUNICATION DATE January 30, 1942 TO The Files FROM Mr. Thompson A meeting was held at 3:00 p.m. yesterday in Secretary Morgenthau's office to discuss the policies which should be adopted to govern the questions of deferments for reserve officers and draftees. Present at the meeting were: Secretary Morgenthau, Secretary Knox, Under Secretary of War Patterson, General Hershey, Mr. McReynolds, and Mr. Thompson. Secretary Morgenthau stated the problem and expressed the neces- sity for the adoption of general rules to be followed by all branches of the Government as a guide in determining whether or not deferments should be requested in any case. Secretary Knox discussed the needs of the Navy particularly with reference to men in the Navy yards who hold commissions in the Army reserves and Under Secretary Patterson agreed that in these cases where vital need can be shown for the employee to remain in his present job, deferments probably should be granted at least temporarily pending efforts to acquire replacements. Generally, however, it was agreed that any reserve officer who preferred to remain in his present job rather than to go into the military service should resign his military commission. Secretary Knox stated that it was his view that heads of depart- ments cannot chuck the responsibility of requesting deferments where the facts indicate that a man would be more valuable in his present job than in the military or naval services, but this view was not concurred in. General Hershey was particularly of the opinion that deferments for Secret Service agents could be justified. With respect to draftees, there was general discussion as to public reaction to deferments and no definite decision was reached as to what the policy should be although it was agreed that if & deferment should be granted it should be only after the establish- ment of a vital need for the person in his present employment. No conclusion was reached on the general question and at Secretary Morgenthau's suggestion it was agreed that a further meeting be held in his office at 3:00 p.m. on Wednesday, February 4. In the meantime Mr. McReynolds and General Hershey were requested to draft regulations to govern policies to be followed in all departments and agencies with & view to uniformity of action in deferment cases. 7Pm Regraded Unclassified 153 January 30, 1942 4:00 p.m. ATD TO CHINA Present: Mr. Viner Mr. White Mrs. Klotz Mr. Foley H.M.JR: That thing should have been ready at a quarter of two, instead of holding me up an hour. I mean, you (Foley) were supposed to be ready at 8. quar- ter of one and then you held it back, and I aat there and they kept telking about the man, and I was on pins and needles for one hour. I mean, I wanted to see you alone. VR. FOLEY: Well, that is all right. H. JR: But anyway, for another time, don't do that to me because the man's name came up two or three times and I never knew when the President was going to ask for it. MR. FOLEY: Well, it was good enough. I just wanted to tie it up a little Bit. II.M.JR: Well, just for the future. MR. FOLEY: O.K. H.M.JR: This is what happened. Evidently T.V. Soong WHS in to see the President this morning and brought up the question of a loan. I athered he gave the Impression I WAS dragging my feet, and the President Regraded Unclassified 154 - 2 - must have called up Hull on the wire and asked him about it. I mean, this is all surmise. And Hull told him that I had been over there this morning, and that we would take it up this afternoon. When I came in to Cabinet I said to Hull, "Have you seen our memorandum and joint resolution?" He said, "No," and I said, "well, here is the original. I gave him the original. "hen I said, "Well, have you seen your own draft" He said, "Oh, no, no." I said, "What your boys did on the message?" He said, "No, I have been too husy. I haven't seen it." So he said he hadn't seen that. So it came up and the President said, "Well, they don't want us to pay their army. I don't know whether he said it then or later. "Recause they would have two kinds of currency." So he said, "Why can't we buy the yuan?" And then I said, "Let's Hull and you and I sit down after Cabinet together," so he said, "Fine." But he didn't do what he usually does, take us into his office. He did it with everybody buzzing around and talking at the top of their voices. We had just nicely started on the thing, you see. So Hull kept saying, "Where is Jesse, where is Jesse?" So he pulled Jesse in. Well, Jesse was waiting just about three feet away from Hull and he dived right between Hull and the President. It really was funny. I mean, whenever there is anything like that up there, Jesse just sort of crowds himself, sort of leans over on them 50 he gets in on it. So he dives right in, what is it, what is it, you know. So they talked. It was going all right, but Hull - I mean, at the lost minute - he could have brought Tease in at any time in the last month. At the la st minute he brings him in and Jesse, smelling some new business, he was only two feet behind. The reason the Hull couldn't see him was that he was leaning right over Hull. +hat is the only reason ne couldn't see him. So he harges his chair right between Hull and the President, and I tried to explain the thing just the way we said this morning, and Hull never said anything. I said, "Well, that is the way it was in your office, wasn't it, Cordell?" Le said, "Yes, yes, Regraded Unclassified 155 - 3 - I suppose so." So the President listened, and of course there was all this talking going on around. It was the most unfavorable circumstances that I ever presented anything in. Jesse said - tried to get in and the Presi- dent said, "Well, why can't you, Jesse, buy some goods?" And Jesse - no, Jesse said, "I could lend them some money against some goods," and the President said, "No, no, that won't be any good." I said, "Mr. President, you might just as well do it right out in the open. So then- and then there will be Congressional action, and that is what Chiang Kai-shek wants. We tried the other and it didn't work. -hat is what he wants. He wants the prestige of a loan backed by Congress to give him face opposite the Japanese." So then Jesse said, "Well, wouldn't it be just as good if it was from the President?" Well, of course there was only one answer I could say. That was "Yes." So the President said, "Well, explore it, Jesse, and if you don't find there is a way that you can do it, then Hull, Jones, and Morgenthau should go up on the Hill together Monday and see the leaders. Well, I never saw anything torpedoed nicer or quicker than the way Hull did it. Now, Jesse knows nothing about it. What I thought I would do is, because I would like to see the Chinese get this thing, I thought I would call up Berle and tell him just what happened and tell him I want to see them get this loan and this is what the President said and that Jones knows nothing about it and Mr. Hull brought him in, so it is his responsibility, but I am ready to do anything. But they will have to do something over there, see. And tell him just what happened. He is Assistant Secretary of State and has been handling this. What do you boys think? It is either Berle or Hornbeck. MR. WHITE: It is 8. little bit strange for you to tell Berle. I think it might be all right for somebody else to tell Berle. H.M.JR: No, I would rather tell him. "This is what 156 - 4 - happened. Now, I would like to see the Chinese get this loan. I am very anxious to do it. Mr. Hull has brought Jones in, and will you please follow through on it and if there is anything that we can do, let me know." MR. VINER: Is it Berle? MR. FOLEY: Yes. MR. WHITE: Would it be - the only thing, it is a little peculiar. H.M.JR: The whole thing was peculiar. MR. WHITE: Hull was there. H.M.JR: Hull won't do anything about it. I don't care what they think. It is no more peculiar than the way Hull runs his Department or after one month's negotiations, when we sit down at the last minute, that he should bring Jesse Jones in. He could have brought him in any time. In one breath he tells us, "This is my business, I have got to work out the details," and the next thing, he brings - now, all of that, all the personnel - I don't care. We will do the way we always do. I will wave it all aside to get Chiang Kai-shek what he wants. A personal affront, anything like that, that is all waved to one side. MR. WHITE: You might get Berle and Currie to take the edge off that, and it would be more effective, too. H.M.JR: Well, you can tell Currie, and let me tell Berle. MR. WHITE: Well, that isn't quite what I had in mind. I mean, you could give it 8 push from both, and it would be logical for you to turn to Currie to follow up the President's thinking, because he is the President's Administrative Assistant. It is Friday now. Something ought to be done. I don't understand Hull. 157 - 5 - I don't understand why - why did he handle it that way? H.M.JR: Just his animosity personally for me. I don't care. Jones can take it. I made up my mind the Chinese should have it. Let me do it. My instinct is all right on this thing. Of course it is 8 funny piece of business, but everything in Washington is. The only way they can't lick me is, do I want to help the Chinese? Yes. MR. VINER: Don't indicate to Berle that you feel aggrieved in any way. Go slow at first, at least. H.M.JR: I don't feel aggrieved. I am used to it. It is Washington, and it is the way they do business here. Now, if I didn't want the Chinese to get anything I would just sit tight and do nothing, but I do want the Chinese to get something, SO I am going to call up Berle and tell him that. Now, these two papers here, this is all I have. I have this joint resolution and this thing from the State Department. The joint resolution is prepared -- MR. WHITE: Here. H.M.JR: And the original is in the hands of Mr. Hull. I have a copy of the State Department memo -- MR. VINER: That is the message. MR. FOLEY: That is the message to support the legislation. H.M.JR: All of these things get down to the ques- tion, I want to help the Chinese. (The Secretary held a telephone conversation with Mr. Berle as follows:) 158 January 30, 1942 4:10 p.m. HMJr: Hello. Adolf Berle: Yes, Mr. Secretary. HMJr: This is Henry. B: Yes, Henry. HMJr: Are you alone? B: I am, yes. HMJr: Well, look, let me tell you what happened at Cabinet and after, see? B: Yes. HMJr: I brought this question up - no, let's get the thing - no, that isn't what happened. The President brought up the question for the loan to the Chinese, and it seemed that T. V. Soong was to have went to see the President today. I don't know about what, but he saw him this morning, see? B: Yes. HMJr: Maybe you know about it. B: No, I don't. HMJr: What? B: No, I don't know what he talked about. HMJr: Well, 80 - and then evidently he brought up the question of the loan, and I gather from what the President said at Cabinet, that the President must have called up Mr. Hull and asked him where it stood, and Hull told him that I'd been over there this morning and we were going to take it up at Cabinet. But Soong sort of must have given the President the impression that the thing wasn't going too well, you see? B: That's wholly unfair to you, sir. Regraded Unclassifie a I I 159 HMJr: It 1e, because you saw the letter from Soong to me, didn't you? B: Yes, I did. HMJr: And my answer. B: Of course. HMJr: But that's neither here nor there. I'm used to that. B: (Laughs) Well, we all are, I think. HMJr: What's that? B: So are we all, I think. HMJr: That's right. Now, then we stayed behind. Then I asked couldn't I see the President after Cabinet with Mr. Hull to discuss the Chinese matter, and the President said, "Fine". But he did it with most the Cabinet around talking very loudly, which it was about the worst possible place to bring it up. B: Yes. HMJr: So I started talking, and we were about Just nicely started when Mr. Hull said, "Where's Jesse Jones? I want him to sit in on this thing." Well, Jease was just behind Cordell, waiting. (Laughs) B: (Laughs) HMJr: So the only reason he couldn't see him was because he was right behind Hull, leaning over him. B: (Laughs) HMJr: So Jesse pulled up his chair between the President and Hull and sat down. And the President asked Jesse whether he couldn't do something about it, and Jesse said, "Well, I could make them a loan against future purchases." And the President said, "No, that would be too slow." So the President said, "Well, couldn't we buy fifty million a month Regraded Unclassified 160 - 3 - from them?" Of yuane, you see. B: Yes. HMJr: And - - he didn't say fifty a month, he said, "every 80 often buy fifty million dollars worth of yuans. So I said, "Well, Mr. President, two things. I'm impressed by what the State Department and the War Department tell me, that this 18 urgent; I'm for it, and this 18 something to build up Chiang Ko1- shek vis-a-vis the Japanese; and also, the State Department says we mustn't do it in 8 way that T. V. Boong will get any credit out of it." And I said, "I'm impressed by that." Now, I said, "We've explored all this thing for months, and whichever way we do it we're going to have to talk to Congress about it, and it's a question of your seeing the leaders." Well, Jesse said, "Well, let me look into it. Let me look into it. Maybe I can do something." So the President said, "Well, if you can't, Jesse, I want Hull, Jones, and Morgenthau - the three of you - - to go up on the Hill together." Hello. B: Yes. HMJr: Now, the purpose of my calling you is this. I'd like to see the Chinese get it. I'm convinced that for political and military reasons they should have it; and I thought if you knew what has happened, you'd be helpful in seeing that the thing didn't fall between three departments now. B: I shall be very glad to, Mr. Secretary. HMJr: And I'm ready to do anything to help. B: Well, thank you very much. What I will do, if I may, after checking with the Chief, will be to - with Mr. Hull, I mean HMJr: Yes. B: will be to endeavor to see that the decision - it - 161 arrives out of the other department right away quick; that 18, that they don't spend an awful lot of time ..... HMJr: Well B: Personally, I think the straight way to do it is to go straight to bat and ask them for it up there. HMJr: Well, the President said - he said, "I think in the end," he said, "that _" he listened to me, you see. And he said, "I think that it's popular to help the Chinese", and he said, "maybe you can get it through in a couple of days." B: I think you probably could, don't you? HMJr: I'm sure that we can. B: So am I. HMJr: But if you're going to do some horse trading about it, and if Jones is going to make a horse deal out of this thing, it'll be another month. B: Well, this is no horse dealing Job as I see it. HMJr: It isn't a banking job. This is a straight political, military proposition; and it must be done in the way, I'm convinced now, that'll leave a good taste in the mouth of the Generalissimo. B: Well, I thought from time to time absolutely this morning when you said, "If we do it at all, the thing to do is to do it handsomely." HMJr: That's right. B: (Unintelligible) HMJr: Well..... B: I privately am sorry that your other idea didn't go through. All the fellows here seemed to think - 5 - 162 that it probably wouldn't, but I was sorry it didn't, because I thought that would take us right out. HMJr: You mean the soldiers. B: Yeah. HMJr: Well B: But there's no use crying over spilt milk. HMJr: Well, the President liked it, Mr. Churchill liked it, Lauch Currie liked it, but it didn't work, 80 that's all we can do. B: We were skeptical as to whether the - our friend across the sea would like it, but that was our only fear, and that, unfortunately, was justi- fied. HMJr: You mean the Generalissimo. B: Yeah. We kept our hands rigidly off, of course. HMJr: Well, he didn't like it, and - I mean, evidently - - I don't know how T. V. Soong got in to see the President. B: I don't either. HMJr: Somebody must have made the appointment and..... B: Well, that, so far as I know, was not done here. I think that he just went in on his own. HMJr: Well, he never has before. Somebody must have - anyway, he got in to see the President. You've got the whole story, and I know that you people over there are anxious - and what I was fearful of if I didn't call you, it would just fall between three departments. B: Well, we will endeavor to see that it doesn't fall, certainly, between this and the other two, and endeavor to report back to you as rapidly as the decks can be cleared. Regraded Unclassified 163 - 6 - HMJr: Right. And remember that the President said that the three of us should go up on the H111. Those were his instructions. B: Right. HMJr: And - Monday, he said. B: Monday. HMJr: That's what he said. B: Well, all right. HMJr: Now, I'm ready to do anything to help, and..... B: Well, 80 are we. HMJr: .....if you'll let me know just personally, because - I'll appreciate it. B: I'll do that with pleasure. Thank you very much, Mr. Secretary. HMJr: Thank you. B: Good-bye, Henry. 164 - 6 - H.M.JR: That is all right, isn't it? MR. VINER: Fine. Perfectly all right. H.M.JR: What? MR. VINER: Sure. H.M.JR: I mean, he will go in and he will stir it up. You notice he said, "None of us, we stood by and did nothing, but we didn't think it would work"? I told Berle, I said, "Now, don't anybody over there send any cables messing this thing up now, but I would be glad if you (White) would say the same thing to Lauch Currie. MR. WHITE: I will do that. H.M.JR: And ask Lauch whether he got T. V. Soong in there to see the President. MR. WHITE: I will find out. H.M.JR: I am satisfied, aren't you? MR. VINER: Yes. H.M.JR: I mean, Berle sounded all right. MR. FOLEY: Yes. MR. WHITE: He is the most eager of the lot. H.M.JR: That is all right. I have decided I want to do it. All right, let's get it done. Now, the fact that at the last second Hull brings in Jones - that is his method of doing things. He could have brought Jones in at any time. MR. WHITE: When he speaks of your going up on the Hill Monday, does he mean to see -- MR. VINER: The leaders. Regraded Unclassified 165 - 7 - MR. WHITE: The leaders? H.M.JR: Yes. MR. WHITE: And who presumably is going to arrange that? Who is going to take the responsibility for carrying this on? H.M.JR: Well, we have needled him today. Berle will call up tomorrow. You call up Lauch tonight and needle him, and maybe we can get it back so when the President sees the leaders Monday - that is the time to do it. The President should do it, you see, but I will be here in the morning and We can get word to the Vice-President, maybe, and get this - but you get Lauch busy, will you? MR. WHITE: I will do that. MR. VINER: Did the President look at the drafts at all? H.M.JR: Didn't look at anything. I have never seen people so rude. Here the President is trying to listen and everybody is talking around at the top of their voices, and the President could just look up and frown, and everybody would stop talking. He listened to me, but Hull sits there. In his own office Hull gives you a history of what he did on the Japanese and how he told this personally that all this is going to happen, and I don't know how you people felt. You notice he said, "Some day when you are on & vacation, I want to tell it all to you." But then this forecast, I just had to come back and just pull myself together and just say, "Well, being a historian doesn't make history. That is very good, Mrs. Klotz. Put it down. And that is what he was doing. He was being a historian, but he wasn't making history.. He was narrating. And I had to come back and pull myself together so that I could get my chin up again, instead of having it down dragging the basement the way he was. He was terrible. I don't know 166 - 8 - what it did to you fellows, but what he did to me was just wicked. Didn't you feel that way? MR. VINER: Oh, it was very pessimistic, but it may be realistic. That I can't say. H.M.JR: Granted, but that doesn't help win the war. If you listen to a thing like that all day long with a man's hands the color of pale yellow parchment, and shaking - and any time he could have taken this thing and said, "I went this thing done," and then wait until the last minute and then bring Jesse Jones in to torpedo it. Wasn't it terribly depressing? MR. WHITE: I thought ninety per cent of it was hindsight. If he felt all that certainty about the importance of maintaining Chinese independence, there were 8 great many things that could have been done last spring and summer, which was six months before the out- break of the Japanese war. H.M.JR: What has he ever done to help China? MR. WHITE: He took a trip once and let the twenty- five million dollar loan go through. H.M.JR: While he was on the high seas. MR. WHITE: No, I don't think he has ever done anything. H.M.JR: Well, thank God I have got belief in this country and our people and that we will keep fighting until I have got no breath left. If I listen to that fellow - it was terrible. I don't know whether he did it to you fellows, but I came out of there just as though a steam roller had gone over me, and that I could take it and laugh and joke about what he did to me fif- teen minutes ago -- MR. WHITE: It doesn't make sense. H.M.JR: Here is something down your alley, Foley. This is just a very mild thing. That made me awfully nervous, about Batt. I was afraid the President would 167 - 9 - turn and say, "where is this, Henry?" MRS. KLOTZ: I think you said to send it over by three o'clock. H.M.JR: Well, I did, but -- MR. FOLEY: The memorandum was all right as it was. What I did was to re-write the second page to tell who General Monnet was, which I thought you wanted me to do, and then I tied up on the third page by saying, "Here these two men had voting trusts." It just made it a little clearer, that is all. TO:- 1/31'42 Nell 168 is is a copy of the Joint Resolution which was given to the Secretary last night. It was initialed by Messrs. Bernard (LJB) Bernstein (BB) Foley (EHFJR) Viner (JV) White (HDW) MR. FOLEY Regraded Unclassified 1/30/42 169 JOINT RESOLUTION To authorize the President of the United States to render financial aid to China, and for other purposes. WHEREAS China has for more than four years valiantly resisted the forces of Japanese aggression; and WHEREAS financial and economic aid to China will increase her ability to oppose the forces of agression; and WHEREAS the defense of China is vital to the defense of the United States: Therefore be it Resolved by the Senate and House of Representatives of the United States in Congress assembled, That the President is hereby authorized, on behalf of the United States, to loan or extend credit or give other financial aid to China in an amount not to exceed in the aggregate $500,000,000 at such time or times and upon such terms and conditions as the President shall deem in the interest of the United States. Sec. 2. The authority herein granted shall be in addition to any other authority provided by law. Sec. 3. There is hereby appropriated out of any money in the Treasury not otherwise appropriated, such sum or sums not to exceed $500,000,000 as may be necessary to carry out the provisions of this Joint Resolution. Regraded Unclassified January 30, 1942 170 Draft of Presidential message to Congress prepared by State Department. (Two copies were furnished to Treasury by Mr. Hornbeck, one of which the Secretary gave to Secretary Jones.) 171 January 30, 1942 There have been brought to the attention of this Government, by responsible officials both of this Govern- ment and of the Government of China, reports on the subject of China's ver effort and the situation in China which point to the existence of n. practical need for on extension to China of economic assistance financial in character. This country has during recent years afforded assistance to the Chinese Government by means of credits, loans and, under Lend-Lease authority, materials. The amount of assistance thus afforded, although not large in particular or in aggregate amounts, has been of obviously substantial benefit to China in her operations of ermed resistance to n movement of aggression 1sunched and carried on against her. It therefore has helped toward carrying out the policies in which this country believes as world policies. It has been A contribution on our part tousrd holding book the tide of conquest which we have long regarded no potentially menneing this country end which now we clearly perceive to be actually and gravely Jeopardizing this country along with all other countries which desire to live in peace and refuse to submit to the demands and the attacks of the predatory nations with whom this country and its powerful masociates, including China, are now at VAT. in Regraded Unclassified -2- 172 In order to strengthen China's position both as regards her internel economy and as regards her capacity in general to function effectively as a co-belligerent with us in the effort which the United Nations are now making first to halt the movement of conquest and ulti- mately to schieve complete victory over those who have initiated it, this country 1s, fortunately, in position to render immediate assistence in the financial field. It is desired and proposed that the Congress appropriate a sum of $500,000,000 and authorize granting therefrom of loans or credits or both to China under agreements to be entered into by the Treasury Department acting in consulte- tion with the Department of State and with the approval of the President. Among the purposes envisaged for the use of this sum are: to safeguard the position of the Government of China in relation to China's public finance; to enable the Chi- nese Government to encourage domestic production of important commodities, especially those essential to war effort; to facilitate making by the Chinese Government of purchases both in the domestic and in foreign markets; to assist in stabilization and effective control in China of Chinese currency; and in general to facilitate cooperation between China and the United States in the common war effort to which both countries along with others are com- mitted. Regraded Unclassified -3- 173 with this mid, the Chinese Government, in its most valorous and effective combat against Japan, may be assisted in maintaining the economic activities essential to the dontinued effective prosecution of the war. It may be helped to finance its military effort in China without so enlarging its issues of paper currency as to create extreme price increases and price disorder; this is essen- tial to maintain production, to sustain the necessary exchange of goods needed for living among the Chinese people, and to secure adequate supplies for the armed forces. This aid will make it easier for the Chinese Gov- ernment to effect necessary revenue measures, and to regulate the flow of supplies and prices thereof. In short, this measure of financial assistance is intended to contribute towards the strengthening within China of the same framework of economic, financial and production measures that is being found necessary within the United States for the pursuit of the war. BECEIAED insmireq9Q SAST 08 NAL to goletviCI domasseR VistogoM Regraded Unclassified 174 January 30, 1942 Telephone conversation between Mr. White and Sir Frederick on Friday, January 30, at 4:45 P.M. Mr. White called Sir Frederick at 4:45 P. M. to return Sir Frederick's earlier call. Sir Frederick inquired about the China loan. Mr. White informed him that discussion was going forward but that there had been no final decision. Mr. White said that he thought a decision would be reached on Monday and that Sir Frederick would probably be informed either by the State Department or by the Treasury. Concerning the take outs, Mr. White said that, so far as he knew, nothing had been heard from the President. Sir Frederick said that the Lend-Lease Appropriation Bill had gone to Budget Director Smith and, lest it become too late, he asked whether he should call Colonel Oran to get some confirmation of Stettinius' statement that the Army could take over the contracts. Mr. White said he saw no reason why this should not be done. HDW Regraded Unclassified 175 January 30, 1942. MORANDUM FOR THE SECRETARY'S RECORD Mr. Jesse Jones telephoned Secretary Morgenthau at 5:30 P.M. on Friday, January 30, to say that he would like to call on the Secretary to learn more about the Chinese matter. Secretary Jones said he would like to get the "feel of the thing" and asked whether he could not see Secretary Morgenthau and talk with him about it. It was arranged that Mr. Jones would call at 10:30 Saturday morning in Secretary Morgenthau's office. HDW Regraded Unclassified Treasury Department Division of Monetary Research 176 Date 2/7/42 19 To: Miss Chauncey In view of the discussions which are going forward, I don't think an answer to this letter is necessary. H.D.W. MR. WHITE Branch 2058 - Room 214 Regraded Unclassified 177 The Secretary wanted you to note - then Miss Chauncey is to show to Mr. White. DueB Regraded Unclassifi 178 OFFICE OF LEND-LEASE ADMINISTRATION FIVE-FIFTEEN 22d STREET NW. WASHINGTON, D.C. E.R. Stettinius, Jr. January 30, 1942 Administrator Dear Henry: Thank you for the copy of your letter of Jenuary 27 to the President, enclosing the note from the British Ambessador and the wenoren.num from you to the Chancellor of the Exchequer. As I sentioned to you at our conference in your office on Tuesday of this week, I understand that the War Department is willing and has or will request the neces- stry funis from Congress to take over British contracts for munitions placed before the Lend-Lease Act TAB pessed. There is still some doubt, however, as to whether the Tar Department ought to or is mking provision for teking over facilities contracts 0.8 contrasted with supply contracts. Since the War Department is, now asking Congress for all funds for munitions to be supplied to Britein, end since the fecilities in question are those located in the United States, It would seem to me that the question of toking over British fecilities contracts should be put up to the War Department. If I can be of any further assistance, please feel free to call upon DE. FORDEFENSE The Honorable Rest BUY The Secretary of the Treasury UNITED STATES SAVINGS SONDS - Regraded Unclassified TREASURY DEPARTMENT 179 MI INTER OFFICE COMMUNICATION DATE JAN 30 1942 TO Secretary Morgenthau FROM Mr. Foley Pehle learned from Stopford that 2 repre- sentative of the Swiss branch of a German bank has recently indicated that he has succeeded in con- vincing the Swiss that the United States may not release blocked Swiss funds after the war, and that as a result the Swiss are very apprehensive about the future of their substantial assets in this country. 9.1.7h 7h Regraded Unclassified TREASURY DEPARTMENT MA 180 INTER OFFICE COMMUNICATION DATE JAN 30 1942 TO Secretary Morgenthau FROM Mr. Foley Personal and Confidential Stopford has mentioned to Pehle that Floyd Blair of National City Bank has been criti- cizing the British attitude toward Vichy as being too strict. Stopford said Floyd Blair is very friendly with a number of people in the Vichy group, such as Lacour-Gayet. 9.107L 76 Regraded Unclassified 181 by CONFIDEN JAN 30 1942 MEMOGANIUM FOR THE PRESIDENT: You have asked me for information concerning William L. Batt's connection with American Bosch Corporation. 1. In order to have a clearer picture it is neces- sary to mention briefly Datt's connection with SKF. Batt has been associated with American SKF and its predecessors since 1910. He was general manager from 1919 to 1923, when he became president, which office he still holds. Eis salary as president has ranged from 126,000 in 1935 to 160,000 in 1940. lie customarily files n joint return. Se and his wife have no significant Income other than his salary from American SKY Corporation. On January 1, 1939, Swedish SKF owned 76 percent of the outstanding stock of American SKF; certain other Swedish interests owned approximately 18 percent. These shares were transforred to Batt under voting trust agreements early in 1041. Batt himself OWNS n. trifling amount of shares in American SKF (65 shares). Regraded Unclassified - 2 - 182 2. In 1938 Batt became a director of American Bosch Corporation at a salary of $2000 a year. The records of the company and the transfer agent do not reveal that he has ever owned any stock in American Boach. He resigned as director of American Bosch on March 5, 1941. The majority of the stock of American Bosch was re- acquired in 1931 by the German Bosch Company. In 1934 Mendelssohn & Co. nominally acquired the German Bosch interest in American Bosch. Shortly thereafter, George Murnane became director of American Bosch and represented Mendelssohn's interest in American Bosch. George Murnane is at present a member of the firm of Monnet, Murnane & Co. and formerly was a partner of Lee Higginson where he actively handled the Kreuger and Toll matters. Murnane's partner, Jean Monnet, formerly was chairman of the British French economic council, and is now a member of the British Supply Council. Murnane be- came chairman of the board of American Bosch in June 1937 and in 1938 effected a reorganization of the company. The financial reorganization left the stock in Mendelssohn & Co. and the managerial reorganization resulted in Donald P. Hess replacing Arthur T. Murray as president. At the same time Batt was made a director of American Bosch. When Fritz Mannheimer, the head of Mendelssohn & Co. committed suicide in August 1939, Mendelssohn & Co. failed Regraded Unclassified - 3 - 183 and was liquidated. In May 1940, the Mendelssohn interests in American Bosch were sold to the Stockholm Enskilda Bank which is owned by the Wallenberg family. Murnane was then designated as the voting trustee of the Swedish interests in American Bosch. At the present time, therefore, the Swedish interests in American SKF are represented by Batt, as voting trustee, and the so-called Swedish interests in American Bosch are represented by Murnane, as voting trustee. 3. In the course of our investigation of the personnel and records of American Bosch, which we started last Saturday, we have run across information which suggests that arrangements may have been made whereby the Germans would protect SKF holdings in German-occupied countries in exchange for efforts by the Wallen- bergs to protect the German interests in American Bosch. Under such an arrangement the Wallenbergs would hold the Swedish interests in American Bosch until the end of the war when it would resell such interests to the Germans. Murnane reported to one of our Treasury investigators that it was upon his recommendation that Batt was made president of SKF and that Hess who succeeded Murray in 1938 as president of American Bosch was suggested by Batt. It has also been reported from another source that during the liquidation of the Mendelsschn (after the outbreak of war) English interests were asked to buy the Mendelssohn- Regraded Unclassified 184 held shares in American Bosch with the understanding that at the end of the war the control would be resold at a profit to Cerman interests; but the English exchange author- ities refused to permit the transaction. Thereafter the Mendelssohn interests in American Bosch were sold to the present Swedish holders. In view of the fact that our investigation of American Bosch has just begun we can not warrant the securacy of the comments contained in section 3 of this memorandum. (Signed) H. Morgenthau, JF. 1/30/42 EHFJr:BB:RP:mp Regraded Unclassified 185 NATHAN J. STRAUSS 212 FIFTH AVENUE NEW YORK.N V. January 30, 1942. Mr. Henry Morgenthau, Jr., Secretary of the Treasury, Treasury Building, Washington, D. C. Dear Mr. Secretary:- I am enclosing herewi th a copy of the "Seattle Post Intelligencer" dated Tuesday, November 18, 1930. I came across this old paper in my files, and was particularly interested in an interview with your honored father. I have marked the article for your attention, and I know that you will be extremely interested in the pre- diction made at that early date as to the possibility of another war. Very truly yours, NJS/PB enc. Regraded Unclassified sontebooy pasmen num boarded train have Ford time ride arrived." out of the window-and said, "for imrgediate relief "Mot dollar in AND 1 think there was a States treasury is 50 secrea it must stay there when we woman in the case." men walking the streetd they That was the positive search ef work they cannot bit He indicated that while Frencil opinion expressed yester- President's eummittee under Arthur A. Woods is perfor day by Fred J. Libby, valuable service la Its tabulás of unemployment statistics and Valk's brother-in-law, aft- general promotion work (or con er making a personal in- struction going on throughout the proble country, more than mere figured grining material it vestigation of the wealthy George Valk, wealthy Pullman con- are needed at present. drink Pullman contractor's mys- tractor, whose dive to death Doles Likely terious plunge Sunday from the eighth floor of the ente Olympic Hotel remains a. mya Borah did not make known jus the night from his room on Any: what sort of relief he Integrio and the eighth floor of the urge, but it was assumed not Olympie Hotel. will take the general 40m under herr MORGENTHAU Doles, either in maney, HvD necessities. or both. is in Suicide Or Accident The projecty of the war depar ment. announced inday, AVM mail) Chief of Detectives Charles Transant, however. was inclined PREDICTS WAR 1y elvers and harbors construction work. Every purtify available le II to believe STart if was n. case of was department for the prexp wamen either suicide or accident, and flocal year will be Immediate thrown Into the picture, the inte house his view was shated by Deputy BATTLE CREEK, Mich. Nov. 17. belog to spend the entire sum Coroner Howard E. MaeDonabld -(A, P.)-Henry Morgenthan, fir February. put M First MueDonald suspected mer ambassador to Turkey, said to- eart Valk had heen murdored, besing day he believes another European Woman Forced Into howe his opinion on the (net e whinan's war is imminent. along sin shirtwaist. unserountable hacked If If happens, he said. the United Auto, Police Toi improved with is pair of scissors, load been States will be forend to take A A report telephoned police es You would found beside Yalk's body where " hand, just as surely AB 11 was in this morning by Attorney Her her, landed on the puvement on the the World War. Clay Agonw that a women Finn Avenue side of the botel War, he asserted, can be averted been forced into an actomot wished SEV- But be abandoned this bit of only by the United States, He sue near bis home. 2044 Borer AND death, Troms evidence after Identifying the shirt- gested that the United States pro started e police search for He Drive waist as one n° the PARE purchased pare a postjonement of payments which Agrew said sped weat Tide make by the Yellow Cab Courpany for of war debts by European countries Boyer Avenue He gave police by Teat, the TERM of for drivers to pollah to the United States, for possibly a license number. hould Their automobiles. D. D. Leche, fivisyear period, with the stipula- there in one of the drivers in the rank Una that any country which le the where the hody tanded, witnessed theu ageregior in a war stall sacritier the tragedy and told MacDonald Coolidge See and Detective N, P. Anderson be this right of determent. Frauce, the former ambasandor used his polishing me to mop no some of the binoil before the pollen sald, is preparing to repel any use U.S.InE Tax:R. und Je. alliances accived Curriter William J. Jonet will with Poland. Juggeloria, Rumania and other countries hald an inquess info the tragedy TOP Cermany. he said, IF not content morrow and delve into all the de without her colonies and territories (Continued ou Page 1, Column and was talk LA general, NORTHAMPTON, 17 the recent Brithe MUSKRAT FIRES pal- conference the doll DOCTOR ERRS AND tried to eat their cake It, too They asked for equi with Britzin and more the those GUN. KILLS MAN self-government, which they 16 BABIES DIE They wanted preferential iffs within the empire, they did not get. They se JAMESTOWN N. Y., Nov. 11- greater political freedom BOGOTA. Coloubia. Nov. CA P.)-Tearlo H George died themselves and fess econ York LA. P.)-Tvo of the internal pediacticians, in Colombia were Today (erum wounde auffered when freedom for Britain wished to share the British hurrying to Medrilin tonight in AR nie shotgun was discharged DE e kets, but not the British ne THE CS- effort to save the lives of thirty- three ehtldren dylng est dipiberta. muskrat Genrge caught the muskcal to a sibilities. rear- Sixteen of forty-nine Inforte to n teap and attempted to free it. be- Economic unity and pali cause it who out.of aeason. As he unity usually g° together, 1697, San crime private hospital there have died pried the was open with the butt of that reason the Briand prop dest with Reporte from Medefin said is Time shotevn, the myskrat scrambled (er a federated Europe is physician nt the hospital innocu- over the EWITY One of HE teet tional plan for closer econ 7,000 espelled lated the children with diphtheria relations Our own Union ind touched the trigger. garme through an lewines accord, An Official Narrative of the Lost ANDREI Polar Expedition Regraded Unclassified 18? (3) "IL PREES JANUARY 50, 1942. IMMEDIATE RELEASE E. TRENT BY THE PRESIDENT 05 SIGNING THE EMERGENCY PRICE CONTROL ACT OF 1942. The Energency Price "ontrol Act of 1942 is an important weapon In our arrery against the onslaught of the Axis powers. Nothing could better serve the purposes of our enemies than that we should become the victims of inflation. The total effort needed for victory means, of course, increasing sacrifices from each of us, as en ever larger portion of our goods and our labor is devoted to the production of ships, tanks, planes, and guns. Effective price control will insure that these sacrifices are equitably distributed, The Act, taken all in all, in a workable one, It. ac- complishes the fundamental objectives of setting up a single Ad- ministrator, and ompowering him to establish maximum prices and rents over 0 broad field, to prohibit related speculative and man- ipulative practices, and to buy and sell commodites in order to obtain the maximum production. To make price and rent control ef- fentive, the Administrator is given adequate powers to license persons subject to the Act, to investigate and enjoin attempted violations, and to bring about the commencement of criminal proceed- ings against violators, Civil suits for treble damages by private persons provide an additional enforcement tool. But a price control measure must fall far short of being #: democratic instrument if it fails to surround the individual with prreguards against ill-considered or arbitrary action. This Act, while granting the Administrator broad powers, imposes upon him a responsibility of equal breadth for fair play. He must, SO far as is practicable, consult with industry members before issuing price regulations, and must accompany each such regulation by a statement of the considerations upon which it is based. The provisions for adjustment assure flexibility in administration. Persons adversely affucted by an order have a speedy and effective remedy in the Emer- gency Court of Appeals, The Administrator may proceed for the revour- tion of El license only through the courts. Finally, the Administrator is required to transmit quarterly progress reports to the Congress, The form program which has been developed since 1933 has set parity prices and income as EL goal. There is nothing in this Act to prevent farmers receiving purity or a fair return. But I Feel that most farmers realize that when farm prices go much above parity, danger is ahead. One of the best ways of avoiding excessive price rises, of course, is sbundant production. And I hope agri- cultural prices can be maintained at such level as to give farmers d. fair return for increasing production. In giving my approvel to this legislation, I AM acting with the understanding, confirmed by congressional leaders, that there is nothing contained therein which can be construed SF a limitation upon the existing powers of governmental agencies, such as the Commodity Credit Corporation, to mke sales of agricultural commodities in the normal conduct of their operations. In By mes- cage to the Congruss on August 25, 1941, disapproving the bill H. P. 5300, I pointed out the extreme disadvantagus of any action devigned to pag prices through the arbitrary withholding of Govern- must-oimed stocks from the normal channels of trade and comuro. Regraded Unclassified 188 - 2 - I further pointed out that the Commodity Credit Corporation should be free to dispose of commodities acquired under its programs in an orderly manner, for otherwise it will be in- possible to maintain an ever-normal granary, to protect farmers against surpluses and consumers against scarcity; and that to restrict the authority of this corporation would greatly increase its losses, nullify the effectiveness of existing programs, and by breaking faith with consumers be inconsistent with our present price control efforts. I also should like to call attention to the fact that I am requesting the departments of the Government possessing commodities to make such commodities available to other depart- ments in order to aid our war effort. This request, primarily, will affect the cotton stocks of the Commodity Credit Corpora- tion and will permit such stocks to be utilized, directly or by exchange, in the production of war goods. Such transfers will be in addition to the quantities which are now available for sale. The request will also include grain and other commodities which may be needed by the departments concerned. The enactment of price control legislation does not mean that the battle against inflation has been won. I have doubts as to the wisdom and adequacy of certain sections of the Act, and amendments to it may become necessary as we move ahead. Moreover, price control legislation alone cannot successfully combat inflation. To do that, an adequate tax and fiscal program, a broad savings program, a sound production program, and an ef- fective priorities and rationing program, are all needed. Finally, all bulwarks against inflation must fail, unless all of us - - the business man, the worker, the farmer, and the consumer - are determined to make those bulwarks hold fast. In the last analysis, as Woodrow Wilson said, "The best form of efficiency is the spontaneous cooporation of a free people". Regraded Unclassified 189 MEMORANDUM FOR THE SECRETARY. January 30, 1942. Mail Report Mail has been very heavy during the past week, entirely naide from any called forth by the Secretary's several speeches. The new auto tax has been the subject of many com- risints - not about the tax itself, but about the form of the stamp, and regulations in connection with it. There is a strong demand for permission to autograph the stamp or to carry it with the driver's license, and many of these letters are written as a result of the theft of the first stamp purchased. Small manufacturers and businessmen continue to write the Secretary, often saying that they know their problems do not come under his jurisdiction, but that he has the reputation of getting things done. Suggestions for substitute names for Defense Bonds and Stamps continue to arrive. The greater proportion of these urge the name "Victory", but others suggest "Freedom", "Unity", and other substitute names. requests for the new tax song are just beginning to come in, and will probably increase as the Disney film is shown around the country. Just BS the abstract was being compiled, 3 letters came in praising the Secretary's radio broadcast on the subject of the President's birthday and infantile paralysis. The address at Clevelend is the subject of a separete abstract sent herewith. Regraded Unclassified 190 - 1 - Comments on the Present Emergency Ing. Enrique de Montalvo, President of the Mexican National Committee, Pro-Help to Democracies in War. With a pleasure I send you, as I offered you, one anexo (memo) about the New Individuals and Commercial and Industrial Firms in Mexico working in benefit of Axis Powers. I let you know that Avila Camacho's Govt. of Mexico talk too much about Democracies to please, and deceives the U. S., but acts in- directly favoring Axis activities. # # # Lots of spyes of Japanese and Germans are working freely in Mexico, and the actual Government of Mexico knows them and make nothing to punish them. Mrs. Myrtle Browning, Grand Saline, Tex. I have some land in Texas that has 8. good grade of lignite at 8. very shallow depth which could be mined cheaply. I am told that this lignite can be pressed into briquetts and that it would make very good fuel for furnaces, locomotives, etc. I am offering this lignite 8.5 a gift to the U.S. Government should it ever be needed to help in this struggle to preserve "The American Way of Life". Katherine M. Wright, Wright's Trading Post, Albuquerque, N.M. The shops in this country have in stock a great deal of merchandise made in Japan. I have very little in my own shop, so little that it doesn't hurt me very much financially to pack it away. But there are lots of mer- chants that it does hurt. At the same time, we are all trying to buy bonds. If this merchandise, instead of being stored in basements, could be sold and all the money used to buy bonds, it would buy a tremendous lot of bonds. We could use Japan's merchandise to fight her in return for all our goods that she is using to fight us. Aris J. Smith, Supt. of Bldg. Area, San Juan, Puerto Rico. Enclosed is a money order in the amount of $49.25, to be used in the National Defense. This donation has been made by the 50 members of crew 14, shift 2, on the Army Terminal Contract. They have declared that it is 8. pleasure for them to make this contribution for the defense of democracy; and they intend to make a similar one every15 days. (All names are Spanish in form.) Regraded Unclassified 191 - 2 - B. F. Shaffer, Chambersburg, Pa. # Many thousands of dollars are being held by collectors. Money that has no value whatever, as premium coins. Some folks save all their V nickels, and some all buffaloes with a Mint mark, Indians, etc. # One party I know has about 1, 700 Indian cents. Some are smooth - none have premium value. Another has two two-quart jare full of Mint marked cents. One man tells me he has $50 worth of V type 5-cent nickels. Really Sir, these coins have no value B.S from 8. collector's viewpoint. They are being held in the hope that some day they will get big premiums on them. The facts are that the lots contain little or no extra value. # # Ask these people to put back into circulation every available coin that does not carry extra premiums. Ask them to buy Defense Bonds with the loose coins of all values that they have on hand. # 4d The exchange to Bonds will, in 10 years, produce value, while coins of only ordinary value will have no more value then than they now have, even up to 10 years. Ask for the release of Indian cents, Lincoln nickels, dimes, quarters, etc. D. 0. Alston, Gen. Manager, Bullitt Hat Company, New Kensington, Pa. Having been affiliated with one of the Departments in Washington, D. C., I am well aware of your ability for getting things done. (Describes difficulties in the hat manufacturing business. ) A letter signed by 20 different names comes from Harding College, Searcy, Ark. The names represent the entire group of students receiving N.Y.A. assistance there. "" 12 # We are requesting, with the approval of Harding College, that we be eliminated from the N.Y.A. payroll effective Feb. 1, 1942, and that the appropriation al loted to Harding College be henceforth used in national defense. We have been anxious to do our part to assist in the great defense program of our nation. We desire, however, that our allotment not be used to increase the allotment of some other college, which pro- bably needs the assistance no more than our own college, and where the students could likely find other employment, just as we have found that we can get other employment here. This sacrifice is being made as B. contribution to the defense of our nation. We are indeed happy that work is now abundant, that We do not longer need the NYA assistance, and that we can offer this contribution to the defense of our country. Regraded Unclassified 192 - 3 - HELP! HELP! HELP! Mrs. Ola McCants Spencer, Mobile, Ala. The Secretary of the Treasuary. Henry Morgenthan. dear sir i am writting you about the way i have bin treated about my deciested husband which is bin dead for some time and here is where. # # # i have prove all the evidence they asked me for and still they wont consider my case and they ditting even buried him when he died. i had to bare all of the expence for his furnell my self. 4i 4 # if i dont get nothing but what i had to pay for the expence of burrying him, and after that i W&8 intiled to sumpthing then, and he never have draw one penny out of his bonius, at all the 1936 bonius, and i know i am intiled to sume of it as i am his wife. * * $ please help me and tell me exzact what i am due and i will sure thank you very murch for a reply. Ashley Miller, N.Y.C. (Telegram) Have'a son in the Army and have been buying Defense Bonds. But now we learn from Congressional investigation that part of our money invested in Bonds does not go into munitions needed by Army and Navy, but into exorbitent profits for the pockets of grafters who have or arrange contracts for planes, ships, guns and other war materials. We loyal Americans went this stopped now. Frances Opack, Sixth Grade, W. B. Powell School, Washington, D.C. (Encloses Money Order for $9.00) The sixth grade of our school has organized a "Penny-a-Plane-Club. For each enemy plane that is shot down by our American fliers, we pay e penny. However, there is a limit to what we can pay in one day. If more than five planes are shot in a day, we can only pay five cents. Our "Penny-s-Plane-Club" is only for voluntary contributions. Enclosed is our con- tribution. R. B. Cadwallader, Financial Agent and Consultant, Atlentic City, N.J. It is rumored that there is 8 captured German Sub at the Cape May Base. If this be correct, why can't the Government capitalize on it and place it on exhibition (preferably at Atlantic City), and charge the purchase of 8 Defense Stamp 8.5 the price of admission? Yours for an early and conclusive victory. Regraded Unclassified - 4 - Chas. A. Koza, Invincible Tool Co., Fort Wayne, Indians. Have been reading 80 many nice things about you in the papers recently that show you to be really human, and an American as well, that I am emboldened to write di- rently to you. 4 * # Is there any place for the very small business man, with Defense Contracts or orders 100%, in the present set-up, Sir? We have orders from General Electric, Federal Shipbuilding, The Army, The Navy -- from every line of Defense Work, for we make tools that are used in building and repairing ships of the sea and shipa of the air. Ford wants them on his bomber, engine and other jobs, and all our orders come to us on AIA OF ACB ratings. The OPM says they are not essential - so no priority rating for us. The banks say they cannot loan money on our orders, having our work done in outside job shops, although we have all our money tied up in materials in these shops. Our customers, who have received millions upon millions from the U. S., tell us they do not have to advance us any 30% as allowed them, and in turn to be passed on to the tool makers, as our tools are attachments and not machinery. We cannot borrow on unpaid accounts, except on ten-day notes -- and we have to wait from 4 to 12 weeks for our customers to pay us, when they already have had their money paid them. * # * Now, this is the story of not one, but many, small businessmen, who have been caught with more orders than they have money to swing. Properly financed, we could make tools up in B. decent lot In good time - if we can get the priority - for there is a good demand for these tools and they are essential to National Defense. Hundreds of others are in the same boat. Do we have to quit and take our products off the market? Joseph Marx, N.Y.C. About three weeks ago I applied for 51. position with the Fed. Reserve Bank in N.Y.C., as I heard they were taking on men. I was informed that there were no available positions, yet 8. friend of mine, of draft age, was accepted at once with the above bank. * 4a * I am B: veteran of the first World War, and while I realize I am too old for active service in the armed forces of this asuntry, I feel that 1 can be of service in other ways. (Lists bank experience, etc.) Regraded Unclassified 1.24 - 5 - Favorable Comments on sonds Robert S. Anderson, Assistant Principal, Western High School, Washington, D. C. Although not a philatelist, I am deeply interested in preserving samples of each of the U.S. Defense Postal Savings Stamps. It occurs to me that n. spe- ciel "Victory" folder, in which one of each of the series of Defense Savings Stamps might be mounted permanently, would appeal to a large number of people just 8.5 it does to me. If so, the sale of stamps would be increased and o great saving to the Government would result, since the souvenir folder would not be exchanged for Savings Bonds, Helen Slobodian, Secretary, Club Ukraine, Brooklyn, N.Y. R 4b * Our organization is composed of American youth of Ukrainian descent whose parents have fled their native land to seek peace and freedom here in this country. We find that it is our duty and great privilege to serve our country as Americans of Ukrainien descent. 42 # We are aware that during the first World War the Ukrainisna were one of the largest buyers of Liberty Bonds in the Foreign Section. We sincerely hope and will try to do our best to see to it that this record may hold true for this war. John A. Johnson, Laramie, Wyoming. Thanks for your letter of December, 1941, and I thank God for a country where we can write to 8. high Government official and know that the letter will be given respectful consideration. Vilko Laric, N.Y.C. Your recent letter, with reference to my purchase of Defense Bonds, has been a great honor and privilege to me. It is now B. further incentive for me to serve this country, which I hope to claim for my own some dey, since I have recently immigrated. ... Be- cause I finally succeeded in converting my status from that of a visitor to that of a regular immigrant on Dec. 31, 1941, I have today purchased again - $2,000 worth of Defense Bonds. And I shall always endeavor to follow the good and patriotic suggestions emanating from such high sources fis your own office and person, whenever I am in a position to do so. Regraded Unclassified 183 - 5 - Favorable Comments on Bonds Robert S. Anderson, Assistent Principal, Western High School, Washington, D. C. Although not & philatelist, I am deeply interested in preserving samples of each of the U. S. Defense Postal Savings Stamps. It occurs to me that a spe- clet "Victory" folder, in which one of each of the seried of Defense Savings Stamps might be mounted permanently, would sppeal to a large number of people just as it does to Y. If so, the sale of stemps would be increased and e creat saving to the Government would result, since the souvenir folder would not be exchanged for Savings Bonds. Helen Slobodian, Secretary, Club Ukraine, Brooklyn, N.Y. * + Our organization is composed of American youth of Ukrainian descent whose parents have fled their native land to seek peace and freedom here in this country. We find that it is our duty and great privilege to serve our country as Americans of Ukrainian descent. # $ We are aware that during the first World War the Ukrainians were one of the largest buyers of Liberty Bonds in the Foreign Section. We sincerely hope and will try to do our best to see to it that this record may hold true for this war. John A. Johnson, Laramie, Wyoming. Thanks for your letter of December, 1941, and I thank God for a country where we can write to a high Government official and know that the letter will be given respectful consideration. Vilko Laric, N.Y.C. Your recent letter, with reference to my purchase of Defense Bonds, has been a great honor and privilege to me. It is now a further incentive for me to serve this country, which I hope to claim for my own some dey, since I have recently immigrated. $9 ⑉ * Be- cluse I finally succeeded in converting my status from that of a visitor to that of E. regular immigrant on Dec. 81, 1941, I have today purchased again - $2,000 worth of Defense Bonds. And I shall always endeavor to follow the good and patriotic surrestions emanating from such high sources AS your own office and person, whenever I em in to position to do SO. Regraded Unclassified 195 - 6 - Leonard Burke Solomon, N.Y.C. It may be presumptuous, my reaching the ripe old age of 13 1/2 and voicing my opinion of the manner in which Defense Bonds are now being sold. The sale of these Bonds and Stamps has been given a great deal of publicity. HE # # We are told that by purchasing, we are performing a great deed of national loyalty and sacrifice. I am amazed that this is necessary. The people should realize that they are not sacrificing any- thing, they are not being heroes. They are making an in- vestment, one they know is the soundest on earth. Bernard Turteltaub, Awning & Shade Co., Englewood, N. J. I have just bought my fourteenth Defense Bond. I expect to buy one 8. week, you 888 - I am on crutches, an infantile paralysis sufferer. I cannot fight, but I can help in my own little way. I have two pieces of paper before me, both represent 8. great deal - both hold my future and both are dear to me. The first piece of paper is the new Bond, fresh and crisp. " a # The second, my father's citizenship papers, which this coming Sat. will be 42 years old. Yes, those papers permitted him to live his own life as he sew fit, and worship his God as he desired, and enjoy not only the four freedoms but the fifth also, and that was giving charity to the underprivileged. # # # You will be interested in knowing that one day I sat eight hours outside of the White House hoping to get B. glimpse of the greatest man living, our President, no luck--. I will continue to buy Bonds, - Bonds are my weapons. In sending 8. copy of one of the many letters urging that the word "Defense" be dropped from the Bonds, and "Victory" be substituted, Senator Carter Glass also sends 8. copy of his acknowledgment which reads - "I may say I quite agree with you that it is about time we abandoned the word defense and abandoned defensive thinking for a more aggressive name and attitude; and I have been glad to pass your suggestion along to the Secretary of the Treasury for consideration." E. A. Rensmeyer, Boise, Idaho. The question has come up among 8. group of the Life Underwriters as to whether it is more patriotic to buy Govt. Defense Bonds, or Life Insurance and Insured Annuities. It has been the conviction of most Regraded Unclassified - 7 - 196 that Bonds were offered as an alternate to saving. 2. n a * Will you please advise us if E man is doing the United States of America an injustice by buying life insurance rather than Government Bonds, particularly when there Is & need for additional insurance on his life? A very remarkable publication comes from E. M. Stigers, Supervisor of Education, U. S. Penitentiary at Leavenworth, Jana. It is THE NEW ERA, an attractive and readable maga- slaw printed by the inmates of the Penitentiary. The rasine contains poems, general news articles and edi- turinia. There is B reprint of the President's indictment ne Jacen; editorials on Pearl Harbor; blood donations; and many "plugs" for Defense Stamps and Bonds. In particular, Mr. Stigers calls the Secretary's attention to & chart showing purchases made by prison inmates amounting to $32,175.00. Senjamia Kaufman, National Commander, Jewish War Veterans of the United States, N.Y.C. We of the Jewish War Veterans of the U. S. appreciate the vital need for our people to buy Defense Bonds and Stamps to aid the Government in order to finance our tremendous war requirements, to prevent in- fistion, and to promote morale. The members of this organ- ization have therefore pledged themselves to purchase, or through their efforts, to sell, $25,000,000 of Defense Bonão prior to April 1, 1942. We are well on the way to- words achieving our goal. Howard Yeager, Easton, Pa. We of the Interstate Blind Friends Club want to purchase 8. Bond for $18.75. We are = smell group. Can the U.S. Defense Bond be in the name af the Club? All officers are blind, and no one individual in the name of one person. Every one tells us N. different sauld very well be responsible for its safety, if it were story, and the members would like the right way to proceed 40 it could be in the name of the Club. Allliam J. Gorman, Secy., National Assn. of Letter Carriers, www.hIngton, D. C. Enclosed herewith me are sending you B. marked copy of our monthly issue, The Postal Record. * # we would also like to take this opportunity to express our commendation of the fine mets and other national defense publicity we have received from time to time from the Treas. Dept., and to thank you sincerely for the opportunity to use them. Regraded Unclassified - 8 - 197 Unfavorable Comments on Bonds Anonymous - The appeal to buy more Defense Bonds is begin- ning to leave me a bit less responsive - when I hear of 80 much aid to England, the Burma Road, Singapore, and not 6. word of our air men being sent to aid General MacArthur. Is Corregidor to be another Wake Island sacrifice? Carl Zahler, (Hungarian Restaurant), N.Y.C. In discussions with customers, I have learned that they are "afraid" to buy Defense Bonds because if they should have an urgent need for funds, for rent or something equally necessary, they could not get an immediate loan thereon -- Defense Bonds "may not be hypothecated as collateral for a loan". They would like to own and keep Defense Bonds, but would like a so-called safety valve provision so that the Bonds could be used as collateral during A time of need. This is particularly true of those who work in a seasonal industry. Miss Besse B. Marks, Sodus, N.Y. In my position as associate editor of The Record, I am able to do quite 8. bit toward promoting the sale of Defense Bonds and Stamps. I an also publicity chairman for the town committee promoting the sale. We have found cooperation in every department and in every way except one - the Post Office. # # # The local Post Office has Stamps for 8. day or two and then they are gone - and one cannot buy them for another week or more. We have all com- plained to the Postmaster, who assures us that the Post Office Dept. is to blame. We are told that the Sodus Post Office is allowed 8. credit of only $200 for Stamps. * # # Surely there is some liason officer in the Treasury Dept. who can take this up with the Post Office Dept.-and iron out 8. situa- tion that should not exist. Sodus is B. township of about 5,000 persons with a quota of $500,000 worth of Bonds in 1942. We DO want to do our share in the war effort. Can someone in Washington help us? Grace T. Lewis, Dean, Davis High School, Mount Vernon, N.Y. # * * I recently bought some tax anticipation bonds through my local bank and was amazed to see the bank note paper used in their preparation. Why are these expensive bonds nec- essary, especially since the civil population is told to save paper, and pay heavy taxes for defense. These bonds cannot be transferred and are not good for more than one year at & time. Why is B. simple, numbered receipt not sufficient? Regraded Unclassified 138 9 J. Newburger, Robert Woolen Co., N.Y.C. # # Mrs. Jonas Gans of 115 Central Park West went to the East River Savings Bank at 96th Street and Amsterdam Ave to buy some Defense Savings Bonds. When they asked her name, she said, "Flossie Gans". The man then told her that he could not sell her any bonds as Flossie is not a name but is a "nick- name". She told him that it has always been her name, that she signs her checks that way, and that she has drawn her will and SO signed it. Still he would not accept it. He told her to go to the Board of Health and get a copy of her birth certificate 80 that "she can know what her right name is". She aid that and found that she is registered there as "Baby" Gans, no name having yet been assigned to her when the doctor filed the birth certificate - so she WILS unable to buy her Bonds. Mrs. S. Kanow, Bronx, N.Y.C. May I call to your attention what I belleve to be & regrettable situation. This afternoon I took my son's $0.25 Defense Stamp book to our subsidiary Post Office to convert same (filled to the extent of $18.75) into & Bond, but was informed by the clerk that this could not be done at this branch. He suggested my taking it to the bank, where I was also told they could not accommodate me. I WILLS referred to the Williamsbridge Post Office. I have since learned that this has been the plight of many, many housewives in this vicinity. This naturally causes a decline in stamp buying and bond accumulating - contrary to the "Buy 8. Defense Bond" drive. Beatrice Kallman, N.Y.C. Our school is located in one of the poorest sections of N.Y.C. The response of the children, therefore, in the purchase of Defense Savings Stamps is not only encouraging, but inspiring. But the response, we know, can be and will be, much greater, if the obstacles inter- posed by the bank, where these children keep their savings, could be eliminated. The great preponderance of the chil- dren in our school come from families on relief. Yet both parents and children stint themselves in order to contribute to our country's defense efforts by investing, or attempting to invest, every penny that they can spare. # : + The children mish to purchase Defense Stamps with their funds on deposit. We have secured the signatures of an overwhelming number of parents for the withdrawal of these funds from the bank for Regraded Unclassified 199 10 the purpose of buying defense stamps. We have offered numerous suggestions to the bank to facilitate such withdrawals. The bank, however, insists on personal visits by the parents in order to do this. This would involve either loss of time from work, or from home duties, aside from the fact that it would cost each parent ten- cents carfare - as the school is located four miles from the bank. The parents know, the children know, and we know that in this instance such expenditure of carfare is pure waste, when the same dime would buy another defense stamp. Neither will the bank convert these savings into defense stamps, even on the written authorization of the parents. A Plain Citizen, Boston, Mass. The United States Govern- ment is advertising far and wide for citizens to buy bonds. I spent an hour today trying to buy 8. $100 Defense Bond in Boston - trying the big banks, as well as your central Post Office in Federal Building. All stated they did not have any on hand. Also, the main Post Office had no $100's, or $50's, only $25's. I took four $25's, but really wanted just one $100 Bond. # Last month I experienced the same result in trying to buy a $100 Bond. C. T. Stripp, University Heights, Ohio. I have received several letters from you relative to purchases which I have made in the past of U.S. Bonds for Defense; and I have also just signed an application for 8 regular monthly sub- scription to such Bonds. However, in this purchase, and based on advices which have been coming to us through every possible channel, regarding the urgent need for money for defense purposes, this money is gladly subscribed, with the stipulation, however, that when and if the funds are diverted in such wasteful extravagances as the St. Lawrence Waterways, the Beaver Mahoning, the Florida Ship, and the Tennessee Tombigbee River projects - all of which require money, men, and materials for a very doubtful result, my subscription will be cancelled. Expending money on such projects will immediately serve as a notice to that effect. By saving Morris, and Malaga, doing without, I find I can save enough in J. W. Wash. # I am an Old Age Pensioner. three months to buy an $18.75 Bond. But just before I bought a Bond, I heard about one of my friends who bought e Bond and the Board out his pension. Regraded Unclassified - 11 - 200 L. 1. Corya, (Real Estate Ins.), Scarzdale, N.Y. What sural right has the Government to urge the purchase of Defense Bonds 8.5 an investment if Secretary Wickard and Ge labor block in Congress refuse to place 8 ceiling on a viculture and wages? If a private business engaged in such a practice, the SEC would be quick to ask this question, and they might offer A legal reason why the surporation could not make such a promise as well. Urs. X. M. Bacheller, Melrose, Muss. Mr. Bacheller re- colved, by mail today, an urgent request for us to pur- COLLE Defense Bonds - that certainly would be B. great joy, but the Administration in Washington the past 8 years has ruined our investments, our securities have not been allowed to recover a small fraction of their actual value. It is our class of citizens who have suf- fered drastically from the unfair policies in the invest- ment field in the past 8 years. The middle class of thrifty, patriotic American citizens who had saved their income to be comfortable in their old age are the ones, apparently, who still must suffer. (Lists their holdings.) u $ 42 We have been ruined while LABOR has been shown every favor regardless of the merits. Force these Labor people who are drawing large salaries or wages to pay their full share of the cost of this Wer, and reduce the salaries of those holding public office. Another class to tax is the MINISTERS, and all persons drawing a pension, large or small, from any fund, whether private or public. * Let LABOR and those holding public office, and all pensioners 00 their part - We have been ruined. If the investment and real estate markets could be allowed to recover their normal values, you would have no difficulty to raise the necessary money. Regraded Unclassified 201 - 12 - Comments on Taxation Caroline Broune, San Francisco, Calif. In your interest- ing broadcast of 8. couple of weeks ago, you invited people to write you if they were interested in the Tax Saving Plan in industry. I am not interested in that particularly, but you always give the impression on the radio that you are interested in the problems of all the small taxpayers, and I thought you might wish to hear from one of the "little people", and the explanation of why we are not buying more Bonds. # # I have always felt toward you as I do toward the President - that you have EL deep feeling of friendliness and B. real understand- ing of the problems of all Americans. It is because I admire your sense of fairness that I take the liberty of suggesting that your broadcast was a little premature. To want to buy Bonds but we cannot plan this year's budget until Congress passes the new Tax Bill. Edw. A. Thompson, Arlington, Va. It is noted that 8 Fed. "Automobile Use" tax takes effect February 1, 1942. * # # We have no objection to the payment of such 8. tax, pro- vided we can be assured of the use of the automobile dur- ing the period for which the tax is applicable. # * It appears reasonable that such an assurance should ac- company each Tax Certificate. We are fully aware of the necessity of additional taxes to meet any emergency in which our country may become involved, and this letter is not to be construed that we object in any way to a fair tax. The word "use" and not "ownership" is the reason for the question raised. May we have the pleasure of re- ceiving your opinion. Louis E. Orcutt, N.Y.C. (Asks better gluing on auto Tax Stamps.) By the way, I knew and greatly admired your father. I was an Editor of the Christian Herald from 1915 to 1918, during which time he represented our chari- ties in Turkey and the Balkans. No one will ever know how well he did it. Rad. Sayman, Chicago, Ill. (Sends news item saying Treas. announces it is illegal to write name on face of Auto Use Stamp.) Do 2 errors make it right? I purchased my auto stamp in good faith, and in order to prevent theft - because Regraded Unclassified 202 - 13 - of the U. S. Treasury Department's error, I put my name and auto license number on the face, and then took Scotch tape and pasted it on the windshield of my car. How can this be illegal when the error wes first made by your Department? Hon. Allen T. Treadway, House of Representatives, Washington, D.C. The simplified income tax return for persons with not more than $3,000 gross income from certain sources is evidence of your interest in making it easier for taxpayers to meet their obligations to the Government. # # # It has come to my attention that Deputy Collectors of Internal Revenue, who are stationed at various points throughout each collection district for the convenience of taxpayers, are refusing to accept cash in payment of Federal taxes, and are insisting that payment be made by check or money order. # # # With the income tax now applying to those with incomes of more than $750 in the case of single persons, and more than $1,500 in the case of married per- sons and heads of families, it obviously affects many persons who do not have checking accounts, and who must necessarily go to the added expense of obtaining 8. money order to pay their income tax, due to the ruling that cash may not be accepted by Deputy Collectors. It occurs to me that the Treasury would be doing a distinct service to small taxpayers by rescinding this ruling. sir I need not remind you that our Federal currency states that it is legal tender for all debts, public and private, and taxpayers are unable to reconcile this declaration with the above-mentioned ruling. Miss Stasia L. Ketner, Reading, Pa. In August, 1941, when the U. S. Treasury Notes - Tax Series A-1943, were issued, I purchased two of the $25 denomination. I con- sidered it a very good idea. However, last week when I went to the Revenue office in our city to pay my income tax and offered these notes in payment, they did not know what to do with them. They did not know if I should endorse them, or just how they should be handled - with the result that I am ready to pay my tax with these notes end the bal- ance with a check, and I cannot do it. My understanding is that they are NOT to be endorsed if they are used to pay Federal Income Taxes, but only if the holder wishes to cash them before maturity. Three clerks were consulted and none of them could help me, all stating they had received no in- formation regarding same. Regraded Unclassified 203 MEMORANDUM FOR THE SECRETARY. January 30, 1942. Letters prompted by the speech of last week-end did not follow the usual pattern. I expected 8 number of telegrams immediately thereafter, and 8. rush of letters, which gradually slackened up. Instend, we had no telegrams - either of approval or disapproval - and for the first two or three days, the only letters received were those from cranks who had com- modity dollar and other monetary theories. Then about the time that the rush of letters would usually be over, they began to come in, and while they do not equal, in number, those elicited by the inflation speech, and some others, there has been quite a respectable collection received. They are about equally divided, favorable and un- favorable, and total so far, between 50 and 60. There have been only 3 or 4 requests for copies of the speech, and only 2 anonymous and abusive communications in con- nection with it. Sample favorable and unfavorable abstracts follow: Regraded Unclassified 201 Favorable Comments on Speech at Cleveland Allan E. Baker, Perfumer, Brooklyn, N.Y. I read in the New York Times today a two-column excerpt from your speech in Cleveland, and congratulate you. And, by the way, this was tucked nicely away on page 34 of the Times, and few people ever get back that far in a newspaper. Of course, the situation is a. damned out- rage, and more than that, but what in hell can the aver- are citizen do. Just a.s you say, it is not a matter of the amount of taxes one pays at all. It is a matter of fairness. Every time I pay my taxes I get mad enough to fight, not for the reason of the amount, but by reason of knowing that others with fifty times the income in state and federal securities don't pay 8 cent! I can't spare either the time nor the money to run down to Washington, and even if I did come down there, I couldn't find anybody to fight, so far as I know. All I know that I can do is to write to the Ways and Means Committee and they'll throw my letter in the waste basket. Well, you are doing good work. Thanks. Mux L. Fraker, Urbana, Illinois. I believe your views on tax-exempt bonds are a. step in the right direction. ... Why can't we, who buy defense stamps and bonds, use them to pay local debts with? - As all the money used to buy defense stamps and bonds will be sent direct to the U. S. Treasury. I believe it will save the U. S. a lot of expenses in various ways. William M. Davy, Cleveland, Ohio. Your speech was not disappointing - EXCEPT - to codfish aristocrate of the Plain Dealer type. Their idea is to use the war to cloak certain financial skullduggery. A hell of a. fine way to build up morale. You ought to frame that last paragraph of their editorial (enclosed). I enjoyed your speech. Sock them in the midriff and let the grunts echo where they may. T. E. Ward, New York, N. Y. The Morgenthau Plan for an international currency 18 on its way to being the greatest accomplishment in the world of commerce and currency since the introduction of bills of exchange and accounts current. You are, I know, better informed than I can possibly be on Regraded Unclassified - 2 - 205 the subject of Nazi economic measures, which are clearly those of desperate and daring men. It is evident that the Nazi determination is (1) Victory and world domina- tion under an International Nazi Mark, and (2) If a Nazi defeat, bankruptcy of the democracies. The Morgenthau Plan will assure solvency in the victory of the democra- cies, We. Redin Woodward, Boston, Mass. You are greatly to be commended on your clear and comprehensive statements of the loopholes in the tax laws. Your statement that the general public is not sufficiently aware of the existence and nature of these loopholes deserves an es- pecially loud "Amen, brother!" Congressman Eliot wrote me last year that I was the only one of his constituents who wrote to him in favor of the compulsory joint return. Perhaps part of the reason for public ignorance on these matters is that most of the income-tax experts are lawyers whose business is chiefly the representing of wealthier taxpayers. It is the Treasury experts who are best armed with facts and who are most likely to be able to bring the public to see what needs to be done. Conse- quently I hope that the Treasury will conduct a vigorous campaign of public information concerning those features of the tax laws which you 80 ably discussed. Paul W. Brainard, Ithaca, New York, It was a pleasure to read your tax proposals given in Cleveland, I agree most heartily with them. I disagree violently with the loose argument advanced by one of our high New York State officials calling it a. "breach of faith" to have the Government tax income from State and Municipal bonds. He might just as well say it's a "breach of faith" to draft our men to defend our very existence. If banking, busi ness, labor and farming are primarily concerned with their own selfish interests, then we have lost the war already. far dollar. to Day as for is From Tax possible our loop-holes the enormous day the Defense value war must production of be Bonds the eliminated have good and old been protect if American issued. we are SO I have "pushed" their sales. Our Bank has been 100% enrolled, since August, on a payroll allotment plan. Our own investments have been 98% in United States Bonds since 1939. I am convinced that eventually the people will Regraded Unclassified 3 206 really "go all out" for your splendid financing plans. Amy A. Guy, Richmond, Va, Your talk last night over the radio was one of the finest I have ever heard. It was sincere, neighborly and kind and I could not help but feel, as you spoke, that President Roosevelt was certainly sent to us by God, to see us through such a critical period. He is indeed fortunate to be such B. person that you could say those things about him. These are strenuous times in which to live but we have many things for which to be thankful - a great President and a great man as head of our financial structure. Robert E. Barrett, Holyoke, Mass. Excerpts from your address at Cleveland indicate the desirability of tax- ing the income from State and Municipal securities. May I ask if there is any reason why the laws should not now be changed so as to tax the net income of state and municipally owned enterprises engaged in furnishing to the public such services as transportation, gas, electricity and water. In Massachusetts alone, there are over forty such municipally owned enterprises fur- nishing gas and electricity to the public with substan- tial annual net profits. In Massachusetts the plant and real estate used by these municipal enter- prises are tax-exempt, but with few exceptions, substan- tial sums are annually transferred from the profit and loss account of the department to relieve the taxes on real estate, but I know of no case where donations have been made to aid the Federal Government whose present activities are so essential to their future security. Regraded Unclassified - 4 - 207 Unfavorable Comments on Speech at Cleveland. Dr. G. D. Fairbanks, Brownsville, Texas. # # You have missed the greatest leak, viz., the millions and billions of dollars paid to officers and employees of corporations. The small stockholders, like myself, 15 to 18 million of us, have to pay the 30 or 40 per cent corporation tax and then on top of that their individual income tax on the same profits. Officers and employees only pay the individual tax but no part of the 40% tax. Many officers also take the money out of their company treasuries to pay even their individual tax. (See 279 U.S. Supreme Court Reports, page 716.) Don't you think a proper payroll tax should be assessed to equalize what the stockholders have to pay? Mr. Herold J. Schwab, Birmingham, Alabama. If instead of making a drastic change by entirely removing income tax exemption on municipal Bonds, the law could be fixed to allow exemption on half, or some fraction, the status would not be entirely changed and the exemptions violently stopped, merely an entering wedge. After carrying this for a year or more, it could be raised or eliminated. In other words, this idea is that the change from 6. non-taxable income to 8. taxable income would therefore not be forcible and sudden. Mr. Harold W. Holt, Urbana, Illinois. Please permit me to point out that adoption by Congress of your proposal to tax income from state and municipal bonds would mean a violation of the understanding under which the states adopted the income tex amendment. They did not at that time understand that they were giving the federal government power to tax income from their securities. Quite the contrary! Henry Y. Offutt, Louisville, Kentucky. In view of your expressed opinion advocating taxation by the Federal Government of the income from now outstanding State and Municipal bonds, I would sincerely appreciate knowing the principles of taxation which you advocate with reference to the income from United States Government bonds issued with the covenant that the income is free from all normal Federal Income taxation. Walter Barlow, Yonkers, New York. I was dumbfounded to read your interview about taxing exempt government and state bonds. I do not own any of these bonds 8.6 I have all I can do to support my family on my small salary but I do not believe in breaking a solemn pledge made by the U. S. KEEP these bonds exempt but make all new issues subject to tax. At least give the world an example of government honesty. I buy $10 of - 5 - 208 Defense Bonds every month. R. D. Adair, Albuquerque, N.M. I read with interest of your statement regarding "tax discrimination" and "glaring examples" of tax exemptions. I was sorry to note, however, that you failed to mention the billion and a half Union racket with its utter lack of taxation. Recently in making out my tax report I listed $18 for exemption as Union dues. This year, the Union says it will be $24. Of course the worker should be allowed this exemption as in 8. great many instances he is forced to pay the dues and initiation fees for the privilege of working. In my own particular case, I was told after 18 years' satisfactory service with my employer, that I either had to join the Union and pay whatever dues they stipulated, or look for work elsewhere. Having 8. family to support and being unable to get other employment, I hung my head in shame and applied for membership. Now I learn that this money is not only exempt 8.8 far as the worker is concerned, but is also exempt from taxation after we turn it over to the Union. Mary Murphy, Philadelphia, Pennsylvania. so you admit the holders of big govt. bonds should be compelled to pay income taxes, which would mean 8. large sum for the prosecution of the war, why don't you do something real about this, i.e., see that they do pay them, instead of considering taking more from the working people? Why don't you crusade for some real decent thing like that instead of touring the country trying to get more working people to buy defense bonds? Give us the reason. John M. Burton, Gloversville, New York. It would seem to me that any proposal to levy taxes on state, municipal or U.S. securities which were sold under 8. solemn pledge not to levy such taxes, would do far more harm than good. The greatest asset of the United States government is not the money in its Treasury, for this is very quickly spent. But the greatest strength and resource of our country lies in the CONFIDENCE and LOVE which our citizens have for our country. When the United States Government breaks its solemnly pledged word, then the respect and confidence of its citizens is very greatly impaired. Mr. W. H. Hill, Newton & Hill, Fort Edward, New York. I have read with misgiving of your proposal to tax exempt government and municipal bonds now in the hands of the public. My own securities of this nature are so limited that the net difference Regraded Unclassified - 6 - 209 in my tax would not warrant writing this letter, but as a holder of life insurance and as president of our local bank, I feel it my duty to register 8. protest. # # # In a small community, we feel that our bank is the cornerstone of our business life. It is owned by many stockholders who have received little or no return on their money during the past several years and without complaint. Our depositors have likewise received only 1% on their deposits and without protest. Your plan, however, would place an extra expense upon us that would totally eliminate any income for either class. # # # It is no time to destroy the confidence of our citizens in the integrity of our Treasury Department. The present trend is towards disaster, which in turn creates dictators, and I can assure you that I frequently hear the question as to whether our "democracy" is worth the cost in bloodshed, to say nothing of resources. When you draft a boy into our army, you require an oath and you demand that he keep it - 80 why should he expect that the government itself should not stand by its own agreements? Regraded Unclassified TREASURY department 210 INTER OFFICE COMMUNICATION DATE January 30, 1942 TO Fercinand Kuhn, Jr. FROM Joseph Melia EDITORIAL COMMENT ON TAXES: CLOSING THE LOOPTOLES The press has no quarrel with the general thesis that tax evoidance is wrong And should not be tolerated. of Secretary Morgenthau's four recommendations for closing tax loopholes, however, only the proposal to tax outstanding issues of State and municipal bonds is creating appreciable editorial dissent at this time. At present, editorial argument over tax exempts is con- fined to the East. Without exception those newspapers that have commented until now, including the financial journals, support the proposal to tax the income from future issues of State and municipal securities. With equal unanimity they bitterly attack the suggestion to tax the income from outstand- inc issues. It is generally conceded that the Federal government has no legal contract with the holders of tax-exempts. Editorial writers nevertheless find an implied guarantee of tax exemption Regraded Unclassified - 2 - 211 for outstanding issues, since the Federal government never challenged the right of States and municipalities to issue tax-free bonds. If 8 tax is imposed on the bonds now out- standing, they hold it would be an inexcusable breach of faith and 8. gross abuse of Federal power. The attitude of the Eastern press toward taxing the Income from future and outstanding issues of State and municipal bond: is well mirrored by the Washington Post. Last week the Post, along with the Scripps-Howard chain, argued: "Under existing conditions the familiar arguments -- political and economic -- against Federal taxation of municipals have lost their validity Consequently existing loopholes for legal tax evasion should be plugged, both in fairness to taxpayers and for the sake of revenue.... After Secretary Morgenthau's speech in Cleveland, however, the Post quickly made it clear that it did not regard outstanding issues as 8. "loophole." "For years," said the Post, "it has been assumed, on the basis of court decisions, that municipal bonds are not subject to Federal taxation. Such bonds have been bought by investors with this understanding. Suddenly to deprive holders of municipal bonds of the tax-exemption privilege would be regarded-- and rightly--as an indirect assault upon the senotity of contracts With war expenditures necessitating the borrowing of many billions, the Government needs more than ever to maintain a reputation for dealing fairly with the investing public." - 3 - 212 Although grassroot editors as & whole have not yet entered the tax exempt argument, the line they may be expected to follow is indicated by the Conference on State Defense, an organization devoted to "preserving the rights" of State and municipal govern- ments. On the very day of the Secretary's speech in Cleveland, the Conference issued a statement attacking the proposal to tax outstanding issues of municipal and State bonds. Every one of these bonds, it said, has been issued with the "full recognition" of the Treasury that they were "immune" from Federal taxation. "This repudiation," the Conference warned, "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." The Conference did not mention in this statement the possibility of taxing future issues, but its traditional stand is that such a step would be "economically unsound, unconstitu- tional and 8 threat to the borrowing power of local governments." The Conference has also consistently called fallacious the argu- ment that such & levy is necessary to finance the war and to plug 8. tax loophole. It maintains that the elimination of future tax exempts would yield no substantial income for forty or fifty years, and that, according to Treasury figures, only about six percent of the assets of large estates are in tax-free bonds. 4 213 Joint Returns The proposal to make mandatory the filing of joint returns has been condemned by the General Federation of Women's Clubs and upheld by the CIO. Claiming to represent two million women in 16,000 affiliated clubs, the board of directors of the Federation voted to oppose any legislation requiring joint returns on the grounds that such a law would be the worst "deterrent" women had suffered in 50 years. "What is $389,000,000 compared to the rights of women?" one director is reported to have inquired when another had brought out that joint returns would increase Federal revenue by that amount. The Federation maintains also that joint returns would endanger the American home by discouraging marriage and encouraging divorce. The CIO's endorsement of mandatory joint returns was con- tained in a tax resolution adopted this week by its executive board. The resolution served notice that the CIO would lobby for a tax program to "stop war profiteering and the creation of war millionaires and which will protect the standard of living necessary to maintain American production at 8 maximum." Specif- ically, the CIO resolved to oppose "most vigorously" any attempt to pass a general tax on wages or sales, and maintained that - 5 - 214 sufficient war revenue could be obtained by (1) increased normal taxes and excess profit taxes on corporations, (2) increased taxes on the present individual income tax base, (3) closing loopholes in the individual and corporate income taxes, such as separate returns for husband and wife and tax-free bonds, (4) increased rates and lowered exemptions on estate and gift taxes, and (5) excise taxes on certain luxury goods. Price Control The only good word the press has to offer for the price control bill is that it might have been worse. Editorial writers are gloomily resigned to an inevitable climb in prices. Relieved that there is at last some sort of legislation on the books, however, they are hopeful that it will give Mr. Henderson enough authority to at least check runaway inflation. Criticism centers on the agricultural provisions and lack of wage control. When even such newspapers as the Hutchinson, Kansas, Herald hold that the farm ceilings will encourage inflation, it is safe to assume that many farmers are among those disgusted with their political spokesmen in Congress. Regraded Unclassified 215 For your information January 30, 1942 To Archibald MacLeish From Alan Barth EDITORIAL OPINION ON THE WAR: RESPONSE TO CANDOR Shift The pendulum of editorial attention has gone full swing from the Atlantic to the Pacific. There appears now to be almost complete agreement in the press that the Far East is at least the most urgent, if not the most important, sector of the war today. Japanese advances, underscored by Australian demands for assistance, shocked the commentators into a state of serious alarm. Even The New York Times, staunch proponent of Hitler as Enemy No. 1, observes that "unless this drive is halted somewhere, the islands fringing Australia and Java will be as firmly in Japan's grip as her mandated archipelago. Our job of dislodging her will be colossal. No present comfort can be drawn from Japan's lengthening communication lines if no effort is made to cut them and if the bases from which they can be attacked are given up one by one." And William Randolph Hearst tells his readers that "The war in the Pacific Regraded Unclassified - 2 - 216 is not only the most serious situation that confronts the Allies, but it is the only phase of the war which is now vital." Secretary Knox's restatement of his view as to the relationship between the European and Asiatic fronts is in accord with the current consensus of editorial opinion. In this atmosphere of general dismay, the Battle of Macassar Strait has glowed as a bright hope. Commentators see in it reassuring evidence that Japanese communications are becoming overextended and that the United Nations are capable of unified and effective action. Perhaps the impor- tance of the blow dealt to this Japanese convoy has been over- stated in headlines. But there are now very few signs of complacency in the editorial attitude toward Far Eastern problems. Offensive Despite absorption in the Pacific, most of the press now available is able to herald the landing of American troops in Northern Ireland as another hopeful indication of allied unity. Minority elements, particularly Irish and Catholic journals, clamor against the employment of our forces to aid England and against the exertion of pressure upon Eire. But the newspapers which have consistently supported Administration foreign policy Regraded Unclassified - 3 - 217 frankly rejoice that the United States is at last moving to meet the enemy on foreign fields. The Philadelphia Record, for example, deploring official reluctance to refer to this force as an AEF, declares: "The public understands quite 8.8 well as the highest officials that we cannot beat the Axis by staying home; that we cannot avenge Pearl Harbor merely by coast defense ... It may be silly, as President Roosevelt says, to call the present force in Ulster an AEF. But it isn't silly to hope that it grows into one -- fast." The Atlanta Constitution describes the contingent as the "vanguard of a new AEF" and "the forerunner of vast forces." The Christian Science Monitor feels that "the presence of an American force in Ireland will have tremendous effect on the morale of peoples in the Nazi-imprisoned countries and in those that are threatened - like Eire." All in all, the press now shows a wholehearted understanding and acceptance of the lesson which the President so painstakingly propounded in the days when aid-to-Britain was 8. live and debatable proposition -- that defense begins abroad. Catharsis The Roberts report seems to have purged the worst phases of Pearl Harbor's unhappy aftermath. It served as a confession - 4 - 218 and, as such, lifted in some measure the sense of guilt and shame which it acknowledged. The Chicago Daily News expressed the prevailing appraisal of the report in calling it "fair, clear and complete." As to the placing of blame, an interesting distinction is to be noted between the majority of the press which has supported the Administration's foreign policy and the minority which has con- sistently opposed it. In the latter category falls William Randolph Hearst's judgment that "The Federal Administration at Washington has conducted an investigation, mainly concerning its own responsibility, in regard to the Pearl Harbor debacle." Similarly, The Chicago Tribune endeavors to show that "the army end navy departments, and almost all the top-ranking generals and admirals share the responsibility for the greatest defeat ever inflicted upon the American navy." A great majority of commentators, however, feels that the basic blame must be spread among all Americans by reason of our complacency and our blindness to the intent of the Axis. They are inclined to place the lightest share of this responsibility upon the top men at Washington who repeatedly warned of impend- ing danger. The Daily Oklahoman, indeed, goes so far as to assert: "This report shows that the Washington departments were fully informed, completely alert, and entirely cooperative." Regraded Unclassified - 5 - 219 Varying degrees of punishment for Admiral Kimmel und General Short are prescribed by the press. Many feel that humiliation and remorse have already given them all the suffer- ing that is their due. Others urge that the ritual of courts- martial be fulfilled. In general, commentators insist that these officers pay an unspecified "appropriate penalty" for their "dereliction of duty." The most common moral drawn from the report is that it demonstrates the need for unified command. The interpretation of the Roberts Commission comments on this score is somewhat confused. Proponents of & separate air force see their thesis vindicated in the failure of the army to disperse its planes and to appreciate the importance of air powers; those opposed to a separate air force find their objections confirmed by the report's demonstration that the coordination of sea, land and air forces is essential. A good deal of indignation has been expressed about the gentle treatment of aliens in Hawaii. Comments on this phase of the report seem calculated to promote increased hostility toward foreign nationals In the United States, particularly Japanese. Regraded Unclassified 220 - 6 - The outstanding effect of the report is an immense restora- tion of confidence in the integrity and responsibility of the United States Government. "The Government," according to The St. Louis Post-Dispatch, "has honored itself by spreading the Pearl Harbor story upon the record. It is a triumph of the democratic method that the Government should make a confession of major error." In all sections of the country, this candor on the part of the Government was appreciated and respected. There is still a strong feeling in the press that the whole story about Pearl Harbor has not yet been told. But there is also 8. warmly compensating feeling that the Government has now told all of the story which national security permits it to tell. Regraded Unclassified