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THE WHITE HOUSE
WASHINGTON
April 28, 1942
-y dear Mr. Secretary:
With the shortage of rubber and the prospective
necessity for curtailing the civilian consumption of gasoline,
the transportation problem for workers in many communities is
rapidly becoming critical. It is imperative that we extend as
long as possible that period of time in which we can count on
private transportation of factory and office workers to their
places of work and home again.
The transportation problem in Washington is no
exception to that existing in very many of our communities
at present. I am therofore calling upon the heads of the
several Federal Departments and Agencies to work out a program
for their employees which will substantially reduce the number
of automobiles which are necessary to take men and women to and
from their places of work. This program should be undertaken
immediately and thoroughly. is few Federal Agencies have already
taken steps in this direction and an interchange of ideas and
experiences should facilitate the development of the most effective
program. I would like to have a report from each Department and
Agency at the end of thirty days relating the effectiveness
of steps which have been taken.
I am also sending a copy of this letter to the Council
of State Governments, the American Municipal Association and the
United States Conference of Mayors asking that they use their
influence to bring about the inauguration of similar programs in
the State and local Covernments.
Very sincerely yours,
Simility Marroweld
The Honorable
The Decretary of the Treasury,
ashington, D. C.
Regraded Unclassified
CC to Mr. Graves, Mr. Gamble, and Mr. Kuhn
219
April 28, 1942
10:43 a.m.
Colonel
Richard C.
Patterson:
.....
your voice.
HMJr:
Dick, I don't know whether your phones are
always so busy, but for ten minutes we couldn't
get a wire.
P:
Well, these phones are busy all the time.
HMJr:
Well, I tell you. What I suggest
P:
I can't hear you, Henry.
HMJr:
I've got a cold.
P:
Oh, I'm sorry.
HMJr:
I suggest - hello.
P:
Yeah.
HMJr:
I suggest you put in an unlisted number that
you could take incoming calls on.
P:
All right. I'll out in an unlisted number
right away.
HMJr:
And then let us know what it 1s.
P:
I'll do it.
HMJr:
And then when you have incoming calls, they
can come in on that.
P:
I'll do it.
HMJr:
Will you do that?
P:
Hello.
HMJr:
Dick - hello - can you hear me?
P:
Yes, Henry, I can hear you.
HMJr:
What I want is this. We've been fooling
220
- 2 -
around with this for a long time, but there
must be somebody like old Tex Rickard who
knows how to run meetings, see.
P:
Yes.
HMJr:
I don't know who it 1s. I don't know whether
there's an association, for instance, across
the country of men who belong to - people like
who own Madison Square Garden and halls similar.
P:
Yes.
HMJr:
But could you find out - hello.
P:
Yes, Henry.
HMJr:
Because what we've got to do is to organize
some big meetings across the country.
P:
Yes.
HMJr:
And I'm going to get some outstanding fellows
like O'Hare - Lieutenant O'Hare
P:
Yes.
HMJr:
that we can send across the country, you
see.
P:
Yes.
HMJr:
Not only in New York. But I want to get hold
of the fellow - whoever the Tex Rickard is
today.
P:
Well, I tried to get Billy Rose ten days ago.
HMJr:
Yeah.
P:
I tried my level best to get him to come in
here and take full command.
HMJr:
Yeah.
P:
I couldn't do it.
HMJr:
Why not?
221
- 3 -
P:
Well, he's just tied up. I may go back at
him. And I talked to Simon and Schuster at
breakfast this morning.
HMJr:
Yeah.
P:
They're going to go to work and try and help
me get this man.
HMJr:
Is Billy Rose the fellow?
P:
Well, I don't know. He's about the - he's
almost the successor of - in - he's almost
Rickard's successor.
HMJr:
Well, think about it, because I'm tremendously
interested. I'm going to get - I'll get the
stars.
P:
Yes.
HMJr:
And - but I've got to have a showman.
P:
You're damn right we've got to have a showman,
and I'm dreaming it and sleeping it, and I'm
provoked that we don't have a showman.
HMJr:
Well, it
P:
I think I'm reflecting your attitude, Henry.
HMJr:
Good.
P:
We're right after just what you want, but it's
so difficult.
HMJr:
Well, I want a showman, and you talk it over
over there. If it's Billy Rose and you need
some help, I'll get in touch with him myself.
P:
Yes.
HMJr:
I don't know who it 18, but I'm not in that
business. Well, you think about it, and after
you're decided, either telephone or send me a
wire, will you?
Regraded Unclassified
222
- 4 -
P:
Oh, I'll go right to it, Henry. I won't
leave a stone unturned on that.
HMJr:
Because MacLeish said last night, he said,
"We've got to get more big public meetings."
P:
Who said that?
HMJr:
Archie MacLeish.
P:
Oh, yes.
HMJr:
And he wants us to do it.
P:
All right. Give me just - we're - for instance,
today I'm having the publishers of all the big
papers at luncheon with me here in the office.
HMJr:
Yeah.
P:
Helen Reed's coming in.
HMJr:
Yeah.
P:
Arthur's in Washington, but they're all coming
in just on this one thing.
HMJr:
Well, what I want 1s a showman who we don't
have to be ashamed of.
P:
I know what you mean.
HMJr:
And a fellow that
P:
Well, give me just a little while, and I'll
keep in contact with you.
HMJr:
You ought to be able to in a day or two to
tell me who it 1s.
P:
I think I can. Give me forty-eight hours.
HMJr:
But be sure it's somebody who won't get us
into trouble.
P:
Why, of course.
223
- 5 -
HMJr:
And whoever it 18, then we'll put the heat
on him and he'll have to come.
P:
Have Rose? you got any suggestions outside of Billy
HMJr:
Well, I - no. This is a field - if you esk
me something easy - but I don't know anything
about this.
P:
Well, leave it to me; and I'll report back.
HMJr:
But we've talked about these community sings
and everything else, but I want a showman.
P:
Leave it to me.
HMJr:
I'll ão that.
P:
All right.
HMJr:
Thank you.
P:
I'll try to carry the message to Garcia for
you.
HMJr:
And have a phone number put in, and then let
us know what it is 80 that incoming calls -
or if you have a call you want to use yourself,
it's there.
P:
Oh, my God. The only reason I haven't had one
put in - you know the reason.
HMJr:
No.
P:
We're trying to teach thrift in this country.
HMJr:
Well, I'll personally okay this one.
P:
(Laughs) All right, Henry.
HMJr:
Thank you.
P:
You'll hear from me. Good-bye.
224
April 28, 1942
11:00 a.m.
FINANCING
Present: Mr. Murphy
Mr. Haas
Mr. Piser
Mr. Hadley
Mr. Baker
Mr. Rouse
Mr. Szymczak
Mr. Buffington
Mr. McKee
Mr. Sproul
Mr. Goldenweiser
Mr. Williams
Mr. Bell
Mr. Eccles
H.M.JR: I hope you can all hear me. I can't talk
any louder. If you can't, come up closer.
Bell, is there anything that you want to say other
than that we need two billion dollars in May and June?
MR. BELL: Well, I can go over the figures if they
would like to hear them for the next three months. This
program contemplates or estimates that there will be six
hundred million dollars in Savings Bonds in May, eight
hundred in June, and a billion dollars from there on
throughout the year. It also contemplates two billion
dollars a month in regular financing up to and including
September, and the expenditures on account of national
defense will increase gradually from about three billion
and a little over in May - three billion two in April to
Regraded Unclassified
225
- 2 -
four billion six in December. We will go out of April
with one billion seven hundred eighty million dollars;
out of May with one billion five hundred; June, one
billion eight; July, one billion eight; August, one billion
six; and September, about a billion eight. It drops down
to less than a billion and a half in October on the basis
of that borrowing program.
For this immediate financing, I thought you might
also like to know the balance on May 14, just the day
before the contemplated payment date of this new issue.
It would be down to about nine hundred fifty million
dollars. It will be the lowest we have had for some time.
In connection with this financing, I thought it might be
a good thing if we would advise the banks before or at
the time of this financing about how much will be with-
drawn from the War Loan Accounts between the first of May
and the fifteenth so that they could have a little better
information on just how to pay, whether to pay for it by
credit or pay for it in cash. Heretofore they haven't
had that information, and sometimes they have said, "Pay
by cash," and then when the payment date came along and
we have made calls, they have changed it. I think it
might help them this time if they knew that in advance.
Somewhere along the line there is for consideration the
question of calling the Home Owners' Loan two and a quarter's
on July 1, which decision will have to be made by Wednesday.
H.M.JR: By Wednesday?
MR. BELL: Wednesday, yes.
H.M.JR: Tomorrow?
MR. BELL: May 1 is the date that we have to call
them.
MR. McKEE: What is the total, Dan?
MR. BELL: Eight hundred seventy-five million, two and
a quarter percent bonds.
MR. ECCLES: That would be a refunding in effect.
Regraded Unclassified
226
- 3 -
MR. BELL: Yes
MR. ECCLES: Treasuries direct, though, instead of
guaranteeds.
MR. BELL: And there is an RFC maturity on the same
date of two hundred seventy-six million, and then there
is the September 15 notes of three hundred forty-two
million which would make an operation of one billion
four hundred ninety-three, if you took them all at once.
H.M.JR: Is that all?
MR. BELL: That is all up to that point. I have got
some other questions I would like to raise after. we get
through with this.
H.M.JR: I would like Haas to read that memorandum
on excess reserves out loud.
MR. HAAS: "Member Bank Reserve Position and the Com-
ing Financing.
"In our memorandum of April 22 on the forthcoming
financing, it was said:
"The reserve position of the banks must probably
be accepted as a datum for this financing. It is highly
desirable, however, that action be taken with respect to
it shortly after this financing and well in advance of
the next cash financing.'
"The developments of the past several days, however,
seem to throw the balance in favor of taking such action
before, rather than after, the forthcoming financing.
"(1) The Bureau of the Budget release issued on
Friday estimates necessary borrowing during the fiscal
year 1943 at $53.6 billions. This is $13.8 billions in
excess of the estimate made in January.
"(2) The Friday Federal Reserve statement showed
excess reserves of $2,752 millions, of which $641 millions
Regraded Unclassified
227
- 4 -
was in New York City. This is a decline for the week of
$134 millions in total excess reserves and of $81 millions
in excess reserves of New York City. This is the lowest
level of total excess reserves since June 15, 1938, and
of excess reserves in New York City since April 6, 1938.
"(3) The statement of weekly reporting member banks
in New York City, also available on Friday, showed borrow-
ings of $5 millions. This is the first time that this
item has appeared on the weekly report of New York City
member banks since November 30, 1938.
"(4) It has come to my attention that the 0.32 per-
cent bill rate this week was made possible only by private
advance assurances to the dealers by the Federal Reserve
Banks of New York that if they entered bids ranging from
0.30 percent to 0.35 percent, the bills would be taken off
their hands. Otherwise, I am informed, the bill rate
would have been 0.35 to 0.40 percent, a rise of about ten
points from the previous week. As it was, the rate was
the highest since October 20, 1937.
"The coming financing will be $2 billions. This is
the largest cash financing undertaken since 1919. It is
important that it go over well.
"The member banks reserve position is badly in need
of strengthening. While under normal conditions it would
be neater to do this after the financing than before, it
seems to me that present conditions are so far from normal
that action before the financing is called for in this case.
"It is, of course, the prerogative of the Board of
Governors to determine how the reserve position should be
strengthened. It should be noted, however, that buying
Government securities in the ordinary manner will not do it
quickly enough. The decline of $134 millions in excess
reserves last week occurred in spite of an increase of $42
millions (mostly in bills) in the Federal Reserve portfolio.
"A reclassification of New York and Chicago would be
quick enough and would increase excess reserves in New York
Regraded Unclassified
228
- 5 -
City by nearly $1 billion and excess reserves in Chicago by
about $200 millions. A general reduction in reserve re-
quirements would also be quick enough.
"The posting by the Federal Reserve Banks of a buying
rate of 0.25 percent for Treasury bills would likewise be
quick enough. This method would also have the advantage
that it would constitute a quasi-fixation of interest rates
and so would tie in with the President's message on price
freezing.
"With a posted buying rate for bills in effect, in-
creases in the volume of bills would tend to ease money
rates, rather than to tighten them as they do at present."
MR. ECCLES: That is & memorandum from--
H.M.JR: Haas to me. Before we go much further, I
would like to discuss it, because I felt it very badly last
time, and the thing has become much more aggravated now,
and I just wondered if something couldn't be done.
MR. ECCLES: I feel that the problem isn't so much
the question of reserves, the whole thing is a question
that the Treasury are pursuing a method of financing which
is the same as has been the case in the past, that instead
of adopting a financing program which is related to these
very extraordinary conditions and the amount of financing,
it is still based upon the open market cash offerings
which are dependent upon the pressure of excess reserves
for the underwriting of the financing by the banking system,
which, of course, is inflationary in its implication. The
whole thing is based upon creating a condition in the bank-
ing system that forces rates down, but puts the banks under
pressure to do the buying and is contrary to what the pub-
lic open statement is of doing as much financing as pos-
sible outside of the banks.
Our whole program is designed to do as much as possible
in the banks and through the banks. We have felt for a
long while that the Treasury should adopt a long-term war
financing program and should get away from what seems to
us to not at all meet the situation. We have agreed to
Regraded Unclassified
229
- 6 -
give such support to the market as is necessary to maintain
a pattern of rates agreed upon, and we feel that the Fed
has carried out that commitment fully and adequately. The
question - on the long market, the long market has been
supported at the basis that was agreed upon and the short
market, it was agreed, as I recall, the last time we dis-
cussed this, that the short-term rate would not be permitted
to go to more than three-eights on a ninety-day basis. The
short market has not exceeded a third. It hasn't been up
to three-eights.
There is, of course - there are two or three ways to
maintain an adequate reserve position, and the only pur-
pose for maintaining a reserve position is its effect
upon interest rates and we have based our policy on our
obligation to maintain an interest rate structure. We
recognize, certainly, that you cannot have widely fluctu-
ating interest rates, that you can't do as was done in
the last war, have & continued increase in interest rates
and a decrease in bond prices during a financing period,
and the stability of your whole rate structure is essen-
tial. We have recognized that.
Now, you can accomplish that in two ways or three
ways, either open market operations, reduction of reserve
requirements, or & reclassification of cities. The latter
would be the least desirable, I think, without legislation
that gave us the responsibility to change reserve require-
ments for reserve cities separate from central reserve
cities, which is not permitted today. If we change re-
serve requirements, they must be changed both for reserve
cities and central reserve cities.
MR. BELL: You say you can't change central reserve to
reserve?
MR. SZYMCZAK: No. What Marriner is talking about,
increasing or decreasing reserve requirements under the
law, we have to increase or decrease for New York and
Chicago and the other reserve city banks.
MR. ECCLES: They are all tied in together.
229
- 6 -
give such support to the market as is necessary to maintain
a pattern of rates agreed upon, and we feel that the Fed
has carried out that commitment fully and adequately. The
question - on the long market, the long market has been
supported at the basis that was agreed upon and the short
market, it was agreed, as I recall, the last time we dis-
cussed this, that the short-term rate would not be permitted
to go to more than three-eights on a ninety-day basis. The
short market has not exceeded a third. It hasn't been up
to three-eights.
There is, of course - there are two or three ways to
maintain an adequate reserve position, and the only pur-
pose for maintaining a reserve position is its effect
upon interest rates and we have based our policy on our
obligation to maintain an interest rate structure. We
recognize, certainly, that you cannot have widely fluctu-
ating interest rates, that you can't do as was done in
the last war, have & continued increase in interest rates
and a decrease in bond prices during a financing period,
and the stability of your whole rate structure is essen-
tial. We have recognized that.
Now, you can accomplish that in two ways or three
ways, either open market operations, reduction of reserve
requirements, or a reclassification of cities. The latter
would be the least desirable, I think, without legislation
that gave us the responsibility to change reserve require-
ments for reserve cities separate from central reserve
cities, which is not permitted today. If we change re-
serve requirements, they must be changed both for reserve
cities and central reserve cities.
MR. BELL: You say you can't change central reserve to
reserve?
MR. SZYMCZAK: No. What Marriner is talking about,
increasing or decreasing reserve requirements under the
law, we have to increase or decrease for New York and
Chicago and the other reserve city banks.
MR. ECCLES: They are all tied in together.
Regraded Unclassified
230
- 7 -
MR. SZYMCZAK: And then the country banks in another
group, you see.
MR. ECCLES: There should be three groups, and we
succeed. tried to get that in the Banking Act of '35, but didn't
MR. BELL: But you could take one group?
MR. SZYMCZAK: Yes.
MR. ECCLES: Yes, we could take reserve cities and
central reserve cities in one group and country banks as
another group.
MR. BELL: Can't you take just central reserve cities
in one group?
MR. ECCLES: No. We could eliminate the central
reserve cities and make them reserve cities.
MR. BELL: That is what I mean.
MR. ECCLES: Oh, we could do that.
MR. McKEE: The Board can do that without legisla-
tion.
MR. ECCLES: But that would be bad, I think. It would
be an evasion. It would be a roundabout way of getting at
it.
MR. SZYMCZAK: You would still have to take the same
action. It doesn't make any difference. In increasing
or decreasing reserve requirements for reserve city banks,
it is the same as for central reserve city banks.
H.M.JR: Could I just say something for a minute? We
have spent a lot of time on this plan which you people gave
us about a five-year tap issue and an eighteen- or twenty-
year tap issue. We have had people out in the field, and
we just can't find the money. It is just a rainbow, say-
ing that there is money in corporations and so forth.
Regraded Unclassified
231
- 8 -
MR. McKEE: How do you know it is a rainbow until you
try it?
H.M.JR: Well, the easiest way to do it is to go and
the corporations.
MR. McKEE: Well, what their position is one day or
one month compared to some other month is pretty hard for
them to tell you.
H.M.JR: I mean, I am not satisfied to sit in this
chair and work on a highly theoretical basis of memoranda.
When you go out in the field and talk to the corporations,
the money isn't there.
MR. ECCLES: You have only talked to seventy of them.
We spent an hour with what's-his-name over there going
into this thing thoroughly.
MR. BUFFINGTON: Buffington.
MR. ECCLES: And as I understand it, he talked to
seventy corporations. They were all the big corporations.
I wouldn't feel for a minute that - from his survey, from
what he told us, that that is conclusive at all.
H.M.JR: What have you got on the other side to prove
it isn't, other than a matter of opinion?
MR. McKEE: All right, but Mr. Secretary, what have
you got to lose by having all kinds of goods on your shelf,
that if and when the Federal Reserve Bank would take the
responsibility off of your hands and try to sell something,
if you have got it on your shelves, to do their best, to
get that much out, what if you don't get more than 8. bil-
lion and a half dollars out of it?
H.M.JR: I will tell you exactly what we have got to
lose, John. I will tell you exactly what we have got to
lose. The thing we have got to lose is this: Any way
that you look at this thing, we are going to have to rely
over and above what we can sell to the people on the pay-
roll plan, we have got to sell it in lots to the banks and
Regraded Unclassified
232
- 9 -
insurance companies, but more and more to the banks.
Now, heaven knows nobody can acuse me of pampering the
banks in the nine years that I have been here. Am I
talking loud enough?
MR. McKEE: I can hear you.
H.M.JR: But if you offered this security which is
payable on demand, and it is an attractive security be-
cause it is payable on demand, and you say to the banks,
"But you can't buy it. We expect you to handle our War
Bonds without any compensation, we expect you to be issu-
ing agents and this thing and that think, and there are
a. thousand and one things that we ask you to do, but when
we come along and give something that is a little bit
extra nice, you can't have that." And I don't think it
is fair, John.
MR. ECCLES: That--
H.M.JR: Now just let me finish one second. There
must be other opinions, I don't know. Maybe they all
agree with you, Marriner. Maybe it is just one voice.
MR. ECCLES: The Board is unanimous and so are the
Federal Reserve Banks.
H.M.JR: Don't tell me that, Marriner, because you
can't prove that.
MR. ECCLES: Well, you have got the record approved
by the presidents and the - you can ask all the group that
is in this room here.
H.M.JR: I have talked to some of the people - I am
not talking about the Board, but the twelve Federal Reserve
Banks are not with you, and I will bring them in here and
they will tell you so.
MR. ECCLES: I would like to know which one isn't,
because we had a meeting that lasted two days and each
Federal Reserve Bank expressed themselves.
MR. McKEE: I am willing to accept it, not knowing
Regraded Unclassified
233
- 10 -
who you mean.
H.M.JR: Let me keep on it, the other people can
talk for themselves. Let's say, John, take you - you
say a billion or a billion and a half. Let's say you
sold two billion.
MR. McKEE: O.K.
H.M.JR: And then you are through and the banks get
sore. Where does it leave me with the other twenty-five
billion I have got to sell?
MR. McKEE: Well, now, I am not going to argue with
you as far as the - as maybe some president of some par-
ticular Federal Reserve Bank hasn't really been sold as
yet on this sytem, but on the other hand, I am not willing
to accept that the bankers would be hurt about that kind
of an issue. I think a lot of them - now, you might find
fellows like Randy Burgess that are chasing rainbows up
and down the streets. He may be hurt, but that isn't true
of the banker mind, because I think I can get the banker
complex of this United States just as well as anybody in
Washington, and I do know that they want to see this sold
to investors.
H.M.JR: And leave them out?
MR. McKEE: They know there is going to be plenty
for them. You can't leave them out. You can't do your
job and leave them out.
H.M.JR: How can you prove that to me?
MR. McKEE: Do the job and not leave them out?
H.M.JR: No, I am not questioning that. We will go
on the assumption that you can sell a billion or 8 billion
and a half the way you said. How can you prove it to me
that in doing this thing that you are not going to make all
the bankers sore?
MR. SPROUL: Some of them, I think, Mr. Secretary may--
Regraded Unclassified
234
- 11 -
H.M.JR: Let's just stick to that point.
MR. McKEE: Excuse me, Allan, but on your over-all
plan you are going to have to increase every kind of
goods you have got on your shelf, short-term paper,
intermediate paper, and long-term paper. Is that not
right?
H.M.JR: That is correct.
MR. McKEE: So if this is short-term paper for some
people, you are going to have to give them, to do your
program, short-term paper enough for their portfolio.
Nobody is going to be harmed. It isn't a scarcity of
goods because your program - the job you have got to do
hasn't any evidence of scarcity of activity on your part.
H.M.JR: I don't make myself plain. Just for a
round figure - I may be wrong - twenty-five billion dollars,
is that a figure for the rest of this year?
MR. BELL: That we will have to finance?
H.M.JR: Yes, outside of War Bonds.
MR. BELL: About sixteen or seventeen billion.
H.M.JR: Bell says sixteen or seventeen billion dollars.
For argument's sake, let's say that twelve billion of it
has to go to the banks. Is that & bad guess?
MR. BELL: No, that is a good guess, probably.
H.M.JR: All right. The thing that I want to get
over to you, that I want you to convince me, is that out
of the twelve you have got to sell sixteen to the banks.
I mean, my figures may be off twenty-five percent, but
for the argument.
MR. McKEE: Yes, that is all right.
H.M.JR: And in order to do that a demand security is
much more attractive and all the banks would like to have it.
Regraded Unclassified
235
- 12 -
What?
MR. BELL: That is right.
H.M.JR: Now, the thing that - the only thing that
worries me is, in selling this merchandise I don't want
to offend my best customers. It is just as though I was
in the grocery business and the Atlantic and Pacific Tea
Company took seventy-five percent of my goods, but I got
out of something, and I said, "Well, I am sorry, you can't
have that, that is going to the independent grocers."
Now, you have got your idea and I have got mine. Now,
how the hell can we find which of us is right?
MR. McKEE: Mr. Secretary, I appreciate--
H.M.JR: Do you see what I mean?
MR. McKEE:
what the banks would like to have and
all that, but nevertheless they are going to buy market
issues that they can dispose of, and you are going to have
to price those market issues at a price that they will
subscribe for. Now, that is going to be the proportion
that they are going to take. Now, you don't have to give
them more than they are going to take and hold and that is
what they would like to see - some of them would like to
see you do, and price it so that they could subscribe for
it and sell it at a profit. Not to hold it.
H.M.JR: But you don't get away - are you familiar
with the great number of things that we ask banks to do
for us for nothing?
MR. McKEE: Yes, and I am in sympathy with - I know
your position on that, that you would like to make a
contribution, but you can't and you want to do something.
Now, I think your best way of making that contribution -
and I take it from George's memorandum that there is some
concern on the bill rate moving up as fast as it has -
well, there is a medium of subsidy by indirection which solely
goes to the banks because they are the owners of bills.
H.M.JR: But that isn't what worries George. George
Regraded Unclassified
236
- 13 -
can talk for himself.
MR. McKEE: I just inject that into the argument as
& possibility, that through the short-term market you can
pay for some of the services you are getting.
MR. ECCLES: Let--
H.M.JR: Do you mind one minute?
MR. ECCLES: Yes.
H.M.JR: I mean, I know I haven't convinced John, and
John hasn't convinced me:
MR. McKEE: I know I haven't.
H.M.JR: I don't know where the other Board members
are, but let me use an example. The Atlantic and Pacific
Tea are such big buyers. Now, you might sit back and say,
"Well, to hell with them. Supposing he does buy seventy-
five percent of my goods? I will give him all the goods
that he needs." That is your argument. "I will give him -
I am a manufacturer of oatmeal, and he can have all he
wants, but I am going to get out a specially nice package
and that is going to go to the independent grocers and
the A and P can't have any. I will give him all he wants,
but he has got to take it in a less nice package." That
is the situation. It is 8. matter of merchandising.
MR. McKEE: All right, but I still contend that this
Federal Reserve System may be all wet, but they still
believe that they can solicit, not the objections, but
the support of member banks to help you sell your credit
to investors, and they will help you sell them.
Now, I speak of that because I think that there are
some banks that know that they are going to pay through
the nose for this thing, and they have got their sales
adjusted to take it on the chin, and they are willing to
go ahead, and we have seen a lot of that by sympathetic
reaction to Regulation V and coming forth and making loans
for production. It is on your side, and I don't think you
Regraded Unclassified
237
- 14 -
realize, and you can't sample it because it isn't general
in any respect, it is spotty. But it will become more
general by experience.
H.M.JR: John, in my whole experience in Washington,
I have never had finer cooperation from any group than
the banks have given me during the past year. They have
been magnificent, see. Now, I don't want to, because I am
Secretary of the Treasury, abuse that, see, and the thing
that I am arguing about is, not what you and I think -
let's say I am a hundred percent wrong, but how can we
find out, not what Randolph Burgess thinks, but what the
rank and file of the bankers think, you see.
Now, you and I sit in this room here and find that
out and certainly you people on the Federal Reserve are
in a much better position to find it out than I am. How
can you find out for me, for us, what do these fellows
think, the rank and file, not the National City, not the
Chase, but the rank and file. Now, if I am wrong--
MR. McKEE: My answer to that is--
H.M.JR: John, if I am wrong--
MR. McKEE: If you have had any services worth while
in the past from the Federal Reserve System and the Federal
Reserve System continues to serve you as their fiscal
agents and they come and they say - now, you might say
that you know that we are not in accord or something like
that. That is news to me, but nevertheless I am willing
to accept your statement. Have you any reason now to be
fearful that if and when they ask for this opportunity to
serve you further through this medium, that you can be
harmed and that they are not capable of selling the idea
to the member banks, that this is for their own good as
well as for the Treasury?
H.M.JR: Let me ask you. There is no difference
between the Federal Reserves now. It is this Advisory
Committee that I question, the Advisory Committee.
MR. McKEE: You mean the Federal Advisory Committee?
Regraded Unclassified
238
- 15 -
H.M.JR: What is their title?
-
MR. SZYMCZAK: That is right, the Federal Advisory
Council.
H.M.JR: I said the - the Federal Advisory Council,
that is what I--
MR. McKEE: The banker group?
H.M.JR: The banker group is what I question.
MR. ECCLES: We didn't include those. The memoran-
dum we sent came to you from the Board and the twelve
bank presidents.
H.M.JR: I understood it included them.
MR. ECCLES: No, we never discussed it with them.
H.M.JR: I understood it included the Board plus the
advisory group.
MR. ECCLES: No, the bank presidents.
MR. McKEE: You are going back to before Pearl Harbor
when we wanted authority to raise reserve requirements.
(Laughter)
H.M.JR: I was thinking of the banker advisory group.
MR. ECCLES: No, they have never been - the thing
presented to you was the memorandum only from the Board
and its president.
H.M.JR: I understood it included the banker advisory
group.
MR. ECCLES: We have never discussed it with them.
H.M.JR: Just let me and John have it out for a minute
on a very friendly basis. I am not questioning one bit -
you say to me you want this opportunity to go to town. I
239
- 16 -
am not questioning your sincerity that you mean what you
say and will do the best you can because you have demon-
strated it again and again, but all I am saying'is that
the thing that worries me is that like any manufacturer,
I think, before we try it on the forty-eight states, we
should try it on a community, but at least find out what
the community would like, because I have often been wrong
sitting here in Washington trying to interpret what the
public thinks, and I am just worried that we might - and
It is very, I should think, easy to find out through the
twelve presidents of the banks whether I am wrong or right,
and I am willing to leave it to the twelve presidents of
the banks, that if we get out an issue which is not
available to the banks, will I be taking the risk that I
will sufficiently offend these people that they may throw
in my face some of this work which they are doing at no
cost to me but at extremely heavy cost to them. That is
the whole point.
MR. ECCLES: We have got two presidents here.
H.M.JR: John, do I make myself clear?
MR. McKEE: Yes.
H.M.JR: And if I am wrong, John - now, I am per-
fectly willing to leave it to the twelve presidents of the
banks to test the thing. If I am wrong, I will say to you
now that I am willing to try one of these issues. Now,
could I be fairer? Could that be fairer?
MR. McKEE: That is all right, and I am willing to
go farther than that. If you have anybody complaining to
you and you haven't time to answer the telephone, you
refer them to me and I will take care of them, I don't
care where they are in the United States.
H.M.JR: Well, you have been very nice, and I have
tried more and more to keep you informed, but I say before
I stick my neck out - now, I have been put in the position
as though I wasn't against inflation. Well, I made & speech
in Boston in September which certainly went out all the way
on the thing, and I am just as worried and just as conscious
240
- 17 -
of it as anybody. I hate it and fear it just as much as
anybody. If there is any money lying around, let's call
it of a non-inflationary kind, I would like to get it.
I would like to mop it all up. If there is a billion or
three billion - I will go so far that I would be willing
to issue an open-ended issue at this time. I will take
four or five billion dollars. Bell, you have heard me
say that.
MR. SZYMCZAK: All right, now is the time.
MR. ECCLES: We have got a program here on that.
MR. SZYMCZAK: I think we have got to there.
H.M.JR: I will take it and rest on my oars for 8.
couple of months. If there are four or five billion -
no, I won't renege. If there are four or five billion
dollars of this stuff lying around, idle money, I will
take it and like it, just as long as the twelve Federal
Reserve presidents can assure me that in doing this thing,
I won't have these organizations who are doing 8. dozen
different services for us throw this stuff back in my
face and say, "Take it and do - you know what to do with
it."
Now, you can't blame me because I don't know how
many of you are familiar with what the banks as fiscal
agents - I mean, I am not talking about the Federal Reserves,
we pay them - but all of these banks are selling twenty-
five dollar bonds and New York has got fifteen salesmen out
for me and is getting them made fiscal agents, and they are
doing 8. thousand and one things. We offered to pay the
postage. We got some letters back which were magnificent.
The bank president said, "I will start any time to make
out a War Bond on my own time and let the customer wait."
Now, there is that spirit. You know it is hard as hell
to get that, but it is awfully easy to kill it. Now, I
am through, John. That is my whole thing, but please,
before you put me on the spot, prove to me that I am right
or wrong. That is all I ask.
MR. McKEE: Well, I don't think anybody can tell you
241
- 18 -
within any reasonable amount how much would be available
and it would have to be just as you have done with your
baby bonds, and then your Defense Bonds, you have put -
you have had to build up an organization which will have
to be done on this.
H.M.JR: John, that isn't the question. I don't
care whether it is five hundred million or five billion.
I want to get - prove to me that we can do it without
offending or lessening the enthusiasm of the banks.
MR. SPROUL: Mr. Secretary, I think if you made an
inquiry through the Federal Reserve Bank presidents, you
would get undoubtedly & divided opinion. Some would say
that they didn't like the idea at all. I think if you
made an inquiry you would merely get a divided view.
Some would say they didn't like the idea of short-term
tap issue at all. Others would say, "It is a fine idea,
but if there is going to be any of that around, we want
in on it," and others would say, "Yes, it is 8 good idea
to get something which can be sold outside the banking
system." I think from my own experience and discussing
this from day to day and week to week with the bankers,
if that is any criterion, with the growth in the size of
this program and the amounts that are going to have to be
borrowed from the banks, they would come around gradually
to the view that we must have all kinds of merchandise on
the shelves, and we must have an organization to sell all
kinds of merchandise both outside the banking system and
inside the banking system, and that this type of issue
from which we are barred is one kind of merchandise that
we should have. My own view is that your situation now
is not the same as the wholesale merchant selling to the
A and P and to independent grocers. You have a program
here which is so big that you have to give a lead as well
as follow what the buyer wants, that you are not selling
to competitors of the A and P, you are selling to his
customers who he wants you to sell to. He says with you,
We want to get as much as this outside the banking system
as possible. As far as the banks and their compensation
and their spirit with respect to aiding you on the war
financing program, I don't think you could kill it by any
such small thing as this. I think it is too big and too
242
- 19 -
real & spirit of "do whatever is necessary."
Now, the fundamental situation with respect to bank
investment very soon is going to be that we are going to
have to provide them with the funds with which they make
those investments. We are going to have to put the fund
in to maintain their reserves and in that situation it is
merely the desirable, I think the necessary, alternative
to doing it through greenbacks or direct through the
central banking system, but there is no need for being too
fearful about their reaction to whatever you do, because
they are merely taking part in a big financing program in
which you have to call the tune from here on, and we have
to provide most of the funds.
MR. ECCLES: That is right.
H.M.JR: Well, just let me talk a minute. I haven't
got any hobby in this thing. I haven't got any fixed
opinion, but I don't want to kill this very fine spirit.
Now, I read this survey which Dan gave me on how the
banks feel, and from that you don't get it. You don't
get the feel of the situation. I just don't know.
MR. SPROUL: Well, as I say, I have been discussing
it with the New York City banks for some time now.
First, there was general opposition to the idea with
some minor views that, "If there is going to be anything,
we want it."
The most recent views I have had, and I can't say
that this could go for all the banks, because I don't
think it would - but the most recent view I have had of
the market was, "What is the harm in trying it? We are
going to have to-have all kinds of goods on the shelves.
We are going to have to have an organization to sell
those goods, and we want to be prepared to do it."
Regraded Unclassified
243
- 20 -
MR. WILLIAMS: Mr. Secretary, I attended a meet-
ing of five hundred country bankers last Saturday up in
Lewisburg, and I can check on what you say about their
being patriotic and friendly. It was evident, for example,
in their response to the certificates of indebtedness.
I have here statistics on response in the third district.
In all, there are about nine hundred banks up there, and
all together about two hundred and forty of them came in.
They liked especially that provision that gave them assur-
ance they could get twenty-five thousand dollars. They
wanted to know where they stood. They wanted to know
from you what they were to do. They will respond. I
think you have got a loyal group. On the question you
raised, I don't think they thought through it, but one
could, certainly on an experimental basis, determine
pretty quickly what their attitude would be, and I think
if they had all the facts as Mr. Sproul has just indicated,
that you would get full cooperation from them.
H.M.JR: Don't you think that my position is reason-
able? I want to know before I jump. I want to know how
deep the water is.
MR. WILLIAMS. Yes, you are asking for some evidence,
and I think it could be obtained, and I think it would be
the right sort. If we put before them the complete compre-
hensive program and the part that they would play in it--
H.M.JR: What state is Lewisburg in?
MR. WILLIAMS: Pennsylvania
H.M.JR: Well, how long do you think it would take
through the presidents of the twelve banks to find out?
MR. WILLIAMS: You could do it in two or three
days.
MR. McKEE: You know, Mr. Secretary, I don't know
how the presidents could approach this subject without
you having a program that would show what had to be done
and they were privileged to talk about that program of
243
- 20 -
MR. WILLIAMS: Mr. Secretary, I attended a meet-
ing of five hundred country bankers last Saturday up in
Lewisburg, and I can check on what you say about their
being patriotic and friendly. It was evident, for example,
in their response to the certificates of indebtedness.
I have here statistics on response in the third district.
In all, there are about nine hundred banks up there, and
all together about two hundred and forty of them came in.
They liked especially that provision that gave them assur-
ance they could get twenty-five thousand dollars. They
wanted to know where they stood. They wanted to know
from you what they were to do. They will respond. I
think you have got a loyal group. On the question you
raised, I don't think they thought through it, but one
could, certainly on an experimental basis, determine
pretty quickly what their attitude would be, and I think
if they had all the facts as Mr. Sproul has just indicated,
that you would get full cooperation from them.
H.M.JR: Don't you think that my position is reason-
able? I want to know before I jump. I want to know how
deep the water is.
MR. WILLIAMS. Yes, you are asking for some evidence,
and I think it could be obtained, and I think it would be
the right sort. If we put before them the complete compre-
hensive program and the part that they would play in it--
H.M.JR: What state is Lewisburg in?
MR. WILLIAMS: Pennsylvania
H.M.JR: Well, how long do you think it would take
through the presidents of the twelve banks to find out?
MR. WILLIAMS: You could do it in two or three
days.
MR. McKEE: You know, Mr. Secretary, I don't know
how the presidents could approach this subject without
you having a program that would show what had to be done
and they were privileged to talk about that program of
244
- 21 -
what had to be done, not only this, but in many other
ways, such as market issues and so forth, and which
they had the future opportunity of coming in on. Now,
I think that--
H.M.JR: Well, I am perfectly willing. I don't
feel the way I used to, that this thing has to be
guarded as a secret. Now, let me ask you gentlemen
this. In this thing where you said you were going to
sell a billion or a billion and 8. half, I will stick to
your own figures, did you have in mind the five-year
issue or the long issue?
MR. McKEE: Oh, I think that is up to you. The
short issue is what I had in mind.
MR. ECCLES: The short, yes.
H.M.JR: Then supposing just for argument's sake -
we won't settle this thing this morning - and I don't
want to forget the excess reserve thing either - supposing
we said that for this next issue they would rely on a -
I think you called it tap issue, didn't you, five years?
MR. McKEE: Registered issue. I don't like that
damn word, tap.
H.M.JR: I don't either.
MR. ECCLES: Non-negotiable. Registered is a good
word.
H.M.JR: Let's say we were going to sell a billion
dollars of that, the five year. That goes, I take it,
to non-banking institutions. And then a billion dollars
of & long issue, open to anybody, you see. I mean, I
am just throwing that on the table. I mean, just for 8.
minute. Then we say well, in the next day or two we
decide that is it. We could decide in a day or two that
is it. Then give it not only to the Federal Reserve,
but to this very fine organization of security dealers to
let them go out and feel the market. How long do you
think?
Regraded Unclassified
245
- 22 -
MR. SPROUL: Well, I don think we can get a
reaction within two or three days that would mean
anything. It takes a consideration and study of the
whole financing problem and the whole program, and to
ask a lot of country bankers how they feel about it, they
will look at it in an isolated way as one particular
issue and give you a snap judgment, which I don't think
would be worth very much.
(Discussion off the record.)
MR. WILLIAMS: John, I think the Secretary would
be interested in our general approach to the whole prob-
lem because we have discussed only one or two aspects
of it. I think the memorandum might be in order now.
MR. ECCLES: Yes. I was just going to say that
in discussing the excess reserve question and likewise
in discussing this particular tap issue, it doesn't seem
to me it can be intelligently discussed without consider-
ing its relationship to the whole problem. Now, we have
prepared a brief statement here of three pages. We
haven't had any time to give it any particular refine-
ment. It is rather a rough draft, but it does express
in general the views of the Executive Committee and the
staff members who sat in with us. Likewise, Mr. Ransom
and Evans, who sat in with us. They were present, too,
in the preparation of this statement. It deals with the
immediate problem, and then - if you want to go over it,
then I would like to say something briefly on this short
tap issue as related to it.
H.M.JR: Has anybody else seen it?
MR. SZYMCZAK: No, we just brought it up.
MR. ECCLES: This just came off the typewriter ten
minutes before we left.
H.M.JR: Dan will read it out loud.
MR. BELL: "Treasury Financing. The magnitude of
of the war finaneing program is increasing enormously as
245
- 22 -
MR. SPROUL: Well, I don' think we can get a
reaction within two or three days that would mean
anything. It takes a consideration and study of the
whole financing problem and the whole program, and to
ask 8. lot of country bankers how they feel about it, they
will look at it in an isolated way as one particular
issue and give you a snap judgment, which I don't think
would be worth very much.
(Discussion off the record.)
MR. WILLIAMS: John, I think the Secretary would
be interested in our general approach to the whole prob-
lem because we have discussed only one or two aspects
of it. I think the memorandum might be in order now.
MR. ECCLES: Yes. I was just going to say that
in discussing the excess reserve question and likewise
in discussing this particular tap issue, it doesn't seem
to me it can be intelligently discussed without consider-
ing its relationship to the whole problem. Now, we have
prepared a brief statement here of three pages. We
haven't had any time to give it any particular refine-
ment. It is rather a rough draft, but it does express
in general the views of the Executive Committee and the
staff members who sat in with us. Likewise, Mr. Ransom
and Evans, who sat in with us. They were present, too,
in the preparation of this statement. It deals with the
immediate problem, and then - if you want to go over it,
then I would like to say something briefly on this short
tap issue as related to it.
H.M.JR: Has anybody else seen it?
MR. SZYMCZAK: No, we just brought it up.
MR. ECCLES: This just came off the typewriter ten
minutes before we left.
H.M.JR: Dan will read it out loud.
MR. BELL: "Treasury Financing. The magnitude of
of the war finaneing program is increasing enormously as
Regraded Unclassified
246
23 -
we are successful in the war production program. The
most recent budget estimates for the fiscal year 1943
indicate that expenditures by the Federal Government will
be seventy-six billion dollars instead of sixty-two bil-
lion as was estimated in January. The Federal debt,
taking account of the income from proposed new taxes,
will increase by fifty-four billion dollars instead of
forty billion. Exclusive of sales of War Savings Bonds
at the hoped for rate of one billion dollars per month,
thirty-five billion dollars will have to be borrowed
from banks and other lenders and investors.
"The size of this task alone emphasizes the necessity
of adopting a comprehensive long range financing program.
Yesterday's Presidential message required the support of
such a program, if monetary policy is to support fiscal
policy in combatting a rise in the cost of living. There
is a danger in feeling our way along without a program;
the danger that we shall drift into & program which does
not measure up to the requirements of our situation. The
views of various groups of lenders and investors should be
taken into account, but they should not control policy,
nor be allowed to delay too long the adoption of a program.
Financing a war of the present magnitude involves a judicious
but very substantial amount of telling the buyer what he
is to take, as well as finding out what he wants to buy.
"General Principles. One, the program should not be
cast in the last war pattern of rising rates of interest
as the war progresses.
"Two, maintenance or increase of the present volume
of excess reserves as such in the country outside of
New York or in New York is not necessary to the program
and might be detrimental - it would continue pressure
upon banks to invest whereas banks should have less induce-
ment to invest and others should have more inducement.
"Three, there is need for an additional amount of
short-term Treasury paper, such as bills and certificates
of indebtedness, so that excess reserves can be shifted
readily from market to market and bank to bank, through
the purchase and sale of these obligations. This mobility
Regraded Unclassified
247
- 24 -
of funds will not be achieved, however, if short-term
rates are so low as to repel demand for such maturities
outside the principal money markets.
"Four, borrowing from non-bank investors must be
increased to the fullest possible extent in order to
avoid the inflationary implications of an unrestrained
increase in the volume of bank credit.
"Five, borrowing from commercial banks, in S0 far
as it is necessary, should be for periods not exceeding
ten years.
"Six, Federal Reserve System purchases of Government
securities in substantial amounts will be necessary in
order to maintain adequate bank reserves, and to facilitate
the Treasury's financing program.
"Methods. The differences not covered by agreement
on principles relate to methods of putting those princi-
ples into effect, and most particularly to methods of
selling and keeping as large a volume of securities as
possible outside the banking system.
"There are various ways of carrying forward the finan-
cing program (exclusive of War Savings Bonds, etc.),
including:
"One, continuance of present method of offerings for
general subscription.
"Two, periodic offerings of very large issues to be
sold by campaign methods (Canadian program).
"Three, the Tap Issue Method (British program).
"Four, a method which combines offerings of special
securities available at all times to investors other than
banks, with regular and special campaign offerings of
securities suitable for bank and other investment (such
as the program previously proposed by the Federal Open
Market Committee and the Board of Governors of the Federal
Reserve System).
Regraded Unclassified
248
- 25 -
"Whatever method of financing is chosen, and we
again recommend the fourth method, we have now reached &
point where it is imperative that we have an organiza-
tion (separate from the War Savings Bond organization,
which is working in a special field) available to sell
whatever securities are offered; that is, an organization
of the commercial banks, as well as the investment bankers
and others, that will reach investors everywhere and sell
Government securities. Such an organization can and should
be set up in each Federal Reserve District centering around
the Federal Reserve Bank.
"There will not be time before the May financing
must be decided and announced to set up the organization
for making a comprehensive program effective. The attempt
should be made, however, to have this financing conform,
as far as possible, with the objectives of such a compre-
hensive program.
"Specific Suggestions for May Financing. One, issue
a 7-9 year two percent bond which will be primarily a bank
investment. Such an issue in the amount of one to one and
one-half billion dollars could be readily sold.
"Two, begin immediately to increase the weekly offer-
ing of Treasury bills from one hundred fifty million dollars
to two hundred fifty million. For the present, the Federal
Reserve System will support the Treasury bill rate firmly
at three-eighths of one percent.
"Three, offer a registered two and one-half percent,
20-25-year market bond which could not be registered in
the name of commercial banks for ten years and which could
not be transferred for sixty days. The amount of this
offering need not be fixed.
H.M.JR: What does that mean?
MR. SZYMCZAK: After a fifteen year bond before it
could be transferred to a commercial bank. For the first
ten years--
MR. ECCLES: You could take five years or fifteen
years. Ten is a--
249
- 26 -
H.M.JR: After the thing is out ten years, the bank
can have it?
MR. SPROUL: After it comes within the area of
suitable bank investment, then it would be available to
banks.
MR. SZYMCZAK: That is right. It is consistent with
the other statement on the ten years maturity.
MR. BELL: "The amount of this offering need not be
fixed. The books could be left open for as long as
desired, and a special canvass of insurance companies
and other similar investors could be made.
"Four, discard all subscription rules. The reasons
for these rules have now disappeared and subscribers
should be permitted and encouraged to subscribe for what-
ever amount of Government securities they desire.
"The Federal Reserve System in this serious situation
must, of course, do whatever it can to assist in the
Treasury's program. It can be of greatest help if a com-
prehensive program is now developed. It is ready and will-
ing to support such a program in whatever ways are necessary
by whatever means are at its disposal. As an immediate
guide to its operations, the System might undertake to
purchase in the open market a sufficient amount of Govern-
ment securities to offset future increases in currency in
circulation. This in itself would not constitute a net
increase in the amount of available bank credit."
H.M.JR: I will say this. It is a very honest and
sincere memorandum, and I am very glad to have it. I
don't think there is a tremendous amount of difference
between us. I think the principal difference is on the
question of excess reserves, where you say that it shouldn't
be changed.
MR. ECCLES: Well, you are interested in two things,
the success of the Treasury financing, and secondly, that
a pattern of rates be maintained. Now--
Regraded Unclassified
250
- 27 -
H.M.JR: I will add a third one. I don't know which
comes first. I would like to sell every dollar that I
can to non-inflationary sources.
MR. ECCLES: Outside the bank. We agree on that.
H.M.JR: That is right, non-inflationary sources.
MR. ECCLES: Now, there is one other thing that we
didn't - on page two where we - number four. It is our
idea that this present program for May, that this number
three, this long tap issue here, number three, as you
will notice, is modified considerably from the one that
we proposed in the former memorandum. That is number
three, in that it is available--
MR. SZYMCZAK: It is a market issue, but it is
registered.
H.M.JR: But it is a market issue, you see, but you
have a way of keeping the banks from taking it through
its registration. It is a market issue, but not a--
MR. BELL: It can't be registered in the name of a
bank.
MR. ECCLES: It is not demand at all. It is a market
issue, but the banks can't take it because it is regis-
tered outside of the banks.
MR. BELL: You have improved.
H.M.JR: It is not a demand issue?
MR. ECCLES: No.
H.M.JR: Say it again.
MR. ECCLES: It isn't a demand issue, it is a market
issue, but it is not - it can't be registered in the name
of the banks, so it keeps the banks out of it, and it
gets your long-term funds in it.
Regraded Unclassified
251
- 28 -
MR. SZYMCZAK: The banks can get it.
MR. BELL: It can be transferred between permanent
investors only in the banking area.
ME. ECCLES: That is right.
MR. SZYMCZAK: You don't exclude the banks either.
After a period of time they can have it.
H.M.JR: The doctor is over at the White House; and
if I slipped over, then I could come back; but if you
people could keep this thing going, but particularly should
we go ahead on May 4 and should we do it on May 11, or
what? I will be back. It only takes me ten minutes.
But you people have changed here considerably.
MR. SZYMCZAK: No, we haven't changed. We are just
moving along with conditions, and we still stand by our
original statement.
H.M.JR: But your other two issues were demand issues.
MR. SZYMCZAK: I know, but that is the present finan-
cing we are talking about, that May financing.
(The Secretary left the conference.)
MR. ECCLES: I was just going to say, Dan, that this
specific suggestion for May financing on number three,
that after that is out of the way, it was then our idea
that the short-term non-negotiable issue should be tried
before the June financing so as to find out what funds
can be gotten from that source, and it may well be that
with this program under number three here that you would
get, as the Secretary indicated, he is willing to take
three or four or five billion, that you may get enough
that June financing, market financing, would not be necessary.
MR. BELL: I am a little worried about that, because
it takes time, you know, to put one of these things out,
regulations and everything.
252
- 29 -
MR. ECCLES: What do you mean, Dan, which ones do
you mean?
MR. BELL: I am talking about tap issues that require
special provisions.
MR. ECCLES: Sure. Our idea was to make it available
for the first of June. That is the short tap.
MR. BELL: I am still worried.
MR. ECCLES: Well, I mean to the extent here that
you propose bills. We feel that you have got to have
more bills for two reasons. First, to help to make
effective the existing two and a half billion or two
billion seven hundred million of excess reserves; and
secondly, so that the Federal Reserve System will have
a volume of securities that they can readily purchase.
In other words, the best way for us to deal with the
excess reserve picture would be to purchase a half
billion dollars worth of bills over a period of weeks
here. That would be the one way to give to the market
excess reserves. We feel very strongly that to come out
and to actually decrease reserve requirements until these
other things are done - now, it may well be that later on
it would appear to be advisable to do that; but until
these other things were done, until a program is set, it
would look like all we are trying to do is to make for the
continuation of the easy open market financing based upon
the banks doing the great bulk of the financing, doing
the underwriting, and we feel that that is a mistake, to
give that impression at this time. Again, the President
has just announced an anti-inflationary program. The
Board is considering a regulation covering the whole
field of consumer credit, which is the most difficult and
involved job. It will have to do with the banks to a
large extent. Now, to come along and to take that action
with reference to consumer credit as an anti-inflationary
means, along with other things that the President is doing,
and the the Board right in the face of that to come out
and announce they have increased reserves, I mean, increased
excess reserves so as to put the banks under pressure, it
would look contradictory, and we feel it would be a great
253
- 30 -
mistake, and entirely uncalled for. If this sort of a
program is adopted and we carry out an open market
operation in order to maintain that three-eighths rate
in the bill market--
MR. BELL: Well, I don't think you necessarily put
the banks under pressure by increasing reserve require-
ments. You certainly make them feel a little happier.
MR. ECCLES: They don't want it. Did you read this
report of Reserve cities the other day on the question
of reserves?
MR. BELL: I read it.
MR. ECCLES: Well now, speaking of pleasing the -
the Secretary was anxious to avoid offending the banks
from the standpoint of their being customers, and this
point which is accepted by the Reserve City Bank Associa-
tion has this to say: "For the maintenance of a broad
and dependable market for Government securities, the
prime necessity is cooperative understanding between the
Treasury, the Reserve System, and banks, buyers, and
others. Closely related to the question of maintenance
of steady interest rates is the reserve position of the
banks. For a number of years the banks have had large -
have had huge amounts of excess reserves, and this excess
has been largely responsible for a continuous decline
in interest rates. It has made Treasury financing very
easy; for as rates fell, bank earnings also fell; and
the banks were under pressure to use excess funds to buy
more and more Government securities. Now, this situation
needs to be re-examined, for it is necessary that securities
be distributed wisely among investors, and the banks take
only what cannot be sold to others.
"The banks ought to have less inducement to invest,
and others should have more inducement. This objective
would probably be achieved more easily if excess reserves
declined somewhat further, but they should not be allowed
to decrease enough to place too much - or to place pressure
on the market." Now, there is the bankers' point of
view on this picture so that--
254
- 31 -
MR. BELL: The original draft had a billion and &
half, and they were afraid of that figure, so they took
that out.
MR. SPROUL: They were afraid of that figure, because
they had in the back of their minds selling the program
to the Treasury, and they thought there might be some
resistance to the figure here. They still believe that
way, I think.
MR. BELL: That is right.
MR. ECCLES: They would be very much opposed to an
increase in the reserves. We would get just the same -
we would get real criticism, I am sure. I am not con-
cerned about that. If it were the thing to do - I think
this program cannot be designed to suit private interests.
You have got to try to work with them, but at the same
time it has got to be a broad over-all program, as indi-
cated here.
MR. SZYMCZAK: And it isn't something you can do
over night, Dan. You can't go right out and say, "There
is a billion or two billion dollars of money waiting for
you. It is an educational effort just like the War Savings
Bonds, it takes time to work out.
MR. BELL: That is right. We can't rely on it for
any particular money. That is what I am afraidis
developing here. The Secretary is--
MR. BUFFINGTON: He doesn't understand that.
MR. BELL: We just can't do that.
MR. ECCLES: We don't want that to take the place
of your May and June financing, that isn't our idea.
MR. BELL: I don't think it should take the place
of either one of them.
MR. ECCLES: No, we never expected it to.
MR. SZYMCZAK: It takes time.
255
- 32 -
MR. ECCLES: The Secretary as he went out of the room
said we have got to discuss whether we have got to do
this next week or the week of the eleventh. Now, Dan,
you are out of money by the twentieth. I think it has
to be done, and I think we have to have two billion to
carry us through to the next financing; and while we
have a large balance going out of June, we are spending
a hundred to a hundred and twenty-five millions & day
above our receipts.
MR. SPROUL: We say you can get that, and whatever
you get with this long term registered bond will be so
much additional, which will--
MR. SZYMCZAK: And you are breaking--
MR. SPROUL: Ease your total.
MR. ECCLES: And you can get ready for your short
registered for June.
MR. WILLIAMS: Dan, the attitude of the banks of
the country which concerns the Secretary, and I think
very properly so, I think, turns on this. Will they be
content to confine their maturities to ten to twelve
year stuff at a rate which related to the maturities, say
two percent? I would think there the problem of earnings
for the bank is taken care of by the volume of the stuff,
because there is going to be enough for everybody by the
time we get through here.
MR. BELL: Well, I don't think they are worried about
the volume. They are going to get plenty. I think what
the banks are going to ask for, at least I am fearful
this is what they are going to ask for, you have given
everybody else a special security. They can come in and
get their money on it any time with certain notice. Now,
you have left us the bag so far as the market is con-
cerned. Now, why can't we get a special security where
we can put it on our books at par?
MR.GOLDENWEISER: That is the very point I wanted to
make. This security doesn't offer - this security that
Regraded Unclassified
256
- 33 -
is proposed in the memorandum doesn't say that it is
redeemable without notice.
MR. BELL: No, but that is just for this particular
financing.
MR. ECCLES: This tap issue.
MR. BELL: You still want the tap issue, as I
understood.
MR. SPROUL: The short-term issue we still recommend,
and that would be a redeemable issue; but the banks are
getting what they want in short-term market issues which
they can buy and sell with anyone, not be confined as
they would be with this redeemable tap issue; and further-
more, they - if they - they know that they have & call
on the Federal Reserve System if they need funds prior to
the maturity of the obligation. They both have a market-
able issue which doesn't--
MR. BELL: You have discarded entirely the long tap?
MR. SPROUL: We have a substitute for it now, and
we still recommend the short tap as part of a comprehensive
program.
MR. BELL: Well, you have relieved my mind a little;
because as we approached it before, I said that I didn't
mind the short tap, and I thought maybe it would produce
some money, but I certainly have always been luke-warm
to this long tap, and I have never been so sure as to
what it would do to the market.
MR. McKEE: That is fine. Then you vote "yes" on
the short tap?
MR. BELL: I didn't say I voted "yes." I said, "I
would go along with it."
MR. ECCLES: Well, Dan, so far as the long tap, we
were interested in accomplishing a financing of a long-term -
Regraded Unclassified
257
- 34 -
a long-term financing outside of the banks.
MR. BELL: We all agree to that. We all agree
that we want to get outside of the banks.
MR. ECCLES: Well, this accomplishes the same thing.
MR. BELL: Let me ask you this. You talk about
this sales program and the drive that the Federal Reserve
with the organization they have could put on. Couldn't
you do the same thing with a two and a half percent market-
able security with no frills or additions?
MR. SPROUL: Sure we could, but then it would go
into the banks as well as to the others--
H.M.JR: It wouldn't if you placed it permanently.
MR. SPROUL: Well, they could buy it in the market.
MR. BELL: No, I am talking about a marketable security,
and banks will take the security that is meant for them,
the two percent. Now, you are going to put on a selling
campaign to sell the long two and a half percent marketable
security, and you are going to sell it to everybody except
banks.
MR. SPROUL: The banks all over the country, I think,
many of them would take the two and & half percent obliga-
tion knowing that they had a demand obligation as far as
we are concerned under present circumstances, and I see
no reason why the Treasury should pay two and a half percent
for bank money under these conditions.
MR. ECCLES: It is demand when you get the market
issue - two and a half market issue is practically a
demand issue today.
MR. SPROUL: I think the only money the Treasury should
pay two and a half percent for is insurance companies' and
other institutional investors' money, where there is some
reason really to subsidize the business because it needs
258
- 35 -
that sort of income to keep going, and it is necessary
to our social order to keep it going, but there is no
reason to pay two and a half percent to banks for bank
credit in these circumstances.
MR. HAAS: What is significance in - the meaning
of "for the present" when you are talking about that
three-eighths rate?
MR. ECCLES: George, you don't want to say--
MR. HAAS: I would like to get a little bit more
the spirit of '76 on that.
MR. MURPHY: He means they will put it down soon.
MR. HAAS: I mean, is that just a temporary--
MR. McKEE: I think it was Ransom, George, that
was speaking about '76. He was reading a circular of
Government debt during the Civil War. What was the
length of it?"he said. It was a period of time. The
interest rate was seven and three-eighths.
MR. SPROUL: Well, as far as I am concerned, I
would be frank with you about that. I think we should
stand at three-eighths of one percent for the present
until we see what the effect of standing at three-eighths
percent as on the distribution of securities at short
term, that we would want to take another look at it
after we had had experience with it, not be committed
to that indefinitely, and that if the rate had to go
higher to accomplish the purpose of getting a wider
distribution outside the principal money centers of
short term securities, then we would want to contemplate
that.
MR. McKEE: Haven't we gone a long distance since
the rate has come up here, George, in speeding this out
in the street, so to speak?
259
- 36 -
MR. HAAS: You have gone a long distance. If it
went any place it had to go outside.
MR. ECCLES: Yes, but they did go out. I mean,
there is an increased buying outside as the rate gets
above a quarter. A quarter of a percent rate just didn't
interest the outside investors. The three-eighths does.
Even now you have had quite 8. considerable amount of out-
side buying of bills, even though you are not quite up
to the three-eighths, and it is our feeling that 8 three-
eighths rate would bring in a considerable amount of the
excess reserves of the banks outside of New York. Certainly
we wouldn't have any - we didn't expect that the three-
eighths rate would be changed unless it was agreeable
to the Treasury that it should be, unless all of the facts
of the situation after discussion and consultation with
the Treasury made it appear to them as well as to us
that there should be a change.
MR. HAAS: My personal opinion is that the three-
eighths and the prospect that this isn't even firm, is
going to change your rate structure even out on the
long end.
MR. BELL: That is what I am afraid of, too.
MR. ECCLES: Well, if we support the long bonds it
isn't.
MR. MURPHY: There is a big difference between a
market that is supported, though, and a market that
stays there, apparently, of its own accord.
MR. ECCLES: You are going to have to have 8. supported
market on this whole picture. Every country has had it,
and you are going to have to get used to it.
MR. MURPHY: I would prefer to not have a - there
is one thing between a market that is mesmerized, and
another thing between a market that has visible props
under each issue.
- 37-
260
MR. McKEE: By purchasing power?
MR. MURPHY: By direct purchasing.
MR. GOLDENWEISER: A reduction in a reserve require-
ment is a pretty visible prop. I can't see why that isn't
as visible a prop and as big a prop as anything you could
put up. I don't think you can get any distinction as
between buying the securities as a visible prop, and
reducing the reserve requirements as an invisible prop.
I don't know that the distinction is a good distinction
anyway, but you certainly can't make it between those
two things.
MR. HAAS: Well, Goldie, before this year is out there
has got to be quite an increase in excess reserves. Are
you going to do it all through open market operations?
MR. SPROUL: Got to be quite an increase in reserves,
not in excess reserves.
MR. HAAS: Oh, I see what you mean. All right.
MR. GOLDENWEISER: You are asking me, George. My
answer is that I wouldn't want to say now what is -
what we have got to do six months from now or nine months
from now. Things are changing too fast. I wouldn't
reduce requirements until we found that there is 8 situation
that requires a major readjustment. I think myself, and
I can speak only for myself, that the reserve requirements
should be used only as a major readjustment at infrequent
intervals.
MR. HAAS: In terms of what the Budget has just recently
been advised, and I thought there was a general feeling
in the Reserve that they wanted a long term program, I
should think the long term program would at least en-
visage - I mean, the expenditure figures as they are now
set forth have just recently been revised, so that you
would - you couldn't look that far ahead, it is obvious.
There are only really two places where the money and the
magnitude as required can come from. That is from -
261
- 38 -
that, of course, is your income which is generally wages
and salaries, and what you can't get out of that has to
come from the banks.
MR. ECCLES: Well, it has to come from corporations,
too, George.
MR. HAAS: Yes. I wasn't counting that. But that
is a minor - in terms of the magnitude of the figures,
Marriner, wouldn't you say it would be minor? I will
take any estimate you want and say, "I agree with you,"
but still the amount is relatively small.
MR. ECCLES: Isn't this true? It is a question, after
all, of the total volume of funds and the velocity of
them, how fast you can - now, the velocity of our deposit
structure is still very low, which shows that there are
a lot of funds that aren't being used. So to the extent
that funds must be supplied by increasing the volume of
funds through banks making the investments, it seems to
me it is pretty difficult to determine until you get a
much greater velocity of existing funds, that we are not
at the present time using anywhere near the funds that
are available and the sho t tap issue would, to my way
of thinking, tap a very large supply of funds, an in-
creasing amount of funds, as corporations are unable -
that is, the non-defense corporations are unable to invest
their depletion and their depreciation reserves and like-
wise the funds that are going to accumulate through the
reduction of inventories. The inventories today of con-
sumer goods are very high and those - and the accounts
are high, and as the accounts are checked and as the
inventories are reduced, which is sure to be the case
due to the reduction in the supply of consumer goods;
funds are going to accumulate and as those funds accumulate
the Treasury ought to get those funds rather than create
new funds, and it was for that reason that we felt that
this short tap issue would meet that problem, and I am
sure that if the banks had a choice of having the short
tap issue put into effect, or increasing reserve requirements
262
- 39 -
so that they could do the financing that we would expect
to be done through the short tap issue, they would prefer
the short tap issue rather than the increase in reserve
requirements which would force them to not only take
what we want them now to take, but take, in addition, funds
that we would like to place outside the banks.
MR. HAAS: Assume, Marriner, all right,you put out
tomorrow the short tap. Still you have got to do some-
thing about the reserve picture and, of course, you wouldn't
do the whole thing in one lick. I wouldn't suggest that.
But something has to be done in the very near future.
Why not do it prior to this financing?
MR. ECCLES: Well, you have got two billion seven
hundred million of excess reserves and we feel if you put
out some bills and if the Federal Reserve operates in
the bill market, that that will meet the situation, at least
for a month or so here. Now, it may well be that it would
be necessary for us to take action on reserves in the course
of several months, and we feel that it would be better to
do it then rather than right now after this anti-inflationary
program has been announced.
(The Secretary returned to the conference.)
MR. HAAS: How about posting a bill rate? That would
be right in line with the anti-inflationary program.
MR. ECCLES: Well, if we go in and buy at three-eighths
it has the same effect.
MR. McKEE: Well, you haven't any fear, George, that
any issue that you put out isn't going to be sold, have
you?
MR. HAAS: Well, I think - that would just be foolish-
ness to allow that to happen.
MR. McKEE: Yes.
MR. HAAS: But I have these fears, that you get rates -
- 40 -
263
well, now for instance, the six months certificate, we
can't use that any more with the present rates. We
couldn't issue another one today, I don't think.
MR. McKEE: Why not?
MR. HAAS: I think it is out of line.
MR. MURPHY: The bill rate went up.
MR. HAAS: The creeping up is what bothers me and
pretty soon it creeps up 80 the long end of your market
becomes untenable.
MR. SPROUL: There is nothing to - at least in the
past record of rates, to indicate that the long market
must become untenable.
MR. ECCLES: The Secretary has suggested that on
account of his throat and this treatment, that we meet
with him again in the morning and this afternoon that
you boys meet with us over at the Fed. Is that agreeable?
MR. SPROUL: I will have to be back in New York
tomorrow.
MR. ECCLES: Afternoon?
MR. SPROUL: Yes.
MR. ECCLES: Can you be here in the morning and take
a plane at noon? It is important. What time this after-
noon, Dan, would be suitable? How would two-thirty do?
MR. BELL: I have got an appointment at two-thirty
but I can break that. Would three be all right?
MR. ECCLES: It would be all right with me. Is that
O.K. with everybody?
MR. SZYMCZAK: And eleven c'clock tomorrow morning?
Regraded Unclassified
- 41 -
264
MR. McKEE: Three this afternoon?
H.M.JR: Shall we do it at three here tomorrow
afternoon? Could you stay over, Bob?
MR. ROUSE: I think it would be better to go home
and come back. I can be here tomorrow at three.
MR. ECCLES: O.K., then.
H.M.JR: I will be frea at three tomorrow afternoon.
MR. ECCLES: How is that for you, Al?
MR. WILLIAMS: All right.
H.M.JR: All right, then.
265
April 28, 1942
TREASURY FINANCING
The magnitude of the war financing program is increasing enormously as we
are successful in the war production program. The most recent budget estimates for
the fiscal year 1943 indicate that expenditures by the Federal Government will be
76 billion dollars instead of 62 billion as was estimated in January. The Federal
debt, taking account of the income from proposed new taxes, will increase by 54
billion dollars instead of 40 billion. Exclusive of sales of war savings bonds at
the hoped for rate of one billion dollars per month, 35 billion dollars will have
to be borrowed from banks and other lenders and investors.
The size of this task alone emphasizes the necessity of adopting a com-
prehensive long range financing program. Yesterday's Presidential message requires
the support of such a program, if monetary policy is to support fiscal policy in
combatting a rise in the cost of living. There is a danger in feeling our way
along without a program; the danger that we shall drift into a program which does
not measure up to the requirements of our situation. The views of various groups
of lenders and investors should be taken into account but they should not control
policy, nor be allowed to delay too long the adoption of a program. Financing a
war of the present magnitude involves a judicious but very substantial amount of
telling the buyer what he is to take, as well as finding out what he wants to buy.
General Principles
1. The program should not be cast in the last war pattern of rising
rates of interest as the war progresses.
2. Maintenance or increase of the present volume of excess reserves
as such in the country outside of New York or in New York is not
necessary to the program and might be detrimental--it would con-
tinue pressure upon banks to invest whereas banks should have
less inducement to invest and others should have more inducement.
3. There is need for an additional amount of short-term Treasury paper,
such as bills and certificates of indebtedness, so that excess
Regraded Unclassified
-2-
266
reserves can be shifted readily from market to market and bank to
bank, through the purchase and sale of these obligations. This
mobility of funds will not be achieved, however, if short-term
rates are BO low as to repel demand for such maturities outside
the principal money markets.
4. Borrowing from non-bank investors must be increased to the fullest
possible extent in order to avoid the inflationary implications of
an unrestrained increase in the volume of bank credit.
5. Borrowing from commercial banks, in so far as it is necessary,
should be for periods not exceeding ten years.
6. Federal Reserve System purchases of Government securities in sub-
stantial amounts will be necessary in order to maintain adequate bank re-
serves, and to facilitate the Treasury's financing program.
Methods
The differences not covered by agreement on principles relate to methods of
putting those principles into effect, and most particularly to methods of selling and
keeping as large a volume of securities as possible outside the banking system.
There are various ways of carrying forward the financing program (exclusive
of War Savings Bonds, etc.), including:
1. Continuance of present method of offerings for general subscription.
2. Periodic offerings of very large issues to be sold by campaign
methods (Canadian program).
3. The Tap Issue Method (British program).
4. A method which combines offerings of special securities available
at all times to investors other than banks, with regular and special
campaign offerings of securities suitable for bank and other invest-
ment (such as the program previously proposed by the Federal Open
Market Committee and the Board of Governors of the Federal Reserve
System).
Whatever method of financing is chosen, and we again recommend the fourth
method, we have now reached a. point where it is imperative that we have an organiza-
tion (separate from the War Savings Bond organization, which is working in a. special
field) available to sell whatever securities are offered; that is, an organization
of the commercial banks, as well as the investment bankers and others, that will
each investors everywhere and sell Government securities. Such an organization
can and should be set up in each Federal Reserve District centering around the
Federal Reserve Bank.
Regraded Unclassified_
-- 3 --
267
There will not be time before the May financing must be decided and
announced to set up the organization for making a comprehensive program effective.
The attempt should be made, however, to have this financing conform, as far as
possible, with the objectives of such a comprehensive program.
Specific Suggestions for May Financing.
1. Issue a 7-9 year 2 per cent bond which will be primarily a bank
investment. Such an issue in the amount of 1 to 1 1/2 billion
dollars could be readily sold.
2. Begin immediately to increase the weekly offering of Treasury bills
from 150 million dollars to 250 million. For the present, the
Federal Reserve System will support the Treasury bill rate firmly
at 3/8 of 1 per cent.
3. Offer a registered 2 1/2 per cent, 20-25 year market bond which
could not be registered in the name of commercial banks for 10
years and which could not be transferred for 60 days. The
amount of this offering need not be fixed, the books could be
left open for as long as desired, and a special canvass of in-
surance companies and other similar investors could be made.
4. Discard all subscription rules. The reasons for these rules
have now disappeared and subscribers should be permitted and
encouraged to subscribe for whatever amount of Government
securities they desire.
The Federal Reserve System in this serious situation must, of course,
do whatever it can to assist in the Treasury's program. It can be of greatest
help if a comprehensive program is now developed. It is ready and willing to
support such a program in whatever ways are necessary by whatever means are at
its disposal. As an immediate guide to its operations the System might under-
take to purchase in the open market a sufficient amount of Government se-
curities to offset future increases in currency in circulation. This in itself
would not constitute a net increase in the amount of available bank credit.
Regraded Unclassified
268
April 28, 1942
1:00 p.m.
HMJr:
Hello.
Operator:
Judge Rosenman.
HMJr:
Right.
Operator:
Go ahead.
HMJr:
Hello. Hello.
Judge
Rosenman:
Hello.
HMJr:
My name is Henry.
R:
Henry.
HMJr:
Yeah.
R:
Can you tell me approximately how many people are
affected in the United States on - by a twenty-
five thousand ceiling? In other words, how
many people, approximately, would have a net
income after payment of taxes of twenty-five
thousand or
HMJr:
No, but I'll try and find out for you.
R:
No, I don't mean the exact, I mean, five hundred
thousand, two hundred
HMJr:
I wouldn't know.
R:
Could you find out?
HMJr:
Sure. How many pages are there in the Sears,
Roebuck catalog?
R:
Yeah. Is that many?
HMJr:
I don't know.
R:
Okay.
HMJr:
How soon do you want to know?
R:
Well, inside of two hours.
Regraded Unclassified
268
April 28, 1942
1:00 p.m.
HMJr:
Hello.
Operator:
Judge Rosenman.
HMJr:
Right.
It
Operator:
Go ahead.
HMJr:
Hello. Hello.
Judge
Rosenman:
Hello.
HMJr:
My name is Henry.
R:
Henry.
HMJr:
Yeah.
R:
Can you tell me approximately how many people are
affected in the United States on - by a twenty-
five thousand ceiling? In other words, how
many peoole, approximately, would have a net
income after payment of taxes of twenty-five
thousand or
HMJr:
No, but I'll try and find out for you.
R:
No, I don't mean the exact, I mean, five hundred
thousand, two hundred
HMJr:
I wouldn't know.
R:
Could you find out?
HMJr:
Sure. How many pages are there in the Sears,
Roebuck catalog?
R:
Yeah. Is that many?
HMJr:
I don't know.
R:
Okay.
HMJr:
How soon do you want to know?
R:
Well, inside of two hours.
269
- 2 -
HMJr:
Oh, hell. We'll either give it to you right
or not at all.
R:
Okay.
HMJr:
What?
R:
Okay.
HMJr:
Sure.
R:
All rightie.
HMJr:
Sure. Is that all you want to know?
R:
That's all right now. There's been no change
on taxes. Anything you got in the speech about
taxes you want changed?
HMJr:
No, I'm - no, I'll leave it - as far as I'm
concerned, I'd say leave it alone. It's a
good speech.
R:
Well, it's been changed a lot. Oh, I'm wrong
when I say that there's no change on taxes.
Where he lists as items
HMJr:
Yeah.
R:
he's changed that number one to read -
you make the change there
HMJr:
Wait a minute. What's it say?
R:
That item number one he's just changed to read -
oh, wait until I get it.
HMJr:
(Talks aside) Tell Chauncey or somebody -
somebody has the President's speech for tonight -
to get it. I don't know who has it. Somebody.
Hello.
R:
Hello.
HMJr:
Yeah.
R:
He's cut the seven points in length.
Regraded Unclassified
270
- 3 -
HMJr:
Yeah.
R:
"One. We must through heavier taxes keep
personal and corporate profits at a low,
reasonable rate.
HMJr:
Yeah.
R:
That's all you're interested in.
HMJr:
Is that all?
R:
And then in five, you know he says - it's
changed. "We must get more billions into
War Bonds."
You don't object to that.
HMJr:
No.
R:
There have been no other changes you're
interested in.
HMJr:
No, that's all right.
R:
Okay.
HMJr:
I'd say that was fine.
R:
All right.
HMJr:
That's fine.
R:
If any more changes come that you're interested
in, I'll call you.
HMJr:
I appreciate it. And I'll do the other thing
right away.
R:
He's thinking of outting in a sentence, "We
will have to tax all tax-exemot Federal
securities."
HMJr:
(Laughs) Go to hell.
R:
Okay.
HMJr:
(Laughs)
271
- 4 -
R:
(Laughs)
HMJr:
Did you get my letter?
R:
No.
HMJr:
It's not fair to pick on me today, Sam.
I've got such a bum throat. I'm low.
R:
Okay. You should be in bed.
HMJr:
It's - I'm not up - - it isn't - it's unfair
sport.
R:
Okay.
HMJr:
(Laughs)
R:
(Laughs) All right.
HMJr:
But I can still laugh.
R:
All right.
HMJr:
All right.
R:
Good-bye.
272
MEMORANDUM
April 28, 1942.
TO:
Judge Rosenman
FROM:
Secretary Morgenthau
In response to your inquiry as to the approximate number of
people who would be affected by limitation of $25,000 yearly income after
Federal income taxes, I wish to advise your
1. In calendar year 1942, under the tax rates proposed by
the Treasury, it is estimated that the number of individuals
or families who would have left more than $25,000, after
Federal income taxes, is as follows:
a. If joint returns are made mandatory, 22,000
b. If joint returns are not made mandatory, 19,000
2. In calendar year 1942, under the rates in the Revenue Act
of 1941, it is estimated that the number of individuals
or families who would have left more than $25,000, after
Federal income taxes, is as follows:
a. If joint returns are made mandatory, 44,000
b. If joint returns are not made mandatory, 38,000
Regraded Unclassified
273
April 28, 1942
3:00 p.m.
SILVER LEGISLATION
Present: Mr. White
Mr. Foley
Mr. Bernard Bernstein
Mr. E. M. Bernstein
Mrs. Klotz
Mr. Henry Morgenthau, III
H.M.JR: I am for abolishing all silver legislation
when I go up there tomorrow.
MR. WHITE: Well, they will certainly do that.
H.M.JR: What are they?
MR. FOLEY: McCarran introduced a resolution--
H.M.JR: A little louder. Just because I talk in a
whisper is no reason for you to.
MR. FOLEY: McCarran introduced a resolution about
a month ago which was referred to this special silver
committee in the Senate to investigate the reasons
relating to the order which OPM put out relating to prefer-
ence ratings for certain mining machinery. I assume that
that is the reason why he wants you to come down there.
H.M.JR: No, he said in view of my statements in the
press.
MR. FOLEY: I see.
H.M.JR: So your assumption is wrong. Start all over
again. I made & statement based on what Harry White told
me a couple. of months ago, that he would have some silver
legislation ready for me if and when I would give him a
hearing. They pressed me, and I said, "Yes, it is being
studied in Harry White's shop." Now I am on the spot.
What did you have, Harry?
Regraded Unclassified
274
- 2 -
MR. WHITE: We are on the spot. We have got a bill
there.
MR. FOLEY: We have got a couple of bills here.
One bill would authorize you to sell silver at thirty-
five cents an ounce, not less than thirty-five cents
an ounce, and it also would permit you to lease or
license the use of silver and it also would permit you
upon such terms and conditions as you prescribed to make
silver available for use in articles or commodities
which are essential to the prosecution of the war and
which are manufactured pursuant to a contract with the
United States. In other words, that would permit you
to give it away.
H.M.JR: And then I could sell it out of stuff
already in the Treasury?
MR. FOLEY: That is right, stuff that is already
here.
H.M.JR: Harry, one of you guys, tomorrow morning
have it on a piece of paper, how much industrial silver
we will use, the rate now as compared with the last two
or three years. That is my whole excuse, see. And
then have something about copper, Harry, when I go up
there tomorrow morning, because we have got so much
shortage of copper and so much use for the silver, and
therefore I feel that we ought to loosen up and let
them buy the newly mined silver. What is it, a hundred
and twenty thousand a year?
MR. WHITE: It hasn't been that, but it may be that
this year.
H.M.JR: Well, have something like that. But that
is no good.
MR. FOLEY: And then it also would suspend the provision
in the Silver Purchase Act which requires you to buy all
newly mined domestic silver at seventy-one cents an ounce.
Regraded Unclassified
375
- 3 -
MR. WHITE: If you raise that point, I don't think
you can quite say what you said unless you say something
else, because if you stop buying domestic silver at
seventy-one cents an ounce, McCarran will come back and
say, "Why, there is a lot of silver that is produced
with this copper and this lead. If we can't get seventy-
one cents an ounce, we will have to stop producing some
of that copper. If
H.M.JR: Now listen, what I was going to do is,
instead of being political and smart, just for a change
I thought I would be honest. You know, just for a change
once in a while. I thought I would say, "Now, look,
gentlemen, I know you are not going to agree with me. I
think the silver legislation has had eight years of trial.
In my opinion, for whatever it is worth, I don't think it
has worked. Therefore, I think it ought to be abolished.
That is my position.'
MR. WHITE: I don't think they will let you get away
with that wholly, because McCarran is bound to say, "Now,
you are interested in saving copper.
H.M.JR: No, supposing I just say that. "I don't
think that during the past eight years we have been able
to prove to my satisfaction that silver is of monetary
value.'
MR. WHITE: Do you think this is a good time, Mr.
Secretary, to curtail the production of such necessary
metals as copper and zino?
H.M.JR: Well, no, but let them pay for what they
need for copper and zinc.
MR. WHITE: And Jesse Jones can do that under authority
which he has. He can pay more for certain copper and zinc
from certain mines or certain lodes than he can for others,
and that is the way to meet that argument. That is Jesse
Jones' problem. That is up to him. He is given authority
to pay as much as he wants.
H.M.JR: The thing that I am afraid of, I have made
this statement now publicly to Vandenberg and all the others.
Regraded Unclassified
276
- 4 -
You fellows think it over. I will simply say, "Gentlemen,
this is the way I feel. I know you don t agree with me,
but this thing has had this time. You-can give me
figures. I mean, we haven't been-able to get up to - what
is it, one-third?
MR. WHITE: One-fourth.
H.M.JR: "And the thing hasn't worked and that is the
way I feel. I know that you won t agree with me, and
if you need the zinc or the copper, Procurement will pay
whatever it is, two cents extra for high-cost copper in
Michigan. We can do it through Procurement, or Mr. Jones
can do it. If we need the extra stuff, we will pay the
extra money. But to keep on buying this thing and so
forth and so on, I think it is just unnecessary subsidy
to a very small segment of the economic part of this
country. That is the way I feel. I am not going to get
excited. I know you people will not agree with me, but
that is the way I feel.
MR. WHITE: I think you could say that and add one
or two more arguments and make it very effective. I think
you might also say that you would like to be able to sell
silver if it is going above thirty-five cents. You just
got a letter from OPA that they are worried about the
rising price of silver and there is no way of stopping it,
because the industrial demand is increasing and the foreign
supply is diminishing, and silver will rise.
H.M.JR: Well, I think I should say something. It is
running at about the rate of a hundred and twenty million
ounces. We produced how much silver in this country?
MR. WHITE: Sixty-five.
H.M.JR: Sixty-five million in this country and sixty
million in Mexico.
MR. WHITE: Seventy-five million.
H.M.JR: And how much in Canada?
Regraded Unclassified
277
- 5 -
MR. WHITE: What is it, about fifteen in Canada?
Twenty-five.
H.M.JR: Now, for every million ounces of silver
that we can substitute for some other things, it releases
that much for bullets.
MR. WHITE: That is right.
H.M.JR: "Now, both from a military standpoint and
an economic standpoint, I can't see any justification,
and that is the way I feel, gentlemen.
MR. WHITE: And it is inflationary too, at this
time. Not much, but for whatever it is worth, it is
inflationary.
H.M.JR: How much is there of gold and silver behind
any dollar?
MR. WhITE: For every ounce of silver that is mined,
you issue seventy-one cents.
H.M.JR: But how much is there behind - there is
over two dollars behind it.
MR. B. BERNSTEIN: There is eleven and a half
millions of currency in circulation. As against that,
you have probably twenty-two and 8. half to twenty-three
billions of gold besides the silver.
H.M.JR: But I mean the last I heard it was two
dollars plus, was how much gold and silver there was
behind every dollar.
MR. B. BERNSTEIN: That is approximately correct.
MR. WHITE: What I had in mind, it is inflationary
in the sense that you issue money for the silver that you
buy. It just takes more money and makes copper worth
that much more.
H.M.JR: You issue a dollar twenty-nine, don't you?
Regraded Unclassified
278
- 6 -
MR. WHITE: You could, but you don't. You issue
only the value of the silver you buy. So you issue
seventy-one cents worth of silver certificates for every
seventy-one cents worth you buy.
H.M.JR: Well, I could say on the inflationary
front, on the economic front, and on the military front,
every one of these fronts, my judgment tells me we should
stop doing this thing. I am going to say, "Gentlemen, I
am not going to get excited about this thing. I am not
going to pull my hair about it one way or the other. I
know you people don't agree with me. I don't expect to
get into an argument. As far as I am concerned, the thing
has had a trial for eight or nine years. It is no more
necessary today than an NYA or CCC camp. They have both
served their purposes in their time, and their time is
past. What?
MR. WHITE: I think that is all right.
H.M.JR: That is a poor comparison.
MR. WHITE: I wouldn't make that comparison, but do
you think that is the way to handle it? They are not
going to agree with it. They are not interested in your
arguments.
H.M.JR: If I begin to compromise, I might just as
well go the whole hog and say, "Gentlemen, I am going
to strike the thing off." If it was left to me, I would.
I am not going to push this thing. I am not excited
about it. There are a lot of other things.
MR. FOLEY: Well, I think if you say that you also
ought to tell them that Nelson is thinking in terms of
repealing the provision in the Silver Purchase Act which
requires you to buy all the newly mined domestic silver,
so that that silver will get into the market.
MR. WHITE: Did Nelson tell you that? If he didn't,
I don't think you should say SO.
MR. FOLEY: His people have talked about it.
Regraded Unclassified
279
- 7 -
H.M.JR: I will say this last move we made on
silver was on the instigation of Nelson's office.
MR. WHITE: It was at their request.
H.M.JR: Instigation.
MR. B. Bernstein: May I be the devil's advocate
with just one more question?
H.M.JR: I would be disappointed if you weren't,
Bernie, but I am getting used to it, and like it.
MR. B. BERNSTEIN: Thank you very much. Supposing
McCarran says, "There is such a shortage of strategic
materials that no manpower is wasted when any metal is
produced; and since silver is being used as though it
were a strategic material, isn't it worth producing it
even if you have to pay seventy-one cents an ounce for it?"
H.M.JR: Oh, I will say, "Why pay seventy-one when
you can get it for thirty-five?
MR. WHITE: Plus what Jones would pay for the by-
products, plus the further fact that the material and the
labor that goes into the the mining of silver should go
into the mining of copper and other materials which are
more necessary, and it won't be wasted if you don't
produce silver.
H.M.JR: He knows I have got an eleven o'clock
appointment. When I sit down I will say, "Now, gentlemen,
please remember I have got an eleven o'clock appointment,
so at a quarter of eleven if this is a heated argument,
please don't think I am running out on you. What do you
think, Edward?
MR. FOLEY: It is all right. We are not going to
recommend anything. We will just have a little talk.
H.M.JR: No. I will just say, "This is the way I
feel. I know you are not going to do anything. I have
made this statement, and that is the way I feel. If you
feel some way else, then don't let's have a hair-pulling
match.
Regraded Unclassified
280
- 8 -
MR. FOLEY: All right, and we haven't got a bill
that we are going to ask to have introduced, and we
are down. not going to ask the President to send anything
H.M.JR: No.
MR. FOLEY: O.K.
H.M.JR: And I think they would be flabbergasted -
what?
MR. WHITE: There is some question about OPA coming
to us again for more bus bars, and we will have soon
reached the limit of free silver. Now, do you want to
mention that or do you want to anticipate coming to them
for further powers or let that go until that occasion
arises?
H.M.JR: We will let them have forty million ounces?
MR. WHITE: Forty thousand tons.
H.M.JR: How much have you got altogether?
MR. WHITE: Well, there is another seventeen. It is
mostly gone, of the free silver. We would have to go into
the silver behind the silver certificates.
MR. FOLEY: What have we got, about eighty of that?
MR. E.M.BERNSTEIN: Eighty-six altogether.
H.M.JR: After we let the free silver go, how much
would we have left?
MR. B. BERNSTEIN: About forty-seven altogether.
H.M.JR: Tons?
MR. WHITE: Thousand tons.
H.M.JR: But I don't think we ought to let that go.
Regraded Unclassified
281
- 9 -
MR. WHITE: There is some difference of opinion
on that. I don't know, if we ever wanted to go to it,
there is another proposal which the lawyers have, and
that is to permit you the authority to use any metal
that you have at all in your coins or behind the silver,
if you see fit, in any way you see fit for the war
effort.
H.M.JR: Well, I think what I will say is this:
"If Mr. Nelson feels he needs something more, I am going
to ask him to come up before you and ask you.
MR. FOLEY: If the shortage of copper and other
metals gets more acute, you might want to ask Congress
for authority to call in the copper pennies and the nickels
and melt them down and put out some kind of a war coin in
lieu of the things that are out now.
H.M.JR: I don't think I am going to say much,
gentlemen. I think I am going to go up there and just be
very quiet like, because they are not going to expect
that and SO forth.
MR. WHITE: I think that is wise, because they have
no intention of being convinced by anything you say.
H.M.JR: I will never forget the first year I was here.
You (Mrs. Klotz) have heard this story. I went to Senator
Ashurst of Arizona. Have you heard me tell this story?
MR. FOLEY: No.
H.M.JR: Have you?
MR. WHITE: No.
H.M.JR: I said, "Look, Senator, I am here and I
come from the East, and I don't understand silver. Why
are you so interested in silver?" He said, "Morgenthau,
I was brought up on my mother's knee on silver, and I
can no more discuss silver with you than you can discuss
your religion with me." And I said, "Senator, thank you
for that very revealing explanation."
Regraded Unclassified
282
- 10 -
MR. WHITE: That explains a lot. The only thing
is, you don't make money out of your religion.
H.M.JR: No, I don't say I do.
MR. WHITE: But they do make it out of their silver.
283
APR 23 1942
Dear Mr. Nalsons
This is in reply to your letter of April 22nd,
enclosing a copy of your latter to Mr. Jesse Jones
on the matter of silver bus bare.
I understand from Mr. Foley that Mr. Jense is
going forward with the arrangements.
Sincerely yours,
(Signed) " Morgenthand and
Secretary of the Treasury.
Mr. Donald M. Helson,
Chairman, Mar Preduction Board,
Washington, D. C.
cc-mm. C. Photojile
By Messenger Bany 100
file wr.white
capies to
4/27/42
Regraded Unclassified
WAR PRODUCTION BOARD
WASHINGTON, D. C.
OFFICE OF
DONALD M. NELSON
April 22, 1942
CHAIRMAN
Dear Mr. Secretary:
This will acknowledge and thank you for your
letter of April 16th together with the enclosures referred
to therein relating to the use of the free silver stocks
of the Treasury in lieu of copper for bus bars and other
purposes. In this connection I have written to Jesse
Jones per the attached copy requesting him to save the
Treasury harmless from any loss of silver resulting from
its conversion and use for war purposes.
I am very anxious that no delay occur in the prompt
use of this silver and therefore hope you will advise me
if you feel that I can be of any further assistance.
Sincerely yours,
Whileren Donald V. Nelson
The Honorable
The Secretary of the Treasury
Attachment
en ENSE
BUY
ENITED
WATER
VINGS
FORDS
Regraded Unclassified
WAR PRODUCTION BOARD
WASHINGTON, D.C.
OFFICE OF
DONALD M. NELSON
April 22, 1942
CHAIRMAN
Dear Mr. Secretary:
This will acknowledge and thank you for your
letter of April 16th together with the enclosures referred
to therein relating to the use of the free silver stocks
of the Treasury in lieu of copper for bus bars and other
purposes. In this connection I have written to Jesse
Jones per the attached copy requesting him to save the
Treasury harmless from any loss of silver resulting from
its conversion and use for war purposes.
I am very anxious that no delay occur in the prompt
use of this silver and therefore hope you will advise me
if you feel that I can be of any further assistance,
Sincerely yours,
Donald M. Nelson
The Honorable
The Secretary of the Treasury
Attachment
ADDRENSE
BUY
ENGTED
MATES
TWOS
Regraded Unclassified
April 22, 1942
Dear Jesse:
I am in receipt of a letter from Henry Forgenthau dated
April 16, 1942, enclosing copies of his recent corresponience with
you on the subject of the substitution of silver for copper for bus
bare and other purposes, In order to save time in this pressing pat-
ter, I an writing you directly and am cending a copy of this letter
to Mr. Morgenthau.
Mr. Morgenthau, in his letter, referred to the fact that
the Treasury Department concluded there was logal authority to permit
the use of the free silver on the basis that it be returned to the
Treasury and that any loss through wear or tear or other reasons be
made good. Mr. Morgenthau states that the Attorney General rendered
an opinion conco. ring in the Treasury's view and that the resident
approved the proposal.
In your letter of April 14th to the Secretary of the Treasury
you suggest that the Defense Plant Corporation should not bear the -
risk of loss involved in its agreeing to return silver of the same
weight and fineness to the Treasury. Any such change from the other
proposal would appear to necessitate further delay, as it would pre-
sumably require a further opinion from the Attorney Genoral, and
possibly another approval from the President.
It is of the utmpst importance that these arrangements be
completed promptly, if ye are to save the copper and not delay the
aluminum and magnesium programs. Accordingly, I request that you,
through the Defense Plant Corporation or any other agency under your
jurisdiction, agree to bear these risks. If for any reason you feel
you do not have the authority to make such an arrangement, please
advise me as promptly as possible.
Sincerely yours,
Donald V. Nelson
The Honorable
The Secretary of Commerce
ee: Secretary of Treasury
LML:ECH:me
Regraded Unclassified
286
APR 28 1942
Gentlement
Attention: L. W. Knoks
Reference is más to my letter of November 19, 1941, enclosing
a form of letter which I approved and which I authorized and 20-
quested you, as fiscal agent of the United States, to write to Banco
de Nexice, S. A., Mexico City, Maxieo, respecting the purchase of
sevly-mined Maximan silver.
It 10 my understanding that Banco de Mexico has advised you
that 10 vishes to remov, for the menth of May, 1942, the
nent provided for by your letter of November 21, 1941, to it. This
is to advise you that you are authorized and requested, as fiscal
agent of the United States, to resev such arrangement for the month
of May, 1942, all as stated is your letter to Banco de Mexico above
nentioned, emergé that during May, 1942, you may purchase sevly-
nined Mexican silver which according to the production date marked
on the have vas produced in Maziee during April, May or June, 1942,
and so to advise Banco de Hextee, and to carry out during such month
the transactions contemplated W your letter of November 21, 1941.
It 10 understood that the terms of the Department's letter to
you of June 19. 1934, regarding the purchase for the account of the
United States of silver, at home or abroad. shall apply to the action
taken by you parsuant to the foregoing, except that the silver pur-
chased parsuant to this amborization need not be of the degrees of
fineness, 02 earry the marks, required for "good delivery" in the
market of the place where the purchase is made or where delivery is
to be taken.
Very truly yours,
(Bigned) B. Morgenthan. JF.
Secretary of the Treasury.
Federal Recerve Bank of New York,
33 Liberty Street,
liev York, N. T.
RH:kma 4/14/42
name
Didnets office
Regraded Unclassified
287
APR 28 1942
Gestlement
Attention: by W. Instea
Reference Le made to w letter of February 28, 1936, enclosing a
form of letter which I approved and which I authorized and requested yea,
as fiscal agent of the United States, to write to the Bank of Canada,
Obsawn, Qatario, Canada, respecting the purchase of newly-mined Considian
silver, and also so of letters of May 13, 1936. November 5. 1936, January
26, 1938, March 29. 1940 and September 14, 1940, is this connection.
It le my understanding that the Bank of Canada has advised you that
11 vishes to renov, for the month of May, 1942, the arrangement pro-
vided for by your letter to it of February 29, 1936 as amended and clari-
fied by your letters of Kag 27, 1936, lloveaber 10. 1936, January 27. 1938,
March 30. 1940 and September 24, 1940. This is to advise you that you are
authorised and requested, as fissel agant of the United States, to TOROV
such affangament for the month of May, 1942, all as stated in your letter
to the Bank of Canada above mentioned, as ensuded and clarified, exsept
that during Hay, 1942, you my purchase nevly-mined Canndian silver which
according to the production date marked en the bare was produced is
Canada during April, May or June, 1942, and so to advice the Bank of
Canada, and to earry out during soah south the transmations contemplated
by your letters of February 29, 1936. May 27. 1936, November 10. 1936,
January 27. 1938, March 30. 1940 and Suptember 24, 1940.
It is understood that the berne of the Department's letter to you of
June 19, 1934. regarding the purchase for the account of the United States
of silver, at have or abroad, shall apply to the action taken by you your
swet to the foregoing, except that the silver purchased pursuant to this
authorization need not be of the degrees of finenses, or carry the mrks,
required for "good delivery* la the market of the place where the purchase
is made or where delivery 10 to be
Very truly yours,
(Signed) H. Morgerthan. 20.
Secretary of the Treasury.
Federal Receive Bank of Bev York,
33 Liberty Street,
liev Tosta, N. T.
Marled hom Dictricts office
n.m.c.
RH1kma 4/15/52
Regraded Unclassified
288
April 28, 1942
3:58 p.m.
HMJr:
Hello.
Secretary
Stimson:
Hello, Henry.
HMJr:
How are you, Henry?
S:
You wrote a letter to me about next Monday,
which I'm trying to accept.
HMJr:
Oh, good.
8:
But it's awfully hard for me to make any sort
of a talk
HMJr:
Oh.
S:
and I'm - I - I'm a little choosey about
my talks. I don't have any ghost writers much.
HMJr:
I see.
S:
But - 80 I'd like to know what to - what the
time is - I mean the length of time, the length
of the thing and the surroundings.
HMJr:
Well, I - well, the surroundings would be my
office, and Mr. Nelson's accepted.
S:
Mr. who?
HMJr:
Nelson - Donald Nelson. Knox is out of town.
He suggested Admiral King. I think he's going
to accept, but he's - I can't reach him - but
his office said they thought he'd talk. And
the idea 1s just to stimulate the purchase of
War Bonds.
S:
How much time
HMJr:
From you?
S:
For me.
HMJr:
oh, five minutes?
289
- 2 -
S:
Well, 18 it - 18 it worth it, that's only
HMJr:
Pardon?
S:
I was wondering whether my contribution in that
length of time would be worthwhile.
HMJr:
Well, I
S:
A little bit longer would be essential to bring
out the point I wanted to bring.
HMJr:
You want - - well, how much time do you want?
S:
I don't know. I don't want any more than the
others have, but I wanted to have enough to
make a point - my point that I found most
effective in the last war when I was snaked
in - - when I came back from the front - - on Liberty
Loan Bonds was - I'm not going to say anything
about the amount of weapons we want
HMJr:
Yes.
S:
I mean, the kind of weapons and things of
that sort; but what I found was counted - woke
up the people
HMJr:
Yeah.
S:
was that the weapons in a war of this kind,
even of the kind then, but much more BO in this
war, meant the saving of life to the American
soldiers.
HMJr:
Yes.
S:
And I say - you put it every - you've got to pay
either a dollar in bonds, or a dollar in blood.
HMJr:
Yeah.
S:
And you - the enemy are going to have their
people protected, and if you're unwilling to
give us the weapons to overcome their defense,
why it means simply that our poor men will
have to do it with their bare hands, and that's
290
- 3 -
why we ask you for more weapons. Well, that's
now - I mean, just in general.
HMJr:
Well, it sounds very good. I sent for Kuhn.
He ought to be here any minute. I can then
ask him what time we go on and how much time
that they ve given us, you see.
S:
But I mean, a mere five minute speech is
HMJr:
Well, how about
S:
I wondered whether it was worthwhile.
HMJr:
Well, how about ten minutes?
S:
Ten minutes could be done, I think.
HMJr:
Well, I'm sure we can arrange ten minutes.
S:
Yes.
HMJr:
I'm sure we can arrange ten minutes.
S:
I mean, in other words, I'm - we're preparing
an army of American boys and I'm - whatever I
say, I'm going to say it for their protection,
and their help in the hardest and most dangerous
and bloodiest task they've ever had.
HMJr:
Well, now, if you'll just hold the wire one
second, I'll ask Kuhn.
He says it's from nine-thirty until ten.
S:
Yes. How many people have got to speak in that
time?
HMJr:
Well, there'd be - the way it is now - I mean,
all I'll do is to introduce - there'd be yourself,
and Nelson, and King.
S:
Yes. Well, I can - I guess I can get it in
easily in that time.
HMJr:
I'd like awfully to have you. Hello.
291
- 4 -
S:
Yes.
HMJr:
I say, I'd like very much to have you.
8:
I appreciate that. Thank you. But I was just
thinking to myself.
HMJr:
Well.....
S:
I think we could probably put in something if
I had seven or eight minutes, something like
that, we'd get it in.
HMJr:
Oh, yes.
S:
But make it ten, if possible.
HMJr:
Yes.
S:
All right. Okay, I'll try to do it then.
HMJr:
Well, can - are you saying yes to me?
S:
I'm saying yes, but it's - (Laughs) - it's a
reluctant, hard yes.
HMJr:
What?
8:
Still I think you're entitled to it. I want
to help you.
HMJr:
Well, it would be most helpful to us. I say
it would be most helpful.
S:
Yes. Well, thank you for that. Yes, I'm glad
that you think that my help will do you any good.
HMJr:
We've got - we have two hook-ups that night.
There are two different radio chaine.
S:
What hour?
HMJr:
Nine-thirty to ten.
S:
Yes, I see.
HMJr:
That's a good time.
292
- 5 -
S:
Yes.
HMJr:
And we're on NBC and then on Mutual.
S:
Yes. And I was just trying - I was just trying
to visualize your whole picture and see how it
would come in.
HMJr:
My picture?
S:
The picture that you presented - that set-up
that you just
HMJr:
Oh.
S:
.....were speaking of.
HMJr:
Well, each man will talk on what 18 closest to
his own heart, you see.
S:
Yes.
HMJr:
And the idea 18 that by having you, we get the
audience and we explain what it means to the
armed forces to have, as you say, the tools they
have to work with and if they're going to have
them, we've got to pay for them.
8:
Yes.
HMJr:
I mean, that's the whole idea; and somebody
like myself can stress - why, I mean, I won't
talk much at all - just introduce; but if I
have a few minutes, I may say something of the
importance of getting it from the man who works
in the munitions plant and 80 that he'll give
us the money rather than spending it on some
luxury.
S:
Yes. What - oh, yes, I see.
HMJr:
You see what I mean?
S:
You mean - yes.
HMJr:
I mean, that if he'll save his money rather than
spending it on a luxury, and lend it to his
293
- 6 -
Government
S:
Yeah.
HMJr:
that we can put it to a great
S:
In other words, the difference - if he'll make
the difference of putting in an investment in
a bond instead of squandering it on a
HMJr:
That's right.
S:
drink, why that's all we're asking him.
HMJr:
That's right.
S:
Well
HMJr:
The President, both in his message to Congress
stressed the bond thing and the objective, if
you would notice - I'm sure you've
S:
I haven't yet read the message.
HMJr:
Well, if you read that, that gives the
S:
The one today, or the one
HMJr: I
The one today - particularly the one to Congress.
S:
Yes.
HMJr:
I mean the one to Congress, because - how should
I say - we gave him a few hints - is that a polite
way of putting it?
S:
Yes.
HMJr:
What?
S:
A very true way, probably.
HMJr:
And he took it and amplified it, and I think if
you would read what he said about War Bonds,
you'd get sort of the keystone, the spirit of
the thing.
S:
Yes.
294
- 7 -
HMJr:
Because he said quite a lot about it.
S:
Yes, I see. That's in the Congress one.
HMJr:
In the Congress.
S:
All right.
HMJr:
Yes.
8:
All right.
HMJr:
Well, I'm delighted.
S:
Well, I want to help you, old man, in this
thing.
HMJr:
Thank you.
S:
Good-bye.
4/28/42
295
Admiral Wilson reported Admiral King will
be out of town until 4/29 - will let HM Jr
know then.
296
APPROVED come
--------
April 25, 1942
of TO:
MR. KUHN
FROM:
THE SECRETARY
Secretary Knox cannot come for the broadcast on
May 4. I asked if it would be all right if we asked
Admiral King and Knox said yes; he would be glad to have
Admiral King go on and I could say 80 to Admiral King.
Su phone can with sky-4/25-
Hill let Haji know-
Broadhast portbared
indefinitely 4/29-
Regraded Unclassified
TREASURY DEPARTMENT
297
INTER OFFICE COMMUNICATION
DATE April 28, 1942
TO
The Secretary of the Treasury
FROM Mr. Houghteling
At your suggestion I recently approached William Green of the
A.F. of L. and Philip Murray of the C.I.O. about getting the help of
field organizers of their staff and of their constituent national unions
to help us promote the participation of their members in Pay Roll Savings
Plans. Both Mr. Green and Mr. Murray agreed cordially to put their
entire staff of organizers at our disposal.
Mr. Green agreed to write the heads of all of his national
unions about this matter and also asked me to consult with Frank Fenton,
Director of
Organization, who has 150 organizers working directly under
his control.
Mr. Murray has a similar group of organizers, directed by Alan
Hayward, who will be available to help the Treasury.
Yesterday I worked out a plan with Mr. Fenton. It involved
dividing the country into four districts, the North Atlantic States,
the Southern States, the Middle West and the Western States. It was
agreed that one member of the War Savings Staff should be in charge of
each district and should have the duty of contacting the organizers at
various central points and explaining the whole program to them. The
Treasury can provide our representatives with schedules by States, show-
ing the companies in each State which have installed Pay Roll Savings
Plans, the number of members participating and the percentage of pay
allotted per participant. Mr. Fenton agreed to appoint one of his chief
organizers for each district to work with our Treasury men -- Mr. Hyatt,
Mr. Barrett, Mr. Dowell, etc. In this way we will have two men responsible for
allocating work to the various A.F. of L. organizers in each district.
These men will ascertáin which of the Pay Roll Savings Plan companies have
labor contracts with A.F. of L. unions. From the result of this, the A.F.
of L. organizers will be asked to get to work on the local A.F. of L.
unions employed in the various plants having Pay Roll Savings Plans, in
order to urge union members to participate in greater numbers and to allot a
larger percentage of their pay. This can be done through forming
committees in the local unions, through union meetings, mass meetings,
individual solicitation, etc. Mr. Fenton stated that he wished to use
the entire organization of the A.F. of L. to vitalize this program among
State Federations, City Central bodies, etc., forming committees every-
where to promote the War Savings Program.
Regraded Unclassified
298
- 2 -
In the case of the railroad unions we already have joint committees
on 150 railroads, with membership representing both management and labor.
We have an average of ten labor men on each railroad committee, all of them
general chairman of railroad unions whose time is paid for by the unions
themselves. Besides these 1500 railroad labor men who are giving a con-
siderable part of their whole time to the War Savings Program we have many
divisional chairmen whose time is paid for by the railroads themselves.
In the case of the C.I.O., Mr. Murray and Mr. Carey have agreed
to a program like that of the A.F. of L. and we hope to follow with the
C.I.O. the same plan outlined in yesterday's discussion with Mr. Fenton.
299
April 28, 1942
My dear Mr. President:
I feel sure that you will be
as pleased as I was on reading these
very unique letters from President Green
to the various officers of the A.F.of L.
I have been assured by the
C.I.O. and the Railroad Brotherhood that
they will do at least as well by us as
the A.F. of L.
Yours sincerely,
(Signed) Henry Morgenthau, Jr.
The President,
The White House.
BY Messenger ss ags.
Regraded Unclassified
300
April 28, 1942
Dear Henry:
I thought you would be inter-
ested in reading these very unique letters
from President Green to the various officers
of the A. F. of L.
I have been assured by the C.I.O.
and the Railroad Brotherhood that they will
do at least as well by us as the A. F. of L.
Yours sincerely,
(Signed) Heary
Hon. Henry A. Wallace,
The Vice President.
n.m.c
Regraded Unclassified
301
April 28, 1942
Dear Harry:
I thought you would be inter-
ested in reading these very unique letters
from President Green to the various of-
ficers of the A. F. of L.
I have been assured by the C.I.O.
and the Railroad Brotherhood that they will
do at least as well by us as the A.F. of L.
Yours sincerely,
(Signed) Heary
Hon. Harry Hopkins,
The White House.
n.m.c.
Regraded Unclassified
302
April 28, 1942
Dear Steve:
I thought you would be interested
in reading these very unique letters from
President Green to the various officers of
the A. F. of L.
I have been assured by the C.I.O.
and the Railroad Brotherhood that they will
do at least as well by us as the A. F. of L.
Yours sincerely,
(Signed) Heary
Hon. Stephen Early,
Secretary to the President,
The White House.
n.m.c.
Regraded Unclassified
303
April 28, 1942
Dear Lauch:
I thought you would be interested
in reading these very unique letters from
President Green to the various officers of
the A. F. of L.
I have been assured by the C.I.O.
and the Railroad Brotherhood that they will
do at least as well by us as the A. F. of L.
Yours sincerely,
(Inimler) H mJc
Dr. Lauchlin Currie,
The White House.
n.m.c.
Regraded Unclassified
304
April 28, 1942
Dear Donald:
I thought you would be inter-
ested in reading these very unique
letters from President Green to the
various officers of the A. F. of L.
I have been assured by the
C.I.O. and the Railread Brotherhood
that they will do at least as well by
us as the A. F. of L.
Yours sincerely,
(Signed) Heard
Mr. Donald Nelson, Chairman
War Production Board,
Washington, D. C.
n.m.c.
Regraded Unclassified
305
April 28, 1942
Dear Harold:
I thought you would be interested
in reading these very unique letters from
President Green to the various officers of
the A. F. of L.
I have been assured by the C.I.O.
and the Railroad Brotherhood that they will
do at least as well by us as the A.F. of L.
Yours sincerely,
(Intisced) Hmg
Hon. Harold W. Smith,
Director of the Budget.
n.m.c.
Regraded Unclassified
306
April 28, 1942
Dear Leon:
I thought you would be interested
in reading these very unique letters from
President Green to the various officers of
the A. F. of L.
I have been assured by the C.I.O.
and the Railroad Brotherhood that they will
do at least as well by us as the A. F. of L.
Yours sincerely,
(Signed) Heary
hon. Leon Henderson,
Office of Price Administration,
Washington, D. C.
n.m.c.
Regraded Unclassified
307
April 28, 1942
Dear Archie:
I thought you would be interested
in reading these very unique letters from
President Green to the various officers of
the A. F. of L.
I have been assured by the C.I.O.
and the Railroad Brotherhood that they will
do at least as well by us as the A.F. of L.
Yours sincerely,
(Signed) Heary
Hon. Archibald MacLeish,
Office of Facts and Figures,
Washington, D. C.
n.m.c
Regraded Unclassified
C.
308
0
P
Y
AMERICAN FEDERATION OF LABOR
April 27, 1942.
To the officers of
National and International Unions.
Dear Sir and Brother:
I enclose a copy of an official communication which
I have sent to the officers of City Central Bodies, State
Federations of Labor and directly affiliated local trade and
federal labor unions.
This communication was prepared and sent to the
organizations named in response to an urgent request made by
Secretary of the Treasury Morgenthau for additional funds to
be used in the prosecution of the war effort
I can assure you that the need is very great and
most urgent. I advised Secretary Morgenthau that in my opinion
an appeal for voluntary contributions such as I have made in
the letter which I am bringing to your attention will bring
better results than would the enactment of compulsory saving
and investment legislation. Labor has always favored voluntary
action and has been uncompromisingly opposed to compulsion.
Will you please supplement the communication I have
sent to these directly affiliated organizations by addressing
a similar communication to the membership of the local unions
chartered by your international organization? I feel sure
that because this voluntary plan providing for the systematic
payroll deduction of ten per cent of earnings for investment
in War Savings Stamps and War Bonds, is reasonable and can be
accepted by the workers, that we can all join in recommending
it.
I will be grateful to you if you will join with me
in this patriotic endeavor for the purpose of meeting the
urgent financial needs of our government in the prosecution
of the war effort.
Very truly yours,
(Signed) William Green
President,
Y.Enclosure.
American Federation of Labor.
C
309
0
P
Y
AMERICAN FEDERATION OF LABOR
April 27, 1942.
To Officers of State Federations of Labor,
City Central Labor Unions and
Directly affiliated Local Unions.
Dear Sirs and Brothers:
Secretary Morgenthau of the United States Treasury
Department is calling upon labor to purchase War Bonds and
War Savings Stamps to the extent of its financial ability.
I am supplementing this call of the Secretary of
the Treasury by appealing to the membership of the American
Federation of Labor to agree to a voluntary payroll deduction
amounting to ten per cent of earnings for investment in War
Bonds and War Savings Stamps. Such action would mean a steady
and systematic investment in War Savings Stamps and Bonds, and
that in turn would mean & systematic and steady income to the
government for the purpose of meeting the heavy war expenses
which the government is forced to incur.
A systematic investment in War Savings Stamps and
War Bonds, as herein suggested, will help to prevent inflation.
Furthermore, it would provide an investment which the workers
will need and can use when the post-war period arrives.
A steady investment of ten per cent of the earnings
of working men and women in War Savings Stamps and War Bonds
would be reasonable and in no way burdensome. It would
represent a savings investment and could not be considered
as a gift. It would be accepted as labor's voluntary
contribution to the war effort.
If all the workers of the nation will voluntarily
agree to a payroll deduction of ten per cent of their earnings
to be invested in War Savings Stamps and War Bonds, the pro-
ceeds will provide an enormous sum of money which the govern-
ment can use in the prosecution of its war effort.
Regraded Unclassified
310
- 2 -
I am influenced to make this appeal and this recom-
mendation because there are those connected with our government
and within the Congress of the United States who favor and are
recommending the enactment of legislation providing for compul-
sory savings and compulsory payroll deductions in order to
provide sufficient funds for the government to meet its
pressing war needs.
Labor favors voluntary action and is against
compulsory action. I feel sure that if labor will respond
and will voluntarily agree to 8. payroll deduction of ten per
cent of earnings, to be invested in War Savings Stamps and
War Bonds, that compulsory savings legislation will be
defeated.
I appeal to the workers to respond favorably to
the recommendations I have herein made for a voluntary ten
per cent payroll deduction for investment in War Bonds and
War Savings Stamps.
The need is urgent. The war effort calls for
service and sacrifice of the highest order. Labor is respond-
ing and has responded in a noble way. I am sure labor will
respond to this appeal as it has responded to other appeals
for support of the government in its war effort, made by the
representatives of the American Federation of Labor.
Very truly yours,
(Signed) William Green
President,
American Federation of Labor.
Regraded Unclassified
311
C
0
P
Y
AMERICAN FEDERATION OF LABOR
April 24, 1942
TO ORGANIZERS OF
AMERICAN FEDERATION OF LABOR
Dear Sir and Brother:
Secretary of the Treasury Morgenthau, Jr., has
appealed to me to render all assistance possible in the sale
of Savings Stamps and Bonds. As you well know, the cost of
the war is very great. In order to meet this cost a regular
and steady income from the sale of Savings Stamps and Bonds
must flow into the Treasury of the United States. This money
is needed in order to win the war.
In order to accelerate the purchase of Savings
Stamps and Bonds among the membership of organized labor, I
am requesting that you assist in this work to the extent of
your ability. Please call upon the membership of organized
abor whenever opportunity presents itself for you to do so
to purchase Savings Stamps and Bonds regularly in order to
help our Government win the war. Urge the workers to agree to
payroll deductions with their employers of at least 10% of their
earnings each pay, said amount to be used to purchase Savings
Stamps and Bonds.
This action will serve as a guarantee against
inflation and at the same time will enable the workers to save
money which they will, no doubt, badly need when the post-war
period arrives.
The Congress of the United States is threatening
the enactment of legislation which would provide for compulsory
payroll deductions. We are opposing this form of compulsion.
Instead we are recommending that a payroll deduction plan of
10% of the earnings of the workers be put into effect as a
voluntary plan. I am confident if this plan is universally
applied and is put into effect that we can head off and prevent
the enactment of compulsory payroll legislation.
Regraded Unclassified
312
- 2 -
Please specialize in this work. Do it in
addition to your regular organizing work. Appeal to our
workers to agree upon and put into effect the 10% payroll
deduction plan for the purchase of Savings Stamps and Bonds.
I count upon you to render special valuable service in this
particular matter which I am bringing to your attention in
this communication. I will be grateful to you if you will
do SO.
Fraternally yours,
(Signed) William Green
President,
American Federation of Labor
April 24, 1942
ds
Regraded Unclassified
313
APR 28 1942
Dear Bab:
I want you to know that General A. H.
Carter, in charge of the Administrative
Division, and his representatives were very
helpful in changing the War Department
directive covering the accountability for
pay roll deductions made by corporations
under cost-plus-a-fixed-fee contracts with
the Government.
I appreciate the good and fast work
which they did in this connection and I have
taken the liberty of writing directly to
General Carter to thank him and his represen-
tatives for their part in it.
Sincerely yours,
(Signed) H. Norgenthau. in
Secretary of the Treasury
Honorable Robert P. Patterson,
Under Secretary of War,
War Department,
By Messenger Sungis 12:20
Washington, D. C.
DWB:NLE
n.m.e. copies To Thompson
4/28/42
Regraded Unclassified
314
LORD & THOMAS
Advertising
247 PARK AVENUE, NEW YORK
April 28, 1942
The Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Dear Mr. Secretary:
I spoke with Mr. Gamble today and was
sorry to hear that you aren't feeling so well.
I sincerely hope you will be back at your desk
soon and feeling well above par.
Meanwhile, I have prepared a device
to be used in the advertisements which I think
will do much to put across the quota idea in all
communities, and do it locally.
Mr. Gamble told me he would speak to
you on your return and arrange for our next meet-
ing. I look forward to seeing you again.
Very truly yours
WJW/hs
W. J. Weir
Regraded Unclassified
315
April 28, 1942
My dear Henry:
Thank you so much for sending me the
copy of the letter and leaflet uring the
purchase of War Savings Bonds.
May I congratulate you on your
program?
Sincerely yours,
hances Smkins
The Honorable Henry Morgenthau
Secretary of the Treasury
Washington, D. C.
AYS VUS 53 VW B 22
316
treasury department
FISCAL SERVICE
BUREAU OF ACCOUNTS
WASHINGTON
OFFICE OF THE COMMISSIONER
April 28, 1942.
TO MISS CHAUNCEY:
Further reference is made to your inquiry of April 21
concerning the newspaper clipping captioned "WPA Worker Loses
Job When He Buys War Bonds," and to my memorandum of that date
stating that Mr. Brummett, Assistant Commissioner of the Work
Prejects Administration, had advised that the case was a misin-
terpretation of the regulations issued by the Work Projects Ad-
ministration. Mr. Brummett also advised that the employee would
be reinstated and that a definite interpretation of the regulation
would be sent out pertaining to the purchase of War Savings Bonds.
There is enclosed a copy of Employment Letter No. 34
of the Work Projects Administration which is self-explanatory,
and which also takes care of the re-employment of the worker
mentioned in the clipping.
Pumacured K. W. Maxwell,
Assistant Commissioner of Accounts.
Enclosure
FORDEFENSE
BUY
UNITED
STATES
SAVINGS
BONDS
ARG STAMPS
Regraded Unclassified
317
FEDERAL WORKS AGENCY
WORK PROJECTS ADMINISTRATION
A4293
1734 NEW YORK AVENUE NW.
WASHINGTON, D.C.
HOWARD o. HUNTER
COMMISSIONER OF work PROJECTS
April 16, 1942
Employment Letter No. 34
TO:
All State Work Projects /dministrators
SUBJECT: Eligibility of Persons who own Dofense Bonds
or Stamps
In determining need for employment and continued
employment on projects of this Administration, defense
bonds and/or stamps (hereafter to be known as War Savings Bonds
and Stamps) owned by the applicant shall not be considered.
Referral agencies should be instructed regarding this policy.
Workers who, during the review of need, have had their certifi-
cation cancelled because they owned har Savings Bonds and/or
Stamps, should be recertified by local offices of this /dminis-
tration if they reapply for employment.
mJ Millen
Malcolm J. Miller
Assistant Commissioner
318
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
APR 28 1942
TO Secretary Morgenthau
FROM Mr. Haas M.
1. The attached tables present data showing
(1) the number of agents qualified to issue War
Savings Bonds, Series E, as of the close of business
on April 25, classified by type of agent according
to Federal Reserve Districts and (2) the number of
issuing agents on selected dates since May 7, 1941.
2. Excluding post offices, agents qualified
to issue Series E Savings Bonds numbered 21,287 on
April 25, 164 more than on April 18.
3. Corporations qualified to issue Series E
Savings Bonds on payroll allotment plans totaled
1,223 on April 25, an increase of 113 since
April 18.
Attachments
Number of agents qualified to issue Series E
Savings Bonds, May 7, 1941
to date
:
1941
:
1942
: May : Sept. : Jan. : Feb. : March : April : April
: 7
: 30
:
31
:
28
: 28
: 18
: 25
Commercial and savings banks
7,676
11,571
14,097
14,240
14,331
14,383
14,394
Building and loan associations
739
1,481
2,434
2,560
2,632
2,662
2,675
Credit unions
8
389
2,080
2,479
2,695
2,765
2,791
Other corporations 1/
-
-
351
686
931
1,110
1,223
Investment Industry
-
-
37
63
66
67
69
All others
7
27
99
137
135
136
135
Total other than post offices
8,430
13,468
19,098
20,165
20,790
21,123
21,287
Post offices
15,812
16,429
17,123
17,928
18,208
18,361
18,361
Grand total
24,242
29,897
36,221
38,093
38,998
39,484
39,648
Office of the Secretary of the Treasury,
April 28, 1942
Division of Research and Statistics.
1/ In accordance with telegram of December 27, 1941.
319
Regraded Uncle
Classification of the
unl/
of agents qualified to
issue Series E Savings Bonds on April 25, 1942
:
:Building:
:
:
:
:
:
= and
:
: Other : Invest-
:
All
: Banks
: loan
Credit
:
:
:corpora-:
ment
: others
: Total
:
:associa-:
unions
: tions :industry :
=
:
: tions :
:
:
:
:
Corporations and associations:
Federal Reserve District of:
Boston
837
253
231
82
1
14
1,418
New York
1,166
258
433
214
18
68
2,157
Philadelphia
862
116
126
231
-
-
1,335
Cleveland
1,190
395
354
73
8
2
2,022
Richmond
1,029
196
151
50
8
1
1,435
Atlanta
1,032
168
197
30
-
-
1,427
Chicago
2,382
488
289
338
19
28
3,544
St. Louis
1,414
169
83
59
7
1
1,733
Minneapolis
1,282
62
86
11
-
3
1,444
Kansas City
1,790
195.
225
28
2
6
2,246
Dallas
864
131
253
64
3
9
1,324
San Francisco
546
244
363
43
3
3
1,202
Subtotal
14,394
2,675
2,791
1,223
69
135
21,287
Post offices
-
-
-
-
-
-
18,361
Grand total
14,394
2,675
2,791
1,223
69
135
39,648
Office of the Secretary of the Treasury,
Division of Research and Statistics.
April 28, 1942
In accordance with telegram of December 27, 1941.
Except post offices.
320
Regraded Uncla
UNITED STATES SAVINGS BONDS
Daily Sales - April, 1942
On Basis of Issue Price
(In thousands of dollars)
Post Office
Bank Bond Sales
All Bond Sales
Date
Bond Sales
Series I
Series E
Series I
Series G
Total
Series E
Series 7
Series G
Total
April 1942
1
$ 2,476
$ 10,517
$ 2,380
$ 9,608
$ 22,504
$ 12,993
$ 2,380
$ 9,608
$ 24,980
2
2,999
8,264
2,119
7,570
17,953
11,263
2,119
7,570
20,953
3
3,222
7,572
1,185
6,235
14,992
10,794
1,185
6,235
18,214
4
2,778
9,292
1,387
5,334
16,013
12,070
1,387
5,334
18,790
6
4,961
13,035
2,329
8,027
23,391
17,996
2,329
8,027
28,352
7
2,958
5,722
834
8,983
15,539
8,680
834
8,983
18,497
8
2,309
9,610
1,142
6,562
17,314
11,919
1,142
6,562
19,623
9
2,906
9,304
955
5,715
15,974
12,210
955
5.715
15,880
10
2,730
8,052
1,573
5,261
14,885
10,782
1,573
5,261
17,615
11
2,150
5,224
668
2,720
8,613
7,374
668
2,720
10,762
13
4,619
17,572
2,432
8,604
28,609
22,192
2,432
8,604
33,228
14
2,513
6,152
1,076
3,333
10,561
8,665
1,076
3,333
13,074
15
2,584
5,102
1,251
5,374
11,728
7,686
1,251
5,374
14,312
16
3,472
10,008
1,400
7,773
19,180
13,480
1,400
7,773
22,652
17
2,690
8,076
850
3,695
12,621
10,766
850
3,695
15,311
18
3,111
7,175
948
3,303
11,426
10,286
948
3,303
14,537
20
5,252
13,334
2,227
9,001
24,562
18,586
2,227
9,001
29,814
21
2,517
6,845
977
3,703
11,525
9,362
977
3,703
14,042
22
2,925
9,112
1,925
6,793
17,830
12,037
1,925
6,793
20,755
23
3,101
9,403
1,805
5,928
17,136
12,504
1,805
5,928
20,237
24
3,451
10,981
1,721
5,694
18,396
14,431
1,721
5,694
21,846
25
2,616
8,704
1,327
4,552
14,583
11,321
1,327
4,552
17,200
27
5,317
15,721
2,313
7.971
26,004
21,038
2,313
7,971
31,321
Total
$ 73,657
$214,777
$ 34,825
$141,736
$391,338
$288,434
$ 34,825
$141,736
$464,995
Office of the Secretary of the Treasury, Division of Research and Statistics.
April 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 Unclas
322
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Comparative Statement of Sales During
First Twenty-three Business Days of April, March and February 1942
(April 1-27, March 1-27, February 1=27)
On Basis of Issue Price
(Amounts in thousands of dollars)
:
:
Amount of Increase
:
Percentage of Increase
Sales
:
:
or Decrease (-)
:
or Decrease (-)
Item
:
:
:
: April
:
March
:
April
:
March
: April
:
March
: February
:
over
:
over
:
over
:
over
:
:
:
:
March
:
February
:
March
:
February
Series E 1- - Post Offices
$ 73,657
$ 76,736
$ 84,361
-$ 3,079
-$ 7,625
- 4.0%
- 9.0%
Series 1- E Banks
214,777
226,272
301,631
- 11,495
- 75,359
- 5.1
- 25.0
Series 1- Total
288,434
303,008
385,992
- 14,574
- 82,984
- 4.8
- 21.5
Series 1- Banks
34,825
37,154
50,310
- 2,329
- 13,156
- 6.3
- 26.1
Series G - Banks
141,736
162,053
244,819
- 20,317
- 82,766
- 12.5
- 33.8
Total
$464,995
$502,215
$681,121
-$ 37,220
-$178,906
- 7.4%
- 26.3%
Office of the Secretary of the Treasury, Division of Research and Statistics.
April 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 Unclassifie
323
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE April 28, 1942.
TO
Secretary Morgenthau
FROM Mr. Shaeffer C.P.
U. V. Wilcox, Washington correspondent of the AMERICAN
BANKER, has been "tipped off" by his parent office that
three major changes in the Administration are imminent.
His information 18 to the effect that Secretary
Morgenthau will replace Ambassador Winant at the Court of
St. James, and Winant would replace Madame Perkins as
Secretary of Labor. Governor Lehman would then be drafted
as Secretary of the Treasury.
Wilcox was informed these changes would occur before
"the middle of the year".
I am passing it along for your information.
324
MEMORANDUM
April 28, 1942.
TO:
The Secretary
FROM:
Commissioner Helvering and Mr. Sullivan
We submit the following procedure to be followed in the inves-
tigation of the income and excess profits tax returns of the 350 corpora-
tions having the majority of war contracts, and those corporations con-
structing the principle Army cantonments and Navy bases:
1. Select from this number those cases with patent irregulari-
ties.
2. Order immediate investigation.
3. In the absence of evidence of criminal fraud, revenue agent
immediately upon completion of his investigation will notify
the taxpayer of the proposed adjustments, give taxpayer a
copy of the agent's report, and request taxpayer's explana-
tion forthwith.
4. Agent will then transmit his report, together with taxpayer's
explanation to Washington.
5. The Bureau of Internal Revenue will immediately review agent's
report and taxpayer's explanation and the Commissioner will
advise the Secretary as to his views on the proposed deficiency.
6. Presentation of the case to the Joint Tax Committee.
7. If fraud is present to such a degree as to warrant a criminal
prosecution, special Intelligence agents should interrogate
corporate officials and employees immediately after the field
investigation is made and before presentation of the case to
the Joint Tax Committee.
They Offelving
Ths
Regraded Unclassified
325
BOARD OF ECONOMIC WARFARE
ECONOMIC DEFENSE BOARD
WASHINGTON, D.C.
OFFICE OF THE CHAIRMAN
April 28, 1942
The Honorable,
The Secretary of the Treasury.
Dear Henry:
Beginning May 7, & meeting of the Board of
Economic Warfare will be held every other Thursday at
10:00 a.m. at my office in the Capitol.
At the meeting on May 7, the subject for dis-
cussion will be ways and means of cooperating with the
South American Republics in ridding those Republics of.
Axis influences.
It is my hope that these regular meetings will
increase the effectiveness of our work.
Sincerely yours,
sfaw allace
4-30-42
H. A. Wallace
sicy says he will attend
with white
White advised
Vice Presidents office notified
LOVE
laws Ved sa VW 15 do
1 received E
E.g.7.
326
APR 22 1942
Dear Mr. Perkins:
I an in receipt of a letter, dated
April 16, 1942, from the Vice President,
outlining an interia procedure for obtain-
ing background material with e view toward
discharging the responsibilities centralized
in the Board of Economic Warfare by Executive
Order 9126.
In accordance with your Directive No. 1,
transmitted by the Vice President, I an des-
ignating Mr. Clifton Mack, Director of the
Procurement Division, to serve as clearance
officer for the Treasury.
Sincerely yours,
(Signed) H. Horgenthaus JR,
Secretary of the Treasury
Hr. Milo Perkins,
Executive Director,
Board of Economic Warfare,
Washington, D. C.
cc.n.m.c.
"-ceyton mack
Hompon
WLU:as
By Messenger Bandy 5:10
4/17/42
327
FIFTH DRAFT
ADDRESS OF THE PRESIDENT
APRIL 28, 1942
It 1a nearly five months since in true Nasi style DO
were attacked at Pearl Harbor. For the two years prior to that
attack this country had been gearing itself up to a high level of
production of nunitions. Yet our war efforts had done little to
dislocate the normal lives of most of us.
We have dispatched strong forces of our Army and Navy
to bases and bettle fronts thousands of miles from home, and e
have stepped up our war production on & scale that has tested our
industrial power and our engineering genius and our economic structure
to the utmost. We 010 this with our eyes open; we did it knowing
that the fulfillment of our objectives would be felt in every home
throughout the land. We have had no illusions about the fact that
this would be a tough job, and & long one.
American war ships are now in combet in the North and
South Atlantic, in the Aretic, in the Mediterranean, and in the
North and South Pacific. American troops have taken stations in
South America, Greenland, Iceland, the British Isles, the Near East,
Regraded Unclassified
328
FIFTH DRAFT
- 2 -
the Middle East, the Far East, the Continent of Australia, and the
sany Islands of the Pacific. American war planes manned by Americans
are flying in actual combat over all the continents and all the
oceans.
On the European front the most important development of
the past year has been the crushing offensive on the part of the
great armies of Russia against the powerful German army. These
Russian forces have destroyed and are destroying more armed power
of our enemies -- troops, planes, tanks, guns and other munitions
of war -- than dl the other United Nations put together.
In the Mediterranean area, matters remain, on the sur-
face, very much as they were. But the situation here is receiving
very careful attention.
Very recently we have received news of a change in
government in what we knew as the Republic of France - a name
dear to the hearts of all lovers of liberty -- a name and an
institution which we hope will soon be restored to full dignity.
Throughout the Nasi occupation of France, we have hoped
for the maintenance of a French Government which would strive to
regain independence to reestablish the principles of "Liberty,
Regraded Unclassified
329
FIFTH DRAFT
- 3 -
Equality and Fraternity" and resume the historic culture of France.
However, the known character of those who have recently come to
power can mean only that a determined attempt will be made to
force the brave French people to complete surrender to the Nazi
despotism.
The United Nations will take measures, if necessary, to
prevent the use of French territory in any part of the world for
silitary purposes by the Axis powers. The good people of France,
wherever they may be, will readily understand that such action
is essential for the United Nations in preventing assistance to
the armies or navies or air forces of Germany, Italy and Japan.
The overwhelming majority of the French people understand that
the fight of the United Nations is their fight, that victory for
the United Nations means the restoration of a free and independent
France -- and the saving of France from the subjection and the
slavery which would be imposed upon her by her own enemies and
her own traitors.
We know how the French people really feel. We know
because they tell us by their heroic actions in defiance of Hitler
and his Gestapo. They do all in their power to slow up work, to
Regraded Unclassified
330
FIFTH DRAFT
- 4
sabotage production in their factories which have been perverted
to the service of the Nasi war machine. They cheer the R.A.F.
when these factories are bombed. They will have occasion to
cheer our own American Flying Fortresses and Liberators when
we have joined in force with the Britishlover the darkened conti-
nent of Europe.
The same holds true of all the occupied countries.
In Norway, Belgium, The Netherlands, Poland, Czecho-Slovakia,
Jugoslavia and Greece there are men, women and even little
children who have never stopped fighting, never stopped resist-
ing, never stopped proving to the Nazis that their so-called
"New Order" can never be enforced upon free peoples.
In the German and Italian peoples themselves there
is & growing conviction that the cause of Nazism and Fascism
13 hopeless -- that their political and military leaders have
led them along the bitter road which leads not to world conquest
but to final defeat. They cannot fail to contrast the present
defensive speeches of these loaders with their arrogant boastings
of & year ago, and two years ago.
Regraded Unclassified
331
FIFTH DRAFT
- 5 -
On the other side of the world, in the Far East, we
have passed through a phase of serious losses.
We have inevitably lost control of a large portion of
the Philippine Islands. But this whole nation pays tribute to
the Filipino and American officers and men who held out so long
on Bataan Peninsula, to those grim and gallant fighters who still
hold Corregidor, and to the forces who are still striking effectively
at the enemy on Mindanao and other islands.
The Malayan Peninsula and Singapore are in the hands of
the enemy; the Netherlands East Indies are almost entirely occupied,
though resistance there continues. Many other Islands are in the
possession of the Japanese. But there is good reason to believe
that their southward advance has been checked and that Australia,
liew Zealand and the Islands along our lines of communication will
be held, and will be bases for offensive action.
The Japanese are pressing their northward advance in
Burna with considerable power, driving toward India and China. They
have been opposed with great bravery by small British and Chinese
forces, aided by American fliers.
Regraded Unclassified
332
FIFTH DRAFT
- 6 -
The news in Burna tonight is not good. The Japanese
my cut the Burma Road; but I want to say to the gallant people
of China that no matter what advances the Japanese may make,
ways will be found to deliver airplanes and munitions of war
to the armies of the Generalissimo Chiang Kai-shek.
We remember that the Chinese people were the first to
stand up and fight against the aggressors in this war; and in the
future an unconquerable China will play its proper role in main-
taining peace and prosperity not only in Eastern Asia but in the
whole world.
For every advance that the Japanese have made since
they started their frenzied career of conquest, they have had to
pay a very heavy toll in warships, in transports, in planes and
in men. They are feeling the effects of those losses. The in-
evitable results of the ambition and the greed of the Japanese
Army-Navy oligarchy are being brought home to the Japanese people.
It is even reported from Japan that somebody has dropped
bombs on Tokyo and on other principal centers of Japanese war
industries. If this be true, it is the first time in history that
Japan has suffered such indignities.
Regraded Unclassified
333
FIFTH DRAFT
- 7 -
Although the treacherous attack on Pearl Harbor was
found
the immediate cause of our entry into the war that event funnt
the American people spiritually prepared for war on a world-wide
scale. We went into this war fighting. We know what we are fight-
ing for. We realize that the war has become what Hitler originally
proclaimed it to be a total war.
Nor all of us will have the privilege of fighting our
enemies in distant parts of the world.
Not all of us will have the privilege of working in a
munitions factory or shipyard, or on the farms or in oil fields
or mines, producing the weapons or the raw materials which are
needed by our armed forces.
But there is one front and one battle where everyone
in the United States - every man, woman, and child -- is in
action and will be privileged to remain in action for the duration.
That front is right here at home, in our daily lives and in our
daily tasks. Here at home everyone will have the privilege of
making whatever self-denial is necessary, not only to supply our
fighting men, but to keep the economic structure of our country
fortified and secure during the war and after the war.
This will require the abandonment not only of luxuries
Regraded Unclassified
334
but - other creature conforts.
Brery leyal insrican is care of bis individual responsi-
bility. themever I hear engree saying - American people are
complacent - they need to be aroused", I feel like asking his
to come to Washington and read the mail that floods into the
White House and into all departments of this government. the
one question that recure through all these thousands of letters
and wessages is street more can I do to help my country in
winning this was?
To build the factories, and buy the materials, and
pay the labor, and provide the transportation, and equip the
feed and house the seldiers, sailers and marines, and to 60
all the thousands of things necessary in a was - all cost
money, nore many then has ever been spent by any nation at
say time in the history of the world.
" are - spending, solely for was purposes, the -
of about - Immired million dollars every day in the week.
But, before this year 10 over, that almost unbelisvable rate
of odpenditure will be very nearly deubled.
All of this may has to be spent - and spent quiskly -
if w are to produce within the time new svailable the enserves
quantities of weapons of war which - need. But the spending
Regraded Unclassified
335
I I process of s I I @ I %
national commany.
then your Government continues to spend there unpress-
dented - of usery for var materials - month w month, and
year by year, it ness that nare and more money will be finding
its way into the posketbooks and bank accounts of nearly every
civilian in the United states. st the same time that this is
going on, the supply of goods in the United States, which you
and I night ordinarily bay, to buing constantly reduced. Is
is being reduced because - materials must be taken away from
civilian use ad put into was uses because machinery and factories
must be converted to war production by the Governments because
our normal sources of supply from countries abroad are eut
down by easy action.
You do not have to be a Professor of Economics to ⑉
that when people have enough ready cash to buy all the goods
they want but the supply of goods is limited, the people begin
to bie against each other and the price of the goods good up.
Testerday I submitted w the Congrees of the United
States a coven point program of general principles which
together could be called the mational esensuis policy for
Regraded Unclassified
336
attaining the great objective of keeping the cost of living dom.
I repeat then nove
1. the met tax heavily, and in that process
keep personal of corporate profits at a reason-
able rate, the word *reasonable* being defined
at a low lovel.
2. the wast fix coilings en the prises which
consumers, retailers, sholeselers and -
facturers pay for the things they buys and
coilings on rents for dwellings in all areas
affected by was industries.
3. the must stabilise the remmeration received
by individuals for their work.
4. We must stabilize the prices received w
groners for the products of their lands.
5. We must encourage all eitizens to contri-
trube to the cost of winning this war by yur-
chasing for Bonds with their earnings instead
of using these cornings to by articles which
1 &
Regraded Unclassified
337
FIFTH DRAFT
- 11 -
6. We must ration all essential commodities
of which there is a scarcity, so that they may
be distributed fairly among consumers and not
mercly in accordance with financial ability to
pay high prices for them.
7. We must discourage credit and instalment buy-
ing, and encourage the paying off of debts, mort-
gages, and other obligations; for this promotes
savings, retards excessive buying and adds to the
amount available to the creditor for the purchase
of War Bonds.
I do not think it is necessary to repeat what I said
yesterday to the Congress in discussing these general principles.
The important thing to remember is that each one of these
points is dependent on the others if the whole program is to work.
There are those who say that the only thing necessary is
to freeze all prices. There are others who say that the only
thing necessary is to freeze wages. There are others who say
that the only thing necessary is to increase taxes. But none of
these alone would be enough. The only effective course of action
is a simultaneous attack on all of these problems in one comprehensive,
Regraded Unclassified
338
$
all-embracing program - stued at was prince, profits, taxes,
and control of consumer buying - credit.
the blumt fact is that every single person in the United
States is going to be affected by this program. Some of you
will be affected more directly w one or two of these №
strictive masures, but all of you will be affected indirectly
by all of them.
Are you a business me, w do you om stock in &
business corporation? Your profits are going to be out down
to a reasonably low level w texation. Your income will be
subject to higher taxes. Indeed in these days, when every
available dollar should go to the war effort, X do not
think that my American citizen should have a not income in
excess of $25,000 per year after payment of texes.
Are you a retailer w a wholesaler or & numbersaturer
or a former or a londlord? Coilings are being placed an
the prices at which you can sell your goods or rent your
Do you work for wages? You will have to forego higher
wages for your particular job for the charation of the was.
There may be exceptional circumstances where injustices
Regraded Unclassified
339
ZIPIN_DRAVE
&
Transfer 1 setus I I other a & I
All of us are used to spending many for things - west
which are not absolutely cosential. we will all have to forego
that spending.
Because we - put every dine and every dollar
we ean possibly spare out of - eernings into War
I I 1
Because the domate of the was effort require
the retioning of good of which there is not enough
s 1 &
Because the stepping of purchases of -
,
essentials will release thousands of workers who
are needed in the vap effort.
This great our offort must be carried through to its
victorious conclusion by the indonitable will and determination
not
of the people. It must/be impoded by the faint of heart. It
must not be impeded by those who put their own selfish interests
above the interests of the nation. It must not be impeded by
the begus patriots who use the secred freedom of the press to
cobe the sentiments of the prepagandistsin Tokyo and Berlin.
Regraded Unclassified
340
FIFTH DRAFT
- 24 -
And, above all, it shall not be imporilled by the handful
of noisy traiters - the betrayers of America and of Christianity
itself - the would-be dictaters who in their hearts and souls
have yielded to Hitlerism and would have this reyublic do likewise.
I shall use all of the executive power that I have to
carry out the policy laid down. If it becauses necessary to ask
for any additional legislation in order to attain our objective
of preventing a spiral in the cost of living, I shall do so.
I know the American former, the American workman, the
American business man. I knew that for freedom's sake they will
stop at nothing. I know that this economy of sacrifice they will
sladly embrace - satisfied that it is necessary for the most visal
and compelling notive in their lives - winning through to vistory.
Never in the memory of man has there been a war in which
the courage, the endurence and the leyalty of civilians played so
ital a part.
Many thousands of civilians all over the world have been
and are being killed or mixed w enery action.
Regraded Unclassified
340
VIFTH DRAFT
- 14 -
And, above all, 12 shall not be imperilled by the handful
of noisy traitors - the betrayers of America and of Christianity
itself - the would-be dictaters who in their hearts and souls
have yielded to Hitlerism and would have this republic do likewise.
I shall use all of the executive power that I have to
carry out the policy laid com. If it becomes necessary to ask
for any additional legislation in order to attain our objective
of preventing a spiral in the cost of living, I shall do so.
I know the American farmer, the American workman, the
American business man. I know that for freedom's sake they will
stop at nothing. I know that this economy of saerifice they will
gladly embrace -- satisfied that it is necessary for the most vital
and compelling notive in their lives - winning through to victory.
Never in the memory of man has there been a war in which
the courage, the endurance and the leyalty of civilians played so
ital a part.
Many thousands of civilians all over the world have been
And are being killed or mained by enemy action.
Regraded Unclassified
341
FIFTH DRAFT
- 15 -
Our own American civilien population is now relatively
safe from such disasters. And, to an over increasing extent,
our soldiers, sailors and marines are fighting with great
bravery and great skill on far distant fronts to make sure
that we shall remain safe.
Regraded Unclassified
342
HOLD FOR RELEASE
HOLD FOR RELEASE
HOLD FOR RELEASE
April 28, 1942
CAUTION: The following address of the President MUST BE HELD IN
CONFIDENCE until released.
NOTE:
Release to editions of all newspapers appearing on the
streets NOT EARLIER THAN 10:00 P.M., E.C.T., 4pril 28, 1942.
The same release of the text of the address also applies to radio
announcers and news commentators.
OARE MUST BE EXERCISED TO PREVENT PREMATURE FUBLICATION.
STEPHEN EARLY
Secretary to the President
It is nearly five months since we were attacked at
Pearl Harbor. For the two years prior to that attack this
country had been gearing itself up to a high level of
production of munitions. Yet our war efforts had done
little to dislocate the normal lives of most of us.
Since then we have dispatched strong forces of our
Army and Navy to bases and battle-fronts thousands of miles
from home. He have stepped up our war production on a
scale that is testing our industrial power and our
engineering genius and our economic structure to the
utmost. no have had no illusions about the fact that
this would be a tough job - and & long one.
American warships are now in combat in the North
and South Atlantic, in the Arctic, in the kediterranean,
and in the North and South Pacific. American troops have
taken stations in South America, Greenland, Iceland,
the British Isles, the Bear East, the Middle Last, the Far
cast, the Continent of Australia, and many islands of the
Pacific. American war planes, manned by Americans, are
flying in actual combat over all the continents and all the
oceans.
On the European front the most important development
of the past year has been the crushing ffensive on the
part of the great armies of Russia against the powerful
German army. These Russian forces have destroyed and are
destroying more armed power of our enemies - troops, planes,
tanks and guns - than all the other United Nations put
together.
In the Mediterranean area, matters remain, on the
surface much as they were. But the situation there is
receiving very careful attention.
Recently we have received news of a change in
government in what we used to know as the Republic of
France -- a name dear to the hearts of all lovers of
liberty - a name and an institution which we hope will
soon be rostored to full dignity.
Throughout the Nazi occupation of France, we
have hoped for the maintenance of a French Government
which would strive to regain independence, to reestablish
the principles of "Liberty, Equality and Fraturnity",
and to restore the historic culture of france. Our
policy has been consistent from the very beginning.
However, we are now concerned lost those who have
recently come to power may seek to force the brave
French people to submission to Nazi despotism.
Regraded Unclassified
343
- 2 -
The United Nations will take measures, if neces-
sary, to prevent the use of French territory in.any part of
the world for military purposes by the Axia powers. The good
people of France will readily understand that such action 18
essential for the United Nations to prevent assistance to
the armies or navies or air forces of Germany, Italy and
Japan. The overwhelming majority of the French people under-
stand that the fight of the United Nations 1s fundamentally
their fight, that our victory means the restoration of B. free
and independent France -- and the saving of France from the
slavery which would be imposed upon her by her external enemies
and her internal traitors,
We know how the French people really feel. We know
that a doop-seated determination to obstruct every atep in the
Axis plan extends from occupied France through Vichy France
to the people of their colonies in every ocean and on every
continent.
Our planes are helping in the defense of French
colonies today, and soon American Flying Fortresses will be
fighting for the liberation of the darkened continent of
Europe.
In all the occupied countries there are mon, women
and even little children who have nover stopped fighting,
never stopped resisting, never stopped proving to the Nazia
that their so-called "New Order" can never be enforced upon
free peoples.
In the German and Italian peoples themselves there
1a a growing conviction that the cause of Naziom and Fascism
18 hopeless -- that thoir political and military leaders have
led them along the bitter road which leads not to world con-
quest but to final defeat. They cannot fail to contrast the
present frantic speeches of these leadors with their arrogant
boastings of a year ago, and two years ago.
On the other side of the world, in the Far East, ve
have passed through a phase of serious losses.
We have inevitably lost control of a largo portion of
the Philippine Islands. But this whole nation pays tributo to
tho Filipino and American officers and men who held out 80 long
on Bataan Poninsula, to those grim and gallant fighters who
still hold Corregidor, end to the forces which are still strik-
ing effectively at the enomy on Mindanao and other islands.
The Malayan Peninsula and Singapore are in the hands
of the enemy; the Netherlands East Indies are almost entirely
occupied, though resistance there continues, Many other islands
are in the possession of the Japanese. But there is good roason
to believe that their southward advance has been checked.
Australia, New Zealend and much other territory will be bases
for offensive action -- and wo are determined that the territory
which has been lost will be regained.
The Japanese are pressing their northward advance in
Burma with considerable power, driving toward India and China.
They have been opposed with great bravery by small British and
Chinese forces aided by American fliers.
The news in Burma tonight 1a not good. The Japanese
may out the Burma Road; but I want to say to the gallant people
of China that no matter what advances the Japanese may make, ways
will be found to deliver airplance and munitions of war to the
armies of Goneralissimo Chiang Kai-shek.
Regraded Unclassified
- 3 -
344
We remember that the Chinese people were the first
to stand up and fight against the aggressors in this war;
and in the future an unconquerable China will play its
in Eastern Asia but in the whole world.
proper role in maintaining peace and prosperity not only
For every advance that the Japanese have made since
they started their frenzied career of conquest, they have
had to pay a very heavy toll in warships, in transports,
in planes and in men. They are feeling the effects of
those losses.
It is even reported from Japan that somebody has
dropped bombs on Tokyo and on other principal centers of
Japanese war industries. If this be true, it is the first
time in history that Japan has suffered such indignities.
Although the treacherous attack on Pearl Harbor
was the immediate cause of our entry into the war, that
event found the American people spiritually prepared for
war on a world-wide scale. We went into this war fighting.
We know what we are fighting for. We realize that the
war has become what Hitler originally proclaimed it to
be -- a total war.
Not all of us can have the privilege of fighting our
enemies in distant parts of the world.
Not all of us can have the privilege of working in
a munitions factory or shipyard, or on the farms or in oil
fields or mines, producing the weapons or the raw materials
which are needed by our armed forces.
But there is one front and one battle where everyone
in the United States -- every man, woman, and child -- is
in action, and will be privileged to remain in action
throughout this war. That front is right here at home, in
our daily lives and in our daily tasks. Here at home
everyone will have the privilege of making whatover self-
denial is necessary, not only to supply our fighting men,
but to keep the economic structure of our country fortified
and secure during the war and after the war.
This will require the abandonment not only of
luxuries but many other creature comforts.
Every loyal American is aware of his individual
responsibility. Whenever I hear anyone saying "The American
people are complacent - they need to be aroused", I feel
like asking him to come to Wushington and read the mail that
floods into the White House and into all departments of this
government. The one question that recurs through all these
thousands of letters and messages is "What more can I do
to help my country in winning this war"?
To build the factories, and buy the materials, and
pay the labor, and provide the transportation, and equip
and feed and house the soldiers, sailors and marines, and
to do all the thousands of things necessary in a war --
all cost money, more money than has ever been spent by
any nation at any time in the history of the world.
We are now spending, solely for war purposes, the
sum of about one hundred million dollars every day in the
week. But, before this year is over, that almost un-
believable rate of expenditure will be doubled.
All of this money has to be spent -- and spent
quickly if Wu are to produce within the time now avail-
able the enormous quantities of weapons of war which we need.
But the spending of these tremendous sums presents grave danger
of disaster to our national economy.
Regraded Unclassified
345
- 4
When your Government continues to spend these
unprecedented sums for munitions month by month and year
by year, that money goes into the pocketbooks and bank
accounts of the people of the United States. At the same
time raw materials and many manuf actured goods are necessarily
taken away from civilian use; and machinery and factories
are being converted to war production.
You do not have to be a professor of economics to
see that if people with plenty of cash start bidding against
each other for scarce goods, the price of them goes up.
Yesterday I submitted to the Congress of the United
States a seven point program of general principles which
together could be called the national economic policy for
attaining the great objective of keeping the cost of living
down.
I repeat them now in substance:
1. We must, through heavier taxes, keep
personal and corporate profits at a low
reasonable rate.
2. We must fix ceilings on prices and rents.
3. we must stabilize wages.
4. we must stabilize farm prices.
5. We must put more billions into war Bonds.
6. he must ration all essential commodities
which are scarce.
7. We must discourage instalment buying, and
encourage paying off debts and mortgages.
I do not think it is necessary to repeat what 1 said
yesterday to the Congress in discussing these general
principles.
The important thing to remember is that each one of
these points is dependent on the others if the whole program
is to work.
Some people are already taking the position that
every one of the seven points is correct except the one
point which steps on their own individual toes. A few scem
very willing to approve self-denial - on the part of their
neighbors. The only effective course of action is a
simultaneous attack on all of the factors which increase
the cost of living, in one comprehensive, all-embracing
program covering prices, profits, wages, taxes and debts.
The blunt fact is that every single person in the
United States is going to be affected by this program.
Some of you will be affected more directly by one or two
of these restrictive measures, but all of you will be
affected indirectly by, all of them.
Are you a business man, or do you own stock in a
business corporation? Your profits are going to be cut
down to a reasonably low level by taxation. Your income
will be subject to higher taxes. Indeed in these days, when
every available dollar should go to the war effort, I do not
think that any American citizen should have a net income
in excess of $25,000 per year after payment of taxes.
Regraded Unclassified
346
5 -
Are you a retailer or a wholesaler or a manufacturer
or a farmer or a landlord? Ceilings are being placed on the
prices at which you can sell your goods or rent your property.
Do you work for wages? You will have to forego
higher wages for your particular Job for the duration of the
war,
All of us are used to spending money for things ve
want but which are not absolutely essential. We will all have
to forego that spending. Because ve must put every dimo and
every dollar ve can possibly spare out of our earnings into
War Bonds and Stamps. Bocause the domands of the war effort
require the rationing of goods of which there is not enough to
go around. Because the stopping of purchases of non-essentials
will release thousands of workers who are needed in the var
effort,
An I told the Congress yesterday, "sacrifice" 10 not
the proper word with which to describe this program of self-
denial. When, at the end of this great struggle we shall have
saved our free way of life, we shall have made no "sacrifice".
The price for civilization must be paid in hard work
and sorrow and blood. The price is not too high. If you doubt
it, ask those millions who live today under the tyranny of
Hitlerism.
Ask the workers of France and Norway, whipped to
labor by the lash, whother the stabilization of vages 18 too
great & "sacrifice".
Ask the farmors of Poland and Denmark, of Czechoslovakia
and France, looted of their livestock, starving while their own
crops are stolen from their land, whother "parity" prices are
too great a "sacrifice".
Ask the business mon of Europe, whose enterprises have
been stolen from their owners, whether the limitation of profits
and personal incomes 18 too great B. "sacrifice".
Ask the womon and children whom Hitlor is starving
whether the rationing of tires and gasoline and sugar in too great
& "sacrifice".
We do not have to ask thom. They have alroady given us
their agonized answers.
This great war effort must be carried through to its
victorious conclusion by the indomitable will and determination
of the people.
It must not be impedod by the faint of heart.
It must not be impeded by those who put their own selfish
interests above the interests of the nation.
It must not be impeded by those who pervert honest
criticism into falsification of fact,
It must not be impeded by self-styled oxperts either
in economics or military problems who know neither true figures
nor geography itself.
It must not be impeded by a few bogus patriots who use
the sacred freedom of the press to echo the sentiments of the
propagandiste in Tokyo and Borlin.
And, above all, it shall not be imperiled by the hand-
ful of noisy traitors betrayers of America and of Christianity
itself -- would-be dictators who in their hearts and soule have
yiolded to Hitlerium and would have this Republic do likewise.
Regraded Unclassified
347
- 6 -
I shall use all of the exocutive power that I have
to carry out the policy laid don. If it becomes necessary
to ask for any additional legislation in order to attain
our objective of preventing a spiral in the cost of living,
I shall do 50.
I know the American farmer, the American workman,
the American business man. I know that they will gladly
embrace this economy of sacrifice -- satisfied that it is
necessary for the most vital and compelling motive in all
their lives -- winning through to victory.
Never in the memory of man has there been a war in
which the courage, the endurance and the loyalty of civilians
played so vital a part.
Many thousands of civilians all over the world have
been and are being killed or maimed by enemy action. Indeed,
it was the fortitude of the common people of Britain under
fire which enabled that islano to stand and prevented Hitl er
from winning the war in 1940. The ruins of London and
Coventry and other cities are today the proudest monuments
to British heroism.
Our own American civilian population is now relatively
safe from such disasters. And, to an ever increasing extent,
our soldiers, sallors and marines are fighting with great
bravery and great skill on far distant fronts to make sure
that we shall remain safe.
I should like to tell you one or two stories about
the men we have in our armed forces:
There is, for instance, Dr. Corydon K. Wassell. He
was a missionary, well known for his good works in China.
He is a simple, modest, retiring man, nearly sixty years old,
but hu entered the service of his country and was commissioned
a Lieutenant Commander in the Navy.
Dr. Massell was assigned to duty in Java caring for
wounded officers and men of the cruisers Houston and Marblehead
which had been in heavy action in the Java seas.
When the Japanese advanced across the island, it was
decided to evacuate as many as possible of the wounded to
Australia. But about twolve of the men Wefe so badly wounded
that they could not be moved. Dr. Wassell remained with
these men, knowing that he would be captured by the enemy.
But he decided to make a despurate attempt to get the
mun out of Java. He asked each of them if he wished to
take the chance, and every one agreed.
He first had to get the twelvo men to the Seá coast --
fifty miles away. To do this, he had to improvise strutchers
for the hazardous journey. The men were suffering severely,
but Dr. Nassell kept them alive by his skill, and inspired
thum by his own courage.
As the official report said, Dr. Wassell was
"almost like a Christ-like shopherd devoted to his flook".
On the Soa coast, ho embarked the men on a little
Dutch ship. They were bombed and machine-gunned by waves
of Japanese planus. Dr. Wassell took virtual command of
the ship, and by great skill avoided destruction, hiding in
small bays and inlets.
A few days later, Dr. Wassell and his little flock
of wounded men reached Australia safuly.
Regraded Unclassified
348
- 7 -
Dr. Wassell now wears the Navy Cross,
Another story concerns a ship rather than an indi-
vidual man.
You may remember the tragic sinking of the submarine
SQUALUS off the New England coast in the summer of 1939. Some
of the crew were lost, but others were saved by the speed and
efficiency of the surface rescue crews, The SQUALUS itealf
vas tediously raised from the bottom of the ocean.
Eventually she sailed again under e new name, the
U.S.S. SAILFISH. Today, she 1e B. potent and effective unit of
our submarine fleet.
The SAILFISH has covered many thousands of miles in
operations in the far western Pacific.
She has sunk & Japanese destroyer.
She has torpedoed a Japanese cruiser.
She has made two torpedo hits on B. Japanese aircraft
carrier.
Three of the enlisted mon of our Navy who went down
with the SQUALUS in 1939 are today serving on the samo ship,
the SAILFISE, in this war.
It is heartening to know that the SQUALUS, once given
up as lost, rose from the depths to fight for our country in
time of peril.
One more story, which I heard only this morning:
This is a story of one of our Army Flying Fortresses
operating in the Western Pacific. The pilot of this plane 1s
a modest young man, proud of his crew for one of the toughost
fights a bomber has yet experienced.
The bomber departed from its base, as part of B. flight
of five, to attack Japanese transports which were landing troops
in the Philippines. When they had gone about half way to their
destination, one of the motors of this bomber went out of com-
mission. The young pilot lost contact with the other bombers.
The crow, however, got the motor working again and the plane
proceeded on its mission alone.
By the time it arrived at its target the other four
Flying Fortresses had already passed over, had dropped their
bombs, and had stirred up the Japanese "Zero" planos. Eighteen
of them attacked our one Flying Fortress. Despite this mase
attack, our plane proceeded on its mission, and dropped all of
its bombs on six Japanese transporte which were lined up along
the docks,
As it turned back on its homeward journey a running
fight between the bomber and the eighteen Japanose pursuit planes
continued for seventy-five miles. Four pursuit ships attacked
similtaneously at each side, and were shot down with the side
guns. During this fight, the bomber's radio operator vas killed,
the engineer's right hand vas shot off, end one gunner vas
crippled, leaving only one man available to operate both side
manned both sido guns, bringing down three more Japanese "Zoro"
guns. Although wounded in one hand, this gunner alternately
planes. While this vas going on, one engine on the bomber vas
shot out, ono gas tank ves hit, the radio vas shot off, end the
oxygen system vas entirely destroyed. Out of eleven control
cables all but four were shot away. The rear landing wheel vas
blown off, and the two front wheels were both shot flat.
Regraded Unclassified
349
- 8 -
The fight continued until the remaining Japanese
pursuit ships exhausted their ammunition and turned back.
With two engines gone and the plane practically out of con-
trol, the American bomber returned to its base after dark and
made an emergency landing. The mission had been accomplished.
The name of that pilot 1s Captain Howitt T. Wheless,
of the United States Army. He comes from Menard, Texas --
population 2,375. Ho has been awarded the Distinguished
Service Cross. I hope he is listening.
These stories I have told you are not exceptional.
They are typical examples of individual heroism and skill.
As we here at home contemplate our own duties, our
own responsibilities, let us think and think hard of the ex-
ample which is being sot for us by our fighting mon.
Our soldiers and sailors are members of well dis-
ciplined units. But they are still and forever individuals --
free individuals. They are farmers, workers, business men,
professional mon, artists, clerks.
They are the United States of America.
That 18 why they fight.
We too are the United States of America.
That 1s why we must work and sacrifice.
It is for them. It 18 for us. It 1s for victory.
350
April 28, 1942
Dear Admiral Land:
I am sending you herewith a Daston's memo
confidential Treasury memorandum listing of 4/07-
vessels at fourteen ports as of April 24.
Yours sincerely,
(Signed) a. Morgenthaus 12.
Rear Admiral Emory S. Land,
Chairman, II.S. Maritime Commission.
n.m.c.
By Measenger Bundy 3:40
Regraded Unclassified
- -
351
April 28, 1942
Dear Lew:
I an sending you herewith a con-
fidential Treasury memorandum listing vessels
at fourteen ports as of April 24.
Yours sincerely,
(Signed) Heary
Mr. Lewis Douglas,
U.S. Maritime Commission,
Washington, D. C.
n.m.c.
By Measenser Burry 3:40
352
APR 28 1942
My dear Mr. President:
I am enclosing report on our exports
to come selected countries for the period
ending April 10, 1942.
Faithfully,
(Signed) 1. Morgenthan. in
Secretary of the Treasury
The President,
The white House.
Enclosure.
copies to Dr. w hitis office
n.m.c.
By Messenger Saugh 5.20
RDWISS
4/27/42
Ret to Sicy's office
Regraded Unclassified
353
APR 28 1942
My dear Mr. Secretary:
I an enclosing copy of report on our
exports to some selected countries for the
period ending April 10, 1942.
Sincerely yours,
(Signed) H. Morgenthau, In:
Secretary of the Treasury
The Honorable,
The Secretary of State,
Washington, D. c.
Enclosure
copiests Dr.W n.m.c. Lite office
By Messenger Bundy 3:40
#DWimen
4/27/42
Res to Seeijo office
Regraded Unclassified
354
APR 28 1942
My dear Colonel Donovan:
I as enclosing copy of report on our
exports to some selected countries for the
period ending April 10, 1942.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
Colonel william J. Donovan,
Coordinator,
Office of Coordinator of Information,
01d National Institute of Health Building,
25th and E Streets, N. W.,
washington, D. c.
Enclosure.
copies n.m.c. to Drw hites office
By Messenger Bundy 3:40
HDW:meh
4/27/42
Ret to Secip office
Regraded Unclassified
355
APR 88 1942
My dear Mr. Perkins:
I an enclosing five copies of the
report on our exports to some selected
countries for the period ending April 10,
1942.
Sincerely yours,
(Signed) H. Morgenthau. Jr.
Secretary of the Treasury
Mr. Milo Perkins,
Executive Director,
Board of Economic Warfare,
Room 3710,
Department of Commerce Building,
washington, D. c.
Enclosures.
n.m.c. copies had offer
By Messenger Bundy 3:40
HDV:meb
4/27/42
Ret to Leey's office
Regraded Unclassified
356
April 25, 1942
Exports to Russie, Free China, Suree and other blocked
countries, as reported to the Treasury Department
during the 10-day period ending April 10, 1942.
1. Exports to Russia
Exports to Russia, AS reported to the Treasury during
the period ending April 10, 1942 amounted to more than
$51,000,000. Motor trucks, military tanks and landplanes
were the principal items. (see Appendix C.)
2. Exports to Free Chima and Burea
Exports to Free China during the period under review
amounted to about $4,800,000. Landplanes were the principal
items. (See Appendix 0.)
Exports to Burne amounted to $447,000. (See Appendix 5.)
3. Exports to France
No exports to France were reported during the period
under review.
4. Exports to other blooked countries
Exports to other blocked countries are given in Appendix A.
Nost important were exports to Sweden and Portugal amounting to
$1,572,000 and $1,077,000, respectively.
Regraded Unclassified
357
STRICTLY CONFIDENTIAL
NOT FOR PUBLICATION
SUBMARY OF UNITED STATES
DOMESTIC EXPORTS to SELMOTED COUNTRIES
AS REPORTED TO THE TREASURY DEPARTMENT
FROM EXPORT DECLARATIONS RECEIVED
DURING THE PERIOD INDICATED 2
July 28, 1941 to April 10, 1942.
(In thousands of dellars)
July 28
to
Period ended
Period ended
Total
March 20
Hereb n
April 10
Describe Importe
U. s. s. Re
$236,748
8 42,435
$ 51,698
$ 330,681
Proo China
60,693
2
4,836
65,591
Jurns 2/
11,108
=
447
11,597
France v
6
-
-
6
Occupied France
2
-
-
2
Incceupied France
as
-
-
28
Spain
2,833
s/
12
2,845
Switzerland
7,406
273
11
7,690
Sweden
13,855
2,045
1,572
17,472
Portugal
6,933
476
1,077
8,488
French North Africa w
6,283
-
-
6,263
Treasury Department, Division of Nonetary Research
April 29, 1942.
1/ Many of the emport declarations are received with a lag of several days or sere.
Therefore this compilation does not securately represent the actual shipment of
a particular week. The longer the period covered, the closer will these figures
come to Department of Commerce revised figures.
2/ From September 11, 1941 to date - it is presented that a large persentage of
naterial listed here, consigned to Burna, is destined for Free China.
2/ Includes both Occupied end Unscrupted France through work ending Ostober hp 1941.
Desupied and Unecexpied Prance separated thereafter.
w Includes Nercess, Algeria and Turisia,
s/ Less them $500.
Mirl 4/23/42
Regraded Unclassified
APPENDIX B
358
Exports from the U. 5. to Free Chima, Burne and
U.S S.R. " reported to the Treasury Department
July 28, 1941 - April 10, 1942
(Thousends of Dollars)
Exports to
Exports to
Exports to
Free China
Burna 3/
U.S.S.R.
July 28 - Aug. 2
395
4,523
Aug. 4 - Aug. 2
-
Aug. 11 - Aug. 16
309
322
Aug. 18 - Aug. 23
2
2,735
Aug. 25 - Aug. 30
1
1,023
Sept. 2 - Sept. 6
204
4,280
Sept. 8 - Sept.13
2,281
5,217
Sept.15 - Sept.20
3,822
752
Sept.22 - Sept.27
110
449
2,333
Sept.29 - Oct. 4
1,225
684
323
Oct. 6 - Oct. 11
5,312
1,157
6,845
Oct. 13 - Oct. 16
5
35
1,924
Oct. 20 - Oct. 25
269
403
5,623
Det. 27 - Nov. 1
4,772
58
4,484
Nov. 3 - Nov. 8
1,672
342
4,552
Nov. 10 - Nov. 15
2,851
88
2,677
Nov. 17 - Nov. 22
1,228
1,021
3,581
Nov. 24 - Nov. 29
3,239
1,364
2,436
A0. 1 - Dec. 6
791
64
3,609
Dec. e - Dee. 13
2,337
18
12,040
Dec. 15 - Dee. 20
111
a
4,580
Dec. 22 - Dec. n
1
196
1,829
Dec. 29 - Jan. 3
35
2
3,993
Jan. 5 - Jan. 10
91
1,073
8,247
Jan. 12 - Jan. 17
1,695
447
5,874
Jan. 19 - Jan. 24
-
-
3,885
Jan. 26 - Jam. 31
6,938
923
9,601
Feb. 1 - Feb. 10
4,889
1,054
13,315
Feb. 10 - reb. 20
4,853
583
26,174
Feb. 20 - Feb. 28
s/
2,921
-
28,119
Mar. 1 - Mar. 10
2,879
23
32,509
Mar. 10 - Mar. 20
5,058
3
28,556
Mar. 20 - Mar. 31 s/
3
2
42,435
Apr. 1 - Apr. 10
4,836
447
51,698
Total
68,134
10,444
331,316
1. These figures are in part taken from sopies of shipping manifests.
2. Figures for exports to Free China during these weeks include exports
to Rangoom which are presumed to be destined for Free China.
3. It is presused that a large persentage of exports to Burna are
destined for Free China.
4.
Beginning with February 1 figures will be given for 10-day period
instead of week except where otherwise indiented.
5. M-day period.
" 11-day period.
Treasury Department, Division of Monetary Research
April 25, 194
Regraded Unclassified
359
APPENDIX C
Principal Exports from U. s. to U. s. S. R.
as reported to the Treasury Department
during the ten-day period ending
April 10, 1942
y
(Thousands of Dolbrs)
TOTAL EXPORTS
s 51,69€
Principal Items:
Motor trucks
7,919
Military tanks - medium
4,782
Dried egg products
3,599
Landplanes, pursuit, interceptor and fighter
3,538
Bausage canned
2,732
Pork canned
1,909
Lard
1,446
Insulated copper wire
1,311
Brass and bronze plates and sheets
1,221
Sugar, refined
1,149
Metallie cartridges
1,134
Landplanes, bombardment
1,050
Hilitary tanks - light
1,045
Steel bers
836
Brace and bronze fabrications for munitions
814
Armor plate
768
Tin plate and taggers tin
750
Explosive shells and projectiles
748
Iron and steel strip
710
Ziene boots and shoes
699
Jole leather
690
Treasury Department, Division of Monetary Research
April 25, 1942
Regraded Unclassified
360
APPENDIX D
Principal Exports from U. S. to Free China
as reported to the Treasury Department
during the ton-day period ending
April 10, 1942
(Thousends of Dellars)
TOTAL EXPORTS
$ 4,836
Principal Items:
Landplanes, pursuit, interceptors, fighter
1,259
Aircraft parts and accessories, n.e.s.
559
Other ammunition
470
Smokeless powder
442
Motor trucks
254
Metallie cartridges
236
Iron and steel bare
198
Industrial chemicals
192
Printed matter
140
Shot shells
115
Treasury Department, Division of Nonetary Research
April 25. 1942
Regraded Unclassified
361
APPENDIX g
Principal Exports from U. 5. to Burne
as reported to the Treasury Department
during the ten-day period ending
April 10, 1942
(Thousands of Dollars)
TOTAL EXPORTS
# 447
Principal Items:
Motor trucks
445
Alloy steel sheets
2
Treasury Department, Division of Monetary Research
April 25, 1942
inf/efu
4/25/42
Regraded Unclassified
362
TREASURY department
INTER OFFICE COMMUNICATION
DATE April 2B, 1942
TO
Secretary Morgenthau
FROM
Mr. Hass
Subject: The Export Freight Situation.
Lighterage freight in storage and on hand for unloading
at New York decreased by 46 cars during the past week to
20,539 cars. (See Chart 1.) Rail storage space occupied
at the end of the week amounted to 12,086 cars, while addi-
tional storage space was available for 8,013 cars.
Exports from New York decreased by an estimated 253 cars
to 7,209 cars. (See Chart 2, upper section.) Receipts for
export at New York decreased by 344 cars to 7,167 cars.
(Chart 2, lower section.)
Receipts of export freight at 9 North Atlantic ports
and at 6 Pacific ports also showed declines, dropping by
217 and 102 cars to 3,787 and 3,048 cars, respectively.
(Refer to Chart 2, lower section.)
Regraded Unclassified
LIGHTERAGE FREIGHT IN STORAGE
AND ON HAND FOR UNLOADING IN NEW YORK HARBOR*
1941
1942
CARLOADS
CARLOADS
Thousands
Thousands
24
24
22
22
20
20
18
18
16
16
14
14
12
12
10
10
8
8
JAN.
MAR.
MAY
JULY
SEPT
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
1941
1942
363
Chart 1
* Largety export freight, but about 10% represents freight for local
and cosstel shipment. Figures exclude erain.
Office of the Secretary of the Trass)
- of - and Helder
C-303-0
Regraded Unclass
EXPORT FREIGHT MOVEMENT
1941
1942
CARLOADS
CARLOADS
Thousands
Thousands
Exports
10
10
9
9
6
e
From New York®
7
7
6
6
1
5
mm/
5
4
4
3
3
2
2
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
1941
1942
CARLOADS
CARLOADS
Thousands
Thousands
Receipts for Export
10
10
9
9
8
8
At New York*
7
7
6
6
5
5
4
4
At 9 other North
Atlantic Ports "
3
3
2
2
I
I
At 6 Pocific Ports .
.
o
o
JAM.
MAR.
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
SEPT
NOV.
364
1941
1942
Chart 2
e As estimated from date of general managers' association of New York.
e e Association of American Refiresds.
Office of the Bentery of the Trumpy
- of - at Made
C-MR-B
Regraded Unclassifie
365
TREASURY DEPARTMENT
OFFICE or THE SUGGERANT
April 28, 1942
COMPIEMITIAL
Received this date from the Federal Recerve
Bank of New York, for the confidential informa-
tion of the Secretary of the Treasury, compila-
tiem for the week ended April 15. 1942, showing
dollar disbursements out of the Brittsh Empire
and French accounts at this bank and the means
w which these expenditures were financed.
A
lap-4/28/42
Regraded Unclassified
366
C
0
P
Y
FEDERAL RESERVE BANK
OF NEW YORK
April 23, 1942
CONFIDENTIAL
Dear Mr. Secretary: Attention; Mr. H. D. White
I am enclosing our compilation for the week
ended April 15, 1942, showing dollar disbursements out
of the British Empire and French accounts at this bank
and the means by which these expenditures were financed.
Faithfully yours,
/a/ L. W. Knoke
L. V. Knoke,
Vice President.
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Enclosure
Copy:vw:4-27-42
LISTS OF BRITTSH AND FRENCH ACCOUNTS
(In Millions of Dollare
Yesk Inded
BANK OF ENGLAND (BRITISH GOVERNMENT)
BANK
OF
FRANCE
DEBITS
CREDITS
DEBITS
CREDITS
Proceeds of
Net Incr.
Net Incr.
Gov't
Sales of
(+) or
Gov't
Proceeds
(+) or
Total Expendi-
Other
Total
Securities
Other
Decr. (-)
Total
Expendi-
Other
Total
of Gold
Other
Decr. (-)
Debits
Sales
Credits
in Balance
Debits
tures(a)
Debite
Credita
PERIOD
Gold
(Official) (b)
Credita(c):
in Balance
Debits
tures (d)
Credits
First year of war
(8/29/39-8/28/40)*
1,793.2
605.6
1,187.6
1,828.2
1,356.1
52,0
420.1
+ 35.0
866.3(e)
416.6(e)
449.7
1,095.3
900.2
195.1(e)
+229.0
War period through
878.3
421.4
456.9
1,098.4
900,2
198.2
+220.1
December, 1940
2,792.3
1,425.6
1,356.7
2,793.1
2,109.5
108.0
575.6
+ 10.8
Second year of war
(8/29/40-8/27/42)**
2,203.0
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
1941
2.0
154.1
+ 35-3
0.3
#
0.3
0.5
-
0.5
+ 0,2
Aug. 28- Oct. 1
140.9
105.9
35.0
176,2
20.1
Oct. 2 - Oct. 29
109.0
77.3
31,7
150.9
0.8
150.1
+ 41.9
0.3
,
0.3
0.3
-
1
0.3
-
Oct. 30 - Dec. 3
156,1
111.6
44.5
134,6
1,0
133.6
- 21.5
16,1
-
16.1
0.4
-
0.4
- 15.7
-
69,6
52.5
51,5
-36.9
0,8
-
0,8
0.4
-
Dec. 4- Dec. 31
88.4
18,8
0,4
- 0.4
-
-
1942
69.3
0.5
68.8
- 33.0
0.2
-
0,2
0.4
-
0.4
+ 0,2
Jan. 1- Jan, 28
102.3
73,2
29.1
1
1,0
56.2
- 30,0
-
-
-
0,3
-
0.3
+ 0,3
Jan. 29 Feb. 25
87.2
63.8
23.4
57.2
-
121.4
171.4
$ 50.0
0.1
-
0,1
86.4
-
-
0.4
-
Feb. 26- Apr. 1
35.0
171.4
0.4
t 0.3
WEEK ENDED:
- 2.3
-
-
-
1
-
0.1
- 0.1
Mar. 25
21.1
14.2
6.9
18.8
-
-
18.8
19.8
13.3
6.5
58.9
58.9
+ 39.1
-
-
-
-
1
-
-
-
-
Apr. 1
17.3
20.3
0.5
19.8
- 16.0
-
-
-
(.)
-
0.1
+ 0.1
19.0
-
8
36.3
22.8(f) - 2.0
0.1
-
0,1
-1
-
0.1
-
15
24.8
17.6
7.2
22.8
-
-
Transfers from British Purchasing Commission to
Average Weekly Expenditures Since Outbreak of War
Bank of Canada for French Account
France (through June 19, 1940) $19.6 million
Week ended April 15, 1942
$ -
million
England (through June 19, 1940) 27.6 million
Cumulation from July 6, 1940
$
162.7
million
**For monthly breakdown see tabulations prior to October 8, 1941
*For monthly breakdown see tabulations prior to April 23, 1941.
England (since June 19, 1940) 38.9 million
(See attached sheet for other footnotes)
Regraded Unclassified
(a) Includes payments for account of British Purchasing Commission, British Air Ministry, British Supply Board, Ministry of
Supply Timber Control, and Ministry of Shipping.
(b) Estimated figures based on transfers from the New York Agency of the Bank of Montreal, which apparently represent the
proceeds of official British sales of American securities, including those effected through direct negotiation. In addition
to the official selling, substantial liquidation of securities for private British account occurred, particularly during the
early months of the war, 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 $334 million.
(c) Includes about $85 million received during October, 1939 from the accounts of British authorized banks with New York banks,
presumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October,
1939 apperently represent the acquisition of proceeds of exports from the sterling area and other currently accruing dollar
receipts.
(d) Includes payments for account of French Air Commission and French Purchasing Commission.
(e) Adjusted to eliminate the effect of 620 million paid out on June 26, 1940 and returned the following day.
(f) Includes $10 million transferred from accounts of British authorized banks and $3.6 million presumably representing proceeds of wool
exports to the U.S.
BANK
OF
CANADA (and Canadian Government)
COMMONWEALTH BANK AUSTRALIA
WHELTS
CREDITS
DEBIT3
CREDITS
Transfers
Transfers from Official
Transfers
to
Proceeds
British A/C
Net Incr.
to
Proceeds
Net Incr.
Official
of
(+) or
Official
of
(+) or
Total
British
Other
Total
Gold
For Own
For French
Other
Decr. (-)
Total
British
Other
Total
Gold
Other
Decr. (-)
PERIOD
Debits
A/C
Debits
Credits
Sales
A/C
A/C
Credits
in Balance
Debits
A/C
Debits
Credits
Sales
Credits
in Balance
First year of war
(8/29/39-8/28/40)*
323.0
16.6
306.4
504.7
412.7
20.9
38.7
32.4
+181.7
31.2
3.9
27.3
36.1
30.0
6.1
+ 4.9
Mar period through
December, 1940
477.2
16,6
460.6
707.4
534.8
20,9
110,7
41,0
+230.2
57.9
14.5
43.4
62.4
50.1
12.3
+ 4.5
Second year of war
(8/29/40-8/27/41)**
460.4
-
460.4
462,0
246.2
3.4
123.9
88.5
+ 1.6
72.2
16.7
55.5
81,2
62,9
18,3
+ 9.0
Ang. 28 Oct. 1
23.1
-
23,1
52,2
21,2
-
-
31.0
+ 29.1
10.7
0.5
10,2
218
2.1
0.7
- 7.9
1941
Oct, 2- Oct, 29
37.4
-
37.4
19,7
11.9
-
-
7,8
- 17,7
8.2
5.5
2,7
8.0
5.9
2.1
+ 0,2
Oct. 30 - Dec. 3
52.8
0.1
52,7
32.5
19,3
-
-
13,2
- 20.3
10.3
6.9
3.4
11.6
9.0
2.6
* 1,3
Dec. 6 - Dec. 31
47.7
-
47.7
22.2
17.3
-
-
4,9
- 25.5
3.9
1,8
2,1
2,8
0,2
2,6
- 1.1
1942
Jana 1 - Jan. 28
39.5
-
39.5
33.0
27.0
-
-
6.0
- 6.5
4.5
I
4.5
10,8
-
10.8
+ 6.3
Jan. 29 - Feb. 25
34.1
-
34.1
35,7
12,4
-
-
23.3
+ 1.6
8.4
5.3
3.1
1,6
-
1,6
- 6,8
Pab. 26 Apr. 1
46.5
-
46.5
99.3
20,5
7.7
-
71.1
+ 52.8
7.8
1.3
6.5
3.6
-
3.6
- 4.2
NEEK ENDED:
Mar. 25
11,9
-
11.9
8.3
0,2
3.4
-
4.7
- 3.6
0.1
-
0.1
0.5
-
0.5
+ 0.4
Apr. 1
14.1
-
14.1
12.7
9,2
-
-
3.5
- 1.4
2.3
1.3
1.0
2.4
-
2.4
+ 0.1
7.2
-
7.2
9.5
2.5
-
-
8
2.0
+2.3
0.3
-
0.3
0.8
-
0.8
+ 0.5
15
7.6
-
7.6
7.9
3.7
-
-
4.2(a)
+ 0.3
1.1
-
1.1
12.3
-
12.3(b)
+ 11.2
kly Average of Total Debits Since Outbreak of War
Through April 15, 1942
$
7.8
million
+ For monthly breakdown see tabulationsprior to April 23, 1941.
-- For monthly breakdown see tabulations prior to October 8, 1941.
(a) Includes about 32 million representing proceeds of U. S. Government checks deposited by War Supplies, Ltd.
(b)Includes $12 million received from U. S. Govt. for account of U. S. military And naval forces Abroad.
Regraded Unclassified
370
OFFICE OF LEND-LEASE ADMINISTRATION
FIVE-FIFTEEN 22d STREET NW.
WASHINGTON, D.C.
April 28, 1942
Mr. Harry D. White
Assistant to The Secretary
Treasury Department
Washington, D.C.
Dear Mr. White,
As requested, I enclose herewith a
memorandum which in substance covers the
points which it was felt by Lend-Lease could
be agreed on by the Treasury, State, War
Department and ourselves. It was our under-
standing that this arrangement was super-
seded by the conversation held in Mr.
Morgenthau's office.
Sincerely yours,
Ind Echey F.W. Ecker Echey
FORDEFENSE
BUY
UNITED
sner 08 519A
STATES
SAVINGS
BONDS
AND STAMPS
371
OFFICE OF LEND-LEASE ADMINISTRATION
FIVE-FIFTEEN 22d STREET NW.
WASHINGTON, D.C.
April , 1942
MEMORANDUM
Reconstructed
TO:
The President
Draft
FROM:
Messrs. Morgenthau, Acheson, McCloy and McCabe
SUBJECT: British Dollar Position
As of April 1st the British gold and U.S. dollar
position amounted to approximately $600 millions. Out-
standing contracts requiring dollar payments together
with other net expenditures are such that it is
estimated that by the end of 1942 this figure may be
reduced to $150 million if it is not augmented by
current gold production. In making this estimate it is
assumed that approximately $150 million of the pay of
American expeditionary forces will be spent in sterling
areas and that all imports to the United States from
such areas will be paid for in U.S. dollars. On the
other hand, it assumes that supplies and food obtained
locally for American expeditionary forces will be
provided on Lend-Lease in Reverse as will also pay of
civilians in sterling area working on projects for U.S.
armed forces.
The balance of $150 million, referred to above, is
too low, and it is felt that ways and means should be
provided to maintain it around the present level.
It is, therefore, agreed that
(1) the War Department will take over from the
British certain ordnance contracts which will
provide approximately $110 million.
(2) from a study of the Treasury estimates
based on the British figures, Lend-Lease
FOR DEFENSE
BUY
UNITED
STATES
ENVINGS
BONDS
372
The President
(2)
April , 1942
believes that the current trend of its
operations may well result in the
reduction in British dollar needs by
$100 millions, and will attempt through
broadening its policy of aid to assist
in reaching this objective.
(3) up to $200 millions additional will be
provided by payment in dollars for supplies
and/or local civilian labor assumed in the
estimate to be received under Lend-Lease in
Reverse.
373
20 Mass Chamges
See meal not
All this
Southard
C
0
374
P
Y
DEPARTMENT OF STATE
WASHINGTON
April 28, 1942
In reply refer to
If 865.5151/432
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and transmits
for his information a copy of telegram no. 741, April 23,
1 p.m., from the American Embassy at Buenos Aires, as well
as a paraphrased copy of telegram no. 742, April 23, 2 p.m.,
concerning an offer from Hans Seligman, Schurch and Company,
of Basel, which proposes to involve licensed lire exchange
transfers to America in amounts of at least twenty million
lire each for investments, debt repayments and gifts, and
suggesting the United States Treasury would consent to ex-
change transactions as depriving Italy of foreign exchange.
Enclosures:
1. Telegram no. 741,
April 23, from
Buenos Aires.
2. Paraphrase of
telegram no. 742,
April 23, from
Buenos Aires.
Copy:bj:4-28-42
375
MRL
GRAY
Buenos Aires
Dated April 23, 1942
Rec'd 2:40 p.m.
Secretary of State,
Washington.
RUSH
741, April 23, 1 p.m.
Strupp of Strupp and Company has informed the Embassy
of the following telegram from Hans Seligman Schurch Company
of Basel received this morning:
"Have special permit many million lire for expenditure
investments, debt repayments, gifts ethical by any person
residing anywhere. Seller is Vatican. Could you organize
sale in America main condition buying firm each time at least
20,000,000. Think can provide consent United States of
American Treasury for transaction as depriving Italy foreign
exchange coming in hands of Vatican to be used for their
peaceful purposes abroad. Could buy those special lire at
about 50% discount of official rate. Matter very interesting,
urgent, hurry as can approach Treasury only after you general
but unobliging consent. Italian treasury indicates gift
transfers from Argentine monthly above 20,000,000." See
Embassy's telegram 742.
ARMOUR
WSB
Copy:bj:4-28-42
C
o
376
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM: AMEMBASSY, Buenos Aires.
TO : Secretary of State, Washington.
DATED: April 23, 1942, 2 p.m.
NUMBER: 742.
Part two of telegram 741 from the Embassy at
Buenos Aires.
The party mentioned in the telegram under reference,
Hans Seligman, Schurch & Company of Basel, is on the
Proclaimed List and Strupp stated his bank would have no
relations with the subject matter and later he agreed
with the British Embassy that no reply to the offer would
be forthcoming from his firm until that Embassy was heard
from again. Instructions from London are being requested.
ARMOUR
Copy:bj:4-28-42
Treasury Department
377
Division of Monetary Research
Date April 28 19 42
To:
Miss Chauncey
I think the Secretary
might want to glance at this.
MR. WHITE
Branch 2058 - Room 2141
378
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE April 28, 1942
TO
Secretary Morgenthau
FROM
Mr. White
Subject: Digest of cable from Mr. Adler dated April 23, 1942.
1. Economic conditions in Chungking have
deteriorated further. Wholesale price
index now 4,130. (January - June 1937
equal 100.) However, collection of land
tax in kind proving fairly successful.
2. It is interesting to note that according
to reports received the Chinese Government
plans compulsory subscription of Chinese
bonds payable in United States dollars by
high income groups and voluntary subscrip-
tion by the general public.
379
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Chungking, China
DATE: April 23, 1942, 9 seme
NO.: 447
This in & strictly confidential message, TF-29, for
Mr. Tox, in care of the Secretary of the Treasury, from
Mr. Adlor.
For Treasury's and your information following is the
first weekly coonomic report, no.l.
1. March prices in Chungking (Wholessle price index of
the Institute of Wartime Sconomic Research and rotail price
index of the Farmers Bank, both based on January - June 1937
equalling 100) were 4130 wholesale, and 3390 retail, up
12 and 12.5% respectively over the February prices. The
February rise in retail prices over January W&B 12.5% and
the wholesale was 18%.
2. In March the legal tender notes in circulation
increased 45 over the February figurs--from 16,833 million
Chinese currency dollars In February to our 17,150 million
(preliminary) in March. The February figure is & 5%
inere 00 over that of January.
3. On April 16 the interest rate of the native banks
in Chungking on 15-day loans web CM dollars 14 por 1000
Chinese national dollars or 33.6% por ornus. Since April 1
there has been NO change.
4. According to the report of the Ministry of Finance
April 20 the collection of the land bar in kind rendered
21.2 million standerd piculs of rice and other cereals or
94% of the revised ortinite for September 1941--April 1942
season which W&B 22.9 million piculs. (110 pounds avoirdupois
equals one standard pioul.) 111% of the estimated Szechuan
collection was produced, this accounting for alsost 1/3 of
the total.
5. According to a preliminary estim to, from April 1
to 18 the sole of seving certificates vasi Chungking,
8 million dollars; Kunning, 2 million Chinese national
dollars and 2 million Chinese national dollars, making a
total of CN dollars 12 million.
6. Issue beginning May 1 of United States dollar-
backed bonds of up to 100,000,000 in United States dollars
paying
Regraded Unclassified
380
paying 45 per annum with 4. maturity of 10 years at the
purchase price of GN dollars 100 equalling $ in United
States currency was authorized by the Executive Yuan on
April 21. Under the authorized scheme 6. large scale
selling campaign is planned including compulsory subscrip-
tions by the high income groups and voluntary subscriptions
by the general public. To Kung Pao reported this decision
on April 22 and it was confirmed on the Same date in a
conversation with Y. C. Koo and O. K. Yui.
In paragraphs 2, 4, and 5, the figures given are
strictly confidential and are unpublished. Those in
paragraph 1 are published only after e one-to-three
months lage
GAUSS
Regraded Unclassified
C
0
381
P
Y
TRB
PLAIN
Cairo
Dated April 28, 1942
Rec'd 3:18 a.m., 29th
Secretary of State,
Washington.
666, twonty-eighth.
Today's press carries in extenso speech of Finance Minister
Makram Ebeid Pasha in Chamber of Deputies last night introducing new
budget stated to be largest (53 million Egyptien pounds) ever framed
in Egypt outstanding feature of speech was Minister's emphasis on social
principles underlying Government's proposals following points being
stressed (one) last budget was of bureaucratic type and was "designed
not to serve the people in their relations with the government but
the Government in its relations with the people" (two) new budget aims
at presenting clearcut financial policy reconciling needs and serving
interests of different classes and at realizing progressive schemes which
had been "disastrously neglected in the past" (three) East is particularly
liable to fall prey to a form of economic distatorship which is more
deadly than political "for a political dictatorship may arouse men to
revolution whereas an economic dictatorship **** so absorbs them in
the struggle for existonce that they have no time to think of active
struggle". If political independence of Egypt is to be real it must
be accompanied by economic independence based on interest of people
rather than of Government. In Egypt Government officials are wellpaid
and landowners flourish but what of industrial and farm laborers who
although forming about 90% of population "might well be living in
another world and in another age? **** Let us bluntly state our aims.
We have worked to save the Egyptian from foreign imperialism; it is now
time to save him from Egyptian imperialism" the only way to achieve this
is to extend and maintain democracy in Egypt and the WAFD although not
claiming perfection in itself is as the party of the people best qualified
to carry through such a program this is not socialism but merely an
effort to achieve social justice in struggle between democracy and
bureaucracy.
Proceeding to deal with more concrete aspects of budget Finance
Minister mentioned inter alia following (one) necessity to curb inflation
(two) plans to effect more equitable distribution of tax burden by
lightening taxes on small landowners increasing taxes, on large incomes
and commercial profits, amusements, alcoholic beverages, raising
supplemental tax (three) increasing telephone and telegraph rates (four)
selling government land (five) reduction of expenses wherever possible.
Regraded Unclassified
382
-2-
In addition to budget proper Finance Minister took occasion to
discuss Government policy regarding creation of department of Govern-
ment accounts reduction of land debts cereal shortage financing next
cotton crop (mention being made of offer of British Government to
purchase from Anglo-Egyptian Cotton Commission 500,000 cantars of giza
seven cotton at 21 dollars 50 cents or five dollars fifty dollars
above original purchase price) improved distribution to meet sugar
shortage fertilizer supply export and import licensing project to reduce
government pensions fiduciary circulation at one point Minister expressed
appreciation of action of American Government in including Egypt among
countries entitled to Lead-Lease.
KIRK
BB
Copy:bj:5-5-42
383
Agr12 m, 1940
m. Livery
Mr. Dictrich
will you please cont the attached colds to the American Roberty. London,
"Yes Canadar from the Secretary of the fireasury*.
/
m
384
:
d - I
American Roberty,
London, England.
Free
the Secretary of the Treasury
Please send w air pouch the series on "Consumer Rationing--
Coupon Banking Schome", as listed in recent summaries of reporting
activities.
WEIGHT 4/29/43
Ded id
385
TELEGRAM SENT
PH
April 28, 1942
This telegram must bE
peraphrased before being
7 p.m.
communicated to Anyone
other than a Governmental
agency. (ER)
AMEMEASSY
LONDON (ENGLAND)
1838
FOR CASADAY FROM THE SECRETARY OF THE TREASURY
QUOTE Please send by air pouch the stries on
INNER QUOTE Consumer Rationing-Coupon Banking Scheme
END INNTER QUOTE, as listed in recent summaries of
reporting activities. END QUOTE.
HULL
(FL)
FD:FL:ME
Regraded Unclassified
C
0
P
386
Y
DEPARTMENT OF STATE
WASHINGTON
April 28, 1942
In reply refer to
FD 102.1/6476
The Secretary of State presents his compliments to the
Honorable the Secretary of the Treasury and encloses copies of
telegram no. 2018, dated April 21, 1942, from the American Embassy,
London, England, regarding the procedure for cashing Treasury
checks under arrangements made between the United States and
the British Treasuries, and copies of the Department's telegram
No. 1820, dated April 27, 1942, in reply thereto.
Enclosure:
From Embassy, London,
No. 2018, April 21, 1942.
To Embassy, London,
No. 1820, April 27, 1942.
eh:copy
4-29-42
0
0
P
387
Y
TELEGRAM SENT
HRL
PLAIN
April 27, 1942
AMEMBASSY,
LONDON (ENGLAND).
1820, twenty-seventh.
Your 2018, April 21, 5 p.m.
Department's 1468 sent for Treasury Department per-
tains to checks drawn on the Treasurer of the United States
by disbursing officers having checking accounts with him.
Drafts drawn on the Secretary of State are apparently being
negotiated in the British Isles in a normal manner as the Department
has not heard of any difficulties being experienced there in that
respect.
Foreign Service Officers in the British Isles should draw,
negotiate and account for drafts as usual unless conditions
make this practice unsatisfactory in which event Department should
be advised. However, it is believed advisable that a first and
second of exchange be drawn and issued of each draft negotiated.
HULL
(GHS)
102.1/6476
DA:LLW:SJ
FA
FD
eh:copy
4-29-42
388
NWN
GRAY
London
Dated April 21, 1942
Rec'd. 8:30 p.m.
Secretary of State,
Washington.
2018, April 21, 5 p.m.
Department's 1468, April 8, midnight.
On April 14, the Bank of England issued a
notice to banks and bankers, the substance of which
was communicated to the Treasury of the United States
outlining procedure under arrangements made between
the American and British Treasuries. According to
this notice, checks subject to procedure outlined
by Treasury of United States are confined to official
drafts and checks on the United States Treasury
from United States military or naval paymasters,
United States diplomatic officers, disbursing officers
or senior officers acting in their official capacity.
British authorities state that this can bE meant to
include individual checks cashed by American officials
and Employees with paymasters and later turned into
banks by the latter for negotiation. It is assumed
that when the Treasury says all (repeat all) "United
States
Regraded Unclassified
389
-2- #2018, April 21, 5 p.m., from London.
States dollar checks drawn on the Treasurer of the
United States" in part two of the outling it means
checks affected by the negotiations and EXCLUDES
pension checks and other Treasury checks drawn to
individual order and chased by individual as a regular
commerical transaction.
Army and Navy officials have been informed of
the suggested procedure outlined in point nine of
the Treasury's communication to the Department.
DOES the Department wish Embassy to follow
procedure outlined in point nine for local currency
requirements? If so, what accounting procedure
is to bE used where standing instructions from the
Department require the drawing of separate drafts
and separate accounting? In the EVENT that Embassy
is no longer to draw drafts for local currency require-
ments the Chase National Bank is designated as bank
of deposit.
Bank of England has raised question as to whether
procedure applies to consular officers outside London.
As Department made no mention of consular officers
in the field in its cable, instructions are requested
as to whether they are to draw drafts as usual and
have them
390
-3- #2018, April 21, 5 p.m., from London.
have them delivered through appropriate London bank
to Embassy for transmission. As consular officers
draw very few drafts it will appear needless to tele-
graph for local currency requirements.
In order that End of April accounts may bE
Expedited an early reply is requested.
MATTHEWS
KLP
Copy
391
Miss Chauncey
From:
0. G. & Tar.
Not worth calling to Secretary's
attention.
orig. of this memo attached to 5/1/42 STATE
392
INC
PLAIN
Bern
Dated April 28, 1942
Rec'd 3:38 a.m.
Secretary of State,
Washington.
1784, Twenty-eighth
Consul Zurich reports: fundamental reorganization
German industrial economy illustrated by new decree
regulating simplificati n industrial economy which
case into force April 20 as described by various news-
paper. FRANKFURTER ZEITUNG owing increased demand area-
ments industries organization must be simplified production
intensified. National industrial economy now comes under
direct control district economic chambers (gauvirtschaft-
skammer) specially created and directly responsible to
Reichs Economic Minister. ABl other organizations such
aschooal chambers of commerce and industry abolished and
absorbed by new district chambers this gives gauleaders
increased authority. Effective immediately forty-one
chambers of commerce closed vis Arnsberg, Bingen, Coburg
Dametadt, Dessau, Detmold, Erfurt, Feldkirch, Flensburg,
Frankfurt
Regraded Unclassified
393
#1784, Twenty-eighth, from Bern
Frankfurt on Oder, Freidberg, Gera, Giessen Goerlitz Hal-
berstadt, Hildesheim, Hirschberg, Krefeld, Liegnitz Mains,
Nordhausen, Offenbach, Oppelnosn, Abrueck, Passau, Pfor-
sheim, Plauen, Reutlingen, Rottweil, Sagan, Schneidemuehl,
Schweidnitz, Solingen, Sonnenberg, Stadthagen, Stolp,
Teschen, Vlm, Verden, Worms, Zittau. Introduction of
district economic chambers brings regional economic
organization under greater party control. Therefore decen-
tralization as planned by decree March 19 canceled FRANKFUR-
TER ZEITUNG continuing discussion following day states
necessities caused by long war awakened new energies. For
months everyone busy endeavoring improve Germany's war
industries in making them stronger more elastic. Of Ger-
many's 111 local Chambers of Commerce 41 will completely
disappear this but preliminary spade work. Other indus-
trial and commercial chambers will not be closed but will
disappear as such becoming centers of new organization.
Also 71 chambers of commerce and 23 chambers of industry
lose former privileges and disappear. Future regional
organizati ns will be managed by district local and
branch economic chambers. In many instances seat of new
chambers will be district Government office (Gauverwaltung)
whose
Regraded Unclassified
394
-3-
$1784, Twenty-eighth, from Born
whose resident will become proper exponent regional
economic development coordinating it with party
economic and political program. District economic
chambers will directly represent economic organization
and will take over all duties prerogatives former
chambers of commerce industry craftsmens guilds others.
They will form separate groups dealing with industry
guilds banks insurance power plants and transportation.
Cooperation with party will be increased. Centralization
economic power made easier. BERLINER BOERSENZEITUNG
Funk spoke in Graz occasion opening first
"Gauwirtschaftskamner" stating self administration of
industry considered unsatisfactory being partial
compromise between old new systems. New measures
simplify operations and represent stronger "transversal"
tie with party. New chambers-will unite all economic
organizations and create "vertioal" connections between
various groups of industry. Instead of being merely
"super structures" as chambers commerce were they will
maintain direct relations with manufacturers. Their
managers who are given extraordinary responsibility have
important education work to perform. Next day Funk
spoke in
Regraded Unclassified
395
+ $1784, Twenty-sighth, from Bern
spoke in Klagenfurt inauguration new chambers
FRANKFURTER ZEITUNG "his statements on new industrial
policy. Simplification as now being introduced not
only applies war industries but whole national production.
Main points were: (one ) armaments Minister must feel
sure that industries being supplied with necessary raw
materials with minimum friction in order that production
be increased and former methods must be ignored;
(two) allotments to be made with minimum "paper" work
as speedily possible (three) allotment control centere
must act mainly as statistical offices reducing unnecessary
labor other statistical bureaus (four) industry must reduce
official correspondence to minimum (five) in order speed
up production measures must be taken eliminate necessity
industries to communicate with too many official Reich
offices (six) financial methods to be radioally altered in
that greater stress to be laid on granting normal bank
credits and reduction government subsidies (seven)
manufacturers called on for greater discipline and re-
nunciation normal industrial lucrative considerations
(eight) consumers called on for similar discipline in
reducing standard living (nine) war debts will be settled
comparatively short
Regraded Unclassified
396
-5- $1784, Twenty-eighth, from Bern
comparatively short time after was as surplus cheap
labor raw materials will be available. Manufactured
goods will be cheaper than price level Germany and
difference will be used reduce war debt as well as insure
stabilization currency (detailed-report will follow
by airmail).
State Secretary Reinhardt announced important
reform German income tax. Local municipal income tax
abolished state tax increased. New system provides
taxation relief for small medium wage earners increased
taxation higher salaried classes BERLINGER BOERSENZEITUNG
states 1941 municipal income tax totaled 800 million
marks new taxation comes into force July first. This
measure reduces work done by municipal authorities making
unnecessary for them to fill out page four on some 26
million income tax declarations and abolishes their
complicated accounting system. As minimum exemption
from municipal taxes was lower than from Government income
tax and as undesirable that persons formerly liable
municipal income taxes now exempt Government minimum
exemption from income tax reduced for all single persons,
childless married couples or families with not over
two children.
HARRISON
BB
Regraded Unclassified
397
B.S
Montevideo
This telegram must bE
paraphrased before being
Dated April 28, 1942
communicated to anyone
other than a Governmental
Rec'd 6:35 p.m.
agency. (BR)
?
Secretary of State,
Washington.
324, ..pril 28, 7 p.m.
Department's telegram 220, April 23, 9 p.m.
Commercial Attache has made discrett inquiry
of Bank of the Republic official who is usually very
willing to furnish information. The official
appeared reluctant to make any statement other than
that the gold was being brought to Uruguay in agreement
with the Minister of Finance.
Another bank official has mentioned the
impending shipment to an American banker but
gave no information as to reason. The American
banker is at a loss to Explain the shipment but
suggests that it may bE either because of
apprehension of an Eventual gold Embargo in the
United States or because of the feeling that a
large proportion of gold reserves should bE in
Uruguay.
DAWSON
CSB
398
TREASURY department
INTER-OFFICE COMMUNICATION
Blue Chauses
DATE April 28, 1942
TO
Secretary Morgenthau
FROM Mr. White
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£61,000
Purchased from commercial concerns
£42,000
Open market sterling remained at 4.03-3/4. with no reported transactions.
In a dull market, the Canadian dollar discount narrowed to 12-1/16%, as
compared with 12-1/4 yesterday.
In New York, closing quotations for the foreign currencies listed below
were 8.8 follows:
Argentine peso (free)
.2365
Brazilian milreis (free)
.0516
Colombian peso
.5775
Mexican peso
.2064
Uruguayan peso (free)
.5295
Venezuelan bolivar
.2870
Cuban peso
1/4% premium
There were no purchases or sales of gold effected by us today.
The Federal Reserve Bank of New York has been holding an earmarked gold
balance of $4,438,000 for the Banke Millie Afghan, Account G, this gold being the
property of the Royal Afghan Government. The Treasury authorized the Federal today
to transfer this gold in its vaults to a new account entitled "Da Afghanistan Banke,
Account G". The latter is the Government Central Bank of that country.
The Federal Reserve Bank of New York reported that the Bank of Mexico shipped
$176,000 in gold from Mexico to the Federal for its account, for sale to the New
York Assay Office.
In London, spot and forward silver remained at 23-1/2d, equivalent to 42.67$.
The Treasury's purchase price for foreign silver was unchanged at 35#. Handy
and Harman's settlement price for foreign silver was also unchanged at 35-1/84.
We made no purchases of silver today.
Regraded Unclassified
399
COPY NO, 13
BRITISH MOST SECRET
(U.S. SECRET)
OPTEL No. 138
Information received up to 7 A.M., 28th April, 1942,
1, NAVAL
Air recennaissance yesterday showed TIRPITZ, SCHEER, HIPPER and PRINZ
EUGEN at TRONDHJEM in their usual positions.
2. MILITARY
BURMA. By early 26th our forces had occupied a general line KYAUK-
PADANG-MEIKTIA covering the withdrawal of Chinese troops, There are continued
reports of enemy thrusts towards the Northern SHAN STATE and elements have reached
about half-way along the road LOILEM-HS IPAN RUSSIA. Local Russian attacks are
continuing in the Central Sector.
3. AIR OPERATIONS
WESTERN FRONT. 26th/27th. About fifty tons of high explosive and
incendiaries were dropped on ROSTOCK and about eighty-six tons on the Heinkel
Works. Weather was excellent and the attack is considered successful. Many crews
considered the attack on the town the best of the series,
27th, Bostons and Hurricane bombers attacked power stations at OSTEND
and LILIE as well as three enemy aerodromes, 518 Fighters operated and enemy
casualties were eleven destroyed, eight probably destroyed and fourteen damaged.
Two Bostons, two Hurricane bombers and fifteen fighters are missing. One pilot
safe, Off the Danish Coast Hudsons made two hits on each of two vessels of about
3,500 tons,
27th/28th. 120 aircraft were despatched: COLOGNE 92, DUNKIRK 12,
Sea mining 11, Leaflets 5. Weather was very good and many big fires are reported
at COLOGNE. Twelve of our aircraft are missing. About 25 onemy aircraft made a
sharp attack on NORWICH,
MALTA, Between 1600/26 and 1320/27 125 bombers with fighter escort
attacked, At KALAFRANA a high speed launch and two seaplane tenders were des-
troyed, Elsewhere, a transformer room and power station were hit. Anti-aircraft
destroyed two Junkers 88,
4. HOME SECURITY
BATH. On 26th/27th about sixty high explesives were dropped. Blast
effect was reported as exceptional. Casualties for the two nights are given as
150 killed.
NORWICH. 27th/28th. The city station and a hospital were seriously
damaged and there were about thirty-five fatal casualties,
Regraded Unclassified
400
DADINATO
UNITED STATES GOVERNMENT
COORDINATOR OF INFORMATION
WASHINGTON, D.C.
April 28, 1942
The Honorable
The Secretary of the Treasury
Washington, D. C.
Dear Henry:
The attached has just come to me from
our London office. It is the British Political
Warfare Executive Weekly French Directive.
Sincerely,
William J. Bill Donovan
401
The French fleet:
a. Do not comment on French warships, either on their
dispositions or the possible use of them. Do not go out of
your way to attack Darlan. There may be some significance in
the ommissions in his Order of the Day and letter of resigna-
tion. Avoid referring to Darlan as Commander in Chief of
the French navy. Insist on the way the Germans are exploiting
the economic resources of the French colonies and the French
merchant fleet. Any discussion of Madagascar should be a-
voided.
France:
a. Police measures. Undoubtedly Laval is concertrating
on a cleanup. It is expected that there will be a compre-
hensive purge among Darlan's former administrative collabor-
ators. In unoccupied France the police are to be reorganized
by Bousquet. The Paris police force is asking for further re-
cruits. Before he makes any further steps toward selling out,
Laval is making sure of his internal position.
b. RNP is to extend its organization to the unoccupied
zone. Deat's forces will be put at Laval's disposal. The
attempt to form a "Partie de la Revolution National" should
be shown up as a trick on the part of Laval to suppress all
other organizations, even those which support the Marshal.
C. The present government is little more than a "half-
way house" tewards a full collaborationist" government.
Moysset and Barthelemy are not likely to last long. It should
be pointed out that the cabinet is full of second class men
who were deliberately chosen to cover the first period while
Laval gets full control of all the reins of government. Even-
tually Laval, having served his usefullness, will also be
discarded by the Germans.
Regraded Unclassified
402
- 2 -
d. The Germans are being discreet about Laval. Only
after he has shown himself a good servant will they make
concessions.
e. Laval will probably get in touch with Germans in a
higher place than Abetz. The position of Petain in 1942 is
the same as that of Hindenburg in 1933.
Emphasize:
a. The distinction between Laval and the French people.
b. Although Laval is afraid of the French people, he
flatters himself that he can double cross them. He is there-
fore proceeding in two stages, first, temporary acceptance of
Darlan's military position and Marshal's "cover", second,
gradual purge of Vichy's "old guard".
C. While Germany undertakes the spring campaigns, she
requires that France be ruled by a man whose future is bound
up with hers.
d. Petain has been reduced by Laval to a mere figure-
head. Point out all Laval's efforts to cover himself by the
Marshal's formal authority. Petain will not know what Laval
is planning; he has no control over internal policy.
e. Frenchmen who have been serving Vichy through self
interest or under the illusion that they have been serving
France must now be disillusioned. They must not know that
Laval is to them an implacable enemy. There is no longer the
appearance of a "buffer" between Germany and the people of
France.
f. The fact that both these factions are their enemies
will now be apparent to the people of France.
Regraded Unclassified
403
DEDINATOR CODEDINATOR:D
UNITED STATES GOVERNMENT
COORDINATOR OF INFORMATION
WASHINGTON, D.C.
N
April 28, 1942
The Honorable
The Secretary of the Treasury
Washington, D. C.
Dear Henry:
The attached is from the British Political
Warfare Executive German Weekly Directive.
Sincerely,
Bull
William J. Donovan
404
Policy:
a. Inside Germany. In news matter we should confine
ourselves to factual reportage, personnel changes, decrees,
etc. Watch for items which will illustrate Sauckel's man-
power crisis.
b. France. Avoid mere abuse of Laval; vague state-
ments that all France is against him; emphasize that the new
government is proof of: first, Germany's fear of intervention
in the West; second, Germany's need of foreign labor.
Strategy:
a. Be careful to stick to imuendo when mentioning our
western front intervention threat. The Germans are talking
of "Wikingersburgen" on the west. However, such fortifications
are as outdated as the Maginot line. RAF offensive and Commande
raids should still be described as the first stage of our offen
sive action.
b. Be careful not to over inflate the Russian local
attacks. We can assume that the German spring offensive will
not start for several weeks.
Military points:
a. Malta. We can state that Malta's resistance has
already delayed the spring offensive by diverting Kesselring's
forces.
b. Yugoslavia. Some seventeen Italian divisions are
now contained by the Yugoslav army, not to mention Bulgarian,
Hungarian or German--in all, some thirty divisions.
Naval points:
a. Continue to emphasize Germany's need to break our
communications with Murmansk. The Tirpitz, etc. still inac-
tive at Trondheim. The Gneisenau was damaged BO seriously
that she has now been towed to Gydnia for repairs where she
Regraded Unclassified
405
-2-
lies alongside the Graf Zeppelin, still incomplete. The
Scharnhorst is also in dry dock.
b. Lay off U-boats sinking stories and expose German
sinking claims.
Air Points:
a. It is possible to assume that the Luftwaffe is
feeling the pinch both in personnel and in machines because:
first, wastage of machines in Russia because of climatic
conditions, poor runways, low efficiency of flying personnel
owing to over-work, inadequate aids to landing at night; second
forced landings due to using aircraft which has exceeded normal
first line life and aircraft not serviced with usual complete-
ness.
b. Many units had less than half their strength to-
wards the end of 1941. The reserves have been swallowed up
in less than six months. The results of this shortage have
been: first, the number of dive bomber units has been re-
duced to two-thirds of June, 1940. Until late in March no
dive bombers could be spared for Malta and since then there
have been only enough to contribute less than ten per cent
of the total effort. Second, for months the raids on Moscow
have had only a nuisance effect. Third, it has been necessary
to use first line bomber aircraft for transport work. Fourth,
owing to a shortage of ME 110, twin engine day-fighter units
have been disbanded to expand night-fighters.
Regraded Unclassified
406
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE April 28, 1942
TO
Secretary Morgenthau
FROM
Mr. Kamarck
Subject: Summary of Intelligence Reports
Russo-Japanese Relations
(The Japanese are reinforcing their army in Manchuria.
If this trend continues, an attack on Siberia around the
first of June probably is to be expected.)
The British state that recent reliable information
indicates that the Japanese forces in Manchuria have been
increased from 20 to 23 divisions.
(U.K. Operations Report, April 27, 1942)
Information secured by the Coordinator of Information's
office is to the effect that the number of military planes
in Manchuria and Korea was increased in the first half of
April from 300 to 700 and in Northern China from 60 to
200. The number of planes in Japan also increased from
400 to 750. (The total number of Japanese planes avail-
able against Siberia thus totals 1,650, or almost half of
the Japanese first-line combat strength.)
(C.O.I. "The War This Week", April 16-23, 1942)
Chinese Supplies in Burma
According to an American transport expert, it will
require a year to 18 months to move into China the Chinese
supplies accumulated in Burma. In December, there were
150,000 tons of Chinese goods in Burma, of which almost
half were already in upper Burma. By the end of February,
the great bulk of lend-lease goods had been moved up-
country out of Rangoon.
(C.O.I. "The War This Week", April 16-23, 1942)
Regraded Unclassified
407
- 2 -
France
Food supplies in France were 80 short in the large
towns during March that mass street demonstrations occurred
in Montpelier, Sete, and Lyons. Crowds shouted for meat,
milk and bread. Thousands of women sent deputations to
mayors and signed petitions.
(U.K. Ministry of Economic Warfare Weekly Digest;
C.O.I., April 25, 1942)
Voice of the Chief Broadcasts
Italians Bring Death to Nazi Captives
Recently, 72 Nazi soldiers from the Afrika Korps lost
their lives aboard the Italian ship Eretria which went
down in the Mediterranean.
"These Germans were prisoners aboard the ship, mostly
for disciplinary breach of discipline. Thus one German
soldier in a dispute with an Italian officer, had pushed
his elbow into the latter's face." Another Nazi had am-
bushed an Italian who had stolen his food.
"It is really the height of outrage when a German soldier
has to submit without resistance to arrest by a stuck-up
macaroni policeman. But in addition, these 72 Nazi fighters
aboard the Italian ship were manacled and herded like sheep
into locked compartments to travel under Italian guard to a
Naples prison camp.
"As a result, when the ship sank and the Italian jailers
jumped, these men were unable to get out and drowned help-
lessly."
(Federal Communications Commission)
Racketeers Cheat on U-Boat Rations
The Griem concern commits its most flagrant crimes in
Wilhelmshaven. There, "home-coming and outgoing subs are
met by Griem's crooked agents, such 88 the ring-leader Fritz
Wimmert or fat Herr Franzmann who owns the bar next to the
Tax Office. Sometimes, female agents are used to bring in
the business. Now the sub might order for its next long-
distance cruise 1,800 eggs, 300 pounds of coffee, 1,200 bars
of chocolate, 750 cans of preserved fruits, and 80 on.
Regraded
408
- 3 -
"After delivery of the stuff, the sub supply steward,
who 18 often in on the game, will sign bills for the above
amounts as having been received from the Griem concern.
These bills are then counter-signed by the sub's commandant
whereupon prompt payment is made by the Navy cashier.
Actually, of all goods supposedly delivered, one-third will
be missing.
"Ten years' imprisonment were recently meted out to
Herr Hugo Finch, a small grocer in Berlin-Wilmersdorf, for
supplying a customer with 2 pounds of cheese outside of
rations. But a well-connected firm like that of Wilhelm
Griem is suffered to carry on wholesale corruption undis-
turbed."
(Federal Communications Commission)
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"ocrText": "rights The 218 upson\nTHE WHITE HOUSE\nWASHINGTON\nApril 28, 1942\n-y dear Mr. Secretary:\nWith the shortage of rubber and the prospective\nnecessity for curtailing the civilian consumption of gasoline,\nthe transportation problem for workers in many communities is\nrapidly becoming critical. It is imperative that we extend as\nlong as possible that period of time in which we can count on\nprivate transportation of factory and office workers to their\nplaces of work and home again.\nThe transportation problem in Washington is no\nexception to that existing in very many of our communities\nat present. I am therofore calling upon the heads of the\nseveral Federal Departments and Agencies to work out a program\nfor their employees which will substantially reduce the number\nof automobiles which are necessary to take men and women to and\nfrom their places of work. This program should be undertaken\nimmediately and thoroughly. is few Federal Agencies have already\ntaken steps in this direction and an interchange of ideas and\nexperiences should facilitate the development of the most effective\nprogram. I would like to have a report from each Department and\nAgency at the end of thirty days relating the effectiveness\nof steps which have been taken.\nI am also sending a copy of this letter to the Council\nof State Governments, the American Municipal Association and the\nUnited States Conference of Mayors asking that they use their\ninfluence to bring about the inauguration of similar programs in\nthe State and local Covernments.\nVery sincerely yours,\nSimility Marroweld\nThe Honorable\nThe Decretary of the Treasury,\nashington, D. C.\nRegraded Unclassified\nCC to Mr. Graves, Mr. Gamble, and Mr. Kuhn\n219\nApril 28, 1942\n10:43 a.m.\nColonel\nRichard C.\nPatterson:\n.....\nyour voice.\nHMJr:\nDick, I don't know whether your phones are\nalways so busy, but for ten minutes we couldn't\nget a wire.\nP:\nWell, these phones are busy all the time.\nHMJr:\nWell, I tell you. What I suggest\nP:\nI can't hear you, Henry.\nHMJr:\nI've got a cold.\nP:\nOh, I'm sorry.\nHMJr:\nI suggest - hello.\nP:\nYeah.\nHMJr:\nI suggest you put in an unlisted number that\nyou could take incoming calls on.\nP:\nAll right. I'll out in an unlisted number\nright away.\nHMJr:\nAnd then let us know what it 1s.\nP:\nI'll do it.\nHMJr:\nAnd then when you have incoming calls, they\ncan come in on that.\nP:\nI'll do it.\nHMJr:\nWill you do that?\nP:\nHello.\nHMJr:\nDick - hello - can you hear me?\nP:\nYes, Henry, I can hear you.\nHMJr:\nWhat I want is this. We've been fooling\n220\n- 2 -\naround with this for a long time, but there\nmust be somebody like old Tex Rickard who\nknows how to run meetings, see.\nP:\nYes.\nHMJr:\nI don't know who it 1s. I don't know whether\nthere's an association, for instance, across\nthe country of men who belong to - people like\nwho own Madison Square Garden and halls similar.\nP:\nYes.\nHMJr:\nBut could you find out - hello.\nP:\nYes, Henry.\nHMJr:\nBecause what we've got to do is to organize\nsome big meetings across the country.\nP:\nYes.\nHMJr:\nAnd I'm going to get some outstanding fellows\nlike O'Hare - Lieutenant O'Hare\nP:\nYes.\nHMJr:\nthat we can send across the country, you\nsee.\nP:\nYes.\nHMJr:\nNot only in New York. But I want to get hold\nof the fellow - whoever the Tex Rickard is\ntoday.\nP:\nWell, I tried to get Billy Rose ten days ago.\nHMJr:\nYeah.\nP:\nI tried my level best to get him to come in\nhere and take full command.\nHMJr:\nYeah.\nP:\nI couldn't do it.\nHMJr:\nWhy not?\n221\n- 3 -\nP:\nWell, he's just tied up. I may go back at\nhim. And I talked to Simon and Schuster at\nbreakfast this morning.\nHMJr:\nYeah.\nP:\nThey're going to go to work and try and help\nme get this man.\nHMJr:\nIs Billy Rose the fellow?\nP:\nWell, I don't know. He's about the - he's\nalmost the successor of - in - he's almost\nRickard's successor.\nHMJr:\nWell, think about it, because I'm tremendously\ninterested. I'm going to get - I'll get the\nstars.\nP:\nYes.\nHMJr:\nAnd - but I've got to have a showman.\nP:\nYou're damn right we've got to have a showman,\nand I'm dreaming it and sleeping it, and I'm\nprovoked that we don't have a showman.\nHMJr:\nWell, it\nP:\nI think I'm reflecting your attitude, Henry.\nHMJr:\nGood.\nP:\nWe're right after just what you want, but it's\nso difficult.\nHMJr:\nWell, I want a showman, and you talk it over\nover there. If it's Billy Rose and you need\nsome help, I'll get in touch with him myself.\nP:\nYes.\nHMJr:\nI don't know who it 18, but I'm not in that\nbusiness. Well, you think about it, and after\nyou're decided, either telephone or send me a\nwire, will you?\nRegraded Unclassified\n222\n- 4 -\nP:\nOh, I'll go right to it, Henry. I won't\nleave a stone unturned on that.\nHMJr:\nBecause MacLeish said last night, he said,\n\"We've got to get more big public meetings.\"\nP:\nWho said that?\nHMJr:\nArchie MacLeish.\nP:\nOh, yes.\nHMJr:\nAnd he wants us to do it.\nP:\nAll right. Give me just - we're - for instance,\ntoday I'm having the publishers of all the big\npapers at luncheon with me here in the office.\nHMJr:\nYeah.\nP:\nHelen Reed's coming in.\nHMJr:\nYeah.\nP:\nArthur's in Washington, but they're all coming\nin just on this one thing.\nHMJr:\nWell, what I want 1s a showman who we don't\nhave to be ashamed of.\nP:\nI know what you mean.\nHMJr:\nAnd a fellow that\nP:\nWell, give me just a little while, and I'll\nkeep in contact with you.\nHMJr:\nYou ought to be able to in a day or two to\ntell me who it 1s.\nP:\nI think I can. Give me forty-eight hours.\nHMJr:\nBut be sure it's somebody who won't get us\ninto trouble.\nP:\nWhy, of course.\n223\n- 5 -\nHMJr:\nAnd whoever it 18, then we'll put the heat\non him and he'll have to come.\nP:\nHave Rose? you got any suggestions outside of Billy\nHMJr:\nWell, I - no. This is a field - if you esk\nme something easy - but I don't know anything\nabout this.\nP:\nWell, leave it to me; and I'll report back.\nHMJr:\nBut we've talked about these community sings\nand everything else, but I want a showman.\nP:\nLeave it to me.\nHMJr:\nI'll ão that.\nP:\nAll right.\nHMJr:\nThank you.\nP:\nI'll try to carry the message to Garcia for\nyou.\nHMJr:\nAnd have a phone number put in, and then let\nus know what it is 80 that incoming calls -\nor if you have a call you want to use yourself,\nit's there.\nP:\nOh, my God. The only reason I haven't had one\nput in - you know the reason.\nHMJr:\nNo.\nP:\nWe're trying to teach thrift in this country.\nHMJr:\nWell, I'll personally okay this one.\nP:\n(Laughs) All right, Henry.\nHMJr:\nThank you.\nP:\nYou'll hear from me. Good-bye.\n224\nApril 28, 1942\n11:00 a.m.\nFINANCING\nPresent: Mr. Murphy\nMr. Haas\nMr. Piser\nMr. Hadley\nMr. Baker\nMr. Rouse\nMr. Szymczak\nMr. Buffington\nMr. McKee\nMr. Sproul\nMr. Goldenweiser\nMr. Williams\nMr. Bell\nMr. Eccles\nH.M.JR: I hope you can all hear me. I can't talk\nany louder. If you can't, come up closer.\nBell, is there anything that you want to say other\nthan that we need two billion dollars in May and June?\nMR. BELL: Well, I can go over the figures if they\nwould like to hear them for the next three months. This\nprogram contemplates or estimates that there will be six\nhundred million dollars in Savings Bonds in May, eight\nhundred in June, and a billion dollars from there on\nthroughout the year. It also contemplates two billion\ndollars a month in regular financing up to and including\nSeptember, and the expenditures on account of national\ndefense will increase gradually from about three billion\nand a little over in May - three billion two in April to\nRegraded Unclassified\n225\n- 2 -\nfour billion six in December. We will go out of April\nwith one billion seven hundred eighty million dollars;\nout of May with one billion five hundred; June, one\nbillion eight; July, one billion eight; August, one billion\nsix; and September, about a billion eight. It drops down\nto less than a billion and a half in October on the basis\nof that borrowing program.\nFor this immediate financing, I thought you might\nalso like to know the balance on May 14, just the day\nbefore the contemplated payment date of this new issue.\nIt would be down to about nine hundred fifty million\ndollars. It will be the lowest we have had for some time.\nIn connection with this financing, I thought it might be\na good thing if we would advise the banks before or at\nthe time of this financing about how much will be with-\ndrawn from the War Loan Accounts between the first of May\nand the fifteenth so that they could have a little better\ninformation on just how to pay, whether to pay for it by\ncredit or pay for it in cash. Heretofore they haven't\nhad that information, and sometimes they have said, \"Pay\nby cash,\" and then when the payment date came along and\nwe have made calls, they have changed it. I think it\nmight help them this time if they knew that in advance.\nSomewhere along the line there is for consideration the\nquestion of calling the Home Owners' Loan two and a quarter's\non July 1, which decision will have to be made by Wednesday.\nH.M.JR: By Wednesday?\nMR. BELL: Wednesday, yes.\nH.M.JR: Tomorrow?\nMR. BELL: May 1 is the date that we have to call\nthem.\nMR. McKEE: What is the total, Dan?\nMR. BELL: Eight hundred seventy-five million, two and\na quarter percent bonds.\nMR. ECCLES: That would be a refunding in effect.\nRegraded Unclassified\n226\n- 3 -\nMR. BELL: Yes\nMR. ECCLES: Treasuries direct, though, instead of\nguaranteeds.\nMR. BELL: And there is an RFC maturity on the same\ndate of two hundred seventy-six million, and then there\nis the September 15 notes of three hundred forty-two\nmillion which would make an operation of one billion\nfour hundred ninety-three, if you took them all at once.\nH.M.JR: Is that all?\nMR. BELL: That is all up to that point. I have got\nsome other questions I would like to raise after. we get\nthrough with this.\nH.M.JR: I would like Haas to read that memorandum\non excess reserves out loud.\nMR. HAAS: \"Member Bank Reserve Position and the Com-\ning Financing.\n\"In our memorandum of April 22 on the forthcoming\nfinancing, it was said:\n\"The reserve position of the banks must probably\nbe accepted as a datum for this financing. It is highly\ndesirable, however, that action be taken with respect to\nit shortly after this financing and well in advance of\nthe next cash financing.'\n\"The developments of the past several days, however,\nseem to throw the balance in favor of taking such action\nbefore, rather than after, the forthcoming financing.\n\"(1) The Bureau of the Budget release issued on\nFriday estimates necessary borrowing during the fiscal\nyear 1943 at $53.6 billions. This is $13.8 billions in\nexcess of the estimate made in January.\n\"(2) The Friday Federal Reserve statement showed\nexcess reserves of $2,752 millions, of which $641 millions\nRegraded Unclassified\n227\n- 4 -\nwas in New York City. This is a decline for the week of\n$134 millions in total excess reserves and of $81 millions\nin excess reserves of New York City. This is the lowest\nlevel of total excess reserves since June 15, 1938, and\nof excess reserves in New York City since April 6, 1938.\n\"(3) The statement of weekly reporting member banks\nin New York City, also available on Friday, showed borrow-\nings of $5 millions. This is the first time that this\nitem has appeared on the weekly report of New York City\nmember banks since November 30, 1938.\n\"(4) It has come to my attention that the 0.32 per-\ncent bill rate this week was made possible only by private\nadvance assurances to the dealers by the Federal Reserve\nBanks of New York that if they entered bids ranging from\n0.30 percent to 0.35 percent, the bills would be taken off\ntheir hands. Otherwise, I am informed, the bill rate\nwould have been 0.35 to 0.40 percent, a rise of about ten\npoints from the previous week. As it was, the rate was\nthe highest since October 20, 1937.\n\"The coming financing will be $2 billions. This is\nthe largest cash financing undertaken since 1919. It is\nimportant that it go over well.\n\"The member banks reserve position is badly in need\nof strengthening. While under normal conditions it would\nbe neater to do this after the financing than before, it\nseems to me that present conditions are so far from normal\nthat action before the financing is called for in this case.\n\"It is, of course, the prerogative of the Board of\nGovernors to determine how the reserve position should be\nstrengthened. It should be noted, however, that buying\nGovernment securities in the ordinary manner will not do it\nquickly enough. The decline of $134 millions in excess\nreserves last week occurred in spite of an increase of $42\nmillions (mostly in bills) in the Federal Reserve portfolio.\n\"A reclassification of New York and Chicago would be\nquick enough and would increase excess reserves in New York\nRegraded Unclassified\n228\n- 5 -\nCity by nearly $1 billion and excess reserves in Chicago by\nabout $200 millions. A general reduction in reserve re-\nquirements would also be quick enough.\n\"The posting by the Federal Reserve Banks of a buying\nrate of 0.25 percent for Treasury bills would likewise be\nquick enough. This method would also have the advantage\nthat it would constitute a quasi-fixation of interest rates\nand so would tie in with the President's message on price\nfreezing.\n\"With a posted buying rate for bills in effect, in-\ncreases in the volume of bills would tend to ease money\nrates, rather than to tighten them as they do at present.\"\nMR. ECCLES: That is & memorandum from--\nH.M.JR: Haas to me. Before we go much further, I\nwould like to discuss it, because I felt it very badly last\ntime, and the thing has become much more aggravated now,\nand I just wondered if something couldn't be done.\nMR. ECCLES: I feel that the problem isn't so much\nthe question of reserves, the whole thing is a question\nthat the Treasury are pursuing a method of financing which\nis the same as has been the case in the past, that instead\nof adopting a financing program which is related to these\nvery extraordinary conditions and the amount of financing,\nit is still based upon the open market cash offerings\nwhich are dependent upon the pressure of excess reserves\nfor the underwriting of the financing by the banking system,\nwhich, of course, is inflationary in its implication. The\nwhole thing is based upon creating a condition in the bank-\ning system that forces rates down, but puts the banks under\npressure to do the buying and is contrary to what the pub-\nlic open statement is of doing as much financing as pos-\nsible outside of the banks.\nOur whole program is designed to do as much as possible\nin the banks and through the banks. We have felt for a\nlong while that the Treasury should adopt a long-term war\nfinancing program and should get away from what seems to\nus to not at all meet the situation. We have agreed to\nRegraded Unclassified\n229\n- 6 -\ngive such support to the market as is necessary to maintain\na pattern of rates agreed upon, and we feel that the Fed\nhas carried out that commitment fully and adequately. The\nquestion - on the long market, the long market has been\nsupported at the basis that was agreed upon and the short\nmarket, it was agreed, as I recall, the last time we dis-\ncussed this, that the short-term rate would not be permitted\nto go to more than three-eights on a ninety-day basis. The\nshort market has not exceeded a third. It hasn't been up\nto three-eights.\nThere is, of course - there are two or three ways to\nmaintain an adequate reserve position, and the only pur-\npose for maintaining a reserve position is its effect\nupon interest rates and we have based our policy on our\nobligation to maintain an interest rate structure. We\nrecognize, certainly, that you cannot have widely fluctu-\nating interest rates, that you can't do as was done in\nthe last war, have & continued increase in interest rates\nand a decrease in bond prices during a financing period,\nand the stability of your whole rate structure is essen-\ntial. We have recognized that.\nNow, you can accomplish that in two ways or three\nways, either open market operations, reduction of reserve\nrequirements, or & reclassification of cities. The latter\nwould be the least desirable, I think, without legislation\nthat gave us the responsibility to change reserve require-\nments for reserve cities separate from central reserve\ncities, which is not permitted today. If we change re-\nserve requirements, they must be changed both for reserve\ncities and central reserve cities.\nMR. BELL: You say you can't change central reserve to\nreserve?\nMR. SZYMCZAK: No. What Marriner is talking about,\nincreasing or decreasing reserve requirements under the\nlaw, we have to increase or decrease for New York and\nChicago and the other reserve city banks.\nMR. ECCLES: They are all tied in together.\n229\n- 6 -\ngive such support to the market as is necessary to maintain\na pattern of rates agreed upon, and we feel that the Fed\nhas carried out that commitment fully and adequately. The\nquestion - on the long market, the long market has been\nsupported at the basis that was agreed upon and the short\nmarket, it was agreed, as I recall, the last time we dis-\ncussed this, that the short-term rate would not be permitted\nto go to more than three-eights on a ninety-day basis. The\nshort market has not exceeded a third. It hasn't been up\nto three-eights.\nThere is, of course - there are two or three ways to\nmaintain an adequate reserve position, and the only pur-\npose for maintaining a reserve position is its effect\nupon interest rates and we have based our policy on our\nobligation to maintain an interest rate structure. We\nrecognize, certainly, that you cannot have widely fluctu-\nating interest rates, that you can't do as was done in\nthe last war, have & continued increase in interest rates\nand a decrease in bond prices during a financing period,\nand the stability of your whole rate structure is essen-\ntial. We have recognized that.\nNow, you can accomplish that in two ways or three\nways, either open market operations, reduction of reserve\nrequirements, or a reclassification of cities. The latter\nwould be the least desirable, I think, without legislation\nthat gave us the responsibility to change reserve require-\nments for reserve cities separate from central reserve\ncities, which is not permitted today. If we change re-\nserve requirements, they must be changed both for reserve\ncities and central reserve cities.\nMR. BELL: You say you can't change central reserve to\nreserve?\nMR. SZYMCZAK: No. What Marriner is talking about,\nincreasing or decreasing reserve requirements under the\nlaw, we have to increase or decrease for New York and\nChicago and the other reserve city banks.\nMR. ECCLES: They are all tied in together.\nRegraded Unclassified\n230\n- 7 -\nMR. SZYMCZAK: And then the country banks in another\ngroup, you see.\nMR. ECCLES: There should be three groups, and we\nsucceed. tried to get that in the Banking Act of '35, but didn't\nMR. BELL: But you could take one group?\nMR. SZYMCZAK: Yes.\nMR. ECCLES: Yes, we could take reserve cities and\ncentral reserve cities in one group and country banks as\nanother group.\nMR. BELL: Can't you take just central reserve cities\nin one group?\nMR. ECCLES: No. We could eliminate the central\nreserve cities and make them reserve cities.\nMR. BELL: That is what I mean.\nMR. ECCLES: Oh, we could do that.\nMR. McKEE: The Board can do that without legisla-\ntion.\nMR. ECCLES: But that would be bad, I think. It would\nbe an evasion. It would be a roundabout way of getting at\nit.\nMR. SZYMCZAK: You would still have to take the same\naction. It doesn't make any difference. In increasing\nor decreasing reserve requirements for reserve city banks,\nit is the same as for central reserve city banks.\nH.M.JR: Could I just say something for a minute? We\nhave spent a lot of time on this plan which you people gave\nus about a five-year tap issue and an eighteen- or twenty-\nyear tap issue. We have had people out in the field, and\nwe just can't find the money. It is just a rainbow, say-\ning that there is money in corporations and so forth.\nRegraded Unclassified\n231\n- 8 -\nMR. McKEE: How do you know it is a rainbow until you\ntry it?\nH.M.JR: Well, the easiest way to do it is to go and\nthe corporations.\nMR. McKEE: Well, what their position is one day or\none month compared to some other month is pretty hard for\nthem to tell you.\nH.M.JR: I mean, I am not satisfied to sit in this\nchair and work on a highly theoretical basis of memoranda.\nWhen you go out in the field and talk to the corporations,\nthe money isn't there.\nMR. ECCLES: You have only talked to seventy of them.\nWe spent an hour with what's-his-name over there going\ninto this thing thoroughly.\nMR. BUFFINGTON: Buffington.\nMR. ECCLES: And as I understand it, he talked to\nseventy corporations. They were all the big corporations.\nI wouldn't feel for a minute that - from his survey, from\nwhat he told us, that that is conclusive at all.\nH.M.JR: What have you got on the other side to prove\nit isn't, other than a matter of opinion?\nMR. McKEE: All right, but Mr. Secretary, what have\nyou got to lose by having all kinds of goods on your shelf,\nthat if and when the Federal Reserve Bank would take the\nresponsibility off of your hands and try to sell something,\nif you have got it on your shelves, to do their best, to\nget that much out, what if you don't get more than 8. bil-\nlion and a half dollars out of it?\nH.M.JR: I will tell you exactly what we have got to\nlose, John. I will tell you exactly what we have got to\nlose. The thing we have got to lose is this: Any way\nthat you look at this thing, we are going to have to rely\nover and above what we can sell to the people on the pay-\nroll plan, we have got to sell it in lots to the banks and\nRegraded Unclassified\n232\n- 9 -\ninsurance companies, but more and more to the banks.\nNow, heaven knows nobody can acuse me of pampering the\nbanks in the nine years that I have been here. Am I\ntalking loud enough?\nMR. McKEE: I can hear you.\nH.M.JR: But if you offered this security which is\npayable on demand, and it is an attractive security be-\ncause it is payable on demand, and you say to the banks,\n\"But you can't buy it. We expect you to handle our War\nBonds without any compensation, we expect you to be issu-\ning agents and this thing and that think, and there are\na. thousand and one things that we ask you to do, but when\nwe come along and give something that is a little bit\nextra nice, you can't have that.\" And I don't think it\nis fair, John.\nMR. ECCLES: That--\nH.M.JR: Now just let me finish one second. There\nmust be other opinions, I don't know. Maybe they all\nagree with you, Marriner. Maybe it is just one voice.\nMR. ECCLES: The Board is unanimous and so are the\nFederal Reserve Banks.\nH.M.JR: Don't tell me that, Marriner, because you\ncan't prove that.\nMR. ECCLES: Well, you have got the record approved\nby the presidents and the - you can ask all the group that\nis in this room here.\nH.M.JR: I have talked to some of the people - I am\nnot talking about the Board, but the twelve Federal Reserve\nBanks are not with you, and I will bring them in here and\nthey will tell you so.\nMR. ECCLES: I would like to know which one isn't,\nbecause we had a meeting that lasted two days and each\nFederal Reserve Bank expressed themselves.\nMR. McKEE: I am willing to accept it, not knowing\nRegraded Unclassified\n233\n- 10 -\nwho you mean.\nH.M.JR: Let me keep on it, the other people can\ntalk for themselves. Let's say, John, take you - you\nsay a billion or a billion and a half. Let's say you\nsold two billion.\nMR. McKEE: O.K.\nH.M.JR: And then you are through and the banks get\nsore. Where does it leave me with the other twenty-five\nbillion I have got to sell?\nMR. McKEE: Well, now, I am not going to argue with\nyou as far as the - as maybe some president of some par-\nticular Federal Reserve Bank hasn't really been sold as\nyet on this sytem, but on the other hand, I am not willing\nto accept that the bankers would be hurt about that kind\nof an issue. I think a lot of them - now, you might find\nfellows like Randy Burgess that are chasing rainbows up\nand down the streets. He may be hurt, but that isn't true\nof the banker mind, because I think I can get the banker\ncomplex of this United States just as well as anybody in\nWashington, and I do know that they want to see this sold\nto investors.\nH.M.JR: And leave them out?\nMR. McKEE: They know there is going to be plenty\nfor them. You can't leave them out. You can't do your\njob and leave them out.\nH.M.JR: How can you prove that to me?\nMR. McKEE: Do the job and not leave them out?\nH.M.JR: No, I am not questioning that. We will go\non the assumption that you can sell a billion or 8 billion\nand a half the way you said. How can you prove it to me\nthat in doing this thing that you are not going to make all\nthe bankers sore?\nMR. SPROUL: Some of them, I think, Mr. Secretary may--\nRegraded Unclassified\n234\n- 11 -\nH.M.JR: Let's just stick to that point.\nMR. McKEE: Excuse me, Allan, but on your over-all\nplan you are going to have to increase every kind of\ngoods you have got on your shelf, short-term paper,\nintermediate paper, and long-term paper. Is that not\nright?\nH.M.JR: That is correct.\nMR. McKEE: So if this is short-term paper for some\npeople, you are going to have to give them, to do your\nprogram, short-term paper enough for their portfolio.\nNobody is going to be harmed. It isn't a scarcity of\ngoods because your program - the job you have got to do\nhasn't any evidence of scarcity of activity on your part.\nH.M.JR: I don't make myself plain. Just for a\nround figure - I may be wrong - twenty-five billion dollars,\nis that a figure for the rest of this year?\nMR. BELL: That we will have to finance?\nH.M.JR: Yes, outside of War Bonds.\nMR. BELL: About sixteen or seventeen billion.\nH.M.JR: Bell says sixteen or seventeen billion dollars.\nFor argument's sake, let's say that twelve billion of it\nhas to go to the banks. Is that & bad guess?\nMR. BELL: No, that is a good guess, probably.\nH.M.JR: All right. The thing that I want to get\nover to you, that I want you to convince me, is that out\nof the twelve you have got to sell sixteen to the banks.\nI mean, my figures may be off twenty-five percent, but\nfor the argument.\nMR. McKEE: Yes, that is all right.\nH.M.JR: And in order to do that a demand security is\nmuch more attractive and all the banks would like to have it.\nRegraded Unclassified\n235\n- 12 -\nWhat?\nMR. BELL: That is right.\nH.M.JR: Now, the thing that - the only thing that\nworries me is, in selling this merchandise I don't want\nto offend my best customers. It is just as though I was\nin the grocery business and the Atlantic and Pacific Tea\nCompany took seventy-five percent of my goods, but I got\nout of something, and I said, \"Well, I am sorry, you can't\nhave that, that is going to the independent grocers.\"\nNow, you have got your idea and I have got mine. Now,\nhow the hell can we find which of us is right?\nMR. McKEE: Mr. Secretary, I appreciate--\nH.M.JR: Do you see what I mean?\nMR. McKEE:\nwhat the banks would like to have and\nall that, but nevertheless they are going to buy market\nissues that they can dispose of, and you are going to have\nto price those market issues at a price that they will\nsubscribe for. Now, that is going to be the proportion\nthat they are going to take. Now, you don't have to give\nthem more than they are going to take and hold and that is\nwhat they would like to see - some of them would like to\nsee you do, and price it so that they could subscribe for\nit and sell it at a profit. Not to hold it.\nH.M.JR: But you don't get away - are you familiar\nwith the great number of things that we ask banks to do\nfor us for nothing?\nMR. McKEE: Yes, and I am in sympathy with - I know\nyour position on that, that you would like to make a\ncontribution, but you can't and you want to do something.\nNow, I think your best way of making that contribution -\nand I take it from George's memorandum that there is some\nconcern on the bill rate moving up as fast as it has -\nwell, there is a medium of subsidy by indirection which solely\ngoes to the banks because they are the owners of bills.\nH.M.JR: But that isn't what worries George. George\nRegraded Unclassified\n236\n- 13 -\ncan talk for himself.\nMR. McKEE: I just inject that into the argument as\n& possibility, that through the short-term market you can\npay for some of the services you are getting.\nMR. ECCLES: Let--\nH.M.JR: Do you mind one minute?\nMR. ECCLES: Yes.\nH.M.JR: I mean, I know I haven't convinced John, and\nJohn hasn't convinced me:\nMR. McKEE: I know I haven't.\nH.M.JR: I don't know where the other Board members\nare, but let me use an example. The Atlantic and Pacific\nTea are such big buyers. Now, you might sit back and say,\n\"Well, to hell with them. Supposing he does buy seventy-\nfive percent of my goods? I will give him all the goods\nthat he needs.\" That is your argument. \"I will give him -\nI am a manufacturer of oatmeal, and he can have all he\nwants, but I am going to get out a specially nice package\nand that is going to go to the independent grocers and\nthe A and P can't have any. I will give him all he wants,\nbut he has got to take it in a less nice package.\" That\nis the situation. It is 8. matter of merchandising.\nMR. McKEE: All right, but I still contend that this\nFederal Reserve System may be all wet, but they still\nbelieve that they can solicit, not the objections, but\nthe support of member banks to help you sell your credit\nto investors, and they will help you sell them.\nNow, I speak of that because I think that there are\nsome banks that know that they are going to pay through\nthe nose for this thing, and they have got their sales\nadjusted to take it on the chin, and they are willing to\ngo ahead, and we have seen a lot of that by sympathetic\nreaction to Regulation V and coming forth and making loans\nfor production. It is on your side, and I don't think you\nRegraded Unclassified\n237\n- 14 -\nrealize, and you can't sample it because it isn't general\nin any respect, it is spotty. But it will become more\ngeneral by experience.\nH.M.JR: John, in my whole experience in Washington,\nI have never had finer cooperation from any group than\nthe banks have given me during the past year. They have\nbeen magnificent, see. Now, I don't want to, because I am\nSecretary of the Treasury, abuse that, see, and the thing\nthat I am arguing about is, not what you and I think -\nlet's say I am a hundred percent wrong, but how can we\nfind out, not what Randolph Burgess thinks, but what the\nrank and file of the bankers think, you see.\nNow, you and I sit in this room here and find that\nout and certainly you people on the Federal Reserve are\nin a much better position to find it out than I am. How\ncan you find out for me, for us, what do these fellows\nthink, the rank and file, not the National City, not the\nChase, but the rank and file. Now, if I am wrong--\nMR. McKEE: My answer to that is--\nH.M.JR: John, if I am wrong--\nMR. McKEE: If you have had any services worth while\nin the past from the Federal Reserve System and the Federal\nReserve System continues to serve you as their fiscal\nagents and they come and they say - now, you might say\nthat you know that we are not in accord or something like\nthat. That is news to me, but nevertheless I am willing\nto accept your statement. Have you any reason now to be\nfearful that if and when they ask for this opportunity to\nserve you further through this medium, that you can be\nharmed and that they are not capable of selling the idea\nto the member banks, that this is for their own good as\nwell as for the Treasury?\nH.M.JR: Let me ask you. There is no difference\nbetween the Federal Reserves now. It is this Advisory\nCommittee that I question, the Advisory Committee.\nMR. McKEE: You mean the Federal Advisory Committee?\nRegraded Unclassified\n238\n- 15 -\nH.M.JR: What is their title?\n-\nMR. SZYMCZAK: That is right, the Federal Advisory\nCouncil.\nH.M.JR: I said the - the Federal Advisory Council,\nthat is what I--\nMR. McKEE: The banker group?\nH.M.JR: The banker group is what I question.\nMR. ECCLES: We didn't include those. The memoran-\ndum we sent came to you from the Board and the twelve\nbank presidents.\nH.M.JR: I understood it included them.\nMR. ECCLES: No, we never discussed it with them.\nH.M.JR: I understood it included the Board plus the\nadvisory group.\nMR. ECCLES: No, the bank presidents.\nMR. McKEE: You are going back to before Pearl Harbor\nwhen we wanted authority to raise reserve requirements.\n(Laughter)\nH.M.JR: I was thinking of the banker advisory group.\nMR. ECCLES: No, they have never been - the thing\npresented to you was the memorandum only from the Board\nand its president.\nH.M.JR: I understood it included the banker advisory\ngroup.\nMR. ECCLES: We have never discussed it with them.\nH.M.JR: Just let me and John have it out for a minute\non a very friendly basis. I am not questioning one bit -\nyou say to me you want this opportunity to go to town. I\n239\n- 16 -\nam not questioning your sincerity that you mean what you\nsay and will do the best you can because you have demon-\nstrated it again and again, but all I am saying'is that\nthe thing that worries me is that like any manufacturer,\nI think, before we try it on the forty-eight states, we\nshould try it on a community, but at least find out what\nthe community would like, because I have often been wrong\nsitting here in Washington trying to interpret what the\npublic thinks, and I am just worried that we might - and\nIt is very, I should think, easy to find out through the\ntwelve presidents of the banks whether I am wrong or right,\nand I am willing to leave it to the twelve presidents of\nthe banks, that if we get out an issue which is not\navailable to the banks, will I be taking the risk that I\nwill sufficiently offend these people that they may throw\nin my face some of this work which they are doing at no\ncost to me but at extremely heavy cost to them. That is\nthe whole point.\nMR. ECCLES: We have got two presidents here.\nH.M.JR: John, do I make myself clear?\nMR. McKEE: Yes.\nH.M.JR: And if I am wrong, John - now, I am per-\nfectly willing to leave it to the twelve presidents of the\nbanks to test the thing. If I am wrong, I will say to you\nnow that I am willing to try one of these issues. Now,\ncould I be fairer? Could that be fairer?\nMR. McKEE: That is all right, and I am willing to\ngo farther than that. If you have anybody complaining to\nyou and you haven't time to answer the telephone, you\nrefer them to me and I will take care of them, I don't\ncare where they are in the United States.\nH.M.JR: Well, you have been very nice, and I have\ntried more and more to keep you informed, but I say before\nI stick my neck out - now, I have been put in the position\nas though I wasn't against inflation. Well, I made & speech\nin Boston in September which certainly went out all the way\non the thing, and I am just as worried and just as conscious\n240\n- 17 -\nof it as anybody. I hate it and fear it just as much as\nanybody. If there is any money lying around, let's call\nit of a non-inflationary kind, I would like to get it.\nI would like to mop it all up. If there is a billion or\nthree billion - I will go so far that I would be willing\nto issue an open-ended issue at this time. I will take\nfour or five billion dollars. Bell, you have heard me\nsay that.\nMR. SZYMCZAK: All right, now is the time.\nMR. ECCLES: We have got a program here on that.\nMR. SZYMCZAK: I think we have got to there.\nH.M.JR: I will take it and rest on my oars for 8.\ncouple of months. If there are four or five billion -\nno, I won't renege. If there are four or five billion\ndollars of this stuff lying around, idle money, I will\ntake it and like it, just as long as the twelve Federal\nReserve presidents can assure me that in doing this thing,\nI won't have these organizations who are doing 8. dozen\ndifferent services for us throw this stuff back in my\nface and say, \"Take it and do - you know what to do with\nit.\"\nNow, you can't blame me because I don't know how\nmany of you are familiar with what the banks as fiscal\nagents - I mean, I am not talking about the Federal Reserves,\nwe pay them - but all of these banks are selling twenty-\nfive dollar bonds and New York has got fifteen salesmen out\nfor me and is getting them made fiscal agents, and they are\ndoing 8. thousand and one things. We offered to pay the\npostage. We got some letters back which were magnificent.\nThe bank president said, \"I will start any time to make\nout a War Bond on my own time and let the customer wait.\"\nNow, there is that spirit. You know it is hard as hell\nto get that, but it is awfully easy to kill it. Now, I\nam through, John. That is my whole thing, but please,\nbefore you put me on the spot, prove to me that I am right\nor wrong. That is all I ask.\nMR. McKEE: Well, I don't think anybody can tell you\n241\n- 18 -\nwithin any reasonable amount how much would be available\nand it would have to be just as you have done with your\nbaby bonds, and then your Defense Bonds, you have put -\nyou have had to build up an organization which will have\nto be done on this.\nH.M.JR: John, that isn't the question. I don't\ncare whether it is five hundred million or five billion.\nI want to get - prove to me that we can do it without\noffending or lessening the enthusiasm of the banks.\nMR. SPROUL: Mr. Secretary, I think if you made an\ninquiry through the Federal Reserve Bank presidents, you\nwould get undoubtedly & divided opinion. Some would say\nthat they didn't like the idea at all. I think if you\nmade an inquiry you would merely get a divided view.\nSome would say they didn't like the idea of short-term\ntap issue at all. Others would say, \"It is a fine idea,\nbut if there is going to be any of that around, we want\nin on it,\" and others would say, \"Yes, it is 8 good idea\nto get something which can be sold outside the banking\nsystem.\" I think from my own experience and discussing\nthis from day to day and week to week with the bankers,\nif that is any criterion, with the growth in the size of\nthis program and the amounts that are going to have to be\nborrowed from the banks, they would come around gradually\nto the view that we must have all kinds of merchandise on\nthe shelves, and we must have an organization to sell all\nkinds of merchandise both outside the banking system and\ninside the banking system, and that this type of issue\nfrom which we are barred is one kind of merchandise that\nwe should have. My own view is that your situation now\nis not the same as the wholesale merchant selling to the\nA and P and to independent grocers. You have a program\nhere which is so big that you have to give a lead as well\nas follow what the buyer wants, that you are not selling\nto competitors of the A and P, you are selling to his\ncustomers who he wants you to sell to. He says with you,\nWe want to get as much as this outside the banking system\nas possible. As far as the banks and their compensation\nand their spirit with respect to aiding you on the war\nfinancing program, I don't think you could kill it by any\nsuch small thing as this. I think it is too big and too\n242\n- 19 -\nreal & spirit of \"do whatever is necessary.\"\nNow, the fundamental situation with respect to bank\ninvestment very soon is going to be that we are going to\nhave to provide them with the funds with which they make\nthose investments. We are going to have to put the fund\nin to maintain their reserves and in that situation it is\nmerely the desirable, I think the necessary, alternative\nto doing it through greenbacks or direct through the\ncentral banking system, but there is no need for being too\nfearful about their reaction to whatever you do, because\nthey are merely taking part in a big financing program in\nwhich you have to call the tune from here on, and we have\nto provide most of the funds.\nMR. ECCLES: That is right.\nH.M.JR: Well, just let me talk a minute. I haven't\ngot any hobby in this thing. I haven't got any fixed\nopinion, but I don't want to kill this very fine spirit.\nNow, I read this survey which Dan gave me on how the\nbanks feel, and from that you don't get it. You don't\nget the feel of the situation. I just don't know.\nMR. SPROUL: Well, as I say, I have been discussing\nit with the New York City banks for some time now.\nFirst, there was general opposition to the idea with\nsome minor views that, \"If there is going to be anything,\nwe want it.\"\nThe most recent views I have had, and I can't say\nthat this could go for all the banks, because I don't\nthink it would - but the most recent view I have had of\nthe market was, \"What is the harm in trying it? We are\ngoing to have to-have all kinds of goods on the shelves.\nWe are going to have to have an organization to sell\nthose goods, and we want to be prepared to do it.\"\nRegraded Unclassified\n243\n- 20 -\nMR. WILLIAMS: Mr. Secretary, I attended a meet-\ning of five hundred country bankers last Saturday up in\nLewisburg, and I can check on what you say about their\nbeing patriotic and friendly. It was evident, for example,\nin their response to the certificates of indebtedness.\nI have here statistics on response in the third district.\nIn all, there are about nine hundred banks up there, and\nall together about two hundred and forty of them came in.\nThey liked especially that provision that gave them assur-\nance they could get twenty-five thousand dollars. They\nwanted to know where they stood. They wanted to know\nfrom you what they were to do. They will respond. I\nthink you have got a loyal group. On the question you\nraised, I don't think they thought through it, but one\ncould, certainly on an experimental basis, determine\npretty quickly what their attitude would be, and I think\nif they had all the facts as Mr. Sproul has just indicated,\nthat you would get full cooperation from them.\nH.M.JR: Don't you think that my position is reason-\nable? I want to know before I jump. I want to know how\ndeep the water is.\nMR. WILLIAMS. Yes, you are asking for some evidence,\nand I think it could be obtained, and I think it would be\nthe right sort. If we put before them the complete compre-\nhensive program and the part that they would play in it--\nH.M.JR: What state is Lewisburg in?\nMR. WILLIAMS: Pennsylvania\nH.M.JR: Well, how long do you think it would take\nthrough the presidents of the twelve banks to find out?\nMR. WILLIAMS: You could do it in two or three\ndays.\nMR. McKEE: You know, Mr. Secretary, I don't know\nhow the presidents could approach this subject without\nyou having a program that would show what had to be done\nand they were privileged to talk about that program of\n243\n- 20 -\nMR. WILLIAMS: Mr. Secretary, I attended a meet-\ning of five hundred country bankers last Saturday up in\nLewisburg, and I can check on what you say about their\nbeing patriotic and friendly. It was evident, for example,\nin their response to the certificates of indebtedness.\nI have here statistics on response in the third district.\nIn all, there are about nine hundred banks up there, and\nall together about two hundred and forty of them came in.\nThey liked especially that provision that gave them assur-\nance they could get twenty-five thousand dollars. They\nwanted to know where they stood. They wanted to know\nfrom you what they were to do. They will respond. I\nthink you have got a loyal group. On the question you\nraised, I don't think they thought through it, but one\ncould, certainly on an experimental basis, determine\npretty quickly what their attitude would be, and I think\nif they had all the facts as Mr. Sproul has just indicated,\nthat you would get full cooperation from them.\nH.M.JR: Don't you think that my position is reason-\nable? I want to know before I jump. I want to know how\ndeep the water is.\nMR. WILLIAMS. Yes, you are asking for some evidence,\nand I think it could be obtained, and I think it would be\nthe right sort. If we put before them the complete compre-\nhensive program and the part that they would play in it--\nH.M.JR: What state is Lewisburg in?\nMR. WILLIAMS: Pennsylvania\nH.M.JR: Well, how long do you think it would take\nthrough the presidents of the twelve banks to find out?\nMR. WILLIAMS: You could do it in two or three\ndays.\nMR. McKEE: You know, Mr. Secretary, I don't know\nhow the presidents could approach this subject without\nyou having a program that would show what had to be done\nand they were privileged to talk about that program of\n244\n- 21 -\nwhat had to be done, not only this, but in many other\nways, such as market issues and so forth, and which\nthey had the future opportunity of coming in on. Now,\nI think that--\nH.M.JR: Well, I am perfectly willing. I don't\nfeel the way I used to, that this thing has to be\nguarded as a secret. Now, let me ask you gentlemen\nthis. In this thing where you said you were going to\nsell a billion or a billion and 8. half, I will stick to\nyour own figures, did you have in mind the five-year\nissue or the long issue?\nMR. McKEE: Oh, I think that is up to you. The\nshort issue is what I had in mind.\nMR. ECCLES: The short, yes.\nH.M.JR: Then supposing just for argument's sake -\nwe won't settle this thing this morning - and I don't\nwant to forget the excess reserve thing either - supposing\nwe said that for this next issue they would rely on a -\nI think you called it tap issue, didn't you, five years?\nMR. McKEE: Registered issue. I don't like that\ndamn word, tap.\nH.M.JR: I don't either.\nMR. ECCLES: Non-negotiable. Registered is a good\nword.\nH.M.JR: Let's say we were going to sell a billion\ndollars of that, the five year. That goes, I take it,\nto non-banking institutions. And then a billion dollars\nof & long issue, open to anybody, you see. I mean, I\nam just throwing that on the table. I mean, just for 8.\nminute. Then we say well, in the next day or two we\ndecide that is it. We could decide in a day or two that\nis it. Then give it not only to the Federal Reserve,\nbut to this very fine organization of security dealers to\nlet them go out and feel the market. How long do you\nthink?\nRegraded Unclassified\n245\n- 22 -\nMR. SPROUL: Well, I don think we can get a\nreaction within two or three days that would mean\nanything. It takes a consideration and study of the\nwhole financing problem and the whole program, and to\nask a lot of country bankers how they feel about it, they\nwill look at it in an isolated way as one particular\nissue and give you a snap judgment, which I don't think\nwould be worth very much.\n(Discussion off the record.)\nMR. WILLIAMS: John, I think the Secretary would\nbe interested in our general approach to the whole prob-\nlem because we have discussed only one or two aspects\nof it. I think the memorandum might be in order now.\nMR. ECCLES: Yes. I was just going to say that\nin discussing the excess reserve question and likewise\nin discussing this particular tap issue, it doesn't seem\nto me it can be intelligently discussed without consider-\ning its relationship to the whole problem. Now, we have\nprepared a brief statement here of three pages. We\nhaven't had any time to give it any particular refine-\nment. It is rather a rough draft, but it does express\nin general the views of the Executive Committee and the\nstaff members who sat in with us. Likewise, Mr. Ransom\nand Evans, who sat in with us. They were present, too,\nin the preparation of this statement. It deals with the\nimmediate problem, and then - if you want to go over it,\nthen I would like to say something briefly on this short\ntap issue as related to it.\nH.M.JR: Has anybody else seen it?\nMR. SZYMCZAK: No, we just brought it up.\nMR. ECCLES: This just came off the typewriter ten\nminutes before we left.\nH.M.JR: Dan will read it out loud.\nMR. BELL: \"Treasury Financing. The magnitude of\nof the war finaneing program is increasing enormously as\n245\n- 22 -\nMR. SPROUL: Well, I don' think we can get a\nreaction within two or three days that would mean\nanything. It takes a consideration and study of the\nwhole financing problem and the whole program, and to\nask 8. lot of country bankers how they feel about it, they\nwill look at it in an isolated way as one particular\nissue and give you a snap judgment, which I don't think\nwould be worth very much.\n(Discussion off the record.)\nMR. WILLIAMS: John, I think the Secretary would\nbe interested in our general approach to the whole prob-\nlem because we have discussed only one or two aspects\nof it. I think the memorandum might be in order now.\nMR. ECCLES: Yes. I was just going to say that\nin discussing the excess reserve question and likewise\nin discussing this particular tap issue, it doesn't seem\nto me it can be intelligently discussed without consider-\ning its relationship to the whole problem. Now, we have\nprepared a brief statement here of three pages. We\nhaven't had any time to give it any particular refine-\nment. It is rather a rough draft, but it does express\nin general the views of the Executive Committee and the\nstaff members who sat in with us. Likewise, Mr. Ransom\nand Evans, who sat in with us. They were present, too,\nin the preparation of this statement. It deals with the\nimmediate problem, and then - if you want to go over it,\nthen I would like to say something briefly on this short\ntap issue as related to it.\nH.M.JR: Has anybody else seen it?\nMR. SZYMCZAK: No, we just brought it up.\nMR. ECCLES: This just came off the typewriter ten\nminutes before we left.\nH.M.JR: Dan will read it out loud.\nMR. BELL: \"Treasury Financing. The magnitude of\nof the war finaneing program is increasing enormously as\nRegraded Unclassified\n246\n23 -\nwe are successful in the war production program. The\nmost recent budget estimates for the fiscal year 1943\nindicate that expenditures by the Federal Government will\nbe seventy-six billion dollars instead of sixty-two bil-\nlion as was estimated in January. The Federal debt,\ntaking account of the income from proposed new taxes,\nwill increase by fifty-four billion dollars instead of\nforty billion. Exclusive of sales of War Savings Bonds\nat the hoped for rate of one billion dollars per month,\nthirty-five billion dollars will have to be borrowed\nfrom banks and other lenders and investors.\n\"The size of this task alone emphasizes the necessity\nof adopting a comprehensive long range financing program.\nYesterday's Presidential message required the support of\nsuch a program, if monetary policy is to support fiscal\npolicy in combatting a rise in the cost of living. There\nis a danger in feeling our way along without a program;\nthe danger that we shall drift into & program which does\nnot measure up to the requirements of our situation. The\nviews of various groups of lenders and investors should be\ntaken into account, but they should not control policy,\nnor be allowed to delay too long the adoption of a program.\nFinancing a war of the present magnitude involves a judicious\nbut very substantial amount of telling the buyer what he\nis to take, as well as finding out what he wants to buy.\n\"General Principles. One, the program should not be\ncast in the last war pattern of rising rates of interest\nas the war progresses.\n\"Two, maintenance or increase of the present volume\nof excess reserves as such in the country outside of\nNew York or in New York is not necessary to the program\nand might be detrimental - it would continue pressure\nupon banks to invest whereas banks should have less induce-\nment to invest and others should have more inducement.\n\"Three, there is need for an additional amount of\nshort-term Treasury paper, such as bills and certificates\nof indebtedness, so that excess reserves can be shifted\nreadily from market to market and bank to bank, through\nthe purchase and sale of these obligations. This mobility\nRegraded Unclassified\n247\n- 24 -\nof funds will not be achieved, however, if short-term\nrates are so low as to repel demand for such maturities\noutside the principal money markets.\n\"Four, borrowing from non-bank investors must be\nincreased to the fullest possible extent in order to\navoid the inflationary implications of an unrestrained\nincrease in the volume of bank credit.\n\"Five, borrowing from commercial banks, in S0 far\nas it is necessary, should be for periods not exceeding\nten years.\n\"Six, Federal Reserve System purchases of Government\nsecurities in substantial amounts will be necessary in\norder to maintain adequate bank reserves, and to facilitate\nthe Treasury's financing program.\n\"Methods. The differences not covered by agreement\non principles relate to methods of putting those princi-\nples into effect, and most particularly to methods of\nselling and keeping as large a volume of securities as\npossible outside the banking system.\n\"There are various ways of carrying forward the finan-\ncing program (exclusive of War Savings Bonds, etc.),\nincluding:\n\"One, continuance of present method of offerings for\ngeneral subscription.\n\"Two, periodic offerings of very large issues to be\nsold by campaign methods (Canadian program).\n\"Three, the Tap Issue Method (British program).\n\"Four, a method which combines offerings of special\nsecurities available at all times to investors other than\nbanks, with regular and special campaign offerings of\nsecurities suitable for bank and other investment (such\nas the program previously proposed by the Federal Open\nMarket Committee and the Board of Governors of the Federal\nReserve System).\nRegraded Unclassified\n248\n- 25 -\n\"Whatever method of financing is chosen, and we\nagain recommend the fourth method, we have now reached &\npoint where it is imperative that we have an organiza-\ntion (separate from the War Savings Bond organization,\nwhich is working in a special field) available to sell\nwhatever securities are offered; that is, an organization\nof the commercial banks, as well as the investment bankers\nand others, that will reach investors everywhere and sell\nGovernment securities. Such an organization can and should\nbe set up in each Federal Reserve District centering around\nthe Federal Reserve Bank.\n\"There will not be time before the May financing\nmust be decided and announced to set up the organization\nfor making a comprehensive program effective. The attempt\nshould be made, however, to have this financing conform,\nas far as possible, with the objectives of such a compre-\nhensive program.\n\"Specific Suggestions for May Financing. One, issue\na 7-9 year two percent bond which will be primarily a bank\ninvestment. Such an issue in the amount of one to one and\none-half billion dollars could be readily sold.\n\"Two, begin immediately to increase the weekly offer-\ning of Treasury bills from one hundred fifty million dollars\nto two hundred fifty million. For the present, the Federal\nReserve System will support the Treasury bill rate firmly\nat three-eighths of one percent.\n\"Three, offer a registered two and one-half percent,\n20-25-year market bond which could not be registered in\nthe name of commercial banks for ten years and which could\nnot be transferred for sixty days. The amount of this\noffering need not be fixed.\nH.M.JR: What does that mean?\nMR. SZYMCZAK: After a fifteen year bond before it\ncould be transferred to a commercial bank. For the first\nten years--\nMR. ECCLES: You could take five years or fifteen\nyears. Ten is a--\n249\n- 26 -\nH.M.JR: After the thing is out ten years, the bank\ncan have it?\nMR. SPROUL: After it comes within the area of\nsuitable bank investment, then it would be available to\nbanks.\nMR. SZYMCZAK: That is right. It is consistent with\nthe other statement on the ten years maturity.\nMR. BELL: \"The amount of this offering need not be\nfixed. The books could be left open for as long as\ndesired, and a special canvass of insurance companies\nand other similar investors could be made.\n\"Four, discard all subscription rules. The reasons\nfor these rules have now disappeared and subscribers\nshould be permitted and encouraged to subscribe for what-\never amount of Government securities they desire.\n\"The Federal Reserve System in this serious situation\nmust, of course, do whatever it can to assist in the\nTreasury's program. It can be of greatest help if a com-\nprehensive program is now developed. It is ready and will-\ning to support such a program in whatever ways are necessary\nby whatever means are at its disposal. As an immediate\nguide to its operations, the System might undertake to\npurchase in the open market a sufficient amount of Govern-\nment securities to offset future increases in currency in\ncirculation. This in itself would not constitute a net\nincrease in the amount of available bank credit.\"\nH.M.JR: I will say this. It is a very honest and\nsincere memorandum, and I am very glad to have it. I\ndon't think there is a tremendous amount of difference\nbetween us. I think the principal difference is on the\nquestion of excess reserves, where you say that it shouldn't\nbe changed.\nMR. ECCLES: Well, you are interested in two things,\nthe success of the Treasury financing, and secondly, that\na pattern of rates be maintained. Now--\nRegraded Unclassified\n250\n- 27 -\nH.M.JR: I will add a third one. I don't know which\ncomes first. I would like to sell every dollar that I\ncan to non-inflationary sources.\nMR. ECCLES: Outside the bank. We agree on that.\nH.M.JR: That is right, non-inflationary sources.\nMR. ECCLES: Now, there is one other thing that we\ndidn't - on page two where we - number four. It is our\nidea that this present program for May, that this number\nthree, this long tap issue here, number three, as you\nwill notice, is modified considerably from the one that\nwe proposed in the former memorandum. That is number\nthree, in that it is available--\nMR. SZYMCZAK: It is a market issue, but it is\nregistered.\nH.M.JR: But it is a market issue, you see, but you\nhave a way of keeping the banks from taking it through\nits registration. It is a market issue, but not a--\nMR. BELL: It can't be registered in the name of a\nbank.\nMR. ECCLES: It is not demand at all. It is a market\nissue, but the banks can't take it because it is regis-\ntered outside of the banks.\nMR. BELL: You have improved.\nH.M.JR: It is not a demand issue?\nMR. ECCLES: No.\nH.M.JR: Say it again.\nMR. ECCLES: It isn't a demand issue, it is a market\nissue, but it is not - it can't be registered in the name\nof the banks, so it keeps the banks out of it, and it\ngets your long-term funds in it.\nRegraded Unclassified\n251\n- 28 -\nMR. SZYMCZAK: The banks can get it.\nMR. BELL: It can be transferred between permanent\ninvestors only in the banking area.\nME. ECCLES: That is right.\nMR. SZYMCZAK: You don't exclude the banks either.\nAfter a period of time they can have it.\nH.M.JR: The doctor is over at the White House; and\nif I slipped over, then I could come back; but if you\npeople could keep this thing going, but particularly should\nwe go ahead on May 4 and should we do it on May 11, or\nwhat? I will be back. It only takes me ten minutes.\nBut you people have changed here considerably.\nMR. SZYMCZAK: No, we haven't changed. We are just\nmoving along with conditions, and we still stand by our\noriginal statement.\nH.M.JR: But your other two issues were demand issues.\nMR. SZYMCZAK: I know, but that is the present finan-\ncing we are talking about, that May financing.\n(The Secretary left the conference.)\nMR. ECCLES: I was just going to say, Dan, that this\nspecific suggestion for May financing on number three,\nthat after that is out of the way, it was then our idea\nthat the short-term non-negotiable issue should be tried\nbefore the June financing so as to find out what funds\ncan be gotten from that source, and it may well be that\nwith this program under number three here that you would\nget, as the Secretary indicated, he is willing to take\nthree or four or five billion, that you may get enough\nthat June financing, market financing, would not be necessary.\nMR. BELL: I am a little worried about that, because\nit takes time, you know, to put one of these things out,\nregulations and everything.\n252\n- 29 -\nMR. ECCLES: What do you mean, Dan, which ones do\nyou mean?\nMR. BELL: I am talking about tap issues that require\nspecial provisions.\nMR. ECCLES: Sure. Our idea was to make it available\nfor the first of June. That is the short tap.\nMR. BELL: I am still worried.\nMR. ECCLES: Well, I mean to the extent here that\nyou propose bills. We feel that you have got to have\nmore bills for two reasons. First, to help to make\neffective the existing two and a half billion or two\nbillion seven hundred million of excess reserves; and\nsecondly, so that the Federal Reserve System will have\na volume of securities that they can readily purchase.\nIn other words, the best way for us to deal with the\nexcess reserve picture would be to purchase a half\nbillion dollars worth of bills over a period of weeks\nhere. That would be the one way to give to the market\nexcess reserves. We feel very strongly that to come out\nand to actually decrease reserve requirements until these\nother things are done - now, it may well be that later on\nit would appear to be advisable to do that; but until\nthese other things were done, until a program is set, it\nwould look like all we are trying to do is to make for the\ncontinuation of the easy open market financing based upon\nthe banks doing the great bulk of the financing, doing\nthe underwriting, and we feel that that is a mistake, to\ngive that impression at this time. Again, the President\nhas just announced an anti-inflationary program. The\nBoard is considering a regulation covering the whole\nfield of consumer credit, which is the most difficult and\ninvolved job. It will have to do with the banks to a\nlarge extent. Now, to come along and to take that action\nwith reference to consumer credit as an anti-inflationary\nmeans, along with other things that the President is doing,\nand the the Board right in the face of that to come out\nand announce they have increased reserves, I mean, increased\nexcess reserves so as to put the banks under pressure, it\nwould look contradictory, and we feel it would be a great\n253\n- 30 -\nmistake, and entirely uncalled for. If this sort of a\nprogram is adopted and we carry out an open market\noperation in order to maintain that three-eighths rate\nin the bill market--\nMR. BELL: Well, I don't think you necessarily put\nthe banks under pressure by increasing reserve require-\nments. You certainly make them feel a little happier.\nMR. ECCLES: They don't want it. Did you read this\nreport of Reserve cities the other day on the question\nof reserves?\nMR. BELL: I read it.\nMR. ECCLES: Well now, speaking of pleasing the -\nthe Secretary was anxious to avoid offending the banks\nfrom the standpoint of their being customers, and this\npoint which is accepted by the Reserve City Bank Associa-\ntion has this to say: \"For the maintenance of a broad\nand dependable market for Government securities, the\nprime necessity is cooperative understanding between the\nTreasury, the Reserve System, and banks, buyers, and\nothers. Closely related to the question of maintenance\nof steady interest rates is the reserve position of the\nbanks. For a number of years the banks have had large -\nhave had huge amounts of excess reserves, and this excess\nhas been largely responsible for a continuous decline\nin interest rates. It has made Treasury financing very\neasy; for as rates fell, bank earnings also fell; and\nthe banks were under pressure to use excess funds to buy\nmore and more Government securities. Now, this situation\nneeds to be re-examined, for it is necessary that securities\nbe distributed wisely among investors, and the banks take\nonly what cannot be sold to others.\n\"The banks ought to have less inducement to invest,\nand others should have more inducement. This objective\nwould probably be achieved more easily if excess reserves\ndeclined somewhat further, but they should not be allowed\nto decrease enough to place too much - or to place pressure\non the market.\" Now, there is the bankers' point of\nview on this picture so that--\n254\n- 31 -\nMR. BELL: The original draft had a billion and &\nhalf, and they were afraid of that figure, so they took\nthat out.\nMR. SPROUL: They were afraid of that figure, because\nthey had in the back of their minds selling the program\nto the Treasury, and they thought there might be some\nresistance to the figure here. They still believe that\nway, I think.\nMR. BELL: That is right.\nMR. ECCLES: They would be very much opposed to an\nincrease in the reserves. We would get just the same -\nwe would get real criticism, I am sure. I am not con-\ncerned about that. If it were the thing to do - I think\nthis program cannot be designed to suit private interests.\nYou have got to try to work with them, but at the same\ntime it has got to be a broad over-all program, as indi-\ncated here.\nMR. SZYMCZAK: And it isn't something you can do\nover night, Dan. You can't go right out and say, \"There\nis a billion or two billion dollars of money waiting for\nyou. It is an educational effort just like the War Savings\nBonds, it takes time to work out.\nMR. BELL: That is right. We can't rely on it for\nany particular money. That is what I am afraidis\ndeveloping here. The Secretary is--\nMR. BUFFINGTON: He doesn't understand that.\nMR. BELL: We just can't do that.\nMR. ECCLES: We don't want that to take the place\nof your May and June financing, that isn't our idea.\nMR. BELL: I don't think it should take the place\nof either one of them.\nMR. ECCLES: No, we never expected it to.\nMR. SZYMCZAK: It takes time.\n255\n- 32 -\nMR. ECCLES: The Secretary as he went out of the room\nsaid we have got to discuss whether we have got to do\nthis next week or the week of the eleventh. Now, Dan,\nyou are out of money by the twentieth. I think it has\nto be done, and I think we have to have two billion to\ncarry us through to the next financing; and while we\nhave a large balance going out of June, we are spending\na hundred to a hundred and twenty-five millions & day\nabove our receipts.\nMR. SPROUL: We say you can get that, and whatever\nyou get with this long term registered bond will be so\nmuch additional, which will--\nMR. SZYMCZAK: And you are breaking--\nMR. SPROUL: Ease your total.\nMR. ECCLES: And you can get ready for your short\nregistered for June.\nMR. WILLIAMS: Dan, the attitude of the banks of\nthe country which concerns the Secretary, and I think\nvery properly so, I think, turns on this. Will they be\ncontent to confine their maturities to ten to twelve\nyear stuff at a rate which related to the maturities, say\ntwo percent? I would think there the problem of earnings\nfor the bank is taken care of by the volume of the stuff,\nbecause there is going to be enough for everybody by the\ntime we get through here.\nMR. BELL: Well, I don't think they are worried about\nthe volume. They are going to get plenty. I think what\nthe banks are going to ask for, at least I am fearful\nthis is what they are going to ask for, you have given\neverybody else a special security. They can come in and\nget their money on it any time with certain notice. Now,\nyou have left us the bag so far as the market is con-\ncerned. Now, why can't we get a special security where\nwe can put it on our books at par?\nMR.GOLDENWEISER: That is the very point I wanted to\nmake. This security doesn't offer - this security that\nRegraded Unclassified\n256\n- 33 -\nis proposed in the memorandum doesn't say that it is\nredeemable without notice.\nMR. BELL: No, but that is just for this particular\nfinancing.\nMR. ECCLES: This tap issue.\nMR. BELL: You still want the tap issue, as I\nunderstood.\nMR. SPROUL: The short-term issue we still recommend,\nand that would be a redeemable issue; but the banks are\ngetting what they want in short-term market issues which\nthey can buy and sell with anyone, not be confined as\nthey would be with this redeemable tap issue; and further-\nmore, they - if they - they know that they have & call\non the Federal Reserve System if they need funds prior to\nthe maturity of the obligation. They both have a market-\nable issue which doesn't--\nMR. BELL: You have discarded entirely the long tap?\nMR. SPROUL: We have a substitute for it now, and\nwe still recommend the short tap as part of a comprehensive\nprogram.\nMR. BELL: Well, you have relieved my mind a little;\nbecause as we approached it before, I said that I didn't\nmind the short tap, and I thought maybe it would produce\nsome money, but I certainly have always been luke-warm\nto this long tap, and I have never been so sure as to\nwhat it would do to the market.\nMR. McKEE: That is fine. Then you vote \"yes\" on\nthe short tap?\nMR. BELL: I didn't say I voted \"yes.\" I said, \"I\nwould go along with it.\"\nMR. ECCLES: Well, Dan, so far as the long tap, we\nwere interested in accomplishing a financing of a long-term -\nRegraded Unclassified\n257\n- 34 -\na long-term financing outside of the banks.\nMR. BELL: We all agree to that. We all agree\nthat we want to get outside of the banks.\nMR. ECCLES: Well, this accomplishes the same thing.\nMR. BELL: Let me ask you this. You talk about\nthis sales program and the drive that the Federal Reserve\nwith the organization they have could put on. Couldn't\nyou do the same thing with a two and a half percent market-\nable security with no frills or additions?\nMR. SPROUL: Sure we could, but then it would go\ninto the banks as well as to the others--\nH.M.JR: It wouldn't if you placed it permanently.\nMR. SPROUL: Well, they could buy it in the market.\nMR. BELL: No, I am talking about a marketable security,\nand banks will take the security that is meant for them,\nthe two percent. Now, you are going to put on a selling\ncampaign to sell the long two and a half percent marketable\nsecurity, and you are going to sell it to everybody except\nbanks.\nMR. SPROUL: The banks all over the country, I think,\nmany of them would take the two and & half percent obliga-\ntion knowing that they had a demand obligation as far as\nwe are concerned under present circumstances, and I see\nno reason why the Treasury should pay two and a half percent\nfor bank money under these conditions.\nMR. ECCLES: It is demand when you get the market\nissue - two and a half market issue is practically a\ndemand issue today.\nMR. SPROUL: I think the only money the Treasury should\npay two and a half percent for is insurance companies' and\nother institutional investors' money, where there is some\nreason really to subsidize the business because it needs\n258\n- 35 -\nthat sort of income to keep going, and it is necessary\nto our social order to keep it going, but there is no\nreason to pay two and a half percent to banks for bank\ncredit in these circumstances.\nMR. HAAS: What is significance in - the meaning\nof \"for the present\" when you are talking about that\nthree-eighths rate?\nMR. ECCLES: George, you don't want to say--\nMR. HAAS: I would like to get a little bit more\nthe spirit of '76 on that.\nMR. MURPHY: He means they will put it down soon.\nMR. HAAS: I mean, is that just a temporary--\nMR. McKEE: I think it was Ransom, George, that\nwas speaking about '76. He was reading a circular of\nGovernment debt during the Civil War. What was the\nlength of it?\"he said. It was a period of time. The\ninterest rate was seven and three-eighths.\nMR. SPROUL: Well, as far as I am concerned, I\nwould be frank with you about that. I think we should\nstand at three-eighths of one percent for the present\nuntil we see what the effect of standing at three-eighths\npercent as on the distribution of securities at short\nterm, that we would want to take another look at it\nafter we had had experience with it, not be committed\nto that indefinitely, and that if the rate had to go\nhigher to accomplish the purpose of getting a wider\ndistribution outside the principal money centers of\nshort term securities, then we would want to contemplate\nthat.\nMR. McKEE: Haven't we gone a long distance since\nthe rate has come up here, George, in speeding this out\nin the street, so to speak?\n259\n- 36 -\nMR. HAAS: You have gone a long distance. If it\nwent any place it had to go outside.\nMR. ECCLES: Yes, but they did go out. I mean,\nthere is an increased buying outside as the rate gets\nabove a quarter. A quarter of a percent rate just didn't\ninterest the outside investors. The three-eighths does.\nEven now you have had quite 8. considerable amount of out-\nside buying of bills, even though you are not quite up\nto the three-eighths, and it is our feeling that 8 three-\neighths rate would bring in a considerable amount of the\nexcess reserves of the banks outside of New York. Certainly\nwe wouldn't have any - we didn't expect that the three-\neighths rate would be changed unless it was agreeable\nto the Treasury that it should be, unless all of the facts\nof the situation after discussion and consultation with\nthe Treasury made it appear to them as well as to us\nthat there should be a change.\nMR. HAAS: My personal opinion is that the three-\neighths and the prospect that this isn't even firm, is\ngoing to change your rate structure even out on the\nlong end.\nMR. BELL: That is what I am afraid of, too.\nMR. ECCLES: Well, if we support the long bonds it\nisn't.\nMR. MURPHY: There is a big difference between a\nmarket that is supported, though, and a market that\nstays there, apparently, of its own accord.\nMR. ECCLES: You are going to have to have 8. supported\nmarket on this whole picture. Every country has had it,\nand you are going to have to get used to it.\nMR. MURPHY: I would prefer to not have a - there\nis one thing between a market that is mesmerized, and\nanother thing between a market that has visible props\nunder each issue.\n- 37-\n260\nMR. McKEE: By purchasing power?\nMR. MURPHY: By direct purchasing.\nMR. GOLDENWEISER: A reduction in a reserve require-\nment is a pretty visible prop. I can't see why that isn't\nas visible a prop and as big a prop as anything you could\nput up. I don't think you can get any distinction as\nbetween buying the securities as a visible prop, and\nreducing the reserve requirements as an invisible prop.\nI don't know that the distinction is a good distinction\nanyway, but you certainly can't make it between those\ntwo things.\nMR. HAAS: Well, Goldie, before this year is out there\nhas got to be quite an increase in excess reserves. Are\nyou going to do it all through open market operations?\nMR. SPROUL: Got to be quite an increase in reserves,\nnot in excess reserves.\nMR. HAAS: Oh, I see what you mean. All right.\nMR. GOLDENWEISER: You are asking me, George. My\nanswer is that I wouldn't want to say now what is -\nwhat we have got to do six months from now or nine months\nfrom now. Things are changing too fast. I wouldn't\nreduce requirements until we found that there is 8 situation\nthat requires a major readjustment. I think myself, and\nI can speak only for myself, that the reserve requirements\nshould be used only as a major readjustment at infrequent\nintervals.\nMR. HAAS: In terms of what the Budget has just recently\nbeen advised, and I thought there was a general feeling\nin the Reserve that they wanted a long term program, I\nshould think the long term program would at least en-\nvisage - I mean, the expenditure figures as they are now\nset forth have just recently been revised, so that you\nwould - you couldn't look that far ahead, it is obvious.\nThere are only really two places where the money and the\nmagnitude as required can come from. That is from -\n261\n- 38 -\nthat, of course, is your income which is generally wages\nand salaries, and what you can't get out of that has to\ncome from the banks.\nMR. ECCLES: Well, it has to come from corporations,\ntoo, George.\nMR. HAAS: Yes. I wasn't counting that. But that\nis a minor - in terms of the magnitude of the figures,\nMarriner, wouldn't you say it would be minor? I will\ntake any estimate you want and say, \"I agree with you,\"\nbut still the amount is relatively small.\nMR. ECCLES: Isn't this true? It is a question, after\nall, of the total volume of funds and the velocity of\nthem, how fast you can - now, the velocity of our deposit\nstructure is still very low, which shows that there are\na lot of funds that aren't being used. So to the extent\nthat funds must be supplied by increasing the volume of\nfunds through banks making the investments, it seems to\nme it is pretty difficult to determine until you get a\nmuch greater velocity of existing funds, that we are not\nat the present time using anywhere near the funds that\nare available and the sho t tap issue would, to my way\nof thinking, tap a very large supply of funds, an in-\ncreasing amount of funds, as corporations are unable -\nthat is, the non-defense corporations are unable to invest\ntheir depletion and their depreciation reserves and like-\nwise the funds that are going to accumulate through the\nreduction of inventories. The inventories today of con-\nsumer goods are very high and those - and the accounts\nare high, and as the accounts are checked and as the\ninventories are reduced, which is sure to be the case\ndue to the reduction in the supply of consumer goods;\nfunds are going to accumulate and as those funds accumulate\nthe Treasury ought to get those funds rather than create\nnew funds, and it was for that reason that we felt that\nthis short tap issue would meet that problem, and I am\nsure that if the banks had a choice of having the short\ntap issue put into effect, or increasing reserve requirements\n262\n- 39 -\nso that they could do the financing that we would expect\nto be done through the short tap issue, they would prefer\nthe short tap issue rather than the increase in reserve\nrequirements which would force them to not only take\nwhat we want them now to take, but take, in addition, funds\nthat we would like to place outside the banks.\nMR. HAAS: Assume, Marriner, all right,you put out\ntomorrow the short tap. Still you have got to do some-\nthing about the reserve picture and, of course, you wouldn't\ndo the whole thing in one lick. I wouldn't suggest that.\nBut something has to be done in the very near future.\nWhy not do it prior to this financing?\nMR. ECCLES: Well, you have got two billion seven\nhundred million of excess reserves and we feel if you put\nout some bills and if the Federal Reserve operates in\nthe bill market, that that will meet the situation, at least\nfor a month or so here. Now, it may well be that it would\nbe necessary for us to take action on reserves in the course\nof several months, and we feel that it would be better to\ndo it then rather than right now after this anti-inflationary\nprogram has been announced.\n(The Secretary returned to the conference.)\nMR. HAAS: How about posting a bill rate? That would\nbe right in line with the anti-inflationary program.\nMR. ECCLES: Well, if we go in and buy at three-eighths\nit has the same effect.\nMR. McKEE: Well, you haven't any fear, George, that\nany issue that you put out isn't going to be sold, have\nyou?\nMR. HAAS: Well, I think - that would just be foolish-\nness to allow that to happen.\nMR. McKEE: Yes.\nMR. HAAS: But I have these fears, that you get rates -\n- 40 -\n263\nwell, now for instance, the six months certificate, we\ncan't use that any more with the present rates. We\ncouldn't issue another one today, I don't think.\nMR. McKEE: Why not?\nMR. HAAS: I think it is out of line.\nMR. MURPHY: The bill rate went up.\nMR. HAAS: The creeping up is what bothers me and\npretty soon it creeps up 80 the long end of your market\nbecomes untenable.\nMR. SPROUL: There is nothing to - at least in the\npast record of rates, to indicate that the long market\nmust become untenable.\nMR. ECCLES: The Secretary has suggested that on\naccount of his throat and this treatment, that we meet\nwith him again in the morning and this afternoon that\nyou boys meet with us over at the Fed. Is that agreeable?\nMR. SPROUL: I will have to be back in New York\ntomorrow.\nMR. ECCLES: Afternoon?\nMR. SPROUL: Yes.\nMR. ECCLES: Can you be here in the morning and take\na plane at noon? It is important. What time this after-\nnoon, Dan, would be suitable? How would two-thirty do?\nMR. BELL: I have got an appointment at two-thirty\nbut I can break that. Would three be all right?\nMR. ECCLES: It would be all right with me. Is that\nO.K. with everybody?\nMR. SZYMCZAK: And eleven c'clock tomorrow morning?\nRegraded Unclassified\n- 41 -\n264\nMR. McKEE: Three this afternoon?\nH.M.JR: Shall we do it at three here tomorrow\nafternoon? Could you stay over, Bob?\nMR. ROUSE: I think it would be better to go home\nand come back. I can be here tomorrow at three.\nMR. ECCLES: O.K., then.\nH.M.JR: I will be frea at three tomorrow afternoon.\nMR. ECCLES: How is that for you, Al?\nMR. WILLIAMS: All right.\nH.M.JR: All right, then.\n265\nApril 28, 1942\nTREASURY FINANCING\nThe magnitude of the war financing program is increasing enormously as we\nare successful in the war production program. The most recent budget estimates for\nthe fiscal year 1943 indicate that expenditures by the Federal Government will be\n76 billion dollars instead of 62 billion as was estimated in January. The Federal\ndebt, taking account of the income from proposed new taxes, will increase by 54\nbillion dollars instead of 40 billion. Exclusive of sales of war savings bonds at\nthe hoped for rate of one billion dollars per month, 35 billion dollars will have\nto be borrowed from banks and other lenders and investors.\nThe size of this task alone emphasizes the necessity of adopting a com-\nprehensive long range financing program. Yesterday's Presidential message requires\nthe support of such a program, if monetary policy is to support fiscal policy in\ncombatting a rise in the cost of living. There is a danger in feeling our way\nalong without a program; the danger that we shall drift into a program which does\nnot measure up to the requirements of our situation. The views of various groups\nof lenders and investors should be taken into account but they should not control\npolicy, nor be allowed to delay too long the adoption of a program. Financing a\nwar of the present magnitude involves a judicious but very substantial amount of\ntelling the buyer what he is to take, as well as finding out what he wants to buy.\nGeneral Principles\n1. The program should not be cast in the last war pattern of rising\nrates of interest as the war progresses.\n2. Maintenance or increase of the present volume of excess reserves\nas such in the country outside of New York or in New York is not\nnecessary to the program and might be detrimental--it would con-\ntinue pressure upon banks to invest whereas banks should have\nless inducement to invest and others should have more inducement.\n3. There is need for an additional amount of short-term Treasury paper,\nsuch as bills and certificates of indebtedness, so that excess\nRegraded Unclassified\n-2-\n266\nreserves can be shifted readily from market to market and bank to\nbank, through the purchase and sale of these obligations. This\nmobility of funds will not be achieved, however, if short-term\nrates are BO low as to repel demand for such maturities outside\nthe principal money markets.\n4. Borrowing from non-bank investors must be increased to the fullest\npossible extent in order to avoid the inflationary implications of\nan unrestrained increase in the volume of bank credit.\n5. Borrowing from commercial banks, in so far as it is necessary,\nshould be for periods not exceeding ten years.\n6. Federal Reserve System purchases of Government securities in sub-\nstantial amounts will be necessary in order to maintain adequate bank re-\nserves, and to facilitate the Treasury's financing program.\nMethods\nThe differences not covered by agreement on principles relate to methods of\nputting those principles into effect, and most particularly to methods of selling and\nkeeping as large a volume of securities as possible outside the banking system.\nThere are various ways of carrying forward the financing program (exclusive\nof War Savings Bonds, etc.), including:\n1. Continuance of present method of offerings for general subscription.\n2. Periodic offerings of very large issues to be sold by campaign\nmethods (Canadian program).\n3. The Tap Issue Method (British program).\n4. A method which combines offerings of special securities available\nat all times to investors other than banks, with regular and special\ncampaign offerings of securities suitable for bank and other invest-\nment (such as the program previously proposed by the Federal Open\nMarket Committee and the Board of Governors of the Federal Reserve\nSystem).\nWhatever method of financing is chosen, and we again recommend the fourth\nmethod, we have now reached a. point where it is imperative that we have an organiza-\ntion (separate from the War Savings Bond organization, which is working in a. special\nfield) available to sell whatever securities are offered; that is, an organization\nof the commercial banks, as well as the investment bankers and others, that will\neach investors everywhere and sell Government securities. Such an organization\ncan and should be set up in each Federal Reserve District centering around the\nFederal Reserve Bank.\nRegraded Unclassified_\n-- 3 --\n267\nThere will not be time before the May financing must be decided and\nannounced to set up the organization for making a comprehensive program effective.\nThe attempt should be made, however, to have this financing conform, as far as\npossible, with the objectives of such a comprehensive program.\nSpecific Suggestions for May Financing.\n1. Issue a 7-9 year 2 per cent bond which will be primarily a bank\ninvestment. Such an issue in the amount of 1 to 1 1/2 billion\ndollars could be readily sold.\n2. Begin immediately to increase the weekly offering of Treasury bills\nfrom 150 million dollars to 250 million. For the present, the\nFederal Reserve System will support the Treasury bill rate firmly\nat 3/8 of 1 per cent.\n3. Offer a registered 2 1/2 per cent, 20-25 year market bond which\ncould not be registered in the name of commercial banks for 10\nyears and which could not be transferred for 60 days. The\namount of this offering need not be fixed, the books could be\nleft open for as long as desired, and a special canvass of in-\nsurance companies and other similar investors could be made.\n4. Discard all subscription rules. The reasons for these rules\nhave now disappeared and subscribers should be permitted and\nencouraged to subscribe for whatever amount of Government\nsecurities they desire.\nThe Federal Reserve System in this serious situation must, of course,\ndo whatever it can to assist in the Treasury's program. It can be of greatest\nhelp if a comprehensive program is now developed. It is ready and willing to\nsupport such a program in whatever ways are necessary by whatever means are at\nits disposal. As an immediate guide to its operations the System might under-\ntake to purchase in the open market a sufficient amount of Government se-\ncurities to offset future increases in currency in circulation. This in itself\nwould not constitute a net increase in the amount of available bank credit.\nRegraded Unclassified\n268\nApril 28, 1942\n1:00 p.m.\nHMJr:\nHello.\nOperator:\nJudge Rosenman.\nHMJr:\nRight.\nOperator:\nGo ahead.\nHMJr:\nHello. Hello.\nJudge\nRosenman:\nHello.\nHMJr:\nMy name is Henry.\nR:\nHenry.\nHMJr:\nYeah.\nR:\nCan you tell me approximately how many people are\naffected in the United States on - by a twenty-\nfive thousand ceiling? In other words, how\nmany people, approximately, would have a net\nincome after payment of taxes of twenty-five\nthousand or\nHMJr:\nNo, but I'll try and find out for you.\nR:\nNo, I don't mean the exact, I mean, five hundred\nthousand, two hundred\nHMJr:\nI wouldn't know.\nR:\nCould you find out?\nHMJr:\nSure. How many pages are there in the Sears,\nRoebuck catalog?\nR:\nYeah. Is that many?\nHMJr:\nI don't know.\nR:\nOkay.\nHMJr:\nHow soon do you want to know?\nR:\nWell, inside of two hours.\nRegraded Unclassified\n268\nApril 28, 1942\n1:00 p.m.\nHMJr:\nHello.\nOperator:\nJudge Rosenman.\nHMJr:\nRight.\nIt\nOperator:\nGo ahead.\nHMJr:\nHello. Hello.\nJudge\nRosenman:\nHello.\nHMJr:\nMy name is Henry.\nR:\nHenry.\nHMJr:\nYeah.\nR:\nCan you tell me approximately how many people are\naffected in the United States on - by a twenty-\nfive thousand ceiling? In other words, how\nmany peoole, approximately, would have a net\nincome after payment of taxes of twenty-five\nthousand or\nHMJr:\nNo, but I'll try and find out for you.\nR:\nNo, I don't mean the exact, I mean, five hundred\nthousand, two hundred\nHMJr:\nI wouldn't know.\nR:\nCould you find out?\nHMJr:\nSure. How many pages are there in the Sears,\nRoebuck catalog?\nR:\nYeah. Is that many?\nHMJr:\nI don't know.\nR:\nOkay.\nHMJr:\nHow soon do you want to know?\nR:\nWell, inside of two hours.\n269\n- 2 -\nHMJr:\nOh, hell. We'll either give it to you right\nor not at all.\nR:\nOkay.\nHMJr:\nWhat?\nR:\nOkay.\nHMJr:\nSure.\nR:\nAll rightie.\nHMJr:\nSure. Is that all you want to know?\nR:\nThat's all right now. There's been no change\non taxes. Anything you got in the speech about\ntaxes you want changed?\nHMJr:\nNo, I'm - no, I'll leave it - as far as I'm\nconcerned, I'd say leave it alone. It's a\ngood speech.\nR:\nWell, it's been changed a lot. Oh, I'm wrong\nwhen I say that there's no change on taxes.\nWhere he lists as items\nHMJr:\nYeah.\nR:\nhe's changed that number one to read -\nyou make the change there\nHMJr:\nWait a minute. What's it say?\nR:\nThat item number one he's just changed to read -\noh, wait until I get it.\nHMJr:\n(Talks aside) Tell Chauncey or somebody -\nsomebody has the President's speech for tonight -\nto get it. I don't know who has it. Somebody.\nHello.\nR:\nHello.\nHMJr:\nYeah.\nR:\nHe's cut the seven points in length.\nRegraded Unclassified\n270\n- 3 -\nHMJr:\nYeah.\nR:\n\"One. We must through heavier taxes keep\npersonal and corporate profits at a low,\nreasonable rate.\nHMJr:\nYeah.\nR:\nThat's all you're interested in.\nHMJr:\nIs that all?\nR:\nAnd then in five, you know he says - it's\nchanged. \"We must get more billions into\nWar Bonds.\"\nYou don't object to that.\nHMJr:\nNo.\nR:\nThere have been no other changes you're\ninterested in.\nHMJr:\nNo, that's all right.\nR:\nOkay.\nHMJr:\nI'd say that was fine.\nR:\nAll right.\nHMJr:\nThat's fine.\nR:\nIf any more changes come that you're interested\nin, I'll call you.\nHMJr:\nI appreciate it. And I'll do the other thing\nright away.\nR:\nHe's thinking of outting in a sentence, \"We\nwill have to tax all tax-exemot Federal\nsecurities.\"\nHMJr:\n(Laughs) Go to hell.\nR:\nOkay.\nHMJr:\n(Laughs)\n271\n- 4 -\nR:\n(Laughs)\nHMJr:\nDid you get my letter?\nR:\nNo.\nHMJr:\nIt's not fair to pick on me today, Sam.\nI've got such a bum throat. I'm low.\nR:\nOkay. You should be in bed.\nHMJr:\nIt's - I'm not up - - it isn't - it's unfair\nsport.\nR:\nOkay.\nHMJr:\n(Laughs)\nR:\n(Laughs) All right.\nHMJr:\nBut I can still laugh.\nR:\nAll right.\nHMJr:\nAll right.\nR:\nGood-bye.\n272\nMEMORANDUM\nApril 28, 1942.\nTO:\nJudge Rosenman\nFROM:\nSecretary Morgenthau\nIn response to your inquiry as to the approximate number of\npeople who would be affected by limitation of $25,000 yearly income after\nFederal income taxes, I wish to advise your\n1. In calendar year 1942, under the tax rates proposed by\nthe Treasury, it is estimated that the number of individuals\nor families who would have left more than $25,000, after\nFederal income taxes, is as follows:\na. If joint returns are made mandatory, 22,000\nb. If joint returns are not made mandatory, 19,000\n2. In calendar year 1942, under the rates in the Revenue Act\nof 1941, it is estimated that the number of individuals\nor families who would have left more than $25,000, after\nFederal income taxes, is as follows:\na. If joint returns are made mandatory, 44,000\nb. If joint returns are not made mandatory, 38,000\nRegraded Unclassified\n273\nApril 28, 1942\n3:00 p.m.\nSILVER LEGISLATION\nPresent: Mr. White\nMr. Foley\nMr. Bernard Bernstein\nMr. E. M. Bernstein\nMrs. Klotz\nMr. Henry Morgenthau, III\nH.M.JR: I am for abolishing all silver legislation\nwhen I go up there tomorrow.\nMR. WHITE: Well, they will certainly do that.\nH.M.JR: What are they?\nMR. FOLEY: McCarran introduced a resolution--\nH.M.JR: A little louder. Just because I talk in a\nwhisper is no reason for you to.\nMR. FOLEY: McCarran introduced a resolution about\na month ago which was referred to this special silver\ncommittee in the Senate to investigate the reasons\nrelating to the order which OPM put out relating to prefer-\nence ratings for certain mining machinery. I assume that\nthat is the reason why he wants you to come down there.\nH.M.JR: No, he said in view of my statements in the\npress.\nMR. FOLEY: I see.\nH.M.JR: So your assumption is wrong. Start all over\nagain. I made & statement based on what Harry White told\nme a couple. of months ago, that he would have some silver\nlegislation ready for me if and when I would give him a\nhearing. They pressed me, and I said, \"Yes, it is being\nstudied in Harry White's shop.\" Now I am on the spot.\nWhat did you have, Harry?\nRegraded Unclassified\n274\n- 2 -\nMR. WHITE: We are on the spot. We have got a bill\nthere.\nMR. FOLEY: We have got a couple of bills here.\nOne bill would authorize you to sell silver at thirty-\nfive cents an ounce, not less than thirty-five cents\nan ounce, and it also would permit you to lease or\nlicense the use of silver and it also would permit you\nupon such terms and conditions as you prescribed to make\nsilver available for use in articles or commodities\nwhich are essential to the prosecution of the war and\nwhich are manufactured pursuant to a contract with the\nUnited States. In other words, that would permit you\nto give it away.\nH.M.JR: And then I could sell it out of stuff\nalready in the Treasury?\nMR. FOLEY: That is right, stuff that is already\nhere.\nH.M.JR: Harry, one of you guys, tomorrow morning\nhave it on a piece of paper, how much industrial silver\nwe will use, the rate now as compared with the last two\nor three years. That is my whole excuse, see. And\nthen have something about copper, Harry, when I go up\nthere tomorrow morning, because we have got so much\nshortage of copper and so much use for the silver, and\ntherefore I feel that we ought to loosen up and let\nthem buy the newly mined silver. What is it, a hundred\nand twenty thousand a year?\nMR. WHITE: It hasn't been that, but it may be that\nthis year.\nH.M.JR: Well, have something like that. But that\nis no good.\nMR. FOLEY: And then it also would suspend the provision\nin the Silver Purchase Act which requires you to buy all\nnewly mined domestic silver at seventy-one cents an ounce.\nRegraded Unclassified\n375\n- 3 -\nMR. WHITE: If you raise that point, I don't think\nyou can quite say what you said unless you say something\nelse, because if you stop buying domestic silver at\nseventy-one cents an ounce, McCarran will come back and\nsay, \"Why, there is a lot of silver that is produced\nwith this copper and this lead. If we can't get seventy-\none cents an ounce, we will have to stop producing some\nof that copper. If\nH.M.JR: Now listen, what I was going to do is,\ninstead of being political and smart, just for a change\nI thought I would be honest. You know, just for a change\nonce in a while. I thought I would say, \"Now, look,\ngentlemen, I know you are not going to agree with me. I\nthink the silver legislation has had eight years of trial.\nIn my opinion, for whatever it is worth, I don't think it\nhas worked. Therefore, I think it ought to be abolished.\nThat is my position.'\nMR. WHITE: I don't think they will let you get away\nwith that wholly, because McCarran is bound to say, \"Now,\nyou are interested in saving copper.\nH.M.JR: No, supposing I just say that. \"I don't\nthink that during the past eight years we have been able\nto prove to my satisfaction that silver is of monetary\nvalue.'\nMR. WHITE: Do you think this is a good time, Mr.\nSecretary, to curtail the production of such necessary\nmetals as copper and zino?\nH.M.JR: Well, no, but let them pay for what they\nneed for copper and zinc.\nMR. WHITE: And Jesse Jones can do that under authority\nwhich he has. He can pay more for certain copper and zinc\nfrom certain mines or certain lodes than he can for others,\nand that is the way to meet that argument. That is Jesse\nJones' problem. That is up to him. He is given authority\nto pay as much as he wants.\nH.M.JR: The thing that I am afraid of, I have made\nthis statement now publicly to Vandenberg and all the others.\nRegraded Unclassified\n276\n- 4 -\nYou fellows think it over. I will simply say, \"Gentlemen,\nthis is the way I feel. I know you don t agree with me,\nbut this thing has had this time. You-can give me\nfigures. I mean, we haven't been-able to get up to - what\nis it, one-third?\nMR. WHITE: One-fourth.\nH.M.JR: \"And the thing hasn't worked and that is the\nway I feel. I know that you won t agree with me, and\nif you need the zinc or the copper, Procurement will pay\nwhatever it is, two cents extra for high-cost copper in\nMichigan. We can do it through Procurement, or Mr. Jones\ncan do it. If we need the extra stuff, we will pay the\nextra money. But to keep on buying this thing and so\nforth and so on, I think it is just unnecessary subsidy\nto a very small segment of the economic part of this\ncountry. That is the way I feel. I am not going to get\nexcited. I know you people will not agree with me, but\nthat is the way I feel.\nMR. WHITE: I think you could say that and add one\nor two more arguments and make it very effective. I think\nyou might also say that you would like to be able to sell\nsilver if it is going above thirty-five cents. You just\ngot a letter from OPA that they are worried about the\nrising price of silver and there is no way of stopping it,\nbecause the industrial demand is increasing and the foreign\nsupply is diminishing, and silver will rise.\nH.M.JR: Well, I think I should say something. It is\nrunning at about the rate of a hundred and twenty million\nounces. We produced how much silver in this country?\nMR. WHITE: Sixty-five.\nH.M.JR: Sixty-five million in this country and sixty\nmillion in Mexico.\nMR. WHITE: Seventy-five million.\nH.M.JR: And how much in Canada?\nRegraded Unclassified\n277\n- 5 -\nMR. WHITE: What is it, about fifteen in Canada?\nTwenty-five.\nH.M.JR: Now, for every million ounces of silver\nthat we can substitute for some other things, it releases\nthat much for bullets.\nMR. WHITE: That is right.\nH.M.JR: \"Now, both from a military standpoint and\nan economic standpoint, I can't see any justification,\nand that is the way I feel, gentlemen.\nMR. WHITE: And it is inflationary too, at this\ntime. Not much, but for whatever it is worth, it is\ninflationary.\nH.M.JR: How much is there of gold and silver behind\nany dollar?\nMR. WhITE: For every ounce of silver that is mined,\nyou issue seventy-one cents.\nH.M.JR: But how much is there behind - there is\nover two dollars behind it.\nMR. B. BERNSTEIN: There is eleven and a half\nmillions of currency in circulation. As against that,\nyou have probably twenty-two and 8. half to twenty-three\nbillions of gold besides the silver.\nH.M.JR: But I mean the last I heard it was two\ndollars plus, was how much gold and silver there was\nbehind every dollar.\nMR. B. BERNSTEIN: That is approximately correct.\nMR. WHITE: What I had in mind, it is inflationary\nin the sense that you issue money for the silver that you\nbuy. It just takes more money and makes copper worth\nthat much more.\nH.M.JR: You issue a dollar twenty-nine, don't you?\nRegraded Unclassified\n278\n- 6 -\nMR. WHITE: You could, but you don't. You issue\nonly the value of the silver you buy. So you issue\nseventy-one cents worth of silver certificates for every\nseventy-one cents worth you buy.\nH.M.JR: Well, I could say on the inflationary\nfront, on the economic front, and on the military front,\nevery one of these fronts, my judgment tells me we should\nstop doing this thing. I am going to say, \"Gentlemen, I\nam not going to get excited about this thing. I am not\ngoing to pull my hair about it one way or the other. I\nknow you people don't agree with me. I don't expect to\nget into an argument. As far as I am concerned, the thing\nhas had a trial for eight or nine years. It is no more\nnecessary today than an NYA or CCC camp. They have both\nserved their purposes in their time, and their time is\npast. What?\nMR. WHITE: I think that is all right.\nH.M.JR: That is a poor comparison.\nMR. WHITE: I wouldn't make that comparison, but do\nyou think that is the way to handle it? They are not\ngoing to agree with it. They are not interested in your\narguments.\nH.M.JR: If I begin to compromise, I might just as\nwell go the whole hog and say, \"Gentlemen, I am going\nto strike the thing off.\" If it was left to me, I would.\nI am not going to push this thing. I am not excited\nabout it. There are a lot of other things.\nMR. FOLEY: Well, I think if you say that you also\nought to tell them that Nelson is thinking in terms of\nrepealing the provision in the Silver Purchase Act which\nrequires you to buy all the newly mined domestic silver,\nso that that silver will get into the market.\nMR. WHITE: Did Nelson tell you that? If he didn't,\nI don't think you should say SO.\nMR. FOLEY: His people have talked about it.\nRegraded Unclassified\n279\n- 7 -\nH.M.JR: I will say this last move we made on\nsilver was on the instigation of Nelson's office.\nMR. WHITE: It was at their request.\nH.M.JR: Instigation.\nMR. B. Bernstein: May I be the devil's advocate\nwith just one more question?\nH.M.JR: I would be disappointed if you weren't,\nBernie, but I am getting used to it, and like it.\nMR. B. BERNSTEIN: Thank you very much. Supposing\nMcCarran says, \"There is such a shortage of strategic\nmaterials that no manpower is wasted when any metal is\nproduced; and since silver is being used as though it\nwere a strategic material, isn't it worth producing it\neven if you have to pay seventy-one cents an ounce for it?\"\nH.M.JR: Oh, I will say, \"Why pay seventy-one when\nyou can get it for thirty-five?\nMR. WHITE: Plus what Jones would pay for the by-\nproducts, plus the further fact that the material and the\nlabor that goes into the the mining of silver should go\ninto the mining of copper and other materials which are\nmore necessary, and it won't be wasted if you don't\nproduce silver.\nH.M.JR: He knows I have got an eleven o'clock\nappointment. When I sit down I will say, \"Now, gentlemen,\nplease remember I have got an eleven o'clock appointment,\nso at a quarter of eleven if this is a heated argument,\nplease don't think I am running out on you. What do you\nthink, Edward?\nMR. FOLEY: It is all right. We are not going to\nrecommend anything. We will just have a little talk.\nH.M.JR: No. I will just say, \"This is the way I\nfeel. I know you are not going to do anything. I have\nmade this statement, and that is the way I feel. If you\nfeel some way else, then don't let's have a hair-pulling\nmatch.\nRegraded Unclassified\n280\n- 8 -\nMR. FOLEY: All right, and we haven't got a bill\nthat we are going to ask to have introduced, and we\nare down. not going to ask the President to send anything\nH.M.JR: No.\nMR. FOLEY: O.K.\nH.M.JR: And I think they would be flabbergasted -\nwhat?\nMR. WHITE: There is some question about OPA coming\nto us again for more bus bars, and we will have soon\nreached the limit of free silver. Now, do you want to\nmention that or do you want to anticipate coming to them\nfor further powers or let that go until that occasion\narises?\nH.M.JR: We will let them have forty million ounces?\nMR. WHITE: Forty thousand tons.\nH.M.JR: How much have you got altogether?\nMR. WHITE: Well, there is another seventeen. It is\nmostly gone, of the free silver. We would have to go into\nthe silver behind the silver certificates.\nMR. FOLEY: What have we got, about eighty of that?\nMR. E.M.BERNSTEIN: Eighty-six altogether.\nH.M.JR: After we let the free silver go, how much\nwould we have left?\nMR. B. BERNSTEIN: About forty-seven altogether.\nH.M.JR: Tons?\nMR. WHITE: Thousand tons.\nH.M.JR: But I don't think we ought to let that go.\nRegraded Unclassified\n281\n- 9 -\nMR. WHITE: There is some difference of opinion\non that. I don't know, if we ever wanted to go to it,\nthere is another proposal which the lawyers have, and\nthat is to permit you the authority to use any metal\nthat you have at all in your coins or behind the silver,\nif you see fit, in any way you see fit for the war\neffort.\nH.M.JR: Well, I think what I will say is this:\n\"If Mr. Nelson feels he needs something more, I am going\nto ask him to come up before you and ask you.\nMR. FOLEY: If the shortage of copper and other\nmetals gets more acute, you might want to ask Congress\nfor authority to call in the copper pennies and the nickels\nand melt them down and put out some kind of a war coin in\nlieu of the things that are out now.\nH.M.JR: I don't think I am going to say much,\ngentlemen. I think I am going to go up there and just be\nvery quiet like, because they are not going to expect\nthat and SO forth.\nMR. WHITE: I think that is wise, because they have\nno intention of being convinced by anything you say.\nH.M.JR: I will never forget the first year I was here.\nYou (Mrs. Klotz) have heard this story. I went to Senator\nAshurst of Arizona. Have you heard me tell this story?\nMR. FOLEY: No.\nH.M.JR: Have you?\nMR. WHITE: No.\nH.M.JR: I said, \"Look, Senator, I am here and I\ncome from the East, and I don't understand silver. Why\nare you so interested in silver?\" He said, \"Morgenthau,\nI was brought up on my mother's knee on silver, and I\ncan no more discuss silver with you than you can discuss\nyour religion with me.\" And I said, \"Senator, thank you\nfor that very revealing explanation.\"\nRegraded Unclassified\n282\n- 10 -\nMR. WHITE: That explains a lot. The only thing\nis, you don't make money out of your religion.\nH.M.JR: No, I don't say I do.\nMR. WHITE: But they do make it out of their silver.\n283\nAPR 23 1942\nDear Mr. Nalsons\nThis is in reply to your letter of April 22nd,\nenclosing a copy of your latter to Mr. Jesse Jones\non the matter of silver bus bare.\nI understand from Mr. Foley that Mr. Jense is\ngoing forward with the arrangements.\nSincerely yours,\n(Signed) \" Morgenthand and\nSecretary of the Treasury.\nMr. Donald M. Helson,\nChairman, Mar Preduction Board,\nWashington, D. C.\ncc-mm. C. Photojile\nBy Messenger Bany 100\nfile wr.white\ncapies to\n4/27/42\nRegraded Unclassified\nWAR PRODUCTION BOARD\nWASHINGTON, D. C.\nOFFICE OF\nDONALD M. NELSON\nApril 22, 1942\nCHAIRMAN\nDear Mr. Secretary:\nThis will acknowledge and thank you for your\nletter of April 16th together with the enclosures referred\nto therein relating to the use of the free silver stocks\nof the Treasury in lieu of copper for bus bars and other\npurposes. In this connection I have written to Jesse\nJones per the attached copy requesting him to save the\nTreasury harmless from any loss of silver resulting from\nits conversion and use for war purposes.\nI am very anxious that no delay occur in the prompt\nuse of this silver and therefore hope you will advise me\nif you feel that I can be of any further assistance.\nSincerely yours,\nWhileren Donald V. Nelson\nThe Honorable\nThe Secretary of the Treasury\nAttachment\nen ENSE\nBUY\nENITED\nWATER\nVINGS\nFORDS\nRegraded Unclassified\nWAR PRODUCTION BOARD\nWASHINGTON, D.C.\nOFFICE OF\nDONALD M. NELSON\nApril 22, 1942\nCHAIRMAN\nDear Mr. Secretary:\nThis will acknowledge and thank you for your\nletter of April 16th together with the enclosures referred\nto therein relating to the use of the free silver stocks\nof the Treasury in lieu of copper for bus bars and other\npurposes. In this connection I have written to Jesse\nJones per the attached copy requesting him to save the\nTreasury harmless from any loss of silver resulting from\nits conversion and use for war purposes.\nI am very anxious that no delay occur in the prompt\nuse of this silver and therefore hope you will advise me\nif you feel that I can be of any further assistance,\nSincerely yours,\nDonald M. Nelson\nThe Honorable\nThe Secretary of the Treasury\nAttachment\nADDRENSE\nBUY\nENGTED\nMATES\nTWOS\nRegraded Unclassified\nApril 22, 1942\nDear Jesse:\nI am in receipt of a letter from Henry Forgenthau dated\nApril 16, 1942, enclosing copies of his recent corresponience with\nyou on the subject of the substitution of silver for copper for bus\nbare and other purposes, In order to save time in this pressing pat-\nter, I an writing you directly and am cending a copy of this letter\nto Mr. Morgenthau.\nMr. Morgenthau, in his letter, referred to the fact that\nthe Treasury Department concluded there was logal authority to permit\nthe use of the free silver on the basis that it be returned to the\nTreasury and that any loss through wear or tear or other reasons be\nmade good. Mr. Morgenthau states that the Attorney General rendered\nan opinion conco. ring in the Treasury's view and that the resident\napproved the proposal.\nIn your letter of April 14th to the Secretary of the Treasury\nyou suggest that the Defense Plant Corporation should not bear the -\nrisk of loss involved in its agreeing to return silver of the same\nweight and fineness to the Treasury. Any such change from the other\nproposal would appear to necessitate further delay, as it would pre-\nsumably require a further opinion from the Attorney Genoral, and\npossibly another approval from the President.\nIt is of the utmpst importance that these arrangements be\ncompleted promptly, if ye are to save the copper and not delay the\naluminum and magnesium programs. Accordingly, I request that you,\nthrough the Defense Plant Corporation or any other agency under your\njurisdiction, agree to bear these risks. If for any reason you feel\nyou do not have the authority to make such an arrangement, please\nadvise me as promptly as possible.\nSincerely yours,\nDonald V. Nelson\nThe Honorable\nThe Secretary of Commerce\nee: Secretary of Treasury\nLML:ECH:me\nRegraded Unclassified\n286\nAPR 28 1942\nGentlement\nAttention: L. W. Knoks\nReference is más to my letter of November 19, 1941, enclosing\na form of letter which I approved and which I authorized and 20-\nquested you, as fiscal agent of the United States, to write to Banco\nde Nexice, S. A., Mexico City, Maxieo, respecting the purchase of\nsevly-mined Maximan silver.\nIt 10 my understanding that Banco de Mexico has advised you\nthat 10 vishes to remov, for the menth of May, 1942, the\nnent provided for by your letter of November 21, 1941, to it. This\nis to advise you that you are authorized and requested, as fiscal\nagent of the United States, to resev such arrangement for the month\nof May, 1942, all as stated is your letter to Banco de Mexico above\nnentioned, emergé that during May, 1942, you may purchase sevly-\nnined Mexican silver which according to the production date marked\non the have vas produced in Maziee during April, May or June, 1942,\nand so to advise Banco de Hextee, and to carry out during such month\nthe transactions contemplated W your letter of November 21, 1941.\nIt 10 understood that the terms of the Department's letter to\nyou of June 19. 1934, regarding the purchase for the account of the\nUnited States of silver, at home or abroad. shall apply to the action\ntaken by you parsuant to the foregoing, except that the silver pur-\nchased parsuant to this amborization need not be of the degrees of\nfineness, 02 earry the marks, required for \"good delivery\" in the\nmarket of the place where the purchase is made or where delivery is\nto be taken.\nVery truly yours,\n(Bigned) B. Morgenthan. JF.\nSecretary of the Treasury.\nFederal Recerve Bank of New York,\n33 Liberty Street,\nliev York, N. T.\nRH:kma 4/14/42\nname\nDidnets office\nRegraded Unclassified\n287\nAPR 28 1942\nGestlement\nAttention: by W. Instea\nReference Le made to w letter of February 28, 1936, enclosing a\nform of letter which I approved and which I authorized and requested yea,\nas fiscal agent of the United States, to write to the Bank of Canada,\nObsawn, Qatario, Canada, respecting the purchase of newly-mined Considian\nsilver, and also so of letters of May 13, 1936. November 5. 1936, January\n26, 1938, March 29. 1940 and September 14, 1940, is this connection.\nIt le my understanding that the Bank of Canada has advised you that\n11 vishes to renov, for the month of May, 1942, the arrangement pro-\nvided for by your letter to it of February 29, 1936 as amended and clari-\nfied by your letters of Kag 27, 1936, lloveaber 10. 1936, January 27. 1938,\nMarch 30. 1940 and September 24, 1940. This is to advise you that you are\nauthorised and requested, as fissel agant of the United States, to TOROV\nsuch affangament for the month of May, 1942, all as stated in your letter\nto the Bank of Canada above mentioned, as ensuded and clarified, exsept\nthat during Hay, 1942, you my purchase nevly-mined Canndian silver which\naccording to the production date marked en the bare was produced is\nCanada during April, May or June, 1942, and so to advice the Bank of\nCanada, and to earry out during soah south the transmations contemplated\nby your letters of February 29, 1936. May 27. 1936, November 10. 1936,\nJanuary 27. 1938, March 30. 1940 and Suptember 24, 1940.\nIt is understood that the berne of the Department's letter to you of\nJune 19, 1934. regarding the purchase for the account of the United States\nof silver, at have or abroad, shall apply to the action taken by you your\nswet to the foregoing, except that the silver purchased pursuant to this\nauthorization need not be of the degrees of finenses, or carry the mrks,\nrequired for \"good delivery* la the market of the place where the purchase\nis made or where delivery 10 to be\nVery truly yours,\n(Signed) H. Morgerthan. 20.\nSecretary of the Treasury.\nFederal Receive Bank of Bev York,\n33 Liberty Street,\nliev Tosta, N. T.\nMarled hom Dictricts office\nn.m.c.\nRH1kma 4/15/52\nRegraded Unclassified\n288\nApril 28, 1942\n3:58 p.m.\nHMJr:\nHello.\nSecretary\nStimson:\nHello, Henry.\nHMJr:\nHow are you, Henry?\nS:\nYou wrote a letter to me about next Monday,\nwhich I'm trying to accept.\nHMJr:\nOh, good.\n8:\nBut it's awfully hard for me to make any sort\nof a talk\nHMJr:\nOh.\nS:\nand I'm - I - I'm a little choosey about\nmy talks. I don't have any ghost writers much.\nHMJr:\nI see.\nS:\nBut - 80 I'd like to know what to - what the\ntime is - I mean the length of time, the length\nof the thing and the surroundings.\nHMJr:\nWell, I - well, the surroundings would be my\noffice, and Mr. Nelson's accepted.\nS:\nMr. who?\nHMJr:\nNelson - Donald Nelson. Knox is out of town.\nHe suggested Admiral King. I think he's going\nto accept, but he's - I can't reach him - but\nhis office said they thought he'd talk. And\nthe idea 1s just to stimulate the purchase of\nWar Bonds.\nS:\nHow much time\nHMJr:\nFrom you?\nS:\nFor me.\nHMJr:\noh, five minutes?\n289\n- 2 -\nS:\nWell, 18 it - 18 it worth it, that's only\nHMJr:\nPardon?\nS:\nI was wondering whether my contribution in that\nlength of time would be worthwhile.\nHMJr:\nWell, I\nS:\nA little bit longer would be essential to bring\nout the point I wanted to bring.\nHMJr:\nYou want - - well, how much time do you want?\nS:\nI don't know. I don't want any more than the\nothers have, but I wanted to have enough to\nmake a point - my point that I found most\neffective in the last war when I was snaked\nin - - when I came back from the front - - on Liberty\nLoan Bonds was - I'm not going to say anything\nabout the amount of weapons we want\nHMJr:\nYes.\nS:\nI mean, the kind of weapons and things of\nthat sort; but what I found was counted - woke\nup the people\nHMJr:\nYeah.\nS:\nwas that the weapons in a war of this kind,\neven of the kind then, but much more BO in this\nwar, meant the saving of life to the American\nsoldiers.\nHMJr:\nYes.\nS:\nAnd I say - you put it every - you've got to pay\neither a dollar in bonds, or a dollar in blood.\nHMJr:\nYeah.\nS:\nAnd you - the enemy are going to have their\npeople protected, and if you're unwilling to\ngive us the weapons to overcome their defense,\nwhy it means simply that our poor men will\nhave to do it with their bare hands, and that's\n290\n- 3 -\nwhy we ask you for more weapons. Well, that's\nnow - I mean, just in general.\nHMJr:\nWell, it sounds very good. I sent for Kuhn.\nHe ought to be here any minute. I can then\nask him what time we go on and how much time\nthat they ve given us, you see.\nS:\nBut I mean, a mere five minute speech is\nHMJr:\nWell, how about\nS:\nI wondered whether it was worthwhile.\nHMJr:\nWell, how about ten minutes?\nS:\nTen minutes could be done, I think.\nHMJr:\nWell, I'm sure we can arrange ten minutes.\nS:\nYes.\nHMJr:\nI'm sure we can arrange ten minutes.\nS:\nI mean, in other words, I'm - we're preparing\nan army of American boys and I'm - whatever I\nsay, I'm going to say it for their protection,\nand their help in the hardest and most dangerous\nand bloodiest task they've ever had.\nHMJr:\nWell, now, if you'll just hold the wire one\nsecond, I'll ask Kuhn.\nHe says it's from nine-thirty until ten.\nS:\nYes. How many people have got to speak in that\ntime?\nHMJr:\nWell, there'd be - the way it is now - I mean,\nall I'll do is to introduce - there'd be yourself,\nand Nelson, and King.\nS:\nYes. Well, I can - I guess I can get it in\neasily in that time.\nHMJr:\nI'd like awfully to have you. Hello.\n291\n- 4 -\nS:\nYes.\nHMJr:\nI say, I'd like very much to have you.\n8:\nI appreciate that. Thank you. But I was just\nthinking to myself.\nHMJr:\nWell.....\nS:\nI think we could probably put in something if\nI had seven or eight minutes, something like\nthat, we'd get it in.\nHMJr:\nOh, yes.\nS:\nBut make it ten, if possible.\nHMJr:\nYes.\nS:\nAll right. Okay, I'll try to do it then.\nHMJr:\nWell, can - are you saying yes to me?\nS:\nI'm saying yes, but it's - (Laughs) - it's a\nreluctant, hard yes.\nHMJr:\nWhat?\n8:\nStill I think you're entitled to it. I want\nto help you.\nHMJr:\nWell, it would be most helpful to us. I say\nit would be most helpful.\nS:\nYes. Well, thank you for that. Yes, I'm glad\nthat you think that my help will do you any good.\nHMJr:\nWe've got - we have two hook-ups that night.\nThere are two different radio chaine.\nS:\nWhat hour?\nHMJr:\nNine-thirty to ten.\nS:\nYes, I see.\nHMJr:\nThat's a good time.\n292\n- 5 -\nS:\nYes.\nHMJr:\nAnd we're on NBC and then on Mutual.\nS:\nYes. And I was just trying - I was just trying\nto visualize your whole picture and see how it\nwould come in.\nHMJr:\nMy picture?\nS:\nThe picture that you presented - that set-up\nthat you just\nHMJr:\nOh.\nS:\n.....were speaking of.\nHMJr:\nWell, each man will talk on what 18 closest to\nhis own heart, you see.\nS:\nYes.\nHMJr:\nAnd the idea 18 that by having you, we get the\naudience and we explain what it means to the\narmed forces to have, as you say, the tools they\nhave to work with and if they're going to have\nthem, we've got to pay for them.\n8:\nYes.\nHMJr:\nI mean, that's the whole idea; and somebody\nlike myself can stress - why, I mean, I won't\ntalk much at all - just introduce; but if I\nhave a few minutes, I may say something of the\nimportance of getting it from the man who works\nin the munitions plant and 80 that he'll give\nus the money rather than spending it on some\nluxury.\nS:\nYes. What - oh, yes, I see.\nHMJr:\nYou see what I mean?\nS:\nYou mean - yes.\nHMJr:\nI mean, that if he'll save his money rather than\nspending it on a luxury, and lend it to his\n293\n- 6 -\nGovernment\nS:\nYeah.\nHMJr:\nthat we can put it to a great\nS:\nIn other words, the difference - if he'll make\nthe difference of putting in an investment in\na bond instead of squandering it on a\nHMJr:\nThat's right.\nS:\ndrink, why that's all we're asking him.\nHMJr:\nThat's right.\nS:\nWell\nHMJr:\nThe President, both in his message to Congress\nstressed the bond thing and the objective, if\nyou would notice - I'm sure you've\nS:\nI haven't yet read the message.\nHMJr:\nWell, if you read that, that gives the\nS:\nThe one today, or the one\nHMJr: I\nThe one today - particularly the one to Congress.\nS:\nYes.\nHMJr:\nI mean the one to Congress, because - how should\nI say - we gave him a few hints - is that a polite\nway of putting it?\nS:\nYes.\nHMJr:\nWhat?\nS:\nA very true way, probably.\nHMJr:\nAnd he took it and amplified it, and I think if\nyou would read what he said about War Bonds,\nyou'd get sort of the keystone, the spirit of\nthe thing.\nS:\nYes.\n294\n- 7 -\nHMJr:\nBecause he said quite a lot about it.\nS:\nYes, I see. That's in the Congress one.\nHMJr:\nIn the Congress.\nS:\nAll right.\nHMJr:\nYes.\n8:\nAll right.\nHMJr:\nWell, I'm delighted.\nS:\nWell, I want to help you, old man, in this\nthing.\nHMJr:\nThank you.\nS:\nGood-bye.\n4/28/42\n295\nAdmiral Wilson reported Admiral King will\nbe out of town until 4/29 - will let HM Jr\nknow then.\n296\nAPPROVED come\n--------\nApril 25, 1942\nof TO:\nMR. KUHN\nFROM:\nTHE SECRETARY\nSecretary Knox cannot come for the broadcast on\nMay 4. I asked if it would be all right if we asked\nAdmiral King and Knox said yes; he would be glad to have\nAdmiral King go on and I could say 80 to Admiral King.\nSu phone can with sky-4/25-\nHill let Haji know-\nBroadhast portbared\nindefinitely 4/29-\nRegraded Unclassified\nTREASURY DEPARTMENT\n297\nINTER OFFICE COMMUNICATION\nDATE April 28, 1942\nTO\nThe Secretary of the Treasury\nFROM Mr. Houghteling\nAt your suggestion I recently approached William Green of the\nA.F. of L. and Philip Murray of the C.I.O. about getting the help of\nfield organizers of their staff and of their constituent national unions\nto help us promote the participation of their members in Pay Roll Savings\nPlans. Both Mr. Green and Mr. Murray agreed cordially to put their\nentire staff of organizers at our disposal.\nMr. Green agreed to write the heads of all of his national\nunions about this matter and also asked me to consult with Frank Fenton,\nDirector of\nOrganization, who has 150 organizers working directly under\nhis control.\nMr. Murray has a similar group of organizers, directed by Alan\nHayward, who will be available to help the Treasury.\nYesterday I worked out a plan with Mr. Fenton. It involved\ndividing the country into four districts, the North Atlantic States,\nthe Southern States, the Middle West and the Western States. It was\nagreed that one member of the War Savings Staff should be in charge of\neach district and should have the duty of contacting the organizers at\nvarious central points and explaining the whole program to them. The\nTreasury can provide our representatives with schedules by States, show-\ning the companies in each State which have installed Pay Roll Savings\nPlans, the number of members participating and the percentage of pay\nallotted per participant. Mr. Fenton agreed to appoint one of his chief\norganizers for each district to work with our Treasury men -- Mr. Hyatt,\nMr. Barrett, Mr. Dowell, etc. In this way we will have two men responsible for\nallocating work to the various A.F. of L. organizers in each district.\nThese men will ascertáin which of the Pay Roll Savings Plan companies have\nlabor contracts with A.F. of L. unions. From the result of this, the A.F.\nof L. organizers will be asked to get to work on the local A.F. of L.\nunions employed in the various plants having Pay Roll Savings Plans, in\norder to urge union members to participate in greater numbers and to allot a\nlarger percentage of their pay. This can be done through forming\ncommittees in the local unions, through union meetings, mass meetings,\nindividual solicitation, etc. Mr. Fenton stated that he wished to use\nthe entire organization of the A.F. of L. to vitalize this program among\nState Federations, City Central bodies, etc., forming committees every-\nwhere to promote the War Savings Program.\nRegraded Unclassified\n298\n- 2 -\nIn the case of the railroad unions we already have joint committees\non 150 railroads, with membership representing both management and labor.\nWe have an average of ten labor men on each railroad committee, all of them\ngeneral chairman of railroad unions whose time is paid for by the unions\nthemselves. Besides these 1500 railroad labor men who are giving a con-\nsiderable part of their whole time to the War Savings Program we have many\ndivisional chairmen whose time is paid for by the railroads themselves.\nIn the case of the C.I.O., Mr. Murray and Mr. Carey have agreed\nto a program like that of the A.F. of L. and we hope to follow with the\nC.I.O. the same plan outlined in yesterday's discussion with Mr. Fenton.\n299\nApril 28, 1942\nMy dear Mr. President:\nI feel sure that you will be\nas pleased as I was on reading these\nvery unique letters from President Green\nto the various officers of the A.F.of L.\nI have been assured by the\nC.I.O. and the Railroad Brotherhood that\nthey will do at least as well by us as\nthe A.F. of L.\nYours sincerely,\n(Signed) Henry Morgenthau, Jr.\nThe President,\nThe White House.\nBY Messenger ss ags.\nRegraded Unclassified\n300\nApril 28, 1942\nDear Henry:\nI thought you would be inter-\nested in reading these very unique letters\nfrom President Green to the various officers\nof the A. F. of L.\nI have been assured by the C.I.O.\nand the Railroad Brotherhood that they will\ndo at least as well by us as the A. F. of L.\nYours sincerely,\n(Signed) Heary\nHon. Henry A. Wallace,\nThe Vice President.\nn.m.c\nRegraded Unclassified\n301\nApril 28, 1942\nDear Harry:\nI thought you would be inter-\nested in reading these very unique letters\nfrom President Green to the various of-\nficers of the A. F. of L.\nI have been assured by the C.I.O.\nand the Railroad Brotherhood that they will\ndo at least as well by us as the A.F. of L.\nYours sincerely,\n(Signed) Heary\nHon. Harry Hopkins,\nThe White House.\nn.m.c.\nRegraded Unclassified\n302\nApril 28, 1942\nDear Steve:\nI thought you would be interested\nin reading these very unique letters from\nPresident Green to the various officers of\nthe A. F. of L.\nI have been assured by the C.I.O.\nand the Railroad Brotherhood that they will\ndo at least as well by us as the A. F. of L.\nYours sincerely,\n(Signed) Heary\nHon. Stephen Early,\nSecretary to the President,\nThe White House.\nn.m.c.\nRegraded Unclassified\n303\nApril 28, 1942\nDear Lauch:\nI thought you would be interested\nin reading these very unique letters from\nPresident Green to the various officers of\nthe A. F. of L.\nI have been assured by the C.I.O.\nand the Railroad Brotherhood that they will\ndo at least as well by us as the A. F. of L.\nYours sincerely,\n(Inimler) H mJc\nDr. Lauchlin Currie,\nThe White House.\nn.m.c.\nRegraded Unclassified\n304\nApril 28, 1942\nDear Donald:\nI thought you would be inter-\nested in reading these very unique\nletters from President Green to the\nvarious officers of the A. F. of L.\nI have been assured by the\nC.I.O. and the Railread Brotherhood\nthat they will do at least as well by\nus as the A. F. of L.\nYours sincerely,\n(Signed) Heard\nMr. Donald Nelson, Chairman\nWar Production Board,\nWashington, D. C.\nn.m.c.\nRegraded Unclassified\n305\nApril 28, 1942\nDear Harold:\nI thought you would be interested\nin reading these very unique letters from\nPresident Green to the various officers of\nthe A. F. of L.\nI have been assured by the C.I.O.\nand the Railroad Brotherhood that they will\ndo at least as well by us as the A.F. of L.\nYours sincerely,\n(Intisced) Hmg\nHon. Harold W. Smith,\nDirector of the Budget.\nn.m.c.\nRegraded Unclassified\n306\nApril 28, 1942\nDear Leon:\nI thought you would be interested\nin reading these very unique letters from\nPresident Green to the various officers of\nthe A. F. of L.\nI have been assured by the C.I.O.\nand the Railroad Brotherhood that they will\ndo at least as well by us as the A. F. of L.\nYours sincerely,\n(Signed) Heary\nhon. Leon Henderson,\nOffice of Price Administration,\nWashington, D. C.\nn.m.c.\nRegraded Unclassified\n307\nApril 28, 1942\nDear Archie:\nI thought you would be interested\nin reading these very unique letters from\nPresident Green to the various officers of\nthe A. F. of L.\nI have been assured by the C.I.O.\nand the Railroad Brotherhood that they will\ndo at least as well by us as the A.F. of L.\nYours sincerely,\n(Signed) Heary\nHon. Archibald MacLeish,\nOffice of Facts and Figures,\nWashington, D. C.\nn.m.c\nRegraded Unclassified\nC.\n308\n0\nP\nY\nAMERICAN FEDERATION OF LABOR\nApril 27, 1942.\nTo the officers of\nNational and International Unions.\nDear Sir and Brother:\nI enclose a copy of an official communication which\nI have sent to the officers of City Central Bodies, State\nFederations of Labor and directly affiliated local trade and\nfederal labor unions.\nThis communication was prepared and sent to the\norganizations named in response to an urgent request made by\nSecretary of the Treasury Morgenthau for additional funds to\nbe used in the prosecution of the war effort\nI can assure you that the need is very great and\nmost urgent. I advised Secretary Morgenthau that in my opinion\nan appeal for voluntary contributions such as I have made in\nthe letter which I am bringing to your attention will bring\nbetter results than would the enactment of compulsory saving\nand investment legislation. Labor has always favored voluntary\naction and has been uncompromisingly opposed to compulsion.\nWill you please supplement the communication I have\nsent to these directly affiliated organizations by addressing\na similar communication to the membership of the local unions\nchartered by your international organization? I feel sure\nthat because this voluntary plan providing for the systematic\npayroll deduction of ten per cent of earnings for investment\nin War Savings Stamps and War Bonds, is reasonable and can be\naccepted by the workers, that we can all join in recommending\nit.\nI will be grateful to you if you will join with me\nin this patriotic endeavor for the purpose of meeting the\nurgent financial needs of our government in the prosecution\nof the war effort.\nVery truly yours,\n(Signed) William Green\nPresident,\nY.Enclosure.\nAmerican Federation of Labor.\nC\n309\n0\nP\nY\nAMERICAN FEDERATION OF LABOR\nApril 27, 1942.\nTo Officers of State Federations of Labor,\nCity Central Labor Unions and\nDirectly affiliated Local Unions.\nDear Sirs and Brothers:\nSecretary Morgenthau of the United States Treasury\nDepartment is calling upon labor to purchase War Bonds and\nWar Savings Stamps to the extent of its financial ability.\nI am supplementing this call of the Secretary of\nthe Treasury by appealing to the membership of the American\nFederation of Labor to agree to a voluntary payroll deduction\namounting to ten per cent of earnings for investment in War\nBonds and War Savings Stamps. Such action would mean a steady\nand systematic investment in War Savings Stamps and Bonds, and\nthat in turn would mean & systematic and steady income to the\ngovernment for the purpose of meeting the heavy war expenses\nwhich the government is forced to incur.\nA systematic investment in War Savings Stamps and\nWar Bonds, as herein suggested, will help to prevent inflation.\nFurthermore, it would provide an investment which the workers\nwill need and can use when the post-war period arrives.\nA steady investment of ten per cent of the earnings\nof working men and women in War Savings Stamps and War Bonds\nwould be reasonable and in no way burdensome. It would\nrepresent a savings investment and could not be considered\nas a gift. It would be accepted as labor's voluntary\ncontribution to the war effort.\nIf all the workers of the nation will voluntarily\nagree to a payroll deduction of ten per cent of their earnings\nto be invested in War Savings Stamps and War Bonds, the pro-\nceeds will provide an enormous sum of money which the govern-\nment can use in the prosecution of its war effort.\nRegraded Unclassified\n310\n- 2 -\nI am influenced to make this appeal and this recom-\nmendation because there are those connected with our government\nand within the Congress of the United States who favor and are\nrecommending the enactment of legislation providing for compul-\nsory savings and compulsory payroll deductions in order to\nprovide sufficient funds for the government to meet its\npressing war needs.\nLabor favors voluntary action and is against\ncompulsory action. I feel sure that if labor will respond\nand will voluntarily agree to 8. payroll deduction of ten per\ncent of earnings, to be invested in War Savings Stamps and\nWar Bonds, that compulsory savings legislation will be\ndefeated.\nI appeal to the workers to respond favorably to\nthe recommendations I have herein made for a voluntary ten\nper cent payroll deduction for investment in War Bonds and\nWar Savings Stamps.\nThe need is urgent. The war effort calls for\nservice and sacrifice of the highest order. Labor is respond-\ning and has responded in a noble way. I am sure labor will\nrespond to this appeal as it has responded to other appeals\nfor support of the government in its war effort, made by the\nrepresentatives of the American Federation of Labor.\nVery truly yours,\n(Signed) William Green\nPresident,\nAmerican Federation of Labor.\nRegraded Unclassified\n311\nC\n0\nP\nY\nAMERICAN FEDERATION OF LABOR\nApril 24, 1942\nTO ORGANIZERS OF\nAMERICAN FEDERATION OF LABOR\nDear Sir and Brother:\nSecretary of the Treasury Morgenthau, Jr., has\nappealed to me to render all assistance possible in the sale\nof Savings Stamps and Bonds. As you well know, the cost of\nthe war is very great. In order to meet this cost a regular\nand steady income from the sale of Savings Stamps and Bonds\nmust flow into the Treasury of the United States. This money\nis needed in order to win the war.\nIn order to accelerate the purchase of Savings\nStamps and Bonds among the membership of organized labor, I\nam requesting that you assist in this work to the extent of\nyour ability. Please call upon the membership of organized\nabor whenever opportunity presents itself for you to do so\nto purchase Savings Stamps and Bonds regularly in order to\nhelp our Government win the war. Urge the workers to agree to\npayroll deductions with their employers of at least 10% of their\nearnings each pay, said amount to be used to purchase Savings\nStamps and Bonds.\nThis action will serve as a guarantee against\ninflation and at the same time will enable the workers to save\nmoney which they will, no doubt, badly need when the post-war\nperiod arrives.\nThe Congress of the United States is threatening\nthe enactment of legislation which would provide for compulsory\npayroll deductions. We are opposing this form of compulsion.\nInstead we are recommending that a payroll deduction plan of\n10% of the earnings of the workers be put into effect as a\nvoluntary plan. I am confident if this plan is universally\napplied and is put into effect that we can head off and prevent\nthe enactment of compulsory payroll legislation.\nRegraded Unclassified\n312\n- 2 -\nPlease specialize in this work. Do it in\naddition to your regular organizing work. Appeal to our\nworkers to agree upon and put into effect the 10% payroll\ndeduction plan for the purchase of Savings Stamps and Bonds.\nI count upon you to render special valuable service in this\nparticular matter which I am bringing to your attention in\nthis communication. I will be grateful to you if you will\ndo SO.\nFraternally yours,\n(Signed) William Green\nPresident,\nAmerican Federation of Labor\nApril 24, 1942\nds\nRegraded Unclassified\n313\nAPR 28 1942\nDear Bab:\nI want you to know that General A. H.\nCarter, in charge of the Administrative\nDivision, and his representatives were very\nhelpful in changing the War Department\ndirective covering the accountability for\npay roll deductions made by corporations\nunder cost-plus-a-fixed-fee contracts with\nthe Government.\nI appreciate the good and fast work\nwhich they did in this connection and I have\ntaken the liberty of writing directly to\nGeneral Carter to thank him and his represen-\ntatives for their part in it.\nSincerely yours,\n(Signed) H. Norgenthau. in\nSecretary of the Treasury\nHonorable Robert P. Patterson,\nUnder Secretary of War,\nWar Department,\nBy Messenger Sungis 12:20\nWashington, D. C.\nDWB:NLE\nn.m.e. copies To Thompson\n4/28/42\nRegraded Unclassified\n314\nLORD & THOMAS\nAdvertising\n247 PARK AVENUE, NEW YORK\nApril 28, 1942\nThe Honorable Henry Morgenthau, Jr.\nSecretary of the Treasury\nWashington, D. C.\nDear Mr. Secretary:\nI spoke with Mr. Gamble today and was\nsorry to hear that you aren't feeling so well.\nI sincerely hope you will be back at your desk\nsoon and feeling well above par.\nMeanwhile, I have prepared a device\nto be used in the advertisements which I think\nwill do much to put across the quota idea in all\ncommunities, and do it locally.\nMr. Gamble told me he would speak to\nyou on your return and arrange for our next meet-\ning. I look forward to seeing you again.\nVery truly yours\nWJW/hs\nW. J. Weir\nRegraded Unclassified\n315\nApril 28, 1942\nMy dear Henry:\nThank you so much for sending me the\ncopy of the letter and leaflet uring the\npurchase of War Savings Bonds.\nMay I congratulate you on your\nprogram?\nSincerely yours,\nhances Smkins\nThe Honorable Henry Morgenthau\nSecretary of the Treasury\nWashington, D. C.\nAYS VUS 53 VW B 22\n316\ntreasury department\nFISCAL SERVICE\nBUREAU OF ACCOUNTS\nWASHINGTON\nOFFICE OF THE COMMISSIONER\nApril 28, 1942.\nTO MISS CHAUNCEY:\nFurther reference is made to your inquiry of April 21\nconcerning the newspaper clipping captioned \"WPA Worker Loses\nJob When He Buys War Bonds,\" and to my memorandum of that date\nstating that Mr. Brummett, Assistant Commissioner of the Work\nPrejects Administration, had advised that the case was a misin-\nterpretation of the regulations issued by the Work Projects Ad-\nministration. Mr. Brummett also advised that the employee would\nbe reinstated and that a definite interpretation of the regulation\nwould be sent out pertaining to the purchase of War Savings Bonds.\nThere is enclosed a copy of Employment Letter No. 34\nof the Work Projects Administration which is self-explanatory,\nand which also takes care of the re-employment of the worker\nmentioned in the clipping.\nPumacured K. W. Maxwell,\nAssistant Commissioner of Accounts.\nEnclosure\nFORDEFENSE\nBUY\nUNITED\nSTATES\nSAVINGS\nBONDS\nARG STAMPS\nRegraded Unclassified\n317\nFEDERAL WORKS AGENCY\nWORK PROJECTS ADMINISTRATION\nA4293\n1734 NEW YORK AVENUE NW.\nWASHINGTON, D.C.\nHOWARD o. HUNTER\nCOMMISSIONER OF work PROJECTS\nApril 16, 1942\nEmployment Letter No. 34\nTO:\nAll State Work Projects /dministrators\nSUBJECT: Eligibility of Persons who own Dofense Bonds\nor Stamps\nIn determining need for employment and continued\nemployment on projects of this Administration, defense\nbonds and/or stamps (hereafter to be known as War Savings Bonds\nand Stamps) owned by the applicant shall not be considered.\nReferral agencies should be instructed regarding this policy.\nWorkers who, during the review of need, have had their certifi-\ncation cancelled because they owned har Savings Bonds and/or\nStamps, should be recertified by local offices of this /dminis-\ntration if they reapply for employment.\nmJ Millen\nMalcolm J. Miller\nAssistant Commissioner\n318\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE\nAPR 28 1942\nTO Secretary Morgenthau\nFROM Mr. Haas M.\n1. The attached tables present data showing\n(1) the number of agents qualified to issue War\nSavings Bonds, Series E, as of the close of business\non April 25, classified by type of agent according\nto Federal Reserve Districts and (2) the number of\nissuing agents on selected dates since May 7, 1941.\n2. Excluding post offices, agents qualified\nto issue Series E Savings Bonds numbered 21,287 on\nApril 25, 164 more than on April 18.\n3. Corporations qualified to issue Series E\nSavings Bonds on payroll allotment plans totaled\n1,223 on April 25, an increase of 113 since\nApril 18.\nAttachments\nNumber of agents qualified to issue Series E\nSavings Bonds, May 7, 1941\nto date\n:\n1941\n:\n1942\n: May : Sept. : Jan. : Feb. : March : April : April\n: 7\n: 30\n:\n31\n:\n28\n: 28\n: 18\n: 25\nCommercial and savings banks\n7,676\n11,571\n14,097\n14,240\n14,331\n14,383\n14,394\nBuilding and loan associations\n739\n1,481\n2,434\n2,560\n2,632\n2,662\n2,675\nCredit unions\n8\n389\n2,080\n2,479\n2,695\n2,765\n2,791\nOther corporations 1/\n-\n-\n351\n686\n931\n1,110\n1,223\nInvestment Industry\n-\n-\n37\n63\n66\n67\n69\nAll others\n7\n27\n99\n137\n135\n136\n135\nTotal other than post offices\n8,430\n13,468\n19,098\n20,165\n20,790\n21,123\n21,287\nPost offices\n15,812\n16,429\n17,123\n17,928\n18,208\n18,361\n18,361\nGrand total\n24,242\n29,897\n36,221\n38,093\n38,998\n39,484\n39,648\nOffice of the Secretary of the Treasury,\nApril 28, 1942\nDivision of Research and Statistics.\n1/ In accordance with telegram of December 27, 1941.\n319\nRegraded Uncle\nClassification of the\nunl/\nof agents qualified to\nissue Series E Savings Bonds on April 25, 1942\n:\n:Building:\n:\n:\n:\n:\n:\n= and\n:\n: Other : Invest-\n:\nAll\n: Banks\n: loan\nCredit\n:\n:\n:corpora-:\nment\n: others\n: Total\n:\n:associa-:\nunions\n: tions :industry :\n=\n:\n: tions :\n:\n:\n:\n:\nCorporations and associations:\nFederal Reserve District of:\nBoston\n837\n253\n231\n82\n1\n14\n1,418\nNew York\n1,166\n258\n433\n214\n18\n68\n2,157\nPhiladelphia\n862\n116\n126\n231\n-\n-\n1,335\nCleveland\n1,190\n395\n354\n73\n8\n2\n2,022\nRichmond\n1,029\n196\n151\n50\n8\n1\n1,435\nAtlanta\n1,032\n168\n197\n30\n-\n-\n1,427\nChicago\n2,382\n488\n289\n338\n19\n28\n3,544\nSt. Louis\n1,414\n169\n83\n59\n7\n1\n1,733\nMinneapolis\n1,282\n62\n86\n11\n-\n3\n1,444\nKansas City\n1,790\n195.\n225\n28\n2\n6\n2,246\nDallas\n864\n131\n253\n64\n3\n9\n1,324\nSan Francisco\n546\n244\n363\n43\n3\n3\n1,202\nSubtotal\n14,394\n2,675\n2,791\n1,223\n69\n135\n21,287\nPost offices\n-\n-\n-\n-\n-\n-\n18,361\nGrand total\n14,394\n2,675\n2,791\n1,223\n69\n135\n39,648\nOffice of the Secretary of the Treasury,\nDivision of Research and Statistics.\nApril 28, 1942\nIn accordance with telegram of December 27, 1941.\nExcept post offices.\n320\nRegraded Uncla\nUNITED STATES SAVINGS BONDS\nDaily Sales - April, 1942\nOn Basis of Issue Price\n(In thousands of dollars)\nPost Office\nBank Bond Sales\nAll Bond Sales\nDate\nBond Sales\nSeries I\nSeries E\nSeries I\nSeries G\nTotal\nSeries E\nSeries 7\nSeries G\nTotal\nApril 1942\n1\n$ 2,476\n$ 10,517\n$ 2,380\n$ 9,608\n$ 22,504\n$ 12,993\n$ 2,380\n$ 9,608\n$ 24,980\n2\n2,999\n8,264\n2,119\n7,570\n17,953\n11,263\n2,119\n7,570\n20,953\n3\n3,222\n7,572\n1,185\n6,235\n14,992\n10,794\n1,185\n6,235\n18,214\n4\n2,778\n9,292\n1,387\n5,334\n16,013\n12,070\n1,387\n5,334\n18,790\n6\n4,961\n13,035\n2,329\n8,027\n23,391\n17,996\n2,329\n8,027\n28,352\n7\n2,958\n5,722\n834\n8,983\n15,539\n8,680\n834\n8,983\n18,497\n8\n2,309\n9,610\n1,142\n6,562\n17,314\n11,919\n1,142\n6,562\n19,623\n9\n2,906\n9,304\n955\n5,715\n15,974\n12,210\n955\n5.715\n15,880\n10\n2,730\n8,052\n1,573\n5,261\n14,885\n10,782\n1,573\n5,261\n17,615\n11\n2,150\n5,224\n668\n2,720\n8,613\n7,374\n668\n2,720\n10,762\n13\n4,619\n17,572\n2,432\n8,604\n28,609\n22,192\n2,432\n8,604\n33,228\n14\n2,513\n6,152\n1,076\n3,333\n10,561\n8,665\n1,076\n3,333\n13,074\n15\n2,584\n5,102\n1,251\n5,374\n11,728\n7,686\n1,251\n5,374\n14,312\n16\n3,472\n10,008\n1,400\n7,773\n19,180\n13,480\n1,400\n7,773\n22,652\n17\n2,690\n8,076\n850\n3,695\n12,621\n10,766\n850\n3,695\n15,311\n18\n3,111\n7,175\n948\n3,303\n11,426\n10,286\n948\n3,303\n14,537\n20\n5,252\n13,334\n2,227\n9,001\n24,562\n18,586\n2,227\n9,001\n29,814\n21\n2,517\n6,845\n977\n3,703\n11,525\n9,362\n977\n3,703\n14,042\n22\n2,925\n9,112\n1,925\n6,793\n17,830\n12,037\n1,925\n6,793\n20,755\n23\n3,101\n9,403\n1,805\n5,928\n17,136\n12,504\n1,805\n5,928\n20,237\n24\n3,451\n10,981\n1,721\n5,694\n18,396\n14,431\n1,721\n5,694\n21,846\n25\n2,616\n8,704\n1,327\n4,552\n14,583\n11,321\n1,327\n4,552\n17,200\n27\n5,317\n15,721\n2,313\n7.971\n26,004\n21,038\n2,313\n7,971\n31,321\nTotal\n$ 73,657\n$214,777\n$ 34,825\n$141,736\n$391,338\n$288,434\n$ 34,825\n$141,736\n$464,995\nOffice of the Secretary of the Treasury, Division of Research and Statistics.\nApril 28, 1942.\nSource: All figures are deposits with the Treasurer of the United States on account of proceeds of\nsales of United States savings bonds.\nNote: Figures have been rounded to nearest thousand and will not necessarily add to totals.\nRegraded Unclas\n322\nCONFIDENTIAL\nUNITED STATES SAVINGS BONDS\nComparative Statement of Sales During\nFirst Twenty-three Business Days of April, March and February 1942\n(April 1-27, March 1-27, February 1=27)\nOn Basis of Issue Price\n(Amounts in thousands of dollars)\n:\n:\nAmount of Increase\n:\nPercentage of Increase\nSales\n:\n:\nor Decrease (-)\n:\nor Decrease (-)\nItem\n:\n:\n:\n: April\n:\nMarch\n:\nApril\n:\nMarch\n: April\n:\nMarch\n: February\n:\nover\n:\nover\n:\nover\n:\nover\n:\n:\n:\n:\nMarch\n:\nFebruary\n:\nMarch\n:\nFebruary\nSeries E 1- - Post Offices\n$ 73,657\n$ 76,736\n$ 84,361\n-$ 3,079\n-$ 7,625\n- 4.0%\n- 9.0%\nSeries 1- E Banks\n214,777\n226,272\n301,631\n- 11,495\n- 75,359\n- 5.1\n- 25.0\nSeries 1- Total\n288,434\n303,008\n385,992\n- 14,574\n- 82,984\n- 4.8\n- 21.5\nSeries 1- Banks\n34,825\n37,154\n50,310\n- 2,329\n- 13,156\n- 6.3\n- 26.1\nSeries G - Banks\n141,736\n162,053\n244,819\n- 20,317\n- 82,766\n- 12.5\n- 33.8\nTotal\n$464,995\n$502,215\n$681,121\n-$ 37,220\n-$178,906\n- 7.4%\n- 26.3%\nOffice of the Secretary of the Treasury, Division of Research and Statistics.\nApril 28, 1942.\nSource: All figures are deposits with the Treasurer of the United States on account of proceeds\nof sales of United States savings bonds.\nNote:\nFigures have been rounded to nearest thousand and will not necessarily add to totals.\nRegraded Unclassifie\n323\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE April 28, 1942.\nTO\nSecretary Morgenthau\nFROM Mr. Shaeffer C.P.\nU. V. Wilcox, Washington correspondent of the AMERICAN\nBANKER, has been \"tipped off\" by his parent office that\nthree major changes in the Administration are imminent.\nHis information 18 to the effect that Secretary\nMorgenthau will replace Ambassador Winant at the Court of\nSt. James, and Winant would replace Madame Perkins as\nSecretary of Labor. Governor Lehman would then be drafted\nas Secretary of the Treasury.\nWilcox was informed these changes would occur before\n\"the middle of the year\".\nI am passing it along for your information.\n324\nMEMORANDUM\nApril 28, 1942.\nTO:\nThe Secretary\nFROM:\nCommissioner Helvering and Mr. Sullivan\nWe submit the following procedure to be followed in the inves-\ntigation of the income and excess profits tax returns of the 350 corpora-\ntions having the majority of war contracts, and those corporations con-\nstructing the principle Army cantonments and Navy bases:\n1. Select from this number those cases with patent irregulari-\nties.\n2. Order immediate investigation.\n3. In the absence of evidence of criminal fraud, revenue agent\nimmediately upon completion of his investigation will notify\nthe taxpayer of the proposed adjustments, give taxpayer a\ncopy of the agent's report, and request taxpayer's explana-\ntion forthwith.\n4. Agent will then transmit his report, together with taxpayer's\nexplanation to Washington.\n5. The Bureau of Internal Revenue will immediately review agent's\nreport and taxpayer's explanation and the Commissioner will\nadvise the Secretary as to his views on the proposed deficiency.\n6. Presentation of the case to the Joint Tax Committee.\n7. If fraud is present to such a degree as to warrant a criminal\nprosecution, special Intelligence agents should interrogate\ncorporate officials and employees immediately after the field\ninvestigation is made and before presentation of the case to\nthe Joint Tax Committee.\nThey Offelving\nThs\nRegraded Unclassified\n325\nBOARD OF ECONOMIC WARFARE\nECONOMIC DEFENSE BOARD\nWASHINGTON, D.C.\nOFFICE OF THE CHAIRMAN\nApril 28, 1942\nThe Honorable,\nThe Secretary of the Treasury.\nDear Henry:\nBeginning May 7, & meeting of the Board of\nEconomic Warfare will be held every other Thursday at\n10:00 a.m. at my office in the Capitol.\nAt the meeting on May 7, the subject for dis-\ncussion will be ways and means of cooperating with the\nSouth American Republics in ridding those Republics of.\nAxis influences.\nIt is my hope that these regular meetings will\nincrease the effectiveness of our work.\nSincerely yours,\nsfaw allace\n4-30-42\nH. A. Wallace\nsicy says he will attend\nwith white\nWhite advised\nVice Presidents office notified\nLOVE\nlaws Ved sa VW 15 do\n1 received E\nE.g.7.\n326\nAPR 22 1942\nDear Mr. Perkins:\nI an in receipt of a letter, dated\nApril 16, 1942, from the Vice President,\noutlining an interia procedure for obtain-\ning background material with e view toward\ndischarging the responsibilities centralized\nin the Board of Economic Warfare by Executive\nOrder 9126.\nIn accordance with your Directive No. 1,\ntransmitted by the Vice President, I an des-\nignating Mr. Clifton Mack, Director of the\nProcurement Division, to serve as clearance\nofficer for the Treasury.\nSincerely yours,\n(Signed) H. Horgenthaus JR,\nSecretary of the Treasury\nHr. Milo Perkins,\nExecutive Director,\nBoard of Economic Warfare,\nWashington, D. C.\ncc.n.m.c.\n\"-ceyton mack\nHompon\nWLU:as\nBy Messenger Bandy 5:10\n4/17/42\n327\nFIFTH DRAFT\nADDRESS OF THE PRESIDENT\nAPRIL 28, 1942\nIt 1a nearly five months since in true Nasi style DO\nwere attacked at Pearl Harbor. For the two years prior to that\nattack this country had been gearing itself up to a high level of\nproduction of nunitions. Yet our war efforts had done little to\ndislocate the normal lives of most of us.\nWe have dispatched strong forces of our Army and Navy\nto bases and bettle fronts thousands of miles from home, and e\nhave stepped up our war production on & scale that has tested our\nindustrial power and our engineering genius and our economic structure\nto the utmost. We 010 this with our eyes open; we did it knowing\nthat the fulfillment of our objectives would be felt in every home\nthroughout the land. We have had no illusions about the fact that\nthis would be a tough job, and & long one.\nAmerican war ships are now in combet in the North and\nSouth Atlantic, in the Aretic, in the Mediterranean, and in the\nNorth and South Pacific. American troops have taken stations in\nSouth America, Greenland, Iceland, the British Isles, the Near East,\nRegraded Unclassified\n328\nFIFTH DRAFT\n- 2 -\nthe Middle East, the Far East, the Continent of Australia, and the\nsany Islands of the Pacific. American war planes manned by Americans\nare flying in actual combat over all the continents and all the\noceans.\nOn the European front the most important development of\nthe past year has been the crushing offensive on the part of the\ngreat armies of Russia against the powerful German army. These\nRussian forces have destroyed and are destroying more armed power\nof our enemies -- troops, planes, tanks, guns and other munitions\nof war -- than dl the other United Nations put together.\nIn the Mediterranean area, matters remain, on the sur-\nface, very much as they were. But the situation here is receiving\nvery careful attention.\nVery recently we have received news of a change in\ngovernment in what we knew as the Republic of France - a name\ndear to the hearts of all lovers of liberty -- a name and an\ninstitution which we hope will soon be restored to full dignity.\nThroughout the Nasi occupation of France, we have hoped\nfor the maintenance of a French Government which would strive to\nregain independence to reestablish the principles of \"Liberty,\nRegraded Unclassified\n329\nFIFTH DRAFT\n- 3 -\nEquality and Fraternity\" and resume the historic culture of France.\nHowever, the known character of those who have recently come to\npower can mean only that a determined attempt will be made to\nforce the brave French people to complete surrender to the Nazi\ndespotism.\nThe United Nations will take measures, if necessary, to\nprevent the use of French territory in any part of the world for\nsilitary purposes by the Axis powers. The good people of France,\nwherever they may be, will readily understand that such action\nis essential for the United Nations in preventing assistance to\nthe armies or navies or air forces of Germany, Italy and Japan.\nThe overwhelming majority of the French people understand that\nthe fight of the United Nations is their fight, that victory for\nthe United Nations means the restoration of a free and independent\nFrance -- and the saving of France from the subjection and the\nslavery which would be imposed upon her by her own enemies and\nher own traitors.\nWe know how the French people really feel. We know\nbecause they tell us by their heroic actions in defiance of Hitler\nand his Gestapo. They do all in their power to slow up work, to\nRegraded Unclassified\n330\nFIFTH DRAFT\n- 4\nsabotage production in their factories which have been perverted\nto the service of the Nasi war machine. They cheer the R.A.F.\nwhen these factories are bombed. They will have occasion to\ncheer our own American Flying Fortresses and Liberators when\nwe have joined in force with the Britishlover the darkened conti-\nnent of Europe.\nThe same holds true of all the occupied countries.\nIn Norway, Belgium, The Netherlands, Poland, Czecho-Slovakia,\nJugoslavia and Greece there are men, women and even little\nchildren who have never stopped fighting, never stopped resist-\ning, never stopped proving to the Nazis that their so-called\n\"New Order\" can never be enforced upon free peoples.\nIn the German and Italian peoples themselves there\nis & growing conviction that the cause of Nazism and Fascism\n13 hopeless -- that their political and military leaders have\nled them along the bitter road which leads not to world conquest\nbut to final defeat. They cannot fail to contrast the present\ndefensive speeches of these loaders with their arrogant boastings\nof & year ago, and two years ago.\nRegraded Unclassified\n331\nFIFTH DRAFT\n- 5 -\nOn the other side of the world, in the Far East, we\nhave passed through a phase of serious losses.\nWe have inevitably lost control of a large portion of\nthe Philippine Islands. But this whole nation pays tribute to\nthe Filipino and American officers and men who held out so long\non Bataan Peninsula, to those grim and gallant fighters who still\nhold Corregidor, and to the forces who are still striking effectively\nat the enemy on Mindanao and other islands.\nThe Malayan Peninsula and Singapore are in the hands of\nthe enemy; the Netherlands East Indies are almost entirely occupied,\nthough resistance there continues. Many other Islands are in the\npossession of the Japanese. But there is good reason to believe\nthat their southward advance has been checked and that Australia,\nliew Zealand and the Islands along our lines of communication will\nbe held, and will be bases for offensive action.\nThe Japanese are pressing their northward advance in\nBurna with considerable power, driving toward India and China. They\nhave been opposed with great bravery by small British and Chinese\nforces, aided by American fliers.\nRegraded Unclassified\n332\nFIFTH DRAFT\n- 6 -\nThe news in Burna tonight is not good. The Japanese\nmy cut the Burma Road; but I want to say to the gallant people\nof China that no matter what advances the Japanese may make,\nways will be found to deliver airplanes and munitions of war\nto the armies of the Generalissimo Chiang Kai-shek.\nWe remember that the Chinese people were the first to\nstand up and fight against the aggressors in this war; and in the\nfuture an unconquerable China will play its proper role in main-\ntaining peace and prosperity not only in Eastern Asia but in the\nwhole world.\nFor every advance that the Japanese have made since\nthey started their frenzied career of conquest, they have had to\npay a very heavy toll in warships, in transports, in planes and\nin men. They are feeling the effects of those losses. The in-\nevitable results of the ambition and the greed of the Japanese\nArmy-Navy oligarchy are being brought home to the Japanese people.\nIt is even reported from Japan that somebody has dropped\nbombs on Tokyo and on other principal centers of Japanese war\nindustries. If this be true, it is the first time in history that\nJapan has suffered such indignities.\nRegraded Unclassified\n333\nFIFTH DRAFT\n- 7 -\nAlthough the treacherous attack on Pearl Harbor was\nfound\nthe immediate cause of our entry into the war that event funnt\nthe American people spiritually prepared for war on a world-wide\nscale. We went into this war fighting. We know what we are fight-\ning for. We realize that the war has become what Hitler originally\nproclaimed it to be a total war.\nNor all of us will have the privilege of fighting our\nenemies in distant parts of the world.\nNot all of us will have the privilege of working in a\nmunitions factory or shipyard, or on the farms or in oil fields\nor mines, producing the weapons or the raw materials which are\nneeded by our armed forces.\nBut there is one front and one battle where everyone\nin the United States - every man, woman, and child -- is in\naction and will be privileged to remain in action for the duration.\nThat front is right here at home, in our daily lives and in our\ndaily tasks. Here at home everyone will have the privilege of\nmaking whatever self-denial is necessary, not only to supply our\nfighting men, but to keep the economic structure of our country\nfortified and secure during the war and after the war.\nThis will require the abandonment not only of luxuries\nRegraded Unclassified\n334\nbut - other creature conforts.\nBrery leyal insrican is care of bis individual responsi-\nbility. themever I hear engree saying - American people are\ncomplacent - they need to be aroused\", I feel like asking his\nto come to Washington and read the mail that floods into the\nWhite House and into all departments of this government. the\none question that recure through all these thousands of letters\nand wessages is street more can I do to help my country in\nwinning this was?\nTo build the factories, and buy the materials, and\npay the labor, and provide the transportation, and equip the\nfeed and house the seldiers, sailers and marines, and to 60\nall the thousands of things necessary in a was - all cost\nmoney, nore many then has ever been spent by any nation at\nsay time in the history of the world.\n\" are - spending, solely for was purposes, the -\nof about - Immired million dollars every day in the week.\nBut, before this year 10 over, that almost unbelisvable rate\nof odpenditure will be very nearly deubled.\nAll of this may has to be spent - and spent quiskly -\nif w are to produce within the time new svailable the enserves\nquantities of weapons of war which - need. But the spending\nRegraded Unclassified\n335\nI I process of s I I @ I %\nnational commany.\nthen your Government continues to spend there unpress-\ndented - of usery for var materials - month w month, and\nyear by year, it ness that nare and more money will be finding\nits way into the posketbooks and bank accounts of nearly every\ncivilian in the United states. st the same time that this is\ngoing on, the supply of goods in the United States, which you\nand I night ordinarily bay, to buing constantly reduced. Is\nis being reduced because - materials must be taken away from\ncivilian use ad put into was uses because machinery and factories\nmust be converted to war production by the Governments because\nour normal sources of supply from countries abroad are eut\ndown by easy action.\nYou do not have to be a Professor of Economics to ⑉\nthat when people have enough ready cash to buy all the goods\nthey want but the supply of goods is limited, the people begin\nto bie against each other and the price of the goods good up.\nTesterday I submitted w the Congrees of the United\nStates a coven point program of general principles which\ntogether could be called the mational esensuis policy for\nRegraded Unclassified\n336\nattaining the great objective of keeping the cost of living dom.\nI repeat then nove\n1. the met tax heavily, and in that process\nkeep personal of corporate profits at a reason-\nable rate, the word *reasonable* being defined\nat a low lovel.\n2. the wast fix coilings en the prises which\nconsumers, retailers, sholeselers and -\nfacturers pay for the things they buys and\ncoilings on rents for dwellings in all areas\naffected by was industries.\n3. the must stabilise the remmeration received\nby individuals for their work.\n4. We must stabilize the prices received w\ngroners for the products of their lands.\n5. We must encourage all eitizens to contri-\ntrube to the cost of winning this war by yur-\nchasing for Bonds with their earnings instead\nof using these cornings to by articles which\n1 &\nRegraded Unclassified\n337\nFIFTH DRAFT\n- 11 -\n6. We must ration all essential commodities\nof which there is a scarcity, so that they may\nbe distributed fairly among consumers and not\nmercly in accordance with financial ability to\npay high prices for them.\n7. We must discourage credit and instalment buy-\ning, and encourage the paying off of debts, mort-\ngages, and other obligations; for this promotes\nsavings, retards excessive buying and adds to the\namount available to the creditor for the purchase\nof War Bonds.\nI do not think it is necessary to repeat what I said\nyesterday to the Congress in discussing these general principles.\nThe important thing to remember is that each one of these\npoints is dependent on the others if the whole program is to work.\nThere are those who say that the only thing necessary is\nto freeze all prices. There are others who say that the only\nthing necessary is to freeze wages. There are others who say\nthat the only thing necessary is to increase taxes. But none of\nthese alone would be enough. The only effective course of action\nis a simultaneous attack on all of these problems in one comprehensive,\nRegraded Unclassified\n338\n$\nall-embracing program - stued at was prince, profits, taxes,\nand control of consumer buying - credit.\nthe blumt fact is that every single person in the United\nStates is going to be affected by this program. Some of you\nwill be affected more directly w one or two of these №\nstrictive masures, but all of you will be affected indirectly\nby all of them.\nAre you a business me, w do you om stock in &\nbusiness corporation? Your profits are going to be out down\nto a reasonably low level w texation. Your income will be\nsubject to higher taxes. Indeed in these days, when every\navailable dollar should go to the war effort, X do not\nthink that my American citizen should have a not income in\nexcess of $25,000 per year after payment of texes.\nAre you a retailer w a wholesaler or & numbersaturer\nor a former or a londlord? Coilings are being placed an\nthe prices at which you can sell your goods or rent your\nDo you work for wages? You will have to forego higher\nwages for your particular job for the charation of the was.\nThere may be exceptional circumstances where injustices\nRegraded Unclassified\n339\nZIPIN_DRAVE\n&\nTransfer 1 setus I I other a & I\nAll of us are used to spending many for things - west\nwhich are not absolutely cosential. we will all have to forego\nthat spending.\nBecause we - put every dine and every dollar\nwe ean possibly spare out of - eernings into War\nI I 1\nBecause the domate of the was effort require\nthe retioning of good of which there is not enough\ns 1 &\nBecause the stepping of purchases of -\n,\nessentials will release thousands of workers who\nare needed in the vap effort.\nThis great our offort must be carried through to its\nvictorious conclusion by the indonitable will and determination\nnot\nof the people. It must/be impoded by the faint of heart. It\nmust not be impeded by those who put their own selfish interests\nabove the interests of the nation. It must not be impeded by\nthe begus patriots who use the secred freedom of the press to\ncobe the sentiments of the prepagandistsin Tokyo and Berlin.\nRegraded Unclassified\n340\nFIFTH DRAFT\n- 24 -\nAnd, above all, it shall not be imporilled by the handful\nof noisy traiters - the betrayers of America and of Christianity\nitself - the would-be dictaters who in their hearts and souls\nhave yielded to Hitlerism and would have this reyublic do likewise.\nI shall use all of the executive power that I have to\ncarry out the policy laid down. If it becauses necessary to ask\nfor any additional legislation in order to attain our objective\nof preventing a spiral in the cost of living, I shall do so.\nI know the American former, the American workman, the\nAmerican business man. I knew that for freedom's sake they will\nstop at nothing. I know that this economy of sacrifice they will\nsladly embrace - satisfied that it is necessary for the most visal\nand compelling notive in their lives - winning through to vistory.\nNever in the memory of man has there been a war in which\nthe courage, the endurence and the leyalty of civilians played so\nital a part.\nMany thousands of civilians all over the world have been\nand are being killed or mixed w enery action.\nRegraded Unclassified\n340\nVIFTH DRAFT\n- 14 -\nAnd, above all, 12 shall not be imperilled by the handful\nof noisy traitors - the betrayers of America and of Christianity\nitself - the would-be dictaters who in their hearts and souls\nhave yielded to Hitlerism and would have this republic do likewise.\nI shall use all of the executive power that I have to\ncarry out the policy laid com. If it becomes necessary to ask\nfor any additional legislation in order to attain our objective\nof preventing a spiral in the cost of living, I shall do so.\nI know the American farmer, the American workman, the\nAmerican business man. I know that for freedom's sake they will\nstop at nothing. I know that this economy of saerifice they will\ngladly embrace -- satisfied that it is necessary for the most vital\nand compelling notive in their lives - winning through to victory.\nNever in the memory of man has there been a war in which\nthe courage, the endurance and the leyalty of civilians played so\nital a part.\nMany thousands of civilians all over the world have been\nAnd are being killed or mained by enemy action.\nRegraded Unclassified\n341\nFIFTH DRAFT\n- 15 -\nOur own American civilien population is now relatively\nsafe from such disasters. And, to an over increasing extent,\nour soldiers, sailors and marines are fighting with great\nbravery and great skill on far distant fronts to make sure\nthat we shall remain safe.\nRegraded Unclassified\n342\nHOLD FOR RELEASE\nHOLD FOR RELEASE\nHOLD FOR RELEASE\nApril 28, 1942\nCAUTION: The following address of the President MUST BE HELD IN\nCONFIDENCE until released.\nNOTE:\nRelease to editions of all newspapers appearing on the\nstreets NOT EARLIER THAN 10:00 P.M., E.C.T., 4pril 28, 1942.\nThe same release of the text of the address also applies to radio\nannouncers and news commentators.\nOARE MUST BE EXERCISED TO PREVENT PREMATURE FUBLICATION.\nSTEPHEN EARLY\nSecretary to the President\nIt is nearly five months since we were attacked at\nPearl Harbor. For the two years prior to that attack this\ncountry had been gearing itself up to a high level of\nproduction of munitions. Yet our war efforts had done\nlittle to dislocate the normal lives of most of us.\nSince then we have dispatched strong forces of our\nArmy and Navy to bases and battle-fronts thousands of miles\nfrom home. He have stepped up our war production on a\nscale that is testing our industrial power and our\nengineering genius and our economic structure to the\nutmost. no have had no illusions about the fact that\nthis would be a tough job - and & long one.\nAmerican warships are now in combat in the North\nand South Atlantic, in the Arctic, in the kediterranean,\nand in the North and South Pacific. American troops have\ntaken stations in South America, Greenland, Iceland,\nthe British Isles, the Bear East, the Middle Last, the Far\ncast, the Continent of Australia, and many islands of the\nPacific. American war planes, manned by Americans, are\nflying in actual combat over all the continents and all the\noceans.\nOn the European front the most important development\nof the past year has been the crushing ffensive on the\npart of the great armies of Russia against the powerful\nGerman army. These Russian forces have destroyed and are\ndestroying more armed power of our enemies - troops, planes,\ntanks and guns - than all the other United Nations put\ntogether.\nIn the Mediterranean area, matters remain, on the\nsurface much as they were. But the situation there is\nreceiving very careful attention.\nRecently we have received news of a change in\ngovernment in what we used to know as the Republic of\nFrance -- a name dear to the hearts of all lovers of\nliberty - a name and an institution which we hope will\nsoon be rostored to full dignity.\nThroughout the Nazi occupation of France, we\nhave hoped for the maintenance of a French Government\nwhich would strive to regain independence, to reestablish\nthe principles of \"Liberty, Equality and Fraturnity\",\nand to restore the historic culture of france. Our\npolicy has been consistent from the very beginning.\nHowever, we are now concerned lost those who have\nrecently come to power may seek to force the brave\nFrench people to submission to Nazi despotism.\nRegraded Unclassified\n343\n- 2 -\nThe United Nations will take measures, if neces-\nsary, to prevent the use of French territory in.any part of\nthe world for military purposes by the Axia powers. The good\npeople of France will readily understand that such action 18\nessential for the United Nations to prevent assistance to\nthe armies or navies or air forces of Germany, Italy and\nJapan. The overwhelming majority of the French people under-\nstand that the fight of the United Nations 1s fundamentally\ntheir fight, that our victory means the restoration of B. free\nand independent France -- and the saving of France from the\nslavery which would be imposed upon her by her external enemies\nand her internal traitors,\nWe know how the French people really feel. We know\nthat a doop-seated determination to obstruct every atep in the\nAxis plan extends from occupied France through Vichy France\nto the people of their colonies in every ocean and on every\ncontinent.\nOur planes are helping in the defense of French\ncolonies today, and soon American Flying Fortresses will be\nfighting for the liberation of the darkened continent of\nEurope.\nIn all the occupied countries there are mon, women\nand even little children who have nover stopped fighting,\nnever stopped resisting, never stopped proving to the Nazia\nthat their so-called \"New Order\" can never be enforced upon\nfree peoples.\nIn the German and Italian peoples themselves there\n1a a growing conviction that the cause of Naziom and Fascism\n18 hopeless -- that thoir political and military leaders have\nled them along the bitter road which leads not to world con-\nquest but to final defeat. They cannot fail to contrast the\npresent frantic speeches of these leadors with their arrogant\nboastings of a year ago, and two years ago.\nOn the other side of the world, in the Far East, ve\nhave passed through a phase of serious losses.\nWe have inevitably lost control of a largo portion of\nthe Philippine Islands. But this whole nation pays tributo to\ntho Filipino and American officers and men who held out 80 long\non Bataan Poninsula, to those grim and gallant fighters who\nstill hold Corregidor, end to the forces which are still strik-\ning effectively at the enomy on Mindanao and other islands.\nThe Malayan Peninsula and Singapore are in the hands\nof the enemy; the Netherlands East Indies are almost entirely\noccupied, though resistance there continues, Many other islands\nare in the possession of the Japanese. But there is good roason\nto believe that their southward advance has been checked.\nAustralia, New Zealend and much other territory will be bases\nfor offensive action -- and wo are determined that the territory\nwhich has been lost will be regained.\nThe Japanese are pressing their northward advance in\nBurma with considerable power, driving toward India and China.\nThey have been opposed with great bravery by small British and\nChinese forces aided by American fliers.\nThe news in Burma tonight 1a not good. The Japanese\nmay out the Burma Road; but I want to say to the gallant people\nof China that no matter what advances the Japanese may make, ways\nwill be found to deliver airplance and munitions of war to the\narmies of Goneralissimo Chiang Kai-shek.\nRegraded Unclassified\n- 3 -\n344\nWe remember that the Chinese people were the first\nto stand up and fight against the aggressors in this war;\nand in the future an unconquerable China will play its\nin Eastern Asia but in the whole world.\nproper role in maintaining peace and prosperity not only\nFor every advance that the Japanese have made since\nthey started their frenzied career of conquest, they have\nhad to pay a very heavy toll in warships, in transports,\nin planes and in men. They are feeling the effects of\nthose losses.\nIt is even reported from Japan that somebody has\ndropped bombs on Tokyo and on other principal centers of\nJapanese war industries. If this be true, it is the first\ntime in history that Japan has suffered such indignities.\nAlthough the treacherous attack on Pearl Harbor\nwas the immediate cause of our entry into the war, that\nevent found the American people spiritually prepared for\nwar on a world-wide scale. We went into this war fighting.\nWe know what we are fighting for. We realize that the\nwar has become what Hitler originally proclaimed it to\nbe -- a total war.\nNot all of us can have the privilege of fighting our\nenemies in distant parts of the world.\nNot all of us can have the privilege of working in\na munitions factory or shipyard, or on the farms or in oil\nfields or mines, producing the weapons or the raw materials\nwhich are needed by our armed forces.\nBut there is one front and one battle where everyone\nin the United States -- every man, woman, and child -- is\nin action, and will be privileged to remain in action\nthroughout this war. That front is right here at home, in\nour daily lives and in our daily tasks. Here at home\neveryone will have the privilege of making whatover self-\ndenial is necessary, not only to supply our fighting men,\nbut to keep the economic structure of our country fortified\nand secure during the war and after the war.\nThis will require the abandonment not only of\nluxuries but many other creature comforts.\nEvery loyal American is aware of his individual\nresponsibility. Whenever I hear anyone saying \"The American\npeople are complacent - they need to be aroused\", I feel\nlike asking him to come to Wushington and read the mail that\nfloods into the White House and into all departments of this\ngovernment. The one question that recurs through all these\nthousands of letters and messages is \"What more can I do\nto help my country in winning this war\"?\nTo build the factories, and buy the materials, and\npay the labor, and provide the transportation, and equip\nand feed and house the soldiers, sailors and marines, and\nto do all the thousands of things necessary in a war --\nall cost money, more money than has ever been spent by\nany nation at any time in the history of the world.\nWe are now spending, solely for war purposes, the\nsum of about one hundred million dollars every day in the\nweek. But, before this year is over, that almost un-\nbelievable rate of expenditure will be doubled.\nAll of this money has to be spent -- and spent\nquickly if Wu are to produce within the time now avail-\nable the enormous quantities of weapons of war which we need.\nBut the spending of these tremendous sums presents grave danger\nof disaster to our national economy.\nRegraded Unclassified\n345\n- 4\nWhen your Government continues to spend these\nunprecedented sums for munitions month by month and year\nby year, that money goes into the pocketbooks and bank\naccounts of the people of the United States. At the same\ntime raw materials and many manuf actured goods are necessarily\ntaken away from civilian use; and machinery and factories\nare being converted to war production.\nYou do not have to be a professor of economics to\nsee that if people with plenty of cash start bidding against\neach other for scarce goods, the price of them goes up.\nYesterday I submitted to the Congress of the United\nStates a seven point program of general principles which\ntogether could be called the national economic policy for\nattaining the great objective of keeping the cost of living\ndown.\nI repeat them now in substance:\n1. We must, through heavier taxes, keep\npersonal and corporate profits at a low\nreasonable rate.\n2. We must fix ceilings on prices and rents.\n3. we must stabilize wages.\n4. we must stabilize farm prices.\n5. We must put more billions into war Bonds.\n6. he must ration all essential commodities\nwhich are scarce.\n7. We must discourage instalment buying, and\nencourage paying off debts and mortgages.\nI do not think it is necessary to repeat what 1 said\nyesterday to the Congress in discussing these general\nprinciples.\nThe important thing to remember is that each one of\nthese points is dependent on the others if the whole program\nis to work.\nSome people are already taking the position that\nevery one of the seven points is correct except the one\npoint which steps on their own individual toes. A few scem\nvery willing to approve self-denial - on the part of their\nneighbors. The only effective course of action is a\nsimultaneous attack on all of the factors which increase\nthe cost of living, in one comprehensive, all-embracing\nprogram covering prices, profits, wages, taxes and debts.\nThe blunt fact is that every single person in the\nUnited States is going to be affected by this program.\nSome of you will be affected more directly by one or two\nof these restrictive measures, but all of you will be\naffected indirectly by, all of them.\nAre you a business man, or do you own stock in a\nbusiness corporation? Your profits are going to be cut\ndown to a reasonably low level by taxation. Your income\nwill be subject to higher taxes. Indeed in these days, when\nevery available dollar should go to the war effort, I do not\nthink that any American citizen should have a net income\nin excess of $25,000 per year after payment of taxes.\nRegraded Unclassified\n346\n5 -\nAre you a retailer or a wholesaler or a manufacturer\nor a farmer or a landlord? Ceilings are being placed on the\nprices at which you can sell your goods or rent your property.\nDo you work for wages? You will have to forego\nhigher wages for your particular Job for the duration of the\nwar,\nAll of us are used to spending money for things ve\nwant but which are not absolutely essential. We will all have\nto forego that spending. Because ve must put every dimo and\nevery dollar ve can possibly spare out of our earnings into\nWar Bonds and Stamps. Bocause the domands of the war effort\nrequire the rationing of goods of which there is not enough to\ngo around. Because the stopping of purchases of non-essentials\nwill release thousands of workers who are needed in the var\neffort,\nAn I told the Congress yesterday, \"sacrifice\" 10 not\nthe proper word with which to describe this program of self-\ndenial. When, at the end of this great struggle we shall have\nsaved our free way of life, we shall have made no \"sacrifice\".\nThe price for civilization must be paid in hard work\nand sorrow and blood. The price is not too high. If you doubt\nit, ask those millions who live today under the tyranny of\nHitlerism.\nAsk the workers of France and Norway, whipped to\nlabor by the lash, whother the stabilization of vages 18 too\ngreat & \"sacrifice\".\nAsk the farmors of Poland and Denmark, of Czechoslovakia\nand France, looted of their livestock, starving while their own\ncrops are stolen from their land, whother \"parity\" prices are\ntoo great a \"sacrifice\".\nAsk the business mon of Europe, whose enterprises have\nbeen stolen from their owners, whether the limitation of profits\nand personal incomes 18 too great B. \"sacrifice\".\nAsk the womon and children whom Hitlor is starving\nwhether the rationing of tires and gasoline and sugar in too great\n& \"sacrifice\".\nWe do not have to ask thom. They have alroady given us\ntheir agonized answers.\nThis great war effort must be carried through to its\nvictorious conclusion by the indomitable will and determination\nof the people.\nIt must not be impedod by the faint of heart.\nIt must not be impeded by those who put their own selfish\ninterests above the interests of the nation.\nIt must not be impeded by those who pervert honest\ncriticism into falsification of fact,\nIt must not be impeded by self-styled oxperts either\nin economics or military problems who know neither true figures\nnor geography itself.\nIt must not be impeded by a few bogus patriots who use\nthe sacred freedom of the press to echo the sentiments of the\npropagandiste in Tokyo and Borlin.\nAnd, above all, it shall not be imperiled by the hand-\nful of noisy traitors betrayers of America and of Christianity\nitself -- would-be dictators who in their hearts and soule have\nyiolded to Hitlerium and would have this Republic do likewise.\nRegraded Unclassified\n347\n- 6 -\nI shall use all of the exocutive power that I have\nto carry out the policy laid don. If it becomes necessary\nto ask for any additional legislation in order to attain\nour objective of preventing a spiral in the cost of living,\nI shall do 50.\nI know the American farmer, the American workman,\nthe American business man. I know that they will gladly\nembrace this economy of sacrifice -- satisfied that it is\nnecessary for the most vital and compelling motive in all\ntheir lives -- winning through to victory.\nNever in the memory of man has there been a war in\nwhich the courage, the endurance and the loyalty of civilians\nplayed so vital a part.\nMany thousands of civilians all over the world have\nbeen and are being killed or maimed by enemy action. Indeed,\nit was the fortitude of the common people of Britain under\nfire which enabled that islano to stand and prevented Hitl er\nfrom winning the war in 1940. The ruins of London and\nCoventry and other cities are today the proudest monuments\nto British heroism.\nOur own American civilian population is now relatively\nsafe from such disasters. And, to an ever increasing extent,\nour soldiers, sallors and marines are fighting with great\nbravery and great skill on far distant fronts to make sure\nthat we shall remain safe.\nI should like to tell you one or two stories about\nthe men we have in our armed forces:\nThere is, for instance, Dr. Corydon K. Wassell. He\nwas a missionary, well known for his good works in China.\nHe is a simple, modest, retiring man, nearly sixty years old,\nbut hu entered the service of his country and was commissioned\na Lieutenant Commander in the Navy.\nDr. Massell was assigned to duty in Java caring for\nwounded officers and men of the cruisers Houston and Marblehead\nwhich had been in heavy action in the Java seas.\nWhen the Japanese advanced across the island, it was\ndecided to evacuate as many as possible of the wounded to\nAustralia. But about twolve of the men Wefe so badly wounded\nthat they could not be moved. Dr. Wassell remained with\nthese men, knowing that he would be captured by the enemy.\nBut he decided to make a despurate attempt to get the\nmun out of Java. He asked each of them if he wished to\ntake the chance, and every one agreed.\nHe first had to get the twelvo men to the Seá coast --\nfifty miles away. To do this, he had to improvise strutchers\nfor the hazardous journey. The men were suffering severely,\nbut Dr. Nassell kept them alive by his skill, and inspired\nthum by his own courage.\nAs the official report said, Dr. Wassell was\n\"almost like a Christ-like shopherd devoted to his flook\".\nOn the Soa coast, ho embarked the men on a little\nDutch ship. They were bombed and machine-gunned by waves\nof Japanese planus. Dr. Wassell took virtual command of\nthe ship, and by great skill avoided destruction, hiding in\nsmall bays and inlets.\nA few days later, Dr. Wassell and his little flock\nof wounded men reached Australia safuly.\nRegraded Unclassified\n348\n- 7 -\nDr. Wassell now wears the Navy Cross,\nAnother story concerns a ship rather than an indi-\nvidual man.\nYou may remember the tragic sinking of the submarine\nSQUALUS off the New England coast in the summer of 1939. Some\nof the crew were lost, but others were saved by the speed and\nefficiency of the surface rescue crews, The SQUALUS itealf\nvas tediously raised from the bottom of the ocean.\nEventually she sailed again under e new name, the\nU.S.S. SAILFISH. Today, she 1e B. potent and effective unit of\nour submarine fleet.\nThe SAILFISH has covered many thousands of miles in\noperations in the far western Pacific.\nShe has sunk & Japanese destroyer.\nShe has torpedoed a Japanese cruiser.\nShe has made two torpedo hits on B. Japanese aircraft\ncarrier.\nThree of the enlisted mon of our Navy who went down\nwith the SQUALUS in 1939 are today serving on the samo ship,\nthe SAILFISE, in this war.\nIt is heartening to know that the SQUALUS, once given\nup as lost, rose from the depths to fight for our country in\ntime of peril.\nOne more story, which I heard only this morning:\nThis is a story of one of our Army Flying Fortresses\noperating in the Western Pacific. The pilot of this plane 1s\na modest young man, proud of his crew for one of the toughost\nfights a bomber has yet experienced.\nThe bomber departed from its base, as part of B. flight\nof five, to attack Japanese transports which were landing troops\nin the Philippines. When they had gone about half way to their\ndestination, one of the motors of this bomber went out of com-\nmission. The young pilot lost contact with the other bombers.\nThe crow, however, got the motor working again and the plane\nproceeded on its mission alone.\nBy the time it arrived at its target the other four\nFlying Fortresses had already passed over, had dropped their\nbombs, and had stirred up the Japanese \"Zero\" planos. Eighteen\nof them attacked our one Flying Fortress. Despite this mase\nattack, our plane proceeded on its mission, and dropped all of\nits bombs on six Japanese transporte which were lined up along\nthe docks,\nAs it turned back on its homeward journey a running\nfight between the bomber and the eighteen Japanose pursuit planes\ncontinued for seventy-five miles. Four pursuit ships attacked\nsimiltaneously at each side, and were shot down with the side\nguns. During this fight, the bomber's radio operator vas killed,\nthe engineer's right hand vas shot off, end one gunner vas\ncrippled, leaving only one man available to operate both side\nmanned both sido guns, bringing down three more Japanese \"Zoro\"\nguns. Although wounded in one hand, this gunner alternately\nplanes. While this vas going on, one engine on the bomber vas\nshot out, ono gas tank ves hit, the radio vas shot off, end the\noxygen system vas entirely destroyed. Out of eleven control\ncables all but four were shot away. The rear landing wheel vas\nblown off, and the two front wheels were both shot flat.\nRegraded Unclassified\n349\n- 8 -\nThe fight continued until the remaining Japanese\npursuit ships exhausted their ammunition and turned back.\nWith two engines gone and the plane practically out of con-\ntrol, the American bomber returned to its base after dark and\nmade an emergency landing. The mission had been accomplished.\nThe name of that pilot 1s Captain Howitt T. Wheless,\nof the United States Army. He comes from Menard, Texas --\npopulation 2,375. Ho has been awarded the Distinguished\nService Cross. I hope he is listening.\nThese stories I have told you are not exceptional.\nThey are typical examples of individual heroism and skill.\nAs we here at home contemplate our own duties, our\nown responsibilities, let us think and think hard of the ex-\nample which is being sot for us by our fighting mon.\nOur soldiers and sailors are members of well dis-\nciplined units. But they are still and forever individuals --\nfree individuals. They are farmers, workers, business men,\nprofessional mon, artists, clerks.\nThey are the United States of America.\nThat 18 why they fight.\nWe too are the United States of America.\nThat 1s why we must work and sacrifice.\nIt is for them. It 18 for us. It 1s for victory.\n350\nApril 28, 1942\nDear Admiral Land:\nI am sending you herewith a Daston's memo\nconfidential Treasury memorandum listing of 4/07-\nvessels at fourteen ports as of April 24.\nYours sincerely,\n(Signed) a. Morgenthaus 12.\nRear Admiral Emory S. Land,\nChairman, II.S. Maritime Commission.\nn.m.c.\nBy Measenger Bundy 3:40\nRegraded Unclassified\n- -\n351\nApril 28, 1942\nDear Lew:\nI an sending you herewith a con-\nfidential Treasury memorandum listing vessels\nat fourteen ports as of April 24.\nYours sincerely,\n(Signed) Heary\nMr. Lewis Douglas,\nU.S. Maritime Commission,\nWashington, D. C.\nn.m.c.\nBy Measenser Burry 3:40\n352\nAPR 28 1942\nMy dear Mr. President:\nI am enclosing report on our exports\nto come selected countries for the period\nending April 10, 1942.\nFaithfully,\n(Signed) 1. Morgenthan. in\nSecretary of the Treasury\nThe President,\nThe white House.\nEnclosure.\ncopies to Dr. w hitis office\nn.m.c.\nBy Messenger Saugh 5.20\nRDWISS\n4/27/42\nRet to Sicy's office\nRegraded Unclassified\n353\nAPR 28 1942\nMy dear Mr. Secretary:\nI an enclosing copy of report on our\nexports to some selected countries for the\nperiod ending April 10, 1942.\nSincerely yours,\n(Signed) H. Morgenthau, In:\nSecretary of the Treasury\nThe Honorable,\nThe Secretary of State,\nWashington, D. c.\nEnclosure\ncopiests Dr.W n.m.c. Lite office\nBy Messenger Bundy 3:40\n#DWimen\n4/27/42\nRes to Seeijo office\nRegraded Unclassified\n354\nAPR 28 1942\nMy dear Colonel Donovan:\nI as enclosing copy of report on our\nexports to some selected countries for the\nperiod ending April 10, 1942.\nSincerely yours,\n(Signed) H. Morgenthau, Jr.\nSecretary of the Treasury\nColonel william J. Donovan,\nCoordinator,\nOffice of Coordinator of Information,\n01d National Institute of Health Building,\n25th and E Streets, N. W.,\nwashington, D. c.\nEnclosure.\ncopies n.m.c. to Drw hites office\nBy Messenger Bundy 3:40\nHDW:meh\n4/27/42\nRet to Secip office\nRegraded Unclassified\n355\nAPR 88 1942\nMy dear Mr. Perkins:\nI an enclosing five copies of the\nreport on our exports to some selected\ncountries for the period ending April 10,\n1942.\nSincerely yours,\n(Signed) H. Morgenthau. Jr.\nSecretary of the Treasury\nMr. Milo Perkins,\nExecutive Director,\nBoard of Economic Warfare,\nRoom 3710,\nDepartment of Commerce Building,\nwashington, D. c.\nEnclosures.\nn.m.c. copies had offer\nBy Messenger Bundy 3:40\nHDV:meb\n4/27/42\nRet to Leey's office\nRegraded Unclassified\n356\nApril 25, 1942\nExports to Russie, Free China, Suree and other blocked\ncountries, as reported to the Treasury Department\nduring the 10-day period ending April 10, 1942.\n1. Exports to Russia\nExports to Russia, AS reported to the Treasury during\nthe period ending April 10, 1942 amounted to more than\n$51,000,000. Motor trucks, military tanks and landplanes\nwere the principal items. (see Appendix C.)\n2. Exports to Free Chima and Burea\nExports to Free China during the period under review\namounted to about $4,800,000. Landplanes were the principal\nitems. (See Appendix 0.)\nExports to Burne amounted to $447,000. (See Appendix 5.)\n3. Exports to France\nNo exports to France were reported during the period\nunder review.\n4. Exports to other blooked countries\nExports to other blocked countries are given in Appendix A.\nNost important were exports to Sweden and Portugal amounting to\n$1,572,000 and $1,077,000, respectively.\nRegraded Unclassified\n357\nSTRICTLY CONFIDENTIAL\nNOT FOR PUBLICATION\nSUBMARY OF UNITED STATES\nDOMESTIC EXPORTS to SELMOTED COUNTRIES\nAS REPORTED TO THE TREASURY DEPARTMENT\nFROM EXPORT DECLARATIONS RECEIVED\nDURING THE PERIOD INDICATED 2\nJuly 28, 1941 to April 10, 1942.\n(In thousands of dellars)\nJuly 28\nto\nPeriod ended\nPeriod ended\nTotal\nMarch 20\nHereb n\nApril 10\nDescribe Importe\nU. s. s. Re\n$236,748\n8 42,435\n$ 51,698\n$ 330,681\nProo China\n60,693\n2\n4,836\n65,591\nJurns 2/\n11,108\n=\n447\n11,597\nFrance v\n6\n-\n-\n6\nOccupied France\n2\n-\n-\n2\nIncceupied France\nas\n-\n-\n28\nSpain\n2,833\ns/\n12\n2,845\nSwitzerland\n7,406\n273\n11\n7,690\nSweden\n13,855\n2,045\n1,572\n17,472\nPortugal\n6,933\n476\n1,077\n8,488\nFrench North Africa w\n6,283\n-\n-\n6,263\nTreasury Department, Division of Nonetary Research\nApril 29, 1942.\n1/ Many of the emport declarations are received with a lag of several days or sere.\nTherefore this compilation does not securately represent the actual shipment of\na particular week. The longer the period covered, the closer will these figures\ncome to Department of Commerce revised figures.\n2/ From September 11, 1941 to date - it is presented that a large persentage of\nnaterial listed here, consigned to Burna, is destined for Free China.\n2/ Includes both Occupied end Unscrupted France through work ending Ostober hp 1941.\nDesupied and Unecexpied Prance separated thereafter.\nw Includes Nercess, Algeria and Turisia,\ns/ Less them $500.\nMirl 4/23/42\nRegraded Unclassified\nAPPENDIX B\n358\nExports from the U. 5. to Free Chima, Burne and\nU.S S.R. \" reported to the Treasury Department\nJuly 28, 1941 - April 10, 1942\n(Thousends of Dollars)\nExports to\nExports to\nExports to\nFree China\nBurna 3/\nU.S.S.R.\nJuly 28 - Aug. 2\n395\n4,523\nAug. 4 - Aug. 2\n-\nAug. 11 - Aug. 16\n309\n322\nAug. 18 - Aug. 23\n2\n2,735\nAug. 25 - Aug. 30\n1\n1,023\nSept. 2 - Sept. 6\n204\n4,280\nSept. 8 - Sept.13\n2,281\n5,217\nSept.15 - Sept.20\n3,822\n752\nSept.22 - Sept.27\n110\n449\n2,333\nSept.29 - Oct. 4\n1,225\n684\n323\nOct. 6 - Oct. 11\n5,312\n1,157\n6,845\nOct. 13 - Oct. 16\n5\n35\n1,924\nOct. 20 - Oct. 25\n269\n403\n5,623\nDet. 27 - Nov. 1\n4,772\n58\n4,484\nNov. 3 - Nov. 8\n1,672\n342\n4,552\nNov. 10 - Nov. 15\n2,851\n88\n2,677\nNov. 17 - Nov. 22\n1,228\n1,021\n3,581\nNov. 24 - Nov. 29\n3,239\n1,364\n2,436\nA0. 1 - Dec. 6\n791\n64\n3,609\nDec. e - Dee. 13\n2,337\n18\n12,040\nDec. 15 - Dee. 20\n111\na\n4,580\nDec. 22 - Dec. n\n1\n196\n1,829\nDec. 29 - Jan. 3\n35\n2\n3,993\nJan. 5 - Jan. 10\n91\n1,073\n8,247\nJan. 12 - Jan. 17\n1,695\n447\n5,874\nJan. 19 - Jan. 24\n-\n-\n3,885\nJan. 26 - Jam. 31\n6,938\n923\n9,601\nFeb. 1 - Feb. 10\n4,889\n1,054\n13,315\nFeb. 10 - reb. 20\n4,853\n583\n26,174\nFeb. 20 - Feb. 28\ns/\n2,921\n-\n28,119\nMar. 1 - Mar. 10\n2,879\n23\n32,509\nMar. 10 - Mar. 20\n5,058\n3\n28,556\nMar. 20 - Mar. 31 s/\n3\n2\n42,435\nApr. 1 - Apr. 10\n4,836\n447\n51,698\nTotal\n68,134\n10,444\n331,316\n1. These figures are in part taken from sopies of shipping manifests.\n2. Figures for exports to Free China during these weeks include exports\nto Rangoom which are presumed to be destined for Free China.\n3. It is presused that a large persentage of exports to Burna are\ndestined for Free China.\n4.\nBeginning with February 1 figures will be given for 10-day period\ninstead of week except where otherwise indiented.\n5. M-day period.\n\" 11-day period.\nTreasury Department, Division of Monetary Research\nApril 25, 194\nRegraded Unclassified\n359\nAPPENDIX C\nPrincipal Exports from U. s. to U. s. S. R.\nas reported to the Treasury Department\nduring the ten-day period ending\nApril 10, 1942\ny\n(Thousands of Dolbrs)\nTOTAL EXPORTS\ns 51,69€\nPrincipal Items:\nMotor trucks\n7,919\nMilitary tanks - medium\n4,782\nDried egg products\n3,599\nLandplanes, pursuit, interceptor and fighter\n3,538\nBausage canned\n2,732\nPork canned\n1,909\nLard\n1,446\nInsulated copper wire\n1,311\nBrass and bronze plates and sheets\n1,221\nSugar, refined\n1,149\nMetallie cartridges\n1,134\nLandplanes, bombardment\n1,050\nHilitary tanks - light\n1,045\nSteel bers\n836\nBrace and bronze fabrications for munitions\n814\nArmor plate\n768\nTin plate and taggers tin\n750\nExplosive shells and projectiles\n748\nIron and steel strip\n710\nZiene boots and shoes\n699\nJole leather\n690\nTreasury Department, Division of Monetary Research\nApril 25, 1942\nRegraded Unclassified\n360\nAPPENDIX D\nPrincipal Exports from U. S. to Free China\nas reported to the Treasury Department\nduring the ton-day period ending\nApril 10, 1942\n(Thousends of Dellars)\nTOTAL EXPORTS\n$ 4,836\nPrincipal Items:\nLandplanes, pursuit, interceptors, fighter\n1,259\nAircraft parts and accessories, n.e.s.\n559\nOther ammunition\n470\nSmokeless powder\n442\nMotor trucks\n254\nMetallie cartridges\n236\nIron and steel bare\n198\nIndustrial chemicals\n192\nPrinted matter\n140\nShot shells\n115\nTreasury Department, Division of Nonetary Research\nApril 25. 1942\nRegraded Unclassified\n361\nAPPENDIX g\nPrincipal Exports from U. 5. to Burne\nas reported to the Treasury Department\nduring the ten-day period ending\nApril 10, 1942\n(Thousands of Dollars)\nTOTAL EXPORTS\n# 447\nPrincipal Items:\nMotor trucks\n445\nAlloy steel sheets\n2\nTreasury Department, Division of Monetary Research\nApril 25, 1942\ninf/efu\n4/25/42\nRegraded Unclassified\n362\nTREASURY department\nINTER OFFICE COMMUNICATION\nDATE April 2B, 1942\nTO\nSecretary Morgenthau\nFROM\nMr. Hass\nSubject: The Export Freight Situation.\nLighterage freight in storage and on hand for unloading\nat New York decreased by 46 cars during the past week to\n20,539 cars. (See Chart 1.) Rail storage space occupied\nat the end of the week amounted to 12,086 cars, while addi-\ntional storage space was available for 8,013 cars.\nExports from New York decreased by an estimated 253 cars\nto 7,209 cars. (See Chart 2, upper section.) Receipts for\nexport at New York decreased by 344 cars to 7,167 cars.\n(Chart 2, lower section.)\nReceipts of export freight at 9 North Atlantic ports\nand at 6 Pacific ports also showed declines, dropping by\n217 and 102 cars to 3,787 and 3,048 cars, respectively.\n(Refer to Chart 2, lower section.)\nRegraded Unclassified\nLIGHTERAGE FREIGHT IN STORAGE\nAND ON HAND FOR UNLOADING IN NEW YORK HARBOR*\n1941\n1942\nCARLOADS\nCARLOADS\nThousands\nThousands\n24\n24\n22\n22\n20\n20\n18\n18\n16\n16\n14\n14\n12\n12\n10\n10\n8\n8\nJAN.\nMAR.\nMAY\nJULY\nSEPT\nNOV.\nJAN.\nMAR.\nMAY\nJULY\nSEPT.\nNOV.\n1941\n1942\n363\nChart 1\n* Largety export freight, but about 10% represents freight for local\nand cosstel shipment. Figures exclude erain.\nOffice of the Secretary of the Trass)\n- of - and Helder\nC-303-0\nRegraded Unclass\nEXPORT FREIGHT MOVEMENT\n1941\n1942\nCARLOADS\nCARLOADS\nThousands\nThousands\nExports\n10\n10\n9\n9\n6\ne\nFrom New York®\n7\n7\n6\n6\n1\n5\nmm/\n5\n4\n4\n3\n3\n2\n2\nJAN.\nMAR.\nMAY\nJULY\nSEPT.\nNOV.\nJAN.\nMAR.\nMAY\nJULY\nSEPT.\nNOV.\n1941\n1942\nCARLOADS\nCARLOADS\nThousands\nThousands\nReceipts for Export\n10\n10\n9\n9\n8\n8\nAt New York*\n7\n7\n6\n6\n5\n5\n4\n4\nAt 9 other North\nAtlantic Ports \"\n3\n3\n2\n2\nI\nI\nAt 6 Pocific Ports .\n.\no\no\nJAM.\nMAR.\nMAY\nJULY\nSEPT.\nNOV.\nJAN.\nMAR.\nMAY\nJULY\nSEPT\nNOV.\n364\n1941\n1942\nChart 2\ne As estimated from date of general managers' association of New York.\ne e Association of American Refiresds.\nOffice of the Bentery of the Trumpy\n- of - at Made\nC-MR-B\nRegraded Unclassifie\n365\nTREASURY DEPARTMENT\nOFFICE or THE SUGGERANT\nApril 28, 1942\nCOMPIEMITIAL\nReceived this date from the Federal Recerve\nBank of New York, for the confidential informa-\ntion of the Secretary of the Treasury, compila-\ntiem for the week ended April 15. 1942, showing\ndollar disbursements out of the Brittsh Empire\nand French accounts at this bank and the means\nw which these expenditures were financed.\nA\nlap-4/28/42\nRegraded Unclassified\n366\nC\n0\nP\nY\nFEDERAL RESERVE BANK\nOF NEW YORK\nApril 23, 1942\nCONFIDENTIAL\nDear Mr. Secretary: Attention; Mr. H. D. White\nI am enclosing our compilation for the week\nended April 15, 1942, showing dollar disbursements out\nof the British Empire and French accounts at this bank\nand the means by which these expenditures were financed.\nFaithfully yours,\n/a/ L. W. Knoke\nL. V. Knoke,\nVice President.\nThe Honorable Henry Morgenthau, Jr.,\nSecretary of the Treasury,\nWashington, D. C.\nEnclosure\nCopy:vw:4-27-42\nLISTS OF BRITTSH AND FRENCH ACCOUNTS\n(In Millions of Dollare\nYesk Inded\nBANK OF ENGLAND (BRITISH GOVERNMENT)\nBANK\nOF\nFRANCE\nDEBITS\nCREDITS\nDEBITS\nCREDITS\nProceeds of\nNet Incr.\nNet Incr.\nGov't\nSales of\n(+) or\nGov't\nProceeds\n(+) or\nTotal Expendi-\nOther\nTotal\nSecurities\nOther\nDecr. (-)\nTotal\nExpendi-\nOther\nTotal\nof Gold\nOther\nDecr. (-)\nDebits\nSales\nCredits\nin Balance\nDebits\ntures(a)\nDebite\nCredita\nPERIOD\nGold\n(Official) (b)\nCredita(c):\nin Balance\nDebits\ntures (d)\nCredits\nFirst year of war\n(8/29/39-8/28/40)*\n1,793.2\n605.6\n1,187.6\n1,828.2\n1,356.1\n52,0\n420.1\n+ 35.0\n866.3(e)\n416.6(e)\n449.7\n1,095.3\n900.2\n195.1(e)\n+229.0\nWar period through\n878.3\n421.4\n456.9\n1,098.4\n900,2\n198.2\n+220.1\nDecember, 1940\n2,792.3\n1,425.6\n1,356.7\n2,793.1\n2,109.5\n108.0\n575.6\n+ 10.8\nSecond year of war\n(8/29/40-8/27/42)**\n2,203.0\n1,792.2\n410,8\n2,189.8\n1,193.7\n274.0\n722.1\n- 13.2\n38.9\n4.8\n34.1\n8.8\n-\n8.8\n- - 30,1\n1941\n2.0\n154.1\n+ 35-3\n0.3\n#\n0.3\n0.5\n-\n0.5\n+ 0,2\nAug. 28- Oct. 1\n140.9\n105.9\n35.0\n176,2\n20.1\nOct. 2 - Oct. 29\n109.0\n77.3\n31,7\n150.9\n0.8\n150.1\n+ 41.9\n0.3\n,\n0.3\n0.3\n-\n1\n0.3\n-\nOct. 30 - Dec. 3\n156,1\n111.6\n44.5\n134,6\n1,0\n133.6\n- 21.5\n16,1\n-\n16.1\n0.4\n-\n0.4\n- 15.7\n-\n69,6\n52.5\n51,5\n-36.9\n0,8\n-\n0,8\n0.4\n-\nDec. 4- Dec. 31\n88.4\n18,8\n0,4\n- 0.4\n-\n-\n1942\n69.3\n0.5\n68.8\n- 33.0\n0.2\n-\n0,2\n0.4\n-\n0.4\n+ 0,2\nJan. 1- Jan, 28\n102.3\n73,2\n29.1\n1\n1,0\n56.2\n- 30,0\n-\n-\n-\n0,3\n-\n0.3\n+ 0,3\nJan. 29 Feb. 25\n87.2\n63.8\n23.4\n57.2\n-\n121.4\n171.4\n$ 50.0\n0.1\n-\n0,1\n86.4\n-\n-\n0.4\n-\nFeb. 26- Apr. 1\n35.0\n171.4\n0.4\nt 0.3\nWEEK ENDED:\n- 2.3\n-\n-\n-\n1\n-\n0.1\n- 0.1\nMar. 25\n21.1\n14.2\n6.9\n18.8\n-\n-\n18.8\n19.8\n13.3\n6.5\n58.9\n58.9\n+ 39.1\n-\n-\n-\n-\n1\n-\n-\n-\n-\nApr. 1\n17.3\n20.3\n0.5\n19.8\n- 16.0\n-\n-\n-\n(.)\n-\n0.1\n+ 0.1\n19.0\n-\n8\n36.3\n22.8(f) - 2.0\n0.1\n-\n0,1\n-1\n-\n0.1\n-\n15\n24.8\n17.6\n7.2\n22.8\n-\n-\nTransfers from British Purchasing Commission to\nAverage Weekly Expenditures Since Outbreak of War\nBank of Canada for French Account\nFrance (through June 19, 1940) $19.6 million\nWeek ended April 15, 1942\n$ -\nmillion\nEngland (through June 19, 1940) 27.6 million\nCumulation from July 6, 1940\n$\n162.7\nmillion\n**For monthly breakdown see tabulations prior to October 8, 1941\n*For monthly breakdown see tabulations prior to April 23, 1941.\nEngland (since June 19, 1940) 38.9 million\n(See attached sheet for other footnotes)\nRegraded Unclassified\n(a) Includes payments for account of British Purchasing Commission, British Air Ministry, British Supply Board, Ministry of\nSupply Timber Control, and Ministry of Shipping.\n(b) Estimated figures based on transfers from the New York Agency of the Bank of Montreal, which apparently represent the\nproceeds of official British sales of American securities, including those effected through direct negotiation. In addition\nto the official selling, substantial liquidation of securities for private British account occurred, particularly during the\nearly months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuracy. According\nto data supplied by the British Treasury and released by Secretary Morgenthau, total official and private British liquidation\nof our securities through December, 1940 amounted to $334 million.\n(c) Includes about $85 million received during October, 1939 from the accounts of British authorized banks with New York banks,\npresumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October,\n1939 apperently represent the acquisition of proceeds of exports from the sterling area and other currently accruing dollar\nreceipts.\n(d) Includes payments for account of French Air Commission and French Purchasing Commission.\n(e) Adjusted to eliminate the effect of 620 million paid out on June 26, 1940 and returned the following day.\n(f) Includes $10 million transferred from accounts of British authorized banks and $3.6 million presumably representing proceeds of wool\nexports to the U.S.\nBANK\nOF\nCANADA (and Canadian Government)\nCOMMONWEALTH BANK AUSTRALIA\nWHELTS\nCREDITS\nDEBIT3\nCREDITS\nTransfers\nTransfers from Official\nTransfers\nto\nProceeds\nBritish A/C\nNet Incr.\nto\nProceeds\nNet Incr.\nOfficial\nof\n(+) or\nOfficial\nof\n(+) or\nTotal\nBritish\nOther\nTotal\nGold\nFor Own\nFor French\nOther\nDecr. (-)\nTotal\nBritish\nOther\nTotal\nGold\nOther\nDecr. (-)\nPERIOD\nDebits\nA/C\nDebits\nCredits\nSales\nA/C\nA/C\nCredits\nin Balance\nDebits\nA/C\nDebits\nCredits\nSales\nCredits\nin Balance\nFirst year of war\n(8/29/39-8/28/40)*\n323.0\n16.6\n306.4\n504.7\n412.7\n20.9\n38.7\n32.4\n+181.7\n31.2\n3.9\n27.3\n36.1\n30.0\n6.1\n+ 4.9\nMar period through\nDecember, 1940\n477.2\n16,6\n460.6\n707.4\n534.8\n20,9\n110,7\n41,0\n+230.2\n57.9\n14.5\n43.4\n62.4\n50.1\n12.3\n+ 4.5\nSecond year of war\n(8/29/40-8/27/41)**\n460.4\n-\n460.4\n462,0\n246.2\n3.4\n123.9\n88.5\n+ 1.6\n72.2\n16.7\n55.5\n81,2\n62,9\n18,3\n+ 9.0\nAng. 28 Oct. 1\n23.1\n-\n23,1\n52,2\n21,2\n-\n-\n31.0\n+ 29.1\n10.7\n0.5\n10,2\n218\n2.1\n0.7\n- 7.9\n1941\nOct, 2- Oct, 29\n37.4\n-\n37.4\n19,7\n11.9\n-\n-\n7,8\n- 17,7\n8.2\n5.5\n2,7\n8.0\n5.9\n2.1\n+ 0,2\nOct. 30 - Dec. 3\n52.8\n0.1\n52,7\n32.5\n19,3\n-\n-\n13,2\n- 20.3\n10.3\n6.9\n3.4\n11.6\n9.0\n2.6\n* 1,3\nDec. 6 - Dec. 31\n47.7\n-\n47.7\n22.2\n17.3\n-\n-\n4,9\n- 25.5\n3.9\n1,8\n2,1\n2,8\n0,2\n2,6\n- 1.1\n1942\nJana 1 - Jan. 28\n39.5\n-\n39.5\n33.0\n27.0\n-\n-\n6.0\n- 6.5\n4.5\nI\n4.5\n10,8\n-\n10.8\n+ 6.3\nJan. 29 - Feb. 25\n34.1\n-\n34.1\n35,7\n12,4\n-\n-\n23.3\n+ 1.6\n8.4\n5.3\n3.1\n1,6\n-\n1,6\n- 6,8\nPab. 26 Apr. 1\n46.5\n-\n46.5\n99.3\n20,5\n7.7\n-\n71.1\n+ 52.8\n7.8\n1.3\n6.5\n3.6\n-\n3.6\n- 4.2\nNEEK ENDED:\nMar. 25\n11,9\n-\n11.9\n8.3\n0,2\n3.4\n-\n4.7\n- 3.6\n0.1\n-\n0.1\n0.5\n-\n0.5\n+ 0.4\nApr. 1\n14.1\n-\n14.1\n12.7\n9,2\n-\n-\n3.5\n- 1.4\n2.3\n1.3\n1.0\n2.4\n-\n2.4\n+ 0.1\n7.2\n-\n7.2\n9.5\n2.5\n-\n-\n8\n2.0\n+2.3\n0.3\n-\n0.3\n0.8\n-\n0.8\n+ 0.5\n15\n7.6\n-\n7.6\n7.9\n3.7\n-\n-\n4.2(a)\n+ 0.3\n1.1\n-\n1.1\n12.3\n-\n12.3(b)\n+ 11.2\nkly Average of Total Debits Since Outbreak of War\nThrough April 15, 1942\n$\n7.8\nmillion\n+ For monthly breakdown see tabulationsprior to April 23, 1941.\n-- For monthly breakdown see tabulations prior to October 8, 1941.\n(a) Includes about 32 million representing proceeds of U. S. Government checks deposited by War Supplies, Ltd.\n(b)Includes $12 million received from U. S. Govt. for account of U. S. military And naval forces Abroad.\nRegraded Unclassified\n370\nOFFICE OF LEND-LEASE ADMINISTRATION\nFIVE-FIFTEEN 22d STREET NW.\nWASHINGTON, D.C.\nApril 28, 1942\nMr. Harry D. White\nAssistant to The Secretary\nTreasury Department\nWashington, D.C.\nDear Mr. White,\nAs requested, I enclose herewith a\nmemorandum which in substance covers the\npoints which it was felt by Lend-Lease could\nbe agreed on by the Treasury, State, War\nDepartment and ourselves. It was our under-\nstanding that this arrangement was super-\nseded by the conversation held in Mr.\nMorgenthau's office.\nSincerely yours,\nInd Echey F.W. Ecker Echey\nFORDEFENSE\nBUY\nUNITED\nsner 08 519A\nSTATES\nSAVINGS\nBONDS\nAND STAMPS\n371\nOFFICE OF LEND-LEASE ADMINISTRATION\nFIVE-FIFTEEN 22d STREET NW.\nWASHINGTON, D.C.\nApril , 1942\nMEMORANDUM\nReconstructed\nTO:\nThe President\nDraft\nFROM:\nMessrs. Morgenthau, Acheson, McCloy and McCabe\nSUBJECT: British Dollar Position\nAs of April 1st the British gold and U.S. dollar\nposition amounted to approximately $600 millions. Out-\nstanding contracts requiring dollar payments together\nwith other net expenditures are such that it is\nestimated that by the end of 1942 this figure may be\nreduced to $150 million if it is not augmented by\ncurrent gold production. In making this estimate it is\nassumed that approximately $150 million of the pay of\nAmerican expeditionary forces will be spent in sterling\nareas and that all imports to the United States from\nsuch areas will be paid for in U.S. dollars. On the\nother hand, it assumes that supplies and food obtained\nlocally for American expeditionary forces will be\nprovided on Lend-Lease in Reverse as will also pay of\ncivilians in sterling area working on projects for U.S.\narmed forces.\nThe balance of $150 million, referred to above, is\ntoo low, and it is felt that ways and means should be\nprovided to maintain it around the present level.\nIt is, therefore, agreed that\n(1) the War Department will take over from the\nBritish certain ordnance contracts which will\nprovide approximately $110 million.\n(2) from a study of the Treasury estimates\nbased on the British figures, Lend-Lease\nFOR DEFENSE\nBUY\nUNITED\nSTATES\nENVINGS\nBONDS\n372\nThe President\n(2)\nApril , 1942\nbelieves that the current trend of its\noperations may well result in the\nreduction in British dollar needs by\n$100 millions, and will attempt through\nbroadening its policy of aid to assist\nin reaching this objective.\n(3) up to $200 millions additional will be\nprovided by payment in dollars for supplies\nand/or local civilian labor assumed in the\nestimate to be received under Lend-Lease in\nReverse.\n373\n20 Mass Chamges\nSee meal not\nAll this\nSouthard\nC\n0\n374\nP\nY\nDEPARTMENT OF STATE\nWASHINGTON\nApril 28, 1942\nIn reply refer to\nIf 865.5151/432\nThe Secretary of State presents his compliments to\nthe Honorable the Secretary of the Treasury and transmits\nfor his information a copy of telegram no. 741, April 23,\n1 p.m., from the American Embassy at Buenos Aires, as well\nas a paraphrased copy of telegram no. 742, April 23, 2 p.m.,\nconcerning an offer from Hans Seligman, Schurch and Company,\nof Basel, which proposes to involve licensed lire exchange\ntransfers to America in amounts of at least twenty million\nlire each for investments, debt repayments and gifts, and\nsuggesting the United States Treasury would consent to ex-\nchange transactions as depriving Italy of foreign exchange.\nEnclosures:\n1. Telegram no. 741,\nApril 23, from\nBuenos Aires.\n2. Paraphrase of\ntelegram no. 742,\nApril 23, from\nBuenos Aires.\nCopy:bj:4-28-42\n375\nMRL\nGRAY\nBuenos Aires\nDated April 23, 1942\nRec'd 2:40 p.m.\nSecretary of State,\nWashington.\nRUSH\n741, April 23, 1 p.m.\nStrupp of Strupp and Company has informed the Embassy\nof the following telegram from Hans Seligman Schurch Company\nof Basel received this morning:\n\"Have special permit many million lire for expenditure\ninvestments, debt repayments, gifts ethical by any person\nresiding anywhere. Seller is Vatican. Could you organize\nsale in America main condition buying firm each time at least\n20,000,000. Think can provide consent United States of\nAmerican Treasury for transaction as depriving Italy foreign\nexchange coming in hands of Vatican to be used for their\npeaceful purposes abroad. Could buy those special lire at\nabout 50% discount of official rate. Matter very interesting,\nurgent, hurry as can approach Treasury only after you general\nbut unobliging consent. Italian treasury indicates gift\ntransfers from Argentine monthly above 20,000,000.\" See\nEmbassy's telegram 742.\nARMOUR\nWSB\nCopy:bj:4-28-42\nC\no\n376\nP\nY\nPARAPHRASE OF TELEGRAM RECEIVED\nFROM: AMEMBASSY, Buenos Aires.\nTO : Secretary of State, Washington.\nDATED: April 23, 1942, 2 p.m.\nNUMBER: 742.\nPart two of telegram 741 from the Embassy at\nBuenos Aires.\nThe party mentioned in the telegram under reference,\nHans Seligman, Schurch & Company of Basel, is on the\nProclaimed List and Strupp stated his bank would have no\nrelations with the subject matter and later he agreed\nwith the British Embassy that no reply to the offer would\nbe forthcoming from his firm until that Embassy was heard\nfrom again. Instructions from London are being requested.\nARMOUR\nCopy:bj:4-28-42\nTreasury Department\n377\nDivision of Monetary Research\nDate April 28 19 42\nTo:\nMiss Chauncey\nI think the Secretary\nmight want to glance at this.\nMR. WHITE\nBranch 2058 - Room 2141\n378\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE April 28, 1942\nTO\nSecretary Morgenthau\nFROM\nMr. White\nSubject: Digest of cable from Mr. Adler dated April 23, 1942.\n1. Economic conditions in Chungking have\ndeteriorated further. Wholesale price\nindex now 4,130. (January - June 1937\nequal 100.) However, collection of land\ntax in kind proving fairly successful.\n2. It is interesting to note that according\nto reports received the Chinese Government\nplans compulsory subscription of Chinese\nbonds payable in United States dollars by\nhigh income groups and voluntary subscrip-\ntion by the general public.\n379\nPARAPHRASE OF TELEGRAM RECEIVED\nFROM: American Embassy, Chungking, China\nDATE: April 23, 1942, 9 seme\nNO.: 447\nThis in & strictly confidential message, TF-29, for\nMr. Tox, in care of the Secretary of the Treasury, from\nMr. Adlor.\nFor Treasury's and your information following is the\nfirst weekly coonomic report, no.l.\n1. March prices in Chungking (Wholessle price index of\nthe Institute of Wartime Sconomic Research and rotail price\nindex of the Farmers Bank, both based on January - June 1937\nequalling 100) were 4130 wholesale, and 3390 retail, up\n12 and 12.5% respectively over the February prices. The\nFebruary rise in retail prices over January W&B 12.5% and\nthe wholesale was 18%.\n2. In March the legal tender notes in circulation\nincreased 45 over the February figurs--from 16,833 million\nChinese currency dollars In February to our 17,150 million\n(preliminary) in March. The February figure is & 5%\ninere 00 over that of January.\n3. On April 16 the interest rate of the native banks\nin Chungking on 15-day loans web CM dollars 14 por 1000\nChinese national dollars or 33.6% por ornus. Since April 1\nthere has been NO change.\n4. According to the report of the Ministry of Finance\nApril 20 the collection of the land bar in kind rendered\n21.2 million standerd piculs of rice and other cereals or\n94% of the revised ortinite for September 1941--April 1942\nseason which W&B 22.9 million piculs. (110 pounds avoirdupois\nequals one standard pioul.) 111% of the estimated Szechuan\ncollection was produced, this accounting for alsost 1/3 of\nthe total.\n5. According to a preliminary estim to, from April 1\nto 18 the sole of seving certificates vasi Chungking,\n8 million dollars; Kunning, 2 million Chinese national\ndollars and 2 million Chinese national dollars, making a\ntotal of CN dollars 12 million.\n6. Issue beginning May 1 of United States dollar-\nbacked bonds of up to 100,000,000 in United States dollars\npaying\nRegraded Unclassified\n380\npaying 45 per annum with 4. maturity of 10 years at the\npurchase price of GN dollars 100 equalling $ in United\nStates currency was authorized by the Executive Yuan on\nApril 21. Under the authorized scheme 6. large scale\nselling campaign is planned including compulsory subscrip-\ntions by the high income groups and voluntary subscriptions\nby the general public. To Kung Pao reported this decision\non April 22 and it was confirmed on the Same date in a\nconversation with Y. C. Koo and O. K. Yui.\nIn paragraphs 2, 4, and 5, the figures given are\nstrictly confidential and are unpublished. Those in\nparagraph 1 are published only after e one-to-three\nmonths lage\nGAUSS\nRegraded Unclassified\nC\n0\n381\nP\nY\nTRB\nPLAIN\nCairo\nDated April 28, 1942\nRec'd 3:18 a.m., 29th\nSecretary of State,\nWashington.\n666, twonty-eighth.\nToday's press carries in extenso speech of Finance Minister\nMakram Ebeid Pasha in Chamber of Deputies last night introducing new\nbudget stated to be largest (53 million Egyptien pounds) ever framed\nin Egypt outstanding feature of speech was Minister's emphasis on social\nprinciples underlying Government's proposals following points being\nstressed (one) last budget was of bureaucratic type and was \"designed\nnot to serve the people in their relations with the government but\nthe Government in its relations with the people\" (two) new budget aims\nat presenting clearcut financial policy reconciling needs and serving\ninterests of different classes and at realizing progressive schemes which\nhad been \"disastrously neglected in the past\" (three) East is particularly\nliable to fall prey to a form of economic distatorship which is more\ndeadly than political \"for a political dictatorship may arouse men to\nrevolution whereas an economic dictatorship **** so absorbs them in\nthe struggle for existonce that they have no time to think of active\nstruggle\". If political independence of Egypt is to be real it must\nbe accompanied by economic independence based on interest of people\nrather than of Government. In Egypt Government officials are wellpaid\nand landowners flourish but what of industrial and farm laborers who\nalthough forming about 90% of population \"might well be living in\nanother world and in another age? **** Let us bluntly state our aims.\nWe have worked to save the Egyptian from foreign imperialism; it is now\ntime to save him from Egyptian imperialism\" the only way to achieve this\nis to extend and maintain democracy in Egypt and the WAFD although not\nclaiming perfection in itself is as the party of the people best qualified\nto carry through such a program this is not socialism but merely an\neffort to achieve social justice in struggle between democracy and\nbureaucracy.\nProceeding to deal with more concrete aspects of budget Finance\nMinister mentioned inter alia following (one) necessity to curb inflation\n(two) plans to effect more equitable distribution of tax burden by\nlightening taxes on small landowners increasing taxes, on large incomes\nand commercial profits, amusements, alcoholic beverages, raising\nsupplemental tax (three) increasing telephone and telegraph rates (four)\nselling government land (five) reduction of expenses wherever possible.\nRegraded Unclassified\n382\n-2-\nIn addition to budget proper Finance Minister took occasion to\ndiscuss Government policy regarding creation of department of Govern-\nment accounts reduction of land debts cereal shortage financing next\ncotton crop (mention being made of offer of British Government to\npurchase from Anglo-Egyptian Cotton Commission 500,000 cantars of giza\nseven cotton at 21 dollars 50 cents or five dollars fifty dollars\nabove original purchase price) improved distribution to meet sugar\nshortage fertilizer supply export and import licensing project to reduce\ngovernment pensions fiduciary circulation at one point Minister expressed\nappreciation of action of American Government in including Egypt among\ncountries entitled to Lead-Lease.\nKIRK\nBB\nCopy:bj:5-5-42\n383\nAgr12 m, 1940\nm. Livery\nMr. Dictrich\nwill you please cont the attached colds to the American Roberty. London,\n\"Yes Canadar from the Secretary of the fireasury*.\n/\nm\n384\n:\nd - I\nAmerican Roberty,\nLondon, England.\nFree\nthe Secretary of the Treasury\nPlease send w air pouch the series on \"Consumer Rationing--\nCoupon Banking Schome\", as listed in recent summaries of reporting\nactivities.\nWEIGHT 4/29/43\nDed id\n385\nTELEGRAM SENT\nPH\nApril 28, 1942\nThis telegram must bE\nperaphrased before being\n7 p.m.\ncommunicated to Anyone\nother than a Governmental\nagency. (ER)\nAMEMEASSY\nLONDON (ENGLAND)\n1838\nFOR CASADAY FROM THE SECRETARY OF THE TREASURY\nQUOTE Please send by air pouch the stries on\nINNER QUOTE Consumer Rationing-Coupon Banking Scheme\nEND INNTER QUOTE, as listed in recent summaries of\nreporting activities. END QUOTE.\nHULL\n(FL)\nFD:FL:ME\nRegraded Unclassified\nC\n0\nP\n386\nY\nDEPARTMENT OF STATE\nWASHINGTON\nApril 28, 1942\nIn reply refer to\nFD 102.1/6476\nThe Secretary of State presents his compliments to the\nHonorable the Secretary of the Treasury and encloses copies of\ntelegram no. 2018, dated April 21, 1942, from the American Embassy,\nLondon, England, regarding the procedure for cashing Treasury\nchecks under arrangements made between the United States and\nthe British Treasuries, and copies of the Department's telegram\nNo. 1820, dated April 27, 1942, in reply thereto.\nEnclosure:\nFrom Embassy, London,\nNo. 2018, April 21, 1942.\nTo Embassy, London,\nNo. 1820, April 27, 1942.\neh:copy\n4-29-42\n0\n0\nP\n387\nY\nTELEGRAM SENT\nHRL\nPLAIN\nApril 27, 1942\nAMEMBASSY,\nLONDON (ENGLAND).\n1820, twenty-seventh.\nYour 2018, April 21, 5 p.m.\nDepartment's 1468 sent for Treasury Department per-\ntains to checks drawn on the Treasurer of the United States\nby disbursing officers having checking accounts with him.\nDrafts drawn on the Secretary of State are apparently being\nnegotiated in the British Isles in a normal manner as the Department\nhas not heard of any difficulties being experienced there in that\nrespect.\nForeign Service Officers in the British Isles should draw,\nnegotiate and account for drafts as usual unless conditions\nmake this practice unsatisfactory in which event Department should\nbe advised. However, it is believed advisable that a first and\nsecond of exchange be drawn and issued of each draft negotiated.\nHULL\n(GHS)\n102.1/6476\nDA:LLW:SJ\nFA\nFD\neh:copy\n4-29-42\n388\nNWN\nGRAY\nLondon\nDated April 21, 1942\nRec'd. 8:30 p.m.\nSecretary of State,\nWashington.\n2018, April 21, 5 p.m.\nDepartment's 1468, April 8, midnight.\nOn April 14, the Bank of England issued a\nnotice to banks and bankers, the substance of which\nwas communicated to the Treasury of the United States\noutlining procedure under arrangements made between\nthe American and British Treasuries. According to\nthis notice, checks subject to procedure outlined\nby Treasury of United States are confined to official\ndrafts and checks on the United States Treasury\nfrom United States military or naval paymasters,\nUnited States diplomatic officers, disbursing officers\nor senior officers acting in their official capacity.\nBritish authorities state that this can bE meant to\ninclude individual checks cashed by American officials\nand Employees with paymasters and later turned into\nbanks by the latter for negotiation. It is assumed\nthat when the Treasury says all (repeat all) \"United\nStates\nRegraded Unclassified\n389\n-2- #2018, April 21, 5 p.m., from London.\nStates dollar checks drawn on the Treasurer of the\nUnited States\" in part two of the outling it means\nchecks affected by the negotiations and EXCLUDES\npension checks and other Treasury checks drawn to\nindividual order and chased by individual as a regular\ncommerical transaction.\nArmy and Navy officials have been informed of\nthe suggested procedure outlined in point nine of\nthe Treasury's communication to the Department.\nDOES the Department wish Embassy to follow\nprocedure outlined in point nine for local currency\nrequirements? If so, what accounting procedure\nis to bE used where standing instructions from the\nDepartment require the drawing of separate drafts\nand separate accounting? In the EVENT that Embassy\nis no longer to draw drafts for local currency require-\nments the Chase National Bank is designated as bank\nof deposit.\nBank of England has raised question as to whether\nprocedure applies to consular officers outside London.\nAs Department made no mention of consular officers\nin the field in its cable, instructions are requested\nas to whether they are to draw drafts as usual and\nhave them\n390\n-3- #2018, April 21, 5 p.m., from London.\nhave them delivered through appropriate London bank\nto Embassy for transmission. As consular officers\ndraw very few drafts it will appear needless to tele-\ngraph for local currency requirements.\nIn order that End of April accounts may bE\nExpedited an early reply is requested.\nMATTHEWS\nKLP\nCopy\n391\nMiss Chauncey\nFrom:\n0. G. & Tar.\nNot worth calling to Secretary's\nattention.\norig. of this memo attached to 5/1/42 STATE\n392\nINC\nPLAIN\nBern\nDated April 28, 1942\nRec'd 3:38 a.m.\nSecretary of State,\nWashington.\n1784, Twenty-eighth\nConsul Zurich reports: fundamental reorganization\nGerman industrial economy illustrated by new decree\nregulating simplificati n industrial economy which\ncase into force April 20 as described by various news-\npaper. FRANKFURTER ZEITUNG owing increased demand area-\nments industries organization must be simplified production\nintensified. National industrial economy now comes under\ndirect control district economic chambers (gauvirtschaft-\nskammer) specially created and directly responsible to\nReichs Economic Minister. ABl other organizations such\naschooal chambers of commerce and industry abolished and\nabsorbed by new district chambers this gives gauleaders\nincreased authority. Effective immediately forty-one\nchambers of commerce closed vis Arnsberg, Bingen, Coburg\nDametadt, Dessau, Detmold, Erfurt, Feldkirch, Flensburg,\nFrankfurt\nRegraded Unclassified\n393\n#1784, Twenty-eighth, from Bern\nFrankfurt on Oder, Freidberg, Gera, Giessen Goerlitz Hal-\nberstadt, Hildesheim, Hirschberg, Krefeld, Liegnitz Mains,\nNordhausen, Offenbach, Oppelnosn, Abrueck, Passau, Pfor-\nsheim, Plauen, Reutlingen, Rottweil, Sagan, Schneidemuehl,\nSchweidnitz, Solingen, Sonnenberg, Stadthagen, Stolp,\nTeschen, Vlm, Verden, Worms, Zittau. Introduction of\ndistrict economic chambers brings regional economic\norganization under greater party control. Therefore decen-\ntralization as planned by decree March 19 canceled FRANKFUR-\nTER ZEITUNG continuing discussion following day states\nnecessities caused by long war awakened new energies. For\nmonths everyone busy endeavoring improve Germany's war\nindustries in making them stronger more elastic. Of Ger-\nmany's 111 local Chambers of Commerce 41 will completely\ndisappear this but preliminary spade work. Other indus-\ntrial and commercial chambers will not be closed but will\ndisappear as such becoming centers of new organization.\nAlso 71 chambers of commerce and 23 chambers of industry\nlose former privileges and disappear. Future regional\norganizati ns will be managed by district local and\nbranch economic chambers. In many instances seat of new\nchambers will be district Government office (Gauverwaltung)\nwhose\nRegraded Unclassified\n394\n-3-\n$1784, Twenty-eighth, from Born\nwhose resident will become proper exponent regional\neconomic development coordinating it with party\neconomic and political program. District economic\nchambers will directly represent economic organization\nand will take over all duties prerogatives former\nchambers of commerce industry craftsmens guilds others.\nThey will form separate groups dealing with industry\nguilds banks insurance power plants and transportation.\nCooperation with party will be increased. Centralization\neconomic power made easier. BERLINER BOERSENZEITUNG\nFunk spoke in Graz occasion opening first\n\"Gauwirtschaftskamner\" stating self administration of\nindustry considered unsatisfactory being partial\ncompromise between old new systems. New measures\nsimplify operations and represent stronger \"transversal\"\ntie with party. New chambers-will unite all economic\norganizations and create \"vertioal\" connections between\nvarious groups of industry. Instead of being merely\n\"super structures\" as chambers commerce were they will\nmaintain direct relations with manufacturers. Their\nmanagers who are given extraordinary responsibility have\nimportant education work to perform. Next day Funk\nspoke in\nRegraded Unclassified\n395\n+ $1784, Twenty-sighth, from Bern\nspoke in Klagenfurt inauguration new chambers\nFRANKFURTER ZEITUNG \"his statements on new industrial\npolicy. Simplification as now being introduced not\nonly applies war industries but whole national production.\nMain points were: (one ) armaments Minister must feel\nsure that industries being supplied with necessary raw\nmaterials with minimum friction in order that production\nbe increased and former methods must be ignored;\n(two) allotments to be made with minimum \"paper\" work\nas speedily possible (three) allotment control centere\nmust act mainly as statistical offices reducing unnecessary\nlabor other statistical bureaus (four) industry must reduce\nofficial correspondence to minimum (five) in order speed\nup production measures must be taken eliminate necessity\nindustries to communicate with too many official Reich\noffices (six) financial methods to be radioally altered in\nthat greater stress to be laid on granting normal bank\ncredits and reduction government subsidies (seven)\nmanufacturers called on for greater discipline and re-\nnunciation normal industrial lucrative considerations\n(eight) consumers called on for similar discipline in\nreducing standard living (nine) war debts will be settled\ncomparatively short\nRegraded Unclassified\n396\n-5- $1784, Twenty-eighth, from Bern\ncomparatively short time after was as surplus cheap\nlabor raw materials will be available. Manufactured\ngoods will be cheaper than price level Germany and\ndifference will be used reduce war debt as well as insure\nstabilization currency (detailed-report will follow\nby airmail).\nState Secretary Reinhardt announced important\nreform German income tax. Local municipal income tax\nabolished state tax increased. New system provides\ntaxation relief for small medium wage earners increased\ntaxation higher salaried classes BERLINGER BOERSENZEITUNG\nstates 1941 municipal income tax totaled 800 million\nmarks new taxation comes into force July first. This\nmeasure reduces work done by municipal authorities making\nunnecessary for them to fill out page four on some 26\nmillion income tax declarations and abolishes their\ncomplicated accounting system. As minimum exemption\nfrom municipal taxes was lower than from Government income\ntax and as undesirable that persons formerly liable\nmunicipal income taxes now exempt Government minimum\nexemption from income tax reduced for all single persons,\nchildless married couples or families with not over\ntwo children.\nHARRISON\nBB\nRegraded Unclassified\n397\nB.S\nMontevideo\nThis telegram must bE\nparaphrased before being\nDated April 28, 1942\ncommunicated to anyone\nother than a Governmental\nRec'd 6:35 p.m.\nagency. (BR)\n?\nSecretary of State,\nWashington.\n324, ..pril 28, 7 p.m.\nDepartment's telegram 220, April 23, 9 p.m.\nCommercial Attache has made discrett inquiry\nof Bank of the Republic official who is usually very\nwilling to furnish information. The official\nappeared reluctant to make any statement other than\nthat the gold was being brought to Uruguay in agreement\nwith the Minister of Finance.\nAnother bank official has mentioned the\nimpending shipment to an American banker but\ngave no information as to reason. The American\nbanker is at a loss to Explain the shipment but\nsuggests that it may bE either because of\napprehension of an Eventual gold Embargo in the\nUnited States or because of the feeling that a\nlarge proportion of gold reserves should bE in\nUruguay.\nDAWSON\nCSB\n398\nTREASURY department\nINTER-OFFICE COMMUNICATION\nBlue Chauses\nDATE April 28, 1942\nTO\nSecretary Morgenthau\nFROM Mr. White\nCONFIDENTIAL\nRegistered sterling transactions of the reporting banks were as follows:\nSold to commercial concerns\n£61,000\nPurchased from commercial concerns\n£42,000\nOpen market sterling remained at 4.03-3/4. with no reported transactions.\nIn a dull market, the Canadian dollar discount narrowed to 12-1/16%, as\ncompared with 12-1/4 yesterday.\nIn New York, closing quotations for the foreign currencies listed below\nwere 8.8 follows:\nArgentine peso (free)\n.2365\nBrazilian milreis (free)\n.0516\nColombian peso\n.5775\nMexican peso\n.2064\nUruguayan peso (free)\n.5295\nVenezuelan bolivar\n.2870\nCuban peso\n1/4% premium\nThere were no purchases or sales of gold effected by us today.\nThe Federal Reserve Bank of New York has been holding an earmarked gold\nbalance of $4,438,000 for the Banke Millie Afghan, Account G, this gold being the\nproperty of the Royal Afghan Government. The Treasury authorized the Federal today\nto transfer this gold in its vaults to a new account entitled \"Da Afghanistan Banke,\nAccount G\". The latter is the Government Central Bank of that country.\nThe Federal Reserve Bank of New York reported that the Bank of Mexico shipped\n$176,000 in gold from Mexico to the Federal for its account, for sale to the New\nYork Assay Office.\nIn London, spot and forward silver remained at 23-1/2d, equivalent to 42.67$.\nThe Treasury's purchase price for foreign silver was unchanged at 35#. Handy\nand Harman's settlement price for foreign silver was also unchanged at 35-1/84.\nWe made no purchases of silver today.\nRegraded Unclassified\n399\nCOPY NO, 13\nBRITISH MOST SECRET\n(U.S. SECRET)\nOPTEL No. 138\nInformation received up to 7 A.M., 28th April, 1942,\n1, NAVAL\nAir recennaissance yesterday showed TIRPITZ, SCHEER, HIPPER and PRINZ\nEUGEN at TRONDHJEM in their usual positions.\n2. MILITARY\nBURMA. By early 26th our forces had occupied a general line KYAUK-\nPADANG-MEIKTIA covering the withdrawal of Chinese troops, There are continued\nreports of enemy thrusts towards the Northern SHAN STATE and elements have reached\nabout half-way along the road LOILEM-HS IPAN RUSSIA. Local Russian attacks are\ncontinuing in the Central Sector.\n3. AIR OPERATIONS\nWESTERN FRONT. 26th/27th. About fifty tons of high explosive and\nincendiaries were dropped on ROSTOCK and about eighty-six tons on the Heinkel\nWorks. Weather was excellent and the attack is considered successful. Many crews\nconsidered the attack on the town the best of the series,\n27th, Bostons and Hurricane bombers attacked power stations at OSTEND\nand LILIE as well as three enemy aerodromes, 518 Fighters operated and enemy\ncasualties were eleven destroyed, eight probably destroyed and fourteen damaged.\nTwo Bostons, two Hurricane bombers and fifteen fighters are missing. One pilot\nsafe, Off the Danish Coast Hudsons made two hits on each of two vessels of about\n3,500 tons,\n27th/28th. 120 aircraft were despatched: COLOGNE 92, DUNKIRK 12,\nSea mining 11, Leaflets 5. Weather was very good and many big fires are reported\nat COLOGNE. Twelve of our aircraft are missing. About 25 onemy aircraft made a\nsharp attack on NORWICH,\nMALTA, Between 1600/26 and 1320/27 125 bombers with fighter escort\nattacked, At KALAFRANA a high speed launch and two seaplane tenders were des-\ntroyed, Elsewhere, a transformer room and power station were hit. Anti-aircraft\ndestroyed two Junkers 88,\n4. HOME SECURITY\nBATH. On 26th/27th about sixty high explesives were dropped. Blast\neffect was reported as exceptional. Casualties for the two nights are given as\n150 killed.\nNORWICH. 27th/28th. The city station and a hospital were seriously\ndamaged and there were about thirty-five fatal casualties,\nRegraded Unclassified\n400\nDADINATO\nUNITED STATES GOVERNMENT\nCOORDINATOR OF INFORMATION\nWASHINGTON, D.C.\nApril 28, 1942\nThe Honorable\nThe Secretary of the Treasury\nWashington, D. C.\nDear Henry:\nThe attached has just come to me from\nour London office. It is the British Political\nWarfare Executive Weekly French Directive.\nSincerely,\nWilliam J. Bill Donovan\n401\nThe French fleet:\na. Do not comment on French warships, either on their\ndispositions or the possible use of them. Do not go out of\nyour way to attack Darlan. There may be some significance in\nthe ommissions in his Order of the Day and letter of resigna-\ntion. Avoid referring to Darlan as Commander in Chief of\nthe French navy. Insist on the way the Germans are exploiting\nthe economic resources of the French colonies and the French\nmerchant fleet. Any discussion of Madagascar should be a-\nvoided.\nFrance:\na. Police measures. Undoubtedly Laval is concertrating\non a cleanup. It is expected that there will be a compre-\nhensive purge among Darlan's former administrative collabor-\nators. In unoccupied France the police are to be reorganized\nby Bousquet. The Paris police force is asking for further re-\ncruits. Before he makes any further steps toward selling out,\nLaval is making sure of his internal position.\nb. RNP is to extend its organization to the unoccupied\nzone. Deat's forces will be put at Laval's disposal. The\nattempt to form a \"Partie de la Revolution National\" should\nbe shown up as a trick on the part of Laval to suppress all\nother organizations, even those which support the Marshal.\nC. The present government is little more than a \"half-\nway house\" tewards a full collaborationist\" government.\nMoysset and Barthelemy are not likely to last long. It should\nbe pointed out that the cabinet is full of second class men\nwho were deliberately chosen to cover the first period while\nLaval gets full control of all the reins of government. Even-\ntually Laval, having served his usefullness, will also be\ndiscarded by the Germans.\nRegraded Unclassified\n402\n- 2 -\nd. The Germans are being discreet about Laval. Only\nafter he has shown himself a good servant will they make\nconcessions.\ne. Laval will probably get in touch with Germans in a\nhigher place than Abetz. The position of Petain in 1942 is\nthe same as that of Hindenburg in 1933.\nEmphasize:\na. The distinction between Laval and the French people.\nb. Although Laval is afraid of the French people, he\nflatters himself that he can double cross them. He is there-\nfore proceeding in two stages, first, temporary acceptance of\nDarlan's military position and Marshal's \"cover\", second,\ngradual purge of Vichy's \"old guard\".\nC. While Germany undertakes the spring campaigns, she\nrequires that France be ruled by a man whose future is bound\nup with hers.\nd. Petain has been reduced by Laval to a mere figure-\nhead. Point out all Laval's efforts to cover himself by the\nMarshal's formal authority. Petain will not know what Laval\nis planning; he has no control over internal policy.\ne. Frenchmen who have been serving Vichy through self\ninterest or under the illusion that they have been serving\nFrance must now be disillusioned. They must not know that\nLaval is to them an implacable enemy. There is no longer the\nappearance of a \"buffer\" between Germany and the people of\nFrance.\nf. The fact that both these factions are their enemies\nwill now be apparent to the people of France.\nRegraded Unclassified\n403\nDEDINATOR CODEDINATOR:D\nUNITED STATES GOVERNMENT\nCOORDINATOR OF INFORMATION\nWASHINGTON, D.C.\nN\nApril 28, 1942\nThe Honorable\nThe Secretary of the Treasury\nWashington, D. C.\nDear Henry:\nThe attached is from the British Political\nWarfare Executive German Weekly Directive.\nSincerely,\nBull\nWilliam J. Donovan\n404\nPolicy:\na. Inside Germany. In news matter we should confine\nourselves to factual reportage, personnel changes, decrees,\netc. Watch for items which will illustrate Sauckel's man-\npower crisis.\nb. France. Avoid mere abuse of Laval; vague state-\nments that all France is against him; emphasize that the new\ngovernment is proof of: first, Germany's fear of intervention\nin the West; second, Germany's need of foreign labor.\nStrategy:\na. Be careful to stick to imuendo when mentioning our\nwestern front intervention threat. The Germans are talking\nof \"Wikingersburgen\" on the west. However, such fortifications\nare as outdated as the Maginot line. RAF offensive and Commande\nraids should still be described as the first stage of our offen\nsive action.\nb. Be careful not to over inflate the Russian local\nattacks. We can assume that the German spring offensive will\nnot start for several weeks.\nMilitary points:\na. Malta. We can state that Malta's resistance has\nalready delayed the spring offensive by diverting Kesselring's\nforces.\nb. Yugoslavia. Some seventeen Italian divisions are\nnow contained by the Yugoslav army, not to mention Bulgarian,\nHungarian or German--in all, some thirty divisions.\nNaval points:\na. Continue to emphasize Germany's need to break our\ncommunications with Murmansk. The Tirpitz, etc. still inac-\ntive at Trondheim. The Gneisenau was damaged BO seriously\nthat she has now been towed to Gydnia for repairs where she\nRegraded Unclassified\n405\n-2-\nlies alongside the Graf Zeppelin, still incomplete. The\nScharnhorst is also in dry dock.\nb. Lay off U-boats sinking stories and expose German\nsinking claims.\nAir Points:\na. It is possible to assume that the Luftwaffe is\nfeeling the pinch both in personnel and in machines because:\nfirst, wastage of machines in Russia because of climatic\nconditions, poor runways, low efficiency of flying personnel\nowing to over-work, inadequate aids to landing at night; second\nforced landings due to using aircraft which has exceeded normal\nfirst line life and aircraft not serviced with usual complete-\nness.\nb. Many units had less than half their strength to-\nwards the end of 1941. The reserves have been swallowed up\nin less than six months. The results of this shortage have\nbeen: first, the number of dive bomber units has been re-\nduced to two-thirds of June, 1940. Until late in March no\ndive bombers could be spared for Malta and since then there\nhave been only enough to contribute less than ten per cent\nof the total effort. Second, for months the raids on Moscow\nhave had only a nuisance effect. Third, it has been necessary\nto use first line bomber aircraft for transport work. Fourth,\nowing to a shortage of ME 110, twin engine day-fighter units\nhave been disbanded to expand night-fighters.\nRegraded Unclassified\n406\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE April 28, 1942\nTO\nSecretary Morgenthau\nFROM\nMr. Kamarck\nSubject: Summary of Intelligence Reports\nRusso-Japanese Relations\n(The Japanese are reinforcing their army in Manchuria.\nIf this trend continues, an attack on Siberia around the\nfirst of June probably is to be expected.)\nThe British state that recent reliable information\nindicates that the Japanese forces in Manchuria have been\nincreased from 20 to 23 divisions.\n(U.K. Operations Report, April 27, 1942)\nInformation secured by the Coordinator of Information's\noffice is to the effect that the number of military planes\nin Manchuria and Korea was increased in the first half of\nApril from 300 to 700 and in Northern China from 60 to\n200. The number of planes in Japan also increased from\n400 to 750. (The total number of Japanese planes avail-\nable against Siberia thus totals 1,650, or almost half of\nthe Japanese first-line combat strength.)\n(C.O.I. \"The War This Week\", April 16-23, 1942)\nChinese Supplies in Burma\nAccording to an American transport expert, it will\nrequire a year to 18 months to move into China the Chinese\nsupplies accumulated in Burma. In December, there were\n150,000 tons of Chinese goods in Burma, of which almost\nhalf were already in upper Burma. By the end of February,\nthe great bulk of lend-lease goods had been moved up-\ncountry out of Rangoon.\n(C.O.I. \"The War This Week\", April 16-23, 1942)\nRegraded Unclassified\n407\n- 2 -\nFrance\nFood supplies in France were 80 short in the large\ntowns during March that mass street demonstrations occurred\nin Montpelier, Sete, and Lyons. Crowds shouted for meat,\nmilk and bread. Thousands of women sent deputations to\nmayors and signed petitions.\n(U.K. Ministry of Economic Warfare Weekly Digest;\nC.O.I., April 25, 1942)\nVoice of the Chief Broadcasts\nItalians Bring Death to Nazi Captives\nRecently, 72 Nazi soldiers from the Afrika Korps lost\ntheir lives aboard the Italian ship Eretria which went\ndown in the Mediterranean.\n\"These Germans were prisoners aboard the ship, mostly\nfor disciplinary breach of discipline. Thus one German\nsoldier in a dispute with an Italian officer, had pushed\nhis elbow into the latter's face.\" Another Nazi had am-\nbushed an Italian who had stolen his food.\n\"It is really the height of outrage when a German soldier\nhas to submit without resistance to arrest by a stuck-up\nmacaroni policeman. But in addition, these 72 Nazi fighters\naboard the Italian ship were manacled and herded like sheep\ninto locked compartments to travel under Italian guard to a\nNaples prison camp.\n\"As a result, when the ship sank and the Italian jailers\njumped, these men were unable to get out and drowned help-\nlessly.\"\n(Federal Communications Commission)\nRacketeers Cheat on U-Boat Rations\nThe Griem concern commits its most flagrant crimes in\nWilhelmshaven. There, \"home-coming and outgoing subs are\nmet by Griem's crooked agents, such 88 the ring-leader Fritz\nWimmert or fat Herr Franzmann who owns the bar next to the\nTax Office. Sometimes, female agents are used to bring in\nthe business. Now the sub might order for its next long-\ndistance cruise 1,800 eggs, 300 pounds of coffee, 1,200 bars\nof chocolate, 750 cans of preserved fruits, and 80 on.\nRegraded\n408\n- 3 -\n\"After delivery of the stuff, the sub supply steward,\nwho 18 often in on the game, will sign bills for the above\namounts as having been received from the Griem concern.\nThese bills are then counter-signed by the sub's commandant\nwhereupon prompt payment is made by the Navy cashier.\nActually, of all goods supposedly delivered, one-third will\nbe missing.\n\"Ten years' imprisonment were recently meted out to\nHerr Hugo Finch, a small grocer in Berlin-Wilmersdorf, for\nsupplying a customer with 2 pounds of cheese outside of\nrations. But a well-connected firm like that of Wilhelm\nGriem is suffered to carry on wholesale corruption undis-\nturbed.\"\n(Federal Communications Commission)"
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